AFFILIATED COMPUTER SERVICES INC, 424B4, 1996-06-25

AFFILIATED COMPUTER SERVICES INC
424B4, 1996-06-25
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE>
Filed Pursuant to Rule 424(b)(4)
File No. 333-05639
PROSPECTUS

4,027,500 SHARES

[LOGO] AFFILIATED COMPUTER SERVICES, INC.

CLASS A COMMON STOCK
--------------------------

Of the 4,027,500 shares of Class A Common Stock offered hereby, 2,000,000
shares are being sold by the Company and 2,027,500 shares are being sold by the
Selling Stockholders. The Company will not receive any of the proceeds from the
sale of the Class A Common Stock by the Selling Stockholders. See "Principal and
Selling Stockholders."

The Company has two classes of Common Stock outstanding. The Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), is entitled to one
vote per share, and the Class B Common Stock, par value $.01 per share (the
"Class B Common Stock"), is entitled to ten votes per share. See "Description of
Capital Stock."

The Company will use the net proceeds to it from this offering to repay a
portion of the debt incurred under the Company's revolving credit agreement in
connection with the acquisition (the "Acquisition") from MCN Investment
Corporation ("MCN Investment") of all of the outstanding capital stock of The
Genix Group, Inc. See "Use of Proceeds" and "The Acquisition."

The Class A Common Stock of the Company is quoted on the Nasdaq National
Market under the symbol ACSA. On June 24, 1996, the closing sale price of the
Company's Class A Common Stock was $49.00 per share. See "Price Range of Class A
Common Stock and Dividend Policy."

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

SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share.................. $48.00 $2.04 $45.96 $45.96
Total (3).................. $193,320,000 $8,216,100 $91,920,000 $93,183,900
</TABLE>

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

(2) Before deducting expenses payable by the Company, estimated at $450,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 604,125 shares of Class A Common Stock on the same terms and
conditions as set forth above solely to cover over-allotments, if any. If
such shares are purchased, the total Price to Public, Underwriting Discounts
and Commissions and Proceeds to Company will be $222,318,000, $9,448,515 and
$119,685,585, respectively.
--------------------------

The shares of Class A Common Stock are offered subject to prior sale when,
as and if delivered to and accepted by the Underwriters, and subject to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify said offer and to reject orders in whole or in part. It is expected that
delivery of the Class A Common Stock will be made on or about June 28, 1996 at
the offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York
10167.

--------------------------
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES
CORPORATION
HAMBRECHT & QUIST

JUNE 24, 1996
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the Commission's
public reference facilities at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 and at the following regional offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained at prescribed rates from the Commission's Public
Reference Section at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549.

Additional information regarding the Company and the shares offered hereby
is contained or incorporated by reference in the Registration Statement on Form
S-3 and the exhibits thereto (the "Registration Statement") filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement and to the exhibits filed
therewith. Statements contained in this Prospectus regarding the contents of any
agreement or other document are not necessarily complete, and in each instance
reference is made to the copy of such agreement or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed with the Commission (File No. 0-24787)
pursuant to the Exchange Act are incorporated herein by reference:

1. The Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1995;

2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1995, December 31, 1995 and March 31, 1996; and

3. All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Class A
Common Stock made hereby.

Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for all purposes to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document that is also, or is deemed to be, incorporated by reference, modifies
or replaces such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Prospectus, except as so modified or
superseded. The Company will provide without charge to each person to whom this
Prospectus has been delivered, on written or oral request of such person, a copy
(without exhibits, unless such exhibits are specifically incorporated by
reference into such documents) of any or all documents incorporated by reference
in this Prospectus. Any such request should be directed to the Secretary of the
Company at 2828 North Haskell Avenue, Dallas, Texas 75204, telephone number:
(214) 841-6152.

MoneyMaker-SM- is a registered service mark of the Company.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET. SUCH
STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS OR THEIR RESPECTIVE
AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS A
COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH
RULE 10B-6A UNDER THE EXCHANGE ACT. SEE "UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN.
EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. SEE "UNDERWRITING." AS USED
HEREIN, THE "COMPANY" OR "ACS" REFER TO AFFILIATED COMPUTER SERVICES, INC. AND
ITS SUBSIDIARIES (EXCLUDING THE GENIX GROUP, INC. AND ITS SUBSIDIARIES
("GENIX")) UNLESS THE CONTEXT OTHERWISE REQUIRES. PROSPECTIVE PURCHASERS OF THE
CLASS A COMMON STOCK SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS AND SHOULD
CONSIDER, AMONG OTHER THINGS, THE MATTERS SET FORTH IN "RISK FACTORS."

THE COMPANY

ACS is a nationwide provider of information technology services and
electronic funds transfer ("EFT") transaction processing. The Company's
information technology services include data processing outsourcing, image
management and professional services. The Company provides its services to
customers with time-critical, transaction-intensive information processing
needs. ACS' revenues from continuing operations increased from $146.8 million in
fiscal 1991 to $313.2 million in fiscal 1995, and income from continuing
operations increased from $3.1 million to $17.6 million during the same period.

The Company's data processing outsourcing services are provided to a variety
of customers nationwide, including retailers, healthcare providers,
telecommunications companies, wholesale distributors, manufacturers, and
regional, non-money center financial institutions. The Company utilizes a
variety of proprietary and third party industry-standard software packages that
can be matched with the appropriate hardware platform to provide flexible and
cost-effective solutions to customer requirements. ACS is capitalizing on the
trend toward client-server computing by providing consulting and transitional
outsourcing services, including network and desktop computer management, to
companies that are changing to these distributed platform environments. The
Company offers image management services such as electronic imaging, document
imaging, record storage and retrieval services, micrographics processing
services and high speed data capture services. Beginning in January 1995, ACS
expanded its product offerings to include professional services such as
consulting, contract programming and technical support, as well as network
design and systems integration. The Company's EFT transaction processing
business consists primarily of the operation of a proprietary automated teller
machine ("ATM") network consisting of Company owned ATMs as well as ATMs owned
by third parties. According to industry data as of September 1995, based on the
number of network ATMs, the Company's MoneyMaker-SM- ATM network is one of the
largest proprietary off-premise ATM networks in the United States. The Company
operates a national network of host and remote data centers that enable ACS to
process transactions for its outsourcing and EFT customers in a rapid, cost-
effective manner.

ACS was formed in 1988 to participate in the trend to outsource information
processing to third parties to enable businesses to focus on core operations,
respond to rapidly changing technologies and reduce data processing expenses.
The Company's business strategy is to continue to lower its unit processing
costs by expanding its customer base through both internal marketing and the
acquisition of complementary companies. Since inception, the Company has
completed 26 acquisitions (excluding the Acquisition), which have resulted in
geographic expansion, growth and diversification of the Company's customer base,
expansion of services and products offered, and increased economies of scale.
Approximately 58% of the increase in the Company's revenues for the five years
ended June 30, 1995 has been attributable to acquisitions. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview." The Company's marketing efforts focus on developing
long-term relationships with customers that choose to outsource various
information processing requirements, as well as on expanding services offered to
existing customers. The Company had approximately 13,400 information technology
customers and approximately 3,460 EFT customers as of March 31, 1996.

The Company, a Delaware corporation, maintains its corporate headquarters at
2828 North Haskell Avenue, Dallas, Texas 75204, telephone: (214) 841-6111.

3
<PAGE>
THE ACQUISITION

On June 21, 1996, the Company acquired 100% of the stock of Genix from MCN
Investment for approximately $137.5 million in cash. Genix is a nationwide
provider of data processing outsourcing services.

The Acquisition continues the Company's strategy of acquiring information
processing companies to grow its customer base, enhance its service offerings
and expand its geographic presence. The Acquisition provides the Company with
three additional data centers, which will strengthen the Company's presence in
the Midwest, Northeast and Southeast, and adds customers in its core outsourcing
business in new industries, including the insurance and utility industries, as
well as in other industries, particularly manufacturing, that ACS currently
services.

Genix is headquartered in Dearborn, Michigan, with data centers in Dearborn,
Pittsburgh, Pennsylvania and Charlotte, North Carolina. Genix's primary focus is
providing a diverse set of data processing outsourcing solutions to companies
that desire reductions in data processing costs and improvements in the quality
of data processing and that seek assistance in achieving strategic information
processing solutions. Genix's principal outsourcing service is the delivery of
data processing services on a remote basis from host data centers. The mission
critical application systems processed by Genix for its customers include claims
management, manufacturing, retail and wholesale distribution and financial
systems. Genix also seeks to capitalize on the growing demand for client-server
computing by offering network and desktop management and support of distributed
platform environments. Genix utilizes a variety of third-party software in
conjunction with appropriate hardware platforms to provide flexible and
cost-effective solutions for customers.

Genix's revenues have grown from $62.4 million for the year ended December
31, 1991 to $105.2 million for the year ended December 31, 1995. As of March 31,
1996, Genix had approximately 100 customers. Genix typically serves its computer
operations management customers under long-term contracts, with contract terms
ranging from three to seven years.

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered:
By the Company.................. 2,000,000 shares
By the Selling Stockholders..... 2,027,500 shares
Total......................... 4,027,500 shares
Common Stock to be outstanding after this offering:
Class A Common Stock............ 14,479,300 shares (1)
Class B Common Stock............ 3,202,843 shares (2)
Total......................... 17,682,143 shares
Voting rights..................... The Class A Common Stock is entitled to one vote per
share and the Class B Common Stock is entitled to ten
votes per share. See "Risk Factors--Voting Control by
Chairman of the Board."
Use of proceeds by the Company.... To repay a portion of the debt incurred under the
Company's revolving credit agreement in connection with
the Acquisition.
Nasdaq National Market symbol..... ACSA
</TABLE>

- ------------------------------
(1) Excludes an aggregate of (i) 396,594 shares of Class A Common Stock
reserved for issuance upon the exercise of an outstanding warrant held by
one of the Company's larger customers, which is exercisable beginning on
January 1, 1996 at an increasing exercise price that was $29.31 per share
as of April 1, 1996, (ii) 1,007,463 shares of Class A Common Stock reserved
for issuance upon the exercise of outstanding employee stock options as of
March 31, 1996 with a weighted average exercise price of $20.85 per share
under the Company's Stock Option Plan (the "Stock Option Plan") and (iii)
26,466 shares (based on the closing stock price at March 31, 1996) of Class
A Common Stock reserved for issuance upon conversion of the Company's
Series A Preferred Stock. See "Risk Factors--Shares Eligible for Future
Sale."

(2) See "Description of Capital Stock--Class A and Class B Common Stock"
regarding the conversion rights and restrictions on transfer of the Class B
Common Stock.

4
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA (1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
YEAR NINE MONTHS
ENDED NINE MONTHS ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, MARCH 31, MARCH 31,
----------------------------------------------------- --------- -------------------- -----------
1991 1992 1993 1994 1995 1995(3) 1995 1996 1996(3)
--------- --------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
(FROM CONTINUING OPERATIONS):
Revenues (2)............... $ 146,827 $ 149,944 $ 189,064 $ 271,055 $ 313,181 $ 496,633 $ 223,638 $ 279,708 $ 393,304
Operating income........... 5,850 10,356 17,375 24,810 31,542 46,000 22,402 28,273 35,910(4)
Income from continuing
operations................ 3,092 4,933 9,318 11,925 17,604 18,847 12,528 16,468 16,066(4)
Earnings per share......... $ .37 $ .45 $ .82 $ 1.05 $ 1.37 $ 1.47 $ .99 $ 1.19 $ 1.16(4)
Weighted average shares
outstanding............... 8,357 10,827 11,384 11,413 12,808 12,808 12,598 13,849 13,849
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
JUNE 30, ----------------------------------------
----------------------------------------------------- PRO FORMA
1991 1992 1993 1994 1995 ACTUAL PRO FORMA (5) AS ADJUSTED(6)
--------- --------- --------- --------- --------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............. $ 28,458 $ 37,325 $ 28,958 $ 50,653 $ 51,602 $ 44,674 $ 51,417 $ 51,417
Total assets................ 133,902 106,065 187,301 190,055 225,731 305,660 503,933 503,933
Total long-term debt (less
current portion)........... 19,976 26,856 61,731 80,001 37,940 7,315 149,170 57,700
Total stockholders'
equity..................... 38,443 45,640 55,437 48,166 106,624 193,998 193,998 285,468
</TABLE>

- ------------------------
(1) Reflects results from continuing operations of the Company and the related
reorganization described in Note 3 of the Notes to the Company's
Consolidated Financial Statements. These results also reflect revenues and
expenses related to the Bank of America Texas, N.A. contract, which expired
August 31, 1995. See Note 2 of the Notes to the Company's Consolidated
Financial Statements.

(2) The Company has acquired 17 companies during the periods presented, and
therefore revenues between periods are not comparable. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

(3) Pro forma income statement data for the year ended June 30, 1995 and the
nine months ended March 31, 1996 present the results of operations of the
Company for such year and such period as if the following transactions had
occurred at the beginning of each such period: (a) the consummation of the
Acquisition; and (b) the consummation of six additional acquisitions during
the year ended June 30, 1995 and seven acquisitions subsequent to July 1,
1995. No adjustment has been made for the consummation of this offering.
See Pro Forma Condensed Consolidated Financial Information (Unaudited).

(4) Includes a non-recurring charge to Genix's operations of $2.4 million
relating to an early computer lease termination. See Note 2 of the Notes to
Condensed Consolidated Interim Financial Statements of Genix.

(5) Pro forma balance sheet data at March 31, 1996 reflect the Acquisition as
if it had occurred on March 31, 1996. See Pro Forma Condensed Consolidated
Financial Information (Unaudited).

(6) Pro forma balance sheet data at March 31, 1996 as adjusted give effect to
the receipt of the net proceeds from the sale of the two million shares of
Class A Common Stock offered by the Company hereby. See "Use of Proceeds"
and "Capitalization."

5
<PAGE>
RISK FACTORS

THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING THE CLASS A
COMMON STOCK OFFERED HEREBY.

RELIANCE ON SIGNIFICANT CUSTOMERS. The Company's success is dependent in
large part on its retention of contracts with certain significant outsourcing
customers. Also, the Company's five largest customers in the years ended June
30, 1994 and 1995 and the nine months ended March 31, 1996 accounted for
approximately 30%, 27%, and 17%, respectively, of the Company's revenues. While
the Company believes its relations with its five largest customers for the nine
months ended March 31, 1996 are good and has contracts with each with remaining
terms of two to eight years, the loss of any of such customers or a material
decrease in services provided to any such customer could have an adverse impact
on the Company. Outsourcing companies such as ACS incur a high level of fixed
costs as a result of significant investments in data processing centers,
including computer hardware platforms, computer software, facilities and
customer service infrastructure. The loss of any one significant outsourcing
customer can leave an outsourcing company with a higher level of fixed costs
than is necessary to serve remaining customers, therefore reducing
profitability. Other than one customer, which represented 7% of revenues during
the nine months ended March 31, 1996, no one customer represented more than 3%
of such revenues. Generally, customers of the Company may be lost due to merger,
business failure, conversion to a competing data processor or conversion to an
in-house data processing system. In addition, several of Genix's customers are
serviced under contracts that allow for early termination. See "The
Acquisition." There can be no assurance that the Company will be able to
maintain long-term relationships with its or Genix's significant customers. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the contract expiration in August 1995 of the
Company's historically largest customer as a result of its acquisition in 1993
by Bank of America Texas, N.A. ("B of A Texas").

COMPETITION AND TECHNOLOGICAL CHANGE. The markets for the Company's
services are intensely competitive and highly fragmented. The Company's market
share represents a small percentage of the total information processing market.
Many of the Company's principal competitors have greater financial, technical
and operating resources than the Company, and may be able to use their resources
to adapt more quickly to new or emerging technologies or to devote greater
resources to the promotion and sale of their products and services. In addition,
the Company believes that its competitors will continue their practice of
investing in or acquiring assets from large data processing customers in order
to obtain outsourcing contracts. There can be no assurance that the Company will
be able to compete successfully in the future or that competition will not have
a material adverse effect on the Company's results of operations. See
"Business-- Competition."

The market for information processing services is subject to rapid
technological changes and rapid changes in customer requirements. Technological
advances and competition require the Company to commit substantial amounts of
its resources to the operation of multiple hardware platforms, the customization
of third-party software programs and the training of customer personnel in the
use of such hardware and software. A significant portion of the Company's
outsourcing revenue is derived from data processing services performed on
IBM-compatible mainframe systems. Technological advances currently in process
may result in the development of hardware and software products that are able to
manipulate large amounts of data more cost-effectively than existing mainframe
platforms. An acceleration of the shift towards client-server data processing,
in which individual computers or groups of personal computers and mid-range
systems replace mainframe systems, may adversely affect the Company. The Company
has committed substantial amounts of its resources in the development of
outsourcing solutions for these distributed computing environments. However,
there can be no assurance that the Company will be successful in customizing
products and services that incorporate new technology on a timely basis or will
continue to be able to deliver the services and products demanded by the
marketplace.

INVESTMENTS RELATED TO SIGNIFICANT CUSTOMER CONTRACTS. Large outsourcing
agreements often require a significant capital investment. The Company is
sometimes required to purchase certain assets from its

6
<PAGE>
customers, such as data processing fixed assets and software, and in limited
circumstances, to make investments in certain securities issued by or to provide
financial incentives to its non-financial institution customers. The aggregate
amount of such items since the Company's inception through March 31, 1996 was
approximately $20.4 million. These items have been recorded by the Company at
fair market value, with the remainder recorded as intangible assets, which are
then amortized over the term of each contract. The net book value of such items
was $11.6 million at March 31, 1996. The termination of a customer contract or
the deterioration of the financial condition of a customer has in the past and
may in the future result in an impairment of the net book value of the items
recorded. There can be no assurance that the Company will be successful in its
ability to both finance and properly evaluate these items. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

IMPACT OF ACQUISITIONS. A significant percentage of the Company's revenues
has been attributable to acquisitions. Since inception, the Company's
acquisition strategy has resulted in the completion of 26 acquisitions
(excluding the Acquisition). Approximately 58% of the increase in the Company's
revenues for the five years ended June 30, 1995 has been attributable to
acquisitions. The Company intends to continue its growth through acquisitions.
There can be no assurance that future acquisition opportunities will become
available, that future acquisitions can be accomplished on favorable terms, or
that such acquisitions will result in profitable operations. Moreover, the
Company has incurred substantial debt and non-cash amortization expenses in
connection with past acquisitions and will incur additional debt in connection
with the Acquisition. The Company's business strategy to pursue additional
acquisitions may require the Company to incur additional debt in the future, may
result in potentially dilutive issuance of securities and may result in
increased goodwill, intangible assets and amortization expense. See
"Business--Business Strategy" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

SHARES ELIGIBLE FOR FUTURE SALE. As of June 24, 1996, the Company had
outstanding 12,479,300 shares of Class A Common Stock (assuming outstanding
stock options and an outstanding warrant are not exercised and no conversion of
the Company's Series A preferred stock (the "Series A Preferred Stock") to
acquire an aggregate of 1,426,356 shares of Class A Common Stock), 3,202,843
shares of Class B Common Stock, all of which may be converted into a like number
of shares of Class A Common Stock, and 1,000 shares of Series A Preferred Stock,
which are convertible into Class A Common Stock as set forth in "Description of
Capital Stock--Preferred Stock." In connection with the June 1994 reorganization
described in "Reorganization," the Company has registered under the Securities
Act 10,447,714 shares (including 2,000,000 shares owned by First Nationwide Bank
("First Nationwide") that are being offered hereby) of Class A Common Stock
(including all outstanding shares of Class A Common Stock not sold in the
Company's initial public offering (the "IPO"), 4,804,258 shares of Class A
Common Stock that have been or may be issued upon the conversion of the Class B
Common Stock and 99,149 shares of Class A Common Stock issuable upon exercise of
the warrant described below), and has agreed to maintain the effectiveness of
such registration until October 1996. Such registration allows all such shares
of Class A Common Stock, including shares owned by officers, directors, and
affiliates of the Company, to be freely tradable. Shortly after the completion
of the Company's IPO, the Company registered under the Securities Act an
aggregate of 1,850,000 shares of Class A Common Stock issuable upon exercise of
options granted and to be granted pursuant to the Company's Stock Option Plan.
However, pursuant to agreements with the Underwriters, without the prior written
consent of Bear, Stearns & Co. Inc. ("Bear Stearns"), (i) Darwin Deason has
agreed not to sell or otherwise dispose of his shares of Class A Common Stock
issuable on conversion of his Class B Common Stock until September 22, 1996, and
(ii) First Nationwide has agreed not to sell or otherwise dispose of any of its
shares of Class A Common Stock that are not offered hereby until September 22,
1996. An aggregate of 1,041,808 outstanding shares of Class A Common Stock and
3,202,843 shares of Class B Common Stock are subject to such agreements with the
Underwriters.

See "Description of Capital Stock--Warrant" regarding an outstanding warrant
to purchase 396,594 shares of the Company's Class A Common Stock at an
increasing exercise price that was $29.31 per share as of April 1, 1996, which
became exercisable in part beginning on January 1, 1996. In addition, 65,000
shares (including 27,500 shares that are being offered hereby) of Class A Common
Stock were issued on February 15, 1996 in connection with the Company's
acquisition of a 70% interest in The Systems Group, Inc.

7
<PAGE>
("TSG"). The shares issuable on exercise of the warrant (other than 99,149
shares of Class A Common Stock issuable upon exercise of a portion of the
warrant, which have been registered on the shelf registration statement
referenced above filed by the Company) will be, and the shares issued in
connection with the TSG acquisition that are not offered hereby are, "restricted
securities" within the meaning of the Securities Act.

No predictions can be made as to the effect, if any, that market sales of
such shares will have on the market price of the shares of Class A Common Stock
prevailing from time to time. However, sales of substantial amounts of Class A
Common Stock in the open market or the availability of such shares for sale
could adversely affect the market price for the shares of Class A Common Stock.
See "Description of Capital Stock" and "Principal and Selling Stockholders."

DEPENDENCE ON KEY PERSONNEL. The Company's success is largely dependent on
the skills, experience and performance of certain key members of its management,
including Darwin Deason, the Company's Chairman of the Board and Chief Executive
Officer. The loss of the services of any of these key employees could have an
adverse effect on the Company's business and prospects. The Company has not
entered into employment agreements with any of its key employees.

VOTING CONTROL BY CHAIRMAN OF THE BOARD. The Company is controlled by
Darwin Deason, who has voting control over an aggregate of 3,202,843 shares of
Class B Common Stock, which have an aggregate of 32,028,430 votes, representing
approximately 69% of the total voting power of the Company after giving effect
to this offering. Accordingly, Mr. Deason controls virtually all decisions made
with respect to the Company by its stockholders, including decisions relating to
the election of directors of the Company. Furthermore, as a result of his
control of the voting stock of the Company, Mr. Deason may, except as otherwise
provided by Delaware law or certain provisions in the Company's Second Amended
and Restated Certificate of Incorporation (the "Certificate of Incorporation")
and its Amended Bylaws (the "Bylaws") requiring an 80% stockholder vote, without
the concurrence of the remaining stockholders, amend the Certificate of
Incorporation, effect or prevent a merger, sale of assets or other business
acquisition or disposition and otherwise control the outcome of all actions
requiring stockholder approval. See "Principal and Selling Stockholders" and
"Description of Capital Stock--Class A and Class B Common Stock."

POSSIBLE VOLATILITY OF STOCK PRICE. Prices for the Class A Common Stock are
determined in the market place and may be influenced by many factors, including
the depth and liquidity of the market for the Class A Common Stock, investor
perception of the Company, and general economic and market conditions.
Variations in the Company's operating results, general trends in the industry
and other factors could cause the market price of the Class A Common Stock to
fluctuate significantly. In addition, general trends and developments in the
industry, including the announcement of technological innovations by the Company
or its competitors, government regulation and other factors, could have a
significant impact on the price of the Class A Common Stock. The stock market
has, on occasion, experienced price and volume fluctuations that have often
particularly affected market prices for smaller companies and that often have
been unrelated or disproportionate to the operating performance of the affected
companies, and the price of the Class A Common Stock could be affected by such
fluctuations.

ANTI-TAKEOVER EFFECT OF CERTIFICATE OF INCORPORATION AND BYLAWS. Certain
provisions of the Company's Certificate of Incorporation and the Company's
Bylaws may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider to be in such stockholder's best interest, including
attempts that might result in a premium over the market price for the stock held
by stockholders. The Bylaws also provide that the number of directors shall be
fixed, from time to time, by resolution of the Board of Directors of the Company
(the "Board of Directors"). Further, the Certificate of Incorporation permits
the Board of Directors to establish by resolution one or more series of
preferred stock (the "Preferred Stock") and to establish the powers,
designations, preferences and relative, participating, optional or other special
rights of each series of Preferred Stock. The Preferred Stock could be issued on
terms that are unfavorable to the holders of Class A Common Stock or that could
make a takeover or change in control of the Company more difficult. In addition,
the Company is subject to Section 203 of the Delaware General Corporation Law
(the "DGCL"), which places restrictions on certain business combinations with
certain stockholders that could render more difficult a change in control of the
Company.

8
<PAGE>
INDEMNIFICATION OF STOCKHOLDERS FOR SPIN-OFF. On June 30, 1994, the Company
distributed all of the shares of capital stock of its wholly-owned subsidiary,
Precept Business Products, Inc., a Texas corporation ("Precept"), to the
Company's stockholders, including Mr. Deason, the Company's largest stockholder.
See "Principal and Selling Stockholders." In connection with the Spin-Off
described in "Reorganization," the Company has agreed to indemnify the Company's
stockholders, on a net after-tax basis, for any actual taxes (including
penalties, interest and legal fees), net of the actual or assumed benefit
resulting from increased tax basis, that may be asserted against the Company's
stockholders on the basis that the Spin-Off fails to qualify under Section 355
of the Internal Revenue Code of 1986, as amended (the "Code"). The Company's
aggregate indemnification liability is limited to $5 million, reduced by the
Company's expenses incurred in connection with determining qualification under
Section 355. Although prior to the Spin-Off the Company received an opinion of
counsel to the effect that it is more likely than not that the Spin-Off should
qualify for tax-free treatment under Section 355 of the Code subject to certain
restrictions, such opinion has no binding effect upon the Internal Revenue
Service (the "IRS") or the courts and there can be no assurance that the IRS or
a court will agree with the opinion. See "Reorganization--Spin-Off of Precept."

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including without limitation, statements under "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" regarding the Company's financial position, business
strategy and plans and objectives of management of the Company for future
operations, are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") are disclosed under "Risk
Factors" and elsewhere in this Prospectus, including without limitation in
conjunction with the forward-looking statements included in this Prospectus. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.

9
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of 2,000,000 shares of Class A
Common Stock offered by the Company in this offering, after deduction of
underwriting discounts and commissions and expenses payable by the Company in
connection therewith, are estimated to be approximately $91.5 million
(approximately $119.2 million if the over-allotment option granted by the
Company to the Underwriters is exercised in full). The Company will not receive
any of the proceeds from the sale of the Class A Common Stock by the Selling
Stockholders. See "Underwriting."

The Company will use all of the net proceeds to it from this offering for
the repayment of a portion of the bank debt ($0.0 million at March 31, 1996,
plus approximately $137.5 million incurred in connection with the Acquisition)
under its revolving credit agreement, as amended (the "Amended Credit
Agreement"), with Wells Fargo Bank (Texas), N.A. ("Wells Fargo") and Bank One,
Texas, N.A. The debt under this agreement matures on June 30, 1999, unless
converted at that time to a two year term loan due in eight quarterly
installments, and bears interest at a rate equal to the Company's election of
either a floating rate equal to the London Interbank Offered Rate (LIBOR) plus
0.5% to 1.375% or Wells Fargo's base rate. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

PRICE RANGE OF CLASS A COMMON STOCK AND DIVIDEND POLICY

The Company's Class A Common Stock is quoted on the Nasdaq National Market
under the symbol ACSA. The following table sets forth for the periods indicated
the high and low sale prices of the Company's Class A Common Stock:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, HIGH LOW
------- -------
<S> <C> <C>
1995
First Quarter (beginning September 26, 1994).............................. $20 $17
Second Quarter............................................................ 23 1/2 19 1/4
Third Quarter............................................................. 30 1/2 19 3/4
Fourth Quarter............................................................ 31 1/2 24 3/4

1996
First Quarter............................................................. $32 1/4 $27 3/4
Second Quarter............................................................ 38 1/2 28 3/4
Third Quarter............................................................. 43 33 3/4
Fourth Quarter (through June 24, 1996).................................... 53 3/4 41 1/2
</TABLE>

On June 24, 1996, the last reported sale price of the Company's Class A
Common Stock on the Nasdaq National Market was $49.00 per share. On June 24,
1996, the Company had approximately 52 stockholders of record of the Company's
Class A Common Stock.

To date, the Company has not paid any cash dividends on its common stock.
The Company intends to continue to retain earnings for use in the operation of
its business and, therefore, does not anticipate paying any cash dividends in
the foreseeable future. Under the terms of the Amended Credit Agreement, the
Company is permitted to pay dividends in any fiscal year to the extent that
total dividends in such fiscal year do not exceed 50% of the Company's net
income for the preceding fiscal year. Also, under the terms of the Company's
outstanding Series A Preferred Stock, the Company must pay all accrued dividends
on outstanding Series A Preferred Stock prior to making any cash dividend
payments on the Company's common stock. Any future determination to pay
dividends will be at the discretion of the Company's Board of Directors and will
be dependent upon the Company's financial condition, results of operations,
contractual restrictions, capital requirements, business prospects and such
other factors as the Board of Directors deems relevant.

10
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company (i) as of
March 31, 1996, (ii) on a pro forma basis as of March 31, 1996 to give effect to
the Acquisition as if the Acquisition had occurred on March 31, 1996 and (iii)
on a pro forma basis as of March 31, 1996 as adjusted to give effect to the
receipt by the Company of the estimated net proceeds of $91.5 million from the
sale of the 2,000,000 shares of Class A Common Stock offered by the Company
hereby and the application of the net proceeds therefrom. See "Use of Proceeds."
This table should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto and the Pro Forma Condensed Consolidated
Financial Information (Unaudited) contained elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt, including current portion of long-term debt................ $ 14,520 $ 15,215 $ 15,215
---------- ----------- -----------
---------- ----------- -----------
Long-term debt (less current portion)....................................... $ 7,315 $ 149,170 $ 57,700
---------- ----------- -----------
Cumulative redeemable preferred stock, aggregate liquidation value of
$1,100..................................................................... 1,100 1,100 1,100
---------- ----------- -----------
Stockholders' equity:
Common stock:
Class A, par value $.01 per share, 17,195,742 shares authorized,
12,207,156 shares outstanding (14,207,156 after this offering) (1)..... 122 122 142
Class B, par value $.01 per share, 4,804,258 shares authorized,
3,202,843 shares outstanding........................................... 32 32 32
Additional paid-in capital................................................ 150,199 150,199 241,649
Retained earnings......................................................... 43,645 43,645 43,645
---------- ----------- -----------
Total stockholders' equity.......................................... 193,998 193,998 285,468
---------- ----------- -----------
Total capitalization.............................................. $ 202,413 $ 344,268 $ 344,268
---------- ----------- -----------
---------- ----------- -----------
</TABLE>

- ------------------------
(1) Excludes (i) 396,594 shares of Class A Common Stock reserved for issuance
upon the exercise of an outstanding warrant held by one of the Company's
larger customers, which is exercisable beginning on January 1, 1996, at an
increasing price that was $29.31 per share on April 1, 1996, (ii) 1,007,463
shares of Class A Common Stock reserved for issuance upon the exercise of
outstanding employee stock options as of March 31, 1996 with a weighted
average exercise price of $20.85 per share under the Company's Stock Option
Plan, (iii) 3,202,843 shares of Class A Common Stock issuable upon
conversion of all outstanding shares of Class B Common Stock, and (iv)
26,466 shares (based on the closing stock price at March 31, 1996) of Class
A Common Stock reserved for issuance upon conversion of the Company's Series
A Preferred Stock.

11
<PAGE>
THE ACQUISITION

On June 21, 1996, the Company acquired 100% of the stock of Genix from MCN
Investment for approximately $137.5 million in cash. Genix is a nationwide
provider of data processing outsourcing services.

Genix is the result of the combination of MCN Computer Services, Inc. and
Genix Corporation in 1990. MCN Computer Services, Inc. began in 1982 as the
internal data center for Michigan Consolidated Gas Company, a subsidiary of MCN
Corporation, before expanding its services to outside customers. In 1989, the
business had achieved revenues of $23 million and included a wide variety of
customers from the utility, financial services, manufacturing and public
sectors. Genix Corporation was similarly formed in 1984 as the internal data
center for National Steel in Pittsburgh, Pennsylvania. Genix Corporation also
expanded its services to outside customers and in 1989 had achieved revenues of
$27 million.

Genix's revenues have grown from $62.4 million for the year ended December
31, 1991 to $105.2 million for the year ended December 31, 1995. As of March 31,
1996, Genix had approximately 100 customers. Genix typically serves its
customers under long-term contracts, with contract terms ranging from three to
seven years. Several of Genix's customers are serviced under contracts that
allow for early termination. See "Risk Factors -- Reliance on Significant
Customers."

Genix operates full service data centers for the support of its customers'
computing requirements. The data centers are designed to provide redundant
electrical power, cooling and telecommunication capabilities that significantly
reduce the risk of service disruption. The Dearborn, Michigan data center is
owned by Genix. This facility has approximately 69,000 square feet with an
additional four acres of undeveloped adjacent real estate. The Pittsburgh data
center includes approximately 90,000 square feet of leased space under a twenty
year lease expiring in the year 2009. The Charlotte data center has
approximately 48,000 square feet and was leased in 1994 upon the signing of an
outsourcing agreement with a major customer. The lease expires concurrent with
the customer contract in 2001.

Genix leases 15 IBM mainframes and eight Digital Equipment Corporation and
six Hewlett Packard mid-range computers. The initial terms of the leases range
from 36 to 60 months. Genix believes that the computer equipment, as
periodically expanded and upgraded, is adequate for its present business needs.
Genix's data centers have a combined processing capacity of over 2,500 MIPS
(million of instructions per second). In addition, Genix's Pittsburgh data
center has sufficient unused infrastructure capacity to enable ACS to curtail
the planned expansion of its existing Dallas facilities.

12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated income statement data for the fiscal year ended
June 30, 1993 and the consolidated financial data set forth below for the fiscal
years ended June 30, 1994 and 1995 are derived from the Company's Consolidated
Financial Statements, which were audited by Price Waterhouse LLP, independent
accountants, and included elsewhere herein. In addition, the following selected
consolidated financial data for the years ended June 30, 1991 and 1992 and the
consolidated balance sheet data at June 30, 1993 are derived from the Company's
audited consolidated financial statements, which are not included herein. The
balance sheet data at March 31, 1996 and the income statement data for the nine
months ended March 31, 1995 and March 31, 1996 are derived from unaudited
financial statements, which, in the opinion of management of the Company,
reflect all adjustments, consisting only of normal, recurring adjustments
necessary to present fairly the information set forth. The results for the nine
months ended March 31, 1996 are not necessarily indicative of the results that
may be expected for any other interim period or for the fiscal year. The
following selected consolidated financial data of the Company are qualified by
reference to and should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
INCOME STATEMENT DATA ----------------------------------------------------- --------------------
(FROM CONTINUING OPERATIONS) (1): 1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues (2)............................. $ 146,827 $ 149,944 $ 189,064 $ 271,055 $ 313,181 $ 223,638 $ 279,708
Operating expenses:
Wages and benefits..................... 52,272 52,472 62,902 91,117 106,966 76,561 110,772
Services and supplies.................. 34,015 34,774 48,983 74,947 77,613 55,260 71,313
Rent, lease and maintenance............ 39,661 39,461 45,972 66,075 80,250 58,955 55,262
Depreciation and amortization.......... 11,155 7,970 6,731 8,524 11,847 8,069 10,745
Other operating expenses............... 3,874 4,911 7,101 5,582 4,963 2,391 3,343
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses................. 140,977 139,588 171,689 246,245 281,639 201,236 251,435
--------- --------- --------- --------- --------- --------- ---------
Operating income......................... 5,850 10,356 17,375 24,810 31,542 22,402 28,273
Interest and other expenses, net......... 225 1,169 1,620 4,598 1,755 1,186 614
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes............... 5,625 9,187 15,755 20,212 29,787 21,216 27,659
Income tax expense....................... 1,805 3,528 6,437 8,287 12,183 8,688 11,191
Loss on equity investment................ 728 726 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Income from continuing operations........ $ 3,092 $ 4,933 $ 9,318 $ 11,925 $ 17,604 $ 12,528 $ 16,468
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings per share....................... $ .37 $ .45 $ .82 $ 1.05 $ 1.37 $ .99 $ 1.19
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average shares outstanding...... 8,357 10,827 11,384 11,413 12,808 12,598 13,849
</TABLE>

<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------------- MARCH 31,
BALANCE SHEET DATA (1): 1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital.......................... $ 28,458 $ 37,325 $ 28,958 $ 50,653 $ 51,602 $ 44,674
Total assets............................. 133,902 106,065 187,301 190,055 225,731 305,660
Total long-term debt (less current
portion)................................ 19,976 26,856 61,731 80,001 37,940 7,315
Cumulative redeemable preferred stock.... 5,838 6,424 7,081 1,100 1,100 1,100
Total stockholders' equity............... 38,443 45,640 55,437 48,166 106,624 193,998
</TABLE>

- ------------------------------
(1) Reflects results from continuing operations of the Company and the related
reorganization described in Note 3 of the Notes to the Company's
Consolidated Financial Statements. These results also reflect revenues and
expenses related to the B of A Texas contract, which expired August 31,
1995. See Note 2 of the Notes to the Company's Consolidated Financial
Statements. Revenues from this contract were $28.3 million, $37.2 million,
$35.1 million and $4.6 million for fiscal years 1993, 1994 and 1995 and the
nine months ended March 31, 1996, respectively, while direct expenses for
the same periods were $7.0 million, $9.5 million, $7.4 million and $0.8
million.

13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following presentation of management's discussion and analysis of the
Company's financial condition and results of operations should be read in
conjunction with the Company's Consolidated Financial Statements, accompanying
Notes thereto and other financial information appearing elsewhere in this
Prospectus. All references in the following presentation to revenues, operating
income and income before income taxes refer to revenues, operating income and
income before income taxes from continuing operations, respectively.

OVERVIEW

The Company derives its revenues from providing information technology
services and EFT transaction processing to commercial and financial institution
customers. A substantial portion of the Company's revenues is derived from
recurring monthly charges to its customers under service contracts that vary in
terms from one to ten years. For the nine months ended March 31, 1996,
approximately 91% of the Company's revenues were recurring. Recurring revenues
are defined by the Company as revenues derived from services that are used by
the Company's customers each year in connection with their ongoing businesses,
and accordingly exclude conversion and deconversion fees, software license fees,
product installation fees and hardware sales. Since inception, the Company has
acquired 26 companies (excluding the Acquisition), which have resulted in
geographic expansion, growth and diversification of the Company's customer base,
expansion of services offered and increased economies of scale. Approximately
58% of the increase in revenues for the five years ended June 30, 1995 has been
attributable to acquisitions.

In January 1994, the Company's then largest customer, B of A Texas, informed
the Company of its intention to consolidate its data processing and EFT
transaction processing with its parent's systems, and therefore not renew its
contract with the Company, which was due to expire on August 31, 1995. Due to
the magnitude of the B of A Texas revenues, comprising approximately 15%, 14%
and 11% of the Company's 1993, 1994 and 1995 revenues, respectively, management
of the Company developed and successfully executed a plan to eliminate costs
directly related to the services provided under the contract, as well as
additional indirect infrastructure costs, including customer support, general
overhead and other indirect expenses.

In conjunction with the contract expiration, the Company expected to incur
various non-recurring expenses primarily associated with the termination or
renegotiation of a computer lease. Such costs were estimated to aggregate $16.1
million, of which $13.3 million had been accrued through June 30, 1995. Due to
the signing of a services contract with another customer in May 1995, the
Company determined that the computer lease would not need to be terminated or
renegotiated, as the new customer would replace computer capacity previously
utilized for the B of A Texas contract. Accordingly, the Company determined that
continuing the accrual for the computer lease was no longer necessary, and, in
September 1995, began to amortize the accrual over the remaining term of the
computer lease, which expires February 1999, at a rate of approximately $1.0
million per quarter. The expiration of the B of A Texas contract is further
discussed in Note 2 of the Notes to the Company's Consolidated Financial
Statements.

14
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain items from
the Company's Consolidated Statements of Operations as a percentage of revenues:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Operating expenses
Wages and benefits........................................ 33.3 33.6 34.2 34.2 39.6
Services and supplies..................................... 25.9 27.6 24.8 24.7 25.5
Rent, lease and maintenance............................... 24.3 24.4 25.6 26.4 19.8
Depreciation and amortization............................. 3.6 3.1 3.8 3.6 3.8
Other operating expenses.................................. 3.7 2.1 1.5 1.1 1.2
----- ----- ----- ----- -----
Total operating expenses................................ 90.8 90.8 89.9 90.0 89.9
----- ----- ----- ----- -----
Operating income............................................ 9.2 9.2 10.1 10.0 10.1
Interest and other expenses, net............................ 0.9 1.7 0.6 .5 0.2
----- ----- ----- ----- -----
Income before income taxes.................................. 8.3 7.5 9.5 9.5 9.9
Income tax expense.......................................... 3.4 3.1 3.9 3.9 4.0
----- ----- ----- ----- -----
Income from continuing operations........................... 4.9% 4.4% 5.6% 5.6% 5.9%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995

Revenues increased $56.1 million, or 25%, to $279.7 million in the nine
months ended March 31, 1996 from $223.6 million for the same period of the prior
year. This increase was due to the completion of seven acquisitions subsequent
to March 31, 1995 and internally generated sales from both new customers and
growth from existing customers, partially offset by the reductions in revenues
from the B of A Texas contract. Revenues related to the B of A Texas contract
decreased to $4.6 million from $27.6 million for the nine months ended March 31,
1996 and 1995, respectively. Excluding revenues from the B of A Texas contract,
the increase in revenues was 40% for the nine months ended March 31, 1996. The
seven entities acquired subsequent to March 31, 1995 contributed revenues of
$33.5 million for the nine months ended March 31, 1996.

Total operating expenses were $251.4 million in the nine months ended March
31, 1996, an increase of 25% from $201.2 million for the prior period. Operating
expenses as a percentage of revenues remained virtually unchanged in the nine
months ended March 31, 1996 compared to the nine months ended March 31, 1995 at
approximately 90%. Wages and benefits increased as a percentage of revenues from
34.2% to 39.6% due to the acquisitions consummated in the Company's professional
services and image management lines of business, which are significantly more
labor intensive than the Company's other lines of business. Without these
acquisitions, wages and benefits as a percentage of revenues for the first nine
months of fiscal 1996 would have remained approximately the same as the first
nine months of fiscal 1995. Rent, lease and maintenance decreased to 19.8% of
revenues in the first nine months of fiscal 1996, compared to 26.4% of revenues
in the first nine months of fiscal 1995. This decrease is attributable primarily
to the acquisitions in fiscal 1996 of several labor intensive businesses and
economies of scale. In addition, the first nine months of fiscal 1996 included
$2.2 million of amortization of the B of A Texas accrual compared to $7.2
million accrued in the first nine months of fiscal 1995. See Note 2 to the
Company's Consolidated Financial Statements.

Operating income increased $5.9 million, or 26%, to $28.3 million for the
first nine months of fiscal 1996, compared to $22.4 million for the first nine
months of fiscal 1995. The increase was due to internal growth and acquisitions
since the third quarter of fiscal 1995.

15
<PAGE>
Interest and other expenses declined from $1.2 million in the first nine
months of fiscal 1995 to $0.6 million in fiscal 1996. The decrease is primarily
attributable to decreased interest expense due to the reduction in debt in
October 1994 upon receipt of proceeds from the IPO.

The Company's effective tax rate of approximately 40.5% exceeded the federal
statutory rate of 35%, due primarily to the amortization of certain
acquisition-related costs that are non-deductible for tax purposes, plus the net
effect of state income taxes.

COMPARISON OF FISCAL 1995 TO FISCAL 1994

Revenues increased $42.1 million, or 15.5%, to $313.2 million for fiscal
1995, compared to $271.1 million for fiscal 1994, due primarily to internally
generated sales growth (almost two-thirds of the increase), with the remainder
(approximately $15.6 million) generated from acquisitions. Excluding revenues
from B of A Texas, fiscal 1995 revenues increased almost 19% over fiscal 1994.

Outsourcing services revenues increased 14.4%, to $174.1 million, due to an
increase in accounts processed and higher volumes processed for existing
significant commercial outsourcing customers. Revenues earned from the EFT
transaction processing business increased by 15.1% to $64.4 million, due
primarily to an increase in the number of ATMs processed, particularly from an
increase in low-cost ATM devices. Revenues earned from the image management
services business increased 4.8% to $65.9 million due to the acquisition of
Microfilm Services Company, Inc. in January 1995. Professional services, a new
line of business for the Company created with the January 1995 acquisition of
TSG, contributed $8.7 million to revenues.

Total operating expenses were $281.6 million in fiscal 1995, an increase of
14.4% over fiscal 1994. Consistent with the increase in revenues, the overall
increase in operating expenses is due to increases associated with internally
generated sales growth and, to a lesser extent, acquisitions. Total operating
expenses improved as a percentage of revenues to 89.9% in fiscal 1995 from 90.8%
in fiscal 1994, due primarily to increased economies of scale from internally
generated sales growth and the effects of the B of A Texas cost savings plans.

Wages and benefits as a percentage of revenue increased by slightly more
than one-half percentage point due to the acquisition of TSG. As a professional
services business, TSG is labor intensive. Excluding the acquisition of TSG,
wages and benefits would have declined by approximately one percentage point.
The net decrease in services and supplies and rent, lease and maintenance
(approximately two percentage points) was due primarily to economies of scale
resulting from the Company's revenue growth, offset slightly by an increase in
the amount of expenses accrued for the B of A Texas contract. Fiscal 1995 rent,
lease and maintenance expense included $8.5 million for the B of A Texas
contract termination compared to $4.8 million for fiscal 1994. Depreciation and
amortization increased as a percentage of revenues by slightly over one-half
percentage point due to the write-off of $1.1 million of purchased research and
development costs associated with two fiscal 1995 acquisitions and increased
acquisition amortization.

Operating income increased $6.7 million, or 27.1%, in fiscal 1995 compared
to fiscal 1994. As a percentage of revenues, operating income increased by one
percentage point. This increase was due to economies of scale and implementation
of the B of A Texas cost savings plan, offset by an increase in the B of A Texas
accrual in fiscal 1995 versus fiscal 1994. The economies of scale resulted from
increased outsourcing and EFT processing revenues, which were not accompanied by
proportionate increases in headcount or equipment costs due to the Company's
existing infrastructure and available capacity.

Interest and other net expenses decreased by more than one percentage point
due to decreases in interest costs resulting from the payment of debt, primarily
from proceeds from the IPO, and because fiscal 1994 included charges associated
with the divestiture of the Company's Hawaii outsourcing operations of $0.9
million.

The effective tax rate for fiscal 1995 and 1994 was approximately 41% and
exceeded the statutory rate of 35% due to certain non-deductible
acquisition-related costs and the net effect of state income taxes.

16
<PAGE>
COMPARISON OF FISCAL 1994 TO FISCAL 1993

Revenues increased $82.0 million, or 43.4%, to $271.1 million in fiscal 1994
from $189.1 million in fiscal 1993, primarily due to three acquisitions and, to
a lesser extent, internal growth.

Revenues from the Company's outsourcing services business increased 28.4% to
$152.2 million due to the acquisition in June 1993 of a healthcare outsourcing
company, which generated revenues of $19.2 million during fiscal 1994, a $5.1
million increase in revenues from B of A Texas resulting from an increase in
accounts processed and higher volumes processed for existing significant
commercial outsourcing customers. Revenues from the EFT transaction processing
business increased 28.3% to $56.0 million due primarily to an increase in the
number of ATMs processed, including $3.8 million attributable to B of A Texas,
as well as an increase in transaction pricing. Revenues from the image
management services business increased 133.6% to $62.9 million, due primarily to
the full year effect of companies acquired in fiscal 1993. In December 1992, the
Company increased its ownership interest in Dataplex Acquisition Corp. to 96.5%,
which resulted in Dataplex Acquisition Corp. becoming a consolidated subsidiary.
The Company also acquired an additional image management company in June 1993.
Revenues from the two acquired companies were $62.9 million in fiscal 1994
compared to $26.9 million in the prior period.

Total operating expenses were $246.2 million in fiscal 1994, an increase of
43.4% from $171.7 million in fiscal 1993. Approximately two-thirds of this
increase was attributable to acquisitions. Total operating expenses remained
constant as a percentage of revenues at 90.8% of revenues in fiscal 1994 and
fiscal 1993. Services and supplies increased as a percentage of revenues to
27.6% in fiscal 1994 from 25.9% in fiscal 1993 due to the acquisition of an
image management business, Dataplex Corporation ("Dataplex"). The image
management business uses a relatively high amount of supplies such as
microfiche, microfilm, and other storage media. Rent, lease and maintenance
remained essentially flat as a percentage of revenues despite a $4.8 million
accrual established in fiscal 1994 for the B of A Texas lease termination. The
$4.8 million accrual was largely offset by decreased rent, lease and maintenance
costs resulting from increased economies of scale. Other operating expenses
decreased as a percentage of revenues to 2.1% in fiscal 1994 from 3.7% in fiscal
1993, primarily due to a $2.8 million charge in fiscal 1993 related to a CPU
upgrade and lease termination.

Operating income increased $7.4 million, or 42.8%, to $24.8 million in
fiscal 1994, compared to $17.4 million in fiscal 1993. Operating income remained
constant as a percentage of revenues at 9.2% in fiscal 1994 and fiscal 1993.

Interest and other expense increased $3.0 million to $4.6 million, or 1.7%
of revenues in fiscal 1994, from $1.6 million or 0.9% of revenues in fiscal
1993. The increase resulted from increased debt incurred for acquisitions
completed in fiscal 1993, an increase in ATM cash borrowings to fund cash in new
Company owned ATMs and a $0.9 million charge related to the divestiture of the
Company's Hawaii outsourcing business.

The Company's effective tax rate of 41% exceeded the statutory rate of 35%
due primarily to the amortization of certain acquisition-related costs that were
non-deductible for tax purposes, plus the net effect of state income taxes.

QUARTERLY COMPARISONS

The following table sets forth certain quarterly unaudited financial data in
dollar amounts and as a percentage of revenues for each of the quarters in
fiscal 1995 and the first three quarters in fiscal 1996. The decrease in the
earnings per share in the quarter ended December 31, 1995 is primarily
attributable to the expiration of the B of A Texas contract. See "--Comparison
of the Nine Months Ended March 31, 1996 and

17
<PAGE>
1995." In the opinion of management, such unaudited financial information
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the information for the periods. The
operating results for any quarter are not necessarily indicative of results for
any future periods.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1995 1995 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues........................... $ 70,600 $ 72,338 $ 80,700 $ 89,543 $ 89,294 $ 91,352 $ 99,062
Operating income................... 7,389 7,870 7,143 9,140 9,933 8,392 9,948
Net income......................... 3,774 4,295 4,459 5,076 5,661 5,072 5,735
Earnings per share................. $ .33 $ .32 $ .34 $ .38 $ .41 $ .37 $ .41
PERCENTAGE OF REVENUES:
Operating income................... 10.5% 10.9% 8.9% 10.2% 11.1% 9.2% 10.0%
Net income......................... 5.3% 5.9% 5.5% 5.7% 6.3% 5.6% 5.8%
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1996, the Company's liquid assets, consisting of cash and cash
equivalents, totaled $44.3 million compared to $49.7 million at June 30, 1995.
These liquid assets included $9.0 million ($8.3 million at June 30, 1995)
borrowed under a revolving credit facility (the "ATM Cash Facility") for use in
the Company's automated teller machines ("ATMs"). Working capital was $44.7
million at March 31, 1996 and reflected the net proceeds of $68.3 million
received from the Company's secondary offering of 1.8 million shares of Class A
Common Stock completed in March 1996, less $43.1 million of the net proceeds
used for the repayment of debt. Working capital at March 31, 1996 decreased by
$6.9 million from the June 30, 1995 total of $51.6 million primarily due to the
reclassification of the $9.0 million ATM Cash Facility to a current liability
during this quarter as a result of the refinancing discussed below.

Net cash provided by operating activities was $11.0 million for the first
nine months of fiscal 1996, compared with $18.9 million provided by operating
activities in fiscal 1995. The decrease is primarily due to the elimination of
the prepayment of services from B of A Texas, which was approximately $2.2
million at June 30, 1995, in connection with the expiration of the B of A Texas
contract, and a decrease of $5.6 million in the periods related to the changes
in ATM cash balances. Net cash used for investing activities increased by $55.2
million over the prior nine month period. The current period included $22.4
million for six acquisitions, compared to five smaller acquisitions of $7.8
million in fiscal 1995, and an increase of $27.3 million in cash used for the
purchase of property, equipment and software. Property and equipment purchases
increased with the purchase of the Company's headquarters and the purchase and
renovation of an adjacent building, growth associated with outsourcing services
customers and an increase in the number of ATMs owned and operated by the
Company. Net cash provided by financing activities increased $48.3 million due
primarily to proceeds received from the Company's secondary stock offering
completed in March 1996.

In December 1995, the Company refinanced its revolving line of credit
facility (the "Credit Facility") and ATM Cash Facility. These borrowing
arrangements provided up to $90 million of funds under the three year unsecured
Credit Facility and $11 million under the one year ATM Cash Facility. In
connection with the secondary stock offering completed in March 1996, the
Company paid down its balance outstanding under the Credit Facility, leaving
approximately $79 million available for use, net of outstanding letters of
credit. Borrowings of $9.0 million were outstanding at March 31, 1996 under the
ATM Cash Facility. In August 1995, the Company amended its vault cash custody
agreement with First Interstate Bank Texas, N.A. (now Wells Fargo Bank (Texas),
N.A.), which replaced a similar facility that expired August 31, 1995 provided
under the B of A Texas contract. This amendment increased the amount of funds
available to $50 million and extended the term to July 1997. The amount of cash
outstanding under this facility was approximately $35.4 million as of March 31,
1996. This cash is neither an asset nor a liability of the Company and therefore
is not recorded on the accompanying balance sheets.

18
<PAGE>
The Company amended its credit agreement with Wells Fargo and Bank One,
Texas, N.A. prior to consummation of the Acquisition to increase the amount
available under the Credit Facility to $160 million. The Amended Credit
Agreement provides for a mandatory facility reduction on a quarterly basis
beginning in June 1997 that will reduce the outstanding principal balance of the
Credit Facility to $90 million by June 30, 1999. In addition, the Company agreed
to apply all of the net proceeds to it from this offering to repay the
outstanding principal balance of the Credit Facility, which will permanently
reduce the commitment under the Credit Facility to $125 million.

In connection with the Acquisition, the Company may have a liability of up
to an additional $32.1 million related to the present value of a long-term fixed
obligation between Genix and a software vendor that was entered into in March
1995. As the obligation relates to duplicate services for which the Company has
already contracted, it is considered to be an unfavorable commitment. Payments
related to this obligation are payable over the remaining nine years of the
contract.

The Company's management believes that available cash and cash equivalents,
together with cash generated from operations and available borrowings under its
credit facilities, will provide adequate funds for the Company's anticipated
needs, including working capital, the capital expenditures and ATM vault cash
requirements. Management also believes that cash provided from operations will
be sufficient to satisfy all existing debt obligations as they come due. The
Company intends to continue its growth through acquisitions and from time to
time to engage in discussions with potential acquisition candidates. As the size
and financial resources of the Company increase, however, additional acquisition
opportunities requiring significant commitments of capital may arise. In order
to pursue such opportunities, the Company may be required to incur debt or to
issue additional potentially dilutive securities in the future. No assurance can
be given as to the Company's future acquisition and expansion opportunities and
how such opportunities would be financed.

19
<PAGE>
BUSINESS

ACS is a nationwide provider of information technology services and EFT
transaction processing. The Company's information technology services include
data processing outsourcing, image management and professional services. The
Company provides its services to customers with time-critical,
transaction-intensive information processing needs. ACS' revenues from
continuing operations increased from $146.8 million in fiscal 1991 to $313.2
million in fiscal 1995, and income from continuing operations increased from
$3.1 million to $17.6 million during the same period.

The Company's data processing outsourcing services are provided to a variety
of customers nationwide, including retailers, healthcare providers,
telecommunications companies, wholesale distributors, manufacturers, and
regional, non-money center financial institutions. The Company utilizes a
variety of proprietary and third party industry-standard software packages that
can be matched with the appropriate hardware platform to provide flexible and
cost-effective solutions to customer requirements. ACS is capitalizing on the
trend toward client-server computing by providing consulting and transitional
outsourcing services, including network and desktop computer management, to
companies that are changing to these distributed platform environments. The
Company offers image management services such as electronic imaging, document
imaging, record storage and retrieval services, micrographics processing
services and high speed data capture services. Beginning in January 1995, ACS
expanded its product offerings to include professional services such as
consulting, contract programming and technical support, as well as network
design and systems integration. The Company's EFT transaction processing
business consists primarily of the operation of a proprietary ATM network
consisting of Company owned ATMs as well as ATMs owned by third parties.
According to industry data as of September 1995, based on the number of network
ATMs, the Company's MoneyMaker-SM- ATM network is one of the largest proprietary
off-premise ATM networks in the United States. The Company operates a national
network of host and remote data centers that enable ACS to process transactions
for its outsourcing and EFT customers in a rapid, cost-effective manner.

ACS was formed in 1988 to participate in the trend to outsource information
processing to third parties to enable businesses to focus on core operations,
respond to rapidly changing technologies and reduce data processing expenses.
The Company's business strategy is to continue to lower its unit processing
costs by expanding its customer base through both internal marketing and the
acquisition of complementary companies. Since inception, the Company has
completed 26 acquisitions (excluding the Acquisition), which have resulted in
geographic expansion, growth and diversification of the Company's customer base,
expansion of services and products offered, and increased economies of scale.
Approximately 58% of the increase in the Company's revenues for the five years
ended June 30, 1995 has been attributable to acquisitions. The Company's
marketing efforts focus on developing long-term relationships with customers
that choose to outsource various information processing requirements, as well as
on expanding services offered to existing customers. The Company had
approximately 13,400 information technology customers and approximately 3,460
EFT customers as of March 31, 1996.

MARKET OVERVIEW

The Company believes that the demand for third-party information processing
services has grown substantially in recent years and will continue to increase
in the future as a result of financial, strategic and technological factors.
These factors include: (i) the desire by businesses to take advantage of the
latest advances in technology without the cost and time commitment required to
maintain an in-house system, (ii) the increasing requirements for rapid
processing and communication of large amounts of data to multiple locations,
(iii) the increasing attention by businesses to cost control, causing them to
compare the fully allocated cost of in-house processing with the cost of
outsourcing and (iv) the desire of organizations to focus on their primary
competencies. According to a published market research report, the size of the
U.S. information systems outsourcing market is estimated to be approximately $22
billion in 1996.

According to an industry trade association, the market for image management
products and services is estimated to be approximately $6.2 billion in 1996. The
Company participates in all segments of this market, primarily as a provider of
micrographics products and services, and as a provider of electronic imaging
products and services.

20
<PAGE>
As a result of rapid technological change in the Company's markets, the
Company expects continued strong demand for third-party professional programming
and consulting services. Because ACS provides professional services to customers
with mainframe environments as well as with newer client-server and network
applications, the Company believes that it is well-positioned to expand its
services in current locations as well as in new markets.

EFT transaction processing involves the on-line processing of transactions
initiated by a consumer at a terminal using a debit or credit card issued by the
consumer's financial institution. Various transactions, including cash
withdrawals, transfers and balance inquiries, are authorized and performed with
immediate posting to the consumer's accounts. Usage of ATMs located at financial
institutions and retail stores has increased during recent years. According to
an industry publication, there were over 122,000 ATMs deployed in the United
States as of September 1995. Transaction volume has grown in recent years due to
an increase in the number of ATMs deployed, the number of cardholders and the
frequency of use by cardholders.

Information processing has experienced dramatic changes over the past
several years. These changes are the result of both technological changes as
well as business process changes, such as the reengineering of core processing.
The continuing reduction of market influence by historically dominant technology
vendors has led to rapidly advancing and changing technology, resulting in
issues of compatibility, scalability and increased complexity. The shift toward
the client-server environment has created the need for more user-friendly
applications, complex on-line support mechanisms and the integration of highly
complex systems/ applications development projects. The technology surrounding
the storage and retrieval of massive amounts of data on media such as optical
disk, microfilm and paper has further increased the complexity of information
processing. As a result, customers are demanding that computer services vendors
provide complete information technology solutions. Image management and
professional services have thus become a logical extension of traditional data
processing outsourcing services. The Company began offering image management
services on a large scale beginning in 1992 and has further enhanced its
professional service offerings, which now include consulting, contract
programming and network design and systems integration.

The Company's revenues derived from information technology services and EFT
transaction processing for the periods indicated are shown in the following
table:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Information technology services:
Outsourcing services............................... $ 112,476 $ 113,765 $ 118,518 $ 152,204 $ 174,136
Image management services.......................... -- -- 26,909 62,871 65,897
Professional services.............................. -- -- -- -- 8,703
---------- ---------- ---------- ---------- ----------
112,476 113,765 145,427 215,075 248,736
EFT transaction processing........................... 34,351 36,179 43,637 55,980 64,445
---------- ---------- ---------- ---------- ----------
Total............................................ $ 146,827 $ 149,944 $ 189,064 $ 271,055 $ 313,181
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

BUSINESS STRATEGY

The key components of the Company's business strategy include the following:

-EXPAND CUSTOMER BASE--The Company seeks to develop long-term
relationships with its customers by leveraging its expertise with
multiple services and product offerings to provide complete information
technology solutions. The Company's primary focus is on increasing its
revenues by adding large-volume transaction processing customers.

-PROVIDE FLEXIBLE INFORMATION PROCESSING SOLUTIONS--The Company offers
custom-tailored information processing solutions using a variety of
proprietary and third-party licensed software on multiple hardware and
systems software platforms. ACS is capitalizing on the trend toward

21
<PAGE>
client-server computing by providing consulting and transitional
outsourcing services, including network and desktop computer
management, to companies that are changing to these distributed
platform environments.

-MAXIMIZE ECONOMIES OF SCALE--The Company's strategy is to develop and
maintain a significant customer and account/transaction base to create
sufficient economies of scale that enable the Company to achieve
competitive unit processing costs.

-COMPLETE STRATEGIC ACQUISITIONS--The Company's acquisition strategy is
to acquire companies that enable the Company to expand its geographic
presence, to expand the products and services offered to existing
customers, and to obtain presence in new, complementary markets.

-INVEST IN TECHNOLOGY--The Company responds to technological advances
and the rapid changes in the requirements of its customers through the
commitment of substantial amounts of its resources to the operation of
multiple hardware platforms, customization of products and services
that incorporate new technology on a timely basis, and the continuous
training of customer personnel.

-BUILD RECURRING REVENUES--The Company seeks to enter into long-term
contracts with customers to provide services that meet their ongoing
information processing needs.

INFORMATION TECHNOLOGY SERVICES

OUTSOURCING SERVICES

The Company offers a diverse set of outsourcing solutions to commercial
businesses desiring to achieve reductions in data processing costs, improvements
in the quality of data processing or both. The Company's principal commercial
outsourcing service is the delivery of data processing services on a remote
basis from host data centers with sufficient computer processing (mainframe and
other) capacity to deliver significant cost savings to customers. The principal
services provided include both on-line and batch processing of data and network
management assistance. The mission critical application systems processed by the
Company for its customers include financial, human resources, retail and
wholesale inventory distribution, manufacturing, healthcare management,
transportation management, commercial and residential telephone billing,
mortgage portfolio information and software development systems. See "--Sales,
Marketing and Customer Support." In recent years new client-server platforms
have been developed that may, for some applications, provide more flexibility to
customers than is available from mainframe processing. To the extent these new
platforms are less costly than mainframe processing, customers may choose to
move portions of their processing requirements to their own in-house
client-server systems. However, the Company believes mainframe processing
services will continue to be important for many applications, and that new
opportunities will be presented for outsourcing both client-server and mainframe
platforms for complementary use. For example, in June 1995, the Company entered
into an alliance with SAP America, Inc. ("SAP") to jointly pursue marketing
opportunities to implement and outsource SAP's R/3 client-server software, which
is used to manage complex financial, manufacturing, sales and human resources
requirements. Under this alliance, it is contemplated that ACS would outsource
customers' existing legacy systems and client-server environments and ACS
expects to commit financial resources to customers for license and
implementation costs related to SAP software. The Company currently provides
outsourcing services on a variety of client-server platforms.

The Company's target market for commercial data processing services consists
of medium-to-large-sized commercial organizations with time-critical
transaction-intensive information processing needs. The Company provided
commercial data processing services to approximately 220 customers as of March
31, 1996, including retailers, wholesale distributors, healthcare providers, and
telecommunications, transportation and other commercial companies. The primary
geographic market for the Company's commercial data processing services is the
United States, although the Company evaluates international opportunities from
time to time. Because of the high-speed and high-capacity capabilities of the
telecommunications networks available to the Company, host data centers
currently located in Dallas, Texas and Santa Clara, California are able to serve
customers throughout the United States.

22
<PAGE>
The Company typically outsources a customer's in-house data processing
operation by migrating the processing workload to one of the Company's data
centers over a period of three to six months, and in some instances the Company
acquires the customer's data processing assets and hires certain customer
personnel. In a facilities management arrangement, which is less common, Company
personnel manage and operate a data center on the customer's site. The customer
may, in some instances, maintain and enhance its application programs and
schedule and initiate processing, using computer and network resources provided
by the Company. In other instances, the Company maintains and enhances
application programs for the customer. The Company owns certain proprietary
applications software that the Company uses to provide services to commercial
customers, including telecommunications service providers and wholesale
distribution customers. The software is not licensed to customers or third
parties. The Company also licenses software provided by various software vendors
under perpetual or renewable term licenses. The Company does not believe it is
significantly dependent upon any proprietary software with respect to its
commercial outsourcing services and believes that, as to software licensed to
the Company, sufficient alternative software products are generally available
for licensing by the Company. However, there can be no assurance that the
Company will be able to obtain such alternative software products on a timely
basis or without incurring additional expense. The Company's data center
hardware and systems software platforms are also made available to customers,
such as software development companies, which desire to purchase processing
resources on an as-required basis. The Company processes its commercial services
customers on a variety of hardware platforms.

The Company's commercial data processing services are typically priced on a
resource utilization basis rather than on the basis of accounts or transactions
processed. Resources utilized include processing time, professional services
utilization, hardware utilization, data storage and retrieval requirements, and
output volume required for processing.

The Company also offers outsourcing services to commercial banks, thrifts,
and credit unions. The Company satisfies its customer's core processing
requirements (deposits, installment, commercial and mortgage loans, financial
accounting and reporting, and central information file processing) through
on-line data delivery systems. Core processing services have historically been
delivered to customers on a service bureau basis using custom-tailored mainframe
solutions; however, with the emergence of new generation UNIX-based products,
the Company has altered its direction to focus on these products, which can be
installed in-house on the client's hardware or run in a service bureau
environment. With the acquisition of two Texas-based information processing
companies during fiscal 1995, ACS enhanced its offerings to these markets via
proprietary software products designed for in-house or service bureau processing
for banks and credit unions. With these new generation UNIX-based products,
featuring graphical-user-interface (GUI) pop-up screens and relational
databases, the Company is equipped to offer flexible alternatives to its
existing customers and to pursue other segments of the financial institution
processing market. Item processing and back office services (including proofing
and encoding, bulk filing and statement preparation) are provided by the Company
to accommodate additional needs of customers. The Company's data processing and
item processing services to financial institutions are typically priced on the
basis of account or item volume. The Company also offers a variety of ancillary
services and products to smaller financial institutions to enable them to
compete with larger financial institutions that offer a broad array of services
and products to their customers. These services and products include
voice-response access banking, safe deposit box accounting, cash management
services, imaging services, and optical disk/report recall and on-line reports.

The Company's target financial services customer base is primarily regional,
non-money center banks, thrifts and credit unions. As of March 31, 1996, data
processing and/or item processing services were provided to over 240 financial
institutions and other customers, over 100 of which received full data
processing services. The Company also provides account processing software
support and maintenance to over 130 financial institution customers who utilize
its products in-house. Most of the Company's financial data processing customers
are based in the southwestern United States and check processing and back-office
services are provided in the southwestern and northeastern United States.

In addition to providing core processing, item processing and back-office
services, the Company provides securities processing services to money-center
banks, mutual funds and limited partnerships using

23
<PAGE>
proprietary software. The services offered include stock transfer and corporate
reorganization services, processing for partnerships and mutual funds, and
processing for governmental escheatment proceedings. Through its data centers in
New York, New York and Boston, Massachusetts, the Company provides securities
processing services to approximately 30 customers, which are primarily located
in the northeastern United States.

IMAGE MANAGEMENT SERVICES

The Company began offering image management services as a result of the 1992
acquisition of Dataplex, which was a part of the Company's strategy to offer
complementary services to its outsourcing customers. The Image Management
division ("Image Management") offers services that convert customer data into
suitable media, stores such data in a secure environment and retrieves archived
data. Image Management also sells a variety of imaging equipment and supplies to
end users.

Customer information is received in a variety of media such as paper,
microfilm, computer tape, optical disk or CD ROM. Upon receipt, the information
is either duplicated, electronically scanned, or converted into another medium,
and then the information is processed for the customer in the desired medium. In
many instances, a copy of the information is stored on microfilm at the
Company's 533-acre storage and retrieval facility.

Image Management uses several types of hardware and software to deliver its
services, including electronic subscription-based image processors, microfilm
processors and duplicators, rotary, planetary and step-and-repeat cameras, COM
(computer output to microfiche) recorders, optical scanning equipment, and
client-server and personal computers. The Company delivers these services from
36 service centers in 19 states.

Imaging services are generally priced based upon the volume of information
and images (document pages, COM frames, microfilm rolls) processed, stored or
retrieved. The Company currently provides imaging services and products to
approximately 12,660 customers nationwide. Financial institutions represent
approximately 53% of the Image Management customer base. Services generally are
provided under one-year renewable contracts, with the exception of major
accounts, which operate under multi-year contracts with initial terms of three
years. Imaging equipment and supplies are sold to customers on an as-needed
basis. Microfilm is the largest component of supplies sales and is sold to
customers who use microfilm in conjunction with other image management services.

In March 1996, the Company acquired a majority interest in Unibase
Technologies, Inc. ("Unibase"), a Utah-based provider of high speed data capture
services. Using state-of-the-art image transmission, storage and retrieval
technology, millions of information records are digitized and transmitted daily
from customer locations throughout the country for high-speed conversion and
database update. Founded in 1985, Unibase currently employs over 1,300 full-time
employees and captures over 100 million characters of data each day for
approximately 50 customers at 13 service centers in seven states and in Mexico.

PROFESSIONAL SERVICES

Through its purchase in January 1995 of a majority interest in TSG, a
Dallas-based professional services provider, the Company enhanced its ability to
offer its customers high quality consulting, contract programming and technical
support services. In September 1995, TSG further expanded its geographic
presence with the acquisition of Technical Directions, Inc., a San Diego-based
professional services provider. Founded in 1988, TSG currently has approximately
385 employees in offices located in Dallas/Ft. Worth, Atlanta and San Diego.

TSG provides a variety of clients with professional services allowing such
clients the opportunity to use a planned, flexible workforce, either through
staff augmentation or by serving as a client's in-house development staff. Due
to the nature of the work performed, TSG's professional services are generally
offered on an hourly rate basis to a changing client base under short-term
contractual arrangements. TSG's ability to provide trained technical personnel
employing proven methodologies enhances ACS' ability to offer complementary
services to clients and prospects dealing with technological change.

24
<PAGE>
Through the acquisition in August 1995 of Medianet, Inc., based in Austin,
Texas, the Company began to offer back office administrative services for
customers' co-op advertising promotion allowance programs. The services provided
by ACS include consultation, market planning and analysis, audit and payment,
reporting, deduction tracking and database management.

The Company further expanded its professional services offerings with the
purchase in December 1995 of a majority interest in The LAN Company ("Lanco").
Lanco, based in Philadelphia, is a provider of network design and installation
services and document management systems to law firms and other commercial
customers in the Northeast. The acquisition is part of the Company's strategy to
bolster its presence in the local area/wide area network (LAN/WAN) market.

EFT TRANSACTION PROCESSING

The Company engages in the EFT transaction processing business both as a
third-party processor for retailers and financial institutions and on the
Company's own behalf. The Company's EFT business is primarily conducted through
its MoneyMaker-SM- ATM network, which has been operated by the Company since its
formation in 1988. According to industry data as of September 1995, based on the
number of network ATMs, the Company's MoneyMaker-SM- ATM network is one of the
largest proprietary off-premise ATM networks in the United States. Approximately
100 million transactions were processed in the network during the twelve months
ended March 31, 1996. The Company also provides ATM maintenance services to
MoneyMaker-SM- customers, as well as to owners of ATMs in other networks. In
addition, the Company's EFT processing business includes electronic benefit
transfer ("EBT") services provided primarily to government agencies.

In a typical ATM transaction processed by the Company, a debit or credit
cardholder inserts a card, which is issued by the cardholder's financial
institution (a "Card Issuer"), into an ATM to withdraw funds, obtain a balance
inquiry or transfer funds. The transaction is routed from the ATM to the
Company's data center. The Company's computer then identifies the Card Issuer by
the financial institution identification number contained within the card's
magnetic strip. If the Company maintains the Card Issuer's account balance
information files, the Company authorizes or denies the requested transaction.
If the Company does not maintain the Card Issuer's account balance information
files, the transaction is switched to the Card Issuer or its designated
processor for authorization. Once authorization is received, the authorization
message is routed back to the ATM and the transaction is completed.

Throughout these steps, the Company charges various fees that may be in
addition to any fees that the Card Issuer or other ATM processor might charge
the customer. When the Company processes the transaction for non-Company owned
ATMs and is also the Card Issuer's processor, it receives an authorization fee
from the Card Issuer for authorizing the transaction and updating the
cardholder's account information and a processing fee from the ATM owner. When
the Company is the ATM owner, it receives an interchange fee and an
authorization fee from the Card Issuer, and may elect to charge the cardholder a
convenience fee to be added to the transaction withdrawal amount. The Company
also receives a switch fee from the Card Issuer for processing transactions in
which the Card Issuer and the ATM owner are not processed by the same processor,
requiring the transaction to be switched to another network and routed to
another switch for authorization.

The Company markets its EFT services to financial institutions and
retailers, primarily in the southern United States. At March 31, 1996, the
Company processed 816 MoneyMaker-SM- ATMs and 1.1 million card accounts,
primarily for 349 financial institution customers located in Arkansas,
Louisiana, North Carolina, New Mexico, Mississippi and Texas. ATMs owned by
financial institutions are most often located on the premises of the financial
institutions or its branches. MoneyMaker-SM- ATMs owned by ACS are generally
located in retail locations such as convenience stores and grocery stores. The
Company typically signs three-to-seven year contracts with retailers for the
right to place ATMs in retail store locations. In exchange, the Company pays the
retailer a share of the transaction-based fee revenue. At March 31, 1996, the
Company had ATMs in 997 retail locations in nine states. ACS is required to
provide cash to operate the ATMs it owns.

25
<PAGE>
This cash is provided by borrowings under a revolving credit facility and vault
cash custody arrangements with financial institutions. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

In fiscal 1993, the Company began to deploy low-cost ATM devices throughout
the United States. Utilizing cost-saving features such as retailer cash loading
and dial-up communications, these devices make ATM services financially viable
for retail locations generating less than half the transaction volume of typical
ATM installations. ACS provides such retailers the option to own these devices,
enabling them to receive the associated fees, while paying the Company for
terminal driving services. Alternatively, ACS may own the low-cost ATMs and pay
the retailer a share of the transaction-based fee. Approximately 3,200 low-cost
devices have been installed in retail sites in 43 states as of March 31, 1996.

Through arrangements with a number of independent sales organizations, ACS
continues to grow its EFT network through the sale, placement and processing of
a variety of available ATMs. The Company expects a significant portion of the
future growth in its ATM network will be attributable to non-Company owned ATMs.

The number of financial institutions for which the Company provides EFT
processing services has grown 65% since June 30, 1992. The number of ATMs in the
network has tripled since 1992. The following table illustrates the growth of
the MoneyMaker-SM- ATM network since June 30, 1992:

<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED JUNE AS OF AND FOR THE
30, NINE MONTHS ENDED
------------------------------------ MARCH 31,
1993 1994 1995 1996
---------- ---------- ------------ -----------------
<S> <C> <C> <C> <C>
Banks using the MoneyMaker-SM- ATM network............. 252 275 303 349
Total ATMs (1)......................................... 1,513 2,487 3,042 5,017
Average monthly fee-generating transactions (1)........ 7,196,000 9,544,000 10,040,000 8,132,000
</TABLE>

- ------------------------
(1) B of A Texas accounted for approximately 300 ATMs and over 2.2 million
average monthly transactions prior to their deconversion, which began in
February 1995. As of June 30, 1995, all of the B of A Texas ATMs had been
deconverted. See Note 2 of the Notes to the Company's Consolidated Financial
Statements.

MoneyMaker-SM- processing contracts generally provide for an initial term of
three to five years and automatically renew unless notice of non-renewal is
given prior to expiration. Charges for services are based primarily on the
volume of transactions processed and are collected daily. Certain charges are
paid monthly. The Company generally is permitted to raise prices on an annual
basis subject to limits based on a specified consumer price index.

The Company provides ATM maintenance services to approximately 325
customers, 76 of which are also EFT processing customers. As of March 31, 1996,
the Company's 115 technicians maintained approximately 4,480 ATM terminals of
various types in 27 states, approximately one-half of which are also processed
by ACS through the MoneyMaker-SM- ATM network. In addition to maintenance
services, the Company also provides armored car services for ATM cash
replenishment by subcontracting with major armored car companies. The Company
enters into standard ATM maintenance contracts with its customers that generally
provide for a minimum initial term of three years. These contracts automatically
renew for one year at the end of the initial or any renewal term unless either
party elects to cancel the agreement 60 days prior to the contract's expiration.

The Company provides EBT transaction processing services to a governmental
agency through its subsidiary, ACS Government Services, Inc. ("Government
Services"). EBT systems deliver welfare and other government benefits
electronically using a debit-like card, rather than by check or other printed
vouchers. EBT services are designed to increase the efficiency of government
distribution of welfare and other benefits to recipients and to reduce system
fraud and abuse. Government Services' proprietary

26
<PAGE>
software is currently one of five such software systems certified by the federal
government for use in EBT programs with federal funding. The Company has formed
a joint venture with a minority-owned company for further marketing of EBT
services to government agencies.

DATA AND SERVICE CENTERS

The Company's outsourcing, EFT and electronic image management services are
provided through the Company's extensive national data and service center
network, which comprises two host data centers, 13 remote data centers, and 49
image management facilities in 22 states and Mexico, as well as an extensive
telecommunications network.

The Company's multi-platform data centers, located in Dallas, Texas and
Santa Clara, California, have a combined processing capacity of over 2,300 MIPS
(millions of instructions per second). Hardware and systems software platforms
currently operated by the Company include a broad range of on-line IBM-MVS,
IBM-DOS, IBM-VM, IBM-AS400, IBM-RISC 6000, DEC, Tandem/Guardian and UNIX
processing environments. To compete effectively in the rapidly changing
technology market, it is critical that the Company implement and maintain these
multiple hardware and software platforms. The Company continually plans for
testing and implementation of new technology and emphasizes flexibility in
structuring the services it offers using new technology.

On August 31, 1994, the Company entered into a ten-year software license
with Computer Associates International, Inc., a large provider of mainframe
systems and client-server software ("CA"). The terms of the license make all of
CA's mainframe systems software available to the Company and allow the Company's
outsourcing customers to operate these products under the Company's license
instead of under separate licenses maintained by the customers. The Company also
is appointed as a reseller of CA's client-server software. The Company will pay
an annual license fee composed of fixed minimum fees plus a percentage of the
annual incremental increases in the Company's outsourcing revenues. The terms of
this license will not have a material effect on the Company's financial
position, results of operation or liquidity.

The host data centers, together with remote centers serving financial
institution customers, are capable of providing comprehensive data processing
services required by ACS' customers. The Company maintains a disaster recovery
plan with certain vendors to provide alternative data processing sites in the
event the Company experiences a natural disaster or other interruption at one of
its data centers.

The Company also manages data communications and, in some instances, voice
communications for its commercial customers, as well as various local and wide
area networks. The Company maintains a nationwide voice and data network to
support the complex telecommunications requirements of its customer base. The
Company monitors and maintains network lines and circuits on a seven-day,
24-hour basis from a central computer installation in Dallas, Texas. The Company
also provides shared hub satellite transmission services as an alternative to
multi-drop and point-to-point hard line telecommunication networks.

The Company commits substantial amounts of its resources to the operation of
multiple hardware platforms, the customization of third-party software programs
and the training of customer personnel in the use of such hardware and software
in order to stay current with rapid technological changes and changes in
customer requirements.

CUSTOMER BASE

The Company achieves growth in its data processing revenues and customer
base through marketing and acquisitions of other information processing
companies. Customers may be lost at the expiration of a contract due to
conversion to a competing processor or to an in-house system. Prior to contract
expiration, customers may be lost due to business failure or acquisition of a
customer. Except for one customer, which represented 7% of the Company's
revenues for the nine months ended March 31, 1996, no other customer of the
Company represented over 3% of such revenues. See "Risk Factors--Reliance on
Significant Customers."

As of March 31, 1996, the Company had over 13,400 information technology
customers, including approximately 460 outsourcing customers, 12,715 image
management customers and approximately 250

27
<PAGE>
professional services customers. In addition, the Company provides EFT services
to approximately 3,460 customers, consisting of approximately 350 full-service
ATM customers, over 2,780 low-cost ATM customers, and approximately 325 ATM
maintenance customers.

Approximately 95% and 91% of the Company's revenues for fiscal 1995 and the
first nine months of fiscal 1996, respectively, were recurring. Recurring
revenues are defined by the Company as revenues derived from services that are
used by the Company's customers each year in connection with their ongoing
businesses, and accordingly exclude conversion and deconversion fees, software
license fees, product installation fees and hardware sales.

The Company's five largest customers accounted for approximately 30% and 27%
of the Company's fiscal 1994 and fiscal 1995 revenues, respectively, and
approximately 17% of revenues for the first nine months of the Company's 1996
fiscal year. B of A Texas, historically the largest of the five customers,
accounted for approximately 14% and 11% of revenues in fiscal 1994 and fiscal
1995, respectively, and 2% of revenues for the first nine months of fiscal 1996.
See "Risk Factors--Reliance on Significant Customers."

SALES, MARKETING AND CUSTOMER SUPPORT

The Company markets its services and products primarily through separate
sales forces located throughout the United States. In order to enhance its sales
and marketing efforts, the Company hires sales representatives who have
significant experience in the industries to which they will be marketing.
Maintaining separate sales forces for its various service lines allows the
Company's sales representatives to concentrate on particular services, product
technology and customer markets, thereby staying abreast of developments in
these areas.

The Company's sales force is made up of 27 sales representatives for
outsourcing services, 69 sales representatives for image management, 22 sales
representatives for professional services and 22 sales representatives for EFT
transaction processing services as of March 31, 1996. Sales representatives in
the various groups are informed as to all the Company's services and products
and are encouraged to refer prospect leads to the appropriate professionals.

The Company markets its information processing services by designing
custom-tailored solutions that are attractive to the customer in terms of
features, quality of service and price. In addition, for non-financial
institution outsourcing customers, the Company sometimes acquires data
processing assets, and, in limited circumstances, makes investments in
securities issued by or provides financial incentives to the customer. The
aggregate amount of such items since the Company's inception through March 31,
1996 was approximately $20.4 million. These items have been recorded by the
Company at fair market value, with the remainder recorded as intangible assets,
which are then amortized over the term of each contract. The net book value of
such items was $11.6 million at March 31, 1996. See "Risk Factors -- Investments
Related to Significant Customer Contracts."

The Company provides its information processing customers with extensive
support. For its outsourcing customers, the Company provides (i) a technical
support group to assist customers in evaluating their unique needs and in
recommending and implementing solutions, (ii) a production control group to
handle the adaptation of customer application systems to the Company's data
processing centers and (iii) on-site operations analysts to assist with problems
and specific processing needs. The Company makes available to its outsourcing
customers a seven-day, 24-hour help desk to provide network management
assistance and to assist in defining problems, recommending changes and
assigning problem resolution responsibility to an employee of the Company. Other
customer support services such as data storage management, data security, and
off-site disaster recovery coordination are offered to all of the Company's
information processing customers through the Company's technical staff.

The Company commits substantial capital and resources to the customization,
enhancement and maintenance of the software systems that support its outsourcing
and image management services. The Company believes that its commitment to
software development and enhancements has been, and will be, a

28
<PAGE>
competitive factor in the outsourcing and image management businesses. Certain
of the licensors of the software systems used by the Company for its financial
services customers provide regulatory and other maintenance services for the
software, and the Company provides such services in some cases.

COMPETITION

ACS faces substantial competition in its outsourcing, image management and
professional services and EFT transaction processing businesses. The most
significant competitive factors are reliability and quality of services,
technical competence and price of services. In connection with certain large
outsourcing contracts with non-financial institution customers, the Company may
be required to purchase data processing assets from the prospective customer or
to make an investment in the securities issued by the prospective customer in
order to obtain their contracts. See "Risk Factors--Investments Related to
Significant Customer Contracts." Many of the Company's competitors have
substantially greater assets and thus, may have a greater ability to obtain
customer contracts where sizable asset purchases or investments are required. In
recent years, several large hardware vendors have begun to compete directly in
the outsourcing business. To maintain competitive prices, the Company is
required to operate with efficient and low overhead, and it must acquire and
maintain a significant customer base and account/transaction base to achieve
sufficient economies of scale. The Company's principal outsourcing competitors
include Electronic Data Systems Corporation ("EDS"), Integrated Systems
Solutions Corporation (a subsidiary of IBM), Computer Sciences Corporation,
FIserv, Inc. and other regional competitors.

Competitive factors in the EFT services business are network availability
and response time, terminal location and access to other networks. With respect
to off-premise ATMs, additional competitive factors include percentage and
timing of revenue sharing with retailers providing ATM sites and the ability to
provide cost-efficient ATM cash replenishment and maintenance services. Customer
retention in the EFT services business is closely associated with satisfactory
location and performance of ATMs. Principal EFT competitors include EDS, Deluxe
Data Corporation, large financial institutions and several regional ATM networks
and processors.

The Company competes successfully in the image management business by
offering a complete range of services and achieving favorable pricing by
maintaining a significant volume of business with equipment and media suppliers.
Principal information management competitors include numerous small-to-medium
size local and regional competitors.

EMPLOYEES

As of March 31, 1996, the Company and its subsidiaries had approximately
4,900 full-time employees. The Company has entered into a collective bargaining
agreement with the Southern Council of Industrial Workers, which represents
approximately 320 production and maintenance employees in Dataplex's Flora,
Mississippi records center. The Company does not anticipate a work stoppage or
strike. Other than the approximately 320 Dataplex employees, none of the
Company's or its subsidiaries' employees are currently represented by a union.
The Company has never experienced any work stoppages or strikes. Management
considers its relations with its employees to be good.

GOVERNMENT REGULATION

The Company is not directly subject to federal or state regulations
specifically applicable to financial institutions. As a provider of services to
banking institutions, however, the Company's outsourcing operations are examined
from time to time by various state and federal regulatory agencies. These
agencies make recommendations to the Company regarding various aspects of
outsourcing operations and generally the Company implements such
recommendations. The Company also arranges for an annual independent examination
of its bank data processing facilities.

The Company's ATM network operations are subject to federal regulations
governing consumers' rights with respect to ATM transactions. Fees charged by
ATM owners are currently regulated or similar legislation has been proposed in
several states and there can be no assurance whether such regulations or
legislation will continue to be enacted in the future or that existing consumer
protection laws will not be expanded to apply to fees charged in connection with
ATM transactions.

29
<PAGE>
PROPERTY AND OPERATIONS

The Company's executive offices and primary host data center are located in
a facility of approximately 218,000 square feet in Dallas, Texas. This facility
was purchased by the Company in December 1995. In September 1995, the Company
also purchased a 350,000 square foot building adjacent to its headquarters to be
renovated for expansion of the Company's operations. The Company also has a host
data center in Santa Clara, California with approximately 55,000 square feet,
the lease on which has an expiration date of November 30, 1997. The Company's 13
remote data centers have varying lease expiration terms and range in size from
4,400 square feet to 46,000 square feet and are located in Boston,
Massachusetts; New York, Pearl River, Woodbury and Utica, New York; New Orleans
and Baton Rouge, Louisiana; and Austin (2), Fort Worth, Houston (2) and Waco,
Texas. Included in the 49 image management service centers is the Company's
records center in Flora, Mississippi. The records center is on 533 acres of
land, of which the Company owns 334 acres with 38 underground bunkers and leases
199 acres with 23 underground bunkers. The remaining service center locations
are leased and range in size from 300 square feet to 56,800 square feet. The
Company also leases 23 other facilities used for office or warehouse space
ranging from 450 square feet to 40,530 square feet. All properties leased or
owned by the Company are in good repair and in suitable condition for the
purposes for which they are used.

ACS leases four Amdahl mainframes, five Tandem mid-range computers, seven
IBM mid-range computers, seven Digital Equipment mid-range computers and one
Hewlett Packard mid-range computer under operating leases. The initial terms of
the leases range from 36 to 60 months. Approximately 90% of the other data
processing equipment located in the Company's data centers is leased, generally
for terms ranging from 36 to 60 months. ACS believes its computer equipment, as
periodically expanded and upgraded, is adequate for its present business needs.

LEGAL PROCEEDINGS

On October 31, 1995, the Fifth District Court of Appeals in Dallas, Texas
(the "Court of Appeals") affirmed the judgment of the trial court in an action
between the Company and Thomas McLaughlin and John Lazovich. The trial court had
rendered a verdict in favor of Messrs. McLaughlin and Lazovich on causes of
action for tortious interference with an acquisition agreement entered by
Messrs. McLaughlin and Lazovich and First Texas Savings Association in 1986
related to the acquisition of an electronic benefit transfer business. The total
amount of the judgment against the Company, ACS Government Services, Inc.,
Darwin Deason, and J. Livingston Kosberg, a former director of the Company,
including interest, is approximately $9.0 million, which includes $3.0 million
in actual damages and $1.5 million in exemplary damages. The Company has
indemnified Mr. Deason and Mr. Kosberg from any liability arising from the suit.
The Company has appealed the decision of the Court of Appeals.

On October 10, 1995, the Company filed a counterclaim against National
Convenience Stores, Incorporated ("NCS") alleging that NCS had breached a
contract with the Company and seeking unspecified damages. This counterclaim was
filed in response to an action filed by NCS against the Company in the 101st
Judicial District Court in Dallas, Texas seeking a declaratory judgment that NCS
is not contractually obligated to allow the Company to review and match any
third party proposal to process automated teller machines in NCS stores upon
expiration of the contract with the Company, pursuant to its terms, on December
1, 1995. The Company intends to vigorously oppose this action and to pursue the
claims asserted in the counterclaim.

Various other legal actions, all of which arose in the normal course of
business, are pending. Neither the above described litigation nor any of the
Company's routine litigation, individually or in the aggregate, is expected to
have a material adverse effect on the Company's financial condition or results
of operations.

30
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Darwin Deason 56 Chairman of the Board, Chief Executive Officer and Director
Jeffrey A. Rich 36 President, Chief Operating Officer and Director
Henry G. Hortenstine 52 Executive Vice President
Mark A. King 39 Executive Vice President, Chief Financial Officer and Director
Thomas G. Connor, Jr. 56 Executive Vice President; Chairman of the Board and Chief
Executive Officer of Dataplex
David W. Black 34 Executive Vice President, Secretary, General Counsel and Director
Gerald J. Ford 51 Director
Donald R. Dixon 48 Director
Joseph P. O'Neill 47 Director
Frank A. Rossi 57 Director
</TABLE>

The following is a brief description of the business experience of the
directors and executive officers of the Company for the past five years.

DARWIN DEASON has served as Chairman of the Board and Chief Executive
Officer of the Company since its formation in 1988. Prior to the formation of
the Company, Mr. Deason spent 20 years with MTech Corp. ("MTech"), a data
processing subsidiary of MCorp, a bank holding corporation based in Dallas,
Texas ("MCorp"), serving as MTech's Chief Executive Officer and Chairman of the
Board from 1978 until April 1988, and served on the board of various
subsidiaries of MTech and MCorp. Prior to that, Mr. Deason was employed in the
data processing department of Gulf Oil in Tulsa, Oklahoma. Mr. Deason has over
30 years of experience in the data processing industry.

JEFFREY A. RICH has served as President and Chief Operating Officer of the
Company since April 1995 and as a director since August 1991. Mr. Rich joined
the Company in July 1989 as Senior Vice President and Chief Financial Officer
and was named Executive Vice President in October 1991. Prior to joining the
Company, Mr. Rich served as a Vice President of Citibank N.A. from March 1986
through June 1989, and also served as an Assistant Vice President of Interfirst
Bank Dallas, N.A. from 1982 until March 1986.

HENRY G. HORTENSTINE has served as an Executive Vice President of the
Company since March 1995. Prior to that time, he served as Senior Vice President
- -Business Development from July 1993 to March 1995. Mr. Hortenstine was engaged
by the Company as a consultant providing various business and corporate
development services from 1990 to July 1993. Prior to that, he was Senior
Executive Vice President of Lomas Mortgage USA, a subsidiary of Lomas Financial
Corporation, from 1987 to 1989.

MARK A. KING has served as Executive Vice President and Chief Financial
Officer since May 1995 and as a director since May 1996. Mr. King joined the
Company in November 1988 as Chief Financial Officer of various ACS subsidiaries.
Prior to joining the Company, Mr. King was Vice President and Assistant
Controller of MTech. Mr. King has over 17 years of finance and accounting
experience, and over ten years of experience in the data processing industry.

THOMAS G. CONNOR, JR. has served as Executive Vice President of the Company
since July 1988 and is also Chairman of the Board and Chief Executive Officer of
Dataplex, the Company's electronic image management subsidiary. Prior to joining
the Company, Mr. Connor served as Executive Vice President and General Manager
of MTech's Northern Region. Mr. Connor has over 30 years of experience in the
data processing industry.

31
<PAGE>
DAVID W. BLACK has served as Executive Vice President, Secretary, General
Counsel and a director of the Company since May 1995. Mr. Black joined the
Company in February 1995 as Associate General Counsel. Prior to that time, Mr.
Black was an attorney engaged in the private practice of law in Dallas from 1986
through January 1995.

GERALD J. FORD has been a director of the Company since August 1991. Mr.
Ford served as Chairman of the Board, Chief Executive Officer and a director of
First Gibraltar Bank, FSB ("FGB") until February 1993, when he assumed his
present position as Chairman of the Board of Directors of First Nationwide, the
successor to First Madison Bank, FSB (successor to FGB). Mr. Ford also served as
Chairman and Chief Executive Officer of First United Bank Group, Inc., until it
was acquired by Norwest Corporation on January 14, 1994. In addition, Mr. Ford
serves as director of Norwest Corporation. Mr. Ford was elected to the Board of
Directors of the Company in connection with the Company's August 1991 settlement
with FGB, the Federal Deposit Insurance Corporation, and the Office of Thrift
Supervision. Under the terms of that settlement, the Company has agreed to take
permissible actions to cause the nomination and election of Mr. Ford as a
director of the Company until First Nationwide no longer owns at least 15% of
the outstanding shares of all classes of the Company's common stock.

DONALD R. DIXON has been a director of the Company since its formation in
May 1988. He has served as President of Trident Capital, Inc., a private
investment firm, since May 1993, and before that as Co-President of Partech
International, Inc., an international venture capital and money management firm,
from 1988 until 1992. Prior to that, he was Managing Director of Alex. Brown &
Sons, Inc. and Vice President of Morgan Stanley & Co. Incorporated. He also is a
director of American Business Information, Inc., Unison Software, Inc., CSG
Systems International, Inc., Platinum Software, Inc., and several private
companies.

JOSEPH P. O'NEILL has served as a director of the Company since November
1994 and also serves as a consultant to the Company. Mr. O'Neill has served as
President and Chief Executive Officer of Public Strategies Washington, Inc., a
public affairs consulting firm, since March 1991 and from 1985 through February
1991, served as President of the National Retail Federation, a national
association representing United States retailers.

FRANK A. ROSSI has served as a director of the Company since November 1994
and also serves as a consultant to the Company. Mr. Rossi has served as Chairman
of FAR Holding Company, L.L.C., a private investment firm, since February 1994,
and before that was employed by Arthur Andersen L.L.P. for over 35 years. Mr.
Rossi served in a variety of capacities for Arthur Andersen since 1959,
including Managing Partner/Chief Operating Officer and as a member of the firm's
Board of Partners and Executive Committee.

COMMITTEES

The Board of Directors has an Audit Committee on which Messrs. Rossi
(Chairman), Dixon, and O'Neill serve. The Audit Committee was formed in May 1994
and given general responsibility for meeting periodically with representatives
of the Company's independent public accountants and electronic data processing
("EDP") auditors to review the general scope of audit coverage, including
consideration of the Company's accounting and EDP practices and procedures and
system of internal controls, and to report to the Board with respect thereto.
The Audit Committee also recommends to the Board of Directors the appointment of
the Company's independent financial and EDP auditors.

In addition, the Board of Directors has a Compensation Committee, which was
formed in May 1994, on which Messrs. Deason and Ford serve. The Compensation
Committee is responsible for the administration of and grant of awards under the
Company's incentive bonus program and stock option plan.

The Board of Directors also has an Independent Directors Committee on which
Messrs. Dixon, Ford, O'Neill and Rossi serve. The Independent Directors
Committee was formed in May 1994 to review annually the prices and terms of the
services, forms and supplies provided between the Company and Precept pursuant
to the Company's reciprocal services agreement.

32
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of each class of the Company's common stock as of the date of this
Prospectus, and as adjusted to reflect the sale of the shares of Class A Common
Stock offered hereby, assuming no exercise of the Underwriters' over-allotment
option, (i) by each of the Company's directors and executive officers, (ii) by
all executive officers and directors as a group, (iii) by each person who is
known by the Company to own beneficially more than 5% of each class of the
Company's common stock, and (iv) by the Selling Stockholders. Except as
indicated in the footnotes to this table, the Company believes that the persons
named in the table have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED AFTER
SHARES BENEFICIALLY OWNED PRIOR TO OFFERING OFFERING
--------------------------------------------------------------------- -----------
NUMBER NUMBER PERCENT OF SHARES OF NUMBER
OF SHARES PERCENT OF OF SHARES TOTAL SHARES PERCENT OF CLASS A OF SHARES
OF CLASS A TOTAL SHARES OF CLASS B OF CLASS A TOTAL COMMON OF CLASS A
COMMON OF CLASS A COMMON AND CLASS B VOTING STOCK COMMON
STOCK COMMON STOCK STOCK COMMON STOCK POWER (1) OFFERED STOCK
----------- ------------- ----------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS
Darwin Deason (2) ........... 3,655 * 3,202,843 20.45% 71.97% -- 3,655
2828 North Haskell Avenue
Dallas, Texas 75204
Jeffrey A. Rich (3).......... 26,593 * -- * -- -- 26,593
Thomas G. Connor, Jr......... 10,721 * -- * * -- 10,721
Donald R. Dixon.............. 34,441 * -- * * -- 34,441
Gerald J. Ford (4)........... -- -- -- -- -- -- --
Joseph P. O'Neill............ 11,905 * -- * * -- 11,905
Frank A. Rossi............... 2,500 * -- * * -- 2,500
Henry G. Hortenstine (5)..... 21,518 * -- * * -- 21,518
David W. Black............... -- -- -- * * -- --
Mark A. King................. 16,906 * -- * * -- 16,906
ALL EXECUTIVE OFFICERS AND 128,239 1.02% 3,202,843 21.18% 72.17% -- 128,239
DIRECTORS AS A GROUP (ten
persons) (6)..................
BENEFICIAL OWNERS OF MORE THAN
5% OF THE COMPANY'S COMMON
STOCK
Massachusetts Financial 727,400 5.83% -- 4.64% 1.63% -- 727,400
Services Company (7) .......
500 Boylston Street
Boston, Mass. 02116
The Kaufmann Fund, Inc. 657,300 5.27% -- 4.19% 1.48% -- 657,300
(7) .......................
140 E. 45th Street
43rd Floor
New York, New York 10017
SELLING STOCKHOLDERS
First Nationwide (8) ........ 3,041,808 24.37% -- 19.40% 6.83% 2,000,000 1,041,808
14651 Dallas Parkway
Suite 200
Dallas, Texas 75240
John A. Winslow (9) ......... 27,500 * -- * * 27,500 --
3904 Wentwood
Dallas, Texas 75225

<CAPTION>
NUMBER PERCENT OF
PERCENT OF OF SHARES TOTAL SHARES
TOTAL SHARES OF CLASS B OF CLASS A PERCENT OF
OF CLASS A COMMON AND CLASS B TOTAL VOTING
COMMON STOCK STOCK COMMON STOCK POWER (1)
------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS
Darwin Deason (2) ........... * 3,202,843 18.13% 68.87%
2828 North Haskell Avenue
Dallas, Texas 75204
Jeffrey A. Rich (3).......... * -- * *
Thomas G. Connor, Jr......... * -- -- *
Donald R. Dixon.............. * -- * *
Gerald J. Ford (4)........... -- -- * *
Joseph P. O'Neill............ * -- * *
Frank A. Rossi............... * -- * *
Henry G. Hortenstine (5)..... * -- * *
David W. Black............... -- -- * *
Mark A. King................. * -- * *
ALL EXECUTIVE OFFICERS AND * 3,202,843 18.79% 69.07%
DIRECTORS AS A GROUP (ten
persons) (6)..................
BENEFICIAL OWNERS OF MORE THAN
5% OF THE COMPANY'S COMMON
STOCK
Massachusetts Financial 5.02% -- 4.11% 1.56%
Services Company (7) .......
500 Boylston Street
Boston, Mass. 02116
The Kaufmann Fund, Inc. 4.54% -- 3.72% 1.41%
(7) .......................
140 E. 45th Street
43rd Floor
New York, New York 10017
SELLING STOCKHOLDERS
First Nationwide (8) ........ 7.20% -- 5.89% 2.24%
14651 Dallas Parkway
Suite 200
Dallas, Texas 75240
John A. Winslow (9) ......... -- -- -- --
3904 Wentwood
Dallas, Texas 75225
</TABLE>

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* Less than 1%.

(1) In calculating the percent of total voting power, the voting power of shares
of Class A Common Stock (one vote per share) and Class B Common Stock (ten
votes per share) is aggregated.

(2) All of the Class B shares listed are owned by The Deason International Trust
(the "Trust"). Mr. Deason holds the sole voting power with respect to such
shares through an irrevocable proxy granted by the Trust. The investment
power with respect to such shares is held by the Trust. The shares of Class
A Common Stock are owned by, and are the separate property of, Mr. Deason's
spouse and his spouse's daughter. The beneficial ownership of all such
shares of Class A Common Stock is disclaimed by Mr. Deason.

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(3) Consists of 26,593 shares of Class A Common Stock issuable pursuant to
options that are currently exercisable. See "Risk Factors -- Shares Eligible
for Future Sale."

(4) Excludes 3,041,808 shares of Class A Common Stock prior to this offering,
and 1,041,808 shares of Class A Common Stock after this offering, owned by
First Nationwide, of which Mr. Ford serves as Chairman of the Board. Mr.
Ford, individually, has neither voting nor investment power with respect to
such shares.

(5) Consists of 21,518 shares of Class A Common Stock issuable pursuant to
options that are currently exercisable. See "Risk Factors -- Shares Eligible
for Future Sale."

(6) Includes 48,111 shares of Class A Common Stock issuable pursuant to options
that are currently exercisable, and 3,655 shares of Class A Common Stock as
to which Mr. Deason disclaims beneficial ownership. Excludes 3,041,808
shares of Class A Common Stock owned by First Nationwide, of which Mr. Ford
serves as Chairman of the Board. Mr. Ford, individually, has neither voting
nor investment power with respect to such shares.

(7) Based on filings by the stockholder with the Commission or otherwise.

(8) All shares are owned of record by First Nationwide, which is a wholly owned
subsidiary of First Nationwide Holdings Inc. ("FN Holdings"). Hunter's
Glen/Ford, Ltd., a limited partnership controlled by Gerald J. Ford, a
director of the Company, beneficially owns 20% of the outstanding capital
stock of FN Holdings, the remaining 80% of which is indirectly beneficially
owned by Ronald O. Perelman.

(9) Mr. Winslow was the Chairman of the Board of TSG until May 31, 1996.

CONTROL BY CHAIRMAN OF THE BOARD

Mr. Deason beneficially owns 3,202,843 shares of Class B Common Stock, each
of which is entitled to ten votes per share, giving Mr. Deason approximately 69%
of the total voting power of the Company after giving effect to this offering.
Accordingly, Mr. Deason controls virtually all of the decisions made with
respect to the Company including decisions relating to the election of all
directors of the Company and the disposition and voting of the Class A Common
Stock held by the Company.

Furthermore, as a result of his control of the voting stock of the Company,
Mr. Deason may, except as otherwise provided by Delaware law or certain
provisions of the Company's Certificate of Incorporation or Bylaws requiring 80%
stockholder vote, without concurrence of the remaining stockholders, amend the
Certificate of Incorporation, effect or prevent a merger, sale of assets or
other business acquisition or disposition and otherwise control the outcome of
all actions requiring stockholder approval.

ADDITIONAL SALES BY EXISTING STOCKHOLDERS

See "Risk Factors -- Shares Eligible for Future Sale" for a description of
the shares of Class A Common Stock of the Company that are registered under the
Securities Act and therefore freely tradeable at any time during and after this
offering.

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REORGANIZATION

On June 30 and July 5, 1994, the Company completed a series of transactions
to (i) reclassify the Company's capital stock (the "Reclassification"), (ii)
merge Affiliated Computer Services, Inc., a Delaware corporation and subsidiary
of the Company ("Services"), into the Company, (iii) contribute the capital
stock of Affiliated Computer Systems Funding Corporation, a Delaware corporation
and wholly owned subsidiary of the Company ("Funding"), to Precept, (iv) spin
off all of the capital stock of Precept to the Company's stockholders on a pro
rata basis, (v) merge Dataplex Acquisition Corp., a Delaware corporation and
subsidiary of the Company ("DAC") that owned all of the stock of Dataplex, into
the Company and (vi) change the Company's name to Affiliated Computer Services,
Inc. The foregoing transactions are collectively referred to as the
"Reorganization."

RECLASSIFICATION

The Company's Certificate of Incorporation was amended in June 1994 to
increase the authorized capital stock of the Company to 25,000,000 shares,
consisting of 3,000,000 shares of Preferred Stock, par value $1.00 per share,
17,195,742 shares of Class A Common Stock, par value $0.01 per share, and
4,804,258 shares of Class B Common Stock, par value $0.01 per share. In
addition, the Company effected a reclassification of each previously outstanding
share of Class A Common Stock, par value $0.00029 per share, of the Company,
each previously outstanding share of Class B Common Stock, par value $0.00016
per share, of the Company and each previously outstanding share of Class C
Common Stock, par value $0.00029 per share, of the Company into 5,565,432 shares
of Class A Common Stock and 4,804,258 shares of Class B Common Stock in
accordance with the elections of the stockholders of the Company. As a result of
the foregoing and the issuance of shares of Class A Common Stock to minority
stockholders of DAC in connection with the merger of DAC into the Company,
5,595,245 shares of Class A Common Stock and 4,804,258 shares of Class B Common
Stock were outstanding immediately prior to the IPO. For a description of the
rights of and restrictions on the capital stock of the Company, see "Description
of Capital Stock."

MERGER OF SERVICES AND DAC

As part of the Reorganization, effective June 30, 1994, Services was merged
with and into the Company, with the Company as the surviving corporation.
Effective July 5, 1994, DAC was merged with and into the Company, with the
Company as the surviving corporation and with Dataplex thereby becoming a
wholly-owned subsidiary of the Company. In connection with the DAC merger, the
Company's name was changed to Affiliated Computer Services, Inc. Also in
connection with these mergers, all outstanding employee stock options of
Services and DAC were converted into equivalent value options to purchase shares
of the Company's Class A Common Stock, the outstanding shares of DAC's common
stock not owned by the Company were exchanged for 29,813 shares of Class A
Common Stock of the Company, the DAC Series B Preferred Stock was canceled (with
respect to shares owned by the Company) or redeemed (with respect to shares not
owned by the Company), and the 1,000 outstanding shares of Services' preferred
stock were exchanged for 1,000 shares of Series A Preferred Stock of the
Company. The conversions of employee stock options were based on an opinion from
an independent valuation company and did not result in any increase in the
intrinsic value of the options, reduction in the ratio of the exercise price per
share to the market value per share or change in vesting provisions.
Accordingly, in accordance with the Financial Accounting Standards Board
Emerging Issues Task Force Issue No. 90-9, the Company did not record any
compensation expense as a result of such conversions.

SPIN-OFF OF PRECEPT

Immediately following the Services merger, the Company contributed all of
the capital stock of Funding to Precept, a business products and forms
distributor that was formed by the Company in October 1988. As a result of this
contribution, Precept became the owner of all of the Company's business not
related to data processing, EFT transaction processing or image management, with
a net book value of approximately $20.0 million as of June 30, 1994. As a
result, Precept, directly or through its subsidiaries, is a provider of business
support services, including business forms and products distribution and courier
and limousine services.

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Precept also owns certain construction and property management operations. David
L. Neely, a former Executive Vice President of the Company, is the Chief
Executive Officer of Precept, and Darwin Deason is a director and has voting
control of Precept.

Following the contribution of the capital stock of Funding to Precept,
Precept's articles of incorporation were amended to reclassify the capital stock
of Precept into 17,195,742 shares of Class A Common Stock, par value $0.01 per
share, of Precept (the "Precept Class A Common Stock") and 4,804,258 shares of
Class B Common Stock, par value $0.01 per share, of Precept (the "Precept Class
B Common Stock"). The rights of and restrictions on the Precept Class A Common
Stock and the Precept Class B Common Stock are substantially the same as the
rights of and restrictions on the Company's Class A Common Stock and Class B
Common Stock, respectively.

Immediately following the reclassification of the Precept shares, on June
30, 1994 the Company declared a dividend on a pro rata basis of all of the
shares of Precept Class A Common Stock to holders of the Company's Class A
Common Stock and of all of the shares of Precept Class B Common Stock to holders
of the Company's Class B Common Stock (the "Spin-Off") and entered into a tax
indemnification agreement with such stockholders. Immediately prior to the
Spin-Off, the Company received an opinion from an independent valuation company
that the fair market value of the Precept stock distributed in the Spin-Off was
$13.1 million as of June 30, 1994. Accordingly, the business conducted by
Precept and the related assets and liabilities are no longer a part of the
Company. In addition, the Company is subject to tax indemnification obligations
incurred in connection with the distribution of the Precept shares. See "Risk
Factors-- Indemnification of Stockholders for Spin-Off."

The Spin-Off was structured to qualify for tax-free treatment under the
Code. Prior to the Spin-Off, the Board of Directors of the Company received an
opinion of counsel to the effect that it is more likely than not that, pursuant
to Section 355 of the Code, no gain or loss should be recognized to (and no
amount should be included in the income of) the stockholders of the Company, nor
should any gain or loss be recognized to the Company, by reason of the
distribution of the stock of Precept as contemplated by the Spin-Off. Such
opinion is conditioned upon certain representations of the stockholders and the
management of the Company as to certain facts and circumstances, upon certain
assumptions and upon the effectiveness of certain restrictions. One of these
restrictions (the "linked sales restriction") requires, in part, that any sales
or exchanges of shares of the Company's Class A Common Stock (or the Company's
Class B Common Stock, whether or not converted into the Company's Class A Common
Stock prior to sale) that were held prior to the IPO and that are to be sold or
disposed of during the two-year period following the Spin-Off must be effected
in conjunction with the sale at approximately the same time of an equal portion
of the holder's shares of Precept Class A or B Common Stock. Holders of Precept
Class A or B Common Stock subject to the linked sales restriction who desire to
sell or dispose of their shares of Precept Class A or B Common Stock during the
two-year period following the Spin-Off, and who are unable to sell their shares
of Precept Class A or B Common Stock to a third party, may elect to sell their
shares of Precept Class A or B Common Stock to Precept at approximately the same
time in order to satisfy the linked sales restriction. The purchase price to be
paid by Precept for such shares is $1.26 per share, which was based on the fair
market value of the Precept stock distributed in the Spin-Off, as determined by
an independent valuation company as of June 30, 1994, and is payable in 15
years, without interest, pursuant to a promissory note from Precept. In the case
of Mr. Deason, the linked sales restriction may be satisfied only by the sale of
the requisite number of Precept shares to an unrelated third party. In the case
of each other stockholder of the Company prior to the IPO, such requirement may
be satisfied by the sale of the Precept shares to Precept, but only if such sale
effects at least a 20% reduction in the stockholder's interest in Precept and
certain other conditions are satisfied, or to a third party.

The opinion of counsel received by the Company regarding the tax-free
treatment of the Spin-Off is not binding on the IRS or on the courts and there
can be no assurance that the IRS or a court will agree with that opinion.
Accordingly, the Company has agreed to indemnify the Company's stockholders, on
a net after-tax basis, for any actual taxes (including penalties, interest and
legal fees), net of the actual or assumed benefit resulting from increased tax
basis, that may be asserted against the Company's stockholders on the basis that
the Spin-Off fails to qualify under Section 355 of the Code. The Company's
aggregate indemnification

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liability is limited to $5 million, reduced by the Company's expenses incurred
in connection with determining qualification under Section 355. The Company
believes that, if the Spin-Off were to fail to qualify under Section 355 of the
Code, there should be no material tax-related consequences to the Company other
than pursuant to the indemnification. See "Risk Factors--Indemnification of
Stockholders for Spin-Off."

In connection with the Reorganization, the Company and Precept entered into
a reciprocal services agreement pursuant to which Precept will sell business
forms and supplies, and provide courier, third-party benefit plan administration
and certain other administrative consulting and building management services to
the Company, and the Company will provide office space and human resource
services to Precept. The prices for all services, forms and supplies provided by
Precept to the Company under such agreement must be no less favorable than could
be obtained from an independent third party and are subject to review from time
to time by a committee of independent directors of the Company. The prices for
all services provided by the Company to Precept will be at no less than the
Company's direct cost. The costs incurred by the Company for services provided
by Precept covered by such reciprocal services agreement, which are believed to
approximate fair market value, were approximately $4.5 million, $4.7 million,
and $5.8 million, for the fiscal years ended June 30, 1993, 1994, and 1995,
respectively. In addition to these services, Precept historically provided other
services to the Company, including human resource administration, building
administration and maintenance services, and equipment leasing services. In
connection with the Reorganization, effective July 1, 1994 the Precept employees
who provided these services, with the exception of certain building management
employees, were transferred to the Company and such services are now performed
directly by the Company. The Company either did not historically provide such
services to Precept or did not charge Precept for such services.

In addition, the Company and Precept entered into (i) a mutual
indemnification agreement that defines the parties' rights and obligations with
respect to any claims, liabilities or losses relating to the parties'
businesses, (ii) a tax-sharing agreement that defines the parties' rights and
obligations with respect to federal, state and other income or franchise tax
matters and (iii) a noncompetition agreement under which each of the parties
agreed not to compete in the business of the other party for a period of two
years.

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue up to 17,195,742 shares of Class A Common
Stock, par value $0.01 per share, up to 4,804,258 shares of Class B Common
Stock, par value $0.01 per share, and up to 3,000,000 shares of Preferred Stock,
$1.00 par value. As of June 24, 1996, the Company had issued and outstanding
12,479,300 shares of Class A Common Stock held by 52 stockholders of record,
3,202,843 shares of Class B Common Stock held by one holder of record, and 1,000
shares of Series A Preferred Stock held by one holder of record.

The relative rights and limitations of the Class A Common Stock and the
Class B Common Stock, as well as the Company's Preferred Stock, are summarized
below. The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Certificate of Incorporation and
the Bylaws, copies of which have been filed as exhibits to the Company's reports
or registration statements filed with the Commission.

PREFERRED STOCK

The Board of Directors has the authority, without further action by the
stockholders, to issue up to 2,999,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted
to or imposed upon any unissued shares of Preferred Stock and to fix the number
of shares constituting any series and the designations of such series. The
issuance of Preferred Stock could adversely affect the voting power of the
holders of common stock and the likelihood that such holders will receive
dividend payments and payments upon liquidation and may have the effect of
delaying, deferring or preventing a change in control of the Company.

In connection with the Reorganization, 1,000 shares of Series A Preferred
Stock were issued in exchange for the outstanding shares of preferred stock of a
subsidiary that was merged into the Company.

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The Series A Preferred Stock is redeemable through July 15, 1999 at a price of
$1,100 per share plus accrued and unpaid dividends and is subject to mandatory
redemption on July 15, 1999. Dividends on the Series A Preferred Stock accrue at
a rate of 9% per annum and are cumulative. In addition, the terms of the Series
A Preferred Stock require a sinking fund with quarterly deposits through June
30, 1999. Holders of the Series A Preferred Stock have the right at any time
after July 1, 1996 to convert all, but not less than all, such shares into Class
A Common Stock determined by (a) multiplying the number of shares of Series A
Preferred Stock held by such holder by $1,100, (b) dividing the result by the
price per share of the Class A Common Stock as determined on the next business
day occurring on or after 10 days following the date of the Company's receipt of
the conversion notice based on the average of the bid and asked prices for the
Class A Common Stock on the Nasdaq National Market, and (c) rounding the result
to the nearest whole number. Holders of the Series A Preferred Stock also have
the right to cause the Company to register such shares of Class A Common Stock
for public sale after the conversion described above until September 15, 1996.

CLASS A AND CLASS B COMMON STOCK

VOTING RIGHTS

Each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to ten votes on all matters submitted to a vote
of the stockholders. Except as otherwise provided by law, Class A Common Stock
and Class B Common Stock vote together as a single class on all matters
presented for a vote of the stockholders. Neither class of the Company's common
stock has cumulative voting rights.

CONVERSION

Class A Common Stock has no conversion rights. Each share of Class B Common
Stock is convertible at any time, at the option of and without cost to the
stockholder, into one share of Class A Common Stock upon surrender to the
Company's transfer agent of the certificate or certificates evidencing the Class
B Common Stock to be converted, together with a written notice of the election
of such stockholder to convert such shares into Class A Common Stock. Shares of
Class B Common Stock will also be automatically converted into shares of Class A
Common Stock on the occurrence of certain events described below. Once shares of
Class B Common Stock are converted into shares of Class A Common Stock, such
shares may not be converted back into Class B Common Stock.

RESTRICTIONS ON TRANSFER OF CLASS A AND CLASS B COMMON STOCK

No person or entity holding shares of Class B Common Stock (a "Class B
Holder") may transfer such shares, whether by sale, assignment, gift, bequest,
appointment or otherwise, except to a Permitted Transferee (as hereinafter
defined). In the case of a Class B Holder who is a natural person and the
beneficial owner of shares of Class B Common Stock to be transferred, a
Permitted Transferee consists of (i) such Class B Holder's spouse; provided,
however, that upon divorce any Class B Common Stock held by such spouse shall
automatically be converted into Class A Common Stock, (ii) any lineal descendant
of any great-grandparent of such Class B Holder, including adopted children, and
such descendant's spouse (such descendants and their spouses, together with such
Class B Holder's spouse, are referred to as "family members"), (iii) the trustee
of a trust for the sole benefit of such Class B Holder or any of such Class B
Holder's family members, (iv) any charitable organization established by such
Class B Holder or any of such Class B Holder's family members, (v) any
partnership made up exclusively of such Class B Holder and any of such Class B
Holder's family members or any corporation wholly-owned by such Class B Holder
and any of such Class B Holder's family members; provided that, if there is any
change in the partners of such partnership or in the stockholders of such
corporation that would cause such partnership or corporation no longer to be a
Permitted Transferee, any Class B Common Stock held by such partnership or
corporation shall automatically be converted into Class A Common Stock. In the
case of a Class B Holder that is a partnership or corporation, a Permitted
Transferee consists of (i) such partnership's partners or such corporation's
stockholders, as the case may be, (ii) any transferor to such partnership or
corporation of shares of Class B Common Stock after the record date of the
initial distribution of Class B Common Stock and (iii) successors by merger or
consolidation. In the case of a Class B Holder that is an irrevocable trust on
the record date of the distribution of Class B Common Stock, a Permitted
Transferee consists of (i) certain successor trustees of such trust, (ii) any
person to whom or for whose benefit principal or income may be

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distributed under the terms of such trust or any person to whom such trust may
be obligated to make future transfers, provided such obligation exists prior to
the date such trust becomes a holder of Class B Common Stock and (iii) any
family member of the creator of such trust. In the case of a Class B Holder that
is any trust other than an irrevocable trust on the date of the distribution of
Class B Common Stock, a Permitted Transferee consists of (i) certain successor
trustees of such trust and (ii) the person who established such trust and such
person's Permitted Transferees. Upon the death or permanent incapacity of any
Class B Holder, such Holder's Class B Common Stock shall automatically be
converted into Class A Common Stock. All shares of Class B Common Stock will
automatically convert into shares of Class A Common Stock on the ninetieth day
after the death of Darwin Deason or upon the conversion by Mr. Deason of all
Class B Common Stock beneficially owned by Mr. Deason into shares of Class A
Common Stock.

Subject to compliance with applicable securities laws, shares of Class B
Common Stock are freely transferable among Permitted Transferees, but any other
transfer of Class B Common Stock will result in its automatic conversion into
Class A Common Stock. The restriction on transfers of shares of Class B Common
Stock to other than a Permitted Transferee may preclude or delay a change in
control of the Company.

Prior to the Spin-Off, the Board of Directors of the Company received an
opinion of counsel to the effect that it is more likely than not that, pursuant
to Section 355 of the Code, no gain or loss should be recognized to (and no
amount should be included in the income of) the stockholders of the Company, nor
should any gain or loss be recognized to the Company, by reason of the
distribution of the stock of Precept as contemplated by the Spin-Off. Such
opinion is conditioned upon certain representations of the stockholders and the
management of the Company as to certain facts and circumstances upon certain
assumptions and upon the effectiveness of certain restrictions. One of these
restrictions (the "linked sales restriction") requires, in part, that any sales
or exchanges of shares of the Company's Class A Common Stock (or the Company's
Class B Common Stock, whether or not converted into the Company's Class A Common
Stock prior to sale) that were held prior to the IPO and that are to be sold or
disposed of during the two-year period following the Spin-Off must be effected
in conjunction with the sale at approximately the same time an equal portion of
the holder's shares of Precept Class A or B Common Stock. Holders of Precept
Class A or B Common Stock subject to the linked sales restriction who desire to
sell or dispose of their shares of Precept Class A or B Common Stock in
connection with any sales of the Company's Class A Common Stock during the
two-year period following the Spin-Off, and who are unable to sell their shares
of Precept Class A or B Common Stock to a third party, may elect to sell their
shares of Precept Class A or B Common Stock to Precept at approximately the same
time in order to satisfy the linked sales restriction. The purchase price to be
paid by Precept for such shares will be $1.26 per share, which was based on the
fair market value of the Precept stock distributed in the Spin-Off, as
determined by an independent valuation company as of June 30, 1994, and will be
payable in 15 years, without interest, pursuant to a promissory note from
Precept. In the case of Mr. Deason, the linked sales restriction may be
satisfied only by the sale of the requisite number of Precept shares to an
unrelated third party. In the case of each other stockholder of the Company
prior to the IPO, such requirement may be satisfied by the sale of the Precept
shares to Precept, but only if such sale effects at least a 20% reduction in the
stockholder's interest in Precept and certain other conditions are satisfied, or
to a third party.

DIVIDENDS AND LIQUIDATION RIGHTS

The holders of Class A Common Stock and Class B Common Stock are entitled to
receive dividends out of assets legally available therefore at such times and in
such amounts as the Board of Directors may from time to time determine. Upon
liquidation and dissolution of the Company, the holders of Class A Common Stock
and Class B Common Stock are entitled to receive all assets available for
distribution to stockholders.

OTHER RIGHTS

The holders of Class A Common Stock and Class B Common Stock are not
entitled to preemptive or subscription rights, and there are no redemption or
sinking fund provisions applicable to such common stock.

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WARRANT

In January 1989, the Company entered into a ten-year data processing
contract and issued a warrant to a data processing customer under an agreement
(the "Warrant Agreement"), which became exercisable in part in January 1996. The
Warrant Agreement entitles the customer to purchase 396,594 shares (adjusted for
the Reorganization) of the Company's Class A Common Stock for an aggregate
purchase price equal to (i) $4,700,000 plus (ii) $230,000 for each full 12-month
period that has elapsed from December 31, 1988. In addition, the aggregate
purchase price is increased by 10% per annum, accrued daily but not compounded.
Shares may be purchased under the Warrant Agreement in increments beginning
January 1, 1996 as follows: up to 99,149 shares from January 1, 1996 through
December 31, 1996; up to 99,149 share from January 1, 1997 through December 31,
1997, plus any shares not purchased in the prior year; up to 99,148 shares from
January 1, 1998 through December 31, 1998, plus any shares not purchased in the
prior two years; and up to 99,148 shares on January 2, 1999, plus any shares not
purchased in the prior three years. The purchase price for shares purchased in
1996 would be $28.60 per share, plus accrued daily interest for that year;
$32.04 per share for shares purchased in 1997, plus accrued daily interest;
$35.82 per share for shares purchased in 1998, plus accrued daily interest; and
$39.98 per share for shares purchased through January 2, 1999, plus accrued
daily interest. The Warrant Agreement expires on the earlier of (i) January 2,
1999 or (ii) any termination of the customer's data processing contract with the
Company. In connection with entering into the data processing contract the
customer also acquired 396,594 shares (adjusted for the Reorganization) of the
Company's Class A Common Stock, which shares were subject to certain forfeiture
provisions relating to any early termination of the data processing contract.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

One of the effects of the existence of unissued and unreserved Class A
Common Stock and Preferred Stock may be to enable the Board of Directors to
render more difficult or to discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise, and
thereby to protect the continuity of the Company's management. If, in the
exercise of its fiduciary obligations, for example, the Board of Directors were
to determine that a takeover proposal was not in the Company's best interests,
the Board of Directors could issue such authorized but unissued shares without
stockholder approval in one or more private placements or other transactions.
Such an issuance could dilute the voting or other rights of the proposed
acquiror, insurgent stockholder or stockholder group by creating a substantial
voting block in institutional or other hands that could support the position of
the incumbent Board of Directors by effecting an acquisition that might
complicate or preclude the takeover.

CERTIFICATE OF INCORPORATION AND BYLAWS

The following description of certain provisions of the Company's Certificate
of Incorporation and Bylaws is qualified in its entirety by reference to the
Certificate of Incorporation and Bylaws, copies of which have been filed as
exhibits to the Company's reports or registration statements filed with the
Commission.

The Certificate of Incorporation and Bylaws contain several provisions that
may be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt. The Certificate of Incorporation does not
provide for cumulative voting and, accordingly, Mr. Deason, as the holder of a
majority of the outstanding voting power, can currently elect all the members of
the Board of Directors. See "Risk Factors--Voting Control by Chairman of the
Board."

Under the DGCL, any action required or permitted to be taken by the
stockholders of a corporation may be taken only at a duly called annual or
special meeting of stockholders. The Bylaws provide that special meetings of the
stockholders of the Company may be called only by the Chairman of the Board of
Directors, the President, a majority of the members of the Board of Directors or
the holders of a majority of the voting power of the Company's outstanding
capital stock. These provisions could have the effect of delaying until the next
annual stockholders' meeting actions that are not favored by the holders of a
majority of the voting power of the outstanding capital stock of the Company.
Moreover, the Bylaws authorize the stockholders of

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the Company to take action by written consent signed by the holders of a
majority of the voting power of the Company's outstanding capital stock,
provided that written notice is given to those stockholders who have not
consented in writing.

Under the DGCL, the approval of a Delaware corporation's board of directors,
in addition to stockholder approval, is required to adopt any amendment to the
company's certificate of incorporation, but the exclusive power to adopt, amend
and repeal the bylaws is conferred solely upon the stockholders, unless the
corporation's certificate of incorporation also confers such power on its board
of directors. The Certificate of Incorporation grants the power to amend the
Bylaws to the Board of Directors.

The Certificate of Incorporation contains certain provisions permitted under
the DGCL that limit the liability of directors.

In addition to the foregoing provisions of the Certificate of Incorporation
and Bylaws, the Company is subject to the provisions of Section 203 of the DGCL,
which restricts the consummation of certain business combination transactions
(including mergers, stock and asset sales and other transactions resulting in
financial benefit to the stockholder) between a Delaware public corporation and
an "interested stockholder" for a period of three years after the date the
interested stockholder acquired its stock. An "interested stockholder" is
defined as a person who, together with any affiliates and/or associates of such
person, beneficially owns 15% or more of any class or series of stock entitled
to vote in the election of directors, unless, among other exceptions, (i) the
transaction is approved by (a) the corporation's board of directors prior to the
date the interested stockholder acquired such shares or (b) a majority of the
board of directors and by the affirmative vote of the holders of two-thirds of
the outstanding shares of each class or series of stock entitled to vote
generally in the election of directors, not including the shares owned by the
interested stockholder, or (ii) the interested stockholder acquired at least 85%
of the voting stock of the corporation in the transaction in which it became an
interested stockholder. Section 203 of the DGCL is intended to discourage
certain takeover practices by impeding the ability of a hostile acquiror to
engage in certain transactions with the target company.

Moreover, the Bylaws contain a provision that permits any contract or other
transaction between the Company and any of its directors, officers or
stockholders (or any corporation or firm in which any of them are directly or
indirectly interested) to be valid notwithstanding the presence of such
director, officer or stockholder at the meeting authorizing such contract or
transaction, or his participation or vote in such stockholder's meeting or
authorization subject to certain conditions, including disclosure.

TRANSFER AGENT

Chemical Mellon Shareholder Services Group, Inc. serves as transfer agent
and registrar for the Class A Common Stock.

41
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Bear, Stearns & Co.
Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Hambrecht & Quist
LLC, have severally agreed to purchase from the Company and the Selling
Stockholders the following respective shares of Class A Common Stock:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Bear, Stearns & Co. Inc.......................................................... 1,242,500
Donaldson, Lufkin & Jenrette Securities Corporation.............................. 1,242,500
Hambrecht & Quist LLC............................................................ 1,242,500
First Southwest Company.......................................................... 100,000
Hoak Securities Corp............................................................. 100,000
Monness, Crespi, Hardt & Co., Inc................................................ 100,000
----------
Total.......................................................................... 4,027,500
----------
----------
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that, if any of the foregoing
shares of Class A Common Stock are purchased by the Underwriters pursuant to the
Underwriting Agreement, all such shares must be so purchased. The Company and,
to a limited extent, the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

The Company and the Selling Stockholders have been advised that the
Underwriters propose initially to offer the shares of Class A Common Stock to
the public at the public offering price set forth on the cover page of this
Prospectus and to certain selected dealers (who may include the Underwriters) at
such public offering price less a concession not to exceed $1.22 per share. The
selected dealers may reallow a concession to certain other dealers not to exceed
$.10 per share. After the offering to the public, the public offering price, the
concession to selected dealers and the reallowance to other dealers may be
changed by the Underwriters.

The Company has granted to the Underwriters an option to purchase up to
604,125 additional shares of Class A Common Stock at the public offering price
less the underwriting discounts and commissions set forth on the cover page of
this Prospectus, solely to cover over-allotments, if any. Such option may be
exercised at any time until 30 days after the date of this Prospectus. If the
Underwriters exercise such option, each of the Underwriters will be committed,
subject to certain conditions, to purchase a number of additional shares
proportionate to such Underwriter's initial commitment as indicated in the
preceding table.

The Company has agreed that during the period of 90 days from the date of
this Prospectus, it will not, without prior written consent of Bear Stearns,
issue, sell, offer or agree to sell, grant any option for the sale of (other
than employee stock options to purchase up to 75,000 shares of common stock to
be granted pursuant to the Company's Stock Option Plan provided that such
options will not become exercisable during such 90 day period), or otherwise
dispose of, directly or indirectly, any common stock or any securities
substantially similar to the common stock or any securities convertible into,
exercisable for or exchangeable for common stock or securities substantially
similar to the common stock, otherwise than in this offering or upon the
exercise of presently outstanding stock options; provided, however, that during
such period the Company may issue up to 100,000 shares of unregistered Class A
Common Stock in connection with the consummation of acquisitions provided that
it gives prior written notice of any such issuances to Bear Stearns. In
addition, pursuant to an agreement with the Underwriters, Darwin Deason and
First Nationwide have agreed not to sell any of their shares of common stock
(other than the shares offered hereby) until September 22, 1996. See "Risk
Factors -- Shares Eligible for Future Sale."

Certain of the Underwriters that currently act as market makers for the
Company's common stock engage in "passive market making" in such securities on
Nasdaq in accordance with Rule 10b-6A under the

42
<PAGE>
Exchange Act. Rule 10b-6A permits, upon the satisfaction of certain conditions,
underwriters and selling group members participating in a distribution that are
also Nasdaq market makers in the security being distributed to engage in limited
market transactions during the period when Rule 10b-6 under the Exchange Act
would otherwise prohibit such activity. Rule 10b-6A prohibits underwriters and
selling group members engaged in passive market making generally from entering a
bid or effecting a purchase at a price that exceeds the highest bid for those
securities displayed on Nasdaq by a market maker that is not participating in
the distribution. Under Rule 10b-6A, each underwriter or selling group member
engaged in passive market making is subject to a daily net purchase limitation
equal to 30% of such entity's average daily trading volume during the two full
consecutive calendar months immediately preceding the date of the filing of the
registration statement under the Securities Act pertaining to the security to be
distributed.

Certain Underwriters (including the Representatives) or their affiliates
provide the Company with investment banking services from time to time for which
they receive customary compensation. Donaldson, Lufkin & Jenrette Securities
Corporation has acted as financial adviser to the Company in connection with the
Acquisition.

LEGAL MATTERS

The validity of the Class A Common Stock offered hereby has been passed upon
for the Company by Hughes & Luce, L.L.P., Dallas, Texas. Certain legal matters
with respect to the Class A Common Stock will be passed upon for the
Underwriters by Thompson & Knight, P.C., Dallas, Texas, which firm represents
the Company with respect to intellectual property matters from time to time.

EXPERTS

The consolidated financial statements of the Company as of June 30, 1994 and
1995 and for each of the three years in the period ended June 30, 1995 included
in this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in accounting and auditing.

The consolidated financial statements of The Genix Group, Inc. as of
December 31, 1994 and 1995 and for each of the three years in the period ended
December 31, 1995 included in this Prospectus have been so included in reliance
on the report of Deloitte & Touche LLP, independent auditors, given on the
authority of said firm as experts in accounting and auditing.

43
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGES
---------
<S> <C>
AFFILIATED COMPUTER SERVICES, INC.:

Report of Independent Accountants......................................................................... F-2

Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1994 and 1995................................................ F-3
Consolidated Statements of Operations for the Years Ended June 30, 1993, 1994 and 1995.................. F-4
Consolidated Statements of Changes of Stockholder's Equity for the Years Ended June 30, 1993, 1994 and
1995................................................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended June 30, 1993, 1994 and 1995.................. F-6

Notes to Consolidated Financial Statements................................................................ F-7

Condensed Consolidated Interim Financial Statements (Unaudited)
Condensed Consolidated Interim Balance Sheet at March 31, 1996.......................................... F-22
Condensed Consolidated Interim Statements of Operations for the Nine Months Ended March 31, 1995 and
1996................................................................................................... F-23
Condensed Consolidated Interim Statements of Cash Flows for the Nine Months Ended March 31, 1995 and
1996................................................................................................... F-24

Notes to Condensed Consolidated Interim Financial Statements.............................................. F-25

THE GENIX GROUP, INC.:

Independent Auditors' Report.............................................................................. F-27

Consolidated Financial Statements
Consolidated Statement of Financial Position as of December 31, 1994 and 1995........................... F-28
Consolidated Statement of Income for the Years Ended December 31, 1993, 1994 and 1995................... F-29
Consolidated Statement of Shareholder's Equity for the Years Ended December 31, 1993, 1994 and 1995..... F-30
Consolidated Statement of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995............... F-31

Notes to Consolidated Financial Statements................................................................ F-32

Consolidated Interim Financial Statements (Unaudited)
Condensed Consolidated Interim Financial Position as of March 31, 1996.................................. F-37
Condensed Consolidated Interim Statement of Income for the Three Months Ended March 31, 1995 and 1996... F-38
Condensed Consolidated Interim Statement of Cash Flows for the Three Months Ended March 31, 1995 and
1996................................................................................................... F-39

Notes to Condensed Consolidated Interim Financial Statements.............................................. F-40

PRO FORMA FINANCIAL STATEMENTS (UNAUDITED):

Pro Forma Condensed Consolidated Financial Information.................................................. F-41
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1996 and Related Notes................... F-42
Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended March 31, 1996 and
Related Notes.......................................................................................... F-44
Pro Forma Condensed Consolidated Statement of Operations for the Year Ended June 30, 1995 and Related
Notes.................................................................................................. F-46
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Affiliated Computer Services, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity, present fairly, in all material respects, the financial
position of Affiliated Computer Services, Inc. and its subsidiaries at June 30,
1994 and 1995 and the results of their operations and their cash flows for each
of the three years in the period ended June 30, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Dallas, Texas
July 31, 1995

F-2
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
JUNE 30,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................................ $ 20,409 $ 41,476
ATM cash................................................................................. 14,800 8,250
Investment in marketable securities, net................................................. 14,223 --
Accounts receivable, net of allowance for doubtful accounts of $1,551 and $1,792,
respectively............................................................................ 31,751 42,325
Inventory................................................................................ 5,096 6,294
Prepaid expenses......................................................................... 6,342 6,960
Deferred taxes........................................................................... 5,956 8,645
Other current assets..................................................................... 593 429
--------- ---------
Total current assets................................................................... 99,170 114,379
Property and equipment, net................................................................ 15,539 23,463
Purchased computer software, net of accumulated amortization of $16,001 and $14,734,
respectively.............................................................................. 2,336 3,219
Goodwill, net of accumulated amortization of $3,942 and $5,783, respectively............... 59,847 69,293
Other intangible assets, net of accumulated amortization of $1,995 and $3,039,
respectively.............................................................................. 6,436 6,078
Long-term investments...................................................................... 3,494 3,225
Deferred taxes............................................................................. 1,201 4,183
Other long-term assets..................................................................... 2,032 1,891
--------- ---------
Total assets........................................................................... $ 190,055 $ 225,731
--------- ---------
--------- ---------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable......................................................................... $ 4,061 $ 4,360
Accrued compensation and benefits........................................................ 7,846 9,856
Other accrued liabilities................................................................ 20,270 32,124
Income taxes payable..................................................................... 2,866 234
Current portion of long-term debt........................................................ 4,436 5,763
Current portion of unearned revenue...................................................... 9,038 10,440
--------- ---------
Total current liabilities.............................................................. 48,517 62,777
Long-term debt............................................................................. 80,001 37,940
Unearned revenue........................................................................... 1,906 2,713
Other long-term liabilities................................................................ 10,365 14,577
--------- ---------
Total liabilities...................................................................... 140,789 118,007
--------- ---------
Cumulative redeemable preferred stock...................................................... 1,100 1,100
--------- ---------
Stockholders' equity:
Class A common stock, $.01 par value, 17,196 shares authorized, 5,595 shares and 8,488
shares outstanding, respectively........................................................ 56 85
Class B common stock, $.01 par value, 4,804 shares authorized and outstanding............ 48 48
Additional paid-in capital............................................................... 38,487 79,312
Retained earnings........................................................................ 9,575 27,179
--------- ---------
Total stockholders' equity............................................................. 48,166 106,624
--------- ---------
Commitments and contingencies (Notes 2, 3, 5, 9 and 17)
Total liabilities and stockholders' equity............................................. $ 190,055 $ 225,731
--------- ---------
--------- ---------
</TABLE>

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

F-3
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues from continuing operations.......................................... $ 189,064 $ 271,055 $ 313,181
Expenses:
Wages and benefits......................................................... 62,902 91,117 106,966
Services and supplies...................................................... 48,983 74,947 77,613
Rent, lease and maintenance................................................ 45,972 66,075 80,250
Depreciation and amortization.............................................. 6,731 8,524 11,847
Other operating expenses................................................... 7,101 5,582 4,963
---------- ---------- ----------
Total operating expenses................................................. 171,689 246,245 281,639
---------- ---------- ----------
Operating income from continuing operations................................ 17,375 24,810 31,542
Interest and other expenses, net............................................. 1,620 4,598 1,755
---------- ---------- ----------
Pretax profit from continuing operations................................... 15,755 20,212 29,787
Income tax expense........................................................... 6,437 8,287 12,183
---------- ---------- ----------
Income from continuing operations.......................................... 9,318 11,925 17,604
Discontinued operations:
Income from discontinued operations, net of taxes.......................... 226 371 --
---------- ---------- ----------
Net income................................................................. $ 9,544 $ 12,296 $ 17,604
---------- ---------- ----------
---------- ---------- ----------
Earnings per common and common equivalent share:
Continuing operations...................................................... $ .82 $ 1.05 $ 1.37
Discontinued operations.................................................... .02 .03 --
---------- ---------- ----------
Net income................................................................. $ .84 $ 1.08 $ 1.37
---------- ---------- ----------
---------- ---------- ----------
Weighted average shares outstanding.......................................... 11,384 11,413 12,808
---------- ---------- ----------
---------- ---------- ----------
Earnings per common share assuming full dilution:
Continuing operations...................................................... $ .62 $ .80 $ 1.36
Discontinued operations.................................................... .02 .02 --
---------- ---------- ----------
Net income................................................................. $ .64 $ .82 $ 1.36
---------- ---------- ----------
---------- ---------- ----------
Weighted average shares outstanding assuming full dilution................... 14,969 14,998 12,919
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

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

F-4
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------
CLASS A CLASS B
------------------------ ------------------------ PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
----------- ----------- ----------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1992.................. 5,234 $ 53 4,804 $ 48 $ 37,790 $ 7,749 $ 45,640
Exercise of stock options................. 331 3 250 253
Net income................................ 9,544 9,544
----- --- ----- --- --------- --------- ----------
Balance at June 30, 1993.................. 5,565 56 4,804 48 38,040 17,293 55,437
Conversion of subsidiary stock to Company
stock.................................... 30 447 447
Spin-Off of Precept Business
Products, Inc............................ (20,014) (20,014)
Net income................................ 12,296 12,296
----- --- ----- --- --------- --------- ----------
Balance at June 30, 1994.................. 5,595 56 4,804 48 38,487 9,575 48,166
Net proceeds of initial public offering... 2,300 23 32,171 32,194
Issuance of compensatory stock
options.................................. 2,521 2,521
Exercise of stock options and related tax
benefits................................. 580 6 4,810 4,816
Stock issued in connection with
acquisitions............................. 13 1,323 1,323
Net income................................ 17,604 17,604
----- --- ----- --- --------- --------- ----------
Balance at June 30, 1995.................. 8,488 $ 85 4,804 $ 48 $ 79,312 $ 27,179 $ 106,624
----- --- ----- --- --------- --------- ----------
----- --- ----- --- --------- --------- ----------
</TABLE>

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

F-5
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................................. $ 9,544 $ 12,296 $ 17,604
---------- ---------- ----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................. 6,731 8,524 11,847
Loss on marketable securities............................................. -- 746 11
Recognition of stock option compensation.................................. -- 750 680
Other..................................................................... 110 (9) --
Changes in assets and liabilities, net of effects from acquisitions:
(Increase) decrease in accounts receivable.............................. (2,533) 1,773 (7,609)
Increase in inventory................................................... (82) (199) (889)
Increase in prepaid expenses............................................ (1,544) (2,041) (1,316)
Increase in deferred taxes.............................................. (2,821) (4,545) (5,930)
(Increase) decrease in other current assets............................. (170) (30) 175
(Increase) decrease in ATM cash......................................... -- (14,800) 6,550
(Increase) decrease in other long-term assets........................... (1,408) 1,485 (1,100)
Increase (decrease) in accounts payable................................. 1,218 (2,240) (124)
Increase in accrued compensation and benefits........................... 679 1,231 1,338
Increase in other accrued liabilities................................... 2,748 1,543 4,924
Increase (decrease) in income taxes payable............................. (1,749) 3,403 (2,940)
Increase in other long-term liabilities................................. 721 3,547 7,878
Increase (decrease) in unearned revenue................................. 625 1,324 (1,347)
---------- ---------- ----------
Total adjustments..................................................... 2,525 462 12,148
---------- ---------- ----------
Net cash provided by operating activities............................. 12,069 12,758 29,752
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of marketable securities................................. 2,209 7,214 14,354
Purchases of marketable securities.......................................... (17,662) (6,730) --
Purchases of property, equipment and computer software...................... (2,662) (6,595) (11,826)
Payments for acquisitions, net of cash acquired............................. (21,149) -- (9,204)
Additions to other intangible assets and goodwill........................... (306) (131) (150)
Purchase of long-term investment............................................ -- (236) --
Net advances to discontinued operations..................................... (6,034) (5,074) --
---------- ---------- ----------
Net cash used in investing activities................................. (45,604) (11,552) (6,826)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................................... 14,874 36,476 --
Repayments of long-term debt................................................ (5,753) (31,681) (40,488)
Proceeds from issuance of common stock, net of issuance costs............... -- -- 33,310
Proceeds from the exercise of stock options and related tax benefits........ 253 -- 5,319
---------- ---------- ----------
Net cash provided by (used in) financing activities................... 9,374 4,795 (1,859)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents........................ (24,161) 6,001 21,067
Cash and cash equivalents at beginning of year.............................. 38,569 14,408 20,409
---------- ---------- ----------
Cash and cash equivalents at end of year.................................... $ 14,408 $ 20,409 $ 41,476
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

See non-cash activities disclosed in Notes 5, 7, 9, 10 and 11.
The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Affiliated Computer Services, Inc. (the "Company") was incorporated on June
8, 1988. The Company and its subsidiaries are primarily engaged in providing
information processing services. These services include outsourcing services,
electronic funds transfer ("EFT") transaction processing services, image
management services and professional services. The Company also had subsidiaries
engaged in business forms distribution, real estate investment and brokerage,
courier services, limousine services and lease brokerage services. These
non-information processing businesses have been classified as "discontinued
operations" due to the Spin-Off to stockholders of such operations on June 30,
1994, as explained in Note 3.

The consolidated financial statements are comprised of the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The Company's fiscal year
ends June 30.

CASH, CASH EQUIVALENTS AND ATM CASH

Cash and cash equivalents consist primarily of short-term investments in
commercial paper and securities purchased under agreements to resell and
short-term treasury bills issued by the United States government. Such
investments have an initial maturity of three months or less. At June 30, 1995,
amounts outstanding for securities purchased under agreements to resell from
Prudential Securities, Inc. are approximately $16,723,000 with a maturity of 5
days. ATM cash represents cash borrowed under a revolving credit agreement for
use in Company-owned automated teller machines ("ATMs").

INVENTORY

Inventories consist primarily of micrographics supplies and equipment, and
ATM and computer maintenance parts, and are recorded at the lower of cost
(first-in, first-out) or market (net realizable value).

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets, which
for equipment range primarily from three to seven years and for buildings and
improvements up to twenty years.

PURCHASED COMPUTER SOFTWARE

Purchased computer software and internally developed computer software
purchased through acquisitions are amortized using the straight-line method over
expected useful lives which range from two to six years. With respect to costs
incurred to develop software for its information processing services that is not
purchased through acquisitions, the Company's policy is to capitalize such costs
only after technological feasibility has been established. No software
development costs have been capitalized in the accompanying financial
statements.

LONG-TERM INVESTMENTS

Long-term investments consist of equity investments and are accounted for
using either cost or the equity methods, as determined on a case-by-case basis.
It is the Company's policy to periodically review the net realizable value of
its long-term investments through an assessment of the recoverability of the
carrying amount of each investment. Each investment is reviewed to determine if
events or changes in circumstances of the issuer have occurred which indicate
that the recoverability of the carrying amount may be uncertain. In the event
that an investment is found to be carried at an amount in excess of its
recoverable amount, then the asset is adjusted for impairment to a level
commensurate with the recoverable amount of the underlying asset.

F-7
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER INTANGIBLE ASSETS

Other intangible assets consist primarily of customer contracts which are
recorded at cost and amortized using the straight-line method over the contract
terms, which range from three to ten years.

GOODWILL

Goodwill represents the excess of the purchase price over the fair value of
net assets acquired and is amortized using the straight-line method over the
expected useful lives which range from ten to forty years. It is the Company's
policy to periodically review the net realizable value of its intangible assets,
including goodwill, through an assessment of the estimated future cash flows
related to such assets. Each business unit to which these intangible assets
relate is reviewed to determine whether future cash flows over the remaining
estimated useful life of the asset provide for recovery of the assets. In the
event that assets are found to be carried at amounts which are in excess of
estimated gross future cash flows, then the intangible assets are adjusted for
impairment to a level commensurate with a discounted cash flow analysis of the
underlying assets. Effective July 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The effect of
adoption was not significant.

REVENUE RECOGNITION

Information processing revenue is recorded as services are performed.
Revenue from annual maintenance contracts is deferred and recognized ratably
over the maintenance period. Image management services and supplies revenues
earned in excess of related billings are accrued, whereas billings in excess of
revenues earned are deferred until the related services are provided. Revenues
earned from the five largest customers each year together comprise 32%, 30% and
27% of revenues from continuing operations, respectively, for the years ended
June 30, 1993, 1994 and 1995. Trade accounts receivable from these customers
aggregated $6,891,000 at June 30, 1994 and $8,646,000 at June 30, 1995.

INCOME TAXES

Effective for the year ended June 30, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," the
cumulative effect of which was not material. Deferred income taxes provided in
the accompanying financial statements are determined based on the difference
between financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the years in which such differences are expected
to reverse.

INCOME PER COMMON AND COMMON EQUIVALENT SHARE

On September 26, 1994, the Company completed an initial public offering (the
"Offering") to sell shares of its Class A common stock. Earnings per common and
common equivalent share are based on the weighted average number of common
shares outstanding during the period plus common equivalent shares arising from
stock options and warrants, if dilutive. Stock options granted with exercise
prices below the Offering price during the twelve-month period preceding the
initial filing date of the Offering have been included in the calculation of
common equivalent shares, using the treasury stock method and the Offering price
of $16.00 per share, as if they were outstanding for the years ended June 30,
1993 and 1994. Stock options granted and warrants issued more than twelve months
prior to the Offering have been included in the computations, using the treasury
stock method and the Offering price of $16.00 per share, only when their effect
would be dilutive.

Earnings per common share assuming full dilution reflects the effects (when
greater than 3% dilution) of common shares contingently issuable upon the
exercise of options, warrants and the conversion of cumulative redeemable
preferred stock in periods in which such exercise or conversion would cause
dilution. The fully diluted per share computation for the years ended June 30,
1993 and 1994 reflects the effect of escrowed shares which were contingently
issuable to First Madison Bank, formerly First Gibraltar Bank,

F-8
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FSB. Such shares were escrowed to secure the Company's obligation to purchase
shares of its stock in connection with a put right held by First Madison Bank.
Upon consummation of the Company's Offering, the put right and the related
escrowed shares were canceled.

2. NON-RENEWAL OF LARGEST CUSTOMER CONTRACT
The Company's largest customer, Bank of America Texas, N.A. ("B of A
Texas"), informed the Company that it would not renew its data processing
services agreement with the Company at the end of the contract term on August
31, 1995. Revenues earned from B of A Texas and its predecessor, First Gibraltar
Bank, FSB ("FGB"), were $28.3 million, $37.2 million and $35.1 million for the
fiscal years ended June 30, 1993, 1994 and 1995, respectively. Expenses directly
related to services provided to this customer, excluding any allocable expenses
of the Company's fixed costs for such items as shared computing, customer
support functions, occupancy and selling, general and administrative, were $7.0
million, $9.5 million and $7.4 million for the fiscal years ended June 30, 1993,
1994 and 1995, respectively. Pursuant to terms of the contract with B of A
Texas, the Company will continue to receive minimum monthly revenues of $2.2
million through August 31, 1995. In addition, management has implemented a cost
savings plan designed to eliminate certain indirect operating costs associated
with servicing the B of A Texas contract.

In conjunction with the contract expiration, the Company expected to incur
various non-recurring expenses primarily associated with the termination or
renegotiation of a computer lease. Such costs were estimated to aggregate $16.1
million, of which $13.3 million has been accrued through June 30, 1995. Due to
the signing of a services contract with another customer in May 1995, the
Company determined that the computer lease would not need to be terminated or
renegotiated, as the new customer will replace computer capacity previously
utilized for the B of A Texas contract. Accordingly, the Company determined that
continuing the accrual for the computer lease was no longer necessary. Services
to this new customer have begun, and beginning September 1995, the existing
accrual will be amortized over the remaining term of the computer lease, which
expires February 1999. Of the $13.3 million accrued at June 30, 1995, $3.0
million was classified as current and $10.3 million as an other long-term
liability, compared to $4.8 million accrued at June 30, 1994 as an other
long-term liability.

3. REORGANIZATION
On June 30 and July 5, 1994, the Company completed a series of transactions
(collectively, the "Reorganization") designed to restructure the Company for the
Offering. The transactions included: (i) reclassification of the Company's
capital stock, (ii) merger of certain of the Company's subsidiaries, Affiliated
Computer Services, Inc. ("Services") and Dataplex Acquisition Corp. ("DAC"),
into the Company, including the conversion of the 3.5% minority interest shares
of DAC into Class A common stock of the Company, (iii) contribution of
Affiliated Computer Systems Funding Corporation, a wholly owned subsidiary of
the Company, to Precept Business Products, Inc. ("Precept"), another wholly
owned subsidiary, (iv) the Spin-Off of Precept to the Company's stockholders on
a pro rata basis (the "Spin-Off"), and (v) the change of the Company's name from
ACS Investors, Inc. to Affiliated Computer Services, Inc. The then current
holders of the Company's Class A, B and C common shares elected to reclassify
each of their shares into 14.69735071 shares (rounded up to the nearest whole
share) of the Company's newly-created Class A or B shares. Class A stockholders
are entitled to one vote per share on all matters referred to stockholders, and
Class B stockholders are entitled to ten votes per share. Class B shares are
convertible into Class A shares, but until converted, carry significant
restrictions with regard to transfer rights. The Company authorized 22,000,000
common shares, consisting of 17,195,742 Class A common shares and 4,804,258
Class B common shares, of which 5,595,245 shares and 4,804,258 shares,
respectively, were outstanding prior to the Offering. The Class A and B common
shares have a par value of $0.01 per share. All share and per share amounts in
the accompanying financial statements have been adjusted to give effect to the
Reorganization.

F-9
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. REORGANIZATION (CONTINUED)
In connection with the mergers of Services and DAC into the Company,
outstanding options of these subsidiaries were converted into options to
purchase Class A common shares of the Company at respective conversion ratios of
10.7855213 and 0.67573477 (rounded up to the nearest whole share). The
conversion ratios of employee stock options were based on an opinion from an
independent valuation company and did not result in any increase in the
intrinsic value of the option, reduction in the ratio of the exercise price per
share to the market value per share or changes in vesting provisions. Therefore,
in accordance with the Financial Accounting Standards Board Emerging Issues Task
Force Issue No. 90-9, the Company did not record any compensation expense as a
result of such conversions. In addition to the stock options, each outstanding
share of DAC's common stock not owned by the Company was exchanged for
0.67573477 shares (rounded up to the nearest whole share) of the Company's Class
A common stock.

The distribution of Precept's stock was structured to qualify for tax-free
treatment under the Internal Revenue Code of 1986, and is subject to certain
conditions. The businesses distributed consist of various lines of business
unrelated to information processing and have been accounted for as discontinued
operations in the consolidated statements of operations (see Note 4). In
connection with the Spin-Off, the Company agreed to indemnify its stockholders
against taxes which might be assessed if the Spin-Off fails to qualify for
tax-free treatment. The Company's aggregate indemnification liability is limited
to $5 million.

4. DISCONTINUED OPERATIONS
Precept's operations are comprised of business support activities, including
business forms distribution, real estate investment and brokerage, courier
services, and various other lines of business unrelated to the Company's
information processing business. Summary financial results for the discontinued
operations prior to the Spin-Off were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Third party revenues.............................................................. $ 38,221 $ 50,108
Revenue from affiliates........................................................... 11,991 13,764
--------- ---------
Total revenue..................................................................... $ 50,212 $ 63,872
--------- ---------
--------- ---------
Income before taxes............................................................... $ 378 $ 654
Income tax expense................................................................ 152 283
--------- ---------
Net income........................................................................ $ 226 $ 371
--------- ---------
--------- ---------
</TABLE>

Prior to the Spin-Off of Precept to the Company's stockholders, Precept paid
off its remaining debt obligation to the Company in the amount of approximately
$8.0 million, which included $1.8 million of income taxes paid by the Company on
behalf of Precept. Trade accounts between the Company and Precept were
immaterial for all years presented. The following footnote disclosures exclude
discontinued operations.

F-10
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. ACQUISITIONS
During fiscal years 1993 and 1995, the Company's continuing operations
acquired the following information processing services businesses:

<TABLE>
<CAPTION>
BUSINESS DATE ACQUIRED TYPE OF BUSINESS
- -------------------------------------------------------- ------------------ -----------------------
<S> <C> <C>
Fiscal Year 1993
Dataplex Acquisition Corp. December 1992 Image Management
Mino-Micrographics, Inc. June 1993 Image Management
National Healthtech Corporation June 1993 Outsourcing
Fiscal Year 1995
Tecniflex October 1994 Image Management
Item processing business of Hancock Bank of Louisiana January 1995 Outsourcing
Microfilm Services Company, Inc. January 1995 Image Management
The Systems Group, Inc. January 1995 Professional Services
Total/1 Services Corporation February 1995 Outsourcing
McCoy Myers and Associates, Inc. April 1995 Outsourcing
</TABLE>

In connection with the acquisitions, the Company purchased stock or assets
and assumed liabilities as follows (in thousands):

<TABLE>
<CAPTION>
ASSETS LIABILITIES PURCHASE
ACQUIRED ASSUMED PRICE
--------- ----------- ---------
<S> <C> <C> <C>
Fiscal year 1993 $ 69,280 $ 45,749 $ 23,531
--------- ----------- ---------
--------- ----------- ---------
Fiscal year 1995 $ 21,518 $ 5,159 $ 16,359
--------- ----------- ---------
--------- ----------- ---------
</TABLE>

Of the acquisitions during fiscal year 1995, the Company financed a portion
of the aggregate purchase price through the issuance of $3.3 million of
seller-financed notes and 78,000 shares (65,000 shares of which are not issuable
until February 1996) of unregistered Class A common stock. Of the acquisitions
during fiscal year 1993, $1.2 million of seller-financed notes were issued. All
acquisitions during fiscal years 1993 and 1995 have been accounted for as
purchases, all of which resulted in amounts allocated to goodwill with assigned
lives ranging from 10 years to 40 years. The results of operations of the
acquired businesses have been included in the accompanying consolidated
statements of operations from the respective acquisition dates. Included in
results of operations for the year ended June 30, 1995 is a charge to
depreciation and amortization expense of approximately $1.1 million representing
the write-off of software research and development costs purchased in two of the
acquisitions.

In December 1992, the Company purchased 64.5% of the Series B preferred
stock and 58.3% of the outstanding common stock of DAC, bringing the Company's
total investment in the outstanding common stock of DAC to 96.5%. As a result of
this step acquisition, the Company has consolidated the financial position and
results of operations of DAC since that date. The 3.5% minority interest in DAC
was converted into Class A common stock of the Company on July 5, 1994 (see Note
3). DAC owns 100% of Dataplex Corporation ("Dataplex"), a full service provider
of image capture, conversion, storage, protection, and retrieval services.

In conjunction with its acquisitions, the Company is obligated to make
certain contingent payments to former owners based on the achievement of
specified profit levels. As of June 30, 1995, the maximum aggregate amount of
these contingent payments is approximately $8.7 million. Any such payments would
result in a corresponding increase in goodwill; however, no such contingent
payments have been earned to date.

F-11
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. ACQUISITIONS (CONTINUED)
Assuming the acquisitions made during fiscal year 1995 had occurred as of
July 1, 1993, pro forma unaudited condensed consolidated results of operations
would be approximately as follows (in thousands except per share amounts):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------
1994 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
Revenues from continuing operations.......................................... $ 298,776 $ 330,044
---------- ----------
---------- ----------
Operating income from continuing operations.................................. $ 26,356 $ 32,917
---------- ----------
---------- ----------
Income from continuing operations............................................ $ 12,268 $ 18,086
---------- ----------
---------- ----------
Earnings per common and common equivalent share.............................. $ 1.07 $ 1.41
---------- ----------
---------- ----------
Weighted average shares outstanding.......................................... 11,491 12,847
---------- ----------
---------- ----------
</TABLE>

This pro forma information is not necessarily indicative of the actual
results that would have been achieved had these acquisitions occurred as of July
1, 1993 and is not necessarily indicative of future results.

F-12
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. MARKETABLE SECURITIES
The Company's marketable securities, which were recorded at the lower of
cost or market and included in current assets, consisted primarily of investment
grade bonds held with the intent to sell prior to maturity. During fiscal year
1995, the Company disposed of its marketable securities at prices approximating
book value. At June 30, 1994, such investments were carried at their market
value of $14,223,000. Included in income from continuing operations for the year
ended June 30, 1994 was an impairment in value of approximately $746,000.
Realized gains and losses from sales of these securities were immaterial for the
years ended June 30, 1993 and 1994.

7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
----------------------
1994 1995
---------- ----------
<S> <C> <C>
Land......................................................................... $ 275 $ 343
Buildings.................................................................... 1,028 1,340
Computer equipment........................................................... 10,582 14,864
Leasehold improvements....................................................... 3,889 5,544
Furniture and fixtures....................................................... 11,803 16,080
Operating systems software................................................... 7,662 10,149
Construction in progress..................................................... 69 371
---------- ----------
35,308 48,691
Accumulated depreciation and amortization.................................... (19,769) (25,228)
---------- ----------
$ 15,539 $ 23,463
---------- ----------
---------- ----------
</TABLE>

In connection with an outsourcing contract signed in March 1994, the Company
acquired assets with a fair market value of $3,952,000, including property and
equipment of $1,205,000, and assumed liabilities of $1,450,000. The net
consideration received of $2,502,000 has been recorded as unearned revenue, and
both the revenue and the depreciation expense are being recognized ratably over
the three-year term of the outsourcing contract.

In connection with an outsourcing contract signed in March 1995, the Company
acquired assets with a fair market value of approximately $2,521,000, including
property, equipment and computer software of $2,237,000. Liabilities assumed
were $35,000, and unearned revenue of $2,486,000 was recorded which will be
recognized ratably over a three-year period.

8. LONG-TERM INVESTMENTS
In January 1992, the Company paid $7,500,000 in connection with signing a
long-term data processing contract and the acquisition of 7,500 shares of a
customer's Class C preferred stock. The amounts allocated to the preferred stock
(included in long-term investments) and the customer contract (included in other
intangible assets), based on an independent appraisal, were $3,220,000 and
$4,280,000, respectively, as of the date of purchase. The preferred stock is not
considered by management to be a marketable equity security, and as such, is
accounted for at cost. The preferred stock accrues quarterly dividends in years
one through five of 10%, if paid through in-kind shares, or 9% if paid in cash.
Dividends in years six through ten are payable at 9% in cash. The stock is
required to be redeemed in four equal amounts during the tenth year of the data
processing contract. Through June 30, 1995, the customer's quarterly dividends
have been paid in-kind with additional shares of preferred stock.

F-13
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. LONG-TERM DEBT
A summary of long-term debt follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Secured $90,000 revolving credit agreement, payable to a bank, interest due
monthly at LIBOR plus 0.5% to 1.25%, or the bank's base rate, as elected by
the Company. Principal reductions are required in varying amounts from June
1996 through March 1999, which reduce the outstanding indebtedness to $50,000
with the remainder due in June 1999 (A)(B).................................... $ 38,437 $ 16,237
Secured $12,000 ($15,000 at June 30, 1994) revolving ATM cash credit agreement,
payable to a bank, due in June 1996, interest due quarterly at the bank's
overnight interest rate plus 0.5%, collateralized by subsidiaries' stock and
substantially all of their assets. Proceeds are restricted for use in
Company-owned ATMs. The Company intends to refinance this facility prior to
its due date (A)(B)........................................................... 14,800 8,250
Senior subordinated note payable, due December 1999, interest at a six-month
average LIBOR plus 5%, repaid October 1994.................................... 10,000 --
10% junior subordinated debentures, payable to former shareholders of a
subsidiary, due January 2000, interest payable semiannually (C)............... 6,661 7,344
Other installment notes payable to individuals, final installments due July
2000, interest rates primarily at 6.5%, the majority of which are secured by
certain purchased computer software........................................... 257 2,080
Unsecured note payable to a customer, $4,437 face amount, interest at LIBOR
plus 1%, not to exceed 10% per annum, payable in monthly installments of $46
plus interest, beginning September 1994 (A)(D)................................ 4,437 3,975
Note payable to a corporation, interest at prime plus 1.5% (A)(E).............. 3,500 3,500
Note payable to a customer, $5,000 face amount, noninterest bearing for first
two years, 11.5% thereafter, payable in monthly installments of $79, scheduled
to begin June 1, 1992, settled in March 1995 (F).............................. 5,000 --
Other installment notes payable to corporations, final payments due January
1996 to February 1999, interest rates ranging from fixed at 6% to variable
based on LIBOR (A)............................................................ 713 1,900
Capitalized lease obligations at various interest rates, payable through May
1999.......................................................................... 632 417
--------- ---------
84,437 43,703
Less current portion........................................................... (4,436) (5,763)
--------- ---------
$ 80,001 $ 37,940
--------- ---------
--------- ---------
</TABLE>

F-14
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt at June 30, 1995 are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30:
- -------------------------------------------------------------------------
<S> <C>
1996..................................................................... $ 5,763
1997..................................................................... 9,641
1998..................................................................... 1,399
1999..................................................................... 17,370
2000..................................................................... 8,329
Thereafter............................................................... 1,201
---------
$ 43,703
---------
---------
</TABLE>

Interest expense of $3,196,000, $5,864,000 and $4,449,000 was incurred
during the years ended June 30, 1993, 1994 and 1995, respectively. Cash payments
for interest for the years ended June 30, 1993, 1994 and 1995 were $2,620,000,
$4,823,000 and $3,040,000, respectively. Interest income was $1,458,000,
$1,935,000 and $2,260,000 for the years ended June 30, 1993, 1994 and 1995,
respectively.

At June 30, 1995, the Company had outstanding letters of credit aggregating
approximately $9,843,000, which are being maintained primarily for performance
on contracts and as collateral for an appeal bond related to an outstanding
judgment (see Note 17).

In December 1994, the Company entered into a cash custody agreement with
First Interstate Bank ("FIB"), as amended August 1995. The agreement expires
July 31, 1997 and provides the Company with up to $50,000,000 of the financial
institution's vault cash for use in Company-owned ATMs located in Texas. This
agreement replaces a similar facility with B of A Texas which expires August 31,
1995. At June 30, 1995, approximately $9,700,000 was in use under the FIB
agreement and $32,800,000 under the B of A Texas agreement. The cash is owned by
the financial institutions and consequently not recorded on the Company's
accompanying balance sheet.

(A) Interest rates at June 30, 1995:

<TABLE>
<S> <C>
LIBOR........................................................ 6.1%
Overnight rate -- revolving ATM credit agreement............. 6.6%
Prime........................................................ 9.0%
</TABLE>

(B) The secured revolving credit agreements contain covenants which require
that the Company and a certain subsidiary comply with certain negative,
affirmative, and financial covenants customary in notes of this nature.
The secured $90,000,000 revolving credit agreement is collateralized by
the stock of all subsidiaries and the Company's accounts receivable,
inventory and equipment. The agreements contain, among other items,
restrictive covenants relating to the current ratio, minimum net worth
and fixed charge ratio, and limit payment of dividends, additional loans,
guarantees and investments by the Company and its subsidiaries. The
agreements also have provisions which would permit acceleration of the
maturity of the borrowings after the occurrence of certain defined events
of default.

(C) In January 1994, DAC issued 10% junior subordinated debentures in the
principal amount of $6,344,000 in exchange for all outstanding shares of
12% cumulative Series A preferred stock with equal redemption value.
Interest on the debentures is payable semiannually in cash, or by issuing
additional debentures (this option expired June 1995). The Company
elected to pay interest for the six months ended June 30, 1994 and for
the year ended June 30, 1995 by issuing additional debentures on a pro
rata basis such that the aggregate principal amount of the additional
exchange

F-15
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. LONG-TERM DEBT (CONTINUED)
debentures issued, $317,000 and $681,000, respectively, equaled the
amount of the interest payment if payments had been made in cash. The
debentures are redeemable at their face amount, plus accrued and unpaid
interest, at the option of the Company.

(D) In connection with a data processing services agreement signed in
September 1992, the Company purchased certain data processing equipment
from a customer in exchange for a $4,437,000 ten-year note payable. The
fair market value of the data processing equipment was estimated to be
$1,260,000, based on an independent estimate, of which $596,000 was
subsequently sold by the Company. The remaining amount of $3,177,000 has
been allocated to other intangible assets and is being amortized over the
term of the data processing contract.

(E) The Company's $3,500,000 note payable to a corporation is an obligation
of ACS Government Services, Inc. ("ACSGS"), a subsidiary of the Company.
The corporation has recourse only to ACSGS. ACSGS has ceased making
payments under the note, and ACSGS and the corporation are in dispute
over whether the current outstanding balance of the note is owed. The
note is secured by certain software developed by ACSGS, a copy of which
has been given to the corporation. Costs incurred to develop this
software have been expensed and, accordingly, the collateral does not
relate to recorded assets of the Company at June 30, 1995. The note
balance is fully recorded as a current liability at June 30, 1995 due to
the uncertainty regarding the final outcome of this matter.

(F) In connection with a data processing agreement signed in June 1990 with
International Telecharge, Inc. ("ITI"), the Company purchased certain
software from ITI for $3,977,000. This purchase was financed through a
ten-year promissory note with the customer at a face amount of
$5,000,000, but discounted to $3,977,000 due to the non-interest-bearing
nature of the note for the first two years. Beginning in January 1992,
ITI ceased payments for services provided under the data processing
contract. In February 1992, the Company became involved in litigation
with ITI following a change in ownership of ITI and termination of the
Company's outsourcing contract with ITI. The Company entered into an
agreement, effective March 31, 1995, with Oncor Communications, Inc.
("OCI") (formerly known as ITI) to settle the litigation initiated in
1992. In exchange for certain payments by OCI to the Company, the
dismissal of all claims against the Company and the settlement of the
note payable by the Company, the Company agreed to dismiss all
counterclaims it had alleged against OCI and OCI's Chairman and Chief
Executive Officer.

10. INCOME TAXES
Income tax expense (benefit) from continuing operations is comprised of the
following (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal.............................................................. $ 7,570 $ 10,658 $ 11,302
State................................................................ 1,410 1,996 2,903
Tax reduction credited to paid-in capital from exercise of stock
options............................................................. -- -- 5,142
--------- --------- ---------
Total current expense.............................................. 8,980 12,654 19,347
--------- --------- ---------
Deferred:
Federal.............................................................. (2,211) (3,706) (6,079)
State................................................................ (332) (661) (1,085)
--------- --------- ---------
Total deferred benefits............................................ (2,543) (4,367) (7,164)
--------- --------- ---------
Total expense for income taxes..................................... $ 6,437 $ 8,287 $ 12,183
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-16
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. INCOME TAXES (CONTINUED)
At June 30, 1995, the Company had available unused net operating loss
carryforwards ("NOLs") of approximately $237,000 which expire in years 1999
through 2002. The NOLs are subject to the limitations imposed by Internal
Revenue Code Section 382, which limits the Company's ability to use the tax
benefit arising from the operations of any of its subsidiaries prior to their
acquisition by the Company. The net operating losses are stated net of their
valuation reserve due to Section 382 limitations which will prevent any
additional utilization and are included in the long-term deferred tax account.
The utilization of prior NOLs and other built-in tax deductions from acquired
companies have reduced goodwill by $0, $214,000 and $0 for the years ended June
30, 1993, 1994 and 1995, respectively.

At June 30, 1995, the Company had a total unused capital loss carryforward
of approximately $4,904,000, which will expire in 1998. Due to Section 382
limitations, a maximum of approximately $842,000 of the total loss is eligible
for use before expiration of the carryforward period. The loss carryforward has
been fully reserved due to capital loss restrictions.

The Company's deferred tax assets and (liabilities) consist of the following
(in thousands):

<TABLE>
<CAPTION>
JUNE 30,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Accrued expenses not yet deductible for tax purposes............................. $ 7,363 $ 13,406
Stock option compensation expense................................................ 781 558
Loss carryforwards............................................................... 863 877
Investment basis differences..................................................... 718 662
Other............................................................................ 228 244
--------- ---------
Total deferred tax assets...................................................... 9,953 15,747
--------- ---------
Deferred tax liabilities:
Depreciation and amortization.................................................... (2,017) (2,140)
--------- ---------
Deferred tax assets valuation allowance............................................ (779) (779)
--------- ---------
Net deferred tax assets............................................................ $ 7,157 $ 12,828
--------- ---------
--------- ---------
</TABLE>

The valuation allowance at June 30, 1995 exists principally due to tax
benefits of acquired corporations for which realization of any future benefit
would be uncertain due to Section 382 limitations. The valuation allowance for
deferred tax assets decreased by $190,000 during the year ended June 30, 1994.
The decrease relates to improvements in the facts and circumstances with respect
to the realization of future tax benefits of certain investments which cause
such realizations to be more likely than not.

Income tax expense from continuing operations varies from the amount
computed by applying the statutory federal income tax rate to income before
income taxes. The reasons for this difference are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Income tax expense at the federal statutory rate.......................... $ 5,357 $ 7,074 $ 10,425
Increase (decrease) resulting from:
Excess of book basis over tax basis of acquired companies............... 273 496 553
State income taxes (net of federal benefit)............................. 711 868 1,275
Other................................................................... 96 (151) (70)
--------- --------- ---------
Total expense for income taxes............................................ $ 6,437 $ 8,287 $ 12,183
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-17
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. INCOME TAXES (CONTINUED)
Federal and state income tax payments during the years ended June 30, 1993,
1994 and 1995 were $10,617,000, $11,782,000 and $15,697,000, respectively.

11. CUMULATIVE REDEEMABLE PREFERRED STOCK
A former subsidiary of the Company, which was subsequently merged into
Services, issued, in connection with an acquisition on January 1, 1989, 1,000
shares of cumulative preferred stock with a par value of $1 and a subscription
value of $1,100 per share (1,000 shares authorized). In connection with the
merger of the former subsidiary into Services, the stock was canceled and
reissued in the name of Services. The issue is redeemable through January 1999
at the subscription value plus accrued and unpaid dividends, and is subject to
mandatory redemption in January 1999. Cumulative dividends began accruing in
January 1992 at a rate of 8% per annum and are paid quarterly. When Services
merged with the Company in the Reorganization (see Note 3), the preferred stock
of Services was exchanged for Series A preferred stock of the Company (1,000
shares authorized). The preferred stock exchanged carries similar terms, except
that the newly issued preferred stock has a dividend rate of 9%, a sinking fund
requirement for quarterly deposits through June 30, 1999, a right to convert
such shares into Class A common stock (36,066 shares using the June 30, 1995
market price) after July 15, 1996 based on the closing price of Class A common
stock ten days after notice of conversion, and a right to cause the Company to
register such shares of Class A common stock for public sale between July 15,
1996 and September 15, 1996.

12. COMMON STOCK
As of June 30, 1995 and reflecting changes to the Company's capital
structure due to the Offering and the Reorganization (see Note 3), the Company's
combined Class A and Class B stock consisted of 22,000,000 shares authorized, of
which 17,195,742 were Class A common shares and 4,804,258 were Class B common
shares. As of June 30, 1995, 8,487,598 shares and 4,804,258 shares,
respectively, were outstanding, each with a par value of $0.01 per share.
Effective July 3, 1995, one of the holders of Class B common stock elected to
convert 1,601,415 shares of Class B common stock to the same number of Class A
shares. Class B shares, which are entitled to ten votes per share, are
convertible, at the holder's option, into Class A shares, but until converted
carry significant transfer restrictions.

Proceeds from the Company's Offering totalled $32.2 million, net of $4.6
million of Offering costs ($1.1 million of which were prepaid in fiscal 1994).

In connection with an acquisition in January 1995, the Company is required
to issue 65,000 shares of Class A common stock in February 1996 to the sellers
(see Note 5).

In January 1989, the Company issued warrants to purchase 396,594 additional
shares of Class A common stock (the number of shares reflects the
Reorganization) to a data processing customer. The warrants are exercisable at
an aggregate price of $4,700,000 plus $230,000 for each year that elapses after
December 31, 1988, plus interest at 10% per annum. At June 30, 1995, the
exercise price was $26.73 per share. Beginning in January 1996, shares may be
purchased in increments through January 1999, the date on which the warrant
agreement expires.

13. STOCK OPTION PLANS
Effective September 2, 1988, the Company established a nonqualified
compensatory stock option plan for certain of its employees. The plan was
amended and restated on May 24, 1994. Under the amended plan, the Company has
reserved 1,850,000 shares of Class A common stock (as adjusted to give effect to
the Reorganization) for awards to employees at exercise prices determined by the
Board of Directors of the Company. Options generally vest over five years and
are exercisable over a five to ten year period from the date of the grant.
Options expire the earlier of ten years from the date of grant or three years
after an initial public offering.

F-18
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. STOCK OPTION PLANS (CONTINUED)
The Company recognized $680,000 of compensation expense for the year ended
June 30, 1995, primarily from the issuance of stock options to certain key
employees where the option exercise price was below the market price of the
Company's Class A common stock on the day prior to issuance. For the year ended
June 30, 1994, the Company recognized $750,000 of compensation expense relating
to stock option grants and a repricing of certain existing stock options. The
amount of the expense was determined based upon the difference between the
granted and repriced option exercise prices and the fair value of the underlying
stock at the time.

As described in Note 3, outstanding options of Services and DAC were
converted to options to purchase stock of the Company upon the merger of those
subsidiaries into the Company. Therefore, these options are included in the
following presentation on an "as converted" basis. Prior to the conversion,
Services had approximately 81,000 options outstanding with exercise prices
ranging from $.02 to $102.71 per share and DAC had approximately 72,000 options
outstanding with exercise prices ranging from $.10 to $1.85 per share. In
general, the Services and DAC options vested over five years, were exercisable
over ten years from the date of grant and expired ten years from the date of
grant.

Option activity for the years ended June 30, 1993, 1994 and 1995 is
summarized as follows:

<TABLE>
<CAPTION>
OPTION PRICE
OPTIONS PER SHARE
---------- ------------------
<S> <C> <C>
Outstanding at June 30, 1992.......................................... 1,305,458 $.01 -- $1.43
Granted............................................................. 126,572 $.22 -- $9.55
Exercised........................................................... (330,690) $.07
Forfeited........................................................... (3,712) $.05
----------
Outstanding at June 30, 1993.......................................... 1,097,628 $.01 -- $9.55
Granted............................................................. 32,280 $1.43
Canceled............................................................ (29,368) $.15 -- $9.55
----------
Outstanding at June 30, 1994.......................................... 1,100,540 $.01 -- $9.55
Granted............................................................. 416,184 $16.00 -- $22.50
Exercised........................................................... (579,061) $.01 -- $9.54
Canceled............................................................ (56,269) $.01 -- $16.00
----------
Outstanding at June 30, 1995.......................................... 881,394 $.01 -- $22.50
----------
----------
Exercisable at June 30, 1995.......................................... 471,210 $.01 -- $2.66
----------
----------
</TABLE>

14. FINANCIAL INSTRUMENTS
As of June 30, 1994 and 1995, the fair values of the Company's revolving
credit balances and other variable-rate debt instruments approximate the related
carrying values. The fair values of the Company's fixed-rate debt also
approximate the related carrying values, as determined based upon relative
changes in the Company's variable borrowing rates, whether the borrowings
occurred recently or if the borrowings were repaid after the fiscal year ended.

The fair value of the cumulative redeemable preferred stock is deemed to
approximate book value as it is the Company's intent to redeem this over the
next year.

15. PROFIT SHARING PLAN
The Company has adopted a 401(k) plan, as defined by the United States
Internal Revenue Code, whereby participants may contribute a percentage of
compensation. The plan provides for a discretionary matching contribution by the
Company as determined by the Board of Directors. There were no contributions
made by the Company to the plan during the years ended June 30, 1993, 1994 and
1995.

F-19
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company provides services to a
corporation which is a stockholder and warrant holder of Class A common stock.
Revenues earned from this stockholder were 6%, 4% and 3% of total revenues for
the years ended June 30, 1993, 1994 and 1995, respectively. Trade receivables
from this stockholder aggregated $1,652,000 and $1,726,000 at June 30, 1994 and
1995, respectively.

In March 1994, the Company paid $4,900 to acquire a 49% interest in
TransFirst, Inc. ("TransFirst"), a minority-owned provider of data processing
and electronic benefits services for state and local governments. Concurrently,
the Company sold TransFirst two existing service contracts in exchange for notes
receivable totaling $2,200,000. The notes bear interest at a bank's prime rate
and are due in a lump-sum payment in February 2004. The Company accounts for its
investment on the equity method. Equity earnings for the year ended June 30,
1995 and for the period from March 1994 to June 1994 were not significant.

17. COMMITMENTS AND CONTINGENCIES
The Company has various operating lease agreements for data processing
equipment and facilities. A summary of the lease commitments under noncancelable
operating leases at June 30, 1995, is as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30:
- ---------------------------------------------------------------------------------------------
<S> <C>
1996......................................................................................... $ 31,928
1997......................................................................................... 24,999
1998......................................................................................... 17,969
1999......................................................................................... 11,052
2000......................................................................................... 2,869
Thereafter................................................................................... 394
---------
$ 89,211
---------
---------
</TABLE>

Lease expense for data processing equipment and facilities was $24,041,000,
$32,903,000 and $36,894,000 for the years ended June 30, 1993, 1994 and 1995,
respectively.

In December 1992, a judgment was rendered against the Company, jointly and
severally with certain other affiliated defendants, in the amount of
approximately $6,500,000. The Company has posted an appeal bond for the amount
of the judgment plus required post judgment interest (see Note 9). In fiscal
1993 and 1995, the Company recorded a charge in "Other operating expenses" for
an amount which it believes is adequate to sustain any loss in settlement of
this matter. The reserve is included in "Other accrued liabilities." The Company
intends to vigorously pursue its appeal of the judgment, which is pending before
the Texas Supreme Court.

The Company is subject to certain other legal proceedings, claims and
disputes which arise in the ordinary course of its business. Although the
Company cannot predict the outcomes of these legal proceedings, the Company's
management does not believe these actions will have a material adverse effect on
the Company's financial position, results of operations or liquidity. However,
if unfavorably resolved, these proceedings could have a material adverse effect
on the Company's financial position, results of operations and liquidity.

F-20
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------
FISCAL 1994 FISCAL 1995
-------------------------------------------------- -------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1993 1993 1994 1994 1994 1994 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from continuing
operations..................... $ 65,181 $ 66,538 $ 68,970 $ 70,366 $ 70,600 $ 72,338 $ 80,700
Operating income from continuing
operations..................... 6,520 5,812 6,454 6,024 7,389 7,870 7,143
Income from continuing
operations..................... 3,189 2,154 3,228 3,354 3,774 4,295 4,459
Net income...................... 3,291 2,069 3,461 3,475 3,774 4,295 4,459
Income per share from continuing
operations..................... $ .28 $ .19 $ .28 $ .29 $ .33 $ .32 $ .34
Earnings per share.............. .29 .18 .30 .31 .33 .32 .34

JUNE 30,
1995
-----------

<S> <C>
Revenues from continuing
operations..................... $ 89,543
Operating income from continuing
operations..................... 9,140
Income from continuing
operations..................... 5,076
Net income...................... 5,076
Income per share from continuing
operations..................... $ .38
Earnings per share.............. .38
</TABLE>

F-21
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
MARCH 31,
1996
----------
<S> <C>
Current assets:
Cash and cash equivalents........................................................................... $ 35,401
ATM cash............................................................................................ 8,950
Accounts receivable, net............................................................................ 58,370
Inventory........................................................................................... 10,892
Prepaid expenses and other current assets........................................................... 10,167
Deferred taxes...................................................................................... 8,162
----------
Total current assets.............................................................................. 131,942
Property and equipment, net........................................................................... 57,303
Purchased computer software, net...................................................................... 4,583
Goodwill, net......................................................................................... 87,877
Other intangible assets, net.......................................................................... 8,501
Deferred taxes........................................................................................ 8,522
Long-term investments and other assets................................................................ 6,932
----------
Total assets...................................................................................... $ 305,660
----------
----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable.................................................................................... $ 14,721
Accrued compensation and benefits................................................................... 11,525
Other accrued liabilities........................................................................... 33,904
Income taxes payable................................................................................ 1,564
ATM cash note payable............................................................................... 8,950
Current portion of long-term debt................................................................... 5,570
Current portion of unearned revenue................................................................. 11,034
----------
Total current liabilities......................................................................... 87,268
Long-term debt........................................................................................ 7,315
Unearned revenue...................................................................................... 3,435
Other long-term liabilities........................................................................... 12,544
----------
Total liabilities................................................................................. 110,562
----------
Cumulative redeemable preferred stock................................................................. 1,100
----------
Stockholders' equity:
Class A common stock................................................................................ 122
Class B common stock................................................................................ 32
Additional paid-in capital.......................................................................... 150,199
Retained earnings................................................................................... 43,645
----------
Total stockholders' equity........................................................................ 193,998
----------
Total liabilities and stockholders' equity........................................................ $ 305,660
----------
----------
</TABLE>

See notes to condensed consolidated interim financial statements.

F-22
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Revenues.................................................................................. $ 223,638 $ 279,708
---------- ----------
Expenses:
Wages and benefits...................................................................... 76,561 110,772
Services and supplies................................................................... 55,260 71,313
Rent, lease and maintenance............................................................. 58,955 55,262
Depreciation and amortization........................................................... 8,069 10,745
Other operating expenses................................................................ 2,391 3,343
---------- ----------
Total operating expenses.............................................................. 201,236 251,435
---------- ----------
Operating income........................................................................ 22,402 28,273
Interest and other expenses, net.......................................................... 1,186 614
---------- ----------
Income before income taxes.............................................................. 21,216 27,659
Income tax expense........................................................................ 8,688 11,191
---------- ----------
Net income.............................................................................. $ 12,528 $ 16,468
---------- ----------
---------- ----------
Earnings per common share................................................................. $ .99 $ 1.19
---------- ----------
---------- ----------
Weighted average shares outstanding....................................................... 12,598 13,849
---------- ----------
---------- ----------
</TABLE>

See notes to condensed consolidated interim financial statements.

F-23
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................................................. $ 12,528 $ 16,468
---------- ----------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization......................................................... 8,069 10,745
Recognition of stock option compensation.............................................. 681 45
Other................................................................................. 73 24
Changes in assets and liabilities, net of effects from acquisitions:
(Increase) decrease in ATM cash..................................................... 4,850 (700)
Increase in accounts receivable..................................................... (7,379) (7,158)
Increase in inventory............................................................... (1,070) (4,783)
Increase in prepaid expenses and other current assets............................... (1,597) (2,440)
(Increase) decrease in deferred taxes............................................... (4,972) 1,794
(Increase) decrease in other long-term assets....................................... (362) 85
Increase (decrease) in accounts payable............................................. (73) 6,357
Decrease in accrued compensation and benefits....................................... (63) (429)
Increase (decrease) in other accrued liabilities.................................... 8,402 (2,797)
Increase (decrease) in income taxes payable......................................... (1,297) 1,958
Increase (decrease) in other long-term liabilities.................................. 307 (3,957)
Increase (decrease) in unearned revenue............................................. 834 (4,198)
---------- ----------
Total adjustments..................................................................... 6,403 (5,454)
---------- ----------
Net cash provided by operating activities............................................. 18,931 11,014
---------- ----------
Cash flows from investing activities:
Sales of marketable securities.......................................................... 10,038 --
Purchases of property, equipment and computer software.................................. (8,966) (36,283)
Payments for acquisitions, net of cash acquired......................................... (7,761) (22,350)
Additions to other intangible assets and goodwill....................................... (150) (2,590)
Other................................................................................... -- (855)
---------- ----------
Net cash used for investing activities................................................ (6,839) (62,078)
---------- ----------
Cash flows from financing activities:
Net proceeds from stock offerings....................................................... 33,310 68,333
Proceeds from issuance of long-term debt................................................ -- 51,100
Repayments of long-term debt............................................................ (33,447) (77,711)
Net borrowings (repayments) of ATM debt................................................. (4,850) 700
Proceeds from stock options exercised and related tax benefits.......................... 1,719 3,144
Other................................................................................... -- (577)
---------- ----------
Net cash provided by (used for) financing activities.................................. (3,268) 44,989
---------- ----------
Net increase (decrease) in cash and cash equivalents...................................... 8,824 (6,075)
Cash and cash equivalents at beginning of period.......................................... 20,409 41,476
---------- ----------
Cash and cash equivalents at end of period................................................ $ 29,233 $ 35,401
---------- ----------
---------- ----------
</TABLE>

See notes to condensed consolidated interim financial statements.

F-24
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Affiliated
Computer Services, Inc. and its majority-owned subsidiaries (the "Company"). All
material intercompany profits, transactions and balances have been eliminated.
The Company is primarily engaged in providing information processing services.
These services include outsourcing services, professional services, electronic
funds transfer transaction processing services and image management services.

The financial information presented should be read in conjunction with the
Company's annual consolidated financial statements for the year ended June 30,
1995. The foregoing unaudited consolidated financial statements reflect all
adjustments (all of which are of a normal recurring nature) which are, in the
opinion of management, necessary for a fair presentation of the results of the
interim periods. The results for interim periods are not necessarily indicative
of results to be expected for the year.

In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation" ("SFAS 123"), was issued. This
statement requires the fair value of stock options and other stock-based
compensation issued to employees to either be included as compensation expense
in the income statement, or the pro forma effect on net income and earnings per
share of such compensation expense to be disclosed in the footnotes to the
Company's financial statements commencing with the Company's 1997 fiscal year.
The Company expects to adopt SFAS 123 on a disclosure basis only. As such,
implementation of SFAS 123 is not expected to impact the Company's consolidated
balance sheet or income statement.

2. NON-RENEWAL OF LARGEST CUSTOMER CONTRACT
On August 31, 1995, the Company's contract with its largest customer, Bank
of America Texas, N.A. ("B of A Texas"), expired pursuant to its terms. Revenues
earned from B of A Texas for the nine months ended March 31, 1995 were
approximately $27.6 million compared to revenues for the nine months ended March
31, 1996 of $4.6 million. In anticipation of the expiration of the contract,
management of the Company completed a cost savings plan implemented to reduce
direct expenses associated with this contract and other indirect infrastructure
costs of the Company.

In conjunction with the contract expiration, the Company expected to incur
various non-recurring expenses primarily associated with the termination or
renegotiation of a computer lease. Such costs were estimated to aggregate $16.1
million, of which $13.3 million had been accrued through June 30, 1995. Due to
the signing of a services contract with another customer in May 1995, the
Company determined that the computer lease would not need to be terminated or
renegotiated, as the new customer would replace computer capacity previously
utilized for the B of A Texas contract. Accordingly, the Company determined that
continuing the accrual for the computer lease was no longer necessary, and, in
September 1995, began to amortize the accrual over the remaining term of the
computer lease, which expires February 1999, at a rate of approximately $1.0
million per quarter (resulting in a $2.2 million reduction to rent, lease and
maintenance expense for the nine months ended March 31, 1996 as compared to
expense of $7.2 million for the nine months ended March 31, 1995).

3. ACQUISITIONS
During the first nine months of fiscal 1996, the Company closed six
acquisitions, none of which were individually significant. A summarization of
the acquisitions is as follows (in millions):

<TABLE>
<S> <C>
Fair value of assets acquired................................ $ 39.3
Less: Liabilities assumed.................................... 11.6
Notes issued and other liabilities to sellers........... 5.3
---------
Cash paid to sellers, net.................................... $ 22.4
---------
---------
</TABLE>

F-25
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

4. SECONDARY OFFERING
On March 29, 1996, the Company completed a secondary offering of 1.8 million
shares of Class A common stock. Proceeds received from the offering during the
quarter were $68.3 million, net of underwriters' discounts and other offering
expenses paid of $3.7 million. An additional 0.3 million shares from the
exercise of the over-allotment option of the offering were issued in April 1996
and resulted in net proceeds of approximately $10 million, which will be
recorded in the fourth quarter of this fiscal year. Proceeds of the offering
were used for the repayment of Company indebtedness and for general corporate
purposes.

F-26
<PAGE>
INDEPENDENT AUDITORS' REPORT

To The Genix Group, Inc.:

We have audited the accompanying consolidated statement of financial position of
The Genix Group, Inc. and subsidiaries ("Genix") as of December 31, 1994 and
1995, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of Genix's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Genix as of December
31, 1994 and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Detroit, Michigan
March 7, 1996

F-27
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 6a)........................................................ $ 5,669 $ 1,031
Accounts receivable, less allowance for doubtful accounts of $108 and $335 respectively.... 14,157 20,128
Accounts and interest receivable -- affiliates (Notes 6a and 6b)........................... 1,605 1,499
Prepaid assets............................................................................. 2,833 2,475
Other...................................................................................... 879 1,468
--------- ---------
Total current assets..................................................................... 25,143 26,601
--------- ---------
Property, plant and equipment (Note 3)....................................................... 44,433 50,107
Less -- accumulated depreciation........................................................... 13,525 19,390
--------- ---------
Property, plant and equipment, net......................................................... 30,908 30,717
--------- ---------
Deferred charges and other assets:
Intangibles, net of accumulated amortization of $6,388 and $7,110, respectively............ 5,068 4,347
Deferred migration costs (Note 2e)......................................................... 2,941 3,940
Deferred foreign income taxes (Note 10).................................................... 84 311
Other...................................................................................... 252 1,821
--------- ---------
Total deferred charges and other assets.................................................. 8,345 10,419
--------- ---------
Total assets............................................................................. $ 64,396 $ 67,737
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable........................................................................... $ 8,566 $ 7,576
Accounts and interest payable -- affiliates (Notes 6a and 6c).............................. 296 276
Property and other taxes payable........................................................... 435 610
Income taxes payable -- affiliate (Note 10)................................................ 436 381
Accrued wages and benefits................................................................. 1,427 1,536
Notes payable -- affiliate (Note 6a)....................................................... 1,007 29,385
Current portion of capital lease obligations (Note 4)...................................... 849 104
Other...................................................................................... 478 1,607
--------- ---------
Total current liabilities................................................................ 13,494 41,475
--------- ---------
Deferred credits and other liabilities:
Notes payable -- affiliate (Note 6a)....................................................... 21,000 --
Deferred federal income taxes (Note 10).................................................... 2,486 2,545
Other (Note 8b)............................................................................ 2,117 2,669
--------- ---------
Total deferred credits and other liabilities............................................. 25,603 5,214
--------- ---------
Capital lease obligations (Note 4)........................................................... 2,758 72
--------- ---------
Commitments (Note 5)
Common shareholder's equity:
Common stock, par value $.01 per share -- authorized 50,000 shares; 10 shares issued and
outstanding............................................................................... -- --
Additional paid-in capital................................................................. 20,039 20,037
Retained earnings.......................................................................... 2,502 939
--------- ---------
Total shareholder's equity............................................................... 22,541 20,976
--------- ---------
$ 64,396 $ 67,737
--------- ---------
--------- ---------
</TABLE>

The accompanying notes to the
consolidated financial statements are an integral part of this statement.

F-28
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Operating revenues (Notes 6b and 9):
Computing services............................................................. $ 62,415 $ 76,782 $ 91,113
Facilities operations.......................................................... 3,280 3,838 5,306
Printing operations and other.................................................. 8,696 7,617 8,742
--------- --------- ---------
Total operating revenues..................................................... 74,391 88,237 105,161
--------- --------- ---------
Operating expenses:
Operations and maintenance..................................................... 62,751 73,710 87,465
Depreciation and amortization.................................................. 4,616 5,785 6,981
Property and other taxes....................................................... 1,832 2,125 2,719
--------- --------- ---------
Total operating expenses..................................................... 69,199 81,620 97,165
--------- --------- ---------
Operating income............................................................... 5,192 6,617 7,996
--------- --------- ---------
Other income and (deductions):
Interest income................................................................ 10 155 28
Interest income -- affiliate (Note 6a)......................................... 59 271 425
Interest expense............................................................... (17) (115) (12)
Interest expense -- affiliate (Note 6a)........................................ (778) (1,290) (2,205)
Other, net..................................................................... 119 101 (23)
--------- --------- ---------
Total other income and (deductions).......................................... (607) (878) (1,787)
--------- --------- ---------
Income before income taxes..................................................... 4,585 5,739 6,209

Income tax provision (Note 10)................................................... 1,968 2,569 2,622
--------- --------- ---------
Net income..................................................................... $ 2,617 $ 3,170 $ 3,587
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes to the
consolidated financial statements are an integral part of this statement.

F-29
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1992............................................ $ -- $ 20,193 $ 5,315 $ 25,508
Net income.......................................................... -- -- 2,617 2,617
Other............................................................... -- (154) -- (154)
----- ----------- ----------- ---------
Balance, December 31, 1993............................................ -- 20,039 7,932 27,971
Net income.......................................................... -- -- 3,170 3,170
Dividends to common shareholder..................................... -- -- (8,600) (8,600)
----- ----------- ----------- ---------
Balance, December 31, 1994............................................ -- 20,039 2,502 22,541
Net income.......................................................... -- -- 3,587 3,587
Dividends to common shareholder..................................... -- -- (5,150) (5,150)
Other............................................................... -- (2) -- (2)
----- ----------- ----------- ---------
Balance, December 31, 1995............................................ $ -- $ 20,037 $ 939 $ 20,976
----- ----------- ----------- ---------
----- ----------- ----------- ---------
</TABLE>

The accompanying notes to the
consolidated financial statements are an integral part of this statement.

F-30
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income................................................................................... $ 2,617 $ 3,170 $ 3,587
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization.............................................................. 4,616 5,785 6,981
Deferred income taxes...................................................................... 2 510 (332)
Changes in assets and liabilities, exclusive of changes shown separately................... (4,686) 2,396 (7,600)
--------- --------- ---------
Net cash provided from operating activities.................................................. 2,549 11,861 2,636
--------- --------- ---------
Cash flow from financing activities:
Dividends paid............................................................................... -- (8,600) (5,150)
Payment of capital lease obligations......................................................... (90) (336) (263)
Net borrowings on notes payable -- affiliate (Note 6a)....................................... 4,612 7,007 7,378
--------- --------- ---------
Net cash provided from (used for) financing activities..................................... 4,522 (1,929) 1,965
--------- --------- ---------
Cash flow from investing activities:
Capital expenditures......................................................................... (5,064) (7,530) (9,380)
Other........................................................................................ 158 139 141
--------- --------- ---------
Net cash used for investing activities..................................................... (4,906) (7,391) (9,239)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........................................... 2,165 2,541 (4,638)
Cash and cash equivalents, at January 1........................................................ 963 3,128 5,669
--------- --------- ---------
Cash and cash equivalents, at December 31...................................................... $ 3,128 $ 5,669 $ 1,031
--------- --------- ---------
--------- --------- ---------
Changes in assets and liabilities, exclusive of changes shown separately:
Accounts receivable.......................................................................... $ (2,745) $ (322) $ (5,971)
Accounts and interest receivable -- affiliates............................................... (1,231) 832 106
Prepaid assets............................................................................... (722) 12 358
Accounts payable............................................................................. (757) 4,509 (990)
Accounts and interest payable -- affiliates.................................................. 526 (278) (20)
Income, property and other taxes payable..................................................... 486 77 120
Accrued wages and benefits................................................................... (557) 366 109
Deferred migration costs..................................................................... (630) (2,130) (999)
Other current assets and liabilities......................................................... 169 (1,089) 706
Other deferred assets and liabilities........................................................ 775 419 (1,019)
--------- --------- ---------
$ (4,686) $ 2,396 $ (7,600)
--------- --------- ---------
--------- --------- ---------
Supplemental Disclosures
Cash paid for:
Interest................................................................................... $ 770 $ 1,318 $ 2,165
--------- --------- ---------
--------- --------- ---------
Federal income taxes....................................................................... $ 1,288 $ 1,468 $ 2,283
--------- --------- ---------
--------- --------- ---------
Property purchased (disposed) under capital leases (Note 4).................................. $ -- $ 3,942 $ (3,098)
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes to the
consolidated financial statements are an integral part of this statement.

F-31
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. CORPORATE ORGANIZATION
The Genix Group, Inc., through its subsidiaries MCN Computer Services, Inc.
(MCN Computer), Genix Corporation and The Genix Group Ltd. (collectively,
"Genix"), offers computer operations management, data processing, network design
and management, large scale electronic printing and mailing, and business
process solution services primarily in the United States. The Genix Group, Inc.
is a wholly-owned subsidiary of MCN Investment Corporation (MCN Investment),
which is a wholly-owned subsidiary of MCN Corporation (MCN).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. BASIS OF PRESENTATION

The accompanying consolidated financial statements were prepared in
conformity with generally accepted accounting principles. In connection with
their preparation, management was required to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues, and expenses.
Actual results could differ from those estimates.

b. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Genix and its
wholly-owned subsidiaries. All significant intercompany transactions have been
eliminated. Certain reclassifications have been made to the prior years
statements to conform with the 1995 presentation.

c. DEPRECIATION AND AMORTIZATION

Property, plant and equipment and intangible assets are depreciated or
amortized using the straight-line method over the following estimated useful
lives:

<TABLE>
<CAPTION>
YEARS
---------
<S> <C>
Building and improvements.................................................. 30-35
Computer and other equipment............................................... 1-10
Leasehold improvements..................................................... 16
Furniture, fixtures and other.............................................. 2.5-10
Noncompete covenant........................................................ 5
Goodwill................................................................... 40
</TABLE>

During 1995, Genix fully amortized the noncompete covenant which it had
originally recorded in 1990.

d. SOFTWARE COSTS

The cost of specialized software acquired to support a customer under a
service contract is capitalized to better match expenses with revenues earned.
Amortization is provided using the straight-line method over the term of the
related customer contract which ranges from 1 to 5 years.

e. MIGRATION COSTS

Genix defers certain contract costs relating to the migration of new
customers into its data centers. Amortization is provided using the
straight-line method over the term of the related customer contract which ranges
from 1 to 7 years.

f. STATEMENT OF CASH FLOWS

For purposes of this statement, Genix considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.

F-32
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost and consists of the
following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Land.......................................................... $ 1,581 $ 1,581
Building and improvements..................................... 9,779 12,687
Computer and other equipment.................................. 20,492 21,868
Leasehold improvements........................................ 4,991 5,200
Capitalized software.......................................... 4,853 5,596
Furniture, fixtures and other................................. 2,731 3,175
Construction in progress...................................... 6 --
--------- ---------
$ 44,433 $ 50,107
--------- ---------
--------- ---------
</TABLE>

Maintenance and repairs are charged to operating expense; major additions
and improvements are capitalized. The amount of accumulated amortization for
capitalized software at December 31, 1994 and 1995 was $2,582,000 and
$3,345,000, respectively. Capitalized software amortized for 1993, 1994 and 1995
was $790,000, $885,000 and $1,013,000, respectively.

4. LEASING ARRANGEMENTS
Genix leases a data center and computer equipment under several
noncancellable lease arrangements expiring on various dates through 2010.
Certain leases provide that Genix pay taxes, maintenance and insurance costs on
the leased equipment.

In 1995, Genix renegotiated various capital lease agreements resulting in
their classification as operating leases. At December 31, 1995, capital lease
obligations were not significant. Future annual minimum rental payments required
under noncancelable operating leases at December 31, 1995 are as follows (in
thousands):

<TABLE>
<S> <C>
1996....................................................... $ 17,191
1997....................................................... 14,397
1998....................................................... 9,830
1999....................................................... 5,093
2000....................................................... 1,162
2001 and thereafter........................................ 9,047
---------
Total minimum lease payments............................... $ 56,720
---------
---------
</TABLE>

Operating lease expense for the years ended December 31, 1993, 1994 and 1995
was $14,206,000, $16,030,000 and $16,954,000, respectively.

5. COMMITMENTS
Genix has entered into long-term contracts through 2004 to obtain software
licensing rights for both internal use and for the support of client data
processing. Provisions under one such contract limit the use for clients for
which the software can be used through March 31, 1996. Under these agreements,
Genix is required to make minimum annual payments through 2004 which
cumulatively total $45,150,000. Additionally, Genix is required to make
contingent payments beginning in 1997 to the extent computer operating revenues
exceed a base amount of $89,000,000. The contingent payment ranges from 4.37% to
6.25% of annual revenues in excess of the base amount. The expense recognized in
connection with these agreements for the years ended December 31, 1994 and 1995
totaled $500,000 and $1,951,000, respectively.

F-33
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. RELATED PARTY TRANSACTIONS

a. NOTES RECEIVABLE/PAYABLE AND RELATED INTEREST

Genix is a participant in an intercompany credit agreement with MCN
Investment whereby Genix can borrow needed cash from, and loan available cash
to, MCN Investment. During 1995, the agreement was amended to allow for
increased Genix borrowings of up to $10,000,000 at MCN Investment's average
daily borrowing rate. No amounts had been loaned to MCN Investment as of
December 31, 1995. Notes receivable of $4,129,000 at December 31, 1994 are
classified as cash equivalents. Borrowings outstanding under the intercompany
credit agreement at December 31, 1994 and 1995 totaled $1,007,000 and
$9,385,000, respectively, and were at interest rates of 8.5% and 6.0%,
respectively.

Genix also has a term loan with MCN Investment that matures on December 31,
1996. The term loan was amended during 1995 to reduce the interest rate and the
level of allowed borrowing to $20,000,000. Borrowings outstanding under the term
loan at December 31, 1994 and 1995 totaled $21,000,000 and $20,000,000,
respectively, and were at interest rates of 8.0% and 6.5%, respectively.

b. ACCOUNTS RECEIVABLE AND RELATED REVENUE

Genix has a computer services agreement with MCN and Michigan Consolidated
Gas Company (MichCon, a wholly-owned subsidiary of MCN), whereby Genix provides
certain data processing and related services. Services to these affiliates
accounted for $15,340,000 (21%), $15,877,000 (18%), and $15,260,000 (15%) of
total operating revenues for the years ended December 31, 1993, 1994 and 1995,
respectively.

c. ACCOUNTS PAYABLE AND RELATED EXPENSE

Under a service agreement with MCN and affiliates, Genix receives various
services, including tax, financial and legal services. Total billings for these
services for the years ended December 31, 1993, 1994 and 1995 were $96,000,
$146,000 and $70,000, respectively.

7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Genix has estimated the fair value of its financial instruments, consisting
of notes payable to MCN Investment, using available market information and
appropriate valuation methodologies. As of December 31, 1995, the carrying
amounts approximated the related fair values. The estimated fair values were
determined based on interest rates currently available to Genix.

8. RETIREMENT BENEFITS

a. RETIREMENT SAVINGS PLAN BENEFITS

Genix has a defined contribution retirement savings plan (savings plan)
which provides for regular company contributions based upon salary and the
matching of employee contributions up to certain predefined limits. The savings
plan covers substantially all employees. Total expense under this plan was
$818,000, $1,068,000 and $1,351,000 for the years ended December 31, 1993, 1994
and 1995, respectively.

b. OTHER POSTRETIREMENT BENEFITS

Genix, with other affiliated companies, participates in health care and life
insurance benefit plans. Effective January 1993, Genix discontinued paid
benefits for its future retirees. Employees closer to retirement meeting certain
age and years of service criteria were subject to a "grandfather" clause which
allowed for partial company paid health care and life insurance benefits upon
their retirement. Persons who retired from Genix prior to 1993 will continue to
receive full company paid health care and life insurance benefits.

Effective January 1993, Genix adopted Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," which requires the use of accrual accounting for
postretirement benefits. At December 31, 1994 and 1995, Genix' accumulated

F-34
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. RETIREMENT BENEFITS (CONTINUED)
postretirement benefit obligation of the plans amounted to $1,153,000 and
$1,310,000, respectively, including the unrecognized transition obligation,
which is being amortized over 20 years. The net postretirement cost for 1993,
1994 and 1995 was $250,000, $270,000 and $256,000, respectively. The accrued
postretirement liability recognized at December 31, 1994 and 1995 was $514,000
and $770,000, respectively.

9. MAJOR CUSTOMERS
During the years ended December 31, 1993, 1994 and 1995, Genix had revenues
from two major customers which accounted for $8,064,000 (11%), $15,176,000 (17%)
and $23,065,000 (22%) of total operating revenues, respectively. Total revenues
received from these customers and MichCon (Note 6b) accounted for $23,404,000
(31%), $30,857,000 (35%) and $38,139,000 (36%) of total operating revenues for
the years ended December 31, 1993, 1994 and 1995, respectively.

10. SUMMARY OF INCOME TAXES
Effective January 1, 1993, Genix adopted SFAS No. 109, "Accounting for
Income Taxes," which supersedes SFAS No. 96. No cumulative adjustment was
necessary for the adoption of this standard because its provisions are not
materially different than those applied under the previous standard. Genix is
part of the consolidated federal income tax return of MCN. The income tax
provision or benefit of Genix is determined on an individual company basis.
Genix records taxes payable to or receivable from MCN resulting from the
inclusion of its taxable income or loss in the consolidated tax return.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Effective federal income tax rate.......................................... 36.5% 37.4% 37.0%
--------- --------- ---------
--------- --------- ---------
Income taxes consist of (in thousands):
Current provision........................................................ $ 1,966 $ 2,060 $ 2,953
Federal deferred provision............................................... (32) 594 (105)
Foreign deferred provision............................................... -- (85) (226)
Effect of change in tax rate on deferred tax provision................... 34 -- --
--------- --------- ---------
Total income taxes....................................................... $ 1,968 $ 2,569 $ 2,622
--------- --------- ---------
--------- --------- ---------
Reconciliation between statutory and actual income taxes (in thousands):
Statutory federal income tax expense at a rate of 35%.................... $ 1,605 $ 2,009 $ 2,173
Adjustments to federal income tax expense:
State and local income taxes, net...................................... 301 441 338
Other, net............................................................. 62 119 111
--------- --------- ---------
Total income taxes....................................................... $ 1,968 $ 2,569 $ 2,622
--------- --------- ---------
--------- --------- ---------
</TABLE>

Deferred tax assets and liabilities are recognized for the estimated future
tax effect of temporary differences between the tax basis of assets or
liabilities and the reported amounts in the financial statements.

F-35
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. SUMMARY OF INCOME TAXES (CONTINUED)
Deferred tax assets and liabilities are classified as current or noncurrent
according to the classification of the related assets or liabilities. The tax
effect of temporary differences that gave rise to the Company's deferred tax
assets and liabilities consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Vacation accrual and other benefits.................................................. $ 528 $ 764
Leases............................................................................... 253 265
Foreign net operating loss carryforward.............................................. 84 311
Other................................................................................ 217 216
--------- ---------
Total deferred tax assets.......................................................... 1,082 1,556
--------- ---------
Deferred tax liabilities:
Depreciation and other property related basis differences, net....................... 2,402 2,285
Deferred acquisition costs........................................................... 369 341
Deferred migration costs............................................................. 561 787
Other................................................................................ 154 216
--------- ---------
Total deferred tax liabilities..................................................... 3,486 3,629
--------- ---------
Net deferred tax liability........................................................... 2,404 2,073

Less: Net federal deferred tax (asset) liability -- current.......................... 2 (161)
Net foreign deferred tax (asset) liability -- noncurrent........................ (84) (311)
--------- ---------
Net deferred tax liability -- noncurrent........................................ $ 2,486 $ 2,545
--------- ---------
--------- ---------
</TABLE>

F-36
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
(IN THOUSANDS)
ASSETS

<TABLE>
<CAPTION>
MARCH 31,
1996
-----------
<S> <C>
Current assets:
Cash and cash equivalents............................................................................ $ 1,048
Accounts receivable -- net........................................................................... 24,115
Accounts and interest receivable -- affiliates....................................................... 2,752
Prepaid assets and other............................................................................. 5,370
-----------
Total current assets............................................................................... 33,285
-----------
Property, plant and equipment, net..................................................................... 34,787
-----------
Deferred charges and other assets:
Goodwill and other intangibles, net.................................................................. 8,599
Other................................................................................................ 1,987
-----------
Total deferred charges and other assets............................................................ 10,586
-----------
Total assets....................................................................................... $ 78,658
-----------
-----------

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable..................................................................................... $ 7,647
Accounts and interest payable -- affiliates.......................................................... 366
Notes payable -- affiliate........................................................................... 34,071
Current portion of capital lease obligations......................................................... 695
Other................................................................................................ 4,319
-----------
Total current liabilities.......................................................................... 47,098
-----------

Deferred credits and other liabilities:
Capital lease obligations............................................................................ 4,355
Deferred federal income taxes and other.............................................................. 6,594
-----------
Total deferred credits and other liabilities....................................................... 10,949
-----------
Common shareholder's equity:
Common stock......................................................................................... --
Additional paid-in capital........................................................................... 20,036
Retained earnings.................................................................................... 575
-----------
Total shareholder's equity......................................................................... 20,611
-----------
Total liabilities and shareholder's equity......................................................... $ 78,658
-----------
-----------
</TABLE>

The accompanying notes to the condensed
consolidated financial statements are an integral part of this statement.

F-37
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Operating revenues:
Computing services...................................................................... $ 22,272 $ 24,776
Facilities operations................................................................... 1,276 1,812
Printing operations and other........................................................... 2,167 2,005
--------- ---------
Total operating revenues.............................................................. 25,715 28,593
--------- ---------
Operating expenses:
Operations and maintenance.............................................................. 20,848 23,453
Lease termination charge................................................................ -- 2,353
Depreciation and amortization........................................................... 1,876 1,726
Property and other taxes................................................................ 714 911
--------- ---------
Total operating expenses.............................................................. 23,438 28,443
--------- ---------
Operating income........................................................................ 2,277 150

Other deductions, net..................................................................... (404) (725)
--------- ---------
Income (loss) before income taxes....................................................... 1,873 (575)
Income tax provision (benefit)............................................................ 844 (211)
--------- ---------
Net income (loss)....................................................................... $ 1,029 $ (364)
--------- ---------
--------- ---------
</TABLE>

The accompanying notes to the condensed
consolidated financial statements are an integral part of this statement.

F-38
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss).......................................................................... $ 1,029 $ (364)
--------- ---------
Adjustments to reconcile net income (loss) to net cash used for operating activities:
Depreciation and amortization............................................................ 1,876 1,669
Deferred income taxes.................................................................... 147 (910)
Changes in assets and liabilities, exclusive of changes shown separately................. (9,928) (4,231)
--------- ---------
Net cash used for operating activities..................................................... (6,876) (3,836)
--------- ---------
Cash flow from financing activities:
Dividends paid............................................................................. (3,000) --
Payment of capital lease obligations....................................................... (217) --
Net borrowings on notes payable -- affiliate............................................... 10,605 4,686
--------- ---------
Net cash provided from financing activities.............................................. 7,388 4,686
--------- ---------
Cash flow from investing activities:
Capital expenditures....................................................................... (1,670) (832)
Other...................................................................................... 4 (1)
--------- ---------
Net cash used for investing activities................................................... (1,666) (833)
--------- ---------
Net increase (decrease) in cash and cash equivalents......................................... (1,154) 17
Cash and cash equivalents, at January 1...................................................... 5,669 1,031
--------- ---------
Cash and cash equivalents, at March 31....................................................... $ 4,515 $ 1,048
--------- ---------
--------- ---------
Changes in assets and liabilities, exclusive of changes shown separately:
Accounts receivable -- net................................................................. $ (3,902) $ (3,987)
Accounts and interest receivable -- affiliates............................................. (959) (1,254)
Prepaid assets............................................................................. (1,538) (1,422)
Accounts payable........................................................................... (2,279) 71
Accounts and interest payable -- affiliates................................................ 19 89
Other current assets and liabilities....................................................... 201 190
Other deferred assets and liabilities...................................................... (1,470) 2,082
--------- ---------
$ (9,928) $ (4,231)
--------- ---------
--------- ---------
Supplemental Disclosures
Cash paid (refunded) for:
Interest................................................................................. $ 110 $ 581
--------- ---------
--------- ---------
Federal income taxes..................................................................... $ (45) $ (392)
--------- ---------
--------- ---------
Property purchased under capital leases.................................................... $ 2,959 $ 4,875
--------- ---------
--------- ---------
</TABLE>

The accompanying notes to the condensed
consolidated financial statements are an integral part of this statement.

F-39
<PAGE>
THE GENIX GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of The Genix
Group, Inc. and its subsidiaries, MCN Computer Services, Inc., Genix Corporation
and The Genix Group, Ltd. (collectively, "Genix"). Genix offers computer
operations management, data processing, network design and management, large
scale electronic printing and mailing, and business process solutions services,
primarily in the United States. Genix is a wholly-owned subsidiary of MCN
Investment Corporation ("MCN Investment"), which is a wholly-owned subsidiary of
MCN Corporation.

The financial information presented should be read in conjunction with the
Genix annual consolidated financial statements for the year ended December 31,
1995. The foregoing unaudited condensed consolidated financial statements
reflect all adjustments (all of which are of a normal recurring nature) which
are, in the opinion of management, necessary for a fair presentation of the
results of the interim periods. The results for interim periods are not
necessarily indicative of results to be expected for the year.

2. OPERATING LEASE
In March 1996, Genix entered into a long-term lease agreement to obtain the
latest technology in computer processing equipment. The new equipment is
anticipated to generate substantial savings in annual operating costs and
contribute to overall system efficiency and reliability. In conjunction with
entering into this new agreement, Genix terminated existing leases for equipment
that had been used to provide the same functions as the new equipment. The lease
termination resulted in a $2,353,000 non-recurring charge to operations in March
1996.

3. SUBSEQUENT EVENT
In May 1996, MCN Investment reached a definitive agreement for the sale of
Genix to Affiliated Computer Services, Inc., a leading nationwide provider of
information technology services. MCN Investment expects the transaction to be
finalized by the end of June 1996, subject to anti-trust regulatory approval.

F-40
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

The following unaudited pro forma condensed consolidated balance sheet as of
March 31, 1996 set forth below presents the financial position of the Company as
if the following transactions had occurred on March 31, 1996: (i) The
consummation of the acquisition of The Genix Group, Inc. ("Genix"); and (ii) the
consummation of this offering, including the issuance and sale of two million
shares of Common Stock by the Company and the application of the estimated net
proceeds to the Company therefrom. The unaudited pro forma condensed
consolidated balance sheet as of March 31, 1996 combines, with appropriate
adjustments, the Company's unaudited condensed consolidated balance sheet as of
March 31, 1996 and the unaudited consolidated statement of financial position of
Genix as of March 31, 1996.

The unaudited pro forma condensed consolidated statements of operations for
the nine months ended March 31, 1996 and the year ended June 30, 1995 set forth
below present the results of operations of the Company for such period and such
year as if the following transactions had occurred at the beginning of each such
period: (i) The consummation of the acquisition of Genix; (ii) the six
additional acquisitions completed during fiscal 1995 and the seven acquisitions
(excluding Genix) completed subsequent to July 1, 1995 (collectively the "Other
Acquisitions"); and (iii) the consummation of this offering including issuance
and sale of two million shares of Common Stock by the Company and the
application of the estimated net proceeds to the Company therefrom. The
unaudited pro forma condensed consolidated statement of operations for the nine
months ended March 31, 1996 combines, with appropriate adjustments, the
Company's and Genix' unaudited condensed consolidated results of operations for
the nine months ended March 31, 1996 with the unaudited results of operations of
the Other Acquisitions for the same nine month period to the extent they are not
included in the Company's results of operations. The unaudited pro forma
condensed consolidated statement of operations for the year ended June 30, 1995,
combines, with appropriate adjustments, the Company's audited consolidated
results of operations for its fiscal year ended June 30, 1995; the unaudited
consolidated results of operations for Genix for the twelve months ended June
30, 1995; and the unaudited results of operations of the Other Acquisitions for
the twelve months ended June 30, 1995 to the extent they are not included in the
Company's results of operations. Certain reclassifications were made to conform
the historical financial statements of Genix and the Other Acquisitions with the
Company's historical financial statements.

The unaudited pro forma condensed consolidated financial statements have
been prepared on the basis of preliminary assumptions and estimates. The pro
forma adjustments represent the Company's preliminary determinations of these
adjustments and are based on available information and certain assumptions the
Company considers reasonable under the circumstances. Final amounts could differ
from those set forth herein. The unaudited pro forma consolidated financial
statements may not be indicative of the results of operations that would have
been achieved if the acquisition of Genix and the Other Acquisitions and the
Offering had been effected on the dates indicated or which may be achieved in
the future. The unaudited pro forma consolidated financial statements and notes
thereto should be read in conjunction with the Company's "Selected Consolidated
Financial Data", "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the annual consolidated financial statements of
the Company and Genix appearing elsewhere herein.

F-41
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
---------------------------- AS ADJUSTED
GENIX --------------------------
ACQUISITION OFFERING
ASSETS ACS GENIX (A) ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
--------- ----------- --------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........... $ 35,401 $ 1,048 -- $ 36,449 $ 36,449
ATM cash............................ 8,950 -- -- 8,950 8,950
Accounts receivable, net............ 58,370 26,867 -- 85,237 85,237
Inventory........................... 10,892 -- -- 10,892 10,892
Prepaid expenses and other.......... 18,329 5,370 $ (400)(B) 23,299 23,299
--------- ----------- --------------- ----------- ------------- -----------
Total current assets.............. 131,942 33,285 (400) 164,827 -- 164,827
Property and equipment, net........... 57,303 34,787 (10,417)(B) 81,673 81,673
Goodwill and other intangible assets,
net.................................. 100,961 8,599 130,432(C) 239,992 239,992
Other long-term assets................ 15,454 1,987 -- 17,441 17,441
--------- ----------- --------------- ----------- ------------- -----------
Total assets...................... $ 305,660 $ 78,658 $ 119,615 $ 503,933 -- $ 503,933
--------- ----------- --------------- ----------- ------------- -----------
--------- ----------- --------------- ----------- ------------- -----------

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities........................ $ 61,714 $ 12,332 $ 13,115 (D)(F $ 87,161 $ 87,161
Notes payable, affiliate............ -- 34,071 (34,071)(E) -- --
Current portion of long-term debt... 14,520 695 -- 15,215 15,215
Current portion of unearned
revenue............................ 11,034 -- -- 11,034 11,034
--------- ----------- --------------- ----------- ------------- -----------
Total current liabilities......... 87,268 47,098 (20,956) 113,410 -- 113,410
Long-term debt........................ 7,315 4,355 137,500(E) 149,170 $ (91,470)(H) 57,700
Other long-term liabilities........... 15,979 6,594 23,682 (B)(F 46,255 -- 46,255
--------- ----------- --------------- ----------- ------------- -----------
Total liabilities................. 110,562 58,047 140,226 308,835 (91,470) 217,365
--------- ----------- --------------- ----------- ------------- -----------
Cumulative redeemable preferred
stock................................ 1,100 -- -- 1,100 1,100
--------- ----------- -----------
Stockholders' equity:
Common stock........................ 154 -- -- 154 20(H) 174
Additional paid-in capital.......... 150,199 20,036 (20,036)(G) 150,199 91,450(H) 241,649
Retained earnings................... 43,645 575 (575)(G) 43,645 -- 43,645
--------- ----------- --------------- ----------- ------------- -----------
Total stockholders' equity........ 193,998 20,611 (20,611) 193,998 91,470 285,468
--------- ----------- --------------- ----------- ------------- -----------
Total liabilities and
stockholders' equity............. $ 305,660 $ 78,658 $ 119,615 $ 503,933 -- $ 503,933
--------- ----------- --------------- ----------- ------------- -----------
--------- ----------- --------------- ----------- ------------- -----------
</TABLE>

See Notes to Pro Forma Condensed Consolidated Balance Sheet
as of March 31, 1996.

F-42
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996

(A) Information obtained from the March 31, 1996 unaudited condensed
consolidated statement of financial position of Genix. Certain amounts
reported in Genix's historical financial statements have been reclassified
to conform with the Company's presentation in the Pro Forma Condensed
Consolidated Balance Sheet.

(B) Adjusts assets and liabilities to their respective fair values.

(C) Reflects goodwill and other intangible assets originating from the Company's
purchase of all of the outstanding stock of Genix. Represents a preliminary
allocation of the excess purchase price using the purchase method of
accounting for the transaction after adjusting the assets acquired and
liabilities assumed to their respective fair values. The purchase price of
Genix could be adjusted downward by up to $41 million based upon the
occurrence of certain contingencies, which include, among other things,
adjustments arising from changes in net assets acquired, retention of
certain large customers for one to two years and tax-related matters.

(D) Reflects transaction costs associated with acquisition of Genix which are
estimated to be $1.3 million and the estimated severance costs and other
benefits of approximately $3.5 million which are to be paid as a result of
an immediate reduction in duplicate workforce.

(E) Adjusts for the Company's financing associated with the transaction and the
extinguishment of intercompany debt owed to the parent of Genix prior to the
acquisition.

(F) Reflects estimate of a liability of up to an additional $32.1 million
resulting from the acquisition of Genix. The liability is associated with a
long-term fixed obligation between Genix and a vendor that was entered into
in March 1995. As the obligation relates to duplicate services for which the
Company has already contracted, the obligation is considered to be an
unfavorable commitment, and the present value of the obligation is reflected
as a liability. Of the total liability of $32.1 million, of which $1.3
million was recorded by Genix as of March 31, 1996, $8.4 million is
reflected as a current liability. Payments related to this obligation are
payable over the remaining nine years of the contract.

(G) Eliminates the equity of Genix.

(H) Reflects an estimate of the net proceeds to be received by the Company from
this offering of 2,000,000 new shares of the Company's Class A Common Stock
at the offering price of $48.00 per share less underwriting discounts and
estimated offering expenses. Proceeds received will be used to pay down a
substantial portion of the bank debt incurred to finance the acquisition of
Genix.

F-43
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
----------------------- -----------------
GENIX OTHER OTHER
ACQUISITION ACQUISITIONS ACQUISITIONS
ACS GENIX (A) ADJUSTMENTS SUBTOTAL (G) ADJUSTMENTS (H)
--------- ----------- ------------ --------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ 279,708 $ 83,417 $ 363,125 $ 30,009 $ 170
--------- ----------- --------- ------- -----
Expenses:
Wages and benefits.................. 110,772 24,046 $ (2,810)(B) 132,008 17,678 (88)
Services and supplies............... 71,313 7,215 (450)(B) 78,078 7,042 (46)
Rent, lease and maintenance......... 55,262 36,188 (780)(C) 90,670 1,353 (1)
Lease termination charge (J)........ -- 2,353 -- 2,353 -- --
Depreciation and amortization....... 10,745 5,236 2,337(D) 18,318 1,157 (118)
Other operating expenses............ 3,343 4,324 7,667 1,323 --
--------- ----------- ------------ --------- ------- -----
Total operating expenses.......... 251,435 79,362 (1,703) 329,094 28,553 (253)
--------- ----------- ------------ --------- ------- -----
Operating income.................. 28,273 4,055 1,703 34,031 1,456 423

Interest and other expenses, net...... 614 1,616 5,377(E) 7,607 898 345
--------- ----------- ------------ --------- ------- -----
Income before income taxes........ 27,659 2,439 (3,674) 26,424 558 78

Income tax expense (benefit).......... 11,191 952 (1,580)(F) 10,563 286 145
--------- ----------- ------------ --------- ------- -----
Net income........................ $ 16,468 $ 1,487 $ (2,094) $ 15,861 $ 272 $ (67)
--------- ----------- ------------ --------- ------- -----
--------- ----------- ------------ --------- ------- -----

Earnings per common share............. $ 1.19 $ 1.15
--------- ---------
--------- ---------

Weighted average shares outstanding... 13,849 13,849
--------- ---------
--------- ---------

AS ADJUSTED
----------------------------
OFFERING
COMBINED ADJUSTMENTS (I) COMBINED
----------- --------------- -----------
<S> <C> <C> <C>
Revenues.............................. $ 393,304 $ 393,304
----------- -----------
Expenses:
Wages and benefits.................. 149,598 149,598
Services and supplies............... 85,074 85,074
Rent, lease and maintenance......... 92,022 92,022
Lease termination charge (J)........ 2,353 2,353
Depreciation and amortization....... 19,357 19,357
Other operating expenses............ 8,990 8,990
----------- ------- -----------
Total operating expenses.......... 357,394 -- 357,394
----------- ------- -----------
Operating income.................. 35,910 -- 35,910
Interest and other expenses, net...... 8,850 $ (4,600) 4,250
----------- ------- -----------
Income before income taxes........ 27,060 4,600 31,660
Income tax expense (benefit).......... 10,994 1,863 12,857
----------- ------- -----------
Net income........................ $ 16,066 $ 2,737 $ 18,803
----------- ------- -----------
----------- ------- -----------
Earnings per common share............. $ 1.16 $ 1.19
----------- -----------
----------- -----------
Weighted average shares outstanding... 13,849 2,000 15,849
----------- ------- -----------
----------- ------- -----------
</TABLE>

See Notes to Pro Forma Condensed Consolidated Statement of Operations
for the Nine Months Ended March 31, 1996.

F-44
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 1996

(A) Information obtained from the unaudited interim financial statements of
Genix for the nine months ended March 31, 1996. Certain amounts reported in
Genix's historical financial information have been reclassified to conform
with the Company's presentation in the Pro Forma Condensed Consolidated
Statement of Operations.

(B) Reflects the savings expected as a result of employee terminations (i.e.,
salary and related expenses) to be effected immediately after consummation
of the acquisition.

(D) Reflects the additional amortization of expense of approximately $2.5
million resulting from the allocation of the excess cost of the acquisition
to goodwill after recording the fair value of the assets acquired and the
liabilities assumed and the net reduction in depreciation and amortization
expense of approximately $.2 million as a result of recording Genix's assets
at their respective fair values based on a preliminary purchase price
allocation.

(E) Reflects $6.9 million in interest expense for the financing of the
transaction based upon the terms of the Company's increase in its revolving
line of credit (See "Use of Proceeds" discussed elsewhere in this
Prospectus) and a $1.5 million reduction in interest expense on intercompany
debt owed to the parent of Genix. The intercompany debt was extinguished in
connection with the consummation of the acquisition.

(F) Reflects the income tax effect for the pro forma adjustments at Genix's
effective tax rate.

(G) Other Acquisitions reflects the aggregate historical results of operations
for the seven acquisitions made by the Company during the period from July
1, 1995 through the date of this Prospectus (excluding Genix). Certain
amounts reported in the acquired companies' historical financial information
have been reclassified to conform with the Company's presentation in the Pro
Forma Condensed Consolidated Statement of Operations for the Nine Months
Ended March 31, 1996.

(H) To record the aggregate pro forma adjustments from the seven acquisitions
made by the Company during the period noted in (G). Such adjustments
represent primarily: (i) net decreases to expenses upon the consolidation of
the acquired businesses operations, including the elimination of costs
associated with the prior owners and overhead allocations by the prior
owners deemed unreasonable or excessive by the Company and not reflective of
the ongoing operations of the acquired operations, (ii) the net decrease to
depreciation and amortization expense from the allocation of the purchase
price of each acquisition to the assets and liabilities of the business
acquired, (iii) the net increase to interest expense reflecting the
financing of the transactions and minority interest expense for the less
than 100% stock acquisitions, and (iv) the related tax effect of the pro
forma adjustments.

(I) Reflects the reduction in interest expense, including related tax effect,
for the financing of the Genix acquisition upon the application of the net
proceeds to be received by the Company from this offering of 2,000,000 new
shares of the Company's Class A Common Stock at the offering price of $48.00
per share less underwriting discounts and commissions and estimated offering
expenses.

(J) In March 1996, Genix entered into a long-term lease agreement to obtain the
latest technology in computer processing equipment. The new equipment is
anticipated to generate substantial savings in annual operating costs and
contribute to overall system efficiency and reliability. In conjunction with
entering into this new agreement, Genix terminated existing leases for
equipment that had been used to provide the same functions as the new
equipment. The lease termination resulted in a $2,353,000 non-recurring
charge to operations in March 1996.

F-45
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
------------------------ ---------------
GENIX OTHER OTHER
ACQUISITION ACQUISITIONS ACQUISITION
ACS GENIX (A) ADJUSTMENTS SUBTOTAL (G) ADJUSTMENTS (H)
--------- ----------- ------------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................... $ 313,181 $ 98,592 -- $ 411,773 $ 84,578 $ 282
--------- ----------- ------------- --------- ------- -------
Expenses:
Wages and benefits....................... 106,966 26,845 $ (3,746)(B) 130,065 48,750 (17)
Services and supplies.................... 77,613 7,278 (600)(B) 84,291 24,084 (294)
Rent, lease and maintenance.............. 80,250 42,502 (1,313)(C) 121,439 4,530 208
Depreciation and amortization............ 11,847 6,721 2,710(D) 21,278 2,790 (197)
Other operating expenses................. 4,963 7,363 12,326 1,907 (527)
--------- ----------- ------------- --------- ------- -------
Total operating expenses............... 281,639 90,709 (2,949) 369,399 82,061 (827)
--------- ----------- ------------- --------- ------- -------
Operating income....................... 31,542 7,883 2,949 42,374 2,517 1,109

Interest and other expenses, net........... 1,755 1,495 7,846(E) 11,096 1,036 1,055
--------- ----------- ------------- --------- ------- -------
Income before income taxes............. 29,787 6,388 (4,897) 31,278 1,481 54

Income tax expense (benefit)............... 12,183 2,902 (2,106)(F) 12,979 646 341
--------- ----------- ------------- --------- ------- -------
Net income............................. $ 17,604 $ 3,486 $ (2,791) $ 18,299 $ 835 $ (287)
--------- ----------- ------------- --------- ------- -------
--------- ----------- ------------- --------- ------- -------

Earnings per common share.................. $ 1.37 $ 1.43
--------- ---------
--------- ---------

Weighted average shares outstanding........ 12,808 12,808
--------- ---------
--------- ---------

AS ADJUSTED
----------------------------
OFFERING
COMBINED ADJUSTMENTS (I) COMBINED
----------- --------------- -----------
<S> <C> <C> <C>
Revenues................................... $ 496,633 $ 496,633
----------- -----------
Expenses:
Wages and benefits....................... 178,798 178,798
Services and supplies.................... 108,081 108,081
Rent, lease and maintenance.............. 126,177 126,177
Depreciation and amortization............ 23,871 23,871
Other operating expenses................. 13,706 13,706
----------- ------- -----------
Total operating expenses............... 450,633 -- 450,633
----------- ------- -----------
Operating income....................... 46,000 -- 46,000
Interest and other expenses, net........... 13,187 $ (6,317) 6,870
----------- ------- -----------
Income before income taxes............. 32,813 6,317 39,130
Income tax expense (benefit)............... 13,966 2,584 16,550
----------- ------- -----------
Net income............................. $ 18,847 $ 3,733 $ 22,580
----------- ------- -----------
----------- ------- -----------
Earnings per common share.................. $ 1.47 $ 1.52
----------- -----------
----------- -----------
Weighted average shares outstanding........ 12,808 2,000 14,808
----------- ------- -----------
----------- ------- -----------
</TABLE>

See Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended June 30, 1995.

F-46
<PAGE>
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995

(A) Information obtained from the unaudited financial statements of Genix for
the twelve months ended June 30, 1995. Certain amounts reported in Genix's
historical financial information have been reclassified to conform with the
Company's presentation in the Pro Forma Condensed Consolidated Statement of
Operations.

(B) Reflects savings expected as a result of employee terminations (i.e., salary
and related expenses) to be effected immediately after consummation of the
acquisition.

(D) Reflects the additional amortization of expense of approximately $3.4
million resulting from the allocation of the excess cost of the acquisition
to goodwill after recording the fair value of the assets acquired and the
liabilities assumed and the net reduction in depreciation and amortization
expense of approximately $0.7 million as a result of recording the Genix's
assets at their respective fair values based on a preliminary purchase price
allocation.

(E) Reflects $9.5 million in interest expense for the financing of the
transaction based upon the terms of the Company's increase in its revolving
line of credit (See "Use of Proceeds" included elsewhere in this Prospectus)
and a $1.7 million reduction in interest expense on intercompany debt owed
to the parent of Genix. The intercompany debt was extinguished in connection
with the consummation of the acquisition.

(F) Reflects the income tax effect for the pro forma adjustments at Genix's
effective tax rate.

(G) Other Acquisitions reflects the aggregate historical results of operations
for the thirteen acquisitions made by the Company during the period from
July 1, 1994 through the date of this Prospectus (excluding Genix). Certain
amounts reported in the acquired companies' historical financial information
have been reclassified to conform with the Company's presentation in the Pro
Forma Condensed Consolidated Statement of Operations For the Year Ended June
30, 1995.

(H) To record the aggregate pro forma adjustments from the thirteen acquisitions
made by the Company during the period noted in (G). Such adjustments
represent primarily: (i) net decreases to expenses upon the consolidation of
the acquired businesses' operations, including the elimination of costs
associated with the prior owners and overhead allocations by the prior
owners deemed unreasonable or excessive by the Company and not reflective of
the ongoing operations of the acquired operations, (ii) the net decrease to
depreciation and amortization expense from the allocation of the purchase
price of each acquisition to the assets and liabilities of the businesses
acquired, (iii) the net increase to interest expense reflecting the
financing of the transactions and minority interest expense for the less
than 100% stock acquisitions, and (iv) the related tax effect of the pro
forma adjustments.

F-47
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Information by
Reference..................................... 2
Prospectus Summary............................. 3
Risk Factors................................... 6
Disclosure Regarding Forward-Looking
Statements.................................... 9
Use of Proceeds................................ 10
Price Range of Class A Common Stock and
Dividend Policy............................... 10
Capitalization................................. 11
The Acquisition................................ 12
Selected Consolidated Financial Data........... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 14
Business....................................... 20
Management..................................... 31
Principal and Selling Stockholders............. 33
Reorganization................................. 35
Description of Capital Stock................... 37
Underwriting................................... 42
Legal Matters.................................. 43
Experts........................................ 43
Index to Consolidated Financial
Statements.................................... F-1
</TABLE>

4,027,500 SHARES

AFFILIATED COMPUTER
SERVICES, INC.

[LOGO]

CLASS A
COMMON STOCK
----------------

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

BEAR, STEARNS & CO. INC.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

HAMBRECHT & QUIST
JUNE 24, 1996

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