MPSI SYSTEMS INC, POS AM, 1995-12-22

MPSI SYSTEMS INC
POS AM, 1995-12-22
PREPACKAGED SOFTWARE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1995

REGISTRATION NO. 33-76286
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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POST-EFFECTIVE

AMENDMENT NO. 3

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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MPSI SYSTEMS INC.

(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization)
7389
(Primary standard industrial
classification code number)
73-1064024
(I.R.S. Employer
Identification No.)

8282 SOUTH MEMORIAL DRIVE
TULSA, OKLAHOMA 74133
(918) 250-9611

(Address, including zip code, and telephone number, including area code of
registrant's principal executive offices)

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COPIES TO:

<TABLE>
<S> <C>
RONALD G. HARPER STEPHEN W. RAY
8282 SOUTH MEMORIAL DRIVE HALL, ESTILL, HARDWICK, GABLE,
TULSA, OKLAHOMA 74133 GOLDEN & NELSON, P.C.
(918) 250-9611 320 SOUTH BOSTON AVE., SUITE 400
(Name, address and TULSA, OKLAHOMA 74103-3708
telephone number (918) 594-0400
of agent for service)
</TABLE>

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This Registration Statement shall hereafter become effective in accordance
with the provisions of Section 8(c) of the Securities Act of 1933.

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<PAGE> 2

MPSI SYSTEMS INC.

CROSS-REFERENCE SHEET FURNISHED PURSUANT TO ITEM 501 OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS HEADING
- -------- ------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Facing Sheet; Outside Front Cover
Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front and Outside Back Cover
Pages; Available Information
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges................. Outside Front Cover Page; Prospectus
Summary; The Company; Risk Factors
4. Use of Proceeds.............................. Use of Proceeds
5. Determination of Offering Price.............. Plan of Distribution
6. Dilution..................................... Not Applicable
7. Selling Security Holders..................... Recapitalization Transaction; Plan
of Distribution
8. Plan of Distribution......................... Outside Front Cover Page; Plan of
Distribution
9. Description of Securities to be Registered... Outside Front Cover Page; Prospectus
Summary; Recapitalization
Transaction; Description of Capital
Stock; Stock Ownership of Certain
Beneficial Owners and Management
10. Interests of Named Experts and Counsel....... Legal Matters; Experts
11. Information with Respect to the Registrant... Outside Front Cover Page; Prospectus
Summary; The Company; Risk Factors;
Recapitalization Transaction; Plan
of Distribution; Description of
Capital Stock; Business; Market
Information for MPSI Common Stock;
Selected Financial Data;
Management's Discussion and Analysis
of Financial Condition and Results
of Operations; Directors and
Executive Officers of MPSI; Stock
Ownership of Certain Beneficial
Owners and Management; Executive
Compensation; Certain Transactions;
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Indemnification
</TABLE>
<PAGE> 3

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.

AMENDED PROSPECTUS

<TABLE>
<S> <C> <C>
1,780,436 SHARES
MPSI SYSTEMS INC.
LOGO COMMON STOCK
(PAR VALUE $0.05)
</TABLE>

All of the shares of $0.05 par value Common Stock ("Common Stock") offered
hereby are being sold for the account of certain security holders ("Selling
Stockholders") of MPSI Systems Inc. ("MPSI" or the "Company"). The Company will
not receive any proceeds from this offering. The Company's President owns or
controls approximately 43% of the outstanding Common Stock.

SEE "RISK FACTORS" FOR A DISCUSSION OF RISK FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.

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

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

UNDERWRITING
DISCOUNTS PROCEEDS TO THE
PRICES TO PUBLIC AND COMMISSIONS(2) COMPANY(3)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Prevailing
Per Share........................ Market Value(1) Not Applicable Not Applicable
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>

(1) The shares will be sold at prevailing prices from time to time by the
Selling Stockholders. See "Plan of Distribution." The Common Stock of the
Company is traded on the NASDAQ SmallCap Market(TM) under the symbol
"MPSI". On November 30, 1995, the per share bid and offer quotations for
the Common Stock were $4.75 and $6.25, respectively. See "Market
Information for MPSI Common Stock."

(2) There is no underwriter with respect to this offering and each Selling
Stockholder will be determining the timing of sales of shares made pursuant
hereto. Broker-Dealers acting as agents for Selling Stockholders in
effecting sales hereunder will realize usual and customary brokerage
commissions.

(3) The Company will realize no proceeds from this offering. The expenses of
this offering, estimated to be approximately $202,000, inclusive of the
registration fee for the shares, are being paid by the Company.

It is anticipated that the Selling Stockholders may from time to time sell
all or a part of the shares of Common Stock covered by this Amended Prospectus
("Prospectus") in ordinary brokerage or principal transactions at prices
prevailing at the time of sale. Upon any sale of the shares of Common Stock
offered hereby, Selling Stockholders, brokers executing sales orders on their
behalf and dealers to whom such persons or entities may sell such shares may,
under certain circumstances, be deemed to be "underwriters" within the meaning
of the Securities Act of 1933, as amended (the "1933 Act").

BROKER-DEALERS EFFECTING SALES OF SHARES OF COMMON STOCK PURSUANT TO THIS
PROSPECTUS SHOULD CAREFULLY REVIEW THE RESTRICTIONS ON THE USE HEREOF AND THE
MANNER OF SELLING AS DESCRIBED IN "PLAN OF DISTRIBUTION."

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

The date of this Amended Prospectus is .
<PAGE> 4

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files periodic
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such periodic reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at 7 World Trade Center,
13th Floor, New York, New York 10048, and Citicorp Center, 500 W. Madison
Street, Suite 1400, Chicago, Illinois 60621. Copies of such material may be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549.

The Company's Common Stock is traded on The NASDAQ SmallCap Market(TM).
Reports and other information pertaining to the Company may be inspected at the
NASD Public Reference Room located at 1735 K Street, N.W., Washington, D.C.

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Act with respect to the shares of Common Stock offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information pertaining to the Company and Common Stock, reference is made to
such Registration Statement and the exhibits and schedules thereto, which may be
inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of which may be obtained from the
Public Reference Section of the Commission at prescribed rates.

<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the detailed
information and the Consolidated Financial Statements, including notes,
appearing elsewhere in this Prospectus.

THE COMPANY

The Company develops and markets proprietary computer applications software
and related geographically specific information data bases used by petroleum
companies and other multi-outlet retailers for strategic planning in specified
geographic market areas. Together, this software and the related data bases
construct a mathematical model of a retail market, allowing the Company's
clients to anticipate changes in both the supply and demand variables of that
market in order to forecast profitability of retail outlets. Clients use the
Company's retail planning software and related services to forecast the sales
volumes and, ultimately, the profitability of retail site locations, to make
decisions relating to site selection, divestiture and remodeling, and to
evaluate competitive strategies, such as pricing, use of credit cards and
product line expansion. To date the primary users of the Company's services have
been major petroleum companies with extensive worldwide retail networks. Most of
the Company's revenues are derived from clients who have entered into multi-year
software license agreements and who subsequently purchase related market data
bases. The Company also provides consulting services and informational services,
such as consumer and other research, data base management of geographic and
tabular data files and retail outlet surveys. See "Business."

The Company was previously named "The MPSI Group Inc." On October 24, 1983,
its name was changed to "MPSI Systems Inc." The Company's principal executive
offices are located at 8282 South Memorial Drive, Tulsa, Oklahoma 74133 and its
telephone number is (918) 250-9611. As used in this Prospectus, the terms
"Company" and "MPSI" mean MPSI Systems Inc. and each of its subsidiaries and
predecessors unless the context indicates otherwise.

THE OFFERING

This Prospectus relates to 1,780,436 shares of Common Stock that may be
offered and sold from time to time by the Selling Stockholders who acquired such
shares in a private placement and recapitalization of the Company which closed
on September 29, 1993. See "Recapitalization Transaction." The Company will not
receive any of the proceeds from the sale of shares by the Selling Stockholders.
See "Plan of Distribution." In addition to other information in this Prospectus,
prospective investors should carefully consider matters discussed under "Risk
Factors" before making an investment.

SELECTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues..................................................... $23,437 $19,872 $19,524 $25,313 $ 31,966
Income (loss) from continuing operations..................... 2,029 1,956 (939) (5,567) (6,014)
Net income (loss)............................................ 2,029 1,474 1,560 (5,581) (13,311)
Income (loss) per share from continuing operations........... .72 .71 (.94) (6.53) (7.11)
Net income (loss) per share.................................. .72 .53 1.56 (6.54) (15.73)
BALANCE SHEET DATA:
Total assets................................................. $12,924 $ 9,734 $10,040 $14,861 $ 22,849
Long-term debt............................................... -- -- -- 2,620 --
Noncurrent deferred revenue.................................. 1,961 1,068 1,453 2,602 4,054
Other noncurrent liabilities................................. 220 349 252 2,429 2,691
</TABLE>

Operating data prior to fiscal year 1994 has been restated giving effect to
discontinued operations of the Retail Systems, Inc. ("RSI") subsidiary. See Note
2 to Consolidated Financial Statements. All share and per share data for all
periods presented reflect the reverse stock split which occurred on November 18,
1993 as described in "Recapitalization Transaction."

<PAGE> 6

RISK FACTORS

In addition to the other information in this Prospectus, prospective
purchasers should carefully consider the following risk factors relating to the
Company and its Common Stock before making an investment.

HISTORY OF LOSSES

The Company experienced losses from continuing operations in three of its
five most recent fiscal years of $.9 million, $5.6 million, and $6.0 million,
for the fiscal years ending September 30, 1993, 1992 and 1991. Although for the
fiscal years ended September 30, 1995 and 1994 the Company reported net income,
there can be no assurance that the Company will not suffer losses again in the
future.

ABSENCE OF A PUBLIC MARKET

Although the shares will be registered and freely tradeable in the public
market, there may not be a ready market for the shares. The Company's Common
Stock was listed on the NASDAQ Small Cap Market(TM) effective September 26, 1995
but the trading volume is low.

COMMON STOCK RESTRICTIONS LIMITING TAKEOVER POTENTIAL

The President of the Company, Ronald G. Harper, owns or controls
approximately 43% of the Company's outstanding stock. An additional 46% is owned
by five participants in the 1993 recapitalization transaction. As discussed
below, each of these six stockholders has agreed to stock distribution and
resale restrictions for three years ending September 29, 1996, which
restrictions were designed to protect the Company's net operating loss
carryforwards for federal income taxes. A "super majority" requirement of 61%
stockholder approval was also entered into in the recapitalization for
extraordinary corporate transactions such as mergers and sales of all or
substantially all MPSI assets. Such restrictions may have the effect of
precluding any interest in an acquisition of the Common Stock through a
takeover, which could suppress stock value. Concentration of ownership in so few
a number of stockholders could also result in such owners' interests not being
aligned with the interests of the smaller stockholders in areas of corporate
operations and governance. Among other matters, these stockholders will control
the outcome of all elections of directors.

OTHER ANTI-TAKEOVER MATTERS

The Company's Certificate of Incorporation and Bylaws contain provisions
which may discourage certain types of transactions involving an actual or
threatened change of control of the Company that a stockholder might consider to
be in the stockholder's best interest, including provisions that: (i) permit the
Company's Board of Directors, without stockholder approval, to issue Preferred
Stock and Junior Common Stock and, at the time of issuance, to fix the
designations, rights, preferences and limitations of such stock, which could
include dilution of voting power of the Common Stock offered hereby, and (ii)
provide for removal of directors only with cause and upon vote of a majority of
the voting stock of the Company. In addition, as a corporation organized under
the laws of the State of Delaware, the Company is subject to Delaware laws
restricting certain business combinations absent "super majority" approvals by
noninterested stockholders, among other restrictions. The existence or threat of
implementation of one or more of these anti-takeover mechanisms could have an
adverse impact on the market price of the Common Stock. See "Description of
Capital Stock -- Certain Effects of Authorized but Unissued Stock," "--
Certificate of Incorporation and Bylaws" and "-- Delaware Takeover Statute."

SHARES ELIGIBLE FOR RESALE

There are approximately 2,752,000 total shares of Common Stock outstanding
as of the date of this Prospectus. Of these shares, 1,780,436 are covered by
this Prospectus, meaning 65% is available for sale in the public market under
this Prospectus. All 2,752,000 shares are eligible for immediate sale in the
public market, except that affiliates of the Company may generally sell their
shares not covered by this Prospectus in the public market only in compliance
with the restrictions contained in Rule 144 adopted by the Commission pursuant
to the 1933 Act. Accordingly, no assurance can be given that the eligibility of
such number of shares

2
<PAGE> 7

for sale will not have an adverse impact on the market price of the Common
Stock. Sales of substantial amounts of Common Stock of the Company in the public
market pursuant to and subsequent to this offering could adversely affect the
prevailing market price of the Common Stock and could impair the Company's
future ability to raise capital through the sale of its equity securities.

The Commission adopted Rule 144A on April 19, 1990, which, under certain
circumstances, permits qualified institutional buyers, as defined in the rule,
to more easily acquire and sell "restricted securities." The Company is unable
to predict the effect Rule 144A will have on the prevailing market price of the
Common Stock, although it could contribute to the potential for a high volume of
selling activity and the probable attendant suppression of market price
occurring in connection therewith.

MARKET OVERHANG

Because the sales pursuant to this Prospectus will not be effected through
an underwriter, there will be a substantial number of shares available for sale
on the market at one time without any control over the timing or volume of sales
by the Company or any third party. The Company cannot foresee the impact of such
potential sales on the market, but it is possible that if attempts are being
made to sell a significant percentage of such available shares within a short
period of time, the effect on the market may be negative. It is also doubtful
whether or not the market for the Common Stock could absorb such a large number
of shares in a short period of time, regardless of the price at which the same
might be offered. Even if a substantial number of sales are not effected within
a short period of time, the mere existence of this "market overhang" could have
a negative effect on the market for the Common Stock and the Company's future
ability to conduct any equity financing. The effect of the market overhang may
become more acute after September 29, 1996 when resale restrictions presently
applicable to the Principal Investors expire. See Recapitalization Transaction.

POTENTIAL LOSS OF MPSI TAX BENEFITS

As discussed more fully in Note 7 to the Consolidated Financial Statements,
the Company retains certain carryforwards for tax purposes in the United States.
The large amount of Common Stock offered by this Prospectus, while originally
issued to recapitalize the Company, potentially has at least one negative
consequence. Under United States income tax laws, these tax credit carryforwards
are only preserved and available to corporations without limitation so long as
no significant shifts in ownership occur. Considering the stock placed in the
recapitalization, if prior to September 29, 1996 pre-recapitalization
shareholders sell an additional 3% of the total outstanding equity ownership of
the Company, or if the Company within said period issues a comparable amount of
new stock, utilization of the then remaining tax credit carryforwards will be
limited and perhaps ultimately lost. The six principal stockholders
participating in the recapitalization agreed upon disposition restrictions for a
three year term designed to limit the possibility of losing this tax benefit.
While these principal investors in the recapitalization did agree to the
restrictions, not all investors did so, and there is no restriction precluding
the Company's other pre-recapitalization stockholders from selling.
Consequently, current U.S. tax credit carryforwards of approximately $689,000
are at risk. Loss of this potentially valuable tax benefit would result in the
Company's exposure to significant income tax liability which is avoidable if the
carryforwards are preserved. No prediction can be made as to the effect on the
market price for the Common Stock in the event these carryforwards are limited
or lost.

REVENUE CONCENTRATION

The Company is dependent on the petroleum industry for substantially all of
its revenues. Four individual petroleum industry customers have accounted for
gross MPSI revenues in excess of 10% of consolidated revenues in at least one of
the three years 1995, 1994 and 1993 as follows (in millions of dollars):

<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
AMOUNT % AMOUNT % AMOUNT %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Exxon/Esso/Imperial.................... $4.4 19 $3.8 19 $3.2 16
Texaco................................. $ .6 3 $2.2 11 $2.4 13
Shell.................................. $2.8 12 $2.1 11 $2.1 11
Amoco.................................. $2.5 11 $1.4 7 $ .2 1
</TABLE>

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<PAGE> 8

The Company would be adversely affected if several petroleum industry
clients curtailed their usage of MPSI products.

FOREIGN OPERATIONS

Substantial portions of the Company's sales are to foreign affiliates of
multi-national oil companies and such sales are denominated primarily in either
Singapore Dollars or British Pounds. Additionally, the Company has entered into
multi-year market study commitments with some of those foreign clients. The
studies are generally produced in the United States. These business activities
expose the Company to risks associated with changes in the value of the foreign
currencies in which the sales prices are denominated. The Company recorded
transaction gains (losses) of $638,000, $8,000, and $(33,000) in fiscal years
1995, 1994, and 1993, respectively. In those economies which are
hyper-inflationary, the Company's practice is to reduce the related currency
risk, when possible, by structuring such transactions so that a substantial
portion of the sale price is payable in U.S. dollars and a relatively smaller
portion is payable in the client's local currency.

The Company continually monitors applicable changes in regulatory
requirements, tax laws and intellectual property laws in the various countries
where it does business. As many of such laws are patterned after United States
or United Kingdom laws, compliance generally does not place an abnormal burden
on the Company, although certain costs are attached to compliance. The
intellectual property laws of certain countries do not provide the same
protection as do laws of the United States. The Company relies on its
confidentiality agreements with clients as additional product protection in such
instances. The Company is unaware of any breach in product security since its
inception.

There is a risk that adverse changes in regulatory, tax, trade or
intellectual property laws might affect the Company's foreign operations.
However, the countries in which the Company operates have exhibited relatively
stable economic, legal and taxation environments. In many instances, treaties
have been negotiated by the United States governing taxation and intellectual
property further reducing exposure to adverse changes. The Company has not
experienced any significant negative impact on its business as a result of the
risks noted above. Considering the countries in which the Company conducts
foreign operations and the level of investment in those countries, management
does not expect any material adverse consequences to its business as a result of
these risks.

WORKING CAPITAL AND LIQUIDITY

At September 30, 1995 and 1994, the Company's balance sheets reflected
working capital (current assets less current liabilities) of $1,948,000 and
$(5,000), respectively. The Company's clients have traditionally provided
working capital through advance payments for market studies and software
licenses resulting in recognition of deferred revenues. Although reflected in
part as current liabilities, these deferred revenues do not require a
commensurate cash outlay due to inherent profit components. Management expects
the Company to meet its obligations as they mature from operating cash flows and
an available bank line of credit.

As discussed more fully under "Recapitalization Transaction," the Company
completed a recapitalization transaction on September 29, 1993 which, among
other things, resulted in elimination of the Company's debt (excluding normal
trade payables and accrued operating liabilities) and, together with fiscal 1993
net income, increased stockholders' equity to a positive balance. Although the
transaction provided only nominal proceeds over and above proceeds applied to
debt reduction, cash flows of approximately $130,000 per month, which would have
otherwise been required for debt service, have been available for other
purposes.

Approximately 46% of the Company's consolidated assets at September 30,
1995 are represented by unbilled receivables derived from two principal sources:

- Included in trade receivables are unbilled receivables which represent
market study revenues recognized under the percentage-of-completion
method in excess of amounts billed. These unbilled amounts will
generally be billable within 12 months upon completion of the respective
studies. No significant collection difficulties are anticipated.

4
<PAGE> 9

- Long-term receivables, including the current portion thereof, are
related to noncancelable software license agreements which generally
encompass a five-year term. When collection is probable, licensing
revenue is recognized at the later of contract execution or software
delivery (the portion of such contracts related to service and
maintenance is deferred and recognized ratably or as earned over the
contract term). Since the agreements allow annual payments by the
client, the unbilled balance of some contracts is as much as four years'
future billings. The Company's typical clients for these license
agreements are large corporations in the petroleum industry which have
significant financial resources. The Company has historically
experienced virtually no bad debt expense related to software licenses
and, accordingly, considers collection of the contract amounts to be
probable (although the "collectibility" is regularly evaluated on a
contract-by-contract basis).

MARKET FACTORS

Economic conditions throughout the world have varying degrees of impact on
the Company's products. For example, oil prices, unsettled economic conditions
and retail consolidation efforts in the petroleum industry worldwide continued
to affect the Company's volume of new business in fiscal year 1995. The Company
is unable to predict the extent to which the continuance of current conditions
in the petroleum industry will affect its business. However, the Company's
software and services are intended for use by its clients to promote the
efficiency of their operations, including the divestiture of uneconomical
outlets as well as the selective acquisition of additional retail sites, and
therefore should have appeal even in adverse economic times.

The Company's operating cycle and cash flow are driven principally by the
timing of client orders for market studies. Many North American petroleum
clients budget on a calendar year basis, while many European and Pacific Rim
clients operate on March 31 fiscal periods. Consequently, MPSI generally
receives a concentration of orders in December through February and May through
June. The timing of market study production and the resulting revenues are
subject to a degree of fluctuation. Quarterly revenues can also be impacted by
the timing of software license agreements. Accordingly, management believes that
quarterly results may not be indicative of results for full fiscal years.

Although the Company believes that it is a leader in comprehensive
applications software and data base systems for multi-outlet retailers, there
has recently been a worldwide trend toward product development of this type. The
Company realizes this competition lies in two areas: first, in the market
research staffs of petroleum companies and in potential customers who develop
and manage their own software and data; and second, in consulting and research
companies which compete primarily for portions of the Company's business. See
"Business -- Competition."

RECAPITALIZATION TRANSACTION

Effective September 29, 1993, the Company completed a series of
transactions as part of a broad equity recapitalization plan. The
recapitalization was the culmination of the Company's own substantial
restructuring efforts which had taken place over the previous three fiscal
years. The equity recapitalization plan involved not only injection of cash, but
a conversion of significant debt to stock. All the Common Stock offered hereby
was originally issued in connection with the recapitalization plan. The number
of shares discussed below, as well as the prices involved, were accurate as of
the time the transactions were accomplished. However and as further discussed
below, subsequent to the recapitalization, the Company completed a one-for-ten
reverse stock split which had the effect of proportionately altering the number
of shares and price information below. (See Note 11 to Consolidated Financial
Statements for a discussion on a post-split basis.)

To facilitate the plan, the Company issued 7,835,552 shares of Common Stock
in a private placement to 16 investors at a price of $0.225 per share, resulting
in aggregate cash proceeds to the Company of $1,763,000. Of these subscriptions,
12 investors purchased Common Stock for an aggregate price of $121,000. Two
other investors, Sanford Orkin and The Robertson Stephens Orphan Fund, purchased
2,222,222 shares for $500,000 and 1,828,889 shares for $412,000, respectively.
The two remaining purchasers, John C. Bumgarner, Jr. and Joseph C. McNay, who
are also directors of the Company, each purchased 1,622,222 shares of Common

5
<PAGE> 10

Stock for an investment by each of $365,000. Mr. Bumgarner and Mr. McNay also
each acquired six shares of the Company's Convertible Preferred Stock, Series
1993 ("Preferred Stock"), in a private placement for a total price of $135,000
each, meaning both Mr. Bumgarner and Mr. McNay invested an aggregate of $500,000
cash.

As noted above, in addition to cash subscriptions, certain investors
converted debt to equity. Bank of Oklahoma, N.A., applied $1,000,000 of
indebtedness due it towards purchase of 2,857,143 shares of the Common Stock, an
exchange rate of $0.35 per share. Ronald G. Harper, the Company's Chairman and
Chief Executive Officer, converted $1,350,000 in indebtedness owed to him by the
Company to 60 shares of the Preferred Stock at the same rate as the other "cash"
investors of $0.225 per common equivalent share. The exchange rate for the Bank
of Oklahoma shares was negotiated at a rate higher than other investors because
it received a substantially higher cash settlement of its debt compared with Mr.
Harper.

The Preferred Stock had been previously authorized by the Company's
shareholders, but the Board of Directors established its relative rights and
privileges upon issuance in this transaction. The 72 shares of Preferred Stock
issued were convertible into the equivalent of 7,200,000 shares of Common Stock,
for a ratio of 100,000 to 1. The Preferred Stockholders possessed the equivalent
voting power to that of holders of 7,200,000 shares of Common Stock, or 26.4% of
the voting power in the Company at that time. The agreements pursuant to which
the Preferred Stock was issued provided that one day after effectiveness of the
reverse stock split, described below, such shares would automatically convert to
720,000 shares of Common Stock, consistent with a one-for-ten reverse stock
split.

Of the total $2,033,000 in cash proceeds from the transaction, $1,725,000
was paid to Bank of Oklahoma, N.A., to discharge the remaining balance of the
Company's indebtedness to such bank. A total of $150,000 was used to satisfy the
remaining portion of an original $1,500,000 Company debt to Ronald G. Harper and
family, a substantial portion of which was converted to equity, as set forth
above. Remaining cash proceeds of approximately $158,000 were used to pay
transaction costs associated with the private placements of stock, entering into
related agreements and for general working capital purposes.

The Company made several agreements in connection with the private
placements. Among others, the principal investors, being John C. Bumgarner, Jr.,
Ronald G. Harper, Joseph C. McNay, Sanford Orkin, The Robertson Stephens Orphan
Fund and Bank of Oklahoma, N.A. (collectively, the "Principal Investors"),
required the Company grant them certain registration rights for the restricted
securities received in the private placement. Specifically, upon request of not
less than 30% of the Common Stock subject to the agreements, and so long as 10%
of all Company Common Stock would be represented, the Principal Investors have
the right to demand the Company file and make effective with the Commission up
to two registration statements for their shares. In addition, should the Company
ever decide to file a registration statement for its own account or for the
benefit of stockholders other than the Principal Investors, the Principal
Investors nevertheless may elect to have their securities included in such other
registration statements collectively on up to two occasions, subject to
reduction upon determination of unfavorable market conditions by the
underwriter. Selling Stockholders, other than the Principal Investors, were also
accorded registration rights to be exercised at the same time and on the same
terms as those applicable to the Principal Investors, except that these
Stockholders were not extended any "demand" registration rights. In all such
registrations, the Company agreed to pay all expenses of registration for the
securities. The registration agreements also provide for the reciprocal
indemnities for violations of securities laws by either the Company or the
Principal Investors in connection with any public registration. All registration
rights extended in the recapitalization expire on September 29, 1998.

Pursuant to a written notice received by the Company dated February 28,
1994, Principal Investors with a requisite ownership made demand upon the
Company to register their shares. Based upon such demand, the Company proceeded
in the registration process with the Commission and the various state securities
regulatory authorities. This Prospectus evidences effectiveness of registration
of such shares with the Commission. Accordingly, as a result of this
registration, only one further "demand" registration may be made by the
Principal Investors.

6
<PAGE> 11

Other miscellaneous agreements were also reached in connection with the
private placement. The Selling Stockholders are entitled to price protection
assuring that for a period of three years, the Company does not issue Common
Stock at a value of less than $0.225 per share (except for issuance to employee
benefit or incentive plans and except 100,000 shares may be issued free of the
restriction) or they will be permitted to receive additional shares without cost
as if they had purchased at the lower price or prices. Further, the Principal
Investors agreed upon a disposition procedure for a three-year term designed to
attempt to protect the Company's net operating loss carryforward for federal
income taxes. See "Risk Factors -- Potential Loss of MPSI Tax Benefits." The
Principal Investors have among themselves also agreed to certain co-sale rights
should any of them wish to sell their shares. Specifically, if 11% or more of
the outstanding shares of Common Stock have been sold by a Principal Investor
outside such group during any six-month period (other than as a result of a
public offering, such as is being conducted pursuant to this Prospectus, or in a
Rule 144 transaction), then thereafter any such further sales by the selling
member may only be consummated on the condition that each Principal Investor may
also participate in the further sale or sales if they so wish on a pro rata
basis. Considering the relative amount of holdings, this limitation applies only
to Ronald G. Harper and an affiliate. All such agreements have a three-year
term.

A part of the Principal Investors' agreements also assures that the
existing Board of Directors shall remain in office until the third anniversary
of the recapitalization, and that during such period the membership of the
audit, compensation and nominating committees of the Board will be composed of
their current members as described under "Directors and Executive Officers of
MPSI." Other agreements reached provide for regular financial and budgetary
reporting to the Board of Directors, together with limitations upon authority of
the officers to incur general working capital indebtedness in excess of $100,000
on behalf of the Company without prior Board approval. Another voting agreement
entered into by the Principal Investors requires 61% or greater approval of the
Common Stock for the Company to merge, consolidate, or enter into a transaction
to sell or lease all or substantially all of its assets, or to issue additional
shares of equity except to employment benefit or incentive plans. Lastly, John
C. Bumgarner, Jr. and Joseph C. McNay each have the separate right to advance
the nomination of another individual for a director's position, so long as each
owns at least 5% of the outstanding Common Stock, and the Principal Investors
have contractually agreed to vote their shares in support of any such
nomination. The current relative holdings of the Principal Investors assure that
any nominee of Mr. Bumgarner or Mr. McNay will be approved, although they have
not yet exercised such right. All agreements reached by the Principal Investors
with the Company have a three-year term except as noted above for the
registration rights, which extend five years from the closing date of the equity
recapitalization plan.

The Preferred Stock was issued in the recapitalization plan only as a
temporary investment vehicle to facilitate completion of the plan. It was
utilized because, until a reverse stock split could be accomplished, the Company
did not have sufficient authorized Common Stock to complete the transaction.

On November 16, 1993, stockholders, representing 78% of the combined voting
power in the Company, approved a reverse stock split effective November 18,
1993. Holders of Common Stock outstanding at the effective date ("Old Stock")
received one share of Common Stock ("New Stock") for each ten shares of Old
Stock surrendered. The Company is paying cash for the fractional shares. On the
effective date of the reverse stock split, the Preferred Stock automatically
converted to New Stock at the rate of 10,000 common shares for each preferred
share. After the conversions and reverse split, there were 2,704,735 shares of
Common Stock outstanding and no outstanding Preferred Stock.

The number of shares of Common Stock will be adjusted downward as the
result of fractional shares from the reverse stock split being eliminated by
cash payment. At September 30, 1995, the Company has paid cash in lieu of 35
fractional shares.

USE OF PROCEEDS

All of the proceeds from the sales of the shares offered hereby will be
received by the Selling Stockholders. See "Plan of Distribution." The Company
will not receive any proceeds from the sale of the shares of Common Stock.

7
<PAGE> 12

PLAN OF DISTRIBUTION

RESTRICTIONS ON USE OF PROSPECTUS

This Prospectus may only be used in accordance with and sales of Common
Stock effected hereunder only in compliance with the following:

1. A Selling Stockholder may only sell or place for sale any shares of
Common Stock with broker-dealers registered as such with the National
Association of Securities Dealers, Inc. ("NASD") who are in good standing
with such organization. In connection with any such sales, the Selling
Stockholder shall deliver to the broker all necessary information to allow
the broker to comply with the prospectus delivery and other requirements of
applicable law in connection with any such sale. The agreement with the
Selling Stockholder's selling agent must contain all usual and customary
provisions including, without limitation, the obligation to (i) comply with
all applicable rules of the NASD, (ii) provide no additional information
and make no representations other than those contained in the Prospectus,
(iii) comply with applicable rules and regulations, and (iv) otherwise
comply with the requirements for the use of the Prospectus and the sale of
Common Stock thereunder imposed hereby and by applicable law.

2. No information or offering materials other than the Prospectus, as
it may be amended or supplemented, may be used by a Selling Stockholder or
broker-dealer in effecting sales hereunder.

3. As the Registration Statement will be maintained effective by the
Company for an undetermined period of time, it will be necessary for the
Company to supplement and amend the Registration Statement and the
Prospectus from time to time. Upon notice from the Company that any such
supplement or amendment is necessary, a Selling Stockholder shall cease any
effort to sell any shares of Common Stock offered for sale pursuant to the
Registration Statement, and shall cause any selling agent to cease all
sales efforts, and will not so sell any such shares of Common Stock until
he has received the supplemental or amended prospectus and delivered a copy
of the same to any prospective purchaser or broker effecting any such sale,
as required by law.

4. The Selling Stockholder will bear all commissions, transfer taxes,
fees and disbursements of counsel, if any, and all other expenses directly
related to his or her sale of Common Stock hereunder.

5. No broker-dealer selling shares of Common Stock hereunder shall be
compensated at other than usual and customary broker rates.

6. From and after the time any shares of Common Stock are deposited
with a selling agent for sale hereunder and until the agreement with such
selling agent is terminated and all certificates representing unsold shares
of Common Stock are returned to the Selling Stockholder, the Selling
Stockholder may not sell, make any short sale of, loan or give a lien on,
grant any option for the purchase of or otherwise dispose of, such shares,
without the prior written consent to the selling agent.

BENEFICIAL OWNERSHIP OF SELLING STOCKHOLDERS

This Prospectus relates to 1,780,436 shares of Common Stock that may be
offered and sold from time to time by the Selling Stockholders. On September 29,
1993, the Selling Stockholders received the shares which are being offered in
this Prospectus in a private placement under Section 4 (2) of the 1933 Act, as
discussed under "Recapitalization Transaction".

8
<PAGE> 13

Set forth below is information as of December 5, 1995, regarding the
beneficial ownership of Common Stock by each Selling Stockholder: The
information set forth in this table is based on a review by the Company of its
stock record books at such date. The table assumes no other purchases of Common
Stock by any of the Selling Stockholders.

<TABLE>
<CAPTION>
SHARES COMMON SHARES
BENEFICIALLY OWNED NUMBER OF BENEFICIALLY OWNED
PRIOR TO OFFERING(1) COMMON AFTER OFFERING(2)
-------------------- SHARES ------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- -------------------------------------------- ---------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Ronald G. Harper(3)(4)...................... 1,170,072 42.52% 600,000 570,072 20.72%
Bank of Oklahoma, N.A. ..................... 285,715 10.38% 285,715 -- --
The Robertson Stephens Orphan Fund.......... 263,971 9.60% 182,890 81,081 2.95%
Joseph C. McNay(4).......................... 261,322 9.50% 222,222 39,100 1.42%
John C. Bumgarner, Jr.(4)................... 222,322 8.08% 222,222 100 --
Sanford Orkin............................... 222,222 8.08% 222,222 -- --
Roger A. Finn(3)............................ 13,421 -- 222 13,199 --
Suzanne C. Huff............................. 5,000 -- 5,000 -- --
Dorothy Y. Terhune(3)....................... 4,242 -- 444 3,798 --
The Donald and Yvonne Harper Living Trust... 13,800 -- 10,000 3,800 --
Prince P. Platner(5)........................ 11,743 -- 1,944 9,799 --
Shirley J. Johnson(5)....................... 2,968 -- 887 2,081 --
Thomas D. Gable............................. 17,778 -- 17,778 -- --
Thomas F. Golden............................ 4,445 -- 4,445 -- --
Michael D. Cooke............................ 4,445 -- 4,445 -- --
---------- ---------- --------
Offering Totals............................. 2,503,466 90.98% 1,780,436 723,030 26.28%
========== ========== ========
</TABLE>

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

(1) Unless otherwise indicated, the person named in the table has sole voting
and sole investment power with respect to all Common Stock beneficially
owned, subject to community property laws. Ownership percentages are
presented only with respect to holdings which exceed one percent of the
aggregate shares outstanding.

(2) Assumes that all of the Common Stock offered hereby is actually sold.

(3) The individual identified is an executive officer of the Company.

(4) The individual identified is a director of the Company.

(5) The individual identified is an employee of the Company.

PREVIOUS SALES

The Registration Statement was declared effective by the Commission on July
28, 1994, and covered 1,789,270 shares of Common Stock to be offered for sale by
Selling Stockholders. Since the effective date and to the date of this Amended
Prospectus, 8,834 of such shares were sold. Accordingly, this Amended Prospectus
offers 1,780,436 shares of Common Stock and the table above as to each Selling
Stockholder reflects only the shares now offered hereunder, as reduced for any
previous sales under the Registration Statement, and any Selling Stockholder who
has previously sold all shares originally registered for sale under the
Registration Statement is no longer reflected as a Selling Stockholder in the
table.

MANNER OF DISTRIBUTION

The Selling Stockholders may sell all or a portion of the Common Stock
offered by this Prospectus from time to time (i) to the public through the
NASDAQ SmallCap or in the over-the-counter market, (ii) in negotiated
transactions, at fixed prices which may be changed, at market prices prevailing
at the time of sale or at prices reasonably related thereto or at negotiated
prices, (iii) pursuant to Rule 144, if available at the time of sale, or (iv) by
a combination of the foregoing methods of sale. The Selling Stockholders may
effect such transactions by selling the Common Stock to or through
broker-dealers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders and/or the

9
<PAGE> 14

purchasers of the Common Stock for whom such broker-dealers may act as agent or
to whom they may sell as principal, or both. The Company is not aware as of the
date of this Prospectus of any agreements between any of the Selling
Stockholders and any broker-dealers with respect to the sale of the shares
offered by this Prospectus. The Selling Stockholders and any broker-dealer or
other agent executing sell orders on behalf of the Selling Stockholders may be
deemed to be "underwriters" within the meaning of the 1933 Act, in which event
commissions received by any such broker-dealer or agent and profit on any resale
of the Common Stock may be deemed to be underwriting commissions under the 1933
Act. Such commissions received by a broker-dealer or agent may be in excess of
customary compensation.

The Company will pay all of the costs, expenses and fees incident to the
offering and sale of the shares to the public other than commissions and
discounts of underwriters, broker-dealers or agents not paid by the purchasers
of the shares.

The Company has advised each of the Selling Stockholders of their
obligation to comply fully with applicable securities law restrictions regarding
the sale of Common Stock pursuant to this Prospectus, including the above
described requirements. In addition, the Company has advised each Selling
Stockholder of his or her obligation to comply fully with the anti-manipulation
provisions of Rules 10b-6 and 10b-7 of the Commission adopted under the
Securities Exchange Act of 1934, namely not to buy shares of Common Stock, not
to solicit purchases of shares of Common Stock by others and not to engage in
any stabilization transaction with respect to the price of the Common Stock to
facilitate the Selling Stockholder's distribution hereunder. Each Selling
Stockholder has also been advised to notify the other Selling Stockholders and
the Company when such Selling Stockholder's distribution is completed.

In effecting the sale of the shares of Common Stock offered by this
Prospectus, each of the Selling Stockholders must comply with Rule 10b-6 under
the Securities Exchange Act of 1934, which requires that a Selling Stockholder,
as well as any person who acts in concert with such Selling Stockholder and the
broker, if any, who sells the shares on behalf of such Selling Stockholder,
suspend all purchases of shares of Common Stock at least nine business days
prior to and during any offers and sales by such Selling Stockholder of the
shares of the Common Stock offered by this Prospectus. In the case of any
Selling Stockholder who is an affiliate of the Company, Rule 10b-6 also requires
the Company and all persons who are in a control relationship with the Company
to suspend all purchases of shares of the Company at least nine business days
prior to and during any offers and sales by the affiliate Selling Stockholder of
the shares of Common Stock offered by this Prospectus. The Company will require
each Selling Stockholder, and his or her broker if applicable, to provide a
letter that acknowledges compliance with Rule 10b-6 before authorizing the
transfer of such Selling Stockholder's shares.

DESCRIPTION OF CAPITAL STOCK

PREFERRED STOCK

The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock, $.10 par value, none of which is presently outstanding. The Board of
Directors is authorized without any further vote or action by the stockholders
to determine and alter the rights, preferences, privileges and restrictions,
including the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption, liquidation preferences and sinking fund terms
granted to or imposed upon any wholly unissued class or series of Preferred
Stock, the number of shares constituting any series and the designation thereof,
and to increase or decrease the number of shares of such series subsequent to
the issuance of shares of such series (but not below the number of shares of
such series then outstanding). The Company has no present plans to issue any of
the Preferred Stock, but a series thereof was issued and then retired in
connection with the Company's recapitalization plan.

COMMON STOCK

The Company is authorized to issue up to 20,000,000 shares of Common Stock.
Each holder of Common Stock is entitled to one vote for each share held of
record. Holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available

10
<PAGE> 15

therefor and to share pro rata in any other distribution to holders of Common
Stock. Upon liquidation or dissolution of the Company, subject to any prior
liquidation rights of any outstanding Preferred Stock, the holders of Common
Stock are entitled to receive ratably, subject to the rights of holders of any
Junior Common Stock then outstanding to share in such assets on a basis up to
but not exceeding the rights of the holders of Common Stock, the assets legally
available for distribution to stockholders. The Common Stock has no cumulative
voting, preemptive or other subscription rights, and there are no conversion
rights or redemption or sinking fund provisions with respect to such shares. All
the outstanding shares of Common Stock are fully paid and nonassessable.
Effective September 26, 1995 MPSI's Common Stock began trading on The NASDAQ
SmallCap Market(TM) under the trading symbol "MPSI".

As of December 5, 1995, 2,751,595 shares of Common Stock were outstanding
and were held of record by 951 stockholders. The Company has reserved 880,000
shares of Common Stock for future issuance pursuant to stock option plans.

The Common Stock held by the Principal Investors is subject to various
voting agreements entered into upon closing of the recapitalization plan. Such
agreements include prescribed voting for a slate of directors and "super
majority" provisions to approve extraordinary corporate transactions. For a
discussion of all such agreements, see "Recapitalization Transaction" and "Stock
Ownership of Certain Beneficial Owners and Management -- Voting Agreements for
Common Stock."

JUNIOR COMMON STOCK

The Company is authorized to issue up to 500,000 shares of a class of
common shares designated Junior Common Stock, $.05 par value ("Junior Common
Stock"), in one or more series, having such voting rights and preferences,
redemption prices, sinking funds, convertibility provisions, liquidation and
certain other rights and provisions as the Board of Directors, by action of a
majority of disinterested directors, may fix in providing for the issuance of
such stock without any vote or action by stockholders, except that holders of
the Junior Common Stock shall not be entitled to receive dividends, except share
dividends paid in the same ratio as share dividends paid on the Common Stock,
and in no event shall the voting rights or other rights with respect to shares
of Junior Common Stock be greater than the voting or other rights with respect
to shares of Common Stock. Holders of Common Stock and Junior Common Stock, if
any, shall vote together as a class on all matters.

The Company has no shares of Junior Common Stock outstanding and no present
plans to issue any shares of Junior Common Stock. In the event shares of Junior
Common Stock are issued in the future, it is likely that they will be
subordinated to the Common Stock with respect to voting rights and liquidation
preferences, and may be convertible into Common Stock upon the occurrence of
certain events. If and when the Board of Directors should approve the issuance
of Junior Common Stock, voting rights and redemption prices, sinking funds,
convertibility provisions, liquidation and certain other rights and provisions
of such an issue could decrease the amount of earnings and assets available for
distribution to holders of Common Stock.

STOCKHOLDER ACTION

Pursuant to the Company's Certificate of Incorporation, with respect to any
act or action to be taken by the holders of the Common Stock the affirmative
vote of the holders of a majority of the issued and outstanding Common Stock
entitled to vote thereon and represented at a meeting of the stockholders at
which a quorum is present is sufficient to authorize, affirm, ratify or consent
to such act or action.

The Certificate of Incorporation provides that stockholders may take
certain action without the holding of a meeting by written consent or consents
signed by the holders of a majority of the outstanding shares of the capital
stock of the Company entitled to vote thereon. Prompt notice of the taking of
any action without a meeting by less than unanimous consent of the stockholders
will be given to those stockholders who do not consent in writing to the action.
The purposes of this provision are to facilitate action by stockholders and to
reduce the corporate expense associated with annual and special meetings of
stockholders. As discussed in "Risk Factors -- Common Stock Restrictions
Limiting Takeover Potential," the Principal Investors currently own or control
approximately 88% of the outstanding Common Stock. Accordingly, the Principal
Investors

11
<PAGE> 16

will be in a position to approve by written consent certain actions required or
permitted to be taken by stockholders of the Company, including the election of
directors. Pursuant to the rules and regulations of the Commission, if
stockholder action is taken by written consent, the Company will be required to
send each stockholder entitled to vote on the matter acted on, but whose consent
was not solicited, an information statement containing information substantially
similar to that which would have been contained in a proxy statement.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

The Company's authorized but unissued capital stock consists of 1,000,000
shares of Preferred Stock, approximately 17,248,000 shares of Common Stock and
500,000 shares of Junior Common Stock. One of the effects of the existence of
authorized but unissued capital 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 due
exercise of its fiduciary obligations, for example, the Board of Directors was
to determine that a takeover proposal was not in the Company's best interests,
such shares could be issued by the Board of Directors without stockholder
approval in one or more private offerings or other transactions that might
prevent or render more difficult or costly the completion of the takeover
transaction by diluting the voting or other rights of the proposed acquiror or
insurgent stockholder or stockholder group, by creating a substantial voting
block in institutional or other hands that might undertake to support the
position of the incumbent Board of Directors, by effecting an acquisition that
might complicate or preclude the takeover, or otherwise. In this regard, the
Company's Certificate of Incorporation grants the Board of Directors broad power
to establish the rights and preferences of the authorized and unissued Preferred
Stock, one or more series of which could be issued entitling holders to vote
separately as a class on any proposed merger or consolidation, to convert
Preferred Stock into a larger number of shares of Common Stock or other
securities, to demand redemption at a specified price under prescribed
circumstances related to a change in control, or to exercise other rights
designed to impede takeover. The issuance of shares of Preferred Stock pursuant
to the Board's authority described above could decrease the amount of earnings
and assets available for distribution to holders of Common Stock, and adversely
affect the rights and powers, including voting rights, of such holders and may
have the effect of delaying, deferring or preventing a change in control of the
Company. Junior Common Stock may likewise be issued with dilutive effect on
ownership, but not voting rights. The Board of Directors does not currently
intend to seek stockholder approval prior to any issuance of authorized but
unissued stock, unless otherwise required by law.

CERTIFICATE OF INCORPORATION AND BYLAWS

Under Delaware law, the exclusive power to adopt, amend and repeal bylaws
is conferred solely upon the stockholders unless the corporation's certificate
of incorporation also confers such power upon its Board of Directors. Under the
Company's Certificate of Incorporation, the Board of Directors has been granted
this power. These provisions, in addition to the existence of authorized but
unissued capital stock, may have the effect, either alone or in combination with
each other, of making more difficult or discouraging an acquisition of the
Company deemed undesirable by the Board of Directors.

DELAWARE TAKEOVER STATUTE

The Company is subject to Section 203 of the Delaware General Corporation
Law. In general, Section 203 prevents an "interested stockholder" from engaging
in a "business combination" with a Delaware corporation for three years
following the date such person became an interested stockholder, unless (i)
prior to the date such person became an interested stockholder, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the interested stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held (x) by
directors who are also officers of the corporation and (y) by employee stock
plans that do not provide employees with the

12
<PAGE> 17

rights to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer); or (iii) on or subsequent to the
date of the transaction in which such person became an interested stockholder,
the business combination is approved by the board of directors of the
corporation and authorized at a meeting of stockholders by the affirmative vote
of the holders of two-thirds of the outstanding voting stock of the corporation
not owned by the interested stockholder. Under Section 203, the restrictions
described above do not apply to certain business combinations proposed by an
interested stockholder following the announcement or notification of one of a
number of extraordinary transactions involving the corporation and a person who
had not been an interested stockholder during the previous three years or who
became an interested stockholder with the approval of a majority of the
corporation's directors, if such extraordinary transaction is approved or not
opposed by a majority of the directors who were directors prior to any person
becoming an interested stockholder during the previous three years or who were
recommended for election or elected to succeed such directors by a majority of
such directors.

Section 203 defines a "business combination" to include (i) any merger or
consolidation involving the corporation and an interested stockholder, (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition involving
an interested stockholder of 10% or more of assets of the corporation, (iii)
subject to certain exceptions, any transaction which results in the issuance or
transfer by the corporation of any stock of the corporation to an interested
stockholder, (iv) any transaction involving the corporation which has the effect
of increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder or (v) the receipt
by an interested stockholder of any loans, advances, guarantees, pledges or
other financial benefits provided by or through the corporation. In addition,
Section 203 defines an "interested stockholder" as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such an entity or person.

STOCKHOLDER REPORTS

The Company will furnish to its stockholders annual reports containing
audited financial statements reported on by independent public accountants for
each fiscal year.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Chemical Mellon
Shareholder Services, Overpeck Centre, 85 Challenger Road, Ridgefield, New
Jersey 07660.

BUSINESS

The operations of MPSI are confined to one business segment wherein it
provides decision support products and services in the form of (1) proprietary
computer software, (2) geographically specific information data bases (market
studies), and (3) consulting services. These products and services are designed
to meet retail business planning requirements of its clients.

From its inception in 1970 until it became a publicly-held company in 1983,
the Company's decision support services were directed primarily at planning
requirements for petroleum companies and other multi-outlet retailers who were
concerned with retail site selection and retail network optimization. MPSI
products provided computerized models of specified retail markets which enabled
its clients to predict sales volumes at proposed new retail sites, while at the
same time indicating the effects of each new outlet on sales volumes at both the
client's and competitors' existing outlets. During this period, the Company's
operations were characterized by limited geographic diversification, centralized
management, centralized market study production and significant dependence on
the petroleum industry.

With the 1983 capital infusion from its initial public offering, the
operating plan of the Company expanded. In order to diversify and maintain
growth, management initiated programs intended to expand the Company's
geographic presence and its client mix. Such programs sought to reduce MPSI's
exposure to economic factors in a particular country and to lessen the
percentage of its total revenues which were

13
<PAGE> 18

attributable to the petroleum industry (while maintaining steady growth in that
core business). Accordingly, during the period from 1983 to 1987, MPSI expanded
its European operations and opened new offices in Singapore, Japan and Brazil.
This expansion led to decentralization of management and the market study
production operations. In 1986, the Company acquired Retail Systems, Inc.
("RSI"), a company headquartered in Minneapolis, Minnesota, which offered
products to retail food clients that were similar to those offered by MPSI to
the petroleum industry. This acquisition combined with expanded retail planning
software for banks, restaurants and governmental clients, enabled MPSI to
diversify its revenue portfolio such that revenues from the petroleum industry,
as a percent of total revenues, dropped from 90% in 1985 to 75% in 1988. During
this period, MPSI's products continued to be directed toward site selection,
although enhancements such as artificial intelligence technology moved the
Company's products toward operational decision support capabilities.

In 1988 MPSI undertook significant changes aimed at accelerating the
Company's revenue growth, product expansion and diversification of its customer
base. MPSI reorganized its existing business unit and acquired Execucom Systems
Corporation ("ESC"). The ESC acquisition resulted in (1) a more diverse family
of products including financial planning and executive information systems, (2)
a greater number of client industries, and (3) an expanded international
presence. Although revenues from petroleum clients continued to be important to
the Company, they accounted for approximately 53% of consolidated revenues in
1990 because of the dilutive effect of ESC's non-petroleum revenues. The
concurrent restructuring of the MPSI business unit resulted in the realignment
of managerial responsibilities to correspond with the distinct client industries
it served. This realignment centralized management responsibilities such that
functional units were again controlled from the United States, regardless of
where the personnel might be located. Although not brought about directly as the
result of the changes noted above, in 1989 management also decided that the
computer workstation should replace the mainframe computer as the Company's
principal product delivery and product development hardware. This action was
taken in order to reduce internal operating costs associated with the mainframe,
facilitate product development and communications using workstation networks and
enhance product distribution.

The period from 1988 to 1991 was characterized by significant product
development. The development activities were driven by two principal needs. The
MPSI unit needed new products and services which went beyond site selection to
operational decision support. The ESC unit, being in a highly competitive
environment, needed to regularly upgrade existing products incorporating new
technology in order to retain its maintenance revenue stream. These requirements
coupled with additional marketing personnel and programs contributed to a
substantial increase in the Company's debt through early 1991.

In March 1991, effective for accounting purposes at February 28, 1991, the
Company sold substantially all of the net operating assets of ESC to Comshare,
Incorporated. This action was necessitated because of poor performance by the
ESC unit, the weakening U.S. economy, declines in MPSI revenues due to the
effects of the Persian Gulf conflict and limitations on the Company's cash
resources. The sale resulted in a substantial loss on disposition, but generated
approximately $4.5 million of cash which was used to reduce debt.

Concurrent with the ESC sale, management scaled back the MPSI business unit
to refocus on the core petroleum industry products and clients in order to begin
liquidating the remaining debt. Additionally, the Company wrote down certain
capitalized software development costs previously carried in the consolidated
balance sheet which related to products developed for industries that had not
met profit goals. As explained more fully in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and in Note 13 to the
Consolidated Financial Statements, the corporate restructuring initiated in 1991
eventually encompassed further restructuring throughout the three-year period
ended September 30, 1993.

The initial 1991 restructuring involved a 30% reduction of the work force
in England, closure of the Singapore production center with termination of
virtually all employees in that facility, and reduction of management personnel
in the United States. Aggregate costs related to these measures were
approximately $976,000. Substantially all market study production and software
development activities were consolidated back into the United States. Portions
of these activities had been previously performed in the Company's Singapore and
England offices, in addition to the U.S. corporate headquarters.

14
<PAGE> 19

In spite of the cost reductions and production streamlining achieved as the
result of 1991 actions discussed above, consolidated revenues continued to
decline during fiscal year 1992 forcing the Company to further reduce its work
force in the United States and in England at an aggregate cost of $154,000.
Additionally, the Company abandoned excess office space in the U.S. at a cost of
$168,000.

Economic conditions continued to worsen for MPSI during fiscal year 1993.
The Company again reduced its work force and overhead expenses throughout the
fiscal year. Approximately 106 employees (30% of work force) were terminated (at
a cost of $370,000) or resigned, and the Company negotiated a reduction in the
space occupied by its corporate headquarters (which although it cost $88,000 to
renovate retained space and restore abandoned space, resulted in future annual
rental savings of more than $500,000). Further, the Company closed certain
foreign sales offices and moved to less expensive office space in several
satellite offices at a cost of $30,000.

During the fourth quarter of fiscal year 1993, the Company completed a
significant recapitalization transaction and eliminated its corporate debt
(other than trade payables and accrued liabilities). See "Recapitalization
Transaction." Among other benefits, the recapitalization allowed the Company to
redirect funding from debt service to product development. During fiscal year
1994, the Company experienced increased stability in its regional petroleum
industry markets as clients generally completed restructuring and focused on the
retail aspects of their businesses. Although European operations continue to be
sluggish, revenues in North America, South America and Pacific Rim grew
approximately 35%, 31% and 15%, respectively, in fiscal year 1995. Several U.S.
oil companies who have been recently inactive with MPSI placed significant
market study orders in 1994 and 1995 indicating interest in MPSI's new software
products which target operational and pricing decision support. Beginning in
1994 and in response to client input, MPSI committed substantial funding and
development efforts toward release of a new generation of MPSI decision support
products. Early versions of these products were completed for commercial release
in fiscal year 1995 (see discussion of CAPS(TM), OPS(TM) and PVO(TM) software
under "Product Development").

Although the petroleum industry utilization of MPSI's products has been
somewhat revitalized, the Company's retail food line of business, which was
serviced by RSI, continued to sustain losses. As a result, on September 1, 1994,
RSI sold all of its noncash assets to Dakota Worldwide Corporation ("Dakota"),
an unaffiliated third party, and the Company discontinued its services and
products to that class of customer. Dakota assumed all performance obligations
related to contracts in force with RSI's customers. Concurrent with this
transaction, RSI and MPSI executed an agreement not to compete with Dakota. RSI
terminated all its employees, subject to temporary retention of certain
administrative staff, and RSI was responsible for all severance costs related
thereto. The RSI assets sold included accounts receivable, work in process,
office furnishings, personal computer hardware and software, intangible assets
including software held for resale, copyrights, trademarks, service marks,
fictitious names and goodwill. The assumed lease obligations included RSI's
office facility in Minneapolis, Minnesota and office equipment and personal
computers. MPSI remains contingently liable under those leases in the event
Dakota fails to perform until December 31, 1997.

PRODUCTS AND SERVICES

The Company markets its services in the United States, Europe, Africa,
Canada, South America, Central America, the Caribbean Basin and the Pacific Rim.
See Note 8 to the Consolidated Financial Statements for financial information
addressing foreign and domestic operations and export sales. Generally, the
Company's marketing activities center on personal presentations to existing and
prospective clients, client referrals, proposal submissions, selective mailings,
limited print advertising, seminars and trade show participation. Most of the
Company's clients are identified by the Company's direct sales force.

The Company's operating cycle and cash flow are driven principally by the
timing of client orders for market studies. Many North American petroleum
clients budget on a calendar year basis, while most European and Pacific Rim
clients operate on March 31 fiscal periods. Consequently, MPSI generally
receives a concentration of orders in December through February and May through
June. The timing of market study production and the resulting revenues are
subject to a degree of fluctuation. Quarterly revenues can also be

15
<PAGE> 20

impacted by the timing of software license agreements. Accordingly, management
believes that quarterly results may not be indicative of results for full fiscal
years.

Economic conditions throughout the world have varying degrees of impact on
the Company's products. The Company anticipates growth in Southeast Asia during
fiscal 1996 and increased retail petroleum activity in the U.S. and South
American markets. However, volatile oil prices, unsettled economic conditions
and retail consolidation, coupled with significant expenditures by clients in
order to address environmental issues, affected the Company's volume of new
business in fiscal 1995. The Company is unable to predict the extent to which
these conditions will continue to affect its business during 1996. At present,
however, the Company is realigning its products and services to increase
profitability, either by evaluating alternative methods for gathering market
information in order to contain future expenses or by development of ancillary
products and services which will allow the Company to leverage market
information through sales to companies who cannot afford a commitment to MPSI's
expensive main line products.

After adjustment to remove the effects of RSI, which business was
discontinued in September 1994 as set forth above, approximately 96%, 99%, and
97% of revenues were derived from the petroleum industry during the fiscal years
ended September 30, 1995, 1994, and 1993, respectively. In each of the fiscal
years 1995, 1994 and 1993, MPSI derived revenues exceeding 10% of consolidated
revenues from certain clients, together with their affiliates, as set forth
below (in millions of dollars):

The Company could be adversely affected if several petroleum industry
clients curtailed their long-term usage of MPSI products.

The following table shows the percentage of total revenue from continuing
operations that the Company derived from various sources during each of the last
three fiscal years.

REVENUE DERIVED FROM KEY PRODUCTS AND SERVICES (%)

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Data base construction (market studies)......................... 70 65 68
Software licenses............................................... 5 12 4
Software maintenance agreements................................. 5 7 9
Consulting, educational, and other services..................... 20 16 19
</TABLE>

Described below are the computer applications software, information data
bases and other services currently provided by the Company.

Retail Planning

The Company's primary retail planning applications software has
historically been the Retail Planning System(R) ("RPS"). See "Product
Development" for discussion of three major enhancements of RPS scheduled for
commercial release in fiscal year 1996. This country-specific software interacts
with an information data base (market study) to construct a mathematical model
of a retail market. The enhanced systems support client needs in three areas:

Short-term pricing issues are addressed by assisting the client with
daily pricing decisions at retail outlets that optimize profit while
maintaining target sales volumes. The system also aids with the
establishment of supply/demand-balanced trade zones to reduce rapid
geographic deterioration in pricing.

16
<PAGE> 21

Medium-term operational issues are addressed by systematic forecasting
of retail sales volume changes resulting from operational changes (such as
hours of operation and merchandising practices), by counselling dealers as
to pricing, merchandising and operational practices and by providing
territory-wide planning for anticipated retail sales volumes, pricing and
operations.

Long-term capital investment issues are addressed in the areas of (1)
new retail site location where the system provides an objective measure for
comparing available sites based on competition and convenience to demand,
(2) identification of outlets to divest where the system isolates and
evaluates client locations that have poor performance, (3) identification
of outlets to be rebuilt by identifying sales potential to be realized by
remodeling or reformatting specified outlets and (4) assessing multiple
profit centers by forecasting the potential benefits of retailing
complementary products and services.

Software licensing agreements for the RPS (including ancillary products)
generally have multi-year noncancellable terms. These agreements offer the
client an installment payment option requiring a payment upon execution and
annual payments on the succeeding anniversary dates of the agreement. The
software can be used by the client for a particular industry (such as petroleum)
and a particular geographic market (such as Japan). Also, the agreement contains
broad restrictions on the use and disclosure of the software by the client. See
"Trademarks, Copyrights, and Licenses" below. Modifying the software typically
involves changes in the weighting of various supply and demand factors or the
addition of a new factor as the result of changes in the marketplace.

MPSI provides full maintenance (postcontract customer support) services for
the RPS and, where necessary, training of and consultation with client staff.
Software licenses, maintenance and optional consulting services are set out
separately in each multi-year license agreement. The agreement states that any
company-sponsored modification to the software during the postcontract customer
support period will be provided to the client at no additional cost. Prices for
the RPS in the United States are based upon formulas which address geographical
boundaries, population, number of automobiles and other factors. Prices for the
RPS applicable to foreign countries are based on a percentage of the United
States pricing.

Information Data Bases

The Company also constructs the market study data bases that are the
primary informational sources used by the retail planning software. Separate
contracts govern each data base order by a client and generally require advance
payments ranging from 35 percent to 70 percent of the total sales value. The
amount of the required prepayment is determined principally by the client's
delivery requirements. There is no retainage provision relative to these
production-type contracts. These data bases are arranged and presented in six
types of studies.

Constantly Current Market Studies ("CCMS"). These studies are used by
clients who possess a large number of retail sites and who wish to analyze
market conditions and evaluate site locations in metropolitan areas on a
regular basis. The supply and demand data used in this type of study is
collected by the Company. This type of study provides clients with a series
of consecutive data base updates over a specific time period, generally
five years. Clients agree to pay for the CCMS in periodic installments. It
is tailored to individual client needs, and pricing is determined in part
by the number of subscribers to a particular market during the commitment
period and offers clients discounts for their multi-year commitments.

Quality Partnership Studies ("QP"). These study programs, like the
CCMS studies, offer clients the opportunity to regularly update market
study information on an annual basis. However, in the QP program, all
clients participate in the updating process by providing regular
information about changes (new outlets, new brands, rebuilt outlets, etc.)
in the market. MPSI gathers information relative to these changes and
updates the data base which otherwise remains unchanged. The lower update
costs are passed on to the client participants in the form of lower annual
update prices. Although the updates are not as extensive as full CCMS
updates, clients are able to track the effects of major market changes
using QP's.

17
<PAGE> 22

Scheduled Market Area Studies ("SMAS"). These studies are similar to
the CCMS except that the clients do not commit to a series of consecutive
data base updates over a specific time period. These studies are usually
scheduled by one client and offered to additional clients on a subscription
basis. While each study uses a single demand-side data base, the final data
base provided to each client is unique.

Market Area Studies ("MAS"). These studies are similar to the SMAS
except they are sold to a single client. Portions of the demographic data
can generally be used as a major part of other studies in the same market
for clients in the same or comparable retail industries.

Mini-Market Area Studies. These studies are similar to the MAS except
the area studied does not contain more than 75 outlets. Likewise, the
accompanying study deliverables are scaled down.

Single Site Studies. These studies are used to evaluate market
conditions or the effects of various operating decisions at a specific
location within a specified geographic area.

Other Products and Services

Licensed software clients may utilize the retail planning software and
information data bases on their own computer facilities, may dial in to MPSI's
computers and use the software interactively (subject to certain usage
restrictions),or may elect to have MPSI run tactics (that is, pose "what if"
questions) on MPSI's computers. In cases where software is installed on client
computers, the Company charges for installation of the software and training the
client's personnel. A client may then run unlimited tactics on its own
equipment. If tactics are run on the Company's computers, the client pays a fee
per tactic. Clients who have entered into long-term user agreements are entitled
to discounts on data bases and on tactics.

MPSI introduced two new "data" products during fiscal year 1995 which were
designed to leverage market information already in MPSI's inventory or allow
clients to contract for customized data collection by MPSI. The Quest product
allows MPSI clients to obtain point-in-time retail outlet information either
relative to MPSI's standard market study boundaries in a given geographic market
or to establish specialized market boundaries or specialized data requirements
for an additional fee. MPSI's PriceTracker(TM) product allows clients to obtain
high quality, timely retail pricing information on a recurring basis in order to
track trends in the marketplace.

Other products and services provided by the Company include litigation
support; determination of petroleum price zones and key competitors; regular
tracking of petroleum prices using geographic information systems for user
analyses; retail consulting; consumer research; and customized retail outlet
surveys. Certain services are complementary to retail planning services. For
example, the data bases provided as part of the retail planning services may be
linked with other data supplied by the client. This data could then be processed
interactively through geographic information system software which manages and
displays information in a variety of graphic and map formats.

COMPETITION

Since its inception in 1970 the Company has provided comprehensive
applications software and data base systems, primarily to the retail petroleum
industry, and currently has more than 175 multinational clients in 73 countries.
There has recently been a worldwide trend toward competitive product development
of this type due to the availability of computer resources and acceptance of
retail modeling theory. The Company believes its competition lies in two areas:
first, in the market research staffs of petroleum companies or potential
customers who develop and manage their own software and data; and second, in
consulting and research companies which compete for portions of the Company's
business.

The Company has found that the market research staffs of some large
petroleum companies continue to concentrate on in-house data gathering and site
selection methods, while other companies with more limited resources must
consider low cost alternatives for obtaining market information. It has been
MPSI's experience that clients often encounter substantial cost barriers
relative to internally developed systems. Without the economies of scale, data
gathering expertise and modelling sophistication that MPSI has obtained during
its 25-year existence, clients often find that systems developed in house are
expensive to develop, expensive to

18
<PAGE> 23

maintain given changing market conditions, require market information with an
inherent degree of accuracy which is difficult to obtain, and that the results
of such systems do not justify the associated costs and effort. Additionally, as
clients or potential clients struggle to manage operating costs and consider
outsourcing certain activities where economically feasible, the capabilities of
companies like MPSI offer an attractive alternative to internal systems. Because
of the trend in large companies to out source certain functions and because of
the growth in business consulting generally, independent consulting and research
companies have challenged certain products the Company offers such as
demographic data collection, geographic data bases, retail outlet surveys,
retail consulting, pricing applications, and single site studies. Occasionally,
such consultants are engaged to develop a proprietary internal model for their
clients. Often competitive services of this type are offered by independent
consultants as part of a larger consulting project wherein pricing for the
retail planning segment can be very competitive with MPSI's pricing. Certain of
such companies are offering computerized tools and services which, the Company
believes are not as sophisticated as MPSI products, but may be attractive to
customers willing to sacrifice accuracy for a lower cost solution to their
business needs.

The Company believes it competes within these various market alternatives
by providing high-quality, sophisticated software and reliable, accurate data
bases at a reasonable cost. MPSI further believes its historical expertise and
success in the areas of volume projections and retail network planning provide a
substantial barrier to entry for competitors. Further, MPSI's maintenance
programs and its commitment to more than one client in a given market results in
regular updates of existing software in line with changes in a given market. The
Company attributes its ability to provide these quality products and services to
the expertise and experience of its personnel.

By focusing on PC oriented products and services, the Company believes it
is better equipped to challenge "lower cost competitors". New data collection
techniques will allow more timely and regular updating of market data using
hand-held data collection technology and PC-based data transmission and delivery
technology. These processes are expected to reduce MPSI's data collection costs
relative to market studies and thereby allow the Company to leverage data
already collected or to collect custom data for clients who may not require full
market study information. The Company believes it can thereby be competitive
with potential competitors who have targeted customers with limited retail
market resources.

In addition to addressing low-cost competitors, MPSI began a program in
fiscal year 1994 whereby it will seek to establish strategic alliances with
certain independent consulting firms. The target consulting firms will be those
who service industries in which MPSI has historical expertise (e.g., petroleum,
government/postal, and banking). Such alliances can provide MPSI the opportunity
to sub-contract portions of larger consulting projects thereby establishing
MPSI's credibility with the client and allowing interface with customer
personnel who are potentially valuable sales contacts for future business.

BACKLOG

The Company's September 30, 1995 and 1994 backlog consisted principally of
orders for market information data bases (1995 -- $14,669,000,
1994 -- $18,799,000) and multi-year commitments by customers for software
maintenance and support services (1995 -- $3,014,000, 1994 -- $2,258,000). The
Company expects that the market information data bases in backlog at September
30, 1995 will be recognized in fiscal year revenues as follows:
1996 -- $7,634,000; 1997 -- $3,333,000; 1998 -- $2,321,000 and 1999 --
$1,381,000. Maintenance and support services in backlog are the result of client
contractual obligations to purchase support services generally over periods of
three to five years. Such revenues will be recognized, and backlog accordingly
reduced, on a ratable basis over the life of each underlying agreement. Of the
aggregate maintenance and support backlog at September 30, 1995, future fiscal
year revenues are expected to be recognized as follows: 1996 -- $1,114,000;
1997 -- $690,000; 1998 -- $542,000; 1999 -- $402,000, 2000 -- $193,000 and
2001 -- $73,000.

EMPLOYEES

As of September 30, 1995, the Company employed 240 people, including 88 in
sales and marketing, 48 in research and development, 75 in data base analysis,
consulting, and production and 29 in management,

19
<PAGE> 24

administration, and finance. Of these, 190 are employed in the United States and
50 are employed in foreign countries.

PRODUCT DEVELOPMENT

Since 1970, the foundation of the Company's business has been its developed
software which helps retailers select sites, improve operations and make product
pricing decisions. Over the last five years, the major development efforts of
the Company have been directed toward (1) enhancement of this core RPS product
in order to extend its petroleum utilization around the world, (2) portation of
the software from mainframe to workstation/PC platforms, and (3) incorporation
of third party software in order to enhance the user interface, speed and
efficiency of this software. Currently, the Company has several development
efforts underway that address the aforesaid areas.

MPSI's product development cycle consists of four primary stages. During
the product specification phase the Company identifies the initial requirements
of the software, determines the functional requirements and begins the initial
design. During this stage, the Company sets forth the data base requirements as
well as the hardware, operating systems, third-party imbedded software and
general functional requirements. From this information a business plan,
conceptual prototype and a project plan are developed. The prototypes developed
during this stage are not fully functional prototypes, but are designed to
present the "look and feel" of the end product. Upon completion of this phase,
the Company has generally completed a detailed program design and, accordingly,
established the technological feasibility of the project. Following the product
specification phase, the project enters the BUILD PHASE where actual software
programming takes place. Once coding is complete the project enters the QUALITY
ASSURANCE PHASE which encompasses various internal systems testing and user
acceptance testing. Once testing is completed the project enters the
IMPLEMENTATION PHASE where hardware and software installation procedures and
user documentation are finalized.

Software development costs incurred prior to completion of the detailed
program design are expensed as research and development costs. Costs incurred
during the build, quality assurance and implementation phases are generally
capitalized. At the point where the software product is ready for general
release to the customers, capitalization of costs ceases.

Beginning in fiscal year 1993 and extending through December 1994, MPSI
undertook a major internally funded rewrite of the retail planning software for
petroleum retailers. The new RPS was designed to meet the three primary
operational requirements of clients through PC-based products including the
Capital Performance System ("CAPS")(TM) for site selection and capital planning,
the Operational Performance System(TM) ("OPS")(R) for use in the field by retail
managers in order to optimize outlet and territory performance and the Price
Volume Optimizer ("PVO")(TM) for retail fuel pricing decisions. The initial
versions of OPS(R) and PVO(TM) software were available to customers in fiscal
year 1994 but are presently undergoing further enhancement. The CAPS(TM)
software for North America was released in January 1995. Third-party geographic
information system software is being incorporated into the RPS as part of
rewrite enhancements. The RPS rewrite should not only provide client requested
enhancements but is also expected to reduce costs associated with (market study)
data base production and efficiencies in future product programming and model
revisions. Regional CAPS(TM) software for Europe, South America and the Pacific
Rim is scheduled for release in 1996.

Development of the initial PVO(TM) product was the result of a contract
that was signed with a North American client during 1993 for the nonexclusive
development of a volume prediction model for a petroleum related product and
service facility. Several market data bases were also part of the contract. The
commercial version of PVO(TM) was completed in August of 1995 and is presently
undergoing implementation testing by clients in England, Argentina, and the
United States. It is anticipated this product, if successful, will not only
result in contracts for additional client data bases in 1996, but also will lead
to further business with other clients through the adaptation of the model to
other petroleum client ancillary product/service needs. Utilizing information
from Company produced RPS data bases or from other MPSI studies, PVO(TM) is
designed to give retailers an easy to use decision tool for optimizing petroleum
outlet profits through price or volume level determinations.

20
<PAGE> 25

The PC-based OPS(R) software utilizing RPS data base information is
currently being installed with clients in the United States, Europe and the
Pacific Rim. During fiscal year 1996, the Company intends to continue making the
model available to existing clients at a nominal cost for the purpose of
increasing Company-produced data bases, MPSI's principal revenue source. A
stand-alone OPS(R) product is scheduled for development and release late in
fiscal year 1996.

MPSI continues to pursue postal business in the United States and Europe.
Should MPSI be awarded a U.S. postal contract for market studies, additional
development efforts would be expended during fiscal 1996 to enhance certain
features of an existing prototype model and to incorporate new technology which
has become available since the prototype was developed.

During the years ended September 30, 1995, 1994 and 1993, the Company spent
$2,789,000, $3,257,000, and $2,546,000, respectively, on research and
development or enhancement of new products and the maintenance of existing
products. The amounts spent on research and development were primarily Company
sponsored, meaning there is no direct recoupment of expenses from clients.

TRADEMARKS, COPYRIGHTS, AND LICENSES

The Company holds a number of trademarks, some of which are registered at
the U.S. Patent and Trademark Office. To date, registration has been sought only
in the United States. During fiscal year 1996 and in connection with global
introduction of new products, the Company will evaluate trademark registration
in certain foreign countries where the volume of present and/or potential
business warrants registration. Set forth below are the Company's trademarks and
related registration expiration dates.

<TABLE>
<CAPTION>
PRODUCT TYPE OF MARK STATUS/EXPIRATION
---------------------------------- ------------- ---------------------
<S> <C> <C>
MPSI's Site Evaluation System..... Registered 2001
MPSI and Design................... Registered 2002
MPSI.............................. Registered 2004
MPSI's OPS........................ Registered 2002
Retail Planning System............ Registered 2005
MPSI's CAPS....................... Trademark Filed
Price Volume Optimizer............ Trademark Filed
PVO............................... Trademark Filed
Location Volume................... Trademark Filed
Facility/Location Volume.......... Trademark Filed
Quest Systems International
Inc. ........................... Trademark Filed
MPSI's Market Monitor............. Trademark Registration Pending
PriceTracker...................... Trademark Registration Pending
The Intelligent Approach to Retail
Marketing....................... Trademark Registration Pending
</TABLE>

The Company does not hold any patents or copyrights. The Company's
long-term software license agreements require customer acknowledgment of the
proprietary nature of the Company's software. The Company relies on these
agreements, together with trade secret laws and internal nondisclosure
safeguards, to protect its products. To date, the Company has had no indication
of any material breach in the security of its products. Should a material breach
in the security of the Company's software products occur, it might have the
impact of reducing the current barriers to entry for competitors and thus
materially adversely effect long-term results of Company operations. The
Company's modeling methodology, mathematical modeling algorithms and data
gathering processes have been developed over an extensive period of time and
would, in the absence of a material breach in the security, require potential
competitors a substantial period of time to duplicate. Even in the event that a
material breach did occur, such as a reverse engineering of an MPSI software
product, the Company believes that because of the rapid annual change in
technology and the regular software upgrades required thereby, such breach would
not result in a material adverse effect on the

21
<PAGE> 26

Company's short-term business because new versions of its products would likely
reduce the competitive value of older versions breached by potential
competitors.

PROPERTIES

The Company's principal facility and corporate headquarters in Tulsa,
Oklahoma (42,500 square feet) is the primary location for software development
and market study production. The Bristol, England facility encompasses 10,000
square feet, and the Rio de Janeiro, Brazil office encompasses 3,000 square
feet. Both foreign offices do single site and special project work in addition
to their primary marketing role. Regional sales offices in Singapore; Melbourne,
Australia; and Tokyo, Japan remained the Company's principal client liaison
facilities in those areas at September 30, 1995. Management believes that the
various facilities are now properly sized to meet anticipated business levels.
Additional space may be required to accommodate business expansion. All office
facilities are leased.

MARKET INFORMATION FOR MPSI COMMON STOCK

During fiscal 1993, 1994 and through September 25, 1995, the Company's
Common Stock was not listed with an established securities exchange and all
purchases and sales occurred in direct negotiations or over the counter. Set
forth below for those periods are the high and low bid prices, as adjusted
giving effect to a one-for-ten reverse stock split on November 18, 1993. The
trading symbol is "MPSI". Bid prices reflect interdealer prices without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions. On September 26, 1995, the Company's Common Stock was listed on
The NASDAQ SmallCap MarketSM. Information in the table below for the fourth
quarter of fiscal 1995 ended September 30, 1995, reflects the high and low sales
prices reported by NASDAQ.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1993
First Quarter Ended December 31, 1992................................ 2 1/2 5/8
Second Quarter Ended March 31........................................ 6 1/4 5/8
Third Quarter Ended June 30.......................................... 2 1/2 5/8
Fourth Quarter Ended September 30.................................... 5 5/8 5/8
Fiscal 1994
First Quarter Ended December 31, 1993................................ 7 5
Second Quarter Ended March 31........................................ 7 4
Third Quarter Ended June 30.......................................... 5 1/4 2
Fourth Quarter Ended September 30.................................... 4 3/4
Fiscal 1995
First Quarter Ended December 31, 1994................................ 2 5/8 1 1/2
Second Quarter Ended March 31........................................ 2 1/2 1
Third Quarter Ended June 30.......................................... 7 1 1/2
Fourth Quarter Ended September 30.................................... 7 1/2 3
</TABLE>

The 2,733,000 shares of Common Stock outstanding at September 30, 1995,
were held by 939 stockholders of record. At that date, an additional 168,617
shares were subject to options to purchase Common Stock as discussed more fully
in Note 9 to the Consolidated Financial Statements. The per share bid and offer
prices on November 30, 1995, were $4.75 and $6.25, respectively. Common Stock
that could be sold pursuant to Rule 144 under the 1933 Act totals 575,738 shares
as of November 30, 1995.

The Company intends to reinvest its earnings in its business and therefore
does not anticipate paying any cash dividends in the foreseeable future. The
Company has not paid cash dividends since its inception. Further, the Company is
restricted from paying any dividends if any outstanding borrowings exist under
its bank line of credit (no outstanding borrowings currently exist).

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<PAGE> 27

SELECTED FINANCIAL DATA*

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.................................. $23,437 $19,872 $19,524 $ 25,313 $ 31,966
Income (loss) from continuing
operations.............................. 2,029 1,956 (939) (5,567) (6,014)
Income (loss) from discontinued
operations.............................. -- (482) 2,149 (14) (7,297)
Extraordinary gain on debt
extinguishment.......................... -- -- 350 -- --
Net income (loss)......................... 2,029 1,474 1,560 (5,581) (13,311)
Per share:
Income (loss) per common and common
equivalent share:
Continuing operations................ $ .72 $ .71 $ (.94) $ (6.53) $ (7.11)
Discontinued operations.............. -- (.18) 2.15 (.01) (8.62)
Extraordinary item................... -- -- .35 -- --
Net income (loss).................... .72 .53 1.56 (6.54) (15.73)
Weighted average shares of common stock
and common stock equivalents
outstanding............................. 2,802 2,766 998 853 846
BALANCE SHEET DATA:
Total assets.............................. $12,924 $ 9,734 $10,040 $ 14,861 $ 22,849
Long-term debt............................ -- -- -- 2,620 --
Noncurrent deferred revenue............... 1,961 1,068 1,453 2,602 4,054
Other noncurrent liabilities.............. 220 349 252 2,429 2,691
</TABLE>

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

* Operating data prior to fiscal year 1994 has been restated giving effect to
the September 1994 sale of the RSI subsidiary. See Note 2 to Consolidated
Financial Statements regarding discontinued operations. All share and per
share data for fiscal years prior to 1995 reflect the effect of a reverse
stock split described in Note 11 to Consolidated Financial Statements.

23
<PAGE> 28

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

The following table sets forth (in thousands), for the periods indicated,
certain items in the consolidated statements of continuing operations and the
change of such items as compared with the indicated prior period. See Note 2 to
the Consolidated Financial Statements which sets forth the effect of the
September 1994 sale of RSI. All information below reflects RSI as discontinued
operations.

<TABLE>
<CAPTION>
CHANGE
-------------------
YEAR ENDED SEPTEMBER 30 1995 1994
----------------------------- VS. VS.
1995 1994 1993 1994 1993
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues................................... $23,437 $19,872 $19,524 $ 3,565 $ 348
Cost of sales.............................. 10,432 7,614 9,409 2,818 (1,795)
------- ------- ------- ------- --------
Gross profit............................. 13,005 12,258 10,115 747 2,143
------- ------- ------- ------- --------
Operating expenses:
General and administrative............... 2,571 2,388 1,930 183 458
Marketing and client services............ 6,993 5,578 6,219 1,415 (641)
Research and development................. 1,794 2,331 2,159 (537) 172
Restructuring expenses................... -- -- 488 -- (488)
------- ------- ------- ------- --------
Total operating expenses.............. 11,358 10,297 10,796 1,061 (499)
------- ------- ------- ------- --------
Operating income (loss).................... 1,647 1,961 (681) (314) 2,642
Other income (expense), net................ 836 289 (136) 547 425
------- ------- ------- ------- --------
Income (loss) from continuing operations
before income taxes...................... 2,483 2,250 (817) 233 3,067
Income taxes............................... (454) (294) (122) (160) (172)
------- ------- ------- ------- --------
Income (loss) from continuing operations... $ 2,029 $ 1,956 $ (939) $ 73 $ 2,895
======= ======= ======= ======= ========
</TABLE>

RESULTS OF OPERATIONS

MPSI reported net income for the fiscal year ended September 30, 1995, of
$2.0 million or $.72 per share on revenues of $23.4 million compared with net
income of $1.5 million or $.53 per share and $1.6 million or $1.56 per share on
revenues of $19.9 million and $19.5 million in fiscal years 1994 and 1993,
respectively. The 1995 increase in gross profit over 1994 was primarily
attributable to higher margins on market studies (the largest revenue component
of Information Services), and an increase of $3.6 million or 18% in revenues.
The increase in gross profits was offset by higher marketing expenses
(attributable largely to new products introduced as discussed below) which
lowered Operating Income compared with 1994. Higher 1995 net income was
attributable in part to foreign exchange gains as discussed below. The Company
does not believe that inflation has significantly impacted the results of
operations during the three years ended September 30, 1995. The 1994
implementation of lower pricing in North America, South America and Europe
resulted in increased client interest in those regions. While the Company
believes that pricing has contributed to improved revenues in 1994 and 1995, the
Company attributes the increased revenues primarily to the attractiveness of its
new products. The positive results for fiscal year 1995 were affected by strong
fourth quarter revenues and earnings. The Company reported net income of
$878,000 or $.31 per share on revenues of $7.1 million compared with net income
of $45,000 or $.02 per share on revenues of $4.8 million in the 1994 fourth
quarter. The increase in revenues for 1995, particularly during the last six
months of the fiscal year, resulted in a drop of approximately $4.1 million in
backlog. MPSI expects to replenish the backlog through 1996 sales.

Although overall revenues increased in 1995 compared with 1994 and 1993,
revenues from software licensing declined $1.2 million or 52% compared with 1994
but were $312,000 or 40% higher than in 1993. The timing of new or renewed
long-term software license agreements can have a substantial impact upon
reported revenues and gross profits from software licensing for any interim or
annual fiscal period. The 1994 software licensing revenues reflect, among other
things, a software license renewal by a single worldwide

24
<PAGE> 29

licensee in the amount of $1.5 million. While MPSI regularly records software
license renewals and recorded software renewals in both 1995 and 1993, the surge
in 1994 software revenues was attributable to the single large renewal
transaction which affects comparability between the periods. Excluding the one
transaction in 1994, both 1994 and 1993 software revenues were comparable, and
MPSI's 1995 software revenues favorably compared with both previous fiscal
years.

With the exception of the Company's European operations which are still
sluggish, MPSI has generally experienced growth in regional revenues (in
thousands of dollars) as set forth below:

<TABLE>
<CAPTION>
1995 VS. 1994 1994 VS. 1993
-------------- ---------------
AMOUNT % AMOUNT %
------ --- ------- ---
<S> <C> <C> <C> <C>
North America....................................... $2,455 35 $ 1,939 38
South America....................................... 394 31 111 10
Pacific Rim......................................... 1,342 15 (365) (4)
Europe/Africa....................................... (626) (21) (1,337) (31)
------ -------
Totals............................................ $3,565 18 $ 348 2
====== =======
</TABLE>

The revenue growth trend in North America represents a revitalization of that
geographic market which can be principally attributable to the release during
1994 of the new CAPS software. CAPS software versions for the three remaining
MPSI regions will be released during fiscal year 1996. The revenue growth in
South America and the Pacific Rim is principally attributable to MPSI's entry
into new geographic markets. The Company hopes for a turnaround in the European
revenue trend for fiscal year 1996 as a number of inactive clients are very
interested in MPSI's new product offerings.

While MPSI is projecting continued revenue and earnings growth with respect
to its core CAPS/RPS software and market study products, several new products
have been under development. Although they were not profit contributors in
fiscal year 1995 due to development and start-up costs, they are expected to
positively impact fiscal years 1996 and beyond. MPSI completed development and
released its enhanced commercial version of PVO software in August 1995. This
short-term pricing decision support software was released in an initial version
in late fiscal 1993. While client response to the concepts in that initial
version were favorable, MPSI has now substantially enhanced that product in
release 2.0. Clients in North America, South America and Europe are presently
evaluating acquisition of the PVO software.

In addition to PVO, MPSI undertook the introduction of two "data" products
during fiscal year 1995 which were designed to leverage market information
already in MPSI's inventory and to combat the competitive challenge from data
providers. The Quest product allows clients to obtain point-in-time retail
outlet information either relative to MPSI's standard market study boundaries in
a given geographic market or to establish specialized market boundaries or
specialized data requirements for an additional fee. PriceTracker allows clients
to obtain high quality, timely retail pricing information on a recurring basis
in order to track trends in the marketplace. The start-up and survey
coordination costs on these products exceeded revenues in fiscal year 1995, but
these products are expected to attain profitability in fiscal year 1996.

In addition to higher revenues, MPSI experienced better gross profit
margins on its software and market studies in 1995 compared with 1994 (excluding
the impact of the $1.5 million license renewal discussed above) and 1993.
Software cost of sales reflects amortization of capitalized software development
costs generally over product lives of 18 months from product release. The
Company expects fiscal year 1996 amortization to increase as its new CAPS
software, currently under development for Europe and South America, is completed
and released for customer use in the second fiscal quarter. Software cost of
sales was lower in 1994 than in 1993 and 1995 as substantial non-capitalized
research and specification work was undertaken in preparation for actual
development of the CAPS software which began late in fiscal year 1994 (see
discussion of research and development expenses below). Gross profit on market
studies, the largest component of Information Services, was approximately $9.9
million in 1995 compared with $7.5 million in 1994 and $6.3 million in 1993, and
increased as a percent of market study revenues (60% in 1995 compared with 58%
and 47% in 1994 and 1993, respectively). The higher market study gross profits
in 1995 were attributable to production efficiencies implemented during the year
and to a higher number of studies prepared

25
<PAGE> 30

for multiple client users, thus allowing MPSI to leverage its costs. The higher
gross profit on market studies in 1995 was offset by lower margins on special
projects and other services such that overall margins for Information Services
and Software Maintenance were lower than in 1994.

The 1995 increases in operating expenses compared with 1994 included higher
general and administrative costs in the amount of $183,000 (8%) related
principally to accrual of incentive bonuses and awards for employees where no
similar amounts were accrued or paid for fiscal years 1994 or 1993. Marketing
and client services expenses grew in 1995 by $1.4 million (25%) reflecting
primarily the start-up costs for the new products mentioned above. Research and
development expenses in the consolidated statements of operations declined
$537,000 (23%) in fiscal year 1995 compared with 1994 as the Company's overall
expenditures were less in respect of contract programming resources and because
a higher proportion of such expenses were capitalized in connection with
development of PVO version 2.0 and the CAPS versions for Europe and South
America as these products achieved technological feasibility.

The Company's operating expenses declined $499,000 (5%) in 1994 compared
with 1993, principally due to 1993 restructing expenses for which there was no
1994 counterpart. General and administrative expenses increased $458,000 (24%)
in 1994 compared with 1993 principally as a result of costs associated with
registration of securities. This increase was, however, offset by a $641,000
(10%) decline in marketing and client services which was attributable to the
lower number of such personnel as the result of the Company's 1993 downsizing
and refocused attention on its core business and products. Research and
development expenses increased $172,000 in 1994 compared with 1993 principally
due to the additional resources brought on board during the specification and
research phases of CAPS(TM) development. Actual CAPS(TM) programming and product
development began late in fiscal year 1994 and carried into fiscal year 1995.

MPSI enters into multi-year contracts for market studies, some of which are
denominated in foreign currencies. This exposes MPSI to exchange gains or losses
depending upon the periodic value of the U.S. Dollar relative to the respective
foreign currencies. As noted above, during fiscal year 1995, MPSI benefited from
foreign currency exchange gains in the amount of $638,000. These gains were the
result of contract commitments booked by clients in prior years, performed and
earned in 1995, and denominated and billed in Singapore Dollars which
substantially increased in value relative to the U.S. Dollar reporting currency.
Although MPSI anticipates continuing benefit from the same source in fiscal year
1996, the magnitude should be considerably lower. In the longer term, these
multi-year commitments could result in exchange losses if the current currency
trends were to reverse.

Income taxes increased $160,000 and $172,000 in fiscal years 1995 and 1994,
respectively, compared with the applicable prior year. The 1993 and 1994 income
taxes were primarily foreign income taxes either applicable to the Company's
foreign subsidiaries or withheld at the source from payments by foreign clients.
Income taxes in 1995, however, reflect a larger component of U.S. Federal and
state income taxes (see Note 7 to the Consolidated Financial Statements). The
profits generated in fiscal years 1995, 1994 and 1993 from U.S. operations
resulted in utilization of virtually all net operating loss carryforwards
available for income tax purposes in the U.S. (except for some foreign tax
credits carried forward to fiscal year 1996 as set forth in Note 7). As a
result, the Company expects to pay higher U.S. income taxes in 1996 and beyond.

The results of operations in fiscal year 1995 allowed the Company to meet
the various thresholds for listing on the NASDAQ SmallCap MarketSM. The
Company's Common Stock began trading on the SmallCap Market effective September
26, 1995 under the trading symbol "MPSI".

FINANCIAL CONDITION AND LIQUIDITY

The Company's working capital improved to a positive balance of $1.9
million at September 30, 1995 from deficits of $5,000 and $1.3 million at
September 30, 1994 and 1993, respectively. The 1995 improvement was a
combination of the Company's continued generation of operating cash flow ($1.6
million as reflected in the statement of cash flow) and the higher balance in
current receivables at September 30, 1995 ($6.4 million) compared with September
30, 1994 ($4.4 million). The increase in trade receivables is principally
attributable to increased market study activity. The 1994 improvement was
primarily the result of utilization of operating cash flows to reduce current
liabilities.

26
<PAGE> 31

Since its inception in 1970, the Company has historically placed
significant reliance on customer deposits and prepayments as a source of ongoing
liquidity and operating capital. Should substantial direct competitors gain
market share and offer price concessions or favorable payment terms, the
Company's liquidity could be negatively impacted. The Company relies on its
long-term client relationships and the quality of its products and services to
mitigate this potential negative impact on liquidity.

As set forth in the statements of cash flow, the Company generated cash
flow from continuing operations of $1.6 million in 1995 which was comparable
with 1994. Cash flow from continuing operations in 1994 was 63% higher than the
$966,000 in 1993. During both 1994 and 1995, MPSI committed substantial
resources to acquisition of additional computer equipment and to development of
new software products, as previously discussed. The Company expended $1.0
million in both 1994 and 1995 (only $231,000 in 1993) for such purposes. The
Company anticipates comparable expenditures in 1996 for similar purposes but has
no commitments for capital expenditures other than those related to the regional
versions of CAPS(TM) software which are expected to be funded entirely out of
operating cash flows. In the event external funding is required, the Company has
a bank line of credit in the amount of $300,000 at September 30, 1995. As
discussed more fully in Note 6 to the Consolidated Financial Statements, the
line of credit arrangement established certain limitations on capital
acquisitions and other indebtedness and established certain financial tests
related to net worth. Additionally it contains formulae for determining
borrowing limits based upon the Company's accounts receivable. The Company is in
full compliance with all covenants of the agreement, and the full amount of the
line is available, subject to regular $25,000 quarterly reductions in the
maximum borrowing limit. The line of credit expires in September 1996, and the
Company expects to establish an extension or replacement line of credit in the
amount of at least $500,000.

The trends in software licensing discussed under "Results of Operations"
above impacted the relative levels of both the related receivables and deferred
revenues. The current and noncurrent balances in long-term receivables (totaling
$4.3 million and $4.1 million at September 30, 1995 and 1994, respectively) and
the deferred maintenance component of deferred revenue (totaling $3.0 and $2.3
million at September 30, 1995 and 1994, respectively) increased in 1995 as the
receivables and deferred revenue from new software contracts exceeded the
collections and maintenance revenue recognized during 1995. MPSI's license
agreements generally are noncancelable, although a few contracts include
provisions for cancellation of portions of the client's commitment upon
occurrence of certain negative economic events in the clients' geographic areas
of operations. In accordance with its policy, the Company does not recognize
revenues on such contingent portions of agreements, so that in the event of
cancellation, only receivables and deferred revenue are generally adjusted. No
substantial cancellations occurred during 1995 ($226,000 and $676,000 occurred
during 1994 and 1993, respectively). As the number of contracts with
cancellation clauses are few, the Company does not expect significant impact
from cancellations in 1996.

The decrease in other noncurrent liabilities to $220,000 at September 30,
1995 from $349,000 at September 30, 1994 is the result of reclassifying a
deferred compensation liability and certain U.S. headquarters lease obligations
to current accrued liabilities. The Company's present lease on its headquarters
facility expires in April 1998, and the Company has been informed by a new
landlord who recently acquired the building that MPSI will be required to vacate
at the end of the lease. The landlord has offered to release MPSI from all
present lease obligations in the event that MPSI moves before the lease
expiration. The Company is presently evaluating facility alternatives and does
not anticipate a substantial increase in its U.S. facility costs in the event a
decision is made to move before lease expiration.

27
<PAGE> 32

DIRECTORS AND EXECUTIVE OFFICERS OF MPSI

INFORMATION WITH RESPECT TO DIRECTORS

The following table sets forth the directors, their ages, a brief
description of their recent business experience, including present occupations
and employment, certain directorships held by each and the year in which each
became a director of the Company. All were elected at the Company's Annual
Meeting of Stockholders held on February 1, 1995.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION AT PRESENT DIRECTOR
AND FOR THE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE AGE
- ----------------------------------------------------------------------------- -------- ---
<S> <C> <C>
Ronald G. Harper(1).......................................................... 1970 57
Mr. Harper, who founded the Company in 1970, has served as its President,
Chairman of the Board and Chief Executive Officer since inception.
John C. Bumgarner, Jr.(1)(2)(3).............................................. 1982 53
In 1979, Mr. Bumgarner was appointed to his present position as Senior Vice
President -- Corporate Development and Planning of The Williams Companies,
Inc., a Tulsa-based conglomerate. He has been employed by The Williams
Companies, Inc. since 1977. He is also a director of TRANSCO, James River
Coal Company, and several privately held companies.
Dr. David L. Huff(1)......................................................... 1982 64
Since 1968, Dr. Huff has been a member of the faculty at the University of
Texas. He has been a Fulbright Lecturer and has published numerous books
and articles, including Market Area Analysis, "A Graphical Index of
Consumer Expectation," "Measures of Market Area Overlap," and "Retail
Location Theory." He is an expert in computer modeling techniques.
Joseph C. McNay(1)(2)(3)..................................................... 1982 61
Since November 1976, Mr. McNay has been the President, a Director and the
Chairman of the Board of Essex Investment Management Company, Inc., a
company engaged in investment and advisory services. Mr. McNay is also a
director of Softech, Inc. and Alpha 1 Biomedical, Inc., each of which are
publicly-held companies.
John J. McQueen(2)(3)........................................................ 1982 74
Mr. McQueen has been in the private practice of law in the Tulsa area since
1959. He has also served as a certified public accountant with KPMG Peat
Marwick, as a tax specialist with Warren Petroleum Corp., and as controller
of Davis Investments, a company engaged in oil and real estate activities.
</TABLE>

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

(1) The individual identified is a member of the Compensation Committee.

(2) The individual identified is a member of the Audit Committee.

(3) The individual identified is a member of the Nominating Committee.

28
<PAGE> 33

INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS

The following table sets forth the executive officers currently serving the
Company, their ages, all positions and offices held with the Company and their
tenure in such office. All officers of the Company serve at the pleasure of its
Board of Directors, and there exists no arrangement or understanding among any
of the Company's executive officers with any other person pertaining to their
selection to serve in such position.

<TABLE>
<CAPTION>
SERVING IN
NAME AND ALL POSITIONS CURRENT
AND OFFICES HELD WITH POSITION
THE COMPANY SINCE AGE
- ---------------------------------------------------------------------------- ---------- ---
<S> <C> <C>
Ronald G. Harper............................................................ 1970 57
Mr. Harper, who founded the Company in 1970, has served as its President,
Chairman of the Board and Chief Executive Officer since inception.
Roger A. Finn............................................................... 1992 58
Mr. Finn was appointed as Vice President and Chief Operating Officer of
the Company on December 14, 1992, effective January 4, 1993. Mr. Finn
joined MPSI in 1982 as Director of Network Planning. Subsequent
assignments included General Manager -- Network Planning, Chief Marketing
Officer, Vice President of Operations, Vice President of Americas
Petroleum, and Vice President -- Marketing and Product Development.
Dorothy Y. Terhune.......................................................... 1979 60
Mrs. Terhune, employed by MPSI since 1975, has been Corporate Secretary
since December 1979 and Manager, Human Resources since December 1984.
James C. Auten.............................................................. 1992 47
Mr. Auten was appointed Principal Accounting Officer in December 1992. Mr.
Auten joined MPSI in 1984 as Corporate Controller and held such position
until December 1992.
Jyo Umezawa................................................................. 1989 55
Mr. Umezawa was appointed Vice President, Pacific Rim Region in July 1989.
Mr. Umezawa joined MPSI in 1983 and has served as Manager -- Market
Development, Director -- Market Studies, Chief Information Officer and
General Manager -- Technical Services.
Mark R. Davis............................................................... 1994 43
Mr. Davis was appointed to his present position as Vice President,
Europe/Middle East/Africa effective April 1994. Mr. Davis joined MPSI in
1978 and has served as Project Manager, Manager -- Network Planning,
Director of Marketing, Director -- Product Development,
Director -- Network Planning, General Manager -- Production, Vice
President -- Production and Vice President -- Government/Financial
Services.
Bryan D. Porto.............................................................. 1994 46
Mr. Porto was appointed to his present position as Vice President,
North/Central/South America effective May 1994. Mr. Porto joined MPSI's
Rio de Janeiro office in 1985 and has served as Director -- Network
Planning, General Manager -- Marketing and Vice President of MPSI's
Brazilian subsidiary prior to his present position.
</TABLE>

29
<PAGE> 34

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of December 5, 1995, as to
shares of Common Stock beneficially owned by the directors, the executive
officers, the directors and officers of the Company as a group, and certain
persons known to the Company to own beneficially more than five percent of the
Common Stock. Except as otherwise indicated, each person has sole investment and
voting power with respect to the shares shown. Ownership information is based
upon information furnished by the respective individuals.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
---------------------------
PERCENT
NUMBER OF
NAME OF COMMON STOCKHOLDER OF SHARES CLASS
- ------------------------------------------------------------------- --------- -------
<S> <C> <C>
Ronald G. Harper (2)............................................... 1,170,072(1) 42.52%
8282 South Memorial Drive
Tulsa, Oklahoma 74133
John C. Bumgarner, Jr.............................................. 222,322 8.08%
4900 Bank of Oklahoma Tower
One Williams Center
Tulsa, Oklahoma 74172
Joseph C. McNay.................................................... 261,322 9.50%
125 High Street, 29th Floor
Boston, Massachusetts 02110
Bank of Oklahoma, N.A.............................................. 285,715 10.38%
P. O. Box 2300
Tulsa, Oklahoma 74192
The Robertson Stephens Orphan Fund................................. 263,971 9.60%
555 California Street, Suite 2600
San Francisco, California 94104
Sanford Orkin...................................................... 222,222 8.08%
3414 Peachtree Road, N.E., Suite 236
Atlanta, Georgia 30326
Dr. David L. Huff.................................................. 5,000(3) .18%
John J. McQueen.................................................... -- --
Roger A. Finn (2).................................................. 13,421 .49%
Dorothy Y. Terhune (2)............................................. 4,242 .15%
James C. Auten (2)................................................. 10,748 .39%
Jyo Umezawa (2).................................................... 15,772 .57%
Mark R. Davis (2).................................................. 10,046 .37%
Bryan D. Porto (2)................................................. 7,734 .28%
All officers and directors as a group (11 persons)................. 1,720,679 62.53%
</TABLE>

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

(1) Includes 100,977 shares of Common Stock held directly by Mr. Harper's family
or in trust for the benefit of Mr. Harper's family and 396,030 shares held
in trust for the benefit of certain charities, as to which shares Mr. Harper
disclaims beneficial ownership.

(2) The indicated individuals are executive officers of the Company.

(3) Represents shares held by Dr. Huff's wife, as to which Dr. Huff disclaims
beneficial ownership.

30
<PAGE> 35

VOTING AGREEMENTS FOR COMMON STOCK

On September 29, 1993, the Company closed a recapitalization plan. See
"Recapitalization Transaction." The Principal Investors involved in the
transaction, being John C. Bumgarner, Jr., Ronald G. Harper, Joseph C. McNay,
Sanford Orkin, The Robertson Stephens Orphan Fund and Bank of Oklahoma, N.A.
made several agreements among themselves and with the Company in connection with
the recapitalization. Some of these agreements pertain to voting of their shares
of Common Stock which, in the aggregate, approximate 88% of the voting power in
the Company.

One of the Principal Investors' agreements assures the existing slate of
directors shall remain in office until September 29, 1996, and that during such
period the Audit, Compensation and Nominating Committees will be composed of the
members described under "Directors and Executive Officers of MPSI." Another
voting agreement entered into by the Principal Investors requires 61% or greater
approval of the Common Stock ownership for the Company to merge, consolidate, or
enter into a transaction to sell or lease all or substantially all of its
assets, or to issue additional shares of equity except to employment benefit or
incentive plans. Lastly, John C. Bumgarner, Jr. and Joseph C. McNay were each
accorded the separate right to advance the nomination of another individual for
a director's position, so long as each own at least 5% of the outstanding Common
Stock, and the Principal Investors have agreed to vote their shares in support
of any such nomination. The current relative holdings of the Principal Investors
assure that any nominee of Mr. Bumgarner or Mr. McNay will be approved. All of
the above-described voting agreements have a three-year term. Existence of the
voting agreements may have the effect of suppressing the market price for the
Common Stock.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Based solely upon a review of Forms 5 furnished to the Company with respect
to its most recent fiscal year, the Company has determined that reports required
pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended,
were not filed on a timely basis. The Company believes that Forms 4 for Roger A.
Finn and James C. Auten were not filed when due. The Forms 5 for such
individuals were filed at year end and reflected all information which was
required to be filed as to such individuals, including the information which
should have been filed on Forms 4.

31
<PAGE> 36

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table summarizes the compensation paid over the last three
completed fiscal years to the Company's CEO and the other executive officers of
the Company who received compensation of $100,000 or more during the fiscal year
ended September 30, 1995.

SUMMARY COMPENSATION TABLE

LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------------- ---------------------- -------
OTHER ALL OTHER
NAME AND ANNUAL RESTRICTED ANNUAL
PRINCIPAL COMPENSATION STOCK OPTIONS/ LTIP COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(1) AWARD(S) SARS (#) PAYOUTS ($)(2)
- -------------------------- ---- --------- -------- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald G. Harper.......... 1995 181,456 5,599 8,232 -- -- -- 8,128
Chairman of the Board, 1994 155,402 6,994 34,285 -- -- -- 8,754
President and 1993 153,313 6,200 34,285 -- -- -- 8,145
Chief Executive Officer
Roger A. Finn............. 1995 101,013 4,092 6,000 -- 6,000 -- 4,006
Vice President and 1994 102,674 4,620 6,000 -- -- -- 3,817
Chief Operating Officer 1993 99,740 3,680 6,000 -- 12,500 -- 3,442
Jyo Umezawa............... 1995 100,022 4,701 -- -- 7,000 -- 3,155
Vice President 1994 93,970 6,354 -- -- -- -- 3,476
Pacific Rim 1993 89,871 2,405 -- -- 10,000 -- 3,439
Mark R. Davis............. 1995 100,022 3,300 -- -- 5,400 -- 3,599
Vice President 1994 92,236 3,084 -- -- 5,000 -- 1,575
Europe/Africa 1993 86,728 3,280 5,000 -- 5,000 -- 1,551
Bryan D. Porto............ 1995 100,022 4,000 -- -- 5,400 -- 624
Vice President 1994 92,809 3,480 -- -- 8,000 -- 612
Americas 1993 90,407 3,164 -- -- 2,000 -- 576
</TABLE>

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

(1) Represents automobile allowances paid to the named executive officers.

(2) Disclosure of the components of "All Other Compensation" is omitted for the
fiscal year ended September 30, 1993 as permitted by Securities and
Exchange Commission rules. The amounts presented for the fiscal years ended
September 30, 1995 and 1994 include (a) Company matching contributions to
the Company's 401(k) defined contribution plan (Mr. Harper -- $3,865 and
$4,497, Mr. Finn -- $3,244 and $3,182, Mr. Umezawa -- $2,531 and $2,864,
Mr. Davis -- $2,975 and $976), respectively, (b) supplemental life
insurance premiums paid by the Company (Mr. Harper -- $4,263 and $4,257,
Mr. Finn -- $762 and $635, Mr. Umezawa -- $624 and $612, Mr. Davis -- $624
and $599 and Mr. Porto -- $624 and $612), respectively.

32
<PAGE> 37

OPTION/SAR GRANTS TABLE

The following table sets forth certain information with respect to stock
options (whether or not in tandem with stock appreciation rights) and
freestanding stock appreciation rights (SAR) granted to the named executive
officers during the last completed fiscal year.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS/ OPTIONS/SARS EXERCISE APPRECIATION
SARS GRANTED TO OR BASE FOR OPTION TERM
GRANTED EMPLOYEES PRICE EXPIRATION ------------------
NAME (#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- --------------------------- -------- ----------------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Roger A. Finn.............. 6,000 9% $ 3.00 11-27-99 4,973 10,989
Mark R. Davis.............. 5,400 8% 3.00 11-27-99 4,476 9,890
Bryan D. Porto............. 5,400 8% 3.00 11-27-99 4,476 9,890
Jyo Umezawa................ 7,000 10% 3.00 11-27-99 5,802 12,821
James C. Auten............. 6,000 9% 3.00 11-27-99 4,973 10,989
Dorothy Y. Terhune......... 500 1% 3.00 11-27-99 414 916
</TABLE>

OPTIONS EXERCISED TABLE

The following table sets forth information concerning each exercise of
stock options by the named executive officers during the last completed fiscal
year.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY END OPTION VALUES

<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
------ --------------- ----------- ------------- ---------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY END(#) FY END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------- --------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
James C. Auten....................... 3,333 $ 8,083 3,333/9,334 $12,500/$30,500
</TABLE>

EMPLOYMENT CONTRACTS AND SEVERANCE ARRANGEMENTS

The Company maintains a severance policy applicable to all full-time
regular employees with at least one year of fulltime service. Eligible employees
are those who are terminated as the result of (1) a reduction of the Company's
work force, (2) elimination of a job or position, (3) inability to
satisfactorily perform required responsibilities, or (4) relocation of
applicable Company facilities. The amount of severance paid is based upon the
employee's base salary and length of service, and includes payment for vested
but unused vacations and pro rated automobile allowances, if applicable. The
only named executive officer who would receive aggregate severance in excess of
$100,000 under the current policy is Mr. Ronald G. Harper. Mr. Harper's
aggregate severance would be approximately $103,000 at September 30, 1995.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors (the "Committee") was
composed of Ronald G. Harper, President and Chief Executive Officer of the
Company, and independent outside directors, John C. Bumgarner, Jr., Joseph C.
McNay and Dr. David L. Huff. This Committee is responsible for overseeing and
administering the Company's executive compensation program described below.

33
<PAGE> 38

Compensation Policy

The executive compensation program of the Company is reviewed and approved
annually by the Committee and is designed to serve the interest of the Company
and its stockholders by aligning executive compensation with stockholder
objectives and to encourage and reward management initiatives and good
performance. Specifically, the executive compensation program seeks to:

(i) implement compensation practices which allow the Company to
attract and retain highly qualified executives and maintain a competitive
position in the executive marketplace with employers of comparable size and
in similar lines of business;

(ii) enhance the compensation potential of executives who are in the
best position to contribute to the development and success of the Company
by providing the flexibility to compensate individual performance; and

(iii) directly align the interest of executives with the long-term
interest of stockholders through compensation opportunities in the form of
Common Stock ownership.

These objectives are met through a program comprised of base salary and
annual cash or stock incentive awards, which are tied to operating performance,
and long-term incentive opportunities primarily in the form of incentive stock
options.

Salary. The Committee considers annual salary adjustments for the Company's
executive officers, including those named in the Summary Compensation Table.
Salary adjustments are designed to reflect internal comparability,
organizational considerations and competitive data provided by outside surveys.
As a general rule, salary ranges are targeted toward the median of survey
results.

Incentive Awards. Executives are eligible for cash awards annually based
upon financial and nonfinancial results relative to pre-established performance
targets and objectives.

Stock Options. The Company's 1988 Stock Option Plan, approved by the
stockholders in 1989, permits the Committee to grant incentive or nonstatutory
stock options to executive officers. The plan provides for stock option awards
giving executives the right to purchase Common Stock over a five-year period at
the fair market value per share as of the date the option is granted. Options
generally become exercisable in three equal annual installments beginning one
year after grant. Neither Mr. Harper nor any other member of the Board of
Directors are eligible to participate in the stock option plan.

Chief Executive Officer Compensation

Mr. Harper's overall compensation package has remained relatively constant
during the three years ended September 30, 1995. Mr. Harper received annual
incentive awards as set forth in the Summary Compensation Table. In determining
the amount of annual incentive awards, the Committee took into consideration the
Company's progress as evidenced by increased profitability in an environment
affected by adverse economic conditions, the increased quality of core assets as
a result of the Company's emphasis on its core client industry (retail
petroleum), and Mr. Harper's increased personal attention to revitalization of
certain significant client relationships.

The Board of Directors did not reject or modify any compensation
recommendation of the Compensation Committee.

THE COMPENSATION COMMITTEE
John C. Bumgarner, Jr.
Ronald G. Harper
Dr. David L. Huff
Joseph C. McNay

34
<PAGE> 39

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Ronald G. Harper, Chief Executive Officer of the Company, is the only
member of the Compensation Committee who is also an employee or officer of the
Company. In addition, Mr. Harper is a party to certain relationships and
transactions with the Company which are described below.

In November 1982, the Company entered into a ten year lease for its
corporate headquarters with a joint venture in which Mr. Harper had a 23%
interest. In April 1993, such joint venture relinquished its interest in the
headquarters building to a non-affiliated third party mortgagee. In fiscal year
1993, the Company paid $148,000 under the lease to the joint venture. At the
time the building was conveyed to the lender, the Company was in arrears on
rental payments to the joint venture by approximately $600,000. The joint
venture agreed to discount the arrearage by $280,000, leaving $320,000 owing,
and to accept payment of the remaining balance in five equal annual installments
of $60,000 commencing September 15, 1993, together with a one time payment of
$20,000 at March 31, 1993.

In 1993 and 1994, the Company entered into leases of computer equipment and
related software from Ronald G. Harper or certain members of his family. The
original cost of the equipment subject to lease was approximately $118,000. The
lease agreements provided for quarterly rental payments by the Company of
approximately $16,000. The transactions carry an inherent interest rate of 8.5%
per annum. At September 30, 1995 the Company's remaining lease obligation to the
indicated parties was $3,700 and all such leases expire December 31, 1995.

The Company entered into a number of agreements on or about September 29,
1993 with certain of its directors, executive officers and significant
stockholders, including Ronald G. Harper, all as discussed above under
"Recapitalization Transaction." Among other undertakings, the Company agreed
that upon the request of the Principal Investors (identified in
"Recapitalization Transaction," including Mr. Harper) owning a specified
percentage of shares of Common Stock, on one additional occasion (one such
registration request having been satisfied by this Prospectus), the Company will
register under the 1933 Act and applicable state securities laws, the sale of
the Common Stock owned by the Principal Investors. The Company's obligation is
subject to certain limitations regarding the timing of registrations and other
matters. The Company is also obligated to offer, on up to two occasions, to the
Principal Investors the opportunity to include shares of Common Stock owned by
them in certain registration statements filed by the Company. In addition, the
Company has agreed to indemnify the Principal Investors against securities law
liabilities arising in connection with such offerings, other than liabilities
arising as a result of information furnished to the Company by the Principal
Investors participating in the registration. The Company is obligated to pay all
expenses incident to such registration, except underwriting discounts and
commissions allocable to the sale of shares by the Principal Investors.

Mr. Harper and his wife extended a loan to the Company and certain of its
subsidiaries in the amount of $1.5 million on July 30, 1990, in consideration
for which the Harpers received a promissory note due June 30, 1991, and bearing
interest at Chase Manhattan Bank, N.A. floating prime plus 1 1/2%. This note had
been extended and was ultimately extinguished by the agreement of the Harpers to
accept $150,000 in cash and convert the remaining balance of $1.35 million to
equity as discussed under "Recapitalization Transaction."

DIRECTORS' COMPENSATION

Members of the Board of Directors who are employees of the Company receive
no additional compensation as a result of their service as directors. Directors
who are not employees of the Company are compensated at the rate of $1,500 for
each board meeting attended and are reimbursed for any out-of-pocket expenses
incurred in attending meetings.

35
<PAGE> 40

PERFORMANCE GRAPH

The following graph sets forth the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock during the
preceding five fiscal years ended September 30, 1995 compared with the
cumulative total returns of the NASDAQ Stock Market -- U.S. index and an
industry peer group. The comparison assumes $100 was invested on September 30,
1990 in the Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends.

<TABLE>
<CAPTION>
Measurement Period MPSI SYSTEMS NASDAQ STOCK
(Fiscal Year Covered) INC. PEER GROUP MRKT - US
<S> <C> <C> <C>
9/90 100 100 100
9/91 69 121 157
9/92 13 146 176
9/93 28 179 231
9/94 125 173 233
9/95 375 199 321
</TABLE>

For comparative purposes, the Company has identified a peer group including
companies who are competitors or who are known to provide services similar to
those provided by the Company. The peer group companies are CACI International
Incorporated, Information Resources Incorporated, MARC Incorporated, Equifax
Incorporated, Dun & Bradstreet, Acxiom Corporation, Market Facts Incorporated,
SEI Corporation, and Fair Issac & Company.

CERTAIN TRANSACTIONS

In November 1982, the Company entered into a ten year lease for its
corporate headquarters with a joint venture in which Mr. Harper had a 23%
interest. In April 1993, such joint venture relinquished its interest in the
headquarters building to an unaffiliated third party mortgagee. In fiscal year
1993, the Company paid $148,000 under the lease to the joint venture. At the
time the building was conveyed to the lender, the Company was in arrears on
rental payments to the joint venture by approximately $600,000. The joint
venture agreed to discount the arrearage by $280,000, leaving $320,000 owing,
and to accept payment of the remaining balance in five equal annual installments
of $60,000 commencing September 15, 1993, together with a one-time payment of
$20,000 at March 31, 1993. The Company reached satisfactory leasing arrangements
with the new owner of the building, and its current lease will expire on April
30, 1998.

The Company entered into a number of agreements on or about September 29,
1993 with certain of its directors, executive officers and significant
stockholders, all as discussed above under "Recapitalization Transaction." Under
the terms of such agreements, the Company has agreed that, upon the request of
the Principal Investors owning a specified percentage of shares of Common Stock,
on one additional occasion (one such registration request having been satisfied
by effectiveness hereof), the Company will register under the 1933 Act and
applicable states securities laws, the sale of the Common Stock owned by the
Principal Investors. The Company's obligation is subject to certain limitations
regarding the timing of registrations and

36
<PAGE> 41

certain other matters. In addition, the Company has agreed to indemnify the
Principal Investors against securities law liabilities arising in connection
with such offerings, other than liabilities arising as a result of information
furnished to the Company by the Principal Investors participating in the
registration. The Company is obligated to pay all expenses incident to such
registrations, except underwriter's discounts and commissions allocable to the
sale of shares by the Principal Investors.

Concurrent with the recapitalization transaction, the Company obtained a
$500,000 line of credit from the Bank of Oklahoma, N.A., a holder of 10.38% of
the Company's Common Stock, which declines $25,000 in availability each quarter
(beginning December 31, 1993), matures in September 1996 and bears interest on
any outstanding balances at New York prime plus 1 1/2%. The line is secured by
receivables, property and equipment. Quarterly payments equal to 5% of the
outstanding balance plus accrued interest commence at the end of the first
calendar quarter during which the initial advance is made. No advances were
outstanding under this agreement at September 30, 1995, and $300,000 remains
available at that date.

Mr. Harper and his wife extended a loan to the Company and certain of its
subsidiaries (collectively referred to as the "Borrower") in the amount of
$1,500,000 on July 30, 1990 in consideration for which the Borrower issued to
the Harpers a promissory note due June 30, 1991 in the principal amount of
$1,500,000 bearing interest at a fluctuating interest rate equal to the prime
rate in effect at the principal New York office of Chase Manhattan Bank, N.A.,
plus one and one-half percent (the "Note"). The Note had been extended and was
ultimately extinguished by the agreement of the Harpers to accept $150,000 in
cash and convert the remaining balance of $1,350,000 to equity in connection
with the recapitalization plan described above.

In 1993 and 1994, the Company entered into leases of computer equipment and
related software from its Chairman and Chief Executive Officer, Ronald G.
Harper, or certain members of his family. The original cost of the equipment
subject to lease was approximately $118,000. The lease agreements provided for
quarterly rental payments by the Company of approximately $16,000. The
transactions carry an inherent interest rate of 8.5% per annum. At September 30,
1995 the Company's remaining lease obligation to the indicated parties was
$3,700 and all such leases expire December 31, 1995.

The Company believes that the terms of the above described transactions
were competitive and no less beneficial to the Company than would have been made
available by unaffiliated parties. The Board of Directors of the Company has a
policy that the Company not enter into any related party transactions unless
approved by a majority of the Company's independent directors based upon
independent evidence of fair value.

INDEMNIFICATION

The Company has included in its Certificate of Incorporation and Bylaws
provisions to (i) eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty (provided that such
provision does not eliminate liability for breaches of the duty of loyalty, acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, violations under Section 174 of the Delaware General
Corporation Law (the "Law"), or for any transaction from which the director
derived an improper personal benefit) and (ii) indemnify its directors and
officers to the fullest extent permitted by Section 145 of the Law, including
circumstances in which indemnification is otherwise discretionary. MPSI has also
entered into separate indemnification agreements with certain of its directors
and executive officers which, among other terms and provisions, (i) provide the
individuals a contractual right of indemnity, as opposed to reliance upon
statutes or the Company's governing instruments, (ii) express the Company's
intention to maintain liability insurance, and (iii) specify procedures for
indemnity claims. The Company believes that these provisions are necessary to
attract and retain qualified persons as directors and officers.

As discussed in "Recapitalization Transaction," the Company entered into an
agreement with the Principal Investors according them certain rights to require
the Company make their shares of Common Stock freely tradeable by registration
with the Commission. As a part of such agreements, the Company and the Principal
Investors entered into reciprocal indemnity arrangements providing for indemnity
against securities

37
<PAGE> 42

law liabilities arising in connection with this offering and other offerings
pursuant to which such rights are exercised, other than liabilities arising as a
result of information furnished by the party seeking indemnity.

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

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by its counsel, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C.,
Tulsa, Oklahoma. Members of such firm participating as Selling Stockholders
hereunder include Thomas D. Gable, Thomas F. Golden and Michael D. Cooke.

EXPERTS

The consolidated financial statements and schedules of MPSI Systems Inc.,
at September 30, 1995 and 1994, and for each of the three years in the period
ended September 30, 1995, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.

38
<PAGE> 43

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Auditors..................................................... F-2
Consolidated Statements of Operations for the Years Ended September 30, 1995, 1994
and 1993......................................................................... F-3
Consolidated Balance Sheets at September 30, 1995 and 1994......................... F-4
Consolidated Statements of Cash Flow for the Years Ended September 30, 1995, 1994
and 1993......................................................................... F-5
Consolidated Statements of Stockholders' Equity for the Years Ended September 30,
1995, 1994 and 1993.............................................................. F-6
Notes to Consolidated Financial Statements......................................... F-7
</TABLE>

F-1
<PAGE> 44

REPORT OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND STOCKHOLDERS
MPSI SYSTEMS INC.

We have audited the accompanying consolidated balance sheets of MPSI
Systems Inc. and subsidiaries as of September 30, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flow for
each of the three years in the period ended September 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
MPSI Systems Inc. and subsidiaries at September 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1995 in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Tulsa, Oklahoma

November 13, 1995

F-2
<PAGE> 45

MPSI SYSTEMS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Information services and software maintenance................ $22,348,000 $17,593,000 $18,747,000
Software licensing........................................... 1,089,000 2,279,000 777,000
----------- ----------- -----------
Total revenues........................................ 23,437,000 19,872,000 19,524,000
----------- ----------- -----------
Cost of sales:
Information services and software maintenance................ 10,100,000 7,368,000 8,854,000
Software licensing (Note 5).................................. 332,000 246,000 555,000
----------- ----------- -----------
Total cost of sales........................................ 10,432,000 7,614,000 9,409,000
----------- ----------- -----------
Gross profit............................................... 13,005,000 12,258,000 10,115,000
Operating expenses:
General and administrative (net of a $280,000 discount of
rent in arrears by a related party in 1993 -- Note 10)..... 2,571,000 2,388,000 1,930,000
Marketing and client services................................ 6,993,000 5,578,000 6,219,000
Research and development..................................... 1,794,000 2,331,000 2,159,000
Restructuring expenses (Note 13)............................. -- -- 488,000
----------- ----------- -----------
Total operating expenses................................... 11,358,000 10,297,000 10,796,000
----------- ----------- -----------
Operating income (loss).................................... 1,647,000 1,961,000 (681,000)
Other income (expense):
Interest income.............................................. 195,000 205,000 346,000
Interest expense............................................. (12,000) (16,000) (398,000)
Gain (loss) on foreign exchange.............................. 638,000 8,000 (33,000)
Other, net................................................... 15,000 92,000 (51,000)
----------- ----------- -----------
Income (loss) from continuing operations before income
taxes...................................................... 2,483,000 2,250,000 (817,000)
Income taxes................................................... (454,000) (294,000) (122,000)
----------- ----------- -----------
Income (loss) from continuing operations....................... 2,029,000 1,956,000 (939,000)
Discontinued operations (Note 2):
Operating loss of RSI before disposition..................... -- (431,000) (266,000)
Loss on RSI disposition...................................... -- (51,000) --
Gain on ESC lease settlement................................. -- -- 2,415,000
----------- ----------- -----------
Income before extraordinary item............................. 2,029,000 1,474,000 1,210,000
Extraordinary gain on extinguishment of debt (net of $7,000
income taxes) (Note 6)....................................... -- -- 350,000
----------- ----------- -----------
Net income................................................... $ 2,029,000 $ 1,474,000 $ 1,560,000
=========== =========== ===========
Per share (Note 11):
Income (loss) per common and common equivalent share:
Continuing operations...................................... $ .72 $ .71 $ (.94)
Discontinued operations.................................... $ -- $ (.18) $ 2.15
Extraordinary item......................................... $ -- $ -- $ .35
Net income................................................. $ .72 $ .53 $ 1.56
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 46

MPSI SYSTEMS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 1,270,000 $ 635,000
Short-term investments, at cost................................. 41,000 44,000
Receivables (Notes 3 and 6):
Trade........................................................ 4,522,000 2,089,000
Current portion of long-term receivables, net of
unamortized discount....................................... 1,893,000 2,313,000
Work in process inventory....................................... 304,000 532,000
Prepayments..................................................... 175,000 216,000
----------- -----------
Total current assets.................................... 8,205,000 5,829,000
Long-term receivables, net of unamortized discount (Notes 3 and
6).............................................................. 2,421,000 1,790,000
Property and equipment, net (Notes 4 and 6)....................... 1,191,000 987,000
Software products, net (Note 5)................................... 673,000 601,000
Other assets...................................................... 434,000 527,000
----------- -----------
Total assets............................................ $12,924,000 $ 9,734,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................ $ 905,000 $ 1,224,000
Accrued liabilities (Notes 7 and 9)............................. 1,738,000 1,160,000
Deferred revenue................................................ 3,614,000 3,392,000
Net current liabilities of discontinued operations (Note 2)..... -- 58,000
----------- -----------
Total current liabilities............................... 6,257,000 5,834,000
Noncurrent deferred revenue....................................... 1,961,000 1,068,000
Other noncurrent liabilities...................................... 220,000 349,000
----------- -----------
Total liabilities....................................... 8,438,000 7,251,000
----------- -----------
Commitments and contingencies (Note 10)........................... -- --
Stockholders' equity (Notes 9 and 11):
Preferred Stock, $.10 par value, 1,000,000 shares authorized,
none issued or outstanding................................... -- --
Common Stock, $.05 par value, 20,000,000 shares authorized,
2,733,000 and 2,728,000 shares issued and outstanding at
September 30, 1995 and 1994, respectively.................... 137,000 136,000
Junior Common Stock, $.05 par value, 500,000 shares authorized,
none issued or outstanding................................... -- --
Additional paid-in capital...................................... 12,751,000 12,742,000
Deficit......................................................... (9,340,000) (11,369,000)
Foreign currency translation adjustment......................... 938,000 974,000
----------- -----------
Total stockholders' equity.............................. 4,486,000 2,483,000
----------- -----------
Total liabilities and stockholders' equity.............. $12,924,000 $ 9,734,000
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 47

MPSI SYSTEMS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW (SEE ALSO NOTE 12)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------
1995 1994 1993
---------- --------- ----------
<S> <C> <C> <C>
Income (loss) from continuing operations............. $2,029,000 $1,956,000 $ (939,000)
Adjustments to reconcile income (loss) from
continuing operations to cash provided by
continuing operations:
Provision for loss on receivables in excess of
write-offs...................................... -- -- (17,000)
Depreciation and amortization of property and
equipment....................................... 405,000 406,000 539,000
Amortization of software products.................. 294,000 246,000 546,000
Deferred income taxes.............................. -- 26,000 (33,000)
Loss (gain) on sale of assets...................... 7,000 (1,000) 36,000
Write off of capitalized software development
costs........................................... 30,000 -- --
Changes in assets and liabilities:
Decrease (increase) in assets:
Receivables..................................... (2,436,000) (715,000) 1,963,000
Inventories..................................... 228,000 (254,000) 174,000
Prepayments..................................... 138,000 191,000 364,000
Increase (decrease) in liabilities:
Trade payables and accruals..................... (214,000) (699,000) (505,000)
Taxes payable................................... 234,000 (24,000) (327,000)
Deferred revenue................................ 924,000 440,000 (835,000)
---------- --------- ----------
Net cash provided by continuing
operations............................... 1,639,000 1,572,000 966,000
---------- --------- ----------
Loss from discontinued operations.................... -- (482,000) (266,000)
Adjustments to reconcile loss from discontinued
operations to cash provided (used) by discontinued
operations:
Provision for loss on receivables in excess of
write-offs...................................... -- 2,000 (4,000)
Loss on sale of assets............................. -- 51,000 3,000
Provision for income taxes......................... -- (10,000) (5,000)
Depreciation and amortization...................... -- 27,000 54,000
Changes in noncash current assets and current
liabilities..................................... -- -- 147,000
---------- --------- ----------
Net cash used by discontinued operations... -- (412,000) (71,000)
---------- --------- ----------
Net cash provided by operating
activities............................... 1,639,000 1,160,000 895,000
---------- --------- ----------
Cash flows from investing activities:
Increase in short-term investment.................. -- (28,000) (16,000)
Purchase equipment................................. (634,000) (388,000) (163,000)
Software development............................... (396,000) (590,000) (68,000)
Proceeds from disposition of assets................ 16,000 7,000 27,000
Proceeds from sale of discontinued RSI unit........ -- 70,000 --
Net investment activities of discontinued
operations...................................... -- (11,000) (295,000)
---------- --------- ----------
Net cash used by investing activities...... (1,014,000) (940,000) (515,000)
---------- --------- ----------
Cash flows from financing activities:
Proceeds from issuance of capital stock............ 10,000 -- 2,033,000
Repayments of indebtedness......................... -- -- (2,863,000)
Payments under lease settlement arrangements....... -- -- (80,000)
---------- --------- ----------
Net cash provided (used) by financing
activities............................... 10,000 -- (910,000)
---------- --------- ----------
Increase (decrease) in cash and cash equivalents..... 635,000 220,000 (530,000)
Cash and cash equivalents at beginning of period..... 635,000 415,000 945,000
---------- --------- ----------
Cash and cash equivalents at end of period........... $1,270,000 $ 635,000 $ 415,000
========== ========= ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 48

MPSI SYSTEMS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FISCAL YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
COMMON STOCK FOREIGN
-------------------- ADDITIONAL RETAINED CURRENCY TOTAL
CARRYING PAID-IN EARNINGS TRANSLATION STOCKHOLDERS'
SHARES VALUE CAPITAL (DEFICIT) ADJUSTMENT EQUITY
--------- -------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1992............. 861,000 $ 43,000 $ 8,679,000 $(14,403,000) $ 1,075,000 $ (4,606,000)
Stock issued to 401(k) Plan........... 55,000 3,000 121,000 -- -- 124,000
Stock sold in private placement (Note
11):
Cash sales......................... 903,000 53,000 1,980,000 -- -- 2,033,000
Non-cash exchange for debt......... 886,000 36,000 1,856,000 -- -- 1,892,000
Net income............................ -- -- -- 1,560,000 -- 1,560,000
Translation adjustment................ -- -- -- -- (69,000) (69,000)
--------- -------- ----------- ------------ ----------- ------------
Balance, September 30, 1993............. 2,705,000 135,000 12,636,000 (12,843,000) 1,006,000 934,000
Net income............................ -- -- -- 1,474,000 -- 1,474,000
Stock issued to 401(k) Plan........... 23,000 1,000 106,000 -- -- 107,000
Translation adjustment................ -- -- -- -- (32,000) (32,000)
--------- -------- ----------- ------------ ----------- ------------
Balance, September 30, 1994............. 2,728,000 136,000 12,742,000 (11,369,000) 974,000 2,483,000
Net income............................ -- -- -- 2,029,000 -- 2,029,000
Stock options exercised............... 5,000 1,000 9,000 -- -- 10,000
Translation adjustment................ -- -- -- -- (36,000) (36,000)
--------- -------- ----------- ------------ ----------- ------------
Balance, September 30, 1995............. 2,733,000 $137,000 $12,751,000 $ (9,340,000) $ 938,000 $ 4,486,000
========= ======== =========== ============ =========== ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 49

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of MPSI Systems Inc. and its wholly owned
subsidiaries. All significant intercompany transactions and accounts have been
eliminated in consolidation. All shares and per share data appearing in the
consolidated financial statements and notes thereto reflect a one-for-ten
reverse stock split (see Note 11).

Revenue Recognition: Revenues and costs related to production of market
information data bases are recorded based upon the ratio of costs incurred to
total estimated completion costs (percentage-of-completion method). Revenues and
costs related to single site studies, mini-market studies and other projects
which are completed in a short time period are recognized at completion.
Anticipated losses on contracts are charged against earnings at the time such
losses are identified.

The Company's software products are generally licensed to customers through
noncancelable software license and maintenance contracts with terms of up to
five years. The corresponding long-term receivables and deferred maintenance
revenue from these installment contracts are stated at the discounted present
value of annual license and maintenance payments to be received over the
contract term based upon the prime rate of interest on the effective date of
each contract. The present value discount, related to installments due after one
year, is amortized to interest income using an accelerated method that equates
interest earnings with outstanding receivable balances. Software license
revenues, equal to the present value of the aggregate annual license
installments, are recognized at the latter of contract execution or software
delivery when collection is probable. When it cannot be determined that
collection is probable, or if a contract contains cancellation options, software
revenues are recognized as the annual installments are billed. At the time
revenue is recognized, the Company has no remaining obligations under the
software license and maintenance contracts other than providing postcontract
customer support services related to the maintenance portion of the contract and
performance obligations under any optional and separately priced training or
consulting arrangements. Maintenance revenues, equal to the present value of
annual installment payments, are recognized ratably over the term of the
contracts as the postcontract customer support services are provided and the
related costs are incurred and recognized. Optional training and consulting
represent service transactions as to which revenues and expense are recognized
when the earnings process is substantially complete.

Statement of Cash Flows: For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.

Property and Equipment: Property and equipment is stated at cost.
Depreciation is provided using the straight-line method, over the estimated
useful lives of the respective assets, except for leasehold improvements which
are amortized over the lesser of the lease term or the economic life of the
underlying asset. Since such assets are employed in all facets of the Company's
operations, depreciation expense is reflected in cost of sales as well as in
each category of operating expenses. The Company charges the cost of repairs and
maintenance to expense as incur red and capitalizes the cost of replacements,
renewals and betterments. When property or equipment is retired, the cost and
accumulated depreciation are removed from the accounts, and the resulting gain
or loss on the disposition is reflected in other income (expense).

Software Products: Cost of software held for resale, which was either
purchased with the intent to incorporate the acquired software in MPSI products
or developed internally, is presented net of accumulated amortization. The costs
of internally developed software include direct labor, materials and overhead,
and relate to significant enhancements to existing software or to development of
new software products. All costs incurred to establish the technological
feasibility of internally developed software are charged to research and
development expense as incurred. Royalties, which may become payable because of
ongoing proprietary interests related to third-party software imbedded in MPSI
products, are charged to cost of sales-software licensing as applicable software
sales are recognized.

F-7
<PAGE> 50

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The annual amortization of software products is computed on a
product-by-product basis and is the greater of the amount determined using (1)
the ratio that current gross revenues for a product bear to the total of current
and anticipated future gross revenues for that product or (2) the straight-line
method over the remaining economic life of the product. Historically, the
straight-line method has resulted in a greater amount of amortization in each
accounting period and has, therefore, been the basis for amortization in the
current period and in prior periods. Amortization starts when a product is
available for general release to customers and is reflected in cost of
sales-software licensing.

In the event that capitalized software development costs are subsequently
determined not to be fully recoverable from future operations, the carrying
value of such software is reduced to an amount equal to its net realizable value
less costs of marketing and distribution. The reduction in carrying value is
recorded in cost of sales-software licensing.

Inventory: Work-in-process is composed of direct labor, costs of gathering
demographic data, indirect costs and overhead. Indirect costs and overhead are
allocated to each contract based upon the direct labor incurred.

Income Taxes: The Company applies the liability method of accounting for
income taxes in accordance with Statement of Financial Accounting Standards No.
109 which was adopted October 1, 1993 as required. Under this method, deferred
income taxes are recognized for the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities. The effect on deferred taxes of a change in
tax rates is recognized in the results of operations during the period that
includes the enactment date.

Earnings Per Share: Earnings per share computations are based upon the
weighted average number of common shares outstanding during each period,
including dilutive common stock equivalents related to unexercised stock
options. Earnings per share computations do not give effect to common stock
equivalents for any period in which their inclusion would have the effect of
increasing the earnings per share amount or decreasing the loss per share amount
otherwise computed.

Foreign Currency Translation: Assets and liabilities of the Company's
foreign operations, except Brazil, are translated from the foreign operating
currency to the U.S. Dollar equivalent for consolidated reporting purposes using
the applicable exchange rates at the balance sheet date. Revenues and expenses
are translated at average rates for the year. Exchange differences from these
translations are included in stockholders' equity. Where amounts denominated in
a foreign currency are or are expected to be converted into dollars by
remittance or repayment, the realized exchange differences are reflected in the
results of operations. Due to high rates of inflation in Brazil, transactions
and accounting records are maintained in U.S. Dollar equivalents.

Restructuring Expenses: Expenses associated with corporate restructuring
are recognized at the time that the underlying obligations are incurred.
Severance costs are accrued in the accounting period during which management,
having authority to do so, approves severance plans, provided that (1) the
specific individuals or positions to be terminated have been identified and the
costs thereof were reasonably quantifiable and probable of occurrence within the
succeeding twelve months, and (2) prior to release of the financial statements
for the affected period, the affected employees or positions are either
terminated or the general terms of the termination plan have been communicated,
including the benefits to which terminated employees are entitled or will
voluntarily receive. The net present value of remaining lease obligations
related to excess space is accrued in full at the time the space is abandoned,
net of sublease recoveries which are probable. The costs of other corporate
restructuring decisions are accrued at the time the obligations related thereto
are incurred and quantifiable.

New Accounting Pronouncements: In November 1992, the Financial Accounting
Standards Board adopted Statement No. 112, "Employers' Accounting for
Postemployment Benefits," effective for fiscal years

F-8
<PAGE> 51

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

beginning after December 15, 1993. In March 1995 the Financial Accounting
Standards Board adopted Statement No. 121, "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," effective for
fiscal years beginning after December 15, 1995. Adoption of these new Statements
had no material effect on the Company's financial position or results of
operations.

In October 1995, the Financial Accounting Standards Board adopted Statement
No. 123, "Accounting for Stock Based Compensation," effective for fiscal years
beginning after December 15, 1995. FAS 123 provides MPSI the option to continue
present methods of accounting for stock-based compensation with additional
disclosure of the effects thereof had the accounting policies set forth in the
Statement been adopted. MPSI will incorporate the required disclosure in future
financial statements.

2. DISCONTINUED OPERATIONS:

On September 1, 1994, the Company's wholly owned subsidiary, RSI, sold all
of its noncash assets to an unaffiliated third party, Dakota Worldwide
Corporation ("Dakota"). Dakota paid $70,000 cash, assumed trade accounts payable
of approximately $97,000, assumed certain lease obligations of approximately
$426,000 at the date of sale (although RSI remains contingently liable on such
leases in the event Dakota fails to perform) and agreed to pay RSI future
royalties equal to 10% of sales generated from RSI's client base through and
including August 31, 1997. Dakota acquired trade accounts receivable,
furnishings and equipment (with a net book value of $52,000) and work in process
inventory. Dakota assumed all performance obligations related to contracts in
force with RSI's customers at the sale date.

Concurrent with this transaction, RSI and MPSI executed an agreement not to
compete with Dakota in North America. RSI terminated all of its employees,
subject to temporary retention of certain administrative staff, and RSI was
responsible for all severance costs related thereto. The Company has completed a
winding down of the corporate affairs of RSI and dissolved it effective
September 25, 1995.

Operating results of the discontinued RSI business unit were as follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1994 1993
---------- ----------
<S> <C> <C>
Revenues.................................................... $1,226,000 $1,945,000
Loss before income taxes.................................... (440,000) (271,000)
Income tax benefit.......................................... 9,000 5,000
Loss from operations........................................ (431,000) (266,000)
</TABLE>

The loss on disposal of RSI at September 30, 1994 included the following:

<TABLE>
<S> <C> <C>
Gain on net assets sold..................................... $ 32,000
Accrued close-down costs.................................... (38,000)
Income tax benefit.......................................... 1,000
Accrued employee severance.................................. (46,000)
----------
Loss on disposal of discontinued operations............ $ (51,000)
=========
</TABLE>

During fiscal year 1995, MPSI settled net liabilities of $58,000 accrued at
September 30, 1994. No assets or liabilities related to discontinued operations
remained at September 30, 1995.

During fiscal year 1993, the Company settled all remaining liabilities
related to the business of ESC, discontinued in 1991, including a facility's
lease obligation. The Company paid the lessor a $206,000 cash settlement in
March 1993 and was thereafter released from all remaining liability under that
lease. As a result of settling the remaining liabilities, the Company reversed
the remaining accrued lease liability resulting in a $2.4 million gain from
discontinued operations (net of $20,000 income taxes, which amount reflects

F-9
<PAGE> 52

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

substantial reduction from expected income taxes due to application of net
operating loss carryforwards) in the 1993 statement of operations.

3. RECEIVABLES:

Trade accounts receivable include unbilled amounts of $1,662,000 at
September 30, 1995 and $947,000 at September 30, 1994. These amounts represent
market study revenues recognized under the percentage-of-completion method in
excess of amounts billed and will generally be billable during the succeeding
twelve months upon completion of the respective studies.

Current and noncurrent receivables also include unbilled amounts of
$4,254,000 at September 30, 1995 and $3,849,000 at September 30, 1994 (before
present value discount and excluding $381,000 and $442,000 which had been billed
at September 30, 1995 and 1994, respectively) related to multi-year software
license and maintenance agreements. Since these agreements contain annual
installment billing provisions, the unbilled receivable balance for some
contracts is as much as four years' future annual billings. Of the September 30,
1995 unbilled amounts, $1,656,000 (compared with $2,005,000 at September 30,
1994) will be billed in the succeeding twelve months, and the remainder will be
billed thereafter at such future dates as are specified in the respective
contracts. The portion of such future billings related to maintenance and
support services not yet performed is offset by corresponding amounts in
deferred revenue. The current portions of long-term receivables are reduced by
unamortized present value discount of $144,000 and $134,000 at September 30,
1995 and 1994, respectively. Noncurrent long-term receivables are presented net
of unamortized present value discount in the amount of $177,000 and $54,000 at
September 30, 1995 and 1994, respectively. The present value discount is imputed
based upon the New York prime rate on the effective date of each agreement.
Interest income related to these agreements was $171,000, $196,000, and $338,000
in fiscal years 1995, 1994 and 1993, respectively.

A significant portion of the Company's business activity is with the major
multinational oil companies. At September 30, 1995, 93% ($8,556,000) of the
Company's receivables (before present value discounts) were from petroleum
clients ($6,167,000 or 97% at September 30, 1994). The receivable portfolio is
well diversified geographically which tends to mitigate the potential impact of
fluctuations in petroleum activities which may otherwise result if receivables
were confined to a particular geographic area. Software license agreements are
payable over several years (generally five-year agreements) and are expected to
be paid from operating cash flows of the customers. The Company does not require
collateral or other security to support these contractual receivables. The
carrying value of long-term receivables, net of unearned discount, approximates
market value.

4. PROPERTY AND EQUIPMENT:

Property and equipment consists of:

<TABLE>
<CAPTION>
SEPTEMBER 30,
USEFUL LIFE ---------------------------
IN YEARS 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Leasehold improvements........................ Various $ 713,000 $ 713,000
Computer equipment and software............... 4-5 6,243,000 5,706,000
Office furnishings and equipment.............. 3-10 1,655,000 1,672,000
----------- -----------
8,611,000 8,091,000
Accumulated depreciation...................... (7,420,000) (7,104,000)
----------- -----------
Net property and equipment.................. $ 1,191,000 $ 987,000
=========== ===========
</TABLE>

The provision for depreciation was $405,000, $406,000 and $539,000, for the
years ended September 30, 1995, 1994 and 1993, respectively. At September 30,
1995, fully depreciated assets with an aggregate original cost of approximately
$6.3 million remain in use.

F-10
<PAGE> 53

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. SOFTWARE PRODUCTS:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Capitalized software development costs.................... $ 3,171,000 $ 2,805,000
Accumulated amortization.................................. (2,498,000) (2,204,000)
----------- -----------
Net software products..................................... $ 673,000 $ 601,000
=========== ===========
</TABLE>

The provision for amortization, reflected in Software Licensing cost of sales,
was $294,000, $246,000, and $546,000 for the years ended September 30, 1995,
1994 and 1993, respectively.

6. DEBT:

The Company's chairman and chief executive officer extended a loan to the
Company and certain of its wholly owned subsidiaries in the amount of $1,500,000
on July 30, 1990. The loan bore interest equal to the prime rate in effect at
the principal New York office of Chase Manhattan Bank, N.A. plus one and
one-half percent. The outstanding balance was liquidated in connection with the
September 1993 equity recapitalization transaction (see Note 11) by cash payment
of $150,000 and exchange of the remaining $1,350,000 for Common Stock of the
Company.

In fiscal year 1993 until September 29, 1993, the Company had a note
payable to Bank of Oklahoma, N.A. (the "Bank"). The Company was in default
during that period until a debt restructuring which took place effective January
19, 1993. This restructuring arrangement provided for an extension of the Bank's
commitment to MPSI through November 30, 1993, waived previous defaults in
existence at that time, and amended weekly debt service and financial reporting
requirements. No gain or loss resulted from this restructuring transaction. The
Company complied with the restructuring agreement until the loan was liquidated
as the result of an equity recapitalization on September 29, 1993.

On September 29, 1993 the Company consummated an infusion of equity capital
as described more fully in Note 11. Approximately $1,725,000 and $150,000 of the
proceeds from that transaction were paid to the Bank and to the Company's
Chairman, respectively, as partial liquidation of the aforementioned debt
instruments. The remaining $1 million debt owing to the Bank was liquidated in
exchange for 286,000 shares of MPSI Common Stock, which had a market value at
September 29, 1993 of approximately $2.25 per share. This transaction, which
represented a concession by the Bank in connection with a restructuring of
troubled debt, resulted in a pre-tax extraordinary gain of $357,000 representing
the difference between the $1 million owed to the Bank (after the partial
payment) and the $643,000 value of the Common Stock exchanged. As the result of
the recapitalization transaction, the Company had no further debt obligation at
September 30, 1993, except for normal trade payables and accrued liabilities.

Concurrent with the equity transaction, the Company obtained a $500,000
line of credit from the Bank which declines $25,000 in availability each quarter
(beginning December 31, 1993), matures in September 1996 and bears interest on
any outstanding balances at New York prime plus 1 1/2%. The line is secured by
receivables, property and equipment. Quarterly payments equal to 5% of the
outstanding balance plus accrued interest commence at the end of the first
calendar quarter during which the initial advance is made. No advances were
outstanding under this agreement at September 30, 1995, and $300,000 remained
available at that date. The agreement restricts the Company's external financing
and capital acquisitions during the commitment period as described below:

- Leasing arrangements (excluding workstation computer equipment) must be
limited such that aggregate rentals during any consecutive twelve-month
period do not exceed $3.5 million.

F-11
<PAGE> 54

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- No more than $1,050,000 of expenditures may be made annually for
acquisition, construction, expansion or improvement of capital assets
(excluding computer workstations).

- Aggregate expenditures for computer workstation equipment may not exceed
$600,000 during the commitment period.

- The Company must not permit to exist any borrowings except (a) borrowings
under this agreement, (b) borrowings in connection with workstation
computer equipment, (c) obligations related to trade payables incurred in
the ordinary course of business, or (d) obligations under existing
leases.

The Company is in compliance with these restrictions, and management is of
the opinion that these financial restrictions will not adversely affect the
Company's operations as they allow sufficient flexibility to meet anticipated
operating requirements.

7. INCOME TAXES:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------
1995 1994 1993
---------- --------- ----------
<S> <C> <C> <C>
Income (loss) from continuing operations
before income taxes:
Domestic................................... $3,515,000 $2,977,000 $ 513,000
Foreign.................................... (1,032,000) (727,000) (1,330,000)
----------- ---------- -----------
Total.............................. $2,483,000 $2,250,000 $ (817,000)
=========== ========== ===========
Income taxes (benefits):
Current:
Federal................................. $ 80,000 $ 56,000 $ 37,000
State................................... 203,000 3,000 (10,000)
Foreign................................. 171,000 209,000 128,000
----------- ---------- -----------
Current income taxes............... 454,000 268,000 155,000
----------- ---------- -----------
Foreign deferred income tax (benefits)..... -- 26,000 (33,000)
----------- ---------- -----------
Provision for total income taxes... $ 454,000 $ 294,000 $ 122,000
=========== ========== ===========
</TABLE>

A reconciliation of the provision for income taxes at the applicable
Federal statutory income tax rate to the actual provision for income taxes
follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------
1995 1994 1993
---------- --------- ----------
<S> <C> <C> <C>
Expense (benefit) at statutory rate.......... $ 869,000 $ 787,000 $ (378,000)
Alternative minimum tax...................... 80,000 56,000 37,000
Foreign income and taxes, net................ (201,000) 177,000 35,000
Loss carryforwards........................... 418,000 311,000 537,000
Federal loss carryforwards utilized.......... (813,000) (1,069,000) (124,000)
State income taxes........................... 132,000 2,000 (6,000)
Other, net................................... (31,000) 30,000 21,000
----------- ---------- -----------
Income taxes............................... $ 454,000 $ 294,000 $ 122,000
=========== ========== ===========
</TABLE>

Income taxes of $352,000 were payable at September 30, 1995 ($28,000 at
September 30, 1994). The Company does not accrue income taxes on undistributed
earnings of certain foreign subsidiaries which are permanently invested. At
September 30, 1995 and 1994, the amount of undistributed earnings for which
taxes have not been accrued was insignificant.

F-12
<PAGE> 55

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At September 30, 1995, the Company has various U.S. tax credits of $689,000
which expire between 1996 and 2007. As discussed in Note 11, should stock
transactions occur prior to September 28, 1996, which have the effect of
increasing the relative holdings of certain parties to the 1993 recapitalization
by more than 3%, the Company's tax carryforwards would be limited as to annual
utilization thereafter. Such limitations might result in the recognition of
substantial deferred income taxes related to temporary differences, the effects
of which are currently offset by such carryforwards in the financial statements.
These carryforwards have eliminated the U.S. deferred income tax liabilities at
September 30, 1995 and 1994. At September 30, 1995, certain foreign subsidiaries
have net operating loss carryforwards of approximately $7,693,000 which may be
utilized in future years.

Effective October 1, 1993, the Company adopted Statement of Accounting
Standard No. 109, "Accounting for Income Taxes". Adoption of the Statement had
no effect on the Company's financial position or results of operations. Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Software revenue........................................ $ 825,000 $ 992,000
Depreciation............................................ 49,000 27,000
Other................................................... 98,000 98,000
----------- -----------
Total deferred tax liabilities.................. 972,000 1,117,000
----------- -----------
Deferred tax assets:
Accrued liabilities..................................... 245,000 218,000
U.S. and foreign loss carryforwards..................... 2,279,000 2,779,000
U.S. tax credit carryforwards........................... 689,000 1,176,000
----------- -----------
Total deferred tax assets....................... 3,213,000 4,173,000
Valuation allowance for deferred tax assets............. (2,339,000) (3,150,000)
----------- -----------
Net deferred tax assets......................... 874,000 1,023,000
----------- -----------
Net deferred tax liabilities included in Other
Noncurrent Liabilities........................ $ 98,000 $ 94,000
=========== ===========
</TABLE>

Utilization of the Company's tax credit and loss carryforwards is dependent
on realizing taxable income in the appropriate tax jurisdiction. Deferred tax
assets for these carryforwards have been reduced by the valuation allowance to
an amount that is more likely than not to be realized.

F-13
<PAGE> 56

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. BUSINESS SEGMENT AND REVENUE FROM MAJOR CUSTOMERS:

The Company operates in one business segment from its principal production
facility in the United States supported by satellite production facilities in
England and Brazil. Foreign sales offices are currently maintained in Australia,
Brazil, Japan, the United Kingdom and Singapore. The following table sets forth
the revenues and other information related to continuing services provided by
each of the Company's three production centers.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Unaffiliated customers:
United States................................................ $21,839,000 $18,045,000 $16,888,000
Europe....................................................... 1,369,000 1,428,000 2,194,000
Brazil....................................................... 229,000 399,000 442,000
Between geographic areas(1):
United States................................................ 300,000 391,000 957,000
Europe....................................................... 284,000 384,000 595,000
Asia/Pacific Rim............................................. 2,222,000 2,033,000 1,925,000
Eliminations................................................... (2,806,000) (2,808,000) (3,477,000)
----------- ----------- -----------
Total revenues........................................ $23,437,000 $19,872,000 $19,524,000
=========== =========== ===========
Operating income (loss):
United States................................................ $ 2,868,000 $ 2,520,000 $ 821,000
Europe....................................................... (649,000) (430,000) (1,177,000)
Brazil....................................................... (572,000) (129,000) (325,000)
----------- ----------- -----------
Total operating income (loss)......................... $ 1,647,000 $ 1,961,000 $ (681,000)
=========== =========== ===========
Identifiable assets:
United States................................................ $11,581,000 $ 8,620,000 $ 9,109,000
Europe....................................................... 891,000 860,000 643,000
Brazil....................................................... 452,000 254,000 288,000
----------- ----------- -----------
Total assets.......................................... $12,924,000 $ 9,734,000 $10,040,000
=========== =========== ===========
Export sales from U.S.:
Canada....................................................... $ 749,000 $ 572,000 $ 1,185,000
Central America.............................................. 154,000 418,000 524,000
South America................................................ 1,554,000 790,000 648,000
Europe....................................................... 903,000 1,475,000 2,175,000
Asia/Pacific Rim............................................. 10,066,000 8,724,000 9,090,000
Africa....................................................... 143,000 137,000 8,000
----------- ----------- -----------
Total export sales.................................... $13,569,000 $12,116,000 $13,630,000
=========== =========== ===========
Consolidated revenues from foreign customers by geographic area
are as follows:
Canada and Central America................................... $ 903,000 $ 991,000 $ 1,709,000
Singapore, Australia and Japan............................... 10,066,000 8,724,000 9,089,000
Europe and United Kingdom.................................... 2,271,000 2,903,000 4,369,000
Africa....................................................... 143,000 137,000 8,000
South America................................................ 1,783,000 1,189,000 1,091,000
----------- ----------- -----------
Consolidated foreign revenues......................... $15,166,000 $13,944,000 $16,266,000
=========== =========== ===========
Depreciation and amortization of property and equipment:
United States................................................ $ 366,000 $ 373,000 $ 416,000
Europe....................................................... 24,000 18,000 102,000
Brazil....................................................... 15,000 15,000 21,000
Capital expenditures:
United States................................................ $ 565,000 $ 374,000 $ 160,000
Europe....................................................... 64,000 14,000 1,000
Brazil....................................................... 5,000 -- 2,000
</TABLE>

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

(1) Sales between geographic areas are made at prices that generally approximate
the prices of similar charges to unaffiliated customers.

F-14
<PAGE> 57

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Approximately 96% of total revenues from continuing operations were derived
from the petroleum industry during the year ended September 30, 1995 (99% and
97% during 1994 and 1993, respectively). Individual customers accounted for MPSI
revenues which were in excess of 10% of consolidated revenues in 1993, 1994 or
1995 as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
AMOUNT % AMOUNT % AMOUNT %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Exxon/Esso/Imperial...................... $4.4 19 $3.8 19 $3.2 16
Texaco................................... $ .6 3 $2.2 11 $2.4 13
Shell.................................... $2.8 12 $2.1 11 $2.1 11
Amoco.................................... $2.5 11 $1.4 7 $ .2 1
</TABLE>

Although the Company would be adversely affected if several petroleum
industry customers curtailed their long-term usage of MPSI products or in the
event of a significant long-term economic downturn in the petroleum industry
generally, the Company's petroleum clients are well diversified geographically
which reduces the long-term risk attendant with its industry dependence, and
MPSI has historically experienced high renewal rates for its software license
and maintenance agreements.

9. EMPLOYEE BENEFITS:

Under an employee stock ownership and investment plan, all participants may
contribute up to 16% of their annual earnings. Subject to certain limitations,
the Company will contribute in cash or Common Stock an amount equal to but not
less than 50% or more than 100% of a participant's salary deferral contributions
that are not in excess of 6% of the participant's earnings for the year.
Contributions may be invested in the Company's Common Stock or in five other
equity or fixed-income funds. At September 30, 1995 and 1994, the Company had
accrued $102,000 and $91,000 of liabilities for matching contributions to the
401(k) plan (which in each case represented the estimated Company match
attributable to nine months of participant contributions since the Plan year
ends December 31). The Company liquidated its matching contribution liability
for the Plan year ended December 31, 1993 during fiscal year 1994 by
contributing previously unissued Common Stock at a value of $107,000. During
fiscal year 1995, the Company paid a $121,000 cash matching contribution
applicable to the Plan year ended December 31, 1994. The matching contribution
for Plan year 1995 will be paid during fiscal year 1996.

The Company has reserved 750,000 shares of Common Stock for issuance of
stock options under a 1988 stock option plan which expires in 1998. An
additional 130,000 shares are potentially issuable if outstanding options under
a 1984 stock option plan are exercised. The remaining options under the 1984
plan expire from September 3, 1998 to November 28, 1999, and no further options
may be granted under that plan.

F-15
<PAGE> 58

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the status of the plans at September 30,
1995:

<TABLE>
<CAPTION>
NO. OF OPTION PRICE
SHARES PER SHARE
------- -------------
<S> <C> <C>
Outstanding September 30, 1992............................. 89,490 $ 5.60-$38.80
Granted.................................................. 106,500 $ 2.25
Cancelled................................................ (77,655) $ 5.60-$38.80
Expired.................................................. (8,735) $22.50-$38.80
-------
Outstanding September 30, 1993............................. 109,600 $ 2.25-$17.50
Granted.................................................. 18,000 $ 3.00-$ 4.50
Cancelled................................................ (15,500) $ 2.25
-------
Outstanding September 30, 1994............................. 112,100 $ 2.25-$17.50
Granted.................................................. 68,900 $ 3.00
Cancelled................................................ (8,050) $ 2.25-$ 8.75
Exercised................................................ (4,333) $ 2.25
-------
Outstanding September 30, 1995............................. 168,617 $ 2.25-$17.50
=======
Exercisable September 30, 1995............................. 62,912 $ 2.25-$17.50
=======
</TABLE>

The Company accrued $140,000 at September 30, 1995 (none accrued at
September 30, 1994); in connection with incentive award programs for certain
employees. The awards were accrued based upon the Company's achievement of
certain revenue and operating income objectives and the respective contributions
of certain employees to the achievement of those objectives. The various
incentive plans specify cash settlement of the accrued liability prior to
December 31, 1995.

At September 30, 1994 and 1995, the Company had an accrual of approximately
$110,000 in connection with discretionary employee performance awards in the
form of deferred compensation. Such amount was earned and accrued based on the
employee's performance during the year ended September 30, 1994. Under deferred
compensation agreements with certain key employees as approved by the
Compensation Committee, the Company will pay future cash awards to the specified
employees upon the achievement, for thirty consecutive business days, of a $6.00
per share market price for the Company's Common Stock. Such payments could be
made at any point after November 29, 1995, assuming stock price and other
vesting requirements have been met. The liability for these discretionary
bonuses is reflected in the consolidated balance sheets under the caption Other
Noncurrent Liabilities.

At September 30, 1995 and 1994, the Company had accrued $546,000 and
$482,000, respectively, related to employee vacations earned but not yet taken.

10. COMMITMENTS AND CONTINGENCIES:

In early fiscal year 1993, the Company was in arrears under the lease for
its corporate headquarters. The lessor was a joint venture in which the
Company's chairman had a noncontrolling financial interest and a director with
nominal shareholdings in the Company had a dominant financial interest. At March
31, 1993 the Company resolved its $600,000 rental arrearage with the lessor. The
lessor agreed to discount the arrearage by approximately $280,000, leaving
$320,000 owing, and to accept payment of the remaining balance in five annual
installments of $60,000 commencing September 15, 1993, together with a one-time
payment of $20,000 at March 31, 1993. As neither the Company nor its chairman
exercised significant influence over the joint venture, the discount to the
arrearage was recognized as a reduction of general and administrative expense in
1993. Related party rent expense of $228,000 and $693,000 was paid in 1993 and
1992, respectively. The Company has made all payments required to date. New
leasing arrangements negotiated by

F-16
<PAGE> 59

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company with the new owner of the building, an unaffiliated third party,
which took effect April 1, 1993, cover 40,000 square feet and expire April 1998.

During 1993 and 1994, the Company leased computer equipment from its
chairman and members of his family under various agreements which require
aggregate quarterly payments of approximately $16,000 and expire in 1995.
Approximately $45,000 was paid under such agreements during each of the years
ended September 30, 1995 and 1994 ($24,000 in 1993).

The Company leases other office space and equipment under various
agreements, substantially all of which have been accounted for as operating
leases. Rental expense, including the leases described above, of $1,095,000 was
recorded during the year ended September 30, 1995 ($1,265,000 and $1,794,000 in
1994 and 1993, respectively). Aggregate future rentals under these commitments
are as follows: 1996 -- $834,000; 1997 -- $694,000; 1998 -- $329,000, and
1999 -- $3,000.

In connection with the discontinued RSI business unit and sale of its
assets as described in Note 2, the Company remains contingently liable until
December 31, 1997, for certain lease obligations in the event that the purchaser
does not fully perform in accordance with the lease terms. The Company has
received no notices of non-performance on these obligations. At September 30,
1995, the aggregate remaining lease obligations assumed by the purchaser were
$2,000 related to equipment leases and $280,000 related to the office space
which RSI occupied prior to the sale. The annual amounts under such lease
obligations for which the Company might be liable in the event that Dakota fails
to perform are: 1996 -- $126,000; 1997 -- $124,000, and 1998 -- $32,000.

11. EQUITY INFUSION:

Effective September 29, 1993, the Company completed a series of
transactions as part of a broad equity recapitalization plan which yielded total
proceeds of $4.4 million as set forth below. The plan involved not only
injection of cash, but a conversion of significant debt to equity. Unless
otherwise indicated, all transactions were based on a price of $2.25 per share.
All shares and per share data appearing in the consolidated financial statements
and notes thereto reflect a one-for-ten reverse stock split described below.

<TABLE>
<CAPTION>
STOCK ISSUED
PROCEEDS TO REGISTRANT -------------------------------
----------------------- COMMON EQUIVALENT
DEBT OF CONVERTIBLE
NAME OF STOCKHOLDER CASH CONVERSION COMMON PREFERRED SHARES
- ----------------------------------------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Investors acquiring more than 5% of
outstanding stock:
Ronald G. Harper....................... $ -- $1,350,000 -- 600,000
John C. Bumgarner, Jr. ................ 500,000 -- 162,222 60,000
Joseph C. McNay........................ 500,000 -- 162,222 60,000
The Robertson Stephens Orphan Fund..... 412,000 -- 182,890 --
Sanford Orkin.......................... 500,000 -- 222,222 --
Bank of Oklahoma, N.A.(1).............. -- 1,000,000 285,715 --
All other investors, each of whom
acquired less than 5% of outstanding
stock
(12 persons)........................... 121,000 -- 53,999 --
---------- ---------- ---------- -------
Totals......................... $2,033,000 $2,350,000 1,069,270 720,000
========== ========== ========== =======
</TABLE>

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

(1) Conversion price was $3.50 per share which reflects the Bank's concession in
a troubled debt restructuring.

F-17
<PAGE> 60

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Preferred Stock was issued only as a temporary investment vehicle to
facilitate consummation of the equity transaction. It was utilized because,
until a reverse stock split could be accomplished, the Company did not have
sufficient authorized Common Stock to complete the transaction. Because of the
temporary nature of the Preferred Stock, it has been reflected herein as if
converted at September 30, 1993.

The Preferred Stock had been previously authorized by the Company's
shareholders, but the Board of Directors established its relative rights and
privileges upon issuance in this transaction. The 72 shares of Preferred Stock
issued were convertible into 720,000 shares of Common Stock. Even prior to
conversion, the Preferred Stockholders possessed the equivalent voting power to
holders of 720,000 shares of Common Stock. The agreements pursuant to which the
Preferred Stock was issued provide that one day after effectiveness of the
Reverse Stock Split described below, such shares automatically convert to
720,000 shares of Common Stock.

Of the total $2,033,000 cash proceeds from the transaction, $1,725,000 was
paid to Bank of Oklahoma, N.A., to discharge the remaining balance of the
Company's indebtedness to such bank. An additional $150,000 was used to satisfy
the remaining portion of an original $1,500,000 Company indebtedness to Ronald
G. Harper and family, a substantial portion of which is being converted to
equity, as set forth above. Remaining cash proceeds of approximately $158,000
were used to pay transaction costs associated with the private placements of
stock, entering into related agreements and for general working capital
purposes. The Company accrued approximately $101,000 of estimated transaction
costs with a corresponding charge to additional paid-in capital.

The Company made several agreements in connection with the private
placements. Among others, the principal investors, being John C. Bumgarner, Jr.,
Ronald G. Harper, Joseph C. McNay, Sanford Orkin, The Robertson Stephens Orphan
Fund and Bank of Oklahoma, N.A. (collectively, the "Principal Investors"),
required the Company grant them demand registration rights for the restricted
securities received in the private placement. Specifically, upon request of 30%
of the stock subject to the agreements, and so long as 10% of all Company Common
Stock would be represented, the Principal Investors have a right to require the
Company to file and make effective with the Securities and Exchange Commission
one additional registration statement for their stock. In addition, should the
Company ever decide to file a registration statement for its own account or for
the benefit of stockholders other than the Principal Investors, the Principal
Investors nevertheless may elect to have their securities included in such other
registration statements collectively on up to two occasions. Selling
Stockholders, other than the Principal Investors, were also accorded
registration rights to be exercised at the same time and on the same terms as
those applicable to the Principal Investors. All registration rights extended in
the private placement expire on September 29, 1998.

Other miscellaneous agreements were reached in connection with the private
placement as well. The Principal Investors are entitled to price protection
assuring that for a period of three years, the Company does not issue Common
Stock at a value of less than $2.25 per share, subject to certain exceptions, or
they will be permitted to receive additional shares as if they had purchased at
the lower price or prices. Further, certain holders of Common Stock received in
the private placement have agreed upon a disposition procedure for a three-year
term designed to not jeopardize the Company's credit carryforwards for federal
income taxes. However, because all stockholders are not subject to such
restrictions, and considering the new stock issued in the private placement and
the relatively small percentage of outstanding equity (less than 3%) which, if
ownership changed or the Company issued a comparable amount of new stock, could
limit the tax credit carryforwards, this attractive tax benefit is at risk. The
Principal Investors have among themselves also agreed to a pro rata co-sale
right should any of the principal group of investors wish to sell their stock. A
part of the Principal Investors' agreements also assure the existing slate of
directors shall remain in office for the next three years, and that during such
period the Audit, Compensation and Nominating Committees will be composed of the
members serving as of September 29, 1993. Other agreements reached provide for
regular financial and budgetary reporting to the Board of Directors, together
with limitations upon operational

F-18
<PAGE> 61

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

authority of the officers to incur indebtedness in excess of $100,000 on behalf
of the Company without prior Board approval. Another voting agreement entered
into by the Principal Investors requires 61% or greater approval of the Common
Stock for the Company to merge, consolidate, or enter into a transaction to sell
or lease all or substantially all of its assets, or to issue additional shares
of equity except to employment benefit or incentive plans. Lastly, John C.
Bumgarner, Jr. and Joseph C. McNay each have the right to advance the nomination
of another individual for a director's position, and the Principal Investors
have agreed to vote their shares in support of any such nomination. The relative
holdings of such persons assure that any nominee of Mr. Bumgarner or Mr. McNay
will be approved.

On November 16, 1993, stockholders, representing 78% of the combined voting
power of outstanding common and preferred stock, approved a reverse stock split
effective November 18, 1993. Holders of Common Stock outstanding at the
effective date ("Old Stock") received one share of Common Stock ("New Stock")
for each ten shares of Old Stock surrendered. The Company will pay cash for
incremental shares. On the effective date, all convertible preferred shares
automatically converted to New Stock at the rate of 10,000 common shares for
each preferred share. After the conversions and reverse split there were
2,704,735 shares of Common Stock outstanding. At September 30, 1995, the number
of shares outstanding has been adjusted downward by 35 shares as the result of
fractional shares resulting from the reverse stock split which were eliminated
by cash payment.

The adjusted weighted average shares utilized in determining income (loss)
per share were 2,802,000 for fiscal year 1995, 2,766,000 for fiscal year 1994
and 998,000 for fiscal year 1993. Earnings per share in 1993 reflect the pro
rata portion of the year during which new equity shares were outstanding.

12. SUPPLEMENTAL CASH FLOW INFORMATION:

The following information concerning noncash transactions is provided to
supplement the Consolidated Statements of Cash Flow.

The equity recapitalization which took place September 29, 1993, resulted
in a noncash conversion of $2,350,000 debt into equity and a noncash
extraordinary gain of $350,000 net of income taxes. Concurrent with that
transaction, the Company accrued $101,000 for legal costs offset by a noncash
charge to additional paid-in capital.

During 1993, the Company negotiated various settlements related to lease
arrearages which resulted in (1) a noncash gain of $2,415,000 from discontinued
operations, (2) transfer of equipment and furnishings having an aggregate net
book value of $127,000 to a lessor in partial settlement, and (3)
reclassification of certain lease liabilities in the amount of $264,000 from
current to noncurrent. In addition, property and equipment having a net book
value of $32,000 were abandoned resulting in a noncash reduction in that asset
category.

In the normal course of business, certain clients exercised contract
cancellation options available in their software license agreements in response
to economic downturns in their operating regions. As the Company, in accordance
with its policy, had not recognized any revenues on such contingent portions of
those agreements, the cancellations resulted in noncash reductions of long-term
receivables and deferred revenues in the amount of approximately $65,000 during
fiscal year 1995 and $226,000 during fiscal year 1994.

The Company satisfied its 401(k) matching contribution for the Plan year
ended December 31, 1993 by subsequently issuing its Common Stock. This
transaction resulted in a noncash reduction of accrued liabilities and a
corresponding increase in Common Stock and additional paid-in capital of
approximately $107,000 in fiscal year 1994.

F-19
<PAGE> 62

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company paid interest of $12,000 during fiscal year 1995, $16,000 in
fiscal year 1994, and $380,000 in fiscal year 1993. Income taxes of $220,000,
$295,000, and $390,000 were paid during fiscal years 1995, 1994 and 1993,
respectively.

13. CORPORATE RESTRUCTURING:

During the three years ended September 30, 1993, the Company undertook
substantial downsizing in order to reduce operating expenses. The Company
refocused its sales and product development activities on its core products and
services which target the retail petroleum industry, which industry accounted
for more than 95% of the Company's revenues at September 30, 1995, 1994 and
1993. The downsizing and reorganization necessitated a reduction in personnel as
well as a smaller physical presence in certain foreign and domestic locations.

In 1993, approximately 106 employees representing 30% of work force were
terminated or resigned (65 in the U.S. at a cost of $240,000, 29 in England at a
cost of $117,000 and 12 in various other foreign offices at a cost of $13,000).
The Company also negotiated a reduction in the space occupied by its corporate
headquarters at a cost of $88,000 to renovate retained space and restore
abandoned space (but resulted in annual rental savings of more than $500,000
thereafter), and abandoned its office lease in Canada at a cost of $30,000. No
further reorganization costs were incurred during fiscal years 1994 and 1995.

F-20
<PAGE> 63

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
STOCKHOLDERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF ANY OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 1
Risk Factors........................ 2
Recapitalization Transaction........ 5
Use of Proceeds..................... 7
Plan of Distribution................ 8
Description of Capital Stock........ 10
Business............................ 13
Market Information for MPSI Common
Stock............................. 22
Selected Financial Data............. 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 24
Directors and Executive Officers
of MPSI........................... 28
Stock Ownership of Certain
Beneficial Owners and
Management........................ 30
Executive Compensation.............. 32
Certain Transactions................ 36
Indemnification..................... 37
Legal Matters....................... 38
Experts............................. 38
Index to Consolidated Financial
Statements........................ F-1
</TABLE>

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

1,780,436 SHARES

COMMON STOCK

(LOGO)

MPSI SYSTEMS INC.

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

A M E N D E D P R O S P E C T U S

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

, 1995

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 64

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The Company has agreed to pay all of the following fees and expenses on
behalf of the Selling Stockholders:

<TABLE>
<CAPTION>
ESTIMATED
AMOUNT
----------
<S> <C>
Securities and Exchange Commission Registration Fee............................. $ 4,473.17*
Printing Expenses............................................................... 84,000.00
Accounting Fees and Expenses.................................................... 45,000.00
Blue Sky Expenses............................................................... 7,000.00
Legal Fees and Expenses......................................................... 40,000.00
Transfer Agent and Registrar's Fees............................................. 9,583.00*
Miscellaneous Offering Costs.................................................... 12,000.00
----------
Total......................................................................... $202,056.17
==========
</TABLE>

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

* Fees marked with an asterisk are exact and all others are estimated and
approximate. The fees so marked have previously been paid.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law provides, generally,
that a corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any suit or proceeding (except
actions by or in the right of the corporation) by reason of the fact that such
person is or was a director or officer of the corporation, against all expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. A corporation may
similarly indemnify such person for expenses actually and reasonably incurred by
him in connection with the defense or settlement of any action or suit by or in
the right of the corporation, provided such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, in the case of claims, issues and matters as to which such
person shall have been adjudged liable to the corporation, provided that a court
shall have determined, upon application, that, despite the adjudication of
liability but in view of all of the facts and circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.

Section 102(b)(7) of the Delaware General Corporation Law provides,
generally, that the certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision may not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
payment of an unlawful dividend, or for an unlawful stock purchase or
redemption, or (iv) for any transaction from which the director derived an
improper personal benefit. No such provision may eliminate or limit the
liability of a director for any act or omission occurring prior to the date when
such provision becomes effective.

Effective February 17, 1987, the Company amended its Certificate of
Incorporation by adding a new Article XI to limit the liability of its directors
under the circumstances described above.

Article IX of the Company's Certificate of Incorporation provides for
indemnification to the fullest extent permitted by Section 145 of the Delaware
General Corporation Law. Such article also states that the charter

II-1
<PAGE> 65

indemnification shall not be deemed exclusive of any other rights to indemnity
available to the party seeking indemnity.

Article VII, Section 1 of the Company's By-laws also contains an indemnity
provision, requiring the Company to indemnify members of the Board of Directors
and officers, employees and agents of the Company and their respective heirs,
executors and administrators, to the extent provided by the Delaware General
Corporation Law.

On August 5, 1986, the Company entered into separate indemnification
agreements with its directors and officers then serving. Directors and officers
still in such capacity with the Company and who received such agreements were
all the currently serving directors, namely, Ronald G. Harper, John C.
Bumgarner, Jr., Joseph C. McNay, Dr. David L. Huff and John J. McQueen. The only
officers covered by these contracts who are still employed by MPSI are Mr.
Harper and Dorothy Y. Terhune.

While the indemnification extended is to the full extent provided under the
Company's Certificate of Incorporation, Bylaws and Delaware law, it is also
specifically stated to generally encompass any and all expenses, financial
penalties or settlements actually and reasonably incurred by an indemnitee in
any present or completed action or proceeding of any type, which occurs by
reason of the indemnitee's service as a director, officer, employee or agent of
the Company, or serving in such capacity with another enterprise at the
Company's request. The Company also agreed therein to purchase and maintain
director and office liability insurance coverage so long as available at
reasonable cost.

Certain restrictions are placed on the ability to seek and recover
indemnity from the Company under the agreements, however. Specifically,
indemnity may not be had if there exists insurance coverage; pertains to a
personal profit or advantage to which the indemnitee was not legally entitled;
relates to an accounting of profits made in violation of the "short swing"
provisions of the Securities Exchange Act of 1934; is sought where the loss is
sustained or contributed to by the dishonesty of the indemnitee, or where
dishonesty is confirmed by judgment of a court; or if a court determines that
indemnity is not lawful.

All the Company's agreements expressed in these contracts continue beyond
cessation of the individual's service as director or officer. The agreements
also establish procedures for a determination of the propriety of indemnity, as
well as addressing issues pertaining to expense advances during the pendency of
a matter. Indemnification is mandatory if the action is successful. In addition,
assurances are provided to the indemnitee of a direct contractual claim against
the Company for violation of the indemnification obligations expressed therein.
In all circumstances, the Company has the right to defend any claim for which
indemnity may be appropriate to the affected director or officer.

The Company has entered into agreements with the Principal Investors in the
recapitalization transaction according them certain rights to require the
Company make their shares of Common Stock freely tradeable by registration with
the Commission. This Registration Statement evidences compliance by the Company
with such requirements. As a part of the agreements, the Company and the
Principal Investors entered into reciprocal indemnity arrangements providing for
indemnity against securities law liabilities arising in connection with this
offering and other offerings pursuant to which such rights are exercised, other
than liabilities arising as a result of information furnished by the party
seeking indemnity.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On September 29, 1993, the Company issued equity equivalent to a total of
1,789,270 shares of Common Stock to the Selling Stockholders for purchase prices
of $2.25 or $3.50 per share in connection with a private offering under Section
4(2) of the 1933 Act. See "Recapitalization Transaction."

II-2
<PAGE> 66

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following exhibits and financial statement schedules are filed herewith
(unless otherwise indicated) and made a part of this Registration Statement.
Financial statement schedules not presented herein were omitted either because
they are inapplicable or because the required information is contained elsewhere
in the Registration Statement.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------------
<C> <S>
*3.1 -- Certificate of Incorporation of MPSI Systems Inc., as amended, filed as the
same numbered exhibit with the Company's Form 10-Q dated March 31, 1987, File
No. 0-11527.
*3.2 -- By-laws, as amended, filed as Exhibit 3.1 with the Company's Form 10-Q dated
June 30, 1987, File No. 0-11527.
*3.3 -- Certificate of Designation dated September 23, 1993 establishing the rights
conferred on $.10 Par Value Convertible Preferred Stock, Series 1993, filed as
the same numbered exhibit with the Company's 1993 Form 10-K, File No. 0-11527.
*3.4 -- Amendment to Certificate of Incorporation dated November 16, 1993 to reflect a
one-for-ten reverse stock split, filed as the same numbered exhibit with the
Company's 1993 Form 10-K, File No. 0-11527.
*3.5 -- Certificate dated November 18, 1993 whereby the $.10 Par Value Preferred Stock,
Series 1993, and the rights previously set forth in the Certificate of
Designation were eliminated, filed as the same numbered exhibit with the
Company's 1993 Form 10-K, File No. 0-11527.
*4.1 -- Stock Purchase Agreement dated September 3, 1993 between MPSI Systems Inc. and
various private investors (excluding exhibits thereto which are included
herewith as Exhibits 4.2 and 4.3) which sets forth the terms of an equity
recapitalization of the registrant, filed as the same numbered exhibit with the
Company's 1993 Form 10-K, File No. 0-11527.
*4.2 -- Stockholder Agreement dated September 29, 1993 between MPSI Systems Inc. and
certain private investors which regulates certain stockholder relationships
with respect to voting, ownership, transfer or other disposition of MPSI stock,
filed as the same numbered exhibit with the Company's 1993 Form 10-K, File No.
0-11527.
*4.3 -- Registration Rights Agreement dated September 29, 1993 between MPSI Systems
Inc. and certain private investors which sets forth the rights of the parties
with respect to future registrations of stock of the registrant, filed as the
same numbered exhibit with the Company's 1993 Form 10-K, File No. 0-11527.
*4.4 -- Supplemental Agreement dated October 7, 1993 which revised the requirements and
procedures related to the proposed reverse stock split and the conversion of
preferred stock, filed as the same numbered exhibit with the Company's 1993
Form 10-K, File No. 0-11527.
4.5 -- Stock Purchase Agreement dated September 23, 1993 among MPSI Systems Inc. and
Selling Stockholders other than the Principal Investors.
4.6 -- Registration Agreement dated July 1, 1994 among MPSI Systems Inc. and the
Selling Stockholders (final form).
5.1 -- Opinion of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C. regarding
validity of the Common Stock registered hereby.
*10.3 -- MPSI Systems Inc. 1984 Stock Option Plan as amended effective January 1, 1987,
filed as the same numbered exhibit with the Company's 1987 Form 10-K, File No.
0-11527.
*10.4 -- Stock Option Agreement pursuant to MPSI Systems Inc. 1984 Stock Option Plan,
filed as the same numbered exhibit with the Company's 1984 Form 10-K, File No.
0-11527.
*10.7 -- Real property lease dated August 7, 1981, between MPSI Centre Joint Venture, as
lessor, and the Company, as lessee, relating to the Company's Tulsa, Oklahoma
facility, filed as Exhibit 10.5 with the Company's Registration Statement on
Form S-1, File No. 2-81641, which became effective on March 2, 1983.
*10.14 -- Stipulation Providing For Settlement, Mutual Release and Transfer of Certain
Assets of the Estate of Comarc Systems, Inc. (Debtor), filed as the same
numbered exhibit with the Company's 1986 Form 10-K, File No. 0-11527.
</TABLE>

II-3
<PAGE> 67

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------------
<C> <S>
*10.15 -- Indemnification Agreements with Directors and Officers of MPSI Systems Inc.
filed as the same numbered exhibit with the Company's 1986 Form 10-K, File No.
0-11527.
*10.16 -- MPSI Systems Inc. Amended and Restated 1988 Stock Option Plan, effective
November 29, 1988, filed as Exhibit 4.5 with the Company's 1994 Form S-8, File
No. 0-11527.
*10.17 -- Stock Option Agreement pursuant to MPSI Systems Inc. Amended and Restated 1988
Stock Option Plan, filed as Exhibit 4.6 with the Company's 1994 Form S-8, File
No. 0-11527.
*10.20 -- MPSI Systems Inc. Matching Investment Plan, effective January 1, 1990, filed as
Exhibit 4(c) with Pre-effective Amendment No. 1 to the Company's Form S-8,
filed on December 29, 1989, File No. 0-11527.
*10.22 -- Asset Purchase Agreement dated March 11, 1991 between Comshare, Incorporated
(Buyer), Execucom Systems Corporation (Seller) and MPSI Systems Inc. (Seller's
Parent); and Amendment to Asset Purchase Agreement effective March 22, 1991,
filed as Exhibit 2.1 to Form 8-K dated March 22, 1991, File No. 0-11527.
*10.23 -- Amendment dated March 19, 1991 to real property lease between MPSI Centre Joint
Venture, as lessor, and MPSI Systems Inc., as lessee, filed as the same
numbered exhibit with the Company's 1991 Form 10-K, File No. 0-11527.
*10.25 -- Amendment dated March 31, 1993 to real property lease between MPSI Centre Joint
Venture, as lessor, and MPSI Systems Inc., as lessee, filed as the same
numbered exhibit with the Company's 1993 Form 10-K, File No. 0-11527.
*10.26 -- Asset Purchase Agreement dated August 29, 1994 between the Registrant, its
wholly-owned Subsidiary, Retail Systems, Inc., and Dakota Worldwide Corporation
filed as Exhibit 10.1 to Form 8-K filed September 15, 1994.
+11.1 -- Computation of Earnings Per Share.
+21.1 -- List of Subsidiaries.
+23.1 -- Consent of Independent Auditors -- Ernst & Young LLP.
23.2 -- Consent of Legal Counsel -- Hall, Estill, Hardwick, Gable, Golden & Nelson,
P.C.
</TABLE>

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

* Incorporated by reference.

+ Indicates such exhibit is filed with this Post-Effective Amendment No. 3.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933.

(ii) To reflect in the Prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement.

2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

II-4
<PAGE> 68

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement or Registration Statement Amendment
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Tulsa, State of Oklahoma, on the 20th day of December, 1995.

MPSI SYSTEMS INC.

By /s/ RONALD G. HARPER
Ronald G. Harper
Chairman of the Board,
President and Chief
Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Registration Statement Amendment has been signed below
by the following persons on behalf of the Registrant, in the capacities and on
the date indicated.

<TABLE>
<C> <S> <C>
/s/ RONALD G. HARPER Chairman of the Board, December 20, 1995
Ronald G. Harper President and Principal
Executive Officer
/s/ JAMES C. AUTEN Corporate Controller -- December 20, 1995
James C. Auten (Principal Accounting and
Financial Officer)
/s/ JOHN C. BUMGARNER, JR. Director December 20, 1995
John C. Bumgarner, Jr.
/s/ DAVID L. HUFF Director December 20, 1995
David L. Huff
/s/ JOSEPH C. MCNAY Director December 20, 1995
Joseph C. McNay
/s/ JOHN J. MCQUEEN Director December 20, 1995
John J. McQueen
</TABLE>

II-5
<PAGE> 69

REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES

We have audited the consolidated financial statements of MPSI Systems Inc.
as of September 30, 1995 and 1994, and for each of the three years in the period
ended September 30, 1995, and have issued our report thereon dated November 13,
1995 (included elsewhere in this Registration Statement). Our audits also
included the financial statement schedules included in this Registration
Statement. These schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

Tulsa, Oklahoma

November 13, 1995

S-1
<PAGE> 70

SCHEDULE VIII

MPSI SYSTEMS INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED SEPTEMBER 30, 1995

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------- --------- -------------------------- ---------- ---------
ADDITIONS
BALANCE --------------------------
AT CHARGED TO OTHER BALANCE
BEGINNING COSTS AND REDUCTION OF (DEDUCTIONS) AT END OF
DESCRIPTION OF PERIOD EXPENSES REVENUES ADDITIONS PERIOD
- ---------------------------------- --------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
For the year ended September 30,
1993:
Accumulated depreciation........ $7,699,000 $593,000 $ -- $(1,180,000)(2) $7,112,000
Accumulated amortization........ 1,412,000 546,000 -- -- 1,958,000
Allowance for doubtful
receivables................... 37,000 26,000 -- (47,000) 16,000
Unamortized discount on software
license agreements............ 530,000 -- 86,000(1) (338,000)(1) 278,000
For the year ended September 30,
1994:
Accumulated depreciation........ $7,112,000 $433,000 $ -- $ (441,000)(3) $7,104,000
Accumulated amortization........ 1,958,000 246,000 -- -- 2,204,000
Allowance for doubtful
receivables (RSI)............. 16,000 17,000 -- (33,000)(3) --
Unamortized discount on software
license agreements............ 278,000 -- 138,000(1) (228,000)(1) 188,000
For the year ended September 30,
1995:
Accumulated depreciation........ $7,104,000 $405,000 $ -- $ (89,000)(2) $7,420,000
Accumulated amortization........ 2,204,000 294,000 -- -- 2,498,000
Unamortized discount on software
license agreements............ 188,000 -- 304,000(1) (171,000)(1) 321,000
</TABLE>

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

(1) Reduction of unamortized discount on long-term receivables represents
current period interest income recognition (see Note 3 to Consolidated
Financial Statements). Increases to unamortized discount represent the
present-value-discount on new software license agreements net of adjustment
for any contract cancellations or revisions.

(2) Reduction is due to retirement of fully amortized assets and to assets sold
or otherwise disposed.

(3) Included in the reductions are $373,000 of accumulated depreciation and
$33,000 related to uncollectible accounts, all of which are attributable to
the sale of the RSI business unit.

S-2
<PAGE> 71

SCHEDULE X

MPSI SYSTEMS INC. AND SUBSIDIARIES

SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED SEPTEMBER 30, 1995

<TABLE>
<CAPTION>
COLUMN A COLUMN B
- ----------------------------------------------------------- ----------------------------------
FISCAL YEARS ENDED SEPTEMBER 30,
----------------------------------
ITEM 1995 1994 1993
- ----------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Maintenance and repairs.................................... $155,000 $178,000 $393,000
Amortization of internally developed software.............. 294,000 246,000 546,000
Royalties.................................................. 28,000 -- 2,000
Advertising costs.......................................... 99,000 51,000 11,000
</TABLE>

S-3
<PAGE> 72

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ----------------------------------------------------------------------------------- ------------
<C> <S> <C>
11.1 -- Earnings Per Share Computation.......................................
21.1 -- List of Subsidiaries.................................................
23.1 -- Consent of Independent Auditors -- Ernst & Young LLP.................
</TABLE>

<PAGE> 1

EXHIBIT 11.1

EARNINGS PER SHARE COMPUTATION

Earnings per share calculations may be affected by the granting of stock
options under the provisions of MPSI Systems Inc. Stock Option Plans. The
granting of these options may have a dilutive effect on earnings per common and
common equivalent share. Following is a summary computation of the weighted
average number of shares outstanding and earnings per share using the
treasury-stock method. There is no significant difference between primary and
fully diluted earnings per share in any period presented.

FISCAL YEAR ENDED SEPTEMBER 30, 1995:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
ISSUED INCREMENTAL
WEIGHTED AVERAGE SHARES OUTSTANDING SHARES SHARES
- ----------------------------------------------------------------------- -------- -----------
<S> <C> <C>
Common stock:
Outstanding throughout the period.................................... 2,728,000 2,728,000
Stock options exercised.............................................. 5,000 3,000
Dilutive unexercised stock options*.................................. -- 71,000
-------- -----------
Total shares................................................. 2,733,000 2,802,000
======== ========
</TABLE>

<TABLE>
<CAPTION>
WEIGHTED
1995 AVERAGE PER SHARE
PER SHARE COMPUTATIONS RESULTS(A) SHARES(B) (A)/(B)
- --------------------------------------------- ---------- --------- ---------
<S> <C> <C> <C>
Continuing operations........................ $2,029,000 2,802,000 $ .72
Discontinued operations...................... $ -- 2,802,000 $ --
Net income................................... $2,029,000 2,802,000 $ .72
</TABLE>

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

* Represents incremental shares as computed using the Treasury Stock Method
applied to all outstanding options which would be dilutive if exercised.

<PAGE> 1

EXHIBIT 21.1

SUBSIDIARIES

<TABLE>
<S> <C>
MPSI Systems Limited U.K. Corporation
MPSI Australia Pty. Ltd. Australia Corporation
MPSI do Brasil Brazil Corporation
MPSI Systems SARL French Corporation
MPSI Systems K.K. Japanese Corporation
MPSI Systems Pte. Ltd. Singapore Corporation
Shanghai MPSI Software Inc. Chinese Corporation
INACTIVE CORPORATIONS
MPSI China Inc. Delaware Corporation
MPSI Surveys Inc. Oklahoma Corporation
MPSI Systems Canada Inc. Canadian Corporation
Management Planning Systems, Inc. Oklahoma Corporation
MPSI Systems GmbH German Corporation
Quest Systems International Inc. Delaware Corporation
</TABLE>

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated November 13, 1995 in Post-Effective Amendment No. 3
to the Registration Statement (Form S-1 No. 33-76286) and related Amended
Prospectus of MPSI Systems Inc. for the registration of 1,780,436 shares of its
Common Stock.

ERNST & YOUNG LLP

Tulsa, Oklahoma

December 20, 1995