STAR TECHNOLOGIES INC, 10-Q, 1996-11-14

STAR TECHNOLOGIES INC
10-Q, 1996-11-14
ELECTRONIC COMPUTERS

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For Quarter Ended September 30, 1996 Commission File Number 0-13318

STAR TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware 93-0794452
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

515 Shaw Road
Sterling, Virginia 20166
(Address of principal executive offices)
(Zip Code)

(703) 689-4400
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.

Yes X No

19,890,324 shares of Common Stock were outstanding as of September 30, 1996.
<PAGE>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
<TABLE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
(In thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1996 1995 1996 1995

<S> <C> <C> <C> <C>
Revenue $ 217 $ 505 $ 932 $ 3,081

Cost of revenue 259 319 464 1,675
------- ------- ------- -------
Gross margin (42) 186 468 1,406
------- ------- ------- -------
Operating expenses
Research and development 305 451 680 1,128
Selling, general and administrative 1,027 848 1,814 1,862
------- ------- ------- -------
Total operating expenses 1,332 1,299 2,494 2,990
------- ------- ------- -------
Operating loss (1,374) (1,113) (2,026) (1,584)

Interest income, net 339 114 400 251
Other income, net 6,215 35 6,215 35
------- ------- ------- -------
Net income (loss) before provision for income taxes 5,180 (964) 4,589 (1,298)

Provision for income taxes - - - -
------- ------- ------- -------
Net income (loss) $ 5,180 $ (964) $ 4,589 $(1,298)
======= ======= ======= =======

Net income (loss) $ 5,180 $ (964) $ 4,589 $(1,298)
Preferred stock dividend requirement (25) (348) (25) (646)
Adjustment for repurchase of preferred stock (174) - (522) -
Excess carrying amount and cumulative undeclared
dividends of preferred stock over consideration 10,580 - 10,580 4,954
------- ------- ------- -------
Net income (loss) applicable to common shares $15,561 $(1,312) $14,622 $ 3,010
======= ======= ======= =======

Earnings (loss) per share:
Per common and common equivalent share $ .78 $ (.07) $ .74 $ .15
======= ======= ======= =======
Assuming full dilution $ .70 $ (.07) $ .66 $ .12
======= ======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.
-1-
<PAGE>
<TABLE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(In thousands, except share data)
<CAPTION>
Sept. 30, March 31,
Assets 1996 1996
Current assets
<S> <C> <C>
Cash $ 2,032 $ 166
Short-term investments 5,179 4,886
Accounts receivable, net 135 156
Inventory, net 562 726
Other current assets 119 94
------- -------
Total current assets 8,027 6,028

Property and equipment, net 438 502
Other assets 144 144
------- -------
Total assets $ 8,609 $ 6,674
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 534 $ 608
Accrued payroll and related benefits 303 408
Other accrued liabilities 374 450
------- -------
Total current liabilities 1,211 1,466
------- -------
Commitments and contingencies - -

Stockholders' equity
Preferred stock; $.01 par value; 1,000,000 shares authorized
Series A convertible; 500,000 shares designated; 45,500
and 46,900 shares issued; 45,500 and 46,900 shares
outstanding; aggregate liquidation preference of
$1,638 and $1,688 1 1
Series B convertible; 120,117 shares designated; 11,917
and 59,584 shares issued; 11,917 and 59,584 shares
outstanding; aggregate liquidation preference of $1,192
and $5,958 1 1
Series C convertible; 80,079 shares designated; 7,945
and 39,723 shares issued; 7,945 and 39,723 shares
outstanding aggregate liquidation preference of
$795 and $3,972 1 1
Common stock; $.01 par value; 60,000,000 shares authorized;
19,937,115 and 19,927,035 shares issued; 19,890,324 and
19,880,244 shares outstanding 199 199
Additional paid-in capital 61,047 63,446
Treasury stock, at cost; 46,791 shares (201) (201)
Retained deficit (53,650) (58,239)
------- -------
Total stockholders' equity 7,398 5,208
------- -------
Total liabilities and stockholders' equity $ 8,609 $ 6,674
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.
-2-
<PAGE>
<TABLE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

<CAPTION>
Six Months Ended
September 30,

1996 1995

<S> <C> <C>
Cash flows from (used for) operating activities
Net income (loss) $ 4,589 $(1,298)

Adjustments to reconcile net loss to net cash
from (used for) operating activities
Depreciation and amortization 105 168
Decrease in restricted cash 17 185
Decrease in accounts receivable 21 77
Decrease in inventory 164 977
Increase in other current assets (25) (61)
Decrease in accounts payable (74) (545)
Decrease in accrued liabilities (181) (600)
------- -------
Net cash from (used for) operating activities 4,616 (1,097)
------- -------
Cash flows from (used for) investing activities
Capital expenditures (41) (32)
Other investing activities, net - 37
------- -------
(41) 5
------- -------
Cash flows from (used for) financing activities
Repurchase of preferred stock (2,399) (1,187)
Proceeds from stock option exercises - 5
------- -------
(2,399) (1,182)
------- -------
Net increase (decrease) in cash and equivalents 2,176 (2,274)

Cash and equivalents, beginning of period 5,035 8,723
------- -------
Cash and equivalents, end of period $ 7,211 $ 6,449
======= =======

</TABLE>
See accompanying notes to consolidated financial statements.

-3-
<PAGE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Star Technologies, Inc. ("Star" or the "Company") has historically
designed and manufactured performance-enhancing computing products and
solutions for the image and signal processing marketplace, principally for
medical imaging. Star is currently developing products for the image and
information management market. A key segment of this market is medical
imaging, which draws upon Star's historical skills and experience. Star's
current product focus is a family of DICOM 3.0-compliant solutions, with
special expertise in the area of DICOM image storage. Star markets its
products and technology to OEM suppliers of medical imaging equipment. The
Company has not yet generated any significant revenue from these products.
In addition, Star continues to pursue contract engineering and manufacturing
business opportunities. The Company's products compete in markets which are
highly competitive and characterized by rapid technological advances.

NOTE 1 - Financial Information

The interim financial statements presented herein are unaudited. They
reflect all adjustments that, in the opinion of management, are necessary to
fairly present the Company's financial position and results of operations
for the interim periods presented. All such adjustments are of a normal,
recurring nature. The results of operations for the three- and six-month
periods ended September 30, 1996 are not necessarily indicative of the
results to be expected for the entire fiscal year.

The interim consolidated financial information should be read in
conjunction with the Company's Annual Report on Form 10-K, Commission file
number 0-13318, for the fiscal year ended March 31, 1996.

Certain fiscal 1996 amounts have been reclassed for comparative
purposes.

NOTE 2 - Short-Term Investments

The Company's short-term investments consist entirely of commercial
paper. These investments, which are held to maturity (less than three
months from the date of purchase), are carried at cost which approximates
their market value.

NOTE 3 - Inventory

Inventory is stated at the lower of cost (first-in, first-out basis) or
market. All classifications of inventory include materials and an
allocation of manufacturing overhead. Systems-in-process and completed
systems include an allocation of labor.

The major classifications of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
Sept. 30, March 31,
1996 1996

<S> <C> <C>
Components and subassemblies $510 $686
Systems-in-process 15 22
Completed systems 37 18
---- ----
$562 $726
==== ====
</TABLE>
-4-
<PAGE>
NOTE 4 - Accounts Receivable

Accounts receivable are shown net of an allowance for doubtful accounts
of $23,000 and $22,000 at September 30, 1996 and March 31, 1996,
respectively.

NOTE 5 - Transactions with General Electric Medical Systems ("GEMS") and
General Electric ("GE")

In August 1996, GEMS paid Star $9.4 million, the amount including
interest, awarded to Star in March 1996 in its claim against GEMS for breach
of contract. The payment from GEMS arose from a demand for arbitration that
Star filed against GEMS in January 1995. As previously reported, Star filed
the demand after GEMS declared that it would not purchase any reconstruction
processors from Star after May 1995. The demand alleged that GEMS' decision
to stop buying reconstruction processors from Star violated a development
and technology transfer agreement that Star and GEMS entered into in October
1991. Following a hearing on Star's demand, a three-member panel of the
American Arbitration Association found that GEMS violated the agreement by
terminating its purchases from Star and by using certain technology owned by
Star in reconstruction processors that GEMS is manufacturing.

GEMS paid the award in connection with an agreement with Star that
provided for Star to repurchase 80% of Star's Series B and Series C Senior
Preferred Stock (the "Preferred Stock") held by GE. Star paid GE $2.4
million for the Preferred Stock which had an aggregate redemption price of
$13.0 million, including 100% of cumulative, undeclared dividends that
totaled in excess of $5.0 million. GE also granted to Star a three-year
option to repurchase the remaining 20% of the Preferred Stock at the same
per share price that Star paid in the August 1996 repurchase. In addition,
Star and GEMS have amended the related preferred stock purchase agreement
and Star's Certificate of Incorporation to eliminate numerous rights that GE
had as the sole holder of the Preferred Stock, including the rights to elect
one third of Star's Board of Directors and, under certain circumstances, to
assume control of the Board.

The remaining Preferred Stock now accrues dividends at a rate of 10%
per annum effective August 1996. To the extent declared, such dividends
would be payable quarterly in the amount of $50,000 in cash. Unpaid
cumulative dividends in arrears on the Preferred Stock total $25,000 as of
September 30, 1996.

The Company's revenue from GEMS totaled $17,000 and $98,000 for the
quarters ended September 30, 1996 and 1995, respectively. For the six
months ended September 30, 1996 and 1995, revenue from GEMS totalled $80,000
and $2.3 million, respectively.

NOTE 6 - Notes Payable and Capital Lease Obligations

On September 30, 1995, the Company's revolving credit note agreement
expired and was not renewed. The Company had not borrowed under this
agreement since December 1993 and has had sufficient cash reserves for its
operating needs since that time. Although the Company does not require a
credit agreement to meet its anticipated operating requirements, the Company
is in discussion with several banks regarding potential credit agreement
arrangements. The Company's remaining short-term obligations relate
entirely to capital lease obligations, all of which mature in 1997.

-5-
<PAGE>
The Company expects to have sufficient cash, through its current cash
and short-term investments position and from operations, to meet its fiscal
1997 operating requirements. In the event that the Company requires more
funds, there can be no assurance that the Company would be successful in
raising new capital from external sources.

NOTE 7 - Earnings Per Share

In August 1996, the Company repurchased and retired 80% of the
outstanding shares of its Series B and Series C Senior Preferred Stock (the
"Preferred Stock") from GE. In the transaction, the Company paid $2.4
million for 79,445 shares of the Preferred Stock which had a redemption
price of $13.0 million, including cumulative undeclared dividends in excess
of $5.0 million. For purposes of computing the earnings per share for the
three- and six-month period ended September 30, 1996, the transaction
resulted in the availability of $10.6 million additional earnings to common
stockholders, representing the difference between the carrying amount of the
redeemed Preferred Stock, including cumulative undeclared dividends, and the
price paid by the Company to repurchase the stock.

In April 1995, the Company also repurchased and retired 46,549 shares
of the outstanding shares of the Preferred Stock. In the transaction, the
Company paid $1.2 million for the shares which had a redemption price of
$6.2 million, including cumulative undeclared dividends in excess of $1.5
million. For purposes of computing the earnings per share for the six-month
period ended September 30, 1995, the transaction resulted in the
availability of $5.0 million additional earnings to common stockholders,
representing the difference between the carrying amount of the redeemed
Preferred Stock, including cumulative undeclared dividends, and the price
paid by the Company to repurchase the stock.

NOTE 8 - Recent Accounting Pronouncements

In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of
("Statement 121"). Statement 121 requires that the Company review its
long-lived assets for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be recoverable. To the extent
that the undiscounted net future cash flows expected to be generated from an
asset are less than the asset's carrying amount, an impairment loss is
recognized as the difference between that asset's carrying amount and its
fair value. The Company adopted Statement 121 as of April 1, 1996. The
adoption of Statement 121 did not have a material impact on the Company's
results of operations.

In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock
Based Compensation ("Statement 123"). Under Statement 123, the Company may
elect, but is not required, to adopt a fair value approach to accounting for
stock-based awards granted to employees. The Company adopted Statement 123
as of April 1, 1996. The Company did not implement the fair value
methodology of Statement 123, although certain pro forma disclosures will be
required in the Company's fiscal 1997 consolidated financial statements.

-6-
<PAGE>
NOTE 9 - Settlement of Patent Litigation

In August 1996, the Company settled all claims asserted by Ronald G.
Walters ("Walters") against the Company and certain officers and directors
of the Company in a patent infringement and unjust enrichment lawsuit. In
that suit, Walters had sought over $67 million, with trebling of any damages
awarded. In response to the suit, the Company had filed a counterclaim
against Walters.

Under the terms of the settlement agreement, the Company paid Walters a
one-time payment of $2.9 million for which Walters dismissed the claims he
had brought against the Company, and the Company dismissed the counterclaim
it had asserted against Walters.

The settlement payment is reflected as a reduction of other income on
the Consolidated Statement of Operations in the second quarter of fiscal
1997.

Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition

Results of Operations

Revenue for the three-month period ended September 30, 1996 decreased
57% from the same period a year ago, primarily due to lower levels of spare
parts sales and maintenance and support revenue. For the six months ended
September 30, 1996, revenue decreased 70% from the comparable prior-year
period, primarily due to the cessation of reconstruction processor sales to
General Electric Medical Systems ("GEMS") in the first quarter of fiscal
1996. (See Note 5.)

The gross margin percentage for the three-month period ended September
30, 1996 decreased from 37% to (19)% from the comparable prior-year period,
primarily due to an unfavorable absorption rate of fixed costs associated
with lower revenue levels. The gross margin percentage for the six months
ended September 30, 1996 increased from 46% to 50% from the same prior-year
period primarily due to the final settlement on the claim under the U.S.
Navy's SH-60 Program which was recognized as revenue in the first quarter of
fiscal 1996.

Research and development ("R&D") expense for the three and six months
ended September 30, 1996 decreased 32% and 40%, respectively, from the same
periods a year ago. The decreases are primarily attributable to
company-wide cost reductions as well as reduced staff levels.

Selling, general and administrative ("SG&A") expense for the quarter
ended September 30, 1996 increased 21% from the same period a year ago,
primarily due to costs associated with the recently terminated acquisition
discussions with Electronic Instrumentation and Technology, Inc. ("EIT"), as
well as performance bonuses related to the receipt of the $9.4 million GEMS
arbitration award. For the six months ended September 30, 1996, the above
increases were offset by lower legal costs associated with the GEMS
arbitration, resulting in a 3% decrease in SG&A expense from the same
prior-year period.

During the three- and six-month periods ended September 30, 1996 and
1995, the Company earned $339,000 and $114,000, and $400,000 and $251,000,
respectively, of net interest income. The increases for the three and six
months ended September 30, 1996 from the prior-year periods are primarily
attributable to interest received from GEMS on the arbitration award. (See
Note 5.)

-7-
<PAGE>
Other income for the three- and six-month periods ended September 30,
1996 includes the GEMS arbitration award of $9.1 million, excluding
interest, offset by the settlement of a patent infringement lawsuit of $2.9
million. (See Notes 5 and 9.)

Liquidity and Capital Resources

The Company generated $4.6 million of cash flow for the six months
ended September 30, 1996, primarily as a result of the receipt of the
arbitration award from GEMS in August 1996. (See Note 5.)

In August 1996, after receiving $9.4 million from GEMS for breach of
contract, the Company repurchased and retired 80% of the outstanding shares
of its Series B and Series C Senior Preferred Stock (the "Preferred Stock")
from GE. In the transaction, the Company paid $2.4 million for 79,445
shares of the Preferred Stock which had a redemption price of $13.0 million,
including cumulative undeclared dividends in excess of $5.0 million. GE
also issued to Star a three-year option to purchase the remaining 20% of the
Preferred Stock at the same per share price that Star paid in the August
1996 repurchase. In addition, Star and GE amended the related preferred
stock purchase agreement and Star's Certificate of Incorporation to
eliminate numerous rights that GE had as the holder of the Preferred Stock,
including the rights to elect one third of Star's Board of Directors and,
under certain circumstances, to assume control of the Board. (See Note 5.)

The Company expects to have sufficient cash, through its current cash
and short-term investment position and from operations, to meet its fiscal
1997 operating requirements. In the event that the Company requires more
funds, there can be no assurance that the Company would be successful in
raising new capital from external sources.

Corporate Repositioning

The Company previously engaged in acquisition discussions with EIT and
had announced, in August 1996, the signing of a letter of intent to acquire
EIT. In October 1996, the Company announced that it had ended acquisition
discussions with EIT citing the inability of the two parties to reach
agreement on key financial aspects of the acquisition.

The Company remains committed to growing Star through strategic mergers
or acquisitions. The Company continues to work with an investment banking
firm and with other sources to identify potential merger or acquisition
candidates.

-8-
<PAGE>
The Company has concentrated its R&D efforts over the past few years
exploring growth opportunities in the medical imaging business in which the
Company has over ten years of experience. The Company has targeted the
medical information systems market, including both medical reporting and
digital medical imaging and communications systems. In fiscal 1996, the
Company received Food and Drug Administration clearance to market the Image
Management Server and the Film Image Scan System, the Company's two new
products. The Company can give no assurances that the products will be
accepted in the marketplace.

Certain statements in Management's Discussion and Analysis of Results
of Operations and Financial Condition contain "forward-looking" information
(as defined in the Private Securities Litigation Reform Act of 1995) that
involve risks and uncertainties, including, but not limited to, customer
concentration, product demand and market acceptance risks, product
development, commercialization and technological difficulties, the impact of
competitive products and pricing, availability of parts and supplies from
third party suppliers on a timely basis and at reasonable prices, and the
effect of economic conditions.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 4. Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting of Stockholders on August 22, 1996.
16,780,785 shares of the Company's Common Stock and Series A Preferred Stock
were present, in person or by proxy, at the Annual Meeting to vote on the
election of three directors. 99,307 shares of the Preferred Stock were
present, in person or by proxy, at the Annual Meeting.

At the Annual Meeting, Francis Jungers was elected to the Company's
Board of Directors for a term equal to the earliest of three years, the
election and qualification of his successor, or until his death, resignation
or removal from office. Only holders of the Company's Common Stock and
Series A Preferred Stock were eligible to vote on the nomination of Mr.
Jungers to the Board of Directors. 16,463,907 shares were voted for Mr.
Jungers and 316,888 shares were withheld.

Robert Compton, Alan Maxwell and Dr. Carl Ravin continue as Directors
of the Company. The terms of Mr. Compton and Dr. Ravin expire on the date
of the 1997 Annual Meeting of Stockholders. The term of Mr. Maxwell expires
on the date of the 1998 Annual Meeting of Stockholders.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits.

The exhibits filed herewith or incorporated by reference are set
forth on the Exhibit Index immediately preceding the exhibits.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 1996.

-9-
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

STAR TECHNOLOGIES, INC.

Dated: November 14, 1996 /s/ Robert C. Compton
Robert C. Compton
Chairman of the Board of Directors,
President and Chief Executive
Officer and Director

/s/ Brenda A. Potosnak
Brenda A. Potosnak
Vice President of Finance and Administration,
Secretary, Treasurer and Chief Financial
Officer

-10-
<PAGE>
EXHIBIT INDEX

Exhibit
No.

3.1* Restated Certificate of Incorporation of the Company, as
amended, incorporated by reference from the Company's
Annual Report on Form 10-K for the fiscal year ended March
31, 1988 (Registration No. 0-13318) filed with the
Commission on June 29, 1988.

3.2* Certificate of Designation, Preferences and Rights of
Series B Senior Preferred Stock and Series C Senior
Preferred Stock ("Certificate of Designation"),
incorporated by reference from the exhibit filing to the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1990 (Registration No. 0-13318) filed with
the Commission on June 29, 1990.

3.3* Certificate of Amendment of Restated Certificate of
Incorporation of the Company, dated August 29, 1994,
incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1995
(Registration No. 0-13318) filed with the Commission on
June 29, 1995.

3.4 Certificate of Amendment of Restated Certificate of
Incorporation of the Company dated August 23, 1996.

3.5 By-Laws of the Company, as amended and restated on February
24, 1994, and as further amended on August 22, 1996.

4.1* Restated Certificate of Incorporation, as amended (see
Exhibit 3.1).

4.2* Certificate of Amendment of Restated Certificate of
Incorporation (see Exhibit 3.2).

4.3* Certificate of Designation (see Exhibit 3.3).

4.4 Certificate of Amendment of Restated Certificate of
Incorporation (see Exhibit 3.4).

10.26 Stock Repurchase Agreement, dated August 16, 1996, between
the Company and General Electric Company.

10.27 Amendment No. 1 to Preferred Stock Purchase Agreement,
dated August 16, 1996, between General Electric Company and
the Company.

10.28 Stock Option Agreement, dated August 16, 1996, between
General Electric Company and the Company.

11 Statement Regarding Computation of Per Share Earnings.

27 Financial Data Schedule.

*Incorporated by reference.

-11-

EXHIBIT 3.4
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
STAR TECHNOLOGIES, INC.

Star Technologies, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Company"), does hereby certify:

FIRST: That the Restated Certificate of Incorporation of the Company
(the "Certificate of Incorporation") is hereby amended by:

a. Striking out Sections 1, 2, 3, 4 and 5 of the Certificate of
Designation Relating to Series B Senior Preferred Stock Having a Par
Value of $.01 Per Share and Series C Preferred Stock Having a Par Value
of $.01 Per Share of Star Technologies, Inc. (the "Certificate of
Designation") (which Certificate of Designation was dated, filed with
the Secretary of State of the State of Delaware, and amended and became
a part of Article 4 of the Certificate of Incorporation on May 30,
1990) and substituting in lieu thereof the text of Annex A attached
hereto;

b. Deleting in its entirety Section 6 of the Certificate of
Designation; and

c. Striking out the number "7" in the title of Section 7 of the
Certificate of Designation and substituting in lieu thereof the number
"6".

SECOND: That the amendment of the Certificate of Incorporation herein
certified has been duly adopted in accordance with the provisions of
Sections 228 and 242 of the General Corporation Law of the State of
Delaware.

IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment to be signed by Robert C. Compton, its President, and Brenda A.
Potosnak, its Secretary, this 23 day of August, 1996.

STAR TECHNOLOGIES, INC.

/s/ Robert C. Compton
Robert C. Compton
President
ATTEST:

/s/ Brenda A. Potosnak
Brenda A. Potosnak
Secretary
<PAGE>
ANNEX A

1. Dividends.
(a) The holders of the then outstanding Series B and Series C
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors out of any funds legally available therefor, cumulative
dividends at the rate of 10.0% of the Issue Price (as hereinafter defined)
per annum per share of the Series B and Series C Preferred Stock from and
after August 16, 1996 (the "Dividend Commencement Date"). Dividends shall
accrue and be payable quarterly in arrears on the last day of each June,
September, December and March in each year commencing on September 30, 1996.
No dividends or other distributions shall be declared or paid with respect
to the common stock, par value $.01 per share, of the corporation (the
"Common Stock") or stock of any other class or series ranking junior (with
respect to either dividends and distributions or rights of liquidation) to
the Series B Preferred Stock or Series C Preferred Stock (hereinafter, the
"Series B or Series C Preferred Stock") until all cumulative dividends on
all shares of the Series B and Series C Preferred Stock shall have been
paid, the dividends on all shares of the Series B and Series C Preferred
Stock for the then current dividend period shall have been paid or declared
and set apart for payment.

(b) Dividends on each share of Series B and Series C Preferred Stock
shall accrue (whether or not earned or declared) and be fully cumulative
only from the Dividend Commencement Date, and all rights of the holders of
Series B and Series C Preferred Stock to receive cumulative dividends which
have not been declared for any period prior to the Dividend Commencement
Date are hereby cancelled. Accumulations of dividends on any shares of
Series B or Series C Preferred Stock shall not bear interest. The amount of
dividends so payable shall be determined on the basis of twelve 30-day
months and a 360-day year. Dividends paid on the shares of Series B and
Series C Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share by share basis among all such shares at the time
outstanding. Dividends on the Series B and Series C Preferred Stock shall
be paid to the holders of record thereof on the Business Day (as defined in
Section 3) next preceding the date on which such dividend is to be paid.

2. Liquidation Preference.

(a) In the event of any liquidation, dissolution or winding up of the
corporation, either voluntary or involuntary, the holders of the Series B
and Series C

<PAGE>
Preferred Stock by reason of their ownership thereof shall be entitled to be
paid out of the assets of the corporation available for distribution to its
shareholders, before any payment or declaration and setting apart for
payment of any amount shall be made in respect of the Common Stock or stock
of any other class or series ranking junior as to the assets in liquidation
to the Series B and Series C Preferred Stock, an amount equal to $100 per
share of the Series B Preferred Stock (as adjusted for any stock split,
stock dividend, combination or similar recapitalization resulting in a
change in the Series B Preferred Stock) (the "Series B Issue Price") and
$100 per share of the Series C Preferred Stock (as adjusted for any stock
split, stock dividend, combination or similar recapitalization resulting in
a change in the Series C Preferred Stock) (the "Series C Issue Price") (the
Series B Issue Price and the Series C Issue Price being sometimes termed the
"Issue Price" or "Issue Prices") plus an amount in each case equal to all
accrued and unpaid dividends on the Series B or Series C Preferred Stock, as
the case may be, from the Dividend Commencement Date to the date of final
distribution to such holders. If upon the occurrence of such event the
assets distributable among the holders of the Series B and Series C
Preferred Stock and all other series of preferred stock ranking equally as
to the corporation's assets in liquidation shall be insufficient to permit
the payment of the full preferential amounts for all such series, then the
entire assets and funds of the corporation legally available for
distribution to its shareholders shall be distributed among the holders of
all such series of the preferred stock then outstanding ratably per share in
proportion to the full preferential amounts per share to which they are
respectively entitled.

(b) After the payment or distribution to the holders of the Series B
and Series C Preferred Stock and all other series of preferred stock ranking
equally with the Series B and Series C Preferred Stock as to the
corporation's assets in liquidation, of their full preferential amounts has
been made, the remaining assets of the corporation available for
distribution to its shareholders shall be distributed ratably to the holders
of the outstanding Common Stock and any other series of preferred stock,
except to the extent otherwise provided in the designation of any series of
Common Stock or any such series of preferred stock.

3. Redemption.

(a) The Series B and Series C Preferred Stock shall not be redeemable
at the option of the holders thereof.

(b) The corporation may at its option at any time prior to conversion
thereof redeem the then outstanding shares of Series B Preferred Stock, in
whole or in part, at a redemption price per share equal to 100% of the
Series B Issue Price, plus an amount equal to accrued but unpaid dividends
on the shares being redeemed to and including the date fixed for redemption
of such shares (a "Redemption Date"). The

<PAGE>
redemption price plus accrued but unpaid dividends to and including the
applicable Redemption Date shall be payable in cash. If less than all the
shares of Series B Preferred Stock are to be redeemed, the shares of Series
B Preferred Stock shall be redeemed pro rata from the holders of the Series
B Preferred Stock. The shares of Series B Preferred Stock which are not
redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein.

(c) The corporation may at its option, at any time prior to conversion
thereof, redeem the then outstanding shares of Series C Preferred Stock, in
whole or in part, at a redemption price per share equal to 100% of the
Series C Issue Price, plus an amount equal to accrued but unpaid dividends
on the shares being redeemed to and including the Redemption Date for such
shares. The redemption price plus accrued but unpaid dividends to and
including the applicable Redemption Date shall be payable in cash. If less
than all the shares of Series C Preferred Stock are to be redeemed, the
shares of Series C Preferred Stock shall be redeemed pro rata from the
holders of the Series C Preferred Stock. The shares of Series C Preferred
Stock which are not redeemed shall remain outstanding and entitled to all
the rights and preferences provided herein.

(d) Notice of any redemption of shares of Series B or Series C
Preferred Stock pursuant to Subsection (b) or (c) of this Section 3 shall be
given by mail, postage prepaid, at least 30, but not more than 60, days
prior to the Redemption Date to each holder of shares of Series B or Series
C Preferred Stock to be redeemed, at such holder's address as it appears on
the transfer books of the corporation.

(e) On the date of any redemption being made pursuant to Subsection
(b) or (c) of this Section 3 which is specified in a notice given pursuant
to Subsection (d) of this Section 3, the corporation shall, and at any time
after such notice shall have been mailed and before the Redemption Date the
corporation may, deposit for the benefit of the holders of shares of Series
B and Series C Preferred Stock to be redeemed the funds necessary for such
redemption, including the amount necessary to pay all accrued and unpaid
dividends to and including the Redemption Date, with a bank or trust company
in the Borough of Manhattan, The City of New York, having a capital and
surplus of at least $100,000,000. Any moneys so deposited by the
corporation and unclaimed at the end of two years from the date designated
for such redemption shall revert to the general funds of the corporation.
After such reversion, any such bank or trust company shall, upon demand, pay
over to the corporation such unclaimed amounts and thereupon such bank or
trust company shall be relieved of all responsibility in respect thereof and
any holder of shares of Series B or Series C Preferred Stock to be redeemed
shall look only to the corporation for the payment of the redemption price
plus all accrued and unpaid dividends to and including the

<PAGE>
Redemption Date. In the event that moneys are deposited pursuant to this
Subsection (e) in respect of shares of Series B or Series C Preferred Stock
that are converted in accordance with the provisions of Section 4, such
moneys shall, upon such conversion, revert to the general funds of the
corporation and, upon demand, such bank or trust company shall pay over to
the corporation such moneys and shall be relieved of all responsibility to
the holders of such converted shares in respect thereof. Any interest
accrued on funds deposited pursuant to this Subsection (e) shall be paid
from time to time to the corporation for its own account.

(f) Notice of redemption having been given as aforesaid, upon the
deposit of funds pursuant to Subsection (e) in respect of shares of Series B
or Series C Preferred Stock to be redeemed pursuant to Subsection (b) or (c)
of this Section 3, notwithstanding that any certificates for such shares
shall not have been surrendered for cancellation, from and after the
Redemption Date designated in the notice of redemption (i) the shares
represented thereby shall no longer be deemed outstanding, (ii) the right to
receive dividends thereon shall cease to accrue, and (iii) all rights of the
holders of shares of Series B and Series C Preferred Stock designated for
redemption shall cease and terminate with respect to such shares, excepting
only the right to receive the redemption price therefor, plus all accrued
and unpaid dividends to and including the Redemption Date.

4. Conversion.

The holders of the Series B and Series C Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):

(a) Right to Convert. Subject to Subsection (c), each share of Series
B and Series C Preferred Stock shall be convertible, at the option of the
holder thereof, at any time prior to redemption, at the office of the
corporation or any transfer agent for the Series B and Series C Preferred
Stock, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing (A) the Series B Issue Price by the
Conversion Price for the Series B Preferred Stock (the "Series B Conversion
Price") at the time in effect for such share of Series B Preferred Stock and
(B) the Series C Issue Price by the Conversion Price for the Series C
Preferred Stock (the "Series C Conversion Price") at the time in effect for
such share of Series C Preferred Stock (the Series B Conversion Price and
the Series C Conversion Price sometimes hereinafter referred to as the
"Conversion Price" or "Conversion Prices"). The initial Series B Conversion
Price and the initial Series C Conversion Price shall be $1.00 per share;
provided, however, that each Conversion Price shall be subject to adjustment
as set forth in Subsection 4(c).

<PAGE>
(b) Mechanics of Conversion. Before any holder of Series B or Series
C Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the corporation or of any transfer agent for
the Series B or Series C Preferred Stock, and shall give written notice by
mail, postage prepaid, to the corporation at its principal corporate office,
of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock
are to be issued. The corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Series B or Series C
Preferred Stock, or to the nominee or nominees of such holder, a certificate
or certificates for the number of shares of Common Stock to which such
holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of
such surrender of the shares of Series B or Series C Preferred Stock to be
converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such
date.

(c) Conversion Price Adjustments of Series B and Series C Preferred
Stock. The Conversion Prices of the Series B and Series C Preferred Stock
shall be subject to adjustment from time to time as follows:

(i) In the event the corporation should at any time or from time
to time after the Dividend Commencement Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common
Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend, distribution, split or subdivision if no
record date is fixed), the Series B Conversion Price and the Series C
Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of outstanding
shares.

(ii) If the number of shares of Common Stock outstanding at any
time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of
such combination,

<PAGE>
the Series B Conversion Price and the Series C Conversion Price shall
be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased
in proportion to such decrease in outstanding shares.

(d) Other Distributions. In the event the corporation shall declare a
distribution payable in securities of other persons, evidences of
indebtedness issued by the corporation or other persons, assets (excluding
cash dividends) or options or rights not referred to in Subsection 4(c)(i),
then, in each such case for the purpose of this Subsection 4(d), the holders
of the Series B or Series C Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders
of the number of shares of Common Stock of the corporation into which their
shares of Series B and Series C Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of
the corporation entitled to receive such distribution.

(e) Recapitalizations. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a split,
subdivision or combination provided for elsewhere herein) provision shall be
made so that the holders of the Series B and Series C Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series B and Series
C Preferred Stock the number of shares of stock or other securities or
property of the corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 4 with respect to the
rights of the holders of the Series B and Series C Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series B and Series C Preferred Stock)
shall be applicable after that event as nearly equivalent as may be
practicable.

(f) No Impairment. This corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by this corporation,
but will at all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series B and Series C Preferred Stock against impairment.

<PAGE>
(g) No Fractional Shares and Certificate as to Adjustments.

(i) No fractional shares shall be issued upon conversion of the
Series B or Series C Preferred Stock, and the number of shares of
Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares would otherwise be issuable upon such
conversion shall be determined on the basis of the total number of
shares of Series B or Series C Preferred Stock the holder is at the
time converting into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.

(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series B and Series C Preferred Stock pursuant to
this Section 4, the corporation shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series B or Series C Preferred Stock a
certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is
based. The corporation shall, upon the written request at any time of
a holder of Series B or Series C Preferred Stock, furnish or cause to
be furnished to such holder a like certificate setting forth (A) such
adjustments and readjustments, (B) the Conversion Price at the time in
effect, and (C) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the
conversion of a share of Series B or Series C Preferred Stock.

(h) Notices of Record Date. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a dividend pursuant to Subsection 1(a)) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to
receive any other right, the corporation shall mail to each holder of Series
B or Series C Preferred Stock, at least 20 days prior to the date specified
therein, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.

(i) Reservation of Stock Issuable Upon Conversion. The corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series B and Series C Preferred Stock such
number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series
B and Series C Preferred Stock; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the

<PAGE>
conversion of all such shares of Series B and Series C Preferred Stock, in
addition to such other remedies as shall be available to the holders of such
Series B and Series C Preferred Stock, the corporation shall take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purposes.

(j) Notices. Any notice required by the provisions of this Section 4
to be given to the holders of shares of Series B or Series C Preferred Stock
shall be deemed given when personally delivered to such holder or deposited
in the United States mail, return receipt requested, postage prepaid, and
addressed to each holder of record at his address appearing on the books of
the corporation.

(k) Taxes. The corporation shall pay all taxes (other than income
taxes) that may be imposed in respect of the issue or delivery of shares of
Common Stock upon conversion of shares of Series B or Series C Preferred
Stock. The corporation shall not, however, be required to pay any tax that
may be imposed in respect of any transfer involved in the issue or delivery
of shares of Common Stock in a name other than that of the holder of the
shares of Series B or Series C Preferred Stock to be converted.

5. Voting Rights.

Except as otherwise expressly provided herein or as required by law,
the holder of each share of Series B or Series C Preferred Stock shall have
the right to one vote for each share of Common Stock into which such Series
B or Series C Preferred Stock could then be converted, and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be
entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the By-Laws of the corporation, and
shall be entitled to vote, together with holders of Common Stock, with
respect to any question upon which holders of Common Stock have the right to
vote.

EXHIBIT 3.5

BY-LAWS
OF
STAR TECHNOLOGIES, INC.
(a Delaware corporation)

As Amended and Restated on February 24, 1994, and as further amended on
August 22, 1996
<PAGE>
AMENDMENTS

Article Effect of Amendment Date of Amendment

3; 3.2.1 Deletion of references to a Director August 22, 1996
elected by the holders of Series B
Senior Preferred Stock and Series C
Senior Preferred Stock

3; 3.13 Modify the provisions relating to August 22, 1996
removal of Directors

3; 3.14 Deletion of references to the right August 22, 1996
of the holders of the Series B Senior
Preferred Stock and Series C Senior
Preferred Stock to fill vacancies
on the Board

<PAGE>
CONTENTS

ARTICLE 1. OFFICES . . . . . . . . . . . . . . . . . . . . 1

ARTICLE 2. STOCKHOLDERS. . . . . . . . . . . . . . . . . . 1

2.1 Annual Meeting; Procedures Governing Business of Annual
Meeting. . . . . . . . . . . . . . . . . . . . 1

2.1.1 Annual Meeting. . . . . . . . . . . . 1
2.1.2 Procedures Governing Business of Annual
Meeting.. . . . . . . . . . . . . . . 1

2.2 Special Meetings. . . . . . . . . . . . . . . . 2
2.3 Place of Meeting. . . . . . . . . . . . . . . . 2
2.4 Notice of Meeting.. . . . . . . . . . . . . . . 2
2.5 Waiver of Notice. . . . . . . . . . . . . . . . 3

2.5.1 Written Waiver. . . . . . . . . . . . 3
2.5.2 Waiver by Attendance. . . . . . . . . 3

2.6 Fixing of Record Date for Determining Stockholders.3

2.6.1 Record Date for Meetings of Stockholders and
Adjournments. . . . . . . . . . . . . 3
2.6.2 Record Date for Stockholder Consent to
Corporate Action without a Meeting. . 4
2.6.3 Record Date for Dividends and Distributions or
for any other Purpose or Action.. . . 4

2.7 Voting List.. . . . . . . . . . . . . . . . . . 4
2.8 Quorum. . . . . . . . . . . . . . . . . . . . . 5
2.9 Manner of Acting. . . . . . . . . . . . . . . . 5
2.10 Proxies.. . . . . . . . . . . . . . . . . . . . 5
2.11 Voting of Shares. . . . . . . . . . . . . . . . 5
2.12 Action by Stockholders without a Meeting. . . . 5

ARTICLE 3. BOARD OF DIRECTORS. . . . . . . . . . . . . . . 6

3.1 General Powers. . . . . . . . . . . . . . . . . 6
3.2 Number and Tenure; Procedure for Nomination.. . 6

<PAGE>

3.2.1 Number and Tenure.. . . . . . . . . . 6
3.2.2 Procedure for Nomination. . . . . . . 6

3.3 Annual and Regular Meetings.. . . . . . . . . . 7
3.4 Special Meetings. . . . . . . . . . . . . . . . 8
3.5 Meetings by Telephone.. . . . . . . . . . . . . 8
3.6 Notice of Special Meetings. . . . . . . . . . . 8

3.6.1 Delivery by Personal Service. . . . . 8
3.6.2 Delivery by Mail. . . . . . . . . . . 8
3.6.3 Delivery by Telegraph.. . . . . . . . 8

3.7 Waiver of Notice. . . . . . . . . . . . . . . . 8

3.7.1 Written Waiver. . . . . . . . . . . . 8
3.7.2 Waiver by Attendance. . . . . . . . . 9

3.8 Quorum. . . . . . . . . . . . . . . . . . . . . 9
3.9 Manner of Acting. . . . . . . . . . . . . . . . 9
3.10 Presumption of Assent.. . . . . . . . . . . . . 9
3.11 Action by Board or Committee without a Meeting. 9
3.12 Resignation.. . . . . . . . . . . . . . . . . . 9
3.13 Removal.. . . . . . . . . . . . . . . . . . . . 10
3.14 Vacancies . . . . . . . . . . . . . . . . . . . 10
3.15 Executive and other Committees. . . . . . . . . 10

3.15.1 Standing or Temporary Committees. . . 10
3.15.2 Executive Committee.. . . . . . . . . 11
3.15.3 Minutes of Meetings.. . . . . . . . . 11
3.15.4 Resignation.. . . . . . . . . . . . . 11
3.15.5 Removal.. . . . . . . . . . . . . . . 11

3.16 Compensation. . . . . . . . . . . . . . . . . . 11

ARTICLE 4. OFFICERS. . . . . . . . . . . . . . . . . . . . 12

4.1 Number. . . . . . . . . . . . . . . . . . . . . 12
4.2 Election and Term of Office.. . . . . . . . . . 12
4.3 Resignation.. . . . . . . . . . . . . . . . . . 12
4.4 Removal.. . . . . . . . . . . . . . . . . . . . 12
4.5 Vacancies.. . . . . . . . . . . . . . . . . . . 13

<PAGE>
4.6 Chairman of the Board.. . . . . . . . . . . . . 13
4.7 President.. . . . . . . . . . . . . . . . . . . 13
4.8 Vice Presidents.. . . . . . . . . . . . . . . . 13
4.9 Secretary.. . . . . . . . . . . . . . . . . . . 14
4.10 Salaries. . . . . . . . . . . . . . . . . . . . 14

ARTICLE 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS . . . . . 14

5.1 Contracts.. . . . . . . . . . . . . . . . . . . 14
5.2 Loans.. . . . . . . . . . . . . . . . . . . . . 14
5.3 Checks, Drafts, Etc.. . . . . . . . . . . . . . 14
5.4 Deposits. . . . . . . . . . . . . . . . . . . . 15

ARTICLE 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER. . . 15

6.1 Issuance of Shares. . . . . . . . . . . . . . . 15
6.2 Certificates for Shares.. . . . . . . . . . . . 15
6.3 Transfer Agents and Registrars. . . . . . . . . 15
6.4 Restriction on Transfer.. . . . . . . . . . . . 15
6.5 Transfer of Shares. . . . . . . . . . . . . . . 16
6.6 Lost or Destroyed Certificates. . . . . . . . . 16

ARTICLE 7. BOOKS AND RECORDS . . . . . . . . . . . . . . . 16

ARTICLE 8. FISCAL YEAR . . . . . . . . . . . . . . . . . . 17

ARTICLE 9. SEAL . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE 10. INDEMNIFICATION . . . . . . . . . . . . . . . . 17

ARTICLE 11. AMENDMENTS. . . . . . . . . . . . . . . . . . . 17

<PAGE>

BY-LAWS
OF
STAR TECHNOLOGIES, INC.

ARTICLE 1. OFFICES

The principal office of the corporation shall be located at the
principal place of business or such other place as the Board of
Directors ("Board") may designate. The corporation may have such
other offices, either within or without the State of Delaware, as
the Board may designate or as the business of the corporation may
require from time to time.

ARTICLE 2. STOCKHOLDERS

2.1 Annual Meeting; Procedures Governing Business of Annual
Meeting.

2.1.1 Annual Meeting.

The annual meeting of the stockholders for the purpose of
electing Directors and transacting such other business as may
properly come before the meeting shall be held annually on the
second Tuesday in July, or on such other day as shall be fixed by
resolution of the Board of Directors. If the day fixed for the
annual meeting is a legal holiday at the place of the meeting, the
meeting shall be held on the next succeeding business day.

2.1.2 Procedures Governing Business of Annual
Meeting.

Only such business shall be conducted at an annual meeting of
the stockholders as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business
must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board, (b) otherwise
properly brought before the meeting by or at the direction of the
Board, or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary. To be timely, a
stockholder's notice must be delivered to or mailed and received at
the principal office of the corporation not less than sixty days nor
more than ninety days prior to the meeting; provided, that in the
event that less than seventy days' notice of the date of the meeting
is given to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the
seventh day following the day on which such notice of the date of
the meeting was
<PAGE>
mailed. A stockholder's notice to the Secretary shall set forth (a)
as to each matter the stockholder proposes to bring before the
annual meeting, a brief description of the business desired to be
brought before the annual meeting, the language of the proposal, if
appropriate, and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (c)
a representation that the stockholder is entitled to vote at such
meeting and a statement of the class and number of shares of the
corporation which are beneficially owned by the stockholder, (d) any
material interest of the stockholder in such business, and (e) a
representation that the stockholder intends to appear in person or
by proxy at the meeting to present the business specified in the
notice. Notwithstanding anything in these By-Laws to the contrary,
no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 2.1.2. The
Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before
the meeting in accordance with the provisions of this Section 2.1.2,
and, if he or she should so determine, the Chairman shall so declare
to the meeting and any such business not properly brought before the
meeting shall not be transacted.

2.2 Special Meetings.

The Chairman of the Board, the President, the Board, or the
holders of not less than one-quarter of all the outstanding shares
of the corporation entitled to vote at the meeting, may call special
meetings of the stockholders for any purpose. Only such business
shall be conducted at a special meeting as shall have been stated in
the notice of the meeting as the purpose or purposes of the meeting.

2.3 Place of Meeting.

All meetings shall be held at the principal office of the
corporation or at such other place within or without the State of
Delaware designated by the Board, by any persons entitled to call a
meeting hereunder or by a waiver of notice signed by all of the
stockholders entitled to vote at the meeting.

2.4 Notice of Meeting.

The Chairman of the Board, the President, the Secretary or the
Board shall cause to be delivered to each stockholder entitled to
vote at the annual meeting of stockholders either personally or by
mail, not less than ten nor more than sixty days before the annual
meeting, written notice
<PAGE>
stating the place, day and hour of the meeting. The Chairman of the
Board, the President, the Board or the stockholders calling a
special meeting of stockholders as provided in Section 2.2 of these
By-Laws shall cause to be delivered to each stockholder entitled to
vote at such special meeting, either personally or by mail, not less
than thirty nor more than sixty days before such special meeting,
written notice stating the place, day and hour of the meeting and
the purpose or purposes for which such special meeting is called.
If such notice is mailed, it shall be deemed to be delivered when
deposited with postage prepaid in the official government mail
properly addressed to the stockholder at his or her address as it
appears on the stock transfer books of the corporation. If a
meeting of stockholders is adjourned to another date, time or place,
notice need not be given of the adjourned meeting if the date, time
and place thereof are announced at the meeting at which the
adjournment is taken; provided, that if the adjournment is for more
than thirty days or, if, after the adjournment, a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting
shall be given to each stockholder entitled to vote at the meeting.

2.5 Waiver of Notice.

2.5.1 Written Waiver.

Whenever any notice is required to be given to any stockholder
under the provisions of these By-Laws, the Certificate of
Incorporation or the General Corporation Law of the State of
Delaware, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such
notice.

2.5.2 Waiver by Attendance.

The attendance of a stockholder at a meeting shall constitute a
waiver of notice of such meeting, except when a stockholder attends
a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.

2.6 Fixing of Record Date for Determining Stockholders.

For the purpose of determining stockholders entitled to notice
of, or to vote at, any meeting of stockholders or any adjournment
thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for
any other purpose, the Board may fix in advance a date as the record
date for any such determination, which record date shall not precede
the date upon which the resolution fixing the record date is adopted
by the Board. Any determination to be made on any record date shall
be made at the close of business of such record date.

2.6.1 Record Date for Meetings of Stockholders and
Adjournments.

In the case of an annual meeting of stockholders, the record
date shall be not more than sixty days and not less than ten days
prior to the date of such annual meeting. In the case of a special
meeting of stockholders, the record date shall be not more than sixty
<PAGE>
days and not less than thirty days prior to the date of such special
meeting. Such record dates shall apply to any adjournments of such
annual or special meetings of stockholders unless the Board, in its
sole discretion, shall determine to fix a new record date for any
such adjournment.

2.6.2 Record Date for Stockholder Consent to
Corporate Action without a Meeting.

If the Board shall seek the consent of the stockholders to any
corporate action without a meeting of stockholders, the Board shall
fix a record date not more than sixty days and not less than ten
days prior to the date of the Board's solicitation of such consents.
If no record date has been so fixed by the Board, the record date
for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of
Directors is required by the General Corporation Law of the State of
Delaware, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered
to the corporation. If no record date has been fixed by the Board
and prior action by the Board is required by the General Corporation
Law of the State of Delaware, the record date for determining
stockholders entitled to consent to corporate action in writing
without a meeting shall be the day on which the Board adopts the
resolution taking such prior action. For purposes of this
Section 2.6.2, delivery to the corporation shall be effected by
delivery to its principal office by hand or by certified or
registered mail, return receipt requested.

2.6.3 Record Date for Dividends and
Distributions or for any other Purpose or Action.

In the case of a dividend or distribution payable to the
stockholders, or for any other purpose or action, the record date
shall be not more than sixty days prior to the payment of such
dividend or distribution or the taking of such action; provided,
that if the Board does not set a record date, the record date shall
be the day the Board adopts the resolution authorizing the payment
of such dividend or distribution or the taking of such action.

2.7 Voting List.

At least ten days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting,
or any adjournment thereof, shall be made, arranged in alphabetical
order, with the address of and number of shares held by each
stockholder. This list shall be kept open at such meeting for the
inspection of any stockholder and shall also be open to the
examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of ten days
prior to the meeting, either at a place within the city where the
meeting is to be held, which place
<PAGE>
shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held.

2.8 Quorum.

A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of the stockholders. If less than
a majority of the outstanding shares entitled to vote are
represented at a meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice.
If a quorum is present or represented at a reconvened meeting
following such an adjournment, any business may be transacted that
might have been transacted at the meeting as originally called. The
stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.

2.9 Manner of Acting.

If a quorum is present, the affirmative vote of the majority of
the shares present at the meeting in person or by proxy and entitled
to vote on the subject matter shall be the act of the stockholders,
unless the vote of a greater number is required by these By-Laws,
the Certificate of Incorporation or the General Corporation Law of
the State of Delaware.

2.10 Proxies.

A stockholder may vote by proxy executed in writing by the
stockholder or by his or her attorney-in-fact. Such proxy shall be
filed with the Secretary of the corporation before or at the time of
the meeting or before the delivery to the corporation of a
stockholder's written consent to corporate action, as the case may
be. A proxy shall become invalid three years after the date of its
execution, unless otherwise provided in the proxy. A proxy with
respect to a specified meeting shall entitle the holder thereof to
vote at any adjournment of such meeting but shall not be valid after
the final adjournment thereof.

2.11 Voting of Shares.

The holders of the capital stock of the corporation shall
have the right to vote their shares as provided in Article 4 of the
Certificate of Incorporation.

2.12 Action by Stockholders without a Meeting.

Any action which could be taken at a meeting of the
stockholders may be taken without a meeting, without prior notice
and without a vote, if a written consent, setting forth the action
so taken, is signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to
authorize or take such
<PAGE>
action at a meeting at which all shares entitled to vote thereon
were present and voted. Every written consent shall bear the date
of signature of each stockholder who signs the consent and no
written consent shall be effective to take the corporate action
referred to therein unless, within sixty days of the earliest-dated
consent delivered to the corporation, written consents signed by a
sufficient number of holders to take action are delivered to the
corporation. Any such written consent shall be inserted in the
minute book as if it were the minutes of a meeting of the
stockholders. Prompt notice of the taking of corporate action
without a meeting by less than unanimous written consent shall be
given to those stockholders who have not consented in writing.

ARTICLE 3. BOARD OF DIRECTORS

3.1 General Powers.

The business and affairs of the corporation shall be managed by
the Board.

3.2 Number and Tenure; Procedure for Nomination.

3.2.1 Number and Tenure.

The Board shall be composed of no less than five and no more
than eleven Directors, the specific number to be set by resolution
of the Board; provided, that the Board may be composed of less than
five Directors until vacancies are filled. The Board shall be
divided into three classes, with said classes to be as equal in
number as may be possible. At each annual meeting of stockholders,
a Director whose term expires on that date and who has been duly
nominated shall be elected to a term of office of three years or
such lesser term as the Board shall determine to be necessary to
cause said classes to be as equal in number as may be possible, and
each Director shall serve for the term he or she was elected, or
until his or her successor shall have been duly nominated, elected
and qualified, or until his or her death, resignation or removal
from office.

3.2.2 Procedure for Nomination.

Only persons who are nominated in accordance with the
procedures set forth in this Section 3.2.2 shall be eligible for
election as Directors by the stockholders. Nominations of persons
for election to the Board may be made at a meeting of stockholders
by or at the direction of the Board or by any stockholder of the
corporation entitled to vote for the election of Directors at the
meeting who complies with the notice procedure set forth in this
Section 3.2.2. Such nominations, other than those made by or at the
direction of the Board, shall be made pursuant to timely notice in
writing to the Secretary. To be timely, a stockholder's notice
shall be delivered to or mailed and received at the principal
executive office of the corporation not less than sixty days nor
more than ninety days prior to the meeting; provided, that in the
event that less than seventy days' notice of the date of the meeting
is given to stockholders, notice by the
<PAGE>
stockholder to be timely must be so received not later than the
close of business on the seventh day following the day on which such
notice of the date of the meeting was mailed. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election as a Director, (i) the name, age,
business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class
and number of shares of the corporation that are beneficially owned
by such person and (iv) any other information relating to such
person that is required to be disclosed in solicitations of proxies
for election of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such person's written
consent to being named in the proxy statement as a nominee and to
serving as a Director if elected); and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the
corporation's books, of such stockholder, (ii) a representation that
the stockholder is entitled to vote at such meeting and a statement
of the class and number of shares of the corporation that are
beneficially owned by such stockholder and (iii) a representation
that the stockholder intends to appear in person or by proxy at the
meeting to make the nomination specified in the notice. At the
request of the Board, any person nominated by the Board for election
as a Director shall furnish to the Secretary that information
required to be set forth in a stockholder's notice of nomination.
No person shall be eligible for election as a Director of the
corporation unless nominated in accordance with the procedures set
forth in this Section 3.2.2. The Chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed
by these By-Laws, and, if he or she should so determine, he or she
shall so declare to the meeting and the defective nomination shall
be disregarded.

3.3 Annual and Regular Meetings.

An annual Board meeting shall be held without notice as soon as
practicable after the annual meeting of stockholders at the
principal office of the corporation or at such other time or place
as shall be determined by the Board. By resolution, the Board may
specify the time and place either within or without the State of
Delaware for holding regular meetings without other notice than such
resolution.

3.4 Special Meetings.

Special Board meetings may be called by or at the request of
the Chairman of the Board, the President, the Secretary or any two
Directors. The person or persons authorized to call special
meetings may fix any place either within or without the State of
Delaware as the place for holding any special Board meeting called
by them.
<PAGE>

3.5 Meetings by Telephone.

Members of the Board or any committee designated by the Board
may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other
at the same time. Participation by such means shall constitute
presence in person at a meeting.

3.6 Notice of Special Meetings.

Notice of a special Board meeting shall be given to a Director
in writing delivered to the Director at his or her address shown on
the records of the corporation. Neither the business to be
transacted at, nor the purpose of, any special meeting need be
specified in the notice of such meeting.

3.6.1 Delivery by Personal Service.

If delivery is by personal service, the notice shall be
effective if delivered at such address at least two days before the
meeting.

3.6.2 Delivery by Mail.

If notice is delivered by mail, the notice shall be deemed
effective if deposited in the official government mail properly
addressed with postage prepaid at least three days before the
meeting.

3.6.3 Delivery by Telegraph.

If notice is delivered by telegraph, the notice shall be deemed
effective if the content thereof is delivered to the telegraph
company at least two days before the meeting.

3.7 Waiver of Notice.

3.7.1 Written Waiver.

Whenever any notice is required to be given to any Director
under the provisions of these By-Laws, the Certificate of
Incorporation or the General Corporation Law of the State of
Delaware, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board need be specified in
the waiver of notice of such meeting.
<PAGE>
3.7.2 Waiver by Attendance.

The attendance of a Director at a meeting shall constitute a
waiver of notice of such meeting, except when a Director attends a
meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.

3.8 Quorum.

A majority of the total number of Directors shall constitute a
quorum for the transaction of business at any Board meeting but, if
less than a majority are present at a meeting, a majority of the
Directors present may adjourn the meeting from time to time without
further notice.

3.9 Manner of Acting.

The act of the majority of the Directors present at a meeting
at which there is a quorum shall be the act of the Board, unless the
vote of a greater number is required by these By-Laws, the
Certificate of Incorporation or the General Corporation Law of the
State of Delaware.

3.10 Presumption of Assent.

A Director present at a Board meeting at which action on any
corporate matter is taken shall be presumed to have assented to the
action taken unless his or her dissent is entered in the minutes of
the meeting, or unless such Director files a written dissent to such
action with the person acting as the secretary of the meeting before
the adjournment thereof, or forwards such dissent by registered mail
to the Secretary of the corporation immediately after the
adjournment of the meeting. A Director who voted in favor of such
action may not dissent.

3.11 Action by Board or Committee without a Meeting.

Any action which could be taken at a meeting of the Board or of
any committee appointed by the Board may be taken without a meeting
if a written consent setting forth the action so taken is signed by
each of the Directors or by each committee member. Any such written
consent shall be inserted in the minute book as if it were the
minutes of a Board or a committee meeting.

3.12 Resignation.

Any Director may resign at any time by delivering written
notice to the Chairman of the Board, the President, the Secretary or
the Board, or to the registered office of the corporation. Any such
resignation shall take effect at the time specified therein, or if the
<PAGE>
time is not specified, upon delivery thereof and, unless otherwise
specified therein, the acceptance of such resignation shall not be
necessary to make it effective.

3.13 Removal.

Any Director may be removed with or without cause by the
holders of not less than two-thirds of the outstanding shares
present at a meeting and entitled to vote at an election of
Directors.

3.14 Vacancies

Any vacancy occurring on the Board may be filled by the
affirmative vote of a majority of the remaining Directors though
less than a quorum of the Board. A Director elected to fill a
vacancy shall be elected for the unexpired term of his or her
predecessor in office or such lesser term as the Board shall
determine to be necessary to cause the classes of the Board to be as
equal in number as may be possible, or, if such vacancy exists by
reason of an increase in the number of Directors, for a term of
office continuing only until the next election of the class for
which such Director shall have been chosen and until his or her
successor shall be elected and qualify.

3.15 Executive and other Committees.

3.15.1 Standing or Temporary Committees.

The Board may, by resolution passed by a majority of the whole
Board, appoint standing or temporary committees, each committee to
consist of one or more Directors of the corporation, and invest such
committees with such powers as it may see fit, subject to such
conditions as may be prescribed by the Board and by applicable law.
The Board may designate one or more Directors as alternate members
of any committee, who may replace any absent or disqualified member
at any meeting of the committee. In the absence or disqualification
of a member of a committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of
any such absent or disqualified member.

3.15.2 Executive Committee.

An Executive Committee shall have and may exercise all of the
authority of the Board, except that no such committee shall have the
authority to: (1) declare dividends or distributions, except at a
rate or in periodic amount determined by the Board, (2) approve or
recommend to stockholders actions or proposals required by the
General Corporation Law of the State of Delaware to be approved by
stockholders, (3) fill vacancies on the Board or any committee
thereof, (4) amend these By-Laws, (5) authorize or approve the
reacquisition of shares unless pursuant to general formula or
<PAGE>
method specified by the Board, (6) fix compensation of any Director
for serving on the Board or on any committee, (7) approve a plan of
merger, consolidation, or exchange of shares not requiring
stockholder approval, (8) reduce earned or capital surplus, or
(9) appoint other committees of the Board or members thereof.

3.15.3 Minutes of Meetings.

All committees so appointed shall keep regular minutes of their
meetings and shall cause them to be recorded in books kept for that
purpose.

3.15.4 Resignation.

Any member of any committee may resign at any time by
delivering written notice thereof to the Chairman of the Board, the
President, the Secretary, the Board or the Chairman of such
Committee. Any such resignation shall take effect at the time
specified therein, or if the time is not specified, upon delivery
thereof and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.

3.15.5 Removal.

The Board may remove from office any member of any committee
elected or appointed by it or by an Executive Committee, but only by
the affirmative vote of not less than a majority of the whole Board.

3.16 Compensation.

By Board resolution, Directors and committee members may be
paid their expenses, if any, of attendance at each Board or
committee meeting or for all or portions of days spent working at
the request of the corporation on its affairs, or a fixed sum for
attendance at each Board or committee meeting or for all or portions
of days spent working at the request of the corporation on its
affairs, or a stated salary as Director or a committee member, or a
combination of the foregoing. No such payment shall preclude any
Director or committee member from serving the corporation in any
other capacity and receiving compensation therefor.

ARTICLE 4. OFFICERS

4.1 Number.

The officers of the corporation shall be a Chairman of the
Board, a President and a Secretary, each of whom shall be elected by
the Board. One or more Vice Presidents and such other officers and
assistant officers may be elected or appointed by the Board, such
officers and assistant officers to hold office for such period, have
such authority and
<PAGE>
perform such duties as are provided in these By-Laws or as may be
provided by resolution of the Board. Any officer may be assigned by
the Board any additional title that the Board deems appropriate.
The Board may delegate to any officer or agent the power to appoint
any such subordinate officers or agents and to prescribe their
respective terms of office, authority and duties. Any two or more
offices may be held by the same person.

4.2 Election and Term of Office.

The officers of the corporation shall be elected annually by
the Board at the Board meeting held after the annual meeting of the
stockholders. If the election of officers is not held at such
meeting, such election shall be held as soon thereafter as a Board
meeting conveniently may be held. Unless an officer dies, resigns,
or is removed, he or she shall hold office until the next annual
meeting of the Board or until his or her successor is elected.

4.3 Resignation.

Any officer may resign at any time by delivering written notice
to the Chairman of the Board, the President, a Vice President, the
Secretary or the Board. Any such resignation shall take effect at
the time specified therein, or if the time is not specified, upon
delivery thereof and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.

4.4 Removal.

Any officer or agent elected or appointed by the Board may be
removed by the Board whenever in its judgment the best interests of
the corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so
removed.

4.5 Vacancies.

A vacancy in any office because of death, resignation, removal,
disqualification, creation of a new office or any other cause may be
filled by the Board for the unexpired portion of the term or for a
new term established by the Board.

4.6 Chairman of the Board.

The Chairman of the Board shall be the chief executive officer
of the corporation unless some other officer is so designated by the
Board, shall preside over meetings of the Board and stockholders,
and, subject to the Board's control, shall supervise and control all
of the assets, business and affairs of the corporation. The
Chairman of the Board may sign, with the Secretary or an Assistant
Secretary or with the Treasurer or an Assistant
<PAGE>
Treasurer, certificates for shares of the corporation. The Chairman
of the Board may sign deeds, mortgages, bonds, contracts, or other
instruments, except when the signing and execution thereof have been
expressly delegated by the Board or by these By-Laws to some other
officer or agent of the corporation or are required by law to be
otherwise signed or executed by some other officer or in some other
manner. In general, the Chairman of the Board shall perform all
duties incident to the office of the chief executive officer of a
corporation and such other duties as are prescribed by the Board
from time to time.

4.7 President.

The President shall be the chief operating officer of the
corporation unless some other officer is so designated by the Board
and, in the event of the death of the Chairman of the Board or his
or her inability to act, the President shall perform the duties of
the Chairman of the Board, with all the powers and subject to all
the restrictions upon the Chairman of the Board. The President may
sign, with the Secretary or an Assistant Secretary or with the
Treasurer or an Assistant Treasurer, certificates for shares of the
corporation. The President shall have, to the extent authorized by
the Chairman of the Board or the Board, the same powers as the
Chairman of the Board to sign deeds, mortgages, bonds, contracts, or
other instruments. The President shall perform such other duties as
from time to time may be assigned to him or her by the Chairman of
the Board or by the Board.

4.8 Vice Presidents.

The Vice Presidents may sign, with the Secretary or an
Assistant Secretary or with the Treasurer or an Assistant Treasurer,
certificates for shares of the corporation. The Vice Presidents
shall perform such other duties as from time to time may be assigned
to each of them by the Chairman of the Board, the President or by
the Board.

4.9 Secretary.

The Secretary shall: (a) keep the minutes of meetings of the
stockholders and the Board in one or more books provided for that
purpose; (b) see that all notices are duly given in accordance with
the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and seal of the corporation;
(d) keep registers of the post office address of each stockholder
and Director; (e) sign certificates for shares of the corporation;
(f) have general charge of the stock transfer books of the
corporation; (g) sign with the President, or other officer
authorized by the President or the Board, deeds, mortgages, bonds,
contracts, or other instruments; and (h) in general perform all
duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him or her by the President or
by the Board. In the absence of the Secretary, an Assistant
Secretary may perform the duties of the Secretary.

<PAGE>
4.10 Salaries.

The salaries of the officers shall be fixed from time to time
by the Board or by any person or persons to whom the Board has
delegated such authority. No officer shall be prevented from
receiving such salary by reason of the fact that he or she is also a
Director of the corporation.

ARTICLE 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS

5.1 Contracts.

The Board may authorize any officer or officers, or agent or
agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances.

5.2 Loans.

No loans shall be contracted on behalf of the corporation and
no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board. Such authority may be
general or confined to specific instances.

5.3 Checks, Drafts, Etc.

All checks, drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, or agent or
agents, of the corporation and in such manner as is from time to
time determined by resolution of the Board.

5.4 Deposits.

All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board may
select.
ARTICLE 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER

6.1 Issuance of Shares.

No shares of the corporation shall be issued unless authorized by the
Board, which authorization shall include the maximum number of shares to be
issued and the consideration to be received for each share.
<PAGE>

6.2 Certificates for Shares.

Certificates representing shares of the corporation shall be
signed by the Chairman of the Board or the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary and shall include on their face
written notice of any restrictions which may be imposed on the
transferability of such shares. If such certificate is
countersigned (1) by a Transfer Agent other than the corporation or
its employee, or (2) by a Registrar other than the corporation or
its employee, any other signature on the certificate may be a
facsimile. In case any officer, Transfer Agent or Registrar who has
signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, Transfer Agent or
Registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person was such officer,
Transfer Agent or Registrar at the date of issue. All certificates
shall be consecutively numbered or otherwise identified.

6.3 Transfer Agents and Registrars.

The Board may, in its discretion, appoint responsible banks or
trust companies in Sterling, Virginia, and in such other city or
cities as the Board may deem advisable, from time to time, to act as
Transfer Agents and Registrars of the stock of the corporation and,
when such appointments shall have been made, no stock certificate
shall be valid until countersigned by one of such Transfer Agents
and registered by one of such Registrars.

6.4 Restriction on Transfer.

Except to the extent that such certificates represent shares of
the corporation that have been registered under the Securities Act
of 1933, or unless the corporation has otherwise obtained an opinion
of counsel acceptable to the corporation that transfer restrictions
are not required under applicable securities laws or unless in any
particular transaction or series of transactions the corporation has
otherwise adequately provided for transfer restrictions under
applicable securities laws, all certificates representing shares of
the corporation shall bear a legend, on the face of the certificate
or on the reverse of the certificate if a reference to the legend is
contained on the face, that shall read substantially as follows:

"The securities evidenced by this certificate have
not been registered under the Securities Act of
1933 or any applicable state law, and no interest
therein may be sold, distributed, assigned,
offered, pledged or otherwise transferred unless
(a) there is an effective registration statement
under such Act and applicable state securities
laws covering any such transaction involving said
securities or (b) this corporation receives an
opinion of legal counsel for the holder of these
securities (concurred in by legal counsel for this
corporation) stating that such transaction is
exempt from registration or
<PAGE>
this corporation otherwise satisfies itself that such
transaction is exempt from registration."

6.5 Transfer of Shares.

Shares may be transferred by delivery of the certificates
therefor, accompanied either by an assignment in writing on the back
of the certificates or by written power of attorney to sell, assign
and transfer the same, signed by the record holder thereof, but no
transfer shall affect the right of the corporation to pay any
dividend upon the shares to the holder of record thereof or to treat
the holder of record as the holder in fact thereof for all purposes,
and no transfer shall be valid, except between the parties thereto,
until such transfer shall have been made upon the books of the
corporation. All certificates surrendered to the corporation for
transfer shall be cancelled and no new certificate shall be issued
until the former certificates for a like number of shares shall have
been surrendered and cancelled.

6.6 Lost or Destroyed Certificates.

In the case of a lost, destroyed or mutilated certificate, a
new certificate may be issued therefor upon such terms and indemnity
to the corporation as the Board may prescribe.

ARTICLE 7. BOOKS AND RECORDS

The corporation shall keep correct and complete books and
records of account, stock transfer books, minutes of the proceedings
of its stockholders and Board and such other records as may be
necessary or advisable.

ARTICLE 8. FISCAL YEAR

The fiscal year of the corporation shall be the twelve months
ending March 31, provided that if a different fiscal year is at any
time selected for purposes of federal income taxes, the fiscal year
shall be the year so selected.

ARTICLE 9. SEAL

The seal of the corporation shall consist of the name of the
corporation, the state of its incorporation and the year of its
incorporation.

ARTICLE 10. INDEMNIFICATION

To the full extent permitted by the General Corporation Law of
the State of Delaware, the corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any
civil, criminal, administrative or investigative action, suit or
proceeding (whether brought by or in the right of the corporation or
otherwise) by
<PAGE>
reason of the fact that he or she is or was a Director or officer of
the corporation, or is or was serving at the request of the
corporation as a Director or officer of another corporation, against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding; and the Board may,
at any time, approve indemnification of any other person which this
corporation has the power to indemnify under the General Corporation
Law of the State of Delaware. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which a
person may be entitled as a matter of law or by contract or by vote
of the Board or the stockholders. The corporation may purchase and
maintain indemnification insurance for any person to the extent
provided by applicable law.

ARTICLE 11. AMENDMENTS

These By-Laws may be altered, amended, restated or repealed and
new By-Laws may be adopted by the Board at any regular or special
meeting of the Board. The stockholders may also make, alter, amend
or repeal the By-Laws of the corporation at any annual meeting or at
a special meeting, if the substance of such amendment shall be
contained in the notice of such meeting of stockholders, or by
written consent.

The foregoing By-Laws were adopted by the Board of Directors on
February 24, 1994 and amended by the Board of Directors on
August 22, 1996.

EXHIBIT 10.26

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated August 16,
1996, between Star Technologies, Inc., a Delaware corporation ("Purchaser"),
and General Electric Company, a New York corporation ("Seller").

W I T N E S S E T H:

WHEREAS, Seller owns 59,584 shares of Purchaser's Series B Senior
Preferred Stock, having a par value of $.01 per share ("Series B Preferred
Stock"), and 39,723 shares of Purchaser's Series C Senior Preferred Stock,
having a par value of $.01 per share ("Series C Preferred Stock"); and
WHEREAS, Seller desires to sell 47,667 shares of the Series B Preferred
Stock and 31,778 shares of the Series C Preferred Stock (collectively, the
"Shares") to Purchaser and Purchaser desires to purchase the Shares from
Seller upon the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

ARTICLE I

Purchase of Shares

Section 1.1 Purchase of Shares

Upon the terms and subject to the conditions set forth herein, at the
Closing (as defined below), Seller agrees to sell to Purchaser and Purchaser
agrees to purchase from Seller the Shares.

Section 1.2 Closing

The consummation of the transactions contemplated by this Agreement and
the delivery of the Shares to Purchaser pursuant hereto (the "Closing")
shall occur at
<PAGE>
Perkins Coie, 607 Fourteenth Street, N.W., Washington, D.C. on the date
hereof (the "Closing Date").

Section 1.3 Consideration to be Delivered

At Closing:

(a) Purchaser shall pay Seller as full consideration for purchase of
the Shares the amount of $2,400,000 (the "Purchase Price") by authorizing
Seller to offset such amount against amounts otherwise due Purchaser by
Seller pursuant to that certain Letter Agreement dated July 9, 1996 between
Purchaser and Seller; and

(b) Seller shall deliver to Purchaser the stock certificates of
Purchaser listed on Schedule 1 hereto, representing, among other securities,
the Shares, accompanied, in each case, by a stock power duly endorsed in
favor of Purchaser authorizing surrender of the Shares, with signatures
guaranteed by a commercial bank or trust company.

Section 1.4 Surrender of Rights

With respect to the Shares, Seller hereby surrenders and relinquishes,
effective upon Closing, any right it has or may have had at any time under
(i) the Preferred Stock Purchase Agreement, dated as of May 31, 1990, among
Seller (as successor to General Electric Capital Corporation), Trustees of
General Electric Pension Trust, State Farm Mutual Automobile Insurance
Company and Purchaser (the "Preferred Stock Purchase Agreement") and
(ii) the Certificate of Designation relating to, among other securities, the
Shares, filed by Purchaser with the Secretary of State of the State of
Delaware on May 30, 1990, including without limitation any claim with
respect to the payment of any dividend on the Shares.

Section 1.5 Waiver of Breach

Seller hereby waives any and all breaches by Purchaser of any
covenants, agreements or obligations that may have occurred or are occurring
under the Preferred Stock Purchase Agreement.

<PAGE>
ARTICLE II

Representations and Warranties

Section 2.1 Representations and Warranties of Purchaser

Purchaser represents and warrants to and agrees with Seller that as of
the Closing Date:

(a) Purchaser has corporate power and authority to make, execute,
deliver and perform this Agreement, and this Agreement has been duly
authorized and approved by all required corporate action of Purchaser;

(b) Purchaser is not (including by obtaining any necessary consents
with respect thereto) subject to or a party to, any agreement, contract,
instrument, law, rule, regulation, order, judgment or decree that would
prevent consummation of the transactions contemplated by this Agreement or
compliance by Purchaser with the terms of this Agreement; and

Section 2.2 Representations and Warranties of Seller

Seller represents and warrants to Purchaser that as of the Closing
Date:

(a) Seller has corporate power and authority to make, execute, deliver
and perform this Agreement, and this Agreement has been duly authorized and
approved by all required corporate action of Seller;

(b) Seller is the lawful owner of the Shares, free and clear of all
liens, encumbrances, restrictions and claims of every kind; Seller has full
legal right, power and authority to sell, assign, transfer and convey the
Shares pursuant to this Agreement;

(c) Seller is not subject to, or a party to, any agreement, contract,
instrument, law, rule, regulation, order, judgment or decree that would
prevent consummation of the transactions contemplated by this Agreement or
compliance by Seller with the terms of this Agreement; and

(d) Seller has not taken any action that would cause the transfer of
the Shares contemplated hereby not to be exempt under the Securities Act of
1933, as amended.
<PAGE>
ARTICLE III

Conditions Precedent

Section 3.1 Conditions Precedent to Obligations of Purchaser

All obligations of Purchaser under this Agreement are subject to the
fulfillment, on or prior to the Closing Date, of each of the following
conditions:

(a) Purchaser shall have received the certificates representing the
Shares as provided in Section 1.3(b); and

(b) Seller's representations and warranties contained in this
Agreement shall be true and correct in all material respects on and as of
the Closing Date as though such representations and warranties were made as
of such time.

Section 3.2 Conditions Precedent to Obligations of Seller

All obligations of Seller under this Agreement are subject to the
fulfillment, on or prior to the Closing Date, of each of the following
conditions:

(a) Seller shall have received the Purchase Price as provided in
Section 1.3(a);

(b) Seller shall have received stock certificates representing the
shares of Series B Preferred Stock and Series C Preferred Stock retained by
Seller and not sold to Purchaser; and

(c) Purchaser's representations and warranties contained in this
Agreement or in any certificate or document delivered pursuant to the
provisions hereof or in connection with the transactions contemplated hereby
shall be true and correct in all material respects on and as of the Closing
Date as though such representations and warranties were made as of such
time.
ARTICLE IV

Miscellaneous

Section 4.1 Governing Law

The interpretation and construction of this Agreement, and all matters
relating hereto, shall be governed by the laws of the State of New York,
excluding its conflict of law rules.
<PAGE>
Section 4.2 Third Party Beneficiaries

Each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than
the parties hereto.

Section 4.3 Severability

Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.

Section 4.4 Captions

The Article and Section captions used herein are for reference purposes
only, and shall not in any way affect the meaning or interpretation of this
Agreement.

Section 4.5 Notices

Any notice or other communications required or permitted hereunder
shall be in writing and be sufficiently given if delivered in person or sent
by facsimile or by registered or certified mail, postage prepaid, addressed
as follows:

If to Purchaser, to:

Star Technologies, Inc.
515 Shaw Road
Sterling, Virginia 20166
Attention: Treasurer
Facsimile: (703) 478-3600

and if to Seller, to:

General Electric Company
Medical Systems Division
P.O. Box 414
Milwaukee, Wisconsin 53201
Attention: General Counsel
Facsimile: (414) 544-3573

or such other address as shall be furnished in writing by either party to
the other, and such notice or communication shall be deemed to have been
given as of the date so delivered, sent by facsimile or mailed.
<PAGE>
Section 4.6 Parties in Interest

This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns; provided, that neither party may assign its rights
or delegate its obligations hereunder without the prior written consent of
the other party, and any attempt to so assign or delegate without such
consent shall be void.

Section 4.7 Counterparts

This Agreement may be executed in one or more counterparts (or upon
separate signature pages bound together into one or more counterparts), all
of which taken together shall constitute one instrument.

Section 4.8 Waiver

Waiver by either party of any breach or failure to comply with any
provision of this Agreement by the other party shall not be construed as, or
constitute, a continuing waiver of such provision, or a waiver of any other
breach of or failure to comply with any other provisions of this Agreement.

Section 4.9 Entire Agreement

This Agreement contains the entire understanding of the parties hereto
with respect to the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.

Section 4.10 Amendments

This Agreement may not be amended or modified orally, but only by an
agreement in writing signed by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, each of Purchaser and Seller has caused this Stock
Purchase Agreement to be duly executed by its duly authorized representative
on the date first set forth above.

STAR TECHNOLOGIES, INC.

By /s/ Robert C. Compton
Name: . . . . . . . Robert C. Compton
Title:. . . . Chairman, President and
Chief Executive Officer

GENERAL ELECTRIC COMPANY

By /s/ Keith S. Sherin
Name: . . . . . . . . Keith S. Sherin
Title:. . . . . . . . .Vice President

<PAGE>

GENERAL ELECTRIC COMPANY

SCHEDULE 1 TO STOCK PURCHASE AGREEMENT

STOCK CERTIFICATES

SERIES B SENIOR PREFERRED STOCK

CERT. NO. NO. OF SHARES
B-13 59,584
SHARES PURCHASED 47,667
SHARES TO BE REISSUED 11,917

SERIES C SENIOR PREFERRED STOCK

CERT. NO. NO. OF SHARES
C-13 39,723
SHARES PURCHASED 31,778
SHARES TO BE REISSUED 7,945

EXHIBIT 10.27

AMENDMENT NO. 1 TO
PREFERRED STOCK PURCHASE AGREEMENT

AMENDMENT NO. 1 TO PREFERRED STOCK PURCHASE AGREEMENT, dated August 16,
1996, between GENERAL ELECTRIC COMPANY, a New York corporation
("Purchaser"), and Star Technologies, Inc., a Delaware corporation (the
"Company").

WHEREAS, General Electric Capital Corporation ("GECC"), Trustees of
General Electric Pension Trust ("GEPT"), and State Farm Mutual Automobile
Insurance ("State Farm"), as Purchasers, and the Company, as Seller, entered
into a Preferred Stock Purchase Agreement dated as of May 31, 1990 (the
"Purchase Agreement"); capitalized terms used herein without definition have
the respective meanings set forth in the Purchase Agreement;

WHEREAS, GEPT and State Farm have sold all of their respective
outstanding shares of Preferred Stock to the Company;

WHEREAS, GECC has sold all of its outstanding shares of Preferred Stock
to Purchaser; and

WHEREAS, Purchaser, as the sole holder of outstanding shares of
Preferred Stock, and the Company have agreed to amend the Purchase
Agreement;

NOW, THEREFORE, Purchaser and the Company hereby agree as follows:

1. Amendment to Section 2. Section 2 of the Purchase Agreement is
hereby deleted in its entirety and replaced with the text of Annex A hereto.

2. Amendment to Section 7. Section 7.6 of the Purchase Agreement is
hereby amended as follows:

(a) The information with respect to notices to be sent to the
Company is hereby amended by deleting such information in its entirety and
inserting in its place the following:

THE COMPANY:

STAR TECHNOLOGIES, INC.
515 Shaw Road
Sterling, Virginia 20166
Attention: Chief Financial Officer

<PAGE>

With a copy to:

Kerry B. Long, Esq.
Perkins Coie
607 Fourteenth Street, N.W.
Washington, D.C. 20005

; and

(b) The information with respect to notices to be sent to GECC is
hereby amended by deleting such information in its entirety and inserting in
its place the following:

GENERAL ELECTRIC COMPANY
Medical Systems Division
P.O. Box 414
Milwaukee, Wisconsin 53201
Attention: General Counsel

<PAGE>
IN WITNESS WHEREOF, Purchaser and Seller have caused this Amendment No. 1 to
Preferred Stock Purchase Agreement to be duly executed and delivered the
date first above written.

GENERAL ELECTRIC COMPANY

By /s/ Keith S. Sherin
Name: Keith S. Sherin
Title: Vice President

STAR TECHNOLOGIES, INC.

By /s/ Robert C. Compton
Name: Robert C. Compton
Title: President

<PAGE>
ANNEX A

2. Covenants

The Company covenants that so long as there are any shares of
Preferred Stock outstanding:

2.1 Exchange of Stock Certificates

The Company will, at its expense, promptly upon surrender of any
certificates representing shares of Preferred Stock at the office of the
Company referred to in, or designated pursuant to, Section 7.6, execute and
deliver to such Purchaser a new certificate or certificates registered in
such names and in such denominations specified by such Purchaser for an
aggregate number of shares of Preferred Stock equal to the number of shares
of such stock represented by the certificates surrendered.

2.2 Lost, Stolen, Destroyed or Mutilated Stock Certificates

Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any certificate for shares of Preferred
Stock and, in the case of loss, theft or destruction, upon delivery of an
indemnity satisfactory to the Company (which, in the case of any original
Purchaser, may be an undertaking by such Purchaser to so indemnify the
Company), or, in the case of mutilation, upon surrender and cancellation
thereof, the Company will issue a new certificate of like tenor for a number
of shares of Preferred Stock equal to the number of shares of such stock
represented by the certificate lost, stolen, destroyed or mutilated.

2.3 Limitation on Agreements

The Company will not enter into any agreement or instrument, or any
amendment, modification or supplement to any existing agreement or
instrument, which by its terms limits, restricts or prohibits the Company's
ability to pay dividends on the Preferred Stock.

EXHIBIT 10.28

STOCK OPTION AGREEMENT

THIS STOCK OPTION AGREEMENT (this "Agreement"), dated August 16, 1996,
between General Electric Company, a New York corporation ("GE") and Star
Technologies, Inc., a Delaware corporation (the "Company").

W I T N E S S E T H:

WHEREAS, GE desires to issue and the Company desires to acquire an
option from GE to purchase 11,917 shares of the Company's Series B Senior
Preferred Stock, having a par value of $.01 per share and 7,945 shares of
the Company's Series C Senior Preferred Stock, having a par value of $.01
per share (collectively, the "Shares") on the terms and conditions set forth
herein;

NOW THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

ARTICLE I

Grant of Option

Section 1.1 The Option

GE hereby irrevocably grants to the Company an option (the "Option") to
purchase the Shares (including without limitation all rights to accrued and
unpaid dividends, whether or not declared) from GE. The Option shall be
exercisable by the Company at any time between August 16, 1996 and
August 16, 1999, inclusive, by delivery by the Company to GE of a notice
substantially in the form attached hereto as Exhibit A, together with
payment in the amount of $600,000 (the "Purchase Price").

Section 1.2 No Rights in Shares

Except as provided herein, the Company shall have no rights in respect
of the Shares until such time as it exercises the Option and makes payment
to GE as herein provided.

<PAGE>
ARTICLE II

Representations, Warranties and Covenants

Section 2.1 Representations, Warranties and Covenants of GE

GE represents and warrants to and covenants with the Company that:

(a) GE owns and holds good and valid title to the Shares, free and
clear of any liens, pledges, charges, claims, security interests,
restrictions, options, commitments or encumbrances (except such restrictions
on transferability as are imposed by applicable state and federal securities
laws) (collectively, "Charges");

(b) GE holds Certificate Nos. B-14 and C-14 evidencing the Shares.
Upon surrender to the Company of such Certificates by GE, duly endorsed and
accompanied by a duly executed stock power, and upon payment of the Purchase
Price by the Company, the Company will have obtained good and valid title to
the Shares, free and clear of any Charges;

(c) GE has not granted or permitted to exist any Charges with respect
to the Shares, or any rights to acquire any of the Shares, other than such
as are granted to the Company hereunder; GE shall not, so long as the Option
is exercisable, grant or permit to exist any Charges with respect to the
Shares, or any rights to buy or otherwise acquire any of the Shares, other
than such as are granted to the Company hereunder, or cause the Shares to be
converted, in whole or in part, into Common Stock of the Company;

(d) GE has the full and unrestricted right, power, capacity and
authority to enter into, execute and deliver this Agreement and to transfer
and sell good and valid title to the Shares free and clear of any Charges;
and

(e) This Agreement, when executed and delivered, shall constitute a
legal, valid and binding obligation of GE.

Section 2.2 Representations and Warranties of the Company

The Company represents and warrants to GE that as of the date first set
forth above:

(a) The Company has the requisite power to enter into this Agreement;
and
(b) This Agreement, when executed and delivered, shall constitute a
legal, valid and binding obligation of the Company.
<PAGE>
ARTICLE III

Conditions Precedent

Section 3.1 Conditions Precedent to Obligations of the Company

All obligations of the Company under this Agreement are subject to the
fulfillment, on or prior to the date first set forth above, of each of the
following conditions:

(a) GE's representations and warranties contained in this Agreement
shall be true and correct in all material respects as of the date first set
forth above as though such representations and warranties were made as of
such time; and

(b) All documents contemplated by this Agreement shall have been
executed by the parties or shall be executed by the parties simultaneously
with the execution of this Agreement.

Section 3.2 Conditions Precedent to Obligations of GE

All obligations of GE under this Agreement are subject to the
fulfillment, on or prior to the date first set forth above, of each of the
following conditions:

(a) The Company's representations and warranties contained in this
Agreement shall be true and correct in all material respects on and as of
the date first set forth above, as though such representations and
warranties were made as of such time; and

(b) All documents contemplated by this Agreement shall have been
executed by the parties or shall be executed by the parties simultaneously
with the execution of this Agreement.

Section 3.3 Further Action

Each of the parties hereto shall, subject to the fulfillment of or
before the date first set forth above of each of the conditions to its
performance set forth in this Article III or any waiver thereof by any of
the parties, perform such further acts and execute such documents as may be
reasonably required to effectuate the transactions contemplated hereby.

<PAGE>
ARTICLE IV

Miscellaneous

Section 4.1 Stop Transfer Instructions

GE authorizes the Company to issue stop transfer instructions to its
stock transfer agent, or, so long as it may act as its own transfer agent,
to make a stop transfer notation in the stock records of the Company.

Section 4.2 Governing Law

The interpretation and construction of this Agreement, and all matters
relating hereto, shall be governed by the laws of the State of New York,
excluding its conflict of law rules.

Section 4.3 Third Party Beneficiaries

Each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than
the parties hereto.

Section 4.4 Severability

Section 4.5 Captions

The Article and Section captions used herein are for reference purposes
only, and shall not in any way affect the meaning or interpretation of this
Agreement.

Section 4.6 Notices

<PAGE>
If to GE, to:

General Electric Company
Medical Systems Division
P.O. Box 414
Milwaukee, Wisconsin 53201
Attention: General Counsel
Facsimile: (414) 544-3573

and if to Company, to:

Star Technologies, Inc.
515 Shaw Road
Sterling, Virginia 20166
Attention: Treasurer
Facsimile: (703) 478-3600

Section 4.7 Parties in Interest

Section 4.8 Counterparts

Section 4.9 Waiver

Section 4.11 Amendments

This Agreement may not be amended or modified orally, but only by an
agreement in writing signed by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, each of GE and the Company has caused this Stock
Option Agreement to be duly executed by its duly authorized representative
on the date first set forth above.

GENERAL ELECTRIC COMPANY

By /s/ Keith S. Sherin
Name: . . . . . . . . Keith S. Sherin
Title:. . . . . . . . .Vice President

STAR TECHNOLOGIES, INC.

By /s/ Robert C. Compton
Name: . . . . . . . Robert C. Compton
Title:. . . . . . . . . . . President

<PAGE>

EXHIBIT A TO STOCK OPTION AGREEMENT

NOTICE OF EXERCISE

General Electric Company
Medical Systems Division
P.O. Box 414
Milwaukee, Wisconsin 53201

Pursuant to the Stock Option Agreement dated August 16, 1996
between General Electric Company ("GE") and Star Technologies,
Inc. (the "Company") (the "Agreement"), the Company hereby elects
to exercise its option to purchase the Shares (as defined in the
Agreement).

Concurrently with delivery of this Notice of Exercise, the
Company has paid to GE the Purchase Price (as defined in the
Agreement).
Very truly yours,
STAR TECHNOLOGIES, INC.

By____________________________

Receipt of the above
is hereby acknowledged:
GENERAL ELECTRIC COMPANY

By___________________________

<TABLE>
EXHIBIT 11

COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
Primary Per Share Earnings (Loss) 1996 1995 1996 1995

<S> <C> <C> <C> <C>
Average shares outstanding during period 19,878 19,880 19,884 19,877
======= ======= ======= =======

Net income (loss) $ 5,180 $ (964) $ 4,589 $(1,298)

Undeclared cumulative dividends on Series B
and Series C Senior Preferred Stock (199) (348) (547) (646)

Excess carrying amount and cumulative
undeclared dividends of Series B and Series C
Senior Preferred Stock over consideration 10,580 - 10,580 4,954
------- ------- ------- -------
Net income (loss) applicable to common shares $15,561 $(1,312) $14,622 $ 3,010
======= ======= ======= =======

Primary earnings (loss) per common and common
equivalent share: $ .78 $ (.07) $ .74 $ .15
======= ======= ======= =======

</TABLE>

-12-
<PAGE>
<TABLE>
EXHIBIT 11

COMPUTATION OF PER SHARE EARNINGS (Cont'd)
(In thousands, except per share data)

Three Months Ended Six Months Ended
September 30, September 30,
Fully Diluted Per Share Earnings 1996 1995 1996 1995

<S> <C> <C> <C> <C>
Average shares outstanding during period 19,878 19,880 19,884 19,877

Dilutive effect of convertible securities
computed by the "if converted" method:

Series A preferred stock 327 338 327 338
Series B & C preferred stock 1,986 9,931 1,986 9,931
------- ------- ------- -------
22,191 30,149 22,197 30,146
======= ======= ======= =======

Net income (loss) $ 5,180 $ (964) $ 4,589 $(1,298)

Adjustment for repurchase of Series B and
Series C Senior Preferred Stock (174) - (522) -

Excess carrying amount and cumulative undeclared
dividends of Series B and Series C Senior
Preferred Stock over consideration 10,580 - 10,580 4,954
------- ------- ------- -------
Net income (loss) applicable to common shares $15,586 $ (964) $14,647 $ 3,656
======= ======= ======= =======

Fully diluted earnings (loss) per common
and common equivalent share: $ .70 $ (.03) $ .66 $ .12
======= ======= ======= =======

</TABLE>

-13-

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2032
<SECURITIES> 5179
<RECEIVABLES> 158
<ALLOWANCES> 23
<INVENTORY> 562
<CURRENT-ASSETS> 8027
<PP&E> 7790
<DEPRECIATION> 7352
<TOTAL-ASSETS> 8609
<CURRENT-LIABILITIES> 1211
<BONDS> 0
0
3
<COMMON> 199
<OTHER-SE> 7196
<TOTAL-LIABILITY-AND-EQUITY> 8609
<SALES> 932
<TOTAL-REVENUES> 932
<CGS> 464
<TOTAL-COSTS> 464
<OTHER-EXPENSES> 2494
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4589
<INCOME-TAX> 0
<INCOME-CONTINUING> 4589
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4589
<EPS-PRIMARY> .74
<EPS-DILUTED> .66

</TABLE>