S-1/A

As filed with the Securities and Exchange Commission on October 4, 2005

Registration No. 333-127006

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

AMENDMENT NO. 2

TO

FORM S-1

REGISTRATION STATEMENT

Under the

Securities Act of 1933

NCI, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	7373	20-3211574
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

11730 Plaza America Drive

Reston, Virginia 20190

(703) 707-6900

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Charles K. Narang

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

NCI, Inc.

11730 Plaza America Drive

Reston, Virginia 20190

(703) 707-6900

(Name, Address Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to:

Craig E. Chason, Esq.	R.W. Smith, Jr., Esq.
John M. McDonald, Esq.	Jason C. Harmon, Esq.
Pillsbury Winthrop Shaw Pittman LLP	DLA Piper Rudnick Gray Cary US LLP
1650 Tysons Boulevard	6225 Smith Avenue
McLean, Virginia 22102	Baltimore, Maryland 21209
(703) 770-7900	(410) 580-3000

Approximate date of commencement of proposed sale to the public:    As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

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

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 4, 2005

5,150,000 Shares

NCI, INC.

Class A Common Stock

This is our initial public offering. Of the 5,150,000 shares of Class A common stock being offered, 4,800,000 shares are being sold by us and 350,000 shares are being sold by the selling stockholders. We have granted the underwriters an option to purchase up to 772,500 additional shares of Class A common stock to cover over-allotments. We will not receive any proceeds from the sale of the shares of Class A common stock by the selling stockholders.

Prior to this offering, there has been no public market for our Class A common stock. It is currently estimated that the initial public offering price per share will be between $10.00 and $12.00. We have applied to list the Class A common stock on The Nasdaq National Market under the symbol “NCIT.”

Investing in our Class A common stock involves risks. See “ Risk Factors” beginning on page 8.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per share	Total
Public offering price	$	$
Underwriting discount and commissions	$	$
Proceeds to us (before expenses)	$	$
Proceeds to selling stockholders (before expenses) (1)	$	$

(1) We have agreed to pay the underwriting discount and commissions for the selling stockholders.

The underwriters expect to deliver the shares of Class A common stock to purchasers on or about                 , 2005.

Legg Mason Wood Walker Incorporated Raymond James

Robert W. Baird & Co. Stephens Inc.

The date of this prospectus is                 , 2005.

TABLE OF CONTENTS

	Page
Prospectus Summary	1
Risk Factors	8
Forward-Looking Statements	18
Relevant Industry Terms	18
Use of Proceeds	20
Dividend Policy	20
S Corporation Status	21
Capitalization	22
Dilution	23
Selected Consolidated Financial Data	24
Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Business	41
Management	55
Principal and Selling Stockholders	62
Related Party Transactions	63
Description of Capital Stock	64
Shares Eligible for Future Sale	68
Underwriting	70
Legal Matters	72
Experts	72
Where You Can Find More Information	73
Index to Financial Statements	F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is complete and accurate only as of the date on the front cover regardless of the time of delivery of this prospectus or of any sale of shares. Except where the context requires otherwise, in this prospectus the “Company,” “NCI,” “we,” “us” and “our” refer to NCI, Inc., a Delaware corporation, and, where appropriate, its subsidiaries.

We have not undertaken any efforts to qualify this offering for offers to individual investors in any jurisdiction outside the U.S. Individual investors located outside the U.S. should not expect to be eligible to participate in this offering.

Until                     , 2005, 25 days after the date of this offering, all dealers that effect transactions in our shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before making your investment decision. We urge you to read this entire prospectus carefully, including the “Risk Factors” section and our consolidated financial statements and the notes to those statements. See “Relevant Industry Terms” beginning on page 18 for a more complete definition of industry terms used in this prospectus.

NCI, Inc.

We are a provider of information technology services and solutions to U.S. federal government agencies. We focus on designing, implementing, maintaining and upgrading secure information technology (IT) systems and networks by leveraging our skills across four core service offerings: network engineering; information assurance; systems development and integration; and enterprise systems management. A majority of our revenue is derived from the delivery of mission-critical IT services to defense and intelligence agencies. We believe our diversified and stable client base, strong client relationships, broad array of contracts and significant management and operational capabilities position us to continue our growth.

We have a diversified and stable client base with approximately two-thirds of our revenue derived from engagements with defense and intelligence agencies, including the U.S. Army, U.S. Air Force, Defense Logistics Agency and key members of the intelligence community. These agencies, with their focus on network-centric warfare and information superiority, currently have, and are expected to continue to have, significant funding for transformation through information technology initiatives. In addition, approximately one-third of our revenue is derived from engagements with federal civilian agencies that are also focused on enhancing their mission-critical IT systems. We believe our broad client base will enable us to expand our business, regardless of shifts in federal government spending priorities.

Since our founding in 1989, we have focused on building long-term client relationships. We have provided IT services and solutions to clients within the U.S. Army, U.S. Air Force, Department of Energy (DOE), National Aeronautics and Space Administration (NASA) and intelligence community for more than ten years. In addition, over the past three years, we won more than 90% of the competitively awarded prime engagements on which we were the incumbent and eligible for award. We believe our strong relationships result from our in-depth understanding of client missions, the strength of our technical solutions and the co-location of a majority of our employees with our clients.

We have a broad array of contracts that consisted of approximately 80 contracts and 155 task orders as of June 30, 2005. Our largest engagement, representing approximately 8.0% of revenue for the six months ended June 30, 2005, is not scheduled for recompetition until 2011, assuming, even though the federal government is not obligated to do so, all option periods are exercised. Our contract base includes multiple government wide acquisition contracts, or GWACs, such as: the seven-year U.S. Army Information Technology Enterprise Solutions (ITES) contract; the five-year U.S. Air Force Network-Centric Solutions (NETCENTS) contract; and the ten-year Department of Commerce Information Technology Solutions—Next Generation Program (COMMITS NexGen) contract. As a prime contractor on each of these contract vehicles, we are competing with a discrete number of other pre-qualified companies for several hundred million dollars of additional business each year.

We have made significant investments in our management, employees and infrastructure in support of our growth and profitability strategies. Our senior managers average more than 25 years of experience with federal government agencies, the U.S. military and federal government contractors. In addition, our President and our Chief Operating Officer each has more than 18 years of public company experience in the federal IT services

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sector. We have assembled a highly skilled work force of approximately 1,450 employees, of whom 68% possess at least one security clearance. We have also invested in internally developed business management software tools and expanded facilities, including multiple Sensitive Compartmented Information Facilities (SCIFs), which are government certified facilities that allow us to pursue highly classified activities.

For the six months ended June 30, 2005, our revenue was $93.9 million and our net income was $4.7 million, representing organic growth of 15.6% and 77.6%, respectively, over the same period in 2004. Since 2001, our revenue, including the effect of an acquisition, has grown to $171.3 million in 2004, representing a compound annual growth rate of 12.9%. Over the same period, our net income decreased 4.0%, from $6.4 million in 2001 to $6.1 million in 2004. As of June 30, 2005, our total estimated contract backlog was $525 million, of which approximately $63 million was funded.

Market Opportunity

The federal government is among the largest consumers of information technology services and solutions in the world. According to INPUT, an independent federal government market research firm, the overall market for contracted IT systems and services by the federal government is expected to grow from $59.2 billion in federal fiscal year 2005 to $78.8 billion in federal fiscal year 2010. In addition, recent defense budgets are significantly higher than in prior years, particularly in areas related to IT, intelligence, surveillance, reconnaissance and homeland security. We believe that over the next several years there will be significant market opportunities for providers of IT services and solutions to federal government agencies, particularly those in the defense and intelligence community, primarily due to the following trends:

• Focus on Federal Government Transformation. The federal government, and the Department of Defense (DoD) in particular, is in the midst of a significant transformation that is primarily driven by the federal government’s need to address the changing nature of global threats. A significant aspect of this transformation is the use of information technology to increase the federal government’s effectiveness and efficiency.

• Increased Reliance on Professional Services Providers. Federal government agencies have increased their reliance on professional services providers primarily due to increased demand for more innovative technical solutions and a declining federal government IT workforce.

• Evolving Procurement Practices. Federal government procurement policies continue to evolve and are currently shaped by a focus on best value awards and an increased use of multiple award contracts.

Competitive Strengths

We believe we are well positioned to meet the rapidly evolving needs of federal government agencies for IT services and solutions because we possess the following key business strengths:

• In-Depth Understanding of Client Missions. Through our long-term client relationships, as well as the co-location of a majority of our employees at client sites, we have developed an in-depth understanding of our clients’ missions that enables us to create new technical solutions and high-value service offerings in anticipation of clients’ future critical requirements.

• Proven Ability to Win Business. We have a proven ability to win business, as evidenced by our success in 2004 when we were awarded task orders and single award contracts with a total value in excess of $300 million.

• Diverse Base of Key Prime Contract Vehicles. We are a prime contractor on numerous multi-year GWACs that provide us the opportunity to bid on hundreds of millions of dollars of business against a discrete number of other pre-qualified companies each year.

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• Highly Skilled Employees with Security Clearances. As of June 30, 2005, we had approximately 1,450 employees, 71% of whom had formal degrees and 68% of whom held at least one federal government security clearance.

• Experienced Management Team. Our senior managers average more than 25 years of experience with federal government agencies, the U.S. military and federal government contractors.

Strategy

Our objective is to grow our business as a provider of information technology services and solutions to federal government agencies while improving our profitability. To achieve our objective, we intend to:

• Accelerate Internal Growth. We plan to accelerate our internal growth by:

Capitalizing on our current contract base. We intend to aggressively pursue task orders under our existing prime GWACs. We have developed several internal tools that facilitate our ability to track, prioritize and win task orders under these vehicles.

Expanding the services we provide to our existing clients. We believe our understanding of client missions, processes and needs, in conjunction with our full lifecycle IT offerings and our strong performance record, positions us to capture new work from existing clients.

Expanding our client base. We plan to expand our client base into areas with significant growth potential by leveraging our reputation, long-term client relationships with federal government agencies and diverse contract base, including our GWAC vehicles.

Offering new complementary services. We intend to leverage our strong reputation for providing IT services to offer new complementary services to our existing clients. We expect to focus on high value-added services that are closely aligned with our current offerings.

• Improve Operating Margins. We believe that we have a significant opportunity to improve our profitability by:

Capitalizing on our corporate infrastructure investments. We have made significant investments in our senior management and corporate infrastructure. As our revenue grows, we expect to leverage this infrastructure base and increase our operating margins.

Capitalizing on our internally developed tools. We have developed a variety of web-based business development and project management tools. We believe these highly scaleable tools will enable us to increase operating efficiency as our revenue base grows.

Concentrating on our high value-added prime contracts. We expect to improve our operating margins as we continue to increase the percentage of revenue we derive from our work as a prime contractor and from engagements where contracts are awarded on a best value, rather than on a low cost, basis.

• Pursue Strategic Acquisitions. We intend to augment our organic growth by identifying, acquiring and integrating strategic acquisitions that complement and broaden our existing client base and expand our primary service offerings. Our successful acquisition of Scientific & Engineering Solutions, Inc. (SES) in December 2003 demonstrated our ability to complete and integrate an acquisition that meets our goals.

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Challenges We Face

We face a number of risks associated with our business and industry and must overcome a variety of challenges in order to be successful. For example:

• We depend on contracts with the federal government for substantially all of our revenue. If our relationships with federal government agencies are harmed, our revenue and operating profits would decline.

• We face intense competition from many competitors that have greater resources than we do, which could result in price reductions, reduced profitability and loss of market share.

• We expect to lose our eligibility to participate in the federal government’s small business programs which may affect our ability to win contracts and grow revenue.

• We cannot guarantee that our estimated contract backlog will result in actual revenue.

• If we fail to attract and retain skilled employees or employees with the necessary security clearances, we might not be able to perform under our contracts or win new business.

• Our revenue and operating profits could be adversely affected by significant changes in the contracting or fiscal policies of the federal government.

• Our federal government contracts may be terminated by the federal government at any time, and if we do not replace them, our revenue and operating profits may be adversely affected.

For further discussion of these and other risks you should consider before making an investment in our Class A common stock, see “Risk Factors” beginning on page 8.

We were incorporated in Delaware on July 27, 2005, to hold all of the capital stock of NCI Information Systems, Inc., which was incorporated in Virginia in 1989. Our principal executive offices are located at 11730 Plaza America Drive, Reston, Virginia 20190. Our telephone number at that address is (703) 707-6900. Our website address is www.nciinc.com. We do not intend the information on our website to constitute part of this prospectus.

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The Offering

Class A common stock offered by us	4,800,000 shares
Class A common stock offered by the selling stockholders	350,000 shares
Common stock to be outstanding immediately after this offering:
Class A common stock	5,628,946 shares
Class B common stock	6,300,000 shares
Total	11,928,946 shares
Use of proceeds	We expect to use the net proceeds from this offering to repay certain indebtedness and for working capital and general corporate purposes, including potential acquisitions. We will not receive any of the proceeds from the sale of shares by the selling stockholders. See “Use of Proceeds.”
Over-allotment option	We have granted the underwriters an option to purchase up to an additional 772,500 shares of Class A common stock solely to cover over-allotments.
Proposed Nasdaq symbol	NCIT

The information contained in this prospectus is based on shares outstanding as of October 4, 2005 and unless we specifically state otherwise:

• is based on the assumption that the underwriters will not exercise their over-allotment option;

• assumes that the initial public offering price will be $11.00, the midpoint of the expected price range;

• gives effect to certain transactions completed prior to the offering, including a share exchange, merger, 1-for-1.9 reverse split of our common stock and revocation of our S corporation status;

• excludes 1,343,386 shares of common stock subject to issuance upon the exercise of options we have granted under our 2005 Performance Incentive Plan at a weighted average exercise price of $4.22 per share, of which 652,629 shares are vested and exercisable at a weighted average price of $0.44 as of the offering date; and

• excludes 1,464,509 shares of common stock reserved for issuance under our 2005 Performance Incentive Plan, plus annual increases in the number of shares that will be reserved for issuance under our 2005 Performance Incentive Plan.

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Summary Consolidated Financial Data

The tables below set forth our summary consolidated financial data for the years ended December 31, 2002, 2003 and 2004 and for the six months ended June 30, 2004 and 2005. Prospective investors should read this summary consolidated financial data in conjunction with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

	Year ended December 31,									Six months ended June 30,
	2002			2003			2004			2004			2005
	(audited)									(unaudited)
	(in thousands, except per share data)
Statement of Operations Data:
Revenue	$	138,165		$	136,421		$	171,253		$	81,227		$	93,875
Operating costs and expenses:
Cost of revenue (1)		115,728			113,521			144,146			68,229			79,671
General and administrative expenses (2)		12,166			14,524			16,363			8,037			7,239
Depreciation and amortization		1,600			1,576			1,741			886			801
Amortization of intangible assets		20			16			1,252			616			539
Total operating costs and expenses		129,514			129,637			163,502			77,768			88,250
Operating income		8,651			6,784			7,751			3,459			5,625
Interest income		21			15			26			6			26
Interest expense		(826	)		(439	)		(1,373	)		(721	)		(768	)
Income before income taxes		7,846			6,360			6,404			2,744			4,883
Provision for income taxes (3)		242			262			276			118			220
Net income	$	7,604		$	6,098		$	6,128		$	2,626		$	4,663
Unaudited pro forma net income:
Income before taxes	$	7,846		$	6,360		$	6,404		$	2,744		$	4,883
Pro forma provision for income taxes (3)		3,044			2,448			2,595			1,112			1,939
Pro forma net income	$	4,802		$	3,912		$	3,809		$	1,632		$	2,944
Pro forma earnings per share:
Basic	$	0.71		$	0.58		$	0.56		$	0.24		$	0.43
Diluted	$	0.67		$	0.55		$	0.53		$	0.23		$	0.41
Pro forma weighted average shares:
Basic		6,779			6,779			6,779			6,779			6,779
Diluted		7,140			7,143			7,158			7,134			7,228

	As of June 30, 2005
	Actual		Pro forma(4)			Pro forma as adjusted(5)
	(unaudited)
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	13	$	13		$	7,121
Net working capital		3,303		(12,267	)		27,633
Total assets		66,330		69,097			76,205
Total debt, including current portion		22,326		40,326			—
Total stockholders’ equity		18,101		2,868			50,302

(1) Cost of revenue includes stock-based compensation expense of approximately $0, $175,000 and $116,000 for the years ended December 31, 2002, 2003 and 2004, respectively, and approximately $59,000 and $58,000 for the six months ended June 30, 2004 and 2005, respectively.

(2) General and administrative expenses include stock-based compensation expense of approximately $0, $113,000 and $1,063,000 for the years ended December 31, 2002, 2003 and 2004, respectively, and approximately $50,000 and $315,000 for the six months ended June 30, 2004 and 2005, respectively.

(footnotes continued on the following page)

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(3) For comparative purposes, we have included a pro forma provision for income taxes assuming we had been taxed as a C corporation in all periods when our S corporation election was in effect.

(4) Pro forma balance sheet data reflects: (a) additional borrowings of $3 million under our line of credit and $15 million under our six-month time loan; (b) the distribution of $18 million to our stockholders for previously undistributed S corporation earnings (excludes a potential additional distribution for previously undistributed S corporation earnings, estimated at $5 million, which is expected to be made to the existing stockholders); and (c) the establishment of estimated net deferred tax assets totaling approximately $2.8 million recorded in connection with our conversion to a C corporation.

(5) Pro forma as adjusted balance sheet data reflects: (a) the pro forma adjustments in (4); (b) the assumed net proceeds from the offering of $47.4 million; and (c) the repayment of approximately $40.3 million of short and long-term debt.

Transactions Prior To Offering

Share Exchange, Merger and Stock Split

We were incorporated in Delaware on July 27, 2005. On September 1, 2005, we completed a merger and share exchange that resulted in NCI Information Systems, Inc., a Virginia corporation, becoming our wholly-owned subsidiary. Pursuant to a share exchange agreement, Chander (Charles) K. Narang, our founder, Chairman and Chief Executive Officer, transferred all of his shares of common stock of NCI Information Systems, Inc. to our wholly-owned subsidiary, NCI Acquisition, LLC, a Virginia limited liability company. Mr. Narang received one share of our Class B common stock in exchange for each share he transferred. On the effective date of this share exchange, but after Mr. Narang transferred his shares, NCI Information Systems, Inc. merged with our wholly-owned subsidiary, with NCI Information Systems, Inc. surviving the merger. As a result of this merger, each issued and outstanding share of common stock of NCI Information Systems, Inc., other than the shares transferred to our wholly-owned subsidiary by Mr. Narang, was converted into one share of our Class A common stock. In connection with this merger, we assumed all of the issued and outstanding options to acquire capital stock of NCI Information Systems, Inc., and, after the merger, these options became exercisable for shares of our Class A common stock, subject to the same limitations on vesting and exercise that applied before the merger.

Prior to this offering, we effected a 1-for-1.9 reverse stock split of our Class A common stock and Class B common stock. The Class A common stock and the Class B common stock have the same rights and preferences, except that each share of the Class A common stock is entitled to one vote and each share of the Class B common stock is entitled to ten votes and is convertible into one share of Class A common stock. See “Description of Capital Stock—Common Stock.” For purposes of this prospectus, unless stated otherwise, all references to our common stock refer to shares of the Delaware corporation after giving effect to the share exchange, merger and stock split, other than with respect to historical consolidated financial statements.

Revocation of S Corporation Status

We intend to revoke our S corporation status prior to or concurrently with the completion of the offering. In connection with that revocation, we will make a distribution to our current stockholders, including Mr. Narang, representing payment of undistributed S corporation earnings at and through the date of revocation. The actual amount of the distribution of S corporation earnings will depend on the amount of our income prior to the revocation of our S corporation status. We estimate the final distribution to our current stockholders of S corporation earnings will be approximately $5 million and will occur during the fourth quarter of 2005 or the first quarter of 2006.

Immediately following this offering, Mr. Narang, our founder, Chairman and Chief Executive Officer, will own or control 92.5% of the combined voting power and 56.8% of the outstanding shares of the common stock. As a result, Mr. Narang will be able to control the vote on all matters submitted to a vote of the holders of our common stock, including election of our directors, amendments to our certificate of incorporation, mergers and other business transactions.

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RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. Before making an investment in our Class A common stock, you should carefully consider the following risks, as well as the other information contained in this prospectus, including our consolidated financial statements and the related notes. Additional risks and uncertainties not currently known to us, or risks that we currently deem immaterial, may also impair our business operations. Any of the risk factors described below could significantly and adversely affect our business and results of operations. As a result, the trading price of our Class A common stock could decline and you may lose all or part of your investment. See “Relevant Industry Terms” for a more complete definition of industry terms used in this prospectus.

Risks Related to Our Business

We depend on contracts with the federal government for substantially all of our revenue. If our relationships with federal government agencies are harmed, our revenue and operating profits would decline.

For the six months ended June 30, 2005, we derived approximately 99.5% of our revenue from federal government contracts, either as a prime contractor or a subcontractor, including approximately 73.0% of our revenue from contracts with the Department of Defense and intelligence agencies. We believe that federal government contracts will continue to be the source of substantially all of our revenue for the foreseeable future. For this reason, any issue that compromises our relationship with agencies of the federal government in general, or with the Department of Defense in particular, would cause our revenue to decline. Among the key factors in maintaining our relationships with federal government agencies are our performance on individual contracts and task orders, the strength of our professional reputation and the relationships of our key executives with client personnel. To the extent that our performance does not meet client expectations, or our reputation or relationships with one or more key clients are impaired, our revenue and operating results could decline materially.

We face intense competition from many competitors that have greater resources than we do, which could result in price reductions, reduced profitability or loss of market share.

We operate in highly competitive markets and generally encounter intense competition to win contracts from many other firms, including mid-tier federal contractors with specialized capabilities and large defense and IT services providers. We expect competition in our markets to increase as a result of a number of factors, such as the entrance of new or larger competitors, including those formed through consolidation. These competitors may have greater financial, technical, marketing and public relations resources, larger client bases and greater brand or name recognition than we do. These competitors could, among other things:

• divert sales from us by winning very large-scale government contracts, a risk that is enhanced by the recent trend in government procurement practices to bundle services into larger contracts;

• force us to charge lower prices; or

• adversely affect our relationships with current clients, including our ability to continue to win competitively awarded engagements in which we are the incumbent.

If we lose business to our competitors or are forced to lower our prices, our revenue and our operating profits could decline. In addition, we may face competition from our subcontractors who, from time-to-time, seek to obtain prime contractor status on contracts for which they currently serve as a subcontractor to us. If one or more of our current subcontractors are awarded prime contractor status on such contracts in the future, it could divert sales from us and could force us to charge lower prices, which could cause our margins to suffer.

We expect to lose our eligibility to participate in the federal government’s small business programs which may affect our ability to win contracts and grow revenue.

In prior years, we were able to pursue business under the U.S. Small Business Administration’s (SBA) business development programs, making us eligible to receive certain federal contracts set aside for small

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businesses, or set-aside contracts. Companies may qualify as small businesses if they meet certain size restrictions based on revenue or employee base. Although we currently meet the requirement standard for certain small business contracts, we do not plan to pursue future small business opportunities. We may have difficulty in teaming with small business companies on set-aside contracts and our revenue mix and profitability could be negatively impacted due to our role as a subcontractor. We may also face increased competition from larger companies as we bid on non-set-aside contracts as a large prime contractor.

Our quarterly operating results may fluctuate significantly as a result of factors outside of our control, which could cause the market price of our common stock to decline.

We expect our revenue and operating results to vary from quarter to quarter. As a result, our operating results may fall below the expectations of securities analysts and investors, which could cause the price of our common stock to decline. Factors that may affect our operating results include those listed in this “Risk Factors” section of this prospectus and others such as:

• fluctuations in revenue recognized on contracts;

• variability in demand for our services and solutions;

• commencement, completion or termination of contracts during any particular quarter;

• timing of award or performance incentive fee notices;

• timing of significant bid and proposal costs;

• variable purchasing patterns under the GSA Schedule 70 Contracts, government wide acquisition contracts (GWACs), blanket purchase agreements and other Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts;

• strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs and joint ventures;

• strategic investments, or changes in business strategy;

• changes in the extent to which we use subcontractors;

• seasonal fluctuations in our staff utilization rates; and

• federal government shutdowns or temporary facility closings.

Reductions in revenue in a particular quarter could lead to lower profitability in that quarter because a relatively large amount of our expenses are fixed in the short-term. We may incur significant operating expenses during the start-up and early stages of large contracts and may not be able to recognize corresponding revenue in that same quarter. We may also incur additional expenses when contracts expire, are terminated or are not renewed.

In addition, payments due to us from federal government agencies may be delayed due to billing cycles or as a result of failures of government budgets to gain congressional and administration approval in a timely manner. The federal government’s fiscal year ends September 30. If a federal budget for the next federal fiscal year has not been approved by that date in each year, our clients may have to suspend engagements that we are working on until a budget has been approved. Any such suspensions may reduce our revenue in the fourth quarter of that year or the first quarter of the subsequent year. The federal government’s fiscal year end can also trigger increased purchase requests from clients for equipment and materials. Any increased purchase requests we receive as a result of the federal government’s fiscal year end would serve to increase our third or fourth quarter revenue, but will generally decrease profit margins for that quarter, as these activities generally are not as profitable as our typical offerings.

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We cannot guarantee that our estimated contract backlog will result in actual revenue.

As of June 30, 2005, our estimated contract backlog totaled approximately $525 million, of which approximately $63 million was funded. There can be no assurance that our backlog will result in actual revenue in any particular period, or at all, or that any contract included in backlog will be profitable. There is a higher degree of risk in this regard with respect to unfunded backlog. The actual receipt and timing of any revenue is subject to various contingencies, many of which are beyond our control. The actual receipt of revenue on contracts included in backlog may never occur or may change because a program schedule could change or the program could be canceled, or a contract could be reduced, modified or terminated early. Our estimates are based on our experience under such contracts and similar contracts. However, there can be no assurances that all, or any, of such estimated contract value will be recognized as revenue.

If we fail to attract and retain skilled employees or employees with the necessary security clearances, we might not be able to perform under our contracts or win new business.

The growth of our business and revenue depends in large part upon our ability to attract and retain sufficient numbers of highly qualified individuals who have advanced information technology skills. If we are unable to recruit and retain a sufficient number of these employees, our ability to maintain and grow our business could be limited. In a tight labor market, our direct labor costs could increase or we may be required to engage large numbers of subcontractor personnel, which could cause our profit margins to suffer. In addition, some of our contracts contain provisions requiring us to staff an engagement with personnel that the client considers key to our successful performance under the contract. In the event we are unable to provide these key personnel or acceptable substitutions, the client may terminate the contract and we may lose revenue.

In addition, certain federal government contracts require us, and some of our employees, to maintain security clearances. If our employees lose or are unable to obtain security clearances, or if we are unable to hire employees with the appropriate security clearances, the client may terminate the contract or decide not to renew it upon its expiration. As a result, we may not derive the revenue anticipated from the contract, which, if not replaced with revenue from other contracts, could seriously harm our operating results.

The loss of any member of our senior management could impair our relationships with federal government clients and disrupt the management of our business.

We believe that the success of our business and our ability to operate profitably depends on the continued contributions of the members of our senior management. We rely on our senior management to generate business and execute programs successfully. In addition, the relationships and reputation that many members of our senior management team have established and maintain with federal government personnel contribute to our ability to maintain strong client relationships and to identify new business opportunities. We do not have any employment agreements providing for a specific term of employment with any member of our senior management. The loss of any member of our senior management could impair our ability to identify and secure new contracts, to maintain good client relations and to otherwise manage our business.

If our subcontractors fail to perform their contractual obligations, our performance and reputation as a prime contractor and our ability to obtain future business could suffer.

As a prime contractor, we often rely significantly upon other companies as subcontractors to perform work we are obligated to perform for our clients. We estimate that revenue derived from work performed by our subcontractors represented 14% of our revenue for the six months ended June 30, 2005. As we secure more work under our GWAC vehicles, we expect to require an increasing level of support from subcontractors that provide complementary and supplementary services to our offerings. Depending on labor market conditions, we may not be able to identify, hire and retain sufficient numbers of qualified employees to perform the task orders we

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expect to win. In such cases, we will need to rely on subcontracts with unrelated companies. Moreover, even in favorable labor market conditions, we anticipate entering into more subcontracts in the future as we expand our work under our GWACs. We are responsible for the work performed by our subcontractors, even though in some cases we have limited involvement in that work. If one or more of our subcontractors fail to satisfactorily perform the agreed-upon services on a timely basis or violate federal government contracting policies, laws or regulations, our ability to perform our obligations as a prime contractor or meet our clients’ expectations may be compromised. In extreme cases, performance or other deficiencies on the part of our subcontractors could result in a client terminating our contract for default. A termination for default could expose us to liability, including liability for the agency’s costs of reprocurement, could damage our reputation and could hurt our ability to compete for future contracts.

If we experience systems or service failure, our reputation could be harmed and our clients could assert claims against us for damages or refunds.

We create, implement and maintain IT solutions that are often critical to our clients’ operations. We have experienced, and may in the future experience, some systems and service failures, schedule or delivery delays and other problems in connection with our work. If we experience these problems, we may:

• lose revenue due to adverse client reaction;

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

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

• suffer claims for substantial damages.

In addition to any costs resulting from product or service warranties, contract performance or required corrective action, these failures may result in increased costs or loss of revenue if clients postpone subsequently scheduled work or cancel, or fail to renew, contracts.

While many of our contracts limit our liability for consequential damages that may arise from negligence in rendering services to our clients, we cannot assure you that these contractual provisions will be legally sufficient to protect us if we are sued.

In addition, our errors and omissions and product liability insurance coverage may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims, or the insurer may disclaim coverage as to some types of future claims. As we continue to grow and expand our business into new areas, our insurance coverage may not be adequate. The successful assertion of any large claim against us could seriously harm our business. Even if not successful, these claims could result in significant legal and other costs, may be a distraction to our management and may harm our reputation.

Security breaches in sensitive federal government systems could result in the loss of clients and negative publicity.

Many of the systems we develop, install and maintain involve managing and protecting information involved in intelligence, national security and other sensitive or classified federal government functions. A security breach in one of these systems could cause serious harm to our business, damage our reputation and prevent us from being eligible for further work on sensitive or classified systems for federal government clients. We could incur losses from such a security breach that could exceed the policy limits under our errors and omissions and product liability insurance. Damage to our reputation or limitations on our eligibility for additional work resulting from a security breach in one of the systems we develop, install and maintain could materially reduce our revenue.

Our employees may engage in misconduct or other improper activities, which could cause us to lose contracts.

We are exposed to the risk that employee fraud or other misconduct could occur. Misconduct by employees could include intentional failures to comply with federal government procurement regulations, engaging in unauthorized activities or falsifying time records. Employee misconduct could also involve the improper use of our clients’ sensitive or classified information, which could result in regulatory sanctions against us and serious

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harm to our reputation and could result in a loss of contracts and a reduction in revenues. It is not always possible to deter employee misconduct, and the precautions we take to prevent and detect this activity may not be effective in controlling unknown or unmanaged risks or losses, which could cause us to lose contracts or cause a reduction in revenues.

We may not be successful in identifying acquisition candidates and if we undertake acquisitions, they could increase our costs or liabilities and impair our revenue and operating results.

One of our strategies is to pursue growth through acquisitions. We have limited experience with acquisitions, having completed only one significant acquisition since our inception. We may not be able to identify suitable acquisition candidates at prices that we consider appropriate. If we do identify an appropriate acquisition candidate, we may not be able to successfully negotiate the terms of the acquisition or finance the acquisition on terms that are satisfactory to us. Negotiations of potential acquisitions and the integration of acquired business operations could disrupt our business by diverting management attention from day-to-day operations. Acquisitions of businesses or other material operations may require additional debt or equity financing, resulting in additional leverage or dilution of ownership.

If we are unable to successfully integrate companies we may acquire in the future, our revenue and operating results could suffer. The integration of such businesses into our operations may result in unforeseen operating difficulties (including incompatible accounting and information management systems), may absorb significant management attention and may require significant financial resources that would otherwise be available for the ongoing development or expansion of our business. These difficulties of integration may require us to coordinate geographically dispersed organizations, integrate personnel with disparate business backgrounds and reconcile different corporate cultures. In certain acquisitions, federal acquisition regulations may require us to enter into government novation agreements, a potentially time-consuming process. In addition, we may not be successful in achieving the anticipated synergies from these acquisitions, including our strategy of offering our services to clients of acquired companies to increase our revenue. We may experience increased attrition, including, but not limited to, key employees of the acquired companies, during and following the integration of acquired companies that could reduce our future revenue. In addition, we may need to record write-downs from future impairments of identified intangible assets and goodwill, which could reduce our future reported earnings. Acquisition candidates may have liabilities or adverse operating issues that we fail to discover through due diligence prior to the acquisition. In particular, to the extent that prior owners of any acquired businesses or properties failed to comply with or otherwise violated applicable laws or regulations, or failed to fulfill their contractual obligations to the federal government or other clients, we, as the successor owner, may be financially responsible for these violations and failures and may suffer reputational harm or otherwise be adversely affected. The discovery of any material liabilities associated with our acquisitions could cause us to incur additional expenses and cause a reduction in our operating profits.

We may be harmed by intellectual property infringement claims and our failure to protect our intellectual property could enable competitors to market products and services with similar features.

We may become subject to claims from our employees or third parties who assert that software and other forms of intellectual property that we use in delivering services and solutions to our clients infringe upon intellectual property rights of such employees or third parties. Our employees develop much of the software and other forms of intellectual property that we use to provide our services and solutions to our clients, but we also license technology from other vendors. If our employees, vendors, or other third parties assert claims that we or our clients are infringing on their intellectual property rights, we could incur substantial costs to defend those claims. In addition, if any of these infringement claims are ultimately successful, we could be required to:

• cease selling or using products or services that incorporate the challenged software or technology;

• obtain a license or additional licenses from our employees, vendors, or other third parties; or

• redesign our products and services that rely on the challenged software or technology.

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In addition, if we are unable to protect our intellectual property, our competitors could market services or products similar to our services and products, which could reduce demand for our offerings. We may be unable to prevent unauthorized parties from attempting to copy or otherwise obtain and use our technology. Policing unauthorized use of our technology is difficult, and we may not be able to prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our intellectual property as fully as those in the United States. Others, including our employees, may circumvent the trade secrets and other intellectual property that we own. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets and to determine the validity and scope of the proprietary rights of others. Any litigation could result in substantial costs and diversion of resources, with no assurance of success.

Risks Related to Our Industry

Our revenue and operating profits could be adversely affected by significant changes in the contracting or fiscal policies of the federal government.

We depend on continued federal government expenditures on intelligence, defense and other programs that we support. Accordingly, changes in federal government contracting policies could directly affect our financial performance. In addition, a change in presidential administrations, congressional majorities or in other senior federal government officials may negatively affect the rate at which the federal government purchases IT services. The overall U.S. defense budget declined from time-to-time in the late 1980s and the early 1990s. While spending authorizations for intelligence and defense-related programs by the federal government have increased in recent years, future levels of expenditures and authorizations for those programs may decrease, remain constant or shift to programs in areas where we do not currently provide services. Among the factors that could materially adversely affect us are:

• budgetary constraints affecting federal government spending generally, or specific departments or agencies in particular, and changes in fiscal policies or available funding;

• changes in federal government programs or requirements, including the increased use of small business providers;

• curtailment of the federal government’s use of professional services providers;

• the adoption of new laws or regulations;

• federal governmental shutdowns (such as that which occurred during the federal government’s 1996 fiscal year) and other potential delays in the government appropriations process;

• delays in the payment of our invoices by federal government payment offices due to problems with, or upgrades to, federal government information systems, or for other reasons;

• competition and consolidation in the IT industry; and

• general economic conditions.

These or other factors could cause federal governmental agencies, or prime contractors for which we are acting as a subcontractor, to reduce their purchases under contracts, to exercise their right to terminate contracts or not to exercise options to renew contracts, any of which could cause our revenue and operating profits to decline.

Our federal government contracts may be terminated by the federal government at any time, and if we do not replace them, our revenue and operating profits may be adversely affected.

We derive most of our revenue from federal government contracts that typically span one or more base years and one or more option years. The option periods may cover more than half of a contract’s potential duration. Federal government agencies have the right not to exercise these option periods. In addition, our contracts also contain provisions permitting a federal government client to terminate the contract on short notice

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and for its convenience, as well as for our default. A decision by a federal government agency not to exercise option periods or to terminate contracts could result in a reduction of our profitability on these contracts and significant revenue shortfalls.

If the federal government terminates a contract for convenience, we may recover only our incurred or committed costs, settlement expenses and profit on work completed prior to the termination. We cannot recover anticipated profit on terminated work. If the federal government terminates a contract for default, we may not recover even those amounts, and instead may be liable for excess costs incurred by the federal government in procuring undelivered items and services from another source.

Federal government contracts contain other provisions that may be unfavorable to us.

Federal government contracts contain provisions and are subject to laws and regulations that give the federal government rights and remedies not typically found in commercial contracts. These allow the federal government to terminate a contract for convenience or decline to exercise an option to renew. They also permit the federal government to do the following:

• reduce or modify contracts or subcontracts;

• cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable;

• claim rights in products and systems produced by us; and

• suspend or debar us from doing business with the federal government.

If the federal government exercises its rights under any of these provisions, our revenues and operating profits could decline.

Many of our federal government clients spend their procurement budgets through multiple award contracts under which we are required to compete for post-award orders or for which we may not be eligible to compete and could limit our ability to win new contracts and grow revenue.

Budgetary pressures and reforms in the procurement process have caused many federal government clients to increasingly purchase goods and services through ID/IQ contracts, the GSA Schedule 70 Contracts and other multiple award and/or GWAC vehicles. These contract vehicles have resulted in increased competition and pricing pressure, requiring us to make sustained post-award efforts to realize revenue under the relevant contract vehicle. The federal government’s ability to select multiple winners under multiple award schedule contracts, GWACs, blanket purchase agreements and other ID/IQ contracts, as well as its right to award subsequent task orders among such multiple winners, means that there is no assurance that these multiple award contracts will result in the actual orders equal to the ceiling value, or result in any actual orders. We are only eligible to compete for work (task orders and delivery orders) as a prime contractor pursuant to GWACs already awarded to us. Our failure to compete effectively in this procurement environment could reduce our revenue. If the federal government elects to use a contract vehicle that we do not hold we will not be able to compete as a prime contractor.

Each of our contract types involves the risk that we could underestimate our costs and incur losses.

We enter into three types of federal government contracts for our services: time-and-materials, cost-plus and fixed-price. For the six months ended June 30, 2005, we derived approximately 59.4%, 25.7% and 14.9% of our revenue from time-and-materials, cost-plus and fixed-price contracts, respectively. If we acquire other businesses, our contract mix may change.

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Each of these types of contracts, to differing degrees, involves the risk that we could underestimate our cost of performance, which may result in a reduced profit or a loss on the contract for us. Under time-and-materials contracts, we are reimbursed for labor at negotiated hourly billing rates and for certain expenses. We assume minimal financial risk on time-and-materials contracts because we only assume the risk of performing those contracts at negotiated hourly rates. Under cost-plus contracts, we are reimbursed for allowable costs and paid a fee, which may be fixed or performance-based. To the extent that the actual costs incurred in performing a cost-plus contract are within the contract ceiling and allowable under the terms of the contract and applicable regulations, we are entitled to reimbursement of our costs, plus a profit. However, if our costs exceed the ceiling or are not allowable under the terms of the contract or applicable regulations, we may not be able to recover those costs. Under fixed-price contracts, we perform specific tasks for a fixed price. Compared to time-and-materials and cost-plus contracts, fixed-price contracts generally offer higher margin opportunities, but involve greater financial risk because we bear the impact of cost overruns. Because we assume the most risk for cost overruns and contingent losses on fixed-price contracts, an increase in the percentage of fixed-price contracts in our contract mix would increase our risk of suffering losses.

Our profits could be adversely affected if our costs under any of these contracts exceed the assumptions we used in bidding for the contract.

Our failure to comply with complex procurement laws and regulations could cause us to lose business and subject us to a variety of penalties.

We must comply with and are affected by laws and regulations relating to the formation, administration and performance of federal government contracts, which affect how we do business with our clients and may impose added costs on us. Among the most significant laws and regulations are:

• the Federal Acquisition Regulations, and agency regulations supplemental to the Federal Acquisition Regulations, which comprehensively regulate the formation, administration and performance of federal government contracts;

• the Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection with contract negotiations;

• the Cost Accounting Standards and Cost Principles, which impose accounting requirements that govern our right to reimbursement under certain cost-based federal government contracts; and

• laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the export of certain products and technical data.

Moreover, we are subject to industrial security regulations of the Department of Defense and other federal agencies that are designed to safeguard against foreigners’ access to classified information. If we were to come under foreign ownership, control or influence, our federal government clients could terminate or decide not to renew our contracts, and our ability to obtain new contracts could be impaired.

We derive significant revenue from contracts awarded through a competitive procurement process, which may require significant upfront bid and proposal costs that could negatively affect our operating results.

We derive significant revenue from federal government contracts that are awarded through a competitive procurement process. We expect that most of the federal government business we seek in the foreseeable future will be awarded through competitive processes. Competitive procurements impose substantial costs and present a number of risks, including:

• the substantial cost and managerial time and effort that we spend to prepare bids and proposals for contracts that may not be awarded to us and could reduce our profitability; and

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• the expense and delay that we may face if our competitors protest or challenge contract awards made to us pursuant to competitive procedures, and the risk that any such protest or challenge could result in the resubmission of offers, or in termination, reduction or modification of the awarded contract, which could result in increased cost and reduced profitability.

In addition, most federal government contract awards are subject to protest by competitors. If specified legal requirements are satisfied, these protests require the federal government agency to suspend the contractor’s performance of the newly awarded contract pending the outcome of the protest. These protests could also result in a requirement to resubmit bids for the contract or in the termination, reduction or modification of the awarded contract.

Unfavorable federal government audit results could subject us to a variety of penalties and sanctions, and could harm our reputation and relationships with our clients and impair our ability to win new contracts.

The federal government, including the Defense Contract Audit Agency (DCAA), audits and reviews our performance on contracts, pricing practices, cost structure and compliance with applicable laws, regulations and standards. The DCAA reviews a contractor’s internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems, and the contractor’s compliance with such policies. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded. Adverse findings in a DCAA audit could materially affect our competitive position and result in a substantial adjustment to our revenue and profit.

If a federal government audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment from doing business with federal government agencies. In addition, we could suffer serious harm to our reputation and competitive position if allegations of impropriety were made against us, whether or not true. If our reputation or relationship with federal government agencies were impaired, or if the federal government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our revenue and operating profit would decline.

Risks Related to This Offering

There is no prior public market for our Class A common stock and our stock price could be volatile and could decline following this offering, resulting in a substantial loss on your investment.

Prior to this offering, there has not been a public market for our Class A common stock. An active trading market for our Class A common stock may never develop or be sustained, which could affect your ability to sell your shares and could depress the market price of your shares. In addition, the initial public offering price has been determined through negotiations between us and the representatives of the underwriters and may bear no relationship to the price at which the common stock will trade upon completion of this offering. The stock market in general has been highly volatile. As a result, the market price of our common stock is likely to be similarly volatile, and investors in our Class A common stock may experience a decrease in the value of their stock, including decreases unrelated to our operating performance or prospects. The price of our Class A common stock could be subject to wide fluctuations in response to a number of factors, including those listed in this “Risk Factors” section of this prospectus and others such as:

• our operating performance and the performance of other similar companies;

• changes in our revenue or earnings estimates;

• changes in recommendations by securities analysts;

• publication of research reports about us or our industry by securities analysts;

• speculation in the press or investment community;

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• terrorist acts; and

• general market conditions, including economic factors unrelated to our performance.

In the past, securities class action litigation has, at times, been instituted against companies following periods of volatility in their stock price. This type of litigation against us could result in substantial costs and divert our management’s attention and resources.

You will experience immediate and substantial dilution.

The initial public offering price per share will significantly exceed the current net tangible book value per share of our stock that was outstanding prior to this offering. As a result, investors purchasing Class A common stock in this offering will experience immediate and substantial dilution. Dilution is the difference between the offering price per share and the pro forma net tangible book value per share of our Class A common stock. In addition, we have issued options to acquire 1,343,386 shares of common stock at a weighted average price of $4.22 per share. The exercise of these stock options will result in further dilution to new investors.

Mr. Narang, our founder, Chairman and CEO, will continue to control the Company after the offering, and his interests may not be aligned with yours.

Upon completion of this offering, Mr. Narang, through his ownership of our Class B common stock, will own or control 92.5% of the combined voting power and 56.8% of the outstanding shares of the common stock. Accordingly, Mr. Narang will control the vote on all matters submitted to a vote of our stockholders. As long as Mr. Narang beneficially owns the majority of the voting power of our common stock, he will have the ability, without the consent of our public stockholders, to elect all members of our board of directors and to control our management and affairs. Mr. Narang’s voting control may have the effect of preventing or discouraging transactions involving a change in control, including proxy contests, tender offers, mergers or other purchases of the capital stock of the Company, regardless of whether a premium is offered over then-current market prices.

A substantial number of shares of our common stock will be eligible for sale by Mr. Narang and other stockholders in the near future, which could cause our common stock price to decline significantly.

A substantial number of shares of our common stock will be eligible for sale by Mr. Narang and other stockholders in the near future. After this offering, Mr. Narang will beneficially own 6,778,946 shares, or approximately 56.8% of our outstanding shares of common stock. If Mr. Narang or other stockholders sell, or the market perceives that they intend to sell, substantial amounts of our common stock in the public market following this offering, the market price of our Class A common stock could decline significantly. These sales may also make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. Immediately after completion of this offering and based on the number of our shares outstanding as of October 4, 2005, we will have 11,928,946 outstanding shares of Class A common stock and Class B common stock, assuming no exercise of outstanding options. Of these shares, 5,150,000 shares sold in this offering will be freely tradable. Approximately 6,778,946 additional shares of Class A common stock will be available for sale in the public market 180 days after the date of this prospectus following the expiration of lock-up agreements entered into by our executive officers and directors, subject to applicable volume restriction and manner of sale requirements imposed on affiliates under Rule 144 of the Securities Act. Legg Mason Wood Walker, Incorporated, on behalf of the underwriters, may release the executive officers, directors and stockholders from their lock-up agreements with the underwriters at any time and without notice, which would allow for earlier sale of shares in the public market. As restrictions on resale end, the market price of our common stock could drop significantly if the holders of restricted shares sell them or are perceived by the market as intending to sell them.

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FORWARD-LOOKING STATEMENTS

This prospectus, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements. We have attempted to identify forward-looking statements by using such words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “would” or other similar expressions. These forward-looking statements, which are subject to risks and uncertainties, and assumptions about us, may include, among other things, projections of our future financial performance, our anticipated growth strategies, anticipated trends in our industry, our potential growth opportunities, the effects of future regulations and the effects of competition. These statements are only predictions based on our current expectations and projections about future events. Because these forward-looking statements involve risks and uncertainties, you should be aware that there are important factors that could cause our actual results, level of activity or performance to differ materially from the results, level of activity or performance expressed or implied by these forward-looking statements. Some of these important factors are outlined under “Risk Factors” and elsewhere in this prospectus. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, level of activity or performance. We undertake no obligation to update publicly or revise any forward-looking statements. You should not place undue reliance on the forward-looking statements.

RELEVANT INDUSTRY TERMS

We generally perform our services for federal government agencies pursuant to both contracts and task orders. A contract may include specific work requirements for a particular job that is to be performed, or may instead provide a framework that defines the scope and terms under which work may be performed in the future, in which case any task orders that may be issued from time to time under the contract set forth the specific work assignments that are to be performed under the contract. In this prospectus, references to any contract includes the task orders, if any, issued under that contract. Accordingly, information in this prospectus regarding our revenue under government contracts includes revenue we receive under both contracts and task orders. We perform services as a prime contractor under those contracts and task orders that are awarded to us directly by the federal government. We also perform services for the federal government as a subcontractor to other companies that are awarded prime contracts. References in this prospectus regarding our engagements mean specific work that we have contracted to perform as a prime contractor or subcontractor pursuant to both contracts and task orders for a particular client.

Some of our contracts are multiple award contracts. Multiple award contracts are vehicles pursuant to which the federal government may purchase goods or services from several different pre-qualified contractors. Such contracts include government-wide acquisition contracts (GWACs), blanket purchase agreements (BPAs), GSA Schedule 70 and other Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts. GWACs are task-order or delivery-order contracts for goods and services established by one agency for government-wide use. BPAs are a simplified method of filling repetitive needs or services by establishing “charge accounts” with qualified suppliers and eliminating the need for issuing individual purchase, invoice and payment documents. GSA Schedule 70 is a contracting vehicle sponsored by the General Services Administration that is available to all federal government agencies for procuring information technology services and products pursuant to contracts (GSA Schedule 70 Contracts) and task orders (GSA Schedule 70 Task Orders) awarded thereunder. Over 5,000 contractors are currently on the GSA Schedule 70, and the federal government purchased more than $16.8 billion in services and products under the schedule in 2004. Finally, ID/IQs are contracts for goods or services which do not specify a firm quantity and that provide for issuance of orders for the performance of tasks during the contract period. Multiple award contracts typically have a ceiling, which is the maximum amount the government is authorized to spend under the contract over the life of the contract. While the government is permitted to spend up to the ceiling amount, there is no guarantee that it will do so or that any particular pre-qualified contractor will receive awards under the vehicle.

Federal government contracts for our services include three types of pricing: time-and-materials; cost-plus; and fixed-price. Time-and-materials contracts are contracts under which we are reimbursed for labor at fixed

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hourly rates and generally reimbursed separately for allowable materials, other direct costs and out-of-pocket expenses. Cost-plus contracts are contracts under which we are reimbursed for costs that are determined to be allowable and allocable to the contract and receive a fee, which represents our profit. Cost-plus fixed fee contracts specify the contract fee in dollars. Cost-plus incentive fee and cost-plus award fee contracts provide for increases or decreases in the contract fee, within specified limits, based upon actual results as compared to contractual targets for factors such as cost, quality, schedule and performance. Fixed-price contracts are contracts under which we perform specific tasks for a predetermined price. We have three basic categories of fixed-price contracts: fixed unit price; fixed-price level-of-effort; and fixed-price completion contracts. Fixed unit price is where we receive a fixed price per unit of work delivered, and the unit price is not subject to adjustment. Fixed-price level-of-effort requires the contractor to provide a specified level of effort over a stated period of time, on work that can only be stated in general terms, and the government is to pay a stated fixed amount. Fixed-price completion provides a set price for specific performance that is not subject to any adjustment on the basis on the contractor’s actual cost experience in performing the contract. The majority of our work under fixed-price contracts is fixed-price level-of-effort work.

We define backlog as our estimate of the remaining future revenue from existing signed contracts over the remaining base contract performance period and from the option periods of those contracts, assuming the exercise of all related options. Our backlog does not include any estimate of future potential delivery orders that might be awarded under our GWAC or other multiple award contract vehicles. We define funded backlog as the portion of backlog for which funding currently is appropriated and obligated to us under a contract or other authorization for payment signed by an authorized purchasing agency, less the amount of revenue we have previously recognized. Our funded backlog does not represent the full potential value of our contracts, as Congress often appropriates funds for a particular program or agency on a quarterly or yearly basis, even though the contract may provide for the provision of services over a number of years. We define unfunded backlog as the total backlog less the funded backlog. Unfunded backlog includes values for contract options that have been priced but not yet funded.

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USE OF PROCEEDS

We estimate our net proceeds of this offering will be approximately $47.4 million after deducting the estimated expenses related to this offering and the underwriting discounts. We intend to use the net proceeds we receive to pay off all of the principal and accrued interest then outstanding under our credit facility, which includes amounts incurred in connection with our acquisition of SES and for the distribution of previously undistributed S corporation earnings. On June 30, 2005, that amount was $21.8 million, approximately $10.1 million of which was under a term note and $11.7 million of which was under a line of credit. In July 2005, the credit facility was amended to allow for a new time loan under which we borrowed $15 million and an additional $3 million under our line of credit, for distribution of previously undistributed S corporation earnings. Our term note and line of credit mature on December 31, 2006, and accrue interest based on LIBOR plus an applicable margin. The time loan will be due in January 2006, or upon receipt of proceeds from this offering, whichever occurs first. As of June 30, 2005, interest on our term note and line of credit was based on LIBOR plus 2.7% and 2.2%, respectively. Both margins are based on the ratio of our funded indebtedness to our adjusted earnings. The weighted average interest rate applicable to all borrowings under our credit facility was approximately 5.5% on June 30, 2005. The interest rate on the time loan is LIBOR plus 45 basis points. After the repayment of the line of credit, we may re-incur debt under the revolving note.

We may use some or all of the remaining net proceeds from this offering for working capital and general corporate purposes, including all or a portion of the costs of any acquisitions we decide to pursue in the future. We have no present commitments, agreements or understandings to acquire any business. Pending final use, we may invest the net proceeds of this offering in short-term, investment grade, interest-bearing securities or guaranteed obligations of the United States or its agencies.

We will not receive any of the proceeds from sale of Class A common stock by the selling stockholders.

DIVIDEND POLICY

We currently intend to retain all future earnings, if any, for use in the operation, development and expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. Any future determination as to the declaration and payment of cash dividends will be at the discretion of our board of directors and will depend on then-existing conditions, business prospects and any other factors our board of directors deems relevant. Our existing credit facility prohibits us from paying a dividend if, after it is paid, we will be in default under our credit agreement. In addition, the terms of any future credit agreement may prevent us from paying any dividends or making any distributions or payments with respect to our capital stock.

All of our assets consist of the stock of our subsidiary. We will need to rely upon dividends and other payments from our subsidiary to generate the funds necessary to make dividend payments, if any, on our Class A common stock. However, our subsidiary is legally distinct from us and has no obligation to pay amounts to us. The ability of our subsidiary to make dividend and other payments to us is subject to, among other things, the availability of funds, the terms of our subsidiary’s indebtedness and applicable state laws.

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S CORPORATION STATUS

Since the incorporation of our subsidiary in 1989, we have been treated for federal and certain state income tax purposes as an S corporation under Subchapter S of the Internal Revenue Code and comparable state laws. As a result, our earnings have been taxed for federal and, in the case of certain states, state income tax purposes directly to our stockholders rather than to us. In connection with this offering, we will revoke our status as an S corporation and thereafter be taxed as a C corporation. As a result of the revocation of our S corporation status, we will record a net deferred tax asset and corresponding income tax benefit effective upon the revocation date. The total amount of the net deferred tax assets would have been approximately $2.8 million if the revocation date had been June 30, 2005.

In connection with the revocation of our S corporation tax status, we will make a distribution to our existing stockholders representing undistributed S corporation earnings. The actual amount, which we estimate to be approximately $5 million, will be determined after giving effect to our operating results through the revocation date with the filing of the final S corporation tax return. We will also enter into a tax indemnification agreement with the existing stockholders. Although we believe that we have met the requirements for an S corporation, the agreement provides for, among other things, the existing stockholders to indemnify us for any additional federal and state income taxes, including interest and penalties, incurred by us if for any reason we are deemed to be a C corporation during any period in which we reported our taxable income as an S corporation. The tax indemnification obligation of our existing stockholders is limited to the aggregate amount of all distributions made to them by us to pay taxes during any time that we were reporting our taxable income as an S corporation but are deemed to be a C corporation. The agreement also provides for payments by our existing stockholders to us and by us to our existing stockholders to adjust for any increases or decreases in tax liability arising from a tax audit that affects our tax liability and results in a corresponding adjustment to the tax liability of our existing stockholders. The amount of any payment cannot exceed the amount of refund received by us or our existing stockholders attributable to the adjustment in tax liability.

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CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2005:

• on an actual basis;

• on a pro forma basis to reflect the S corporation distributions made in July 2005, the borrowings to fund the distributions and the estimated net deferred tax assets recorded in connection with our conversion to a C corporation; and

• on a pro forma as adjusted basis to reflect the pro forma adjustments noted above, our sale of 4,800,000 shares of Class A common stock at an assumed initial public offering price of $11.00 per share, after deducting underwriting discounts, commissions and the estimated offering expenses payable by us, the exercise of options by the selling stockholders for 350,000 shares of Class A common stock and the repayment of approximately $40.3 million of short and long-term debt.

This table excludes:

• 1,343,386 shares of common stock subject to issuance upon the exercise of options we have granted under our 2005 Performance Incentive Plan at a weighted average exercise price of $ 4.22 per share; and

• 1,464,509 shares of common stock reserved for issuance under our 2005 Performance Incentive Plan, plus annual increases in the number of shares that will be reserved for issuance under our 2005 Performance Incentive Plan.

You should read this table together with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

	As of June 30, 2005
	Actual			Pro forma			Pro forma as adjusted
	(in thousands except share and per share data)
	(unaudited)
Cash and cash equivalents	$	13		$	13		$	7,121
Short-term debt, including current portion of long-term debt	$	14,792		$	32,792		$	—
Long-term debt, net of current portion		7,534			7,534			—
Stockholders’ equity:
Class A common stock, $.019 par value; 37,500,000 shares authorized and 478,946 shares issued and outstanding, actual and pro forma; 37,500,000 shares authorized and 5,628,946 shares issued and outstanding, pro forma as adjusted		9			9			100
Class B common stock, $.019 par value; 12,500,000 shares authorized and 6,300,000 shares issued and outstanding, actual, pro forma and pro forma as adjusted		120			120			120
Paid in capital		5,423			5,423			52,766
Deferred stock-based compensation		(2,235	)		(2,235	)		(1,031	)
Retained earnings (deficit)		14,784			(449	)		(1,653	)
Total stockholders’ equity		18,101			2,868			50,302
Total capitalization	$	40,427		$	43,194		$	50,302

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DILUTION

If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our Class A common stock and the adjusted net tangible book value per share of our common stock immediately after this offering.

The net tangible book value of our common stock on a pro forma basis as of June 30, 2005 was approximately $(16.4) million, or approximately $(2.42) per share. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities divided by the number of shares of common stock outstanding.

After giving effect to the issuance and sale of the shares of the Class A common stock offered by us and after deducting the underwriting discount and commissions and estimated offering expenses payable by us, the application of the net proceeds and the exercise of stock options by the selling stockholders, our as adjusted net tangible book value after this offering would have been approximately $31.0 million, or approximately $2.60 per share. This represents an immediate increase in net tangible book value of approximately $5.02 per share to existing stockholders and an immediate dilution of approximately $8.40 per share to new investors purchasing shares in this offering. If the initial public offering price is higher or lower, the dilution to the new investors will be more or less, respectively. The following table illustrates this per share dilution:

Assumed initial public offering price per share				$11.00
Pro forma net tangible book value per share at June 30, 2005	$	(2.42	)
Increase in net tangible book value per share attributable to new investors		5.02
As adjusted net tangible book value per share after this offering				2.60
Dilution per share to new investors				$8.40

The following table summarizes, as of June 30, 2005, the total number of shares of common stock purchased from us, the value of the total consideration paid to us, or attributed to the shares purchased, and the average price per share paid to us, or attributed to the shares purchased, by the existing stockholders and by the investors purchasing shares of Class A common stock from us in this offering. The calculation below is based on an assumed initial public offering price of $11.00 per share.

	Shares purchased			Total consideration				Average price per share
	Number	Percent		Amount		Percent
Existing stockholders	6,778,946	56.8	%	$	128,800	0.24	%	$	0.02
Optionholders(a)	350,000	2.9			6,650	0.01			0.02
New investors	4,800,000	40.3			52,800,000	99.75			11.00
Total	11,928,946	100.00	%	$	52,935,450	100.00	%	$	4.44

(a) In connection with this offering, options to purchase 350,000 shares of Class A common stock will be exercised by the selling stockholders, of which 130,948 were granted to Linda J. Allan, one of our executive vice presidents. The aggregate exercise price for such shares is $2,488, and such shares have a value of $1.4 million at the assumed public offering price.

The discussion and table above assume no other exercise of stock options and therefore excludes 1,343,386 shares of common stock at a weighted average exercise price of $4.22 per share that will be subject to issuance upon exercise of the options under our 2005 Performance Incentive Plan of which 619,052 shares are vested and exercisable as of the offering date by certain officers and directors, for a total consideration of $77,012, with a value of $6.8 million, at the assumed public offering price of $11.00.

If the underwriters exercise in full their option to purchase additional shares of our Class A common stock from us at the initial public offering price less the underwriters’ discount, the percentage of shares held by existing stockholders will decrease to 53.4% of the total shares outstanding, and the number of shares held by new investors will increase to 5,572,500, or 43.9% of the total shares outstanding.

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SELECTED CONSOLIDATED FINANCIAL DATA

The tables below set forth the selected consolidated financial data for each of the years in the five-year period ended December 31, 2004 and for the six months ended June 30, 2004 and 2005. We derived the selected consolidated financial data as of June 30, 2004 and 2005 and for the periods then ended from our unaudited consolidated financial statements. We have prepared our unaudited consolidated financial statements on the same basis as our audited consolidated financial statements. Our results of operations for the six months ended June 30, 2005 are not necessarily indicative of our operating results for 2005 or any other future period. Prospective investors should read this selected financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

	Year ended December 31,															Six months ended June 30,
	2000			2001			2002			2003			2004			2004			2005
	(audited)															(unaudited)
	(in thousands, except per share data)
Statements of Operations Data:
Revenue	$	112,049		$	119,100		$	138,165		$	136,421		$	171,253		$	81,227		$	93,875
Operating costs and expenses:
Cost of revenue (1)		95,428			100,017			115,728			113,521			144,146			68,229			79,671
General and administrative expenses (2)		9,513			9,632			12,166			14,524			16,363			8,037			7,239
Depreciation and amortization		1,115			1,296			1,600			1,576			1,741			886			801
Amortization of intangible assets		189			189			20			16			1,252			616			539
Total operating costs and expenses		106,245			111,134			129,514			129,637			163,502			77,768			88,250
Operating income		5,804			7,966			8,651			6,784			7,751			3,459			5,625
Interest income		130			270			21			15			26			6			26
Interest expense		(1,376	)		(1,551	)		(826	)		(439	)		(1,373	)		(721	)		(768	)
Income before income taxes		4,558			6,685			7,846			6,360			6,404			2,744			4,883
Provision for income taxes (3)		330			302			242			262			276			118			220
Net income	$	4,228		$	6,383		$	7,604		$	6,098		$	6,128		$	2,626		$	4,663
Earnings per share:
Basic							$	1.12		$	0.90		$	0.90		$	0.39		$	0.69
Diluted							$	1.03		$	0.83		$	0.82		$	0.36		$	0.62
Weighted average shares:
Basic								6,779			6,779			6,779			6,779			6,779
Diluted								7,350			7,347			7,443			7,351			7,571
Unaudited pro forma net income:
Income before taxes							$	7,846		$	6,360		$	6,404		$	2,744		$	4,883
Pro forma provision for income taxes (3)								3,044			2,448			2,595			1,112			1,939
Pro forma net income							$	4,802		$	3,912		$	3,809		$	1,632		$	2,944
Pro forma earnings per share:
Basic							$	0.71		$	0.58		$	0.56		$	0.24		$	0.43
Diluted							$	0.67		$	0.55		$	0.53		$	0.23		$	0.41
Pro forma weighted average shares:
Basic								6,779			6,779			6,779			6,779			6,779
Diluted								7,140			7,143			7,158			7,134			7,228
	As of December 31,															As of June 30, 2005
	2000			2001			2002			2003			2004			Actual			Pro forma(4)
	(audited)															(unaudited)
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	842		$	744		$	316		$	1,340		$	40		$	13		$	13
Net working capital		2,104			3,189			6,539			2,492			4,653			3,303			(12,267	)
Total assets		39,497			41,834			36,681			61,992			64,170			66,330			69,097
Total debt, including current portion		17,824			16,565			12,129			29,343			24,503			22,326			40,326
Total stockholders’ equity		9,122			10,354			9,877			12,216			16,043			18,101			2,868

(footnotes on following page)

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(1) Cost of revenue includes stock-based compensation expense of approximately $0, $0, $0, $175,000 and $116,000 for the years ended December 31, 2000, 2001, 2002, 2003 and 2004, respectively, and approximately $59,000 and $58,000 for the six months ended June 30, 2004 and 2005, respectively.

(2) General and administrative expenses include stock-based compensation expense of approximately $171,000, $0, $0, $113,000 and $1,063,000 for the years ended December 31, 2000, 2001, 2002, 2003 and 2004, respectively, and approximately $50,000 and $315,000 for the six months ended June 30, 2004 and 2005, respectively.

(3) For comparative purposes, we have included a pro forma provision for income taxes assuming we had been taxed as a C corporation in all periods when our S corporation election was in effect.

(4) Pro forma balance sheet data reflects: (a) additional borrowings of $3 million under our line of credit and $15 million under our six-month time loan; (b) the distribution of $18 million to our stockholders for previously undistributed S corporation earnings; and (c) the establishment of estimated net deferred tax assets totaling approximately $2.8 million recorded in connection with our conversion to a C corporation.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the “Selected Consolidated Financial Data” and the consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this prospectus should be read as applying to all related forward-looking statements wherever they appear in this prospectus. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could cause or contribute to our actual results differing materially from those anticipated include, but are not limited to, those discussed in “Risk Factors” and elsewhere in this prospectus. See “Relevant Industry Terms” for a more complete definition of industry terms used herein.

Overview

We are a provider of information technology services and solutions to federal government agencies. We focus on designing, implementing, maintaining and upgrading secure IT systems and networks. Our technology and industry expertise enables us to provide a full spectrum of services and solutions that assist our clients in achieving their program goals. We deliver a wide range of complex services and solutions by leveraging our skills across four core service offerings:

• network engineering;

• information assurance;

• systems development and integration; and

• enterprise systems management.

We generate substantially all of our revenue from federal government contracts. We report operating results and financial data as one operating segment. Funding for our contracts and task orders is generally linked to trends in federal government spending by defense, intelligence and federal civilian agencies. For the six months ended June 30, 2005, we received approximately 73.0% of our revenue from services and solutions we provided to the Department of Defense and intelligence agencies, 26.5% of our revenue from federal civilian agencies and less than 1.0% of our revenue from commercial and state and local entities. For the same six month period ended June 30, 2004, we received approximately 68.1% of our revenue from services and solutions we provided to the Department of Defense and intelligence agencies, 31.4% of our revenue from federal civilian agencies and less than 1.0% of our revenue from commercial and state and local entities. The following table shows our revenue from the client groups listed as a percentage of total revenue.

	Year ended December 31,						Six months ended June 30,
	2002		2003		2004		2004		2005
Department of Defense and intelligence agencies	62.1	%	61.5	%	69.9	%	68.1	%	73.0	%
Federal civilian agencies	36.9		37.8		29.6		31.4		26.5
Commercial and state & local entities	1.0		0.7		0.5		0.5		0.5
Total revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

We believe that our contract base is well diversified. As of June 30, 2005, we had approximately 80 active contracts and 155 task orders. Our largest engagement is with the U.S. Transportation Command (USTRANSCOM), which has been a client of ours since 1992. This engagement generated approximately 8.0% of our revenue for the six months ended June 30, 2005 and approximately 8.6% of our revenue for the six months ended June 30, 2004. In June 2004, USTRANSCOM awarded us two new seven-year task orders, with a total value of approximately $117 million. The value of the task orders has subsequently been increased to $130 million, assuming all options are exercised, which the government is not obligated to do. Each of the USTRANSCOM task orders has a four-month base period and seven option periods. The first six option periods are one-year each, and the seventh option period is eight months, for a total of seven years. Each option period has been priced and has a value associated with it. As of October 1, 2005, USTRANSCOM has exercised the first two options on each of these task orders for a total value of $41 million.

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As of June 30, 2005, our total contract backlog was approximately $525 million of which approximately $63 million was funded. We define backlog as our estimate of the remaining future revenue from existing signed contracts over the remaining base contract performance period and from the option periods of those contracts, assuming the exercise of all related options. Our backlog does not include any estimate of future potential delivery orders that might be awarded under our GWAC or other multiple award contract vehicles. We define funded backlog as the portion of backlog for which funding currently is appropriated and obligated to us under a contract or other authorization for payment signed by an authorized purchasing agency, less the amount of revenue we have previously recognized. Our funded backlog does not represent the full potential value of our contracts, as Congress often appropriates funds for a particular program or agency on a quarterly or yearly basis, even though the contract may provide for the provision of services over a number of years. We define unfunded backlog as the total backlog less the funded backlog. Unfunded backlog includes values for contract options that have been priced but not yet funded.

We intend to expand our revenue by pursuing opportunities under our GWAC vehicles. As we secure more work under these vehicles, we expect to hire additional employees and to require an increasing level of support from subcontractors that provide complementary and supplementary services to our offerings. Depending on labor market conditions, we may not be able to identify, hire and retain a sufficient number of qualified employees to perform the task orders we expect to win. In such cases, we will need to rely on subcontracts with unrelated companies. Moreover, even in favorable labor market conditions, we anticipate entering into more subcontracts in the future as we expand our work under our GWACs. The additional use of subcontractors may increase our risk of non-performance under our GWACs because we will not exercise control over such subcontractors’ day to day operations. A material failure by a subcontractor on a particular engagement could impact our client relationships, making it more difficult for us to win additional task orders from that client, as well as other potential clients. Further, as we grow our business, we expect the possibility of technical failures and lawsuits against us for intellectual property infringement to increase.

We do not expect the effects of these trends to have a material impact on the results of our operations, working capital requirements or liquidity.

On December 23, 2003, we acquired Scientific & Engineering Solutions, Inc. (SES), a provider of information assurance, software engineering and knowledge and enterprise management solutions to agencies within the intelligence community. The acquisition of SES strengthened our presence in the intelligence sector, enabling us to bid and win larger contracts with new and existing clients. The total consideration paid, including closing indebtedness and acquisition costs, was $22.3 million, of which a total of $2.9 million was paid during 2004 and 2005 as a result of certain contract transfers. The transaction was accounted for in accordance with SFAS No. 141, Business Combinations, whereby the net tangible and identifiable intangible assets acquired and liabilities assumed were recognized at their estimated fair market values at the date of acquisition.

Our federal government contracts are subject to audits by the Defense Contract Audit Agency (DCAA). Our DCAA audits have been completed through 2001. The DCAA audits for SES have been completed through 2002. We do not anticipate any material impact to our financial results with respect to periods in which audits have not been completed.

Revenue

Substantially all of our revenue is derived from services and solutions provided to the federal government, primarily by our employees and, to a lesser extent, our subcontractors. In some cases, our revenue includes third-party hardware and software that we purchase and integrate as a part of our overall solutions. The level of hardware and software purchases we make for clients may vary from period to period depending on specific contract and client requirements. Since we earn higher profits from labor services that our employees provide compared with subcontracted efforts and other reimbursable items such as hardware and software purchases for clients, we seek to optimize our labor services on all of our engagements.

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Contract Types

Our services and solutions are provided under three types of contracts: time-and-materials; cost-plus; and fixed-price. Our contract mix varies from year to year due to numerous factors including our business strategies and federal government procurement objectives. The following table shows our revenue from each of these types of contracts as a percentage of our total revenue for the periods shown.

	Year ended December 31,						Six months ended June 30,
	2002		2003		2004		2004		2005
Time-and-materials	60.5	%	59.2	%	58.8	%	60.5	%	59.4	%
Cost-plus	28.4		28.5		28.4		26.9		25.7
Fixed-price	11.1		12.3		12.8		12.6		14.9
Total revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Time-and-materials contracts. Under time-and-materials contracts, we are reimbursed for labor at fixed hourly rates and generally reimbursed separately for allowable materials, other direct costs and out-of-pocket expenses. Our actual labor costs may vary from the negotiated hourly rates if, in a constricted labor market, we need to hire additional employees at higher wages or increase the compensation paid to existing employees, or in a weak labor market, we are able to hire employees at lower than expected rates. To date, we have not experienced any material variations in the negotiated hourly rates on our time-and-material contracts and our actual labor costs in connection with those contracts. To the extent that our actual labor costs under a time-and-materials contract vary significantly from the negotiated hourly rates, we can generate more or less than the targeted amount of profit.

Cost-plus contracts. Under cost-plus contracts, we are reimbursed for costs that are determined to be allowable and allocable to the contract and receive a fee, which represents our profit. Cost-plus fixed fee contracts specify the contract fee in dollars. Cost-plus incentive fee and cost-plus award fee contracts provide for increases or decreases in the contract fee, within specified limits, based upon actual results as compared to contractual targets for factors such as cost, quality, schedule and performance.

Fixed-price contracts. Under fixed-price contracts, we perform specific tasks for a predetermined price. We have three basic categories of fixed-price contracts: fixed unit price; fixed-price level-of-effort; and fixed-price completion contracts. See “Relevant Industry Terms” for a more complete definition of industry terms used herein. Compared to time-and-materials and cost-plus contracts, fixed-price contracts generally offer higher profit margin opportunities but involve greater financial risk because we bear the impact of potential cost overruns in return for the full benefit of any cost savings. The majority of our work under fixed-price contracts is fixed-price level-of-effort work, which has a lower risk than fixed-price completion contracts, such as software development.

Operating Expenses

Cost of Revenue

Cost of revenue primarily includes direct costs incurred to provide our services and solutions to clients. The most significant portion of these costs is salaries and wages, plus associated fringe benefits including stock-based compensation, of our employees directly serving clients, in addition to the related management, facilities and infrastructure costs. Cost of revenue also includes the costs of subcontractors and outside consultants, third-party materials, such as hardware or software that we purchase and provide to the client as part of an integrated solution, and any other related direct costs, such as travel expenses. Since we earn higher profits on our own labor services, we expect the ratio of cost of revenue as a percent of revenue to decline when our labor services mix increases relative to subcontracted labor or third-party material. Conversely, as subcontracted labor or third-party material purchases for clients increase relative to our own labor services, we expect the ratio of cost of revenue as a percent of revenue to increase. Changes in the mix of services and equipment provided under our contracts can result in variability in our contract margins. In addition, as we continue to bid and win larger

28

contracts, our own labor services component could decrease. This is because the larger contracts typically are broader in scope and require more diverse capabilities resulting in more subcontracted labor and the potential for more third-party hardware and software purchases. While these factors could lead to a higher ratio of cost of revenue as a percent of revenue, the economics of these larger jobs are nonetheless generally favorable because they increase income, broaden our revenue base and have a favorable return on invested capital.

General and Administrative Expenses

General and administrative expenses include the salaries and wages, plus associated fringe benefits including stock-based compensation, of our employees not performing work directly for clients. Among the functions covered by these costs are facilities, corporate business development, bid and proposal, contracts administration, finance and accounting, legal, corporate governance, and executive and senior management.

Depreciation and Amortization

Depreciation and amortization includes the depreciation of computers, furniture and other equipment, the amortization of third party software we use internally, and leasehold improvements.

Amortization of Intangible Assets

Amortization of intangible assets includes the amortization of identifiable intangible assets over their estimated useful lives. Non-compete agreements are generally amortized straight-line over the term of the agreement, while contracts and related client relationships are amortized proportionately against the acquired backlog.

Interest Expense

Interest expense is primarily related to interest expense incurred or accrued under our outstanding borrowings and notes payable and, to a lesser extent, our interest rate swap agreement, deferred financing charges and interest on capital leases.

Provision for Income Taxes

Under our S corporation election, all items of income and expense were “passed through” and taxed at the stockholder level. As a result, we were not required to record a provision for federal income taxes. However, we have recorded a provision for state income taxes for those states that do not recognize the S corporation status. For the periods ended on the dates indicated below, after giving effect to the revocation of our S corporation status, we estimate our effective income tax rate would have been approximately 38.8%, 38.5% and 40.5% for the years ended 2002, 2003 and 2004, respectively and an estimated 39.7% for the six months ended June 30, 2005.

29

Results of Operations

The following table sets forth certain items from our consolidated statements of operations as a percentage of revenue for the periods indicated.

	Year ended December 31,						Six months ended June 30,
	2002		2003		2004		2004		2005
Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Operating costs and expenses:
Cost of revenue	83.7		83.2		84.2		83.9		84.9
General and administrative expenses	8.8		10.6		9.6		9.9		7.7
Depreciation and amortization	1.2		1.2		1.0		1.1		0.8
Amortization of intangible assets	0.0		0.0		0.7		0.8		0.6
Total operating costs and expenses	93.7		95.0		95.5		95.7		94.0
Operating income	6.3		5.0		4.5		4.3		6.0
Interest income	0.0		0.0		0.0		0.0		0.0
Interest expense	(0.6	)	(0.3	)	(0.8	)	(0.9	)	(0.8	)
Income before taxes	5.7		4.7		3.7		3.4		5.2
Provision for income taxes(1)	0.2		0.2		0.1		0.2		0.2
Net income	5.5	%	4.5	%	3.6	%	3.2	%	5.0	%

(1) Provision for income taxes only reflects taxes paid as an S corporation. See “S Corporation Status.”

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

Revenue: Revenue for the six months ended June 30, 2005 was $93.9 million, compared to $81.2 million for the six months ended June 30, 2004, representing an increase of $12.7 million, or 15.6%. The increase is primarily due to approximately $11.9 million in revenue from new contract awards, including a five-year task order with an estimated value of $63.7 million with the U.S. Army’s Program Executive Office for Simulation, Training and Instrumentation (PEO STRI). In addition, the increase in revenue was also due to approximately $6.2 million from growth on existing contracts and approximately $0.5 million from higher award fees from cost-plus contracts. These increases were partially offset by reductions of approximately $4.0 million in work we performed for the Department of Energy (DOE) and U.S. Navy on a subcontracted basis.

Cost of revenue: Cost of revenue for the six months ended June 30, 2005 was $79.6 million, or 84.9% of revenue, compared to $68.2 million, or 83.9%, for the six months ended June 30, 2004. The increase in cost of revenue was primarily due to approximately $7.8 million of higher subcontractor costs. To a lesser extent, the increase was driven by approximately $2.4 million of direct contract costs in support of new and expanded task orders and contracts and the reallocation of approximately $0.9 million of expenses associated with the reorganization of our business development efforts. The increase in cost of revenue as a percent of revenue was primarily due to the increased use of subcontractors and increased levels of hardware and equipment acquired on behalf of our clients.

General and administrative expenses: General and administrative expenses for the six months ended June 30, 2005 were $7.2 million, or 7.7% of revenue, compared to $8.0 million, or 9.9%, for the six months ended June 30, 2004. The decrease in general and administrative expenses is due to the reallocation of approximately $0.9 million of expenses associated with the reorganization of our business development efforts and approximately $1.3 million reduction in accounting costs after the integration of SES. These decreases were offset, to some extent, by approximately $0.4 million increases in audit and consulting fees associated with corporate governance and approximately $0.8 million for expenses associated with the hiring of additional executive management.

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Depreciation and amortization: Depreciation and amortization for the six months ended June 30, 2005 was approximately $0.8 million, compared to approximately $0.9 million for the six months ended June 30, 2004. The decrease in depreciation and amortization was primarily due to certain computer and equipment assets being fully depreciated during 2005.

Amortization of intangible assets: Amortization of intangible assets for the six months ended June 30, 2005 was approximately $0.5 million, compared to approximately $0.6 million for the six months ended June 30, 2004. The decrease was primarily due to decreasing amortization on the contracts and client relationship intangible asset recorded in connection with the SES acquisition, which is being amortized proportionately against the acquired backlog over five years.

Operating income: For the six months ended June 30, 2005, operating income was $5.6 million, or 6.0% of revenue, compared to $3.5 million, or 4.3%, for the six months ended June 30, 2004. Operating income, as a percent of revenue, increased primarily due to lower general and administrative expenses and the recognition of revenue from award fees upon notification of award. Award fees on cost-plus contracts are in addition to the reimbursement of allowable costs and, therefore, have no additional expense associated with them.

Interest expense: For the six months ended June 30, 2005, interest expense was $0.8 million, compared to $0.7 million for the six months ended June 30, 2004. The increase in interest expense was due to a higher average interest rate on borrowings, which was partially offset by decreased borrowing under our line of credit and term note.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Revenue: Revenue for the year ended December 31, 2004 was $171.3 million, compared to $136.4 million for the year ended December 31, 2003, representing an increase of $34.9 million, or 25.6%. The increase in revenue was primarily due to approximately $22.4 million which we assumed as a result of the 2003 SES acquisition, $9.8 million in new contract awards and $18.5 million in contract growth under existing contracts and task orders. New contract awards included the U.S. Army’s PEO STRI contract, various task orders under the U.S. Army’s ITES GWAC and an award for the U.S. Air Force’s Aircraft Maintenance Intuitive Troubleshooting (AMIT) program. The additional revenue on these and other contracts was partially offset by a decrease in revenue of approximately $7.3 million from expired contracts and $9.7 million funding reductions under existing contracts.

Cost of revenue: Cost of revenue for the year ended December 31, 2004 was $144.0 million, or 84.2% of revenue, compared to $113.5 million, or 83.2%, for the year ended December 31, 2003. The increase was due to approximately $19.6 million in additional labor and related overhead costs and approximately $11.1 million in additional subcontract costs. The increase in cost of revenue as a percent of revenue was primarily due to the increased use of subcontractors and increased levels of hardware and equipment acquired on behalf of our clients.

General and administrative expenses: General and administrative expenses for the year ended December 31, 2004 were $16.4 million, or 9.6% of revenue, compared to $14.5 million, or 10.6%, for the year ended December 31, 2003. The increase in general and administrative expenses was due to approximately $0.7 million for the addition of senior executives to support corporate growth and approximately $3.0 million for the full-year inclusion of general and administrative functions associated with SES. In addition, general and administrative expenses increased due to $0.9 million in stock compensation expense resulting from the issuance of non-qualified stock options to senior executives. These increases were offset, in part, by a reduction and reallocation of approximately $2.8 million due to reorganization of our business development efforts. General and administrative expenses as a percent of revenue declined as we leveraged our corporate infrastructure expenses over a larger revenue base.

Depreciation and amortization: Depreciation and amortization for the year ended December 31, 2004 was $1.7 million, compared to $1.6 million for the year ended December 31, 2003. The increase in depreciation and amortization was primarily due to increased amortization of leasehold improvements.

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Amortization of intangible assets: Amortization of intangible assets for the year ended December 31, 2004 was $1.3 million, compared to $16,000 for the year ended December 31, 2003. The increase was the result of the full-year amortization of intangible assets recorded in connection with the acquisition of SES.

Operating income: For the year ended December 31, 2004, operating income was $7.8 million, or 4.5% of revenue, compared to $6.8 million, or 5.0%, for the year ended December 31, 2003. Operating income, as a percent of revenue, decreased primarily due to an increase in cost of revenue, amortization of intangible assets and stock compensation expense, which was partially offset by a decrease in general and administrative expenses as a percent of revenue.

Interest expense: For the year ended December 31, 2004, interest expense was $1.4 million, compared to $0.4 million for the year ended December 31, 2003. The increase in interest expense was due to increased borrowing under our line of credit, a new term note used to finance the acquisition of SES and rising interest rates.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Revenue: Revenue for the year ended December 31, 2003 was $136.4 million, compared to $138.2 million for the year ended December 31, 2002, representing a decrease of $1.8 million, or 1.3%. The decrease was due to approximately $11.7 million in contract work reductions and a reduction in revenue of approximately $8.3 million from the expiration of small business prime contracts for which we were not eligible to bid as a prime contractor and were able to retain only a portion of the work as a subcontractor on some of these contracts. This decrease was partially offset by approximately $4.9 million additional revenue from new contracts awarded, including the National Nuclear Security Administration’s (NNSA) Nevada contract and the Defense Logistics Agency’s Applications Support Team (DLA AST) contract, and approximately $11.5 million in revenue growth on existing contracts.

Cost of revenue: Cost of revenue for the year ended December 31, 2003 was $113.5 million, or 83.2% of revenue, compared to of $115.7 million, or 83.7%, for the year ended December 31, 2002. The decrease in cost of revenue was primarily due to a decrease of approximately $4.0 million in the use of subcontractor labor which was partially offset by a $1.7 million increase in direct labor. The decrease in cost of revenue as a percent of revenue was primarily due to this increased use of our direct labor, which typically generates higher margins, and the decreased use of subcontractor labor.

General and administrative expenses: General and administrative expenses for the year ended December 31, 2003 were $14.5 million, or 10.6% of revenue, compared to $12.2 million, or 8.8%, for the year ended December 31, 2002. The increase in general and administrative expenses was due to investments in corporate infrastructure to support our anticipated future growth, including approximately $1.8 million for an expansion of the business development and marketing staff, and approximately $0.2 million of increased legal expenses.

Depreciation and amortization: Depreciation and amortization for the years ended December 31, 2003 and 2002 was $1.6 million.

Amortization of intangible assets: Amortization of intangible assets for the year ended December 31, 2003 was $16,000 due to the partial-year amortization of intangible assets recorded in connection with the acquisition of SES. The amortization of intangible assets for the year ended December 31, 2002 was $20,000 due to the final amortization of a copyright.

Stock compensation expense: Stock compensation expense for the year ended December 31, 2003 was $0.3 million. We recorded no stock compensation expense for the year ended December 31, 2002. The increase was due to the issuance of non-qualified stock options to senior executives.

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Operating income: For the year ended December 31, 2003, operating income was $6.8 million, or 5.0% of revenue, compared to $8.7 million, or 6.3%, for the year ended December 31, 2002. Operating income, as a percent of revenue, decreased primarily due to the decrease in revenue and the increase in general and administrative expenses, which were partially offset by a decrease in cost of revenue.

Interest expense: For the year ended December 31, 2003, interest expense was $0.4 million, compared to $0.8 million for the year ended December 31, 2002. The decrease was due to reduced borrowing under our line of credit and declining interest rates during 2003 as compared to 2002.

Effects of Inflation

We generally have been able to price our contracts in a manner to accommodate the rates of inflation experienced in recent years. In 2004, we conducted approximately 58.8% of our business under time-and-materials contracts, where labor rates are usually adjusted annually by predetermined escalation factors. Also in 2004, we conducted approximately 28.4% of our business under cost-plus contracts, which automatically adjust for changes in cost. We conducted the remaining 12.8% of our business under fixed-price contracts, in which we include a predetermined escalation factor and for which we generally have not been adversely affected by inflation.

Liquidity and Capital Resources

Our primary liquidity needs are for financing working capital, investing in capital expenditures and making selective strategic acquisitions. Historically, we have relied primarily on our cash flow from operations and borrowings under our credit facility to provide the capital for our liquidity needs. We expect the combination of cash flow from operations and the available borrowing capacity on our credit facility to continue to meet our normal working capital and capital expenditure requirements for at least the next twelve months. As part of our growth strategy, we may pursue acquisitions that could require us to raise additional external capital.

Cash and net working capital: The following table sets forth our cash and net working capital (current assets less current liabilities) balances as of June 30, 2005 and December 31, 2004 and 2003, respectively.

	As of December 31,				As of June 30, 2005
	2003		2004
	(in thousands)
Cash and cash equivalents	$	1,340	$	40	$	13
Net working capital		2,492		4,653		3,303

We consider cash on deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. We maintain minimal cash balances and have substantially all available cash credited against our borrowings under our line of credit. Net working capital decreased by $1.3 million for the six months ended June 30, 2005 and increased by $2.2 million for the year ended December 31, 2004. The decrease for the six months ended June 30, 2005 was primarily due to a $1.1 million increase in accrued salaries and benefits and a $1.1 million increase in accounts payable, primarily offset by a $0.7 million decrease in borrowings under our line of credit. The increase in net working capital for the year ended December 31, 2004 was primarily due to an increase in operating cash flow which reduced our line of credit balance by $2.5 million. This reduction was partially offset by a slightly larger increase in accounts payable and accrued expenses than in accounts receivable. Accounts receivable did not grow as much as accounts payable and accrued expenses primarily due to our improved invoicing and collection efforts that reduced our days sales outstanding.

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Cash flow: The following table sets forth our sources and uses of cash for the six months ended June 30, 2005 and 2004, and the years ended December 31, 2004, 2003 and 2002.

	Year ended December 31,									Six months ended June 30,
	2002			2003			2004			2004			2005
	(audited)									(unaudited)
	(in thousands)
Net cash provided by operating activities	$	9,946		$	12,353		$	9,232		$	3,326		$	8,193
Net cash provided by (used in) investing activities		2,594			(24,497	)		(2,212	)		(585	)		(3,066	)
Net cash (used in) provided by financing activities		(12,968	)		13,168			(8,320	)		(3,133	)		(5,154	)
Net (decrease) increase in cash	$	(428	)	$	1,024		$	(1,300	)	$	(392	)	$	(27	)

Our operating cash flow is primarily affected by the overall profitability of our contracts, our ability to invoice and collect from our clients in a timely manner, and our ability to manage our vendor payments. We bill most of our clients and prime contractors monthly after services are rendered. Improving our invoicing and collection procedures remains a top priority in order to increase cash flow from operations. The increase in cash provided by operating activities for the six months ended June 30, 2005 compared to the six months ended June 30, 2004 was primarily due to increased profitability and a decrease in accounts receivable due to improved collections. The $3.1 million decrease in net cash provided by operating activities for the year ended December 31, 2004 was caused primarily by a $5.3 million increase in accounts receivable compared to a $3.7 million decrease in accounts receivable for the year ended December 31, 2003. This increase was caused by growth in our business, yet reflects our improved invoicing and collection efforts. The increase in accounts receivable was partially offset by an increase of $0.9 million in stock compensation expense related to the issuance of non-qualified stock options to senior executives in 2004.

Our cash flow used in investing activities consists primarily of capital expenditures and acquisitions. Our increase in cash used in investing activities for the six months ended June 30, 2005 compared to the six months ended June 30, 2004 was primarily due to capital expenditures and final SES acquisition payments. The $2.2 million in cash used for investing activities for the year ended December 31, 2004 was primarily due to $1.0 million in capital expenditures and $1.2 million in additional payments related to the SES acquisition. The $24.5 million in cash used for investing activities for the year ended December 31, 2003 was primarily due to $19.2 million in cash used to acquire SES in December 2003 and capital expenditures of $5.3 million. The increased capital expenditures in 2003 were primarily due to the relocation of our headquarters and the leasehold improvements and other fixed asset additions associated with that relocation.

Our cash flow provided by financing activities consists primarily of proceeds from and payments on our line of credit and term note, and distributions to our stockholders. Our increase in cash provided by financing activities for the six months ended June 30, 2005 compared to the six months ended June 30, 2004 was primarily due to payments on our line of credit and term loan and stockholder distributions. For the year ended December 31, 2004, cash flow used in financing activities included $2.6 million in scheduled amortization payments on the term note, payments of $2.5 million on the line of credit and distributions to stockholders of $3.5 million, partially offset by a $0.2 million increase in capital lease obligations. The $13.2 million provided by financing activities for the year ended December 31, 2003 was primarily due to increased borrowing under our line of credit and a $14.0 million term note. Borrowings under the line of credit and the term note were used to finance the acquisition of SES in December 2003.

Credit Agreement: On December 23, 2003, we entered into a Loan and Security Agreement that provides for a $30.0 million revolving note and a $14.0 million term note.

The revolving note provides a line of credit of up to $30.0 million, limited to a percentage of our eligible receivables under the Loan and Security Agreement. The outstanding balance of the line of credit accrues interest

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based on LIBOR plus an applicable margin. The outstanding borrowings are collateralized by a security interest in substantially all of our assets. The bank also requires a direct assignment of all of our contracts at the bank’s discretion. The line of credit expires on December 31, 2006, but may be renewed by agreement of the parties. The following table summarizes our line of credit as of June 30, 2005 and December 31, 2004 and 2003.

	As of December 31,						As of June 30, 2005
	2003			2004			Actual			Pro forma
	(dollars in thousands)
Amount available under line of credit	$	25,266		$	26,788		$	27,007		$	27,007
Outstanding balance		14,951			12,439			11,731			14,731
Unused portion	$	10,315		$	14,349		$	15,276		$	12,276
Interest rate on line of credit		3.7	%		4.5	%		5.3	%		5.3	%

For the six months ended June 30, 2005 and for the years ended December 31, 2004, 2003 and 2002, the interest expense on the line of credit was approximately $0.4 million, $0.6 million, $0.3 million and $0.5 million, respectively.

The $14.0 million term note was provided as part of the financing for our acquisition of SES in December 2003. The term note balance is being amortized over 60 months commencing February 1, 2004 with the balance of $5.6 million due on December 31, 2006. The term note accrues interest based on LIBOR plus an applicable margin. In connection with the term note, we entered into an interest rate swap agreement with an initial notional amount of $14.0 million, which amortizes at the same rate as the term note. The interest rate swap agreement has effectively fixed our interest rate on the term note at 2.6% plus the applicable margin.

Our scheduled term note maturities for the years following December 31, 2004 are: $2.8 million in 2005 and $8.4 million in 2006, including the final payment of $5.6 million due on December 31, 2006. For the six months ended June 30, 2005 and for the year ended December 31, 2004, the interest expense on the term note was approximately $0.3 million and $0.6 million, respectively.

The following table summarizes the outstanding balance and applicable interest rate on our term note as of June 30, 2005 and December 31, 2004 and 2003.

	As of December 31,						As of June 30, 2005
	2003			2004
	(dollars in thousands)
Outstanding balance	$	14,000		$	11,433		$	10,033
Interest rate on term note		4.1	%		5.0	%		5.8	%

On July 25, 2005, we amended the Loan and Security Agreement to provide for additional borrowings under a six-month time loan of up to $15.0 million. The time loan will be due in January 2006 or upon receipt of proceeds from this offering, whichever occurs first, and will bear interest at LIBOR plus 45 basis points. On July 26, 2005, we borrowed $15 million under the time loan.

The Loan and Security Agreement requires that we meet certain financial covenants, including a minimum net worth, a funded debt ratio and a fixed charge coverage ratio. We have been in compliance with these financial covenants.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2004 that require us to make future cash payments.

	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Contractual obligations:
Revolving note(1)	$	12,440	$	12,440	$	—	$	—	$	—
Term note		11,433		2,800		8,633		—		—
Capital lease obligations		684		274		410		—		—
Operating lease obligations		324		199		121		4		—
Rent on facilities		26,749		3,490		10,245		6,210		6,804
Other long-term liabilities		188		150		38		—		—
Total	$	51,818	$	19,353	$	19,447	$	6,214	$	6,804

(1) The revolving note expires on December 31, 2006, but is classified as a current liability.

Critical Accounting Policies

Revenue Recognition

Our revenue recognition policy addresses our three different types of contractual arrangements: time-and-materials contracts; cost-plus contracts; and fixed-price contracts.

Time-and-Materials Contracts: Revenue on time-and-materials contracts is recognized based on negotiated billable rates multiplied by the number of hours delivered plus allowable expenses incurred during the period.

Cost-Plus Contracts: Revenue on cost-plus contracts is recognized based on the allowable costs incurred during the period, plus any recognizable earned fee. Revenue associated with fixed fees under cost-plus contracts is considered earned in proportion to the allowable expenses incurred in performance of the contract.

Fixed-Price Contracts: The Company has three categories of fixed-price contracts: fixed unit price; fixed-price level-of-effort; and fixed-price completion contracts. Revenue on fixed unit price contracts, where specified units are delivered under service arrangements, is recognized as units are delivered based on the specified price per unit. Revenue for fixed-price level-of-effort contracts is recognized based upon the number of units of labor actually delivered multiplied by the negotiated rate for each unit of labor. Revenue on fixed-price completion contracts is recognized on the percentage of completion method using costs incurred in relation to total estimated costs.

For contracts with performance based incentives or award fees, revenue is recognized as earned. Certain fees are not recognized until award notification is received, which may result in revenue and profit variability from quarter to quarter.

Contract accounting requires judgment relative to assessing risks, estimating contract revenues and costs, and making assumptions for schedule and technical issues. Less than 2% of our revenue is derived from contracts that require the use of estimates or related assumptions. Due to the size and nature of certain of our contracts that require the use of estimates or related assumptions, the estimation of total revenue and cost at completion is subject to many variables. Contract costs include material, labor and subcontracting costs, as well as an allocation of allowable indirect costs. Assumptions have to be made regarding the length of time to complete the contract because costs also include expected increases in wages and prices for materials. We apply judgment in estimating the amounts and assessing the potential for realization. Further, we utilize a number of management processes to monitor contract performance and revenue estimates, including quarterly management reviews of contract estimates. These amounts are only included in contract value when they can be reliably estimated and realization is considered probable. Estimates of award fees related to performance on certain contracts, which are

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generally awarded at the discretion of the client, as well as penalties related to contract performance, are considered in estimating sales and profit rates. Incentives and penalties are recorded when there is sufficient information for us to assess anticipated performance. Anticipated losses on contracts are recognized at the time they become known.

From time to time, circumstances develop or actual amounts are determinable that require us to revise our total estimated costs or revenue expectations. We record the effect of any revisions to our estimated total costs and revenue in the period in which circumstances requiring revision become known. Consequently, operating results could be affected by revisions to prior accounting estimates. Historically, these changes relate to changes in the contractual scope of our work, and have not significantly impacted the expected profit rate on a contract. We do not expect that revisions to our estimates and assumptions would have a material effect on the Company’s consolidated results of operations, cash flows or financial position.

Stock-Based Compensation

We account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25) using the intrinsic-value method. Under this method, we recognized approximately $1.2 million and $0.3 million in compensation expense for stock options issued during 2004 and 2003, respectively. We allocate this expense either to cost of revenues or general and administrative expenses depending on the recipient of the option. We have issued nonqualified stock options to employees at various times during 2004 and 2003 with vesting periods ranging from zero to seven years. Compensation expense for the amount that the fair value of the stock at the grant date exceeds the exercise price is being amortized over the applicable vesting periods. In addition to the standard vesting schedule, some of the option agreements have accelerated vesting upon the occurrence of certain events, including an IPO or the achievement of certain revenue and profit goals. We estimate stock compensation expense in 2005 will be approximately $1.7 million, including the expense for the accelerated vesting of certain options. We estimate our stock compensation expense to be approximately $0.2 million each year for 2006 through 2009, but up to an additional $0.2 million could be expensed in the year the revenue and profit goals are achieved, which would reduce the expense in subsequent years.

Due to the lack of a public market for our common stock, we determined the fair value of our options considering the guidance provided by the AICPA’s Audit and Accounting Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. We estimated the fair value of the common stock underlying the options by performing contemporaneous valuations each quarter for options granted in that quarter. The valuations were based on the public company method under the market approach, applying the valuation multiples of public companies in our sector that we determined to be sufficiently comparable on trailing twelve months for reported revenue, EBITDA and operating income to our previous four quarters’ results, adjusted for outstanding debt, cash, and applying a discount for lack of marketability. We prepared the valuations in-house because we have reasonable methodologies for estimating the fair value of the common stock. The following table lists the options granted during the twelve-month period ended June 30, 2005:

Month of grant	Number of options granted	Exercise price		Fair value (1)		Intrinsic value at grant (2)	Intrinsic value at IPO (3)		Fair value differential (4)
September 2004	49,999	$	10.00	$	6.92	—	$	1.00	$	4.08
November 2004	14,472		10.00		7.51	—		1.00		3.49
December 2004	29,205		10.00		8.70	—		1.00		2.30
April 2005	52,630		10.00		9.14	—		1.00		1.86
June 2005	26,315		10.00		8.93	—		1.00		2.07

(1) Fair value of the common stock underlying the options is based on contemporaneous valuations performed quarterly by management using the public company method under the market approach.

(2) Intrinsic value at grant date is the amount by which the fair value of the common stock on the grant date exceeds the exercise price for the options and is the amount recorded as stock-based compensation expense over the applicable vesting period.

(footnotes continue on following page)

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(3) Intrinsic value at the IPO is the amount by which the assumed initial public offering price of $11.00 exceeds the exercise price.

(4) Fair value differential is the difference between the fair value of the common stock on each grant date and the assumed initial public offering price of $11.00.

Because we use the public company method under the market approach described above, the estimated fair value for our common stock and the corresponding fair value differential at each grant date are affected by our results over the previous four quarters, our debt and cash levels at each measurement date, and the market valuation of the selected comparable public companies at the measurement date. The estimated fair value changes from the September 2004 grants to the November 2004 grants and the November 2004 grants to the December 2004 grants are attributable to increases in our revenue, EBITDA, and operating income results for the four quarters ended June 30, 2004 and September 30, 2004, an improvement in the market multiples of the comparable public companies, and a decrease in our outstanding debt. The increase in estimated fair value from the December 2004 grants to the April 2005 grants is due to continued improvement in our revenue, EBITDA, and operating income for the four quarters ended December 31, 2004, despite a minor reduction in the comparable public company multiples and an increase in our debt level. The slight decrease in the estimated fair value of the June 2005 grants is due to a decrease in the comparable public company multiples and an increase in our debt level. This estimated fair value decrease was partially offset by additional increases in our revenue, EBITDA, and operating income for the four quarters ended March 31, 2005. The fair value differentials are attributable to continued increases in our revenue, EBITDA, and operating income results on a rolling four quarter basis and our increased organic growth rate over the first half of 2005.

Based on the assumed initial public offering price of $11.00, the intrinsic value of options outstanding at June 30, 2005 was $13.1 million, of which $7.8 million related to vested options and $5.3 million related to unvested options.

In December 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. (See discussion below under Significant New Accounting Pronouncement.) Nonpublic entities that did not use the fair-value-based method of accounting are required to apply the prospective transition method of accounting under FAS 123(R) as of the required effective date, which is, for us, January 1, 2006. Under the prospective method, a nonpublic entity accounting for its equity-based awards using the intrinsic-value method under APB 25, would continue to apply APB 25 in future periods to awards outstanding at the date they adopt FAS 123(R). Therefore, there will be no change to the projected stock compensation expenses for our existing stock options as a result of FAS 123(R).

Goodwill and the Amortization of Intangible Assets

Our accounting policy regarding acquisitions is in accordance with SFAS No. 141, Business Combinations, whereby the net tangible and identifiable intangible assets acquired and liabilities assumed are recognized at their estimated fair market values at the date of acquisition. The value of the contracts and related client relationships is based on an independent appraisal. At the time of the acquisition, all intangibles including the contracts and related client relationships and non-compete agreements are reviewed to determine the term of amortization for each intangible asset.

Our accounting policy regarding goodwill and the amortization of intangible assets requires that goodwill be reviewed periodically for impairment and no longer be amortized against earnings. Annually, on October 1, we perform a fair value analysis of our reporting units using valuation techniques prescribed in Statement of Financial Accounting Standards (SFAS) No. 142.

Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset many not be fully recoverable in accordance with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets. An impairment loss is recognized if the sum of the long-term undiscounted cash flows is less than the carrying amount of the long-lived asset being evaluated. Any write-downs are treated as permanent reductions in the carrying amount of the assets.

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Contract rights are amortized proportionately against the acquired backlog. Non-compete agreements are amortized over their estimated useful lives.

Significant New Accounting Pronouncement

In December 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), Share Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Statement 123(R) will be effective for nonpublic companies in the first fiscal year beginning after December 15, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. We plan to adopt FAS 123(R) effective January 1, 2006. FAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values (i.e. pro forma disclosure is no longer an alternative to financial statement recognition). Nonpublic entities that did not use the fair-value-based method of accounting are required to apply the prospective transition method of accounting under FAS 123(R) as of the required effective date. Under the prospective method, a nonpublic entity accounting for its equity-based awards using the intrinsic-value method under APB 25, would continue to apply APB 25 in future periods to awards outstanding at the date they adopt FAS 123(R). All awards granted, modified or settled after the date of adoption will be accounted for using the measurement, recognition and attribution provisions of FAS 123(R). Although the adoption of FAS 123(R) is expected to affect the measurement of share-based equity awards to employees after adoption, we do not expect the adoption will have a material effect on our consolidated results of operations, cash flows or financial position.

Qualitative and Quantitative Disclosures about Market Risk

Our exposure to market risk relates to changes in interest rates for borrowings under our revolving credit agreement and our term loan. These borrowings accrue interest at variable rates. Based upon our borrowings under these two facilities in 2004, a hypothetical 10% increase in interest rates would have increased interest expense by approximately $21,400 and would have decreased our annual cash flow by a comparable amount.

Quarterly Results of Operations

Our results of operations, particularly our revenue, operating income and cash flow may vary significantly from quarter to quarter depending on a number of factors, including the progress of contract performance, the number of billable days in a quarter, vacation days, the timing of client orders, timing of award fee notices, changes in the scope of contracts, billing of other direct and subcontract costs, the commencement and completion of contracts we have been awarded and general economic conditions. Because a significant portion of our expenses, such as personnel and facilities costs, are fixed in the short term, successful contract performance and variation in the volume of activity, as well as in the number of contracts or task orders commenced or completed during any quarter, may cause significant variations in operating results from quarter to quarter.

The federal government’s fiscal year ends September 30. If a federal budget for the next federal fiscal year has not been approved by that date in each year, our clients may have to suspend engagements that we are working on until a budget has been approved. Any such suspensions may reduce our revenue in the fourth quarter of that year or the first quarter of the subsequent year. The federal government’s fiscal year end can also trigger increased purchase requests from clients for equipment and materials. Any increased purchase requests we receive as a result of the federal government’s fiscal year end would serve to increase our third or fourth quarter revenue, but will generally decrease profit margins for that quarter, as these activities generally are not as profitable as our typical offerings.

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

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	For the quarter ended
	Mar. 31, 2003			June 30, 2003			Sept. 30, 2003			Dec. 31, 2003			Mar. 31, 2004			June 30, 2004			Sept. 30, 2004			Dec. 31, 2004			Mar. 31, 2005			June 30, 2005
	(in thousands, except per share data)
Statement of Operations Data:
Revenue	$	35,311		$	34,751		$	34,147		$	32,212		$	40,843		$	40,384		$	44,261		$	45,765		$	46,372		$	47,503
Operating costs and expenses:
Cost of revenue (1)		29,603			28,872			28,105			26,940			34,289			33,940			37,536			38,380			39,567			40,104
General and administrative expenses (1)		3,729			3,829			3,069			3,898			4,132			3,904			3,939			4,387			3,622			3,617
Depreciation and amortization		413			385			376			403			449			437			435			420			398			403
Amortization of intangible assets		—			—			—			16			309			307			320			316			272			267
Total operating costs and expenses		33,745			33,086			31,550			31,257			39,179			38,588			42,230			43,503			43,859			44,391
Operating income		1,566			1,665			2,597			955			1,664			1,796			2,031			2,262			2,513			3,112
Interest income		11			1			0			3			2			4			8			13			8			18
Interest expense		(158	)		(100	)		(80	)		(101	)		(401	)		(320	)		(364	)		(288	)		(352	)		(416	)
Income before income taxes		1,419			1,566			2,517			857			1,265			1,480			1,675			1,987			2,169			2,714
Provision for income taxes (2)		59			65			104			35			55			64			72			86			102			118
Net income	$	1,360		$	1,501		$	2,413		$	822		$	1,210		$	1,416		$	1,603		$	1,901		$	2,067		$	2,596
Pro forma earnings per share-diluted (3)	$	0.12		$	0.13		$	0.22		$	0.07		$	0.11		$	0.12		$	0.14		$	0.16		$	0.18		$	0.23
	For the quarter ended
	Mar. 31, 2003			June 30, 2003			Sept. 30, 2003			Dec. 31, 2003			Mar. 31, 2004			June 30, 2004			Sept. 30, 2004			Dec. 31, 2004			Mar. 31, 2005			June 30, 2005
As a Percentage of Revenue:
Revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Operating costs and expenses:
Cost of revenue		83.8			83.1			82.3			83.6			84.0			84.0			84.8			83.9			85.4			84.5
General and administrative expenses		10.6			11.0			9.0			12.1			10.1			9.7			8.9			9.6			7.8			7.6
Depreciation and amortization		1.2			1.1			1.1			1.3			1.1			1.1			1.0			0.9			0.9			0.8
Amortization of intangible assets		—			—			—			0.1			0.8			0.8			0.7			0.7			0.6			0.6
Total operating costs and expenses		95.6			95.2			92.4			97.1			96.0			95.6			95.4			95.1			94.7			93.5
Operating income		4.4			4.8			7.6			2.9			4.0			4.4			4.6			4.9			5.3			6.5
Interest income		0.0			0.0			0.0			0.0			0.0			0.0			0.0			0.0			0.0			0.0
Interest expense		(0.4	)		(0.3	)		(0.2	)		(0.3	)		(1.0	)		(0.8	)		(0.8	)		(0.6	)		(0.8	)		(0.9	)
Income before income taxes		4.0			4.5			7.4			2.6			3.0			3.6			3.8			4.3			4.5			5.6
Provision for income taxes (2)		0.1			0.2			0.3			0.1			0.1			0.2			0.2			0.1			0.2			0.2
Net income		3.9	%		4.3	%		7.1	%		2.5	%		2.9	%		3.4	%		3.6	%		4.2	%		4.3	%		5.4	%
(1)    Cost of revenue and general and administrative expenses include the following stock-based compensation expense:
	For the quarter ended
	Mar. 31, 2003			June 30, 2003			Sept. 30, 2003			Dec. 31, 2003			Mar. 31, 2004			June 30, 2004			Sept. 30, 2004			Dec. 31, 2004			Mar. 31, 2005			June 30, 2005
	(in thousands)
Cost of revenue	$	22		$	73		$	22		$	58		$	30		$	29		$	28		$	29		$	29		$	29
General and administrative expenses		24			36			36			17			26			23			507			506			148			167

(2) Provision for income taxes only reflects taxes paid as an S corporation. See “S Corporation Status.”

(3) Pro forma earnings per share is based on pro forma net income assuming we had been taxed as a C corporation in all periods when our S corporation election was in effect.

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BUSINESS

Company Overview

We are a provider of information technology services and solutions to federal government agencies. We focus on designing, implementing, maintaining and upgrading secure information technology (IT) systems and networks by leveraging our skills across four core service offerings: network engineering; information assurance; systems development and integration; and enterprise systems management. Since our founding in 1989, we have derived substantially all of our revenue from contracts performed for federal government agencies, with the majority of our revenue currently generated from the delivery of mission-critical IT services to defense and intelligence agencies. We believe our diversified and stable client base, strong client relationships, broad array of contracts and significant management and operational capabilities position us to continue our growth.

We have a diversified and stable client base of federal government agencies that are upgrading and modernizing their mission-critical IT systems to enhance their operational effectiveness. Approximately two-thirds of our revenue is derived from engagements with defense and intelligence agencies, including the U.S. Army, U.S. Air Force, Defense Logistics Agency and key members of the intelligence community. These agencies, with their focus on network-centric warfare and information superiority, currently have, and are expected to continue to have, significant funding for transformation through information technology initiatives. Approximately one-third of our revenue is derived from engagements with federal civilian agencies that are also focused on enhancing their mission-critical IT systems, including the Department of Energy (DOE), the National Aeronautics and Space Administration (NASA) and the General Accounting Office (GAO). We believe our broad client base of federal agencies will enable us to expand our business, regardless of shifts in federal government spending priorities.

We have strong, long-term relationships with our clients, as evidenced by our record of retaining business. We have provided IT services and solutions to clients within the U.S. Army, U.S. Air Force, DOE, NASA and the intelligence community for more than ten years, In addition, over the past three years, we won more than 90% of the competitively awarded prime engagements on which we were the incumbent and eligible for award. We believe our strong relationships result from our in-depth understanding of client missions, the strength of our technical solutions and the co-location of a majority of our employees with our clients.

We have a broad array of contracts that enables us to expand business with existing clients and develop relationships with new clients. As of June 30, 2005, we were performing work on approximately 80 contracts and 155 task orders. For the six months then ended, our largest engagement represented approximately 8.0% of our revenue, and that work is not scheduled for recompetition until 2011, assuming, even though the federal government is not obligated to do so, that all option periods are exercised. Our contract base includes multiple large government wide acquisition contracts, or GWACs, such as: the U.S. Army Information Technology Enterprise Solutions (ITES) contract with a ceiling of $500 million over seven years; the U.S. Air Force Network-Centric Solutions (NETCENTS) contract with a ceiling of $9 billion over five years; the Department of Commerce Information Technology Solutions—Next Generation Program (COMMITS NexGen) contract with a ceiling of $8 billion over ten years. As a prime contractor on each of these contract vehicles, we compete with a discrete number of other pre-qualified companies for several hundred million dollars of additional business each year. Because the federal government is not obligated to make any awards under these GWACs, there is no assurance that these multiple award contracts will result in actual awards equal to the ceiling values, or result in any actual awards. In light of the government’s annual spending and the priorities of any particular administration, it is difficult to predict how much revenue, if any, we will receive under our GWACs.

We have made significant investments in our management, employees and infrastructure in support of our growth and profitability strategies. Our senior managers average more than 25 years of experience with federal government agencies, the U.S. military and federal government contractors. In addition, our President and our Chief Operating Officer each has more than 18 years of public company experience in the federal IT services sector. Members of our management team have extensive experience growing businesses organically, as well as through acquisitions. We deliver our services through a highly skilled work force of approximately 1,450

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employees, of whom 68% possess at least one security clearance. In addition, we recently expanded our Sensitive Compartmented Information Facilities (SCIFs), which are government certified facilities that enable us to pursue additional classified work.

For the six months ended June 30, 2005, our revenue was $93.9 million and our net income was $4.7 million, representing organic growth of 15.6% and 77.6%, respectively, over the same period in 2004. Since 2001, our revenue, including the effect of an acquisition, has grown to $171.3 million in 2004, representing a compound annual growth rate of 12.9%. Over the same period, our net income decreased 4.0%, from $6.4 million in 2001 to $6.1 million in 2004. As of June 30, 2005, our total estimated contract backlog was $525 million, of which approximately $63 million was funded. We are focused on continuing to grow organically while improving margins, and intend to expand our capabilities through strategic acquisitions.

Market Opportunity

The federal government is among the largest consumers of information technology services and solutions in the world. According to INPUT, an independent federal government market research firm, the overall market for contracted IT systems and services by the federal government is expected to grow from $59.2 billion in federal fiscal year 2005 to $78.8 billion in federal fiscal year 2010. In addition, recent defense budgets are significantly higher than in prior years, particularly in areas related to IT, intelligence, surveillance, reconnaissance and homeland security due to increased counter-terrorism activities and the U.S. deployments overseas. According to INPUT, the Department of Defense’s spending on information technology services and solutions is expected to increase from $27.2 billion in federal fiscal year 2005 to $35.0 billion in federal fiscal year 2010. Although spending on intelligence related activities by the federal government remains highly classified, INPUT estimates total addressable IT spending for U.S. intelligence agencies in federal fiscal year 2005 at $7.8 billion, growing to $10.9 billion in federal fiscal year 2010. We believe there will be significant market opportunities for providers of IT services and solutions to federal government agencies, particularly those in the defense and intelligence community, over the next several years because of the trends outlined below.

Focus on Federal Government Transformation

The federal government, and the DoD in particular, is in the midst of a significant transformation that is driven by the federal government’s need to address the changing nature of global threats. A significant aspect of this transformation is the use of information technology to increase the federal government’s effectiveness and efficiency. The result is increased federal government spending on information technology to upgrade networks and transform the federal government from separate, isolated organizations into larger, enterprise level, network-centric organizations capable of sharing information broadly and quickly. While the transformation initiative is driven by the need to prepare for new world threats, adopting these IT transformation initiatives will also improve efficiency and reduce infrastructure costs across all federal government agencies. We believe IT spending in connection with the federal government’s transformation initiative will continue to be driven by:

Increased Demand for Interoperable and Robust Networks. The federal government is focused on enhancing interoperability across its disparate networks and systems in order to effectively use information to assess and respond to terrorist threats and to transform the military’s approach to fulfilling its mission. Such a transformation is necessary to ensure information superiority and foster the development and deployment of the next generation of information technology systems for network centric warfare, including C4I systems (command, control, communications, computing and intelligence systems). In addition, we believe the convergence of voice, video and data onto the desktop will increase the requirements for more robust networks. We expect these increased requirements to result in greater market opportunities and demand for our core business services.

Increased Demand for Secure Networks and Systems. In response to increased concerns over cyber-attacks and threats to the national information infrastructure, the federal government adopted the Federal Information

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Security Management Act (FISMA) in 2002. FISMA requires each federal government agency to develop, document and implement an agency-wide information security program and ensure that its systems are certified and accredited according to predetermined federal government standards and processes. According to the Office of Management and Budget, many agencies are still working to achieve compliance with FISMA and will likely require the assistance of professional services providers to achieve their information security requirements. INPUT estimates that federal spending for information security initiatives will increase from approximately $5.1 billion in federal fiscal year 2005 to approximately $7.3 billion in federal fiscal year 2010.

Increased Reliance on Professional Services Providers

The federal government has increasingly relied on professional services providers, particularly for information technology services, in connection with its transformation initiatives. INPUT projects total federal spending on contracted information technology services to grow from $12.7 billion in federal fiscal year 2005 to $16.5 billion in federal fiscal year 2010. We believe two of the primary reasons for the federal government’s increased reliance on professional services providers are:

Demand for More Innovative Solutions and Technology Services. Federal government agencies are seeking more innovative solutions and technology services in response to the increasing pressure to operate more effectively and efficiently. Because of their skills and experience, federal government agencies are using professional services providers to support transformational mandates, introduce commercial best practices and leverage commercial technological advances. In addition, professional services providers are able to leverage their recent experiences across their client base to develop more cost-effective and efficient technology solutions that comply with the latest applicable standards.

Declining Federal Government IT Workforce. According to INPUT estimates, approximately 45% of federal government IT workers will be eligible to retire by federal fiscal year 2008. Given the difficulty the federal government has experienced in recruiting and retaining skilled technology personnel, we believe the declining federal government IT workforce will necessitate the continued and increasing use of professional services providers for the federal government’s IT needs.

Evolving Procurement Practices

Federal government procurement practices and policies are expected to continue to evolve as federal agencies increasingly rely on professional services providers for information technology solutions and services. We expect the following trends to continue to shape the federal government’s procurement practices and policies:

Focus on Strength of Technical Solution and Best Value. Federal government agencies are shifting emphasis to the procurement of contracts with the strongest technical solution and overall best value for the federal government. To achieve this goal, federal agencies have adopted procurement criteria that give more consideration to companies’ technical capabilities and past performance on similar projects. These criteria also place more emphasis on a solution’s overall contribution to a federal government agency’s mission than on the proposed cost. We believe these factors benefit companies with deeper technical capabilities, relevant project experience and existing relationships with clients.

Increased Use of GWACs and Multiple Award Contracts. As part of its shift in procurement practices aimed at increasing flexibility and responsiveness, the federal government is expanding its use of GWACs and other multiple award contracts. Professional services providers compete to be pre-selected under these umbrella contracts, which outline the basic terms and conditions for the procurement of services. Once pre-selected, the companies compete only among themselves to provide services under the vehicle. These contracts provide the federal government contracting agencies with additional flexibility and responsiveness as projects can be awarded quickly to these preferred providers.

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Competitive Strengths

We believe we are well positioned to meet the rapidly evolving needs of federal government agencies for IT services and solutions because we possess the following key business strengths:

In-Depth Understanding of Client Missions

Since our founding, we have provided mission-critical services and solutions to our clients, enabling us to develop an in-depth understanding of their missions and technical needs. In addition, approximately three quarters of our employees are located at client sites, giving us valuable strategic insights into clients’ ongoing and future program requirements. Our in-depth understanding of our client missions, in conjunction with the strategic location of our employees, enables us to offer technical solutions tailored to our clients’ specific requirements and consistent with their evolving mission objectives.

Proven Ability to Win Business

In 2004, we were awarded task orders and single award contracts with a total value in excess of $300 million. Over the past three years, we won more than 90% of the competitively awarded prime engagements on which we were the incumbent and eligible for award. Our success in winning business is based, in part, on our ability to anticipate clients’ emerging requirements which enables us to develop stronger technical proposals. As a result, we are often awarded contracts based on the overall value of our solution rather than its cost.

Diverse Base of Key Prime Contract Vehicles

As a result of our business development focus on securing key contracts, we are a prime contractor on numerous multi-year GWACs that provide us the opportunity to bid on hundreds of millions of dollars of business against a discrete number of other pre-qualified companies each year. These contracts include: the U.S. Army ITES contract with a ceiling of $500 million over seven years; the U.S. Air Force NETCENTS contract with a ceiling of $9 billion over five years; the Department of Veterans Affairs Global IT Support Services (GITSS) contract with a ceiling of $3 billion over eight years; the Department of Commerce COMMITS NexGen contract with a ceiling of $8 billion over ten years; and the GSA Schedule 70. While the federal government is not obligated to make any awards under these vehicles, we believe that holding prime positions on these contract vehicles provides us an advantage as we seek to expand the level of services we provide to our clients.

Highly Skilled Employees with Security Clearances

As of June 30, 2005, we had approximately 1,450 employees, 71% of whom had formal degrees and the majority of whom hold technical certifications. In addition, approximately 68% of our employees as of June 30, 2005 held at least one federal government security clearance, and approximately 34% possessed clearance levels of Top Secret or higher. These higher clearance levels generally require sponsorship by a client, extensive background investigations and lifestyle polygraph testing, a process that can take more than one year to complete.

Experienced Management Team

Our senior management team has the skills, experience and knowledge to implement our business and operating strategies. Members of our senior management team have significant federal government sector experience, as well as considerable experience as senior operating executives of publicly traded federal government contractors. For example, our President and our Chief Operating Officer each has more than 18 years of public company experience in the federal IT services sector. The senior management team’s range of experience includes growing smaller companies, primarily through internal growth, and large companies through internal growth and acquisitions. Our senior management team has significant experience successfully identifying, acquiring and integrating acquisitions, having completed more than 30 transactions during their careers.

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Strategy

Our objective is to grow our business as a provider of information technology services and solutions to federal government agencies while improving our profitability. To achieve our objective, we intend to:

Accelerate Internal Growth

We intend to accelerate our internal growth rate by capitalizing on our current contract base, expanding services provided to our existing clients, expanding our client base and offering new, complementary services.

Capitalize on Current Contract Base. Our contract base includes four prime GWAC vehicles with a total combined budgeted ceiling value in excess of $20 billion. We intend to aggressively pursue task orders under these vehicles to maximize our revenue and strengthen our client relationships, though there is no assurance that the federal government will make awards up to the ceiling amounts or that we will be awarded any task orders under these vehicles. We have developed several internal tools that facilitate our ability to track, prioritize and win task orders under these vehicles. Combining these tools with our technical expertise, our strong past performance record and our knowledge of our clients’ needs, should position us to win additional task orders under our prime GWAC vehicles.

Expand Services Provided to Existing Clients. We intend to expand the services we provide to our current clients by leveraging our strong relationships, technical capabilities and past performance record. We believe our understanding of client missions, processes and needs, in conjunction with our full lifecycle IT offerings, positions us to capture new work from existing clients as the federal government continues to increase the volume of IT services contracted to professional services providers. Moreover, we believe our strong past performance record positions us to expand the level of services we provide to our clients as the federal government places greater emphasis on past performance as a criterion for awarding contracts.

Expand Client Base. We also plan to expand our client base into areas with significant growth opportunities by leveraging our industry reputation, long-term client relationships and diverse contract base. We anticipate that this expansion will enable us both to pursue additional higher value work and to further diversify our revenue base across the federal government. Our long-term relationships with federal government agencies, together with our GWAC vehicles, give us opportunities to win contracts with new clients within these agencies. For example, under the $500 million U.S. Army ITES vehicle, since March 2004 we have been awarded 12 task orders with a combined value in excess of $200 million. Of these task orders, six were awarded by new clients.

Offer New Complementary Services. We intend to leverage our strong reputation for providing IT services to offer new complementary services to our existing clients. We expect to focus on high value-added services that are closely aligned with our current offerings. When appropriate, we anticipate selectively identifying and hiring key personnel who possess unique client, mission or technical experience to enhance our knowledge of and expertise in the new service offering. New services in which we are currently focused on building a greater presence include systems engineering, acquisition management and program management.

Improve Operating Margins

We believe that we have significant opportunities to increase our operating margins and improve profitability by capitalizing on our corporate infrastructure investments and internally developed tools, and concentrating on high value-added prime contracts.

Capitalize on Corporate Infrastructure Investments. During the past several years we have made significant investments in our senior management and corporate infrastructure in anticipation of future revenue growth. These investments included hiring four executives with more than 90 years of combined experience with federal IT services companies, strengthening our internal controls and accounting staff in anticipation of Sarbanes-Oxley compliance and public company reporting requirements, expanding our SCIFs and moving our headquarters to a larger facility. We believe our management experience and corporate infrastructure are more typical of a

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company with a much larger revenue base than ours. We therefore anticipate that as our revenue grows, we will be able to leverage this infrastructure base and increase our operating margins.

Capitalize on Internally Developed Tools. We have invested significant resources in a variety of web-based tools that enable us to efficiently and effectively manage our business development and project management functions. We created our business development tool to allow our managers to track and manage new business opportunities in real time securely over the internet. Our proposal staff and project managers leverage our proposal development tool to create more effective new business proposals in an online, collaborative environment, regardless of their locations. In addition, our project management tool is highly modular and adaptable, enabling management to track project progress virtually instantaneously to better manage contract costs and improve profitability. We believe these highly scaleable tools will enable us to increase operating efficiency as our revenue base grows.

Concentrate on High Value-Added Prime Contracts. We expect to improve our operating margins as we continue to increase the percentage of revenue we derive from our work as a prime contractor and from engagements where contracts are awarded on a best value, rather than on a low cost, basis. As a prime contractor, we better control our staffing levels and maximize employee utilization. During the six months ended June 30, 2005 as compared to the six months ended June 30, 2004, we increased our percentage of revenue from prime contracts to approximately 64.3% from 55.7%. For the year ended December 31, 2004 as compared to year ended December 31, 2003, our percentage of revenue from prime contracts increased to approximately 59.4% from 55.4%. We expect to further increase this percentage given our recent prime contract awards. The federal government’s move toward performance-based contract awards to realize greater return on its investment has resulted in a shift to greater utilization of best value awards. We believe this shift will enable us to expand our operating margins as we are awarded more contracts of this nature. See “Relevant Industry Terms” for a more complete definition of industry terms used herein.

Pursue Strategic Acquisitions

We intend to supplement our organic growth by identifying, acquiring and integrating acquisitions that complement and broaden our existing client base and expand our primary service offerings. Our senior management team brings significant acquisition experience, having completed more than 30 transactions. Our successful acquisition of Scientific & Engineering Solutions, Inc. (SES) in December 2003 demonstrated our ability to complete and integrate an acquisition that meets our goals. In addition to strengthening our presence in the intelligence sector, the acquisition of SES has positioned us to bid on and win larger, technically more sophisticated contracts with the intelligence community.

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Services and Solutions

We provide integrated information technology services and solutions by leveraging our four core service offerings: network engineering; information assurance; systems development and integration; and enterprise systems management.

Network Engineering

We offer a full lifecycle of network engineering services to our clients from the initial analysis of the requirements and design of the network through implementation and testing of the solution, including the design of disaster recovery contingency plans. Our network engineering capabilities include the design, architecture, configuration, implementation and operation of Local Area Networks (LAN), Metropolitan Area Networks (MAN) and Wide Area Networks (WAN). Our extensive experience providing the following network engineering services for federal government clients allows us to rapidly identify potential bottlenecks, security threats and vulnerabilities, and address these potential issues with cost-effective solutions:

•      Architecture Design	•      Protocol and Topology Selection
•      Disaster Response Planning and Recovery	•      Reliability and Contingency Assessment
•      Installation, Test and Evaluation	•      Requirements Analysis
•      Network Configuration	•      Routing Design
•      Network Security Evaluation	•      Vulnerability Assessment

Information Assurance

We offer information assurance solutions to secure enterprise systems and networks, with particular expertise protecting IT infrastructures for our clients that operate in classified environments. We design, configure and deploy security architectures based on assessments of our clients’ current and future information technology needs, mission objectives and regulatory requirements, in addition to specific threats from unauthorized users. In connection with the implementation of these architectures, we help define and implement information assurance policies, procedures and guidelines to ensure effective future IT planning. Our highly skilled and accredited employees provide research and implementation of security policies, technical support and the development of comprehensive security assessment plans. We also identify potential threats and vulnerabilities and design and implement corrective action plans that employ advanced technologies, such as encryption, digital signatures and firewalls, using both commercial-off-the-shelf (COTS) and custom security and software solutions. Our information assurance services include:

•      Certification and Accreditation	•      Public Key Infrastructure (PKI) Implementation
•      Intrusion Detection System (IDS) Development	•      Risk and Threat Assessment
•      Policy and Procedures Development	•      Security Awareness and Training
•      Products Evaluation and Integration	•      Security Test and Evaluation

Systems Development and Integration

We provide a full range of systems development and integration services to our clients. Initially, we leverage our business process engineering skills to analyze the activities, roles and objectives of a proposed IT system or solution. Based on this analysis, we integrate advanced technologies with our clients’ legacy systems to improve their operational efficiency and increase our clients’ returns on IT investments. Our systems development and integration services include:

•      Database Design	•      Legacy System Integration
•      Enterprise Portal Implementation	•      Project Planning and Management
•      Integration, Test and Evaluation	•      Requirements Definition

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Enterprise Systems Management

We design, install and manage complex, mission-critical enterprise systems for our clients, increasing the reliability, security and efficiency of their IT operations while meeting stringent mission requirements. As part of our overall network operation and management services, we continually analyze and monitor enterprise system components and create systems that can adapt to rapidly changing needs. We employ a knowledge-centric service delivery assurance methodology designed to keep client mission-critical systems at peak performance. This methodology utilizes network and traffic simulations to identify potential changes in performance or possible security issues within a particular network, allowing our engineers to protect clients’ systems and data. Our network engineers are certified in the leading commercial enterprise tools and combine that knowledge with our techniques, experience and processes to deliver solutions to our clients. Our enterprise systems management services include:

•      Applications Support	•      Network Performance Evaluation
•      Infrastructure Operation and Management	•      Network Upgrade Assessment
•      Intrusion Detection and Response	•      Telecommunications Support and Help Desk

Clients

Our clients include a diverse base of federal government defense, intelligence and civilian agencies. For the six months ended June 30, 2005, Department of Defense and intelligence community clients generated approximately 73.0% of our revenue and federal civilian agency clients generated approximately 26.5%. We believe our risk from adverse budgetary changes is reduced by the mission-critical nature of the IT work we perform for our clients. We also believe our diverse client base within the federal government mitigates the impact of annual fluctuations in our clients’ budgets.

The following is a representative list of our clients for the six months ended June 30, 2005. Due to the sensitive nature of our work with the intelligence community, we are precluded from providing detailed information regarding specific intelligence agency clients.

Department of Defense

• Air National Guard

• Army National Guard—Headquarters

• Defense Intelligence Agency

• Defense Logistics Agency

• U.S. Air Force Warner Robbins, Georgia

• U.S. Air Force U.S. Transportation Command/Air Mobility Command (TRANSCOM/AMC)

• U.S. Army Communications Electronic Lifecycle Management Command (C-E LCMC)

• U.S. Army Ft. Lewis, Washington

• U.S. Army Program Executive Office for Enterprise Information Systems (PEO EIS)

• U.S. Army Program Executive Office for Simulation, Training and Instrumentation (PEO STRI)

• U.S. Army Tank-Automotive and Armaments Command (TACOM)

• U.S. Army White Sands Missile Range, New Mexico

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Various Intelligence Agencies

Federal Civilian

• Department of Commerce

• Department of Energy

• Department of State

• Department of Veterans Affairs

• General Accounting Office

• General Services Administration

• NASA—Goddard Space Flight Center

• NASA—Headquarters

• NASA—Langley Research Center

• National Nuclear Security Administration

Representative Engagements

The following engagements are representative of both our client base and the types of services we offer. In these descriptions, the contract value and period of performance indicated reflect our current expectations about completion of the engagements, including the assumption that all priced option periods are exercised, if applicable. Contract value represents the stated value of the contract at the time of the award, and as modified post-award.

U.S. Transportation Command (USTRANSCOM) C4 Systems and Support

Contract Value	Period of Performance	NCI Role
$76.7 million	06/2004 – 05/2011	Prime
$53.3 million	06/2004 – 05/2011	Prime

Objective: Provide comprehensive IT support services, under two separate task orders, to USTRANSCOM, the agency charged with delivering synchronized transportation, distribution and sustainment for the Department of Defense. During an average week, USTRANSCOM conducts more than 1,900 air missions, with 25 ships underway and 10,000 ground shipments operating in three-quarters of the world’s countries.

Solution: We have provided network engineering, information assurance, systems development and integration and enterprise systems management services to USTRANSCOM since 1992. As part of our engagement, we developed and deployed advanced communications security and intrusion detection technologies and services for which USTRANSCOM won the prestigious Frank B. Rowlett Organizational Excellence Award three times. With this award, the National Security Agency (NSA) annually recognizes one organization in the federal government for making the most significant contribution to improving national information systems security, operational information assurance readiness, or the defensive information operations posture of the federal government. USTRANSCOM is the only federal government agency to win this award three times, most recently in 2003.

In connection with our ongoing maintenance and upgrade of USTRANSCOM’s systems, we designed and implemented an enterprise-wide web portal that extends to approximately 4,500 users across the world. We also

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implemented an automated asset management system that tracks over 8,000 pieces of USTRANSCOM C4 equipment, successfully exceeding the client’s goal of 95% accuracy in inventory accounting.

U.S. Army Program Executive Office for Simulation, Training and Instrumentation (PEO STRI)

Contract Value	Period of Performance	NCI Role
$63.7 million	09/2004 - 08/2009	Prime

Objective: Provide comprehensive information technology services and solutions for the PEO STRI Chief Information Officer’s large and complex information systems. These systems support the PEO and subordinate Program Management Offices in attaining the PEO STRI worldwide mission to provide lifecycle management of interoperable training, testing and simulations solutions for soldier readiness.

Solution: In September 2004, we were awarded a one-year base task order with four one-year option periods to provide the PEO STRI CIO comprehensive IT support services including project management, network engineering, information assurance, asset acquisition and management, system maintenance, software support, sustainment and other services in support of the IT infrastructure. As part of the overall execution strategy, we are assisting our client in migrating to a 100% .net IT environment in support of the U.S. Army’s larger goal of moving to a more secure and responsive, net-centric IT services environment. We have successfully completed a significant early contract delivery with the implementation of a prototype Executive Management Dashboard. The Dashboard provides the foundation to support follow-on .net activities and was developed and delivered within 120 days of contract award, fulfilling a long-standing desire by the client.

National Nuclear Security Administration (NNSA) Information Assurance

Contract Value	Period of Performance	NCI Role
$10.0 million to date*	10/2002 – 09/2007	Subcontractor
$129.7 million	06/2000 – 05/2010	Subcontractor

* This contract does not specify a total value for the period of performance. The value stated above is based on task orders issued to date.

Objective: Provide comprehensive information assurance services for NNSA Nuclear Weapons Complex facilities. The NNSA’s mission is to maintain and enhance the safety, reliability and performance of the U.S. nuclear weapons stockpile to meet national security requirements.

Solution: We perform classified and unclassified cyber-security services for NNSA at the following facilities: Las Vegas, Nevada; Germantown, Maryland; Washington, DC; Albuquerque, New Mexico; Amarillo, Texas; and Oak Ridge, Tennessee. We help define and implement information assurance policies, procedures and guidelines to ensure effective information technology planning. Our certified engineers develop and implement security policies and integrate security technologies into new and existing systems, networks and software applications. We also provide security support for web-enabled systems and electronic messaging and development of comprehensive computer security plans. Our engineers are certified in NSA-approved network encryptors and serve as communications security custodians for keying material and Classified Removable Electronic Media. Application of our information assurance solutions and expertise has resulted in a significantly more robust IT security at NNSA.

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Army National Guard (ARNG), Air National Guard (ANG)

Contract Value	Period of Performance	NCI Role
$99.0 million	10/2003 – 09/2009	Prime

Objective: Provide complete IT operations support for the Army National Guard (ARNG) and Air National Guard (ANG). The ARNG and ANG, administered by the National Guard Bureau, maintain well-trained, well-equipped units available for prompt mobilization during war and provide assistance during national emergencies.

Solution: We have provided the ARNG and ANG with comprehensive IT infrastructure services, including local area network operations and maintenance, enterprise support and integrated data and telecommunications support, for over seven years. These services support our clients’ transformation to net-centric systems and adaptive processes that are designed to improve the ARNG’s and ANG’s efficiency in carrying out their missions. We provide support to these clients at multiple locations including Andrews Air Force Base. At these locations, we support approximately 6,000 users with a centralized help desk and by providing information assurance, quality assurance, network engineering, desktop maintenance, training and telecommunications services.

Intelligence Agency Contract

Contract Value	Period of Performance	NCI Role
$34.9 million	02/2005 – 09/2008	Prime

Objective: Provide system, software and network development and integration, full lifecycle support, information assurance and technical documentation and training development in support of the organization’s operational mission.

Solution: We support our intelligence agency client’s mission by providing systems engineering and full lifecycle IT support services to a significant number of mission related critical systems. Services include system and software design, development and implementation, as well as knowledge management and extraction on very large databases. We also leverage our information assurance expertise to provide overall policy review, evaluation and implementation, for the purposes of ensuring the integrity of our clients’ IT systems. Our enterprise solutions ensure stable and reliable architectures and operations across complex and diverse computing environments. Because of the sensitive and classified nature of the work performed for this client, we are unable to give detailed information on specific contracts.

Contracts

We have a stable and diversified contract base with approximately 80 active contracts and 155 task orders. Our contract terms typically extend from one to seven years, including option years (which may be exercised at the election of the federal government). Our top ten engagements accounted for approximately 50.2% of revenue for the six months ended June 30, 2005.

Many of our services are provided under GWAC vehicles. Our contract base includes the following prime GWAC vehicles that have an aggregate program ceiling value of $20.5 billion, excluding GSA Schedule 70.

Vehicle	Owning agency	Period of performance	Ceiling value	Number of pre-qualified contractors
NETCENTS	U.S. Air Force	09/2004 – 09/2009	$9.0 billion	8
ITES	U.S. Army	10/2003 – 10/2010	$0.5 billion	5
GITSS	Department of Veterans Affairs	10/2003 – 10/2013	$3.0 billion	10
COMMITS NexGen	Department of Commerce	02/2005 – 02/2015	$8.0 billion	55
GSA Schedule 70	General Services Administration	06/2002 – 06/2007	Not Specified	>5,000

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We believe that these contract vehicles are the preferred method of awarding work by many of our clients because they enable federal government agencies to rapidly obtain services through a streamlined process. Under these GWAC vehicles, task orders can only be awarded to a discrete number of pre-qualified companies. For instance, on the $9.0 billion ceiling NETCENTS contract, there were awards made to eight contractors in total. Revenue under our GWAC and GSA Schedule 70 Task Orders accounted for approximately 45.5% of our total revenue for the six months ended June 30, 2005. We anticipate that this percentage will increase in the future as we have the opportunity to bid on additional tasks under these contract vehicles.

The federal government’s ability to select multiple winners under multiple award contracts, as well as its right to award subsequent task orders among such multiple winners, means that there is no assurance that these multiple award contracts will result in the actual orders equal to the ceiling value, or result in any actual orders. Our failure to compete effectively in this procurement environment could reduce our revenue. While the government is permitted to spend up to the ceiling amount, there is no guarantee that it will do so, or that any particular pre-qualified contractor will receive awards under that vehicle.

Contract Backlog

As of June 30, 2005, our total contract backlog was approximately $525 million, of which approximately $63 million was funded. We define backlog as our estimate of the remaining future revenue from existing signed contracts over the remaining base contract performance period and from the option periods of those contracts, assuming the exercise of all related options. Our backlog does not include any estimate of future potential delivery orders that might be awarded under our GWAC or other multiple award contract vehicles. See “Relevant Industry Terms” for a more complete definition of industry terms used herein.

We define funded backlog as the portion of backlog for which funding currently is appropriated and obligated to us under a contract or other authorization for payment signed by an authorized purchasing agency, less the amount of revenue we have previously recognized. Our funded backlog does not represent the full potential value of our contracts, as Congress often appropriates funds for a particular program or agency on a quarterly or yearly basis, even though the contract may provide for the provision of services over a number of years.

We define unfunded backlog as the total backlog less the funded backlog. Unfunded backlog includes values for contract options that have been priced but not yet funded.

Our estimates of funded, unfunded and total backlog as of June 30, 2005 and 2004 and for our three most recent years are as follows:

As of	Funded backlog		Unfunded backlog		Total backlog
			(in millions)
June 30, 2005	$	62.7	$	461.8	$	524.5
June 30, 2004		66.8		471.8		538.6
December 31, 2004		61.5		485.3		546.8
December 31, 2003		61.9		356.1		418.0
December 31, 2002		70.7		298.8		369.5

There can be no assurance that our backlog will result in actual revenue in any particular period, or at all, or that any contract included in backlog will be profitable. There is a higher degree of risk in this regard with respect to unfunded backlog. The actual receipt and timing of any revenue is subject to various contingencies, many of which are beyond our control. The actual receipt of revenue on contracts included in backlog may never occur or may change because a program schedule could change or the program could be canceled, or a contract could be reduced, modified or terminated early. Our estimates are based on our experience under such contracts and similar contracts.

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Business Development

Our business development process is closely aligned with our overall business strategy to accelerate our organic growth while improving our operating margins. We are focused on maximizing the work we perform under our GWAC vehicles, expanding our work with existing clients, expanding our client base and offering new, complementary services. Working closely as a team, our business development and operations personnel assess market activities with the objective of identifying, qualifying and generating capture strategies for contract opportunities consistent with our overall business development focus. Business opportunities are carefully qualified and prioritized based on potential value and win probability. A senior level executive is assigned responsibility for evaluating and capturing each opportunity.

We have centralized and dedicated staff resources for proposal development, pricing, contracts administration, market research and recruiting to support these business development activities. We manage our business development activity with an internally developed, automated sales and opportunity tracking tool. The entire process is defined and quality controlled using our ISO 9001 best practices procedures. All major business development opportunities undergo frequent, disciplined reviews with our senior management. In addition, our CEO, President and COO conduct monthly reviews of all opportunities in our pipeline to validate our business development activities and ensure that resources are allocated to maximize the return on these investments.

Competition

We believe that the major competitive factors in our market are strong client relationships, a record of successful contract performance, a reputation for quality, an experienced management team, employees with a wide-range of technical expertise, security clearances and competitive pricing. We often compete against or team with divisions of large defense and information technology services contractors, including Lockheed Martin Corporation, Northrop Grumman Corporation and Science Applications International Corporation. We also compete against or team with mid-tier federal contractors with specialized capabilities, such as Anteon International Corporation, CACI International Inc and SRA International, Inc. Some of our competitors have significantly longer operating histories and more substantial resources. We expect competition in the federal government IT services sector to increase in the future.

Employees

As of June 30, 2005, we had approximately 1,450 employees, 68% of whom held at least one federal government security clearance and 34% of whom possessed clearance levels of Top Secret or higher. Our employees are located at more than 50 sites within the United States, Europe and Asia. Over 83% of our staff is located on-site with our clients, allowing us to build long-term relationships. Approximately 71% of our employees have formal degrees, and the majority of our technical staff is professionally certified in one or more of the following areas:

•      Microsoft Certified Professional (MCP) •      Microsoft Certified Systems Engineer (MCSE) •      Microsoft Certified Systems Administrator (MCSA) •      Cisco Certified Network Associate (CCNA) •      Cisco Certified Network Professional (CCNP) •      Cisco Certified Design Professional (CCDP) •      Cisco Certified Security Professional (CCSP) •      CompTIA A+ Certification •      Sun Certified Systems Administrator •      Certified Information Security System
    Professional (CISSP) •      Certified INFOSEC Professional •      COMSEC Certification •      Global Information Assurance Certification

We believe we have a professional environment that encourages advanced training to acquire industry-recognized certifications, rewards strong job performance with advancement opportunities and fosters ethical and honest conduct. Only five of our employees are represented by a labor union or subject to a collective bargaining agreement. We believe our salary structures, incentive compensation and benefit packages are competitive within our industry.

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Legal Proceedings

From time-to-time, we are involved in legal proceedings arising in the ordinary course of business. There is no litigation pending that is expected to have a material adverse effect on our financial condition and results of operations.

Facilities

We lease office facilities used in our business. Our executive offices and principal operations are located at 11730 Plaza America Drive, Reston, Virginia, where we occupy space under a lease that expires in 2013. We also lease space located in Alabama, Arizona, Colorado, Florida, Georgia, Illinois, Maryland, Ohio, Tennessee and Virginia. We have multiple high-level Sensitive Compartmented Information Facilities (SCIFs). The majority of our employees are located in facilities provided by the federal government. We do not currently own any real estate used in the performance of ongoing contracts and maintain flexibility in facility occupancy through termination and subleasing options concurrent with contract terms in many of our leases. We currently own one condominium, have a long-term rental agreement on one apartment and from time-to-time may rent other apartments that are used by our executive officers and proposal teams who are traveling for an extended period and where we believe it is cost-effective to do so. We believe our facilities meet our current needs and that additional facilities will be available as we expand in the future.

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MANAGEMENT

The following table identifies our executive officers and directors and indicates their ages and positions as of June 30, 2005.

Name	Age	Position
Charles K. Narang	63	Chairman, Chief Executive Officer and Director
Michael W. Solley	47	President and Director
Judith L. Bjornaas	42	Senior Vice President and Chief Financial Officer
Terry W. Glasgow	61	Chief Operating Officer
Linda J. Allan	57	Executive Vice President
James P. Allen	56	Director
John E. Lawler	56	Director
Paul V. Lombardi	63	Director
J. Patrick McMahon	63	Director
Daniel R. Young	71	Director

Set forth below is biographical information for our executive officers and directors. References to our offices and directorships mean offices and directorships of NCI Information Systems, Inc. for the time period prior to implementation of our holding company structure and mean offices and directorships of NCI, Inc. for all time periods thereafter.

Charles K. Narang founded NCI Information Systems, Inc. in 1989 and has served as our Chairman and Chief Executive Officer since that time. Mr. Narang has more than 30 years of experience in corporate management and the analysis of large financial and information management systems for the federal government and Fortune 100 clients. Under Mr. Narang’s direction, we have grown from one office to more than 50 work sites worldwide, and have won numerous awards and citations for our work and client service. He holds a Master’s degree in industrial engineering, a Master of Business Administration degree and is a Certified Public Accountant licensed in the Commonwealth of Virginia.

Michael W. Solley has served as our President since October 2003 and has served on our board of directors since July 2004. Prior to joining us, Mr. Solley served as Chief Executive Officer, President and director of MTC Technologies, Inc., a provider of technical and engineering services to the federal government, from 2002 to 2003. From 2000 to 2002, Mr. Solley served as President of Modern Technologies Corporation which became MTC Technologies, Inc. in 2002. Mr. Solley served from 1998 until 2000 as Executive Vice President for Nichols Research Corporation, a company that provided engineering services to, among other clients, the Department of Defense and other federal government agencies. Mr. Solley also served as President of the Government Segment for Nichols from 1999 until 2000 and as President of the Government Information Technology Segment from 1996 until 1998. Nichols merged with Computer Sciences Corporation in November 1999, and Mr. Solley continued to serve as the President of the CSC/Nichols defense business until March 2000.

Judith L. Bjornaas has served as our Chief Financial Officer since January 2004. Prior to that, she was our Vice President of Finance since joining us in 1995. Prior to joining NCI, Ms. Bjornaas was Vice President of Finance and Accounting for I-NET, Inc., a provider of network management and outsourcing services to the federal government, from 1987 through 1995. Prior to that, Ms. Bjornaas worked for Electronic Data Systems, a publicly traded provider of business and technology solutions, from 1985 to 1987 in various audit and accounting roles. She holds a Master of Business Administration degree and is a Certified Management Accountant.

Terry W. Glasgow joined us in 2004 and has served as Chief Operating Officer since May 2004. He served as our Executive Vice President of Federal Programs from January 2004 until May 2004. From 1991 through 2003, Mr. Glasgow was the Vice President/General Manager of Computer Sciences Corporation’s Army Programs business area, managing a business portfolio of over $400 million annually. Under his leadership, in

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excess of $3 billion of new business awards were captured. Mr. Glasgow also led several significant acquisitions, including the acquisition and integration of Nichols Research. Prior to 1991, Mr. Glasgow was Vice President of Ford Aerospace and Communications Army Programs in Colorado Springs. While at Ford Aerospace, Mr. Glasgow held numerous executive positions, including Controller of their Satellite Division and Vice President and Controller of their Command, Control and Communications Division.

Linda J. Allan joined us in 1991 and has served as our Executive Vice President since that time. From 1985 to 1991, Ms. Allan served in numerous roles with Automated Sciences Group, Inc., including Vice President of Corporate Programs from 1989 to 1991 and Vice President and Senior Director of the Energy and Environment Group from 1985 to 1989. Prior to joining Automated Sciences Group, Ms. Allan served in several senior management roles with MAXIMA Corporation from 1979 to 1985, Litton Bionetics, a subsidiary of Litton Industries, Inc., from 1972 to 1979 and the Microbiological Associates subsidiary of Whittaker Corporation from 1970 to 1972.

James P. Allen has served on our board of directors since October 2004. Mr. Allen served as the Senior Vice President and Chief Financial Officer of Veridian Corporation, a publicly traded federal IT services contractor, from May 2000 until its sale to General Dynamics Corporation in August 2003. Prior to Veridian, he served as CFO for both GRC International, Inc. and CACI International Inc, both publicly traded companies in the federal IT services sector.

John E. Lawler has served on our board of directors since October 2004. Mr. Lawler has been President of East/West Financial Services, Inc., a diversified financial management and business consulting firm, since November 1987. He is also co-founder, Chief Executive Officer and Chairman of Sterling Wealth Management, Inc., a registered investment advisor. From 1975 to 1982, Mr. Lawler served in top administrative positions with the U.S. House of Representatives, including serving as Chief of the Office of Finance. Mr. Lawler also currently serves as a director of Identix Incorporated, a Nasdaq listed company, and chairs its audit committee. Mr. Lawler serves on the Board of Trustees of two non-profit organizations and is a member of the American Institute of Certified Public Accountants (AICPA).

Paul V. Lombardi has served on our board of directors since October 2004. Mr. Lombardi served as President and Chief Executive Officer of DynCorp from 1997 until its sale to Computer Sciences Corporation (CSC) in 2003. Prior to his association with DynCorp, Mr. Lombardi was employed at PRC Inc. where he held a variety of executive level positions including Senior Vice President and General Manager of PRC’s Applied Management Group, which provided information technology and systems integration in the federal IT services sector.

J. Patrick McMahon has served on our board of directors since January 2005. Mr. McMahon is a Partner in the law firm of Barton, Baker, McMahon, Hildebrandt & Tolle, LLP where he practices corporate law with a primary focus on companies that offer information technology products and services to the federal government. Prior to this position, Mr. McMahon served as a legislative attorney for the Secretary of Defense where he worked with the staffs of all of the Uniformed Services and the staffs of the House and Senate Armed Services Committees. Mr. McMahon’s other government service positions included: legislative attorney for the Secretary of the Navy; Navy Judge Advocate General’s Office; Administrative Law Division; and U.S. Marine Corps officer.

Daniel R. Young has served on our board of directors since January 2005. Mr. Young is currently Managing Partner of the Turnberry Group, an advisory practice to CEOs and other senior executives. He was the Vice Chairman and Chief Executive Officer of Federal Data Corporation (FDC) before retiring after having served the company in various executive capacities for 25 years. Before joining FDC, Mr. Young was an executive with Data Transmission Company and prior to that, he held various engineering, sales and management positions at Texas Instruments, Inc. Mr. Young also served as an officer in the U.S. Navy. He is also a director of Analex Corporation, GTSI Corporation and Halifax Corporation.

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Committees of the Board of Directors

Our board of directors has established an Audit Committee, a Compensation Committee and a Nominating/Governance Committee. Our board of directors has determined that each of the members of these committees is independent under the applicable SEC and Nasdaq rules and regulations.

The Audit Committee, which consists of Messrs. Allen (chairman), Lombardi and Lawler, reviews the professional services provided by our independent registered public accounting firm, the independence of our accountants from our management, our annual and quarterly financial statements and our internal accounting controls. The Audit Committee also reviews other matters with respect to our accounting, auditing and financial reporting practices and procedures as it may find appropriate or may be brought to its attention. Our board of directors has determined that Mr. Allen, an independent director, qualifies as an “audit committee financial expert” as defined in the Securities Exchange Act of 1934, as amended.

The Compensation Committee, which consists of Messrs. Lombardi (chairman), Young and Allen, reviews executive salaries, administers our bonus, incentive compensation and stock plans and approves the salaries and other benefits of our executive officers. In addition, the Compensation Committee consults with our management regarding our benefit plans and compensation policies and practices.

The Nominating/Governance Committee, which consists of Messrs. Lawler (chairman), McMahon and Young, oversees all aspects of our corporate governance functions, makes recommendations to the board of directors regarding corporate governance issues, identifies, reviews and evaluates candidates to serve as directors and makes such other recommendations to the board regarding affairs relating to our directors.

Director Compensation

We pay each non-employee director $20,000 per year, paid quarterly, $1,000 for each board meeting attended and $1,000 for each committee meeting attended. The chairman of the Audit Committee receives an additional payment of $3,000 per year, the chairman of the Compensation Committee receives an additional payment of $1,500 per year and the chairman of the Nominating/Governance Committee receives an additional payment of $1,000 per year. In addition, each non-employee director was issued non-qualified stock options to purchase 10,526 shares of Class A common stock which vest in three annual installments beginning one year from the grant date of April 1, 2005.

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Executive Compensation

The following table sets forth information concerning the compensation we paid to our Chief Executive Officer and our four most highly-compensated executive officers other than the Chief Executive Officer for the 2004 calendar year. The bonuses were paid based on performance objectives related to revenue, profit and management performance.

	Annual compensation					Other annual compensation			All other compensation
Name and principal position	Salary		Bonus
Charles K. Narang Chairman and Chief Executive Officer	$	397,917	$	100,000			—		$	6,230	(1)
Michael W. Solley President	$	313,613	$	50,000			—		$	450	(2)
Judith L. Bjornaas Chief Financial Officer	$	216,834	$	60,000			—		$	4,398	(1)
Terry W. Glasgow Chief Operating Officer	$	221,645	$	55,000	(3)	$	6,000	(4)	$	3,814	(1)
Linda J. Allan Executive Vice President	$	176,840	$	—		$	6,000	(4)	$	359,990	(5)

(1) Represents matching payments to defined contribution plans and payments for excess life insurance coverage.

(2) Represents payments for excess life insurance coverage.

(3) Includes $25,000 signing bonus.

(4) Represents amount paid as car allowance.

(5) Includes (i) $242,585 paid in connection with the cancellation of a life insurance policy which was under a key person supplemental life program which has been terminated, (ii) $112,500 note payment (see Note 11 of our consolidated financial statements) and (iii) $4,905 for matching payments to defined contribution plans and payments for excess life insurance coverage. We have satisfied the balance of the note payable as of September 30, 2005.

Option Grants in 2004

	Individual grants
	Number of securities underlying options granted (#)(1)	Percent of total options granted to employees in fiscal year 2004 (2)		Exercise price per share		Expiration date	Potential realizable value at assumed annual rates of stock price appreciation for option term (3)
Name							0%		5%		10%
Charles K. Narang	—	—	%	$	—	—	$	—	$	—	$	—
Michael W. Solley	368,421	60.9			0.19	06/30/14		3,982,631		6,531,309		10,441,481
Judith L. Bjornaas	13,157	2.2			0.19	06/30/14		142,227		233,245		372,885
Terry W. Glasgow	39,473	6.5			10.00	04/21/14		39,473		312,541		731,481
	26,315	4.4			10.00	09/13/14		26,315		208,358		487,648
Linda J. Allan	—	—			—	—		—		—		—

(1) Each option represents the right to purchase one share of Class A common stock.

(2) During 2004, we granted employees options to purchase an aggregate of 604,716 shares of Class A common stock.

(3) There was no public market for our common stock on the grant dates of these options. Accordingly, we calculated the potential realizable value by multiplying the number of shares of our common stock subject to a given option by the assumed initial public offering price of $11.00 per share, assuming that the aggregate stock value derived from that calculation compounds at the annual rates of 0%, 5% and 10% for the entire term of the option, and subtracting from that result the total option exercise price.

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Aggregate Fiscal Year-End Option Values

The following table provides information regarding stock options held by the named executive officers as of December 31, 2004.

	Number of securities underlying unexercised options at end of fiscal year		Value of unexercised in-the-money options at end of fiscal year(1)
	Exercisable	Unexercisable	Exercisable		Unexercisable
Charles K. Narang	—	—	$	—	$	—
Michael W. Solley	—	368,421		—		3,982,631
Judith L. Bjornaas	—	52,630		—		313,935
Terry W. Glasgow	—	65,788		—		65,788
Linda J. Allan(2)	—	407,894		—		4,217,339

(1) Value is calculated by subtracting the exercise price per share from the assumed initial public offering price of $11.00 per share and multiplying the result by the number of shares subject to the option.

(2) A portion of these options will become exercisable upon the completion of the offering and we expect that some will be sold in the offering.

Executive Employment Contracts

We do not have employment agreements with any of our executives.

Employee Benefit Plans

401(k) Plan

We sponsor a defined contribution 401(k) profit sharing plan that covers all eligible full-time and part-time employees. We provide 50% matching funds for eligible participating employees, limited to the employee’s participation of up to 5% of earnings. Currently, for certain non-highly compensated employees, we provide 100% matching funds limited to the employees’ participation of up to 6% of their earnings. Our total contributions to the plan totaled $0.8 million for the six months ended June 30, 2005, $1.8 million for the year ended December 31, 2004, $1.5 million for the year ended December 31, 2003 and $1.1 million for the year ended December 31, 2002.

We are also required to contribute to a union pension plan under a Collective Bargaining Agreement with the International Association of Machinists and Aerospace Workers for eligible employees on one of our contracts. The current agreement expires December 31, 2006. For years ended December 31, 2002, 2003 and 2004, the contribution amounts were approximately $45,000, $24,000 and $19,000, respectively. For the six months ended June 30, 2005 the contribution was approximately $7,500.

For certain of our contracts, we are required to adopt a 401(k) retirement plan for eligible employees. For the years ended December 31, 2002, 2003 and 2004, the contribution amounts were approximately $75,000, $81,000 and $116,000, respectively. For the six months ended June 30, 2005, the contribution was approximately $63,000.

2005 Performance Incentive Plan

Our board of directors has adopted our 2005 Performance Incentive Plan which plan has been approved by our stockholders. The 2005 Performance Incentive Plan provides for the grant of incentive stock options and nonqualified stock options, stock appreciation rights, the grant or sale of restricted shares and other stock-based awards and incentive awards. Prior to completion of the offering and in connection with the merger and share exchange with NCI Information Systems, Inc., we will assume under the plan all issued and outstanding options to acquire stock of NCI Information Systems, Inc., and after the merger these options will be exercisable under

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the plan for 1,693,386 shares of a Class A common stock. The committee administering the plan may provide for the payment of dividend equivalents, on a current, deferred or contingent basis, on awards granted under the plan. Subject to compliance with applicable tax law rules, the committee administering the plan may also authorize participants in the plan to defer receipt or settlement of an award and may further provide that deferred payments include the payment of dividend equivalents or interest on the deferred amounts.

Options: Under the 2005 Performance Incentive Plan, we may grant options intended to qualify as incentive stock options under Section 422 of the Code and non-qualified stock options not intended to so qualify. The option exercise price of an incentive stock option may not be less than the fair market value of the Class A common stock on the date the option is granted. The plan prohibits repricing of an outstanding option, and therefore, the committee administering the plan may not, without the consent of the stockholders, lower the exercise price of an outstanding option. This limitation does not, however, prevent adjustments resulting from stock dividends, stock splits, reclassifications of stock or similar events.

Restricted Shares: Restricted shares may be granted in consideration of the performance of services or payments by a participant that may be less than the market value of our common stock on the date of grant. Each grant or sale will constitute an immediate transfer of the ownership of common stock to the participants. During the restricted period, the restricted shares will be subject to a substantial risk of forfeiture and may not be transferred by the participant.

Stock Appreciation Rights: Stock appreciation rights entitle the recipient to a payment in cash, shares of Class A common stock or both, as we determine, equal to the excess of the fair market value of our Class A common stock on the date of exercise of the stock appreciation right over the fair market value on the date the award is granted.

Other Stock Based Awards: Other stock based awards are awards other than options, restricted shares or stock appreciation rights that are denominated in, valued in whole or in part by reference to, or otherwise based on or related to our Class A common stock.

Incentive Awards: Incentive awards are performance based awards that are denominated in dollars. Both annual and long-term incentive awards may be granted. Performance goals for incentive awards and other awards under the Plan as established by the committee administering the plan. Performance goals for awards intended to constitute performance based compensation under Section 162(m) of the Code include specified levels of, or increases in, our return on equity, earnings per share, total earnings, earnings growth, return on capital, return on assets, economic value added, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, sales growth, gross margin return on investment, increase in the fair market value of the shares, share price (including but no limited to growth measures and total shareholder return), net operating profit, cash flow return on investments (which equals net cash flow divided by total capital), internal rate of return, increase in net present value or expense targets.

Shares Reserved; Plan Limits: We have reserved a total of 3,157,895 shares of our Class A common stock for issuance under the 2005 Performance Incentive Plan, subject to adjustment in the event of forfeitures, transfers of common stock to us in payment of the exercise price or withholding amounts or changes in our capital structure. On August 1^st of each year the total number of shares of Class A common stock reserved for issuance under the Plan will increase by 78,947 shares. The maximum incentive awards that may be granted to an individual participant in any one calendar year is $1.0 million for each full or partial year in the performance cycle for the award. No participant may be granted awards for more than 394,737 shares during any calendar year.

Eligibility: Officers, employees, non-employee directors and consultants of NCI and related entities may be selected by the the committee administering the plan to receive benefits under the plan. The committee administering the plan may provide for special terms for awards to participants who are foreign nationals or who are employed by us outside the United States as the board of directors may deem necessary or appropriate to accommodate differences in local law, tax policy or custom.

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Adjustments: The number of shares covered by outstanding awards, certain other provisions contained in outstanding awards, the number of shares reserved for issuance under the plan and the other share limits contained in the plan are subject to adjustment in certain situations as provided in the plan.

Administration, Termination and Amendments: The Compensation Committee of our board of directors administers and interprets the plan. The plan terminates ten years after its initial adoption by our board of directors, unless terminated earlier by our board. The plan may be amended by the board of directors so long as any amendment that increases the aggregate number of shares available, that changes the class of employees eligible for incentive stock options or that must be approved by our stockholders in order to comply with applicable law or the rules of any securities exchange or market on which shares of common stock are traded or quoted is subject to obtaining such stockholder approval.

Plan Benefits: As of October 4, 2005, there were options to purchase 1,693,386 shares of Class A common stock outstanding under the plan with a weighted average exercise price of $3.63 per share. Currently, it is not possible to determine specific awards that may be granted in the future under the plan. We are authorized to grant options covering up to an additional 1,464,509 shares of Class A common stock under our 2005 Performance Incentive Plan.

	Equity compensation plan information as of December 31, 2004
	(A)	(B)		(C)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A))
Equity compensation plans approved by security holders	1,696,017	$	3.26	—
Equity compensation plans not approved by security holders	—		—	—
Total	1,696,017	$	3.26	—

2005 Incentive Compensation Plan

We have a 2005 Incentive Compensation Plan pursuant to which we may make annual cash awards to certain senior executives and selected management personnel. The plan is effective for the period January 1, 2005 to December 31, 2005. Awards may only be made under the plan if we achieve or exceed a pre-established profit level for the effective period of the plan. For each participant in the plan, we establish target levels for performance objectives, such as revenue, profit and new business awards. Cash awards to participants will be made based on the relative degree to which the participants achieve or exceed these targets.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth, as of October 4, 2005, information with respect to the beneficial ownership of our common stock by:

• each person known to us to beneficially own more than 5% of the outstanding shares of our common stock;

• each of the selling stockholders;

• each director of NCI and each executive officer; and

• all directors and executive officers as a group.

The selling stockholders will acquire the shares of Class A common stock being offered by exercising options granted by us. The percentages shown are based on 478,946 shares of Class A common stock and 6,300,000 shares of Class B common stock outstanding as of September 2, 2005 and 5,628,946 shares of Class A common stock and 6,300,000 shares of Class B common stock to be outstanding after the offering. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to the securities. Common stock subject to options that are currently exercisable or exercisable within 60 days of October 4, 2005 are deemed to be outstanding and beneficially owned by the person holding such options or warrants. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law, and have the same address as NCI, Inc. Our address is 11730 Plaza America Drive, Reston, Virginia 20190.

	Class A common stock(1)(2)							Class B common stock(1)			Percent of vote of all classes of common stock
Name	Shares beneficially owned prior to this offering			Shares being offered	Shares beneficially owned after this offering
	Number	Percent		Number	Number	Percent		Number	Percent		Before offering		After offering
Charles K. Narang(3)	478,946	100.0	%	—	478,946	8.5	%	6,300,000	100.0	%	100.0	%	92.5	%
Michael W. Solley(4)	368,421	43.5	%	—	368,421	6.1	%	—	—		*		*
Judith L. Bjornaas(4)	13,157	2.7	%	—	13,157	*		—	—		*		*
Terry W. Glasgow	—	—		—	—	—		—	—		—		—
Linda J. Allan(4)	368,421	43.5	%	130,948	237,473	4.0	%	—	—		*		*
James P. Allen	—	—		—	—	—		—	—		—		—
James E. Lawler	—	—		—	—	—		—	—		—		—
Paul V. Lombardi	—	—		—	—	—		—	—		—		—
J. Patrick McMahon	—	—		—	—	—		—	—		—		—
Daniel R. Young	—	—		—	—	—		—	—		—		—
All executive officers and directors as a group (10 persons)(5)	1,228,945	100.0	%	130,948	1,097,997	17.6	%	6,300,000	100.0%		100.0	%	92.6	%
Estate of Norris B. Carter(6)	221,052	31.6	%	219,052	2,000	*		—	—		*		*

(1) The holders of each share of Class A common stock are entitled to one vote per share, and the holder of the shares of Class B common stock is entitled to ten votes per share.

(2) Excludes shares of Class B common stock that are convertible into shares of Class A common stock at the election of the holder.

(3) Includes 478,946 shares of Class A common stock outstanding which are held of record by the Shashi K. Narang 2004 GRAT, under Trust Agreement dated December 29, 2004, and the Chander K. Narang 2004 GRAT, under Trust Agreement dated December 29, 2004.

(4) Represents shares issuable upon exercise of outstanding stock options.

(5) Includes 749,999 shares issuable upon exercise of outstanding stock options.

(6) Mr. Carter was a former employee of NCI Information Systems, Inc. and his estate is a selling stockholder. The address for the estate is c/o Law Offices of McEvoy & Dean, 8 West Third Street, Frederick, MD 21701.

* Represents less than 1%.

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RELATED PARTY TRANSACTIONS

In January 2005, we entered into a subcontracting agreement with Net Commerce Corporation, a government contractor which provides support in the performance of certain imaging, indexing and retrieval services for the District of Columbia Department of Motor Vehicles. This relationship allows us to provide cost effective services in non-core business areas such as electronic imaging and retrieval services. Net Commerce is wholly-owned by Rajiv Narang, the son of Charles K. Narang, our founder, Chairman and Chief Executive Officer. The agreement provides for payments on a time-and-materials basis based on labor utilization for the month. For the six months ended June 30, 2005, we made payments to Net Commerce Corporation totaling $312,891. The current subcontract has a value of $409,222, which will increase by approximately $372,000 as a result of its extension from September 2005 to May 2006. We are also a party to a fixed-price purchase order with Net Commerce Corporation to provide support on our contract with the Drug Enforcement Agency, which began in January 2005 and expired in September 2005. For the six months ended June 30, 2005, we have made payments to Net Commerce Corporation on this purchase order totaling $88,125. Additionally, in June 2005, we terminated a consulting arrangement with Net Commerce Corporation pursuant to which we had paid $142,360 during 2004 and $169,650 during the six months ended June 30, 2005. During 2002, Net Commerce Corporation provided support to us on a number of short-term projects and we paid a total of $177,847 for these services in 2002. Prior to April 1, 2004, Net Commerce Corporation was owned by Charles K. Narang. Additionally, we have provided network management services to Net Commerce Corporation during the periods 2002 through 2004. We were paid approximately $13,000, $107,000 and $34,000 for the services provided in the years ending December 31, 2002, 2003, and 2004, respectively. No services have been provided in the six months ended June 30, 2005. We believe that the terms of these agreements reflect then current market conditions.

We have used private aircraft to accommodate the travel needs of our executives for our business. These aircraft are owned directly or indirectly by Michael W. Solley, our President and one of our directors. We have paid to Mr. Solley or his affiliate $7,727 in 2003, $164,820 in 2004 and $37,367 during the six months ended June 30, 2005 as reimbursement for fees and expenses associated with the business use of these aircraft. We believe that these reimbursements reflect then current market conditions. We have no formal business arrangement with Mr. Solley and the arrangement can be terminated by either party for any reason.

S Corporation Distributions

Since our initial incorporation in 1989, we have been treated for federal and state income tax purposes as an S corporation under Subchapter S of the Internal Revenue Code of 1986 and comparable state tax laws. As a result, our earnings are taxed, and will be taxed until the termination of our S corporation status, with certain exceptions, directly to our existing stockholders rather than to us, leaving our existing stockholders responsible for paying income taxes on these earnings. We have historically paid distributions to our stockholders to enable them to pay their income tax liabilities as a result of our status as an S corporation and, from time to time, to distribute previously undistributed S corporation earnings and profits. We made cash S corporation distributions to our existing stockholders of approximately $8.1 million during 2002, $4.0 million during 2003, $3.5 million during 2004 and $3.0 million in the six months ended June 30, 2005.

We will revoke our S corporation status in connection with this offering. We intend to distribute substantially all of our S corporation earnings for tax purposes through the date of revocation of S corporation status to our existing stockholders. The actual amount of the distribution of S corporation earnings to our existing stockholders will depend on the amount of our income prior to completion of the offering. We estimate the final distribution of S corporation earnings will be approximately $5 million and will occur during the fourth quarter of 2005 or the first quarter of 2006.

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DESCRIPTION OF CAPITAL STOCK

General

Our authorized capital stock consists of 37,500,000 shares of Class A common stock, $0.019 par value, and 12,500,000 shares of Class B common stock, $0.019 par value, after giving effect to a share exchange, merger and 1-for-1.9 reverse reverse stock split. See “Transactions Prior to Offering—Share Exchange, Merger and Stock Split.” Together, the Class A common stock and the Class B common stock comprise all of the authorized capital stock. Prior to this offering, there were 6,300,000 shares of Class B common stock outstanding, all of which were held of record by Charles K. Narang, our founder, Chairman and CEO, and 478,946 shares of Class A common stock outstanding, all of which were held of record by two stockholders, the Shashi K. Narang 2004 GRAT, under Trust Agreement dated December 29, 2004, and the Chander K. Narang 2004 GRAT, under Trust Agreement dated December 29, 2004.

Common Stock

Upon completion of this offering, and assuming the over-allotment option is not exercised, there will be 5,628,946 shares of Class A common stock and 6,300,000 shares of Class B common stock outstanding. All of the outstanding shares of Class B common stock will be beneficially owned by Charles K. Narang, our founder, Chairman and Chief Executive Officer. In addition, an aggregate of 1,343,386 shares of our Class A common stock will be subject to issuance upon the exercise of options granted under our 2005 Performance Incentive Plan.

Voting. Holders of Class A common stock are entitled to one vote for each share held of record, and holders of Class B common stock are entitled to ten votes for each share held of record, except with respect to any “going private transaction” (generally, a transaction in which Mr. Narang, his affiliates, his direct or indirect permitted transferees or a group, which includes Mr. Narang, such affiliates and permitted transferees, seek to buy all outstanding shares), as to which each share of Class A common stock and Class B common stock are entitled to one vote per share. The Class A common stock and the Class B common stock vote together as a single class on all matters submitted to a vote of stockholders, including the election of directors, except as required by law. Holders of our common stock do not have cumulative voting rights in the election of directors.

As a result of this offering, excluding any over-allotment shares, the percentage of the voting power of the outstanding common stock owned or controlled by Mr. Narang will decline to approximately 92.5% if the over-allotment option is not exercised and 91.5% if the over-allotment option is exercised in full; but he will continue to control all actions to be taken by the stockholders, including the election of all directors to the board of directors. See “Principal and Selling Stockholders” and “Risk Factors—Mr. Narang, our founder, Chairman and CEO, will continue to control the Company after the offering and his interests may not be aligned with yours.”

Dividends; Stock Splits. Holders of common stock are entitled to receive, when and if declared by the board of directors from time-to-time, such dividends and other distributions in cash, stock or property from our assets or funds legally available for such purposes. Each share of Class A common stock and Class B common stock is equal in respect of dividends and other distributions in cash, stock or property, except that in the case of stock dividends, only shares of Class A common stock will be distributed with respect to the Class A common stock and only shares of Class B common stock will be distributed with respect to Class B common stock. In no event will either Class A common stock or Class B common stock be split, divided or combined unless the other class is proportionately split, divided or combined. For example, as a result of our 1-for-1.9 reverse stock split with respect to the Class A common stock, we also effected a 1-for-1.9 reverse stock split with respect to the Class B common stock.

Conversion. The shares of Class A common stock are not convertible into any other series or class of securities. Each share of Class B common stock, however, is freely convertible into one share of Class A common stock at the option of the Class B stockholder. Except for transfers to certain family members or trusts

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established for the benefit of such family members, transfers to partnerships, corporations, or similar entities whose general partners, stockholders or members are, directly or indirectly, such family members, and transfers to certain charitable organizations or to one of our employee benefit plans (each, a “Permitted Transferee”), any transfer of Class B common stock will result in the automatic conversion of the transferred shares into Class A common stock. In addition, if Mr. Narang transfers shares of Class B common stock to one or more Permitted Transferees and at any time after such transfer or transfers he does not exercise voting control over the transferred shares, then all of the shares of Class B common stock which Mr. Narang has transferred to these Permitted Transferees and over which Mr. Narang does not exercise voting control will automatically convert to an equivalent number of shares of Class A common stock. Shares of Class B common stock may be pledged as collateral for indebtedness but, unless the pledgee is a Permitted Transferee, the shares will automatically convert to Class A common stock upon any transfer in foreclosure of the pledged shares. Upon Mr. Narang’s death or permanent mental incapacity, all outstanding shares of Class B common stock automatically convert to Class A common stock.

Mergers, Consolidations and Other Transactions. In the event that we enter into any consolidation, merger, combination or other transaction in which shares of common stock are exchanged for other capital stock, cash or property, then the shares of each class of common stock will be exchanged for the same amount of capital stock, cash or property, as the case may be, for which each share of any other class of common stock is exchanged. Holders of each class of common stock may receive different distributions of stock, securities, cash or property if:

• shares of common stock are exchanged for shares of capital stock, then the shares exchanged may differ only to the extent that the Class A common stock and the Class B common stock differ;

• the holders of Class A common stock receive an amount of stock, securities, cash or property per share having a value greater than or equal to the value per share into which or for which each share of Class B common stock is exchanged; or

• holders of Class A common stock and holders of Class B common stock receive an amount of stock, securities, cash or property per share in accordance with a transaction approved by the holders of a majority of Class A common stock and by the holders of a majority of Class B common stock, each voting separately as a class.

Nasdaq. We have applied to list our Class A common stock on The Nasdaq National Market under the symbol “NCIT.”

Corporate Governance Provisions of Our Certificate of Incorporation and Bylaws

Advance Notice. Our bylaws require that advance written notice of all director nominations or other business matters proposed to be brought before an annual meeting of stockholders be delivered to our Secretary at our principal executive office not later than 60 days nor more than 120 days prior to the first anniversary of the date on which we first mailed our proxy materials for the prior year’s annual meeting of stockholders. This provision may make it more difficult for stockholders to nominate or elect directors or take action opposed by our board.

Special Meetings. Our certificate of incorporation and bylaws provide that special meetings of the stockholders may be called by our Secretary at the direction of:

• the affirmative vote of a majority of the board of directors;

• the chairman of the board of directors;

• the chief executive officer; or

• the holders of shares representing a majority of the voting power of the outstanding common stock entitled to vote at such meeting of stockholders.

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No Stockholder Action by Written Consent. Our certificate of incorporation provides that stockholders entitled to take action on any matter may act solely at a meeting of stockholders duly called and held in accordance with applicable law and our certificate of incorporation and bylaws and may not act by a consent or consents in writing. Accordingly, our stockholders will not be able to take action by written consent in lieu of a meeting. This provision may have the effect of deterring hostile takeovers or delaying changes in control or management.

Indemnification of Directors and Officers. Our certificate of incorporation and bylaws provide a right to indemnification for expenses, attorney’s fees, damages, punitive damages, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by any person whether or not the indemnified liability arises or arose from any threatened, pending or completed proceeding by or in our right by reason of the fact that he or she is or was our director or officer or while our director or officer, is or was serving at our request as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, to the fullest extent permitted under the Delaware General Corporation Law. Our certificate of incorporation and bylaws also provide for the advancement of expenses to an indemnified party. Additionally, we may indemnify any employee or agent of ours to the fullest extent permitted by law. Our bylaws authorize us to take steps to ensure that all persons entitled to the indemnification are properly indemnified, including, if the board of directors so determines, purchasing and maintaining insurance.

Anti-Takeover Effects of Delaware Law and Provisions of our Certificate of Incorporation and Bylaws. We are subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law. Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction by which that person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction involving NCI and an interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior did own, 15.0% or more of our voting stock.

Our certificate of incorporation and bylaws to be effective upon the completion of this offering provide:

• that the number of directors shall be fixed exclusively by the board of directors pursuant to a resolution adopted by a majority of the board of directors;

• that directors may be removed at any time, with or without cause, by the affirmative vote of the holders of at least a majority of the voting power of the then-outstanding shares of our capital stock entitled to vote generally in the election of directors; and

• that any vacancy on the board of directors, however occurring, including a vacancy resulting from an enlargement of the board, may only be filled by vote of a majority of the directors then in office.

The limitations on the number of directors on the board of directors and the limitations on the removal of directors and filling of vacancies could have the effect of making it more difficult for a third party to acquire us, which could have the effect of discouraging a third party from attempting to do so.

Our certificate of incorporation and bylaws will also provide that:

• any action required or permitted to be taken by the stockholders at an annual meeting or special meeting of stockholders may only be taken if it is properly brought before such meeting and may not be taken by written consent in lieu of a meeting; and

• special meetings of the stockholders may only be called by the chairman of the board of directors, the chief executive officer, the board of directors acting pursuant to a resolution adopted by a majority of the whole board or the holders of shares representing a majority of the voting power of the outstanding shares of our capital stock entitled to vote at such a meeting of stockholders.

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These provisions could delay until the next stockholders’ meeting stockholder actions which are favored by the holders of a majority of our outstanding voting securities. These provisions may also discourage another person or entity from making a tender offer for our common stock, because such person or entity, even if it acquired a majority of our outstanding voting securities, would be able to take action as a stockholder (such as electing new directors or approving a merger) only at a duly called stockholders’ meeting and not by written consent.

Delaware’s corporation law generally provides that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or bylaws, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Following the share exchange and merger, our amended and restated certificate of incorporation will require the affirmative vote of the holders of at least 75% of the combined voting power of the outstanding shares of our capital stock entitled to vote to amend or repeal any of the foregoing provisions of our amended and restated certificate of incorporation. Generally, our amended and restated bylaws may be amended or repealed at any meeting of the board of directors or the stockholders, provided notice of the proposed change was given in the notice of the meeting and, in the case of a meeting of the board of directors, in a notice given at least 24 hours prior to the meeting.

Limitations on Liability of Officers and Directors. Our certificate of incorporation provides that none of the directors shall be personally liable to us or our stockholders for monetary damages for breaches of their fiduciary duty as a director, except liability for:

• any breach of the director’s duty of loyalty to us or our stockholders;

• acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

• the payment of unlawful dividends and certain other actions prohibited by Delaware General Corporation Law; and

• any transaction from which the director derived any improper personal benefits.

The effect of this provision of our certificate of incorporation is to eliminate our rights and the rights of our stockholders to recover monetary damages against a director for breach of the fiduciary duty of care as a director, including breaches resulting from negligent or grossly negligent behavior, except in the situations described above. This provision does not limit or eliminate our rights or the rights of any stockholder to seek non-monetary relief, such as an injunction or rescission in the event of a breach of a director’s duty of care.

Transfer Agent and Registrar

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

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SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of our Class A common stock in the public market could adversely affect the market price of our Class A common stock and could impair our future ability to raise capital through the sale of our equity securities.

Upon consummation of this offering, we will have 5,628,946 shares of Class A common stock outstanding, assuming no exercise of the underwriters’ option to purchase additional shares of our Class A common stock at the initial public offering price less the underwriters’ discount, and no exercise of outstanding options or warrants. Of these shares, the 5,150,000 shares to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended, except that any shares purchased by our affiliates may generally only be sold in compliance with the limitations of Rule 144 described below. An affiliate is defined under Rule 144 as a person that controls, is controlled by or is under common control with NCI, Inc. The remaining shares of Class A common stock, and all of the shares of Class B common stock, are held by existing stockholders and were issued and sold by us in reliance on exemptions from the registration requirements of the Securities Act. Upon expiration of the lock-up agreements, as described below, 6,778,946 shares of Class A common stock (including shares of Class A common stock into which shares of Class B common stock may be converted) will become eligible for sale, subject in most cases to the limitations of either Rule 144 or Rule 701 under the Securities Act.

Lock-up Agreements

All of our officers and directors have entered into lock-up agreements with the underwriters. These lock-up agreements provide that these individuals will not offer, sell, contract to sell, pledge (other than to us), hedge or otherwise dispose of our Class A common stock, Class B common stock, or any securities convertible into or exchangeable for our capital stock, owned by them for a period of 180 days after the date of this prospectus without the prior written consent of Legg Mason Wood Walker, Incorporated, as representative of the underwriters, other than certain permitted transfers. Each purchaser of shares of Class A common stock through the directed share program will be required to enter into a lock-up agreement precluding such purchaser from disposing of or hedging any such shares for a period of 30 days after the date of this prospectus without the prior written consent of Legg Mason Wood Walker, Incorporated.

Legg Mason Wood Walker, Incorporated, in its sole discretion, may release any of the securities subject to these lock-up agreements at any time without notice, but they have advised us that they have no present intent or arrangement to release any of the securities subject to lock-up agreements prior to expiration of the lock-up period. Factors Legg Mason Wood Walker, Incorporated may consider in deciding whether to release shares may include the length of time before the lock-up expires, the number of shares involved, the reason for the requested release, market conditions, the trading price of our Class A common stock, historical trading volumes of our Class A common stock and whether the person seeking the release is our officer, director or affiliate.

Rule 144

In general, under Rule 144, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares of our Class A common stock or Class B common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

• 1% of the shares of Class A common stock then outstanding, which will equal 56,290 shares immediately after this offering; or

• the average weekly trading volume of the Class A common stock on The Nasdaq National Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Sales under Rule 144 must comply with manner of sale provisions and notice requirements, and information about us must be publicly available.

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Under Rule 144(k), a person who has not been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell those shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Rule 701

Under Rule 701, persons who purchase shares upon the exercise of options granted prior to the effective date of this offering are entitled, beginning 90 days after this offering, to sell those shares in reliance on Rule 144, without complying with the holding period requirements or, in the case of sales by non-affiliates, without complying with any of the limitations and requirements of Rule 144 except manner of sale limitations. The options granted to our directors and named executive officers, covering an aggregate of 947,363 shares of Class A common stock, were granted under Rule 701.

Stock Options

The Estate of Mr. Norris B. Carter and Ms. Linda J. Allan have been issued options to purchase shares of our common stock. In May 2000, Mr. Carter received options, which after the share exchange, merger and stock split, allow him to purchase 221,052 shares of our Class A common stock at an exercise price of $0.019 per share. In May 2001, Ms. Allan received options, which after the share exchange, merger and stock split, allow her to purchase 368,421 shares of our Class A common stock at an exercise price of $0.019 per share. In addition, as of October 4, 2005, approximately 1,103,913 shares of our Class A common stock were issuable pursuant to stock options granted under our stock option plans.

We intend to file a registration statement on Form S-8 under the Securities Act following this offering, to register up to 2,807,895 shares of Class A common stock, including 1,343,386 of the 1,693,386 shares of Class A common stock subject to outstanding options as of October 4, 2005. The registration statement is expected to become effective upon filing.

69

UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement between us, the selling stockholders and the underwriters, each of the underwriters named below has severally agreed to purchase, and we and the selling stockholders have agreed to sell to each named underwriter, the number of shares set forth opposite the name of each underwriter.

Underwriters	Number of shares
Legg Mason Wood Walker, Incorporated
Raymond James & Associates, Inc.
Robert W. Baird & Co. Incorporated
Stephens Inc.
Total

The underwriting agreement provides that the obligation of the underwriters to purchase the shares included in this offering is subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all of the shares (other than those covered by the over-allotment option described below) if they purchase any of the shares.

The underwriters propose to offer some of the shares directly to the public at the public offering price set forth on the cover page of this prospectus, and some of the shares to dealers at the public offering price less a concession not to exceed $             per share. The underwriters may allow, and dealers may reallow, a concession not to exceed $             per share on sales to other dealers. If all of the shares are not sold at the initial public offering price, the representatives of the underwriters may change the public offering price and other selling terms.

We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of 772,500 additional shares of Class A common stock at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with the offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment.

We and each of our officers and directors have agreed that for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of Legg Mason Wood Walker, Incorporated, offer, sell, hedge or otherwise dispose of any shares of our Class A common stock or any securities convertible into or exchangeable for our Class A common stock held directly by them, subject to certain exceptions. Legg Mason Wood Walker, Incorporated in its sole discretion may release any of the securities subject to these lock-up agreements at any time without notice.

At our request, the underwriters have reserved an aggregate of 144,000 shares of Class A common stock for sale at the public offering price to persons who are directors, officers or employees, or who are otherwise associated with us, through a directed share program. The number of shares of Class A common stock available for sale to the general public will be reduced by the number of directed shares purchased by participants in the program. Any directed shares not purchased will be offered by the underwriters to the general public on the same basis as all other shares of Class A common stock offered.

Prior to this offering, there has been no public market for our Class A common stock. Consequently, the public offering price for the shares was determined by negotiations among us, the selling stockholders and the representatives. Among the factors considered in determining the public offering price were our record of operations, our current financial condition, our future prospects, our markets, the economic conditions in and

70

future prospects for the industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to us. We cannot assure you, however, that the prices at which the shares will sell in the public market after this offering will not be lower than the public offering price or that an active trading market in our Class A common stock will develop and continue after this offering.

We have applied to have our Class A common stock listed on The Nasdaq National Market under the symbol “NCIT.” The underwriters have undertaken to sell shares of Class A common stock to a minimum of 2,000 beneficial owners in lots of 100 or more shares to meet Nasdaq’s distribution requirements for trading.

The following table shows the underwriting discounts and commissions that we and the selling stockholders are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares of Class A common stock.

	Per Share				Total
	Without Option		With Option		Without Option		With Option
Underwriting discount and commission paid by us	$		$		$		$
Expenses payable by us
Underwriting discount and commission paid by us on behalf of the selling stockholders
Expenses payable by the selling stockholders		—		—		—		—

We estimate that the total expenses of this offering will be approximately $1,400,000, excluding underwriters’ discount and commission. We will pay all expenses associated with this offering and will pay the underwriters’ discount and commission on all shares sold in the offering, including $             with respect to the selling stockholders’ shares.

In connection with this offering, the underwriters may purchase and sell shares of Class A common stock in the open market. These transactions may include short sales, syndicate covering transactions and stabilizing transactions. Short sales involve syndicate sales of Class A common stock in excess of the number of shares to be purchased by the underwriters in this offering, which creates a syndicate short position. “Covered” short sales are sales of shares made in an amount up to the number of shares represented by an underwriter’s over-allotment option. In determining the source of shares to close out the covered syndicate short position, an underwriter will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which it may purchase shares through the over-allotment option. Transactions to close out the covered syndicate short position involve either purchases in the open market after the distribution has been completed or the exercise of the over-allotment option. The underwriters may also make “naked” short sales of shares in excess of the over-allotment option. An underwriter must close out any naked short position by purchasing shares of Class A common stock in the open market. A naked short position is more likely to be created if an underwriter is concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of bids for, or purchases of, shares in the open market while the offering is in progress.

The underwriters also may impose a penalty bid. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the underwriters repurchase shares originally sold by that syndicate member in order to cover syndicate short positions or make stabilizing purchases.

Any of these activities may have the effect of preventing or retarding a decline in the market price of the Class A common stock. They may also cause the price of the Class A common stock to be higher than the price that would otherwise exist on the open market in the absence of these transactions. The underwriters may conduct these transactions on The Nasdaq National Market, in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.

71

The underwriters do not expect sales to discretionary accounts to exceed 5% of the total number of shares of the Class A common stock offered.

Some of the underwriters have from time-to-time performed, and may in the future perform, various investment banking, financial advisory and other services for us for which they have been paid, or will be paid, customary fees. Raymond James & Associates, Inc. acted as our financial advisor in connection with our acquisition of SES in December 2003.

A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. The representatives will allocate shares to underwriters that may make Internet distributions on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell shares to online brokerage account holders.

We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.

LEGAL MATTERS

The validity of the issuance of the shares of our Class A common stock offered by this prospectus will be passed upon for us by Pillsbury Winthrop Shaw Pittman LLP. The underwriters are being represented in connection with this offering by DLA Piper Rudnick Gray Cary US LLP.

EXPERTS

The consolidated financial statements of NCI, Inc. at December 31, 2004 and 2003, and for each of the three years in the period ended December 31, 2004, and the financial statements of Scientific and Engineering Solutions, Inc. at December 23, 2003, and for the period from January 1, 2003 through December 23, 2003, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

72

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the Class A common stock to be sold in this offering. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement. For further information about us and the Class A common stock, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed. The registration statement may be inspected without charge at the principal office of the Commission in Washington, DC and copies of all or any part of it may be inspected and copied at the public reference facilities maintained by the Commission at 100 F Street, N.E., Room 1580, Washington, DC 20549. Copies of this material can also be obtained at prescribed rates by mail from:

Public Reference Section

Securities and Exchange Commission

100 F Street, N.E.

Room 1580

Washington, DC 20549

Attention: Secretary

Please call the Commission at (800) SEC-0330 for further information on the operating rules and procedures for the public reference room. In addition, the Commission maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Prior to this offering, we were not required to file reports with the Commission.

Upon completion of this offering, we will become subject to information and periodic reporting requirements of the Exchange Act, and we will file annual, quarterly and current reports, proxy statements and other information with the Commission. We intend to furnish our stockholders written annual reports containing financial statements audited by our independent auditors, and make available to our stockholders quarterly reports for the first three quarters of each year containing unaudited interim financial statements.

We will make our Commission filings available to the public at no cost over the Internet at www.nciinc.com. Amendments to these filings will be posted to our website as soon as reasonably practicable after filing with the Commission. You may also request copies of any exhibits to the registration statement. Please direct your request to:

NCI, Inc.

11730 Plaza America Drive

Reston, Virginia 20190

Attention: Investor Relations

(703) 707-6900

73

INDEX TO FINANCIAL STATEMENTS

NCI, INC.

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets
As of December 31, 2003 and 2004, and June 30, 2005 (unaudited) and pro forma as of June 30, 2005 (unaudited)	F-3
Consolidated Statements of Income
For the years ended December 31, 2002, 2003 and 2004, and the six months ended June 30, 2004 and 2005 (unaudited)	F-4
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2002, 2003 and 2004, and the six months ended June 30, 2005 (unaudited)	F-5
Consolidated Statements of Cash Flows
For the years ended December 31, 2002, 2003 and 2004, and the six months ended June 30, 2004 and 2005 (unaudited)	F-6
Notes to Consolidated Financial Statements	F-7
SCIENTIFIC AND ENGINEERING SOLUTIONS, INC.
Report of Independent Registered Public Accounting Firm	F-26
Balance Sheet
As of December 23, 2003	F-27
Statement of Income
For the period January 1, 2003 through December 23, 2003	F-28
Statement of Changes in Stockholder’s Equity
For the period January 1, 2003 through December 23, 2003	F-29
Statement of Cash Flows
For the period January 1, 2003 through December 23, 2003	F-30
Notes to Financial Statements	F-31

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

NCI, Inc.

We have audited the accompanying consolidated balance sheets of NCI, Inc. (the Company) as of December 31, 2003 and 2004, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NCI, Inc. at December 31, 2003 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

McLean, VA

March 1, 2005, except as to the Reincorporation Transaction and the stock split described in Note 1, as to which the date is October 3, 2005.

F-2

NCI, Inc.

Consolidated Balance Sheets

(in thousands, except share amounts)

	As of December 31,						As of June 30, 2005
	2003			2004			Actual			Pro forma
							(unaudited)
										(Note 2)
Assets
Current assets:
Cash and cash equivalents	$	1,340		$	40		$	13		$	13
Accounts receivable—net		33,162			38,458			38,932			38,932
Deferred tax asset		—			—			—			2,430
Prepaid expenses and other current assets		1,140			381			375			375
Total current assets		35,642			38,879			39,320			41,750
Property and equipment—net		7,001			6,299			6,632			6,632
Other assets		1,362			1,093			1,099			1,099
Deferred tax asset—net		—			—			—			337
Intangible assets—net		3,644			2,391			1,852			1,852
Goodwill		14,343			15,508			17,427			17,427
Total assets	$	61,992		$	64,170		$	66,330		$	69,097
Liabilities and stockholders’ equity
Current liabilities:
Line of credit	$	14,951		$	12,440		$	11,731		$	14,731
Accounts payable		5,536			7,086			8,230			8,230
Accrued salaries and benefits		7,453			8,373			9,501			9,501
Other accrued expenses		2,161			3,144			3,385			3,385
Current portion of capital lease obligation		117			242			261			261
Current portion of notes payable		2,800			2,800			2,800			17,800
Due to employee, current portion		132			141			109			109
Total current liabilities		33,150			34,226			36,017			54,017
Capital lease obligation, less current portion		275			388			301			301
Long-term notes payable, less current portion		11,200			8,633			7,233			7,233
Deferred rent		4,973			4,843			4,678			4,678
Due to employee, less current portion		178			37			—			—
Total liabilities		49,776			48,127			48,229			66,229
Stockholders’ equity:
Class A common stock, $0.019 par value—37,500,000 shares authorized; 478,946 shares issued and outstanding (Note 6)		9			9			9			9
Class B common stock, $0.019 par value—12,500,000 shares authorized; 6,300,000 shares issued and outstanding (Note 6)		120			120			120			120
Additional paid-in capital		3,107			5,508			5,423			5,423
Deferred compensation		(1,471	)		(2,693	)		(2,235	)		(2,235	)
Retained earnings (deficit)		10,451			13,099			14,784			(449	)
Total stockholders’ equity		12,216			16,043			18,101			2,868
Total liabilities and stockholders’ equity	$	61,992		$	64,170		$	66,330		$	69,097

See Notes to Consolidated Financial Statements.

F-3

NCI, Inc.

Consolidated Statements of Income

(in thousands, except per share amounts)

	Year ended December 31,									Six months ended June 30,
	2002			2003			2004			2004			2005
										(unaudited)
Revenue	$	138,165		$	136,421		$	171,253		$	81,227		$	93,875
Operating costs and expenses:
Cost of revenue		115,728			113,521			144,146			68,229			79,671
General and administrative expense		12,166			14,524			16,363			8,037			7,239
Depreciation and amortization		1,600			1,576			1,741			886			801
Amortization of intangible assets		20			16			1,252			616			539
Total operating costs and expenses		129,514			129,637			163,502			77,768			88,250
Operating income		8,651			6,784			7,751			3,459			5,625
Interest income		21			15			26			6			26
Interest expense		(826	)		(439	)		(1,373	)		(721	)		(768	)
Income before taxes		7,846			6,360			6,404			2,744			4,883
Income taxes		242			262			276			118			220
Net income	$	7,604		$	6,098		$	6,128		$	2,626		$	4,663
Earnings per common and common equivalent share:
Basic:
Weighted average shares outstanding		6,779			6,779			6,779			6,779			6,779
Net income per share	$	1.12		$	0.90		$	0.90		$	0.39		$	0.69
Diluted:
Weighted average shares and equivalent shares outstanding		7,350			7,347			7,443			7,351			7,571
Net income per share	$	1.03		$	0.83		$	0.82		$	0.36		$	0.62
Unaudited pro forma income tax information:
Income before taxes	$	7,846		$	6,360		$	6,404		$	2,744		$	4,883
Pro forma provision for income taxes		3,044			2,448			2,595			1,112			1,939
Pro forma net income	$	4,802		$	3,912		$	3,809		$	1,632		$	2,944
Unaudited pro forma earnings per common and common equivalent share:
Basic:
Weighted average shares outstanding		6,779			6,779			6,779			6,779			6,779
Pro forma net income per share	$	0.71		$	0.58		$	0.56		$	0.24		$	0.43
Diluted:
Weighted average shares and equivalent shares outstanding		7,140			7,143			7,158			7,134			7,228
Pro forma net income per share	$	0.67		$	0.55		$	0.53		$	0.23		$	0.41
Unaudited pro forma earnings per common and common equivalent share, as adjusted for distribution (Note 2):
Basic:
Weighted average shares outstanding, as adjusted								8,870						8,870
Pro forma net income per share, as adjusted							$	0.43					$	0.33
Diluted:
Weighted average shares and equivalent shares outstanding, as adjusted								9,249						9,319
Pro forma net income per share, as adjusted							$	0.41					$	0.32

See Notes to Consolidated Financial Statements.

F-4

NCI, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands)

	Class A common stock			Class B common stock			Additional paid-in capital			Deferred compensation			Retained earnings			Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2001	479	$	9	6,300	$	120	$	1,348		$	—		$	8,877		$	10,354
Net income	—		—	—		—		—			—			7,604			7,604
Distributions to stockholders	—		—	—		—		—			—			(8,081	)		(8,081	)
Issuance of stock options	—		—	—		—		—			—			—			—
Amortization of deferred compensation	—		—	—		—		—			—			—			—
Balance at December 31, 2002	479		9	6,300		120		1,348			—			8,400			9,877
Net income	—		—	—		—		—			—			6,098			6,098
Distributions to stockholders	—		—	—		—		—			—			(4,047	)		(4,047	)
Issuance of stock options	—		—	—		—		1,759			(1,759	)		—			—
Amortization of deferred compensation	—		—	—		—		—			288			—			288
Balance at December 31, 2003	479		9	6,300		120		3,107			(1,471	)		10,451			12,216
Net income	—		—	—		—		—			—			6,128			6,128
Distributions to stockholders	—		—	—		—		—			—			(3,480	)		(3,480	)
Issuance of stock options	—		—	—		—		2,401			(2,401	)		—			—
Amortization of deferred compensation	—		—	—		—		—			1,179			—			1,179
Balance at December 31, 2004	479		9	6,300		120		5,508			(2,693	)		13,099			16,043
Net income (unaudited)	—		—	—		—		—			—			4,663			4,663
Distributions to stockholders (unaudited)	—		—	—		—		—			—			(2,978	)		(2,978	)
Issuance of stock options (unaudited)	—		—	—		—		(85	)		85			—			—
Amortization of deferred compensation (unaudited)	—		—	—		—		—			373			—			373
Balance at June 30, 2005 (unaudited)	479	$	9	6,300	$	120	$	5,423		$	(2,235	)	$	14,784		$	18,101

See Notes to Consolidated Financial Statements.

F-5

NCI, Inc.

Consolidated Statements of Cash Flows

(in thousands)

	Year ended December 31,									Six months ended June 30,
	2002			2003			2004			2004			2005
										(unaudited)
Cash flows from operating activities
Net income	$	7,604		$	6,098		$	6,128		$	2,626		$	4,663
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,620			1,592			2,993			1,502			1,340
Cash surrender value of life insurance		(98	)		(70	)		(70	)		(68	)		(334	)
Loss (gain) on sale and disposal of property and equipment		4			(1	)		8			8			1
Non-cash stock compensation expense		—			288			1,179			109			373
Changes in operating assets and liabilities, net of effect of business combination:
Accounts receivable, net		838			3,712			(5,297	)		(2,967	)		(474	)
Prepaid expenses and other assets		218			(875	)		1,099			138			345
Accounts payable		(704	)		514			1,550			911			1,144
Accrued expenses/other current liabilities		551			(3,746	)		1,848			1,041			1,369
Deferred rent		—			4,964			(74	)		91			(165	)
Due to employee		(87	)		(123	)		(132	)		(65	)		(69	)
Net cash provided by operating activities		9,946			12,353			9,232			3,326			8,193
Cash flows from investing activities
Purchase of property and equipment		(1,095	)		(5,319	)		(1,055	)		(442	)		(1,151	)
Proceeds from sale of property and equipment		67			3			—			—			4
Cash paid for purchase of SES		—			(19,181	)		(1,157	)		(143	)		(1,919	)
Note receivable from stockholder		3,622			—			—			—			—
Net cash provided by (used in) investing activities		2,594			(24,497	)		(2,212	)		(585	)		(3,066	)
Cash flows from financing activities
(Payments on) proceeds from line of credit, net		(4,808	)		3,227			(2,511	)		559			(708	)
Proceeds from (payments on) term loan		—			14,000			(2,567	)		(1,400	)		(1,400	)
(Principal payments under) additions to capital lease obligation		(79	)		(12	)		238			51			(68	)
Distributions to stockholders		(8,081	)		(4,047	)		(3,480	)		(2,343	)		(2,978	)
Net cash (used in) provided by financing activities		(12,968	)		13,168			(8,320	)		(3,133	)		(5,154	)
Net change in cash and cash equivalents		(428	)		1,024			(1,300	)		(392	)		(27	)
Cash and cash equivalents, beginning of year		744			316			1,340			1,340			40
Cash and cash equivalents, end of year	$	316		$	1,340		$	40		$	948		$	13
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	954		$	598		$	1,367		$	781		$	769
Income taxes	$	242		$	262		$	276		$	161		$	191

See Notes to Consolidated Financial Statements.

F-6

NCI, Inc.

Notes to Consolidated Financial Statements

December 31, 2004

1. Organization and Business Overview

Reincorporation Transaction

NCI, Inc. (the Company or NCI) was incorporated in Delaware in July 2005.

In September 2005, we completed a merger and share exchange as a result of which NCI Information Systems, Inc., a Virginia corporation, became our wholly-owned subsidiary. Pursuant to a share exchange agreement, the majority stockholder of NCI Information Systems, Inc. transferred all of his shares of common stock of NCI Information Systems, Inc. to our wholly-owned subsidiary, NCI Acquisition, LLC, a Virginia limited liability company. The majority stockholder received one share of Class B common stock in exchange for each share he transferred. NCI Information Systems, Inc. then merged with our wholly-owned subsidiary, with NCI Information Systems, Inc. surviving the merger. As a result of this merger, each issued and outstanding share of common stock of NCI Information Systems, Inc., other than the shares transferred to our wholly-owned subsidiary by the majority stockholder, was converted into one share of our Class A common stock. In connection with this merger, NCI assumed all of the issued and outstanding options to acquire capital stock of NCI Information Systems, Inc., and these options became exercisable shares of our Class A common stock. As this transaction represented a merger of entities under common control, the transaction was accounted for similar to a pooling-of-interests whereby all financial information prior to the transactions has been restated as if the combined entity existed for the periods presented. Refer to Note 6 for additional description of the capital stock transactions associated with this transaction. The above transactions are collectively referred to herein as the “Reincorporation Transaction.”

Business Overview

NCI is a provider of information technology services and solutions to federal government agencies. The Company’s focus is on designing, implementing, maintaining and upgrading secure information technology (IT) systems and networks by leveraging the Company’s skills across four core service offerings: network engineering; information assurance; systems development and integration; and enterprise systems management. The Company provides these services to defense, intelligence and federal civilian agencies. Substantially all of the Company’s revenue was derived from contracts with the federal government, directly as a prime contractor or as a subcontractor. The Company conducts business domestically in 22 states and the District of Columbia. In addition, the Company conducts business internationally in support of federal government contracts.

The Company’s operations are subject to certain risks and uncertainties including, among others, dependence on contracts with federal government agencies, dependence on significant clients, existence of contracts with fixed pricing, dependence on subcontractors to fulfill contractual obligations, current and potential competitors with greater resources, dependence on key management personnel, ability to recruit and retain qualified employees, and uncertainty of future profitability and possible fluctuations in financial results.

2. Summary of Significant Accounting Policies

Interim Results

The accompanying unaudited condensed consolidated financial statements as of and for the six months ended June 30, 2004 and 2005, have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. As a result, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. In the opinion of management, the accompanying unaudited interim consolidated

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Interim Results (continued)

financial statements reflect all necessary adjustments and reclassifications (all of which are of a normal, recurring nature) that are necessary for fair presentation for the periods presented. The information disclosed in the notes to the financial statements for these periods is unaudited. It is suggested that these unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements included herein. The current period’s results of operations are not necessarily indicative of results that may be achieved for any future period.

Unaudited Pro Forma Financial Information

The pro forma consolidated balance sheet data as of June 30, 2005 gives effect to expected deferred tax assets created as a result of the planned termination of the Company’s S corporation status (see Note 13) and the stockholder distributions and the borrowing under the new time loan (see Note 15) as though they had occurred on June 30, 2005.

Major Clients

The Company earned approximately 99% of its revenue from the federal government for the years ended December 31, 2002, 2003 and 2004, respectively. Revenue by client sector for each of the three years ended December 31 was as follows:

	Year ended December 31,
	2002		%		2003		%		2004		%
	(dollars in thousands)
Department of Defense and intelligence agencies	$	85,812	62.1	%	$	83,871	61.5	%	$	119,755	69.9	%
Federal civilian agencies	$	50,976	36.9	%	$	51,567	37.8	%	$	50,596	29.6	%
Commercial and state & local entities	$	1,377	1.0	%	$	983	0.7	%	$	902	0.5	%

Basis of Consolidation

The consolidated financial statements include the accounts of wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts for prior years have been reclassified to conform with the current presentation.

Revenue Recognition

The Company generates its revenue from three different types of contractual arrangements: time-and-materials contracts; cost-plus contracts; and fixed-price contracts.

Revenue on time-and-material contracts is recognized based on negotiated billable rates multiplied by the number of hours delivered plus allowable expenses incurred. The Company considers fixed fees under cost-plus contracts to be earned in proportion to the allowable costs incurred in performance of the contract. Revenue for performance based fee incentives is recognized as earned.

The Company has three basic categories of fixed-price contracts: fixed unit price; fixed-price level-of-effort; and fixed-price completion contracts. Revenue on fixed unit price contracts, where specified units are delivered

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Revenue Recognition (continued)

under service arrangements, is recognized as units are delivered based on the specified price per unit. Revenue for fixed-price level-of-effort contracts is recognized based upon the number of units of labor actually delivered multiplied by the negotiated rate for each unit of labor. Revenue on fixed-price completion contracts is recognized on the percentage of completion method using costs incurred in relation to total estimated costs.

Contract accounting requires judgment relative to assessing risks, estimating contract revenue and costs, and making assumptions for schedule and technical issues. Due to the size and nature of many of the Company’s contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables. Contract costs included material, labor and subcontracting costs, as well as an allocation of allowable indirect costs. Assumptions have to be made regarding the length of time to complete the contract because costs also include expected increases in wages and prices for materials. For contract change orders, claims or similar items, the Company applies judgment in estimating the amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is considered probable. Estimates of award fees for certain contracts are also a significant factor in estimating revenue and profit rates based on actual and anticipated awards. Anticipated losses on contracts are recognized at the time they become known.

Cash and Cash Equivalents

The Company considers cash on deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.

Cash Surrender Value of Life Insurance

The Company had a life insurance policy on its majority stockholder with a total face amount of approximately $1.0 million as of December 31, 2004, of which the Company was the beneficiary. Subsequent to year-end, the policy was transferred to the majority stockholder. As of December 31, 2003, the Company had life insurance policies on its majority stockholder and other officers with a total face value of approximately $2.4 million. During 2004, policies with face values of approximately $1.4 million were either cancelled or transferred to the covered individuals. During 2003, policies with face values of approximately $2.5 million were either cancelled or transferred to the covered individuals. As of December 31, 2003 and 2004, the policies were recorded at their cash surrender value, which approximates fair value.

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Property and Equipment

Property, equipment and leasehold improvements are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives, which range from two to seven years for property and equipment, over the shorter of the lease term or the useful lives of the leasehold or leasehold improvements and over 30 years for real property. The following table details the net property and equipment at the end of each period:

	As of December 31,				As of June 30, 2005
	2003		2004
					(unaudited)
	(in thousands)
Property and equipment
Furniture and equipment	$	8,554	$	9,488	$	9,964
Leasehold improvements		3,907		3,950		4,579
Real property		558		549		549
		13,019		13,987		15,092
Less: Accumulated depreciation and amortization		6,018		7,688		8,460
Net property and equipment	$	7,001	$	6,299	$	6,632

Goodwill

Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets (SFAS No. 142), requires that goodwill no longer be amortized against earnings, but instead reviewed periodically for impairment. Annually, on October 1, the Company performs a fair value analysis of its two reporting units using valuation techniques prescribed in SFAS No. 142. The Company had two reporting units in 2004, NCI and Scientific and Engineering Solutions, Inc. (SES), a wholly-owned subsidiary. For 2005, the Company has one reporting unit as SES was fully integrated into NCI. Based on the analysis performed, the Company determined that no impairment existed as of October 1, 2003 or 2004.

Long-Lived Assets (Excluding Goodwill)

In accordance with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets, a review of long-lived assets for impairment is performed when events or changes in circumstances indicate the carrying value of such assets may not be recoverable. If an indication of impairment is present, the Company compares the estimated undiscounted future cash flows to be generated by the asset to its carrying amount. If the undiscounted future cash flows are less than the carrying amount of the asset, the Company records an impairment loss equal to the excess of the asset’s carrying amount over its fair value. Any write-downs are treated as permanent reductions in the carrying amount of the assets. The Company believes there were no indications of impairment of such assets during 2003 or 2004.

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Intangible Assets

Intangible assets consisted of the following:

	As of December 31,				As of June 30, 2005
	2003		2004
					(unaudited)
	(in thousands)
Copyrights	$	100	$	100	$	100
Less: Accumulated amortization		100		100		100
		—		—		—
Contract and client relationships		2,260		2,260		2,260
Less: Accumulated amortization		6		792		1,098
		2,254		1,468		1,162
Non-compete agreements		1,400		1,400		1,400
Less: Accumulated amortization		10		477		710
		1,390		923		690
Total	$	3,644	$	2,391	$	1,852

Contract and client relationships are being amortized over five years based on projected cash flows, which are proportionate to acquired backlog. Non-compete agreements are being amortized over 36 months based on their estimated useful lives. Amortization expense for the year ended December 31, 2004 was approximately $1.3 million. Future amortization expense related to intangible assets is expected to be as follows:

For the year ending December 31,	(in thousands)
2005	$	1,053
2006		957
2007		354
2008		27

Income Taxes

The Company is treated, for income tax purposes, as an S corporation under Subchapter S of the Internal Revenue Code (the Code) and under relevant sections of the tax law of the various states that conform to the Code. As an S corporation, the net income or loss of the entity is reportable on the personal tax return of the majority stockholder. Consequently, no provision for federal income taxes has been reflected in the accompanying financial statements.

A current provision for state income taxes of approximately $242,000, $262,000 and $276,000 for the years ended December 31, 2002, 2003 and 2004, respectively, and $118,000 and $220,000 for the six months ended June 30, 2004 and 2005, respectively, was recorded for states that do not recognize the S corporation status.

The unaudited pro forma provision for income tax information on the accompanying statements of income for the years ended December 31, 2002, 2003 and 2004 and the six months ended June 30, 2004 and 2005 show the approximate federal and state income taxes (by applying statutory rates) that would have been incurred had

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Income Taxes (continued)

the Company been taxed as a C corporation in those periods, and thus subject to federal and certain state income taxes. The unaudited pro forma provision for income tax information included in the statements of income and Note 13 is presented in accordance with SFAS No. 109, Accounting for Income Taxes (SFAS No. 109).

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Estimated fair values of our financial instruments were determined by management using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The carrying values of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable, accrued expenses and bank loans approximate their fair values.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2004. Although the Company is not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

Derivative Financial Instruments

The Company uses derivative financial instruments to manage its exposure to fluctuations in interest rates on its line of credit. None of the derivatives held by the Company are accounted for as hedges and all are recorded as either assets or liabilities in the consolidated balance sheet, and periodically adjusted to fair value. Adjustments to reflect the changes in the fair values of the derivatives are reflected in earnings. The Company does not hold or issue derivative financial instruments for trading purposes.

Earnings Per Share

SFAS No. 128, Earnings Per Share, requires presentation of basic and diluted earnings per share. Basic earnings per share exclude dilution and are computed by dividing net income by the weighted average number of common shares outstanding for the period. The computation of earnings per share presented is for both Class A and Class B common stock.

Diluted earnings per share reflect potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earnings per share include the incremental effect of stock options calculated using the treasury stock method.

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Earnings Per Share (continued)

The following details the historical and pro forma computation of basic and diluted earnings per common share (Class A and Class B) for the years ended December 31, 2002, 2003 and 2004, respectively, and for the six months ended June 30, 2004 and 2005, respectively:

	Year ended December 31,						Six months ended June 30,
	2002		2003		2004		2004		2005
							(unaudited)
	(in thousands, except per share data)
Historical net income	$	7,604	$	6,098	$	6,128	$	2,626	$	4,663
Weighted average number of basic shares outstanding during the period		6,779		6,779		6,779		6,779		6,779
Dilutive effect of stock options after application of treasury stock method		571		568		664		572		792
Weighted average number of diluted shares outstanding during the period		7,350		7,347		7,443		7,351		7,571
Basic earnings per share	$	1.12	$	0.90	$	0.90	$	0.39	$	0.69
Diluted earnings per share	$	1.03	$	0.83	$	0.82	$	0.36	$	0.62
Pro forma net income	$	4,802	$	3,912	$	3,809	$	1,632	$	2,944
Weighted average number of basic shares outstanding during the period		6,779		6,779		6,779		6,779		6,779
Dilutive effect of stock options after application of treasury stock method		361		364		379		355		449
Weighted average number of diluted shares outstanding during the period		7,140		7,143		7,158		7,134		7,228
Pro forma basic earnings per share	$	0.71	$	0.58	$	0.56	$	0.24	$	0.43
Pro forma diluted earnings per share	$	0.67	$	0.55	$	0.53	$	0.23	$	0.41

As discussed in Note 15, in connection with the Company’s proposed initial public offering, a distribution will be made to the stockholders of the Company. The following details pro forma net income per share for the year ended December 31, 2004 and the six months ended June 30, 2005 as adjusted for the estimated number of shares (2,090,909) that the Company would need to issue (at an assumed initial public offering price of $11.00 per share, which is the midpoint of the proposed initial public offering price range) to fund distributions of approximately $23 million to the Company’s existing stockholders, $18 million of which was distributed in July 2005 and $5 million of which represents an estimate of additional funds which may be distributed sometime during the fourth quarter of 2005 or the first quarter of 2006.

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Earnings Per Share (continued)

	Year ended December 31, 2004		Six months ended June 30, 2005
	(unaudited)
	(in thousands, except per share data)
Pro forma net income	$	3,809	$	2,944
Weighted average number of basic shares outstanding during the period		8,870		8,870
Dilutive effect of stock options after application of treasury stock method		379		449
Weighted average number of diluted shares outstanding during the period		9,249		9,319
Pro forma as adjusted, basic earnings per share	$	0.43	$	0.33
Pro forma as adjusted, diluted earnings per share	$	0.41	$	0.32

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25) using the intrinsic-value method. Under this method, the Company recognized approximately $373,000 and $109,000 as of June 30, 2004 and 2005, respectively, and $288,000 and $1.2 million in compensation expense for stock options issued during 2003 and 2004, respectively. There was no stock-based compensation expense incurred for the year ended December 31, 2002. The Company issued non-qualified stock options to employees at various times during 2003 and 2004 with vesting periods ranging from zero to seven years and any related expense is being amortized over the applicable vesting periods.

SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), as amended, requires the disclosure of pro forma effects on net income computed as if the Company accounted for the stock options under the fair value method. For the options issued during 2003 and 2004, the fair value of the options was estimated using the minimum value method assuming a weighted average risk free interest rate of 3.4% and 3.7%, respectively, with no dividends expected to be paid over the expected life of five to seven years. The pro forma effect on net income is shown in the following table:

	Year ended December 31,						Six months ended June 30,
	2003			2004			2004			2005
	(in thousands)
Net income as reported	$	6,098		$	6,128		$	2,626		$	4,663
Add: Stock-based employee compensation expense as reported under APB No. 25 for all awards, net of related tax effects		288			1,179			109			373
Deduct: Stock-based compensation expense determined under SFAS No. 123 for all awards, net of related tax effects		(382	)		(1,283	)		(155	)		(418	)
Pro forma net income	$	6,004		$	6,024		$	2,580		$	4,618

New Accounting Pronouncements to be Adopted

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123(R), which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB No. 25, and amends SFAS No. 95, Statement of Cash Flows.

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

New Accounting Pronouncements to be Adopted (continued)

SFAS No. 123(R) will be effective for non-public companies in the first fiscal year beginning after December 15, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. The Company plans to adopt SFAS No. 123(R) effective January 1, 2006. SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values (i.e., pro forma disclosure is no longer an alternative to financial statement recognition). Non-public entities that did not use the fair-value-based method of accounting are required to apply the prospective transition method of accounting under SFAS 123(R) as of the required effective date. Under the prospective method, a non-public entity accounting for its equity-based awards using the intrinsic-value method under APB No. 25, would continue to apply APB No. 25 in future periods to awards outstanding at the date they adopt SFAS 123(R). All awards granted, modified or settled after the date of adoption would be accounted for using the measurement, recognition and attribution provisions of SFAS 123(R). Although the adoption of SFAS 123(R) is expected to affect the measurement of share-based equity awards to employees after adoption, management does not expect the adoption would have a material effect of the Company’s consolidated results of operations, cash flows or financial position. Information about the fair value of stock options and the proforma impact on the Company’s net earnings for the years ended December 31, 2003 and 2004, and for the six months ended June 30, 2004 and 2005 can be found in the Stock-Based Compensation section of Note 2.

3. Accounts Receivable

Accounts receivable consist of billed and unbilled amounts at December 31, 2003 and 2004 and June 30, 2005 as follows:

	As of December 31,				As of June 30, 2005
	2003		2004
					(unaudited)
	(in thousands)
Billed receivables:
Billed receivables	$	20,367	$	20,045	$	22,437
Billable receivables at end of period		10,758		17,824		16,036
Total billed receivables		31,125		37,869		38,473
Total unbilled receivables		2,237		1,064		1,059
Total accounts receivable		33,362		38,933		39,532
Less: Allowance for doubtful accounts		200		475		600
Total accounts receivable, net	$	33,162	$	38,458	$	38,932

Unbilled receivables primarily consist of fees withheld by the client in accordance with the contract terms and conditions that will be billed upon contract completion and approval of indirect rates.

4. Loan and Security Agreement

On December 23, 2003, the Company entered into a Loan and Security Agreement that provides for a $30.0 million revolving note and a $14.0 million term note.

The revolving note provides a line of credit of up to $30.0 million limited to a percentage of the Company’s eligible receivables as defined in the line of credit agreement. As such, as of December 31, 2002, 2003 and 2004

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

4. Loan and Security Agreement (continued)

and June 30, 2005 approximately $24.6 million, $25.3 million, $26.8 million and $27.0 million, respectively, was available on the line of credit. The unpaid principal balance of the line of credit bears interest based on the LIBOR plus applicable margins.

As of December 31, 2002, 2003 and 2004 and June 30, 2005, the interest rate was 2.9%, 3.7%, 4.5% and 5.3%, respectively. The outstanding borrowings are collateralized by a security interest in substantially all assets of the Company. The bank also requires a direct assignment of all the Company’s contracts at the bank’s discretion. The line of credit is renewable on December 31, 2006. For the years ended December 31, 2002, 2003 and 2004 and for the six months ended June 30, 2004 and 2005, the interest expense was approximately $501,000, $303,000, $584,000, $320,000 and $390,000, respectively.

As of December 31, 2003 and 2004 and June 30, 2005, the term note had an outstanding balance of $14.0 million, $11.4 million and $10.0 million, respectively. The term note balance will be amortized over 60 months commencing February 1, 2004 in consecutive equal monthly installments of $233,000 plus applicable interest with the balance of $5.6 million due on December 31, 2006. The note bears interest based on LIBOR plus applicable margins. The interest rate at December 31, 2003 and 2004 and June 30, 2005 was 4.1%, 5.0% and 5.8%, respectively. The Company’s scheduled term note maturities for the years following December 31, 2004 are $2.8 million in 2005 and $8.4 million in 2006, including a final payment of $5.6 million due on December 31, 2006.

The Loan and Security Agreement requires that the Company meet certain financial covenants including a minimum net worth, a funded debt ratio and a fixed charge coverage ratio. The Company was in compliance with the financial covenants of the line of credit at December 31, 2004. Substantially all assets of the Company have been pledged as collateral under this Loan and Security Agreement.

As described in Note 15, in July 2005 the Loan and Security Agreement was amended.

5. Derivatives

On March 13, 2001, the Company entered into a Master Swap Agreement. In 2001, under this agreement, the Company entered into an interest rate swap and a collar to swap LIBOR-based variable rates on the Company’s line of credit for fixed interest rates. The interest rate swap expired March 15, 2004, and the collar expired March 15, 2003. The Company did not designate the swap or collar as a hedge, therefore, at December 31, 2002, 2003 and 2004, and June 30, 2004 and 2005, an increase in fair value of approximately $64,000, $214,000, $48,600, $0 and $0, respectively, was recorded as interest expense.

On December 23, 2003, the Company entered into an interest rate swap under this agreement, with an initial notional amount of $14.0 million and a monthly amortization of $233,333, to swap a LIBOR-based variable rate on the Company’s term note for fixed interest rates. The interest rate swap expires January 3, 2006, with an optional termination period beginning July 1, 2004 through and including December 1, 2005 at the Company’s discretion. The Company did not designate the swap as a hedge. Therefore, at December 31, 2003, the change in fair value of approximately $55,000 was recorded as additional interest expense and at December 31, 2004, $91,000 was recorded as a reduction in interest expense. At June 30, 2004 and 2005, $60,000 and $17,000, respectively, was recorded as a reduction in interest expense.

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

6. Stockholders’ Equity and Related Items

Common Stock

As described in Note 1, the Company completed the reincorporation of its business in September, 2005. As a result, the Company maintains two classes of common stock. In connection with the proposed initial public offering, on October 3, 2005 the Company effected a 1-for-1.9 reverse stock split of both its Class A and Class B common stock. The effect of this reincorporation, including the reverse stock split, has been reflected retroactively in the accompanying consolidated financial statements.

Holders of Class A common stock are entitled to one vote for each share held of record, and holders of Class B common stock are entitled to ten votes for each share held of record, except with respect to any “going private transaction,” as to which each share of Class A common stock and Class B common stock are both entitled to one vote per share. The Class A common stock and the Class B common stock vote together as a single class on all matters submitted to a vote of stockholders, including the election of directors, except as required by law. Holders of our common stock do not have cumulative voting rights in the election of directors.

Holders of common stock are entitled to receive, when and if declared by the board of directors from time-to-time, such dividends and other distributions in cash, stock or property from our assets or funds legally available for such purposes. Each share of Class A common stock and Class B common stock is equal in respect of dividends and other distributions in cash, stock or property, except that in the case of stock dividends, only shares of Class A common stock will be distributed with respect to the Class A common stock and only shares of Class B common stock will be distributed with respect to Class B common stock.

Each share of Class B common stock is convertible into one share of Class A common stock at any time at the option of the Class B stockholder, and in certain other circumstances.

Stock Options

The Board of Directors of the Company duly adopted and approved the 2003 Performance Incentive Plan (the Plan) on January 31, 2003. The Plan was designed to enable the Company to attract and retain key personnel. The Plan will expire on January 31, 2013, subject to earlier termination by the Board of Directors but such expiration shall not affect the validity of outstanding options. Stock options granted in 2003 and 2004 under the Plan will fully vest over a period of zero to seven years from the date of grant in accordance with the individual stock option agreement. The occurrence of an initial public offering of the Company’s stock, the achievement of certain performance criteria, or a change in control as defined by the Plan may accelerate the vesting period. Upon the completion of the initial public offering, additional stock compensation expense of approximately $1,204,000 will be recorded. The Board of Directors of the Company administers the Plan.

During 2003 and 2004 and the first six months of 2005, the Company granted options to purchase 693,925, 604,716 and 78,945 shares of common stock, respectively, to certain employees and directors under the Plan. No options were granted during 2002. Stock-based compensation cost related to stock option grants has been reflected in the net income for the years ended December 31, 2002, 2003 and 2004 and the six months ended June 30, 2004 and 2005 as certain options granted had an exercise price less than the fair market value of the underlying common stock at the date of the grant. Stock compensation expense and pro forma information regarding net income as if the Company had accounted for its employee stock options under the fair value method is included in Note 2.

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NCI, Inc.

Notes to Consolidated Financial Statements (continued)

6. Stockholders’ Equity and Related Items (continued)

Stock Options (continued)

The Board of Directors of the Company has adopted the 2005 Performance Incentive Plan which has been approved by the Company’s stockholders, and under which 3,157,895 shares of Class A common stock were reserved for issuance under this plan. Stock options granted under the 2003 Performance Incentive Plan, as described above, together with certain non-qualified stock options granted to two executives in 2000 and 2001, were assumed under the 2005 Performance Incentive Plan and, thereafter, became exercisable for shares of Class A common stock. The 2005 Performance Incentive Plan provides for the grant of incentive stock options and non-qualified stock options, and the grant or sale of restricted shares of common stock to the Company’s directors, employees and consultants.

Stock option activity is as follows:

	Options	Weighted average exercise price per share
	(in thousands, except per share data)
Outstanding at December 31, 2001	589	less than $0.02
Granted	—	—
Forfeited/cancelled	—	—
Outstanding at December 31, 2002	589	less than $0.01
Granted	694	6.58
Forfeited/cancelled	145	6.65
Outstanding at December 31, 2003	1,138	$3.17
Granted	605	3.81
Forfeited/cancelled	47	8.14
Outstanding at December 31, 2004	1,696	$3.26
Granted (unaudited)	79	10.00
Forfeited/cancelled (unaudited)	55	8.40
Outstanding at June 30, 2005 (unaudited)	1,720	$3.41

Information regarding options outstanding at December 31, 2004 is summarized below:

Range of exercise prices	Number of options	Weighted average exercise price		Weighted average remaining contractual life	Options exercisable
	(in thousands)			(in years)
Less than $1.00	971	$	0.09	19.5	—
$1.00 – $2.00	11		1.90	8.2	—
$5.00 – $6.00	512		6.65	8.2	—
$9.00 – $10.00	202		10.00	9.6	—

F-18

NCI, Inc.

Notes to Consolidated Financial Statements (continued)

6. Stockholders’ Equity and Related Items (continued)

Stock Options (continued)

The following table lists the options granted during the twelve month period ended June 30, 2005:

Month of Grant	Number of Options Granted	Exercise Price		Fair Value (1)		Intrinsic Value at Grant (2)
September 2004	49,999	$	10.00	$	6.92	—
November 2004	14,472		10.00		7.51	—
December 2004	29,205		10.00		8.70	—
April 2005	52,630		10.00		9.14	—
June 2005	26,315		10.00		8.93	—

(1) Fair value of the common stock underlying the options is based on contemporaneous valuations performed quarterly by management using the public company method under the market approach.

(2) Intrinsic value at grant date is the amount by which the fair value of the common stock on the grant date exceeds the exercise price for the options and is the amount recorded as stock-based compensation expense over the applicable vesting period.

The weighted average fair value of each option granted during 2004 was $6.78.

7. Leases

The Company leases office space, equipment, and automobiles under operating leases that expire on various dates through December 31, 2013. Several of the leases contain escalation clauses ranging from 2.5% to 5.0% per year, which are reflected in the amounts below. The Company is also responsible for certain operating expenses.

The Company has entered into certain capital lease obligations with various expiration dates through January 2008. In October 2003, the Company entered into a lease line of credit to finance various PC and networking equipment.

The following amounts have been capitalized and are included in property and equipment:

	As of December 31,				As of June 30, 2005
	2003		2004
	(in thousands)
Telephone equipment	$	477	$	477	$	477
PC and networking equipment		50		452		519
Office furniture and other equipment		39		56		39
		566		985		1,035
Less: Principal amortization		174		355		474
	$	392	$	630	$	561

F-19

NCI, Inc.

Notes to Consolidated Financial Statements (continued)

7. Leases (continued)

Minimum lease payments under the noncancelable operating leases and the capital leases are as follows:

	Capital leases		Operating leases
	(in thousands)
For the year ending December 31,
2005	$	274	$	3,689
2006		267		3,551
2007		132		3,512
2008		11		3,303
2009		—		3,361
Thereafter		—		9,655
Total minimum lease payments		684	$	27,071
Amounts representing interest		54
Present value of net minimum lease payments	$	630

The Company incurred rent expense under operating leases of $2.3 million, $2.7 million and $2.9 million for the years ended December 31, 2002, 2003 and 2004, respectively, and $1.4 million and $1.5 million for the six months ended June 30, 2004 and 2005, respectively.

8. Profit Sharing and Pension Plans

The Company has a 401(k) profit sharing plan that covers substantially all employees meeting certain criteria. The plan is a “defined contribution plan” whereby participants have the option of contributing to the plan. The plan provides for the Company to match 50% of the participant’s contribution not to exceed 2.5% of the participant’s total compensation. Participants are 100% vested in their employee contributions immediately. The participants become fully vested in the employer contributions over five years of service.

The Company’s contributions for each of the years ended December 31, 2002, 2003 and 2004 were approximately $1.1 million. The trustee of this 401(k) plan is New York Life Trust Company.

The Company is also required to contribute to a union pension plan under a Collective Bargaining Agreement with the International Association of Machinists and Aerospace Workers for eligible employees on one of its contracts. The current agreement expires December 31, 2006. For years ended December 31, 2002, 2003 and 2004, the contribution amounts were approximately $45,000, $24,000 and $19,000, respectively.

For certain of its contracts, the Company is required to adopt a 401(k) retirement plan for eligible employees. For the years ended December 31, 2002, 2003 and 2004, the contribution amounts were approximately $75,000, $81,000 and $116,000, respectively.

The Company maintains a separate 401(k) plan that covers substantially all employees meeting certain criteria of SES. The plan is a “defined contribution plan” whereby participants have the option of contributing to the plan. The plan provides for the Company to match 100% of the participant’s contribution not to exceed 6% of the participant’s total compensation. Participants are 100% vested in their employee contributions immediately. The participants become fully vested in the employer contributions over five years of service. The Company contributions for the year ended December 31, 2004 were approximately $650,000. The trustee of this 401(k) plan is Transamerica Retirement Services. Subsequent to December 31, 2004, the SES plan was merged into the Company’s plan.

F-20

NCI, Inc.

Notes to Consolidated Financial Statements (continued)

9. Acquisition of Scientific and Engineering Solutions, Inc.

The Company entered into a Stock Purchase Agreement (the Agreement) on December 17, 2003, effective December 23, 2003, to acquire all the issued and outstanding shares of SES stock. The total consideration at closing was cash of $20.5 million, per the Agreement, less closing indebtedness. The Agreement allows for adjustment of the purchase price for the net asset adjustments as determined in the closing statements due ninety days after closing, a contingent payment of up to $3.0 million, and an earnout payment of up to $5.5 million based on reaching certain revenue and gross margin goals determined as of December 31, 2004. During 2004, the Company paid approximately $1.0 million in contingent payments to former SES stockholders. No earnout payments have been earned and no payments are anticipated. In March 2005, the Company paid an additional $1.9 million in contingent payments which was not included in goodwill as of December 31, 2004 as the triggering events for such payments had not occurred at that time. The $1.9 million represents the final contingent payment related to the SES acquisition.

The transaction was accounted for in accordance with SFAS No. 141, Business Combinations, whereby the net tangible and identifiable intangible assets acquired and liabilities assumed were recognized at their estimated fair market values at the date of acquisition. The identifiable intangible assets consisted of $2.3 million of contracts and client relationships and $1.4 million for the value of a non-compete agreement. At the time of the acquisition, the contracts and related customer relationships had an expected useful life of approximately five years. The non-compete agreement is being amortized on a straight-line basis over the three-year term of the agreement. In accordance with SFAS No. 142, goodwill arising from the transaction is not being amortized.

The total purchase price paid through December 31, 2004, including closing indebtedness and acquisition costs, of $20.3 million was allocated to the assets acquired and liabilities assumed as follows:

	(in thousands)
Accounts receivable and other current assets	$	5,162
Property and equipment, net		260
Other assets		74
Accounts payable and other current liabilities		(4,149	)
Contracts and client relationships		2,260
Non-compete agreement		1,400
Goodwill		15,340
Total consideration	$	20,347

The following unaudited pro forma combined condensed statement of income sets forth the consolidated results of operations of the Company for the year ended December 31, 2003 as if the above described acquisition had occurred at January 1, 2003 and if the Company had been subject to income taxes (see Note 13). The unaudited pro forma information excludes transaction bonuses and option payments made by SES and does not purport to be indicative of the actual results that would have occurred if the combination had occurred at this earlier date:

	December 31, 2003
	(in thousands, except per share amounts)
Revenue	$	156,562
Net income		4,386
Net income per share		0.65

F-21

NCI, Inc.

Notes to Consolidated Financial Statements (continued)

10. Related Party Transaction

The Company provided support services on an as-needed basis under a blanket purchase order with Net Commerce Corporation, a government contractor originally owned by the majority stockholder of the Company. On April 1, 2004, Net Commerce Corporation was sold to a family member of the majority stockholder. For the years ended December 31, 2002, 2003 and 2004, the revenue for services and expenses incurred under this purchase order were approximately $13,000, $107,000 and $34,000, respectively, of which $2,000, $104,000 and $34,000, respectively, is included in accounts receivable at December 31, 2002, 2003 and 2004.

The Company also purchased services from Net Commerce Corporation of approximately $177,800, $0 and $124,000 for the years ended December 31, 2002, 2003 and 2004, respectively, of which $0, $0, and $19,000, respectively, were included in accounts payable in those respective years. For the six months ended June 30, 2005, the Company purchased services from Net Commerce Corporation of approximately $571,000 (unaudited), of which $72,500 (unaudited) was included in accounts payable.

The Company has used private aircraft to accommodate the travel needs of our executives for Company business. These aircraft are owned directly or indirectly by Michael W. Solley, the President and a director of the Company. The Company has paid approximately $8,000 and $165,000 for the years ended December 31, 2003 and 2004, respectively, and approximately $37,000 (unaudited) for the six months ended June 30, 2005 to Mr. Solley or his affiliates as reimbursement for fees and expenses associated with the business use of these aircraft.

All transactions with related parties have been conducted based on then current market conditions.

11. Contingencies

Government Audits

Payments to the Company on federal government contracts are subject to adjustment upon audit by various agencies of the federal government. Audits of costs and the related payments have been performed by the various agencies through 2001 for the Company and through 2002 for SES. In the opinion of management, the final determination of costs and related payments for unaudited years will not have a material effect on the Company’s financial position, results of operations or liquidity.

Litigation

The Company is party to various legal actions, claims, government inquires, and audits resulting from the normal course of business. The Company believes that any resulting liability will not have a material effect on the Company’s financial position, results of operations or liquidity.

Employee-Related Matter

On May 9, 2001, the Company signed a final settlement agreement with an employee in resolution of an outstanding offer letter commitment. The agreement calls for a cash payout of $750,000, without interest, paid quarterly over a five-year period. Amounts are recorded net of imputed interest. Amounts due to the employee were approximately $310,000 and $178,000 as of December 31, 2003 and 2004, respectively.

F-22

NCI, Inc.

Notes to Consolidated Financial Statements (continued)

12. Business Segment Information

The Company reports operating results and financial data in one operating segment. This segment provides information technology solutions through its four core service offerings: network engineering; information assurance; systems development and integration; and enterprise systems management. The accounting policies of the segment are the same as those described in the summary of significant accounting policies in Note 2 to the financial statements. The Company evaluates the performance of its operating segment based on income before income taxes. Financial information concerning the Company’s reportable segment is shown in the consolidated financial statements.

Although for purposes of promoting an understanding of the Company’s complex business, the four core service offerings are discussed, the Company does not manage its business or allocate capital resources based upon those service offerings. In addition, the underlying accounting and forecasting systems are not designed to capture key financial information such as revenue, costs and capital expenditures by such service offerings because these offerings cut across all operating divisions of the Company. Therefore, it is not practical for the Company to report revenue by service offerings.

13. Pro Forma Provision for Income Taxes (unaudited)

In connection with the Company’s proposed initial public offering, the Company’s S corporation status will terminate and the Company will therefore be subject to federal and state income taxes as a C corporation. Because the Company is an S corporation, deferred taxes have not been reflected in the financial statements, and the Company is not responsible for these income taxes until the termination of its S corporation status. For informational purposes, the statements of income include a pro forma provision for income taxes that would have been recorded if the Company was a C corporation, calculated in accordance with SFAS No. 109.

The differences between the pro forma provision for income taxes at the statutory U.S. federal income tax rate of 34%, and those reported in the pro forma provision for income tax information relate to the impact of state and local income taxes and other differences. Other differences include, among other items, the nondeductible portion of meals and entertainment, nondeductible penalties and fines, nondeductible dues, and nondeductible officers’ life insurance premiums, as well as any tax-exempt items of income.

In connection with the revocation of its S corporation status, the Company will record net deferred tax assets and a related benefit for income taxes effective upon the revocation date. The amount of the net deferred tax assets would have been approximately $2.8 million if the revocation date had been June 30, 2005 and is reflected in the Company’s pro forma balance sheet and retained earnings. The actual amount will be determined after giving effect to the Company’s operating results through the revocation date. The significant items comprising the pro forma net deferred tax asset as of June 30, 2005 are accrued compensation expense from stock options, deferred rent and accrued vacation.

F-23

NCI, Inc.

Notes to Consolidated Financial Statements (continued)

13. Pro Forma Provision for Income Taxes (unaudited) (continued)

Significant components of the pro forma provision for income taxes for the years ended December 31, 2002, 2003 and 2004 are as follows:

	2002			2003			2004
	(in thousands)
Current:
Federal	$	2,548		$	2,265		$	2,720
State and local		585			470			674
Total current		3,133			2,735			3,394
Deferred:
Federal		(57	)		(227	)		(667	)
State and local		(32	)		(60	)		(132	)
Total deferred benefit		(89	)		(287	)		(799	)
Total income tax provision	$	3,044		$	2,448		$	2,595

The reconciliation between statutory U.S. federal income tax rate and those reported in the unaudited pro forma income tax information in the consolidated statements of income for the years ended December 31, 2002, 2003 and 2004 is as follows:

	2002		2003		2004
Statutory federal income tax rate	34.0	%	34.0	%	34.0	%
State and local taxes, net of federal taxes	4.7		4.3		5.6
Other	0.1		0.2		0.9
	38.8	%	38.5	%	40.5	%

14. Supplemental Financial Information

SCHEDULE II—Valuation and Qualifying Accounts

	For the year ended December 31,
	2002		2003		2004
	(in thousands)
Balance at beginning of period	$	—	$	—	$	200
Additions at cost		—		200		275
Deductions		—		—		—
Other charges		—		—		—
Balance at end of period	$	—	$	200	$	475

F-24

NCI, Inc.

Notes to Consolidated Financial Statements (continued)

15. Subsequent Events (unaudited)

In July 2005, the Loan and Security Agreement was amended to recognize the pending agreements related to the Reincorporation Transaction, the initial public offering of Class A common stock, and to provide a time loan of up to $15 million to finance the payment of a portion of a distribution to the stockholders of the Company.

Under the terms of this amendment the Company is permitted to make distributions out of its accumulated adjustments account, of which up to $15 million would come from the time loan and the remainder from the line of credit. In July 2005, the Company made an $18 million distribution to the existing stockholders of the Company. Of this amount, $15 million was financed by the time loan, and the balance from the existing line of credit. The Company estimates that the final distribution of S corporation earnings will be approximately $5 million and will occur during the fourth quarter of 2005 or the first quarter of 2006. The time loan will be due in January 2006 or upon receipt of proceeds from the offering, whichever occurs first, and will bear interest at LIBOR plus 45 basis points. As a result of this amendment, certain financial covenants were amended within the Loan and Security Agreement to accommodate these transactions.

F-25

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

NCI, Inc.

We have audited the balance sheet of Scientific and Engineering Solutions, Inc. (the Company) as of December 23, 2003, and the related statement of income, changes in stockholder’s equity, and cash flows for the period from January 1, 2003 through December 23, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2003 financial statements referred to above present fairly, in all material respects, the financial position of Scientific and Engineering Solutions, Inc. as of December 23, 2003, and the results of its operations and its cash flows for the period from January 1, 2003 through December 23, 2003, in conformity with accounting principles generally accepted in the United States.

/s/    Ernst & Young LLP

McLean, VA

March 1, 2005

F-26

Scientific and Engineering Solutions, Inc.

Balance Sheet

December 23, 2003

Assets
Current assets:
Cash	$	2,300,595
Accounts receivable—contracts, net		4,995,225
Prepaid expenses and other current assets		143,281
Total current assets		7,439,101
Property and equipment:
Computer and telephone equipment		220,986
Furniture and office equipment		56,207
Software		72,177
Leasehold improvements		225,776
		575,146
Less: Accumulated depreciation and amortization		(315,073	)
		260,073
Other assets		73,998
Total assets	$	7,773,172
Liabilities and stockholder’s equity
Current liabilities:
Accounts payable	$	721,777
Accrued expenses		438,738
Accrued payroll, payroll taxes and benefits		2,956,859
Income taxes payable		8,478
Total current liabilities		4,125,852
Stockholder’s equity:
Common stock—$.001 par value, 11,000,000 shares authorized, 5,250,000 shares issued and outstanding		5,250
Additional paid-in capital		4,129,150
Accumulated deficit		(487,080	)
Total stockholder’s equity		3,647,320
Total liabilities and stockholder’s equity	$	7,773,172

See Notes to Financial Statements.

F-27

Scientific and Engineering Solutions, Inc.

Statement of Income

Period January 1 through December 23, 2003

Contract revenue	$	20,140,231
Direct contract costs:
Direct labor		8,534,143
Subcontractors and consultants		1,814,620
Other direct costs		919,950
Total direct contract costs		11,268,713
Gross profit		8,871,518
Indirect costs:
Overhead expenses		5,469,859
General and administrative expenses		4,816,286
Total indirect costs		10,286,145
Loss from operations		(1,414,627	)
Other income (expense):
Other income		12,526
Interest expense		(49,005	)
Total other (expense)		(36,479	)
Loss before provision for income taxes		(1,451,106	)
Provision for income taxes		(19,478	)
Net loss	$	(1,470,584	)

See Notes to Financial Statements.

F-28

Scientific and Engineering Solutions, Inc.

Statement of Changes in Stockholder’s Equity

	Common stock			Additional paid-in capital		Retained earnings			Total
	Shares	Amount
Balance, December 31, 2002	5,250,000	$	5,250	$	45,502	$	1,826,510		$	1,877,262
Distributions	—		—		—		(843,006	)		(843,006	)
Additional investment by stockholder	—		—		4,083,648		—			4,083,648
Net loss	—		—		—		(1,470,584	)		(1,470,584	)
Balance, December 23, 2003	5,250,000	$	5,250	$	4,129,150	$	(487,080	)	$	3,647,320

See Notes to Financial Statements.

F-29

Scientific and Engineering Solutions, Inc.

Statement of Cash Flows

Period January 1 through December 23, 2003

Cash flows from operating activities
Net loss	$	(1,470,584	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		105,761
Changes in operating assets and liabilities:
Accounts receivable		(1,316,114	)
Prepaid expenses and other current assets		(61,870	)
Other assets		(58,905	)
Accounts payable		426,819
Accrued expenses		58,785
Accrued payroll, payroll taxes, and benefits		2,366,222
Net cash provided by operating activities		50,114
Cash flows from investing activities
Purchase of property and equipment		(205,568	)
Net cash used by investing activities		(205,568	)
Cash flows from financing activities
Net payments on line of credit		(850,349	)
Payments on notes payable		(34,608	)
Distributions paid		(843,006	)
Additional paid-in capital from stockholder		4,083,648
Net cash provided by financing activities		2,355,685
Net increase in cash		2,200,231
Cash, beginning of year		100,364
Cash, end of year	$	2,300,595
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	49,005
Income taxes	$	19,478

See Notes to Financial Statements.

F-30

Scientific and Engineering Solutions, Inc.

Notes to Financial Statements

December 23, 2003

1. Summary of Significant Accounting Policies

Nature of Business

Scientific and Engineering Solutions, Inc. (the Company) was organized under the laws of the State of Maryland in 1996. The Company is a small, disadvantaged business concern as defined by the Small Business Administration’s regulations and has been participating in the Section 8(a) Minority Business Development Program. The Company is a provider of information assurance, software engineering and knowledge and enterprise management solutions to agencies within the intelligence community. The Company has elected to be treated as an S corporation under the provisions of the Internal Revenue Code.

Revenue Recognition

Revenue from time-and-materials contracts is recognized as costs are incurred at amounts represented by the agreed-upon billing rates.

Revenue from cost-type contacts is recognized as costs are incurred on the basis of direct costs plus allowable indirect costs and an allocable portion of the fixed fee.

Revenue from fixed-price type contacts is recognized under the percentage-of-completion method of accounting, with costs and estimated profits included in contract revenue as work is performed. If actual and estimated costs to complete a contract indicate a loss, provision is made currently for the loss anticipated on the contract.

Basis of Accounting

The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.

Use of Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Property and Equipment

Property and equipment are recorded at the original cost to the Company. Assets are depreciated using the straight-line method over the estimated useful lives of five to seven years. Software is amortized using the straight-line method over the estimated useful lives of three years.

Income Taxes

The Company files its income tax returns using the accrual basis of accounting. The Company has elected to be treated as an S corporation, and, therefore, does not pay federal taxes on its net income since the tax attributes of the Company are reported on the stockholder’s income tax returns. Certain states in which the Company conducts business do not recognize the S corporation filing status. Accordingly, a provision for current income taxes is included in the accompanying financial statements for such state taxes.

F-31

Scientific and Engineering Solutions, Inc.

Notes to Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Cash and Cash Equivalents

For financial statement purposes, all investments with original maturities of three months or less are classified as cash equivalents. The Company maintains cash balances that may exceed federally insured limits. The Company does not believe that this results in any significant risk.

Stock-Based Compensation

The Company follows Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for its stock-based compensation using the intrinsic method. Had compensation cost for the options been recognized in accordance with Statement of Financial Accounting Standards Board No. 123, Accounting for Stock-Based Compensation, the net income for the period from January 1, 2003 through December 23, 2003 would not have been materially different.

2. Accounts Receivable

The accounts receivable consists mainly of billed and unbilled amounts under contracts in progress that are primarily with federal government agencies, principally the Department of Defense.

At December 23, 2003, the components of accounts receivable are:

	As of December 23, 2003
Billed receivables:
Billed receivables	$	2,127,210
Billable receivables at end of period		2,109,376
Total billed receivables		4,236,586
Total unbilled receivables		758,639
Total	$	4,995,225

All billed and unbilled amounts are expected to be collected during the next fiscal year. At December 23, 2003, 86% of the total accounts receivable were due from two agencies of the federal government. During the period from January 1, 2003 through December 23, 2003, 83% of the Company’s annual revenues were for sales and services to the same two clients. The billed accounts receivable were pledged to a bank as collateral on a line of credit arrangement described in Note 3.

3. Line of Credit

The Company maintained a line of credit arrangement that was terminated on December 23, 2003. The line was secured by the accounts receivable of the Company and was guaranteed by the Company’s stockholder. Under the terms of the agreement, the Company could borrow up to the lesser of $4.0 million or 90% of eligible billed government accounts receivable, plus 80% of eligible billed commercial accounts receivable, plus eligible unbilled accounts receivable at the billed receivable advance rates (capped at $750,000). Interest was payable monthly at the Company’s choice of the prime rate plus an amount ranging from 0% to 0.5% or LIBOR plus an amount ranging from approximately 2.8% to 3.5%. Changes between the prime rate and LIBOR could be made quarterly at the Company’s option. The arrangement required that the Company maintain certain financial ratios. The Company was in compliance with all covenants at December 23, 2003. The outstanding balance at December 23, 2003 was $0 upon the termination of the line of credit arrangement.

F-32

Scientific and Engineering Solutions, Inc.

Notes to Financial Statements (continued)

4. Leases

The Company is obligated, as lessee, under noncancelable operating leases for its office space in Annapolis Junction, Maryland. These leases expire in December 2009. The leases require the Company to pay a pro rata share of annual increases above a stated base amount of the real estate taxes and operating expenses, and provide for fixed annual increases in rent during the lease term. The Company has two options, each for two years, to renew the leases. In December 2003, the Company entered into a three-year operating lease for furniture and equipment.

Minimum lease payments under the noncancelable operating leases are as follows:

For the year ending December 31,	Amount
2004	$	398,273
2005		409,002
2006		411,019
2007		337,495
2008		347,632
2009		358,061

Total rental expense under the operating leases for the period from January 1, 2003 through December 23, 2003 was $208,583. Rent expense for 2003 is net of sublease income of $42,591.

5. Retirement Plan

The Company maintains a qualified 401(k) profit-sharing plan to provide retirement benefits for all eligible employees. The plan is a “defined contribution plan” whereby the participants have the option of contributing to the plan. Under the plan, employees become eligible to participate after attaining the age of 21 and completing three months of service. The Company may make discretionary matching contributions not to exceed 15% of each participant’s compensation per pay period. During 2003, the Company matched 100% of the participant’s contribution, not to exceed 6% of the participant’s total compensation. Participants immediately vest 100% in their contributions. Participants vest in the Company’s matching contributions as follows: 25% after one year and 25% per year thereafter until fully vested at the end of four years. During the period from January 1, 2003 through December 23, 2003, the Company made discretionary matching contributions of $326,865. The trustee of this 401(k) plan is Transamerica Retirement Services.

F-33

Scientific and Engineering Solutions, Inc.

Notes to Financial Statements (continued)

6. Stock Options and Stock Incentive Plan

On July 15, 1999, the Company adopted a stock incentive plan. All employees, officers, directors, and consultants to the Company were eligible to participate in the plan. The plan allowed for various incentives including: stock options (both qualified and non-qualified); stock appreciation rights; stock awards; phantom stock; and performance awards. During 2002, the plan was amended by the Board of Directors to increase the amount of shares available in plan from 750,000 to 1,750,000. Additionally, the Company had approximately 420,000 outstanding stock options issued under separate option agreements outside of the plan. Total stock option transactions for the Company are as follows:

	Number of options shares		Weighted- average exercise price
Outstanding at January 1, 2003	1,400,142		$	1.39
Granted during 2003	412,095			2.33
Forfeited options	(579,797	)		1.83
Repurchased options	(1,232,440	)		1.51
Outstanding at December 23, 2003	—		$	—

Pursuant to the Stock Purchase Agreement (see Note 9), all stock options were repurchased by the Company. There were no options outstanding as of December 23, 2003. During 2003, stock compensation expense of $2,088,074 was recorded, primarily related to the repurchase of stock options by the Company.

Stock compensation expense and pro forma information regarding net loss as if the Company had accounted for its employee stock options under the fair value method is included in Note 1.

7. Related Party Transactions

The Company donated approximately $110,000 to a not-for-profit organization established by the sole stockholder.

8. Contingencies

Government Audits

Payments to the Company on federal government contracts are subject to adjustment upon audit by various federal government agencies. Audits of costs and the related payments have been performed by the various agencies through 1998. In the opinion of management, the final determination of costs and related payments for unaudited years will not have a material effect on the Company’s financial position, results of operations, or liquidity.

9. Subsequent Events

The Company and the sole stockholder entered into a Stock Purchase Agreement on December 17, 2003, effective December 23, 2003, with NCI Information Systems, Inc. (NCI) to sell all the issued and outstanding shares of stock of the Company, upon which the Company ceased to exist as a separate operating entity. The total consideration at closing was cash of $20.5 million per the Stock Purchase Agreement less closing indebtedness. The purchase price can be modified for the net asset adjustments as determined in the closing statements due 90 days after closing, a contingent payment of up to $3.0 million, and an earn out payment of up to $5.5 million based on reaching certain revenue and gross margin goals determined as of December 31, 2004. Any additional payments will be distributed by NCI in accordance with the Stock Purchase Agreement.

F-34

5,150,000 Shares

Class A Common Stock

PROSPECTUS

                             , 2005

Legg Mason Wood Walker Incorporated Raymond James

Robert W. Baird & Co. Stephens Inc.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table itemizes the expenses, other than the underwriting discount, incurred, or to be incurred, by the Registrant in connection with the registration and issuance of the securities being registered hereunder. All amounts shown below are estimates except for the SEC registration fee and the NASD filing fee.

SEC registration fee	$	8,365
NASD filing fee	$	7,607
Printing and engraving expenses	$	225,000
Accounting fees and expenses	$	565,000
Legal fees and expenses	$	450,000
Transfer Agent and Registrar fees and expenses	$	3,500
Miscellaneous (including listing fees)	$	140,528
Total	$	1,400,000

The Registrant will bear all expenses shown above.

Item 14. Indemnification of Directors and Officers

The Registrant’s charter includes provisions that eliminate the personal liability of the Registrant’s directors for monetary damages for breach of fiduciary duty as a director, except for liability:

• for any breach of the director’s duty of loyalty to the Registrant or its stockholders;

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

• under Section 174 of the Delaware General Corporation law; or

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

The Registrant’s charter requires, as a condition to advancing expenses, the delivery to the corporation of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified.

The Registrant’s charter further provides for the indemnification of the Registrant’s directors and officers to the fullest extent permitted by Section 145 of the Delaware General Corporation Law. Indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant under the foregoing provisions, or otherwise. The Registrant has been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act may be against public policy as expressed in the Securities Act and in such an event would be unenforceable.

Item 15. Recent Sales of Unregistered Securities

None.

II-1

Item 16. Exhibits

The following Exhibits are filed herewith and made a part hereof:

Number	Description
1.1	Form of Underwriting Agreement(2)
2.1	Agreement and Plan of Merger by and between NCI Information Systems, Inc. and NCI Acquisition, LLC, dated as of September 1, 2005(2)
2.2	Share Exchange Agreement by and between NCI, Inc. and Charles Narang, dated as of September 1, 2005(2)
3.1	Amended and Restated Certificate of Incorporation of the Registrant(1)
3.2	Bylaws of the Registrant(3)
4.1	Specimen Class A Common Stock Certificate(1)
4.2*	NCI, Inc. 2005 Performance Incentive Plan(3)
4.3	[reserved]
4.4*	Form of 2005 Performance Incentive Plan Notice of Stock Option Grant and Stock Option Agreement(1)
4.5*	Amendment to NCI, Inc. Non-Qualified Stock Option Agreement(1)
4.6*	2005 Incentive Compensation Plan(1)
5.1	Opinion of Pillsbury Winthrop Shaw Pittman LLP regarding the validity of the securities being registered(2)
10.1*	Non-Statutory Stock Option Agreement by and between NCI Information Systems, Inc. and Linda J. Allan dated May 4, 2001(3)
10.2	Non-Statutory Stock Option Agreement by and between NCI Information Systems, Inc. and Norris B. Carter dated May 5, 2000(3)
10.3	Tax Indemnification Agreement between NCI, Inc. and stockholders of NCI, Inc., dated as of September 1, 2005(2)
10.4*	401(k) Profit Sharing Plan(3)
10.5	Loan and Security Agreement between SunTrust Bank and NCI Information Systems, Inc. dated as of December 23, 2003(3)
10.6	Amendment to Loan and Security Agreement between SunTrust Bank and NCI Information Systems, Inc. dated as of May 6, 2004(3)
10.7	Second Amendment to Loan and Security Agreement between SunTrust Bank and NCI Information Systems, Inc. dated as of March 15, 2005(3)
10.8	Third Amendment to Loan and Security Agreement between SunTrust Bank and NCI Information Systems, Inc dated as of July 25, 2005(3)
10.9	Lease Agreement between NCI Information Systems, Inc. and Winthrop Resources Corporation, dated October 22, 2003(3)
10.10	Lease by and between NCI Information Systems, Inc. and Plaza America Office Development II, LLC dated as of January 13, 2003(3)
10.11	Lease by and between NCI Information Systems, Inc. and Corporate Center II, LLC dated as of March 8, 2001(3)
10.12	Office Lease Agreement by and between JFB Joint Venture Limited Partnership and Scientific Engineering Solutions, Inc. dated as of April 13, 1998(3)
10.13*	Option Assumption Agreement dated July 29, 2005 between NCI, Inc. and Linda Allan(2)
10.14*	Michael W. Solley Non-Qualified Stock Option Agreement(1)
10.15	Option Assumption Agreement dated September 2, 2005 between NCI, Inc. and the personal representatives of Norris B. Carter(1)
10.16*	Judith L. Bjornaas Non-Qualified Stock Option Agreement(1)
10.17*	Form of Lock-Up Agreement(1)
10.18	Subcontract Agreement between NCI Information Systems, Inc. and Net Commerce Corporation dated as of January 27, 2005(1)
10.19	Purchase Order to New Commerce Corporation dated February 3, 2005(1)
10.20	Purchase Order to Net Commerce Corporation dated February 10, 2005(1)
10.21	Change Order to Net Commerce Corporation dated February 10, 2005(1)
14.1	Code of Ethics of NCI, Inc.(1)
21.1	Subsidiaries of Registrant(3)
23.1	Consent of Ernst & Young LLP(1)

II-2

Number	Description
23.2	Consent of Pillsbury Winthrop Shaw Pittman LLP (included as part of Exhibit 5.1)(2)
23.3	Consent of INPUT(2)
24.1	Powers of Attorney (included in signature page to Registration Statement)(3)

(1) Included with this filing.

(2) Previously filed on Form S-1/A dated September 6, 2005.

(3) Previously filed on Form S-1 dated July 29, 2005.

* Management Contract or Compensatory Plan or Arrangement

Item 17. Undertakings

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

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

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in “Calculation of Registration Fee” table in the effective registration statement; and

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

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

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

(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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

II-3

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Reston, Commonwealth of Virginia, on October 4, 2005.

NCI, INC.
By:	/s/    JUDITH L. BJORNAAS
	Judith L. Bjornaas
	Senior Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
* Charles K. Narang	Chief Executive Officer, Director and Chairman of the Board (Principal Executive Officer)	October 4, 2005
* Michael W. Solley	President and Director	October 4, 2005
/S/    JUDITH L. BJORNAAS         Judith L. Bjornaas	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	October 4, 2005
* James P. Allen	Director	October 4, 2005
* John E. Lawler	Director	October 4, 2005
* Paul V. Lombardi	Director	October 4, 2005
* J. Patrick McMahon	Director	October 4, 2005
* Daniel R. Young	Director	October 4, 2005

*By:	/S/    JUDITH L. BJORNAAS
	Judith L. Bjornaas Attorney-in-Fact

II-4

INDEX TO EXHIBITS

Number	Description
1.1	Form of Underwriting Agreement(2)
2.1	Agreement and Plan of Merger by and between NCI Information Systems, Inc. and NCI Acquisition, LLC, dated as of September 1, 2005(2)
2.2	Share Exchange Agreement by and between NCI, Inc. and Charles Narang, dated as of September 1, 2005(2)
3.1	Amended and Restated Certificate of Incorporation of the Registrant(1)
3.2	Bylaws of the Registrant(3)
4.1	Specimen Class A Common Stock Certificate(1)
4.2*	NCI, Inc. 2005 Performance Incentive Plan(3)
4.3	[reserved]
4.4*	Form of 2005 Performance Incentive Plan Notice of Stock Option Grant and Stock Option Agreement(1)
4.5*	Amendment to NCI, Inc. Non-Qualified Stock Option Agreement(1)
4.6*	2005 Incentive Compensation Plan(1)
5.1	Opinion of Pillsbury Winthrop Shaw Pittman LLP regarding the validity of the securities being registered(2)
10.1*	Non-Statutory Stock Option Agreement by and between NCI Information Systems, Inc. and Linda J. Allan dated May 4, 2001(3)
10.2	Non-Statutory Stock Option Agreement by and between NCI Information Systems, Inc. and Norris B. Carter dated May 5, 2000(3)
10.3	Tax Indemnification Agreement between NCI, Inc. and stockholders of NCI, Inc., dated as of September 1, 2005(2)
10.4*	401(k) Profit Sharing Plan(3)
10.5	Loan and Security Agreement between SunTrust Bank and NCI Information Systems, Inc. dated as of December 23, 2003(3)
10.6	Amendment to Loan and Security Agreement between SunTrust Bank and NCI Information Systems, Inc. dated as of May 6, 2004(3)
10.7	Second Amendment to Loan and Security Agreement between SunTrust Bank and NCI Information Systems, Inc. dated as of March 15, 2005(3)
10.8	Third Amendment to Loan and Security Agreement between SunTrust Bank and NCI Information Systems, Inc dated as of July 25, 2005(3)
10.9	Lease Agreement between NCI Information Systems, Inc. and Winthrop Resources Corporation, dated October 22, 2003(3)
10.10	Lease by and between NCI Information Systems, Inc. and Plaza America Office Development II, LLC dated as of January 13, 2003(3)
10.11	Lease by and between NCI Information Systems, Inc. and Corporate Center II, LLC dated as of March 8, 2001(3)
10.12	Office Lease Agreement by and between JFB Joint Venture Limited Partnership and Scientific Engineering Solutions, Inc. dated as of April 13, 1998(3)
10.13*	Option Assumption Agreement dated July 29, 2005 between NCI, Inc. and Linda Allan(2)
10.14*	Michael W. Solley Non-Qualified Stock Option Agreement(1)
10.15	Option Assumption Agreement dated September 2, 2005 between NCI, Inc. and the personal representatives of Norris B. Carter(1)
10.16*	Judith L. Bjornaas Non-Qualified Stock Option Agreement(1)
10.17*	Form of Lock-Up Agreement(1)
10.18	Subcontract Agreement between NCI Information Systems, Inc. and Net Commerce Corporation dated as of January 27, 2005(1)
10.19	Purchase Order to New Commerce Corporation dated February 3, 2005(1)
10.20	Purchase Order to Net Commerce Corporation dated February 10, 2005(1)
10.21	Change Order to Net Commerce Corporation dated February 10, 2005(1)
14.1	Code of Ethics of NCI, Inc.(1)
21.1	Subsidiaries of Registrant(3)
23.1	Consent of Ernst & Young LLP(1)

II-5

Number	Description
23.2	Consent of Pillsbury Winthrop Shaw Pittman LLP (included as part of Exhibit 5.1)(2)
23.3	Consent of INPUT(2)
24.1	Powers of Attorney (included in signature page to Registration Statement)(2)

(1) Included with this filing.

(2) Previously filed on Form S-1/A dated September 6, 2005.

(3) Previously filed on Form S-1 dated July 29, 2005.

* Management Contract or Compensatory Plan or Arrangement

II-6

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

NCI, INC.

Michele Cappello, the Secretary of NCI, Inc., hereby certifies that:

ONE:    The date of filing the original Certificate of Incorporation of this company with the Secretary of State of the State of Delaware was July 27, 2005.

TWO:    She is the duly elected and acting Secretary of NCI, INC., a Delaware corporation.

THREE:    The Certificate of Incorporation of this company is hereby amended and restated in accordance with Section 245 of the Delaware General Corporation Law to read as follows:

FIRST:    The name of the corporation (the “Corporation”) is:

NCI, Inc.

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

THIRD:    The purpose of the Corporation is to engage in any lawful business for which corporations may now or hereafter be organized under the Delaware General Corporation Law.

FOURTH:

4.1 Authorized Capital Stock. The total number of shares of stock that the Corporation has authority to issue is Fifty Million (50,000,000), consisting of:

(a) Thirty Seven Million Five Hundred Thousand (37,500,000) shares of Class A Common Stock, par value $0.019 per share (the “Class A Common Stock”); and

(b) Twelve Million Five Hundred Thousand (12,500,000) shares of Class B Common Stock, par value of $0.019 per share (the “Class B Common Stock”).

The Class A Common Stock together with the Class B Common Stock is referred to collectively as the “Common Stock.”

4.2 Terms of Common Stock. All shares of Common Stock will be identical in all respects and will entitle the holders thereof to the same rights and privileges, except as otherwise provided herein.

(a) Voting Rights. Except as otherwise provided in this Certificate of Incorporation or by applicable law, the holders of Class A Common Stock and Class B Common Stock shall vote together as a single class with respect to all matters submitted to a vote of holders of shares of Common Stock. The holders of shares of Common Stock shall have the following voting rights:

(i) each share of Class A Common Stock shall entitle the holder thereof to one (1) vote in person or by proxy on all matters submitted to a vote of the stockholders of the Corporation; and

(ii) each share of Class B Common Stock shall entitle the holder thereof to ten (10) votes in person or by proxy on all matters submitted to a vote of the stockholders of the Corporation, except with respect to any Going Private Transaction (as such term is defined below), which shall be governed by paragraph (k) of this Section 4.2.

(b) Dividends. The holders of the Common Stock shall be entitled to participate ratably, on a share-for-share basis as if all shares of Common Stock were of a single class, in such dividends, whether in cash, stock or otherwise, as may be declared by the Board of Directors from time to time out of funds of the Corporation legally available therefor; provided, however, that any dividends payable in shares of Common Stock (or payable in rights to subscribe for or purchase shares of Common Stock or securities or indebtedness convertible into or exchangeable for shares of Common Stock) shall be declared and paid at the same rate on each class of Common Stock and only in shares of Class A Common Stock (or rights to subscribe for or to purchase shares of Class A Common Stock or securities or indebtedness convertible into or exchangeable for shares of Class A Common Stock) to holders of Class A Common Stock and in shares of Class B Common Stock (or rights to subscribe for or to purchase shares of Class B Common Stock or securities or indebtedness convertible into or exchangeable for shares of Class B Common Stock) to holders of Class B Common Stock.

(c) Issuance of Class B Common Stock. After the IPO Date (as defined below), the Corporation shall not issue or sell any shares of Class B Common Stock or any securities (including, without limitation, any rights, options, warrants or other securities) convertible into or exchangeable or exercisable for shares of Class B Common Stock to any person other than (x) issuance of a certificate or certificates in the name of a person who is an owner of record of Class B Common Stock on the IPO Date (an “Initial Holder”) or a Permitted Transferee (as defined in Section 4.2(j)) representing shares of Class B Common Stock that are outstanding on the IPO Date (regardless of whether such shares are held by the Initial Holder or Permitted Transferee on the IPO Date), or (y) issuances or sales upon a stock split, stock dividend, rights offering or other transaction or event in connection with which Class B Common Stock is expressly required or permitted to be issued or sold under this Certificate of Incorporation. For the purposes of this Article Four, the term “IPO Date” shall mean the third business day before the closing date of any initial public offering of the Class A Common Stock in a firm commitment underwritten offering that is registered with the U.S. Securities and Exchange Commission. Any issuance or sale of shares of Class B Common Stock (or securities convertible into, or exchangeable or exercisable for, shares of Class B Common Stock) in violation of this Section 4.2(c) shall be null and void ab initio.

(d) Voluntary Conversion of Class B Common Stock.

(1) The holder of each share of Class B Common Stock shall have the right at any time, or from time to time, at such holder’s option, to convert such share into one fully paid and nonassessable share of Class A Common Stock on and subject to the terms and conditions hereinafter set forth.

(2) In order to exercise the conversion privilege, the holder of any shares of Class B Common Stock to be converted shall present and surrender the certificate or certificates representing such shares during usual business hours at any office or agency of the Corporation maintained for the transfer of Class B Common Stock and shall deliver a written notice of the election of the holder to convert the shares represented by such certificate or any portion thereof specified in such notice. Such notice shall also state the name or names (with address) in which the certificate or certificates for shares of Class A Common Stock issuable on such conversion shall be registered. If required by the Corporation, any certificate for shares surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder of such shares or his duly authorized representative. Each conversion of shares of Class B Common Stock shall be deemed to have been effected on the date (the “Conversion Date”) on which the certificate or certificates representing such shares shall have been surrendered and such notice and any required instruments of transfer shall have been received as aforesaid, and the person or persons in whose name or names any certificate or certificates for shares of Class A Common Stock shall be issuable on such conversion shall be, for the purpose of receiving dividends and for all other corporate purposes whatsoever, deemed to have become the holder or holders of record of the shares of Class A Common Stock represented thereby on the Conversion Date.

(3) As promptly as practicable after the presentation and surrender for conversion, as herein provided, of any certificate for shares of Class B Common Stock, the Corporation shall issue and deliver at such office or agency, to or upon the written order of the holder thereof, certificates for the number of shares of Class A Common Stock issuable upon such conversion. Subject to the provisions of Section 4.2(e), in case any certificate for shares of Class B Common Stock shall be surrendered for conversion of only a part of the shares represented thereby, the Corporation shall deliver at such office or agency, to or upon the written order of the holder thereof, a certificate or certificates for the number of shares of Class B Common Stock represented by such surrendered certificate that are not being converted.

(e) Automatic Conversion of Class B Common Stock upon Certain Events.

(1) No record or beneficial owner of shares of Class B Common Stock may transfer, and the Corporation shall not register the transfer of, such shares of Class B Common Stock, whether by sale, assignment, gift, bequest, appointment, or otherwise, except to a “Permitted Transferee” as provided herein.

(2) Notwithstanding anything to the contrary set forth herein, any Class B Holder may pledge such holder’s shares of Class B Common Stock to a financial institution pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to such financial institution, provided that such shares shall not be transferred to or registered

in the name of the financial institution and shall remain subject to the provisions of this Section 4.2(e). In the event of foreclosure or other similar action by the financial institution, such pledged shares of Class B Common Stock may only be transferred to a Permitted Transferee of the pledgor or converted into shares of Class A Common Stock, as the pledgor may elect; provided, however, that if within ten business days after such foreclosure or similar action any such converted shares are returned to the pledgor or a permitted transferee, such shares shall convert automatically into shares of Class B Common Stock.

(3) Any purported transfer of shares of Class B Common Stock not permitted hereunder shall result in the conversion of the transferee’s shares of Class B Common Stock into shares of Class A Common Stock, effective on the date on which certificates representing such shares are presented for transfer on the stock transfer record books of the Corporation; provided, however, that if the Corporation should determine that such shares were not so presented for transfer within twenty (20) days after the date of such sale, transfer, assignment, or other disposition, the transfer date shall be the actual date of such sale, transfer, assignment, or other disposition as determined in good faith by the Board of Directors or its appointed agent. The Corporation may, as a condition to the transfer or the registration of transfer of shares of Class B Common Stock to a purported Permitted Transferee, require the furnishing of such affidavits or other proof as it deems necessary to establish that such transferee is a Permitted Transferee. If no indication to the contrary is supplied at the time shares of Class B Common Stock are presented for transfer, the transfer shall be presumed by the Corporation to be a transfer to a person other than the Permitted Transferee.

(4) Shares of Class B Common Stock shall not be registered in “street” or “nominee” names; provided, however, certificates representing shares of Class B Common Stock may be registered in the name of a nominee which is a “Permitted Transferee.” The Corporation shall note on the certificates representing the shares of Class B Common Stock that there are restrictions on transfer and registration of transfer imposed by Sections 4.2(d) and (e).

(5) Notwithstanding anything to the contrary set forth herein, (i) upon the death of Mr. Chander K. Narang, all shares of Class B Common Stock shall be converted automatically into shares of Class A Common Stock on a share-for-share basis, and stock certificates formerly representing such shares of Class B Common Stock shall thereupon and thereafter be deemed to represent a like number of shares of Class A Common Stock; (ii) if Mr. Chander K. Narang transfers shares of Class B Common Stock that he beneficially owns to a Permitted Transferee, and at any time after such transfer he does not exercise voting control over the transferred shares, then all of the shares of Class B Common Stock that have been so transferred to Permitted Transferees and over which Mr. Chander K. Narang does not exercise voting control will automatically convert to an equivalent number of shares of Class A Common Stock; and (iii) upon a Permitted Transferee ceasing to qualify as a Permitted Transferee (and subject to the operation of Section 4.2(j)(9)) all shares of Class B Common Stock held by it shall be converted automatically into shares of Class A Common Stock on a share-for-share basis, and stock certificates formerly representing such shares of Class B Common Stock shall thereupon and thereafter be deemed to represent a like number of shares of Class A Common Stock.

(f) Further Provisions Regarding Conversions.

(1) Any dividends declared and not paid on shares of Common Stock prior to their conversion as provided above shall be paid, on the payment date, to the holder or holders entitled thereto on the record date for such dividend payment, notwithstanding such conversion; provided, however, that such holder or holders shall not be entitled to receive the corresponding dividends declared but not paid on the shares of Common Stock issuable upon such conversion.

(2) In the event of a reclassification or other similar transaction as a result of which the shares of Class A Common Stock are converted into another security, then a holder of Class B Common Stock shall be entitled to receive upon conversion the amount of such security that such holder would have received if such conversion had occurred immediately prior to the record date of such reclassification or other similar transaction.

(3) Shares of the Class B Common Stock converted into Class A Common Stock shall be retired and shall resume the status of authorized but unissued shares of Class B Common Stock.

(4) The issuance of certificates for shares of Class A Common Stock issuable upon the conversion of shares of Class B Common Stock by the registered holder thereof shall be made without charge to the converting holder for any tax imposed on the Corporation in respect of the issue thereof. The Corporation shall not, however, be required to pay any tax that may be payable with respect to any transfer involved in the issue and delivery of any certificate in a name other than that of the registered holder of the shares being converted, and the Corporation shall not be required to issue or deliver any such certificate unless and until the person requesting the issue thereof shall have paid to the Corporation the amount of such tax or has established to the satisfaction of the Corporation that such tax has been paid.

(g) Reservation of Shares. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversions provided for herein, such number of shares of Class A Common Stock as shall from time to time be sufficient to effect the conversions provided for herein and shall take all such corporate action as may be necessary to assure that such shares of Class A Common Stock shall be validly issued, fully paid and non-assessable upon conversion of all of the outstanding shares of Class B Common Stock; moreover, if at any time the number of authorized but unissued shares of Class A Common Stock shall not be sufficient to effect the conversions provided for herein, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Class A Common Stock to such number of shares as shall be sufficient for such purpose.

(h) Adjustments for Stock Splits and Stock Dividends. The Corporation shall treat the shares of Common Stock identically in respect of any subdivisions or combinations (for example, if the Corporation effects a two-for-one stock split with respect to the Class A Common Stock, it shall at the same time effect a two-for-one stock split with respect to the Class B Common Stock).

(i) Mergers, Consolidation, Etc. In the event that the Corporation enters into any consolidation, merger, combination or other transaction in which shares of Common Stock

are exchanged for or changed into other stock or securities, cash and/or any other property, then, and in such event, the shares of each class of Common Stock shall be exchanged for or changed into (1) the same amount of stock, securities, cash and/or any other property, as the case may be, into which or for which each share of any other class of Common Stock is exchanged or changed; provided, however, that if shares of Common Stock are exchanged for or changed into shares of capital stock, such shares so exchanged for or changed into may differ to the extent and only to the extent that the Class A Common Stock and the Class B Common Stock differ as provided herein; or (2) if holders of each class of Common Stock are to receive different distributions of stock, securities, cash and/or any other property, either (i) holders of Class A Common Stock shall receive an amount of stock, securities, cash and/or property per share having a value, as determined by an independent investment banking firm of national reputation selected by the Board of Directors, greater than or equal to the value per share into which or for which each share of Class B Common Stock is exchanged or changed, or (ii) holders of Class A Common Stock and holders of Class B Common Stock shall receive such stock, securities, cash and/or property per share as shall be provided for pursuant to a transaction approved by the holders of a majority of Class A Common Stock and by the holders of a majority of Class B Common Stock, each voting separately as a class.

(j) Permitted Transferee. For purposes of this Certificate of Incorporation, the term “Permitted Transferee” shall mean:

(1) In the case of a holder of record of the Class B Common Stock (the “Class B Holder”) who is a natural person and the beneficial owner of the shares of Class B Common Stock to be transferred, Permitted Transferees shall include only the following:

(a) the spouse of such Class B Holder, any lineal descendant of a grandparent of such Class B Holder, or any spouse of such lineal descendent (herein collectively referred to as “such Class B Holder’s Family Members”);

(b) the trustee or trustees of a trust (including a voting trust) for the sole benefit of such Class B Holder and/or one or more of such Class B Holder’s Permitted Transferees, except that such trust may also grant a general or special power of appointment to one or more of such Class B Holder’s Family Members and may permit trust assets to be used to pay taxes, legacies, and other obligations of the Trust or the estates of one or more of such Class B Holder’s Family Members payable by reason of the death of any of such Family Members; provided, however, if at any time such trust ceases to meet the requirements of this subparagraph (b), all shares of Class B Common Stock then held by such trustee or trustees shall immediately and automatically, without further act or deed on the part of the Corporation or any person, be converted into Class A Common Stock on a share-for-share basis, and stock certificates formerly representing such shares of Class B Common Stock shall thereupon and thereafter be deemed to represent a like number of shares of Class A Common Stock;

(c) a corporation or similar entity wholly owned by such Class B Holder and/or such Class B Holder’s Permitted Transferees or a partnership or similar entity in which all of the general partners are, and all of the general partnership interests are owned by, such Class B Holder and/or such Class B Holder’s Permitted Transferees provided that if by reason of any change in the ownership of such stock or general partners or general partnership

interests, such corporation or partnership would no longer qualify as a Permitted Transferee of such Class B Holder, all shares of Class B Common Stock then held by such corporation or partnership shall immediately and automatically, without further act or deed on the part of the corporation or any other person, be converted into shares of Class A Common Stock on a share-for-share basis, and stock certificates formerly representing such shares of Class B Common Stock shall thereupon and thereafter be deemed to represent a like number of shares of Class A Common Stock;

(d) an organization established by the Class B Holder and/or such Class B Holder’s Permitted Transferees, contributions to which are deductible for federal income, estate, or gift tax purposes (a “Charitable Organization”) and a majority of whose governing board at all times consists of the Class B Holder and/or one or more of the Permitted Transferees of such Class B Holder, or any successor to such Charitable Organization meeting such definition; provided that if by reason of any change in the composition of the governing board of such Charitable Organization, such Charitable Organization shall no longer qualify as a Permitted Transferee of such Class B Holder, all shares of Class B Common Stock then held by such Charitable Organization shall immediately and automatically, without further act or deed on the part of the Corporation or any other person, be converted into shares of Class A Common Stock on a share-for-share basis, and stock certificates formerly representing such shares of Class B Common Stock shall thereupon and thereafter be deemed to represent the like number of shares of Class A Common Stock; and

(e) the executor, administrator, or personal representative of the estate of a deceased Class B Holder or guardian or conservator of a Class B Holder adjudged disabled or incompetent by a court of competent jurisdiction, acting in his capacity as such.

(2) In the case of a Class B Holder who is the executor or administrator of the estate of a deceased Class B Holder or guardian or conservator of the estate of a disabled or incompetent Class B Holder, Permitted Transferees shall include only a Permitted Transferee of such deceased, disabled, or incompetent Class B Holder.

(3) In the case of a Class B Holder holding the shares of Class B Common Stock as trustee pursuant to a trust, Permitted Transferees shall include only the following:

(a) the person who contributed such shares to such trust and any Permitted Transferee of such person, determined in accordance with Section 4.2(j)(i) above; and

(b) any successor trustee of such trust who is described in the immediately preceding subparagraph (j)(3)(a).

(4) In the case of a Class B Holder that is a partnership or similar entity, Permitted Transferees shall include only:

(a) any partner of such partnership who was also a partner of such partnership on the IPO Date;

(b) any person transferring shares of Class B Common Stock to such partnership after the IPO Date (to the extent of the number of shares of Class B Common Stock transferred by the transferor to such partnership); and

(c) any Permitted Transferee of such person referred to in subparagraph (j)(4)(a) or (j)(4)(b) above (not in excess of the number of shares that such person is entitled to receive pursuant to this subparagraph (j)(4)).

(5) In the case of a Class B Holder that is a corporation or similar entity, Permitted Transferees shall include only:

(a) any stockholder of such corporation on the IPO Date who receives shares of Class B Common Stock pro rata to his stock ownership in such corporation through a dividend or a distribution on or upon redemption of the shares of such corporation;

(b) any person transferring shares of Class B Common Stock to such corporation after the IPO Date (to the extent of the number of shares of Class B Common Stock transferred by the transferor to such corporation); and

(c) any Permitted Transferee of such stockholder or person referred to in subparagraph (j)(5)(a) or (j)(5)(b) above (not in excess of the number of shares that such stockholder or person is entitled to receive pursuant to this subparagraph (j)(5)).

(6) An employee benefit plan sponsored by the Corporation or any of its affiliates.

(7) Any Initial Holder.

(8) For purposes of this Section 4.2(j):

(a) The relationship of any person that is derived by or through legal adoption shall be considered a natural one;

(b) Each joint owner of shares of Class B Common Stock shall be considered a Class B Holder of such shares;

(c) A minor for whom shares of Class B stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Class B Holder of such shares; and

(d) Unless otherwise specified, the term “person” means both natural person and legal entities.

(9) Notwithstanding the foregoing, in the event that any transferee of Class B Common Stock is not at the time of transfer or thereafter ceases to qualify as a Permitted Transferee, and within ten business days after the Corporation notifies such person that it has concluded that such person is not or has ceased to qualify as a Permitted Transferee and the bases for such conclusion, such person transfers the shares of Class B Common Stock to a

Permitted Transferee, demonstrates that it is a Permitted Transferee or takes appropriate action so that it qualifies as a Permitted Transferee, then notwithstanding anything else in this Section 4.2, the shares of Class B Common Stock held by such person that converted automatically into shares of Class A Common Stock as a result of such person not being or ceasing to qualify as a Permitted Transferee shall convert back to Class B Common Stock.

(k) Going Private Transaction. With respect to any Going Private Transaction, the holders of shares of Class A Common Stock and Class B Common Stock shall vote together as a single class, with each share of Class A Common Stock and each share of Class B Common Stock entitling the holder thereof to one (1) vote. For purposes of this Section 4(b), the term “Going Private Transaction” shall mean any transaction between the Corporation and (i) an Initial Holder, (ii) any Affiliate of an Initial Holder, or (iii) any group including an Initial Holder or Affiliates of an Initial Holder where the participation of such person or persons in such group would cause the transaction to be deemed a “Rule 13e-3 Transaction,” as such term is defined in Rule 13e-3(a)(3), 17 C.F.R. ss. 240.13e-3(a)(3), as amended from time to time, promulgated under the Securities Exchange Act of 1934, as amended, provided however, that the term “affiliate” as used in Rule 13e-3(a)(3)(i) shall be deemed to include an Affiliate, as defined herein. For purposes hereof, an “Affiliate” of a person shall mean (x) any individual or entity who or that, directly or indirectly, controls, is controlled by, or is under common control with such person, and (y) the spouse, a child or grandchild (by blood, adoption or marriage) of such person, or any trust for the benefit of one or more of the foregoing.

4.3 General. Subject to the foregoing provisions of this Certificate of Incorporation, the Corporation may issue shares of its capital stock from time to time for such consideration (not less than the par value thereof) as may be fixed by the Board of Directors, which is expressly authorized to fix the same in its absolute and uncontrolled discretion subject to the foregoing conditions, or as otherwise provided by law. Shares so issued for which the consideration shall have been paid or delivered to the Corporation shall be deemed fully paid capital stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares.

FIFTH:

5.1 Number of Directors. The number, and terms of the Board of Directors of the Corporation and the procedures to elect directors, to remove directors, and to fill vacancies in the Board of Directors shall be as stated in the Bylaws of the Corporation (the “Bylaws”).

5.2 Powers of the Board of Directors. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In furtherance, and not in limitation, of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to:

(a) adopt, amend, alter, change or repeal Bylaws of the Corporation; provided, however, that no Bylaw hereafter adopted shall invalidate any prior act of the Corporation that would have been valid if such new Bylaws had not been adopted;

(b) subject to the Bylaws as from time to time in effect, determine the rules and procedures for the conduct of the business of the Board of Directors and the management and direction by the Board of Directors of the business and affairs of the Corporation, including the power to designate and empower committees of the Board of Directors, to elect, or authorize the appointment of, and empower officers and other agents of the Corporation, and to determine the time and place of, the notice requirements for, and the manner of conducting, Board meetings, as well as other notice requirements for, and the manner of taking, Board action; and

(c) exercise all such powers and do all such acts as may be exercised or done by the Corporation, subject to the provisions of the Delaware General Corporation Law and this Certificate of Incorporation and Bylaws of the Corporation.

SIXTH:

6.1 Limitation of Liability. No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this provision shall not eliminate or limit the liability of a director (a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under section 174 of the Delaware General Corporation Law or (d) for any transaction from which the director derived any improper personal benefits. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.

6.2 Amendments. Any repeal or modification of Section 6.1 hereof by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

SEVENTH:

7.1 Indemnity Undertaking. The Corporation shall indemnify any person who is or was made, or is threatened to be made, a party to any Proceeding, including, without limitation, an action by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that such person is or was a director or officer of the Corporation, or, at the request of the Corporation, is or was serving as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise (an “Other Entity”), to the fullest extent permitted under the Delaware General Corporation Law, as the same exists or may hereafter be amended, against judgments, fines, penalties, excise taxes, amounts paid in settlement and costs, charges and expenses (including attorneys’ fees, disbursements and other charges), except as provided in Section 7.3. Without limiting the generality of the foregoing, to the extent permitted by then applicable law, the grant of mandatory indemnification pursuant to this Article VII shall extend to Proceedings involving the negligence of such Person.

7.2 Advancement of Expenses. Except as provided in Section 7.3, the Corporation shall reimburse or advance to any director or officer entitled to indemnification hereunder the funds necessary for payment of expenses, including attorneys’ fees and disbursements, incurred in connection with any Proceeding, in advance of the final disposition of such Proceeding; provided, however, that, if required by the Delaware General Corporation Law, such expenses incurred by or on behalf of any director or officer may be paid in advance of the final disposition of a Proceeding only upon receipt by the Corporation of an undertaking, by or on behalf of such director or officer, to repay any such amount so advanced if it shall ultimately be determined by final judicial decision from which there is no further right of appeal that such director or officer is not entitled to be indemnified for such expenses.

7.3 Actions against the Corporation. Notwithstanding anything to the contrary in this Article VII, the Corporation shall not be obligated to indemnify a director or officer or to advance expenses with respect to any claim asserted by such person initially or by cross-claim, counter-claim, or third-party claim, in any Proceeding against the Corporation, except for Proceedings to enforce rights to indemnification (including rights to advancement of expenses), unless, prior to such claim being asserted, the assertion of such claim is approved by the directors of the Corporation by a majority vote of a quorum of the Board of Directors or a committee thereof established for such purpose.

7.4 Rights Not Exclusive. The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article VII shall not be deemed exclusive of any other rights to which a person seeking indemnification or reimbursement or advancement of expenses may have or hereafter be entitled under any statute, this Certificate of Incorporation, the Bylaws, any agreement, any vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office.

7.5 Continuation of Benefits. The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article VII shall continue as to a person who has ceased to be a director or officer (or other person indemnified hereunder) and shall inure to the benefit of the heirs, executors, administrators, and personal representatives of such person.

7.6 Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of an Other Entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article VII, this Certificate of Incorporation or under section 145 of the Delaware General Corporation Law or any other provision of law.

7.7 Binding Effect. The provisions of this Article VII shall be a contract between the Corporation, on the one hand, and each director and officer who serves in such capacity at any time while this Article VII is in effect, on the other hand, pursuant to which the Corporation and each such director or officer intend to be, and shall be, legally bound. No repeal or modification

of this Article VII shall affect any rights or obligations with respect to any state of facts then or theretofore existing or thereafter arising or any Proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.

7.8 Procedural Rights. The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article VII shall be enforceable by any person entitled to such indemnification or reimbursement or advancement of expenses in any court of competent jurisdiction. If a claim for indemnification or advancement of expenses hereunder is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, the claimant shall also be entitled to be paid the expenses of prosecuting such claim. The burden of proving that such indemnification or reimbursement or advancement of expenses is not appropriate shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel and its stockholders) to have made a determination prior to the commencement of such action that such indemnification or reimbursement or, except as otherwise provided in Section 7.3, advancement of expenses is proper in the circumstances nor an actual determination by the Corporation (including its Board of Directors, its independent legal counsel and its stockholders) that such person is not entitled to such indemnification or reimbursement or advancement of expenses shall constitute a defense to the action or create a presumption that such person is not so entitled, except as otherwise provided in Section 7.3. Such a person shall also be indemnified for any expenses incurred in connection with successfully establishing his or her right to such indemnification or reimbursement or advancement of expenses, in whole or in part, in any such Proceeding.

7.9 Indemnification of Others. The Corporation may additionally indemnify any employee or agent of the Corporation to the fullest extent permitted by law.

7.10 Definition of “Proceeding”. As used herein, the term “Proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, any appeal in such an action, suit, or proceeding, and any inquiry or investigation that could lead to such an action, suit, or proceeding.

EIGHTH:

8.1 Action by Unanimous Written Consent. Any action required or permitted by the law to be taken at a meeting of the stockholders of the Corporation may be taken without a meeting and without prior notice, if a consent in writing setting forth the action so taken shall be signed by all of the stockholders who would be entitled to vote thereon at a meeting of the stockholders of the Corporation. Such written consent shall be delivered to the Secretary of the Corporation for filing with the corporate records or inclusion in the minutes of proceedings of the stockholders.

8.2 Meetings of Stockholders. The annual meeting of stockholders for the election of directors and the transaction of such other business as may be brought before such meeting in accordance with this Certificate of Incorporation and the Bylaws shall be held at such hour and on such business day in each year as may be determined by resolution adopted by the affirmative

vote of a majority of the Board. Except as otherwise required by law, special meetings of stockholders may be called by the Secretary at the direction of: (a) the affirmative vote of a majority of the Board, (b) the Chairman of the Board of Directors, (c) the Chief Executive Officer, or (d) the holders of shares representing a majority of the voting power of the outstanding Common Stock entitled to vote at such meeting of stockholders. Annual and special meetings of stockholders shall not be called or held otherwise than as herein provided.

NINTH:    The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provisions contained in this Certificate of Incorporation in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article.

EX-4.1

NCI, Inc.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed

as though they were written out in full according to applicable laws or regulations:

TEN COM	—	as tenants in common	UNIF GIFT MIN ACT —	Custodian
TEN ENT	—	as tenants by the entireties		(Cust)(Minor)
JT TEN	—	as joint tenants with right of survivorship and not as tenants in common		under Uniform Gifts to Minors Act                                                                                  (State)

Additional abbreviations may also be used though not in the above list.

For value received              hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER

      IDENTIFYING NUMBER OF ASSIGNEE

Please print or typewrite name and address including postal zip code of assignee

Shares

of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint

Attorney to transfer the said Shares on the books of the within-named Company with full power of substitution in the premises.

Dated                                                      

Signature

Signature

NOTICE: The signature to this assignment must correspond with the name as written upon the face of the Certificate, in every particular, without alteration or enlargement, or any change whatever.

SIGNATURE(S) GUARANTEED:
	THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

EX-4.4

Exhibit 4.4

NCI, INC.

NOTICE OF STOCK OPTION GRANT

NCI, INC. 2005 PERFORMANCE INCENTIVE PLAN

You have been granted a stock option to purchase Class A Common Stock of NCI, Inc. (the ”Corporation”) under the NCI, Inc. 2005 Performance Incentive Plan (the “Plan”). Your stock option is subject to the terms and conditions set forth in this Notice of Stock Option Grant, the Stock Option Agreement and the Plan. Capitalized terms used in this Notice of Stock Option Grant and the Stock Option Agreement have the same meaning as defined in the Plan.

Name of Participant: [insert name of Participant]

Option Grant Date: [insert date of option grant]

Vesting Commencement Date: [insert date vesting starts]

Exercise Price: $             per Share.

Number of Shares of Common Stock Subject to Option: [Insert total number of shares.]

Type of Option:

[    ] Nonqualified Stock Option (i.e., an option which is not an incentive stock option under Section 422 of the Code).

[    ] Incentive Stock Option (within the meaning of Section 422 of the Code).

Vesting Period: This stock option will become vested and subject to exercise in accordance with the

following schedule:

Period of Continuous Service From Vesting Commencement Date	Percentage of Option Vested
Less than one year	0%
One year	33-1/3 %
Two years	66-2/3%
Three years	100%

By your signature below, you agree that this stock option is granted under and governed by the Stock Option Agreement and the NCI, Inc. 2005 Performance Incentive Plan, which are incorporated herein by reference.

Participant:	NCI, Inc.
	By:
	Title:
print name

NCI, INC.

NOTICE OF STOCK OPTION GRANT

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STOCK OPTION AGREEMENT

NCI, INC. 2005 PERFORMANCE INCENTIVE PLAN

I. PURPOSE.

The Corporation has granted the Participant, pursuant to the Notice of Stock Option Grant and the Corporation’s 2005 Stock Incentive Plan (the “Plan”), a stock option to purchase certain shares of the Corporation’s Class A Common Stock, upon the terms and conditions set forth in this Stock Option Agreement, the Notice of Stock Option Grant and the Plan, the provisions of which are incorporated herein by reference. References in this Agreement to “you” mean the Participant and any holder of shares of Common Stock acquired upon exercise of a Stock Option. Except as provided herein, capitalized terms have the same meaning as defined in the Plan.

II. KIND OF STOCK OPTION.

This Stock Option is intended to be either an incentive stock option, intended to meet the requirements of Section 422 of the Internal Revenue Code (an “ISO”), or a nonqualified stock option (an “NSO”), which is not intended to meet the requirements of an ISO, as indicated in the Notice of Stock Option Grant. Even if this Stock Option is designated as an ISO, it shall be deemed to be an NSO to the extent required by the $100,000 annual limitation under Section 422(d) of the Code.

III. TERMS AND CONDITIONS OF STOCK OPTIONS.

A. Option Exercise: As provided in the Plan, the following rules shall apply to termination of Continuous Service (as defined in Section 1.k. of the Plan):

1. Subject to the terms and conditions of the Plan and this Stock Option Agreement, your Stock Option will be exercisable with respect to the number of shares that have become vested in accordance with the schedule set forth in the Notice of Stock Option Grant. After your Continuous Service terminates for any reason, vesting immediately stops and your Stock Option expires immediately as to the number of Shares that are not vested as of the date of your termination of Continuous Service.

2. If your termination of Continuous Service is by reason of death or Disability (defined for this purpose as a disability qualifying you for benefits under the Corporation’s (or its Related Entity’s) employer-funded long-term disability plan or if no such plan applies to you, Section 22(e)(3) of the Code), the right to exercise the Stock Option (to the extent that it is vested) will expire on the earlier of: (i) one (1) year after the date of your termination of Continuous Service; or (ii) the expiration date under the terms of this Agreement and the Plan. Until the expiration date, your heirs, legatees or legal representative may exercise the Stock Option.

3. If your termination of Continuous Service is an involuntary termination without Cause or a voluntary termination (other than a voluntary termination described in Section III.A.4, below), the right to exercise the Stock Option (to the extent that it is vested) will expire on the earlier of: (i) three (3) months after the date of the your termination of Continuous Service; or (ii) the expiration date under the terms of this Agreement and the Plan. If your termination of Continuous Service is an involuntary termination without Cause or a voluntary termination (other than a voluntary termination described in Section III.A.4, below) and you die after your termination of Continuous Service but before your right to exercise the Stock Option has expired, the right to exercise the Stock Option shall expire on the earlier of (i) one (1) year after the date of your termination of

NCI, INC.

STOCK OPTION AGREEMENT

-1-

Continuous Service, or (ii) the expiration date under the terms of this Agreement and the Plan, and, until expiration, your heirs, legatees or legal representative may exercise the Stock Option.

4. If your termination of Continuous Service is for Cause (as defined in Section 1.d. of the Plan) or is a voluntary termination at any time after an event which would be grounds for your termination of Continuous Service for Cause (as defined in Section 1.d. of the Plan), the right to exercise the Stock Option shall, automatically and without notice, expire as of the date of your termination of Continuous Service.

B. Termination Date. Subject to earlier termination as provided in this Agreement and the Plan, the right to exercise this Stock Option expires at 5:00 p.m. at the Corporation’s corporate headquarters on the tenth annual anniversary of the date of grant.

C. Non Transferability. This Stock Option in non-transferable except by will or by laws of descent and distribution and during the lifetime of Participant shall be exercisable only to the Participant to whom the Stock Option is granted. Notwithstanding the foregoing, however, to the extent permitted by the Committee in its sole discretion, an NSO may be transferred by you to one or more immediate family members or to a family partnership or family trust established for your benefit and/or one or more of your family members to the extent permitted by the Plan.

D. Exercise. The vested portion of this Stock Option shall be exercised by delivery to the Corporation of (a) written notice of exercise stating the number of Shares being purchased (in whole shares only) and such other information as the Corporation shall request and (ii) payment of the Exercise Price in cash or cash equivalents. Alternatively, you may pay all or part of the Exercise Price by surrendering, or attesting to ownership of, shares of the Corporation’s Common Stock already owned by you, provided that shares acquired upon exercise a Stock option have been held by you for at least 6 months. Such shares shall be surrendered to the Corporation in good form for transfer and shall be valued at their Fair Market Value on the date of Stock Option exercise. To the extent that a public market for the Corporation’s Common Stock exists and to the extent permitted by applicable law, in each case as determined by the Corporation, you also may exercise your Stock Option by delivery (on a form prescribed by the Corporation) of an irrevocable direction to a securities broker to sell shares and to deliver all or part of the sale proceeds to the Corporation in payment of the aggregate Exercise Price and, if requested, applicable withholding taxes. The Corporation will provide the forms necessary to make such a cashless exercise. The Corporation may permit such other payment forms as it deems appropriate, subject to applicable laws, regulations and rules.

IV. TAX WITHHOLDING AND REPORTING.

You will not be allowed to exercise this Stock Option unless you pay, or make acceptable arrangements to pay, any taxes required to be withheld as a result of the Stock Option exercise or the sale of Shares acquired upon exercise of this Stock Option. You hereby authorize withholding from payroll or any other payment due you from the Corporation or your employer to satisfy any such withholding tax obligation. If you sell or otherwise dispose of any of the Shares acquired pursuant to the exercise of an ISO on or before the later of (i) two years after the grant date, or (ii) one year after the exercise date, you shall immediately notify the Corporation in writing of such disposition.

V. MISCELLANEOUS.

A. Adjustments. In the event of a stock split, a stock dividend or a similar change in the Corporation’s Stock, the number of Shares covered by this Stock Option and the Exercise Price per share may be adjusted pursuant to the Plan. Your Stock Option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Corporation is subject to such corporate activity as set forth in the Plan.

NCI, INC.

STOCK OPTION AGREEMENT

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B. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

C. Entire Agreement. Except as otherwise expressly set forth herein or in agreements executed contemporaneously herewith, this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

D. Governing Law. It is understood and agreed that the construction and interpretation of this Agreement shall at all times and in all respects be governed by the laws of the State of Delaware without regard to its rules of conflicts of laws.

E. Notices. Any notice permitted or required to be given pursuant to this Stock Option or the Plan shall be in writing and shall be deemed to be delivered upon receipt or, in the case of notices by the Corporation, 5 days after deposit in the U.S. mail, postage prepaid, addressed to Participant at the address last provided to the Corporation by Participant for his or her employee records.

F. Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Corporation and its successors and assigns and you and your successors and the respective successors and assigns of each of them, so long as they hold shares of Common Stock.

G. Headings. Headings of the sections and subsections of this Agreement are for the convenience of the parties only, and shall be given no substantive or interpretative effect whatsoever.

H. Retention Rights. This Agreement does not give you the right to be retained by the Corporation (or a Related Entity) in any capacity. The Corporation and each Related Entity reserves the right to terminate your service at any time and for any reason without thereby incurring any liability to you.

********

NCI, INC.

STOCK OPTION AGREEMENT

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EX-4.5

Exhibit 4.5

AMENDMENT

to

NCI, Inc.

Non-Qualified Stock Option Agreement

This Amendment is entered into by and between NCI, Inc., a Delaware corporation (“NCI-DE”), and the undersigned holder (“Optionee”) of a Non-Qualified Stock Option (the “Stock Option”) originally granted by NCI Information Systems, Inc., a Virginia corporation (“NCI-VA”), pursuant to a Non-Qualified Stock Option Agreement dated June 30, 2004 (the “Stock Option Agreement”).

Whereas, NCI-DE assumed the Stock Option and the Stock Option Agreement pursuant to an Option Assumption Agreement dated ___________ __, 2005;

Whereas, Section 5 of the Stock Option Agreement provides that the Stock Option vests in full on the occurrence of an initial public offering of NCI-DE’s stock;

Whereas, Section 6(a) of the Stock Option Agreement provides that the vested portion of the option shall only become exercisable upon the occurrence of certain events, including, among others, an underwritten public offering of shares; and

Whereas, NCI-DE and Optionee desire to amend the Stock Option Agreement to allow Optionee to exercise the Stock Option in full at any time after NCI-DE executes and delivers a definitive Underwriting Agreement for the purpose of effecting an initial public offering of any shares of its capital stock, all on the terms and conditions provided herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Section 5 is hereby amended to add the following sentence at the end thereof:

“For purposes of this Section 5, an IPO shall be deemed to occur when the Company has entered into a definitive Underwriting Agreement for the purpose of effecting an IPO.”

2. Section 6(a) is hereby amended by deleting clause (b) and replacing it with the following:

“(b) the Company has entered into a definitive Underwriting Agreement for the purpose of effecting an IPO,”

3. Except as amended above, the Stock Option Agreement remains in full force and effect.

4. This Amendment may be signed in counterparts.

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date above written.

NCI,  INC.	OPTIONEE
By:                                                                                                                             Its:

EX-4.6

Exhibit 4.6

NCI INFORMATION SYSTEMS, INC.

2005

Incentive

Compensation

Plan

2005 INCENTIVE COMPENSATION PLAN

Effective January 1, 2005 - December 31, 2005

I. OBJECTIVE

The NCI (“Company”) Incentive Compensation Plan (“Plan”) is designed to provide annual cash incentive awards to NCI’s Senior Executives and selected management personnel. These individuals are considered to be in key positions and responsible for contributing significantly to the strategic, technical and financial success of the Company based upon the achievement of corporate and/or operational unit targets for the subject fiscal year.

II. RESPONSIBILITY

The Vice President of Human Resources administers the NCI ICP Plan with consultation, advice, and support from the CFO. NCI’s finance department will provide the financial operating results specified in the ICP. Discretionary amounts will be determined based on supervisor recommendations and input from COO and will be reviewed and approved by the President and Chairman. The compensation for NCI’s CEO and CFO (including bonuses) will be determined by NCI’s Compensation Committee, which is composed of independent Directors of the Board. The Compensation Committee will also review the recommendations for all officers to ensure consistency and provide recommendations to the CEO or President as appropriate.

III. ELIGIBILITY/PLAN APPLICATION

Individuals must be full time employees during the Plan Year to be eligible to participate in this Plan. Once an individual has started to participate in this plan, in a designated position and salary level, subsequent changes in their salary resulting from such actions as merit increases or equity adjustments will not be a factor in calculating year-end incentive awards. Individuals entering the Plan after January 1^st will have their incentive awards calculated on a prorata basis according to their date of entry into the plan. Individuals must be active employees on the distribution date (typically mid-March of the following year) to be eligible for any payments under the plan.

Individuals participating in this incentive plan are not eligible to participate in any other incentive or bonus plan (e.g. Business Acquisition Incentive Plan) unless explicitly approved by the CEO, President, and COO.

IV. KEY DEFINITIONS

A. Revenue is defined as the total dollar value of the business delivered and recognized by the Corporation, group, or operating unit.

B. Profit is defined as the difference between revenue, as defined above, and the actual direct and indirect expenses/costs incurred by the corporation. The corporate profit number used for ICP purposes is net income after interest and unallowable expenses. For group level profits, the figure used for ICP purposes is actual group profit after all direct and indirect expenses, including group specific unallowable expenses.

NCI 2005 ICP Company Proprietary

C. Direct Labor is defined as the dollar value of the billable direct labor hours worked on fully executed contracts. Direct labor shall be measured on an annual basis from January 1 through December 31.

D. Direct Labor Utilization is defined as the percentage of direct labor divided by the sum of direct and indirect labor (service center labor, overhead labor, PMO labor, non-billable labor, and B&P/IR&D labor.)

V. PLAN DESIGN/ADMINISTRATION

A. A Corporate Bonus Pool will be created to fund the Company’s incentive plans. The 2005 Corporate Bonus Pool will be calculated as a function of Actual Revenues and the Targeted Net Profit percentage, which for 2005 is 6.0%. The actual dollars available for ICP awards will be based on the dollars available in the pool after payouts for all the other incentive plans in 2005.

B. Incentive Awards under the NCI Incentive Compensation Plan will be a function of the Company achieving or exceeding minimum Threshold Levels of the Goals established for the Company and/or Group Threshold Levels, depending on the participant’s incentive plan worksheet. Incentive Award payout amounts may be affected, however, if there are insufficient funds remaining in the Corporate Bonus Pool. In such cases, awards may be adjusted for incentive plan participants.

C. Should the Company fail to achieve its Threshold Profit Level, the Plan will be nullified and any bonus amounts paid to participants will be totally discretionary as determined by the Chairman.

D. The President and/or COO will establish the Corporate and Group Level Goals associated with this Plan on an annual basis. Those organizational goals associated with Operations are coordinated with the respective executive management prior to the approval by the President and/or COO.

E. The Plan Goals are based on normal business operations. The Chairman has the discretion to exclude certain non-recurring or unusual items of revenue or income, such as acquisitions, extraordinary gains or losses unrelated to operations, etc.

F. Each participant will be given a worksheet (attached to this Plan) detailing their specific goals (i.e. Threshold, Target, and Stretch levels), their respective weights and associated bonus awards.

G. To be eligible to participate in the NCI Incentive Compensation Plan, the participant must have executed the attached Incentive Compensation Plan Acceptance Form and their individual worksheet and have returned both to the Vice President of Human Resources, as their indication of the terms and conditions of this Plan.

H. At fiscal year-end, each participant’s performance will be evaluated relative to the degree of achievement against his or her respective targets (i.e. Revenue, Profit, Bookings, etc.). The percent achievement of individually assigned targets will be used in determining the specific amount of a participant’s Incentive Awards. To receive 100% of the Target Award amount

NCI 2005 ICP Company Proprietary

award, the Target level of each of the individual’s designated incentive factors will have to have been attained.

I. Awards to an individual participant for achieving results above the Target Level for any given incentive factor will be limited to 125% of the Target Award amount. However, incentives for Revenue will be capped at 100% unless the budgeted profit margin percentage for that organization is met or exceeded. Extraordinary results above the Stretch level may rewarded above the Stretch payout level at the discretion of the CEO and President and based on the availability of funds in the bonus pool.

VI. INCENTIVE AWARD PAYOUTS

A. The total incentive award amount an individual is eligible to receive is established upon their initial entry into the Plan.

B. Payout of the incentive compensation award will be made on or prior to the 15^th of March of the following calendar year.

C. While it is the intent of the Company to pay Incentive Awards strictly on the basis of achievement of goals, the actual bonus amount an individual receives may also reflect management’s assessment of circumstances which may affect the individual’s accomplishments or corporate results, either negatively or positively. Determination of the final incentive bonus amounts, if any, will be made at the discretion of the President and CEO.

VII. GENERAL CONDITIONS

A. Eligibility for participation and incentive award payment under this plan requires strict compliance with the Company’s Policies and Procedures regarding ethical business conduct, practices and contacts with customer and government representatives, agents, brokers and other intermediaries. Non-compliance, with such Policies and Procedures, as determined by the Company, may constitute cancellation of incentive eligibility.

B. If for any reason the participant’s employment terminates prior to the scheduled bonus payment date, he/she shall not be eligible for any incentive award (including any pro rata amount) derived from NCI’s Incentive Compensation Plan, with respect to that year.

C. If an individual is reclassified into another position not covered by this plan, he/she may be eligible for a pro rata portion of their incentive award, based upon the portion of the year that the individual was covered by this plan.

D. All employees of the Company are employed in an “at will” capacity, which means that either the employees or the Company may terminate the relationship at any time with or without cause. This plan is not considered a contract of employment. Further, this plan shall not in any way diminish or limit the Company’s right to terminate the employment of any individual, at will, in its sole discretion.

E. The issuance of this plan for any year does not in any way commit the Company that the employee will participate in a similar plan or be paid an equivalent bonus in any subsequent year.

NCI 2005 ICP Company Proprietary

F. This plan and its terms, as well as individual compensation, are sensitive and confidential information and must be treated accordingly. Disclosure of any of its terms or conditions may lead to disciplinary action up to and including termination of employment.

G. The CEO reserves the discretion to adjust or eliminate incentive awards as he deems business conditions may warrant and shall have sole responsibility to modify, revise, and/or resolve any controversies concerning the plan.

H. For each participant in the NCI Incentive Compensation Plan, the ICP as described herein supersedes all other plans, documents, offer letters, promises (oral or written) expressed or implied which precede the signing date of this document and address incentive compensation or bonus compensation.

I. Interpretation of this Plan is governed in all respects by the laws of the Commonwealth of Virginia, regardless of where executed. Participants by their executions of this Plan consent to the jurisdiction of the Commonwealth of Virginia.

Attachments:

1. Incentive Compensation Plan Acceptance Form

2. Incentive Compensation Plan Worksheet

Note: The Incentive Compensation Plan Acceptance Form and Worksheet must be signed by the participant and returned to the VP of Human Resources by the due date in order to be eligible for participation in the 2005 Incentive Compensation Plan.

NCI 2005 ICP Company Proprietary

INCENTIVE COMPENSATION PLAN ACCEPTANCE

CONCURRENCE

I have read closely the Foregoing Terms and Conditions of the 2005 NCI Incentive Compensation Plan and acknowledge those terms and conditions as governing my participation in the ICP. I further acknowledge that by refusing to sign or in any other way attempting to change or disagree with the terms or conditions contained in this incentive compensation program, I will no longer be considered a participant in this plan. I also understand that I must be an employee of NCI Information Systems, Inc. on the ICP payment date to be eligible to receive an ICP bonus. ICP bonuses are usually paid on March 15^th.

Acknowledgement of Receipt:	Date:
ICP Participant

Approved:	Date:
Vice President of Human Resources

NCI 2005 ICP Company Proprietary

EX-10.14

Exhibit 10.14

NCI Information Systems, Inc.

Non-Qualified Stock Option Agreement

This Non-Qualified Stock Option Agreement (“Agreement”) is made and entered into as of the date set forth below, by and between NCI Information Systems, Inc., a Virginia corporation (the “Company”), and the following employee of the Company (“Optionee”): Michael W. Solley.

In consideration of the covenants set forth in this Agreement, the parties agree as follows:

1. Option Information

(a)	Date of Grant:	June 30, 2004
(b)	Optionee:	Michael W. Solley
(c)	Number of Shares:	700,000 (Seven hundred thousand)
(d)	Exercise Price:	$.10 (Ten cents)

2. Acknowledgments

(a) Optionee is an employee of the Company.

(b) The Board of Directors of the Company (the “Board” which term shall include an authorized committee of the Board of Directors) and shareholders of the Company have heretofore adopted the NCI Information Systems, Inc. 2003 Performance Incentive Plan (the “Plan”), pursuant to which this Option is being granted.

(c) The Board has authorized the granting to Optionee of a non-qualified stock option (“Option”) to purchase shares of common stock of the Company (“Stock”) upon the terms and conditions hereinafter stated and pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”) provided by Rule 701 thereunder.

(d) Unless otherwise provided herein, terms used herein that are defined in the Plan and not defined herein shall have the meanings attributed thereto in the Plan.

3. Shares; Price

The Company hereby grants to Optionee the right to purchase, upon and subject to the terms and conditions herein stated, the number of shares of Stock set forth in Section 1(c) above (the “Shares”) for cash (or other consideration as is authorized under the Plan and acceptable to the Board, in its sole and absolute discretion) at the price per Share set forth in Section 1(d) above (the “Exercise Price”).

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4. Term of Option; No Right to Continued Employment

(a) Term. This Option shall expire, and all rights under it to purchase the Shares, shall terminate ten (10) years from the Date of Grant, or on such earlier date as shall be provided in Sections 7, 8, 9 or 10 of this Agreement, or as otherwise provided under the Plan.

(b) No Right to Continued Employment. Nothing contained in this Agreement shall confer upon Optionee the right to the continuation of his or her employment and employment shall always remain “at will”, or to interfere with the right of the Company to terminate such employment or to increase or decrease the compensation of Optionee from the rate in existence at the date hereof.

5. Vesting of Option

Subject to the provisions of Sections 7, 8, 9 and 10 of this Agreement, this Option shall vested as follows:

(i) 175,000 shares shall vest on the occurrence of any of the following:

(a) January 1, 2005, or

(b) a Change in Control, or

(c) an initial public offering of the Company’s Stock (“Initial Public Offering” or “IPO”);

(ii) 175,000 shares shall vest on the occurrence of any of the following:

(a) January 1, 2006, or,

(b) Change in Control, or

(c) an initial public offering of the Company’s Stock (“Initial Public Offering” or “IPO”);

(iii) 350,000 shares shall vest on the occurrence of any of the following:

(a) an Initial Public Offering (“IPO”), or

(b) a sale of more than 50% of the stock of the Corporation, or

(c) the achievement of annual revenues of $300,000,000 or compound organic growth of 20% or greater over a consecutive three year period, whichever occurs first, or

(d) seven years from date of grant.

If the Optionee has a termination of uninterrupted service to the Corporation as an employee or director (“Continuous Service”) and such termination event does not result in accelerated vesting of the Option, options which have not previously vested shall terminate. In the event that a Change of Control or an Initial Public Offering (“IPO”) shall occur prior to the Executive’s termination of Continuous Service, (except as provided in 17(e) below), all previously unvested shares shall vest.

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6. Exercise; Transferability

(a) Exercise Event. The vested portion of this Option shall only become exercisable upon the occurrence of one of the following events (each individually an “exercise event”), whichever occurs first: (a) the Company undergoes a Change in Control as that term is defined in the Plan, (b) the Company completes an underwritten public offering of shares (“IPO”), or (c) nine (9) years from the Date of Grant.

(b) Exercise Method. This Option shall be exercised by delivery to the Company of (a) written notice of exercise stating the number of Shares being purchased (in whole shares only) and such other information set forth on the form of Notice of Exercise attached to this Agreement as Appendix A, (b) a check or cash in the amount of the Exercise Price of the Shares covered by the notice (or such other consideration as has been approved by the Board of Directors consistent with the Plan), plus any applicable withholding taxes, and (c) a written investment representation as provided for in Section 15 of this Agreement. Any allowance under the plan for cashless exercise will be subject to any limitations or restrictions imposed under the Sarbanes-Oxley Act of 2002.

(c) Transferability. Unless otherwise required by law, this Option shall not be assignable or transferable other than by will or by the laws of descent and distribution, and except as provided in Section 9 of this Agreement, Options may be exercised during the lifetime of the participant only by the participant (or the participant’s guardian or legal representative). The foregoing notwithstanding, the Committee, in its’ sole discretion, may provide that any Option, other than an Incentive Stock Option, shall be transferable, including for purposes of estate-planning, to the Optionee’s immediate family members (i.e., spouse, children, grandchildren, or siblings, and including the participant), to trusts for the benefit of such immediate family members, and to partnerships in which such family members and family trusts are the partners, or for any other purpose deemed by the Committee to be not inconsistent with the purposes of the Plan, and subject to such terms and conditions as may be specified by the Committee.

7. Effect of Change of Control; Termination or Change in Duties

Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in Control, as defined in the Plan document, and in the event of an involuntary termination of employment or material change in duties within twelve (12) months following a Change in Control, all Stock Options outstanding as of the date of such Change in Control shall become fully vested and exercisable.

8. Termination of Employment

If Optionee shall cease to be employed by the Company for any reason, whether voluntarily or involuntarily, other than by his or her death, disability, or retirement as those terms are defined herein, Optionee shall have the right to retain all fully vested

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Options. Provided, however, if Optionee is terminated “for Cause” as that term is defined by the terms of the Plan or by any employment agreement between the Optionee and the Company, this Option, whether or not vested, shall automatically and without notice terminate as to all Shares covered by this Option not exercised prior to termination.

9. Death or Disability of Optionee

If the Optionee shall terminate from Continuous Service by reason of death or disability (defined for this purpose as a disability qualifying the Optionee for benefits under the Company’s employer-funded long-term disability plan or if no such plan applies, Section 22(e)(3) of the Code), then the portion of this Option which is not vested shall terminate immediately and the portion which is vested shall terminate on the date which 12 months after the later of (i) the date of Optionee’s death or termination for disability or (ii) the date of an exercise event as described in Section 6, provided that the Option shall be subject to earlier termination in accordance with this Agreement and the Plan. Until such termination, the Option may, to the extent that this Option has not previously been exercised by Optionee, be exercised by the Optionee, in the case of disability, or the Optionee’s personal representative or the person entitled to Optionee’s rights under this Agreement, in the case of death. The right to exercise the Option shall remain subject to Section 6 of the Agreement and the Shares received on exercise shall remain subject to the terms and restrictions of this Agreement.

10. Retirement of Optionee

If the Optionee shall retire from Continuous Service on or after normal retirement age (defined under this Agreement as age 65), then the portion of the Option to purchase Shares which is not vested shall terminate immediately and the portion of the Option which is vested shall remain outstanding subject to termination as otherwise provided in this Agreement or the Plan, and the Optionee’s right to exercise the Option shall remain subject to the terms of Section 6.

11. No Rights as Shareholder

Optionee shall have no rights as a shareholder with respect to the Shares covered by any installment of this Option until the effective date of issuance of the Shares following exercise of this Option, and no adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate or certificates are issued except as provided in Section 12 of this Agreement.

12. Recapitalization

(a) Subject to any required action by the shareholders of the Company, the number of Shares covered by this Option, and the Exercise Price thereof, shall be proportionately adjusted for any increase or decrease in the number of issued shares resulting from a subdivision or consolidation of shares or the payment of a stock dividend, or any other

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increase or decrease in the number of such shares effected without receipt of consideration by the Company; provided however that the conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration by the Company.”

(b) In the event of a proposed sale of all or substantially all of the Company’s assets or any reorganization, merger, consolidation, or other form of corporate transaction in which the Company does not survive, or in which the shares of Common Stock are exchanged for or converted into securities issued by another entity, then the successor or acquiring entity or an affiliate thereof may, with the consent of the Committee or the Board, assume the Option or substitute an equivalent option or right. If the successor or acquiring entity or an affiliate thereof, does not cause such an assumption or substitution, then the Option shall terminate upon consummation of the sale, merger, consolidation, or other corporate transaction. The Committee or the Board shall give written notice of any proposed transaction referred to in this Section 12(b) a reasonable period of time prior to the closing date for such transaction (which notice may be given either before or after the approval of such transaction), in order that the Optionee may have a reasonable period of time prior to the closing date of such transaction within which to exercise any portion of the Option that then is exercisable (including any portion that may become exercisable upon the closing date of such transaction). An Optionee may condition his exercise of all or any portion of the Option upon the consummation of the transaction.

(c) Subject to any required action by the shareholders of the Company, if the Company shall be the surviving entity in any merger or consolidation, this Option thereafter shall pertain to and apply to the securities to which a holder of Shares equal to the Shares subject to this Option would have been entitled by reason of the merger or consolidation, and the installment provisions of Section 5 shall continue to apply. In the event of a change in the shares of the Company as presently constituted, which is limited to a change of all of its authorized Stock without par value into the same number of shares of Stock with a par value, the shares resulting from any such change shall be deemed to be the Shares within the meaning of this Option.

(d) To the extent that the foregoing adjustments relate to shares or securities of the Company, such adjustments shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided in this Agreement, Optionee shall have no rights by reason of any subdivision or consolidation of shares of Stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class, and the number and price of Shares subject to this Option shall not be affected by, and no adjustments shall be made by reason of, any dissolution, liquidation, merger, consolidation or sale of assets or capital stock, or any issue by the Company of shares of stock of any class or securities convertible into shares of stock of any class.

(e) The grant of this Option shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes in its

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capital or business structure or to merge, consolidate, dissolve or liquidate or to sell or transfer all or any part of its business or assets.

13. Taxation Upon Exercise of Option

Optionee understands that, upon exercise of this Option, Optionee will recognize income, for Federal and state income tax purposes, in an amount equal to the amount by which the fair market value of the Shares, determined as of the date of exercise, exceeds the Exercise Price. The acceptance of the Shares by Optionee shall constitute an agreement by Optionee to report such income in accordance with then applicable law and to cooperate with Company in establishing the amount of such income and corresponding deduction to the Company for its income tax purposes. Withholding for Federal or state income and employment tax purposes will be made, if and as required by law, from Optionee’s then current compensation, or, if such current compensation is insufficient to satisfy withholding tax liability, the Company may require Optionee to make a cash payment to cover the liability as a condition of the exercise of this Option. Any allowance under the plan for the ability to use shares as payment for any tax liability will be subject to any limitations or restrictions imposed under the Sarbanes-Oxley Act of 2002.

14. Modification, Extension and Renewal of Options

The Board or Committee, as described in the Plan, may modify, extend or renew this Option or accept its surrender (to the extent not yet exercised) and authorize the granting of a new option in substitution for it (to the extent not yet exercised), subject at all times to the Plan, the Code, and the Corporate Securities Rules of the Commonwealth of Virginia. Notwithstanding the foregoing provisions of this Section 14, no modification shall, without the consent of the Optionee, alter to the Optionee’s detriment or impair any rights of Optionee under this Agreement.

15. Investment Intent; Stock Legend

(a) Optionee represents and agrees that if Optionee exercises this Option in whole or in part, Optionee will in each case acquire the Shares upon such exercise for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof; and that upon the exercise of this Option in whole or in part, Optionee (or any person or persons entitled to exercise this Option under the provisions of Section 9 of this Agreement) shall furnish to the Company a written statement to that effect, satisfactory to the Company in form and substance. If the Shares represented by this Option are registered under the Securities Act, either before or after the exercise of this Option in whole or in part, the Optionee shall be relieved of the investment representation and agreement and shall not be required to furnish the Company with the written statement.

(b) Optionee further represents that Optionee has had access to the financial statements or books and records of the Company, has had the opportunity to ask

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questions of the Company concerning its business, operations and financial condition, and to obtain additional information reasonably necessary to verify the accuracy of such information.

(c) Unless and until the Shares represented by this Option are registered under the Securities Act, all certificates representing the Shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend or other similar capital event shall bear legends in substantially the following form:

“THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.”

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO THAT CERTAIN NONSTATUTORY STOCK OPTION AGREEMENT DATED [~ date ~] BETWEEN THE COMPANY AND THE ISSUEE WHICH RESTRICTS THE TRANSFER OF THESE SHARES WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.”

The certificates shall bear such other legend or legends as the Company and its counsel deem necessary or appropriate. Appropriate stop transfer instructions with respect to the Shares have been placed with the Company’s transfer agent.

16. Stand-off Agreement

Optionee agrees that, in connection with any registration of the Company’s securities under the Securities Act, and upon the request of the Company or any underwriter managing an underwritten offering of the Company’s securities, Optionee shall not sell, short any sale of, loan, grant an option for, or otherwise dispose of any of the Shares (other than Shares included in the offering) without the prior written consent of the Company or the managing underwriter, as applicable, for a period of at least 6 months following the effective date of registration of the offering. Additionally, in the event of the occurrence of an IPO, all employees may be subject to certain black-out periods which restrict the ability to sell shares during those periods in accordance with applicable SEC regulations

17. Restrictions While Stock is Not Registered

(a) Restricted Shares. Any shares of Stock acquired upon exercise of the Option specified in Section 1 and (i) all shares of the Company’s capital stock received as a dividend or other distribution upon such shares, and (ii) all shares of capital stock or

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other securities of the Company into which such shares may be changed or for which such shares shall be exchanged, whether through reorganization, recapitalization, stock split-ups or the like, shall be subject to the provisions of this Section 17 at all times, and only at those times, that shares of the Company’s Common Stock or the shares into which they are converted are not registered under the Securities Exchange Act of 1934, as amended (such times during which the Stock is not so registered sometimes hereinafter being referred to as the “Restricted Period”) and are during the Restricted Period hereinafter referred to as “Restricted Shares.”

(b) No Sale or Pledge of Restricted Shares. Except as otherwise provided herein, Optionee agrees and covenants that during the Restricted Period he or she will not sell, pledge, encumber or otherwise transfer or dispose of, and will not permit to be sold, encumbered, attached or otherwise disposed of or transferred in any manner, either voluntarily or by operation of law (all hereinafter collectively referred to as “transfers”), all or any portion of the Restricted Shares or any interest therein except in accordance with and subject to the terms of this Section 17.

(c) Voluntary Transfer Repurchase Option. If Optionee desires to effect a voluntary transfer of any of the Restricted Shares during the Restricted Period, Optionee shall first give written notice to the Company of such intent to transfer (the “Offer Notice”) specifying (i) the number of the Restricted Shares (the “Offered Shares”) and the date of the proposed transfer (which shall not be less than fifty (50) days after the giving of the Offer Notice), (ii) the name, address, and principal business of the proposed transferee (the “Transferee”), and (iii) the price and other terms and conditions of the proposed transfer of the Offered Shares to the Transferee. The Offer Notice by Optionee shall constitute an offer to sell all, but not less than all, of the Offered Shares, at the price and on the terms specified in such Offer Notice, to the Company and/or its designated purchaser. If the Company desires to accept Optionee’s offer to sell, either for itself or on behalf of its designated purchaser, the Company shall signify such acceptance by written notice to Optionee within fifty (50) days following the giving of the Option Notice. Failing such acceptance, Optionee’s offer shall lapse on the fifty-first day following the giving of the Option Notice. With such written acceptance, the Company shall designate a day not later than ten days following the date of giving its notice of acceptance on which the Company or its designated purchaser shall deliver the purchase price of the Offered Shares (in the same form as provided in the Offer Notice) and Optionee shall deliver to the Company or its designated Purchaser, as applicable, all certificates evidencing the Offered Shares endorsed in blank for transfer or with separate stock powers endorsed in blank for transfer. The Company may in its sole and absolute discretion, notify the Optionee within fifty-one days following the giving of the Option Notice that it does not permit the transfer of the Offered Shares to the Transferee pursuant to the terms and conditions set forth in the Option Notice in which event any such transfer or attempted transfer by the Optionee to the Transferee shall be null and void. Upon the lapse without acceptance by the Company of Optionee’s offer to sell the Offered Shares, and unless the Company shall provide written notice to the Optionee within fifty-one days following the giving of the Option Notice that it will not permit the transfer of the Offered Shares to the Transferee pursuant to the terms and conditions set forth in the Option Notice, Optionee shall be free to transfer the Offered

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Shares not purchased by the Company or the designated purchaser to the Transferee (and no one else), for a price and on terms and conditions which are no more favorable to the Transferee than those set forth in the Offer Notice, for a period of thirty days thereafter, but after such period the restrictions of this Section 17 shall again apply to the Restricted Shares. The Offered Shares so transferred by Optionee to the Transferee shall continue to be subject to all of the terms and conditions of this Section 17 (including without limitation paragraph (e) of this Section 17) and the Company shall have the right to require, as a condition of such transfer, that the Transferee execute an agreement substantially in the form and content of the provisions of this Section 17, as well as any voting agreement and/or shareholders agreement required by the Company.

(d) Involuntary Transfer Repurchase Option. Whenever, during the Restricted Period, Optionee has any notice or knowledge of any attempted, pending, or consummated involuntary transfer or lien or charge upon any of the Restricted Shares, whether by operation of law or otherwise, Optionee shall give immediate written notice thereof to the Company. Whenever the Company has any other notice or knowledge of any such attempted, impending, or consummated involuntary transfer, lien, or charge, it shall give written notice thereof to the Optionee. In either case, Optionee agrees to disclose forthwith to the Company all pertinent information in his possession relating thereto. If during the Restricted Period any of the Restricted Shares are subjected to any such involuntary transfer, lien, or charge, the Company and its designated purchaser shall at all times have the immediate and continuing option to purchase such of the Restricted Shares upon notice by the Company to Optionee or other record holder at a price and on terms determined according to Section 17(e) below, and any of the Restricted Shares so purchased by the Company or its designated purchaser shall in every case be free and clear of such transfer, lien, or charge.

(e) Repurchase Option After Termination of Continuous Service. Anything set forth in this Agreement to the contrary notwithstanding, the Company shall have the right (but not the obligation) to purchase or designate a purchaser of all, but not less than all, of the Restricted Shares (including, without limitation, any Restricted Shares transferred pursuant to Section 17(i)) during the Restricted Period and after termination of the Optionee’s Continuous Service for any reason, for the purchase price and on terms specified in Section 17(f) hereof. The Company may exercise its right to purchase or designate a purchaser of the Restricted Shares at any time (without any time limitation) after the Optionee’s termination of Continuous Service and during the Restricted Period. If the Company chooses to exercise its right to purchase the Restricted Shares hereunder, the Company shall give its notice of its exercise of this right to Optionee or his or her legal representative specifying in such notice a date not later than ten (10) days following the date of giving such notice on which the Company or its designated purchaser shall deliver, or be prepared to deliver, the check or promissory note for the purchase price and Optionee or his or her legal representative shall deliver all stock certificates evidencing such Restricted Shares duly endorsed in blank for transfer or with separate stock powers endorsed in blank for transfer.

(f) Repurchase Price. For purposes of Sections 17(d) and (e) hereof, the per share purchase price of Restricted Shares shall be an amount equal to the fair market value of

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such share, determined by the Board as of any date determined by the Board that is not more than one year prior to the date of the event giving rise to the Company’s right to purchase such Restricted Shares. Notwithstanding the foregoing, if the event that gives rise to the Company’s right to repurchase the Restricted Shares is the termination of the Optionee’s Continuous Service by the Company for Cause, (the per share purchase price of the Restricted Shares shall be an amount equal to the lesser of (i) the Fair Market Value of such share (as determined in accordance with the previous sentence), and (ii) the original purchase price per share the Optionee paid for such Restricted Shares. Any determination of Fair Market Value made by the Board shall be binding and conclusive on all parties unless shown to have been made in an arbitrary and capricious manner. The purchase price shall, at the option of the Company, be payable in cash or in the form of the Company’s promissory note payable in up to three (3) equal annual installments commencing twelve (12) months after the acquisition by the Company (the “Restricted Share Acquisition Date”) of the Restricted Shares, together with interest on the unpaid balance thereof at the rate equal to the prime rate of interest as quoted in the Wall Street Journal on the Restricted Share Acquisition Date.

(g) Voting Rights. As a condition to Optionee’s exercise of any Option pursuant to this Agreement, the Company may in its discretion require that Optionee enter into a voting agreement that grants the Company the voting rights for all shares of Stock acquired pursuant to the exercise of such Options, until the earlier of (i) ten (10) years from the date of exercise of the Option, or (ii) the end of the Restricted Period, such voting agreement to be in such form as the Company reasonably may request.

(h) Acceptance of Restrictions. Acceptance of the Shares shall constitute the Optionee’s agreement to such restrictions and the legending of his or her certificates with respect to the restrictions. Notwithstanding the restrictions, however, so long as the Optionee is the holder of the Shares, or any portion of them, he or she shall be entitled to receive all dividends declared on and to vote the Shares and to all other rights of a shareholder with respect to the Shares.

(i) Permitted Transfers. Notwithstanding any provisions of this Section 17 to the contrary, the Committee, in its’ sole discretion, may provide the transfer by gift any Shares subject to this Agreement, including for purposes of estate-planning, to the Optionee’s immediate family members (i.e., spouse, children, grandchildren, or siblings, and including the participant), to trusts for the benefit of such immediate family members, and to partnerships in which such family members and family trusts are the partners, or for any other purpose deemed by the Committee to be not inconsistent with the purposes of the Plan, and subject to such terms and conditions as may be specified by the Committee; provided, that the permitted transferee or transferees shall hold the Shares subject to all the provisions of this Agreement (all references to the Optionee in this Agreement shall in such cases refer to the permitted transferee); and provided further, that notwithstanding any other provisions of this Agreement, a permitted transferee may not, in turn, make permitted transfers without the written consent of the Optionee and the Company.

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(j) S Election. Optionee acknowledges that the Company has elected “S” corporation status under the Internal Revenue Code of 1986, as amended (the “Code”). Optionee agrees that he shall execute or cause to be executed any form or document determined by the Company or its legal counsel to be necessary or appropriate to be executed in order to elect, reinstate, preserve, maintain and maximize the potential benefit of, the Company’s “S” corporation status. In addition, Optionee hereby agrees and covenants that he will not (i) transfer any shares of Stock to any individual who is not a citizen or resident of the United States or to any entity that would cause the Company to cease to be eligible for “S” corporation status under the Code, or (ii) perform or do (or neglect to perform or do) any other act which would or might have the effect of disqualifying the Company’s “S” corporation status under the Code. Optionee further agrees that the Company, upon the consent of a majority of the entire Board, may terminate the “S” corporation election. In such event, Optionee agrees that he shall execute or cause to be executed any form or document determined by the Company or its legal counsel to be necessary or appropriate to be executed in order to terminate the Company’s “S” corporation status.

18. Notices

Any notice required to be given pursuant to this Option or the Plan shall be in writing and shall be deemed to be delivered upon receipt or, in the case of notices by the Company, 5 days after deposit in the U.S. mail, postage prepaid, addressed to Optionee at the address last provided by Optionee for his or her employee records.

19. Agreement Subject to Plan; Applicable Law

This Option is made pursuant to the Plan and shall be interpreted to comply therewith. A copy of the Plan is attached hereto. Any provision of this Option inconsistent with the Plan shall be considered void and replaced with the applicable provision of the Plan. This Option has been granted, executed and delivered in the Commonwealth of Virginia, and the interpretation and enforcement shall be governed by the laws thereof and subject to the exclusive jurisdiction of the courts therein.

In witness whereof, the parties hereto have executed this Option as of the date first above written.

NCI Information Systems, Inc.

/s/ Charles K. Narang

By: Charles K. Narang, President

Optionee:

/s/ Michael W. Solley

Michael W. Solley

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EXHIBIT A

NCI Information Systems, Inc.

OPTION EXERCISE FORM

Date:

Attention:

The undersigned hereby elects to exercise the Options issued to him/her by NCI Information Systems, Inc. (the “Company”) and dated                                  (the “Options”) and to purchase                      shares of Common stock of the company (the “Shares”) at an exercise price of                                  Dollars ($                    ) per share or an aggregate purchase price of                                          Dollars ($                    ) (the “Exercise Price”). Pursuant to the terms of the Option Agreement the undersigned has delivered the Exercise Price herewith in full in cash or                                         .

Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned.

By:

Typed Name:

Address:

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EX-10.15

Exhibit 10.15

OPTION ASSUMPTION AGREEMENT

THIS OPTION ASSUMPTION AGREEMENT (this “Assumption Agreement”), dated September 1, 2005, is entered into by and among NCI Information Systems, Inc., a Virginia corporation (“NCI Virginia”), NCI, Inc., a Delaware corporation (“NCI Delaware”), and the Estate of Norris B. Carter, Estate No. 29060 filed in the Office of the Register of Wills for Frederick County, Maryland (the “Estate”), by the undersigned Personal Representatives of the Estate (the^. “Representatives”).

WHEREAS, NCI Virginia and Norris B. Carter (the “Optionee”) are party to that certain Non-Statutory Stock Option Agreement, dated May 5, 2000, a copy of which is attached hereto as Exhibit A, pursuant to which Optionee was granted an option to purchase 150 shares of NCI Virginia’s common stock, par value $0.01 per share (the “NCI Virginia Common Stock”), at an exercise price of $1.00 per share, which, by reason of a prior adjustment is currently an option to purchase 420,000 shares of NCI Virginia Common Stock at an exercise price of $0.00036 per share (the “Option Agreement”);

WHEREAS, NCI Delaware and NCI Virginia will consummate a series of transactions, as described on Exhibit B hereto (collectively referred to as the “Reincorporation Transaction”), pursuant to which NCI Virginia will become a wholly owned subsidiary of NCI Delaware;

WHEREAS, in connection with the Reincorporation Transaction, NCI Delaware has agreed to assume all of the issued and outstanding options of NCI Virginia;

WHEREAS, each option to purchase one share of NCI Virginia Common Stock issued by NCI Virginia shall be converted into an option to purchase one share of Class A common stock of NCI Delaware (each, a “NCI Class A Share”) pursuant to NCI Delaware’s 2005 Performance Plan (the “NCI Delaware Plan”), a copy of which is attached hereto as Exhibit C; and

WHEREAS, Optionee died on August 2, 2005. The Representatives were appointed on September 1, 2005 by the Register of Wills for Frederick County, Maryland to serve as Co-Personal Representatives of the Estate.

NOW, THEREFORE, the parties agree that, in consideration of the mutual promises set forth in this Assumption Agreement, and as of the effective time of the Reincorporation Transaction:

1. Subject to the terms and conditions hereof, NCI Delaware hereby assumes all rights and obligations of NCI Virginia with respect to the Option Agreement, and the Representatives, on behalf of the Estate, acknowledge and accept such assumption.

2. The NCI Virginia Option is hereby converted into an option to purchase 420,000 NCI Delaware Class A Shares (the “Optionee’s Shares”), at an exercise price of $0.00036 per share, subject to adjustment in accordance with the last paragraph of Section 13(c) of the Option Agreement.

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3. Effective upon the closing of the sale and payment for 219,053 of the Optionee’s Shares as part of NCI Delaware’s initial public offering of Class A Shares under the Securities Act of 1933, as amended, to occur on or about October 15, 2005 (the “NCI IPO”), as more particularly described in a Form S-1 Registration Statement filed with the Securities and Exchange Commission on September 2, 2005, the Estate shall waive, release and forever discharge NCI Virginia and NCI Delaware from:

(a) the obligation set forth in the last sentence of Section 2 of the Option Agreement regarding Optionee’s right to sell shares issuable upon exercise of the Option Agreement, as assumed by NCI Delaware, to NCI Delaware;

(b) the obligation set forth in Section 10 of the Option Agreement regarding registration rights; and,

(c) any obligation to provide additional options pursuant to Sections 13(a) or 13(b) and the first paragraph of Section 13 (c) of the Option Agreement.

4. The parties acknowledge and agree that the rights under the Option Agreement to acquire Class A Shares may be exercised immediately prior to the NCI IPO in order to include such shares in that offering, and that NCI Delaware will bear all of the fees, costs and expenses (including underwriting discounts and commissions, but expressly excluding any applicable taxes) in connection with offering and sale of the Optionee’s Shares in the NCI IPO.

5. Except as otherwise provided herein, the terms of the Option Agreement shall remain in full force and effect; provided, that, to the extent any term or condition of the Option Agreement is inconsistent with or conflicts with any term or condition of this Assumption Agreement, the term or condition of this Assumption Agreement shall control. With respect only to the Optionee’s Shares not sold in the NCI IPO, except as otherwise provided herein, the terms of the Option Agreement shall remain in full force and effect; provided, that, to the extent any term or condition of the Option Agreement is inconsistent with or conflicts with any term or condition of this Assumption Agreement or the NCI Delaware Plan, the term or condition of this Assumption Agreement or the NCI Delaware Plan shall control.

6. The provisions of this Assumption Agreement are independent and severable. To the extent that any one provision is rendered inoperative, or is contrary to law, the parties agree that, to the extent possible, all other provisions of the Assumption Agreement shall be given full force and effect.

7. This Assumption Agreement shall be interpreted and construed under the laws of the Commonwealth of Virginia without regard to its conflicts of laws principles.

8. This Assumption Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which together will constitute one and the same instrument.

[Signatures appear on following page.]

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IN WITNESS WHEREOF, by signing below, the parties agree to be bound by the terms of this Assumption Agreement.

Estate of Norris B. Carter, by its Co- Personal Representatives	NCI, INC.
/s/ Norris B. Carter, Jr.	By:	/s/ Judith Bjornaas
Norris B. Carter, Jr., Co-Personal		Name:	/s/ Judith Bjornaas
Representative		Title:	Chief Financial Officer
/s/ Cynthia M. Carter
Cynthia M. Carter, Co-Personal
Representative

NCI Information Systems, Inc.
By:	/s/ Judith Bjornaas
	Name:	Judith Bjornaas
	Title:	Chief Financial Officer

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EXHIBIT A

Option Agreement

(See attached.)

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EXHIBIT B

Reincorporation Transaction

NCI Virginia will become a wholly owned subsidiary of NCI Delaware as a result of the following transactions (collectively referred to as the “Reincorporation Transaction”):

NCI Delaware will form Acquisition, LLC, a Virginia limited liability company (“Acquisition”), as a wholly owned subsidiary.

Charles Narang will contribute each of his shares of NCI Virginia Common Stock to Acquisition in exchange for one share of Class B common stock of NCI Delaware (each, a “NCI Delaware Class B Share”) pursuant to a Share Exchange Agreement.

Acquisition and NCI Delaware will become parties to an Agreement and Plan of Merger, pursuant to which (1) NCI Virginia will merge with Acquisition, with NCI Virginia being the surviving entity of such merger, and the existence of Acquisition terminating (the “Merger”), and (2) each share of NCI Virginia Common Stock issued and outstanding converting, by virtue of the Merger and without any action on the part of the holder thereof, into a right to receive, upon surrender of the certificate representing such NCI Virginia Common Stock, one share of Class A common stock of NCI Delaware (each, a “NCI Delaware Class A Share”), with all NCI Virginia Common Stock owned by NCI Virginia as treasury stock being no longer outstanding, and automatically cancelled and retired without payment of any consideration therefor.

Each NCI Delaware Class A Share will have the same rights and preferences as each NCI Delaware Class B Share, except that each NCI Delaware Class A Share will be entitled to one vote and each NCI Delaware Class B Share will be entitled to ten votes and will be convertible into one share of NCI Delaware Class A Share.

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EXHIBIT C

NCI Delaware’s 2005 Performance Plan

(See attached).

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EX-10.16

Exhibit 10.16

NCI Information Systems, Inc.

Non-Qualified Stock Option Agreement

This Non-Qualified Stock Option Agreement (“Agreement”) is made and entered into as of the date set forth below, by and between NCI Information Systems, Inc., a Virginia corporation (the “Company”), and the following employee of the Company (“Optionee”): Judith L. Bjornaas.

In consideration of the covenants set forth in this Agreement, the parties agree as follows:

1. Option Information

(a)	Date of Grant:	June 30, 2004
(b)	Optionee:	Judith L. Bjornaas
(c)	Number of Shares:	25,000 (Twenty-five thousand)
(d)	Exercise Price:	$.10 (Ten cents)

2. Acknowledgments

(a) Optionee is an employee of the Company.

(b) The Board of Directors of the Company (the “Board” which term shall include an authorized committee of the Board of Directors) and shareholders of the Company have heretofore adopted the NCI Information Systems, Inc. 2003 Performance Incentive Plan (the “Plan”), pursuant to which this Option is being granted.

(c) The Board has authorized the granting to Optionee of a non-qualified stock option (“Option”) to purchase shares of common stock of the Company (“Stock”) upon the terms and conditions hereinafter stated and pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”) provided by Rule 701 thereunder.

(d) Unless otherwise provided herein, terms used herein that are defined in the Plan and not defined herein shall have the meanings attributed thereto in the Plan.

3. Shares; Price

The Company hereby grants to Optionee the right to purchase, upon and subject to the terms and conditions herein stated, the number of shares of Stock set forth in Section 1(c) above (the “Shares”) for cash (or other consideration as is authorized under the Plan and acceptable to the Board, in its sole and absolute discretion) at the price per Share set forth in Section 1(d) above (the “Exercise Price”).

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4. Term of Option; No Right to Continued Employment

(a) Term. This Option shall expire, and all rights under it to purchase the Shares, shall terminate ten (10) years from the Date of Grant, or on such earlier date as shall be provided in Sections 7, 8, 9 or 10 of this Agreement, or as otherwise provided under the Plan.

(b) No Right to Continued Employment. Nothing contained in this Agreement shall confer upon Optionee the right to the continuation of his or her employment and employment shall always remain “at will”, or to interfere with the right of the Company to terminate such employment or to increase or decrease the compensation of Optionee from the rate in existence at the date hereof.

5. Vesting of Option

Subject to the provisions of Sections 7, 8, 9 and 10 of this Agreement, this Option shall vested on the occurrence of any of the following:

(i) January 1, 2005, or

(ii) a Change in Control, or

(iii) an Initial Public Offering of the Company’s Stock (“IPO”).

If the Optionee has a termination of uninterrupted service to the Corporation as an employee or director (“Continuous Service”) and such termination event does not result in accelerated vesting of the Option, options which have not previously vested shall terminate. In the event that a Change of Control or an Initial Public Offering (“IPO”) shall occur prior to the Executive’s termination of Continuous Service, (except as provided in 17(e) below), all previously unvested shares shall vest.

6. Exercise; Transferability

(a) Exercise Event. The vested portion of this Option shall only become exercisable upon the occurrence of one of the following events (each individually an “exercise event”), whichever occurs first: (a) the Company undergoes a Change in Control as that term is defined in the Plan, (b) the Company completes an underwritten public offering of shares (“IPO”), or (c) nine (9) years from the Date of Grant.

(b) Exercise Method. This Option shall be exercised by delivery to the Company of (a) written notice of exercise stating the number of Shares being purchased (in whole shares only) and such other information set forth on the form of Notice of Exercise attached to this Agreement as Appendix A, (b) a check or cash in the amount of the Exercise Price of the Shares covered by the notice (or such other consideration as has been approved by the Board of Directors consistent with the Plan), plus any applicable withholding taxes, and (c) a written investment representation as provided for in Section 15 of this Agreement. Any allowance under the plan for cashless exercise will

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be subject to any limitations or restrictions imposed under the Sarbanes-Oxley Act of 2002.

(c) Transferability. Unless otherwise required by law, this Option shall not be assignable or transferable other than by will or by the laws of descent and distribution, and except as provided in Section 9 of this Agreement, Options may be exercised during the lifetime of the participant only by the participant (or the participant’s guardian or legal representative). The foregoing notwithstanding, the Committee, in its’ sole discretion, may provide that any Option, other than an Incentive Stock Option, shall be transferable, including for purposes of estate-planning, to the Optionee’s immediate family members (i.e., spouse, children, grandchildren, or siblings, and including the participant), to trusts for the benefit of such immediate family members, and to partnerships in which such family members and family trusts are the partners, or for any other purpose deemed by the Committee to be not inconsistent with the purposes of the Plan, and subject to such terms and conditions as may be specified by the Committee.

7. Effect of Change of Control; Termination or Change in Duties

Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in Control, as defined in the Plan document, and in the event of an involuntary termination of employment or material change in duties within twelve (12) months following a Change in Control, all Stock Options outstanding as of the date of such Change in Control shall become fully vested and exercisable.

8. Termination of Employment

If Optionee shall cease to be employed by the Company for any reason, whether voluntarily or involuntarily, other than by his or her death, disability, or retirement as those terms are defined herein, Optionee shall have the right to retain all fully vested Options. Provided, however, if Optionee is terminated “for Cause” as that term is defined by the terms of the Plan or by any employment agreement between the Optionee and the Company, this Option, whether or not vested, shall automatically and without notice terminate as to all Shares covered by this Option not exercised prior to termination.

9. Death or Disability of Optionee

If the Optionee shall terminate from Continuous Service by reason of death or disability (defined for this purpose as a disability qualifying the Optionee for benefits under the Company’s employer-funded long-term disability plan or if no such plan applies, Section 22(e)(3) of the Code), then the portion of this Option which is not vested shall terminate immediately and the portion which is vested shall terminate on the date which 12 months after the later of (i) the date of Optionee’s death or termination for disability or (ii) the date of an exercise event as described in Section 6, provided that the Option shall be subject to earlier termination in accordance with this Agreement and the Plan. Until such termination, the Option may, to the extent that this Option has not previously

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been exercised by Optionee, be exercised by the Optionee, in the case of disability, or the Optionee’s personal representative or the person entitled to Optionee’s rights under this Agreement, in the case of death. The right to exercise the Option shall remain subject to Section 6 of the Agreement and the Shares received on exercise shall remain subject to the terms and restrictions of this Agreement.

10. Retirement of Optionee

If the Optionee shall retire from Continuous Service on or after normal retirement age (defined under this Agreement as age 65), then the portion of the Option to purchase Shares which is not vested shall terminate immediately and the portion of the Option which is vested shall remain outstanding subject to termination as otherwise provided in this Agreement or the Plan, and the Optionee’s right to exercise the Option shall remain subject to the terms of Section 6.

11. No Rights as Shareholder

Optionee shall have no rights as a shareholder with respect to the Shares covered by any installment of this Option until the effective date of issuance of the Shares following exercise of this Option, and no adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate or certificates are issued except as provided in Section 12 of this Agreement.

12. Recapitalization

(a) Subject to any required action by the shareholders of the Company, the number of Shares covered by this Option, and the Exercise Price thereof, shall be proportionately adjusted for any increase or decrease in the number of issued shares resulting from a subdivision or consolidation of shares or the payment of a stock dividend, or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company; provided however that the conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration by the Company.”

(b) In the event of a proposed sale of all or substantially all of the Company’s assets or any reorganization, merger, consolidation, or other form of corporate transaction in which the Company does not survive, or in which the shares of Common Stock are exchanged for or converted into securities issued by another entity, then the successor or acquiring entity or an affiliate thereof may, with the consent of the Committee or the Board, assume the Option or substitute an equivalent option or right. If the successor or acquiring entity or an affiliate thereof, does not cause such an assumption or substitution, then the Option shall terminate upon consummation of the sale, merger, consolidation, or other corporate transaction. The Committee or the Board shall give written notice of any proposed transaction referred to in this Section 12(b) a reasonable period of time prior to the closing date for such transaction (which notice may be given either before or after the approval of such transaction), in order that the Optionee may

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have a reasonable period of time prior to the closing date of such transaction within which to exercise any portion of the Option that then is exercisable (including any portion that may become exercisable upon the closing date of such transaction). An Optionee may condition his exercise of all or any portion of the Option upon the consummation of the transaction.

(c) Subject to any required action by the shareholders of the Company, if the Company shall be the surviving entity in any merger or consolidation, this Option thereafter shall pertain to and apply to the securities to which a holder of Shares equal to the Shares subject to this Option would have been entitled by reason of the merger or consolidation, and the installment provisions of Section 5 shall continue to apply. In the event of a change in the shares of the Company as presently constituted, which is limited to a change of all of its authorized Stock without par value into the same number of shares of Stock with a par value, the shares resulting from any such change shall be deemed to be the Shares within the meaning of this Option.

(d) To the extent that the foregoing adjustments relate to shares or securities of the Company, such adjustments shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided in this Agreement, Optionee shall have no rights by reason of any subdivision or consolidation of shares of Stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class, and the number and price of Shares subject to this Option shall not be affected by, and no adjustments shall be made by reason of, any dissolution, liquidation, merger, consolidation or sale of assets or capital stock, or any issue by the Company of shares of stock of any class or securities convertible into shares of stock of any class.

(e) The grant of this Option shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes in its capital or business structure or to merge, consolidate, dissolve or liquidate or to sell or transfer all or any part of its business or assets.

13. Taxation Upon Exercise of Option

Optionee understands that, upon exercise of this Option, Optionee will recognize income, for Federal and state income tax purposes, in an amount equal to the amount by which the fair market value of the Shares, determined as of the date of exercise, exceeds the Exercise Price. The acceptance of the Shares by Optionee shall constitute an agreement by Optionee to report such income in accordance with then applicable law and to cooperate with Company in establishing the amount of such income and corresponding deduction to the Company for its income tax purposes. Withholding for Federal or state income and employment tax purposes will be made, if and as required by law, from Optionee’s then current compensation, or, if such current compensation is insufficient to satisfy withholding tax liability, the Company may require Optionee to make a cash payment to cover the liability as a condition of the exercise of this Option. Any allowance under the plan for the ability to use shares as payment for any tax

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liability will be subject to any limitations or restrictions imposed under the Sarbanes-Oxley Act of 2002.

14. Modification, Extension and Renewal of Options

The Board or Committee, as described in the Plan, may modify, extend or renew this Option or accept its surrender (to the extent not yet exercised) and authorize the granting of a new option in substitution for it (to the extent not yet exercised), subject at all times to the Plan, the Code, and the Corporate Securities Rules of the Commonwealth of Virginia. Notwithstanding the foregoing provisions of this Section 14, no modification shall, without the consent of the Optionee, alter to the Optionee’s detriment or impair any rights of Optionee under this Agreement.

15. Investment Intent; Stock Legend

(a) Optionee represents and agrees that if Optionee exercises this Option in whole or in part, Optionee will in each case acquire the Shares upon such exercise for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof; and that upon the exercise of this Option in whole or in part, Optionee (or any person or persons entitled to exercise this Option under the provisions of Section 9 of this Agreement) shall furnish to the Company a written statement to that effect, satisfactory to the Company in form and substance. If the Shares represented by this Option are registered under the Securities Act, either before or after the exercise of this Option in whole or in part, the Optionee shall be relieved of the investment representation and agreement and shall not be required to furnish the Company with the written statement.

(b) Optionee further represents that Optionee has had access to the financial statements or books and records of the Company, has had the opportunity to ask questions of the Company concerning its business, operations and financial condition, and to obtain additional information reasonably necessary to verify the accuracy of such information.

(c) Unless and until the Shares represented by this Option are registered under the Securities Act, all certificates representing the Shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend or other similar capital event shall bear legends in substantially the following form:

“THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.”

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“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO THAT CERTAIN NONSTATUTORY STOCK OPTION AGREEMENT DATED [~ date ~] BETWEEN THE COMPANY AND THE ISSUEE WHICH RESTRICTS THE TRANSFER OF THESE SHARES WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.”

The certificates shall bear such other legend or legends as the Company and its counsel deem necessary or appropriate. Appropriate stop transfer instructions with respect to the Shares have been placed with the Company’s transfer agent.

16. Stand-off Agreement

Optionee agrees that, in connection with any registration of the Company’s securities under the Securities Act, and upon the request of the Company or any underwriter managing an underwritten offering of the Company’s securities, Optionee shall not sell, short any sale of, loan, grant an option for, or otherwise dispose of any of the Shares (other than Shares included in the offering) without the prior written consent of the Company or the managing underwriter, as applicable, for a period of at least 6 months following the effective date of registration of the offering. Additionally, in the event of the occurrence of an IPO, all employees may be subject to certain black-out periods which restrict the ability to sell shares during those periods in accordance with applicable SEC regulations

17. Restrictions While Stock is Not Registered

(a) Restricted Shares. Any shares of Stock acquired upon exercise of the Option specified in Section 1 and (i) all shares of the Company’s capital stock received as a dividend or other distribution upon such shares, and (ii) all shares of capital stock or other securities of the Company into which such shares may be changed or for which such shares shall be exchanged, whether through reorganization, recapitalization, stock split-ups or the like, shall be subject to the provisions of this Section 17 at all times, and only at those times, that shares of the Company’s Common Stock or the shares into which they are converted are not registered under the Securities Exchange Act of 1934, as amended (such times during which the Stock is not so registered sometimes hereinafter being referred to as the “Restricted Period”) and are during the Restricted Period hereinafter referred to as “Restricted Shares.”

(b) No Sale or Pledge of Restricted Shares. Except as otherwise provided herein, Optionee agrees and covenants that during the Restricted Period he or she will not sell, pledge, encumber or otherwise transfer or dispose of, and will not permit to be sold, encumbered, attached or otherwise disposed of or transferred in any manner, either voluntarily or by operation of law (all hereinafter collectively referred to as “transfers”), all or any portion of the Restricted Shares or any interest therein except in accordance with and subject to the terms of this Section 17.

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(c) Voluntary Transfer Repurchase Option. If Optionee desires to effect a voluntary transfer of any of the Restricted Shares during the Restricted Period, Optionee shall first give written notice to the Company of such intent to transfer (the “Offer Notice”) specifying (i) the number of the Restricted Shares (the “Offered Shares”) and the date of the proposed transfer (which shall not be less than fifty (50) days after the giving of the Offer Notice), (ii) the name, address, and principal business of the proposed transferee (the “Transferee”), and (iii) the price and other terms and conditions of the proposed transfer of the Offered Shares to the Transferee. The Offer Notice by Optionee shall constitute an offer to sell all, but not less than all, of the Offered Shares, at the price and on the terms specified in such Offer Notice, to the Company and/or its designated purchaser. If the Company desires to accept Optionee’s offer to sell, either for itself or on behalf of its designated purchaser, the Company shall signify such acceptance by written notice to Optionee within fifty (50) days following the giving of the Option Notice. Failing such acceptance, Optionee’s offer shall lapse on the fifty-first day following the giving of the Option Notice. With such written acceptance, the Company shall designate a day not later than ten days following the date of giving its notice of acceptance on which the Company or its designated purchaser shall deliver the purchase price of the Offered Shares (in the same form as provided in the Offer Notice) and Optionee shall deliver to the Company or its designated Purchaser, as applicable, all certificates evidencing the Offered Shares endorsed in blank for transfer or with separate stock powers endorsed in blank for transfer. The Company may in its sole and absolute discretion, notify the Optionee within fifty-one days following the giving of the Option Notice that it does not permit the transfer of the Offered Shares to the Transferee pursuant to the terms and conditions set forth in the Option Notice in which event any such transfer or attempted transfer by the Optionee to the Transferee shall be null and void. Upon the lapse without acceptance by the Company of Optionee’s offer to sell the Offered Shares, and unless the Company shall provide written notice to the Optionee within fifty-one days following the giving of the Option Notice that it will not permit the transfer of the Offered Shares to the Transferee pursuant to the terms and conditions set forth in the Option Notice, Optionee shall be free to transfer the Offered Shares not purchased by the Company or the designated purchaser to the Transferee (and no one else), for a price and on terms and conditions which are no more favorable to the Transferee than those set forth in the Offer Notice, for a period of thirty days thereafter, but after such period the restrictions of this Section 17 shall again apply to the Restricted Shares. The Offered Shares so transferred by Optionee to the Transferee shall continue to be subject to all of the terms and conditions of this Section 17 (including without limitation paragraph (e) of this Section 17) and the Company shall have the right to require, as a condition of such transfer, that the Transferee execute an agreement substantially in the form and content of the provisions of this Section 17, as well as any voting agreement and/or shareholders agreement required by the Company.

(d) Involuntary Transfer Repurchase Option. Whenever, during the Restricted Period, Optionee has any notice or knowledge of any attempted, pending, or consummated involuntary transfer or lien or charge upon any of the Restricted Shares, whether by operation of law or otherwise, Optionee shall give immediate written notice thereof to the Company. Whenever the Company has any other notice or knowledge of any such attempted, impending, or consummated involuntary transfer, lien, or charge, it shall give

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written notice thereof to the Optionee. In either case, Optionee agrees to disclose forthwith to the Company all pertinent information in his possession relating thereto. If during the Restricted Period any of the Restricted Shares are subjected to any such involuntary transfer, lien, or charge, the Company and its designated purchaser shall at all times have the immediate and continuing option to purchase such of the Restricted Shares upon notice by the Company to Optionee or other record holder at a price and on terms determined according to Section 17(e) below, and any of the Restricted Shares so purchased by the Company or its designated purchaser shall in every case be free and clear of such transfer, lien, or charge.

(e) Repurchase Option After Termination of Continuous Service. Anything set forth in this Agreement to the contrary notwithstanding, the Company shall have the right (but not the obligation) to purchase or designate a purchaser of all, but not less than all, of the Restricted Shares (including, without limitation, any Restricted Shares transferred pursuant to Section 17(i)) during the Restricted Period and after termination of the Optionee’s Continuous Service for any reason, for the purchase price and on terms specified in Section 17(f) hereof. The Company may exercise its right to purchase or designate a purchaser of the Restricted Shares at any time (without any time limitation) after the Optionee’s termination of Continuous Service and during the Restricted Period. If the Company chooses to exercise its right to purchase the Restricted Shares hereunder, the Company shall give its notice of its exercise of this right to Optionee or his or her legal representative specifying in such notice a date not later than ten (10) days following the date of giving such notice on which the Company or its designated purchaser shall deliver, or be prepared to deliver, the check or promissory note for the purchase price and Optionee or his or her legal representative shall deliver all stock certificates evidencing such Restricted Shares duly endorsed in blank for transfer or with separate stock powers endorsed in blank for transfer.

(f) Repurchase Price. For purposes of Sections 17(d) and (e) hereof, the per share purchase price of Restricted Shares shall be an amount equal to the fair market value of such share, determined by the Board as of any date determined by the Board that is not more than one year prior to the date of the event giving rise to the Company’s right to purchase such Restricted Shares. Notwithstanding the foregoing, if the event that gives rise to the Company’s right to repurchase the Restricted Shares is the termination of the Optionee’s Continuous Service by the Company for Cause, (the per share purchase price of the Restricted Shares shall be an amount equal to the lesser of (i) the Fair Market Value of such share (as determined in accordance with the previous sentence), and (ii) the original purchase price per share the Optionee paid for such Restricted Shares. Any determination of Fair Market Value made by the Board shall be binding and conclusive on all parties unless shown to have been made in an arbitrary and capricious manner. The purchase price shall, at the option of the Company, be payable in cash or in the form of the Company’s promissory note payable in up to three (3) equal annual installments commencing twelve (12) months after the acquisition by the Company (the “Restricted Share Acquisition Date”) of the Restricted Shares, together with interest on the unpaid balance thereof at the rate equal to the prime rate of interest as quoted in the Wall Street Journal on the Restricted Share Acquisition Date.

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(g) Voting Rights. As a condition to Optionee’s exercise of any Option pursuant to this Agreement, the Company may in its discretion require that Optionee enter into a voting agreement that grants the Company the voting rights for all shares of Stock acquired pursuant to the exercise of such Options, until the earlier of (i) ten (10) years from the date of exercise of the Option, or (ii) the end of the Restricted Period, such voting agreement to be in such form as the Company reasonably may request.

(h) Acceptance of Restrictions. Acceptance of the Shares shall constitute the Optionee’s agreement to such restrictions and the legending of his or her certificates with respect to the restrictions. Notwithstanding the restrictions, however, so long as the Optionee is the holder of the Shares, or any portion of them, he or she shall be entitled to receive all dividends declared on and to vote the Shares and to all other rights of a shareholder with respect to the Shares.

(i) Permitted Transfers. Notwithstanding any provisions of this Section 17 to the contrary, the Committee, in its’ sole discretion, may provide the transfer by gift any Shares subject to this Agreement, including for purposes of estate-planning, to the Optionee’s immediate family members (i.e., spouse, children, grandchildren, or siblings, and including the participant), to trusts for the benefit of such immediate family members, and to partnerships in which such family members and family trusts are the partners, or for any other purpose deemed by the Committee to be not inconsistent with the purposes of the Plan, and subject to such terms and conditions as may be specified by the Committee; provided, that the permitted transferee or transferees shall hold the Shares subject to all the provisions of this Agreement (all references to the Optionee in this Agreement shall in such cases refer to the permitted transferee); and provided further, that notwithstanding any other provisions of this Agreement, a permitted transferee may not, in turn, make permitted transfers without the written consent of the Optionee and the Company.

(j) S Election. Optionee acknowledges that the Company has elected “S” corporation status under the Internal Revenue Code of 1986, as amended (the “Code”). Optionee agrees that he shall execute or cause to be executed any form or document determined by the Company or its legal counsel to be necessary or appropriate to be executed in order to elect, reinstate, preserve, maintain and maximize the potential benefit of, the Company’s “S” corporation status. In addition, Optionee hereby agrees and covenants that he will not (i) transfer any shares of Stock to any individual who is not a citizen or resident of the United States or to any entity that would cause the Company to cease to be eligible for “S” corporation status under the Code, or (ii) perform or do (or neglect to perform or do) any other act which would or might have the effect of disqualifying the Company’s “S” corporation status under the Code. Optionee further agrees that the Company, upon the consent of a majority of the entire Board, may terminate the “S” corporation election. In such event, Optionee agrees that he shall execute or cause to be executed any form or document determined by the Company or its legal counsel to be necessary or appropriate to be executed in order to terminate the Company’s “S” corporation status.

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18. Notices

Any notice required to be given pursuant to this Option or the Plan shall be in writing and shall be deemed to be delivered upon receipt or, in the case of notices by the Company, 5 days after deposit in the U.S. mail, postage prepaid, addressed to Optionee at the address last provided by Optionee for his or her employee records.

19. Agreement Subject to Plan; Applicable Law

This Option is made pursuant to the Plan and shall be interpreted to comply therewith. A copy of the Plan is attached hereto. Any provision of this Option inconsistent with the Plan shall be considered void and replaced with the applicable provision of the Plan. This Option has been granted, executed and delivered in the Commonwealth of Virginia, and the interpretation and enforcement shall be governed by the laws thereof and subject to the exclusive jurisdiction of the courts therein.

In witness whereof, the parties hereto have executed this Option as of the date first above written.

NCI Information Systems, Inc.
/s/  Charles K. Narang
By:	Charles K. Narang, President
Optionee:
/s/  Judith L. Bjornaas
Judith L. Bjornaas

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EXHIBIT A

NCI Information Systems, Inc.

OPTION EXERCISE FORM

Date:                         

Attention:                         

The undersigned hereby elects to exercise the Options issued to him/her by NCI Information Systems, Inc. (the “Company”) and dated                      (the “Options”) and to purchase              shares of Common stock of the company (the “Shares”) at an exercise price of                      Dollars ($            ) per share or an aggregate purchase price of                      Dollars ($            ) (the “Exercise Price”). Pursuant to the terms of the Option Agreement the undersigned has delivered the Exercise Price herewith in full in cash or                         .

Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned.

By:

Typed Name: 

Address:

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EX-10.17

Exhibit 10.17

NCI, Inc.

11730 Plaza America Drive

Reston, Virginia 20190

LEGG MASON WOOD WALKER, INCORPORATED

RAYMOND JAMES & ASSOCIATES, INC.

ROBERT W. BAIRD & CO., INCORPORATED

STEPHENS INC.

c/o Legg Mason Wood Walker, Incorporated

100 Light Street

Baltimore, Maryland 21202

Re: Agreement Not to Sell NCI, Inc. Stock (this “Agreement”)

Ladies and Gentlemen:

The undersigned refers to the proposed Underwriting Agreement (the “Underwriting Agreement”) among NCI, Inc., a Delaware corporation (the “Company”), the several underwriters named therein (the “Underwriters”) and the selling stockholders named therein. As an inducement to the Underwriters to execute the Underwriting Agreement in connection with the proposed public offering of shares of the Company’s Class A common stock, par value $0.019 per share (“Class A Common Stock”), pursuant to a Registration Statement on Form S-1, the undersigned hereby agrees that from the date hereof and until 180 days after the public offering date set forth on the final prospectus used to sell the Common Stock (the “Public Offering Date”) pursuant to the Underwriting Agreement, to which you are or expect to become parties, the undersigned will not offer, sell, contract to sell (including any short sale), pledge, hypothecate, grant any option, right or warrant for the sale of, purchase any option or contract to sell, sell any option or contract to purchase, or otherwise encumber, dispose of or transfer, directly or indirectly, any shares of Class A Common Stock or securities convertible into or exchangeable or exercisable for any shares of Class A Common Stock, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Class A Common Stock, whether any such aforementioned transaction is to be settled by delivery of the Class A Common Stock or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Legg Mason Wood Walker, Incorporated. In addition, the undersigned agrees that, during the period commencing on the date hereof and ending 180 days after the Public Offering Date, without the prior written consent of Legg Mason Wood Walker, Incorporated: (a) the undersigned will not request, make any demand for or exercise any right with respect to, the registration of any Class A Common Stock or any security convertible into or exercisable or exchangeable for Class A Common Stock and (b) the undersigned waives any and all notice requirements and rights with respect to the registration of any such security pursuant to any agreement, understanding or otherwise to which the undersigned is a party.

Any Class A Common Stock received upon exercise of options granted to the undersigned will also be subject to this Agreement, but the undersigned shall not be prohibited from exercising any such options and holding the underlying Class A Common Stock. Any Class A Common Stock acquired by the undersigned in the open market on or after the Public Offering Date (pursuant to a “friends and family” or directed share program or otherwise) will also be subject to this Agreement. A transfer of Class A Common Stock to a family member or a trust for the benefit of the undersigned or a family member may be made, provided the transferee agrees in writing to be bound by the terms of this Agreement as if it were a party hereto.

In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to (a) decline to make any transfer of shares of Class A Common Stock if such transfer would constitute a violation or breach of this Agreement and (b) place legends and stop transfer instructions on any such shares of Class A Common Stock owned or beneficially owned by the undersigned.

This Agreement shall be binding on the undersigned and the successors, heirs, personal representatives and assigns of the undersigned. This Agreement shall lapse and become null and void if the Public Offering Date shall not have occurred on or before December 31, 2005.

Very truly yours,

Printed Name:

Date:

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EX-10.18

Exhibit 10.18

SUBCONTRACT AGREEMENT

SUBCONTRACT NUMBER: SC001-9242-DCDMV

Between

NCI Information Systems, Inc.

11730 Plaza America Drive

Reston, VA 22190

And

Net Commerce Corporation

12007 Sunrise Valley Drive, Suite 280

Reston, VA 20191

THIS SUBCONTRACT AGREEMENT IS entered into by and between NCI Information Systems, Inc., (NCI), hereinafter referred to as “Prime Contractor” or “Prime”, a Virginia corporation with principal offices in Reston, Virginia and Net Commerce Corporation, hereinafter referred to as “Subcontractor” or “Sub”, a Virginia corporation with principal offices in 12007 Sunrise Valley Drive, Suite 280, Reston, VA 20191.

WHEREIN Subcontractor is committed to support NCI in the performance of Electronic Imaging and Retrieval Services under NCI’s Prime Contract No. POTO-2001-C-0101 hereinafter referred to as the “Program”.

WHEREAS, in consideration of the mutual promises, covenants, and agreements herein set forth, the Parties agree that Subcontractor shall perform the services set forth in this Subcontractor Statement of Work, for the consideration stated herein and that the rights and obligations of the parties to this Agreement shall be subject to and governed by the Schedule, the General Terms and Conditions, Federal and State laws, and the pertinent provisions of the Prime Contract, incorporated herein by reference, and other documents or specifications attached hereto or referenced herein.

NOW THEREFORE, in consideration of the foregoing premises and mutual covenants herein contained, the Parties hereto mutually agree as follows.

AGREEMENT TITLES

The titles of the clauses in this Agreement, including all Attachments and Exhibits thereto, shall be read as references only and shall not be read as affecting, contradicting, negating, or explaining the meaning or interpretation of this Agreement.

SUPERSEDING EFFECT

Upon acceptance of this subcontract, the Subcontractor agrees that the provisions under this agreement, shall constitute the entire Agreement between the Parties hereto and supersedes all prior agreements whether written or oral relating to the subject matter hereof.

Subcontract Agreement Number: NCI-DCDMV-9242-NCC

SUBCONTRACT TABLE OF CONTENTS

SECTION	SECTION TITLE	PAGE
A	GENERAL TERMS AND CONDITIONS	3
B	SCHEDULE OF SUPPLIES/SERVICES AND PRICES	14
C	DESCRlPTION/SPECIFICATIONS/WORK STATEMENT	15
D	PACKAGING AND MARKING	16
E	INSPECTION AND ACCEPTANCE	17
F	DELIVERIES OR PERFORMANCE	18
G	SUBCONTRACT ADMINISTRATION	19
H	SPECIAL CONTRACT PROVISIONS	22
I	ATTACHMENTS	24
	SUBCONTRACT EXECUTION PAGE	25

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Subcontract Agreement Number: NCI-DCDMV-9242-NCC

SECTION A - GENERAL TERMS AND CONDITIONS

A-1. Scope of Work

The Subcontractor shall, pursuant to the terms and conditions specifically set forth herein, provide services as ordered by Purchase Order under this Subcontract to support NCI in its performance of the Program as detailed in Attachment A, hereto, Subcontractor Statement of Work.

A-2. Notices and Change Requests

Any notices or communications pertaining to this Subcontract shall be deemed to have been duly given by a party if personally served upon the other or if sent to the other by U.S. Mail, Federal Express, or Airborne. This subcontract may not be modified or terminated orally, and neither modification nor any claimed waiver of any of the provisions hereof shall be binding unless in writing and signed by the party against whom such modification or waiver is sought to be enforced. All correspondence from Subcontractor shall note the Subcontract Agreement Number and Prime Contract Number.

A-3. Confidential Information

3.1 For purposes of this subcontract, except as described in paragraph 3.2. below, the term “Confidential Information” means any non-public information which is designated by restrictive marking to be confidential or proprietary, or if given orally, is designated at the time of disclosure as being disclosed as confidential or proprietary. Confidential Information may include the data or information of Prime Contractor, Subcontractor, or third-parties. Confidential Information also includes information and data relating to the Government’s plans, programs, technical requirements, and budgetary matters.

3.2 Notwithstanding the foregoing, Confidential Information does not include information, technical data or know-how which:

(1) is shown by written record to be in the public domain at the time of the disclosure or becomes available to the public thereafter without restriction, and not as a result of the act or omission of the receiving Party;

(2) is rightfully obtained by the receiving Party from a third party without restriction as to disclosure;

(3) is shown by written record to be lawfully in the possession of the receiving Party at the time of the disclosure;

(4) is approved for release by written authorization of the disclosing Party;

(5) is shown by written record to be developed independently and separately by the receiving Party without use of the Disclosing Party’s Confidential Information;

(6) is required to be disclosed by the receiving Party pursuant to law or legally enforceable order of court or judicial body; provided, however, that the receiving Party shall give written notice to the disclosing Party of the requirement of disclosure and shall permit the disclosing Party to attempt, by appropriate legal means, to limit such disclosure. In any event, the receiving Party may use or disclose only such Confidential Information as is expressly authorized in writing.

3.3 During the period of this Agreement, it may be necessary for the Parties to provide Confidential Information to each other. The parties agree to hold such Confidential Information in

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Subcontract Agreement Number: NCI-DCDMV-9242-NCC

strict confidence. Each party is authorized to use such Confidential Information in performance of the Prime Contract and this Subcontract. Therefore, to protect the interests of each other and third parties with respect to such Confidential Information, the Parties agree:

(1) To use Confidential Information only for the purposes of this Subcontract and not to disclose Confidential Information to others, including other organizational elements of their companies not directly involved in the performance of this project without the prior written consent of the other party until such time as that Confidential Information may have been released to the public;

(2) not to make copies of or store Confidential Information or any part thereof except as expressly permitted by this Subcontract;

(3) to reproduce and maintain on any copies of any Confidential Information or any part thereof such proprietary legends or notices (whether of disclosing Party or a third party) as are contained in or on the original or a the disclosing Party may otherwise reasonably request;

(4) not to modify or prepare derivative works from, or decompile, disassemble, or reverse engineer, or sell, publish, make available, compile, display or transfer any Confidential Information or otherwise Infringe upon any Party’s Intellectual Property Rights;

(5) to place restrictive markings consistent with this article, on any reports or other data collection that contain Confidential Information;

(6) to treat this Subcontract as Confidential Information;

(7) to abide by the conditions of restrictive legends contained on any such Confidential Information; and

(8) that employees of either party may be asked to sign and abide by a statement of nondisclosure and that the Subcontractor shall require all of its lower-tier subcontractors to abide by the terms of this article A-3 as a condition precedent to entering into any such subcontract.

3.4 The obligation to protect such Confidential Information will be satisfied if the Party receiving such Confidential Information utilizes the same controls it employs to avoid disclosure of its own proprietary or confidential information but no less than a reasonable level of care.

3.5 Failure to comply with the safeguards of this clause are grounds for termination for default as defined in the termination for default clause of this subcontract. Moreover, the Parties agree that, notwithstanding any other section of this Subcontract, the non-breaching Party shall be entitled to seek equitable relief to protect its interests, including but not limited to preliminary and permanent injunctive relief, as well as money damages. Nothing stated herein shall be construed to limit any other remedies available to the parties.

A-4. Subcontractor Personnel Requirements

4.1 Subcontractor shall provide acceptable skilled personnel qualified to perform the work set forth in Attachment A.

4.2 In any instance where the Prime Contractor is required to give notice to and/or obtain approval from the Government for the substitution or unavailability of Subcontractor personnel, Subcontractor shall provide such notice to the Prime Contractor as soon as possible to allow the Prime Contractor to notify the Government and obtain appropriate approvals if required.

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Subcontract Agreement Number: NCI-DCDMV-9242-NCC

4.3 If approval of such substitution by the government is required by the Prime Contract, the Subcontractor shall not make the substitution unless first approved by the government and the Prime Contractor, in writing.

4.4 Prime Contractor reserves the right to review the qualifications of all personnel assigned to or nominated for performance on the Program.

4.5 Personnel assigned by the Subcontractor to work on the Project shall be acceptable to the Prime Contractor in terms of personal and professional conduct. Should the continued assignment to this Subcontract of any person in the Subcontractor’s organization reasonably be deemed by the NCI Program Manager to conflict with the interests of the Program or the Prime Contractor, that person shall be immediately removed from the assignment. Employment and staffing difficulties will not be justification for failure to meet established schedules under any task order issued and accepted for performance by the Subcontractor, and if such violates the terms of this Agreement, the Subcontractor may be subject to termination.

A-5. Employee Identification

Performance under this Agreement may require access to Government and Prime Contractor facilities. Subcontractor and its employees shall comply with the reasonable identification procedures and practices of the Government and Prime Contractor as shall be from time to time required.

A-6. Transition

It may become necessary during the period of this subcontract to terminate the relationship of the Parties. In the event that this occurs at the conclusion of the Prime Contract or during the performance under this subcontract, Subcontractor agrees to use its best efforts to effect an orderly and efficient transition from itself to its successor during a transition period determined by Prime Contractor, not to exceed 60 days. Subcontractor shall be reimbursed for its transition efforts under A-6 in accordance with the payment and reimbursement provisions of this Subcontract.

A-7. Health and Safety

Subcontractor shall take whatever precautions are necessary for the health and protection of its employees and shall at all times observe industry accepted safety and health practices. Moreover, Subcontractor shall comply with all federal, state, and local health and safety standards, laws, and regulations. If a site condition is identified as a hazard, Subcontractor shall take whatever measures are deemed necessary to protect its employees and to immediately notify the Prime Contractor Program Manager.

A-8. Insurance

In accordance with FAR clause “Insurance - Work on Government Installations (Jan 1997) (FAR 52.228-5)” and this schedule, the subcontractor shall acquire and maintain during the entire performance of this subcontract, insurance of at least the following kinds and minimum amounts set forth below:

a. Workman’s compensation and employees liability insurance in accordance with the amounts specified by Federal and State laws of the states in which the work is to be performed under this subcontract. In the absence of such state laws, an amount of at least

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Subcontract Agreement Number: NCI-DCDMV-9242-NCC

$100,000 shall be required and maintained to cover liability for accidental bodily injury or death and for occupational disease.

b. General Liability Insurance: Bodily injury liability insurance in the minimum amount of $500,000 per occurrence.

c. Automobile liability insurance: At least the minimum limits of $200,000 per person and $500,000 per occurrence for bodily injury and $20,000 per occurrence for property damage.

d. When aircraft are used in connection with performance under this subcontract, aircraft public and passenger liability insurance of at least $200,000 per person and $500,000 per occurrence for bodily injury, other than passenger liability, and $200,000 per occurrence for property damage. Coverage for passenger liability bodily injury shall be at least $100,000 multiplied by the number of seats or passengers, whichever is greater.

Any and all insurance which Subcontractor may desire shall be obtained and provided by the Subcontractor without cost or other obligation to NCI. Subcontractor shall render all services as an independent contractor and shall not be subject to the provisions of NCI employee relations policies nor entitled to any benefits thereunder.

A-9. Intellectual Property

9.1 Intellectual Property Rights. Intellectual Property Rights means any patent rights, copyrights, trade secrets, trade names, service marks, moral rights, know-how and other similar rights or intangible assets recognized under any laws or international conventions, and in any country or jurisdiction in the world, as intellectual creations to which rights of ownership accrue, and all registrations, applications, disclosures, renewals, extensions, continuations or reissues of the foregoing now or hereafter in force.

9.2 Each party acknowledges that the other party will own all rights to all data, information, techniques, methodologies and materials, including without limitation any patents, patent rights, copyrights, trade secret rights and other intellectual property rights embodied therein, that such party owned prior to the commencement of the subcontract.

9.3 Company Technology

(a) Subcontractor agrees to assign (or cause to be assigned) and does hereby irrevocably assign fully to Prime Contractor all of Subcontractor’s worldwide right, title and interest in and to Company Technology. For purposes of this Subcontract, “Company Technology” means all works of authorship, notes, records, drawings, designs, inventions, improvements, developments, discoveries and trade secrets, as well as all derivatives and modifications thereof and thereto conceived, made or discovered by Subcontractor in performing the work required hereunder and all copyrights, patent rights, trade secret rights and other intellectual property rights in or relating to any of the foregoing, but in all events excluding Subcontractor’s general skill and knowledge and developer tools.

(b) Subcontractor agrees to assist Prime Contractor, or its designee, at Prime Contractor’s expense, in every proper way to secure Prime Contractor’s rights in Company Technology in any and all countries, including the disclosure to Prime Contractor of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which Prime Contractor shall deem necessary in order to apply for and obtain such rights and in order to assign and convey to Prime Contractor, its successors, assigns and nominees the sole and exclusive rights, title and interest in and to the Company Technology.

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Subcontract Agreement Number: NCI-DCDMV-9242-NCC

Subcontractor further agrees that Subcontractor’s obligation to execute or cause to be executed, when it is in Subcontractor’s power to do so, any such instrument or papers shall continue after the termination of this Subcontract.

(c) Subcontractor agrees that if in the course of performing the work, Subcontractor incorporates into any Company Technology developed hereunder any invention, improvement, development, concept, discovery or other proprietary information owned by Subcontractor or in which Subcontractor has an interest (“Pre-Existing Subcontractor Intellectual Property Rights”), Prime Contractor is hereby granted and shall have a nonexclusive, royalty free, perpetual, irrevocable, worldwide, paid-up license to copy, make, have made, modify, create derivative works of, use, sell, and distribute such subject matter and derivative works thereof as part of or in connection with the Company Technology. Subcontractor shall indemnify, hold harmless and defend Prime Contractor, its subsidiaries, affiliates, assigns, and its Customers from and against any claims, liabilities, damages, losses and expenses including but not limited to attorneys’ fees and costs of suit, arising out of or in connection with all claims that the use or disclosure of Subcontractor’s Pre-existing Subcontractor Intellectual Property Rights violates any third party’s rights.

9.4 Assignment of Intellectual Property. Ownership of the Intellectual Property Rights in the Work Product or Deliverables arising from the work as provided by this Subcontract shall remain with Prime Contractor. Subcontractor hereby irrevocably assigns to Prime Contractor all of its worldwide right, title and interest in and to any and all inventions, technology, know-how or other subject matter made, conceived or reduced to practice by Prime Contractor jointly with Subcontractor or third parties hereunder and all patent rights, copyrights, trade secret rights, and other intellectual property rights relating to any of the foregoing. Subcontractor agrees to sign all documents and perform all acts reasonably necessary to perfect the foregoing assignment and to enforce and defend the assigned intellectual property rights. If any or all of the foregoing subject matter is not assignable for any reason, Subcontractor hereby grants to Prime Contractor a worldwide, perpetual, unrestricted, royalty-free, fully paid up, exclusive license, including the right to grant and authorize sublicenses, under all patent rights, copyrights, trade secrets and other intellectual property rights in or to the nonassignable subject matter to make, have made, use, sell, offer for sale, and import any and all products, services or components; practice any method or process; copy, modify, have modified, create and have created derivative works of the nonassignable subject matter; publicly display and distribute the nonassignable subject matter and any modifications or derivative works thereof; and otherwise exploit the nonassignable subject.

9.5 Language similar to the language contained in paragraphs 9.3 and 9.4 shall be included in all lower-tier subcontracts and other agreements so that such lower-tier subcontractors assign their rights to NCI.

A-10. Disputes

Either party may litigate any dispute arising under or relating to this Subcontract before any court of competent jurisdiction. Pending the final decision of any dispute arising under or relating to this Subcontract or any SOW issued hereunder, the Subcontractor shall diligently, proceed with the performance of this Subcontract and SOW and comply with any direction of Prime Contractor’s authorized representative. All references to dispute procedures in FAR or DFARS clauses incorporated by reference herein shall be deemed to be superseded by this clause.

A-11. Assignment of Subcontract

Neither this Subcontract nor any portion thereof, is assignable except with, the prior written approval of the Prime Contractor.

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A-12. Consultants and Lower Tier Subcontracting

Use of consultants and lower tier subcontractors is not authorized in the performance of this subcontract. In the event the Subcontractor should identify a requirement to use a consultant or a lower tier subcontractor, the Subcontractor shall obtain prior written approval from the Prime Contractor prior to entering into any agreement with any consultant or lower-tier subcontractor.

A-13. Travel

No travel shall be performed in connection with this subcontract without the prior written approval of the NCI Program Manager. Reimbursement shall not exceed the rates and expenses allowed by the applicable Government Travel Regulations for the Prime Contractor. NCI reserves the right to make travel arrangements for the subcontractor and to be billed directly by the provider of such services.

A-14. Contractual Relationship

14.1 The Prime Contractor shall direct and coordinate all contacts, written or oral, with the Customer during the performance of the Prime Contract. All Subcontractor request, concerns, issues, etc. shall be forwarded, in writing, to the Prime Contractor’s Subcontract Administrator.

14.2 Subcontractor is an independent contractor and is not and shall not represent that he or she is the agent, employee, partner or joint venture of Prime Contractor and may not obligate Prime Contractor or otherwise cause Prime Contractor to be liable under any contract or Subcontract. Subcontractor shall be solely responsible for payment of its taxes and payment of its employees and independent contractors, including payment of applicable Social Security, Worker’s Compensation, Unemployment Insurance and other legal requirements arising out of the performance of the work under this Subcontract. Subcontractor agrees to defend, indemnify and hold Prime Contractor harmless from any and all claims made by any entity on account of an alleged failure by Subcontractor to satisfy, any such tax or withholding obligations. Subcontractor is not entitled to, and hereby expressly waives any claim to, any employee benefits of Prime Contractor, including without limitation, group health, dental, vision, disability, workers’ compensation, and travel accident insurance, 401(k) plan benefits, employee stock purchase plan benefits, and employee stock option plan benefits. In the event that any governmental agency or court of competent jurisdiction reclassifies the employment status of Subcontractor, Subcontractor hereby expressly waives any claim to any of the aforementioned benefits of Prime Contractor for any period of time prior to the date of such reclassification. Additionally, in the event that Subcontractor’s waiver of any claim of entitlement to any of Prime Contractor’s benefits is determined to be unenforceable for any reason, in consideration for the payment received under this Subcontract, Subcontractor hereby agrees not to participate in any of the benefit plans listed in this Section where participation is voluntary.

14.3 All direction regarding the performance of this Subcontract shall be issued by Prime Contractor’s authorized representative. No instruction or direction provided by any other entity, including representatives of the U.S. Government, or unauthorized Prime Contractor employee shall be binding upon the Prime or Subcontractor.

A-15. Standards of Conduct and Restrictions

The Subcontractor shall adhere to the same professional and ethical standards of conduct required by Government and Prime Contractor personnel. Accordingly, the Subcontractor agrees to adhere to all federal, state and local laws, regulations, rules, and codes of conduct, including but not limited to procurement integrity, conflicts of interest, contingent fees, etc. The Subcontractor:

• Shall not solicit new business while performing work under this subcontract during period paid by the Prime Contractor;

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• Certifies that it has no outstanding Subcontract or other obligation that is in conflict with any of the provisions of this Subcontract, or that would preclude Subcontractor from complying with the provisions hereof, and further certifies that it will not enter into any such conflicting Subcontract during the term of this Subcontract. Unless agreed to by the Prime Contractor in writing, Subcontractor further agrees that it shall not provide Services directly to any Prime Contractor customer if Subcontractor has provided Services to said Customer under any existing or prior SOW incorporated into this Agreement;

• Shall not discuss with unauthorized persons any information obtained in the performance of work under this subcontract;

• Shall not conduct business, other than that which is covered by this subcontract, during the periods paid by the Prime Contractor;

• Shall not conduct business not directly related to this subcontract on Government premises;

• Shall not use computer systems and/or other Government and/or Prime Contractor facilities for company or personal business; or,

• Shall not recruit personnel on Government and/or Prime Contractor premises or otherwise act to disrupt official Government business.

Notwithstanding any other provision of this Subcontract, any violation of this article A-15, may, in Prime Contractor’s sole discretion, be deemed a material breach or repudiation of this Subcontract and shall entitle Prime Contractor to recover all breach of contract damages available under law, including, but not limited to, consequential. damages and anticipatory profits.

A-16. Non-Solicitation of Employees

During the period of this subcontract and for one year after the termination or expiration of the subcontract, neither Party hereto shall solicit for hire any employee of the other associated with the performance of this Subcontract; nor shall they hire such employee without the express consent of the firm who employs that individual. Consent to hiring of employees under this provision shall not be unreasonably withheld.

A-17. Hold Harmless and Indemnification

Each Party shall save and hold harmless and indemnify the other against any and all liability, claims, and costs of whatever kind and nature for injury to or death of any person or persons and for loss or damage to any property occurring in connection with or in any way incident to or arising out of the occupancy, use, service, operations, or performance of work under the terms of this subcontract to the extent resulting from the negligent acts of omissions of the Indemnifying Party or any employee, agent, or representative of such Party or the Indemnifying Party’s failure to comply with any federal, state or local law.

A-18. Limitation of Liability

18.1 Disclaimer of Warranty. EXCEPT AS SET FORTH ABOVE, PRIME CONTRACTOR MAKES NO WARRANTIES, WHETHER EXPRESS OR IMPLIED, OR STATUTORY REGARDING OR RELATING TO THE SOFTWARE, DOCUMENTATION OR ANY MATERIALS OR SERVICES

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LICENSED OR OTHERWISE FURNISHED BY IT TO SUBCONTRACTOR HEREUNDER, INCLUDING MAINTENANCE AND SUPPORT.

18.2 Other Liabilities. TO THE MAXIMUM EXTENT ALLOWED BY LAW, IN NO EVENT WILL EITHER PARTY BE LIABLE TO SUBCONTRACTOR OR CUSTOMER, OR ANY THIRD PARTIES, FOR ANY LOSS OF PROFITS, LOSS OF USE, BUSINESS INTERRUPTION, LOSS OF DATA OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGIES OR SERVICES, COST OF COVER OR PUNITIVE OR EXEMPLARY, OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, WHETHER ALLEGED AS A BREACH OF CONTRACT OR TORTIOUS CONDUCT, INCLUDING NEGLIGENCE, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN ADDITION, EXCEPT AS EXPRESSLY AGREED TO IN THE APPROPRIATE ATTACHMENT, PRIME CONTRACTOR WILL NOT BE LIABLE FOR ANY DAMAGES CAUSED BY DELAY IN DELIVERY OR FURNISHING BY SUBCONTRACTOR OF THE SOFTWARE OR SAID SERVICES OR TRANSACTIONS. PRIME CONTRACTOR’S LIABILITY UNDER THIS SUBCONTRACT OR THE TERMINATION OF THIS SUBCONTRACT WHETHER FOR DIRECT, INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL AND/OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, RESTITUTION, SHALL IN NO EVENT EXCEED THE SUMS ALREADY PAID TO SUBCONTRACTOR BY THE PRIME CONTRACTOR HEREUNDER.

A-19. Subcontractor Warranties and Representations

19.1 Subcontractor warrants and represents that:

A. Subcontractor shall perform the obligations described in each SOW in a timely and workmanlike manner with due diligence and in full compliance with the terms and conditions of this Subcontract and the highest professional standards of one skilled in the Subcontractor’s industry. Subcontractor warrants and assures Prime Contractor that the personnel assigned to any work under the SOW are competent and qualified for the work under this Subcontract;

B. Subcontractor has not previously granted and will not grant any rights in any data, software or other intellectual property, to any third party that are inconsistent with the rights granted to Prime Contractor herein;

C. Each of Subcontractor’s employees, consultants, contractors, partners or agents who has been or will be involved in the performance of the Subcontract agrees to the nondisclosure provisions of this Subcontract, conveying all proprietary rights in all work product to the Prime Contractor and agreeing to maintain in confidence all trade secrets and non-Subcontractor proprietary information embodied in the work product or acquired while performing the Subcontract;

D. Materials furnished by the Subcontractor hereunder will be merchantable, free from defects in design, material and workmanship, fit and sufficient, and free from all liens and encumbrances. In addition, if the Materials contain one or more original equipment or software manufacturer’s warranties, Subcontractor hereby warrants that it has the authority to and does hereby assign such warranties to Prime Contractor.

E. Any deliverables or work product resulting from a SOW will undergo and will be subject to quality control services and procedures, including commercially reasonable performance measurements, testing, quality process reviews or inspections to implement such procedures prior to delivery. Subcontractor, at its expense, shall promptly correct any defective or non-conforming work product delivered by Subcontractor, if such failure is reported to Subcontractor within a reasonable period after the discovery of such.

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F. Subcontractor has all requisite corporate power and authority to execute and to deliver this Subcontract and all requisite corporate power and authority to perform its obligations under this Subcontract in accordance with its terms. Subcontractor has taken all necessary action to authorize the execution and delivery of this Subcontract, and the consummation of the transactions contemplated hereby. This Subcontract is a valid and legally binding obligation of Subcontractor, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

G. The execution, delivery and performance by Subcontractor of this Subcontract does not and will not, to the knowledge of Subcontractor, violate any provision of any law or regulation, or any existing writ or decree of any court or Governmental Entity applicable to Subcontractor, or violate, conflict with or constitute a breach of, or a default under, the certificate of incorporation or bylaws of Subcontractor, or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, modification or acceleration) - whether after the giving of notice or the passage of time or both — under any material contract to which Subcontractor is a Party or which is binding on it or its assets, and will not result in the creation of any lien or other charge on, or security interest in, any of the assets or properties of Subcontractor.

H. As of the Effective Date of this Subcontract, all notices, reports or other filings required to be made by Subcontractor, and all consents, registrations, approvals, permits and authorizations of any Third Parties required to be obtained by Subcontractor, in connection with the execution and delivery of this Subcontract by Subcontractor, the performance by Subcontractor of its obligations under this Subcontract and the consummation by Subcontractor of the transactions contemplated hereby have been made or obtained.

I. No officer, director, employee, or agent of Prime Contractor has been or will be employed, retained or paid a fee or otherwise has received or will receive any personal compensation or consideration, by or from Subcontractor or any of Subcontractor’s officers, directors, employees, or agents in connection with the obtaining, arranging, or negotiation of this Subcontract or other documents entered into or executed in connection with this Subcontract.

J. There are no actions, suits, or proceedings, pending or threatened, which will have a material adverse effect on Subcontractor’s ability to fulfill its obligations under this Subcontract; it will immediately notify Prime Contractor if, during the term of this Subcontract, it becomes aware of any action, suit, or proceeding, pending or threatened, which may have a material adverse effect on Subcontractor’s ability to fulfill its obligations under this Subcontract or any SOW; it has all necessary skills, rights, financial resources, and authority to enter into this Subcontract and related Orders and to provide or license the material or services; the material and services will be provided free of any lien or encumbrance of any kind; it will be fully responsible and liable for all acts, omissions, and work performed by any of its affiliates, distributors, agents and representatives, including any subcontractor; that it will cause all of its affiliates, distributors, agents and representatives, including subcontractors, to strictly comply with the provisions specified in this Subcontract; and it will comply with the terms of this Subcontract or any applicable SOW, including those specified in any Exhibits.

19.2 If, at any time during the Subcontractor Warranty Period applicable to the deliverables hereunder, Prime Contractor believes there is a breach of any warranty, Prime Contractor will notify Subcontractor setting forth the nature of such claimed breach. Subcontractor shall promptly investigate such claimed breach, report its findings as to whether or not a breach has occurred to the Prime Contractor, and, at Prime Contractor’s sole discretion, shall, at no additional charge to Prime Contractor, promptly use its best efforts to take such action as may be required to correct such breach, but in no event shall such period exceed thirty (30) days.

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19.3 The warranty period for warranties as provided in this Article as they relate to services and deliverables provided by Subcontractor hereunder shall be the longer of the applicable warranty, if any, or one (1) year (the “Subcontractor Warranty Period”). The Subcontractor Warranty Period in all cases shall commence upon the Acceptance of the items by the Prime Contractor.

19.4 During the Subcontractor Warranty Period, all warranties provided herein will survive inspection, acceptance, payment and use. Except to the extent limited in this Article, Subcontractor will defend, indemnify, and hold Prime Contractor harmless from and against all liabilities for a breach of these warranties.

A-20. Notice of Delay

If the Subcontractor becomes unable to complete the subcontract work at the times specified and under the terms and conditions of this Agreement because of technical difficulties notwithstanding the exercise of good faith and diligent efforts in the performance of the work called for hereunder, the Subcontractor shall give NCI written notice of the anticipated delay and the reasons therefor. Such notice and reasons shall be delivered immediately after the conditions creating the anticipated delay become known to the Subcontractor. When notice is so required, NCI may extend the time specified in the tasking for such period as deemed advisable. Unless NCI grants such an extension, however, all of the Subcontract’s terms and conditions remain in effect.

A-21. Applicable State Law

21.1 This subcontract shall be construed in accordance with and governed by the laws of the Commonwealth of Virginia, except that any provision in this Subcontract that is (i) incorporated in full text or by reference from the FAR; (ii) incorporated in full text or by reference from any agency regulation that implements or supplements the FAR; or (iii) that is substantially based on any such agency regulation or FAR provision, shall be construed and interpreted according to the federal common law of government contracts as enunciated and applied by federal judicial bodies, boards of contract appeals, and quasi- judicial agencies of the federal government. Any suit hereunder shall be brought in the courts of the Commonwealth of Virginia.

21.2 In performing any activities reasonably related to this agreement, both parties shall comply with all applicable provisions of federal, state, and local laws, rules, executive orders, and regulations in effect at the time of such activities.

21.3 If any of the provisions or portions thereof of this Agreement are held to be invalid by a court of competent jurisdiction under any applicable statute or rule of law, they are to that extent to be deemed omitted without affecting the validity of the remaining provisions of the Agreement.

A-22. Order of Precedence

In the event of any inconsistency or conflict between or among the provisions of this Agreement, the inconsistency shall be resolved by giving precedence to this Subcontract, unless the provision is statutory by law and a mandatory flowdown provision, in which case the Prime Contract will prevail. Thereafter, the Schedule, including terms and conditions and attachments thereto, and then the General Provisions shall prevail.

A-23. Exclusivity

Subcontractor shall provide exclusive marketing, proposal, work product, project and contract support and services as ordered to the Prime Contractor. The Subcontractor shall not participate in other team opportunities directly competitive to this Subcontract and/or associated Task Orders or compete

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independently as a Prime Contractor or Subcontractor for the work identified in Attachment B and/or any Task Orders, nor will the Subcontractor reveal any information to third parties concerning any proposal effort, work product, or cost or pricing information directly pertaining to this Subcontract and any associated Task Orders.

A-24. Prime Contract Clauses Incorporated by Reference

The Federal Acquisition Regulations (FAR) clauses and any agency supplement clauses set forth throughout this Subcontract are hereby incorporated by reference in this Subcontract. Unless otherwise indicated, the obligations of the Contractor to the Government as provided in said clauses shall be deemed to be the obligations of Subcontractor to Prime Contractor. FAR and agency supplement clauses referenced throughout this subcontract shall be those in effect on the effective date of this Subcontract. If there is a conflict or modification to a clause in effect on the effective date of this Subcontract and a clause of the Prime Contract, the Prime Contract shall govern.

A-25. Entire Agreement

25.1 Upon acceptance of this Subcontract, the Subcontractor agrees that the provisions under this subcontract, including the documents incorporated herein by reference, shall constitute the entire Agreement between the Parties hereto and supersedes all prior agreements, whether written or oral, relating to the subject matter thereof to include any teaming agreement executed by the Parties for the purpose of responding to the related solicitation. It is further agreed that the headings of the Articles herein are for reference purposes only and are not intended to be descriptive or determinative of the content of the clauses under the headings.

25.2 This Subcontract shall not be amended, modified, or extended, nor shall any waiver of any right hereunder be effective unless set forth in a document executed by a duly authorized representative of the Prime Contractor and the Subcontractor. The waiver of a breach of any term, covenant, or condition herein contained shall not be deemed to be a waiver of such term, covenant, or condition for any subsequent breach of the same.

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SECTION B - SCHEDULE OF SUPPLIES/SERVICES AND PRICES

B-1. Type of Subcontract

This is a Time and Materials subcontract with a not to exceed ceiling of $409,222.00. Services shall be authorized through the issuance of a Purchase Order from the Prime Contractor.

B-2. Fully Loaded Fixed Hourly Labor Rates

The Subcontractor shall be reimbursed for allowable items or direct costs incidental to material related to performance. It is understood and agreed that the fully loaded labor rates include all salaries, overhead, G&A, and profit and that payment is based on these rates. The following rates will be used in the Purchase Orders issued to the Subcontractor by the Prime Contractor.

Subcontract Period:

Labor Category	Fully Loaded Hourly Rate
For Period One: January 1, 2005 – June 30, 2005
Conversion Technician II	$	19.44
Conversion Technician III	$	37.18
Project Manager	$	79.73
For Period Two: July 1, 2005 – August 15, 2005
Conversion Technician II	$	19.78
Conversion Technician III	$	38.78
Project Manager	$	82.60

B-3. Level Of Effort

The level of effort and fixed hourly rates by labor category delineated for the period of performance under this subcontract are based on a normal eight (8) hour workday and 40 hour workweek. Subcontractor shall be reimbursed for actual hours worked in performance of this subcontract up to 40 hours per staff person per week pending Government acceptance and payment of Prime Contractor’s invoice. Subcontractor shall not be reimbursed for work in excess of 40 hours per person per week except upon the prior written authorization of the NCI Program Manager or authorized contractual representative.

B-4. Other Direct Costs

The total not-to-exceed authorized for the purchase of Other Direct Costs related to performance under this subcontract is $5,792.00. No fee will be reimbursed on materials costs. Subcontractor shall obtain prior written authorization from the Program Manager for all purchases.

B-5. Travel

The total not-to-exceed authorized for travel requirements under this subcontract is $1,135.00. All travel shall be in accordance with the Joint Travel Regulations and shall be reimbursed at actual cost. No fee will be reimbursed on travel costs. Subcontractor shall obtain prior written authorization from the Program Manager prior to incurring any travel expenses.

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SECTION C - DESCRIPTION/SPECIFICATIONS/WORK STATEMENT

C-1. Unclassified Work Statement

The description/specifications/work statement is included as Attachment A - Subcontractor Statement of Work.

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SECTION D - PACKAGING AND MARKING

D-1. General

All information submitted to the Prime Contractor Subcontract Administrator and/or the Prime Contractor Program Manager shall clearly indicate the Prime Contract Number, Prime Contract Delivery Order Number, and attention to the specific addressee, as applicable.

D-2. Commercial Packaging

Preservation, packaging, and packing shall provide adequate protection against physical damage during shipment for all deliverable items in accordance with standard commercial practices.

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SECTION E - INSPECTION AND ACCEPTANCE

E-1. General

The Subcontractor shall review and certify in writing to the Prime Contractor Program Manager that all deliverables associated with the subcontract fulfill the requirements and standards set forth in this subcontract.

E-2. Inspection and Acceptance

Inspection and acceptance of any and all deliverables under this subcontract shall be accomplished by the Prime Contractor’s Program Manager or a designated representative.

E-3. Correction of Deliverables, Inspection and Acceptance

To the extent that Prime Contractor may be held liable for correction of deliverables under the Prime Contract, Subcontractor agrees to assume a corresponding obligation under this subcontract for those deliverables submitted by the Subcontractor, at no additional cost to the Prime Contractor or the Government.

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SECTION F - DELIVERIES OR PERFORMANCE

F-1. General

Performance and delivery of services shall be as set forth in individual Purchase Orders issued in support of the Statement of Work set forth in Attachment A of this subcontract.

F-2. Period of Performance

The subcontract period of performance is January 1, 2005 through August 15, 2005.

F-3. Place of Performance

Services required under this subcontract shall be primarily performed at Reston, VA.

F-4. Delivery of Reports

4.1 All data shall be delivered in accordance with the requirements set forth in Attachment A.

4.2 All reports and correspondence submitted under this contract shall include the contract number and project number and be forwarded prepaid. A copy of the letters of transmittal shall be delivered to the Prime Contractor’s Subcontract Administrator as identified in Section G.

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SECTION G – SUBCONTRACT ADMINISTRATION DATA

G-1. Subcontract Administration and Technical Direction

1.1 Subcontract administration of this subcontract will be performed by the NCI Subcontract Administrator. No changes, deviations, or waivers shall be effective without a modification of the subcontract executed between the Prime Contractor and Subcontractor. Only the Prime Contractor Subcontract Administrator or his/her duly authorized representative is authorized to make changes to the subcontract cost/price schedule, Statement of Work, period of performance or alter any terms of this subcontract.

1.2 The Prime Contractor Program Manager is responsible for the overall technical management, direction, and control of performance in support of the Program. Subcontractor shall, in the performance of this subcontract, respond to the technical direction of the Program Manager or the duly appointed Technical Manager. Technical direction includes review, evaluation, and direction of the technical effort in support of the Program. It includes technical discussions, monitoring performance, providing technical management and task direction. Technical direction does not include changes to, or direction outside the scope of this subcontract. The Program Manager does not have the authority to change the scope of the services or effort governed by this subcontract. Technical direction that is not within the scope of this subcontract shall only be authorized and binding on NCI when issued in writing and signed by an authorized representative of the Prime Contractor. Technical direction shall not include any directive, the result of which is to increase the cost of performance of this subcontract or any issued task.

The Prime Contractor’s contractual and technical points of contact are as follows:

Contractual Representative:

Name:	Cynthia L. Alpheaus
Address:	NCI Information Systems, Inc.
	11730 Plaza America Drive
	Reston, VA 20190
Telephone No.:	703-707-6710
Facsimile No.:	703-707-6960
Email address:	calpheaus@nciinc.com

Technical Representative:

Name:	TBD
Address:	NCI Information Systems, Inc.
	11730 Plaza America Drive
	Reston, VA 20190
Telephone No.:	TBD
Facsimile No.:	TBD
Email address:	TBD

The Subcontractor’s contractual and technical points of contact are as follow:

Contractual Representative:

Name:	Rick Kalsi
Address:	NetCommerce Corporation
	12007 Sunrise Valley Drive, Suite 280
	Reston, VA 20190
Telephone No:	703-599-9310
Facsimile No.:	703-476-1324
Email address:

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Technical Representative:

Name:	Darnell Fountain
Address:	NetCommerce Corporation
	11730 Plaza America Drive
	Reston, VA 20190
Telephone No:	703-707-6746
Facsimile No.:	703-476-1324
Email address:

G-2. Submission of Invoices

2.1 The Subcontractor shall prepare invoices and submit an original and 2 copies on Government Standard Form 1034 – Public Voucher for Purchases and Services other Than Personal, together with appropriate supporting documents within three (3) working days from the end of the month for the services rendered during that period to:

NCI Information Systems, Inc.

11730 Plaza America Drive

Reston, VA 20190

Attn: Accounts Payable

Subcontractor’s failure to adhere to this submission requirement may result in late payment.

2.2 The invoices shall contain the following statement dated and signed by an authorized company representative:

“This is to certify that to the best of my knowledge the services set forth herein were performed during the period stated and in accordance with the specifications and all of the Subcontract’s terms and conditions.”

2.3 Invoices shall be submitted for each separate task order and contain or be supported by a report containing the following information:

1. Subcontractor Name and invoice date

2. Prime Contract and Subcontract Number

3. Purchase Order No. XXXXXXXXX

4. Period of Performance covered by invoice

5. Labor rates, hours, and extended totals for each labor category for the current period and cumulative to date

6. Copies of Subcontractor employee timesheets for the current period shall accompany the invoices.

7. Total value of the invoice

8. Remittance address

2.4 Notwithstanding any other provision of this Subcontract (including attachments and exhibits, hereto) or any other task order or modification that may be issued hereunder, Subcontractor shall not be

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paid for any work performed under this Subcontract or any Task Order, unless and until Prime Contractor receives payment from its Customer for the work performed by Subcontractor. If, for any reason, Prime Contractor is not paid by its Customer for work performed by Subcontractor, the parties agree that Prime Contractor shall have no obligation to pay and Subcontractor shall have no right to seek payment for such work performed by Subcontractor. Unless otherwise specified herein, invoices shall be payable within thirty (30) days after receipt of a correct invoice.

2.5 The Subcontractor shall maintain sufficient accounting records for verification of the hours, rates and labor categories against which costs are incurred in the performance of the Agreement. It is further understood and agreed that these accounting records shall be reviewable by the DCAA, for NCI or the Government during the performance of the subcontract and for the term specified in the audit clauses in the General Provisions hereto. Moreover, Subcontractor shall provide such backup and supporting materials to the DCAA as required to adequately verify invoices submitted by the Subcontractor.

G-3. Close-Out

Prime Contractor, at its option, may request the Subcontractor to perform Quick Closeout in accordance with FAR Subpart 42.7. Promptly upon expiration or termination of the subcontract and/or task order, the Subcontractor shall complete, a “final” invoice and closeout certifications shall be submitted to the Prime Contractor as soon as possible but in no event later than thirty (30) days from the date of completion. Failure to comply with any close-out requirements may result in non-payment of a final invoice and/or withholds.

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SECTION H - SPECIAL CONTRACT PROVISIONS

H-1. Incorporation of Section K of the Solicitation by Reference

Pursuant to Federal Acquisition Regulation (FAR) 15.406-1(b), Section K of the solicitation is hereby incorporated herein by reference.

H-2. Assignment of Work

All of the contract effort to be performed under this Subcontract will be assigned in the form of individual task orders.

H-3. Limitation of Funds

The Subcontractor shall provide notice to the Prime Contractor in accordance with FAR 52.232-22 (for incrementally funded cost-reimbursement subcontracts) and/or FAR 52.232-20 (for fully funded cost-reimbursement subcontracts).

H-5. Staffing and Manning Requirements

Key personnel are those individuals mutually recognized by the Prime Contractor and Subcontractor as essential to the performance of this subcontract. Key personnel labor categories may also be mandated by the Prime Contract. Subcontractor shall not remove or substitute any key personnel without the prior written approval of the Prime Contractor. The following personnel and/or labor categories are designated as key under this subcontract:

Name     Labor Category

TO BE DETERMINED

H-6. Classified Information

The Subcontractor will not use any electrical information processing equipment in his possession for the purpose of processing or transmitting classified information under this Subcontract without the written permission of the Prime Contractor.

H-7. Government-Furnished Property

Performance under this Subcontract may require the use of Government Furnished Equipment. In such event that the property is furnished to the Subcontractor, this Subcontract will be modified to include a list of the GFE and the Subcontractor shall comply with the Government Property clause incorporated under Section I of this subcontract, at no additional cost or expense to the Prime Contractor.

The Subcontractor shall assume full responsibility for and shall indemnify the Prime Contractor for any and all loss or damage to any and all Government property resulting in whole or in part from the negligent acts of Subcontractor representatives.

H-8. Observance of Legal Holidays and Administrative Leave

8.1 The following holidays will be observed for on-site Subcontractor personnel:

New Year’s Day	Labor Day
Martin Luther King, Jr.’s Birthday	Columbus Day
President’s Day	Veterans Day
Memorial Day	Thanksgiving Day
Independence Day	Christmas Day

Page - 22

Subcontract Agreement Number: NCI-DCDMV-9242-NCC

Any other day designated by Federal statute, Executive Order, or the President’s proclamation.

8.2 Administrative leave may be granted to Subcontractor employees on the same basis as granted the Prime Contractor. Administrative leave may be authorized for such reasons as hazardous weather conditions, voting, closing of the Government installation, Presidential Executive Order, or other reasons as determined by the Prime Contract.

H-9. Corrective Action

The Subcontractor shall take prompt action upon written notification from the Prime Contractor to correct conditions which have resulted or might result in substandard or defective services. This action shall include preventative measures as well as correction of conditions which have occurred.

Page - 23

Subcontract Agreement Number: NCI-DCDMV-9242-NCC

SECTION I - LIST OF ATTACHMENTS

ATTACHMENT A	Statement of Work
ATTACHMENT B	Government of the District of Columbia Standard Contract Provision
ATTACHMENT C	Wage Determination Schedule No. 1994-2103

Page - 24

Subcontract Agreement Number: NCI-DCDMV-9242-NCC

SUBCONTRACT EXECUTION PAGE

IN WITNESS WHEREOF, the Prime Contractor and Subcontractor hereto have caused this Subcontract Agreement to be executed by their authorized representatives as set forth below.

NCI INFORMATION SYSTEMS, INC.		SUBCONTRACTOR
Authorized Signature	/s/ Marianne J. Strathman	Authorized Signature	/s/ RJ Narang
Name:	Marianne J. Strathman	Name:	RJ Narang
Title:	Director of Federal Contracts	Title:	President
Date:	1/27/05	Date:	Jan 27, 2005

Page - 25

EX-10.19

Exhibit 10.19

The order number set forth below with prefix and suffix, must appear on all correspondence, invoices, packing slips, shipping papers and containers. Acceptance of this order is expressly limited to the Terms and Conditions appearing on the face and on the reverse side hereof and to any Terms and Conditions attached hereto. The vendor must forward to NCI 1.     A copy of the signed shipping receipt. 2.     On all warrantee items: A copy of the warrantee, and a list of serial numbers if applicable. 3.     Send invoices to the address at right to the Attention of Accounts Payable. NCI INFORMATION SYSTEMS, INC. 11730 PLAZA AMERICA DRIVE RESTON, VA 20190 PURCHASE ORDER P.O. #: 19487 G/L #: 9250-042-44 00 PAGE 1 OF 2

ORDER TO:	NET COMMERCE CORPORATION 12007 SUNRISE VALLEY DRIVE RESTON, VA 20091	SHIP TO:	NCI INFORMATION SYSTEMS, 11730 PLAZA AMERICA DR. SUITE 700 RESTON, VA 20190
CONTACT:	RJ NARANG	DELIVER TO:	L. TRAMMELLE/A. LONGO
PHONE:	703-707-1880

P.O. NO.	P.O. DATE	BUYER	VENDOR NO.	TERMS	SHIP VIA
19487	02/03/05	RYAN, DANI	N00501	N30

ITEM NUMBER	DESCRIPTION	REQ. DATE	QTY.	UNIT COST	EXT. COST
	THIS PURCHASE ORDER IS ISSUED TO NCC TO PROVIDE LABOR AND SUPPORT OF DEA ASSET SERVICES. THE ATTACHED STATEMENT OF WORK AND CUSTOMER FLOW DOWN PROVISIONS ARE INCORPORATED BY REFERENCE.
001.	- CONVERSION TECH II @ A RATE OF $18.05/HR FOR 3480/HRS	02/03/05	0.00	0.0000	132188.00
	P.O.P.: 1/1/05-6/30/05 - CONVERSION TECH II @ A RATE OF $34.88/HR FOR 480/HRS
	P.O.P.: 1/1/05-6/30/05 -PROJECT MANAGER @ A RATE OF $86.00/HR FOR 1/HR - CONVERSION TECH II @ A RATE OF $18.68/HR FOR 1922/HRS
	P.O.P.: 7/1/05-9/30/05 - CONVERSION TECH III @ A RATE OF $36.10/HRFOR 240/HRS
	P.O.P.: 7/1/05-9/30/05 - PROJECT MANAGER @ A RATE OF $88.00/HR FOR l/HR
NOTES:				TOTAL
THIS COMPANY IS A FEDERAL GOVERNMENT CONTRACTOR SUBJECT TO THE AFFIRMATIVE ACTION REQUIREMENTS OF EXECUTIVE ORDER 11245, AS AMENDED, SECTION 503 OF THE REHABILITATION ACT OF 1973, AS AMENDED, AND 38 U.S.C. SECTION 2012 (THE VIETNAM ERA VETERANS READJUSTMENT ASSISTANCE ACT OF 1974), AS AMENDED, THE EQUAL OPPORTUNITY CLAUSE OF 41 C.F.R. 60-1.4 AND THE AFFIRMATIVE ACTION CLAUSES OF 41 C.F.R. 60-250.4 AND 741 ARE INCORPORATED BY REFERENCE.

¨  PURCHASING ¨  ACCOUNTS PAYABLE ¨  VENDOR ¨  REQUESTOR ¨  RECEIVING

The order number set forth below with prefix and suffix, must appear on all correspondence, invoices, packing slips, shipping papers and containers. Acceptance of this order is expressly limited to the Terms and Conditions appearing on the face and on the reverse side hereof and to any Terms and Conditions attached hereto. The vendor must forward to NCI 1.     A copy of the signed shipping receipt. 2.     On all warrantee items: A copy of the warrantee, and a list of serial numbers if applicable. 3.     Send invoices to the address at right to the Attention of Accounts Payable. NCI INFORMATION SYSTEMS, INC. 11730 PLAZA AMERICA DRIVE RESTON, VA 20190 PURCHASE ORDER P.O. #: 19487 G/L #: 9250-042-44 00 PAGE    2 OF 2

ORDER TO: NET COMMERCE CORPORATION SHIP TO: NCI INFORMATION SYSTEMS,

P.O. NO.	P.O. DATE	BUYER	VENDOR NO.	TERMS	SHIP VIA
19487

ITEM NUMBER	DESCRIPTION	REQ. DATE	QTY.	UNIT COST	EXT. COST
	- ODC’S - $448.00 - TRAVEL - $945.00 ** PAYMENT SCHEDULE** 9 EQUAL INSTALLMENTS OF $14,687.56
NOTES:	OVERSHIPMENTS NOT ACCEPTED			TOTAL	132,188.00
TAX EXEMPT CERTIFICATE NUMBER: SUPPLIED UPON REQUEST
THIS COMPANY IS A FEDERAL GOVERNMENT CONTRACTOR SUBJECT TO THE AFFIRMATIVE ACTION REQUIREMENTS OF EXECUTIVE ORDER 11245, AS AMENDED, SECTION 503 OF THE REHABILITATION ACT OF 1973, AS AMENDED, AND 38 U.S.C. SECTION 2012 (THE VIETNAM ERA VETERANS READJUSTMENT ASSISTANCE ACT OF 1974), AS AMENDED, THE EQUAL OPPORTUNITY CLAUSE OF 41 C.F.R. 60-1.4 AND THE AFFIRMATIVE ACTION CLAUSES OF 41 C.F.R. 60-250.4 AND 741 ARE INCORPORATED BY REFERENCE.				/s/ Illegible
				Authorized Signature

¨  PURCHASING ¨  ACCOUNTS PAYABLE ¨  VENDOR ¨  REQUESTOR ¨  RECEIVING

Purchase Order Standard Terms and Conditions

Hereinafter, NCI is referred to as “Buyer”. The Seller identified in the face of this Purchase Order is referred to as “Seller”, and the purchase order is referred to “Order”.

SECTION 1 DELIVER AND ACCEPTANCE. The time of delivery stated is of the essence to this Order. The date specified for delivery is the required delivery date at Buyer’s plant, unless otherwise specifically noted hereon. Buyer reserves the right to refuse any goods or services and to cancel all or any part hereof if Seller fails to deliver all or any part of terms specified herein. If Seller’s deliveries will not meet agreed schedule, Buyer may require Seller to ship via a more rapid route or carrier in order to expedite such delivery and any difference in cost caused by such changes shall be paid by Seller provided, nevertheless, that such right shall be in addition to any other rights and remedies of Buyer. Acceptance of any part of the Order shall not bind Buyer to accept future shipments or performance of services and not deprive it of the right to cancel or return all or any part of the goods because of failure to conform to Order or by reason of defects, latent or patient, or other breach or warranty, or to make any claim for damages, including manufacturing cost or loss of profits, injury to reputation or other special consequential and incidental damages. Such rights shall be in addition to any other remedies provided hereunder or provided by law or otherwise. Delivery shall not be deemed to be complete until goods have been actually received and accepted by Buyer, notwithstanding delivery to any carrier or until order for services have been performed, received and accepted. Goods purchased F.O.B. Seller’s plant or shipping point shall not be considered delivered until they reach NCI’s receiving point indicated herein. However, NCI assumes responsibilities at the F.O.B. point for carrier routing transportation charges and risk of loss of damages to the goods in transit, provided such goods are properly prepared and packaged for shipment by Seller.

SECTION 2 ACCEPTANCE-MODIFICATION OF TERMS. This Order may be accepted only by Seller’s agreement to all the terms and conditions of this Order. Acceptance may be by signing the acknowledgement copy thereof and returning it or by part performance hereunder, and any such acceptance shall constitute an unqualified agreement to the terms and conditions set forth herein unless otherwise modified in writing by the parties. Acceptance of this Order is limited to the terms and conditions states herein. Any additions, deletions of difference in the terms proposed by Seller and objected to and hereby rejected unless Buyer agrees otherwise in writing. No additional or different terms and conditions proposed by the Seller in accepting this Order shall be binding upon Buyer unless accepted in writing by Buyer and no other addition, alterations or modification to, and no waiver of any of the provisions herein contained shall be valid unless made in writing and executed by Buyer and Seller.

SECTION 3 PACKING AND SHIPPING. The goods purchased hereunder must be suitably packed and prepared for shipment to secure the lowest transportation rates of appropriately packed to comply with any specific transportation specifications of Buyer, and in all cases, to comply with carrier’s regulations. All charges for packing, crafting and transportation are included in the price for the goods set forth herein and will be paid by Seller except as otherwise specifically stated on the reverse side of this Order. A packing list shall accompany each box or package shipment showing the order number specified hereon as well as the item number and a description of the goods. In the event that no such Packing List accompanies any shipment, the count or weight or other measure of Buyer shall be final and conclusive. Buyer shall not be obligated to accept any shipments in excess of the ordered quantity and any excess of advance shipment may be returned to Seller at Seller’s expense.

SECTION 4 PAYMENT. Invoices shall be submitted in duplicate and shall contain the following information: order, number, item number, description of articles, sizes, quantities, unit prices and expended totals. Invoices submitted hereunder will be Net 30 and paid within thirty (30) days after receipt of invoices or final acceptance of delivered items by the Buyer, whichever occurs later, unless otherwise specified in the face of this Order. Any adjustments in Seller’s invoices due to shortages, late delivery, rejecting or other failure to comply with the requirements of this Order may be made by Buyer before payment. Cash discounts will be taken from date of final acceptance of delivered items, or date of acceptable invoice, whichever is later. Payments shall not constitute final acceptance. Buyer may offset against payment hereunder any amount owed to Buyer by Seller.

SECTION 5 WARRANTY. Seller represents and warrants (1) that the price charged for the goods and/or services purchased hereto shall be no higher than Seller’s current price to any other customer for the same quality and quantity of such goods or services; (2) that all goods delivered pursuant hereto will be new, unless otherwise specified, and free from defects in material and workmanship; (3) that all goods will conform to applicable specifications, drawings and standards of quality and performance, and that all items will be free from defects in design and suitable for their intended purpose; (4) that the goods covered by this Order are fit and safe for consumer use, if so intended purpose; (5) that all services performed pursuant hereto will be free from defects in materials, and workmanship and will be performed in accordance with the specifications and instruction’s of Buyer, provided nevertheless that Seller retains discretion and control with respect to the manner and means of performing such services and shall at all times remain an independent contractor. All the representations and warranties of Seller together with its service warranties and guarantees, if any, shall turn to Buyer and Buyer’s customers. Seller agrees to indemnify and hold Buyer harmless from all claims, liability, loss, damage and expense including special consequential and incidental damages incurred or sustained by Buyer by reason of any breach of any warranty with respect to the goods or services which are purchased in accordance herewith. The foregoing warranties shall survive any delivery, inspection, acceptance or payment by Buyer.

SECTION 6 INSPECTION. All goods supplied and services performed pursuant hereto shall be subject to inspection and test by Buyer and its agents and by its customers at all times and places, whether, during or after manufacturer as to goods, or performance as to services, and notwithstanding their terms of delivery or payments or, as to goods, that title has not yet passed to Buyer or to its customers. In the event that goods supplied hereto or services performed hereunder contain defects in material or workmanship or, as to services, are not performed in accordance with the specifications instructions of Buyer, Buyer may require prompt correction thereof, or, as to services, require that the services be rendered again at Seller’s expense, or as to goods, require that the goods be replaced at Seller’s expense. If such defects exist or if Seller is unable or refuses to replace the goods or render the service again promptly, Buyer may, by contract or otherwise replace such goods or obtain such services and charge Seller or deduct from amounts owed by Buyer to Seller the Costs, expenses and losses including incidental and consequential damages incurred thereby which are in excess of Seller’s price for such goods or services. After notification to Seller that goods are defective, all risk of loss with respect to such goods shall be on Seller and Seller shall pay all package and shipping charges in connection with defective goods returned by the Buyer herein. The goods covered by this Order are intended for the manufacture and sale of Buyer’s established products in which Buyer has built a substantial and valuable reputation for quality and efficiency and any defect in the goods hereunder may occasion special damage to Buyer. All rights and remedies of the Buyer hereunder shall be in addition to any other remedies provided by law.

SECTION 7 ASSIGNMENT AND SUBCONTRACTS. This Order is not assignable and shall not be assigned by Seller without the prior written consent of Buyer. Further, Seller agrees to obtain Buyer’s approval before subcontracting this Order or any substantial portion thereof; provided, however, that this limitation shall not apply to the purchase of standard commercial supplies or raw material.

SECTION 8 RESPONSIBILITY FOR SUPPLIES. Except as otherwise provided in this Order, Seller shall bear the risk of loss of, or damage to, the supplies covered by this Order until delivered to Buyer’s Plant (or to such other places as may be designated on the face of this Order) and accepted by Buyer. Seller shall also bear the risk of loss of, or damage to, rejected supplies after receipt of Buyer’s notice of rejection, provided, however, that Buyer shall bear such risk as to loss or damage caused by the willful or negligent acts of its officers, agents or employees acting within the scope of their employment. Buyer shall have a reasonable time after delivery to inspect and to accept or reject.

SECTION 9 NOTICE OF LABOR DISPUTES. Whenever, the Seller has knowledge that any actual or potential labor dispute is delaying or threatens to delay the timely performance of this Order, the Seller shall immediately give notice thereof, including all relevant information with respect thereto, to the Buyer.

SECTION 10 DEFAULT. (a) Buyer may, by written notice of default to Seller, terminate the whole or any part of this Order in any one of the following circumstances:

i) Seller fails to make delivery of the supplies or to perform the services within the time herein or any extension thereof; or

ii) Seller fails to perform any of the other provisions of this Order or so fails to make progress as to endanger performance of this Order in accordance with its terms, and in either of these two circumstances does not cure such failure within a period of 10 days (or such longer period as Buyer may authorize in writing) after receipt of notice from the Buyer specifying such failure; or

iii) Seller becomes insolvent or the subject of proceedings under any law relating to bankruptcy or the relief of debtors or admits in writing its inability to pay its debts as they become due; or

iv) If Seller fails to provide Buyer within a reasonable time after demand by Buyer, written assurance of due performance by Seller.

SECTION 11 COMPLIANCE WITH LAWS. Sellers agree to comply with the applicable provisions of any federal state or local law or ordinance of all orders, rules and regulations issued thereunder.

SECTION 12 VIRGINIA LAW TO GOVERN. The order shall be governed by subject to and construed according to the laws of the State of Virginia.

SECTION 13 NON-WAIVER OR RIGHTS. The failure of Buyer to insist upon strict performance of any of their rights and conditions of this Order or to exercise any rights or remedies, shall not be construed as a waiver of its rights to assert any of name or to rely on any such terms or conditions at any time thereafter. The invalidity in whole or in part of any term or condition of this Order shall not affect the validity of other parts hereof.

SECTION 14 CHANGES. NCI may at any time, by written order, and without notice to the sureties, make changes within the general scope of this order in any one or more of the following: (i) drawings, designs or specifications; (ii) method of shipment or packing; (iii) place of delivery. If any such change causes an increase or decrease in the cost of, or the time required for the performance of any part of the work under this Order, whether changed or not changed by any such order, an equitable adjustment shall be made in price or delivery schedule, or both and the Order shall be modified in writing accordingly. Any claim by Seller for adjustment under this clause must be asserted in writing within thirty (30) days from the date of receipt by Seller of the notification of change, provided, however, that NCI, if it decides that the facts justify such action may receive and upon any such claim asserted at any time prior to final payment under this Order. However, nothing in this clause shall excuse Seller from proceeding with this Order as changed (a) NCI’s engineering technical and other personnel may from time to time render assistance or give technical advise to or exchange information with Seller’s personnel concerning this Order or the articles or services to be furnished hereunder. However, this shall not constitute a waiver with respect to any of Seller’s obligations or NCI’s rights hereunder or be authority for any change in the goods and services called for hereunder. Any waiver or change to be valid and binding upon NCI must be in writing and signed by an authorized representative of NCI’s Purchasing Department for further instructions. (b) In connection with any claim for adjustment under this clause, Seller shall submit cost data in such form and detail as may reasonably be required by NCI’s if this Order relates to a prime contract with the U.S. Government. Seller shall, upon NCI’s request, submit a Certificate of Current Cost or Pricing Data, in substantially the form set forth in FAR 15.804-4 Certificate of Current Cost and Pricing, with respect to such data. (c) Where the cost of property made obsolete or excess as a result of a change is included in Seller’s claim for adjustment pursuant to this clause. NCI shall have the right to prescribe the manner of disposition of such property.

SECTION 15 TERMINATION FOR CONVENIENCE. Except for paragraphs (c), (f) and (m) thereof, the causes set forth in Subsection 52.249.2 of the Federal Acquisition Regulation in effect on the date of this Order is incorporated herein and made part hereof by reference with the following changes. The terms “Government”, “Contracting Officer”, “Contractor”, and “Contract” appearing in the remaining paragraphs of said clause shall mean Buyer, Buyer’s Purchasing Representative, Seller and Order, respectively, and the 1-year period in paragraph (d) and the 90 day period in paragraph (k) are changed to read 6 months and 45 days, respectively. Said Clause applies whether or not this Order is placed pursuant to a U.S. Government prime contract or subcontract.

SECTION 16 DISPUTES. Either party may litigate any dispute arising under or related to this Order before any court of competent jurisdiction. Pending resolution of any such dispute by settlement or by final judgment, the parties shall proceed diligently with performance. Seller’s performance shall be in accordance with Buyer’s written instructions.

SECTION 17 ENTIRE AGREEMENT. Upon acceptance of this Order, Seller agrees that the provisions of this Order, including all documents incorporated therein by reference shall constitute the entire Agreement between the parties hereto and supersede all prior agreements relation to the subject matter hereof. This Order may not be modified or terminated orally and no modification nor any claimed waiver of any of the provisions thereof shall be binding in writing and signed by the party against whom such modify to waiver is sought to be enforced.

SECTION 18 FEDERAL ACQUISITION REGULATION (FAR) CLAUSES. If marked below, this Order is awarded pursuant to a U.S. Government Prime Contract, therefore, this applicable FAR subcontract clauses and Representation and Certification requirement are incorporated.

EX-10.20

Exhibit 10.20

The order number set forth below with prefix and suffix, must appear on all correspondence, invoices, packing slips, shipping papers and containers. Acceptance of this order is expressly limited to the Terms and Conditions appearing on the face and on the reverse side hereof and to any Terms and Conditions attached hereto. The vendor must forward to NCI 1.     A copy of the signed shipping receipt. 2.     On all warrantee items: A copy of the warrantee, and a list of serial numbers if applicable. 3.     Send invoices to the address at right to the Attention of Accounts Payable. NCI INFORMATION SYSTEMS, INC. 11730 PLAZA AMERICA DRIVE RESTON, VA 20190 PURCHASE ORDER P.O. # : 19493 G/L #: 9242-001-43 00 PAGE 1 OF 2

ORDER TO:	NET COMMERCE CORPORATION 12007 SUNRISE VALLEY DRIVE RESTON, VA 20091	SHIP TO:	NCI INFORMATION SYSTEMS, 11730 PLAZA AMERICA DR. SUITE 700 RESTON, VA 20190
CONTACT:	RICK KALSI	DELIVER TO:	LEN TRAMMELLE
PHONE:	703-707-1880
		F.O.B:	DESTINATION

P.O. NO.	P.O. DATE	BUYER	VENDOR NO.	TERMS	SHIP VIA
19493	02/10/05	RYAN, DANI	N00501	N30	BEST WAY

ITEM NUMBER	DESCRIPTION	REQ. DATE	QTY.	UNIT COST	EXT. COST
	THIS PURCHASE ORDER IS SUBJECT TO THE TERMS AND CONDITIONS OF SUBCONTRACT NUMBER SC001-9242-DCDMV. **PERIOD OF PERFORMANCE** - 1/1/05 -6/30/05 FOR LINES 1-3 - 7/1/05 - 8/15/05 FOR LINES 4-6
001. 9242-001-43 00	CONVERSION TECH II (LC-E4)	06/30/05	12940.00 /HRS	19.4400	251553.60
002. 9242-001-43 00	CONVERSION TECH III (LC-F4)	06/30/05	1680.00 /HRS	37.1800	62462.40
003. 9242-001-43 00	PROJECT MANAGER (LC-H4)	06/30/05	80.00 /HRS	79.7300	6378.40
004. 9242-001-43 00	CONVERSION TECH II (LC-E5)	08/15/05	3240.00 /HRS	19.7800	64087.20
005. 9242-001-43 00	CONVERSION TECH III (LC-F5)	08/15/05	420.00/HRS	38.4800	16161.60
006. 9242-001-43 00	PROJECT MANAGER (LC-H5)	08/15/05	20.00 /HRS	82.6000	1652.00
007.	SOFTWARE LICENSE	08/15/05	1.00	797.5000	797.50
NOTES:				TOTAL
THIS COMPANY IS A FEDERAL GOVERNMENT CONTRACTOR SUBJECT TO THE AFFIRMATIVE ACTION REQUIREMENTS OF EXECUTIVE ORDER 11245, AS AMENDED, SECTION 503 OF THE REHABILITATION ACT OF 1973, AS AMENDED, AND 38 U.S.C. SECTION 2012 (THE VIETNAM ERA VETERANS READJUSTMENT ASSISTANCE ACT OF 1974), AS AMENDED, THE EQUAL OPPORTUNITY CLAUSE OF 41 C.F.R. 60-1.4 AND THE AFFIRMATIVE ACTION CLAUSES OF 41 C.F.R. 60-250.4 AND 741 ARE INCORPORATED BY REFERENCE.

¨  PURCHASING ¨  ACCOUNTS PAYABLE ¨  VENDOR ¨  REQUESTOR ¨  RECEIVING

Purchase Order Standard Terms and Conditions

Hereinafter, NCI is referred to as “Buyer”. The Seller identified in the face of this Purchase Order is referred to as “Seller”, and the purchase order is referred to “Order”.

SECTION 1 DELIVER AND ACCEPTANCE. The time of delivery stated is of the essence to this Order. The date specified for delivery is the required delivery date at Buyer’s plant, unless otherwise specifically noted hereon. Buyer reserves the right to refuse any goods or services and to cancel all or any part hereof if Seller fails to deliver all or any part of terms specified herein. If Seller’s deliveries will not meet agreed schedule, Buyer may require Seller to ship via a more rapid route or carrier in order to expedite such delivery and any difference in cost caused by such changes shall be paid by Seller provided, nevertheless, that such right shall be in addition to any other rights and remedies of Buyer. Acceptance of any part of the Order shall not bind Buyer to accept future shipments or performance of services and not deprive it of the right to cancel or return all or any part of the goods because of failure to conform to Order or by reason of defects, latent or patient, or other breach or warranty, or to make any claim for damages, including manufacturing cost or loss of profits, injury to reputation or other special consequential and incidental damages. Such rights shall be in addition to any other remedies provided hereunder or provided by law or otherwise. Delivery shall not be deemed to be complete until goods have been actually received and accepted by Buyer, notwithstanding delivery to any carrier or until order for services have been performed, received and accepted. Goods purchased F.O.B. Seller’s plant or shipping point shall not be considered delivered until they reach NCI’s receiving point indicated herein. However, NCI assumes responsibilities at the F.O.B. point for carrier routing transportation charges and risk of loss of damages to the goods in transit, provided such goods are properly prepared and packaged for shipment by Seller.

SECTION 2 ACCEPTANCE-MODIFICATION OF TERMS. This Order may be accepted only by Seller’s agreement to all the terms and conditions of this Order. Acceptance may be by signing the acknowledgement copy thereof and returning it or by part performance hereunder, and any such acceptance shall constitute an unqualified agreement to the terms and conditions set forth herein unless otherwise modified in writing by the parties. Acceptance of this Order is limited to the terms and conditions states herein. Any additions, deletions of difference in the terms proposed by Seller and objected to and hereby rejected unless Buyer agrees otherwise in writing. No additional or different terms and conditions proposed by the Seller in accepting this Order shall be binding upon Buyer unless accepted in writing by Buyer and no other addition, alterations or modification to, and no waiver of any of the provisions herein contained shall be valid unless made in writing and executed by Buyer and Seller.

SECTION 3 PACKING AND SHIPPING. The goods purchased hereunder must be suitably packed and prepared for shipment to secure the lowest transportation rates of appropriately packed to comply with any specific transportation specifications of Buyer, and in all cases, to comply with carrier’s regulations. All charges for packing, crafting and transportation are included in the price for the goods set forth herein and will be paid by Seller except as otherwise specifically stated on the reverse side of this Order. A packing list shall accompany each box or package shipment showing the order number specified hereon as well as the item number and a description of the goods. In the event that no such Packing List accompanies any shipment, the count or weight or other measure of Buyer shall be final and conclusive. Buyer shall not be obligated to accept any shipments in excess of the ordered quantity and any excess of advance shipment may be returned to Seller at Seller’s expense.

SECTION 4 PAYMENT. Invoices shall be submitted in duplicate and shall contain the following information: order, number, item number, description of articles, sizes, quantities, unit prices and expended totals. Invoices submitted hereunder will be Net 30 and paid within thirty (30) days after receipt of invoices or final acceptance of delivered items by the Buyer, whichever occurs later, unless otherwise specified in the face of this Order. Any adjustments in Seller’s invoices due to shortages, late delivery, rejecting or other failure to comply with the requirements of this Order may be made by Buyer before payment. Cash discounts will be taken from date of final acceptance of delivered items, or date of acceptable invoice, whichever is later. Payments shall not constitute final acceptance. Buyer may offset against payment hereunder any amount owed to Buyer by Seller.

SECTION 5 WARRANTY. Seller represents and warrants (1) that the price charged for the goods and/or services purchased hereto shall be no higher than Seller’s current price to any other customer for the same quality and quantity of such goods or services; (2) that all goods delivered pursuant hereto will be new, unless otherwise specified, and free from defects in material and workmanship; (3) that all goods will conform to applicable specifications, drawings and standards of quality and performance, and that all items will be free from defects in design and suitable for their intended purpose; (4) that the goods covered by this Order are fit and safe for consumer use, if so intended purpose; (5) that all services performed pursuant hereto will be free from defects in materials, and workmanship and will be performed in accordance with the specifications and instruction’s of Buyer, provided nevertheless that Seller retains discretion and control with respect to the manner and means of performing such services and shall at all times remain an independent contractor. All the representations and warranties of Seller together with its service warranties and guarantees, if any, shall turn to Buyer and Buyer’s customers. Seller agrees to indemnify and hold Buyer harmless from all claims, liability, loss, damage and expense including special consequential and incidental damages incurred or sustained by Buyer by reason of any breach of any warranty with respect to the goods or services which are purchased in accordance herewith. The foregoing warranties shall survive any delivery, inspection, acceptance or payment by Buyer.

SECTION 6 INSPECTION. All goods supplied and services performed pursuant hereto shall be subject to inspection and test by Buyer and its agents and by its customers at all times and places, whether, during or after manufacturer as to goods, or performance as to services, and notwithstanding their terms of delivery or payments or, as to goods, that title has not yet passed to Buyer or to its customers. In the event that goods supplied hereto or services performed hereunder contain defects in material or workmanship or, as to services, are not performed in accordance with the specifications instructions of Buyer, Buyer may require prompt correction thereof, or, as to services, require that the services be rendered again at Seller’s expense, or as to goods, require that the goods be replaced at Seller’s expense. If such defects exist or if Seller is unable or refuses to replace the goods or render the service again promptly, Buyer may, by contract or otherwise replace such goods or obtain such services and charge Seller or deduct from amounts owed by Buyer to Seller the Costs, expenses and losses including incidental and consequential damages incurred thereby which are in excess of Seller’s price for such goods or services. After notification to Seller that goods are defective, all risk of loss with respect to such goods shall be on Seller and Seller shall pay all package and shipping charges in connection with defective goods returned by the Buyer herein. The goods covered by this Order are intended for the manufacture and sale of Buyer’s established products in which Buyer has built a substantial and valuable reputation for quality and efficiency and any defect in the goods hereunder may occasion special damage to Buyer. All rights and remedies of the Buyer hereunder shall be in addition to any other remedies provided by law.

SECTION 7 ASSIGNMENT AND SUBCONTRACTS. This Order is not assignable and shall not be assigned by Seller without the prior written consent of Buyer. Further, Seller agrees to obtain Buyer’s approval before subcontracting this Order or any substantial portion thereof; provided, however, that this limitation shall not apply to the purchase of standard commercial supplies or raw material.

SECTION 8 RESPONSIBILITY FOR SUPPLIES. Except as otherwise provided in this Order, Seller shall bear the risk of loss of, or damage to, the supplies covered by this Order until delivered to Buyer’s Plant (or to such other places as may be designated on the face of this Order) and accepted by Buyer. Seller shall also bear the risk of loss of, or damage to, rejected supplies after receipt of Buyer’s notice of rejection, provided, however, that Buyer shall bear such risk as to loss or damage caused by the willful or negligent acts of its officers, agents or employees acting within the scope of their employment. Buyer shall have a reasonable time after delivery to inspect and to accept or reject.

SECTION 9 NOTICE OF LABOR DISPUTES. Whenever, the Seller has knowledge that any actual or potential labor dispute is delaying or threatens to delay the timely performance of this Order, the Seller shall immediately give notice thereof, including all relevant information with respect thereto, to the Buyer.

SECTION 10 DEFAULT. (a) Buyer may, by written notice of default to Seller, terminate the whole or any part of this Order in any one of the following circumstances:

i) Seller fails to make delivery of the supplies or to perform the services within the time herein or any extension thereof; or

ii) Seller fails to perform any of the other provisions of this Order or so fails to make progress as to endanger performance of this Order in accordance with its terms, and in either of these two circumstances does not cure such failure within a period of 10 days (or such longer period as Buyer may authorize in writing) after receipt of notice from the Buyer specifying such failure; or

iii) Seller becomes insolvent or the subject of proceedings under any law relating to bankruptcy or the relief of debtors or admits in writing its inability to pay its debts as they become due; or

iv) If Seller fails to provide Buyer within a reasonable time after demand by Buyer, written assurance of due performance by Seller.

SECTION 11 COMPLIANCE WITH LAWS. Sellers agree to comply with the applicable provisions of any federal state or local law or ordinance of all orders, rules and regulations issued thereunder.

SECTION 12 VIRGINIA LAW TO GOVERN. The order shall be governed by subject to and construed according to the laws of the State of Virginia.

SECTION 13 NON-WAIVER OR RIGHTS. The failure of Buyer to insist upon strict performance of any of their rights and conditions of this Order or to exercise any rights or remedies, shall not be construed as a waiver of its rights to assert any of name or to rely on any such terms or conditions at any time thereafter. The invalidity in whole or in part of any term or condition of this Order shall not affect the validity of other parts hereof.

SECTION 14 CHANGES. NCI may at any time, by written order, and without notice to the sureties, make changes within the general scope of this order in any one or more of the following: (i) drawings, designs or specifications; (ii) method of shipment or packing; (iii) place of delivery. If any such change causes an increase or decrease in the cost of, or the time required for the performance of any part of the work under this Order, whether changed or not changed by any such order, an equitable adjustment shall be made in price or delivery schedule, or both and the Order shall be modified in writing accordingly. Any claim by Seller for adjustment under this clause must be asserted in writing within thirty (30) days from the date of receipt by Seller of the notification of change, provided, however, that NCI, if it decides that the facts justify such action may receive and upon any such claim asserted at any time prior to final payment under this Order. However, nothing in this clause shall excuse Seller from proceeding with this Order as changed (a) NCI’s engineering technical and other personnel may from time to time render assistance or give technical advise to or exchange information with Seller’s personnel concerning this Order or the articles or services to be furnished hereunder. However, this shall not constitute a waiver with respect to any of Seller’s obligations or NCI’s rights hereunder or be authority for any change in the goods and services called for hereunder. Any waiver or change to be valid and binding upon NCI must be in writing and signed by an authorized representative of NCI’s Purchasing Department for further instructions. (b) In connection with any claim for adjustment under this clause, Seller shall submit cost data in such form and detail as may reasonably be required by NCI’s if this Order relates to a prime contract with the U.S. Government. Seller shall, upon NCI’s request, submit a Certificate of Current Cost or Pricing Data, in substantially the form set forth in FAR 15.804-4 Certificate of Current Cost and Pricing, with respect to such data. (c) Where the cost of property made obsolete or excess as a result of a change is included in Seller’s claim for adjustment pursuant to this clause. NCI shall have the right to prescribe the manner of disposition of such property.

SECTION 15 TERMINATION FOR CONVENIENCE. Except for paragraphs (c), (f) and (m) thereof, the causes set forth in Subsection 52.249.2 of the Federal Acquisition Regulation in effect on the date of this Order is incorporated herein and made part hereof by reference with the following changes. The terms “Government”, “Contracting Officer”, “Contractor”, and “Contract” appearing in the remaining paragraphs of said clause shall mean Buyer, Buyer’s Purchasing Representative, Seller and Order, respectively, and the 1-year period in paragraph (d) and the 90 day period in paragraph (k) are changed to read 6 months and 45 days, respectively. Said Clause applies whether or not this Order is placed pursuant to a U.S. Government prime contract or subcontract.

SECTION 16 DISPUTES. Either party may litigate any dispute arising under or related to this Order before any court of competent jurisdiction. Pending resolution of any such dispute by settlement or by final judgment, the parties shall proceed diligently with performance. Seller’s performance shall be in accordance with Buyer’s written instructions.

SECTION 17 ENTIRE AGREEMENT. Upon acceptance of this Order, Seller agrees that the provisions of this Order, including all documents incorporated therein by reference shall constitute the entire Agreement between the parties hereto and supersede all prior agreements relation to the subject matter hereof. This Order may not be modified or terminated orally and no modification nor any claimed waiver of any of the provisions thereof shall be binding in writing and signed by the party against whom such modify to waiver is sought to be enforced.

SECTION 18 FEDERAL ACQUISITION REGULATION (FAR) CLAUSES. If marked below, this Order is awarded pursuant to a U.S. Government Prime Contract, therefore, this applicable FAR subcontract clauses and Representation and Certification requirement are incorporated.

The order number set forth below with prefix and suffix, must appear on all correspondence, invoices, packing slips, shipping papers and containers. Acceptance of this order is expressly limited to the Terms and Conditions appearing on the face and on the reverse side hereof and to any Terms and Conditions attached hereto. The vendor must forward to NCI 1.     A copy of the signed shipping receipt. 2.     On all warrantee items: A copy of the warrantee, and a list of serial numbers if applicable. 3.     Send invoices to the address at right to the Attention of Accounts Payable. NCI INFORMATION SYSTEMS, INC. 11730 PLAZA AMERICA DRIVE RESTON, VA 20190 PURCHASE ORDER P.O. #: 19493 G/L #: 9242-001-43 00 PAGE    2 OF 2

ORDER TO: NET COMMERCE CORPORATION SHIP TO: NCI INFORMATION SYSTEMS,

P.O. NO.	P.O. DATE	BUYER	VENDOR NO.	TERMS	SHIP VIA
19493

ITEM NUMBER	DESCRIPTION	REQ. DATE	QTY.	UNIT COST	EXT. COST
9242-001-44 00			/EA
008. 9242-001-44 00	ODC’S FOR 7.5 MTHS	08/15/05	0.00	0.0000	3780.00
009. 9242-001-44 00	PAPER SHREDDING FOR 7.5 MTHS	08/10/05	0.00	0.0000	1118.00
010. 9242-001-44 00	TRAVEL COSTS (AS INCURRED)	08/15/05	0.00	0.0000	1135.00
NOTES: OVERSHIPMENTS NOT ACCEPTED				TOTAL	409,125.70
TAX EXEMPT CERTIFICATE NUMBER: SUPPLIED UPON REQUEST
THIS COMPANY IS A FEDERAL GOVERNMENT CONTRACTOR SUBJECT TO THE AFFIRMATIVE ACTION REQUIREMENTS OF EXECUTIVE ORDER 11245, AS AMENDED, SECTION 503 OF THE REHABILITATION ACT OF 1973, AS AMENDED, AND 38 U.S.C. SECTION 2012 (THE VIETNAM ERA VETERANS READJUSTMENT ASSISTANCE ACT OF 1974), AS AMENDED, THE EQUAL OPPORTUNITY CLAUSE OF 41 C.F.R. 60-1.4 AND THE AFFIRMATIVE ACTION CLAUSES OF 41 C.F.R. 60-250.4 AND 741 ARE INCORPORATED BY REFERENCE.				/s/ Illegible
				Authorized Signature

¨  PURCHASING ¨  ACCOUNTS PAYABLE ¨  VENDOR ¨  REQUESTOR ¨  RECEIVING

EX-10.21

Exhibit 10.21

The order number set forth below with prefix and suffix, must appear on all correspondence, invoices, packing slips, shipping papers and containers. Acceptance of this order is expressly limited to the Terms and Conditions appearing on the face and on the reverse side hereof and to any Terms and Conditions attached hereto. The vendor must forward to NCI 1.     A copy of the signed shipping receipt. 2.     On all warrantee items: A copy of the warrantee, and a list of serial numbers if applicable. 3.     Send invoices to the address at right to the Attention of Accounts Payable. NCI INFORMATION SYSTEMS, INC. 11730 PLAZA AMERICA DRIVE RESTON, VA 20190 PURCHASE ORDER P.O. #: 19493 G/L #: 9242-001-43 00 PAGE    1 OF 2

ORDER TO:	NET COMMERCE CORPORATION 12007 SUNRISE VALLEY DRIVE RESTON, VA 20091	SHIP TO:	NCI INFORMATION SYSTEMS, 11730 PLAZA AMERICA DRIVE SUITE 700 RESTON, VA 20190
CONTACT:	RICK KALSI	DELIVER TO:	LEN TRAMMELLE
PHONE:	703-707-1880
		F.O.B:	DESTINATION

P.O. NO.	P.O. DATE	BUYER	VENDOR NO.	TERMS	SHIP VIA
19493	02/10/05	RYAN, DANI	N00501	N30	BEST WAY

ITEM NUMBER	DESCRIPTION	REQ. DATE	QTY.	UNIT COST	EXT. COST
	THIS CHANGE ORDER IS ISSUED AS A NO COST EXTENSION THROUGH 9/30/5 FOR LINE ITEMS 4-6. ALL OTHER TERMS AND CONDITIONS REMAIN THE SAME. THIS PURCHASE ORDER IS SUBJECT TO THE TERMS AND CONDITIONS OF SUBCONTRACT NUMBER SC001-9242-DCDMV.
001. 9242 - 001 - 43 00	CONVERSION TECH II (LC-E4)	06/30/05	12940.00/HRS	19.4400	251553.60
002. 9242 - 001 - 43 00	CONVERSION TECH III (LC-F4)	06/30/05	1680.00/HRS	37.1800	62462.40
003. 9242 - 001 - 43 00	PROJECT MANAGER (LC-H4)	06/30/05	80.00/HRS	79.7300	6378.40
004. 9242 - 001 - 43 00	CONVERSION TECH II (LC-E5)	09/30/05	3240.00/HRS	19.7800	64087.20
005. 9242 - 001 - 43 00	CONVERSION TECH III (LC-F5)	09/30/05	420.00/HRS	38.4800	16161.60
006. 9242 - 001 - 43 00	PROJECT MANAGER (LC-H5)	09/30/05	20.00/HRS	82.600	1652.00
NOTES:				TOTAL
THIS COMPANY IS A FEDERAL GOVERNMENT CONTRACTOR SUBJECT TO THE AFFIRMATIVE ACTION REQUIREMENTS OF EXECUTIVE ORDER 11245, AS AMENDED, SECTION 503 OF THE REHABILITATION ACT OF 1973, AS AMENDED, AND 38 U.S.C. SECTION 2012 (THE VIETNAM ERA VETERANS READJUSTMENT ASSISTANCE ACT OF 1974), AS AMENDED, THE EQUAL OPPORTUNITY CLAUSE OF 41 C.F.R. 60-1.4 AND THE AFFIRMATIVE ACTION CLAUSES OF 41 C.F.R. 60-250.4 AND 741 ARE INCORPORATED BY REFERENCE.

¨  PURCHASING ¨  ACCOUNTS PAYABLE ¨  VENDOR ¨  REQUESTOR ¨  RECEIVING

The order number set forth below with prefix and suffix, must appear on all correspondence, invoices, packing slips, shipping papers and containers. Acceptance of this order is expressly limited to the Terms and Conditions appearing on the face and on the reverse side hereof and to any Terms and Conditions attached hereto. The vendor must forward to NCI 1.     A copy of the signed shipping receipt. 2.     On all warrantee items: A copy of the warrantee, and a list of serial numbers if applicable. 3.     Send invoices to the address at right to the Attention of Accounts Payable. NCI INFORMATION SYSTEMS, INC. 11730 PLAZA AMERICA DRIVE RESTON, VA 20190 PURCHASE ORDER P.O. # : 19493 G/L # : 9242-001-43 00 PAGE    2 OF 2

ORDER TO: NET COMMERCE CORPORATION SHIP TO: NCI INFORMATION SYSTEMS,

P.O. NO.	P.O. DATE	BUYER	VENDOR NO.	TERMS	SHIP VIA
19493

ITEM NUMBER	DESCRIPTION	REQ. DATE	QTY.	UNIT COST	EXT. COST
007. 9242-001-44 00	SOFTWARE LICENSE	08/15/05	1.00/EA	797.5000	797.50
008. 9242-001-44 00	ODC’S FOR 7.5 MTHS	09/30/05	0.00	0.0000	3780.00
009. 9242-001-44 00	PAPER SHREDDING FOR 7.5 MTHS	09/30/05	0.00	0.0000	1118.00
010. 9242-001-44 00	TRAVEL COSTS (AS INCURRED)	09/30/05	0.00	0.0000	1135.00
NOTES: OVERSHIPMENTS NOT ACCEPTED				TOTAL	409,125.70
TAX EXEMPT CERTIFICATE NUMBER: SUPPLIED UPON REQUEST
THIS COMPANY IS A FEDERAL GOVERNMENT CONTRACTOR SUBJECT TO THE AFFIRMATIVE ACTION REQUIREMENTS OF EXECUTIVE ORDER 11245, AS AMENDED, SECTION 503 OF THE REHABILITATION ACT OF 1973, AS AMENDED, AND 38 U.S.C. SECTION 2012 (THE VIETNAM ERA VETERANS READJUSTMENT ASSISTANCE ACT OF 1974), AS AMENDED, THE EQUAL OPPORTUNITY CLAUSE OF 41 C.F.R. 60-1.4 AND THE AFFIRMATIVE ACTION CLAUSES OF 41 C.F.R. 60-250.4 AND 741 ARE INCORPORATED BY REFERENCE.				/s/ Illegible
				Authorized Signature

¨  PURCHASING ¨  ACCOUNTS PAYABLE ¨  VENDOR ¨  REQUESTOR ¨  RECEIVING

EX-14.1

Exhibit 14.1

NCI, INC.

CODE OF ETHICS

Policy Statement:

Consistent with Item 406 of Regulation S-K under the Securities Exchange Act of 1934, NCI, Inc. (the “Company”) has adopted this Code of Ethics. Senior financial officers, including but not limited to the principal executive officer, principal financial officer, principal accounting officer or controller and persons performing certain functions (the “Senior Financial Officers”), of the Company are charged with the responsibility and have the authority to protect and preserve the financial interests of all of the stakeholders in the Company, including, without limitation, stockholders and employees. The Company’s Senior Financial Officers fulfill this responsibility and authority by developing and enforcing policies and procedures for the operation of the Company’s financial functions. All Senior Financial Officers of the Company are required to act in conformance with this Code of Ethics at all times and to encourage all of their respective subordinates to act in conformance with this Code of Ethics. For purposes of this Code of Ethics, the term “Senior Financial Officers” shall mean the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

This Code of Ethics may be revised or supplemented from time to time to reflect changing laws and ethical standards. Each Senior Financial Officer is responsible for maintaining a working knowledge and understanding of this Code of Ethics and will be required to certify on an annual basis that he or she has read, understands and agrees to comply with the most recent version of this Code of Ethics.

Ethics Policy:

1.     Honesty and Ethical Conduct. Each Senior Financial Officer will exhibit and promote the highest standards of ethical conduct by:

(a)    encouraging and rewarding professional integrity in all aspects of the Company’s financial dealings by eliminating all inhibitions and barriers to responsible behavior, such as coercion, fear or alienation;

(b)    prohibiting and eliminating the appearance or occurrence of conflicts between what is in the best interests of the Company and what could result in material personal gain for a member of the Company’s financial departments, including Senior Financial Officers, or other senior management in the Company. In the event any Senior Financial Officer becomes aware of any such conflict, he or she should promptly report the same to the chairman of the Audit Committee of the Company’s Board of Directors;

(c)    providing a mechanism for members of the Company’s financial departments to inform senior management of deviations in practice from established policies and procedures governing honest and ethical behavior; and

(d)    demonstrating his or her personal support for such policies and procedures by providing periodic communications throughout the Company’s financial departments that reinforce these ethical standards.

2.    Financial Records and Periodic Reporting. Senior Financial Officers will cause the Company’s transaction and reporting systems and other procedures to be maintained in a manner which are reasonably designed to ensure that:

(a)    all of the Company’s business transactions are properly authorized and completely and accurately recorded in the Company’s books and records in accordance with generally accepted accounting principles and established financial policies of the Company;

(b)    the retention or disposal of the Company’s financial records is in accordance with the Company’s established practices for retention or disposal of such records and applicable legal and regulatory requirements; and

(c)    periodic financial communications and reports will be delivered in a timely manner and in a way that demonstrates a high degree of clarity as to content and meaning in order to enable readers and users of the communications and reports to accurately determine their significance and consequence.

3.    Compliance with Applicable Laws, Rules and Regulations. Senior Financial Officers will actively promote:

(a)    the education of employees in the Company’s financial departments regarding any federal, state or local law, rule or regulation that affects the operation of the Company’s financial departments or the Company in general;

(b)    the promulgation of adequate Company procedures to monitor compliance by the Company’s financial departments with any applicable federal, state or local law, rule or regulation; and

(c)    prompt identification, reporting and correction of any detected deviations from applicable federal, state or local law, rule or regulation.

Enforcement of the Code of Ethics:

All employees of the Company shall promptly report to the Chief Executive Officer or the Chief Financial Officer, or, if necessary to avoid a conflict of interest, the chairman of the Audit Committee of the Company’s Board of Directors, any violations of this Code of Ethics. Any violation of this Code of Ethics by any Senior Financial Officer will lead to disciplinary action which may include, without limitation, one or more of a warning or letter of reprimand, demotion, loss of merit increase, bonus or stock options, suspension without pay or termination of employment.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our reports on the consolidated financial statements of NCI, Inc. dated March 1, 2005 (except as to the Reincorporation Transaction and the stock split described in Note 1, as to which the date is October 3, 2005), and the financial statements of Scientific and Engineering Solutions, Inc. dated March 1, 2005, in Amendment No. 2 to the Registration Statement on Form S-1 (No. 333-127006) and related Prospectus of NCI, Inc. for the registration of shares of its common stock.

/s/ Ernst & Young LLP

McLean, VA

October 3, 2005

CORRESP

1650 Tysons Boulevard McLean, VA 22102-4859 Tel 703.770.7900
Fax 703.770.7901
www.pillsburylaw.com