BAE SYSTEMS To Purchase STI Government Systems.

Business Editors/High-Tech Writers

ROCKVILLE, Md.--(BUSINESS WIRE)--April 5, 2004

BAE Systems North America today announced it has reached a definitive agreement with STI Industries, Inc. (STI), to purchase the assets of STI Government Systems for $27 million in cash. STI Government Systems employs 125 people and is headquartered in Honolulu, Hawaii.

"STI Government Systems scientists and engineers are well respected throughout government and industry for their innovative technology solutions," said Galen Ho, president of BAE Systems North America's Information and Electronic Systems Integration Sector. "They bring great talent for transforming concepts into solutions and technology. Their capabilities - particularly in hyperspectral imaging and sensor fusion - will be important elements in support of our Communications, Intelligence, Surveillance and Reconnaissance arena."

STI Government Systems is a leader in developing innovative solutions for U.S. government customers with its expertise in photonics, information technologies and system integration. Currently, STI Government Systems supports the U.S. Navy in defense applications of its technologies and also provides a variety of services to other government agencies in areas such as pollution mapping and search and rescue.

The acquisition of STI Government Systems is consistent with the BAE Systems' strategy of acquiring capabilities and technologies that enhance the Company's leadership in key areas.

"We're excited that STI Government Systems is joining BAE Systems," said Ho. "Our two companies have common values and similar histories of innovation and commitment to national security. Together we will be able to provide our customers with more innovative solutions to meet demanding defense and security requirements, particularly in detection of submarines, mines, and other objects in the water as well as terrestrial object identification and surveillance."

BAE Systems North America is a leading defense electronics, information systems and technology services company, and one of the largest providers of systems and services for the U.S. Department of Defense. BAE Systems North America employs more than 25,000 people across some 30 states and at sites in the U.K., generating sales of nearly $5 billion. The company designs, develops, manufactures and supports a wide range of advanced aerospace products and intelligent electronic systems for the U.S. Government and commercial customers.

Closing of the transaction is expected to occur within 45 days and is subject to completion of regulatory reviews and approvals.

About BAE SYSTEMS:

BAE Systems an international company engaged in the development, delivery, and support of advanced defense and aerospace systems in the air, on land, at sea, and in space. The company designs, manufactures, and supports military aircraft, surface ships, submarines, radar, avionics, communications, electronics, and guided weapon systems. It is a pioneer in technology with a heritage stretching back hundreds of years. It is at the forefront of innovation, working to develop the next generation of intelligent defense systems.

BAE Systems has major operations across five continents and customers in some 130 countries. The company employs more than 90,000 people and generates annual sales of approximately $19 billion through its wholly owned and joint-venture operations.

For more information on BAE Systems North America, see www.na.baesystems.com.

About STI:

STI is a 23-year-old photonics, hyperspectral and information processing company based in Honolulu, Hawaii.

The STI Government Systems division is a premier contractor to the U.S. government, focusing on advanced research and development of remote sensing technologies for national defense applications. STI Government Systems deploys these technologies into mission-critical operational roles across the globe and actively supports United States peacekeeping initiatives. A key element of STI Government Systems' strategy is the ongoing synergistic transfer of technology into commercial markets, such as environmental mapping, planning, and management.

In addition to the STI Government Systems division, STI has divisions focused on medical diagnostic imaging (STI Medical Systems) and advanced technology research and development (STI Research).