BDM INTERNATIONAL INC /DE, S-3, 1996-03-06

BDM INTERNATIONAL INC /DE
S-3, 1996-03-06
COMPUTER INTEGRATED SYSTEMS DESIGN

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
BDM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7373 54-1561881
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification No.)
</TABLE>

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

1501 BDM WAY
MCLEAN, VIRGINIA 22102-3204
(703) 848-5000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
-------------------

PHILIP A. ODEEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BDM INTERNATIONAL, INC.
1501 BDM WAY
MCLEAN, VIRGINIA 22102-3204
(703) 848-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------

WITH COPIES TO:

<TABLE>
<S> <C>
WILLIAM J. GRANT, JR., ESQ. ROBERT H. CRAFT, JR., ESQ.
WILLKIE FARR & GALLAGHER SULLIVAN & CROMWELL
ONE CITICORP CENTER 1701 PENNSYLVANIA AVENUE, N.W.
153 EAST 53RD STREET WASHINGTON, D.C. 20006
NEW YORK, NEW YORK 10022 (202) 956-7500
(212) 821-8000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /

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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-------------------
CALCULATION OF ADDITIONAL REGISTRATION FEE

[CAPTION]
<TABLE>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED(1)(2) SHARE(3) PRICE(3) FEE(2)(3)
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share......... 3,220,000 $38.875 $125,177,500.00 $43,164.66
</TABLE>

(1) Includes 420,000 shares of Common Stock subject to the Underwriters'
over-allotment option.

(2) The shares of Common Stock are not registered for the purpose of sales
outside the United States.

(3) Calculated pursuant to Rule 457(c) under the Securities Act of 1933, based
on the average of the high and low prices reported on the Nasdaq National
Market on March 5, 1996.

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

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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 6, 1996

2,800,000 SHARES
[LOGO] BDM INTERNATIONAL, INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------

Of the 2,800,000 shares of Common Stock offered, 2,240,000 shares are being
offered hereby in the United States and 560,000 shares are being offered in a
concurrent international offering outside the United States. The public offering
price and the aggregate underwriting discount per share will be identical for
both Offerings. See "Underwriting".

Of the 2,800,000 shares of Common Stock offered, 450,000 shares are being
sold by the Company and 2,350,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders". The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.

The last reported sale price of the Common Stock, which is quoted under the
symbol "BDMI", on the Nasdaq National Market on March 5, 1996 was $39.00 per
share. See "Price Range of Common Stock".

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.

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

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

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

<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS(2)
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Per Share........... $ $ $ $
Total(3)............ $ $ $ $
</TABLE>

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

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

(2) Before deducting estimated expenses of $500,000 payable by the Company.

(3) One of the Selling Stockholders has granted the U.S. Underwriters an option
for 30 days to purchase up to an additional 336,000 shares of Common Stock
at the price to public, less the underwriting discount, solely to cover
over-allotments. Additionally, such Selling Stockholder has granted the
International Underwriters a similar option with respect to an additional
84,000 shares as part of the concurrent international offering. If such
option is exercised in full, the total price to public, underwriting
discount, proceeds to Company and proceeds to Selling Stockholders will be
$ , $ , $ and $ , respectively. See
"Underwriting".

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

The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
March , 1996, against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
OPPENHEIMER & CO., INC.
-------------------

The date of this Prospectus is March , 1996.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

[BDM LOGO]

[ART]

...a multinational information technology

company that operates primarily in:

. Systems and Software Integration

. Computer and Technical Services

. Enterprises Management and Operations

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Reports and other
information filed by the Company with the Commission can be inspected and copied
at 450 Fifth Street, N.W., Washington, DC 20549, and at the following regional
offices of the Commission: 7 World Trade Center, New York, New York 10048, and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Common Stock is listed on the Nasdaq National Market System, and
these records and other information can also be inspected at the reading room of
the library of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., 2nd Floor, Washington, D.C. 20006.

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

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

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE SHARES ON NASDAQ IN ACCORDANCE WITH RULE 10b-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING".
<PAGE>

BDM
- ---------------
International

OVERVIEW AND PERSPECTIVE

Systems and Software Integration

[ART] - Software Development
- Systems Integration
- Computer Consolidation and Migration
- Enterprise Architecture Development
- Interoperability and Standardization
- Air Traffic Control Systems
- Environmental Information Management
[ART] - Logistics Management Systems
- Education Information Systems
- Warehouse and Distribution Systems
- State Information Management Systems
- Health/Medical Information Systems
- Transaction Management Systems
- Network Design and Integration
- Manufacturing Automation and Modernization
- Re-engineering and Change Management
[ART]
Computer and Technical Services

- Systems Engineering and Technical Assistance
- Computer Migration Analysis
- Modeling and Simulation
- Systems and Requirements Analysis
[ART] - Test and Evaluation
- Environmental and Energy Services
- Workforce Development and Training
- Engineering Design and Development
- Telecommunications Services
- Advanced Transportation Services
- Technology and Manpower Support
- Management Consulting
[ART]
Enterprise Management and Operations

- R&D Management
- Test Center Management
- Training Center Management
- Data Center Management

Systems and Software Computer and Technical Enterprise Management
Integration Services and Operations

<S> <C> <C> <C>
BDM BDM BDM VINNELL
FEDERAL TECHNOLOGIES EUROPE CORPORATION
A BDM International Company A BDM International Company A BDM International Company A BDM International Company

PRIMARY CLIENTS: PRIMARY CLIENTS: PRIMARY CLIENTS: PRIMARY CLIENTS
Defense and Civil State and Local Governments German Government, Defense (Foreign Locations)
Government Agencies Commercial Commercial (European) U.S. Civil Government

HEADQUARTERS: HEADQUARTERS: HEADQUARTERS: HEADQUARTERS:
McLean, Virginia McLean, Virginia Ottobrunn, Germany Fairfax, Virginia
</TABLE>
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, references
herein to the "Company" or "BDM" include BDM International, Inc. and its
subsidiaries. Unless otherwise indicated, all information in this Prospectus
assumes that the Underwriters' over-allotment options are not exercised.

THE COMPANY

BDM is a multinational information technology ("IT") company that provides
Systems and Software Integration, Computer and Technical Services and Enterprise
Management and Operations to both public and private sector clients. Building on
its core competencies developed over 36 years, the Company is pursuing a
strategy of growth and diversification through its decentralized
subsidiaries--BDM Federal, BDM Technologies, BDM Europe and Vinnell. Total
revenue has grown from $297 million in 1991 to $890 million in 1995, a compound
annual growth rate of 32% (15% excluding acquisitions).

The aggregate stated award value of new contracts won by the Company in 1995
exceeded $1 billion for the third consecutive year and led to a record year-end
backlog of $1.7 billion on December 31, 1995. BDM has a diversified business
base with no single contract representing more than 10% of total revenue in
1995.

BDM operates in three interrelated markets:

. SYSTEMS AND SOFTWARE INTEGRATION. The Company creates information and
other computer-based systems that are tailored to specific public and
private sector client needs. BDM assists its clients in consolidating
computer operations and migrating from older mainframe-based computer
systems to newer, more flexible, standardized open systems based on
client/server architectures and linked by local and wide-area networks.
The Company implements its solutions by utilizing commercial off-the-shelf
hardware and software, purchased from multiple vendors, integrated with
software developed by the Company. Typical systems and software projects
include development and delivery of client/server, as well as
mainframe-based management information and transaction processing systems,
large scale control systems (such as air traffic control systems), health
care and medical information systems, automated distribution systems and
manufacturing systems. A current opportunity in communications network
design and integration involves the use of Internet and "Intranet"
capabilities to help clients improve their business processes and
performance. In 1995, Systems and Software Integration revenue was
approximately $274 million (31% of total revenue) and has grown at a
compound annual growth rate of 35% since 1991 (32% excluding
acquisitions).

. COMPUTER AND TECHNICAL SERVICES. The Company provides a broad range of
scientific, engineering, technical assistance and consulting services.
Typical assignments involve requirements analysis, computer migration
analysis, system concept development, training and systems testing.
Specific examples include advanced modeling and simulation services to
help clients improve planning, testing and training; the use of image
technology to enhance security and intelligence; numerous programs in
command, control, communications, computers and intelligence to assist the
U.S. military services and other clients; and technology support services
to augment the information systems capabilities of commercial clients.
Through this work, BDM also gains insights into its clients' operations,
identifies potential cost-effective systems solutions and thereby
positions itself to capture systems and

3
<PAGE>
software integration opportunities. In 1995, Computer and Technical
Services revenue was approximately $505 million (57% of total revenue) and
has grown at a compound annual growth rate of 27% since 1991 (4% excluding
acquisitions).

. ENTERPRISE MANAGEMENT AND OPERATIONS. The Company manages and operates
facilities devoted to data processing, research and development, testing,
logistics and training. Examples include managing and operating commercial
in-house data processing centers; various European test facilities for
vehicles, aircraft and spacecraft; and six Job Corps Centers. In 1995,
Enterprise Management and Operations revenue was approximately $111
million (12% of total revenue) and has grown at a compound annual growth
rate of 59% since 1991 (26% excluding acquisitions).

BDM attributes its recent performance to the following strategies and
strengths:

EMPHASIS ON INFORMATION TECHNOLOGY SYSTEMS MARKETS. BDM has placed an
emphasis on strengthening its ability to compete in the fast-growing systems and
software integration marketplace, focusing on large multi-year contracts ranging
upward from $50 million. The Company has pursued its information systems
strategy through such actions as the establishment of BDM Technologies, an IT
company focused on commercial and state and local government clients, and the
acquisition of European and U.S. companies that possess significant IT systems
capabilities. To enhance the Company's ability to compete in targeted vertical
information systems markets, the Company has developed a common IT strategy and
standardized software development methodologies and has significantly expanded
recruitment and training of its IT professional staff.

EXPANSION INTO TARGETED MARKETS. The Company has successfully transitioned
its expertise gained from work with the Department of Defense ("DOD") into such
vertical markets as air traffic control, workforce development and training,
education technologies, health and human services information management,
manufacturing and distribution automation and environmental/waste management for
civil government and commercial clients. BDM has penetrated the civil government
business through systems development and integration contracts, such as its
Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system for the SEC,
and has built market positions in health and welfare systems for state
governments and education systems for state and local school districts.

GLOBAL DIVERSIFICATION. In 1995, BDM generated more revenue from
international clients ($342 million) than from all sources in 1991 ($297
million). The Company believes that its ability to serve clients on a global
basis differentiates it from its competitors. The Company's overseas presence
allows it to project its core competencies into less competitive IT markets,
which the Company believes will afford significant growth and margin expansion
opportunities. BDM has expanded vigorously into European and Middle Eastern
markets, aided by two key acquisitions, and has begun marketing in the Pacific
Rim. International marketing has been strengthened by synergies between the
Company's U.S. and foreign-based subsidiaries in such areas as air traffic
control, warehouse automation, agile manufacturing and military logistics.

ABILITY TO MEET FULL-SERVICE/FULL-CYCLE REQUIREMENTS. Most of the Company's
major programs cross at least two of the three primary market areas (Systems and
Software Integration, Computer and Technical Services, Enterprise Management and
Operations) and a growing number involve all three. The Company is able to seize
specific opportunities across the full program cycle and also handle
large-scale, full-cycle projects from beginning to end. For example, a Company
initiative in the education technologies area began with consulting services,
progressed to a major system design and integration and ultimately involved
outsourcing of the school system's information services department to BDM.

4
<PAGE>
FOCUSED ACQUISITION PROGRAM. The Company is experienced in identifying and
consummating acquisitions and subsequently integrating acquired businesses into
existing operations. The Company is pursuing an acquisition program, primarily
focused on providing new and expanded market opportunities by strengthening its
core competencies and expanding its position in global information technology
markets. BDM concentrates on identifying acquisition targets, particularly those
focusing on the IT needs of commercial clients, that have strong existing
management teams in place and can be integrated into BDM's decentralized
operating structure within a common overall strategy. The Company's February
1996 acquisition of CW Systems, Inc., IG Systems, Inc. and Melco Systems, Inc.,
now operating collectively as the IT Services Group of BDM Technologies, is an
example of the execution of BDM's acquisition strategy in the commercial IT
sector.

THE OFFERINGS

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Common Stock offered by the Company:
U.S. Offering........................................... 360,000 shares
International Offering.................................. 90,000 shares
-----------
Total................................................. 450,000 shares
Common Stock offered by the Selling Stockholders (1)(2):
U.S. Offering........................................... 1,880,000 shares
International Offering.................................. 470,000 shares
-----------
Total................................................. 2,350,000 shares
Total Common Stock to be outstanding after
the Offerings (2)(3).................................... 13,562,285 shares
Nasdaq National Market Symbol............................. BDMI
Use of proceeds........................................... For general corporate purposes,
including working capital and
acquisitions.
</TABLE>

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

(1) Does not include 420,000 shares of Common Stock that are subject to the
over-allotment options granted by one of the Selling Stockholders to the
Underwriters. See "Underwriting."

(2) Includes 400,000 shares of Common Stock which will be obtained upon the
conversion of an equal number of shares of Class B Common Stock into Common
Stock immediately prior to the Offerings. See "Description of Capital
Stock--Common Stock and Class B Common Stock."

(3) Based on shares outstanding as of February 23, 1996. Does not include
1,630,885 shares of Common Stock issuable upon exercise of options
outstanding at such date under the Company's stock option plans.

As used in this Prospectus, references to the "U.S. Offering" shall mean the
offering of shares of Common Stock in the United States, and references to the
"International Offering" shall mean the offering of such shares outside the
United States. The U.S. Offering and the International Offering are referred to
herein collectively as the "Offerings."

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993(1) 1992(2) 1991(3)
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................................... $889,974 $774,249 $558,292 $424,389 $296,798
Cost of sales................................. 752,107 643,728 460,186 348,191 236,165
Selling, general and administrative........... 80,804 82,950 63,847 41,940 32,328
Depreciation, amortization and other.......... 18,154 20,627 12,089 14,802 18,650
-------- -------- -------- -------- --------
Operating profit.............................. 38,909 26,944 22,170 19,456 9,655
Interest expense, net......................... 1,474 3,481 4,178 5,302 6,425
Equity in earnings of affiliates.............. (1,835) (1,841) (2,223) (1,852) --
Minority interest............................. 5,863 2,526 1,555 -- --
-------- -------- -------- -------- --------
Income before income taxes.................... 33,407 22,778 18,660 16,006 3,230
Provision for income taxes.................... 15,015 9,700 7,632 6,552 2,710
-------- -------- -------- -------- --------
Income before extraordinary gain and
cumulative effect of accounting change....... 18,392 13,078 11,028 9,454 520
Extraordinary gain, net of tax................ -- -- 413 -- --
Cumulative effect of accounting change........ -- -- -- (115) --
-------- -------- -------- -------- --------
Net income.................................... $ 18,392 $ 13,078 $ 11,441 $ 9,339 $ 520
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
EARNINGS PER SHARE:
Income before extraordinary gain and
cumulative effect of accounting change....... $ 1.56 $ 1.20 $ 0.92 $ 0.81 $ 0.05
Extraordinary gain............................ -- -- 0.03 -- --
Cumulative effect of accounting change........ -- -- -- (0.01) --
-------- -------- -------- -------- --------
Net income.................................... $ 1.56 $ 1.20 $ 0.95 $ 0.80 $ 0.05
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------
1995(4) 1994(5) 1993(1) 1992(2) 1991(3)
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Current assets................................ $294,654 $270,079 $242,800 $135,775 $105,220
Total assets.................................. 363,793 335,551 303,436 174,816 133,577
Current liabilities........................... 178,530 175,165 161,052 81,033 48,525
Long-term debt................................ 25,900 82,750 48,480 38,423 40,940
Stockholders' equity.......................... 115,469 41,105 62,909 54,932 44,112
</TABLE>

- ------------
(1) On November 16, 1993, the Company acquired a 45% interest in
Industrieanlagen-Betriebsgesellschaft mbH ("IABG"), a company formerly owned
indirectly by the German government, and entered into an agreement which
gives the Company voting control of IABG and permits the Company to manage
IABG's operations. The Company's financial statements consolidate IABG's
financial position and results of operations and report the remaining
owners' 55% interest as a minority interest. This acquisition was accounted
for as a purchase, and the Company's consolidated results of operations
include IABG from the date of its acquisition through its subsidiary, BDM
Europe.

(2) On March 13, 1992, the Company acquired the outstanding common stock of
Vinnell Corporation ("Vinnell") for approximately $29.6 million, including
transaction expenses. This acquisition was accounted for as a purchase, and
the Company's consolidated results of operations include Vinnell from the
date of its acquisition.

(3) In October 1990, The Carlyle Group, L.P. ("Carlyle") invested $40.0 million
in the equity securities of the Company. The acquisition was accounted for
as a purchase, and $93.5 million of indebtedness of the Company related to
the buyout was incurred. The results of operations for the year ended
December 31, 1991 reflect certain one-time acquisition-related expenses.

(4) The increase in stockholders' equity and the decrease in long-term debt
reflect the impact of net proceeds of $49.4 million from the Company's
initial public offering of 2.875 million shares of Common Stock on June 28,
1995.

6
<PAGE>
RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered when evaluating an
investment in the shares of Common Stock offered hereby.

CONCENTRATION OF REVENUE

Approximately 50%, 49% and 69% of the Company's total revenue in 1995, 1994
and 1993, respectively, was derived from contracts or subcontracts funded by the
U.S. Government, which includes contracts funded by the DOD that accounted for
approximately 37%, 32% and 47% of the Company's total revenue in such years,
respectively. The Company believes that the success and development of its
business will continue to be dependent upon its ability to participate in U.S.
Government contract programs. Accordingly, the Company's financial performance
may be directly affected by changes in U.S. Government contracting policies.
Among the factors that could materially adversely affect the Company's
government contracting business are budgetary constraints, changes in fiscal
policies or available funding, changes in government programs or requirements,
including proposals to abolish certain government agencies or departments,
curtailment of the U.S. Government's use of technology services firms, the
adoption of new laws or regulations, technological developments and general
economic conditions. These factors could cause U.S. Government agencies to
exercise their right to terminate existing contracts for convenience or not to
exercise options to renew.

Certain of the Company's contracts individually contribute a significant
percentage of the Company's revenue. In 1995, the Company's largest contract (by
revenue) generated approximately 8% of the Company's total revenue, and the ten
largest and 30 largest contracts (by revenue) generated approximately 42% and
60% of the Company's total revenue, respectively. Termination of such contracts,
or the Company's inability to renew or replace such key contracts when they
expire, could have a material adverse effect on the Company.

Approximately 14% of the Company's revenue in 1995 was derived from
contracts funded by each of the Saudi and the German governments. See
"--International Operations".

CONTRACTS WITH U.S. FEDERAL, STATE AND LOCAL GOVERNMENTS

U.S. Government contracts, by their terms, generally can be terminated at
any time by the U.S. Government, without cause, for the convenience of the U.S.
Government. If a U.S. Government contract is so terminated, the Company would be
entitled to receive compensation for the services provided or costs incurred
through the time of termination and a negotiated amount of profit on the
contract. Government contractors who fail to comply with applicable government
procurement-related statutes and regulations may also be subject to potential
contract termination, suspension or debarment from contracting with the
Government, or other remedies. Most U.S. Government contracts are also subject
to modification in the event of changes in funding, and the Company's
contractual costs and revenue are subject to adjustment as a result of audits by
the Defense Contract Audit Agency ("DCAA") and other U.S. Government auditors.
Further, U.S. Government contract awards may be protested by competitors.

The Company in the ordinary course of its business occasionally performs
services for U.S. Government clients in advance of receiving a funded
contractual document. The Company does so with the expectation that such
contractual authorization will be obtained. As of December 31, 1995, the Company
had recognized no material amounts of revenue for U.S. Government clients for
which funding had not been obtained; however, no assurance can be given that the
Company will not experience material losses relating to this practice in the
future.

7
<PAGE>
Approximately $49.7 million in revenue (6% of total revenue) in 1995 was
derived from subcontracts with prime contractors on U.S. Government contracts.
Accordingly, the Company may be adversely affected if a prime contractor fails
to perform satisfactorily or is unable or unwilling, for financial or other
reasons, to meet its obligations to the Company.

Many of the types of provisions governing U.S. Government contracts
described above also apply to the Company's contracts with state and local
governments and their agencies. In addition, with respect to state and local
government clients, budgeting pressures and other financial constraints may
result in reductions in funding of various state and local government programs,
which may affect the ability of the Company to obtain new contracts with state
and local governments, cause state and local governments to exercise their right
to terminate existing contracts for convenience or not to exercise their options
thereunder and may result in the extension of the procurement and contract
funding process over a longer period of time.

CONTRACT PROFIT EXPOSURE

The Company's services are provided primarily through three types of
contracts: fixed-price, time-and-material and cost-reimbursable contracts.
Approximately 28% of the Company's total revenue in 1995 was attributable to
fixed-price contracts which require the Company to perform services under a
contract at a stipulated price. The Company derived approximately 33% of its
total revenue during the same period from time-and-material contracts which
reimburse the Company for the number of labor hours expended at established
hourly rates negotiated in the contract, plus the cost of materials incurred.
The balance of the Company's contracts (approximately 39%) are cost-reimbursable
contracts under which the Company is reimbursed for all actual costs incurred in
performing the contract to the extent that such costs are within the contract
ceiling and allowable under the terms of the contract, plus a fee or profit.

The Company assumes greater financial risk on fixed-price contracts than on
either time-and-material or cost-reimbursable contracts. As the Company
increases its commercial and state government business, it believes that an
increasing percentage of its contracts will be fixed-price. Failure to
anticipate technical problems, estimate costs accurately or control costs during
performance of a fixed-price contract may reduce the Company's profit or cause a
loss. Greater risks are involved under time-and-material contracts than under
cost-reimbursable contracts because the Company assumes the responsibility for
the delivery of specified skills at a fixed hourly rate. Although management
believes that adequate provision for its fixed-price and time-and-material
contracts is reflected in the Company's financial statements, no assurance can
be given that this provision is adequate or that losses on fixed-price and
time-and-material contracts will not occur in the future.

INTERNATIONAL OPERATIONS

The Company continues to build its presence in international markets. The
Company recognized approximately $342 million in revenue (38% of total revenue)
in 1995 from contracts funded by international clients. While management
believes that BDM's experience serving the domestic market translates into an
ability to serve international markets, no assurance can be given that the
Company's efforts will succeed.

The Company recognized approximately $223 million in revenue (25% of total
revenue) in 1995 from contracts with foreign defense agencies and approximately
$31 million in revenue (3% of total revenue) in 1995 from contracts with other
foreign government agencies. A significant amount of the foreign defense revenue
was derived from contracts funded by foreign governments under the U.S.
Government's Foreign Military Sales ("FMS") program. FMS contracts involve the
provision of

8
<PAGE>
services to certain foreign governments, procured through U.S. Government
contracting mechanisms, but funded by the foreign governments themselves. The
Company could be materially adversely affected as a result of any political
instability or financial constraints experienced, or decisions to decrease
funding, by such foreign governments. In addition, the Company's operations in
foreign jurisdictions are subject to uncertainty in the enforcement and
application of various laws by foreign governments, including, without
limitation, tax and environmental laws.

In 1993, the Company acquired a 45% interest in IABG pursuant to a plan of
privatization by the German Government. In connection with the acquisition, the
Company entered into an agreement by which the Company votes 53% of the shares
of IABG except in those instances in which the German Federal Ministry of
Defense determines that an issue before the shareholders affects German national
security interests. In addition, BDM has received an informal commitment from
the German Government to use its best efforts to continue to direct business to
IABG through 1996, although there can be no assurance that IABG will receive
such business. This commitment will terminate at the end of 1996.

FOREIGN CURRENCY EXCHANGE RATE RISK

In connection with its international operations, the Company is subject to
various risks inherent in foreign activities. The Company is exposed to risks
associated with fluctuations in exchange rates, including the German Mark, the
Saudi Riyal, the Kuwaiti Dinar, the Turkish Lira and the Dutch Guilder. The
Company limits its exposure to these risks by incurring and paying for its
expenses in the same currencies as those of its revenue. Although the Company
has engaged in hedging activities in the past and may do so in the future, it is
not currently engaged in hedging activities with respect to its foreign source
operating income and cash flows.

COMPETITION

The markets for the Company's services are highly competitive. The
information services industry in which the Company operates is highly fragmented
with no single company or small group of companies in a dominant position. The
Company's competitors include large, diversified firms with substantially
greater financial resources and larger technical staffs than the Company, as
well as firms which receive preferences under set-aside programs. Some of the
Company's competitors also operate in international markets, along with other
concerns which operate exclusively or primarily outside the United States. Some
of the larger competitors offer services in a number of markets which overlap
many of the same areas in which the Company offers services, while certain
companies are focused on only one or a few of these markets. The firms which
compete with the Company are consulting firms, computer services firms,
applications software companies and accounting firms, as well as the computer
service arms of computer manufacturing companies and defense and aerospace
firms. In addition, the internal staffs of client organizations, non-profit
federal contract research centers and universities are, in effect, competitors
of the Company.

ACQUISITIONS AND STRATEGIC ALLIANCES

The Company has made several acquisitions since its formation and is likely
to make additional acquisitions in areas related to its current lines of
business. The Company has no present commitments or agreements as to any
specific acquisition transactions. However, the Company is regularly evaluating
potential acquisition candidates. No assurance can be given that the Company
will make additional acquisitions, that past or future acquisitions will prove
to be successful or that the Company will successfully manage the growth
attributable to such acquisitions. Moreover, the Company has incurred, and may
incur, substantial debt and non-cash amortization expenses in making
acquisitions.

9
<PAGE>
The Company has formed strategic alliances in the form of joint ventures to
gain access to markets in Oman, Saudi Arabia, Turkey and Egypt. As the Company
seeks to expand internationally, it may be necessary to form new strategic
alliances to gain access to particular foreign markets. No assurance can be
given, however, that the Company will be able to maintain its existing alliances
or form new desirable alliances in the future.

ENVIRONMENTAL MATTERS

One of the Company's subsidiaries, Vinnell, along with another potentially
responsible party ("PRP"), entered into a consent decree with the Environmental
Protection Agency ("EPA") in 1992, by which Vinnell and the other PRP are
obligated to reimburse the EPA for costs incurred in its assessment and
monitoring and to undertake work to address the environmental exposure as
defined in the consent decree relating to an asbestos mine owned by Vinnell
prior to the time Vinnell was acquired by the Company. Operations at such mine
ceased in May 1974. Although management believes that its accrual for this
contingency is sufficient to cover costs to be incurred related to the
subsidiary's performance pursuant to the consent decree, there can be no
assurance that additional costs will not be incurred. Another of the Company's
subsidiaries was previously notified by the Massachusetts Department of
Environmental Protection that it is also one of several PRPs in an environmental
matter arising as a result of work performed on a contract with the United
States Air Force ("USAF") in 1986. The Company has been, and management believes
the Company will continue to be, reimbursed by the USAF for all costs incurred
in connection with addressing the claimed environmental hazard associated with
the former contract. See Note 17 of the Notes to Consolidated Financial
Statements. In addition, the Company anticipates increasing its environmental
consulting activity, which includes work related to environmental remediation.
Such business may expose the Company to additional environmental risks in the
future.

STAFFING REQUIREMENTS

The Company's business is dependent on its ability to attract, retain and
mobilize a highly trained technical staff. An inability to maintain a sufficient
number of trained personnel or to relocate or position such personnel on certain
contracts performed at remote locations could have a material adverse effect on
the Company's contract performance or its ability to capitalize on market
opportunities.

PROPRIETARY INFORMATION

The Company believes that its business is dependent on its technical and
organizational knowledge, practices and procedures. The Company claims a
proprietary interest in certain of its work products, software programs,
methodologies and know-how. Some of the proprietary information is protected by
confidentiality agreements and other means. There can be no assurance, however,
that these measures will prevent the unauthorized disclosure or use of the
Company's technical knowledge, practices and procedures or that others may not
independently develop similar knowledge, practices or procedures.

The U.S. Government has certain proprietary rights to software programs and
other products that result from the Company's services under U.S. Government
contracts or subcontracts. The

10
<PAGE>
U.S. Government may disclose such information to third parties, including
competitors of the Company. In the case of subcontracts, the prime contractors
may also have certain rights to such programs and products.

CONCENTRATION OF OWNERSHIP

Upon completion of the Offerings, The Carlyle Partners Leveraged Capital
Fund I, L.P. ("The Carlyle Fund"), BDM Acquisition Partners II, L.P. ("BDM
Partners II") and BDM Acquisition Partners I, L.P. ("BDM Partners I"), three
limited partnerships controlled by Carlyle, will have, in the aggregate,
approximately 31% of the Company's voting power (or 28% if the Underwriters'
over-allotment options are exercised in full). Consequently, since it will have
approximately 31% of the Company's voting power upon completion of the
Offerings, Carlyle will continue to exercise significant influence on the
election of the directors of the Company and on the outcome of all matters
submitted to a vote of the Company's stockholders, as well as on the Company's
management, operations and policies.

Certain agreements to which the Company is a party contain provisions that
may have the effect of deterring a change in control of the Company. Options
granted under the 1990 and 1994 Stock Option Plans will immediately vest upon a
merger in which the Company is not the surviving entity or upon a sale of
substantially all the assets or more than 80% of the then outstanding capital
stock of the Company. In addition, an Investor Stock Purchase Agreement, dated
October 23, 1990, between the Company and certain stockholders, as amended (the
"Investor Agreement") restricts the transferability of the Company's securities
held by Carlyle and such stockholders. See "Certain Transactions--Investor
Agreement."

POSSIBLE VOLATILITY OF STOCK PRICE

The market price for the Common Stock may be highly volatile. The Company
believes that factors such as announcements by it, or its competitors or
suppliers, or quarterly variances in financial results could cause the market
price of the Common Stock to fluctuate substantially. In addition, the stock
market may experience extreme price and volume fluctuations which often are
unrelated to the operating performance of specific companies. Market
fluctuations or perceptions regarding the Company's industry, as well as general
economic or political conditions, may adversely affect the market price of the
Common Stock.

11
<PAGE>
USE OF PROCEEDS

Net proceeds from the sale of the 450,000 shares of the Common Stock by the
Company estimated to be approximately $16.2 million (after deduction of
underwriting discounts and commissions and estimated expenses payable by the
Company), will be available for general corporate purposes, including, but not
limited to, working capital and acquisitions. The Company has no present
commitments or agreements as to any specific acquisition transactions. However,
the Company is regularly evaluating potential acquisition candidates. Pending
application of the net proceeds, the Company will invest such net proceeds in
short-term marketable securities. The Company will not receive any of the
proceeds from the sale of the shares of Common Stock by the Selling
Shareholders.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Since June 29, 1995, the Common Stock has been traded on the Nasdaq National
Market under the symbol "BDMI". The following table sets forth the high and low
sale prices of the Common Stock as reported by the Nasdaq National Market for
each of the quarters indicated.

HIGH LOW
------- -------
1996
First (through March 5)............................ $41.125 $25.438

1995
Second (June 29-30)................................ $21.500 $19.875
Third.............................................. 28.500 20.250
Fourth............................................. 30.500 23.750

On March 5, 1996, the last reported sale price of the Common Stock as
reported by the Nasdaq National Market was $39.00. As of February 23, 1996,
there were approximately 769 stockholders of record of the Common Stock.

The Company does not have a policy of paying regular dividends and has no
present intention of paying any dividends. The payment of dividends is subject
to the discretion of the Board of Directors of the Company and will depend on
the Company's results of operations, financial position and capital
requirements; general business conditions; restrictions imposed by financing
arrangements, if any; legal restrictions on the payment of dividends; and other
factors, such as continued growth opportunities in which to invest, which the
Board of Directors deem relevant. In addition, pursuant to the Company's credit
facility, dividends can only be paid after September 1, 1996 and are not to
exceed 20% of the Company's cumulative net income subsequent to July 1, 1996.
The Company paid a dividend on December 15, 1993, of $.50 per share of Common
Stock and Class B Common Stock. The payment of future dividends by the Company
should not be assumed.

12
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1995 and as adjusted to reflect the sale of the 450,000 shares of
Common Stock by the Company at the assumed public offering price of $39.00 per
share and the application of the net proceeds therefrom. See "Use of Proceeds."
This table should be read in conjunction with the Selected Consolidated
Financial Information, the Consolidated Financial Statements and the related
notes thereto included elsewhere in this Prospectus.

DECEMBER 31, 1995
-----------------------
AS
ACTUAL ADJUSTED
-------- -----------
(IN THOUSANDS)
Current portion of Long-term debt..................... $ 449 $ 449
-------- -----------
-------- -----------
Long-term debt........................................ $ 25,900 $ 25,900
Stockholders' equity
Preferred stock, $.01 par value; 500,000
shares authorized, none issued.................... -- --
Common stock, $.01 par value; 52,000,000 shares
authorized; 12,962,342 issued and outstanding
at December 31, 1995 (13,412,342 issued and
outstanding as adjusted)(1)....................... 130 134
Additional paid-in capital.......................... 68,535 84,758
Retained earnings..................................... 46,804 46,804
-------- -----------
Total stockholders' equity...................... 115,469 131,696
-------- -----------
Total capitalization............................ $141,369 $ 157,596
-------- -----------
-------- -----------

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

(1) Does not include 1,630,885 shares of Common Stock issuable in connection
with options outstanding as of February 23, 1996 granted to certain
employees of the Company.

13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION

The consolidated statement of operations data set forth below with respect
to the calendar years ended December 31, 1995, 1994, 1993, 1992 and 1991 and the
consolidated balance sheet data at December 31, 1995, 1994, 1993, 1992 and 1991
have been derived from, and are qualified by reference to, the Company's
consolidated financial statements and notes thereto audited by Coopers & Lybrand
L.L.P., independent accountants. The selected consolidated financial data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and notes thereto included elsewhere in this Prospectus.

<TABLE><CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993(1) 1992(2) 1991(3)
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue......................................... $889,974 $774,249 $558,292 $424,389 $296,798
Cost of sales................................... 752,107 643,728 460,186 348,191 236,165
Selling, general and administrative............. 80,804 82,950 63,847 41,940 32,328
Depreciation, amortization and other............ 18,154 20,627 12,089 14,802 18,650
-------- -------- -------- -------- --------
Operating profit................................ 38,909 26,944 22,170 19,456 9,655
Interest expense, net........................... 1,474 3,481 4,178 5,302 6,425
Equity in earnings of affiliates................ (1,835) (1,841) (2,223) (1,852) --
Minority interest............................... 5,863 2,526 1,555 -- --
-------- -------- -------- -------- --------
Income before income taxes...................... 33,407 22,778 18,660 16,006 3,230
Provision for income taxes...................... 15,015 9,700 7,632 6,552 2,710
-------- -------- -------- -------- --------
Income before extraordinary gain and cumulative
effect of accounting change.................... 18,392 13,078 11,028 9,454 520
Extraordinary gain, net of tax.................. -- -- 413 -- --
Cumulative effect of accounting change.......... -- -- -- (115) --
-------- -------- -------- -------- --------
Net income...................................... 18,392 $ 13,078 $ 11,441 $ 9,339 $ 520
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
EARNINGS PER SHARE:
Income before extraordinary gain and cumulative
effect of accounting change.................... $ 1.56 $ 1.20 $ 0.92 $ 0.81 $ 0.05
Extraordinary gain.............................. -- -- 0.03 -- --
Cumulative effect of accounting change.......... -- -- -- (0.01) --
-------- -------- -------- -------- --------
Net income...................................... $ 1.56 $ 1.20 $ 0.95 $ 0.80 $ 0.05
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<TABLE><CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------
1995(4) 1994(5) 1993(1) 1992(2) 1991(3)
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Current assets.................................. $294,654 $270,079 $242,800 $135,775 $105,220
Total assets.................................... 363,793 335,551 303,436 174,816 133,577
Current liabilities............................. 178,530 175,165 161,052 81,033 48,525
Long-term debt.................................. 25,900 82,750 48,480 38,423 40,940
Stockholders' equity............................ 115,469 41,105 62,909 54,932 44,112
</TABLE>
- ------------
(1) On November 16, 1993, the Company acquired a 45% interest in IABG and
entered into an agreement which gives the Company voting control of IABG and
permits the Company to manage IABG's operations. The Company's financial
statements consolidate IABG's financial position and results of operations
and report the remaining owners' 55% interest as a minority interest. This
acquisition was accounted for as a purchase, and the Company's consolidated
results of operations include IABG from the date of its acquisition through
its subsidiary, BDM Europe.

(2) On March 13, 1992, the Company acquired the outstanding common stock of
Vinnell for approximately $29.6 million, including transaction expenses.
This acquisition was accounted for as a purchase, and the Company's
consolidated results of operations include Vinnell from the date of its
acquisition.

(3) In October 1990, Carlyle invested $40.0 million in the equity securities of
the Company. The acquisition was accounted for as a purchase, and $93.5
million of indebtedness of the Company related to the buyout was incurred.
The results of operations for the year ended December 31, 1991 reflect
certain one-time acquisition-related expenses.

(5) The decline in stockholders' equity and the increase in long-term debt
reflect the impact of the repurchase of 2.6 million shares of Common Stock
and Class B Common Stock for $36.4 million on May 27, 1994.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

In 1995, BDM achieved its fourth consecutive year of double-digit growth in
revenue, net income and earnings per share. Revenue totaled $890.0 million, a
15% increase over 1994. Net income of $18.4 million represented a 41% increase
over the prior year, and earnings per share of $1.56 represented a 30% increase.
These results reflect the continuing progress the Company has made in moving
toward its goal of increasing its systems and software integration business,
which generally provides higher profit margins. This migration has occurred in
both the commercial and the U.S. Government business sectors.

All of the Company's 1995 increases resulted from internal growth. Although
no acquisitions were made during 1995, the Company announced on February 20,
1996, the acquisition of three affiliated companies, CW Systems, Inc., IG
Systems, Inc. and Melco Systems, Inc., which specialize in providing information
technology systems and services in the oil and gas, telecommunications,
financial, insurance, health care, public utility and entertainment sectors. The
Company continues to pursue a growth and diversification strategy which places
emphasis on acquisitions, especially in the commercial information technology
("IT") area. Acquisitions of companies in the United States and abroad have been
integral to BDM's growth and diversification strategy since 1992. This includes
the acquisitions of Vinnell Corporation (1992), FACE and IABG (1993) and
Geoscience Consultants, Ltd. ("GCL") (1994).

In June 1995, the Company completed a public offering of common stock which
provided net proceeds of $49.4 million. These proceeds were used to reduce
outstanding debt, resulting in lower interest expense and an improved
debt-to-equity ratio. The strengthened balance sheet provides available
borrowing capacity to continue the pursuit of business combinations for the
Company's growth and the development of strategically important areas of the
business.

RESULTS OF OPERATIONS

The following table sets forth certain financial data, expressed as a
percentage of revenue:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Revenue.............................................................. 100.0% 100.0% 100.0%
Cost of sales........................................................ 84.5 83.1 82.4
Selling, general and administrative.................................. 9.1 10.7 11.4
Depreciation, amortization and other................................. 2.0 2.7 2.2
----- ----- -----
Operating profit................................................. 4.4 3.5 4.0
Interest expense, net................................................ 0.2 0.4 0.7
Equity in earnings of affiliates..................................... (0.2) (0.2) (0.4)
Minority interest.................................................... 0.6 0.3 0.3
----- ----- -----
Income before taxes.............................................. 3.8 3.0 3.4
Provision for income taxes........................................... 1.7 1.3 1.4
----- ----- -----
Income before extraordinary gain, net of tax..................... 2.1 1.7 2.0
Extraordinary gain, net of tax....................................... -- -- 0.1
----- ----- -----
Net income....................................................... 2.1% 1.7% 2.1%
----- ----- -----
----- ----- -----
</TABLE>

15
<PAGE>
REVENUE. Revenue increased 15% in 1995 compared to the preceding year. All
subsidiaries contributed to this growth, particularly BDM Federal, which
reported significant revenue growth for the year of 16%, and BDM Technologies,
which grew 48%. Revenue for 1994 was 39% higher compared to the preceding year
due primarily to the inclusion of the results of IABG in BDM Europe for 12
months in 1994 versus six weeks in 1993.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
------------- ------------- -------------
CLIENTS SERVED (IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
U.S. Department of Defense..................... $331.6 37% $244.6 32% $261.0 47%
International Defense.......................... 222.8 25 193.5 25 122.2 22
Civil Governments.............................. 199.8 23 227.3 29 144.9 26
Commercial..................................... 135.8 15 108.8 14 30.2 5
------ --- ------ --- ------ ---
Total.................................... $890.0 100% $774.2 100% $558.3 100%
------ --- ------ --- ------ ---
------ --- ------ --- ------ ---

SERVICES PROVIDED
<S> <C> <C> <C> <C> <C> <C>
Systems and Software Integration............... $273.5 31% $197.0 26% $164.1 29%
Computer and Technical Services................ 505.0 57 490.9 63 345.3 62
Enterprise Management and Operations........... 111.5 12 86.3 11 48.9 9
------ --- ------ --- ------ ---
Total.................................... $890.0 100% $774.2 100% $558.3 100%
------ --- ------ --- ------ ---
------ --- ------ --- ------ ---
<CAPTION>

SUBSIDIARY
<S> <C> <C> <C> <C> <C> <C>
BDM Federal(1)................................. $475.5 53% $411.6 53% $386.9 69%
BDM Technologies............................... 57.5 7 38.8 5 17.7 3
BDM Europe(2).................................. 215.8 24 197.5 26 31.5 6
Vinnell Corporation............................ 141.2 16 126.3 16 122.2 22
------ --- ------ --- ------ ---
Total.................................... $890.0 100% $774.2 100% $558.3 100%
------ --- ------ --- ------ ---
------ --- ------ --- ------ ---
</TABLE>

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

(1) BDM Federal's revenue includes revenue from GCL from its date of acquisition
on February 1, 1994.

(2) BDM Europe's revenue includes revenue from IABG and FACE from their dates of
acquisition, November 16, 1993 and January 1, 1993, respectively.

The growth in 1995 for U.S. Department of Defense revenue was primarily
driven by increased systems and software integration services performed by BDM
Federal. One significant contributor to this growth was the Defense Enterprise
Integration Services program to support the Defense Information Systems Agency.
Due to the nature of the work, these services have been at higher profit margins
than other types of services provided to the U.S. Government in the past. In
addition, this type of work has been in a strategically important growth area
for the Company. BDM Federal also recognized higher defense equipment
procurement revenue compared to 1994, contributing to an increase in the revenue
for computer and technical services compared to the previous year.

At the end of 1995 and the beginning of 1996, as a result of the failure to
enact certain appropriations bills to fund the operations of several U.S.
Government departments and agencies for fiscal year 1996, the U.S. Government
furloughed a portion of its work force. This furlough did not materially impact
BDM's operations and cash flow in 1995. Because three of BDM's largest U.S.
Government clients (Department of Defense, Department of Energy and Department
of Transportation), representing greater than 80% of BDM's 1995 U.S. Government
revenue, have their funding in place for fiscal year 1996, the Company does not
expect the current budget impasse to have a material impact on BDM's operations.

Services provided to international defense clients in 1995 grew 15% while
remaining a level 25% of total revenue. This growth is reflective of the
continued expansion of Vinnell's international

16
<PAGE>
defense and technical training efforts for each of the last two years. Also a
factor in this growth was the increase in revenue reported by BDM Europe in
support of the German Ministry of Defense, although much of this increase was
due to fluctuations in exchange rates.

Civil government revenue declined in BDM Federal in the services provided to
the U.S. Department of Energy and NASA, as well as in BDM Europe as a result of
a reduction in pass-throughs of certain amounts collected by IABG on behalf of
the German government. The decline in civil government revenue was partially
offset by increases in systems integration and consulting services performed for
various state governments by BDM Technologies and growth in the Company's
education technologies business.

Commercial revenue grew 25% from 1994 to 1995 as a result of the expansion
of systems and software integration services. This growth reflects increased
activity in the automation of warehouse and distribution operations,
manufacturing modernization, business process re-engineering and related IT
services performed mainly by BDM Technologies.

COST OF SALES. Cost of sales, which includes salaries, employee benefits,
subcontractor expenses, material purchases and overhead costs, increased as a
percentage of revenue in each of 1995, 1994 and 1993. The increase in 1995 is
generally reflective of increased equipment purchases on behalf of clients which
tend to generate lower profit margins. Equipment purchases as a percent of
revenue were 11.6%, 10.3% and 12.5% for 1995, 1994 and 1993, respectively. The
increase in cost of sales as a percentage of revenue from 1993 to 1994 is due
largely to the acquisition and consolidation of IABG which has profit margins
lower than other sectors of BDM's business.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense ("SG&A"), which includes the Company's research and development costs
("R&D"), decreased as a percentage of revenue for each of the years 1995, 1994
and 1993. These decreases are partially attributable to a single R&D project
which was started in 1993 and was discontinued in 1994. SG&A included $3.9
million and $5.3 million for such R&D activities in 1994 and 1993, respectively.
Excluding these nonrecurring costs, SG&A as a percentage of revenue was 9.1%,
10.2% and 10.5% in 1995, 1994 and 1993, respectively. In addition, the decrease
in SG&A as a percentage of revenue also reflects the growth of revenue of BDM
Technologies in relation to its infrastructure that was created in 1993 when BDM
Technologies was formed. Cost controls at several of the Company's subsidiaries
also contributed to the decrease in SG&A as a percentage of revenue.

DEPRECIATION, AMORTIZATION AND OTHER. There were no significant changes to
fixed assets of the Company; accordingly, depreciation expense was relatively
flat in 1995 compared to 1994. Depreciation expense increased $5.1 million in
1994 over 1993 due primarily to the inclusion of a full year of operations of
BDM Europe.

Amortization expense increased in 1995 reflecting the write-off of the
unamortized goodwill for FACE totaling $1.6 million, as it was determined to be
no longer recoverable. Several factors contributed to this change in
recoverability. The acquired company's anticipated utilization of its technology
for other industries was not realized, and synergies between BDM technologies
and acquired technologies did not result in an expansion of the customer base as
expected. In addition, an economic downturn in the Netherlands contributed to a
deterioration in the revenue base. These factors resulted in a negative cash
flow projection for this particular business. Amortization expense increased
from 1993 to 1994 as a result of goodwill associated with acquisitions.

Other expenses consist largely of certain indirect non-cash charges incurred
by the Company which are typically not allocable to government contracts,
including pension charges required by Statement of Financial Accounting
Standards No. 87--Employers' Accounting for Pensions (FAS 87) in excess of
funding. In 1995, other expenses decreased as a result of a decrease in the
Company's unallocable pension charge of $2.7 million. In addition, approximately
$0.6 million was expensed in 1994 as a result of the Company's decision to delay
its initial public offering until 1995.

17
<PAGE>
INTEREST EXPENSE, NET. Interest expense in 1995 decreased substantially
compared to the preceding year primarily as a result of applying the $49.4
million net proceeds from the public offering to reduce outstanding borrowings.
Slightly offsetting this reduction of interest expense was a one-time charge of
$0.5 million related to the write-off of capitalized financing costs on the
credit facility which was replaced during the year. A new revolving credit
agreement, executed with more favorable terms, also contributed to the lower
interest expense in 1995 compared to 1994. Net interest expense also declined
from 1993 to 1994. While debt balances increased during 1994, lower interest
rates and the inclusion of a full year of interest income from BDM Europe more
than offset higher interest expense.

MINORITY INTEREST. The Company began deducting minority interest from
earnings with the acquisition of 45% of IABG in November of 1993. Minority
interest increased $1.0 million in 1994 reflecting a full year of IABG minority
interest and approximately $0.6 million from a new 60% owned Vinnell joint
venture that began performance on a contract in May 1994. Minority interest
continued to increase in 1995 due to improved IABG profitability, the full-year
effect of the 60% Vinnell joint venture and Vinnell's contract with the Saudi
Arabian National Guard ("SANG"), which was converted to a 51% owned joint
venture in July 1995.

PROVISION FOR INCOME TAX EXPENSE. The provision for income tax expense
increased as a percentage of income before income taxes to 44.9% in 1995 from
42.6% in 1994. The higher effective tax rate in 1995 reflects the write-off of
$1.6 million in goodwill from the FACE acquisition which is not deductible for
income tax purposes. In addition, an increase in the provision for income taxes
was recognized for the write-off of a deferred tax benefit relating to net
operating loss carryforwards at FACE which are no longer expected to provide a
future tax benefit. The effective tax rate also increased in 1994 to 42.6% from
40.9% in 1993 as a result of the effects of certain acquisitions which resulted
in non-deductible goodwill. Additionally, certain tax benefits derived from the
acquisition of IABG were fully realized in the 1993 income tax provision.
Historically, the Company has been able to offset the effects of income
generated in high tax rate foreign jurisdictions with income earned in low tax
rate foreign jurisdictions, so that the overall effect of foreign earnings on
the Company's tax provision has been minimal. However, to the extent that the
Company's growth in international operations occurs in high tax rate
jurisdictions, the portion of the income tax provision which is attributable to
foreign earnings is likely to increase.

EXTRAORDINARY ITEMS. In 1993, the Company recognized two extraordinary items
having the net effect of increasing net income by approximately $0.4 million, or
$.03 per share. In connection with the negotiation of the credit facility, the
Company expensed the carrying value of debt issue costs incurred with the prior
credit agreement of $2.3 million less a related income tax benefit of $1.0
million. In addition, the Company recognized an extraordinary gain related to
the elimination of a liability recognized at the time of the 1990 Acquisition,
resulting in a benefit of $3.0 million less a related income tax expense of $1.3
million.

18
<PAGE>
SELECTED QUARTERLY OPERATING RESULTS

The following table sets forth certain unaudited consolidated statement of
operations data expressed in dollars and as a percentage of total revenue for
the eight most recently ended fiscal quarters. This data has been derived from
unaudited consolidated financial statements of the Company that, in the opinion
of management, include all adjustments necessary for a fair presentation in
accordance with generally accepted accounting principles. The Company's results
of operations for a particular quarter are not necessarily indicative of the
results of operations for any future period. The Company's quarterly results
have varied considerably in the past and are likely to vary from quarter to
quarter in the future.

<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------
1995 1994
------------------------------------------- -------------------------------------------
DEC. 31, SEPT. 30, JUNE 30, MARCH 31, DEC. 31, SEPT. 30, JUNE 30, MARCH 31,
-------- --------- -------- --------- -------- --------- -------- ---------
(IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................ $269.1 $ 215.9 $ 213.1 $ 191.9 $ 239.2 $ 195.5 $174.4 $ 165.2
Operating profit....... 10.9 9.3 8.8 9.9 8.3 7.3 5.8 5.6
Net income............. 5.9 5.3 3.9 3.3 4.1 3.1 3.0 2.9
Earnings per share..... $ 0.44 $ 0.40 $ 0.38 $ 0.33 $ 0.41 $ 0.31 $ 0.26 $ 0.24
Weighted average shares
outstanding.......... 13.6 13.4 10.2 10.0 9.9 9.9 11.4 12.3

AS A PERCENTAGE OF
REVENUE:
Revenue 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Operating profit....... 4.0 4.3 4.1 5.2 3.5 3.8 3.3 3.4
Net income............. 2.2 2.5 1.8 1.7 1.7 1.6 1.7 1.8
</TABLE>

VARIABILITY OF QUARTERLY RESULTS

Fluctuations in the Company's quarterly revenue depend on a number of
factors, some of which are beyond the Company's control. These factors include,
among others, the timing of contracts, the timing of equipment shipments, delays
in client acceptance of the Company's services, the length of the revenue cycle
and client budget changes.

IMPACT OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS 123 (FAS 123)

The Financial Accounting Standards Board has issued FAS 123, "Accounting for
Stock-Based Compensation." FAS 123 encourages, but does not require, companies
to recognize compensation expense for grants of stock, stock options, and other
equity instruments to employees based on new fair value accounting rules.
Companies that choose not to adopt the new accounting rules will continue to
apply the existing rules, but will be required to disclose in the footnotes to
the financial statements the pro forma net income and earnings per share as if
the new rules had been adopted. As permitted by FAS 123, BDM will adopt the new
standard in 1996, choose to continue the current accounting for stock-based
compensation and disclose in the footnotes to the financial statements the pro
forma net income and earnings per share calculated using the new accounting
rules.

INTERNATIONAL OPERATIONS

In connection with its international operations, the Company is subject to
various risks inherent in foreign activities. These risks may include unstable
economic and political conditions, changes in trade policies and regulations of
countries involved, fluctuations in currency exchange rates and requirements for
letters of credit or bank guarantees. Certain of the Company's contracts are
foreign military sales, which mitigate such risks because the contracts are
governed by U.S.

19
<PAGE>
Government procurement regulations. Much of the Company's other international
operations are in Western European countries, mainly in Germany and The
Netherlands, which have experienced relatively stable political conditions and
regulatory environments. The Company is exposed to risks associated with
fluctuations in exchange rates, including the German Mark, the Saudi Riyal, the
Kuwaiti Dinar, the Turkish Lira and the Dutch Guilder. The Company limits its
exposure to these risks by incurring and paying for its expenses in the same
currencies as those of its revenue. In addition, certain contracts performed
overseas have provisions which provide for reimbursement of losses arising from
currency fluctuations. It is the Company's policy not to enter into derivative
financial instruments for speculative purposes. There were no derivative
financial instruments outstanding as of December 31, 1995.

EFFECTS OF INFLATION

The Company's contract mix includes cost-reimbursable contracts which
represented 39%, 43% and 68% of total contract revenue in 1995, 1994 and 1993,
respectively, under which inflationary increases are passed on to the customer.
The decline in the percentage of cost-reimbursable contracts reflects higher
levels of work at BDM Federal performed under time-and-material contracts. In
addition, the companies that comprise BDM Europe have a contract portfolio
consisting of primarily time-and-material contracts. Total 1995 revenue from
time-and-material contracts increased to 33% compared to 27% in 1994 and only 3%
in 1993. These time-and-material contracts, as well as the Company's long-term
fixed price contracts, expose BDM to the risks of inflationary pressures on its
costs. The Company believes the percentage of fixed-price contracts will
increase as it shifts to serving more commercial and state government clients.

LIQUIDITY AND CAPITAL RESOURCES

Over the past several years BDM's operations have provided a positive cash
flow which, along with maintaining an available credit facilitiy, has provided
adequate liquidity and working capital to fully meet the Company's operational
needs and support the acquisition program. In addition, the Company received net
proceeds of $49.4 million in mid-1995 from a public offering of common stock.
These proceeds were applied to reduce outstanding borrowings under the credit
facility and to extinguish the $3.7 million of subordinated debt.

The Company generated $30.5 million, $5.9 million, $34.1 million, $26.2
million and $30.2 million of cash from operating activities for the years ended
December 31, 1995, 1994, 1993, 1992 and 1991, respectively. This has provided
funding for internal growth and contributed to the reduction of debt
outstanding. Specifically, the Company repaid $93.5 million of debt assumed as
part of the 1990 Acquisition in two years rather than the originally planned
five years. In addition, the Vinnell acquisition debt of $25.0 million, which
was incurred in 1992, was repaid in less than three years. Cash flow from credit
facilities has been utilized to fund other non-operating activities, including
capital expenditures, acquisitions, a dividend and a stock buyback.

Related to the IABG transaction, significant advance payments, customary for
that operation, continue to be received from a large percentage of IABG's
customer base, which have been partially offset by severance payments and a
rental deposit made pursuant to the privatization plan have reduced cash flow
from operating activities.

Other factors impacting cash flow from operations included increased income
tax payments in 1995 and 1994 due to the use of the remaining net operating loss
carryforwards in 1993. Cash flow from operations may fluctuate from period to
period based on the timing of payments from clients and payments to suppliers.

Cash flow provided by investing activities has been primarily related to
amounts received in accordance with the IABG acquisition agreement. In March
1995, based on 23% of the shares held in trust, IABG received 23% of a required
capital infusion of $1.9 million. In addition, BDM received

20
<PAGE>
$1.1 million for the reimbursement of 23% of the transaction costs incurred by
the Company in acquiring IABG. The terms of the original acquisition also
required the owners to provide IABG with three guaranteed equity infusions. The
final equity guarantee of approximately $8.9 million was paid on November 16,
1995, of which BDM paid its 45% share.

On February 16, 1994, the Company acquired GCL for $4.3 million. Financing
for the acquisition and a covenant not-to-compete, totaling $4.5 million, was
obtained from the working capital credit facility and is expected to be repaid
from cash generated by the acquired company's operations.

Other investing cash flow activities included fluctuations in the timing of
working capital infusions to and earnings distributions from Vinnell's
unconsolidated joint ventures, as well as planned capital expenditures. Included
in 1995 capital expenditures was approximately $4.8 million related to a new
financial and program management system (SAP) to be implemented at BDM Federal
in 1996. Expenditures for capital equipment increased in 1994 over 1993
primarily due to the full year effect of consolidating BDM Europe's activities.

Financing activities in 1995 included the replacement of the Company's
credit facility with a new revolving credit agreement and an initial public
offering of the Common Stock. The new credit agreement provides an unsecured
multicurrency revolving credit line of $150 million for a term of five years, at
an interest rate based on LIBOR plus margins. The agreement includes covenants
which limit the amount of the Company's debt compared to total capitalization
and compared to earnings before interest, taxes, depreciation and amortization.
In addition, dividends can only be paid after September 1, 1996, and are not to
exceed 20% of the cumulative net income subsequent to July 1, 1996. As of
December 31, 1995, the Company had $113.4 million available for borrowing under
this new credit agreement. The Company had $137.9 million available for
borrowing as of February 29, 1996.

On May 27, 1994, the Company repurchased 2,250,000 shares of its outstanding
Common Stock and 350,000 shares of its outstanding Class B Common Stock, from
its institutional investors at $14.00 per share. To effect the purchase, the
Company borrowed a total of $36.4 million from its working capital credit
facility.

Other financing activities principally relate to employee benefits. The
Company has continued the employee benefit of enabling employees to purchase
shares of common stock through stock option exercise and an employee stock
purchase plan. On June 28, 1995, the Company established a new qualified
non-compensatory employee stock purchase plan (the "Plan") which has reserved
750,000 shares of common stock for issuance under the Plan. The Plan allows all
employees of the Company's domestic subsidiaries to purchase a limited amount of
common stock at a discount during the offering period of July 1, 1995 to June
30, 1996. The purchase price of the Company's common stock is the lesser of
$15.725, which is 85% of the initial offer price of $18.50 per share in the
public offering, or 85% of the market value at the end of each month. During
1995, the Company received $5.0 million from shares purchased under the Plan.

The Company paid a dividend on December 15, 1993 of $.50 per share to all
holders of record as of November 15, 1993. Pursuant to the Company's credit
facility, dividends can only be paid after September 1, 1996 and are not to
exceed 20% of the Company's cumulative net income subsequent to July 1, 1996.
The payment of future dividends by the Company should not be assumed.

During 1995, the fluctuation in the value of the German Mark relative to the
U.S. dollar resulted in a $3.0 million increase in cash as reported in U.S.
dollars in the accompanying financial statements due to the significant balance
of cash maintained by IABG.

The Company's existing sources of liquidity and cash flow should continue to
provide sufficient funds for the Company's operations, debt service
requirements, planned investments and capital expenditures for the foreseeable
future.

21
<PAGE>
BUSINESS

COMPANY OPERATIONS

BDM is a multinational information technology company that operates in three
interrelated markets: Systems and Software Integration, Computer and Technical
Services, and Enterprise Management and Operations. The Company serves public
and private sector clients, including the DOD (approximately 37% of total
revenue in 1995), international defense agencies (approximately 25%), civil
government agencies (approximately 23%), and commercial clients (approximately
15%). The Company provides its services through four decentralized subsidiaries.
These subsidiaries offer their services in specific markets using their
specialized expertise and market knowledge, while drawing upon the market
access, technical breadth and management capability of the entire BDM
organization. BDM's subsidiaries are:

BDM FEDERAL: represents the evolution of a core business that dates back
36 years, serving primarily U.S. Government clients. Included in BDM Federal
totals, for reporting purposes, are the results recognized by GCL, an
environmental services company acquired in 1994.

BDM TECHNOLOGIES: began operations in January 1993 as part of BDM's
evolution to a diversified company by applying its core competencies to
serve commercial and state and local government clients. In 1996, three
affiliated information technology companies serving commercial and state
government clients were acquired and integrated into BDM Technologies.

BDM EUROPE: largely consisting of a 45% interest in IABG, acquired in
November 1993 from a company principally owned by the German Government,
serves German and European governmental and industrial clients.

VINNELL: a 64-year old company that BDM acquired in March 1992,
specializes in international on-site operations and maintenance and training
services in the Middle East. Additionally, Vinnell operates certain Job
Corps Centers located in the United States for the Department of Labor.

BDM FEDERAL

The largest of BDM's subsidiaries, BDM Federal performs Systems and Software
Integration, Computer and Technical Services, and Enterprise Management and
Operations for both defense and civil government clients. Pursuing a balanced
strategic mix of traditional and new markets, BDM Federal has successfully
transitioned and transferred its growing expertise to target markets in air
traffic control and other transportation sectors, education technologies,
environmental remediation and waste management, and energy research and
development, while continuing to serve many sectors of national defense and
security. Information systems is an area of special emphasis, with such diverse
clients as the SEC, the Defense Information Systems Agency, various state and
local school districts and foreign civil government agencies. In representative
contract and program areas, BDM Federal:

. Modernizes the way information is managed by both defense and civil
government agencies under the Defense Enterprise Integration Services
("DEIS") Program contract. The work includes developing an overall
enterprise architecture to integrate disparate information systems, known
as legacy systems, introducing modern information technologies, and re-
engineering information management processes. BDM is one of six prime
contractors on the DEIS contract, along with Computer Sciences
Corporation, Electronic Data Systems, Lockheed Martin, Boeing and Unisys,
and has received the second highest dollar volume of

22
<PAGE>
delivery order awards (approximately $200 million) among the six
contractors since the program began in 1994. 1995 revenue was
approximately $72.5 million.

. Provides systems and software integration services to the SEC as the
developer of the Electronic Data Gathering Analysis and Retrieval System
("EDGAR"). This system permits publicly held companies to file periodic
reports electronically with the SEC, thus replacing paper filings, and
provides for immediate public dissemination of financial filing and
reporting data. EDGAR is now operational, and all public companies will
make the transition to filing via EDGAR by the end of 1996. 1995 revenue
was approximately $9.5 million.

. Consolidates defense logistics computer systems for the United States Air
Force ("USAF") under the $362 million DMRD-924 Program. The Company
provides systems and software integration services, ranging from hardware
acquisition to large-scale systems integration, pursuant to a DOD
directive mandating consolidation of computer sites to enhance performance
and reduce costs. 1995 revenue was approximately $46.4 million.

. Developed and implemented for the Federal Aviation Administration ("FAA")
and the DOD a Terminal Radar Approach Air Traffic Control ("TRACON")
system for the High Desert TRACON facility in Southern California. The
Company believes that this system, based on open system architecture and
the use of commercial off-the-shelf hardware and software, represents a
major technological step forward in air traffic control systems. BDM is a
key member of a team headed by Boeing, one of three teams selected to
compete for a major FAA air traffic control replacement system contract
(known as "STARS"), that is expected to be awarded in 1996. 1995
development revenue from the Company's air traffic control and air space
management projects was approximately $2.0 million.

. Provides comprehensive systems integration services to various state and
local school districts in the areas of financial and administrative
software applications, instructional applications, system architecture and
network design, teacher and administrator training and management
consulting. The Company is working to advance the productivity and
efficiency of administrative systems and improve student performance. The
Company's largest contract in this area ($27.5 million), awarded in 1995,
combines systems integration with outsourcing of the school district's
information services department. 1995 revenue in this area was
approximately $13.3 million.

. Supports the Department of Energy ("DOE") in development of plans and
technologies and the implementation of strategies to advance its waste
management, technology development and environmental restoration programs.
The Company performs information systems support, technical assessments
and other services to help the DOE meet federally-mandated responsibility
for waste management and site cleanup under the Resource Conservation
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and other laws and regulations. 1995 revenue was
approximately $22.7 million.

. Provides logistic support services to the Royal Saudi Air Force
encompassing IT services, logistics and supply, training, engineering and
systems maintenance, administration and other areas. 1995 revenue was
approximately $21.6 million.

. Provides the Ballistic Missile Defense Organization with comprehensive
engineering and technical systems assistance in areas such as systems
architecture and design, system simulation and modeling, command, control,
communications and intelligence, systems testing and logistics planning.
1995 revenue was approximately $20.7 million.

. Manages and operates elements of the Joint Readiness Training Center of
the U.S. Army Training and Doctrine Command, where approximately 50,000
soldiers a year are trained on

23
<PAGE>
integrated battlefields with near-real-time performance feedback. Systems
designed and operated by BDM collect data through lasers, electronics and
videos to provide the U.S. Army with the most comprehensive experience and
data feedback short of actual combat. 1995 revenue was approximately $14.3
million.

. Creates and implements systems and processes to improve blood collections,
processing and distribution for the American Red Cross. Tasks involve
developing standard operating procedures, installing hardware and
software, and providing training to Red Cross personnel. This is a joint
activity with BDM Technologies. Aggregate 1995 revenue was approximately
$13.0 million.

BDM TECHNOLOGIES

This subsidiary, established in 1993, has a dual strategic objective:
penetrating selected vertical markets in the commercial sector and building
business with state and local governments, primarily in information systems
integration. These include the automation of warehouse and distribution
operations, manufacturing modernization, business process re-engineering,
network design and integration and related IT services to strengthen companies
and their management. BDM Technologies provides both strategic business services
and implementation and integration services in which it leverages IT to achieve
strategic and operational benefits for its clients. In early 1996, three
affiliated IT companies (CW Systems, IG Systems and Melco Systems) were acquired
and integrated into this subsidiary. BDM Technologies:

. Designs and integrates state-wide information systems aimed at
strengthening welfare and human services management and provides tested
solutions in such areas as child welfare and child support enforcement.
Major programs are underway in Alabama, Iowa, Missouri, Montana and other
states. In Montana, the BDM-designed child support enforcement system was
the nation's first to achieve the federal certification that all such
systems are required to have. 1995 revenue in this area was approximately
$35.6 million.

. Automates warehouse distribution and control operations to improve
distribution process efficiencies for major national and international
clients including Ford Motor Company ("Ford"), Franklin Mint, Merck and
Co., Ortho-McNeil, Bell Canada, Federal Express, Dot Foods and Spalding.
Using the Company's proprietary MARC [trademark] system, BDM helps clients
achieve increased inventory accuracy, improved response time and other
benefits. 1995 revenue in this area was approximately $7.8 million.

. Performs application outsourcing, maintenance and support and develops
critical software enhancements to various information systems for Ford.
BDM Technologies has been directly involved in the development and
implementation of Computer Integrated Manufacturing applications for
Ford's Electronics Division. In addition, BDM Technologies has also
designed, developed and implemented several key client/server applications
for Ford. 1995 revenue was approximately $6.5 million.

. Delivers business process re-engineering, project management and
Internet/Intranet services to U S West to implement communications and
process improvements in this client's large project management systems. A
current focus of BDM development activity is U S West's "Global Village"
network which uses the Internet's World Wide Web for both internal and
customer support communications. 1995 revenue was approximately $3.2
million.

. Provides systems integration and manufacturing execution systems to
support clients in the semiconductor manufacturing industry.
Representative clients include Advanced Micro Devices, Sony
Semiconductors, National Semiconductor, Hitachi Semiconductor and Zilog.
1995 revenue was approximately $2.5 million.

24
<PAGE>
. Provides IT systems and services, through its newly acquired companies (CW
Systems, IG Systems and Melco Systems), to Fortune 1000 companies and
other large organizations in the oil and gas, telecommunications,
financial, insurance, health care, public utility and entertainment
sectors. They have also served state government agencies in Texas,
Florida, California, Georgia and Oklahoma. These acquired companies' 1995
revenue aggregated approximately $35.2 million.

BDM EUROPE

Two 1993 acquisitions make up the principal elements of BDM Europe. The
acquisition of IABG brings important strengths to the Company in IT, technical
and environmental services and test facilities management and operation. The
Company believes IABG's prospects and opportunities in Europe are similar in
scope and potential to those BDM enjoyed in the 1980s in the United States. BDM
Europe also includes FACE, a Netherlands-based firm experienced in information
systems integration and advanced manufacturing services. BDM Europe:

. Provides information technology and systems support in software
standardization, development and integration of management information
systems for government and commercial clients and strengthening of
command, control, communications and intelligence systems for the German
Ministry of Defense. 1995 revenue was approximately $35.7 million.

. Performs environmental assessments, both to meet requirements at
contaminated sites (site inventory, investigation, assessment and
remediation engineering) and to support environmental planning and the
development of improved remediation systems and techniques. One project
underway involves surveying and environmental risk assessment for former
Soviet military sites in the former East Germany. 1995 revenue was
approximately $25.0 million.

. Analyzes, tests, evaluates and simulates defense systems, missions and
operations for the German Ministry of Defense. Typical programs involve
engineering assessments of new weapons systems and platforms, support of
Battlefield Training Centers, fatigue testing of military aircraft, design
and simulation of camouflage measures and development and implementation
of computer-based models for operational analysis and training. 1995
revenue was approximately $68.1 million.

. Tests commercial and military aircraft structures, such as the Airbus
A330/340 airliners and the Tornado and new Eurofighter aircraft; programs
include testing of major assemblies, components and structural elements to
identify structural weaknesses and improve safety and service life. 1995
revenue was approximately $17.7 million.

. Performs comprehensive testing of satellites and other space structures,
space simulation, thermal vacuum testing, vibration and shock-testing and
project monitoring for the German Ministry of Research and Technology, the
European Space Agency and private clients at the Space Test Center in
Ottobrunn, Germany. 1995 revenue was approximately $22.5 million.

. Tests vehicles and their components for various German automobile
manufacturers such as BMW, Audi and Volkswagen, including climatic
testing, emissions testing and mechanical tests of suspension and steering
elements. 1995 revenue was approximately $5.4 million.

. Operates the Magnetic Levitation ("MagLev") test facility in Elmsland,
Germany, including the performance of numerous technical investigations
and demonstration runs. The successful operation of this facility
contributed to the decision of the German Government to implement the
first MagLev service route in Germany connecting Hamburg and Berlin. 1995
revenue was approximately $11.7 million.

25
<PAGE>
VINNELL

Vinnell provides BDM important strengths in training and complementary
capabilities in technical services, as well as a history of successful
large-scale enterprise management and operations, both in the Middle East and
the United States. Vinnell:

. Provides training, logistical support and comprehensive developmental,
advisory and operational services under the Saudi Arabian National Guard
("SANG") Modernization Program. In April 1995, Vinnell was selected for an
award of a new three year contract with the SANG to continue this effort
through June 1, 1998. This work is performed by a joint venture, of which
Vinnell owns 51%. Aggregate 1995 revenue was approximately $67.2 million.

. Performs training, logistical support and comprehensive developmental,
advisory and operational services for FMC Arabia (an affiliate of FMC
Corporation) in connection with the fielding of the Bradley Fighting
Vehicle System for the Royal Saudi Land Forces. This work is being
performed through an affiliate, of which Vinnell owns 60%. Aggregate 1995
revenue was approximately $34.1 million.

. Manages and operates six Job Corps Centers in the United States for the
Department of Labor ("DOL") under a program designed to bring education
and vocational training to disadvantaged youth. Vinnell's Laredo, Texas,
center was ranked the nation's number one Job Corps Center by the DOL in
program year 1995. Aggregate 1995 revenue was approximately $26.3 million.

. Manages and operates U.S. military facilities in Turkey and three USAF
facilities in Oman and provides personnel support services in Egypt under
joint ventures with Brown & Root Services Corporation, Airwork Ltd. and
SEACOR Services, Inc., respectively. Total 1995 revenue earned by these
joint ventures was approximately $75.1 million. As a 50% partner in these
joint ventures, Vinnell reports earnings using the equity method.
Aggregate equity in earnings from these joint ventures was approximately
$1.8 million in 1995.

CONTRACTS
TYPES OF CONTRACTS

The Company's services are provided primarily through three types of
contracts: fixed-price, time-and-material and cost-reimbursable contracts.
Fixed-price contracts require the Company to perform services under the contract
at a stipulated price. Time-and-material contracts reimburse the Company for the
number of labor hours expended at established hourly rates negotiated in the
contract and the cost of materials incurred. Cost-reimbursable contracts
reimburse the Company for all actual costs incurred in performing the contract
to the extent that such costs are within the contract ceiling and allowable
under the terms of the contract, plus a fee or profit.

The Company assumes greater financial risk on fixed-price contracts than on
either time-and-material or cost-reimbursable contracts. Commercial and state
government contracts are generally fixed-price contracts. Failure to anticipate
technical problems, estimate costs accurately or control costs during contract
performance may reduce the Company's profit or cause a loss. Greater risks are
involved under time-and-material contracts than under cost-reimbursable
contracts because the Company assumes the responsibility for the delivery of
specified skills at a fixed hourly rate. Higher profit margins are generally
negotiated with the government for fixed-price and time-and-material contracts
because the Company bears the risk that increased or unexpected costs may reduce
the Company's profit or cause a loss, while lower than anticipated costs may
result in increased profit.

26
<PAGE>
The following table shows the approximate percentage of revenue by contract
type recognized by the Company during the indicated periods:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
TYPE OF CONTRACT 1995 1994 1993
---------------- ---- ---- ----

<S> <C> <C> <C>
Cost-reimbursable............................. 39 % 43 % 68 %
Fixed-price................................... 28 30 29
Time-and-material............................. 33 27 3
---- ---- ----
Total................................... 100 % 100 % 100 %
---- ---- ----
---- ---- ----
</TABLE>

AWARD OF CONTRACTS

The Company may obtain a government contract after the solicitation by the
relevant government agencies, in open and free competition, of sealed bids from
various suppliers or through the process of negotiation with the Government.
Under certain circumstances, most government agencies are authorized to enter
into contracts based on negotiation rather than sealed bids.

Negotiated contracts may or may not involve the solicitation of competitive
proposals. Generally, negotiated contracts are entered into without competitive
solicitation when the services or supplies desired by the government can be
obtained from only one available source. In most non-competitive procurements,
the government solicits a proposal from the contractor and then negotiates the
price and other terms in accordance with the applicable federal regulations.

GOVERNMENT CONTRACT OPERATIONS

Many of the government programs in which the Company participates as a
contractor or subcontractor may extend for several years, but they are normally
funded on an annual basis. The Company's government contracts and subcontracts
are subject to modification, curtailment and termination in the event of changes
in government funding. Accordingly, all of the Company's contracts and
subcontracts involving the U.S. Government may be terminated at any time by the
U.S. Government, without cause, for the convenience of the U.S. Government. If a
U.S. Government contract is terminated for convenience, the Company would be
entitled to receive compensation for the services provided or costs incurred at
the time of termination and a negotiated amount of the profit on the contract.

The Company's costs and revenue under government contracts are subject to
adjustment as a result of audits by the DCAA. Audits have been completed of
costs incurred on all years through 1987. Audits for 1988 through 1995 have not
been completed. However, management does not believe the results of these audits
will have a material effect on the Company's financial position or results of
future operations.

BACKLOG

The Company's backlog at December 31, 1995 was approximately $1.7 billion
compared to approximately $1.5 billion at December 31, 1994. Approximately 42%
of the Company's backlog at December 31, 1995 is expected to be converted to
revenue within the current fiscal year.

The Company's backlog amounts are composed of funded and unfunded
components. Funded backlog consists of the dollar portion of contracts that is
currently appropriated by the government client or other clients and allocated
to the contract by the purchasing government agency or otherwise authorized for
payment by the client upon completion of a specified portion of work. The
Company's funded backlog was approximately $667 million and $535 million as of
December 31, 1995 and December 31, 1994, respectively. Although unfunded backlog
can include up to the stated award value of the contract including renewals or
extensions that have been priced but still

27
<PAGE>
remain at the discretion of the client whether to fund, BDM, to be conservative,
often recognizes only a portion of stated award values on multi-year contracts
into its backlog records. Because many of BDM's contracts are multi-year
contracts, total backlog may include revenue expected to be realized several
years into the future. The unfunded backlog may not be an indicator of future
contract revenue or earnings because there is no assurance that the unfunded
portion of the Company's backlog will be funded. In addition, most of the
contracts included in backlog are subject to termination for the convenience of
the government client.

BACKLOG SUMMARY BY COMPONENT

AS OF DECEMBER 31,
----------------------------
1995 1994 1993
------ ------ ------
(IN MILLIONS)

Funded.................................... $ 667 $ 535 $ 326
Unfunded.................................. 1,021 1,003 961
------ ------ ------
Total................................. $1,688 $1,538 $1,287
------ ------ ------
------ ------ ------

MARKETING

The Company's marketing activities are conducted by its professional
managers who have technical expertise and whose efforts are supplemented by the
Company's staff of engineers, scientists and analysts. The Company supports the
marketing efforts of its personnel through the direct participation of senior
management and supervisory employees. These marketing efforts are further
supported by a corporate proposal center, organized team reviews of proposals
and a formal corporate training program. The Company believes that this
marketing approach enables it to anticipate and serve the needs of its clients
and ensures that those who are seeking to obtain business for the Company have
the necessary technical expertise and resources both to develop proposals that
satisfy clients' requirements and to participate in or supervise the performance
of services that ultimately may be provided.

COMPETITION

The information services industry in which the Company operates is highly
fragmented with no single company or small group of companies in a dominant
position. The Company's competitors include large, diversified firms with
substantially greater financial resources and larger technical staffs than the
Company as well as firms which receive preferences under set-aside programs.
Some of the Company's competitors also operate in international markets, along
with other concerns which operate exclusively or primarily outside the United
States. Some of the larger competitors offer services in a number of markets
which overlap many of the same areas in which the Company offers services, while
certain companies are focused on only one or a few of these markets. The firms
which compete with the Company are consulting firms, computer services firms,
applications software companies and accounting firms, as well as the computer
service arms of computer manufacturing companies and defense and aerospace
firms. In addition, the internal staffs of client organizations, non-profit
federal contract research centers and universities are, in effect, competitors
of the Company. The primary factors of competition in the business in which the
Company is engaged include technical, management and marketing competence, as
well as price.

EMPLOYEES AND EMPLOYEE REPRESENTATION

As of March 1, 1996, the Company had approximately 7,900 full-time and
part-time employees. Joint ventures, in which the Company is a partner, employed
approximately 2,900 additional

28
<PAGE>
individuals as of this date. In addition, the Company enters into agreements
with a large number of consultants on a project-specific basis who are engaged
by the Company to perform specialized work on contracts or to provide expertise
in support of marketing and contract activities. With the exception of
approximately 125 Vinnell employees and except as discussed in the next
paragraph, no other employees of the Company are represented by a union and, to
the knowledge of the Company, no union organizing activities are in progress.

As a corporation organized under the laws of and operating in Germany, IABG
is subject to the German Co-Determination Law. Under this law, certain German
workers have a right to representation on supervisory boards of a company and,
through Workers' Councils, have a say in issues relating to corporate
operations, particularly those having a direct impact on workers. Approximately
40% of IABG's employees are covered by the tariff agreements of the German metal
workers union, IG Metall. The tariff negotiations determine the annual raises
and weekly working hours for the people covered by this tariff agreement.
Negotiations have been completed to cover the period through December 31, 1996.

FACILITIES

The Company leases all of its offices and other facilities. The Company's
corporate headquarters are located in McLean, Virginia. The Company also leases
office buildings as principal offices in Fairfax, Virginia; Albuquerque, New
Mexico; Houston, Texas; Denver, Colorado; Germantown, Maryland; Kettering, Ohio;
Huntsville, Alabama; Falls Church, Virginia; Boulder, Colorado; Eindhoven, The
Netherlands; and Ottobrunn, Germany.

In addition to these principal offices, as of March 1, 1996, the Company
maintained offices or facilities in connection with the performance of its
contracts in over 80 other locations. A portion of these premises is subleased
to others. In addition to the Company's offices and facilities, Company
personnel are frequently assigned to client locations throughout the country and
overseas.

For additional information on the Company's leases and rental expenses
thereunder, see Note 17 of the Notes to Consolidated Financial Statements.

LEGAL PROCEEDINGS

The Company is a party to various legal actions, claims, government
inquiries and audits resulting from the normal course of business. The Company
believes that any resulting liability should not have a material adverse effect
on the Company.

29
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
directors and executive officers of the Company as of March 1, 1996.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Frank C. Carlucci...................... 65 Chairman of the Board and Director
William E. Conway, Jr.................. 46 Vice Chairman and Director
Philip A. Odeen........................ 60 President, Chief Executive Officer and Director
C. Thomas Faulders, III................ 46 Executive Vice President, Treasurer and Chief
Financial Officer; President, BDM
Technologies
Dr. William E. Sweeney, Jr............. 57 Chairman of the Board, BDM Europe; General
Manager and Chairman of the Management
Board, IABG and Director
Roy V. Woodle.......................... 60 President and Chief Executive Officer, Vinnell
Dr. Jeanette Grasselli Brown........... 67 Director
Neil Goldschmidt....................... 55 Director
Walther Leisler Kiep................... 70 Director
Dr. Hans Mark.......................... 66 Director
Thomas G. Ricks........................ 42 Director
John M. Slosar......................... 57 Director
Helmut Sonnenfeldt..................... 69 Director
Earle C. Williams...................... 66 Director
</TABLE>

The terms of all of the Directors expire upon the next annual meeting of
shareholders in 1996 or when their successors are elected and qualify or, if
earlier, until their retirement during the year in which they turn 70. All
directors are elected for a one-year term. Executive officers are appointed by
the Board and hold office until their successors are chosen and qualify or until
their death, resignation or removal.

Set forth below is certain information regarding the backgrounds of each of
the directors and executive officers of the Company.

Frank C. Carlucci has served as Chairman of the Board of Directors of the
Company since October 1990. Mr. Carlucci has been Chairman and a Managing
Director of Carlyle since 1993 and served as Vice Chairman of Carlyle from 1989
to 1993. Mr. Carlucci served as U.S. Secretary of Defense from 1987 to 1989 and
has served in a number of other government positions, including Ambassador to
Portugal, Deputy Secretary of Defense and Assistant to the President for
National Security Affairs.

Mr. Carlucci presently serves on the Board of Directors of the following
corporations: Ashland Oil, Inc., Bell Atlantic Corporation, CB Commercial Real
Estate Group, Inc., General Dynamics Corporation, Kaman Corporation, Neurogen
Corporation, Northern Telecom, Ltd., The Quaker Oats Company, SunResorts, Ltd.,
N.V., Texas Biotechnology Corporation, Pharmacia & Upjohn, Inc. and Westinghouse
Electric Corporation. He also presently serves on the Board of Directors of
several privately-held companies controlled by Carlyle.

William E. Conway, Jr. has served as Vice Chairman of the Board of Directors
of the Company since October 1990. Mr. Conway has been a Managing Director of
Carlyle since 1987. Mr. Conway presently serves on the Board of Directors of GTS
Duratek, Inc., Tracor, Inc., HighwayMaster Communications, Inc. and several
privately held companies controlled by Carlyle.

30
<PAGE>
Philip A. Odeen has served as President, Chief Executive Officer and a
Director of the Company since May 1992. Mr. Odeen served with Coopers & Lybrand,
an international auditing and consulting company, as Vice Chairman, Management
Consulting Services from 1991 to 1992, and as Managing Partner from 1978 to
1991. Mr. Odeen has served in a number of government positions, including
Director, Program Analysis, National Security Council, and Principal Deputy
Assistant Secretary of Defense.

C. Thomas Faulders, III joined the Company as Executive Vice President,
Treasurer and Chief Financial Officer on April 24, 1995. He has also served as
President of BDM Technologies since October 20, 1995. Mr. Faulders served with
Comsat Corporation, a provider of international communications and
entertainment, as Vice President and Chief Financial Officer from 1992 to 1995.
From 1985 to 1992, he served in several senior management positions with MCI
Communications Corporation, a long distance service provider.

Dr. William E. Sweeney, Jr. has served as Executive Vice President and a
Director of the Company since October 1990 and as Chairman of the Board of BDM
Europe and General Manager and Chairman of the Management Board of IABG since
1993. Dr. Sweeney joined the Predecessor Company in 1977 and has held a number
of positions, including senior management positions in the Communications,
Command and Control Division, the Communications Technology Group and the
Systems Engineering and Development Organization.

Roy V. Woodle has served as President and Chief Executive Officer of Vinnell
since June 1993 and January 1994, respectively. Mr. Woodle joined Vinnell in
1983 as Vice President, Program Development and from 1988 to 1993, he served as
Senior Vice President.

Dr. Jeanette Grasselli Brown has served as a Director of the Company since
May 1995. Dr. Brown is a member of the Ohio Board of Regents. She was
Distinguished Visiting Professor and Director of Research Enhancement at Ohio
University from 1989-1995. From 1950 until her retirement in 1988, she was
employed by BP America (formerly The Standard Oil Company) in various research
positions. She retired as director of corporate research, environmental and
analytical sciences. She is a member of the Board of Directors of AGA Gas, Inc.,
The BF Goodrich Company, McDonald & Company Investments, and USX Corporation.

Neil Goldschmidt has served as a Director of the Company since July 1993.
Mr. Goldschmidt is currently President of Neil Goldschmidt, Inc., a company
focusing on strategic planning and problem solving for national and
international businesses. From 1987 to 1991, Mr. Goldschmidt was Governor of
Oregon. From 1981 to 1986, he served as Vice President of Nike International and
President of Nike Canada. Mr. Goldschmidt served as Secretary of Transportation
from 1979 to 1981 and as Mayor of Portland, Oregon, from 1972 to 1979.

Walther Leisler Kiep has served as a Director of the Company since January
1995. Mr. Kiep has been Managing General Partner of Gradmann & Holler, an
insurance brokerage firm based in Stuttgart, Germany, since 1968. He is
currently Chairman of the Supervisory Board of IABG and Zeneca GmbH. He is a
member of the Supervisory Board of Volkswagen AG, Glunz AG, CS-Interglass, AG,
and Bau Assekuranz-Vermittlungs GmbH. He is a member of the Advisory Council of
the Deutsche Bank AB and of Grunelius KG Privatbankiers, is Chairman of the
International Advisory Board of Marsh & McLennan Companies, and is a member of
the International European Advisory Board of Fuji-Wolfensohn International.

Dr. Hans Mark has served as a Director of the Company since August 1991. Dr.
Mark is a Professor in the Department of Aerospace Engineering and Engineering
Mechanics at the University of Texas at Austin and holder of the John J. McKetta
Centennial Energy Chair in Engineering. He served as Chancellor of The
University of Texas System from 1984 until 1992 and as Deputy

31
<PAGE>
Administrator of NASA from 1981 until 1984. From 1977 until 1979, he was
Undersecretary of the USAF and was named Secretary of the USAF in 1979.

Thomas G. Ricks has served as a Director of the Company since December 1992.
Mr. Ricks became President and Chief Executive Officer of University of Texas
Investment Management Company on March 1, 1996. He served as Vice Chancellor for
Asset Management for The University of Texas System from 1992 to 1996. From 1988
to 1992, he served as Executive Director of Finance and Private Investments for
The University of Texas System. Mr. Ricks is a member of the Board of Directors
of Argus Pharmaceuticals, Inc., DTM Corporation, LifeCell Corporation and
Newfield Exploration Co.

John M. Slosar has served as a Director of the Company since March 1991. Mr.
Slosar is a Senior Vice President and Director of Canny, Bowen Inc., an
executive search firm. Previously, Mr. Slosar held key human resources and
business planning positions within Ford in a career which spanned nearly 35
years. He also served as Vice President--Administration for Rouge Steel Company,
a wholly owned subsidiary of Ford, and Vice President, Employee Relations and
Planning, at Ford Aerospace.

Helmut Sonnenfeldt has served as a Director of the Company since March 1991.
Mr. Sonnenfeldt is a Guest Scholar at the Brookings Institution and a recognized
researcher, author and commentator on East-West issues, national security and
other public policy concerns. Mr. Sonnenfeldt is a trustee of The Johns Hopkins
University and is a member of the International Institute of Strategic Studies
(London), The Council on Foreign Relations (New York) and various other
professional associations. As President of Helmut Sonnenfeldt, Inc., he has
provided consulting services on international political and economic issues
since 1978.

Earle C. Williams has served as a Director of the Company since October
1990. From 1990 until his retirement in 1992, Mr. Williams served as President
and Chief Executive Officer of the Company. From 1972 to 1990, Mr. Williams
served as President and Chief Executive Officer of the Predecessor Company. Mr.
Williams is presently a member of the Board of Directors of GAMMA-A
Technologies, GTS Duratek, Inc., Nortel Federal Systems, Inc. and The Parsons
Corporation.

32
<PAGE>
CERTAIN TRANSACTIONS

THE CARLYLE GROUP, L.P.

Messrs. Carlucci and Conway are Chairman and Vice Chairman of the Company,
respectively, stockholders of the Company and Managing Directors of Carlyle. Mr.
Conway owns more than 10% of the capital stock of the general partner of
Carlyle. Carlyle is the general partner of The Carlyle Fund, BDM Partners I and
BDM Partners II, stockholders of the Company.

The Company has retained Carlyle to provide certain financial and
investor-relations services, to assist management in evaluating corporate
acquisition opportunities and financial strategies and to provide similar other
services. In consideration of such services, the Company pays Carlyle an annual
fee of $500,000 plus expenses, a portion of which is offset by the amount which
ordinarily would be payable to Mr. Conway for services rendered in his capacity
as a Director of the Company. In addition, Carlyle serves as a financial advisor
to the Company in connection with any acquisition, corporate reorganization,
financing, stock offering or similar transaction by the Company, and has
received fees commensurate with its services in connection with any such
transaction. However, Carlyle has waived its rights to receive a financial
advisory fee in connection with the Offerings. The Company paid Carlyle
approximately $506,000, $505,000 and $535,000 for the provision of these
services for the years ended December 31, 1995, 1994 and 1993, respectively. In
addition, in connection with the acquisition of Vinnell in 1992, the Company
paid an advisory fee of $250,000, plus expenses.

All future transactions (other than ordinary course transactions such as
fixing salaries or awarding employee benefits) and loans between the Company and
its directors, officers and principal stockholders will be ratified by a
majority of the members of the Board of Directors not having any interest in the
transactions and will be on terms believed to be no less favorable to the
Company than those generally available from unaffiliated third parties.

INVESTOR AGREEMENT

On October 23, 1990, The Carlyle Fund, R.K. Mellon & Sons ("Mellon"),
Equitable Capital Private Income and Equity Partnership, II, L.P. and Equitable
Deal Flow Fund, L.P. (together, the "Equitable Funds") (collectively, the
"Investor Group") entered into the Investor Agreement with the Company which
contains certain provisions with respect to the transfer of shares of Common
Stock by the Investor Group. As a result of the sale of Common Stock by The
Carlyle Fund to BDM Partners II, BDM Partners I, the Board of Regents of The
University of Texas System (the "Board of Regents") and the Permanent University
Fund of The State of Texas (the "Permanent University Fund") (together, "The
University of Texas"), such parties (together with the Investor Group, the
"Principal Stockholders") became subject to the Investor Agreement.

Pursuant to the terms of the Investor Agreement, if an Investor Group
member, or a transferee of a member pursuant to a transaction not involving a
public offering or an offering not made pursuant to Rule 144 under the
Securities Act (a "Transferee"), desires to sell any shares of Common Stock
purchased under the Investor Agreement other than (i) to another Investor Group
member, the Company or an affiliate, (ii) to a prospective purchaser in a
transaction made pursuant to an effective registration statement or (iii)
pursuant to Rule 144 under the Securities Act or pursuant to certain pledges,
grants of security interests or other encumbrances effected by an Investor Group
member or Transferee with respect to its shares of Common Stock (an "Exempt
Transaction"), then the Company and the other Investor Group members have the
right (a "first refusal" right) to purchase all, but not less than all, of those
shares on the same terms and conditions as those offered by the prospective
purchaser.

33
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock at January 31,
1996, as adjusted to reflect the sales of the Common Stock in the Offerings, by
(i) each stockholder known by the Company to be the beneficial owner of more
than five percent of Common Stock, (ii) each Director of the Company, (iii) each
Named Executive Officer of the Company, (iv) all executive officers and
directors of the Company as a group, and (v) each Selling Stockholder (based
upon 13,086,156 shares outstanding as of January 31, 1996). Unless otherwise
indicated, all shares are owned directly and the indicated owner has sole voting
and dispositive power with respect thereto.

<TABLE>
<CAPTION>
SHARES OWNED SHARES SHARES TO BE OWNED
BENEFICIALLY TO BE BENEFICALLY
DIRECTORS, NAMED EXECUTIVE OFFICERS PRIOR TO OFFERINGS(1) SOLD AFTER OFFERINGS(1)
AND ------------------------ --------- ------------------------
FIVE PERCENT STOCKHOLDERS NUMBER PERCENTAGE(2) NUMBER NUMBER PERCENTAGE(2)
- ------------------------------------ --------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Carlyle............................. 5,750,000(3) 43.9% 1,500,000(4) 4,250,000 31.4%
Equitable Funds(6).................. 400,000 3.1 400,000 0 *
Mellon.............................. 300,000 2.3 150,000 150,000 1.1
The University of Texas(5).......... 250,000 1.9 250,000 0 *
Dr. William E. Sweeney, Jr.(7)...... 185,144 1.4 50,000 135,144 1.0
Philip A. Odeen(8).................. 157,798 1.2 157,798 1.2
Earle C. Williams................... 74,000 * 74,000 *
William E. Conway, Jr............... 61,757 * 61,757 *
Frank C. Carlucci(9)................ 37,116 * 37,116 *
Roy V. Woodle(10)................... 32,548 * 32,548 *
C. Thomas Faulders, III(11)......... 20,617 * 20,617 *
Neil Goldschmidt.................... 6,349 * 6,349 *
John M. Slosar(12).................. 5,133 * 5,133 *
Helmut Sonnenfeldt.................. 2,000 * 2,000 *
Dr. Hans Mark....................... 1,623 * 1,623 *
Dr. Jeanette Grasselli Brown........ 1,343 * 1,343 *
Walther Leisler Kiep................ 0 * 0 *
Thomas G. Ricks..................... 0 * 0 *
All Directors and Executive Officers
as a group (total 14 persons)..... 585,428 4.5 50,000 535,428 4.0
</TABLE>

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

* Less than 1% of the outstanding Common Stock.

(1) Pursuant to SEC regulations, shares are deemed to be "beneficially owned"
by a person if such person directly or indirectly has or shares the power
to vote or dispose of such shares or the right to acquire the power to vote
or dispose of such shares within 60 days, including any right to acquire
through the exercise of any option, warrant or right, whether or not such
person has any pecuniary interest in such shares.

(2) Percentages are calculated based on the number of shares of Common Stock
outstanding as of January 31, 1996 and options exercisable within 60 days
of such date and include 400,000 shares of Class B Common Stock outstanding
as of such date.

(3) Includes 4,875,000 shares of Common Stock held by The Carlyle Fund, 750,000
shares of Common Stock held by BDM Partners II and 125,000 shares of Common
Stock held by BDM Partners I. Carlyle is the sole General Partner of The
Carlyle Fund, BDM Partners II and BDM Partners I. Frank C. Carlucci is
Chairman and a Managing Director and William E. Conway, Jr. is a Managing
Director of Carlyle. Messrs. Carlucci and Conway are each directors and
stockholders of the Company. The University of Texas is the sole limited
partner of BDM Partners II.

34
<PAGE>
(4) Includes 250,000 shares offered by BDM Partners II and 1,250,000 shares
offered by The Carlyle Fund.

(5) Includes 218,750 shares held by the Permanent University Fund, 31,250
shares held by the Board of Regents and excludes 750,000 shares held by BDM
Partners II, the sole limited partner of which is The University of Texas.

(6) Equitable Funds' beneficial ownership of 400,000 shares of Common Stock
consists of their ownership of 400,000 shares of Class B Common Stock,
which is convertible on a one-to-one basis into Common Stock. Immediately
prior to the Offerings, Equitable Funds will convert their 400,000 shares
of Class B Common Stock into the 400,000 shares of Common Stock to be sold
by them in the Offerings.

(7) Includes 156,000 shares held by the William E. Sweeney, Jr. & Elizabeth W.
Sweeney Revocable Trust, of which Dr. Sweeney and his wife are the sole
trustees. Also includes options to purchase 28,667 shares of Common Stock
granted under the 1990 Plan which are currently exercisable.

(8) Includes 6,000 shares held by The Philip and Marjorie Odeen Charitable
Remainder Unitrust, of which Mr. Odeen is the sole trustee. Also includes
options to purchase 42,970 shares of Common Stock granted under the 1990
Plan which are currently exercisable.

(9) Voting power for 37,116 of these shares is shared with Mr. Carlucci's wife.

(10) Includes options to purchase 24,084 shares of Common Stock granted under
the 1990 Plan which are currently exercisable.

(11) Includes options to purchase 6,840 shares and 6,250 shares of Common Stock
granted under the 1990 Plan and 1994 Plan, respectively, which are
currently exercisable.

(12) Voting power for 5,133 of these shares is shared with Mr. Slosar's wife.

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following is a summary of certain of the detailed provisions of the
Certificate of Incorporation regarding the capital stock of the Company. Such
summary is not complete and is qualified in its entirety by reference to the
Certificate of Incorporation and to the By-laws, copies of which are filed as
exhibits to the Registration Statement of which this Prospectus is a part.

GENERAL

The authorized Common Stock of the Company consists of 50,000,000 shares of
Common Stock, 2,000,000 shares of Class B Common Stock and 500,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"). As of
February 23, 1996, there were 769 holders of record of Common Stock and two
holders of Class B Common Stock. Upon completion of the Offerings, there will be
13,562,285 shares of Common Stock outstanding and no shares of Class B Common
Stock outstanding. As of February 23, 1996, options were outstanding for
1,630,885 shares of Common Stock.

Preferred Stock may be issuable in one or more series from time to time at
the discretion of the Board of Directors. The Board of Directors is authorized
to establish the number of shares to be included in each series and fix the
respective designations, powers, preferences, rights, qualifications,
restrictions and limitations of each series. The issuance of Preferred Stock
could be used as an "anti-takeover" device without requiring further action on
the part of the holders of the Common Stock or the Class B Common Stock. The
Company has no current plans to issue another series of the Preferred Stock.

COMMON STOCK AND CLASS B COMMON STOCK

Immediately prior to the consummation of the Offerings, Equitable will
convert 400,000 shares of Class B Common Stock into 400,000 shares of Common
Stock and will sell all of such Common Stock in the Offerings. After such
conversion there will be no shares of Class B Common Stock outstanding.

The holders of Common Stock are entitled to one vote per share for each
share held of record in elections for directors and on all other matters
required or permitted to be approved by a vote of stockholders of the Company.
Each share of the Common Stock and each share of the Class B Common Stock are
equal in respect of rights in liquidation and rights to dividends or
distributions, except that in the case of dividends or other distributions
payable in securities of the Company, only non-voting securities will be
distributed with respect to the Class B Common Stock.

The Class B Common Stock is non-voting except with respect to matters for
which class voting is required by the DGCL. The Company is required to convert
any shares of Class B Common Stock into shares of Common Stock upon the
disposition of such shares by the holder thereof as part of: (1) a sale of all
or substantially all of the Common Stock of the Company; (2) a merger or
consolidation of the Company in which the stockholders of the Company receive
cash and/or marketable securities in exchange for their stock; (3) an
underwritten public offering of Common Stock of the Company pursuant to a
registration statement filed with, and declared effective by, the SEC (other
than a registration statement filed in connection with an employee benefit
offering or a merger or acquisition, or an offering of securities in connection
with an exchange offer or solely to existing security holders of the Company or
present and former employees of the Company or consultants or independent
contractors performing substantial services for the Company); (4) a sale
pursuant to Rule 144 under the Securities Act, following a public offering as
described above; or (5) any other transaction if the conversion of the Class B
Common Stock has been approved by a majority of the Board of Directors of the
Company.

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<PAGE>
Stockholders of the Company do not and will not have any preferential or
preemptive rights to subscribe for, purchase or receive additional shares of any
class of capital stock of the Company, or any options or warrants for such
shares, or any rights to subscribe for or purchase such shares, or any
securities convertible into or exchangeable for such shares, which may be
issued, sold or offered for sale by the Company.

PREFERRED STOCK

The Company's Board of Directors has the authority, without further
stockholder approval, to provide for the issuance of up to 500,000 shares of
Preferred Stock in one or more series, to establish the number and designation
of shares to be included in each series, and to determine the dividend rights,
conversion rights, voting rights, rights and terms of redemption and liquidation
or dissolution rights of such shares. Because the Board of Directors has the
power to establish the preferences and rights of each series, it may afford the
holder of any Preferred Stock preferences, powers and rights (including voting
rights) senior to the rights of the holders of common stock. No shares of
Preferred Stock are currently outstanding. Although the Company currently has no
intention to issue Preferred Stock, the issuance of shares of Preferred Stock or
the issuance of rights to purchase such shares, may have the effect of delaying,
deferring or preventing a change in control of the Company.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

Upon completion of the Offerings, the Company's authorized but unissued
capital stock will consist of 36,437,715 shares of Common Stock, 2,000,000
shares of Class B Common Stock and 500,000 shares of Preferred Stock. All of the
foregoing authorized but unissued shares of capital stock will be available for
future issuance without stockholder approval. These additional shares may be
utilized for a variety of corporate purposes, including issuance pursuant to
stock options granted to certain members of management and key employees and
other employee plans, and future public offerings to raise additional capital or
to facilitate corporate acquisitions.

The Company does not presently have any plans to issue additional shares of
Common Stock other than shares of Common Stock which may be issued upon exercise
of existing options or options which may be granted in the future under the
Management Incentive Stock Purchase Program, the 1990 Stock Option Plan or the
1994 Stock Option Plan.

TRANSFER AGENT AND REGISTRAR

First Chicago Trust Company of New York serves as the Transfer Agent and
Registrar for the Common Stock.

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<PAGE>
VALIDITY OF COMMON STOCK

The validity of the Common Stock offered hereby will be passed upon for the
Company by Willkie Farr & Gallagher, New York, New York, and for the U.S.
Underwriters by Sullivan & Cromwell, Washington, D.C.

EXPERTS

The audited consolidated balance sheets as of December 31, 1995 and 1994 and
the consolidated statements of operations, stockholders' equity and cash flow
for each of the three years in the period ended December 31, 1995, included in
this prospectus, have been included herein on reliance on the report of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.

INCORPORATION OF DOCUMENTS BY REFERENCE

The Company hereby incorporates by reference into the Registration Statement
of which this Prospectus is a part the following documents previously filed with
the Commission pursuant to the Exchange Act:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;

2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995;

3. The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1995;

4. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995; and

5. The Company's Current Report on Form 8-K dated March 5, 1996.

In addition, all reports and other documents filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the Offering hereby shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of filing
of such reports and documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or supersedes for purposes of this Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document that
also is incorporated or deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
upon written or oral request from such person, a copy of any and all of the
documents incorporated by reference in this Prospectus (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into the documents that this Prospectus incorporates). Written or oral requests
for such copies should be directed to Todd A. Stottlemyer at BDM International,
Inc., 1501 BDM Way, McLean, Virginia 22102, (703) 848-5115.

38
<PAGE>
ADDITIONAL INFORMATION

The Company has filed with the SEC under the Securities Act a Registration
Statement with respect to the Common Stock offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement in
accordance with the rules and regulations of the SEC. The Registration Statement
may be inspected and copied at the public reference facilities maintained by the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's Regional
Offices in New York (7 World Trade Center, New York, New York 10007) and Chicago
(Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60611). Copies of such material can be obtained from the public
reference section of the SEC, Washington, D.C. 20549, at prescribed rates. For
further information pertaining to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto and the financial statements, notes and schedules filed as a part
hereof.

39
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGES
-----

<S> <C>
BDM International, Inc.

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

Consolidated Balance Sheets as of December 31, 1995 and 1994...................... F-3

Consolidated Statements of Operations for the years ended December 31, 1995, 1994
and 1993........................................................................ F-4

Consolidated Statements of Stockholders' Equity for the years ended December 31,
1995, 1994 and 1993............................................................. F-5

Consolidated Statements of Cash Flow for the years ended December 31, 1995, 1994
and 1993........................................................................ F-6

Notes to Consolidated Financial Statements........................................ F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
BDM International, Inc.

We have audited the accompanying consolidated balance sheets of BDM
International, Inc. and Subsidiaries (the Company) as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flow for each of the three years in the period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

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

Washington, D.C.
February 15, 1996, except for Notes 3
and 12, for which the date is February 23, 1996 COOPERS & LYBRAND L.L.P.

F-2
<PAGE>
BDM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 69,143 $ 45,314
Accounts receivable, net.................................... 219,354 215,923
Prepaid expenses and other.................................. 6,157 8,842
------------ ------------
Total current assets.................................... 294,654 270,079
Property and equipment, net..................................... 45,722 40,569
Intangible assets, net.......................................... 9,615 13,814
Deposits and other.............................................. 8,580 5,896
Equity in and advances to affiliates............................ 5,222 5,193
------------ ------------
Total assets............................................ $363,793 $335,551
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses....................... $168,253 $166,298
Debt currently payable...................................... 449 426
Income taxes payable........................................ 3,465 3,000
Deferred tax liability...................................... 6,363 5,441
------------ ------------
Total current liabilities............................... 178,530 175,165
Deferred tax liability.......................................... 3,638 5,243
Long term debt.................................................. 25,900 82,750
Severance and other............................................. 12,099 17,248
Minority interest............................................... 28,157 14,040
------------ ------------
Total liabilities....................................... 248,324 294,446
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 500,000 shares authorized, none
issued.......................................................... -- --
Common stock, $.01 par value; 12,962,342 shares issued and
outstanding at December 31, 1995; 9,473,275 shares issued and
outstanding at December 31, 1994.............................. 130 95
Additional paid in capital...................................... 68,535 12,336
Retained earnings............................................... 46,790 28,398
Deferred compensation........................................... (395) (279)
Cumulative translation adjustment............................... 409 555
------------ ------------
Total stockholders' equity.............................. 115,469 41,105
------------ ------------
Total liabilities and stockholders' equity.............. $363,793 $335,551
------------ ------------
------------ ------------
</TABLE>

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

F-3
<PAGE>
BDM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenue................................................... $889,974 $774,249 $558,292
-------- -------- --------
Cost of sales............................................. 752,107 643,728 460,186
Selling, general and administrative....................... 80,804 82,950 63,847
Depreciation, amortization and other...................... 18,154 20,627 12,089
-------- -------- --------
Operating profit.......................................... 38,909 26,944 22,170

Interest expense, net..................................... 1,474 3,481 4,178
Equity in earnings of affiliates.......................... (1,835) (1,841) (2,223)
Minority interest......................................... 5,863 2,526 1,555
-------- -------- --------
Income before taxes....................................... 33,407 22,778 18,660
Provision for income taxes................................ 15,015 9,700 7,632
-------- -------- --------
Income before extraordinary gain.......................... 18,392 13,078 11,028
Extraordinary gain, net of tax............................ -- -- 413
-------- -------- --------
Net income................................................ $ 18,392 $ 13,078 $ 11,441
-------- -------- --------
-------- -------- --------
Earnings per common share:
Income before extraordinary gain.......................... $ 1.56 $ 1.20 $ 0.92
Extraordinary gain........................................ -- -- 0.03
-------- -------- --------
Net income per share...................................... $ 1.56 $ 1.20 $ 0.95
-------- -------- --------
-------- -------- --------
Weighted average shares outstanding....................... 11,818 10,941 11,983
-------- -------- --------
-------- -------- --------
</TABLE>

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

F-4
<PAGE>

BDM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS B TREASURY
COMMON COMMON ADDITIONAL STOCK
-------------- -------------- PAID IN RETAINED DEFERRED ---------------
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS COMPENSATION SHARES AMOUNT
------ ------ ------ ------ ---------- -------- ------------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993...................... 10,590 $106 750 $7 $ 46,731 $ 9,859 $ (1,771) -- $ --
Issuance of common stock....................... 709 7 -- -- 1,205 -- -- -- --
Deferred compensation.......................... -- -- -- -- 131 -- 955 -- --
Tax benefits applicable to stock option
plans........................................ -- -- -- -- 793 -- -- -- --
Cancellation of deferred stock options......... -- -- -- -- (11) -- 11 -- --
Purchase of treasury stock..................... -- -- -- -- -- -- -- (100) (800)
Cash dividend of $.50 per share................ -- -- -- -- -- (5,980 ) -- -- --
Foreign currency translation adjustments....... -- -- -- -- -- -- -- -- --
Net Income..................................... -- -- -- -- -- 11,441 -- -- --
------ ------ ------ --- ---------- -------- ------ ------ -------
Balance at December 31, 1993.................... 11,299 113 750 7 48,849 15,320 (805) (100) (800)
Issuance of common stock....................... 251 3 -- -- 2,262 -- -- -- --
Deferred compensation.......................... -- -- -- -- -- -- 497 -- --
Tax benefits applicable to stock option
plans........................................ -- -- -- -- 11 -- -- -- --
Cancellation of deferred stock options......... -- -- -- -- (29) -- 29 -- --
Purchase of treasury stock..................... -- -- -- -- -- -- -- (2,728) (37,985)
Cancellation of treasury stock................. (2,478) (25) (350) (3) (38,757) -- -- 2,828 38,785
Foreign currency translation adjustments....... -- -- -- -- -- -- -- -- --
Income tax provision on translation
adjustment................................... -- -- -- -- -- -- -- -- --
Net income..................................... -- -- -- -- -- 13,078 -- -- --
------ ------ ------ --- ---------- -------- ------ ------ -------
Balance at December 31, 1994.................... 9,072 91 400 4 12,336 28,398 (279) -- --
Issuance of common stock....................... 3,581 36 -- -- 56,880 -- -- -- --
Costs of stock issuance........................ -- -- -- -- (774) -- -- -- --
Deferred compensation.......................... (12) -- -- -- 501 -- (116) -- --
Tax benefits applicable to stock option
plans........................................ -- -- -- -- 688 -- -- -- --
Purchase of treasury stock..................... -- -- -- -- -- -- -- (79) (1,097)
Cancellation of treasury stock................. (79) (1) -- -- (1,096) -- -- 79 1,097
Foreign currency translation adjustments....... -- -- -- -- -- -- -- -- --
Net income..................................... -- -- -- -- -- 18,392 -- -- --

------ ------ ------ --- ---------- -------- ------ ------ -------
Balance at December 31, 1995.................... 12,562 $126 400 $4 $ 68,535 $46,790 $ (395) -- $ --
------ ------ ------ --- ---------- -------- ------ ------ -------
------ ------ ------ --- ---------- -------- ------ ------ -------

CUMULATIVE TOTAL
TRANSLATION STOCKHOLDERS'
ADJUSTMENT EQUITY
---------- -------------
<S> <C> <C>
Balance at January 1, 1993...................... -$- $ 54,932
Issuance of common stock....................... -- 1,212
Deferred compensation.......................... -- 1,086
Tax benefits applicable to stock option
plans........................................ -- 793
Cancellation of deferred stock options......... -- --
Purchase of treasury stock..................... -- (800)
Cash dividend of $.50 per share................ -- (5,980)
Foreign currency translation adjustments....... 225 225
Net Income..................................... -- 11,441

----- -------------
Balance at December 31, 1993.................... 225 62,909
Issuance of common stock....................... -- 2,265
Deferred compensation.......................... -- 497
Tax benefits applicable to stock option
plans........................................ -- 11
Cancellation of deferred stock options......... -- --
Purchase of treasury stock..................... -- (37,985)
Cancellation of treasury stock................. -- --
Foreign currency translation adjustments....... 643 643
Income tax provision on translation
adjustment................................... (313) (313)
Net income..................................... -- 13,078

----- -------------
Balance at December 31, 1994.................... 555 41,105
Issuance of common stock....................... -- 56,916
Costs of stock issuance........................ -- (774)
Deferred compensation.......................... -- 385
Tax benefits applicable to stock option
plans........................................ -- 688
Purchase of treasury stock..................... -- (1,097)
Cancellation of treasury stock................. -- --
Foreign currency translation adjustments....... (146) (146)
Net income..................................... -- 18,392

----- -------------
Balance at December 31, 1995.................... $409 $ 115,469
----- -------------
----- -------------
</TABLE>

F-5

The accompanying notes are an integral part of these financial statements.
<PAGE>
BDM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash flow from operating activities:
Cash received from clients............................ $ 889,900 $ 746,335 $ 530,785
Cash paid to suppliers and employees.................. (846,920) (725,312) (486,465)
Income taxes paid..................................... (11,514) (11,204) (5,584)
Interest received..................................... 2,689 1,142 223
Interest paid......................................... (3,641) (5,087) (4,824)
--------- --------- ---------
Net cash provided by operating activities............. 30,514 5,874 34,135
--------- --------- ---------
Cash flow from investing activities:
Additions to property and equipment................... (17,754) (9,641) (7,046)
Proceeds from disposals of equipment.................. -- 21 328
Purchases of new businesses........................... -- (4,479) (9,038)
Cash acquired in business combination................. -- -- 20,165
Reimbursement of acquisition costs.................... 1,535 1,362 --
Contributions from minority owners.................... 7,097 2,482 4,171
Distributions from unconsolidated affiliates.......... 2,850 2,775 3,216
Investment in unconsolidated affiliates............... (1,589) (1,936) (500)
--------- --------- ---------
Net cash (used in) provided by investing activities... (7,861) (9,416) 11,296
--------- --------- ---------
Cash flow from financing activities:
Net (repayments of) proceeds from borrowings.......... (53,169) 31,835 35,451
Repayment of term debt................................ (3,700) -- (25,972)
Proceeds from issuance of common stock................ 56,142 2,265 1,061
Payment of debt issuance costs........................ -- (234) (580)
Payment of dividend................................... -- -- (5,980)
Acquisition of common stock........................... (1,097) (37,985) (800)
--------- --------- ---------
Net cash (used in) provided by financing activities... (1,824) (4,119) 3,180
--------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................. 3,000 4,100 179
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents.... 23,829 (3,561) 48,790
Cash and cash equivalents, beginning of period.......... 45,314 48,875 85
--------- --------- ---------
Cash and cash equivalents, end of period................ $ 69,143 $ 45,314 $ 48,875
--------- --------- ---------
--------- --------- ---------
</TABLE>

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

F-6
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

BDM International, Inc. ("BDM" or "the Company") was privately owned from
its inception in 1959 until 1980, when it became a publicly owned company. BDM
was purchased by and became a wholly-owned subsidiary of Ford Aerospace
Corporation ("Ford Aerospace") in June 1988. BDM remained a wholly-owned
subsidiary of Ford Aerospace until members of senior management and an investor
group led by The Carlyle Group, L.P. ("Carlyle"), a Washington, D.C.-based
private merchant bank, acquired substantially all of the assets, liabilities and
business of BDM on October 23, 1990. On June 28, 1995, BDM completed a public
offering of common stock in which 2.875 million shares were sold at $18.50 per
share. BDM's stock has since been traded on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq").

BDM is a multinational information technology company that operates
primarily in three interrelated markets: systems and software integration,
computer and technical services and enterprise management and operations. The
Company provides its services through four decentralized subsidiaries. The
Company operates principally in the United States, Europe and the Middle East.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include all majority-owned or
controlled subsidiaries and joint ventures of the Company. All significant
intercompany accounts and transactions have been eliminated. The Company's
earnings in unconsolidated joint ventures are accounted for using the equity
method.

Revenue Recognition

The Company's revenue is derived primarily from long-term contracts of
various types. Revenue on cost reimbursable contracts is recognized to the
extent of costs incurred plus a proportionate amount of the fee. Revenue on
fixed-price contracts is recognized using the percentage-of-completion method
based on the relationship of actual costs incurred to total costs estimated to
be incurred over the duration of the contract. Revenue on time-and-material
contracts is recognized based on actual hours delivered at the contracted hourly
rate plus the cost of any materials incurred. The fees under certain government
contracts may be increased or decreased in accordance with cost or performance
incentive provisions which measure actual performance against established
targets or other criteria. Such incentive fee awards or penalties are included
in revenue at the time the amounts can be reasonably determined. Provisions for
anticipated contract losses are recognized at the time they become known.

Progress payments received in advance from customers are applied first to
any amount of unbilled accounts receivable on the related contracts. Any excess
of the payments received in advance over the related unbilled accounts
receivable is recorded as an advance payment liability.

Foreign Currency Translation

The results of operations from foreign subsidiaries are translated to U.S.
dollars using the average exchange rates during the period. Assets and
liabilities are translated to U.S. dollars at

F-7
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
the exchange rate in effect at the balance sheet date. The resulting cumulative
translation adjustments are reflected in stockholders' equity.

Statements of Cash Flow

Cash flow from the operations of the Company's foreign subsidiaries are
calculated based on their reporting currencies. The effect of exchange rate
changes on the cash balances held in foreign currencies is reported separately
in the Statements of Cash Flow.

The Company considers all highly liquid financial instruments with purchased
maturities of three months or less to be cash equivalents.

Property and Equipment

Property, equipment and furniture are recorded at cost, or assigned fair
value if acquired through an acquisition. Furniture and equipment are
depreciated over their estimated useful lives, ranging from three to ten years,
primarily using the declining balance method. Leasehold improvements are
amortized over their estimated useful lives or lease terms, whichever is
shorter, using the straight-line method. Maintenance and repairs are charged to
expense as incurred.

Goodwill and Intangible Assets

Goodwill represents the excess of the cost of acquiring businesses over the
fair value of identifiable net tangible and intangible assets acquired. Goodwill
is amortized on a straight-line basis over the period for which the Company
estimates it will benefit directly from the acquisition. Although the period of
benefit from goodwill can be difficult to estimate, the Company considers
goodwill to be recoverable as long as the acquisition generates positive cash
flow from operations after implementation of the Company's strategic plan or
completion of reorganization efforts, if any. Recoverability of goodwill is
evaluated quarterly based on current undiscounted cash flow projections of each
specific acquired business. To date, the Company has limited the period of
amortization of goodwill to fifteen years, even though most of the Company's
acquisitions would project positive cash flows from operations for a much longer
period. Goodwill is amortized over periods ranging from ten to fifteen years.

Intangible assets are recorded at cost, or assigned fair value if acquired
through a business acquisition. Intangible assets are amortized on a
straight-line basis over the term of the underlying asset or the estimated
period of benefit, currently ranging from three to five years, or in the case of
contract backlog, over the remaining terms of the acquired contracts in relation
to the recognition of related contract revenue.

Research and Development Costs

Research and development costs are expensed as incurred and are included in
selling, general and administrative costs. Research and development costs
amounted to $2.0 million, $7.1 million and $7.8 million for the years ended
December 31, 1995, 1994 and 1993, respectively.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been recorded in the financial
statements or tax returns.

F-8
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Deferred tax assets and liabilities represent the tax effects of differences
between the financial statement carrying amounts and the tax basis carrying
amounts of the Company's assets and liabilities. These differences are
calculated based upon the statutory tax rates in effect in the years in which
the differences are expected to reverse. The effect of subsequent changes in tax
rates on deferred tax balances is recognized in the period in which a tax rate
change is enacted.

Foreign income taxes that are reimbursable pursuant to the related contract
terms are classified as contract costs rather than as a component of the
Company's provision for income taxes.

Earnings Per Share

Earnings per share is computed by dividing net income by the sum of the
weighted average number of common and common equivalent shares outstanding. The
Company's common equivalent shares, consisting entirely of options to purchase
common stock, are calculated using the treasury stock method which assumes the
exercise of all outstanding stock options with the hypothetical proceeds being
used to repurchase shares for treasury.

Financial Instruments

The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash equivalents and accounts receivable. The
carrying value of financial instruments approximates fair value since all such
instruments are either short-term in nature or bear interest at rates which are
indexed to current market interest rates.

The Company's cash management policy is to use available cash balances,
primarily of its domestic subsidiaries, to reduce the outstanding balance of the
revolving line of credit. To mitigate exposures to foreign currency risks
associated with using the available cash of foreign subsidiaries or joint
ventures, only the portion of available cash balances deemed not to be needed
for short-term operations of the foreign subsidiary are considered eligible for
inclusion in the centralized cash management activities of the Company. The
majority of the cash balance at December 31, 1995, belongs to IABG (the
Company's German subsidiary) (See Note 3). At December 31, 1995, approximately
$36 million was invested primarily in deposits with various German banks of high
credit ratings, with purchased maturities of one month or less. These
investments are insured up to amounts prescribed by German law. Although there
were no other investments as of December 31, 1995, significant excess cash
balances of domestic subsidiaries not used to extinguish debt are routinely
invested in high quality commercial paper for periods ranging from overnight to
one week. It is the Company's policy to hold such investments to maturity.

In connection with its international operations, the Company is exposed to
risks associated with fluctuations in currency exchange rates, including the
German Mark, the Saudi Riyal, the Kuwaiti Dinar, the Turkish Lira and the Dutch
Guilder. The Company limits its exposure to these risks by incurring and paying
for its expenses in the same currencies as those of its revenue. In addition,
certain contracts performed overseas have provisions which provide for
reimbursement of losses arising from currency fluctuations. It is the Company's
policy not to enter into derivative financial instruments for speculative
purposes. There were no derivative financial instruments outstanding as of
December 31, 1995.

F-9
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The Company generally provides uncollateralized credit to its customers.
Advance payments are secured from a large portion of foreign government
customers pursuant to the appropriation practices of the related governments.
The Company also continually assesses the financial strength of commercial
companies for whom significant subcontracts are performed.

Reclassifications

Certain reclassifications have been made to the prior year financial
statements and disclosures to conform them to the current year presentation.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies as of the dates of the financial statements, and the
reported amounts of revenue and expenses during the reporting periods. Actual
results could differ from management's estimates.

3. ACQUISITIONS

Geoscience Consultants, Ltd.

On February 16, 1994, the Company acquired Geoscience Consultants, Ltd., an
environmental services consulting business, for an acquisition price of
approximately $4.3 million. The acquisition was financed with borrowings from
the Company's working capital facility. Goodwill resulting from the transaction,
accounted for as a purchase, approximated $3.2 million and is being amortized on
a straight-line basis over ten years. A three year covenant not-to-compete for
$150,000 was also issued in connection with the acquisition.

Industrieanlagen-Betriebsgesellschaft mbH

On November 16, 1993, the Company acquired management control, through a 45%
ownership interest, in Industrieanlagen-Betriebsgesellschaft mbH ("IABG"),
located in Ottobrunn, Germany. The interest was acquired primarily from IVG, a
company then owned by the German government, pursuant to a privatization plan
initiated by the German government. IABG performs diversified technical services
in the areas of defense technology, information systems, organizational
analysis, structural analysis and testing and environmental programs on behalf
of ministries of the German government as well as other governmental and private
sector clients.

On the original acquisition date, IVG retained a 15% ownership interest in
IABG and held the remaining 40% ownership interest in trust, for sale to
employees and other investors, subject to the Company's approval. In October
1994, 12% of the trust was sold to Buck Werke GmbH & Co. KG, a German services
company, and an additional 5% was acquired by IVG. The Company has completed the
privatization of the remaining 23% trust balance through a sale to IABG's
employees and other investors at the original cost of the acquisition in 1993.

The Company and IVG had originally entered into a voting rights agreement,
which gave the Company control of IVG's 15% voting authority enabling the
Company to exercise 60% in total voting authority. In connection with the sale
of an additional 5% of IABG to IVG in October 1994, the

F-10
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. ACQUISITIONS--(CONTINUED)
original voting rights agreement was revised to provide IVG with direct control
of 12% of IABG's total voting authority while ensuring that the Company would
retain the right to vote IVG's remaining 8% ownership for a total voting
authority by the Company of 53%. IVG cannot unilaterally terminate the voting
rights agreement. In the event that BDM and IVG cannot agree on a vote, BDM will
be required to acquire the 8% portion of IABG at a price based on a previously
accepted valuation method contained in the original acquisition agreement. The
Company's majority voting authority enables it to manage the operations of IABG;
therefore, the accompanying financial statements consolidate the financial
statements of IABG and present the 55% ownership as minority interest. No owner
other than BDM will ever have voting authority exceeding their ownership
percentage.

The total consideration paid for the acquisition included the purchase price
of $1.7 million, a finders fee of $2.1 million and transaction costs of
approximately $2.1 million. The transaction, accounted for as a purchase,
generated an excess of the purchase price over the book value of net assets
acquired of approximately $10.6 million. Due to the unique nature of certain
acquired equipment, additional time subsequent to the acquisition was needed for
extensive analysis by technical experts to appropriately ascertain a fair value
of this equipment. This subsequent valuation, completed in September 1994,
resulted in the allocation of the entire excess purchase price to certain
acquired technical equipment and buildings with fair values exceeding their
respective acquisition date carrying values. Effective January 1, 1994, the
allocated excess purchase price is being depreciated over the estimated useful
lives of the specific underlying assets averaging nine years, and ranging from
three to thirteen years.

In addition to the purchase price consideration, the privatization plan
required the owners to guarantee equity infusions in IABG of $22.7 million
during the first two years of ownership. Installment payments against this
requirement were made by the owners at the acquisition date and on the first
anniversary thereof totaling $6.5 million and $6.2 million, respectively,
representing 100% and 77% of the equity infusions actually required as of those
dates. The remaining 23% portion of the second infusion, $1.9 million, was made
in March 1995 when the trust ownership transfer was completed. The third
installment commitment of $8.9 million, was made from all of the owners in
November of 1995. The above dollar amounts have been calculated at the then
prevailing exchange rates. The Company's share of all of the above acquisition
costs and equity guarantees was 45%.

Subsequent Event--Acquisition

On February 20, 1996, the Company completed the acquisition of three
affiliated companies-- CW Systems, Inc., IG Systems, Inc. and Melco Systems,
Inc.--for $18.5 million, which was paid out of existing cash balances. The
acquired companies specialize in providing information technology systems and
services to Fortune 1000 companies and other large organizations in the oil and
gas, telecommunications, financial, insurance, health care, public utility and
entertainment sectors. They have also served state government agencies in Texas,
Florida, California, Georgia and Oklahoma. The firms had aggregate 1995 revenue
of approximately $35.2 million.

F-11
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. SUPPLEMENTAL CASH FLOW INFORMATION

The following is a reconciliation of net income to net cash provided by
operating activities for the years ended December 31, (dollars in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Net income.................................................... $18,392 $13,078 $11,441
Non cash adjustments to net income:
Extraordinary items....................................... -- -- 413
Depreciation and amortization............................. 17,761 16,466 10,488
Loss on disposal of property.............................. 376 -- 208
Equity in earnings of affiliates.......................... (1,835) (1,841) (2,223)
Minority interest......................................... 3,797 2,526 1,555
Deferred taxes............................................ (684) 2,563 5,261
Provision for contract losses............................. 4,400 5,138 1,633
Deferred compensation expense............................. 349 497 1,086
Other..................................................... 89 (749) 691
Cash effect of changes in current assets and liabilities:
Accounts receivable....................................... (9,525) (36,543) (28,674)
Prepaid expenses and other................................ 1 (10,265) 2,579
Accounts payable.......................................... (3,072) 13,204 28,477
Income taxes payable...................................... 465 1,800 1,200
------- ------- -------
Net cash provided by operating activities..................... $30,514 $ 5,874 $34,135
------- ------- -------
------- ------- -------
</TABLE>

5. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at December 31, (dollars in
thousands):

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
U.S. Government contracts:
Billed............................................................. $134,847 $118,727
Unbilled:
Retention........................................................ 16,866 28,642
Other............................................................ 3,841 20,173
-------- --------
Total.............................................................. 155,554 167,542

Other contracts:
Billed............................................................. 52,570 42,597
Unbilled:
Retention........................................................ 5,402 4,598
Other............................................................ 22,338 10,962
-------- --------
Total.............................................................. 80,310 58,157

Other.............................................................. 4,220 7,760
Allowance for possible contract losses and uncollectible amounts... (20,730) (17,536)
-------- --------
Net accounts receivable............................................ $219,354 $215,923
-------- --------
-------- --------
</TABLE>

F-12
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. ACCOUNTS RECEIVABLE--(CONTINUED)

As of December 31, 1995 and 1994, approximately $7.8 million and $12.1
million, respectively, in advance payments from customers had been applied
against the unbilled portion of applicable contract receivables.

Unbilled retention balances are billable at contract completion or upon
attainment of other specified contract milestones. Other unbilled amounts
consisted primarily of: contractually earned services not yet billable because
of stipulated installment billing provisions, approximately $19.4 million and
$8.4 million at December 31, 1995 and 1994, respectively; revenue recognized
pursuant to customer authorizations prior to the execution of contractual
documentation, approximately $1.7 million and $2.4 million at December 31, 1995
and 1994, respectively; and a specific receivable related to a contract
performed in Saudi Arabia whereby the Company will owe severance to terminated
employees at contract completion, approximately $1.9 million and $7.8 million at
December 31, 1995, and 1994, respectively. This liability is included in accrued
severance. Management anticipates that substantially all unbilled receivables as
of December 31, 1995, exclusive of retention balances, will be billed and
collected in 1996. Based on the Company's experience with similar contracts in
recent years, retention balances of approximately $9.1 million at December 31,
1995, are not expected to be collected within the coming year. It is common
industry practice to include such amounts in working capital.

6. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, (dollars
in thousands):

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Equipment and office furniture........................................ $ 58,563 $ 52,492
Leasehold improvements................................................ 9,559 10,965
-------- --------
68,122 63,457
Accumulated depreciation and amortization............................. (22,400) (22,888)
-------- --------
Net property and equipment............................................ $ 45,722 $ 40,569
-------- --------
-------- --------
</TABLE>

Depreciation expense was $13.4 million, $12.5 million and $7.3 million for
the years ended December 31, 1995, 1994 and 1993, respectively (See Note 7
regarding IABG).

F-13
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. INTANGIBLE ASSETS

Intangible assets consisted of the following at December 31, (dollars in
thousands):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Goodwill................................................................ $11,480 $13,326
Less: Accumulated amortization........................................ (2,695) (2,124)
------- -------
8,785 11,202
------- -------
Intangible Assets:
Covenant not-to-compete............................................... 3,850 3,850
Debt issue costs...................................................... -- 814
Contract backlog...................................................... 3,752 3,752
Software licenses..................................................... 1,770 1,309
------- -------
9,372 9,725
Less: Accumulated amortization........................................ (8,542) (7,113)
------- -------
830 2,612
------- -------
Total................................................................. $ 9,615 $13,814
------- -------
------- -------
</TABLE>

Goodwill recorded in connection with the IABG acquisition in 1993 of $10.9
million was reallocated to the excess of the fair values over the acquisition
date carrying values of certain acquired technical equipment and test facilities
as a result of a valuation of all acquired assets and liabilities, completed in
September 1994.

Unamortized goodwill for the acquisition of FACE totaling $1.6 million was
expensed during 1995, as it was determined to be no longer recoverable. Several
factors contributed to this change in recoverability. The acquired company's
anticipated utilization of its technology for other industries was not realized,
and synergies between BDM technologies and acquired technologies did not result
in an expansion of the customer base as expected. In addition, an economic
downturn in the Netherlands contributed to a deterioration in the revenue base.
These factors resulted in negative cash flow projected for this particular
business.

In addition, unamortized goodwill from a separate acquisition totaling
$440,000 was expensed during 1994 as it was determined to be no longer
recoverable. The change in recoverability was driven primarily by the loss of a
significant contract performed by the acquired company, which resulted in
negative cash flow projected for that particular business.

F-14
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The components of accounts payable and accrued expenses were as follows at
December 31, (dollars in thousands):

1995 1994
-------- --------
Accounts payable......................................... $ 63,567 $ 74,357
Accrued expenses:
Advance payments....................................... 31,876 24,096
Accrued salaries/benefits.............................. 39,967 33,131
Accrued vacation....................................... 18,838 15,548
Restructuring/severance................................ 10,245 12,030
Environmental matters.................................. 1,356 2,381
Other.................................................. 2,404 4,755
-------- --------
$168,253 $166,298
-------- --------
-------- --------

Restructuring/Severance Liability/Debt Forgiveness

Prior to the Company's acquisition of IABG (See Note 3), IABG found it
necessary to reduce its reliance on the German government for the majority of
its revenue. In addition to redirecting marketing efforts in non-defense areas,
IABG sought means to reduce operating costs. IABG therefore determined that it
would be necessary to reduce its workforce through involuntary terminations. As
prescribed by German law and pursuant to the German government's plan for
privatization of IABG, a severance plan was developed by IABG providing for the
estimated number of involuntary employee reductions, the conditions for
termination and the method for determining the amount of severance due to the
terminating employees. IABG's workforce reductions began in 1994 and will
continue through 1997. In connection with the approval of the plan by the German
government and prior to acquisition of IABG by the Company, an estimate for the
severance totaling $34.2 million was accrued. Benefits paid through 1995
totaling $13.7 million have been applied against the original accrual.
Management believes the remaining liability will be adequate to cover future
benefits claimed pursuant to the plan. The remaining liability as of December
31, 1995 has been classified among current and long-term liabilities according
to IABG's plan for effecting the actual employee reductions.

As an incentive to investors acquiring IABG, the German government
privatization plan agreed to fund a portion of the above severance liability in
an amount equal to the principal balance of two notes held by IABG payable to
the German government's Ministry of Defense (MOD), for a total amount of $10
million. As payments for the severance liability were made to terminated
employees, the MOD forgave an equivalent amount of the debt, all of which has
been satisfied. The balance due on these notes was included as part of the
accrued severance liability.

F-15

<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. DEBT

Long-term debt consisted of the following at December 31, (dollars in
thousands):

1995 1994
------- -------
Revolving line of credit.................................. $25,830 $79,000
Subordinated seller note.................................. -- 3,700
Other..................................................... 519 476
------- -------
26,349 83,176
Less: current portion..................................... (449) (426)
------- -------
Total long-term debt...................................... $25,900 $82,750
------- -------
------- -------

Revolving Line of Credit. In July 1993, the Company entered into a credit
agreement which provided for a working capital facility of up to $100 million
for an original term of three years with two options to extend the term for one
additional year. The facility was amended in May 1994, increasing the borrowing
capacity to $125 million and extending the term of the facility for one of the
option years. The aggregate amount of borrowing was limited to a percentage of
the Company's eligible receivables as defined in the agreement. The Company had
the option to borrow principal at interest rates based either on the bank's
prime rate or the LIBOR rate plus margins, with unused credit also accruing a
standard interest charge. The outstanding borrowings were collateralized by a
security interest in the Company's accounts receivable. Costs incurred to obtain
the facility were capitalized and were being amortized over the term of the
agreement.

During 1995, the Company replaced the credit agreement with a new revolving
credit agreement. The new agreement provides an unsecured multicurrency
revolving credit line of $150 million for a term of five years, at an interest
rate based on LIBOR plus margins. The agreement includes covenants which limit
the amount of the Company's debt compared to total capitalization and compared
to earnings before interest, taxes, depreciation and amortization. In addition,
dividends can only be paid after September 1, 1996, and are not to exceed 20% of
the cumulative net income subsequent to July 1, 1996. Conditions also exist
which limit the investments which can be made in existing subsidiaries and
non-subsidiaries. As of December 31, 1995, the Company had $113.4 million
available for borrowing under this new credit agreement and was in compliance
with all covenants. In connection with the replacement of the previous facility,
the Company expensed $0.5 million of capitalized financing costs.

In connection with the early termination of a previous credit facility, the
Company recorded an extraordinary loss, net of the related tax benefit, of $1.3
million during the year ended December 31, 1993, in connection with the
expensing of unamortized debt issuance costs incurred in obtaining the
predecessor facility.

The Company had also entered into an interest rate swap agreement to reduce
exposure to changes in interest rates. This agreement, which matured on October
23, 1993, required the payment of interest on a $30 million notional amount at
the spread between the prevailing LIBOR interest rate and 8.01%.

Subordinated Seller Note. In connection with the acquisition of Vinnell in
1992, the Company issued a subordinated promissory note to the former owner in
the amount of $3.7 million. The note had an interest rate of 10% per annum, and
was payable semi-annually. The principal balance and unpaid accrued interest was
due the earlier of: (1) the fourth anniversary of the acquisition date on

F-16

<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. DEBT--(CONTINUED)
March 13, 1996, or (2) six months after the death of the former owner. However,
this note was repaid in July 1995 using a portion of the proceeds from the
public offering of stock.

FACE Acquisition Note. Effective January 1, 1993, the Company acquired FACE
Holding BV (a Netherlands Company). To finance the acquisition, the Company
executed a line of credit arrangement in April 1993 with a Netherlands bank for
up to $2.7 million. The outstanding balance incurred interest at 2% above the
prime rate of the Dutch Central Bank. In August 1994, this amount was repaid
with borrowings from the Company's credit facility.

Subordinated Conditional Note. In connection with the acquisition of the
Company in 1990, in exchange for $3 million in consideration, the Company issued
the right to additional future consideration based upon the Company's actual
earnings before interest and taxes (EBIT) for the years 1991 through 1993. The
Company reflected the $3 million consideration as an estimate for this
liability, thereafter termed the Subordinated Conditional Note. At the
conclusion of 1993, it became evident that the EBIT level necessary to trigger
the additional purchase price consideration would not be attained for any of the
years 1991 through 1993. The Subordinated Conditional Note included a provision
that if the EBIT levels were not met, the Company would not be liable for any
conditional amount, or interest thereon, including the amount paid as
consideration. Accordingly, during the year ended December 31, 1993, the Company
recognized an extraordinary gain of $1.7 million, net of related income tax
expense, on the reversal of the amount initially assigned to the conditional
principal liability. Interest expense had not been accrued on the assigned value
of the right to the conditional principal amount.

Maturities. Maturities of debt outstanding at December 31, 1995, were as
follows: 1996--$0.5 million; 1997--$0.1 million; 2000--$25.8 million.

Interest Expense. Total interest expense incurred during 1995, 1994 and 1993
was $4.4 million, $5.1 million and $4.6 million, respectively. The weighted
average interest rate incurred for the years ended December 31, 1995, 1994 and
1993, was 9.25%, 7.04% and 10.33%, respectively.

10. INCOME TAXES

The components of income before taxes were as follows for the years ended
December 31, (dollars in thousands):

1995 1994 1993
------- ------- -------
Domestic....................................... $25,890 $12,335 $10,648
Foreign........................................ 7,517 10,443 8,012
------- ------- -------
Income before taxes.......................... $33,407 $22,778 $18,660
------- ------- -------
------- ------- -------

F-17
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. INCOME TAXES--(CONTINUED)

The provision for income taxes included the following for the years ended
December 31, (dollars in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Current provision:
Federal....................................................... $ 9,530 $3,193 $ 138
State......................................................... 1,634 942 1,033
Foreign....................................................... 4,535 3,000 1,200
------- ------ ------
Total current provision................................... 15,699 7,135 2,371
------- ------ ------

Deferred (benefit) provision:
Federal....................................................... (3,745) 1,629 3,365
State......................................................... (642) 223 97
Foreign....................................................... 3,703 713 1,799
------- ------ ------
Total deferred (benefit) provision........................ (684) 2,565 5,261
------- ------ ------
Total provision for income taxes.......................... $15,015 $9,700 $7,632
------- ------ ------
------- ------ ------
</TABLE>

The actual provision for income taxes as a percentage of pre-tax income
varies from the U.S. Federal statutory income tax rate for the following
reasons:

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory income tax rate............................... 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefits............... 6.0 6.0 6.0
Tax effect relating to non-deductible goodwill amortization.......... 2.7 1.6 1.6
Tax effect relating to write off of tax benefits on foreign
subsidiary......................................................... 1.2 -- --
Differences between U.S. Federal statutory and foreign income
tax rates.......................................................... -- -- (2.8)
Effect of U.S. Federal tax rate increase on cumulative deferred tax
liability.......................................................... -- -- 1.1
---- ---- ----
Effective income tax rate............................................ 44.9% 42.6% 40.9%
---- ---- ----
---- ---- ----
</TABLE>

F-18
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. INCOME TAXES--(CONTINUED)

The sources and tax effects of temporary differences which result in a net
deferred income tax liability were as follows as of December 31, (dollars in
thousands):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Financial reporting basis of net assets acquired........................ $ 5,532 $ 4,725
Other................................................................... 308 480
Revenue recognition..................................................... 23,251 26,531
------- -------
Gross deferred tax liability.......................................... 29,091 31,736
------- -------
Financial reporting depreciation in excess of tax depreciation.......... 735 646
Accrued expenses........................................................ 9,215 7,994
Foreign operating loss carryforward..................................... 669 4,400
Accruals in excess of deductible write-offs............................. 5,981 3,797
Tax credit carryforwards................................................ 2,490 4,215
------- -------
Gross deferred tax asset.............................................. 19,090 21,052
------- -------
Net deferred liability.............................................. $10,001 $10,684
------- -------
------- -------
</TABLE>

As of December 31, 1995, the Company had foreign tax credit carryforwards
(FTC's) of $2.5 million expiring in various years through 1999. Utilization of
the FTC's is subject to certain limitations, including the future amount of
taxable foreign source income, the effective tax rate on such income and the
amount of future U.S. taxable income. The Company also has a net operating loss
carryforward of $1.6 million generated by IABG prior to its acquisition in 1993
by the Company to offset future taxable income in Germany. The temporary
differences between depreciation expense for financial reporting purposes and
income tax reporting purposes resulting from the fixed asset write-up for the
IABG acquisition provides assurance of future taxable income sufficient to
utilize the remaining net operating loss carryforward. Accordingly, no valuation
allowance is necessary. The term of the net operating loss carryforward is not
limited.

11. STOCKHOLDERS' EQUITY

Description of Capital Stock

The Company is authorized to issue a total of 52,500,000 shares of capital
stock, consisting of 500,000 shares of Preferred Stock, 50,000,000 shares of
Common Stock and 2,000,000 shares of Class B Common Stock, all shares with $.01
par value. The Preferred Stock may be issuable in one or more series from time
to time at the discretion of the Board of Directors. The Board of Directors is
authorized to fix the respective designation, relative rights, preferences,
qualifications, restrictions and limitations of each series.

Each share of Common Stock is entitled to one vote in elections of directors
and all other matters required or permitted to be submitted to a vote of the
stockholders. The holders of Class B Common Stock have no voting rights. Holders
of both Common Stock and Class B Common Stock are entitled to receive dividends,
when and if declared by the Board of Directors of the Company. The shares of
Class B Common Stock are convertible into the same number of shares of Common
Stock upon their dispostion in connection with the occurrence of certain events
including a sale of all or substantially all of the Common Stock of the Company;
a merger or consolidation of the

F-19
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. STOCKHOLDERS' EQUITY--(CONTINUED)

Company in which the stockholders of the Company receive cash and/or marketable
securities in exchange for their stock; and an underwritten public offering of
Common Stock of the Company.

Fair Value of Common Stock

Since the acquisition of the Company in October 1990, through June 28, 1995,
there was no public market for the Company's Common Stock. The fair value of the
Company's Common Stock was determined by the Board of Directors based primarily
on periodic valuations performed by an independent valuation company. On June
28, 1995, the Company's public offering was effective, and its Common Stock
began trading on June 29, 1995, on the Nasdaq. The fair value of the Company's
Common Stock has since been determined based on Nasdaq quotation systems.

Stockholders Agreement

At the time of the purchase of the Company in October 1990, certain members
of the Company's then senior management (the Management Group) and the outside
investors (the Investor Group) entered into a Stockholders Agreement. As
subsequently amended, the Stockholders Agreement required the Investor and
Management Groups to vote their shares to provide for a fourteen member Board of
Directors consisting of seven members designated by the Investor Group, four
members designated by the Management Group, and three members designated jointly
by both groups. The Stockholders Agreement terminated in accordance with its
terms following the 1995 offering, when at least 33% of the aggregate number of
the Company's outstanding shares of Common Stock were distributed publicly.

Investor Stock Purchase Agreement

An Investor Stock Purchase Agreement, also executed at the time of the
purchase of the Company in October 1990, provides the Company and members of the
Investor Group with the right of first refusal in the event any member of the
Investor Group desires to sell the shares purchased under the agreement, subject
to certain exceptions. The agreement also provides for anti-dilution, piggy-back
and demand registration rights. With the exception of the underwriters'
discount, most of the expenses incurred in connection with the exercise of such
registration rights by certain stockholders would be borne by the Company.

Common Stock Purchase

On May 27, 1994, the Company acquired 2,250,000 shares and 350,000 shares of
its outstanding Common Stock and Class B Common Stock, respectively, for its
then fair value of $14.00 per share from the Investor Group. Coincident with
this stock purchase, these common shares, as well as all previously acquired
treasury shares, were cancelled.

F-20
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. EQUITY PARTICIPATION PROGRAMS

Employee Stock Purchase Plans

The Company implemented an Employee Stock Purchase Plan in March 1993. The
Plan allowed participants to buy Common Stock at the fair market value through
payroll deductions. Each participating employee was able to purchase up to 26
shares of Common Stock per month at the fair market value per share. On various
occasions since inception of the Plan, the Company has acquired 282,072 shares
of its outstanding Common Stock at its then fair market value ranging from $8.00
through $17.25. During the years ended December 31, 1995, 1994 and 1993, the
Plan participants purchased 51,174, 127,120 and 78,229 shares for an average of
$16.17, $12.75 and $8.00 per share, respectively.

Effective July 1, 1995, the above plan was discontinued and replaced with
the 1995 Employee Stock Purchase Plan (the 1995 Plan). The 1995 Plan is a
qualified non-compensatory employee stock purchase plan which has reserved
750,000 shares of common stock for issuance under this plan. The 1995 Plan
allows all employees of the Company's domestic subsidiaries to purchase a
limited amount of common stock at a discount during the offering period of July
1, 1995 to June 30, 1996. The purchase price of the Company's stock is the
lesser of $15.725, which is 85% of the initial offer price of $18.50 per share
in the public offering, or 85% of the market value at the end of each month.
During 1995, participants in this plan purchased 317,699 shares at $15.725 per
share.

1990 Stock Option Plan

In 1990, the Company established a Stock Option Plan (the 1990 Plan) to
provide officers and key employees with up to 1,562,500 qualified or
non-qualified incentive stock options to purchase shares of Common Stock. The
1990 Plan provides that qualified incentive stock options (as defined in the
Internal Revenue Code) have an exercise price equal to the fair market value of
the Common Stock on the date of the option grant. Non-qualified incentive stock
options have exercise prices as determined by the Compensation Committee of the
Board of Directors. The 1990 Plan provides for adjustments in the number of
shares related to stock options and their respective exercise prices in the
event of stock dividends or stock splits, and for adjustments in the event that
the Company effects a recapitalization or other change in its capital structure.
Options granted pursuant to the 1990 Plan vest over periods ranging from one to
five years. All options pursuant to this plan have been granted. As of December
31, 1995, the Company had 1,068,846 shares of Common Stock reserved for issuance
upon exercise of this plan's remaining outstanding options and 41,314 shares of
Common Stock reserved for future option grants.

1994 Stock Option Plan

In 1994, the Company's Board of Directors reserved 1,000,000 shares of
Common Stock and established the 1994 Stock Option Plan to succeed the 1990
Plan. The continuation 1994 Plan has identical provisions as the predecessor
1990 Plan. At December 31, 1995, the Company had 208,950 shares of Common Stock
reserved for issuance upon exercise of outstanding options and 791,050 shares of
Common Stock reserved for future option grants.

Management Incentive Stock Purchase Program

In 1991, the Company established the Management Incentive Stock Purchase
Program (MIS Plan), which provides for the granting of up to 1,111,111
nonqualified options to purchase shares of Common Stock to certain senior
members of management. The option exercise price is $.01 per

F-21
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. EQUITY PARTICIPATION PROGRAMS--(CONTINUED)

share. Intended to serve as incentive compensation for management, a portion of
each option grant vested each year based on management's ability to meet defined
minimum performance criteria. The majority of remaining outstanding options
became fully vested on March 31, 1995 as the related performance criteria for
1994 was achieved. Upon option grant, the Company records deferred compensation
equal to the difference between the fair market value of the Company's Common
Stock on the date of grant and the option exercise price. The deferred
compensation is expensed over the vesting term of the underlying options. As of
December 31, 1995, the Company had 25,000 shares of Common Stock reserved for
issuance upon exercise of the outstanding options and 4,442 shares of Common
Stock reserved for future option grants.

Stock option activity pursuant to these plans has been as follows:
<TABLE>
<CAPTION>
MIS PLAN NON-MIS PLAN
-------------------------- ---------------------
EXERCISE PRICE EXERCISE PRICE
SHARES PER SHARE SHARES PER SHARE
-------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Balance,
January 1, 1993..................... 612,811 $.01 632,440 $4.00- $ 5.25
Granted............................. 25,000 .01 429,925 5.25- 8.00
Exercised........................... (506,147) .01 (102,310) 4.00- 5.25
Forfeited........................... (2,811) .01 (19,540) 4.00- 8.00
-------- ---------
Balance,
December 31, 1993................... 128,853 .01 940,515 4.00- 8.00
Granted............................. -- -- 471,050 8.00- 14.00
Exercised........................... (17,291) .01 (99,678) 4.00- 8.00
Forfeited........................... (20,208) .01 (95,589) 4.00- 12.00
-------- ---------
Balance,
December 31, 1994................... 91,354 .01 1,216,298 4.00- 14.00
Granted............................. 30,000 .01 392,950 14.00- 26.38
Exercised........................... (96,354) .01 (238,892) 4.00- 12.00
Forfeited........................... -- .01 (92,560) 5.25- 14.00
-------- ---------
Balance,
December 31, 1995................... 25,000 $.01 1,277,796 $4.00- $26.38
-------- ----- --------- ----------------
-------- ----- --------- ----------------
</TABLE>

At December 31, 1995, 629,177 options were exercisable under the 1990 Plan,
and no options were exercisable under the 1994 Plan or the MIS Plan. On February
23, 1996, the Company granted options to purchase an aggregate of 401,950 shares
of Common Stock under the 1990 and 1994 Plans to certain employees at an
exercise price equal to the fair value of $35.50 per share at that date.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards 123 (FAS 123), "Accounting for Stock-Based Compensation."
FAS 123 encourages, but does not require, companies to recognize compensation
expense for grants of stock, stock options, and other equity instruments to
employees based on new fair value accounting rules. Companies that choose not to
adopt the new accounting rules will continue to apply the existing rules, but
will be required to disclose in the footnotes to the financial statements the
pro forma net income and earnings per share as if the new rules had been
adopted. As permitted by FAS 123, BDM will adopt the new standard in 1996 and
will choose to continue the current accounting for

F-22
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. EQUITY PARTICIPATION PROGRAMS--(CONTINUED)

stock-based compensation. Beginning in 1996, the Company will disclose in the
footnotes to the financial statements the pro forma net income and earnings per
share calculated using the new accounting rules.

Directors' Stock Purchase Plan

Members of the Company's Board of Directors are eligible to receive their
compensation in the form of Common Stock in lieu of cash. During 1995, 1994 and
1993, the Company issued 7,369, 14,296 and 23,018 shares, respectively, of
Common Stock for this purpose. During 1995 and 1994, the Company purchased 6,298
and 13,750 shares, respectively, of its outstanding Common Stock for $14.00 per
share for use by this plan. As of December 31, 1995, the Company had 10,318
shares of Common Stock reserved for issuance upon the exercise of the board
members' option to receive compensation in this form.

13. RETIREMENT PLANS

The Company maintains a 401(k) plan covering substantially all full-time
employees of the Company's domestic subsidiaries. Employees may direct the
investment of their contributions among several mutual fund options. Employees
may contribute up to the maximum allowed by federal regulations, currently, 15%
of their monthly salary or a maximum of $9,240. The Company contributes an
amount equal to 25% of the first 4% of the employee's salary contributed to the
plan by the employee. For the years ended December 31, 1995, 1994 and 1993, the
Company's contribution was approximately $907,000, $842,000 and $719,000,
respectively. At the time of the Company's change in ownership in 1990,
employees were allowed a one-time option to purchase the Company's Common Stock
with balances in their plan. Effective July 1, 1995, the BDM Stock Fund became
an active fund option in BDM's 401(k) Savings Plan. A total of 303,661 common
shares were held by the participants of the plan as of December 31, 1995.

The Company also sponsors several other defined contribution plans for
substantially all of the employees of IABG. Participation in the plans is
voluntary; however, participants are required to make contributions to the plans
equal to 50% of the amount of the Company contribution. Company contributions
are based on percentages of the employees' monthly salary up to maximum monthly
benefits. The plans are fully funded and assets of the plans are invested in
insurance company annuities. The Company incurred $3.8 million, $3.5 million and
$423,000 in plan contribution expense for the years ended December 31, 1995,
1994 and in 1993 since the November 16, 1993 acquisition date, respectively.

The Company has a defined benefit pension plan (the Retirement Plan) and a
supplemental executive retirement plan (SERP) providing noncontributory
retirement benefits for eligible employees. Benefits are determined based upon
years of service and employee compensation. The Company's funding policy is to
contribute annually, at a minimum, amounts required by applicable laws and
regulations. Retirement Plan assets are invested principally in a group annuity
contract with an insurance company, as well as in a portfolio of diversified
equity securities and mutual funds. In addition, one of the Company's
subsidiaries, BDM Oklahoma, Inc. , has a defined benefit pension plan which
mirrors the Retirement Plan.

F-23
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. RETIREMENT PLANS--(CONTINUED)

The net periodic pension expense for these defined benefit plans included
the following components for the years ended December 31, (dollars in
thousands):

<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Service cost.................................................. $ 4,883 $ 4,975 $ 3,686
Interest cost on projected benefit obligation................. 5,153 5,752 4,385
Actual return on plan assets.................................. (11,978) (526) (5,864)
Net amortization and deferral................................. 7,681 (5,590) 521
-------- ------- -------
Net periodic pension expense.................................. $ 5,739 $ 4,611 $ 2,728
-------- ------- -------
-------- ------- -------
</TABLE>

The funded status of the Company's defined benefit plans as well as other
disclosures required by Statement of Financial Accounting Standard No.
87--Accounting for Employee Benefit Plans (FAS 87) were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------- --------------------
RETIREMENT RETIREMENT
PLAN SERP PLAN SERP
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Actuarial present value of vested benefit obligation... $ 64,635 $ 1,804 $ 66,516 $ 1,593
---------- ------- ---------- -------
---------- ------- ---------- -------
Actuarial present value of accumulated benefit
obligation........................................... $ 68,216 $ 1,804 $ 68,774 $ 1,607
---------- ------- ---------- -------
---------- ------- ---------- -------
Plan assets at fair value.............................. $ 65,539 $ -- $ 66,073 $ --
Actuarial present value of projected benefit
obligation........................................... (74,626) 1,896 (73,700) (1,794)
---------- ------- ---------- -------
Plan assets less than projected benefit obligation..... (9,087) (1,896) (7,627) (1,794)
Unrecognized prior service cost........................ 2,761 54 3,588 6
Unrecognized net gain (loss)........................... 783 84 (1,331) 140
Adjustment required to recognize minimum liability..... -- (46) -- --
---------- ------- ---------- -------
Accrued pension cost................................... $ (5,543) $(1,804) $ (5,370) $(1,648)
---------- ------- ---------- -------
---------- ------- ---------- -------
</TABLE>

The actuarial present values of the vested benefit obligations shown above
represent the amount to which employees are entitled based on the employees'
expected dates of separation or retirement. Assumptions, based on actual
historical results, used in accounting for the defined benefit plans were as
follows as of December 31,:

<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Discount rate for projected benefits............................... 7.75% 8.5% 7.5%
Average wage increases............................................. 4.0% 4.0% 4.0%
Expected long-term return on plan assets........................... 9.5% 10.0% 10.0%
</TABLE>

On January 1, 1995, the Company made a disbursement of $16.7 million to
fully settle certain benefits of the Retirement Plan with the purchase of an
insurance contract. This resulted in a net loss of $349,000 recognized in 1995.

The Company also maintains another defined benefit pension plan covering
nine past and present members of the management board of IABG. Benefits are
determined based on the members' years of service and compensation. The Company
had an accrued balance of $5.9 million and $5.7 million for this pension
obligation as of December 31, 1995 and 1994, respectively. The contribution
expense amounted to $345,000 in 1995, $554,000 in 1994, and $128,000 for the

F-24
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. RETIREMENT PLANS--(CONTINUED)

period of ownership in 1993. No additional pension disclosures required by FAS
87 have been provided since the majority of the members covered by the plan have
retired and the liability reflected in these financial statements for this plan
will not increase significantly in the future.

The Company maintains a self-insurance plan to cover the costs of certain
employee health benefits. As of December 31, 1995 and 1994, the estimated
balance accrued for the cost of incurred but unreported claims was approximately
$2 million. The Company's annual liability for claims expense is contractually
limited pursuant to an agreement with an insurance company. The actual claims
expense for 1995 did not exceed the contractual maximum.

14. TRANSACTIONS WITH RELATED PARTIES

The Chairman and Vice Chairman of the Company's Board of Directors are the
Chairman and a Managing Director, respectively, of Carlyle. The Company retains
Carlyle to provide certain advisory and consulting services for an annual fee of
$500,000 plus expenses. Total amounts incurred by the Company related to these
services for the years ended December 31, 1995, 1994 and 1993 were approximately
$506,000, $505,000 and $535,000, respectively.

Prior to its privatization by the German government in 1993, IVG was
majority owned by the German government (See Note 3). Contract revenue derived
by IABG from the German government and its ministries totaled $120.4 million and
$118.5 million, respectively, for the years ended December 31, 1995 and 1994 and
$16.3 million for the period from November 16, 1993 through December 31, 1993.
The total amount receivable from the German government at December 31, 1995 and
1994 was $10.5 million and $3.3 million, respectively.

IABG leases most of its facilities from IVG (a 20% owner of IABG). Total
rent expense incurred with IVG for the years ended December 31, 1995, 1994 and
1993 was $8.1 million, $7.3 million and $1.1 million, respectively. IABG earns a
market rate of interest on a related $5 million lease deposit with IVG. Interest
income earned during 1995 amounted to $254,000. Interest earned during 1994
since the installment payments of the lease deposit in 1994 totaled $20,000.

15. UNCONSOLIDATED AFFILIATES

The Company has ownership interests ranging from 42% to 50% in certain
unconsolidated joint ventures. The Company's investments in and advances to the
unconsolidated joint ventures, as well as the location of the ventures'
operations, are summarized as follows (dollars in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
OWNERSHIP AT ----------------
DECEMBER 31, 1995 1995 1994
----------------- ------ ------
<S> <C> <C> <C>
VBR, Turkey............................................ 50% $1,556 $1,880
AWV, Sultanate of Oman................................. 50% 2,063 1,793
Seavin, Egypt.......................................... 50% 1,153 1,174
Others................................................. 42% 450 346
------ ------
$5,222 $5,193
------ ------
------ ------
</TABLE>

F-25
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

15. UNCONSOLIDATED AFFILIATES--(CONTINUED)

Combined summarized financial information of all of the Company's joint
ventures was as follows as of December 31, or for the years then ended (dollars
in thousands):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Current assets.......................................................... $14,951 $14,943
Non-current assets...................................................... 966 775
Current liabilities..................................................... 6,169 5,181
Non-current liabilities................................................. 56 245
Revenue................................................................. 75,092 72,946
Gross profit............................................................ 4,545 4,663
Net income.............................................................. 2,995 3,681
</TABLE>

16. MAJOR CLIENTS AND GEOGRAPHIC OPERATIONS

Major Clients

Revenue from major clients was as follows for the years ended December 31,
(dollars in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
U.S. Government (including subcontract revenue from
government primes)...................................... $449,504 $376,980 $383,661
International defense agencies............................ 222,755 193,523 122,227
Other government agencies................................. 81,878 94,966 22,332
Commercial................................................ 135,837 108,780 30,072
-------- -------- --------
Total............................................... $889,974 $774,249 $558,292
-------- -------- --------
-------- -------- --------
</TABLE>

No contract individually represented more than 10% of total revenue in 1995
or 1994, while one contract individually represented more than 10% of total
revenue for the year ended December 31, 1993, totaling $74.8 million.

F-26
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

16. MAJOR CLIENTS AND GEOGRAPHIC OPERATIONS--(CONTINUED)

Geographic Operations

Revenue, operating profit and assets by geographic area of all consolidated
subsidiaries were as follows as of or for the years ended December 31, (dollars
in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenue:
United States........................................... $547,660 $438,474 $414,528
Europe.................................................. 216,738 201,418 32,940
Middle East............................................. 125,576 134,357 110,824
-------- -------- --------
Total............................................... $889,974 $774,249 $558,292
-------- -------- --------
-------- -------- --------
Operating profit:
United States........................................... $ 29,867 $ 16,559 $ 14,923
Europe.................................................. 1,838 2,064 2,965
Middle East............................................. 7,204 8,321 4,282
-------- -------- --------
Total............................................... $ 38,909 $ 26,944 $ 22,170
-------- -------- --------
-------- -------- --------
Assets:
United States........................................... $221,488 $209,983 $167,851
Europe.................................................. 127,009 103,582 96,240
Middle East............................................. 15,296 21,986 39,345
-------- -------- --------
Total............................................... $363,793 $335,551 $303,436
-------- -------- --------
-------- -------- --------
</TABLE>

Europe's results for 1995 include a one-time write off of $1.6 million for
goodwill discussed in Note 7.

17. COMMITMENTS AND CONTINGENCIES

Government Audits

Payments to the Company on United States or foreign government contracts are
subject to adjustments upon audit by various agencies of the respective
governments. Audits currently in progress are in varying stages of completion;
however, management does not expect the results of these audits, or audits
related to any operations prior to December 31, 1995, subsequently initiated, to
have a material effect on the Company's financial position, results of
operations, or liquidity.

Litigation and Claims

Environmental Matters

One of the Company's wholly owned subsidiaries was previously notified by
the United States Environmental Protection Agency (EPA) that is one of several
potentially responsible parties (PRPs) for remediation in connection with
asbestos present at two sites. The subsidiary, along with

F-27
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

17. COMMITMENTS AND CONTINGENCIES--(CONTINUED)

another PRP, entered into a consent decree with the EPA in 1992, by which the
subsidiary and the other PRP are obligated to reimburse the EPA for costs
incurred in its assessment and monitoring of approximately $1.6 million and to
undertake work to address the environmental exposure as defined in the consent
decree. The Company originally accrued $4.4 million which management believed to
be the best estimate of the liability for this claim. Amounts paid and charged
against this provision through 1995 totaled approximately $3 million. Management
believes that the remaining accrual for this contingency of $1.4 million is
sufficient to cover costs to be incurred related to the subsidiary's performance
pursuant to the consent decree.

Another of the Company's subsidiaries was previously notified by the
Massachusetts Department of Environmental Protection that it is also one of
several PRPs in an environmental matter arising as a result of work performed on
a contract with the U.S. Air Force. The U.S. Air Force reimbursed the company
for all costs incurred to date in connection with this matter. No costs were
incurred by the Company in 1995 or 1994 relative to this contingency. No accrual
has been recorded as of December 31, 1995 as the risk of loss to the Company is
considered to be remote, and the remaining potential amounts involved are
considered to be immaterial.

Lease Obligations

The Company leases office space and equipment under various operating lease
agreements. Leases for principal office space typically have terms of five to
twenty years and carry optional renewal periods of five to twenty years. Most
leases include provisions for periodic rent escalations based on changes in
various economic indices. Amounts representing aggregate rent expense on all
operating leases, excluding equipment rented for use on specific contracts and
reimbursed pursuant to the terms of those contracts, totalled $31.7 million,
$35.4 million and $23.9 million for the years ended December 31, 1995, 1994 and
1993, respectively.

Future minimum payments on non-cancellable operating leases were as follows
on December 31, 1995 (dollars in thousands):
<TABLE>
<CAPTION>
WHOLLY-OWNED
SUBSIDIARIES IABG
-------------------- --------------------
YEAR ENDING OFFICE OFFICE
DECEMBER 31, SPACE EQUIPMENT SPACE EQUIPMENT
- ----------- ------- --------- ------- ---------
<S> <C> <C> <C> <C>
1996.............................................. $17,866 $ 1,243 $ 9,633 $ 722
1997.............................................. 13,244 946 8,194 290
1998.............................................. 9,046 489 8,064 160
1999.............................................. 2,613 70 7,616 105
2000.............................................. 1,373 8 7,512 51
Thereafter...................................... 1,464 -- 31,209 --
------- --------- ------- ---------
Total......................................... $45,606 $ 2,756 $72,228 $ 1,328
------- --------- ------- ---------
------- --------- ------- ---------
</TABLE>

The Company's share of the future minimum lease commitments of IABG is 45%.
The remaining 55% commitment is the responsibility of the subsidiary's other
owners.

IABG is required to provide cash collateral of $6.4 million to the lessor
for its facilities which are leased through the year 2004. Approximately $4.8
million of this commitment was paid in 1994 and the remaining $1.6 million was
paid on November 16, 1995. The amount of the collateral balance will be reduced
by the landlord by $2.4 million prior to the end of the lease term in

F-28
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

17. COMMITMENTS AND CONTINGENCIES--(CONTINUED)

$600,000 increments paid every two years beginning on November 16, 1997. Cash on
deposit is interest-bearing and interest income will accrue at current market
rates payable quarterly.

After the termination of certain of the leases for operating facilities of
IABG, the Company is liable for costs to be incurred, cumulatively up to $7
million adjusted for inflationary changes in a specified economic index, for any
removal or repair of buildings and facilities deemed necessary by the lessor.
For any year that the related lease is extended beyond the year 2013, the
commitment is reduced by 1/10th per year to a minimum commitment of $1 million.
The Company's share of the reclamation costs would be 45%. No amounts have been
accrued for this contingency.

Sublease Commitments

Sublease rental income earned was $2.5 million, $4.4 million and $2.6
million during the years ended December 31, 1995, 1994 and 1993, respectively.
Future minimum payments on non-cancellable subleases were as follows as of
December 31, 1995 (dollars in thousands):

YEAR ENDING
DECEMBER 31,
- ------------
1996................................................... $1,327
1997................................................... 732
1998................................................... 441
1999................................................... 45
2000................................................... --
Thereafter............................................. --
------
Total................................................ $2,545
------
------

18. SELECTED QUARTERLY DATA (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA):
<TABLE>
<CAPTION>
1994
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue........................................ $165,163 $174,421 $195,477 $239,188
Operating profit............................... 5,557 5,761 7,347 8,279
Net income..................................... 2,908 3,005 3,100 4,065
Earnings per share............................. 0.24 0.26 0.31 0.41
<CAPTION>
1995
--------------------------------------------
SECOND
FIRST (1) THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue........................................ $191,901 $213,064 $215,900 $269,109
Operating profit............................... 9,905 8,790 9,339 10,875
Net income..................................... 3,334 3,870 5,291 5,897
Earnings per share............................. 0.33 0.38 0.40 0.44
Sale prices of Common stock:
High......................................... n/a 21 1/2 28 1/2 30 1/2
Low.......................................... n/a 19 7/8 20 1/4 23 3/4
</TABLE>

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

(1) Sale price of common stock commencing June 29, 1995.

F-29
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the U.S.
Underwriters named below, and each of such U.S. Underwriters, for whom Goldman,
Sachs & Co., Lehman Brothers Inc. and Oppenheimer & Co., Inc., are acting as
representatives, has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock set forth
opposite its name below:

NUMBER OF
SHARES
UNDERWRITER OF COMMON STOCK
----------- ---------------
Goldman, Sachs & Co. .........................................
Lehman Brothers Inc. .........................................
Oppenheimer & Co., Inc........................................

---------------
Total................................................... 2,240,000
---------------
---------------

Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The U.S Underwriters propose to offer the shares of Common Stock in part
directly to the public at the public offering price set forth on the cover page
of this Prospectus and in part to certain securities dealers at such price less
a concession of $ per share. The U.S. Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per share to certain brokers and
dealers. After the shares of Common Stock are released for sale to the public,
the offering price and other selling terms may from time to time be varied by
the representatives.

The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the International Offering (the "International Underwriters") providing for the
concurrent offer and sale of 560,000 shares of Common Stock in an international
offering outside of the United States. The offering price and aggregate
underwriting discounts and commissions per share for the two offerings are
identical. The closing of the offering made hereby is a condition to the closing
of the International Offering, and vice versa. The representatives of the
International Underwriters are Goldman Sachs International, Lehman Brothers
International (Europe) and Oppenheimer International Ltd.

This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including the shares initially sold in the
international offering, to persons located in the United States.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with

U-1
<PAGE>
the purchase is located in the United States. Each of the International
Underwriters has agreed pursuant to the Agreement Between that, as a part of the
distribution of the shares offered as a part of the International Offering, and
subject to certain exceptions, it will (i) not, directly or indirectly, offer,
sell or deliver shares of Common Stock (a) in the United States or to any U.S.
persons or (b) to any person who it believes intends to reoffer, resell or
deliver the shares in the United States or to any U.S. persons, and (ii) cause
any dealer to whom it may sell such shares at any concession to agree to observe
a similar restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.

The Carlyle Fund has granted the U.S. Underwriters an option exercisable for
30 days after the date of the Prospectus to purchase up to an aggregate of
336,000 additional shares of Common Stock solely to cover over-allotments, if
any. If the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
2,240,000 shares of Common Stock offered hereby. The Carlyle Fund has granted
the International Underwriters a similar option exercisable up to an aggregate
of 84,000 additional shares of Common Stock.

The Company, the Selling Stockholders and certain directors and executive
officers have agreed that during the period beginning from the date of this
Prospectus and continuing to and including the date 90 days after the date of
the Prospectus, not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities of the Company which are substantially
similar to the shares of Common Stock, including but not limited to securities
which are convertible into or exchangeable for, or represent the right to
receive, Common Stock or any such substantially similar securities (other than,
with respect to the Company, pursuant to employee stock option plans, employee
stock purchase plans, 401(k) plans or any other employee plans of similar
nature, including, without limitation, any such plans for the benefit of
directors or officers of the Company, which are described in this Prospectus or
in an acquisition in which the person or persons receiving the Common Stock or
substantially similar securities agree in writing to be bound by such clause)
without the prior written consent of the representatives, except for the shares
of Common Stock offered in connection with the concurrent U.S. and international
offerings.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.

U-2
<PAGE>
- --------------------------------------------- --------------------------------
- --------------------------------------------- --------------------------------

NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. 2,800,000 SHARES
THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER
THAN THE SECURITIES TO WHICH IT RELATES
OR ANY OFFER TO SELL OR THE SOLICITATION BDM INTERNATIONAL, INC.
OF AN OFFER TO BUY SUCH SECURITIES UNDER
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE COMMON STOCK
MADE HEREUNDER SHALL, UNDER ANY (PAR VALUE $.01 PER SHARE)
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.

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

TABLE OF CONTENTS

PAGE
----
Available Information................. 2 --------------
Prospectus Summary.................... 3 [LOGO]
Risk Factors.......................... 7 --------------
Use of Proceeds....................... 12
Price Range of Common Stock and
Dividend Policy..................... 12
Capitalization........................ 13
Selected Consolidated Financial
Information......................... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 22
Management............................ 30
Certain Transactions.................. 33 GOLDMAN, SACHS & CO.
Principal and Selling Stockholders.... 34
Description of Capital Stock.......... 36 LEHMAN BROTHERS
Validity of Common Stock.............. 38
Experts............................... 38 OPPENHEIMER & CO., INC.
Incorporation of Documents by
Reference........................... 38
Additional Information................ 39 REPRESENTATIVES OF THE
Index to Consolidated Financial UNDERWRITERS
Statements............................ F-1
Underwriting.......................... U-1
- --------------------------------------------- --------------------------------
- --------------------------------------------- --------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered which will be paid
solely by the Company (except for underwriting discounts and commissions on the
shares of Common Stock offered by the Selling Stockholders). All the amounts
shown are estimates, except the SEC registration fee, the NASD filing fee and
the Nasdaq National Market listing fee:

SEC Registration Fee.............................................. $43,164.66
NASD Filing Fees.................................................. *
Nasdaq National Market Listing Fee................................ *
Transfer Agent and Registrar Fees and Expenses.................... *
Printing and Engraving Expenses................................... *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... *
Blue Sky Fees and Expenses........................................ *
Miscellaneous Expenses............................................ *
----------
Total....................................................... $ *
----------
----------

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

* To be completed by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the DGCL empowers a Delaware corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation), by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise. A
corporation may, in advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expenses
(including attorneys' fees) incurred by any officer, director, employee or agent
in defending such action, provided that such person undertakes to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation. A corporation may indemnify such person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.

A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses (including attorneys' fees) which he actually and
reasonably incurred in connection therewith. The indemnification provided is not
deemed to be exclusive of any other rights to which an officer or director may
be entitled under any corporation's by-laws, agreement, vote or otherwise.

II-1
<PAGE>
In accordance with Section 145 of the DGCL, Section 13 of the By-laws
provides that the Company shall indemnify any director, officer or employee of
the Company entitled to indemnity under the DGCL to the fullest extent permitted
by the DGCL; provided, however, that the Company may not be permitted to
indemnify any person in connection with any proceeding initiated by such person,
unless such proceeding is authorized by a majority of the directors of the
Company. Article Eighth of the Certificate of Incorporation provides that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. If the DGCL is amended to authorize
further elimination or limitation of personal liability of directors, then the
liability of a director of the Company shall be eliminated or limited to the
fullest extent permitted by the DGCL, as so amended. Any repeal or modification
of Article Eighth of the Certificate of Incorporation will not adversely affect
any right or protection of a director of the Company existing at the time of
such repeal or modification.

Section 8 of the Underwriting Agreement, a form of which will be included in
Exhibit 1.1 to this Registration Statement, provides for indemnification of
directors and officers of the Company by the Underwriters against certain
liabilities, including certain liabilities under the Securities Act.

ITEM 16. EXHIBITS

II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.8 Agreement, dated November 16, 1993, among the Federal Republic of Germany,
Industrieanlagen-Betriebsgesellschaft mbH, BDM International, Inc.,
Industrieverwaltungsgesellschaft AG and IABG Holding GmbH.+++
10.9 Voting Rights Agreement, dated November 16, 1993, between
Industrieverwaltungsgesellschaft AG and BDM Europe BV.+++
10.10 1990 Stock Option Plan.+
10.11 Form of Management Incentive Stock Purchase Agreement.+
10.12 Form of Director Stock Purchase Plan Purchase Authorization.++++
10.13 BDM International, Inc. 401(k) Savings Plan.
10.14 The BDM Retirement Plan.
10.15 The BDM International, Inc. Supplemental Executive Retirement Plan, effective
December 26, 1984.+
10.16 BDM International, Inc. Defined Contribution Supplemental Executive Retirement
Plan, effective October 8, 1993.++++
10.17 The BDM Corporation Cash and Stock Incentive Compensation Plan.+
10.18 Letter Agreement, dated March 4, 1992, between BDM International, Inc. and Philip
A. Odeen.++++
10.19 1994 Stock Option Plan.+++++
11 Statement of Computation of Earnings Per Share.
21 Subsidiaries of BDM International, Inc.
24.1 Consent of Coopers & Lybrand.
24.2 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1).*
25.1 Power of Attorney of the Board of Directors (included on the signature page).
27 Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

+ Incorporated by reference to Registration Statement on Form S-1 (File No.
33-38405) of BDM Holdings, Inc. filed with the SEC on February 14, 1991.

++ Incorporated by reference to Current Report on Form 8-K (File No.
33-38405) of BDM International, Inc. filed with the SEC on March 13, 1992.

+++ Incorporated by reference to Amendment No. 1 to Current Report on Form
8-K/A (File No. 33-38405) of BDM International, Inc. filed with the SEC on
January 31, 1994.

++++ Incorporated by reference to Registration Statement on Form S-1 (File No.
33-77096) of BDM International, Inc. (the "Registration Statement") filed
with the SEC on March 30, 1994.

+++++ Incorporated by reference to the Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 000-23966) of BDM International, Inc.
filed with the SEC on March 31, 1995.

# Incorporated by reference to Amendment No. 1 to the Registration
Statement filed with the SEC on May 12, 1995.

## Incorporated by reference to Amendment No. 3 to the Registration
Statement filed with the SEC on June 20, 1995.

II-3
<PAGE>
ITEM 17. UNDERTAKINGS

(1) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriter to permit prompt delivery to each purchaser.

(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) 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.

(3) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Certificate of Incorporation, By-Laws, the
Underwriting Agreement 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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.

(4) The Registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.

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

(5) The undersigned registrant hereby undertakes:

(a) 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.

(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,

(b) 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.

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

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of McLean, Commonwealth of Virginia, on March 6, 1996.

BDM INTERNATIONAL, INC.

By /s/ PHILIP A. ODEEN
...................................
Name: Philip A. Odeen
Title: President and Chief Executive
Officer

KNOW ALL MEN BY THESE PRESENTS, each of the undersigned officers and
directors of BDM International, Inc. hereby severally constitutes and appoints
Philip A. Odeen and C. Thomas Faulders, III, each their attorney in fact for the
undersigned, in any and all capacities, each with full power of substitution, to
sign any amendments to this Registration Statement (including post-effective
amendments) and any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act, and to file the same with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact, or any of them, may lawfully do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PHILIP A. ODEEN President and Chief Executive March 6, 1996
.................................................. Officer, Director
Philip A. Odeen

/s/ C. THOMAS FAULDERS, III Executive Vice President, March 5, 1996
.................................................. Treasurer and Chief Financial
C. Thomas Faulders, III Officer

/s/ FRANK C. CARLUCCI Chairman of the Board of March 5, 1996
.................................................. Directors
Frank C. Carlucci

/s/ DR. JEANETTE GRASSELLI BROWN Director March 5, 1996
..................................................
Dr. Jeanette Grasselli Brown

/s/ WILLIAM E. CONWAY, JR. Vice Chairman and Director March 5, 1996
..................................................
William E. Conway, Jr.

/s/ NEIL GOLDSCHMIDT Director March 5, 1996
..................................................
Neil Goldschmidt

/s/ WALTER LEISLER KIEP Director March 5, 1996
..................................................
Walter Leisler Kiep
</TABLE>

II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DR. HANS MARK Director March 6, 1996
..................................................
Dr. Hans Mark

/s/ THOMAS G. RICKS Director March 5, 1996
..................................................
Thomas G. Ricks

/s/ JOHN M. SLOSAR Director March 6, 1996
..................................................
John M. Slosar

/s/ HELMUT SONNENFELDT Director March 5, 1996
..................................................
Helmut Sonnenfeldt

/s/ DR. WILLIAM E. SWEENEY, JR. Director March 5, 1996
..................................................
Dr. William E. Sweeney, Jr.

/s/ EARLE C. WILLIAMS Director March 5, 1996
..................................................
Earle C. Williams
</TABLE>

II-6
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Amended and Restated Certificate of Incorporation.++++
3.2 Amended and Restated By-Laws.++++
4.1 Specimen Common Stock certificate.*
4.2 Investor Stock Purchase Agreement, dated October 23, 1990, among BDM Holdings,
Inc., The Carlyle Partners Leveraged Capital Fund I, L.P., Equitable Partnership,
II, L.P., Equitable Deal Flow Fund, L.P., the Richard King Mellon Foundation.+
4.3 Amendment No. 1 to Investor Stock Purchase Agreement, dated May 31, 1995.++++
4.4 Form of Lock-up Agreement.*
5.1 Opinion of Willkie Farr & Gallagher.*
10.1 Transaction Agreement, dated October 2, 1990, among New BDM, Inc., BDM Holdings,
Inc., The Carlyle Group, L.P., Loral Corporation and Loral Aerospace Corporation.+
10.2 Amendment No. 1 to Transaction Agreement, dated October 23, 1990, New BDM, Inc.,
BDM Holdings, Inc., The Carlyle Group, L.P., Loral Corporation and Loral Aerospace
Corporation.+
10.3 Non-Competition Agreement, dated March 13, 1992, by and among the selling
shareholder, BDM Holdings, Inc. and Vinnell Corporation.++
10.4 Stock Purchase and Redemption Agreement, dated March 13, 1992, by and among the
selling shareholder, Vinnell Corporation and BDM Holdings, Inc.++
10.5 Subordinated Guaranty Agreement, dated March 13, 1992, by and among the selling
shareholder, BDM Holdings, Inc. and Vinnell Corporation.++
10.6 Consulting Agreement, dated March 13, 1992, among BDM Holdings, Inc., the selling
shareholder and Vinnell Corporation.++
10.7 Revolving Credit Agreement, dated as of September 7, 1995 among BDM International,
Inc., the Lenders party thereto, CoreStates Bank, N.A., as Co-Agent and The First
National Bank of Chicago as Agent.
10.8 Agreement, dated November 16, 1993, among the Federal Republic of Germany,
Industrieanlagen-Betriebsgesellschaft mbH, BDM International, Inc.,
Industrieverwaltungsgesellschaft AG and IABG Holding GmbH.+++
10.9 Voting Rights Agreement, dated November 16, 1993, between
Industrieverwaltungsgesellschaft AG and BDM Europe BV.+++
10.10 1990 Stock Option Plan.+
10.11 Form of Management Incentive Stock Purchase Agreement.+
10.12 Form of Director Stock Purchase Plan Purchase Authorization.++++
10.13 BDM International, Inc. 401(k) Savings Plan.
10.14 The BDM Retirement Plan.
10.15 The BDM International, Inc. Supplemental Executive Retirement Plan, effective
December 26, 1984.+
10.16 BDM International, Inc. Defined Contribution Supplemental Executive Retirement
Plan, effective October 8, 1993.++++
10.17 The BDM Corporation Cash and Stock Incentive Compensation Plan.+
10.18 Letter Agreement, dated March 4, 1992, between BDM International, Inc. and Philip
A. Odeen.++++
10.19 1994 Stock Option Plan.+++++
11 Statement of Computation of Earnings Per Share.
21 Subsidiaries of BDM International, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
24.1 Consent of Coopers & Lybrand.
24.2 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1).*
25.1 Power of Attorney of the Board of Directors (included on the signature page).
27 Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

+ Incorporated by reference to Registration Statement on Form S-1 (File No.
33-38405) of BDM Holdings, Inc. filed with the SEC on February 14, 1991.

++ Incorporated by reference to Current Report on Form 8-K (File No.
33-38405) of BDM International, Inc. filed with the SEC on March 13, 1992.

+++ Incorporated by reference to Amendment No. 1 to Current Report on Form
8-K/A (File No. 33-38405) of BDM International, Inc. filed with the SEC on
January 31, 1994.

++++ Incorporated by reference to Registration Statement on Form S-1 (File No.
33-77096) of BDM International, Inc. (the "Registration Statement") filed
with the SEC on March 30, 1994.

+++++ Incorporated by reference to the Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 000-23966) of BDM International, Inc.
filed with the SEC on March 31, 1995.

# Incorporated by reference to Amendment No. 1 to the Registration
Statement filed with the SEC on May 12, 1995.

## Incorporated by reference to Amendment No. 3 to the Registration
Statement filed with the SEC on June 20, 1995.

Exhibit 10.7

REVOLVING CREDIT AGREEMENT

by and among

BDM INTERNATIONAL, INC.,

THE LENDERS PARTY HERETO,

CORESTATES BANK, N.A.,

As Co-Agent

and

THE FIRST NATIONAL BANK OF CHICAGO,

As Agent

dated as of September 7, 1995

<PAGE>

TABLE OF CONTENTS

ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . . 14

2.1. Description of Facility . . . . . . . . . . . . . . . . 14
2.2. Availability of Facility . . . . . . . . . . . . . . . . 14
2.3. Committed Advances . . . . . . . . . . . . . . . . . . . 14

2.3.1. Commitment . . . . . . . . . . . . . . . . . . 14
2.3.2. Ratable Loans; Types of Advances . . . . . . . 14
2.3.3. Minimum Amount of Each Committed Advance . . . 14
2.3.4. Applicable Margin . . . . . . . . . . . . . . . 15
2.3.5. Method of Selecting Types and Interest Periods for
New Committed Advances . . . . . . . . . . . . 16
2.3.6. Conversion and Continuation of Outstanding
Advances . . . . . . . . . . . . . . . . . . 16

2.4. Competitive Bid Advances . . . . . . . . . . . . . . . . 17

2.4.1. Competitive Bid Option; Repayment of
Competitive Bid Advances . . . . . . . . . . . 17
2.4.2. Competitive Bid Quote Request . . . . . . . . . 17
2.4.3. Invitation for Competitive Bid Quotes . . . . . 18
2.4.4. Submission and Contents of Competitive Bid
Quotes . . . . . . . . . . . . . . . . . . . 18
2.4.5. Notice to Borrower . . . . . . . . . . . . . . 19
2.4.6. Acceptance and Notice by Borrower . . . . . . . 19
2.4.7. Allocation by the Agent . . . . . . . . . . . . 19
2.4.8. Administration Fee . . . . . . . . . . . . . . 20

2.5. Method of Borrowing . . . . . . . . . . . . . . . . . . 20
2.6. Fees . . . . . . . . . . . . . . . . . . . . . . . . 20

2.6.1. Commitment Fee . . . . . . . . . . . . . . . . 20
2.6.2. Facility Fee . . . . . . . . . . . . . . . . . 20
2.6.3. Agent Fees . . . . . . . . . . . . . . . . . . 20

2.7. Reductions in Aggregate Commitment; Principal
Payments . . . . . . . . . . . . . . . . . . . . . . . 21

2.7.1. Reductions in Aggregate Commitment . . . . . . 21
2.7.2. Principal Payments . . . . . . . . . . . . . . 21

2.8. Changes in Interest Rate. etc. . . . . . . . . . . . . . 21
2.9. Rates Applicable After Default . . . . . . . . . . . . . 21
2.10. Method of Payment . . . . . . . . . . . . . . . . . . . 22

2.10.1. General . . . . . . . . . . . . . . . . . . . . 22
2.10.2. Currency of Payment . . . . . . . . . . . . . . 22

<PAGE>

2.11. Notes; Telephonic Notices . . . . . . . . . . . . . . . 22
2.12. Interest Payment Dates; Interest and Fee Basis . . . . . 23
2.13. Notification by Agent . . . . . . . . . . . . . . . . . 23
2.14. Lending Installations . . . . . . . . . . . . . . . . . 23
2.15. Non-Receipt of Funds by the Agent . . . . . . . . . . . 23
2.16. Withholding Tax Exemption . . . . . . . . . . . . . . . 24
2.17. Change in Circumstances . . . . . . . . . . . . . . . . 24

2.17.1. Taxes . . . . . . . . . . . . . . . . . . . . . 24
2.17.2. Yield Protection . . . . . . . . . . . . . . . 25
2.17.3. Changes in Capital Adequacy Regulations . . . . 26
2.17.4. Availability of Types of Advances . . . . . . . 26
2.17.5. Funding Indemnification . . . . . . . . . . . . 26
2.17.6. Mitigation of Additional Costs;
Replacement of Lenders . . . . . . . . . . . 26
2.17.7. Lender Statements; Survival of Indemnity . . . 27

2.18. Market Disruption . . . . . . . . . . . . . . . . . . . 27

ARTICLE III THE LETTER OF CREDIT SUBFACILITY . . . . . . . . . . . . 28

3.1. Obligation to Issue . . . . . . . . . . . . . . . . . . 28
3.2. Types and Amounts . . . . . . . . . . . . . . . . . . . 28
3.3. Conditions . . . . . . . . . . . . . . . . . . . . . . . 28
3.4. Procedure for Issuance of Facility Letters of Credit . . 29
3.5. Reimbursement Obligations; Duties of Issuing Banks . . . 30
3.6. Participation . . . . . . . . . . . . . . . . . . . . . 31
3.7. Payment of Reimbursement Obligations . . . . . . . . . . 32
3.8. Compensation for Facility Letters of Credit . . . . . . 32
3.9. Letter of Credit Collateral Account . . . . . . . . . . 33

ARTICLE IV CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . 33

4.1. Initial Advance and Facility Letter of Credit . . . . . 33
4.2. Each Advance and Facility Letter of Credit . . . . . . . 35

ARTICLE V REPRESENTATIONS AND WARRANTIES OF BORROWER . . . . . . . . 35

5.1. Corporate Existence and Standing . . . . . . . . . . . . 35
5.2. Authorization and Validity . . . . . . . . . . . . . . . 35
5.3. No Conflict; Government Consent . . . . . . . . . . . . 35
5.4. Financial Statements . . . . . . . . . . . . . . . . . . 36
5.5. Material Adverse Change . . . . . . . . . . . . . . . . 36
5.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 36
5.7. Litigation and Contingent Obligations . . . . . . . . . 36
5.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 36
5.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . . 36
5.10. Accuracy of Information . . . . . . . . . . . . . . . . 37
5.11. Regulation U . . . . . . . . . . . . . . . . . . . . . . 37

<PAGE>

5.12. Material Agreements . . . . . . . . . . . . . . . . . . 37
5.13. Compliance With Laws . . . . . . . . . . . . . . . . . . 37
5.14. Ownership of Properties . . . . . . . . . . . . . . . . 37
5.15. Investment Company Act . . . . . . . . . . . . . . . . . 37
5.16. Public Utility Holding Company Act . . . . . . . . . . . 37
5.17. Subordinated Indebtedness . . . . . . . . . . . . . . . 37
5.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . 38
5.19. Solvency . . . . . . . . . . . . . . . . . . . . . . . . 38
5.20. Single Business Enterprise . . . . . . . . . . . . . . . 38

ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 39

6.1. Financial Reporting . . . . . . . . . . . . . . . . . . 39
6.2. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 40
6.3. Notice of Default . . . . . . . . . . . . . . . . . . . 40
6.4. Conduct of Business . . . . . . . . . . . . . . . . . . 40
6.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 40
6.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . 40
6.7. Compliance with Laws . . . . . . . . . . . . . . . . . . 41
6.8. Maintenance of Properties . . . . . . . . . . . . . . . 41
6.9. Inspection . . . . . . . . . . . . . . . . . . . . . . . 41
6.10. Dividends . . . . . . . . . . . . . . . . . . . . . . . 41
6.11. Indebtedness . . . . . . . . . . . . . . . . . . . . . . 41
6.12. Merger . . . . . . . . . . . . . . . . . . . . . . . . 42
6.13. Sale of Assets . . . . . . . . . . . . . . . . . . . . . 42
6.14. Affiliates . . . . . . . . . . . . . . . . . . . . . . . 42
6.15. Subordinated Indebtedness . . . . . . . . . . . . . . . 42
6.16. Investments and Acquisitions . . . . . . . . . . . . . . 42

6.16.1. Investments . . . . . . . . . . . . . . . . . . 42
6.16.2. Acquisitions . . . . . . . . . . . . . . . . . . 43

6.17. Liens . . . . . . . . . . . . . . . . . . . . . . . . 43
6.18 Financial Covenants - . . . . . . . . . . . . . . . . . 43

6.18.1. Debt to Total Capitalization . . . . . . . . . 44
6.18.2. Debt to EBITDA . . . . . . . . . . . . . . . . 44

ARTICLE VII DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . 44

ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES . . . . 46

8.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . 46
8.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . 46
8.3. Preservation of Rights . . . . . . . . . . . . . . . . . 47

<PAGE>

ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . 47

9.1. Survival of Representations . . . . . . . . . . . . . . 47
9.2. Governmental Regulation . . . . . . . . . . . . . . . . 47
9.3. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 48
9.4. Headings . . . . . . . . . . . . . . . . . . . . . . . . 48
9.5. Entire Agreement . . . . . . . . . . . . . . . . . . . . 48
9.6. Several Obligations; Benefits of this Agreement . . . . 48
9.7. Expenses; Indemnification . . . . . . . . . . . . . . . 48
9.8. Numbers of Documents . . . . . . . . . . . . . . . . . . 48
9.9. Accounting . . . . . . . . . . . . . . . . . . . . . . . 48
9.10. Severability of Provisions . . . . . . . . . . . . . . . 49
9.11. Nonliability of Lenders . . . . . . . . . . . . . . . . 49
9.12. Language . . . . . . . . . . . . . . . . . . . . . . . . 49
9.13. CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . 49
9.14. CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . 49
9.15. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . 49
9.16. Confidentiality . . . . . . . . . . . . . . . . . . . . 50

ARTICLE X THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . 50

10.1. Appointment . . . . . . . . . . . . . . . . . . . . . . 50
10.2. Powers . . . . . . . . . . . . . . . . . . . . . . . . 50
10.3. General Immunity . . . . . . . . . . . . . . . . . . . . 50
10.4. No Responsibility for Loans, Recitals, etc. . . . . . . 50
10.5. Action on Instructions of Lenders . . . . . . . . . . . 50
10.6. Employment of Agents and Counsel . . . . . . . . . . . . 51
10.7. Reliance on Documents; Counsel . . . . . . . . . . . . . 51
10.8. Agent's Reimbursement and Indemnification . . . . . . . 51
10.9. Rights as a Lender . . . . . . . . . . . . . . . . . . . 51
10.10.Lender Credit Decision . . . . . . . . . . . . . . . . . 51
10.11.Successor Agent . . . . . . . . . . . . . . . . . . . . 52

ARTICLE XI SETOFF; RATABLE PAYMENTS . . . . . . . . . . . . . . . . 52

11 1. Setoff . . . . . . . . . . . . . . . . . . . . . . . . 52
11.2. Ratable Payments . . . . . . . . . . . . . . . . . . . . 52

ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS . . . 53

12.1. Successors and Assigns . . . . . . . . . . . . . . . . . 53
12.2. Participations . . . . . . . . . . . . . . . . . . . . . 53

12.2.1. Permitted Participants; Effect . . . . . . . . 53
12.2.2. Voting Rights . . . . . . . . . . . . . . . . . 53
12.2.3. Benefit of Setoff . . . . . . . . . . . . . . . 54

12.3. Assignments . . . . . . . . . . . . . . . . . . . . . . 54

<PAGE>

12.3.1. Permitted Assignments . . . . . . . . . . . . . 54
12.3.2. Effect; Effective Date . . . . . . . . . . . . 54

12.4. Dissemination of Information . . . . . . . . . . . . . . 55
12.5. Tax Treatment . . . . . . . . . . . . . . . . . . . . . 55

ARTICLE XIII NOTICES . . . . . . . . . . . . . . . . . . . . . . . . 55

13.1. Giving Notice . . . . . . . . . . . . . . . . . . . . . 55
13.2. Change of Address . . . . . . . . . . . . . . . . . . . 55

ARTICLE XIV COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . 55

EXHIBITS AND SCHEDULES
----------------------

EXHIBIT "A-1" COMMITTED NOTE . . . . . . . . . . . . . . . . 59

EXHIBIT "A-2" COMPETITIVE BID NOTE . . . . . . . . . . . . . 61

EXHIBIT "B" COMPETITIVE BID QUOTE REQUEST . . . . . . . . . 63

EXHIBIT "C" INVITATION FOR COMPETITIVE BID QUOTES . . . . . 64

EXHIBIT "D" COMPETITIVE BID QUOTE . . . . . . . . . . . . . 65

EXHIBIT "E" FORM OF OPINION . . . . . . . . . . . . . . . . 67

EXHIBIT "F" LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION 69

EXHIBIT "G" COMPLIANCE CERTIFICATE . . . . . . . . . . . . 70

EXHIBIT "H" GUARANTY COUNTERPART . . . . . . . . . . . . . 73

EXHIBIT "I" ASSIGNMENT AGREEMENT . . . . . . . . . . . . . 75

SCHEDULE "1" PERCENTAGES . . . . . . . . . . . . . . . . . . 83

SCHEDULE "2" LENDING INSTALLATIONS . . . . . . . . . . . . . 84

SCHEDULE "3" LITIGATION . . . . . . . . . . . . . . . . . . 88

SCHEDULE "4" SUBSIDIARIES AND OTHER INVESTMENTS . . . . . . 89

SCHEDULE "5" INDEBTEDNESS AND LIENS . . . . . . . . . . . . 92

SCHEDULE "6" AFFILIATED TRANSACTIONS . . . . . . . . . . . . 93

SCHEDULE "7" EXISTING LETTERS OF CREDIT . . . . . . . . . . 94

<PAGE>

REVOLVING CREDIT AGREEMENT

This Agreement, dated as of September 7, 1995, is among BDM
International, Inc., a Delaware corporation, the Lenders and The First
National Bank of Chicago, as Agent. The parties hereto agree as follows:

ARTICLE I

DEFINITIONS
-----------

As used in this Agreement:

"Absolute Rate" means, with respect to a Loan made by a given Lender
for the relevant Absolute Rate Interest Period, the rate of interest per
annum (rounded to the nearest 1/100 of 1%) offered by such Lender and
accepted by the Borrower pursuant to Section 2.4.6.

"Absolute Rate Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Absolute Rate Loans made by some or all of
the Lenders to the Borrower at the same time and for the same Absolute Rate
Interest Period.

"Absolute Rate Auction" means a solicitation of Competitive Bid
Quotes setting forth Absolute Rates pursuant to Section 2.4.

"Absolute Rate Interest Period" means, with respect to an Absolute
Rate Advance or an Absolute Rate Loan, a period of not less than 7 and not
more than 180 days commencing on a Business Day selected by the Borrower
pursuant to this Agreement, but in no event extending beyond the
Termination Date. If such Absolute Rate Interest Period would end on a day
which is not a Business Day, such Absolute Rate Interest Period shall end
on the next succeeding Business Day.

"Absolute Rate Loan" means a Loan, denominated in Dollars, which
bears interest at an Absolute Rate.

"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which
the Borrower or any of its Subsidiaries (i) acquires (A) all or a
substantial part of the assets, (B) one or more manufacturing lines or (C)
a going business or division, of any Person whether through purchase of
assets, merger or otherwise or (ii) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of transactions)
control of at least 10% (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of
a contingency) or a 10% (by percentage or voting power) ownership interest
in any partnership or joint venture.

"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loans made by some or all of the Lenders to the
Borrower of the same Type (or on the same interest basis in the case of
Competitive Bid Advances) and, in the case of Eurocurrency Advances,
denominated in the same Eurocurrency and, in the case of Fixed Rate
Advances, for the same Interest Period and includes both a Committed
Advance and a Competitive Bid Advance.

<PAGE>

"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such
Person. A Person shall be deemed to control another Person if the
controlling Person owns 10% or more of any class of voting securities (or
other ownership interests) of the controlled Person or possesses, directly
or indirectly, the power to direct or cause the direction of the management
or policies of the controlled Person, whether through ownership of stock,
by contract or otherwise.

"Agent" means The First National Bank of Chicago in its capacity as
agent for the Lenders pursuant to Article X, and not in its individual
capacity as a Lender, and any successor Agent appointed pursuant to Article
X.

"Aggregate Available Commitment" means at any time the Aggregate
Commitment minus the Facility Letter of Credit Obligations.
-----

"Aggregate Commitment" means $150,000,000, as such amount may be
reduced from time to time pursuant to the terms hereof.

"Agreement" means this revolving credit agreement, as it may be
amended or modified and in effect from time to time.

"Agreement Accounting Principles" means generally accepted accounting
principles as in effect as of the date of this Agreement, applied in a
manner consistent with that used in preparing the financial statements
referred to in Section 5.4.

"Alternate Base Rate" means, for any day, a rate of interest per
annum equal to the higher of (i) the Corporate Base Rate for such day or
(ii) the sum of Federal Funds Effective Rate for such day plus 1/2% per
annum.

"Alternate Base Rate Advance" means an Advance, denominated in
Dollars, which bears interest at the Alternate Base Rate.

"Alternate Base Rate Loan" means a Loan, denominated in Dollars,
which bears interest at the Alternate Base Rate.

"Applicable Margin" means, at any date of determination thereof with
respect to any Eurocurrency Committed Advance, the commitment fees payable
pursuant to Section 2.6.1, the facility fees payable pursuant to Section
2.6.2 and Facility Letter of Credit Fees, the respective rates per annum
for such Eurocurrency Committed Advance, commitment fees, facility fees and
Facility Letter of Credit Fees calculated in accordance with the terms of
Section 2.3.4.

"Article" means an article of this Agreement unless another document
is specifically referenced.

"Authorized Officer" means the Chief Financial Officer or the
Controller of the Borrower or, solely for purposes of Article III, of any
Domestic Subsidiary, in any case acting singly.

"Borrower" means BDM International, Inc., a Delaware corporation, and
its successors and assigns.

<PAGE>

"Borrowing Date" means a date on which an Advance is made hereunder.

"Business Day" means (i) with respect to any borrowing, payment or
rate selection of Eurocurrency Advances, a day (other than a Saturday or
Sunday) on which banks generally are open in Chicago, New York and London
for the conduct of substantially all of their commercial lending activities
and on which dealings in United States dollars are carried on in the London
interbank market and (ii) for all other purposes, a day (other than a
Saturday or Sunday) on which banks generally are open in Chicago and New
York for the conduct of substantially all of their commercial lending
activities.

"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with Agreement Accounting Principles.

"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as
a liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.

"Change in Control" means the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 30% or more of the outstanding shares
of voting stock of the Borrower; provided however, that a Change in Control
-------- -------
shall not occur by virtue of the acquisition of voting stock by (a) the
Borrower's employee stock ownership plan, (b) the Carlyle Group, L.P. and
all Affiliates of the Carlyle Group, L.P. or (c) the Borrower's 401-K plan.

"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.

"Commercial Letter of Credit" means a commercial, documentary or
trade Letter of Credit issued by an Issuing Bank pursuant to Section 3.1.

"Commitment" means, for each Lender, the obligation of such Lender to
make Loans and participate in Facility Letters of Credit not exceeding an
amount equal to the product of (i) the then existing Aggregate Commitment
and (ii) the Percentage applicable to such Lender.

"Committed Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Committed Loans made by the Lenders to the
Borrower at the same time, of the same Type and, in the case of
Eurocurrency Committed Advances, denominated in the same Eurocurrency and
for the same Interest Period.

"Committed Borrowing Notice" is defined in Section 2.3.5.

"Committed Loan" means a Loan made by a Lender pursuant to Section
2.3.

"Committed Note" means a promissory note, in substantially the form
of Exhibit "A-1" hereto, duly executed by the Borrower and payable to the
order of a Lender in the amount of its Commitment, including any amendment,
modification, renewal or replacement of such promissory note.

"Competitive Bid Advance" means a Eurodollar Bid Rate Advance or an
Absolute Rate Advance.

<PAGE>

"Competitive Bid Acceptance Notice" is defined in Section 2.4.6.

"Competitive Bid Auction" means an Absolute Rate Auction or a
Eurodollar Auction.

"Competitive Bid Loan" means a Eurodollar Bid Rate Loan or an
Absolute Rate Loan, as the case may be.

"Competitive Bid Margin" means the margin above or below the
applicable Eurodollar Base Rate offered for a Eurodollar Bid Rate Loan,
expressed as a percentage (rounded to the nearest 1/100 of 1%) to be added
or subtracted from such Eurodollar Base Rate.

"Competitive Bid Note" means a promissory note in substantially the
form of Exhibit "A-2" hereto, with appropriate insertions, duly executed
and delivered to the Agent by the Borrower for the account of a Lender and
payable to the order of such Lender, including any amendment, modification,
renewal or replacement of such promissory note.

"Competitive Bid Quote" means a Competitive Bid Quote substantially
in the form of Exhibit "D" hereto completed and delivered by a Lender to
the Agent in accordance with Section 2.4.4.

"Competitive Bid Quote Request" means a Competitive Bid Quote Request
substantially in the form of Exhibit "B" hereto completed and delivered by
the Borrower to the Agent in accordance with Section 2.4.2.

"Condemnation" is defined in Section 7.8.

"Contingent Obligation" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses,
contingently agrees to purchase or provide funds for the payment of, or
otherwise becomes or is contingently liable upon, the obligation or
liability of any other Person (including but not limited to Financial
Guaranties), or agrees to maintain the net worth or working capital or
other financial condition of any other Person, or otherwise assures any
creditor of such other Person against loss, including, without limitation,
any comfort letter, operating agreement, take-or-pay contract or
application for a Letter of Credit.

"Conversion/Continuation Notice" is defined in Section 2.3.6(c).

"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Borrower or any, of its
Subsidiaries, are treated as a single employer under Section 414 of the
Code.

"Corporate Base Rate" means a rate per annum equal to the "corporate
base rate of interest" announced by First Chicago from time to time,
changing when and as said corporate base rate changes.

"Debt" of a Person means such Person's (i) obligations for borrowed
money, (ii) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary
course of such Person's business payable on terms customary in the trade),
(iii) obligations, whether or not assumed, secured by Liens or payable out
of the proceeds or production from property now or hereafter owned or
acquired by such Person, (iv) obligations which are evidenced by notes,

<PAGE>

acceptances, or other instruments, (v) Capitalized Lease Obligations, (vi)
Financial Guaranties and (vii) Standby Letters of Credit.

"Default" means an event described in Article VII, provided that any
--------
requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.

"Determination Date" means the last day of each fiscal quarter of the
Borrower and the date that each Permitted Acquisition described in clause
(ii) of such definition is consummated.

"Dollar" or "$" means United States Dollars.

"Dollar Equivalent" of a Foreign Currency Loan means the Dollar
equivalent of the amount of such Foreign Currency Loan, calculated on the
basis of the arithmetical mean of the buy and sell spot rates of exchange
of the Agent for such Foreign Currency on the London market at 11:00 a.m.
London time, two Business Days prior to the date on which such amount is to
be determined.

"Domestic Subsidiary" means any Subsidiary which is incorporated or
organized under the laws of the United States of America, any state thereof
or the District of Columbia.

"EBITDA" means, for any period, Net Income plus (a) to the extent
----
deducted in determining Net Income, the sum of interest expense, income tax
expense, depreciation expense and amortization expense, plus (b)
----
extraordinary or unusual losses or other losses not incurred in the
ordinary course of business included in the calculation of Net Income, plus
----
(c) any non-cash charge against Net Income required to be recognized in
connection with the issuance of capital stock to employees (whether upon
lapse of vesting restrictions, exercise of employee options or otherwise),
plus (d) any non-cash charge against Net Income required to be recognized
- ----
in connection with employee pension plans, minus (e) extraordinary or
-----
unusual gains or other gains not incurred in the ordinary course of
business included in the calculation of Net Income, all determined on a
consolidated basis for the Borrower and its Subsidiaries in accordance with
Agreement Accounting Principles.

"Effective Date" is defined in Section 4.1.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.

"Eurocurrency" means, subject to Section 2.18, (i) Dollars, (ii)
Australian dollars, Belgian francs, Canadian dollars, Deutsche marks, Dutch
guilders, european currency units, French francs, Hong Kong dollars,
Italian lira, Japanese yen, pounds sterling, Spanish pesetas, Swedish
kroner and Swiss francs, so long as any such currency is one (A) which is
freely transferable and convertible into Dollars and (B) in which deposits
are customarily offered to banks in the London interbank market, and (iii)
any other currency (A) which is freely transferable and convertible into
Dollars, (B) in which deposits are customarily offered to banks in the
London interbank market, (C) which the Borrower requests the Administrative
Agent to include as a Eurocurrency hereunder and (D) which is acceptable to
each Lender.

"Eurocurrency Advance" means a Eurocurrency Committed Advance or a
Eurodollar Bid Rate Advance, as applicable.

<PAGE>

"Eurocurrency Base Rate" means with respect to any Eurocurrency
Advance for the relevant Eurocurrency Interest Period, the rate determined
by the Agent to be the rate at which deposits in the applicable
Eurocurrency are offered by First Chicago to first-class banks in the
London interbank market at approximately 11 a.m. (London time) two Business
Days prior to the first day of such Eurocurrency Interest Period, in the
approximate amount of First Chicago's relevant Eurocurrency Loan, or, in
the case of a Eurodollar Bid Rate Advance, the amount of the Eurodollar Bid
Rate Advance requested by the Borrower, and having a maturity approximately
equal to such Eurocurrency Interest Period.

"Eurocurrency Committed Advance" means a Committed Advance which
bears interest at a Eurocurrency Rate requested by the Borrower pursuant to
Section 2.3, including, but not limited to, Eurodollar Committed Advances.

"Eurocurrency Committed Loan" means a Committed Loan which bears
interest at a Eurocurrency Rate requested by the Borrower pursuant to
Section 2.3, including but not limited to, Eurodollar Committed Loans.

"Eurocurrency Interest Period" means, with respect to a Eurocurrency
Advance, a period of one, two, three or six months commencing on a Business
Day selected by the Borrower pursuant to this Agreement. Such Eurocurrency
Interest Period shall end on (but exclude) the day which corresponds
numerically to such date one, two, three or six months thereafter;
provided, however, that if there is no such numerically corresponding day
- -------- -------
in such next, second, third or sixth succeeding month, such Eurocurrency
Interest Period shall end on the last Business Day of such next, second,
third or sixth succeeding month. If a Eurocurrency Interest Period would
otherwise end on a day which is not a Business Day, such Eurocurrency
Interest Period shall end on the next succeeding Business Day; provided,
--------
however, that if said next succeeding Business Day falls in a new calendar
- -------
month, such Eurocurrency Interest Period shall end on the immediately
preceding Business Day.

"Eurocurrency Loan" means a Eurocurrency Committed Loan or a
Eurodollar Bid Rate Loan, as applicable.

"Eurocurrency Rate" means, with respect to a Eurocurrency Committed
Advance for the relevant Eurocurrency Interest Period, the sum of (i) the
percentage indicated as the Applicable Margin for the Eurocurrency Rate
plus (ii) the quotient of (a) the Eurocurrency Base Rate applicable to such
- ----
Eurocurrency Interest Period, divided by (b) either (1) for any Eurodollar
Committed Advance, a number equal to one minus the Reserve Requirement
(expressed as a decimal) applicable to such Eurocurrency Interest Period or
(2) for any other Eurocurrency Committed Advance, the number one. The
Eurocurrency Rate shall be rounded to the next higher multiple of 1/16 of
1% if the rate is not such a multiple.

"Eurodollar Advance" means a Eurodollar Committed Advance or a
Eurodollar Bid Rate Advance.

"Eurodollar Auction" means a solicitation of Competitive Bid Quotes
setting forth Competitive Bid Margins pursuant to Section 2.4.

"Eurodollar Bid Rate" means, with respect to a Loan made by a given
Lender for the relevant Eurocurrency Interest Period, the sum of (i) the
Eurocurrency Base Rate and (ii) the Competitive Bid Margin offered by such
Lender and accepted by the Borrower pursuant to Section 2.4.6.

<PAGE>

"Eurodollar Bid Rate Advance" means a borrowing hereunder consisting
of the aggregate amount of the several Eurodollar Bid Rate Loans made by
some or all of the Lenders to the Borrower at the same time and for the
same Absolute Rate Interest Period.

"Eurodollar Bid Rate Loan" means a Competitive Bid Loan, denominated
in Dollars, which bears interest at a Eurodollar Bid Rate.

"Eurodollar Committed Advance" means a Committed Advance, denominated
in Dollars, which bears interest at the Eurocurrency Rate.

"Eurodollar Committed Loan" means a Committed Loan, denominated in
Dollars, which bears interest at the Eurocurrency Rate.

"Existing Letter of Credit" means any Letter of Credit issued by
either CoreStates Bank, N.A. or Signet Bank prior to the date of this
Agreement and listed on Schedule "7" attached hereto.

"Facility Letter of Credit" means a Commercial Letter of Credit or
Standby Letter of Credit that is either (i) issued by an Issuing Bank
pursuant to Section 3.1 or (ii) an Existing Letter of Credit.

"Facility Letter of Credit Fee" is defined in Section 3.8.

"Facility Letter of Credit Obligations" means, as at the time of
determination thereof, all liabilities, whether actual or contingent, of
the Borrower with respect to Facility Letters of Credit, including the sum
of (a) the Reimbursement Obligations and (b) the aggregate undrawn face
amount of the then outstanding Facility Letters of Credit.

"Federal Funds Effective Rate" means, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published for such day (or, if such
day is not a Business Day, for the immediately preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations at
approximately 10 a.m. (Chicago time) on such day on such transactions
received by the Agent from three Federal funds brokers of recognized
standing selected by the Agent in its sole discretion.

"Financial Guaranties" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses or
contingently agrees to provide funds for the repayment of money borrowed by
or advanced to or for the account of another Person.

"Financial Letter of Credit" means any Standby Letter of Credit which
represents an irrevocable obligation to the beneficiary on the part of the
Issuing Bank (i) to repay money borrowed by or advanced to or for the
account of the account party or (ii) to make any payment on account of any
indebtedness undertaken by the account party, in the event the account
party fails to fulfill its obligation to the beneficiary.

"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.

"Fixed Rate" means the Eurocurrency Rate, the Eurodollar Bid Rate or
the Absolute Rate.

<PAGE>

"Fixed Rate Advance" means an Advance which bears interest at a Fixed
Rate.

"Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate.

"Foreign Currency" means any Eurocurrency other than Dollars.

"Foreign Currency Advance" means any Advance in a Foreign Currency.

"Foreign Currency Loan" means any Loan in a Foreign Currency.

"Foreign Subsidiary" means any Subsidiary that is not a Domestic
Subsidiary.

"Funded Debt" means, without duplication, for the Borrower and its
Subsidiaries on a consolidated basis, all obligations for borrowed money
determined in accordance with Agreement Accounting Principles.

"Governmental Agency" means any government, foreign or domestic, or
any state, department or other political subdivision thereof, or
governmental body, agency, authority, department or commission (including
without limitation any taxing authority or political subdivision) or
instrumentality (including without limitation any court or tribunal)
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any corporation, partnership
or other entity, directly or indirectly owned by or subject to the control
of any of the foregoing.

"Guarantors" means all of the Subsidiaries as of the Effective Date
(other than the Specified Subsidiaries) and any New Subsidiaries formed
after the Effective Date, and their respective successors and assigns.

"Guaranty" means that certain Guaranty dated as of September 7, 1995
executed by the Guarantors in favor of the Agent, for the ratable benefit
of the Lenders, as it may be amended or modified and in effect from time to
time.

"IABG" means, collectively, IABG Holding GmbH, a German corporation,
Umwelttechnologie und Sanierungsmanagement GmbH, a German corporation, and
Industrieanlagen-Betriebsgesellschaft mbH, a stock company organized under
the laws of Germany.

"Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price
of Property or services (other than accounts payable arising in the
ordinary course of such Person's business payable on terms customary in the
trade), (iii) obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from property now or hereafter
owned or acquired by such Person, (iv) obligations which are evidenced by
notes, acceptances, or other instruments, (v) Capitalized Lease
Obligations, (vi) net liabilities under Rate Hedging Agreements and (vii)
Contingent Obligations.

"Interest Period" means a Eurocurrency Interest Period or an Absolute
Rate Interest Period.

<PAGE>

"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in
the ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in
the trade), deposit account or contribution of capital by such Person to
any other Person or any investment in, or purchase or other acquisition of,
the stock, partnership interests, notes, debentures or other securities of
any other Person made by such Person.

"Invitation for Competitive Bid Quotes" means an Invitation for
Competitive Bid Quotes substantially in the form of Exhibit "C" hereto,
completed and delivered by the Agent to the Lenders in accordance with
Section 2.4.3.

"Issuance Date" is defined in Section 3.4(a).

"Issuance Notice" is defined in Section 3.4(c).

"Issuing Bank" means, with respect to each (i) Existing Letter of
Credit, either CoreStates Bank, N.A. or Signet Bank, as the case may be and
(ii) other Facility Letter of Credit, First Chicago or such other Lender
selected by the Borrower or any Domestic Subsidiary to issue such Facility
Letter of Credit, so long as such Lender consents to such selection.

"Judgment Currency" is defined in Section 2.10.2.

"Lenders" means the lending institutions listed on the signature
pages of this Agreement and their respective successors and assigns.

"Lending Installation" means, with respect to a Lender or the Agent,
any office, branch, subsidiary or affiliate of such Lender or the Agent.

"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon
which such Person is an account party or for which such Person is in any
way liable.

"Letter of Credit Collateral Account" is defined in Section 3.9.

"Letter of Credit Request" is defined in Section 3.4(a).

"Level I Status" is defined in Section 2.3.4.

"Level II Status" is defined in Section 2.3.4.

"Level III Status" is defined in Section 2.3.4.

"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, the interest of a
vendor or lessor under any conditional sale, Capitalized Lease or other
title retention agreement).

"Loan" means, with respect to a Lender, such Lender's portion of any
Advance.

<PAGE>

"Loan Documents" means this Agreement and the Notes.

"Marketable Securities" means any Investment in any of the following:
(i) Short-term obligations of, or fully guaranteed by, the United States of
America; (ii) Commercial paper rated A-I or better by S&P or P-I or better
by Moody's; (iii) Demand deposit accounts maintained in the ordinary,
course of business; and (iv) Certificates of deposit issued by and time
deposits with commercial banks (whether domestic or foreign) having capital
and surplus in excess of $100,000,000.

"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of
operations, or prospects of the Borrower and its Subsidiaries taken as a
whole, (ii) the ability of the Borrower to perform its obligations under
the Loan Documents, or (iii) the validity or enforceability of any of the
Loan Documents or the rights or remedies of the Agent or the Lenders
thereunder.

"Moody's" means Moody's Investors Service, Inc.

"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer
is obligated to make contributions.

"Net Income" means, for any period, the net income (or loss) of the
Borrower and its Subsidiaries on a consolidated basis determined in
conformity with Agreement Accounting Principles.

"Net Worth" means the aggregate amount of common shareholders equity
as determined from a consolidated balance sheet of the Borrower and its
Subsidiaries, prepared in accordance with Agreement Accounting Principles.

"New Subsidiary" is defined in Section 6.16.2.

"Notes" means, collectively, the Committed Notes and the Competitive
Bid Notes.

"Notice of Assignment" is defined in Section 12.3.2.

"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, the Facility Letter of Credit Obligations, all
accrued and unpaid fees and all expenses, reimbursements, indemnities and
other obligations of the Borrower to the Lenders or to any Lender, the
Agent or any indemnified party hereunder arising under the Loan Documents.

"Participants" is defined in Section 12.2.1.

"Payment Date" means the last day of each March, June, September and
December.

"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.

"Percentage" means, for each Lender the percentage set forth opposite
its name on Schedule "1" attached hereto, as such percentage (and such
schedule) may be modified from time to time pursuant to the terms hereof,
including but not limited to the provisions of Section 12.3.2.

<PAGE>

"Performance Letter of Credit" means any Standby Letter of Credit
which represents an irrevocable obligation to the beneficiary on the part
of the Issuing Bank to make payment on account of any default by the
account party in the performance of a nonfinancial or commercial
obligation.

"Permitted Acquisition" means either an Acquisition: (i) for a
purchase price that does not exceed $500,000 made at a time when no Default
or Unmatured Default exists or would exist after giving effect to such
Acquisition or (ii) (a) for a purchase price that exceeds $500,000, (b)
made at a time when no Default or Unmatured Default exists or would exist
after giving effect to such Acquisition, (c) for which the board of
directors of the Person being acquired has approved the terms of the
Acquisition, (d) in the form of a merger (so long as the Borrower or a
Wholly-Owned Subsidiary is the survivor), purchase of stock or purchase of
assets and (e) for which the Borrower has first provided the Lenders with
(1) financial information with respect to the target of the Acquisition
(including historical and pro forma financial statements) and (2) a
description of the target of the Acquisition (which description confirms
that such entity is in the same line of business as the Borrower).

"Person" means any natural person, corporation, firm, joint venture,
limited liability company, partnership, association, enterprise, trust or
other entity or organization, or any government or political subdivision or
any agency, department or instrumentality thereof.

"Plan" means an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code as to which the Borrower or any member of the Controlled
Group may have any liability.

"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.

"Purchasers" is defined in Section 12.3.1.

"Rate Hedging Agreements" of a Person means (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or cross-
currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of
the foregoing.

"Rate Hedging Obligations" of a Person means any and all obligations
of such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions
and modifications thereof and substitutions therefor), under Rate Hedging
Agreements.

"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of
the Federal Reserve System.

<PAGE>

"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.

"Reimbursement Obligations" means, at any time, the aggregate of the
Obligations of the Borrower to the Lenders, the Issuing Banks and the Agent in
respect of all unreimbursed payments or disbursements made by the Lenders, the
Issuing Banks and the Agent under or in respect of the Facility Letters of
Credit.

"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any lease of Property having an original term (including any
required renewals or any renewals at the option of the lessor or lessee) of one
year or more, but does not include any amounts payable under Capitalized Leases
of such Person.

"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.

"Required Lenders" means Lenders in the aggregate having at least 66 2/3%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 66 2/3% of the sum of (i) the Dollar
Equivalent of the aggregate unpaid principal amount of the outstanding Advances
plus (ii) the Facility Letter of Credit Obligations.
- ----

"Reserve Requirement" means, with respect to a Eurocurrency Interest
Period, the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under Regulation D
on Eurocurrency liabilities.

"S&P" means Standard and Poor's Ratings Group.

"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.

"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.

"Specified Currency" is defined in Section 2.10.2.

"Specified Place" is defined in Section 2.10.2.

"Specified Subsidiaries" means, collectively, IABG, BDM Services Arabia,
Limited, a Saudi Arabian corporation, Saudi Strategic Services (S-3), a Saudi
Arabian corporation and Vinnell Arabia, a Saudi Arabian corporation.

<PAGE>

"Standby Letter of Credit" means an irrevocable standby Letter of Credit,
consisting of either a Financial Letter of Credit or a Performance Letter of
Credit.

"Status" means, at any date of determination thereof, whichever of Level I
Status, Level II Status or Level III Status exists at such date.

"Subordinated Indebtedness" of a Person means any Indebtedness of such
Person the payment of which is subordinated to payment of the Obligations to the
written satisfaction of the Required Lenders.

"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.

"Substantial Portion" means, with respect to the Property of the Borrower
and its Subsidiaries, Property which (i) represents more than 15% of the
consolidated assets of the Borrower and its Subsidiaries as would be shown in
the consolidated financial statements of the Borrower and its Subsidiaries as at
the beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 15% of the
consolidated net sales or of the consolidated net income of the Borrower and its
Subsidiaries as reflected in the financial statements referred to in clause (i)
above.

"Taxes" is defined in Section 2.17.1.

"Termination Date" means September 6, 2000.

"Transferee" is defined in Section 12.4.

"Type" means, with respect to any Loan or Advance, its nature as a
Alternate Base Rate Advance or Loan, Eurocurrency Committed Advance or Loan,
Eurodollar Bid Rate Advance or Loan or Absolute Rate Advance or Loan.

"Unfunded Liabilities" means the amount (if any) by which the present value
of all vested nonforfeitable benefits under all Single Employer Plans exceeds
the fair market value of all such Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans.

"Unmatured Default" means an event which would constitute a Default under
Article VII, except that the requirement to give notice and/or the lapse of any
grace period has not occurred.

"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (ii) any partnership, association, joint venture or similar
business organization 100% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.

<PAGE>

The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.

ARTICLE II

THE CREDITS
-----------

2.1. Description of Facility. Upon the terms and subject to the conditions
-----------------------
set forth in this Agreement, the Lenders hereby grant to the Borrower a
revolving credit facility pursuant to which: (i) each Lender severally agrees to
make Committed Loans to the Borrower in accordance with Section 2.3; and (ii)
each Lender may, in its sole discretion, make bids to make Competitive Bid Loans
to the Borrower in accordance with Section 2.4; provided that in no event may
the aggregate principal amount of all outstanding Advances exceed the Aggregate
Available Commitment.

2.2. Availability of Facility. Subject to all of the terms and conditions
------------------------
of this Agreement, the facility is available from the date of this Agreement to
the Termination Date, the Borrower may borrow, repay and reborrow at any time
prior to the Termination Date.

2.3. Committed Advances.
------------------

2.3.1. Commitment. From and including the date of this Agreement and
----------
prior to the Termination Date, each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to make Committed Loans to the Borrower
from time to time in amounts having a Dollar Equivalent not to exceed in the
aggregate at any one time outstanding (after giving effect to the intended use
of proceeds of any Advance used to repay any outstanding Reimbursement
Obligations) the amount of such Lender's Percentage of the Aggregate Available
Commitment. The Commitments to lend hereunder shall expire on the Termination
Date.

2.3.2. Ratable Loans; Types of Advances. Each Committed Advance
--------------------------------
hereunder shall consist of Loans made from the several Lenders ratably in
proportion to the ratio that their respective Commitments bear to the Aggregate
Commitment. The Committed Advances may be Alternate Base Rate Advances or
Eurocurrency Committed Advances, or a combination thereof, selected by the
Borrower in accordance with Sections 2.3.5 and 2.3.6; provided, however, that
(i) Eurocurrency Committed Advances denominated in a Foreign Currency may be
outstanding in not more than five Foreign Currencies at any one time and (ii)
there shall not be more than eight Eurocurrency Committed Advances outstanding
at any one time.

2.3.3. Minimum Amount of Each Committed Advance. Each Eurocurrency
----------------------------------------
Committed Advance shall be in an amount, having a Dollar Equivalent, of not less
than $2,000,000 (and in multiples of $100,000 if in excess thereof), and each
Alternate Base Rate Advance shall be in the minimum amount of $500,000 (and in
multiples of $100,000 if in excess thereof); provided, however, that (i) up to
five Eurocurrency Committed Advances in any twelve month period may be in an
amount, having a Dollar Equivalent, of less than $2,000,000 but not less than
$1,000,000 and (ii) any Alternate Base Rate Advance may be in the amount of the
unused Aggregate Available Commitment.

<PAGE>

2.3.4. Applicable Margin. The Applicable Margin set forth below with
-----------------
respect to each Eurocurrency Committed Advance and for commitment fees, facility
fees and Facility Letter of Credit Fees payable hereunder, shall be subject to
adjustment (upwards or downwards, as appropriate) based on the Borrower's Status
as at each Determination Date in accordance with the table set forth below. The
Borrower's Status as at each Determination Date shall be determined from the
then most recent annual, quarterly or pro forma financial statements of the
Borrower delivered by the Borrower to the Lenders with the compliance
certificate required pursuant to Section 6.1(iii) (collectively, the
"Financials"). The adjustment, if any, to the Applicable Margin shall take place
on, and be effective from and after, the fifth Business Day following the date
the Agent has received the Financials. In the event that the Borrower shall at
any time fail to furnish to the Lenders the Financials within the time
limitations specified by Section 6.1 or the definition of Permitted Acquisition,
as applicable, then the Borrower's Status shall be Level III Status from the
date of such failure until five Business Days after such Financials are so
delivered. Notwithstanding anything to the contrary contained herein, the
Borrower's Status on the Effective Date shall be Level I Status and shall be
adjusted as set forth above, effective five Business Days after the Agent
receives the Borrower's Financials for its quarter ending September 30, 1995.

MARGIN OR FEE LEVEL I LEVEL II LEVEL III
Applicable Margin -- .15% .25% .35%
Eurocurrency Rate
Facility Fee .10% .10% .10%
Commitment Fee 0 0 .02%
Standby Letter of Credit Fee .15% .25% .35%
(Financial)
Standby Letter of Credit Fee .10% .175% .25%
(Performance)
Commercial Letter of Credit .10% .175% .25%
Fee

For purposes of this Agreement, the Borrower's Status will be determined based
on the following definitions:

"Level I Status" exists at any date if, as of the last day of the then most
recently ended fiscal quarter of the Borrower, the ratio of (i) Funded Debt to
(ii) EBITDA (for the four quarter period ending as of such date of
determination) is less than or equal to 1.0 to 1.0.

"Level II Status" exists at any date if, as of the last day of the then
most recently ended fiscal quarter of the Borrower, (i) the requirements
necessary to achieve Level I Status shall not have been satisfied and (ii) the
ratio of (a) Funded Debt to (b) EBITDA (for the four quarter period ending as of
such date of determination) is less than or equal to 2.0 to 1.0.

"Level III Status" exists at any date if the requirements necessary to
achieve Level I Status or Level II Status shall not have been satisfied.

<PAGE>

2.3.5. Method of Selecting Types and Interest Periods for New
------------------------------------------------------
Committed Advances. The Borrower shall select the Type of Committed Advance and,
- ------------------
in the case of each Eurocurrency Committed Advance, the Eurocurrency and the
Eurocurrency Interest Period applicable thereto. The Borrower shall give the
Agent irrevocable notice (a "Committed Borrowing Notice") not later than 10:00
a.m. (Chicago time) on the Borrowing Date of each Alternate Base Rate Advance
and at least three Business Days before the Borrowing Date for each Eurocurrency
Committed Advance, specifying:

(i) the Borrowing Date, which shall be a Business Day, of such Committed
Advance,

(ii) the aggregate amount of such Committed Advance,

(iii) the Type of Committed Advance selected,

(iv) in the case of each Eurocurrency Committed Advance, the Eurocurrency
applicable thereto, and

(v) in the case of each Eurocurrency Committed Advance, the Interest
Period applicable thereto.

2.3.6. Conversion and Continuation of Outstanding Advances.
---------------------------------------------------

(a) Dollar Advances. Alternate Base Rate Advances shall
---------------
continue as Alternate Base Rate Advances unless and until such Alternate Base
Rate Advances are converted into Eurodollar Committed Advances. Each Eurodollar
Committed Advance shall continue as a Eurodollar Committed Advance until the end
of the then applicable Interest Period therefor, at which time such Eurodollar
Committed Advance shall be automatically converted into an Alternate Base Rate
Advance unless repaid or unless the Borrower shall have given the Agent a
Conversion/Continuation Notice in accordance with Section 2.3.6(c) requesting
that, at the end of such Interest Period, such Eurodollar Committed Advance
continue as a Eurodollar Committed Advance for the same or another Interest
Period. Subject to the terms of Section 2.3.3, the Borrower may elect from time
to time to convert all or any part of an Alternate Base Rate Advance into a
Eurodollar Committed Advance.

(b) Foreign Currency Advances. Each Foreign Currency Advance
-------------------------
shall continue as such until the end of the then applicable Interest Period
therefor, at which time such Foreign Currency Advance shall automatically be
deemed to be continued as a Foreign Currency Advance in the same amount and the
same Foreign Currency with a Eurocurrency Interest Period of one month
(commencing on the last day of the expiring Interest Period), unless repaid or
unless the Borrower shall have given the Agent a Conversion/Continuation Notice
in accordance with Section 2.3.6(c) requesting that, at the end of such Interest
Period, such Foreign Currency Advance continue as a Foreign Currency Advance in
the same Foreign Currency for the same or another Eurocurrency Interest Period.

(c) General Provisions. The Borrower shall give the Agent
------------------
irrevocable notice (a "Conversion/Continuation Notice") of each conversion of an
Alternate Base Rate Advance or continuation of a Eurocurrency Committed Advance
(as permitted by the provisions of Sections 2.3.6(a) and (b)) not later than
10:00 a.m. (Chicago time) at least three Business Days prior to the date of the
requested conversion or continuation, specifying:

<PAGE>

(i) the requested date which shall be a Business Day, of such conversion
or continuation;

(ii) the aggregate amount, Eurocurrency and Type of the Committed Advance
which is to be converted or continued; and

(iii) the amount and Type(s) of Committed Advance(s) into which such
Committed Advance is to be converted or continued and, in the case of
a conversion into or continuation of a Eurocurrency Committed Advance,
the duration of the Interest Period applicable thereto.

Notwithstanding the provisions of Sections 2.3.6(a) and (b), no Eurocurrency
Committed Advance shall be continued as or converted into a Eurocurrency
Committed Advance for a new Interest Period if the Dollar Equivalent of the
aggregate principal amount of Advances and Facility Letter of Credit Obligations
to be outstanding after giving effect to such continuation or conversion would
exceed 105% of the Aggregate Commitment.

2.4. Competitive Bid Advances.
------------------------

2.4.1. Competitive Bid Option; Repayment of Competitive Bid Advances.
-------------------------------------------------------------
In addition to Committed Advances pursuant to Section 2.3, but subject to all of
the terms and conditions of this Agreement (including, without limitation, the
limitation set forth in Section 2.1 as to the maximum aggregate principal amount
of all outstanding Advances hereunder), the Borrower may, as set forth in this
Section 2.4, request the Lenders, prior to the Termination Date, to make offers
to make Competitive Bid Advances to the Borrower. Each Lender may, but shall
have no obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.4. Competitive Bid Advances shall be evidenced by the Competitive Bid Notes.
Each Competitive Bid Advance shall be repaid in full by the Borrower on the last
day of the Interest Period applicable thereto.

2.4.2. Competitive Bid Quote Request. When the Borrower wishes to
-----------------------------
request offers to make Competitive Bid Loans under this Section 2.4, the
Borrower shall transmit to the Agent by telecopy a Competitive Bid Quote Request
so as to be received no later than (x) 10:00 a.m., Chicago time, at least five
Business Days prior to the Borrowing Date proposed therein, in the case of a
Eurodollar Auction, or (y) 9:00 a.m., Chicago time, at least two Business Days
prior to the Borrowing Date proposed therein, in the case of an Absolute Rate
Auction, specifying in accordance with all of the terms of this Agreement:

(i) the proposed Borrowing Date for the proposed Competitive Bid
Advance;

(ii) the aggregate principal amount of such Competitive Bid Advance;

(iii) whether the Competitive Bid Quotes requested are to set forth a
Competitive Bid Margin or an Absolute Rate, or both; and

(iv) the Interest Period applicable thereto.

<PAGE>
A Borrower may request offers to make Competitive Bid Loans for more than one
Interest Period and for a Eurodollar Auction and an Absolute Rate Auction in a
single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be
given within five Business Days (or upon reasonable prior notice to the Lenders,
such other number of days as the Borrower and the Agent may agree) of any other
Competitive Bid Quote Request. Each Competitive Bid Quote Request shall be in a
minimum amount of $5,000,000 or a larger multiple of $500,000. A Competitive Bid
Quote Request that does not conform substantially to the format of Exhibit "B"
hereto shall be rejected, and the Agent shall promptly notify the Borrower of
such rejection by telecopy.

2.4.3. Invitation for Competitive Bid Quotes. Promptly upon receipt of
-------------------------------------
a Competitive Bid Quote Request that is not rejected pursuant to Section 2.4.2,
the Agent shall send to each of the Lenders by telecopy an Invitation for
Competitive Bid Quotes which shall constitute an invitation by the Borrower to
each Lender to submit Competitive Bid Quotes offering to make the Competitive
Bid Loans to which such Competitive Bid Quote Request relates in accordance with
this Section 2.4.

2.4.4. Submission and Contents of Competitive Bid Quotes.
-------------------------------------------------

(a) Each Lender may, in its sole discretion, submit a Competitive Bid
Quote containing an offer or offers to make Competitive Bid Loans in response to
any Invitation for Competitive Bid Quotes. Each Competitive Bid Quote must
comply with the requirements of this Section 2.4.4 and must be submitted to the
Agent by telecopy at its offices specified in or pursuant to Article XIII not
later than (i) (A) 12:45 p.m., Chicago time, in the case of First Chicago and
(B) 1:00 p.m., Chicago time, in the case of each other Lender, at least four
Business Days prior to the proposed Borrowing Date in the case of a Eurodollar
Auction, or (ii) (A) 8:45 a.m., Chicago time, in the case of First Chicago and
(B) 9:00 a.m., Chicago time, in the case of each other Lender, on the proposed
Borrowing Date in the case of an Absolute Rate Auction (or, in any such case
upon reasonable prior notice to the Lenders, such other time and date as the
Borrower and the Agent may agree; provided that First Chicago shall always be
required to submit its Competitive Bid Quotes not less than fifteen minutes
prior to the other Lenders). Subject to Articles IV and VIII, any Competitive
Bid Quote so made shall be irrevocable except with the written consent of the
Agent given on the instructions of the Borrower.

(b) Each Competitive Bid Quote shall in any case specify: (i) the
proposed Borrowing Date, which shall be the same as that set forth in the
applicable Invitation for Competitive Bid Quotes; (ii) the principal amount of
the Competitive Bid Loan for which each such offer is being made, (1) which
principal amount may be greater than, less than or equal to the Commitment of
the quoting Lender, but in no case greater than the unutilized Aggregate
Available Commitment, (2) which principal amount must be at least $2,000,000 and
an integral multiple of $500,000, and (3) which principal amount may not exceed
the principal amount of Competitive Bid Loans for which offers were requested;
(iii) in the case of a Eurodollar Auction, the Competitive Bid Margin offered
for each such Competitive Bid Loan; (iv) the minimum or maximum amount, if any,
of the Competitive Bid Loan which may be accepted by the Borrower; (v) in the
case of an Absolute Rate Auction, the Absolute Rate offered for each such
Competitive Bid Loan; (vi) the applicable Interest Period; and (vii) the
identity of the quoting Lender.

(c) The Agent shall reject any Competitive Bid Quote that: (i) is not
substantially in the form of Exhibit "D" hereto or does not specify all of the
information required by Section 2.4.4(b); (ii) contains qualifying, conditional
or similar language, other than any such language contained in Exhibit "D"
hereto; (iii) proposes terms other than or in addition to those set forth in the
applicable Invitation for Competitive Bid Quotes; or (iv) arrives after the time
set forth in Section 2.4.4(a).

<PAGE>

(d) If any Competitive Bid Quote shall be rejected pursuant to Section
2.4.4(c), then the Agent shall notify the relevant Lender of such rejection as
soon as practicable.

2.4.5. Notice to Borrower. The Agent shall promptly notify the
------------------
Borrower of the terms (i) of any Competitive Bid Quote submitted by a Lender
that is in accordance with Section 2.4.4 and (ii) of any Competitive Bid Quote
that is in accordance with Section 2.4.4 and amends, modifies or is otherwise
inconsistent with a previous Competitive Bid Quote submitted by such Lender with
respect to the same Competitive Bid Quote Request. Any such subsequent
Competitive Bid Quote shall be disregarded by the Agent unless such subsequent
Competitive Bid Quote specifically states that it is submitted solely to correct
a manifest error in such former Competitive Bid Quote. The Agent's notice to the
Borrower shall specify the aggregate principal amount of Competitive Bid Loans
for which offers have been received for each Interest Period specified in the
related Competitive Bid Quote Request and the respective principal amounts and
Competitive Bid Margins or Absolute Rates, as the case may be, so offered.

2.4.6. Acceptance and Notice by Borrower. Subject to the receipt of
---------------------------------
the notice from the Agent referred to in Section 2.4.5, not later than (i) 10:00
a.m. (Chicago time) at least three Business Days prior to the proposed Borrowing
Date, in the case of a Eurodollar Auction or (ii) 10:00 a.m. (Chicago time) on
the proposed Borrowing Date, in the case of an Absolute Rate Auction, the
Borrower shall notify the Agent of the Borrower's acceptance or rejection of the
offers so notified to it pursuant to Section 2.4.5; provided, however, that the
failure by the Borrower to give such notice to the Agent shall be deemed to be a
rejection by the Borrower of all such offers. In the case of acceptance, such
notice (a "Competitive Bid Acceptance Notice") shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Borrower may accept or reject any Competitive Bid Quote in whole or in part
(subject to the terms of Section 2.4.4(b)(iv)); provided that:

(i) the aggregate principal amount of each Competitive Bid Advance may
not exceed the applicable amount set forth in the related Competitive Bid
Quote Request;

(ii) acceptance of offers may only be made on the basis of ascending
Competitive Bid Margins or Absolute Rates, as the case may be; and

(iii) the Borrower may not accept any offer of the type described in
Section 2.4.4(c) or that otherwise fails to comply with the requirements of
this Agreement for the purpose of obtaining a Competitive Bid Loan under
this Agreement.

2.4.7. Allocation by the Agent. If offers are made by two or more
-----------------------
Lenders with the same Competitive Bid Margins or Absolute Rate, as the case may
be, for a greater aggregate principal amount than the amount in respect of which
offers are permitted to be accepted for the related Interest Period, the
principal amount of Competitive Bid Loans in respect of which such offers are
accepted shall be allocated by the Agent among such Lenders as nearly as
possible (in such multiples as the Agent may deem appropriate) in proportion to
the aggregate principal amount of such offers; provided, however, that no Lender
shall be allocated a portion of any Competitive Bid Advance which is less than
the minimum amount which such Lender has indicated that it is willing to accept.
Allocations by the Agent of the amounts of Competitive Bid Loans shall be
conclusive in the absence of manifest error. The Agent shall promptly, but in
any event on the same Business Day in the case of Eurodollar Bid Rate Advances,
and by 11:00 a.m. (Chicago time) on the same Business Day in the case of
Absolute Rate Advances, notify

<PAGE>

each Lender of its receipt of a Competitive Bid Acceptance Notice and the
aggregate principal amount of each Competitive Bid Advance allocated to each
participating Lender.

2.4.8. Administration Fee. The Borrower hereby agrees to pay to the
------------------
Agent an administration fee for each Competitive Bid Auction in the amount
agreed to in the fee letter described in Section 2.6.3. Such administration fee
shall be payable in arrears on each Payment Date hereafter and on the
Termination Date (or such earlier date on which the Aggregate Commitment shall
terminate or be cancelled) for any period then ending for which such fee, if
any, shall not have been theretofore paid.

2.5. Method of Borrowing. In the case of Eurocurrency Advances (other than
-------------------
Eurodollar Advances), not later than 11:00 a.m. (London time) on each Borrowing
Date, each Lender shall make available its Eurocurrency Loan or Eurocurrency
Loans, in funds immediately available in London, in the Foreign Currency
selected by the Borrower, to the Agent at its London address specified in
Schedule "2" attached hereto or at any other Lending Installation of the Agent
specified in writing by the Agent. In the case of all other Advances, not later
than noon (Chicago time) on each Borrowing Date, each Lender shall make
available its Loan or Loans, in funds immediately available in Chicago, in
Dollars, to the Agent at its Chicago address specified in Schedule "2" or at any
other Lending Installation of the Agent specified in writing by the Agent. The
Agent will make the funds so received from the Lenders available to the Borrower
at the Agent's aforesaid address, as applicable.

2.6. Fees. In addition to the Facility Letter of Credit Fees and issuance
----
fees identified in Section 3.8, the Borrower agrees to pay the following fees:

2.6.1. Commitment Fee. The Borrower agrees to pay to the Agent for the
--------------
account of each Lender, for the period from the date hereof to and including the
Termination Date, a commitment fee equal to the product of (i) the daily
unborrowed portion of such Lender's Percentage of the Aggregate Available
Commitment times (ii) the percentage indicated for the commitment fee in Section
2.3.4, payable on each Payment Date hereafter and on the Termination Date. All
accrued commitment fees shall be payable on the effective date of any
termination of the obligations of the Lenders to make Loans and issue or
participate in Facility Letters of Credit hereunder. For purposes of calculating
the commitment fee hereunder, (i) the principal amount of each Foreign Currency
Advance shall be the Dollar Equivalent of such Foreign Currency Advance on the
first day of each Interest Period applicable to such Advance and (ii) the
principal amount of all outstanding Competitive Bid Advances shall not count as
usage.

2.6.2. Facility Fee. The Borrower agrees to pay to the Agent for the
------------
account of each Lender, for the period from the date hereof to and including the
Termination Date, a facility fee equal to the product of (i) the Aggregate
Commitment times (ii) the percentage indicated for the facility fee in Section
2.3.4, payable on each Payment Date hereafter and on the Termination Date. All
accrued facility fees shall be payable on the effective date of any termination
of the obligations of the Lenders to make Loans and issue or participate in
Facility Letters of Credit hereunder.

2.6.3. Agent Fees. The Borrower agrees to pay certain fees to the
----------
Agent on the dates and in the amounts set forth in that certain fee letter
between the Borrower and the Agent dated August 2, 1995, as it may be amended
from time to time.

<PAGE>

2.7. Reductions in Aggregate Commitment; Principal Payments.
------------------------------------------------------

2.7.1. Reductions in Aggregate Commitment. The Borrower may
----------------------------------
permanently reduce the Aggregate Commitment in whole, or in part ratably among
the Lenders in integral multiples of $5,000,000, upon at least three Business
Day's written notice to the Agent, which notice shall specify, the amount of any
such reduction; provided, however, that the amount of the Aggregate Commitment
may not be reduced below the sum of (i) the Dollar Equivalent of the aggregate
principal amount of the then outstanding Advances plus (ii) the Facility Letter
----
of Credit Obligations.

2.7.2. Principal Payments.
------------------

(a) Optional Payments. The Borrower may from time to time
-----------------
pay, without penalty or premium, all outstanding Alternate Base Rate Advances,
or, in a minimum aggregate amount of $200,000 or any integral multiple of
$100,000 in excess thereof, any portion of the outstanding Alternate Base Rate
Advances upon same day notice to the Agent. A Fixed Rate Advance may not be paid
prior to the last day of the applicable Interest Period.

(b) Currency Fluctuations. If at any time the Agent shall
---------------------
determine that the Dollar Equivalent (and the Agent shall calculate the Dollar
Equivalent upon the request of any Lender) of the aggregate principal amount of
outstanding Advances and Facility Letter of Credit Obligations is greater than
105% of the Aggregate Commitment then in effect, the Borrower shall, upon one
(1) Business Day's written notice to the Borrower from the Agent, prepay an
aggregate principal amount of Advances such that the Dollar Equivalent of the
aggregate principal amount of outstanding Advances and Facility Letter of Credit
Obligations does not exceed the Aggregate Commitment then in effect.

(c) Termination. The Borrower shall pay in full, on the
-----------
Termination Date, the entire unpaid principal amount of the Advances made to it
and repay (or cash collateralize) all other unpaid Obligations, all as more
fully set forth in Sections 3.9 and 8.1.

2.8. Changes in Interest Rate, etc. Each Alternate Base Rate Advance shall
-----------------------------
bear interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is converted from a Eurodollar
Committed Advance into an Alternate Base Rate Advance pursuant to Section
2.3.6(a) to but excluding the date it becomes due or is converted into a
Eurodollar Committed Advance pursuant to Section 2.3.6(a) hereof, at a rate per
annum equal to the Alternate Base Rate for such day. Changes in the rate of
interest on that portion of any Advance maintained as an Alternate Base Rate
Advance will take effect simultaneously with each change in the Alternate Base
Rate. Each Fixed Rate Advance shall bear interest from and including the first
day of the Interest Period applicable thereto to (but not including) the last
day of such Interest Period at the interest rate determined as applicable to
such Fixed Rate Advance. No Interest Period may end after the Termination Date.

2.9. Rates Applicable After Default. Notwithstanding anything to the
------------------------------
contrary contained in Section 2.3.5 or 2.3.6, during the continuance of a
Default or Unmatured Default no Advance may be made as, converted into or
continued as a Fixed Rate Advance (except with the consent of the Required
Lenders). During the continuance of a Default the Required Lenders may, at their
option, by notice to the Borrower (which notice may be revoked at the option of
the Required Lenders notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that (i)
each Fixed Rate Advance shall bear interest for the remainder of the applicable
Interest Period at

<PAGE>

the rate otherwise applicable to such Interest Period plus 2% per annum and (ii)
each Alternate Base Rate Advance shall bear interest at a rate per annum equal
to the Alternate Base Rate plus 2% per annum.

2.10. Method of Payment.
-----------------

2.10.1. General. All payments of the Obligations hereunder shall be
-------
made, without setoff, deduction, or counterclaim, in immediately available
funds, to the Agent, in Dollars, at the Agent's address for Dollars, as
specified in Schedule "2" hereto (or, in the case of payments of principal of
and interest on Foreign Currency Advances, in the Foreign Currency borrowed, at
the Agent's address for Foreign Currencies, as specified in Schedule "2"
hereto), or at any other Lending Installation of the Agent specified in writing
by the Agent to the Borrower, by noon (Chicago time or London time, as
applicable) on the date when due and shall be applied ratably by the Agent among
the Lenders. Each payment delivered to the Agent for the account of any Lender
shall be delivered promptly by the Agent to such Lender, in the same type of
funds that the Agent received, at such Lender's address for Dollars or for
Foreign Currencies, as specified in Schedule "2" hereto, or at any other Lending
Installation specified in a notice received by the Agent from such Lender. The
Agent is hereby authorized to charge the account of the Borrower maintained with
First Chicago for each payment of principal, interest and fees as it becomes due
hereunder.

2.10.2. Currency of Payment. All payments of principal of and interest
-------------------
on any Advance or payments of Reimbursement Obligations or any other Obligations
hereunder shall be made by the Borrower in the currency borrowed (the "Specified
Currency") in the manner and at the address (the "Specified Place") specified in
Section 2.10.1. Payment of the Obligations shall not be discharged by an amount
paid in another currency or in another place, whether pursuant to a judgment or
otherwise, to the extent that the amount so paid on conversion to the Specified
Currency and transfer to the Specified Place under normal banking procedures
does not yield the amount of the Specified Currency at the Specified Place due
hereunder. If, for the purpose of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in the Specified Currency into another
currency (the "Judgment Currency"), the rate of exchange which shall be applied
shall be that at which in accordance with normal banking procedures the Agent
could purchase the Specified Currency with that amount of the Judgment Currency
on the Business Day next preceding that on which such judgment is rendered. The
obligation of the Borrower in respect of any such sum due from it to the Agent
or any Lender hereunder (an "Entitled Person") shall, notwithstanding the rate
of exchange actually applied in rendering such judgment, be discharged only to
the extent that on the Business Day following receipt by such Entitled Person of
any sum adjudged to be due hereunder or under the Notes in the Judgment
Currency, such Entitled Person may in accordance with normal banking procedures
purchase and transfer to the Specified Place the Specified Currency with the
amount of the Judgment Currency so adjudged to be due; and the Borrower hereby,
as a separate Obligation and notwithstanding any such judgment, agrees to
indemnify such Entitled Person against, and to pay such Entitled Person on
demand, in the Specified Currency, any difference between the sum originally due
to such Entitled Person in the Specified Currency and the amount of the
Specified Currency so purchased and transferred.

2.11. Notes; Telephonic Notices. Each Lender is hereby authorized to record
-------------------------
the principal amount of each of its Loans and each repayment on the schedule
attached to its Notes; provided, however, that the failure to so record shall
not affect the Borrower's obligations under such Notes. The Borrower hereby
authorizes the Lenders and the Agent to extend, convert or continue Advances,
effect selections of Types of Advances and to transfer funds, and the Issuing
Bank to issue Facility Letters of Credit, based on telephonic notices made by
any person or persons the Agent or any Lender in good faith believes to

<PAGE>
be acting on behalf of the Borrower (or, for the issuance of Facility Letters of
Credit only, any Domestic Subsidiary). The Borrower (or such Domestic
Subsidiary) agrees to deliver promptly to the Agent a written confirmation, if
such confirmation is requested by the Agent or any Lender, of each telephonic
notice signed by any of its Authorized Officers. If the written confirmation
differs in any material respect from the action taken by the Agent and the
Lenders, the records of the Agent and the Lenders shall govern absent manifest
error.

2.12. Interest Payment Dates; Interest and Fee Basis. Interest on each
----------------------------------------------
Alternate Base Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, on any date on which
the Alternate Base Rate Advance is prepaid due to acceleration and at maturity.
Interest accrued on each Fixed Rate Advance shall be payable on the last day of
its applicable Interest Period, on any date on which the Fixed Rate Advance is
prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued
on each Fixed Rate Advance having an Interest Period longer than three months
shall also be payable on the last day of each three-month interval during such
Interest Period. Interest and fees shall be calculated for actual days elapsed
on the basis of a 360-day year. Interest shall be payable for the day an Advance
is made but not for the day of any payment on the amount paid if payment is
received prior to noon (Chicago time or London time, as applicable) at the place
of payment. If any payment of principal of or interest on an Advance shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.

2.13. Notification by Agent. Promptly after receipt thereof, the Agent will
---------------------
notify each Lender of the contents of each Aggregate Commitment reduction
notice, Committed Borrowing Notice, Competitive Bid Acceptance Notice,
Conversion/Continuation Notice, Letter of Credit Request, Issuance Notice and
repayment notice received by it hereunder. The Agent will notify each Lender of
the interest rate applicable to each Fixed Rate Advance promptly in writing upon
determination of such interest rate and will give each Lender prompt written
notice of each change in the Alternate Base Rate.

2.14. Lending Installations. Each Lender may book its Loans at any Lending
---------------------
Installation selected by such Lender and may change its Lending Installation
from time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Notes shall be deemed held by each Lender for the benefit
of such Lending Installation. Each Lender may, by written or telex notice to the
Agent and the Borrower, designate a Lending Installation through which Loans
will be made by it and for whose account Loan payments are to be made.

2.15. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender,
---------------------------------
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Committed Loan or (ii) in the case of the Borrower, a payment of
principal, interest or fees to the Agent for the account of the Lenders, that it
does not intend to make such payment, the Agent may assume that such payment has
been made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (ii) in the case of payment by the
Borrower, the interest rate applicable to the relevant Loan.

<PAGE>

2.16. Withholding Tax Exemption. At least five Business Days prior to the
-------------------------
first date on which interest or fees are payable hereunder for the account of
any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each of
the Borrower and the Agent two duly completed copies of United States Internal
Revenue Service Form 1101 or 4224, certifying in either case that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes. Each Lender
which so delivers a Form 1001 or 4224 further undertakes to deliver to each of
the Borrower and the Agent two additional copies of such form (or a successor
form) on or before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrower or the Agent, in
each case certifying that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender advises the Borrower and the Agent that
it is not capable of receiving payments without any deduction or withholding of
United States federal income tax.

2.17. Change in Circumstances.
-----------------------

2.17.1. Taxes.
-----

(a) Payments to be Free and Clear. All sums payable by the
-----------------------------
Borrower whether in respect of principal, interest, fees or otherwise shall be
paid without deduction for any present and future taxes, levies, imposts,
deductions, charges or withholdings imposed by any country, any Governmental
Agency thereof or therein, any jurisdiction from which any or all such payments
are made and any political subdivision or taxing authority thereof or therein
(collectively, "Taxes"), which amounts shall be paid by the Borrower as provided
in Section 2.17.1 (b). The Borrower will pay each Lender the amounts necessary
such that the net amount of the principal, interest, fees or other sums received
and retained by each Lender is not less than the amount payable under this
Agreement.

(b) Grossing-up of Payments. If: (a) the Borrower or any other
-----------------------
Person is required by law to make any deduction or withholding on account of any
such Tax or other amount from any sum paid or expressed to be payable by the
Borrower to any Lender under this Agreement; or (b) any party to this Agreement
(or any Person on its behalf) other than the Borrower is required by law to make
any deduction or withholding from, or (other than on account of tax on the
overall net income of that party) any payment on or calculated by reference to
the amount of, any such sum received or receivable by any Lender under this
Agreement:

(i) the Borrower shall notify the Agent of any such requirement or
any change in any such requirement as soon as the Borrower
becomes aware of it;

(ii) the Borrower shall pay any such Tax or other amount before the
date on which penalties attached thereto become due and payable,
such payment to be made (if the liability to pay is imposed on
the Borrower) for its own account or (if that

<PAGE>

liability is imposed on any party to this Agreement) on behalf of
and in the name of that party;

(iii) the sum payable by the Borrower in respect of which the relevant
deduction, withholding or payment is required shall (except, in
the case of any such payment, to the extent that the amount
thereof is not ascertainable when that sum is paid) be increased
to the extent necessary to ensure that, after the making of that
deduction, withholding or payment, that party receives on the due
date and retains (free from any liability in respect of any such
deduction, withholding or payment) a sum equal to that which it
would have received and so retained had no such deduction,
withholding or payment been required or made; and

(iv) within thirty (30) days after payment of any sum from which the
Borrower is required by law to make any deduction or withholding,
and within thirty (30) days after the due date of payment of any
Tax or other amount which it is required by Section 2.17.1(b)(ii)
to pay, it shall deliver to the Agent all such certified
documents and other evidence as to the making of such deduction,
withholding or payment as (a) are satisfactory to other affected
parties as proof of such deduction, withholding or payment and of
the remittance thereof to the relevant taxing or other authority
and (b) are required by any such party to enable it to claim a
tax credit with respect to such deduction, withholding or
payment.

2.17.2. Yield Protection. If the adoption or promulgation, on or after
----------------
the date hereof, of any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law), or any change, on or after the date hereof, in the interpretation thereof,
or the compliance of any Lender with any such adoption, promulgation or change
in interpretation,

(i) subjects any Lender or any applicable Lending Installation to any tax,
duty, charge or withholding on or from payments due from the Borrower
(excluding United States federal taxation of the overall net income of
any Lender or applicable Lending Installation), or changes the basis
of taxation of payments to any Lender in respect of its Loans, its
interest in the Facility Letters of Credit or other amounts due it
hereunder, or

(ii) imposes, increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by,
any Lender or any applicable Lending Installation (other than reserves
and assessments taken into account in determining the interest rate
applicable to Fixed Rate Advances), or

(iii) imposes any other condition the result of which is to increase the
cost to any Lender or any applicable Lending Installation of making,
funding or maintaining loans or issuing letters of credit or reduces
any amount receivable by any Lender or any applicable Lending
Installation in connection with loans or letters of credit, or
requires any Lender or any applicable Lending Installation to make any
payment calculated by reference to the amount of loans held, letters
of credit issued or participated in or interest received by it by an
amount deemed material by such Lender,

<PAGE>

then, within 15 days of demand by such Lender, the Borrower shall compensate
such Lender for that portion of such increased expense incurred or reduction in
an amount received which such Lender reasonably determines is attributable to
making, funding and maintaining its Loans, its interest in the Facility Letters
of Credit, and its Commitment.

2.17.3. Changes in Capital Adequacy Regulations. If a Lender
---------------------------------------
determines the amount of capital required or expected to be maintained by such
Lender, any Lending Installation of such Lender or any corporation controlling
such Lender is increased as a result of a Change, then, within 15 days of demand
by such Lender, the Borrower shall pay such Lender the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender determines is attributable to this
Agreement, its Loans, its interest in the Facility Letters of Credit, or its
obligation to make Loans, participate in or issue Facility Letters of Credit
hereunder (after taking into account such Lender's policies as to capital
adequacy). "Change" means (i) any change after the date of this Agreement in
the Risk-Based Capital Guidelines or (ii) any adoption of or change in any
other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of
law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any Lending Installation
or any corporation controlling any Lender. "Risk-Based Capital Guidelines"
means (i) the risk-based capital guidelines in effect in the United States on
the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory authorities outside
the United States implementing the July 1988 report of the Basle Committee on
Banking Regulation and Supervisory Practices entitled "International
Convergence of Capital Measurements and Capital Standards," including
transition rules, and any amendments to such regulations adopted prior to the
date of this Agreement.

2.17.4. Availability of Types of Advances. If any Lender determines
----------------------------------
that maintenance of any of its Eurocurrency Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, the Agent shall suspend the availability
of the affected Type of Advance and require any Fixed Rate Advances of the
affected Type to be repaid; or if the Required Lenders determine that (i)
deposits of a type or maturity appropriate to match fund Fixed Rate Advances are
not available, the Agent shall suspend the availability of the affected Type of
Advance with respect to any Fixed Rate Advances made after the date of any such
determination, or (ii) an interest rate applicable to a Type of Advance does not
accurately reflect the cost of making a Fixed Rate Advance of such Type, then,
if for any reason whatsoever the provisions of Section 2.17.2 are inapplicable,
the Agent shall suspend the availability of the affected Type of Advance with
respect to any Fixed Rate Advances made after the date of any such
determination.

2.17.5. Funding Indemnification. If any payment of a Fixed Rate
-----------------------
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or a Fixed
Rate Advance is not made on the date specified by the Borrower for any reason
other than default by the Lenders, the Borrower will indemnify each Lender for
any loss or cost (including lost profits) incurred by it resulting therefrom,
including, without limitation, any loss or cost in liquidating or employing
deposits acquired to fund or maintain the Fixed Rate Advance.

2.17.6. Mitigation Of Additional Costs; Replacement of Lenders. If,
------------------------------------------------------
in respect of any Lender, circumstances arise which result in:

(i) an increase in the liability of the Borrower to such Lender under
Section 2.17.1, 2.17.2 or 2.17.3,

<PAGE>

(ii) the unavailability of a Type of Committed Advance under Section
2.17.4, or

(iii) a Lender being incapable of receiving payments without deduction or
withholding of United States federal income tax;

then, without in any way limiting, reducing or otherwise qualifying the
Borrower's obligations under any of the Sections referred to above in this
Section 2.17.6, such Lender shall promptly upon becoming aware of such
circumstances notify the Agent thereof and such Lender shall, in consultation
with the Agent and the Borrower and to the extent that it can do so without
disadvantaging itself, take such reasonable steps as may be reasonably open to
it to mitigate the effects of such circumstances (including, without limitation,
the designation of an alternate Lending Installation or the transfer of its
Loans to another Lending Installation). If and so long as a Lender has been
unable to take, or has not taken, steps acceptable to the Borrower to mitigate
the effect of the circumstances in question, such Lender shall be obliged, at
the request of the Borrower, to assign all its rights and obligations hereunder
to another Person nominated by the Borrower with the approval of the Agent
(which shall not be unreasonably withheld) and willing to participate in the
facility in place of such Lender; provided that such Person satisfies all of the
requirements of this Agreement including, but not limited to, providing the
forms required by Sections 2.16 and 12.3.2. Notwithstanding any such assignment,
the obligations of the Borrower under Sections 2.17.1, 2.17.2, 2.17.3 and 9.7
shall survive any such assignment and be enforceable by such Lender.

2.17.7. Lender Statements; Survival of Indemnity. Each shall deliver
----------------------------------------
a written statement of such Lender as to the amount due, if any, under Sections
2.17.1, 2.17.2, 2.17.3 or 2.17.5. Such written statement shall set forth in
reasonable detail the calculations upon which such Lender determined such amount
and shall be final, conclusive and binding on the Borrower in the absence of
manifest error. Determination of amounts payable under such Sections in
connection with a Fixed Rate Loan shall be calculated as though each Lender
funded its Fixed Rate Loan through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining the
Fixed Rate applicable to such Loan, whether in fact that is the case or not.
Unless otherwise provided herein, the amount specified in the written statement
shall be payable on demand after receipt by the Borrower of the written
statement. The obligations of the Borrower under Sections 2.17.1, 2.17.2, 2.17.3
and 2.17.5 shall survive payment of the Obligations and termination of this
Agreement.

2.18. Market Disruption. Notwithstanding the satisfaction of all conditions
-----------------
referred to in Article IV with respect to any Foreign Currency Advance, if there
shall occur on or prior to the date of such Advance any change in national or
international financial, political or economic conditions or currency exchange
rates or exchange controls which would in the reasonable opinion of the Agent or
the Required Lenders make it impracticable for the Foreign Currency Loans
comprising such Advance to be denominated in the Eurocurrency specified by the
Borrower, then the Agent shall forthwith give notice thereof to the Borrower and
the Lenders, and such Loans shall not be denominated in such Eurocurrency but
shall be made on such Borrowing Date in Dollars, in an aggregate principal
amount equal to the Dollar Equivalent of the aggregate principal amount
specified in the related Committed Borrowing Notice as Alternate Base Rate
Loans, unless the Borrower notifies the Agent at least one Business Day before
such date that it elects not to borrow on such date.

<PAGE>

ARTICLE III

THE LETTER OF CREDIT SUBFACILITY
--------------------------------

3.1. Obligation to Issue. Subject to the terms and conditions of this
-------------------
Agreement and in reliance upon the representations and warranties of the
Borrower herein set forth, each Issuing Bank hereby agrees to issue for the
account of the Borrower (even though a Domestic Subsidiary may be listed as the
account party thereon) through such of the Issuing Bank's branches as it and the
Borrower or any Domestic Subsidiary may jointly agree, one or more Facility
Letters of Credit in accordance with this Article III, from time to time during
the period, commencing on the Effective Date and ending on the Business Day
prior to the Termination Date.

3.2. Types and Amounts. The issuance of a Facility Letter of Credit shall
-----------------
be subject to the following conditions:

(a) the aggregate maximum amount then available for drawing under
Letters of Credit issued by such Issuing Bank, after giving effect to the
Facility Letter of Credit requested hereunder, shall not exceed any limit
imposed by law or regulation upon such Issuing Bank;

(b) after giving effect thereto, the sum of (a) the Dollar Equivalent
of the aggregate unpaid principal balance of the Advances plus (b) the Facility
----
Letter of Credit Obligations do not exceed the Aggregate Commitment as then in
effect;

(d) it does not have an expiration date more than twenty four (24)
months after the date of its issuance; provided, however, that the aggregate
face amount of all Facility Letters of Credit having an expiration date in
excess of twelve (12) months outstanding at any one time shall not exceed
$10,000,000; and

(e) the Facility Letter of Credit Obligations, after giving effect to
any Facility Letter of Credit requested hereunder, do not exceed $50,000,000.

3.3. Conditions. In addition to being subject to the satisfaction of the
----------
conditions contained in Sections 3.2 and 4.2, the obligation of an Issuing Bank
to issue any Facility Letter of Credit is subject to the satisfaction in full of
the following conditions:

(a) the Borrower (not a Domestic Subsidiary) shall have delivered to
---
such Issuing Bank an executed application, reimbursement agreement or such other
documents and materials as may be required by such Issuing Bank (it being
understood that if any inconsistency exists between such documents and the Loan
Documents, the terms of the Loan Documents shall control);

(b) the proposed Facility Letter of Credit shall be reasonably
satisfactory to the Issuing Bank as to form and content; and

(c) as of the date of issuance, no order, judgment or decree of any
court, arbitrator or governmental authority shall purport by its terms to enjoin
or restrain that Issuing Bank from issuing the

<PAGE>

requested Facility Letter of Credit and no law, rule or regulation applicable to
that Issuing Bank and no request or directive (whether or not having the force
of law) from any governmental authority with jurisdiction over that Issuing Bank
shall prohibit or request that such Issuing Bank refrain from the issuance of
Letters of Credit generally or the issuance of the requested Facility Letter of
Credit in particular.

3.4. Procedure for Issuance of Facility Letters of Credit.
----------------------------------------------------

(a) The Borrower or a Domestic Subsidiary shall give the Issuing Bank
and the Agent at least three (3) Business Days' prior written notice, signed by
an Authorized Officer, of any requested issuance of a Facility Letter of Credit
under this Agreement (a "Letter of Credit Request") (except that, in lieu of
such written notice, the Borrower or Domestic Subsidiary may give the Issuing
Bank and the Agent telephonic notice of such request if confirmed in writing by
delivery to the Issuing Bank and the Agent (i) immediately (A) of a telecopy of
the written notice required hereunder which has been signed by an Authorized
Officer or (B) of a telex containing all information required to be contained in
such written notice and (ii) promptly (but in no event later than the requested
date of issuance) of the written notice required hereunder containing the
original signature of an Authorized Officer); such notice shall be irrevocable
and shall specify:

(1) whether the requested Facility Letter of Credit is a Commercial
Letter of Credit or a Standby Letter of Credit and, if it is a
Standby Letter of Credit, whether the Borrower or Domestic
Subsidiary believes it to be a Financial Letter of Credit or a
Performance Letter of Credit;

(2) the stated amount of the Facility Letter of Credit requested
(which stated amount shall not be less than $250,000), provided,
however, that up to five Facility Letters of Credit issued in any
twelve month period may have a stated amount of less than
$250,000 each;

(3) the effective date (which day shall be a Business Day) of
issuance of such requested Facility Letter of Credit (the
"Issuance Date");

(4) the date on which such requested Facility Letter of Credit is to
expire (which date shall be a Business Day and shall comply with
the provisions of Section 3.2(c) and (d));

(5) the name of the Issuing Bank chosen by the Borrower or Domestic
Subsidiary to issue the requested Facility Letter of Credit;

(6) the purpose for which such Facility Letter of Credit is to be
issued;

(7) the name of the account party to be listed on the Facility Letter
of Credit (notwithstanding the fact that the Borrower shall be
responsible therefor); and

(8) the Person for whose benefit the requested Facility Letter of
Credit is to be issued.

<PAGE>

At the time such request is made, the Borrower or Domestic Subsidiary shall also
provide the Agent and the Issuing Bank with a copy of the form of the Facility
Letter of Credit it is requesting be issued. Such notice, to be effective, must
be received by such Issuing Bank and the Agent not later than 2:00 p.m. (Chicago
time) on the last Business Day on which notice can be given under this Section
3.4(a).

(b) Subject to the terms and conditions of this Article III and
provided that the applicable conditions set forth in Section 4.2 hereof have
been satisfied, such Issuing Bank shall, on the Issuance Date, issue a Facility
Letter of Credit on behalf of the Borrower in accordance with the Issuing Bank's
usual and customary business practices unless the Issuing Bank has actually
received (i) written notice from the Borrower or Domestic Subsidiary
specifically revoking the Letter of Credit Request with respect to such Facility
Letter of Credit, (ii) written notice from a Lender, which complies with the
provisions of Section 3.6(a) or (iii) written or telephonic notice from the
Agent stating that the issuance of such Facility Letter of Credit would violate
Section 3.2.

(c) Each Issuing Bank shall give the Agent and the Borrower written or
telex notice, or telephonic notice confirmed promptly thereafter in writing, of
the issuance of a Facility Letter of Credit (the "Issuance Notice"), which shall
indicate, in the case of the issuance of a Standby Letter of Credit, the Issuing
Bank's reasonable determination as to whether such Standby Letter of Credit is a
Financial Letter of Credit or a Performance Letter of Credit, which
determination shall be conclusive absent manifest error.

(d) An Issuing Bank shall not extend or amend any Facility Letter of
Credit or allow a Facility Letter of Credit to be automatically extended unless
the requirements of this Section 3.4 are met as though a new Facility Letter of
Credit was being requested and issued.

3.5. Reimbursement Obligations; Duties of Issuing Banks.
--------------------------------------------------

(a) (i) Each Issuing Bank shall promptly notify the Borrower and the
Agent of any draw under a Facility Letter of Credit and the Borrower shall
reimburse such Issuing Bank in accordance with Section 3.7; and (ii) any
Reimbursement Obligation with respect to any Facility Letter of Credit shall
bear interest from the date of the relevant drawings under the pertinent
Facility Letter of Credit until payment in full is received by the pertinent
Issuing Bank at (A) the Alternate Base Rate until the next succeeding Business
Day and (B) the Alternate Base Rate plus 2% thereafter.

(b) Any action taken or omitted to be taken by an Issuing Bank under
or in connection with any Facility Letter of Credit, if taken or omitted in the
absence of willful misconduct or gross negligence, shall not put that Issuing
Bank under any resulting liability to any Lender or, assuming that such Issuing
Bank has complied with the procedures specified in Section 3.4, all conditions
to the issuance of a Facility Letter of Credit have been satisfied and any such
Lender has not given a notice contemplated by Section 3.6(a) that continues in
full force and effect, relieve any such Lender of its obligations hereunder to
that Issuing Bank. In determining whether to pay under any Facility Letter of
Credit, an Issuing Bank shall have no obligation relative to the Lenders other
than to confirm that any documents required to be delivered under such Facility
Letter of Credit appear to have been delivered in compliance and that they
appear to comply on their face, with the requirements of such Facility Letter of
Credit.

<PAGE>

3.6. Participation.
-------------

(a) Immediately upon (i) the Effective Date with respect to each
Existing Letter of Credit and (ii) issuance by an Issuing Bank of any Facility
Letter of Credit in accordance with the procedures set forth in Section 3.4,
each Lender shall be deemed to have irrevocably and unconditionally purchased
and received from that Issuing Bank, without recourse, representation or
warranty, an undivided interest and participation equal to its Percentage in
such Facility Letter of Credit (including, without limitation, all rights and
obligations of the Issuing Bank with respect thereto) and any security therefor
or guaranty pertaining thereto; provided, that a Letter of Credit issued by any
Issuing Bank shall not be deemed to be a Facility Letter of Credit for purposes
of this Section 3.6 if such Issuing Bank shall have received written notice from
any Lender on or before the Business Day prior to the date of its issuance of
such Letter of Credit that one or more of the conditions contained in Section
4.2 is not then satisfied, and, in the event an Issuing Bank receives such a
notice, it shall have no further obligation to issue any Facility Letter of
Credit until such notice is withdrawn by that Lender or it receives a notice
from the Agent that such condition has been effectively waived in accordance
with the provisions of this Agreement.

(b) In the event that any Issuing Bank makes any payment under any
Facility Letter of Credit and the Borrower shall not have repaid such amount to
such Issuing Bank pursuant to Section 3.7 hereof, such Issuing Bank shall
promptly notify the Agent, which shall promptly notify each Lender, of such
failure, and each Lender shall promptly and unconditionally pay to the Agent for
the account of such Issuing Bank the amount of such Lender's Percentage of the
unreimbursed amount of such payment, and the Agent shall promptly pay such
amount to the Issuing Bank. The failure of any Lender to make available to the
Agent for the account of any Issuing Bank its Percentage of the unreimbursed
amount of any such payment shall not relieve any other Lender of its obligation
hereunder to make available to the Agent for the account of such Issuing Bank
its Percentage of the unreimbursed amount of any payment on the date such
payment is to be made, but no Lender shall be responsible for the failure of any
other Lender to make available to the Agent its Percentage of the unreimbursed
amount of any payment on the date such payment is to be made.

(c) Whenever an Issuing Bank receives a payment on account of a
Reimbursement Obligation, including any interest thereon, it shall promptly pay
to the Agent and the Agent shall promptly pay to each Lender which has funded
its participating interest therein, in immediately available funds, an amount
equal to such Lender's Percentage thereof.

(d) Upon the request of the Agent or any Lender, an Issuing Bank
shall furnish to such Agent or Lender copies of any Facility Letter of Credit to
which that Issuing Bank is party and such other documentation as may reasonably
be requested by the Agent or Lender.

(e) The obligations of a Lender to make payments to the Agent for the
account of each Issuing Bank with respect to a Facility Letter of Credit shall
be absolute, unconditional and irrevocable, not subject to any counterclaim,
set-off, qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement under all circumstances.

<PAGE>

3.7. Payment of Reimbursement Obligations.
------------------------------------

(a) The Borrower agrees to pay to each Issuing Bank the amount of all
Reimbursement Obligations, interest and other amounts payable to such Issuing
Bank under or in connection with any Facility Letter of Credit immediately when
due (and in any event shall reimburse an Issuing Bank for drawings under a
Facility Letter of Credit issued by it no later than the next Business Day after
payment by that Issuing Bank), irrespective of any claim, set-off, defense or
other right which the Borrower or any Subsidiary may have at any time against
any Issuing Bank or any other Person, under all circumstances, including without
limitation any of the following circumstances:

(1) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents;

(2) the existence of any claim, setoff, defense or other right which
the Borrower or any Subsidiary may have at any time against a
beneficiary named in a Facility Letter of Credit or any
transferee of any Facility Letter of Credit (or any Person for
whom any such transferee may be acting), the Agent, the Issuing
Bank, any Lender, or any other Person, whether in connection with
this Agreement, any Facility Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transactions between the Borrower or any Subsidiary
and the beneficiary named in any Facility Letter of Credit);

(3) any draft, certificate or any other document presented under the
Facility Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect, so long as the Issuing
Bank adhered to the provisions contained in Article 13 (Standard
for Examination of Documents) of the Uniform Customs and Practice
for Documentary Credits, 1993 Revision;

(4) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Loan Documents;
or

(5) the occurrence of any Default or Unmatured Default.

(b) In the event any payment by or for the account of the Borrower or
any Subsidiary received by an Issuing Bank with respect to a Facility Letter of
Credit and distributed by the Agent to the Lenders on account of their
participations is thereafter set aside, avoided or recovered from that Issuing
Bank in connection with any receivership, liquidation, reorganization or
bankruptcy proceeding, each Lender which received such distribution shall, upon
demand by that Issuing Bank, contribute such Lender's Percentage of the amount
set aside, avoided or recovered together with interest at the rate required to
be paid by that Issuing Bank upon the amount required to be repaid by it.

3.8. Compensation for Facility Letters Of Credit.
-------------------------------------------

(a) The Borrower shall pay to the Agent, for the ratable account of
the Lenders, based upon the Lenders' respective Percentages, a fee (the
"Facility Letter of Credit Fee") with respect to each Facility Letter of Credit
that is:

<PAGE>

(1) a Standby Letter of Credit, for the period from the Issuance Date
thereof to but including the final expiration date thereof, in a
per annum amount equal to the product of (A) the average daily
undrawn amount of such Standby Letter of Credit times (B) with
respect to a Standby Letter of Credit that is (1) a Financial
Letter of Credit, the percentage indicated as the Applicable
Margin for the Standby Letter of Credit Fee (Financial) in
Section 2.3.4 or (2) a Performance Letter of Credit, the
percentage indicated as the Applicable Margin for the Standby
Letter of Credit Fee (Performance) in Section 2.3.4, and

(2) a Commercial Letter of Credit, in an amount equal to the
percentage indicated as the Applicable Margin for the Commercial
Letter of Credit Fee in Section 2.3.4 times the face amount of
such Commercial Letter of Credit.

The Facility Letter of Credit Fees shall be due and payable in arrears on each
Payment Date and, to the extent any such fees are then due and unpaid, on the
Termination Date. The Agent shall promptly remit such Facility Letter of Credit
Fees, when paid, to the other Lenders in accordance with their Percentages
thereof.

(b) Each Issuing Bank shall have the right to receive issuance fees
for any Facility Letter of Credit solely for its own account in an amount in
accordance with its standard fee schedule or such other amount to which it and
the Borrower may agree in writing. In addition, each Issuing Bank shall be
entitled to receive its reasonable out-of-pocket costs of issuing and servicing
Facility Letters of Credit.

3.9. Letter of Credit Collateral Account. From and after the occurrence and
-----------------------------------
during the continuance of a Default, the Borrower hereby agrees that it will,
until the Termination Date, maintain a special collateral account (the "Letter
of Credit Collateral Account") at the Agent's office at the address specified
pursuant to Article XIII, in the name of the Borrower but under the sole
dominion and control of the Agent, for the benefit of the Lenders, and in which
the Borrower shall have no interest other than as set forth in Section 8.1. In
addition to the foregoing, the Borrower hereby grants to the Agent, for the
benefit of the Lenders, a security interest in and to the Letter of Credit
Collateral Account and any funds that may hereafter be on deposit in such
account.

ARTICLE IV

CONDITIONS PRECEDENT

4.1. Initial Advance and Facility Letter of Credit. The Lenders shall not
---------------------------------------------
be required to make the initial Advance and, if the initial Advance shall not
have been made, an Issuing Bank shall not be obligated to issue any Facility
Letter of Credit hereunder to the Borrower and, in any event, this Agreement
shall not become effective unless the Borrower has furnished to the Agent with
sufficient copies for the Lenders, the following items (and the date upon which
all such items shall have been so furnished is hereinafter referred to as the
"Effective Date"):

<PAGE>

(i) Copies of the certificate or articles of incorporation, together with
all amendments, and a certificate of good standing for the Borrower,
both certified, as of a recent date, by the appropriate governmental
officer in its jurisdiction of incorporation.

(ii) Copies, certified by the Secretary or Assistant Secretary of the
Borrower, of its by-laws and of its Board of Directors' resolutions
(and resolutions of other bodies, if any are deemed necessary by
counsel for any Lender) authorizing the performance and execution of
the Loan Documents.

(iii) An incumbency certificate, executed by the Secretary or Assistant
Secretary of the Borrower, which shall identify by name and title and
bear the signature of the Authorized Officers of (a) the Borrower
authorized to sign the Loan Documents and to make borrowings and
request Facility Letters of Credit hereunder and (b) each Domestic
Subsidiary authorized to request Facility Letters of Credit hereunder,
upon which certificate the Agent and the Lenders shall be entitled to
rely until informed of any change in writing by the Borrower.

(iv) A compliance certificate, signed by the chief financial officer or
controller of the Borrower, in substantially the form attached hereto
as Exhibit "G".

(v) A written opinion of counsel to the Borrower, addressed to the Lenders
in substantially the form of Exhibit "E".

(vi) Notes from the Borrower payable to the order of each of the Lenders.

(vii) Written money transfer instructions, in substantially the form of
Exhibit "F" hereto, addressed to the Agent and signed by an Authorized
Officer of the Borrower, together with such other related money
transfer authorizations as the Agent may have reasonably requested.

(viii) The Guaranty executed by each Guarantor, together with an opinion of
counsel to the Guarantors in form and substance satisfactory to the
Agent.

(ix) Evidence satisfactory to the Agent that the Borrower and certain of
its Subsidiaries party thereto have paid (or will pay with the initial
advance hereunder) in full and terminated the existing credit
agreement, dated July 20, 1993, among the Borrower, such Subsidiaries,
the lenders party thereto and Corestates Bank, N.A. as agent for such
lenders and have released all Liens granted in connection therewith.

(x) The insurance certificate described in Section 5.18.

(xi) Payment of any fees due to the Agent pursuant to the letter agreement
referred to in Section 2.6.3.

(xii) Such other documents as any Lender or its counsel may have reasonably
requested.

<PAGE>

4.2. Each Advance and Facility Letter of Credit. No Lender shall be
------------------------------------------
required to make any Advance (other than a Committed Advance that, after giving
effect thereto and to the application of the proceeds thereof, does not increase
the aggregate amount of the sum of outstanding (x) Committed Advances and (y)
Reimbursement Obligations) and the Issuing Bank shall not be obligated to issue
any Facility Letter of Credit, unless on the applicable Borrowing Date or
Issuance Date:

(i) There exists no Default or Unmatured Default before and after giving
effect to such advance or issuance.

(ii) The representations and warranties contained in Article V are true
and correct as of such Borrowing Date or Issuance Date, as the case
may be, except to the extent any such representation or warranty is
stated to relate solely to an earlier date, in which case such
representation or warranty shall remain true and correct on and as
of such earlier date.

(iii) All legal matters incident to the making of such Advance or issuance
of such Facility Letter of Credit shall be satisfactory to the
Lenders and their counsel.

Each Borrowing Notice with respect to each such Advance and each Letter of
Credit Request with respect to each Facility Letter of Credit (even if delivered
by a Domestic Subsidiary) shall constitute a representation and warranty by the
Borrower that the conditions contained in Sections 4.2(i) and (ii) have been
satisfied. Any Lender or the Issuing Bank may require a duly completed
compliance certificate in substantially the form of Exhibit "G" hereto as a
condition to making an Advance or issuing a Facility Letter of Credit.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BORROWER

The Borrower represents and warrants to the Lenders that:

5.1. Corporate Existence and Standing. Each of the Borrower and its
--------------------------------
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted.

5.2. Authorization and Validity. The Borrower has the corporate power
--------------------------
and authority and legal right to execute and deliver the Loan Documents and to
perform its obligations thereunder. The execution and delivery by the Borrower
of the Loan Documents and the performance of its obligations thereunder have
been duly authorized by proper corporate proceedings, and the Loan Documents
constitute legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.

5.3. No Conflict; Government Consent. Neither the execution and delivery
-------------------------------
by the Borrower of the Loan Documents, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof will violate
any law, rule, regulation, order, writ, judgment, injunction, decree

<PAGE>
or award binding on the Borrower or any of its Subsidiaries or the Borrower's or
any Subsidiary's certificate or articles of incorporation or by-laws or the
provisions of any indenture, instrument or agreement to which the Borrower or
any of its Subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or conflict with or constitute a default thereunder, or
result in the creation or imposition of any Lien in, of or on the Property of
the Borrower or a Subsidiary pursuant to the terms of any such indenture,
instrument or agreement. No order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, any
Governmental Agency, is required to authorize, or is required in connection with
the execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, any of the Loan Documents.

5.4. Financial Statements. The December 31, 1994 and June 30, 1995
--------------------
consolidated financial statements of the Borrower and its Subsidiaries
heretofore delivered to the Lenders were prepared in accordance with generally
accepted accounting principles in effect on the date such statements were
prepared and fairly present the consolidated financial condition and operations
of the Borrower and its Subsidiaries at such date and the consolidated results
of their operations for the period then ended.

5.5. Material Adverse Change. Since December 31, 1994, there has been no
-----------------------
change in the business, Property, prospects, condition (financial or otherwise)
or results of operations of the Borrower and its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect.

5.6. Taxes. The Borrower and its Subsidiaries have filed all United States
-----
federal tax returns and all other tax returns which are required to be filed and
have paid all taxes due pursuant to said returns or pursuant to any assessment
received by the Borrower or any of its Subsidiaries, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided. No tax liens have been filed and no claims are being asserted with
respect to any such taxes. The charges, accruals and reserves on the books of
the Borrower and its Subsidiaries in respect of any taxes or other governmental
charges are adequate.

5.7. Litigation and Contingent Obligations. Except as set forth on Schedule
-------------------------------------
"3" hereto, there is no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the knowledge of any of their officers,
threatened against or affecting the Borrower or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect. Other than any
liability incident to such litigation, arbitration or proceedings, the Borrower
has no material contingent obligations not provided for or disclosed in the
financial statements referred to in Section 5.4.

5.8. Subsidiaries. Schedule "4" hereto (as the same may have been revised
------------
in accordance with Section 6.16) contains an accurate list of all of the
presently existing Subsidiaries of the Borrower, setting forth their respective
jurisdictions of incorporation and the percentage of their respective capital
stock owned by the Borrower or other Subsidiaries. All of the issued and
outstanding shares of capital stock of such Subsidiaries have been duly
authorized and issued and are fully paid and non-assessable.

5.9. ERISA. The Unfunded Liabilities of all Single Employer Plans do not in
-----
the aggregate exceed $7,500,000. Neither the Borrower nor any other member of
the Controlled Group has incurred, or is reasonably expected to incur, any
withdrawal liability to Multiemployer Plans. Each Plan complies in all material
respects with all applicable requirements of law and regulations, no Reportable
Event has occurred with respect to any Plan, neither the Borrower nor any other
members of the Controlled Group has withdrawn from any Plan or initiated steps
to do so, and no steps have been taken to reorganize or

<PAGE>
terminate any Plan (except that any Single Employer Plan may be terminated so
long as all Unfunded Liabilities with respect to such Plan are paid or otherwise
eliminated).

5.10. Accuracy of Information. No information, exhibit or report furnished
-----------------------
by the Borrower or any of its Subsidiaries to the Agent or to any Lender in
connection with the negotiation of, or compliance with, the Loan Documents
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not misleading.

5.11. Regulation U. Margin stock (as defined in Regulation U) constitutes
------------
less than 25% of those assets of the Borrower and its Subsidiaries which are
subject to any limitation on sale, pledge, or other restriction hereunder.

5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a
-------------------
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in (i) any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect or (ii) any
agreement or instrument evidencing or governing Indebtedness.

5.13. Compliance With Laws. The Borrower and its Subsidiaries have complied
--------------------
with all applicable statutes, rules, regulations, orders and restrictions of any
domestic or foreign government or Government Agency thereof, having jurisdiction
over the conduct of their respective businesses or the ownership of their
respective Property. Neither the Borrower nor any Subsidiary has received any
notice to the effect that its operations are not in material compliance with any
of the requirements of applicable federal, state and local environmental, health
and safety statutes and regulations or the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect.

5.14. Ownership of Properties. Except as set forth on Schedule "5" hereto,
-----------------------
on the date of this Agreement, the Borrower and its Subsidiaries will have good
title, free of all Liens other than those permitted by Section 6.17, to all of
the Property and assets reflected in the financial statements as owned by it.

5.15. Investment Company Act. Neither the Borrower nor any Subsidiary
----------------------
thereof is an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.

5.16. Public Utility Holding Company Act. Neither the Borrower nor any
----------------------------------
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.

5.17. Subordinated Indebtedness. The Obligations constitute senior
-------------------------
indebtedness which is entitled to the benefits of the subordination provisions
of all outstanding Subordinated Indebtedness.

<PAGE>

5.18. Insurance. The certificate signed by the President or Chief Financial
---------
Officer of the Borrower, that attests to the existence and adequacy of, and
summarizes, the property and casualty insurance program carried by the Borrower
and that has been furnished by the Borrower to the Agent and the Lenders, is
complete and accurate as of the date of this Agreement. This summary includes
the insurer's or insurers' name(s), policy number(s), expiration date(s),
amount(s) of coverage, type(s) of coverage, exclusion(s), and deductibles. This
summary also includes similar information, and describes any reserves, relating
to any self-insurance program that is in effect.

5.19. Solvency. Immediately following the making of each Loan, if any, made
--------
on the (i) Effective Date and after giving effect to the application of the
proceeds of such Loans, and (ii) date of any Permitted Acquisition and after
giving effect to the application of the proceeds of such Loans,

(a) the fair value of the assets of the Borrower and the Subsidiaries
on a consolidated basis, at a fair valuation, will exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Borrower and the
Subsidiaries on a consolidated basis;

(b) the present fair saleable value of the property of the Borrower
and the Subsidiaries on a consolidated basis will be greater than the
amount that will be required to pay the probable liability of the Borrower
and the Subsidiaries on a consolidated basis on their debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured;

(c) the Borrower and the Subsidiaries on a consolidated basis will be
able to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured; and

(d) the Borrower and the Subsidiaries on a consolidated basis will not
have unreasonably small capital with which to conduct the businesses in
which they are engaged as such businesses are now conducted and are now
proposed to be conducted.

The Borrower does not intend to, or to permit any of its Subsidiaries to, and
does not believe that it or any of its Subsidiaries will, incur debts beyond (i)
the Borrower's ability to pay its debts as they mature and (ii) the ability of
the Borrower and its Subsidiaries on a consolidated basis to pay all such debts
as they mature, taking into account the timing of and amounts of cash to be
received by it or any such Subsidiary and the timing of the amounts of cash to
be payable on or in respect of its Indebtedness or the Indebtedness of any such
Subsidiary.

5.20. Single Business Enterprise. The Borrower and its Subsidiaries have
--------------------------
historically operated as, and intend to continue operating as a single business
enterprise. Although separate entities, the Borrower and its Subsidiaries
operate under a common business plan. Each of the Borrower and its Subsidiaries
will accordingly benefit from the financing arrangement established by this
Agreement. The Borrower acknowledges that, but for the agreement by each of the
Guarantors to execute and deliver the Guaranty, the Borrower would not have
qualified separately for the total amount of the credit facilities established
hereby.

<PAGE>

ARTICLE VI

COVENANTS
---------

During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:

6.1. Financial Reporting. The Borrower will maintain, for itself and each
-------------------
Subsidiary, a system of accounting established and administered in accordance
with generally accepted accounting principles, and furnish to the Lenders:

(i) Within 90 days after the close of each of its fiscal years, an
unqualified audit report certified by independent certified public
accountants of recognized national standing selected by the
Borrower, prepared in accordance with generally accepted accounting
principles on a consolidated and consolidating basis (consolidating
statements need not be certified by such accountants) for itself
and the Subsidiaries, including balance sheets as of the end of
such period, related profit and loss and changes in shareholder's
equity statements, and a statement of cash flows, accompanied by
any management letter or other similar written materials prepared
by said accountants.

(ii) Within 45 days after the close of the first three quarterly periods
of each of its fiscal years, for itself and the Subsidiaries,
consolidated and consolidating unaudited balance sheets as at the
close of each such period and consolidated and consolidating profit
and loss and changes in shareholder's equity statements and a
statement of cash flows for the period from the beginning of such
fiscal year to the end of such quarter, all certified by its chief
financial officer or controller.

(iii) Together with the financial statements required pursuant to Sections
6.1(i) and 6.1(ii) and the pro forma financial statements required
pursuant to the definition of Permitted Acquisition, a compliance
certificate in substantially the form of Exhibit "G" hereto signed
by its chief financial officer or controller showing the
calculations necessary to determine compliance with this Agreement
and stating that no Default or Unmatured Default exists, or if any
Default or Unmatured Default exists, stating the nature and status
thereof.

(iv) Within 270 days after the close of each fiscal year, a statement of
the Unfunded Liabilities of each Single Employer Plan, certified as
correct by an actuary enrolled under ERISA; provided, however, that
in lieu thereof, the Borrower may deliver an audited financial
statement for any Single Employer Plan, prepared by the Borrower's
independent certified public accountants.

(v) As soon as possible and in any event within 10 days after the
Borrower knows that any Reportable Event has occurred with respect
to any Plan, a statement, signed by the chief financial officer of
the Borrower, describing said Reportable Event and the action which
the Borrower proposes to take with respect thereto.

<PAGE>

(vi) As soon as possible and in any event within 10 days after receipt by
the Borrower, a copy of (a) any notice or claim to the effect that
the Borrower or any of its Subsidiaries is or may be liable to any
Person as a result of the release by the Borrower, any of its
Subsidiaries, or any other Person of any toxic or hazardous waste
or substance into the environment, and (b) any notice alleging any
violation of any federal, state or local environmental, health or
safety law or regulation by the Borrower or any of its Subsidiaries,
which, in either case, could reasonably be expected to have a
Material Adverse Effect.

(vii) Promptly upon the furnishing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy
statements so furnished.

(viii) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports
which the Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission.

(ix) Such other information (including non-financial information) as the
Agent or any Lender may from time to time reasonably request.

6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary
---------------
to, use the Facility Letters of Credit and the proceeds of the Advances for
general corporate purposes (including Investments and Acquisitions permitted
hereunder), and to repay outstanding Advances and Reimbursement Obligations.
The Borrower will not, nor will it permit any Subsidiary to, use any of the
Facility Letters of Credit or the proceeds of the Advances to purchase or
carry any "margin stock" (as defined in Regulation U).

6.3. Notice of Default. The Borrower will, and will cause each Subsidiary
-----------------
to, give prompt notice in writing to the Lenders of the occurrence of any
Default or Unmatured Default and of any other development, financial or
otherwise, which could reasonably be expected to have a Material Adverse Effect.

6.4. Conduct of Business. The Borrower will, and will cause each
-------------------
Subsidiary to, (i) carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and (other than sales of Subsidiaries and mergers of the Borrower or
any Subsidiary which are permitted under this Agreement) do all things necessary
to remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted.

6.5. Taxes. The Borrower will, and will cause each Subsidiary to, pay
-----
when due all taxes, assessments and governmental charges and levies upon it or
its income, profits or Property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside.

6.6. Insurance. The Borrower will, and will cause each Subsidiary to,
---------
maintain with financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is consistent with
sound business practice, and the Borrower will furnish to any Lender upon
request full information as to the insurance carried.

<PAGE>

6.7. Compliance with Laws. The Borrower will, and will cause each
--------------------
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject and obtain
and maintain in effect all consents, licenses, permits, orders or other
governmental approvals necessary in order to perform its obligations under the
Loan Documents.

6.8. Maintenance of Properties. The Borrower will, and will cause each
-------------------------
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition (ordinary wear and tear
excepted), and make all necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly
conducted at all times.

6.9. Inspection. The Borrower will, and will cause each Subsidiary to,
----------
permit the Lenders, by their respective representatives and agents, to inspect
any of the Property, corporate books and financial records of the Borrower and
each Subsidiary, to examine and make copies of the books of accounts and other
financial records of the Borrower and each Subsidiary, and to discuss the
affairs, finances and accounts of the Borrower and each Subsidiary with, and to
be advised as to the same by, their respective officers at such reasonable times
and intervals as the Lenders may designate.

6.10. Dividends. The Borrower will not, nor will it permit any Subsidiary
---------
to, declare or pay any dividends on its capital stock (other than dividends
payable in its own capital stock) or redeem, repurchase or otherwise acquire or
retire any of its then outstanding capital stock at any time at which a Default
or Unmatured Default exists or would exist after giving effect to such dividend,
redemption, repurchase, acquisition or retirement; provided, however, that (i)
any Subsidiary may at any time declare and pay dividends to the Borrower or to a
Wholly-Owned Subsidiary, (ii) the Borrower may redeem, repurchase or otherwise
acquire or retire its then outstanding capital stock to the extent permitted by
Section 6.16.1(iv) and (iii) from and after September 1, 1996, the Borrower may
declare and pay dividends on its capital stock, provided that the aggregate
amount of such dividends shall at no time exceed twenty percent (20%) of the
Borrower's cumulative Net Income since July 1, 1996 (taken as one accounting
period).

6.11. Indebtedness. The Borrower will not, nor will it permit any
------------
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:

(i) The Loans and the Facility Letters of Credit.

(ii) Indebtedness existing on the date hereof and described in Schedule
"5" hereto.

(iii) The Guaranty.

(iv) Contingent Obligations by endorsement of instruments for deposit or
collection in the ordinary course of business.

(v) Indebtedness not included in any of the foregoing exceptions, so
long as no Default or Unmatured Default has occurred and is
continuing on the date of its creation or incurrence.

41
<PAGE>

6.12. Merger. The Borrower will not, nor will it permit any
------
Subsidiary to, merge or consolidate with or into any other Person, except
(i) that a Subsidiary may merge with and into the Borrower or a Wholly-
Owned Subsidiary and (ii) pursuant to a Permitted Acquisition.

6.13. Sale of Assets. The Borrower will not, nor will it permit any
--------------
Subsidiary to, lease, sell or otherwise dispose of its Property, to any
other Person except for (i) sales of inventory in the ordinary course of
business and (ii) leases, sales or other dispositions of its Property that,
together with all other Property of the Borrower and its Subsidiaries
previously leased, sold or disposed of (other than inventory in the
ordinary course of business) as permitted by this Section during the
twelve-month period ending with the month in which any such lease, sale or
other disposition occurs, do not constitute a Substantial Portion of the
Property of the Borrower and its Subsidiaries.

6.14. Affiliates. Except as otherwise described on Schedule "6"
----------
hereto, the Borrower will not, and will not permit any Subsidiary to, enter
into any transaction (including, without limitation, the purchase or sale
of any Property or service) with, or make any payment or transfer to, any
Affiliate except in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction.

6.15. Subordinated Indebtedness. The Borrower will not, and will not
-------------------------
permit any Subsidiary to, (i) make any amendment or modification to the
indenture, note or other agreement evidencing or governing any Subordinated
Indebtedness, or (ii) directly or indirectly voluntarily prepay, defease or
in substance defease, purchase, redeem, retire or otherwise acquire, any
Subordinated Indebtedness.

6.16. Investments and Acquisitions.
----------------------------

6.16.1. Investments. The Borrower will not, nor will it permit any
-----------
Subsidiary to, make or suffer to exist any Investments (including without
limitation, loans and advances to, and other Investments in, Subsidiaries),
or commitments therefor, or to create any Subsidiary or to become or remain
a partner in any partnership or joint venture, except:

(i) Marketable Securities.

(ii) Existing Investments in Subsidiaries and other Investments in
existence on the date hereof and described in Schedule "4"
hereto.

(iii) Any Investment consisting of (A) the acquisition of stock or
other equity interests which constitutes a Permitted
Acquisition, (B) the creation of a new Subsidiary to act as
the Purchaser in a Permitted Acquisition and (C) an Investment
in a Subsidiary for the purpose of facilitating a Permitted
Acquisition.

(iv) Investments by the Borrower in shares of its stock to be held
in treasury for purposes of providing such shares to the
employee stock ownership plan.

(v) Investments in (A) IABG, in an aggregate amount not to exceed
6,000,000 Deutsche marks and (B) Specified Subsidiaries, in an
aggregate amount not to exceed $5,000,000.

<PAGE>

(vi) Investments (other than Investments in Specified Subsidiaries)
not included in any of the foregoing exceptions, in an
aggregate amount not to exceed, in any calendar year, the
greater of (i) $15,000,000 or (ii) fifteen percent (15%) of
the Borrower's Net Worth; provided, however, that all such
-------- ------
Investments are related to the Borrower's existing lines of
business.

6.16.2. Acquisitions. The Borrower will not, nor will it permit any
------------
Subsidiary to, make any Acquisition of any Person, except for Permitted
Acquisitions. Upon the consummation of any Permitted Acquisition, (i) the
Borrower may deliver to the Lenders a revised Schedule "4" listing any new
Subsidiary, if any, formed or acquired pursuant to such Permitted
Acquisition (each, a "New Subsidiary"), and such revised Schedule shall
replace the old Schedule and shall be deemed to have become part of the
Agreement and (ii) the Borrower shall or shall cause any such New
Subsidiary to deliver to the Agent, promptly but in any event within five
days, an executed counterpart to become a Guarantor under the Guaranty, in
the form of Exhibit "H" attached hereto, and appropriate corporate
resolutions and incumbency certificates authorizing such execution and
delivery and an opinion of counsel related thereto, in form and substance
satisfactory to the Agent.

6.17. Liens. The Borrower will not, nor will it permit any
-----
Subsidiary to, (i) be a party to any agreement or undertaking with any
lender or other person whereby the Borrower or such Subsidiary shall commit
itself to any undertaking similar in tenor or effect to this Section 6.17
and (ii) create, incur, or suffer to exist any Lien in, of or on the
Property of the Borrower or any of its Subsidiaries, except:

(i) Liens for taxes, assessments or governmental charges or levies
on its Property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings
and for which adequate reserves in accordance with generally
accepted principles of accounting shall have been set aside on
its books.

(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of
obligations not more than 60 days past due.

(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar
legislation.

(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a
nature generally existing with respect to properties of a
similar character and which do not in any material way affect
the marketability of the same or interfere with the use
thereof in the business of the Borrower or the Subsidiaries.

(v) Liens existing on the date hereof and described in Schedule
"5" hereto.

6.18. Financial Covenants. The Borrower shall maintain, for itself
-------------------
and its Subsidiaries on a consolidated basis, each of the following
financial covenants, each calculated in accordance with Agreement Account
Principles:

<PAGE>

6.18.1. Debt to Total Capitalization. The Borrower shall maintain, on
----------------------------
a consolidated basis, at all times a ratio of (i) Debt to (ii) the sum of
(a) Net Worth plus (b) Debt, all determined on a consolidated basis for the
----
Borrower and its Subsidiaries, not exceeding .60 to 1.0.

6.18.2. Debt to EBITDA. The Borrower shall maintain, on a consolidated
--------------
basis, as of the end of each fiscal quarter a ratio of (i) Debt to (ii)
EBITDA for such fiscal quarter and the three immediately preceding fiscal
quarters, not exceeding 3.0 to 1.0.

ARTICLE VII

DEFAULTS
--------

The occurrence of any one or more of the following
events shall constitute a Default:

7.1. Any representation or warranty made or deemed made by or on
behalf of the Borrower or any of its Subsidiaries to the Lenders or the
Agent under or in connection with this Agreement, any Loan, any Facility
Letter of Credit, or any certificate or information delivered in connection
with this Agreement or any other Loan Document shall be materially false on
the date as of which made or deemed made.

7.2. Nonpayment of principal of any Note when due; nonpayment of
any Reimbursement Obligation when due; or nonpayment of interest upon any
Note or of any fee or other obligation under any of the Loan Documents
within five days after the same becomes due.

7.3. The breach by the Borrower of any of the terms or provisions
of Section 6.2, 6.10, 6.11, 6.12, 6.13, 6.15, 6.16, 6.17 or 6.18.

7.4. The breach by the Borrower (other than a breach which
constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms or
provisions of this Agreement which is not remedied within fifteen days
after the earlier to occur of (i) receipt of written notice from the Agent
or any Lender or (ii) the date the Borrower becomes aware of any such
breach.

7.5. Failure of the Borrower or any of its Subsidiaries to pay any
Indebtedness in excess of $5,000,000 in the aggregate when due; or the
default by the Borrower or any of its Subsidiaries in the performance of
any term, provision or condition contained in any agreement under which any
Indebtedness in excess of $5,000,000 in the aggregate was created or is
governed, or any other event shall occur or condition exist, the effect of
which is to cause, or to permit the holder or holders of such Indebtedness
to cause, such Indebtedness to become due prior to its stated maturity; or
any Indebtedness in excess of $5,000,000 in the aggregate of the Borrower
or any of its Subsidiaries shall be declared to be due and payable or
required to be prepaid (other than by a regularly scheduled payment) prior
to the stated maturity thereof; or the Borrower or any of its Subsidiaries
shall not pay, or admit in writing its inability to pay, its debts
generally as they become due.

<PAGE>

7.6. The Borrower or any of its Subsidiaries shall (i) have an
order for relief entered with respect to it under the Federal bankruptcy
laws as now or hereafter in effect, (ii) make an assignment for the benefit
of creditors, (iii) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any portion of its Property that constitutes a
Substantial Portion, (iv) institute any proceeding seeking an order for
relief under the Federal bankruptcy laws as now or hereafter in effect or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors or fail to file an answer
or other pleading denying the material allegations of any such proceeding
filed against it, (v) take any corporate action to authorize or effect any
of the foregoing actions set forth in this Section 7.6 or (vi) fail to
contest in good faith any appointment or proceeding described in Section
7.7.

7.7. Without the application, approval or consent of the Borrower
or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Borrower or any of its
Subsidiaries or any portion of its Property that constitutes a Substantial
Portion, or a proceeding described in Section 7.6(iv) shall be instituted
against the Borrower or any of its Subsidiaries and such appointment
continues undischarged or such proceeding continues undismissed or unstayed
for a period of 60 consecutive days.

7.8. Any court, government or governmental agency shall condemn,
seize or otherwise appropriate, or take custody or control of (each a
"Condemnation"), all or any portion of the Property of the Borrower and its
Subsidiaries which, when taken together with all other Property of the
Borrower and its Subsidiaries so condemned, seized, appropriated, or taken
custody or control of, during the twelve-month period ending with the month
in which any such Condemnation occurs, constitutes a Substantial Portion.

7.9. The Borrower or any of its Subsidiaries shall fail within 30
days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $5,000,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith.

7.10. The Borrower or any of its Subsidiaries shall be the subject
of any proceeding or investigation pertaining to the release by the
Borrower or any of its Subsidiaries, or any other Person of any toxic or
hazardous waste or substance into the environment, or any violation of any
federal, state or local environmental, health or safety law or regulation,
which, in either case, could reasonably be expected to have a Material
Adverse Effect.

7.11. Any Change in Control shall occur.

7.12. Any Guaranty shall fail to remain in full force or effect or
any action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Guaranty, or any Guarantor shall fail to comply
with any of the terms or provisions of any Guaranty to which it is a party,
or any Guarantor denies that it has any further liability under any
Guaranty to which it is a party, or gives notice to such effect.

7.13. Twenty-five percent (25%) or more of the value of any class of
equity interests (which are not "publicly-offered securities" within the
---
meaning of 29 C.F.R. Sec.2510.3-101 (b)(2)) in the Borrower shall be held by
"benefit plan investors" within the meaning of 29 C.F.R. Sec.2510.3-101(f).

<PAGE>

7.14. The Borrower or any Subsidiary shall have received notice of
the suspension or debarment of the Borrower or any Subsidiary from
contracting with the federal government.

ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
----------------------------------------------

8.1. Acceleration. If any Default described in Section 7.6 or 7.7
------------
occurs with respect to the Borrower, the obligations of the Lenders to make
Loans and of an Issuing Bank to issue Facility Letters of Credit hereunder
shall automatically terminate and the Obligations shall immediately become
due and payable without any election or action on the part of the Agent or
any Lender. If any other Default occurs and is continuing, the Required
Lenders may terminate or suspend the obligations of the Lenders to make
Loans and of an Issuing Bank to issue Facility Letters of Credit hereunder,
or declare the Obligations to be due and payable, or both, whereupon the
Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrower hereby
expressly waives. In addition to the foregoing following the occurrence and
during the continuance of a Default, so long as any Facility Letter of
Credit has not been fully drawn and has not been cancelled or expired by
its terms, upon demand by the Agent the Borrower shall deposit in the
Letter of Credit Collateral Account cash in an amount equal to the
aggregate undrawn face amount of all outstanding Facility Letters of Credit
and all fees and other amounts due or which may become due with respect
thereto. The Borrower shall have no control over funds in the Letter of
Credit Collateral Account, which funds shall be invested by the Agent from
time to time in its discretion in certificates of deposit of First Chicago
having a maturity not exceeding thirty days, so long as the Borrower has
provided the Agent with such documents as the Agent shall have requested in
order to perfect a security interest in such certificates of deposit. Such
funds shall be promptly applied by the Agent to reimburse any Issuing Bank
for drafts drawn from time to time under the Facility Letters of Credit.
Such funds, if any, remaining in the Letter of Credit Collateral Account
following the payment of all Obligations in full shall, unless the Agent is
otherwise directed by a court of competent jurisdiction, be promptly paid
over to the Borrower.

If, within 14 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
and of an Issuing Bank to issue Facility Letters of Credit hereunder as a
result of any Default (other than any Default as described in Section 7.6
or 7.7 with respect to the Borrower) and before any judgment or decree for
the payment of the Obligations due shall have been obtained or entered, the
Required Lenders (in their sole discretion) shall so direct, the Agent
shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.

8.2. Amendments. Subject to the provisions of this Article VIII,
----------
the Required Lenders (or the Agent with the consent in writing of the
Required Lenders) and the Borrower may enter into agreements supplemental
hereto for the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Lenders or the
Borrower hereunder or waiving any Default hereunder; provided, however,
-------- -------
that no such supplemental agreement shall, without the consent of each
Lender, directly or indirectly, affected thereby:

(i) Extend the maturity of any Loan or Note or forgive all or any
portion of the principal amount thereof, or reduce the rate or
extend the time of payment of interest or fees
thereon.

<PAGE>

(ii) Reduce the percentage specified in the definition of Required
Lenders.

(iii) Reduce the amount or extend the payment date for, the
mandatory payments required under Section 2.7, or increase the
amount of the Commitment of any Lender hereunder, or permit
the Borrower to assign its rights under this Agreement.

(iv) Amend (a) this Section 8.2 or (b) Section 3.2, 7.6 or 7.7.

(v) Increase the maximum drawable amount or extend the expiration
date of any outstanding Facility Letter of Credit (except as
expressly permitted by its terms and in accordance with
Article III) or reduce the principal amount of or extend the
time of payment of any Reimbursement Obligation or fee
associated with any Facility Letter of Credit.

(vi) Release any Guarantor of any of the Obligations or release all
or substantially all of any collateral, if any.

No amendment of any provision of this Agreement relating to the Agent shall
be effective without the written consent of the Agent. The Agent may waive
payment of any fee payable to, and for the sole benefit of, the Agent
without obtaining the consent of any other party to this Agreement.

8.3. Preservation of Rights. No delay or omission of the Lenders or
----------------------
the Agent to exercise any right under the Loan Documents shall impair such
right or be construed to be a waiver of any Default or an acquiescence
therein, and the making of a Loan notwithstanding the existence of a
Default or the inability of the Borrower to satisfy the conditions
precedent to such Loan shall not constitute any waiver or acquiescence. Any
single or partial exercise of any such right shall not preclude other or
further exercise thereof or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of the
Loan Documents whatsoever shall be valid unless in writing signed by the
Lenders required pursuant to Section 8.2, and then only to the extent in
such writing specifically set forth. All remedies contained in the Loan
Documents or by law afforded shall be cumulative and all shall be available
to the Agent and the Lenders until the Obligations have been paid in full.

ARTICLE IX

GENERAL PROVISIONS
------------------

9.1. Survival of Representations. All representations and
---------------------------
warranties of the Borrower contained in this Agreement shall survive
delivery of the Notes and the making of the Loans and the issuance of the
Facility Letters of Credit herein contemplated.

9.2. Governmental Regulation. Anything contained in this Agreement
-----------------------
to the contrary notwithstanding, no Lender shall be obligated to extend
credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.

<PAGE>

9.3. Taxes. Any taxes (excluding federal income taxes on the
-----
overall net income of any Lender) or other similar assessments or charges
ruled payable by any governmental or revenue authority in respect of the
Loan Documents shall be paid by the Borrower, together with interest and
penalties, if any.

9.4. Headings. Section headings in the Loan Documents are for
--------
convenience of reference only, and shall not govern the interpretation of
any of the provisions of the Loan Documents.

9.5. Entire Agreement. The Loan Documents, together with the letter
----------------
agreement referred to in Section 2.6.3, embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede
all prior agreements and understandings among the Borrower, the Agent and
the Lenders relating to the subject matter thereof.

9.6. Several Obligations; Benefits of this Agreement. The
-----------------------------------------------
respective obligations of the Lenders hereunder are several and not joint
and no Lender shall be the partner or agent of any other (except to the
extent to which the Agent is authorized to act as such). The failure of any
Lender to perform any of its obligations hereunder shall not relieve any
other Lender from any of its obligations hereunder. This Agreement shall
not be construed so as to confer any right or benefit upon any Person other
than the parties to this Agreement and their respective successors and
assigns.

9.7. Expenses; Indemnification. The Borrower shall reimburse the
-------------------------
Agent for any reasonable costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent,
which attorneys may be employees of the Agent) paid or incurred by the
Agent in connection with the preparation, negotiation, execution, delivery,
review, amendment, modification, and administration of the Guaranty and the
Loan Documents (subject to any limitation contained in the letter agreement
referred to in Section 2.6.3). The Borrower also agrees to reimburse the
Agent and the Lenders for any reasonable costs, internal charges and out-
of-pocket expenses (including attorneys' fees and time charges of attorneys
for the Agent and the Lenders, which attorneys may be employees of the
Agent or the Lenders) paid or incurred by the Agent or any Lender in
connection with the collection and enforcement of the Guaranty and the Loan
Documents. The Borrower further agrees to indemnify the Agent and each
Lender, its directors, officers and employees against all losses, claims,
damages, penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether or
not the Agent or any Lender is a party thereto) which any of them may pay
or incur arising out of or relating to this Agreement, the Guaranty and the
other Loan Documents, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan or
the use or intended use of any Facility Letter of Credit hereunder;
provided that in no event shall any Person be entitled to indemnification
- --------
for any such losses, claims, damages, penalties, judgments, liabilities or
expenses arising out of the gross negligence or willful misconduct of such
Person or any of its Affiliates. The obligations of the Borrower under this
Section shall survive the termination of this Agreement.

9.8. Numbers of Documents. All statements, notices, closing
--------------------
documents, and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agent may furnish one to each of the
Lenders.

9.9. Accounting. Except as provided to the contrary herein, all
----------
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement
Accounting Principles.

<PAGE>

9.10. Severability of Provisions. Any provision in any Loan Document
--------------------------
that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable,
or invalid without affecting the remaining provisions in that jurisdiction
or the operation, enforceability, or validity of that provision in any
other jurisdiction, and to this end the provisions of all Loan Documents
are declared to be severable.

9.11. Nonliability of Lenders. The relationship between the Borrower
-----------------------
and the Lenders and the Agent shall be solely that of borrower and lender.
Neither the Agent nor any Lender shall have any fiduciary responsibilities
to the Borrower. Neither the Agent nor any Lender undertakes any
responsibility to the Borrower to review or inform the Borrower of any
matter in connection with any phase of the Borrower's business or
operations.

9.12. Language. The Loan Documents and all notices, communications,
--------
opinions and other documents to be furnished by or on behalf of the
Borrower pursuant to the Loan Documents shall be in the English language
or, in the case of any notices, communications, opinions or other documents
submitted in another language, accompanied by a certified English
translation thereof and in the event of any conflict between the English
text and such other text of any such document, the English text shall
prevail.

9.13. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING
-------------
A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE
STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

9.14. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
-----------------------
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR
ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY
OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
CHICAGO, ILLINOIS.

9.15. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER
--------------------
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE)
IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT
OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

<PAGE>

9.16. Confidentiality. Each Lender agrees to hold any confidential
---------------
information which it may receive from the Borrower or any Subsidiary
pursuant to this Agreement in confidence, except for disclosure (i) to
other Lenders and their respective Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to that Lender or to a
Transferee on a need-to-know basis, (iii) upon request from regulatory
officials, (iv) to any Person as required by law, regulation, or legal
process, (v) to any Person as required in connection with any legal
proceeding to which that Lender is a party, and (vi) permitted by Section
12.4.

ARTICLE X

THE AGENT
---------

10.1. Appointment. The First National Bank of Chicago is hereby
-----------
appointed Agent hereunder and under each other Loan Document, and each of
the Lenders irrevocably authorizes the Agent to act as the agent of such
Lender. The Agent agrees to act as such upon the express conditions
contained in this Article X. The Agent shall not have a fiduciary
relationship in respect of the Borrower or any Lender by reason of this
Agreement.

10.2. Powers. The Agent is hereby authorized to execute and accept
------
the Guaranty. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental
thereto. The Agent shall have no implied duties to the Lenders, or any
obligation to the Lenders to take any action thereunder except any action
specifically provided by the Loan Documents to be taken by the Agent.

10.3. General Immunity. Neither the Agent nor any of its directors,
----------------
officers, agents or employees shall be liable to the Borrower, the Lenders
or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or willful
misconduct.

10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent
-------------------------------------------
nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i)
any statement, warranty or representation made in connection with any Loan
Document or any borrowing hereunder; (ii) the performance or observance of
any of the covenants or agreements of any obligor under any Loan Document,
including, without limitation, any agreement by an obligor to furnish
information directly to each Lender; (iii) the satisfaction of any
condition specified in Article IV, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness
of any Loan Document or any other instrument or writing furnished in
connection therewith. The Agent shall have no duty to disclose to the
Lenders information that is not required to be furnished by the Borrower to
the Agent at such time, but is voluntarily furnished by the Borrower to the
Agent (either in its capacity as Agent or in its individual capacity),
unless such information would have a Material Adverse Effect.

10.5. Action on Instructions of Lenders. The Agent shall in all
---------------------------------
cases be fully protected in acting, or in refraining from acting, hereunder
and under any other Loan Document in accordance with written instructions
signed by the Required Lenders, and such instructions and any action taken
or failure to act pursuant thereto shall be binding on all of the Lenders
and on all holders of Notes. The Agent shall

<PAGE>

be fully justified in failing or refusing to take any action hereunder and
under any other Loan Document unless it shall first be indemnified to its
satisfaction by the Lenders pro rata against any and all liability, cost
and expense that it may incur by reason of taking or continuing to take any
such action.

10.6. Employment of Agents and Counsel. The Agent may execute any of
--------------------------------
its duties as Agent hereunder and under any other Loan Document by or
through employees, agents, and attorneys-in-fact and shall not be
answerable to the Lenders, except as to money or securities received by it
or its authorized agents, for the default or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care. The Agent shall
be entitled to advice of counsel concerning all matters pertaining to the
agency hereby created and its duties hereunder and under any other Loan
Document.

10.7. Reliance on Documents; Counsel. The Agent shall be entitled to
------------------------------
rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons,
and, in respect to legal matters, upon the opinion of counsel selected by
the Agent, which counsel may be employees of the Agent.

10.8. Agent's Reimbursement and Indemnification. The Lenders agree
-----------------------------------------
to reimburse and indemnify the Agent ratably in proportion to their
respective Commitments (i) for any amounts not reimbursed by the Borrower
for which the Agent is entitled to reimbursement by the Borrower under the
Loan Documents, (ii) for any other expenses incurred by the Agent on behalf
of the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever
which may be imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of the Loan Documents or any other document
delivered in connection therewith or the transactions contemplated thereby,
or the enforcement of any of the terms thereof or of any such other
documents, provided that no Lender shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of
the Agent. The obligations of the Lenders under this Section 10.8 shall
survive payment of the Obligations and termination of this Agreement.

10.9. Rights as a Lender. In the event the Agent is a Lender
------------------
(including its capacity as an Issuing Bank), the Agent shall have the same
rights and powers hereunder and under any other Loan Document as any Lender
and may exercise the same as though it were not the Agent, and the term
"Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless
the context otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, and generally
engage in any kind of trust, debt, equity or other transaction, in addition
to those contemplated by this Agreement or any other Loan Document, with
the Borrower or any of its Subsidiaries in which the Borrower or such
Subsidiary is not restricted hereby from engaging with any other Person.
The Agent, in its individual capacity, is not obligated to remain a Lender.

10.10. Lender Credit Decision. Each Lender acknowledges that it has,
----------------------
independently and without reliance upon the Agent or any other Lender and
based on the financial statements prepared by the Borrower and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Loan Documents.

<PAGE>

10.11. Successor Agent. The Agent may resign at any time by giving
---------------
written notice thereof to the Lenders and the Borrower, such resignation to
be effective upon the appointment of a successor Agent or, if no successor
Agent has been appointed, forty-five days after the retiring Agent gives
notice of its intention to resign. Upon any such resignation, the Required
Lenders shall have the right to appoint, on behalf of the Borrower and the
Lenders, a successor Agent. If no successor Agent shall have been so
appointed by the Required Lenders within thirty days after the resigning
Agent's giving notice of its intention to resign, then the resigning Agent
may appoint, on behalf of the Borrower and the Lenders, a successor Agent.
No successor Agent shall be deemed to be appointed hereunder until such
successor Agent has accepted the appointment. Any such successor Agent
shall be a commercial bank having capital and retained earnings of at least
$100,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
resigning Agent. Upon the effectiveness of the resignation of the Agent,
the resigning Agent shall be discharged from its duties and obligations
hereunder and under the Loan Documents. After the effectiveness of the
resignation of an Agent, the provisions of this Article X shall continue in
effect for the benefit of such Agent in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent hereunder and
under the other Loan Documents.

ARTICLE XI.

SETOFF; RATABLE PAYMENTS
------------------------

11.1. Setoff. In addition to, and without limitation of, any rights
------
of the Lenders under applicable law, if the Borrower becomes insolvent,
however evidenced, or any Default or Unmatured Default occurs, any and all
deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Indebtedness at any
time held or owing by any Lender to or for the credit or account of the
Borrower may be offset and applied toward the payment of the Obligations
owing to such Lender, whether or not the Obligations, or any part hereof,
shall then be due.

11.2. Ratable Payments. If any Lender, whether by setoff or
----------------
otherwise, has payment made to it upon its share of any Advance (other than
payments received pursuant to Sections 2.17.1, 2.17.2, 2.17.3 or 2.17.5) in
a greater proportion than that received by any other Lender, such Lender
agrees, promptly upon demand, to purchase a portion of the Loans comprising
that Advance held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Loans comprising that Advance.
If any Lender, whether in connection with setoff or amounts which might be
subject to setoff or otherwise, receives collateral or other protection for
its Obligations or such amounts which may be subject to setoff, such Lender
agrees, promptly upon demand, to take such action necessary such that all
Lenders share in the benefits of such collateral ratably in proportion to
their Loans. In case any such payment is disturbed by legal process, or
otherwise, appropriate further adjustments shall be made.

<PAGE>

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
-------------------------------------------------

12.1. Successors and Assigns. The terms and provisions of the Loan
----------------------
Documents shall be binding upon and inure to the benefit of the Borrower
and the Lenders and their respective successors and assigns, except that
(i) the Borrower shall not have the right to assign its rights or
obligations under the Loan Documents and (ii) any assignment by any Lender
must be made in compliance with Section 12.3. Notwithstanding clause (ii)
of this Section, any Lender may at any time, without the consent of the
Borrower or the Agent, assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank; provided, however, that
-------- -------
no such assignment shall release the transferor Lender from its obligations
hereunder. The Agent may treat the payee of any Note as the owner thereof
for all purposes hereof unless and until such payee complies with Section
12.3 in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with the Agent. Any
assignee or transferee of a Note agrees by acceptance thereof to be bound
by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request
or giving such authority or consent is the holder of any Note, shall be
conclusive and binding on any subsequent holder, transferee or assignee of
such Note or of any Note or Notes issued in exchange therefor.

12.2. Participations.
--------------

12.2.1. Permitted Participants; Effect. Any Lender may, in the
------------------------------
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Lender's Percentage of
Facility Letters of Credit, any Commitment of such Lender or any other
interest of such Lender under the Loan Documents. In the event of any
such sale by a Lender of participating interests to a Participant,
such Lender's obligations under the Loan Documents shall remain
unchanged, such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Lender
shall remain the holder of any such Note for all purposes under the
Loan Documents, all amounts payable by the Borrower under this
Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Agent shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.

12.2.2. Voting Rights. Each Lender shall retain the sole right to
---------------
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any Loan,
Facility Letter of Credit or Commitment in which such Participant has
an interest which forgives principal, interest or fees or reduces the
interest rate or fees payable with respect to any such Loan, Facility
Letter of Credit or Commitment, postpones any date fixed for any
regularly-scheduled payment of principal of, or interest or fees on,
any such Loan, Facility Letter of Credit or Commitment, releases any
Guarantor or releases any substantial portion of collateral, if any,
securing any such Loan or Facility Letter of Credit.

<PAGE>

12.2.3. Benefit of Setoff. The Borrower agrees that each
-------------------
Participant shall be deemed to have the right of setoff provided in
Section 11.1 in respect of its participating interest in amounts owing
under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the
Loan Documents, provided that each Lender shall retain the right of
setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to
share with each Participant, and each Participant, by exercising the
right of setoff provided in Section 11.1, agrees to share with each
Lender, any amount received pursuant to the exercise of its right of
setoff, such amounts to be shared in accordance with Section 11.2 as
if each Participant were a Lender.

12.3. Assignments.
-----------

12.3.1. Permitted Assignments. Any Lender may, in the ordinary
---------------------
course of its business and in accordance with applicable law, at any
time assign to one or more banks or other entities ("Purchasers") all
or any part of its rights and obligations under the Loan Documents.
Such assignment shall be substantially in the form of Exhibit "I"
hereto or in such other form as may be agreed to by the parties
thereto. The consent of the Borrower and the Agent shall be required
prior to an assignment becoming effective with respect to a Purchaser
which is not a Lender or an Affiliate thereof; provided, however, that
-------- -------
if a Default has occurred and is continuing, the consent of the
Borrower shall not be required. Such consent shall not be unreasonably
withheld.

12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent of
----------------------
a notice of assignment, substantially in the form attached as Annex
"I" to Exhibit "I" hereto (a "Notice of Assignment"), together with
any consents required by Section 12.3.1, and (ii) payment of a $2,500
fee to the Agent for processing such assignment, such assignment shall
become effective on the effective date specified in such Notice of
Assignment. The Notice of Assignment shall contain a representation by
the Purchaser to the effect that none of the consideration used to
make the purchase of the Commitment, Facility Letters of Credit and
Loans under the applicable assignment agreement are "plan assets" as
defined under ERISA and that the rights and interests of the Purchaser
in and under the Loan Documents will not be "plan assets" under ERISA.
On and after the effective date of such assignment, such Purchaser
shall for all purposes be a Lender party to this Agreement and any
other Loan Document executed by the Lenders and shall have all the
rights and obligations of a Lender under the Loan Documents, to the
same extent as if it were an original party hereto, and no further
consent or action by any of the Borrower, the Lenders or the Agent
shall be required to release the transferor Lender with respect to its
Percentage of the Aggregate Commitment, Facility Letters of Credit and
Loans assigned to such Purchaser. Upon the consummation of any
assignment to a Purchaser pursuant to this Section 12.3.2, the
transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such transferor
Lender and new Notes or, as appropriate, replacement Notes, are issued
to such Purchaser, in each case in principal amounts reflecting their
Commitments, as adjusted pursuant to such assignment. In addition,
within a reasonable time after the effective date of any assignment,
the Agent shall, and is hereby authorized and directed to, revise
Schedule "1" reflecting the revised Percentages of each of the Lenders
and shall distribute such revised Schedule "I" to the Lenders and the
Borrower and such revised Schedule "1" shall replace the old Schedule
"1" and become part of this Agreement.

<PAGE>

12.4. Dissemination of Information. The Borrower authorizes each
----------------------------
Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each
a "Transferee") and any prospective Transferee any and all information
in such Lender's possession concerning the creditworthiness of the
Borrower and its Subsidiaries; provided that each Transferee and
--------
prospective Transferee agrees to be bound by the confidentiality
restrictions set forth in Section 9.16 of this Agreement.

12.5. Tax Treatment. If any interest in any Loan Document is
-------------
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the
transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer, to comply with the provisions of
Section 2.16.

ARTICLE XIII
NOTICES
-------

13.1. Giving Notice. Except as otherwise permitted by Section
-------------
2.11 with respect to borrowing notices, all notices and other
communications provided to any party hereto under this Agreement or
any other Loan Document shall be in writing or by telex or by
facsimile and addressed or delivered to such party at its address set
forth below its signature hereto or at such other address as may be
designated by such party in a notice to the other parties. Any notice,
if mailed and properly addressed with postage prepaid, shall be deemed
given when received; any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted (answerback confirmed in the
case of telexes).

13.2. Change of Address. The Borrower, the Agent and any Lender
-----------------
may each change the address for service of notice upon it by a notice
in writing to the other parties hereto.

ARTICLE XIV
COUNTERPARTS
------------

This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower, the
Agent and the Lenders and each party has notified the Agent by telex or
telephone, that it has taken such action.

<PAGE>

IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.

BDM INTERNATIONAL, INC.,
as the Borrower

By: /s/ Judith N. Huntzinger
--------------------------------------

Print Name: JUDITH N. HUNTZINGER
------------------------------

Title: SENIOR VICE PRESIDENT & CONTROLLER
-----------------------------------
1501 BDM Way
McLean, VA 22102
Phone: (703) 848-5066
Fax: (703) 848-6270

Attention: Judith N.Huntzinger,
Senior Vice President
and Controller

THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent

By: /s/ Ted Wozniak
--------------------------------------

Print Name: TED WOZNIAK / AUTHORIZED AGENT
------------------------------

Title: Managing Director
-----------------------------------
One First National Plaza
Chicago, Illinois 60670
Phone: (312) 732-1032
Fax: (312) 732-3885

Attention: Theodore C. Wozniak

<PAGE>

CORESTATES BANK, N.A.,
lndividually and as Co-Agent

By: /s/ Matthew T. Panarese
-----------------------------

Print Name: MATTHEW T. PANARESE
---------------------
Title: VICE PRESIDENT
--------------------------
FC 1-8-3-16
1339 Chestnut Street
Philadelphia, Pennsylvania
19101-7618
Phone (215) 973-3646
Fax: (215) 973-6745

Attention: Matthew T. Panarese
Vice President

CRESTAR BANK By

By: /s/ Diane D. Taylor
-----------------------------

Print Name: DIANE D. TAYLOR
---------------------

Title: SVP
--------------------------
8245 Boone Boulevard Suite 300
Vienna, Virginia 22182
Phone (703) 902-9084
Fax: (703) 902-9075

Attention: Diane Taylor
Senior Vice President

SIGNET BANK

By: /s/ Michael C. O'grady
-----------------------------

Print Name: MICHAEL C. O'GRADY
---------------------

Title: VICE PRESIDENT
--------------------------
7799 Leesburg Pike,
N. Tower Falls
Church, VA 22043
Phone: (703) 714-5034
Fax: (703) 506-9551

Attention: Michael C. O'Grady
Vice President

<PAGE>

THE, BANK OF TOKYO LIMITED,
NEW YORK AGENCY

By: /s/ Yukio Yanaka
-----------------------------

Print Name: YUKIO YANAKA
---------------------

Title: SENIOR VICE PRESIDENT
--------------------------
1251 Avenue of the Americas
New York, New York 10116-3138
Phone: (201) 413-8726
Fax: (201) 413-8920/8922

Attention: Aura Buchberger

with a copy to:

2000 K Street, N.W. - Suite 701
Washington, DC 20006
Phone: (202)463-0177
Fax: (202) 293-3416

Attention: R. Frederick Kay, Jr.

BAYERISCHE VEREINSBANK AG,
New York Branch

By: /s/ Marrianne Weinzinger
-----------------------------

Print Name: MARRIANNE WEINZINGER
---------------------

Title: VICE PRESIDENT
--------------------------
335 Madison Avenue 19th Floor
New York, New York 10017-4679
Phone: (212) 210-0352
Fax: (212) 880-9724

Attention: Marrianne Weinzinger

Exhibit 10.13

BDM

401(k) SAVINGS PLAN

Effective Date: August 26, 1985

Amended and Restated Effective December 26, 1989

<PAGE>
TABLE OF CONTENTS

Page
----
Section 1 - Definitions
- -----------------------

1.1 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Adjustment Date . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Direct Transfer Account . . . . . . . . . . . . . . . . . . . . 2
1.9 Direct Transfer Contribution . . . . . . . . . . . . . . . . . . 2
1.10 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Election Date . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 Employer Matching Contribution . . . . . . . . . . . . . . . . . 4
1.17 Employer Matching Contribution Account . . . . . . . . . . . . . 4
1.18 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 Hour of Service . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.21 Nondeductible Contribution Account . . . . . . . . . . . . . . . 6
1.22 Normal Retirement Age . . . . . . . . . . . . . . . . . . . . . 6
1.23 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.24 Period of Service . . . . . . . . . . . . . . . . . . . . . . . 6
1.25 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.26 Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.27 Retire or Retirement . . . . . . . . . . . . . . . . . . . . . . 7
1.28 Rollover Account . . . . . . . . . . . . . . . . . . . . . . . . 7
1.29 Rollover Contribution . . . . . . . . . . . . . . . . . . . . . 7
1.30 Salary Reduction Agreement . . . . . . . . . . . . . . . . . . . 7
1.31 Salary Reduction Contribution . . . . . . . . . . . . . . . . . 8
1.32 Salary Reduction Contribution Account . . . . . . . . . . . . . 8
1.33 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.34 Trust or Trust Fund . . . . . . . . . . . . . . . . . . . . . . 8
1.35 Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . 8

<PAGE>
Page
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SECTION 2 - CONTRIBUTIONS TO THE TRUST AND ALLOCATION THEREOF
- -------------------------------------------------------------

2.1 Salary Reduction Contributions . . . . . . . . . . . . . . . . . . 9
2.2 Employer Matching Contributions . . . . . . . . . . . . . . . . . 12
2.3 Limitations on Salary Reduction Contributions and
Employer Matching Contributions . . . . . . . . . . . . . . . . 13
2.4 Limitations on Contributions . . . . . . . . . . . . . . . . . . 18
2.5 Limitations on Allocations . . . . . . . . . . . . . . . . . . . . 18
2.6 Nondeductible Voluntary Employee Contributions . . . . . . . . . . 23

SECTION 3 - RETIREMENT: TERMINATION OF SERVICE: DEATH
- -----------------------------------------------------

3.1 Normal Retirement . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2 Delayed Retirement . . . . . . . . . . . . . . . . . . . . . . . 25
3.3 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.4 Termination of Service . . . . . . . . . . . . . . . . . . . . . 25
3.5 Payment of Accounts . . . . . . . . . . . . . . . . . . . . . . . 26
3.6 Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.7 Continued Share in Profits or Losses of Trust Fund . . . . . . . 27
3.8 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.9 Pretermination Distributions . . . . . . . . . . . . . . . . . . 30

SECTION 4 - VESTING
- -------------------

4.1 Salary Reduction Contribution Accounts, Nondeductible Voluntary
Employee Contribution Accounts and Rollover Contribution Accounts 33
4.2 Employer Matching Contribution Accounts . . . . . . . . . . . . . 33
4.3 Restoration of Employer Matching Contribution Accounts . . . . . 33

SECTION 5 - ACCOUNTS; INVESTMENT FUNDS; ADJUSTMENT OF ACCOUNTS OF
- -----------------------------------------------------------------
PARTICIPANTS
- ------------

5.1 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.2 Investment Funds . . . . . . . . . . . . . . . . . . . . . . . . 34
5.3 Adjustments to Accounts . . . . . . . . . . . . . . . . . . . . . 36
5.4 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 37

SECTION 6 - ADMINISTRATION BY COMMITTEE . . . . . . . . . . . . . . . . 38
- ---------------------------------------

SECTION 7 - MANAGEMENT OF FUNDS AND AMENDMENT OF PLAN . . . . . . . . . 41
- -----------------------------------------------------

SECTION 8 - ALLOCATION OF RESPONSIBILITIES AMONG NAMED FIDUCIARIES . . 43
- ------------------------------------------------------------------

SECTION 9 - BENEFITS NOT ASSIGNABLE; FACILITY OF PAYMENTS . . . . . . 45
- ---------------------------------------------------------

SECTION 10 - BENEFICIARY . . . . . . . . . . . . . . . . . . . . . . . 46
- ------------------------

<PAGE>
Page
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SECTION 11 - TERMINATION OF PLAN AND TRUST; REMOVAL OF TRUST; MERGER OR
- -----------------------------------------------------------------------
CONSOLIDATION OF PLAN
- ---------------------

11.1 Complete Termination . . . . . . . . . . . . . . . . . . . . . . 48
11.2 Partial Termination . . . . . . . . . . . . . . . . . . . . . . 48
11.3 Merger and Consolidation . . . . . . . . . . . . . . . . . . . . 48

SECTION 12 - COMMUNICATION TO PARTICIPANTS . . . . . . . . . . . . . . 49
- ------------------------------------------

SECTION 13 - CLAIMS PROCEDURE
- -----------------------------

13.1 Filing of a Claim for Benefits . . . . . . . . . . . . . . . . . 50
13.2 Notification to Claimant of Decision . . . . . . . . . . . . . . 50
13.3 Procedure for Review . . . . . . . . . . . . . . . . . . . . . . 51
13.4 Decision on Review . . . . . . . . . . . . . . . . . . . . . . . 51
13.5 Action by Authorized Representative of Claimant . . . . . . . . 52

SECTION 14 - PARTIES TO THE PLAN . . . . . . . . . . . . . . . . . . . 53
- --------------------------------

SECTION 15 - SPECIAL TOP-HEAVY PROVISIONS
- -----------------------------------------

15.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.2 Determination of Top-Heavy Status . . . . . . . . . . . . . . . 60
15.3 Top-Heavy Requirements . . . . . . . . . . . . . . . . . . . . . 61

SECTION 16 - PORTABILITY OF PARTICIPANT ACCOUNTS . . . . . . . . . . . 65
- ------------------------------------------------

SECTION 17 - SPECIAL PROVISIONS RELATING TO TRANSFERS FROM
- ----------------------------------------------------------
QUALIFIED PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
- ---------------

SECTION 18 - ROLLOVERS . . . . . . . . . . . . . . . . . . . . . . . . 68
- ----------------------

SECTION 19 - SPECIAL TRANSFER FROM RETIREMENT PLAN . . . . . . . . . . 70
- --------------------------------------------------

SECTION 20 - MISCELLANEOUS PROVISIONS
- -------------------------------------

20.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
20.2 Lost Distributees . . . . . . . . . . . . . . . . . . . . . . . 71
20.3 Reliance on Data . . . . . . . . . . . . . . . . . . . . . . . . 71
20.4 Bonding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
20.5 Receipt and Release of Payments . . . . . . . . . . . . . . . . 72
20.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
20.7 Continuation of Employment . . . . . . . . . . . . . . . . . . . 72
20.8 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 72

<PAGE>
BDM

401(k) SAVINGS PLAN

SECTION 1 - DEFINITIONS
-----------------------

As used in the Plan, including this Section 1, and in the Trust Agreement

which is part of the Plan, references to one gender shall include the other

and, unless otherwise indicated by the context.

1.1 "Accounts" shall mean the separate accounts to be maintained by the

Committee with respect to each Participant as described in Section

5.1.

1.2 "Adjustment Date" shall mean for each Plan Year the 25th day of each

calendar month, commencing with September 25, 1985. The December 25

Adjustment Date shall be referred to herein as the "Year-End

Adjustment Date." Effective July 1, 1995, the Adjustment Date shall

be the first business day following receipt of an appropriate notice

requiring the valuation of a Participant's Account for any purpose.

1.3 "Beneficiary" shall mean the person, persons or entity designated or

determined pursuant to the provisions of Section 10 of the Plan.

1.4 "Board" shall mean the Board of Directors of BDM International, Inc.

1.5 "Code" shall mean the Internal Revenue Code of 1986 and rules and

regulations issued thereunder.

1.6 "Committee" shall mean the Committee on Employee Benefits of BDM

International, Inc.

1.7 "Compensation" shall mean the basic remuneration actually paid by the

Employer to an Employee during a Plan Year for Service, excluding any

pay for overtime service, bonuses, the cost of any group insurance and

hospitalization, disability or similar benefits, benefits under the

Plan, any amounts subject to a Salary Reduction Agreement or election

under Section 125 of the Code or any other payments or benefits not

customarily included in basic renumeration.

<PAGE>
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1.8 "Direct Transfer Account" shall mean the separate account to be kept

for the Participant, as described in Sections 5 and 17, with respect

to amounts derived from the direct transfer by the trustee of another

qualified retirement plan to the Trustee under this Plan of assets

allocated to such Participant under such other qualified plan.

1.9 "Direct Transfer Contribution" shall mean the transfer of assets with

respect to a Participant as described in Section 17.

1.10 "Disability" shall mean, for purposes of the Plan, the inability, by

reason of any medically determinable physical or mental impairment

which can be expected to result in death or to continue for a period

of not less than six months, of the Participant to perform his regular

duties with the Employer or any other duties which the Employer is

willing to assign to him. The determination of the existence or

nonexistence of Disability shall be made by the Committee in a

nondiscriminatory manner pursuant to a medical examination by a

medical doctor selected or approved by the Committee.

1.11 "Earnings" shall mean a Participant's Compensation with respect to a

Plan Year, increased by the amount subject to any Salary Reduction

Agreement or election under Section 125 of the Code entered into by

the Participant for such year. Effective December 26, 1989, Earnings

shall not exceed the limitation provided under Section 401(a)(17) of

the Code for the calendar year in which the Plan Year begins. Such

annual limitation shall be adjusted from time to time as provided by

the Code.

1.12 "Effective Date of the Plan" shall be August 26, 1985.

1.13 "Election Date" shall mean the 26th day of March, June, September and

December of each calendar year, commencing with September 26, 1985.

Effective December 23, 1992, Election Date shall mean the 23rd day of

any calendar month. Effective July 1, 1995, Election Date shall mean

any business day of any calendar month.

<PAGE>
-3-

1.14 "Employee" shall mean, except as otherwise provided herein, an

individual in the service of the Employer if the relationship between

him and the Employer is the legal relationship of employer and

employee. In determining who is an Employee for the purposes of this

Plan, the following special provisions shall apply to the extent

applicable:

(a) Except for the purpose of applying the rules of Section 2.3, all

employees of all corporations which are members of a controlled

group of corporations (as defined in Section 414(b) of the Code)

which includes the Employer, and all employees of all trades or

businesses (whether or not incorporated) under common control (as

defined in Section 414(c) of the Code) which includes the

Employer, shall be treated as Employees of the Employer.

(b) All employees of all members of an affiliated service group (as

defined in Section 414(m) of the Code) which includes the

Employer shall be treated as Employees of the Employer.

Employer, but contributions or benefits provided by the leasing

organization which are attributable to services performed for the

Employer shall be treated as provided by the Employer. This

Section 1.14(c) shall not apply to any leased employee if such

employee is covered by a money purchase pension plan providing:

(i) a nonintegrated employer contribution rate of at least 7 1/2

percent of compensation, (ii) immediate participation, and (iii)

full and immediate vesting. For purposes hereof, the term "leased

employee" shall mean any person who, pursuant to an agreement

between the Employer and any other person (the "leasing

organization"), has performed services for the Employer (or for

the Employer and related persons determined in accordance with

Section 414(n)(6) of the Code) on a substantially full-time basis

for a period of at least one year and such services are of a type

historically performed by employees in the trade or business of

the Employer.

(d) Employees included in a unit of employees covered by a collective

bargaining agreement between employee representatives and the

Employer, if retirement benefits were the subject of good faith

bargaining between such employee

<PAGE>
-4-

representatives and the Employer, shall not be treated as

Employees of the Employer.

(e) Employees who are nonresident aliens and who receive no income

from the Employer which constitutes income from sources within

the United States shall not be treated as Employees of the

Employer.

See Section 1.23 for provisions governing eligibility of an Employee

to become a Participant in the Plan.

1.15 "Employer" shall mean BDM International, Inc., a corporation with its

principal office at McLean, Virginia, or any successor thereto by

merger, consolidation or otherwise, which may agree to continue this

Plan.

1.16 "Employer Matching Contribution" shall mean the amounts contributed to

the Plan by the Employer pursuant to the provisions of Section 2.2 of

the Plan.

1.17 "Employer Matching Contribution Account" shall mean the separate

account to be kept for each Participant as described in Sections 2.2

and 5 with respect to amounts derived from Employer Matching

Contributions.

1.18 "ERISA" shall mean the Employee Retirement Income Security Act of

1974, as amended (including amendments of the Internal Revenue Code

affected thereby), and rules and regulations issued thereunder.

1.19 "Hour of Service" shall mean:

(a) each hour for which an Employee is paid or entitled to payment by

the Employer for Service;

(b) each hour for which an Employee is paid or entitled to payment by

the Employer for reasons other than for Service (such as

vacation, holiday, illness, incapacity (including disability),

layoff, jury duty, military duty or leave of absence);

<PAGE>
-5-

back pay (irrespective of mitigation of damages) has been either

awarded or agreed to by the Employer; and

(d) each hour for which an Employee is not actually in Service but is

required to be given credit for Service under any law of the

United States; provided, that in applying paragraph (b) for

periods in which an Employee is not actually in service, the

following special provisions shall apply:

(i) No hours shall be credited with respect to payments made

to the Employee for the purpose of complying with

applicable workmen's compensation, unemployment

compensation or disability insurance laws, or payments

solely to reimburse an Employee for medical or medically

related expenses incurred by the Employee; and

(ii) An amount paid to an Employee by the Employer indirectly,

such as by a trust, fund or insurer to which the Employer

makes contributions or pays premiums, shall be deemed to

be aid by the Employer.

An Employee shall be credited with Hours of Service on the basis of

the records of the Employer showing the hours for which payment is

made or due to the Employee. No more than 501 Hours of Service shall

be credited under (b) or (c) to an Employee on account of any single

continuous period during which an Employee performs no duties. The

provisions of this Section 1.19 shall be applied in accordance with

the provisions of United States Department of Labor Regulations

Sections 2530.200b-2(b)and (c), which provisions are incorporated

herein by reference.

1.20 "Net Profit" shall mean the net profit of the Employer for the Plan

year as determined according to generally accepted accounting

principles and practices by the accountant of the Employer, subject to

the following adjustments:

(a) gains or losses arising from the sale or other disposition of

fixed or capital assets of the Employer shall be excluded;

(b) taxes based upon income shall not be deducted; and

<PAGE>
-6-

defined contribution plan maintained by the Employer shall not

be deducted.

1.21 "Nondeductible Contribution Account" shall mean the separate account

to be kept for the Participant, as described in Sections 2.4 and 5,

with respect to amounts derived from his Nondeductible Voluntary

Contributions made prior to December 26, 1987.

1.22 "Normal Retirement Age" of a Participant shall be age sixty. The

"Normal Retirement Date" of a Participant shall mean the first day of

the calendar month coincident with or next following attainment of his

Normal Retirement Age.

1.23 "Participant" shall mean with respect to any Plan Year an Employee who

has entered the Plan and any former Employee who has an interest in

the Plan, except that an individual who is employed by an entity

described in Section 1.14(a) or 1.14(b), and which entity is not a

party to the Plan, or who is a leased employee described in Section

1.14(c), or who is not a regular full-time Employee, who is not a

regular part-time Employee, shall not be a Participant. For purposes

of this Section 1.23, a "regular full-time" Employee shall mean an

individual in the full-time employment of the Employer in an

established job requiring a minimum of forty Hours of Service per week

on a year-round basis. A "regular part-time" Employee shall mean an

individual in part-time employment of the Employer in an established

job requiring an average of 20 Hours of Service per week on a year-

round basis. An Employee shall enter the Plan and become a

Participant as of the date he shall complete his first Hour of Service

on or after the Effective Date of the Plan. If a Participant shall

terminate Service and shall reenter Service following such

termination, he shall automatically reenter the Plan as of the date he

shall reenter Service.

1.24 "Period of Service" shall mean the period of time from the date the

Employee first performs one Hour of Service to the date the Employee

quits, is discharged, retires, or dies, or the first anniversary of

the date the employee is absent from service for any other reason. An

Employee who is absent from work by reason of pregnancy, birth of a

child of the

<PAGE>

-7-

Employee, adoption of a child, or for purposes of caring for a child

following birth or adoption under an approved leave required by

federal law, including the Family Medical Leave Act of 1993, shall

have the period of leave added to service. A Period of Service shall

include any period of less than 12 months following the quit or

discharge of an Employee if the Employee is rehired before the end of

such 12-month period of absence. Periods of Service shall be

aggregated in accordance with the rules set forth in Section 1.410(a)-

7 of the Income Tax Regulations.

1.25 "Plan" shall mean the plan as herein set out or as duly amended.

1.26 "Plan Year" shall mean the 12 calendar month period commencing on

December 26 of each year and ending on the following December 25,

except for the first Plan year which commenced on August 26, 1985.

1.27 "Retire" or "Retirement" shall mean separation from Service (for

reasons other than death) under circumstances treated as Retirement

(including Disability Retirement) under the Plan.

1.28 "Rollover Account" shall mean the separate account to be kept for the

Participant, as described in Sections 5 and 18, with respect to

amounts derived from assets transferred by the Participant to this

Plan from another qualified retirement plan or individual retirement

account or annuity, which transfer satisfies the requirements of a

Rollover Contribution as described in Section 402(a) of the Code.

1.29 "Rollover Contribution" shall mean a rollover to the Plan by a

Participant as described in Section 18.

1.30 "Salary Reduction Agreement" shall mean a written agreement, entered

into by a Participant, pursuant to the provisions of Section 2.1(c)

of the Plan.

<PAGE>
-8-

1.31 "Salary Reduction Contributions" shall mean the amounts contributed to

the Plan by the Employer pursuant to the provisions of Section 2.1(b)

of the Plan.

1.32 "Salary Reduction Contribution Account" shall mean the separate

account to be kept for each Participant, as described in Sections 2.1

and 5, with respect to amounts derived from Salary Reduction

Contributions.

1.33 "Service" shall mean employment by the Employer as an Employee;

provided, that unless and to the extent the Board shall expressly

agree otherwise, service with a corporation or organization prior to

becoming a member of a controlled group, affiliated service group, or

trade or business under common control within the meaning of Sections

1.14(a) and 1.14(b) shall be disregarded for all purposes of this

Plan.

1.34 "Trust" or "Trust Fund" shall mean the Trust Fund held by the Trustee

under the Plan.

1.35 "Trust Agreement" shall mean the agreement between the Employer and

the Trustee which shall be a part of the Plan.

<PAGE>
-9-

SECTION 2 - CONTRIBUTIONS TO THE TRUST AND ALLOCATION THEREOF
-------------------------------------------------------------

2.1 Salary Reduction Contributions:

(a) (i) Salary Reductions Before July 1, 1995: Each Participant,
---------------------------------------

as of an Election Date coincident with or next following

the later of (i) the attainment of his twenty-first

birthday, or (ii) the completion of six Months of Service,

may elect by entering into a Salary Reduction Agreement

with the Employer to reduce his Earnings from the Employer

by a whole number percentage between two percent and

fifteen percent; provided, if such Participant is highly

compensated within the meaning of Section 2.3(a)(iv), he

may elect to reduce his earnings between two percent and

fifteen percent (or such lesser percentage as may be

determined by the Committee). Amounts subject to Salary

Reduction Agreements effective for a given Plan Year shall

be reduced proportionately to the extent that the Net

Profits of the Employer for such Plan Year and the

accumulated Net Profits for all preceding Plan Years are

not equal to the amounts subject to such Salary Reduction

Agreements. All amounts so reduced, adjusted for earnings,

gains and losses allocable thereto, shall be returned to

the Employer and immediately thereafter paid by the

Employer directly to the applicable Participants.

Effective December 23, 1991, a Participant or future

Participant shall become eligible to enter into a Salary

Reduction Agreement upon the attainment of his twenty-

first birthday.

(ii) Salary Reductions on or After July 1, 1995: Each
------------------------------------------

Participant, as of an Election Date following the

attainment of his twenty-first birthday, may elect by

entering into a Salary Reduction Agreement with the

Employer to reduce his Earnings by a whole number percent

between one and fifteen. Such payment to or by the

Employer shall not be contingent upon the Net Profits of

the Employer. Provided, that a Highly Compensated

Employee's maximum deferral percentage (as defined in

Section 2.3(a)(iv)) may be limited to a lesser percent

effective for Plan Years beginning December 26,

<PAGE>
-10-

1994 and thereafter. The Committee shall have the

authority to adjust such maximum percentage for Highly

Compensated Employees.

(b) Salary Reduction Contributions: The Employer shall contribute
------------------------------

to the trust for each Plan Year a Salary Reduction Contribution

in an amount equal to the total amount subject to Salary

Reduction Agreements for such year and not reduced pursuant to

Section 2.1(a). However, that no Participant shall be allowed

to contribute an amount in excess of the limit prescribed by

section 402(g) of the Code for any calendar year. Salary

Reduction Contributions shall be accumulated through payroll

deductions which shall be paid by the Employer to the Trustee

with reasonable promptness, and in any event, all Salary

Reduction Contributions with respect to Plan Year shall be paid

to the Trustee within thirty days after the end of such Plan

Year.

(c) Administrative rules governing Salary Reduction Agreements:
----------------------------------------------------------

(i) An election pursuant to Section 2.1(a) shall be made by

the Participant by executing and delivering to the

Employer a Salary Reduction Agreement at any time within

the period beginning at least ten days prior to the

Election Date as of when a Participant first becomes

eligible to enter into a Salary Reduction Agreement, or

any subsequent Election Date, and ending on such Election

Date (or, if such Election Date is not a regular business

day of the Employer, on the next following business day),

and shall continue in effect until the Participant shall

elect to discontinue Salary Reduction Contributions (as

described in (ii) below) or to change the percentage of

his Earnings allocable to Salary Reduction Contributions

(as described in (iii) below). Effective July 1, 1995, the

ten-day notice rule referred to above shall no longer be

applicable. Salary Reduction Agreement elections shall be

effectuated as soon as is practicable.

(ii) A Participant may revoke his Salary Reduction Agreement by

providing not less than ten days advance written notice to

the Employer, which revocation shall be effective as soon

as practicable following its receipt. In the event a

Participant revokes a Salary Reduction Agreement, he shall

be ineligible to

<PAGE>
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elect for Salary Reduction Contributions to recommence

until a subsequent Election Date, commencing with the

first Election Date following the date of such revocation

by at least six months. The Employer may amend or revoke a

Salary Reduction Agreement with a Participant at any time

if the Employer determines that such amendment or

revocation is necessary to ensure that the annual

additions (as defined in Section 2.3(a)) to the Accounts

of a Participant do not exceed the maximum permissible

amount (as described in Section 2.3) for such Participant

for that Plan Year or to ensure that the requirements of

Section 2.1 (d) are met for such Plan Year. Effective

July 1, 1995, the ten-day notice rule referred to above

shall no longer be applicable and a Participant who

revokes a Salary Reduction Agreement shall be permitted to

execute a new Salary Reduction Agreement at any subsequent

Election Date without a six-month suspension period.

(iii) A Participant may amend his Salary Reduction Agreement by

providing not less than ten days advance written notice to

the Employer to increase or decrease the portion of such

Participant's Earnings which is subject to salary

reduction, within the percentage limits set forth in

Section 2.1(a). Any amendment to increase the portion of

the Participant's Earnings subject to salary reduction may

be made only as of a March 26, June 26, September 26, or

December 26 Election Date. Effective July 1, 1995, the

restriction limiting increases to the March 26, June 26,

September 26 and December 26 Election Dates is eliminated.

Any amendment to decrease the portion of the Participant's

Earnings subject to salary reduction may be made of any

Election Date.

<PAGE>
-12-

(iv) The Employer shall establish a payroll deduction system or

other procedure to assist it in making Salary Reduction

Contributions, and the Committee may from time to time

adopt policies or rules governing the manner in which such

contributions may be made so that the Plan may be

conveniently administered.

(v) Notwithstanding anything to the contrary contained

elsewhere in the Plan, a Participant's Salary Reduction

Contribution Account shall not be distributable other than

upon:

(A) the Participant's Retirement, death, Disability or

separation from Service;

(B) the Participant's attainment of age 59 1/2; or

(vi) Accounting - Each Participant's Salary Reduction

Contribution Account and Employer Contribution Account

shall be accounted for separately from the Participant's

other Accounts under the Plan.

(vii) Allocation to Salary Reduction Contribution Accounts -

Salary Reduction Contributions made by the Employer with

respect to a Plan Year shall be allocated as of each

Adjustment Date to the Salary Reduction Contribution

Account of a Participant in proportion by which such

Participant's Earnings from the Employer were reduced

pursuant to his Salary Reduction Agreement since the most

recent Adjustment Date.

2.2 Employer Matching Contributions

(a) Employer Match: Effective December 26, 1990, the Employer shall
--------------

provide a matching contribution with respect to a Participant's

Salary Reduction Contributions. The match will equal 25% of the

Participant's Salary Reduction Contributions with respect to the

first four percent of Earnings deferred. Amounts to be

contributed pursuant to this provision for a Plan Year shall be

reduced proportionately to the extent that Net Profits of the

Employer for such

<PAGE>
-13-

Plan Year and the accumulated Net Profits for all preceding Plan

Years are not equal to the amounts to be contributed as Employer

Matching Contributions.

(b) Employer Matching Contributions: Employer Matching
-------------------------------

Contributions shall be accumulated and paid over to the Trustee

at the same time and in the same manner as Salary Reduction

Contributions.

adjusted, if necessary, in accordance with the Participant's

elections made with respect to Salary Reduction Contributions.

2.3 Limitations on Salary Reduction Contributions and Employer Matching

Contributions

(a) Limitations on Salary Reduction Contributions:
---------------------------------------------

(i) Notwithstanding anything to the contrary contained

elsewhere in the Plan or contained in any Salary Reduction

Agreement, all Salary Reduction Agreements entered into

with respect to any Plan Year shall be valid only if one

of the tests set forth in paragraph (ii) of this Section

2.3(a) is satisfied for such Plan Year.

(ii) For each Plan Year the actual deferral percentage for

eligible Participants who are highly compensated shall

bear to the actual deferral percentage for all other

eligible Participants a relationship that satisfies either

of the following tests:

(A) The actual deferral percentage for eligible

Participants who are highly compensated is not

more than the actual deferred percentage of all

other eligible Participants multiplied by 1.25; or

(B) The actual deferral percentage for eligible

Participants who are highly compensated is not

more than the actual deferral percentage for all

other eligible Participants multiplied by 2, and

the excess of the actual deferral percentage for

the group of eligible Participants who are highly

compensated over that of all other eligible

Participants is not more than two percentage

points.

<PAGE>
-14-

(iii) If neither of the tests set forth in paragraph (ii) of this

Section 2.3(a) is satisfied after taking into account all Salary

Reduction Contributions for a Plan Year, then:

(A) Salary Reduction Agreements entered into for such year by

Participants who are highly compensated shall be valid

only to the extent permitted by either of the tests set

forth in paragraph (ii) above and Salary Reduction

Contributions made by the Employer for Participants who

are highly compensated shall be reduced to the extent

necessary to comply with either of the tests set forth in

paragraph (ii) of this Section 2.3(a). All amounts so

reduced shall be allocated to each applicable Participant

and such excess shall be returned to the Employer and

immediately thereafter paid by the Employer directly to

the Participant within 2 1/2 months after the end of the

Plan Year.

(B) Salary Reduction Agreements entered into by all

Participants who are not highly compensated shall be valid

and Salary Reduction Contributions made by the Employer

for such Participants shall not be changed.

(iv) Definitions: For purposes of this Section, the following words
-----------

and phrases shall have the meanings stated below:

(A) The actual deferral percentage for a specified group of

Participants for a Plan Year shall be the average of the

ratios, calculated separately for each Participant in such

group, of:

(I) the Salary Reduction Contribution, if any,

contributed by the Employer on behalf of each such

Participant for the Plan Year; to

(II) the Participant's Earnings for such Plan Year.

(B) An Employee is highly compensated if such Participant was

an Employee who during the Plan Year or preceding Plan

Year:

<PAGE>
-15-

(I) was at any time a 5% owner,

(II) received compensation from the employer in excess of

$75,000,

(III) received compensation from the employer in excess of

$50,000 and was in the top-paid 20% of all Employees,

(b) Limitations on Employee Matching Contributions:
----------------------------------------------

(i) Notwithstanding anything to the contrary contained elsewhere

in the Plan, Employer Matching Contributions shall be valid

only if one of the tests set forth in paragraph (ii) of this

Section 2.3(b) is satisfied for such Plan Year.

(ii) For each Plan Year the actual contribution percentage for

eligible Participants who are highly compensated shall bear

to the actual contribution percentage for all other eligible

Participants a relationship that satisfies either of the

following tests:

(A) The actual contribution percentage for eligible

Participants who are highly compensated is not more

than the actual contribution percentage of all other

eligible Participants multiplied by 1.25; or

(B) The actual contribution percentage for eligible

Participants who are highly compensated is not more

than the actual contribution percentage for all other

eligible Participants multiplied by 2, and the excess

of the actual contribution percentage for the group of

eligible Participants who are highly compensated over

that of all other eligible Participants is not more

than two percentage points.

(iii) If neither of the tests set forth in paragraph (ii) of this

Section 2.3(b) is satisfied after taking into account all

Employer Matching Contributions for a Plan Year, then:

(A) Employer Matching Contributions for Participants who

are highly compensated shall be allowed only to the

extent permitted by either of the tests set forth in

paragraph (ii) above and Employer Matching

Contributions made by the Employer for Participants

who are highly compensated shall be reduced to the

extent necessary to comply with

<PAGE>
-16-

either of the tests set forth in paragraph (ii) of

this Section 2.3(b). All amounts so reduced shall be

allocated to each applicable Participant and such

excess shall be returned to the employer and

immediately thereafter paid to the Participant within

2 1/2 months after the end of the Plan Year. However,

any Employer Matching Contribution reduced because of

the elimination of a Salary Reduction Contribution

pursuant to Sections 2.3(a) or 2.5 shall be forfeited

and used to reduce future Employer Matching

Contributions.

(B) Employer Matching Contributions for all Participants

who are not highly compensated shall not be changed.

(iv) Definitions: For purposes of this Section 2.3, the
-----------

following words and phrases shall have the meanings stated

below:

(A) The actual contribution percentage for a specified

group of Participants for a Plan Year shall be the

average of the ratios, calculated separately for each

Participant in such group, of:

(I) the Employer Matching Contribution, if any,

contributed by the Employer on behalf of each

such Participant for the Plan Year; to

(II) the Participant's Earnings for such Plan

Year.

(B) An Employee is highly compensated if such Participant

was an Employee who during the Plan Year or preceding

Plan Year:

(I) was at any time a 5% owner,

(II) received compensation from the employer in

excess of $75,000 (as adjusted under Section

414(q) of the Code),

(III) received compensation from the employer in

excess of $50,000 (as adjusted under Section

414(q) of the Code) and was in the top-paid

20% of all Employees, or

<PAGE>
-17-

(IV) was at any time an officer and received

compensation greater than 50% of the amount

in effect for the year under Section

415(b)(1)(A) of the Code.

A Participant who is not a 5% owner and was not a highly

compensated employee under (II), (III), or (IV) above in the

preceding Plan Year shall be a Highly Compensated Employee in

the current Plan Year only if the Participant is among the 100

highest compensated employees. For purposes of this provision,

compensation shall be the Participant's W-2 compensation

increased by any Salary Reduction Agreement amounts or salary

reductions pursuant to section 125 of the Code.

(iii) A Participant is an eligible Participant if he is eligible to

enter into a Salary Reduction Agreement pursuant to Section

2.1(a).

2.3(a)(ii)(B) and Section 2.3(b)(ii)(B) are used in the same Plan Year

and the sum of the average actual deferral percentage and average

actual contribution percentage of the Participants who are highly

compensated exceeds the multiple use limit, first, the actual deferral

percentages and then, if necessary, the actual contribution percentage

of highly compensated participants shall be reduced beginning with the

highest actual deferral percentages and then the highest actual

contribution percentages until the multiple use limit is satisfied.

The multiple use limit is the greater of:

(i) 1.25 times the average deferral percentage for non-highly

compensated employees plus the lesser of the average

contribution percentage for non-highly compensated employees

plus 2% or multiplied by 2, or

(ii) 1.25 times the average contribution percentage for non-highly

compensated employees plus the lesser of the average deferral

percentage for non-highly compensated employees plus 2% or

multiplied by 2.

<PAGE>
-18-

2.4 Limitations on Contributions

All Employer Salary Reduction Contributions and Employer Matching

Contributions for any Plan Year shall be made out of the Net Profits

of the Employer for such year or out of accumulated Net Profits for

preceding years; provided, that to the extent necessary to provide

the top-heavy minimum allocations described in Section 15, the

Employer shall make a contribution even if it exceeds current or

accumulated Net Profits or the amount which is deductible under

Section 404 of the Code. Notwithstanding anything to the contrary in

this Section 2, in no event shall the Employer contribute an amount

for any limitation year (as defined in Section 2.5) which would cause

the limitations in Section 2.5 to be exceeded. Except as otherwise

provided in this Section 2, each contribution to the Plan by the

Employer shall be made conditional upon being deductible under Section

404 of the Code and upon the Plan being qualified under Section 401

(a) of the Code for the Plan Year for which such contribution is made.

Effective July 1, 1995, the Net Profits requirement shall no longer

apply to Salary Reduction Contributions.

2.5 Limitations on Allocations

In administering the Plan, the following special provisions shall

apply:

(a) Subject to the provisions of Section 2.5(c), in no event shall

the sum of the annual additions to the Accounts of a

Participant for any limitation year under this Plan and under

any other defined contribution plan (as defined in Section

2.5(d) of the Employer in which the Participant participates

exceed in the aggregate the lesser of: (i) $30,000, referred

to herein as the "dollar limitation", or (ii) 25% of such

Participant's compensation received during the limitation

year, referred to herein as the "compensation limitation." For

limitation years beginning on and after January 1, 1988, the

amount of the dollar limitation shall be adjusted in

accordance with Treasury regulations to reflect increases in

the cost of living. In the event that the limitations provided

in this Section 2.5(a) would be exceeded for any limitation

year with respect to any Participant, any required reduction

in the annual addition to his Accounts shall be made with

respect to the annual addition to his Account under this Plan

as provided in Section 2.5(b).

<PAGE>
-19-

(b) If, as a result of an error in estimating a Participant's

compensation, or other limited facts and circumstances, the

dollar limitation or the compensation limitation set forth in

Section 2.5(a) would be exceeded for any limitation year, such

excess with respect to a Participant for such limitation year

shall be disposed of in the following order:

(i) Any Nondeductible Employee Contributions (and any gains

attributable thereto) to the extent of such excess shall

be returned to the Participant.

(ii) If further reductions are necessary, then such

Participant's share of the Employer Salary Reduction

Contributions (or Employer Matching Contributions) for

the limitation year shall be reduced to the extent of

such remaining excess. The amount of the reduction shall

be reallocated among the remaining Participants in the

ratio which each of such Participant's compensation

during the limitation year in question bears to the

aggregate compensation of all such Participants during

such limitation year and before any Contributions such

limitation year are allocated. If all of the amount of

such reduction with respect to the Participant and the

amount of any reduction with respect to any other

Participant cannot be reallocated without causing the

Accounts of each other Participant to exceed the dollar

limitation or the compensation limitation, then such

amount shall be credited to a separate special account,

designated as the "Suspense Account."

(iii) The Suspense Account shall contain the excess amounts of

Contributions from all limitation years. Such excess

amounts shall be allocated for each succeeding limitation

year among the Salary Reduction Accounts and Employer

Matching Contribution Accounts of Participants in the

ratio which each of such Participant's compensation for

the limitation year in question bears to the aggregate

compensation of all such Participants during such

limitation year and before any Nondeductible Employee

Contributions, Salary Reduction Contributions, or

Employer Matching Contributions for such year are

allocated. The Suspense Account shall be adjusted

annually for additions thereto and distributions

therefrom. In the event the Plan is

<PAGE>
-20-

terminated, any balance in the Suspense Account shall be

distributed to the Participants.

Participant in the Plan and in a defined benefit plan of the

Employer, in no event shall the sum of the defined benefit

fraction (as defined in this Section 2.5(c)) and the defined

contribution fraction (as defined in this Section 2.5(c)) for

any limitation year exceed 1.0. For purposes of this Section

2.5(c), and except as otherwise provided in this Section 2.5,

the defined benefit fraction for any limitation year of a

defined benefit Plan shall be a fraction, the numerator of which

is the projected annual benefit of the Participant under the

defined benefit Plan (as determined as of the close of such

limitation year), and the denominator of which is the lesser of

(i) the product of 1.25 and the dollar limitation in effect for

defined benefit Plans for such limitation year (referred to

herein as the "defined benefit dollar limitation"), and (ii) the

product of 1.4 and 100% of the Participant's average annual

Compensation for the period of three consecutive calendar years

(or the actual number of consecutive years of Service with the

Employer if the Participant was in Service with the Employer for

less than three consecutive years) which will produce the

highest average (referred to herein as the "defined benefit

compensation limitation"). The defined contribution fraction for

any limitation year of this Plan shall be a fraction, the

numerator of which is the sum of the annual additions to the

Participant's Accounts through the close of such limitation

year, and the denominator of which is the sum of the lesser of

(A) or (B) for such limitation year and for each prior

limitation year during which the Participant was an Employee of

the Employer (regardless of whether a Plan was in existence

during those years), where (A) is the product of 1.25 and the

dollar limitation and (B) is the product of 1.4 and the

compensation limitation for the limitation year. In the event the

limitation provided in this Section 2.5(c) would be exceeded for

any limitation year, the reduction in the sum of the defined

benefit fraction and the defined contribution fraction necessary

to comply with the limitation shall be made in the defined

contribution fraction and any reductions in

<PAGE>
-21-

the annual addition to the Accounts of any Participant shall be

made in accordance with Section 2.5(a) and Section 2.5(b).

(d) For the purpose of applying the rules of this Section 2.5, the

following provisions shall apply:

(i) all defined benefit plans of the Employer shall be

considered as a single plan and all defined contribution

plans of the Employer shall be considered as a single

plan;

(ii) "defined contribution plan" shall mean a plan, including

this Plan, which provides for an individual account for

each Participant and for benefits based solely on the

amount contributed to the Participant's account and any

income, expenses, gains and losses, and any forfeitures

of accounts of other Participants, which may be allocated

to such Participant's account; and "Defined Benefit Plan"

shall mean any plan which is not a defined contribution

plan; provided, that there shall be included within the

definition of a defined contribution plan or a defined

benefit plan, as the case may be, only plans which are

described in Section 415(k)(1) of the Code;

(iii) all corporations in a controlled group of corporations

with the Employer (within the meaning of Section 414(b)

of the Code as modified by Section 415(h) of the Code),

all trades or businesses (whether or not incorporated)

under common control with the Employer (within the

meaning of Section 414(c) of the Code as modified by

Section 415(h) of the Code) and all members of an

affiliated service group with the Employer (within the

meaning of Section 414(m) of the Code) shall be

considered to be the Employer;

(iv) "projected annual benefit" shall mean the annual normal

retirement benefit payable in the form of a straight life

annuity (with no ancillary benefits) to which a

Participant would be entitled under the terms of the

defined benefit plan if the following factors are

assumed:

(A) the Participant will continue employment with the

Employer until he reaches normal retirement age

under the defined benefit plan (or

<PAGE>
-22 -

until his then current age, if he has previously

reached such normal retirement age),

(B) the Participant's compensation for the limitation

year will remain the same until the date the

Participant attains normal retirement age under

the defined benefit plan, and

benefits under the defined benefit plan for the

limitation year will remain constant for all future

limitation years;

(v) the "limitation year" shall be the Plan Year;

(vi) "compensation" shall mean for any Participant the wages,

salary, and other amounts paid or accrued with respect to

such Participant by the Employer during the limitation

year for personal services actually rendered by the

Participant in the course of his service with the Employer

(including, but not limited to, commissions, compensation

for services on the basis of a percentage of profits, and

bonuses) and excluding contributions made by the Employer

to any plan of deferred compensation, amounts realized

from the exercise of a nonqualified stock option or from

the sale or other disposition of stock acquired by the

exercise of an incentive stock option, and any other

amount paid by the Employer which receives special tax

benefits; and

(vii) the "annual addition" with respect to any limitation year

shall mean the sum of the following items allocated on

behalf of a Participant (A) Employer contributions

(including Salary Reduction Contributions made pursuant to

Section 2.1); (B) all forfeitures; (C) for contributions

made prior to December 26, 1987, the lesser of (1) the

amount of the Participant's Nondeductible Employee

Contributions in excess of six percent of such

Participant's compensation for the limitation year, and

(2) one-half of such Participant's Nondeductible Employee

Contribution (Nondeductible Employee Contributions shall

be considered made with respect to a particular Plan Year

if such contributions are actually made by the Participant

during such Plan Year or within thirty days after the

close of

<PAGE>
-23-

such Plan Year) and all of the Participant's Non-

deductible Employee Contributions made after December 25,

1987; (D) amounts allocated, after March 31, 1984, to an

individual medical account, as defined in Section 415(l)

of the Code, which is part of a defined benefit plan

maintained by the Employer; and (E) amounts derived from

contributions paid or accrued after December 31, 1985, in

taxable years ending after such date, which are

attributable to post-retirement medical benefits allocated

to the separate account of a key employee, as defined in

Section 419(A)(d) of the Code, under a welfare benefit

fund, as defined in Section 419(e) of the Code, maintained

by the Employer. Provided, that the following are not

"annual additions": (A) transfers of funds from one

qualified Plan to another, (B) Rollover Contributions (as

defined in Sections 402(a)(5), 403(a)(4), 408(d)(3) and

409(b)(3)(C) of the Code, (C) repayments of loans made to

a Participant from the Plan, (D) repayments of

distributions received by an Employee pursuant to Section

411(a)(7)(B) of the Code, (E) repayments of distributions

received by an Employee pursuant to Section 411(a)(3)(D)

of the Code (mandatory contributions), (F) Employee

contributions to a simplified employee pension allowed as

a deduction under Section 219(a) of the Code, and (G)

deductible Employee contributions to a qualified plan.

2.6 Nondeductible Voluntary Employee Contributions

No Nondeductible Employee Contributions shall be made or accepted by

the Plan effective December 26, 1987. Nondeductible Voluntary

Contributions made prior to December 26, 1987 by a Participant, and

all amounts stemming therefrom, shall be allocated to his

Nondeductible Employee Contribution Account. Assets of the

Nondeductible Contribution Accounts may be mingled for investment with

other funds of the Trust. A Participant having an amount in his

Nondeductible Contribution Account may, by giving at least ten days

(no longer required, effective July 1, 1995) written notice to the

Committee, withdraw all or a designated portion of the amount then in

his Nondeductible Contribution Account. Such withdrawal shall be paid

to the Participant as soon as practicable. To the extent not

<PAGE>
-24-

inconsistent with the provisions of this Section 2.4, the Committee

may promulgate rules or by-laws supplementing and implementing the

provisions of this Section 2.4.

<PAGE>
-25-

SECTION 3 - RETIREMENT; TERMINATION OF SERVICE; DEATH
-----------------------------------------------------

3.1 Normal Retirement

A Participant who is in Service shall be eligible to retire from

Service at his Normal Retirement Date.

3.2 Delayed Retirement

If a Participant shall remain in Service following his Normal

Retirement Date, his Retirement date shall be the date he shall

actually terminate Service for reasons other than death. During the

period that such Participant remains in Service pursuant to this

Section 3.2, he shall continue to be a Participant for and including

each Plan Year in which he meets the requirements therefor. If an

Employee not otherwise a Participant becomes eligible to enter the

Plan following his Normal Retirement Date, the provisions of this

Section 3.2 shall apply in determining his Retirement date.

3.3 Disability

If a Participant shall suffer Disability while in Service prior to his

Normal Retirement Date, he may retire as of the date of establishment

of his Disability and the balance in his Account may be payable as

provided in Section 3.5, treating for this purpose the date of his

Disability Retirement as if it were his Normal Retirement Date.

3.4 Termination of Service

A Participant who has terminated Service and who is not eligible to

retire under the Plan on the date of his termination, and whose vested

balance in his Accounts as of the Adjustment Date coincident with or

next following his termination (the "Termination Adjustment Date") is

less than or equal to $3,500, shall be paid such balance in a lump sum

as soon as practicable following his Termination Adjustment Date. A

Participant who has terminated Service and who is not eligible to

retire under the Plan on the date of his termination, and whose vested

balance in his Accounts as of the Termination Adjustment Date exceeds

$3,500, may elect to be paid such balance in a lump sum as soon as

practicable following

<PAGE>
-26-

his Termination Adjustment Date. Such election shall be submitted in

writing on or before the Termination Adjustment Date and shall be

irrevocable on such date. If such Participant shall fail to submit

such election, the balance in his Accounts shall be held under the

Plan, and adjusted as of each Adjustment Date pursuant to Section 3.7,

until the earlier of his Normal Retirement Date or death, whereupon

such balance, as adjusted, shall be paid to him or his Beneficiary, as

the case may be, in the same manner as if he were in Service at the

time of his Normal Retirement Date or death. Notwithstanding the

foregoing provisions, no distribution shall be made pursuant to this

Section 3.4 if the Participant shall be in Service on the date payment

of the lump sum is to be made.

3.5 Payment of Accounts

As of the close of business of the Plan on the Adjustment Date

coincident with or next following the date a Participant retires, the

balance in his Accounts, as adjusted as of such Adjustment Date, shall

be paid to him in a lump sum. In applying the foregoing provisions of

this Section 3.5, the following special provisions shall apply:

(a) Payment must be made within sixty days following the later of:

(i) the Year-End Adjustment Date coincident with or next

following his Normal Retirement Age, or

(ii) the close of the Plan Year in which he shall retire or

otherwise terminate Service.

In the event that, within the applicable sixty-day period, the

amount of payment cannot be determined or the recipient thereof

cannot be located after a reasonable effort has been made to

locate him, payments retroactive to the close of such sixty-day

period shall be made within sixty days after the amount has been

determined or the recipient has been located, whichever shall be

applicable.

(b) Notwithstanding any provision of this Plan to the contrary,

distribution of the Accounts of a Participant shall commence no

later than the first day of April following the earlier of:

(i) the calendar year in which the Participant attains age

70 1/2, or

(ii) the calendar year in which the Participant retires.

<PAGE>

-27-

cash and partly in kind, as determined by the Committee in its

discretion.

(d) All amounts payable to a Participant shall be subject to the rights

afforded to an "alternate payee" under a "qualified domestic relations

order" as those terms are defined in Section 414(p) of the Code.

3.6 Death

As of the Adjustment Date coincident with or next following the death while

in Service of a Participant or the death of a terminated or Retired

Participant who has a vested balance in any of his Accounts at the time of

his death, his Beneficiary (subject to the provisions of Section 10) shall

receive such balance in a lump sum.

3.7 Continued Share in Profits or Losses of Trust Fund

If all or any part of the balances in the Accounts of any individual is

being held in the Trust for future payment to him, his Accounts under the

Plan shall continue to be adjusted as provided in Sections 5.3.

3.8 Loans

Upon the written application of any Participant who is in Service on

or after July 1, 1995, the Committee in accordance with its uniform,

nondiscriminatory policy may direct the Trustee to permit the Participant

to borrow from the Trust, subject to the following provisions:

(a) The Participant shall borrow from the amounts in his Accounts. The

loan principal will be funded from his Accounts in the following

order. First, from the Participant's Rollover Account; second, from

the Nondeductible Contribution Account; third, from the Employer

Matching Contribution Account; and fourth, from the Salary Reduction

Contribution Account. Within each Account, borrowings shall be

allocated proportionately among the elected Investment Funds. Loan

repayments shall be allocated back to the Participant's Accounts in

reverse order to which the loan principal is withdrawn. The minimum

principal amount of

<PAGE>

-28-

any loan to a Participant shall be $500. The maximum principal

amount of any loan made to the Participant, when added to the then

unpaid balance on all loans previously made to the Participant,

shall not exceed the following applicable limitation:

(i) $50,000, if the vested balance in the Accounts of the

Participant shall be $100,000 or more reduced by the highest

outstanding loan balance of the Participant within the 12

months preceding the date of the loan; or

(ii) One-half of the vested balance in the Accounts of the

Participant, if the vested balance in the Accounts of the

Participant shall be less than $100,000.

If a Participant shall have a vested accrued benefit in more than

one tax-qualified retirement plan of the Employer, the limitation in

(i) or (ii) shall be applied both with respect to this Plan only and

with respect to all such plans in the aggregate. In applying the

limitations with respect to this Plan, only loans to the Participant

under this Plan and the vested balance in his Accounts under this

Plan shall be taken into account. In applying the limitations with

respect to all such plans in the aggregate, all loans to the

Participant under all such plans and the sum of the vested balance

in his Accounts and his vested accrued benefits under all such plans

shall be taken into account.

(b) All loans shall be allocated to the Accounts of the borrowing

Participant and shall be repayable by their terms within five years

from the date made, except that the obligation to repay shall not

exceed twenty years with respect to a loan made to a Participant for

the purpose of acquiring, or constructing any dwelling unit

(including a house, apartment, condominium or a mobile home not used

on a transient basis) which is used or will be used within a

reasonable time (determined at the time the loan is made) as the

primary residence of the Participant. A Participant may have two

loans outstanding at any time but only one may be a general purpose

five-year loan and the other must be a loan for the purchase or

construction of a principal residence.

<PAGE>

-29-

on a form provided by the Committee. Each Participant making an

application for a loan shall receive from the Trustee a statement of

the terms of each loan transaction. This statement shall include the

amount financed and the annual interest rate.

(d) Each loan shall be secured by the pledge of the amounts in the

borrowing Participants Accounts. After July 1, 1995, no other

security shall be accepted or requested by the Committee as security

for the loan.

(e) Each loan shall be evidenced by a negotiable promissory note (the

"note") in form acceptable to the Trustee, payable to the order of

the Trustee, bearing interest at the prime rate as determined by the

Committee as of the first day of the month in which the loan is

initiated and, except as provided in Section 3.8(b), payable in full

not more than five years from the date thereof. The borrowing

Participant shall execute any additional documents as shall be

deemed necessary or advisable by the Committee to consummate the

loan and to provide reasonable safeguards. The principal amount of

each loan to a Participant shall be an investment allocated solely

to the appropriate Accounts of the borrowing Participant and the

note and all interest paid thereon shall be allocated to the

Accounts of the borrowing Participant as provided in Sections 5.3

and 5.4. The Employer shall establish a procedure for withholding at

appropriate intervals from the borrowing Participant's regular

payroll checks amounts necessary to satisfy the borrowing

Participant's repayment obligations under the note. All amounts so

withheld shall be transferred immediately to the Trustee.

(f) The occurrence of any one or more of the following events of default

shall constitute a default by the borrowing Participant under the

terms of the loan, whereupon the unpaid balance of the note,

together with accrued interest, will immediately become due and

payable without presentment, demand, protest, or notice of any kind.

Events of default include: (i) failure to make any payment when due,

whether by acceleration or otherwise; (ii) bankruptcy or insolvency

of the borrowing Participant; (iii) death, retirement or termination

of Service of the

<PAGE>

-30-

borrowing Participant; or (iv) a hardship withdrawal as provided in

Section 3.9. Effective July 1, 1995, (iv) above shall no longer

constitute a default.

(g) If an event of default shall occur with respect to a borrowing

Participant, the entire unpaid principal amount of the note, plus

accrued and unpaid interest, shall immediately become due and

payable. Unless such unpaid principal and interest are paid within

90 days following such default, such unpaid principal and interest

shall be charged against the defaulting Participant's Accounts as a

payment therefrom as provided in Section 5.3. The Participant shall

remain liable for any deficiency. No distribution to which such

Participant or the Beneficiary of such Participant is entitled under

the Plan shall be made to such Participant or to his Beneficiary

unless and until all unpaid loans, including interest thereon, have

been satisfied.

3.9 Pretermination Distributions

(a) Hardship withdrawals

(i) A Participant may, at any time prior to his termination of

Service, make application to the Committee to withdraw in a

lump sum all or a portion of the balance (determined as of

the Adjustment Date coincident with or immediately preceding

the date a withdrawal request is made) of his Salary

Reduction Contribution Account by reason of the immediate

and heavy financial needs of the Participant. A withdrawal

on account of immediate and heavy financial needs shall not

exceed the amount required to meet the immediate financial

need created by the hardship and not otherwise reasonably

available from other resources of the Participant. For

purposes of this Section 3.9(a), "immediate and heavy

financial needs" shall be limited to those financial needs

arising on account of the illness or accident of a

Participant or a member of his immediate family. Immediate

and heavy financial needs shall not include those expenses

which are reasonably anticipated to be covered by insurance.

The determination of whether a heavy financial need

constitutes an immediate and heavy financial need within the

scope of this Section 3.9(a) and the pertinent sections of

the Code

<PAGE>

-31-

shall be made by the Committee in its sole and exclusive

discretion, and its decision to grant or deny a withdrawal

on account of financial hardship shall be final. The

Committee shall apply uniform and nondiscriminatory

standards in making its decision. Effective July 1, 1995,

"immediate and heavy financial need" shall also include

purchase of a Participant's principal residence, payment of

post-secondary tuition for the Participant, Participant's

spouse, children or dependents for a 12-month period, or

prevention of eviction or foreclosure on the mortgage of the

Participant's principal residence. The Participant's

representation that one of these events has occurred and

cannot be relieved by other sources specified in the section

401(k) regulations shall constitute acceptable evidence of

hardship without further investigation by the Committee.

(ii) The Participant's request for a withdrawal on account of

financial hardship must be made in writing. The request must

specify the nature of the financial hardship, the total

amount to be withdrawn from his Salary Reduction

Contribution Account, and that the financial needs cannot be

satisfied from other resources including non-taxable plan

loans.

(iii) If a withdrawal under this Section 3.9(a) is approved, such

withdrawal shall be made as of the next following Adjustment

Date. The processing of the request shall be completed as

soon as practicable from the dated on which the Trustee

receives the properly completed written request for a

withdrawal on account of financial hardship. If a

Participant's termination of Service occurs after a request

is approved in accordance with this Section 3.9(a) but prior

to distribution of the full amount approved, the approval of

his request shall be automatically void and the benefits he

is entitled to receive under the Plan shall be distributed

in accordance with the applicable distribution provisions of

the Plan. Only one withdrawal shall be made within any Plan

Year. Effective July 1, 1995, the limitation to one

withdrawal per Plan Year is eliminated.

<PAGE>

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(iv) The Committee may from time to time adopt additional

policies or rules governing the manner in which such

withdrawals may be made so that the Plan may be conveniently

administered.

(v) In the event that a Participant should make a withdrawal

pursuant to this Section 3.9(a), Salary Reduction

Contributions and Nondeductible Voluntary Contribution on

his behalf shall be suspended for 12 months following the

date as of which such hardship withdrawal is made. Any

election to resume Salary Reduction Contributions and

Nondeductible Voluntary Contributions must be made in

writing as provided in Section 2.1. Amounts withdrawn

pursuant to this Section 3.9(a) shall not be returned to the

Plan.

(b) Distributions after age 59 1/2: A Participant who has attained the

age of 59 1/2 may elect, by written request to the Committee, to

withdraw from his Salary Reduction Contribution account an amount

not in excess of the adjusted balance thereof, determined as of the

Adjustment Date coinciding with or next preceding the date of such

withdrawal. No withdrawal made under this Section 3.9(b) shall be

for an amount which is less than the lesser of: (i) $500, or (ii)

the adjusted balance in the Participant's Salary Reduction

Contribution Account. Effective July 1, 1995, the $500 minimum

distribution is eliminated.

<PAGE>

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Section 4 - Vesting
-------------------

4.1 Salary Reduction Contribution Accounts, Nondeductible Voluntary Employee

Contribution Accounts, and Rollover Contribution Accounts A Participant

shall be fully vested in each of these Accounts at all times.

4.2 Employer Matching Contribution Accounts

A Participant shall be fully vested in his Employer Matching Contribution

Account upon the completion of a period of three years of service. If a

Participant should incur a severance from service prior to the completion

of three years of service, such contribution account shall be forfeited and

used to reduce future Employer Matching Contributions.

4.3 Restoration of Employer Matching Contribution Accounts

A Participant who receives a distribution upon separation from service and

who forfeits all or a portion of his Employer Matching Contribution Account

shall have the balance in his Employer Matching Contribution Account

restored if:

(a) the Participant is rehired before incurring a period of severance

equal to or greater than five years, and

(b) the Participant repays to the Plan the amount of his distribution

from his Salary. Reduction Contribution Account, with 5% interest

compounded annually, within 12 months of reemployment.

<PAGE>

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Section 5 - Accounts; Investment Funds,

Adjustment of Accounts of Participants
--------------------------------------

5.1 Accounts

The Committee shall maintain with respect to each Participant the following

Accounts: (a) his Salary Reduction Contribution Account, (b) his Employer

Matching Contribution Account, (c) his Nondeductible Contribution Account, (d)

his Direct Transfer Account, and (e) his Rollover Account.

5.2 Investment Funds

(a) All assets of the Trust shall be held in the investment funds

selected by the Committee and Trustees, among the following types of

Investment Funds. The Committee and Trustees may add or eliminate

from time to time one or more investment funds. Such Funds shall be

referred to herein singularly as an "Investment Fund" and

collectively as "Investment Funds." Within each Investment Fund

separate records shall be kept with respect to amounts therein

allocated to the respective Accounts of the Participants, but all

assets of each Investment Fund may be, commingled for investment

purposes. Pending the selection and purchase of suitable investments

or reinvestment, or the payment of expenses or other anticipated

distributions, any portion of an Investment Fund may be retained in

cash without liability for payment of interest or may be invested in

short-term, interest-bearing securities, whether or not such

investment would otherwise be appropriate for the particular

Investment Fund.

(b) Direction of Investment; Separate Subsidiary Accounts: Any

individual having a balance to his credit in any of the Accounts

under the Plan is empowered, acting through the Committee, to direct

the Trustee as to the investment or reinvestment of such amounts

among the Investment Funds described in Section 5.2(a). The

Committee shall cause separate subsidiary accounts to be kept for

each individual for the accounts referred to in Section 5.1.

References herein to the "Fund

<PAGE>

-35-

Accounts" of a Participant shall mean all of the subsidiary accounts

with respect to the Investment Funds.

Contributions, Employer Matching Contributions, Nondeductible

Voluntary Contributions, Direct Transfer Contributions, and Rollover

Contributions (the "Contributions") allocated to the Plan with

respect to a Participant shall be credited to his appropriate Fund

Account in accordance with the following rules:

(i) By application in writing to the Committee at least ten days

prior to the 25th day of March, June, September or December

(prior to December 23, 1992) and the 23rd day of any month

on or after December 23, 1992, each Participant shall be

entitled to designate, in increments of ten percent (twenty-

five percent prior to December 31, 1992) the percentage of

Contributions made following the next preceding Adjustment

Date which shall be apportioned to each of his appropriate

Fund Accounts. In the event that amounts shall not be

transferrable to one of the Investment Funds as of any

Adjustment Date, amounts to be transferred to such

Investment Fund pursuant to a designation under this

paragraph (a) shall be held in the Short Term Savings Fund

until such amounts may be so transferred, at which time the

contributions and earnings with respect thereto, shall be so

transferred.

(ii) A designation made by the Participant under paragraph (i)

above shall remain in effect as of each succeeding

Adjustment Date, unless the Participant shall file a timely

election providing for a different designation with respect

to any Adjustment Date.

(iii) If for any reason a Participant shall not have made an

effective designation with respect to any Contribution

allocable to him as of any Adjustment Date such Contribution

shall be credited to his appropriate Fund Account and

invested in the Short Term Savings Fund.

(iv) Effective July 1, 1995, fund allocations may be designated

in one percent increments and may be made at any time.

<PAGE>

-36-

(d) Reallocation among Investment Funds: Each individual having an

amount credited to one or more Fund Accounts shall be entitled to

cause all or a portion of such amount to be transferred to another

appropriate Fund Account at the same time and in the same manner

specified in (c) above.

(e) Notification of Trustee: The Committee shall notify the Trustee of

all applications made in accordance with Sections 5.2(c) and 5.2(d)

as required by the Trustee.

5.3 Adjustments to Accounts

With respect to each individual with one or more Accounts under the Plan, the

amount in each of his separate Fund Accounts as of each Adjustment Date,

ascertained with respect to each under this Section 5.3 and herein called the

"basic credit" shall be adjusted as of each succeeding Adjustment Date by the

following credits and debits, in the order stated (references in this Section

5.3 to the "Investment Fund" shall mean the Investment Fund in which each such

Fund Account is invested):

(a) With respect to each separate Fund Account, there shall be debited

the total amount of any distributions from each such account since

the last preceding Adjustment Date to him or for his benefit. With

respect to an individual receiving a distribution from one or more

of his separate Fund Accounts, the portion of such distribution with

respect to each account allocated to each Investment Fund shall be

determined by multiplying the amount of such distribution with

respect to such account by a fraction, the numerator of which is the

amount of the portion of such account in the Investment Fund

following adjustment as of the next preceding Adjustment Date, and

the denominator of which is the total amount in such account

following adjustment as of such Adjustment Date.

(b) With respect to each separate Fund Account, there shall be credited

or debited that portion of the net income or net loss of the

Investment Fund since the next preceding Adjustment Date which his

basic credit as of such preceding Adjustment Date, further adjusted

as provided in Section 5.3(a), bears to the total of the basic

credits of all such individuals as of such preceding Adjustment Date

so adjusted. Such net income or net loss shall be ascertained by the

trustee and shall mean the profits and income actually realized and

received, less the losses and expenses

<PAGE>

-37-

actually incurred and paid, plus any net increase or minus any net

decrease in the fair market value of the assets of the Investment

Fund not actually realized and received or incurred and paid. In

ascertaining such value, the expense of liquidation shall not be

taken into account. "Basic credit as of the next preceding

Adjustment Date" shall be such credit after the adjustments under

this Section 5.3 shall have been made.

that portion of the appropriate Contribution to be allotted to such

account as provided in Section 5.2.

5.4 Loan Accounts

Notwithstanding the foregoing provisions of this Section 5, the portion of

any Account of a Participant evidenced by a note described in Section

3.8(e) shall be held in a special Loan Account in behalf of the

Participant. The Loan Account shall be a part of the specific Account of

the participant, and there shall be credited to the Loan Account any

payments of principal or interest made with respect to said note, which

payments shall be invested by the Trustee in the Short Term Savings Fund

pending the next preceding Adjustment Date. As of the close of business on

each Adjustment Date, any cash balances in the Loan Account shall be

debited to the Loan Account and shall be allocated to the Investment Fund

or Funds with respect to the Participant as specified in Section 3.8(a).

<PAGE>

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Section 6 - Administration by Committee
---------------------------------------

6.1 The Committee shall be responsible for the general administration and

interpretation of the Plan and for carrying out its provisions, except to

the extent all or any of such obligations are specifically imposed on the

Trustee or the Board. The Committee shall constitute the Plan

Administrator and the Chairman of the Committee shall be agent for service

of legal process on the Plan.

6.2 The members of the Committee shall elect a Chairman and may elect an

acting Chairman. They shall also elect a Secretary and may elect an acting

Secretary, either of whom may be but need not be a member of the

Committee. The Committee may appoint from its membership such

subcommittees with such powers as the Committee shall determine, and may

authorize one or more of its members or any agent to execute or deliver

any instruments or to make any payment in behalf of the Committee.

6.3 The Committee shall hold such meetings upon such notice, at such places

and at such intervals as it may from time to time determine. Notice of

meetings shall not be required if notice is waived in writing by all the

members of the Committee at the time in office, or if all such members are

present at the meeting.

6.4 A majority of the members of the Committee at the time in office shall

constitute a quorum for the transaction of business. All resolutions or

other actions taken by the Committee at any meeting shall be by vote of a

majority of those present at any such meeting and entitled to vote.

Resolutions may be adopted or other action taken without a meeting upon

written consent thereto signed by all of the members of the Committee.

6.5 The Committee shall maintain full and complete records of its

deliberations and decisions. The minutes of its proceedings shall be

conclusive proof of the facts of the operation of the Plan. The records of

the Committee shall contain all relevant data pertaining to individual

Participants and their rights under the Plan and in the Trust Fund.

<PAGE>

-39-

6.6 Subject to the limitations of the Plan and of ERISA the Committee may from

time to time establish rules or by-laws for the administration of the Plan

and the transaction of its business.

6.7 No individual member of the Committee shall have any right to vote or

decide upon any matter relating solely to himself or to any of his rights

or benefits under the Plan (except that such member may sign unanimous

written consent to resolutions adopted or other action taken without a

meeting).

6.8 The Committee may correct errors and, so far as practicable, may adjust

any benefit or credit or payment accordingly. The Committee may in its

discretion waive any notice requirements in the Plan; provided that a

waiver of a requirement to notify the Trustee shall be made only with the

consent of the Trustee. A waiver of notice in one or more cases shall not

be deemed to constitute a waiver of notice in any other case. With respect

to any power or authority which the Committee has discretion to exercise

under the Plan, such discretion shall be exercised in a nondiscriminatory

manner.

6.9 Subject to the claims procedure set forth in Section 13, the Committee

shall have the duty and authority to interpret and construe the provisions

of the Plan and to decide any dispute which may arise regarding the rights

of Participants hereunder, which determinations shall apply uniformly to

all persons similarly situated and shall be binding and conclusive upon

all interested persons.

6.10 The Committee may engage an attorney, accountant or any other technical

advisor on matters regarding the operation of the Plan and to perform such

other duties as shall be required in connection therewith, and may employ

such clerical and related personnel as the Committee shall deem requisite

or desirable in carrying out the provisions of the Plan. The Committee

shall from time to time, but no less frequently than annually, review the

financial condition of the Plan and determine the financial and liquidity

needs of the Plan as

<PAGE>

-40-

required by ERISA. The Committee shall communicate such needs to the

Employer and to the Trustee so that the funding policy and investment

policy may be appropriately coordinated to meet such needs.

6.11 No fee or compensation shall be paid to any member of the Committee for

his service as such.

6.12 The Committee shall be entitled to reimbursement out of the Trust Fund for

its reasonable expenses properly and actually incurred in the performance

of its duties in the administration of the Plan; provided, that the BDM

International, Inc. may, in the discretion of the Board, pay such

expenses.

6.13 To the maximum extent permitted by ERISA, no member of the Committee shall

be personally liable by reason of any contract or other instrument

executed by him or on his behalf as a member of the Committee nor for any

mistake of judgment made in good faith, and BDM International, Inc. shall

indemnify and hold harmless, directly from its own assets (including the

proceeds of any insurance policy the premiums for which are paid from BDM

International, Inc. own assets), each member of the Committee and each

other officer, employee, or director of BDM International, Inc. to whom

any duty or power relating to the administration or interpretation of the

Plan may be delegated or allocated, against any unreimbursed or uninsured

cost or expense (including any sum paid in settlement of a claim with the

prior written approval of the Board) arising out of any act or omission to

act in connection with the Plan unless arising out of such person's own

fraud, bad faith, willful misconduct or gross negligence.

<PAGE>

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Section 7 - Management of Funds and Amendment of Plan
-----------------------------------------------------

7.1 All assets of the Plan shall be held in a Trust forming part of the Plan,

which shall be administered as a Trust Fund to provide for the payment to

the Participants or their successors in interest, out of the income and

principal of the Trust, of benefits as provided in the Plan. All

fiduciaries (as defined in ERISA) with respect to the Plan shall discharge

their duties as such solely in the interest of the Participants and their

successors in interest, and (1) for the exclusive purposes of providing

benefits to Participants and their successors in interest and defraying

reasonable expenses of administering the Plan, including the trust which

is a part of the Plan, (2) with the care, skill, prudence and diligence

under the circumstances then prevailing that a prudent man acting in a

like capacity and familiar with such matters would use in the conduct of

an enterprise of like character and with like aims, and (3) in accordance

with the Plan and Trust Agreement, except to the extent such documents may

be inconsistent with the then applicable federal laws relating to

fiduciary, responsibility. The Trust Fund shall be used for the exclusive

benefit of the Participants and beneficiaries and to pay administrative

expenses of the Plan and Trust to the extent not paid by BDM

International, Inc., and no portion of the Trust Fund shall ever revert to

or inure to the benefit of the Employer (except as otherwise provided in

Sections 2 and 7.1(a). Notwithstanding the foregoing provisions of this

Section 7.1, the following special provisions shall apply:

(a) Notwithstanding any other provisions of the Plan, if the Employer

shall (i) make a contribution to the Plan by a mistake of fact, or

(ii) make a contribution to the Plan conditioned upon its

deductibility under Section 404 of the Code and such contribution

shall be determined to be nondeductible, or (iii) make a

contribution to the Plan conditional upon the initial qualification

of the Plan under Section 401(a) of the Code and the qualified

status of the Plan with respect to the Plan Year for which such

contribution is made shall be denied, then in any such event such

contribution shall be returned to the Employer without interest or

other increment as soon as practicable, but in no event later than

one year after said mistaken payment or after it shall be finally

determined that the contribution is not deductible or after

<PAGE>

-42-

final determination of denial of qualified status of the Plan,

whichever shall be applicable. The amount to be so returned shall

reflect Trust net losses, if any, following said contribution, and

shall be limited to the extent necessary to avoid a reduction of the

balance of the Salary Reduction Contribution Account of any

participant below what his balance would have been if such

contribution (to the extent made by mistake or determined to be

nondeductible or made with respect to a year for which the Plan is

disqualified) had not been made.

(b) The Board, acting in behalf of the Employer, shall have the right at

any time and from time to time to amend or terminate the Plan and

the Trust Agreement entered into under the Plan; provided, that no

such amendment which shall alter the duties, responsibilities or

liabilities of the Trustee shall be made unless the Trustee shall

consent thereto in writing. See Section 11 for provisions regarding

termination of the Plan. No amendment to the Plan shall decrease the

balance of the Accounts of a Participant as of the date of such

amendment or eliminate an optional form of distribution.

7.2 The Employer and the Trustee shall enter into an appropriate Trust

Agreement for the administration of the Trust under the Plan. Such

agreement shall contain such powers and reservations as to investment,

reinvestment. control and disbursement of the funds of the Trust, and such

other provisions not inconsistent with the provisions of this Plan and its

nature and purposes as shall be agreed upon and set forth therein. Said

agreement shall provide that the Board may remove the Trustee at any time

upon reasonable notice, that the Trustee may resign at any time upon

reasonable notice, and that upon such removal or resignation of the

Trustee, the Board may designate one or more successor Trustees.

7.3 All requests, directions, requisitions and instructions of the Committee

to the Trustee shall be in writing and signed by such person or persons as

shall be designated by the Committee.

<PAGE>

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Section 8 - Allocation of Responsibilities Among Named Fiduciaries
------------------------------------------------------------------

8.1 The named fiduciaries with respect to the Plan and the fiduciary duties

and other responsibilities allocated to each are as follows:

(a) Board

(i) To amend the Plan;

(ii) To appoint and remove the Trustee under the Plan; and

(iii) To terminate the Plan.

(b) Committee

(i) To interpret the provisions of the Plan and to determine the

rights of participants under the Plan, except to the extent

otherwise provided in Section 13 relating to claims

procedure;

(ii) To administer the Plan in accordance with its terms, except

to the extent powers to administer the Plan are specifically

delegated to another named fiduciary or other person or

persons as provided in the Plan;

(iii) To account for the balances in the Accounts of Participants;

(iv) To direct the Trustee in the distribution of Trust assets;

(v) To file such reports as may be required with the United

States Department of Labor, the Internal Revenue Service and

any other government agencies to which reports may be

required to be submitted from time to time; and

(vi) To comply with requirements of law for disclosure of Plan

provisions and other information relating to the Plan to

Participants and other interested parties; and

(vii) To administer the claims procedure to the extent provided in

Section 13.

(i) To invest and reinvest Trust assets subject to directions of

the investment manager; if any;

(ii) To perform such administrative duties as the Trustee and the

Committee shall agree upon from time to time; and

<PAGE>

-44-

(iii) Except to the extent otherwise provided in Section 8.1 (e):

(A) To make distributions to Participants as directed by

the Committee;

(B) To render annual accounting to the Employer as provided

in the Plan; and

the Trust as provided in the Plan and Trust Agreement.

(d) Investment Manager: In the event the Trustee shall appoint an

investment manager to manage (including the power to acquire and

dispose of) assets of the Trust under the Plan, as provided in

Section 2.4 of the Trust Agreement, the duties of the investment

manager shall be to manage, acquire and dispose of assets of the

Trust, or to direct the Trustee in the management, acquisition and

disposition of assets of the Trust.

(e) Custodian: In the event the Trustee shall appoint a custodian to

hold and manage the assets of the Trust under the Plan, as provided

in Section 2.5 of the Trust Agreement, then notwithstanding the

foregoing provisions of this Section 8.1 or any other provisions of

the Plan and Trust Agreement, the duties of the custodian shall be

to receive, hold, sell, exchange and otherwise deal with the assets

of the Trust, as instructed by the Trustee (or as instructed by the

investment manager, if any, to the extent of the authority of the

investment manager), to make distributions to participants as

directed by the Committee and to render accounting to the Trustee as

provided in Section 3 of the Trust Agreement.

8.2 Except as otherwise provided in ERISA, a named fiduciary shall not be

responsible or liable for any act or omission of another named fiduciary

and respect to fiduciary responsibilities allocated to such other named

fiduciaries, and a named fiduciary of the Plan shall be responsible and

liable only for its own acts or mission with respect to fiduciary duties

specifically allocated to it and designated as its responsibility.

<PAGE>

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Section 9 - Benefits Not Assignable; Facility of Payments
---------------------------------------------------------

9.1 No portion of any benefit held or paid under the Plan with respect to any

Participant shall be subject in any manner to anticipation, alienation,

sale, transfer, assignment, pledge, encumbrance or charge, and any attempt

so to anticipate, alienage, sell, transfer, assign, pledge, encumber or

charge the same shall be void, nor shall any portion of such benefit be in

any manner payable to any assignee, receiver or any one Trustee, or be

liable for his debts, contracts, liabilities, engagements or torts, or be

subject to any legal process to levy upon or attach; provided, that this

Section 9.1 shall not apply to the creation, assignment, or recognition of

a right to any benefit payable with respect to a Participant pursuant to a

qualified domestic relations order, as defined in Section 414(p) of the

Code, or any domestic relations order entered before January 1, 1985.

9.2 If any individual entitled to receive a payment under the Plan shall be

physically, mentally or legally incapable of receiving or acknowledging

receipt of such payment, the Committee, upon the receipt of satisfactory

evidence of his incapacity and satisfactory evidence that another person

or institution is maintaining him and that no guardian or committee has

been appointed for him, may cause any payment otherwise payable to him to

be made to such person or institution so maintaining him. Payment to such

person or institution shall be in full satisfaction of all claims by or

through the Participant to the extent of the amount thereof.

<PAGE>

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Section 10 - Beneficiary
------------------------

The Participant's Beneficiary shall be his surviving spouse, if any; provided,

that if he leaves no surviving spouse, or if he files a qualified election with

the Committee, the Participants Beneficiary (which may include more than one

person, natural or otherwise, and one or more secondary or contingent

beneficiaries) shall be the Beneficiary designated in the Beneficiary

designation form provided by the Committee. For purposes of this Section 10,

"qualified election" shall mean a written Beneficiary designation of the

Participant to which his surviving spouse files a written consent and

acknowledgment of the effect of such consent. Such consent and acknowledgement

shall be ineffective unless witnessed by a notary public. The consent of the

spouse shall not be required if it is established to the satisfaction of the

Committee that such consent cannot be obtained because there is no spouse or the

spouse cannot be located. The qualified election of a Participant may be revoked

at any time by action of the Participant, in which event the surviving spouse,

if any, shall be the Beneficiary. Any other change in Beneficiary shall be made

only by the filing of a revised qualified election. For this purpose, the

Participant's spouse or surviving spouse shall mean the legally married spouse

or surviving spouse of the Participant; provided, that a former spouse shall be

treated as the spouse or surviving spouse to the extent provided under a

qualified domestic relations order as described in Section 414(p) of the Code.

If the Participant's Beneficiary (other than his surviving spouse) dies prior to

asserting a written claim for any death benefit payable from the Trust under the

Plan, or if such participant fails to designate a Beneficiary (other than his

surviving spouse), then and in any of such events, such benefit shall be payable

to his estate. If a Beneficiary is receiving or is entitled to receive payments

from the Trust Fund and dies before receiving all of the payments due him, any

remaining payments shall be made to the contingent Beneficiary, if any, named

pursuant to a qualified election. If there is no contingent Beneficiary, the

balance shall be paid to the estate of the Beneficiary as of the adjustment date

coincident with or next following the date of his death. Any Beneficiary may

disclaim all or any part of any benefit to which such Beneficiary shall be

entitled hereunder by filing a written disclaimer with the Committee at least

ten days before payment of such benefit is to be made. Such

<PAGE>

-47-

a disclaimer shall be made in form satisfactory to the Committee, and shall be

irrevocable when filed. Any benefit disclaimed shall be payable from the Plan in

the same manner as if the Beneficiary who filed the disclaimer had died on the

date of such filing.

<PAGE>

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Section 11 - Termination of Plan and Trust;

Removal of Trust

Merger or Consolidation of Plan
------------------------------------

11.1 Complete Termination

In the event of termination of the Plan, all Employer contributions shall

cease and no additional Participants shall enter the Plan. The assets

under the Plan shall be held in the Plan for distribution in accordance

with the provisions of Section 3; provided, that the Committee may in its

discretion provide for a liquidation of the Trust and distributions to the

Participants of their Accounts in cash, in kind, in the form of

nontransferable annuity contracts, or in any combination thereof. To the

extent not otherwise vested, all Participants shall become 100% vested in

their accounts.

11.2 Partial Termination

In the event of a partial termination of the Plan, the provisions of

Section 11.1 regarding a complete termination shall apply in determining

interests and rights of the Participants and their Beneficiaries with

respect to whom the partial termination shall occur, and shall apply to

the portion of the Trust Fund allocable to such Participants and

Beneficiaries.

11.3 Merger and Consolidation

In the event of any merger or consolidation of the Plan with any other

Plan, or a transfer of assets or liabilities of the Plan to any other

Plan (which merged, consolidated or transferee Plan shall be referred to

in this Section 11.3 as the "successor Plan"), the amount which each

Participant would receive if the successor Plan (and this Plan, if he

has any interest remaining therein) were terminated immediately after

the merger, consolidation or transfer shall be equal to or greater than

the amount he would have received if this Plan (and the successor plan,

if he had any interest therein immediately prior to the merger,

consolidation or transfer) had been terminated immediately preceding the

merger, consolidation or transfer.

<PAGE>

-49-

Section 12 - Communication to Participants
------------------------------------------

In accordance with the requirements of ERISA, the Employer shall communicate the

principal terms of the Plan to the Participants. The Employer shall make

available for inspection by Participants and their Beneficiaries during

reasonable hours, at the principal office of the Employer and at such other

places as may be required by ERISA, a copy of the Plan and of the Trust

Agreement and of such other documents as may be required by ERISA.

<PAGE>

-50-

Section 13 - Claims Procedure
-----------------------------

The following claims procedure shall apply with respect to the Plan:

13.1 Filing of a Claim for Benefits

If a Participant or Beneficiary (the "claimant") believes that he is

entitled to benefits under the Plan which are not being paid to him or

which are not being accrued for his benefit, he shall file a written claim

with the Committee. In the event that a member of the Committee shall be a

claimant, he shall not be entitled to act as such with respect to his

claim.

13.2 Notification to Claimant of Decision

Within 90 days after receipt of a claim by the Committee (or within 180

days if special circumstances require an extension of time), the Committee

shall notify the claimant of his decision with regard to the claim. In the

event of such special circumstances requiring an extension of time, there

shall be furnished to the claimant prior to expiration of the initial 90-

day period written notice of the extension, which notice shall set forth

the special circumstances and the date by which the decision shall be

furnished. If such claim shall be wholly or partially denied, notice

thereof shall be in writing and worded in a manner calculated to be

understood by the claimant, and shall set forth:

(a) the specific reason or reasons for the denial;

(b) specific reference to pertinent provisions of the Plan on which the

denial is based;

for the claimant to perfect the claim and an explanation of why such

material or information is necessary; and

(d) an explanation of the procedure for review of the denial.

If the Committee fails to notify the claimant of the decision in a timely

manner, the claim shall be deemed denied as of the close of the initial

90-day period (or the close of the extension period, if applicable).

<PAGE>

-51-

13.3 Procedure for Review

Within 60 days following receipt by the claimant of notice denying his

claim, in whole or in part, or, if such notice shall not be given, within

60 days following the latest date on which such notice could have been

timely given, the claimant shall appeal denial of the claim by filing a

written application for review with the Board. Following such request for

review, the Board shall fully and fairly review the decision denying the

claim. Prior to the decision of the Board, the claimant shall be given an

opportunity to review pertinent documents and to submit issues and

comments in writing.

13.4 Decision on Review

The decision on review of a claim denied in whole or in part by the

Committee shall be made in the following manner:

(a) Within 60 days following receipt by the Board of the request for

review (or within 120 days if special circumstances require an

extension of time), the Board shall notify the claimant in writing

of its decision with regard to the claim. In the event of such

special circumstances requiring an extension of time, written notice

of the extension shall be furnished to the claimant prior to the

commencement of the extension. If the decision on review is not

furnished in a timely manner, the claim shall be deemed denied as of

the close of the initial 60-day period (or the close of the

extension period, if applicable).

(b) With respect to a claim that is denied in whole or in part, the

decision on review shall set forth specific reasons for the

decision, shall be written in a manner calculated to be understood

by the claimant, and shall cite specific references to the pertinent

Plan provisions on which the decision is based.

<PAGE>

-52-

13.5 Action by Authorized Representative of Claimant

All actions set forth in this Section 13 to be taken by the claimant may

likewise be taken by a representative of the claimant duly authorized by

him to act in his behalf on such matters. The Committee and the Board may

require such evidence as either may reasonably deem necessary or advisable

of the authority to act of any such representative.

<PAGE>

-53 -

Section 14 - Parties to the Plan
--------------------------------

As of the Effective Date of the Plan, each of the following named corporations

in addition to BDM International, Inc. is a party to the Plan and Trust

Agreement:

BDM Federal, Inc.

BDM Management Services Company

BDM Services Company

ZAPEX Corporation

Any other corporation which desires to do so (and which is an entity described

in Section 1.14(a)) may become a party to the Plan provided a written agreement

to that effect is made among such corporation, BDM International, Inc. and the

Trustee. As used in the Plan and in the Trust Agreement, except as otherwise

specifically set forth herein, the term "Employer" shall mean collectively all

such parties to the Plan. The Plan and Trust Agreement shall be applied as a

single plan and trust agreement with respect to all parties in all respects as

if there were only one employer-party, and Service for purposes of the Plan

shall be interchangeable among employer-parties to the Plan and shall not be

deemed to be interrupted by the transfer at any time of any Employee from the

Service or one employer-party to the service of another employer-party.

Notwithstanding the foregoing, the Board of BDM International, Inc. shall have

the power to amend or terminate the Plan and Trust Agreement as applied to each

party, or to delegate such power.

<PAGE>

-54-

Section 15 - Special Top-Heavy Provisions
------------------------------------------

The following special provisions shall apply with respect to any Plan Year in

which the Plan is determined to be top-heavy (as described in Section 15.2):

15.1 Definitions

The following definitions shall apply for purposes of this Section 15

unless a different meaning is plainly required by the context.

(a) "Aggregate account" means, with respect to each Participant, the

balance in his Accounts as of the Valuation Date (defined in Section

15.1(l) corresponding to the Determination Date (defined in Section

15.1(e), following adjustment of such accounts as provided in

Section 5, subject to the following special provisions:

(i) An adjustment shall be made for any contributions due as of

the Determination Date. Such adjustment shall be the amount

of any contributions made after the Valuation Date but on or

before the Determination Date, except for the first Plan

Year when such adjustment shall also reflect the amount of

any contribution made after the Determination Date that are

allocated as of a date in that first Plan Year.

(ii) The amount of any distributions made from the Plan to the

Participant within the Plan Year that includes the

Determination Date or within the four preceding Plan Years

shall be included for purposes of determining the

Participant's Aggregate Account, except to the extent such

distributions are already included in the Participant's

Aggregate Account. The aggregate amount of distributions

made during the five-year period ending on the Determination

Date with respect to a Participant in a terminated plan

which, if it had not been terminated, would have been

required to be included in an Aggregation Group will be

included in accordance with the provisions of Section

416(g)(3) of the Code for purposes of determining the

Participant's Aggregate Account. Further, distribution from

the Plan (including the cash value of life insurance

policies) of a Participant's Account Balance because

<PAGE>

-55-

of death shall be treated as a distribution for purposes of

this subparagraph (ii). See Section 15.1(i).

(iii) Transfers in the form of rollovers or direct plan-to-plan

transfers (herein "transfers") initiated by the Participant

and made from this Plan to a plan maintained by an unrelated

employer ("unrelated transfers") shall be deemed to be

distributions from this Plan for purposes of determining a

Participants Aggregate Account. Unrelated transfers to this

Plan shall not be considered part of the Participants

Aggregate Account. Transfers which either are not initiated

by the Participant or are made to another plan maintained by

the Employer or a related employer ("related transfers")

shall not be considered distributions for the purpose of

determining a Participant's Aggregate Account. Related

transfers to this Plan shall be considered part of the

Participants Aggregate Account, irrespective of the date on

which such related transfer occurs. For purposes of this

subparagraph (iii), all Related Employers shall be

considered a single employer.

(iv) Amounts attributable to Employer contributions and amounts

attributable to employee contributions, whether voluntary or

mandatory, shall be included in determining a Participant's

Aggregate Account, provided that amounts attributable to

deductible employee contributions shall be excluded from a

Participant's Aggregate Account.

(v) Except as otherwise provided in subparagraph (i), the value

of a Participant's Aggregate Account as of any Determination

Date shall be determined in accordance with the provisions

of Section 5 as of the Valuation Date which corresponds to

such Determination Date.

(vi) If this Plan shall be included in an Aggregation Group,

"Aggregate Account" shall mean the sum of the balances in

the Participant's accounts under all defined contribution

plans included in such Aggregation Group determined as of

the most recent Valuation Date within a twelve-month period

ending on the Determination Date.

<PAGE>

-56-

(b) "Aggregation Group" means either a Required Aggregation Group or a

Permissive Aggregation Group as determined in this Section 15.1(b).

(i) Required Aggregation Group: The Required Aggregation Group

comprises all qualified plans (treating for this purpose any

simplified employee pension Plan as a qualified defined

contribution plan) of the Employer and Related Employers

which include a Key Employee as a Participant, and all other

qualified Plans of the Employer and Related Employers which

enable any qualified Plan which includes a Key Employee to

meet the requirements of Sections 401(a)(4) and 410 of the

Code. Each Plan in a required Aggregation Group will be

considered top-heavy if such group is a Top-Heavy Group. No

Plan in a required Aggregation Group will be considered top-

heavy if such group is not a Top-Heavy Group.

(ii) Permissive Aggregation Group: The Permissive Aggregation

Group comprises the required Aggregation Group plus any

other qualified Plan or Plans (treating for this purpose any

simplified employee pension Plan as a qualified defined

contribution plan) maintained by the Employer or a Related

Employer which are not required to be included in a Required

Aggregation Group and which, when considered together with

the Required Aggregation Group, would continue to satisfy

the requirements of Sections 401(a)(4) and 410 of the Code.

The Employer shall determine which Plan or Plans shall be

taken into account in determining the Permissive Aggregation

Group. In the case of a Permissive Aggregation Group which

is a Top-Heavy Group, only a Plan that is part of the

required Aggregation Group will be considered top-heavy. No

Plan in the Permissive Aggregation Group will be considered

top-heavy if the Permissive Aggregation Group is not a Top-

Heavy Group.

(iii) Special Rules: Only those Plans of the Employer and Related

Employers in which the Determination Dates fall within the

same calendar year shall be aggregated in order to determine

whether such Plans are top-heavy plans. An Aggregation Group

shall include any terminated plan of the Employer

<PAGE>

-57-

and Related Employers if it was maintained within the last

five years ending on the Determination Date.

defined in Section 2.3(d).

(d) "Cumulative Accrued Benefit" means the present value of a

Participant's Accrued Benefit under a defined benefit pension

plan (for an unaggregated plan) or the sum of the present values

of a Participant's Accrued Benefits under all defined benefit

plans included in an Aggregation Group (for aggregated plans).

The Cumulative Accrued Benefit with respect to a Participant

shall be determined with reference to the actuarial assumptions

for the Plan as of the most recent Valuation Date (which must

occur within the twelve-month period ending on the Determination

Date), and as if the Participant voluntarily terminated service

as of such Valuation Date. The Valuation Date must be the same

Valuation Date used for computing Plan costs for minimum funding

purposes, regardless of whether a valuation is performed that

year.

(e) "Determination Date" with respect to a Plan Year means (i) the

last day of the preceding Plan Year, or (ii) in the case of the

first Plan Year, the last day of such Plan Year.

(f) "Key Employee" means any Employee or former Employee (or the

Beneficiary of any such deceased employee) who, at any time

during the Plan Year that includes the Determination Date or any

of the preceding four Plan Years, is:

(i) An officer (within the meaning of Section 416 of the Code)

of the Employer or a Related Employer having annual

Compensation for the Plan Year greater than 150% of the

amount in effect under Section 415(c)(1)(A) of the Code for

the calendar year in which such Plan Year ends. For this

purpose the number of officers cannot exceed the lesser of

(A) or (B), where (A) is the greater of three Employees or

10% of all Employees and (B) is fifty Employees;

(ii) One of the ten Employees of the Employer or a Related

Employer having annual Compensation for the Plan Year

greater than the dollar limitation in

<PAGE>

-58-

effect under Section 415(c)(1)(A) of the Code for the

calendar year in which such Plan year ends, and owning (or

considered as owning within the meaning of Section 318 of

the Code) during the Plan Year containing the Determination

Date or any of the four preceding Plan Years both more than

one-half percent interest and the largest interests in all

employers (including the Employer) required to be aggregated

under Sections 414(b), (c) and (m) of the Code (if two

Employees have the same interest, the one with the greater

compensation shall be treated as owning the larger interest);

(iii) Any person who owns (or is considered as owning within the

meaning or Section 318 of the Code) more than five percent

of the outstanding stock or the Employer or a Related

Employer or stock possessing more than five percent of the

total combined voting power of alls stock of the Employer or

Related Employer or in the case of an unincorporated

business, any person who owns more than five percent of the

capital or profits interest in such employer (in determining

percentage ownership under this subparagraph (iii), any

employers (including the Employer) that would otherwise be

aggregated under Section 414(b), (c) and (m) of the Code

shall be treated as separate employers); or

(iv) Any person having annual Compensation from the Employer or a

Related Employer for the Plan Year of more than $150,000 and

who owns (or is considered as owning within the meaning of

Section 318 of the Code) more than one percent of the

outstanding stock of the Employer or a Related Employer or

stock possessing more than one percent of the total combined

voting power of all such stock, or in the case of an

unincorporated business, any person who owns more than one

percent of the capital or profits interest in such employer.

In determining percentage ownership under this subparagraph

(iv), employers (including the Employer) that would

otherwise be aggregated under Section 414(B), (c) and (m)

of the Code shall be treated as separate employers.

<PAGE>

-59-

In determining the amount of a person's Compensation for

purposes of subparagraphs (i), (ii) and (iii), compensation

from the Employer and all Related Employers (including all

employers required to be aggregated under Section 414(b),

aggregate basis. For purposes of this Section 15.1(f),

Section 318(a)(2)(C) of the Code shall be applied by

substituting five percent for fifty percent.

(g) "Non-Key Employee" means any Employee or former Employee

(including the Beneficiary of a deceased Non-Key Employee) who is

not a Key Employee.

(h) "Related Employer" means any corporation which is a member of a

controlled group of corporations (within the meaning of Section

414(b) of the Code) which includes the Employer or any trades or

businesses (whether or not incorporated) which are under common

control (within the meaning of Section 414(c) of the Code) with

the Employer, or a member of an affiliated service group (within

the meaning of Section 414(m) or the Code) which includes the

Employer.

(i) "Top-Heavy Group" means an Aggregation Group in which, as of the

Determination Date, the sum of (i) the Cumulative Accrued

Benefits of Key Employees under all defined benefit pension plans

included in the group, and (ii) the Aggregate Accounts of Key

Employees under all defined contribution plans included in the

group, exceeds sixty percent of a similar sum determined for all

Participants, excluding former Key Employees. A Top-Heavy Group

will be a "Super Top-Heavy Group" if the group would be top-heavy

if ninety percent were substituted for sixty percent in the

preceding sentence. The Cumulative Accrued Benefits and the

Aggregate Accounts of Participants in qualified Plans which are

part of an Aggregation Group shall be increased by the aggregate

distributions during the five-year period ending on the

Determination Date with respect to Participants under a

terminated Plan which, if it had not been terminated, would have

been required to be included in the Aggregation Group. In

determining whether the Aggregation Group is a Top-Heavy Group,

the Cumulative Accrued Benefits and Aggregate Accounts of Key

Employees and Non-Key Employees shall be determined separately

for each Plan as of the individual Plan's Determination

<PAGE>

-60-

Date. The results for each Plan as of the Determination Dates

that fall within the same calendar year are then totaled to

determine whether the Aggregation Group is a Top-Heavy Group. The

Aggregate Account and the Cumulative Accrued Benefit of a Participant

or former Participant who has not performed any service for the

Employer at any time during the five-year period ending on the

Determination Date shall be disregarded.

(j) "Top-Heavy Plan Year" means a Plan Year in which the Plan is

Top-Heavy.

(k) "Unrelated Employer" means any corporation which is not a Related

Employer with respect to the Employer.

(l) "Valuation Date" means, with respect to this Plan, the year-end

Adjustment Date described in Section 1.4.

15.2 Determination of Top-Heavy Status

The Plan shall be top-heavy for any Plan Year if, as of the Determination

Date (a) the sum of the Aggregate Accounts of Key Employees under the Plan

exceeds sixty percent of the Aggregate Accounts of all Participants under

the Plan (the "60% test"), as determined in accordance with the provisions

of Section 416(g) of the Code; or (b) the Plan is part of a Required

Aggregation Group and the Required Aggregation Group is a Top-Heavy Group.

The Plan shall be "super top-heavy" for any Plan Year if, as of the

Determination Date, the Plan would meet the 60% test if ninety percent

(the "90% test") were substituted for sixty percent in the 60% test or the

Plan is part of a Required Aggregation Group and the Required Aggregation

Group is a Super Top-Heavy Group. Notwithstanding the results of the 60%

test or the 90% test, the Plan shall not be considered top-heavy or super

top-heavy for any Plan Year in which the Plan is part of a Required or

Permissive Aggregation Group which is not a Top-Heavy Group or Super

Top-Heavy Group. If any Participant is a Non-Key employee for any Plan

Year, but such Participant was a Key employee for any prior Plan Year, such

Participant's Aggregate Account balance shall not be taken into account for

purposes of determining whether the Plan is top-heavy or super top-heavy

(or whether any Aggregation Group which includes this Plan is a Top-Heavy

Group or a Super Top-Heavy Group). In addition, if a Participant or former

Participant has not performed any Service for the Employer or any Related

Employer maintaining the Plan (other than benefits under the

<PAGE>

-61-

Plan) at any time during the five year period ending on the

Determination Date, the Aggregate Account for such Participant or

former Participant shall not be taken into account for purposes of

determining whether this Plan is top-heavy.

15.3 Top-Heavy Requirements

Notwithstanding any other provisions of the Plan, the Plan shall meet the

following requirements for any top-heavy Plan Year.

(a) Minimum vesting requirements. A Participant shall be vested in

his Salary Reduction Contribution Account, his Employer Matching

Contribution Account, his Nondeductible Contribution Account, his

Rollover Account and his Direct Transfer Account as provided in

Section 4.

(b) Minimum allocations required for Top-Heavy Plan Years. For any

Top-Heavy Plan Year, the Employer's Salary Reduction Contribution

allocated to the Salary Reduction Contribution Account of each

Non-Key employee shall be at least equal to the lesser of the

following percentages: (i) three percent of such Non-Key

employee's Compensation, or (ii) the percentage of such Non-Key

Employee's Compensation equal to the largest percentage which the

allocation of the Employer Salary Reduction Contribution to the

Salary Reduction Contribution Account of any Key employee bears

to such Key Employee's Compensation; provided, that (ii) above

shall not apply if the Plan is required to be included in an

Aggregation Group and the Plan enables a defined benefit pension

plan required to be included in the Aggregation Group to meet the

requirements of Sections 401(a)(4) and 410 of the Code. The

amount allocated to each Non-Key employee pursuant to this

Section 15.3(b) shall be referred to as the "minimum allocation".

The following special rules shall apply for purposes of this

Section 15.3(b):

(i) For purposes of determining the percentage in (ii) above,

the following special provisions shall apply:

(A) all defined contribution plans required to be included

in an Aggregation Group shall be treated as one plan; and

<PAGE>

-62-

(B) the calculation of the percentage at which

contributions are allocated to the Salary Reduction

Contribution Account of a Key employee shall be based

only on his Compensation not in excess of the

401(a)(17) limit in effect for the calendar year in

which the Plan Year begins.

(ii) If a Key Employee is a Participant in both a defined

contribution plan and a defined benefit pension plan that

are both part of a Top-Heavy Group (but neither of such

plans is super top-heavy), the defined contribution and the

defined benefit fractions set forth in Section 2.3 of the

Plan shall remain unchanged, provided the Salary Reduction

Contribution Account of each Non-Key employee who is a

Participant receives an extra allocation (in addition to the

minimum allocation set forth in this Section 15.3(b)) equal

to not less than one percent of such Non-Key Employees'

compensation.

(iii) For purposes of this Section 15.3(b), any Employer

contributions or benefits under the Federal Social Security

Act shall not be taken into account.

(iv) The minimum allocations set forth in this Section 15.3(b)

shall be allocated to the Salary Reduction Contribution

Accounts of all Non-Key Employees who are Participants and

who are in Service on the last day of the applicable Top-

Heavy Plan Year.

(v) If a Non-Key employee is a Participant in both this Plan and

a defined benefit pension plan, and both such plans are top-

heavy with respect to a Plan Year, the Employer shall not be

required to provide a Non-Key Employee with both the minimum

benefit under the defined benefit plan and the minimum

contribution under this Plan. If the Non-Key Employees who

are participating in a defined benefit pension plan

maintained by the Employer or a Related Employer are

accruing under such plan and the minimum benefits provided

under Section 416(c)(1) of the Code, the Employer need not

make the minimum allocation described in this Section

15.3(b) on behalf of the Non-Key Employees. If a Non-Key

Employee is a Participant in both this Plan and another

defined contribution plan

<PAGE>

-63-

maintained by the Employer and both such plans are included

in a Required Aggregation Group with respect to a Plan Year,

the Employer shall not be required to provide a Non-Key

Employee with both the minimum contribution under this Plan

and the minimum contribution under the other Defined

Contribution Plan. If the minimum contribution is being

provided to the Non-Key Employee under the other defined

contribution plan, the Employer need not make the minimum

allocation described in this Section 15.3(b) on behalf of

the Non-Key Employees. Notwithstanding the foregoing, in no

event shall the Employer make a minimum allocation under

this Plan with respect to a Non-Key Employee who is a

Participant in another defined contribution plan which is

subject to Section 412 of the Code and is included with

this Plan in a Required Aggregation Group. Alternatively,

the Employer may satisfy the minimum benefit requirement of

Section 416(c)(1) of the Code for a Non-Key Employee by

providing any combination of benefits or contributions that

satisfy the safe harbor rules of the applicable Treasury

Regulations.

(vi) The Committee may, in its discretion, separately account for

that portion of each Participant's Salary Reduction

Contribution Account attributable to Top-Heavy Plan Years

and Non-Top-Heavy Plan Years.

(vii) The minimum allocations made pursuant to this Section

15.3(b) (to the extent required to be nonforfeitable under

Section 15.3(a)) shall not be forfeitable under Section 411

(a)(3)(B) of the Code (relating to suspension of benefits

upon reemployment) or Section 411(a)(3)(d) of the Code

(relating to withdrawal of mandatory contributions).

Compensation in excess of the 401(a)(17) limit for the calendar year

in which the Plan Year begins shall be disregarded for purposes of

Section 15.3(b).

(d) Impact on special allocation limitations of Section 2.3. For any Plan

Year in which the Plan is super top-heavy, 1.0 shall be substituted

for 1.25 in Section 2.3(c) of the Plan. If the application of this

Section 15.4(d) with respect to a Super Top-Heavy

<PAGE>

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Plan would cause any Participant to exceed the combined

limitations on contributions and benefits described in Section

415 of the Code, the application of this Section 15.3(d) shall be

suspended as to such individual until such time as he no longer

exceeds the combined limitations of Section 415 of the Code as

modified by this Section 15.3(d). During the period of such

suspension, there shall be no contributions, forfeitures or

Nondeductible Voluntary Contributions allocated under this Plan

or any other defined contribution plan of a Related Employer and

there shall be no accruals for such individual under any defined

benefit plan of the Employer or Related Employer. If the Plan is

top-heavy but not super top-heavy for any Plan Year, the

substitutions referred to above with respect to a Super Top-

Heavy Plan shall be made only if the Employer makes the extra

minimum allocation described in Section 15.3(b)(ii). In no event

shall such substitution reduce any benefit accrued under a

defined benefit pension plan prior to the first day of the Plan

Year in which the top-heavy rules became effective.

(e) Construction. The provisions of this Section 15 shall apply with

respect to any Top-Heavy Plan Year notwithstanding any

conflicting provisions elsewhere in the Plan; provided, that the

provisions of this Section shall be applied in a manner to give

effect to the intent and purpose of Section 401(k) of the Code to

the extent applicable to this Plan.

<PAGE>

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SECTION 16 - PORTABILITY OF PARTICIPANT ACCOUNTS
-------------------------------------------------

Notwithstanding any other provision of this Plan, upon the request of the

Participant, the Trustee shall transfer the amount allocated to the credit

of a Participant in the Trust to the Trustee of any other exempt trust

which forms part of a tax-qualified retirement plan under Section 401 of the

Code or effective January 1, 1993 an individual retirement account or annuity.

<PAGE>

-66-

SECTION 17 - SPECIAL PROVISIONS RELATING TO TRANSFERS FROM QUALIFIED PLANS
--------------------------------------------------------------------------

Upon the written direction of the Committee, the Trustee shall receive and

hold, as a part of the Trust Fund, assets (hereinafter referred to as the

"transferred assets," which shall be deemed to include all increments

allocable to such transferred assets) transferred in cash or in kind

directly from the trustee or custodian of any other retirement plan

(hereinafter referred to as the "transferor plan") which is qualified under

Section 401(a) of the Code. In applying the provisions of this Section 17,

the following special provisions shall apply:

17.1 The transferred assets shall at all times be fully vested in the

respective Participants (and in the proportions) to which such

transferred assets had been allocated under the transferor plan

immediately preceding the transfer.

17.2 The Trustee under this Plan, as such, shall not be liable or

responsible for any acts or omissions in the administration of any

transferor plan and the trust thereunder of any other person or

entity who was trustee, custodian or other fiduciary under any such

transferor plan, and the Trustee under this Plan shall be held

harmless from such liability or responsibility.

17.3 The Trustee shall keep a separate Direct Transfer Account with respect

to the transferred assets of each Participant which may be commingled

for investment purposes with other assets of the Trust.

17.4 All transferred assets shall be administered by the Trustee in the

same manner as other assets of the Trust are administered.

17.5 To the extent not inconsistent with the provision of this Section 17,

the Committee may promulgate rules or bylaws supplementing and

implementing the provisions of this Section 17.

<PAGE>

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17.6 Notwithstanding any provisions of this Section 17 to the contrary, the

Committee shall not permit, nor shall the Trustee accept, the transfer

to this Plan of transferred assets from a transferor plan which is

subject to the requirements of Section 401(a)(11) of the Code at the

time of the transfer.

<PAGE>

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SECTION 18 - ROLLOVERS
----------------------

An Employee who receives a distribution of his entire interest from another

retirement plan (including another plan maintained by the Employer) which

is qualified under Section 401(a) of the Code on the date of such

distribution may, with the written consent of the Committee and in

accordance with procedures approved by the Committee, transfer all or a

part of such distribution to the Trustee under this Plan. In applying the

provisions of this Section 18, the following special provisions shall

apply:

18.1 The transfer to the Trustee must occur on or before the 60th day

following the receipt by the Employee of such distribution or, if

such distribution has previously been deposited in an Individual

Retirement Account or Individual Retirement Annuity (as defined in

Section 408 of the Code), the transfer must occur on or before the

60th day following the receipt by the Employee of the balance to his

credit under such Individual Retirement Account or Individual

Retirement Annuity.

18.2 The distribution made to the Employee must be a qualified total

distribution within the meaning of Section 402(a)(5)(E)(i) of the

Code.

18.3 The amount transferred to the Trustee is limited to the maximum

rollover amount as provided in Section 402(a)(5)(B) of the Code.

18.4 The amount transferred to the Trustee shall be credited to a separate

Rollover Account with respect to the Employee.

18.5 Except as otherwise provided in this Section 18, the assets in the

Rollover Account shall be administered by the Trustee in the same

manner as other Trust assets. Assets of the Rollover Account may be

comingled for investment with other assets of the Trust Fund.

<PAGE>

-69-

18.6 Notwithstanding any provision of this Section 18 to the contrary, the

Committee shall not permit, nor shall the Trustee accept, the transfer

to this plan by an Employee of all or part of any distribution

received by such Employee from another qualified retirement plan if

any part of such distribution is attributable to contributions made

on behalf of the Employee while a key employee (within the meaning of

Section 416(i)(1) of the Code) in a top-heavy plan (within the

meaning of Section 416(g) of the Code).

<PAGE>

-70-

SECTION 19 - SPECIAL TRANSFER FROM RETIREMENT PLAN
--------------------------------------------------

BDM Federal, Inc., which is a party to the Plan, is the sponsor of The BDM

Retirement Plan (the "Retirement Plan"). The Retirement Plan permits an

Employee to make voluntary nondeductible contributions which are maintained

in a separate account for his benefit under the Retirement Plan (the

"Retirement Plan Account"). As of the Effective Date of the Plan, the

Retirement Plan Account of a Participant under the Retirement Plan shall be

transferred to the Trust and allocated to his Nondeductible Contribution

Account as provided in Section 2.4. Such transfer shall be treated for

purposes of the Plan as a Nondeductible Voluntary Contribution of the

Participant.

<PAGE>

-71-

SECTION 20 - MISCELLANEOUS PROVISIONS
-------------------------------------

20.1 Notices

Each Participant who is not in Service and each Beneficiary shall be

responsible for furnishing the Plan Administrator with his current

address for the mailing of notices, reports, and benefit payments. Any

notice required or permitted to be given to such Participant or

Beneficiary shall be deemed given if directed to such address and

mailed by regular United States mail, first class, postage prepaid.

If any check mailed to such address is returned as undeliverable to

the addressee, mailing of checks will be suspended until the

Participant or Beneficiary furnishes the proper address. This

provision shall not be construed as requiring the mailing of any

notice or notification otherwise permitted to be given by posting or

by other publication.

20.2 Lost Distributees

A benefit shall be deemed forfeited if the Plan Administrator is

unable after a reasonable period of time, as determined by the

Committee, to locate the Participant or Beneficiary to whom payment

is due; provided, however, that such benefit shall be reinstated if a

valid claim is made by or on behalf of the Participant or Beneficiary

for the forfeited benefit.

20.3 Reliance on Data

The Employer, the Trustee, and the Plan Administrator shall have the

right to rely on any data provided by the Participant or by any

Beneficiary, including representations as to age, health, and marital

status. Such representations shall be binding upon any party seeking

to claim a benefit through a Participant, and the Employer, the

Trustee, and the Plan Administrator shall have no obligation to

inquire into the accuracy of any representation made at any time by a

Participant or Beneficiary.

20.4 Bonding

Unless exempted by ERISA, every fiduciary shall be bonded for each

Plan Year in accordance with the requirements of ERISA. The bond

shall provide protection to the Plan

<PAGE>

-72-

against any loss by reason of acts of fraud or dishonesty by the

fiduciary alone or in connivance with others. The cost of the bond

shall be an expense of the Trust and shall be paid from the Trust Fund

unless the Board shall elect for such cost to be paid by the BDM

International, Inc.

20.5 Receipt and Release for Payments

Any payment made from the Plan to or with respect to any Participant

or Beneficiary, or pursuant to a disclaimer by a Beneficiary, shall,

to the extent thereof, be in full satisfaction of all claims

hereunder against the Plan, the Employer and all fiduciaries with

respect to the Plan. The recipient of any payment from the Plan may

be required by the Committee, as a condition precedent to such

payment, to execute a receipt and release with respect thereto in

such form as shall be acceptable to the Committee.

20.6 Headings

The headings and subheadings of the Plan have been inserted for

convenience of reference and are to be ignored in any construction of

the provisions thereof.

20.7 Continuation of Employment

The establishment of the Plan shall not be construed as conferring any

legal or other rights upon any employee or any persons for

continuation of employment, nor shall it interfere with the right of

the Employer to discharge any Employee or to deal with him without

regard to the effect thereof under the Plan.

20.8 Construction

The provisions of the Plan shall be construed and enforced according

to the laws of the State of Virginia, except to the extent such laws

shall be superseded by the provisions of ERISA.

<PAGE>

-73-

IN WITNESS WHEREOF, the BDM International, Inc. 401(k) Savings Plan is, by

the authority of the Board of Directors of each of the parties hereto, executed

in behalf of each of said parties, this 21st day of December , 1995.
------- -------------

BDM INTERNATIONAL, INC.

By: /s/ Philip A. Odeen
------------------------
President

Attest:

/s/ John F. McCabe
- --------------------------

EXHIBIT 10.14

BDM

RETIREMENT PLAN

(As Amended and Restated Effective December 26, 1989)

<PAGE>

TABLE OF CONTENTS

Page
----

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Article 1 - Name and Definitions
- --------------------------------

1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Gender and Number . . . . . . . . . . . . . . . . . . . . . 9

Article 2 - Eligibility for Membership
- --------------------------------------

2.1 Eligibility for Membership . . . . . . . . . . . . . . . . 10
2.2 Termination of Membership . . . . . . . . . . . . . . . . . 10

Article 3 - Service
- -------------------

3.1 Benefit Service . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Vesting Service . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Limitation of Service Credited . . . . . . . . . . . . . . 11

Article 4 - Eligibility for Benefits
- ------------------------------------

4.1 Normal Retirement . . . . . . . . . . . . . . . . . . . . . 12
4.2 Early Retirement . . . . . . . . . . . . . . . . . . . . . 12
4.3 Late Retirement . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Termination of Employment; Vesting . . . . . . . . . . . . 12
4.5 Death Before Benefit Payments Commence . . . . . . . . . . 13

Article 5 - Computation of Benefits
- -----------------------------------

5.1 Normal Retirement Benefit . . . . . . . . . . . . . . . . . 14
5.2 Early Retirement Benefit . . . . . . . . . . . . . . . . . 15
5.3 Late Retirement Benefit . . . . . . . . . . . . . . . . . . 16
5.4 Deferred Vested Benefit . . . . . . . . . . . . . . . . . . 16
5.5 Death Benefit Before Benefit Payments Commence . . . . . . 16

Article 6 - Payment of Benefits
- -------------------------------

6.1 Payment Period . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Suspension of Benefits on Reemployment of Retired Employees 18
6.3 Facility of Payment . . . . . . . . . . . . . . . . . . . . 19
6.4 Form of Payment at Retirement . . . . . . . . . . . . . . . 20
6.5 Direct Rollovers . . . . . . . . . . . . . . . . . . . . . 24

<PAGE>

Page
----

Article 7 - Financing
- ---------------------

7.1 Funding Policy and Method . . . . . . . . . . . . . . . . . 26
7.2 Company Contributions . . . . . . . . . . . . . . . . . . . 28
7.3 Irrevocability . . . . . . . . . . . . . . . . . . . . . . 28

Article 8 - Administration
- --------------------------

8.1 Committee on Employee Benefits . . . . . . . . . . . . . . 30
8.2 Fiduciary Duties . . . . . . . . . . . . . . . . . . . . . 31
8.3 Procedure and Compensation . . . . . . . . . . . . . . . . 33
8.4 Insurance, Indemnification, and Bond . . . . . . . . . . . 33

Article 9 - Amendment, Duration, Termination, and Merger
- --------------------------------------------------------

9.1 Amendment and Duration of the Plan . . . . . . . . . . . . 35
9.2 Termination of the Plan . . . . . . . . . . . . . . . . . . 35
9.3 Merger of the Plan . . . . . . . . . . . . . . . . . . . . 37

Article 10 - Limitations on Contributions and Benefits
- ------------------------------------------------------

10.1 Maximum Benefit . . . . . . . . . . . . . . . . . . . . . . 38
10.2 Additional Limitation on Benefits . . . . . . . . . . . . . 41
10.3 Temporary Limitations . . . . . . . . . . . . . . . . . . . 43

Article 11 - Miscellaneous
- --------------------------

11.1 Inalienability of Benefits . . . . . . . . . . . . . . . . 47
11.2 Rights of Participants . . . . . . . . . . . . . . . . . . 47
11.3 Representations to Fiduciaries . . . . . . . . . . . . . . 47
11.4 Applicable Law . . . . . . . . . . . . . . . . . . . . . . 47
11.5 Terminated Vested Members as of December 25, 1984 . . . . . 48
11.6 Pre-Retirement Death Benefit Effective August 24, 1984 . . 49

Article 12 - Top Heavy Provisions
- ---------------------------------

12.1 Determination of Top Heavy Plan . . . . . . . . . . . . . . 50
12.2 Special Minimum Vesting Rules . . . . . . . . . . . . . . . 50
12.3 Special Minimum Benefit Accruals . . . . . . . . . . . . . 51
12.4 Special Benefit Limitations . . . . . . . . . . . . . . . . 52
12.5 Special Rules for Terminated Employees . . . . . . . . . . 53

<PAGE>

BDM

RETIREMENT PLAN

(As Amended and Restated Effective December 26, 1989)

The predecessor corporation of BDM Federal, Inc. established the BDM Retirement

Plan for the benefit of its employees effective July 1, 1972. The Plan has been

amended from time to time and is now being amended and restated in its entirety

effective December 26, 1989, except where other effective dates are provided.

Except as provided in Sections 11.5 and 11.6, the rights of persons who retired

or otherwise terminated employment prior to December 26, 1989 will be governed

by the terms of the Plan as in effect on their date of retirement or

termination; provided, however, that each retirement benefit which commenced on

or prior to January 1, 1988 and which is being paid under the Plan as of

January 1, 1988, shall be increased effective January 1, 1988 by 3% multiplied

by the number of full years which have elapsed from the commencement date of the

retirement benefit payment to January 1, 1988.

<PAGE>

-2-

Article 1

NAME AND DEFINITIONS
--------------------

1.1 - Name. The retirement plan as set forth herein or in any amendment hereof
- ----------

shall be known as the BDM Retirement Plan, herein referred to as the "Plan".

1.2 - Definitions. For purposes of this Plan, the following terms when
- -----------------

capitalized shall have the following meanings:

a. "Active Member" means an Employee who has met the eligibility

requirements of Article 2 and who is employed at the date in

question.

b. "Actual Retirement Date" of a Member means the date on which a

Member actually retires from the service of the Corporation,

except that the Actual Retirement Date of a Member who is

entitled to a Deferred Vested Benefit under Section 4.4 shall be

the date upon which the payment of such benefit commences.

c. "Affiliate Corporation" means any corporation which is a member

of a controlled group of corporations (as defined in Section

414(b), (c), (m), or (o) of the Code) which includes the Company.

d. "Approved Leave of Absence" means any approved leave of absence

from employment granted pursuant to the official leave of

absence policy of an Affiliate Corporation.

e. "Average Annual Past Service Compensation" means the arithmetic

average of annual Compensation for up to five continuous Plan

Years for which such average is the highest prior to December 26,

1989. The number of years included in determining such average is

the number of continuous Plan Years for which Benefit

<PAGE>

-3-

Service was earned, up to a maximum of five. Plan Years which

could otherwise be the first and/or last years included in

determining such average and which are Plan Years for which

annual compensation was not received for the entire Plan Year

(whether or not Benefit Service was earned) may or may not be

included in determining such average.

f. "Beneficiary" means (i) a spouse entitled to receive a survivor's

benefit under Section 5.5 or Section 6.4.a., or (ii) a person

designated by the Member, with the right of the Member designation,

or (iii) other than provided in (i) above, the Member's estate if

the Member does not designate a person or if the designated

person does not survive the Member, provided that clauses (ii)

and (iii) are subject to the spousal consent provisions of

Section 6.4.d. and e.

g. "Benefit Service" is defined in Section 3.1.

h. "Board of Directors" means the Board of Directors of BDM Federal,

Inc., or any successor thereto.

i. "Code" means the Internal Revenue Code of 1986, as amended.

j. "Committee" means the Committee on Employee Benefits provided for

in Section 8.1.a.

k. "Company" means BDM Federal, Inc. and any other company which by

appropriate action shall adopt the Plan.

l. "Compensation" means (i) for any period after June 25, 1984, base

salary and wages paid by the Company during such period

(including any before-tax contributions to the BDM International,

Inc. 401(k) Plus Plan or any other plan of the Company which

meets the requirements of Section 401(k) or Section 125 of the

Code), plus

<PAGE>

-4-

bonus earned for performance during such period regardless of

when paid by the Company, plus holiday bonus, plus Foreign

Service Differentials paid by the Company during such period,

plus imputed income from group term life insurance provided by

the Company for such period, and (ii) for any period prior to

June 26, 1984, compensation for such period as defined under the

Plan as in effect on June 25, 1984. Notwithstanding the above,

all stock bonuses paid prior to December 31, 1984 are not to be

considered as compensation.

For Plan Years commencing after December 31, 1988, Compensation

considered under the Plan shall not exceed the amount specified under

Section 401(a)(17) of the Code ($200,000 as adjusted). For Plan Years

commencing after December 31, 1993, the Plan shall not consider

Compensation in excess of the reduced 401(a)(17) limit of $150,000 as

adjusted. In no event will the application of the 401(a)(17) limits in

1989 or the 1994 reduction in the 401(a)(17) limits reduce the benefit

earned by a Member prior to the effective date of the imposition of

the limitation or its subsequent reduction. The compensation limit for

any Plan Year is the 401(a)(17) limit in effect on January 1 of the

calendar year in which such Plan Year began.

m. "Corporation" means BDM International, Inc., or any successor

thereto, and any Affiliate Corporation.

n. "Covered Compensation" for a Plan Year means the average of the

Social Security Wage Bases in effect for each calendar year

during the 35-year period ending with the last day of the

calendar year in which the Member attains or will attain his

Social Security Retirement Age. For Plan Years prior to

December 26, 1994, such

<PAGE>

-5-

average is rounded to the nearest $600. In determining a Member's

Covered Compensation, the Social Security Wage Base in effect at

the beginning of the current Plan Year will be assumed to be the

same for all future years.

o. "Employee" means any employee in the service of the Corporation,

including a person on a Military Leave of Absence or an Approved

Leave of Absence.

p. "ERISA" means the Employee Retirement Income Security Act of 1974

as amended from time to time.

q. "Foreign Service Differentials" means amounts paid because of

employment outside of the United States in the form of an add-on

percentage or flat dollar amount increase to the Employee's base

salary/wages. These include hazardous duty (as defined by the

U.S. Secretary of Defense), remote location allowances, and

foreign service premiums. Not included are other premiums such as

COLA, quarters allowances, dependent education costs, and tax

preparation fees which are considered reimbursement of Employee

expenses. Also not included are continuous service bonuses,

completion bonuses, and R&R payments which may be paid due to

lengthy assignments.

r. "Fund" means the fund established in accordance with Article 7.

s. "Hour of Service" means any hour for which an Employee is

directly or indirectly paid or entitled to payment by the

Corporation for performance of duties or for reasons other than

the performance of duties, including regular time, overtime,

vacations and pooled time off (including hours of accrued

vacation and pooled time off paid to an Employee at the time of

termination of employment, but excluding hours for which an

employee is paid but has not taken while an Employee),

<PAGE>

-6-

compensatory time (including hours of accrued compensatory time

paid to an employee at time of termination of employment, but

excluding hours for which an employee is paid but has not taken

while an Employee), holidays, sickness, disability, layoff, and

similar paid periods, but excluding such time for which the

Employee is not paid or entitled to payment, and also including

any hours for which back pay, irrespective of mitigation of

damages, is either awarded or agreed to by the Corporation, such

hours to be credited for the Plan Year to which the award or

agreement pertains rather than the Plan Year of payment. However,

no more than 501 hours of service shall be credited on account of

any single period during which the employee performs no duties.

Hours of Service shall include any such hours for service with

any company which is a predecessor employer (as provided in

Section 414(a) of the Code) of the Corporation, service with any

company which is a member of a controlled group of corporations

(as defined in Section 414(b) of the Code) which includes the

Corporation, service with any trade or business under common

control (as provided in Section 414(c) of the Code) with the

Corporation, and service with any entity which is aggregated with

the Corporation under Section 414(o) of the Code. In the case of

an Employee on a Military Leave of Absence, as permitted by law,

each such Employee shall be credited with 40 Hours of Service per

week during such Military Leave of Absence. Such hours shall be

credited to the Employee for the Plan Year or Years in which such

Military Leave of Absence occurs, except that such credit shall

be given at the time the Employee makes timely application for

reemployment by the Affiliate Corporation. The foregoing

provisions shall be administered in accordance with Section

2530.200b-2 of the

<PAGE>

-7-

Department of Labor Regulations. Nothing herein shall be

construed as denying an Employee credit for an Hour of Service if

credit is required by ERISA or other Federal law.

t. "Member" means an Employee who is eligible to participate in the

Plan as provided in Article 2 and includes a former Employee

until he ceases to be a Member in accordance with Section 2.2.

u. "Military Leave of Absence" means absence from work due to active

duty for training or service in the Armed Forces of the United

States, including a Reserve component thereof or the Public

Health Service, provided that at the time the Employee makes

application for reemployment by the Affiliate Corporation, he is

entitled to reemployment rights under Federal law.

v. "Normal Retirement Date" of a Member is defined in Section 4.1.

w. "Period Since Last Employment" means the most recent number of

consecutive Service Breaks between the last Plan Year credited

towards Vesting Service and the Plan Year that contains the date

of reemployment.

x. "Plan Year" means the twelve-month period beginning on December

26 and ending on December 25.

y. "Service Break" means a Plan Year during which an Employee fails

to complete more than 500 Hours of Service. In the case of an

Employee on an Approved Leave of Absence solely for the purposes

of determining whether a Plan Year in which he is on such a leave

constitutes a Service Break (and for no other purpose), he shall

be credited with 40 Hours of Service per week, as permitted by

law, during such Approved Leave of Absence. Such hours shall be

credited to the Employee for the

<PAGE>

-8-

Plan Year or Years in which the Approved Leave of Absence occurs,

except that such credit shall be given only after the Employee

returns to active employment with the Affiliate Corporation.

Notwithstanding the foregoing provisions of this subsection y.,

in the event an Employee is absent from work by reason of the

Employee's pregnancy, the birth of a child by the Employee, or

child care during the period immediately following the birth or

adoption of a child by the Employee, solely for the purposes of

determining whether a Plan Year in which such Employee is so

absent constitutes a Service Break (and for no other purpose),

the Employee shall be deemed to have completed (i) the number of

hours that normally would have been credited but for the absence,

or (ii) if the normal work hours are unknown, eight hours of

service during each normal workday of such absence; provided,

however, that the total number of Hours of Service required to be

deemed completed for such period of absence shall not exceed 501

and shall be credited only in the Plan Year in which the absence

begins (if such crediting is necessary to prevent a Service Break

in that Plan Year), or in the following Plan Year. Effective

August 1, 1993, absences from work because of a period of leave

as provided under the Family Medical Leave Act shall be treated

in the same manner as pregnancy leaves for determining whether a

Service Break has occurred.

z. "Social Security Benefit" means the estimated Social Security

Primary Insurance Amount (PIA) payable at the assumed

commencement date determined using reasonable assumptions with

respect to compensation for Social Security purposes, as

determined by the Company.

<PAGE>

-9-

aa. "Social Security Retirement Age" means age 65 in the case of a

Member born before January 1, 1938, age 66 for a Member born after

December 31, 1937 but before January 1, 1955, and age 67 for a Member

born after December 31, 1954.

bb. "Social Security Wage Base" means the maximum amount of wages

subject to taxation under the Federal Social Security Act.

cc. "Termination Date" of a Member means the date on which a Member

terminates employment with the Corporation, other than by death or

retirement.

dd. "Trustee" means one or more insurance companies, banks, trust

companies, or other financial institutions designated in

accordance with the provisions of Article 7 to participate in the

administration of the Plan and in the investment of the Fund.

ee. "Vesting Service" is defined in Section 3.2.

1.3 - Gender and Number. The masculine pronoun whenever used herein shall
- -----------------------

include the feminine gender and vice versa, and the singular number as used

herein shall include the plural and the plural the singular, unless the

context clearly indicates a different meaning.

<PAGE>

-10-

Article 2

ELIGIBILITY FOR MEMBERSHIP
--------------------------

2.1 - Eligibility for Membership. Any person in the employ of the Company
- ---------------------------------

shall become a Member (i) on his date of employment by the Company, if he

completes at least 1,000 Hours of Service during the one-year period

following such date of employment, or, if not, (ii) on the first day of the

first Plan Year commencing after the date of such employment during which

he completes at least 1,000 Hours of Service. Any Employee who was not a

Member on December 31, 1987 solely because age 60 had been attained before

employment commenced shall become a Member on December 26, 1987.

2.2 - Termination of Membership. If a Member's Period Since Last Employment
- -------------------------------

exceeds five years, and he is not entitled to a Deferred Vested Benefit

trader Section 4.4, he will cease to be a Member of the Plan and will

forfeit all rights under the Plan. If he subsequently again becomes a

Member, all prior status as a Member will be disregarded for all purposes.

<PAGE>

-11-

Article 3

SERVICE
-------

3.1 - Benefit Service. A Member's Benefit Service shall be determined as
- ---------------------

follows:

a. One year of Benefit Service shall be credited for each Plan Year

during which a Member has 1,000 Hours of Service with the Company.

b. The maximum number of years of Benefit Service used in determining a

Member's benefit is 20.

3.2 - Vesting Service. A Member's Vesting Service shall be the number of Plan
- ---------------------

Years during which the Member has 1,000 Hours of Service with the Corporation.

3.3 - Limitation of Service Credited. No more than one year of Benefit Service
- ------------------------------------

or Vesting Service shall be credited with respect to any Plan Year.

<PAGE>

-12-

Article 4

ELIGIBILITY FOR BENEFITS
------------------------

4.1 - Normal Retirement. "An Active Member who retires on the first day of the
- -----------------------

month coincident with or next following his attainment of age 60, herein

referred to as his "Normal Retirement Date", shall be entitled to receive a

Normal Retirement Benefit as provided in Section 5.1.

4.2 - Early Retirement. An Active Member may elect to retire early on the first
- ----------------------

day of any month coincident with or following his attainment of age 55 and

completion of 24 months of active regular, full-time employment with the Company

and shall be entitled to receive an Early Retirement Benefit commencing on the

first day of any month not later than his Normal Retirement Date, as provided in

Section 5.2. Approved leaves of absence periods, except those associated with

military duty, do not count toward the completion of the 24 month active,

regular full-time requirement specified above.

4.3 - Late Retirement. At his discretion, an Active Member may postpone his
- ---------------------

retirement beyond his Normal Retirement Date. Upon retirement, such Member shall

be entitled to receive a Late Retirement Benefit as provided in Section 5.3.

4.4 - Termination of Employment; Vesting. An Active Member with five or more
- ----------------------------------------

years of Vesting Service whose employment is terminated other than by retirement

or death, shall be entitled to receive a Deferred Vested Benefit as provided in

Section 5.4.; provided, however, that an Active Member who had transferred to

Ford Motor Company or Ford Aerospace Corporation as of October 22, 1990, but had

Benefit Service in this Plan, shall be, regardless of his years of Vesting

Service, entitled to receive a Deferred Vested Benefit as provided in Section

5.4. An Active Member with fewer than five years of Vesting Service whose

employment is terminated other than

<PAGE>

-13-

by retirement or death, shall have no vested accrued benefit. Upon termination,

such a Member shall be deemed to have received a distribution of such zero

vested accrued benefit and his nonvested accrued benefit shall be forfeited. If

such a Member resumes covered employment under the Plan, his forfeited nonvested

accrued benefit will be restored.

4.5 - Death Before Benefit Payments Commence.
- --------------------------------------------

a. BEFORE NORMAL RETIREMENT DATE - If a married Member dies, either

before or after retirement or other termination of employment but

before his benefit payments commence, after becoming eligible for a

vested benefit upon termination of employment before his Normal

Retirement Date, the Member's spouse shall receive a 50% Pre-

Retirement Death Benefit as provided in Section 5.5.a.

b. AFTER NORMAL RETIREMENT DATE - If a Member dies before his Actual

Retirement Date but on or after his Normal Retirement Date, his

spouse, if any, shall receive a benefit as provided in Section 5.5.b.

<PAGE>

-14-

Article 5

COMPUTATION OF BENEFITS
-----------------------

5.1 - Normal Retirement Benefit.
- -------------------------------

a. The annual Normal Retirement Benefit payable monthly to a Member who

becomes eligible therefor under Section 4.1 shall be equal to the sum

of benefits calculated below for the consecutive maximum number of

years of Benefit Service permitted under Section 3.1.b. which

produces the largest benefit.

(i) Post-December 25, 1989 Benefit Service
--------------------------------------

(1) 1.4% times the Member's Compensation for each Plan Year of

Benefit Service up to the Member's Covered Compensation for

such Plan Year, plus

(2) 1.82% times the Member's Compensation for each such Plan

Year in excess of the Member's Covered Compensation for such

Plan Year.

(ii) Pre-December 26, 1989 Benefit Service
-------------------------------------

(1) 1-1/3% times the Member's Average Annual Past Service

Compensation up to the Member's Covered Compensation for

1989, plus

(2) 2% times the Member's Average Annual Past Service

Compensation in excess of the Member's Covered

Compensation for 1989.

In no event will any Member's Normal Retirement Benefit be less than

the benefit determined on December 25, 1989 based upon the terms of

the Plan then in effect.

<PAGE>

-15-

b. In no event will the sum of the benefit for service after December

25, 1989 and the benefit for service prior to December 26, 1989, as

determined in a. above, be less than the greater of (i) the Member's

annual benefit as of December 25, 1989 as determined under The BDM

Corporation Retirement Plan as in effect on December 24, 1989, and

(ii) an annual benefit equal to 1.3% of the Member's Average Annual

Past Service Compensation up to Covered Compensation for 1989,

reduced from age 62 based on factors specified in column (2) below,

plus 2% of such Average Annual Past Service Compensation in excess of

such Covered Compensation, reduced from age 65 based on factors

specified in column (3) below, multiplied by Benefit Service as of

December 25, 1989, up to a maximum of 25 years. The factors are as

follows:

Age at Benefit Basic Excess
Commencement Factors Factors
-------------- ------- -------
(1) (2) (3)

55 0.767 0.486
56 0.800 0.529
57 0.833 0.577
58 0.867 0.615
59 0.900 0.654
60 0.933 0.692
61 0.967 0.731
62 1.000 0.769
63 1.000 0.846
64 1.000 0.923
65 1.000 1.000

5.2 - Early Retirement Benefit. The annual Early Retirement Benefit payable
- ------------------------------

monthly to a Member who becomes eligible therefor under Section 4.2 shall be

computed as provided in Section 5.1, based on the Member's Compensation, Covered

Compensation and Benefit Service to his Actual

<PAGE>

-16-

Retirement Date. Such Early Retirement Benefit will be reduced 5/12ths of 1% for

each complete month by which the date benefits commence precedes the Member's

Normal Retirement Date; provided, however, that the benefit, determined as in

Section 5.1.b.(ii) above, will be reduced based on factors as specified in

Section 5.1.b.(ii).

5.3 - Late Retirement Benefit. The annual Late Retirement Benefit payable
- -----------------------------

monthly to a Member who becomes eligible therefor under Section 4.3 shall be

computed as provided in Section 5.1, based on the Member's Compensation, Covered

Compensation and Benefit Service to his Actual Retirement Date.

5.4 - Deferred Vested Benefit.
- -----------------------------

a. The annual Deferred Vested Benefit payable monthly to a Member who

becomes eligible therefor under Section 4.4 shall be computed as

provided in Section 5.1, based on the Member's Compensation, Covered

Compensation, and Benefit Service to his Termination Date.

b. A Member's Deferred Vested Benefit shall commence on the Member's

Normal Retirement Date unless the Member elects to have payment of his

Deferred Vested Benefit commence prior to Normal Retirement Date but

not before his attainment of age 55 and the completion of 24 months of

active regular, full-time employment with the Company. In this event,

his benefit shall be reduced as provided in Section 5.2.

5.5 - Death Benefit Before Benefit Payments Commence.
- ----------------------------------------------------

a. BEFORE NORMAL RETIREMENT DATE - The Pre-Retirement Death Benefit

payable to the surviving spouse of a Member who becomes eligible

therefor under Section 4.5.a. shall be equal to the benefit the spouse

would have received if the Member

<PAGE>

-17-

had retired or terminated on the earlier of (i) his actual date of

retirement or termination, and (ii) the day preceding his date of

death, with benefit payments payable under a 50% joint and survivor

benefit as provided in Section 6.4.a. with his spouse as Beneficiary;

the benefit shall be payable to the spouse commencing on the earliest

date at which benefits could have commenced to the Member, unless the

spouse elects to defer commencement to a later date, but not later

than the Member's Normal Retirement Date.

b. AFTER NORMAL RETIREMENT DATE - If a Member dies before his Actual

Retirement Date but on or after his Normal Retirement Date and his

spouse survived him, the 100% joint and survivor benefit shall become

effective on the Member's date of death with payments to be made to

the Member's spouse determined as if the Member's Actual Retirement

Date had been the day preceding his date of death.

<PAGE>

-18-

Article 6

PAYMENT OF BENEFITS
-------------------

6.1 - Payment Period. Except as otherwise provided in Section 4.5, all benefits
- --------------------

shall be payable monthly in an amount equal to 1/12th of the annual benefit,

commencing on the first day of the month coincident with or next following

Actual Retirement Date, death, or elected benefit commencement date, and

continuing until the last monthly payment prior to the death of the payee,

provided, however, that, in the case of a Member who attains age 70-1/2 after

December 31, 1987, payment of a retirement benefit shall commence no later than

the April 1 next following the calendar year in which the Member attains age 70-

1/2, regardless of whether the Member has retired as of such date; except that

for a Member who attained age 70-1/2 during 1988, the payment of a retirement

benefit shall commence no later than April 1, 1990.

When a Member commences to receive benefits before his Actual Retirement Date

because of attainment of age 70-1/2, his benefits shall be recomputed on

December 25 of the year payments commence and each subsequent December 25 until

Actual Retirement Date under the same form of payment as the benefit that is

being paid. Recomputed benefits shall be paid effective with the beginning of

the new Plan Year; provided, however, that any increase in benefits from such

recomputation shall be reduced by the actuarial value of payments received

during the preceding Plan Year using the UP-1984 Table and 6% interest.

6.2 - Suspension of Benefits on Reemployrnent of Retired Employee. If a Member
- -----------------------------------------------------------------

who has retired under this Plan is subsequently reemployed by the Corporation

prior to the April 1 following the calendar year in which the Member attains age

70-1/2, his retirement benefits under this Plan shall be suspended prior to his

Normal Retirement Date, and for each month in which he completes at

<PAGE>

-19-

least 40 hours of Section 203(a)(3)(B) of ERISA service on or after his Normal

Retirement Date, until his subsequent re-retirement. Upon his subsequent re-

retirement, said Member's benefit shall be based upon his total Benefit Service

during his separate periods of employment, reduced by the actuarial value of any

payments received prior to Normal Retirement Date or as a lump sum or as a

Social Security leveling benefit, using the UP-1984 Table and 6% interest. If a

Member who has not retired under this Plan works past his Normal Retirement

Date, his retirement benefits under this Plan shall be paid for each month in

which he completes less than 40 hours of Section 203(a)(3)(B) of ERISA service

on or after his Normal Retirement Date.

6.3 - Facility of Payment.
- -------------------------

a. If the Committee receives information satisfactory to it that a Member

or Beneficiary to whom a benefit is payable from the Fund is, at the

time such benefit becomes payable, unable to care for his affairs

because of illness or accident, or physically or mentally incompetent

to receive such benefit and give a valid release thereof, and that

another person or an institution is then maintaining or has custody of

such person, and that no guardian, committee, or other representative

of the estate of such person has been duly appointed, then the

Committee may direct payment of such benefit otherwise payable to such

Member or Beneficiary to such other person or institution which is

then maintaining or has custody of such person, and the receipt of

such other person or institution shall be a valid and complete

discharge for the payment of such benefit.

b. Any benefit payable hereunder shall be commuted and paid in one lump

sum, if such lump sum is $3,500 or less. Such lump sum shall be

determined using the UP-1984 Table and the interest rates which would

be used (as of the date of distribution)

<PAGE>

-20-

by the Pension Benefit Guaranty Corporation for purposes of

determining the present value of a lump sum payment on plan

termination.

6.4 - Form of Payment at Retirement.
- -----------------------------------

a. A Member who has a spouse on the date his benefit payments commence

shall automatically receive a 50% joint and survivor benefit as

provided under b.(ii)(3) below with his spouse as Beneficiary. Any

other Member shall automatically receive a benefit as provided under

b.(i) below; however, any Member may elect any optional form of

retirement benefit as provided in b. below.

b. A Member may elect one of the following forms of benefit payment:

(i) A benefit determined under Sections 5.1, 5.2, 5.3, or 5.4, as the

case may be, payable for life to the Member.

(ii) A joint and survivor benefit providing a reduced monthly benefit

payable for life to the Member, with 100%, 66-2/3%, or 50% of the

reduced benefit, as elected by the Member, continuing after his

death for the remaining lifetime of his designated Beneficiary.

If the Beneficiary is other than the Member's spouse, the Member

can elect the 100% option only if the Beneficiary is not more

than ten years younger than the Member. The non-spouse

Beneficiary of a Member may not be more than 24 years younger

than the Member if the 66-2/3% option is elected. The reduced

retirement benefit payable under this option shall be determined

based upon the following schedule:

<PAGE>

-21-

Percentage of Percentage to be Applied to Benefit Payable
Reduced Benefit to the Member under b.(i) Above to
to be Continued Determine Benefit Payable to the Member
to Beneficiary Under this Option
-------------- ----------------------------------------

(1) 100% 80% plus (minus) 1% for each full year that
the Beneficiary is older (younger) than the
Member, plus (minus) 1% for each full year
that the Member is below (beyond) his
Normal Retirement Date as of the date his
benefit payments commence, with a
maximum percentage of 99%.

(2) 66-2/3% 86-2/3% plus (minus) 2/3% for each full year
that the Beneficiary is older (younger) than
the Member, plus (minus) 2/3% for each full
year that the Member is below (beyond) his
Normal Retirement Date as of the date his
benefit payments commence,with a
maximum percentage of 99-1/3%.

(3) 50% 90% plus (minus) 1/2% for each full year that
the Beneficiary is older (younger) than the
Member, plus (minus) 1/2% for each full year
that the Member is below (beyond) his
Normal Retirement Date as of the date his
benefit payments commence, with a
maximum percentage of 99-1/2%.

Benefit payments under this option shall terminate with the monthly payment

preceding the date of death of the Member or his Beneficiary, whoever is last to

survive.

(iii) A ten-year certain and life benefit providing a reduced monthly

benefit payable for life to the Member with 120 monthly payments

guaranteed to the Member or his Beneficiary in the event of the

Member's death. The reduced retirement benefit payable to the Member

under this option shall be

<PAGE>

-22-

equal to the benefit payable to the Member under b.(i) above

multiplied by a percentage determined as follows:

95% plus (minus) 1/2% for each full year that the Member is
below (beyond) his Normal Retirement Date as of the date
his benefit payments commence, with a maximum
percentage of 99-1/2%.

(iv) A Social Security leveling benefit providing an increased benefit

payable until Social Security Benefits are assumed to commence and

then a reduced benefit. The increased benefit payable until Social

Security Benefits are assumed to commence shall be equal to:

A + (B x C), where:
-
D

A = the benefit payable to the Member under b.(i) above,

B = the estimated Social Security Benefit payable at the date such

Social Security Benefit is assumed to commence,

C = I, reduced 1/180 (5/9%) for each month up to 60 months plus 1/360

(5/18%) for each month in excess of 60 months that the date of

commencement of A precedes the date that the Social Security

Benefit could commence in an unreduced amount, and

D = 1, reduced 1/180 (5/9%) for each month up to 60 months plus 1/360

(5/18%) for each month in excess of 60 months that the date of

commencement of B precedes the date that the Social Security

Benefit could commence in an unreduced amount.

The reduced benefit payable on and after the date Social Security

Benefits are assumed to commence shall be equal to the increased

benefit payable

<PAGE>

-23 -

until Social Security Benefits are assumed to commence, minus B,

where B is as defined above. If this amount is less than zero,

benefit payments cannot be made under this option based on the

selected assumed commencement date for Social Security Benefits.

c. The election of any form of retirement benefit shall become effective

only upon the Member's Actual Retirement Date, except as provided in

Section 6.1. In order to provide each Member with an oppommity to make

an informed election with respect to the retirement benefit options

(including an election not to take the joint and survivor benefit

provided by a. above), the Committee shall cause to be furnished to

each Member a written notification, in non-technical terms, of the

availability of the election of the retirement benefit options between

30 and 90 days before the date the Member's retirement benefits are

scheduled to commence. Such written notification shall set out the

terms and conditions of the automatic benefit prescribed by a. above

and the financial effects of electing any, optional form of retirement

benefit described in b. above.

d. An election under b. above may be made by the Member without the

consent of any other person (except that an election by a married

Member to take a benefit, other than a joint and survivor benefit with

the Member's spouse as Beneficiary, shall require written consent of

the Member's spouse, which consent acknowledges the effect of such

election and is witnessed by a Plan representative or notary public,

provided that such election shall be deemed effective without such

spousal consent if the Member evidences to the Committee that there is

no spouse or the spouse cannot reasonably be located); shall be made

on a form prescribed by the

<PAGE>

Committee; and may be made within the 90-day period ending on the date

the Member's retirement benefits are scheduled to commence.

e. Death of a Member's Beneficiary before the Member's Actual Retirement

Date shall automatically revoke election of a joint and survivor

benefit under b.(ii) above. An election made in accordance with d.

above may be revoked at any time during the applicable election period

on a form prescribed by the Committee, and such revocation will become

effective when the form is completed and filed with the Committee.

Consent of the Members Beneficiary shall not be required for a valid

revocation, unless the Beneficiary is the Members spouse. If an

election is revoked, either automatically or by filing the prescribed

form, a new election may be made at any time during the applicable

election period in accordance with d. above. An election made in

accordance with d. above will be automatically revoked upon the

Member's marriage or remarriage prior to the Members Actual Retirement

Date.

6.5 - Direct Rollovers.
- ----------------------

a. Effective January 1, 1993, a recipient of an eligible rollover

distribution may elect, at the time and in the manner prescribed by

the Plan, to have any portion of the distribution paid directly to an

eligible retirement plan specified by the recipient in a direct

rollover.

b. An eligible rollover distribution is any distribution described in

Section 402(c)(4) of the Code of at least $200.

c. An eligible retirement plan is an individual retirement account

described in Section 408(a) of the Code, an individual retirement

annuity described in Section 408(b) of the Code, an annuity plan

described in Section 403(a) of the Code, or a qualified

<PAGE>

-25-

trust described in Section 401(a) of the Code, that accepts the

recipient's eligible rollover distribution. However, in the case of an

eligible rollover distribution to a surviving spouse, an eligible

retirement plan is only an individual retirement account or individual

retirement annuity.

d. A recipient includes a Member, a Member's surviving spouse, or former

spouse who is an alternate payee under a qualified domestic relations

order, as described in Section 414(p) of the Code.

e. A direct rollover is a payment by this Plan to the eligible retirement

plan specified by the recipient.

<PAGE>

-26-

Article 7

FINANCING
---------

7.1 - Funding Policy and Method.
- -------------------------------

a. The funding of the Plan and payment of the benefits thereunder shall

be provided for through the medium of a Fund held by a Trustee.

b. The Trustee shall exercise control and management of the Fund in

accordance with an agreement between the Trustee and the Company. To

the extent control and management of such Fund is not limited or

reserved to another fiduciary of the Plan by the terms of said

agreement, the Trustee shall have the sole and exclusive

responsibility therefor.

c. The Board of Directors shall choose the Trustee and shall consider and

respond in a timely fashion to recommendations of the Committee with

respect to continuation of the Trustee. Otherwise, the Board of

Directors shall have no fiduciary duty with respect to control or

management of the assets of the Fund.

d. The Committee shall have the following duties and responsibilities in

respect of control and management of the Fund assets:

(i) In accordance with the agreement between the Trustee and the

Company, designate the manner in which amounts contributed by

the Company under the Plan shall be allocated to the investment

managers selected by the Committee and direct transfers from one

investment manager to another.

(ii) At reasonable intervals, not less than annually, review

generally the performance of the Trustee and investment managers

with respect to control

<PAGE>

-27-

and management of assets of the Fund and determine whether there

is any reason why the Trustee or any investment manager should

not continue to be used as a funding mechanism under the Plan.

(iii) Where, in the judgment of the Committee, after exercising the

care, skill, prudence, and diligence under the circumstances

then prevailing that a prudent man acting in a like capacity and

familiar with such matters would use in the same circumstances,

the performance of the Trustee or an investment manager does not

meet the standards of review set forth in d.(ii) above, make

such recommendation to the Board of Directors as seems

appropriate to the Committee under the circumstances.

Except as set forth in this paragraph d., the Committee shall have no

fiduciary duty with respect to control or management of the assets of

the Fund.

e. The specific duties of the named fiduciaries identified above shall be

the several and not the joint responsibility of each according to the

terms hereof, and no such named fiduciary shall be liable for the act

or omission of any other fiduciary, or for the breach of any duty not

his specific responsibility, unless either (i) by his failure to

administer properly his specific responsibility he has enabled such

other person to commit a breach of fiduciary obligation, (ii) he

knowingly participates in, or knowingly undertakes to conceal, an act

or omission of another person, knowing such act or omission to be a

breach, or (iii) having knowledge of the breach of another, he fails

to make reasonable efforts under the circumstances to remedy such

breach.

<PAGE>

-28-

7.2 - Company Contributions.
- ---------------------------

a. The Company shall make contributions under the Plan at such times and

in such amounts as are actuarially determined to be required to meet

the cost of providing benefits under the Plan; provided, however, that

the Company's contributions for any Plan Year beginning after December

31, 1975 shall in no event be less than the debit balance, if any, at

the end of such year in the Funding Standard Account created pursuant

to c. below. All fees and other expenses with respect to

administration of the Plan shall be paid by the Company to the extent

not paid out of the Fund assets.

b. Any forfeiture arising from a Member's termination of employment or

death or for any other reason prior to the termination of the Plan

will be used to reduce any Company contribution required pursuant to

a. above and will not increase any benefits otherwise payable

hereunder.

c. For Plan Years beginning after December 31, 1975, there shall be

established a Funding Standard Account for the Plan, to which shall be

debited at the end of each Plan Year the normal cost of the Plan for

such year plus other charges to the Account required by ERISA, and to

which shall be credited the amount of the Company's contributions

considered paid for such Plan Year and the other credits required by

ERISA.

7.3 - Irrevocability. The Company shall have no right, title, or interest in the
- --------------------

contributions made by it to the Fund and no part of the Fund shall revert to the

Company except that, after satisfaction of all liabilities of the Plan as set

forth in Section 9.2, any amount remaining shall be deemed to have resulted from

an erroneous actuarial calculation and shall revert to the Company; however, all

<PAGE>

-29-

contributions are conditioned on their deductibility and the continued

qualification of the Plan. Amounts contributed under the following circumstances

shall be returned to the Company within one year of the indicated date:

a. By mistake of fact - date of payment.

b. Before disallowance of deduction - date of disallowance of deduction.

<PAGE>

-30-

Article 8

ADMINISTRATION
--------------

8.1 - Committee on Employee Benefits.
- ------------------------------------

a. The Board of Directors shall appoint a Committee consisting of at

least three members, each of whom shall signify his acceptance of

appointment in writing to the Board of Directors, each of whom shall

be subject to removal by the Board of Directors at any time, and each

of whom shall be "named fiduciaries" of the Plan. Any Employee of the

Company, or member of the Board of Directors, shall be eligible to be

appointed a member of the Committee.

b. The Board of Directors shall have no duty with respect to the

administration of the Plan other than the appointment of the

Committee. Neither the Board of Directors nor any member thereof shall

be responsible as such for the performance of the duties of the

Committee or of any other person with respect to administration of the

Plan in the absence of:

(i) knowing participation in or concealment of an act or omission

with knowledge that it constitutes a breach of duty,

(ii) failing to act prudently in selecting or continuing in office

the members of the Committee, which failure enables a member or

members thereof to breach their duties, or

(iii) failing to make reasonable efforts under the circumstances to

remedy any known breach of fiduciary responsibility by another.

<PAGE>

-31-

8.2 - Fiduciary. Duties.
- -----------------------

a. The Committee shall have the following duties, responsibilities, and

authority with respect to administration of the Plan:

(i) Remit Company contributions to the Trustee and direct the

Trustee with respect to payment of benefits.

(ii) Make such uniform and nondiscriminatory rules, regulations, and

forms for the administration and interpretation of the Plan as

are consistent with the terms hereof or of applicable law.

(iii) Establish and maintain records appropriate to permit the Plan

to be administered according to its terms and the requirements

of applicable law.

(iv) Prepare and file or otherwise disseminate all reports, filings,

and documents required by applicable law or governmental

regulations.

(v) Establish in writing and maintain a claims procedure in

accordance with regulations of the Secretary of Labor pursuant

to Section 503 of ERISA.

(vi) Employ such persons, including but not limited to accountants,

actuaries, and counsel, as it deems appropriate to render

advice with regard to any responsibility it has under the Plan.

(vii) Take all other steps deemed necessary to administer the Plan

properly in accordance with its terms and the requirements of

applicable law or governmental regulation.

b. The Committee may allocate its administrative responsibilities among

its members and may delegate either named fiduciaries or persons other

than named fiduciaries to carry out such responsibilities. Any such

allocation or delegation shall be made

<PAGE>

-32-

in writing and shall specifically identify (i) the person or

institution to whom a duty is allocated or delegated, and (ii) the

nature and scope of the duty allocated or delegated. To the extent a

duty or responsibility is so allocated or delegated, neither the

Committee nor any member thereof (who is not the person to whom the

duty is allocated or delegated) shall be liable for an act or omission

of the person or institute delegated to carry out that duty or

responsibility, except to the extent that the Committee or member

hereof (other than such person) either (i) violated its responsibility

hereunder with respect to making or permitting the allocation or

delegation to continue, (ii) knowingly participated in or attempted to

conceal a known breach of obligation, or (iii) having knowledge of

such a breach, failed to make reasonable efforts under the

circumstances to remedy the breach.

c. A named fiduciary or other person or institution to whom a

responsibility or duty of the Committee is allocated or delegated in

accordance with b. above shall be responsible only for the performance

of that responsibility or duty as specified in the written allocation

or delegation, and shall not be liable for the act or omission of any

other person with respect to that duty or responsibility unless either

(i) by his failure to administer his specific responsibility he has

enabled such other person to commit a breach of fiduciary obligation;

(ii) he has knowingly participated in, or knowingly undertaken to

conceal, an act or omission of another person, knowing such act or

omission to be a breach, or (iii) having knowledge of the breach of

another, he has failed to make reasonable efforts under the

circumstances to remedy that breach.

<PAGE>

-33-

8.3 - Procedure and Compensation.
- --------------------------------

a. Action of the Committee shall be by vote of the majority of all the

members. The Committee may act, notwithstanding the existence of a

vacancy, if there are at least three members. The concurrence or

dissent of any member may be by telephone, wire, cablegram, or letter.

A member of the Committee shall not vote upon any question nor upon

the exercise of any right or option under the Plan relating

specifically to him or his Beneficiaries.

b. The Committee shall keep written minutes of all its proceedings, which

shall be open to inspection by the Board of Directors. With respect to

any decision by the Committee which affects the rights of any Member

or Beneficiary who has made a claim for benefits under the Plan, the

Committee shall include in its minutes a brief explanation of the

grounds on which such decision was based and the vote cast by each

member of the Committee regarding such decision.

c. Members of the Committee shall serve without compensation, unless

otherwise determined by the Board of Directors, but shall be

reimbursed by the Company for all necessary expenses reasonably

incurred in the performance of their duties under the Plan.

8.4 - Insurance, Indemnification, and Bond.
- ------------------------------------------

a. The Company may purchase insurance to cover potential liability of one

or more persons who serve in a fiduciary capacity with respect to

this Plan.

b. The Company may, consistent with its By-Laws and the applicable law,

indemnify some or all of the members of the Board of Directors, some

or all of its officers, the members of the Committee, and any other

fiduciary of the Plan or Employee of the

<PAGE>

-34-

Company from any liability, loss, or other financial consequence,

including the costs of defense in legal proceedings, with respect to

any act or omission relating to this Plan, and including, but not

limited to, any such liability imposed by ERISA.

c. No bond or other security shall be required of any member of the

Committee or any other fiduciary of the Plan, except to the extent

required by Section 412 of ERISA.

<PAGE>

-35-

Article 9

AMENDMENT, DURATION, TERMINATION, AND MERGER
--------------------------------------------

9.1 - Amendment and Duration of the Plan. The Company hopes and expects to
- ----------------------------------------

continue the Plan, but necessarily reserves the right to amend the Plan at any

time, or from time to time, or to terminate the Plan. Amendments shall be in

accordance with ERISA and shall be made by appropriate actions of the Board of

Directors. Except as provided in Section 7.3, no such action shall operate to

recapture for the Company any part of the Fund previously contributed to the

Trustee under the Plan or, except to the extent necessary to meet the

requirements of the Internal Revenue Service or any other governmental

authority, to adversely affect the retirement benefits of Members already

retired or the Fund securing such retirement benefits.

9.2 - Termination of the Plan. In the event of termination of the Plan:
- -----------------------------

a. No benefits will be payable from the Plan to the extent they do not

constitute "accrued benefits" within the meaning of Section 3(23)(A)

of ERISA or benefits protected under Section 204(g) of ERISA.

b. To the extent not already vested, the interests of Members in their

benefit liabilities (as defined under Title IV of ERISA) which remain

after the application of a. shall, to the extent funded, automatically

become fully vested and nonforfeitable, and their interests in all

other benefits under the Plan shall be permanently forfeited. The

assets of the Fund shall constitute the sole source of benefits under

the Plan and under no circumstances shall the Company be liable for

pension payments except in accordance with Title IV of ERISA. Upon

satisfaction of remaining benefit

<PAGE>

-36-

liabilities (as defined under Title IV of ERISA), any residual assets

remaining in the Plan shall revert to the Company.

c. Benefit liabilities may be satisfied by the payment of lump sums,

through the purchase of annuity contracts, or by any other method

permitted by law at such time or times as is determined by the

Committee. In the event of the payment of lump sums on account of the

Plan's termination, the amount of the lump sums will be calculated by

reference to the Normal Retirement Benefit or, for those who have

passed Normal Retirement Date, the Late Retirement Benefit; no

subsidies will be included in the calculations.

In the event of a partial termination of the Plan (as defined under Section

411(d)(3) of the Code), the rights of Members affected by the partial

termination in their benefit liabilities (as defined under Title IV of ERISA but

subject to a., b. and c. of this Section) shall, to the extent funded,

automatically become fully vested and nonforfeitable to the extent required by

law. Nothing in this Section prevents the Company from reducing or eliminating

benefit liabilities that are not accrued benefits or benefits protected under

Section 411(d)(6) (or any successor provision) of the Code at any time. In

addition, the Company may reduce any benefits under the Plan prospectively.

If the Plan terminates, the benefit of any highly compensated Employee and

highly compensated former Employee (as determined under Section 414(q) of the

Code) is limited to a benefit that is nondiscriminatory under Section 401(a)(4)

of the Code.

<PAGE>

-37-

9.3 - Merger of the Plan. No merger or consolidation of the Plan with, or
- ------------------------

transfer of assets or liabilities of the Plan to, any other plan shall be

permitted unless each Member would, if the Plan terminated immediately after the

merger, consolidation, or transfer, receive a benefit equal to or greater than

the benefit he would have been entitled to receive if the Plan had terminated

immediately before such merger, consolidation, or transfer.

<PAGE>

-38-

Article 10

LIMITATIONS ON CONTRIBUTIONS AND BENEFITS
-----------------------------------------

10. I - Maximum Benefit.
- -----------------------

a. The annual benefit payable to any Member shall not exceed the lesser

of the amounts detemined under subparagraphs (i) and (ii) below:

(i) The Member's Service Ratio times 100% of the Member's average

annual compensation for his highest 36 consecutive months. In

each instance, the maximum compensation limitation set forth in

this subparagraph (i) shall be adjusted by multiplying the

Member's average annual compensation for his highest 36

consecutive months by a fraction, the numerator of which is the

adjusted maximum dollar limitation prescribed by the Secretary

of the Treasury under Section 415(d)(1)(A) of the Code for the

calendar year in which the computation is made and the

denominator of which is the adjusted maximum dollar limitation

prescribed by the Secretary of the Treasury under Section

415(d)(1)(A) of the Code for the calendar year in which the

Member terminates his employment, and/or by any other method of

adjustment permitted by the Internal Revenue Service. For

purposes of this Article 10, the term compensation shall mean

compensation as described in Section 1.415-2(d) of the Income

Tax Regulations.

<PAGE>

-39-

(ii) The Member's Benefit Service Ratio times $90,000 (or such

increased amount as may be specified from time to time by the

Secretary of the Treasury or his delegate). In the event that a

Member commences benefits prior to his Social Security Retirement

Age, the $90,000 maximum dollar limitation set forth in this

subparagraph (ii) shall be reduced by 5/9 of 1% for each of the

first 36 months and 5/12 of 1% for each of the additional months

(up to 24 months) by which benefits commence after age 62 and

prior to his Social Security Retirement Age and actuarially

reduced using an annual interest rate equal to 5% compounded for

the number of years and fractions of a year intervening between

the Member's benefit commencement date and the date upon which he

would attain age 62. In the event that a Member commences

benefits after his Social Security Retirement Age, the $90,000

maximum benefit limitation set forth in this subparagraph (ii)

shall be actuarially increased using an annual interest rate

equal to 5% compounded for the number of years and fractions of a

year intervening between the date upon which the Member attained

his Social Security Retirement Age and benefit commencement date.

b. The limitation upon the annual benefit payable to a Member set forth

in a. above shall not apply in any case in which the annual benefit

payable to a Member does not exceed $10,000 multiplied by the Member's

Benefit Service Ratio and the Member has never participated in a

defined contribution plan as defined in Section 414(i) of the Code.

<PAGE>

-40-

c. For purposes of a. and b. above, the benefits payable to a Member

shall be converted to a straight life annuity for the life of the

Member. This conversion shall not take into account (i) benefits

payable to the Member which are not directly related to retirement

income, or (ii) any portion of any joint and survivor annuity payable

to the Member which constitutes a qualified joint and survivor

annuity.

d. For purposes of a. and b. above, a Member's Service Ratio shall be a

fraction, not to exceed 1.0, the numerator of which is the Member's

Vesting Service and the denominator of which is ten. The Member's

Benefit Service Ratio is the same fraction as above but substituting

Benefit Service for Vesting Service.

e. Notwithstanding anything contained in this Article 10 to the contrary,

the annual benefit payable to each Employee who was a Member before

October 3, 1973 shall not be deemed to exceed the limitation upon the

annual benefit payable to a Member set forth in a. above if such

annual benefit does not exceed the lesser of the following:

(i) 100% of the Member's compensation on October 2, 1973, and

(ii) the benefits payable to the Member under the terms of the Plan as

in effect on October 2, 1973, assuming no raise in the Member's

compensation after October 2, 1973.

f. Notwithstanding anything contained in this Article 10 to the contrary,

the annual benefit payable to each Employee who was a Member before

December 31, 1982 shall not be less than the annual benefit payable to

the Member on December 31, 1982 under the terms of the Plan, including

this Article 10, as in effect on July 1, 1982. The annual benefit

payable to each Employee who was a Member before

<PAGE>

-41-

December 26, 1987 shall not be less than the benefit determined

as of December 26, 1987.

10.2 - Additional Limitation on Benefits. In addition to the limitations
- ----------------------------------------

imposed by Section 10.1, the following additional limits shall also apply

to any Member who participates in a defined contribution plan as defined in

Section 414(i) of the Code.

In the case of such a Member, the sum of the Defined Benefit Plan

Fraction and the Defined Contribution Plan Fraction as described below for

any Plan Year shall not exceed 1.0. In the event the sum of such fractions

exceeds 1.0 as of the end of any Plan Year, the Member's maximum benefit

under Section 10.1 shall be reduced to the extent required to limit the sum

of such fractions to 1.0.

a. The Defined Benefit Plan Fraction is determined by dividing:

(i) the annual benefit of the Member, as adjusted pursuant to

the rules in Section 10.1.d., determined by projecting the

Member's Benefit Service to his Normal Retirement Date but

based on the assumption,that the Member's compensation and

all other relevant factors used to determine benefits during

the Plan Year being tested remain unchanged, by

(ii) the lesser of

(1) the Member's limitation determined under Section

10.1.a.(i), based on the assumption that current

compensation remains unchanged until the Member's

Normal Retirement Date, multiplied by 1.4, or

<PAGE>

-42-

(2) the Member's limitation determined under Section

10.1.a.(ii), assuming that the Member has attained his

Normal Retirement Date, multiplied by 1.25.

b. The Defined Contribution Plan Fraction is determined by dividing

(i) the total "annual additions" for each year of Benefit

Service of the Member. For this purpose, an annual addition

is the amount of after-tax employee contributions

contributed by a Member (during a Plan Year ending on or

before December 26, 1987, the amount which represents the

lesser of (1) after-tax employee contributions in excess of
------

6% of compensation, or (2) one-half of after-tax employee

contributions) plus any Company contributions made on the

Member's behalf to a defined contribution plan, and if the

Member is a Key Employee, any Company contributions to a

funded welfare benefit plan providing post retirement

medical benefits to employees, by

(ii) the sum of the maximum "annual additions" which could have

been made for each year of Benefit Service of the Member.

For this purpose, the maximum annual addition which could

have been made for a member in any Plan Year is the lesser

of (1) 35% of compensation, and (2) the maximum dollar

contribution limit as specified in Section 415(c)(1)(A) of

the Code for a Plan Year, based on the dollar limitation in

effect on the January 1 which falls within the Plan Year,

multiplied by 1.25.

<PAGE>

-43-

10.3 - Temporary Limitations.
- ----------------------------

a. For Plan Years beginning before January 1, 1991, in the event

that the Plan is terminated or the full current costs thereof

applicable to the first ten years following a Commencement Date,

as hereinafter defined, have not been met at any time, the

benefits provided under the Plan which any of the 25 Highest Paid

Employees, as hereinafter defined, may receive shall not exceed

those which can be provided from Corporation contributions not in

excess of the largest of the following amounts:

(i) the Company contributions (or funds attributable thereto)

which would have been applied to provide the benefits for

the Members if the Plan as in force on the date preceding

any Commencement Date had been continued without change,

(ii) $20,000, or

(iii) the sum of (1) the Company contributions (or funds

attributable thereto) which would have been applied to

provide the benefits for the Members if the Plan as in

effect on the day preceding any applicable Commencement Date

had been terminated on that day, and (2) an amount computed

by multiplying the number of years in the period for which

the current costs of the Plan on and after any applicable

Commencement Date are met, by 20% of the first $50,000 of

his average annual Compensation during such period.

b. Notwithstanding the limitations in Section 10.3.a., the

contributions of the Company (or funds attributable thereto)

which may be applied to provide retirement benefits under the

Plan to any of the 25 Highest Paid Employees, as hereinafter

defined,

<PAGE>

-44-

shall not exceed the following limitations if they would result

in a greater amount of Company contributions to be used for the

benefit of such restricted Employees:

(i) In the case of a substantial owner (as defined in Section

4022(b)(5) of ERISA), a dollar amount which equals the

present value of the benefit guaranteed for such restricted

Employee under Section 4022 of ERISA, or if the Plan has not

terminated, the present value of the benefit that would be

guaranteed if the Plan terminated on the date the benefit

commences, determined in accordance with regulations of the

Pension Benefit Guaranty Corporation.

(ii) In the case of other restricted Employees, a dollar amount

which equals the present value of the maximum benefit

described in Section 4022(b)(3)(B) of ERISA (determined on

the earlier of the date the Plan terminates or the date

benefits commence, and determined in accordance with

regulations of the Pension Benefit Guaranty Corporation)

without regard to any other limitations in Section 4022 of

ERISA.

c. These conditions shall not restrict the current payment of full

retirement benefits called for by the Plan for any Member or

Beneficiary while the Plan is in full effect. In the event that

any funds are realized by operation of the restrictions set forth

in this Section 10.3, they will be used to reduce subsequent

Company contributions, for the benefit of Members, other than the

25 Highest Paid Employees, on a basis which will not result in

discrimination in favor of the more highly compensated Employees.

<PAGE>

-45-

d. For the purposes of this Section 10.3, the "25 Highest Paid

Employees" shall mean the 25 highest paid Employees of the

Corporation as of the applicable Commencement Date, including any

such highly paid Employees who are not covered by the Plan at

that time but who may later be covered, but excluding any

Employees whose annual benefit will not exceed $1,500.00.

e. For the purpose of this Section 10.3, "Commencement Date" shall

mean July 1, 1972 or the effective date of any amendment to the

Plan which increases substantially the possibility of

discrimination in favor of highly compensated Employees. The

extension of the Plan by action of the Company to a group of

Employees not previously covered hereunder shall not constitute

an amendment of the Plan, but the effective date of such

extension shall constitute a Commencement Date for that group

only.

f. For Plan Years beginning on or after January 1, 1991, benefits

distributed to any of the 25 most highly paid active and former

highly compensated employees (within the meaning of Section

414(q) of the Code) are restricted such that the annual payments

are no greater than an amount equal to the payment that would

have been made on behalf of the Member under a straight life

benefit that is the actuarial equivalent (using the UP-1984

Mortality Table and 6% interest) of the sum of the Member's

accrued benefit and the Member's other benefits (if any) under

the Plan. The preceding sentence shall not apply if: (i) after

payment of the benefit to a Member described in the preceding

sentence, the value of Plan assets equals or exceeds 110% of the

value of current liabilities, as defined in Section 412(1)(7) of

<PAGE>

-46-

the Code, or (ii) the value of the benefits for a Member

described above is less than 1% of the value of current

liabilities.

g. In the event that it should be determined by statute or by ruling

of the Internal Revenue Service that the provisions of this

Section 10.3 are no longer necessary to qualify the Plan under

the Code, this Section 10.3 shall become ineffective without

amendment to the Plan.

<PAGE>

-47-

Article 11

MISCELLANEOUS
-------------

11.1 - Inalienability of Benefits. Except to the extent otherwise provided
- ---------------------------------

by law or by the issuance of a qualified domestic relations order (within

the meaning of Section 206(d), or such successor Section, of ERISA), the

Trustee shall make benefit payments only directly to Members or

Beneficiaries entitled to benefits under the Plan or to persons or

institutions designated under Section 6.3, and no right or claim to benefit

payments from the Fund or assets of the Fund shall be assignable or

alienable, nor shall such rights or claims be subject to attachment,

execution, garnishment, levy, or other legal or equitable process.

11.2 - Rights of Participants. Nothing herein contained shall be deemed to
- -----------------------------

give any Employee the right to be retained in the service of the

Corporation or to interfere with the right of the Corporation to discharge

any Employee at any time without regard to the effect which such discharge

may have upon his rights, if any, under the Plan; nor shall anything

contained herein be deemed to give the Corporation the right to require any

Employee to remain in its service at any time.

11.3 - Representations to Fiduciaries. Any person who is fiduciary with
- -------------------------------------

respect to this Plan shall be entitled to rely on representations made by

Members, Employees, and Beneficiaries with respect to age, marital status,

and other personal facts, unless said fiduciary knows said representations

to be false.

11.4 - Applicable Law. The provisions of this Plan shall be construed,
- ---------------------

regulated, and administered under and in accordance with the laws of the

Commonwealth of Virginia, except to the extent, if any, such laws are

superseded by ERISA.

<PAGE>

-48-

11.5 - Terminated Vested Members as of December 25, 1984. The following
- --------------------------------------------------------

provisions shall apply to a Member who terminated employment prior to

December 26, 1984, with a right to a Deferred Vested Benefit under Section

4.4, and who had not yet commenced receiving benefit payments as of

December 25, 1984:

a. If the lump sum value of the Deferred Vested Benefit payable to

such terminated vested Member as determined under Section 6.3.b.

as of January 1, 1985, is $3,500 or less, the lump sum value of

such benefit shall be paid to such Member as soon as possible

after January 1, 1985.

b. If the lump sum value of the Deferred Vested Benefit payable to

such terminated vested Member, determined as of January 1, 1985,

is greater than $3,500, the following options shall be made

available to the Member as of January 1, 1985:

(i) Such terminated vested Member may elect to receive the lump

sum value of his Deferred Vested Benefit, as determined

under Section 6.3.b. as of January 1, 1985.

(ii) A married terminated vested Member who terminated employment

after June 25, 1976 may elect the Pre-Retirement Death

Benefit provided under Section 4.5.a., with such Member's

Deferred Vested Benefit reduced by 1/60% for each completed

month such election is in effect up to the first day of the

month following such Member's attainment of age 55 plus

1/24% for each completed month such election is in effect

after such Member's attainment of age 55 up to his Normal

Retirement Date. Such election may be revoked at any time

and the option in (iii) below elected.

<PAGE>

-49-

(iii) Such terminated vested Member may elect to remain entitled

to a Deferred Vested Benefit under Section 4.4 with the

right to elect the option in (ii) above at any time.

If such terminated vested Member terminated employment after

August 23, 1984, the written consent of the Member's spouse to

the elections in (i) and (iii) above must be obtained and shall

be filed with the Committee and shall acknowledge the effect of

such election and be witnessed by a Plan representative or notary

public. Such elections shall be deemed effective without such

spousal consent if the Member evidences to the Committee that

there is no spouse or the spouse cannot reasonably be located.

11.6 - Pre-Retirement Death Benefit Effective August 24. 1984. The
- -------------------------------------------------------------

provisions of Section 4.5 shall be effective for Active Members for deaths

occurring after August 23, 1984. The provisions of Section 4.5 shall be

effective for terminated vested Members under Section 11.5 for deaths

occurring after August 23, 1984 and before the earlier of the date an

election under Section 11.5 is received and the date such election is due

to be received by the Company.

<PAGE>

-50-

Article 12

TOP HEAVY PROVISIONS
--------------------

The provisions of this Article 12 shall become applicable only under the

circumstances described hereunder:

12.1 - Determination of Top Heavy Plan. The Plan shall be deemed "Top
- --------------------------------------

Heavy" with respect to any Plan Year commencing on and after December 26,

1984 if, as of the last day of the preceding Plan Year (the "Determination

Date"), the present value of the cumulative accrued benefits for "Key

Employees", as defined in Section 416(i)(1) of the Code, under the Plan and

all other plans in the "Aggregation Group" as defined below, exceeds 60% of

the present value as of the Determination Date of the cumulative accrued

benefits under all such plans for all Employees. For purposes of this

Article 12, (i) the term "Aggregation Group" shall mean each plan of the

Employer in which a Key Employee participates and each other plan of the

Employer which enables such plan to meet the requirements of Section 401

(a)(4) or 410 of the Code; (ii) the present value of such accrued benefits

shall be computed in accordance with Section 416(g) of the Code on the

basis of the UP-1984 Mortality Table and 8% interest; and (iii) the above

percentage ratio shall be determined as of the Determination Date by a

fraction, the numerator of which is the sum of the present value of the

accrued benefits of Key Employees under the Plan and all other plans in the

Aggregation Group, and the denominator of which is the sum of the present

value of the accrued benefits under all such plans, including the Plan, for

all Employees.

12.2 - Special Minimum Vesting Rules. Notwithstanding Section 4.4, for any
- ------------------------------------

Plan Year with respect to which the Plan is deemed Top Heavy, a Member

shall be entitled, upon termination of employment with the Company other

than by retirement or death, to a Deferred Vested Benefit,

<PAGE>

-51-

determined under Sections 5.4 and 12.3 below, based on his Vesting Service

in accordance with the following schedule:

Vesting Percentage
Vesting Service of Accrued Benefit
--------------- ------------------

2 years 20%
3 years 40
4 years 60
5 or more years 100

12.3 - Special Minimum Benefit Accruals.
- ----------------------------------------

a. Notwithstanding Section 5.1, for any Plan Year with respect to

which the Plan is deemed Top Heavy the accrued annual retirement

benefit of a Member who is not a Key Employee and has completed a

year of Benefit Service during such Plan Year shall not be less

than 2% of his "Average Compensation" multiplied by the number of

years of his Vesting Service, not in excess of ten, for the years

during which the Plan is Top Heavy. For purposes of this Section

12.3, "Average Compensation" shall mean the average annual

compensation (subject to the limitations specified in Section

416(d) of the Code) of a Member for the five consecutive years

of his Vesting Service commencing on and after December 26, 1984,

during which he received the greatest aggregate compensation from

the Company (as that term is described in Article 10), excluding

any compensation for service after the last year in which the

Plan is Top Heavy.

b. If the Plan is Top Heavy in any year and ceases to be Top Heavy

in a subsequent year, the following provisions shall be

applicable:

<PAGE>

-52-

(i) The accrued retirement benefit in any such subsequent year

shall not be less than the minimum accrued retirement

benefit provided in a. above, computed as of the end of the

most recent year during which the Plan was Top Heavy.

(ii) A Member who has completed five years of Vesting Service on

or before the last day of the most recent year during which

the Plan was Top Heavy shall have a nonforfeitable right to

his accrued retirement benefit, computed as of any

subsequent date, and deferred to commence on his Normal

Retirement Date.

(iii) A Member who has completed at least three, but less than

five, years of Vesting Service on or before the last day of

the most recent year during which the Plan was Top Heavy

shall continue to have a nonforfeitable right to his accrued

retirement benefit as of such date, deferred to commence on

his Normal Retirement Date, but any benefit accruals after

the Plan ceases to be Top Heavy shall be nonforfeitable only

in accordance with the provisions of Section 5.4.

12.4 - Special Benefit Limitations. Notwithstanding the provisions of
- ----------------------------------

Article I0, if during any Plan Year an Employee participates in both a

defined contribution plan and a defined benefit plan maintained by the

Company which comprise a "Top Heavy Group", as defined in Section

416(g)(2)(B) of the Code, the denominators of the Defined Benefit Plan

Fraction and the Defined Contribution Plan Fraction, as described in

Section 10.2, shall be calculated by substituting "1.0" for "1.25" each

place it appears in such Section; provided, however, that this Section 12.4

shall not apply with respect to a plan in the Top Heavy Group if (i) such

plan would satisfy the requirements

<PAGE>

-53-

of Section 416(h)(2)(A) of the Code, and (ii) the aggregate cumulative

accrued benefits and account balances of Key Employees under all plans in

the Top Heavy Group do not exceed 90% of the aggregate accrued benefits and

cumulative account balances under all such plans for all Employees.

12.5 - Special Rules for Terminated Employees. Notwithstanding the foregoing
- ---------------------------------------------

provisions of this Article 12, effective for Plan Years commencing on and

after December 26, 1985 if a former Employee has not received any

Compensation from the Company (other than benefits under the Plan) at any

time during the five-year period ending on the Determination Date, any

accrued benefit for such former Employee shall not be taken into account

in determining whether the Plan is considered Top Heavy.

IN WITNESS WHEREOF, the Company, by its authorized officers, has caused

these presents to be signed on the 21st day of December ,1995.
---- -------------------

Attest: BDM FEDERAL, INC.

John F. McCabe By: /s/ Philip A. Odeen
- ------------------------- ------------------------------
President

EXHIBIT 11

BDM INTERNATIONAL, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT FOR EARNINGS PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Income before extraordinary items............................. $18,392 $13,078 $11,028
Extraordinary items, net of taxes............................. -- -- 413
------- ------- -------
Net income.................................................... $18,392 $13,078 $11,441
------- ------- -------
------- ------- -------
Shares used for primary earnings per share:
Weighted average shares outstanding......................... 11,121 10,417 11,561
Dilutive effect of common stock equivalents--noncontingent
stock options............................................. 697 524 422
------- ------- -------
Total shares used for primary earnings per share.............. 11,818 10,941 11,983
Additional shares used for fully diluted earnings per share:
Increase for dilutive effect of contingent stock
options................................................. 187 63 91
------- ------- -------
Total shares used for fully diluted earnings per share.... 12,005 11,004 12,074
------- ------- -------
------- ------- -------
Earnings per share:
Income before extraordinary items........................... $ 1.56 $ 1.20 $ 0.92
Extraordinary items, net of tax............................. $ 0.00 $ 0.00 $ 0.03
------- ------- -------
Net income.................................................. $ 1.56 $ 1.20 $ 0.95
------- ------- -------
------- ------- -------
Fully diluted............................................... $ 1.53 $ 1.19 $ 0.95
------- ------- -------
------- ------- -------
</TABLE>

EXHIBIT 21

SUBSIDIARIES
AT MARCH 1, 1996

<TABLE>
<CAPTION>
JURISDICTION OF
INCORPORATION
----------------
<S> <C>
Wholly owned subsidiaries of BDM International, Inc.:
BDM Federal, Inc...................................................... Delaware
BDM Technologies, Inc................................................. Delaware
Vinnell Corporation................................................... Delaware
BDM Europe BV......................................................... The Netherlands
Geoscience Consultants, Ltd........................................... Delaware

Wholly owned active subsidiaries of BDM Federal, Inc.:
BDM Engineering Services Company...................................... Delaware
BDM Management Services Company....................................... Delaware
BDM - Oklahoma, Inc................................................... Delaware

Wholly owned active subsidiaries of Vinnell Corporation:
Logistics & Transportation Services, Inc.............................. Delaware
Vinnell Mining and Minerals Corporation............................... California

Wholly owned subsidiaries of BDM Europe BV:
FACE Holding BV....................................................... The Netherlands
LOGISTICON BV......................................................... The Netherlands

Partially owned subsidiaries of BDM Europe BV:
IABG Holding GmbH..................................................... Germany
Umwelttechnologie und Sanierungsmanagement GmbH....................... Germany

Wholly owned subsidiary of IABG Holding GmbH:
Industrieanlagen - Betriebsgesellschaft mit beschrankter Haftung...... Germany

Partially owned subsidiary of IABG Holding GmbH:
Umwelttechnologie und Sanierungsmanagement GmbH....................... Germany
</TABLE>

EXHIBIT 24.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-3 of
our report dated February 15, 1996, except for Notes 3 and 12, for which the
date is February 23, 1996, on our audits of the consolidated financial
statements of BDM International, Inc. and Subsidiaries. We also consent to the
reference to our firm under the caption "Experts."

COOPERS & LYBRAND L.L.P.

Washington, DC
March 6, 1996

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 69,143
<SECURITIES> 0
<RECEIVABLES> 240,084
<ALLOWANCES> 20,730
<INVENTORY> 0
<CURRENT-ASSETS> 294,654
<PP&E> 68,122
<DEPRECIATION> 22,400
<TOTAL-ASSETS> 363,793
<CURRENT-LIABILITIES> 178,530
<BONDS> 0
0
0
<COMMON> 130
<OTHER-SE> 115,469
<TOTAL-LIABILITY-AND-EQUITY> 363,793
<SALES> 889,974
<TOTAL-REVENUES> 889,974
<CGS> 752,107
<TOTAL-COSTS> 851,065
<OTHER-EXPENSES> 4,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,474
<INCOME-PRETAX> 33,407
<INCOME-TAX> 15,015
<INCOME-CONTINUING> 18,392
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,392
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.53

</TABLE>