AGREEMENT AND PLAN OF MERGER


                                  By and Among


                             GRC INTERNATIONAL, INC.


                                       and


                             MAC MERGER CORPORATION


                                       and


                     MANAGEMENT CONSULTING & RESEARCH, INC.


                                       and


                       THE MAJOR STOCKHOLDER LISTED HEREIN




                                 August 5, 1999






<PAGE>



                                        i
                                TABLE OF CONTENTS


                                    ARTICLE I
                                   The Merger
<TABLE>
<CAPTION>
<S>                          <C>                                                                                  <C>
Section 1.1                The Merger.........................................................................    2
Section 1.2                Closing; Closing Date; Effective Time..............................................    2
Section 1.3                Effect of the Merger...............................................................    2
Section 1.4                Articles of Incorporation; Bylaws..................................................    2
Section 1.5                Directors and Officers.............................................................    2
Section 1.6                Supplementary Action...............................................................    3

                                   ARTICLE II
                           Conversion of Securities; Exchange of Certificates

Section 2.1                Merger Consideration; Conversion and Cancellation of Securities....................    3
Section 2.2                Exchange and Surrender of Certificates and Options.................................    5
Section 2.3                Dissenter's Rights.................................................................    7

                                   ARTICLE III
                           Representations and Warranties of the Company

Section 3.1                Organization and Qualification.....................................................    8
Section 3.2                Charter, Bylaws and Other Records..................................................    8
Section 3.3                Capitalization.....................................................................    8
Section 3.4                Authority..........................................................................    9
Section 3.5                No Conflict; Required Filings and Consents.........................................   10
Section 3.6                Permits; Compliance................................................................   11
Section 3.7                Financial Statements; Absence of Undisclosed Liabilities...........................   11
Section 3.8                Absence of Certain Changes or Events...............................................   12
Section 3.9                Absence of Litigation..............................................................   12
Section 3.10               Employee Benefit Plans; Labor Matters..............................................   12
Section 3.11               Taxes..............................................................................   15
Section 3.12               Certain Business Practices.........................................................   17
Section 3.13               Environmental Matters..............................................................   17
Section 3.14               Vote Required......................................................................   18
Section 3.15               Brokers............................................................................   19
Section 3.16               Insurance..........................................................................   19
Section 3.17               Properties.........................................................................   19
Section 3.18               Certain Material Contracts.........................................................   20
Section 3.19               Competing Interests................................................................   20
Section 3.20               Intellectual Property Rights.......................................................   20
Section 3.21               ESOP...............................................................................   21
Section 3.22               Government Contracts...............................................................   21
Section 3.23               Fairness Opinion...................................................................   22
Section 3.24               Fiduciary Duty.....................................................................   22
Section 3.25               Year 2000 Compliance...............................................................   23
Section 3.26               No Misrepresentation...............................................................   23

                                   ARTICLE IV
             Representations and Warranties of the Major Stockholder

Section 4.1                Ownership of Stock.................................................................   23
Section 4.2                Valid and Binding Agreements.......................................................   24
Section 4.3                Consents and Approvals.............................................................   24
Section 4.4                Investment Representations.........................................................   24
Section 4.5                No Misrepresentations..............................................................   24

                                    ARTICLE V
               Representations and Warranties of Parent Companies

Section 5.1                Organization and Qualification.....................................................   24
Section 5.2                Charter and Bylaws.................................................................   25
Section 5.3                Authority..........................................................................   25
Section 5.4                No Conflict; Required Filings and Consents.........................................   25
Section 5.5                Litigation.........................................................................   26
Section 5.6                SEC Filings........................................................................   26
Section 5.7                Absence of Material Adverse Change.................................................   26
Section 5.8                Parent Shares......................................................................   26
Section 5.9                No Misrepresentations..............................................................   26

                                   ARTICLE VI
                                    Covenants

Section 6.1                Certain Affirmative Covenants of the Company.......................................   26
Section 6.2                Certain Negative Covenants of the Company..........................................   27
Section 6.3                Additional Covenants...............................................................   30
Section 6.4                Access and Information.............................................................   32
Section 6.5                Public Announcements...............................................................   33

                                   ARTICLE VII
                               Closing Conditions

Section 7.1                Conditions to Obligations of Each Party Under This Agreement.......................   33
Section 7.2                Additional Conditions to Obligations of the Parent Companies.......................   33
Section 7.3                Additional Conditions to Obligations of the Company................................   35

                                  ARTICLE VIII
                        Termination, Amendment and Waiver

Section 8.1                Termination........................................................................   36

<PAGE>

Section 8.2                Effect of Termination..............................................................   37
Section 8.3                Amendment..........................................................................   37
Section 8.4                Waiver.............................................................................   37
Section 8.5                Fees, Expenses and Other Payments..................................................   38

                                   ARTICLE IX
                               General Provisions

Section 9.1                Effectiveness of Representations, Warranties and Agreements........................   39
Section 9.2                Notices............................................................................   39
Section 9.3                Certain Definitions................................................................   40
Section 9.4                Headings...........................................................................   44
Section 9.5                Severability.......................................................................   44
Section 9.6                Entire Agreement...................................................................   44
Section 9.7                Assignment.........................................................................   45
Section 9.8                Parties in Interest................................................................   45
Section 9.9                Specific Performance...............................................................   45
Section 9.10               Failure or Indulgence Not Waiver; Remedies Cumulative..............................   45
Section 9.11               Governing Law......................................................................   45
Section 9.12               Settlement of Disputes.............................................................   45
Section 9.13               Counterparts.......................................................................   45
Section 9.14               Irrevocable Proxy..................................................................   46
</TABLE>

EXHIBITS

Exhibit A.........Stockholders List
Exhibit B.........Option Holders List
Exhibit C.........Noncompetition Agreement
Exhibit D.........Irrevocable Proxy
Exhibit  E.........Opinion  of Company Legal Counsel  Exhibit  F.........Initial
Officers of Surviving Corporation Exhibit G.........Opinion of Legal Counsel for
Parent  Companies  Exhibit   H.........Form  of  Employment   Agreement  Exhibit
I.........Indemnification   Agreement   Exhibit   J.........Agreements   to   be
Terminated

<PAGE>

                          AGREEMENT AND PLAN OF MERGER


         THIS  AGREEMENT  AND PLAN OF  MERGER,  dated as of August 5, 1999 (this
"Agreement"),  is by and among GRC International,  Inc., a Delaware  corporation
("Parent"),  MAC Merger  Corporation,  a Virginia  corporation  and wholly owned
subsidiary of Parent ("Merger Sub"), and Management Consulting & Research, Inc.,
a Virginia  corporation (the "Company") and the major stockholder of the Company
listed  on  Exhibit A (the  "Major  Stockholder").  Parent  and  Merger  Sub are
sometimes referred to herein as the "Parent Companies."

         WHEREAS,  the Company,  upon the terms and subject to the conditions of
this  Agreement  and in  accordance  with the  Virginia  Stock  Corporation  Act
("VSCA"),  will merge  with and into  Merger Sub (the  "Merger"),  and  pursuant
thereto,  (i) the  issued and  outstanding  shares of common  stock,  $.0015 par
value,  of the  Company  (the  "Company  Common  Stock")  not owned  directly or
indirectly  by  the  Company  or  the  Parent   Companies  or  their  respective
subsidiaries will be converted into the right to receive  consideration and (ii)
options to acquire shares of Company Common Stock will be surrendered,  canceled
and  exchanged  for  consideration  or  converted  into  the  right  to  receive
consideration  (together,  the consideration for outstanding  shares and for the
options is sometimes  referred to herein as the "Merger  Consideration")  as set
forth herein;

         WHEREAS,  the Board of Directors of the Company has determined that the
Merger  is  fair  to,  and in  the  best  interests  of,  the  Company  and  its
stockholders  and has approved and adopted this  Agreement and the  transactions
contemplated hereby;

         WHEREAS,  the Board of  Directors  of Parent  has  determined  that the
Merger is fair to, and in the best interests of, Parent and its stockholders and
has  approved  and adopted  this  Agreement  and the  transactions  contemplated
hereby;

         WHEREAS,  the Board of Directors of Merger Sub has approved and adopted
this  Agreement and Parent,  as the sole  stockholder  of Merger Sub, will adopt
this Agreement promptly after the execution hereof by the parties hereto;

         WHEREAS,  Exhibit A to this  Agreement  is a list of the  owners of the
Company Common Stock and Exhibit B to this Agreement is a list of the holders of
options to acquire Company Common Stock;

         NOW,  THEREFORE,  in  consideration of the foregoing and the respective
representations,   warranties,  covenants  and  agreements  set  forth  in  this
Agreement, the parties hereto agree as follows:
<PAGE>

                                    ARTICLE I

                                   THE MERGER

Section 1.1 The Merger.  Upon the terms and subject to the  conditions set forth
in this  Agreement,  and in  accordance  with VSCA,  at the  Effective  Time (as
defined in Section 1.2 of this Agreement),  the Company shall be merged with and
into Merger Sub. As a result of the Merger, the separate corporate  existence of
the  Company  shall  cease  and  Merger  Sub  shall  continue  as the  surviving
corporation of the Merger (the "Surviving  Corporation").  Certain terms used in
this Agreement are defined in Section 9.3 hereof.

Section 1.2 Closing;  Closing Date;  Effective Time. Unless this Agreement shall
have been terminated pursuant to Section 8.1, and subject to the satisfaction or
waiver of the  conditions  set forth in Article  VII,  the  consummation  of the
Merger and the closing of the  transactions  contemplated by this Agreement (the
"Closing") shall take place at the offices of Dickstein Shapiro Morin & Oshinsky
LLP, 2101 L Street,  N.W.,  Washington,  DC as soon as  practicable  (but in any
event  within  two  business  days)  after  the  satisfaction  or  waiver of the
conditions  set forth in Article  VII, or at such other date,  time and place as
Parent and the Company may agree;  provided,  that the  conditions  set forth in
Article VII shall have been  satisfied  or waived at or prior to such time.  The
date on which the Closing  takes  place is  referred  to herein as the  "Closing
Date." As promptly as  practicable on the Closing Date, the parties hereto shall
cause the Merger to be consummated  by filing  Articles of Merger with the State
Corporation Commission of the Commonwealth of Virginia, in such form as required
by, and executed in accordance  with the relevant  provisions of, VSCA (the date
and time of such  filing,  or such later date or time  agreed upon by Parent and
the Company and set forth therein, being the "Effective Time").

Section  1.3 Effect of the  Merger.  At the  Effective  Time,  the effect of the
Merger shall be as provided in the applicable provisions of VSCA.

Section 1.4  Articles of  Incorporation;  Bylaws.  At the  Effective  Time,  the
articles of incorporation of Merger Sub, as in effect  immediately  prior to the
Effective  Time  (other  than as  amended  to  provide  for the name  Management
Consulting  & Research,  Inc.),  shall be the articles of  incorporation  of the
Surviving  Corporation  and  thereafter  shall  continue  to be its  articles of
incorporation until amended as provided therein and pursuant to VSCA. The bylaws
of Merger Sub, as in effect  immediately  prior to the Effective Time,  shall be
the bylaws of the Surviving  Corporation and thereafter shall continue to be its
bylaws until amended as provided therein and pursuant to VSCA.

Section 1.5  Directors and  Officers.  The  directors of Merger Sub  immediately
prior to the Effective Time shall be the directors of the Surviving Corporation,
each to hold office in  accordance  with the charter and bylaws of the Surviving
Corporation.  The initial officers of the Surviving  Corporation shall be as set
forth on Exhibit  F, each to hold  office in  accordance  with the bylaws of the
Surviving  Corporation,  in each case until their respective successors are duly
elected or  appointed  and  qualified.  In  connection  with the Merger,  at the
Effective Time or immediately  thereafter,  Parent shall take such action as may
be necessary  or  appropriate  to cause Gerald R.  McNichols to be a director of
Parent immediately after the Effective Time, to hold

                                       2
<PAGE>

office in  accordance  with the charter and bylaws of Parent until his successor
is duly elected or appointed and qualified.

Section 1.6  Supplementary  Action. If at any time after the Effective Time, any
further  assignments  or  assurances in law or any other things are necessary or
desirable  to  vest  or to  perfect  or  confirm  of  record  in  the  Surviving
Corporation  the title to any  property  or rights of either of the  constituent
corporations,  or otherwise to carry out the provisions of this  Agreement,  the
officers and directors of the Surviving  Corporation  are hereby  authorized and
empowered on behalf of the respective constituent  corporations,  in the name of
and on behalf of the appropriate constituent corporation, to execute and deliver
any and all things necessary or proper to vest or to perfect or confirm title to
such property or rights in the Surviving  Corporation,  and otherwise  carry out
the purposes and provisions of this Agreement.


                                   ARTICLE II

               CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

Section 2.1 Merger Consideration; Conversion and Cancellation of Securities. The
entire Merger Consideration  payable with respect to all shares of capital stock
of the Company  issued and  outstanding at the Effective Time and all securities
convertible  into or exercisable or exchangeable  for shares of capital stock of
the Company shall be payable as provided below. At the Effective Time, by virtue
of the Merger and  without any action on the part of the Parent  Companies,  the
Company or their respective stockholders:

         (a) Subject to the other  provisions  of this Article II, the shares of
     Company  Common  Stock  issued  and  outstanding  immediately  prior to the
     Effective Time  (excluding  any Company  Common Stock  described in Section
     2.l(b) of this  Agreement)  and the options to acquire  the Company  Common
     Stock outstanding  immediately prior to the Closing shall be converted into
     the right to receive the Merger Consideration as follows:

             (i) with  respect  to an  aggregate  1,563,569  of the  issued  and
         outstanding   shares  of  Company   Common  Stock  held  by  the  Major
         Stockholder as of the Effective Time, the right to receive an aggregate
         2,000,000 shares of the Parent Common Stock;

             (ii) with respect to each of the rest of the issued and outstanding
         shares  of the  Company  Common  Stock  held  by  Company  stockholders
         (including the Major  Stockholder)  as of the Effective Time other than
         the  shares of Company  Common  Stock  described  in clause (i) of this
         Section 2.1(a), the right to receive an amount in cash equal to the Per
         Share Amount;

             (iii) with respect to each of the Company Stock Options outstanding
         immediately   prior  to  the   Effective   Time  for  which  an  Option
         Cancellation  Agreement  has been  received,  the right to  receive  an
         amount  of  cash  (subject  to  any  applicable   withholding  tax  and
         conditional upon cancellation of such options), equal to the product of
         (A) the Per Share  Amount  minus the  exercise  price per share of such
         Company  Stock Option times (B) the number of shares of Company  Common
         Stock covered by such Company Stock Option; and

                                       3
<PAGE>

             (iv)  with  respect  to the  rest  of  the  Company  Stock  Options
         outstanding immediately prior to the Effective Time for which an Option
         Cancellation  Agreement has not been received,  each such Company Stock
         Option  shall be  converted  into and  become an option to  purchase  a
         number  of shares of Parent  Common  Stock  equal to (A) the  number of
         shares of Company  Common Stock  covered by such  Company  Stock Option
         times  the Per Share  Amount,  divided  by (B)  $8.225.  The  aggregate
         exercise  price for all shares of Parent  Company Stock covered by each
         such  converted  Company  Stock Option shall be equal to the  aggregate
         exercise price of such Company Stock Option prior to the Effective Time
         (adjustment being made hereby to the exercise price per share of Parent
         Common Stock  covered by such  converted  Company  Stock  Option);  the
         converted  Company Stock Option shall be a  nonqualified  stock option;
         and the vesting provisions of the Converted Company Stock Option, shall
         continue unchanged from and after the Effective Time.

         (b)  Notwithstanding  any provision of this  Agreement to the contrary,
     each share of Company  Common Stock held in the treasury of the Company and
     each  share of  Company  Common  Stock  owned by  Parent  or any  direct or
     indirect  wholly owned  subsidiary of Parent or of the Company  immediately
     prior to the Effective Time shall be canceled and extinguished  without any
     conversion thereof and no payment shall be made with respect thereto.

         (c)  All  shares  of  the  Company  Common  Stock  shall  cease  to  be
     outstanding  and shall  automatically  be canceled  and  retired,  and each
     certificate  previously  evidencing the Converted  Shares shall  thereafter
     represent  the right to receive that amount of cash and/or number of shares
     of Parent  Common  Stock  determined  pursuant  to  Section  2.1(a) of this
     Agreement.  The holders of  certificates  previously  evidencing  Converted
     Shares shall cease to have any rights with respect to such Converted Shares
     except as otherwise provided herein or by law. Such certificates previously
     evidencing Converted Shares shall be exchanged for certificates  evidencing
     cash and whole  shares of Parent  Common  Stock upon the  surrender of such
     Certificates  in  accordance  with the  provisions  of Section  2.2 of this
     Agreement,  without  interest.  No fractional shares of Parent Common Stock
     shall be issued in  connection  with the Merger.  All Company Stock Options
     outstanding  immediately  prior  to the  Effective  Time for  which  Option
     Cancellation Agreements have been received shall be canceled and become the
     right  to  receive  the  amount  of cash  determined  pursuant  to  Section
     2.1(a)(iii)  of this  Agreement.  The holders of such Company Stock Options
     will  receive  cash  (subject  to  any  applicable  withholding  tax)  upon
     surrender of their  Company  Stock  Options at or after the Closing Date as
     provided in Section  2.2(a) of this  Agreement  and the  applicable  Option
     Cancellation  Agreement.  All Company Stock Options outstanding immediately
     prior to the Effective Time for which Option  Cancellation  Agreements have
     not been received shall  automatically  be converted,  and become as of the
     Effective  Time,  options  to  purchase  shares of Parent  Common  Stock as
     provided in Section 2.1(a)(iv) of this


                                       4
<PAGE>

     Agreement.  The holders of such Company  Stock  Options will be entitled to
     receive amended or revised or replacement  option agreements  setting forth
     the terms of the  converted  Company  Stock Options on or after the Closing
     Date as provided in Section 2.2(a) of this Agreement.


(d)      Each share of common  stock,  par value $0.10 per share,  of Merger Sub
         issued and  outstanding  immediately  prior to the Effective Time shall
         remain  outstanding  and  unchanged as one share of common  stock,  par
         value $0.10 per share, of the Surviving Corporation.

Section 2.2       Exchange and Surrender of Certificates and Options.

         (a) As soon as practicable  after the Effective  Time, each holder of a
     certificate previously evidencing Converted Shares shall be entitled,  upon
     surrender thereof to Parent or its transfer or exchange agent (as specified
     in the letter of  transmittal  described in Section 2.2 (c)), to receive in
     exchange therefor a certificate or certificates  representing the number of
     whole  shares of Parent  Common  Stock into which the  Converted  Shares so
     surrendered shall have been converted as aforesaid,  in such  denominations
     and registered in such names as such holder may request, and the amounts of
     cash Merger  Consideration  determined pursuant to Section 2.1(a). Until so
     surrendered and exchanged, each certificate previously evidencing Converted
     Shares shall represent solely the right to receive Parent Common Stock, and
     the amounts of cash  Merger  Consideration  determined  pursuant to Section
     2.1(a).  Unless and until any such certificates shall be so surrendered and
     exchanged,  no dividends or other  distributions  payable to the holders of
     record of Parent Common Stock as of any time on or after the Effective Time
     shall be paid to the  holders of such  certificates  previously  evidencing
     Converted  Shares;  provided,  however,  that,  upon any such surrender and
     exchange of such certificates, there shall be paid to the record holders of
     the  certificates  issued and  exchanged  therefor (i) the amount,  without
     interest  thereon,  of dividends  and other  distributions,  if any, with a
     record date on or after the Effective Time theretofore paid with respect to
     such  whole  shares of Parent  Common  Stock,  and (ii) at the  appropriate
     payment date, the amount of dividends or other distributions,  if any, with
     a record date on or after the  Effective  Time but prior to surrender and a
     payment date occurring after surrender,  payable with respect to such whole
     shares of Parent  Common Stock.  Notwithstanding  the  foregoing,  no party
     hereto (or Parent  transfer  agent) shall be liable to any former holder of
     Converted  Shares  for any  cash,  Parent  Common  Stock  or  dividends  or
     distributions thereon delivered to a public official pursuant to applicable
     abandoned  property,  escheat or similar law. At or after the Closing Date,
     holders of Company Stock Options with respect to which Option  Cancellation
     Agreements  have been  received  shall  receive  the cash  provided  for in
     Section  2.1(a)(iii) of this Agreement upon surrender and  cancellation  of
     such  Company  Stock  Options.  At or after the  Closing  Date,  holders of
     Company Stock Options  which have been  converted  into options to purchase
     Parent  Common  Stock shall be  entitled  to receive  amended or revised or
     replacement  option  agreements  setting  forth the terms of the  converted
     Company Stock Options in accordance with Section 2.1(a)(iv).


         (b)  All  shares  of  Parent   Common  Stock  issued  and  cash  Merger
     Consideration   paid  upon  the  surrender  for  exchange  of  certificates
     previously  representing  Converted  Shares  in  accordance  with the terms
     hereof shall be deemed to have been issued and paid

                                       5
<PAGE>

     in full  satisfaction of all rights pertaining to such Converted Shares. At
     and after the Effective  Time,  there shall be no further  registration  of
     transfers  on the stock  transfer  books of the  Surviving  Corporation  of
     Company  Common  Stock  that  was  outstanding  immediately  prior  to  the
     Effective Time. If, after the Effective Time, certificates which previously
     evidenced  Converted Shares are presented to the Surviving  Corporation for
     any  reason,  they shall be  canceled  and  exchanged  as  provided in this
     Article II.

         (c) As promptly as practicable  after the Effective  Time,  Parent will
     send or cause to be sent to each record  holder of Company  Common Stock at
     the Effective Time a letter of transmittal and other appropriate  materials
     for use in surrendering  certificates as contemplated  hereby to the extent
     such certificates have not already been surrendered.

         (d) If any  certificate  for  shares  of Parent  Common  Stock is to be
     issued in a name other than that in which the  certificate  surrendered  in
     exchange  therefor is  registered,  it shall be a condition of the issuance
     thereof (i) that the certificate so surrendered shall be properly endorsed,
     with signatures guaranteed, and otherwise in proper form for transfer, (ii)
     that it is  established  to  Parent's  reasonable  satisfaction  that  such
     transfer  otherwise be proper,  and (iii) that the person  requesting  such
     exchange  shall have paid to Parent or its  transfer  agent any transfer or
     other taxes required by reason of the issuance of a certificate  for shares
     of Parent Common Stock in any name other than that of the registered holder
     of the  certificate  surrendered,  or  established to the  satisfaction  of
     Parent or its transfer agent that such tax has been paid or is not payable.
     Appropriate  procedures  shall  be  implemented  to deal  with  lost  stock
     certificates.

         (e) Parent Common Stock issued in  connection  with the Merger will not
     be  transferred   unless  such  transfer  has  been  registered  under  the
     Securities Act, and applicable  securities laws of other jurisdictions,  or
     an  exemption  from   registration   is  available  and  evidence  of  such
     registration or exemption reasonably satisfactory to Parent is furnished to
     Parent.  Shares of Parent Stock issued in connection  with the Merger shall
     be subject to stop transfer  instructions  and shall be inscribed  with the
     following legend:

               "THE  SHARES  REPRESENTED  BY  THIS  CERTIFICATE  HAVE  NOT  BEEN
               REGISTERED  UNDER THE  SECURITIES ACT OF 1933 (THE "ACT") AND MAY
               NOT BE SOLD OR TRANSFERRED  UNLESS (I) A  REGISTRATION  STATEMENT
               COVERING  SUCH  SHARES  IS  EFFECTIVE  UNDER  THE ACT OR (II) THE
               TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND, IF GRC
               INTERNATIONAL,  INC. ("GRC") REQUESTS, AN OPINION SATISFACTORY TO
               GRC TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL."

         (f) All payments of cash Merger  Consideration  hereunder shall be made
     by  Parent or its  transfer  or  exchange  agent by  mailing  checks to the
     recipient or  (provided  the amount  payable to such  recipient is at least
     $20,000)  depositing,  by bank  wire  transfer,  the  required  amount  (in
     immediately available funds) in an account of the

                                       6
<PAGE>

     recipient,  which  account  shall be  designated  by the recipient at least
     three (3) business days prior the date of the required payment.

         (g)  Parent  shall  be  entitled  to  deduct  and  withhold   from  the
     consideration  otherwise  payable  pursuant to this Agreement to any former
     holder of Converted Shares or to the former holder of Company Stock Options
     such amounts as Parent (or any affiliate thereof) is required to deduct and
     withhold  with respect to the making of such payment under the Code, or any
     provision  of state,  local or foreign tax law. To the extent that  amounts
     are so withheld by Parent,  such withheld  amounts shall be treated for all
     purposes of this  Agreement as having been paid to the former holder of the
     Converted  Shares or to the  former  holder of  options in respect of which
     such deduction and withholding was made by Parent.

Section 2.3 Dissenter's  Rights.  Notwithstanding  anything in this Agreement to
the contrary, each share of Company Common Stock that is outstanding immediately
prior to the Effective Time and is held by stockholders who shall not have voted
such shares in favor of adoption of the Merger and who shall have  delivered  to
the Company a written demand for payment for such shares in the manner  provided
in Article 15 of the VSCA  ("Dissenting  Stock") shall not be converted into the
right to  receive  the  consideration  as  provided  in  Section  2.1(a) of this
Agreement,  but the  holders  thereof  shall be  entitled to payment of the fair
value of such shares in accordance  with the  provisions of such Article 15. The
amount of the Merger  Consideration shall be reduced by the amount of cash which
would  otherwise be payable to holders of Dissenting  Stock  pursuant to Section
2.1(a);  provided,  however,  that (i) if any holder of  Dissenting  Stock shall
subsequently  deliver a written  withdrawal  of his demand  for  payment of such
Dissenting  Stock (with the written  approval of the Surviving  Corporation,  if
such  withdrawal is not tendered  within 60 days after the Effective  Time),  or
(ii) if any holder fails to establish his  entitlement to dissenter's  rights as
provided  in such  Article 15, such holder or holders (as the case may be) shall
forfeit the right to payment for such Dissenting Stock and such Dissenting Stock
shall  thereupon be deemed to have been converted into the right to receive,  as
of the Effective  Time, the amount of  consideration  otherwise  payable to such
holder or holders  pursuant  to Section  2.1(a) of this  Agreement.  The Company
shall give the Parent  Companies  (i) prompt  notice of any  written  notices of
intent to demand  payment,  demands  for  payment,  withdrawals  of demands  for
payment and any other  instruments  served  pursuant to the VSCA received by the
Company,  and (ii) the  opportunity to direct all  negotiations  and proceedings
with  respect  to demands  for  payment  under the VSCA.  The  Company  will not
voluntarily  make any payment  with  respect to any demands for payment and will
not, except with the prior written consent of the Parent's Companies,  settle or
offer to settle any demand.


                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company hereby represents and warrants to the Parent Companies, and
the Parent Companies in agreeing to consummate the transactions  contemplated by
this Agreement have relied upon such representation and warranties, that:

                                       7
<PAGE>

Section 3.1 Organization and Qualification.  Except as set forth in Schedule 3.1
of the Company Disclosure Schedule,  each of the Company and its subsidiaries is
a corporation  duly organized,  validly  existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted and is duly qualified and in good standing
to do  business  in each  jurisdiction  in  which  the  nature  of the  business
conducted  by it or the  ownership  or  leasing  of its  properties  makes  such
qualification  necessary,  other than where the failure to be so duly  qualified
and in good standing would not have a Company Material Adverse Effect.  The term
"Company  Material  Adverse  Effect"  as used in this  Agreement  shall mean any
change or effect that,  individually  or when taken together with all other such
changes or effects, could reasonably be expected to be materially adverse to the
business,  operations,  assets, prospects, condition (financial or otherwise) or
results of  operations  of the Company and its  subsidiaries,  taken as a whole.
Schedule 3.1 of the  disclosure  schedule  delivered to Parent by the Company on
the date hereof (the "Company  Disclosure  Schedule") sets forth, as of the date
of this  Agreement,  a true and complete list of all the  Company's  directly or
indirectly owned  subsidiaries,  together with the jurisdiction of incorporation
or  organization  of each  subsidiary  and the  percentage of each  subsidiary's
outstanding  capital  stock or other  equity  interests  owned by the Company or
another  subsidiary  of  the  Company.  Neither  the  Company  nor  any  of  its
subsidiaries  owns an equity interest in any other  partnership or joint venture
arrangement or other business entity.

Section 3.2  Charter,  Bylaws and Other  Records.  The  Company  has  heretofore
furnished to Parent complete and correct copies of the charter and the bylaws or
the equivalent organizational documents, in each case as amended or restated, of
the  Company  and  each  of its  subsidiaries  as well as  minute  books,  stock
certificate  books  and  stock  record  books  of the  Company  and  each of its
subsidiaries. Neither the Company nor any of its subsidiaries is in violation of
any of the  provisions  of its charter or bylaws (or  equivalent  organizational
documents).

Section 3.3       Capitalization.

         (a) The authorized  capital stock of the Company  consists of 5,000,000
     shares of Company  Common  Stock,  of which as of the date hereof and as of
     the Effective Time: (i) 2,498,000 shares were issued and outstanding,  (ii)
     2,000  shares  were held in treasury by the  Company,  and (iii)  2,000,000
     shares were reserved for future issuance  pursuant to the outstanding stock
     options  as shown  on  Exhibit  B  ("Company  Stock  Options").  Except  as
     described  in  this  Section  3.3 or in  Schedule  3.3(a)  of  the  Company
     Disclosure Schedule, as of the date of this Agreement, no shares of capital
     stock of the Company are reserved for any purpose.  Each of the outstanding
     shares of  capital  stock of, or other  equity  interests  in,  each of the
     Company and its  subsidiaries is duly authorized,  validly issued,  and, in
     the case of shares of capital stock fully paid and  nonassessable,  and has
     not  been  issued  or  transferred  in  violation  of  (nor  are any of the
     authorized  shares of capital  stock of, or other equity  interests in such
     entities  subject to) any  preemptive or similar rights created by statute,
     the charter or bylaws (or the equivalent  organizational  documents) of the
     Company or any of its  subsidiaries,  or any agreement to which the Company
     or any of its subsidiaries is a party or bound, and such outstanding shares
     or other  equity  interests  owned by the  Company or a  subsidiary  of the
     Company are owned


                                       8
<PAGE>

     free  and  clear  of  all  security  interests,   liens,  claims,  pledges,
     agreements,  limitations  on the  Company's  or  such  subsidiary's  voting
     rights, charges or other encumbrances of any nature whatsoever.

         (b)  Except  as set  forth  in  Section  3.3(a)  above  or in  Schedule
     3.3(b)(i)  to the  Company  Disclosure  Schedule,  there  are  no  options,
     warrants or other rights,  agreements,  arrangements  or commitments of any
     character  to  which  the  Company  or any of its  subsidiaries  is a party
     relating to the issued or unissued  capital  stock of the Company or any of
     its  subsidiaries  or obligating the Company or any of its  subsidiaries to
     grant,  issue or sell any shares of the capital stock of the Company or any
     of its subsidiaries,  by sale, lease,  license or otherwise.  Except as set
     forth in Schedule 3.3(b)(ii) to the Company Disclosure Schedule,  there are
     no  obligations,  contingent  or  otherwise,  of the  Company or any of its
     subsidiaries to (A) repurchase,  redeem or otherwise  acquire any shares of
     the Company  Common Stock or other  capital  stock of the  Company,  or the
     capital stock or other equity  interests of any  subsidiary of the Company;
     or (B) (other  than  advances to  subsidiaries  in the  ordinary  course of
     business) provide material funds to, or make any material investment in (in
     the form of a loan,  capital  contribution  or  otherwise),  or provide any
     guarantee with respect to the obligations of, any subsidiary of the Company
     or any other person.  Neither the Company nor any of its  subsidiaries  (x)
     directly  or  indirectly  owns,  (y) has agreed to  purchase  or  otherwise
     acquire  or (z) holds any  interest  convertible  into or  exchangeable  or
     exercisable for the capital stock of any  corporation,  partnership,  joint
     venture  or  other   business   association   or  entity  (other  than  the
     subsidiaries  of the  Company  set  forth in  Schedule  3.1 of the  Company
     Disclosure  Schedule).  Except as set forth in Schedule  3.3(b)(iv)  of the
     Company Disclosure Schedule and except for any agreements,  arrangements or
     commitments  between  the  Company  and its  subsidiaries  or between  such
     subsidiaries,  there are no agreements,  arrangements or commitments of any
     character  (contingent or otherwise) pursuant to which any person is or may
     be entitled to receive any payment  based on the revenues or  earnings,  or
     calculated  in  accordance  therewith,   of  the  Company  or  any  of  its
     subsidiaries.  Except as set forth in  Schedule  3.3(b)(v)  of the  Company
     Disclosure  Schedule,   there  are  no  voting  trusts,  proxies  or  other
     agreements  or   understandings   to  which  the  Company  or  any  of  its
     subsidiaries is a party or by which the Company or any of its  subsidiaries
     is bound with  respect to the voting of any shares of capital  stock of the
     Company or any of its subsidiaries.

         (c) The Company has delivered to Parent  complete and correct copies of
     each of the  Company  Stock  Options or a copy of the form  thereof and the
     Company's  Omnibus Stock Plan.  Schedule  3.3(c) to the Company  Disclosure
     Schedule sets forth a complete and correct list of all outstanding  Company
     Stock  Options  setting forth as of the date hereof (i) the number and type
     of Company  Stock  Options  outstanding,  (ii) the  exercise  price of each
     outstanding Company Stock Option, (iii) the number of Company Stock Options
     exercisable, and (iv) assuming no amendment or waiver of the terms thereof,
     the number of  Company  Stock  Options  which will  become  exercisable  on
     account of the Merger or any other transaction contemplated hereby.

Section 3.4  Authority.  The Company has all  requisite  power and  authority to
execute and deliver this Agreement,  to perform its obligations hereunder and to
consummate the

                                      9
<PAGE>

transactions  contemplated  hereby (subject to, with respect to the Merger,  the
adoption of this  Agreement by the  stockholders  of the Company as described in
Section  3.14  hereof).  The  execution  and  delivery of this  Agreement by the
Company and the  consummation  by the Company of the  transactions  contemplated
hereby have been duly authorized by all necessary  corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the  transactions  contemplated  hereby  (subject to,
with respect to the Merger,  the adoption of this Agreement by the  stockholders
of the Company as described in Section 3.14  hereof).  This  Agreement  has been
duly executed and delivered by the Company and constitutes the legal,  valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.

Section 3.5       No Conflict; Required Filings and Consents.

         (a) The  execution  and delivery of this  Agreement by the Company does
     not, and the consummation of the transactions  contemplated hereby will not
     (i)  conflict  with or violate  the  charter or bylaws,  or the  equivalent
     organizational  documents,  in each case as  amended  or  restated,  of the
     Company or any of its  subsidiaries,  (ii)  conflict  with or  violate  any
     federal, state, foreign or local law, statute, ordinance, rule, regulation,
     order,  judgment or decree (individually,  "Law" and collectively,  "Laws")
     applicable  to the  Company or any of its  subsidiaries  or by which any of
     their  respective  properties  is  bound or  subject  or  (iii)  except  as
     described in Schedule 3.5(a) of the Company Disclosure Schedule,  result in
     any breach of or  constitute  a default  (or an event  that with  notice or
     lapse of time or both would become a default)  under, or give to others any
     rights of  termination,  amendment,  acceleration  or  cancellation  of, or
     require  payment under,  or result in the creation of a lien or encumbrance
     on  any  of  the  properties  or  assets  of  the  Company  or  any  of its
     subsidiaries  pursuant to, any note, bond, mortgage,  indenture,  contract,
     agreement,  lease,  license,  permit,  franchise  or  other  instrument  or
     obligation to which the Company or any of its subsidiaries is a party or by
     or to  which  the  Company  or  any  of its  subsidiaries  or any of  their
     respective  properties  is bound or subject,  except in the case of clauses
     (ii) and (iii)  above  where such  conflict,  violation,  breach,  default,
     right,  requirement,  lien, or encumbrance could not be reasonably expected
     to have a Company  Material  Adverse Effect.  The Board of Directors of the
     Company has taken all actions necessary under VSCA, including approving the
     transactions  contemplated by this Agreement and taking appropriate actions
     under any  stockholder  protection laws applicable to the Company or any of
     its subsidiaries,  to ensure that restrictions on business  combinations or
     the  owning or voting of the  capital  stock of the  Company  or any of its
     subsidiaries  do not, and will not apply with respect or as a result of the
     transactions contemplated by this Agreement.

         (b) The  execution  and delivery of this  Agreement by the Company does
     not, and  consummation of the  transactions  contemplated  hereby will not,
     require  the  Company to obtain any  consent,  license,  permit,  approval,
     waiver,  authorization  or  order  of,  or  to  make  any  filing  with  or
     notification  to, any  governmental  or regulatory  authority,  domestic or
     foreign  (collectively,  "Governmental  Entities"),  except for  applicable
     requirements,  if any, of the Hart-Scott-Rodino  Antitrust Improvements Act
     of 1976,  as amended  (the "HSR Act"),  and the filing and  recordation  of
     appropriate merger documents as required by VSCA.

                                       10
<PAGE>

Section 3.6 Permits;  Compliance. Each of the Company and its subsidiaries is in
possession  of  all  material  franchises,  grants,  authorizations,   licenses,
permits, easements, variances, exemptions, consents, certificates, approvals and
orders  necessary to own,  lease and operate its  properties and to carry on its
business as it is now being conducted (collectively, the "Company Permits"), and
there is no action,  proceeding or investigation pending or, to the knowledge of
the Company,  threatened  regarding  suspension  or  cancellation  of any of the
Company Permits.  Neither the Company nor any of its subsidiaries is in conflict
with, or in default or violation of (a) any Law applicable to the Company or any
of its  subsidiaries  or by or to which any of their  respective  properties  is
bound or subject or (b) any of the Company Permits.  Neither the Company nor any
of its  subsidiaries  has  received  from any  Governmental  Entity any  written
notification with respect to possible material conflicts, defaults or violations
of Laws which has not been fully resolved.

Section 3.7       Financial Statements; Absence of Undisclosed Liabilities.

         (a) Attached as Schedule 3.7(a) of the Company Disclosure  Schedule are
     true and complete copies of (a) the unaudited consolidated balance sheet of
     the Company and its  subsidiaries  (the "Latest  Balance Sheet") as of June
     30,  1999 (the  "Latest  Balance  Sheet  Date") and the  related  unaudited
     consolidated  statements of operations  for the four (4) months then ended,
     and (b) the  audited  consolidated  balance  sheets of the  Company and its
     subsidiaries  as of February 29, 1996 and February 28, 1997,  1998 and 1999
     and the related  audited  statements  of  operations  and cash flow for the
     twelve  (12)  months  each  then  ended   (collectively,   the   "Financial
     Statements").  The Financial  Statements  present  fairly,  in all material
     respects,  the financial condition and stockholders'  equity of the Company
     and  its  subsidiaries  at the  dates  specified  and  the  results  of its
     operations  and cash  flows of the  Company  and its  subsidiaries  for the
     periods specified and the audited  Financial  Statements have been prepared
     in  accordance  with GAAP,  consistently  applied with the  Company's  past
     practices,  and the unaudited  Financial  Statements  have been prepared in
     accordance  with,  except as set forth in  Schedule  3.7(a) of the  Company
     Disclosure  Schedule,  GAAP  consistently  applied with the Company's  past
     practices,  subject  in the case of the  unaudited  statements  to  changes
     resulting from normal period-end  adjustments for recurring accruals (which
     will not be material  individually  or in the aggregate) and to the absence
     of  footnote   disclosure  and  other  presentation  items.  The  Financial
     Statements  do not contain any items of a special or  nonrecurring  nature,
     except as expressly  stated  therein.  The Financial  Statements  have been
     prepared  from the books and records of the  Company and its  subsidiaries,
     which  accurately and fairly  reflect,  in all material  respects,  all the
     transactions of, acquisitions and dispositions of assets by, and incurrence
     of liabilities by the Company and its subsidiaries.

         (b) Neither the Company nor any of its subsidiaries  have any direct or
     indirect debts, obligations or liabilities of any nature, whether absolute,
     accrued, contingent,  liquidated or otherwise, and whether due or to become
     due,   asserted   or   unasserted,    known   or   unknown   (collectively,
     "Liabilities"),  except for (i) Liabilities  specifically identified in the
     Latest Balance Sheet and (ii)  obligations  incurred in the ordinary course
     of business after the Latest Balance Sheet Date.

                                       11
<PAGE>

Section  3.8  Absence of  Certain  Changes or  Events.  Except as  disclosed  in
Schedule 3.8 of the Company Disclosure Schedule,  since February 28, 1999, there
has not been:  (a) any material  adverse  change in the condition  (financial or
otherwise), results of operations, business, prospects, assets or Liabilities of
the  Company  and its  subsidiaries  or with  respect to the manner in which the
Company  and  its  subsidiaries   conduct   business  or  operations;   (b)  any
declaration, setting aside or payment (including without limitation any dividend
or other  distribution or repayment of indebtedness)  to any stockholder,  other
than payment of  compensation  to  employees,  directors or  consultants  of the
Company or its  subsidiaries  in the ordinary  course of business and consistent
with past  practices;  (c) any breach or default  (or event that with  notice or
lapse of time would  constitute a breach or default),  termination or threatened
termination under any Material Contract (as defined in Section 3.18(a)); (d) any
material  theft,  damage,  destruction,  casualty loss,  condemnation or eminent
domain   proceeding   affecting  any  of  the  assets  of  the  Company  or  its
Subsidiaries,  whether or not covered by insurance;  (e) any sale, assignment or
transfer of any of the assets of the Company or its subsidiaries,  except in the
ordinary course of business and consistent  with past practices;  (f) any waiver
by the  Company  or its  subsidiaries  of any  material  rights  related  to the
Company's  business,  operations or assets; (g) any other material  transaction,
agreement  or  commitment  entered  into  by the  Company  or  its  subsidiaries
affecting the business of the Company or its subsidiaries, operations or assets,
except in the ordinary course of business and consistent with past practices; or
(h) any agreement or understanding to do or resulting in any of the foregoing.

Section 3.9 Absence of  Litigation.  Except as set forth in Schedule  3.9 of the
Company  Disclosure  Schedule,  there is no  claim,  action,  suit,  litigation,
proceeding,  arbitration or, to the knowledge of the Company,  investigation  of
any  kind,  at  law or in  equity  (including  actions  or  proceedings  seeking
injunctive  relief),  pending or, to the  knowledge of the  Company,  threatened
against the Company or any of its  subsidiaries  or any  properties or rights of
the Company or any of its  subsidiaries,  and neither the Company nor any of its
subsidiaries is subject to any continuing  order of, consent decree,  settlement
agreement or other similar  written  agreement with, or, to the knowledge of the
Company,  continuing investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Government Entity or arbitrator,
including, without limitation, cease-and-desist or other orders.

Section 3.10      Employee Benefit Plans; Labor Matters.

         (a) Set forth in Schedule 3.10 to the Company Disclosure  Schedule is a
     complete and correct list of all  "employee  benefit  plans" (as defined in
     the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
     all plans or policies  providing for "fringe  benefits"  (including but not
     limited to vacation,  paid holidays,  personal  leave,  employee  discount,
     educational benefit or similar programs),  and each other bonus,  incentive
     compensation,  deferred  compensation,  profit sharing,  stock,  severance,
     retirement,  health, life, disability,  group insurance,  employment, stock
     option,   stock   purchase,   stock   appreciation   right,    supplemental
     unemployment,  layoff,  consulting,  or any other similar plan,  agreement,
     policy  or   understanding   (whether   written  or  oral,   qualified   or
     nonqualified,  currently effective or terminated), and any trust, escrow or
     other  agreement  related  thereto,  which (a) is or has been  established,
     maintained or contributed to by the Company or any ERISA  Affiliate or with
     respect to which the Company or any ERISA  Affiliate has any liability,  or
     (b) provides benefits, or describes

                                       12
<PAGE>

     policies or  procedures  applicable,  to any officer,  employee,  director,
     former  officer,  former  employee or former director of the Company or any
     ERISA  Affiliate,  or any dependent  thereof,  regardless of whether funded
     (each, an "Employee Plan," and collectively, the "Employee Plans").

         (b) No written or oral  representations  have been made to any employee
     or officer or former employee or officer of the Company or its subsidiaries
     promising or guaranteeing  any coverage under any employee welfare plan for
     any period of time beyond the end of the current  plan year  (except to the
     extent of coverage required under Code Section 4980B).  Except as described
     in Schedule 3.10(b) of the Company Disclosure Schedule, the consummation of
     the  transactions  contemplated  by this  Agreement will not accelerate the
     time of  payment  or  vesting,  or  increase  the  amount  of  compensation
     (including amounts due under Employee Plans) due to any employee,  officer,
     former employee or former officer of the Company, or its subsidiaries.

         (c) With respect to each Employee  Plan, the Company has made available
     to Buyer true,  correct and complete  copies of (i) the plan  documents and
     summary  plan  description;  (ii)  the  most  recent  determination  letter
     received  from the  Internal  Revenue  Service;  (iii) the  annual  reports
     required  to be filed for the three  most  recent  plan  years of each such
     Employee Plan; (iv) all related trust  agreements,  insurance  contracts or
     other funding  agreements  which  implement such Employee Plan; and (v) all
     other  documents,  records or other materials  related  thereto  reasonably
     requested by Buyer.

         (d) The Management Consulting & Research,  Inc. Profit Sharing Plan and
     the ESOP (a) are the only employee  pension benefit plans maintained by the
     Company or any ERISA Affiliate; and (b) meet the qualification requirements
     of the Code in form and  operation,  and each such plan, and each trust (if
     any) forming a part thereof, has received a favorable  determination letter
     from the Internal Revenue Service as to the qualification under the Code of
     such plan and the tax-exempt  status of such related trust, and nothing has
     occurred  since the date of such  determination  letter that may  adversely
     affect  the  qualification  of such plan or the  tax-exempt  status of such
     related  trust.  All Employee  Plans  purporting to qualify for special tax
     treatment under any provision of the Code,  including,  without limitation,
     Code Sections 79, 105,  106, 125, 127, 129, 132, 421 or 501(c)(9)  meet the
     requirement of such sections in form and in operation. All reports, returns
     or filings  required by any  Governmental  Entity have been timely filed in
     accordance with all applicable requirements.

         (e) No  condition  exists  that would  subject the  Company,  any ERISA
     Affiliate  or Parent to any excise Tax,  penalty tax or fine related to any
     Employee  Plan.  No prohibited  transactions,  as defined by Section 406 of
     ERISA or Section 4975 of the Code, have occurred with respect to any of the
     Employee  Plans  and  there is no  liability  for  Taxes  with  respect  to
     prohibited transactions under Section 4975 of the Code. Neither the Company
     nor any ERISA  Affiliate has engaged in any  transaction in connection with
     which the  Company,  any ERISA  Affiliate or Parent could be subjected to a
     criminal or civil  penalty  under ERISA.  No  condition  exists which would
     constitute grounds for involuntary termination of any of the Employee Plans
     under  Section 4042 of ERISA,  and except as set forth on Schedule  3.10 of
     the Company Disclosure Schedule, there have

                                       13
<PAGE>
     been no  reportable  events as defined in Section  4043(b) of ERISA  (other
     than  events for which the 30-day  notice  have been  waived by the Pension
     Benefit Guaranty Corporation),  with respect to any Employee Plan that is a
     pension benefit plan.

         (f)  All  excess  contributions,  if  any  (together  with  any  income
     allocable thereto),  have been distributed (or, if forfeitable,  forfeited)
     before  the  close  of the  first  two and one half (2 1/2)  months  of the
     following  plan  year for all plan  years  prior  to the plan  year  ending
     February  2000; and there is no liability for excise Tax under Section 4979
     of the Code with  respect to such  excess  contributions,  if any,  for any
     Employee  Plan.  There is no  liability  for Taxes with  respect to: (i) an
     accumulated  funding deficiency under Section 4971 of the Code; and/or (ii)
     nondeductible contributions under Section 4972 of the Code.

         (g) No  Employee  Plan  provides  for retiree  medical or retiree  life
     insurance  benefits  for  former  employees  of the  Company  or any  ERISA
     Affiliate and there is no liability for Taxes with respect to  disqualified
     benefits under Section 4976 of the Code. No Employee Plan that is a pension
     benefit  plan has been  terminated  by the  Company or any ERISA  Affiliate
     except as set forth on Schedule  3.10 of the Company  Disclosure  Schedule;
     there is no  liability  for Taxes with  respect to a reversion of qualified
     plan assets under Section 4980 of the Code;  and each  terminated  Employee
     Plan that is a pension benefit plan has completed final distribution of its
     assets in  accordance  with both the  terms of the  Employee  Plan and such
     termination.

         (h)  There  have  been no  failures  to  comply  with the  continuation
     coverage provisions required by Sections 601-608 of ERISA and Section 4980B
     of the Code under any Employee Plan.

         (i) There are no  Employee  Plans that are  required to comply with the
     provisions of any foreign law.

         (j) There are no agreements  which will or may provide  payments  which
     will not be deductible under Code Section 280G.

         (k) There is no  Employee  Plan that is subject to Part 3 of Title I of
     ERISA or Title IV of ERISA;  each  Employee  Plan has been  operated in all
     respects in compliance with ERISA,  the Code and all other applicable Laws;
     none of the Employee Plans is a "multiple  employer plan" or "multiemployer
     plan" (as  described or defined in ERISA or the Code),  nor has the Company
     or any ERISA  Affiliate ever  contributed or been required to contribute to
     any such plan; there are no material  unfunded  liabilities  existing under
     any Employee  Plans,  and each  Employee Plan could be terminated as of the
     Closing Date without any material  liability to the Parent,  the Company or
     any ERISA Affiliate.

         (l) There are no actions,  suits,  claims,  audits,  or  investigations
     pending or, to the knowledge of the Company,  threatened  against,  or with
     respect to, any of the Employee Plans,  any trust which serves as a funding
     medium for any of the Employee Plans or their  respective  assets;  and all
     contributions  required  to be made to the  Employee  Plans  have been made
     timely.

                                       14
<PAGE>

         (m) All employees of the Company and its subsidiaries are terminable at
     the will of the Company, and neither the Company, nor any present or former
     director, or officer, employee or agent of the Company has made any binding
     commitments of the Company or any of its  subsidiaries,  written or verbal,
     to any present or former director,  officer,  agent or employee  concerning
     his term,  condition,  benefits  or  employment  other than as set forth in
     Schedule 3.10.

         (n) Neither the Company nor any of its  subsidiaries  is a party to any
     collective   bargaining  or  other  labor  union  contract.  No  collective
     bargaining  agreement  is being  negotiated  by the  Company  or any of its
     subsidiaries.  The Company and its  subsidiaries  are in  compliance in all
     material   respects  with  all  applicable  laws   respecting   employment,
     employment  practices  and wages and hours.  There is no pending or, to the
     knowledge of the Company, threatened labor dispute, strike or work stoppage
     against the Company or any of its subsidiaries which may interfere with the
     respective  business  activities of the Company or any of its subsidiaries.
     None  of  the  Company,   its  subsidiaries  or  any  of  their  respective
     representatives  or employees has  committed any unfair labor  practices in
     connection  with the operation of the respective  businesses of the Company
     or its  subsidiaries,  and there is no pending or, to the  knowledge of the
     Company,  threatened  charge or complaint against the Company or any of its
     subsidiaries by the National Labor Relations Board or any comparable  state
     agency.

         (o) Neither the Company nor any of its subsidiaries is a party to or is
     bound  by  any  severance   agreements,   programs,   policies,   plans  or
     arrangements,  whether or not  written.  Schedule  3.10(o)  of the  Company
     Disclosure Schedule sets forth, and the Company has provided to Parent true
     and  correct  copies of, (i) all  employment  agreements  with  officers or
     employees  of the Company or its  subsidiaries;  (ii) all  agreements  with
     consultants  of the Company or its  subsidiaries  obligating the Company or
     any subsidiary to make annual cash payments in an amount exceeding $50,000;
     and  (iii)  all   noncompetition   agreements   with  the  Company  or  its
     subsidiaries.

         (p) Except as set forth on Schedule  3.10(p) of the Company  Disclosure
     Schedule,   since  February  28,  1999,  there  has  been  no  increase  in
     compensation  payable or to become  payable to any  directors,  officers or
     employees of the Company or any of its subsidiaries other than increases in
     the  ordinary  course of business  after the date  hereof  with  respect to
     employees who are not officers or directors.

Section 3.11      Taxes.

         (a) Except as set forth on Schedule  3.11(a) to the Company  Disclosure
     Schedule, each of the Company and its subsidiaries has timely filed all the
     Tax Returns that it was required to file. All such Tax Returns were correct
     and complete in all material respects. All Taxes owed by any of the Company
     and its  subsidiaries  (whether or not shown on any Tax  Return)  have been
     paid.  Adequate  reserves and accruals have been established by Company and
     its  subsidiaries to provide for the payment of all Taxes which are not yet
     due and payable  with respect to the Company and its  subsidiaries  for all
     taxable periods or portions thereof ending on or before the Effective Time.
     Each of the Company and its  subsidiaries  has  withheld and paid all Taxes
     required to have been withheld and paid in connection  with amounts paid or
     owing to any employee,

                                       15
<PAGE>

     independent  contractor,  creditor,  stockholder,  or other third party. No
     claim has ever been made by an authority in a jurisdiction where any of the
     Company and its subsidiaries does not file Tax Returns that it is or may be
     subject to taxation by that jurisdiction.

         (b) All Tax  Returns of or with  respect  to the  Company or any of its
     subsidiaries,  with unexpired or extended  statutes of  limitations,  which
     have not been  audited by the  applicable  governmental  authority  are set
     forth in Schedule 3.11(b) to the Company Disclosure Schedule.

         (c) Except as set forth on Schedule  3.11(c) to the Company  Disclosure
     Schedule,  there is not in force any  extension of time with respect to the
     due date for the filing of any Tax Return of or with respect to the Company
     or any its  subsidiaries  or any waiver or agreement  for any  extension of
     time  for  the  assessment,  collection  or  payment  of any Tax of or with
     respect to the Company or any of its subsidiaries.

         (d) There are no pending audits, actions, proceedings,  investigations,
     disputes  or claims  with  respect to or against  the Company or any of its
     subsidiaries for or with respect to any Taxes, no assessment, deficiency or
     adjustment has been assessed or proposed, or threatened with respect to any
     Tax Return of or with  respect to the  Company or any of its  subsidiaries,
     and  there is no  reasonable  basis on which  any  claim  for  Taxes can be
     asserted against the Company or any of its subsidiaries.

         (e) The total  amounts set up as  liabilities  for current and deferred
     Taxes  in the  financial  statements  referred  to in  Section  3.7 of this
     Agreement are  sufficient to cover in all material  respects the payment of
     all Taxes, whether or not assessed or disputed, which are, or are hereafter
     found to be, or to have been, due by or with respect to the Company and any
     of its subsidiaries up to and through the periods covered thereby.

         (f) The Company has  previously  delivered  to Parent true and complete
     copies of each written Tax  allocation or sharing  agreement and a true and
     complete   description   of  each   unwritten  Tax  allocation  or  sharing
     arrangement affecting the Company or any of its subsidiaries.

         (g) Except for statutory  liens for current Taxes not yet due, no liens
     for Taxes exist upon the assets of any of the Company or its subsidiaries.

         (h) Neither the Company nor any of its subsidiaries will be required to
     include  any amount in income  for any  taxable  period or portion  thereof
     beginning  after the  Effective  Time as a result of a change in accounting
     method for any taxable  period  ending on or before the  Effective  Time or
     pursuant to any agreement  with any Tax authority  with respect to any such
     taxable period.

         (i) None of the property of the Company or any of its  subsidiaries  is
     held in an arrangement  for which  partnership Tax Returns are being filed,
     and neither the Company nor any of its  subsidiaries  owns any  interest in
     any entity the income of which is  required to be included in the income of
     the Company or such subsidiary.

                                       16
<PAGE>

         (j) None of the property of the Company or any of its  subsidiaries  is
     subject to a  safe-harbor  lease  (pursuant  to  Section  168(f) (8) of the
     Internal Revenue Code of 1954 as in effect after the Economic  Recovery Tax
     Act of 1981 and before the Tax  Reform Act of 1986) or is  "tax-exempt  use
     property" (within the meaning of Section 168(h) of the Code) or "tax-exempt
     bond  financed  property"  (within the meaning of Section  168(g)(5) of the
     Code).

         (k)  Neither  the  Company  nor  any of its  subsidiaries  has  made an
     election under Section 341(f) of the Code.

         (l) Neither the Company nor any  subsidiary  (i) has ever been a member
     of an affiliated  group of  corporations  (as defined in Section 1504(a) of
     the Code) other than the group of which the Company is currently the common
     parent or (ii) has any  liability  for the Taxes of any other  person under
     Treasury  Regulation ss. 1.1502-6 (or any similar provision of state, local
     or foreign law), as a transferee or successor, by contract, or otherwise.

         (m) Neither the Company nor any  subsidiary is or has ever been subject
     to Taxes in any jurisdiction outside the United States.

         (n) Neither the Company  nor any  subsidiary  has been a United  States
     real  property  holding  corporation  within the  meaning  of Code  section
     897(c)(2)   during  the  applicable   period   specified  in  Code  section
     897(c)(1)(A)(ii).

Section  3.12  Certain  Business  Practices.  None  of the  Company,  any of its
subsidiaries or any directors,  officers,  agents or employees of the Company or
any of its  subsidiaries  has (i) used any  funds  for  unlawful  contributions,
gifts,  entertainment or other unlawful expenses relating to political activity,
(ii) made any unlawful  payment to foreign or domestic  government  officials or
employees or to foreign or domestic  political  parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.

Section 3.13  Environmental  Matters.  Except for matters that would not result,
individually  or in the aggregate  with all other such matters,  in liability to
the  Company or any of its  subsidiaries,  (i) the  properties,  operations  and
activities  of the  Company  and its  subsidiaries  are in  compliance  with all
applicable  Environmental  Laws; (ii) the Company and its  subsidiaries  and the
properties and operations of the Company and its subsidiaries are not subject to
any existing,  pending or, to the knowledge of the Company,  threatened  action,
suit, claim, investigation,  inquiry or proceeding by or before any governmental
authority under any Environmental Law; (iii) all notices, permits,  licenses, or
similar authorizations,  if any, required to be obtained or filed by the Company
or any of its subsidiaries  under any  Environmental  Law in connection with any
aspect of the  business of the Company or its  subsidiaries,  including  without
limitation  those relating to the treatment,  storage,  disposal or release of a
hazardous or otherwise regulated substance, have been duly obtained or filed and
will  remain  valid and in effect  after the  Merger,  and the  Company  and its
subsidiaries  are in  compliance  with  the  terms  and  conditions  of all such
notices, permits, licenses and similar authorizations;  (iv) the Company and its
subsidiaries  have satisfied and are currently in compliance  with all financial
responsibility  requirements  applicable to their  operations and imposed by any
governmental authority under

                                       17
<PAGE>

any  Environmental  Law, and the Company and its subsidiaries  have not received
any notice of noncompliance with any such financial responsibility requirements;
(v)  to  the  Company's  knowledge,  there  are  no  physical  or  environmental
conditions  existing  on any  property  of the  Company or its  subsidiaries  or
resulting  from the Company's or such  subsidiaries'  operations or  activities,
past or  present,  at any  location,  that  would  give rise to any  on-site  or
off-site remedial  obligations imposed on the Company or any of its subsidiaries
under any Environmental Laws or that would impact the soil, groundwater, surface
water or human health; (vi) to the Company's knowledge, since the effective date
of the relevant requirements of applicable  Environmental Laws and to the extent
required by such  applicable  Environmental  Laws,  all  hazardous  or otherwise
regulated  substances  generated by the Company and its  subsidiaries  have been
transported only by carriers  authorized under  Environmental  Laws to transport
such  substances  and wastes,  and disposed of only at treatment,  storage,  and
disposal  facilities  authorized  under  Environmental  Laws to treat,  store or
dispose of such  substances and wastes;  (vii) there has been no exposure of any
person or property to hazardous substances or any pollutant or contaminant,  nor
has  there  been any  release  of  hazardous  substances,  or any  pollutant  or
contaminant  into the  environment  by the  Company  or its  subsidiaries  or in
connection with their properties or operations that could reasonably be expected
to give rise to any claim  against  the Company or any of its  subsidiaries  for
damages or compensation;  and (viii) the Company and its subsidiaries  have made
available to Parent all internal and external  environmental  audits and studies
and all correspondence on substantial environmental matters in the possession of
the  Company  or its  subsidiaries  relating  to any of the  current  or  former
properties or operations of the Company and its subsidiaries.

         For purposes of this  Agreement,  the term  "Environmental  Laws" shall
mean any and all laws, statutes,  ordinances,  rules, regulations,  or orders of
any  Governmental  Entity  pertaining to health or the environment  currently in
effect in any and all  jurisdictions  in which the Company and its  subsidiaries
own property or conduct business,  including without  limitation,  the Clean Air
Act, as amended, the Comprehensive Environmental,  Response,  Compensation,  and
Liability  Act of 1980  ("CERCLA"),  as  amended,  the Federal  Water  Pollution
Control  Act, as amended,  the  Occupational  Safety and Health Act of 1970,  as
amended,  the  Resource  Conservation  and  Recovery  Act of 1976  ("RCRA"),  as
amended,  the Safe Drinking Water Act, as amended,  the Toxic Substances Control
Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended,
the  Superfund  Amendments  and  Reauthorization  Act of 1986,  as amended,  the
Hazardous  Materials  Transportation  Act, as amended,  the Oil Pollution Act of
1990 ("OPA"),  any state laws  implementing the foregoing  federal laws, and all
other  environmental  conservation  or  protection  laws.  For  purposes of this
Agreement,  the terms  "hazardous  substance"  and  "release"  have the meanings
specified in CERCLA and RCRA and shall include petroleum and petroleum products,
radon and PCB's,  and the term  "disposal"  has the meaning  specified  in RCRA;
provided,  however,  that to the  extent  the laws of the  state  in  which  the
property is located establish a meaning for "hazardous substance," "release," or
"disposal"  that is broader than that  specified in either CERCLA or RCRA,  such
broader meaning shall apply.

Section 3.14 Vote Required.  The only vote of the holders of any class or series
of the  Company  capital  stock  necessary  to approve the Merger and adopt this
Agreement  is  the  affirmative  vote  of  the  holders  of  two-thirds  of  the
outstanding shares of the Company Common Stock.

                                       18
<PAGE>

Section  3.15  Brokers.  Except as set  forth in  Schedule  3.15 to the  Company
Disclosure Schedule,  no broker,  finder or investment banker is entitled to any
brokerage,  finder's or other fee or commission payable by the Company or any of
its  subsidiaries  in  connection  with the  transactions  contemplated  by this
Agreement based upon  arrangements made by or on behalf of the Company or any of
its subsidiaries.

Section 3.16 Insurance.  Schedule 3.16 of the Company  Disclosure  Schedule sets
forth a complete and correct list of all binders or insurance  policies in force
with respect to Company and its subsidiaries  and identifies the insurer,  type,
the policy number and the period of coverage. Complete and correct copies of all
such policies have been provided to Parent. Except as set forth on Schedule 3.16
of  the  Company  Disclosure  Schedule,  neither  the  Company  nor  any  of its
subsidiaries  has been  refused  any  insurance  with  respect to its  business,
operations,  properties  or any of its assets,  nor has coverage been limited by
any insurance carrier to which it has applied for insurance or with which it has
carried insurance, during the last two years.

Section  3.17  Properties.  Except as set forth on Schedule  3.17 to the Company
Disclosure  Schedule  and except for liens  arising  in the  ordinary  course of
business  after the date  hereof and  properties  and assets  disposed of in the
ordinary  course of  business  after  February  28,  1999,  the  Company and its
subsidiaries  have good and  marketable  title,  free and clear of all  material
liens, to all their properties and assets, whether tangible or intangible, real,
personal or mixed, reflected in the February 28, 1999 consolidated balance sheet
included  in the  Financial  Statements  as being  owned by the  Company and its
subsidiaries as of the date thereof or purported to be owned on the date hereof.
All  buildings,  and all fixtures,  equipment and other property and assets held
under  leases by any of the  Company or its  subsidiaries  are held under  valid
instruments  enforceable by the Company or its  subsidiaries  in accordance with
their respective terms. All of the Company's and its subsidiaries'  equipment in
regular use has been well maintained and is in good and  serviceable  condition,
reasonable wear and tear excepted.

Section 3.18      Certain Material Contracts.

         (a)  Schedule  3.18(a) to the Company  Disclosure  Schedule  lists each
     agreement  and  arrangement  (whether  written  or oral and  including  all
     amendments  thereto) to which the Company or any of its  subsidiaries  is a
     party or a beneficiary  or by which the Company or any of its  subsidiaries
     is bound that is material,  directly or indirectly,  to the business of the
     Company and any of its subsidiaries,  taken as a whole  (collectively,  the
     "Material  Contracts"),   including  without  limitation  (i)  any  supply,
     distribution  or other  agreements  or  arrangements  pursuant to which the
     Company or its subsidiaries sell or distribute any products or services and
     which is not  cancelable  within 30 days notice without  penalty;  (ii) any
     warranty  agreements or arrangements  under which the Company or any of its
     subsidiaries has any liability with a value in excess of $50,000; (iii) any
     capital or operating  leases or conditional  sales  agreements  relating to
     vehicles  or  equipment  with a  value  in  excess  of  $50,000;  (iv)  any
     agreements  or  arrangements  pursuant  to which the  Company or any of its
     subsidiaries  is entitled or  obligated  to acquire any assets from a third
     party in excess of $50,000;  (v) insurance  policies;  (vi) any employment,
     consulting,  noncompetition,  separation,  collective bargaining,  union or
     labor agreements or arrangements;  (vii) any agreement evidencing, securing
     or otherwise  relating to any  indebtedness for which the Company or any of
     its

                                       19
<PAGE>

     subsidiaries  has any liability in excess of $50,000,  (viii) any agreement
     with or for the benefit of any stockholder,  director,  officer or employee
     of the  Company  or any of its  subsidiaries,  or any  affiliate  or family
     member  thereof;  and (ix) any other  agreement or arrangement  pursuant to
     which the Company or any of its  subsidiaries  could be required to make or
     be entitled to receive aggregate payments in excess of $50,000 and which is
     not cancelable within 30 days notice without penalty.

         (b) The Company and its  subsidiaries  have  performed  in all material
     respects all of their  obligations  under each Material  Contract and there
     exists no material breach or default (or event that with notice or lapse of
     time would  constitute  a material  breach or default)  under any  Material
     Contract.

         (c) On the date hereof and on the Closing Date, each Material  Contract
     will be valid,  binding  and in full force and effect  and  enforceable  in
     accordance with its respective terms,  except as such enforceability may be
     limited by  applicable  bankruptcy,  insolvency,  fraudulent  conveyance or
     other similar laws affecting the enforcement of creditors' rights generally
     and subject to general principles of equity.  There has been no termination
     or, to the Company's knowledge, threatened termination or notice of default
     under any Material Contract.  The Company has delivered to Parent a copy of
     each written Material Contract.

         (d) Except as set forth in Schedule  3.18(d) to the Company  Disclosure
     Schedule,  no consent  of any person is  required  in  connection  with the
     transactions contemplated by this Agreement in order to preserve the rights
     of the  Company  or  any  of  its  subsidiaries  under  or to  prevent  any
     disadvantage  to the Company or any of its  subsidiaries  in respect of any
     Material  Contract after the Effective Time. All consents set forth on such
     Schedule 3.18(d) will be obtained prior to the Closing Date.

Section 3.19 Competing Interests.  Except as described in Schedule 3.19, none of
the  Company,  any of its  subsidiaries,  any  director or officer of any of the
foregoing,  or  any  affiliate  of  the  Major  Stockholder  owns,  directly  or
indirectly, an interest in any person that is a competitor, customer or supplier
of the  Company  or any of its  subsidiaries  or  that  otherwise  has  business
dealings  with the Company or any of its  subsidiaries  that are material to the
Company  and its  subsidiaries  taken as a  whole,  other  than  the  beneficial
ownership  of not more than five percent  (5%) of the voting  securities  of any
such entity that are publicly traded. Except as set forth on Schedule 3.19, none
of the Major  Stockholder  or his affiliates or the directors or officers of the
Company or any of its  subsidiaries is currently a party to any transaction with
the Company or any of its  subsidiaries  (other than for services as  employees,
officers and directors), including without limitation any contract, agreement or
other  arrangement  providing for the furnishing of services to or by, providing
for rental of real or  personal  property  to or from,  or  otherwise  requiring
payments  to  or  from,  any  such  person,  or  to  or  from  any  corporation,
partnership,  trust or other  entity in which any such  person owns in excess of
five percent (5%) of the outstanding equity interest.

Section 3.20  Intellectual  Property  Rights.  There are no registered  patents,
trademarks,  service marks,  trade names or copyrights,  or applications  for or
licenses (to or from the Company or any of its subsidiaries)  that (a) are owned
by the Company or any of its subsidiaries,  or with respect to which the Company
or any of its subsidiaries has any rights, or (b) are used, whether

                                       20
<PAGE>

directly or indirectly,  by the Company or any of its subsidiaries.  The Company
and its  subsidiaries  have the right to use the  trademarks and trade names and
any computer software and software licenses,  intellectual property, proprietary
information,  trade secrets,  trademarks,  trade names, Internet domain name(s),
copyrights, material and manufacturing specifications, drawings and designs used
by the Company or any of its  subsidiaries in the business of the Company or any
of its subsidiaries (collectively,  "Intellectual Property"), without infringing
on or otherwise  acting adversely to the rights or claimed rights of any person.
Neither the Company nor any of its  subsidiaries is obligated to pay any royalty
or  other  consideration  to  any  person  in  connection  with  the  use of any
Intellectual Property. To the Company's knowledge, no other person is infringing
on the rights of the Company and its  subsidiaries in any of their  Intellectual
Property.  The Company possesses a valid registration for use of the domain name
"www.mcri.com" as registered with Network Solutions, Inc.

Section 3.21      ESOP.

         (a) The ESOP is the legal  owner and  holder of record of the shares of
     Company  Common  Stock set forth  opposite  its name on Exhibit A, free and
     clear of any pledge,  lien,  security interest,  option,  charge,  right of
     first refusal, encumbrance, claim or equity of any kind.

         (b) The  consummation by the trustee under the ESOP of the transactions
     contemplated hereby, do not and will not (i) require an act, the consent or
     approval of, or advance filing with, any Governmental Entity or other third
     party,  (ii)  constitute  or result in the breach of any  provision  of, or
     constitute a default  under the ESOP,  any agreement or instrument to which
     the ESOP is a party or by which  any of its  assets  is  subject  or bound,
     (iii) violate any Law, regulation, judgment or order binding upon the ESOP,
     including,  without  limitation,   Section  409(e)(3)  of  the  Code,  (iv)
     constitute or result in a prohibited  transaction  under the Code or ERISA,
     (v) result in the creation of any security interest, claim, lien, charge or
     encumbrance  upon any of the  property or assets of the ESOP or (vi) result
     in a Tax imposed under Code Section 4978.

Section 3.22      Government Contracts.

         (a)  (i)  all  Federal  Government  Contracts  of  the  Company  or its
     subsidiaries  and all  contracts  between  either the Company or one of its
     subsidiaries  and any  state  or  local  government,  agency  or  authority
     (collectively  referred to as "Government  Contracts") constitute valid and
     binding  obligations  of either the Company or  subsidiaries  party thereto
     and, to the knowledge of the Company,  the other party or parties  thereof,
     enforceable in accordance with their terms;  (ii) either the Company or any
     of the subsidiaries party thereto is in compliance in all material respects
     with the  terms  of each of the  Government  Contracts  (iii)  neither  the
     Company, its subsidiaries, nor any other party has terminated,  canceled or
     waived any material term or condition of any Government Contract;  and (iv)
     the cost accounting, estimating, property, and procurement systems relating
     to the Government Contracts are in compliance in all material respects with
     applicable laws, regulations, and contract provisions, including applicable
     cost principles and applicable cost accounting standards.

                                       21
<PAGE>

         (b)  None of the  Government  Contracts  has a  currently  incurred  or
     currently projected cost overrun;  and, to the Company's  knowledge,  there
     are no material  delivery or performance  problems or issues on the part of
     the Company or its subsidiaries with respect to the Government Contracts.

         (c) Except  for those  liens  listed on  Schedule  3.22 to the  Company
     Disclosure  Schedule,  made in accordance  with the 31 U.S.C.  ss. 3727 (as
     amended),  otherwise  known as  Assignment of Claims Act, and the 41 U.S.C.
     ss. 15 (as amended),  otherwise  known as the  Assignment of Contracts Act,
     neither the Company nor any of its  subsidiaries  has assigned or otherwise
     conveyed or transferred,  or agreed to assign,  convey,  or transfer to any
     person,  any  right,  title  or  interest  in or to any  of the  Government
     Contracts,  or  any  account  receivable  relating  thereto,  whether  as a
     security interest or otherwise.

         (d) Neither the Company nor any of its  subsidiaries  has  received any
     notice  or other  communication  in any form  from the  federal  government
     regarding  their  actual or  threatened  disqualification,  suspension,  or
     debarment from contracting with the federal government.

         (e) (i) none of the  Government  Contracts  have  been  terminated  for
     default or convenience;  (ii) no show cause or cure notices,  as defined by
     each  Government  Contract or  applicable  federal  regulations,  have been
     issued, or to the Company's  knowledge,  proposed or threatened;  and (iii)
     neither the Company nor its subsidiaries  have received any notices to cure
     any defaults of the Government  Contracts;  (iv) there is no pending or, to
     the knowledge of the Company,  threatened audit,  inquiry, or investigation
     relating to any  Government  Contract;  and (v) neither the Company nor its
     subsidiaries  have received notice of any claims against the Company or its
     subsidiaries by the Governmental Entity, or any other party to a Government
     Contract.

         (f) None of the Government Contracts,  to the Company's knowledge,  are
     anticipated  to be  terminated  for  convenience  or  discontinued  for any
     reason, including for lack of funding or federal budget constraints.

         (g) All information, data, representations, statements and certificates
     as  submitted  or  provided  to any  Governmental  Entity  relative  to the
     Government  Contracts  were current,  complete and accurate in all material
     respects as of the date made (including  particularly  invoices,  claims or
     other  requests  for  payments and any  certificate  regarding  procurement
     integrity "or certificates of current cost and pricing data"), in each case
     to the extent of any open statute of limitations.

Section 3.23 Fairness Opinion. The ESOP and its trustees have received a written
opinion from DeLisi & Ghee,  Inc.,  an  independent  financial  advisor,  to the
effect  that,  as of  the  date  of  delivery  such  opinion,  the  transactions
contemplated  by this Agreement are fair, from a financial  perspective,  to the
ESOP participants.

Section 3.24 Fiduciary  Duty. In connection with the negotiation and approval of
this Agreement and the transactions contemplated hereunder or the calling of the
special meeting of the stockholders of the Company,  the conduct thereof and the
solicitation  of proxies  with  respect  thereto,  neither  the  Company nor its
directors or Major Stockholder have breached any duty

                                       22
<PAGE>

or  obligation  owing to the  stockholders  of the  Company,  including  without
limitation,  any fiduciary duty owed to the stockholders of the Company pursuant
to the VSCA.

Section 3.25      Year 2000 Compliance.

         (a) Schedule  3.25 to the Company  Disclosure  Schedule  sets forth the
     Information  Technology (as defined below) which is Year 2000 Compliant (as
     defined below).

         (b) As used in this  Agreement,  "Year 2000  Compliant"  and "Year 2000
     Compliance"  mean,  with  respect  to  Information  Technology,   that  the
     Information  Technology  accurately processes date/time data (including but
     not limited to,  calculating,  comparing,  and sequencing)  from, into, and
     between the twentieth and  twenty-first  centuries,  and the years 1999 and
     2000 and leap year  calculations,  and, to the extent that other  hardware,
     software,  firmware, network systems, embedded systems,  telecommunications
     systems and other  systems or components  is used in  combination  with the
     Information Technology,  properly exchanges date/time data with it, and the
     Information Technology has been tested to verify these capabilities.

         (c) As used in  this  Agreement,  "Information  Technology"  means  all
     software, hardware, firmware,  telecommunications systems, network systems,
     embedded  systems,  and other  systems or components of the Company and its
     subsidiaries  or their  respective  products  that  utilize  microprocessor
     technology.

Section 3.26 No  Misrepresentation.  Without limiting any of the representations
and warranties  contained  herein,  no representation or warranty of the Company
and no  statement by the Company or other  information  contained in the Company
Disclosure  Schedule  or any  document  incorporated  therein  by  reference  or
delivered  by  the  Company  to  Parent  contains,   as  of  the  date  of  such
representation,  warranty,  statement or document, contains any untrue statement
of material  fact, or omits to state a material fact  necessary in order to make
the statements contained therein, in light of the circumstances under which such
statements were made, not misleading.


                                   ARTICLE IV

             REPRESENTATIONS AND WARRANTIES OF THE MAJOR STOCKHOLDER

         The Major Stockholder  represents and warrants to the Parent Companies,
and the Parent Companies in agreeing to consummate the transactions contemplated
by this Agreement have relied upon such representations and warranties, that:

Section  4.1  Ownership  of Stock.  Except as set forth on  Schedule  4.1 of the
Company Disclosure  Schedule,  the Major Stockholder is the owner,  beneficially
and of record, of the shares of Company Common Stock set forth opposite his name
on Exhibit A, free and clear of any pledge,  lien,  security  interest,  option,
charge, right of first refusal, encumbrance, claim or equity of any kind.

                                       23
<PAGE>

Section 4.2 Valid and Binding  Agreements.  The Major  Stockholder  has the full
right, capacity and power to enter into this Agreement.  All necessary action on
the part of the Major  Stockholder has been taken to authorize the execution and
delivery of this Agreement, the performance of his obligations hereunder and the
consummation of the transactions  contemplated  hereby. This Agreement has been,
duly  and  validly  executed  and  delivered  by  the  Major  Stockholder,   and
constitutes  valid and  binding  obligations,  enforceable  against  such  Major
Stockholder, in accordance with its terms.

Section  4.3  Consents  and  Approvals.   Except  for  consents,   approvals  or
authorizations which, if not received, or declarations, filings or registrations
which, if not made,  would not have a Company  Material  Adverse Effect or which
would not adversely  effect the ability of the Major  Stockholder to perform his
obligations  hereunder,  no permit,  consent,  approval or authorization  of, or
declaration, filing or registration with, any Governmental Entity or third party
is required to be made or obtained by any such Major  Stockholder  in connection
with  the  execution,   delivery  and  performance  of  this  Agreement  or  the
consummation of the transactions contemplated hereby.

Section 4.4 Investment  Representations.  The Major Stockholder who will acquire
Parent Common Stock as part of the Merger  Consideration  (i) is an  "accredited
investor" as defined  under the  Securities  Act,  (ii) is acquiring  the Parent
Common  Stock  for the Major  Stockholder's  own  account  without a view to any
distribution  thereof in violation of the Securities Act or any applicable state
securities  Law, (iii) is  experienced  in evaluating and making  investments of
this type, and has had access to, and has received, all the information that the
Major   Stockholder   reasonably  has  required  to  evaluate  this  investment,
including,  but not  limited to, the  Parent's  SEC  Filings,  and access to the
management of Parent and the opportunity to ask questions and to receive answers
to such  questions,  and (iv) is financially  able to bear the risks  associated
with an investment in the Parent Common Stock being acquired hereby.

Section  4.5  No   Misrepresentations.   The  representations,   warranties  and
statements  made by the Major  Stockholder  in or pursuant to this Agreement are
true,   complete   and  correct  in  all   material   respects.   None  of  such
representations,  warranties  or statements  contains any untrue  statement of a
material  fact or omits to state any  material  fact  necessary to make any such
representation,  warranty or statement,  under the  circumstances in which it is
made, not misleading.


                                    ARTICLE V

               REPRESENTATIONS AND WARRANTIES OF PARENT COMPANIES

         The Parent Companies  hereby represent and warrant to the Company,  and
the Company in agreeing to  consummate  the  transactions  contemplated  by this
Agreement have relied on such representations and warranties, that:

Section 5.1  Organization and  Qualification.  Each of the Parent Companies is a
corporation duly organized, validly existing and in good standing under the laws
of its  state  of  incorporation  and  has all  requisite  corporate  power  and
authority to own,  lease and operate its properties and to carry on its business
as it is now being  conducted  and is duly  qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted


                                       24
<PAGE>

by it or the  ownership or leasing of its  properties  makes such  qualification
necessary,  other than where the  failure  to be so duly  qualified  and in good
standing  would not have a Parent  Material  Adverse  Effect.  The term  "Parent
Material  Adverse  Effect"  as used in this  Agreement  shall mean any change or
effect that,  individually or when taken together with all such other changes or
effects,  could reasonably be expected to be materially adverse to the business,
operations,  assets,  and  prospects,  condition  (financial or  otherwise),  or
results of operations of Parent and its subsidiaries, taken as a whole.

Section 5.2 Charter and Bylaws. Parent has heretofore furnished to the Company a
complete and correct copy of the charter and bylaws, as amended or restated,  of
each of the Parent  Companies.  None of the Parent  Companies is in violation of
any of the provisions of its charter or bylaws.

Section 5.3 Authority.  Each of the Parent Companies has all requisite corporate
power and  authority  to execute  and  deliver  this  Agreement,  to perform its
obligations  hereunder and to consummate the  transactions  contemplated  hereby
(subject  to, with  respect to the Merger,  the  adoption of this  Agreement  by
Parent as the  stockholder  of Merger Sub).  The  execution and delivery of this
Agreement by each of the Parent  Companies and the  consummation  by each of the
Parent  Companies  of  the  transactions  contemplated  hereby  have  been  duly
authorized by all necessary corporate action and no other corporate  proceedings
on the part of any of the Parent  Companies  are  necessary  to  authorize  this
Agreement or to consummate the  transactions  contemplated  hereby  (subject to,
with  respect to the Merger,  the  adoption of this  Agreement  by Parent as the
stockholder of Merger Sub).  This Agreement has been duly executed and delivered
by each of the Parent  Companies and  constitutes  the legal,  valid and binding
obligation  of each of the  Parent  Companies,  enforceable  against  the Parent
Companies in accordance with its terms.

Section 5.4       No Conflict; Required Filings and Consent.

         (a) The execution and delivery of this  Agreement by each of the Parent
     Companies does not, and the consummation of the  transactions  contemplated
     hereby will not (i) conflict with or violate the charter or bylaws,  or the
     equivalent  organizational  documents, in each case as amended or restated,
     of Parent or any of Parent's  subsidiaries,  (ii)  conflict with or violate
     any Laws  applicable to Parent or any of Parent's  subsidiaries or by which
     any of their properties is bound or subject,  or (iii) result in any breach
     of or  constitute  a default (or an event that with notice or lapse of time
     or both  would  become a  default)  under,  or give to others any rights of
     termination,  amendment,  acceleration or cancellation of, or result in the
     creation of a lien or  encumbrance  on any of the  properties  or assets of
     Parent  or any of  Parent's  subsidiaries  pursuant  to,  any  note,  bond,
     mortgage, indenture, contract, agreement, lease, license, permit, franchise
     or other  instrument  or  obligation  to which  Parent  or any of  Parent's
     subsidiaries  is a  party  or by or to  which  Parent  or any  of  Parent's
     subsidiaries or any of their respective properties is bound or subject.

         (b) The execution and delivery of this  Agreement by each of the Parent
     Companies does not, and the consummation of the  transactions  contemplated
     hereby will not, require any of the Parent Companies to obtain any consent,
     license,  permit, approval,  waiver,  authorization or order of, or to make
     any filing with or notification to, any Governmental  Entities,  except for
     applicable requirements, if any, of the HSR Act and

                                       25
<PAGE>

     the Securities  and Exchange  Commission and the New York and Pacific Stock
     Exchanges and the filing and recordation of appropriate merger documents as
     required by VSCA.

Section 5.5 Litigation. There are no lawsuits, actions, claims or administrative
proceedings  pending or, to the  knowledge of Merger Sub or Parent,  threatened,
against  Parent or any of its  subsidiaries  that would have a material  adverse
effect  in the  condition  (financial  or  otherwise),  results  of  operations,
business, assets or liabilities of Parent and its subsidiaries taken as a whole.

Section 5.6 SEC Filings.  The Parent Companies have delivered to the Company for
delivery  to  its  stockholders  true  and  complete  copies  of  the  following
documents,  in each case as filed with the Securities  and Exchange  Commission:
Parent's  Annual  Report on Form 10-K for the fiscal  year ended June 30,  1998,
Amendment No. 1 to Form 10-K/A with respect thereto,  Parent's Quarterly Reports
on Form 10-Q for the fiscal  quarters ended September 30, and December 31, 1998,
and March 31, 1999,  Parent's  Annual  Report to  Stockholders,  Parent's  Proxy
Statement  for its annual  stockholders'  meeting held on November 5, 1998,  and
Parent's Current Report on Form 8-K, dated July 1, 1998 (collectively,  the "SEC
Filings"). The SEC Filings (i) do not contain any untrue statement of a material
fact or omit  to  state  any  material  fact  necessary  to make  any  statement
contained  therein,  under the circumstances in which it is made, not misleading
and  (ii)  were  prepared  in all  material  respects  in  accordance  with  the
requirements of applicable law.

Section 5.7 Absence of Material Adverse Change. Since the date of the latest SEC
Filing,  there  has not  been  any  material  adverse  change  in the  condition
(financial or otherwise), results of operations, business, assets or liabilities
of Merger Sub or Parent.

Section  5.8  Parent  Shares.  When  issued  and  delivered  at the  Closing  in
accordance with this  Agreement,  the shares of Parent Common Stock will be duly
authorized, validly issued, fully paid and nonassessable, free of any preemptive
or  other  similar  rights  of any  Person.  The  Parent  Shares  have  not been
registered  pursuant  to the  Securities  Act,  or under  any  applicable  state
securities Laws.

Section  5.9  No   Misrepresentations.   The  representations,   warranties  and
statements  made by Merger Sub and Parent in or pursuant to this  Agreement  are
true,   complete   and  correct  in  all   material   respects.   None  of  such
representations,  warranties  or statements  contains any untrue  statement of a
material  fact or omits to state any  material  fact  necessary to make any such
representation,  warranty or statement,  under the  circumstances in which it is
made, not misleading.


                                   ARTICLE VI

                                    COVENANTS

Section 6.1 Certain  Affirmative  Covenants of the Company.  The Company  hereby
covenants  and  agrees  that,  prior to the  Effective  Time,  unless  otherwise
expressly  contemplated  by this Agreement or consented to in writing by Parent,
the Company will and will cause its subsidiaries to:

                                       26
<PAGE>

         (a) comply in all material  respects  with all Laws  applicable  to its
     business  and  notify  Parent  of  any  legal,   administrative   or  other
     proceedings,  investigations,  inquiries, complaints, notices of violations
     or other asserted claims, judgments, injunctions or restrictions,  pending,
     outstanding  or to the Company's  knowledge,  threatened  or  contemplated,
     which could have a Company Material Adverse Effect;

         (b) operate its  business in the usual and ordinary  course  consistent
     with past practices;

         (c) use all reasonable  efforts to preserve its business  organization,
     maintain its  material  rights and  franchises,  retain the services of its
     respective  officers and employees and maintain its relationships  with its
     customers and suppliers;

         (d) maintain and keep its  properties  and assets in as good repair and
     condition  as at present,  ordinary  wear and tear  excepted,  and maintain
     supplies  and  inventories  in  quantities  consistent  with its  customary
     business practice; and

         (e) use all  reasonable  efforts  to keep  in  full  force  and  effect
     insurance  and bonds  comparable  in amount and scope of  coverage  to that
     currently maintained.

Section 6.2 Certain  Negative  Covenants  of the  Company.  Except as  expressly
contemplated  by this Agreement or otherwise  consented to in writing by Parent,
from the date of this Agreement  until the Effective  Time, the Company will not
do, and will not permit any of its subsidiaries to do, any of the foregoing:

         (a) (i) increase the  compensation  payable to or to become  payable to
     any director or executive  officer,  unless such increase  results from the
     operation of compensation  arrangements in effect prior to the date hereof;
     (ii) grant any  severance or  termination  pay (other than  pursuant to the
     normal  severance policy of the Company or its subsidiaries as in effect on
     the date of this  Agreement)  to, or enter into or amend any  employment or
     severance  agreement  with,  any  director,   officer  or  employee;  (iii)
     establish, adopt or enter into any employee benefit plan or arrangement; or
     (iv) except as may be required by  applicable  Law,  amend in any  material
     respect,  or take any other  actions  with  respect to, any of the Employee
     Plans  or  any  of the  plans,  programs,  agreements,  policies  or  other
     arrangements described in Section 3.10 of this Agreement;

         (b) declare or pay any dividend on, or make any other  distribution  in
     respect of, outstanding shares of capital stock,  except for dividends by a
     wholly  owned  subsidiary  of the Company to the Company or another  wholly
     owned subsidiary of the Company;

         (c) (i) redeem,  purchase or otherwise acquire any shares of its or any
     of its  subsidiaries'  capital  stock  or  any  securities  or  obligations
     convertible into or exchangeable for any shares of its or its subsidiaries'
     capital  stock (other than any such  acquisition  directly  from any wholly
     owned  subsidiary of the Company in exchange for capital  contributions  or
     loans to such subsidiary),  or any options, warrants or conversion or other
     rights to acquire any shares of its or its  subsidiaries'  capital stock or
     any such securities or obligations  (except in connection with the exercise
     of outstanding Company

                                       27
<PAGE>

     Stock   Options  in  accordance   with  their   terms);   (ii)  effect  any
     reorganization or  recapitalization;  or (iii) split, combine or reclassify
     any of its or its  subsidiaries'  capital  stock or issue or  authorize  or
     propose the issuance of any other  securities  in respect of, in lieu of or
     in substitution for, shares of its or its subsidiaries' capital stock;

         (d) (i) issue,  deliver,  award, grant or sell, or authorize or propose
     the issuance,  delivery,  award,  grant or sale (including the grant of any
     security interests,  liens, claims, pledges,  limitations in voting rights,
     charges  or other  encumbrances)  of, any shares of any class of its or its
     subsidiaries'  capital  stock  (including  shares  held in  treasury),  any
     securities  convertible  into or exercisable or  exchangeable  for any such
     shares, or any rights, warrants or options to acquire any such shares; (ii)
     amend or  otherwise  modify  the terms of any such  rights or  options  the
     effect of which shall be to make such terms more  favorable  to the holders
     thereof;  or (iii)  take any action to  accelerate  the  exercisability  of
     Company Stock Options;

         (e) acquire or agree to acquire,  by merging or consolidating  with, by
     purchasing  an equity  interest in or a portion of the assets of, or by any
     other manner, any business or any corporation,  partnership, association or
     other business  organization or division  thereof,  or otherwise acquire or
     agree to acquire any assets of any other person (other than the purchase of
     assets from  suppliers  or vendors in the  ordinary  course of business and
     consistent with past practice);

         (f) sell,  lease,  exchange,  mortgage,  pledge,  transfer or otherwise
     dispose of, or agree to sell, lease, exchange,  mortgage,  pledge, transfer
     or otherwise  dispose of, any of its material assets or any material assets
     of any of its  subsidiaries,  except for dispositions of inventories and of
     assets  in the  ordinary  course  of  business  and  consistent  with  past
     practice;

         (g)  initiate,  solicit or encourage  (including  by way of  furnishing
     information or  assistance),  or take any other action to  facilitate,  any
     inquiries or the making of any proposal relating to, or that may reasonably
     be expected to lead to, any Competing  Transaction (as defined  below),  or
     enter  into   discussions  or  negotiate  with  any  person  or  entity  in
     furtherance  of such  inquiries  or to obtain a Competing  Transaction,  or
     agree to or endorse any Competing  Transaction,  or authorize or permit any
     of the  officers,  directors  or  employees  of the  Company  or any of its
     subsidiaries  or  any  investment  banker,  financial  advisor,   attorney,
     accountant  or other  representative  retained by the Company or any of the
     Company's  subsidiaries  to take any such  action,  and the  Company  shall
     promptly  notify  Parent of all relevant  terms of any such  inquiries  and
     proposals received by the Company or any of its subsidiaries or by any such
     officer,   director,   investment  banker,  financial  advisor,   attorney,
     accountant or other  representative  relating to any of such matters and if
     such inquiry or proposal is in writing,  the Company shall promptly deliver
     or cause to be  delivered  to Parent a copy of such  inquiry  or  proposal;
     provided,  however,  that nothing  contained in this  subsection  (g) shall
     prohibit  the  Board  of  Directors  of the  Company  from  (i)  furnishing
     information  to, or entering into  discussions  or  negotiations  with, any
     person  or entity  in  connection  with an  unsolicited  bona fide  written
     proposal, which proposal is at a materially higher value and not subject to
     a financing condition, by such person or entity to acquire the Company

                                       28
<PAGE>

     pursuant to a merger,  consolidation,  share exchange, business combination
     or other similar  transaction  or to acquire a  substantial  portion of the
     assets  of the  Company  or any of its  subsidiaries,  if,  and only to the
     extent that (A) the Board of Directors of the Company,  after  consultation
     with and based upon the advice of independent legal counsel,  determines in
     good faith that such action is  necessary  for such Board of  Directors  to
     comply with its fiduciary  duties to stockholders  under applicable Law and
     (B) prior to furnishing such  information to, or entering into  discussions
     or  negotiations  with, such person or entity the Company (x) provides five
     days prior  written  notice to Parent to the effect  that it is  furnishing
     information  to, or entering into  discussions or  negotiations  with, such
     person  or  entity  and (y)  enters  into  with  such  person  or  entity a
     confidentiality  arrangement in reasonably customary form on terms not more
     favorable  to such  person  or  entity  than  the  terms  contained  in the
     Bilateral Non-Disclosure Agreement,  dated March 29, 1999, and that certain
     letter, dated May 25, 1999, each between Parent and Company  (collectively,
     the  "Confidentiality   Arrangement");   (ii)  complying  with  Rule  14e-2
     promulgated under the Exchange Act with regard to a Competing  Transaction;
     or (iii) failing to make or  withdrawing  or modifying  its  recommendation
     referred  to in and based upon the  advice of  independent  legal  counsel,
     determines  in good faith that such action is  necessary  for such Board of
     Directors  to  comply  with its  fiduciary  duties  to  stockholders  under
     applicable  law. For purposes of this  Agreement,  "Competing  Transaction"
     shall mean any of the following (other than the  transactions  contemplated
     by this Agreement)  involving the Company or any of its  subsidiaries:  (i)
     any merger, consolidation,  share exchange, business combination or similar
     transaction;  (ii) any sale, lease, exchange, mortgage, pledge, transfer or
     other  disposition  of 20% or more of the  assets  of the  Company  and its
     subsidiaries, taken as a whole; (iii) any person having acquired beneficial
     ownership  of, or any group (as such term is used in  Section  13(d) of the
     Exchange Act and the rules and regulations  promulgated  thereunder) having
     been formed which  beneficially owns or has the right to acquire beneficial
     ownership of, 20% or more of the outstanding shares of capital stock of the
     Company; or (iv) any public  announcement of a proposal,  plan or intention
     to do  any of  the  foregoing  or any  agreement  to  engage  in any of the
     foregoing;

         (h) release any third party from its obligations, or grant any consent,
     under any existing standstill provision relating to a Competing Transaction
     or otherwise under any confidentiality or other agreement, or fail to fully
     enforce any such agreement;

         (i) adopt or propose to adopt any amendments to its charter or bylaws;

         (j) (A) change any of its methods of  accounting  in effect at February
     28, 1999, or (B) make or rescind any express or deemed election relating to
     Taxes,  settle  or  compromise  any  claim,   action,   suit,   litigation,
     proceeding,  arbitration,  investigation,  audit or controversy relating to
     Taxes,  or change any of its methods of reporting  income or deductions for
     federal income tax purposes from those  employed in the  preparation of the
     federal  income tax returns for the taxable year ending  February 28, 1999,
     except, in each case, as may be required by Law or GAAP;

                                       29
<PAGE>

         (k)  incur  any   obligation  for  borrowed  money  or  purchase  money
     indebtedness,  whether  or not  evidenced  by a note,  bond,  debenture  or
     similar  instrument,  except in the ordinary course of business  consistent
     with past practice and in no event in excess of $50,000 in the aggregate;

         (l) enter into any material arrangement, agreement or contract with any
     third party (other than customers in the ordinary course of business) which
     provides  for  an  exclusive  arrangement  with  that  third  party  or  is
     substantially  more  restrictive  on  the  Company  or  substantially  less
     advantageous  to the Company  than  arrangements,  agreements  or contracts
     existing on the date hereof;

         (m) agree in writing or otherwise to do any of the foregoing.

Section 6.3       Additional Covenants.

         (a) The  Company  and Parent  shall each use,  and shall  cause each of
     their respective  subsidiaries to use, all reasonable  efforts to (i) take,
     or cause to be taken, all appropriate  action, and do, or cause to be done,
     all things necessary, proper or advisable under applicable Law or otherwise
     to consummate  and make  effective the  transactions  contemplated  by this
     Agreement,  (ii)  obtain  from  any  Governmental  Entities  any  consents,
     licenses, permits, waivers, approvals, authorizations or orders required to
     be obtained  or made by Parent or the Company or any of their  subsidiaries
     in  connection  with the  authorization,  execution  and  delivery  of this
     Agreement and the  consummation of the  transactions  contemplated  hereby,
     including,  without  limitation,  the  Merger,  (iii)  make  all  necessary
     filings, and thereafter make any other required  submissions,  with respect
     to this  Agreement and the Merger  required under the HSR Act and any other
     applicable  Law;  provided that Parent and the Company shall cooperate with
     each other in  connection  with the making of all such  filings,  including
     providing  copies  of all such  documents  to the  nonfiling  party and its
     advisors  prior to filings and, if requested,  shall accept all  reasonable
     additions,  deletions or changes suggested in connection therewith.  Parent
     and the Company shall request early  termination of the waiting period with
     respect to the Merger under the HSR Act.

         (b) Parent and the  Company  agree to  cooperate  with  respect to, and
     shall cause each of their respective subsidiaries to cooperate with respect
     to, and agree to use all  reasonable  efforts  vigorously  to  contest  and
     resist,  any  action,  including  legislative,  administrative  or judicial
     action,  and to have vacated,  lifted,  reversed or overturned  any decree,
     judgment,  injunction or other order  (whether  temporary,  preliminary  or
     permanent)  (an "Order") of any  Governmental  Entity that is in effect and
     that restricts, prevents or prohibits the consummation of the Merger or any
     other  transactions  contemplated  by this  Agreement,  including,  without
     limitation,  by vigorously pursuing all available avenues of administrative
     and judicial appeal and all available legislative action.

         (c) (i) Each of the Company and Parent shall give (or shall cause their
     respective subsidiaries to give) any notices to third parties, and use, and
     cause their respective subsidiaries to use all reasonable efforts to obtain
     any third party consents (A)  necessary,  proper or advisable to consummate
     the transactions contemplated by this

                                       30
<PAGE>

     Agreement, (B) otherwise required under any contracts,  licenses, leases or
     other  agreements in connection with the  consummation of the  transactions
     contemplated  hereby or (C) required to prevent a Company  Material Adverse
     Effect from  occurring  prior to the  Effective  Time or a Parent  Material
     Adverse Effect from occurring after the Effective Time.


             (ii) In the event  that any party  shall  fail to obtain  any third
         party consent  described in subsection  (c)(i) above,  such party shall
         use all reasonable efforts,  and shall take any such actions reasonably
         requested by the other  parties,  to limit the adverse  effect upon the
         Company and Parent, their respective subsidiaries, and their respective
         businesses  resulting,  or which could reasonably be expected to result
         after the Effective Time, from the failure to obtain such consent.

         (d) In order to consummate the Merger, the Company's Board of Directors
     shall  duly  call and hold a  meeting  of its  stockholders  on or prior to
     September 7, 1999, for purposes of authorizing the Merger and,  relevant to
     such meeting,  recommend that the stockholders  vote to approve the Merger.
     In connection with such meeting,  the Company shall prepare and send notice
     of such meeting in accordance with the requirements of the VSCA on or prior
     to August 10, 1999. The Company shall cause the ESOP trustees to provide to
     the ESOP participants  notice of the meeting of the Company's  stockholders
     and a means of providing confidential directions to the ESOP trustees as to
     the manner in which the shares of Company Common Stock held by the ESOP are
     to be voted at such meeting in accordance with the requirements of the ESOP
     plan  document,  ERISA  and  the  Code.  All  information  provided  to the
     Company's  stockholders  and the ESOP  participants  shall not  contain any
     untrue  statement  of a material  fact or omit to state any  material  fact
     necessary to make such information not misleading.

         (e) Parent  shall  take  actions  necessary  to cause the Merger Sub to
     approve the Merger.

         (f) Major  Stockholder  shall,  in his capacity as a stockholder of the
     Company, vote to approve the Merger and the other transactions contemplated
     hereby.

         (g) All  agreements,  whether  written  or oral,  direct  or  indirect,
     between  the  Company  or its  subsidiaries  on the one hand and the  Major
     Stockholder or his affiliates on the other hand shall be terminated without
     liability to the Company or such  subsidiary,  at or prior to the Effective
     Time. At or prior to the Closing,  Gerald R. McNichols shall have purchased
     the  Company's  interest  in the split  dollar life  insurance  arrangement
     insuring his life in exchange  for the value of such  interest as reflected
     in the accounts of the Company.

         (h) At or prior to the Closing,  the Major  Stockholder shall repay all
     indebtedness owing to the Company or any of its subsidiaries, including any
     outstanding  principal and interest,  for borrowed money, advances or other
     amounts paid to such Major Stockholder or their affiliates.

                                       31
<PAGE>

         (i) Prior to the  Effective  Time,  the  Committee  under the Company's
     Omnibus Stock Plan shall take all actions required under such Omnibus Stock
     Plan to provide for the  cancellation  and surrender or the  conversion and
     continuance,  as the case may be, of all outstanding  Company Stock Options
     in accordance with Article II of this Agreement.

         (j) The Major  Stockholder  and the Company shall use their  respective
     best efforts to cause all  indebtedness  owing to the Company or any of its
     subsidiaries by any stockholder,  director or officer of the Company or any
     Subsidiary  or by any of their  respective  affiliates,  to be repaid at or
     prior  to the  Closing  except  as  otherwise  provided  in the  Employment
     Agreements set forth in Exhibit H.

         (k) All of the  agreements  listed or  described  on  Exhibit J to this
     Agreement  shall be  terminated  without  liability  to the Company or such
     subsidiary, at or prior to the Effective Time.

Section 6.4       Access and Information.

         (a) The Company shall,  and shall cause its  subsidiaries to (i) afford
     to Parent and its officers, directors, employees, accountants, consultants,
     legal counsel, agents and other representatives (collectively,  the "Parent
     Representatives")  reasonable  access at reasonable  times, upon reasonable
     prior notice, to the officers,  employees, agents, properties,  offices and
     other  facilities of the Company and its  subsidiaries and to the books and
     records   thereof;   (ii)  furnish   promptly  to  Parent  and  the  Parent
     Representatives  such  information  concerning  the  business,  properties,
     contracts,  records  and  personnel  of the  Company  and its  subsidiaries
     (including,  without  limitation,  financial,  operating and other data and
     information) as may be reasonably requested,  from time to time, by Parent;
     and (iii)  afford to Parent  and the Parent  Representatives  access to the
     Company's  customers  (accompanied,  at the  Company's  discretion,  by the
     Company).

         (b) Parent shall, and shall cause its subsidiaries to (i) afford to the
     Company and its officers, directors, employees,  accountants,  consultants,
     legal  counsel,  agents  and  other  representatives  (collectively,  the "
     Company  Representatives")  reasonable  access at  reasonable  times,  upon
     reasonable prior notice, to the officers, employees,  accountants,  agents,
     properties, offices and other facilities of Parent and its subsidiaries and
     to the books and records  thereof and (ii) furnish  promptly to the Company
     and the Company  Representatives such information  concerning the business,
     properties, contracts, records and personnel of Parent and its subsidiaries
     (including,  without  limitation,  financial,  operating and other data and
     information)  as may be  reasonably  requested,  from time to time,  by the
     Company.

         (c)  Notwithstanding  the foregoing  provisions of this Section 6.4, no
     party shall be required to grant access or furnish information to the other
     party to the extent that such access or the furnishing of such  information
     is  prohibited  by  Law.  No  investigation  by  the  parties  hereto  made
     heretofore or hereafter shall affect the  representations and warranties of
     the parties  which are herein  contained and each such  representation  and
     warranty shall survive such investigation.

                                       32
<PAGE>

         (d) The information  received  pursuant to Section 6.4(a) and (b) shall
     be  deemed  to  be   "proprietary   information"   for   purposes   of  the
     Confidentiality Arrangement.

Section 6.5 Public Announcements. The Company and Parent shall consult with each
other before issuing any press release or otherwise making any public statements
with  respect to the  Merger and shall not issue any such press  release or make
any such public statement prior to such consultation  unless required by Law or,
in the case of Parent,  by rules and regulations of the New York Stock Exchange.
The press release  announcing the execution and delivery of this Agreement shall
be a joint press release of Parent and the Company.


                                   ARTICLE VII

                               CLOSING CONDITIONS

Section 7.1 Conditions to Obligations  of Each Party Under This  Agreement.  The
respective  obligations  of each  party  to  effect  the  Merger  and the  other
transactions  contemplated  hereby  shall be subject to the  satisfaction  at or
prior to the Closing Date of the following  conditions,  any or all of which may
be waived in writing by the parties  hereto,  in whole or in part, to the extent
permitted by applicable law:

         (a) No Order.  No  Governmental  Entity or  federal  or state  court of
     competent jurisdiction shall have enacted, issued, promulgated, enforced or
     entered any statute, rule, regulation,  executive order, decree, injunction
     or other Order (whether  temporary,  preliminary or permanent)  which is in
     effect and which has the effect of making the Merger  illegal or  otherwise
     prohibiting  consummation of the Merger;  and no such  Governmental  Entity
     shall have initiated or threatened to initiate any  proceeding  seeking any
     of the foregoing.

         (b) HSR Act.  The  applicable  waiting  period  under  the HSR Act with
     respect  to the  transactions  contemplated  by this  Agreement  shall have
     expired or been terminated.

         (c) Fairness  Opinion.  The ESOP trustee shall have received a fairness
     opinion  for the  benefit  of the  ESOP  participants  from an  independent
     financial  advisor  which  shall  not have  been  rescinded,  withdrawn  or
     revoked.

         (d)  Stockholder  Approval.  The Merger shall have been approved by the
     requisite vote of the stockholders of the Company.

Section 7.2 Additional  Conditions to Obligations of the Parent  Companies.  The
obligations  of the  Parent  Companies  to  effect  the  Merger  and  the  other
transactions  contemplated  hereby are also  subject to the  satisfaction  at or
prior to the Closing Date of the following  conditions,  any or all of which may
be waived in writing by Parent, in whole or in part:

         (a)  Representations  and Warranties.  Each of the  representations and
     warranties  of the  Company  and the Major  Stockholder  contained  in this
     Agreement  shall be true and correct as of the Closing  Date as though made
     on and as of the Closing  Date  (except to the extent such  representations
     and warranties specifically relate to an earlier

                                       33
<PAGE>

     date, in which case such  representations  and warranties shall be true and
     correct as of such earlier date).  The Parent Companies shall have received
     a certificate of the President and Chief Executive  Officer of the Company,
     and a certificate of the Major Stockholder, each dated the Closing Date, to
     such effect.

         (b)  Agreements  and  Covenants.  The Company  shall have  performed or
     complied with all agreements and covenants required by this Agreement to be
     performed  or  complied  with by it on or prior to the  Closing  Date.  The
     Parent  Companies  shall have received a  certificate  of the President and
     Chief  Executive  Officer of the Company,  dated the Closing  Date, to that
     effect.

         (c) Material Adverse Change.  Since February 28, 1999, there shall have
     been no change,  occurrence  or  circumstance  in the  business,  financial
     condition  or  results  of   operations  of  the  Company  or  any  of  its
     subsidiaries  having or reasonably  likely to have,  individually or in the
     aggregate, a material adverse effect on the financial condition, results of
     operations,  business or  operations  of the Company and its  subsidiaries,
     taken as a whole. The Parent Companies shall have received a certificate of
     the President and Chief Executive Officer of the Company, dated the Closing
     Date, to such effect.

         (d)  Absence of  Regulatory  Conditions.  There shall not be any action
     taken, or any statute, rule, regulation or order enacted, entered, enforced
     or  deemed  applicable  to  the  Merger,  by  any  Governmental  Entity  in
     connection  with  the  grant of a  regulatory  approval  necessary,  in the
     reasonable business judgment of Parent, to the continuing  operation of the
     business of the Company,  which imposes any condition or  restriction  upon
     the Parent Companies or the business or operations of the Company which, in
     the reasonable business judgment of Parent, would be materially  burdensome
     in the context of the transactions contemplated by this Agreement.

         (e) Intentionally Omitted.

         (f) Corporate  Proceedings.  All corporate and other  proceedings to be
     taken and all consents to be obtained by the Company in connection with the
     transactions  contemplated  by this  Agreement and all  documents  incident
     thereto  shall be reasonably  satisfactory  in form and substance to Parent
     and its counsel,  each of whom shall have  received  all such  originals or
     certified  or other  copies  of such  documents  as either  may  reasonably
     request.

         (g) Opinion of Company Counsel. Counsel to the Company shall have given
     legal opinions  substantially to the effect as set out in Exhibit E to this
     Agreement.

         (h) Options. The Committee under the Company's Omnibus Stock Plan shall
     have taken all action required under such Omnibus Stock Plan to provide for
     the cancellation and surrender, or conversion and continuance,  as the case
     may be, of all outstanding Company Stock Options in accordance with Article
     II of this Agreement.

         (i) Employment  Agreements.  The Parent  Companies and/or the Surviving
     Corporation shall have entered into employment agreements  substantially in
     the form of Exhibit H with those key employees of the Company designated by
     Parent  in  writing  on or  prior  to the  date  hereof,  which  employment
     agreements shall be in full force and effect.

                                       34
<PAGE>

         (j)  Noncompetition  Agreement.  Gerald R. McNichols shall have entered
     into a noncompetition  agreement  substantially in the form attached hereto
     as Exhibit C to this Agreement.

         (k)  Indemnification  Agreement.  Each of the  Major  Stockholder,  the
     Parent  Companies  and the Company  shall have  executed and  delivered the
     Indemnification  Agreement  substantially  in the form of Exhibit I to this
     Agreement.

         (l) Dissenter's  Rights.  Holders of more than five percent (5%) of the
     Company  Common  Stock  shall not have  given  written  notice of intent to
     demand payment for Company Common Stock under Article 15 of the VSCA.

         (m) Releases of Liens. The Company shall have obtained  releases of all
     liens  and  encumbrances  of record on the  assets of the  Company  and its
     subsidiaries  other than the liens and encumbrances  expressly  approved in
     writing by Parent.

         (n)   Subsidiaries.   The  Company  shall  have  acquired  all  of  the
     outstanding   equity   securities  of  its   subsidiaries  and  shall  own,
     beneficially and of record, all of the equity interests in its subsidiaries
     free  and  clear  of  all  security  interests,   liens,  claims,  pledges,
     agreements,  limitations on voting rights, changes or other encumbrances of
     any nature whatsoever.

Section 7.3 Additional Conditions to Obligations of the Company. The obligations
of the  Company to effect the  Merger  and the other  transactions  contemplated
hereby are also subject to the  satisfaction  at or prior to the Closing Date of
the  following  conditions,  any or all of which may be waived in writing by the
Company, in whole or in part:

         (a)  Representations  and Warranties.  Each of the  representations and
     warranties of the Parent  Companies  contained in this  Agreement  shall be
     true and  correct as of the  Closing  Date as though  made on and as of the
     Closing  Date  (except to the extent such  representations  and  warranties
     specifically relate to an earlier date, in which case such  representations
     and  warranties  shall be true and correct as of such  earlier  date).  The
     Company  shall have  received a  certificate  of the President or the Chief
     Financial Officer of the Parent, dated the Closing Date, to such effect.

         (b) Agreements and Covenants. The Parent Companies shall have performed
     or complied with all agreements and covenants required by this Agreement to
     be performed or complied with by them on or prior to the Closing Date.  The
     Company  shall have  received a  certificate  of the President or the Chief
     Financial Officer of the Parent, dated the Closing Date, to that effect.

         (c) Material  Adverse  Change.  Since March 31, 1999,  there shall have
     been no change,  occurrence  or  circumstance  in the  business,  financial
     condition  or results of  operations  of Parent or any of its  subsidiaries
     having or reasonably  likely to have,  individually or in the aggregate,  a
     material adverse effect on the financial condition,  results of operations,
     business,  or operations of Parent and its subsidiaries,  taken as a whole.
     The Company shall have received a certificate of the President or the Chief
     Financial Officer of each of the Parent Companies,  dated the Closing Date,
     to such effect.

                                       35
<PAGE>

         (d)  Absence of  Regulatory  Conditions.  There shall not be any action
     taken, or any statute, rule, regulation or order enacted, entered, enforced
     or  deemed  applicable  to  the  Merger,  by  any  Governmental  Entity  in
     connection  with  the  grant of a  regulatory  approval  necessary,  in the
     reasonable business judgment of the Company, to the continuing operation of
     the current or future  business of Parent,  which  imposes any condition or
     restriction  upon Parent or the business or operations of Parent which,  in
     the  reasonable  business  judgment  of the  Company,  would be  materially
     burdensome  in  the  context  of  the  transactions  contemplated  by  this
     Agreement.

         (e) Corporate  Proceedings.  All corporate and other  proceedings to be
     taken and all consents to be obtained by the Parent Companies in connection
     with the  transactions  contemplated  by this  Agreement  and all documents
     incident thereto shall be reasonably  satisfactory in form and substance to
     the  Company and its  counsel,  each of whom shall have  received  all such
     originals  or  certified  or other  copies of such  documents as either may
     reasonably request.

         (f) Opinion of Parent  Counsel.  Counsel to the Parent  Companies shall
     have given a legal opinion substantially to the effect set out in Exhibit G
     to this Agreement.


                                  ARTICLE VIII

                        TERMINATION, AMENDMENT AND WAIVER

Section 8.1  Termination.  This Agreement may be terminated at any time prior to
the Effective  Time,  whether before or after approval of this Agreement and the
Merger by the stockholders of the Company:

         (a) by mutual consent of Parent and the Company;

         (b) by Parent, upon a breach of any representation,  warranty, covenant
     or agreement on the part of the Company set forth in this Agreement,  or if
     any  representation or warranty of the Company shall have become untrue, in
     either case such that the conditions set forth in Section 7.2(a) or Section
     7.2(b) of this  Agreement,  as the case may be, would be incapable of being
     satisfied by  September  16,  1999;  provided,  that in any case, a willful
     breach  shall be deemed to cause such  conditions  to be incapable of being
     satisfied for purposes of this Section 8.1(b);

         (c) by the  Company,  upon a breach  of any  representation,  warranty,
     covenant or agreement on the part of the Parent Companies set forth in this
     Agreement,  or if any  representation  or warranty of the Parent  Companies
     shall have become untrue, in either case such that the conditions set forth
     in Section 7.3(a) or Section 7.3(b) of this Agreement,  as the case may be,
     would be incapable of being satisfied by September 16, 1999; provided, that
     in any case, a willful  breach shall be deemed to cause such  conditions to
     be incapable of being satisfied for purposes of this Section 8.1(c);

         (d) by either Parent or the Company,  if there shall be any Order which
     is final and  nonappealable  preventing  the  consummation  of the  Merger,
     except if the party

                                       36
<PAGE>

     relying on such Order to terminate this Agreement has not complied with its
     obligations under Section 6.3(b) of this Agreement;

         (e) by either Parent or the Company,  if the Merger shall not have been
     consummated before September 16, 1999;

         (f) by Parent, if (i) the Board of Directors of the Company  withdraws,
     modifies or changes its recommendation of this Agreement or the Merger in a
     manner adverse to Parent or shall have resolved to do any of the foregoing;
     (ii) the Board of Directors of the Company  shall have  recommended  to the
     stockholders  of the  Company  any  Competing  Transaction  or  shall  have
     resolved to do so; or (iii) any person  (other than Parent or an  affiliate
     thereof) shall have acquired  beneficial  ownership or the right to acquire
     beneficial  ownership  of, or any  "group" (as such term is used in Section
     13(d)  of the  Exchange  Act  and the  rules  and  regulations  promulgated
     thereunder) shall have been formed which beneficially owns or has the right
     to acquire  beneficial  ownership  of, 20% or more of the then  outstanding
     shares of capital stock of the Company; or

         (g) by the Company, if the Board of Directors of the Company recommends
     to  the  Company's  stockholders  approval  or  acceptance  of a  Competing
     Transaction,  in each case only if the Board of  Directors  of the Company,
     after  consultation  with and based  upon the advice of  independent  legal
     counsel,  determines  in good faith that such action is necessary  for such
     Board of  Directors  to comply with its  fiduciary  duties to  stockholders
     under applicable law.

The right of any party  hereto to  terminate  this  Agreement  pursuant  to this
Section 8.1 shall remain  operative  and in full force and effect  regardless of
any  investigation  made  by or on  behalf  of  any  party  hereto,  any  person
controlling  any  such  party or any of their  respective  officers,  directors,
representatives  or  agents,  whether  prior to or after the  execution  of this
Agreement.

Section 8.2 Effect of Termination.  Except as provided in Section 8.5 or Section
9.1 of this  Agreement,  in the  event  of the  termination  of  this  Agreement
pursuant to Section 8.1, this Agreement shall forthwith become void, there shall
be no  liability on the part of the Parent  Companies,  the Company or the Major
Stockholder  to the others,  and all rights and  obligations of any party hereto
shall cease, except that nothing herein shall relieve any party of any liability
for (i) any breach of such  party's  covenants or  agreements  contained in this
Agreement,  or (ii)  any  willful  breach  of such  party's  representations  or
warranties contained in this Agreement.

Section 8.3  Amendment.  This  Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective  Time;  provided,  however,  that,  after approval of the
Merger by the stockholders of the Company, no amendment,  which under applicable
Law may not be made without the approval of the stockholders of the Company, may
be made without such  approval.  This  Agreement may not be amended except by an
instrument in writing signed by the parties hereto.

Section 8.4 Waiver.  At any time prior to the Effective  Time,  any party hereto
may (a) extend the time for the  performance of any of the  obligations or other
acts  of  the  other  party   hereto,   (b)  waive  any   inaccuracies   in  the
representations  and  warranties of the other party  contained  herein or in any
document delivered pursuant hereto and (c) waive compliance by the

                                       37
<PAGE>

other party with any of the agreements or conditions  contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party or parties to be bound thereby. For purposes of this Section
8.4, the Parent Companies as a group shall be deemed to be one party.

Section 8.5       Fees, Expenses and Other Payments.

         (a)  Except as  otherwise  provided  in this  Section  8.5,  the Parent
     Companies, the Company and the Securityholders (including all of holders of
     the  Company  Common  Stock  and  all  holders  of  Company  Stock  Options
     outstanding immediately prior to the Effective Time, the "Securityholders")
     will each bear their own respective  costs and expenses in connection  with
     the  proposed  Merger  and  related  transactions.  The  Company  and Major
     Stockholder shall cause the Securityholders to bear any costs,  expenses or
     fees payable to any financial  advisors,  attorneys,  accountants  or other
     representatives  retained by the Securityholders or the Company with regard
     to the Merger and  related  transactions  contemplated  herein in excess of
     $450,000 in the aggregate.  In no event shall the Parent  Companies make or
     assume any payments in connection with any fairness opinion obtained by, or
     for the  benefit  of, the  Company,  the ESOP or any  Securityholders.  The
     Parent  Companies  shall bear any costs,  expenses  or fees  payable to any
     financial  advisors,   attorneys,   accountants  or  other  representatives
     retained  by the Parent  Companies  with  regard to the Merger and  related
     transactions  contemplated herein. The Parent Companies will pay the filing
     fees and fees of legal counsel applicable to all filings required under the
     HSR  Act  in  connection  with  the  Merger  and  the  other   transactions
     contemplated by this Agreement.

         (b) The Company  agrees that if this  Agreement is terminated  pursuant
     to:

             (i)  Section  8.1(b)  and (x) such  termination  is the result of a
         willful breach of any representation,  warranty,  covenant or agreement
         of the  Company  contained  herein and (y) the  Company  shall have had
         contacts  or  entered  into   negotiations   relating  to  a  Competing
         Transaction,  in any such case at any time within the period commencing
         on the date of this  Agreement  through the date of termination of this
         Agreement; or

             (ii) Section  8.1(e)  because this  Agreement  and the Merger shall
         fail to receive the  requisite  vote for  approval  and adoption by the
         stockholders of the Company at the Company  Stockholders Meeting and at
         the time of such meeting there shall exist a Competing Transaction; or

             (iii) Sections 8.1(f)(ii); or

             (iv) Section 8.1(g);

     then the Company shall pay to Parent an amount equal to  $1,000,000,  which
     amount is inclusive of all of Parent's expenses.

         (c) Any payment  required to be made pursuant to Section 8.5(b) of this
     Agreement shall be made as promptly as practicable but not later than three
     business days

                                       38
<PAGE>

     after termination of this Agreement,  and shall be made by wire transfer of
     immediately available funds to an account designated by Parent.


                                   ARTICLE IX

                               GENERAL PROVISIONS

Section 9.1       Effectiveness of Representations, Warranties and Agreements.

         (a)  Except  as set forth in  Section  9.1(b)  of this  Agreement,  the
     representations,  warranties  and  agreements  of each party  hereto  shall
     remain   operative  and  in  full  force  and  effect   regardless  of  any
     investigation  made by or on behalf of any other party  hereto,  any person
     controlling   any  such  party  or  any  of  their   officers,   directors,
     representatives or agents,  whether prior to or after the execution of this
     Agreement.

         (b) The  representations,  warranties  and agreements in this Agreement
     shall  terminate  at the  Effective  Time or upon the  termination  of this
     Agreement  pursuant  to Article  VIII,  except for the  obligations  of the
     Surviving   Corporation   and  Parent   pursuant  to  Article  II  and  the
     representations and warranties of the Major Stockholder pursuant to Article
     IV,  which  shall  survive  the Merger and the  Closing,  and except to the
     extent  continued for purposes of the  Indemnification  Agreement.  Nothing
     herein  shall be  construed  to cause the  Confidentiality  Arrangement  to
     terminate upon the termination of this Agreement pursuant to Article VIII.

Section 9.2 Notices. All notices and other communications given or made pursuant
hereto  shall be in  writing  and shall be deemed to have been duly  given  upon
receipt,  if  delivered  personally,  mailed by  registered  or  certified  mail
(postage  prepaid,  return  receipt  requested)  to the parties at the following
addresses  (or at such other  address for a party as shall be  specified by like
changes of address) or sent by electronic  transmission to the telecopier number
specified below:

         (a) If to any of the Parent Companies, to:

                           GRC International, Inc.
                           1900 Gallows Road
                           Vienna, Virginia  22182
                           Attn:  Thomas E. McCabe, Senior Vice President,
                           Director of Corporate Development and General Counsel
                           Facsimile No.:  (703) 448-6890

         with a copy to:

                           Dickstein Shapiro Morin & Oshinsky LLP
                           2101 L Street, N.W.
                           Washington, DC  20037
                           Attn:  Kenneth R. Morrow, Esq.
                           Facsimile No.:  (202) 887-0689

                                       39
<PAGE>

         (b) If to the Company, to:

                           Management Consulting & Research, Inc.
                           2000 Corporate Ridge #400
                           McLean, Virginia  22102
                           Attn:  Gerald R. McNichols, President and Chief
                           Executive Officer
                           Facsimile No.:  (703) 506-8601

         with a copy to:

                           Jaeger & Teras, L.L.P.
                           1090 Vermont Avenue, N.W.
                           Suite 350
                           Washington, DC  20005
                           Attn:  Philip W. Jaeger, Esq.
                           Facsimile No.:  (202) 842-0748

         (c) If to the Major Stockholder, to:

                           Gerald R. McNichols
                           23349 Parsons Road
                           Middleburg, VA  20117
                           Facsimile No.:  (540) 687-4164

         with a copy to:

                           Jaeger & Teras, L.L.P.
                           1090 Vermont Avenue, N.W.
                           Suite 350
                           Washington, DC  20005
                           Attn:  Philip W. Jaeger, Esq.
                           Facsimile No.:  (202) 842-0748

Section 9.3 Certain Definitions. For the purposes of this Agreement, the term:

         (a) "affiliate" means a person that directly or indirectly, through one
     or more  intermediaries,  controls,  is  controlled  by, or is under common
     control with, the first mentioned person;

         (b)  "Agreement" has the meaning set out in the first paragraph of this
     Agreement;

         (c) a  person  shall  be  deemed  a  "beneficial  owner"  of or to have
     "beneficial  ownership" of the Company Common Stock or Parent Common Stock,
     as the case may be,  in  accordance  with  the  interpretation  of the term
     "beneficial  ownership" as defined in Rule 13d-3 under the Exchange Act, as
     in effect on the date hereof;  provided that a person shall be deemed to be
     the beneficial  owner of, and to have beneficial  ownership of, the Company
     Common Stock or Parent Common  Stock,  as the case may be, that such person
     or any  affiliate  of such  person has the right to acquire  (whether  such
     right is

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<PAGE>

     exercisable  immediately or only after the passage of time) pursuant to any
     agreement,  arrangement or understanding or upon the exercise of conversion
     rights, exchange rights, warrants or options, or otherwise;

         (d) "business day" means any day other than a day on which banks in the
     Commonwealth of Virginia are authorized or obligated to be closed;

         (e) "CERCLA" has the meaning set out in Section 3.13;

         (f) "Closing" has the meaning set out in Section 1.2;

         (g) "Closing Date" has the meaning set out in Section 1.2;

         (h) "Code" means the Internal Revenue Code of 1986, as amended;

         (i)  "Company"  has the meaning set out in the first  paragraph of this
     Agreement;

         (j) "Company Common Stock" has the meaning set out in the first recital
     to the Agreement;

         (k) "Company  Disclosure  Schedule"  has the meaning set out in Section
     3.1;

         (l)  "Company  Material  Adverse  Effect"  has the  meaning  set out in
     Section 3.1;

         (m) "Company Permits" has the meaning set out in Section 3.6;

         (n)  "Company  Representatives"  has the  meaning  set  out in  Section
     6.4(b);

         (o)  "Company  Stock  Option(s)"  has the  meaning  set out in  Section
     3.3(a);

         (p) "Competing Transaction" has the meaning set out in Section 6.2(g);

         (q) "Confidentiality  Arrangement" has the meaning set forth in Section
     6.2(g);

         (r) "control"  (including the terms "controlled,"  "controlled by," and
     "under common control with") means the possession,  directly or indirectly,
     or as trustee or executor, of the power to direct or cause the direction of
     the  management or policies of a person,  whether  through the ownership of
     stock or as trustee or executor, by contract
         or credit arrangement or otherwise;

         (s) "Converted  Shares" means shares of Company Common Stock issued and
     outstanding  immediately  prior to the Effective Time as converted into the
     right to receive  Merger  Consideration  pursuant to Section  2.1(a) at the
     Effective Time and excluding any shares of Company  Common Stock  described
     in Section 2.1(b);

         (t) "Dissenting Stock" has the meaning set out in Section 2.3;

         (u) "Effective Time" has the meaning set out in Section 1.2;

         (v) "Employee Plan(s)" has the meaning set out in Section 3.10(a);

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<PAGE>

         (w) "Environmental Law(s)" has the meaning set out in Section 3.13;

         (x) "ERISA" has the meaning set out in Section 3.10(a);

         (y)  "ERISA   Affiliate"  means  the  Company  and  each   corporation,
     partnership, or other trade or business, whether or not incorporated, which
     is or has been treated as a single employer or controlled group member with
     the Company pursuant to Code Section 414 or ERISA Section 4001;

         (z) "ESOP" means the Management  Consulting & Research,  Inc.  Employee
     Stock Ownership Plan dated March 1, 1995;

         (aa)  "Exchange  Act" means the  Securities  Exchange  Act of 1993,  as
     amended;

         (bb)  "Federal  Government  Contract" is to be given its  customary use
     within the  industry.  It is further  defined  to include  any  contractual
     arrangement (implied or express) with any agency,  department, or branch of
     the United States Government that is subject to the laws and regulations of
     the United  States of  America,  regardless  of whether  the  Company is in
     privity  of  contract  with the  United  States or is  operating  through a
     subcontract, partnership, teaming arrangement, affiliate, or other indirect
     arrangement;

         (cc) "Financial Statements" has the meaning set out in Section 3.7(a);

         (dd)  "GAAP"  means  United  States   generally   accepted   accounting
     principles;

         (ee)  "Government  Contract(s)"  has the  meaning  set  out in  Section
     3.22(a);

         (ff) "Governmental Entities" has the meaning set out in Section 3.5(b);

         (gg) "HSR Act" has the meaning set out in Section 3.5(b);

         (hh) "Indemnification Agreement" means the indemnification agreement to
     be  entered  into  on the  Closing  Date  by and  among  Parent,  Surviving
     Corporation and the Securityholders in substantially the form of Exhibit I;

         (ii)  "Information  Technology"  has the  meaning  set  out in  Section
     3.25(c);

         (jj) "Intellectual Property" has the meaning set out in Section 3.20;

         (kk)  "knowledge"  or  "known"  means  with  respect  to any  matter in
     question, if an executive officer of the Company or Parent, as the case may
     be, has actual knowledge of such matter after due investigation thereof;

         (ll) "Latest Balance Sheet" has the meaning set out in Section 3.7(a);

         (mm)  "Latest  Balance  Sheet  Date" has the meaning set out in Section
     3.7(a);

         (nn) "Law(s)" has the meaning set out in Section 3.5(a);

         (oo) "Liabilities" has the meaning set out in Section 3.7(b);

         (pp) "Material Contract" has the meaning set out in Section 3.18(a);

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<PAGE>

         (qq)  "Merger  Consideration"  has the  meaning  set  out in the  first
     recital to this Agreement;

         (rr) "Merger Sub" has the meaning as set out in the first  paragraph of
     this Agreement;

         (ss) "OPA" has the meaning set out in Section 3.13;

         (tt)  "Option  Cancellation  Agreement"  means an agreement in form and
     substance satisfactory to the Company and Parent and executed by the holder
     of a Company  Stock Option,  pursuant to which  agreement the Company Stock
     Option will be cancelled and surrendered in exchange for a right to receive
     cash consideration as provided in Section 2.1(a)(iii);

         (uu) "Order" has the meaning set out in Section 6.3(b);

         (vv)  "Parent"  has the meaning set out in the first  paragraph of this
     Agreement;

         (ww) "Parent Common Stock" means the Common Stock,  par value $0.10 per
     share, of Parent;

         (xx) "Parent  Companies" has the meaning set out in the first paragraph
     of this Agreement;

         (yy)  "Parent  Material  Adverse  Effect"  has the  meaning  set out in
     Section 5.1;

         (zz)  "Parent  Representatives"  has the  meaning  set  out in  Section
     6.4(a);

         (aaa) "Per Share  Amount"  means an amount in dollars  equal to (i) the
     sum of (A) $27,100,000  and (B) the aggregate  exercise price of all of the
     Company Stock Options  outstanding  and  unexercised at the Effective Time,
     the  exercise  price of which is  equal to or  greater  than the Per  Share
     Amount,  divided  by (ii) the sum of (X) the  total  number  of  shares  of
     Company  Common Stock issued and  outstanding at the Effective Time and (Y)
     the total number of shares of Company  Common  Stock  covered by all of the
     Company  Stock  Options  which  are  outstanding  immediately  prior to the
     Effective Time;

         (bbb)   "person"  means  an   individual,   corporation,   partnership,
     association, trust, unincorporated organization,  other entity or group (as
     used in Section l3(d) of the Exchange Act);

         (ccc) "RCRA" has the meaning set out in Section 3.13;

         (ddd) "SEC Filings" has the meaning set out in Section 5.6;

         (eee) "Securities Act" means the Securities Act of 1933, as amended;

         (fff) "Securityholder(s)" has the meaning set out in Section 8.5(a);

         (ggg)  "subsidiary"  or  "subsidiaries"  of the  Company,  Parent,  the
     Surviving   Corporation  or  any  other  person,   means  any  corporation,
     partnership, joint venture or

                                       43
<PAGE>

     other legal entity of which the Company,  Parent, the Surviving Corporation
     or any such other  person,  as the case may be (either  alone or through or
     together with any other subsidiary),  owns, directly or indirectly,  50% or
     more of the  stock or other  equity  interests  the  holders  of which  are
     generally  entitled to vote for the  election of the board of  directors or
     other governing body of such corporation or other legal entity;

         (hhh) "Surviving Corporation" has the meaning set out in Section 1.1;

         (iii) "Tax" or "Taxes" means any and all taxes, charges,  fees, levies,
     assessments,  duties or other amounts payable to any federal,  state, local
     or foreign taxing authority or agency, including,  without limitation,  (x)
     income, franchise,  profits, gross receipts, minimum,  alternative minimum,
     estimated,  ad valorem,  value added, sales, use, service, real or personal
     property,  capital  stock,  license,  payroll,   withholding,   disability,
     employment,    social   security,   workers   compensation,    unemployment
     compensation, utility, severance, excise, stamp, windfall profits, transfer
     and gains taxes, (y) customs,  duties,  imposts,  charges,  levies or other
     similar assessments of any kind, and (z) interest,  penalties and additions
     to tax imposed with respect thereto;

         (jjj) "Tax Return"  means any return,  declaration,  report,  claim for
     refund, or information return or statement relating to Taxes, including any
     schedule or attachment thereto, and including any amendment thereof;

         (kkk)  "VSCA"  has the  meaning  set out in the first  recital  to this
     Agreement; and

         (lll)  "Year  2000  Compliant"  and  "Year  2000  Compliance"  have the
     meanings set out in Section 3.25(b).

Section 9.4 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or  interpretation  of
this  Agreement  Section  references  herein are,  unless the context  otherwise
requires, references to sections of this Agreement.

Section 9.5  Severability.  If any term or other  provision of this Agreement is
invalid,  illegal or  incapable  of being  enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the  economic or legal  substance  of
the transactions  contemplated  hereby is not affected in any manner  materially
adverse to any party. Upon such  determination  that any term or other provision
is invalid,  illegal or incapable of being  enforced,  the parties  hereto shall
negotiate  in good faith to modify this  Agreement  so as to effect the original
intent of the parties as closely as possible in an acceptable  manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.

Section 9.6 Entire Agreement. This Agreement (together with the Exhibits and the
Company Disclosure Schedule) and the Confidentiality  Arrangement constitute the
entire  agreement  of the  parties,  and  supersede  all  prior  agreements  and
undertakings,  both written and oral,  among the parties or between any of them,
with  respect to the subject  matter  hereof.  The Company  agrees that  nothing
contained in this  Agreement or the  transactions  contemplated  hereby shall be
deemed to violate the  Confidentiality  Arrangement and that such agreements and
proxies have been entered into or granted with the prior written  consent of the
Company.

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<PAGE>

Section 9.7 Assignment. This Agreement shall not be assigned by operation of law
or  otherwise,  except  that  Merger Sub may assign its  obligations  to another
affiliate.

Section 9.8 Parties in Interest.  This Agreement shall be binding upon and inure
solely to the  benefit  of each party  hereto,  and  nothing in this  Agreement,
express or implied,  is intended  to or shall  confer upon any other  person any
right,  benefit  or remedy of any nature  whatsoever  under or by reason of this
Agreement.

Section 9.9 Specific Performance.  The parties hereby acknowledge and agree that
the  failure of any party to perform its  agreements  and  covenants  hereunder,
including  its failure to take all actions as are  necessary  on its part to the
consummation of the Merger,  will cause irreparable  injury to the other parties
for  which  damages,  even  if  available,  will  not  be  an  adequate  remedy.
Accordingly,  each party hereby consents to the issuance of injunctive relief by
any court of  competent  jurisdiction  to  compel  performance  of such  party's
obligations  and to the  granting  by  any  court  of  the  remedy  of  specific
performance of its obligations hereunder.

Section 9.10 Failure or Indulgence Not Waiver;  Remedies Cumulative.  No failure
or delay on the part of any party hereto in the exercise of any right  hereunder
shall impair such right or be construed to be a waiver of, or  acquiescence  in,
any breach of any  representation,  warranty or agreement herein,  nor shall any
single or partial  exercise of any such right preclude other or further exercise
thereof  or of any other  right.  All rights and  remedies  existing  under this
Agreement  are  cumulative  to, and not  exclusive to, and not exclusive of, any
rights or remedies otherwise available.

Section 9.11 Governing  Law. This Agreement  shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Virginia,  regardless of the
laws that might  otherwise  govern under  applicable  principles of conflicts of
law.

Section 9.12 Settlement of Disputes.  Any and all  controversies,  disputes,  or
claims  arising  out of or  relating  to this  Agreement,  or any  part  hereof,
including,  without  limitation,  the meaning,  applicability,  or scope of this
Section 9.12 and the performance, breach, interpretation, meaning, construction,
or enforceability of this Agreement,  or any portion hereof,  and all claims for
rescission or fraud in the inducement of this  Agreement,  shall, at the request
of any party,  be settled or  resolved  by binding  arbitration  pursuant to the
commercial  rules and regulations of the American  Arbitration  Association (the
"AAA")  for  the  resolution  of  commercial  disputes.   Any  party  requesting
arbitration  under this  Agreement  shall make a demand on the other  parties by
registered  or certified  mail with a copy to the AAA.  The parties  consent and
agree to have any such arbitration  proceedings heard in Vienna,  Virginia.  The
arbitration  shall take place  regardless of whether any party to the dispute or
controversy  fails or  refuses  to  participate.  The  arbitrators  shall  apply
Virginia  substantive  law  and  federal  substantive  law  where  state  law is
preempted. The arbitrators shall have the power to grant all legal and equitable
remedies,  including without limitation, the remedy of specific performance, and
award  compensatory  damages  provided by Virginia  law. The  arbitrators  shall
prepare  in  writing  and  provide to the  parties  an award  including  factual
findings  and the  reasons on which the  decision is based.  Judgement  upon any
award may be entered in any court having jurisdiction thereof.

Section  9.13   Counterparts.   This  Agreement  may  be  executed  in  multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed  shall be

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<PAGE>

deemed to be an original but all of which taken  together  shall  constitute one
and the same agreement.

Section 9.14  Irrevocable  Proxy.  Upon execution of this  Agreement,  the Major
Stockholder  shall execute and deliver,  and the Company shall cause each of the
directors  and  executive  officers  of the  Company to execute  and  deliver an
irrevocable  proxy in favor of Parent with respect to all of the voting stock of
the Company held by such persons,  in substantially the form attached as Exhibit
D to this Agreement.

          [The balance of this page has been intentionally left blank.]

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<PAGE>

         IN  WITNESS  WHEREOF,  each  of the  parties  hereto  has  caused  this
Agreement to be executed as of the date first written above by their  respective
officers thereunto duly authorized.


                               GRC INTERNATIONAL, INC.


                                    /s/ Thomas E. McCabe
                By: --------------------------------------------
                                    Thomas E. McCabe
                  Senior Vice President, Director of Corporate
                                    Development and General Counsel



                               MAC MERGER CORPORATION


                                  /s/ Thomas E. McCabe
               By: ----------------------------------------------
                                  Thomas E. McCabe
                  Senior Vice President, Director of Corporate
                                  Development and General Counsel



                               MANAGEMENT CONSULTING & RESEARCH, INC.


                                  /s/ Gerald R. McNichols
               By: ----------------------------------------------
                                  Gerald R. McNichols
                                  President and Chief Executive Officer



                               MAJOR STOCKHOLDER:


                               /s/ Gerald R. McNichols
                               -------------------------------------------------
                               Gerald R. McNichols



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