An attempted leveraged buyout of DynCorp collapsed yesterday when a special committee of the company's directors rejected a take-it-or-leave-it offer from an investment group headed by DynCorp chairman and cofounder Jose Carnicero.

In what one company official described as a case of corporate "hardball," Carnicero's group abruptly withdrew its offer to buy DynCorp yesterday afternoon, only a few hours after the firm's outside directors declined to accept the group's latest offer. The offer included a demand that the directors issue a "letter of intent" agreement by 5 p.m. today.

The unexpected twist of events left the future of the McLean-based government contracting firm, the Washington area's 13th-largest publicly owned company, more confused than ever. In the two weeks since Carnicero's offer officially put DynCorp into play, the outside directors have received several "serious expressions of interest" from investors wanting to acquire the company, according to Neal McCoy, a lawyer with the Washington firm of Skadden Arps Slate Meagher & Flom, which is representing the five-member independent directors' committee.

None of the other bidders has emerged publicly, and McCoy yesterday refused to identify any of them. He did say, however, that Miami investor Victor Posner, who is DynCorp's second-largest shareholder with 8.7 percent of its stock, is not one of them.

As the outside directors continued to solicit bids, Carnicero's group on Tuesday upped its offer from $24 to $25 a share, putting an extra $10 million on the table. But at the same time, the group placed a new condition on its proposal: the independent directors had until 5 p.m. today to sign a letter of intent to sell to CJM Partners, Carnicero's investment group, or it would be withdrawn. While such a letter of intent would not preclude the company from continuing to solicit outside bids, CJM also demanded that it be granted a 75 cents per share "bust-up fee" in the event the outside directors chose to sell to someone else.

According to McCoy, it was the Carnicero group's insistence on the "bust-up" fee, which would have cost DynCorp an extra $7.9 million, that prompted the directors to reject the offer. CJM then followed through on its threat and pulled its offer from the table.

In the meantime, McCoy said, the outside directors will stick to its Oct. 23 deadline for anyone wanting to make a hard acquisition offer. McCoy also said the directors had no choice but to reject the Carnicero group's demand. Otherwise, they would be subject to shareholders suits alleging possible conflicts of interest and insider dealing. "Seven or eight" such suits have already been filed in recent days in Delaware Chancery Court, McCoy said.

"You've got an independent board that is doing its best to maximize value for the shareholders," said McCoy.

The events, however, were a rude blow to Carnicero, a native Argentinian who cofounded DynCorp 31 years ago and built it into a diversified contracting firm with more than 15,000 employes and $749.1 million in revenue last year. In a terse press release, CJM Partners noted that DynCorp and its advisers "had over two weeks" to evaluate its offer and solicit outside bids.

"In view of DynCorp's unwillingness to negotiate a binding agreement with CJM Partners ... CJM Partners has no alternative but to withdraw its acquisition proposal," the statement continued.

Carnicero was in New York yesterday and could not be reached for comment.

The events that lead to yesterday's showdown began on Sept. 22 when Carnicero filed papers with the Securities and Exchange Commission disclosing the formation of CJM and its offer to buy out DynCorp for a price of $24 a share, or about $270 million.

CJM consisted of Carnicero, the largest DynCorp shareholder with 10.6 percent of the stock, other unidentified members of the firm's management and Eli S. Jacobs, a wealthy New York investor who is the chairman of Memorex Corp.

To avoid conflicts of interest charges, DynCorp's board then announced the formation of a special committee of outside directors to evaluate the CJM offer and solicit outside bids.