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                                                                    Exhibit 10.7

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT, made as of this day of December, 1998, by and between
PERFORMANCE ENGINEERING CORPORATION, a Virginia corporation having its principal
office at 3949 Pender Drive, Fairfax, Virginia 22030, hereinafter referred to as
"PEC", and STUART R. LLOYD, hereinafter referred to as "Lloyd", also referred to
below collectively as the "parties."

         In consideration of Lloyd's employment by PEC and the other mutual
covenants and obligations hereinafter set forth, the parties hereto agree as
follows:

         1.       EMPLOYMENT. PEC shall employ Lloyd as its Vice-President and
Chief Financial Officer from the commencement of Lloyd's employment, to occur no
later than December 31, 1998, through December 31, 2001, subject to the terms of
this Agreement. The parties understand and agree that, notwithstanding anything
herein to the contrary, PEC agrees to employ Lloyd for a minimum term of five
(5) years, subject to the terms of this Agreement.

         2.       RESPONSIBILITIES AND COMMITMENT. As Vice-President and Chief
Financial Officer, Lloyd shall have general responsibility for managing the
finance, accounting, contracts and facilities functions of PEC. Lloyd shall have
such specific duties and responsibilities as may be assigned from time to time
by the President of PEC. Lloyd agrees to faithfully and diligently discharge his
duties and responsibilities under this Agreement and shall devote all of his
business time and attention to the affairs of PEC, except as otherwise provided
in this Agreement or agreed to by the Board of Directors of PEC.

         3.       COMPENSATION.

                  (a)      PEC shall compensate Lloyd with base salary at the
initial annual rate of One Hundred Forty Thousand Dollars ($140,000.00) through
December 31, 1999. For calendar year ending December 31, 2000, Lloyd's annual
base salary shall be a minimum of One Hundred Fifty-Five Thousand Dollars
($155,000.00). For calendar year ending December 31, 2001, Lloyd's annual base
salary shall be a minimum of One Hundred Sixty Thousand Dollars ($160,000.00).
Thereafter, Lloyd's annual base salary shall be set, effective January 1 of each
year, at such amount deemed appropriate by the Board of Directors of PEC,
considering Lloyd's duties, responsibilities and contributions to PEC.

                  (b)      Base salary as provided above will be payable less
appropriate deductions as required by law and this Agreement and shall be paid
in monthly installments to conform with PEC's regular payroll dates.

                  (c)      Upon execution of this Agreement, PEC shall pay Lloyd
the lump sum of Ten Thousand Dollars ($10,000.00), less appropriate deductions
as required by law. Should Lloyd terminate this Agreement on or before December
31, 1999, a pro-rata portion of said lump sum amount shall be repaid by Lloyd to
PEC.


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                  (d)      Lloyd shall be eligible to participate in the Spring
Bonus Plan (Leadership Award) on the same basis as other members of the PEC
executive staff. Employment on January 1 of each year is a requirement for
participation in the Plan. The maximum bonus available under this Plan is the
prior year PEC net income margin as a percentage of base salary.

                  (e)      Lloyd shall be eligible to participate in the Fall
Bonus Plan on the same basis as other members of the PEC executive staff. Any
bonus under this Plan shall be prorated to reflect Lloyd's employment
commencement date. The maximum bonus available under this Plan is twenty percent
(20%) of an executive's annual base salary.

                  (f)      During the term of this Agreement, PEC shall
pay Lloyd the sum of Five Hundred Ninety-Five Dollars ($595.00) per month to
reflect the fact that Lloyd has elected not to participate in the PEC Health
Insurance Program. PEC shall pay to Contract Consulting Dynamics, Inc. ("CCDI")
a mutually agreed upon amount to provide health insurance for Lloyd and his
family. Said amounts paid by PEC to CCDI shall be deducted monthly from Lloyd's
base salary.

         4.       OTHER BENEFITS.

                  (a)      Lloyd shall be entitled to an Executive Automobile
Benefit, subject to the terms and conditions of the PEC Executive Automobile
Policy, as such policy may be amended from time to time, on the same basis as
other members of the PEC executive staff. Such policy provides that an eligible
executive may elect a monthly allowance of Five Hundred Dollars ($500.00) in
lieu of an executive automobile.

                  (b)      PEC shall grant Lloyd two (2) Initial Stock Option
Grants to acquire up to two thousand (2,000) and eight thousand (8,000) shares
of PEC's common stock, respectively, at a price determined by the PEC market
price formulation as of Lloyd's employment commencement date. Such price is
calculated at $12.25 per share through December 31, 1998. The options shall be
exercisable during the term they are outstanding, subject to the terms and
conditions of the current PEC Stock Option Plan.

                           PEC shall take all  reasonable  steps to cause the
Board of Directors to approve an amendment to the PEC Stock Option Plan and to
recommend the adoption of said amendment by the Shareholders of PEC at the
Spring 1999 Annual Meeting of Shareholders, which amendment shall provide that
all options granted under the said PEC Stock Option Plan shall become
immediately vested upon any "Change in Control" of PEC, as defined within the
terms of this Agreement.

                           In the event Lloyd determines to exercise either or
both of the two separate Initial Stock Option Grants through the use of proceeds
borrowed from any third party lender, PEC agrees that it shall guarantee the
loan from the third party lender on the condition that it receive a collateral
security interest in the PEC stock thereby acquired.

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                  (c)      Lloyd shall be eligible to participate in the PEC
Non-Qualified Executive Supplemental Retirement Program on the same basis as
other members of the PEC executive staff, subject to the terms and conditions of
the PEC Non-Qualified Executive Supplemental Retirement Program Agreement.

                  (d)      Lloyd shall be eligible to receive additional annual
stock option grants on the same basis as other members of the PEC executive
staff.

                  (e)      Lloyd shall be entitled to participate in any and all
other pensions, retirement, stock purchase, life insurance, cafeteria plan or
any other fringe benefits on the same basis as other members of the PEC
executive staff.

         5.       TERM AND TERMINATION.

                  (a)      This Agreement shall remain in effect through
December 31, 2003, and thereafter shall automatically renew for additional one
(1) year terms, unless PEC notifies Lloyd in writing of its intent not to renew
the Agreement at least one (1) year prior to its termination date; provided that
Lloyd may terminate this Agreement by giving prior written notice of termination
to PEC not less than ninety (90) days prior to Lloyd's intended date of
termination.

                  (b)      During the term of this Agreement and in the event
Lloyd's employment by PEC is terminated for any reason, except as specifically
provided otherwise in this Subparagraph (b), Lloyd shall not, directly or
indirectly, enter the employ of, or render any service to, any person,
partnership, corporation or other entity engaged in any of the business engaged
in by PEC at the date of termination, for a period of two (2) years after the
termination of employment. Without the permission of PEC, Lloyd further agrees
that during said period he will not become interested in any competing business,
directly or indirectly, as an individual, partner, officer, agent, consultant,
director or principal. Notwithstanding the provisions of this Subsection, PEC
agrees that Lloyd shall be permitted to remain as a member of the Board of
Directors of Eisner, Petrou & Associates.

                           If Lloyd leaves his employment as a result of PEC's
breach of this Agreement, or if PEC terminates Lloyd's employment in breach of
this Agreement, Lloyd shall be under no restriction whatsoever as to the nature
of the business or employment activities in which he may engage after
termination of his employment.

                  (c)      Notwithstanding the provisions of Subsection 5 (a)
herein, this Agreement shall be terminated:

                           (1)      Upon the death of Lloyd;

                           (2)      In the event of the disability of Lloyd,
resulting in his inability to perform his duties,  because of illness or
incapacity,  for a period of three (3) consecutive months, or

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for an aggregate period of five (5) months or more, in any twelve (12) month
period during the term of this Agreement;

                           (3)      In the event of Lloyd's  termination  for
Cause which shall mean a termination of Lloyd's employment only due to Lloyd's
commission of an act of fraud, embezzlement or theft constituting a felony or an
intentional act by Lloyd against the interests of PEC which causes PEC material
injury or damage.

                  (d)      If PEC should terminate Lloyd for any reason other
than one of the three (3) reasons expressly enumerated in Subsection 5(c), it
shall pay to him the compensation he would have received, taking into account
all salary, bonus, benefits, stock options and other benefits granted him under
this Agreement had the contract been performed to term, in one (1) lump sum,
payable within thirty (30) days of his last day of employment. In calculating
the lump sum payment Lloyd may be entitled to pursuant to this Subsection, the
parties shall take into account increases in salary, bonus, benefits, etc. that
Lloyd might have reasonably expected to receive.

         6.       CHANGE IN CONTROL.

                  (a) If PEC should terminate Lloyd's employment under this
Agreement for Good Reason as a result of a Change in Control of PEC, PEC, or its
successor, shall pay to Lloyd the greater of (i) the compensation he would have
received taking into account all salary, bonus, benefits, stock options and
other benefits granted him under this Agreement, had the contract been performed
for a full five (5) years; or (ii) the compensation he would have received
taking into account all salary, bonus, stock options and other benefits granted
him under this Agreement, had the contract been performed for a full two (2)
years beyond its initial five (5) year term or any renewal term. In calculating
the amount of compensation Lloyd may be entitled to pursuant to this Subsection,
the parties shall take into account increases in salary, bonus, benefits, etc.
that Lloyd might have reasonably expected to receive. Such payment shall be in
lieu of any other future payments which Lloyd would be otherwise entitled to
receive under this Agreement.

                  (b)      The term "Change in Control" shall mean any one of
the following occurring within a twelve (12) month period:

                           (1)     The acquisition of ownership of, or power to
vote 51% or more of PEC's outstanding voting stock; or

                           (2)      The acquisition of the power to control the
election of a majority of PEC's directors; or

                           (3)      The sale,  merger,  acquisition or
consolidation of PEC to, with or by any other person or entity in which the
ownership of, or power to vote, 51% or more of PEC's outstanding voting stock
has been transferred; or

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                           (4)      Any other  circumstances  in which a court
of competent jurisdiction would determine that persons or entities who
controlled PEC at the time this Agreement was entered into were no longer in
control of PEC (for purposes of this Subsection 6(b)(4), "control" shall be
defined as the power to vote 51% or more of PEC's outstanding voting stock or
the power to control the election of a majority of PEC's directors).

                  (c)      Termination of Lloyd's employment for "Good Reason"
shall mean termination as a result of any of the following:

                           (1)      A reduction by PEC in Lloyd's base salary as
in effect immediately prior to the Change in Control; or


                           (2)      The failure by PEC to continue in effect any
Plan in which Lloyd is participating at the time of the Change in Control of PEC
(or Plans providing at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its terms as
in effect at the time of the Change in Control, or the taking of any action, or
the failure to act, by PEC which would adversely affect Lloyd's continued
participation in any of such Plans on at least as favorable a basis to Lloyd as
is the case on the date of the Change in Control; or

                           (3)      A material  change in Lloyd's status or
position with PEC or a material change in his duties or responsibilities which
is inconsistent with such status or position, or any removal of Lloyd from such
position, except in connection with the termination of Lloyd's employment for
Cause or disability or as a result of death; or

                           (4)      The failure by PEC to obtain from any
successor the assent to this Agreement contemplated by Section 8 hereof; or

                           (5)      Any  termination by PEC of Lloyd's
employment not satisfying the requirements of Section 5(c) of this Agreement.

         7.       OTHER AGREEMENTS.

                  As a condition of his employment with PEC, Lloyd has also
executed an Employee Confidentiality and Inventions Agreement, a copy of which
is attached hereto and incorporated as a part of this Agreement by this
reference.

         8.       BINDING EFFECT.

                  (a)      This Agreement shall enure to the benefit of, and be
binding upon, any corporate or other successor or assignee of PEC which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or 51% or more of the stock, business or assets of PEC. PEC shall
require any such successor to expressly assume and agree to perform the
provisions

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of Section 6 in the same manner and to the same extent as PEC would be required
to perform if no such succession had taken place. The parties acknowledge that
this Subsection 8(a) is for the benefit and protection of Lloyd; accordingly,
PEC hereby confers the right on Lloyd, either acting on his own behalf or on
behalf of PEC, to enforce this Agreement and, specifically, this Subsection 8(a)
against any successor or assignee of PEC. PEC further grants Lloyd the right to
intervene or otherwise participate in any litigation or other proceeding against
a successor or assignee. In the event PEC fails for any reason to enforce its
rights under this Subsection 8(a), then Lloyd may take all reasonable, prudent
and diligent action in PEC's place and shall recover all his fees, expenses and
costs from PEC.

                  (b)      This Agreement shall insure to the benefit of, and be
enforceable by, Lloyd's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If Lloyd
should die while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Lloyd's devisee, legatee
or other designee or, if there is no such designee, to his estate.

         9.       ENTIRE AGREEMENT. This Agreement and the other instruments
referred to herein contain the entire agreement of the parties relating to the
subject matter hereof and supersede and cancel all prior written and oral
agreements and understandings between the parties relating to the subject matter
of this Agreement, which are not set forth herein. No amendment or modification
of this Agreement shall be valid unless made in writing and signed by the
parties hereto. No term or condition of this Agreement shall be deemed to have
been waived except by written instrument of the party charged with such waiver.

         10.      GOVERNING LAW. This Agreement will be construed in accordance
with the laws of the Commonwealth of Virginia.

         11.      NOTICES.  All notices to be sent to either party by the other
party hereto pursuant to this Agreement shall be sent by registered mail to the
following respective addresses:

                  (a)      PEC.  If to PEC, addressed to it at:

                           3949 Pender Drive
                           Fairfax, Virginia 22030

                           With a required copy to:

                           David W. Pijor, Esquire
                           10482 Armstrong Street
                           Fairfax, Virginia 22030

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                  (b)      LLOYD. If to Lloyd, addressed to him at:

                           10912 Earlsgate Lane
                           Rockville, Maryland 20852

         IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.

                                             PERFORMANCE ENGINEERING CORPORATION
                                             a Virginia corporation

ATTEST:
                                             By:
----------------------------------[SEAL]        --------------------------------
                                                            President


----------------------------------           -----------------------------------
Witness                                      Stuart R. Lloyd

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