DIVESTMENT INCENTIVE PROGRAM
                              
     This Divestment Incentive Program is hereby entered
into this 8th day of September 1998, between AAF-McQuay Inc.
(hereinafter "the Company") and Andrew R. Morrison
(hereinafter "Employee"), who are collectively referred to
herein as the "Parties."
     
     WHEREAS, the Company's shareholder plans to sell the
Company, and the Company wants to provide an incentive
package to certain key employees in exchange for their
agreement to remain employed up to and beyond the sale of
the Company.
     
     NOW, THEREFORE, in consideration of the mutual promises
contained herein, and other good and valuable consideration
as hereinafter recited, the receipt and adequacy of which
are hereby acknowledged, the parties, intending to be
legally bound, covenant and agree as follows:
     
     1.   The Employee agrees to continue his employment
          with the Company in his position as Chief
          Financial Officer, and to perform his customary
          and regular duties, up to and including the
          effective date of the sale of the Company (the
          "Effective Date").  The Company agrees that it
          will continue to pay the Employee his salary at
          his current monthly rate of $16,500 (Sixteen
          Thousand, Five Hundred Dollars).  The Employee
          further agrees that, if the purchasing company
          makes a written offer to the Employee on or prior
          to the Effective Date of a comparable position for
          at least two years along with comparable salary
          and benefits in a location not requiring the
          Employee to relocate, the Employee will accept
          that employment and remain employed by the
          purchasing company for at least two years after
          the Effective Date.  An offer or request pursuant
          to this paragraph 1 is hereinafter referred to as
          a "Continued Employment Offer."
     
     2.   If the Employee agrees to, and remains, employed
          as described in paragraph 1 above, and if he has
          not breached any of the provisions of this
          Agreement (including, without limitation, sections
          4 and 5 hereof) (a "Breach"), he will be eligible
          to receive the following additional incentive
          payments:
     
          (a)  If the Employee remains employed up to and
               including the Effective Date and the
               purchasing company does not make a Continued
               Employment Offer, the Company agrees to pay
               the Employee $396,000, (Three Hundred Ninety
               Six Thousand Dollars) which amount is equal
               to 24 months compensation at his current
               rate, as severance pay, less applicable
               withholding tax.  This severance pay will be
               considered earned as of the first business
               day after the Effective Date and will be paid
               to the Employee within one week after the
               Effective Date.   If the Employee's
               employment with the Company is terminated
               without cause prior to the expiration of two
               years from the date of acceptance of his
               Continued Employment Offer, this severance
               pay will be considered earned as of the first
               business day after such termination and will
               be paid to the Employee within one week after
               such termination.
          
(b)  Provided that the Company is sold prior to the
Termination Date of this Agreement, it is the Company's
intention to create a bonus pool (the "Executive Bonus
Pool").  The Employee's share of the Executive Bonus Pool
will be a function both of the Employee's base salary and a
performance factor.  Individual payouts will be based on
appraised performance during the sale process by the
Employee's direct supervisor and additional higher levels of
senior management, including the CEO.  In addition,
potential payouts, less applicable withholding tax, will be
based upon the selling price and the ultimate equity
proceeds received by the current shareholder as described
below:

<TABLE>
<CAPTION>
Employee              Employee Equity       Employee's Potential
                      Proceeds to           Share of Executive
                      Shareholder           Bonus Pool
<S>                   <C>                   <C>
Andrew R. Morrison    *                     $           0
                      *                     $152,938
                      *                     $251,800
                      *                     $367,249
                      *                     $497,447
</TABLE>

               Interpolation will apply based on actual
               equity proceeds to shareholder.  In addition,
               the Potential Bonus amounts listed above are
               based on the assumption that the Employee
               meets or exceeds the expectations of
               management during the sale process and are
               subject to change.
          
               If the Employee remains employed up to and
               including the Effective Date and the
               purchasing company makes a Continued
               Employment Offer, 50% of the Employee's
               share, if any, of the Executive Bonus Pool
               will be paid to the Employee on the Effective
               Date and 50% of the Employee's share, if any,
               of the Executive Bonus Pool will be paid to
               the Employee on the first anniversary of the
               Effective Date.  If the Employee remains
               employed up to and including the Effective
               Date and the purchasing company does not make
               a Continued Employment Offer, 100% of the
               Employee's share, if any, of the Executive
               Bonus Pool will be paid to the Employee on
               the Effective Date.
     
     3.   If the Employee's employment with the Company
          terminates for any reason (other than a
          termination without cause) prior to the Effective
          Date or, in the event the purchasing company makes
          a Continued Employment Offer, or if the Employee
          commits a Breach, the Company shall have no
          obligation to make any payments of any kind to the
          Employee, including but not limited to severance
          payments or, in certain cases, incentive payments
          as described above.

     4.   The Employee recognizes that the Company's
          business interests require a confidential
          relationship between the Company and the Employee.
          Accordingly, THE EMPLOYEE AGREES DURING HIS
          EMPLOYMENT WITH THE COMPANY FOR A TWO-YEAR PERIOD
          THEREAFTER TO KEEP CONFIDENTIAL AND NOT TO
          DISCLOSE TO ANYONE ANY CONFIDENTIAL OR PROPRIETARY
          INFORMATION OF THE COMPANY, INCLUDING
          PARTICIPATION IN THIS DIVESTMENT INCENTIVE
          PROGRAM.
     
     5.   The Parties agree that any breach by the Employee
          of the confidentiality provisions in this
          Agreement will cause immediate, material and
          irreparable injury and damage, and that there is
          no adequate remedy at law for such breach.  In the
          event of a breach of the confidentiality
          provisions of the Agreement, the Company or its
          successor shall be entitled immediately to seek
          enforcement of this Agreement in a court of
          competent jurisdiction by means of a decree of
          specific performance, and injunction without the
          posting of a bond, any other form of equitable
          relief, and any other remedy it may have at law or
          in equity.  In the event that a court holds any
          provision of this Agreement to be unenforceable,
          the parties agree that that provision shall be
          reduced to the degree necessary to render it
          enforceable without affecting the rest of this
          Agreement.

     6.   In the event any dispute arises under this
          Agreement that is adjudicated to a final verdict
          in the Employee's favor by a court of competent
          jurisdiction, no further appeal is permitted and
          the Employee has complied with paragraph 4 hereof,
          the Company shall reimburse the Employee for his
          reasonable expenses of counsel incurred in
          connection with such dispute from the time the
          Company is notified of the dispute to its final
          adjudication.

     7.   Any other provision of this Agreement
          notwithstanding, this Agreement shall terminate
          and no longer be of any force or effect (i)
          immediately if the Company aborts the sale process
          and, (ii) in any case if a sale of the Company has
          not occurred on or before June 30, 1999 (the
          "Termination Date").

     8.   Each of the parties hereto (a) consents to submit
          himself or itself to the personal jurisdiction of
          any federal court located in the State of Maryland
          or any Maryland State court in the event any
          dispute arises out of this Agreement or any of the
          transactions contemplated by this Agreement, (b)
          agrees that he or it will not attempt to deny or
          defeat such personal jurisdiction by motion or
          other request for leave from any such court, and
          (c) agrees that he or it will not bring any action
          relating to this Agreement or any of the
          transactions contemplated by this Agreement in any
          court other than a federal court sitting in the
          State of Maryland or a Maryland State court.

     9.   This Agreement supersedes all prior Agreements
          between the parties concerning the subject matter
          hereof, and this Agreement constitutes the entire
          Agreement between the parties with respect to the
          subject matter hereof.  This Agreement may be
          modified only by a written instrument signed by
          the Employee and by the President of the Company.
          The validity and construction of this Agreement
          and any of its provisions shall be determined
          under the laws of the State of Maryland.

     10.  The Employee acknowledges that he has read this
          Agreement in its entirety, understands all of its
          terms and conditions, that he has the opportunity
          to consult with any individuals of his choice
          including legal counsel of his choice, that he is
          entering into this Agreement of his own free will,
          without coercion from any source, and that he
          agrees to abide by all of the terms and conditions
          herein contained.

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


WITNESS:                      AAF-McQUAY INC.


/S/ JOAN SEIVWRIGHT           By: /S/ JOSEPH B. HUNTER
                                   Joseph B. Hunter
                                   President and Chief
Executive Officer



/S/ RONALD J. PEDERSON             /S/ ANDREW R. MORRISON
                              Employee