Document:

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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

                                       7<PAGE>

                                                                    Exhibit 10.8

                                  PEC SOLUTIONS

                            2000 STOCK INCENTIVE PLAN

         PEC Solutions, Inc., a Delaware corporation (the "COMPANY"), hereby
establishes this PEC Solutions 2000 Stock Incentive Plan (the "PLAN").

1.       PURPOSE

         The purpose of the Plan is to promote the success of the Company by (i)
providing employees and other persons with incentives to improve stockholder
value and to contribute to the growth and financial success of the Company and
(ii) enabling the Company to attract, retain and reward the best-available
persons.

2.       DEFINITIONS

         Unless the capitalized terms used in this Plan are defined in other
Sections, such terms are defined in this Section 2.

         (a) "AFFILIATE" means any entity, whether now or hereafter existing,
which controls, is controlled by, or is under common control with, the Company
(including, but not limited to, joint ventures, limited liability companies, and
partnerships). For this purpose, "control" means ownership of 50% or more of the
total combined voting power or value of all classes of stock or interests of the
entity.

         (b) "AWARD" means any stock option, stock appreciation right, stock
award, phantom stock award, performance award, or other stock-based award
granted under this Plan.

         (c) "BOARD" means the Board of Directors of the Company.

         (d) "CODE" means the Internal Revenue Code of 1986, as amended, and
regulations thereunder.

         (e) "COMMON STOCK" means common stock of the Company, par value of
$0.01 per share.

         (f) "FAIR MARKET VALUE" shall mean, with respect to a share of the
Company's Common Stock for any purpose on a particular date, the value
determined by the Administrator in good faith. However, if the Common Stock is
registered under Section 12(b) of the Securities Exchange Act of 1934, as
amended, "FAIR MARKET VALUE" shall mean, as applicable, (i) either the closing
price or the average of the high and low sale price on the relevant date, as
determined in the Administrator's discretion, quoted on the New York Stock
Exchange, the American Stock Exchange, or the Nasdaq National Market; (ii) the
last sale price on the relevant date quoted on the Nasdaq SmallCap Market; (iii)
the average of the high bid and low asked prices on the relevant date quoted on
the Nasdaq OTC Bulletin Board Service or by the National Quotation Bureau, Inc.
or a comparable service as determined in the Administrator's discretion; or (iv)
if the Common Stock is not quoted by any of the above, the average of the
closing bid and asked prices on the relevant date furnished by a professional
market maker for the Common Stock, or by such other source, selected by the
Administrator. If no public trading of the Common Stock occurs on the relevant
date, then Fair Market Value shall be determined as of the next preceding date
on which trading of the Common Stock does occur. For all purposes under this
Plan, the term "relevant date" as used in this Section 2(f) shall mean either
the date as of which Fair Market Value is to be determined or the next preceding
date on which public trading of the Common Stock occurs, as determined in the
Administrator's discretion.

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         (g) "GRANT AGREEMENT" means a written document memorializing the terms
and conditions of an Award granted pursuant to the Plan.

3.       ADMINISTRATION

         (a) ADMINISTRATION OF THE PLAN. The Plan is administered by the Board
or by one or more committees as may be appointed by the Board from time to time
(the Board or the committees are referred to herein as the "ADMINISTRATOR").

         (b) POWERS OF THE ADMINISTRATOR. The Administrator shall have all the
powers vested in it by the terms of the Plan, such powers to include authority,
in its sole and absolute discretion, to grant Awards under the Plan, prescribe
Grant Agreements evidencing such Awards and establish programs for granting
Awards.

         The Administrator shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate; (v) modify, amend, extend or renew
outstanding Awards, or accept the surrender of outstanding Awards and substitute
new Awards (provided however, that, except as provided in Section 7(c) of the
Plan, any modification that would materially adversely affect any outstanding
Award shall not be made without the consent of the holder); (vi) accelerate or
otherwise change the time in which an Award may be exercised or becomes payable
and to waive or accelerate the lapse, in whole or in part, of any restriction or
condition with respect to such Award, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of an
Award following termination of any grantee's employment or other relationship
with the Company; and (vii) establish objectives and conditions, if any, for
earning Awards and determining whether Awards will be paid after the end of a
performance period.

         The Administrator shall have full power and authority, in its sole and
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan and for the conduct of its business as the
Administrator deems necessary or advisable.

         (c) NON-UNIFORM DETERMINATIONS. The Administrator's determinations
under the Plan (including without limitation, determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the Grant Agreements evidencing such Awards) need
not be uniform and may be made by the Administrator selectively among persons
who receive, or are eligible to receive, Awards under the Plan, whether or not
such persons are similarly situated.

         (d) LIMITED LIABILITY. To the maximum extent permitted by law, no
member of the Administrator shall be liable for any action taken or decision
made in good faith relating to the Plan or any Award thereunder.

         (e) INDEMNIFICATION. To the maximum extent permitted by law and by the
Company's charter and by-laws, the members of the Administrator shall be
indemnified by the Company in respect of all their activities under the Plan.

         (f) EFFECT OF ADMINISTRATOR'S DECISION. All actions taken and decisions
and determinations made by the Administrator on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Administrator's
sole and absolute discretion and shall be conclusive and binding on all parties
concerned,

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including the Company, its stockholders, any participants in the Plan
and any other employee, consultant, or director of the Company, and their
respective successors in interest.

4.       SHARES AVAILABLE FOR THE PLAN

         Subject to adjustments as provided in Section 7(c) of the Plan, the
shares of Common Stock that may be issued with respect to Awards granted
under the Plan shall not exceed (i) in calendar year 2000, 750,000 shares,
and (ii) in each calendar year thereafter, during any part of which the Plan
is in effect, 6.25% of the total shares of Common Stock outstanding on the
first day of such year, plus the number of shares available for Awards in the
previous calendar year that were not awarded under the Plan; provided that no
more than an aggregate of 7,500,000 shares of Common Stock may be issued
pursuant to incentive stock options intended to qualify under Code section
422.

         The Company shall reserve such number of shares for Awards under the
Plan, subject to adjustments as provided in Section 7(c) of the Plan. If any
Award, or portion of an Award, under the Plan expires or terminates unexercised,
becomes unexercisable or is forfeited or otherwise terminated, surrendered or
canceled as to any shares, or if any shares of Common Stock are surrendered to
the Company in connection with any Award (whether or not such surrendered shares
were acquired pursuant to any Award), or if any shares are withheld by the
Company, the shares subject to such Award and the surrendered and withheld
shares shall thereafter be available for further Awards under the Plan;
provided, however, that any such shares that are surrendered to or withheld by
the Company in connection with any Award or that are otherwise forfeited after
issuance shall not be available for purchase pursuant to incentive stock options
intended to qualify under Code section 422.

5.       PARTICIPATION

         Participation in the Plan shall be open to all employees, officers, and
directors of, and other individuals providing bona fide services to or for, the
Company, or of any Affiliate of the Company, as may be selected by the
Administrator from time to time. The Administrator may also grant Awards to
individuals in connection with hiring, retention or otherwise, prior to the date
the individual first performs services for the Company or an Affiliate provided
that such Awards shall not become vested prior to the date the individual first
performs such services.

6.       AWARDS

         The Administrator, in its sole discretion, establishes the terms of all
Awards granted under the Plan. Awards may be granted individually or in tandem
with other types of Awards. All Awards are subject to the terms and conditions
provided in the Grant Agreement. The Administrator may permit or require a
recipient of an Award to defer such individual's receipt of the payment of cash
or the delivery of Common Stock that would otherwise be due to such individual
by virtue of the exercise of, payment of, or lapse or waiver of restrictions
respecting, any Award. If any such payment deferral is required or permitted,
the Administrator shall, in its sole discretion, establish rules and procedures
for such payment deferrals.

         (a) STOCK OPTIONS. The Administrator may from time to time grant to
eligible participants Awards of incentive stock options as that term is defined
in Code section 422 or nonqualified stock options; provided, however, that
Awards of incentive stock options shall be limited to employees of the Company
or of any current or hereafter existing "parent corporation" or "subsidiary
corporation," as defined in Code sections 424(e) and (f), respectively, of the
Company. Options intended to qualify as incentive stock options under Code
section 422 must have an exercise price at least equal to Fair Market Value as
of the date of grant, but nonqualified stock options may be granted with an
exercise price less than Fair Market Value. No stock option

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shall be an incentive stock option unless so designated by the Administrator at
the time of grant or in the Grant Agreement evidencing such stock option.

         (b) STOCK APPRECIATION RIGHTS. The Administrator may from time to time
grant to eligible participants Awards of Stock Appreciation Rights ("SAR"). An
SAR entitles the grantee to receive, subject to the provisions of the Plan and
the Grant Agreement, a payment having an aggregate value equal to the product of
(i) the excess of (A) the Fair Market Value on the exercise date of one share of
Common Stock over (B) the base price per share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. Payment by the Company of the amount receivable upon any exercise
of an SAR may be made by the delivery of Common Stock or cash, or any
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator. If upon settlement of the exercise of an SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date. No fractional shares shall be used
for such payment and the Administrator shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional shares shall
be eliminated.

         (c) STOCK AWARDS. The Administrator may from time to time grant
restricted or unrestricted stock Awards to eligible participants in such
amounts, on such terms and conditions, and for such consideration, including no
consideration or such minimum consideration as may be required by law, as it
shall determine. A stock Award may be paid in Common Stock, in cash, or in a
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator.

         (d) PHANTOM STOCK. The Administrator may from time to time grant Awards
to eligible participants denominated in stock-equivalent units ("PHANTOM STOCK")
in such amounts and on such terms and conditions as it shall determine. Phantom
stock units granted to a participant shall be credited to a bookkeeping reserve
account solely for accounting purposes and shall not require a segregation of
any of the Company's assets. An Award of phantom stock may be settled in Common
Stock, in cash, or in a combination of Common Stock and cash, as determined in
the sole discretion of the Administrator. Except as otherwise provided in the
applicable Grant Agreement, the grantee shall not have the rights of a
stockholder with respect to any shares of Common Stock represented by a phantom
stock unit solely as a result of the grant of a phantom stock unit to the
grantee.

         (e) PERFORMANCE AWARDS. The Administrator may, in its discretion, grant
performance awards which become payable on account of attainment of one or more
performance goals established by the Administrator. Performance awards may be
paid by the delivery of Common Stock or cash, or any combination of Common Stock
and cash, as determined in the sole discretion of the Administrator. Performance
goals established by the Administrator may be based on the Company's or an
Affiliate's operating income or one or more other business criteria selected by
the Administrator that apply to an individual or group of individuals, a
business unit, or the Company or an Affiliate as a whole, over such performance
period as the Administrator may designate.

         (f) OTHER STOCK-BASED AWARDS. The Administrator may from time to time
grant other stock-based awards to eligible participants in such amounts, on such
terms and conditions, and for such consideration, including no consideration or
such minimum consideration as may be required by law, as it shall determine.
Other stock-based awards may be denominated in cash, in Common Stock or other
securities, in stock-equivalent units, in stock appreciation units, in
securities or debentures convertible into Common Stock, or in any combination of
the foregoing and may be paid in Common Stock or other securities, in cash, or
in a combination of Common Stock or other securities and cash, all as determined
in the sole discretion of the Administrator.

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7.       MISCELLANEOUS

         (a) WITHHOLDING OF TAXES. Grantees and holders of Awards shall pay to
the Company or its Affiliate, or make provision satisfactory to the
Administrator for payment of, any taxes required to be withheld in respect of
Awards under the Plan no later than the date of the event creating the tax
liability. The Company or its Affiliate may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the grantee or holder of an Award. In the event that payment to the Company or
its Affiliate of such tax obligations is made in shares of Common Stock, such
shares shall be valued at Fair Market Value on the applicable date for such
purposes.

         (b) TRANSFERABILITY. Except as otherwise determined by the
Administrator, and in any event in the case of an incentive stock option or a
stock appreciation right granted with respect to an incentive stock option, no
Award granted under the Plan shall be transferable by a grantee otherwise than
by will or the laws of descent and distribution. Unless otherwise determined by
the Administrator in accord with the provisions of the immediately preceding
sentence, an Award may be exercised during the lifetime of the grantee, only by
the grantee or, during the period the grantee is under a legal disability, by
the grantee's guardian or legal representative.

         (c) ADJUSTMENTS; BUSINESS COMBINATIONS.

                  (i) Upon a stock dividend of, or stock split or reverse stock
split affecting, the Common Stock of the Company, (A) the maximum number of
shares reserved for issuance or with respect to which Awards may be granted
under the Plan, as provided in Section 4 of the Plan, and (B) the number of
shares covered by and the exercise price and other terms of outstanding Awards,
shall, without further action of the Board, be adjusted to reflect such event
unless the Board determines, at the time it approves such stock dividend, stock
split or reverse stock split, that no such adjustment shall be made. The
Administrator may make adjustments, in its discretion, to address the treatment
of fractional shares and fractional cents that arise with respect to outstanding
Awards as a result of the stock dividend, stock split or reverse stock split.

                  (ii) In the event of any other changes affecting the Company,
the capitalization of the Company or the Common Stock of the Company by reason
of any spin-off, split-up, dividend, recapitalization, merger, consolidation,
business combination or exchange of shares and the like, the Administrator, in
its discretion and without the consent of holders of Awards, shall make: (A)
appropriate adjustments to the maximum number and kind of shares reserved for
issuance or with respect to which Awards may be granted under the Plan, as
provided in Section 4 of the Plan, and to the number, kind and price of shares
covered by outstanding Awards; and (B) any other adjustments in outstanding
Awards, including but not limited to reducing the number of shares subject to
Awards or providing or mandating alternative settlement methods such as
settlement of the Awards in cash or in shares of Common Stock or other
securities of the Company or of any other entity, or in any other matters which
relate to Awards as the Administrator shall, in its sole discretion, determine
to be necessary or appropriate.

                  (iii) Notwithstanding anything in the Plan to the contrary and
without the consent of holders of Awards, the Administrator, in its sole
discretion, may make any modifications to any Awards, including but not limited
to cancellation, forfeiture, surrender or other termination of the Awards in
whole or in part regardless of the vested status of the Award, in order to
facilitate any business combination that is authorized by the Board to comply
with requirements for treatment as a pooling of interests transaction for
accounting purposes under generally accepted accounting principles.

                  (iv) The Administrator is authorized to make, in its
discretion and without the consent of holders of Awards, adjustments in the
terms and conditions of, and the criteria included in, Awards in

                                      -5-
<PAGE>

recognition of unusual or nonrecurring events affecting the Company, or the
financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the
Administrator determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan and outstanding Awards.

         (d) SUBSTITUTION OF AWARDS IN MERGERS AND ACQUISITIONS. Awards may be
granted under the Plan from time to time in substitution for Awards held by
employees, officers, consultants or directors of entities who become or are
about to become employees, officers, consultants or directors of the Company or
an Affiliate as the result of a merger or consolidation of the employing entity
with the Company or an Affiliate, or the acquisition by the Company or an
Affiliate of the assets or stock of the employing entity. The terms and
conditions of any substitute Awards so granted may vary from the terms and
conditions set forth herein to the extent that the Administrator deems
appropriate at the time of grant to conform the substitute Awards to the
provisions of the awards for which they are substituted.

         (e) TERMINATION, AMENDMENT AND MODIFICATION OF THE PLAN. The Board may
terminate, amend or modify the Plan or any portion thereof at any time.

         (f) NON-GUARANTEE OF EMPLOYMENT OR SERVICE. Nothing in the Plan or in
any Grant Agreement thereunder shall confer any right on an individual to
continue in the service of the Company or shall interfere in any way with the
right of the Company to terminate such service at any time with or without cause
or notice.

         (g) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company and a grantee or any other person. To
the extent that any grantee or other person acquires a right to receive payments
from the Company pursuant to an Award, such right shall be no greater than the
right of any unsecured general creditor of the Company.

         (h) GOVERNING LAW. The validity, construction and effect of the Plan,
of Grant Agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Administrator relating to
the Plan or such Grant Agreements, and the rights of any and all persons having
or claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the State
of Delaware without regard to its conflict of laws principles.

         (i) EFFECTIVE DATE; TERMINATION DATE. The Plan is effective as of the
date on which the Plan is adopted by the Board, subject to approval of the
stockholders within twelve months before or after such date. No Award shall be
granted under the Plan after the close of business on the day immediately
preceding the tenth anniversary of the effective date of the Plan, or if
earlier, the tenth anniversary of the date this Plan is approved by the
stockholders. Subject to other applicable provisions of the Plan, all Awards
made under the Plan prior to such termination of the Plan shall remain in effect
until such Awards have been satisfied or terminated in accordance with the Plan
and the terms of such Awards.

                                      -6-

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