Document:

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                                                                   EXHIBIT 10.11

                              EMPLOYMENT AGREEMENT

                  THIS EMPLOYMENT AGREEMENT is made this 1st day of January,
2002, between Portfolio Recovery Associates, L.L.C., a Delaware limited
liability company with its principal place of business in the City of Norfolk,
Virginia ("Company") and James L. Keown ("Employee").

                  IN CONSIDERATION of the mutual covenants contained herein and
for other considerations the receipt and sufficiency of which are acknowledged,
the parties agree as follows:

         1. POSITION AND RESPONSIBILITIES.

                  The Company hereby hires Employee as a Senior Vice President.
Subject to the LLC Agreement (as defined herein), he shall be vested with such
authority and responsibilities as may be conferred upon him by the Management
Committee of the Company (the "Management Committee") and the President of the
Company (the "President") and which are appropriate and customary to his office.
He shall report to and act under the direction of the President. The Employee
accepts such employment and agrees to diligently and faithfully exercise the
authority and discharge the responsibility of his office to the best of his
ability, devoting substantially all of his business time, attention, and
services to the affairs of the Company. Except with the consent of the
Management Committee, the Employee shall not engage in any other pursuits for
compensation while serving as an officer of the Company.

         2. PLACE OF PERFORMANCE.

                  The principal place of employment of Employee shall be at the
Company's principal executive offices in Norfolk, Virginia or where such offices
may be relocated within a twenty-five (25) mile radius of Norfolk, Virginia (the
"Metropolitan Area"). Notwithstanding the foregoing, Employee may be required to
travel beyond the Metropolitan Area as may be reasonably required to perform his
duties hereunder.

         COMPENSATION.

                  (a) Base Salary. The Employee shall be paid a base salary at
the rate of $105,000 per year, which shall be paid in approximately equal
installments consistent with the Company's payroll policy, as it may exist from
time to time ("Base Salary"). Following the first anniversary of the
Commencement Date (as defined herein) and for each anniversary thereafter during
the Employment Period (as defined herein), Base Salary shall be increased
annually by no less than 4% over the immediately preceding year's Base Salary.

                  (b) Management Bonus Program. The performance of the business
shall be reviewed at the end of each operating year and compared to such goals
as are set forth in the business plan for that year as developed and presented
by the Operating Member of the Company and approved by its Management Committee
(the "Business Plan"). If the results of operations for the year achieve the net
profitability goals for the year specified in the approved Business Plan and
Employee's contribution to such performance results are satisfactory as

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determined in the sole discretion of the Management Committee, a bonus equal to
no less than twenty-five percent (25%) of the Employee's Base Salary shall be
paid to him (the "Bonus"). If the results of operations for the year exceed the
net profitability goals of the approved Business Plan, the amount of the
Employee's Bonus may be increased in recognition of the degree to which
performance exceeded such goals, and the Employee's contribution to such
superior performance results as determined in the sole discretion of the
Management Committee. If the results of operations for the year fail to achieve
such net profitability goals, the amount (if any) of the Employee's Bonus shall
be within the absolute discretion of the Management Committee.

                  (c) Benefits. The Employee shall be entitled to a benefits
package consisting of: (i) four (4) weeks paid annual vacation and (ii) such
other employee benefits programs as may be offered by the Company to other
employees, provided that he shall not be entitled to participate in any
incentive bonus program adopted for non-management level employees during the
time the Management Bonus Program is in effect. In addition, the Company shall
reimburse Employee for reasonable business expenses incurred by Employee upon
appropriate documentation and in accordance with Company policies for senior
executives, as they may exist from time to time. The Company shall reimburse
Employee for his reasonable legal fees incurred with respect to the preparation
of this Agreement; provided, that, such reimbursement shall not exceed $1,000.

                  (d) Warrants. The Employee was granted warrants to acquire
equity interests in the Company in accordance with the terms set forth in
Exhibit A to the Employment Agreement between the Employee and the Company dated
March 31, 1999.

         3. TERM.

                  The period of employment of Employee by the Company hereunder
(the "Employment Period") shall commence on the date hereof the ("Commencement
Date") and shall continue through the third anniversary thereof; provided, that,
commencing on the third anniversary of the Commencement Date and each
anniversary thereafter, the Employment Period shall be automatically extended
for one (1) additional year unless either party shall notify the other party at
least ninety (90) days prior to the expiration of the Employment Period that it
intends to let the Agreement expire. The Employment Period may be sooner
terminated by either party in accordance with Section 5 of this Agreement.

         4. TERMINATION.

                  Employee's employment hereunder may be terminated during the
Employment Period under the following circumstances:

                  (a) Death. Employee's employment hereunder shall terminate
upon his death.

                  (b) Disability. If, as a result of Employee's incapacity due
to physical or mental illness, Employee shall have been substantially unable to
perform his duties hereunder for

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an entire period of six (6) consecutive months or nine (9) months in any twelve
(12) month period, and within thirty (30) days after written Notice of
Termination is given after such period, Employee shall not have returned to the
substantial performance of his duties on a full-time basis, the Company shall
have the right to terminate Employee's employment hereunder for "Disability",
and such termination in and of itself shall not be, nor shall it be deemed to
be, a breach of this Agreement.

                  (c) Cause. The Company shall have the right to terminate
Employee's employment for Cause, and such termination in and of itself shall not
be, nor shall it be deemed to be, a breach of this Agreement. For purposes of
this Agreement, the Company shall have "Cause" to terminate Employee's
employment upon Employee's:

                  (i) conviction of, or plea of guilty or nolo contendere to, a
         felony; or

                  (ii) willful and continued failure to use reasonable best
         efforts to substantially perform his duties hereunder (other than such
         failure resulting from Employee's incapacity due to physical or mental
         illness or subsequent to the issuance of a Notice of Termination by
         Employee for Good Reason) or to obey the lawful written directives of
         the Management Committee or the President after demand for substantial
         performance is delivered by the Company in writing that specifically
         identifies the manner in which the Company believes Employee has not
         used reasonable best efforts to substantially perform his duties; or

                  (iii) willful misconduct (including, but not limited to, a
         willful breach of the provisions of Section 9) that is economically
         injurious to the Company or to any entity in control of, controlled by
         or under common control with the Company ("Affiliates").

                  (d) Good Reason. Employee may terminate his employment for
"Good Reason" within thirty (30) days after Employee has actual knowledge of the
occurrence, without the written consent of Employee, of one of the following
events that has not been cured within thirty (30) days after written notice
thereof has been given by Employee to the Company:

                  (i) the relocation of the Company's principal executive
         offices or Employee's own office location to a location beyond the
         Metropolitan Area; or

                  (ii) the Company's failure to provide any material payments
         due to be provided to Employee.

Employee's right to terminate his employment hereunder for Good Reason shall not
be affected by his incapacity due to physical or mental illness. Employee's
continued employment during the thirty (30) day period referred to above in this
paragraph (d) shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder.

                  (e) Without Cause. The Management Committee or the President
shall have the right to terminate Employee's employment hereunder without Cause
by providing Employee with a Notice of Termination, and such termination shall
not in and of itself be, nor shall it be deemed to be, a breach of this
Agreement.

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                  (f) Without Good Reason. Employee shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.

                  (g) Expiration of the Term. Unless the Company and the
Employee agree to continue the employment on an at will basis pending
negotiation of a new employment agreement, Employee's employment shall terminate
upon the expiration of the Employment Period and such expiration shall not be
deemed to be a termination by the Management Committee or the President without
Cause.

         5. TERMINATION PROCEDURE.

                  (a) Notice of Termination. Any termination of Employee's
employment by the Company or by Employee during the Employment Period (other
than termination pursuant to Section 5(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 12.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee's employment under the
provision so indicated.

                  (b) Date of Termination. "Date of Termination" shall mean (i)
if Employee's employment is terminated by his death, the date of his death, (ii)
if Employee's employment is terminated pursuant to Section 5(b), thirty (30)
days after Notice of Termination (provided that Employee shall not have returned
to the substantial performance of his duties on a full-time basis during such
thirty (30) day period), (iii) if Employee's employment is terminated pursuant
to Section 5(g), the date of expiration, and (iv) if Employee's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.

         6. COMPENSATION UPON TERMINATION OR DURING DISABILITY.

                  In the event Employee is disabled or his employment terminates
during the Employment Period, the Company shall provide Employee with the
payments and benefits set forth below. Employee acknowledges and agrees that the
payments set forth in this Section 7 constitute liquidated damages for any claim
of breach of contract under this Agreement as it relates to termination of his
employment during the Employment Period. In order to receive any of the payments
set forth below, prior to the payments of such amounts, Employee shall execute
and agree to be bound by an agreement relating to the waiver and general release
of any and all claims (other than claims for the compensation and benefits
payable under Section 7 hereof) arising out of or relating to Employee's
employment and termination of employment (the "Release"). Such Release must be
made in a form that is reasonably satisfactory to the Company, and shall run in
favor of the Company and its affiliates, and their respective officers,
directors, employees, agents, successors and assigns.

                  (a) Termination by Management Committee without Cause or by
any individual (other than Steven D. Fredrickson) serving as President without
Cause. If Employee's

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employment is terminated by the Management Committee without Cause or by any
individual (other than Steven D. Fredrickson) serving as President without
Cause:

                  (i) the Company shall pay to Employee (A) his Base Salary and
         accrued vacation pay through the Date of Termination, as soon as
         practicable following the Date of Termination, (B) a lump-sum payment
         equal to two (2) times Employee's then current Base Salary and (C) a
         lump-sum payment equal to two (2) times the amount of the Bonus, if
         any, paid to Employee in the year immediately prior to the year of
         termination. Such payment under clauses (B) and (C) hereof shall be
         made as soon as administratively feasible following the Date of
         Termination and execution of a valid Release, but in no event more than
         forty-five (45) days following the execution of such Release; and

                  (ii) Employee shall be entitled to any other rights,
         compensation and/or benefits as may be due to Employee in accordance
         with the terms and provisions of any agreements, plans or programs of
         the Company.

                  (b) Termination by Steven D. Fredrickson if serving as the
President without Cause or by Employee for Good Reason. If Employee's employment
is terminated by Steven D. Fredrickson if serving as the President without Cause
or by Employee for Good Reason:

                  (i) the Company shall pay to Employee (A) his Base Salary and
         accrued vacation pay through the Date of Termination, as soon as
         practicable following the Date of Termination, (B) a lump-sum payment
         equal to one (1) times Employee's then current Base Salary and (C) a
         lump-sum payment equal to one (1) times the amount of the Bonus, if
         any, paid to Employee in the year immediately prior to the year of
         termination. Such payment under clauses (B) and (C) hereof shall be
         made as soon as administratively feasible following the Date of
         Termination and execution of a valid Release, but in no event more than
         forty-five (45) days following the execution of such Release; and

                  (ii) Employee shall be entitled to any other rights,
         compensation and/or benefits as may be due to Employee in accordance
         with the terms and provisions of any agreements, plans or programs of
         the Company.

                  (c) Cause, by Employee without Good Reason or upon Expiration
of the Employment Period. If Employee's employment is terminated by the Company
for Cause or by Employee (other than for Good Reason) or upon expiration of the
Employment Period:

                  (i) the Company shall pay Employee his Base Salary and, to the
         extent required by law or the Company's vacation policy, his accrued
         vacation pay through the Date of Termination, as soon as practicable
         following the Date of Termination; provided, that, if the Employee's
         termination of employment occurs do to an expiration of the Employment
         Period initiated by a notice provided to Employee by the Company under
         Section 4 of the Agreement, notwithstanding the foregoing and in lieu
         thereof, the Company shall pay to Employee (A) his Base Salary and
         accrued vacation pay through the Date of Termination, as soon as
         practicable following the Date of Termination, (B) a lump-sum payment
         equal to one-half (0.5) times Employee's then current Base Salary and
         (C) a lump-sum payment equal to one-half (0.5) times the amount of the
         Bonus, if

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         any, paid to Employee in the year immediately prior to the year of
         termination. Such payment under clauses (B) and (C) hereof shall be
         made as soon as administratively feasible following the Date of
         Termination and execution of a valid Release, but in no event more than
         forty-five (45) days following the execution of such Release; and

                  (ii) Employee shall be entitled to any other rights,
         compensation and/or benefits as may be due to Employee in accordance
         with the terms and provisions of any agreements, plans or programs of
         the Company.

                  (d) Disability. During any period that Employee fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), Employee shall continue to receive his full Base
Salary set forth in Section 3(a) until his employment is terminated pursuant to
Section 5(b); provided, that, any such amounts shall be off-set, on a dollar for
dollar basis, for each dollar Employee receives by any disability insurance or
social security benefit. In the event Employee's employment is terminated for
Disability pursuant to Section 5(b):

                  (i) the Company shall pay to Employee (A) his Base Salary and
         accrued vacation pay through the Date of Termination, off-set, on a
         dollar for dollar basis, for each dollar Employee receives by any
         disability insurance or social security benefit, as soon as practicable
         following the Date of Termination and (B) a Bonus, for the year in
         which the Date of Termination occurs, pro-rated to the Date of
         Termination and payable at the same time as bonuses are customarily
         paid; and

                  (ii) Employee shall be entitled to any other rights,
         compensation and/or benefits as may be due to Employee in accordance
         with the terms and provisions of any agreements, plans or programs of
         the Company.

                  (e) Death. If Employee's employment is terminated by his
death:

                  (i) the Company shall pay in a lump sum to Employee's
         beneficiary, legal representatives or estate, as the case may be,
         Employee's (A) Base Salary through the Date of Termination and (B)
         Bonus, for the year in which the Date of Termination occurs, pro-rated
         to the Date of Termination and payable at the same time as bonuses are
         customarily paid; and

                  (ii) Employee's beneficiary, legal representatives or estate,
         as the case may be, shall be entitled to any other rights, compensation
         and benefits as may be due to any such persons or estate in accordance
         with the terms and provisions of any agreements, plans or programs of
         the Company.

         7. MITIGATION.

                  Except as otherwise noted above, Employee shall not be
required to mitigate amounts payable under this Agreement by seeking other
employment, and there shall be no off-set against amounts due Employee under
this Agreement on account of subsequent employment except as specifically
provided herein.

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         8. CONFIDENTIAL INFORMATION; OWNERSHIP OF DOCUMENTS; NON-COMPETITION.

                  (a) Confidential Information. Employee shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall have been obtained by Employee during
Employee's employment by the Company and which is not generally available public
knowledge (other than by acts by Employee in violation of this Agreement).
Except as may be required or appropriate in connection with his carrying out his
duties under this Agreement, Employee shall not, without the prior written
consent of the Company or as may otherwise be required by law or any legal
process, or as is necessary in connection with any adversarial proceeding
against the Company (in which case Employee shall use his reasonable best
efforts in cooperating with the Company in obtaining a protective order against
disclosure by a court of competent jurisdiction), communicate or divulge any
such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.

                  (b) Removal of Documents: Rights to Products. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Employee has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Employee's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Employee's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Employee shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.

                  (c) Nonsolicitation. During the Employment Period and for two
(2) years after Employee's employment is terminated for any reason, Employee
will not, directly or indirectly, solicit the customers, suppliers or key
employees of the Company to terminate their relationship with the Company (or to
modify such relationship in a manner that is adverse to the interests of the
Company), or to violate any valid contracts they may have with the Company.

                  (d) Noncompetition. During the Employment Period and for one
(1) year after Employee's employment is terminated for any reason (other than
pursuant to Section 5(d), by the Management Committee under Section 5(e), and by
any individual (other than Steven D. Fredrickson) serving as President under
Section 5(e)), Employee will not, directly or indirectly, own, manage, operate,
control, be employed by, or perform services for any business, howsoever
organized and in whatsoever form, that engages in the same or a similar line of
business as the Company, as determined from its latest Business Plan, and which
is located in the market area of the Company existing on the date of termination
of Employee's employment with Company.

                  (e) Blue Pencil. If, at any time, the provisions of this
Section 9 shall be determined to be invalid or unenforceable, by reason of being
vague or unreasonable as to area, duration or scope of activity, this Section 9
shall be considered divisible and shall become and be immediately amended to
only such area, duration and scope of activity as shall be determined to

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be reasonable and enforceable by the court or other body having jurisdiction
over the matter and Employee agrees that this Section 9 as so amended shall be
valid and binding as though any invalid or unenforceable provision had not been
included herein.

                  (f) Injunctive Relief. In the event of a breach or threatened
breach of this Section 9, Employee agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Employee acknowledging that damages would be
inadequate and insufficient.

                  (g) Continuing Operation. Except as specifically provided in
this Section 9, the termination of Employee's employment or of this Agreement
shall have no effect on the continuing operation of this Section 9.

         9. LIMITATION OF LIABILITY AND INDEMNITY.

                  The limitation of liability and indemnity provisions of
Section 3.8(b)(c) and (d) of the LLC Agreement are a contractual benefit to the
Employee and are a material consideration for his employment.

         10. GOVERNING LAW: LEGAL FEES AND EXPENSES.

                  This Agreement, the employment relationship contemplated
herein and any claim arising from such relationship, shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of laws rules. If any contest or dispute shall arise between
the Company and Employee regarding the provisions of this Agreement, each party
shall be responsible for the payment of its own legal fees and expenses relating
to such claim or dispute regardless of outcome.

         11. NOTICES.

                  All notices hereunder shall be in writing and shall be
delivered in person or mailed by first-class mail with adequate postage affixed,
as follows:

If to the Company, to:

         Portfolio Recovery Associates, L.L.C.
         c/o Angelo, Gordon & Co., L.P.
         245 Park Avenue
         New York, NY 10067
         Attn: David Roberts

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         If to the Employee, to:

                 James L. Keown
                 932 Gideon Road
                 Virginia Beach, VA 23454

         12. LLC AGREEMENT.

                  The term "LLC Agreement" as used herein shall mean the Amended
and Restated Limited Liability Company Agreement of the Company dated as of the
date hereof. All capitalized terms appearing in the text of this Agreement shall
have the same meanings as they have in the LLC Agreement to the extent not
defined herein.

         13. SUCCESSORS; BINDING AGREEMENT.

                  (a) Company's Successors. The Company may assign or transfer
this Agreement; provided, that, the Company will require any successor to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such assignment or
transfer had taken place.

                  (b) Employee's Successors. No rights or obligations of
Employee under this Agreement may be assigned or transferred by Employee other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution. Upon Employee's death, this
Agreement and all rights of Employee hereunder shall inure to the benefit of and
be enforceable by Employee's beneficiary or beneficiaries, personal or legal
representative, or estate, to the extent any such person succeeds to Employee's
interests under this Agreement. Employee shall be entitled to select and change
a beneficiary or beneficiaries to receive any benefit or compensation payable
hereunder following Employee's death by giving the Company written notice
thereof. In the event of Employee's death or a judicial determination of his
incompetence, reference in this Agreement to Employee shall be deemed, where
appropriate, to refer to his beneficiar(y)(ies), estate or other legal
representative(s). If Employee should die following his Date of Termination
while any amounts 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 such person or persons so
appointed in writing by Employee, or otherwise to his legal representatives or
estate.

         14. MISCELLANEOUS.

                  No provisions of this Agreement may be amended, modified, or
waived unless such amendment or modification is agreed to in writing signed by
Employee and by a duly authorized officer of the Company, and such waiver is set
forth in writing and signed by the party to be charged. No waiver by either
party hereto at any time of any breach by the other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The respective rights and obligations of the parties

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hereunder shall survive Employee's termination of employment and the termination
of this Agreement to the extent necessary for the intended preservation of such
rights and obligations.

         15. VALIDITY.

                  The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

         16. COUNTERPARTS.

                  This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

         17. ENTIRE AGREEMENT.

                  This Agreement sets forth the entire agreement of the parties
hereto in respect of the subject matter contained herein and supersede all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto in respect of such subject matter. Any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled.

         18. WITHHOLDING.

                  All payments hereunder shall be subject to any required
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.

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                                                                   EXHIBIT 10.11

         19. SECTION HEADINGS.

                  The section headings in this Agreement are for convenience of
reference only, and they form no part of this Agreement and shall not affect its
interpretation.

                                   "Company":

                                   PORTFOLIO RECOVERY ASSOCIATES, L.L.C.

                                   By: /s/ JOSH BRAIN
                                       ----------------------------------
                                       Name:  Josh Brain
                                       Title: Capital Manager

                                   "Employee"

                                   By: /s/ JAMES L. KEOWN
                                       ----------------------------------
                                       James L. Keown

                                       11<PAGE>
                                                                   EXHIBIT 10.12

                       PORTFOLIO RECOVERY ASSOCIATES, INC.

                             2002 STOCK OPTION PLAN

SECTION 1.        PURPOSE

                  The purposes of the Portfolio Recovery Associates, Inc. 2002
Stock Option Plan (the "Plan") are to encourage selected employees, key
consultants and directors of Portfolio Recovery Associates, Inc., a Delaware
corporation (together with any successor thereto, the "Company"), or any present
or future Subsidiary Corporation (as defined below) of the Company to acquire a
proprietary interest in the growth and performance of the Company, to enhance
the ability of the Company to attract, retain and reward qualified individuals
upon whom, in large measure, the sustained progress, growth and profitability of
the Company depend and to motivate such individuals to contribute to the
achievement of the Company's business objectives and to align the interest of
such individuals with the longer term interests of the Company's stockholders.

SECTION 2.        DEFINITIONS

                  As used in the Plan, the following terms shall have the
meanings set forth below:

                  (a)      "Board" shall mean the Board of Directors of the
Company.

                  (b)      "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.

                  (c)      "Committee" shall mean a committee of the Board
designated by the Board to administer the Plan and comprised of not less than
two (2) Independent Directors, provided that, prior to the Company's initial
public offering, the Committee shall be comprised of David Roberts only).

                  (d)      "Fair Market Value" shall mean, with respect to
Shares or other securities, the fair market value of the Shares or other
securities determined by such methods or procedures as shall be established from
time to time by the Committee in good faith or in accordance with applicable
law. Unless otherwise determined by the Committee, the Fair Market Value of
Shares shall mean (i) the closing price per Share of the Shares on the principal
exchange on which the Shares are then trading, if any, on such date, or, if the
Shares were not traded on such date, then on the next preceding trading day
during which a sale occurred; or (ii) if the Shares are not traded on an
exchange but are quoted on the Nasdaq Stock Market or a successor quotation
system, (1) the last sales price (if the Shares are then listed as a National
Market Issue on the Nasdaq Stock Market) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the Shares on such
date as reported by the Nasdaq Stock Market or such successor quotation system;
or (iii) if the Shares are not publicly traded on an exchange and not
<PAGE>

quoted on the Nasdaq Stock Market or a successor quotation system, the mean
between the closing bid and asked prices for the Shares on such date as
determined in good faith by the Committee. Notwithstanding the foregoing, the
Fair Market Value of any Options granted prior to the Company's initial public
offering shall be deemed to be the initial public offering price as determined
by the Company's underwriters.

                  (e)      "Incentive Stock Option" shall mean an option granted
under the Plan that is designated as an incentive stock option within the
meaning of Section 422 of the Code or any successor provision thereto.

                  (f)      "Independent Director" shall mean each member of the
Board who meets the test for an "independent" director as promulgated by the
Securities and Exchange Commission and the stock exchange or quotation system on
which the Shares are then listed or quoted.

                  (g)      "Key Employee" shall mean any officer, director or
other employee who is a regular full-time employee of the Company or its present
and future Subsidiary Corporations.

                  (h)      "Non-Qualified Stock Option" shall mean an Option
granted under the Plan that is not designated as an Incentive Stock Option.

                  (i)      "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.

                  (j)      "Option Agreement" shall mean a written agreement,
contract or other instrument or document evidencing an Option granted under the
Plan.

                  (k)      "Participant" shall mean a Key Employee, key
consultant (as determined by the Committee) or non-employee Director who has
been granted an Option under the Plan.

                  (l)      "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization or government or political subdivision thereof.

                  (m)      "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation thereto.

                  (n)      "Shares" shall mean the common stock of the Company,
$0.01 par value, and such other securities or property as may become the subject
of Options pursuant to an adjustment made under Section 4(b) of the Plan.

                  (o)      "Subsidiary Corporation" shall have the meaning
ascribed thereto in Code Section 424(f).

                                       2
<PAGE>

                  (p)      "Ten Percent Stockholder" shall mean a Person, who
together with his or her spouse, children and trusts and custodial accounts for
their benefit, immediately at the time of the grant of an Option and assuming
its immediate exercise, would beneficially own, within the meaning of Section
424(d) of the Code, Shares possessing more than ten percent (10%) of the total
combined voting power of all of the outstanding capital stock of the Company or
any Subsidiary Corporation of the Company.

SECTION 3.        ADMINISTRATION

                  (a)      Generally. The Plan shall be administered by the
Committee. Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Option shall be within the sole discretion of the Committee, may be
made at any time, and shall be final, conclusive, and binding upon all Persons,
including the Company, any Participant, any holder or beneficiary of any Option,
any stockholder of the Company and any employee of the Company.

                  (b)      Powers. Subject to the terms of the Plan and
applicable law and except as provided in Section 7 hereof, the Committee shall
have full power and authority to: (i) designate Participants; (ii) determine the
type or types of Options to be granted to each Participant under the Plan; (iii)
determine the number of Shares to be covered by Options; (iv) determine the
terms and conditions of any Option; (v) determine whether, to what extent, and
under what circumstances Options may be settled or exercised in cash, Shares,
other Options, or other property, or canceled, forfeited, or suspended, and the
method or methods by which Options may be settled, exercised, canceled,
forfeited, or suspended; (vi) interpret and administer the Plan and any
instruments or agreements relating to, or Options granted under, the Plan; (vii)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (viii) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.

SECTION 4.        SHARES AVAILABLE FOR OPTIONS

                  (a)      Shares Available. Subject to adjustment as provided
in Section 4(b):

                           (i) Limitation on Number of Shares. Options issuable
under the Plan are limited such that the maximum aggregate number of Shares
which may issued pursuant to, or by reason of, Options is 2,000,000. Further, no
Participant shall be granted Options to purchase more than 200,000 Shares in any
one fiscal year; provided, however, that the Committee may adopt procedures for
the counting of Shares relating to any grant of Options to ensure appropriate
counting, avoid double counting, and provide for adjustments in any case in
which the number of Shares actually distributed differs from the number of
Shares previously counted in connection with such grant. To the extent that an
Option granted or ceases to remain outstanding by reason of termination of
rights granted thereunder, forfeiture or otherwise, the Shares subject to such
Option shall again become available for award under the Plan.

                                       3
<PAGE>

                           (ii) Sources of Shares Deliverable Under Options. Any
Shares delivered pursuant to an Option may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.

                  (b)      Adjustments. In the event that the Committee shall
determine that any change in corporate capitalization, such as a dividend or
other distribution of Shares, or a corporate transaction, such as a merger,
consolidation, reorganization or partial or complete liquidation of the Company
or other similar corporate transaction or event, affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem necessary to prevent dilution or enlargement of the benefits or
potential benefits intended to be made under the Plan, adjust any or all of (x)
the number and type of Shares which thereafter may be made the subject of
Options, (y) the number and type of Shares subject to outstanding Options, and
(z) the grant, purchase, or exercise price with respect to any Option or, if
deemed appropriate, make provision for a cash payment to the holder of an
outstanding Option; provided, however, in each case, that (i) with respect to
Incentive Stock Options no such adjustment shall be authorized to the extent
that such adjustment would cause the Plan to violate Section 422 of the Code or
any successor provision thereto; (ii) such adjustment shall be made in such
manner as not to adversely affect the status of any Option as "performance-based
compensation" under Section 162(m) of the Code; and (iii) the number of Shares
subject to any Option denominated in Shares shall always be a whole number.

SECTION 5.        ELIGIBILITY

                  In determining the Persons to whom Options shall be granted
and the number of Shares to be covered by each Option, the Committee shall take
into account the nature of the Person's duties, such Person's present and
potential contributions to the success of the Company and such other factors as
it shall deem relevant in connection with accomplishing the purposes of the
Plan. A Key Employee who has been granted an Option or Options under the Plan
may be granted an additional Option or Options, subject to such limitations as
may be imposed by the Code on the grant of Incentive Stock Options.
Notwithstanding anything herein to the contrary, Incentive Stock Options may be
granted only to Key Employees of the Company or any Parent Corporation or
Subsidiary Corporation.

SECTION 6.        OPTIONS

                  The Committee is hereby authorized to grant Options to
Participants upon the following terms and the conditions (except to the extent
otherwise provided in Section 7) and with such additional terms and conditions,
in either case not inconsistent with the provisions of the Plan, as the
Committee shall determine:

                  (a)      Exercise Price. The exercise price per Share
purchasable under Options shall be determined by the Committee at the time the
Option is granted but generally shall not be less than the Fair Market Value of
the Shares covered thereby at the time the Option is granted.

                                       4
<PAGE>

                  (b)      Option Term. The term of each Non-Qualified Stock
Option shall be fixed by the Committee but generally shall not exceed ten (10)
years from the date of grant.

                  (c)      Time and Method of Exercise. The Committee shall
determine the time or times at which the right to exercise an Option may vest,
and the method or methods by which, and the form or forms in which, payment of
the option price with respect to exercises of such Option may be made or deemed
to have been made (including, without limitation, (i) cash, Shares, outstanding
Options or other consideration, or any combination thereof, having a Fair Market
Value on the exercise date equal to the relevant option price and (ii) a
broker-assisted cashless exercise program established by the Committee, provided
that any such cashless exercise program established by the Committee shall not
be applicable to executive officers and directors unless and until the Committee
shall have received advice of counsel that participation by executive officers
and directors in such program is permissible), provided in each case that such
methods avoid "short-swing" profits to the Participant under Section 16(b) of
the Securities Exchange Act of 1934, as amended. The payment of the exercise
price of an Option may be made in a single payment or transfer, in installments,
or on a deferred basis, in each case in accordance with rules and procedures
established by the Committee.

                  (d)      Incentive Stock Options. All terms of any Incentive
Stock Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision thereto, and
any regulations promulgated thereunder including that, (i)(A) in the case of a
grant to a Person that is not a Ten Percent Stockholder the purchase price per
Share purchasable under Incentive Stock Options shall not be less than the Fair
Market Value of a Share on the date of grant and (B) in the case of a grant to a
Ten Percent Stockholder the purchase price per Share purchasable under Incentive
Stock Options shall not be less than 110% of the Fair Market Value of a Share on
the date of grant and (ii) the term of each Incentive Stock Option shall be
fixed by the Committee but shall in no event be more than ten (10) years from
the date of grant, or in the case of an Incentive Stock Option granted to a Ten
Percent Stockholder, five (5) years from the date of grant.

                  (e)      Limits on Transfer of Options. Subject to Code
Section 422, no Option and no right under any such Option, shall be assignable,
alienable, saleable or transferable by a Participant otherwise than by will or
by the laws of descent and distribution, and such Option, and each right under
any such Option, shall be exercisable during the Participant's lifetime, only by
the Participant or, if permissible under applicable law (including Code Section
422, in the case of an Incentive Stock Option), by the Participant's guardian or
legal representative. No Option and no right under any such Option, may be
pledged, alienated, attached, or otherwise encumbered, and any purported pledge,
alienation, attachment, or encumbrance thereof shall be void and unenforceable
against the Company. Notwithstanding the foregoing, the Committee may, in its
discretion, provide that Non-Qualified Stock Options be transferable, without
consideration, to immediate family members (i.e., children, grandchildren or
spouse), to trusts for the benefit of such immediate family members and to
partnerships in which such family members are the only partners. The Committee
may attach to such transferability feature such terms and conditions as it deems
advisable. In addition, a Participant may, in the manner established by the
Committee, designate a beneficiary (which may be a person or a trust) to
exercise the rights of the Participant, and to receive any distribution, with
respect to any Option

                                       5
<PAGE>

upon the death of the Participant. A beneficiary, guardian, legal representative
or other person claiming any rights under the Plan from or through any
Participant shall be subject to all terms and conditions of the Plan and any
Option Agreement applicable to such Participant, except as otherwise determined
by the Committee, and to any additional restrictions deemed necessary or
appropriate by the Committee.

                  (f)      Tax Withholding. The Company or any Subsidiary is
authorized to withhold from any Option granted any payment relating to an Option
under the Plan, including from the exercise of an Option, amounts of withholding
and other taxes due in connection with any transaction involving an Option, and
to take such other action as the Committee may deem advisable to enable the
Company and Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Option. This authority shall
include authority to withhold or receive Shares or other property and to make
cash payments in respect thereof in satisfaction of a Participant's tax
obligations.

                  (g)      Loan Provisions. With the consent of the Committee,
and subject at all times to laws and regulations and other binding obligations
or provisions applicable to the Company, the Company may make, guarantee, or
arrange for a loan or loans to a Participant with respect to the exercise of any
Option, including the payment by a Participant of any or all federal, state, or
local income or other taxes due in connection with the exercise of any Option.
Subject to such limitations, the Committee shall have full authority to decide
whether to make a loan or loans hereunder and to determine the amount, terms,
and provisions of any such loan or loans, including the interest rate to be
charged in respect of any such loan or loans, whether the loan or loans are to
be with or without recourse against the borrower, the terms on which the loan is
to be repaid and the conditions, if any, under which the loan or loans may be
forgiven.

SECTION 7.        OPTIONS AWARDED TO NON-EMPLOYEE DIRECTORS

                  Each non-employee Director who is a member of the Board shall
automatically be granted annually a Non-Qualified Stock Option to purchase 5,000
Shares. Such Shares shall be granted at the time such Independent Director joins
the Board (which for current directors shall be deemed to be the date of the
Company's initial public offering) and each anniversary thereof. All Options
granted pursuant to this Section 7 shall (a) be at an exercise price per Share
equal to 100% of the Fair Market Value of a Share on the date of the grant; (b)
have a term of ten (10) years; (c) terminate (i) upon termination of an
non-employee Director's service as a director of the Company for any reason
other than mental or physical disability or death, (ii) three (3) months after
the date the non-employee Director ceases to serve as a director of the Company
due to physical or mental disability or (iii)(A) twelve (12) months after the
date the non-employee Director ceases to serve as a director due to the death of
the non-employee Director or (B) three (3) months after the death of the
non-employee Director if such death shall occur during the three (3) month
period following the date the non-employee Director ceased to serve as a
director of the Company due to physical or mental disability; and (d) be
otherwise on the same terms and conditions as all other Options granted pursuant
to the Plan.

                                       6
<PAGE>

SECTION 8.        AMENDMENT AND TERMINATION

                  Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Option Agreement or in the Plan:

                  (a)      Amendments to the Plan. The Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time or
from time to time by the Board, but no amendment without the approval of the
stockholders of the Company shall be made if such amendment would be required
under Sections 162(m) or 422 of the Code, Rule 16b-3 or any other law or rule of
any governmental authority, stock exchange or other self-regulatory organization
to which the Company may then be subject. Neither the amendment, suspension nor
termination of the Plan shall, without the consent of the holder of such Option,
alter or impair any rights or obligations under any Option theretofore granted.

                  (b)      Correction of Defects, Omissions, and
Inconsistencies. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option in the manner and to the
extent it shall deem desirable to carry the Plan into effect.

SECTION 9.        GENERAL PROVISIONS

                  (a)      No Rights to Awards. No Key Employee shall have any
claim to be granted any Option under the Plan, and there is no obligation for
uniformity of treatment of Key Employees or holders or beneficiaries of Options
under the Plan. The terms and conditions of Options need not be the same with
respect to each recipient.

                  (b)      No Right to Employment. The grant of an Option shall
not be construed as giving a Participant the right to be retained in the employ
of the Company. Further, the Company may at any time dismiss a Participant from
employment, free from any liability, or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Option Agreement.

                  (c)      Governing Law. The validity, construction, and effect
of the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Delaware and applicable
Federal law.

                  (d)      Severability. If any provision of the Plan or any
Option is or becomes or is deemed to be invalid, illegal, or unenforceable in
any jurisdiction, or would disqualify the Plan or any Option under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan, such provision shall be deemed void, stricken and the
remainder of the Plan and any such Option shall remain in full force and effect.

                  (e)      No Fractional Shares. No fractional Shares shall be
issued or delivered pursuant to the Plan or any Option, and the Committee shall
determine whether cash, other

                                       7
<PAGE>

securities, or other property shall be paid or transferred in lieu of any
fractional Shares or whether such fractional Shares or any rights thereto shall
be cancelled, terminated, or otherwise eliminated.

                  (f)      Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision hereof.

SECTION 10.       EFFECTIVE DATE OF THE PLAN

                  The Plan is effective as of November 4, 2002, subject to
stockholder approval of the Plan prior to such date.

SECTION 11.       TERM OF THE PLAN

                  The Plan shall continue until the earlier of (i) the date on
which all Options issuable hereunder have been issued, (ii) the termination of
the Plan by the Board or (iii) the 10th anniversary of the effective date of the
Plan. However, unless otherwise expressly provided in the Plan or in an
applicable Option Agreement, any Option theretofore granted may extend beyond
such date and the authority of the Committee to amend, alter, adjust, suspend,
discontinue, or terminate any such Option or to waive any conditions or rights
under any such Option, and the authority of the Board to amend the Plan, shall
extend beyond such date.

                                       8

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