Document:

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                                                                     EXHIBIT 10K
                             EMPLOYMENT AGREEMENT

          THIS AGREEMENT ("Agreement"), made as of the 23rd day of March, 1999
by and between MFN Financial Corporation, a Delaware corporation ("Company"),
and Edward G. Harshfield ("Executive").

                               WITNESSETH THAT:

          WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company, in accordance with the terms
and conditions of this Agreement.

          NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the Company and the Executive hereby agree as follows:

          1. Employment. The Company hereby agrees to employ the Executive, and
the Executive agrees to serve the Company, in the capacities described herein
during the Period of Employment (as defined in Section 2 of this Agreement), in
accordance with the terms and conditions of this Agreement.

          2. Period of Employment. The term "Period of Employment" shall mean
the period which commences on the effective date of a plan of reorganization for
the Company which is confirmed by the bankruptcy court pursuant to a final order
which is no longer subject to appeal (the "Effective Date") and, unless earlier
terminated pursuant to Section 6, ends on the third anniversary of the Effective
Date.

          3. Duties During the Period of Employment.

(a)  Duties. During the Period of Employment, the Executive shall be employed as
     the President and Chief Executive officer of the Company with overall
     charge and responsibility for the business and affairs of the Company, and
     shall perform such appropriate duties as the Executive shall reasonably be
     directed to perform by the Company's Board of Directors (the "Board"). The
     Company shall also elect the Executive as a member and Chairman of the
     Company's Board. In addition, in connection with each election of
     directors, the Executive may nominate two (2) other individuals to serve as
     outside members of the Board, who shall be included in the slate of
     nominees presented to the shareholders by the Board.

(b)  Scope. During the Period of Employment, and excluding any periods of
     vacation and sick leave to which the Executive is entitled, the Executive
     shall devote substantially all of his business time and attention to the
     business and affairs of the Company. It shall not be a violation of this
     Agreement for the Executive to (i) serve corporate, civic or charitable
     boards or committees, (ii) deliver lectures, fulfill speaking engagements
     or teach at educational institutions, or (iii) manage personal investments,
     so long as such activities under clauses (i), (ii) and (iii) do not
     interfere, in any substantial respect, with the Executive's
     responsibilities hereunder.
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          4. Compensation and Other Payments.

(a)  Salary. During the Period of Employment the Company shall pay the Executive
     an annual base salary ("Base Salary") of one million dollars ($1,000,000)
     per year. The Executive's Base Salary shall be paid in advance, in equal
     monthly installments. The Base Salary shall be reviewed annually as of the
     end of each fiscal year of the Company (the "Applicable Year") during the
     Period of Employment by the Compensation Committee of the Board (the
     "Committee"). Each annual review shall be completed by January 1 following
     the Applicable Year. Based upon such reviews, the Committee may increase,
     but shall not decrease the Base Salary. Any increase in Base Salary shall
     not serve to limit or reduce any other obligation to the Executive under
     this Agreement.

(b)  Annual Bonuses. The Committee or the Board shall at least annually review
     the Executive's performance under this Agreement. The Executive shall be
     awarded annual bonuses at the discretion of the Board or the Committee;
     provided, however, that for each of the second and third years of the
     Period of Employment the Executive's minimum annual bonus shall be five
     hundred thousand dollars ($500,000), subject to achieving such reasonable
     minimum performance levels as shall be agreed upon in writing by the
     Executive and the Company.

(c)  Signing Bonus. As an incentive to join the Company and as compensation for
     terminating his present employment and foregoing other opportunities, the
     Executive shall be paid a cash signing bonus in the amount of four million
     dollars ($4,000,000) ("Signing Bonus"), which shall be due and payable on
     the Effective Date. The payment of the Signing Bonus is contingent on the
     Executive signing this Agreement but is not contingent on the performance
     of services for the Company and does not represent compensation for
     services rendered.

(d)  Initial Stock Options. On the Effective Date, the Company shall grant the
     Executive the following options to purchase stock of the Company, which
     options shall be transferable by the Executive to members of his immediate
     family or to trusts or partnerships formed for the benefit of the Executive
     or members of his immediate family:

(i)  A ten (10)-year option, exercisable from and after the date of grant, to
     purchase a number of shares equal to five percent (5%) of the Company's
     stock outstanding as of the Effective Date (the "First Installment"), for
     an aggregate exercise price equal to five percent (5%) of the total deemed
     equity value of the Company as of the Effective Date (referred to
     hereinafter as the "Reorganization Equity Value"), which for purposes of
     this Agreement shall be eighty-five million dollars ($85,000,000);
     provided, however, that if the post-reorganization capital structure of the
     Company or any other economic feature of the plan of reorganization
     referred to in Section 2, above, differs materially from those described in
     the Disclosure Statement approved by the bankruptcy court on October 15,
     1998, the Reorganization Equity Value shall be adjusted appropriately;

(ii) A ten (10)-year option to purchase a number of shares equal to two and
     one-half percent (2.5%) of the Company's stock outstanding as of the
     Effective Date (the "Second Installment"), for an aggregate exercise price
     equal to two and seven-eighths
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     percent (2.875%) of the Reorganization Equity Value (i.e., a premium of
     fifteen percent (15%) over the pro rata Reorganization Equity Value), which
     option shall vest in twelve (12) equal monthly portions, beginning with the
     first anniversary of the date of grant, with one-twelfth (1/12) vesting on
     such first anniversary and an additional one-twelfth (1/12) vesting on the
     first day of each of the next eleven (11) calendar months thereafter; and

(iii) A ten (10)-year option to purchase a number of shares equal to two and
     one-half percent (2.5%) of the Company's stock outstanding as of the
     Effective Date (the "Third Installment"), for an aggregate exercise price
     equal to three and one-fourth percent (3.25%) of the Reorganization Equity
     Value (i.e., a premium of thirty percent (30%) over the pro rata
     Reorganization Equity Value), which option shall vest in twelve (12) equal
     monthly portions, beginning with the second anniversary of the date of
     grant, with one-twelfth (1/12) vesting on such second anniversary and an
     additional one-twelfth (1/12) vesting on the first day of each of the next
     eleven (11) calendar months thereafter.

               The Company shall take such reasonable efforts as may be
          necessary to cause any shares to be issued in connection with such
          option awards to be registered under the Federal Securities Act of
          1933, as amended, or under applicable state securities laws, or to
          secure an appropriate exemption from such registration. The terms and
          conditions of the said option awards are to be included in a Stock
          Option Agreement in the form attached hereto as Exhibit A. Options
          included in the Second and Third Installments shall become exercisable
          immediately upon vesting and shall remain exercisable until they
          expire or otherwise terminate in accordance with this Agreement or the
          terms and conditions set forth in Exhibit A. To the extent the Company
          is unable to provide sufficient shares to comply with this Section
          4(d), the Company shall provide the Executive with the economic
          equivalent of the value of the option award(s) described in this
          Section 4(d) in the form of a stock appreciation right based upon
          substantially the same terms and conditions as set forth in Exhibit A.

(e)  Future Awards and Option Grants. The Company shall make available a pool of
     stock representing Five percent (5%) of the Company's stock, on a fully
     diluted basis, for option awards to other employees of the Company, and the
     Executive shall not be eligible to receive additional option awards from
     that pool.

(f)  Reimbursement of Professional Fees. The Company shall pay on the
     Executive's behalf all reasonable fees and expenses shown on statements
     submitted to the Executive by the Executive's attorneys, accountants and
     other advisors in connection with the negotiation and execution of this
     Agreement and in connection with the provision of advice regarding this
     Agreement after its execution.

(g)  Travel and Housing. The Company shall pay all reasonable local housing,
     transportation and commutation expenses for the Executive and his spouse
     incurred in connection with the Executive rendering services to the
     Company. Reasonable commutation and transportation
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     expenses include, but are not limited to, air travel between California and
     Chicago and an appropriate automobile for local transportation in the
     Chicago area. The Company shall reimburse the Executive for all taxes
     payable by the Executive because of travel and housing payments by the
     Company, including tax reimbursement payments.

          5. Other Executive Benefits.

(a)  Regular Reimbursed Business Expenses. The Company shall promptly reimburse
     the Executive for all expenses and disbursements reasonably incurred by the
     Executive in the performance of his duties hereunder during the Period of
     Employment.

(b)  Benefit Plans. The Executive and his eligible family members shall be
     entitled to participate, on terms no less favorable to the Executive and
     his eligible family members than the terms offered to other senior
     executives of the Company, in any group and/or executive life,
     hospitalization or disability insurance plan, health program, vacation
     policy, pension, profit sharing, ESOP, 401(k) and similar benefit plans
     (qualified, non-qualified and supplemental) or other fringe benefits of the
     Company, including an automobile allowance, club memberships and dues, and
     similar programs (collectively referred to as the "Benefits"). In the event
     that any health programs or insurance policies applicable to the Benefits
     provided hereunder contain a preexisting conditions clause, the Company
     shall either obtain a waiver from such clause with respect to the Executive
     and/or his eligible family members or self-insure the Executive and/or his
     eligible family members with respect to such conditions. Anything contained
     herein to the contrary notwithstanding, the benefits described herein shall
     not duplicate benefits made available to the Executive pursuant to any
     other provision of this Agreement. In the event that any benefits coverage
     requires an interim waiting period, the Company shall pay all interim
     premiums on behalf of the Executive and his family for such coverage. The
     Company shall reimburse the Executive for all taxes payable by the
     Executive due to payments made by the Company pursuant to this paragraph
     (b), including tax reimbursement payments; provided however, that such tax
     reimbursement shall not apply to payments which constitute vacation pay or
     pension, profit-sharing or similar retirement or deferred compensation
     benefits normally taxable to recipients.

(c)  Perquisites. The Company shall provide the Executive such perquisites of
     employment as are commonly provided to other senior executives of the
     Company.

          6. Termination.

(a)  Death or Disability. This Agreement and the Period of Employment shall
     terminate automatically upon the Executive's death. If the Company
     determines in good faith that the Disability of the Executive has occurred
     (pursuant to the definition of "Disability" set forth below), it may give
     to the Executive written notice of its intention to terminate the
     Executive's employment. In such event, the Executive's employment with the
     Company shall terminate effective on the thirtieth day after receipt by the
     Executive of such notice given at any time after a period of one hundred
     twenty (120) consecutive days of Disability or a period of one hundred
     eighty (180) days of Disability within any twelve (12) consecutive months,
     and, in either case, while such Disability is continuing ("Disability
     Effective Date"),
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     provided that, within the thirty (30) days after such receipt, the
     Executive shall not have returned to full-time performance of the
     Executive's duties. For purposes of this Agreement, "Disability" means the
     Executive's inability to substantially perform his duties hereunder, with
     reasonable accommodation, as evidenced by a certificate signed either by a
     physician mutually acceptable to the Company and the Executive or, if the
     Company and the Executive cannot agree upon a physician, by a physician
     selected by agreement of a physician designated by the Company and a
     physician designated by the Executive. Until the Disability Effective Date,
     the Executive shall be entitled to all compensation and benefits provided
     for under Section 4 and Section 5 hereof. It is understood that nothing in
     this Section 6(a) shall serve to limit the Company's obligations under
     Section 7(b) hereof.

(b)  By the Company for Cause. The Company may terminate the Executive's
     employment hereunder for "Cause" upon five (5) days' written notice. For
     purposes of this Agreement, "Cause" shall mean (i) Executive's commission
     of an act materially and demonstrably detrimental to the Company, which act
     constitutes gross negligence or willful misconduct by Executive in the
     performance of his material duties to the Company or (ii) Executive's
     commission of any material act of dishonesty or breach of trust resulting
     or intended to result in material personal gain or enrichment of Executive
     at the expense of the Company, or (iii) Executive's conviction of a felony
     involving theft or moral turpitude, but specifically excluding any
     conviction based entirely on vicarious liability. Notwithstanding the
     foregoing, the Company may not terminate the Executive's employment for
     Cause unless (i) a determination that Cause exists is made and approved by
     a majority of the Board, (ii) the Executive is given at least five (5) days
     written notice of the Board meeting called to make such determination, and
     (iii) the Executive is given the opportunity to address such meeting.

(c)  By Executive for Good Reason. The Executive's employment hereunder may be
     terminated by the Executive for Good Reason upon five (5) days' written
     notice. For purposes of this Agreement, "Good Reason" shall mean:

(i)  The assignment to the Executive of any duties inconsistent in any respect
     with the Executive's position (including status, offices, titles and
     reporting relationships), authority, duties or responsibilities as
     contemplated by Section 3 of this Agreement, or any other action by the
     Company which results in a significant diminution in such position,
     authority, duties or responsibilities, excluding for this Section 6(c) any
     isolated, immaterial and inadvertent action not taken in bad faith and
     which is remedied by the Company promptly after receipt of notice thereof
     given by the Executive;

(ii) Any failure by the Company to comply with any of the provisions of this
     Agreement, other than an isolated, immaterial and inadvertent failure not
     taken in bad faith and which is remedied by the Company promptly after
     receipt of notice thereof given by the Executive;

(iii) The filing of any bankruptcy petition against the Company which is not
     dismissed within sixty (60) days of the filing of the petition;
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(iv) The revocation of any significant business license of the Company by any
     state, except such a revocation which does not have a material adverse
     business or prospects of the Company taken as a whole; or

(v)  Any criminal indictment of the Company, except for any such indictment (A)
     which (1) is based upon the investigation by the federal Securities and
     Exchange Commission into actions of the Company which preceded the July 15,
     1998 filing date of the bankruptcy petition of the Company and (2) does not
     have a material adverse effect on the business or prospects of the Company
     taken as a whole or (B) which is based primarily upon the Executive's own
     actions, but excluding any indictment based upon an allegation of vicarious
     liability on the part of the Executive, with vicarious liability meaning
     liability which is based on actions of the Company for which the Executive
     is alleged to be responsible solely as a result of his offices with the
     Company and in which he was not directly involved and of which he did not
     have prior knowledge.

(d)  By Executive Other Than for Good Reason. The Executive may, without
     liability to the Company, terminate his employment hereunder at any time
     other than for Good Reason, upon thirty (30) days' written notice to the
     Company.

(e)  By the Company Without Cause. The Company may, subject to Section 7(d)
     hereof, terminate the Executive's employment hereunder at any time upon
     thirty (30) days' written notice to the Executive.

(f)  Notice of Termination. Any termination of employment under this Agreement
     by the Company or by the Executive shall be communicated by Notice of
     Termination to the other party hereto. For purposes of this Agreement, a
     "Notice of Termination" means a written notice which (i) indicates the
     specific termination provision in this Agreement relied upon, (ii) sets
     forth in reasonable detail, if applicable, the facts and circumstances
     claimed to provide a basis for termination of the Executive's employment
     under the provision so indicated, and (iii) specifies, the Date of
     Termination (as defined below). The failure by the Executive or Company to
     set forth in the Notice of Termination any fact or circumstance which
     contributes to a showing of the basis for termination shall not waive any
     right of such party hereunder or preclude such party from asserting such
     fact or circumstance in enforcing his or its rights hereunder.

(g)  Date of Termination. "Date of Termination" means the date specified in the
     Notice of Termination; provided, however, that if the Executive's
     employment is terminated by reason of death or Disability, the Date of
     Termination shall be the date of death of the Executive or the Disability
     Effective Date, as the case may be.

          7. Obligations of the Company Upon Termination or a Change in Control.

(a)  Death. If the Executive's employment is terminated by reason of the
     Executive's death, this Agreement shall terminate without further
     obligations to the Executive's legal representatives under this Agreement,
     other than those obligations accrued or earned and vested (if
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     applicable) by the Executive as of the Date of Termination, including, but
     not limited to, (i) the Executive's Base Salary through the Date of
     Termination at the rate in effect on the Date of Termination disregarding
     any reduction in Base Salary in violation of this Agreement, (ii) any other
     rights and benefits (including, without limitation, payments due pursuant
     to Section 5(a) or Section 5(b) of this Agreement) available to the
     Executive under employee compensation and benefit arrangements of the
     Company (without duplication) in which the Executive was a participant on
     the Date of Termination, determined in accordance with the applicable terms
     and provisions of such arrangements (such amounts specified in clauses (i)
     and (ii) being hereinafter referred to as "Accrued Obligations"); and (iii)
     any amounts that remain unpaid pursuant to Section 4(c).

(b)  Disability. If the Executive's employment is terminated by reason of the
     Executive's Disability, this Agreement shall terminate without further
     obligations to the Executive, other than those obligations accrued or
     earned and vested (if applicable) by the Executive as of the Date of
     Termination, including, but not limited to, all Accrued Obligations and any
     amounts that remain unpaid pursuant to Section 4(c).

(c)  Cause; Other Than Good Reason. If the Executive's employment shall be
     terminated by the Company for Cause or by the Executive other than for Good
     Reason, this Agreement shall terminate without further obligations to the
     Executive, other than those obligations accrued or earned and vested (if
     applicable) by the Executive through the Date of Termination, including,
     but not limited to, all Accrued Obligations. In addition, Executive will
     forfeit any unpaid amounts that he is entitled to pursuant to Section
     7(d)(i) if he terminates his employment other than for Good Reason prior to
     January 1, 2000.

(d)  Good Reason; Change in Control; Other Than for Cause or Disability. If the
     Company shall terminate the Executive's employment other than for Cause or
     Disability, or if the Executive shall terminate his employment for Good
     Reason, or if a Change in Control shall occur while Executive is employed
     by the Company:

(i)  Subject to the limitation set forth in Section 7(c), the Company shall
     cause the Executive to receive the aggregate of the following amounts:

(A)  Continuation of Base Salary through the third anniversary of the Effective
     Date;

(B)  Any options or stock awards previously granted and not yet vested as of
     the Date of Termination or date of Change in Control shall be fully vested
     immediately, and all options shall remain exercisable through the end of
     their original term;

(C)  All unpaid and vested compensation and Benefits accrued or earned by the
     Executive as of the Date of Termination or date of Change in Control,
     including, but not limited to, all Accrued Obligations;

(D)  Any amounts that remain unpaid pursuant to Section 4(c); and
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(E)  Any additional compensation to which the Executive may become entitled
     pursuant to this Agreement because of continued employment after a Change
     in Control.

(ii) Through the third anniversary of the Effective Date, or such longer period
     as any plan, program, practice or policy may provide, the Company shall
     continue benefits to the Executive and/or the Executive's family at least
     equal to those which would have been provided to them in accordance with
     Section 5(b) of this Agreement if the Executive's employment had not been
     terminated, including health insurance and life insurance. Thereafter, the
     Executive shall be treated as a retired senior executive of the Company for
     purposes of Benefits provided by the Company to such retirees.

(iii)   For purposes of this Agreement, a "Change in Control" shall mean:

(A)  The acquisition by any individual, entity or group (within the meaning of
     Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
     amended (the "Exchange Act")) (a "Person") (excluding any of the Holders
     (as defined in paragraph (iv), below) and their affiliates) of beneficial
     ownership (within the meaning of Rule l3d-3 promulgated under the Exchange
     Act) of more than 50% of either (i) the then outstanding shares of capital
     stock of the Company (the "Outstanding Company Capital Stock") or (ii) the
     combined voting power of the then outstanding voting securities of the
     Company entitled to vote generally in the election of directors (the
     "Company Voting Securities"); provided, however, that if the Holders cease
     to be, in the aggregate, beneficial owners of at least 20% of both the
     Outstanding Company Capital Stock and the Company Voting Securities, a
     Change in Control shall mean the acquisition by any individual, entity or
     group (other than any of the Holders and their affiliates) of beneficial
     ownership of 30% or more of either the Outstanding Company Capital Stock or
     the Company Voting Securities; provided further that (X) any acquisition by
     or from the Company or any of its subsidiaries which is recommended or
     approved by the Executive, (Y) any acquisition by any employee benefit plan
     (or related trust) sponsored or maintained by the Company or any of its
     subsidiaries or (Z) any acquisition by any entity with respect to which,
     following such acquisition, more than 80% of, respectively, the then
     outstanding shares of capital stock of such entity and the combined voting
     power of the then outstanding voting securities of such entity entitled to
     vote generally in the election of directors is then beneficially owned,
     directly or indirectly, by all or substantially all of the individuals and
     entities who were the beneficial owners, respectively, of the Outstanding
     Company Capital Stock and Company Voting Securities immediately prior to
     such acquisition, in substantially the same proportion as their ownership,
     immediately prior to such acquisition, of the Outstanding Company Capital
     Stock and Company Voting Securities, as the case may be, shall not
     constitute a Change in Control; or
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(B)  A change in the composition of the Board such that individuals who, as of
     the date hereof, constitute the Board (the "Incumbent Board") cease for any
     reason to constitute a simple majority of the Board, provided that any
     individual becoming a director subsequent to the date hereof whose
     election, or nomination for election by the Company's shareholders, was
     approved by the Executive and by a vote of at least a majority of the
     directors then comprising the Incumbent Board shall be considered as though
     such individual were a member of the Incumbent Board, but excluding, for
     this purpose, any such individual whose initial assumption of office is in
     connection with an actual or threatened election contest relating to the
     election of the directors of the Company; or

(C)  Approval by the shareholders of the Company of a reorganization, merger or
     consolidation (a "Business Combination") with respect to which all or
     substantially all of the individuals and entities who were the respective
     beneficial owners of the Outstanding Company Capital Stock and Company
     Voting Securities immediately prior to such Business Combination do not,
     following such Business Combination, beneficially own, directly or
     indirectly, more than 80% of, respectively, the then outstanding shares of
     capital stock and the combined voting power of the then outstanding voting
     securities entitled to vote generally in the election of directors, as the
     case may be, of the entity resulting from the Business Combination, in
     substantially the same proportion as their ownership immediately prior to
     such Business Combination of the Outstanding Company Capital Stock and
     Company Voting Securities, as the case may be; or

(D)  (1) A complete liquidation or dissolution of the Company or (2) a sale or
     other disposition of all or substantially all of the assets of the Company
     other than to an entity with respect to which, following such sale or
     disposition, more than 80% of, respectively, the then outstanding shares
     of capital stock and the combined voting power of the then outstanding
     voting securities entitled to vote generally in the election of directors
     is then owned beneficially, directly or indirectly, by all or substantially
     all of the individuals and entities who were the beneficial owners,
     respectively, of the Outstanding Company Capital Stock and Company Voting
     Securities immediately prior to such sale or disposition, in substantially
     the same proportion as their ownership Of the Outstanding Company Capital
     Stock and Company Voting Securities, as the case may be, immediately prior
     to such sale or disposition.

(iv) For purposes of this Agreement, "Holder" means each shareholder of the
     Company who, as of the Effective Date, owns ten percent (10%) or more of
     the Company's stock outstanding as of the Effective Date.

It is understood that the Executive's rights under this Section 7 are in lieu of
all other rights which the Executive may otherwise have had upon termination of
this Agreement; provided,
<PAGE>

however, that no provision of this Agreement is intended to adversely affect the
Executive's rights under the Consolidated Omnibus Budget Reconciliation Act of
1985.

          8. Mitigation. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and such
amounts shall not be reduced whether or not the Executive obtains other
employment.

          9. Indemnification. The Company shall maintain, for the benefit of the
Executive and all of the Executive's nominees to the Board, director and officer
liability insurance in form at least as comprehensive as, and in an amount that
is at least equal to, that maintained by the Company on October 1, 1998. The
Executive's rights to such insurance shall continue so long as the Company
maintains director and office liability insurance for any then current director
or officer; provided that such insurance shall in any event be maintained
through December 31, 2003. In addition, the Executive shall be indemnified by
the Company against liability as an officer and director of the Company or any
subsidiary or affiliate of the Company to the maximum extent permitted by
applicable law.

          10. Confidential Information and Noncompetition.

(a)  The Executive shall hold a fiduciary capacity for the benefit of the
     Company all secret or confidential information, knowledge or data relating
     to the Company, or any of its subsidiaries, affiliates and businesses,
     which shall have been obtained by the Executive pursuant to his employment
     by the Company or any of its subsidiaries and affiliates and which shall
     not have become public knowledge (other than by acts by the Executive or
     his representatives in violation of this Agreement). After termination of
     the Executive's employment with the Company, the Executive shall not,
     without the prior written consent of the Company, communicate or divulge
     any such information, knowledge or data to anyone other than the Company
     and those designated by it, However, in no event shall an asserted
     violation of the provisions of this Section 10 constitute a basis for
     deferring or withholding amounts otherwise payable to the Executive under
     this Agreement.

(b)  During the Period of Employment and during the one (1)-year period
     immediately following (i) the Company's termination of the Executive's
     employment for Cause or (ii) the Executive's termination of his employment
     other than for Good Reason, The Executive shall not, directly or
     indirectly, engage in, be employed by, act as a consultant to, or be a
     director, officer, owner or partner of, any business activity or entity
     which competes significantly and directly with the Company or any of its
     subsidiaries in lines of business conducted by the Company or its
     subsidiaries during the Period of Employment or, for purposes of applying
     this noncompetition restriction after the Period of Employment, in lines of
     business conducted by the Company or its subsidiaries as of the Date of
     Termination and, in either event, in any geographic area in which the
     Company or its subsidiaries engage in such business; provided, however,
     that it shall not be a violation of this paragraph (b) for the Executive to
     continue to serve in those current directorships which are disclosed to the
     Company by the Executive in writing at the time of his execution of this
     Agreement; and provided further that it shall not be a violation of this
     Agreement for the Executive to own an
<PAGE>

     interest of less than five percent (5%) in any entity whose ownership
     interests are publicly traded.

          11. Remedy for Violation of Section 10. The Executive acknowledges
that the Company has no adequate remedy at law and will be irreparably harmed if
the Executive breaches or threatens to breach the provisions of Section 10 of
this Agreement and, therefore, agrees that the Company shall be entitled to
injunctive relief to prevent any breach or threatened breach of such section and
that the Company shall be entitled to specific performance of the terms of such
section in addition to any other legal or equitable remedy it may have. Nothing
in this Agreement shall be construed as prohibiting the Company from pursuing
any other remedies at law or in equity that it may have or any other rights that
it may have under any other agreement.

          12. Withholding. Anything in this Agreement to the contrary
notwithstanding, all payments required to be made by the Company hereunder to
the Executive shall be subject to withholding of such amounts, at the time
payments are actually made to the Executive and received by him, relating to
taxes as the Company may reasonably determine it should withhold pursuant to any
applicable law or regulation. In lieu of withholding such amounts, in whole or
in part, the Company may, in its sole discretion, accept other provision for
payment of taxes as required by law, provided that it is satisfied that all
requirements of law affecting its responsibilities to withhold such taxes have
been satisfied.

          13. Arbitration. Any dispute or controversy between the Company and
the Executive, whether arising out of or relating to this Agreement, the breach
of this Agreement, or otherwise, shall be settled by arbitration administered in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") then in effect, and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction. Any arbitration
shall be held before a single arbitrator who shall be selected by the mutual
agreement of the Company and the Executive, unless the parties are unable to
agree to an arbitrator, in which case, the arbitrator will be selected by the
then President of the Chicago Bar Association. The arbitrator shall have the
authority to award any remedy or relief that a court of competent jurisdiction
could order or grant, including, without limitation, the issuance of an
injunction. However, either party may, without inconsistency with this
arbitration provision, apply to any court having jurisdiction over such dispute
or controversy and seek interim provisional, injunctive or other equitable
relief until the arbitration award is rendered or the controversy is otherwise
resolved. Except as necessary in court proceedings to enforce this arbitration
provision or an award rendered hereunder, or to obtain interim relief, or as
required by law, neither a party nor an arbitrator may disclose the existence,
content or results of any arbitration hereunder without the prior written
consent of the Company and the Executive. The Company and the Executive
acknowledge that this Agreement evidences a transaction involving interstate
commerce. Notwithstanding any choice of law provision included in this Agreement
the United States Federal Arbitration Act shall govern the interpretation and
enforcement of this arbitration provision. The arbitration proceeding shall be
conducted in Chicago, Illinois or such other location to which the parties may
agree. The Company shall pay the costs of any arbitrator appointed hereunder.
<PAGE>

          14. Reimbursement of Legal Expenses. In the event that the Executive
is the prevailing party, or is successful to a material degree, in pursuing or
defending, whether in arbitration or litigation, any claim or dispute involving
the Executive's employment with the Company, including any claim or dispute
relating to (a) this Agreement, (b) termination of the Executive's employment
with the Company or (c) the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall promptly reimburse the
Executive for all reasonable costs and expenses (including, without limitation,
attorneys' fees) relating solely, or allocable, to such claim. In any other
case, the Executive and the Company shall each bear all their own costs and
attorneys' fees.

          15. Taxes. In the event that the aggregate of all payments or benefits
made or provided to, or that may be made or provided to, the Executive under
this Agreement and under all other plans, programs and arrangements of the
Company (the "Aggregate Payment") is determined to constitute an "excess
parachute payment," as such term is defined in Section 280G(b) of the Internal
Revenue Code, the Company shall pay to the Executive prior to the time any
excise tax imposed by Section 4999 of the Internal Revenue Code ("Excise Tax")
is payable with respect to such Aggregate Payment, an additional amount which,
after the imposition of all income and excise taxes thereon, is equal to the
Excise Tax on the Aggregate Payment. The determination of whether the Aggregate
Payment constitutes an excess parachute payment and, if so, the amount to be
provided to the Executive and the time of payment pursuant to this Section 15
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. The Auditor shall be a
nationally recognized United States public accounting firm which has not, during
the two (2) years preceding the date of its selection, acted in any way on
behalf of the Company or any affiliate thereof. If the Executive and the Company
cannot agree an the firm to serve as the Auditor, then the Executive and the
Company shall each select one accounting firm and those two firms shall jointly
select the accounting firm to serve as the Auditor. Notwithstanding the
foregoing, in the event that the amount of the Executive's Excise Tax liability
is subsequently determined to be greater than the Excise Tax liability with
respect to which any initial payment to the Executive under this Section 15 has
been made, the Company shall pay to the Executive an additional amount (grossed
up for all taxes), with respect to such additional Excise Tax (and any interest
and penalties thereon) at the time and in the amount reasonably determined by
the Auditor. Similarly, if the amount of the Executive's Excise Tax liability is
subsequently determined to be less than the Excise Tax liability with respect to
which any prior payment to the Executive has been made under this Section 15,
the Executive shall refund to the Company the excess amount received, after
reduction for any nonrefundable tax, penalties and/or interest incurred by the
Executive in connection with the receipt of such excess, and such refund shall
be paid promptly after the Executive has received any corresponding refund of
excess Excise Tax paid to the Internal Revenue Service. The Executive and the
Company shall cooperate with each other in connection with any proceeding or
claim relating to the existence or amount of liability for Excise Tax, and all
expenses incurred by the Executive in connection therewith shall be paid by the
Company promptly upon notice of demand from the Executive.
<PAGE>

          16.   Successors.

(a)  This Agreement is personal to the Executive and, without the prior written
     consent of the Company, the Executive's rights hereunder shall not be
     assignable by the Executive otherwise than by will or the laws of descent
     and distribution. This Agreement shall inure to the benefit of and be
     enforceable by the Executive's heirs and legal representatives.

(b)  This Agreement shall inure to the benefit of and be binding upon the
     Company and its successors and assigns.

(c)  As used in this Agreement the term, "Company" shall include any successor
     to the Company's business and/or assets as aforesaid which assumes and
     agrees to perform this Agreement by operation of law, or otherwise. The
     Company shall require any successor (whether direct or indirect, by
     purchase, merger, reorganization, consolidation, acquisition of property or
     stock, liquidation, or otherwise) to all or a substantial portion of its
     assets, by agreement in form and substance reasonably satisfactory to the
     Executive, expressly 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 this Agreement if no such succession had taken place.

          17.   Representations.

(a)  The Company represents and warrants that (i) the execution of this
     Agreement has been duly authorized by the Company, including action of the
     Board, (ii) the execution, delivery and performance of this Agreement by
     the Company does not and will not violate any law, regulation, order,
     judgment or decree or any agreement, plan or corporate governance document
     of the Company and (iii) upon the execution and delivery of this Agreement
     by the Executive, this Agreement shall be the valid and binding obligation
     of the Company, enforceable in accordance with its terms (subject to entry
     of a confirmation order regarding the plan of reorganization referred to in
     Section 2, above), except to the extent enforceability may be limited by
     applicable bankruptcy, insolvency or similar laws affecting the enforcement
     of creditors' rights generally and by the effect of general principles of
     equity (regardless of whether enforceability is considered in a proceeding
     in equity or at law).

(b)  The Executive represents and warrants to the Company that (i) the
     execution, delivery and performance of this Agreement by the Executive does
     not and will not violate any law, regulation, order, judgment or decree or
     any agreement to which the Executive is a party or by which he is bound;
     (ii) the Executive is not a party to or bound by any employment agreement,
     noncompetition agreement or confidentiality agreement with any other person
     or entity that would interfere with this Agreement or his performance of
     services hereunder; and (iii) upon the execution and delivery of this
     Agreement by the Company, this Agreement shall be the valid and binding
     obligation of the Executive, enforceable in accordance with its terms,
     except to the extent enforceability may be limited by applicable
     bankruptcy, insolvency or similar laws affecting the enforcement of
     creditors' rights generally and by the effect of general principles of
     equity (regardless of whether enforceability is considered in a proceeding
     in equity or at law).
<PAGE>

          18.   Miscellaneous.

(a)  This Agreement shall be governed by and construed in accordance with the
     laws of the State of Illinois, without reference to principles of choice of
     law. The captions of this Agreement are not part of the provisions hereof
     and shall have no force or effect. This Agreement may not be amended or
     modified otherwise than by a written agreement executed by the parties
     hereto or their respective successors and legal representatives.

(b)  All notices and other communications hereunder shall be in writing and
     shall be given by hand delivery to the other party, by overnight courier,
     or by registered or certified mail, return receipt requested, postage
     prepaid, addressed as follows:

          If to the Executive:

               Mr. Edward G. Harshfield
               132 East Delaware Place
               Apartment 5506
               Chicago, IL  60611

          with a copy to:

               Robert J. Stucker, Esq.
               Vedder, Price, Kaufman & Kammholz
               222 North LaSalle Street, Suite 2600
               Chicago, IL  60601

          If to the Company:

               MFN Financial Corporation
               100 Field Drive, Suite 340
               Lake Forest, Illinois  60045
               Attn:  General Counsel

          with a copy to:

               Lewis S. Rosenbloom, Esq.
               McDermott, Will & Emery
               227 West Monroe Street
               Chicago, IL  60606

or to such other addresses as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee, as evidenced by a delivery receipt.

(c)  None of the provisions of this Agreement shall be deemed to be a penalty.
<PAGE>

(d)  The invalidity or unenforceability of any provision of this Agreement shall
     not affect the validity or unenforceability of any other provision of this
     Agreement.

(e)  Either party's failure to insist upon strict compliance with any provision
     hereof shall not be deemed to be a waiver of such provision or any other
     provision hereof.

(f)  This Agreement supersedes any prior agreements or understandings, written
     or oral, between the Company and the Executive and contains the entire
     understanding of the Company and the Executive with respect to the subject
     matter hereof.

(g)  This Agreement may be executed simultaneously in two or more counterparts,
     each of which shall be deemed an original, but all of which together shall
     constitute one and the same instrument.

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

                                    MFN FINANCIAL CORPORATION

                                    -----------------------------------------
                                    Mark E. Dapier, General Counsel

                                    EDWARD G. HARSHFIELD

                                    -----------------------------------------<PAGE>   1

                          SEQUOIA SOFTWARE CORPORATION
                           2000 STOCK INCENTIVE PLAN

1.       ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS

         SEQUOIA SOFTWARE CORPORATION, a Maryland corporation (the "Company"),
hereby establishes the SEQUOIA SOFTWARE CORPORATION 2000 STOCK INCENTIVE PLAN
(the "Plan"). The purpose of the Plan is to promote the long-term growth and
profitability of the Company by (i) providing key people 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.

         The Plan permits the granting of stock options (including incentive
stock options qualifying under Code section 422 and nonqualified stock
options), stock appreciation rights, restricted or unrestricted stock awards,
phantom stock, performance awards, other stock-based awards, or any combination
of the foregoing.

2.       DEFINITIONS

         Under this Plan, except where the context otherwise indicates, the
following definitions apply:

         (a)      "Affiliate" shall mean 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" shall mean 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" shall mean any stock option, stock appreciation
right, stock award, phantom stock award, performance award, or other
stock-based award.

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

         (d)      "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder.

         (e)      "Common Stock" shall mean shares of common stock of the
Company, par value of  ($.001) 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

                                      -1-

<PAGE>   2

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 2.1(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.

         (g)      "Grant Agreement" shall mean a written document memorializing
the terms and conditions of an Award granted pursuant to the Plan and shall
incorporate the terms of the Plan.

3.       ADMINISTRATION

         (a)      Administration of the Plan. The Plan shall be administered by
the Board or by such committee or committees as may be appointed by the Board
from time to time (the Board, committee or committees hereinafter referred to
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(d) 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.

                                      -2-

<PAGE>   3

         (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, 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(d) of the Plan, the
shares of Common Stock that may be issued with respect to Awards granted under
the Plan shall not exceed an aggregate of 7,895,646 shares of Common Stock plus
that number of shares equal to 20% of the sum of (a) the number of shares of
Common Stock outstanding, on a fully diluted basis, taking into consideration
all securities convertible into or exercisable for Common Stock, upon the
closing of the initial public offering of the Common Stock and (b) the number
of shares of Common Stock issued pursuant to any underwriter's exercise of its
over-allotment option in connection with the initial public offering.
notwithstanding the foregoing, no more than _____ of the total number of shares
reserved herein for Awards under the Plan shall be available for purchase
pursuant to incentive stock options intending 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(d) 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

                                      -3-

<PAGE>   4

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
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

                                      -4-

<PAGE>   5

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.

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)      Loans. The Company or its Affiliate may make or guarantee
loans to grantees to assist grantees in exercising Awards and satisfying any
withholding tax obligations.

         (c)      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.

         (d)      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.

                                      -5-

<PAGE>   6

                  (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 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.

         (e)      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.

         (f)      Termination, Amendment and Modification of the Plan. The
Board may terminate, amend or modify the Plan or any portion thereof at any
time.

         (g)      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.

         (h)      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.

                                      -6-

<PAGE>   7

         (i)      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 Maryland, without regard to its conflict of laws principles.

         (j)      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.

         (k)      Prior Options. Prior to the adoption of the Plan, the Company
granted nonqualified stock options for 7,895,646 shares of Common Stock. For
administrative purposes, those shares shall be subject to this Plan and are
included in the number of shares referred to in Section 4 of the Plan and
available for further Awards under the Plan. Notwithstanding the foregoing,
nothing herein shall be deemed to adversely affect the rights of individuals
under such prior grant agreements.

Date Approved by the Board:
                           -----------------------------------------

Date Approved by the Stockholders:
                                  -----------------------------------------

                                      -7-

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