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                                                                 Exhibit 10.50

                           SECOND AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

      THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (as from time to
time amended in accordance with the provisions hereof, this "AGREEMENT"), is
entered into this 16th day of October, 2001 by and between FRANCIS D. JOHN,
residing at 6731 Paxon Road, Solebury, Pennsylvania 18963 (the "EXECUTIVE"), and
KEY ENERGY SERVICES, INC., a Maryland corporation with its principal executive
offices at 400 South River Road, New Hope, Pennsylvania 18938 (the "COMPANY").

                                    RECITALS

      A. The Company and the Executive previously entered into the Amended and
Restated Employment Agreement dated as of July 1, 1999, as now in effect (the
"1999 EMPLOYMENT AGREEMENT"), pursuant to which the Executive serves as Chairman
of the Board, President and Chief Executive Officer of the Company.

      B. In recognition of the fact that the members of the Compensation
Committee (the "COMPENSATION COMMITTEE") of the Board of Directors of the
Company (the "BOARD") are of the view that obtaining a commitment from the
Executive to continue to serve in his capacities as Chairman of the Board,
President and Chief Executive Officer of the Company until June 30, 2006 is
essential to the continued growth and success of the Company and is in the best
interests of the Company and its shareholders, the Company desires to amend and
restate the 1999 Employment Agreement and continue to retain the services of the
Executive as Chairman of the Board, President and Chief Executive Officer of the
Company pursuant to the terms and conditions hereinafter set forth effective as
of July 1, 2001 (the "COMMENCEMENT DATE").

      C. The Executive is willing to amend and restate the 1999 Employment
Agreement and to continue to serve in such capacities pursuant to the terms and
conditions hereinafter set forth effective as of the Commencement Date.

                                    AGREEMENT

      NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the Company and the Executive hereby agree as follows:

1.    EMPLOYMENT; TERM.

(a) Effective as of the Commencement Date, the 1999 Employment Agreement shall
be terminated and shall be of no further force or effect except for the
Company's obligations (i) to make any payments to the Executive under Section 2
thereof for services rendered and expenses incurred prior to the Commencement
Date, (ii) to make any payments to the Executive under benefit plans for
expenses incurred prior to the Commencement Date and (iii) pertaining to any
options previously granted to the Executive; PROVIDED, HOWEVER, that the
deletion of Section

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6(d) of the 1999 Employment Agreement shall be effective as of January 1, 2001.
The Company hereby agrees to employ the Executive, and the Executive hereby
accepts employment by the Company, as the Company's Chairman of the Board,
President and Chief Executive Officer, such employment to commence as of the
Commencement Date, and to continue until the close of business on June 30, 2006,
subject to extension as provided in this Section 1(a), unless sooner terminated
in accordance with Section 5(b) hereof (the "INITIAL EMPLOYMENT PERIOD"). On
each June 30, commencing with June 30, 2006, the term of the Executive's
employment hereunder shall be automatically extended for an additional twelve
(12) months unless either (x) the Company shall have given written notice to the
Executive that such automatic extension shall not occur (a "COMPANY NONRENEWAL
NOTICE"), which notice shall have been given no later than the March 15
immediately preceding the relevant June 30 or (y) the Executive shall have given
written notice to the Company that such automatic extension shall not occur (an
"EXECUTIVE NONRENEWAL NOTICE"), which notice shall have been given no later than
the April 1 immediately preceding the relevant June 30. The Initial Employment
Period, together with any such extensions, until terminated in accordance with
the terms hereof, is referred to herein as the "EMPLOYMENT PERIOD."

(b) The Executive currently serves as a director on the Board, and as a
director, the President or a Vice President of each material domestic Subsidiary
(as defined in Section 16 hereof), and the Executive hereby agrees to continue
in such positions.

(c) The Executive shall have the responsibilities, duties and authority
commensurate with his positions as the Chairman of the Board, President and
Chief Executive Officer of the Company, including, without limitation, the
general supervision and control over, and responsibility for, the general
management and operation of the Company and its Subsidiaries, subject, however,
to the supervision of the Board insofar as such supervision is required by the
Maryland General Corporation Law, and the Company's Articles of Incorporation
and By-Laws. Such responsibilities, duties and authority shall not be expanded
or contracted without the express consent of the Executive. The Executive will
report only to the Board.

(d) The Executive will devote his full time and his reasonable best efforts to
the business and affairs of the Company and its Subsidiaries; PROVIDED, HOWEVER,
that nothing contained in this Section 1 shall be deemed to prevent or limit the
Executive's right to: (i) make investments in the securities of any
publicly-owned corporation; or (ii) make any other investments with respect to
which he is not obligated or required to, and to which he does not in fact,
devote substantial managerial efforts which materially interfere with his
fulfillment of his duties hereunder; or (iii) to continue to serve on boards of
directors on which he currently serves and to serve in such other positions with
non-profit and for-profit organizations as to which the Board may from time to
time consent, which consent shall not be unreasonably withheld, delayed or
conditioned.

(e) The Executive may perform his duties at the Company's principal executive
offices or at such other locations as the Executive may from time to time in his
sole discretion determine. The location of the Company's principal executive
offices may be transferred by the Executive or, with the Executive's consent, by
the Board, in which event the Company will pay moving, temporary living and
other reasonable expenses in connection with the Executive's relocation from his
present primary residence to a location in proximity to the Company's

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principal offices. The Company will pay travel, living and all other reasonable
expenses incurred by the Executive in connection with his travel to and from,
and the performance of services by him at, the Company's principal executive
offices.

2.    SALARY; BONUSES; EXPENSES.

(a) During the Employment Period, the Company will pay a salary to the
Executive, payable in substantially equal installments in accordance with the
Company's existing payroll practices, but no less frequently than biweekly, at
the following annual rates (the "BASE SALARY"): (i) at all times on or prior to
December 31, 2002, Five Hundred Ninety-Five Thousand Dollars ($595,000) per
year, and (ii) at all times on or after January 1, 2003, Six Hundred Ninety-Five
Thousand Dollars ($695,000) per year. The Company will review the Base Salary on
a yearly basis promptly following the end of each Fiscal Year of the Company (a
"FISCAL YEAR" of the Company being the twelve-month period beginning each July
1) to determine if an increase is advisable, and the Base Salary may be
increased but not decreased at the discretion of the Board or the Compensation
Committee, taking into account, among other factors, the Executive's performance
and the performance of the Company.

(b) For each six-month or other applicable period commencing on July 1, 2001 and
thereafter, the Executive shall be eligible to participate in the Company's
Performance Compensation Plan (the "PERFORMANCE COMPENSATION PLAN") for the
Company's executives providing for the payment of cash bonuses, which plan will
provide for the payment of bonuses based upon the achievement of goals set forth
in the Company's strategic plan as developed by the Compensation Committee after
consultation with the Executive, payable within ninety (90) days after the end
of such period. The performance goals for the Performance Compensation Plan will
be based on objective criteria specified in good faith in advance by the
Compensation Committee after consultation with the Executive, and, if such
criteria are achieved, the minimum annual bonus to which the Executive shall be
entitled pursuant to this Section 2(b) shall be equal to 100% of the Base Salary
(for example, if the bonus is earned with respect to a six-month period, the
bonus will be 50% of the Base Salary). Each bonus determined in accordance with
this Section 2(b) is referred to herein as a "SPECIFIED BONUS."

(c) The Executive shall also receive such bonuses other than pursuant to the
Performance Compensation Plan in such amounts and at such times as the
Compensation Committee in its discretion determines are appropriate to recognize
extraordinary performance by the Executive or the Company or extraordinary
actions by the Company, which shall include, without limitation: (i) the
acquisition of the stock or assets, or the merger or consolidation with or into,
another company or other entity; (ii) the acquisition or sale of a division or
divisions of the Company; (iii) the acquisition or sale of a Subsidiary or
Subsidiaries, or the acquisition or sale of the Company; (iv) financings or
refinancings, debt or equity, relating to the Company or any of its
Subsidiaries; (v) restructurings, recapitalizations, reorganizations or other
similar events relating to the Company or any of its Subsidiaries; or (vi) any
other event relating to the Company or any of its Subsidiaries that is outside
of the ordinary course of business and material to the Company or any of its
Subsidiaries. Any bonus paid to the Executive pursuant to this Section 2(c) is
referred to herein as a "SPECIAL BONUS".

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(d)   SUBSTITUTION OF RETENTION INCENTIVE BONUS FOR LOANS.

      (i) Pursuant to an Agreement dated as of August 2, 1999 (the "LOAN
Agreement") between the Executive and the Company: (A) the Executive and the
Company acknowledged that the Executive was indebted to the Company in the
aggregate principal amount of Five Million Dollars ($5,000,000.00); (B) such
indebtedness, including all accrued and unpaid interests thereon, was to have
been forgiven with respect to 20% of the principal amount thereof, and all
accrued and unpaid interest thereon, on July 1, 2000 and on each July 1
thereafter, to and including July 1, 2004; and (C) the Executive was to be
"grossed up" by the Company so that the Company would pay all taxes incurred by
the Executive by virtue of such forgiveness.

      (ii) The Loan Agreement was subsequently amended: (A) as of December 1,
1999 to provide that such forgiveness would occur only if the price of the
Company's stock reached a level which was approximately 2.4 times the price on
the date of such amendment, which condition was subsequently satisfied; (B) as
of June 16, 2000, in contemplation of the Executive entering into an employment
arrangement different from that contained in this Agreement, to change the dates
and rate of forgiveness; and (C) as of May 14, 2001 to further change the dates
of forgiveness and to include the loan referred to in Section 2(d)(iii) hereof
in the indebtedness to be forgiven under the Loan Agreement.

      (iii) In recognition of the Executive's past services to the Company in
respect of the successful integration of the business and operations of Dawson
Production Services, Inc. ("DAWSON") with the business and operations of the
Company, the significant reduction in the Company's long-term debt and leverage
since the Dawson acquisition and the Company's successful public equity and debt
offerings, on May 14, 2001 the Company loaned to the Executive an additional
$1,500,000 subject to the terms and conditions, including the dates and rate of
forgiveness, set forth in the Loan Agreement, as amended.

      (iv) In order to stop interest accruing on the loans which later will be
forgiven, the Company has requested, and the Executive has agreed, to have such
extinguishment and gross-up to occur on such date on or prior to December 31,
2001 as the Company may specify by not less than five business days' prior
notice to the Executive (the "RETENTION INCENTIVE BONUS PAYMENT DATE"), subject
to the provisions of Section 2(d)(vi) hereof; PROVIDED, HOWEVER, that if the
Company fails to give such notice, the Retention Incentive Bonus Payment Date
shall be December 31, 2001.

      (v) On the Retention Incentive Bonus Payment Date, the Company shall pay
to the Executive an extraordinary bonus (the "RETENTION INCENTIVE BONUS") in an
amount equal to the aggregate principal amount of, and all accrued and unpaid
interest on, all indebtedness of the Executive to the Company under the Loan
Agreement PLUS the aggregate amount payable by the Company as "gross up"
payments pursuant to the Loan Agreement in respect of all payments pursuant to
this Section 2(d)(v) as if such payments were forgiveness of indebtedness and
payments entitled to such "gross up" payments. The Executive and the Company
shall agree on the amount of the Retention Incentive

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Bonus not less than one business day prior to the Retention Incentive Bonus
Payment Date. The Executive will be entitled to retain the Retention Incentive
Bonus subject to the provisions of Section 2(d)(vi) hereof. The Retention
Incentive Bonus shall be paid to the Executive subject to the following
withholdings: first, the Company shall withhold such amount of the Retention
Incentive Bonus as may be necessary to satisfy tax withholding requirements with
respect thereto; and second, the Company shall withhold and apply such amount of
the remainder of the Retention Incentive Bonus as may be necessary for the
payment in full of all indebtedness of the Executive of the Company under the
Loan Agreement, including all accrued and unpaid interest thereon. In connection
with the satisfaction of such indebtedness, the Company shall deliver to the
Executive all notes evidencing such indebtedness marked "Paid in Full" and shall
release and discharge of record the mortgages securing such indebtedness. The
Company and the Executive acknowledge that the application of the Retention
Incentive Bonus to amounts payable under the Loan Agreement pursuant to this
Section 2(d)(v) shall constitute payment in full of all indebtedness subject
thereto.

      (vi) In the event that, prior to June 30, 2011, the Executive's employment
is terminated pursuant to Section 5(b)(i), Section 5(b)(ix) or Section 5(b)(x)
hereof (it being understood that an Executive Nonrenewal Notice that is intended
to be effective on or after June 30, 2011 is not such a termination), then the
Executive shall, on or before the date which is sixty (60) days after the
effective date of such termination, pay to the Company an amount equal to the
percentage of the Retention Incentive Bonus specified in the table below with
respect to such effective date:

                                                     PERCENTAGE OF
                 EFFECTIVE DATE                RETENTION INCENTIVE BONUS
                 OF TERMINATION              TO BE RETURNED TO THE COMPANY
            ---------------------------      -----------------------------

            Prior to June 30, 2002                         100%

            On and after June 30, 2002                      90%
            and prior to June 30, 2003

            On and after June 30, 2003                      80%
            and prior to June 30, 2004

            On and after June 30, 2004                      70%
            and prior to June 30, 2005

            On and after June 30, 2005                      60%
            and prior to June 30, 2006

            On and after June 30, 2006                      50%
            and prior to June 30, 2007

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            On and after June 30, 2007                      40%
            and prior to June 30, 2008

            On and after June 30, 2008                      30%
            and prior to June 30, 2009

            On and after June 30, 2009                      20%
            and prior to June 30, 2010

            On and after June 30, 2010                      10%
            and prior to June 30, 2011

            On and after June 30, 2011                       0%

      (e) The Executive is authorized to incur and shall be reimbursed by the
Company for all reasonable expenses, including, but not limited to travel,
lodging, meal and other expenses, in each case as determined by him in his sole
discretion, incurred by him in carrying out his duties hereunder. All commercial
air travel by the Executive may be in first class. In addition, it is the
Company's desire for security and other safety related issues that the
Executive, in his sole discretion, have the authority to lease or otherwise
contract for the services of a private aircraft for business related or for
personal travel, the cost of which shall be paid or reimbursed by the Company;
PROVIDED, HOWEVER, that, in the event that such private aircraft is used solely
for personal travel, the Executive shall reimburse the Company for such travel
in the amount of a first class ticket for air travel to the applicable
destination for each person engaging in such personal travel with the Executive.

3.    STOCK OPTIONS.

      (a) The Company acknowledges that the Executive has previously been
awarded stock options that are either fully vested or not fully vested, as the
case may be, and the Company reaffirms herein its contractual commitments in the
agreements awarding such options. Except as otherwise modified by the terms of
this Agreement, the terms of the stock option agreements pertaining to such
outstanding stock options shall continue to apply and be construed so as not to
change or modify any rights of the Executive set forth therein.

      (b) For each Fiscal Year beginning on or after July 1, 2001, the Executive
shall be eligible to participate in stock option grants made to the Company's
executives. The amount and terms of such grants will be specified in good faith
by the Compensation Committee after consultation with the Executive. The options
granted to the Executive during each Fiscal Year are referred to herein as the
"ANNUAL STOCK OPTION GRANT."

      (c) The Company agrees, so long as the Company shall be subject to the
reporting requirements of Section 13 or 15(d) (or any successor provision) of
the 1934 Act, it shall use its reasonable best efforts to cause to become
effective a registration statement on Form S-3 or S-8 (or a successor form), and
to maintain the effectiveness of such registration statement, such that any
issuance of stock by the Company to the Executive (or his permitted assignee)
upon the

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exercise of any such options shall be registered under the Securities Act of
1933, as amended (or any successor provision).

4. BENEFIT PLANS; VACATIONS. In connection with the Executive's employment
hereunder, he shall be entitled during the Employment Period (and thereafter to
the extent provided in Section 5(g) hereof) to the following additional
benefits:

      (a) At the Company's expense, the Executive shall be entitled to such
fringe benefits, including, without limitation, group medical and dental, life,
executive life, accident and disability insurance and retirement plans and
supplemental and excess retirement benefits, as the Company may provide from
time to time for its senior management, but, in any case, at least the benefits
described on Schedule A hereto.

      (b) The Executive shall be entitled to no less than the number of vacation
days in each Fiscal Year determined in accordance with the Company's vacation
policy as in effect from time to time, but in any event no less than thirty (30)
business days in any Fiscal Year (prorated in any Fiscal Year during which he is
employed hereunder for less than the entire Fiscal Year in accordance with the
number of days in such Fiscal Year in which he is so employed), PROVIDED that,
beginning with the Fiscal Year beginning July 1, 2002, such 30 business day
period shall be increased by a number of days equal to the excess, if any, of 30
business days over the number of business days taken by the Executive as
vacation during the immediately preceding Fiscal Year. The Executive shall also
be entitled to all paid holidays and personal days given by the Company to its
executives.

      (c) The Company acknowledges that a substantial amount of the business
travel undertaken by the Executive is done by means of his driving himself or
being driven in an automobile. The Company shall lease one automobile for the
Executive substantially similar to the automobile currently leased for the
Executive and shall pay all expenses, including but not limited to insurance,
repair and maintenance, incurred by the Executive in connection with the use of
the automobile during the Employment Period as well as a driver trained in
security techniques if needed for his use. In addition, the Executive shall have
the authority, in his sole discretion, to contract for the services of a car and
driver for security and safety reasons to be at his disposal 24 hours a day, 7
days a week, the cost of which shall be paid or reimbursed by the Company.

      (d) The Company will pay the reasonable fees for personal (i) financial
advisory, counseling, accounting and related services; (ii) legal advisory or
attorneys' fees and related expenses; and (iii) income tax return preparation
and tax audit services as reasonably requested by the Executive, provided by
certified public accountants and tax attorneys acceptable to him.

      (e) The Company shall pay or reimburse the reasonable expenses for the
Executive to be able to perform his duties hereunder from his home or any other
location from time to time chosen by the Executive. It is also the Company's
desire that the Executive be entitled to establish Company paid offices for his
use at or near locations in which he may be staying for periods in excess of
twenty-four (24) hours and that the Executive shall be entitled (i) to incur (at
the Company's expense) all expenses deemed reasonably necessary by him in his
sole discretion to establish and maintain Company offices at such locations for
such periods and (ii) to employ

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at the Company's expense such number of administrative assistants at appropriate
compensation levels as are considered necessary by him. In addition, the Company
will provide the Executive with a security system or security coverage at the
job location, at his residence or otherwise, if reasonably requested by the
Executive.

      (f) Nothing herein contained shall preclude the Executive, to the extent
he is otherwise eligible, from participation in all group insurance programs or
other fringe benefit plans which the Company may from time to time in its sole
and absolute discretion make available generally to its personnel, or for
personnel similarly situated, but the Company shall not be required to establish
or maintain any such program or plan except as may be otherwise expressly
provided herein.

      (g) The Company shall pay all membership costs, including, without
limitation, all initiation and membership fees and expenses and all annual or
other periodic fees, dues and costs (including any bond requirement), for the
Executive to become and remain a member of any one private country club, golf
club, tennis club, dining club or similar club or association and any one health
club, spa or similar club or association, in each case as the Executive
determines in his sole discretion is desirable for the maintenance of his
well-being or position in the business or local community.

      (h) The Executive shall be entitled to participate in all other Company
benefit plans, as well as any supplemental benefit or perquisite plans, as the
Company may provide from time to time for its senior executives, on a basis
commensurate with his position.

      (i) The Executive shall, after taking into account any taxes on
reimbursements or other benefits, be kept whole with respect to each
reimbursement or other benefit referred to in this Section 4 (other than those
referred to in Sections 4(b) hereof). Accordingly, to the extent the Executive
is taxed on any such reimbursements or benefits, the Company shall pay the
Executive, in connection therewith, an amount which, after all taxes incurred by
the Executive on payments pursuant to this Section 4(i), shall equal the amount
of the taxes on the reimbursement or benefit being provided.

5.    TERMINATION, CHANGE IN CONTROL AND REASSIGNMENT OF DUTIES.

      (a)  CERTAIN DEFINITIONS. As used herein:

            (i) The term "CAUSE" shall mean any of the of the following:

            (A) the willful and continued (after a reasonable period following
                such demand) failure by the Executive to substantially perform
                his duties hereunder (other than (I) any such willful or
                continued failure resulting from his incapacity due to physical
                or mental illness or physical injury or (II) any such actual or
                anticipated failure after the issuance of a notice of
                termination by the Executive pursuant to Section 5(b)(vi), (vii)
                or (viii)), after written demand for substantial performance is
                delivered by the Company to the Executive that specifically
                identifies the manner in which the Company believes the
                Executive has not substantially performed his duties;

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            (B) the willful engaging by the Executive in misconduct which is
                materially injurious to the Company, monetarily or otherwise; or

            (C) the conviction of the Executive of a felony by a court of
                competent jurisdiction in a judgment which has become final and
                nonappealable if such conviction would render it impossible for
                the Executive to perform his obligations hereunder or if the
                reputation of the Company would be materially damaged by the
                continuance of the Executive's employment hereunder.

      For purposes of this definition, no act, or failure to act, on the part of
      the Executive shall be considered "willful" unless done or omitted to be
      done by him in bad faith and without reasonable belief that his action or
      omission was in the best interest of the Company.

            (ii) The term "CHANGE IN CONTROL" shall have the same meaning as set
      forth in Section 6.7 of the Company's 1997 Incentive Plan.

            (iii) The term "EXECUTIVE'S DEATH" shall mean the death of the
      Executive.

            (iv) The term "EXECUTIVE'S DISABILITY" shall mean the Executive's
      becoming totally and permanently disabled during the Employment Period so
      that he is unable to perform his obligations hereunder by reasons
      involving physical or mental illness or physical injury (A) for a period
      of ninety (90) consecutive days, or (B) for an aggregate of one hundred
      fifty (150) days during any period of twelve (12) consecutive months.

            (v) The term "FINAL AVERAGE COMPENSATION" means the sum of

            (A) the greater of (x) $595,000 or (y) the average of the Base
                Salary as in effect during the three Fiscal Years preceding the
                date of termination and commencing no earlier than July 1, 2001
                (or, if shorter, the number of Fiscal Years from July 1, 2001 to
                the date of termination) plus

            (B) the greater of (x) $595,000 or (y) the average of the Specified
                Bonuses awarded to the Executive pursuant to Section 2(b) hereof
                during the three Fiscal Years preceding the date of termination
                and commencing no earlier than July 1, 2001 (or, if shorter, the
                number of Fiscal Years from July 1, 2001 to the date of
                termination) plus

            (C) the greater of (x) $250,000 or (y) the average of all Special
                Bonuses awarded to the Executive pursuant to Section 2(c) of
                this Agreement during the three Fiscal Years preceding the date
                of termination and commencing no earlier than July 1, 2001 (or,
                if shorter, the number of Fiscal Years from July 1, 2001 to the
                date of termination);

      PROVIDED, HOWEVER, that in no event shall either the Retention Incentive
      Bonus be included in the computation of Final Average Compensation.

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            (vi) The term "GOOD REASON" shall mean any of the following:

            (A) failure by the Board to nominate the Executive for election to
                the Board at any time such nominations are made, or failure of
                the stockholders of the Company to elect the Executive to the
                Board, or failure of the Board to elect the Executive as
                Chairman of the Board, President and Chief Executive Officer of
                the Company, or failure by the Board of Directors or
                stockholders of any Subsidiary to elect the Executive to such
                Board of Directors or other executive office as may be requested
                by the Executive from time to time, or removal of the Executive
                from the Board, the Board of Directors of a Subsidiary or any
                such office of the Company or of a Subsidiary, PROVIDED that
                such failure or removal is not in connection with a termination
                of the Executive's employment hereunder for Cause in accordance
                with Section 5(b)(i), and PROVIDED FURTHER that any notice of
                termination hereunder shall be given by the Executive within
                ninety (90) days of such failure or removal;

            (B) material change by the Company in the Executive's authority,
                functions, duties or responsibilities as Chairman of the Board,
                President and Chief Executive Officer of the Company (including,
                without limitation, material changes in the control or structure
                of the Company) which would cause his position with the Company
                to become of less responsibility, importance, scope or dignity
                than his position as of the Commencement Date, PROVIDED that (I)
                such material change is not in connection with a termination of
                Executive's employment hereunder for Cause in accordance with
                Section 5(b)(i), (II) such material change is not made in
                accordance with Section 5(c)(ii) following a termination of
                Executive's employment pursuant to Section 5(b)(iv) or (x),
                (III) such material change is not made in accordance with
                Section 5(b)(ii) pertaining to disability, including without
                limitation the time period restrictions applicable thereunder,
                and (IV) any notice of termination hereunder shall be given by
                the Executive within ninety (90) days of when the Executive
                becomes aware of such change;

            (C) failure by the Company to comply with any provision of Section
                1, 2, 3, 4, 5(h) or 8 of this Agreement, which has not been
                cured within fifteen (15) days after notice of such
                noncompliance has been given by the Executive to the Company,
                PROVIDED that no such opportunity for cure need be given if
                there has been a previous failure described in this clause (C)
                in the twelve months immediately preceding such failure, and
                PROVIDED, FURTHER, that any notice of termination hereunder
                shall be given by the Executive within ninety (90) days after
                the end of such fifteen (15) day period or such failure (as
                applicable);

            (D) failure by the Company to obtain an assumption of this Agreement
                by a successor in accordance with Section 14 hereof unless
                payment or provision for continuation of benefits under this
                Agreement have been made in a manner permitted by this Section
                5; or

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            (E) any purported termination by the Company of the Executive's
                employment which is not effected in accordance with the terms of
                this Agreement, including without limitation pursuant to a
                notice of termination not satisfying the requirements set forth
                herein (and for purposes of this Agreement no such purported
                termination by the Company shall be effective), which has not
                been cured within ten (10) days after notice of such
                nonconformance has been given by the Executive to the Company,
                PROVIDED that no such opportunity for cure need be given if
                there has been a previous purported termination described in
                this clause (E) in the twelve months immediately preceding such
                purported termination, and PROVIDED, FURTHER any notice of
                termination hereunder shall be given by the Executive within
                thirty (30) days of receipt of notice of such purported
                termination.

      (b) TERMINATION OF EXECUTIVE'S EMPLOYMENT. The Executive's employment
under this Agreement may be terminated as follows and in no other way:

            (i) The Company may terminate the Executive's employment under this
      Agreement at any time for Cause; PROVIDED, HOWEVER, that the Executive's
      employment shall not be deemed to have been terminated for Cause pursuant
      to this Section 5(b)(i) unless (x) notice shall have been given to him
      setting forth in reasonable detail the reasons for the Company's intention
      to terminate for Cause; (y) an opportunity shall have been provided for
      the Executive, together with his counsel, to be heard before the Board;
      and (z) delivery shall have been made to the Executive of a notice of
      termination from the Board finding that in the good faith opinion of a
      majority of the Board (excluding the Executive) he was guilty of conduct
      constituting "Cause" and specifying the particulars thereof in detail.

            (ii) The Company may terminate the Executive's employment under this
      Agreement at any time for the Executive's Disability; PROVIDED, HOWEVER,
      that Board must give notice of such termination within sixty (60) days
      after the expiration of applicable period for determining the Executive's
      Disability, said termination to be effective ten (10) days after written
      notice to the Executive. During any period that the Executive's Disability
      has not yet been determined and the Executive is totally disabled such
      that he is unable to perform his obligations hereunder by reason involving
      physical or mental illness or physical injury, as determined by a
      physician chosen by the Company and reasonably acceptable to the Executive
      (or his legal representative), the Company may reassign the Executive's
      duties hereunder to another person or other persons, PROVIDED that if the
      Executive shall again be able to perform his obligations hereunder, all
      such duties shall again be the Executive's duties. The cost of any
      examination by such physician shall be borne by the Company. Any such
      reassignment shall not be a termination of employment and in no event
      shall such reassignment reduce the Company's obligations to make salary,
      bonus and other payments to the Executive and to provide other benefits to
      him under this Agreement during his employment.

                                                                            -11-
<PAGE>

            (iii) The Company may terminate the Executive's employment under
      this Agreement by giving a Company Nonrenewal Notice in accordance with
      Section 1(a) hereof.

            (iv) The Company may terminate the Executive's employment under this
      Agreement at any time other than pursuant to Sections 5(b)(i), (ii) or
      (iii) hereof; PROVIDED, HOWEVER, that if the Company desires to terminate
      the Executive's employment pursuant to this Section 5(b)(iv) (a "COMPANY
      VOLUNTARY TERMINATION"), it shall give the Executive not less than ninety
      (90) days' prior written notice of such termination.

            (v) The Executive's employment under this Agreement shall be
      automatically terminated upon the Executive's Death.

            (vi) The Executive may terminate his employment under this Agreement
      at any time for Good Reason effective upon his giving notice to the
      Company of such termination setting forth in reasonable detail the reasons
      for the Executive's intention to terminate for Good Reason.

            (vii) The Executive may terminate his employment under this
      Agreement at any time following but prior to the date which is one year
      after the occurrence of a Change in Control, effective upon his giving
      notice to the Company of such termination.

            (viii) The Executive may terminate his employment under this
      Agreement at any time, effective upon his giving notice to the Company of
      such termination, if it becomes probable that Executive Disability will
      occur, PROVIDED that he has obtained a written statement from a qualified
      doctor to such effect.

            (ix) The Executive may terminate his employment under this Agreement
      by giving an Executive Nonrenewal Notice in accordance with Section 1(a)
      hereof.

            (x) The Executive may terminate his employment under this Agreement
      at any time other than pursuant to Sections 5(b)(vi), (vii), (viii) or
      (ix) hereof; PROVIDED, HOWEVER, that if the Executive desires to terminate
      his employment pursuant to this Section 5(b)(x) (an "EXECUTIVE VOLUNTARY
      TERMINATION"), he shall give the Company not less than ninety (90) days'
      prior written notice of such termination.

In the event that the Executive's employment hereunder terminates: (x) for any
reason within one year of a Change in Control, then such termination shall be
conclusively deemed to have been occurred pursuant to Section 5(b)(vii) hereof
for all purposes of this Agreement; (y) for any reason after the Company has
given a notice pursuant to Section 5(b)(iii) or (iv) hereof or the Executive has
or could have given a notice pursuant to Section 5(b)(vi) hereof, then such
termination shall be conclusively deemed to have occurred pursuant to such
Section 5(b)(iii), (iv) or (vi), as applicable, for all purposes of this
Agreement

      (c) EFFECT OF TERMINATION.

            (i) Upon termination of the Executive's employment hereunder
      pursuant to Section 5(b) hereof, then, effective upon the date such
      termination is effective, he will be

                                                                            -12-

<PAGE>

      deemed automatically to have resigned from all positions as an officer and
      Director of the Company and of any of its Subsidiaries, except as the
      parties (or with respect to positions with a Subsidiary, the Executive and
      the Subsidiary) may otherwise agree.

            (ii) In the event that either the Company gives the Executive notice
      of a Company Voluntary Termination or the Executive gives the Company
      notice of an Executive Voluntary Termination, then for the purpose of
      effecting a transition during the ninety (90) day notice period of the
      management of the Company from the Executive to another person or persons,
      during such period the Company may reassign the Executive's duties
      hereunder to another person or other persons. Such reassignment shall not
      reduce the Company's obligations hereunder to make salary, bonus and other
      payments to the Executive and to provide other benefits to him during the
      remainder of his employment, including without limitation the use of his
      office and secretarial services during the remainder of his employment.

      (d) ACCRUED COMPENSATION. In the event of any termination of the
Executive's employment under this Agreement for any reason, the Executive (or
his estate) shall be paid such portion of his Base Salary and bonuses as he has
accrued (including without limitation as provided below) by virtue of his
employment during the period prior to termination and has not yet been paid,
together with any amounts for expense reimbursement and similar items which have
been properly incurred in accordance with the provisions hereof prior to
termination and have not yet been paid. Such amounts shall be paid within ten
(10) days of the date his employment hereunder terminates. The amount due to the
Executive (or his estate) under this Section 5(d) in payment of any bonus,
including without limitation the Specified Bonus and/or Annual Stock Option
Grant, shall be a proportionate amount of the bonus or stock option grant (as
applicable) that would next be payable or awardable to him and would otherwise
have been due to the Executive if such termination had not occurred and such
bonus or stock options (as applicable) had been fully earned, and which
proportion shall be based on the number of elapsed days in the applicable bonus
period prior to the termination date and in which the termination date occurs.
If and to the extent the Executive has any accrued vacation days that he has not
then taken as vacation, he shall be compensated for such unused vacation days in
an amount equal to the number of such days MULTIPLIED BY Base Salary then in
effect DIVIDED BY 255.

      (e) SEVERANCE COMPENSATION. In addition to all other amounts payable to
the Executive hereunder:

            (i) In the event the Executive's employment hereunder is terminated
      pursuant to Section 5(b)(iii), (iv), (vi) or (vii) hereof, the Executive
      shall be entitled to severance compensation in an aggregate amount equal
      to five times the Final Average Compensation, payable in a lump sum on the
      date such termination occurs.

            (ii) In the event the Executive's employment hereunder is terminated
      pursuant to Section 5(b)(ii) or (viii) hereof, the Executive shall be
      entitled to severance compensation in an aggregate amount equal to three
      times the Final Average Compensation, reduced by the amount of any
      Company-paid disability insurance proceeds actually paid to the Executive
      or for his benefit during the three years

                                                                            -13-
<PAGE>

      immediately following such termination, payable in a lump sum on the date
      such termination occurs.

            (iii) In the event the Executive's employment hereunder is
      terminated to Section 5(b)(i), (v), (ix) or (x), the Executive shall not
      be entitled to any additional severance compensation pursuant to this
      Section 5(e).

      (f) EFFECT OF TERMINATION OR CHANGE IN CONTROL UPON EQUITY COMPENSATION.

            (i) In the event the Executive's employment hereunder is terminated
      pursuant to Section 5(b)(ii), (iii), (iv), (v), (vi), (vii) or (viii)
      hereof, then, effective upon the date such termination is effective, any
      restricted stock or unexpired options held by the Executive (or his
      assignee) entitling the Executive (or his assignee) to purchase securities
      of the Company shall, notwithstanding any contrary provision in the
      agreement or plan pursuant to which such restricted stock or options were
      granted, become fully vested and all such options shall become exercisable
      as of such date and shall remain exercisable during the respective terms
      of such options as set forth in the pertinent option agreement.

            (ii) In the event the Executive's employment hereunder is terminated
      pursuant to Section 5(b)(i), (ix) or (x) hereof, then, effective upon the
      date such termination is effective, any restricted stock or options not
      previously vested shall be forfeited, unless there shall be a contrary
      provision in the agreement or plan pursuant to which such restricted stock
      or options were granted.

            (iii) In the event of a Change in Control while the Executive is
      employed, and whether or not the Executive's employment hereunder is
      subsequently terminated, then, as of the date immediately prior to the
      date such Change in Control shall occur, any restricted stock or unexpired
      options held by the Executive (or his assignee) entitling the Executive
      (or his assignee) to purchase securities of the Company shall,
      notwithstanding any contrary provision in the agreement or plan pursuant
      to which such restricted stock or options were granted, become fully
      vested and all such options shall become exercisable as of such date and
      shall remain exercisable during the respective terms of such options as
      set forth in the pertinent option agreement.

      (g) CONTINUATION OF BENEFITS, ETC.

            (i) Subject to the provisions of Section 5(g)(ii) hereof, in the
      event the Executive's employment hereunder is terminated pursuant to
      Section 5(b)(ii), (iii), (iv), (vi), (vii) or (viii) hereof:

            (A) The Executive (or his family, as applicable) shall continue to
                be entitled to the benefits that the Executive was receiving or
                to which the Executive was entitled, as of the date immediately
                preceding the applicable termination date, pursuant to Section 4
                hereof (except for the benefit described in Section 4(i) hereof)
                at the Company's expense for a period of time following the
                termination date ending on the first to occur of (I) the third
                anniversary of the date such employment terminated or (II) the
                date on which the Executive commences full-time employment by
                another

                                                                            -14-
<PAGE>

                employer, but only if and to the extent the Executive is
                eligible to receive through such other employer benefits which
                are at least equivalent on an aggregate basis to those benefits
                the Executive was receiving or to which the Executive was
                entitled under Section 4 hereof as of the date immediately
                preceding such date of termination. If, because of limitations
                required by third parties or imposed by law, the Executive
                cannot be provided such benefits through the Company's plans,
                then the Company will provide the Executive (or his family, as
                applicable) with substantially equivalent benefits, on an
                aggregate basis, at the Company's expense. For purposes of the
                determination of any benefits which require a particular period
                of employment by the Company and/or the attainment of a
                particular age while employed by the Company in order to be
                payable, the Executive shall be treated as having continued in
                the employment of the Company during such period of time as the
                Executive (or his family, as applicable) is entitled to receive
                benefits under this Section 5(g). At such time as the Company is
                no longer required to provide the Executive with life insurance,
                the Executive shall be entitled at the Executive's expense to
                obtain ownership of such life insurance, except and to the
                extent such transfer of ownership is not available from the
                provider of such insurance.

            (B) The Executive shall be entitled, at the Company's expense for a
                period of time following the termination date ending on the
                first to occur of (A) the third anniversary of the termination
                date or (B) the date on which a Executive commences full-time
                employment by another employer, to office space at such location
                as the Executive may from time to time specify and secretarial
                services, in each case substantially commensurate with the
                office space and secretarial services furnished by the Company
                to the Executive prior to the termination date, and to be
                furnished executive job search and employment services by an
                executive employment firm of national reputation selected by the
                Executive and approved by the Board, which approval shall not be
                unreasonably withheld or delayed.

            (ii) In the event the Executive's employment is terminated pursuant
      to Section 5(b)(vii) hereof or is terminated by the Company in
      anticipation of a Change in Control for any reason other than pursuant to
      Section 5(b)(i) hereof, the Company shall pay to the Executive, in lieu of
      providing the benefits contemplated by Section 5(g)(i) hereof, an amount
      in cash equal to the aggregate reasonable expenses that the Company would
      incur if it were to provide such benefits for a period of time following
      the termination date ending on the third anniversary of the termination
      date, which amount shall be paid in one lump sum within ten (10) days
      after the date of such termination.

            (iii) With respect to any termination of the Executive's employment
      pursuant to Section 5(b)(v) hereof, the Executive's family shall be
      entitled to receive continued participation in medical and dental
      insurance coverage until the death of the Executive's spouse; PROVIDED
      that (A) if the Executive's family is precluded from continuing its
      participation in any such coverage, they shall be provided with the
      after-tax economic equivalent of the benefits provided under the plan or
      program in which they are to

                                                                            -15-
<PAGE>

      participate for the period specified above, (B) the economic equivalent of
      any benefit forgone shall be deemed to be the lowest cost that would be
      incurred by the Executive's family in obtaining such benefit themselves on
      an individual or family (as applicable) basis, and (C) payment of such
      after-tax economic equivalent shall be made quarterly in advance.

      (h) NEW EXECUTIVE OFFICE BUILDING.

            (i) The Company is in the process of moving its executive offices
      from East Brunswick, New Jersey to a building located in New Hope,
      Pennsylvania (together with the real property, fixtures and other assets
      associated therewith, the "NEW EXECUTIVE OFFICE BUILDING") in which the
      Company has leased office space pursuant to a lease (the "EXECUTIVE OFFICE
      Lease"). In connection with entering into the Executive Office Lease, the
      Company was granted by the landlord an option (the "BUILDING PURCHASE
      OPTION") to purchase, at a specified price, the New Executive Office
      Building.

            (ii) In the event the Executive's employment is terminated pursuant
      to Section 5(b)(vii) hereof or is terminated by the Company in
      anticipation of a Change in Control for any reason other than pursuant to
      Section 5(b)(i) hereof, the Board may, by notice (the "BUILDING RETENTION
      NOTICE") given to the Executive within one (1) month of the date that the
      Executive's employment is terminated, elect have the provisions of this
      Section 5(b)(ii) apply instead of the provisions of Section 5(b)(iii)
      hereof if, in good faith, it reasonably determines that the retention by
      the Company of the Executive Office Lease and the Building Purchase Option
      is desirable in connection with the continued conduct of its business from
      the New Executive Office Building, in which event the Company shall pay to
      the Executive an amount (the "BUILDING AMOUNT") equal to the sum of the
      Option Amount PLUS the Lease Amount. The term "OPTION AMOUNT" shall mean
      the fair market value of the Building Purchase Option to the holder
      thereof as at the time of such termination (but in no event less than $0),
      and the term "LEASE AMOUNT" shall mean the fair market value of the
      Executive Office Lease to the lessee thereunder as at the time of such
      termination (but in no event less than $0), in each case as determined by
      a real estate appraiser, selected by the Executive and the Board, having
      experience in the rentals of executive office buildings in the area in
      which the New Executive Office Building is located; PROVIDED, HOWEVER,
      that if the Executive and the Board shall have failed to agree on such
      appraiser within ten (10) business days after the Board has given such
      notice, the Executive shall appoint one such appraiser, the Board shall
      appoint one such appraiser, the two appraisers shall appoint a third such
      appraiser and such third appraiser shall make the determination of the
      Option Value and the Lease Value. No more than ten (10) business days
      after the date of such determination, the Company shall pay the Building
      Amount to the Executive. The Company shall pay all costs and expenses of
      each appraiser appointed pursuant to this Section 5(h)(ii).

            (iii) In the event the Executive's employment is terminated pursuant
      to Section 5(b)(vii) hereof or is terminated by the Company in
      anticipation of a Change in Control for any reason other than pursuant to
      Section 5(b)(i) hereof, and the Company shall not have given to the
      Executive the Building Retention Notice within one (1) month of the date
      that the Executive's employment is terminated, the Company shall, upon
      notice from

                                                                            -16-
<PAGE>

      the Executive given at any time after one (1) month but not more than
      three (3) months after the effective date of such termination, to the
      extent transferable, transfer and assign to the Executive as promptly as
      practicable all of the Company's right, title and interest in and to each
      of the Executive Office Lease and the Building Purchase Option. In the
      event that the Executive gives such notice and the Executive Office Lease
      cannot be so assigned, the Company shall, if permitted by the terms of the
      Executive Office Lease, sublease to the Executive the space subject to the
      Executive Office Lease on the same terms and conditions as the Executive
      Office Lease or, if such a sublease is not possible, enter into another
      arrangement, reasonably satisfactory to the Executive, that will give the
      Executive the exclusive use of such space. In the event that the Building
      Purchase Option cannot be so transferred and assigned, the Company shall
      grant to the Executive the right, exercisable by the Executive at any time
      when the Building Purchase Option is exercisable by the Company, to cause
      the Company to exercise the Building Purchase Option and immediately
      thereafter to transfer the New Executive Office Building to the Executive
      upon payment by the Executive to the Company of the exercise price paid by
      the Company to exercise the Building Purchase Option.

            (iv) The Company shall not amend, waive, terminate, assign, transfer
      or otherwise modify in any way its rights under the Building Purchase
      Option or the Executive Office Lease without the prior written consent of
      the Executive, such consent not to be unreasonably withheld, conditioned
      or delayed.

            (v) The Executive shall, after taking into account any taxes, be
      kept whole with respect to the matters described in this Section 5(h).
      Accordingly, to the extent the Executive incurs any taxes with respect to
      any such matters, the Company shall pay the Executive, in connection
      therewith, an amount which, after all taxes incurred by the Executive by
      reason of such payments pursuant to this Section 5(h)(v), and after taking
      into account any payments being made with respect to such matters or
      payments pursuant to Section 5(i) hereof, shall equal the amount of the
      taxes so incurred.

      (i) CERTAIN TAX CONSEQUENCES.

            (i) Whether or not the Executive becomes entitled to the payments
      and benefits described in this Section 5, if any of the payments or
      benefits received or to be received by the Executive in connection with a
      change in ownership or control of the Company (a "STATUTORY CHANGE IN
      CONTROL"), as defined in section 280G of the Code, or the Executive's
      termination of employment (whether pursuant to the terms of this Agreement
      or any other plan, arrangement or agreement with the Company, any person
      whose actions result in a Statutory Change in Control or any person
      affiliated with the Company or such person) (collectively, the "SEVERANCE
      BENEFITS") will be subject to any excise tax (the "EXCISE Tax") imposed
      under section 4999 of the Code, the Company shall pay to the Executive an
      additional amount equal to the Excise Tax, plus any amount necessary to
      "gross up" the Executive for additional taxes resulting from the payments
      to the Executive by the Company under this Section 5(i)(i) (the "EXCISE
      TAX PAYMENT").

            (ii) For purposes of determining whether any of the Severance
      Benefits will be subject to the Excise Tax and the amount of such Excise
      Tax:

                                                                            -17-

<PAGE>

            (A) all of the Severance Benefits shall be treated as "parachute
                payments" within the meaning of Code section 280G(b)(2) if the
                aggregate present value (determined as provided in Code Section
                280G(d)(4)) of such Severance Benefits equals or exceeds three
                times the Executive's "Base Amount" (within the meaning of Code
                Section 280G(b)(3)), and all "excess parachute payments" within
                the meaning of Code section 280G(b)(1) shall be treated as
                subject to the Excise Tax, unless, in the opinion of Ropes &
                Gray or other tax counsel selected by Ropes & Gray and
                reasonably acceptable to the Executive or in the event Ropes &
                Gray is unable or unwilling to make such selection, by other tax
                counsel selected by the Company and reasonably acceptable to the
                Executive, such other payments or benefits (in whole or in part)
                do not constitute parachute payments, including by reason of
                Code section 280G(b)(4)(A), or such excess parachute payments
                (in whole or in part) represent reasonable compensation for
                services actually rendered, within the meaning of Code section
                280G(b)(4)(B), in excess of the "Base Amount" as defined in Code
                section 280G(b)(3) allocable to such reasonable compensation, or
                are otherwise not subject to the Excise Tax; and

            (B) the value of any non-cash benefits or any deferred payment or
                benefit shall be determined by a certified public accountant
                selected by Ropes & Gray and reasonably acceptable to the
                Executive, or in the event that Ropes & Gray is unable or
                unwilling to make such selection, such selection shall be made
                by such other certified public accountant as is selected by the
                Company and is reasonably acceptable to the Executive, in
                accordance with the principles of Code section 280G(d)(3) and
                (4).

            (iii) In the event that the Excise Tax is subsequently determined to
      be less than the amount taken into account hereunder, the Executive shall
      repay to the Company, at the time that the amount of such reduction in
      Excise Tax is finally determined (the "REDUCED EXCISE TAX"), the
      difference of the Excise Tax Payment and the Reduced Excise Tax, plus an
      additional amount representing the difference between (A) the amount paid
      by the Company to the Executive to "gross up" the Executive for taxes on
      payments made by the Company to the Executive in respect of the Excise Tax
      and (B) the amount which should have been paid to the Executive by the
      Company to "gross up" the Executive for taxes on payments made by the
      Company to the Executive in respect of the Reduced Excise Tax. In the
      event that the Excise Tax is subsequently determined to exceed the amount
      taken into account hereunder (including by reason of any payment the
      existence or amount of which could not be determined at the time of the
      Excise Tax Payment), the Company shall make an additional Excise Tax
      payment in respect of such excess (plus any interest or penalties payable
      by the Executive with respect to such excess) at the time that the amount
      of such excess if finally determined, plus any additional taxes resulting
      from the payment to the Executive by the Company for such excess and the
      interest and penalties thereon. The Executive and the Company shall each
      reasonably cooperate with the other in connection with any administrative
      or judicial proceedings concerning the existence or amount of liability
      for Excise Tax with respect to the Severance Benefits.

                                                                            -18-
<PAGE>

            (iv) As used herein, any reference to "Ropes & Gray" shall include
      any successor firm thereto.

6. CONFIDENTIAL INFORMATION; NON-SOLICITATION; NON-COMPETITION.

      (a) The Executive shall hold in 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 affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
that shall not have been or now or hereafter have become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). During the Employment Period and for a period of five years
thereafter, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process or as may be
reasonably determined by the Executive to the extent necessary to enforce his
rights hereunder or otherwise against the Company, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it.

      (b) The Executive shall not, at any time during the Employment Period and
for a period of three years thereafter (i) engage or become economically
interested as an owner (other than as an owner of less than 5% of the stock of a
publicly owned company), stockholder, lender, provider (directly or indirectly,
including, without limitation, by a gift of funds) of financing, partner,
director, officer, employee, consultant or otherwise in any business that is
competitive with any business conducted by the Company or any of its affiliated
companies during the Employment Period or on the date of termination as
applicable or (ii) recruit, solicit for employment, hire or engage any employee
of the Company or any person who was an employee of the Company within two (2)
years prior to the date of termination. The Executive acknowledges that these
provisions (I) have been specifically bargained for by the Company and are
supported by separate and specific consideration provided to him by the Company
and (II) are necessary for the Company's protection and are not unreasonable,
since he would be able to obtain employment with companies whose businesses are
not competitive with those of the Company and its affiliated companies and would
be able to recruit and hire personnel other than employees of the Company. The
duration and the scope of these restrictions on the Executive's activities are
divisible, so that if any provision of this paragraph is held or deemed to be
invalid, that provision shall be automatically modified to the extent necessary
to make it valid.

      (c) The Executive and the Company agree that the covenants set forth in
Section 6(b) hereof are reasonable covenants under the circumstances, and
further agree that if in the opinion of any court of competent jurisdiction such
restraint is not reasonable in any respect, such court shall have the right,
power and authority to excise or modify such provision or provisions of this
covenant as to the court shall appear not reasonable and to enforce the
remainder of the covenant as so amended. The Executive agrees that any breach of
the covenants contained in this Section 6 would irreparably injure the Company.
Accordingly, the Executive agrees that the Company may, in addition to pursuing
any other remedies it may have in law or in equity, withhold payment of any
amounts due hereunder and obtain an injunction against Executive from any court
having jurisdiction over the matter restraining any further violation of this
Agreement by the Executive.

                                                                            -19-
<PAGE>

7. ENFORCEABILITY. If any provision of this Agreement shall be deemed invalid or
unenforceable as written, this Agreement shall be construed, to the greatest
extent possible, or modified, to the extent allowable by law, in a manner which
shall render it valid and enforceable and any limitation on the scope or
duration of any such provision necessary to make it valid and enforceable shall
be deemed to be a part thereof. No invalidity or unenforceability of any
provision contained herein shall affect any other portion of this Agreement
unless the provision deemed to be so invalid or unenforceable is a material
element of this Agreement, taken as a whole.

8. LEGAL EXPENSES. The Company shall pay the Executive's reasonable fees for
legal and tax advice and other related expenses associated with the negotiation
and completion of this Agreement. The Company shall also pay the Executive's
reasonable fees for legal and other related expenses associated with any
disputes arising hereunder or under the stock option agreements referred to
herein if a court of competent jurisdiction shall render a final judgement in
favor of the Executive on the issues in such dispute, from which there is no
further right of appeal. If it shall be determined in such judicial adjudication
that the Executive is successful on some of the issues in such dispute, but not
all, then the Executive shall be entitled to receive a portion of such legal
fees and other expenses as shall be appropriately prorated.

9. NOTICES. All notices which the Company is required or permitted to give to
the Executive shall be given by registered or certified mail or overnight
courier, with a receipt obtained, addressed to the Executive at the address
referred to above, or at such other place as the Executive may from time to time
designate in writing, or by personal delivery, and to counsel for the Executive
as may be requested in writing by the Executive from time to time. All notices
which the Executive is required or permitted to give to the Company shall be
given by registered or certified mail or overnight courier, with a receipt
obtained, addressed to the Company at the address set forth above, or at such
other address as the Company may from time to time designate in writing, or by
personal delivery, and to counsel for the Company as may be requested in writing
by the Company. A notice will be deemed given upon the mailing thereof or
delivery to an overnight courier for delivery the next business day, except for
a notice of a change of address, which will not be effective until receipt.

10. WAIVERS. No waiver by either party of any breach or nonperformance of any
provision or obligation of this Agreement shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision of this
Agreement.

11. HEADINGS; OTHER LANGUAGE. The headings contained in this Agreement are for
reference purposes only and shall in no way affect the meaning or interpretation
of this Agreement. In this Agreement, as the context may require, the singular
includes the plural and the singular, the masculine gender includes both male
and female reference, the word "or" is used in the inclusive sense and the words
"including," "includes," and "included" shall not be limiting.

12. COUNTERPARTS. This Agreement may be executed in duplicate counterparts, each
of which shall be deemed to be an original and all of which, taken together,
shall constitute one agreement.

                                                                            -20-
<PAGE>

13. AGREEMENT COMPLETE; AMENDMENTS. This Agreement, together with the stock
option agreements pertaining to the stock options referred to herein, is the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto,
including without limitation the 1999 Employment Agreement. Without limiting the
generality of the immediately preceding sentence, the Executive and the Company
agree that the Second Amended and Restated Employment Agreement dated as of
August 23, 2001 between the parties hereto is hereby rescinded and replaced with
this Agreement. This Agreement may not be amended, supplemented, canceled or
discharged except by a written instrument executed by both of the parties
hereto; PROVIDED, HOWEVER, that the immediately foregoing provision shall not
prohibit the termination of rights and obligations under this Agreement which
termination is made in accordance with the terms of this Agreement.

14. BENEFIT AND BINDING NATURE/NONASSIGNABILITY. This Agreement shall be binding
upon and inure to the benefit of the successors and permitted assigns of the
respective parties hereto. This Agreement and the rights and obligations
hereunder are personal to the Company and the Executive and are not assignable
or transferable to any other person, firm or corporation without the consent of
the other party, except as contemplated hereby; PROVIDED, HOWEVER, in the event
of the merger or consolidation of the Company, whether or not the Company is the
surviving or resulting corporation, the transfer of all or substantially all of
the assets of the Company, or the voluntary or involuntary dissolution of the
Company, then the surviving or resulting corporation or the transferee or
transferees of the Company's assets shall be bound by this Agreement and the
Company shall take all actions necessary to insure that such corporation,
transferee or transferees are bound by the provisions of this Agreement; and
PROVIDED, FURTHER, this Agreement shall inure to the benefit of the Executive's
estate, heirs, executors, administrators, personal and legal representatives,
distributees, devisees, and legatees. Notwithstanding the foregoing provisions
of this Section 14, the Company shall not be required to take all actions
necessary to insure that a transferee or transferees of the Company's assets are
bound by the provisions of this Agreement and such transferee or transferees of
the Company's shall not be bound by the obligations of the Company under this
Agreement if the Company shall have (a) paid to the Executive or made provision
satisfactory to the Executive for payment to him of all amounts which are or may
become payable to him hereunder in accordance with the terms hereof and (b) made
provision satisfactory to the Executive for the continuance of all benefits
required to be provided to him in accordance with the terms hereof.

15. GOVERNING LAW. This Agreement will be governed and construed in accordance
with the law of Pennsylvania applicable to agreements made and to be performed
entirely within such state, without giving effect to the conflicts of laws
principles thereof.

16. SUBSIDIARIES. As used herein, the term "Subsidiaries" shall mean all
corporations a majority of the capital stock of which entitling the holder
thereof to vote is owned by the Company or a Subsidiary.

17. INTERPRETATION. The Company and the Executive each acknowledge and agree
that this Agreement has been reviewed and negotiated by such party and its or
his counsel, who have contributed to its revision, and the normal rule of
construction, to the effect that any ambiguities are resolved against the
drafting party, shall not be employed in the interpretation of it.

                                                                            -21-
<PAGE>

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

                                          KEY ENERGY SERVICES, INC.

                                          By_________________________
                                          TITLE:

                                          ___________________________
                                          FRANCIS D. JOHN

                                                                            -22-
<PAGE>

                                   SCHEDULE A

                        _________________________________

                             COMPANY PAID COVERAGES

1.    Life Insurance
          $20,000,000 payable to beneficiaries designated by the Executive.

2.    Business Travel Accident Insurance
          Death and dismemberment benefits up to $10,000,000 with twenty-four
          hour business and pleasure travel coverage.

3.    Medical and Dental Coverage
          Comprehensive medical and dental coverage, including an annual
          physical, pursuant to which all medical and dental expenses incurred
          by the Executive, his spouse and his children will be reimbursed by
          Company-provided insurance, or in the absence of insurance coverage,
          directly by the Company.

4.    Director and Officer Liability Insurance
          Minimum coverage of at least $50 million.

                                                                           -B-1-Exhibit 10.7

                      AMERICAN HOME MORTGAGE HOLDINGS, INC.
                        1999 OMNIBUS STOCK INCENTIVE PLAN

                           Adopted on August 16, 1999
                       Effective as of September 23, 1999

     1. Purpose. The purpose of the American Home Mortgage Holdings, Inc. 1999
Omnibus Stock Incentive Plan (the "Plan") is to maintain the ability of American
Home Mortgage Holdings, Inc. (the "Company") and its subsidiaries to attract and
retain highly qualified and experienced employees, officers and directors and to
give such employees, officers and directors a continued proprietary interest in
the success of the Company and its subsidiaries. Pursuant to the Plan, such
employees, officers and directors will be offered the opportunity to acquire the
Company's Common Stock, par value $.0l per share (the "Common Stock"), through
the grant of options, stock appreciation rights in tandem with such options, the
award of restricted stock under the Plan, bonuses payable in stock or a
combination thereof. Unless the context clearly indicates otherwise, references
herein to "option" or "options" shall include any tandem stock appreciation
right that may be granted in connection with such option or options in
accordance with Section 6(f). As used herein, the term "subsidiary" shall mean
any present or future corporation which is or would be a "subsidiary
corporation" of the Company as the term is defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended from time to time (the "Code").

     2. Administration of the Plan. The Plan shall be administered by a
compensation committee (the "Committee") as appointed from time to time by the
Board of Directors of the Company (the "Board"), which Committee shall consist
of not less than two members of the Board; provided, however, that with respect
to members of the Committee and any other directors who (i) are not employees of
the Company or any of its subsidiaries or affiliates and (ii) are otherwise not
eligible for selection to participate in any other plan of the Company or any of
its subsidiaries or affiliates that entitles the participant therein to acquire
securities or derivative securities of the Company ("Nonemployee Directors"),
the Plan shall be administered by the entire Board, and accordingly, with
respect to Committee members and other Nonemployee Directors, references herein
to "Committee" shall mean the entire Board. A majority of the members of the
Committee shall constitute a quorum. The vote of a majority of a quorum shall
constitute action by the Committee.

     In administering the Plan, the Committee may adopt rules and regulations
for carrying out the Plan. The interpretation and decision with regard to any
question arising under the Plan made by the Committee shall be final and
conclusive on all employees and directors of the Company and its subsidiaries
participating or eligible to participate in the Plan. The Committee may consult
with counsel, who may be counsel to the Company, and shall not incur any
liability for any action taken in good faith in reliance upon the advice of
counsel. The Committee shall determine the employees and directors to whom, and
the time or times at which, grants or awards shall be made and the number of
shares to be included in the grants or awards. Within the limitations of the
Plan, the number of shares for which options will be granted from time to time
and the periods for which the options will be outstanding will be determined by
the Committee.

     Each option or stock or other awards granted pursuant to the Plan shall be
evidenced by an option agreement or award agreement (an "Agreement"). An
Agreement shall not be a precondition to the granting of options or stock or
other awards; however, no person shall have any rights under any option or stock
or other awards granted under the Plan unless and until the person to whom such
option or stock or other award shall have been granted shall have executed and
delivered to the Company an Agreement. The Committee shall prescribe the form of
all Agreements. A fully executed original of the Agreement shall be provided to
both the Company and the recipient of the grant or award.

<PAGE>

     3. Shares of Stock Subject to the Plan. The total number of shares that may
be optioned or awarded under the Plan is 1,500,000 shares of Common Stock except
that said number of shares shall be adjusted as provided in Section 13. Any
shares subject to an option which for any reason expires or is terminated
unexercised and any restricted stock which is forfeited may again be optioned or
awarded under the Plan. Shares subject to the Plan may be either authorized and
unissued shares or issued shares acquired by the Company or its subsidiaries.

     4. Eligibility. Key salaried employees, including officers, and directors
of the Company and its subsidiaries are eligible to be granted options and
awarded restricted stock under the Plan and to have their bonuses payable in
stock. The maximum number of shares of Common Stock that shall be available for
the grant of options intended to be incentive stock options, as defined in
Section 422 of the Code, shall be 1,500,000 shares (subject to adjustment as
provided in Section 13 hereof). The employees and directors who shall receive
awards or options under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible, which may be based
upon information furnished to the Committee by the Company's management, and the
Committee shall determine, in its sole discretion, the number of shares to be
covered by the award or awards and by the option or options granted to each such
employee or director selected. Such key salaried employees and directors who are
selected to participate in the Plan shall be referred to collectively herein as
"Participants." In no event shall any Participant who is a key employee be
granted stock options with respect to more than 150,000 shares of Common Stock
in any calendar year (subject to adjustment as provided in Section 13 hereof).

     5. Duration of the Plan. No award or option may be granted under the Plan
more than ten years from the date the Plan is adopted by the Board or the date
the Plan receives shareholder approval, whichever is earlier, but awards or
options theretofore granted may extend beyond that date.

     6. Terms and Conditions of Stock Options. All options granted under this
Plan shall be either incentive stock options, as defined in Section 422 of the
Code, or options other than incentive stock options; provided, however, that all
options granted to Nonemployee Directors shall be nonstatutory stock options not
intended to qualify as incentive stock options entitled to special tax treatment
under Section 422 of the Code. Each such option shall be subject to all the
applicable provisions of the Plan, including the following terms and conditions,
and to such other terms and conditions not inconsistent therewith as the
Committee shall determine.

     a) The option price per share shall be determined by the Committee.
However, subject to Section 6(k), the option price of incentive stock options
shall not be less than 100% of the Fair Market Value of a share of Common Stock
at the time the option is granted. For purposes of the Plan, the "Fair Market
Value" on any date, means (i) if the Common Stock is listed on a national
securities exchange or quotation system, the closing sales prices on such
exchange or quotation system on such date or, in the absence of reported sales
on such date, the closing sales price on the immediately preceding date on which
sales were reported, (ii) if the Common Stock is not listed on a national
securities exchange or quotation system, the mean between the bid and asked
prices as quoted by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") for such date or (iii) if the Common Stock
is neither listed on a national securities exchange or quotation system nor
quoted by NASDAQ, the fair value as determined by such other method as the
Committee determines in good faith to be reasonable.

<PAGE>

     b) Each option shall be exercisable pursuant to the attainment of such
performance goals and/or during and over such period ending not later than ten
years from the date it was granted, as may be determined by the Committee and
stated in the Agreement. In no event may an option be exercised more than ten
years from the date the option was granted.

     c) Unless otherwise provided in the Agreement, no option shall be
exercisable within six months from the date of the granting of the option. An
option shall not be exercisable with respect to a fractional share of Common
Stock or with respect to the lesser of 50 shares or the full number of shares
then subject to the option. No fractional shares of Common Stock shall be issued
upon the exercise of an option. If a fractional share of Common Stock shall
become subject to an option by reason of a stock dividend or otherwise, the
optionee shall not be entitled to exercise the option with respect to such
fractional share.

     d) Each Agreement shall state whether the option(s) evidenced thereby will
or will not be treated as incentive stock option(s).

     e) Each option may be exercised by giving written notice to the Company
specifying the number of shares to be purchased, which shall be accompanied by
payment in full including, if required by applicable law, taxes, if any.
Payment, except as provided in the Agreement, shall be made as follows:

          (i) in United States dollars by certified check or bank draft; or

          (ii) by tendering to the Company shares of Common Stock already owned
     for at least six months by the person exercising the option, which may
     include shares received as the result of a prior exercise of an option, and
     having a Fair Market Value on the date on which the option is exercised
     equal to the cash exercise price applicable to such option; or

          (iii) by a combination of United States dollars and shares of Common
     Stock as aforesaid; or

          (iv) in accordance with a cashless exercise program established by the
     Committee in its sole discretion under which either (A) if so instructed by
     the optionee, shares may be issued directly to the optionee's broker or
     dealer upon receipt of the purchase price in cash from the broker or
     dealer, or (B) shares may be issued by the Company to an optionee's broker
     or dealer in consideration of such broker's or dealer's irrevocable
     commitment to pay to the Company that portion of the proceeds from the sale
     of such shares that is equal to the exercise price of the option(s)
     relating to such shares; or

          (v) in such other manner as permitted by the Committee at the time of
     grant or thereafter.

     No optionee shall have any rights to dividends or other rights of a
shareholder with respect to shares of Common Stock subject to such optionee's
option until such optionee has given written notice of exercise of such
optionee's option and paid in full for such shares.

     f) Notwithstanding the foregoing, the Committee may, in its sole
discretion, grant to a grantee of an option a right (a "stock appreciation
right") to elect, in the manner described below, in lieu of exercising such
grantee's option for all or a portion of the shares of Common Stock covered by
such option, to relinquish such grantee's option with respect to any or all of
such shares and to receive from the Company a payment having a value equal to
the amount by which (a) the Fair Market Value of a share of Common Stock on the
date of such election, multiplied by the number of shares as to which the
grantee shall have made such election, exceeds (b) the total exercise price for
that number of shares of Common Stock under the terms of such option; provided,
however, that to the extent that a stock appreciation right is exercised by a
Participant who is or may be subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), during the ten-day election period
described in Rule 1.6b-3(e) of the Exchange Act, the amount described in clause
(a) above shall be equal to the highest Fair Market Value of the shares of
Common Stock during such ten-day election period. A stock appreciation right
shall be exercisable at the time the tandem option is exercisable, and the
"expiration date" for the stock appreciation right shall be the expiration date
for the tandem option. A grantee who makes such an election shall receive
payment in the sole discretion of the Committee (i) in cash equal to such excess
or (ii) in the nearest whole number of shares of Common Stock of the Company
having an aggregate Fair Market Value, which is not greater than the cash amount
calculated in clause (i) above; or (iii) a combination of the forms of payment
described in clauses (i) and (ii) above. A stock appreciation right may be
exercised only when the amount described in clause (a) above exceeds the amount
described in clause (b) above. An election to exercise stock appreciation rights
shall be deemed to have been made on the day written notice of such election,
addressed to the Committee, is received at the Company's offices. An option or
any portion thereof with respect to which a grantee has elected to exercise the
stock appreciation rights described above shall be surrendered to the Company
and such option shall thereafter remain exercisable according to its terms only
with respect to the number of shares as to which it would otherwise be
exercisable, less the number of shares with respect to which stock appreciation
rights have been exercised. The grant of a stock appreciation right shall be
evidenced by such form of Agreement as the Committee may prescribe. The
Agreement evidencing stock appreciation rights shall be personal and will
provide that the stock appreciation rights will not be transferable by the
grantee otherwise than by will or the laws of descent and distribution and that
they will be exercisable, during the lifetime of the grantee, only by the
grantee.

<PAGE>

     g) Except as provided in the Agreement, an option may be exercised only if
at all times during the period beginning with the date of the granting of the
option and ending on the date of such exercise, the grantee was an employee or
director of either the Company or of a subsidiary of the Company or of another
corporation referred to in Section 421(a)(2) of the Code. The Agreement shall
provide whether, and if so, to what extent, an option may be exercised after
termination of continuous employment, but any such exercise shall in no event be
later than the termination date of the option. If the grantee should die, or
become permanently disabled as determined by the Committee in accordance with
the Agreement, at any time when the option, or any portion thereof, shall be
exercisable by such grantee, the option will be exercisable within a period
provided for in the Agreement, by the optionee or person or persons to whom such
optionee's rights under the option shall have passed by will or by the laws of
descent and distribution, but in no event at a date later than the termination
of the option. The Committee may require medical evidence of permanent
disability, including medical examinations by physicians selected by it.

     h) The option by its terms shall be personal and shall not be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution as provided in Section 6(g). During the lifetime of an optionee,
the option shall be exercisable only by the optionee. In the event any option is
exercised by the executors, administrators, heirs or distributees of the estate
of a deceased optionee as provided in Section 6(g), the Company shall be under
no obligation to issue Common Stock thereunder unless and until the Company is
satisfied that the person or persons exercising the option are the duly
appointed legal representative of the deceased optionee's estate or the proper
legatees or distributees thereof.

     i) Notwithstanding any intent to grant incentive stock options, an option
granted will not be considered an incentive stock option to the extent that it
together with any earlier incentive stock options permits the exercise for the
first time in any calendar year of more than $100,000 in Fair Market Value of
Common Stock (determined at the time of grant).

<PAGE>

     j) The Committee may, but need not, require such consideration from an
optionee at the time of granting an option as it shall determine, either in lieu
of, or in addition to, the limitations on exercisability provided in Section
6(e).

     k) No incentive stock option shall be granted to an employee who owns or
would own immediately before the grant of such option, directly or indirectly,
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company. This restriction does not apply if, at the time such
incentive stock option is granted, the option price is at least 110% of the Fair
Market Value of one share of Common Stock, as determined in accordance with
Section 6(a), on the date of grant and the incentive stock option by its terms
is not exercisable after the expiration of five years from the date of grant.

     l) An option and any Common Stock received upon the exercise of an option
shall be subject to such other transfer restrictions and/or legending
requirements that are specified in the Agreement.

     7. Terms and Conditions of Restricted Stock Awards. All awards of
restricted stock under the Plan shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith, as the Committee
shall determine.

     a) Awards of restricted stock may be in addition to or in lieu of option
grants.

     b) During a period set by, and/or until the attainment of particular
performance goals based upon criteria established by, the Committee at the time
of each award of restricted stock (the "restriction period") as specified in the
Agreement, the recipient shall not be permitted to sell, transfer, pledge, or
otherwise encumber the shares of restricted stock; except that such shares may
be used, if the Agreement permits, to pay the option price of any option granted
under the Plan, provided an equal number of shares delivered to the recipient
shall carry the same restrictions as the shares so used.

     c) If so provided in the Agreement, shares of restricted stock shall become
free of all restrictions if (i) the recipient dies, (ii) the recipient's
employment terminates by reason of permanent disability, as determined by the
Committee, (iii) the recipient retires under specific circumstances set forth in
the Agreement, or (iv) there is a Change in Control (as defined in Section 9
hereof) of the Company. The Committee may require medical evidence of permanent
disability, including medical examinations by physicians selected by it. If the
Committee determines that any such recipient is not permanently disabled, the
restricted stock held by such recipient shall be forfeited and revert to the
Company.

     d) Unless and to the extent otherwise provided in the Agreement in
accordance with Section 7(c), shares of restricted stock shall be forfeited and
revert to the Company upon the recipient's termination of employment or
directorship during the restriction period, except to the extent the Committee,
in its sole discretion, finds that such forfeiture might not be in the best
interest of the Company and, therefore, waives all or part of the application of
this provision to the restricted stock held by such recipient.

     e) Stock certificates for restricted stock shall be registered in the name
of the recipient but shall be appropriately legended and returned to the Company
by the recipient, together with a stock power, endorsed in blank by the
recipient. The recipient shall be entitled to vote shares of restricted stock
and shall be entitled to all dividends paid thereon, except that dividends paid
in Common Stock or other property shall also be subject to the same
restrictions.

<PAGE>

     f) Restricted stock shall become free of the foregoing restrictions upon
expiration of the applicable restriction period, and the Company shall then
deliver Common Stock certificates evidencing such stock to the recipient.

     g) Restricted stock and any Common Stock received upon the expiration of
the restriction period shall be subject to such other transfer restrictions
and/or legending requirements that are specified in the Agreement.

     8. Bonuses Payable in Stock. In lieu of cash bonuses otherwise payable
under the Company's or applicable subsidiary's compensation practices to
employees and directors eligible to participate in the Plan, the Committee, in
its sole discretion, may determine that such bonuses shall be payable in Common
Stock or partly in Common Stock and partly in cash. Such bonuses shall be in
consideration of services previously performed and as an incentive toward future
services and shall consist of shares of Common Stock subject to such terms as
the Committee may determine in its sole discretion. The number of shares of
Common Stock payable in lieu of a bonus otherwise payable shall be determined by
dividing such amount by the Fair Market Value of one share of Common Stock on
the date the bonus is payable.

     9. Change in Control.

     a) In the event of a Change in Control of the Company, the Committee may,
in its sole discretion, provide that any of the following applicable actions be
taken as a result, or in anticipation, of any such event to assure fair and
equitable treatment of Participants:

          (i) accelerate restriction periods for purposes of vesting in, or
     realizing gain from, any outstanding option or shares of restricted stock
     awarded pursuant to this Plan;

          (ii) offer to purchase any outstanding option or shares of restricted
     stock made pursuant to this Plan from the holder for its equivalent cash
     value, as determined by the Committee, as of the date of the Change in
     Control; or

          (iii) make adjustments or modifications to outstanding options or with
     respect to restricted stock as the Committee deems appropriate to maintain
     and protect the rights and interests of the Participants following such
     Change in Control.

     Any such action approved by the Committee shall be conclusive and binding
on the Company, its subsidiaries and all Participants; provided, however, that
notwithstanding the foregoing, under no circumstances shall the Committee take
or approve any action that would result in an "Excess Parachute Payment," as
defined in Section 280G(b) of the Code.

     For purposes hereof, "Change in Control" means a change in control of the
Company of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A under the Exchange Act, whether or not
the Company is subject to the Exchange Act at such time; provided, however, that
without limiting the generality of the foregoing, such a Change in Control shall
in any event be deemed to occur if and when:

          (i) any person (as such term is used in Sections 13(d) and 14(d)(2) of
     the Exchange Act), the Company, its subsidiaries and affiliates (as defined
     in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as
     defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
     securities of the Company representing more than 20% of the combined voting
     power of the Company's then outstanding securities;

<PAGE>

          (ii) stockholders approve a merger or consolidation as a result of
     which securities representing less than 51% of the combined voting power of
     the outstanding voting securities of the surviving or resulting corporation
     will be beneficially owned, directly or indirectly, in the aggregate by the
     former stockholders of the Company;

          (iii) stockholders approve either (A) an agreement for the sale or
     disposition of all or substantially all of the Company's assets to an
     entity which is not a subsidiary of the Company, or (B) a plan of complete
     liquidation;

          (iv) the persons who were members of the Board immediately before the
     completion of a tender offer by any person other than the Company or a
     subsidiary or affiliate of the Company, or before a merger, consolidation,
     or contested election, or before any combination of such transactions,
     cease to constitute a majority of the Board as a result of such transaction
     or transactions; or

          (v) a change in control of the Company occurs of a nature that would
     be required to be reported in response to Item 6(e) of Schedule 14A of
     Regulation 14A under the Exchange Act if the Company were subject to the
     provisions of the Exchange Act at the time such change in control occurs
     (whether or not the Company is subject to the Exchange Act at that time),
     and at the time such change in control occurs, the Company is the
     beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
     directly or indirectly, of securities of the Company representing (A) more
     than 30% of the combined voting power of the Company's then outstanding
     securities, and (B) more than the percentage of the combined voting power
     of the Company's outstanding securities beneficially owned, directly or
     indirectly, at that time by any other person (as such term is used in
     Sections 13(d) and 14(d)(2) of the Exchange Act).

     b) In no event, however, may (i) any option be exercised prior to the
expiration of six months from the date of grant (unless otherwise provided for
in the Agreement), or (ii) any option be exercised after ten years from the date
it was granted.

     10. Transfer, Leave of Absence. For the purpose of the Plan: (a) a transfer
of an employee from the Company to a subsidiary or affiliate of the Company,
whether or not incorporated, or vice versa, or from one subsidiary or affiliate
of the Company to another, and (b) a leave of absence, duly authorized in
writing by the Company or a subsidiary or affiliate of the Company, shall not be
deemed a termination of employment.

     11. Rights of Employees and Directors.

     a) No person shall have any rights or claims under the Plan except in
accordance with the provisions of the Plan and the Agreement.

     b) Nothing contained in the Plan or Agreement shall be deemed to give any
employee or director the right to be retained in the service of the Company or
its subsidiaries.

     12. Tax Withholding Obligations.

<PAGE>

     a) If required by applicable law, the payment of taxes, upon the exercise
of an option pursuant to Section 6(e) or a stock appreciation right pursuant to
Section 6(f), shall be in cash at the time of exercise or on the applicable tax
date under Section 83 of the Code, if later; provided, however, tax withholding
obligations may be met by the withholding of Common Stock otherwise deliverable
to the optionee pursuant to procedures approved by the Committee; provided,
further, however, the amount of Common Stock so withheld shall not exceed the
minimum required withholding obligation.

     b) If required by applicable law, recipients of restricted stock, pursuant
to Section 7, shall be required to pay taxes to the Company upon the expiration
of restriction periods or such earlier dates as elected pursuant to Section 83
of the Code; provided, however, tax withholding obligations may be met by the
withholding of Common Stock otherwise deliverable to the recipient pursuant to
procedures approved by the Committee. If tax withholding is required by
applicable law, in no event shall Common Stock be delivered to any awardee until
such awardee has paid to the Company in cash the amount of such tax required to
be withheld by the Company or has elected to have such awardee's withholding
obligations met by the withholding of Common Stock in accordance with the
procedures approved by the Committee or otherwise entered into an agreement
satisfactory to the Company providing for payment of withholding tax.

     c) the Company shall first withhold from any cash bonus described in
Section 8, an amount of cash sufficient to meet its tax withholding obligations
before the amount of Common Stock paid in accordance with Section 8 is
determined.

13.
Changes in Capital; Reorganization.

     a) Upon changes in the outstanding Common Stock by reason of a stock
dividend, stock split, reverse split, subdivision, recapitalization, an
extraordinary dividend payable in cash or property, combination or exchange of
shares, separation, reorganization or liquidation, and the like, the aggregate
number and class of shares available under the Plan as to which stock options
and restricted stock may be awarded, the number and class of shares under (i)
each option and the option price per share and (ii) each award of restricted
stock shall, in each case, be correspondingly adjusted by the Committee, such
adjustments to be made in the case of outstanding options without change in the
total price applicable to such options.

     b) In the event (i) the Company is merged or consolidated with another
entity and the Company is not the surviving corporation, or the Company shall be
the surviving corporation and there shall be any change in the Common Stock of
the Company by reason of such merger or consolidation, or (ii) all or
substantially all of the assets of the Company are acquired by another
corporation, or (iii) there is a reorganization or liquidation of the Company
(each, a "Reorganization Event"), or (iv) the Board shall propose that the
Company enter into a Reorganization Event, then the Board (acting solely through
members of the Board who were members of the Board prior to the occurrence of
the Reorganization Event) may in its discretion take any or all of the following
actions:

          (i) by written notice to the holders of stock options or restricted
     stock awards, provide that the stock options or restricted stock awards
     shall be terminated unless exercised within 30 days (or such longer period
     as the Board shall determine in its discretion) after the date of such
     notice; and

          (ii) advance the dates upon which (A) any or all outstanding stock
     options and stock appreciation rights shall be exercisable or (B)
     restrictions applicable to restricted stock awards shall lapse.

<PAGE>

     Whenever deemed appropriate by the Board, any action referred to in this
Section 13(b) may be made conditioned upon the consummation of the applicable
Reorganization Event.

     c) Any adjustments or other action pursuant to this Section 13 shall be
made by the Board and the Board's determination as to what adjustments shall be
made or actions taken, and the extent thereof, shall be final and binding.

     14. Miscellaneous Provisions.

     a) The Plan Shall be Unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares or the payment of cash upon exercise of
any option or stock appreciation right under the Plan. Proceeds from the sale of
shares of Common Stock pursuant to options granted under this Plan shall
constitute general funds of the Company. The expenses of the Plan shall be borne
by the Company.

     b) It is understood that the Committee may, at any time and from time to
time after the granting of an option or the award of restricted stock or bonuses
payable in Common Stock hereunder, specify such additional terms, conditions and
restrictions with respect to such option or stock as may be deemed necessary or
appropriate to ensure compliance with any and all applicable laws, including,
without limitation, terms, restrictions and conditions for compliance with
federal and state securities laws and methods of withholding or providing for
the payment of required taxes.

     c) If at any time the Committee shall determine, in its discretion, that
the listing, registration or qualification of shares of Common Stock upon any
national securities exchange or quotation system or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of shares of Common Stock hereunder, no option may be exercised or
restricted stock or stock bonus may be transferred in whole or in part unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Committee.

     d) By accepting any benefit under the Plan, each Participant and each
person claiming under or through such Participant shall be conclusively deemed
to have indicated such Participant's or person's acceptance and ratification,
and consent to, any action taken under the Plan by the Committee, the Company or
the Board.

     e) THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF.

     15. Limits of Liability.

     a) Any liability of the Company or any of its subsidiaries to any
participant with respect to any option or award shall be based solely upon
contractual obligations created by the Plan and the Agreement.

     b) None of the Company or any of its subsidiaries, or any member of the
Committee or the Board, or any other person participating in any determination
of any question under the Plan, or in the interpretation, administration or
application of the Plan, shall have any liability to any party for any action
taken or not taken in connection with the Plan, except as may expressly be
provided by statute.

<PAGE>

     16. Amendments and Termination. The Board may, at any time, amend, alter or
discontinue the Plan; provided, however, no amendment, alteration or
discontinuation shall be made which, without the approval of the stockholders,
would:

     a) except as is provided in Section 13, increase the maximum number of
shares of Common Stock reserved for the purpose of the Plan;

     b) except as is provided in Section 13, decrease the option price of an
option to less than 100% of the Fair Market Value of a share of Common Stock on
the date of the granting of the option;

     c) change the class of persons eligible to receive an award of restricted
stock, options or bonuses payable in Common Stock under the Plan; or (d) extend
the duration of the Plan.

     d) the Committee may amend the terms of any award of restricted stock or
option theretofore granted, retroactively or prospectively, but no such
amendment shall impair the rights of any holder without such holder's written
consent.

     17. Duration. The Plan shall be adopted by the Board as of the date on
which it is approved by a majority of the Company's stockholders, which approval
must occur within the period ending 12 months after the date the Plan is
adopted. The Plan shall terminate upon the earliest of the following dates or
events to occur:

     a) the adoption of a resolution of the Board, terminating the Plan; or

     b) the date all shares of Common Stock subject to the Plan are purchased
according to the Plan's provisions; or

     c) ten years from the date hereof.

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