The seven-man, five-woman jury at Albany County Court, found Aaron James McKinney, 22, guilty in the killing of Matthew Shepard in 1998.

McKinney now faces the death sentence, as the jury prepares to enter the sentencing stage of the case on Thursday.

Both defense and prosecuting attorneys requested Wednesday afternoon free while a penalty phase is put together.

In October, 1998, McKinney and Russel Henderson, 21, lured the 21-year-old openly homosexual university student out of the bar where they had met, kidnapped, robbed and beat him with a heavy pistol, then left him to die strapped to a ranch fence.

Shepard hung on the fence for 18 hours until two passing cyclists found him. He died five days later in a Colorado hospital. Defense attorneys had argued the killing was in reaction to an unwanted sexual advance and under the influence of drugs and alcohol.

While McKinney's lawyer acknowledged that "Matthew Shepard suffered ... at the hands of Aaron McKinney," he argued that his client was addicted to drugs and alcohol and did not intend to kill Shepard, The Washington Post wrote Wednesday.

"It happened because Matthew Shepard grabbed his balls, and it continued because Aaron McKinney was under the influence of chronic methamphetamine use," the Post quoted defense attorney Dion Custis as saying.

But District Judge Barton Voigt had ruled that the defense could not use a "gay panic" defense as it would constitute a temporary insanity or diminished capacity defense -- not permitted under Wyoming law.

McKinney's accomplice, Russell Henderson, pleaded guilty earlier this year and is serving a life sentence.

The 12 jurors and four alternates will be sequestered for the duration of McKinney's trial.

The killing -- apparently targeting Shepard because he was gay -- drew national headlines and condemnation from President Bill Clinton.

The largest problem facing the world and the United States is "the primitive, age-old fear and hatred and dehumanization of other people who are not like us," Clinton said at a fund-raising dinner earlier this month.

Clinton became the first sitting US president to address a gay civil rights group in 1997. He has expanded health care benefits for federal employees to include same-sex partners, and he has appointed open gays and lesbians to many government posts.

Aaron McKinney was found guilty of felony murder on Wednesday by jurors who rejected a more serious murder charge, one involving premeditation.

But the 22-year-old roofer also was convicted of kidnapping and robbery, aggravating factors that make him eligible for the death penalty. Arguments on his punishment were to begin today.

If jurors do not vote unanimously for death, McKinney will receive a lifetime prison sentence, which the judge cannot alter.

Shepard, 21, was lured from a Laramie bar 13 months ago, robbed of $20, lashed to a fence, bludgeoned in the head with a pistol and left to die on the prairie. The University of Wyoming student died five days later in a Fort Collins, Colo., hospital.

The crime drew condemnation from President Clinton and spurred nationwide rallies for anti-hate crime legislation. The case has been closely watched by gay rights groups.

Andrew Cohen, a Denver attorney who has followed the case, said the verdict does send a message.

``I think this verdict is a bit of a sign from this jury that they're buying into the defense argument that however horrible the crime was, McKinney didn't mean to do it and didn't plan to do it,'' he said.

If so, that could save McKinney's life, Cohen said.

McKinney and friend Russell Henderson were charged in the attack. Investigators said the robbery was the primary motive but that the slightly built Shepard also was singled out because he was gay.

Henderson, 22, pleaded guilty to murder earlier this year and has been sentenced to life in prison.

McKinney's lawyers had sought to use a ``gay panic'' defense based on the theory that some people are prone to an uncontrollable, violent reaction when propositioned by a homosexual.

They argued that McKinney flew into a drug-influenced rage after Shepard grabbed him while the two rode in a pickup truck. The defense claimed the alleged advance triggered memories for McKinney of a childhood homosexual assault.

District Judge Barton Voigt, however, barred the defense, ruling that it was similar to temporary insanity or a diminished-capacity defense -- both of which are prohibited under Wyoming law.

McKinney stood with his hands clasped in front of him to hear the verdict. His arms dropped to his sides after the first ``guilty'' was announced by the court clerk.

Shepard's parents, Dennis and Judy, held hands and were expressionless. They later refused to comment.

Clinton issued a statement praising the jurors' decision.

``This verdict is a dramatic statement that we are determined to have a tolerant law-abiding nation that celebrates our differences, rather than deepening them,'' Clinton said. ``We cannot surrender to those on the fringe of our society who lash out at those who are different.''

The deal was reached after Shepard's parents agreed to it.

``I really don't know what to say other than that I'm truly sorry to the entire Shepard family,'' Aaron McKinney told the court. ``Never will a day go by I won't be ashamed for what I have done.''

A day earlier, a jury found McKinney guilty of felony murder, which carried a possible death sentence.

``I would like nothing better than to see you die Mr. McKinney, but now is the time to heal,'' Shepard's father, Dennis, told the 22-year-old roofer. ``Every time you wake up in your cell, remember you had the opportunity or the ability to stop your actions that night.''

Shepard was lured from a Laramie bar 13 months ago, robbed of $20, lashed to a fence, bludgeoned in the head with a pistol and left to die on the prairie. The University of Wyoming student died five days later in a Fort Collins, Colo., hospital.