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                                                               EXHIBIT 10(xviii)

                          UNITED DOMINION REALTY TRUST
                   DESCRIPTION OF THE OUT-PERFORMANCE PROGRAM

     Background

     The Company competes for management talent with both public and private
real estate investment vehicles and constantly reviews compensation structures
and practices in an effort to remain highly competitive. The Company's
compensation programs are designed to further its primary goal of increasing
dividend income and share price appreciation. The Board of Directors intends for
these goals to be the primary economic motivation of its executive officers and
other key employees.

     The Board of Directors believes that it is in the best interest of the
shareholders to attract and retain a management team that has a meaningful
equity stake in the long-term success of the Company. To this end it is
recommending that the shareholders approve the Out-Performance Program (the
"Program") pursuant to which officers and other key employees will be given the
opportunity to invest in the Company by purchasing performance shares
("Out-Performance Partnership Shares" or "OPPSs") of United Dominion Realty,
L.P., a Virginia limited partnership in which the Company is the sole general
partner ("Dominion Realty").

     The Program is designed to provide participants with the possibility of
substantial returns on their investment if the Company's total return on its
Common Stock exceeds targeted levels, while putting the participants' investment
at risk if those levels are not exceeded. The Program will be administered by
the Company's Board of Directors. Members of the Board of Directors who are not
employees of the Company are not eligible to participate in the Program.

     If the Program is approved, the Board of Directors anticipates authorizing
every other year the sale of a class of OPPSs to a limited liability company
(sometimes referred to as an "LLC") to be formed for the benefit of selected
officers and key employees who agree to invest in that class of OPPSs. The
participants will contribute the funds for the LLC to purchase the OPPSs and
will share ownership of the LLC on the basis of each participant's investment in
the LLC. The purchase price for each class of OPPSs will be set by the Company's
Board of Directors based upon the advice of an independent valuation expert. The
Board of Directors expects that the specific features of each class of OPPSs,
the designation of officers and key employees as potential participants in the
class and the level of participation of a particular participant will vary from
class to class.

     Participation in Class I OPPSs

     The Board of Directors has developed the principal terms of the Class I
OPPSs that it intends to offer to participants in 2001. For the Class I OPPSs,
participation rights will be approximately as follows:

                                                         OPPSs to
                      Participant                       be Offered
          -----------------------------------      --------------------
          Chief Executive Officer                              444,500
          Senior Executive Vice President                      190,500
          Chief Financial Officer                              127,000
          Treasurer/Investor Relations                         127,000
          Other Key Employees                                  381,000
                                                   --------------------
                                                             1,270,000
                                                   ====================

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     The purchase price for the Class I OPPSs has been determined by the Board
of Directors to be $1,270,000 based on a valuation by Salomon Smith Barney, Inc.
That valuation took into account that any investment in the Class I OPPSs will
become worthless if the targeted Total Return is not achieved. The value of the
Class I OPPSs also has been discounted significantly because of the substantial
restrictions on transfer and the limited redemption rights provided for with
respect to Class I OPPSs.

     It is important to recognize that any officer or other employee who is
provided the opportunity to invest is under no obligation to exercise that
right. The Class I OPPSs must be fully subscribed within 45 days of shareholder
approval, if obtained. If some of those eligible to participate elect not to
participate, the remaining OPPSs shall be retained by the Company.

     The Board of Directors may elect to loan Company funds to participants to
permit them to invest in a class of OPPSs. For the Class I OPPSs, the Board has
determined that participants can borrow some or all of the funds they need to
participate with a loan maturity date at the earlier of the fifth anniversary of
the date of the loan or 60 days from the date the participant ceases to be
employed by the Company for any reason. Loans to the Chief Executive Officer,
the Senior Executive Vice President, the Chief Financial Officer and the
Treasurer/Investor Relations will be 100% recourse. All other participants will
be at risk personally for at least 25% of the amount he or she invests with
respect to the Class I OPPSs. Interest will be payable annually and the interest
rate will be the same as the Company's cost of funds, as determined on an annual
basis.

     To begin the Program, for the Class I OPPSs the Company's performance will
be measured over a twenty-eight month period beginning with the month Mr.
Toomey's employment began (February, 2001). The LLC that holds the Class I OPPS
will have no right to receive distributions or allocations of income or loss, or
to redeem those shares prior to the date (the "Valuation Date") that is the
earlier of (i) the expiration of the measurement period for the class (June 1,
2003), or (ii) the date of a change of control of the Company (defined as a
"Transaction" in Dominion Realty's Agreement of Limited Partnership).

     The Class I OPPSs will only be entitled to receive distributions and
allocations of income and loss if, as of the Valuation Date, the cumulative
Total Return of the Company Common Stock during the measurement period

     .    exceeds the cumulative Total Return of the designated peer group index
          over the same period; and

     .    is at least the equivalent of a 30% Total Return or 12% annualized
          (the "Minimum Return").

     If the thresholds are met, holders of the OPPSs will be entitled to begin
receiving distributions and allocations of income and loss from Dominion Realty
equal to the distributions and allocations that would be received on the number
of interests in Dominion Realty ("OP Units") obtained by:

     .    (i) determining the amount by which the cumulative Total Return of the
          Company Common Stock over the measurement period exceeds the greater
          of the cumulative Total Return of the Morgan Stanley REIT Index (peer
          group index) or the Minimum Return (such excess being the "Excess
          Return");

     .    (ii) multiplying 4% of the Excess Return by the Company's Market
          Capitalization; and

     .    (iii) dividing the number obtained in clause (ii) by the market value
          of one share of the Company Common Stock on the Valuation Date, as the
          weighted average price per day of the Common Stock for the 20 trading
          days immediately preceding the Valuation Date.

     For the Class I OPPSs, the number determined pursuant to clause (ii) in the
preceding paragraph is capped at 2% of Market Capitalization (approximately 1%
per year). "Market Capitalization" is defined as the average number of shares
outstanding over the 28 month period (that includes Common Stock and OP Units
but does not include

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outstanding options or convertible securities) multiplied by the daily closing
price of the Company's Common Stock.

     If, on the Valuation Date, the cumulative Total Return of the Company
Common Stock does not meet the Minimum Return, the Total Return of the Morgan
Stanley REIT Index and there is no Excess Return, then holders of Class I OPPSs
will forfeit their initial investment of $1.27 million.

     The Morgan Stanley REIT Index will be used as the peer group index for
purposes of measuring the Class I Out-Performance Partnership Shares. The Morgan
Stanley REIT Index is a capitalization-weighted index with dividends reinvested
of the most actively traded real estate investment trusts. The Morgan Stanley
REIT Index is comprised of approximately 113 real estate investment trusts
selected by Morgan Stanley & Co. Incorporated and a total market cap of $123.6
billion. The Board of Directors of the Company has selected this index because
it believes that it is the real estate investment trust index most widely
reported and accepted among institutional investors. For the historical
performance of the Morgan Stanley REIT Index, see the Performance Graph on page
24. The Board of Directors has the ability to select a different index for
future classes of OPPSs. For example, the Board of Directors may select a
different index if it determines that the Morgan Stanley REIT Index is no longer
an appropriate comparison for the Company; if the Morgan Stanley REIT Index is
not maintained throughout the Measurement Period; or for any other reason that
the Board of Directors determines.

     "Total Return" means, for any security or index and for any period, the
cumulative total return for such security or index over such period, as measured
by the sum of (a) the cumulative amount of dividends paid in respect of such
security or index for such period (assuming that all cash dividends are
reinvested in such security as of the payment date for such dividend based on
the security price on the dividend payment date), and (b) an amount equal to (x)
the security price or index value at the end of such period, minus (y) the
security price or index value at the beginning of the measurement period.

     LLC Governance and Restrictions on Transfer

     The Class I OPPSs cannot be transferred by the LLC without the approval of
the managers of the LLC, who are expected to be the two largest participants in
the LLC, as long as they are employees of the Company, and representatives of
the independent Directors. Class I OPPSs may only be transferred by the LLC
after targeted returns have been exceeded and a forty-month vesting period from
the date of issuance has passed. At that time transfers may only be made to
participants or to one of their family members (or a family-owned entity).
Individuals who receive OPPSs after the vesting period may exchange them for an
equivalent number of OP Units. They may not transfer any OPPSs or OP Units
received except to a family member (or a family-owned entity) or in the event of
death or disability.

     The terms of the operating agreement of the Class I LLC will restrict the
participants' ability to transfer their interests in the LLC. The LLC will have
the right to repurchase the interest of any participant in the LLC at the
original purchase price if prior to the end of the forty-month vesting period
such participant's employment with the Company is terminated for any reason
other than by death or disability. In this case, the participant will be
entitled to retain any distributions that he or she received on the OPPSs
subsequent to the Valuation Date. The LLC will be used as a vehicle to purchase
the OPPSs to ensure that there would be no opportunity for the participants to
profit from the ownership of those OPPSs prior to the Valuation Date.

     The Class I Out-Performance Partnership Shares are not convertible into
Common Stock. However, in the event of a change of control of the Company, the
LLC or any participant that holds any OPPSs will have the same redemption rights
as other holders of OP Units. Upon the occurrence of a change of control, the
LLC or participant that holds OPPSs may require Dominion Realty to redeem all or
a portion of the units held by such party in exchange for a cash payment per
unit equal to the market value of a share of Common Stock at the time of
redemption. However, in the event that any units are tendered for redemption,
Dominion Realty's obligation to pay

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the redemption price will be subject to the prior right of the Company to
acquire such units in exchange for an equal number of shares of Common Stock.

     Examples of the Value of Class I OPPSs

     The following tables illustrate the value of the Class I OPPSs under
different share prices and total returns at the Valuation Date. For the two year
period ended December 31, 2000, the minimum thresholds for the Class I OPPSs
would not have been met.

This table assumes that the cumulative Total Return of the Morgan Stanley REIT
Index is less than the 30% minimum return:

                           Value to Shareholders
                   ---------------------------------------
                                                                 Value of
 Stock Price at        UDR Total      Shareholder Value            Opps
 Valuation Date       Return (1)         Achieved (2)        to Management (3)
----------------     ------------    -------------------    -------------------
                                         (Millions)             (Millions)

     $12.00              28.8%            $   349.2               $  0.0
     $13.00              39.5%            $   479.4               $  5.4
     $14.00              50.3%            $   609.6               $ 12.4
     $15.00              61.0%            $   739.8               $ 20.3
     $16.00              71.7%            $   870.0               $ 29.1
     $17.00              82.5%            $ 1,000.1               $ 37.0
     $18.00              93.2%            $ 1,130.3               $ 39.2

This table assumes that the cumulative Total Return of the Morgan Stanley REIT
Index is 50% and therefore is the operative threshold instead of the 30% minimum
return.

                           Value to Shareholders
                   ---------------------------------------
                                                                 Value of
 Stock Price at        UDR Total      Shareholder Value            Opps
 Valuation Date       Return (1)         Achieved (2)        to Management (3)
----------------     ------------    -------------------    -------------------
                                         (Millions)             (Millions)

     $12.00              28.8%            $   349.2               $  0.0
     $13.00              39.5%            $   479.4               $  0.0
     $14.00              50.3%            $   609.6               $  0.2
     $15.00              61.0%            $   739.8               $  7.2
     $16.00              71.7%            $   870.0               $ 15.1
     $17.00              82.5%            $ 1,000.1               $ 24.0
     $18.00              93.2%            $ 1,130.3               $ 33.8

(1)  Total Return to the UDR shareholders, assuming an 8% annual dividend rate.
(2)  Total Return multiplied by average market capitalization of $1,305 million
     (108.78 million shares and OP Units outstanding multiplied by the share
     price at the Valuation Date).
(3)  Out-Performance shareholder value multiplied by management participation of
     4% subject to 2% dilution limit.

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     The numbers used in the table are for illustrative purposes only and there
can be no assurance that actual outcomes will be within the ranges used. Some of
the factors that could affect the results set forth in the table are the Total
Return on the Company Common Stock relative to the Total Return of the Morgan
Stanley REIT Index, and the market value of the average outstanding equity of
the Company during any Measurement Period. These factors may be affected by
general economic conditions, local real estate conditions and the dividend
policy of the Company.

     Possible Negative Effects of the OPPSs

     Although the Company does not believe that the sale of Out-Performance
Partnership Shares will have an antitakeover effect, the OPPSs could increase
the potential cost of acquiring control of the Company and thereby discourage an
attempt to take control of the Company. However, the Board of Directors is not
aware of any attempt to take control of the Company and the Board of Directors
has not approved the sale of the OPPSs with the intention of discouraging any
such attempt.

     If with respect to the Class I OPPSs the Total Return on the Company Common
Stock over the Measurement Period exceeds both the Total Return of the Morgan
Stanley REIT Index and exceeds the Minimum Return, then the LLC that holds the
OPPSs could be entitled to receive the same distributions and allocations as the
holder of a significant number of OP Units of Dominion Realty. This could have a
dilutive effect on future earnings per share of Company Common Stock, and on the
Company's equity ownership in Dominion Realty.<PAGE>

                                                                 EXHIBIT 10(xix)

                          UNITED DOMINION REALTY TRUST
            DESCRIPTION OF THE LONG TERM INCENTIVE COMPENSATION PLAN

Background

     In 1998, the shareholders approved an amendment to the Company's 1985 Stock
Option Plan which limited the amount of shares of Common Stock issuable on the
exercise of options outstanding at any given time to 8% of the number of shares
issued and outstanding at that time, subject to a maximum aggregate limit of
10,000,000 shares. The Board of Directors has approved, in various stages, a
1999 Long-Term Incentive Plan ("LTIP") for the purpose of granting awards of
restricted stock and cash performance unit awards. On March 20, 2001, our Board
approved amendments of the LTIP to include a possible award of options. The LTIP
is being submitted for approval by our shareholders at the annual meeting so
that incentive stock options may be awarded and so that future awards made under
the LTIP may be fully deductible without regard for the deduction limits of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").

     As of March 9, 2001, there were 3,781,175 shares of Common Stock available
for grant under the 1985 Stock Option Plan, and 218,825 shares of restricted
stock have been awarded pursuant to the LTIP. We have reserved 4,000,000 shares
for issuance upon the grant or exercise of awards pursuant to the LTIP. If the
shareholders approve the LTIP, no additional grants will be made under the 1985
Stock Option Plan. Approximately 2,000 employees are eligible to participate in
the LTIP.

     The purpose of the LTIP is to promote our success by linking the personal
interests of our employees, officers and directors to those of our shareholders,
and by providing participants with an incentive for outstanding performance. The
LTIP authorizes the granting of awards in any of the following forms:

     .  options to purchase shares of Common Stock

     .  stock appreciation rights

     .  restricted stock

     .  dividend equivalents

     .  other stock-based awards

     .  any other right or interest relating to Common Stock, or

     .  cash.

     No more than 15% of the shares authorized under the LTIP may be granted as
awards of restricted stock or unrestricted stock awards. The maximum number of
shares of Common Stock with respect to one or more options and/or stock
appreciation rights that may be granted during any one calendar year under the
LTIP to any one person is 500,000. The maximum fair market value of any awards
(other than options and stock appreciation rights) that may be received by a
participant (less any consideration paid by the participant for such award)
during any one calendar year under the LTIP is $1,000,000.

<PAGE>

Administration

     The LTIP is administered by the Compensation Committee of our Board of
Directors. The Committee has the authority to designate participants; determine
the type or types of awards to be granted to each participant and the number,
terms and conditions thereof; establish, adopt or revise any rules and
regulations as it may deem advisable to administer the plan; and make all other
decisions and determinations that may be required under the plan. The Board of
Directors may at any time administer the plan. If it does so, it will have all
the powers of the Committee.

Formula Grants to Non-Employee Directors

     The LTIP provides for the automatic grant of non-qualified stock options to
our non-employee directors. On the day that such director first joins the Board
(or on the day of the 2001 annual meeting if he or she is already on the Board
at that time), each non-employee director will receive a grant of options to
purchase 5,000 shares of Common Stock. These initial options are immediately
exercisable and have a five-year term. In addition, on the day after each annual
meeting of our shareholders beginning with the 2001 annual meeting, each
non-employee director then in office will receive an option to purchase 2,000
shares of Common Stock. These annual options are immediately exercisable and
have a 10-year term. Pro-rata grants will be made if at any time there are
insufficient shares under the LTIP to make the full scheduled grants of
non-employee director options.

     The exercise price for each of these options will be the fair market value
of our Common Stock on the date of grant. A director's options will not
automatically lapse if he or she ceases to qualify as a non-employee director,
as long as he or she remains a member of the Board. However, such options will
lapse 30 days after the director ceases to serve as a member of the Board,
unless he or she retires. The Committee may make discretionary awards to
non-employee directors pursuant to the other provisions of the plan.

Discretionary Awards

     Stock Options. The Committee is authorized to grant incentive stock options
or non-qualified stock options under the plan. The terms of an incentive stock
option must meet the requirements of Section 422 of the Code. All options will
be evidenced by a written award agreement with the participant, which will
include any provisions specified by the Committee. However, the exercise price
of an option may not be less than the fair market value of the underlying stock
on the date of grant and no option may have a term of more than 10 years. In
addition, the Committee is not permitted to grant options with a "re-load"
feature, which provides for the automatic grant of a new option if the optionee
delivers shares of stock as full or partial payment of the exercise price of the
original option.

     Stock Appreciation Rights. The Committee may grant stock appreciation
rights under the plan. Upon the exercise of a stock appreciation right, the
participant has the right to receive the excess, if any, of: the fair market
value of one share of Common Stock on the date of exercise, over the grant price
of the stock appreciation right as determined by the Committee, which will not
be less than the fair market value of one share of Common Stock on the date of
grant. All awards of stock appreciation rights will be evidenced by an award
agreement, reflecting the terms, methods of exercise, methods of settlement,
form of consideration payable in settlement, and any other terms and conditions
of the stock appreciation right, as determined by the Committee at the time of
grant.

     Restricted Stock Awards. The Committee may make awards of restricted stock
to participants, which will be subject to such restrictions on transferability
and other restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote restricted stock or the right to
receive dividends, if any, on the restricted stock). No more than 15% of the
shares authorized under the LTIP may be granted as awards of restricted stock or
unrestricted stock awards.

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     Dividend Equivalents. The Committee is authorized to grant dividend
equivalents to participants subject to such terms and conditions as may be
selected by the Committee. Dividend equivalents entitle the participant to
receive payments equal to dividends with respect to all or a portion of the
number of shares of Common Stock subject to an option award or stock
appreciation right award, as determined by the Committee. The Committee may
provide that dividend equivalents be paid or distributed when accrued or be
deemed to have been reinvested in additional shares of Common Stock or otherwise
reinvested.

     Other Stock-Based Awards. The Committee may, subject to limitations under
applicable law, grant to participants such other awards that are payable in,
valued in whole or in part by reference to, or otherwise based on or related to
shares of Common Stock as deemed by the Committee to be consistent with the
purposes of the plan, including without limitation of shares of Common Stock
awarded purely as a bonus and not subject to any restrictions or conditions,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of Common Stock, and awards valued by reference to book
value of shares of Common Stock or the value of securities of or the performance
of specified parents or subsidiaries. The Committee will determine the terms and
conditions of any such awards.

     .  Performance Goals. The Committee may determine that any award will be
        determined solely on the basis of

     .  our achievement (or the achievement of our parent or subsidiary) of a
        specified target return, or target growth in return, on equity or
        assets,

     .  our total shareholder return (stock price plus reinvested dividends)
        relative to a defined comparison group or target over a specific
        performance period,

     .  our stock price,

     .  the achievement by an individual, us, or a business unit of ours or our
        parent or subsidiary, of a specified target, or target growth in,
        revenues, net income or earnings per share,

     .  the achievement of objectively determinable goals with respect to
        product delivery, product quality, customer satisfaction, meeting
        budgets and/or retention of employees, or

     .  any combination of the above.

     If an award is made on such basis, the Committee must establish goals prior
to the beginning of the period for which such performance goal relates (or such
later date as may be permitted under applicable tax regulations) and the
Committee may for any reason reduce (but not increase) any award,
notwithstanding the achievement of a specified goal. Any payment of an award
granted with performance goals will be conditioned on the written certification
of the Committee in each case that the performance goals and any other material
conditions were satisfied.

     Limitations on Transfer; Beneficiaries. No award will be assignable or
transferable by a participant other than by will or the laws of descent and
distribution or, except in the case of an incentive stock option, pursuant to a
qualified domestic relations order; provided, however, that the Committee may
(but need not) permit other transfers where the Committee concludes that such
transferability does not result in accelerated taxation, does not cause any
option intended to be an incentive stock option to fail to qualify as such, and
is otherwise appropriate and desirable, taking into account any factors deemed
relevant, including without limitation, any state or federal tax or securities
laws or regulations applicable to transferable awards. A participant may, in the
manner determined by the Committee, designate a beneficiary to exercise the
rights of the participant and to receive any distribution with respect to any
award upon the participant's death.

     Acceleration Upon Certain Events. Upon a participant's death, disability
or retirement, all of his or her outstanding options, stock appreciation rights,
and other awards in the nature of rights that may be exercised will

<PAGE>

become fully exercisable and all restrictions on his or her outstanding awards
will lapse, except that in the case of retirement such awards will remain
exercisable for the full original term. Any of his or her options or stock
appreciation rights will thereafter continue or lapse in accordance with the
other provisions of the LTIP and the award agreement. Unless otherwise provided
in an award agreement, upon the occurrence of a change in control of the Company
(as defined in the plan), all outstanding options, stock appreciation rights,
and other awards in the nature of rights that may be exercised will become fully
vested and all restrictions on all outstanding awards will lapse; provided,
however that such acceleration will not occur if, in the opinion of our
accountants, such acceleration would preclude the use of pooling of interest
accounting treatment for a change in control transaction that would otherwise
qualify for such accounting treatment and is contingent upon qualifying for such
accounting treatment. In addition, the Committee may at its discretion declare
any or all awards to be fully vested, and/or all restrictions on all outstanding
awards to lapse. The Committee may discriminate among participants or among
awards in exercising such discretion.

Termination and Amendment

     Our Board of Directors or the Committee may, at any time and from time to
time, terminate, amend or modify the LTIP without shareholder approval; but they
may condition any amendment on the approval of our shareholders if such approval
is necessary under tax, securities or other applicable laws, policies or
regulations. No termination or amendment of the LTIP may adversely affect any
award previously granted under the LTIP without the written consent of the
participant. The Committee may amend or terminate outstanding awards. However,
such amendments may require the consent of the participant and, unless approved
by the shareholders or permitted by the anti-dilution provisions of the plan,
the exercise price of an outstanding option may not be reduced.

Certain Federal Tax Effects of the Grant, Exercise and Transfer of Options

     Non-qualified Stock Options. There will be no federal income tax
consequences to the optionee or to us upon the grant of a non-qualified stock
option under the plan. When the optionee exercises a non-qualified option,
however, he or she will realize ordinary income in an amount equal to the excess
of the fair market value of the Common Stock received upon exercise of the
option at the time of exercise over the exercise price, and we will be allowed a
corresponding deduction, subject to applicable limitations under Code Section
162(m). Any gain that the optionee realizes when he or she later sells or
disposes of the option shares will be short-term or long-term capital gain,
depending on how long the shares were held.

     Incentive Stock Options. There typically will be no federal income tax
consequences to the optionee or to us upon the grant or exercise of an incentive
stock option. If the optionee holds the option shares for the required holding
period of at least two years after the date the option was granted or one year
after exercise, the difference between the exercise price and the amount
realized upon sale or disposition of the option shares will be long-term capital
gain or loss, and we will not be entitled to a federal income tax deduction. If
the optionee disposes of the option shares in a sale, exchange, or other
disqualifying disposition before the required holding period ends, he or she
will realize taxable ordinary income in an amount equal to the excess of the
fair market value of the option shares at the time of exercise over the exercise
price, and we will be allowed a federal income tax deduction equal to such
amount, subject to applicable limitations under Code Section 162(m). While the
exercise of an incentive stock option does not result in current taxable income,
the excess of the fair market value of the option shares at the time of exercise
over the exercise price will be an item of adjustment for purposes of
determining the optionee's alternative minimum taxable income.

     Transfers of Options. The Committee may, but is not required to, permit the
transfer of non-qualified stock options granted under the plan. Based on current
tax and securities regulations, such transfers, if permitted, are likely to be
limited to gifts to members of the optionee's immediate family or certain
entities controlled by the optionee or such family members. The following
paragraphs summarize the likely income, estate, and gift tax consequences to

<PAGE>

the optionee, us, and any transferees, under present federal tax regulations,
upon the transfer and exercise of such options.

     Federal Income Tax. There will be no federal income tax consequences to the
optionee, us, or the transferee upon the transfer of a non-qualified stock
option. However, the optionee will recognize ordinary income when the transferee
exercises the option, in an amount equal to the excess of the fair market value
of the option shares upon the exercise of such option over the exercise price,
and we will be allowed a corresponding deduction, subject to applicable
limitations under Code Section 162(m). The gain, if any, realized upon the
transferee's subsequent sale or disposition of the option shares will constitute
short-term or long-term capital gain to the transferee, depending on the
transferee's holding period. The transferee's basis in the stock will be the
fair market value of such stock at the time of exercise of the option.

     Federal Estate and Gift Tax. If an optionee transfers a non-qualified stock
option to a transferee during the optionee's life but before the option has
become exercisable, the optionee will not be treated as having made a completed
gift for federal gift tax purposes until the option becomes exercisable.
However, if the optionee transfers a fully exercisable option during the
optionee's life, he or she will be treated as having made a completed gift for
federal gift tax purposes at the time of the transfer. If the optionee transfers
an option to a transferee by reason of death, the option will be included in the
decedent's gross estate for federal estate tax purposes. The value of such
option for federal estate or gift tax purposes may be determined using a
"Black-Scholes" or other appropriate option pricing methodology, in accordance
with IRS requirements.

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