Document:

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                                                                    EXHIBIT 10.8

                                            February 26, 2001

Mr. Robert H. Slater
816 Emerald Drive
Alexandria, VA 22308

Dear Mr. Slater:

This letter agreement (the "Agreement") confirms the terms of the termination of
Executive's employment with AvalonBay Communities, Inc. (the "Company," a term
which for purposes of this Agreement includes its related or affiliated
entities).

1.       MODIFICATION OF EXISTING EMPLOYMENT AGREEMENT. Robert H. Slater
         ("Executive") and the Company acknowledge that they are parties to a
         certain written employment agreement dated March 9, 1998, as amended by
         them on July 30, 1999 (collectively, "Employment Agreement"). This
         letter, when executed by the parties hereto, constitutes an amendment
         to the Employment Agreement, in accordance with Section 11 thereof.

2.       TERMINATION DATE. It is mutually agreed that the effective date of
         termination of Executive's Employment Agreement, except for certain
         provisions thereof as provided herein, shall be March 29, 2002 or such
         earlier date as the Company and Executive may reasonably agree
         ("Termination Date"). Notwithstanding anything to the contrary in
         Sections 1 or 7(c)(iv) of the Employment Agreement, the Company shall
         not be obligated to give to Executive Notice of Nonrenewal pursuant to
         Section 1 of the Employment Agreement and Executive waives receipt of
         such notice.

3.       DEPARTURE DATE. Notwithstanding the provisions of paragraph 2,
         Employment Duties, of the Employment Agreement, it is agreed that
         Executive shall cease serving as the Executive Vice President of the
         Company on April 30, 2001, or such other date as shall be mutually
         agreeable to the Company and Executive (the "Departure Date"), and
         Executive's current duties and authority shall thereupon cease. Such
         cessation of title, duties, and responsibilities shall in no event
         constitute a Constructive Termination without Cause. Executive agrees
         that as of the Departure Date he shall be deemed to have resigned as an
         officer of AvalonBay Communities, Inc. and as a director and/or officer
         of all subsidiaries and affiliates thereof, as applicable.

4.       CONSULTING DUTIES.

         (a) CONSULTING SERVICES. From and after the Departure Date, and until
         March 29, 2002 (the "Consulting Period"), Executive will perform
         services for the Company as a

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         consultant. The legal status of Executive's consultancy will be as an
         independent contractor. Executive will make himself available to
         perform consulting services, including, but not limited to, legal
         assistance services, on a part-time basis only, at times and upon
         notice reasonably acceptable to Executive. The Company agrees to
         utilize the consulting services of Executive at times and places which
         do not interfere with Executive's post-departure business or employment
         activities. During the Consulting Period, Executive shall be free to
         pursue other business opportunities or employment, except to the extent
         that such other business opportunities or employment violate Section
         13(d) hereof. Executive shall not be required to provide consulting
         services in a manner that unreasonably interferes with his ability to
         pursue such other business opportunities or employment.

         (b) TECHNICAL SUPPORT. During the Consulting Period, and, in any event
         until at least March 29, 2002, the Company will maintain for Executive
         at its headquarters a direct dial telephone number, voicemail, the
         reasonable support of an administrative assistant and, at reasonable
         times and upon reasonable notice, information technology support. In
         addition to using these resources as a consultant to the Company,
         Executive may use these resources for personal use as well.

5.       COMPENSATION/BENEFITS UNTIL TERMINATION DATE.

         (a) BASE SALARY. From and after the Departure Date and until the
         Termination Date, Executive will continue to receive his base salary
         (at its rate as adjusted in February 2001 for commencement on March 1,
         2001) in accordance with Section 3(a) of the Employment Agreement.

         (b) BONUSES. In respect of the bonus provided in Section 3(b) of the
         Employment Agreement, the Company agrees to pay the Executive a full
         cash bonus for the year 2001 at the time such year 2001 bonuses are
         paid to other Company officers, i.e., on or about February 2002. The
         cash bonus paid to the Executive for 2001 will be $253,328 (i.e., the
         average of Executive's cash bonuses received in respect of 1998
         (225,000), 1999 ($214,828) and 2000 ($320,158)). No other bonus or
         bonuses pursuant to Section 3(b) of the Employment Agreement will be
         paid.

         (c) MEDICAL INSURANCE/PHYSICAL. From and after the Departure Date and
         until the Termination Date, the Company will continue to provide to
         Executive and Executive's immediate family the health insurance which
         Executive and Executive's family are receiving pursuant to Section 3(c)
         of the Employment Agreement, including one comprehensive physical after
         the date hereof (with no reimbursement for travel related to obtaining
         such physical).

         (d) LIFE INSURANCE/DISABILITY INSURANCE. From and after the Departure
         Date and until the Termination Date, the Company will continue to
         provide the Executive Life Insurance/Disability Insurance benefits as
         currently provided pursuant to Section 3(d) of the Employment
         Agreement.

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         (e) STOCK GRANTS. Executive shall be eligible for an employee stock
         grant for the year 2001 on the same basis as other senior managers of
         the Company as if Executive had served as an employee under the
         provisions of the Employment Agreement for the full year 2001. The
         grant will be made at the same time as grants are made to other senior
         managers of the Company for the year 2001. The grant (the "2001 Grant")
         will be fully vested and freely tradable when conferred. The grant will
         be determined by applying to Executive's target grant level for the
         year 2001 (which is the same as Executive's potential target grant
         level as for the year 2000) the same percentage realization as is
         applied to other senior managers of the Company whose percentage
         realization is determined in the same manner. In addition, on or about
         February 2002, restricted shares granted in prior years that were
         scheduled to vest at that time shall vest in accordance with their
         terms (the "2002 Vesting Shares").

         (f) STOCK OPTIONS. On or prior to the Departure Date, the Company shall
         grant to Executive 46,375 employee stock options, and thereafter
         Executive shall not be eligible to receive any other award of stock
         options for the year 2001. Such options will expire on February 15,
         2007, which will be unaffected by the termination of the Employment
         Agreement or the termination of Executive's employment. The Executive
         shall enter into the Company's standard form option agreement as
         currently in use, and such option award shall be subject to the
         provisions of such stock option agreement as modified by the terms of
         this Agreement (collectively, the "Stock Option Agreement").

         (g) BUSINESS EXPENSES. The Company shall reimburse Executive for
         reasonable and customary business expenses incurred by Executive in the
         course of performing Executive's consultant duties for the Company
         through the Termination Date

6.       COMPENSATION/BENEFITS FOLLOWING TERMINATION DATE.

         (a) COVERED AVERAGE COMPENSATION. The Company shall provide Executive,
         for twelve (12) consecutive months, commencing with April 2002, a gross
         monthly payment in the amount of $116,536 (i.e., $1,398,437 in the
         aggregate). Executive and Company agree that this amount fulfills
         Company's obligations under Section 7(c) of the Employment Agreement.
         The Company may elect to make these payments at the times that the
         Company's regular payroll checks are issued, such that the gross
         aggregate amount of $1,398,437 is paid over a 12 month period by
         payment of regular payroll checks or direct deposit.

         (b) MEDICAL AND DISABILITY BENEFITS. The Company will continue, without
         cost to Executive, benefits comparable to the medical and disability
         benefits provided to Executive immediately prior to the Termination
         Date under Sections 3(c) and 3(d) of the Employment Agreement for a
         period of twenty-four (24) months following the Termination Date or
         until such earlier date as Executive may obtain comparable benefits
         through other employment (whether self-employment or otherwise). Upon
         obtaining medical or disability benefits through other employment
         comparable to

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         those provided to Executive under Sections 3(c) or 3(d) of the
         Employment Agreement, Executive will promptly notify the Company in
         writing.

         (c) SPLIT-DOLLAR LIFE INSURANCE POLICY. The Company will continue to
         pay, for so long as such payments are due, all premiums then due and
         payable on, but only to the extent relating to the whole-life portion
         of, the split-dollar life insurance policy obtained pursuant to Section
         3(d) of the Employment Agreement; provided that the Company's
         obligation to pay under this Section 6(c) are conditioned upon
         Executive's payment of all premiums payable on, but only to the extent
         relating to the term life portion of, said split-dollar life insurance
         policy. Executive agrees to cooperate with the Company in verifying
         Executive's continuing satisfaction of the foregoing condition. The
         Company agrees to promptly notify Executive, and Executive agrees to
         promptly notify the Company, of any premium notice or other notice it
         or Executive receives from the insurer relating to the policy. In the
         event that the Company determines its obligation to make payments under
         this Section 6(c) has ceased by reason of Executive's nonpayment of
         premiums relating to the life insurance portion of said split-dollar
         life insurance policy, the Company shall provide Executive with thirty
         (30) days' written notice of its intent to terminate payments
         hereunder. Such notice shall identify specifically Executive's
         nonpayment of the term life insurance premium as the basis upon which
         the Company asserts its right to cease payments and shall provide
         Executive with a reasonable opportunity to cure.

         (d) STOCK GRANTS. In addition to the 2001 Grant and the 2002 Vesting
         Shares referred to in Section 5(e), all other shares of the Company's
         stock that Executive was granted as restricted shares shall vest as of
         the Termination Date. Upon the occurrence of the Termination Date, the
         Company shall (or the Company shall cause the Company's transfer agent
         to) (i) promptly deliver to Executive certificates representing such
         shares with no restrictive legends, and such shares shall be freely
         transferable by Executive subject to applicable securities laws; and
         (ii) remove or cause to be removed all restrictive legends on shares
         previously issued to Executive. Executive acknowledges that the Company
         has advised him to consult an attorney regarding Executive's continuing
         obligations under Section 16 of the Securities Exchange Act of 1934, as
         amended, Rule 144 promulgated under the Securities Act of 1933, as
         amended, as well as other federal and state securities laws, including
         insider trading laws and regulations. For convenience, EXHIBIT A sets
         forth a list of all shares of restricted stock Executive was granted
         and that (to the extent Executive has not disposed of any prior to such
         date) Executive will retain following the Date of Termination.

        (e)      STOCK OPTIONS.

                           (A) In accordance with Section 7(c) of the Employment
                  Agreement, all options to purchase shares of the Company's
                  common stock that Executive has been or may be granted prior
                  to the Departure Date will vest as of the Departure Date
                  (i.e., April 30, 2001). For convenience, EXHIBIT B hereto sets
                  forth the

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                  options (with applicable option exercise prices and expiration
                  dates) which Executive holds as of today.

                           (B) The Board of Directors, or the compensation
                  committee of the Board of Directors, of the Company has taken
                  or will take such action as is necessary so that, with respect
                  to the options granted with respect to year 2000 (granted in
                  February 2001) and year 2001 (to be granted prior to the
                  Departure Date, in accordance with Section 5(f) hereof),
                  Executive will have until February 13, 2006 (in the case of
                  the options granted with respect to 2000) and until February
                  15, 2007 (in the case of the options granted with respect to
                  2001) to exercise the options (collectively, the "Extended
                  Options").

                           (C) In accordance with the terms of the option
                  agreements and the Company's stock incentive plan, because of
                  Executive's "other business relationship" as a consultant to
                  the Company, all options other than the Extended Options shall
                  continue until the later of (i) their stated expiration date,
                  (ii) 90 days after the Termination Date (or, in the event
                  Executive's services under Section 4 terminate earlier than
                  the Termination Date as determined by mutual agreement between
                  the Company and Executive or by a final arbitration decision
                  to such effect, then 90 days from such earlier termination),
                  or (iii) in the case of Disability or Death (as defined in the
                  applicable stock option agreements), the date provided in the
                  stock option agreements for such occurrence. In accordance
                  with paragraph (B) of this Section 6(e) the Extended Options
                  shall not expire until their stated expiration date regardless
                  of earlier death, disability or other occurrence.

                           (D) The Company will provide reasonable and customary
                  cooperation in Executive's consummation of a "cashless
                  exercise" with a broker in which the proceeds of the sale of
                  shares of the Company common stock are used, directly or
                  indirectly, to finance Executive's remittance of the exercise
                  price on the options. Beginning on the third business day
                  after the public disclosure of the Company's second quarter
                  2001 earnings, or such earlier time after the Departure Date
                  as the Company reasonably determines is appropriate, the
                  Company will in no event assert that Executive is in
                  possession of information regarding the Company such that
                  there is a basis for the Company to not provide such
                  cooperation. The Company has agreed that the payment of the
                  exercise price for any such option also may be made, in
                  accordance with the terms of the Stock Option Agreements, by
                  Executive in the form of shares of Company stock which are
                  unrestricted and which have been held by Executive for at
                  least six (6) months. In the event of Executive's death,
                  Executive's options shall be exercisable by Executive's legal
                  representative or legatee in accordance with their terms.

         (f) EXCISE TAX. The Company has determined in good faith, after
         consultation with Arthur Anderson LLP, that none of the payments
         provided hereunder is subject to an excise tax under Section 4999 of
         the Internal Revenue Code of 1986, as amended. The provisions of
         Section 7(d) of the Employment Agreement shall survive the

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         Termination Date. Notwithstanding the provisions of the Employment
         Agreement, however, for purposes of application of said Section 7(d) of
         the Employment Agreement and for purposes of this Agreement, the term
         "Accounting Firm" shall be deemed to refer to Arthur Anderson LLP.

         (g) OUTPLACEMENT SERVICES. Executive may retain, in his sole
         discretion, services of a recognized professional outplacement services
         firm, including but not limited to David Kyle of Lind and Kyle
         Consultants, to provide such services to Executive as Executive may
         require to find employment between the date hereof and the date
         Executive accepts full time employment (including self-employment) or
         one (1) year following the Departure Date, whichever occurs first. The
         Company will reimburse Executive for up to Twenty-Five Thousand Dollars
         ($25,000) in services rendered by the outplacement services firm in
         accordance with the provisions of this Section 6(g). If Executive so
         elects, Executive and the Company will select a mutually agreeable
         outplacement services firm (which may include Lind and Kyle) to be
         retained by the Company to provide the outplacement services described
         in this Section 6(g), in which event the Company shall pay the
         outplacement services firm directly for services rendered to and on
         behalf of Executive.

         (h) PROFESSIONAL ADVICE. The Company will reimburse Executive for up to
         Fifteen Thousand Dollars ($15,000) in attorneys' fees actually incurred
         by Executive in association with his departure from and termination of
         employment with the Company, including review of the Employment
         Agreement and professional services leading to the execution of this
         Agreement. The Company will reimburse Executive for up to Five Thousand
         Dollars ($5,000) for tax advice obtained by Executive from a public
         accounting firm or other financial advisor associated with and relating
         to his departure from and termination of employment with the Company.

         (i) DEFERRED COMPENSATION. Executive may elect to defer the payout of
         his vested deferred compensation so that it will be paid out over a
         term of five (5) years following the Termination Date. To make such an
         election, Executive must submit written notice thereof to the Company's
         General Counsel not later than ten (10) business days following the
         execution of this Agreement.

         (j) LITIGATION ASSISTANCE. Executive agrees to provide reasonable
         cooperation in connection with any ongoing or future litigation matter
         in which his knowledge and experience as to the matter involved makes
         his assistance of value to the Company, as determined by the Company in
         its reasonable discretion.

7.       MATERIAL BREACH.

                           (A) In the event that Executive willfully and
                  materially breaches the terms of Sections 8(b), 10 (but only
                  to the extent that Section 10 incorporates by reference
                  Sections 6(b) and Annex B of the Employment Agreement), 11,
                  12, 13(a), 13(c), 13(d) or 13(e) of this Agreement (a
                  "Material Breach") at any time after the date hereof and
                  within twenty-four (24) months following the Termination Date
                  (or,

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                  with respect to a particular provision, until the expiration
                  of his obligations with respect to such provision), in
                  addition to the Company's rights to obtain equitable relief or
                  damages for such breach, the Company may suspend the full
                  original or remaining amount of each tranche of Extended
                  Options (any such suspended options, "Suspended Options"). The
                  Company shall suspend Executive's right to exercise the
                  Suspended Options by (i) filing a request for arbitration
                  within a reasonable time after any senior manager (i.e., any
                  individual holding the title of Senior Vice President or
                  higher) learns of the Material Breach, which request
                  specifically states that the Company is suspending Executive's
                  right to exercise, or (ii) in the event the Company reasonably
                  determines that Executive's asserted Material Breach is
                  curable, by sending Executive a written notice describing the
                  Material Breach and the steps Executive must take to cure such
                  Material Breach. In the event that the Company asks Executive
                  to cure a Material Breach and Executive fails to cure such
                  breach to the Company's satisfaction within five (5) business
                  days following delivery to Executive of written notice from
                  the Company, the Company then may commence an arbitration
                  proceeding, in which case Executive's right to exercise the
                  Suspended Options will remain suspended. In the event that an
                  arbitrator determines that Executive has not committed a
                  Material Breach, the arbitrator may award Executive damages
                  directly caused by the suspension of Executive's right to
                  exercise the Suspended Options. In the event that an
                  arbitrator determines that Executive has committed a Material
                  Breach, the exercise period of the Suspended Options shall
                  terminate immediately without further action or decision by
                  the arbitrator, without prejudice to the Company's right to
                  obtain equitable relief or damages for such Material Breach;
                  provided that an award of additional damages (if any) shall
                  take into account termination of the Suspended Options.
                  Nothing contained herein otherwise shall be deemed to limit
                  the Company's right to obtain equitable relief or damages for
                  a Material Breach that occurs prior to or within twenty-four
                  (24) months following the Termination Date.

                           (B) Because a violation prior to the Termination Date
                  by Executive of Sections 13(a) or 13(e) of this Agreement may
                  cause the Company to incur great and irreparable damage,
                  Executive and Company agree that if Executive willfully and
                  materially breaches Sections 13(a) or 13(e) of this Agreement
                  prior to the Termination Date, then, in addition to whatever
                  other remedies the Company may have, the Company's obligations
                  to make or continue to make future payments and deliveries
                  ("Payments") under Sections 5(a) (base salary), 5(b) (2001
                  cash bonus) and 5(e) (2001 Grant and 2002 Vesting Shares)
                  shall cease (a "termination for Cause"), PROVIDED, HOWEVER,
                  that any termination for Cause shall be subject to the
                  following:

                           (i) Notice of intention to terminate for Cause has
                           been given to Executive in writing by the Company
                           within 30 days after the Chief Executive Officer of
                           the Company learns of the act, failure to act or

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                           event (or latest in a series of acts, failures to act
                           or events) constituting Cause;

                           (ii) Executive has been given written notice of the
                           particular acts, failures to act or events which
                           forms the basis for the Company's assertion for a
                           termination for Cause and has been afforded at least
                           30 days in which (A) to present his position with
                           respect to such basis in writing in person with
                           counsel present at a meeting of the Company's Board
                           of Directors and, (B) if, in the reasonable judgment
                           of the Company, such act, failure to act or event is
                           curable, Executive has been given a reasonable
                           opportunity to cure the asserted basis for Cause; and

                           (iii) In the event that two-thirds of the Company's
                           outside Board of Directors reasonably determines that
                           Executive's written statement of his position with
                           respect to the Company's assertion of Cause is not
                           satisfactory and, if curable, Executive failed to
                           cure to the Company's reasonable satisfaction, the
                           Company then may commence an arbitration proceeding
                           to establish its right to terminate for Cause. In the
                           event that an arbitrator determines that the Company
                           does not have a right to terminate for Cause, the
                           Company's obligation to continue making Payments
                           under Sections 5(a), 5(b) and 5(e) shall continue.
                           The arbitration shall take place in accordance with
                           the procedures described in paragraph 17(e) hereof.
                           In the event that the date of payment for any Payment
                           occurs while the process described in subsections (i)
                           through (iii) hereof is pending, the Company shall
                           pay that installment of the cash (and deliver the
                           shares contemplated by Section 5(e)) into an escrow
                           account in accordance with and subject to the escrow
                           provisions of Section 17(e) hereof. The arbitrator
                           shall direct that the amount held in escrow,
                           including accrued interest (and dividends on shares),
                           be paid over to the prevailing party. Nothing in this
                           Section 7(B) shall be deemed to preclude the Company
                           or Executive from seeking equitable relief in a court
                           as specified in, and for the limited purposes set
                           forth in, this Agreement (or the Employment
                           Agreement, to the extent incorporated herein).

                  The provisions of this Section 7(B) shall not apply after a
         Change in Control (as defined in the Employment Agreement) or after the
         Termination Date, and after a Change in Control or after the
         Termination Date the Company's remedy for a breach by Executive of
         Sections 13(a) or 13(e) shall be to (i) to the extent permitted, take
         the actions contemplated by Section 7(A) and/or (ii) seek injunctive
         relief and/or (iii) bring an arbitration proceeding for monetary
         damages.

8.       RELEASE OF CLAIMS.

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         (a) Executive, on behalf of himself and his successors, heirs, assigns,
         executors, administrators and/or estate, hereby irrevocably and
         unconditionally release, acquit and forever discharge the Company, its
         subsidiaries, divisions and related or affiliated entities, and each of
         their respective predecessors, successors or assigns, and the officers,
         directors, partners, shareholders, representatives, employees and
         agents of each of the foregoing (the "Releasees"), from any and all
         charges, complaints, claims, liabilities, obligations, promises,
         agreements, controversies, damages, actions, causes of action, suits,
         rights, demands, costs, losses, debts and expenses (including
         attorneys' fees and costs actually incurred), known or unknown, that
         directly or indirectly arise out of, relate to or concern Executive's
         employment or termination of employment with the Company ("Claims"),
         which Executive has, owns or holds, or at any time heretofore had,
         owned or held against the Releasees up to the date on which Executive
         executes this Agreement, including without limitation, express or
         implied, all Claims for: breach of express or implied contract;
         promissory estoppel; fraud, deceit or misrepresentation; intentional,
         reckless or negligent infliction of emotional distress; breach of any
         express or implied covenant of employment, including the covenant of
         good faith and fair dealing; interference with contractual or
         advantageous relations; discrimination on any basis under federal,
         state or local law, including without limitation, Title VII of the
         Civil Rights Act of 1964, as amended, the Americans with Disabilities
         Act, as amended, The Age Discrimination in Employment Act, as amended,
         and the [California Fair Employment and Housing Act, Cal. Gov't. Code
         Sections 12940, ET SEQ., as amended;] and all claims for defamation or
         damaged reputation.

         (b) Executive represents and warrants that he has not filed any
         complaints or charges asserting any Claims against the Releasees with
         any local, state or federal agency or court. Executive further
         represents and warrants that he has not assigned or transferred to any
         person or entity any Claims or any part or portion thereof.

         (c) Executive agrees that he will not hereafter pursue any Claim
         against any Releasee (including without limitation any claim seeking
         reinstatement with, or damages of any nature, severance, incentive or
         retention pay, attorney's fees, or costs) by filing a lawsuit in any
         local, state or federal court for or on account of anything which has
         occurred up to the present time as a result of Executive's employment;
         PROVIDED, however, that nothing in this Section 8 shall be deemed to
         release the Company from any claims that Executive may have (i) under
         this Agreement, (ii) for indemnification pursuant to and in accordance
         with applicable statutes, the by-laws of the Company and Section 4(b)
         of the Employment Agreement, (iii) vested pension or retirement
         benefits under the terms of qualified employee pension benefit plans,
         (iv) accrued but unpaid wages, or (v) for excise tax payments pursuant
         to Section 7(d) of the Employment Agreement.

9.       RELEASE BY THE COMPANY.

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         (a) The Company, on behalf of itself, its subsidiaries, divisions and
         related or affiliated entities and each of their respective
         predecessors, successors or assigns hereby irrevocably and
         unconditionally releases, acquits and forever discharges Executive,
         Executive's successors, heirs, assigns, executors, administrators
         and/or estate (the "Slater Releasees"), from any and all charges,
         complaints, claims, liabilities, obligations, promises, agreements,
         controversies, damages, actions, causes of action, suits, rights,
         demands, costs, losses, debts and expenses (including attorney's fees
         and costs actually incurred) that directly or indirectly arise out of,
         relate to or concern Executive's employment or termination of
         employment with the Company (the "Company Claims") which the Company
         has, owns or holds, or at any time heretofore had, owned or held
         against the Slater Releasees up to the date on which it executes this
         Agreement.

         (b) The Company represents and warrants that it has not filed any
         complaints or charges asserting any Company Claims against the Slater
         Releasees with any local, state or federal agency or court. The Company
         further represents and warrants that it has not assigned or transferred
         to any person or entity any Company Claims or any part or portion
         thereof.

         (c) The Company agrees that it will not hereafter pursue any Company
         Claims against any Slater Releasees by filing a lawsuit in any local,
         state or federal court for or on account of anything which has occurred
         up to the present time as a result of Executive's employment; PROVIDED,
         HOWEVER, that nothing in this Section 9 shall be deemed to release
         Executive from any claims the Company may have (i) under this
         Agreement, or (ii) for breaches prior to the date hereof of the
         nondisclosure provisions of Section 6 of the Employment Agreement or
         Annex B to the Employment Agreement.

10.      EMPLOYMENT AGREEMENT. Except as set forth in the next sentence or as
         expressly provided elsewhere in this Agreement, this Agreement
         supersedes all provisions of the Employment Agreement as of the
         Termination Date only. Nothing contained herein, however, shall be
         deemed to terminate Executive's obligations to the Company or the
         Company's obligations to Executive under Sections 4(b)
         (Indemnification), 6 (Records/Nondisclosure/Company Policies), 7(d)
         (Excise Tax Payment), 8(c) (Specific Enforcement), and 13(a)
         (Resolution of Disputes) (as modified by Section 17 hereinbelow) of the
         Employment Agreement, Annexes A (Code of Ethics) or B (Nondisclosure
         Agreement, provided however that Executive's obligation to return
         documents in accordance with Annex B shall be effective as of the
         Termination Date and not as of the Departure Date except as the Company
         may otherwise request in writing) thereto, or the Company's Stock
         Option Plan or the Stock Option Agreements entered into by Executive
         from time to time (as modified by Section 6(f) hereinabove).

11.      RETURN OF PROPERTY. In accordance with Section 4 of the Nondisclosure
         Agreement, dated as of March 9, 1998, by and between Executive and Bay
         Apartment

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         Communities, Inc. (a predecessor name to the Company), and incorporated
         in the Employment Agreement as Annex B ("Nondisclosure Agreement"),
         Executive agrees that promptly following the Departure Date he will
         return to the Company (a) all records, manuals, correspondence, notes,
         financial statements, computer printouts and other documents and
         recorded material of every nature (including copies thereof) that may
         be in Executive's possession or control dealing with Confidential
         Information (as defined in Section 8 of the Nondisclosure Agreement)
         and, (b) other property, in each case except to the extent that the
         Company agrees Executive may retain such material for purposes of
         fulfilling his consulting duties under Section 4. In any event,
         Executive may retain his laptop computer until the Termination Date.
         For the purpose of avoiding confusion, prior to the Departure Date
         Executive shall provide Company with a letter that lists the furniture
         and other items which are owned by Executive but which are currently
         used in the Company's offices, and in the event that such items remain
         (with the Company's consent) in the Company's offices after the
         Departure Date, Executive may reclaim such items upon reasonable
         notice.

12.      ADVERSE ACTIONS. Executive agrees that for forty-eight (48) months
         following the date Executive executes this Agreement without the prior
         written consent of the Company Executive shall not, directly or
         indirectly or in any manner, or solicit, request, advise, assist or
         encourage any other person or entity to, (a) undertake any action that
         would be reasonably likely to, or is intended to, result in a Change in
         Control (as that term is defined in the Employment Agreement) of the
         Company, including, for these purposes, without limitation, a valuation
         of the Company; (b) seek to change or control in any manner the
         management or the Board of Directors of the Company, or the business,
         operations or affairs of the Company; or (c) undertake an investment
         (other than in respect to the equity rights described in Section 6
         above) in the Company.

13.      NON-DISPARAGEMENT, NONDISCLOSURE AND NON-SOLICITATION.

         (a) NON-DISPARAGEMENT. Executive and Company each agree that, if asked
         about the other, he or it will only speak or write positively of the
         other. However, for the purpose of avoiding disputes and litigation
         arising from a violation of this Section 13(a), Executive and Company
         each agree that there will only be a violation of this covenant if a
         party willfully disparages the other with the intent of harming the
         other. References to the Company in this Section 13(a) mean the
         following individuals of the Company: the Company's directors and any
         officer of the Company who holds a title equal to or senior to Senior
         Vice President. The provisions of this Section 13(a) shall not apply to
         any truthful statement required to be made by Executive or any director
         or senior officer of the Company, as the case may be, in any legal
         proceeding, governmental or regulatory investigation, in any public
         filing or disclosure legally required to be filed or made, and also
         shall not apply to any confidential discussion or consultation with
         professional advisors.

                                       11
<PAGE>

         (b) NON-DISCLOSURE OF TERMS OF AGREEMENT. Executive agrees not to
         disclose the terms of this Agreement, except (i) to Executive's
         professional advisors, including accountants and attorneys (provided
         they agree to keep such information confidential), (ii) to the extent
         that, prior to Executive's disclosure, the Company has previously
         disclosed such information publicly, whether in its filings with the
         Securities & Exchange Commission or otherwise, and (iii) (A) pursuant
         to a valid subpoena or (B) as otherwise required by law, but in either
         (iii)(A) or (iii)(B) only after providing the Company, to the attention
         of its Chief Executive Officer, with prior written notice and
         reasonable opportunity to contest such subpoena or other requirement.
         In the case of the circumstances contemplated by subsections
         13(b)(iii)(A) or (B), written notice shall be provided to the Company
         as soon as practicable, but in no event less than five (5) business
         days before any such disclosure is compelled, or, if disclosure is
         compelled earlier, not later than the next business day following
         Executive's receipt of notice compelling such disclosure.

         (c) NON-DISCLOSURE. In furtherance of Executive's obligations under
         this Agreement, Executive further agrees that he shall not disclose,
         provide or reveal, directly or indirectly, any confidential information
         concerning the Company, including without implication of limitation,
         their respective operations, plans, strategies or administration, to
         any other person or entity unless compelled to do so pursuant to (i) a
         valid subpoena or (ii) as otherwise required by law, but in either case
         only after providing the Company, to the attention of its Chief
         Executive Officer, with prior written notice and opportunity to contest
         such subpoena or other requirement. Written notice shall be provided to
         the Company as soon as practicable, but in no event less than five (5)
         business days before any such disclosure is compelled, or, if
         disclosure is compelled earlier, not later than the next business day
         following Executive's receipt of notice compelling such disclosure.

         (d) COMPETITION. Until the Termination Date, Executive will be subject
         to and agrees to observe Section 8(a) of the Employment Agreement (as
         modified on July 30, 1999). The Company confirms that the Chief
         Executive Officer of the Company has been delegated by the Board (by
         resolution dated February 14, 2001) authority, without further Board
         consent, to provide a waiver to Executive of his obligations under
         Section 8(a) of the Employment Agreement. The Company agrees that
         nothing in this or any other agreement prohibits Executive, after the
         Termination Date, from competing with, or providing services to an
         entity that competes with, the Company; that such competition or
         services alone would not constitute a violation of this or any other
         agreement or law; and that the Company will not assert that such
         competition or services alone constitutes a violation of this or any
         agreement or law on the theory that it inevitably would result in the
         disclosure of confidential information or trade secrets. This
         provision, however, shall not relieve Executive of any obligation
         Executive may have under the Employment Agreement, Annex B thereto, or
         common or statutory law not to actually disclose trade secrets or
         confidential information. Nor does this provision relieve Executive of
         his obligations under Section 12 or the other paragraphs of Section 13
         of this Agreement.

                                       12
<PAGE>

         (e) NON-SOLICITATION. Commencing with the date of execution of this
         Agreement and continuing until two (2) years following the Termination
         Date, Executive shall not solicit or attempt to solicit for employment
         with or on behalf of any corporation, partnership, venture or other
         business entity, including any business operated by Executive as a sole
         proprietorship or for employment by Executive personally, any employee
         of the Company or any person who was formerly employed by the Company
         within the preceding six (6) months, unless such person's employment
         was terminated by the Company. The provisions of this Section 13(e)
         shall not apply to any solicitation by Executive of Brenda Putnam,
         provided such solicitation occurs on or after June 30, 2001.

14.      EXCLUSIVITY. This Agreement sets forth all the consideration to which
         Executive is entitled by reason of the termination of Executive's
         employment, and Executive agrees that he shall not be entitled to or
         eligible for any payments or benefits under any other Company
         severance, bonus, retention or incentive policy, arrangement, plan or
         agreement.

15.      TAX MATTERS. All payments and other consideration provided to Executive
         pursuant to this Agreement shall be subject to any deductions,
         withholding or tax reporting that the Company reasonably determines to
         be required for tax purposes; provided, that nothing contained in this
         Section 15 affects Executive's independent obligation and primary
         responsibility, which obligation and responsibility Executive hereby
         affirms, to determine and make proper judgments regarding the payment
         of taxes under applicable law.

16.      REALEUM INVESTMENT.

         (a) On or about July 5, 2000, Executive was granted 1,000 LLC shares in
         AvalonBay Trillium Employee LLC ("Trillium LLC") under the Company's
         Special Technology Equity Grant Plan. Notwithstanding Section 3.1 of
         the Vesting Certificate related to such grant, on the Departure Date
         such 1,000 LLC shares shall vest. The Company hereby waives its right,
         under Section 3.4 of such Vesting Certificate, to exercise its
         repurchase right.

         (b) On or about July 5, 2000, Employee purchased, pursuant to the
         Company's Special Technology Equity Purchase Plan, 81,274 LLC shares in
         Trillium LLC for an aggregate purchase price of $26,820.42. Such
         purchase was subject to a Vesting Certificate. The Company hereby
         waives its right, under Section 3.4 of such Vesting Certificate, to
         exercise its repurchase right.

         (c) The Company shall provide information regarding Trillium LLC to
         Executive to the same extent as the Company provides information
         regarding Trillium LLC generally to those members of Trillium LLC who
         are employees of the Company, provided that the Company may require a
         reasonable confidentiality letter before providing such information.

                                       13
<PAGE>

17.      ARBITRATION.

         (a) Any controversy or claim arising out of or relating to this
         Agreement or the breach hereof shall be resolved in the manner set
         forth in Section 13(a) (Resolution of Disputes) of the Employment
         Agreement, as modified by this Section 17.

         (b) In the event any legal action or proceeding, including arbitration
         or declaratory relief, is commenced by the Company with respect to any
         controversy or claim arising out of or relating to this Agreement or
         the breach hereof, or otherwise to enforce any rights or obligations
         under this Agreement, the arbitrator or, in the case of a claim for
         equitable relief, the judge in such proceeding (i) shall have
         discretion to award to Executive if Executive is the prevailing party
         reasonable attorney's fees and costs, if any, in said action or
         proceeding, but (ii) regardless of the outcome in said action or
         proceeding, shall not award to the Company any of its attorney's fees
         or costs.

         (c) In the event any legal action or proceeding, including arbitration
         or declaratory relief, is commenced by Executive with respect to any
         controversy or claim arising out of or relating to this Agreement or
         the breach hereof, or otherwise to enforce any rights or obligations
         under this Agreement, the arbitrator or, in the case of a claim for
         equitable relief, the judge in such proceeding shall have discretion to
         award the prevailing party reasonable attorney's fees and costs, if
         any, in said action or proceeding.

         (d) An award of attorney's fees and costs pursuant to subsections (b)
         or (c) above shall take into account the amount or degree of relief
         awarded to the prevailing party relative to that party's demands. An
         award of reasonable attorney's fees and costs also shall take into
         account any offer of settlement or judgment by the non-prevailing
         party. Attorney's fees and costs incurred by the prevailing party from
         and after the date of such an offer of settlement or judgment may be
         limited or eliminated to the extent that the value of the final
         judgment in favor of the prevailing party does not materially exceed
         the value of the offer of settlement or judgment.

         (e) It is the intention of the Company to fulfill its obligations and
         make all payments and deliveries required under this Agreement. A
         non-material breach by Executive of this Agreement shall not justify
         the Company's failure to pay or deliver, it being the understanding
         that in the case of a non-material breach the Company's remedy is to
         commence an arbitration proceeding to determine the damages to the
         Company, which damages then may be set off against future payments.
         However, in the event Executive believes that any payments or
         deliveries are owed to Executive by the Company under this Agreement
         and have not been paid or delivered when due, Executive may make a
         written demand for payment or delivery. In such event, there shall be
         deemed to be a "Dispute." In the event of a Dispute, the Company shall
         deposit the overdue payment and delivery on which the Dispute is based
         to a mutually acceptable escrow agent to be held in an escrow account
         pending an arbitration award or satisfactory resolution of the Dispute
         by the parties. The escrowed cash payments

                                       14
<PAGE>

         shall be invested as directed by the Company, but if cumulative
         earnings as of the end of any calendar month are less than 18%
         (eighteen percent) on an annualized basis compounded monthly the
         Company shall pay an amount equal to the shortfall of such cumulative
         earnings into the escrow account monthly until the Dispute is resolved
         (said fees, deliveries, payments, or other consideration, together with
         interest thereon hereinafter referred to as the "Escrow"). Promptly
         following the commencement of a Dispute, Executive and the Company
         shall commence an arbitration proceeding to determine whether in fact
         the Company owes the Escrow to Executive. The arbitrator shall direct
         that the Escrow be paid over to the prevailing party. In connection
         with such arbitration, the Company shall advance Executive reasonable
         attorney's fees, subject to Executive's undertaking to repay such
         advanced fees in the event that Executive does not prevail on any
         material issue. In the event that the Company prevails in such an
         arbitration and the arbitrator finds that Executive's commencement of
         the Dispute was (i) not made in good faith or (ii) was reckless, then
         Executive shall pay to the Company interest on (i) the deposits made by
         the Company into the Escrow from time to time and (ii) the amount of
         advances for attorney's fees made from time to time at a rate of 8%
         (eight percent) (on an annualized basis compounded monthly).

18.      NOTICES, ACKNOWLEDGMENTS AND OTHER TERMS

         (a) Executive is advised to consult with an attorney and tax advisor
         before signing this Agreement. Executive acknowledges that he has
         consulted with an attorney of his choice.

         (b) Executive acknowledges and agrees that the Company's promises in
         this Agreement include consideration in addition to anything of value
         to which Executive is otherwise entitled by reason of the termination
         of his employment.

         (c) Executive acknowledges that he has been given the opportunity, if
         he so desires, to consider this Agreement for twenty-one (21) days
         before executing it. If Executive breaches any of the conditions of the
         Agreement within the twenty-one (21) day period, the offer of this
         Agreement will be withdrawn and Executive's execution of the Agreement
         will not be valid. In the event that Executive executes and returns
         this Agreement within twenty-one (21) days or less of the date of its
         delivery to Executive, Executive acknowledges that such decision was
         entirely voluntary and that Executive had the opportunity to consider
         this letter agreement for the entire twenty-one (21) day period.

         (d) By signing this Agreement, Executive acknowledges that he is doing
         so voluntarily and knowingly, fully intending to be bound by this
         Agreement. Executive also acknowledges that he is not relying on any
         representations by any representative of the Company concerning the
         meaning of any aspect of this Agreement. Executive understands that
         this Agreement shall not in any way be construed as an admission by the
         Company of any liability or any act of wrongdoing whatsoever by the
         Company

                                       15
<PAGE>

         against Executive and that the Company specifically disclaims any
         liability or wrongdoing whatsoever against Executive on the part of
         itself and its officers, directors, shareholders, employees and agents.
         Executive understands that if he does not enter into this Agreement and
         bring any claims against the Company, the Company will dispute the
         merits of those claims and contend that it acted lawfully and for good
         business reasons with respect to Executive.

         (e) In the event of any dispute, this Agreement will be construed as a
         whole, will be interpreted in accordance with its fair meaning, and
         will not be construed strictly for or against either Executive or the
         Company. Section headings and parenthetical explanations of section
         references are for convenience only and shall not be used to interpret
         the meaning of any provision or term of this Agreement.

         (f) Any notices required to be given under this Agreement shall be
         provided in writing and delivered by hand or certified mail, and shall
         be deemed to have been duly given when received at the following
         addresses, unless and to the extent that notice of change of address
         has been duly given hereunder

                  If to Executive at:

                  Mr. Robert Slater
                  816 Emerald Drive
                  Alexandria, VA 22308

                  with a copy to:

                  Herbert W. Krueger, Esq.
                  Mayer Brown & Platt
                  190 South LaSalle Street
                  Chicago, IL 60603-3441

                  If to the Company, to it at:

                  AvalonBay Communities, Inc.
                  2900 Eisenhower Avenue, Third Floor
                  Alexandria, VA 22314
                  Attention: Chief Executive Officer

                  with a copy to:

                  AvalonBay Communities, Inc.
                  2900 Eisenhower Avenue, Third Floor
                  Alexandria, VA 22314
                  Attn:  General Counsel

                                       16
<PAGE>

                  and a copy to:

                  Robert M. Lieber, Esq,
                  Littler Mendelson, PC
                  650 California St., 20th Floor
                  San Francisco, CA 94108-2693

         (g) The law of the State of Virginia will govern any dispute about this
         Agreement, including any interpretation or enforcement of this
         Agreement.

         (h) In the event that any provision or portion of a provision of this
         Agreement shall be determined to be illegal, invalid or unenforceable,
         the remainder of this Agreement shall be enforced to the fullest extent
         possible and the illegal, invalid or unenforceable provision or portion
         of a provision will be amended by a court of competent jurisdiction, or
         otherwise thereafter shall be interpreted, to reflect as nearly as
         possible without being illegal, invalid or unenforceable the parties'
         intent if possible. If such amendment or interpretation is not
         possible, the illegal, invalid or unenforceable provision or portion of
         a provision will be severed from the remainder of this Agreement and
         the remainder of this Agreement shall be enforced to the fullest extent
         possible as if such illegal, invalid or unenforceable provision or
         portion of a provision was not included.

         (i) This Agreement may be modified only by a written agreement signed
         by Executive and an authorized representative of the Company.

         (j) This Agreement constitutes the entire agreement between the parties
         with respect to the subject matter hereof and, except as expressly
         provided herein, supersedes all prior agreements between the parties
         with respect to any related subject matter.

         (k) This Agreement shall be binding upon each of the parties and upon
         their respective heirs, administrators, representatives, executors,
         successors and assigns, and shall inure to the benefit of each party
         and to their heirs, administrators, representatives, executors,
         successors, and assigns.

         If Executive agrees to these terms, please sign and date below and
return this Agreement to the Company's Chief Executive Officer by March 1, 2001.
This Agreement may be executed in counterparts and/or by facsimile transmission,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument. The execution of this Agreement may be
by actual or facsimile signature.

                                       Sincerely,

                                       AvalonBay Communities, Inc.

                                       17
<PAGE>

                                       By: \s\ RICHARD L. MICHAUX
                                           --------------------------------
                                           Richard L. Michaux

                                          Its: Executive Chairman

Accepted and Agreed to:

\s\ ROBERT SLATER
--------------------------------
    Robert Slater

Dated:
      --------------------------

                                       18<PAGE>

                                                             EXHIBIT 10.14

                             AVALON PROPERTIES, INC.
                      1993 STOCK OPTION AND INCENTIVE PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

         The name of the plan is the Avalon Properties, Inc. 1993 Stock Option
and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees and Directors of Avalon Properties, Inc. (the
"Company") and its Subsidiaries upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.

         The following terms shall be defined as set forth below:

         "ACT" means the Securities Exchange Act of 1934, as amended.

         "AWARD" or "AWARDS," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options and Non-Qualified
Stock Options.

         "BOARD" means the Board of Directors of the Company.

         "CAUSE" means and shall be limited to a vote of the Board of Directors
resolving that the participant should be dismissed as a result of (i) any
material breach by the participant of any agreement to which the participant and
the Company are parties, (ii) any act (other than retirement) or omission to act
by the participant which may have a material and adverse effect on the business
of the Company or any Subsidiary or on the participant's ability to perform
services for the Company or any Subsidiary, including, without limitation, the
participant being convicted of any crime (other than ordinary traffic
violations), or (iii) any material misconduct or neglect of duties by the
participant in connection with the business or affairs of the Company or any
Subsidiary.

         "CHANGE OF CONTROL" is defined in Section 10.

         "CODE" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

         "COMMITTEE" means the Board or any Committee of the Board referred to
in Section 2.

                                       1
<PAGE>

         "DISABILITY" means disability as set forth in Section 22(e)(3) of the
Code.

         "DISINTERESTED PERSON" means a Non-Employee Director who qualifies as
such under Rule 16b-3(c)(2)(i) promulgated under the Act, or any successor
definition under the Act.

         "EFFECTIVE DATE" means the date on which the Plan is approved by
shareholders as set forth in Section 12.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related rules, regulations and interpretations.

         "FAIR MARKET VALUE" on any given date means the last reported sale
price at which Stock is traded on such date or, if no Stock is traded on such
date, the most recent date on which Stock was traded, as reflected on the New
York Stock Exchange or, if applicable, any other national stock exchange on
which the Stock is traded. Notwithstanding the foregoing, the Fair Market Value
on the first day of the Company's initial public offering shall mean the initial
public offering price.

         "INCENTIVE STOCK OPTION" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.

         "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not also an
employee of the Company or any Subsidiary.

         "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.

         "OPTION" or "STOCK OPTION" means any option to purchase shares of Stock
granted pursuant to Section 5.

         "STOCK" means the Common Stock, $.01 par value per share, of the
Company, subject to adjustments pursuant to Section 3.

         "SUBSIDIARY" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities, beginning with
the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the total combined voting power of all classes of
stock or other interests in one of the other corporations or entities in the
chain.

SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
AND DETERMINE AWARDS

         (a) COMMITTEE. Prior to the date of the closing of the Company's
initial public offering, the Plan shall be administered by the Board. On and
after the date of the closing

                                       2
<PAGE>

of the Company's initial public offering, the Plan shall be administered by all
of the Non-Employee Director members of the Compensation Committee of the Board,
or any other committee of not less than two Non-Employee Directors performing
similar functions, as appointed by the Board from time to time. Each member of
the Committee shall be a Disinterested Person on and after the date of the
closing of the Company's initial public offering.

         (b) POWERS OF COMMITTEE. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

                  (i) to select the officers and other employees of the Company
         and its Subsidiaries to whom Awards may from time to time be granted;

                  (ii) to determine the time or times of grant, and the extent,
         if any, of Incentive Stock Options or Non-Qualified Stock Options
         granted to any one or more participants;

                  (iii) to determine the number of shares to be covered by any
         Award;

                  (iv) to determine and modify the terms and conditions,
         including restrictions, not inconsistent with the terms of the Plan, of
         any Award, which terms and conditions may differ among individual
         Awards and participants, and to approve the form of written instruments
         evidencing the Awards;

                  (v) to accelerate the exercisability or vesting of all or any
         portion of any Option;

                  (vi) subject to the provisions of Section 5(a)(iii), to extend
         the period in which Stock Options may be exercised; and

                  (vii) to adopt, alter and repeal such rules, guidelines and
         practices for administration of the Plan and for its own acts and
         proceedings as it shall deem advisable; to interpret the terms and
         provisions of the Plan and any Award (including related written
         instruments); to make all determinations it deems advisable for the
         administration of the Plan; to decide all disputes arising in
         connection with the Plan; and to otherwise supervise the administration
         of the Plan.

         All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.

SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

         (a) SHARES ISSUABLE. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 10% of the shares of Stock sold
in the Company's initial public offering. For purposes of this limitation, the
shares of Stock

                                       3
<PAGE>

underlying any Awards which are forfeited, cancelled, reacquired by the Company,
satisfied without the issuance of Stock or otherwise terminated (other than by
exercise) shall be added back to the shares of Stock available for issuance
under the Plan so long as the participants to whom such Awards had been
previously granted received no benefits of ownership of the underlying shares of
Stock to which the Award related. Subject to such overall limitation, shares may
be issued up to such maximum number pursuant to any type or types of Award,
including Incentive Stock Options. Shares issued under the Plan may be
authorized but unissued shares or shares reacquired by the Company.

         (b) STOCK DIVIDENDS, MERGERS, ETC. In the event of a stock dividend,
stock split or similar change in capitalization affecting the Stock, the
Committee shall make appropriate adjustments in (i) the number and kind of
shares of stock or securities on which Awards may thereafter be granted, (ii)
the number and kind of shares remaining subject to outstanding Awards, and (iii)
the option or purchase price in respect of such shares. In the event of any
merger, consolidation, dissolution or liquidation of the Company, the Committee
in its sole discretion may, as to any outstanding Awards, make such substitution
or adjustment in the aggregate number of shares reserved for issuance under the
Plan and in the number and purchase price (if any) of shares subject to such
Awards as it may determine and as may be permitted by the terms of such
transaction, or amend or terminate such Awards upon such terms and conditions as
it shall provide (which, in the case of the termination of the vested portion of
any Award, shall require payment or other consideration which the Committee
deems equitable in the circumstances).

         (c) SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.

SECTION 4. ELIGIBILITY

         Participants in the Plan will be such full or part-time officers and
other employees of the Company and its Subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company and its
Subsidiaries and who are selected from time to time by the Committee, in its
sole discretion. Non-Employee Directors are also eligible to participate in the
Plan but only to the extent provided in Section 5(c) below.

SECTION 5. STOCK OPTIONS

         Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

                                       4
<PAGE>

         Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. To the extent that any Stock Option does
not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified
Stock Option.

         No Incentive Stock Option shall be granted under the Plan after
November 11, 2003.

         (a) STOCK OPTIONS GRANTED TO EMPLOYEES. The Committee in its discretion
may grant Stock Options to employees of the Company or any Subsidiary. Stock
Options granted to employees pursuant to this Section 5(a) shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:

                  (i) EXERCISE PRICE. The exercise price per share for the Stock
         covered by a Stock Option granted pursuant to this Section 5(a) shall
         be determined by the Committee at the time of grant but shall be not
         less than 100% of Fair Market Value on the date of grant. If an
         employee owns or is deemed to own (by reason of the attribution rules
         applicable under Section 424(d) of the Code) more than 10% of the
         combined voting power of all classes of stock of the Company or any
         Subsidiary or parent corporation and an Incentive Stock Option is
         granted to such employee, the option price shall be not less than 110%
         of Fair Market Value on the grant date.

                  (ii) GRANT OF OPTIONS IN LIEU OF CASH BONUS. Upon the request
         of an employee and with the consent of the Committee, such employee may
         elect to receive a Stock Option each calendar year in lieu of cash
         bonus to which he may become entitled during the following year
         pursuant to any other plan of the Company, but only if such employee
         makes an irrevocable election to waive receipt of all or a portion of
         such cash bonus. Such election shall be made no later than 15 days
         preceding January 1 of the calendar year in which the cash bonus would
         otherwise be paid. A Stock Option shall be granted to each employee who
         made such an irrevocable election on the date the waived cash bonus
         would otherwise be paid; provided, however, that with respect to an
         employee who is subject to Section 16 of the Act, if such grant date is
         not at least six months and one day from the date of the election, the
         grant shall be delayed until the date which is six months and one day
         from the date of the election (or the next following business day, if
         such date is not a business day). The exercise price per share shall be
         the Fair Market Value of the Stock on the date the Stock Option is
         granted. The number of shares subject to the Stock Option shall be
         determined by dividing the amount of the waived cash bonus by the Fair
         Market Value of the Stock on the date the Stock Option is granted. The
         Stock Option shall be granted for whole number of shares so determined;
         the value of any fractional share shall be paid in cash. An employee
         may revoke his election under this Section 5(a)(ii) on a prospective
         basis at any time; provided, however, that with respect to an employee
         who is subject to Section 16 of the Act, such revocation shall only be
         effective six months and one day following the date of such revocation.

                                       5
<PAGE>

                  (iii) OPTION TERM. The term of each Stock Option shall be
         fixed by the Committee, but except as provided in Sections 5(a)(vii)
         and (viii) no Incentive Stock Option shall be exercisable more than ten
         years after the date the option is granted. If an employee owns or is
         deemed to own (by reason of the attribution rules of Section 424(d) of
         the Code) more than 10% of the combined voting power of all classes of
         stock of the Company or any Subsidiary or parent corporation and an
         Incentive Stock Option is granted to such employee, the term of such
         option shall be no more than five years from the date of grant.

                  (iv) EXERCISABILITY; RIGHTS OF A SHAREHOLDER. Stock Options
         shall become vested and exercisable at such time or times, whether or
         not in installments, as shall be determined by the Committee at or
         after the grant date; provided, however, that Stock Options in lieu of
         cash bonus shall be exercisable immediately. The Committee may at any
         time accelerate the exercisability of all or any portion of any Stock
         Option. An optionee shall have the rights of a shareholder only as to
         shares acquired upon the exercise of a Stock Option and not as to
         unexercised Stock Options.

                  (v) METHOD OF EXERCISE. Stock Options may be exercised in
         whole or in part, by giving written notice of exercise to the Company,
         specifying the number of shares to be purchased. Payment of the
         purchase price may be made by one or more of the following methods:

                           (A) In cash, by certified or bank check or other
                  instrument acceptable to the Committee;

                           (B) In the form of shares of Stock that are not then
                  subject to restrictions under any Company plan and that have
                  been held by the optionee for at least six months, if
                  permitted by the Committee in its discretion. Such surrendered
                  shares shall be valued at Fair Market Value on the exercise
                  date; or

                           (C) By the optionee delivering to the Company a
                  properly executed exercise notice together with irrevocable
                  instructions to a broker to promptly deliver to the Company
                  cash or a check payable and acceptable to the Company to pay
                  the purchase price; provided that in the event the optionee
                  chooses to pay the purchase price as so provided, the optionee
                  and the broker shall comply with such procedures and enter
                  into such agreements of indemnity and other agreements as the
                  Committee shall prescribe as a condition of such payment
                  procedure. Payment instruments will be received subject to
                  collection.

The delivery of certificates representing shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt from
the Optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by

                                       6
<PAGE>

the Company of the full purchase price for such shares and the fulfillment of
any other requirements contained in the Stock Option or applicable provisions of
laws.

                  (vi) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
         transferable by the optionee otherwise than by will or by the laws of
         descent and distribution and all Stock Options shall be exercisable,
         during the optionee's lifetime, only by the optionee.

                  (vii) TERMINATION BY DEATH. If any optionee's employment by
         the Company and its Subsidiaries terminates by reason of death, the
         Stock Option may thereafter be exercised, to the extent exercisable at
         the date of death, by the legal representative or legatee of the
         optionee, for a period of six months (or such longer period as the
         Committee shall specify at any time) from the date of death.

                  (viii) TERMINATION BY REASON OF DISABILITY.

                           (A) Any Stock Option held by an optionee whose
                  employment by the Company and its Subsidiaries has terminated
                  by reason of Disability may thereafter be exercised, to the
                  extent it was exercisable at the time of such termination, for
                  a period of twelve months (or such longer period as the
                  Committee shall specify at any time) from the date of such
                  termination of employment.

                           (B) The Committee shall have sole authority and
                  discretion to determine whether a participant's employment has
                  been terminated by reason of Disability.

                           (C) Except as otherwise provided by the Committee at
                  the time of grant, the death of an optionee during a period
                  provided in this Section 5(a)(viii) for the exercise of a
                  Non-Qualified Stock Option shall extend such period for six
                  months from the date of death.

                  (ix) TERMINATION FOR CAUSE. If any optionee's employment by
         the Company and its Subsidiaries has been terminated for Cause, any
         Stock Option held by such optionee shall terminate and be of no further
         force and effect after 30 days from the date of termination of
         employment or at the expiration of the stated term of the Option, if
         earlier.

                  (x) OTHER TERMINATION. Unless otherwise determined by the
         Committee, if an optionee's employment by the Company and its
         Subsidiaries terminates for any reason other than death, Disability, or
         for Cause, any Stock Option held by such optionee may thereafter be
         exercised, to the extent it was exercisable on the date of termination
         of employment, for three months (or such longer period as the Committee
         shall specify at any time) from the date of termination of employment
         or until the expiration of the stated term of the Option, if earlier.

                                       7
<PAGE>

                  (xi) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent
         required for "incentive stock option" treatment under Section 422 of
         the Code, the aggregate Fair Market Value (determined as of the time of
         grant) of the Stock with respect to which Incentive Stock Options
         granted under this Plan and any other plan of the Company or its
         Subsidiaries become exercisable for the first time by an optionee
         during any calendar year shall not exceed $100,000.

                  (xii) FORM OF SETTLEMENT. Shares of Stock issued upon exercise
         of a Stock Option shall be free of all restrictions under the Plan,
         except as otherwise provided in this Plan.

         (b) RELOAD OPTIONS. At the discretion of the Committee, Options granted
under Section 5(a) may include a so-called "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(v)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Stock equal to the
number delivered to exercise the original Option.

         (c) STOCK OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS.

                  (i) AUTOMATIC GRANT OF OPTIONS. Each Non-Employee Director who
         becomes a Director of the Company on or before the date 30 days after
         the closing of the Company's initial public offering shall
         automatically be granted a Non-Qualified Stock Option to purchase 5,000
         shares of Stock on such date at a price per share equal to the greater
         of the Fair Market Value on the date of grant or $20.50. Each
         Non-Employee Director who is serving as Director of the Company on the
         fifth business day after each annual meeting of stockholders, beginning
         with the 1994 annual meeting, shall automatically be granted on such
         day a Non-Qualified Stock Option to acquire 3,000 shares of Stock.
         Except as provided in the preceding sentence, the exercise price per
         share for the Stock covered by a Stock Option granted hereunder shall
         be equal to the Fair Market Value of the Stock on the date the Stock
         Option is granted.

                  (ii) GRANT OF OPTIONS IN LIEU OF DIRECTOR'S FEES. Each
         Non-Employee Director shall receive a Non-Qualified Stock Option each
         calendar year in lieu of cash director's fees he would otherwise
         receive for such year, but only if the Non-Employee Director makes an
         irrevocable election to waive receipt of all or a portion of such cash
         director's fees. Such election shall be made during the 30-day period
         immediately preceding January 1 of a calendar year and shall be
         effective six months and one day following the date of such election. A
         Non-Qualified Stock Option shall be granted to each Non-Employee
         Director who made such an irrevocable election on each July 15 and
         January 15 (or the next following business day, if such date is not a
         business day) with respect to the waived amount of director's fees
         earned for the six-month period ending June 30 and December 31,

                                       8
<PAGE>

         respectively. The exercise price per share shall be the Fair Market
         Value of the Stock on the date the Stock Option is granted. The number
         of shares subject to the Stock Option shall be determined by dividing
         the amount of the waived directors' fees for the applicable six-month
         period by the Fair Market Value of the Stock on the date the Stock
         Option is granted. The Stock Option shall be granted for whole number
         of shares so determined; the value of any fractional share shall be
         paid in cash. A Non-Employee Director may revoke his election under
         this Section 5(c)(ii) at any time; provided, however, that such
         revocation shall only be effective six months and one day following the
         date of such revocation.

                  (iii) EXERCISE; TERMINATION; NON-TRANSFERABILITY.

                           (A) Except as provided in Section 10, no Option
                  granted under Section 5(c)(i) may be exercised before the
                  first anniversary of the date upon which it was granted;
                  provided, however, that any Option so granted shall become
                  exercisable upon the termination of service of the
                  Non-Employee Director because of Disability or death. All
                  Options granted under Section 5(c)(ii) shall be immediately
                  exercisable. No Option issued under this Section 5(c) shall be
                  exercisable after the expiration of ten years from the date
                  upon which such Option is granted.

                           (B) The rights of a Non-Employee Director in an
                  Option granted under Section 5(c) shall terminate six months
                  after such Director ceases to be a Director of the Company or
                  the specified expiration date, if earlier; provided, however,
                  that if the Non-Employee Director ceases to be a Director for
                  Cause, the rights shall terminate immediately on the date on
                  which he ceases to be a Director.

                           (C) No Stock Option granted under this Section 5(c)
                  shall be transferable by the optionee otherwise than by will
                  or by the laws of descent and distribution, and such Options
                  shall be exercisable, during the optionee's lifetime only by
                  the optionee. Any Option granted to a Non-Employee Director
                  and outstanding on the date of his death may be exercised by
                  the legal representative or legatee of the optionee for a
                  period of six months from the date of death or until the
                  expiration of the stated term of the option, if earlier.

                           (D) Options granted under this Section 5(c) may be
                  exercised only by written notice to the Company specifying the
                  number of shares to be purchased. Payment of the full purchase
                  price of the shares to be purchased may be made by one or more
                  of the methods specified in Section 5(a)(v). An optionee shall
                  have the rights of a shareholder only as to shares acquired
                  upon the exercise of a Stock Option and not as to unexercised
                  Stock Options.

                  (iv) LIMITED TO NON-EMPLOYEE DIRECTORS. The provisions of this
         Section 5(c) shall apply only to Options granted or to be granted to
         Non-Employee

                                       9
<PAGE>

         Directors, and shall not be deemed to modify, limit or otherwise apply
         to any other provision of this Plan or to any Option issued under this
         Plan to a participant who is not a Non-Employee Director of the
         Company. To the extent inconsistent with the provisions of any other
         Section of this Plan, the provisions of this Section 5(c) shall govern
         the rights and obligations of the Company and Non-Employee Directors
         respecting Options granted or to be granted to Non-Employee Directors.
         The provisions of this Section 5(c) which affect the price, date of
         exercisability, option period or amount of shares under an option shall
         not be amended more than once in any six-month period, other than to
         comport with changes in the Code or ERISA.

SECTION 6. TAX WITHHOLDING

         (a) PAYMENT BY PARTICIPANT. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.

         (b) PAYMENT IN SHARES. A participant may elect to have such tax
withholding obligation satisfied, in whole or in part, by (i) authorizing the
Company to withhold from shares of Stock to be issued pursuant to any Award a
number of shares with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due, or (ii)
transferring to the Company shares of Stock owned by the participant with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due. With respect to any participant who is
subject to Section 16 of the Act, the following additional restrictions shall
apply:

                  (A) the election to satisfy tax withholding obligations
         relating to an Award in the manner permitted by this Section 6(b) shall
         be made either (1) during the period beginning on the third business
         day following the date of release of quarterly or annual summary
         statements of revenues of the Company and ending on the twelfth
         business day following such date, or (2) at least six months prior to
         the date as of which the receipt of such an Award first becomes a
         taxable event for Federal income tax purposes;

                  (B) such election shall be irrevocable;

                  (C) such election shall be subject to the consent or
         disapproval of the Committee; and

                  (D) the Stock withheld to satisfy tax withholding, if granted
         at the discretion of the Committee, must pertain to an Award which has
         been held by the participant for at least six months from the date of
         grant of the Award.

                                       10
<PAGE>

Notwithstanding the foregoing, the first sentence of Section 6(b)(A) shall not
be applicable until the Company has been subject to the reporting requirements
of the Act for at least a year prior to the election and has filed all reports
and statements required to be filed pursuant to that Section for that year.

SECTION 7. TRANSFER, LEAVE OF ABSENCE, ETC.

         For purposes of the Plan, the following events shall not be deemed a
termination of employment:

         (a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or

         (b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.

SECTION 8. AMENDMENTS AND TERMINATION

         The Board may at any time amend or discontinue the Plan and the
Committee may at any time amend or cancel any outstanding Award (or provide
substitute Awards at the same or reduced exercise or purchase price or with no
exercise or purchase price, but such price, if any, must satisfy the
requirements which would apply to the substitute or amended Award if it were
then initially granted under this Plan) for the purpose of satisfying changes in
law or for any other lawful purpose, but no such action shall adversely affect
rights under any outstanding Award without the holder's consent. To the extent
required by the Code to ensure that Options granted hereunder qualify as
Incentive Stock Options and to the extent required by the Act to ensure that
Awards and Options granted under the Plan are exempt under Rule 16b-3
promulgated under the Act, Plan amendments shall be subject to approval by the
Company's stockholders.

SECTION 9. STATUS OF PLAN

         With respect to the portion of any Award which has not been exercised
and any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards.

SECTION 10. CHANGE OF CONTROL PROVISIONS

         Upon the occurrence of a Change of Control as defined in this Section
10:

                                       11
<PAGE>

         (a) Each Stock Option shall automatically become fully exercisable
notwithstanding any provision to the contrary herein.

         (b) "CHANGE OF CONTROL" shall mean the occurrence of any one of the
following events:

                  (i) any "PERSON," as such term is used in Sections 13(d) and
         14(d) of the Act (other than the Company, any of its Subsidiaries, any
         trustee, fiduciary or other person or entity holding securities under
         any employee benefit plan of the Company or any of its Subsidiaries),
         together with all "affiliates" and "associates" (as such terms are
         defined in Rule 12b-2 under the Act) of such person, shall become the
         "beneficial owner" (as such term is defined in Rule 13d-3 under the
         Act), directly or indirectly, of securities of the Company representing
         30% or more of either (A) the combined voting power of the Company's
         then outstanding securities having the right to vote in an election of
         the Company's Board of Directors ("Voting Securities") or (B) the then
         outstanding shares of Stock of the Company (in either such case other
         than as a result of acquisition of securities directly from the
         Company); or

                  (ii) persons who, as of the date of the closing of the
         Company's initial public offering, constitute the Company's Board of
         Directors (the "Incumbent Directors") cease for any reason, including,
         without limitation, as a result of a tender offer, proxy contest,
         merger or similar transaction, to constitute at least a majority of the
         Board, provided that any person becoming a director of the Company
         subsequent to the Closing of the Company's initial public offering
         whose election or nomination for election was approved by a vote of at
         least a majority of the Incumbent Directors shall, for purposes of this
         Plan, be considered an Incumbent Director; or

                  (iii) the stockholders of the Company shall approve (A) any
         consolidation or merger of the Company or any Subsidiary where the
         stockholders of the Company, immediately prior to the consolidation or
         merger, would not, immediately after the consolidation or merger,
         beneficially own (as such term is defined in Rule 13d-3 under the Act),
         directly or indirectly, shares representing in the aggregate 30% of the
         voting stock of the corporation issuing cash or securities in the
         consolidation or merger (or of its ultimate parent corporation, if
         any), (B) any sale, lease, exchange or other transfer (in one
         transaction or a series of transactions contemplated or arranged by any
         party as a single plan) of all or substantially all of the assets of
         the Company or (C) any plan or proposal for the liquidation or
         dissolution of the Company.

         Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of shares of Stock or other Voting Securities outstanding, increases (x)
the proportionate number of shares of Stock beneficially owned by any person to
30% or more of the shares of Stock then outstanding or (y) the proportionate
voting power represented by the Voting Securities beneficially owned by any
person to 30% or more of the combined voting power of all then

                                       12
<PAGE>

outstanding Voting Securities; PROVIDED, HOWEVER, that if any person referred to
in clause (x) or (y) of this sentence shall thereafter become the beneficial
owner of any additional shares of Stock or other Voting Securities (other than
pursuant to a stock split, stock dividend, or similar transaction), then a
"CHANGE OF CONTROL" shall be deemed to have occurred for purposes of the
foregoing clause (i).

SECTION 11. GENERAL PROVISIONS

         (a) NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee
may require each person acquiring shares pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.

         No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange requirements have
been satisfied. The Committee may require the placing of such stop-orders and
restrictive legends on certificates for Stock and Awards as it deems
appropriate.

         (b) DELIVERY OF STOCK CERTIFICATES. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.

         (c) OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to stockholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.

SECTION 12. EFFECTIVE DATE OF PLAN

         The Plan shall become effective upon approval by the holders of a
majority of the shares of capital stock of the Company present or represented
and entitled to vote at a meeting of stockholders. Subject to such approval by
the stockholders, and to the requirement that no Stock may be issued hereunder
prior to such approval, Stock Options and other Awards may be granted hereunder
on and after adoption of the Plan by the Board.

SECTION 13. GOVERNING LAW

         This Plan shall be governed by Maryland law except to the extent such
law is preempted by federal law.

                                       13

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