Document:

<PAGE>
                                                                 Exhibit 10.17.6

             EMPLOYMENT AND CONFIDENTIALITY AGREEMENT [CONNECTICUT]

     This Agreement, between 724 Solutions Corp. ("724 Solutions"), One Market,
Steuart Tower, 1475, San Francisco, CA 94105 and Christopher Whitland Jarman
("Employee"), 11 Cardinal Road, Greenwich Connecticut, 06830 is made as of this
7TH day of August, 2000.

                                    RECITALS

     724 Solutions and Employee wish to enter into an employment relationship
with a written Employment Agreement intended to supersede all other written and
oral representations regarding Employee's employment with 724 Solutions.

                                    AGREEMENT

     NOW, THEREFORE, based on the foregoing premises and in consideration of the
commitments set forth below, Employee and 724 Solutions agree as follows:

1.   PERIOD OF EMPLOYMENT. 724 Solutions shall employ Employee to render
     services to 724 Solutions in the position and with the duties and
     responsibilities described in Section 3 for the period (the "Period of
     Employment") commencing on the date set forth in Section 2 and ending in
     accordance with Section 5 on Employee's status as an at-will employee.

2.   START DATE. Your employment with 724 Solutions will start effective August
     7, 2000.

3.   DUTIES. You are employed by 724 Solutions to render services to 724
     Solutions in the position of Executive Vice President, Mobile Commerce
     Development, based at 11 Cardinal Road, Greenwich, Connecticut 06830, USA.
     So long as you are employed
     by 724 Solutions:

     (a)  you will devote your full business time and energy to your position at
          724 Solutions, well and faithfully serve 724 Solutions, and use your
          best efforts, skills and abilities to promote the interests of 724
          Solutions and agree to perform such other tasks and duties related to
          the foregoing as may from time to time be determined by the 724
          Solutions management;

     (b)  you will abide by any 724 Solutions policies that the Board of
          Directors of 724 Solutions may establish or amend having general
          application to 724 Solutions' staff and management;

     (c)  you will be a member of 724 Solutions' senior management team; and

                                        1
<PAGE>

     (d)  you will have global responsibility over mobile commerce business
          development activities.

4.   COMPENSATION AND BENEFITS. Your compensation and benefits are listed in
     Schedule "A" to this agreement. Your compensation will be payable bi-weekly
     and will be subject to such periodic review and enhancement as may be
     deemed appropriate by the Board of Directors of 724 Solutions from time to
     time but in any event shall be at least once per year commencing January 1,
     2001 and continuing on each anniversary thereafter.

5.   EMPLOYMENT AT WILL. Employee acknowledges and agrees that Employee's
     employment with 724 Solutions is terminable "at will." 724 Solutions may
     terminate Employee's employment at any time with or without notice, and
     with or without cause. Employee may terminate employment with 724 Solutions
     at any time with or without notice, and with or without cause. Neither 724
     Solutions nor Employee make any representation to the other that employment
     will continue for a set period of time or that employment will be
     terminated only under particular circumstances or after implementation of
     particular procedures (such as progressive discipline).

6.   INVENTIONS AND IDEAS.

     (a)  DEFINED; STATUTORY NOTICE. The term "Invention/Idea" includes any and
          all ideas, processes, trademarks, service marks, inventions,
          technology, computer hardware or software, original works of
          authorship, designs, formulas, discoveries, patents, copyrights,
          products, and all improvements, know-how, rights, and claims related
          to the foregoing that are conceived, developed, or reduced to practice
          by Employee, alone or with others, during the Period of Employment
          (subject to earlier termination under Section 5 above).

     (b)  DISCLOSURE. Employee shall maintain adequate and current written
          records on the development of all Invention/Ideas and shall disclose
          promptly to 724 Solutions all Invention/Ideas and relevant records,
          which records will remain the sole property of 724 Solutions. Employee
          agrees that all information and records pertaining to any idea,
          process, trademark, service mark, invention, technology, computer
          hardware or software, original work of authorship, design, formula,
          discovery, patent, copyright, product, and all improvements, know-how,
          rights, and claims related to the foregoing ("Intellectual Property"),
          that Employee does not believe to be an Invention/Idea, but that is
          conceived, developed, or reduced to practice by Employee (alone or
          with others) during the Period of Employment (or during the
          post-employment period set forth in Section 6(e) below), shall be
          disclosed promptly to 724 Solutions (such

                                          2
<PAGE>

          disclosure to be received in confidence). 724 Solutions shall
          examine such information to determine if in fact the Intellectual
          Property is an Invention/Idea subject to this Agreement, but shall
          hold such information in the strictest confidence and shall not use or
          disclose such information in any manner if it is determined that the
          same is not an Invention/Idea subject to this Agreement.

     (c)  ASSIGNMENT. Employee agrees to, and hereby does, assign to 724
          Solutions his or her entire right, title, and interest (throughout the
          United States and in all foreign countries), free and clear of all
          liens and encumbrances, in and to each Invention/Idea, which shall be
          the sole property of 724 Solutions, whether or not patentable. In the
          event any Invention/Idea is deemed by 724 Solutions to be patentable
          or otherwise registrable, Employee shall assist 724 Solutions (at its
          expense) in obtaining letters patent or other applicable registrations
          thereon and shall execute all documents and do all other things
          necessary or proper thereto (including testifying at 724 Solutions'
          expense) and to vest 724 Solutions, or any entity or person specified
          by 724 Solutions, with full and perfect title thereto or interest
          therein. Employee shall also take any action necessary or advisable in
          connection with any continuations, renewals, or reissues thereof or in
          any related proceedings or litigation. Should 724 Solutions be unable
          to secure Employee's signature on any document necessary to apply for,
          prosecute, obtain, or enforce any patent, copyright, or other right or
          protection relating to any Invention/Idea, whether due to Employee's
          mental or physical incapacity or any other cause, Employee irrevocably
          designates and appoints 724 Solutions and each of its duly authorized
          officers and agents as Employee's agent and attorney-in-fact, to act
          for and in Employee's behalf and stead and to execute and file any
          such document, and to do all other lawfully permitted acts to further
          the prosecution, issuance, and enforcement of patents, copyrights, or
          other rights or protections with the same force and effect as if
          executed, delivered, and/or done by Employee. Such designation and
          appointment shall be solely for matters related to the pursuance of
          said patents and copyrights and for no other purpose.

     (d)  EXCLUSIONS. 724 Solutions and Employee acknowledge that, for one year
          from the date of termination from Employee's previous employment,
          Employee is subject to the following:

              Employee agrees that any intellectual property arising out of work
              performed during the Period of Employment including any and all
              invention(s) derived from said intellectual property subsequently
              reduced to practice by employee within one year after termination
              shall vest with the Employer. Employee acknowledges the receipt of
              the sum of US$1 in respect of such vesting.

                                            3
<PAGE>

          Notwithstanding the foregoing, Employee represents that, to the best
          of his knowledge (i) there are no Inventions/Ideas that he or she
          desires to exclude from the operation of this Agreement; and (ii)
          there are no facts or circumstances that would prevent him from
          carrying out his Duties pursuant to this Agreement. Other than as set
          forth herein, to the best of Employee's knowledge, there is no other
          existing contract in conflict with this Agreement and there is no
          other contract to assign any Intellectual Property that is now in
          existence between Employee and any other person or entity.

     (e)  POST-TERMINATION PERIOD. Because of the difficulty of establishing
          when any Intellectual Property is first conceived or developed by
          Employee, or whether it results from access to Confidential
          Information or 724 Solutions' equipment, supplies, facilities, or
          data, Employee agrees that any Intellectual Property shall be presumed
          to be an Invention/Idea, if reduced to practice by Employee or with
          the aid of Employee within one (1) year after termination of
          employment. Employee can rebut the above presumption if he or she
          proves that the Intellectual Property (i) was developed entirely on
          Employee's own time or entirely while employed by another party
          without using 724 Solutions' equipment, supplies, facilities, or trade
          secret information; (ii) was not conceived or reduced to practice
          during the Employee's employment with 724 Solutions, or, if conceived
          or reduced to practice during this period, did not, at the time of
          conception or reduction to practice, relate to 724 Solutions' business
          or actual or demonstrably anticipated research or development; and
          (iii) did not result from any work performed by Employee for 724
          Solutions.

7.   PROPRIETARY INFORMATION.

     (a)  DEFINED. "Proprietary Information" is all information and any idea in
          whatever form, tangible or intangible, pertaining in any manner to the
          business of 724 Solutions, or any affiliate, or its employees,
          clients, consultants, or business associates, which was produced by
          any employee of 724 Solutions in the course of his or her employment
          or otherwise produced or acquired by or on behalf of 724 Solutions.
          All Proprietary Information not generally known outside of 724
          Solutions' organization, and all Proprietary Information so known only
          through improper means, shall be deemed "Confidential Information."
          Without limiting the foregoing definition, Proprietary and
          Confidential Information shall include, but not be limited to: (i)
          formulas, teaching and development techniques, processes, trade
          secrets, computer programs, electronic codes, inventions,
          improvements, and research projects; (ii) information about costs,
          profits, markets, sales, and lists of customers or clients; (iii)

                                          4
<PAGE>

          business, marketing, and strategic plans; and (iv) employee personnel
          files and compensation information. Proprietary and Confidential
          Information shall exclude information which at the time of its
          disclosure is publicly available through no fault of Employee) or
          which is released to the public without restriction or otherwise
          becomes part of the public domain through no fault of Employee (but
          only after it is released or otherwise becomes part of the public
          domain). Employee should consult any 724 Solutions procedures
          instituted to identify and protect certain types of Confidential
          Information, which are considered by 724 Solutions to be safeguards in
          addition to the protection provided by this Agreement. Nothing
          contained in those procedures or in this Agreement is intended to
          limit the effect of the other.

     (b)  GENERAL RESTRICTIONS ON USE. During the Employee's employment,
          Employee shall use Proprietary Information, and shall disclose
          Confidential Information, only for the benefit of 724 Solutions and as
          is necessary to carry out his or her responsibilities under this
          Agreement. Following termination, Employee shall neither, directly or
          indirectly, use any Proprietary Information nor disclose any
          Confidential Information, except as expressly and specifically
          authorized in writing by 724 Solutions. The publication of any
          Proprietary Information through literature or speeches must be
          approved in advance in writing by 724 Solutions.

     (c)  LOCATION AND REPRODUCTION. Employee shall maintain at his or her work
          station and/or any other place under his or her control only such
          Confidential Information as he or she has a current "need to know."
          Employee shall return to the appropriate person or location or
          otherwise properly dispose of Confidential Information once that need
          to know no longer exists. Employee shall not make copies of or
          otherwise reproduce Confidential Information unless there is a
          legitimate business need for reproduction.

     (d)  PRIOR ACTIONS AND KNOWLEDGE. Employee represents and warrants that
          from the commencement of employment with 724 Solutions, he or she has
          held in strict confidence all Confidential Information and has not
          disclosed any Confidential Information, directly or indirectly, to
          anyone outside of 724 Solutions (with the exception of legal and
          accounting advisors), or used, copied, published, or summarized any
          Confidential Information, except to the extent otherwise permitted in
          this Agreement and as may have been disclosed to legal and accounting
          advisers during negotiations of the merger.

                                       5
<PAGE>

     (e)  THIRD-PARTY INFORMATION. Employee acknowledges that 724 Solutions has
          received and in the future will receive from third parties their
          confidential information subject to a duty on 724 Solutions' part to
          maintain the confidentiality of this information and to use it only
          for certain limited purposes. Employee agrees that he or she owes 724
          Solutions and these third parties, during the Period of Employment and
          thereafter, a duty to hold all such confidential information in the
          strictest confidence and not to disclose or use it, except as
          necessary to perform his or her obligations hereunder and as is
          consistent with 724 Solutions' agreement with third parties.

     (f)  CONFLICTING OBLIGATIONS. Employee represents and warrants that his or
          her execution of this Agreement, his or her employment with 724
          Solutions, and the performance of his or her proposed duties under
          this Agreement will not knowingly violate any obligations he or she
          may have to any former employer (or other person or entity), including
          any obligations with respect to proprietary or confidential
          information of any other person or entity. Employee agrees that he or
          she will not use for the benefit of, or disclose to, 724 Solutions any
          confidential information belonging to any former employer or other
          entity unless he or she has written permission from the employer or
          entity to do so (or if 724 Solutions has been granted such
          permission).

     (g)  RETURN OF PROPERTY. In the event your employment with 724 Solutions
          terminates, you shall return to 724 Solutions all property of 724
          Solutions or any Affiliate in your possession or under your direct or
          indirect control, including, without limitation, all equipment and all
          Confidential Information, notebooks and other materials, documents,
          dairies, calendars and data of or relating to 724 Solutions or any
          Affiliate, whether printed, typed, written or on any source of
          computer media.

     (h)  COMPETITIVE ACTIVITY.

          (1)  ACKNOWLEDGMENT. Employee acknowledges and agrees that the pursuit
               of the activities forbidden by Section 7(h)(2) below would
               necessarily involve the use or disclosure of Confidential
               Information in breach of Section 7, but that proof of such a
               breach would be extremely difficult.

          (2)  PROHIBITED ACTIVITY. To forestall the above-described disclosure,
               use, and breach, Employee agrees that:

               (i) for a period of one (1) year after termination of the Period
               of Employment, he or she shall not, directly or indirectly divert
               or

                                          6
<PAGE>

               attempt to divert from 724 Solutions (or any Affiliate) any
               business of any kind in which it is engaged at the date of
               termination;

               (ii) for a period of one (1) year after termination of the Period
               of Employment, he or she shall not, directly or indirectly
               employ, recommend for employment, or solicit for employment any
               person employed by 724 Solutions (or any Affiliate);

               (iii) for a period of one (1) year after termination of the
               Period of Employment, he or she shall not, directly or indirectly
               solicit any customer of 724 Solutions (or any Affiliate) known to
               Employee during the Period of Employment to have been a customer

               (iv) for a period of six (6) months after termination of the
               Period of Employment, he or she shall not, directly or indirectly
               carry on or be engaged in or hold any interest in or advise,
               manage or assist in any business activity that is or may be
               competitive with 724 Solutions (or any Affiliate) in any country
               where 724 Solutions conducts its business.

8.   ARBITRATION.

     (a)  ARBITRABLE CLAIMS. Except as provided in Section 9 on Injunctive
          Relief, to the fullest extent permitted by law, all disputes between
          Employee (and his or her attorneys, successors, and assigns) and
          Employer (and its affiliates, shareholders, directors, officers,
          employees, agents, successors, attorneys, and assigns) relating in any
          manner whatsoever to the employment or termination of Employee,
          including, without limitation, all disputes arising under this
          Agreement, ("Arbitrable Claims") shall be resolved by arbitration. All
          persons and entities specified in the preceding sentence (other than
          Employer and Employee) shall be considered third-party beneficiaries
          of the rights and obligations created by this Agreement. Arbitrable
          Claims shall include, but are not limited to, contract (express or
          implied) and tort claims of all kinds, as well as all claims based on
          any federal, state, or local law, statute, or regulation, excepting
          only claims under applicable workers' compensation law and
          unemployment insurance claims. By way of example and not in limitation
          of the foregoing, Arbitrable Claims shall include (to the fullest
          extent permitted by law) any claims arising under Title VII of the
          Civil Rights Act of 1964, the Age Discrimination in Employment Act,
          the Americans with Disabilities Act, and the Connecticut Fair
          Employment Practices Act, as well as any claims asserting wrongful
          termination, harassment, breach of contract, breach of the covenant of
          good faith and fair dealing, negligent or intentional infliction of
          emotional distress, negligent or

                                        7
<PAGE>

          intentional misrepresentation, negligent or intentional interference
          with contract or prospective economic advantage, defamation, invasion
          of privacy, and claims related to disability.

     (b)  ARBITRATION PROCEDURE. Arbitration of Arbitrable Claims shall be in
          accordance with the National Rules for the Resolution of Employment
          Disputes of the American Arbitration Association, as amended ("AAA
          Employment Rules"), as augmented in this Agreement. Arbitration shall
          be initiated as provided by the AAA Employment Rules, although the
          written notice to the other party initiating arbitration shall also
          include a statement of the claim(s) asserted and the facts upon which
          the claim(s) are based. Arbitration shall be final and binding upon
          the parties and shall be the exclusive remedy for all Arbitrable
          Claims. Either party may bring an action in court to compel
          arbitration under this Agreement and to enforce an arbitration award.
          Otherwise, neither party shall initiate or prosecute any lawsuit or
          administrative action in any way related to any Arbitrable Claim. All
          arbitration hearings under this Agreement shall be conducted in New
          York, New York. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO
          TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS, INCLUDING WITHOUT
          LIMITATION ANY RIGHT TO TRIAL BY JURY AS TO THE MAKING, EXISTENCE,
          VALIDITY, OR ENFORCEABILITY OF THE AGREEMENT TO ARBITRATE OR AS TO ANY
          CLAIM ALLEGING ANY FORM OF DISCRIMINATION.

     (c)  ARBITRATOR SELECTION AND AUTHORITY. A single arbitrator shall decide
          all disputes involving Arbitrable Claims. The arbitrator shall be
          selected by mutual agreement of the parties within thirty (30) days of
          the effective date of the notice initiating the arbitration. If the
          parties cannot agree on an arbitrator, then the complaining party
          shall notify the AAA and request selection of an arbitrator in
          accordance with the AAA Employment Rules. The arbitrator shall have
          authority to award equitable relief, damages, costs, and fees to the
          greatest extent permitted by law, including, but not limited to, any
          remedy or relief that a court would have. The fees of the arbitrator
          shall be split between both parties equally. If the allocation of
          responsibility for payment of the arbitrator's fees would render the
          obligation to arbitrate unenforceable, the parties authorize the
          arbitrator to modify the allocation as necessary to preserve
          enforceability. The arbitrator shall have exclusive authority to
          resolve all Arbitrable Claims, including, but not limited to, whether
          any particular claim is arbitrable and whether all or any part of this
          Agreement is void or unenforceable.

                                         8
<PAGE>

     (d)  ARBITRATION CONFIDENTIALITY. All proceedings and all documents
          prepared in connection with any Arbitrable Claim shall be confidential
          and, unless otherwise required by law, the subject matter thereof
          shall not be disclosed to any person other than the parties to the
          proceedings, their counsel, witnesses and experts, the arbitrator,
          and, if involved, the court and court staff. All documents filed with
          the arbitrator or with a court shall be filed under seal. The parties
          shall stipulate to all arbitration and court orders necessary to
          effectuate fully the provisions of this Section concerning
          confidentiality.

9.   INJUNCTIVE RELIEF. If Employee breaches or threatens to breach any of the
     covenants contained in Section 6 on Inventions and Ideas or Section 7 on
     Proprietary Information, the parties acknowledge and agree that the damage
     or imminent damage to 724 Solutions' business or its goodwill would be
     irreparable and extremely difficult to estimate, making any remedy at law
     or in damages inadequate. Both parties further acknowledge that 724
     Solutions considers the services of Employee to be provided under this
     Agreement to be unique, extraordinary, and/or of intellectual character.
     Accordingly, 724 Solutions shall be entitled to injunctive relief against
     Employee in the event of any breach or threatened breach of the above
     provisions by Employee, in addition to any other relief (including damages)
     available to 724 Solutions under this Agreement or under law. Nothing
     herein is intended or expected to limit 724 Solutions right to seek
     injunctive relief against employee in a court of competent jurisdiction
     prior to, or during the pendency of any arbitration proceedings.

10.  NOTICES. Any notice which may or is required to be given pursuant to this
     agreement shall be in writing and shall be sufficiently given or made if
     mailed by prepaid registered mail, faxed or served personally upon the
     party for whom it is intended, addressed to the other party at the address
     or fax number first above written. The date of receipt of any notice, if
     served personally or by fax, shall be deemed to be the date of delivery
     thereof and, if mailed, the third business day after delivery.

11.  ASSIGNMENT. You acknowledge that 724 Solutions may assign this agreement
     and the benefits of your covenants and obligations under this agreement to
     any person who purchases all or substantially all the assets of 724
     Solutions. In addition, this agreement and the rights and obligations of
     724 Solutions may be assigned at any time by 724 Solutions to an affiliate
     of 724 Solutions. Subject to the forgoing, neither this agreement nor any
     rights or obligations hereunder shall be assignable by any party without
     the prior written consent of the other party. Subject thereto, this
     agreement shall enure to the benefit of and be binding upon the parties and
     their respective heirs, executors, administrators, legal personal
     representatives, successors (including any successor by reason of
     amalgamation or statutory arrangement of any party) and permitted assigns.

                                         9
<PAGE>

12.  INVALIDITY AND SEVERABILITY. If any provision of this Agreement, or its
     application to any person, place, or circumstance, is held by a court of
     competent jurisdiction to be invalid, unenforceable, or void, such
     provision shall be enforced to the greatest extent permitted by law, and
     the remainder of this Agreement and such provision as applied to other
     persons, places, and circumstances shall remain in full force and effect.

13.  FURTHER ASSURANCES. You agree to do such acts and execute such further
     documents, conveyances, deeds, assignments, transfers and the like, and
     will cause the doing of such acts and will cause the execution of such
     further documents as are within your power as we may in writing at any time
     and from time to time reasonably request be done and or executed, in order
     to give full effect to the provisions of this agreement.

14.  WAIVER OF RIGHTS. Any waiver of, or consent to depart from, the
     requirements of any provision of this agreement shall be effective only if
     it is in writing and signed by the party giving it, and only in the
     specific instance and for the specific purpose for which it has been given.
     No failure on the part of any party to exercise, and no delay in
     exercising, any right under this agreement shall operate as a waiver of
     such right. No single or partial exercise of any such right shall preclude
     any other or further exercise of such right or the exercise of any other
     right.

15.  AMENDMENTS; WAIVERS. This Agreement may not be amended except by an
     instrument in writing, signed by each of the parties. No failure to
     exercise and no delay in exercising any right, remedy, or power under this
     Agreement shall operate as a waiver thereof, nor shall any single or
     partial exercise of any right, remedy, or power under this Agreement
     preclude any other or further exercise thereof, or the exercise of any
     other right, remedy, or power provided herein or by law or in equity.

16.  ENTIRE AGREEMENT. This Agreement is intended to be the final, complete, and
     exclusive statement of the terms of Employee's employment by 724 Solutions.
     This Agreement supersedes all other prior and contemporaneous agreements
     and statements, whether written or oral, express or implied pertaining in
     any manner to the employment of Employee, and it may not be contradicted by
     evidence of any prior or contemporaneous statements or agreements. To the
     extent that the practices, policies, or procedures of 724 Solutions, now or
     in the future, apply to Employee and are inconsistent with the terms of
     this Agreement, the provisions of this Agreement shall control.

17.  GOVERNING LAW. This Agreement is to be construed in accordance with and
     governed by the laws of the State of Connecticut, without giving effect to
     any

                                       10
<PAGE>

     choice of law rule that would cause the application of the laws of any
     jurisdiction other than the State of Connecticut to the rights and duties
     of the parties.

18.  INTERPRETATION. This Agreement shall be construed as a whole, according to
     its fair meaning, and not in favor of or against any party. By way of
     example and not in limitation, this Agreement shall not be construed in
     favor of the party receiving a benefit nor against the party responsible
     for any particular language in this Agreement. Captions are used for
     reference purposes only and should be ignored in the interpretation of the
     Agreement.

19.  EMPLOYEE ACKNOWLEDGMENT. Employee acknowledges that he or she has had the
     opportunity to consult legal counsel in regard to this Agreement, that he
     or she has read and understands this Agreement, that he or she is fully
     aware of its legal effect, and that he or she has entered into it freely
     and voluntarily and based on his or her own judgment and not on any
     representations or promises other than those contained in this Agreement.

20.  DATE OF AGREEMENT. The parties have duly executed this Agreement as of the
     date first written above.

By:  /s/ Gregory Wolfond         /s/ Christopher Jarman
     ------------------------    -------------------------
     Gregory Wolfond             Christopher Whitland Jarman
     CEO
     724 Solutions Corp.

                                        11
<PAGE>

                                  SCHEDULE "A"

                          COMPENSATION AND BENEFITS OF
                           CHRISTOPHER WHITLAND JARMAN

1.   SALARY. Your salary will be $250,000 USD per annum with a variable annual
     compensation of $150,000 USD for a target income of $400,000 USD. For the
     first year of your employment (from August 7, 2000 to December 31, 2000),
     the variable annual portion shall be payable as follows: (i) $100,000 USD
     shall be fixed and shall be paid on or before January 31, 2001; and (ii)
     $50,000 shall be payable on or before January 31, 2001 if Employee
     successfully completes two participations with 724 Solutions. For each
     subsequent calendar year of your employment (commencing with the calendar
     year 2001) the variable annual portion shall be payable within 30 days of
     the end of such calendar year and shall be based upon the completion of
     projects set out in a Memorandum of Agreement signed by you and 724
     Solutions within 4 weeks of the beginning of each year of this agreement.
     You acknowledge and agree that in the event you are eligible to earn any
     variable pay or bonus payments, only such variable pay or bonus payments
     actually earned by you as of the date your employment ceases shall be paid
     to you. 724 Solutions shall deduct all required US deductions. Employee
     shall only be liable for US-based taxation and other liabilities, and 724
     Solutions shall hold employee free from any other related liability in any
     other jurisdiction that may arise as a result of Employee carrying out his
     Duties under this Agreement. The foregoing shall not apply to the extent
     that Employee relocates in accordance with Section 7 of this Schedule.

2.   PAID ABSENCE. You will be eligible for 4 weeks of vacation in each calendar
     year, prorated from your starting date. In addition you will be entitled to
     2 personal days each calendar year plus statutory US public holidays. Your
     supervisor must approve all vacations, and approval is subject to the
     operational needs of 724 Solutions. Vacation accrual is subject to a
     maximum number of days, in accordance with 724 Solutions' policies.

3.   HOME OFFICE. You will be equipped with the necessary tools and devices
     including maintenance and respective usage costs to effectively work out of
     your home. This shall include, although not be limited to, computing ,
     cable and modem communications, fixed and mobile telephone and fax
     services, scanner/printer services and CDRW mass storage. Home office at 11
     Cardinal Road, Greenwich, Connecticut 06830, USA shall be designated as
     your normal place of work.

4.   BENEFITS. You will be eligible to participate in any plans maintained from
     time to time by 724 Solutions for the benefit of 724 Solutions' employees,
     including, but not limited to, those pertaining to group life, accident,
     dental, prescription,

                                      A-1
<PAGE>

     sickness and medical, and long term disability insurance, provided that
     premiums for such coverages are reasonable, as determined by 724 Solutions
     in its sole discretion. Such terms to be not less than those provided to
     you by 724 Solutions dated June 14, 2000.

5.   OPTIONS TO PURCHASE SHARES.

     Subject to you and 724 Solutions entering into 724 Solutions' standard
     Option Agreement, 724 Solutions hereby grants to you:

     (a)  the option to purchase 33,333 common shares of 724 Solutions (or the
          group of companies that forms 724 Solutions), at their Market Price
          (as defined in the Stock Option Plan) on the date of the grant (your
          first day of employment with 724 Solutions), which option vests on and
          continues from the first anniversary of your employment; and

     (b)  the option to purchase an additional 33,333 common shares of 724
          Solutions (or the group of companies that forms 724 Solutions), at
          their Market Price (as defined in the Stock Option Plan) on the date
          of the grant (your first day of employment with 724 Solutions), which
          option vests on and continues from the second anniversary of your
          employment; and

     (c)  the option to purchase an additional 33,334 common shares of 724
          Solutions (or the group of companies that forms 724 Solutions), at
          their Market Price (as defined in the Stock Option Plan) on the date
          of the grant (your first day of employment with 724 Solutions), which
          option vests on and continues from the third anniversary of your
          employment.

     Further options may be granted to you in accordance with 724 Solutions'
     standard ongoing grant program, which grants must be approved by the
     Compensation Committee of the Board of Directors of 724 Solutions.

     Please note that the terms and conditions of the Option Agreement and
     corresponding Option Plan govern the options granted in this agreement. In
     particular, you should note that your eligibility for unvested options will
     be automatically forfeited if your employment with 724 Solutions terminates
     for any reason except for rights granted to you under Section 6 of this
     Schedule.

6.   NON-VOLUNTARY TERMINATION OF EMPLOYMENT WITH 724 SOLUTIONS.

     In the event that you are terminated without cause by 724 Solutions, you
     shall be entitled to receive your base salary for a period of six (6)
     months from the date of such termination. Further, you shall immediately be
     entitled to exercise any stock options which would otherwise have vested in
     the six (6) month period immediately following your termination. These
     rights represent your full and

                                     A-2
<PAGE>

     only compensation upon termination without cause, and shall be granted to
     you upon your execution of a full and final release of any claims against
     724 Solutions related in any manner to your employment.

7.   RELOCATION

     Employee shall be entitled to relocation in connection with the permanent
     location of 724 Solutions Headquarters. If, by December 31st., 2001, this
     remains located in Toronto, Canada then Employee shall be entitled to be
     relocated to Toronto. If, at that time, Employee elects to be so relocated,
     724 Solutions shall reimburse actual, reasonable, direct relocation
     expenses up to, but not exceeding $75,000.

8.   GENERAL

     This statement of Compensation and Benefits supersedes all other prior and
     contemporaneous agreements and statements, whether written or oral, express
     or implied pertaining in any manner to your compensation and benefits, and
     it may not be contradicted by evidence of any prior or contemporaneous
     statements or agreements. To the extent that the practices, policies, or
     procedures of 724 Solutions, now or in the future, apply to Employee and
     are inconsistent with the terms of this Agreement, the provisions of this
     Agreement shall control.

                                     A-3<PAGE>

                                                                    EXHIBIT 10.5

                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT (this "AGREEMENT") made as of the 26th day of
February, 2001 (the "EFFECTIVE DATE") by and between Timothy J. Naughton and
AvalonBay Communities, Inc., a Maryland corporation (the "COMPANY").

         WHEREAS, Executive has been performing services for the Company; and

         WHEREAS, Executive and the Company desire to enter into an employment
agreement, effective as of the date of execution of this Agreement.

         NOW, THEREFORE, the parties hereto do hereby agree as follows.

         1. TERM. The Company hereby agrees to employ Executive, and Executive
hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this Agreement for the period commencing on the Effective Date and
terminating on February 25, 2004 (the "ORIGINAL TERM"), unless earlier
terminated as provided in Section 7. The Original Term shall be extended
automatically for additional one year periods measured from February 26, 2004
(each a "RENEWAL TERM"), unless notice that this Agreement will not be extended
is given by either party to the other ninety (90) days prior to the expiration
of the Original Term or any Renewal Term. Notwithstanding the foregoing, upon a
Change in Control, the Employment Period shall be extended automatically to
three years from the date of such Change in Control. (The period of Executive's
employment hereunder within the Original Term and any Renewal Terms is herein
referred to as the "EMPLOYMENT PERIOD.")

         2. EMPLOYMENT DUTIES.

                  (a) During the Employment Period, Executive shall be employed
in the business of the Company and its affiliates. Executive shall serve as a
corporate officer of the Company with the title of CHIEF OPERATING OFFICER. In
the performance of his duties, Executive shall be subject to the direction of
the Board of Directors of the Company (the "Board"), including any committee of
the Board designated by the Board, if any, and the President and/or Chief
Executive Officer of the Company ("CEO", which term refers to the President
and/or Chief Executive Officer, each with authority acting alone to give
direction hereunder in the event that both titles are not held by the same
person) and shall not be required to take direction from or report to any other
person. Executive's duties, title and/or authority, as assigned by the Board or
CEO, shall include responsibility for overseeing the Company's overall (i)
development activities, (ii) construction activities, (iii) investment
activities, (iv) marketing activities, and (v) property operations activities
(in each case, to the extent the same relate to the multifamily rental
business), PROVIDED, HOWEVER, that it will not be a violation of this Section
2(a), or otherwise be a breach by the Company under any term of this Agreement,
if (a) the Company modifies Executive's duties so that they include only three
out of the aforementioned five functional areas, or (b) the Executive's duties
are modified from time to time as Executive and Company mutually reasonably
agree.

                  (b) Executive agrees to his employment as described in this
Section 2 and agrees to devote substantially all of his working time and efforts
to the performance of his duties under this Agreement; provided that nothing in
this Section 2(b) shall be interpreted to preclude Executive from (i)
participating with the prior written consent of the Board as an officer or
director of, or advisor to, any other entity or organization that is not a
customer or material service provider to the Company or a Competing Enterprise,
as defined in Section 8, so long as such participation does not interfere with
the performance of

<PAGE>

Executive's duties hereunder, whether or not such entity or organization is
engaged in religious, charitable or other community or non-profit activities,
(ii) investing in any entity or organization which is not a customer or material
service provider to the Company or a Competing Enterprise, so long as such
investment does not interfere with the performance of Executive's duties
hereunder, or (iii) delivering lectures or fulfilling speaking engagements so
long as such lectures or engagements do not interfere with the performance of
Executive's duties hereunder.

                  (c) In performing his duties hereunder, Executive shall be
available for reasonable travel as the needs of the business require. Executive
shall be based in Alexandria, Virginia (or otherwise in the Washington
Baltimore, DC-MD-VA-WV Consolidated Metropolitan Statistical Area as defined by
the U.S. Census Bureau ("Metropolitan D.C.")).

                  (d) Breach by either party of any of his or its respective
obligations under this Section 2 shall be deemed a material breach of that
party's obligations hereunder.

         3. COMPENSATION/BENEFITS. In consideration of Executive's services
hereunder, the Company shall provide Executive the following:

                  (a) BASE SALARY. During the Employment Period, the Executive
shall receive an annual rate of base salary ("BASE SALARY") in an amount not
less than $350,000. Executive's Base Salary will be reviewed by the Company
annually and may be adjusted upward (but not downward) at such time. Base Salary
shall be payable in accordance with the Company's normal business practices, but
in no event less frequently than monthly.

                  (b) BONUSES. Commencing at the close of each fiscal year
during the Employment Period, the Company shall review the performance of the
Company and of Executive during the prior fiscal year, and the Company may
provide Executive with additional compensation in the form of a cash bonus
("CASH BONUS") and/or in the form of long term equity incentives such as stock
options and restricted stock grants ("LT EQUITY BONUS") if the Board, or any
compensation committee thereof, in its discretion, determines that the
performance of the Company and Executive's contribution to the Company warrants
such additional payment and the Company's anticipated financial performance of
the present period permits such payment. Any Cash Bonuses hereunder shall be
paid as a lump sum not later than 75 days after the end of the Company's
preceding fiscal year.

                  (c) MEDICAL AND DISABILITY INSURANCE/PHYSICAL. During the
Employment Period, the Company shall provide to Executive and Executive's
immediate family a comprehensive policy of health insurance in accordance with
the Company's general practice applicable to officers (including payment of all
or a portion of the premiums due thereon) and shall provide to Executive a
disability policy in accordance with the Company's general practice applicable
to officers (including payment of all or a portion of the premiums due thereon).
During the Employment Period, Executive shall be entitled to a comprehensive
annual physical performed, at the expense of the Company (but not including any
related travel expense), by the physician or medical group of Executive's
choosing.

                  (d) SPLIT DOLLAR LIFE INSURANCE. During the Employment Period,
the Company shall keep in force and pay the premiums on the split-dollar life
insurance policy referenced in the Split Dollar Insurance Agreement between the
Company and Executive, subject to reimbursement by Executive as provided in such
Split Dollar Insurance Agreement. Executive agrees to submit to such medical
examinations as may be required in order to maintain such policy of insurance.

                  (e) VACATIONS. Executive shall be entitled to reasonable paid
vacations during the Employment Period in accordance with the then regular
procedures of the Company governing officers.

                                       2
<PAGE>

                  (f) OFFICE/SECRETARY, ETC. During the Employment Period,
Executive shall be entitled to secretarial services and a private office
commensurate with his title and duties.

                  (g) ANNUAL ALLOWANCE. The Company will provide the Executive
with an annual allowance of up to $5,000 per year (the "ALLOWANCE"). The
Executive may draw on the Allowance for expenses incurred in his discretion for
items such as country club membership, financial counseling or tax preparation.
Payment of the Allowance shall be subject to substantiation of expenses in
accordance with the Company's policies in effect from time to time for executive
officers of the Company. Unused portions of the Allowance shall not be carried
over from year to year. For purposes of this Section 3(g), a new year shall be
deemed to commence on each January 1.

                  (h) AUTOMOBILE. The Company shall provide Executive with a
monthly car allowance during the Employment Period in accordance with the
Company's current practices but in no event less than Executive's current
monthly car allowance.

                  (i) OTHER BENEFITS. During the Employment Period, the Company
shall provide to Executive such other benefits, excluding severance benefits,
but including the right to participate in such retirement or pension plans, as
are made generally available to officers of the Company from time to time.
Executive shall be given credit for purposes of eligibility and vesting of
employee benefits and benefit accrual for service prior to the Effective Date
with Avalon Properties, Inc. and its affiliates ("AVALON"), and Trammell Crow
Residential ("TCR") under each benefit plan of the Company and its subsidiaries
to the extent such service had been credited under employee benefit plans of
Avalon or TCR, provided that no such crediting of service results in duplication
of benefits.

                  (j) TOTAL COMPENSATION. The Company acknowledges that the
Executive's Cash Bonus and LT Equity Bonus awarded to the Executive by the Board
or Compensation Committee of the Board in its discretion from time-to-time, are
a material part of total compensation for the Executive. The Company will
endeavor to provide Executive with a reasonable Cash Bonus and/or reasonable LT
Equity Bonus on an annual basis such that the Executive's total compensation, in
light of the Company's performance and his performance in his role of COO, is
reasonable under the circumstances and reasonable relative to the Cash Bonuses
and LT Equity Bonuses awarded other officers of the Company. The Company shall
not be in breach of this provision unless it can be demonstrated that the
Company acted in bad faith in determining whether to award (or the size of an
award of) a Cash Bonus or LT Equity Bonus, which determination of bad faith
shall specifically be made with reference to the target awards set for other
officers and the actual awards paid other officers.

         4. EXPENSES/INDEMNIFICATION.

                  (a) During the Employment Period, the Company shall reimburse
Executive for the reasonable business expenses incurred by Executive in the
course of performing his duties for the Company hereunder, upon submission of
invoices, vouchers or other appropriate documentation, as may be required in
accordance with the policies in effect from time to time for executive employees
of the Company.

                  (b) To the fullest extent permitted by law, the Company shall
indemnify Executive with respect to any actions commenced against Executive in
his capacity as an officer or director or former officer or director of the
Company, or any affiliate thereof for which he may render service in such
capacity, whether by or on behalf of the Company, its shareholders or third
parties, and the Company shall advance to Executive on a timely basis an amount
equal to the reasonable fees and expenses incurred in defending such actions,
after receipt of an itemized request for such advance, and an undertaking from
Executive to repay the amount of such advance, with interest at a reasonable
rate from the date of the request, as determined by the Company, if it shall
ultimately be determined that he is not entitled to be indemnified against such
expenses. Notwithstanding the foregoing, the Company shall not indemnify

                                       3
<PAGE>

Executive with respect to any acts or omissions attributable, directly or
indirectly, to Executive's gross negligence, willful misconduct or material
breach of this Agreement. The Company agrees that it shall use reasonable best
efforts to secure and maintain officers' and directors' liability insurance that
shall include coverage with respect to Executive.

         5. EMPLOYER'S AUTHORITY/POLICIES.

                  (a) GENERAL. Executive agrees to observe and comply with the
rules and regulations of the Company as adopted by its Board respecting the
performance of his duties and to carry out and perform orders, directions and
policies communicated to him from time to time by the Board or the CEO.

                  (b) ETHICS POLICIES. Executive agrees to comply with and be
bound by the Ethics Policies of the Company, as reflected in the attachment at
ANNEX A hereto and made a part hereof. Executive agrees to comply with and be
bound by the Company's insider trading policies and procedures that are
generally applicable to employees and/or senior officers.

         6. RECORDS/NONDISCLOSURE/COMPANY POLICIES.

                  (a) GENERAL. All records, manuals, financial statements and
similar documents obtained, reviewed or compiled by Executive in the course of
the performance by him of services for the Company, whether or not confidential
information or trade secrets, shall be the exclusive property of the Company.
Executive shall have no rights in such documents upon any termination of this
Agreement.

                  (b) NONDISCLOSURE AGREEMENT. Without limitation of the
Company's rights under Section 6(a), Executive agrees to abide by and be bound
by the Nondisclosure Agreement of the Company executed by Executive and the
Company as reflected in the attachment at ANNEX B and made a part hereof.

         7. TERMINATION; SEVERANCE AND RELATED MATTERS.

                  (a) AT-WILL EMPLOYMENT. Executive's employment hereunder is
"at will" and, therefore, may be terminated at any time, with or without Cause,
at the option of the Company, subject only to the severance obligations under
this Section 7. Upon any termination hereunder, the Employment Period shall
expire.

                  (b) DEFINITIONS. For purposes of this Section 7, the following
terms shall have the indicated definitions:

                           (1) CAUSE. "Cause" shall mean:

                                    (i) Executive is convicted of or enters a
                           plea of nolo contendere to an act which is defined as
                           a felony under any federal, state or local law, not
                           based upon a traffic violation, which conviction or
                           plea has or can be expected to have, in the good
                           faith opinion of the Board, a material adverse impact
                           on the business or reputation of the Company;

                                    (ii) any one or more acts of theft, larceny,
                           embezzlement, fraud or material intentional
                           misappropriation from or with respect to the Company;

                                    (iii) a breach by Executive of his fiduciary
                           duties under Maryland law as an officer; or material
                           breach by Executive of any rule, regulation, policy
                           or procedure, the Company (including, without
                           limitation, as described in Section 5 hereof);

                                       4
<PAGE>

                                    (iv) Executive's commission of any one or
                           more acts of gross negligence or willful misconduct
                           which in the good faith opinion of the Board has
                           resulted in material harm to the business or
                           reputation of the Company; or

                                    (v) default by Executive in the performance
                           of his material duties under this Agreement, without
                           correction of such action within 15 days of written
                           notice thereof.

         Notwithstanding the foregoing, no termination of Executive's employment
by the Company shall be treated as for Cause or be effective until and unless
all of the steps described in subparagraphs (A) through (C) below have been
complied with:

                                             (A) Notice of intention to
                                    terminate for Cause has been given by the
                                    Company within 120 days after the Board
                                    learns of the act, failure or event (or
                                    latest in a series of acts, failures or
                                    events) constituting "Cause";

                                             (B) The Board has voted (at a
                                    meeting of the Board duly called and held as
                                    to which termination of Executive is an
                                    agenda item) to terminate Executive for
                                    Cause after Executive has been given notice
                                    of the particular acts or circumstances
                                    which are the basis for the termination for
                                    Cause and has been afforded at least 20 days
                                    notice of the meeting and an opportunity to
                                    present his position in writing; and

                                             (C) The Board has given a Notice of
                                    Termination to Executive within 20 days
                                    after such Board meeting.

         The Company may suspend Executive with pay at any time during the
period commencing with the giving of notice to Executive under clause (A) above
until final Notice of Termination is given under clause (C) above. Upon the
giving of notice as provided in clause (C) above, no further payments shall be
due Executive except as provided in Section 7(c)(vii).

                  (2) CHANGE IN CONTROL. A "Change in Control" shall mean the
         occurrence of any one or more of the following events following the
         Effective Date:

                           (i) Any individual, entity or group (a "Person")
                  within the meaning of Sections 13(d) and 14(d) of the
                  Securities Exchange Act of 1934 (the "Act") (other than the
                  Company, any corporation, partnership, trust or other entity
                  controlled by the Company (a "Subsidiary"), or any trustee,
                  fiduciary or other person or entity holding securities under
                  any employee benefit plan or trust 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) of
                  securities of the Company representing 30% or more of the
                  combined voting power of the Company's then outstanding
                  securities having the right to vote generally in an election
                  of the Company's Board of Directors ("Voting Securities"),
                  other than as a result of (A) an acquisition of securities
                  directly from the Company or any Subsidiary or (B) an
                  acquisition by any corporation pursuant to a reorganization,
                  consolidation or merger if, following such reorganization,
                  consolidation or merger the conditions described in clauses
                  (A), (B) and (C) of subparagraph (iii) of this Section 7(b)(2)
                  are satisfied; or

                           (ii) Individuals who, as of the Effective Date,
                  constitute the Company's Board (the "Incumbent Directors")
                  cease for any reason to constitute at least a

                                       5
<PAGE>

                  majority of the Board, provided, however, that any individual
                  becoming a director of the Company subsequent to the date
                  hereof (excluding, for this purpose, (A) any such individual
                  whose initial assumption of office is in connection with an
                  actual or threatened election contest relating to the election
                  of members of the Board or other actual or threatened
                  solicitation of proxies or consents by or on behalf of a
                  Person other than the Board, including by reason of agreement
                  intended to avoid or settle any such actual or threatened
                  contest or solicitation, and (B) any individual whose initial
                  assumption of office is in connection with a reorganization,
                  merger or consolidation, involving an unrelated entity and
                  occurring during the Employment Period), whose election or
                  nomination for election by the Company's shareholders was
                  approved by a vote of at least a majority of the persons then
                  comprising Incumbent Directors shall for purposes of this
                  Agreement be considered an Incumbent Director; or

                           (iii) Consummation of a reorganization, merger or
                  consolidation of the Company, unless, following such
                  reorganization, merger or consolidation, (A) more than 50% of,
                  respectively, the then outstanding shares of common stock of
                  the corporation resulting from such reorganization, merger or
                  consolidation and the combined voting power of the then
                  outstanding voting securities of such corporation entitled to
                  vote generally in the election of directors is then
                  beneficially owned, directly or indirectly, by all or
                  substantially all of the individuals and entities who were the
                  beneficial owners, respectively, of the outstanding Voting
                  Securities immediately prior to such reorganization, merger or
                  consolidation, (B) no Person (excluding the Company, any
                  employee benefit plan (or related trust) of the Company, a
                  Subsidiary or the corporation resulting from such
                  reorganization, merger or consolidation or any subsidiary
                  thereof, and any Person beneficially owning, immediately prior
                  to such reorganization, merger or consolidation, directly or
                  indirectly, 30% or more of the outstanding Voting Securities),
                  beneficially owns, directly or indirectly, 30% or more of,
                  respectively, the then outstanding shares of common stock of
                  the corporation resulting from such reorganization, merger or
                  consolidation or the combined voting power of the then
                  outstanding voting securities of such corporation entitled to
                  vote generally in the election of directors, and (C) at least
                  a majority of the members of the board of directors of the
                  corporation resulting from such reorganization, merger or
                  consolidation were members of the Incumbent Board at the time
                  of the execution of the initial agreement providing for such
                  reorganization, merger or consolidation;

                           (iv) Approval by the shareholders of the Company of a
                  complete liquidation or dissolution of the Company; or

                           (v) The sale, lease, exchange or other disposition of
                  all or substantially all of the assets of the Company, other
                  than to a corporation, with respect to which following such
                  sale, lease, exchange or other disposition (A) more than 50%
                  of, respectively, the then outstanding shares of common stock
                  of such corporation and the combined voting power of the then
                  outstanding voting securities of such corporation entitled to
                  vote generally in the election of directors is then
                  beneficially owned, directly or indirectly, by all or
                  substantially all of the individuals and entities who were the
                  beneficial owners of the outstanding Voting Securities
                  immediately prior to such sale, lease, exchange or other
                  disposition, (B) no Person (excluding the Company and any
                  employee benefit plan (or related trust) of the Company or a
                  Subsidiary or such corporation or a subsidiary thereof and any
                  Person beneficially owning, immediately prior to such sale,
                  lease, exchange or other disposition, directly or indirectly,
                  30% or more of the outstanding Voting Securities),
                  beneficially owns, directly or indirectly, 30% or more of,
                  respectively, the then outstanding shares of common stock of
                  such corporation and the combined voting

                                       6
<PAGE>

                  power of the then outstanding voting securities of such
                  corporation entitled to vote generally in the election of
                  directors and (C) at least a majority of the members of the
                  board of directors of such corporation were members of the
                  Incumbent Board at the time of the execution of the initial
                  agreement or action of the Board of Directors providing for
                  such sale, lease, exchange or other disposition of assets of
                  the Company.

                  Notwithstanding the foregoing, a "Change in Control" shall not
                  be deemed to have occurred for purposes of this Agreement
                  solely as the result of an acquisition of securities by the
                  Company which, by reducing the number of shares of Voting
                  Securities outstanding, increases 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 outstanding Voting Securities; provided, however,
                  that if any Person referred to in 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 in Control" shall be deemed to
                  have occurred for purposes of this Agreement.

                  (3) COMPLETE CHANGE IN CONTROL. A "Complete Change in Control"
         shall mean that a Change in Control has occurred, after modifying the
         definition of "Change in Control" by deleting clause (i) from Section
         7(b)(2) of this Agreement.

                  (4) CONSTRUCTIVE TERMINATION WITHOUT CAUSE. "Constructive
         Termination Without Cause" shall mean a termination of Executive's
         employment initiated by Executive not later than 12 months following
         the occurrence (not including any time during which an arbitration
         proceeding referenced below is pending), without Executive's prior
         written consent, of one or more of the following events (or the latest
         to occur in a series of events), and effected after giving the Company
         not less than 10 working days' written notice of the specific act or
         acts relied upon and right to cure:

                           (i) a material adverse change in the functions,
                  duties or responsibilities of Executive's position which is
                  inconsistent with Section 2(a), except in connection with the
                  termination of Executive's employment for Disability, Cause,
                  as a result of Executive's death or by Executive other than
                  for a Constructive Termination Without Cause;

                           (ii) any material breach by the Company of this
                  Agreement;

                           (iii) any purported termination of Executive's
                  employment for Cause by the Company which does not comply with
                  the terms of Section 7(b)(1) of this Agreement;

                           (iv) the failure of the Company to obtain an
                  agreement, satisfactory to the Executive, from any successor
                  or assign of the Company, to assume and agree to perform this
                  Agreement, as contemplated in Section 10 of this Agreement;

                           (v) the failure by the Company to continue in effect
                  any compensation plan in which Executive participates
                  immediately prior to a Change in Control which is material to
                  Executive's total compensation, unless comparable alternative
                  arrangements (embodied in ongoing substitute or alternative
                  plans) have been implemented with respect to such plans, or
                  the failure by the Company to continue Executive's
                  participation therein (or in such substitute or alternative
                  plans) on a basis not materially less favorable, in terms of
                  the amount of benefits provided and the level of Executive's
                  participation relative to

                                       7
<PAGE>

                  other participants, as existed during the last completed
                  fiscal year of the Company prior to the Change in Control;

                           (vi) the relocation of the Company's Alexandria
                  offices to a new location outside of Metropolitan D.C. or the
                  failure to locate Executive's own office at the Alexandria
                  office (or at the office to which such office is relocated
                  which is within Metropolitan D.C.) ("RELOCATION TERMINATION");
                  or

                           (vii) any voluntary termination of employment by the
                  Executive for any reason during the 12-month period
                  immediately following a Complete Change in Control of the
                  Company if such Complete Change in Control occurs during the
                  Employment Period.

                  Notwithstanding the foregoing, a Constructive Termination
         Without Cause shall not be treated as having occurred unless Executive
         has given a final Notice of Termination delivered after expiration of
         the Company's cure period. Executive or the Company may, at any time
         after the expiration of the Company's cure period and either prior to
         or up until three months after giving a final Notice of Termination,
         commence an arbitration proceeding to determine the question of
         whether, taking into account the actions complained of and any efforts
         made by the Company to cure such actions, a termination by Executive of
         his employment should be treated as a Constructive Termination Without
         Cause for purposes of this Agreement. If the Executive or the Company
         commences such a proceeding prior to delivery by Executive of a final
         Notice of Termination, the commencement of such a proceeding shall be
         without prejudice to either party and Executive's and the Company's
         rights and obligations under this Agreement shall continue unaffected
         unless and until the arbitrator has determined such question in the
         affirmative, or, if earlier, the date on which Executive or the Company
         has delivered a Notice of Termination in accordance with the provisions
         of this Agreement.

                  (5) AVERAGE COVERED TOTAL COMPENSATION. "Average Covered Total
         Compensation" shall mean the sum of Executive's Covered Total
         Compensation as calculated for the calendar year in which the Date of
         Termination occurs and for each of the two preceding calendar years,
         divided by three, PROVIDED, HOWEVER, that if the Date of Termination
         occurs before the second anniversary of the Effective Date, then
         "Average Covered Total Compensation" shall mean the sum of Executive's
         Covered Total Compensation as calculated for the calendar year in which
         the Date of Termination occurs and for the preceding calendar year,
         divided by two. "Average Covered Base And Cash Bonus Compensation,"
         "Average Covered Cash Bonus Compensation" and "Average Covered LT
         Equity Compensation" shall have analogous meanings but with reference
         to Covered Base And Cash Bonus Compensation, Covered Cash Bonus
         Compensation and Covered LT Equity Compensation, respectively.

                  (6) COVERED COMPENSATION DEFINITIONS. "Covered Total
         Compensation," for any calendar year, shall mean an amount equal to the
         sum of (i) Executive's Base Salary for the calendar year (disregarding
         any decreases made effective during the Employment Period), (ii) the
         cash bonus actually earned by Executive with respect to such calendar
         year, and (iii) the value of all stock and other equity-based
         compensation awards made to Executive during such calendar year. In the
         event that the Company has or hereafter makes any special, mid-year or
         other non-routine grant of equity outside of the Company's recurring
         annual equity compensation programs, or in the event that the Company
         grants, outside of the current recurring annual equity compensation
         programs, any equity based compensation pursuant to any long-term plan
         under which equity grants may be made based on multi-year Company
         results, the value of any such mid-year, special, or long-term plan
         equity based compensation shall not be included in clause (iii) of the
         preceding sentence and therefore shall not be included in the
         calculation of Covered Compensation definitions,

                                       8
<PAGE>

         and the value of such equity shall have no impact on any cash payments
         made under Section 7(c) of the Agreement.

                           "Covered Base And Cash Bonus Compensation" for any
                  calendar year shall mean Covered Total Compensation for such
                  year but without the inclusion of amounts attributable to
                  clause (iii) of the definition of Covered Total Compensation.

                           "Covered Cash Bonus Compensation" for any calendar
                  year shall mean Covered Total Compensation for such year but
                  without the inclusion of amounts attributable to clauses (i)
                  and (iii) of the definition of Covered Total Compensation.

                           "Covered LT Equity Compensation" for any calendar
                  year shall mean Covered Total Compensation for such year but
                  without the inclusion of clauses (i) and (ii) of the
                  definition of Covered Total Compensation.

                  For purposes of applying the Covered Compensation definitions
         set forth above, the following rules shall apply:

                                    (A) In valuing awards for purposes of clause
                           (iii) of the definition of Covered Total
                           Compensation, all such awards shall be treated as if
                           fully vested when granted, stock grants shall be
                           valued by reference to the fair market value on the
                           date of grant of the Company's common stock, par
                           value $.01 per share, and other equity-based
                           compensation awards shall be valued at the value
                           established in good faith by the Compensation
                           Committee of the Board. Reference is made to Section
                           7(c)(viii) for further clarification regarding this
                           matter.

                                    (B) In determining the cash bonus actually
                           paid with respect to a calendar year, if no cash
                           bonus has been paid with respect to the calendar year
                           in which the Date of Termination occurs, the cash
                           bonus paid with respect to the immediately preceding
                           calendar year shall be assumed to have been paid in
                           each of the current and immediately preceding
                           calendar years, and if no cash bonus has been paid by
                           the Date of Termination with respect to the
                           immediately preceding calendar year, the cash bonus
                           paid with respect to the second preceding calendar
                           year shall be assumed to have been paid in all three
                           (or two, as applicable) of the calendar years taken
                           into account in determining Average Covered Total
                           Compensation (or any of the derivative definitions
                           under Section 7(b)(5)).

                                    (C) If (i) any cash bonus paid with respect
                           to the current or immediately preceding calendar year
                           was paid within three months of Executive's Date of
                           Termination, (ii) such cash bonus is lower than the
                           last cash bonus paid more than three months from the
                           Date of Termination, and (iii) it is determined that
                           the Board acted in bad faith in setting such cash
                           bonus (which determination of bad faith shall
                           specifically be made with reference to the target
                           cash bonuses set for other officers and the actual
                           cash bonuses paid other officers), then in such event
                           any such cash bonus paid within three months of the
                           Date of Termination shall be disregarded and the last
                           cash bonus paid more than three months from the Date
                           of Termination shall be substituted for each cash
                           bonus so disregarded.

                                    (D) In determining the amount of stock and
                           other equity-based compensation awards made during a
                           calendar year during the averaging period, rules
                           similar to those set forth in subparagraphs (B) and
                           (C) of this Section 7(b)(6) shall be followed except
                           that all awards made in connection with the Company's
                           initial public offering shall be disregarded.

                                       9
<PAGE>

                  (7) DISABILITY. "Disability" shall mean Executive has been
         determined to be disabled and to qualify for long-term disability
         benefits under the long-term disability insurance policy obtained
         pursuant to Section 3(d) of this Agreement.

         (C) RIGHTS UPON TERMINATION.

                  (i) PAYMENT OF BENEFITS EARNED THROUGH DATE OF TERMINATION.
         Upon any termination of Executive's employment during the Employment
         Period, Executive, or his estate, shall in all events be paid (I) all
         accrued but unpaid Base Salary and (II) (except in the case of a
         termination by the Company for Cause or a voluntary termination by
         Executive which is not due to a Constructive Termination Without Cause,
         in either of which cases this clause (II) shall not apply) a pro rata
         portion of the Executive's Cash Bonus and LT Equity Bonus. For purposes
         of fulfilling the requirements of clause (II) of the prior sentence,
         the following shall apply:

         (a)      In all events, any stock options issued will be issued prior
                  to Executive's Date of Termination so that such stock options
                  are employee stock options. Such stock options shall have an
                  exercise price equal to the closing price of the Company's
                  stock on the date of grant of such options, and such options
                  shall expire one year after the date of grant.

         (b)      The Company and Executive shall work in good faith to
                  determine an appropriate Cash Bonus and LT Equity Bonus for
                  the year in which the Date of Termination occurs. Such
                  determination shall be based in good faith on an evaluation of
                  Executive's and the Company's performance. If the Company and
                  Executive cannot agree on appropriate amounts, then:

                  (A)      The Company may defer the determination of the Cash
                           Bonus and the restricted stock portion of the LT
                           Equity Bonus until such bonuses in respect of such
                           year are determined for other officers, and at such
                           time the amounts to be used for determining
                           Executive's pro rata bonuses shall be a percentage of
                           his target Cash Bonus and a percentage of his target
                           number of restricted shares with such percentages
                           being equal to the average of the percentages that
                           apply to the Cash Bonus and restricted shares,
                           respectively, of other officers ranked Senior Vice
                           President or higher; and

                  (B)      The Company may grant to Executive a number of stock
                           options based on the assumption that the percentage
                           of the target number of options Executive would have
                           received in respect of the year in which the Date of
                           Termination occurs would equal the average of the
                           percentage realization applied to options granted
                           with respect to the prior three calendar years.

         (c)      Once the determination in the preceding paragraph is made, the
                  pro rata portion of such amounts shall equal such amounts
                  multiplied by a fraction, the numerator of which is the number
                  of days from January 1 to the Date of Termination in the year
                  of termination and the denominator of which is 365.

         Executive shall also retain all such rights with respect to vested
         equity-based awards as are provided under the circumstances under the
         applicable grant or award agreement, and shall

                                       10
<PAGE>

         be entitled to all other benefits which are provided under the
         circumstances in accordance with the provisions of the Company's
         generally applicable employee benefit plans, practices and policies,
         other than severance plans.

                  (ii) DEATH. In the event of Executive's death during the
         Employment Period, the Company shall, in addition to paying the amounts
         set forth in Section 7(c)(i), take whatever action is necessary to
         cause all of Executive's unvested equity-based awards to become fully
         vested as of the date of death and, in the case of equity-based awards
         which have an exercise schedule, to become fully exercisable and
         continue to be exercisable for such period as is provided in the case
         of vested and exercisable awards in the event of death under the terms
         of the applicable award agreements.

                  (iii) DISABILITY. In the event the Company elects to terminate
         Executive's employment during the Employment Period on account of
         Disability, the Company shall, in addition to paying the amounts set
         forth in Section 7(c)(i) and subject to Executive first entering into a
         separation agreement, including a general release of all claims, in a
         form reasonably acceptable to the Company ("SEPARATION AGREEMENT"), pay
         to Executive, in one lump sum, no later than the later of the effective
         date of said Separation Agreement or 31 days following the Date of
         Termination, an amount equal to one times Average Covered Total
         Compensation. The Company shall also, commencing upon the Date of
         Termination and subject to Executive entering into a Separation
         Agreement:

                           (A) Continue, without cost to Executive, benefits
                  comparable to the medical benefits provided to Executive
                  immediately prior to the Date of Termination under Section
                  3(c) for a period of 12 months following the Date of
                  Termination or until such earlier date as Executive obtains
                  comparable benefits through other employment;

                           (B) Continue to pay, or reimburse Executive, for all
                  premiums then due or thereafter payable on the whole-life
                  portion of the split-dollar insurance policy referenced under
                  Section 3(d) for so long as such payments are due; PROVIDED,
                  that the Company's obligations under this Section 7(c)(iii)(B)
                  are contingent on Executive's timely payment of the premiums
                  then due or thereafter payable on the term portion of said
                  split-dollar insurance policy; and

                           (C) Take whatever action is necessary to cause
                  Executive to become vested as of the Date of Termination in
                  all stock options, restricted stock grants, and all other
                  equity-based awards and be entitled to exercise and continue
                  to exercise all stock options and all other equity-based
                  awards having an exercise schedule and to retain such grants
                  and awards to the same extent as if they were vested upon
                  termination of employment in accordance with their terms.

                           (D) If Executive obtains a disability policy on
                  commercially reasonable terms with the same or similar
                  coverage as provided by the Company prior to the Date of
                  Termination then, until that date that is 12 months following
                  the Date of Termination (or, if earlier, until Executive
                  obtains comparable benefits through other employment),
                  reimburse Executive for an amount equal to the difference
                  between (i) the monthly premiums for such disability policy,
                  less (ii) the amount paid by Executive in respect of a portion
                  of the premiums on the disability policy provided by Company
                  prior to the Date of Termination.

                                       11
<PAGE>

                           (iv) NON-RENEWAL BY THE COMPANY. In the event the
                  Company gives Executive a notice of non-renewal pursuant to
                  Section 1 above, and either (I) within one year after
                  expiration of the Employment Period the Executive voluntarily
                  terminates his employment ("POST-EXPIRATION RESIGNATION") or
                  (II) within two years after expiration of the Employment
                  Period the Executive's employment is terminated by the Company
                  without Cause or Constructively Terminated without Cause
                  ("POST-EXPIRATION TERMINATION"), then, in either such case,
                  the Company shall, in addition to paying the amounts set forth
                  in Section 7(c)(i), and subject to Executive first entering
                  into a Separation Agreement, pay to Executive, for 12
                  consecutive months beginning with the first business day of
                  the calendar month following the Effective Date of said
                  Separation Agreement, a monthly amount equal to one-twelfth (
                  1/12) of the sum of one times his then applicable Base Salary
                  plus one times Average Covered Cash Bonus Compensation. The
                  Company shall also, commencing upon the Date of Termination
                  and subject to Executive entering into a Separation Agreement,
                  continue, without cost to Executive, benefits comparable to
                  the medical benefits provided to Executive immediately prior
                  to the Date of Termination under Section 3(c) for a period of
                  12 months following the Date of Termination or until such
                  earlier date as Executive obtains comparable benefits through
                  other employment. In addition, if Executive obtains a
                  disability policy on commercially reasonable terms with the
                  same or similar coverage as provided by the Company prior to
                  the Date of Termination then, until that date that is 12
                  months following the Date of Termination (or, if earlier,
                  until Executive obtains comparable benefits through other
                  employment), reimburse Executive for an amount equal to the
                  difference between (i) the monthly premiums for such
                  disability policy, less (ii) the amount paid by Executive in
                  respect of a portion of the premiums on the disability policy
                  provided by Company prior to the Date of Termination.

                  In addition to the above, in the case of a Post-Expiration
                  Termination the Company additionally shall:

                           I.       Take whatever action is necessary to cause
                                    Executive to become vested as of the Date of
                                    Termination in all stock options, restricted
                                    stock grants, and all other equity-based
                                    awards and be entitled to exercise and
                                    continue to exercise all stock options and
                                    all other equity-based awards having an
                                    exercise schedule and to retain such grants
                                    and awards to the same extent as if they
                                    were vested upon termination of employment
                                    in accordance with their terms; and

                           II.      Continue to pay, or reimburse Executive for,
                                    all premiums then due or thereafter payable
                                    on the whole-life portion of the
                                    split-dollar insurance policy referenced
                                    under Section 3(d) for so long as such
                                    payments are due; PROVIDED, that the
                                    Company's obligations under this Section
                                    7(c)(iv)(B)(II) are contingent on
                                    Executive's timely payment of the premiums
                                    then due or thereafter payable on the term
                                    portion of said split-dollar insurance
                                    policy;

                           (V) TERMINATION WITHOUT CAUSE OR CONSTRUCTIVE
                  TERMINATION WITHOUT CAUSE PRIOR TO CHANGE IN CONTROL OF
                  COMPANY. In the event the Company or any successor to the
                  Company terminates Executive's employment without Cause, or if
                  Executive terminates his employment in a Constructive
                  Termination without Cause, in either case prior to the
                  effective time of any Change in Control of the Company or at
                  any time after two years after a Change in Control of the
                  Company, the Company shall, in addition to paying the amounts
                  provided under Section 7(c)(i), and subject to Executive first
                  entering

                                       12
<PAGE>

                  into a Separation Agreement, pay to Executive, in one lump sum
                  no later than the later of the Effective Date of said
                  Separation Agreement or 31 days following the Date of
                  Termination, an amount equal to the sum of (x) two times
                  Average Covered Base And Cash Bonus Compensation PLUS (y) one
                  times Average Covered LT Equity Compensation (such sum, the
                  "SECTION 7(c)(v) PAYMENT"); PROVIDED, HOWEVER, that in the
                  event that the Constructive Termination Without Cause is a
                  Relocation Termination, the payment shall be in an amount
                  equal to one times Average Covered Total Compensation. The
                  Company shall also, commencing upon the Date of Termination
                  and subject to the Executive entering into a Separation
                  Agreement:

                           (A)      Continue, without cost to Executive,
                                    benefits comparable to the medical benefits
                                    provided to Executive immediately prior to
                                    the Date of Termination under Section 3(c)
                                    for a period of 24 months (12 months in the
                                    case of a Relocation Termination) following
                                    the Date of Termination or until such
                                    earlier date as Executive obtains comparable
                                    benefits through other employment;

                           (B)      Continue to pay, or reimburse Executive, for
                                    so long as such payments are due, all
                                    premiums then due or payable on the
                                    whole-life portion of the split-dollar
                                    insurance policy referenced under Section
                                    3(d); PROVIDED that the Company's
                                    obligations under this Section 7(c)(v)(B)
                                    are contingent on Executive's timely payment
                                    of the premiums then due or thereafter
                                    payable on the term portion of said
                                    split-dollar insurance policy; and

                           (C)      Take whatever action is necessary to cause
                                    Executive to become vested as of the Date of
                                    Termination in all stock options, restricted
                                    stock grants, and all other equity-based
                                    awards and be entitled to exercise and
                                    continue to exercise all stock options and
                                    all other equity-based awards having an
                                    exercise schedule and to retain such grants
                                    and awards to the same extent as if they
                                    were vested upon termination of employment
                                    in accordance with their terms.

                           (D)      If Executive obtains a disability policy on
                                    commercially reasonable terms with the same
                                    or similar coverage as provided by the
                                    Company prior to the Date of Termination
                                    then, until that date that is 24 months (12
                                    months in the case of a Relocation
                                    Termination) following the Date of
                                    Termination (or, if earlier, until Executive
                                    obtains comparable benefits through other
                                    employment), reimburse Executive for an
                                    amount equal to the difference between (i)
                                    the premium for such disability policy, less
                                    (ii) the amount paid by Executive in respect
                                    of a portion of the premiums on the
                                    disability policy provided by Company prior
                                    to the Date of Termination.

                  In the event that, within six months after the Notice of
                  Termination which gave rise to the termination of Executive's
                  employment under this Section 7(c)(v), a Change in Control of
                  the Company occurs, then (provided Executive previously signed
                  a Separation Agreement), Executive shall be entitled to
                  receive the payments and benefits under Section 7(c)(vi)
                  rather than this Section 7(c)(v). To effect this increase in
                  payments and benefits, within 31 days of the Change in Control
                  the Company shall pay to Executive, in one lump sum, an amount
                  equal to the difference between (A) three times Average
                  Covered Total Compensation (calculated as of the Date of
                  Termination) less (B) the Section 7(c)(v) Payment. No payment
                  in the nature of interest or for the time value of money shall
                  be paid by the Company. In addition, the benefits described in
                  Section 7(c)(v)(A) shall continue for 36 months following the
                  Date of Termination (or until such earlier date as Executive
                  obtains comparable benefits through other employment) rather
                  than 24 months.

                                       13
<PAGE>

                           (VI) TERMINATION WITHOUT CAUSE WITHIN TWO YEARS
                  FOLLOWING A CHANGE IN CONTROL. In the event the Company or any
                  successor to the Company terminates Executive's employment
                  without Cause (or Executive's employment is Constructively
                  Terminated without Cause) within two years following the
                  effective time of a Change in Control of the Company, the
                  Company shall, in addition to paying the amounts provided
                  under Section 7(c)(i), and subject to the Executive first
                  entering into a Separation Agreement, pay to the Executive, in
                  one lump sum no later than the later of the effective date of
                  said Separation Agreement or 31 days following the Date of
                  Termination, an amount equal to three times Average Covered
                  Total Compensation. The Company shall also, commencing upon
                  the Date of Termination:

                                    (A) Continue, without cost to Executive,
                           benefits comparable to the medical benefits provided
                           to Executive immediately prior to the Date of
                           Termination under Section 3(c) for a period of 36
                           months following the Date of Termination or until
                           such earlier date as Executive obtains comparable
                           benefits through other employment;

                                    (B) Continue to pay, or reimburse Executive,
                           for so long as such payments are due, all premiums
                           then due or payable on the whole-life portion of the
                           split-dollar insurance policy referenced under
                           Section 3(d); ); PROVIDED that the Company's
                           obligations under this Section 7(c)(vi)(B) are
                           contingent on Executive's timely payment of the
                           premiums then due or thereafter payable on the term
                           portion of said split-dollar insurance policy; and

                                    (C) Take whatever action is necessary to
                           cause Executive to become vested as of the Date of
                           Termination in all stock options, restricted stock
                           grants, and all other equity-based awards and be
                           entitled to exercise and continue to exercise all
                           stock options and all other equity-based awards
                           having an exercise schedule and to retain such grants
                           and awards to the same extent as if they were vested
                           upon termination of employment in accordance with
                           their terms.

                                    (D) If Executive obtains a disability policy
                           on commercially reasonable terms with the same or
                           similar coverage as provided by the Company prior to
                           the Date of Termination then, until that date that is
                           36 months following the Date of Termination (or, if
                           earlier, until Executive obtains comparable benefits
                           through other employment), reimburse Executive for an
                           amount equal to the difference between (i) the
                           monthly premiums for such disability policy, less
                           (ii) the amount paid by Executive in respect of a
                           portion of the premiums on the disability policy
                           provided by Company prior to the Date of Termination.

                  (vii) TERMINATION FOR CAUSE; VOLUNTARY RESIGNATION. In the
         event Executive's employment terminates during the Employment Period
         other than in connection with a termination meeting the conditions of
         subparagraphs (ii), (iii), (iv), (v) or (vi) of this Section 7(c),
         Executive shall receive the amounts set forth in Section 7(c)(i) in
         full satisfaction of all of his entitlements from the Company. All
         equity-based awards not vested as of the Date of Termination shall
         terminate (unless otherwise provided in the applicable award agreement)
         and Executive shall have no further entitlements with respect thereto.

                  (viii) CLARIFICATION REGARDING TREATMENT OF OPTIONS AND
         RESTRICTED STOCK. The stock option and restricted stock agreements (the
         "EQUITY AWARD AGREEMENTS")

                                       14
<PAGE>

         that Executive has or may receive may contain language regarding the
         effect of a termination of Executive's employment under certain
         circumstances.

                           (A) Notwithstanding such language in the Equity Award
                  Agreements, for so long as this Agreement is in effect, the
                  Company will be obligated, if the terms of this Agreement are
                  more favorable in this regard than the terms of the Equity
                  Award Agreements, to take the actions required under Sections
                  7(c)(ii), 7(c)(iii)(C), 7(c)(iv)(for a Post-Expiration
                  Termination), 7(c)(v)(C) and 7(c)(vi)(C) hereof upon the
                  happening of the circumstances described therein. Those
                  sections provide that in certain situations the Company will
                  cause the Executive to become vested as of the Date of
                  Termination in all or certain equity-based awards, and that
                  such equity-based awards will thereafter be subject to the
                  provisions of the applicable Equity Award Agreement as it
                  applies to vested awards upon a termination. For purposes of
                  clarification, although an option grant may VEST in accordance
                  with these above-referenced Sections, such option will
                  thereafter be EXERCISABLE only for so long as the related
                  option agreement provides, except that the Compensation
                  Committee of the Board of Directors may, in its sole
                  discretion, elect to extend the expiration date of such
                  option. For example, in general Executive's option agreements
                  granted prior to the date hereof provide that (in the absence
                  of an extension by the Compensation Committee) upon a
                  termination of employment for any reason other than death,
                  disability, retirement or cause, any vested options will only
                  be exercisable for three months from the date of termination
                  or, if earlier, the expiration date of the option.

                           (B) Notwithstanding the definition of "Cause" which
                  may appear in the Equity Award Agreements, for so long as this
                  Agreement is in effect (X) any "for Cause" termination must be
                  in compliance with the terms of this Agreement, including the
                  definition of "Cause" set forth herein, and (Y) only in the
                  event of a "for Cause" termination that meets both the
                  definition in this Agreement and the definition in the Equity
                  Award Agreement will the disposition of options and restricted
                  stock under such Equity Award Agreement be treated in the
                  manner described in such Equity Award Agreement in the case of
                  a termination "for Cause."

                           (C) For purposes of Section 7(b)(6)(A), the value of
                  any option may be determined by the Compensation Committee of
                  the Board at any time after its grant date by setting such
                  value at the value determined by a nationally recognized
                  accounting firm or employee benefits compensation firm,
                  selected by such Committee, that calculates such value in
                  accordance with a Black-Scholes formula or variations thereof
                  using such parameters and procedures (including, without
                  limitation, parameters and procedures used to measure the
                  historical volatility of the Company's common stock as of the
                  relevant grant date) as the Compensation Committee and/or such
                  firm deems reasonably appropriate. In all events, if the
                  parameters used for valuing any option for purposes of Section
                  7(b)(6)(A) are the same as the parameters used for valuing any
                  other options for purposes of disclosure or inclusion in the
                  Company's financial statements or financial statement
                  footnotes, then such parameters shall be deemed reasonable.

                           (D) During the Employment Period any stock options
                  issued to Executive shall provide that if Executive's
                  employment is terminated in any manner which gives rise to an
                  obligation under this Agreement (or any successor Agreement or
                  other severance arrangement) to cause the acceleration of
                  vesting of

                                       15
<PAGE>

                  stock options, then in such event such stock options shall not
                  expire until one year after the Date of Termination (or, if
                  earlier, the expiration of their ordinary term). The Company
                  represents that the stock options awarded to Executive in
                  February 2001 have a provision to the same effect. This
                  covenant of the Company shall not apply to any stock options
                  issued prior to 2001 or to any stock options issued after the
                  expiration of the Employment Period.

         (d) ADDITIONAL BENEFITS.

                  (i) Anything in this Agreement to the contrary
         notwithstanding, in the event it shall be determined that any payment
         or distribution by the Company to or for the benefit of Executive,
         whether paid or payable or distributed or distributable (1) pursuant to
         the terms of Section 7 of this Agreement, (2) pursuant to or in
         connection with any compensatory or employee benefit plan, agreement or
         arrangement, including but not limited to any stock options, restricted
         or unrestricted stock grants issued to or for the benefit of Executive
         and forgiveness of any loans by the Company to Executive or (3)
         otherwise (collectively, "Severance Payments"), would be subject to the
         excise tax imposed by Section 4999 of the Internal Revenue Code of
         1986, as amended (the "Code"), and any interest or penalties are
         incurred by Executive with respect to such excise tax (such excise tax,
         together with any such interest and penalties, are hereinafter
         collectively referred to as the "Excise Tax"), then Executive shall be
         entitled to receive an additional payment from the Company (a "Partial
         Gross-Up Payment"), such that the net amount retained by Executive,
         before accrual or payment of any Federal, state or local income tax or
         employment tax, but after accrual or payment of the Excise Tax
         attributable to the Partial Gross-Up Payment, is equal to the Excise
         Tax on the Severance Payments.

                  (ii) Subject to the provisions of Section 7(d)(iii), all
         determinations required to be made under this Section 7, including
         whether a Partial Gross-Up Payment is required and the amount of such
         Partial Gross-Up Payment, shall be made by Arthur Andersen LLP or such
         other nationally recognized accounting firm as may at that time be the
         Company's independent public accountants immediately prior to the
         Change in Control (the "Accounting Firm"), which shall provide detailed
         supporting calculations both to the Company and Executive as soon as
         practicable after the Date of Termination, if applicable. The initial
         Partial Gross-Up Payment, if any, as determined pursuant to this
         Section 7(d)(ii), shall be paid to Executive within five days of the
         receipt of the Accounting Firm's determination. If the Accounting Firm
         determines that no Excise Tax is payable by Executive, the Company
         shall furnish Executive with an opinion of counsel that failure to
         report the Excise Tax on Executive's applicable federal income tax
         return would not result in the imposition of a negligence or similar
         penalty. Any determination by the Accounting Firm shall be binding upon
         the Company and Executive. As a result of the uncertainty in the
         application of Section 4999 of the Code at the time of the initial
         determination by the Accounting Firm hereunder, it is possible that
         Partial Gross-Up Payments which will not have been made by the Company
         should have been made (an "Underpayment"). In the event that the
         Company exhausts its remedies pursuant to Section 7(d)(iii) and
         Executive thereafter is required to make a payment of any Excise Tax,
         the Accounting Firm shall determine the amount of the Underpayment that
         has occurred, consistent with the calculations required to be made
         hereunder, and any such Underpayment, and any interest and penalties
         imposed on the Underpayment and required to be paid by Executive in
         connection with the proceedings described in Section 7(d)(iii), and any
         related legal and accounting expenses, shall be promptly paid by the
         Company to or for the benefit of Executive.

                                       16
<PAGE>

                  (iii) Executive shall notify the Company in writing of any
         claim by the Internal Revenue Service that, if successful, would
         require the payment by the Company of the Partial Gross-Up Payment.
         Such notification shall be given as soon as practicable but no later
         than 10 business days after Executive acquires actual knowledge of such
         claim and shall apprise the Company of the nature of such claim and the
         date on which such claim is requested to be paid. Executive shall not
         pay such claim prior to the expiration of the 30-day period following
         the date on which he gives such notice to the Company (or such shorter
         period ending on the date that any payment of taxes with respect to
         such claim is due). If the Company notifies Executive in writing prior
         to the expiration of such period that it desires to contest such claim,
         Executive shall:

                           (A) give the Company any information reasonably
                  requested by the Company relating to such claim,

                           (B) take such action in connection with contesting
                  such claim as the Company shall reasonably request in writing
                  from time to time, including, without limitation, accepting
                  legal representation with respect to such claim by an attorney
                  selected by the Company,

                           (C) cooperate with the Company in good faith in order
                  effectively to contest such claim, and

                           (D) permit the Company to participate in any
                  proceedings relating to such claim; provided, however that the
                  Company shall bear and pay directly all costs and expenses
                  attributable to the failure to pay the Excise Tax (including
                  related additional interest and penalties) incurred in
                  connection with such contest and shall indemnify and hold
                  Executive harmless, for any Excise Tax up to an amount not
                  exceeding the Partial Gross-Up Payment, including interest and
                  penalties with respect thereto, imposed as a result of such
                  representation, and payment of related legal and accounting
                  costs and expenses (the "Indemnification Limit"). Without
                  limitation on the foregoing provisions of this Section
                  7(d)(iii), the Company shall control all proceedings taken in
                  connection with such contest and, at its sole option may
                  pursue or forego any and all administrative appeals,
                  proceedings, hearings and conferences with the taxing
                  authority in respect of such claim and may, at its sole
                  option, either direct Executive to pay the tax claimed and sue
                  for a refund or contest the claim in any permissible manner,
                  and Executive agrees to prosecute such contest to a
                  determination before any administrative tribunal, in a court
                  of initial jurisdiction and in one or more appellate courts,
                  as the Company shall determine; provided, however, that if the
                  Company directs Executive to pay such claim and sue for a
                  refund, the Company shall advance so much of the amount of
                  such payment as does not exceed the Excise Tax, and related
                  interest and penalties, to Executive on an interest-free basis
                  and shall indemnify and hold Executive harmless, from any
                  related legal and accounting costs and expenses, and from any
                  Excise Tax, including related interest or penalties imposed
                  with respect to such advance or with respect to any imputed
                  income with respect to such advance up to an amount not
                  exceeding the Indemnification Limit; and further provided that
                  any extension of the statute of limitations relating to
                  payment of taxes for the taxable year of Executive with
                  respect to which such contested amount is claimed to be due is
                  limited solely to such contested amount. Furthermore, the
                  Company's control of the contest shall be limited to issues
                  with respect to which a Partial Gross-Up Payment would be
                  payable hereunder and Executive shall be entitled to settle or
                  contest, as the case

                                       17
<PAGE>

                  may be, any other issues raised by the Internal Revenue
                  Service or any other taxing authority.

                  (iv) If, after the receipt by Executive of an amount advanced
         by the Company pursuant to Section 7(d)(iii), Executive becomes
         entitled to receive any refund with respect to such claim, Executive
         shall (subject to the Company's complying with the requirements of
         Section 7(d)(iii)) promptly pay to the Company so much of such refund
         (together with any interest paid or credited thereon after taxes
         applicable thereto) (the "Refund") as is equal to (A) if the Company
         advanced or paid the entire amount required to be so advanced or paid
         pursuant to Section 7(d)(iii) hereof (the "Required Section 7(d)
         Advance"), the aggregate amount advanced or paid by the Company
         pursuant to this Section 7(d) less the portion of such amount advanced
         to Executive to reimburse him for related legal and accounting costs,
         or (B) if the Company advanced or paid less than the Required Section
         7(d) Advance, so much of the aggregate amount so advanced or paid by
         the Company pursuant to this Section 7(d) as is equal to the
         difference, if any, between (C) the amount refunded to Executive with
         respect to such claim and (D) the sum of the portion of the Required
         Section 7(d) Advance that was paid by Executive and not paid or
         advanced by the Company plus Executive's related legal and accounting
         fees, as applicable. If, after the receipt by Executive of an amount
         advanced by the Company pursuant to Section 7(d)(iii), a determination
         is made that Executive shall not be entitled to any refund with respect
         to such claim and the Company does not notify Executive in writing of
         its intent to contest such denial of refund prior to the expiration of
         30 days after such determination, then such advance shall be forgiven
         and shall not be required to be repaid and the amount of such advance
         shall offset, to the extent thereof, the amount of Partial Gross-Up
         Payment required to be paid.

         (e) NOTICE OF TERMINATION. Notice of non-renewal of this Agreement
pursuant to Section 1 hereof or of any termination of Executive's employment
(other than by reason of death) shall be communicated by written notice (a
"Notice of Termination") from one party hereto to the other party hereto in
accordance with this Section 7 and Section 9.

         (f) DATE OF TERMINATION. "Date of Termination," with respect to any
termination of Executive's employment during the Employment Period, shall mean
(i) if Executive's employment is terminated for Disability, 30 days after Notice
of Termination is given (provided that Executive shall not have returned to the
full-time performance of Executive's duties during such 30 day period), (ii) if
Executive's employment is terminated for Cause, the date on which a Notice of
Termination is given which complies with the requirements of Section 7(b)(1)
hereof, and (iii) if Executive's employment is terminated for any other reason,
the date specified in the Notice of Termination. In the case of a termination by
the Company other than for Cause, the Date of Termination shall not be less than
30 days after the Notice of Termination is given. In the case of a termination
by Executive, the Date of Termination shall not be less than 15 days from the
date such Notice of Termination is given. Notwithstanding the foregoing, in the
event that Executive gives a Notice of Termination to the Company, the Company
may unilaterally accelerate the Date of Termination and such acceleration shall
not result in the termination being treated as a termination without Cause. Upon
any termination of his employment, Executive will concurrently resign his
membership as a director and/or officer of the Company and all subsidiaries of
the Company, to the extent applicable.

         (g) NO MITIGATION. The Company agrees that, if Executive's employment
by the Company is terminated during the term of this Agreement, Executive is not
required to seek other employment, or to attempt in any way to reduce any
amounts payable to Executive by the Company pursuant to Section 7(d)(i) hereof.
Further, the amount of any payment provided for in this Agreement shall not be
reduced by any compensation earned by Executive as the result of employment by
another employer,

                                       18
<PAGE>

by retirement benefits, or, except for amounts then due and payable in
accordance with the terms of any promissory notes given by Executive in favor of
the Company, by offset against any amount claimed to be owed by Executive to the
Company or otherwise.

         (h) NATURE OF PAYMENTS. The amounts due under this Section 7 are in the
nature of severance payments considered to be reasonable by the Company and are
not in the nature of a penalty. Such amounts are in full satisfaction of all
claims Executive may have in respect of his employment by the Company or its
affiliates and are provided as the sole and exclusive benefits to be provided to
Executive, his estate, or his beneficiaries in respect of his termination of
employment from the Company or its affiliates.

         8. NON-COMPETITION; NON-SOLICITATION; SPECIFIC ENFORCEMENT.

         (a) NON-COMPETITION. Because Executive's services to the Company are
special and because Executive has access to the Company's confidential
information, Executive covenants and agrees that, during the Employment Period
and, for a period of one year following the Date of Termination by the Company
for Cause or Disability, or a termination by Executive (other than a
Constructive Termination Without Cause) prior to a Change in Control, Executive
shall not, without the prior written consent of the Board of Directors, become
associated with, or engage in any "Restricted Activities" with respect to any
"Competing Enterprise," as such terms are hereinafter defined, whether as an
officer, employee, principal, partner, agent, consultant, independent contractor
or shareholder. "Competing Enterprise," for purposes of this Agreement, shall
mean any person, corporation, partnership, venture or other entity which is
engaged in the business of managing, owning, leasing or joint venturing
multifamily rental real estate within 30 miles of multifamily rental real estate
owned or under management by the Company or its affiliates. "Restricted
Activities," for purposes of this Agreement, shall mean executive, managerial,
directorial, administrative, strategic, business development or supervisory
responsibilities and activities relating to all aspects of multifamily rental
real estate ownership, management, multifamily rental real estate franchising,
and multifamily rental real estate joint-venturing.

         (b) NON-SOLICITATION. For so long as the Executive remains employed by
the Company (or any successor thereto) and for one year following termination of
employment, regardless of reason, Executive shall not, without the prior written
consent of the Company, except in the course of carrying out his duties
hereunder, solicit or attempt to solicit for employment with or on behalf of any
corporation, partnership, venture or other business entity, any employee of the
Company or any of its affiliates or any person who was formerly employed by the
Company or any of its affiliates within the preceding six months, unless such
person's employment was terminated by the Company or any of such affiliates.

         (c) SPECIFIC ENFORCEMENT. Executive and the Company agree that the
restrictions, prohibitions and other provisions of this Section 8 are
reasonable, fair and equitable in scope, terms, and duration, are necessary to
protect the legitimate business interests of the Company and are a material
inducement to the Company to enter into this Agreement. Should a decision be
made by a court of competent jurisdiction that the character, duration or
geographical scope of the provisions of this Section 8 is unreasonable, the
parties intend and agree that this Agreement shall be construed by the court in
such a manner as to impose all of those restrictions on Executive's conduct that
are reasonable in light of the circumstances and as are necessary to assure to
the Company the benefits of this Agreement. The Company and Executive further
agree that the services to be rendered under this Agreement by Executive are
special, unique and of extraordinary character, and that in the event of the
breach by Executive of the terms and conditions of this Agreement or if
Executive, without the prior consent of the Board of Directors, shall take any
action in violation of this Section 8, the Company will suffer irreparable harm
for which there is no adequate remedy at law. Accordingly, Executive hereby
consents to the entry of a temporary restraining order or ex parte injunction,
in addition to any other remedies available at law or in equity, to enforce the
provisions hereof. Any proceeding or action seeking equitable relief for
violation of this Section 8 must be commenced in the federal or state courts, in
either case in Virginia. Executive and the Company

                                       19
<PAGE>

irrevocably and unconditionally submit to the jurisdiction of such courts and
agree to take any and all future action necessary to submit to the jurisdiction
of and venue in such courts.

         9. NOTICE. Any notice required or permitted hereunder shall be in
writing and shall be deemed sufficient when given by hand or by nationally
recognized overnight courier or by Express, registered or certified mail,
postage prepaid, return receipt requested, and addressed, if to the Company at
2900 Eisenhower Avenue, Suite 300, Alexandria, VA 22303, Attention: Chief
Executive Officer (with a second copy, sent by the same means and to the same
address, Attention: General Counsel), and if to Executive at the address set
forth in the Company's records (or to such other address as may be provided by
notice).

         10. MISCELLANEOUS. This Agreement, together with Annex A and Annex B
and the Split Dollar Insurance Agreement and any Equity Award Agreements now or
hereafter in effect, constitutes the entire agreement between the parties
concerning the subjects hereof and supersedes any and all prior agreements or
understandings, including, without limitation, any plan or agreement providing
benefits in the nature of severance, but excluding benefits provided under other
Company plans or agreements, except to the extent this Agreement provides
greater rights than are provided under such other plans or agreements. This
Agreement may not be assigned by Executive without the prior written consent of
the Company, and may be assigned by the Company and shall be binding upon, and
inure to the benefit of, the Company's successors and assigns. The Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. Headings herein are for convenience
of reference only and shall not define, limit or interpret the contents hereof.

         11. AMENDMENT. This Agreement may be amended, modified or supplemented
by the mutual consent of the parties in writing, but no oral amendment,
modification or supplement shall be effective. No waiver by either party of any
breach by the other party of any condition or provision contained in this
Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by Executive or an
authorized officer of the Company, as the case may be.

         12. SEVERABILITY. The provisions of this Agreement are severable. The
invalidity of any provision shall not affect the validity of any other
provision, and each provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.

         13. RESOLUTION OF DISPUTES.

         (a) PROCEDURES AND SCOPE OF ARBITRATION. Except for any controversy or
claim seeking equitable relief pursuant to Section 8 of this Agreement, all
controversies and claims arising under or in connection with this Agreement or
relating to the interpretation, breach or enforcement thereof and all other
disputes between the parties, shall be resolved by expedited, binding
arbitration, to be held in the District of Columbia metropolitan area in
accordance with the applicable rules of the American Arbitration Association
governing employment disputes (the "National Rules"). In any proceeding relating
to the amount owed to Executive in connection with his termination of
employment, it is the contemplation of the parties that the only remedy that the
arbitrator may award in such a proceeding is an amount equal to the termination
payments, if any, required to be provided under the applicable provisions of
Section 7(c) and, if applicable, Section 7(d) hereof, to the extent not
previously paid, plus the costs of arbitration and Executive's reasonable
attorneys fees and expenses as provided below. Any award made by such arbitrator
shall be

                                       20
<PAGE>

final, binding and conclusive on the parties for all purposes, and judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.

         (b) ATTORNEYS FEES.

                  (i) REIMBURSEMENT AFTER EXECUTIVE PREVAILS. Except as
         otherwise provided in this paragraph, each party shall pay the cost of
         his or its own legal fees and expenses incurred in connection with an
         arbitration proceeding. Provided an award is made in favor of Executive
         in such proceeding, all of his reasonable attorneys fees and expenses
         incurred in pursuing or defending such proceeding shall be promptly
         reimbursed to Executive by the Company within five days of the entry of
         the award. Any award of reasonable attorneys' fees shall take into
         account any offer of the Company, such that an award of attorneys' fees
         to the Executive may be limited or eliminated to the extent that the
         final decision in favor of the Executive does not represent a material
         increase in value over the offer that was made by the Company during
         the course of such proceeding. However, any elimination or limitation
         on attorneys' fees shall only apply to those attorneys' fees incurred
         after the offer by the Company.

                  (ii) REIMBURSEMENT IN ACTIONS TO STAY, ENJOIN OR COLLECT. In
         any case where the Company or any other person seeks to stay or enjoin
         the commencement or continuation of an arbitration proceeding, whether
         before or after an award has been made, or where Executive seeks
         recovery of amounts due after an award has been made, or where the
         Company brings any proceeding challenging or contesting the award, all
         of Executive's reasonable attorneys fees and expenses incurred in
         connection therewith shall be promptly reimbursed by the Company to
         Executive, within five days of presentation of an itemized request for
         reimbursement, regardless of whether Executive prevails, regardless of
         the forum in which such proceeding is brought, and regardless of
         whether a Change in Control has occurred.

                  (iii) REIMBURSEMENT AFTER A CHANGE IN CONTROL. Without
         limitation on the foregoing, solely in a proceeding commenced by the
         Company or by Executive after a Change in Control has occurred, the
         Company shall advance to Executive, within five days of presentation of
         an itemized request for reimbursement, all of Executive's legal fees
         and expenses incurred in connection therewith, regardless of the forum
         in which such proceeding was commenced, subject to delivery of an
         undertaking by Executive to reimburse the Company for such advance if
         he does not prevail in such proceeding (unless such fees are to be
         reimbursed regardless of whether Executive prevails as provided in
         clause (ii) above).

         14. SURVIVORSHIP. The provisions of Sections 4(b), 6, 8 (to the extent
described below) and 13 of this Agreement shall survive Executive's termination
of employment. Other provisions of this Agreement shall survive any termination
of Executive's employment to the extent necessary to the intended preservation
of each party's respective rights and obligations. The provisions of Section
8(a) shall in no event apply if Executive's employment terminates for any reason
after the expiration of the Employment Period (for clarification, this means
that if Executive's employment terminates on or prior to the expiration of the
Original Term or any later Renewal Term then the one year post-termination
non-compete set forth in Section 8(a) will apply if the termination is for one
of the reasons set forth in Section 8(a)). The provisions of Section 8(b) shall
apply during the Employment Period, and shall also apply with respect to any
termination of Executive's employment for any reason during the two year period
following the expiration of the Employment Period (for clarification, this means
that if Executive's employment terminates for any reason on or prior to the
second anniversary of the expiration of the Original Term or any later Renewal
Term, then the non-solicitation requirement of Section 8(b) shall apply to
Executive for one year following

                                       21
<PAGE>

termination of employment).

         15. BOARD ACTION. Where an action called for under this Agreement is
required to be taken by the Board of Directors, such action shall be taken by
the vote of not less than a majority of the members then in office and
authorized to vote on the matter.

         16. WITHHOLDING. All amounts required to be paid by the Company shall
be subject to reduction in order to comply with applicable federal, state and
local tax withholding requirements.

         17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, 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.

         18. GOVERNING LAW. This Agreement shall be construed and regulated in
all respects under the laws of the State of Maryland.

         IN WITNESS WHEREOF, this Agreement is entered into as of the date and
year first above written.

                                       AVALONBAY COMMUNITIES, INC.

                                       By:   /s/ BRYCE BLAIR
                                            ------------------------------------
                                            Bryce Blair
                                       Its: Chief Executive Officer

                                       /s/ TIMOTHY J. NAUGHTON
                                       -----------------------------------------
                                       Timothy J. Naughton

                                       22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00022-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00022-of-00352.parquet"}]]