<PAGE>

                                                                    EXHIBIT 10.2

             THE SECOND AMENDED AND RESTATED 1993 STOCK OPTION AND
                              INCENTIVE PLAN FOR
                            OFFICERS, DIRECTORS AND
                               KEY EMPLOYEES OF
                              CENTER TRUST, INC.
                                      AND
                        CT OPERATING PARTNERSHIP, L.P.
<PAGE>

             THE SECOND AMENDED AND RESTATED 1993 STOCK OPTION AND
                              INCENTIVE PLAN FOR
                            OFFICERS, DIRECTORS AND
                               KEY EMPLOYEES OF
                              CENTER TRUST, INC.
                                      AND
                        CT OPERATING PARTNERSHIP, L.P.

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                       <C>
ARTICLE I DEFINITIONS....................................................................    2
     1.1    General......................................................................    2
            -------
     1.2    Award Limit..................................................................    3
            -----------
     1.3    Beneficiary..................................................................    3
            -----------
     1.4    Board........................................................................    3
            -----
     1.5    Change in Control............................................................    3
            -----------------
     1.6    Code.........................................................................    4
            ----
     1.7    Committee....................................................................    4
            ---------
     1.8    Common Stock.................................................................    4
            ------------
     1.9    Company......................................................................    4
            -------
     1.10   Company Employee.............................................................    5
            ----------------
     1.11   Company Subsidiary...........................................................    5
            ------------------
     1.12   Corporate Transaction........................................................    5
            ---------------------
     1.13   Director.....................................................................    6
            --------
     1.14   Employee.....................................................................    6
            --------
     1.15   Exchange Act.................................................................    6
            ------------
     1.16   Fair Market Value............................................................    6
            -----------------
     1.17   General Partner Interest.....................................................    7
            ------------------------
     1.18   HPMI.........................................................................    7
            ----
     1.19   HPMI Director................................................................    7
            -------------
     1.20   HPMI Employee................................................................    7
            -------------
     1.21   HPMI Subsidiary..............................................................    8
            ---------------
     1.22   Incentive Stock Option.......................................................    8
            ----------------------
     1.23   Independent Director.........................................................    8
            --------------------
     1.24   Non-Qualified Stock Option...................................................    8
            --------------------------
     1.25   Option.......................................................................    8
            ------
     1.26   Optionee.....................................................................    9
            --------
     1.27   Operating Partnership........................................................    9
            ---------------------
     1.28   Operating Partnership Employee...............................................    9
            ------------------------------
     1.29   Operating Partnership Subsidiary.............................................    9
            --------------------------------
     1.30   Ownership Limit..............................................................    9
            ---------------
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                       <C>
     1.31   Plan......................................................................... 10
            ----
     1.32   Property Management Agreement................................................ 10
            -----------------------------
     1.33   QDRO......................................................................... 10
            ----
     1.34   Restricted Stock............................................................. 10
            ----------------
     1.35   Restricted Stockholder....................................................... 10
            ----------------------
     1.36   Rule 16b-3................................................................... 10
            ----------
     1.37   Termination Of Directorship.................................................. 11
            ---------------------------
     1.38   Termination of Employment.................................................... 11
            -------------------------
     1.39   Gender and Number............................................................ 12
            -----------------
ARTICLE II SHARES SUBJECT TO PLAN........................................................ 12
     2.1    Shares Subject to Plan....................................................... 12
            ----------------------
     2.2    Add-back of Options and Restricted Stock..................................... 13
            ----------------------------------------
ARTICLE III GRANTING OF OPTIONS.......................................................... 14
     3.1    Eligibility.................................................................. 14
            -----------
     3.2    Disqualification for Stock Ownership......................................... 15
            ------------------------------------
     3.3    Qualification of Incentive Stock Options..................................... 15
            ----------------------------------------
     3.4    Granting of Options.......................................................... 15
            -------------------
ARTICLE IV TERMS OF OPTIONS.............................................................. 18
     4.1    Option Agreement............................................................. 18
            ----------------
     4.2    Option Price................................................................. 18
            ------------
     4.3    Option Term.................................................................. 19
            -----------
     4.4    Option Vesting............................................................... 20
            --------------
     4.5    Limitations on Exercise of Options Granted to Independent Directors.......... 21
            -------------------------------------------------------------------
     4.6    Consideration................................................................ 22
            -------------
     4.7    Limitation in Terms of Option................................................ 23
            -----------------------------
ARTICLE V EXERCISE OF OPTIONS............................................................ 23
     5.1    Partial Exercise............................................................. 23
            ----------------
     5.2    Time of Exercise............................................................. 23
            ----------------
     5.3    Manner of Exercise........................................................... 23
            ------------------
     5.4    Transfer of Shares to a Company Employee or Independent Director............. 25
            ----------------------------------------------------------------
     5.5    Transfer of Shares to an HPMI Employee or HPMI Director...................... 25
            -------------------------------------------------------
     5.6    Transfer of Shares to an Operating Partnership Employee...................... 26
            -------------------------------------------------------
     5.7    Transfer of Payment to the Operating Partnership............................. 27
            ------------------------------------------------
     5.8    Certain Timing Requirements.................................................. 28
            ---------------------------
     5.9    Conditions to Issuance of Stock Certificates................................. 28
            --------------------------------------------
     5.10   Rights as Stockholders....................................................... 29
            ----------------------
     5.11   Ownership and Transfer Restrictions.......................................... 29
            -----------------------------------
     5.12   Restrictions on Exercise of Option........................................... 30
            ----------------------------------
ARTICLE VI AWARD OF RESTRICTED STOCK..................................................... 31
     6.1    Eligibility.................................................................. 31
            -----------
     6.2    Award of Restricted Stock.................................................... 31
            -------------------------
ARTICLE VII TERMS OF RESTRICTED STOCK.................................................... 32
     7.1    Restricted Stock Agreement................................................... 32
            --------------------------
     7.2    Consideration to the Company................................................. 32
            ----------------------------
</TABLE>

                                      ii
<PAGE>

             THE SECOND AMENDED AND RESTATED 1993 STOCK OPTION AND
                              INCENTIVE PLAN FOR
                            OFFICERS, DIRECTORS AND
                               KEY EMPLOYEES OF
                              CENTER TRUST, INC.
                                      AND
                        CT OPERATING PARTNERSHIP, L.P.

          Center Trust, Inc. (formerly known as CenterTrust Retail Properties,
Inc., formerly known as Alexander Haagen Properties, Inc.), a Maryland
corporation, adopted The 1993 Stock Option and Incentive Plan for Officers,
Directors and Key Employees of Center Trust, Inc., CT Operating Partnership,
L.P. (formerly known as Alexander Haagen Properties Operating Partnership, L.P.)
and Haagen Property Management, Inc. (the "Original Plan"), effective December
10, 1993, for the benefit of their eligible employees and directors.  The
Original Plan was amended on August 14, 1995 and amended and restated on
February 28, 1996 (the "Amended and Restated Plan").

          Subsequently, the Amended and Restated Plan was amended (i) in the
form of the First Amendment to the Amended and Restated Plan on November 19,
1996; (ii) in the form of the Second Amendment to the Amended and Restated Plan
on February 27, 1997; (iii) in the form of the Third Amendment to the Amended
and Restated Plan on May 30, 1997; (iv) in the form of the Fourth Amendment to
the Amended and Restated Plan on July 8, 1997; (v) in the form of the Fifth
Amendment to the Amended and Restated Plan on April 30, 1998; (vi) in the form
of the Sixth Amendment to the Amended and Restated Plan on February 9, 1999;
(vii) in the form of the Seventh Amendment to the Amended and Restated Plan on
June 7, 1999; and (viii) in the form of the Eighth Amendment to the Amended and
Restated Plan on June 7, 1999.  This second amendment and restatement (the
"Plan") was adopted by the Board on March 23, 2000.

                                       1
<PAGE>

          The Plan consists of three plans: (i) one for the benefit of the key
employees of Center Trust, Inc. and the Company Subsidiaries (as defined below);
(ii) one for the benefit of Independent Directors (as defined below) and (iii)
one for the benefit of the key employees of CT Operating Partnership, L.P., a
California limited partnership, and the Operating Partnership Subsidiaries (as
defined below), the key employees of Haagen Property Management, Inc., a
California corporation, and the HPMI Subsidiaries (as defined below) and the
directors of Haagen Property Management, Inc.

          The purposes of this Plan are as follows:

          (1) To provide an additional incentive for directors and key Employees
to further the growth, development and financial success of the Company by
personally benefiting through the ownership of Company stock and/or rights which
recognize such growth, development and financial success.

          (2) To enable the Company and the Operating Partnership to obtain and
retain the services of directors and key Employees (as such term is defined
below) considered essential to the long range success of the Company by offering
them an opportunity to own stock in the Company and/or rights which will reflect
the growth, development and financial success of the Company.

                                   ARTICLE I

                                  DEFINITIONS

          1.1  General
               -------
          Wherever the following terms are used in this Plan they shall have the
meaning specified below, unless the context clearly indicates otherwise.

                                       2
<PAGE>

          1.2  Award Limit
               -----------

          "Award Limit" shall mean 500,000 shares of Common Stock.

          1.3  Beneficiary
               -----------

          "Beneficiary" shall mean the person or persons properly designated by
the Optionee, including his spouse or heirs at law, to exercise such Optionee's
rights under this Plan in the event of the Optionee's death, or if the Optionee
has not designated such person or persons, or such person or persons shall all
have pre-deceased the Optionee, the executor or administrator of the Optionee's
estate.  Designation, revocation and redesignation of Beneficiaries must be made
in writing in accordance with rules established by the Committee and shall be
effective upon delivery to the Committee.

          1.4  Board
               -----

          "Board" shall mean the Board of Directors of the Company.

          1.5  Change in Control
               -----------------

          "Change in Control" shall mean a change in ownership or control of the
Company effected through either of the following transactions:

          (a) any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities pursuant to a tender or exchange
offer made directly to the Company's stockholders which the Board does not
recommend such stockholders to accept; or

                                       3
<PAGE>

          (b) there is a change in the composition of the Board over a period of
thirty-six (36) consecutive months (or less) such that a majority of the Board
members (rounded up to the nearest whole number) ceases, by reason of one or
more proxy contests for the election of Board members, to be comprised of
individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (i) who were still in office at the time such election or
nomination was approved by the Board.

          1.6  Code
               ----

          "Code" shall mean the Internal Revenue Code of 1986, as amended.

          1.7  Committee
               ---------

          "Committee" shall mean the Compensation Committee of the Board, or
another committee, or a subcommittee of the Board, appointed as provided in
Section 8.1.

          1.8  Common Stock
               ------------

          "Common Stock" shall mean the common stock of the Company, par value
$.01 per share, and any equity security of the Company issued or authorized to
be issued in the future, but excluding any preferred stock and any warrants,
options or other rights to purchase Common Stock.  Debt securities of the
Company convertible into Common Stock shall be deemed equity securities of the
Company.

          1.9  Company
               -------

          "Company" shall mean Center Trust, Inc., a Maryland corporation
(formerly known as CenterTrust Retail Properties, Inc., formerly known as
Alexander Haagen Properties, Inc.).

                                       4
<PAGE>

          1.10  Company Employee
                ----------------

          "Company Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is then a Company Subsidiary.

          1.11  Company Subsidiary
                ------------------

          "Company Subsidiary" shall mean any corporation in an unbroken chain
of corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.  Except with respect to
Incentive Stock Options, "Company Subsidiary" shall also mean any partnership in
which the Company and/or any Company Subsidiary owns more than fifty percent
(50%) of the capital or profits interests; provided, however, that "Company
                                           --------  -------
Subsidiary" shall not include the Operating Partnership nor any Operating
Partnership Subsidiary.

          1.12  Corporate Transaction
                ---------------------

          "Corporate Transaction" shall mean any of the following stockholder-
approved transactions to which the Company is a party:

          (a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated, form a holding company or
effect a similar reorganization as to form whereupon this Plan and all Options
are assumed by the successor entity;

          (b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a), above; or

                                       5
<PAGE>

          (c) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are transferred to
a person or persons different from those who held such securities immediately
prior to such merger.

          1.13  Director
                --------

          "Director" shall mean a member of the Board.

          1.14  Employee
                --------

          "Employee" shall mean any Company Employee, HPMI Employee or Operating
Partnership Employee.

          1.15  Exchange Act
                ------------

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

          1.16  Fair Market Value
                -----------------

          "Fair Market Value" of a share of Common Stock as of a given date
shall mean (i) the closing price of a share of Common Stock on the principal
exchange on which shares of Common Stock are then trading, if any (or as
reported on any composite index which includes such principal exchange), on such
date, or if shares were not traded on such date, then on the next preceding date
on which a trade occurred; or (ii) if Common Stock is not traded on an exchange
but is quoted on NASDAQ or a successor quotation system, the mean between the
closing representative bid and asked prices for the Common Stock on the trading
day previous to such date as reported by NASDAQ or such successor quotation
system; or (iii) if Common Stock is not publicly traded on an exchange and not
quoted on NASDAQ or a successor quotation system, the Fair Market Value of a
share of Common Stock as established by the Committee (or the

                                       6
<PAGE>

Board, in the case of Options or Restricted Stock granted to Independent
Directors) acting in good faith.

          1.17  General Partner Interest
                -------------------------

          "General Partner Interest" shall mean an ownership interest in the
Operating Partnership that is a general partnership interest and includes any
and all benefits to which the holder of such an interest may be entitled as
provided in the Amended and Restated Agreement of Limited Partnership of CT
Operating Partnership, L.P., as amended, together with all obligations of such
holder to comply with the terms and provisions of such agreement.

          1.18  HPMI
                ----

          "HPMI" shall mean Haagen Property Management, Inc., a California
corporation.

          1.19  HPMI Director
                -------------

          "HPMI Director" shall mean a member of the board of directors of HPMI,
or of any corporation which is then an HPMI Subsidiary; provided, however, that
                                                        --------  -------
any director of HPMI, or of any HPMI Subsidiary, shall not be an HPMI Director
for purposes of granting Options or rights to acquire Restricted Stock after the
Property Management Agreement is terminated.

          1.20  HPMI Employee
                -------------

          "HPMI Employee" shall mean any officer or other employee (as defined
in accordance with Section 3401(c) of the Code) of HPMI, or of any corporation
which is then an HPMI Subsidiary; provided, however, that any officer or other
                                  --------  -------
employee of HPMI, or of any HPMI Subsidiary, shall not be an HPMI Employee for
purposes of granting Options or rights to acquire Restricted Stock after the
Property Management Agreement is terminated.

                                       7
<PAGE>

          1.21  HPMI Subsidiary
                ---------------

          "HPMI Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with HPMI if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.  "HPMI Subsidiary" shall also mean any
partnership in which HPMI and/or any HPMI Subsidiary owns more than fifty
percent (50%) of the capital or profits interests.

          1.22  Incentive Stock Option
                ----------------------

          "Incentive Stock Option" shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Committee.

          1.23  Independent Director
                --------------------

          "Independent Director" shall mean a member of the Board who is not a
Company Employee, an HPMI Employee, an Operating Partnership Employee or an HPMI
Director.
          1.24  Non-Qualified Stock Option
                --------------------------

          "Non-Qualified Stock Option" shall mean an Option which is not
designated as an Incentive Stock Option by the Committee.

          1.25  Option
                ------

          "Option" shall mean a stock option granted pursuant to this Plan.  An
option granted under this Plan shall, as determined by the Committee, be either
a Non-Qualified Stock Option or an Incentive Stock Option; provided, however,
                                                           --------  -------
that  Options granted to Operating Partnership Employees, HPMI Employees, HPMI
Directors and Independent Directors shall be Non-Qualified Stock Options.

                                       8
<PAGE>

          1.26  Optionee
                --------

          "Optionee" shall mean an Employee, HPMI Director or Independent
Director to whom an Option is granted under the Plan.

          1.27  Operating Partnership
                ---------------------

          "Operating Partnership" shall mean CT Operating Partnership, L.P., a
California limited partnership.

          1.28  Operating Partnership Employee
                ------------------------------

          "Operating Partnership Employee" shall mean any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of the
Operating Partnership, or any corporation which is then an Operating Partnership
Subsidiary.

          1.29  Operating Partnership Subsidiary
                --------------------------------

          "Operating Partnership Subsidiary" shall mean any partnership in an
unbroken chain of partnerships beginning with the Operating Partnership if each
of the partnerships other than the last partnership in the unbroken chain then
owns more than fifty percent (50%) of the capital or profits interests in one of
the other partnerships.  "Operating Partnership Subsidiary" shall also mean any
corporation in which the Operating Partnership and/or any Operating Partnership
Subsidiary owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock.

          1.30  Ownership Limit
                ---------------

          "Ownership Limit" shall mean that no person may own more than 9.8% (in
value or in number of shares, whichever is more restrictive) of the outstanding
Common Stock (as defined in the Company's Amended and Restated Charter) of the
Company.

                                       9
<PAGE>

          1.31  Plan
                ----

          "Plan" shall mean The Second Amended and Restated 1993 Stock Option
and Incentive Plan for Officers, Directors and Key Employees of Center Trust,
Inc. and CT Operating Partnership, L.P.

          1.32  Property Management Agreement
                -----------------------------

          "Property Management Agreement" shall mean the Property Management
Agreement between the Operating Partnership and HPMI made as of December 27,
1993, or any successor agreement thereto.

          1.33  QDRO
                ----

          "QDRO" shall mean a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.

          1.34  Restricted Stock
                ----------------

          "Restricted Stock" shall mean Common Stock awarded pursuant to Article
VII of this Plan.

          1.35  Restricted Stockholder
                ----------------------

          "Restricted Stockholder" shall mean an Employee or Independent
Director to whom Restricted Stock has been awarded under this Plan.

          1.36  Rule 16b-3
                ----------

          "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended in the future.

                                       10
<PAGE>

          1.37  Termination Of Directorship
                ---------------------------

          "Termination of Directorship" shall mean the time when an Optionee who
is an Independent Director or a HPMI Director ceases to be a director of the
Company or HPMI, respectively, for any reason, including, but not by way of
limitation, a termination by resignation, failure to be elected, death or
retirement.  The Board, in its sole and absolute discretion, shall determine the
effect of all other matters and questions relating to Termination of
Directorship with respect to Independent Directors and the Committee, in its
sole and absolute discretion, shall determine the effect of all other matters
and questions relating to Termination of Directorship with respect to HPMI
Directors.

          1.38  Termination of Employment
                -------------------------

          "Termination of Employment" shall mean the time when the employee-
employer relationship between the Optionee or Restricted Stockholder and the
Company, a Company Subsidiary, HPMI, an HPMI Subsidiary, the Operating
Partnership or an Operating Partnership Subsidiary is terminated for any reason,
with or without cause, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding (i)
terminations where there is a simultaneous reemployment or continuing employment
of an Optionee or Restricted Stockholder by the Company, a Company Subsidiary,
HPMI, an HPMI Subsidiary, the Operating Partnership or an Operating Partnership
Subsidiary, (ii) at the sole and absolute discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company, a Company Subsidiary, HPMI, an HPMI Subsidiary, the Operating
Partnership or an Operating Partnership Subsidiary with the former employee.
The Committee, in its sole and absolute

                                       11
<PAGE>

discretion, shall determine the effect of all other matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, with respect to
                                       --------  -------
Incentive Stock Options, a leave of absence, change in status from an employee
to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company, any Company Subsidiary, HPMI, any
HPMI Subsidiary, the Operating Partnership or any Operating Partnership
Subsidiary has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in writing.

          1.39  Gender and Number
                -----------------

          Wherever the masculine gender is used it shall include the feminine
and neuter and wherever a singular pronoun is used it shall include the plural,
unless the context clearly indicates otherwise.

                                  ARTICLE II

                            SHARES SUBJECT TO PLAN

          2.1  Shares Subject to Plan
               ----------------------

          (a) The shares of stock subject to Options or Restricted Stock Awards
shall be Common Stock, initially shares of the Company's common stock, par value
$.01 per share, as

                                       12
<PAGE>

presently constituted, and the aggregate number of such shares which may be
issued upon exercise of such Options or upon any such awards under the Plan
shall not exceed 2,750,000 (which amount includes (i) the original 850,000
shares authorized to be issued upon exercise of such Options or upon any such
awards under the Plan, (ii) an additional 500,000 shares authorized to be issued
upon exercise of such Options or upon any such awards under the Plan by a
resolution of the Committee on February 27, 1997, (iii) an additional 650,000
shares authorized to be issued upon exercise of such Options on upon any such
awards under the Plan by a resolution of the Committee on May 30, 1997, and (iv)
an additional 750,000 shares authorized to be issued upon exercise of such
Options or upon any such awards under the Plan by a resolution of the Committee
on June 7, 1999). The shares of Common Stock issuable upon exercise or grant of
an Option, or as Restricted Stock, shall be previously authorized but unissued
shares.

          (b)  The maximum number of shares which may be subject to Options
granted under the Plan to any individual in any calendar year shall not exceed
the Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are cancelled continue to be counted against the Award
Limit and if, after grant of an Option, the price of shares subject to such
Option is reduced, the transaction is treated as a cancellation of the Option
and a grant of a new Option and both the Option deemed to be canceled and the
Option deemed to be granted are counted against the Award Limit.

          2.2  Add-back of Options and Restricted Stock
               ----------------------------------------

          If any Option expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
optioned, granted or awarded hereunder, subject to the

                                       13
<PAGE>

limitations of Section 2.1. Furthermore, any shares subject to Options which are
adjusted pursuant to Section 9.3 and become exercisable with respect to shares
of stock of another corporation shall be considered canceled and may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Shares of Common Stock which are delivered by the Optionee or withheld by
the Company upon the exercise of any Option under this Plan, in payment of the
exercise price thereof, may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. If any share of Restricted Stock is
forfeited by the Grantee or repurchased by the Company pursuant to Section 7.5
hereof, such share may again be optioned, granted or awarded hereunder, subject
to the limitations of Section 2.1. Notwithstanding the provisions of this
Section 2.2, no shares of Common Stock may again be optioned, granted or awarded
if such action would cause an Incentive Stock Option to fail to qualify as an
incentive stock option under Section 422 of the Code.

                                  ARTICLE III

                              GRANTING OF OPTIONS

          3.1  Eligibility
               -----------

          Subject to the Award Limit and the Ownership Limit, any Employee and
any HPMI Director selected by the Committee pursuant to Section 3.4(a)(i) shall
be eligible to be granted an Option. Subject to the Award Limit and the
Ownership Limit, each Independent Director of the Company shall be eligible to
be granted Options at the times and in the manner set forth in Section 3.4(d).

                                       14
<PAGE>

          3.2  Disqualification for Stock Ownership
               ------------------------------------

          No person may be granted an Incentive Stock Option under this Plan if
such person, at the time the Incentive Stock Option is granted, owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any subsidiary or parent thereof (within the
meaning of Section 422 of the Code) unless such Incentive Stock Option conforms
to the applicable provisions of Section 422 of the Code.

          3.3  Qualification of Incentive Stock Options
               ----------------------------------------

          No Incentive Stock Option shall be granted unless such Option, when
granted, qualifies as an "incentive stock option" under Section 422 of the Code.
No Incentive Stock Option shall be granted to any person who is not a Company
Employee.

          3.4  Granting of Options
               -------------------

          (a)  The Committee shall from time to time, in its sole and absolute
discretion, and subject to applicable limitations of this Plan:

               (i)    Determine which Employees are key Employees and select
     from among the key Employees and HPMI Directors (including Employees and
     HPMI Directors to whom Options have previously been granted and/or shares
     of Restricted Stock have previously been issued) such of them as in its
     opinion should be granted Options;

               (ii)   Subject to the Award Limit and the Ownership Limit,
     determine the number of shares to be subject to such Options granted to the
     selected key Employees and HPMI Directors;

               (iii)  Determine whether such Options are to be Incentive Stock
     Options or Non-Qualified Stock Options; provided, however, that any Option
                                             --------  -------
     granted to any

                                       15
<PAGE>

     HPMI Employee or HPMI Director or any Operating Partnership Employee shall
     be a Non-Qualified Stock Option; and

               (iv)  Determine the terms and conditions of such Options,
     consistent with this Plan; provided, however, that the terms and conditions
                                --------  -------
     of Options intended to qualify as performance-based compensation as
     described in Section 162(m)(4)(C) of the Code shall include, but not be
     limited to, such terms and conditions as may be necessary to meet the
     applicable provisions of Section 162(m) of the Code.

          All Options granted with an exercise price equal to or greater than
the Fair Market Value of the Common Stock on the date of such grant shall be
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code unless the Committee otherwise determines.

          (b)  Upon the selection of a key Employee or HPMI Director to be
granted an Option, the Committee shall instruct the Secretary of the Company to
issue the Option and may impose such conditions on the grant of the Option as it
deems appropriate. Without limiting the generality of the preceding sentence,
the Committee may, in its sole and absolute discretion and on such terms as it
deems appropriate, require as a condition on the grant of an Option to an
Employee or HPMI Director that the Employee or HPMI Director surrender for
cancellation some or all of the unexercised Options or awards of Restricted
Stock which have been previously granted to him under this Plan or otherwise. An
Option, the grant of which is conditioned upon such surrender, may have an
option price lower (or higher) than the exercise price of such surrendered
Option, may cover the same (or a lesser or greater) number of shares as such
surrendered Option or Restricted Stock award, may contain such other terms as
the Committee deems appropriate, and shall be exercisable in accordance with its
terms, without regard to the

                                       16
<PAGE>

number of shares, price, exercise period or any other term or condition of such
surrendered Option or Restricted Stock award.

          (c)  Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.

          (d)  Subject to the Award Limit and the Ownership Limit, when a person
is initially elected to the Board and is then an Independent Director, each such
new Independent Director automatically shall be granted an Option to purchase
5,000 shares of Common Stock (subject to adjustment as provided in Section 9.3)
on the date of his or her election to the Board. During the term of the Plan,
each then current Independent Director shall automatically be granted, on
January 1 of each year, an Option to purchase 3,000 shares of Common Stock
(subject to adjustment as provided in Section 9.3). On August 14, 1995 each then
current Independent Director shall automatically be granted an Option to
purchase 10,000 shares of Common Stock (subject to adjustment as provided in
Section 9.3). Members of the Board who are Company Employees who subsequently
retire from the Company and remain on the Board will not receive an initial
Option grant pursuant to the first sentence of this Section 3.4(d), but to the
extent that they are otherwise eligible, will receive, after retirement from
employment with the Company, Options as described in the second sentence of this
Section 3.4(d) and, if such a member is an Independent Director on August 14,
1995, will receive on such date Options as described in the third sentence of
this Section 3.4(d). All the foregoing Option grants authorized by this Section
3.4(d) are subject to stockholder approval of the Plan and to the Ownership
Limit and the Award Limit.

                                       17
<PAGE>

                                   ARTICLE IV

                                TERMS OF OPTIONS

          4.1  Option Agreement
               ----------------

          Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized officer of the Company
and which shall contain such terms and conditions as the Committee (or the
Board, in the case of Options granted to Independent Directors) shall determine,
consistent with this Plan. Stock Option Agreements evidencing Options intended
to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code. Stock
Option Agreements evidencing Incentive Stock Options shall contain such terms
and conditions as may be necessary to meet the applicable provisions of Section
422 of the Code.

          4.2  Option Price
               ------------

          The price per share of the shares subject to each Option shall be set
by the Committee; provided, however, that such price shall be no less than the
                  --------  -------
par value of a share of Common Stock, unless otherwise permitted by applicable
state law, and (i) in the case of Incentive Stock Options and Options intended
to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, such price shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted; (ii)
in the case of Incentive Stock Options granted to an individual then owning
(within the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any subsidiary
or parent thereof (within the meaning of Section 422 of the

                                       18
<PAGE>

Code), such price shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date the Option is granted; and (iii) in the case
of Options granted to Independent Directors, such price shall equal 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted;
provided, however, that the price of each share subject to each Option granted
--------  -------
to an Independent Directors at any time from the date of the initial public
offering of Common Stock through February 9, 1994 pursuant to the first sentence
of Section 3.4(d) upon his initial election to the Board shall equal the greater
of (i) 100% of the Fair Market Value of a share of Common Stock on the date such
Option is granted or (ii) the initial public offering price per share of Common
Stock ($18.00 per share).

          4.3  Option Term
               -----------

          The term of an Option shall be set by the Committee in its sole and
absolute discretion; provided, however, that, (i) in the case of Options granted
                     --------  -------
to Independent Directors, the term shall be ten (10) years from the date the
Option is granted, without variation or acceleration hereunder, but subject to
Section 4.5, and (ii) in the case of Incentive Stock Options, the term shall not
be more than ten (10) years from the date the Incentive Stock Option is granted,
or five (5) years from such date if the Incentive Stock Option is granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any subsidiary or parent thereof (within the meaning of
Section 422 of the Code). Except as limited by requirements of Section 422 of
the Code and regulations and rulings thereunder applicable to Incentive Stock
Options, the Committee may extend the term of any outstanding Option granted to
an Employee or HPMI Director in connection with any Termination of Employment or

                                       19
<PAGE>

Termination of Directorship of the Optionee, or amend any other term or
condition of such Option relating to such a termination.

          4.4  Option Vesting
               --------------

          (a)  The period during which the right to exercise an Option in whole
or in part vests in the Optionee shall be set by the Committee and the Committee
may determine that an Option may not be exercised in whole or in part for a
specified period after it is granted; provided, however, that, unless the
Committee otherwise provides in the terms of the Option or otherwise, no Option
shall be exercisable by any Optionee who is then subject to Section 16 of the
Exchange Act within the period ending six months and one day from the date the
Option is granted; and provided, further, that except as provided in this
Section 4.4(a) Options granted to Independent Directors shall become exercisable
in cumulative annual installments of twenty-five percent (25%) on each of the
first, second, third and fourth anniversaries of the date of Option grant,
without variation or acceleration hereunder except as provided in Section
9.3(b). At any time after grant of an Option, the Committee may, in its sole and
absolute discretion and subject to whatever terms and conditions it selects,
accelerate the period during which an Option (except an Option granted to an
Independent Director) vests. Notwithstanding any provision of this Section
4.4(a) or the Plan to the contrary, Options awarded to Tom Bradley, James Hankla
and Warren Fix prior to the approval by the stockholders of the transactions
contemplated by the Stock Purchase Agreement with LF Strategic Realty Investors,
L.P. and Prometheus Western Retail, LLC. shall become fully exercisable on the
date of such shareholder approval.

          (b)  No portion of an Option which is unexercisable at Termination of
Employment or Termination of Directorship, as applicable, shall thereafter
become exercisable, except as may be otherwise provided by the Committee in the
case of Options granted to

                                       20
<PAGE>

Employees or HPMI Directors either in the Stock Option Agreement or by action of
the Committee following the grant of the Option.

          (c)  To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company, any Company Subsidiary, HPMI,
any HPMI Subsidiary, the Operating Partnership and any Operating Partnership
Subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code.  The rule set forth
in the preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 4.4(c), the Fair
Market Value of stock shall be determined as of the time the Option with respect
to such stock is granted.

          4.5  Limitations on Exercise of Options Granted to Independent
               ---------------------------------------------------------
Directors
---------

          Unless earlier terminated pursuant to Section 9.3(b)(ii) or
9.3(b)(vii), no Option granted to an Independent Director may be exercised to
any extent by anyone after the first to occur of the following events:

          (a)  The expiration of twelve (12) months from the date of the
Optionee's death; or

          (b)  the expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code); or

          (c)  the expiration of three (3) months from the date of the
Optionee's Termination of Directorship for any reason other than such Optionee's
death or his permanent

                                       21
<PAGE>

and total disability, unless the Optionee dies within said three-month period;
provided, however, Options granted to Warner Heineman prior to April 27, 1999,
--------  -------
may be exercised at any time prior to the expiration of twelve (12) months
following Mr. Heineman's Termination of Directorship on July 14, 1999; or

          (d)  the expiration of ten years from the date the Option was granted.

          4.6  Consideration
               -------------

          In consideration of the granting of a Non-Qualified Stock Option, the
Optionee shall agree, in the written Stock Option Agreement, to remain in the
employ of the Company, a Company Subsidiary, HPMI, an HPMI Subsidiary, the
Operating Partnership or an Operating Partnership Subsidiary (or to serve as an
Independent Director of the Company or as a director of HPMI, as applicable) for
a period of at least one year (or such shorter period as may be fixed in the
Stock Option Agreement or by action of the Committee or the Board following
grant of the Option) after the Non-Qualified Stock Option is granted (or until
the next annual meeting of the stockholders of the Company, in the case of an
Independent Director or HPMI Director). In consideration of the granting of an
Incentive Stock Option, the Optionee shall agree, in the written Stock Option
Agreement, to remain in the employ of the Company or a Company Subsidiary for a
period of at least one year (or such shorter period as may be fixed in the Stock
Option Agreement or by action of the Committee or the Board following grant of
the Option) after the Incentive Stock Option is granted. Nothing in this Plan or
in any Stock Option Agreement hereunder shall confer upon any Optionee any right
to continue in the employ of the Company, any Company Subsidiary, HPMI, any HPMI
Subsidiary, the Operating Partnership or any Operating Partnership Subsidiary or
as a director of the Company or HPMI, or shall interfere with or restrict in any
way the rights of the Company, any Company Subsidiary, HPMI, any

                                       22
<PAGE>

HPMI Subsidiary, the Operating Partnership or any Operating Partnership
Subsidiary, which are hereby expressly reserved, to discharge any Optionee at
any time for any reason whatsoever, with or without good cause.

          4.7  Limitation in Terms of Option
               -----------------------------

          The Company shall not grant an Option which will, or is likely to,
result in a violation of Section 5.12.

                                   ARTICLE V

                              EXERCISE OF OPTIONS

          5.1  Partial Exercise
               ----------------

          An exercisable Option may be exercised in whole or in part. However,
an Option shall not be exercisable with respect to fractional shares and the
Committee (or the Board, in the case of Options granted to Independent
Directors) may require that, by the terms of the Option, a partial exercise be
with respect to a minimum number of shares.

          5.2  Time of Exercise
               ----------------

          Options may be exercised only on the first business day of every
month.

          5.3  Manner of Exercise
               ------------------

          All or a portion of an exercisable Option shall be deemed exercised
upon delivery of all of the following to the Secretary of the Company or his
office:

          (a)  A written notice complying with the applicable rules established
by the Committee (or the Board, in the case of Options granted to Independent
Directors), stating that the Option, or a portion thereof, is exercised.  The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion;

                                       23
<PAGE>

          (b)  Such representations and documents as the Committee (or the
Board, in the case of Options granted to Independent Directors), in its sole and
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee or Board may, in
its sole and absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and
registrars; and

          (c)  In the event that the Option shall be exercised pursuant to
Section 9.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and

          (d)  Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised.  However,
the Committee (or the Board, in the case of Options granted to Independent
Directors), may in its discretion (i) allow payment, in whole or in part,
through the delivery of shares of Common Stock owned by the Optionee duly
endorsed for transfer to the Company with a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or exercised
portion thereof or (ii) subject to the timing requirements of Section 5.8, if
applicable, allow payment, in whole or in part, through the surrender of shares
of Common Stock then issuable upon exercise of the Option having a Fair Market
Value on the date of Option exercise equal to the aggregate exercise price of
the Option or exercised portion thereof.  In addition, at the sole and absolute
discretion of the Committee, the terms of Options granted to Employees may (x)
allow a delay in payment up to thirty (30) days from the date the Option, or
portion thereof, is exercised; (y) allow payment, in whole or in part, through
the delivery of property of any kind which constitutes good and

                                       24
<PAGE>

valuable consideration; or (z) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (i), (ii) and (x).

          5.4  Transfer of Shares to a Company Employee or Independent Director
               ----------------------------------------------------------------

          As soon as practicable after receipt by the Company, pursuant to
Section 5.3(d), of payment for the shares with respect to which an Option (which
in the case of a Company Employee was issued to and is held by such Company
Employee in his or her capacity as a Company Employee), or portion thereof, is
exercised by an Optionee who is a Company Employee or Independent Director, with
respect to each such exercise, the Company shall transfer to the Optionee the
number of shares equal to

          (a)  the amount of the payment made by the Optionee to the Company
pursuant to Section 5.3(d), divided by
                            ------- --

          (b)  the price per share of the shares subject to the Option as
determined pursuant to Section 4.2.

          5.5  Transfer of Shares to an HPMI Employee or HPMI Director
               -------------------------------------------------------

          As soon as practicable after receipt by the Company, pursuant to
Section 5.3(d), of payment for the shares with respect to which an Option (which
was issued to and is held by an HPMI Employee or HPMI Director in his or her
capacity as an HPMI Employee or HPMI Director), or portion thereof, is exercised
by an Optionee who is an HPMI Employee or HPMI Director, with respect to each
such exercise:

          (a)  the Company shall transfer to the Optionee the number of shares
equal to (A) the amount of the payment made by the Optionee to the Company
pursuant to Section 5.3(d) divided by (B) the Fair Market Value of a share of
                           ----------
Common Stock at the time of exercise (the "HPMI Optionee Purchased Shares");

                                       25
<PAGE>

          (b)  the Company shall sell to the Operating Partnership the number of
shares (the "HPMI Partnership Purchased Shares") equal to the excess of (A) the
amount obtained by dividing (i) the amount of the payment made by the Optionee
to the Company pursuant to Section 5.3(d) by (ii) the price per share of the
shares subject to the Option as determined pursuant to Section 4.2, over (B) the
HPMI Optionee Purchased Shares;

          The price to be paid by the Operating Partnership to the Company for
the HPMI Partnership Purchased Shares (the "HPMI Partnership Purchase Price")
shall be an amount equal to the product of (A) the number of HPMI Partnership
Purchased Shares multiplied by (B) the Fair Market Value of a share of Common
                 ---------- --
Stock at the time of the exercise;

          (c)  as soon as practicable after receipt of the HPMI Partnership
Purchased Shares by the Operating Partnership, the Operating Partnership shall
transfer such shares to HPMI;

          (d)  as soon as practicable after receipt of the HPMI Partnership
Purchased Shares by HPMI, HPMI shall transfer such shares to the Optionee at no
additional cost, as additional compensation; and

          (e)  the value of any Options, Restricted Stock and other benefits
provided by the Operating Partnership to HPMI under this Plan are deemed to
constitute an additional management fee to HPMI from the Operating Partnership
under the Property Management Agreement equal to the value of such Options,
Restricted Stock and other benefits.

          5.6  Transfer of Shares to an Operating Partnership Employee
               -------------------------------------------------------

          As soon as practicable after receipt by the Company, pursuant to
Section 5.3(d), of payment for the shares with respect to which an Option (which
was issued to and is held by a Partnership Employee in his or her capacity as a
Partnership Employee), or portion thereof, is

                                       26
<PAGE>

exercised by an Optionee who is an Operating Partnership Employee, with respect
to each such exercise:

          (a)  the Company shall transfer to the Optionee the number of shares
equal to (A) the amount of the payment made by the Optionee to the Company
pursuant to Section 5.3(d) divided by (B) the Fair Market Value of a share of
                           ----------
Common Stock at the time of exercise (the "Partnership Optionee Purchased
Shares");
          (b)  the Company shall sell to the Operating Partnership the number of
shares (the "Partnership Purchased Shares") equal to the excess of (A) the
amount obtained by dividing (i) the amount of the payment made by the Optionee
to the Company pursuant to Section 5.3(d) by (ii) the price per share of the
shares subject to the Option as determined pursuant to Section 4.2., over (B)
the Partnership Optionee Purchased Shares;

          The price to be paid by the Operating Partnership to the Company for
the Partnership Purchased Shares (the "Partnership Purchase Price") shall be an
amount equal to the product of (A) the number of Partnership Purchased Shares
multiplied by (B) the Fair Market Value of a share of Common Stock at the time
---------- --
of the exercise; and

          (c)  as soon as practicable after receipt of the Operating Partnership
Purchased Shares by the Operating Partnership, the Operating Partnership shall
transfer such shares to the Optionee at no additional cost, as additional
compensation.

          5.7  Transfer of Payment to the Operating Partnership
               ------------------------------------------------

          As soon as practicable after receipt by the Company (i) of the amount
described in Section 5.3(d), and (ii) the Partnership Purchase Price described
in Section 5.6, the Company may contribute to the Operating Partnership an
amount of cash equal to such payment and the

                                       27
<PAGE>

Operating Partnership shall issue additional General Partner Interests to the
Company on the terms set forth in the Partnership Agreement.

          5.8  Certain Timing Requirements
               ---------------------------

          With respect to Options granted prior to November 19, 1996, at the
sole and absolute discretion of the Committee (or Board, in the case of Options
granted to Independent Directors), shares of Common Stock issuable to the
Optionee upon exercise of the Option may be used to satisfy the Option exercise
price or the tax withholding consequences of such exercise, in the case of
persons subject to Section 16 of the Exchange Act, only (i) during the period
beginning on the third business day following the date of release of the
quarterly or annual summary statement of sales and earnings of the Company and
ending on the twelfth business day following such date or (ii) pursuant to an
irrevocable written election by the Optionee to use shares of Common Stock
issuable to the Optionee upon exercise of the Option to pay all or part of the
Option price or the withholding taxes made at least six months prior to the
payment of such Option price or withholding taxes.

          5.9  Conditions to Issuance of Stock Certificates
               --------------------------------------------

          The Company, HPMI or the Operating Partnership shall  not be required
to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

          (a)  The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;

          (b)  The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange

                                       28
<PAGE>

Commission or any other governmental regulatory body which the Committee or
Board shall, in its sole and absolute discretion, deem necessary or advisable;

          (c)  The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee (or Board, in the case of
Options granted to Independent Directors) shall, in its sole and absolute
discretion, determine to be necessary or advisable;

          (d)  The lapse of such reasonable period of time following the
exercise of the Option as the Committee (or Board, in the case of Options
granted to Independent Directors) may establish from time to time for reasons of
administrative convenience; and

          (e)  The receipt by the Company, HPMI, or the Operating Partnership of
full payment for such shares, including payment of any applicable withholding
tax.
          5.10 Rights as Stockholders
               ----------------------

          The holders of Options shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.

          5.11 Ownership and Transfer Restrictions
               -----------------------------------

          Shares acquired through the exercise of an Option shall be subject to
the restrictions on ownership and transfer set forth in the Company's Amended
and Restated Charter. The Committee (or Board, in the case of Options granted to
Independent Directors), in its sole and absolute discretion, may impose such
additional restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate. Any such
restriction shall be set forth in the respective Stock Option Agreement and may
be

                                       29
<PAGE>

referred to on the certificates evidencing such shares. The Committee may
require an Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting such Option to such Employee or (ii) one
year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.

          5.12 Restrictions on Exercise of Option
               ----------------------------------

          An Option is not exercisable if, in the sole and absolute discretion
of the Committee, the exercise of such Option would likely result in any of the
following:

          (a)  the Optionee's ownership of Common Stock being in violation of
the Ownership Limit set forth in the Company's Amended and Restated Charter;

          (b)  income to the Company that could impair the Company's status as a
real estate investment trust, within the meaning of Sections 856 through 860 of
the Code; or

          (c)  a transfer or sale, at any one time, of more than .1% (measured
in value or in number of shares, whichever is more restrictive) of the Company's
total Common Equity Stock (as defined in the Company's Amended and Restated
Charter) from the Company to the Operating Partnership pursuant to Section 5.5.

          Notwithstanding any other provision of this Plan, the Optionee shall
have no rights under this Plan to acquire Common Stock which would otherwise be
prohibited under the Company's Amended and Restated Charter.

                                       30
<PAGE>

                                   ARTICLE VI

                           AWARD OF RESTRICTED STOCK

          6.1  Eligibility
               -----------

          Subject to the Ownership Limit, Restricted Stock may be awarded to any
Employee whom the Committee, pursuant to Section 3.4(a)(i), determines is a key
Employee and to any Independent Director as the Board, in its sole and absolute
discretion, and subject to applicable limitations of this Plan, deems
appropriate.  Subject to the Award Limit and the Ownership Limit, each
Independent Director shall also be eligible to be awarded Restricted Stock at
the time and in the manner set forth in Section 6.2(d) of this Plan.

          6.2  Award of Restricted Stock
               -------------------------

          (a)  The Committee (or the Board in the case of Independent Directors)
may from time to time, in its sole and absolute discretion:

               (i)  Select from among the Independent Directors and key
     Employees (including Independent Directors and Employees to whom Options
     have previously been granted and/or shares of Restricted Stock have
     previously been issued) such of them as in its opinion should be awarded
     Restricted Stock; and

               (ii) Determine the purchase price, if any, and other terms and
     conditions applicable to such Restricted Stock, consistent with this Plan.

          (b)  The Committee (or the Board in the case of Independent Directors)
shall establish the purchase price, if any, and form of payment for Restricted
Stock; provided, however, that such purchase price shall be no less than the par
       --------  -------
value of the Common Stock to be purchased, unless otherwise permitted by
applicable state law; provided, further, that the
                      --------  -------

                                       31
<PAGE>

purchase price of each share of Restricted Stock awarded to an Independent
Director pursuant to Section 6.2(d) of the Plan shall be $.01 per share. In all
cases, legal consideration shall be required for each issuance of Restricted
Stock.

          (c)  Upon the selection of a key Employee or Independent Director to
be awarded Restricted Stock, the Committee (or the Board in the case of
Independent Directors) shall instruct the Secretary of the Company to issue such
Restricted Stock and may impose such conditions on the issuance of such
Restricted Stock as it deems appropriate; provided, however, that each share of
                                          --------  -------
restricted stock awarded to an Independent Director pursuant to Section 6.2(d)
of the Plan shall be subject to the restrictions set forth in Section 7.4(b) of
the Plan.

          (d)  On February 27, 1997, subject to stockholder approval and the
Award Limit and the Ownership Limit, each then current Independent Director
shall automatically be granted 1,000 shares of Restricted Shares (subject to
adjustment as provided in Section 9.3).

                                  ARTICLE VII

                           TERMS OF RESTRICTED STOCK

          7.1  Restricted Stock Agreement
               --------------------------

          Restricted Stock shall be issued only pursuant to a written Restricted
Stock Agreement, which shall be executed by the Restricted Stockholder and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board in the case of Independent Directors)
shall determine, consistent with this Plan.

          7.2  Consideration to the Company
               ----------------------------

          As consideration for the issuance of Restricted Stock, in addition to
payment of any purchase price, the Restricted Stockholder shall agree, in the
written Restricted Stock

                                       32
<PAGE>

Agreement, to remain in the employ of the Company, Company Subsidiary, HPMI, an
HPMI Subsidiary, the Operating Partnership or an Operating Partnership
Subsidiary (or to serve as an Independent Director of the Company) for a period
of at least one year after the Restricted Stock is issued (or such shorter
period as may be fixed in the Restricted Stock Agreement or by action of the
Committee (or the Board in the case of Independent Directors) following grant of
the Restricted Stock) or until the next annual meeting of the stockholders of
the Company, in the case of an Independent Director. Nothing in this Plan or in
any Restricted Stock Agreement hereunder shall confer on any Restricted
Stockholder any right to continue in the employ of the Company, any Company
Subsidiary, HPMI, any HPMI Subsidiary, the Operating Partnership or any
Operating Partnership Subsidiary or as a director of the Company or shall
interfere with or restrict in any way the rights of the Company, any Company
Subsidiary, HPMI, any HPMI Subsidiary, the Operating Partnership or any
Operating Partnership Subsidiary, which are hereby expressly reserved, to
discharge any Restricted Stockholder at any time for any reason whatsoever, with
or without good cause.

          7.3  Rights as Stockholders
               ----------------------

          Upon delivery of the shares of Restricted Stock to the escrow holder
pursuant to Section 7.6, the Restricted Stockholder shall have, unless otherwise
provided by the Committee (or the Board in the case of Independent Directors),
all the rights of a stockholder with respect to said shares, subject to the
restrictions in his Restricted Stock Agreement, including the right to receive
all dividends and other distributions paid or made with respect to the shares;
provided, however, that in the sole and absolute discretion of the Committee (or
--------  -------
the Board in the case of Independent Directors), any extraordinary distributions
with respect to the Common Stock shall be subject to the restrictions set forth
in Section 7.4(a) or 7.4(b), as applicable.  All shares of

                                       33
<PAGE>

Restricted Stock shall be subject to the restrictions on ownership and transfer
set forth in the Company's Amended and Restated Charter.

          7.4  Restriction
               -----------

          (a)  All shares of Restricted Stock issued under this Plan (including
any shares received by holders thereof with respect to shares of Restricted
Stock as a result of stock dividends, stock splits or any other form of
recapitalization) shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee (or the Board in the
case of Independent Directors) shall provide, which restrictions may include,
without limitation, restrictions concerning voting rights and transferability
and restrictions based on duration of employment with the Company, Company
performance and individual performance; provided, however, that, unless the
                                        --------  -------
Committee (or the Board in the case of Independent Directors) otherwise provides
in the terms of the Restricted Stock Agreement or otherwise, no share of
Restricted Stock granted to a person subject to Section 16 of the Exchange Act
shall be sold, assigned or otherwise transferred until at least six months and
one day have elapsed from the date on which the Restricted Stock was issued; and
provided, further, that by action taken after the Restricted Stock is issued,
--------  -------
the Committee (or the Board in the case of Independent Directors) may, on such
terms and conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Restricted Stock Agreement.
Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire.

          (b)  Notwithstanding any provision of this Section 7.4 to the
contrary, each share of Restricted Stock awarded to an Independent Director
pursuant to Section 6.2(d) of the Plan (including any shares received by holders
thereof with respect to shares of Restricted Stock as a result of stock
dividends, stock splits or any other form of recapitalization) shall be subject

                                       34
<PAGE>

to the following restrictions until such restrictions lapse in accordance with
Section 7.4(c): Neither the Restricted Stock nor any interest or right therein
or part thereof shall be liable for the debts, contracts, or engagements of the
Restricted Stockholder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy) and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that, subject to the Ownership Limit (as defined in the organizational
documents of the Company), such restrictions shall not prevent transfers by will
or by the applicable laws of descent and distribution. Restricted Stock may not
be sold or encumbered until all restrictions are terminated, expire or lapse.

          (c)  Notwithstanding any provision of this Section 7.4 to the
contrary, the restrictions imposed pursuant to Section 7.4(b) on each share of
Restricted Stock awarded to an Independent Director pursuant to Section 6.2(d)
of the Plan (including any shares received by holders thereof with respect to
shares of Restricted Stock as a result of stock dividends, stock splits or any
other form of recapitalization) shall lapse in the following cumulative
installments: (i) such restrictions shall lapse with respect to 333 of such
shares on February 27, 1998, provided that the Independent Director has not had
a Termination of Directorship prior to such date, (ii) such restrictions shall
lapse with respect to 333 of such shares on February 27, 1999, provided that the
Independent Director has not had a Termination of Directorship prior to such
date, and (iii) such restrictions shall lapse with respect to 334 of such shares
on February 27, 2000, provided that the Independent Director has not had a
Termination of Directorship prior to such date; provided, however, that
notwithstanding any provision of this Section 7.4(c) or the Plan to

                                       35
<PAGE>

the contrary, the restrictions imposed pursuant to Section 7.4(b) on each share
of Restricted Stock awarded to Tom Bradley, James Hankla and Warren Fix pursuant
to Section 6.2(d) of the Plan (including any shares received by holders thereof
with respect to shares of Restricted Stock as a result of stock dividends, stock
splits or any other form of recapitalization) shall lapse upon the date that the
stockholders of the Company approve the transactions contemplated by the Stock
Purchase Agreement with LF Strategic Realty Investors, L.P. and Prometheus
Western Retail, LLC.

          (d)  Unless provided otherwise by the Committee (or the Board in the
case of Independent Directors), if no consideration was paid by the Restricted
Stockholder upon issuance, a Restricted Stockholder's rights in unvested
Restricted Stock shall lapse upon Termination of Employment or Termination of
Directorship.

          7.5  Repurchase of Restricted Stock
               ------------------------------

          The Committee (or the Board in the case of Independent Directors)
shall provide in the terms of each individual Restricted Stock Agreement that
the Company shall have the right to repurchase from the Restricted Stockholder
the Restricted Stock then subject to restrictions under the Restricted Stock
Agreement immediately upon a Termination of Employment or Termination of
Directorship for any reason at a cash price per share equal to the price paid by
the Restricted Stockholder for such Restricted Stock; provided, however, that in
                                                      --------  -------
the sole and absolute discretion of the Committee (or the Board in the case of
Independent Directors) provision may be made that no such right of repurchase
shall exist in the event of a Termination of Employment or Termination of
Directorship without cause, or following a change in control of the Company or
because of the Restricted Stockholder's retirement, death or disability, or
otherwise.

                                       36
<PAGE>

          7.6  Escrow
               ------

          The Secretary of the Company or such other escrow holder as the
Committee (or the Board in the case of Independent Directors) may appoint shall
retain physical custody of each certificate representing Restricted Stock until
all of the restrictions imposed under the Restricted Stock Agreement with
respect to the shares evidenced by such certificate expire or shall have been
removed.

          7.7  Legend
               ------

          In order to enforce the restrictions imposed upon shares of Restricted
Stock hereunder, the Committee (or the Board in the case of Independent
Directors) shall cause a legend or legends to be placed on certificates
representing all shares of Restricted Stock that are still subject to
restrictions under Restricted Stock Agreements, which legend or legends shall
make appropriate reference to the conditions imposed thereby.

          7.8  Section 83(b)
               -------------

          A Restricted Stockholder may not make an election under Section 83(b)
of the Code or any other analogous state or local law, regulation or other
provision with respect to the receipt of any share of Restricted Stock.

                                  ARTICLE VIII

                                 ADMINISTRATION

          8.1  Compensation Committee
               ----------------------

          The Compensation Committee (or another committee of the Board
appointed to administer this Plan) shall consist solely of two or more directors
appointed by and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined

                                       37
<PAGE>

by Rule 16b-3 and an "outside director" for purposes of Section 162(m) of the
Code. Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.

          8.2  Duties and Powers of Committee
               ------------------------------

          It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions.  The Committee
shall have the power to interpret this Plan, the Options and the Restricted
Stock, and the agreements pursuant to which the Options and Restricted Stock are
granted or awarded, and to adopt such rules for the administration,
interpretation, and application of this Plan as are consistent therewith and to
interpret, amend or revoke any such rules.  Notwithstanding the foregoing, the
full Board, acting by a majority of its members in office, shall conduct the
general administration of the Plan with respect to Options and Restricted Stock
granted to Independent Directors.  Any such grant or award under this Plan need
not be the same with respect to each Optionee or Restricted Stockholder.  Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code.  In its sole and
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under this Plan except with
respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any
regulations or rules issued thereunder, are required to be determined in the
sole and absolute discretion of the Committee.

                                       38
<PAGE>

          8.3  Majority Rule; Unanimous Written Consent
               ----------------------------------------

          The Committee shall act by a majority of its members in attendance at
a meeting at which a quorum is present or by a memorandum or other written
instrument signed by all members of the Committee.

          8.4  Compensation; Professional Assistance; Good Faith Actions
               ---------------------------------------------------------

          Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board.  All expenses and
liabilities which members of the Committee or Board incur in connection with the
administration of this Plan shall be borne by the Company.  The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons.  The Committee, the Board, the Company
and the Company's officers and Directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons.  All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Optionees, Restricted Stockholders,
the Company, HPMI, the Operating Partnership and all other interested persons.
No members of the Committee or Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to this Plan,
any Option or any award of Restricted Stock, and all members of the Committee
and Board shall be fully protected by the Company in respect of any such action,
determination or interpretation.

          8.5  No Liability
               ------------

          No member of the Board or the Committee, or director, officer or
employee of the Company, any Company Subsidiary, HPMI, any HPMI Subsidiary, the
Operating Partnership or any Operating Partnership Subsidiary shall be liable,
responsible or accountable in damages or otherwise for any determination made or
other action taken or any failure to act by such person

                                       39
<PAGE>

so long as such person is not determined to be guilty by a final adjudication of
willful misconduct with respect to such determination, action or failure to act.

          8.6  Indemnification
               ---------------

          To the fullest extent permitted by law, each of the members of the
Board and the Committee and each of the directors, officers and employees of the
Company, any Company Subsidiary, HPMI, any HPMI Subsidiary, the Operating
Partnership and any Operating Partnership Subsidiary shall be held harmless and
be indemnified by the Company for any liability, loss (including amounts paid in
settlement), damages or expenses (including reasonable attorneys' fees) suffered
by virtue of any determinations, acts or failures to act, or alleged acts or
failures to act, in connection with the administration of this Plan so long as
such person is not determined by a final adjudication to be guilty of willful
misconduct with respect to such determination, action or failure to act.

                                   ARTICLE IX

                            MISCELLANEOUS PROVISIONS

          9.1  Not Transferable
               ----------------

          Options and Restricted Stock under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or pursuant to a QDRO, unless and until such Options have been
exercised, or the shares underlying such Options or awards have been issued, and
all restrictions imposed on such shares pursuant to the terms of the Stock
Option Agreement or Restricted Stock Agreement, as applicable, have lapsed;
provided, however, that no transfer shall be permitted to the extent such
--------  -------
transfer violates the Ownership Limit; and provided, further, that subject to
                                           --------  -------
the Ownership Limit, an Optionee may

                                       40
<PAGE>

designate a Beneficiary to exercise his Option or other rights under this Plan
after his death. No Option or Restricted Stock award or interest or right
therein shall be liable for the debts, contracts or engagements of the Optionee
or Restricted Stockholder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.

          During the lifetime of the Optionee, only he may exercise an Option
(or any portion thereof) granted to him under the Plan, unless it has been
disposed of pursuant to a QDRO.  After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option Agreement or
other agreement, may be exercised by his personal representative or by any
person empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.

          9.2  Amendment, Suspension or Termination of this Plan
               -------------------------------------------------

          Except as otherwise provided in this Section 9.2, this Plan may be
wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Board or the Committee.  Notwithstanding
the foregoing, except as permitted by the applicable exemptive conditions of
Rule 16b-3, the provisions of the Plan relating to the formula Option grants to
Independent Directors, including the amount, price and timing thereof, shall not
be amended more than once in any six-month period other than to comport with
changes in the Code, the Employee Retirement Income Security Act, as amended, or
the respective rules

                                       41
<PAGE>

thereunder, and such amendments must be adopted by action of the Board.
Furthermore, without approval of the Company's stockholders given within twelve
months before or after the action by the Committee or the Board, no action of
the Committee or the Board may, except as provided in Section 9.3, increase the
limits imposed in Section 2.1 on the maximum number of shares which may be
issued under this Plan or modify the Award Limit, and no action of the Committee
or the Board may be taken that would otherwise require stockholder approval as a
matter of applicable law, regulation or rule. No amendment, suspension or
termination of this Plan shall, without the consent of the holder of an Option
or Restricted Stock award, alter or impair any rights or obligations under any
Option or Restricted Stock award theretofore granted or awarded, unless the
award itself otherwise expressly so provides. No Option or Restricted Stock
award may be granted or awarded during any period of suspension or after
termination of this Plan, and in no event may any Incentive Stock Option be
granted under this Plan after the first to occur of the following events: (a)
the expiration of ten years from the date the Plan (prior to this amendment and
restatement) is adopted by the Board; or (b) the expiration of ten years from
the date the Plan (prior to this amendment and restatement) was approved by the
Company's stockholders.

          9.3  Changes in Common Stock or Assets of the Company, Acquisition or
               ----------------------------------------------------------------
Liquidation of the Company and Other Corporate Events
-----------------------------------------------------

          (a)  Subject to Section 9.3(d), in the event that the Committee (or
the Board, in the case of Options and Restricted Stock granted to Independent
Directors) determines that any dividend or other distribution (whether in the
form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the

                                       42
<PAGE>

Company (including, but not limited to a Corporate Transaction), or exchange of
Common Stock or other securities of the Company, issuance of warrants or other
rights to purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event, in the Committee's sole discretion (or
in the case of Options and Restricted Stock granted to Independent Directors,
the Board's sole discretion), affects the Common Stock such that an adjustment
is determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to an Option or Restricted Stock award, then the
Committee (or the Board, in the case of Options and Restricted Stock granted to
Independent Directors) shall, in such manner as it may deem equitable, adjust
any or all of

               (i)   the number and kind of shares of Common Stock (or other
     securities or property) with respect to which Options may be granted under
     the Plan or which may be granted as Restricted Stock (including, but not
     limited to, adjustments of the limitations in Section 2.1 on the maximum
     number and kind of shares which may be issued and adjustments of the Award
     Limit),

               (ii)  the number and kind of shares of Common Stock (or other
     securities or property) subject to outstanding Options, and in the number
     and kind of shares of outstanding Restricted Stock, and

               (iii) the exercise price with respect to any Option.

          (b)  Subject to Sections 9.3(b)(vii), 9.3(d) and 9.8, in the event of
any Corporate Transaction or other transaction or event described in Section
9.3(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws,

                                       43
<PAGE>

regulations, or accounting principles, the Committee (or the Board, in the case
of Options and Restricted Stock granted to Independent Directors) in its
discretion is hereby authorized to take any one or more of the following actions
whenever the Committee (or the Board, in the case of Options and Restricted
Stock granted to Independent Directors) determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to any Option, or Restricted Stock award under this Plan, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or
principles:

               (i)  In its sole and absolute discretion, and on such terms and
     conditions as it deems appropriate, the Committee (or the Board, in the
     case of Options and Restricted Stock granted to Independent Directors) may
     provide, either by the terms of the Option Agreement or Restricted Stock
     Agreement or by action taken prior to the occurrence of such transaction or
     event and either automatically or upon the Optionee's or Restricted
     Stockholder's request, for either the purchase of any such Option or
     Restricted Stock for an amount of cash equal to the amount that could have
     been attained upon the exercise of such Option or realization of the
     Optionee's rights had such Option been currently exercisable or such
     Restricted Stock been fully vested or the replacement of such Option or
     Restricted Stock award with other rights or property selected by the
     Committee (or the Board, in the case of Options and Restricted Stock
     granted to Independent Directors) in its sole discretion;

               (ii) In its sole and absolute discretion, the Committee (or the
     Board, in the case of Options and Restricted Stock granted to Independent
     Directors) may provide, either by the terms of the Option Agreement or
     Restricted Stock Agreement or by action

                                       44
<PAGE>

     taken prior to the occurrence of such transaction or event that it cannot
     vest or be exercised after such event;

               (iii) In its sole and absolute discretion, and on such terms and
     conditions as it deems appropriate, the Committee (or the Board, in the
     case of Options granted to Independent Directors) may provide, either by
     the terms of the Option Agreement or by action taken prior to the
     occurrence of such transaction or event, that for a specified period of
     time prior to such transaction or event, such Option shall be exercisable
     as to all shares covered thereby, notwithstanding anything to the contrary
     in (i) Section 4.4 or (ii) the provisions of such Option Agreement;

               (iv)  In its sole and absolute discretion, and on such terms and
     conditions as it deems appropriate, the Committee (or the Board, in the
     case of Options and Restricted Stock granted to Independent Directors) may
     provide, either by the terms of such Option Agreement or Restricted Stock
     Agreement or by action taken prior to the occurrence of such transaction or
     event, that upon such event, such Option or Restricted Stock be assumed by
     the successor or survivor corporation (or a parent or subsidiary thereof),
     or shall be substituted for by similar options or awards covering the stock
     of the successor or survivor corporation (or a parent or subsidiary
     thereof), with appropriate adjustments as to the number and kind of shares
     and prices; and

               (v)   In its sole and absolute discretion, and on such terms and
     conditions as it deems appropriate, the Committee (or the Board, in the
     case of Options and Restricted Stock granted to Independent Directors) may
     make adjustments in the number and type of shares of Common Stock (or other
     securities or property) subject to outstanding Options, and in the number
     and kind of outstanding Restricted Stock and/or

                                       45
<PAGE>

     in the terms and conditions of and the criteria included in, outstanding
     Options and Restricted Stock and Options and Restricted Stock which may be
     granted in the future.

               (vi)  In its sole and absolute discretion, and on such terms and
     conditions as it deems appropriate, the Committee may provide either by the
     terms of the Restricted Stock Agreement or by action taken prior to the
     occurrence of such transaction or event that, for a specified period of
     time prior to such event, the restrictions imposed under a Restricted Stock
     Agreement upon some or all shares of Restricted Stock shall be terminated,
     and some or all shares of such Restricted Stock shall cease to be subject
     to repurchase under Section 7.5 or forfeiture under Section 7.4(d) upon
     such transaction or event.

               (vii) None of the foregoing discretionary terms of this Section
     9.3(b) shall be permitted with respect to Options granted under Section
     3.4(d) to Independent Directors and Restricted Stock granted to Independent
     Directors to the extent that such discretion would be inconsistent with the
     applicable exemptive conditions of Rule 16b-3.  In the event of a Change in
     Control or a Corporate Transaction, to the extent that the Board does not
     have the ability under Rule 16b-3 to take or to refrain from taking the
     discretionary actions set forth in Section 9.3(b)(iii) above, each Option
     granted to an Independent Director shall be exercisable as to all shares
     covered thereby upon such Change in Control or during the five days
     immediately preceding the consummation of such Corporate Transaction and
     subject to such consummation, notwithstanding anything to the contrary in
     Section 4.4 or the vesting schedule of such Options.  In the event of a
     Corporate Transaction, to the extent that the Board does not have the
     ability under Rule 16b-3 to take or to refrain from taking the
     discretionary actions set forth in Section

                                       46
<PAGE>

     9.3(b)(ii) above, no Option granted to an Independent Director may be
     exercised following such Corporate Transaction unless such Option is, in
     connection with such Corporate Transaction, either assumed by the successor
     or survivor corporation (or parent or subsidiary thereof) or replaced with
     a comparable right with respect to shares of the capital stock of the
     successor or survivor corporation (or parent or subsidiary thereof).

          (c)  Subject to Section 9.3(d) and 9.8, the Committee (or the Board,
in the case of Options and Restricted Stock granted to Independent Directors)
may, in its discretion, include such further provisions and limitations in any
Option Agreement or Restricted Stock Agreement, as it may deem equitable and in
the best interests of the Company.

          (d)  With respect to Incentive Stock Options and Options intended to
qualify as performance-based compensation under Section 162(m), no adjustment or
action described in this Section 9.3 or in any other provision of the Plan shall
be authorized to the extent that such adjustment or action would cause the Plan
to violate Section 422(b)(1) of the Code or would cause such option to fail to
so qualify under Section 162(m), as the case may be, or any successor provisions
thereto.  Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the
Committee (or the Board, in the case of Options and Restricted Stock granted to
Independent Directors) determines that the Option or Restricted Stock is not to
comply with such exemptive conditions.  The number of shares of Common Stock
subject to any Option or award shall always be rounded to the next whole number.

                                       47
<PAGE>

          9.4  Approval of Amendment and Restatement of Plan by Stockholders
               -------------------------------------------------------------

          This amended and restated Plan will be submitted for the approval of
the Company's stockholders within twelve months after the date of the Board's
adoption of the amendment to Plan adopted on August 14, 1995, which is
incorporated herein.  Options may be granted and Restricted Stock may be awarded
under the amended and restated Plan prior to such stockholder approval, provided
that such Options shall not be exercisable and such Restricted Stock shall not
vest prior to the time when this amended and restated Plan is approved by the
stockholders, and provided further that if such approval has not been obtained
at the end of said twelve-month period, all Options previously granted and all
Restricted Stock previously awarded under this amended and restated Plan shall
thereupon be cancelled and become null and void. If the amended and restated
Plan is not approved by stockholders by the end of such twelve-month period, the
Plan shall continue as it existed prior to such August 14, 1995 amendment and
all Options and Restricted Stock granted thereunder shall remain in effect in
accordance with their terms. With respect to Incentive Stock Options granted
after the date of the adoption of the Seventh Amendment, the Plan, as amended by
the First Amendment, the Second Amendment, the Third Amendment, the Fourth
Amendment, the Fifth Amendment and the Sixth Amendment, shall constitute a new
plan for purposes of Section 422 of the Code. In the event the Seventh Amendment
is not approved by the Company's stockholders, Incentive Stock Options granted
after the date of the Board's adoption of the Seventh Amendment shall be
governed by the provisions of the Plan as it existed immediately prior to the
adoption of the Seventh Amendment.

          9.5  Tax Withholding
               ---------------

          The Company, HPMI and the Operating Partnership shall be entitled to
require payment in cash or deduction from other compensation payable to each
Optionee or Restricted

                                       48
<PAGE>

Stockholder of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, vesting or exercise of any Option or
Restricted Stock. Subject to the timing requirements of Section 5.8, if
applicable, the Committee (or the Board, in the case of Options and Restricted
Stock granted to Independent Directors) may in its sole and absolute discretion
and in satisfaction of the foregoing requirement allow such Optionee or
Restricted Stockholder to elect to have the Company, HPMI or the Operating
Partnership withhold shares of Common Stock otherwise issuable under such Option
or other award (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld. If the Optionee or
Restricted Stockholder elects to advance such sums directly, written notice of
that election shall be delivered on or prior to such exercise and, whether
pursuant to such election or pursuant to a requirement imposed by the Company,
HPMI or the Operating Partnership, payment in cash or by check of such sums for
taxes shall be delivered within two days after the date of exercise. Elections
by such persons to have shares of Common Stock withheld for this purpose will be
subject to the following restrictions: (x) the election shall be subject to the
disapproval of the Committee (or the Board, in the case of Options and
Restricted Stock granted to Independent Directors), (y) if the person is subject
to Section 16 of the Exchange Act, the election shall be subject to such
additional restrictions as the Committee (or the Board, in the case of Options
and Restricted Stock granted to Independent Directors) may impose in an effort
to secure the benefits of any regulations thereunder, and (z) any stock
ownership resulting from such withholding shall not violate the Ownership Limit
set forth in the Company's Amended and Restated Charter. The Committee shall not
be obligated to issue shares and/or distribute cash to any person upon exercise
of any right until such payment has been received or shares have been so
withheld, unless withholding (or offset against a cash payment) as of or prior
to the date of

                                       49
<PAGE>

such exercise is sufficient to cover all such sums due or which may be due with
respect to such exercise.

          9.6  Loans
               -----

          The Committee may, in its sole and absolute discretion, extend one or
more loans to key Employees in connection with the exercise or receipt of
outstanding Options granted under this Plan, or the issuance of Restricted Stock
awarded under this Plan.  The terms and conditions of any such loan shall be set
by the Committee.

          9.7  Forfeiture Provisions
               ---------------------

          Pursuant to its general authority to determine the terms and
conditions applicable to awards under the Plan, the Committee (or the Board, in
the case of Options and Restricted Stock granted to Independent Directors) shall
have the right (to the extent consistent with the applicable exemptive
conditions of Rule 16b-3) to provide, in the terms of Options or Restricted
Stock awards made under the Plan, or to require the recipient to agree by
separate written instrument, that (i) any proceeds, gains or other economic
benefit actually or constructively received by the recipient upon any receipt or
exercise of the Option or award, or upon the receipt or resale of any Common
Stock underlying such Option or award, must be paid to the Company, and (ii) the
Option or award shall terminate and any unexercised portion of such Option or
award (whether or not vested) shall be forfeited, if (a) a Termination of
Employment, or Termination of Directorship occurs prior to a specified date, or
within a specified time period following receipt or exercise of the Option or
award, or (b) the recipient at any time, or during a specified time period,
engages in any activity in competition with the Company, or which is inimical,
contrary or harmful to the interests of the Company, as further defined by the
Committee (or the Board, as applicable).

                                       50
<PAGE>

          9.8  Limitations Applicable to Section 16 Persons and Performance-
               ------------------------------------------------------------
Based Compensation
------------------

          Notwithstanding any other provision of this Plan, this Plan, and any
Option granted, or Restricted Stock awarded, to any individual who is then
subject to Section 16 of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that
are requirements for the application of such exemptive rule.  To the extent
permitted by applicable law, the Plan, Options and Restricted Stock granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.  Furthermore, notwithstanding any other
provision of this Plan, any Option intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be subject
to any additional limitations set forth in Section 162(m) of the Code (including
any amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan
shall be deemed amended to the extent necessary to conform to such requirements.

          9.9  Effect of Plan Upon Options and Compensation Plans
               --------------------------------------------------

          The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Company Subsidiary, HPMI, any
HPMI Subsidiary, the Operating Partnership or any Operating Partnership
Subsidiary.  Nothing in this Plan shall be construed to limit the right of the
Company, HPMI or the Operating Partnership (a) to establish any other forms of
incentives or compensation for employees and directors of the Company, any
Company Subsidiary, HPMI, any HPMI Subsidiary, the Operating Partnership or any
Operating

                                       51
<PAGE>

Partnership Subsidiary or (b) to grant or assume options or other rights
otherwise than under this Plan in connection with any proper corporate or
partnership purpose including but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, firm or association.

          9.10 Compliance with Laws
               --------------------

          This Plan, the granting and vesting of Options or Restricted Stock
under this Plan and the issuance and delivery of shares of Common Stock and the
payment of money under this Plan or under Options granted or Restricted Stock
awarded hereunder are subject to compliance with all applicable federal and
state laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals by
any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Company, be necessary or advisable in connection therewith.  Any
securities delivered under this Plan shall be subject to such restrictions, and
the person acquiring such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable legal
requirements.  To the extent permitted by applicable law, the Plan, Options and
Restricted Stock granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

          9.11 Titles
               ------

          Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Plan.

                                       52
<PAGE>

          9.12 Governing Law
               -------------

          This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of California
without regard to conflicts of laws thereof.

                          [signature page to follow]

                                       53
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers duly authorized on this 23 day of March, 2000.

                              Center Trust, Inc., a Maryland corporation.

                                    By: /s/ Edward D. Fox
                                        ----------------------------------------
                                    Name: Edward D. Fox
                                    Title: Chief Executive Officer and
                                           President

                              CT Operating Partnership, L.P., a California
                              limited partnership.

                                    By: Center Trust, Inc., a Maryland
                                    corporation, in its capacity as General
                                    Partner.

                                    By: /s/ Edward D. Fox
                                        ----------------------------------------
                                    Name: Edward D. Fox
                                    Title: Chief Executive Officer and
                                           President

                                      S-1