<PAGE>
 
                                                                  Exhibit 10.11


                      SECURITY CAPITAL GROUP INCORPORATED
                         1998 LONG-TERM INCENTIVE PLAN
                         -----------------------------
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------

SECTION 1.................................................... 1
      GENERAL................................................ 1
         1.1.  Purpose....................................... 1
         1.2.  Participation................................. 1

SECTION 2.................................................... 2
      OPTIONS................................................ 2
         2.1.  Definition.................................... 2
         2.2.  Eligibility................................... 2
         2.3.  Price......................................... 2
         2.4.  Exercise...................................... 3
         2.5.  Post-Exercise Limitations..................... 4
         2.6.  Expiration Date............................... 4

SECTION 3.................................................... 6
      SHARE AWARDS........................................... 6
         3.1.  Definition.................................... 6
         3.2.  Eligibility................................... 6
         3.3.  Terms and Conditions of Awards................ 6

SECTION 4.................................................... 7
     OPERATION AND ADMINISTRATION............................ 7
         4.1.  Effective Date................................ 7
         4.2.  Shares Subject to Plan........................ 7
         4.3.  Individual Limits on Awards................... 8
         4.4.  Adjustments to Shares......................... 8
         4.5.  Change in Control.............................11
         4.6.  Limit on Distribution.........................13
         4.7.  Liability for Cash Payments...................13
         4.8.  Performance-Based Compensation................13
         4.9.  Withholding...................................14
         4.10. Transferability...............................14
         4.11. Notices.......................................14
         4.12. Form and Time of Elections....................15
         4.13. Agreement With Company........................15
         4.14. Limitation of Implied Rights..................15
         4.15. Evidence......................................16
         4.16. Action by Company or Related Company..........16
         4.17. Gender and Number.............................16
         4.18. Applicable Law................................16
         4.19. Foreign Employees.............................16

SECTION 5....................................................16
      COMMITTEE..............................................16
         5.1.  Administration................................16
         5.2.  Selection of Committee........................16
         5.3.  Powers of Committee...........................17
         5.4.  Delegation by Committee.......................18
<PAGE>
 
         5.5.  Information to be Furnished to Committee......18
         5.6.  Liability and Indemnification of Committee....18

SECTION 6....................................................18
      AMENDMENT AND TERMINATION..............................18
<PAGE>
 
                      SECURITY CAPITAL GROUP INCORPORATED
                         1998 LONG-TERM INCENTIVE PLAN
                         -----------------------------


                                    SECTION 1
                                   ----------

                                     GENERAL
                                    --------

      1.1  Purpose.  The Security Capital Group Incorporated 1998 Long-Term
           -------                                                         
Incentive Plan (the "Plan") has been established by Security Capital Group
Incorporated (the "Company") to:

     (a)  attract and retain employees and other persons providing services to
          the Company and the Related Companies (as defined below);

     (b)  motivate Participants (as defined in subsection 1.2), by means of
          appropriate incentives, to achieve long-range goals;

     (c)  provide incentive compensation opportunities that are competitive with
          those of other corporations; and

     (d) further identify Participants' interests with those of the Company's
         other stockholders through compensation that is based on the value of
         the Company's common shares;

and thereby promote the long-term financial interest of the Company and the
Related Companies, including the growth in value of the Company's equity and
enhancement of long-term stockholder return.  The term "Related Company" means
any company during any period in which it is a "subsidiary corporation" (as that
term is defined in section 424(f) of the Internal Revenue Code of 1986, as
amended (the "Code")), with respect to the Company or any affiliate of the
Company which is designated as a Related Company by the Committee.

      1.2  Participation.  Subject to the terms and conditions of the Plan, the
           -------------                                                       
Committee (as described in Section 5) shall determine and designate, from time
to time, from among the Eligible Individuals (as defined below), those persons
who will be granted one or more awards under Sections 2 or 3 of the Plan (an
"Award"), and thereby become "Participants" in the Plan.  In the discretion of
the Committee, and subject to the terms of the Plan, a Participant may be
granted any Award permitted under the provisions of the Plan, and more than one
Award may be granted to a Participant.  Except as otherwise agreed by the
Company and the Participant, or except as otherwise provided in the Plan, an
Award under the Plan shall not affect any previous Award under the Plan or an
award under any other plan maintained by the
<PAGE>
 
Company or the Related Companies. For purposes of the Plan, the term "Eligible
Individual" shall mean any employee of the Company or a Related Company or other
person providing services thereto; provided, however, that a member of the Board
of Directors of the Company (the "Board") who is not an employee of the Company
or a Related Company shall not be an "Eligible Individual".


                                    SECTION 2
                                   ----------

                                     OPTIONS
                                    --------

      2.1  Definitions.  The grant of an "Option" under this Section 2 entitles
           -----------                                                         
the Participant to purchase shares of Class B common stock of the Company
("Shares") at a price fixed at the time the Option is granted, subject to the
terms of this Section. Options granted under this Section may be either
Incentive Stock Options or Non-Qualified Stock Options, as determined in the
discretion of the Committee.  An "Incentive Stock Option" is an Option that is
intended to satisfy the requirements applicable to an "incentive stock option"
described in section 422 of the Code. A "Non-Qualified Stock Option" is an
Option that is not intended to be an Incentive Stock Option.

      2.2  Eligibility.  The Committee shall designate the Participants to whom
           -----------                                                         
Options are to be granted under this Section and shall determine the number of
Shares subject to each such Option.  If the Committee grants Incentive Stock
Options, to the extent that the aggregate fair market value of Shares with
respect to which Incentive Stock Options are exercisable for the first time by
any individual during any calendar year (under all plans of the Company and all
related companies within the meaning of section 424(f) of the Code) exceeds
$100,000, such options shall be treated as Non-Qualified Stock Options, to the
extent required by section 422 of the Code.

      2.3  Price.  The determination and payment of the purchase price of a
           -----                                                           
Share under each Option granted under this Section shall be subject to the
following:

     (a)  The purchase price shall be established by the Committee at the time
          the Option is granted; provided, however, that in no event shall such
          price be less than the greater of the Fair Market Value (defined
          below) of a Share on the date the Option is granted or the par value
          of a Share.

     (b)  Subject to the following provisions of this subsection, the full
          purchase price of each Share purchased upon the exercise of any Option
          shall be paid at the time of such exercise (or such later date as may
          be permitted

                                       2
<PAGE>
 
          by the Committee in the case of a cashless exercise) and,
          as soon as practicable thereafter (subject to an election under
          subsection 2.4), a certificate representing the Shares so purchased
          shall be delivered to the person entitled thereto.

     (c)  The purchase price shall be payable in cash or by tendering Shares by
          actual delivery or attestation (valued at Fair Market Value as of the
          day of exercise) that have been held by the Participant at least six
          months, or in any combination thereof, as determined by the Committee.

     (d)  The "Fair Market Value" of a Share as of any date shall be determined
          in accordance with the following rules:

          (i)  If the Shares are at the time listed or admitted to trading on
               any stock exchange, then the Fair Market Value shall be the
               closing price per Share on such date on the principal exchange on
               which the Shares are then listed or admitted to trading or, if no
               such sale is reported on that date, on the last preceding date on
               which a sale was so reported.

          (ii) If the Shares are not at the time listed or admitted to trading
               on a stock exchange, the Fair Market Value shall be the average
               of the closing reported bid and asked prices regular way of the
               Shares on the date in question in the over-the-counter market, as
               such prices are reported in a publication of general circulation
               selected by the Committee and regularly reporting the market
               price of Shares in such market.

        (iii)  If the Shares are not listed or admitted to trading on any stock
               exchange or traded in the over-the-counter market, the Fair
               Market Value shall be as determined by the Committee in good
               faith.

         (iv) For purposes of determining the Fair Market Value of Shares that
              are sold pursuant to a cashless exercise program, Fair Market
              Value shall be the price at which such Shares are sold.

      2.4  Exercise.  Except as otherwise expressly provided in the Plan, an
           --------                                                         
Option granted under this Section shall be exercisable in accordance with the
following terms of this subsection:

                                       3
<PAGE>
 
     (a)  The terms and conditions relating to exercise of an Option shall be
          established by the Committee, and may include, without limitation,
          conditions relating to completion of a specified period of service
          (subject to paragraph (b) below), achievement of performance standards
          prior to exercise of the Option or the achievement of Share ownership
          objectives by the Participant.  The Committee, in its sole discretion,
          may accelerate the vesting of any Option under circumstances
          designated by it at the time the Option is granted or thereafter.

     (b)  No Option may be exercised by a Participant after the Expiration Date
          (as defined in subsection 2.6) applicable to that Option.

     (c)  Prior to the date the Shares would otherwise be transferred pursuant
          to the exercise of an Option, to the extent permitted by the
          Committee, a Participant may irrevocably elect to defer receipt of
          such Shares until the last date of a later calendar year, but in no
          event later than the Participant's Date of Termination (as defined in
          subsection 2.6), provided, that if the Date of Termination of a
          Participant who is a member of a select group of management or a
          highly compensated employee within the meaning of section 401(a)(1) of
          the Employee Retirement Income Security Act of 1974, as amended,
          occurs by reason of Retirement (as defined in subsection 2.6), the
          Participant may elect to defer receipt for a period up to the last day
          of the calendar year in which occurs the fifteenth anniversary of the
          Participant's Retirement.  Any such deferral election shall be made in
          such form and at such times as the Committee may determine and shall
          be subject to such other terms, conditions and limitations as the
          Committee may establish, provided, however, any election to defer
          payment beyond a Participant's Retirement which has not been on file
          at least 12 months prior to the Participant's Retirement shall be
          disregarded.

      2.5  Post-Exercise Limitations.  The Committee, in its discretion, may
           -------------------------                                        
impose such restrictions on Shares acquired pursuant to the exercise of an
Option as it determines to be desirable, including, without limitation,
restrictions relating to disposition of the shares and forfeiture restrictions
based on service, performance, Share ownership by the Participant and such other
factors as the Committee determines to be appropriate.

      2.6  Expiration Date.  The "Expiration Date" with respect to an Option
           ---------------                                                  
means the date established as the Expiration Date by

                                       4
<PAGE>
 
the Committee at the time of the grant; provided, however, that unless
determined otherwise by the Committee, the Expiration Date with respect to any
Option shall not be later than the earliest to occur of:

     (a)  the ten-year anniversary of the date on which the Option is granted;

     (b)  if the Participant's Date of Termination occurs by reason of death,
          Disability or Retirement, the one-year anniversary of such Date of
          Termination;

     (c)  if the Participant's Date of Termination occurs for reasons other than
          Retirement, death, Disability or Cause, the three-month anniversary of
          such Date of Termination; or

     (d) if the Participant's Date of Termination occurs for reasons of Cause,
         such Date of Termination.

For purposes of the Plan, a Participant's "Date of Termination" shall be the
date on which he both ceases to be an employee of the Company and the Related
Companies and ceases to perform material services for the Company and the
Related Companies, regardless of the reason for the cessation; provided that a
"Date of Termination" shall not be considered to have occurred during the period
in which the reason for the cessation of services is a leave of absence approved
by the Company or the Related Company which was the recipient of the
Participant's services.  Except as otherwise provided by the Committee, a
Participant shall be considered to have a "Disability" during the period in
which he is unable, by reason of a medically determinable physical or mental
impairment, to engage in the material and substantial duties of his regular
occupation, which condition is expected to be permanent.  "Retirement" of a
Participant shall mean the occurrence of a Participant's Date of Termination,
other than for Cause, death or Disability, after providing at least five years
of service to the Company or the Related Companies and attaining age 60.  For
purposes of the Plan, "Cause" shall mean, in the reasonable judgment of the
Committee (i) the willful and continued failure by the Participant to
substantially perform his duties with the Company or any Related Company after
written notification by the Company or Related Company, (ii) the willful
engaging by the Participant in conduct which is demonstrably injurious to the
Company or any Related Company, monetarily or otherwise, or (iii) the engaging
by the Participant in egregious misconduct involving serious moral turpitude.
For purposes hereof, no act, or failure to act, on the Participant's part shall
be deemed "willful" unless done, or omitted to be done, by the Participant not
in good faith and without reasonable belief

                                       5
<PAGE>
 
that such action was in the best interest of the Company or Related Company.


                                   SECTION 3
                                   ---------

                                  SHARE AWARDS
                                 -------------

      3.1  Definition.  Subject to the terms of this Section, a Share Award
           ----------                                                      
under the Plan is a grant of Shares to a Participant, the earning, vesting or
distribution of which is subject to one or more conditions established by the
Committee, provided, that in no event will Share Awards under the Plan exceed
20% of the Shares reserved under the Plan.  Such conditions may relate to events
(such as performance or continued employment) occurring before or after the date
the Share Award is granted, or the date the Shares are earned by, vested in or
delivered to the Participant.  If the vesting of Share Awards is subject to
conditions occurring after the date of grant, the period beginning on the date
of grant of a Share Award and ending on the vesting or forfeiture of such Shares
(as applicable) is referred to as the "Restricted Period". To the extent that
the vesting of a Share Award is contingent on performance, the performance shall
be measured over a period of not less than one year. Share Awards may provide
for delivery of the shares of Shares at the time of grant or may provide for a
deferred delivery date.  A Share Award may, but need not, be made in conjunction
with a cash-based incentive compensation program maintained by the Company and
may, but need not, be in lieu of cash otherwise awardable under such program.

      3.2  Eligibility.  The Committee shall designate the Participants to whom
           -----------                                                         
Share Awards are to be granted and the number of Shares that are subject to each
such Award.

      3.3  Terms and Conditions of Awards.  Share Awards granted to Participants
           ------------------------------                                       
under the Plan shall be subject to the following terms and conditions:

     (a)  Beginning on the date of grant (or, if later, the date of
          distribution) of Shares comprising a Share Award, and including any
          applicable Restricted Period, the Participant as owner of such Shares
          shall have the right to vote such Shares.

     (b)  Payment of dividends, if any, with respect to Share Awards shall be
          subject to the following:

          (i)  On and after the date that a Participant has a fully earned and
               vested right to the Shares comprising a Share Award and the
               Shares have been

                                       6
<PAGE>
 
               distributed to the Participant, the Participant
               shall have all dividend rights (and other rights) of a
               stockholder with respect to such Shares.

          (ii)  Prior to the date that a Participant has a fully earned and
                vested right to the shares comprising a Share Award, the
                Committee, in its sole discretion, may award Dividend Rights
                with respect to such shares.

          (iii) On and after the date that a Participant has a fully earned and
                vested right to the Shares comprising a Share Award, but before
                the Shares have been distributed to the Participant, the
                Participant shall be entitled to Dividend Rights with respect to
                such Shares, at the time and in the form determined by the
                Committee.

          (iv)  A "Dividend Right" with respect to shares comprising a Share
                Award shall entitle the Participant, as of each dividend payment
                date, to an amount equal to the dividends payable with respect
                to a Share multiplied by the number of such Shares. Dividend
                Rights shall be settled in cash or in Shares valued at Fair
                Market Value as of the date of settlement, as determined by the
                Committee, shall be payable at the time determined by the
                Committee and shall be subject to such other terms and
                conditions as the Committee may determine.


                                    SECTION 4
                                   ----------

                          OPERATION AND ADMINISTRATION
                         -----------------------------

      4.1  Effective Date.  The Plan shall be effective as of the date it is
           --------------                                                   
approved by the Company's stockholders.  The Plan shall be unlimited in duration
and, in the event of Plan termination, shall remain in effect as long as any
Awards awarded under it are outstanding and not fully vested; provided, however,
that no new Awards shall be made under the Plan on or after the tenth
anniversary of the date on which the Plan is adopted by the Board.

      4.2  Shares Subject to Plan.  The Shares with respect to which Awards may
           ----------------------                                              
be made under the Plan shall be shares currently authorized but unissued or
currently held or subsequently acquired by the Company as treasury shares,
including shares purchased in the open market or in private transactions.
Subject to the provisions of subsection 4.4, the number of Shares which

                                       7
<PAGE>
 
may be issued with respect to Awards under the Plan shall not exceed 12,257,733
Shares in the aggregate. Except as otherwise provided herein, any Shares subject
to an Award which for any reason expires or is terminated without issuance of
Shares (including Shares that are not issued because Shares are tendered
pursuant to subsection 2.3(c) or 4.9) shall again be available under the Plan.

      4.3  Individual Limits on Awards.  Notwithstanding any other provision of
           ---------------------------                                         
the Plan to the contrary, no Participant shall receive any Award of an Option
under the Plan to the extent that the sum of:

     (a)  the number of Shares subject to such Award;

     (b)  the number of Shares subject to all other prior Awards of Options
          under the Plan during the one-year period ending on the date of the
          Award; and

     (c)  the number of Shares subject to all other prior share options granted
          to the Participant under other plans or arrangements of the Company
          during the one-year period ending on the date of the Award;

would exceed the Participant's Individual Limit under the Plan. The
determination made under the foregoing provisions of this subsection shall be
based on the Shares subject to the Awards at the time of grant, regardless of
when the Awards become exercisable.  Subject to the provisions of subsection
4.4, a Participant's "Individual Limit" shall be 1,000,000 Shares.

      4.4  Adjustments to Shares.
           --------------------- 

     (a)  If the Company shall effect any subdivision or consolidation of Shares
          or other capital readjustment, payment of stock dividend, stock split,
          combination of shares or recapitalization or other increase or
          reduction of the number of Shares outstanding without receiving
          compensation therefor in money, services or property, then the
          Committee shall equitably adjust (i) the number of Shares available
          under the Plan; (ii) the number of shares available under any
          individual or other limits; (iii) the number of Shares subject to
          outstanding Awards; and (iv) the per-share price under any outstanding
          Award to the extent that the Participant is required to pay a purchase
          price per Share with respect to the Award.

     (b)  If the Company is reorganized, merged or consolidated or is party to a
          plan of exchange with another corporation, pursuant to which
          reorganization, merger,

                                       8
<PAGE>
 
          consolidation or plan of exchange, the stockholders of the Company
          receive any shares of stock or other securities or property, or the
          Company shall distribute securities of another corporation to its
          stockholders, there shall be substituted for the Shares subject to
          outstanding Awards an appropriate number of shares of each class of
          stock or amount of other securities or property which were distributed
          to the stockholders of the Company in respect of such Shares, subject
          to the following:

          (i)   If the Committee determines that the substitution described in
                accordance with the foregoing provisions of this paragraph would
                not be fully consistent with the purposes of the Plan or the
                purposes of the outstanding Awards under the Plan, the Committee
                may make such other adjustments to the Awards to the extent that
                the Committee determines such adjustments are consistent with
                the purposes of the Plan and of the affected Awards.

          (ii)  All or any of the Awards may be cancelled by the Committee on or
                immediately prior to the effective date of the applicable
                transaction, but only if the Committee gives reasonable advance
                notice of the cancellation to each affected Participant, and
                only if either: (A) the Participant is permitted to exercise all
                Awards that will be cancelled (without regard to whether such
                Awards would otherwise be exercisable) for a reasonable period
                prior to the effective date of the cancellation; or (B) the
                Participant receives payment or other benefits that the
                Committee determines to be reasonable compensation for the value
                of all cancelled Awards (without regard to whether such Awards
                would otherwise be vested).

          (iii) Upon the occurrence of a reorganization of the Company or any
                other event described in this paragraph (b), any successor to
                the Company shall be substituted for the Company to the extent
                that the Company and the successor agree to such substitution.

     (c)  Upon (or, in the discretion of the Committee, immediately prior to)
          the sale to (or exchange with) a third party unrelated to the Company
          of all or substantially all of the assets of the Company, all Awards
          shall be cancelled.  If Awards are cancelled

                                       9
<PAGE>
 
          under this paragraph, then, with respect to any affected Participant,
          either:

          (i)  the Participant shall be provided with reasonable advance notice
               of the cancellation, and the Participant shall be permitted to
               exercise all Awards that will be cancelled (without regard to
               whether such Awards would otherwise be exercisable) for a
               reasonable period prior to the effective date of the
               cancellation; or

          (ii) the Participant shall receive payment or other benefits that the
               Committee determines to be reasonable compensation for the value
               of all cancelled Awards (without regard to whether such cancelled
               Awards would otherwise be vested).

          The foregoing provisions of this paragraph shall also apply to the
          sale of all or substantially all of the assets of the Company to a
          related party, if the Committee determines such application is
          appropriate. Notwithstanding the foregoing provisions of this
          paragraph (c), in lieu of cancellation of outstanding Awards, the
          Committee and the purchaser of all or substantially all of the
          Company's assets may provide that an appropriate number of shares or
          securities of the purchaser or its affiliates shall be substituted for
          Shares with respect to outstanding Awards under the Plan, provided
          that such substituted awards shall be comparable in value and contain
          terms and conditions similar to the Awards.

     (d)  In determining what action, if any, is necessary or appropriate under
          the foregoing provisions of this subsection, the Committee shall act
          in a manner that it determines to be consistent with the purposes of
          the Plan and of the affected Awards and, where applicable or otherwise
          appropriate, in a manner that it determines to be necessary to
          preserve the benefits and potential benefits of the affected Awards
          for the Participants and the Company.

     (e)  The existence of this Plan and the Awards granted hereunder shall not
          affect in any way the right or power of the Company or its
          stockholders to make or authorize any or all adjustments,
          recapitalizations, reorganizations or other changes in the Company's
          capital structure or its business, any merger or consolidation of the
          Company, any issue of bonds, debentures, preferred or prior preference
          stocks ahead of or affecting the Company's Shares or the rights

                                       10
<PAGE>
 
          thereof, the dissolution or liquidation of the Company, any sale or
          transfer of all or any part of its assets or business, or any other
          corporate act or proceeding, whether of a similar character or
          otherwise.

     (f)  Except as expressly provided by the terms of this Plan, the issue by
          the Company of shares of stock of any class, or securities convertible
          into shares of stock of any class, for cash or property or for labor
          or services, either upon direct sale, upon the exercise of rights or
          warrants to subscribe therefor or upon conversion of shares or
          obligations of the Company convertible into such shares or other
          securities, shall not affect, and no adjustment by reason thereof,
          shall be made with respect to Awards then outstanding hereunder.

     (g)  Awards under the Plan are subject to adjustment under this subsection
          only during the period in which they are considered to be outstanding
          under the Plan.  For purposes of this subsection, an Award is
          considered "outstanding" on any date if the Participant's ability to
          obtain all benefits with respect to the Award is subject to limits
          imposed by the Plan (including any limits imposed by the Agreement
          reflecting the Award). The determination of whether an Award is
          outstanding shall be made by the Committee.

      4.5  Change in Control.  In the event that (i) a Participant's employment
           -----------------                                                   
is terminated by the Company or the successor to the Company or an affiliated
entity which is his or her employer for reasons other than Cause following a
Change in Control of the Company (as defined below), or (ii) the Plan is
terminated by the Company or its successor following a Change in Control without
provision for the continuation of outstanding Awards hereunder, all Options
which have not otherwise expired shall become immediately exercisable and all
other Awards shall become fully vested.  For purposes of the Plan, a "Change in
Control" means the happening of any of the following:

     (a)  the stockholders of the Company approve a definitive agreement to
          merge the Company into or consolidate the Company with another entity,
          sell or otherwise dispose of all or substantially all of its assets or
          adopt a plan of liquidation, provided, however, that a Change in
          Control shall not be deemed to have occurred by reason of a
          transaction, or a substantially concurrent or otherwise related series
          of transactions, upon the completion of which 50% or more of the
          beneficial ownership of the voting power of the Company, the surviving
          corporation or corporation directly or

                                       11
<PAGE>
 
          indirectly controlling the Company or the surviving corporation, as
          the case may be, is held by the same persons (as defined below)
          (although not necessarily in the same proportion) as held the
          beneficial ownership of the voting power of the Company immediately
          prior to the transaction or the substantially concurrent or otherwise
          related series of transactions, except that upon the completion
          thereof, employees or employee benefit plans of the Company may be a
          new holder of such beneficial ownership; provided, further, that a
          transaction with an "Affiliate" of the Company (as defined in the
          Securities Exchange Act of 1934, as amended (the "Exchange Act"))
          shall not be treated as a Change in Control; or

     (b)  the "beneficial ownership" (as defined in Rule 13d-3 under the
          Exchange Act) of securities representing 50% or more of the combined
          voting power of the Company is acquired, other than from the Company,
          by any "person" as defined in Sections 13(d) and 14(d) of the Exchange
          Act (other than by an Affiliate or any trustee or other fiduciary
          holding securities under an employee benefit or other similar stock
          plan of the Company); or

     (c)  at any time during any period of two consecutive years, individuals
          who at the beginning of such period were members of the Board of
          Directors of the Company cease for any reason to constitute at least a
          majority thereof (unless the election, or the nomination for election
          by the Company's stockholders, of each new Director was approved by a
          vote of at least two-thirds of the Directors still in office at the
          time of such election or nomination who were Directors at the
          beginning of such period).

For purposes of this subsection, a Participant's employment shall be deemed to
be terminated by the Company or the successor to the Company or an affiliated
entity if the Participant terminates employment after (i) a substantial adverse
alteration in the nature of the Participant's status or responsibilities from
those in effect immediately prior to the Change in Control, or (ii) a material
reduction in the Participant's annual base salary and target bonus, if any, as
in effect immediately prior to the Change in Control.  If, upon a Change in
Control, awards in other shares or securities are substituted for outstanding
Awards pursuant to Section 4.4, and immediately following the Change in Control
the Participant becomes employed by the entity into which the Company merged, or
the purchaser of substantially all of the assets of the Company, or a successor
to such entity or purchaser, the Participant shall not be treated as having
terminated employment for purposes of this Section 4.5 until such

                                       12
<PAGE>
 
time as the Participant terminates employment with the merged entity or
purchaser (or successor), as applicable.

      4.6  Limit on Distribution.  Distribution of Shares or other amounts under
           ---------------------                                                
the Plan shall be subject to the following:

     (a)  Notwithstanding any other provision of the Plan, the Company shall
          have no liability to deliver any Shares under the Plan or make any
          other distribution of benefits under the Plan unless such delivery or
          distribution would comply with all applicable laws and the applicable
          requirements of any securities exchange or similar entity.

     (b)  In the case of a Participant who is subject to Section 16(a) and 16(b)
          of the Exchange Act, the Committee may, at any time, add such
          conditions and limitations to any Award to such Participant, or any
          feature of any such Award, as the Committee, in its sole discretion,
          deems necessary or desirable to comply with Section 16(a) or 16(b) and
          the rules and regulations thereunder or to obtain any exemption
          therefrom.

     (c)  To the extent that the Plan provides for issuance of certificates to
          reflect the transfer of Shares, the transfer of such Shares may be
          effected on a non-certificated basis, to the extent not prohibited by
          applicable law or the rules of any stock exchange.

      4.7  Liability for Cash Payments.  Subject to the provisions of this
           ---------------------------                                    
Section, each Related Company shall be liable for payment of cash due under the
Plan with respect to any Participant to the extent that such benefits are
attributable to the service rendered for that Related Company by the
Participant. Any disputes relating to liability of a Related Company for cash
payments shall be resolved by the Committee.

      4.8  Performance-Based Compensation.  To the extent that the Committee
           ------------------------------                                   
determines that it is necessary or desirable to conform any Awards under the
Plan with the requirements applicable to "Performance-Based Compensation", as
that term is used in Code section 162(m)(4)(C), it may, at or prior to the time
an Award is granted, take such steps and impose such restrictions with respect
to such Award as it determines to be necessary to satisfy such requirements
including, without limitation:

     (a)  The establishment of performance goals that must be satisfied prior to
          the payment or distribution of benefits under such Awards.

                                       13
<PAGE>
 
     (b)  The submission of such Awards and performance goals to the Company's
          stockholders for approval and making the receipt of benefits under
          such Awards contingent on receipt of such approval.

     (c)  Providing that no payment or distribution be made under such Awards
          unless the Committee certifies that the goals and the applicable terms
          of the Plan and Agreement reflecting the Awards have been satisfied.

To the extent that the Committee determines that the foregoing requirements
relating to Performance-Based Compensation do not apply to Awards under the Plan
because the Awards constitute Options, the Committee may, at the time the Award
is granted, conform the Awards to alternative methods of satisfying the
requirements applicable to Performance-Based Compensation.

      4.9   Withholding.  All Awards and other payments under the Plan are
            -----------                                                   
subject to withholding of all applicable taxes, which withholding obligations
may be satisfied, with the consent of the Committee, through the surrender of
Shares which the Participant already owns or to which a Participant is otherwise
entitled under the Plan; provided, however, except to the extent permitted by
the Committee, previously-owned Shares that have been held by the Participant
less than six months or Shares to which the Participant is entitled under the
Plan may only be used to satisfy the minimum tax withholding required by
applicable law.

      4.10. Transferability.  Awards under the Plan are not transferable except
            ---------------                                                    
as designated by the Participant by will or by the laws of descent and
distribution or, to the extent provided by the Committee, pursuant to a
qualified domestic relations order (within the meaning of the Code and
applicable rules thereunder).  To the extent that the Participant who receives
an Award under the Plan has the right to exercise such Award, the Award may be
exercised during the lifetime of the Participant only by the Participant.
Notwithstanding the foregoing provisions of this subsection, Awards under the
Plan may be transferred to or for the benefit of the Participant's family
(including, without limitation, to a trust or partnership for the benefit of a
Participant's family), subject to such procedures as the Committee may
establish.  In no event shall an Incentive Stock Option be transferable to the
extent that such transferability would violate the requirements applicable to
such option under Code section 422.

      4.11. Notices.  Any notice or document required to be filed with the
            -------                                                       
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee, in care of the Company, at
its principal executive offices.  The Committee may, by advance written notice
to

                                       14
<PAGE>
 
affected persons, revise such notice procedure from time to time. Any notice
required under the Plan (other than a notice of election) may be waived by the
person entitled to notice.

      4.12. Form and Time of Elections.  Unless otherwise specified herein, each
            --------------------------                                          
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.

      4.13. Agreement With Company.  At the time of an Award to a Participant
            ----------------------                                           
under the Plan, the Committee may require a Participant to enter into an
agreement with the Company (the "Agreement") in a form specified by the
Committee, agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe.

      4.14. Limitation of Implied Rights.
            ---------------------------- 

      (a)  Neither a Participant nor any other person shall, by reason of the
           Plan, acquire any right in or title to any assets, funds or property
           of the Company or any Related Company whatsoever, including, without
           limitation, any specific funds, assets, or other property which the
           Company or any Related Company, in its sole discretion, may set aside
           in anticipation of a liability under the Plan. A Participant shall
           have only a contractual right to the amounts, if any, payable under
           the Plan, unsecured by any assets of the Company and any Related
           Company. Nothing contained in the Plan shall constitute a guarantee
           by the Company or any Related Company that the assets of such
           companies shall be sufficient to pay any benefits to any person.

      (b)  The Plan does not constitute a contract of employment, and selection
           as a Participant will not give any employee the right to be retained
           in the employ of the Company or any Related Company, nor any right or
           claim to any benefit under the Plan, unless such right or claim has
           specifically accrued under the terms of the Plan. Except as otherwise
           provided in the Plan, no Award under the Plan shall confer upon the
           holder thereof any right as a stockholder of the Company prior to the
           date on which he fulfills all service requirements and other
           conditions for receipt of such rights and Shares are registered in
           his name.

                                       15
<PAGE>
 
      4.15. Evidence.  Evidence required of anyone under the Plan may be by
            --------                                                       
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.

      4.16. Action by Company or Related Company.  Any action required or
            ------------------------------------                         
permitted to be taken by the Company or any Related Company shall be by
resolution of its board of directors or trustees, as applicable, or by action of
one or more members of the board (including a committee of the board) who are
duly authorized to act for the board or (except to the extent prohibited by
applicable law or the rules of any stock exchange) by a duly authorized officer
of the Company.

      4.17. Gender and Number.  Where the context admits, words in any gender
            -----------------                                                
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.

     4.18. Applicable Law.  The provisions of the Plan shall be construed in
           --------------                                                   
accordance with the laws of the State of Maryland, without giving effect to
choice of law principles.

     4.19. Foreign Employees.  Notwithstanding any other provision of the Plan 
           -----------------                                                    
to the contrary, the Committee may grant Awards to eligible persons who are
foreign nationals on such terms and conditions different from those specified in
the Plan as may, in the judgment of the Committee, be necessary or desirable to
foster and promote achievement of the purposes of the Plan. In furtherance of
such purposes, the Committee may make such modifications, amendments, procedures
and subplans as may be necessary or advisable to comply with provisions of laws
in other countries or jurisdictions in which the Company or a Related Company
operates or has employees.


                                    SECTION 5
                                   ----------

                                    COMMITTEE
                                   ----------

      5.1  Administration.  The authority to control and manage the operation
           --------------                                                    
and administration of the Plan shall be vested in a committee (the "Committee")
in accordance with this Section 5.

      5.2  Selection of Committee.  So long as the Company is subject to section
           ----------------------                                               
16 of the Exchange Act, the Committee shall be selected by the Board and shall
consist of not fewer than two members of the Board or such greater number as may
be required for compliance with Rule 16b-3 issued under the Exchange Act, none
of whom shall be eligible to receive Awards under the Plan.

                                       16
<PAGE>
 
      5.3  Powers of Committee.  The authority to manage and control the
           -------------------                                          
operation and administration of the Plan shall be vested in the Committee,
subject to the following:

     (a)  Subject to the provisions of the Plan, the Committee will have the
          authority and discretion to select individuals to receive Awards, to
          determine the time or times of receipt, to determine the types of
          Awards and the number of Shares covered by the Awards, to establish
          the terms, conditions, performance criteria, restrictions, and other
          provisions of such Awards, and to cancel or suspend Awards.  In making
          such Award determinations, the Committee may take into account the
          nature of services rendered by the respective employee, the
          individual's present and potential contribution to the Company's
          success and such other factors as the Committee deems relevant.

     (b)  Subject to the provisions of the Plan, the Committee will have the
          authority and discretion to determine the extent to which Awards under
          the Plan will be structured to conform to the requirements applicable
          to Performance-Based Compensation, and to take such action, establish
          such procedures, and impose such restrictions at the time such Awards
          are granted as the Committee determines to be necessary or appropriate
          to conform to such requirements.

     (c)  The Committee will have the authority and discretion to interpret the
          Plan, to establish, amend and rescind any rules and regulations
          relating to the Plan, to determine the terms and provisions of any
          agreements made pursuant to the Plan and to make all other
          determinations that may be necessary or advisable for the
          administration of the Plan.

     (d)  Any interpretation of the Plan by the Committee and any decision made
          by it under the Plan is final and binding on all persons.

     (e)  Except as otherwise expressly provided in the Plan, where the
          Committee is authorized to make a determination with respect to any
          Award, such determination shall be made at the time the Award is made,
          except that the Committee may reserve the authority to have such
          determination made by the Committee in the future (but only if such
          reservation is made at the time the Award is granted and is expressly
          stated in the Agreement reflecting the Award).

                                       17
<PAGE>
 
      5.4  Delegation by Committee.  Except to the extent prohibited by
           -----------------------                                     
applicable law or the rules of any stock exchange or NASDAQ (if appropriate),
the Committee may allocate all or any portion of its responsibilities and powers
to any one or more of its members and may delegate all or any part of its
responsibilities and powers to any person or persons selected by it.  Any such
allocation or delegation may be revoked by the Committee at any time.

      5.5  Information to be Furnished to Committee.  The Company and Related
           ----------------------------------------                          
Companies shall furnish the Committee such data and information as may be
required for it to discharge its duties. The records of the Company and Related
Companies as to an employee's or Participant's employment (or other provision of
services), termination of employment (or cessation of the provision of
services), leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect.  Participants and other
persons entitled to benefits under the Plan must furnish the Committee such
evidence, data or information as the Committee considers desirable to carry out
the terms of the Plan.

      5.6  Liability and Indemnification of Committee.  No member or authorized
           ------------------------------------------                          
delegate of the Committee shall be liable to any person for any action taken or
omitted in connection with the administration of the Plan unless attributable to
his own fraud or willful misconduct; nor shall the Company or any Related
Company be liable to any person for any such action unless attributable to fraud
or willful misconduct on the part of a Director or employee of the Company or
Related Company.  The Committee, the individual members thereof, and persons
acting as the authorized delegates of the Committee under the Plan, shall be
indemnified by the Company against any and all liabilities, losses, costs and
expenses (including legal fees and expenses) of whatsoever kind and nature which
may be imposed on, incurred by or asserted against the Committee or its members
or authorized delegates by reason of the performance of a Committee function if
the Committee or its members or authorized delegates did not act dishonestly or
in willful violation of the law or regulation under which such liability, loss,
cost or expense arises.  This indemnification shall not duplicate but may
supplement any coverage available under any applicable insurance.


                                    SECTION 6
                                   ----------

                            AMENDMENT AND TERMINATION
                           --------------------------

     Subject to obtaining such approvals as may be required under the Code,
Federal securities law, Maryland corporate law or stock exchange requirements,
the Board may, at any time, amend or terminate the Plan, provided that, subject
to subsection 4.4 (relating to certain adjustments to shares), no amendment or

                                       18
<PAGE>
 
termination may materially adversely affect the rights of any Participant or
beneficiary under any Award made under the Plan prior to the date such amendment
is adopted by the Board.

                                       19