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                               THE ROUSE COMPANY


                               THE ROUSE COMPANY

                              SPECIAL OPTION PLAN


                        EFFECTIVE DATE JANUARY 1, 1998
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                               TABLE OF CONTENTS



ARTICLE                                                PAGE

ARTICLE I
       PURPOSE......................................     1

ARTICLE II
       DEFINITIONS..................................     1
ARTICLE III
       OPTION GRANT.................................     3
ARTICLE IV
       OPTION EXERCISE..............................     6
ARTICLE V
       AMENDMENT OR TERMINATION.....................     8
ARTICLE VI
       ADMINISTRATION...............................     9
ARTICLE VII
       MISCELLANEOUS PROVISIONS.....................    10

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                               THE ROUSE COMPANY

                              SPECIAL OPTION PLAN


                                   ARTICLE I

                                    PURPOSE

   1.1  PURPOSE.  The purpose of the Plan is to provide supplemental
compensation to certain key individuals, commensurate with their contributions
to the success of the Employer, in a form that will provide incentives and
rewards for superior performance, encourage the recipients to continue in the
employment of the Employer, and allow the recipients to diversify their
investment portfolios.

   1.2  INTENT.  The Plan is intended to be an unfunded plan maintained by the
Employer primarily for a select group of management or highly compensated
employees.  The Plan is also intended to be a nonqualified stock option plan
within the meaning of section 83 of the Code.

                                   ARTICLE II

                                  DEFINITIONS

   As used herein, the following capitalized words and phrases shall have the
respective meanings set forth below:

   2.1 "ADMINISTRATOR" means the Director of Human Resources and any individual
or entity designated by the Director of Human Resources pursuant to Section
6.2(f) of the Plan.  As described in section 6, the Administrator shall have the
ability to determine awards of Options and to administer the Plan.

   2.2 "BENEFICIARY" Means The person or persons designated by a Participant,
pursuant to Section 3.6, to exercise an Option after the Participant's death.

   2.3 "CHANGE OF CONTROL" means any change in (a) the effective control of the
employer, or (b) the ownership of a substantial portion of the assets of the
Employer, as defined under section 280g of the Code, except as otherwise
provided by written agreement executed by the Employer and a Participant prior
to such Change of Control.

   2.4 "CODE" means the Internal Revenue Code of 1986, any amendments thereto,
and any regulations or rulings issued thereunder.

   2.5 "EFFECTIVE DATE" means January 1, 1998.

   2.6 "EMPLOYEE" means any individual who is employed by the Employer.

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   2.7 "EMPLOYER" means the Rouse Company and any successor thereto and any
other employer which adopts the Plan for the benefit of its employees.

   2.8 "ERISA" means the Employee Retirement Income Security Act of 1974, any
amendments thereto, and any regulations or rulings issued thereunder.

   2.9 "EXERCISE DATE" means the date upon which the Administrator approves the
Option exercise form which is completed and submitted to the Administrator with
respect to the Option being exercised.

   2.10 "EXERCISE PERIOD" means the period during which a Participant may
exercise an Option, as determined under Section 4.1.

   2.11 "EXERCISE PRICE" means the price to be paid by a Participant to exercise
an Option, as determined under Section 3.3 or under an Option Agreement signed
by the Participant and the Administrator.

   2.12 "FAIR MARKET VALUE" means the closing price of a share of Stock (as
defined in Section 2.19) reflected in the consolidated trading tables of The
Wall Street Journal, or other recognized market source, as determined by the
Administrator, on the applicable date of reference hereunder, or if there is no
sale on such date, then the closing price on the last previous day on which a
sale is reported.  Notwithstanding the preceding sentence, if Stock trading
operations require the use of the closing price of a share of Stock on the
trading date next preceding the date of reference in order to currently execute
a purchase or sale of a share of Stock, then such previous day price shall be
used and shall constitute the Fair Market Value of the stock on the applicable
reference date.

   2.13 "GRANT DATE" means, with respect to any Option, the date on which the
Option Agreement is executed by the Employer and the Participant.

   2.14 "OPTION" means the right of a Participant, granted by the Employer in
accordance with Section 3.2, to purchase Stock from the employer at the Exercise
Price.

   2.15 "OPTION AGREEMENT" means an agreement executed by the Employer and by a
Participant to whom Options have been awarded, acknowledging the issuance of the
Options and setting forth any terms pursuant to Section 3.2.

   2.16 "PARTICIPANT" means any individual who meets the eligibility
requirements of Section 3.1, who has received an award of Options in accordance
with Section 3.2, and whose Options have not been completely exercised or
lapsed.  After a Participant's death, his Beneficiary is considered to be a
Participant to the extent necessary to facilitate the exercise of any Options
that continue to be exercisable under the terms of the Plan.  In the event of a
Participant's disability or other legal incapacity, the Participant's legal
representative is considered to be a Participant to the extent necessary to
facilitate the exercise of any Options that are or become exercisable under the
terms of the Plan. If a Participant has assigned his Options under Section 3.8
then the Participant's assignee is considered a Participant able to exercise
Options under the terms of the Plan.

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   2.17 "PLAN" means The Rouse Company Special Option Plan as adopted by the
Employer and set forth herein and from time to time amended.

   2.18  "SPREAD" means The difference between the Fair Market Value of an
Option's Underlying Stock and the Exercise Price required to exercise such
Option.

   2.19 "STOCK" means the property subject to purchase through the exercise of
an Option. For purposes of the Plan, Stock shall be determined by the
Administrator and may consist of any of the following: (i) shares of common or
preferred stock of a corporation listed on a national securities exchange, (ii)
shares of the Employer, or (iii) shares of a registered investment company
regulated by the Investment Company Act of 1940, as amended. Stock may be issued
in the form of shares, units or such other designated form, and, for purposes of
the Plan, the phrase "shares of" shall refer to the terminology most appropriate
to the particular form of Stock subject to Option under the Plan.

   2.20 "TERMINATION OF EMPLOYMENT" means an Employee's separation from the
service of the Employer (including all subsidiaries and affiliates of the
Employer) by reason of resignation, discharge, death or other termination.  The
Administrator may, in its discretion, determine whether any leave or other
absence from service constitutes a Termination of Employment for purposes of the
Plan.

                                  ARTICLE III

                                  OPTION GRANT

   3.1  ELIGIBILITY. Options may be granted to any Participant approved by the
Administrator who is an executive officer or other employee of the Employer who
occupies a managerial position and has the capability of making a contribution
to the success of the Employer.  In making this selection and in determining the
form and amount of Options, the Administrator shall consider any factors that it
deems relevant, including the individual's functions, responsibilities, value of
services to the Employer and past and potential contributions to the employer's
success and growth.

   3.2  GRANT OF OPTIONS.

   (A) IN GENERAL.  Options may be granted by the Administrator at any time on
or after the Effective Date and prior to the termination of the Plan.  Options
shall become effective upon the execution by the Employer and the Participant of
an Option Agreement specifying the Exercise Price and such other terms and in
such form as the Administrator may from time to time determine in accordance
with the Plan.  The Administrator may in its discretion set the minimum number
of Options allowed to be granted during any calendar year.

   (B) EFFECT OF CASH AND NONCASH DISTRIBUTIONS. In the event of the payment of
cash dividends or other noncash distributions with respect to the Option's
Stock, the following will occur.

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       (i) PAYMENT OF CASH DIVIDENDS. The treatment of cash dividends (or other
   cash distributions) will depend upon the actions taken by the issuer of the
   Stock with respect to such cash dividends or other cash distributions.

            (A) CASH DIVIDENDS REINVESTED AUTOMATICALLY BY ISSUER. Should the
          issuer of the Stock automatically reinvest into additional shares of
          Stock the cash dividends or other cash distributions paid on an
          Option's Stock, then, without further action on the part of the
          Administrator or the Participant, additional Options (for the same
          Stock) shall be considered to be granted to the Participant as of the
          date of such reinvestment.  The grant of new Options because of such
          distribution shall require the issuance of an Option Agreement for
          such new shares at the next normally scheduled Option Grant Date for
          the particular Participant. Any additional Options acquired pursuant
          to this method shall be subject to the same terms and conditions that
          would apply to the issuance of any other new Options under the Plan.
          The Participant shall be notified by the Administrator (or its
          representative) of the payment of the dividends.

            (B) CASH DIVIDENDS PAID TO EMPLOYER. Should the issuer of the Stock
          automatically pay to the Employer the cash dividends or other cash
          distributions paid on such Stock, then these distributions will be
          accumulated in a money market (or similar) account for the benefit of
          the Participant until the next Grant Date, at which time another
          Option shall be granted to the Participant.

       (ii) PAYMENT OF NONCASH DIVIDENDS.  In the event of a stock dividend,
   stock split, reverse stock split, rights offering recapitalization or similar
   transaction that affects the market value or the number of shares of the
   Stock to which an Option relates, then, without further action by the
   Administrator or the Participant, the Option's Exercise Price or the number
   of shares of Stock subject to the Option will be adjusted to maintain the
   same Exercise Price to Fair Market Value ratio that existed just prior to the
   transaction.

       Neither the adjustment of the Option's Exercise Price nor the number of
   shares of Stock subject to the Option shall require the issuance of a new
   Option Agreement reflecting the new Exercise Price or the number of shares of
   Stock now subject to the Option. Instead, the Participant shall be notified
   in writing by the Administrator (or its representative) of the adjustment of
   the Exercise Price or the number of shares of Stock now subject to the
   Option.

                                       4
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   3.3  EXERCISE PRICE.  The Exercise Price shall be initially determined by the
Administrator and shall be noted on the individual Option Agreement signed by
the eligible Participant and the Administrator.  The Administrator has
determined the initial Exercise Price shall equal twenty-five percent (25%) of
the Fair Market Value of the Stock on the Grant Date.  Upon a request to
exercise any Option, the Exercise Price required to be paid by the Participant
shall be the greater of the Exercise Price on the Grant Date or twenty-five
percent (25%) of the Fair Market Value of the Stock on the Exercise Date.

   3.4   SUBSTITUTION OF OPTION PROPERTY.  The Administrator may, in its
discretion, after consultation with the Participant, change the Stock which is
subject to purchase by the Participant upon exercise of the Option. When a
substitution occurs, the Administrator and the Participant are required to
terminate the existing Option Agreement and adopt a new Option Agreement. The
new Option shall be awarded with an Exercise Price which, when subtracted from
the new underlying stock's current trading price, equals the Spread on the
original Option at the date of its termination. The new Option shall also be
subject to the same terms and conditions of the Plan which applied to the
original Option, including the original Exercise Period.  However, in the
discretion of the Committee, the new Option may be awarded with new terms and
conditions applicable only to the new Option, including a new Exercise Period.
Such change in Option property shall be considered the grant of new Options and
the terms of this Plan shall apply to the grant of the new Options.

   In the event that the listing, registration or qualification of the Option or
the Stock on any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary as a
condition of, or in connection with, the exercise of the Option, then the Option
shall not be exercised in whole or in part until such listing, registration,
qualification, consent or approval has been effected or obtained.

   3.5   PURCHASE OF OPTION PROPERTY.  Upon the grant of an Option, the Employer
shall acquire an amount of Stock that represents the difference between (a) the
Fair Market Value of the Stock subject to purchase under the Option, and (b) the
Exercise Price of the Option.  At the time the Option is exercised, the Stock
acquired by the Employer pursuant to the preceding sentence shall not be subject
to any security interest, whether or not perfected, or to any Option or contract
under which any other person may acquire any interest in it.

   Upon a change in Option property pursuant to Section 3.4 above, the Employer
shall acquire new Stock that represents the difference between (a) the Fair
Market Value (taken as of the Grant Date of the new Option) of the new Stock
subject to purchase under the Option, and (b) the Exercise Price of the Option,
and the Employer may dispose of any Stock it holds which no longer represents
Stock subject to the Option.

   3.6  DESIGNATION OF BENEFICIARY.  As soon as practicable after the grant of
an Option, the Participant shall designate one or more Beneficiaries and
successor Beneficiaries, and may change a Beneficiary designation at any time,
by filing the prescribed form with the Administrator.  The consent of the
Participant's current Beneficiary shall not be required for a change of
Beneficiary.  No Beneficiary shall have any rights under the Plan or an Option
Agreement during the lifetime of the Participant, except as may otherwise be
provided herein.

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   A Participant who dies without having designated a Beneficiary in accordance
with this Section 3.6 and who is lawfully married on the date of death shall be
deemed to have named the Participant's surviving spouse as Beneficiary.

   Any other Participant who dies without having designated a Beneficiary in
accordance with this Section 3.6 shall be deemed to have named the Participant's
estate as Beneficiary.

   3.7  General Non-Transferability.  No Option granted under this Plan may be
transferred, assigned, or alienated (whether by operation of law or otherwise),
except as provided herein, and no Option shall be subject to execution,
attachment or similar process.  An Option may be exercised only by the
Participant or the Participant's Beneficiary pursuant to Section 3.6 or the
Participant's assignee pursuant to Section 3.8.

   3.8  PERMITTED TRANSFERS.  Notwithstanding the provisions of Section 3.7, a
Participant may at any time prior to death, assign all or any Options to:

       (a) the Participant's spouse or lineal descendants,

       (b) the trustee of a trust for the primary benefit of the Participant's
   spouse and/or lineal descendants, or

       (c) a partnership of which the Participant's spouse and/or lineal
   descendants are the only partners.

   Any such assignment shall be permitted only if an assignment is expressly
permitted in the Option Agreement, or approved in writing by the Administrator,
and the Participant receives no consideration for the assignment.  Any such
assignment shall be evidenced by an appropriate written document executed by the
Participant, and delivered to the Administrator on or before the effective date
of the assignment.  In the event of such assignment, the spouse, lineal
descendant, trustee or partnership shall be entitled to all of the rights of the
Participant with respect to the assigned portion of the Option, and such portion
of the Option, shall continue to be subject to all of the terms, conditions and
restrictions applicable to the Option, as set forth in the Plan and the Option
Agreement.

                                   ARTICLE IV

                                OPTION EXERCISE

   4.1  EXERCISE PERIOD. A Participant or the Participant's Beneficiary pursuant
to section 3.6 may exercise all or any Options at any time during the period
beginning six (6) months after the Grant Date and ending on the earliest of -

   fifteen (15) years after the date of grant, or

   six (6) months after his Termination of Employment, if he is terminated
     involuntarily for cause, or

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   sixty (60) months after the Participant's date of death if the Termination of
     Employment is on account of retirement, death or disability, or

   sixty (60) months after the Participant's Termination of Employment, if his
     termination is for any reason not specified above in this Section 4.1.

   If a Participant or his Beneficiary fails to exercise an Option within the
Exercise Period, then the Participant or his Beneficiary or assignee loses all
rights with respect to such Option upon expiration of the Exercise Period.
Notwithstanding the foregoing, at no time shall the Exercise Period be less than
six months from the Grant Date or less than one year after the date of death of
the participant.

   4.2  OPTION EXERCISE.  A Participant or the Participant's Beneficiary
pursuant to Section 3.6 may exercise all or any of his Options by giving written
notice to the Administrator and tendering full payment of the Exercise Price by
check or other means acceptable to the Administrator on or about the Exercise
Date.  As provided in the Option Agreement, or with the prior written consent of
the Administrator, the Participant may tender payment in whole or in part
through the surrender of previously acquired Stock valued at Fair Market Value
on the Exercise Date.  The minimum number of Options allowed to be exercised at
any one time is the lesser of the following: (1) 50% of the total number of
Options currently eligible to be exercised or, (2) the number of Options for
which the Fair Market Value of the underlying Stock totals $5,000; provided,
however, that the Administrator may in its discretion permit the exercise of
fewer Options in certain exceptional circumstances.  For these purposes, the
term "underlying Stock" means the Stock which will be acquired by the
Participant upon the exercise of the Option. Any terms not specified in the Plan
shall be specified in the Option Agreement.  Neither the Participant nor his
Beneficiary shall have any of the rights and privileges of a shareholder with
respect to any Stock purchasable or issuable upon the exercise of an Option
prior to the date of exercise of such Option in accordance with this Section
4.2.

   In the event that the listing, registration or qualification of the Option or
the Stock on any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary as a
condition of, or in connection with, the exercise of the Option, then the Option
will not be exercised in whole or in part until such listing, registration,
qualification, consent or approval has been effected or obtained.

   4.3  DELIVERY OF STOCK.  Within 5 (five) business days following the date
that a participant satisfies the conditions for exercising an Option in
accordance with Section 4.2, the Employer shall deliver or cause to be delivered
the Stock subject to such Option to the Participant or the Participant's
Beneficiary Pursuant to Section 3.6.

   4.4  TAX WITHHOLDING.  Whenever Stock is to be delivered upon exercise of an
Option under the Plan, the Employer shall require as a condition of such
delivery (a) the cash payment by the Participant of an amount sufficient to
satisfy all federal, state and local tax withholding requirements related
thereto, (b) the withholding of such amount from any Stock to be delivered to
the Participant, (c) the withholding of such amount from compensation otherwise
due to the Participant, or (d) any combination of the foregoing, at the election
of the Participant with the consent of the Employer.  Such election shall be
made before the date on

                                       7
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which the amount of tax to be withheld is determined by the Employer, and such
election shall be irrevocable. With the consent of the Employer, the Participant
may elect a greater amount of withholding, not to exceed the estimated amount of
the Participant's total tax liability with respect to the delivery of Stock
under the Plan. Such election shall be made at the same time and in the same
manner as provided above.

   4.5  FAILURE TO EXERCISE.  No Option shall be exercised, in whole or in part,
after the end of the Exercise Period as stated in Section 4.1, and the Employer
shall have no obligation to deliver or cause to be delivered to the Participant
or the Participant's Beneficiary pursuant to Section 3.6 the Stock subject to
such Option.

                                   ARTICLE V

                            AMENDMENT OR TERMINATION

   5.1  PLAN AMENDMENT.  The Administrator may, from time to time in its
discretion, amend any provision of the Plan, in whole or in part, subject to
section 5.3 of the plan with respect to any Participant or group of
Participants.  Such amendment shall be effective as of the date specified
therein and shall be binding upon the Administrator, all Participants and
Beneficiaries, and all other persons claiming an interest under the Plan.

   5.2  PLAN TERMINATION.  The Plan shall terminate as the Administrator may
determine in its discretion.  Such termination shall be effective as of the date
determined by the Administrator and shall be binding upon the Administrator, all
Participants and Beneficiaries, and all other persons claiming an interest under
the Plan.  Options shall continue to be exercisable after the effective date of
such termination, and may be exercised in accordance with Article IV, but no new
Options shall be granted, except for Options required to be granted under
Section 3.2(b).

   5.3  AMENDMENT OF OPTIONS.  An Option may be amended by the Administrator at
any time if the Administrator determines that an amendment is necessary or
advisable as a result of:

       (A) any addition to or change in the Code or ERISA, a federal or state
   securities law or any other law or regulation, which occurs after the Grant
   Date and by its terms applies to the Option,

       (B) any substitution of stock acquired pursuant to Section 3.5, or

       (C) any Plan amendment pursuant to Section 5.1, or Plan termination
   pursuant to Section 5.2, provided that the amendment or termination does not
   materially affect the terms, conditions and restrictions applicable to the
   Option, or

       (D) any circumstances not specified in Paragraphs (a), or (b), or (c),
   with the consent of the Participant.

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   5.4  CHANGE OF CONTROL.  Notwithstanding any other provision of the Plan or
an Option Agreement, in the event of a Change of Control, the Exercise Period
under Section 4.1 shall not end prior to six months after such Change of
Control, and the Option Agreement shall not be amended by the Administrator
under Section 5.3 for any reason without the consent of the Participant.

                                   ARTICLE VI

                                 ADMINISTRATION

   6.1  THE ADMINISTRATOR.  The Plan shall be administered by the Administrator
as defined in Section 2.1 of the Plan.

   6.2  POWERS OF THE ADMINISTRATOR.  In carrying out its duties with respect to
the general administration of the Plan, the Administrator shall have, in
addition to any other powers conferred by the Plan or by law, the following
powers:

       (a) to determine eligibility to participate in the Plan and eligibility
   to receive Options;

       (b) to grant Options, and to determine the form, amount and timing of
   such Options;

       (c) to determine the terms and provisions of the Option Agreements, and
   to modify such Option Agreements as provided in Section 5.3;

       (d) to maintain all records necessary for the administration of the Plan;

       (e) to prescribe, amend, and rescind rules for the administration of the
   Plan to the extent not inconsistent with the terms thereof;

       (f) to appoint such individuals and committees as it deems desirable for
   the conduct of its affairs and the administration of the Plan;

       (g) to employ counsel, accountants and other consultants to aid in
   exercising its powers and carrying out its duties under the Plan; and

       (h) to perform any other acts necessary and proper for the conduct of its
   affairs and the administration of the Plan.

   6.3  DETERMINATIONS BY THE ADMINISTRATOR.  The Administrator shall interpret
and construe the Plan and the Option Agreements, and its interpretations and
determinations shall be conclusive and binding on all Participants and
Beneficiaries.  The Administrator's interpretations and determinations under the
Plan and the Option Agreements need not be uniform and may be made by it
selectively among Participants, Beneficiaries and any other persons whether or
not they are similarly situated.

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   6.4  INDEMNIFICATION OF THE ADMINISTRATOR.  The Employer shall indemnify and
hold harmless the Administrator against any and all expenses and liabilities
arising out of such member's action or failure to act in such capacity,
excepting only expenses and liabilities arising out of the Administrator's own
willful misconduct or failure to act in good faith.

   Expenses and liabilities against which a member of the Administrator is
indemnified hereunder shall include, without limitation, the amount of any
settlement or judgment, costs, counsel fees and related charges reasonably
incurred in connection with a claim asserted or a proceeding brought against him
or the settlement thereof.

   This right of indemnification shall be in addition to any other rights to
which the Administrator may be entitled.

   The Employer may, at its own expense, settle any claim asserted or proceeding
brought against the Administrator when such settlement appears to be in the best
interests of the Employer.

   6.5  EXPENSES OF THE ADMINISTRATOR.  The Administrator shall serve without
compensation for services as such.  All expenses of the Administrator shall be
paid by the Employer.

                                  ARTICLE VII

                            MISCELLANEOUS PROVISIONS

   7.1  HEADINGS.  The headings of articles, sections and paragraphs are solely
for convenience of reference.  If there is any conflict between such headings
and the text of this Plan, the text shall control.

   7.2  GENDER.  Unless the context clearly requires a different meaning, all
pronouns shall refer indifferently to persons of any gender.

   7.3  SINGULAR AND PLURAL.  Unless the context clearly requires a different
meaning, singular terms shall also include the plural and vice versa.

   7.4  GOVERNING LAW.  Except to the extent preempted by federal law, the
construction and operation of the Plan shall be governed by the laws of the
State of Maryland without regard to the choice of law principles of such state.

   7.5  SEVERABILITY.  If any provision of this Plan is held illegal or invalid
by any court or governmental authority for any reason, the remaining provisions
shall remain in full force and effect and shall be construed and enforced in
accordance with the purposes of the Plan as if the illegal or invalid provision
did not exist.

   7.6  NO OBLIGATION TO EXERCISE.  The granting of an Option shall impose no
obligation upon a Participant to exercise such Option.

                                       10
<PAGE>

   7.7  NO RIGHTS OF SHAREHOLDER.  Neither the Participant nor a Beneficiary
shall have any of the rights and privileges of a shareholder with respect to any
Stock purchasable or issuable upon the exercise of an Option prior to the date
of exercise of such Option in accordance with Section 4.2 of the Plan.

   7.8  NO RIGHT TO CONTINUED EMPLOYMENT.  Nothing contained in the Plan shall
be deemed to give any person the right to be retained in the employ of the
Employer, or to interfere with the right of the Employer to discharge any person
at any time without regard to the effect that such discharge shall have upon
such person's rights or potential rights, if any, under the Plan.  The
provisions of the Plan are in addition to, and not a limitation on, any rights
that a Participant may have against the Employer by reason of any employment or
other agreement with the Employer.

   7.9  NOTICES.  Unless otherwise specified in an Option Agreement, any notice
to be provided under the Plan to the Administrator shall be mailed (by certified
mail, postage prepaid) or delivered to the Administrator in care of the Employer
at its executive offices, and any notice to the Participant shall be mailed (by
certified mail, postage prepaid) or delivered to the participant at the current
address shown on the payroll records of the Employer.  No notice shall be
binding on the Administrator until received by the Administrator, and no notice
shall be binding on the Participant until received by the Participant.



  IN WITNESS WHEREOF, The Rouse Company has caused these presents to be executed
by its duly authorized officer as of the 31st day of December, 1997.

                                    The Rouse Company
[Corporate Seal]

                              By:

                              Title:   ______________________________

                                       11
<PAGE>

                               THE ROUSE COMPANY
                              SPECIAL OPTION PLAN

                                OPTION AGREEMENT

The capitalized terms in this Option Agreement (the "Agreement") shall have the
same meanings as they do in The Rouse Company Special Option Plan (the "Plan").

     1.  Options shall be granted to _________________________ (name of
participant) as of the following Grant Dates, provided that Options shall be
granted to the Participant only on such dates as the Participant is eligible to
receive an Option under Article III of the Plan:


     Grant Date 1:  ____________________

     Grant Date 2:  ____________________

     Grant Date 3:  ____________________

     Grant Date 4:  ____________________


     2.  The number of Options granted pursuant to this Agreement as of each
Grant Date, the Stock subject to each such Option as of the applicable Grant
Date, and the Fair Market Value of such Stock on the applicable Grant Date,
shall be as set forth in the attached Addendum to this Agreement.

     3.  The initial Exercise Price for an Option as of the applicable Grant
Date shall equal twenty-five percent (25%) of the Fair Market Value of the Stock
subject to such Option on such Grant Date. The Exercise Price shall thereafter
be adjusted such that the Exercise Price to be paid upon exercise of the Option
shall be the greater of (a) the initial Exercise Price, or (b) twenty-five
percent (25%) of the Fair Market Value of the Stock subject to the Option on the
Exercise Date.

     4.  Except as specifically provided in this Agreement, the rights of the
Participant, or any other person entitled to exercise the Options, are governed
by the terms and provisions of the Plan which are incorporated by reference into
this Agreement.

     5.  The Options may be exercised only by the Participant, the Participant's
Beneficiary, or the Participant's assignee.  In addition, under the terms of
this Agreement, the transfer of Options is not allowable except as permitted
under Section 3.8 of the Plan.  The Options shall not otherwise be transferred,
assigned, pledged or hypothecated (whether by operation of law or otherwise),
except as provided herein, and no Options shall be subject to execution,
attachment or similar process.
<PAGE>

     6.  As a condition to receiving delivery and title to Stock subject to an
Option under the Plan, a Participant must properly complete the Option Exercise
Form provided by the Administrator and deliver the form to the Administrator in
person or mail (by certified mail, postage prepaid) the form to the
Administrator at the following address:

                         Vice President and Director of Human
                         Resources and Administrative Services
                         Division;
                         The Rouse Company
                         10275 Little Patuxent Parkway
                         Columbia, Maryland  21044-3456


     7.  Payment of the Exercise Price shall be made by check or other means
acceptable to the Administrator no later than one (1) business day after the
Exercise Date, or such later date as the Administrator permits in its
discretion, and the Participant must satisfy all federal, state and local
withholding tax requirements in any manner permitted under the Plan.

     8.  Options may be exercised at any time during the period beginning six
(6) months after the applicable Grant Date and ending the earliest of:

     fifteen (15) years after the Grant Date, or

     six (6) months after the Participant's Termination of Employment, if he is
terminated involuntarily for cause, or

     sixty (60) months after the Participant's date of death if the Termination
of Employment is on account of retirement, death or disability, or

     sixty (60) months after the Participant's Termination of Employment, if his
termination is for any reason not specified above or in Section 4.1 of the Plan;

     provided that in no event shall the Exercise Period for an Option be less
than six months from the Grant Date or less than one year after the date of
death of the Participant.

     9.  Neither the Participant nor a Beneficiary or assignee shall have any of
the rights or privileges of a stockholder with respect to any Stock purchasable
or issuable upon the exercise of an Option unless and until such Option is
exercised by such Participant or Beneficiary or assignee in accordance with
Section 4.2 of the Plan, and the transfer of ownership of the shares of Stock
has been completed.

     10.  The Options are conditioned upon the acceptance of this Agreement by
the Participant as evidenced by the return of an executed copy to the
Administrator.

     11.  Except to the extent preempted by federal law, the Options and this
Agreement shall be construed and interpreted according to the laws of the State
of Maryland without regard to its choice of law principles.
<PAGE>

The Rouse Company

By: __________________________________  Date: __________________________________


The undersigned has consulted with tax and legal advisors and is not relying on
the advice or representations of the Employer or the Administrator on any legal
or tax matters.

-----------------------------------     ------------------------------------
Participant                             Date:

<PAGE>

                               THE ROUSE COMPANY
                              SPECIAL OPTION PLAN

                           OPTION AGREEMENT ADDENDUM



PARTICIPANT:    ___________________________

GRANT DATE:     ___________________________



<TABLE>
<CAPTION>
    NAME OF STOCK            PER UNIT OR SHARE       NUMBER OF SHARES       AGGREGATE FAIR MARKET       EXERCISE PRICE PER UNIT
  SUBJECT TO OPTION         VALUE ON GRANT DATE          OR UNITS            VALUE AT GRANT DATE            ON GRANT DATE
<S>                       <C>                     <C>                      <C>                          <C>

______________________    ______________________  ______________________   ______________________       ______________________

______________________    ______________________  ______________________   ______________________       ______________________

______________________    ______________________  ______________________   ______________________       ______________________

______________________    ______________________  ______________________   ______________________       ______________________

______________________    ______________________  ______________________   ______________________       ______________________

______________________    ______________________  ______________________   ______________________       ______________________

______________________    ______________________  ______________________   ______________________       ______________________

______________________    ______________________  ______________________   ______________________       ______________________

______________________    ______________________  ______________________   ______________________       ______________________

______________________    ______________________  ______________________   ______________________       ______________________

______________________    ______________________  ______________________   ______________________       ______________________
</TABLE>
<PAGE>

                              EMPLOYMENT AGREEMENT
                              --------------------


          This employment agreement ("Agreement") is entered into this 1st day
of May, 1996, by and between TRC ACQUISITION COMPANY I, THE ROUSE COMPANY and
JOHN L. GOOLSBY (the "Executive").

                             EXPLANATORY STATEMENT
                             ---------------------

          The Executive is currently the President and Chief Executive Officer
of The Hughes Corporation ("THC"), a Delaware corporation which is to be merged
with and into TRC Acquisition Company I, a subsidiary of The Rouse Company
("Rouse") on or about June 1, 1996, pursuant to an Agreement and Plan of Merger
dated February 22, 1996 among THC, Rouse and TRC Acquisition Company I (the
"Merger"). Following the Merger, TRC Acquisition Company I, as the surviving
corporation will be a wholly owned subsidiary of Rouse, and will be renamed "The
Howard Hughes Corporation". (TRC Acquisition Company I as it currently exists
and as it is intended to exist after the Merger under the name "The Howard
Hughes Corporation" is herein referred to as the "Company".) It is intended that
the Company will conduct all of the business currently being conducted by The
Hughes Corporation and by Howard Hughes Properties, Limited Partnership and
their respective affiliates and subsidiaries. Rouse wishes to provide
<PAGE>

for the Executive's continued employment as Chief Executive Officer of the
Company following the Merger.

          NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties agree as follows:

          1.   Employment, Term and Duties.
               ---------------------------
          1.1       Employment.  The Company hereby employs the Executive and
                    ----------
the Executive hereby accepts employment by the Company on the terms and
conditions set forth in this Agreement.

          1.2       Term.  The Executive's employment shall commence on the
                    ----
effective date of the Merger (the "Effective Date") and shall terminate on June
30, 1999, unless earlier terminated as provided in Section 4 below (the "Term").

          1.3       Duties.  During the Term, the Executive shall serve as the
                    ------
President and the Chief Executive Officer of the Company, with such customary
duties and responsibilities as are incident to said positions, including such
authority, duties, and responsibilities as set forth with respect to such
offices in the Company's articles and bylaws. The Executive shall report
directly to the Chief Executive Officer of Rouse (the "Rouse CEO"). The
Executive and the Company acknowledge that the Executive's responsibilities and
relationships with respect to the Company and Rouse are more fully described in
a letter dated

                                      -2-
<PAGE>

March 29, 1996 from Anthony W. Deering to the Executive, to which reference is
hereby made. The Executive agrees to devote substantially all his attention and
time during normal business hours to the business and affairs of the Company and
to use his reasonable best efforts to perform faithfully and efficiently the
duties and responsibilities assigned to the Executive. Notwithstanding the
foregoing, the Executive may engage in the following activities (and shall be
entitled to retain all economic benefits thereof including fees paid in
connection therewith) as long as they do not interfere in any material respect
with the performance of the Executive's duties and responsibilities hereunder:
(i) serve on corporate, civic, religious, educational and/or charitable boards
or committees, (ii) deliver lectures, fulfill speaking engagements or teach on a
part-time basis at educational institutions and (iii) make investments in
businesses or enterprises and manage his personal investments; provided that
with respect to such activities Executive shall comply with Business Conduct and
Ethics Policy applicable to employees of Rouse and its subsidiaries. The parties
acknowledge that the Executive's participation as a director of the commercial
corporations listed on Schedule 1 attached hereto have been approved by the
Rouse CEO.

                                      -3-
<PAGE>

          2.   Compensation and Other Benefits.
               -------------------------------

          2.1       Base Compensation.  As compensation for services rendered
                    -----------------
during the Term, the Company shall pay to the Executive an annual salary of
$475,000 (the "Base Salary"). The Personnel Committee of the Board of Directors
of Rouse (the "Committee") shall conduct a review of the Base Salary in
February, 1997, and thereafter at such time or times as the Committee reviews
the annual compensation of the executives of Rouse in general, and the Executive
shall be entitled at such time or times to such annual increase in the Base
Salary as is in accordance with the then prevailing policy of Rouse with respect
to executive compensation in general; provided, that such salary may not be
reduced at any time. The Base Salary shall be payable in accordance with the
payroll policies of Rouse as from time to time in effect, less such amounts as
shall be required to be deducted or withheld therefrom by applicable law and
regulations.

          2.2       Annual Bonus. In addition to the Base Salary, the Executive
                    ------------
shall be eligible to receive, for each calendar year or portion thereof
occurring during the Term, an annual bonus (the "Annual Bonus") in an amount up
to seventy-five percent (75%) of the Executive's Base Salary for such calendar
year or portion thereof. The amount of any such Annual Bonus

                                      -4-
<PAGE>

shall be determined by the Committee, based on the recommendation of the Rouse
CEO, in accordance with the standard practice of such Committee relating to the
incentive compensation program of Rouse. The Annual Bonus shall be paid to the
Executive, less such amounts as shall be required to be deducted or withheld
therefrom by applicable law and regulations, at such time or times as is in
accordance with the then prevailing policy of Rouse relating to incentive
compensation payments.

          2.3       Stock Grant and Stock Option.
                    ----------------------------
          (a) Stock Grant and Loan.  As of the Effective Date, Rouse shall grant
              --------------------
Executive a stock grant of 40,000 shares of Rouse's Common Stock pursuant to
Rouse's 1994 Stock Incentive Plan.  The terms, conditions and restrictions with
regard to such stock grant shall be evidenced by a letter agreement between
Rouse and the Executive in the form of Exhibit A attached hereto which shall be
                                       ---------
incorporated herein by reference and its terms, conditions and notifications
shall be considered a part of this Agreement.

          In connection with the stock grant, Executive shall be entitled to
receive a loan from Rouse for the purpose of funding income tax payable with
regard to the stock grant in an amount equal to one-half ( 1/2) of the product
of (i) 40,000 shares

                                      -5-
<PAGE>

multiplied by (ii) the market price per share of Rouse Common Stock as of the
Effective Date. The terms and conditions of said loan shall be evidenced by a
loan agreement substantially in the form of Exhibit B attached hereto which
                                            ---------
shall be incorporated herein by reference and its terms, conditions and
notifications shall be considered a part of this Agreement.

          b.        Stock Options.  As of the Effective Date, Rouse shall grant
                    -------------
Executive a stock option for 40,000 shares of Rouse Common Stock pursuant to
Rouse's 1994 Stock Incentive Plan. The maximum number of such options which
qualify as "qualified stock options" shall be granted as "qualified stock
options" and the remainder of such options shall be non-qualified stock options.
The terms, conditions and restrictions with regard to said stock options shall
be evidenced by an Incentive Stock Option Agreement (as to the qualified stock
options) and a Nonqualified Stock Option Agreement (as to the non-qualified
stock options), substantially in the forms attached hereto as Exhibit C-1 and
                                                              -----------
Exhibit C-2 respectively which shall be incorporated herein by reference and
-----------
their terms, conditions and restrictions shall be considered a part of this
Agreement.

          2.4       Participation in Employee Benefit Plans. The Company agrees
                    ---------------------------------------
to permit the Executive during the Term to

                                      -6-
<PAGE>

participate in any group life, hospitalization and/or disability insurance plan,
health program, supplemental executive retirement plan, nonqualified
compensation plan, pension and/or savings plans, long-term incentive plan,
receive "fringe benefits," e.g., club memberships and automobile allowance, and
                           ----
participate in such other benefit plans or programs of the Company (collectively
"Benefits"). The Company also agrees to implement such other benefit plans (the
"Other Benefit Plans") for the benefit of Executive to the extent Rouse offers
its comparable senior executives benefits that are not currently offered by the
Company. The Other Benefit Plans shall provide Executive benefits that are no
less favorable than those benefits which are available to comparable senior
executives of Rouse or its subsidiaries. For this purpose, a comparable
executive shall be the Executive Vice President of Rouse, and such benefits
shall be no less than those offered to the Executive Vice President of Rouse. In
addition, the Company agrees that for purposes of determining Executive's
eligibility for the Benefits and the Other Benefit Plans, Executive's prior
service with Summa Corporation, THC and Howard Hughes Properties, Limited
Partnership and their respective affiliates and subsidiaries shall count towards
the Executive's eligibility, vesting and

                                      -7-
<PAGE>

benefit accrual under the plans, and the Company agrees to take all action that
may be necessary to amend the respective plan documents to provide for this past
service credit. The Company also agrees to provide life insurance to the
Executive during the Term in an amount equal to two times the Executive's Base
Compensation.

          2.5       General Business Expenses. The Company shall pay or
                    -------------------------
reimburse the Executive for all expenses that are consistent with Rouse policy
and reasonably and necessarily incurred by the Executive during the Term in the
performance of the Executive's duties under this Agreement. Such payment shall
be made upon presentation of such documentation as Rouse customarily requires of
its executive employees prior to making such payments or reimbursements.

          2.6.           Vacation.  During the Term, the Executive shall be
                         --------
entitled to five weeks of vacation per year. The Executive shall not be
permitted to accumulate and carryover unused vacation time or pay from year to
year except to the extent permitted in accordance with Rouse's vacation policy
for senior executives.

                                      -8-
<PAGE>

          3.          Non-Competition.
                      ---------------

          3.1         Covenants Against Competition. The Executive acknowledges
                      -----------------------------
that as of the execution of this Employment Agreement (i) the Company is engaged
in the business of commercial and community real estate development and office
and industrial building development (the "Business") (provided the Business
shall not be deemed to include residential real estate brokerage or residential
construction activities); (ii) the Company's Business is conducted in the
greater Las Vegas, Nevada metropolitan area; (iii) his employment with the
Company will have given him access to confidential information concerning the
Company; and (iv) the agreements and covenants contained in this Agreement are
essential to protect the business and goodwill of the Company. Accordingly, the
Executive covenants and agrees as follows:

               (a) Non-Compete.  Without the prior written consent of the Chief
                   ------------
     Executive Officer of Rouse or the Board of Directors of the Company, the
     Executive shall not during the Restricted Period (as defined below) in the
     greater Las Vegas, Nevada metropolitan area, directly (except in the
     Executive's capacity as an officer of the Company or any of its
     affiliates); (i) engage or participate in the Business;

                                      -9-
<PAGE>

     (ii) enter the employ of, or render any services (whether or not for a fee
     or other compensation) to, any person engaged in the Business; or (iii)
     acquire an equity interest in any such person in any capacity; provided,
     that the foregoing restrictions shall not apply at any time if the
     Executive's employment is terminated during the Term by the Executive for
     Good Reason (as defined in the Executive's Option Agreement) or by the
     Company without good cause (as defined in the Executive's Loan Agreement);
     provided, further, that during the Restricted Period the Executive may own,
     ------------------
     directly or indirectly, solely as a passive investment, securities of any
     company traded on any national securities exchange or on the National
     Association of Securities Dealers Automated Quotation System. As used
     herein, the "Restricted Period" shall mean the period commencing with the
     effective date of this Agreement and ending on the first anniversary of the
     last day of the Term.

               (b) Confidential Information; Personal Relationships. The
                   ------------------------------------------------
     Executive acknowledges that the Company has a legitimate and continuing
     proprietary interest in the protection of its confidential information and
     has invested substantial sums and will continue to invest substantial

                                      -10-
<PAGE>

     sums to develop, maintain and protect confidential information. The
     Executive agrees that, during and after the Restricted Period, without the
     prior written consent of the Chief Executive Officer of Rouse or the Board
     of Directors of the Company, the Executive shall keep secret and retain in
     strictest confidence, and shall not knowingly use for the benefit of
     himself or others all confidential matters relating to the Company's
     Business including, without limitation, operational methods, marketing or
     development plans or strategies, business acquisition plans, joint venture
     proposals or plans, and new personnel acquisition plans, learned by the
     Executive heretofore or hereafter (such information shall be referred to
     herein collectively as "Confidential Information"); provided, that nothing
     in this Agreement shall prohibit the Executive from disclosing or using any
     Confidential Information (A) in the performance of his duties hereunder,
     (B) as required by applicable law, (C) in connection with the enforcement
     of his rights under this Agreement or any other agreement with the Company
     or Rouse, or (D) in connection with the defense or settlement of any claim,
     suit or action brought or threatened against the Executive by or in the
     right of the

                                      -11-
<PAGE>

     Company or Rouse. Notwithstanding any provision contained herein to the
     contrary, the term "Confidential Information" shall not be deemed to
     include any general knowledge, skills or experience acquired by the
     Executive or any knowledge or information known or available to the public
     in general. Moreover, the Executive shall be permitted to retain copies of,
     or have access to, all such Confidential Information relating to any
     disagreement, dispute or litigation (pending or threatened) involving the
     Executive.

               (c) Employees of the Company and its Affiliates. During the
                   -------------------------------------------
     Restricted Period, without the prior written consent of the Chief Executive
     Officer of Rouse or the Board of Directors of the Company, the Executive
     shall not, directly or indirectly, hire or solicit, or cause others to hire
     or solicit, for employment by any person other than the Company or any
     affiliate or successor thereof, any employee of, or person employed within
     the two years preceding the Executive's hiring or solicitation of such
     person by, the Company and its affiliates or successors or encourage any
     such employee to leave his employment.  For this purpose, any person whose
     employment has been terminated involuntarily by Rouse or the Company shall
     be excluded from

                                      -12-
<PAGE>

     those persons protected by this Section 3.1(c) for the benefit of the
     Company.

               (d) Business Relationships.  During the Restricted Period, the
                   ----------------------
     Executive shall not, directly or indirectly, request or advise a person
     that has a business relationship with the Company to curtail or cancel such
     person's business relationship with the Company.

          3.2       Rights and Remedies Upon Breach.  If the Executive breaches,
                    -------------------------------
or threatens to commit a breach of, any of the provisions contained in Section
3.1 of this Agreement (the "Restrictive Covenants"), the Company shall have the
following rights and remedies, each of which rights and remedies shall be
independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or in equity.

               (a) Specific Performance.  The right and remedy to have the
                   --------------------
     Restrictive Covenants specifically enforced by any court of competent
     jurisdiction, it being agreed that any breach or threatened breach of the
     Restrictive Covenants would cause irreparable injury to the Company and
     that money damages would not provide an adequate remedy to the Company.

                                      -13-
<PAGE>

               (b) Accounting.  The right and remedy to require the Executive to
                   ----------
     account for and pay over to the Company all compensation, profits, monies,
     accruals, increments or other benefits derived or received by the Executive
     as the result of any action constituting a breach of Restrictive Covenants.

          3.3  Severability of Covenants.  The Executive acknowledges and agrees
               -------------------------
that the Restrictive Covenants are reasonable and valid in duration and
geographical scope and in all other respects.  If any court determines that any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect without regard to the invalid portions.  The
provisions set forth in Section 3.1 above shall be in addition to any other
provisions of the Business Conduct and Ethics Policy applicable to employees of
Rouse and its subsidiaries during the term of Executive's employment.

          4.   Termination.
               -----------

          4.1       Termination upon Death or Disability.  If the Executive
                    ------------------------------------
either dies or becomes entitled to benefits under a Company long-term disability
plan or program during the Term, the

                                      -14-
<PAGE>

Term shall automatically terminate thereupon, and the Executive or the
Executive's estate, as the case may be, shall be entitled to receive, in
addition to any life insurance or disability benefits which are payable, as soon
as reasonably practicable after the separate determinations thereof, (i) the
Base Salary earned, but unpaid, up to such date of termination, (ii) any unpaid
vested Benefits accrued up to such date of termination, (iii) an amount equal to
the product of (a) the Annual Bonus, if any, otherwise payable with respect to
the year in which the Term is terminated, multiplied by (b) a fraction, the
numerator of which is the number of days elapsed in such year as of the
termination date and the denominator of which is 365. These items are in
addition to and shall not reduce any other benefits to which the Executive or
his estate may be entitled (such as the stock grant, the loan agreement, and the
stock options).

          4.2  Other Termination.
               -----------------

          (a) Termination With and Without Cause. Notwithstanding any provision
              ----------------------------------
     of the Agreement to the contrary, the Company has the right, at any time
     during the Term, exercisable by serving written notice, effective on or
     after the date of service of such notice as specified therein, to terminate
     the Executive's employment under this

                                      -15-
<PAGE>

     Agreement and to discharge the Executive with or without cause. To be
     valid, any such notice may be effective no sooner than 30 days after
     service, and it must state whether the termination is with cause (and the
     reasons therefor) or without cause. Any such termination of employment by
     the Company, whether with or without cause or voluntary or involuntary,
     shall terminate the Term and thereafter no amounts shall be payable, or
     Benefits provided, to the Executive by the Company pursuant to this
     Agreement except as provided herein, including: (i) the Base Salary then
     earned, but unpaid, plus an amount equal to the Base Salary which would
     have been earned up to and including the end of the Term (as otherwise
     determined before such termination), (ii) any unpaid vested Benefits
     accrued up to such date of termination, (iii) an amount equal to the
     aggregate of the Annual Bonuses which would have been payable on account of
     any periods ending on or before the end of the Term (as otherwise
     determined before such termination), which bonuses shall, for each such
     period be equal to sixty percent (60%) of the then current Base Salary. All
     of the foregoing amounts shall be payable in a lump sum, less such amounts
     as shall be required to be deducted or withheld therefrom by

                                      -16-
<PAGE>

     applicable law and regulations, within fifteen (15) days after the
     termination date. (iv) To the extent the Executive is eligible thereunder,
     for a period through the end of the Term (as otherwise determined before
     termination pursuant to Section 4.2 hereof), the Executive shall continue
     to be provided life insurance, disability, long-term disability policies
     and any other Benefits provided to the Executive on the date hereof or such
     successor policies in effect at the time of the Executive's termination,
     and shall also continue to be covered for the applicable period by such
     other insurance, disability, health or other Benefit program, plan or
     policy by which he was covered at the time of the Executive's termination.
     In the event the Executive is ineligible to continue to be so covered under
     the terms of any such life insurance, disability, long-term disability,
     insurance, health or other Benefit program, plan or policy, the Company
     shall provide to the Executive through other sources such benefits,
     including such additional benefits, as may be necessary to make the
     benefits applicable to the Executive substantially equivalent to those in
     effect immediately prior to such termination, provided that if during such
                                                   --------
     period the

                                      -17-
<PAGE>

     Executive should enter into the employ of another company or firm which
     provides to the Executive substantially similar benefit coverage, the
     Executive's participation in the comparable benefits provided by the
     Company, either directly or through such other sources, shall cease.
     Nothing contained in this paragraph shall be deemed to require or permit
     termination or restriction of any of the Executive's coverage under any
     plan or program of the Company or any of its subsidiaries or any successor
     plan or program thereto to which the Executive is entitled under the terms
     of such plan or program, whether at the end of the aforementioned period or
     at any other time.

          These items are in addition to and shall not reduce any other benefits
     to which the Executive may be entitled (such as, the stock grant, the loan
     agreement, and the stock options).

          Nothing in this Agreement shall prevent the Executive's right to
terminate his employment with the Company.

          (b) Termination for Good Reason.  Notwithstanding any provision of the
              ---------------------------
     Agreement to the contrary, the Executive has the right, at any time during
     the Term, exercisable by serving written notice, effective on or after the
     date of

                                      -18-
<PAGE>

     service of such notice as specified therein, to terminate his employment
     under this Agreement with or without Good Reason (as defined in the
     Executive's option agreement). Any such termination shall terminate the
     Term, and in the case of the Executive's termination for Good Reason, the
     following amounts shall be payable or provided by the Company: (i) the Base
     Salary then earned, but unpaid, plus an amount equal to the Base Salary
     which would have been earned up to and including the end of the Term (as
     otherwise determined before such termination), (ii) any unpaid vested
     Benefits accrued to such date of termination, (iii) an amount equal to the
     aggregate Annual Bonuses which would have been payable on account of any
     periods ending on or before the end of the Term (as otherwise determined
     before such termination) which bonuses shall, for each such period be equal
     to sixty percent (60%) of the then current Base Salary. All of the
     foregoing amounts shall be payable in a lump sum, less such amounts as
     shall be required to be deducted or withheld therefrom by applicable law
     and regulations, within fifteen (15) days after the termination date. (iv)
     To the extent the Executive is eligible thereunder, for a period through
     the end of the Term (as

                                      -19-
<PAGE>

     otherwise determined before termination pursuant to Section 4.2 hereof),
     the Executive shall continue to be provided life insurance, disability,
     long-term disability policies and any other Benefits provided to the
     Executive on the date hereof or such successor policies in effect at the
     time of the Executive's termination, and shall also continue to be covered
     for the applicable period by such other insurance, disability, health or
     other Benefit program, plan or policy by which he was covered at the time
     of the Executive's termination. In the event the Executive is ineligible to
     continue to be so covered under the terms of any such life insurance,
     disability, long-term disability, insurance, health or other Benefit
     program, plan or policy, the Company shall provide to the Executive through
     other sources such benefits, including such additional benefits, as may be
     necessary to make the benefits applicable to the Executive substantially
     equivalent to those in effect immediately prior to such termination,
     provided that if during such period the Executive should enter into the
     employ of another company or firm which provides to the Executive
     substantially similar benefit coverage, the Executive's participation in
     the comparable benefits provided by the

                                      -20-
<PAGE>

     Company, either directly or through such other sources, shall cease.
     Nothing contained in this paragraph shall be deemed to require or permit
     termination or restriction of any of the Executive's coverage under any
     plan or program thereto to which the Executive is entitled under the terms
     of such plan or program, whether at the end of the aforementioned period or
     at any other time. These items are in addition to and shall not reduce any
     other benefits to which the Executive may be entitled (such as the Stock
     Grant, the Loan Agreement, and the Stock Agreement).

          (c) Termination Without Good Reason.  Notwithstanding any provision of
              -------------------------------
     the Agreement to the contrary, the Executive has the right, at any time
     during the Term, exercisable by serving written notice, effective on or
     after the date of service of such notice as specified therein, to terminate
     his employment under this Agreement with or without Good Reason (as defined
     in the Executive's option agreement).  Any such termination shall terminate
     the Term, and in the case of the Executive's termination without Good
     Reason the following amounts shall be payable or provided by the Company:
     (i) the Base Salary then earned, but unpaid, (ii) any unpaid vested
     Benefits accrued to such date of

                                      -21-
<PAGE>

     termination, (iii) an amount equal to the product of (a) the Annual Bonus,
     if any, otherwise payable with respect to the year in which the Term is
     terminated, multiplied by (b) a fraction, the numerator of which is the
     number of days elapsed in such year as of the termination date and the
     denominator of which is 365. All of the foregoing amounts shall be payable
     in a lump sum, less such amounts as shall be required to be deducted or
     withheld therefrom by applicable law and regulations, within fifteen (15)
     days after the termination date.

          These items are in addition to and shall not reduce any other benefits
     to which the Executive may be entitled (such as, the stock grant, the loan
     agreement, and the stock options).

          4.3  Stock Grant and Stock Options.  In the event of any termination
               -----------------------------
described in Sections 4.1 or 4.2 above, Executive's rights with regard to his
stock grant, loan agreement and stock options shall be as set forth in the
respective agreement containing the terms and conditions pertaining thereto.

          4.4  Certain Additional Payments by the Company. Anything in this
               ------------------------------------------
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution

                                      -22-
<PAGE>

by the Company to or for the benefit of the Executive, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by the Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. Subject to the provisions of this Section
4.4, all determinations required to be made hereunder, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by KPMG Peat Marwick or such other accounting firm which at the time audits
the financial statements of the Company (the "Accounting Firm") at the sole
expense of the Company, which shall provide detailed supporting calculations
both to the Company and the Executive within 15 business days of the date of

                                      -23-
<PAGE>

termination of the Executive's employment under this Agreement, if applicable,
or such earlier time as is requested by the Company. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, the Accounting Firm
shall furnish the Executive with an opinion that he has substantial authority
not to report any Excise Tax on his federal income tax return. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments, which will not have been made by the Company
should have been made (an "Underpayment"), consistent with the calculations
required to be made hereunder. If the Company exhausts its remedies pursuant
hereto and the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive.

          The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no

                                      -24-
<PAGE>

later than ten business days after the Executive knows of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:

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

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

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

               (iv) permit the Company to participate in any proceedings
          relating to such claim;

                                      -25-
<PAGE>

provided that the Company shall bear and pay directly all costs and expenses
--------
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax, including interest and penalties with
respect thereto, imposed as a result of such representation and payment of costs
and expenses.  Without limitation on the foregoing provisions hereof the Company
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine, provided that if the Company
                                                  --------
directs the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income

                                      -26-
<PAGE>

tax, including interest or penalties with respect thereto, imposed with respect
to such advance or with respect to any imputed income with respect to such
advance, and further provided that any extension of the statute of limitations
             -----------------
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.

          If, after the receipt by the Executive of an amount advanced by the
Company pursuant hereto, the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements hereof) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon after taxes
applicable thereto).  If, after the receipt by the Executive of an amount
advanced by the Company pursuant hereto, a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and the

                                      -27-
<PAGE>

Company does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

          5.   Other Provisions.
               ----------------

          5.1  Notices.  Any notice or other communication required or permitted
               -------
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, on the date of actual receipt thereof, as follows:

          (i)  If to the Company or Rouse, to:

                    The Rouse Company
                    10275 Little Patuxent Parkway
                    Columbia, Maryland  21044
                    Attn: General Counsel

          (ii) If to the Executive, to:

                    John L. Goolsby
                    9029 Greensboro Lane
                    Las Vegas, Nevada  89134

               Any party may change its address for notice hereunder by notice
to the other party hereto.

                                      -28-
<PAGE>

               5.2  Entire Agreement.  This Agreement, including the attached
                    ----------------
Schedules which are a part hereof for all purposes, contains the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersedes all prior agreements, written or oral, with respect
thereto.

               5.3  Governing Law.  This Agreement shall be governed and
                    -------------
construed in accordance with the laws of the State of Nevada.

               5.4  Assignment.  The obligations of the Executive hereunder are
                    ----------
personal and may not be assigned or delegated by him or transferred in any
manner whatsoever, nor are such obligations subject to involuntary alienation,
assignment or transfer.  The Company shall have the right to assign this
Agreement and to delegate all rights, duties and obligations hereunder, either
in whole or in part, to any parent, affiliate, successor or subsidiary
organization or company of the Company, so long as the obligations of the
Company under this Agreement remain the obligations of the Company and of Rouse,

provided that the Company will require any successor (whether direct or
--------
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably acceptable

                                      -29-
<PAGE>

to the Executive, to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
it if no such succession had taken place.

               5.5  Termination.  Except as otherwise provided expressly herein,
                    -----------
this Agreement shall terminate upon end of the Restricted Period.

               6.  Resolution of Disputes.
                   ----------------------

               6.1  Negotiation.  The parties shall attempt in good faith to
                    -----------
resolve any dispute arising out of or relating to this Agreement promptly by
negotiations between the Executive and an executive officer of the Company and
Rouse who has authority to settle the controversy. Any party may give the other
party written notice of any dispute not resolved in the normal course of
business. Within 10 days after the effective date of such notice, the Executive
and an executive officer of the Company and Rouse shall meet at a mutually
acceptable time and place within the Las Vegas, Nevada metropolitan area, and
thereafter as often as they reasonably deem necessary, to exchange relevant
information and to attempt to resolve the dispute. If the matter has not been
resolved within 30 days of the disputing party's notice, or if the parties fail
to meet within 10 days, either

                                      -30-
<PAGE>

party may initiate arbitration of the controversy or claim as provided
hereinafter. If a negotiator intends to be accompanied at a meeting by an
attorney, the other negotiator shall be given at least three business days'
notice of such intention and may also be accompanied by an attorney. All
negotiations pursuant to this Section 6.1 shall be treated as compromise and
settlement negotiations for the purposes of the federal and state rules of
evidence and procedure.

          6.2  Arbitration.  Any dispute arising out of or relating to this
               -----------
Agreement or the breach, termination or validity thereof, which has not been
resolved by non-binding means as provided in Section 6.1 within 60 days of the
initiation of such procedure, shall be finally settled by arbitration conducted
expeditiously in accordance with the Center for Public Resources, Inc. ("CPR")
Rules for Non-Administered Arbitration of Business Disputes by three independent
and impartial arbitrators, of whom each party shall appoint one, provided that
if one party has requested the other to participate in a non-binding procedure
and the other has failed to participate, the requesting party may initiate
arbitration before the expiration of such period.  Any such party shall be
appointed from the CPR Panels of Neutrals. The arbitration shall be governed by
the United States

                                      -31-
<PAGE>

Arbitration Act and any judgment upon the award decided upon the arbitrators may
be entered by any court having jurisdiction thereof. The arbitrators are not
empowered to award damages in excess of compensatory damages and each party
hereby irrevocably waives any damages in excess of compensatory damages. Each
party hereby acknowledges that compensatory damages include (without limitation)
any benefit or right of indemnification given by another party to the other
under this Agreement.

          6.3  Expenses.  The Company shall promptly pay or reimburse the
               --------
Executive for all costs and expenses, including, without limitation, court costs
and attorneys' fees, incurred by the Executive as a result of any claim, action
or proceeding (including, without limitation a claim action or proceeding by the
Executive against the Company or Rouse) arising out of, or challenging the
validity or enforceability of, this Agreement or any provision hereof.

     7.  Guaranty.  In addition to Rouse's own obligations under this Agreement,
         --------
Rouse undertakes that on default of the Company it will be bound by and will do
and perform all acts and things referred to or provided to be done by the
Company under this Agreement.  Except as may be expressly set forth herein, no
provision of this Agreement is intended to limit the Executive's

                                      -32-
<PAGE>

authority as Chief Executive Officer of the Company and no such action shall
have the effect of waiving or otherwise affecting the validity or quantity of
Rouse's guaranty hereunder.

     8.  Successors.  This Agreement shall be binding upon and inure to the
         ----------
benefit of the Executive and his heirs, executors, administrators and legal
representatives.  This Agreement shall be binding upon and inure to the benefit
of the Company and its successors and assigns.

     9.  No Mitigation or Set-Off.  The provisions of this Agreement are not
         ------------------------
intended to, nor shall they be construed to, require that the Executive mitigate
the amount of any payment provided for in this Agreement by seeking or accepting
other employment, nor shall the amount of any payment provided for in this
Agreement be reduced by any compensation earned by the Executive as a result of
his employment by another employer or otherwise.  The Company's or Rouse's
obligations to make the payments to the Executive required under this Agreement
and otherwise to perform its obligations hereunder shall not be affected by any
set off, counterclaim, recoupment, defense or other claim, right or action that
the Company or Rouse may have against the Executive.

                                      -33-
<PAGE>

     10.  This Agreement may be amended or modified by an agreement in writing
executed by all of the parties hereto.

          IN WITNESS WHEREOF, the parties have executed this Agreement effective
for all purposes as of the date first above written.

WITNESS/ATTEST:                     TRC ACQUISITION COMPANY I


                                    By:
-------------------------              ---------------------------
                                              President


                                    THE ROUSE COMPANY



                                    By:
-------------------------              ---------------------------
                                              President


-------------------------           ------------------------------
                                              John L. Goolsby

                                      -34-
<PAGE>

                                  SCHEDULE 1

                                John L. Goolsby

                    Executive's Participation as a Director
                           in Commercial Corporation

     Bank of America

     Nevada Power Company

     America West Airlines, Inc.
<PAGE>

                                   EXHIBIT A
                                   ---------



                                              Effective Date


John L. Goolsby
-----------------------
-----------------------
-----------------------

Dear                  :
     -----------------

          On February 22, 1996, the Board of Directors of the Company granted
you a stock bonus under the 1994 Stock Incentive Plan for 40,000 shares of the
Company's Common Stock (the "Bonus Shares").  This stock bonus is subject to the
following restrictions:

          1. If your employment with the Company terminates for any reason other
             than death, total disability, discharge without good cause or
             retirement from the Company after attaining age 62 or the
             termination of employment by you for Good Reason (as defined in
             your Operating Agreement), the Bonus Shares that are still subject
             to the restrictions will be forfeited to the Company without
             payment therefor.

          2. You may not sell, assign, transfer, pledge, hypothecate, encumber
             or otherwise dispose of the Bonus Shares except to the extent that
             the restrictions have lapsed.

          The restrictions on the Bonus Shares will lapse as to thirty percent
(30%) of the shares on January 1, 1997, an additional thirty percent (30%) of
the shares on January 1, 1998 and the remaining forty percent (40%) of the
shares on January 1, 1999.  Attachment 1, attached hereto and incorporated by
reference herein.

          You may have The Rouse Company retain or accept a sufficient number of
shares to satisfy the Company's tax withholding obligations or your tax
liabilities in connection with the receipt of the Bonus Shares, the lapse of
restrictions with respect to the Bonus Shares, the sale of the Bonus Stock or
the receipt or forgiveness of a loan or loans relating to the Bonus Shares.

          Three certificates for shares of the The Rouse Company's Common Stock
in the respective amounts of 12,000 shares, 12,000 shares and 16,000 shares,
have been delivered to you.  The legend on the reverse side of each certificate
describes the restrictions to which the stock represented by such certificate is
subject.
<PAGE>

Page 2
Effective Date
John L. Goolsby

          Enclosed is a Loan Agreement between the Company and you. Section 6 of
the Agreement defines "total disability" and "discharge without good cause."
Section 2 of the Option Agreement defined "Good Reason". In the event of your
death, total disability, discharge without good cause or retirement from the
Company after attaining age 62 or your termination of employment for Good Reason
(as defined in your Option Agreement), all restrictions on your Bonus Shares
will immediately terminate, and you will own those shares outright.

          To acknowledge your agreement to the terms and restrictions to which
the Bonus Shares are subject, please sign and date the original of this letter.
The copy is for your files. You should also sign and date the enclosed Loan
Agreement and Promissory Note. When you actually receive any portion of the
proceeds of the loan, you also will need to sign a Receipt, a copy of which is
enclosed. The signed documents, including the original of this letter, should be
returned to Dave Schwiesow.

          If you have any questions concerning your stock bonus, please feel
free to contact me.

                                    Sincerely yours,

                                    THE ROUSE COMPANY


                                    By
                                      --------------------------
                                         Anthony W. Deering
                                         President and Chief
                                         Executive Officer
Enclosures

The undersigned agrees to the
above-described terms and
restrictions to which the
Bonus Shares are subject.

Signature:
          ------------------------
Date:
     -----------------------------

                                      -2-
<PAGE>

                       ATTACHMENT 1 to Letter Agreement
                             Regarding Stock Grant


     Any capitalized term used herein which is not otherwise defined shall have
the meaning attributed to it in the letter agreement (the "Letter Agreement") to
which this is attached or the Executive's Employment Agreement (the "Employment
Agreement").

     The Letter Agreement provides that certain restrictions (the
"Restrictions") on the Bonus Shares shall lapse if the Chief Executive Officer
of Rouse (the "Rouse CEO") shall determine that certain objectives for "income
from operations" for The Howard Hughes Corporation (the "Income Objectives")
have been achieved. The purpose of this Attachment is to set forth the procedure
for (i) setting the Income Objectives for each year and (ii) determining whether
the Income Objectives have been obtained. The parties further recognize that the
Executive will be establishing annual objectives (the "Bonus Objectives") to be
used in connection with the Executive's participation in The Rouse Company
incentive compensation program.  The parties also wish to provide for the
integration of the processes by which the Bonus Objectives and the Income
Objectives are established. Therefore, the Income Objectives and Bonus
Objectives described herein must also be the same as the annual objectives for
The Howard Hughes Corporation integrated into The Rouse Company's corporate
objectives for its annual incentive compensation program.

     On or prior to December 15, 1996 and December 15, 1997 the Executive shall
submit a proposed business plan to the Rouse CEO for the ensuing calendar year.
The proposed Business Plan shall be in form similar to the approved 1996
business plan which is attached hereto as Exhibit 1.  The proposed business plan
shall be subject to review and approval by the Rouse CEO.  The Executive and the
Rouse CEO shall discuss in good faith any revisions to the proposed plan
required by the CEO, but notwithstanding such discussions, the business plan
shall be subject to the approval of the Rouse CEO in the exercise of his
discretion.  The business plan shall constitute an essential portion of the
Executive's Bonus Objectives, it being acknowledged that for 1997 and 1998, the
Executive may include in his Bonus Objectives, other performance objectives, in
addition to the business plan, as he and the Rouse CEO shall agree.

     In formulating the business plan the Executive and the Rouse CEO shall
agree on a budgeted amount of "income from operations" to be generated by The
Howard Hughes Corporation, such amount to
<PAGE>

be calculated in the manner as set forth in Exhibit 2 entitled "The Howard
Hughes Corporation" - Projected Summary of Operations 1996-1998 (the "Current
Projections") attached hereto.

     The Income Objectives for 1996 shall be $46,896,000 as shown on the Current
Projections, as may be adjusted for changes in accounting policies and
practices, as described below.  The Income Objectives for 1997 and 1998 shall be
presumed to be the amounts shown on the Current Projections for those years
subject to submission and review of the annual business plan as set forth above.
In submitting the proposed business plan for 1997 and 1998 the Executive may
suggest revisions to the Income Objectives.  The final determination of the
Income Objectives shall be subject to the approval of the Rouse CEO, but in no
event shall the Rouse CEO increase the Income Objectives for 1997 or 1998 above
the amounts set forth in the Current Projections. Moreover, the Income
Objectives for 1996, 1997 and 1998 shall be adjusted to reflect any changes in
accounting policies and practices implemented by The Howard Hughes Corporation
after the Merger.

     Within ten (10) days after the year end financial results of the Company
are made available to the Rouse CEO, he shall determine whether, in his good
faith judgment, the Company's income from operations has met or exceeded, the
Income Objectives.  If the Income Objectives have been met or exceeded, then the
Restrictions as to the applicable percentage of Bonus Stock shall be removed.
If the income from operations is less than the Income Objectives, then the Rouse
CEO may determine that the Restrictions as to the full percentage, or some
lesser percentage of the Bonus Stock shall be removed.  In making such
determination, the Rouse CEO shall take into consideration, as he deems
appropriate, factors which may have affected the Company's ability to meet the
Income Objectives, including unusual market conditions, Rouse's failure to
approve (or take other appropriate action regarding) any material recommendation
by the Executive regarding the Company or to the extent Rouse rather than the
Executive assumes responsibility for providing equity requirements or financing,
the failure of Rouse to provide such equity requirements or financing.

     Notwithstanding the foregoing, (i) if the Income Objectives for either 1996
or 1997 are not met, but as of the end of 1997, the aggregate net income from
operations for 1996 and 1997 equals
<PAGE>

or exceeds the aggregate Income Objectives for 1996 and 1997 then the
Restrictions on the Bonus Stock eligible for removal in 1996 and 1997 shall be
removed and (ii) if the aggregate income from operations for 1996, 1997 and 1998
equals or exceeds the aggregate Income Objectives for 1996, 1997 and 1998 then
the Restrictions as to all of the Bonus Stock shall be removed, notwithstanding
that for any of the individual years 1996, 1997 and 1998 the income from
operations did not meet or exceed the Income Objectives. The income from
operations shall be deemed to have met the Income Objectives and the
Restrictions shall automatically be removed as of January 31 of each applicable
year unless prior thereto the Rouse CEO shall have notified the Executive in
writing of his determination that the Restrictions are not to be fully removed.
The Rouse CEO agrees to discuss with the Executive, at his request, any
determination that the Restrictions are not to be fully removed.

          With regard to any shares of Bonus Stock as to which the Restrictions
have not been removed by February 1, 1999 such shares shall be forfeited to The
Rouse Company without payment therefor and any rights of the Executive therein
shall be terminated.

                                      -3-
<PAGE>

                           EXHIBIT 1 to ATTACHMENT 1
                           -------------------------

                              1996 Business Plan
                              ------------------

The following are key objectives for 1996:

     1. Produce revenues consistent with the Projected Summary of Operations for
        1996.

     2. Complete or commence construction of the following
        commercial/residential projects in accordance with approved budgets.

        Hughes Center
        -------------
        Restaurant                          23,500 square feet
        Office                              85,000 square feet

        Summerlin Commercial
        --------------------
        Office/flex                         276,000 square feet

        Hughes Airport Center
        ---------------------
        Office/industrial/flex              248,000 square feet

        Hughes Cheyenne Center
        ----------------------
        Industrial/flex                     210,000 square feet

     3. Continue or commence construction of required infrastructure to support
        land sales on Summerlin Villages 3, 11/12 and 14A.

     4. Obtain required permanent project financing for 1996 as follows

          (with Rouse support where required):

        Hughes Center                       $39,500,000
        Summerlin Commercial                 20,750,000
        Hughes Airport                       25,200,000

     5. Complete next increment of Special Improvement District Financing of
        approximately $40,000,000 for Summerlin.

     6. Complete the lease up of new commercial buildings consistent with
        approved pro forma.

     7. Maintain occupancy in existing commercial buildings within 5% of
        December 1995 levels.
<PAGE>

                           EXHIBIT 2 TO ATTACHMENT 1

                         The Howard Hughes Corporation
                        Projected Summary of Operations
                                  1996 - 1998
                                (in thousands)

<TABLE>
<CAPTION>
                                            1996       1997       1998
<S>                                       <C>        <C>        <C>

Operating Revenues:
 Income producing properties                73,379     88,285    100,097
 Development properties                    116,472    146,428    107,201
 Investment properties                       8,485     43,871     17,465
   Subtotal                                198,336    278,584    224,763

Cost of Revenues:
 Income producing properties               (27,959)   (32,840)   (36,288)
 Development properties                    (81,979)   (97,508)   (74,132)
 Investment properties                      (1,918)    (5,891)    (2,669)
   Subtotal                               (111,856)  (136,239)  (113,089)

Gross Project From Operations               86,480    142,345    111,674

Other Income (Expense):
 General and administrative                (10,659)   (10,290)   (10,555)
 Interest income                             8,517      4,492      5,642
 Interest expense (net of capitalized)     (18,990)   (28,789)   (24,260)
 Depreciation and amortization             (20,517)   (21,775)   (24,349)
 Abandoned Tenant Costs
 Other - net                                 2,065      2,768      2,811
   Subtotal                                (39,584)   (53,594)   (50,711)

Income from Operations                      46,896     88,751     60,963
</TABLE>
<PAGE>

                                   EXHIBIT B
                                   ---------

                                LOAN AGREEMENT

          THIS AGREEMENT is made as of the ___ day of __________, 1996,
("Agreement"), by and between JOHN L. GOOLSBY (the "Borrower") and THE ROUSE
COMPANY, a Maryland corporation (the "Company").

          WHEREAS, the Borrower, a senior officer of The Howard Hughes
Corporation, a subsidiary of the Company, intends to continue to serve the
Company for the foreseeable future, subject to the direction of the Board of
Directors of the Company; the Borrower wishes to borrow money from the Company
for purposes which include the satisfaction of certain obligations that he has
incurred or will incur with respect to the receipt of shares of Common Stock of
the Company pursuant to the Company's 1994 Stock Incentive Plan (the "Shares"),
including, but not limited to, the payment of federal and state income taxes;
the Company, in recognition of the services the Borrower has performed for The
Howard Hughes Corporation, and in contemplation of future services that the
Borrower will perform for The Howard Hughes Corporation, has determined to
extend credit to the Borrower on the terms set forth herein, it being the
considered view of the Board of Directors of the Company that the best interests
of the Company and its stockholders will be served and advanced through the
continued services of Borrower to the Company.

       NOW THEREFORE, for good and valuable consideration as reflected in this
Agreement, the Company and the Borrower agree as follows:
<PAGE>

          1.   The Company agrees to lend to Borrower, and Borrower agrees to
borrow from the Company from time to time, [the principal sum of one-half ( 1/2)
market value (the "Loan Amount") of the shares on the effective date of the
Merger (the "Effective Date"], which loan shall be evidenced by the Promissory
Note of Borrower (attached as Exhibit A) Borrower may borrow all or any portion
of the principal sum of the loan upon at least one day's written notice to the
Company (attached as Exhibit B), except that Borrower must borrow at least [one-
third of loan] on or before each of [January 31, 1997], [January 31, 1998] and
[January 31, 1999]. The loan shall be the unsecured obligation of Borrower,
shall bear interest as stated in the Promissory Note, payable on January 31 of
each year, at the rate of 5% per annum on the principal balance outstanding from
time to time, shall mature in its entirety on [January 31, 1999], and shall be
repayable (unless forgiven as hereinafter set forth) as to principal in three
equal installments of [one-third of Loan Amount] payable on [January 31] in each
of the years 1997 through 1999. The Company agrees that Borrower is entitled to
the entire loan proceeds and is entitled to have the loan forgiven
notwithstanding whether the Borrower remains an employee of the Company at the
time the restrictions lapse.

          2.   The Company represents and warrants to Borrower that this
Agreement has been duly authorized by its Board of Directors and constitutes the
legal, valid and enforceable obligation of the Company in consideration of the
obligations of

                                      -2-
<PAGE>

Borrower under this Agreement, the Promissory Note and the contemplated services
of Borrower. The Company understands that the Promissory Note constitutes the
unsecured obligation of Borrower.

          3.   Borrower represents and warrants to the Company that he intends
to apply the proceeds of the loan from the Company for purposes that include the
payment of obligations, and interest thereon, incurred or to be incurred by him
in connection with the grant of the Shares, including the payment of federal and
state income taxes.

          4.   On January 31 in each of the years 1997 through 1999, Borrower's
obligation evidenced by the Promissory Note shall be extinguished and forgiven
by the Company as to [one-third (1/3) of the loan amount], without any payment
by Borrower, provided that Borrower has not prior to any such dates been
discharged as an employee of the Company or any subsidiary thereof for cause.
Accordingly, if the Borrower has not previously been discharged for cause as of
January 31, 1999, his obligation to the Company as evidenced by the Promissory
Note shall be extinguished and forgiven totally as to principal without any
payment by him except as to interest on the principal balance outstanding from
time to time. In no event shall termination of Borrower's employment at any time
reestablish personal responsibility of Borrower for amounts of principal
indebtedness extinguished and forgiven prior to such termination.

                                      -3-
<PAGE>

          5.   Provided that an uncured Event of Default has not theretofore
occurred, in the event of the Borrower's death, total disability, discharge
without good cause, retirement from the Company and all subsidiaries thereof
after attaining age 62, or termination of employment for Good Reason (as defined
in the Option Agreement) at any time prior to January 31, 1999, while he is
employed by the Company or any subsidiary thereof, the entire remaining balance
of principal indebtedness evidenced by the Promissory Note shall be extinguished
and forgiven without any payment on the part of the Borrower except as to
accrued interest to the date of the event.

          6.   When used in Sections 5 and 7, (a) "total disability" shall mean
a disability on the part of the Borrower that has continued for a period of more
than 180 days and has prevented him from performing in a usual and proper manner
the functions of his position, and (b) "discharge without good cause" shall mean
(i) any discharge other than discharge due solely to an act or acts of gross or
willful negligence or of intentional wrongdoing or misconduct, any of which has
or have a material adverse effect on Borrower's ability to perform the duties of
his position or on the good standing, financial condition or profitability of
the Company or The Howard Hughes Corporation, and shall be deemed to include any
voluntary termination of employment by the Borrower after January 31, 1999; or
(ii) any change of control of the Company or The Howard Hughes Corporation (as
hereinafter defined); for purposes hereof, a "change of

                                      -4-
<PAGE>

control" shall mean (1) any merger by the Company or The Howard Hughes
Corporation with or into another corporation or corporations; (2) any
acquisition (by purchase, lease or otherwise) of all or substantially all of the
assets of the Company or The Howard Hughes Corporation by any person,
corporation or other entity or group thereof acting jointly; (3) the acquisition
of beneficial ownership, directly or indirectly, of voting securities of the
Company or The Howard Hughes Corporation (as defined below) and rights to
acquire voting securities of the Company or The Howard Hughes Corporation (also
as defined below) by any person, corporation or other entity or group thereof
acting jointly, in such amount or amounts as would permit such person,
corporation or other entity or group thereof acting jointly to elect a majority
of the members of the Board of Directors of the Company or The Howard Hughes
Corporation, as then constituted; or (4) the acquisition of beneficial
ownership, directly or indirectly, of voting securities and rights to acquire
voting securities having voting power equal to 20% or more of the combined
voting power of the Company's or The Howard Hughes Corporation's then
outstanding voting securities by any person, corporation or other entity or
group thereof acting jointly. Notwithstanding the preceding sentence, any
transaction that involves a mere change in identity, form or place of
organization within the meaning of Section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended, or a transaction of similar effect, shall not
constitute a "change of control."

                                      -5-
<PAGE>

          For purposes of this Agreement, the term "voting securities" means
Common Stock of the Company or The Howard Hughes Corporation or any securities
having presently exercisable voting rights that the Company or The Howard Hughes
Corporation may issue in the future. "Rights to acquire voting securities"
include, but are not limited to, securities that are convertible into voting
securities (as defined above) and rights, options, warrants and other agreements
or arrangements to acquire such voting securities. A person's ownership position
shall be computed on the basis that its rights to acquire voting securities are
immediately exercisable and exercised.

          7.   Upon the occurrence of an Event of Default, as hereinafter
defined, the Company may declare all unpaid principal and interest on the
Promissory Note to be due and payable within ninety (90) days. For the purposes
of this Agreement and the Promissory Note, "Event of Default" shall mean (i)
default in the payment when due of any interest on the Promissory Note, which
default shall have continued for a period of thirty (30) days after notice to
the Borrower or (ii) termination before January 31, 1999 of the Borrower's
employment with the Company or any subsidiary other than as a result of death,
total disability, discharge without good cause, retirement from the Company or
any subsidiary after attaining age 62, or the Borrower's termination of
employment for Good Reason (as defined in the Borrower's Option Agreement).

                                      -6-
<PAGE>

          8.   Upon the occurrence of an Event of Default, the Borrower shall be
entitled to no further forgiveness of indebtedness under Sections 4 or 5.

          9.   This Agreement shall be governed by the laws of the State of
Maryland and shall be binding upon and inure to the benefit of the Company and
its successors and assigns and the Borrower and his heirs, personal
representatives and assigns.

          IN WITNESS WHEREOF, the Company and Borrower have
executed this Agreement as of the _______ day of June, 1996.

WITNESS:


--------------------------          --------------------------
                                    JOHN L. GOOLSBY



ATTEST:                             THE ROUSE COMPANY


--------------------------          --------------------------
                                    Anthony W. Deering
                                    President and Chief
                                    Executive Officer

                                      -7-
<PAGE>

                          EXHIBIT A TO LOAN AGREEMENT
                          ---------------------------

                                PROMISSORY NOTE


                                                              Columbia, Maryland
                                                              ____________, 1996


          FOR VALUE RECEIVED the undersigned, (the "Maker"), promises to pay to
the order of THE ROUSE COMPANY (the "Company") the sum of __________ Dollars, or
such lesser amount as shall be outstanding from time to time, at the offices of
the Company in Columbia, Maryland, with interest on the balance outstanding from
time to time at the rate of 5% per annum.  This Promissory Note has been issued
pursuant to a Loan Agreement, dated [Effective Date], by and between the Maker
and the Company to which reference is made for further description of the rights
and obligations specified herein and of certain other rights and obligations of
the Maker and the Company that affect the terms and provisions of this
Promissory Note.

          Interest on the balance outstanding from time to time shall be paid on
January 31, 1997, and thereafter on January 31 in each succeeding year until the
principal and interest on this Promissory Note are paid in full.

          Payments of principal shall be made in annual installments of
_________ Dollars ($__________) on January 31 in each of the years 1997 through
1999, inclusive, unless repaid prior thereto by the Maker or extinguished and
forgiven pursuant to the terms of the Loan Agreement. Prepayments of principal
may

                                      -8-
<PAGE>

be made in the sole discretion of the Maker, in whole or in part, at any time or
from time to time, without penalty.

          The obligation represented by this Promissory Note shall constitute
the unsecured general obligation of the Maker. Upon the occurrence of any Event
of Default, as defined in the Loan Agreement, the Company may declare all unpaid
principal and interest on this Promissory Note to be due and payable within
ninety (90) days thereafter.  To the extent permitted by law, the Maker waives
all exemptions, diligence in collection, demand, presentment for payment,
protest and notice of protest of nonpayment.  The Company agrees to make an
appropriate notation on this Promissory Note to reflect all payments of
principal or the extinguishment and forgiveness of principal pursuant to the
terms of the Loan Agreement, and upon the Maker's request, the Company will
submit this Promissory Note to the Maker for a review of such notation.

          This Promissory Note shall be governed by the laws of the State of
Maryland and shall be binding upon and inure to the benefit of the Company, its
successors and assigns and to the Maker and the Maker's heirs, personal
representatives and assigns.



                                                            (SEAL)
                                    ------------------------
                                    John L. Goolsby

                                      -9-
<PAGE>

                          EXHIBIT B TO LOAN AGREEMENT
                          ---------------------------

                              NOTICE OF BORROWING


          Pursuant to Section 1 of the Loan Agreement, made as of [Effective
Date] by the undersigned and The Rouse Company, this is to request
$______________, representing a loan from The Rouse Company to the undersigned
under the Loan Agreement.


Dated:
      -------------------           ------------------------------
                                    John L. Goolsby
<PAGE>

                                   EXHIBIT C
                                   ---------



                                    Effective Date


John L. Goolsby
---------------------
---------------------
---------------------

Dear                 :
     ----------------

          The Personnel Committee of the Board of Directors of The Rouse Company
(the "Company") has granted you an incentive stock option to purchase _________
shares of the Common Stock of the Company and a nonqualified stock option to
purchase _________ shares of the Common Stock of the Company.  As determined in
accordance with Article I(b)(4) of The Rouse Company 1994 Stock Incentive Plan,
the exercise price for both options is [price as of Effective Date] per share.

          To accept the options, sign the originals of the enclosed Incentive
Stock Option Agreement and Nonqualified Stock Option Agreement and the duplicate
of this letter and return them to David Schwiesow.  Please retain the copies of
the Agreements and the original of this letter for your records.

          If you have any questions concerning your option grants, feel free to
give me a call.

                                    Sincerely,

                                    THE ROUSE COMPANY


                                    By:___________________________
                                         Anthony W. Deering
                                         President and
                                         Chief Executive Officer


          I accept the stock options to purchase shares of the Company's Common
Stock upon the terms and conditions contained in the Incentive Stock Option
Agreement and the Nonqualified Stock Option Agreement, each dated
_________________________ between the Company and me.

                              Signature:______________________
<PAGE>

                                                                     EXHIBIT C-1
                                                                     -----------

                               THE ROUSE COMPANY

                           1994 STOCK INCENTIVE PLAN

                        INCENTIVE STOCK OPTION AGREEMENT
                        --------------------------------


          THIS INCENTIVE STOCK OPTION AGREEMENT, effective the [Effective Date]
by and between THE ROUSE COMPANY 1994 Stock Incentive Plan, a Maryland
corporation (the "Company"), and JOHN L. GOOLSBY (the "Employee").

                                  BACKGROUND
                                  ----------

          By action of its Board of Directors and Stockholders, the Company has
adopted The Rouse Company 1994 Stock Incentive Plan (the "Plan"), under which
the Company may grant stock options and other stock awards to employees of the
Company and its subsidiaries. The Plan is administered by a Committee of the
Board of Directors that has authority (i) to grant stock options to officers and
other key employees of the Company and its subsidiaries and, subject to the
provisions of the Plan, to determine the employees to whom and the time or times
at which options will be granted, the number of shares to be covered by each
option, the period of time and requisite conditions for exercising an option and
the terms and provisions of the option agreements and (ii) to determine the fair
market value, from time to time, of a share of Common Stock of the Company.

                                  THE OPTION
                                  ----------

          The Committee has determined to grant a stock option to Employee, and
Employee, by his execution of this Agreement, agrees to accept the stock option,
subject to the provisions of the Plan and the following terms and conditions:

          SECTION 1. Grant of Option.
                     ----------------

          a.   Number of Shares.  The Company grants to Employee the right and
               ----------------
option to purchase, subject to the terms and conditions of this Agreement and
the Plan, a total of [_________] shares of Common Stock of the Company, par
value one cent ($.0l) per share ("Common Stock"), which shares are designated as
shares granted under an incentive stock option (as that term is described in
Section i(d) below).

          b.   Option Price. The purchase price of all such shares of Common
Stock shall be $______________ per share, which price is equal to the last sale
price for Common Stock on the Effective Date.

          c.   "Option" Defined.  The option granted hereby and all of
               ----------------
Employee's rights under this Agreement and the Plan are referred to collectively
as the "Option."
<PAGE>

          d.   Tax Status of Option.  The Option is designated as constituting
               --------------------
an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended.

          SECTION 2. Vesting of Option.  The Company and the Employee
                     -----------------
acknowledge that simultaneously herewith the Employee and the Company are
entering into a letter agreement (the "Stock Grant Agreement") pursuant to which
the Employee is receiving a grant of 40,000 shares (the "Bonus Stock") of the
Common Stock of the Company. Pursuant to the Stock Grant Agreement certain
restrictions apply to Employee's ownership of the Bonus Stock which restrictions
(the "Restrictions") may be removed as to percentages of the Bonus Stock as of
January 31, 1997, January 31, 1998 and January 31, 1999. It is intended that the
Option granted herein shall vest at the same time and in the same percentages as
the Restrictions on the Bonus Stock are removed. Accordingly, the Option shall
vest as to a percentage of the total shares of the Option on each of January 31,
1997, January 31, 1998 and January 31, 1999, which percentage on each such date
shall equal the percentage of the total shares of Bonus Stock on which the
Restrictions are removed as of each such date.

          In addition, the Option immediately vests as to all of the shares of
Common Stock in the event of Employee's death, total disability (as defined in
Section 5(d) below), retirement from the Company after attaining age 62,
discharge without good cause (as defined in Section 3 below), or in the event of
the Employee's termination of employment for Good Reason.

          As used in this paragraph, the term "Good Reason" shall mean the
occurrence of any of the following events which is not corrected by the Company
within 15 days after Employee has provided the Company with written notice of
such event: (i) assignment to the Employee of any duties materially inconsistent
with the Employee's position, authority, duties or responsibilities with the
Company as established pursuant to the Employment Agreement between the Employee
and the Company as then in effect, (ii) reduction of Employee's annual base
salary as established pursuant to the Employment Agreement between Employee and
the Company as then in effect, (iii) relocation of the Company's principal
executive offices or Employee's principal place of performance of his duties and
responsibility of employment with the Company to a location outside the Greater
Las Vegas area, (iv) a material breach by the Company or Rouse of any of its
obligations to Employee pursuant to the Employment Agreement between Employee
and the Company as then in effect, (v) any amendment to the articles or bylaws
by the Company or Rouse that adversely affects the Employee's right to
indemnification by the Company or Rouse, except as may be required by applicable
federal or state law, and (vi) the failure of the Company or Rouse to have the
obligations under this Agreement assumed by any assignee under Section 5.4 of
the Employment Agreement.

                                      -2-
<PAGE>

          SECTION 3.  "Discharge Without Good Cause" and "Change of Control"
                      ------------------------------------------------------
Defined.
--------

          a.   "Discharge Without Good Cause."  For purposes of this Agreement,
               -----------------------------
"discharge without good cause" shall mean (i) any discharge other than discharge
due solely to an act or acts of gross or willful negligence or of intentional
wrongdoing or misconduct, which has or have a material adverse effect on
Employee's ability to perform the duties of his position or on the good
standing, financial condition or profitability of The Howard Hughes Corporation;
or (ii) any change of control of the Company or The Howard Hughes Corporation(as
hereinafter defined).

          b.   "Change of Control."  For purposes of this Agreement, a "change
               ------------------
of control" shall mean (1) any merger by the Company or The Howard Hughes
Corporation with or into another corporation or corporations; (2) any
acquisition (by purchase, lease or otherwise) of all or substantially all of the
assets of the Company or The Howard Hughes Corporation by any person,
corporation or other entity or group thereof acting jointly; (3) the acquisition
of beneficial ownership, directly or indirectly, of voting securities of the
Company or The Howard Hughes Corporation (defined as Common Stock of the Company
or The Howard Hughes Corporation or any securities having voting rights that the
Company or The Howard Hughes Corporation may issue in the future) and rights to
acquire voting securities of the Company or The Howard Hughes Corporation
(defined as including, without limitation, securities that are convertible into
voting securities of the Company or The Howard Hughes Corporation (as defined
above) and rights, options, warrants and other agreements or arrangements to
acquire such voting securities) by any person, corporation or other entity or
group thereof acting jointly, in such amount or amounts as would permit such
person, corporation or other entity or group thereof acting jointly to elect a
majority of the members of the Board of Directors of the Company or The Howard
Hughes Corporation, as then constituted; or (4) the acquisition of beneficial
ownership, directly or indirectly, of voting securities and rights to acquire
voting securities having voting power equal to 20% or more of the combined
voting power of the Company's or The Howard Hughes Corporation's then
outstanding voting securities by any person, corporation or other entity or
group thereof acting jointly. Notwithstanding the preceding sentence, any
transaction that involves a mere change in identity, form or place of
organization within the meaning of Section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended, or a transaction of similar effect, shall not
constitute a "change of control."

                                      -3-
<PAGE>

          SECTION 4. Termination of Option.
                     ----------------------

          a.   Termination for Cause.  If Employee's employment is terminated by
               ---------------------
the Company for cause, all unexercised rights under the option shall expire on
the date of such termination.

          b.   Other Termination.  If, before the Option vests as provided in
               -----------------
Section 2 above, Employee's employment with the Company or any subsidiary
terminates for any reason other than death, total disability (as defined in
Section 5 (d) below) , retirement from the Company or any subsidiary after
attaining age 62, discharge without good cause (as defined in Section 3 above),
or the Employee's termination of employment for Good Reason (as defined in
Section 2 above) the option shall terminate on the date of such termination, and
Employee shall have no rights under the Option or this Agreement.

          SECTION 5.  Exercise of Option.
                      ------------------

          a.   Exercise Period - General.  Subject to the provisions of Sections
               -------------------------
5 (b) and 5 (c) below, Employee may exercise the Option to purchase the vested
shares at any time (whether while serving as an employee of the Company or any
subsidiary or after ceasing to be an employee of the Company or any subsidiary),
and from time to time (but not as to less than 10 shares at any one time), on
and after the date such shares have vested as provided in Section 2 above
through and including (ten (10) years) (the "Expiration Date"), notwithstanding
that Employee may forfeit the favorable tax treatment afforded the option if
Employee exercises the option later than three (3) months after such
termination.

          b.   Exercise Period - Certain Terminations of Employment.  Employee
               ----------------------------------------------------
may exercise the Option to purchase the vested shares for only one year
following a voluntary termination of employment other than upon retirement from
the Company after attaining age 62, a termination of employment due to a
discharge without good cause (as defined in Section 3 above) or the Employee's
termination of employment for Good Reason (as defined in Section 2 above).

          c.   Exercise Period - Death or Total Disability.  If Employee dies or
               -------------------------------------------
becomes totally disabled (as defined in Section 5(d) below) either while serving
as an employee of the Company or any subsidiary or after ceasing to be an
employee of the Company or any subsidiary, the Option may be exercised with
respect to the vested shares by Employee or by the executor, administrator or
personal representative of Employee's estate or other person entitled by law to
Employee's rights under the Option at any time through and including the
Expiration Date.

                                      -4-
<PAGE>

          d.   "Total Disability" Defined.  "Total disability" shall mean a
                -------------------------
disability that has continued for a period of more than 180 days and has
prevented Employee from performing in a usual and proper manner the functions of
his position.

          e.   Exercise before the Expiration Date. Notwithstanding any other
               -----------------------------------
provision of this Agreement, in no event may the Option or any portion of the
option be exercised after [ten (10) years after Effective Date].

          SECTION 6.  Manner of Exercise; Notices.  The Option shall be
                      ---------------------------
exercised by sending to the Secretary of the Company a written notice of
Employee's intention to purchase such shares, specifying the number of shares
(but not less than 10 shares at any one time) and the date that the purchase is
to occur. Payment of the option price may be made (i) in U.S. dollars in cash or
by wire transfer, check, bank draft or money order payable to the Company, (ii)
through the delivery of Common Stock or other securities issued by the Company
that have a fair market value equal to the option price, or (iii) by a
combination of the foregoing. Full payment must be made for all shares to be
purchased before the shares will be released to Employee. The exercise notice
shall be addressed to the Secretary of the Company at The Rouse Company
Building, 10275 Little Patuxent Parkway, Columbia, Maryland 21044, or at such
other address as the Company designates in writing to Employee. Any notice to
Employee shall be sent to his address as shown in the records of the Company or
at such other address as Employee designates in writing to the Company. Any such
notice shall be deemed to have been duly given if it is personally delivered or
registered and deposited, postage and registry fee prepaid, in a United States
Post Office. For purposes of this Section 6, the "fair market value" of any
Company securities that are delivered in payment of the option price shall be
equal to (i) the last sale price for Company Common Stock or Preferred Stock for
the business day immediately preceding the date on which any portion of the
Option is exercised as reported on the New York Stock Exchange, or, if Company
Common Stock or Preferred Stock is not traded on the New York Stock Exchange, on
the exchange on which such Common Stock or Preferred Stock is principally
traded, or, if no sale price is reported for such day, the first preceding
business day for which a sale price for Common Stock or Preferred Stock is
reported, or (ii) the value of any other Company security, as determined by the
Chief Financial Officer of the Company in a manner consistent, to the extent
possible, with the determination of fair market value of Company Common Stock or
Preferred Stock as provided in clause (i).

          SECTION 7.  Tax Provisions.  At the request of Employee, the Company
                      --------------
shall retain or accept a sufficient number of shares in connection with the
receipt or exercise of the option or a sale of the underlying shares to satisfy
the

                                      -5-
<PAGE>

Company's tax withholding obligations, if any, or Employee's tax liabilities
with respect to such transactions.

          SECTION 8.  Adjustments upon Certain Changes in the Common Stock. If,
                      ----------------------------------------------------
after the date of this Agreement and prior to the full exercise of the Option,
the Company (without receiving compensation therefor) effects one or more. stock
splits, stock dividends, recapitalizations or other increases or reductions in
the number of shares of its outstanding Common Stock, then, unless the Board of
Directors expressly determines otherwise, the number of shares with respect to
the unexercised portion of the Option and the per share purchase price shall be
adjusted as follows:

          a.   in the event of a net increase in the number of shares of its
outstanding Common Stock, the number of shares shall be proportionately
increased, and the per share purchase price shall be proportionately reduced; or

          b.   in the event of a net reduction in the number of shares of its
outstanding Common Stock, the number of shares shall be proportionately reduced,
and the per share purchase price shall be proportionately increased.

          SECTION 9.  Employee's Rights Prior to Issuance of Shares.  Employee
                      ---------------------------------------------
shall not be, nor shall Employee have any of the rights or privileges of, a
stockholder of the Company with regard to any of the shares issuable upon
exercise of the Option unless and until certificates for such shares have been
issued.

          SECTION 10.  Assignment or Transfer.  Except for transfer by
                       ----------------------
testamentary instrument or the laws of inheritance, descent and distribution,
the Option may not be transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process.

          SECTION 11.  Continued Employment.  Employee shall have no duty or
                       --------------------
obligation to remain in the employ of the Company or any subsidiary. Nothing in
this Agreement shall be deemed to confer upon Employee any right to continue in
the employ of the Company or to interfere in any way with the right of the
Company to terminate the employment of Employee, which (except as otherwise
provided in the Employment Agreement) is at will, at any time.

          SECTION 12.  Binding on Successors.  This Agreement shall be binding
                       ---------------------
upon and inure to the benefit of the Company and Employee and their respective
successors, representatives and assigns.
<PAGE>

          SECTION 13.  Captions.  The captions of this Agreement are for
                       --------
convenience and reference only and in no way define, describe, extend or limit
the scope or intent of any of its provisions.

          SECTION 14.  Amendments.  This Agreement may only be amended in
                       ----------
writing and with the mutual consent of the Company and Employee.

          SECTION 15.  Applicable Law. This Agreement and any disputes arising
                       --------------
under this Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland and any applicable laws of the United States of
America.

          IN WITNESS WHEREOF the Company and Employee have executed this
Agreement as of the day and year first above written.

ATTEST/WITNESS:                     THE ROUSE COMPANY



                                    By
------------------------              ----------------------------
                                         ANTHONY W. DEERING
                                         President and
                                         Chief Executive Officer


------------------------              ----------------------------
                                         JOHN L. GOOLSBY

                                      -7-
<PAGE>

                                                                     EXHIBIT C-2
                                                                     -----------


                               THE ROUSE COMPANY

                           1994 STOCK INCENTIVE PLAN

                      NONQUALIFIED STOCK OPTION AGREEMENT
                      -----------------------------------


          THIS NONQUALIFIED STOCK OPTION AGREEMENT, effective [Effective Date],
by and between THE ROUSE COMPANY, a Maryland corporation (the "Company"), and
John L. Goolsby (the "Employee").

                                   BACKGROUND
                                   ----------

          By action of its Board of Directors and Stockholders, the Company has
adopted The Rouse Company 1994 Stock Incentive Plan (the "Plan"), under which
the Company may grant stock options and other stock awards to employees of the
Company. The Plan is administered by a Committee of the Board of Directors that
has authority (i) to grant stock options to officers and other key employees of
the Company and, subject to the provisions of the Plan, to determine the
employees to whom and the time or times at which options will be granted, the
number of shares to be covered by each option, the period of time and requisite
conditions for exercising an option and the terms and provisions of the option
agreements and (ii) to determine the fair market value, from time to time, of a
share of Common Stock of the Company.

                                   THE OPTION
                                   ----------

          The Committee has determined to grant a nonqualified stock option to
Employee, and Employee, by his execution of this Agreement, agrees to accept the
nonqualified stock option, subject to the provisions of the Plan and the
following terms and conditions:

          SECTION 1.  Grant of Option.
                      ---------------

          a.  Number of Shares.  The Company grants to Employee the right and
              ----------------
option to purchase, subject to the terms and conditions of this Agreement and
the Plan, a total of [40,000 minus number of incentive shares] shares of Common
Stock of the Company, par value one cent ($.01) per share ("Common Stock").

          b.  Option Price.  The purchase price of all such shares of Common
              ------------
Stock shall be [___________], which price is equal to the last sale price for
Common Stock on the Effective Date.
<PAGE>

          c.  "Option" Defined.  The option granted hereby and all of Employee's
              ----------------
rights under this Agreement and the Plan are referred to collectively as the
"Option."

          d.   Tax Status of Option.  This option is designated as not
               --------------------
constituting an "incentive stock option" under Section 422 of the Internal
Revenue Code of 1986, as amended.  If, however, there is a change in law that
permits all or any portion of the shares granted under this Agreement to be
treated as shares granted under an "incentive stock option," the Company (by the
Chairman of the Board or Chief Executive Officer of the Company) and Employee
may mutually agree that such shares shall be treated as shares granted under an
"incentive stock option," and the Company and Employee may amend this Agreement
or enter into such other agreements as may be necessary or desirable to provide
that such shares shall be treated as shares granted under an "incentive stock
option."

          SECTION 2.  Vesting of Option. The Company and the Employee
                      -----------------
acknowledge that simultaneously herewith the Employee and the Company are
entering into a letter agreement (the "Stock Grant Agreement") pursuant to which
the Employee is receiving a grant of 40,000 shares (the "Bonus Stock") of the
Common Stock of the Company.  Pursuant to the Stock Grant Agreement certain
restrictions apply to Employee's ownership of the Bonus Stock which restrictions
(the "Restrictions") may be removed as to percentages of the Bonus Stock as of
January 31, 1997, January 31, 1998 and January 31, 1999.  It is intended that
the Option granted herein shall vest at the same time and in the same
percentages as the Restrictions on the Bonus Stock are removed. Accordingly, the
Option shall vest as to a percentage of the total shares of the Option on each
of January 31, 1997, January 31, 1998 and January 31, 1999, which percentage on
each such date shall equal the percentage of the total shares of Bonus Stock on
which the Restrictions are removed as of each such date.

     In addition, the Option immediately vests as to all of the shares of Common
Stock in the event of Employee's death, total disability (as defined in Section
5(d) below), retirement from the Company after attaining age 62, discharge
without good cause (as defined in Section 3 below), or in the event of the
Employee's termination of employment for Good Reason.

          As used in this paragraph, the term "Good Reason" shall mean the
occurrence of any of the following events which is not corrected by the Company
within 15 days after Employee has provided the Company with written notice of
such event:  (i) assignment to the Employee of any duties materially
inconsistent with the Employee's position, authority, duties or

                                      -2-
<PAGE>

responsibilities with the Company as established pursuant to the Employment
Agreement between the Employee and the Company as then in effect, (ii) reduction
of Employee's annual base salary as established pursuant to the Employment
Agreement between Employee and the Company as then in effect, (iii) relocation
of the Company's principal executive offices or Employee's principal place of
performance of his duties and responsibility of employment with the Company to a
location outside the Greater Las Vegas area, (iv) a material breach by the
Company of any of its obligations to Employee pursuant to the Employment
Agreement between Employee and the Company as then in effect, (v) any amendment
to the articles or bylaws by the Company or Rouse that adversely affects the
Employee's right to indemnification by the Company or Rouse, except as may be
required by applicable federal or state law, and (vi) the failure of the Company
or Rouse to have the obligations under this Agreement assumed by any assignee
under Section 5.4 of the Employment Agreement.

          SECTION 3.  "Discharge Without Good Cause" and "Change of Control"
                       -----------------------------------------------------
Defined.
-------

          a.  "Discharge Without Good Cause."  For purposes of this Agreement,
               ----------------------------
"discharge without good cause" shall mean (i) any discharge other than discharge
due solely to an act or acts of gross or willful negligence or of intentional
wrongdoing or misconduct, which has or have a material adverse effect on
Employee's ability to perform the duties of his position or on the good
standing, financial condition or profitability of The Howard Hughes Corproation;
or (ii) any change of control of the Company or The Howard Hughes Corporation
(as hereinafter defined).

          b.  "Change of Control."  For purposes of this Agreement, a "change of
               -----------------
control" shall mean (1) any merger by the Company or The Howard Hughes
Corporation with or into another corporation or corporations; (2) any
acquisition (by purchase, lease or otherwise) of all or substantially all of the
assets of the Company or The Howard Hughes Corporation by any person,
corporation or other entity or group thereof acting jointly; (3) the acquisition
of beneficial ownership, directly or indirectly, of voting securities of the
Company or The Howard Hughes Corporation (defined as Common Stock of the Company
or The Howard Hughes Corporation or any securities having voting rights that the
Company or The Howard Hughes Corporation may issue in the future) and rights to
acquire voting securities of the Company or The Howard Hughes Corporation
(defined as including, without limitation, securities that are convertible into
voting securities of the Company or The Howard Hughes Corporation (as defined
above) and rights, options, warrants and other agreements

                                      -3-
<PAGE>

or arrangements to acquire such voting securities) by any person, corporation or
other entity or group thereof acting jointly, in such amount or amounts as would
permit such person, corporation or other entity or group thereof acting jointly
to elect a majority of the members of the Board of Directors of the Company or
The Howard Hughes Corporation, as then constituted; or (4) the acquisition of
beneficial ownership, directly or indirectly, of voting securities and rights to
acquire voting securities having voting power equal to 20% or more of the
combined voting power of the Company's or The Howard Hughes Corporation's then
outstanding voting securities by any person, corporation or other entity or
group thereof acting jointly. Notwithstanding the preceding sentence, any
transaction that involves a mere change in identity, form or place of
organization within the meaning of Section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended, or a transaction of similar effect, shall not
constitute a "change of control."

          SECTION 4.  Termination of Option.
                      ---------------------

          a.  Termination for Cause.  If Employee's employment is terminated by
              ---------------------
the Company for cause, all unexercised rights under the Option shall expire on
the date of such termination.

          b.  Other Termination.  If, before the Option vests as provided in
              -----------------
Section 2 above, Employee's employment with the Company or any subsidiary
terminates for any reason other than death, total disability (as defined in
Section 5(d) below), retirement from the Company or any subsidiary after
attaining age 62, or discharge without good cause (as defined in Section 3
above), or the Employee's termination of employment for Good Reason (as defined
in Section 2 above) the Option shall terminate on the date of such termination,
and Employee shall have no rights under the Option or this Agreement.

          SECTION 5.  Exercise of Option.
                      ------------------

          a.  Exercise Period - General.  Subject to the provisions of Sections
              -------------------------
5(b) and 5(c) below, Employee may exercise the Option to purchase the vested
shares at any time (whether while serving as an employee of the Company or any
subsidiary or after ceasing to be an employee of the Company or any subsidiary),
and from time to time (but not as to less than 10 shares at any one time), on
and after the date such shares have vested as provided in Section 2 above
through and including [Ten (10) years after the Effective Date (the "Expiration
Date")].

          b.  Exercise Period - Certain Terminations of Employment.  Employee
              ----------------------------------------------------
may exercise the Option to purchase the

                                      -4-
<PAGE>

vested shares for only one year following a voluntary termination of employment
other than upon retirement from the Company after attaining age 62, a
termination of employment due to a discharge without good cause (as defined in
Section 3 above) or the Employee's termination of employment for Good Reason (as
defined in Section 2 above).

          c.   Exercise Period - Death or Total Disability.  If Employee dies or
               -------------------------------------------
becomes totally disabled (as defined in Section 5(d) below) either while serving
as an employee of the Company or any subsidiary, or after ceasing to be an
employee of the Company or any subsidiary, the Option may be exercised with
respect to the vested shares by Employee or by the executor, administrator or
personal representative of Employee's estate or other person entitled by law to
Employee's rights under the Option at any time through and including the
Expiration Date.

          d.  "Total Disability" Defined.  "Total disability" shall mean a
               -------------------------
disability that has continued for a period of more than 180 days and has
prevented Employee from performing in a usual and proper manner the functions of
his position.

          e.  Exercise before the Expiration Date. Notwithstanding any other
              -----------------------------------
provision of this Agreement, in no event may the Option or any portion of the
Option be exercised after February 21, 2006.

          SECTION 6.  Manner of Exercise; Notices.  The Option shall be
                      ---------------------------
exercised by sending to the Secretary of the Company a written notice of
Employee's intention to purchase such shares, specifying the number of shares
(but not less than 10 shares at any one time) and the date that the purchase is
to occur. Payment of the option price may be made (i) in U.S. dollars in cash or
by wire transfer, check, bank draft or money order payable to the Company, (ii)
through the delivery of Common Stock or other securities issued by the Company
that have a fair market value equal to the option price, or (iii) by a
combination of the foregoing.  Full payment must be made for all shares to be
purchased before the shares will be released to Employee.  The exercise notice
shall be addressed to the Secretary of the Company at The Rouse Company
Building, 10275 Little Patuxent Parkway, Columbia, Maryland 21044, or at such
other address as the Company designates in writing to Employee.  Any notice to
Employee shall be sent to his address as shown in the records of the Company or
at such other address as Employee designates in writing to the Company.  Any
such notice shall be deemed to have been duly given if it is personally
delivered or registered and deposited, postage and registry fee prepaid, in a
United States Post Office.  For purposes of this Section 6, the "fair market

                                      -5-
<PAGE>

value" of any Company securities that are delivered in payment of the option
price shall be equal to (i) the last sale price for Company Common Stock or
Preferred Stock for the business day immediately preceding the date on which any
portion of the Option is exercised as reported on the New York Stock Exchange,
or, if Company Common Stock or Preferred Stock is not traded on the New York
Stock Exchange, on the exchange on which such Common Stock or Preferred Stock is
principally traded, or, if no sale price is reported for such day, the first
preceding business day for which a sale price for Common Stock or Preferred
Stock is reported, or (ii) the value of any other Company security, as
determined by the Chief Financial Officer of the Company in a manner consistent,
to the extent possible, with the determination of fair market value of Company
Common Stock or Preferred Stock as provided in clause (i).

          SECTION 7.  Tax Provisions.  At the request of Employee, the Company
                      --------------
shall retain or accept a sufficient number of shares in connection with the
receipt or exercise of the Option or a sale of the underlying shares to satisfy
the Company's tax withholding obligations, if any, or Employee's tax liabilities
with respect to such transactions.

          SECTION 8.  Adjustments upon Certain Changes in the Common Stock.  If,
                      ----------------------------------------------------
after the date of this Agreement and prior to the full exercise of the Option,
the Company (without receiving compensation therefor) effects one or more stock
splits, stock dividends, recapitalizations or other increases or reductions in
the number of shares of its outstanding Common Stock, then, unless the Board of
Directors expressly determines otherwise, the number of shares with respect to
the unexercised portion of the Option and the per share purchase price shall be
adjusted as follows:

          a.  in the event of a net increase in the number of shares of its
outstanding Common Stock, the number of shares shall be proportionately
increased, and the per share purchase price shall be proportionately reduced; or

          b.  in the event of a net reduction in the number of shares of its
outstanding Common Stock, the number of shares shall be proportionately reduced,
and the per share purchase price shall be proportionately increased.

          SECTION 9.  Employee's Rights Prior to Issuance of Shares.  Employee
                      ---------------------------------------------
shall not be, nor shall Employee have any of the rights or privileges of, a
stockholder of the Company with regard to any of the shares issuable upon
exercise of the Option unless and until certificates for such shares have been
issued.

                                      -6-
<PAGE>

          SECTION 10.  Assignment or Transfer.  Except for transfer by
                       ----------------------
testamentary instrument or the laws of inheritance, descent and distribution,
the Option may not be transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process.

          SECTION 11.  Continued Employment.  Employee shall have no duty or
                       --------------------
obligation to remain in the employ of the Company or any subsidiary.  Nothing in
this Agreement shall be deemed to confer upon Employee any right to continue in
the employ of the Company or to interfere in any way with the right of the
Company to terminate the employment of Employee, which (except as otherwise
provided in the Employment Agreement) is at will, at any time.

          SECTION 12.  Binding on Successors.  This Agreement shall be binding
                       ---------------------
upon and inure to the benefit of the Company and Employee and their respective
successors, representatives and assigns.

          SECTION 13.  Captions.  The captions of this Agreement are for
                       --------
convenience and reference only and in no way define, describe, extend or limit
the scope or intent of any of its provisions.

          SECTION 14.  Amendments.  This Agreement may only be amended in
                       ----------
writing and with the mutual consent of the Company and Employee.

          SECTION 15.  Applicable Law.  This Agreement and any disputes arising
                       --------------
under this Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland and any applicable laws of the United States of
America.

          IN WITNESS WHEREOF the Company and Employee have executed this
Agreement as of the day and year first above written.

ATTEST/WITNESS:                     THE ROUSE COMPANY

                                    By
-----------------------------         ---------------------------
                                         ANTHONY W. DEERING
                                         President and
                                         Chief Executive Officer

-----------------------------         ---------------------------
                                         John L. Goolsby

                                      -7-
<PAGE>

                                   EXHIBIT 1
                                   ---------



     A business plan for The Howard Hughes Corporation (the "Business Plan")
shall be established for each of calendar years 1996, 1997 and 1998 as follows.
The Business Plan for 1996 is attached hereto as Exhibit 1-A.  On or prior to
December 15, 1996 and December 15, 1997, John Goolsby (the "Executive") shall
submit to the Chief Executive Officer of The Rouse Company (the "CEO") a
proposed Business Plan for the ensuing calendar year.  The proposed Business
Plan shall be in form similar to the 1996 Business Plan.

     The essential basis of the Business Plan shall be the achievement by the
Company of the "net income" amounts shown on the "Projected Summary of
Operations" which is attached hereto.  The parties however, recognize that the
Projected Summary of Operations reflects accounting policies and practices of
the Company in effect prior to the Merger.  To the extent that those accounting
policies are revised after the Merger, the amount of "net income" shall be
appropriately adjusted to reflect any such policy revisions.

     The proposed business plan shall be subject to review and approval by the
CEO.  The Executive and the CEO shall discuss in good faith any revisions to the
proposed plan required by the CEO, but such revisions shall be made unless they
require results in excess of the "net income" shown in the Projected Summary of
Operations.

     Within five (5) days after the financial results of the Company are
available to the CEO, the CEO shall determine in his good faith judgment whether
the Executive has achieved the objectives of the Business Plan.  If the CEO
determines that the Business Plan has not been achieved, then the CEO shall
communicate such fact to the Executive and the Executive shall have the
opportunity to discuss the CEO's determination with the CEO.  The decision of
the CEO, made in good faith, shall be final and binding.

     The CEO may take into consideration, to the extent he believes it
appropriate, factors affecting the Executive's ability to achieve the Business
Plan, such as unusual market conditions or inability of Rouse to provide equity
requirements or financing.  If such factors exist, the CEO may determine that
the Business Plan has been achieved notwithstanding that the net income amounts
for the Company have not been achieved.  However, the Executive acknowledges
that the essential determination is whether the "net income" amounts are
achieved notwithstanding the existence of conditions beyond the Executive's
control.
<PAGE>

                                  EXHIBIT 1-A
                                  -----------

                              1996 Business Plan
                              ------------------

     The following are key objectives for 1996:

          1. Produce revenues consistent with the Projected Summary of
             Operations.

          2. Complete or commence construction of the following
             commercial/residential projects in accordance with approved
             budgets.

             Hughes Center
             -------------
             Restaurant                          23,500 square feet
             Office                              85,000 square feet

             Summerlin Commercial
             --------------------
             Office/flex                         276,000 square feet

             Hughes Airport Center
             ---------------------
             Office/industrial/flex                   248,000 square feet

             Hughes Cheyenne Center
             ----------------------
             Industrial/flex                          210,000 square feet

          3. Continue or commence construction of required infrastructure to
             support land sales on Summerlin Villages 3, 11/12 and 14A.

          4. Complete next increment of Special Improvement District Financing
             of approximately $40,000,000 for Summerlin.

          5. Complete the lease up of new commercial buildings consistent with
             approved pro forma.

          6. Maintain occupancy in existing commercial buildings within 5% of
             December 1995 levels.

                                      -2-