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                                                                    EXHIBIT 10.5



                         THE SECOND AMENDED AND RESTATED
                      1997 STOCK OPTION AND INCENTIVE PLAN
                                       OF
                            AMB PROPERTY CORPORATION
                       AND AMB INVESTMENT MANAGEMENT, INC.
                        AND THEIR RESPECTIVE SUBSIDIARIES

               AMB Property Corporation, a Maryland corporation (the "Company")
and AMB Investment Management, Inc., a Maryland corporation (the "Investment
Management Company") adopted The 1997 Stock Option and Incentive Plan of AMB
Property Corporation and AMB Investment Management, Inc. and their Respective
Subsidiaries (as such term is defined below), effective November 26, 1997, for
the benefit of their eligible employees, consultants and directors and those of
their Subsidiaries. The 1997 Stock Option and Incentive Plan of AMB Property
Corporation and AMB Investment Management, Inc. and their Respective
Subsidiaries was amended and restated in its entirety in the form of the First
Amended and Restated 1997 Stock Option and Incentive Plan of AMB Property
Corporation and AMB Investment Management, Inc. and their Respective
Subsidiaries, effective March 5, 1999, as amended by the First Amendment to the
First Amended and Restated 1997 Stock Option and Incentive Plan, effective March
5, 1999 (as amended, the "First Amended and Restated 1997 Stock Option and
Incentive Plan"). The First Amended and Restated 1997 Stock Option and Incentive
Plan is hereby amended and restated in its entirety in the form of this Second
Amended and Restated 1997 Stock Option and Incentive Plan of AMB Property
Corporation and AMB Investment Management, Inc. and their Respective
Subsidiaries (as amended and restated, the "Plan"), effective as of May 7, 1999.
The Plan consists of two plans, one for the benefit of employees, consultants
and independent directors of the Company and its Subsidiaries and one for the
benefit of the employees, consultants and independent directors of the
Investment Management Company and its Subsidiaries.

               The purposes of this Plan are as follows:

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

               (2) To enable the Company and the Investment Management Company,
and their respective Subsidiaries, to obtain and retain the services of
directors, key Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.


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                                   ARTICLE I.
                                   DEFINITIONS


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

               1.2. Award Limit. "Award Limit" shall mean 1 million shares of
Common Stock, as adjusted pursuant to Section 10.3.

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

               1.4. Cause. "Cause," unless otherwise defined in an Employee's
employment agreement, or a consultant's consulting agreement, with the Company
or one of its Subsidiaries, shall mean (i) gross negligence or willful
misconduct, (ii) an uncured breach of any of the employee's material duties
under their employment agreement, (iii) fraud or other conduct against the
material best interests of the Company or (iv) a conviction of a felony if such
conviction has a material adverse effect on the Company.

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

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

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

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

               1.7. Committee. "Committee" shall mean, with respect to the
Company and any Company Subsidiary, the Compensation Committee of the Board, or
another committee or subcommittee of the Board, appointed as provided in Section
9.1 and, with respect to the Investment Management Company, the Compensation
Committee of its board of directors or



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another committee or subcommittee of such board, if any, appointed by the Board
of Directors of the Investment Management Company in a manner consistent with
Section 9.1 hereof (except that references to the Board in such Section shall
mean the board of directors of the Investment Management Company) or the
Investment Management Company's board of directors; provided, however, that in
the case of a person who is an "officer or director of the issuer" within the
meaning of Rule 16-3(a) under the Securities Exchange Act of 1934, as amended,
the grant of any award under this Plan to such person shall be made by the
Compensation Committee of the Board.

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

               1.9. Company. "Company" shall mean AMB Property Corporation, a
Maryland corporation.

               1.10. Company Employee. "Company Employee" shall mean any officer
or other employee (as defined in accordance with Section 3401(c) of the Code) of
the Company or of any Company Subsidiary.

               1.11. Company Subsidiary. "Company Subsidiary" shall mean (i) a
corporation, association or other business entity of which 50% or more of the
total combined voting power of all classes of capital stock is owned, directly
or indirectly, by the Company or by one or more Company Subsidiaries or by the
Company and one or more Company Subsidiaries, (ii) any partnership or limited
liability company of which 50% or more of the capital and profits interests is
owned, directly or indirectly, by the Company or by one or more Company
Subsidiaries or by the Company and one or more Company Subsidiaries, and (iii)
any other entity not described in clauses (i) or (ii) above of which 50% or more
of the ownership and the power, pursuant to a written contract or agreement, to
direct the policies and management or the financial and the other affairs
thereof, are owned or controlled by the Company or by one or more other Company
Subsidiaries or by the Company and one or more Company Subsidiaries.

               1.12. Consultant. "consultant" shall mean any consultant or
adviser if:

               (a) the consultant or adviser renders bona fide services to the
Company, the Investment Management Company or their respective subsidiaries;

               (b) the services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital-raising transaction
and do not directly or indirectly promote or maintain a market for the
securities of the Company, the Investment Management Company or their respective
subsidiaries; and



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               (c) the consultant or adviser is a natural person who has
contracted directly with the Company, the Investment Management Company or their
respective subsidiaries, as applicable, to render such services.

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

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

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

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

               1.14. Deferred Stock. "Deferred Stock" shall mean Common Stock
awarded under Article VII of this Plan.

               1.15. Director. "Director" shall mean an Independent Director, an
Investment Management Company Director or a Non-Employee Director.

               1.16. Dividend Equivalent. "Dividend Equivalent" shall mean a
right to receive the equivalent value (in cash or Common Stock) of dividends or
regular cash distributions paid on Common Stock, awarded under Article VII of
this Plan.

               1.17. Employee. "Employee" shall mean any Company Employee or any
Investment Management Company Employee.

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

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



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publicly traded on an exchange and not quoted on Nasdaq or a successor quotation
system, the Fair Market Value of a share of Common Stock as established by the
Committee (or the Board, in the case of Options granted to Independent
Directors) acting in good faith. Notwithstanding anything to the contrary
herein, the Fair Market Value at the time of grant of a share of Common Stock
underlying an option grant or other award made under this Plan and in connection
with the initial public offering of the Company shall be the initial offering
price per share.

               1.20. General Partner Interest. "General Partner Interest" shall
mean an ownership interest in the Partnership that is a general partner interest
and includes any and all benefits to which the holder of such an interest may be
entitled as provided in the Partnership Agreement, together with all obligations
of such holder to comply with the terms and provisions of such agreement.

               1.21. Grantee. "Grantee" shall mean an Employee or consultant
granted a Performance Award, Dividend Equivalent, Stock Payment or Stock
Appreciation Right, or an award of Deferred Stock, under this Plan.

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

               1.23. Initial Independent Director. "Initial Independent
Director" shall have the meaning given to such term in Section 3.4(d) hereof.

               1.24. Independent Director. "Independent Director" shall mean a
member of the Board who is not an employee, officer or affiliate of the Company
or a subsidiary or division thereof, or a relative of a principal executive
officer, and who is not an individual member of an organization acting as an
advisor, consultant or legal counsel receiving compensation on a continuing
basis from the Company in addition to director's fees.

               1.25. Investment Management Company. "Investment Management
Company" shall mean AMB Investment Management, Inc., a Maryland corporation.

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

               1.27. Investment Management Company Independent Director.
"Investment Management Company Independent Director" shall mean a member of the
Investment Management Company Board who is not (i) an employee, officer, or
affiliates of the Company, the Investment Management Company or a subsidiary or
division of the foregoing, or a relative of a principal executive officer, and
who is not an individual member of an organization acting as an advisor,
consultant or legal counsel receiving compensation on a continuing basis from
the company or the Investment Management Company in addition to director's fees
or (b) an Independent Director.



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               1.28. Investment Management Company Purchase Price. "Investment
Management Company Purchase Price" shall have the meaning set forth in Section
5.5 hereof.

               1.29. Investment Management Company Purchased Shares. "Investment
Management Company Purchased Shares" shall have the meaning set forth in Section
5.5 hereof.

               1.30. Investment Management Company Subsidiary. "Investment
Management Company Subsidiary" shall mean (i) a corporation, association or
other business of which 50% or more of the total combined voting power of all
classes of capital stock is owned, directly or indirectly, by the Investment
Management Company or by one or more Investment Management Company Subsidiaries
or by the Investment Management Company and one or more Investment Management
Company Subsidiaries, (ii) any partnership or limited liability company of which
50% or more of the capital and profits interests is owned, directly or
indirectly, by the Investment Management Company or by one or more Investment
Management Company Subsidiaries or by the Investment Management Company and one
or more Investment Management Company Subsidiaries and (iii) any other entity
not described in clauses (i) or (ii) above of which 50% or more of the ownership
and the power, pursuant to a written contract or agreement, to direct the
policies and management or the financial and the other affairs thereof, are
owned or controlled by the Investment Management Company or by one or more
Investment Management Company Subsidiaries or by the Investment Management
Company and one or more Investment Management Company Subsidiaries.

               1.31. Non-Employee Director. "Non-Employee Director" shall mean a
member of the Board or the Investment Management Company Board who is not an
Independent Director, an Investment Management Company Independent Director or
an Employee.

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

               1.33. Option. "Option" shall mean a stock option granted under
Article III of this Plan. An Option granted under this Plan shall, as determined
by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to anyone other than Company
Employees shall be Non-Qualified Stock Options.

               1.34. Optionee. "Optionee" shall mean an Employee, consultant or
Director granted an Option under this Plan.

               1.35. Partnership. "Partnership" shall mean AMB Property, L.P., a
Delaware limited partnership.

               1.36. Partnership Agreement. "Partnership Agreement" shall mean
the Amended and Restated Agreement of Limited Partnership of the Partnership, as
the same may be amended, modified or restated from time to time.



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

               1.38. Partnership Purchase Price. "Partnership Purchase Price"
shall have the meaning set forth in Section 5.4

               1.39. Partnership Purchased Shares. "Partnership Purchased
Shares" shall have the meaning set forth in Section 5.4.

               1.40. Partnership Subsidiary. "Partnership Subsidiary" shall mean
(i) a corporation, association or other business entity of which 50% or more of
the total combined voting power of all classes of capital stock is owned,
directly or indirectly, by the Partnership or by one or more Partnership
Subsidiaries or by the Partnership and one or more Partnership Subsidiaries,
(ii) any partnership or limited liability company of which 50% or more of the
capital and profits interests is owned, directly or indirectly, by the
Partnership or by one or more Partnership Subsidiaries or by the Partnership and
one or more Partnership Subsidiaries, and (iii) any other entity not described
in clauses (i) or (ii) above of which 50% or more of the ownership and the
power, pursuant to a written contract or agreement, to direct the policies and
management or the financial and the other affairs thereof, are owned or
controlled by the Partnership or by one or more other Partnership Subsidiaries
or by the Partnership and one or more Partnership Subsidiaries.

               1.41. Performance Award. "Performance Award" shall mean a cash
bonus, stock bonus or other performance or incentive award that is paid in cash,
Common Stock or a combination of both, awarded under Article VII of this Plan.

               1.42. Plan. "Plan" shall mean the Second Amended and Restated
1997 Stock Option and Incentive Plan of AMB Property Corporation and AMB
Investment Management, Inc. and their Respective Subsidiaries.

               1.43. Restricted Stock. "Restricted Stock" shall mean Common
Stock awarded under Article VI of this Plan.

               1.44. Restricted Stockholder. "Restricted Stockholder" shall mean
an Employee or consultant granted an award of Restricted Stock under Article VI
of this Plan.

               1.45. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.

               1.46. Section 162(m) Participant. "Section 162(m) Participant"
shall mean any key Employee designated by the Committee as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.



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               1.47. Stock Appreciation Right. "Stock Appreciation Right" shall
mean a stock appreciation right granted under Article VIII of this Plan.

               1.48. Stock Payment. "Stock Payment" shall mean (i) a payment in
the form of shares of Common Stock, or (ii) an option or other right to purchase
shares of Common Stock, as part of a deferred compensation arrangement, made in
lieu of all or any portion of the compensation, including without limitation,
salary, bonuses and commissions, that would otherwise become payable to a key
Employee or consultant in cash, awarded under Article VII of this Plan.

               1.49. Subsidiary. "Subsidiary" shall mean any Company Subsidiary
or Investment Management Company Subsidiary.

               1.50. Termination of Consultancy. "Termination of Consultancy"
shall mean the time when the engagement of an Optionee, Grantee or Restricted
Stockholder as a consultant to the Company, a Company Subsidiary, the Investment
Management Company, an Investment Management Company Subsidiary, the Partnership
or a Partnership Subsidiary is terminated for any reason, with or without Cause,
including, but not by way of limitation, by resignation, discharge, death or
retirement; but excluding terminations where there is a simultaneous
commencement of employment with the Company, a Company Subsidiary, the
Investment Management Company, an Investment Management Company Subsidiary, the
Partnership or a Partnership Subsidiary. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a discharge for
Cause, and all questions of whether a particular leave of absence constitutes a
Terminations of Consultancy. Notwithstanding any other provision of this Plan,
the Company, a Company Subsidiary, the Investment Management Company, an
Investment Management Company Subsidiary, the Partnership or a Partnership
Subsidiary has an absolute and unrestricted right to terminate a consultant's
service at any time for any reason whatsoever, with or without Cause, except to
the extent expressly provided otherwise in writing.

               1.51. Termination of Directorship. "Termination of Directorship"
shall mean the time when an Optionee, Grantee or Restricted Stockholder who is
an Independent Director or a Management Investment Company Independent Director
ceases to be a Director for any reason, including, but not by way of limitation,
a termination by resignation, failure to be elected, death or retirement; but
excluding, at the discretion of the Committee, terminations (i) where there is a
simultaneous reemployment or continuing employment of an Optionee, Grantee or
Restricted Stockholder by the Company, a Company Subsidiary, the Investment
Management Company, an Investment Management Company Subsidiary, the Partnership
or a Partnership Subsidiary and (ii) which are followed by the simultaneous
establishment of a directorship with the Company, a Company Subsidiary, the
Investment Management Company, an Investment Management Company Subsidiary, the
Partnership or a Partnership Subsidiary. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship with respect to Independent Directors or Management
Investment Company Independent Directors in accordance with the Company's
bylaws.



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               1.52. Termination of Employment. "Termination of Employment"
shall mean the time when the employee-employer relationship between an Optionee,
Grantee or Restricted Stockholder and the Company, Investment Management Company
or Partnership, or any of their respective Subsidiaries, is terminated for any
reason, with or without Cause, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or retirement; but
excluding (i) terminations where there is a simultaneous reemployment or
continuing employment of an Optionee, Grantee or Restricted Stockholder by the
Company, a Company Subsidiary, the Investment Management Company, an Investment
Management Company Subsidiary, the Partnership or a Partnership Subsidiary, (ii)
at the discretion of the Committee, terminations which result in a temporary
severance of the employee-employer relationship, and (iii) at the discretion of
the Committee, terminations which are followed by the simultaneous establishment
of a consulting relationship by the Company, a Company Subsidiary, the
Investment Management Company, an Investment Management Company Subsidiary, the
Partnership or a Partnership Subsidiary with the former employee. The Committee,
in its absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Employment, including, but not by way of
limitation, the question of whether a Termination of Employment resulted from a
discharge for Cause, and all questions of whether a particular leave of absence
constitutes a Termination of Employment; provided, however, that, with respect
to Incentive Stock Options unless otherwise determined by the Committee in its
discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision of
this Plan, the Company, a Company Subsidiary, the Investment Management Company,
an Investment Management Company Subsidiary, the Partnership or a Partnership
Subsidiary has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without Cause, except
to the extent expressly provided otherwise in writing.

                                   ARTICLE II.
                             SHARES SUBJECT TO PLAN

               2.1.   Shares Subject to Plan.

               (a) The shares of stock subject to Options, awards of Restricted
Stock, Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be shares of Common Stock. The
aggregate number of such shares which may be issued upon exercise of such
Options or rights or upon any such awards under the Plan shall not exceed Eight
Million Nine Hundred Fifty Thousand (8,950,000). The shares of Common Stock
issuable upon exercise of such Options or rights or upon any such awards may be
either previously authorized but unissued shares or treasury shares.

               (b) The maximum number of shares which may be subject to Options,
awards of Restricted Stock, Performance Awards, Dividend Equivalents, awards of
Deferred Stock,



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Stock Payments or Stock Appreciation Rights granted under the Plan to any
individual in any calendar year shall not exceed the Award Limit.

               2.2. Add-back of Options and Other Rights. If any Option, or
other right to acquire shares of Common Stock under any other award under this
Plan, expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by this Plan, the number of
shares subject to such Option or other right but as to which such Option or
other right was not exercised prior to its expiration, cancellation or exercise
may again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Furthermore, any shares subject to Options or other awards which
are adjusted pursuant to Section 10.3 and become exercisable with respect to
shares of stock of another corporation shall be considered canceled and may
again be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Shares of Common Stock which are delivered by the Optionee or
Grantee or withheld by the Company upon the exercise of any Option or other
award under this Plan, in payment of the exercise price thereof, may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. If any share of Restricted Stock is forfeited by the Grantee or repurchased
by the Company pursuant to Section 6.6 hereof, such share may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.

                                  ARTICLE III.
                               GRANTING OF OPTIONS

               3.1. Eligibility. Any Employee, consultant or Non-Employee
Director selected by the Committee pursuant to Section 3.4(a)(i) shall be
eligible to be granted an Option. Independent Directors of the Company shall be
eligible to be granted Options at the times and in the manner set forth in
Section 3.4(d).

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

               3.3. Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted to any person who is not an Employee, or to any Employee
of a Subsidiary which does not constitute a "subsidiary corporation" within
Section 424(f) of the Code.

               3.4.   Granting of Options

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



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                      (i) Determine which Employees are key Employees and select
        from among the key Employees, consultants and Non-Employee Directors
        (including Employees, consultants and Non-Employee Directors who have
        previously received Options or other awards under this Plan) such of
        them as in its opinion should be granted Options;

                      (ii) Subject to the Award Limit, determine the number of
        shares to be subject to such Options granted to the selected key
        Employees or consultants;

                      (iii) Subject to Section 3.3, determine whether such
        Options are to be Incentive Stock Options or Non-Qualified Stock Options
        and whether such Options are to qualify as performance-based
        compensation as described in Section 162(m)(4)(C) of the Code; and

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

               (b) Upon the selection of a key Employee or consultant to be
granted an Option, the Committee shall instruct the Secretary of the Company to
issue the Option and may impose such conditions on the grant of the Option as it
deems appropriate.

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

               (d) During the term of the Plan, each person who is named as an
Independent Director in the Company's registration statement in connection with
the Company's initial public offering of its Common Stock (an "Initial
Independent Director") as of the date upon which such Independent Director's
term as a director commences, automatically shall be granted (i) an Option to
purchase twenty-six thousand two hundred fifty (26,250) shares of Common Stock
(subject to adjustment as provided in Section 10.3) on the date of such initial
public offering and (ii) an Option to purchase fifteen thousand (15,000) shares
of Common Stock (subject to adjustment as provided in Section 10.3) on the date
of each annual meeting of stockholders after such initial public offering at
which the Independent Director is reelected to the Board commencing with the
annual meeting to be held in 1999. During the term of the Plan, a person, other
than an Initial Independent Director, who is initially elected to the Board
after the consummation of the initial public offering of Common Stock and who is
an Independent Director at the time of such initial election automatically shall
be granted (i) an Option to purchase twenty thousand (20,000) shares of Common
Stock (subject to adjustment as provided in Section 10.3) on the date of such
initial election and (ii) an Option to purchase fifteen thousand (15,000) shares
of Common Stock (subject to adjustment as provided in Section 10.3) on the date
of each annual meeting of stockholders after such initial election at which the



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Independent Director is reelected to the Board. Members of the Board who are
employees of the Company who subsequently retire from the Company and remain on
the Board will not receive an initial Option grant pursuant to clause (i) of the
preceding sentence, but to the extent that they are otherwise eligible, will
receive, after retirement from employment with the Company, Options as described
in clause (ii) of the preceding sentence. All the foregoing Option grants
authorized by this Section 3.4(d) are subject to stockholder approval of the
Plan.

                                   ARTICLE IV.
                                TERMS OF OPTIONS

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

               4.2. Option Price. The price per share of the shares subject to
each Option shall be set by the Committee; provided, however, that (i) in the
case of Incentive Stock Options such price shall not be less than 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted
(or the date the Option is modified, extended or renewed for purposes of Section
424(h) of the Code); (ii) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code), such price shall not be less than 110% of the Fair
Market Value of a share of Common Stock on the date the Option is granted (or
the date the Option is modified, extended or renewed for purposes of Section
424(h) of the Code); (iii) in the case of Options granted to Independent
Directors, such price shall equal 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted; provided, however, that the
price of each share subject to each Option granted to Initial Independent
Directors pursuant to Section 3.4(d) hereof shall equal the initial public
offering price per share of Common Stock; and (iv) in the case of all other
Options granted, such price shall be not less than 100% of the Fair Market Value
of a share of Common Stock on the date the Option is granted. Notwithstanding
any other provision of this Plan to the contrary, the Committee shall not have
the authority to amend the terms of any outstanding Option to reduce its
exercise price.

               4.3. Option Term. The term of an Option shall be set by the
Committee in its discretion; provided, however, that, (i) no Option shall be
granted with a term of more than ten (10) years from the date the Option is
granted, (ii) in the case of Options granted to Independent Directors, the term
shall be ten (10) years from the date the Option is granted, and (iii) in the
case of Incentive Stock Options, the term shall not be more than five (5) years
from the date the



                                       12
<PAGE>   13

Incentive Stock Option is granted, if the Incentive Stock Option is granted to
an individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code). Except as limited by requirements of Section 422 of
the Code and regulations and rulings thereunder applicable to Incentive Stock
Options, the Committee may extend the term of any outstanding Option in
connection with any Termination of Employment or Termination of Consultancy of
the Optionee, or amend any other term or condition of such Option relating to
such a termination.

               4.4.   Option Vesting

               (a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or in part
for a specified period after it is granted; provided, however, that, unless the
Committee otherwise provides in the terms of the Option or otherwise, no Option
shall be exercisable by any Optionee who is then subject to Section 16 of the
Exchange Act within the period ending six months and one day after the date the
Option is granted; and provided, further, that, unless the Board otherwise
provides in the terms of the Options or otherwise, Options granted to
Independent Directors shall become fully exercisable on first anniversary of the
date of Option grant, except as provided in Section 10.3(b). At any time after
grant of an Option, the Committee may, in its sole and absolute discretion and
subject to whatever terms and conditions it selects, accelerate the period
during which an Option (except an Option granted to an Independent Director)
vests.

               (b) No portion of an Option which is unexercisable at Termination
of Employment, Termination of Directorship or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the Committee
following the grant of the Option.

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

               4.5. Consideration. In consideration of the granting of an
Option, the Optionee shall agree, in the written Stock Option Agreement, to
remain in the employ of (or to consult for or to serve as an Independent
Director of, as applicable) the Company, a Company Subsidiary, the Investment
Management Company, an Investment Management Company Subsidiary, the



                                       13
<PAGE>   14

Partnership or a Partnership Subsidiary for a period of at least one year (or
such shorter period as may be fixed in the Stock Option Agreement or by action
of the Committee following grant of the Option) after the Option is granted (or,
in the case of an Independent Director, until the next annual meeting of
stockholders of the Company). Nothing in this Plan or in any Stock Option
Agreement hereunder shall (i) confer upon any Optionee any right to (a) continue
in the employ of, or as a consultant for, the Company, a Company Subsidiary, the
Investment Management Company, an Investment Management Company Subsidiary, the
Partnership or a Partnership Subsidiary, or as a Director, or (b) receive any
severance pay from the Company, a Company Subsidiary, the Investment Management
Company, an Investment Management Company Subsidiary, the Partnership or a
Partnership Subsidiary or (ii) interfere with or restrict in any way the rights
of the Company, a Company Subsidiary, the Investment Management Company, an
Investment Management Company Subsidiary, the Partnership or a Partnership
Subsidiary, which are hereby expressly reserved, to discharge any Optionee at
any time for any reason whatsoever, with or without Cause.

                                   ARTICLE V.
                               EXERCISE OF OPTIONS

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

               5.2. Manner of Exercise. All or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company (or such other officer as identified in the applicable
Stock Option Agreement):

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

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

               (c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and



                                       14
<PAGE>   15

               (d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised.
However, the Committee (or the Board, in the case of Options granted to
Independent Directors), may in its discretion (i) allow a delay in payment up to
thirty (30) days from the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, through the delivery of shares of
Common Stock owned by the Optionee, duly endorsed for transfer to the Company
with a Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in whole
or in part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of a full
recourse promissory note bearing interest (at no less than such rate as shall
then preclude the imputation of interest under the Code) and payable upon such
terms as may be prescribed by the Committee or the Board; or (v) allow payment
through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii) and (iv). In the case of a promissory note, the
Committee (or the Board, in the case of Options granted to Independent
Directors) may also prescribe the form of such note and the security to be given
for such note. The Option may not be exercised, however, by delivery of a
promissory note or by a loan from the Company when or where such loan or other
extension of credit is prohibited by law.

               5.3. Transfer of Shares to a Company Employee, Consultant or
Independent Director. As soon as practicable after receipt by the Company,
pursuant to Section 5.2(d), of payment for the shares with respect to which an
Option (which in the case of a Company Employee, consultant or Independent
Director was issued to and is held by such Optionee in such capacity), or
portion thereof, is exercised by an Optionee who is a Company Employee,
Independent Director or a consultant to the Company, with respect to each such
exercise, the Company shall transfer to the Optionee the number of shares equal
to

               (a) The amount of the payment made by the Optionee to the Company
pursuant to Section 5.2(d), divided by

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

               5.4. Transfer of Shares to a Partnership Employee, Consultant or
Independent Director. (a)At the time that an Optionee who is an Employee,
Independent Director or consultant of the Partnership or a Partnership
Subsidiary exercises all or any part of an Option pursuant to the terms of this
Plan, such Optionee shall remit to the Partnership or the Partnership
Subsidiary, as the case may be, an amount equal to the product of the exercise
price per share of such Option and the number of shares with respect to such
Option being exercised by such Optionee.

               (b) As soon as practicable after receipt by the Operating
Partnership of a notice of the exercise of shares with respect to which an
Option (which was issued to and is held by a Partnership Employee, consultant or
Independent Director in such capacity), or portion



                                       15
<PAGE>   16

thereof, is exercised by an Optionee who is a Partnership Employee, Independent
Director or consultant, with respect to each such exercise the Company shall
sell to the Partnership, or the Partnership Subsidiary in the case of an
Optionee who is an Employee, consultant or Independent Director of Partnership
Subsidiary, the number of shares (the "Partnership Purchased Shares") equal to
the number of shares subject to such exercise by such Optionee at a purchase
price equal to the Fair Market Value of a share of Common Stock at the time of
the exercise (the "Partnership Purchase Price");

               (c) As soon as practicable after receipt of the Partnership
Purchased Shares by the Partnership, or the Partnership Subsidiary in the case
of an Optionee who is an Employee, Independent Director or consultant of a
Partnership Subsidiary, the Partnership or the Partnership Subsidiary, as the
case may be, shall transfer such shares to the Optionee at no additional cost.

               5.5. Transfer of Shares to an Investment Management Company
Employee, Consultant or Independent Director. (a) At the time that an Optionee
who is an Employee, Independent Director or consultant of the Investment
Management Company or an Investment Management Company Subsidiary exercises all
or any part of an Option pursuant to the terms of this Plan, such Optionee shall
remit to the Investment Management Company or the Investment Management Company
Subsidiary, as the case may be, an amount equal to the product of the exercise
price per share of such Option and the number of shares with respect to such
Option being exercised by such Optionee.

               (b) As soon as practicable after receipt by the Investment
Management Company, of a notice of the exercise of shares with respect to which
an Option (which in the case of an Investment Management Company Employee,
consultant or Independent Director was issued to and is held by such Optionee in
such capacity), or portion thereof, is exercised by an Optionee who is an
Investment Management Company Employee, an Investment Management Company
Independent Director or consultant, with respect to each such exercise the
Company shall sell to the Investment Management Company, or the Investment
Management Company Subsidiary in the case of an Optionee who is an Employee,
consultant or Independent Director of an Investment Management Company
Subsidiary, the number of shares (the "Investment Management Company Purchased
Shares") equal to the number of shares subject to such exercise by such Optionee
at a purchase price equal to the Fair Market Value of a share of Common Stock at
the time of the exercise (the "Investment Management Company Purchase Price");

               (c) As soon as practicable after receipt of the Investment
Management Company Purchased Shares by the Investment Management Company, or the
Investment Management Company Subsidiary in the case of an Optionee who is an
Employee, Independent Director or consultant of a Investment Management Company
Subsidiary, the Investment Management Company or such Investment Management
Company Subsidiary, as the case may be, shall transfer such shares to the
Optionee at no additional cost.

               5.6. Transfer of Payment to the Partnership. As soon as
practicable after receipt by the Company of the amount described in Section
5.2(d), 5.4(b) and 5.5(b) the



                                       16
<PAGE>   17

Company shall contribute to the Partnership an amount of cash equal to such
payment and the Partnership shall issue an additional interest in the
Partnership on the terms set forth in the Partnership Agreement.

               5.7. Conditions to Issuance of Stock Certificates. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:

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

               (b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body which the Committee or Board shall, in its absolute discretion, deem
necessary or advisable;

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

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

               (e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.

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

               5.9. Ownership and Transfer Restrictions. The Committee (or
Board, in the case of Options granted to Independent Directors), in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares. The Committee
may require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Employee or (ii) one year after the transfer of such shares to
such Employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement to give prompt
notice of disposition.



                                       17
<PAGE>   18

               5.10. Limitations on Exercise of Options Granted to an Optionee.
The Committee (or the Board, in the case of Options granted to Independent
Directors), in its absolute discretion, may impose such limitations and
restrictions on the exercise of Options as it deems appropriate. Any such
limitation shall be set forth in the respective Stock Option Agreement.
Notwithstanding the foregoing, an Option is not exercisable if in the sole and
absolute discretion of the Committee the exercise of such Option would likely
result in any of the following:

               (a) the Optionee's or any other person's ownership of capital
stock being in violation of the Stock Ownership Limit (as defined in the
Company's Articles of Incorporation); or

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

                                   ARTICLE VI.
                            AWARD OF RESTRICTED STOCK

               6.1. Eligibility. Subject to the Award Limit, Restricted Stock
may be awarded to any Employee who the Committee determines is a key Employee or
any Director or consultant whom the Committee determines should receive such an
award.

               6.2.   Award of Restricted Stock

               (a) The Committee may from time to time, in its absolute
discretion:

                      (i) Determine which Employees are key Employees and select
        from among the key Employees, Directors or consultants (including
        Employees, Directors or consultants who have previously received other
        awards under this Plan) such of them as in its opinion should be awarded
        Restricted Stock; and

                      (ii) Determine the purchase price, if any, and other terms
        and conditions (including, without limitation, in the case of awards to
        Employees, consultants or Independent Directors of the Partnership, any
        Partnership Subsidiary, the Investment Management Company or any
        Investment Management Company Subsidiary, the mechanism for the transfer
        of the Restricted Stock and payment therefor and, in the case of the
        repurchase of shares of Restricted Stock subject to restrictions in
        effect at the time of the Termination of Employment, Directorship or
        Consultancy of such Employee, Director or consultant, as the case may
        be) applicable to such Restricted Stock, consistent with this Plan.

               (b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Stock; provided, however, that such purchase
price shall be no less than the par value of the Common Stock to be purchased,
unless otherwise permitted by applicable state law. In all cases, legal
consideration shall be required for each issuance of Restricted Stock.



                                       18
<PAGE>   19

               (c) Upon the selection of a key Employee or consultant to be
awarded Restricted Stock, the Committee shall instruct the Secretary of the
Company to issue such Restricted Stock and may impose such conditions on the
issuance of such Restricted Stock as it deems appropriate.

               6.3. Restricted Stock Agreement. Restricted Stock shall be issued
only pursuant to a written Restricted Stock Agreement, which shall be executed
by the selected key Employee or consultant and an authorized officer of the
Company and which shall contain such terms and conditions as the Committee shall
determine, consistent with this Plan.

               6.4. Consideration. As consideration for the issuance of
Restricted Stock, in addition to payment of any purchase price, the Restricted
Stockholder shall agree, in the written Restricted Stock Agreement, to remain in
the employ of, or to consult for, the Company, a Company Subsidiary, the
Investment Management Company, an Investment Management Company Subsidiary, the
Partnership or a Partnership Subsidiary for a period of at least one year after
the Restricted Stock is issued (or such shorter period as may be fixed in the
Restricted Stock Agreement or by action of the Committee following grant of the
Restricted Stock) or, in the case of a Director, complete the remainder of such
Director's elected term. Nothing in this Plan or in any Restricted Stock
Agreement hereunder shall (i) confer on any Restricted Stockholder any right to
(a) continue in the employ of, as a Director of or as a consultant for, the
Company, a Company Subsidiary, the Investment Management Company, an Investment
Management Company Subsidiary, the Partnership or a Partnership Subsidiary or
(b) receive any severance pay from the Company, a Company Subsidiary, the
Investment Management Company, an Investment Management Company Subsidiary, the
Partnership or a Partnership Subsidiary or (ii) interfere with or restrict in
any way the rights of the Company, a Company Subsidiary, the Investment
Management Company, an Investment Management Company Subsidiary, the Partnership
or a Partnership Subsidiary, which are hereby expressly reserved, to discharge
the Employee or consultant at any time for any reason whatsoever, with or
without Cause, or any Director pursuant to the Company's bylaws.

               6.5. Rights as Stockholders. Subject to Section 6.6, upon
delivery of the shares of Restricted Stock to the escrow holder pursuant to
Section 6.8, the Restricted Stockholder shall have, unless otherwise provided by
the Committee, all the rights of a stockholder with respect to said shares,
subject to the restrictions in his Restricted Stock Agreement, including the
right to receive all dividends and other distributions paid or made with respect
to the shares; provided, however, that in the discretion of the Committee, any
extraordinary distributions with respect to the Common Stock shall be subject to
the restrictions set forth in Section 6.6.

               6.6. Restriction. All shares of Restricted Stock issued under
this Plan (including any shares received by holders thereof with respect to
shares of Restricted Stock as a result of stock dividends, stock splits or any
other form of recapitalization) shall, in the terms of each individual
Restricted Stock Agreement, be subject to such restrictions as the Committee
shall provide, which restrictions may include, without limitation, restrictions
concerning voting rights and transferability and restrictions based on duration
of employment with the Company, Company performance and individual performance;
provided, however, that, unless the



                                       19
<PAGE>   20

Committee otherwise provides in the terms of the Restricted Stock Agreement or
otherwise, no share of Restricted Stock granted to a person subject to Section
16 of the Exchange Act shall be sold, assigned or otherwise transferred until at
least six months and one day have elapsed from the date on which the Restricted
Stock was issued, and provided, further, that, except with respect to shares of
Restricted Stock granted pursuant to Section 6.10, by action taken after the
Restricted Stock is issued, the Committee may, on such terms and conditions as
it may determine to be appropriate, remove any or all of the restrictions
imposed by the terms of the Restricted Stock Agreement. Restricted Stock may not
be sold or encumbered until all restrictions are terminated or expire. If no
consideration was paid by the Restricted Stockholder upon issuance, a Restricted
Stockholder's rights in unvested Restricted Stock shall lapse upon a Termination
of Employment or, if applicable, upon a Termination of Directorship or a
Termination of Consultancy; provided, however, that the Committee in its sole
and absolute discretion may provide that such rights shall not lapse in the
event of a Termination of Employment or Termination of Directorship following a
"change of ownership control" (within the meaning of Treasury Regulation Section
1.62-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Restricted Stockholder's death or disability.

               6.7. Repurchase of Restricted Stock. The Committee shall provide
in the terms of each individual Restricted Stock Agreement that the Company
shall have the right to repurchase from the Restricted Stockholder the
Restricted Stock then subject to restrictions under the Restricted Stock
Agreement immediately upon a Termination of Employment or, if applicable, upon a
Termination of Director or a Termination of Consultancy, at a cash price per
share equal to the price paid by the Restricted Stockholder for such Restricted
Stock; provided, however, that the Committee in its sole and absolute discretion
may provide that no such right of repurchase shall exist in the event of a
Termination of Employment, Termination of Directorship or Termination of
Consultancy following a "change of ownership or control" (within the meaning of
Treasury Regulation Section 1.162-27(e)(2)(v) or any successor regulation
thereto) of the Company or because of the Restricted Stockholder's death or
disability; provided, further, that, except with respect to shares of Restricted
Stock granted pursuant to Section 6.10, the Committee in its sole and absolute
discretion may provide that no such right of repurchase shall exist in the event
of a Termination of Employment, Termination of Directorship or a Termination of
Consultancy without Cause, following any change in control or ownership of the
Company, because of the Restricted Stockholder's retirement, or otherwise.

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

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



                                       20
<PAGE>   21

               6.10.  Provisions Applicable to Section 162(m) Participants.

               (a) Notwithstanding anything in the Plan to the contrary, the
Committee may grant Restricted Stock to a Section 162(m) Participant the
restrictions with respect to which lapse upon the attainment of performance
goals for the Company which are related to one or more of the following business
criteria: (i) pre-tax income, (ii) operating income, (iii) cash flow, (iv)
earnings per share, (v) return on equity, (vi) return on invested capital or
assets, (vii) cost reductions or savings, (viii) funds from operations, (ix)
appreciation in the fair market value of Common Stock and (x) earnings before
any one or more of the following items: interest, taxes, depreciation or
amortization.

               (b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
Restricted Stock which may be granted to one or more Section 162(m)
Participants, no later than ninety (90) days following the commencement of any
fiscal year in question or any other designated fiscal period or period of
service (or such other time as may be required or permitted by Section 162(m) of
the Code), the Committee shall, in writing, (i) designate one or more Section
162(m) Participants, (ii) select the performance goal or goals applicable to the
fiscal year or other designated fiscal period or period of service, (iii)
establish the various targets and amounts of Restricted Stock which may be
earned for such fiscal year or other designated fiscal period or period of
service and (iv) specify the relationship between performance goals and targets
and the amounts of Restricted Stock to be earned by each Section 162(m)
Participant for such fiscal year or other designated fiscal period or period of
service. Following the completion of each fiscal year or other designated fiscal
period or period of service, the Committee shall certify in writing whether the
applicable performance targets have been achieved for such fiscal year or other
designated fiscal period or period of service. In determining the amount earned
by a Section 162(m) Participant, the Committee shall have the right to reduce
(but not to increase) the amount payable at a given level of performance to take
into account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or other
designated fiscal period or period of service.

                                  ARTICLE VII.

                    PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
                         DEFERRED STOCK, STOCK PAYMENTS

               7.1. Eligibility. Subject to the Award Limit, one or more
Performance Awards, Dividend Equivalents, awards of Deferred Stock, and/or Stock
Payments may be granted to any Employee whom the Committee determines is a key
Employee or any consultant or Independent Director whom the Committee determines
should receive such an award.

               7.2. Performance Awards. Any key Employee, consultant or
Independent Director selected by the Committee may be granted one or more
Performance Awards. The value of such Performance Awards may be linked to the
market value, book value, net profits or other measure of the value of Common
Stock or other specific performance criteria determined



                                       21
<PAGE>   22

appropriate by the Committee, in each case on a specified date or dates or over
any period or periods determined by the Committee, or may be based upon the
appreciation in the market value, book value, net profits or other measure of
the value of a specified number of shares of Common Stock over a fixed period or
periods determined by the Committee. In making such determinations, the
Committee shall consider (among such other factors as it deems relevant in light
of the specific type of award) the contributions, responsibilities and other
compensation of the particular key Employee or consultant.

               7.3. Dividend Equivalents. Any key Employee, consultant or
Independent Director selected by the Committee may be granted Dividend
Equivalents based on the dividends declared on Common Stock, to be credited as
of dividend payment dates, during the period between the date an Option, Stock
Appreciation Right, Deferred Stock or Performance Award is granted, and the date
such Option, Stock Appreciation Right, Deferred Stock or Performance Award is
exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Common Stock by
such formula and at such time and subject to such limitations as may be
determined by the Committee. With respect to Dividend Equivalents granted with
respect to Options intended to be qualified performance-based compensation for
purposes of Section 162(m) of the Code, such Dividend Equivalents shall be
payable regardless of whether such Option is exercised.

               7.4. Stock Payments. Any key Employee, consultant or Independent
Director selected by the Committee may receive Stock Payments in the manner
determined from time to time by the Committee. The number of shares shall be
determined by the Committee and may be based upon the Fair Market Value, book
value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined appropriate by the Committee,
determined on the date such Stock Payment is made or on any date thereafter.

               7.5. Deferred Stock. Any key Employee, consultant or Independent
Director selected by the Committee may be granted an award of Deferred Stock in
the manner determined from time to time by the Committee. The number of shares
of Deferred Stock shall be determined by the Committee and may be linked to the
market value, book value, net profits or other measure of the value of Common
Stock or other specific performance criteria determined to be appropriate by the
Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee. Common Stock underlying a Deferred Stock
award will not be issued until the Deferred Stock award has vested, pursuant to
a vesting schedule or performance criteria set by the Committee. Unless
otherwise provided by the Committee, a Grantee of Deferred Stock shall have no
rights as a Company stockholder with respect to such Deferred Stock until such
time as the award has vested and the Common Stock underlying the award has been
issued.

               7.6. Performance Award Agreement, Dividend Equivalent Agreement,
Deferred Stock Agreement, Stock Payment Agreement. Each Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be
evidenced by a written agreement, which shall be executed by the Grantee and an
authorized Officer of the Company and which shall contain such terms and
conditions (including, without limitation, in the case of



                                       22
<PAGE>   23

awards to Employees, consultants or Independent Directors of the Partnership,
any Partnership Subsidiary, the Investment Management Company or any Investment
Management Company Subsidiary, the mechanism for the transfer or rights under
such awards) as the Committee shall determine, consistent with this Plan.

               7.7. Term. The term of a Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment shall be set by the Committee in
its discretion.

               7.8. Exercise or Purchase Price. The Committee may establish the
exercise or purchase price of a Performance Award, shares of Deferred Stock, or
shares received as a Stock Payment; provided, however, that such price shall not
be less than the par value for a share of Common Stock, unless otherwise
permitted by applicable state law.

               7.9. Exercise Upon Termination of Employment. A Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment is
exercisable or payable only while the Grantee is an Employee or consultant;
provided, however, that the Committee in its sole and absolute discretion may
provide that the Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment may be exercised or paid subsequent to a Termination of
Employment following a "change of control or ownership" (within the meaning of
Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company;
provided, further, that except with respect to Performance Awards granted
pursuant to Section 7.12, the Committee in its sole and absolute discretion may
provide that the Performance Awards may be exercised or paid following a
Termination of Employment or a Termination of Consultancy without cause, or
following a change in control of the Company, or because of the Grantee's
retirement, death or disability, or otherwise.

               7.10. Payment on Exercise. Payment of the amount determined under
Section 7.1 or 7.2 above shall be in cash, in Common Stock or a combination of
both, as determined by the Committee. To the extent any payment under this
Article VII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 5.3.

               7.11. Consideration. In consideration of the granting of a
Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment, the Grantee shall agree, in a written agreement, to remain in the
employ of, or to consult for, the Company, a Company Subsidiary, the Investment
Management Company, an Investment Management Company Subsidiary, the Partnership
or a Partnership Subsidiary for a period of at least one year after such
Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment is granted (or such shorter period as may be fixed in such agreement or
by action of the Committee following such grant). Nothing in this Plan or in any
agreement hereunder shall (i) confer on any Grantee any right to (a) continue in
the employ of, or as a consultant for, the Company, a Company Subsidiary, the
Investment Management Company, an Investment Management Company Subsidiary, the
Partnership or a Partnership Subsidiary or (b) receive any severance pay from
the Company, a Company Subsidiary, the



                                       23
<PAGE>   24

Investment Management Company, an Investment Management Company Subsidiary, the
Partnership or a Partnership Subsidiary or (ii) interfere with or restrict in
any way the rights of the Company, a Company Subsidiary, the Investment
Management Company, an Investment Management Company Subsidiary, the Partnership
or a Partnership Subsidiary, which are hereby expressly reserved, to discharge
any Grantee at any time for any reason whatsoever, with or without Cause.

               7.12.  Provisions Applicable to Section 162(m) Participants.

               (a) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any performance or incentive awards described in Article VII
to a Section 162(m) Participant that vest or become exercisable or payable upon
the attainment of performance goals for the Company which are related to one or
more of the following business criteria: (i) pre-tax income, (ii) operating
income, (iii) cash flow, (iv) earnings per share, (v) return on equity, (vi)
return on invested capital or assets, (vii) cost reductions or savings, (viii)
funds from operations, (ix) appreciation in the fair market value of Common
Stock and (x) earnings before any one or more of the following items: interest,
taxes, depreciation or amortization.

               (b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
performance or incentive awards described in Article VII which may be granted to
one or more Section 162(m) Participants, no later than ninety (90) days
following the commencement of any fiscal year in question or any other
designated fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall, in
writing, (i) designate one or more Section 162(m) Participants, (ii) select the
performance goal or goals applicable to the fiscal year or other designated
fiscal period or period of service, (iii) establish the various targets and
bonus amounts which may be earned for such fiscal year or other designated
fiscal period or period of service and (iv) specify the relationship between
performance goals and targets and the amounts to be earned by each Section
162(m) Participant for such fiscal year or other designated fiscal period or
period of service. Following the completion of each fiscal year or other
designated fiscal period or period of service, the Committee shall certify in
writing whether the applicable performance targets have been achieved for such
fiscal year or other designated fiscal period or period of service. In
determining the amount earned by a Section 162(m) Participant, the Committee
shall have the right to reduce (but not to increase) the amount payable at a
given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate
performance for the fiscal year or other designated fiscal period or period of
service.

                                  ARTICLE VIII.
                            STOCK APPRECIATION RIGHTS

               8.1. Grant of Stock Appreciation Rights. A Stock Appreciation
Right may be granted to any key Employee or consultant selected by the
Committee. A Stock Appreciation Right may be granted (i) in connection and
simultaneously with the grant of an Option, (ii) with respect to a previously
granted Option, or (iii) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions (including, without limitation,
the mechanism for the transfer of rights under such awards) not inconsistent
with this Plan as the Committee



                                       24
<PAGE>   25

shall impose and shall be evidenced by a written Stock Appreciation Right
Agreement, which shall be executed by the Grantee and an authorized officer of
the Company. The Committee, in its discretion, may determine whether a Stock
Appreciation Right is to qualify as performance-based compensation as described
in Section 162(m)(4)(C) of the Code and Stock Appreciation Right Agreements
evidencing Stock Appreciation Rights intended to so qualify shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code.

               8.2.   Coupled Stock Appreciation Rights

               (a) A Coupled Stock Appreciation Right ("CSAR") shall be related
to a particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.

               (b) A CSAR may be granted to the Grantee for no more than the
number of shares subject to the simultaneously or previously granted Option to
which it is coupled.

               (c) A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may impose.

               8.3.   Independent Stock Appreciation Rights

               (a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of shares of Common Stock as the Committee may
determine; provided, however, that unless the Committee otherwise provides in
the terms of the ISAR or otherwise, no ISAR granted to a person subject to
Section 16 of the Exchange Act shall be exercisable until at least six months
have elapsed from (but excluding) the date on which the Option was granted. The
exercise price per share of Common Stock subject to each ISAR shall be set by
the Committee. An ISAR is exercisable only while the Grantee is an Employee or
consultant; provided that the Committee may determine that the ISAR may be
exercised subsequent to Termination of Employment or Termination of Consultancy
without cause, or following a change in control of the Company, or because of
the Grantee's retirement, death or disability, or otherwise.

               (b) An ISAR shall entitle the Grantee (or other person entitled
to exercise the ISAR pursuant to this Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its terms) and
to receive from the Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR from



                                       25
<PAGE>   26

the Fair Market Value of a share of Common Stock on the date of exercise of the
ISAR by the number of shares of Common Stock with respect to which the ISAR
shall have been exercised, subject to any limitations the Committee may impose.

               8.4.   Payment and Limitations on Exercise

               (a) Payment of the amount determined under Section 8.2(c) and
8.3(b) above shall be in cash, in Common Stock (based on its Fair Market Value
as of the date the Stock Appreciation Right is exercised) or a combination of
both, as determined by the Committee. To the extent such payment is effected in
Common Stock it shall be made subject to satisfaction of all provisions of
Section 5.3 above pertaining to Options.

               (b) Grantees of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the settlement or
exercise of a Stock Appreciation Right, including a window-period limitation, as
may be imposed in the discretion of the Board or Committee.

               8.5. Consideration. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Company, a
Company Subsidiary, the Investment Management Company, an Investment Management
Company Subsidiary, the Partnership or a Partnership Subsidiary for a period of
at least one year after the Stock Appreciation Right is granted (or such shorter
period as may be fixed in the Stock Appreciation Right Agreement or by action of
the Committee following grant of the Restricted Stock). Nothing in this Plan or
in any Stock Appreciation Right Agreement hereunder shall (i) confer on any
Grantee any right to (a) continue in the employ of, or as a consultant for, the
Company, a Company Subsidiary, the Investment Management Company, an Investment
Management Company Subsidiary, the Partnership or a Partnership Subsidiary or
(b) receive any severance pay from the Company, a Company Subsidiary, the
Investment Management Company, an Investment Management Company Subsidiary, the
Partnership or a Partnership Subsidiary or (ii) interfere with or restrict in
any way the rights of the Company, a Company Subsidiary, the Investment
Management Company, an Investment Management Company Subsidiary, the Partnership
or a Partnership Subsidiary, which are hereby expressly reserved, to discharge
any Grantee at any time for any reason whatsoever, with or without Cause.

                                   ARTICLE IX.
                                 ADMINISTRATION

               9.1. Compensation Committee. Prior to the Company's initial
registration of Common Stock under Section 12 of the Exchange Act, the
Compensation Committee shall consist of the entire Board. Following such
registration, the Compensation Committee (or another committee or a subcommittee
of the Board assuming the functions of the Committee under this Plan) shall
consist solely of two or more Independent Directors appointed by and holding
office at the pleasure of the Board, each of whom is both a "non-employee
director" as defined by Rule 16b-3 and an "outside director" for purposes of
Section 162(m) of the Code.



                                       26
<PAGE>   27

Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.

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

               9.3. Majority Rule; Unanimous Written Consent. The Committee
shall act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed by all
members of the Committee.

               9.4. Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Optionees, Grantees, Restricted
Stockholders, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan, Options, awards of
Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments, and all members of the Committee
and the Board shall be fully protected by the Company in respect of any such
action, determination or interpretation.

               9.5. Delegation of Authority to Grant Awards. The Committee may,
but need not, delegate from time to time to a committee consisting of one or
more members of the Committee or of one or more officers of the Company some or
all of the Committee's authority to grant awards under this Plan to eligible
recipients; provided, however, that each such recipient



                                       27
<PAGE>   28

must be an individual other than an "officer," "director" or "beneficial owner
of more than ten per centum of any class of any equity security" within the
meaning of each such term as it is used under Section 16(b) of the Exchange Act.
Any delegation hereunder shall be subject to the restrictions and limits that
the Committee specifies at the time of such delegation of authority and may be
rescinded at any time by the Committee. At all times, any committee appointed
under this Section 9.5 shall serve in such capacity at the pleasure of the
Committee.

                                   ARTICLE X.
                            MISCELLANEOUS PROVISIONS

               10.1. Not Transferable. Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution, unless and until such rights or awards have been exercised, or
the shares underlying such rights or awards have been issued, and all
restrictions applicable to such shares have lapsed. No Option, Restricted Stock
award, Deferred Stock award, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment or interest or right therein shall be
liable for the debts, contracts or engagements of the Optionee, Grantee or
Restricted Stockholder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.

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

               10.2. Amendment, Suspension or Termination of this Plan. Except
as otherwise provided in this Section 10.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 10.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or increase the
Award Limit, and no action of the Board or the Committee may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. No amendment, suspension or termination of this Plan shall, without the
consent of the holder of Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments, alter or impair any rights or obligations under



                                       28
<PAGE>   29

any Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments theretofore
granted or awarded, unless the award itself otherwise expressly so provides. No
Options, Restricted Stock, Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments may be granted or
awarded during any period of suspension or after termination of this Plan, and
in no event may any Incentive Stock Option be granted under this Plan after the
first to occur of the following events:

               (a) The expiration of ten years from the date the 1997 Stock
Option and Incentive Plan of AMB Property Corporation and AMB Investment
Management, Inc. and their Respective Subsidiaries was adopted by the Board; or

               (b) The expiration of ten years from the date the 1997 Stock
Option and Incentive Plan of AMB Property Corporation and AMB Investment
Management, Inc. and their Respective Subsidiaries was approved by the Company's
stockholders under Section 10.4.

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

               (a) Subject to Section 10.3(d), in the event that the Committee
(or the Board, in the case of Options granted to Independent Directors)
determines that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company (including, but not limited to, a
Corporate Transaction), or exchange of Common Stock or other securities of the
Company, issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event, in
the Committee's sole discretion (or in the case of Options granted to
Independent Directors, the Board's sole discretion), affects the Common Stock
such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to an Option,
Restricted Stock award, Performance Award, Stock Appreciation Right, Dividend
Equivalent, Deferred Stock award or Stock Payment, then the Committee (or the
Board, in the case of Options granted to Independent Directors) shall, in such
manner as it may deem equitable, adjust any or all of

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



                                       29
<PAGE>   30

                      (ii) the number and kind of shares of Common Stock (or
        other securities or property) subject to outstanding Options,
        Performance Awards, Stock Appreciation Rights, Dividend Equivalents, or
        Stock Payments, and in the number and kind of shares of outstanding
        Restricted Stock or Deferred Stock, and

                      (iii) the grant or exercise price with respect to any
        Option, Performance Award, Stock Appreciation Right, Dividend Equivalent
        or Stock Payment.

               (b) Subject to Section 10.3(d), in the event of any Corporate
Transaction or other transaction or event described in Section 10.3(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board, in the case of Options granted to
Independent Directors) in its discretion is hereby authorized to take any one or
more of the following actions whenever the Committee (or the Board, in the case
of Options granted to Independent Directors) determines that such action is
appropriate or desirable:

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

                      (ii) In its sole and absolute discretion, the Committee
        (or the Board, in the case of Options granted to Independent Directors)
        may provide, either by the terms of such Option, Performance Award,
        Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or
        Restricted Stock or Deferred Stock or by action taken prior to the
        occurrence of such transaction or event that it cannot vest, be
        exercised or become payable after such event;

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



                                       30
<PAGE>   31

        Option, Performance Award, Stock Appreciation Right, Dividend
        Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock;

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

                      (v) In its sole and absolute discretion, and on such terms
        and conditions as it deems appropriate, the Committee (or the Board, in
        the case of Options granted to Independent Directors) may make
        adjustments in the number and type of shares of Common Stock (or other
        securities or property) subject to outstanding Options, Performance
        Awards, Stock Appreciation Rights, Dividend Equivalents, or Stock
        Payments, and in the number and kind of outstanding Restricted Stock or
        Deferred Stock and/or in the terms and conditions of, and the criteria
        included in, outstanding options, rights and awards and options, rights
        and awards which may be granted in the future; and

                      (vi) In its sole and absolute discretion, and on such
        terms and conditions as it deems appropriate, the Committee may provide
        either by the terms of a Restricted Stock award or Deferred Stock award
        or by action taken prior to the occurrence of such event that, for a
        specified period of time prior to such event, the restrictions imposed
        under a Restricted Stock Agreement or a Deferred Stock Agreement upon
        some or all shares of Restricted Stock or Deferred Stock may be
        terminated, and, in the case of Restricted Stock, some or all shares of
        such Restricted Stock may cease to be subject to repurchase under
        Section 6.6 or forfeiture under Section 6.5 after such event.

               (c) Subject to Section 10.3(d) and 10.8, the Committee (or the
Board, in the case of Options granted to Independent Directors) may, in its
discretion, include such further provisions and limitations in any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock
Payment, or Restricted Stock or Deferred Stock agreement or certificate, as it
may deem equitable and in the best interests of the Company.

               (d) With respect to Options, Restricted Stock, Deferred Stock,
Stock Appreciation Rights and performance or incentive awards described in
Article VII which are granted to Section 162(m) Participants and are intended to
qualify as performance-based compensation under Section 162(m)(4)(C), no
adjustment or action described in this Section 10.3 or in any other provision of
the Plan shall be authorized to the extent that such adjustment or action would
cause the Plan to violate Section 422(b)(1) of the Code or would cause such
option or stock appreciation right to fail to so qualify under Section
162(m)(4)(C), as the case may be, or



                                       31
<PAGE>   32

any successor provisions thereto. Furthermore, no such adjustment or action
shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Committee (or the Board, in the case of
Options granted to Independent Directors) determines that the option or other
award is not to comply with such exemptive conditions. The number of shares of
Common Stock subject to any option, right or award shall always be rounded to
the next whole number.

               10.4. Approval of Plan by Stockholders. This Plan will be
submitted for the approval of the Company's stockholders within twelve months
after the date of the Board's initial adoption of this Plan. Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments may be granted and Restricted Stock or Deferred Stock may be awarded
prior to such stockholder approval, provided that such Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments shall
not be exercisable and such Restricted Stock or Deferred Stock shall not vest
prior to the time when this Plan is approved by the stockholders, and provided
further that if such approval has not been obtained at the end of said
twelve-month period, all Options, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments previously granted and all Restricted
Stock or Deferred Stock previously awarded under this Plan shall thereupon be
canceled and become null and void.

               10.5. Tax Withholding. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Optionee,
Grantee or Restricted Stockholder of any sums required by federal, state or
local tax law to be withheld with respect to the issuance, vesting, exercise or
payment of any Option, Restricted Stock, Deferred Stock, Performance Award,
Stock Appreciation Right, Dividend Equivalent or Stock Payment. The Committee
(or the Board, in the case of Options granted to Independent Directors) may in
its discretion and in satisfaction of the foregoing requirement allow such
Optionee, Grantee or Restricted Stockholder to elect to have the Company
withhold shares of Common Stock otherwise issuable under such Option or other
award (or allow the return of shares of Common Stock) having a Fair Market Value
equal to the sums required to be withheld.

               10.6. Loans. The Committee may, in its discretion, extend one or
more loans to key Employees in connection with the exercise or receipt of an
Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment granted under this Plan, or the issuance of Restricted Stock or
Deferred Stock awarded under this Plan. The terms and conditions of any such
loan shall be set by the Committee.

               10.7. Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide, in the terms of Options or other
awards made under the Plan, or to require the recipient to agree by separate
written instrument, that (i) any proceeds, gains or other economic benefit
actually or constructively received by the recipient upon any receipt or
exercise of the award, or upon the receipt or resale of any Common Stock
underlying such award, must be paid to the Company, and (ii) the award



                                       32
<PAGE>   33

shall terminate and any unexercised portion of such award (whether or not
vested) shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified date, or
within a specified time period following receipt or exercise of the award, or
(b) the recipient at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee (or
the Board, as applicable).

               10.8. Limitations Applicable to Section 16 Persons and
Performance-Based Compensation. Notwithstanding any other provision of this
Plan, this Plan, and any Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment granted, or Restricted Stock or Deferred
Stock awarded, to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan, Options, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, Stock Payments, Restricted Stock and Deferred Stock granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule. Furthermore, notwithstanding any other provision
of this Plan, any Option, Stock Appreciation Right or performance or incentive
award described in Article VII which is granted to a Section 162(m) Participant
and is intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall be subject to any additional limitations
set forth in Section 162(m) of the Code (including any amendment to Section
162(m) of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.

               10.9. Effect of Plan Upon Options and Compensation Plans. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary or (ii) to grant or assume options or other rights or
awards otherwise than under this Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.

               10.10. Section 83(b) Election Prohibited. No Grantee, Optionee or
Restricted Stockholder may make an election under Section 83(b) of the Code with
respect to any award or grant under this Plan, without the Company's consent.

               10.11. Compliance with Laws. This Plan, the granting and vesting
of Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this
Plan and the issuance and delivery of



                                       33
<PAGE>   34

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

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

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

               10.14. Conflicts with Company's Articles of Incorporation.
Notwithstanding any other provision of this Plan, no Optionee, Grantee or
Restricted Stockholder shall acquire or have any right to acquire any Common
Stock, and shall not have other rights under this Plan, which are prohibited
under the Company's Articles of Incorporation.



                  [Remainder of Page Intentionally Left Blank.]



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<PAGE>   35

               I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of AMB Property Corporation on May 7, 1999.

               Executed on this 7th day of May, 1999.



                                        ________________________________________
                                        David S. Fries
                                        Chief Administrative Officer,
                                        Managing Director and General
                                        Counsel



                                       S-1
<PAGE>   36

               IN WITNESS WHEREOF, the parties below have caused the foregoing
Plan to be approved by their officers duly authorized on this 7th day of May,
1999.


                                        AMB PROPERTY, L.P.,
                                        a Delaware limited partnership

                                        By:  AMB Property Corporation
                                             its general partner



                                             By: _______________________________
                                                 David S. Fries
                                                 Chief Administrative Officer,
                                                 Managing Director and General
                                                 Counsel



                                        AMB PROPERTY II, L.P.,
                                        a Delaware limited partnership

                                        By:  AMB Property Holding Corporation
                                             its general partner



                                             By: _______________________________
                                                 John T. Roberts
                                                 Vice President



                                      S-2
<PAGE>   37

                                        AMB INVESTMENT MANAGEMENT, INC.,
                                        a Maryland corporation



                                        By:  ___________________________________
                                             Barbara J. Linn
                                             President




                                        AMB INVESTMENT MANAGEMENT LIMITED
                                        PARTNERSHIP

                                        By:  AMB Investment Management, Inc.
                                             its general partner



                                             By: _______________________________
                                                 Barbara J. Linn
                                                 President



                                      S-3