<PAGE>   1





                       THE 1997 STOCK INCENTIVE PLAN FOR
                            OFFICERS, DIRECTORS AND
                                KEY EMPLOYEES OF
                          AMBASSADOR APARTMENTS, INC.,
                          AMBASSADOR APARTMENTS, L.P.
                                AND SUBSIDIARIES
<PAGE>   2

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          Page
<S>                                                                                       <C>
ARTICLE I                                                                               
         DEFINITIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
         1.1     General  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
         1.2     "Award Limit"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
         1.3     "Beneficiary"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
         1.4     "Board"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
         1.5     "Capital Stock"  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
         1.6     "Cause"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
         1.7     "Change in Control"  . . . . . . . . . . . . . . . . . . . . . . . . . .  2
         1.8     "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
         1.9     "Committee"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
         1.10    "Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
         1.11    "Common Units" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
         1.12    "Company"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
         1.13    "Company Charter"  . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
         1.14    "Company Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
         1.15    "Company Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . .  4
         1.16    "Director" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
         1.17    "Disability" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
         1.18    "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
         1.19    "Employer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
         1.20    "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
         1.21    "Expiration Date"  . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
         1.22    "Exchange Factor"  . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
         1.23    "Fair Market Value"  . . . . . . . . . . . . . . . . . . . . . . . . . .  4
         1.24    "Good Reason"  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5
         1.25    "Incentive Stock Option" . . . . . . . . . . . . . . . . . . . . . . . .  5
         1.26    "Independent Director" . . . . . . . . . . . . . . . . . . . . . . . . .  5
         1.27    "Non-Qualified Stock Option" . . . . . . . . . . . . . . . . . . . . . .  6
         1.28    "Operating Partnership"  . . . . . . . . . . . . . . . . . . . . . . . .  6
         1.29    "Operating Partnership Employee" . . . . . . . . . . . . . . . . . . . .  6
         1.30    "Operating Partnership Purchase Price" . . . . . . . . . . . . . . . . .  6
         1.31    "Operating Partnership Subsidiary" . . . . . . . . . . . . . . . . . . .  6
         1.32    "Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
         1.33    "Option Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
         1.34    "Optionee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
         1.35    "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
         1.36    "Property Partnership" . . . . . . . . . . . . . . . . . . . . . . . . .  6
         1.37    "Property Partnership Employee"  . . . . . . . . . . . . . . . . . . . .  6
         1.38    "Property Partnership Purchase Price"  . . . . . . . . . . . . . . . . .  7
         1.39    "Property Partnership Subsidiary"  . . . . . . . . . . . . . . . . . . .  7
         1.40    "Retirement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
         1.41    "Rule 16b-3" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
         1.42    "Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
         1.43    "Stock Ownership Limit"  . . . . . . . . . . . . . . . . . . . . . . . .  7
         1.44    "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
         1.45    "Subsidiary Corporation" . . . . . . . . . . . . . . . . . . . . . . . .  7
         1.46    "Ten Percent Shareholder"  . . . . . . . . . . . . . . . . . . . . . . .  7
         1.47    "Termination of Directorship"  . . . . . . . . . . . . . . . . . . . . .  7
</TABLE>





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<PAGE>   3

<TABLE>   
<S>                                                                                       <C>
         1.48    "Termination of Employment"  . . . . . . . . . . . . . . . . . . . . . .  8
         1.49    Gender and Number  . . . . . . . . . . . . . . . . . . . . . . . . . . .  8
                                                                                         
ARTICLE II                                                                               
         SHARES SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8
         2.1     Shares Subject to Plan . . . . . . . . . . . . . . . . . . . . . . . . .  8
         2.2     Unexercised Options and Other Rights . . . . . . . . . . . . . . . . . .  9
         2.3     Effect of Certain Exercises  . . . . . . . . . . . . . . . . . . . . . .  9
                                                                                         
ARTICLE III                                                                              
         GRANTING OF OPTIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9
         3.1     Eligibility  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9
         3.2     Qualification of Incentive Stock Options . . . . . . . . . . . . . . . . 10
         3.3     Granting of Options  . . . . . . . . . . . . . . . . . . . . . . . . . . 10
                                                                                         
ARTICLE IV                                                                               
         TERMS OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
         4.1     Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
         4.2     Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
         4.3     Option Term  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
         4.4     Option Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
         4.5     Exercise of Option after Termination of Employment or Directorship . . . 13
         4.6     Limitation in Terms of Option  . . . . . . . . . . . . . . . . . . . . . 15
                                                                                         
ARTICLE V                                                                                
         EXERCISE OF OPTIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
         5.1     Partial Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
         5.2     Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
         5.3     Transfer of Shares to a Company Employee or Independent Director . . . . 17
         5.4     Transfer of Shares to an Operating Partnership Employee  . . . . . . . . 17
         5.5     Transfer of Shares to a Property Partnership Employee  . . . . . . . . . 17
         5.6     Transfer of Payment to the Partnership . . . . . . . . . . . . . . . . . 18
         5.7     Conditions to Issuance of Stock Certificates . . . . . . . . . . . . . . 18
         5.8     Rights as Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . 19
         5.9     Ownership and Transfer Restrictions  . . . . . . . . . . . . . . . . . . 19
         5.10    Restrictions on Exercise of Option . . . . . . . . . . . . . . . . . . . 19
                                                                                         
ARTICLE VI                                                                               
         ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
         6.1     Committee  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
         6.2     Duties and Powers of Committee; Board Ratification of Grants . . . . . . 20
         6.3     Majority Rule  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
         6.4     Compensation; Professional Assistance; Good Faith Actions  . . . . . . . 20
         6.5     Delegation of Authority  . . . . . . . . . . . . . . . . . . . . . . . . 21
         6.6     No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
         6.7     Indemnification  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>





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<PAGE>   4

<TABLE>
<S>                                                                                       <C>
ARTICLE VII                                                                              
         MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
         7.1     Not Transferable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
         7.2     Amendment, Suspension or Termination of this Plan  . . . . . . . . . . . 23
         7.3     Changes in Common Stock or Assets of the Company . . . . . . . . . . . . 23
         7.4     Merger of the Company  . . . . . . . . . . . . . . . . . . . . . . . . . 24
         7.5     Effective Date; Approval of Plan by Stockholders . . . . . . . . . . . . 24
         7.6     Tax Withholding  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
         7.7     Loans  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
         7.8     Limitations Applicable to Section 16 Persons . . . . . . . . . . . . . . 25
         7.9     Effect of Plan Upon Options and Other Compensation Plans . . . . . . . . 26
         7.10    Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 26
         7.11    Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
         7.12    Governing Law  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>





                                      iii
<PAGE>   5

                       THE 1997 STOCK INCENTIVE PLAN FOR
                            OFFICERS, DIRECTORS AND
                                KEY EMPLOYEES OF
                          AMBASSADOR APARTMENTS, INC.,
                          AMBASSADOR APARTMENTS, L.P.
                                AND SUBSIDIARIES

                 The 1997 Stock Incentive Plan for Officers, Directors and Key
Employees of Ambassador Apartments, Inc., Ambassador Apartments, L.P. and
Subsidiaries (the "Plan") was adopted, effective January 1, 1997, for the
benefit of those officers, key employees and directors.  The purposes of the
plan are as follows:

                 (1)      To provide an additional incentive for officers,
directors and key employees of Ambassador Apartments, Inc., a Maryland
corporation (the "Company"), Ambassador Apartments, L.P., a Delaware limited
partnership (the "Operating Partnership"), and their Subsidiaries (as such
terms are defined in the Plan) to further the growth, development and financial
success of the Company by personally benefiting through the ownership of
Company stock which will reflect such growth, development and financial
success.

                 (2)      To enable the Company, the Operating Partnership and
the Subsidiaries to obtain and retain the services of such officers, directors
and key employees considered essential to their long term success by offering
them an opportunity to own stock in the Company which will reflect their
growth, development and financial success.


                                   ARTICLE I
                                  DEFINITIONS

         1.1     GENERAL

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

         1.2     "AWARD LIMIT" shall mean 1,200,000 shares of Common Stock.

         1.3     "BENEFICIARY" shall mean the person or persons properly
designated by the Optionee, including his spouse or heirs at law, to exercise
such Optionee's rights under this Plan in the event of the Optionee's death, or
if the Optionee has not designated such person or persons, or such person or
persons shall all have predeceased the Optionee, the executor or administrator
of the Optionee's estate.  Designation, revocation and redesignation of
Beneficiaries must be made in writing in accordance with rules established by
the Committee and shall be effective, upon delivery of such writing to the
Committee.
<PAGE>   6

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

         1.5     "CAPITAL STOCK" shall mean all classes or series of stock of
the Company.

         1.6     "CAUSE" shall mean any one or more of the following have
occurred:

                 (a)      a finding by the Board that an Optionee has
         materially harmed the Company or the Operating Partnership through an
         act of dishonesty or material conflict of interest which relates to
         the performance of the Optionee's duties as an Employee, under his
         employment agreement or otherwise, or as a Director;

                 (b)      an Optionee's conviction of a felony;

                 (c)      an Optionee's failure to perform in any material
         respect his duties as an Employee, under his employment agreement or
         otherwise, or as a Director (other than a failure due to disability)
         after written notice specifying the failure and a reasonable
         opportunity to cure (it being understood that if an Optionee's failure
         to perform is not of a type requiring a single action to fully cure,
         then the Optionee may commence the cure promptly after such written
         notice and thereafter diligently prosecute such cure to completion);
         or

                 (d)      the material breach by an Optionee of any of his
         obligations under his employment agreement, if any, or any written
         policies or directives of the Board as determined by the Board in good
         faith in its sole discretion, and the failure of the Optionee to cure
         such breach within 30 days after receipt by the Optionee of a written
         notice specifying in reasonable detail the nature of the breach.

         1.7     "CHANGE IN CONTROL" shall be deemed to have occurred if:

                 (a)      any "person" (as such term is used in Sections 13(d)
         and 14(d) of the Exchange Act), other than (i) a trustee or other
         fiduciary holding securities under an employee benefit plan of the
         Company or any other Employer, (ii) a corporation owned directly or
         indirectly by the stockholders of the Company in substantially the
         same proportions as their ownership of the Common Stock, or controlled
         directly or indirectly by the stockholders of the Company, or (iii)
         David M. Glickman or any of his affiliates becomes the "beneficial
         owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
         indirectly, of securities of the Company representing 50% or more of
         the total voting power represented by the Company's then outstanding
         securities which vote generally in the election of Directors (referred
         to herein as "Voting Securities"); or





                                       2
<PAGE>   7

                 (b)      during any period of two consecutive years,
         individuals who at the beginning of such period constitute the Board
         and any new Directors whose election by the Board or nomination for
         election by the Company's stockholders was approved by a vote of at
         least two-thirds of the Directors then still in office who either were
         Directors at the beginning of the period or whose election or
         nomination for election was previously so approved, cease for any
         reason to constitute a majority of the Board; or

                 (c)      the stockholders of the Company approve a merger or
         consolidation of the Company with any other corporation other than a
         merger or consolidation which would result in the Voting Securities of
         the Company outstanding immediately prior thereto continuing to
         represent (either by remaining outstanding or by being converted into
         Voting Securities of the surviving entity) at least 50% of the total
         voting power represented by the Voting Securities of the Company or
         such surviving entity outstanding immediately after such merger or
         consolidation, and such transaction is consummated; or

                 (d)      the stockholders of the Company approve a plan of
         complete liquidation of the Company or an agreement for the sale,
         assignment, conveyance, transfer, lease or other disposition by the
         Company of (in one transaction or a series of transactions) all or
         substantially all of the Company's assets, and such transaction is
         consummated.

         1.8     "CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.

         1.9     "COMMITTEE" shall mean a committee of the Board, appointed as
provided in Section 6.1, or the Board until such Committee is appointed or if
required so that the Plan and this Agreement comply with the provisions of the
exemptive rule under Section 16 of the Exchange Act.

         1.10    "COMMON STOCK" shall mean the common stock of the Company, par
value $.01 per share.

         1.11    "COMMON UNITS" shall mean partnership units designated as
"Common Units" under the Amended and Restated Agreement of Limited Partnership
of the Operating Partnership, as amended from time to time.

         1.12    "COMPANY" shall have the meaning set forth in the first
introductory paragraph.

         1.13    "COMPANY CHARTER" shall mean the Articles of Amendment and
Restatement of the Articles of Incorporation of the Company, as amended and
supplemented from time to time.





                                       3
<PAGE>   8

         1.14    "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 entity which is then a Company Subsidiary.

         1.15    "COMPANY SUBSIDIARY" shall mean any corporation, partnership
or other entity (other than the Company) in an unbroken chain beginning with
the Company if all of them in the aggregate, other than the last one in the
unbroken chain, then own stock or other interests possessing 50 percent or more
of the total combined economic interests or the total combined voting power of
all classes of stock or other interests in each of the others in such chain;
provided, however, that "Company Subsidiary" shall not include the Operating
Partnership or any Operating Partnership Subsidiary.

         1.16    "DIRECTOR" shall mean a member of the Board.

         1.17    "DISABILITY" shall mean a physical or mental condition
resulting from any medically determinable physical or mental impairment that
renders an Optionee incapable of engaging in any substantial gainful employment
and that can be expected to result in death or that has lasted and can be
expected to last for a continuous period in the aggregate of no less than four
consecutive months, as determined by the Committee in good faith in its sole
discretion.

         1.18    "EMPLOYEE" shall mean any Company Employee, Operating
Partnership Employee or Property Partnership Employee.

         1.19    "EMPLOYER" shall mean the Company, a Company Subsidiary, the
Operating Partnership or an Operating Partnership Subsidiary.

         1.20    "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.

         1.21    "EXPIRATION DATE" shall mean the last day of the term of the
Option as established in Section 4.3.

         1.22    "EXCHANGE FACTOR" shall have the meaning set forth in the
Exchange Rights Agreement, dated as of August 31, 1994, among the Company and
certain limited partners of the Operating Partnership, as such agreement may be
amended from time to time, including but not limited to any amendment to make a
future limited partner of the Operating Partnership a party to such agreement.

         1.23    "FAIR MARKET VALUE" of a share of Common Stock shall mean the
per share value of the Common Stock as of a given date, determined as follows:

                 (a)      If the Common Stock is listed or admitted for trading
         on the New York Stock Exchange (or if not, on another national
         securities exchange upon which the Common Stock is





                                       4
<PAGE>   9

         listed), the Fair Market Value of the Common Stock is the last
         reported sales price of the Common Stock for composite transactions on
         the New York Stock Exchange (or if not listed on the New York Stock
         Exchange, such other national securities exchange) on such date or, if
         there were no sales on such date, the last date on which there were
         sales.

                 (b)      If the Common Stock is not traded on any national
         securities exchange, but is quoted on the National Association of
         Securities Dealers, Inc. Automated Quotation System (the "NASDAQ
         System") or any similar system of automated dissemination of
         quotations of prices in common use, the Fair Market Value of the
         Common Stock is (i) if the Common Stock is then listed as a national
         market issue under the NASDAQ System, the last reported sales price of
         the Common Stock on the NASDAQ System on such date or, if there were
         no sales on such date, the last date on which there were sales or (ii)
         if the Common Stock is then not listed as a national market issue
         under the NASDAQ System, the mean between the closing representative
         bid and asked prices for the Common Stock on the NASDAQ System (or
         such similar quotation system) on such date.

                 (c)      If neither clause (a) nor clause (b) of this
         definition is applicable, or the Board determines in good faith that
         the value determined in accordance with clause (a) or (b), as
         otherwise applicable, does not represent the fair market value of the
         shares within the meaning of Section 422 or Section 162(m) of the
         Code, the Fair Market Value of the Common Stock is the fair market
         value per share as of such valuation date, as determined by the Board
         in good faith and in accordance with uniform principles consistently
         applied.

         1.24    "GOOD REASON" shall mean:

                 (a)      the material breach by an Employer of its obligations
         under any written employment agreement which may exist between an
         Employer and the Employee and the failure of the Employer to cure such
         breach within 30 days after receipt by the Employer of a written
         notice from the Employee specifying in reasonable detail the nature of
         the breach; or

                 (b)      any material diminution in the scope of an Employee's
         responsibilities and duties.

         1.25    "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.

         1.26    "INDEPENDENT DIRECTOR" shall mean a member of the Board who is
not also an Employee.





                                       5
<PAGE>   10

         1.27    "NON-QUALIFIED STOCK OPTION" shall mean an Option which is not
designated as an Incentive Stock Option.

         1.28    "OPERATING PARTNERSHIP" shall have the meaning set forth in
the first introductory paragraph.

         1.29    "OPERATING PARTNERSHIP EMPLOYEE" shall mean any officer or
other employee (as defined in accordance with Section 3401(c) of the Code) of
the Operating Partnership or any entity which is then an Operating Partnership
Subsidiary (other than a Property Partnership Employee).

         1.30    "OPERATING PARTNERSHIP PURCHASE PRICE" shall have the meaning
set forth in Section 5.4.

         1.31    "OPERATING PARTNERSHIP SUBSIDIARY" shall mean each of the
Property Partnerships or any other corporation, partnership or other entity
(other than the Operating Partnership) in an unbroken chain beginning with the
Operating Partnership if all of them in the aggregate, other than the last one
in the unbroken chain, then own more than 50 percent of the total combined
economic interests or the total combined voting power of all classes of stock
or other interests in each of the others.

         1.32    "OPTION" shall mean a stock option granted pursuant to this
Plan.  An Option granted pursuant to 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 Independent Directors and to
Employees who are not Employees of the Company or of a Subsidiary Corporation
shall be Non-Qualified Stock Options.

         1.33    "OPTION AGREEMENT" shall have the meaning set forth in Section
4.1.

         1.34    "OPTIONEE" shall mean an Employee or an Independent Director
to whom an Option is granted under the Plan.

         1.35    "PLAN" shall mean The 1997 Stock Incentive Plan for Officers,
Directors and Key Employees of Ambassador Apartments, Inc., Ambassador
Apartments, L.P. and Subsidiaries, as amended from time to time.

         1.36    "PROPERTY PARTNERSHIP" shall mean Ambassador Texas Partners,
L.P., Ambassador I, L.P., Ambassador II, L.P., Ambassador III, L.P., Ambassador
IV, L.P., Ambassador V, L.P., Ambassador VI, L.P., Ambassador VII, L.P.,
Ambassador VIII, L.P., Ambassador IX, L.P., Ambassador X, L.P., Ambassador XI,
L.P., each of which is a limited partnership, and any other Operating
Partnership Subsidiary designated as such by the Board.

         1.37    "PROPERTY PARTNERSHIP EMPLOYEE" shall mean any officer or
other employee (as defined in accordance with Section 3401(c) of





                                       6
<PAGE>   11

the Code) of a Property Partnership or any entity which is then a Property
Partnership Subsidiary.

         1.38    "PROPERTY PARTNERSHIP PURCHASE PRICE" shall have the meaning
set forth in Section 5.5(a).

         1.39    "PROPERTY PARTNERSHIP SUBSIDIARY" shall mean any corporation,
partnership, or other entity (other than a Property Partnership) in an unbroken
chain beginning with a Property Partnership if all of them in the aggregate,
other than the last one in the unbroken chain, then own more than 50 percent of
the total combined economic interests or total combined voting power of all
classes of stock or other interests in each of the others.

         1.40    "RETIREMENT" shall mean (a) an Employee's Termination of
Employment upon or after attainment of age 65 and completion of five years of
service with the Company and/or any other Employer or at such earlier time with
the permission of the Committee, or (b) an Independent Director's Termination
of Directorship upon or after attainment of age 65.

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

         1.42    "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.

         1.43    "STOCK OWNERSHIP LIMIT" shall mean (a) the "Common Stock
Ownership Limit" restrictions on ownership and transfer provided in the Company
Charter; (b) the "Aggregate Stock Ownership Limit" restrictions on ownership
and transfer provided in the Company Charter; and (c) any other restrictions on
ownership or transfer set forth in the Company Charter.

         1.44    "SUBSIDIARY" shall mean a Company Subsidiary or an Operating
Company Subsidiary (including, without limitation, any Property Partnership and
Property Partnership Subsidiary).

         1.45    "SUBSIDIARY CORPORATION" shall mean a Company Subsidiary that
qualifies as a subsidiary corporation within the meaning of Section 424(f) of
the Code.

         1.46    "TEN PERCENT SHAREHOLDER" shall mean an Employee who owns (or
is deemed to own by reason of the attribution rules of Section 424(d) of the
Code) stock possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or any Company Subsidiary that is a
Subsidiary Corporation.

         1.47    "TERMINATION OF DIRECTORSHIP" shall mean the time when an
Optionee who was an Independent Director ceases to be a Director of the Company
for any reason.





                                       7
<PAGE>   12

         1.48    "TERMINATION OF EMPLOYMENT" shall mean the time when the
employee-employer relationship between the Optionee and an Employer is
terminated for any reason, other than (a) termination where there is a
simultaneous reemployment or continuing employment of an Optionee by another
Employer, and (b) at the sole and absolute discretion of the Committee, a
termination which results in a temporary severance of the employee-employer
relationship that does not exceed one year; provided, however, that, if an
Employer ceases to qualify as same under the Plan as a result of a sale of
stock or other interests or any similar event, a Termination of Employment of
the Optionees who were employed by such Employer immediately prior to such
cessation shall be deemed to have occurred.  The Committee, in its sole and
absolute discretion, shall determine the effect of all other matters and
questions relating to Termination of Employment, including, but not limited to,
the question of whether a Termination of Employment resulted from a discharge
for Cause or a resignation by the employee for Good Reason, and all questions
of whether particular leaves of absence shall constitute Terminations of
Employment; provided, however, that, with respect to Incentive Stock Options, a
leave of absence shall constitute a Termination of Employment if, and to the
extent that, such leave of absence 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,
an Employer has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without Cause, except
to the extent expressly provided otherwise in writing.

         1.49    GENDER AND NUMBER

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


                                   ARTICLE II
                             SHARES SUBJECT TO PLAN

         2.1     SHARES SUBJECT TO PLAN

                 The shares of stock subject to Options shall be shares of
Common Stock, and the aggregate number of such shares which may be issued upon
exercise of such Options shall not exceed 1,600,000.   Notwithstanding anything
herein to the contrary, no single Optionee may be granted Options in any year
to purchase shares of Common Stock which, in the aggregate, exceed the Award
Limit, and the aggregate number of shares of Common Stock which may be issued
upon exercise of Options granted in the first year of this Plan shall not
exceed 450,000 (excluding the portion of any Option which has expired or has
been canceled without having been fully exercised so long as the Optionee to
whom such Option had previously been





                                       8
<PAGE>   13

granted received no benefits of ownership of the underlying shares of Common
Stock to which such Option related) and in the first and second years of this
Plan shall not exceed 1,000,000 (excluding the portion of any Option which has
expired or has been canceled without having been fully exercised so long as the
Optionee to whom such Option had previously been granted received no benefits
of ownership of the underlying shares of Common Stock to which such Option
related).  The shares of Common Stock issuable upon exercise of an Option may
be either previously authorized but unissued shares or issued shares which have
been repurchased by the Company.

         2.2     UNEXERCISED OPTIONS AND OTHER RIGHTS

                 If any Option expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
the subject of an Option granted hereunder so long as the Optionee to whom such
Options had previously been granted received no benefits of ownership of the
underlying shares of Common Stock to which such Options related.

         2.3     EFFECT OF CERTAIN EXERCISES

                 If any shares of Common Stock issuable pursuant to any Option
are surrendered as a payment for the price due on the exercise of said Option,
the number of shares of Common Stock issuable but so surrendered shall be
charged against the maximum number of shares of Common Stock that may be issued
under this Plan and shall not be considered Options that the Optionee with
respect thereto received no benefits of ownership.  In the event shares of
Common Stock are withheld pursuant to Section 7.6 hereof, the number of shares
that would have been issuable but that are withheld pursuant to the provisions
of Section 7.6 shall be charged against the maximum number of shares of Common
Stock that may be issued under this Plan and shall not be considered Options
that the Optionee with respect thereto received no benefits of ownership.


                                  ARTICLE III
                              GRANTING OF OPTIONS

         3.1     ELIGIBILITY

                 Employees eligible to participate in the Plan are those full
or part-time officers and other Employees who are responsible for or contribute
to the management, growth or profitability of the Company and the other
Employers and who are selected from time to time by the Committee, in its sole
and absolute discretion.  Independent Directors shall be eligible to be granted
Non-Qualified Stock Options.





                                       9
<PAGE>   14

         3.2     QUALIFICATION OF INCENTIVE STOCK OPTIONS

                 No Incentive Stock Option shall be granted unless such Option
when granted qualifies as an "incentive stock option" under Section 422 of the
Code, including, in the case of an Incentive Stock Option granted to a Ten
Percent Shareholder, the provisions of Section 422(c)(5) of the Code which
provides that an Incentive Stock Option granted to a Ten Percent Shareholder
must have an Option price of at least 110% of the Fair Market Value of the
stock subject thereto on the date of grant and cannot have a term longer than
five years.  Options granted under the Plan to Employees who are not Employees
of the Company or of a Subsidiary Corporation do not qualify as "incentive
stock options" under Sections 422 of the Code.  Unless the Committee in its
sole discretion provides otherwise in the Option Agreement, if all or any
portion of an Option that is intended to qualify as an "incentive stock option"
under Section 422 of the Code (a) does not qualify as such when granted, such
Option (or such portion) shall be treated as a Non-Qualified Option, and (b)
qualified as an "incentive stock option" when granted but later no longer
qualifies as such, such Option (or such portion) shall thereafter be treated as
a Non-Qualified Stock Option.  To the extent that the aggregate Fair Market
Value of shares of Common 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 Subsidiary Corporation) exceed $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 these
purposes, the Fair Market Value shall be determined as of the date of grant of
the Option.

         3.3     GRANTING OF OPTIONS

                 (a)      Subject to availability of shares as provided under
         Section 2.1 and 7.2, the Committee shall from time to time, in its
         absolute discretion:

                          (i)     Determine which Employees are key Employees
                 and select from among the Independent Directors and the key
                 Employees (including Independent Directors and Employees to
                 whom Options have previously been granted under the Plan) such
                 of them as in its opinion should be granted Options;

                          (ii)    Determine the number of shares to be subject
                 to such Options granted to the selected Independent Directors
                 and key Employees;





                                       10
<PAGE>   15


                          (iii)   Subject to Sections 3.1 and 3.2, determine
                 whether such Options are to be Incentive Stock Options or Non-
                 Qualified Stock Options; and

                          (iv)    Determine the terms and conditions of such
                 Options, consistent with this Plan, including, but not limited
                 to, such terms and conditions as may be required by Section
                 162(m) of the Code.

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

                 (c)      Any Incentive Stock Option granted under this Plan
         may be modified by the Committee to disqualify such Option from
         treatment as an "incentive stock option" under Section 422 of the
         Code; provided, however, that prior to such modification the Committee
         must obtain a written consent of the Optionee relating to such
         modification.


                                   ARTICLE IV
                                TERMS OF OPTIONS

         4.1     OPTION AGREEMENT

                 Each Option shall be evidenced by a written Option Agreement
(the "Option Agreement"), which shall be executed by the Optionee and an
authorized officer of the Company (and in the case of an Option granted to an
Employee, his Employer, if different), and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.  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.





                                       11
<PAGE>   16

         4.2     OPTION PRICE

                 Subject to Section 3.2, the price per share of the shares
subject to each Option shall be set by the Committee in its sole and absolute
discretion; provided, however, that 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.

         4.3     OPTION TERM

                 Subject to Section 3.2, the term of an Option shall be set by
the Committee in its sole and absolute discretion; provided, however, that such
term shall not be more than ten years from the date the Option is granted.  The
last day of the terms of the Option shall be the Option's Expiration Date.

         4.4     OPTION VESTING

                 (a)      No Option may be exercised in whole or in part until
         it has vested or otherwise becomes exercisable in accordance with the
         terms of this Plan and the Option Agreement pursuant to which such
         Option was granted.

                 (b)  The period during which the right to exercise an Option
         in whole or in part vests in the Optionee shall be determined by the
         Committee in its sole and absolute discretion and set forth in the
         Option Agreement, 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 and that such Option may vest in one or more installments.
         At any time after grant of an Option to an Optionee, the Committee
         may, in its sole and absolute discretion and subject to whatever terms
         and conditions it selects, accelerate the period during which all or
         any portion of an Option granted to an Optionee vests or becomes
         exercisable.

                 (c)      Upon an Employee's Termination of Employment for
         Cause, any and all Options held by such Employee (whether or not
         vested or exercisable) shall be forfeited and shall immediately
         terminate effective with such Termination of Employment; provide,
         however, that the Committee may in its sole discretion provide that
         all or a part of any Option, to the extent exercisable as of such
         date, can be exercised for a period of up to one month from the date
         of Termination of Employment.

                 (d)      The portion of any Option granted to an Employee that
         has not vested and become exercisable upon the Employee's Termination
         of Employment shall be forfeited and shall immediately terminate
         effective with such Termination of Employment; provided, however, that
         in the sole discretion of the Committee, the Option Agreement with
         respect to an Employee may provide that the unvested portion of any
         Option





                                       12
<PAGE>   17

         shall immediately become vested and exercisable (in whole or in part)
         in the event of a Change in Control, the Employee's Termination of
         Employment by reason of his Disability, by the Employer not for Cause,
         by the Employee for Good Reason, as a result of the Employee's
         Retirement, or if the Employee dies while an Employee.

                 (e)      Upon an Independent Director's Termination of
         Directorship for Cause, any and all Options held by such Independent
         Director (whether or not vested or exercisable) shall be forfeited and
         shall immediately terminate effective with such Termination of
         Directorship; provided, however, that the Committee may in its sole
         discretion provide that all or a part of any Option, to the extent
         exercisable as of such date, can be exercised for a period of up to
         one month from the date of Termination of Directorship.

                 (f)      The portion of any Option granted to an Independent
         Director that has not vested and become exercisable upon the
         Director's Termination of Directorship shall be forfeited and shall
         immediately terminate effective with such Termination of Directorship;
         provided, however, that in the sole discretion of the Committee, the
         Option Agreement with respect to an Independent Director may provide
         that the unvested portion of any Option shall immediately become
         vested and exercisable (in whole or in part) in the event of a
         Termination of Directorship for any reason other than Cause.

         4.5     EXERCISE OF OPTION AFTER TERMINATION OF EMPLOYMENT OR 
                 DIRECTORSHIP

                 (a)      An Option granted to an Employee may be exercised
         only while the Optionee is an Employee; provided, however, that the
         Committee may determine in its sole discretion and an Option Agreement
         may provide that an Option granted to an Employee may be exercised, to
         the extent that the Optionee could have done so immediately preceding
         the Optionee's Termination of Employment (and to the extent, if any,
         such Option became exercisable under the Option Agreement as a result
         of such termination), subsequent to such Optionee's Termination of
         Employment, subject to the following limitations:

                          (i)     If the Optionee dies while an Employee, the
                 Optionee's Beneficiary may exercise the Option not later than
                 12 months after the Optionee's death; or

                          (ii)    If the Optionee's Termination of Employment
                 is due to the Optionee's Disability or Retirement, the
                 Optionee (or the Optionee's personal representative) may
                 exercise the Option no later than 12 months after such
                 termination; or





                                       13
<PAGE>   18

                          (iii)   If the Optionee's Termination of Employment
                 is for any reason other than those set forth in (i) or (ii)
                 above and is not for Cause, the Optionee may exercise the
                 Option within three months after such termination; or

                          (iv)    If the Optionee dies during a period
                 described in clause (ii) or (iii) above for the exercise of an
                 Option after the Optionee's Termination of Employment, the
                 Optionee's Beneficiary may exercise such Option no later than
                 the expiration of such extended period; or

                          (v)     If the Optionee's Termination of Employment
                 is for Cause, the Optionee may not exercise any portion of the
                 Option thereafter except to the extent and at the times
                 permitted by the Committee in accordance with Section 4.4(c);
                 and

                          (vi)    Notwithstanding (i) through (v) above or
                 anything in an Option Agreement or the Plan to the contrary,
                 (A) at any time after the grant of an Option to an Employee,
                 the Committee, in its sole and absolute discretion and subject
                 to whatever terms and conditions it selects, may provide that
                 the Option may be exercised after the relevant extended period
                 set forth above, and (B) no Option may be exercised later than
                 its Expiration Date in any circumstances.

                 (b)      An Option granted to an Independent Director may be
         exercised only while the Optionee is an Independent Director;
         provided, however, that the Committee may determine in its sole
         discretion and an Option Agreement may provide that an Option granted
         to an Independent Director may be exercised, to the extent that the
         Optionee could have done so immediately preceding the Optionee's
         Termination of Directorship (and to the extent, if any, such Option
         became exercisable under the Option Agreement as a result of such
         termination), subsequent to such Optionee's Termination of
         Directorship, subject to the following limitations:

                          (i)     If the Optionee dies while a Director, the
                 Optionee's Beneficiary may exercise the Option within 12
                 months after the Optionee's death; or

                          (ii)    If the Optionee's Termination of Directorship
                 is due to Disability or Retirement, the Optionee (or the
                 Optionee's personal representative) may exercise the Option no
                 later than 12 months after such termination; or

                          (iii)   If the Optionee's Termination of Directorship
                 is for any reason other than those set forth in (i) or (ii)
                 above and is not for Cause, the Optionee may exercise the
                 Option within three months after such termination; or





                                       14
<PAGE>   19

                          (iv)    If the Optionee dies during a period
                 described in clause (ii) or (iii) above for the exercise of an
                 Option after the Optionee's Termination of Directorship, the
                 Optionee's Beneficiary may exercise such Option no later than
                 the expiration of such extended period; or

                          (v)     If the Optionee's Termination of Directorship
                 is for Cause, the Optionee may not exercise any portion of the
                 Option thereafter except to the extent and at the times
                 permitted by the Committee in accordance with Section 4.4(e);
                 and

                          (vi)    Notwithstanding (i) through (v) above or
                 anything contained in an Option Agreement or the Plan to the
                 contrary, (A) at any time after the grant of an Option to an
                 Independent Director, the Committee, in its sole and absolute
                 discretion and subject to whatever terms and conditions its
                 selects, may provide that the Option may be exercised after
                 the relevant extended period set forth above, and (B) no
                 Option may be exercised later than its Expiration Date in any
                 circumstances.

         4.6     LIMITATION IN TERMS OF OPTION

                 The Company shall not grant an Option which, and no Option
shall be exercisable to the extent that it, will, or is likely to, result in a
violation of Section 5.10.


                                   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 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:

                 (a)      Delivery of all of the following to the Secretary of
         the Company or his office (or his delegate):

                          (i)     A written notice complying with the
                 applicable rules established by the Committee, stating that
                 the Option, or a portion thereof, is exercised.  The notice
                 shall be signed by the Optionee or other person then





                                       15
<PAGE>   20

                 entitled to exercise the Option or a portion thereof, and a
                 copy thereof shall be delivered at the same time to the
                 Operating Partnership with respect to an Operating Partnership
                 Employee and to the Property Partnership with respect to a
                 Property Partnership Employee;

                          (ii)    Such representations and documents as the
                 Committee, in its sole and absolute discretion, deems
                 necessary or advisable to effect compliance with all
                 applicable provisions of the Securities Act 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; and

                          (iii)   In the event that the Option shall be
                 properly exercised by any person or persons other than the
                 Optionee, appropriate proof of the right of such person or
                 persons to exercise the Option.

                 (b)      Full payment in cash, by certified or bank check or
         other instrument acceptable to the Committee for the shares with
         respect to which the Option, or portion thereof, is being exercised
         to:

                          (i)     the Secretary of the Company (with respect to
                 an Option of an Independent Director and a Company Employee);

                          (ii)    the Operating Partnership (with respect to an
                 Option of an Operating Partnership Employee); or

                          (iii)   the Property Partnership (with respect to
                 Options of a Property Partnership Employee).

         Notwithstanding the preceding sentence, at the sole and absolute
         discretion of the Committee, the terms of an Option granted to any
         Employee may with the approval of the Committee, in its sole and
         absolute discretion:

                          (A)     allow payment, in whole or in part, through
                 the delivery of shares of Common Stock owned by the Optionee
                 duly endorsed for transfer with a Fair Market Value on the
                 date of delivery equal to the aggregate exercise price of the
                 Option or the portion thereof intended to be paid through the
                 delivery of shares of Common Stock; or

                          (B)     allow payment, in whole or in part, through
                 the surrender of shares of Common Stock then issuable upon the
                 exercise of the Option having a Fair Market Value on the date
                 of Option exercise equal to the aggregate





                                       16
<PAGE>   21

                 exercise price of the Option or the portion thereof intended
                 to be paid through the delivery of shares of Common Stock,
                 including a "cashless exercise"; or

                          (C)     (x) allow a delay in payment up to 30 days
                 from the date the Option, or portion thereof, is exercised,
                 (y) allow payment, in whole or in part, through the delivery
                 of property of any kind which constitutes good and valuable
                 consideration, or (z) allow payment through any combination of
                 the consideration provided in clauses (A), (B) and (C).

        5.3      TRANSFER OF SHARES TO A COMPANY EMPLOYEE OR INDEPENDENT 
DIRECTOR

                 Subject to Section 5.7, as soon as practicable after receipt
by the Company, pursuant to Section 5.2(b)(i), of payment for the shares with
respect to which an Option, or portion thereof, is exercised by an Optionee who
is an Independent Director or a Company Employee (or any Beneficiary thereof),
the Company shall transfer to the Optionee the number of shares to which such
Optionee is entitled upon such exercise.

         5.4     TRANSFER OF SHARES TO AN OPERATING PARTNERSHIP EMPLOYEE

                 Subject to Section 5.7, as soon as practicable after receipt
by the Operating Partnership pursuant to Section 5.2(b)(ii), of payment for the
shares with respect to which an Option, or portion thereof, is exercised by an
Optionee who is an Operating Partnership Employee (or any Beneficiary thereof),
with respect to each such exercise:

                 (a)      the Company shall sell to the Operating Partnership
         and the Operating Partnership shall purchase the number of shares for
         which such Option is being exercised for an aggregate purchase price
         (the "Operating Partnership Purchase Price") equal to the product of
         (i) the number of such shares multiplied by (ii) the Fair Market Value
         of a share of Common Stock on the date of the exercise; and

                 (b)      the Operating Partnership shall sell such shares to
         the Optionee in return for the amount of the payment made by the
         Optionee to the Operating Partnership pursuant to Section 5.2(b).

         5.5     TRANSFER OF SHARES TO A PROPERTY PARTNERSHIP EMPLOYEE

                 Subject to Section 5.7, as soon as practicable after receipt
by a Property Partnership, pursuant to Section 5.2(b)(iii), of payment for the
shares with respect to which an Option, or portion thereof, is exercised by an
Optionee who is a Property Partnership Employee (or any Beneficiary thereof),
with respect to each such exercise:





                                       17
<PAGE>   22

                 (a)      the Company shall sell to the Property Partnership
         and the Property Partnership shall purchase the number of shares of
         Common Stock for which such Option is being exercised for an aggregate
         purchase price (the "Property Partnership Purchase Prices") equal to
         the product of (i) such number of shares multiplied by (ii) the Fair
         Market Value of a share of Common Stock on the date of exercise; and

                 (b)      the Property Partnership shall sell such shares to
         the Optionee in return for the amount of the payment made by the
         Optionee to the Property Partnership pursuant to Section 5.2(b).

         5.6     TRANSFER OF PAYMENT TO THE PARTNERSHIP

                 As soon as practicable after receipt by the Company with
respect to the exercise of any Option, or portion thereof, of the amount
described in Section 5.2(b)(i), the Operating Partnership Purchase Price or the
Property Partnership Purchase Price, the Company shall transfer to the
Operating Partnership an amount of cash equal to such payment and the Operating
Partnership shall issue additional Common Units to the Company corresponding to
the number of shares of Common Stock issuable upon the exercise of the relevant
Option multiplied by a fraction, the numerator of which is one and the
denominator of which is the Exchange Factor in effect on the date of such
transfer.

         5.7     CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES

                 No certificate or certificates for shares of stock purchased
upon the exercise of any Option, or portion thereof, shall be required to be
issued 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 shall,
         in its sole and absolute discretion, deem necessary or advisable;

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

                 (d)      The lapse of such reasonable period of time following
         the exercise of the Option as the Committee may establish from time to
         time for reasons of administrative convenience; and





                                       18
<PAGE>   23

                 (e)      The receipt of full payment for such shares,
         including payment of any applicable withholding tax in accordance with
         Section 7.6.

         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 to such holders.

         5.9     OWNERSHIP AND TRANSFER RESTRICTIONS

                 Shares acquired through the exercise of an Option shall be
subject to the restrictions on ownership and transfer set forth in the Company
Charter.  The Committee, in its sole and absolute discretion, may impose such
additional restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate in order to
preserve the qualification of the Company as a real estate investment trust,
within the meaning of Sections 856 through 860 of the Code.  The Committee may
require an Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
either of (a) two years from the date of granting such Option to such Employee
or (b) one year after the transfer of such shares to such Employee.  Any such
restriction or notice requirement shall be set forth in the respective Option
Agreement and may be referred to on the certificates evidencing such shares.

         5.10    RESTRICTIONS ON EXERCISE OF OPTION

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

                 (a)      The Optionee's ownership of Capital Stock being in
         violation of the Stock Ownership Limit; 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.

                 Notwithstanding any other provision of this Plan, the Optionee
shall have no rights under this Plan to acquire Options or Common Stock which
would otherwise be prohibited under the Company Charter.





                                       19
<PAGE>   24


                                   ARTICLE VI
                                 ADMINISTRATION

         6.1     COMMITTEE

                 The Committee shall consist solely of two or more Directors,
appointed by and holding office at the pleasure of the Board, each of whom is
not then an Employee and each of whom is both a "Non-Employee Director" as
defined by Rule 16b-3 and an "outside director" within the meaning of Section
162(m)(4)(C)(i) of the Code; provided, however, that if one or more of the
members of the Committee does not qualify as such a "Non-Employee Director" or
"outside director" at the time any Option is granted, such Option nevertheless
shall be deemed to be properly authorized and issued under the Plan and shall
remain in full force and effect subject to the other terms and conditions
contained in the Plan and the relevant Option Agreement.  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.

         6.2     DUTIES AND POWERS OF COMMITTEE; BOARD RATIFICATION OF GRANTS

                 It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions.  The Committee
shall have the power to interpret this Plan, the Options, and the Option
Agreements, 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.  Any such interpretations and rules with respect to
Incentive Stock Options shall be consistent with the provisions of Section 422
of the Code.  Notwithstanding any other provision of this Plan to the contrary,
the Board, in establishing or authorizing any committee of the Board to act as
the Committee, may require that any or all of the grants of Options by the
Committee with respect to the Plan be subject to ratification by the Board
and/or another committee of the Board.

         6.3     MAJORITY RULE

                 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.

         6.4     COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS

                 Members of the Committee shall receive such compensation for
their services as members as may be determined by the Board.  All expenses and
liabilities which members of the Committee or Board incur in connection with
the administration of this Plan shall be borne by the Company.  The Committee
may, with the





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<PAGE>   25

approval of the Board, employ attorneys, consultants, accountants, appraisers,
brokers or other persons.  The Committee, the Board, the Company and the
Company's officers and Directors and all other persons charged with
responsibility for administering the Plan 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 Board in good faith
shall be final and binding upon all persons, including the Optionees and the
Employers.  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 or any Option, and all members of the Committee and Board shall be
fully protected by the Company in respect of any such action, determination or
interpretation.

         6.5     DELEGATION OF AUTHORITY

                 The Committee may, in its sole and absolute discretion,
delegate to the Chief Financial Officer, the Secretary or any other proper
officer of the Company, or more than one of them, any or all of the
administrative duties and authority of the Committee under this Plan, other
than the authority to make grants or awards under this Plan to Employees who
are directors or officers of the Company within the meaning of Rule 16(a)-1(b)
of the Exchange Act or whose total compensation is required to be reported to
the Company's stockholders under the Exchange Act, to determine the price,
timing or amount of such grants or awards or to determine any other matter
required by Rule 16b-3 or Code Section 162(m) to be determined in the sole and
absolute discretion of the Committee.

         6.6     NO LIABILITY

                 No member of the Board or the Committee, Director, officer of
the Company or other Employee shall be liable, responsible or accountable in
damages or otherwise for any determination made or other action taken or any
failure to act by such person with respect to this Plan so long as such person
is not determined to be guilty by a final adjudication of willful misconduct
with respect to such determination, action or failure to act.

         6.7     INDEMNIFICATION

                 To the fullest extent permitted by law, each of the members of
the Board and the Committee and each of the Directors, officers of the Company
and the Employees shall be held harmless and be indemnified by the Company for
any liability, loss (including amounts paid in settlement), damages or expenses
(including reasonable attorneys' fees) suffered by virtue of any
determinations, acts or failures to act, or alleged acts or failures to act, in
connection with the administration of this Plan so long as such person is not
determined by a final adjudication to





                                       21
<PAGE>   26

be guilty of willful misconduct with respect to such determination, action or
failure to act.


                                  ARTICLE VII
                            MISCELLANEOUS PROVISIONS

         7.1     NOT TRANSFERABLE

                 Options 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; provided, however, that, subject to the Stock Ownership Limit, an
Optionee may designate a Beneficiary to exercise his Option or other rights
under this Plan after his death, and, with respect to Non-Qualified Stock
Options, the Committee, in its sole discretion, may provide in the Option
Agreement that the Optionee may transfer, without consideration of the
transfer, all or a portion of his Options to members of his immediate family
(i.e., children, grandchildren or spouse), to trusts for the benefit of
immediate family members, to partnerships in which such family members are the
only parties and to charitable institutions; provided, however, prior to any
such transfer, the Optionee shall deliver written notice to the Company
describing in reasonable detail the proposed transfer together with an opinion
of counsel which (to the Company's satisfaction) is knowledgeable in securities
law matters to the effect that such transfer and the ownership and exercise of
such Option by the proposed transferee, taking into account any covenants or
restrictions mutually agreeable to the Company, the Optionee and the proposed
transferee, may be effected without registration under the Securities Act of
the Option or the Common Stock issuable upon exercise thereof.  No Option or
interest or right therein shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect;
provided, however, that nothing in this Section 7.1 shall prevent transfers by
will or by the applicable laws of descent and distribution or, if provided in
the Option Agreement, to an immediate family member, to trusts for the benefit
of immediate family members, to partnerships in which such family members are
the only parties and to charitable institutions, as provided above.  Except as
provided in this Section 7.1 and the Option Agreement, an Option shall be
exercised during the Optionee's lifetime only the Optionee or his guardian or
legal representative.





                                       22
<PAGE>   27

         7.2     AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN

                 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.  Furthermore, without approval of the Company's stockholders given with
12 months before or after the action by the Board, no action of the Board may,
except as provided in Section 7.3, materially increase the limits imposed in
Section 2.1 on the maximum number of shares which may be issued under this
Plan, materially modify the eligibility requirements of Section 3.1, reduce the
minimum Option price requirements of Section 4.2, extend the limit imposed in
this Section 7.2 on the period during which Options may be granted or otherwise
materially increase the benefits accruing to participants under the Plan and no
action of the Committee or Board may be taken that would otherwise require
stockholder approval as a matter of applicable law, regulation or rule.  No
amendment, suspension or termination of this Plan shall, without the consent of
the holder of an Option, alter or impair any rights or obligations under any
Option theretofore granted or awarded, unless the award itself otherwise
expressly so provides.  No Option may be granted or awarded during any period
of suspension nor after termination of this Plan, and in no event may any
Incentive Stock Option be granted under this Plan after the first to occur of
the following events:

                 (a)      the expiration of ten years from the date the Plan is
         adopted by the Board; or

                 (b)      the expiration of ten years from the date the Plan is
         approved by the Company's stockholders under Section 7.5.

         7.3     CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY

                 In the event that the outstanding shares of Common Stock are
hereafter changed into or exchanged for cash or a different number or kind of
shares or other securities of the Company, by reason of recapitalization,
reclassification, stock split up, stock dividend, or combination of shares,
appropriate adjustments shall be made by the Committee in the number and kind
of shares of stock for the purchase of which Options may be granted, including
adjustments of the limitation in Section 2.1 (and, to the extent permitted
under Section 162(m) of the Code, the Award Limit) on the maximum number and
kind of shares of stock which may be issued.

                 In the event of such a change or exchange other than by reason
of reorganization (and other than for stock or securities of another
corporation, which shall be subject to the provisions of Section 7.4), the
Committee shall also make an appropriate and equitable adjustment in the number
and kind of shares of stock as to which all outstanding Options, or portions
thereof then unexercised, shall be exercisable.  Such adjustment shall be made
with the intent that after the change or exchange of shares of stock, each
Optionee's proportionate interest shall be maintained





                                       23
<PAGE>   28

as before the occurrence of such event.  Such adjustment in an outstanding
Option may include a necessary or appropriate corresponding adjustment in
Option exercise price, but shall be made without change in the total price
applicable to the Option, or the unexercised portion thereof (except for any
change in the aggregate price resulting from rounding-off of share quantities
or prices).

                 Where an adjustment of the type described above is made to an
Incentive Stock Option under this Section, the adjustment will be made in a
manner which will not be considered a "modification" under the provisions of
subsection 424(h)(3) of the Code.

                 In the event of a "spin-off" or other substantial distribution
of assets of the Company which has a material diminutive effect upon the Fair
Market Value of the Common Stock, the Committee may, in its sole and absolute
discretion, make an appropriate and equitable adjustment to the Option price to
reflect such diminution.

         7.4     MERGER OF THE COMPANY

                 In the event of the merger or consolidation of the Company
with or into another corporation or other entity, the exchange of all or
substantially all of the assets of the Company for the securities of another or
other entity, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock, or the liquidation or dissolution of the Company:

                 (a)      At the sole and absolute discretion of the Committee,
         the terms of an Option may provide that it may not be exercised after
         such event; and

                 (b)      In its sole and absolute discretion, and on such
         terms as it shall deem appropriate, the Committee may provide either
         by the terms of such Option or by a resolution adopted prior to the
         occurrence of such event that, for a specified period of time prior to
         such event, such Option shall be exercisable as to all shares of stock
         covered thereby, notwithstanding anything to the contrary in the Plan
         or the Option Agreement evidencing such Option.

         7.5     EFFECTIVE DATE; APPROVAL OF PLAN BY STOCKHOLDERS

                 Subject to the approval of the Company's stockholders (by the
holders of a majority of the shares of the Company present or represented and
entitled to vote at the meeting at which the Plan is considered), the Plan
shall be effective as of January 1, 1997 and shall continue in effect
thereafter until terminated or suspended by the Committee.  Options may be
granted prior to such stockholder approval, provided, however, that such
Options shall





                                       24
<PAGE>   29

not be exercisable prior to the time when this Plan is approved by the
stockholders, and provided further, that all Options granted under this Plan
shall be canceled and become null and void and of no effect, retroactive to the
date of grant, and the Plan shall be null and void and of no effect,
retroactive to the date of Board approval, in the event the Plan is not
approved by Company's stockholders prior to the first anniversary of its
approval by the Board.  The Company shall take such actions with respect to the
Plan as may be necessary to satisfy the requirements of Rule 16b-3.

         7.6     TAX WITHHOLDING

                 Each Optionee shall, no later than the date as of which the
value of any shares received upon the exercise of an Option first becomes
includable in gross income for federal income tax purposes, pay or make
arrangements satisfactory to the Committee regarding payment of any sums
required by federal, state or local tax law to be withheld with respect to such
Option.  The Committee may, in its sole and absolute discretion, allow such
Optionee to elect to have shares of Common Stock withheld (or allow the return
of shares of Common Stock) having a Fair Market Value equal to all or a portion
of the sums required to be withheld.  If, as allowed by the Committee, the
Optionee elects to have shares of Common Stock withheld (or allow the return of
shares of Common Stock) having a Fair Market Value equal to all or a portion of
the sums required to be withheld, the value of the shares of Common Stock to be
withheld (or returned as the case may be) will equal to the Fair Market Value
of such shares (less any costs or taxes associated with the sale of such
shares) on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").  Elections by such persons to have shares of Common Stock
withheld for this purpose will be subject to the following restrictions:  (a)
the election must be made on or prior to the Tax Date, (b) the election must be
irrevocable, (c) the election shall be subject to the disapproval of the
Committee, (d) if the person is an officer of the Company within the meaning of
Section 16 of the Exchange Act, the election shall be subject to such
additional restrictions as the Committee may impose in an effort to secure the
benefits of any regulations thereunder, and (e) any stock ownership resulting
from such withholding shall not violate the Stock Ownership Limit set forth in
the Company Charter.

         7.7     LOANS

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

         7.8     LIMITATIONS APPLICABLE TO SECTION 16 PERSONS

                 Notwithstanding any other provision of this Plan, any Option
granted to an Optionee who is then subject to Section 16 of





                                       25
<PAGE>   30

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) the compliance with which is
necessary for the application of such exemptive rule.  Any such additional
limitation shall be set forth in an annex to this Plan, such annex to be
incorporated herein by the reference and made part of this Plan.

         7.9     EFFECT OF PLAN UPON OPTIONS AND OTHER COMPENSATION PLANS

                 The adoption of this Plan shall not affect any other
compensation or incentive plans established by the Company, the Operating
Partnership, the Property Partnerships or any other Employer.  Nothing in this
Plan shall be construed to limit the right of any of them (a) to establish any
other forms of incentives or compensation for their employees and directors or
(b) to grant or assume options or other rights otherwise than under this Plan
in connection with any proper corporate or partnership purpose including but
not limited to the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, firm or association.

         7.10    COMPLIANCE WITH LAWS

                 This Plan, the granting and vesting of Options under this Plan
and the issuance and delivery of shares of Common Stock upon the exercise of
Options granted 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 and Options
granted or awarded hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

         7.11    TITLES

                 Titles are provided herein for convenience only and are not
intended to be the basis for interpretation or construction of this Plan.





                                       26
<PAGE>   31

         7.12    GOVERNING LAW

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





                                       27