PARAGON GROUP, INC.

                           THIRD AMENDED AND RESTATED
                    1994 EMPLOYEE STOCK OPTION, UNIT OPTION,
                      RESTRICTED STOCK, RESTRICTED UNIT AND
                           RESTRICTED STOCK RIGHT PLAN


                  This Paragon  Group,  Inc.  Third  Amended and  Restated  1994
Employee  Stock  Option,  Unit Option,  Restricted  Stock,  Restricted  Unit and
Restricted Stock Right Plan (the "Plan") amends and restates in its entirety the
Paragon Group, Inc. Second Amended and Restated 1994 Employee Stock Option, Unit
Option,  Restricted  Stock and Restricted Unit Plan. Set forth herein are all of
the terms of the three  plans  comprising  the Plan,  one for the benefit of the
employees of the Company (the "Company Plan"),  one for the benefit of employees
of Paragon Residential Services,  Inc. (the "Management Company") or its general
partner (the "Operating  Partnership Plan") and one for the benefit of employees
of  Paragon  Residential  Services,  Inc.  (the"Management   Company")  and  any
Subsidiary of the Management Company (the "Management Company Plan").


     1.   PURPOSE

          The Plan is intended  to advance the  interests  of the  Company,  the
     Operating  Partnership  and the  Management  Company by providing  eligible
     individuals (as designated pursuant to Section 5 below) with an opportunity
     to acquire or  increase a  proprietary  interest in the Company by granting
     them options,  restricted  units,  restricted  stock and  restricted  stock
     rights in  accordance  with the terms  stated  herein,  which  thereby will
     create a stronger  incentive  to expend  maximum  effort for the growth and
     success  of the  Company,  the  Operating  Partnership  and the  Management
     Company,  and encourage such eligible  individuals to continue to serve the
     Company,  the Operating  Partnership or the Management Company.  Each stock
     option granted under the Plan is intended to be an "incentive stock option"
     except (i) to the extent that any such Option would exceed the  limitations
     set forth in Section 9 below, (ii) for Options granted to an employee other
     than an employee of the Company or any  Subsidiary of the Company and (iii)
     for  Options  specifically  designated  at the time of  grant as not  being
     "incentive stock options".


     2.   DEFINITIONS

     For  purposes of  interpreting  the Plan and related  documents  (including
     Stock  Option  Agreements,   Unit  Option   Agreements,   Restricted  Stock
     Agreements,   Restricted  Unit   Agreements  and  Restricted   Stock  Right
     Agreements), the following definitions shall apply:

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     2.1  "Affiliate"  means with  respect to an  entity,  any  company or other
          trade or business that is  controlled by or under common  control with
          such entity  (determined in accordance  with the principles of Section
          414(b) and 414(c) of the Code and the regulations thereunder) or is an
          affiliate of such entity  within the meaning of Rule 405 of Regulation
          C under the 1933 Act.

     2.2  "Agreement"  means a  written  agreement  that  sets out the terms and
          conditions of the grant of an Incentive Award.

     2.3  "Applicable Committee" means, with respect to the Company Plan and the
          Operating  Partnership Plan, the Company Committee,  and, with respect
          to the Management Company Plan, the Management Company Committee.

     2.4  "Code" means the Internal Revenue Code of 1986, as now in effect or as
          hereafter amended.

     2.5  "Company" means Paragon Group, Inc.

     2.6  "Company Committee" means the Executive  Compensation Committee of the
          Board of Directors of the Company, which must consist of no fewer than
          two members of such board and shall be  appointed  by such  board,  or
          such other  committee as the Board of  Directors of the Company  shall
          designate.

     2.7  "Company Plan" means the Plan as administered  pursuant to Section 3.1
          hereof for the benefit of employees of the Company.

     2.8  "Effective  Date"  means July 11,  1994,  with  respect to the Company
          Plan, and July 26, 1994 with respect to the Operating Partnership Plan
          and the Management Company Plan.

     2.9  "Employer"  means the  Company,  Paragon  Group  L.P.  or its  general
          partner,  Paragon Residential Services, Inc., or any Subsidiary of the
          Management Company, in their capacity as Employers of persons eligible
          to be designated recipients of Incentive Awards.

     2.10 "Exchange  Act" means the  Securities  Exchange Act of 1934, as now in
          effect or as hereafter amended.

     2.11 "Exercise  Price" means the Option Price  multiplied  by the number of
          shares of Stock or Units  purchased  pursuant  to the  exercise  of an
          Option.

     2.12 "Expiration  Date"  means the tenth  (10th)  anniversary  of the Grant
          Date,  or, if  earlier,  the  termination  of the Option  pursuant  to
          Section 18.3 hereof.

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     2.13 "Fair Market  Value" means the value of each share of Stock subject to
          the  Plan  determined  as  follows:  if on the  Grant  Date  or  other
          determination  date the shares of Stock are  listed on an  established
          national or regional stock exchange,  are admitted to quotation on the
          National Association of Securities Dealers Automated Quotation System,
          or are publicly traded on an established  securities  market, the Fair
          Market Value of the shares of Stock shall be the closing  price of the
          shares of Stock on such  exchange or in such market (the  highest such
          closing  price if there is more than one such  exchange  or market) on
          the trading  day  immediately  preceding  the Grant Date or such other
          determination date (or if there is no such reported closing price, the
          Fair Market Value shall be the mean between the highest bid and lowest
          asked  prices or between the high and low sale prices on such  trading
          day)  or,  if no sale of the  shares  of Stock  is  reported  for such
          trading  day, on the next  preceding  day on which any sale shall have
          been  reported.  If the  shares  of Stock  are not  listed  on such an
          exchange,  quoted on such  System  or  traded  on such a market,  Fair
          Market  Value shall be  determined  by the Board of  Directors  of the
          Company in good faith.  Fair Market Value of a Unit is deemed equal to
          the Fair Market Value of a share of Stock.

     2.14 "Grant  Date"  means  the  later  of (i)  the  date  as of  which  the
          Applicable Committee approves the grant, (ii) the date as of which the
          Holder and the Employer enter into the  relationship  resulting in the
          Holder  being  eligible  for grants,  and (iii) such other date as the
          Applicable Committee shall determine.

     2.15 "Granting  Employer" means the Company,  the Operating  Partnership or
          the Management Company,  each with respect to Restricted Stock Awards,
          Restricted Unit Awards and Restricted Stock Right Awards made pursuant
          to the Company Plan, the Operating Partnership Plan and the Management
          Company Plan, respectively,  unless the Applicable Committee as to any
          grant designates another Employer as the Granting Employer.

     2.16 "Holder" means a person who holds Stock or Units, including Restricted
          Stock, Restricted Units or Restricted Stock Rights under the Plan.

     2.17 "Incentive  Award"  means  an award of an  Option,  Restricted  Stock,
          Restricted Units or Restricted Stock Rights under the Plan.

     2.18 "Incentive  Stock Option" means an "incentive stock option" within the
          meaning of section 422 of the Code.

     2.19 "Limited Partnership  Agreement" means the Second Amended and Restated
          Agreement  of Limited  Partnership  of Paragon  Group L.P.,  as now in
          effect or as hereafter amended.

     2.20 "Management Company" means Paragon Residential Property Services, Inc.

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<PAGE>

     2.21 "Management  Company  Committee"  means the Board of  Directors of the
          Management Company or any committee thereof appointed by such board to
          administer the Management Company Plan.

     2.22 "Management  Company Plan" means the Plan as administered  pursuant to
          Section 3.3 hereof for the benefit of the employees of the  Management
          Company or its Subsidiaries.

     2.23 "Operating Partnership" means Paragon Group L.P.

     2.24 "Operating  Partnership Plan" means the Plan as administered  pursuant
          to  Section  3.2  hereof  for  the  benefit  of the  employees  of the
          Operating Partnership or its general partner.

     2.25 "Option"  means an option to  purchase  one or more shares of Stock or
          Units pursuant to the Plan.

     2.26 "Option Agreement" means the written agreement evidencing the grant of
          an Option hereunder.

     2.27 "Optionee" means a person who holds an Option under the Plan.

     2.28 "Option Period" means the period during which Options may be exercised
          as defined in Section 12.

     2.29 "Option  Price"  means the  purchase  price for each share of Stock or
          Unit subject to an Option.

     2.30 "Plan"  means this Third  Amended and  Restated  1994  Employee  Stock
          Option, Unit Option,  Restricted Stock, Restricted Unit and Restricted
          Stock Right Plan (which  encompasses  the Company Plan,  the Operating
          Partnership Plan and the Management  Company Plan), as the same may be
          hereafter amended from time to time.

     2.31 "Reporting  Person"  means a person who is  required  to file  reports
          under Section 16(a) of the Exchange Act.

     2.32 "Restricted  Stock"  means  Stock  which  is  subject  to  a  risk  of
          forfeiture pursuant to the Plan.

     2.33 "Restricted  Stock Agreement" means the written  agreement  evidencing
          the grant of Restricted Stock hereunder.

     2.34 "Restricted  Stock Award" means an award of  Restricted  Stock granted
          under the Plan.

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<PAGE>

     2.35 "Restricted  Stock  Right"  means a  conditional  right,  awarded to a
          Holder  pursuant to Section 14 hereof,  to receive a share of Stock in
          the  future,  which  is  subject  to  restrictions  and to a  risk  of
          forfeiture.

     2.36 "Restricted   Stock  Right  Agreement"  means  the  written  agreement
          evidencing the grant of Restricted Stock Rights hereunder.

     2.37 "Restricted  Stock Right  Award"  means an award of  Restricted  Stock
          Rights granted under the Plan.

     2.38 "Restricted  Unit"  means  a  Unit  which  is  subject  to a  risk  of
          forfeiture pursuant to the Plan.

     2.39 "Restricted Unit Agreement" means the written agreement evidencing the
          grant of Restricted Units hereunder.

     2.40 "Restricted  Unit Award" means an award of  Restricted  Units  granted
          under the Plan.

     2.41 "1933 Act" means the  Securities  Act of 1933,  as now in effect or as
          hereafter amended.

     2.42 "Stock" means the shares of common stock, par value $.01 per share, of
          the Company.

     2.43 "Stock Option  Agreement" means the written  agreement  evidencing the
          grant of an Option to acquire shares of Stock hereunder.

     2.44 "Subsidiary" means any "subsidiary  corporation" of the Company within
          the meaning of Section 424(f) of the Code.

     2.45 "Unit"  means a  "Partnership  Unit" as that  term is  defined  in the
          Limited  Partnership  Agreement.  All Units  that are the  subject  of
          Restricted  Unit Agreements to be granted under this Plan are "Limited
          Partner Interests" as that term is defined in the Limited  Partnership
          Agreement.


     2.46 "Unit Option  Agreement"  means the written  agreement  evidencing the
          grant of an Option to acquire Units hereunder.


     3.   ADMINISTRATION

     3.1  Company Plan.  The Company Plan shall be  administered  by the Company
          Committee.  Each member of the Company  Committee  must qualify in all
          respects  as a  "disinterested  person" as defined in Rule 16b-3 under
          the  Exchange  Act. The Company  Committee  shall have such powers and
          authorities  related to the  administration of the Company Plan as are
          consistent with the

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          Company's  articles of  incorporation  and by-laws and with applicable
          law.  The Company  Committee  shall have the full power and  authority
          (subject to any restrictions  imposed by the Board of Directors of the
          Company,  the  Company's  articles  of  incorporation  or  by-laws  or
          applicable  law) to take all  actions  and to make all  determinations
          required or provided for under the Company Plan,  any Incentive  Award
          granted  by the  Company  Committee  under  the  Company  Plan and any
          Agreement entered into in connection therewith and shall have the full
          power and authority to take all such other actions and  determinations
          not inconsistent with the specific terms and provisions of the Company
          Plan that the Company  Committee  deems to be necessary or appropriate
          to the administration of the Company Plan, any Incentive Award granted
          by the  Company  Committee  under the Company  Plan and any  Agreement
          entered  into  in  connection   therewith.   The   interpretation  and
          construction by the Company  Committee of any provision of the Company
          Plan, any Incentive  Award granted by the Company  Committee under the
          Company Plan and any Agreement  entered into in  connection  therewith
          shall be final and conclusive with respect to the Holder.

     3.2  Operating  Partnership  Plan. The Operating  Partnership Plan shall be
          administered  by the  Company  Committee.  Each  member of the Company
          Committee must qualify in all respects as a "disinterested  person" as
          defined in Rule 16b-3 under the Exchange  Act.  The Company  Committee
          shall have the full power and authority  (subject to any  restrictions
          imposed on such  Committee  by Section 3.1 hereof) to take all actions
          and to make all  determinations  required  or  provided  for under the
          Operating Partnership Plan, any Incentive Award granted by the Company
          Committee  under  the  Operating  Partnership  Plan and any  Agreement
          entered into in connection therewith and shall have the full power and
          authority  to take all  such  other  actions  and  determinations  not
          inconsistent  with the specific  terms and provisions of the Operating
          Partnership  Plan that the Company  Committee deems to be necessary or
          appropriate to the  administration of the Operating  Partnership Plan,
          any  Incentive  Award  granted  by the  Company  Committee  under  the
          Operating   Partnership  Plan  and  any  Agreement   entered  into  in
          connection  therewith.  The  interpretation  and  construction  by the
          Company Committee of any provision of the Operating  Partnership Plan,
          any  Incentive  Award  granted  by the  Company  Committee  under  the
          Operating   Partnership  Plan  and  any  Agreement   entered  into  in
          connection therewith shall be final and conclusive with respect to the
          Holder.

     3.3  Management   Company  Plan.  The  Management  Company  Plan  shall  be
          administered  by the  Management  Company  Committee.  The  Management
          Company  Committee shall have such powers and  authorities  related to
          the  administration  of the Management  Company Plan as are consistent
          with the Management Company's certificate of incorporation and by-laws
          and with applicable law. The Management  Company  Committee shall have
          the full power and authority  (subject to any restrictions  imposed by
          the Board of  Directors  of the  Management  Company,  the  Management
          Company's  certificate of  incorporation or

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<PAGE>

          by-laws  or  applicable  law)  to take  all  actions  and to make  all
          determinations  required or provided for under the Management  Company
          Plan, any Incentive Award granted by the Management  Company Committee
          under the  Management  Company Plan and any Agreement  entered into in
          connection  therewith  and shall have the full power and  authority to
          take all such other actions and  determinations  not inconsistent with
          the specific terms and provisions of the Management  Company Plan that
          the Management  Company Committee deems to be necessary or appropriate
          to the  administration  of the Management  Company Plan, any Incentive
          Award granted by the Management Company Committee under the Management
          Company Plan and any Agreement  entered into in connection  therewith.
          The   interpretation   and  construction  by  the  Management  Company
          Committee  of  any  provision  of the  Management  Company  Plan,  any
          Incentive Award granted by the Management  Company Committee under the
          Management  Company Plan and any Agreement  entered into in connection
          therewith shall be final and conclusive with respect to the Holder.

     3.4  No  Liability.  No member of the Company  Committee or the  Management
          Company Committee shall be liable to any Holder or to the Company, the
          Operating  Partnership,  or the  Management  Company  or any of  their
          Affiliates,  employees,  stockholders  or  partners  for any action or
          determination  made in good  faith  with  respect  to the  Plan or any
          Incentive Award granted or Agreement entered into hereunder.

     3.5  Applicability  of Rule 16b-3.  Those  provisions of the Plan that make
          express  reference  to Rule 16b-3  shall  apply  only with  respect to
          Incentive Awards to Reporting Persons.


     4.   STOCK AND UNITS

          The  shares of Stock and Units that are the  subject  of an  Incentive
     Award may be (i) issued and  outstanding  shares or Units owned or acquired
     by the  Granting  Employer,  (ii)  treasury  shares or Units (to the extent
     permitted by applicable  law) or (iii)  authorized  but unissued  shares or
     Units.  The aggregate total number of shares of Stock and Units that may be
     granted  pursuant  to  Incentive  Awards  under the Plan shall not exceed a
     combined  total of 1,460,000  shares of Stock and Units,  provided  that no
     more than  485,000  shares of Stock  and  Units may be issued  pursuant  to
     Restricted Stock Awards,  Restricted Unit Awards and Restricted Stock Right
     Awards.  If any Incentive  Award expires,  terminates,  or is terminated or
     canceled for any reason prior to exercise or vesting in full, the shares of
     Stock  or  Units  that  were  subject  to the  unexercised,  forfeited,  or
     terminated  portion of such Incentive Award shall be available  immediately
     for future grants by the Granting Employer with respect thereto (subject to
     Section 13.1(c) hereof) of Incentive Awards under the Plan.


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<PAGE>

     5.   ELIGIBILITY

     5.1  Designated Recipients.  Incentive Awards may be granted under the Plan
          to  (i)  any  full-time   employee  of  the  Company,   the  Operating
          Partnership or its general  partner or the  Management  Company or any
          Subsidiary of the Management  Company  (including any such  individual
          who  is  an  officer  or  director  of  the  Company,   the  Operating
          Partnership or its general  partner or the  Management  Company or any
          Subsidiary  of the  Management  Company) as the  Applicable  Committee
          shall  determine  and  designate  from  time to time or (ii) any other
          individual  whose  participation  in the  Plan  is  determined  by the
          Company Committee to be in the best interests of the Company and is so
          designated by the Company Committee.

     5.2  Successive  Grants.  An  individual  may hold more than one  Incentive
          Award, subject to such restrictions as are provided herein.

     6.   EFFECTIVE DATE AND TERM OF THE PLAN

     6.1  Effective Date. The Plan is effective as of the Effective Date.

     6.2  Term. The Plan has no termination  date;  provided,  however,  that no
          Incentive   Stock  Option  may  be  granted  on  or  after  the  tenth
          anniversary of the Effective Date.


     7.   PARACHUTE LIMITATIONS

          Notwithstanding  any  other  provision  of this  Plan or of any  other
     agreement,  contract, or understanding heretofore or hereafter entered into
     by the  Optionee  or Holder  with any  Employer  that is not an  agreement,
     contract,  or  understanding  entered  into after the  Effective  Date that
     expressly  modifies or excludes  application  of this  paragraph (an "Other
     Agreement"),  and  notwithstanding  any  formal or  informal  plan or other
     arrangement  for the direct or indirect  provision of  compensation  by the
     Employers  to the  Optionee  or  Holder  (including  groups or  classes  of
     participants or beneficiaries of which the Optionee or Holder is a member),
     whether or not such compensation is deferred, is in cash, or is in the form
     of a benefit to or for the Optionee or Holder (a "Benefit Arrangement"), if
     the  Optionee  or Holder is a  "disqualified  individual,"  as  defined  in
     Section 280G(c) of the Code, any Option held by that Optionee and any right
     to receive  any payment or other  benefit  under this Plan shall not become
     exercisable  or  vested  (i) to the  extent  that such  right to  exercise,
     vesting,  payment,  or  benefit,  taking  into  account  all other  rights,
     payments, or benefits to or for the Optionee or Holder under this Plan, all
     Other Agreements, and all Benefit Arrangements,  would cause any payment or
     benefit  to the  Optionee  or Holder  under  this Plan to be  considered  a

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     "parachute  payment"  within  the  meaning  of  Section  280G(b)(2)  of the
     Internal  Revenue Code as then in effect (a  "Parachute  Payment") and (ii)
     if, as a result of receiving a Parachute Payment,  the aggregate  after-tax
     amounts  received by the Optionee or Holder from all  Employers  under this
     Plan, all Other Agreements, and all Benefit Arrangements would be less than
     the maximum  after-tax  amount  that could be  received by the  Optionee or
     Holder  without  causing  any such  payment or benefit to be  considered  a
     Parachute  Payment.  In the event  that the  receipt  of any such  right to
     exercise, vesting, payment, or benefit under this Plan, in conjunction with
     all other  rights,  payments,  or benefits to or for the Optionee or Holder
     under any Other  Agreement  or any  Benefit  Arrangement,  would  cause the
     Optionee or Holder to be considered  to have  received a Parachute  Payment
     under  this Plan that would have the  effect of  decreasing  the  after-tax
     amount  received by the  Optionee or Holder as  described in clause (ii) of
     the preceding  sentence,  then the Optionee or Holder shall have the right,
     in the Optionee's or Holder's sole  discretion,  to designate those rights,
     payments,  or  benefits  under this  Plan,  any Other  Agreements,  and any
     Benefit  Arrangements  that should be reduced or  eliminated so as to avoid
     having the payment or benefit to the  Optionee or Holder under this Plan be
     deemed to be a Parachute Payment.



     8.   GRANT OF OPTIONS

     8.1  General.  Subject to the terms and conditions of the Plan, the Company
          Committee and the Management  Company  Committee may from time to time
          grant to such eligible  individuals  as the  Applicable  Committee may
          determine, Options to purchase such number of shares of Stock or Units
          on  such  terms  and  conditions  as  the  Applicable   Committee  may
          determine, including any terms or conditions which may be necessary to
          qualify  such  Options as  Incentive  Stock  Options.  Such  authority
          specifically  includes  the  authority,  in  order to  effectuate  the
          purposes of the Plan but without  amending the Plan,  to modify grants
          to eligible  individuals who are foreign  nationals or are individuals
          who are employed outside the United States to recognize differences in
          local law, tax policy, or custom.


     8.2  Limitation on Grants of Options to  Executives.  The maximum number of
          shares of Stock and Units subject to Options that can be awarded under
          the  Plan to any  executive  officer  of the  Company,  the  Operating
          Partnership or its general  partner or the Management  Company,  or to
          any other  person  eligible  for a grant of an  Incentive  Award under
          Section  5.1 hereof,  is 600,000  during the first ten years after the
          effective date of the Plan and 60,000 per year thereafter.

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<PAGE>


     9.   LIMITATION OF INCENTIVE STOCK OPTIONS


               An Option (other than an Option  described in exceptions  (ii) or
          (iii) of Section 1) shall  constitute an Incentive Stock Option to the
          extent that the aggregate  fair market value  (determined  at the time
          the option is  granted)  of the shares of Stock with  respect to which
          Incentive  Stock  Options  are  exercisable  for the first time by any
          Optionee  during any calendar year (under the Plan and all other plans
          of the  Optionee's  employer and its parent and  Subsidiary)  does not
          exceed  $100,000.  This limitation  shall be applied by taking Options
          into account in the order in which they were granted.


     10.  OPTION AGREEMENTS

               All Options  granted  pursuant to the Plan shall be  evidenced by
          Option Agreements,  to be executed by the Granting Employer and by the
          Optionee, in such form or forms as the Applicable Committee shall from
          time to time determine.  Option  Agreements  covering  Options granted
          from  time  to time or at the  same  time  need  not  contain  similar
          provisions;  provided,  however, that all such Option Agreements shall
          comply with all terms of the Plan.


     11.  OPTION PRICE

               The Option Price shall be fixed by the  Applicable  Committee and
          stated in each Option  Agreement.  The Option  Price shall not be less
          than the Fair  Market  Value  of the  shares  of Stock or Units on the
          Grant Date of the  Option;  provided,  however,  that in the event the
          Optionee would  otherwise be ineligible to receive an Incentive  Stock
          Option by reason of the provisions of Sections 422(b)(6) and 424(d) of
          the Code (relating to stock  ownership of more than ten percent),  the
          Option  Price of an Option that is intended to be an  Incentive  Stock
          Option  shall be not less than the greater of par value or 110 percent
          of the Fair  Market  Value of a share of Stock at the time such Option
          is granted.


 .    12. TERM AND EXERCISE OF OPTIONS

     12.1 Term.  Each  Option  granted  under the Plan shall  terminate  and all
          rights to  purchase  shares of Stock or Units  thereunder  shall cease
          upon the expiration of ten years from the date such Option is granted,
          or on such  date  prior  thereto  as may be  fixed  by the  Applicable
          Committee and stated in the Option Agreement  relating to such Option;
          provided,  however,  that in the event the Optionee would otherwise be
          ineligible  to  receive  an  Incentive  Stock  Option by reason of the
          provisions of Sections  422(b)(6) and 424(d) of the Code  (relating to
          stock  ownership of more than ten percent),  an Option granted to such
          Optionee that is intended to be an Incentive  Stock Option shall in no
          event be exercisable  after the expiration of five years from the date
          it is granted.

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<PAGE>

     12.2 Option Period and  Limitations on Exercise.  Each Option granted under
          the Plan shall be  exercisable,  in whole or in part,  at any time and
          from time to time over a period  commencing on or after the Grant Date
          and ending upon the expiration or  termination  of the Option,  as the
          Applicable  Committee  shall  determine  and set  forth in the  Option
          Agreement relating to such Option. Without limiting the foregoing, the
          Applicable Committee, subject to the terms and conditions of the Plan,
          may in its sole discretion provide that an Option may not be exercised
          in whole or in part for a stated  period  or  periods  of time  during
          which such Option is  outstanding;  provided,  however,  that any such
          limitation  on the  exercise  of an  Option  contained  in any  Option
          Agreement  may be  rescinded,  modified  or waived  by the  Applicable
          Committee,  in its sole discretion,  at any time and from time to time
          after the Grant Date of such Option,  so as to accelerate  the time at
          which the Option may be exercised.

     12.3 Termination of Employment.  Upon the  termination of the employment of
          an Optionee  with the Granting  Employer,  other than by reason of the
          death or  "permanent  and total  disability"  (within  the  meaning of
          Section  22(e)(3)  of the  Code),  any Option  granted to an  Optionee
          pursuant to the Plan shall terminate,  and such Optionee shall have no
          further  right to purchase  shares of Stock or Units  pursuant to such
          Option;  provided further,  that the Applicable Committee may provide,
          by inclusion of appropriate language in any Option Agreement,  that an
          Optionee may (subject to the general limitations on exercise set forth
          in Section 12.2 above),  in the event of  termination of employment of
          the Optionee with the Granting Employer,  exercise an Option, in whole
          or in part, at any time  subsequent to such  termination of employment
          and prior to termination of the Option pursuant to Section 12.2 above,
          either subject to or without regard to any  installment  limitation on
          exercise  imposed  pursuant to Section 12.2 above,  as the  Applicable
          Committee,  in its sole and absolute  discretion,  shall determine and
          set forth in the Option Agreement. Whether a leave of absence or leave
          on military or government  service shall  constitute a termination  of
          employment  for  purposes  of the  Plan,  shall be  determined  by the
          Applicable   Committee,   which   determination  shall  be  final  and
          conclusive. For purposes of the Plan, a termination of employment with
          the Granting  Employer shall not be deemed to occur if the Optionee is
          immediately thereafter employed with any other Employer.

     12.4 Rights in the Event of Death.  If an Optionee  dies while  employed by
          the Granting Employer,  the executors or administrators or legatees or
          distributees of such  Optionee's  estate shall have the right (subject
          to the  general  limitations  on  exercise  set forth in Section  12.2
          above),  at any time within one year after the date of such Optionee's
          death and prior to termination of the Option  pursuant to Section 12.1
          above,  to exercise  any Option  held by such  Optionee at the date of
          such  Optionee's  death,  whether or not such  Option was  exercisable
          immediately prior to such Optionee's death;  provided,  however,  that
          the  Applicable

                                       11
<PAGE>

          Committee  may provide by  inclusion  of  appropriate  language in any
          Option  Agreement that, in the event of the death of an Optionee,  the
          executors  or  administrators  or  legatees  or  distributees  of such
          Optionee's  estate may  exercise  an Option  (subject  to the  general
          limitations on exercise set forth in Section 12.2 above),  in whole or
          in part, at any time subsequent to such Optionee's  death and prior to
          termination  of the Option  pursuant  to Section  12.1  above,  either
          subject to or without regard to any installment limitation on exercise
          imposed  pursuant to Section 12.2 above, as the Applicable  Committee,
          in its sole and absolute discretion,  shall determine and set forth in
          the Option Agreement.

     12.5 Rights  in  the  Event  of  Disability.   If  an  Optionee  terminates
          employment with the Granting  Employer by reason of the "permanent and
          total disability" (within the meaning of Section 22(e)(3) of the Code)
          of such Optionee,  then such Optionee shall have the right (subject to
          the general  limitations on exercise set forth in Section 12.2 above),
          at any time within one year after such  termination  of employment and
          prior to termination of the Option  pursuant to Section 12.1 above, to
          exercise, in whole or in part, any Option held by such Optionee at the
          date of such termination of employment, whether or not such Option was
          exercisable  immediately  prior  to such  termination  of  employment;
          provided,  however,  that the  Applicable  Committee  may provide,  by
          inclusion of  appropriate  language in any Option  Agreement,  that an


          Optionee may (subject to the general limitations on exercise set forth
          in Section 12.2 above),  in the event of the termination of employment
          of the Optionee with the Granting Employer by reason of the "permanent
          and total  disability"  (within the meaning of Section 22(e)(3) of the
          Code) of such  Optionee,  exercise an Option,  in whole or in part, at
          any time  subsequent to such  termination  of employment  and prior to
          termination  of the Option  pursuant  to Section  12.1  above,  either
          subject to or without regard to any installment limitation on exercise
          imposed  pursuant to Section 12.2 above, as the Applicable  Committee,
          in its sole and absolute discretion,  shall determine and set forth in
          the Option  Agreement.  Whether a  termination  of employment is to be
          considered by reason of "permanent and total  disability" for purposes
          of this Plan shall be determined by the  Applicable  Committee,  which
          determination shall be final and conclusive.

     12.6 Limitations  on  Exercise  of Option.  Notwithstanding  the  foregoing
          Sections,  in no event  may the  Option be  exercised,  in whole or in
          part,  after ten years  following  the date upon  which the  Option is
          granted,  as set forth in Section 1 above,  or after the occurrence of
          an  event   referred  to  in  Section  18.3  below  which  results  in
          termination of the Option. In no event may the Option be exercised for
          a fractional share or Unit.

     12.7 Method of Exercise.  An Option that is  exercisable  hereunder  may be
          exercised  by the  Optionee's  delivery  to the  Granting  Employer of
          written  notice of the  exercise  and the number of shares of Stock or
          Units for which the Option is being  exercised.  Such  delivery  shall
          occur  on any  business  day,  at the

                                       12
<PAGE>

          Granting  Employer's  principal office,  addressed to the attention of
          the  Applicable  Committee.  Such notice  shall  specify the number of
          shares of Stock or Units  with  respect  to which the  Option is being
          exercised  and shall be  accompanied  by payment in full of the Option
          Price of the shares or Units for which the Option is being  exercised.
          The minimum  number of shares of Stock or Units with  respect to which
          an Option may be exercised,  in whole or in part, at any time shall be
          the lesser of (i) 100 shares or Units or such lesser  number set forth
          in the  applicable  Option  Agreement  and (ii) the maximum  number of
          shares or Units available for purchase under the Option at the time of
          exercise.  Payment  of the  Option  Price  for  the  shares  or  Units
          purchased  pursuant to the  exercise of an Option shall be made (i) in
          cash or in cash  equivalents;  (ii) through the tender to the Granting
          Employer of shares of Stock or Units,  which  shares or Units shall be
          valued,  for  purposes of  determining  the extent to which the Option
          Price has been paid thereby, at their Fair Market Value on the date of
          exercise;  or (iii) by a combination  of the methods  described in (i)
          and (ii).  The  Applicable  Committee  may  provide,  by  inclusion of
          appropriate  language in an Option Agreement,  that payment in full of
          the Option  Price need not  accompany  the written  notice of exercise
          provided  the  notice  of  exercise  directs  that  the  Stock or Unit
          certificate or certificates for the shares of Stock or Units for which
          the Option is exercised be delivered to a licensed  broker  acceptable
          to the Granting  Employer as the agent for the  individual  exercising
          the Option  and,  at the time such  certificate  or  certificates  are
          delivered,  the broker tenders to the Granting  Employer cash (or cash
          equivalents  acceptable to the Granting  Employer) equal to the Option
          Price  for the  shares  of Stock or Units  purchased  pursuant  to the
          exercise  of the Option  plus the  amount  (if any) of federal  and/or
          other  taxes  which the  Granting  Employer  may in its  judgment,  be
          required to withhold  with respect to the  exercise of the Option.  An
          attempt to exercise  any Option  granted  hereunder  other than as set
          forth  above  shall be  invalid  and of no force  and  effect.  Unless
          otherwise  stated in the applicable  Option  Agreement,  an individual
          holding  or  exercising  an Option  shall have none of the rights of a
          shareholder  or limited  partner  (for  example,  the right to receive
          cash,  dividend payments or distributions  attributable to the subject
          shares of Stock or Units or to direct the voting of the subject shares
          of Stock ) until the  shares  of Stock or Units  covered  thereby  are
          fully paid and issued to him or her.  Except as provided in Section 18
          below,  no adjustment  shall be made for dividends,  distributions  or
          other  rights for which the  record  date is prior to the date of such
          issuance.


     12.8 Transfer of Stock to Employee.  Promptly after the exercise of a Stock
          Option by an  employee  of the  Company and the payment in full of the
          Option Price of the shares of Stock covered  thereby,  the  individual
          exercising  the Option  shall be entitled  to the  issuance of a Stock
          certificate or Stock  certificates  evidencing his or her ownership of
          such shares of Stock.



                                       13
<PAGE>


     12.9 Transfer of Stock to Other Employees


          (a)  Promptly  after the  exercise of a Stock Option by an employee of
               an  Employer  that is not the  Company and the payment in full of
               the Option Price of the shares of Stock covered thereby:


                    (i) The Company  shall sell to the  Employer  employing  the
               Optionee the number of shares of Stock as to which the Option was
               exercised  for a price  equal  to the Fair  Market  Value of such
               shares.


                    (ii) The Employer shall deliver to the individual exercising
               the Option a Stock certificate or Stock  certificates  evidencing
               his or her ownership of such shares of Stock.


    12.10 Transfer  of  Units to an  Operating  Partnership  Employee.  Promptly
          after the  exercise of a Unit  Option by an employee of the  Operating
          Partnership  or its  general  partner  and the  payment in full of the
          Option Price of the Units covered thereby,  the individual  exercising
          the Option shall be entitled to the issuance of a Unit  certificate or
          Unit  certificates (if certificates  with respect to Units are issued)
          evidencing his or her ownership of such Units.


     12.11 Transfer of Units to Other Employees


          (a)  Promptly after the exercise of a Unit Option by an employee of an
               Employer  that is not the  Operating  Partnership  or its general
               partner and the payment in full of the Option  Price of the Units
               covered thereby:


                         (i)  The  Operating   Partnership  shall  sell  to  the
                    Employer  employing  the  Optionee the number of Units as to
                    which the Option was exercised for a price equal to the Fair
                    Market Value of such Units.


                         (ii)  The  Employer  shall  deliver  to the  individual
                    exercising   the   Option   a  Unit   certificate   or  Unit
                    certificates  (if  certificates  with  respect  to Units are
                    issued) evidencing his or her ownership of such Units.


                                       14
<PAGE>

     13.  GRANT OF RESTRICTED STOCK AND RESTRICTED UNITS

     13.1 Restricted Stock Awards; Restricted Unit Awards.

          (a)  The Company  Committee and the Management  Company  Committee may
               from time to time,  and subject to the provisions of the Plan and
               such other terms and conditions as the  Applicable  Committee may
               determine,  grant  Restricted  Stock Awards under the Plan.  Each
               Restricted Stock Award shall be evidenced by a written instrument
               which  shall  state the number of shares of Stock  covered by the
               award and the terms and conditions which the Applicable Committee
               shall have determined with respect to such award.  Upon the grant
               of each Restricted  Stock Award,  subject to Sections 13.1(e) and
               13.3 hereof,  the Company shall cause a certificate  representing
               the Stock  covered by the award to be  registered  in the name of
               the Holder and  delivered  to the Holder  without  payment on his
               part (unless such shares are newly issued shares of Stock granted
               under the Company  Plan,  in which case the Company may require a
               payment  equal to the par  value  of each  share  for each  share
               issued).   The  Holder  shall   generally  have  the  rights  and
               privileges of a  stockholder  of the Company with respect to such
               Stock,  including  the  right to vote and to  receive  dividends,
               subject to the  restrictions  specified  in Sections  13.1(c) and
               13.1(d) hereof.

          (b)  The Company  Committee and the Management  Company  Committee may
               from time to time,  and subject to the provisions of the Plan and
               such other terms and conditions as the  Applicable  Committee may
               determine,  grant  Restricted  Unit Awards  under the Plan.  Each
               Restricted Unit Award shall be evidenced by a written  instrument
               which  shall  state the number of Units  covered by the award and
               the terms and  conditions  which the Applicable  Committee  shall
               have  determined  with  respect to such award.  Upon the grant of
               each Restricted Unit Award,  subject to Sections 13.1(f) and 13.3
               hereof,  if  certificates  are issued with respect to Units,  the
               Operating Partnership shall cause a certificate  representing the
               Units  covered by the award to be  registered  in the name of the
               Holder and delivered to the Holder  without  payment on his part.
               If the Unit is newly  issued or,  with  respect  to a  previously
               issued  Unit,  the  general   partner  admits  the  Holder  as  a
               substituted limited partner,  the Holder shall generally have the
               rights  and  privileges  of a limited  partner  in the  Operating
               Partnership  with  respect to such Unit,  including  the right to
               receive  distributions,  subject to the restrictions specified in
               Sections 13.1(c) and 13.1(d) hereof.

          (c)  The  Applicable  Committee  shall  determine  a  period  of  time
               ("Limitation  Period") during which  restrictions  shall apply to
               the Stock and Units  transferred to a Holder with respect to each
               Restricted  Stock  Award and

                                       15
<PAGE>

               Restricted  Unit Award.  Except as  otherwise  determined  by the
               Applicable Committee, the Holder may not sell, transfer,  assign,
               pledge or otherwise encumber or dispose of the shares of Stock or
               Units covered by each  Restricted  Stock Award or Restricted Unit
               Award during the  Limitation  Period  applicable  with respect to
               such  Restricted  Stock  Award and  Restricted  Unit  Award.  The
               Applicable  Committee in its discretion may prescribe  conditions
               for the incremental  lapse of the preceding  restrictions  during
               the Limitation  Period,  and for the lapse or termination of such
               restrictions  upon the  occurrence  of certain  events before the
               expiration of the Limitation Period. The Applicable  Committee in
               its  discretion  also may  shorten or  terminate  the  Limitation
               Period or waive any  conditions  for the lapse or  termination of
               the restrictions with respect to all or any portion of the shares
               of  Stock or  Units  covered  by the  Restricted  Stock  Award or
               Restricted  Unit  Award.   The   restrictions   applicable  to  a
               Restricted  Stock  Award or a  Restricted  Unit Award shall lapse
               upon the earliest of the  following:  (1) the  expiration  of the
               Limitation  Period  applicable to the  Restricted  Stock Award or
               Restricted Unit Award;  (2) the occurrence of an event prescribed
               by the  Applicable  Committee  which  results in the lapse of the
               restrictions;  or (3) such other time as the Applicable Committee
               may determine.

          (d)  The shares of Stock or Units covered by a Restricted  Stock Award
               or  Restricted  Unit Award shall be  forfeited by the Holder upon
               termination of the Holder's employment with the Granting Employer
               for  any  reason  before  the  occurrence  of any  of the  events
               described in the last  sentence of Section  13.1(c)  hereof.  The
               Holder shall thereupon  immediately  transfer the shares or Units
               to his or her Employer without payment by the Granting  Employer.
               If the  Granting  Employer  is not the  Company or the  Operating
               Partnership, the Company and the Operating Partnership shall have
               the right to  purchase  any such  forfeited  shares or Units from
               such  Granting  Employer at a price equal to Fair Market Value at
               any time subsequent to such forfeiture.


          (e)  Promptly  after  the  grant of a  Restricted  Stock  Award by the
               Operating  Partnership  or its general  partner,  the  Management
               Company or a Subsidiary of the Management  Company,  such company
               shall  notify  the  Company  of the grant and of the  recipient's
               name,  address and social security  number,  and shall either (i)
               pay or cause to be paid to the  Company  an  amount  equal to the
               Fair  Market  Value  of  the  shares  which  are  subject  to the
               Restricted  Stock  Award or (ii)  deliver  free and  clear of any
               liens  or  encumbrances   certificates  representing  outstanding
               shares of Stock in an amount  equivalent  to the number of shares
               granted.


          (f)  Promptly  after  the  grant  of a  Restricted  Unit  Award by the
               Management  Company or a Subsidiary  of the  Management  Company,
               such company shall notify the Operating  Partnership of the grant
               and of the recipient's name,  address and social security number,
               and  shall  either  (i) pay or cause to be paid to the  Operating
               Partnership an amount equal to the Fair Market Value of the Units
               which are subject to the  Restricted  Unit Award or (ii)  deliver
               free

                                       16
<PAGE>


               and clear of any liens or encumbrances  certificates representing
               outstanding  Units in an amount equivalent to the number of Units
               granted.

     13.2 Restricted Stock Agreement;  Restricted Unit Agreement. All Restricted
          Stock Awards and all Restricted  Unit Awards  granted  pursuant to the
          Plan shall be evidenced by Restricted  Stock  Agreements or Restricted
          Unit  Agreements,  as  applicable,  to be  executed  by  the  Granting
          Employer  and by the Holder,  in such form or forms as the  Applicable
          Committee  shall  from  time  to  time  determine.   Restricted  Stock
          Agreements and Restricted Unit Agreements  covering  Restricted  Stock
          and  Restricted  Units  granted  from time to time or at the same time
          need not contain similar provisions;  provided, however, that all such
          Restricted  Stock  Agreements and  Restricted  Unit  Agreements  shall
          comply with all terms of the Plan.

     13.3 Certificates for Restricted Stock and Restricted Units. The Applicable
          Committee may require that the certificates  evidencing the grant of a
          Restricted Stock Award or Restricted Unit Award (if Unit  certificates
          are issued)  hereunder be held in escrow until such  restrictions have
          expired.  The  Company  shall also cause a legend to be placed on such
          certificates  that complies with the  applicable  securities  laws and
          regulations  and makes  appropriate  reference to the  restrictions to
          which the shares of Stock or Units are subject. Upon attainment of the
          specified  objectives and requirements (or, to the extent specified in
          the  grant,  the  portion  of such  shares or Units  earned by partial
          attainment of the  objectives  and  requirements,  as  applicable),  a
          certificate  for the  number  of  shares  of Stock  or Units  (if Unit
          certificates  are  issued)  with  respect to which  restrictions  have
          lapsed  shall be  delivered  to the Holder free of  restrictions  upon
          submission of the certificate  originally  issued with respect to such
          shares or Units.

     14.  GRANT OF RESTRICTED STOCK RIGHTS

     14.1 Restricted Stock Right Awards.

          (a)  The Company  Committee and the Management  Company  Committee may
               from time to time,  and subject to the provisions of the Plan and
               such other terms and conditions as the  Applicable  Committee may
               determine,  grant  Restricted  Stock Right Awards under the Plan.
               Unless  otherwise  provided  in a  Restricted  Stock  Right Award
               Agreement,  holders  of  Restricted  Stock  Rights  shall have no
               rights as stockholders of the Company.  The Applicable  Committee
               may  provide  in  an  Restricted   Stock  Right  Award  Agreement
               evidencing a grant of Restricted  Stock Rights that the holder of
               such Restricted  Stock Rights shall be entitled to receive,  upon
               the  Company's  payment  of a cash  dividend  on its  outstanding
               Stock,  a cash  payment for each share of  Restricted  Stock held
               equal  to  the  per-share   dividend  paid  on  the  Stock.  Such
               Restricted  Stock  Rights Award  Agreement  may also provide that
               such cash payment will be deemed  reinvested in additional shares
               of

                                       17
<PAGE>

               Restricted  Stock  Rights at a price  per unit  equal to the Fair
               Market  Value of a share of Stock on the date that such  dividend
               is paid.

          (b)  The Applicable  Committee shall  determine  establish a period of
               time (the "Restricted  Period") or shall prescribe certain events
               that must occur (each a  "Triggering  Event")  that must lapse in
               order for the  restrictions  that apply to the Stock subject to a
               Restricted  Stock  Right  Award  to  terminate.   Each  grant  of
               Restricted Stock Rights may be subject to a different  Restricted
               Period  or  Triggering  Event,  as  applicable.   The  Applicable
               Committee  may,  in its sole  discretion,  at the time a grant of
               Restricted  Stock  Rights  is  made,  prescribe  restrictions  in
               addition to or other than the expiration of the Restricted Period
               or  the   occurrence  of  a  Triggering   Event,   including  the
               satisfaction of corporate or individual  performance  objectives,
               which may be applicable  to all or any portion of the  Restricted
               Stock  Rights.  The  Applicable  Committee  also may, in its sole
               discretion, shorten or terminate the Restricted Period, waive the
               required  occurrence  of a Triggering  Event,  or waive any other
               restrictions  applicable  to all or a portion  of the  Restricted
               Stock  Rights.  The  Restricted  Stock  Rights  may not be  sold,
               transferred,   assigned,   pledged  or  otherwise  encumbered  or
               disposed  of  during  the  Restricted  Period  or  prior  to  the
               satisfaction  of  any  other   restrictions   prescribed  by  the
               Applicable  Committee  with  respect  to  such  Restricted  Stock
               Rights.

          (c)  The rights to shares of Stock covered by a Restricted Stock Right
               Award shall be forfeited  upon the  termination of the employment
               of a Holder with the Granting Employer for any reason, unless the
               Applicable  Committee,  in its discretion,  determines otherwise.
               Upon forfeiture of Restricted Stock Rights, the Holder shall have
               no further rights with respect to such grant.

          (d)  Promptly after the grant of a Restricted Stock Right Award by the
               Operating  Partnership  or its general  partner,  the  Management
               Company or a Subsidiary of the Management  Company,  such company
               shall  notify  the  Company  of the grant and of the  recipient's
               name, address and social security number.  Upon the expiration or
               termination  of  the  Restricted  Period  or  occurrence  of  the
               Triggering  Event,  as applicable,  and the  satisfaction  of any
               other  conditions  prescribed by the  Applicable  Committee,  the
               company  that  granted  the  Restricted  Stock  Right Award shall
               either (i) pay or cause to be paid to the Company an amount equal
               to the Fair  Market  Value of the shares  that are subject to the
               Restricted  Stock Right Award or (ii)  deliver  free and clear of
               any liens or encumbrances  certificates  representing outstanding
               shares of Stock in an amount  equivalent  to the number of shares
               granted.

     14.2 Restricted Stock Right  Agreement.  All Restricted Stock Rights Awards
          granted  pursuant to the Plan shall be evidenced by  Restricted  Stock
          Rights  Agreements to be executed by the Granting  Employer and by the
          Holder,  in such form or forms as the Applicable  Committee shall from
          time to time determine.  Restricted  Stock Right  Agreements  covering
          Restricted  Stock Rights granted from

                                       18
<PAGE>

          time to time or at the same time need not contain similar  provisions;
          provided,  however,  that all such Restricted  Stock Right  Agreements
          shall comply with all terms of the Plan.

     14.3 Delivery  of  Stock  and  Payment  Therefor.  Upon the  expiration  or
          termination of the  Restricted  Period or occurrence of the Triggering
          Event, as applicable,  and the  satisfaction  of any other  conditions
          prescribed by the Applicable Committee, the restrictions applicable to
          shares of  Restricted  Stock Rights shall lapse,  and, upon payment by
          the Holder to the Company,  in cash or by check,  of the aggregate par
          value of the  shares of Stock  represented  by such  Restricted  Stock
          Rights, a stock  certificate for such shares shall be delivered,  free
          of all such restrictions, to the Holder or the Holder's beneficiary or
          estate, as the case may be.

     15.  TRANSFERABILITY OF STOCK, UNITS AND OPTIONS

               During the lifetime of an Optionee, only such Optionee or grantee
          (or, in the event of legal incapacity or incompetency, the guardian or
          legal  representative  of the  Optionee or grantee)  may  exercise the
          Option.  No share of  Restricted  Stock or  Restricted  Unit  shall be
          assignable or transferable,  other than by will or the laws of descent
          and  distribution,  before the satisfaction of applicable  performance
          and service  requirements with respect to such shares, as set forth in
          the  applicable   Restricted   Stock   Agreement  or  Restricted  Unit
          Agreement.


     16.  USE OF PROCEEDS

               The proceeds received by the Company or the Operating Partnership
          from the sale of shares of Stock or Units pursuant to Incentive Awards
          granted under the Plan shall  constitute  general funds of the Company
          or the Operating  Partnership,  respectively.  As soon as  practicable
          after  receipt  by the  Company of the amount  described  in  Sections
          12.9(a)(i) and 13.1(e) above,  the Company shall  contribute an amount
          of cash equal to such  payment to the wholly owned  subsidiaries  that
          own its  interests in the  Operating  Partnership,  which in turn will
          contribute such cash to the Operating  Partnership,  and the Operating
          Partnership  shall  issue  additional  partnership  interests  to such
          subsidiaries with a value equal to the amount of such contribution.


     17.  REQUIREMENTS OF LAW

     17.1 General.  The  Company  and the  Operating  Partnership  shall  not be
          required  to sell or issue  any  shares  of Stock or Units  under  any
          Incentive  Award if the sale or issuance of such shares or Units would
          constitute a violation by the Optionee,  the individual exercising the
          Option, or the Company or the Operating  Partnership of any provisions
          of any law or  regulation  of any

                                       19
<PAGE>

          governmental  authority,  including without  limitation any federal or
          state securities laws or regulations. If at any time the Company shall
          determine,  in its  discretion,  that  the  listing,  registration  or
          qualification  of any shares or Units  subject to the Option  upon any
          securities  exchange or under any  governmental  regulatory  body,  is
          necessary or desirable as a condition of, or in connection  with,  the
          issuance or purchase of shares or Units hereunder,  the Option may not
          be  exercised in whole or in part unless such  listing,  registration,
          qualification,  consent  or  approval  shall  have  been  effected  or
          obtained free of any  conditions  not acceptable to the Company or the
          Operating  Partnership,  as  applicable,  and any delay caused thereby
          shall  in no way  affect  the  date  of  termination  of  the  Option.
          Specifically  in connection with the 1933 Act, at the time of grant of
          Restricted  Stock,  Restricted  Units or  shares  of Stock  underlying
          Restricted Stock Rights, or when such shares or Units become vested or
          upon the exercise of any Option, unless a registration statement under
          such act is in effect  with  respect  to the  shares of Stock or Units
          covered by the Option or  Restricted  Stock Right,  the Company or the
          Operating Partnership, as applicable, shall not be required to sell or
          issue such shares or Units unless the Company  Committee  has received
          evidence  satisfactory  to it that the  Optionee or Holder may acquire
          such shares or Units pursuant to an exemption from registration  under
          such  act.  Any  determination  in  this  connection  by  the  Company
          Committee shall be final, binding, and conclusive.  The Company or the
          Operating  Partnership  may,  but shall in no event be  obligated  to,
          register  any  securities  covered  hereby  pursuant  to the 1933 Act.
          Neither the Company nor the Operating  Partnership  shall be obligated
          to take any  affirmative  action in order to cause the  exercise of an
          Option or the issuance of shares of Stock or Units pursuant thereto or
          pursuant  to  a  grant  of  Restricted  Stock,   Restricted  Units  or
          Restricted  Stock Rights to comply with any law or  regulation  of any
          governmental  authority. As to any jurisdiction that expressly imposes
          the requirement that an Option shall not be exercisable or that shares
          of Stock or Units may not be issued  pursuant  to a  Restricted  Stock
          Award,  Restricted Unit Award or Restricted  Stock Rights Award unless
          and until the shares of Stock or Units covered by such Option or grant
          are registered or are exempt from  registration,  the exercise of such
          Option or the  issuance  of shares of Stock or Units  pursuant to such
          grant  (under  circumstances  in which  the laws of such  jurisdiction
          apply)  shall be deemed  conditioned  upon the  effectiveness  of such
          registration or the availability of such an exemption.

     17.2 Rule 16b-3.  The intent of this Plan is to qualify  for the  exemption
          provided  by Rule  16b-3  under the  Exchange  Act.  To the extent any
          provision  of the Plan or action by the Plan  administrators  does not
          comply  with the  requirements  of Rule  16b-3,  it  shall  be  deemed
          inoperative,  to the extent  permitted by law and deemed  advisable by
          the Plan  administrators,  and shall not  affect the  validity  of the
          Plan.  In the event Rule 16b-3 is  revised or  replaced,  the Board of
          Directors of the Company may exercise  discretion  to modify this Plan
          in any respect  necessary to satisfy the  requirements  of the revised
          exemption or its replacement.

                                       20
<PAGE>

     17.3 REIT Qualification. The Company shall not be required to sell or issue
          any shares of Stock under any Incentive  Award if the sale or issuance
          of such  shares  would  cause the Company to fail to qualify as a real
          estate  investment  trust for  Federal  income tax  purposes  or would
          result in the  Optionee's or Holder's  ownership of Stock in violation
          of the  restrictions  on ownership  and transfer of Stock set forth in
          the Company's articles of incorporation.

     18.  AMENDMENT AND TERMINATION OF THE PLAN

          The Board of  Directors  of the Company may, at any time and from time
     to time, amend, suspend, or terminate the Plan as to any shares of Stock or
     Units as to  which  Incentive  Awards  have  not  been  granted;  provided,
     however, no amendment that materially affects the terms of Incentive Awards
     under the Operating Partnership Plan shall be effective with respect to the
     Operating  Partnership  Plan without the approval of the Board of Directors
     of the general partner of the Operating Partnership,  and no amendment that
     materially  affects  the terms of  Incentive  Awards  under the  Management
     Company Plan shall be effective with respect to the Management Company Plan
     without the approval of the Board of Directors of the  Management  Company;
     and  provided  further,  that  any  amendment  which  requires  stockholder
     approval  under Rule 163-b (or any  successor  rule) as a condition  to the
     Plan's  continued  compliance with such rule, or which would cause the Plan
     not to comply with the Code, shall not be effective without approval by the
     affirmative  vote of  stockholders  who  hold at  least a  majority  of the
     outstanding shares of Stock of the Company entitled to vote thereon and who
     vote in person or by proxy at a duly constituted stockholders' meeting. The
     Employer may retain the right in an Agreement to cause a forfeiture  of the
     shares  of Stock or gain  realized  by a Holder  of an  Incentive  Award on
     account  of  the  Holder  taking  actions   prohibited  by  the  applicable
     Agreement.  Except as permitted under this Section 11 or Section 12 hereof,
     no amendment,  suspension,  or termination  of the Plan shall,  without the
     consent of the Holder of the  Incentive  Award,  alter or impair  rights or
     obligations under any Incentive Award theretofore granted under the Plan.


     19.  EFFECT OF CHANGES IN CAPITALIZATION

     19.1 Changes  in Stock or Units.  If the  number of  outstanding  shares of
          Stock or Units is  increased  or  decreased  or the shares of Stock or
          Units are changed into or exchanged for a different  number or kind of
          shares or Units or other  securities  of the Company or the  Operating
          Partnership  on  account  of any  recapitalization,  reclassification,
          stock or Unit split,  reverse  split,  combination of shares or Units,
          exchange  of shares or Units,  stock  dividend  or other  distribution
          payable in capital  stock or Units,  or other  increase or decrease in
          such shares or Units effected  without receipt of consideration by the
          Company or the Operating  Partnership,  occurring  after the Effective
          Date of the Plan, the number and kinds of

                                       21
<PAGE>
          shares of Stock or Units for the  issuance of which  Restricted  Stock
          Awards, Restricted Unit Awards, and Restrictive Stock Right Awards may
          be granted  and shares for the  acquisition  of which  Options  may be
          granted  under  the  Plan  shall  be  adjusted   proportionately   and
          accordingly by the Company. In addition, the number and kind of shares
          for which Restricted Stock Awards,  Restricted Unit Awards, Restricted
          Stock  Right  Awards or  Options  are  outstanding  shall be  adjusted
          proportionately and accordingly so that the proportionate  interest of
          the Holder of the Restricted  Stock Awards,  Restricted  Units Awards,
          Restricted Stock Right Awards or Optionee  immediately  following such
          event shall,  to the extent  practicable,  be the same as  immediately
          before such event.  Any such  adjustment in outstanding  Options shall
          not change the  aggregate  Option Price payable with respect to shares
          or Units  that are  subject to the  unexercised  portion of the Option
          outstanding but shall include a corresponding proportionate adjustment
          in the Option Price per share or Unit.

     19.2 Reorganization  in Which the Company or Operating  Partnership  Is the
          Surviving  Entity.  Subject to Section 19.3 hereof,  if the Company or
          the  Operating  Partnership  shall  be  the  surviving  entity  in any
          reorganization,  merger,  or  consolidation  of  the  Company  or  the
          Operating  Partnership  with one or more  other  entities,  any Option
          theretofore granted pursuant to the Plan shall pertain to and apply to
          the  securities  to which a holder of the number of shares of Stock or
          Units  subject to such  Option  would have been  entitled  immediately
          following  such  reorganization,  merger,  or  consolidation,  with  a
          corresponding  proportionate  adjustment of the Option Price per share
          or Unit so that the  aggregate  Option Price  thereafter  shall be the
          same as the  aggregate  Option Price of the shares or Units  remaining
          subject  to the  Option  immediately  prior  to  such  reorganization,
          merger,  or  consolidation.  Subject to any  contrary  language in the
          applicable  Restricted Stock  Agreement,  Restricted Unit Agreement or
          Restricted   Stock  Right  Agreement,   any  restrictions   that  were
          applicable  to  any  previously   granted   Restricted   Stock  Award,
          Restricted  Unit Award or Restricted  Stock Right Award shall apply as
          well to any  replacement  shares received by the Holder as a result of
          such reorganization, merger, or consolidation.

     19.3 Reorganization  in Which the Company or Operating  Partnership  Is Not
          the  Surviving  Entity or Sale of  Assets or Stock or Units.  Upon the
          dissolution   or   liquidation   of  the  Company  or  the   Operating
          Partnership, or upon a merger, consolidation, or reorganization of the
          Company or the Operating  Partnership  with one or more other entities
          in which the Company or the Operating Partnership is not the surviving
          entity,  or  upon a sale of  substantially  all of the  assets  of the
          Company or the Operating  Partnership to another  entity,  or upon any
          transaction (including, without limitation, a merger or reorganization
          in which the Company or Operating Partnership is the surviving entity)
          approved  by the Board of  Directors  of the  Company  or the  general
          partner of the Operating Partnership,  as applicable,  that results in
          any  person or entity  (or  person  or  entities  acting as a group or
          otherwise in concert) owning 80 percent or more of the combined voting

                                       22
<PAGE>

          power of all classes of securities of, or interests in, the Company or
          the  Operating  Partnership  (other than the  Company or wholly  owned
          subsidiaries  of the  Company),  the Plan and all Options  outstanding
          hereunder shall  terminate,  except to the extent provision is made in
          writing in connection with such  transaction  for the  continuation of
          the Plan or the assumption of such Options theretofore granted, or for
          the substitution for such Options of new options covering the stock or
          partnership  units of a successor  Company,  or a parent or subsidiary
          thereof,  with  appropriate  adjustments as to the number and kinds of
          shares  or units  and  exercise  prices,  in which  event the Plan and
          Options theretofore granted shall continue in the manner and under the
          terms so provided.  In the event of any such  termination of the Plan,
          each individual holding an Option shall have the right (subject to the
          general  limitations  on exercise  set forth in Section  12.2  above),
          immediately  before the occurrence of such termination and during such
          period occurring  before such termination as the Company  Committee in
          its sole discretion  shall  determine and designate,  to exercise such
          Option in whole or in part,  whether or not such Option was  otherwise
          exercisable at the time such termination occurs. The Company Committee
          shall  send  written  notice of an event  that  will  result in such a
          termination  to all  individuals  who hold  Options not later than the
          time at which the Company  gives notice  thereof to its  shareholders.
          Unvested   Restricted   Stock  Awards,   Restricted  Unit  Awards  and
          Restricted  Stock Right Awards shall be vested in the case of an event
          described in this Section 19.3.

     19.4 Adjustments  Adjustments  under  this  Section 19 related to shares of
          Stock  or  securities  of  the  Company  or  Units  of  the  Operating
          Partnership   shall   be  made  by  the   Company   Committee,   whose
          determination in that respect shall be final, binding, and conclusive.
          No  fractional  shares  or units of other  securities  shall be issued
          pursuant to any such adjustment,  and any fractions resulting from any
          such adjustment shall be eliminated in each case by rounding  downward
          to the nearest whole share or unit.

     19.5 No  Limitations  on Company  or  Operating  Partnership.  The grant of
          Incentive Awards pursuant to the Plan shall not affect or limit in any
          way the right or power of the Company or the Operating  Partnership to
          make adjustments,  reclassifications,  reorganizations,  or changes of
          its capital or business structure or to merge, consolidate,  dissolve,
          or  liquidate,  or to sell or transfer all or any part of its business
          or assets.

     20.  DISCLAIMER OF RIGHTS

               No provision  in the Plan or in any  Incentive  Award  granted or
          Agreement  entered  into  pursuant to the Plan shall be  construed  to
          confer  upon any  individual  the  right to  remain  in the  employ or
          service  of  any  Employer,  or to  interfere  in  any  way  with  any
          contractual  or other right or  authority  of any  Employer  either to
          increase  or  decrease  the  compensation  or  other  payments  to any
          individual  at any  time,  or to  terminate  any  employment  or other
          relationship

                                       23
<PAGE>

          between any individual and such Employer. In addition, notwithstanding
          anything  contained  in the  Plan to the  contrary,  unless  otherwise
          stated in the applicable  Agreement,  no Incentive Award granted under
          the Plan shall be  affected by any change of duties or position of the
          Optionee or Holder (including a transfer to or from any Employer),  so
          long as such Optionee or Holder  continues to be a director,  officer,
          consultant,  employee, or independent  contractor (as the case may be)
          of any Employer (the "Successor Granting Employer"). The Plan shall in
          no way be interpreted to require any Employer to transfer any Stock or
          Units to a third party trustee or otherwise hold any Stock or Units in
          trust or escrow for any participant or beneficiary  under the terms of
          the Plan.

     21.  NONEXCLUSIVITY OF THE PLAN

               Neither the adoption of the Plan nor the  submission  of the Plan
          to the  stockholders of the Company for approval shall be construed as
          creating any limitations  upon the right and authority of the Company,
          the Operating  Partnership  or its general  partner or the  Management
          Company  or any  Subsidiary  thereof  to adopt  such  other  incentive
          compensation arrangements (which arrangements may be applicable either
          generally to a class or classes of  individuals or  specifically  to a
          particular  individual  or  particular  individuals)  such entities in
          their discretion determine desirable.

     22.  CAPTIONS

               The use of  captions  in this  Plan or any  Agreement  is for the
          convenience  of reference only and shall not affect the meaning of any
          provision of the Plan or such Agreement.


     23.  WITHHOLDING TAXES

     23.1 Withholding. The Granting Employer shall have the right to deduct from
          payments  of any kind  otherwise  due to an  Optionee  or  Holder  any
          Federal,  state,  or local  taxes of any  kind  required  by law to be
          withheld  with respect to any shares of Stock or Units issued upon the
          exercise of an Option under the Plan,  with respect to the termination
          of the  Limitation  Period with respect to Restricted  Stock Awards or
          Restricted  Unit  Awards  under  the  Plan  or  with  respect  to  the
          termination  of  the  Restricted   Period  in  conjunction   with  the
          Restricted  Stock  Right  Awards.  At the time of  termination  of the
          Limitation Period or Restricted Period, as applicable, the Optionee or
          Holder shall pay to the Granting Employer any amount that the Granting
          Employer  may  reasonably  determine  to be  necessary to satisfy such
          withholding obligation.  Subject to the prior approval of the Granting
          Employer,  which may be withheld by the Granting  Employer (and/or the
          Successor Granting  Employer) in its sole discretion,  the Optionee or
          Holder may elect to satisfy such obligations, in whole or in part, (i)
          by causing such Granting Employer

                                       24
<PAGE>

          to withhold  shares of Stock or Units otherwise  issuable  pursuant to
          the  exercise  of an Option  or (ii) by  delivering  to such  Granting
          Employer  shares of Stock or Units  already  owned by the  Optionee or
          Holder.  The shares of Stock or Units so delivered  or withheld  shall
          have a fair market value equal to such  withholding  obligations.  The
          fair market value of the shares of Stock or Units used to satisfy such
          withholding  obligation  shall be determined by the Granting  Employer
          (and/or  the  Successor  Granting  Employer)  as of the date  that the
          amount of tax to be  withheld  is to be  determined.  An  Optionee  or
          Holder who has made an election pursuant to this Section 23.1 may only
          satisfy  his or her  withholding  obligation  with  shares of Stock or
          Units that are not subject to any repurchase,  forfeiture, unfulfilled
          vesting, or other similar requirements.

     23.2 Limitations for Reporting Person.  Notwithstanding  the foregoing,  in
          the case of a Reporting  Person, no election to use Stock or Units for
          the payment of  withholding  taxes shall be  effective  unless made in
          compliance with any applicable requirements under Rule 16b-3(e) or any
          successor rule under the Exchange Act.


     24.  OTHER PROVISIONS

          Each  Incentive  Award  granted  under the Plan may contain such other
     terms and conditions not inconsistent with the Plan as may be determined by
     the Applicable Committee, in its sole discretion.


     25.  NUMBER AND GENDER

          With  respect  to words  used in this Plan,  the  singular  form shall
     include the plural form,  the  masculine  gender shall include the feminine
     gender, etc., as the context requires.


     26.  SEVERABILITY

          If any provision of the Plan or any  Agreement  shall be determined to
     be illegal or  unenforceable by any court of law in any  jurisdiction,  the
     remaining  provisions hereof and thereof shall be severable and enforceable
     in accordance with their terms, and all provisions shall remain enforceable
     in any other jurisdiction.


     27.  GOVERNING LAW

          The  validity  and  construction  of this  Plan  and  the  instruments
     evidencing the Incentive Awards granted  hereunder shall be governed by the
     laws of the State of Texas.

                                     * * *




                                       25
<PAGE>



     The Paragon  Group,  Inc.  Third Amended and Restated  1994 Employee  Stock
Option, Unit Option,  Restricted Stock and Restricted Unit Plan was duly adopted
and approved by the Board of Directors of Paragon  Group,  Inc. on the 11 day of
September, 1996.



                                                --------------------------
                                                Jerry J. Bonner
                                                Secretary of Paragon Group, Inc.


     The Paragon  Group,  Inc.  Third Amended and Restated  1994 Employee  Stock
Option, Unit Option, Restricted Stock and Restricted Unit Plan was duly approved
by the Board of Directors of Paragon Group GP Holdings, Inc., as general partner
of Paragon Group L.P., on the 11 day of September, 1996.



                                                --------------------------
                                                Jerry J. Bonner
                                                Secretary of Paragon Group GP
                                                Holdings, Inc.



     The Paragon  Group,  Inc.  Third Amended and Restated  1994 Employee  Stock
Option, Unit Option, Restricted Stock and Restricted Unit Plan was duly approved
by the Board of Directors of Paragon Group Property Services, Inc. on the 12 day
of September, 1996.



                                                --------------------------
                                                Jerry J. Bonner
                                                Secretary of Paragon Group
                                                Property Services, Inc.