Document:

<PAGE>

                                                                    Exhibit 4.06

                              EXCHANGE AGREEMENT

          AGREEMENT, dated as of March 28, 2001, by and among Cendant Membership
Services Holdings, Inc., a Delaware corporation ("Buyer"), Joseph A. Preis
("Preis"), and John P. McWeeny ("McWeeny" and together with Preis, the
"Sellers").

          WHEREAS, Preis is the owner of 81,761 shares ("the Preis Shares") of
Cendant Corporation common stock designated as Move.com Tracking Stock, par
value $0.01 per share ("Move.com Stock"), and McWeeny is the owner of 15,751
shares of Move.com Stock (the "McWeeny Shares" and together with the Preis
Shares, the "Tracking Stock Shares");

          WHEREAS, Buyer is a party to an Agreement and Plan of Reorganization,
dated as of October 26, 2000, by and among Homestore.com, Inc., ("Homestore"),
Metal Acquisition Corp., WW Acquisition Corp., Move.com, Inc. ("Move.com"),
Welcome Wagon International Inc., Buyer and Cendant Corporation, a Delaware
corporation ("Parent"), pursuant to which each outstanding share of common stock
of Move.com, par value $.01 per share, was converted into the right to receive
 .7284 shares (the "Exchange Ratio") of common stock of Homestore.com, Inc., par
value $0.001 per share ("Homestore Common Stock"); and

          WHEREAS, the parties desire to exchange Tracking Stock Shares for
shares of Homestore Common Stock at the Exchange Ratio (substituting Tracking
Stock Shares for shares of common stock of Move.com in the calculation), on the
terms and conditions provided for herein.

          NOW, THEREFORE, in consideration of the provisions contained herein,
the parties hereto agree as follows:

          1.    EXCHANGE OF TRACKING STOCK SHARES FOR HOMESTORE SHARES.
                ------------------------------------------------------

                1.1 Exchange of Shares. On the terms and subject to the
                    ------------------
conditions contained herein, Buyer agrees to exchange with the Sellers and the
Sellers agree to exchange with Buyer (i) 59,555 shares of Homestore Common Stock
(the "Preis Homestore Shares") in exchange for the Preis Shares, and (ii) 11,473
shares of Homestore Common Stock (the "McWeeny Homestore Shares" and, together
with the Preis Homestore Shares, the "Homestore Shares") in exchange for the
McWeeny Shares. Pursuant to a Registration Rights Agreement, dated as of October
26, 2000 and effective as of February 16, 2000, by and between Homestore
<PAGE>

and Parent (the "Registration Rights Agreement"), Homestore is required to file
a registration statement on Form S-3 no later than May 17, 2001 for a public
offering of the Homestore Shares (the "Shelf Registration").

             1.2 Delivery of Shares. (a) At the Closing each of the Sellers
                 ------------------
shall deliver to Buyer validly issued certificates representing the Tracking
Stock Shares duly endorsed in blank or accompanied by stock powers duly executed
in blank, with all necessary stock transfer stamps affixed.

     (b)  At the Closing Buyer shall (i) deliver to Preis a validly issued
certificate representing the Preis Homestore Shares duly endorsed in blank or
accompanied by stock powers duly executed in blank, with all necessary stock
transfer stamps affixed and (ii) deliver to McWeeny a validly issued certificate
representing the McWeeny Homestore Shares duly endorsed in blank or accompanied
by stock powers duly executed in blank, with all necessary stock transfer stamps
affixed.

     2.    THE CLOSING.  Upon the terms and subject to the conditions of this
           -----------
Agreement, it is intended that the closing of  the transactions contemplated by
this Agreement (the "Closing") shall take place on the date of execution of this
Agreement at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times
Square, New York, New York 10036, at 10:00 a.m. (local time); provided, however,
                                                              --------  -------
if any of the conditions set forth in this Agreement shall not have been
satisfied or waived as of the date of this Agreement, then the Closing shall
take place on the third business day after satisfaction of all the conditions
provided for in Section 5 hereof, or at such other place and time as the parties
hereto shall agree in writing (the time and date of such closing being referred
to herein as the "Closing Date").  The parties hereto agree to use their best
efforts to have the Closing occur as soon as practicable consistent with the
provisions of this Agreement.

     3.    REPRESENTATIONS AND WARRANTIES OF THE SELLERS.  Each of the Sellers
           ---------------------------------------------
jointly and severally represent and warrant to Buyer as follows:

           3.1  Authorization. Each Seller has full power and authority to enter
                -------------
into and to perform its obligation under this Agreement in accordance with its
terms.

           3.2  Binding Agreement. This Agreement has been duly and validly
                -----------------
executed and delivered on behalf of each Seller and, assuming due authorization,
execution and delivery by Buyer, constitutes the legal and binding

                                       2
<PAGE>

obligation of each of the Sellers enforceable against the Sellers in accordance
with its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, and to general equity principles (whether
considered in a proceeding in equity or at law).

             3.3  Required Approvals, Notices and Consents. Except as described
                  ----------------------------------------
herein or in Schedule 3.3 hereof, no consent or approval of, other action by, or
any notice to, any governmental body or agency, domestic or foreign, or any
third party is required in connection with the execution and delivery by each of
the Sellers of this Agreement or the consummation by each of the Sellers of the
transaction contemplated hereby.

             3.4  Restricted Securities. Until the Shelf Registration is
                  ---------------------
declared effective by the Securities and Exchange Commission pursuant to the
Registration Rights Agreement (which may or may not occur by May 17, 2001), each
Seller understands that (a) the Homestore Shares to be received by such Seller
hereunder are characterized as "restricted securities" under the federal
securities laws inasmuch as such securities are being acquired from Buyer in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances and (b) the
certificate(s) representing the Homestore Shares shall bear the following
legends:

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES REPRESENTED BY
     THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
     REGISTRATION OR A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE
     ISSUER IN FORM AND SUBSTANCE, THAT SUCH TRANSFER IS EXEMPT FROM THE
     REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933.

          The Sellers must request that Homestore remove the legend set forth
above from the certificates evidencing the Homestore Shares or issue to such
holder new certificates therefor free of such legend in connection with the
Shelf Registration.

             3.5  Suitability Standards.
                  ---------------------

                                       3
<PAGE>

          (a)  Each Seller is acquiring the Homestore Shares for investment
               purposes only and solely for his own accounts and not with a view
               to, or for resale in connection with, the distribution or
               disposition thereof, except for such distributions or
               dispositions which are effected in compliance with the Securities
               Act;

          (b)  Each Seller understand that the Homestore Shares have not been
               registered under the Securities Act or under any state securities
               or "blue sky" laws;

          (c)  Each Seller will not directly or indirectly offer, sell,
               transfer, assign, pledge, hypothecate or otherwise dispose of, or
               solicit any offers to purchase or otherwise acquire or take a
               pledge of, any of the Homestore Shares, except in accordance with
               the Securities Act and all applicable state securities or "blue
               sky" laws;

          (d)  The financial situation of each Seller is such that he can afford
               to bear the economic risk of holding the Homestore Shares for an
               indefinite period of time and suffer complete loss of his
               investment in the Homestore Shares;

          (e)  Each Seller has such knowledge and experience in financial and
               business matters that he is capable of evaluating the merits and
               risks relating to his investment in the Homestore Shares;

          (f)  Each Seller acknowledge that the Homestore Shares must be held
               indefinitely and each Seller must continue to bear the economic
               risk of his investments in the Homestore Shares until the
               Homestore Shares are subsequently registered under the Securities
               Act or an exemption from such registration is available;

          (g)  Each Seller understands that the Homestore Shares represent a
               speculative investment which involves a high degree of risk of
               loss of his investment therein;

          (h)  In making his decision to receive the Homestore Shares under this
               Agreement, each Seller has relied upon independent investigations
               made by his and, to the extent believed by him to be appropriate,
               his representatives, including his own professional, tax and
               other advisors;

                                       4
<PAGE>

          (i)  In making his decision to receive the Homestore Shares under this
               Agreement, each Seller has not received or relied upon any
               information relating the Homestore from Buyer and each Seller has
               relied solely upon the public filings of Homestore to evaluate
               the risks associated with ownership of the Homestore Shares; and

          (j)  All information that each Seller has provided to Buyer concerning
               himself and his financial position and the financial position of
               Preis' spouse is true, complete and correct as of the date of
               this Agreement.

               3.6  Fees and Commissions. No agent, broker, investment banker,
                    --------------------
person or firm acting on behalf of or under the authority of either Seller is or
will be entitled to any broker's or finder's fee or any other commission
directly or indirectly in connection with the transactions contemplated herein.
Each Seller agrees to indemnify and hold harmless Buyer from liability for any
compensation to any intermediary retained or otherwise authorized to act by, or
on behalf of, such Seller and the fees and expenses of defending against such
liability or alleged liability.

               3.7  Transfer Instructions. Each Seller agrees that Homestore may
                    ---------------------
provide for appropriate transfer instructions to implement the provisions of
Section 3.4 hereof.

          4.   REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
               ---------------------------------------
warrants to each of the Sellers as follows:

               4.1  Organization and Standing. Buyer is a corporation duly
                    -------------------------
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.

               4.2  Binding Agreement. Buyer has all requisite corporate power
                    -----------------
and authority to enter into, execute and deliver this Agreement, to carry out
its obligations hereunder and to consummate the transaction contemplated hereby.
This Agreement has been duly and validly authorized, executed and delivered by
Buyer and, assuming due authorization, execution and delivery by each of the
Sellers, constitutes the legal and binding obligation of Buyer enforceable
against Buyer in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other laws relating to or affecting

                                       5
<PAGE>

creditors' rights generally, and to general equity principles (whether
considered in a proceeding in equity or at law).

              4.3 Fees and Commissions. No agent, broker, investment banker,
                  --------------------
person or firm acting on behalf of or under the authority of Buyer is or will be
entitled to any broker's or finder's fee or any other commission directly or
indirectly in connection with the transactions contemplated herein.

              4.4  Required Approvals, Notices and Consents. Except as described
                   ----------------------------------------
herein or in Schedule 4.4 hereof, no consent or approval of, other action by, or
any notice to, any governmental body or agency, domestic or foreign, or any
third party is required in connection with the execution and delivery by Buyer
of this Agreement or the consummation by Buyer of the transaction contemplated
hereby.

        5.    CONDITIONS PRECEDENT. To the extent that the date of this
              --------------------
Agreement is not also the date of the Closing the following shall apply: The
obligations of each party hereunder are subject to the fulfillment on or prior
to the Closing as follows:

              5.1  Representations, Warranties and Agreements. The
                   ------------------------------------------
representations and warranties of the other party hereto shall be true and
correct in all material respects on the Closing Date as though made on and as of
such date and the other party shall have performed all other obligations and
agreements contained in this Agreement to be performed prior to the Closing.

        6.    MISCELLANEOUS.
              -------------

              6.1 Entire Agreement. This Agreement embodies the entire agreement
                  ----------------
and understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, arrangements and undertakings, whether
written or oral, relating to matters provided for herein. There are no
provisions, undertakings, representations or warranties relative to the subject
matter of this Agreement not expressly set forth herein.

              6.2 Expenses.  Except as otherwise specifically provided in this
                  --------
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transaction contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.

                                       6
<PAGE>

             6.3  Notices. Any notice, demand, claim, notice of claim, request
                  -------
or communication required or permitted to be given under the provisions of this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally by facsimile transmission or sent by first class or
certified mail, postage prepaid to the following addresses,

          If to Preis:

               Joseph A. Preis
               c/o MetroRent, Inc.
               2021 Fillmore Street
               San Francisco, California  94115
               Facsimile:  (415) 563-0383

               With a copy to

               Dudnick Detwiler Rivin & Stikker LLP
               351 California Street, 15/th/ Floor
               San Francisco, California  94104
               Attention:  Jeffrey B. Detwiler, Esq.
               Facsimile:  (415) 982-1401

          If to McWeeny:

               John P. McWeeny
               c/o MetroRent, Inc.
               2021 Fillmore Street
               San Francisco, California  94115
               Facsimile:  (415) 563-0383

               with a copy to:

               Dudnick Detwiler Rivin & Stikker LLP
               351 California Street, 15/th/ Floor
               San Francisco, California  94104
               Attention:  Jeffrey B. Detwiler, Esq.
               Facsimile:  (415) 982-1401

          If to Buyer:

                                       7
<PAGE>

               c/o Cendant Corporation
               9 West 57/th/ Street
               New York, New York  10019
               Attention:  Eric J. Bock, Esq.
               Facsimile:  (212) 413-1922

               with a copy to:

               Skadden, Arps, Slate, Meagher & Flom LLP
               Four Times Square
               New York, New York 10038
               Attention:  David Fox, Esq.
               Facsimile:  (212) 735-2000

or to such other address as any party may request by notifying in writing all of
the other parties to this Agreement in accordance with this Section 6.3.

     Any such notice shall be deemed to have been received on the date of
personal delivery, the date set forth on the postal service return receipt, the
date of delivery shown on the records of the overnight courier or the date shown
on the facsimile confirmation, as applicable.

             6.4  Benefit and Assignment. This Agreement will be binding upon
                  ----------------------
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. There sh all be no assignment of any interest under this
Agreement by any party except that Buyer may assign its rights hereunder to any
wholly owned subsidiary of Buyer; provided, however, that no such assignment
                                  --------  -------
shall relieve the assignor of its obligations under this Agreement. Nothing
herein, express or implied, is intended to or shall confer upon any other person
any legal or equitable right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement.

             6.5  Waiver. Any waiver of any provision of this Agreement shall be
                  ------
valid only if set forth in an instrument in writing signed by the party to be
bound thereby. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any such rights.

                                       8
<PAGE>

             6.6  Amendment. This Agreement may not be amended or modified
                  ---------
except by an instrument in writing signed by, or on behalf of, the Sellers and
Buyer.

             6.7  Release of Claims. The Sellers hereby fully and
                  -----------------
unconditionally releases from any and all claims, actions, causes of actions,
lawsuits, damages, liabilities, costs, losses, expenses, assessments, sums of
money, promises and demands of any nature whatsoever of the Sellers against
Buyer and each of its respective officers, directors, employees or agents which
are related to or arise out of (a) any act taken or omitted to be taken in
connection with or in anticipation of the transactions contemplated hereby or
(b) any act taken or omitted to be taken by Buyer in connection with the
transactions contemplated hereby; provided that the foregoing shall in no event
operate as a release of claims, actions, causes of action, lawsuits, damages,
liabilities, costs, losses, expenses, assessments, sums of money, promises or
demands of any nature whatsoever that in any way relate to or arise out of or in
connection with that certain Asset Purchase Agreement among Parent, Move.com,
Sellers and others dated as of October 29, 1999, as amended, those certain
Employment Agreements between Rent Net, Inc. and each Seller dated December 17,
1999, that certain Escrow Agreement among Move.com, Bank of San Francisco,
Sellers and others dated as of December 17, 1999, and those certain Stock Option
Agreements between Move.com and each Seller dated as of January 13, 2000.

             6.8  Construction of this Agreement. The language used in this
                  ------------------------------
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual agreement, and this Agreement shall not be deemed to have
been prepared by any single party hereto. The headings of the sections and
subsections of this Agreement are inserted as a matter of convenience and for
reference purposes only and in no respect define, limit or describe the scope of
this Agreement or the intent of any section or subsection. This Agreement may be
executed in one or more counterparts and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.

             6.9  Governing Law. This Agreement shall be governed by, enforced
                  -------------
under and construed in accordance with, the laws of the State of New York,
without giving effect to any choice of law provision or rule thereof. The
parties submit to the exclusive jurisdiction of the courts of the State of New
York and of the United States of America in each case located in the County of
New York for any litigation arising out of or relating to the Agreement and the
transactions contemplated hereby.

                                       9
<PAGE>

          IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.

                                      CENDANT MEMBERSHIP SERVICES HOLDINGS, INC.

                                      /s/ Eric J. Bock
                                      ----------------
                                      Name: Eric J. Bock
                                      Title: Senior Vice President & Secretary

                                      JOSEPH A. PREIS

                                      /s/ Joseph A. Preis
                                      -------------------

                                      JOHN P. MCWEENY

                                      /s/ John P. McWeeny
                                      -------------------
<PAGE>

                                SPOUSAL CONSENT

       The undersigned represents that the undersigned is the spouse of

                                Joseph A. Preis

and that the undersigned is familiar with the terms of the Exchange Agreement
attached hereto and all related agreements and instruments executed pursuant to
or in connection with the Exchange Agreement (together the "Agreements").  The
undersigned hereby agrees that the interest of the undersigned's spouse in all
property which is the subject of such Agreements shall be irrevocably bound by
the terms of such Agreements and by any amendment, modification, waiver or
termination signed by the undersigned's spouse . The undersigned further agrees
that the undersigned's community property interest, if any, in all property
which is the subject of such Agreements shall be irrevocably bound by the terms
of such Agreements, and that such Agreements shall be binding on the executors,
administrators, heirs and assigns of the undersigned. The undersigned further
authorizes the undersigned's spouse to amend, modify or terminate such
Agreements, or waive any rights thereunder, and that each such amendment,
modification, waiver or termination signed by the undersigned's spouse shall be
binding on the community property interest, if any, of the undersigned in all
property which is the subject of such Agreements and on the executors,
administrators, heirs and assigns of the undersigned, each as fully as if the
undersigned had signed such amendment, modification, waiver or termination.

Dated: March 28, 2001

                                                    /s/ Carolyn Obstfeld Preis
                                                   -----------------------------
                                                   Name:  Carolyn Obstfeld Preis<PAGE>   1
                                                                    EXHIBIT 10.5

                           WATERMARK COMMUNITIES, INC.
                 1998 NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
                            AS RESTATED MAY 21, 1999

                        ---------------------------------

1.        PURPOSE OF THE PLAN

          The purpose of the Plan is to aid the Company in attracting, retaining
and compensating non-employee directors and to enable them to increase their
ownership of Shares. The Plan will be beneficial to the Company and its
stockholders since it will allow non-employee directors of the Board to have a
greater personal financial stake in the Company through the ownership of Shares,
in addition to underscoring their common interest with stockholders in
increasing the value of the Shares on a long-term basis.

2.        DEFINITIONS

          The following capitalized terms used in the Plan have the respective
meanings set forth in this Paragraph:

                  (a)      Act: The Securities Exchange Act of 1934, as amended,
                           or any successor thereto.

                  (b)      Beneficial Owner: As such term is defined in Rule
                           13d-3 under the Act (or any successor rule thereto).

                  (c)      Board: The Board of Directors of the Company.

                  (d)      Change in Control: (i) Any "person" as defined in
                           Section 3(a)(9) of the Securities Exchange Act of
                           1934, as amended (the "Exchange Act"), and as used in
                           Section 13(d) and 14(d) thereof, including a "group"
                           as defined in Section 13(d) of the Exchange Act
                           (excluding any person holding securities representing
                           50% or more of the combined voting power of the
                           Company's outstanding securities as of the Effective
                           Date, the Company, any Subsidiary and any employee
                           benefit plan sponsored or maintained by the Company
                           or any Subsidiary (including any trustee of such plan
                           acting as trustee)), directly or indirectly, becomes
                           the "beneficial owner" (as defined in Rule 13d-3
                           under the Exchange Act), of securities of the Company
                           representing 50% (or 25% after an initial public
                           offering) or more of the combined voting power of the
                           Company's then outstanding securities (unless the
                           event causing the 50% (or 25% after an initial public
                           offering) threshold to be crossed is an acquisition
                           of securities directly from the Company); or

                           (ii) the shareholders of the Company shall approve
                           any merger or other business combination of the
                           Company, sale of 50% or more
<PAGE>   2
Watermark Communities, Inc.
Non-Employee Director Stock Incentive Plan
Page 2

                            of the Company's assets, liquidation or dissolution
                            of the Company or combination of the foregoing
                            transactions (the "Transactions") other than a
                            Transaction immediately following which the
                            shareholders of the Company and any trustee or
                            fiduciary of any Company employee benefit plan
                            immediately prior to the Transaction own at least
                            80% of the voting power, directly or indirectly, of
                            (A) the surviving entity in any such merger or other
                            business combination; (B) the purchaser of or
                            successor to the Company's assets; (C) both the
                            surviving entity and the purchaser in the event of
                            any combination of Transactions; or (D) the parent
                            company owning 100% of such surviving entity,
                            purchaser or both the surviving entity and the
                            purchaser, as the case may be; or

                           (iii) within any twenty-four month period, the
                           persons who were directors immediately before the
                           beginning of such period (the "Incumbent Directors")
                           shall cease (for any reason other than death) to
                           constitute at least a majority of the Board or the
                           board of directors of a successor to the Company. For
                           this purpose, any director who was not a director at
                           the beginning of such period shall be deemed to be an
                           Incumbent Director if such director was elected to
                           the Board by, or on the recommendation of or with the
                           approval of, at least two-thirds of the directors who
                           then qualified as Incumbent Directors (so long as
                           such director was not nominated by a person who has
                           entered into an agreement to effect a Change in
                           Control or expressed an intention to cause such a
                           Change in Control).

                  (e)      Code: The Internal Revenue Code of 1986, as amended.

                  (f)      Committee: The Compensation Committee of the Board,
                           or any successor thereto or other committee
                           designated by the Board to assume the obligations of
                           the Committee hereunder.

                  (g)      Company: Watermark Communities, Inc.

                  (h)      Effective Date: The date on which the Plan takes
                           effect, as defined pursuant to Paragraph 15 of the
                           Plan.

                  (i)      Fair Market Value: Such value of a Share as reported
                           for stock exchange transactions if listed on an
                           exchange, or if not so listed, as determined in
                           accordance with any applicable resolutions or
                           regulations of the Committee in effect at the
                           relevant time, provided that if a Participant is a
                           party to a management stockholder's agreement with
                           the Company, the applicable provisions of such
                           management stockholder's agreement will apply.
<PAGE>   3
Watermark Communities, Inc.
Non-Employee Director Stock Incentive Plan
Page 3

                  (j)      Meetings Fees: Means compensation to which a
                           Non-Employee Director is entitled for attending a
                           meeting of the Board of Directors or a meeting of any
                           committee of the Board of Directors, exclusive of any
                           amounts paid by the Corporation or its subsidiaries
                           to such director for services rendered to the
                           Corporation or its Subsidiaries in a capacity other
                           than as a director.

                  (k)      Non-Employee Director: Means a director of the
                           Corporation whom while a director is not an employee
                           or an officer of the Corporation or any Subsidiary of
                           the Corporation.

                  (l)      Option: A Non-Qualified Stock Option to purchase
                           Shares granted pursuant to Paragraph 6 of the Plan.

                  (m)      Option Price: The purchase price per Share subject to
                           an Option, as provided pursuant to Paragraph 6 of the
                           Plan.

                  (n)      Participant: Any director of the Company who is not
                           an employee of the Company or any Subsidiary of the
                           Company as of the date that an Option is granted.

                  (o)      Plan: The Restated 1998 Watermark Communities, Inc.
                           Non-Employee Directors' Stock Incentive Plan.

                  (p)      Plan Year: Means the twelve (12) consecutive month
                           period beginning January 1 and ending December 31.

                  (q)      Shares: Shares of common stock, par value $0.0001 per
                           share, of the Company.

                  (r)      Stock Option Agreement: An agreement between the
                           Company and a Participant that sets forth the terms,
                           conditions and limitations applicable to an Option.

                  (s)      Subsidiary: Any corporation in an unbroken chain of
                           corporations beginning with the Company if each of
                           the corporations, or group of commonly controlled
                           corporations, other than the last corporation in the
                           unbroken chain then owns stock possessing 50% or more
                           of the total combined voting power of all classes of
                           stock in one of the other corporations in such chain.

3.        SHARES SUBJECT TO THE PLAN

          The total number of Shares, which may be issued under the Plan, is One
<PAGE>   4
Watermark Communities, Inc.
Non-Employee Director Stock Incentive Plan
Page 4

Hundred Fifty Thousand (150,000). The Shares may consist, in whole or in part,
of unissued Shares or treasury Shares. The grant of Options shall reduce the
total number of Shares available under the Plan. Shares subject to Options that
terminate or lapse may be granted again under the Plan.

4.        ADMINISTRATION

          (a) The Plan shall be administered by the Committee, which may
delegate its duties and powers in whole or in part to any subcommittee thereof;
provided, however, that the members of the Committee or subcommittee shall
qualify to administer the Plan for purposes of Rule 16b-3 under the Act (or any
successor rule thereto) to the extent that the Company is subject to such rule;
provided, further, that any action permitted to be taken by the Committee or
subcommittee may be taken by the Board, in its discretion. The Committee may
adopt its own rules of procedure, and action of a majority of the members of the
Committee taken at a meeting, or action taken without a meeting by unanimous
written consent, shall constitute action by the Committee. The Committee shall
have the power and authority to administer, construe and interpret the Plan, to
make rules for carrying it out and to make changes in such rules. Any such
interpretations, rules, and administration shall be consistent with the basic
purposes of the Plan.

         (b) The Committee may delegate to the Chief Executive Officer and to
other senior officers of the Company its duties under the Plan subject to such
conditions and limitations as the Committee shall prescribe except that only the
Committee may designate and grant Options to Participants who are subject to
Section 16 of the Exchange Act.

         (c) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company, and the
officers and directors of the Company 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 in good faith shall be
final and binding upon all Participants, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Options, and all members of the Committee shall be fully protected by the
Company with respect to any such action, determination or interpretation.

5.        ELIGIBILITY AND TERMS

          All Participants shall be eligible to participate under this Plan. The
terms, conditions and limitations of each Option granted under the Plan shall be
set forth in a Stock Option Agreement, in a form consistent with the terms of
the Plan; provided, however, that such Stock Option Agreement, (i) shall contain
provisions dealing with the treatment of Options in the event of the
termination, death or disability of a Participant, (ii) shall contain provisions
which accommodate the deferral of fees payable to a director for the purchase of
Shares and, (iii) may also include provisions concerning the treatment of

<PAGE>   5
Watermark Communities, Inc.
Non-Employee Director Stock Incentive Plan
Page 5

Options in the event of a Change in Control of the Company.

6.        OPTIONS

          From time to time, the Committee will, in its discretion, grant
Options to Participants. The Options shall be Non-Qualified Stock Options, which
are not designated by the Committee as "Incentive Stock Options". At the time of
grant of an Option the Committee shall determine, and shall include in the Stock
Option Agreement or other Plan rules, the Option exercise period, the Option
Price and such other conditions or restrictions on the grant or exercise of the
Option as the Committee deems appropriate. In addition to other restrictions
contained in the Plan, an Option granted under this Paragraph 6 (i) may not be
exercised more than 10 years after the date of grant and (ii) may not have an
Option Price less than 50% of the Fair Market Value of Shares on the date of
grant. Payment of the Option Price shall be made (i) in cash, (ii) in Shares,
(iii) in a combination thereof or (iv) through the delivery of irrevocable
instructions to a broker to deliver promptly to the Company an amount equal to
the aggregate Option Price for the Shares being purchased, in each case, in
accordance with the terms of the Plan, the Stock Option Agreement and of any
applicable guidelines of the Committee in effect at the time.

7.       DEFERRED MEETING FEES

         A Non-Employee Director may elect to defer all or a portion of such
Non-Employee Director's Meeting Fees by indicating at the space provided
therefor in the Annual Deferral Notice, to apply said deferral to the exercise
price for vested Shares in lieu of payment of Meeting Fees to the Non-Employee
Director that are earned by the Non-Employee Director in such upcoming Plan
Year; provided that a Non-Employee Director may elect to defer Meeting Fees for
the period of the 1999 Plan Year from and after February 22, 1999, having made
such election on February 22, 1999, with such election to apply with respect to
Meeting Fees earned during the 1999 Plan Year from and after the date of such
election and for each succeeding Plan year thereafter by making such election on
or before December 31 of each year. The maximum amount of Meeting Fees that may
be deferred shall not exceed the amount required to exercise vested Option
Shares by the Non-Employee Director.

8.        SUCCESSORS AND ASSIGNS

          The Plan shall be binding on all successors and assigns of the Company
and a Participant, including without limitation, the estate of such Participant
and the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.

9.        CHOICE OF LAW

          The Plan shall be governed by and construed in accordance with the
laws of the State
<PAGE>   6
Watermark Communities, Inc.
Non-Employee Director Stock Incentive Plan
Page 6

of Florida applicable to contracts made and to be performed in the State of
Florida, without regard to principles of conflicts of laws.

10.       LIMITATIONS AND CONDITIONS

         (a) No Options shall be granted under the Plan beyond ten years after
the effective date of the Plan, but the terms of Options made on or before the
expiration of the Plan may extend beyond such expiration. At the time an Option
is granted or amended or the terms or conditions of an Option are changed, the
Committee may provide for limitations or conditions on such Option.

         (b) Nothing contained herein shall affect the right of the Company to
remove any Participant from the Board at any time or for any reason.

         (c) Other than as specifically provided in the Stock Option Agreement,
no benefit under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any
attempt to do so shall be void. No such benefit shall, prior to receipt thereof
by the Participant, be in any manner liable for or subject to the debts,
contracts, liabilities, engagements, or torts of the Participant.

         (d) Participants shall not be, and shall not have any of the rights or
privileges of stockholders of the Company in respect of any Shares purchasable
in connection with any Option unless and until certificates representing any
such Shares have been issued by the Company to such Participants.

         (e) No election as to benefits or exercise of any Option may be made
during a Participant's lifetime by anyone other than the Participant except by a
legal representative appointed for or by the Participant.

         (f) Absent express provisions to the contrary, any Option under this
Plan shall not be deemed compensation for purposes of computing benefits or
contributions under any retirement plan of the Company or its Subsidiaries and
shall not affect any benefits under any other benefit plan of any kind now or
subsequently in effect under which the availability or amount of benefits is
related to level of compensation. This Plan is not a "Retirement Plan" or
"Welfare Plan" under the Employee Retirement Income Security Act of 1974, as
amended.

         (g) Unless the Committee determines otherwise, no benefit or promise
under the Plan shall be secured by any specific assets of the Company or any of
its subsidiaries, nor shall any assets of the Company or any of its subsidiaries
be designated as attributable or allocated to the satisfaction of the Company's
obligations under the Plan.

11.       ADJUSTMENTS

          In the event of any change in the outstanding Shares by reason of a
stock split, spin-
<PAGE>   7
Watermark Communities, Inc.
Non-Employee Director Stock Incentive Plan
Page 7

off stock dividend, stock combination or reclassification, reorganization,
recapitalization, merger, consolidation, spin-off or similar event, the
Committee shall adjust appropriately the number of Shares subject to the Plan
and available for or covered by Options and the Option Price of outstanding
Options and make such other revisions to outstanding Options as it deems are
equitably required.

12.      MERGER, CONSOLIDATION, EXCHANGE, ACQUISITION, LIQUIDATION OR
         DISSOLUTION

          Except as otherwise provided in a Stock Option Agreement, in the event
of a Change in Control, the Committee may, in its absolute discretion and
without liability to any person, take such actions, if any, as it deems
necessary or desirable coincident with or after the grant of any Option, either
by the terms of such Option or by resolution adopted prior to the occurrence of
such Change in Control, including without limitation, (i) acceleration of the
exercisability of an Option (but subject to the provisions of Paragraph 9(a)),
(ii) the payment of a cash amount in exchange for the cancellation of an Option
and/or (iii) the requiring of the issuance of substitute benefits that will
substantially preserve the value, rights and benefits of any affected Option
previously granted hereunder; provided, however, that any Option that shall
remain exercisable after any such Change in Control, from and after such Change
in Control, shall be exercisable only for the kind and amount of securities
and/or other property, or the cash equivalent thereof (as determined by the
Committee in good faith), receivable as a result of such event by the holder of
a number of Shares for which such Option could have been exercised immediately
prior to such event.

13.       AMENDMENT AND TERMINATION

          The Committee shall have the authority to make such amendments to any
terms and conditions applicable to outstanding Options as are consistent with
this Plan, provided that no such action shall modify any Option in a manner
adverse to the Participant without the Participant's consent except as such
modification is provided for or contemplated in the terms of the Stock Option
Agreement or this Plan (except that any adjustment that is made pursuant to
Paragraph 10 or 11 hereof shall be made by the Committee in good faith). The
Board of Directors may amend, suspend or terminate the Plan except that no such
action, other than an action under Paragraph 10 or 11 hereof may be taken which
would, without shareholder approval, increase the aggregate number of Shares
available for Options under the Plan, decrease the Option Price of outstanding
Options, change the requirements relating to the Committee or extend the term of
the Plan.

14.       WITHHOLDING TAXES

          The Company shall have the right to deduct from any cash payment made
under the Plan any federal, state or local income or other taxes required by law
to be withheld with
<PAGE>   8
Watermark Communities, Inc.
Non-Employee Director Stock Incentive Plan
Page 8

respect to such payment. It shall be a condition to the obligation of the
Company to deliver Shares upon the exercise of an Option that the Participant
pay to the Company such amount as may be requested by the Company for the
purpose of satisfying any liability for such withholding taxes. Any Stock Option
Agreement may provide that the Participant may elect, in accordance with any
conditions set forth in such Stock Option Agreement, to pay a portion or all of
such withholding taxes in Shares.

15.       EFFECTIVE DATE AND TERMINATION DATES

          The Plan shall be effective as of December 4, 1998 and shall terminate
ten years later, subject to earlier termination by the Board of Directors
pursuant to Paragraph 12.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}]]