EXCEL LEGACY CORP, DEF 14A, 2000-04-28

EXCEL LEGACY CORP
DEF 14A, 2000-04-28
REAL ESTATE DEALERS (FOR THEIR OWN ACCOUNT)

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<PAGE> 1

SCHEDULE 14A INFORMATION
(Rule 14a-101)

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

EXCEL LEGACY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(4) Date Filed:

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<PAGE> 2

EXCEL LEGACY CORPORATION
17140 BERNARDO CENTER DRIVE, SUITE 300
SAN DIEGO, CALIFORNIA 92128

April 28, 2000

Dear Stockholder:

It is my pleasure to invite you to the Annual Meeting of Stockholders of
Excel Legacy Corporation. This year the meeting will be held on Wednesday, June
7, 2000 at 11:00 a.m. (PDT) at the Rancho Bernardo Inn, 17750 Bernardo Oaks
Drive, San Diego, California. Your Board of Directors and Management look
forward to meeting with you at this time.

We consider the Annual Meeting an excellent opportunity to review the
events of the past year and to discuss the company's objectives with you in
person.

Thank you for your interest and participation. I look forward to seeing
you there.

Sincerely,

/s/ GARY B. SABIN
------------------------------------
Gary B. Sabin
Chairman and Chief
Officer

<PAGE> 3

EXCEL LEGACY CORPORATION
17140 BERNARDO CENTER DRIVE, SUITE 300
SAN DIEGO, CALIFORNIA 92128

NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND PROXY STATEMENT

TO THE STOCKHOLDERS OF EXCEL LEGACY CORPORATION:

Notice is hereby given that the Annual Meeting of Stockholders of Excel
Legacy Corporation (the "Company"), will be held at the Rancho Bernardo Inn,
17550 Bernardo Oaks Drive, San Diego, California, on June 7, 2000, at 11:00 a.m.
for the following purposes:

1. To elect eight Directors for a one-year term and until their successors
have been duly elected and qualified. The present Board of Directors of
the Company has nominated and recommends for such election as Directors
the following eight persons:

GARY B. SABIN RICHARD B. MUIR KELLY D. BURT JACK MCGRORY

RICHARD J. NORDLUND ROBERT E. PARSONS, JR. ROBERT S. TALBOTT JOHN H. WILMOT

2. To consider and vote upon a proposal to approve and adopt The 1998 Stock
Option Plan of Excel Legacy Corporation, as amended and restated herein
(the "Legacy Stock Option Plan").

3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.

The Board of Directors has fixed the close of business on April 10, 2000
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting and at any adjournment or postponement
thereof.

Accompanying this Notice of Annual Meeting is a proxy. WHETHER OR NOT
YOU EXPECT TO BE AT THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT PROMPTLY. If you plan to attend the meeting and wish to vote
your shares personally, you may do so at any time before the proxy is voted.

All stockholders are cordially invited to attend the meeting.

By Order of the Board of Directors

/s/ GARY B. SABIN
------------------------------------
Gary B. Sabin
Chairman of the Board,
President and Chief Executive Officer

San Diego, California
April 28, 2000

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<PAGE> 4

EXCEL LEGACY CORPORATION
17140 BERNARDO CENTER DRIVE, SUITE 300
SAN DIEGO, CALIFORNIA 92128

PROXY STATEMENT

The Board of Directors of the Company is soliciting the enclosed proxy
for use at the Annual Meeting of Stockholders to be held on June 7, 2000, at
11:00 a.m., at the Rancho Bernardo Inn, 17550 Bernardo Oaks Drive, San Diego,
California. This Proxy Statement was first mailed to stockholders on or about
April 28, 2000.

All stockholders who find it convenient to do so are cordially invited
to attend the meeting in person. In any event, please complete, sign, date and
return the proxy in the enclosed envelope.

A proxy may be revoked by written notice to the Secretary of the Company
at any time prior to the voting of the proxy, or by executing a later proxy or
by attending the meeting and voting in person. Unrevoked proxies will be voted
in accordance with the instructions indicated in the proxies, or if there are no
such instructions, such proxies will be voted for the election of the Board's
nominees for Director and for approval of the Legacy Stock Option Plan. Shares
represented by proxies that reflect abstentions or include "broker non-votes"
will be treated as present and entitled to vote for purposes of determining the
presence of a quorum. Abstentions and "broker non-votes" do not constitute a
vote "for" or "against" any matter and thus will be disregarded in the
calculation of "votes cast."

Stockholders of record at the close of business on April 10, 2000 (the
"Record Date") will be entitled to vote at the meeting. As of that date,
36,838,102 shares of common stock, par value $.01 per share ("Common Stock"), of
the Company and 21,281,000 shares of Series B Liquidating Preference Convertible
Preferred Stock due 2005, par value $.01 per share ("Series B Preferred Stock,"
and together with the Common Stock, "Voting Stock"), were outstanding. Holders
of the Common Stock and Series B Preferred Stock vote together on all matters
submitted to the stockholders for a vote. Each share of Common Stock is entitled
to one vote, and each share of Series B Preferred Stock is entitled to one vote
for each share of Common Stock into which such share of Series B Preferred Stock
is convertible. A majority of the outstanding shares of the Company entitled to
vote, represented in person or by proxy at the Annual Meeting, constitutes a
quorum. A plurality of the votes cast at the Annual Meeting is required to elect
Directors, and a majority of the shares present in person or represented by
proxy and entitled to vote at the Annual Meeting is required to approve the
Legacy Stock Option Plan.

The cost of preparing, assembling and mailing the Notice of Annual
Meeting, Proxy Statement and proxy will be borne by the Company. In addition to
soliciting proxies by mail, the Company's officers, Directors and other regular
employees, without additional compensation, may solicit proxies personally or by
other appropriate means. It is anticipated that banks, brokers, fiduciaries,
other custodians and nominees will forward proxy soliciting materials to their
principals, and that the Company will reimburse such persons' out-of-pocket
expenses.

PROPOSAL 1:

ELECTION OF DIRECTORS

The Board currently consists of the following eight Directors: Gary B.
Sabin, Richard B. Muir, Kelly D. Burt, Jack McGrory, Richard J. Nordlund, Robert
E. Parsons, Jr., Robert S. Talbott and John H. Wilmot. The current Directors
will serve until the Annual Meeting and until their respective successors have
been duly elected and qualified. Each of the current eight Directors of the
Company has been nominated and recommended for election to serve as a Director
for a term of one year and until his successor has been duly elected and
qualified. Each of the Director nominees has individually advised the Board that
he is able and willing to serve as a Director of the Company. If no contrary
indication is made, proxies in the accompanying form are to be voted for each of
the eight nominees for Director or, if for any reason any of them become
unavailable for election, the individuals named in the enclosed proxy may
exercise their discretion to vote for any substitute nominee or nominees
proposed by the Board.

The eight individuals with the highest number of affirmative votes will
be elected to the eight Directorships of the Company.

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<PAGE> 5

INFORMATION REGARDING DIRECTORS

Set forth below is certain information concerning each of the eight
nominees to the Board of Directors.

<TABLE>
<CAPTION>
NAME Age PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
Gary B. Sabin....................... 46 Chairman, President and Chief Executive Officer
Richard B. Muir..................... 44 Director, Executive Vice President, Chief
Operating Officer and Secretary
Kelly D. Burt....................... 42 Director and Executive Vice
President--Development
Jack McGrory........................ 50 Director
Richard J. Nordlund................. 55 Director
Robert E. Parsons, Jr............... 44 Director
Robert S. Talbott................... 46 Director
John H. Wilmot...................... 57 Director
</TABLE>

GARY B. SABIN has served as Chairman of the Board of Directors,
President and Chief Executive Officer since the Company's formation. Mr. Sabin
also has served as President and Chief Executive Officer and a Director of Price
Enterprises, Inc. ("Enterprises") since November 1999. Mr. Sabin served as
Director and President of New Plan Excel Realty Trust, Inc. ("New Plan Excel")
from September 1998 to April 1999 and as Chairman, President and Chief Executive
Officer of Excel Realty Trust, Inc. from January 1989 to September 1998. In
addition, Mr. Sabin has served as Chief Executive Officer of various companies
since his founding of Excel Realty Trust's predecessor company and its
affiliates starting in 1977. He has been active for over 20 years in diverse
aspects of the real estate industry, including the evaluation and negotiation of
real estate acquisitions, management, financing and dispositions.

RICHARD B. MUIR has served as Director, Executive Vice President and
Secretary since the Company's formation. Mr. Muir has served as the Company's
Chief Operating Officer since November 1999. Mr. Muir also has served as
Executive Vice President, Chief Operating Officer, and a Director of Enterprises
since November 1999. Mr. Muir served as a Director, Executive Vice President and
Co-Chief Operating Officer of New Plan Excel from September 1998 to April 1999
and served as Director, Executive Vice President and Secretary of Excel Realty
Trust from January 1989 to September 1998. In addition, Mr. Muir served as an
officer and director of various affiliates of Excel Realty Trust starting in
1978, primarily in administrative and executive capacities, including direct
involvement in and supervision of asset acquisitions, management, financing and
dispositions.

KELLY D. BURT has served as the Company's Director and Executive Vice
President--Development since May 1998 and in the same position with Enterprises
since November 1999. From 1992 to May 1998, Mr. Burt served as President and
founder of TenantFirst, a real estate development company in San Diego,
California that was acquired by the Company in May 1998. From 1984 to 1992, Mr.
Burt was an Industrial/Office Partner at the San Diego division of Trammell Crow
Company, a real estate development company headquartered in Dallas, Texas.

JACK MCGRORY has served as a Director of the Company and as Chairman of
the Board of Enterprises since November 1999. Mr. McGrory also serves as Chief
Operating Officer of the San Diego Padres, a position he has held since October
1999. Mr. McGrory served as President and Chief Executive Officer of Enterprises
from September 1997 to November 1999 and as City Manager of the City of San
Diego from March 1991 to August 1997.

RICHARD J. NORDLUND has served as a Director since the Company's
formation and as President of RJN Management, a real estate firm in Santa
Barbara, California, since 1985. From 1978 through 1988, Mr. Nordlund served as
President of First Corporate Services, an investment banking firm in
Minneapolis, Minnesota. He is also associated with Miller & Schroeder Financial,
Inc. Mr. Nordlund's business experience includes 28 years in the investment
banking and mortgage banking industries.

ROBERT E. PARSONS, JR. has served as a Director since the Company's
formation. He served as a Director of Excel Realty Trust and then New Plan Excel
from January 1989 to April 1999. Mr. Parsons is presently Executive Vice
President and Chief Financial Officer of Host Marriott Corporation, a company he
joined in 1981. He also serves as a director and officer of several Host
Marriott subsidiaries, and as a Director of Merrill Financial Corporation, a
privately-held real estate company.

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<PAGE> 6

ROBERT S. TALBOTT has served as a Director since the Company's
formation. Mr. Talbott is an attorney and has served as President of Holrob
Investments, LLC, a company engaged in the acquisition, development, management
and leasing of real property, since 1997. From 1985 through 1997, Mr. Talbott
served as Executive Vice President and President of Horne Properties, Inc.,
where he was involved in the acquisition and development of over 100 shopping
centers. He also serves as a member of the Public Building Authority of
Knoxville, Tennessee, as a member of the Knoxville Industrial Development Board,
as a Director of the Knoxville Chamber of Commerce and as Chairman of the St.
Mary's Foundation.

JOHN H. WILMOT has served as a Director since the Company's formation.
He served as a Director of Excel Realty Trust and then New Plan Excel from 1989
to April 1999. Mr. Wilmot, individually and through his wholly-owned
corporations, develops and manages real property, including office buildings,
shopping centers and residential projects primarily in the Phoenix/Scottsdale
area, and has been active in that business since 1976.

MEETINGS OF THE BOARD

During 1999, the Board held six meetings. In 1999, each Director
attended at least 75% of the aggregate of all meetings held by the Board and all
meetings held by all committees of the Board on which such Director served.

COMMITTEES OF THE BOARD

AUDIT COMMITTEE. The Audit Committee consists of Messrs. McGrory,
Nordlund, Parsons and Talbott. During 1999, the Audit Committee held two
meetings. The Audit Committee reviews the annual audits of the Company's
independent public accountants, reviews and evaluates internal accounting
controls, recommends the selection of the Company's independent public
accountants, reviews and passes upon (or ratifies) related party transactions,
and conducts such reviews and examinations as it deems necessary with respect to
the practices and policies of, and the relationship between, the Company and its
independent public accountants.

COMPENSATION COMMITTEE. The Compensation Committee consists of Messrs.
Nordlund, Talbott and Wilmot. During 1999, the Compensation Committee held three
meetings. The Compensation Committee reviews compensation of senior officers of
the Company and administers the Company's executive compensation policies and
the Legacy Stock Option Plan.

EXECUTIVE COMMITTEE. The Executive Committee consists of Messrs. Sabin,
Muir, Burt and Wilmot. During 1999, the Executive Committee held three meetings.
The Executive Committee has all powers and rights necessary to exercise the full
authority of the Board in the management of the business and affairs of the
Company, except as provided in the Delaware General Corporation Law or the
Company's Bylaws.

COMPENSATION OF DIRECTORS

Effective February 18, 2000, each non-employee Director of the Company
receives $8,000 per year for serving on the Board and an additional $1,000 for
each in person meeting attended (other than committee meetings). Each
non-employee Director also receives a grant of 2,000 shares of Common Stock upon
re-election, and is eligible to receive stock options pursuant to the Legacy
Stock Option Plan. Pursuant to the terms of the current Legacy Stock Option
Plan, each Director is entitled to receive an option to purchase 3,000 shares of
Common Stock upon the Director's initial re-election at an annual meeting of
stockholders and at each subsequent annual meeting of stockholders at which the
Director is re-elected. For a discussion of the proposed amendment to this
formula grant of options under the Legacy Stock Option Plan, see "Proposal 2:
Approval of the Legacy Stock Option Plan."

Directors also receive reimbursement for travel expenses incurred in
connection with their duties as Directors.

RECOMMENDATION OF THE BOARD

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES SET FORTH
ABOVE. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY OTHERWISE ON THEIR PROXY CARDS.

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<PAGE> 7

PROPOSAL 2:

APPROVAL OF THE LEGACY STOCK OPTION PLAN

At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon a proposal to approve the Legacy Stock Option Plan, as
amended and restated herein. The Legacy Stock Option Plan was initially adopted
by the Company's Board of Directors and stockholders, effective March 24, 1998.

DESCRIPTION OF THE LEGACY STOCK OPTION PLAN

GENERAL NATURE AND PURPOSE. The Legacy Stock Option Plan was adopted (i)
to further the growth, development and financial success of the Company by
providing additional incentives to certain of its Directors, key employees and
consultants by assisting them to become owners of capital stock of the Company
and thus to benefit directly from its growth, development and financial success,
and (ii) to enable the Company to retain the services of Directors, key
employees and consultants considered essential to the long-range success of the
Company, by providing and offering them the opportunity to become owners of
capital stock of the Company. The Legacy Stock Option Plan provides for the
grant to executive officers, other key employees, consultants and Directors of
the Company of nonqualified stock options and incentive stock options. The
principal features of the Legacy Stock Option Plan are summarized below, but the
summary is qualified in its entirety by reference to the full text of the Legacy
Stock Option Plan (including the amendment thereto), which is set forth as
Exhibit A to this Proxy Statement.

ADMINISTRATION. The Legacy Stock Option Plan is administered by the
Compensation Committee of the Board of Directors. In addition to administering
the Legacy Stock Option Plan, the Compensation Committee is also authorized to
adopt, interpret, amend and rescind rules relating to the administration of the
Legacy Stock Option Plan. Notwithstanding the foregoing, the full Board conducts
the general administration of the Legacy Stock Option Plan with respect to
options granted to Directors.

ELIGIBILITY. Any employee or consultant selected by the Compensation
Committee is eligible to receive options under the Legacy Stock Option Plan. The
Compensation Committee, in its absolute discretion, will determine among the
eligible participants the individuals to whom options are to be granted and the
number of shares to be subject thereto and the terms and conditions thereof.

GRANT OF OPTIONS. The Compensation Committee will from time to time, in
its absolute discretion, determine the number of shares to be subject to options
granted to selected employees and consultants, determine whether such options
are to be incentive stock options or non-qualified stock options, and determine
the terms and conditions of such options, consistent with the Legacy Stock
Option Plan.

During the term of the Legacy Stock Option Plan, a person who is
initially elected to the Board automatically shall be granted an option to
purchase shares of Common Stock on the date of each annual meeting of
stockholders after such initial election at which such Director is re-elected to
the Board in accordance with the formula set forth below in "Proposed Amendment
to the Legacy Stock Option Plan."

PURCHASE PRICE OF OPTIONED SHARES. The price per share of the shares
subject to each option shall be set by the Compensation Committee; provided,
however, that such price shall be no less than the par value of a share of
Common Stock, unless otherwise permitted by applicable state law, and in the
case of incentive stock options and options intended to qualify as
performance-based compensation the price shall not be less than 100% of the fair
market value of a share of Common Stock on the date the option is granted. In
the case of incentive stock options granted to an individual then owning more
than 10% of the total combined voting power of all classes of stock of the
Company or any subsidiary or parent corporation thereof, such price shall not be
less than 110% of the fair market value of a share of Common Stock on the date
the option is granted.

TERMS OF OPTIONS. Options granted under the Legacy Stock Option Plan may
not be exercised more than ten years after the date of grant, although the
Compensation Committee may grant options having shorter terms. The term shall
not exceed five years in the case of incentive stock options granted to an
individual then owning more than 10% of the total combined voting power of all
classes of stock of the Company. Except as limited by the Legacy Stock Option
Plan or applicable law, the Compensation Committee may extend the term of any
outstanding option in connection with any termination of employment or
termination of consultancy of the optionee, or amend any other term or condition
of such option relating to such a termination.

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<PAGE> 8

EXERCISE OF OPTIONS. Upon the exercise of an option under the Legacy
Stock Option Plan, the optionee must make full cash payment to the Secretary of
the Company for the shares with respect to which the option, or portion thereof,
is exercised. However, the Compensation Committee may in its discretion allow
various forms of payment, which are described in detail in the Legacy Stock
Option Plan.

FEDERAL TAX CONSEQUENCES. The income tax consequences of the Legacy
Stock Option Plan under current federal law are summarized below. The discussion
is intended to provide only general information. Federal alternative minimum tax
and employment tax consequences and State, local and foreign tax consequences
are not discussed.

There optionee will not recognize ordinary income by reason of the grant
or exercise of an incentive stock option. If an optionee holds stock acquired
through exercise of an incentive stock option for at least two years from the
date on which the option is granted and at least one year from the date on which
the stock is transferred to the optionee upon exercise of the option, any gain
or loss upon sale or other disposition of such stock will be capital gain or
loss. The Company will not be entitled to a deduction if the optionee holds the
stock for these holding periods. Generally, if the optionee sells or disposes of
the stock before the expiration of either of these holding periods (a
"disqualifying disposition"), at the time of sale or disposition, the optionee
will recognize ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the aggregate exercise
price, or (b) the optionee's actual gain, if any, on the sale or disposition.
The optionee's additional gain, if any, upon the disqualifying disposition will
be capital gain.

To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company generally will be entitled (subject to
the requirement of reasonableness, Code Section 162(m) and the satisfaction of a
tax reporting obligation) to a corresponding business expense deduction in the
tax year in which the disqualifying disposition occurs.

The optionee will not recognize ordinary income by reason of the grant
of a non-qualified stock option. Upon exercise of a non-qualified stock option,
the optionee will recognize ordinary income equal to the excess of the stock's
fair market value on the date of exercise over the aggregate exercise price
paid. Generally, with respect to employees, the Company is required to withhold
taxes in an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness, Code Section 162(m) and the satisfaction of a
tax-reporting obligation, the Company generally will be entitled to a business
expense deduction equal to the taxable ordinary income realized by the optionee.
Upon sale or disposition of the stock, the optionee will recognize any gain or
loss as capital gain or loss.

Code Section 162(m) denies a deduction to any publicly held corporation
for compensation paid to certain executive officers in a taxable year to the
extent that compensation exceeds $1,000,000 for such an executive officer.
Compensation attributable to stock options, alone or when combined with all
other types of compensation received by such an executive officer from the
Company, may cause this limitation to be exceeded in any particular year.

Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with applicable Treasury regulations issued under Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation, provided that: either (a) (i) the option plan contains a
per-employee limitation on the number of shares for which options may be granted
during a specified period, (ii) the per-employee limitation is approved by the
stockholders, (iii) the option is granted by a compensation committee comprised
solely of "outside directors" (as defined in Section 162(m)) and (iv) the
exercise price of the option is no less than the fair market value of the stock
on the date of grant; or (b) the option is granted by a compensation committee
comprised solely of "outside directors" and is granted (or exercisable) only
upon the achievement of an objective performance goal established by the
compensation committee while the outcome is substantially uncertain and approved
by the stockholders.

The foregoing discussion is intended to be a general summary only of the
federal income tax aspects of options granted under the Legacy Stock Option
Plan; tax consequences may vary depending on the particular circumstances at
hand. In addition, administrative and judicial interpretations of the
application of the federal income tax laws are subject to change.

AMENDMENT OF THE LEGACY STOCK OPTION PLAN. The Legacy Stock Option Plan
may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Board or the Compensation
Committee. However, without approval of the stockholders of the Company, the
Legacy Stock Option Plan may not be amended to (i) increase the maximum number
of shares issuable upon exercise of options granted under the Legacy Stock
Option Plan and (ii) no action of

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<PAGE> 9

the Board or the Compensation Committee may be taken that would otherwise
require stockholder approval as a matter of applicable law, regulation or rule.

GRANTS IN 1998 AND 1999. Options to purchase 2,940,000 and 1,383,000
shares of Common Stock were granted under the Legacy Stock Option Plan during
1998 and 1999, respectively. See "Option Grants in 1999" table below for a list
of the options granted to each of the Company's executive officers listed on the
Summary Compensation Table.

Under the Legacy Stock Option Plan, not more than 5,250,380 shares of
Common Stock (or the equivalent in other equity securities) will be authorized
for issuance upon the exercise of options. Furthermore, the maximum number of
shares which may be subject to options granted under the Legacy Stock Option
Plan to any individual in any calendar year may not exceed 525,000.

PROPOSED AMENDMENT TO THE LEGACY STOCK OPTION PLAN

Under the current Legacy Stock Option Plan, a person who is initially
elected to the Board automatically shall be granted an option to purchase 3,000
shares of Common Stock on the date of each annual meeting of stockholders after
such initial election at which such Director is re-elected to the Board. The
Board believes that increasing the number of shares available for issuance to
Directors under the Legacy Stock Option Plan is necessary in order for the
Company to attract, motivate and retain qualified Directors. Accordingly, the
Board recommends an amendment to the current Legacy Stock Option Plan to
increase the award of options to Directors according to the following formula:

Each Director shall be granted an option to purchase ten thousand
(10,000) shares of Common Stock on the date of the first annual meeting
of stockholders at which such Director is re-elected to the Board. At
each subsequent annual meeting of stockholders at which such Director is
re-elected to the Board, such Director shall receive an option to
purchase the number of shares of Common Stock granted to such Director
in the prior year plus an additional one thousand (1,000) shares of
Common Stock; provided that in no event shall any Director be entitled
to receive an option to purchase more than twenty thousand (20,000)
shares of Common Stock upon re-election in any given year.
Notwithstanding the foregoing, each Director that is re-elected at the
2000 Annual Meeting of Stockholders shall receive an option to purchase
ten thousand (10,000) shares of Common Stock.

NEW PLAN BENEFITS

The following table sets forth the benefits under the Legacy Stock
Option Plan in 2000 for (i) the current individual Directors who are officers of
the Company and (ii) all current non-executive Directors as a group.

LEGACY STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF
SHARES SUBJECT
TO STOCK
OPTIONS IN
NAME AND POSITION 2000(1)
------------------ --------------
<S> <C>
Gary B. Sabin, Chairman of the Board,
President and Chief Executive Officer................... 10,000
Richard B. Muir, Director, Executive Vice
President, Chief Operating Officer and Secretary........ 10,000
Kelly D. Burt, Director and Executive Vice
President--Development ................................. 10,000
Non-Executive Director Group (5 non-employee
Directors).............................................. 50,000
</TABLE>

- ----------
(1) Amounts assume re-election of each of the nominees for Director at the
Annual Meeting. As of April 10, 2000, the closing price of the Company's
Common Stock as reported on the American Stock Exchange was $3.25.

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<PAGE> 10

VOTE REQUIRED; RECOMMENDATION OF THE BOARD

The affirmative vote of a majority of the shares present in person or
represented by proxy and entitled to vote at the Annual Meeting is required to
approve and adopt the Legacy Stock Option Plan.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE LEGACY STOCK OPTION
PLAN. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY OTHERWISE ON THEIR PROXY CARDS.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of April 10, 2000, by: (1) each
Director and executive officer of the Company; (2) all executive officers and
Directors of the Company as a group; and (3) all other stockholders known by the
Company to be beneficial owners of more than five percent of its Common Stock or
Series B Preferred Stock. Except as otherwise indicated, each individual named
has a business address of 17140 Bernardo Center Drive, Suite 300, San Diego,
California 92128, and has sole investment and voting power with respect to the
securities shown.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES OF SERIES B PREFERRED
OF COMMON STOCK STOCK PERCENT
NAME BENEFICIALLY OWNED (1) BENEFICIALLY OWNED BENEFICIALLY OWNED(2)
- ------------------------------------ --------------------- --------------------- ---------------------
<S> <C> <C> <C>
Gary B. Sabin(3) ................... 4,412,288 -- 11.8% of Common Stock
7.5% of Voting Stock
Richard B. Muir ................... 1,564,942 -- 4.2% of Common Stock
2.7% of Voting Stock
Mark T. Burton ..................... 1,254,966 -- 3.4% of Common Stock
2.2% of Voting Stock
Graham R. Bullick, Ph.D ............ 1,243,271 -- 3.4% of Common Stock
2.1% of Voting Stock
S. Eric Ottesen .................... 1,236,222 -- 3.3% of Common Stock
2.1% of Voting Stock
Kelly D. Burt ...................... 1,144,316 -- 3.1% of Common Stock
2.0% of Voting Stock
James Y. Nakagawa .................. 127,353 -- *
John H. Wilmot(4) .................. 113,310 -- *
Richard J. Nordlund(5) ............. 35,468 -- *
Robert S. Talbott(6) ............... 20,000 -- *
Robert E. Parsons, Jr.(7) .......... 15,123 -- *
Jack McGrory ....................... -- -- *
All executive officers and Directors
as a group (12 persons) ............ 11,167,259 -- 28.7% of Common Stock
18.6% of Voting Stock
Fidelity Management Company(8) ..... 2,715,790 -- 7.4% of Common Stock
4.6% of Voting Stock
Longleaf Partners Realty Fund(9) ... 2,280,000 14,600,000 6.2% of Common Stock
29.0% of Voting Stock
BancBoston Capital Inc.(10) ........ -- 2,681,000 0.0% of Common Stock
4.6% of Voting Stock
The Northwestern Mutual Life ....... -- 2,000,000 0.0% of Common Stock
Insurance Company(11) .............. 3.4% of Voting Stock
Allstate Insurance Company(12) ..... -- 2,000,000 0.0% of Common Stock
3.4% of Voting Stock
</TABLE>

- ----------

* Less than 1%.

(1) Includes the following shares issuable upon the exercise of outstanding
stock options that are exercisable within 60 days of April 10, 2000
("Option Shares"): Mr. Sabin - 526,333 Option Shares; Mr. Muir - 471,333
Option Shares; Mr. Burton - 236,666 Option Shares; Mr. Bullick - 236,666
Option Shares; Mr. Ottesen - 233,666 Option Shares; Mr. Burt - 254,666
Option Shares; Mr. Nakagawa - 101,333 Option Shares; Mr. Wilmot - 3,000
Option Shares; Mr. Nordlund - 3,000 Option Shares; Mr. Talbott - 3,000
Option Shares;

10
<PAGE> 11

Mr. Parsons - 3,000 Option Shares; and all executive officers and Directors
as a group (12 persons) - 2,071,663 Option Shares.

(2) Percentages are based on 36,838,102 shares of Common Stock and 21,281,000
shares of Series B Preferred Stock outstanding as of April 10, 2000 plus,
for each person, the shares that would be issued assuming that such person
exercises all options he holds that are exercisable within 60 days of April
10, 2000.

(3) Includes shares of Common Stock held by EIC, of which Gary Sabin is the
controlling stockholder.

(4) Mr. Wilmot's business address is 7201 E. Camelback Rd., #222, Phoenix,
Arizona 85018.

(5) Mr. Nordlund's business address is 615 Hot Springs Road, Santa Barbara,
California 93108.

(6) Mr. Talbott's business address is 2607 Kingston Pike, Knoxville, Tennessee
37919.

(7) Mr. Parson's business address is Host Marriott Corporation, 10400 Fernwood
Road, Bethesda, MD 20058.

(8) Fidelity is a group of funds of which no single fund owns more than 5.0% of
the Common Stock. Fidelity's business address is 82 Devonshire Street,
Boston, Massachusetts 02109.

(9) Longleaf Partners Realty Fund's business address is c/o Southeastern Asset
Management, Inc., 6410 Poplar Avenue, 9th Floor, Memphis, Tennessee 38119.

(10) BancBoston Capital Inc.'s business address is 100 Federal Street, Boston,
Massachusetts 02110.

(11) The Northwestern Mutual Life Insurance Company's business address is 720
East Wisconsin Avenue, Milwaukee, Wisconsin 53202.

(12) Allstate Insurance Company's business address is Allstate Plaza, 3075
Sanders Road, Suite G5B, Northbrook, Illinois 60062.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Set forth below are the names, positions and ages of the executive
officers and other key employees of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Gary B. Sabin.......................................... 46 Chairman, President and Chief Executive Officer
Richard B. Muir........................................ 44 Director, Executive Vice President, Chief Operating Officer
and Secretary
Kelly D. Burt.......................................... 42 Director and Executive Vice President--Development
Graham R. Bullick, Ph.D................................ 49 Senior Vice President--Capital Markets
Mark T. Burton......................................... 39 Senior Vice President--Acquisitions
S. Eric Ottesen........................................ 44 Senior Vice President, General Counsel and Assistant Secretary
James Y. Nakagawa...................................... 34 Chief Financial Officer
Emmett R. Albergotti................................... 57 Senior Vice President--Retail Development
William J. Hamilton.................................... 42 Senior Vice President--Self Storage
William J. Stone....................................... 56 Senior Vice President--Retail Development
John A. Visconsi....................................... 55 Senior Vice President--Leasing/Asset Management
Susan M. Wilson........................................ 42 Senior Vice President--Office/Industrial/Hospitality
</TABLE>

GARY B. SABIN has served as Chairman of the Board of Directors,
President and Chief Executive Officer since the Company's formation. Mr. Sabin
also has served as President and Chief Executive Officer and a Director of
Enterprises since November 1999. For a more detailed discussion of Mr. Sabin's
business experience, see "Election of Directors--Information Regarding
Directors."

KELLY D. BURT has served as the Company's Director and Executive Vice
President--Development since May 1998 and in the same position with Enterprises
since November 1999. For a more detailed discussion of Mr. Burt's business
experience, see "Election of Directors--Information Regarding Directors."

GRAHAM R. BULLICK, PH.D. has served as the Company's Senior Vice
President--Capital Markets since the Company's formation and in the same
position with Enterprises since November 1999. Mr. Bullick served as Senior Vice
President--Capital Markets of Excel Realty Trust and then New Plan Excel from
January 1991 to April 1999. Previously, Mr. Bullick was associated with Excel
Realty Trust as a Director from 1991 to 1992. From 1985 to 1991, Mr. Bullick
served as Vice President and Chief

11
<PAGE> 12

Operations Officer for a real estate investment firm, where his responsibilities
included acquisition and financing of investment real estate projects.

MARK T. BURTON has served as the Company's Senior Vice
President--Acquisitions since the Company's formation and in the same position
with Enterprises since November 1999. Mr. Burton served as Senior Vice
President--Acquisitions with Excel Realty Trust and then New Plan Excel from
October 1995 to April 1999. He also served as a Vice President of Excel Realty
Trust from January 1989 to October 1995. Mr. Burton was associated with Excel
Realty Trust and its affiliates beginning in 1983, primarily in the evaluation
and selection of property acquisitions.

S. ERIC OTTESEN has served as Senior Vice President, General Counsel and
Assistant Secretary since the Company's formation. Mr. Ottesen also has served
as Senior Vice President, General Counsel and Secretary of Enterprises since
November 1999. Mr. Ottesen served as Senior Vice President--Legal Affairs and
Secretary of New Plan Excel from September 1998 to April 1999. Mr. Ottesen
served as Senior Vice President, General Counsel and Assistant Secretary of
Excel Realty Trust from September 1996 to September 1998. From 1987 to 1995, Mr.
Ottesen was a senior partner in a San Diego law firm.

JAMES Y. NAKAGAWA has served as the Company's Chief Financial Officer
since October 1998. Mr. Nakagawa also has served as Chief Financial Officer and
Treasurer of Enterprises since November 1999. From March 1998 to October 1998,
Mr. Nakagawa served as Controller of the Company. Mr. Nakagawa served as
Controller of Excel Realty Trust and then New Plan Excel from September 1994 to
April 1999. Prior to joining New Plan Excel, Mr. Nakagawa was a manager at
Coopers & Lybrand LLP. Mr. Nakagawa is a certified public accountant.

EMMETT R. ALBERGOTTI has served the Company as a Senior Vice
President--Retail Development since August 1998 and in the same position with
Enterprises since November 1999. From 1993 to August 1998, Mr. Albergotti served
as Senior Vice President of AMC Realty, Inc., the real estate arm of AMC
Entertainment, Inc., for which he oversaw the acquisition and development of new
theater locations throughout the western United States.

WILLIAM J. HAMILTON has served as the Company's Senior Vice
President--Self Storage since November 1999 and in the same position with
Enterprises since November 1999. From August 1996 to September 1999, Mr.
Hamilton served as Vice President--Self Storage of Enterprises. Mr. Hamilton has
also served as the President of Price Self Storage, a subsidiary of Enterprises
that owns self storage unit facilities, since its inception in August 1996. From
August 1995 to July 1996, Mr. Hamilton served as an Executive Vice President of
Price Quest, a subsidiary of Enterprises that had various retailing divisions.
From November 1994 to August 1995, he was a Vice President of Enterprises. From
October 1993 to November 1994, Mr. Hamilton was a Vice President of PriceCostco.

WILLIAM J. STONE has served as a Senior Vice President--Retail
Development of the Company and Enterprises since December 1999. From November
1994 to December 1999 Mr. Stone served as the Executive Vice President of
DDR/OliverMcMillan, where he oversaw the development of urban
retail/entertainment redevelopment projects. Prior to joining DDR/OliverMcMillan
and since 1975, Mr. Stone was an executive with several nationally recognized
firms in the regional shopping center industry, most recently with Hahn Trizec,
Inc.

JOHN A. VISCONSI has served as the Company's Senior Vice
President--Leasing/Asset Management since May 1999 and in the same position with
Enterprises since November 1999. Mr. Visconsi served as Vice President--Leasing
with Excel Realty Trust and then New Plan Excel from January 1995 to April 1999.
He also served as Senior Vice President of Enterprises from January 1994 to
March 1995. From 1981 to 1994, Mr. Visconsi was Director of Leasing and Land
Development of Hahn Trizec, Inc.

SUSAN M. WILSON has served as Senior Vice
President--Office/Industrial/Hospitality since December 1999. Ms. Wilson also
has served as Senior Vice President--Mixed Use/Development of Enterprises since
December 1999. Ms. Wilson joined the Company in May 1998. From May 1992 to May
1998, Ms. Wilson owned and operated her own real estate development and property
management firm specializing in office, industrial and multi-family projects.

EXECUTIVE COMPENSATION

The following table sets forth certain summary information concerning
compensation paid by the Company to or on behalf of the Company's Chief
Executive Officer and each of the Company's other five most highly compensated
executive officers. The Company elected to change its fiscal year-end date from
July 31 to December 31 in 1998 and, accordingly, executive compensation

12
<PAGE> 13

is reported below for (i) the fiscal year ended December 31, 1999, (ii) the
transition period consisting of the five months ended December 31, 1998 and
(iii) the period from March 31, 1998 through the remainder of the fiscal year
ended July 31, 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
FISCAL YEAR NUMBER OF
COMPENSATION SECURITIES
FISCAL -------------------------- UNDERLYING ALL OTHER
NAME YEAR SALARY BONUS OPTIONS COMPENSATION(1)
- --------------------------------------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Gary B. Sabin ......................... 1999 $249,574(2) $125,000(3) 243,000 $ 3,633
Chairman, President ................. Transition 76,295(4) -- -- --
and Chief Executive Officer ......... 1998 27,533(4) -- 800,000 --
Richard B. Muir ....................... 1999 164,840(5) 100,000(3) 171,000 5,628
Executive Vice President, ........... Transition 46,498(4) -- -- --
Chief Operating Officer and Secretary 1998 17,700(4) -- 800,000 --
Graham R. Bullick, Ph.D ............... 1999 117,138(6) 75,000(3) 120,000 3,633
Senior Vice President-- ............. Transition 25,632(4) -- -- --
Capital Markets ..................... 1998 11,013(4) -- 300,000 --
S. Eric Ottesen ....................... 1999 117,138(6) 75,000(3) 120,000 3,633
Senior Vice President, General ...... Transition 25,632(4) -- -- --
Counsel and Assistant Secretary ..... 1998 11,013(4) -- 300,000 --
Mark T. Burton ........................ 1999 117,138(6) 75,000(3) 120,000 3,633
Senior Vice President--Acquisitions . Transition 25,632(4) -- -- --
1998 11,013(4) -- 300,000 --
Kelly D. Burt ......................... 1999 150,000 35,000(7) 140,000 14,677
Executive Vice President--Development Transition 62,500 25,000 -- 8,448
1998 50,000 -- 300,000 2,500
</TABLE>

- ----------

(1) All other compensation consists of medical and dental benefits, life
insurance, and the Company's matching 401(k) contributions and, in the case
of Mr. Burt, a car allowance.

(2) Since May 1, 1999, Mr. Sabin has been paid his annual salary by the Company
pursuant to Mr. Sabin's employment agreement with the Company under which
Mr. Sabin receives an annual base salary of $300,000. Mr. Sabin received
$200,000 in 1999 under his employment agreement in the form of payment of a
portion of Mr. Sabin's debt to the Company, which was incurred for the
purchase of Common Stock. The remaining $49,574 was paid by the Company to
New Plan Excel under an Administrative Services Agreement between New Plan
Excel and the Company. The Administrative Services Agreement provided that
New Plan Excel would provide management and administrative services to the
Company including the ability to use the services of New Plan Excel's
employees in connection with the Company's business. In exchange for those
services, the Company was required to pay New Plan Excel on a monthly basis
the sum of (i) the product of 115.0% of the sum of (A) two-thirds of the
aggregate amount of all wages and salaries paid during the month to New
Plan Excel employees (excluding senior executives) who spent more than
50.0% of their working time performing services for the Company and were
designated in writing as "Legacy Individuals" for purposes of the
Administrative Services Agreement, and (B) one-third of the aggregate
amount of all wages and salaries paid during the month to New Plan Excel
employees (excluding senior executives) who were not designated as Legacy
Individuals and (ii) 23.0% of the sum of all current monthly salaries and
one-twelfth of the most recent annual bonuses for the senior executives of
New Plan Excel. The Administrative Services Agreement was terminated on
April 22, 1999.

(3) The bonuses were paid in the form of payment of a portion of each
individual's debt to the Company, which was incurred for the purchase of
Common Stock.

(4) These amounts were paid to New Plan Excel by the Company under the
Administrative Services Agreement.

(5) Since May 1, 1999, Mr. Muir has been paid his annual salary by the Company
pursuant to Mr. Muir's employment agreement with the Company under which
Mr. Muir receives an annual base salary of $200,000. Mr. Muir received
$133,333 in 1999 under his employment agreement and directed the Company to
apply the salary he received to reduce a portion of his debt to the
Company, which was incurred for the purchase of Common Stock. The remaining
$31,507 was paid by the Company to New Plan Excel under the Administrative
Services Agreement.

(6) Since May 1, 1999, Messrs. Bullick, Ottesen and Burton have been paid their
annual salary by the Company pursuant to their employment agreements with
the Company, under which each receives an annual base salary of $150,000.
Messrs. Bullick, Ottesen and Burton each received $100,000 in 1999 under
their employment

13
<PAGE> 14

agreements in the form of payment of a portion of their
debts to the Company, which were incurred for the purchase of Common Stock.
The remaining $17,138 was paid by the Company to New Plan Excel under the
Administrative Services Agreement.

(7) Mr. Burt's bonus for 1999 was paid in the form of Common Stock.

The following table sets forth certain summary information concerning
individual grants of stock options made during 1999 to each of the Company's
executive officers named in the Summary Compensation Table.

OPTION GRANTS IN 1999

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED 1999 PER SHARE DATE 5% 10%
- ------------------------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gary B. Sabin 240,0000 17.5% $ 5.125 05/19/09 $ 773,540 $1,960,303
3,000(2) 0.2 3.625 01/28/09 6,839 17,332
Richard B. Muir 168,000 12.2 5.125 05/19/09 541,478 1,372,212
3,000(2) 0.2 3.625 01/28/09 6,839 17,332
Graham R. Bullick, Ph.D 120,000 8.8 5.125 05/19/09 386,770 980,152
S. Eric Ottesen 120,000 8.8 5.125 05/19/09 386,770 980,152
Mark T. Burton 120,000 8.8 5.125 05/19/09 386,770 980,152
Kelly D. Burt 140,000 10.2 5.125 05/19/99 451,232 1,143,510
</TABLE>

- ----------
(1) These amounts represent assumed rates of appreciation in the price of the
Common Stock during the terms of the options in accordance with rates
specified in applicable federal securities regulations. Actual gains, if
any, on stock option exercises will depend on the future price of the
Common Stock and overall stock market conditions. There is no
representation that the rates of appreciation reflected in this table will
be achieved.

(2) Mr. Sabin and Mr. Muir each received an option to purchase 3,000 shares in
his capacity as a Director.

The following table sets forth certain information concerning exercises
of stock options by each of the Company's executive officers named in the
Summary Compensation Table during 1999, and the number of options and value of
unexercised options held by each such person on December 31, 1999.

AGGREGATED OPTION EXERCISES IN 1999
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT YEAR-END OPTIONS AT YEAR-END(1)
ACQUIRED VALUE ----------------------------- --------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary B. Sabin -- -- 303,000 740,000 -- --
Richard B. Muir -- -- 261,000 710,000 -- --
Graham R. Bullick, Ph.D -- -- 130,000 290,000 -- --
S. Eric Ottesen -- -- 130,000 290,000 -- --
Mark T. Burton -- -- 130,000 290,000 -- --
Kelly D. Burt -- - 150,000 290,000 -- --
</TABLE>

- ----------
(1) The dollar values have been calculated by determining the difference
between the fair market value of the securities underlying the options and
the closing price of the Company's Common Stock on December 31, 1999.

EMPLOYMENT AGREEMENTS

The Company entered into employment agreements with each of the officers
listed below. Each agreement has a term of 43 months commencing May 1, 1999. On
January 1, 2004, and on each anniversary date thereafter, the employment period
shall automatically be extended for one additional year unless either party
gives written notice at least six months before such anniversary. Each agreement
provides for an annual base salary as set forth in the table below and a maximum
bonus of up to 100% of the officer's annual base salary based upon, among other
things, the performance of the Company. Under each agreement, the

14
<PAGE> 15

officer is eligible to participate in the Legacy Stock Option Plan. Each
agreement provides that in the event the officer's employment is terminated by
the Company without "Cause" or by the officer for "Good Reason," including,
without limitation, a "Change of Control" (as such terms are defined in each
agreement), the officer is entitled to a payment of 200% of his annual base
salary and 200% of the average total additional compensation for the two
preceding fiscal years of the Company.

The following table provides the name, position and annual base salary
of each of the executive officers named in the Summary Compensation Table who
has entered into an employment agreement with the Company:

<TABLE>
<CAPTION>
NAME POSITION ANNUAL BASE SALARY
---- -------- ------------------
<S> <C> <C>
Gary B. Sabin................ Chief Executive Officer $300,000
Richard. B. Muir............. Executive Vice President and $200,000
Chief Operating Officer
Graham R. Bullick, Ph.D...... Senior Vice President--Capital $150,000
Markets
S. Eric Ottesen.............. Senior Vice President and General $150,000
Counsel
Mark T. Burton............... Senior Vice $150,000
President--Acquisitions
</TABLE>

The Company entered into an employment agreement with Mr. Burt. The
agreement has a term of 36 months commencing May 1, 1998. At the end of such
term, and on each anniversary date thereafter, the employment period shall
automatically be extended for one additional year unless either party gives
notice at least six months before such anniversary. The agreement provides for
an annual base salary of $150,000 and a maximum bonus of up to 100% of his
annual base salary based upon, among other things, the performance of the
Company. The agreement also provided for the issuance to Mr. Burt in April 1998
of options to purchase 300,000 shares of Common Stock, half of which have an
exercise price of $5.00 per share and half of which have an exercise price of
$10.00 per share. In the event the Company terminates Mr. Burt without cause,
Mr. Burt shall receive a severance payment in an amount equal to 150% of his
highest compensation paid under the agreement during any employment year, or if
greater, the amount he would have received had he been employed for the entire
36 month term of the agreement.

COMPENSATION PLANS

LEGACY STOCK OPTION PLAN. The Legacy Stock Option Plan was adopted (i)
to further the growth, development and financial success of the Company by
providing additional incentives to certain of its Directors, key employees and
consultants by assisting them to become owners of capital stock of the Company
and thus to benefit directly from its growth, development and financial success,
and (ii) to enable the Company to retain the services of Directors, key
employees and consultants considered essential to the long-range success of the
Company, by providing and offering them the opportunity to become owners of
capital stock of the Company. The Legacy Stock Option Plan provides for the
grant to executive officers, other key employees, consultants and Directors of
the Company of nonqualified stock options and incentive stock options.

In 1999, the Company issued options to acquire an aggregate of 1,383,000
shares of Common Stock to its officers, other employees and Directors under the
Legacy Stock Option Plan. Of such shares, 21,000 are immediately exercisable and
have an exercise price of $3.6875; 10,000 will become exercisable in three equal
annual installments commencing on the first anniversary date of the grant and
have an exercise price of $4.625; 640,000 are immediately exercisable and have
an exercise price of $5.125; 488,000 will become exercisable in three equal
annual installments commencing on the first anniversary of the date of grant and
have an exercise price of $5.125; 100,000 will become exercisable in five equal
annual installments commencing on the first anniversary of the date of grant and
have an exercise price of $4.3125; 50,000 will become exercisable in five equal
annual installments commencing on the first anniversary of the date of grant and
have an exercise price of $3.75; 5,000 will become exercisable in three equal
annual installments commencing on the first anniversary of the date of grant and
have an exercise price of $4.625; 48,000 will become exercisable in three equal
annual installments commencing on the first anniversary of the date of grant and
have an exercise price of $4.63; and 21,000 are immediately exercisable and have
an exercise price of $2.92.

For additional information regarding the Legacy Stock Option Plan, see
"Proposal 2: Approval of the Legacy Stock Option Plan."

401(k) RETIREMENT PLAN AND TRUST. The Company has established a
tax-qualified employee savings and retirement plan (the "401(k) Plan") effective
January 1998 covering all employees who were employed on August 31, 1998 or who
have been employed by the Company for at least six months and who are at least
21 years of age. Pursuant to the 401(k) Plan, employees may elect to reduce
their current compensation by up to the maximum amount determined by the Federal
Government each year and have the amount of such reduction contributed to the
401(k) Plan. The 401(k) Plan permits, but does not require, additional cash
contributions to the 401(k) Plan by the Company. The trustee under the 401(k)
Plan invests the assets of the 401(k) Plan in

15
<PAGE> 16

designated investment options. The 401(k) Plan is intended to qualify under
Section 401 of the Internal Revenue Code so that contributions to the 401(k)
Plan, and income earned on plan contributions, are not taxable to employees
until withdrawn from the 401(k) Plan, and so that contributions by the Company
are deductible by the Company when made for income tax purposes.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1999, the Compensation Committee was comprised of Messrs.
Nordlund, Talbott and Wilmot. No interlocking relationship exists between any
member of the Compensation Committee and any member of any other company's board
of directors or compensation committee.

COMPENSATION COMMITTEE REPORT

Set forth below in full is the Report of the Compensation Committee
regarding the compensation paid by the Company to its executive officers during
1999:

The philosophy of the Company's compensation program is to employ,
retain and reward executives capable of leading the Company in achieving its
business objectives. These objectives include enhancing stockholder value,
maximizing financial performance, preserving a strong financial posture,
increasing the Company's assets and positioning its assets and business in
geographic markets offering long-term growth opportunities. The accomplishment
of these objectives is measured against the conditions characterizing the
industry within which the Company operates.

COMPONENTS OF EXECUTIVE COMPENSATION

BASE SALARY is established by the Compensation Committee based on an
executive's job responsibilities, level of experience, individual performance
and contribution to the business, with reference to the competitive marketplace
for executive officers at certain other similar companies. The Compensation
Committee believes that the base salaries paid to executive officers of the
Company are at competitive levels relative to the various markets from which the
Company attracts its executive talent.

ANNUAL CASH INCENTIVE BONUS is established by the Committee at the end
of the fiscal year and is based on the Company's performance, individual
performance, and compensation surveys. Bonuses awarded in prior years are also
taken into consideration. Those executive officers of the Company with
employment agreements may receive up to 100% of their base salary in the form of
a bonus.

LONG-TERM INCENTIVES include awards of stock options. The objective for
the awards is to align closely executive interests with the longer term
interests of stockholders. These awards, which are at risk and dependent on the
creation of incremental stockholder value or the attainment of cumulative
financial targets over several years, represent a portion of the total
compensation opportunity provided for the executive officers. Award sizes are
based on individual performance, level of responsibility, the individual's
potential to make significant contributions to the Company, and award levels at
other similar companies.

ANNUAL STOCK GRANTS include annual stock grants of Common Stock to
employees based on contributions to the Company and individual job performance.

COMPENSATION FOR THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER

During 1999, the Chief Executive Officer, Mr. Gary B. Sabin, received a
base salary of $249,574 and a bonus of $125,000 in the form of payment of a
portion of his debt to the Company. With respect to long-term incentives, during
1999, Mr. Sabin was awarded options to purchase 240,000 shares of Common Stock
of the Company in his capacity as Chief Executive Officer. Of such shares,
140,000 are immediately exercisable and the remaining 100,000 will vest in three
equal installments commencing on the first anniversary of the date of grant. The
options granted to Mr. Sabin in 1999 have an exercise price of $5.125 per share.
The Compensation Committee reviewed the Company's actual performance in 1999 and
determined that most of the Company's goals and objectives were accomplished
and, in some instances, exceeded. Mr. Sabin's bonus and his award of stock
options took into consideration his performance and contribution to achieving
the Company's objectives in 1999.

16
<PAGE> 17

TAX CONSIDERATIONS

Section 162(m) of the Internal Revenue Code generally limits the tax
deductions a public corporation may take for compensation paid to its Chief
Executive Officer and its other four most highly compensated executive officers
to $1 million per executive per year. The Company does not presently anticipate
any such executive officers to exceed the non-performance based compensation
threshold of Section 162(m) of the Internal Revenue Code. The Committee intends
to evaluate the Company's executive compensation policies and benefit plans
during the coming year to determine whether any actions to maintain the tax
deductibility of executive compensation are in the best interest of the
Company's stockholders.

The foregoing report has been furnished by the Compensation Committee.

Richard J. Nordlund
Robert S. Talbott
John H. Wilmot
April 10, 2000

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

BUSINESS RELATIONSHIPS

HASSAYAMPA, LLC. During 1999, the Company maintained a business
relationship with Hassayampa, LLC, of which John Wilmot, a Director of the
Company, owned in excess of a ten percent equity interest. Hassayampa, LLC
provided consulting services to the Company related to the Canals project in
Scottsdale, Arizona and to the leasing up of the Scottsdale City Centre. The
Company paid Hassayampa, LLC a total of $303,607.26 in 1999 for work it
performed for the Company.

HOLROB INVESTMENTS, LLC. During 1999, the Company became co-guarantor of
Holrob Investments, LLC on a $500,000 line of credit with First Tennessee Bank
obtained by Holrob Investments, LLC. Mr. Talbott, a Director of the Company,
owns Holrob Investments, LLC. The line of credit expires in November 2000.

INDEBTEDNESS OF MANAGEMENT

In 1998, the Company loaned to certain officers, in connection with
their purchase of Company Common Stock, approximately 50% of the purchase price
therefor (an aggregate amount of $10.9 million). Such loans bear interest at the
rate of 7.0% per annum, mature in 2003 and are full recourse obligations. The
following table lists the largest aggregate amount outstanding during 1999 and
the aggregate amount outstanding as of April 10, 2000 for the loans to the
officers identified therein.

<TABLE>
<CAPTION>
AGGREGATE AMOUNT
LARGEST AGGREGATE AMOUNT OUTSTANDING AS OF
NAME AND POSITION OUTSTANDING DURING 1999 APRIL 10, 2000
----------------- ----------------------- --------------
<S> <C> <C>
Gary B. Sabin
Chairman, President $4,005,690 $3,721,110
and Chief Executive Officer
Richard B. Muir
Executive Vice President, 1,327,782 1,097,605
Chief Operating Officer and Secretary
Graham R. Bullick, Ph.D.
Senior Vice President-- 1,331,306 1,164,228
Capital Markets
S. Eric Ottesen
Senior Vice President, General 1,331,306 1,164,228
Counsel and Assistant Secretary
Mark T. Burton
Senior Vice President--Acquisitions 1,331,306 1,164,228
</TABLE>

17
<PAGE> 18

PERFORMANCE GRAPH

The following performance graph compares the performance of the
Company's Common Stock to the S&P 500 Index and to an index average of the
Company's peer group, composed of comparable publicly-traded companies in the
real estate business, in each case for the period commencing March 31, 1998
through December 31, 1999. Such peer group includes: Crescent Operating, Inc.,
Forest City Enterprises, Inc. and Wellsford Real Properties, Inc. The graph
assumes that the value of the investment in the Company's Common Stock and each
index was $100 at March 31, 1998 and that all dividends were reinvested. The
stock price performance shown on the graph is not necessarily indicative of
future price performance.

COMPARISON OF CUMULATIVE TOTAL RETURNS
PERFORMANCE REPORT FOR
EXCEL LEGACY CORPORATION

<TABLE>
<CAPTION>
31-Mar-98 31-Dec-1998 31-Dec-1999
--------- ----------- -----------
<S> <C> <C> <C>
Peer Group 100 64.6 57.3
S & P 500 100 111.6 133.4
Excel Legacy 100 82.1 67.9
</TABLE>

RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS

The Company's financial statements for 1999 have been examined by
PricewaterhouseCoopers LLP. Representatives of PricewaterhouseCoopers LLP are
expected to be available at the Annual Meeting to respond to appropriate
questions and to make a statement if they desire to do so. The Company will
select independent accountants for the current year sometime after the Annual
Meeting.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Under Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), Directors, executive officers and beneficial owners of ten
percent or more of the Common Stock ("Reporting Persons") are required to report
to the Securities and Exchange Commission (the "SEC") on a timely basis the
initiation of their status as a Reporting Person and any changes with respect to
their beneficial ownership of the Common Stock. Regulations promulgated by the
SEC require the Company to disclose in this Proxy Statement any reporting
violations in 1999 that came to the Company's attention based on a review of the
applicable filings required by the SEC to report such status as an officer or
Director or such changes in beneficial ownership as submitted to the Company.
Based solely on its review of such forms received by it, the Company believes
that all filing requirements applicable to its executive officers, Directors and
beneficial owners of more than ten percent of the Common Stock were complied
with during 1999.

OTHER BUSINESS

No other matters are to be presented for action at the Annual Meeting
other than as set forth in this Proxy Statement. If other matters should
properly come before the Annual Meeting, however, the persons named in the
accompanying proxy will vote all proxies in accordance with their best judgment.

ANNUAL REPORT TO STOCKHOLDERS

The Annual Report of the Company for 1999 is provided with this Proxy
Statement to the stockholders of record as of April 10, 2000. Upon request, the
Company will furnish the Annual Report to any stockholder.

18
<PAGE> 19

STOCKHOLDER PROPOSALS

Any proposal to be considered for inclusion in the Company's proxy
statement for the next annual meeting of stockholders must be received at the
Company's principal executive offices not later than December 31, 2000 to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to that meeting. In addition, pursuant to a rule of the SEC, if the
Company has not received notice by March 14, 2001 of any matter a stockholder
intends to propose for a vote at the next annual meeting of stockholders, then a
proxy solicited by the Board may be voted on such matter in the discretion of
the proxy holder, without discussion of the matter in the proxy statement
soliciting such proxy and without such matter appearing as a separate item on
the proxy card.

By Order of the Board of Directors,

/s/ GARY B. SABIN
-----------------------------------
Gary B. Sabin, Chairman of the
Board, President and Chief Executive Officer

San Diego, California
April 28, 2000

19
<PAGE> 20

THE 1998 STOCK OPTION PLAN
OF
EXCEL LEGACY CORPORATION
(as Amended and Restated)

Excel Legacy Corporation, a Delaware corporation, has adopted The 1998
Stock Option Plan of Excel Legacy Corporation, as amended and restated (this
"Plan"), for the benefit of its eligible employees, consultants and directors.

The purposes of this Plan are as follows:

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

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

ARTICLE I.

DEFINITIONS

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

1.2 Award Limit. "Award Limit" shall mean 525,000 shares of Common
Stock, as adjusted pursuant to Section 7.3.

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

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

1.5 Committee. "Committee" shall mean the Compensation Committee of the
Board, or another committee or subcommittee of the Board, appointed as provided
in Section 6.1.

1.6 Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share.

1.7 Company. "Company" shall mean Excel Legacy Corporation, a Delaware
corporation.

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

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

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

A-1
<PAGE> 21

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

1.9 Director. "Director" shall mean a member of the Board.

1.10 Distribution. "Distribution" shall mean the distribution of Common
Stock to the stockholders of Excel Realty Trust, Inc.

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

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

1.13 Fair Market Value. "Fair Market Value" of a share of Common Stock
as of a given date shall be (i) the closing price of a share of Common Stock on
the principal exchange on which shares of Common Stock are then trading, if any
(or as reported on any composite index which includes such principal exchange),
on the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (ii) if Common Stock is not traded on an exchange but is
quoted on Nasdaq or a successor quotation system, the closing price of a share
of Common Stock on the trading day previous to such date as reported by Nasdaq
or such successor quotation system; or (iii) if Common Stock is not publicly
traded on an exchange and not quoted on Nasdaq or a successor quotation system,
the Fair Market Value of a share of Common Stock as established by the Committee
(or the Board, in the case of Options granted to Directors) acting in good
faith.

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

1.15 Independent Director. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.

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

1.17 Option. "Option" shall mean a stock option granted under Article
III of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.

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

1.19 Plan. "Plan" shall mean The 1998 Stock Option Plan of Excel Legacy
Corporation, as amended and restated.

1.20 QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.

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

A-2
<PAGE> 22

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

1.23 Subsidiary. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
50 percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.

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

1.25 Termination of Directorship. "Termination of Directorship" shall
mean the time when an Optionee who is a Director ceases to be a Director for any
reason, including, but not by way of limitation, a termination by resignation,
failure to be elected, death or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship with respect to Directors.

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

A-3
<PAGE> 23

ARTICLE II.
SHARES SUBJECT TO PLAN

2.1 Shares Subject to Plan.

(a) The shares of stock subject to Options shall be Common Stock.
The aggregate number of such shares which may be issued upon exercise of such
Options or rights or upon any such awards under the Plan shall not exceed
5,250,380. The shares of Common Stock issuable upon exercise of such Options may
be either previously authorized but unissued shares or treasury shares.

(b) The maximum number of shares which may be subject to Options
granted under the Plan to any individual in any fiscal year shall not exceed the
Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the Award
Limit and if, after grant of an Option, the price of shares subject to such
Option is reduced, the transaction is treated as a cancellation of the Option
and a grant of a new Option and both the Option deemed to be canceled and the
Option deemed to be granted are counted against the Award Limit.

2.2 Add-Back of Options. If any Option to acquire shares of Common Stock
under this Plan expires or is canceled without having been fully exercised, or
is exercised in whole or in part for cash as permitted by this Plan, the number
of shares subject to such Option but as to which such Option was not exercised
prior to its expiration, cancellation or exercise may again be optioned
hereunder, subject to the limitations of Section 2.1. Furthermore, any shares
subject to Options which are adjusted pursuant to Section 7.3 and become
exercisable with respect to shares of stock of another corporation shall be
considered cancelled and may again be optioned hereunder, subject to the
limitations of Section 2.1. Shares of Common Stock which are delivered by the
Optionee or withheld by the Company upon the exercise of any Option under this
Plan, in payment of the exercise price thereof, may again be optioned hereunder,
subject to the limitations of Section 2.1. Notwithstanding the provisions of
this Section 2.2, no shares of Common Stock may again be optioned if such action
would cause an Incentive Stock Option to fail to qualify as an incentive stock
option under Section 422 of the Code.

ARTICLE III.

GRANTING OF OPTIONS

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

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

3.3 Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.

3.4 Granting of Options

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

A-4
<PAGE> 24

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

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

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

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

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

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

(d) During the term of this Plan, each Director shall be granted
an Option to purchase ten thousand (10,000) shares of Common Stock on the date
of the first annual meeting of stockholders at which such Director is re-elected
to the Board. At each subsequent annual meeting of stockholders at which a
Director is re-elected to the Board, such Director shall receive an Option to
purchase the number of shares of Common Stock granted to such Director in the
prior year plus an additional one thousand (1,000) shares of Common Stock;
provided that in no event shall any Director be entitled to receive an Option to
purchase more the twenty thousand (20,000) shares of Common Stock upon
re-election in any given year. Notwithstanding the foregoing, each Director who
is re-elected at the 2000 Annual Meeting of Stockholders shall receive an option
to purchase 10,000 shares of Common Stock.

ARTICLE IV.

TERMS OF OPTIONS

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

A-5
<PAGE> 25

4.2 Option Price. The price per share of the shares subject to each
Option shall be set by the Committee; provided, however, that such price shall
be no less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law, and (i) in the case of Options intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code, such price shall not be less than 100% of the Fair Market Value of
a share of Common Stock on the date the Option is granted; (ii) in the case of
Incentive Stock Options such price shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted (or
the date the Option is modified, extended or renewed for purposes of Section
424(h) of the Code); (iii) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code), such price shall not be less than 110% of the Fair
Market Value of a share of Common Stock on the date the Option is granted (or
the date the Option is modified, extended or renewed for purposes of Section
424(h) of the Code); and (iv) in the case of Options granted to Directors, such
price shall equal 100% of the Fair Market Value of a share of Common Stock on
the date the Option is granted; provided, however, that the price of each share
subject to each Option granted to Directors on the date of the Distribution
shall equal the average of the trading price for the Common Stock for the twenty
days commencing on the sixth day after the effective date of the Distribution.

4.3 Option Term. The term of an Option shall be set by the Committee in
its discretion; provided, however, that, (i) in the case of Options granted to
Directors, the term shall be ten (10) years from the date the Option is granted,
without variation or acceleration hereunder, but subject to Section 5.6, and
(ii) in the case of Incentive Stock Options, the term shall not be more than ten
(10) years from the date the Incentive Stock Option is granted, or five (5)
years from such date if the Incentive Stock Option is granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code). Except as limited by requirements of Section 422 of the Code and
regulations and rulings thereunder applicable to Incentive Stock Options, the
Committee may extend the term of any outstanding Option in connection with any
Termination of Employment or Termination of Consultancy of the Optionee, or
amend any other term or condition of such Option relating to such a termination.

4.4 Option Vesting.

(a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or in part
for a specified period after it is granted; provided, however, that, unless the
Committee otherwise provides in the terms of the Option or otherwise, no Option
shall be exercisable by any Optionee who is then subject to Section 16 of the
Exchange Act within the period ending six months and one day after the date the
Option is granted; and provided further, that Options granted to Directors shall
become exercisable in cumulative annual installments of 20% on each of the
first, second, third, fourth and fifth anniversaries of the date of Option
grant, without variation or acceleration hereunder except as provided in Section
7.3(b). At any time after grant of an Option, the Committee may, in its sole and
absolute discretion and subject to whatever terms and conditions it selects,
accelerate the period during which an Option (except an Option granted to a
Director) vests.

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

A-6
<PAGE> 26

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

4.5 Consideration. In consideration of the granting of an Option, the
Optionee shall agree, in the written Stock Option Agreement, to remain in the
employ of (or to consult for or to serve as a Director of, as applicable) the
Company or any Subsidiary for a period of at least six months (or such shorter
period as may be fixed in the Stock Option Agreement or by action of the
Committee following grant of the Option) after the Option is granted (or, in the
case of a Director, until the next annual meeting of stockholders of the
Company). Nothing in this Plan or in any Stock Option Agreement hereunder shall
confer upon any Optionee any right to continue in the employ of, or as a
consultant for, the Company or any Subsidiary, or as a director of the Company,
or shall interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Optionee at
any time for any reason whatsoever, with or without good cause.

ARTICLE V.

EXERCISE OF OPTIONS

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

5.2 Manner Of Exercise. All or a portion of an exercisable Option shall
be deemed exercised upon delivery of all of the following to the Secretary of
the Company or his office:

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

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

(c) In the event that the Option shall be exercised pursuant to
Section 7.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and

(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised.
However, the Committee (or the Board, in the case of Options granted to
Directors), may in its discretion (i) allow a delay in payment up to thirty (30)
days from the date the Option, or portion thereof, is exercised; (ii) allow
payment, in whole or in part, through the delivery of shares of Common Stock
owned by the Optionee, duly endorsed for transfer to the Company

A-7
<PAGE> 27

with a Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in whole
or in part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee or the Board; (vi) allow payment, in whole
or in part, through the delivery of a notice that the Optionee has placed a
market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the Committee (or
the Board, in the case of Options granted to Directors) may also prescribe the
form of such note and the security to be given for such note. The Option may not
be exercised, however, by delivery of a promissory note or by a loan from the
Company when or where such loan or other extension of credit is prohibited by
law.

5.3 Conditions to Issuance of Stock Certificates. The Company shall not
be required to issue or deliver any certificate or certificates of stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions, any of which may be waived by
the Company, in its discretion:

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

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

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

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

(e) Subject to Section 5.2(d), the receipt by the Company of full
payment for such shares, including payment of any applicable withholding tax.

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

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

A-8
<PAGE> 28

purposes of Section 424(h) of the Code) such Option to such Employee or (ii) one
year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.

5.6 Limitations on Exercise of Options Granted to Directors. No Option
granted to a Director may be exercised to any extent by anyone after the first
to occur of the following events:

(a) the expiration of twelve (12) months from the date of the
Optionee's death;

(b) the expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);

(c) the expiration of three (3) months from the date of the
Optionee's Termination of Directorship for any reason other than such Optionee's
death or his permanent and total disability, unless the Optionee dies within
said three-month period; or

(d) The expiration of ten years from the date the Option was
granted.

ARTICLE VI.

ADMINISTRATION

6.1 Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under this Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.

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

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

6.4 Compensation; Professional Assistance, Good Faith Actions. Members
of the Committee shall receive such compensation, if any, for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations

A-9
<PAGE> 29

of any such persons. All actions taken and all interpretations and
determinations made by the Committee or the Board in good faith shall be final
and binding upon all Optionees, the Company and all other interested persons. No
members of the Committee or Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to this Plan or
Options, and all members of the Committee and the Board shall be fully protected
by the Company in respect of any such action, determination or interpretation.

ARTICLE VII.

MISCELLANEOUS PROVISIONS

7.1 Not Transferable. Options under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or pursuant to a QDRO, unless and until such options have been
exercised, or the shares underlying such options have been issued, and all
restrictions applicable to such shares have lapsed. No Option or interest or
right therein shall be liable for the debts, contracts or engagements of the
Optionee or his successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.

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

7.2 Amendment, Suspension or Termination of this Plan. Except as
otherwise provided in this Section 7.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 7.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan, and no action of
the Board or the Committee may be taken that would otherwise require stockholder
approval as a matter of applicable law, regulation or rule. Furthermore, no
modification of the Award Limit shall be effective prior to the approval of the
Company's stockholders. No amendment, suspension or termination of this Plan
shall, without the consent of the holder of Options, alter or impair any rights
or obligations under any Options theretofore granted or awarded, unless the
award itself otherwise expressly so provides. No Options may be granted or
awarded during any period of suspension or after termination of this Plan, and
in no event may any Incentive Stock Option be granted under this Plan after the
first to occur of the following events:

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

(b) The expiration of ten years from the date the Plan is approved
by the Company's stockholders under Section 7.4.

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

(a) Subject to Section 7.3(d), in the event that the Committee (or
the Board, in the case of Options granted to Directors) determines that any
dividend or other distribution (whether in the form of

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<PAGE> 30

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

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

(ii) the number and kind of shares of Common Stock (or
other securities or property) subject to outstanding Options, and

(iii) the grant or exercise price with respect to any
Option.

(b) Subject to Section 7.3(d), in the event of any Corporate
Transaction or other transaction or event described in Section 7.3(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board, in the case of Options granted to
Directors) in its discretion is hereby authorized to take any one or more of the
following actions whenever the Committee (or the Board, in the case of Options
granted to Directors) determines that such action is appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan or with respect to any option under this
Plan, to facilitate such transactions or events or to give effect to such
changes in laws, regulations or principles:

(i) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Directors) may provide, either by the terms of the
agreement or by action taken prior to the occurrence of such transaction or
event and either automatically or upon the optionee's request, for either the
purchase of any such Option for an amount of cash equal to the positive
difference, if any, between the amount that could have been obtained upon the
exercise of such Option and the exercise price of such Option, or realization of
the optionee's rights had such Option been currently exercisable or payable or
fully vested or the replacement of such Option with other rights or property
selected by the Committee (or the Board, in the case of Options granted to
Directors) in its sole discretion;

(ii) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Directors) may provide, either by the terms of such Option
or by action taken prior to the occurrence of such transaction or event, that
for a specified period of time prior to such transaction or event, such Option
shall be exercisable as to all shares covered thereby, notwithstanding anything
to the contrary in (i) Section 4.4 or (ii) the provisions of such Option;

(iii) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee (or the Board, in
the case of Options granted to Directors) may provide, either by the terms of
such Option or by action taken prior to the occurrence of such transaction or
event, that upon such event, such Option be assumed by the successor or survivor
corporation, or a parent or

A-11
<PAGE> 31

subsidiary thereof, or shall be substituted for by similar Options covering the
stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and
prices; and

(iv) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Directors) may make adjustments in the number and type of
shares of Common Stock (or other securities or property) subject to outstanding
Options and/or in the terms and conditions of (including the grant or exercise
price), and the criteria included in, outstanding Options and Options which may
be granted in the future.

(c) Subject to Section 7.3(d) and 7.8, the Committee (or the
Board, in the case of Options granted to Directors) may, in its discretion,
include such further provisions and limitations in any Option as it may deem
equitable and in the best interests of the Company.

(d) With respect to Options which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 7.3 or
in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such option to fail to so qualify under Section
162(m)(4)(C), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent such
adjustment or action would result in short-swing profits liability under Section
16 or violate the exemptive conditions of Rule 16b-3 unless the Committee (or
the Board, in the case of Options granted to Directors) determines that the
option is not to comply with such exemptive conditions. The number of shares of
Common Stock subject to any option shall always be rounded to the next whole
number.

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

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

7.6 Loans. The Committee may, in its discretion, extend one or more
loans to key Employees in connection with the exercise or receipt of an Option
granted under this Plan. The terms and conditions of any such loan shall be set
by the Committee.

7.7 Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Options granted to Directors) shall have
the right (to the extent consistent with the applicable exemptive conditions of
Rule 16b-3) to provide, in the terms of Options made under the Plan, or to
require the recipient to agree by separate written instrument, that (i) any
proceeds, gains or other economic benefit actually or constructively received by
the recipient upon any receipt or exercise of an Option, or upon the receipt or
resale of any Common Stock underlying such Option, must be paid to the Company,
and (ii) the Option shall terminate and any unexercised portion of such Option
(whether or not vested) shall be forfeited, if (a) a Termination of Employment,
Termination of Consultancy or Termination of Directorship occurs prior to a
specified date, or within a specified time period following receipt or exercise
of the Option, or

A-12
<PAGE> 32

(b) the recipient at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee (or
the Board, as applicable).

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

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

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

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

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

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<PAGE> 33

PROXY PROXY

EXCEL LEGACY CORPORATION

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 7, 2000

The undersigned stockholder(s) of Excel Legacy Corporation (the
"Company") hereby constitutes and appoints Gary B. Sabin and Richard B. Muir,
and each of them, attorneys and proxies of the undersigned, each with power of
substitution, to attend, vote and act for the undersigned at the Annual Meeting
of Stockholders of the Company to be held on June 7, 2000, and at any
adjournments or postponements thereof, according to the number of shares of
capital stock of the Company which the undersigned may be entitled to vote, and
with all powers which the undersigned would possess if personally present, as
follows:

THIS PROXY WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NOMINEES
SET FORTH IN THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT, AND FOR APPROVAL
OF THE LEGACY STOCK OPTION PLAN, AS DESCRIBED IN THE PROXY STATEMENT, UNLESS THE
CONTRARY IS INDICATED IN THE APPROPRIATE PLACE.

(continued on reverse side)

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

-- FOLD AND DETACH HERE --

<PAGE> 34

EXCEL LEGACY CORPORATION

PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]

1. Election of Directors:

<TABLE>
<CAPTION>
For Withheld Abstain
--- -------- -------
<S> <C> <C> <C>
Gary B. Sabin [ ] [ ] [ ]
Richard B. Muir [ ] [ ] [ ]
Kelly D. Burt [ ] [ ] [ ]
Jack McGrory [ ] [ ] [ ]
Richard J. Nordlund [ ] [ ] [ ]
Robert E. Parsons, Jr. [ ] [ ] [ ]
Robert S. Talbott [ ] [ ] [ ]
John H. Wilmot [ ] [ ] [ ]

2. Approval of the Legacy Stock Option Plan
described in the accompanying Proxy Statement. [ ] [ ] [ ]
</TABLE>

In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.

The undersigned revokes any prior proxy at such meeting and ratifies all that
said attorneys and proxies, or any of them, may lawfully do by virtue hereof.
Receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement is
hereby acknowledged.

Dated: ___________, 2000

------------------------------------
(Signature(s) of stockholders)

Please sign exactly as name appears
herein. When shares are held by joint
tenants, both should sign; when signing
as an attorney, executor, administrator,
trustee or guardian, give full title as
such. If a corporation, sign in full
corporate name by President or other
authorized officer. If a partnership,
sign in partnership name by authorized
partner.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF EXCEL LEGACY CORPORATION
PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY IN
THE POSTAGE-PAID ENVELOPE ENCLOSED

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

FOLD AND DETACH HERE