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                                                                     Exhibit 4.1

                              ARCHSTONE-SMITH TRUST

                      ARTICLES OF AMENDMENT AND RESTATEMENT

================================================================================

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>                                                                                        <C>
ARTICLE I. THE TRUST ....................................................................   1
     Section 1.   Name ..................................................................   1
     Section 2.   Resident Agent ........................................................   2
     Section 3.   Nature of Trust .......................................................   2
     Section 4.   Powers and Purposes ...................................................   2
     Section 5.   Conflicts of Interest .................................................   2

ARTICLE II. SHARES ......................................................................   3
     Section 1.   Shares of Beneficial Interest .........................................   3
     Section 2.   Series A Preferred Shares .............................................   5
     Section 3.   Series B Junior Participating Preferred Shares ........................   5
     Section 4.   Series C Preferred Shares. ............................................   5
     Section 5.   Series D Preferred Shares .............................................   5
     Section 6.   Series E Preferred Shares .............................................   5
     Section 7.   Series F Preferred Shares .............................................   6
     Section 8.   Series G Preferred Shares. ............................................   6
     Section 9.   Series H Preferred Shares. ............................................   6
     Section 10.  Series I Preferred Shares. ............................................   6
     Section 11.  Series J Preferred Shares. ............................................   6
     Section 12.  Series K Preferred Shares. ............................................   6
     Section 13.  Series L Preferred Shares. ............................................   6
     Section 14.  [reserved] ............................................................   7
     Section 15.  Sale of Shares ........................................................   7
     Section 16.  General Nature ........................................................   7
     Section 17.  Acquisition of Shares .................................................   7
     Section 18.  Transferability; ......................................................   8
             (a)  Definitions ...........................................................   8
             (b)  Ownership Limitation. .................................................  11
             (c)  Excess Shares .........................................................  13
             (d)  Prevention of Transfer ................................................  17
             (e)  Notice to Trust .......................................................  17
             (f)  Information for Trust .................................................  17
             (g)  Other Action by Board .................................................  18
             (h)  Ambiguities ...........................................................  18
             (i)  Modification of Existing Holder Limits ................................  18
             (j)  Increase or Decrease in Ownership Limit ...............................  19
             (k)  Limitations on Changes in Existing Holder and Ownership Limits ........  19
             (l)  Waivers by the Board ..................................................  19
             (m)  Legend ................................................................  19
             (n)  Severability ..........................................................  20
             (o)  Transfer of Excess Shares .............................................  20
</TABLE>

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<TABLE>
<S>                                                                             <C>
           (p)    Distributions on Excess Shares .............................  20
           (q)    Voting of Excess Shares ....................................  20
           (r)    Non-Transferability of Excess Shares .......................  21
           (s)    Acting as Agent ............................................  21
           (t)    Call by Trust on Excess Shares .............................  21
           (u)    Underwritten Offerings .....................................  22
     Section 18A. Transferability; ...........................................  22
           (a)    Definitions ................................................  22
           (b)    Ownership Limitation .......................................  25
           (c)    Remedies for Breach. .......................................  26
           (d)    Notice to Trust ............................................  26
           (e)    Information for Trust. .....................................  26
           (f)    Remedies Not Limited .......................................  27
           (g)    No Remedy Against Transferor ...............................  27
           (h)    Ambiguity ..................................................  27
           (i)    Exception ..................................................  27
           (j)    Legend .....................................................  28

ARTICLE III. SHAREHOLDERS ....................................................  28
     Section 1.   Meetings ...................................................  28
     Section 2.   Voting .....................................................  28
     Section 3.   Distributions ..............................................  29
     Section 4.   Annual Report ..............................................  29
     Section 5.   Inspection Rights ..........................................  30
     Section 6.   Nonliability and Indemnification ...........................  30
     Section 7.   Notice of Nonliability .....................................  30

ARTICLE IV. THE TRUSTEES .....................................................  31
     Section 1.   Number, Qualification, Compensation and Term ...............  31
     Section 2.   Resignation, Removal and Death .............................  32
     Section 3.   Vacancies ..................................................  32
     Section 4.   Meetings and Action Without a Meeting ......................  32
     Section 5.   Authority ..................................................  33
     Section 6.   Powers .....................................................  33
     Section 7.   Right to Own Shares ........................................  35
     Section 8.   Transactions with Trust ....................................  35
     Section 9.   Limitation of Liability ....................................  35
     Section 10.  Indemnification ............................................  36
     Section 11.  Persons Dealing with Trustees ..............................  36
     Section 12.  Administrative Powers ......................................  36
     Section 13.  Election of Officers .......................................  37
     Section 14.  Committees and Delegation of Powers and Duties .............  37
</TABLE>

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<TABLE>
<S>                                                                         <C>
ARTICLE V. TERMINATION AND DURATION ......................................  37
     Section 1.   Termination ............................................  37
     Section 2.   Organization as a Corporation ..........................  38
     Section 3.   Merger, Consolidation or Sale ..........................  38
     Section 4.   Duration ...............................................  38

ARTICLE VI. AMENDMENTS ...................................................  38
     Section 1.   Amendment by Shareholders ..............................  38
     Section 2.   Amendment by Trustees ..................................  39
     Section 3.   Requirements of Maryland Law ...........................  39

ARTICLE VII. MISCELLANEOUS 39 ............................................
     Section 1.   Construction ...........................................  39
     Section 2.   Headings for Reference Only ............................  39
     Section 3.   Filing and Recording                                      39
     Section 4.   Applicable Law .........................................  39
     Section 5.   Certifications .........................................  39
     Section 6.   Severability ...........................................  40
     Section 7.   Bylaws .................................................  40
     Section 8.   Recording ..............................................  40

ARTICLE VIII. LIMITATION OF LIABILITY AND INDEMNIFICATION ................  40
     Section 1.   Limitation of Liability of Officers ....................  40
     Section 2.   Indemnification of Officers and Employees ..............  41
     Section 3.   Insurance ..............................................  41
</TABLE>

ANNEX A  SERIES A CUMULATIVE CONVERTIBLE PREFERRED SHARES OF BENEFICIAL INTEREST

ANNEX B  SERIES B JUNIOR PARTICIPATING PREFERRED SHARES OF BENEFICIAL INTEREST

ANNEX C  SERIES C CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST

ANNEX D  SERIES D CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST

ANNEX E  SERIES E CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST

ANNEX F  SERIES F CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST

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ANNEX G  SERIES G CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST

ANNEX H  SERIES H CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED SHARES

ANNEX I  SERIES I CUMULATIVE REDEEMABLE PREFERRED SHARES

ANNEX J  SERIES J CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED SHARES

ANNEX K  SERIES K CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED SHARES

ANNEX L  SERIES L CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED SHARES

                                       iv

<PAGE>

                              ARCHSTONE-SMITH TRUST
                      ARTICLES OF AMENDMENT AND RESTATEMENT

     These Articles of Amendment and Restatement of Archstone-Smith Trust are
made as of October 26, 2001.

                                    RECITALS

     1. Archstone-Smith Trust, a Maryland real estate investment trust (the
"Trust"), desires to amend and restate its declaration of trust, as currently in
effect, in the manner hereinafter set forth.

     2. The amendment to and restatement of the declaration of trust of the
Trust as hereinafter set forth was advised by the Board of Trustees (the
"Board") of the Trust and approved by the shareholders (the "Shareholders") of
the Trust as required by law.

     3. The Trustees desire that the Trust continue to qualify as a "real estate
investment trust" under the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and under Title 8 of the Corporations and Associations
                                -------
Article of the Annotated Code of Maryland, as amended ("Title 8"), so long as
such qualification, in the opinion of the Trustees, is advantageous to the
Shareholders of the Trust.

     4. The beneficial interests in the Trust are divided into transferable
Shares of one or more classes of shares of beneficial interest evidenced by
certificates.

                                   DECLARATION

     NOW, THEREFORE, the Trustees hereby declare that they hold the duties of
Trustees hereunder in accordance with the terms and conditions hereinafter
provided, which are all of the provisions of the Trust's declaration of trust as
currently in effect and as amended hereby.

                              ARTICLE I. THE TRUST

     Section 1.   Name.

     (a)  The Trust governed by this Amended and Restated Declaration of Trust
(as amended, supplemented or restated from time to time, this "Declaration of
                                                               --------------
Trust") is herein referred to as the "Trust" and shall be known by the name
-----
"Archstone-Smith Trust." So far as may be practicable, legal and convenient, the
affairs of the Trust shall be conducted and transacted under such name, which
name shall not refer to the Trustees individually or personally or to the
beneficiaries or Shareholders of the Trust, or to any officers, employees or
agents of the Trust. Under circumstances in which the Board determines that the
use of the name "Archstone-Smith" is not practicable, legal or convenient, it
may as appropriate use the Trustees' names with suitable reference to their
Trustee status, or some other suitable designation, or it may adopt another name
under which the Trust may hold property

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or operate in any jurisdiction which name shall not, to the knowledge of the
Board, refer to beneficiaries or Shareholders of the Trust.

     (b) Legal title to all of the properties subject from time to time to this
Declaration of Trust shall be transferred to, vested in and held by the Trust in
its own name except that the Board shall have the power to cause legal title to
any property of the Trust to be held by and/or in the name of any other person
as nominee, on such terms, in such manner and with such powers as the Board may
determine, provided that the interest of the Trust therein is, in the judgment
of the Board, appropriately protected.

     (c) The Trust shall have the authority to operate under an assumed name or
names in such state or states or any political subdivision thereof where it
would not be legal, practical or convenient to operate in the name of the Trust.
The Trust shall have the authority to file such assumed name certificates or
other instruments in such places as may be required by applicable law to operate
under such assumed name or names.

     Section 2. Resident Agent. The name and address of the resident agent of
the Trust in the State of Maryland is CSC-Lawyers Incorporating Service Company,
11 East Chase Street, Baltimore, Maryland 21202. The principal office of the
Trust is 7670 South Chester Street, Suite 100, Englewood, Colorado 80112. The
Trust may have such other offices or places of business within or without the
State of Maryland as the Board may from time to time determine.

     Section 3. Nature of Trust. The Trust is a real estate investment trust
under Title 8. The Trust is not intended to be, shall not be deemed to be and
shall not be treated as, a general partnership, limited partnership, joint stock
association or, except as provided in Section 2 of Article V, a corporation. The
Shareholders shall be beneficiaries in such capacity in accordance with the
rights conferred on them hereunder.

     Section 4. Powers and Purposes. The Trust is formed pursuant to the
provisions of, and shall have all of the powers provided in, Title 8, as it may
be amended from time to time, and shall have such additional powers as are not
inconsistent with, and are appropriate with respect to, the purposes of the
Trust as set forth in this Declaration of Trust. The purposes of the Trust are
to purchase, hold, lease, manage, sell, exchange, develop, subdivide and improve
real property and interests in real property and to invest in notes, bonds and
other obligations secured by mortgages on real property, and in general, to do
all other things in connection with the foregoing and to have and exercise all
powers conferred by Maryland law on real estate investment trusts formed under
Maryland law, and to do any or all of the things set forth herein to the same
extent as natural persons might or could do. In addition, it is intended that
the business of the Trust shall be conducted so that the Trust will qualify (so
long as such qualification, in the opinion of the Board, is advantageous to the
Shareholders) as a "real estate investment trust" as defined in the Code.

     Section 5. Conflicts of Interest. Any transactions between the Trust and
any Trustee or any affiliates thereof shall be approved by a majority of the
Trustees (whether or not constituting a

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quorum for the transaction of business) not otherwise interested in such
transactions as being fair and reasonable to the Trust.

                               ARTICLE II. SHARES

     Section 1. Shares of Beneficial Interest.

     (a) The units into which the beneficial interests in the Trust shall be
divided shall be designated as shares of beneficial interest ("Shares"), with a
                                                               ------
par value of $0.01 per Share. Ownership of Shares shall be evidenced by
certificates in such form as shall be determined by the Board from time to time
in accordance with Maryland law; provided, however, that the Board may provide
                                 --------  -------
that some or all of any or all classes or series of Shares shall be
uncertificated. The owners of the Shares shall be designated as "Shareholders."
                                                                 ------------
The certificates shall be negotiable and title thereto shall be transferred by
assignment or delivery in all respects as a stock certificate of a Maryland
corporation. The Shares shall consist of common shares of beneficial interest,
par value $0.01 per Share (the "Common Shares"), and such other types or classes
                                -------------
of Shares as the Board may create and authorize from time to time and designate
as representing a beneficial interest in the Trust. The consideration paid for
the issuance of Shares shall be determined by the Board and shall consist of
money paid, tangible or intangible property or labor or services actually
performed. Shares shall not be issued until the full amount of the consideration
has been received by the Trust. The Board may authorize Share dividends or Share
splits. All Shares issued hereunder shall be, when issued, fully paid, and no
assessment shall ever be made on the Shareholders.

     (b) Immediately before the adoption of this Declaration of Trust, the total
number of Shares which the Trust had authority to issue was 1,000 Common Shares,
par value $0.01 per share, representing an aggregate par value of $10.00.
Immediately after the adoption of this Declaration of Trust, the total number of
Shares of all classes which the Trust has authority to issue is 450,000,000
Shares, consisting of 430,733,260 Common Shares, 3,174,235 Series A Cumulative
Convertible Preferred Shares of Beneficial Interest, par value $0.01 per Share
(the "Series A Preferred Shares"), 4,500,000 Series B Junior Participating
      -------------------------
Preferred Shares of Beneficial Interest, par value $0.01 per Share (the "Series
                                                                         ------
B Junior Participating Preferred Shares"), 1,969,100 Series C Cumulative
---------------------------------------
Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per Share
(the "Series C Preferred Shares"), 1,989,956 Series D Cumulative Redeemable
      -------------------------
Preferred Shares of Beneficial Interest, par value $0.01 per Share (the "Series
                                                                         ------
D Preferred Shares"), 1,600,000 Series E Cumulative Redeemable Preferred Shares
------------------
of Beneficial Interest par value $0.01 per Share (the "Series E Preferred
                                                       ------------------
Shares"), 800,000 Series F Cumulative Redeemable Preferred Shares of Beneficial
------
Interest, par value $0.01 per Share (the "Series F Preferred Shares"), 600,000
                                          -------------------------
Series G Cumulative Redeemable Preferred Shares of Beneficial Interest, par
value $0.01 per Share (the "Series G Preferred Shares"), 2,640,325 Series H
                            -------------------------
Cumulative Convertible Redeemable Preferred Shares, par value $0.01 per Share
(the "Series H Preferred Shares"), 500 Series I Cumulative Redeemable Preferred
      -------------------------
Shares, par value $0.01 per Share (the "Series I Preferred Shares"), 684,931
                                        -------------------------
Series J Cumulative Convertible Redeemable Preferred Shares, par value $0.01 per
Share (the

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"Series J Preferred Shares"), 666,667 Series K Cumulative Convertible Redeemable
 -------------------------
Preferred Shares, par value $0.01 per Share (the "Series K Preferred Shares"),
                                                  -------------------------
and 641,026 Series L Cumulative Convertible Redeemable Preferred Shares, par
value $0.01 per Share (the "Series L Preferred Shares"), representing an
                            -------------------------
aggregate par value of $4,500,000, provided that the Board may amend this
Declaration of Trust, without Shareholder consent, to increase or decrease the
aggregate number of Shares or the number of Shares of any class which the Trust
has authority to issue.

     (c)  The Board may classify or reclassify any unissued Shares from time to
time by setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or distributions,
qualifications or terms or conditions of redemption of the Shares by filing
articles supplementary pursuant to Maryland law. The Board is authorized to
issue from the authorized but unissued Shares of the Trust preferred Shares in
series and to establish from time to time the number of preferred Shares to be
included in each such series and to fix the designation and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of the Shares
of each series. Except for Shares so classified or reclassified and any
preferred Shares issued hereunder, all other Shares shall be designated as
Common Shares, each of which Common Shares shall be equal in all respects to
every other Common Share. The authority of the Board with respect to each
unissued series shall include, but not be limited to, determination of the
following:

          (i)   The number of Shares constituting such series and the
     distinctive designation of such series;

          (ii)  The rate of dividend, if any, payable on Shares of such series
     and whether (and, if so, on what terms and conditions) such dividends shall
     be cumulative (and, if so, whether unpaid dividends shall compound or
     accrue interest) or shall be payable in preference or in any other relation
     to the dividends payable on any other class or series of Shares;

          (iii) Whether Shares of such series shall have voting rights in
     addition to the voting rights provided by law and, if so, the terms and
     extent of such voting rights;

          (iv)  Whether Shares of such series shall be issued with the privilege
     of conversion or exchange and, if so, the terms and conditions of such
     conversion or exchange (including, without limitation, the price or prices
     or the rate or rates of conversion or exchange or any terms for adjustment
     thereof);

          (v)   Whether Shares of such series may be redeemed and, if so, the
     terms and conditions on which they may be redeemed (including, without
     limitation, the dates on or after which they may be redeemed and the price
     or prices at which they may be redeemed, which price or prices may be
     different in different circumstances or at different redemption dates);

                                       4

<PAGE>

          (vi)   The amount, if any, payable on Shares of such series upon the
     voluntary liquidation, dissolution or winding up of the Trust in preference
     to Shares of any other class or series and whether Shares of such series
     shall be entitled to participate generally in distributions on the Common
     Shares under such circumstances;

          (vii)  The amount, if any, payable on Shares of such series upon the
     involuntary liquidation, dissolution or winding up of the Trust in
     preference to Shares of any other class or series and whether Shares of
     such series shall be entitled to participate generally in distributions on
     the Common Shares under such circumstances;

          (viii) Sinking fund provisions, if any, for the redemption or purchase
     of Shares of such series (including any similar fund, however designated);
     and

          (ix)   Any other relative rights, preferences, limitations and powers
     of Shares of such series.

     Section 2.  Series A Preferred Shares. The Board has classified 3,174,235
Shares of the Trust as Series A Preferred Shares. A description of the Series A
Preferred Shares, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex A hereto, which is
hereby incorporated by reference as if it were set forth in this Section 2 in
its entirety.

     Section 3.  Series B Junior Participating Preferred Shares. The Board has
classified 4,500,000 Shares of the Trust as Series B Junior Participating
Preferred Shares. A description of the Series B Junior Participating Preferred
Shares, including the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex B hereto, which is
hereby incorporated by reference as if it were set forth in this Section 3 in
its entirety.

     Section 4.  Series C Preferred Shares. The Board has classified 1,969,100
Shares of the Trust as Series C Preferred Shares. A description of the Series C
Preferred Shares, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex C hereto, which is
hereby incorporated by reference as if it were set forth in this Section 4 in
its entirety.

     Section 5.  Series D Preferred Shares. The Board has classified 1,989,956
shares of the Trust as Series D Preferred Shares. A description of the Series D
Preferred Shares, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex D hereto, which is
hereby incorporated by reference as if it were set forth in this Section 5 in
its entirety.

     Section 6.  Series E Preferred Shares. The Board has classified 1,600,000
shares of the Trust as Series E Preferred Shares. A description of the Series E
Preferred Shares, including the

                                       5

<PAGE>

preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption thereof, is set forth in Annex E hereto, which is hereby incorporated
by reference as if it were set forth in this Section 6 in its entirety.

     Section 7. Series F Preferred Shares. The Board has classified 800,000
shares of the Trust as Series F Preferred Shares. A description of the Series F
Preferred Shares, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex F hereto, which is
hereby incorporated by reference as if it were set forth in this Section 7 in
its entirety.

     Section 8. Series G Preferred Shares. The Board has classified 600,000
shares of the Trust as Series G Preferred Shares. A description of the Series G
Preferred Shares, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex G hereto, which is
hereby incorporated by reference as if it were set forth in this Section 8 in
its entirety.

     Section 9. Series H Preferred Shares. The Board has classified 2,640,325
shares of the Trust as Series H Preferred Shares. A description of the Series H
Preferred Shares, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex H hereto, which is
hereby incorporated by reference as if it were set forth in this Section 9 in
its entirety.

     Section 10. Series I Preferred Shares. The Board has classified 500 shares
of the Trust as Series I Preferred Shares. A description of the Series I
Preferred Shares, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex I hereto, which is
hereby incorporated by reference as if it were set forth in this Section 10 in
its entirety.

     Section 11. Series J Preferred Shares. The Board has classified 684,931
shares of the Trust as Series J Preferred Shares. A description of the Series J
Preferred Shares, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex J hereto, which is
hereby incorporated by reference as if it were set forth in this Section 11 in
its entirety.

     Section 12. Series K Preferred Shares. The Board has classified 666,667
shares of the Trust as Series K Preferred Shares. A description of the Series K
Preferred Shares, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex K hereto, which is
hereby incorporated by reference as if it were set forth in this Section 12 in
its entirety.

     Section 13. Series L Preferred Shares. The Board has classified 641,026
shares of the Trust as Series L Preferred Shares. A description of the Series L
Preferred Shares, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends,

                                       6

<PAGE>

qualifications, and terms and conditions of redemption thereof, is set forth in
Annex L hereto, which is hereby incorporated by reference as if it were set
forth in this Section 13 in its entirety.

     Section 14. [reserved]

     Section 15. Sale of Shares. The Board, in its discretion, may from time to
time issue or sell or contract to issue or sell to such party or parties and for
such consideration, as allowed by Maryland law, at such time or times, and on
such terms as the Board may deem appropriate. In connection with any issuance of
Shares, the Board, in its discretion, may provide for the issuance of fractional
Shares or may provide for the issuance of scrip for fractions of Shares and
determine the terms of such scrip including, but not limited to, the time within
which any such scrip must be surrendered in exchange for Shares and the right,
if any, of holders of scrip upon the expiration of the time so fixed, the right,
if any, to receive proportional distributions, and the right, if any, to redeem
scrip for cash, or the Board may, in its discretion, or if it sees fit at the
option of each holder, provide in lieu of scrip for the adjustment of fractions
in cash. Except as may be provided in this Declaration of Trust or in any
agreement between the Trust and any of its Shareholders, the Shareholders shall
have no preemptive rights of any kind whatsoever (including, but not limited to,
the right to purchase or subscribe for or otherwise acquire any Shares of the
Trust of any class, whether now or hereafter authorized, or any securities or
obligations convertible into or exchangeable for, or any right, warrant or
option to purchase such Shares, whether or not such Shares are issued and/or
disposed of for cash, property or other consideration of any kind).

     Section 16. General Nature. All Shares shall be personal property entitling
the Shareholders only to those rights provided in this Declaration of Trust or
in the resolution creating any class or series of Shares. The legal ownership of
the property of the Trust is exclusively vested in the Trust and the right to
conduct the business of the Trust is vested exclusively in the Trustees; the
Shareholders shall have no interest therein other than beneficial interest in
the Trust conferred by their Shares and shall have no right to compel any
partition, division, dividend or distribution of the Trust or any of its
property. The death of a Shareholder shall not terminate the Trust or give his
or her legal representative any rights against other Shareholders, the Trustees
or the Trust property, except the right, exercised in accordance with applicable
provisions of the Trust's Bylaws (the "Bylaws"), to receive a new certificate
for Shares in exchange for the certificate held by the deceased Shareholder.

     Section 17. Acquisition of Shares. The Trust may repurchase or otherwise
acquire its own Shares at such price or prices as may be determined by the
Board, and for such purpose the Trust may create and maintain such reserves as
are deemed necessary and proper. Shares issued hereunder and purchased or
otherwise acquired for the account of the Trust shall not, so long as they
belong to the Trust, either receive distributions (except that they shall be
entitled to receive distributions payable in Shares of the Trust) or be voted at
any meeting of the Shareholders. Such Shares may, in the discretion of the
Board, be disposed of by the Board at such time or times, to such party or
parties, and for such consideration, as the Board may deem appropriate or may be
returned to the status of authorized but unissued Shares of the Trust.

                                       7

<PAGE>

     Section 18. Transferability; Transfer Restrictions and Ownership
Limitations of Shares Other Than the Smith Preferred Shares. Shares in the Trust
shall be transferable (subject to the further provisions of this Section 18) in
accordance with the procedure prescribed from time to time in the Bylaws. The
persons in whose name the Shares are registered on the books of the Trust shall
be deemed the absolute owners thereof and, until a transfer is effected on the
books of the Trust, the Board shall not be affected by any notice, actual or
constructive, of any transfer. Any issuance, redemption or transfer of Trust
Shares which would operate to disqualify the Trust as a REIT, shall be null and
void ab initio.

     (a)  Definitions. For purposes of this Section 18, the following terms
shall have the following meanings:

          "Adoption Date" shall mean the date of the adoption of the ownership
           -------------
     restrictions contained in this Section 18 by resolution of the Board, which
     shall be deemed to occur upon the Board's adoption of this Declaration of
     Trust.

          "Beneficial Ownership" shall mean, except as provided below in the
           --------------------
     following sentence, ownership of Shares by a Person (whether or not treated
     as an individual for purposes of Section 544 of the Code) who is or would
     be treated as an owner of such Shares either directly or constructively
     through the application of Section 544 of the Code, as modified by Section
     856(h)(1)(B) of the Code. "Beneficial Ownership" shall also mean beneficial
     ownership as defined under Rule 13(d) under the Securities Exchange Act of
     1934, as amended, and, with respect to such meaning, Beneficial Ownership
     by any Person shall include Beneficial Ownership by other Persons who are
     part of the same group as the original Person for purposes of such Rule
     13(d). The terms "Beneficial Owner," "Beneficially Owns," "Beneficially
                       ----------------    -----------------    ------------
     Own" and "Beneficially Owned" shall have correlative meanings.
     ---       ------------------

          "Charitable Beneficiary" shall mean an organization or organizations
           ----------------------
     described in Sections 170(b)(1)(A) and 170(c) of the Code and identified by
     the Board as the beneficiary or beneficiaries of the Excess Share Trust.

          "Code" shall mean the Internal Revenue Code of 1986, as amended from
           ----
     time to time.

          "Constructive Ownership" shall mean ownership of Shares by a Person
           ----------------------
     who would be treated as an owner of such Shares, either directly or
     constructively, through the application of Section 318 of the Code, as
     modified by Section 856(d)(5) of the Code. The terms "Constructive Owner",
                                                           ------------------
     "Constructively Owns", "Constructively Owning" and "Constructively Owned"
      -------------------    ---------------------       --------------------
     shall have correlative meanings.

          "Excess Shares" shall mean Shares resulting from an exchange described
           -------------
     in subsection (c) of this Section 18.

                                       8

<PAGE>

          "Excess Share Trust" shall mean the trust created pursuant to
           ------------------
     subsections (c) and (o) of this Section 18.

          "Excess Share Trustee" shall mean a person, who shall be unaffiliated
           --------------------
     with the Trust, any Purported Beneficial Transferee and any Purported
     Record Transferee, identified by the Board as the trustee of the Excess
     Share Trust.

          "Existing Holder" shall mean any Person who is, or would be upon the
           ---------------
     exchange of Units, debt or any security of the Trust, the Beneficial Owner
     of Shares in excess of the Ownership Limit both on and immediately after
     the Adoption Date, so long as, but only so long as, such Person
     Beneficially Owns or would, upon exchange of Units, debt or any security of
     the Trust, Beneficially Own Shares in excess of the Ownership Limit.

          "Existing Holder Limit" for any Existing Holder shall mean the
           ---------------------
     percentage of the outstanding Shares Beneficially Owned, or which would be
     Beneficially Owned upon the exchange of Units, debt or any security of the
     Trust, by such Existing Holder on and immediately after the Adoption Date,
     and, after any adjustment pursuant to subsection (i) of this Section 18,
     shall mean such percentage of the outstanding Shares as so adjusted. Any
     Existing Holder Limit shall not be modified except as provided in
     subsection (i) of this Section 18. From the Adoption Date until the
     Restriction Termination Date, the Trust shall maintain and, upon request,
     make available to each Existing Holder, a schedule which sets forth the
     then current Existing Holder Limit for each Existing Holder.

          "Market Price" shall mean the last reported sales price reported on
           ------------
     the NYSE for Shares on the trading day immediately preceding the relevant
     date, or if not then traded on the NYSE, the last reported sales price for
     Shares on the trading day immediately preceding the relevant date as
     reported on any exchange or quotation system over or through which such
     Shares may be traded, or if not then traded over or through any exchange or
     quotation system, then the market price of such Shares on the relevant date
     as determined in good faith by the Board.

          "Non-U.S. Person" shall mean a Person other than a U.S. Person.
           ---------------

          "Ownership Limit" shall initially mean 9.8%, in number of Shares or
           ---------------
     value, of the outstanding Shares, and, after any adjustment as set forth in
     subsection (j) of this Section 18, shall mean such lesser or greater
     percentage of the outstanding Shares as so adjusted. The number and value
     of the outstanding Shares of the Trust shall be determined by the Board in
     good faith, which determination shall be conclusive for all purposes
     hereof.

          "Person" shall mean an individual, corporation, partnership, estate,
           ------
     trust (including a trust qualified under Section 401(a) or 501(c)(17) of
     the Code), portion of a trust permanently set aside for or to be used
     exclusively for the purposes described in Section

                                       9

<PAGE>

     642(c) of the Code, association, private foundation within the meaning of
     Section 509(a) of the Code, joint stock company or other entity.

          "Purported Beneficial Transferee" shall mean, with respect to any
           -------------------------------
     purported Transfer which results in Excess Shares, as defined in subsection
     (c) of this Section 18, the beneficial holder of such Shares, if such
     Transfer had been valid under subsection (b) of this Section 18.

          "Purported Record Transferee" shall mean, with respect to any
           ---------------------------
     purported Transfer which results in Excess Shares, as defined in subsection
     (c) of this Section 18, the record holder of such Shares, if such Transfer
     had been valid under subsection (b) of this Section 18.

          "REIT" shall mean a real estate investment trust under Section 856 of
           ----
     the Code.

          "REIT Provisions of the Code" means Sections 856 through 860 of the
           ---------------------------
     Code and any successor or other provisions of the Code relating to REITs
     (including provisions as to the attribution of ownership of beneficial
     interests therein) and the regulations promulgated thereunder.

          "Related Tenant Limit" shall mean 9.9% by value of the outstanding
           --------------------
     Shares of the Trust.

          "Related Tenant Owner" shall mean any Constructive Owner who also
           --------------------
     owns, directly or indirectly, an interest in a Tenant, which interest is
     equal to or greater than (i) 9.9% of the combined voting power of all
     classes of stock of such Tenant, (ii) 9.9% of the total number of shares of
     all classes of stock of such Tenant or (iii) if such Tenant is not a
     corporation, 9.9% of the assets or net profits of such Tenant, in each case
     only if such ownership would cause the Trust to fail the 95% gross income
     test set forth in Section 856(c)(2) of the Code or the 75% gross income
     test set forth in Section 856(c)(3) of the Code.

          "Restriction Termination Date" shall mean the first day after the
           ----------------------------
     Adoption Date on which the Board determines that it is no longer in the
     best interests of the Trust to continue to qualify as a REIT.

          "Shares" shall mean the shares of beneficial interest of the Trust as
           ------
     may be authorized and issued from time to time pursuant to this Article II.

          "Smith Preferred Shares" shall mean the Series H Preferred Shares,
           ----------------------
     Series I Preferred Shares, Series J Preferred Shares, Series K Preferred
     Shares and Series L Preferred Shares of the Trust or any of the foregoing.

                                       10

<PAGE>

          "Tenant" shall mean any tenant (including a subtenant) of (i) the
           ------
     Trust, (ii) a subsidiary of the Trust which is deemed to be a "qualified
     REIT subsidiary" under Section 856(i) (2) of the Code or (iii) a
     partnership or limited liability company in which the Trust or one or more
     of its qualified REIT subsidiaries is a partner or a member.

          "Transfer" shall mean any sale, transfer, gift, assignment, devise or
           --------
     other disposition of Shares other than Smith Preferred Shares (including
     (i) the granting of any option or entering into any agreement for the sale,
     transfer or other disposition of such Shares, (ii) the sale, transfer,
     assignment or other disposition of any securities or rights convertible
     into or exchangeable for such Shares, but excluding the exchange of Units,
     debt or any security of the Trust for such Shares and (iii) any transfer or
     other disposition of any interest in such Shares as a result of a change in
     the marital status of the holder thereof), whether voluntary or
     involuntary, whether of record, constructively or beneficially and whether
     by operation of law or otherwise. The terms "Transfers" and "Transferred"
                                                  ---------       -----------
     shall have correlative meanings.

          "Units" shall mean units or other equity interests of any partnership
           -----
     or other entity (which for purposes of the provisions hereof shall include
     Archstone-Smith Operating Trust, a Maryland real estate investment trust)
     which are convertible into or exchangeable for Shares or in respect of
     which any Shares may be issued in satisfaction of a unitholder's redemption
     right.

          "U.S. Person" shall mean a person defined as a "United States Person"
           -----------
     in Section 7701(a)(30) of the Code.

     (b)  Ownership Limitation.

          (i)   Except as provided in subsections (l) and (u) of this Section 18
     and subject to subsection (b)(ix) of this Section 18, from the Adoption
     Date until the Restriction Termination Date, no Person or Persons acting as
     a group (other than an Existing Holder) shall Beneficially Own Shares in
     excess of the Ownership Limit.

          (ii)  Except as provided in subsections (l) and (u) of this Section 18
     and subject to subsection (b)(ix) of this Section 18, from the Adoption
     Date until the Restriction Termination Date, any Transfer which, if
     effective, would result in any Person (other than an Existing Holder)
     Beneficially Owning Shares in excess of the Ownership Limit shall be void
     ab initio as to the Transfer of the Shares which would be otherwise
     Beneficially Owned by such Person in excess of the Ownership Limit; and the
     intended transferee shall acquire no rights in such Shares.

          (iii) Except as provided in subsections (l) and (u) of this Section 18
     and subject to subsection (b)(ix) of this Section 18, from the Adoption
     Date until the Restriction Termination Date, any Transfer which, if
     effective, would result in any Existing Holder

                                       11

<PAGE>

          Beneficially Owning Shares in excess of the applicable Existing Holder
          Limit shall be void ab initio as to the Transfer of the Shares which
          would be otherwise Beneficially Owned by such Existing Holder in
          excess of the applicable Existing Holder Limit; and such Existing
          Holder shall acquire no rights in such Shares.

               (iv)   Except as provided in subsections (l) and (u) of this
          Section 18 and subject to subsection (b)(ix) of this Section 18, from
          the Adoption Date until the Restriction Termination Date, any Transfer
          which, if effective, would result in the Shares being beneficially
          owned (as provided in Section 856(a) of the Code) by fewer than 100
          Persons (determined without reference to any rules of attribution)
          shall be void ab initio as to the Transfer of the Shares which would
          be otherwise beneficially owned (as provided in Section 856(a) of the
          Code) by the transferee; and the intended transferee shall acquire no
          rights in such Shares.

               (v)    Except as provided in subsection (l) of this Section 18
          and subject to subsection (b)(ix) of this Section 18, from the
          Adoption Date until the Restriction Termination Date, any Transfer
          which, if effective, would result in the Trust being "closely held"
          within the meaning of Section 856(h) of the Code shall be void ab
          initio as to the Transfer of the Shares which would cause the Trust to
          be "closely held" within the meaning of Section 856(h) of the Code;
          and the intended transferee shall acquire no rights in such Shares.

               (vi)   Subject to subsection (b)(ix) of this Section 18, from the
          Adoption Date until the Restriction Termination Date, any Transfer to
          a Non-U.S. Person shall be void ab initio as to the Transfer of such
          Shares if, as a result of such Transfer, the fair market value of
          Shares owned directly or indirectly by Non-U.S. Persons would comprise
          50% or more of the fair market value of the issued and outstanding
          Shares of the Trust; and such Non-U.S. Person shall acquire no rights
          in such Shares.

               (vii)  Subject to subsection (b)(ix) of this Section 18, from the
          Adoption Date until the Restriction Termination Date, any Transfer
          which, if effective, would result in any Related Tenant Owner
          Constructively Owning Shares in excess of the Related Tenant Limit
          shall be void ab initio as to the Transfer of such Shares which would
          be otherwise Constructively Owned by such Related Tenant Owner in
          excess of the Related Tenant Limit; and the intended transferee shall
          acquire no rights in such Shares.

               (viii) Subject to subsection (b)(ix) of this Section 18, from the
          Adoption Date until the Restriction Termination Date, any Transfer
          which, if effective, would result in the disqualification of the Trust
          as a REIT by virtue of actual, Beneficial or Constructive Ownership of
          Shares shall be void ab initio as to such portion of the Transfer
          resulting in the disqualification; and the intended transferee shall
          acquire no rights in such Shares.

                                       12

<PAGE>

               (ix) Nothing contained in this Section 18 shall preclude the
          settlement of any transaction entered into through the facilities of
          the New York Stock Exchange (the "NYSE"). The fact that the settlement
                                            ----
          of any transaction is permitted shall not negate the effect of any
          other provision of this Section 18 and any transferee in such a
          transaction shall be subject to all of the provisions and limitations
          set forth in this Section 18.

          (c)  Excess Shares.

               (i)  If, notwithstanding the other provisions contained in this
          Section 18, at any time after the Adoption Date until the Restriction
          Termination Date, there is a purported Transfer which is not void ab
          initio pursuant to subsection (b) of this Section 18 such that (i) any
          Person (other than an Existing Holder) would Beneficially Own Shares
          in excess of the applicable Ownership Limit or (ii) any Existing
          Holder would Beneficially Own Shares in excess of the applicable
          Existing Holder Limit, then, except as otherwise provided in
          subsection (l) of this Section 18, Shares (other than Smith Preferred
          Shares) directly owned by such Person or Existing Holder, as the case
          may be, shall be automatically exchanged for an equal number of Excess
          Shares until such Person or Existing Holder, as the case may be, does
          not Beneficially Own Shares in excess of the applicable Ownership
          Limit or Existing Holder Limit. Such exchange shall be effective as of
          the close of business on the business day prior to the date of the
          purported Transfer. If, after exchanging all of the Shares owned
          directly by a Person or Existing Holder, such Person or Existing
          Holder still Beneficially Owns Shares in excess of the applicable
          Ownership Limit or Existing Holder Limit, Shares (other than Smith
          Preferred Shares) owned by such Person or Existing Holder
          constructively through the application of Section 544 of the Code, as
          modified by Section 856(h)(1)(B) of the Code, shall be exchanged for
          an equal number of Excess Shares until such Person or Existing Holder,
          as the case may be, does not Beneficially Own Shares in excess of the
          applicable Ownership Limit or Existing Holder Limit. If such Person or
          Existing Holder owns Shares constructively through one or more Persons
          and the Shares held by such other Persons must be exchanged for an
          equal number of Excess Shares, the exchange of Shares by such other
          Persons shall be pro rata.

               (ii) If, notwithstanding the other provisions contained in this
          Section 18, at any time after the Adoption Date until the Restriction
          Termination Date, there is a purported Transfer or any sale, transfer,
          gift, assignment, devise or other disposition of Shares or other
          interests of a direct or indirect Shareholder of the Trust which is
          not void ab initio pursuant to subsection (b) of this Section 18 and
          which, if effective, would cause the Trust to become "closely held"
          within the meaning of Section 856(h) of the Code, then any Shares
          (other than Smith Preferred Shares) being Transferred which would
          cause the Trust to be "closely held" within the meaning of Section
          856(h) of the Code (rounded up to the nearest whole Share) shall be
          automatically exchanged for an equal number of Excess Shares and be
          treated as provided in this Section 18. Such designation and treatment
          shall be effective as of the close of business on the business day
          prior to the date of the purported Transfer. If, after the exchange of
          any such Shares, the Trust is still "closely held" within the meaning
          of Section 856(h) of the Code, any individual whose Beneficial
          Ownership of Shares in the Trust increased as a result of the sale,
          transfer, gift, assignment, devise or other disposition of shares or
          other interests of a direct or indirect Shareholder of the Trust or
          any other event and is one of the five individuals who caused the
          Trust to be "closely held" within the meaning of Section

                                       13

<PAGE>

     856(h) of the Code, shall exchange Shares (other than Smith Preferred
     Shares) owned directly for an equal number of Excess Shares until the Trust
     is not "closely held" within the meaning of Section 856(h) of the Code. If
     similarly situated individuals exist, the exchange shall be pro rata. If,
     after applying the foregoing provisions, the Trust is still "closely held"
     within the meaning of Section 856(h) of the Code, then any Shares (other
     than Smith Preferred Shares) constructively owned by such individuals shall
     be exchanged for Excess Shares, on a pro rata basis among similarly
     situated individuals, until the Trust is not "closely held" within the
     meaning of Section 856(h) of the Code.

          (iii) If, at any time after the Adoption Date until the Restriction
     Termination Date, an event other than a purported Transfer (an "Event")
                                                                     -----
     occurs which would (i) cause any Person (other than an Existing Holder) to
     Beneficially Own Shares in excess of the Ownership Limit or (ii) cause an
     Existing Holder to Beneficially Own Shares in excess of the Existing Holder
     Limit, then, except as otherwise provided in subsection (l) of this Section
     18, Shares (other than Smith Preferred Shares) Beneficially Owned by such
     Person or Existing Holder, as the case may be, shall be automatically
     exchanged for an equal number of Excess Shares to the extent necessary to
     eliminate such excess ownership. Such exchange shall be effective as of the
     close of business on the business day prior to the date of the Event. In
     determining which Shares are exchanged, Shares (other than Smith Preferred
     Shares) Beneficially Owned by any Person who caused the Event to occur
     shall be exchanged before any Shares not so held are exchanged. If
     similarly situated Persons exist, the exchange shall be pro rata. If any
     Person is required to exchange Shares pursuant to this subsection (c)(iii),
     such Person shall first exchange Shares (other than Smith Preferred Shares)
     directly held by such Person before exchanging Shares owned constructively
     through the application of Section 544 of the Code, as modified by Section
     856(h)(1)(B) of the Code. If such Person or Existing Holder owns Shares
     constructively through one or more Persons and the Shares held by such
     other Persons must be exchanged for an equal number of Excess Shares, the
     exchange of Shares by such other Persons shall be pro rata.

          (iv)  If, at any time after the Adoption Date until the Restriction
     Termination Date, an Event occurs which would cause the Trust to become
     "closely held" within the meaning of Section 856(h) of the Code, then
     Shares (other than Smith Preferred Shares) Beneficially Owned by any Person
     or Existing Holder, as the case may be, shall be automatically exchanged
     for an equal number of Excess Shares to the extent necessary to eliminate
     such excess ownership. Such exchange shall be effective as of the close of
     business on the business day prior to the date of the Event. In determining
     which Shares are exchanged, Shares (other than Smith Preferred Shares)
     Beneficially Owned by any Person who caused the Event to occur shall be
     exchanged before any Shares not so held are exchanged. If similarly
     situated Persons exist, the exchange shall be pro rata. If any Person is
     required to

                                       14

<PAGE>

     exchange Shares pursuant to this subsection (c)(iv), such Person shall
     first exchange Shares (other than Smith Preferred Shares) directly held by
     such Person before exchanging Shares owned constructively through the
     application of Section 544 of the Code, as modified by Section 856(h)(1)(B)
     of the Code. If any Person owns Shares constructively through one or more
     Persons and the Shares held by such other Persons must be exchanged for an
     equal number of Excess Shares, the exchange of Shares by such other Persons
     shall be pro rata.

          (v)   If, notwithstanding the other provisions contained in this
     Article II, there is a purported Transfer which is not void ab initio
     pursuant to subsection (b) of this Section 18 to (i) a Non-U.S. Person or
     (ii) a U.S. Person whose Shares would be treated as owned indirectly by a
     Non-U.S. Person, then any Shares (other than Smith Preferred Shares) being
     Transferred which would result in the fair market value of Shares owned
     directly or indirectly by Non-U.S. Persons comprising 50% or more of the
     fair market value of the issued and outstanding Shares of the Trust shall
     be automatically exchanged for an equal number of Excess Shares and be
     treated as provided in this Section 18. Such designation and treatment
     shall be effective as of the close of business on the business day prior to
     the date of the purported Transfer.

          (vi)  If, notwithstanding the other provisions contained in this
     Article II, there is an event other than those described in subsection
     (c)(v) of this Section 18 (a "Non-U.S. Event") which would result in the
                                   --------------
     fair market value of Shares owned directly or indirectly by Non-U.S.
     Persons comprising 50% or more of the fair market value of the issued and
     outstanding Shares of the Trust, then Shares (other than Smith Preferred
     Shares) owned directly or indirectly by Non-U.S. Persons shall be
     automatically exchanged for an equal number of Excess Shares to the extent
     necessary to eliminate such excess ownership. Such exchange shall be
     effective as of the close of business on the business day prior to the date
     of the Non-U.S. Event. In determining which Shares are exchanged, Shares
     (other than Smith Preferred Shares) owned directly or indirectly by any
     Non-U.S. Person who caused the Non-U.S. Event to occur shall be exchanged
     before any Shares not so held are exchanged. If similarly situated Persons
     exist, the exchange shall be pro rata. If the Non-U.S. Event was not caused
     by a Non-U.S. Person, Shares (other than Smith Preferred Shares) owned
     directly or indirectly by Non-U.S. Persons shall be chosen by random lot
     and exchanged for Excess Shares until Non-U.S. Persons do not own directly
     or indirectly 50% or more of the issued and outstanding Shares.

          (vii) If, notwithstanding the other provisions contained in this
     Section 18, at any time after the Adoption Date until the Restriction
     Termination Date, there is a purported Transfer or any sale, transfer,
     gift, assignment, devise or other disposition of Shares or other interests
     of a direct or indirect Shareholder of the Trust which, if effective, would
     cause any Related Tenant Owner to Constructively Own Shares in excess of
     the Related Tenant Limit, then any Shares (other than Smith Preferred
     Shares) purportedly owned by such Related Tenant Owner which would cause
     such Related Tenant to Constructively Own Shares in excess of the Related
     Tenant Limit shall be automatically exchanged for an equal number of

                                       15

<PAGE>


     Excess Shares and be treated as provided in this Section 18. Such
     designation and treatment shall be effective as of the close of business on
     the business day prior to the date of the purported Transfer or event
     described in the preceding sentence. In determining which Shares are
     exchanged, Shares (other than Smith Preferred Shares) owned directly or
     indirectly by any Person who caused the Related Tenant Event to occur shall
     be exchanged before any Shares not so held are exchanged. If similarly
     situated Persons exist, the exchange shall be pro rata. If the Related
     Tenant Limit is still exceeded and the Related Tenant Event was not caused
     by the Related Tenant Owner in question, Shares (other than Smith Preferred
     Shares) owned directly or indirectly by such Related Tenant Owner shall be
     exchanged for Excess Shares until the Related Tenant Owner does not own
     Shares in excess of the Related Tenant Limit.

          (viii) If, at any time after the Adoption Date until the Restriction
     Termination Date, there is an event (a "Related Tenant Event") which would
                                             --------------------
     cause any Related Tenant Owner to Constructively Own Shares in excess of
     the Related Tenant Limit, then Shares (other than Smith Preferred Shares)
     which would cause the Related Tenant Limit to be exceeded shall be
     automatically exchanged for an equal number of Excess Shares to the extent
     necessary to eliminate such excess ownership. Such exchange shall be
     effective as of the close of business on the business day prior to the date
     of the Related Tenant Event. In determining which Shares are exchanged,
     Shares (other than Smith Preferred Shares) owned directly or indirectly by
     any Person who caused the Related Tenant Event to occur shall be exchanged
     before any Shares not so held are exchanged. If similarly situated Persons
     exist, the exchange shall be pro rata. If the Related Tenant Limit is still
     exceeded and the Related Tenant Event was not caused by the Related Tenant
     Owner in question, Shares (other than Smith Preferred Shares) owned
     directly or indirectly by such Related Tenant Owner shall be exchanged for
     Excess Shares until the Related Tenant Owner does not own Shares in excess
     of the Related Tenant Limit.

          (ix) If, notwithstanding the other provisions contained in this
     Section 18, at any time after the Adoption Date until the Restriction
     Termination Date, there is a purported Transfer or any sale, transfer,
     gift, assignment, devise or other disposition of Shares or other interests
     of a direct or indirect Shareholder of the Trust which, if effective, would
     result in the disqualification of the Trust as a REIT by virtue of actual,
     Beneficial or Constructive Ownership of Shares, then any Shares (other than
     Smith Preferred Shares) being Transferred which would result in such
     disqualification shall be automatically exchanged for an equal number of
     Excess Shares and shall be treated as provided in this Section 18. Such
     designation and treatment shall be effective as of the close of business on
     the business day prior to the date of the purported Transfer.

          (x) If, at any time after the Adoption Date until the Restriction
     Termination Date, notwithstanding the other provisions contained in this
     Section 18, there is an event (a "Prohibited Owner Event") which would
                                       ----------------------
     result in the disqualification of the Trust as a REIT by virtue of actual,
     Beneficial or Constructive Ownership of Shares, then Shares (other than

                                       16

<PAGE>

          Smith Preferred Shares) which would result in the disqualification of
          the Trust shall be automatically exchanged for an equal number of
          Excess Shares to the extent necessary to avoid such disqualification.
          Such exchange shall be effective as of the close of business on the
          business day prior to the date of the Prohibited Owner Event. In
          determining which Shares are exchanged, Shares (other than Smith
          Preferred Shares) owned directly or indirectly by any Person who
          caused the Prohibited Owner Event to occur shall be exchanged before
          any Shares not so held are exchanged. If similarly situated Persons
          exist, the exchange shall be pro rata. If the Trust is still
          disqualified, Shares (other than Smith Preferred Shares) owned
          directly or indirectly by Persons who did not cause the Prohibited
          Owner Event to occur shall be chosen by random lot and exchanged for
          Excess Shares until the Trust is no longer disqualified as a REIT.

          (d)  Prevention of Transfer. If the Board or its designee shall at any
time determine in good faith that a Transfer has taken place in violation of
subsection (b) of this Section 18 or that a Person intends to acquire or has
attempted to acquire Beneficial Ownership (determined without reference to any
rules of attribution) of any Shares in violation of subsection (b) of this
Section 18, the Board or its designee shall take such action as it deems
advisable to refuse to give effect to or to prevent such Transfer, including,
but not limited to, refusing to give effect to such Transfer on the books of the
Trust or instituting proceedings to enjoin such Transfer; provided, however,
that any Transfers or attempted Transfers in violation of subsection (b) of this
Section 18 shall automatically result in the designation and treatment described
in subsection (c) of this Section 18, irrespective of any action (or non-action)
by the Board.

          (e)  Notice to Trust. Any Person who acquires or attempts to acquire
Shares in violation of subsection (b) of this Section 18, or any Person who is a
transferee such that Excess Shares result under subsection (c) of this Section
18, shall immediately give written notice or, with respect to a proposed or
attempted Transfer, give at least 30 days' prior written notice to the Trust of
such event and shall provide to the Trust such other information as the Trust
may request in order to determine the effect, if any, of such Transfer or
attempted Transfer on the Trust's status as a REIT.

          (f)  Information for Trust. From the Adoption Date until the
Restriction Termination Date:

               (i) Every Beneficial Owner of more than 5% (or such other
          percentage, between 0.5% and 5%, as provided in the income tax
          regulations promulgated under the Code) of the number or value of
          outstanding Shares of the Trust, if such Beneficial Ownership includes
          Shares other than Smith Preferred Shares, shall, within 30 days after
          January 1 of each year, give written notice to the Trust stating the
          name and address of such Beneficial Owner, the number of Shares
          Beneficially Owned and a description of how such Shares are held; and
          each such Beneficial Owner shall provide to the Trust such additional
          information as the Trust may reasonably request in order to determine
          the effect, if any, of such Beneficial Ownership on the Trust's status
          as a REIT; and

                                       17

<PAGE>

               (ii) Each Person who is a Beneficial Owner of Shares, if such
          Beneficial Ownership includes Shares other than Smith Preferred
          Shares, and each Person (including the Shareholder of record) who is
          holding Shares for a Beneficial Owner, if such Beneficial Ownership
          includes Shares other than Smith Preferred Shares, shall provide to
          the Trust in writing such information with respect to direct, indirect
          and constructive ownership of Shares as the Board deems reasonably
          necessary to comply with the provisions of the Code applicable to a
          REIT, to determine the Trust's status as a REIT, to comply with the
          requirements of any taxing authority or governmental agency or to
          determine any such compliance.

          (g)  Other Action by Board. Subject to subsection (b) of this Section
18, nothing contained in this Section 18 shall limit the authority of the Board
to take such other action as it deems necessary or advisable to protect the
Trust and the interests of its Shareholders by preservation of the Trust's
status as a REIT; provided, however, that no provision of this Section 18 shall
preclude the settlement of any transaction entered into through the facilities
of the NYSE.

          (h)  Ambiguities. In the case of an ambiguity in the application of
any of the provisions of this Section 18, including any definition contained in
subsection (a) of this Section 18, the Board shall have the power to determine
the application of the provisions of this Section 18 with respect to any
situation based on the facts known to it.

          (i)  Modification of Existing Holder Limits. The Existing Holder
Limits may be modified as follows:

               (i)   Subject to the limitations provided in subsection (k) of
          this Section 18, the Board may grant options which result in
          Beneficial Ownership of Shares by an Existing Holder pursuant to an
          option plan approved by the Board and/or the Shareholders. Any such
          grant shall increase the Existing Holder Limit for the affected
          Existing Holder to the maximum extent possible under subsection (k) of
          this Section 18 to permit the Beneficial Ownership of Shares issuable
          upon the exercise of such option.

               (ii)  Subject to the limitations provided in subsection (k) of
          this Section 18, an Existing Holder may elect to participate in a
          dividend reinvestment plan approved by the Board which results in
          Beneficial Ownership of Shares by such participating Existing Holder
          and any comparable reinvestment plan of any partnership, wherein those
          Existing Holders holding Units are entitled to purchase additional
          Units. Any such participation shall increase the Existing Holder Limit
          for the affected Existing Holder to the maximum extent possible under
          subsection (k) of this Section 18 to permit Beneficial Ownership of
          the Shares acquired as a result of such participation.

               (iii) The Board shall reduce the Existing Holder Limit for any
          Existing Holder after any Transfer permitted in this Section 18 by
          such Existing Holder by the percentage of the outstanding Shares so
          Transferred or after the lapse (without exercise) of an option

                                       18

<PAGE>

          described in subsection (i)(i) of this Section 18 by the percentage of
          the Shares which the option, if exercised, would have represented, but
          in either case no Existing Holder Limit shall be reduced to a
          percentage which is less than the Ownership Limit.

          (j)  Increase or Decrease in Ownership Limit. Subject to the
limitations provided in subsection (k) of this Section 18, the Board may from
time to time increase or decrease the Ownership Limit; provided, however, that
any decrease may only be made prospectively as to subsequent holders (other than
a decrease as a result of a retroactive change in existing law which would
require a decrease to retain REIT status, in which case such decrease shall be
effective immediately).

          (k)  Limitations on Changes in Existing Holder and Ownership Limits.

               (i)   Neither the Ownership Limit nor any Existing Holder Limit
          may be increased (nor may any additional Existing Holder Limit be
          created) if, after giving effect to such increase (or creation), five
          individual Beneficial Owners of Shares (including all of the then
          Existing Holders) could Beneficially Own, in the aggregate, more than
          49.9% in number or value of the outstanding Shares.

               (ii)  Prior to the modification of any Existing Holder Limit or
          Ownership Limit pursuant to subsection (i) or (j) of this Section 18,
          the Board may require such opinions of counsel, affidavits,
          undertakings or agreements as it may deem necessary or advisable in
          order to determine or ensure the Trust's status as a REIT.

               (iii) No Ownership Limit may be increased to a percentage which
          is greater than 9.9%.

          (l)  Waivers by the Board. The Board, upon receipt of a ruling from
the Internal Revenue Service, an opinion of counsel to the effect that such
exemption will not result in the Trust being "closely held" within the meaning
of Section 856(h) of the Code or such other evidence as the Board deems
necessary in its sole discretion, may exempt, on such conditions and terms as
the Board deems necessary in its sole discretion, a Person from the Ownership
Limit or the Existing Holder Limit, as the case may be, if the Board obtains
such representations and undertakings from such Person as the Board may deem
appropriate and such Person agrees that any violation or attempted violation
shall result in, to the extent necessary, the exchange of Shares held by such
Person for Excess Shares in accordance with subsection (c) of this Section 18.

          (m) Legend. Each certificate for Shares (other than Smith Preferred
     Shares) shall bear substantially the following legend:

          "The securities represented by this certificate are subject to
          restrictions on ownership and transfer for purposes of the Trust's
          maintenance of its status as a real estate investment trust under the
          Internal Revenue Code of 1986, as amended. Except as

                                       19

<PAGE>

     otherwise provided pursuant to the Amended and Restated Declaration of
     Trust of the Trust, no Person may Beneficially Own Shares in excess of 9.8%
     (or such greater percentage as may be determined by the Board of Trustees
     of the Trust) of the number or value of the outstanding Shares of the
     Trust. Any Person who attempts or proposes to Beneficially Own Shares in
     excess of the above limitations must notify the Trust in writing at least
     30 days prior to such proposed or attempted Transfer. In addition, Share
     ownership by and transfers of Shares to non-U.S. persons and certain
     tenants of the Trust are subject to certain restrictions. If the
     restrictions on transfer are violated, the securities represented hereby
     shall be designated and treated as Excess Shares which shall be held in
     trust by the Excess Share Trustee for the benefit of the Charitable
     Beneficiary. All capitalized terms in this legend have the meanings defined
     in the Amended and Restated Declaration of Trust of the Trust, a copy of
     which, including the restrictions on transfer, shall be furnished to each
     Shareholder on request and without charge."

     (n)   Severability. If any provision of this Section 18 or any application
of any such provision is determined to be void, invalid or unenforceable by any
court having jurisdiction over the issue, the validity and enforceability of the
remaining provisions shall be affected only to the extent necessary to comply
with the determination of such court.

     (o)   Transfer of Excess Shares. Upon any purported Transfer which results
in Excess Shares pursuant to subsection (c) of this Section 18, such Excess
Shares shall be deemed to have been transferred to the Excess Share Trustee, as
trustee of a special trust for the exclusive benefit of the Charitable
Beneficiary or Charitable Beneficiaries to whom an interest in such Excess
Shares may later be transferred pursuant to subsection (c) of this Section 18.
Excess Shares so held in trust shall be issued and outstanding Shares of the
Trust. The Purported Record Transferee or Purported Record Holder shall have no
rights in such Excess Shares except as provided in subsection (r) of this
Section 18.

     (p)   Distributions on Excess Shares. Any dividends (whether taxable as a
dividend, return of capital or otherwise) on Excess Shares shall be paid to the
Excess Share Trust for the benefit of the Charitable Beneficiary. Upon
liquidation, dissolution or winding up, the Purported Record Transferee shall
receive the lesser of (i) the amount of any distribution made upon liquidation,
dissolution or winding up or (ii) the price paid by the Purported Record
Transferee for the Shares, or if the Purported Record Transferee did not give
value for the Shares, the Market Price of the Shares on the day of the event
causing the Shares to be held in trust. Any such dividend paid or distribution
paid to the Purported Record Transferee in excess of the amount provided in the
preceding sentence prior to the discovery by the Trust that the Shares with
respect to which the dividend or distribution was made had been exchanged for
Excess Shares shall be repaid to the Excess Share Trust for the benefit of the
Charitable Beneficiary.

     (q)   Voting of Excess Shares. The Excess Share Trustee shall be entitled
to vote the Excess Shares for the benefit of the Charitable Beneficiary on any
matter. Any vote taken by a

                                       20

<PAGE>

Purported Record Transferee prior to the discovery by the Trust that the Excess
Shares were held in trust shall, subject to applicable law, be rescinded ab
initio, provided, however, that if the Trust has taken irreversible action, a
vote need not be rescinded. The owner of the Excess Shares shall be deemed to
have given an irrevocable proxy to the Excess Share Trustee to vote the Excess
Shares for the benefit of the Charitable Beneficiary.

     (r)   Non-Transferability of Excess Shares. Excess Shares shall be
transferable only as provided in this subsection (r). At the direction of the
Trust, the Excess Share Trustee shall transfer the Shares held in the Excess
Share Trust to a Person whose ownership of the Shares will not violate the
Ownership Limit or Existing Holder Limit. If Shares were transferred to the
Excess Share Trustee pursuant to subsection (c)(i), (c)(ii), (c)(iii) or (c)(iv)
of this Section 18, at the direction of the Trust, the Excess Share Trustee
shall transfer the Shares held by the Excess Share Trustee to a Person who makes
the highest offer for the Excess Shares and pays the purchase price and whose
ownership of the Shares will not violate the Ownership Limit. If Shares were
transferred to the Excess Shares Trustee pursuant to subsection (c)(v) or
(c)(vi) of this Section 18, at the direction of the Trust, the Excess Share
Trustee shall transfer the Shares held by the Excess Share Trustee to the U.S.
Person who makes the highest offer for the Excess Shares and pays the purchase
price. If such a transfer is made to a Person, the interest of the Charitable
Beneficiary shall terminate and proceeds of the sale shall be payable to the
Purported Record Transferee and to the Charitable Beneficiary. The Purported
Record Transferee shall receive (i) the lesser of (A) the price paid by the
Purported Record Transferee for the Shares or, if the Purported Record
Transferee did not give value for the Shares, the Market Price of the Shares on
the day of the event causing the Shares to be held in trust, and (B) the price
received by the Excess Share Trust from the sale or other disposition of the
Shares minus (ii) any dividend paid or distribution paid to the Purported Record
Transferee which the Purported Record Transferee was under an obligation to
repay to the Excess Share Trustee but has not repaid to the Excess Share Trustee
at the time of the distribution of the proceeds. Any proceeds in excess of the
amount payable to the Purported Record Transferee shall be paid to the
Charitable Beneficiary. Prior to any transfer of any Excess Shares by the Excess
Share Trustee, the Trust must have waived in writing its purchase rights under
subsection (t) of this Section 18. It is expressly understood that the Purported
Record Transferee may enforce the provisions of this Section 18 against the
Charitable Beneficiary.

     (s)   Acting as Agent. If any of the foregoing restrictions on transfer of
Excess Shares is determined to be void, invalid or unenforceable by any court of
competent jurisdiction, then the Purported Record Transferee may be deemed, at
the option of the Trust, to have acted as an agent of the Trust in acquiring
such Excess Shares and to hold such Excess Shares on behalf of the Trust.

     (t)   Call by Trust on Excess Shares. Excess Shares shall be deemed to have
been offered for sale to the Trust, or its designee, at a price per Share equal
to the lesser of (i) the price per Share in the transaction which created such
Excess Shares (or, in the case of a devise, gift or other transaction in which
no value was given for such Excess Shares, the Market Price at the time of such
devise, gift or other transaction) and (ii) the Market Price of the Shares to
which such Excess Shares relate on the date the Trust, or its designee, accepts
such offer (the "Redemption Price"). The
                 ----------------

                                       21

<PAGE>

Trust shall have the right to accept such offer for a period of 90 days after
the later of (A) the date of the Transfer which resulted in such Excess Shares
and (B) the date the Board determines in good faith that a Transfer resulting in
Excess Shares has occurred, if the Trust does not receive a notice of such
Transfer pursuant to subsection (e) of this Section 18, but in no event later
than a permitted Transfer pursuant to and in compliance with the terms of
subsection (r) of this Section 18. Unless the Board determines that it is in the
interests of the Trust to make earlier payments of all of the amount determined
as the Redemption Price per Share in accordance with the preceding sentence, the
Redemption Price may be payable at the option of the Board at any time up to but
not later than five years after the date the Trust accepts the offer to purchase
the Excess Shares. In no event shall the Trust have an obligation to pay
interest to the Purported Record Transferee.

     (u)   Underwritten Offerings. The Ownership Limit shall not apply to the
acquisition of Shares or rights, options or warrants for, or securities
convertible into, Shares by an underwriter in a public offering, provided that
the underwriter makes a timely distribution of such Shares or rights, options or
warrants for, or securities convertible into, Shares.

     Section 18A. Transferability; Transfer Restrictions and Ownership
Limitations of the Smith Preferred Shares.

     (a)   Definitions. For purposes of this Section 18A, the following terms
shall have the following meanings:

           "Acquire" shall mean the acquisition of Beneficial or Constructive
            -------
     Ownership of Shares of the Trust by any means including, without
     limitation, (i) the acquisition of direct ownership of Shares by any
     Person, including through the exercise of Acquisition Rights or any other
     option, warrant, pledge, other security interest or similar right to
     acquire Shares, and (ii) the acquisition of indirect ownership of Shares
     (taking into account the constructive ownership rules of Section 544 of the
     Code, as modified by Section 856(h)(1)(B) of the Code) by a Person who is
     an individual within the meaning of Section 542(a)(2) of the Code,
     including, without limitation, through the acquisition by any Person of
     Acquisition Rights or any option, warrant, pledge, security interest, or
     similar right to acquire Shares. The term "Acquisition" shall have the
     correlative meaning.

           "Acquisition Rights" shall mean rights to Acquire Shares pursuant to:
            ------------------
     (i) the exercise of any option to acquire Shares; or (ii) any pledge of
     Shares.

           "Adoption Date" shall mean the date of the adoption of the ownership
            -------------
     restrictions contained in this Section 18A by resolution of the Board,
     which shall be deemed to occur upon the Board's adoption of this
     Declaration of Trust.

           "Beneficial Ownership" shall mean, with respect to any Person,
            --------------------
     ownership of Shares by that Person equal to the sum of (i) the Shares
     directly owned by such Person and (ii) the Shares indirectly owned by such
     Person (if such Person is an "individual" as defined in

                                       22

<PAGE>

Section 542(a)(2) of the Code) taking into account constructive ownership
determined under Section 544 of the Code, as modified by Section 856(h)(1)(B) of
the Code (except where expressly provided otherwise). The terms "Beneficial
Owner," "Beneficially Owns" and "Beneficially Owned" shall have the correlative
meanings.

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

     "Constructive Ownership" shall mean ownership of Shares either directly by
      ----------------------
a Person or constructively by a Person through the application of Section 318(a)
of the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Owns," and "Constructively Owned" shall
have the correlative meanings.

     "Constructive Ownership Prohibitions" shall mean as follows: (i) no Smith
      -----------------------------------
and Kogod Holder, nor any Person whose ownership of Shares would cause a Smith
and Kogod Holder to be considered to Constructively Own such Shares, nor any
Person who would be considered to Constructively Own Shares that are
Constructively Owned by a Smith and Kogod Holder, shall be permitted to Acquire
Shares (whether by reason of the exercise of the Redemption Right or otherwise)
if, after giving effect to and as a result of such Acquisition, (a) as the
result of such Acquisition, any tenant or subtenant of real property considered
owned, directly or indirectly, by the Trust for purposes of Section 856(d)(2)(B)
of the Code would be regarded as a "related party tenant" of the Trust for
purposes of Section 856(d)(2)(B) of the Code and (b) the total rental income
considered derived by the Trust for the calendar year of such Acquisition or any
calendar year thereafter from all "related party tenants" could reasonably be
expected (either at such time or in the foreseeable future) to exceed one-half
of one percent (0.5%) of the gross income of the Trust (as determined for
purposes of Section 856(c)(2) of the Code) for such calendar year, and (ii) no
Person (other than a Person subject to (i) of this paragraph) shall be permitted
to Acquire Shares (whether by reason of the exercise of the Redemption Right or
otherwise) if, after giving effect to and as a result of such acquisition, such
Person would Constructively Own more than 9.8% of the outstanding Shares.

     "Excess Shares" shall have the meaning given to such term in Section 18 of
      -------------
the Declaration of Trust.

     "Market Price" on any date shall mean, with respect to any class or series
      ------------
of outstanding Shares, the average of the Closing Price for such Shares for the
five consecutive Trading Days ending on such date. The "Closing Price" on any
date shall mean the last sale price for such series Shares, regular way, or, in
case no such sale takes place on such date, the average of the closing bid and
asked prices, regular way, for such Shares, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, for such series of Shares in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to

                                       23

<PAGE>

trading on the NYSE or, if such Shares are not listed or admitted to trading on
the NYSE, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which such Shares are listed or admitted to trading or, if such Shares are
not listed or admitted to trading on any national securities exchange, the last
quoted price, or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System or, if such system is no
longer in use, the principal other automated quotation systems that may then be
in use or, if such Shares are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in such Shares selected by the Board of the Trust. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the applicable Shares are listed or admitted to trading is
open for the transaction of business, or, if such Shares are not listed or
admitted to trading on any national securities exchange, shall mean any day
other than a Saturday, a Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive order to
close.

     "Ownership Limit" shall mean 9.8% either in number of shares or value
      ---------------
(whichever is more restrictive) of the outstanding Shares of the Trust.

     "Person" shall mean an individual, corporation, partnership, estate, trust
      ------
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity and also includes a group as that term is used for purposes of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; but does
not include an underwriter which participates in a public offering of Shares for
a period of 90 days following the purchase by such underwriter of the Shares,
provided that the ownership of Shares by such underwriter would not result in
the Trust being "closely held" within the meaning of Section 856(h) of the Code
or otherwise result in the Trust failing to qualify as a REIT.

     "REIT" shall mean a "real estate investment trust" under Section 856 of the
      ----
Code.

     "REIT Provisions of the Code" means Sections 856 through 860 of the Code
      ---------------------------
and any successor or other provisions of the Code relating to real estate
investment trusts (including provisions as to the attribution of ownership of
beneficial interests therein) and the regulations promulgated thereunder.

     "Redemption Right" shall mean the right set forth in Section 6.6 of Annex A
      ----------------
of the Amended and Restated Declaration of Trust of Archstone-Smith Operating
Trust.

                                       24

<PAGE>

     "Restriction Termination Date" shall mean the first day after the Adoption
      ----------------------------
Date on which the Trust determines that it is no longer in the best interests of
the Trust to attempt to, or continue to, qualify as a REIT.

     "Shares" shall mean all classes or series of shares of the Trust, including
      ------
without limitation, Common Shares, Smith Preferred Shares and Excess Shares.

     "Smith and Kogod Holders" shall mean, collectively, Robert H. Smith, Robert
      -----------------------
P. Kogod, each of the spouses and children of Robert H. Smith and Robert P.
Kogod, Charles E. Smith Management, Inc., Charles E. Smith Construction
Management, Inc., Consolidated Engineering Services, Inc. and any other Person
who is or would be either a Beneficial Owner or Constructive Owner of Shares as
a result of the Beneficial Ownership or Constructive Ownership of Shares by any
of Robert H. Smith, Robert P. Kogod or the spouses of Robert H. Smith and Robert
P. Kogod, or whose ownership of Shares would cause any of Robert H. Smith,
Robert P. Kogod or the spouses of Robert H. Smith and Robert P. Kogod, to be a
Beneficial Owner or Constructive Owner of such Shares.

     "Smith Preferred Shares" shall mean the Series H Preferred Shares, Series I
      ----------------------
Preferred Shares, Series J Preferred Shares, Series K Preferred Shares and
Series L Preferred Shares of the Trust or any of the foregoing.

     "Transfer" shall mean any sale, transfer, gift, assignment, devise or other
      --------
disposition of Smith Preferred Shares that results in a change in the record,
Beneficial Ownership or Constructive Ownership of the Smith Preferred Shares or
the right to vote or receive dividends on the Smith Preferred Shares (including
without limitation (i) the granting of any option or entering into any agreement
for the sale, transfer or other disposition of the Smith Preferred Shares or the
right to vote or receive dividends on the Smith Preferred Shares or (ii) the
sale, transfer, assignment or other disposition or grant of any Acquisition
Rights or other securities or rights convertible into or exchangeable for the
Smith Preferred Shares, or the right to vote or receive dividends on the Smith
Preferred Shares), whether voluntary or involuntary, whether of record,
Beneficially or Constructively and whether by operation of law or otherwise.

     (b)   Ownership Limitation.

           (i)   Except as provided in subsection (i) of this Section 18A,
     during the period commencing on the date of the Adoption Date and prior to
     the Restriction Termination Date:

                 (A)   no Person shall Acquire or Beneficially Own any Smith
           Preferred Shares if, as the result of such Acquisition or Beneficial
           Ownership, such Person would Beneficially Own Shares in excess of the
           Ownership Limit;

                                       25

<PAGE>

                  (B) no Person shall Acquire or Constructively Own any Smith
           Preferred Shares if, as the result of such Acquisition or
           Constructive Ownership, any Person would Constructively Own Shares in
           violation of the Constructive Ownership Prohibitions;

                  (C) no Person shall Acquire any Smith Preferred Shares if, as
           a result of such Acquisition, the Shares would be Beneficially Owned
           by less than 100 Persons (determined without reference to any rules
           of attribution); and

                  (D) no Person shall Acquire or Beneficially Own any Smith
           Preferred Shares if, as a result of such Acquisition or Beneficial
           Ownership, the Trust would be "closely held" within the meaning of
           Section 856(h) of the Code.

           (ii)   Any Transfer (whether or not such Transfer is the result of a
     transaction entered into through the facilities of the New York Stock
     Exchange) that, if effective, would result in a violation of the
     restrictions in this subsection (b) of this Section 18A shall be void ab
     initio as to the Transfer of such Shares that would cause the violation of
     the applicable restriction in this subsection (b) of this Section 18A, and
     the intended transferee shall acquire no rights in such Shares.

     (c)   Remedies for Breach. If the Board or a committee thereof shall at any
time determine in good faith that a purported Transfer or other event has taken
place in violation of subsection (b) of this Section 18A or that a Person
intends to Acquire or has attempted to Acquire Beneficial Ownership or
Constructive Ownership of any Shares that will result in violation of subsection
(b) of this Section 18A (whether or not such violation is intended), the Board
or a committee thereof shall take such action as it or they deem advisable to
refuse to give effect to or to prevent such Transfer or other event, including,
but not limited to, refusing to give effect to such Transfer on the books of the
Trust or instituting proceedings to enjoin such Transfer.

     (d)   Notice to Trust . Any Person who Acquires or attempts or intends to
Acquire Shares in violation of subsection (b) of this Section 18A or any Person
who is a transferee in a Transfer or is otherwise affected by an event, shall
immediately give written notice to the Trust of such Transfer or other event and
shall provide to the Trust such other information as the Trust may request in
order to determine the effect, if any, of such Transfer or attempted, intended
or purported Transfer or other event on the Trust's status as a REIT.

     (e)   Information for Trust. From after the Adoption Date and prior to the
Restriction Termination Date:

                  (i)   every shareholder of record of more than 5% (or such
           lower percentage as required by the Code or regulations promulgated
           thereunder) of the number or value of the outstanding Shares shall,
           if such Shares include Smith Preferred Shares, within 30 days after
           December 31 of each year, give written notice to the Trust stating
           the name and address of

                                       26

<PAGE>

     such record shareholder, the number of Shares Beneficially Owned by it, and
     a description of how such Shares are held; provided that a shareholder of
     record who holds outstanding Shares as nominee for another person, which
     other person is required to include in gross income, for U.S. federal
     income tax purposes, the dividends received on such Shares (an "Actual
     Owner"), shall give written notice to the Trust stating the name and
     address of such Actual Owner and the number of shares of such Actual Owner
     with respect to which the shareholder of record is nominee.

          (ii)  every Actual Owner of more than 5% (or such lower percentage as
     required by the Code or regulations promulgated thereunder) of the number
     or value of the outstanding Shares who is not a shareholder of record,
     shall, if such Shares include Smith Preferred Shares, within 30 days after
     December 31 of each year give written notice to the Trust stating the name
     and address of such Actual Owner, the number of Shares Beneficially Owned,
     and a description of how such Shares are held.

          (iii) each person who is a Beneficial Owner or Constructive Owner of
     Shares, if such Shares include Smith Preferred Shares, and each Person
     (including the shareholder of record) who is holding Shares for a
     Beneficial Owner or Constructive Owner, if such Shares include Smith
     Preferred Shares, shall provide to the Trust such information as the Trust
     may request, in good faith, in order to determine the Trust's compliance
     with the REIT provisions of the Code.

     (f) Remedies Not Limited. Nothing contained in this Section 18A shall
limit the authority of the Board to take such other action as it deems necessary
or advisable to protect the Trust and the interests of its shareholders in
preserving the Trust's status as a REIT.

     (g) No Remedy Against Transferor. A purported transferee shall have no
claim, cause of action, or any other recourse whatsoever against a transferor of
Shares acquired by such purported transferee in violation of subsection (b) of
this Section 18A.

     (h) Ambiguity. In the case of an ambiguity in the application of any of the
provisions of this Section 18A, including any definition contained in subsection
(a) of Section 18A, the Board shall have the power to determine the application
of the provisions of this Section 18A with respect to any situation based on the
facts known to it.

     (i) Exception. The Board, in its sole discretion, may exempt a Person from
the Ownership Limit or the Constructive Ownership Prohibitions, as the case may
be, with respect to Smith Preferred Shares to be Acquired, Beneficially Owned,
or Constructively Owned by such Person (A) if such Person is not an individual
for purposes of Section 542(a)(2) of the Code and the Board obtains such
representations and undertakings from such Person as it determines are
reasonably necessary to ascertain that no individual's Beneficial or
Constructive Ownership of such Shares will violate the Ownership Limit, or the
Constructive Ownership Prohibitions, as the case may be, or otherwise violate
subsection (b) of this Section 18A and (B) if such Person does not own,

                                       27

<PAGE>

actually or Constructively, an interest in a tenant of the Trust (or a tenant of
an entity owned or controlled by the Trust) that would cause the Trust to own,
actually or Constructively, more than a 9.8% interest (as set forth in Section
856(d)(2)(B) of the Code) in such tenant. Prior to granting any exception
pursuant to this subsection (i) of this Section 18A, the Board may require a
ruling from the Internal Revenue Service, or an opinion of counsel, in either
case in form and substance satisfactory to the Board in its sole discretion, as
it may deem necessary or advisable in order to determine or ensure the Trust's
status as a REIT. Notwithstanding the receipt of any ruling or opinion, the
Board may impose such conditions or restrictions as it deems appropriate in
connection with granting such exception.

     (j)  Legend. Each certificate for Smith Preferred Shares shall bear
substantially the following legend:

          "The shares represented by this certificate are subject to
          restrictions on transfer and ownership for the purpose of the Trust's
          maintenance of its status as a Real Estate Investment Trust under the
          Internal Revenue Code of 1986, as amended. Subject to certain further
          restrictions and except as expressly provided in the Trust's Amended
          and Restated Declaration of Trust, no Person may Beneficially Own
          Shares of the Trust in excess of 9.8 percent in number or value of the
          outstanding Shares of the Trust. Separate restrictions set forth in
          Sections 18 and 18A of the Trust's Amended and Restated Declaration of
          Trust apply to restrict the permissible Constructive Ownership of
          Shares. Any Person who Beneficially Owns or attempts to Beneficially
          Own Shares in excess of the above limitations must immediately notify
          the Trust, Shares so held may be subject to mandatory redemption or
          sale in certain events, certain purported acquisitions of Shares in
          excess of such limitations shall be void ab initio. A Person who
          attempts to Beneficially Own Shares in violation of the ownership
          limitations set forth in Sections 18 or 18A of the Trust's Amended and
          Restated Declaration of Trust shall have no claim, cause of action, or
          any other recourse whatsoever against a transferor of such shares. All
          capitalized terms in this legend have the meanings defined in the
          Trust's Amended and Restated Declaration of Trust, a copy of which,
          including the restrictions on transfer, will be sent without charge to
          each shareholder who so requests."

                            ARTICLE III. SHAREHOLDERS

     Section 1. Meetings.

     (a)  There shall be an annual meeting of Shareholders at such time and
place, either within or without the State of Maryland, as the Board shall
prescribe, at which Trustees shall be elected or re-elected and any other proper
business may be conducted. The annual meeting of Shareholders shall be held upon
proper notice at a convenient location and within a reasonable period following
delivery of the annual report. Special meetings of Shareholders may be called by
a majority of the

                                       28

<PAGE>

Trustees or by the Chairman of the Board, President or Chief Executive Officer
of the Trust, and shall be called upon the written request of Shareholders
holding in the aggregate not less than 25 percent of the outstanding Shares
entitled to vote in the manner provided in the Bylaws. If there shall be no
Trustees, the officers of the Trust shall promptly call a special meeting of the
Shareholders for the election of successor Trustees. Written or printed notice
stating the place, date and time of the Shareholders' meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than 10 nor more than 60 days before the day of the
meeting either personally or by mail, by or at the direction of the Board or any
officer or the person calling the meeting, to each Shareholder of record
entitled to vote at such meeting. No other business than that which is stated in
the call for a special meeting shall be considered at such meeting.

     (b)  A majority of the outstanding Shares entitled to vote at any meeting
represented in person or by proxy shall constitute a quorum at such meeting.
Whenever any action is to be taken by the Shareholders, it shall, except as
otherwise required by law or this Declaration of Trust or the Bylaws, be
authorized by a majority of the number of votes entitled to be cast on the
matter.

     Section 2. Voting. At each meeting of Shareholders, each Shareholder
entitled to vote shall have the right to vote, in person or by proxy in any
manner permitted under Maryland law, the number of Shares owned by him or her on
each matter on which the vote of the Shareholders is taken. In any election of
Trustees in which more than one vacancy is to be filled, each Shareholder may
vote the number of Shares owned by him or her for each vacancy to be filled as
to which such Shares are entitled to vote. There shall be no right of cumulative
voting. Each outstanding Share, regardless of class, shall be entitled to one
vote on each matter submitted to a vote at a meeting of Shareholders, except (i)
to the extent that this Declaration of Trust or articles supplementary (to the
extent permitted by Maryland law) provide otherwise or (ii) as otherwise
provided by Maryland law.

     Section 3. Distributions. The Board may from time to time pay to
Shareholders such dividends or distributions in cash, property or other assets
of the Trust or in securities of the Trust or from any other source as the Board
in its discretion shall determine. The Board shall endeavor to authorize the
Trust to pay such dividends and distributions as shall be necessary for the
Trust to qualify as a REIT under the REIT Provisions of the Code (so long as
such qualification, in the opinion of the Board, is in the best interests of the
Shareholders); however, Shareholders shall have no right to any dividend or
distribution unless and until authorized by the Board. The exercise of the
powers and rights of the Board pursuant to this Section 3 shall be subject to
the provisions of any class or series of Shares at the time outstanding and to
applicable law. The receipt by any Person in whose name any Shares are
registered on the records of the Trust or by his or her duly authorized agent
shall be a sufficient discharge for all dividends or distributions payable or
deliverable in respect of such Shares and from all liability with respect to the
application thereof.

     Section 4. Annual Report. The Trust shall prepare an annual report
concerning its operations for the preceding fiscal year in the manner and within
the time prescribed by Title 8.

                                       29

<PAGE>

     Section 5. Inspection Rights. The books and records of the Trust shall be
open to inspection upon the written demand of a Shareholder at any reasonable
time for a purpose reasonably related to his or her interests as a Shareholder.
Such inspection by a Shareholder may be made in person or by agent or attorney
and the right of inspection includes the right to make extracts. Demand of
inspection shall be made in writing on the Chief Executive Officer or the
Secretary of the Trust at the principal office of the Trust.

     Section 6. Nonliability and Indemnification. Shareholders shall not be
personally or individually liable in any manner whatsoever for any debt, act,
omission or obligation incurred by the Trust or the Board and shall be under no
obligation to the Trust or its creditors with respect to their Shares other than
the obligation to pay to the Trust the full amount of the consideration for
which the Shares were issued or to be issued. The Shareholders shall not be
liable to assessment and the Board shall have no power to bind the Shareholders
personally. The Trust shall indemnify and hold each Shareholder harmless from
and against all claims and liabilities, whether they proceed to judgment or are
settled or otherwise brought to a conclusion, to which such Shareholder may
become subject by reason of his or her being or having been a Shareholder, and
shall reimburse such Shareholder for all legal and other expenses reasonably
incurred by him or her in connection with any such claim or liability; provided,
however, that such Shareholder must give prompt notice as to any such claims or
liabilities or suits and must take such action as will permit the Trust to
conduct the defense thereof. The rights accruing to a Shareholder under this
Section 6 shall not exclude any other right to which such Shareholder may be
lawfully entitled, nor shall anything contained herein restrict the right of the
Trust to indemnify or reimburse a Shareholder in any appropriate situation even
though not specifically provided herein; provided, however, that the Trust shall
have no liability to reimburse Shareholders for taxes assessed against them by
reason of their ownership of Shares, nor for any losses suffered by reason of
changes in the market value of securities of the Trust. No amendment to this
Declaration of Trust increasing or enlarging the liability of the Shareholders
shall be made without the unanimous vote or written consent of all of the
Shareholders.

     Section 7. Notice of Nonliability. The Board shall use every reasonable
means to assure that all persons having dealings with the Trust shall be
informed that the private property of the Shareholders and the Trustees shall
not be subject to claims against and obligations of the Trust to any extent
whatever. The Board shall cause to be inserted in every written agreement,
undertaking or obligation made or issued on behalf of the Trust, an appropriate
provision to the effect that the Shareholders and the Trustees shall not be
personally liable thereunder, and that all parties concerned shall look solely
to the Trust property for the satisfaction of any claim thereunder, and
appropriate reference shall be made to this Declaration of Trust. The omission
of such a provision from any such agreement, undertaking or obligation, or the
failure to use any other means of giving such notice, shall not, however, render
the Shareholders or the Trustees personally liable or such agreement,
undertaking or obligation unenforceable.

                                       30

<PAGE>

                            ARTICLE IV. THE TRUSTEES

     Section 1. Number, Qualification, Compensation and Term.

     (a) The Board shall be comprised of not less than three nor more than 15
Trustees. The current number of Trustees is 6, which may be changed from time to
time by resolution of the Board within the limits provided in the preceding
sentence. Trustees may succeed themselves in office. Trustees shall be
individuals who are at least 21 years old and not under any legal disability. No
Trustee shall be required to give bond, surety or securities to secure the
performance of his or her duties or obligations hereunder. No reduction in the
number of Trustees shall have the effect of removing any Trustee from office
prior to the expiration of his or her term. Whenever a vacancy among the
Trustees shall occur, until such vacancy is filled as provided in Section 3, the
Trustee or Trustees continuing in office, regardless of their number, shall have
all of the powers granted to the Board and shall discharge all of the duties
imposed on the Board by this Declaration of Trust. The Trustees shall receive
such fees for their services and expenses as they shall deem reasonable and
proper. A majority of the Trustees shall not be officers or employees of the
Trust.

     (b) The Board shall be divided into three classes of Trustees, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of Trustees constituting the entire
Board. The term of office of each Trustee shall be three years and until his or
her successor is elected and qualifies, subject to prior death, resignation or
removal. At the 2002 annual meeting of Shareholders, Class I Trustees shall be
elected; at the 2003 annual meeting of Shareholders, Class II Trustees shall be
elected; and at the 2004 annual meeting of Shareholders, Class III Trustees
shall be elected. At each succeeding annual meeting of Shareholders, beginning
in 2002, successors to the class of Trustees whose term expires at such annual
meeting shall be elected. If the authorized number of Trustees constituting the
Board is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of Trustees in each class as nearly equal
as possible, and any additional Trustee of any class elected to fill a vacancy
resulting from an increase in such class shall hold office until the next annual
meeting of shareholders, but in no case shall a decrease in the number of
Trustees constituting the Board shorten the term of any incumbent Trustee. The
names, classes and addresses of the current Trustees, are as follows:

Name                Class               Address
----                -----               -------

James A. Cardwell      I    7670 South Chester Street, Englewood, Colorado 80112
James H. Polk, III     I    7670 South Chester Street, Englewood, Colorado 80112
Ned S. Holmes        III    7670 South Chester Street, Englewood, Colorado 80112
John M. Richman       II    7670 South Chester Street, Englewood, Colorado 80112
John C. Schweitzer    II    7670 South Chester Street, Englewood, Colorado 80112
R. Scot Sellers      III    7670 South Chester Street, Englewood, Colorado 80112

                                       31

<PAGE>

The records of the Trust shall be revised to reflect the names, classes and
addresses of the current Trustees, at such times as any change has occurred.

     Section 2. Resignation, Removal and Death. A Trustee may resign at any time
by giving written notice thereof in recordable form to the other Trustees at the
principal office of the Trust. The acceptance of a resignation shall not be
necessary to make it effective. A Trustee may be removed with or without cause
by the shareholders by the affirmative vote of two-thirds of all of the votes
entitled to be cast in the election of Trustees or by the Trustees then in
office by a two-thirds vote (which action shall be taken only by vote at a
meeting and not by authorization without a meeting, notwithstanding anything in
Section 4 of this Article IV to the contrary); provided, however, that in the
                                               --------  -------
case of any Trustees elected by holders of a class or series of preferred
Shares, such Trustees may be removed without cause solely by the affirmative
unanimous vote of the holders of that class or series of preferred Shares. Upon
the resignation or removal of any Trustee, he or she shall execute and deliver
such documents and render such accounting as the remaining Trustee or Trustees
shall require and shall thereupon be discharged as Trustee. Upon the incapacity
or death of any Trustee, his or her status as a Trustee shall immediately
terminate, and his or her legal representatives shall perform the acts set forth
in the preceding sentence.

     Section 3. Vacancies. The resignation, removal, incompetency or death of
any or all of the Trustees shall not terminate the Trust or affect its
continuity. During a vacancy, the remaining Trustee or Trustees may exercise the
powers of the Trustees hereunder. Whenever there shall be a vacancy or vacancies
among the Trustees (including vacancies resulting from an increase in the number
of Trustees), such vacancy or vacancies shall be filled (i) at a special meeting
of Shareholders called for such purpose (which may be by written consent), (ii)
by the Trustee or Trustees then in office or (iii) at the next annual meeting of
Shareholders provided, however, that any vacancy among the Trustees elected by a
             --------  -------
class or series of preferred Shares may be filled by a majority of the remaining
Trustees elected by that class or series of preferred Shares (or the sole
remaining such Trustee) or by the holders of that class or series of Preferred
Shares. Trustees elected at special meetings of Shareholders to fill vacancies
shall hold office for the balance of the unexpired term of the Trustees whom
they are replacing or whose vacancy they are filling (or in the case of a
vacancy created by an increase in the number of Trustees, for the balance of the
unexpired term of Trustees of the same class of Trustees). Any Trustee appointed
by the remaining Trustee or Trustees to fill vacancies shall hold office until
the next annual meeting of Shareholders and until his or her successor is
elected and qualifies.

     Section 4. Meetings and Action Without a Meeting. The Board may act with or
without a meeting. Except as otherwise provided herein, any action of a majority
of Trustees present at a duly convened meeting of the Board shall be conclusive
and binding as an action of the Board. A quorum for meetings of the Board shall
be a majority of all of the Trustees in office. Action may be taken without a
meeting in any manner and by any means permitted by Maryland law only by
unanimous consent of all of the Trustees in office and shall be evidenced by a
written certificate or instrument signed by all of the Trustees in office. Any
action taken by the Board in accordance with the provisions of this Section 4
shall be conclusive and binding on the Trust, the Trustees and the

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<PAGE>

Shareholders, as an action of all of the Trustees, collectively, and of the
Trust. Any deed, mortgage, evidence of indebtedness or other instrument,
agreement or document of any character, whether similar or dissimilar, executed
by one or more of the Trustees, when authorized at a meeting or by written
authorization without a meeting in accordance with the provisions of this
Section 4, shall be valid and binding on the Trustees, the Trust and the
Shareholders.

     Section 5. Authority. The Trustees shall have absolute and exclusive
control over the management and conduct of the business affairs of the Trust,
free from any power or control on the part of the Shareholders, subject only to
the express limitations in this Declaration of Trust.

     Section 6. Powers. The Board shall have all of the powers necessary,
convenient or appropriate to effectuate the purposes of the Trust and may take
any action which it deems necessary or desirable and proper to carry out such
purposes. Any determination of the purposes of the Trust made by the Board in
good faith shall be conclusive. In construing the provisions of this Declaration
of Trust, the presumption shall be in favor of the grant of powers to the Board.
Without limiting the generality of the foregoing, the Board's powers on behalf
of the Trust shall include the following:

     (a) To purchase, acquire through the issuance of Shares in the Trust,
obligations of the Trust or otherwise, mortgage, sell, acquire on lease, hold,
manage, improve, lease to others, option, exchange, release and partition real
estate interests of every nature, including freehold, leasehold, mortgage,
ground rent and other interests therein; and to erect, construct, alter, repair,
demolish or otherwise change buildings and structures of every nature.

     (b) To purchase, acquire through the issuance of Shares in the Trust,
obligations of the Trust or otherwise, option, sell and exchange stocks, bonds,
notes, certificates of indebtedness and securities of every nature.

     (c) To purchase, acquire through the issuance of Shares in the Trust,
obligations of the Trust or otherwise, mortgage, sell, acquire on lease, hold,
manage, improve, lease to others, option and exchange personal property of every
nature.

     (d) To hold legal title to property of the Trust in the name of the Trust.

     (e) To borrow money for the purposes of the Trust and to give notes or
other negotiable or nonnegotiable instruments of the Trust therefor; to enter
into other obligations or guarantee the obligations of others on behalf of and
for the purposes of the Trust; and to mortgage or pledge or cause to be
mortgaged or pledged real and personal property of the Trust to secure such
notes, debentures, bonds, instruments or other obligations.

     (f) To lend money on behalf of the Trust and to invest the funds of the
Trust.

     (g) To create reserve funds for such purposes as it deems advisable.

                                       33

<PAGE>

     (h) To deposit funds of the Trust in banks and other depositories without
regard to whether such accounts will draw interest.

     (i) To pay taxes and assessments imposed on or chargeable against the Trust
or the Trustees by virtue of or arising out of the existence, property, business
or activities of the Trust.

     (j) To purchase, issue, sell or exchange Shares as provided in Article II.

     (k) To exercise with respect to property of the Trust, all options,
privileges and rights, whether to vote, assent, subscribe or convert, or of any
other nature; to grant proxies; and to participate in and accept securities
issued under any voting trust agreement.

     (l) To participate in any reorganization, readjustment, consolidation,
merger, dissolution, sale or purchase of assets, lease or similar proceedings of
any corporation, partnership or other organization in which the Trust shall have
an interest and in connection therewith to delegate discretionary powers to any
reorganization, protective or similar committee and to pay assessments and other
expenses in connection therewith.

     (m) To engage or employ agents, representatives and employees of any
nature, or independent contractors, including, but not limited to, transfer
agents for the transfer of Shares in the Trust, registrars, underwriters for the
sale of Shares in the Trust, independent certified public accountants, attorneys
at law, appraisers and real estate agents and brokers; and to delegate to one or
more Trustees, agents, representatives, employees, independent contractors or
other persons such powers and duties as the Board deems appropriate.

     (n) To determine conclusively the allocation between capital and income of
the receipts, holdings, expenses and disbursements of the Trust, regardless of
the allocation which might be considered appropriate in the absence of this
provision.

     (o) To determine conclusively the value from time to time and to revalue
the real estate, securities and other property of the Trust by means of
independent appraisals.

     (p) To compromise or settle claims, questions, disputes and controversies
by, against or affecting the Trust.

     (q) To solicit proxies of the Shareholders.

     (r) To adopt a fiscal year for the Trust and to change such fiscal year in
accordance with the REIT Provisions of the Code.

     (s) To adopt and use a seal.

                                       34

<PAGE>

     (t) To merge the Trust with or into any other trust, corporation or other
entity in accordance with Maryland law and the other provisions of this
Declaration of Trust.

     (u) To deal with the Trust property in every way, including joint ventures,
partnerships and any other combinations or associations, which it would be
lawful for an individual to deal with the same, whether similar to or different
from the ways herein specified.

     (v) To determine whether or not, at any time or from time to time, to
attempt to cause the Trust to qualify for taxation, or to terminate the status
of the Trust, as a REIT.

     (w) To make, adopt, amend or repeal Bylaws containing provisions relating
to the business of the Trust, the conduct of its affairs, its rights or powers
and the rights or powers of its Shareholders, Trustees or officers not
inconsistent with law or this Declaration of Trust.

     (x) To serve as a trustee of a real estate investment trust or of any other
entity or to act as a fiduciary, partner, limited partner, manager, member, or
in any other representative capacity, as the case may be, with respect to any
other entity.

     (y) To do all other such acts and things as are incident to the foregoing
and to exercise all powers which are necessary or useful to carry on the
business of the Trust, to promote any of the purposes of the Trust and to carry
out the provisions of this Declaration of Trust.

     Section 7. Right to Own Shares. A Trustee may acquire, hold and dispose of
Shares in the Trust for his or her individual account and may exercise all
rights of a Shareholder to the same extent and in the same manner as if he or
she were not a Trustee.

     Section 8. Transactions with Trust. Subject to the provisions of Section 5
of Article I, and to any restrictions in this Declaration of Trust or adopted by
the Board in the Bylaws or by resolution, the Trust may enter into any contract
or transaction of any kind (including, but not limited to, for the purchase or
sale of property or for any type of services, including those in connection with
underwriting or the offer or sale of securities of the Trust) with any person,
including any Trustee, officer, employee or agent of the Trust or any person
affiliated with a Trustee, officer, employee or agent of the Trust, whether or
not any of them has a financial interest in such transaction.

     Section 9. Limitation of Liability. To the maximum extent that Maryland law
in effect from time to time permits limitation of the liability of trustees of a
real estate investment trust, no Trustee of the Trust shall be liable to the
Trust or to any Shareholder for money damages. Neither the amendment nor repeal
of this Section 9, nor the adoption or amendment of any other provision of this
Declaration of Trust inconsistent with this Section 9, shall apply to or affect
in any respect the applicability of the preceding sentence with respect to any
act or failure to act which occurred prior to such amendment, repeal or
adoption. In the absence of any Maryland statute limiting the liability of
trustees of a Maryland real estate investment trust for money damages in a suit
by or on behalf of the Trust or by any Shareholder, no Trustee of the Trust
shall be liable to the Trust or to any

                                       35

<PAGE>

Shareholder for money damages except to the extent that (i) the Trustee actually
received an improper benefit or profit in money, property or services, for the
amount of the benefit or profit in money, property or services actually
received; or (ii) a judgment or other final adjudication adverse to the Trustee
is entered in a proceeding based on a finding in the proceeding that the
Trustee's action or failure to act was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding.

     Section 10. Indemnification. The Trust shall indemnify each Trustee, to the
fullest extent permitted by Maryland law, as amended from time to time, in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she was a Trustee of the Trust or is or was serving at the request of
the Trust as a director, trustee, officer, partner, manager, member, employee or
agent of another foreign or domestic corporation, partnership, joint venture,
trust, limited liability company, other enterprise or employee benefit plan,
from all claims and liabilities to which such person may become subject by
reason of service in such capacity and shall pay or reimburse reasonable
expenses, as such expenses are incurred, of each Trustee in connection with any
such proceedings.

     Section 11. Persons Dealing with Trustees. No corporation, person, transfer
agent or other party shall be required to examine or investigate the trust,
terms or conditions contained in this Declaration of Trust or otherwise
applicable to the Trust, and no such corporation, person, transfer agent or
other party dealing with the Trustees or with the Trust or Trust property and
assets shall be required to see to the application of any money or property paid
or delivered to any Trustee, or nominee, agent or representative of the Trust or
the Trustees. A certificate executed by or on behalf of the Trustees or by any
other duly authorized representative of the Trust delivered to any person or
party dealing with the Trust or Trust property and assets, or, if relating to
real property, recorded in the deed records for the county or district in which
such real property lies, certifying as to the identity and authority of the
Trustees, agents or representatives of the Trust for the time being, or as to
any action of the Trustees or of the Trust, or of the Shareholders, or as to any
other fact affecting or relating to the Trust or this Declaration of Trust, may
be treated as conclusive evidence thereof by all persons dealing with the Trust.
No provision of this Declaration of Trust shall diminish or affect the
obligation of the Trustees and every other representative or agent of the Trust
to deal fairly and act in good faith with respect to the Trust and the
Shareholders insofar as the relationship and accounting among the parties to the
Trust is concerned; but no third party dealing with the Trust or with any
Trustee, agent or representative of the Trust shall be obliged or required to
inquire into, investigate or be responsible for the discharge and performance of
such obligation.

     Section 12. Administrative Powers. The Board shall have the power to pay
the expenses of administration of the Trust, including all legal and other
expenses in connection with the preparation and carrying out of the acquisition
of properties and the issuance of Shares; and to employ such officers, experts,
counsel, managers, salesmen, agents, workmen, clerks and other persons as they
deem appropriate.

                                       36

<PAGE>

     Section 13. Election of Officers. The Board shall annually elect a Chairman
of the Board (or two or more Co-Chairmen of the Board) and a Secretary of the
Trust. The Board may also annually elect one or more Chief Financial Officers,
Chief Operating Officers, Presidents, Vice Presidents, a Treasurer, Assistant
Secretaries, Assistant Treasurers and such other officers as the Board shall
deem proper. Except as required by law, the officers of the Trust need not be
Trustees. All officers and agents of the Trust shall have such authority and
perform such duties in the management of the Trust as may be provided in the
Bylaws or as may be determined by the Board not inconsistent with the Bylaws.
Any officer or agent elected or appointed by the Board may be removed by the
Board whenever in its judgment the best interest of the Trust will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of any officer or agent
shall not of itself create contract rights. The Board shall fix the compensation
of all officers.

     Section 14. Committees and Delegation of Powers and Duties. The Board may,
in its discretion, by resolution passed by a majority of the Trustees, designate
from among its members one or more committees which shall consist of one or more
Trustees. The Board may designate one or more Trustees as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of the committee. Such committees shall have and may exercise such
powers as shall be conferred or authorized by the resolution appointing them
(including, but not limited to, the determination of the type and amount of
consideration at which Shares are to be issued). A majority of any such
committee may determine its action and fix the time and place of its meetings,
unless the Board shall otherwise provide. The Board, by resolution passed by a
majority of the Trustees, may at any time change the membership of any such
committee, fill vacancies on it or dissolve it. The Bylaws, or a majority of the
Trustees, may authorize any one or more of the Trustees, or any one or more of
the officers or employees or agents of the Trust, on behalf of the Trust, to
exercise and perform any and all powers granted to the Board, and to discharge
any and all duties imposed on the Board, and to do any acts and to execute any
instruments deemed by such person or persons to be necessary or appropriate to
exercise such power or to discharge such duties, and to exercise his or her own
judgment in so doing.

                       ARTICLE V. TERMINATION AND DURATION

     Section 1.  Termination. Subject to the provisions of any class or series
of Shares at the time outstanding, after approval by a majority of the entire
Board of Trustees the Trust may be terminated at any meeting of Shareholders
called for such purpose, by the affirmative vote of the holders of not less than
a majority of the outstanding Shares. In connection with any termination of the
Trust, the Board, upon receipt of such releases or indemnity as they deem
necessary for their protection, may

     (a) Sell and convert into cash the property of the Trust and distribute the
net proceeds among the Shareholders ratably; or

                                       37

<PAGE>

     (b) Convey the property of the Trust to one or more persons, entities,
trusts or corporations for consideration consisting in whole or in part of cash,
shares of stock or other property of any kind, and distribute the net proceeds
among the Shareholders ratably, at valuations fixed by the Board, in cash or in
kind, or partly in cash and partly in kind.

Upon termination of the Trust and distribution to the Shareholders as herein
provided, a majority of the Trustees shall execute and place among the records
of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the right, title and interest of all
Shareholders shall cease and be canceled and discharged.

     Section 2. Organization as a Corporation. If the Board deems it in the best
interests of the Shareholders that the Trust be organized as a corporation under
the laws of any state, the Board shall have the power to organize such
corporation, under the laws of such state as it may consider appropriate, in the
place and stead of the Trust upon the affirmative vote of a majority of all the
votes entitled to be cast on the matter, in which event the capital stock of
such corporation shall be and remain the same as fixed under this Declaration of
Trust unless otherwise approved in accordance with this Declaration of Trust and
applicable law, and the Shareholders shall receive and accept stock in such
corporation on the same basis as they hold Shares in the Trust.

     Section 3. Merger, Consolidation or Sale. The Trust shall have the power to
(i) merge with or into another entity, (ii) consolidate the Trust with one or
more other entities into a new entity or (iii) sell or otherwise dispose of all
or substantially all of the assets of the Trust; provided that such action shall
have been approved by the Board of Trustees and by the Shareholders, at a
meeting called for such purpose, by the affirmative vote of the holders of not
less than a majority of the Shares then outstanding and entitled to vote
thereon; provided, however, that the Shareholders shall not be entitled to vote
         --------  -------
on a merger or consolidation of the Trust which Title 8 or this Declaration of
Trust permits to be approved without a vote of the Shareholders.

     Section 4. Duration. Subject to possible earlier termination in accordance
with the provisions of this Article V, the duration of the Trust shall be
perpetual or, in any jurisdiction in which such duration is not permitted, then
the Trust shall terminate on the latest date permitted by the law of such
jurisdiction.

                             ARTICLE VI. AMENDMENTS

     Section 1. Amendment by Shareholders. Except as provided in Section 2 of
this Article VI and in Section 1 of Article II and in Article IV, this
Declaration of Trust may be amended only by the affirmative vote or written
consent of the holders of at least a majority of the Shares then outstanding and
entitled to vote thereon after approval of a majority of the entire Board.

                                       38

<PAGE>

     Section 2. Amendment by Trustees. The Trustees by a two-thirds vote may
amend provisions of this Declaration of Trust from time to time to enable the
Trust to qualify as a real estate investment trust under the REIT Provisions of
the Code or under Title 8.

     Section 3. Requirements of Maryland Law. Except as provided in Article II,
Section 1(b) or in this Article VI, this Declaration of Trust may only be
amended in accordance with Section 8-501 of Title 8.

                           ARTICLE VII. MISCELLANEOUS

     Section 1. Construction. This Declaration of Trust shall be construed in
such a manner as to give effect to the intent and purposes of the Trust and this
Declaration of Trust. If any provisions hereof appear to be in conflict, more
specific provisions shall control over general provisions. This Declaration of
Trust shall govern all of the relationships among the Trustees and Shareholders
of the Trust; and each provision hereof shall be effective for all purposes and
to all persons dealing with the Trust to the fullest extent possible under
applicable law in each jurisdiction in which the Trust shall engage in business.
In defining or interpreting the powers and duties of the Trust and the Trustees
and officers of the Trust, reference may be made, to the extent appropriate and
not inconsistent with the Code, Title 8 and this Declaration of Trust, to Titles
1 through 3 of the Corporations and Associations Article of the Annotated Code
of Maryland.

     Section 2. Headings for Reference Only. Headings preceding the text of
articles, sections and subsections hereof have been inserted solely for
convenience and reference, and shall not be construed to affect the meaning,
construction or effect of this Declaration of Trust.

     Section 3. Filing and Recording. This Declaration of Trust shall be filed
in the manner prescribed for real estate investment trusts under Maryland law
and may be filed for record in any county where real property is owned by the
Trust.

     Section 4. Applicable Law. This Declaration of Trust has been executed with
reference to, and its construction and interpretation shall be governed by,
Maryland law, and the rights of all parties and the construction and effect of
every provision hereof shall be subject to and construed according to Maryland
law.

     Section 5. Certifications. Any certificates signed by a person who,
according to the records of the State Department of Assessments and Taxation of
Maryland, appears to be a Trustee hereunder, shall be conclusive evidence as to
the matters so certified in favor of any person dealing with the Trust or the
Trustees or any one or more of them, and the successors or assigns of such
persons, which certificate may certify to any matter relating to the affairs of
the Trust, including, but not limited to, any of the following: a vacancy among
the Trustees; the number and identity of Trustees; this Declaration of Trust and
any amendments or supplements thereto, or any restated declaration of trust and
any amendments or supplements thereto, or that there are no amendments to this
Declaration of Trust or any restated declaration of trust; a copy of the Bylaws
or any amendment

                                       39

<PAGE>

thereto; the due authorization of the execution of any instrument or writing;
the vote at any meeting of the Board or a committee thereof or Shareholders; the
fact that the number of Trustees present at any meeting or executing any written
instrument satisfies the requirements of this Declaration of Trust; a copy of
any Bylaw adopted by the Shareholders or the identity of any officer elected by
the Board; or the existence or nonexistence of any fact or facts which in any
manner relate to the affairs of the Trust. If this Declaration of Trust or any
restated declaration of trust is filed or recorded in any recording office other
than the State Department of Assessments and Taxation of Maryland, any one
dealing with real estate so located that instruments affecting the same should
be filed or recorded in such recording office may rely conclusively on any
certificate of the kind described above which is signed by a person who
according to the records of such recording office appears to be a Trustee
hereunder. In addition, the Secretary or any Assistant Secretary of the Trust or
any other officer of the Trust designated by the Bylaws or by action of the
Board may sign any certificate of the kind described in this Section 5, and such
certificate shall be conclusive evidence as to the matters so certified in favor
of any person dealing with the Trust, and the successors and assigns of such
person.

     Section 6. Severability. If any provision of this Declaration of Trust
shall be invalid or unenforceable, such invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
invalid or unenforceable any other provision of this Declaration of Trust and
this Declaration of Trust shall be carried out, if possible, as if such invalid
or unenforceable provision were not contained herein.

     Section 7. Bylaws. The Bylaws may be altered, amended or repealed, and new
Bylaws may be adopted, at any meeting of the Board by vote of a majority of the
Trustees, subject to repeal or change by action of the Shareholders of the Trust
entitled to vote thereon.

     Section 8. Recording. This Declaration of Trust shall be filed in the
manner prescribed for real estate investment trusts under Maryland law and may
also be filed or recorded in such other places as the Board deems appropriate,
but failure to file for record this Declaration of Trust or any amendment hereto
in any office other than in the State Department of Assessments and Taxation of
Maryland shall not affect or impair the validity or effectiveness of this
Declaration of Trust or any amendment or supplement hereto.

            ARTICLE VIII. LIMITATION OF LIABILITY AND INDEMNIFICATION

     Section 1. Limitation of Liability of Officers. To the maximum extent that
Maryland law in effect from time to time permits limitation of the liability of
officers of a real estate investment trust, no officer of the Trust shall be
liable to the Trust or to any Shareholder for money damages. Neither the
amendment nor repeal of this Section 1, nor the adoption or amendment of any
other provision of this Declaration of Trust inconsistent with this Section 1,
shall apply to or affect in any respect the applicability of the preceding
sentence with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption. In the absence of any Maryland statute limiting
the liability of officers of a Maryland real estate investment trust for money
damages in a suit by or on behalf of the Trust or by any Shareholder, no officer
of the Trust shall be liable to the Trust

                                       40

<PAGE>

or to any Shareholder for money damages except to the extent that (i) the
officer actually received an improper benefit or profit in money, property or
services, for the amount of the benefit or profit in money, property or services
actually received; or (ii) a judgment or other final adjudication adverse to the
officer is entered in a proceeding based on a finding in the proceeding that the
officer's action or failure to act was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding.

     Section 2. Indemnification of Officers and Employees. The Trust shall
indemnify each officer and employee, and shall have the power to indemnify each
agent, of the Trust to the fullest extent permitted by Maryland law, as amended
from time to time, in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she was an officer, employee or
agent of the Trust or is or was serving at the request of the Trust as a
director, trustee, officer, partner, manager, member, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
limited liability company, other enterprise or employee benefit plan, from all
claims and liabilities to which such person may become subject by reason of
service in such capacity and shall pay or reimburse reasonable expenses, as such
expenses are incurred, of each officer, employee or agent in connection with any
such proceedings.

     Section 3. Insurance. Notwithstanding any other provisions of this
Declaration of Trust, the Trust, for purposes of providing indemnification for
its Trustees, officers, employees and agents, shall have the authority, without
specific Shareholder approval, to enter into insurance or other arrangements,
with persons or entities which are regularly engaged in the business of
providing insurance coverage, to indemnify all Trustees, officers, employees and
agents of the Trust against any and all liabilities and expenses incurred by
them by reason of their being Trustees, officers, employees or agents of the
Trust, whether or not the Trust would otherwise have the power under this
Declaration of Trust or under Maryland law to indemnify such persons against
such liability. Without limiting the power of the Trust to procure or maintain
any kind of insurance or other arrangement, the Trust may, for the benefit of
persons indemnified by it, (i) create a trust fund, (ii) establish any form of
self-insurance, (iii) secure its indemnity obligation by grant of any security
interest or other lien on the assets of the Trust or (iv) establish a letter of
credit, guaranty or surety arrangement. Any such insurance or other arrangement
may be procured, maintained or established within the Trust or with any insurer
or other person deemed appropriate by the Board regardless of whether all or
part of the stock or other securities thereof are owned in whole or in part by
the Trust. In the absence of fraud, the judgment of the Board as to the terms
and conditions of insurance or other arrangement and the identity of the insurer
or other person participating in any arrangement shall be conclusive, and such
insurance or other arrangement shall not be subject to voidability, nor subject
the Trustees approving such insurance or other arrangement to liability, on any
ground, regardless of whether Trustees participating in and approving such
insurance or other arrangement shall be beneficiaries thereof.

                                    * * * * *

                                       41

<PAGE>

     IN WITNESS WHEREOF, the Trust has caused these Articles of Amendment and
Restatement to be signed in its name and on its behalf as of the date first
written above, by the undersigned Senior Vice President and attested by its
Assistant Secretary. The undersigned Senior Vice President acknowledges these
Articles of Amendment and Restatement to be the trust act of the Trust and as to
all matters and facts required to be verified under oath that to the best of her
knowledge, information and belief, the matters and facts set forth herein are
true in all material respects and that this statement is made under the
penalties for perjury.

                                             ARCHSTONE-SMITH TRUST


                                             By: /s/ Caroline Brower
                                                 -------------------------
                                             Name:  Caroline Brower
                                             Title: Senior Vice President

ATTEST:

/s/ Cory B. Wood
-----------------------------
Name:  Cory B. Wood
Title: Assistant Secretary

                                       42

<PAGE>

                                     ANNEX A
                    SERIES A CUMULATIVE CONVERTIBLE PREFERRED
                          SHARES OF BENEFICIAL INTEREST

     (a) Number of Shares and Designation. This class of preferred Shares shall
be designated as Series A Cumulative Convertible Preferred Shares of Beneficial
Interest ("Series A Preferred Shares") and the number of Shares which shall
           -------------------------
constitute such series shall not be more than 3,174,235 Shares, par value $0.01
per Share, which number may be decreased (but not below the number thereof then
outstanding plus the number required to fulfill the Trust's obligations under
options, warrants or similar rights issued by the Trust) from time to time by
the Board.

     (b) Definitions. For purposes of the Series A Preferred Shares, the
following terms shall have the meanings indicated:

         "Archstone Communities Trust" shall mean Archstone Communities Trust,
          ---------------------------
     a Maryland real estate investment trust now known as Archstone-Smith
     Operating Trust; provided, however, that notwithstanding anything to the
     contrary herein, all references to Archstone Communities Trust shall refer
     solely to such real estate investment trust as it existed prior to the
     Issue Date and solely with respect to time periods, actions, events or
     circumstances prior to the Issue Date.

         "Board" shall mean the Board or any committee authorized by the Board
          -----
     to perform any of its responsibilities with respect to the Series A
     Preferred Shares.

         "Business Day" shall mean any day other than a Saturday, Sunday or a
          ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

         "Call Date" shall mean the date of the notice to holders required
          ---------
     under subsection (e)(iv) of this Section 2.

         "Common Shares" shall mean the common shares of beneficial interest of
          -------------
     the Trust, par value $0.01 per Share.

         "Constituent Person" shall have the meaning set forth in subsection
          ------------------
     (f)(viii) of this Section 2.

         "Conversion Price" shall mean the conversion price per Common Share
          ----------------
     for which the Series A Preferred Shares are convertible, as such Conversion
     Price may have been and may be adjusted pursuant to subsection (f) of this
     Section 2. The initial conversion price is $18.561 (equivalent to a
     conversion rate of 1.3469 Common Shares for each Series A Preferred Share).

                                       A-1

<PAGE>

               "Current Market Price" of publicly traded common shares or any
                --------------------
          other class of shares or capital stock or other security of the Trust
          or any other issuer for any day shall mean the last reported sales
          price, regular way on such day, or, if no sale takes place on such
          day, the average of the reported closing bid and asked prices on such
          day, regular way, in either case as reported on the New York Stock
          Exchange (the "NYSE") or, if such security is not listed or admitted
                         ----
          for trading on the NYSE, on the principal national securities exchange
          on which such security is listed or admitted for trading or, if not
          listed or admitted for trading on any national securities exchange, on
          the National Market System of the National Association of Securities
          Dealers, Inc. Automated Quotations System ("NASDAQ") or, if such
                                                      ------
          security is not quoted on such National Market System, the average of
          the closing bid and asked prices on such day in the over-the-counter
          market as reported by NASDAQ or, if bid and asked prices for such
          security on such day shall not have been reported through NASDAQ, the
          average of the bid and asked prices on such day as furnished by any
          NYSE member firm regularly making a market in such security selected
          for such purpose by the Chairman of the Board or the Board.

               "Dividend Payment Date" shall mean the last calendar day of
                ---------------------
          March, June, September and December in each year, commencing on the
          first of such days to occur following the Issue Date; provided,
          however, that if any Dividend Payment Date falls on any day other than
          a Business Day, the dividend payment due on such Dividend Payment Date
          shall be paid on the Business Day immediately following such Dividend
          Payment Date.

               "Dividend Periods" shall mean quarterly dividend periods
                ----------------
          commencing on April 1, July 1, October 1 and January 1 of each year
          and ending on and including the day preceding the first day of the
          next succeeding Dividend Period.

               "Fair Market Value" shall mean the average of the daily Current
                -----------------
          Market Prices of a Common Share during the five consecutive Trading
          Days selected by the Trust commencing not more than 20 Trading Days
          before, and ending not later than, the earlier of the day in question
          and the day before the "ex date" with respect to the issuance or
          distribution requiring such computation. The term "ex date," when used
          with respect to any issuance or distribution, means the first day on
          which the Common Shares trade regular way, without the right to
          receive such issuance or distribution, on the exchange or in the
          market, as the case may be, used to determine such day's Current
          Market Price.

               "Fully Junior Shares" shall mean the Common Shares and any other
                -------------------
          class or series of Shares now or hereafter issued and outstanding over
          which the Series A Preferred Shares have preference or priority in
          both (i) the payment of dividends and (ii) the distribution of assets
          on any liquidation, dissolution or winding up of the Trust.

               "Issue Date" shall mean the first date on which the Series A
                ----------
          Preferred Shares were issued.

                                       A-2

<PAGE>

               "Junior Shares" shall mean the Common Shares and any other class
                -------------
          or series of Shares now or hereafter issued and outstanding over which
          the Series A Preferred Shares have preference or priority in the
          payment of dividends or in the distribution of assets on any
          liquidation, dissolution or winding up of the Trust.

               "Non-Electing Share" shall have the meaning set forth in
                ------------------
          subsection (f)(viii) of this Section

               "Parity Shares" shall have the meaning set forth in subsection
                -------------
          (h)(ii) of this Section 2.

               "Person" shall mean any individual, firm, partnership,
                ------
          corporation or other entity, and shall include any successor (by
          merger or otherwise) of such entity.

               "Securities" and "Security" shall have the meanings set forth in
                ----------       --------
          paragraph (C) of subsection (f)(vii) of this Section 2.

               "Series A Preferred Shares" shall have the meaning set forth in
                -------------------------
          subsection (a) of this Section 2.

               "set apart for payment" shall be deemed to include, without any
                ---------------------
          action other than the following, the recording by the Trust in its
          accounting ledgers of any accounting or bookkeeping entry which
          indicates, pursuant to a declaration of dividends or other
          distribution by the Board, the allocation of funds to be so paid on
          any series or class of Shares; provided, however, that if any funds
          for any class or series of Junior Shares or any class or series of
          Shares ranking on a parity with the Series A Preferred Shares as to
          the payment of dividends are placed in a separate account of the Trust
          or delivered to a disbursing, paying or other similar agent, then "set
          apart for payment" with respect to the Series A Preferred Shares shall
          mean placing such funds in a separate account or delivering such funds
          to a disbursing, paying or other similar agent.

               "Shares" shall mean the shares of beneficial interest of the
                ------
          Trust as may be authorized and issued from time to time pursuant to
          Article II of the Declaration of Trust.

               "Trading Day" shall mean any day on which the securities in
                -----------
          question are traded on the NYSE, or if such securities are not listed
          or admitted for trading on the NYSE, on the principal national
          securities exchange on which such securities are listed or admitted,
          or if not listed or admitted for trading on any national securities
          exchange, on the National Market System of NASDAQ, or if such
          securities are not quoted on such National Market System, in the
          applicable securities market in which the securities are traded.

               "Transaction" shall have the meaning set forth in subsection
                -----------
          (f)(viii) of this Section 2.

                                       A-3

<PAGE>

               "Transfer Agent" means Mellon Investor Services LLC, New York
                --------------
          City, New York, or such other agent or agents of the Trust as may be
          designated by the Board or its designee as the transfer agent for the
          Series A Preferred Shares.

               "Voting Preferred Shares" shall have the meaning set forth in
                -----------------------
          subsection (i) of this Section 2.

          (c)  Dividends.

               (i)   The holders of Series A Preferred Shares shall be entitled
          to receive, when, as and if declared by the Board out of funds legally
          available for such purpose, dividends payable in cash in an amount per
          Series A Preferred Share equal to the greater of (A) $1.75 per annum
          or (B) the dividends (determined on each Dividend Payment Date) on the
          Common Shares, or portion thereof, into which a Series A Preferred
          Share is convertible. Such dividends shall equal the number of Common
          Shares, or portion thereof, into which a Series A Preferred Share is
          convertible, multiplied by the most current quarterly dividend on a
          Common Share on or before the applicable Dividend Payment Date. Such
          dividends shall begin to accrue and shall be fully cumulative from
          October 1, 2001, whether or not in any Dividend Period or Periods
          there shall be funds of the Trust legally available for the payment of
          such dividends, and shall be payable quarterly, when, as and if
          declared by the Board, in arrears on Dividend Payment Dates,
          commencing on the first Dividend Payment Date after the Issue Date.
          Each such dividend shall be payable in arrears to the holders of
          record of Series A Preferred Shares, as they appear on the Share
          records of the Trust at the close of business on such record dates,
          not more than 50 days preceding such Dividend Payment Dates thereof,
          as shall be fixed by the Board. Accrued and unpaid dividends for any
          past Dividend Periods may be declared and paid at any time and for
          such interim periods, without reference to any regular Dividend
          Payment Date, to holders of record on such date, not exceeding 50 days
          preceding the payment date thereof, as may be fixed by the Board.

               (ii)  The amount of dividends payable for each full Dividend
          Period for the Series A Preferred Shares shall be computed by dividing
          the annual dividend rate by four. The amount of dividends payable for
          any period shorter or longer than a full Dividend Period on the Series
          A Preferred Shares shall be computed on the basis of twelve 30-day
          months and a 360-day year. Holders of Series A Preferred Shares shall
          not be entitled to any dividends, whether payable in cash, property or
          stock, in excess of cumulative dividends, as herein provided, on the
          Series A Preferred Shares. No interest, or sum of money in lieu of
          interest, shall be payable in respect of any dividend payment or
          payments on the Series A Preferred Shares which may be in arrears.

               (iii) So long as any Series A Preferred Shares are outstanding,
          no dividends, except as described in the immediately following
          sentence, shall be declared or paid or set apart for payment on any
          class or series of Parity Shares for any period unless full cumulative
          dividends have been or contemporaneously are declared and paid or
          declared and a sum

                                       A-4

<PAGE>

          sufficient for the payment thereof set apart for such payment on the
          Series A Preferred Shares for all Dividend Periods terminating on or
          prior to the Dividend Payment Date on such class or series of Parity
          Shares. When dividends are not paid in full or a sum sufficient for
          such payment is not set apart, as aforesaid, all dividends declared on
          Series A Preferred Shares and all dividends declared on any other
          class or series of Parity Shares shall be declared ratably in
          proportion to the respective amounts of dividends accumulated and
          unpaid on the Series A Preferred Shares and accumulated and unpaid on
          such Parity Shares.

               (iv) So long as any Series A Preferred Shares are outstanding, no
          dividends (other than dividends or distributions paid solely in, or
          options, warrants or rights to subscribe for or purchase, Fully Junior
          Shares) shall be declared, or paid or set apart for payment or other
          distribution declared or made on Junior Shares, nor shall any Junior
          Shares be redeemed, purchased or otherwise acquired (other than a
          redemption, purchase or other acquisition of Common Shares made for
          purposes of an employee incentive or benefit plan of the Trust or any
          subsidiary) for any consideration (or any moneys be paid to or made
          available for a sinking fund for the redemption of any such Shares) by
          the Trust, directly or indirectly (except by conversion into or
          exchange for Fully Junior Shares), unless in each case (A) the full
          cumulative dividends on all outstanding Series A Preferred Shares and
          any other Parity Shares shall have been paid or declared and set apart
          for payment for all past Dividend Periods with respect to the Series A
          Preferred Shares and all past dividend periods with respect to such
          Parity Shares and (B) sufficient funds shall have been paid or
          declared and set apart for the payment of the dividend for the current
          Dividend Period with respect to the Series A Preferred Shares and the
          current dividend period with respect to such Parity Shares.

          (d)  Liquidation Preference.

               (i)  Upon any liquidation, dissolution or winding up of the
          Trust, whether voluntary or involuntary, before any payment or
          distribution of the assets of the Trust (whether capital or surplus)
          shall be made to or set apart for the holders of Junior Shares, the
          holders of the Series A Preferred Shares shall be entitled to receive
          Twenty-Five Dollars ($25.00) per Series A Preferred Share plus an
          amount equal to all dividends (whether or not earned or declared)
          accrued and unpaid thereon to the date of final distribution to such
          holders; but such holders shall not be entitled to any further
          payment. If, upon any liquidation, dissolution or winding up of the
          Trust, the assets of the Trust, or proceeds thereof, distributable
          among the holders of the Series A Preferred Shares shall be
          insufficient to pay in full the preferential amount aforesaid and
          liquidating payments on any other class or series of Parity Shares,
          then such assets, or the proceeds thereof, shall be distributed among
          the holders of Series A Preferred Shares and any such other Parity
          Shares ratably in accordance with the respective amounts which would
          be payable on such Series A Preferred Shares and any such other Parity
          Shares if all amounts payable thereon were paid in full. For purposes
          of this subsection (d), (A) a consolidation or merger of the Trust
          with one or more corporations, (B) a sale or transfer of all or
          substantially all of the Trust's assets or (C) a statutory share

                                      A-5

<PAGE>

          exchange shall not be deemed to be a liquidation, dissolution or
          winding up, voluntary or involuntary, of the Trust.

                (ii)  Subject

                       (iii) to the rights of the holders of any series or class
or classes of Shares ranking on a parity with or senior to the Series A
Preferred Shares upon liquidation, dissolution or winding up, upon any
liquidation, dissolution or winding up of the Trust, after payment shall have
been made in full to the holders of the Series A Preferred Shares, as provided
in this subsection (d), any other series or class or classes of Junior Shares
shall, subject to the respective terms and provisions (if any) applying thereto,
be entitled to receive any and all assets remaining to be paid or distributed,
and the holders of the Series A Preferred Shares shall not be entitled to share
therein.

          (e)   Redemption at the Option of the Trust.

                (i)   Subject to subsection (j) of this Section 2, the Series A
          Preferred Shares shall not be redeemable by the Trust prior to
          November 30, 2003. On and after November 30, 2003, the Trust, at its
          option, may redeem the Series A Preferred Shares, in whole at any time
          or from time to time in part at the option of the Trust at a
          redemption price of Twenty-Five Dollars ($25.00) per Series A
          Preferred Share, plus the amounts indicated in subsection (e)(ii) of
          this Section 2.

                (ii)  Upon any redemption of Series A Preferred Shares pursuant
          to this subsection (e), the Trust shall pay any accrued and unpaid
          dividends in arrears for any Dividend Period ending on or prior to the
          Call Date. If the Call Date falls after a dividend payment record date
          and prior to the corresponding Dividend Payment Date, then each holder
          of Series A Preferred Shares at the close of business on such dividend
          payment record date shall be entitled to the dividend payable on such
          Series A Preferred Shares on the corresponding dividend payment date
          notwithstanding the redemption of such Series A Preferred Shares
          before such Dividend Payment Date. Except as provided above, the Trust
          shall make no payment or allowance for unpaid dividends, whether or
          not in arrears, on Series A Preferred Shares called for redemption.

                (iii) If full cumulative dividends on the Series A Preferred
          Shares and any other class or series of Parity Shares have not been
          paid or declared and set apart for payment, the Series A Preferred
          Shares may not be redeemed under this subsection (e) in part and the
          Trust may not purchase or acquire Series A Preferred Shares, otherwise
          than pursuant to a purchase or exchange offer made on the same terms
          to all holders of Series A Preferred Shares or pursuant to subsection
          (j) of this Section 2.

                (iv)  Notice of the redemption of any Series A Preferred Shares
          under this subsection (e) shall be mailed by first-class mail to each
          holder of record of Series A Preferred Shares to be redeemed at the
          address of each such holder as shown on the Trust's record, not less
          than 30 nor more than 90 days prior to the Call Date. Neither the
          failure to mail any

                                       A-6

<PAGE>

     notice required by this subsection (e)(iv), nor any defect therein or in
     the mailing thereof, to any particular holder, shall affect the sufficiency
     of the notice or the validity of the proceedings for redemption with
     respect to the other holders. Any notice which was mailed in the manner
     herein provided shall be conclusively presumed to have been duly given on
     the date mailed whether or not the holder receives the notice. Each such
     mailed notice shall state, as appropriate: (A) the Call Date; (B) the
     number of Series A Preferred Shares to be redeemed and, if fewer than all
     of the Series A Preferred Shares held by such holder are to be redeemed,
     the number of Series A Preferred Shares to be redeemed from such holder;
     (C) the place or places at which certificates for such Series A Preferred
     Shares are to be surrendered; (D) the then-current Conversion Price; and
     (E) that dividends on the Series A Preferred Shares to be redeemed shall
     cease to accrue on such Call Date except as otherwise provided herein.
     Notice having been mailed as aforesaid, from and after the Call Date
     (unless the Trust shall fail to make available an amount of cash necessary
     to effect such redemption), (x) except as otherwise provided herein,
     dividends on the Series A Preferred Shares so called for redemption shall
     cease to accrue, (y) such Series A Preferred Shares shall no longer be
     deemed to be outstanding and (z) all rights of the holders thereof as
     holders of Series A Preferred Shares of the Trust shall cease (except the
     rights to convert and to receive cash payable upon such redemption, without
     interest thereon, upon surrender and endorsement of their certificates if
     so required and to receive any dividends payable thereon). The Trust's
     obligation to provide cash in accordance with the preceding sentence shall
     be deemed fulfilled if, on or before the Call Date, the Trust shall deposit
     with a bank or trust company (which may be an affiliate of the Trust) which
     has an office in the Borough of Manhattan, City of New York, and which has,
     or is an affiliate of a bank or trust company which has, capital and
     surplus of at least $50,000,000, necessary for such redemption, in trust,
     with irrevocable instructions that such cash be applied to the redemption
     of the Series A Preferred Shares so called for redemption. No interest
     shall accrue for the benefit of the holders of Series A Preferred Shares to
     be redeemed on any cash so set aside by the Trust. Subject to applicable
     escheat laws, any such cash unclaimed at the end of two years from the Call
     Date shall revert to the general funds of the Trust, after which reversion
     the holders of such Series A Preferred Shares so called for redemption
     shall look only to the general funds of the Trust for the payment of such
     cash.

                (v) As promptly as practicable after the surrender in accordance
          with such notice of the certificates for any such Series A Preferred
          Shares so redeemed (properly endorsed or assigned for transfer, if the
          Trust shall so require and if the notice shall so state), such Series
          A Preferred Shares shall be exchanged for any cash (without interest
          thereon) for which such Series A Preferred Shares have been redeemed.
          If fewer than all of the outstanding Series A Preferred Shares are to
          be redeemed, the Series A Preferred Shares to be redeemed shall be
          selected by the Trust from outstanding Series A Preferred Shares not
          previously called for redemption by lot or pro rata (as nearly as may
          be) or by any other method determined by the Trust in its sole
          discretion to be equitable. If fewer than all of the Series A
          Preferred Shares represented by any certificate are redeemed, then new
          certificates representing the unredeemed Series A Preferred Shares
          shall be issued without cost to the holder thereof.

                                       A-7

<PAGE>

          (f)   Conversion. Holders of Series A Preferred Shares shall have the
right to convert all or a portion of such Series A Preferred Shares into Common
Shares, as follows:

                (i)  Subject to and upon compliance with the provisions of this
          subsection (f), a holder of Series A Preferred Shares shall have the
          right, at his or her option, at any time to convert such Series A
          Preferred Shares into the number of fully paid and non-assessable
          Common Shares obtained by dividing the aggregate liquidation
          preference of such Series A Preferred Shares by the Conversion Price
          (as in effect at the time and on the date provided for in subsection
          (f)(v) of this Section 2 by surrendering such Series A Preferred
          Shares to be converted, such surrender to be made in the manner
          provided in subsection (f)(ii) of this Section 2; provided, however,
          that the right to convert Series A Preferred Shares called for
          redemption pursuant to subsection (e) of this Section 2 shall
          terminate at the close of business on the fifth Business Day prior to
          the Call Date fixed for such redemption, unless the Trust shall
          default in making payment of the cash payable upon such redemption
          under subsection (e) of this Section 2.

                (ii)  In order to exercise the conversion right, the holder of
          each Series A Preferred Share to be converted shall surrender the
          certificate representing such Series A Preferred Share, duly endorsed
          or assigned to the Trust or in blank, at the office of the Transfer
          Agent, accompanied by written notice to the Trust that the holder
          thereof elects to convert such Series A Preferred Shares. Unless the
          Series A Preferred Shares issuable on conversion are to be issued in
          the same name as the name in which such Series A Preferred Share is
          registered, each Series A Preferred Share surrendered for conversion
          shall be accompanied by instruments of transfer, in form satisfactory
          to the Trust, duly executed by the holder or such holder's duly
          authorized attorney and an amount sufficient to pay any transfer or
          similar tax (or evidence reasonably satisfactory to the Trust
          demonstrating that such taxes have been paid).

                (iii) Holders of Series A Preferred Shares at the close of
          business on a dividend payment record date shall be entitled to
          receive the dividend payable on such Series A Preferred Shares on the
          corresponding Dividend Payment Date notwithstanding the conversion
          thereof following such dividend payment record date and prior to such
          Dividend Payment Date. However, Series A Preferred Shares surrendered
          for conversion during the period between the close of business on any
          dividend payment record date and the opening of business on the
          corresponding Dividend Payment Date (except Series A Preferred Shares
          converted after the issuance of notice of redemption with respect to a
          Call Date during such period, such Series A Preferred Shares being
          entitled to such dividend on the Dividend Payment Date) must be
          accompanied by payment of an amount equal to the dividend payable on
          such Series A Preferred Shares on such Dividend Payment Date. A holder
          of Series A Preferred Shares on a dividend payment record date who (or
          whose transferee) tenders any such Series A Preferred Shares for
          conversion into Common Shares on the corresponding Dividend Payment
          Date shall receive the dividend payable by the Trust on such Series A
          Preferred Shares on such date, and the converting holder need not
          include payment of the

                                       A-8

<PAGE>

          amount of such dividend upon surrender of Series A Preferred Shares
          for conversion. Except as provided above, the Trust shall make no
          payment or allowance for unpaid dividends, whether or not in arrears,
          on converted Series A Preferred Shares or for dividends on the Common
          Shares issued upon such conversion.

                (iv)  As promptly as practicable after the surrender of
          certificates for Series A Preferred Shares as aforesaid, the Trust
          shall issue and shall deliver at such office to such holder, or on his
          or her written order, a certificate or certificates for the number of
          full Common Shares issuable upon the conversion of such Series A
          Preferred Shares in accordance with provisions of this subsection (f),
          and any fractional interest in respect of a Common Share arising upon
          such conversion shall be settled as provided in subsection (f) (vi) of
          this Section 2.

                (v)   Each conversion shall be deemed to have been effected
          immediately prior to the close of business on the date on which the
          certificates for Series A Preferred Shares shall have been surrendered
          and such notice (and if applicable, payment of an amount equal to the
          dividend payable on such Series A Preferred Shares) received by the
          Trust as aforesaid, and the person or persons in whose name or names
          any certificate or certificates for Common Shares shall be issuable
          upon such conversion shall be deemed to have become the holder or
          holders of record of the Common Shares represented thereby at such
          time on such date and such conversion shall be at the Conversion Price
          in effect at such time on such date unless the Share transfer books of
          the Trust shall be closed on such date, in which event such person or
          persons shall be deemed to have become such holder or holders of
          record at the close of business on the next succeeding day on which
          such Share transfer books are open, but such conversion shall be at
          the Conversion Price in effect on the date on which such Series A
          Preferred Shares shall have been surrendered and such notice received
          by the Trust.

                (vi)  No fractional Common Shares or scrip representing
          fractions of Common Shares shall be issued upon conversion of the
          Series A Preferred Shares. Instead of any fractional interest in a
`         Common Share which would otherwise be deliverable upon the conversion
          of a Series A Preferred Share, the Trust shall pay to the holder of
          such Series A Preferred Share an amount in cash based on the Current
          Market Price of Common Shares on the Trading Day immediately
          preceding the date of conversion. If more than one Series A Preferred
          Share shall be surrendered for conversion at one time by the same
          holder, the number of full Common Shares issuable upon conversion
          thereof shall be computed on the basis of the aggregate number of
          Series A Preferred Shares so surrendered.

                (vii) The Conversion Price shall be adjusted from time to time
          as follows:

                      (A) If the Trust shall after the Issue Date (i) pay a
               dividend or make a distribution on its Shares in Common Shares,
               (ii) subdivide its outstanding Common Shares into a greater
               number of Common Shares, (iii) combine its outstanding Common
               Shares into a smaller number of Common Shares or (iv) issue any
               Shares

                                       A-9

<PAGE>

               by reclassification of its Common Shares, the Conversion Price in
               effect at the opening of business on the day following the date
               fixed for the determination of Shareholders entitled to receive
               such dividend or distribution or at the opening of business on
               the Business Day next following the day on which such
               subdivision, combination or reclassification becomes effective,
               as the case may be, shall be adjusted so that the holder of any
               Series A Preferred Share thereafter surrendered for conversion
               shall be entitled to receive the number of Common Shares which
               such holder would have owned or have been entitled to receive
               after the happening of any of the events described above as if
               such Series A Preferred Shares had been converted immediately
               prior to the record date in the case of a dividend or
               distribution or the effective date in the case of a subdivision,
               combination or reclassification. An adjustment made pursuant to
               this paragraph (A) shall become effective immediately after the
               opening of business on the Business Day next following the record
               date (except as provided in subsection (f)(xi) of this Section 2)
               in the case of a dividend or distribution and shall become
               effective immediately after the opening of business on the
               Business Day next following the effective date in the case of a
               subdivision, combination or reclassification.

                    (B) If the Trust shall issue after the Issue Date rights,
               options or warrants to all holders of Common Shares entitling
               them (for a period expiring within 45 days after the record date
               mentioned below) to subscribe for or purchase Common Shares at a
               price per Common Share less than 94% (100% if a stand-by
               underwriter is used and charges the Trust a commission) of the
               Fair Market Value per Common Share on the record date for the
               determination of Shareholders entitled to receive such rights,
               option or warrants, then the Conversion Price in effect at the
               opening of business on the Business Day next following such
               record date shall be adjusted to equal the price determined by
               multiplying (i) the Conversion Price in effect immediately prior
               to the opening of business on the Business Day next following the
               date fixed for such determination by (ii) a fraction, the
               numerator of which shall be the sum of (A) the number of Common
               Shares outstanding on the close of business on the date fixed for
               such determination and (B) the number of Common Shares which the
               aggregate proceeds to the Trust from the exercise of such rights,
               option or warrants for Common Shares would purchase at 94% of
               such Fair Market Value (or 100% in the case of a stand-by
               underwriting), and the denominator of which shall be the sum of
               (X) the number of Common Shares outstanding on the close of
               business on the date fixed for such determination and (Y) the
               number of additional Common Shares offered for subscription or
               purchase pursuant to such rights, options or warrants. Such
               adjustment shall become effective immediately after the opening
               of business on the day next following such record date (except as
               provided in subsection (f)(xi) of this Section 2). In determining
               whether any rights, options or warrants entitle the holders of
               Common Shares to subscribe for or purchase Common Shares at less
               than 94% of such Fair Market Value (or 100% in the case of a
               stand-by underwriting), there shall be taken into account any
               consideration received by the Trust upon issuance and upon
               exercise

                                      A-10

<PAGE>

                    of such rights, options or warrants, the value of such
                    consideration, if other than cash, to be determined by the
                    Chairman of the Board or the Board.

                         (C) If the Trust shall distribute to all holders of its
                    Common Shares any Shares (other than Common Shares) or
                    evidence of its indebtedness or assets (excluding cumulative
                    cash dividends or distributions paid with respect to the
                    Common Shares or the common shares of Archstone Communities
                    Trust after September 30, 1993 which are not in excess of
                    the following: the sum of (i) the Trust's cumulative
                    undistributed funds from operations at September 30, 1993,
                    plus (ii) the Trust's cumulative amount of funds from
                    operations, as determined by the Board, after September 30,
                    1993, minus (iii) the cumulative amount of dividends accrued
                    or paid in respect of the Series A Preferred Shares or any
                    other class or series of preferred Shares of the Trust or
                    preferred shares of Archstone Communities Trust after
                    November 30, 1993) or rights, options or warrants to
                    subscribe for or purchase any of its securities (excluding
                    those rights, options and warrants issued to all holders of
                    Common Shares entitling them for a period expiring within 45
                    days after the record date referred to in paragraph (B)
                    above to subscribe for or purchase Common Shares, which
                    rights and warrants are referred to in and treated under
                    paragraph (B) above) (any of the foregoing being hereinafter
                    in this paragraph (C) collectively called the "Securities"
                                                                   ----------
                    and individually a "Security"), then in each such case the
                                        --------
                    Conversion Price shall be adjusted so that it shall equal
                    the price determined by multiplying (x) the Conversion Price
                    in effect immediately prior to the close of business on the
                    date fixed for the determination of Shareholders entitled to
                    receive such distribution by (y) a fraction, the numerator
                    of which shall be the Fair Market Value per Common Share on
                    the record date mentioned below less the then fair market
                    value (as determined by the Chairman of the Board or the
                    Board, whose determination shall be conclusive), of the
                    portion of the Shares or assets or evidences of indebtedness
                    so distributed or of such rights or warrants applicable to
                    one Common Share, and the denominator of which shall be the
                    Fair Market Value per Common Share on the record date
                    mentioned below. Such adjustment shall become effective
                    immediately at the opening of business on the Business Day
                    next following (except as provided in subsection (f)(xi) of
                    this Section 2) the record date for the determination of
                    Shareholders entitled to receive such distribution. For
                    purposes of this paragraph (C), the distribution of a
                    Security, which is distributed not only to the holders of
                    the Common Shares on the date fixed for the determination of
                    Shareholders entitled to such distribution of such Security,
                    but also is distributed with each Common Share delivered to
                    a Person converting a Series A Preferred Share after such
                    determination date, shall not require an adjustment of the
                    Conversion Price pursuant to this paragraph (C); provided
                    that on the date, if any, on which a person converting a
                    Series A Preferred Share would no longer be entitled to
                    receive such Security with a Common Share (other than as a
                    result of the termination of all such Securities), a
                    distribution of such Securities shall be deemed to have
                    occurred and the Conversion Price shall be adjusted as
                    provided in this paragraph (C) (and such day shall be deemed
                    to be "the date fixed for the

                                      A-11

<PAGE>

                    determination of the Shareholders entitled to receive such
                    distribution" and "the record date" within the meaning of
                    the two preceding sentences).

                         (D)  In case a tender or exchange offer made by the
                    Trust or any subsidiary of the Trust for all or any portion
                    of the Common Shares shall expire and such tender or
                    exchange offer shall involve the payment by the Trust or
                    such subsidiary of consideration per Common Share having a
                    fair market value (as determined in good faith by the Board,
                    whose determination shall be conclusive and described in a
                    resolution of the Board), at the last time (the "Expiration
                                                                     ----------
                    Time") tenders or exchanges may be made pursuant to such
                    ----
                    tender or exchange offer, which exceeds the Current Market
                    Price per Common Share on the Trading Day next succeeding
                    the Expiration Time, the Conversion Price shall be reduced
                    so that the same shall equal the price determined by
                    multiplying the Conversion Price in effect immediately prior
                    to the effectiveness of the Conversion Price reduction
                    contemplated by this paragraph (D), by a fraction of which
                    the numerator shall be the number of Common Shares
                    outstanding (including any tendered or exchanged Common
                    Shares) at the Expiration Time, multiplied by the Current
                    Market Price per Common Share on the Trading Day next
                    succeeding the Expiration Time, and the denominator shall be
                    the sum of (i) the fair market value (determined as
                    aforesaid) of the aggregate consideration payable to
                    Shareholders based on the acceptance (up to any maximum
                    specified in the terms of the tender or exchange offer) of
                    all Common Shares validly tendered or exchanged and not
                    withdrawn as of the Expiration Time (the Common Shares
                    deemed so accepted, up to any maximum, being referred to as
                    the "Purchased Shares") and (ii) the product of the number
                         ----------------
                    of Common Shares outstanding (less any Purchased Shares) at
                    the Expiration Time and the Current Market Price per Common
                    Share on the Trading Day next succeeding the Expiration
                    Time, such reduction to become effective immediately prior
                    to the opening of business on the day following the
                    Expiration Time.

                         (E)  No adjustment in the Conversion Price shall be
                    required unless such adjustment would require a cumulative
                    increase or decrease of at least 1% in such price; provided,
                    however, that any adjustments which by reason of this
                    paragraph (E) are not required to be made shall be carried
                    forward and taken into account in any subsequent adjustment
                    until made; and provided, further, that any adjustment shall
                    be required and made in accordance with the provisions of
                    this subsection (f) (other than this paragraph (E)) not
                    later than such time as may be required in order to preserve
                    the tax-free nature of a distribution to the holders of
                    Common Shares. Notwithstanding any other provisions of this
                    subsection (f), the Trust shall not be required to make any
                    adjustment of the Conversion Price for the issuance of any
                    Common Shares pursuant to any plan providing for the
                    reinvestment of dividends or interest payable on securities
                    of the Trust and the investment of additional optional
                    amounts in Common Shares under such plan. All calculations
                    under this subsection (f) shall be made to the nearest cent
                    (with $0.005 being rounded upward) or to the nearest
                    one-tenth of a Share

                                      A-12

<PAGE>

          (with 0.05 of a Share being rounded upward), as the case may be.
          Anything in this subsection (f)(vii) to the contrary notwithstanding,
          the Trust shall be entitled, to the extent permitted by law, to make
          such reductions in the Conversion Price, in addition to those required
          by this subsection (f)(vii), as it in its discretion shall determine
          to be advisable in order that any Share dividends, subdivision of
          Shares, reclassification or combination of Shares, distribution of
          rights or warrants to purchase Shares or securities, or a distribution
          of other assets (other than cash dividends) hereafter made by the
          Trust to its Shareholders shall not be taxable.

          (viii) If the Trust shall be a party to any transaction (including

     without limitation a merger, consolidation, statutory share exchange, self
     tender offer for all or substantially all Common Shares, sale of all or
     substantially all of the Trust's assets or recapitalization of the Common
     Shares and excluding any transaction as to which paragraph (A) of
     subsection (f)(vii) of this Section 2 applies) (each of the foregoing being
     referred to herein as a "Transaction"), in each case as a result of which
                              -----------
     all or substantially all Common Shares are converted into the right to
     receive stock, securities or other property (including cash or any
     combination thereof), each Series A Preferred Share which is not redeemed
     or converted into the right to receive stock, securities or other property
     prior to such Transaction shall thereafter be convertible into the kind and
     amount of shares of stock, securities and other property (including cash or
     any combination thereof) receivable upon the consummation of such
     Transaction by a holder of such number of Common Shares into which one
     Series A Preferred Share was convertible immediately prior to such
     Transaction, assuming such holder of Common Shares (A) is not a Person with
     which the Trust consolidated or into which the Trust merged or which merged
     into the Trust or to which such sale or transfer was made, as the case may
     be (a "Constituent Person"), or an affiliate of a Constituent Person and
            ------------------
     (B) failed to exercise his rights of election, if any, as to the kind or
     amount of stock, securities and other property (including cash) receivable
     upon such Transaction (provided that if the kind or amount of stock,
     securities and other property (including cash) receivable upon such
     Transaction is not the same for each Common Share held immediately prior to
     such Transaction by other than a Constituent Person or an affiliate thereof
     and in respect of which such rights of election shall not have been
     exercised (a "Non-Electing Share"), then for purposes of this subsection
                   ------------------
     (f)(viii) the kind and amount of stock, securities and other property
     (including cash) receivable upon such Transaction by each Non-Electing
     Share shall be deemed to be the kind and amount so receivable per share by
     a plurality of the Non-Electing Shares). The Trust shall not be a party to
     any Transaction unless the terms of such Transaction are consistent with
     the provisions of this subsection (f)(viii), and it shall not consent or
     agree to the occurrence of any Transaction until the Trust has entered into
     an agreement with the successor or purchasing entity, as the case may be,
     for the benefit of the holders of the Series A Preferred Shares which shall
     contain provisions enabling the holders of the Series A Preferred Shares
     which remain outstanding after such Transaction to convert into the
     consideration received by holders of Common Shares at the Conversion Price
     in effect immediately prior to such Transaction. The provisions of this
     subsection (f)(viii) shall similarly apply to successive Transactions.

                                      A-13

<PAGE>

          (ix) If:

               (A)   the Trust shall declare a dividend (or any other
          distribution) on the Common Shares (other than cash dividends or
          distributions paid with respect to the Common Shares or the common
          shares of Archstone Communities Trust after September 30, 1993 not in
          excess of the sum of the Trust's cumulative undistributed funds from
          operations at September 30, 1993, plus the Trust's cumulative amount
          of funds from operations, as determined by the Board, after September
          30, 1993, minus the cumulative amount of dividends accrued or paid in
          respect of the Series A Preferred Shares or any other class or series
          of preferred Shares of the Trust or preferred shares of Archstone
          Communities Trust after November 30, 1993); or

               (B)   the Trust shall authorize the granting to the holders of
          Common Shares of rights, options or warrants to subscribe for or
          purchase any Shares of any class or any other rights, options or
          warrants; or

               (C)   there shall be any reclassification of the Common Shares
          (other than an event to which paragraph (A) of subsection (f)(vii) of
          this Section 2 applies) or any consolidation or merger to which the
          Trust is a party and for which approval of any Shareholders of the
          Trust is required, or a statutory share exchange, or a self tender
          offer by the Trust for all or substantially all of the outstanding
          Common Shares or the sale or transfer of all or substantially all of
          the assets of the Trust as an entirety; or

               (D)   there shall occur the voluntary or involuntary liquidation,
          dissolution or winding up of the Trust,

     then the Trust shall cause to be filed with the Transfer Agent and shall
     cause to be mailed to the holders of Series A Preferred Shares at their
     addresses as shown on the Share records of the Trust, as promptly as
     possible, but at least 10 days prior to the applicable date hereinafter
     specified, a notice stating (i) the date on which a record is to be taken
     for purposes of such dividend, distribution or granting of rights, options
     or warrants, or, if a record is not to be taken, the date as of which the
     holders of Common Shares of record to be entitled to such dividend,
     distribution or granting of rights, options or warrants are to be
     determined or (ii) the date on which such reclassification, consolidation,
     merger, statutory share exchange, sale, transfer, liquidation, dissolution
     or winding up is expected to become effective, and the date as of which it
     is expected that holders of Common Shares of record shall be entitled to
     exchange their Common Shares for securities or other property, if any,
     deliverable upon such reclassification, consolidation, merger, statutory
     share exchange, sale, transfer, liquidation, dissolution or winding up.
     Failure to give or receive such notice or any defect therein shall not
     affect the legality or validity of the proceedings described in this
     subsection (f).

          (x)  Whenever the Conversion Price is adjusted as herein provided, the
     Trust shall promptly file with the Transfer Agent an officer's certificate
     setting forth the Conversion Price

                                      A-14

<PAGE>

     after such adjustment and setting forth a brief statement of the facts
     requiring such adjustment which certificate shall be conclusive evidence of
     the correctness of such adjustment absent manifest error. Promptly after
     delivery of such certificate, the Trust shall prepare a notice of such
     adjustment of the Conversion Price setting forth the adjusted Conversion
     Price and the effective date of such adjustment and shall mail such notice
     of such adjustment of the Conversion Price to the holder of each Series A
     Preferred Share at such holder's last address as shown on the Share records
     of the Trust.

          (xi)   In any case in which subsection (f)(vii) of this Section 2
     provides that an adjustment shall become effective on the day next
     following the record date for an event, the Trust may defer until the
     occurrence of such event (A) issuing to the holder of any Series A
     Preferred Share converted after such record date and before the occurrence
     of such event the additional Common Shares issuable upon such conversion by
     reason of the adjustment required by such event over and above the Common
     Shares issuable upon such conversion before giving effect to such
     adjustment and (B) paying to such holder any amount of cash in lieu of any
     fraction pursuant to subsection (f)(vi) of this Section 2.

          (xii)  There shall be no adjustment of the Conversion Price in case of
     the issuance of any Shares in a reorganization, acquisition or other
     similar transaction except as specifically set forth in this subsection
     (f). If any action or transaction would require adjustment of the
     Conversion Price pursuant to more than one paragraph of this subsection
     (f), only one adjustment shall be made and such adjustment shall be the
     amount of adjustment which has the highest absolute value.

          (xiii) If the Trust shall take any action affecting the Common Shares,
     other than action described in this subsection (f), which in the opinion of
     the Board would materially and adversely affect the conversion rights of
     the holders of the Series A Preferred Shares, the Conversion Price for the
     Series A Preferred Shares may be adjusted, to the extent permitted by law,
     in such manner, if any, and at such time, as the Board, in its sole
     discretion, may determine to be equitable in the circumstances.

          (xiv)  (A)  The Trust covenants that it shall at all times reserve and
          keep available, free from preemptive rights, out of the aggregate of
          its authorized but unissued Common Shares, for purposes of effecting
          conversion of the Series A Preferred Shares, the full number of Common
          Shares deliverable upon the conversion of all outstanding Series A
          Preferred Shares not theretofore converted. For purposes of this
          subsection (f)(xiv), the number of Common Shares which shall be
          deliverable upon the conversion of all outstanding Series A Preferred
          Shares shall be computed as if at the time of computation all such
          outstanding Series A Preferred Shares were held by a single holder.

                 (B)  The Trust covenants that any Common Shares issued upon
          conversion of the Series A Preferred Shares shall be validly issued,
          fully paid and non-assessable.

                                      A-15

<PAGE>

          Before taking any action which would cause an adjustment reducing the
          Conversion Price below the then-par value of the Common Shares
          deliverable upon conversion of the Series A Preferred Shares, the
          Trust shall take any trust action which, in the opinion of its
          counsel, may be necessary in order that the Trust may validly and
          legally issue fully paid and (subject to any customary qualification
          based on the nature of a business trust) non-assessable Common Shares
          at such adjusted Conversion Price.

                 (C)  The Trust shall endeavor to list the Common Shares
          required to be delivered upon conversion of the Series A Preferred
          Shares, prior to such delivery, on each national securities exchange,
          if any, on which the outstanding Common Shares are listed at the time
          of such delivery.

                 (D)  Prior to the delivery of any securities which the Trust
          shall be obligated to deliver upon conversion of the Series A
          Preferred Shares, the Trust shall endeavor to comply with all federal
          and state laws and regulations thereunder requiring the registration
          of such securities with, or any approval of or consent to the delivery
          thereof by, any governmental authority.

          (xv)   The Trust shall pay any and all documentary stamp or similar
     issue or transfer taxes payable in respect of the issue or delivery of
     Common Shares or other securities or property on conversion of the Series A
     Preferred Shares pursuant hereto; provided, however, that the Trust shall
     not be required to pay any tax which may be payable in respect of any
     transfer involved in the issue or delivery of Common Shares or other
     securities or property in a name other than that of the holder of the
     Series A Preferred Shares to be converted, and no such issue or delivery
     shall be made unless and until the person requesting such issue or delivery
     has paid to the Trust the amount of any such tax or established, to the
     reasonable satisfaction of the Trust, that such tax has been paid.

          (xvi)  For purposes of determining the Trust's funds from operations
     in accordance with this subsection (f), the Trust's funds from operations
     for all dates and periods prior to the Issue Date shall be the funds from
     operations of Archstone Communities Trust, and the Trust's funds from
     operations for all dates and periods from and after the Issue Date shall be
     the funds from operations of Archstone-Smith Trust. For purposes of
     determining the Trust's undistributed funds from operations in accordance
     with this subsection (f), the Trust's undistributed funds from operations
     for all dates and periods prior to the Issue Date shall be the
     undistributed funds from operations of Archstone Communities Trust, and the
     Trust's undistributed funds from operations for all dates and periods from
     and after the Issue Date shall be the undistributed funds from operations
     of Archstone-Smith Trust.

     (g)  Shares To Be Retired. All Series A Preferred Shares which shall have
been issued and reacquired in any manner by the Trust shall be restored to the
status of authorized but unissued shares of beneficial interest of the Trust,
without designation as to class or series.

                                      A-16

<PAGE>

     (h)  Ranking. Any class or series of Shares shall be deemed to rank:

          (i)    senior to the Series A Preferred Shares, in the payment of
     dividends and or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if the holders of such class or
     series are entitled to the receipt of dividends or of amounts distributable
     upon any liquidation, dissolution or winding up of the Trust, as the case
     may be, in preference or priority to the holders of Series A Preferred
     Shares;

          (ii)   on a parity with the Series A Preferred Shares, in the payment
     of dividends and in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, whether or not the dividend rates,
     dividend payment dates or redemption or liquidation prices per Share
     thereof are different from those of the Series A Preferred Shares, if the
     holders of such class or series and the holders of the Series A Preferred
     Shares are entitled to the receipt of dividends and amounts distributable
     upon any liquidation, dissolution or winding up of the Trust in proportion
     to their respective amounts of dividends accrued and unpaid per Share or
     liquidation preferences, without preference or priority to each other
     ("Parity Shares");
       -------------

          (iii)  junior to the Series A Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such class or series is Junior
     Shares; and

          (iv)   junior to the Series A Preferred Shares, in the payment of
     dividends and in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such class or series is Fully
     Junior Shares.

     (i)  Voting.

          (i)    If and whenever six quarterly dividends (whether or not
     consecutive) payable on the Series A Preferred Shares or any series or
     class of Parity Shares shall be in arrears (which shall, with respect to
     any such quarterly dividend, mean that any such dividend has not been paid
     in full), whetheror not earned or declared, the number of Trustees then
     constituting the Board shall be increased by two and the holders of Series
     A Preferred Shares, together with the holders of Shares of every other
     series of Parity Shares (any such other series, the "Voting Preferred
                                                          ----------------
     Shares"), voting as a single class regardless of series, shall be entitled
     ------
     to elect the two additional Trustees to serve on the Board at any annual
     meeting of Shareholders or special meeting held in place thereof, or at a
     special meeting of the holders of the Series A Preferred Shares and the
     Voting Preferred Shares called as hereinafter provided. Whenever all
     arrears in dividends on the Series A Preferred Shares and the Voting
     Preferred Shares then outstanding shall have been paid and dividends
     thereon for the current quarterly dividend period shall have been paid or
     declared and set apart for payment, then the right of the holders of the
     Series A Preferred Shares and the Voting Preferred Shares to elect such
     additional two Trustees shall cease (but subject always to the same
     provision for the vesting of such voting rights in the case of any similar
     future arrearages in six quarterly dividends), and the terms of

                                      A-17

<PAGE>

     office of all persons elected as Trustees by the holders of the Series A
     Preferred Shares and the Voting Preferred Shares shall forthwith terminate
     and the number of the Board shall be reduced accordingly. At any time after
     such voting power shall have been so vested in the holders of Series A
     Preferred Shares and the Voting Preferred Shares, the Secretary of the
     Trust may, and upon the written request of any holder of Series A Preferred
     Shares (addressed to the Secretary at the principal office of the Trust)
     shall, call a special meeting of the holders of the Series A Preferred
     Shares and of the Voting Preferred Shares for the election of the two
     Trustees to be elected by them as herein provided, such call to be made by
     notice similar to that provided in the Trust's Bylaws (the "Bylaws") for a
                                                                 ------
     special meeting of the Shareholders or as required by law. If any such
     special meeting required to be called as provided above shall not be called
     by the Secretary within 20 days after receipt of any such request, then any
     holder of Series A Preferred Shares may call such meeting, upon the notice
     provided above, and for such purpose shall have access to the Share records
     of the Trust. The Trustees elected at any such special meeting shall hold
     office until the next annual meeting of the Shareholders or special meeting
     held in lieu thereof if such office shall not have previously terminated as
     provided above. If any vacancy shall occur among the Trustees elected by
     the holders of the Series A Preferred Shares and the Voting Preferred
     Shares, a successor shall be elected by the Board, upon the nomination of
     the then-remaining Trustee elected by the holders of the Series A Preferred
     Shares and the Voting Preferred Shares or the successor of such remaining
     Trustee, to serve until the next annual meeting of the Shareholders or
     special meeting held in place thereof if such office shall not have
     previously terminated as provided above. Notwithstanding any other
     provisions of this subsection (i), in any vote for the election of
     additional Trustees hereunder, the Series A Preferred Shares and Voting
     Preferred Shares beneficially owned by Security Capital Group Incorporated,
     a Maryland corporation ("Security Capital Group"), any of its direct or
                              ----------------------
     indirect subsidiaries and any of their respective directors, officers or
     controlling stockholders (together, the "Restricted Parties"), shall be
                                              ------------------
     voted in the same respective percentages as the Series A Preferred Shares
     and Voting Preferred Shares which are not beneficially owned by the
     Restricted Parties. The provisions in the preceding sentence shall cease
     and be of no further force and effect from and after such time, but only as
     long as, the Restricted Parties together no longer beneficially own in
     excess of 10% of the Trust's outstanding Common Shares.

          (ii)  So long as any Series A Preferred Shares are outstanding, in
     addition to any other vote or consent of Shareholders required by law or by
     this Declaration of Trust, the affirmative vote of at least two-thirds of
     the votes entitled to be cast by the holders of the Series A Preferred
     Shares and the Voting Preferred Shares, at the time outstanding, acting as
     a single class regardless of series, given in person or by proxy, either in
     writing without a meeting or by vote at any meeting called for the purpose,
     shall be necessary for effecting or validating:

                (A)  Any amendment, alteration or repeal of any of the
          provisions of this Declaration of Trust which materially and adversely
          affects the voting powers, rights or preferences of the holders of the
          Series A Preferred Shares or the Voting Preferred

                                      A-18

<PAGE>

          Shares; provided, however, that the amendment of the provisions of
          this Declaration of Trust so as to authorize or create or to increase
          the authorized amount of, any Fully Junior Shares, Junior Shares which
          are not senior in any respect to the Series A Preferred Shares, or any
          Shares of any class ranking on a parity with the Series A Preferred
          Shares or the Voting Preferred Shares shall not be deemed to
          materially adversely affect the voting powers, rights or preferences
          of the holders of Series A Preferred Shares; and provided, further,
          that if any such amendment, alteration or repeal would materially and
          adversely affect any voting powers, rights or preferences of the
          Series A Preferred Shares or another series of Voting Preferred Shares
          which are not enjoyed by some or all of the other series otherwise
          entitled to vote in accordance herewith, the affirmative vote of at
          least two-thirds of the votes entitled to be cast by the holders of
          all series similarly affected, similarly given, shall be required in
          lieu of the affirmative vote of at least two-thirds of the votes
          entitled to be cast by the holders of the Series A Preferred Shares
          and the Voting Preferred Shares otherwise entitled to vote in
          accordance herewith; or

               (B)  A share exchange which affects the Series A Preferred
          Shares, a consolidation with or merger of the Trust into another
          entity, or a consolidation with or merger of another entity into the
          Trust, unless in each such case each Series A Preferred Share (i)
          shall remain outstanding without a material and adverse change to its
          terms and rights or (ii) shall be converted into or exchanged for
          convertible preferred stock of the surviving entity having
          preferences, conversion or other rights, voting powers, restrictions,
          limitations as to dividends, qualifications and terms or conditions of
          redemption thereof identical to that of a Series A Preferred Share
          (except for changes which do not materially and adversely affect the
          holders of the Series A Preferred Shares); or

               (C)  The authorization or creation of, or the increase in the
          authorized amount of, any Shares of any class or any security
          convertible into Shares of any class ranking senior to the Series A
          Preferred Shares in the distribution of assets on any liquidation,
          dissolution or winding up of the Trust or in the payment of dividends;

     provided, however, that no such vote of the holders of Series A Preferred
     Shares shall be required if, at or prior to the time when such amendment,
     alteration or repeal is to take effect, or when the issuance of any such
     prior Shares or convertible security is to be made, as the case may be,
     provision is made for the redemption of all Series A Preferred Shares at
     the time outstanding. For purposes of the foregoing provisions, a "share
     exchange" means a transaction (including a forward or reverse triangular
     merger) in which an entity acquires all the issued or all the outstanding
     equity securities of one or more classes of another entity and which does
     not affect the existence of either entity, and the term "surviving entity"
     shall include the entity acquiring equity securities in a share exchange.

                                      A-19

<PAGE>

          (iii)  For purposes of the foregoing provisions of this subsection
     (i), each Series A Preferred Share shall have one vote per Share, except
     that when any other series of preferred Shares shall have the right to vote
     with the Series A Preferred Shares as a single class on any matter, then
     the Series A Preferred Shares and such other series shall have with respect
     to such matters one vote per $25.00 of stated liquidation preference.
     Except as otherwise required by applicable law or as set forth herein, the
     Series A Preferred Shares shall not have any relative, participating,
     optional or other special voting rights and powers other than as set forth
     herein, and the consent of the holders thereof shall not be required for
     the taking of any Trust action.

     (j)  Limitation on Ownership.

          (i)    Notwithstanding any other provision of the terms of the Series
     A Preferred Shares, except as provided in the next sentence and in
     subsection (j)(ii) of this Section 2, no Person, or Persons acting as a
     group, shall at any time directly or indirectly acquire ownership of more
     than 25% of the outstanding Series A Preferred Shares. Any Series A
     Preferred Shares owned by a Person or Persons acting as a group in excess
     of such 25% shall be deemed "Excess Preferred Shares," except that any such
                                  -----------------------
     Series A Preferred Shares in excess of 25% shall not be considered Excess
     Preferred Shares if the 25% limitation is exceeded solely as a result of
     the Trust's redemption of Series A Preferred Shares, provided that
     thereafter any additional Series A Preferred Shares acquired by such Person
     or Persons acting as a group shall be considered Excess Preferred Shares.
     Within 10 days of becoming aware of the existence of Excess Preferred
     Shares (whether by notice on Schedule 13D or otherwise), the Trust shall
     redeem any and all Excess Preferred Shares by giving notice of redemption
     to the holder or holders thereof, unless, prior to the giving of such
     notice, the holder shall have disposed of its ownership in the Excess
     Preferred Shares. Such notice shall set forth the number of Series A
     Preferred Shares constituting Excess Preferred Shares, the redemption price
     and the place or places at which the certificates representing such Excess
     Preferred Shares are to be surrendered and such notice shall set forth the
     matters described in the following sentence. From and after the date of
     giving such notice of redemption, the Series A Preferred Shares called for
     redemption shall cease to be outstanding and the holder thereof shall cease
     to be entitled to dividends (other than dividends declared but unpaid prior
     to the notice of redemption), voting rights and other benefits with respect
     to such Series A Preferred Shares excepting the rights to payment of the
     redemption price determined and payable as set forth in the next two
     sentences. Subject to the limitation on payment set forth in the following
     sentence, the redemption price of each Excess Preferred Share called for
     redemption shall be the average daily per Series A Preferred Share closing
     sales price, if the Series A Preferred Shares are listed on a national
     securities exchange or, if not, are reported on the NASDAQ National Market
     System, and if the Series A Preferred Shares are not so listed or reported,
     shall be the mean between the average per Series A Preferred Share closing
     bid prices and the average per Series A Preferred Share closing asked
     prices, in each case during the 30 day period ending on the business day
     prior to the redemption date, or if there have been no sales on a national
     securities exchange or the NASDAQ National Market System and no published

                                      A-20

<PAGE>

     bid quotations and no published asked quotations with respect to Series A
     Preferred Shares during such 30 day period, the redemption price shall be
     the price determined by the Board in good faith. Unless the Board
     determines that it is in the interest of the Trust to make earlier payment
     of all of the amount determined as the redemption price per Series A
     Preferred Share in accordance with the preceding sentence, the redemption
     price may be payable, at the option of the Board, at any time or times up
     to, but not later than the earlier of (A) five years after the redemption
     date or (B) the liquidation of the Trust, in which latter event the
     redemption price shall not exceed an amount which is the sum of the per
     Series A Preferred Share distributions designated as liquidating
     distributions and return of capital distributions declared with respect to
     unredeemed Series A Preferred Shares of the Trust of record subsequent to
     the redemption date; and in any event, no interest shall accrue with
     respect to the period subsequent to the redemption date to the date of such
     payment. Nothing in this subsection (j)(i) shall preclude the settlement of
     any transaction entered into through the facilities of the NYSE.

          (ii)   The limitation on ownership set forth in subsection (j)(i) of
     this Section 2 shall not apply to the acquisition of Series A Preferred
     Shares by an underwriter in a public offering of Series A Preferred Shares.
     The Board, in its sole and absolute discretion, may exempt from the
     ownership limitation set forth in subsection (j)(i) of this Section 2
     certain designated Series A Preferred Shares owned by a person (other than
     any of the Restricted Parties) who has provided the Board with evidence and
     assurances acceptable to the Board that the qualification of the Trust as a
     REIT would not be jeopardized thereby.

     (k)  Record Holders. The Trust and the Transfer Agent may deem and treat
the record holder of any Series A Preferred Shares as the true and lawful owner
thereof for all purposes, and neither the Trust nor the Transfer Agent shall be
affected by any notice to the contrary.

     (l)  Sinking Fund. The Series A Preferred Shares shall not be entitled to
the benefits of any retirement or sinking fund. (m)

                                      A-21

<PAGE>


                                     ANNEX B
                     SERIES B JUNIOR PARTICIPATING PREFERRED
                          SHARES OF BENEFICIAL INTEREST

     (a)  Designation and Amount. There shall be a series of preferred shares of
the Trust, $0.01 par value per share, which shall be designated "Series B Junior
Participating Preferred Shares" (the "Series B Preferred Shares"), and the
number of shares constituting that series shall be 4,500,000. Such number of
shares may be increased or decreased by resolution of the Board of Trustees and
by the filing of articles supplementary in accordance with the provisions of
Title 8 of the Corporations and Associations Article of the Code of Maryland
stating that such increase or reduction has been so authorized; provided,
                                                                --------
however, that no decrease shall reduce the number of Series B Preferred Shares
-------
to a number less than the number of Series B Preferred Shares then outstanding
plus the number of Series B Preferred Shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Trust.

     (b)  Dividends and Distributions.

     (i)  Subject to the prior and superior rights of the holders of any shares
of any class or series of preferred shares of the Trust ranking prior and
superior to the Series B Preferred Shares with respect to dividends, the holders
of Series B Preferred Shares shall be entitled to receive, when, as and if
declared by the Board of Trustees out of funds legally available for the
purpose, quarterly dividends payable in cash to holders of record on the last
Business Day of January, April, July and October in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a Series B
Preferred Share or fraction thereof, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in Common Shares (hereinafter defined) or a subdivision of the
outstanding Common Shares (by a reclassification or otherwise), authorized on
the common shares of beneficial interest, $0.01 par value per share, of the
Trust (the "Common Shares") since the immediately preceding Quarterly Dividend
Payment Date, or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any Series B Preferred Share or fraction thereof. In
the event the Trust shall at any time following August 31, 2001 (i) declare any
dividend on Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares or (iii) combine the outstanding Common Shares into a
smaller number of shares, then in each such case the amount to which holders of
Series B Preferred Shares were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying each such
amount by a fraction the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.

                                       B-1

<PAGE>

     (ii)  The Trust shall declare a dividend or distribution on the Series B
Preferred Shares as provided in paragraph (a) above at the time it declares a
dividend or distribution on the Common Shares (other than a dividend payable in
Common Shares).

     (iii) No dividend or distribution (other than a dividend or distribution
payable in Common Shares) shall be paid or payable to the holders of Common
Shares unless, prior thereto, all accrued but unpaid dividends to the date of
that dividend or distribution shall have been paid to the holders of Series B
Preferred Shares.

     (iv)  Dividends shall begin to accrue and be cumulative on outstanding
Series B Preferred Shares from the Quarterly Dividend Payment Date next
preceding the date of issuance of such Series B Preferred Shares, unless the
date of issuance of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue and be cumulative from the date of issuance of such shares, or
unless the date of issuance is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of Series B Preferred
Shares entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the Series B
Preferred Shares in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Trustees may fix a record date for the determination of holders of Series B
Preferred Shares entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.

     (c)   Voting Rights. The holders of Series B Preferred Shares shall have
the following voting rights:

     (A)   Subject to the provision for adjustment hereinafter set forth, each
one one-hundredth of a Series B Preferred Share shall entitle the holder thereof
to one vote on all matters submitted to a vote of the shareholders of the Trust.
In the event the Trust shall at any time following August 31, 2001 (i) declare
any dividend on Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares or (iii) combine the outstanding Common Shares into a
smaller number of shares, then in each such case the number of votes per share
to which holders of Series B Preferred Shares were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.

     (B)   Except as otherwise provided herein or required by law, the holders
of Series B Preferred Shares and the holders of Common Shares and any other
shares of beneficial interest of the

                                       B-2

<PAGE>

Trust having general voting rights shall vote together as one class on all
matters submitted to a vote of shareholders of the Trust.

         (C)   (i)   Whenever, at any time or times, dividends payable on any
         Series B Preferred Shares shall be in arrears in an amount equal to at
         least six full quarterly dividends (whether or not declared and
         whether or not consecutive), the holders of record of the outstanding
         Series B Preferred Shares shall have the exclusive right, voting
         separately as a single class, to elect two trustees of the Trust at a
         special meeting of shareholders of the Trust or at the Trust's next
         annual meeting of shareholders, and at each subsequent annual meeting
         of shareholders, as provided below. At elections for such trustees,
         the holders of Series B Preferred Shares shall be entitled to cast one
         vote for each one one-hundredth of a Series B Preferred Share held,
         subject to adjustment.

               (ii)  Upon the vesting of such right of the holders of the
         Series B Preferred Shares, the maximum authorized number of members of
         the Board of Trustees shall automatically be increased by two and the
         two vacancies so created shall be filled by vote of the holders of the
         outstanding Series B Preferred Shares as hereinafter set forth. A
         special meeting of the shareholders of the Trust then entitled to vote
         shall be called by the Chairman of the Board, the President or the
         Chief Executive Officer of the Trust, if requested in writing by the
         holders of record of not less than 10% of the Series B Preferred Shares
         then outstanding. At such special meeting, or, if no such special
         meeting shall have been called, then at the next annual meeting of
         shareholders of the Trust, the holders of the Series B Preferred Shares
         shall elect, voting as above provided, two trustees of the Trust to
         fill the aforesaid vacancies created by the automatic increase in the
         number of members of the Board of Trustees. At any and all such
         meetings for such election, the holders of a majority of the
         outstanding Series B Preferred Shares shall be necessary to constitute
         a quorum for such election, whether present in person or by proxy, and
         such two trustees shall be elected by the vote of at least a plurality
         of shares held by such shareholders present or represented at the
         meeting. Any trustee elected by holders of Series B Preferred Shares
         pursuant to this Section may be removed at any annual or special
         meeting, by vote of the holders of a majority of the Series B
         Preferred Shares, with or without cause. In case any vacancy shall
         occur among the trustees elected by the holders of the Series B
         Preferred Shares pursuant to this Section, such vacancy may be filled
         by the remaining trustee so elected, or his successor then in office,
         and the trustee so elected to fill such vacancy shall serve until the
         next meeting of shareholders for the election of trustees. After the
         holders of the Series B Preferred Shares shall have exercised their
         right to elect trustees in any default period and during the
         continuance of such period, the number of trustees shall not be
         further increased or decreased except by vote of the holders of Series
         B Preferred Shares as herein provided or pursuant to the rights of any
         equity securities ranking senior to or pari passu with the Series B
                                                ---- -----
         Preferred Shares.

               (iii) The right of the holders of the Series B Preferred
         Shares, voting separately as a class, to elect two members of the Board
         of Trustees as aforesaid shall continue until, and only until, such
         time as all arrears in dividends (whether or not declared) on the
         Series B

                                       B-3

<PAGE>
          Preferred Shares shall have been paid or declared and set apart for
          payment, at which time such right shall terminate, except as herein or
          by law expressly provided, subject to revesting in the event of each
          and every subsequent default of the character above-mentioned. Upon
          any termination of the right of the holders of the Series B Preferred
          Shares as a class to vote for trustees as herein provided, the term of
          office of all trustees then in office elected by the holders of Series
          B Preferred Shares pursuant to this Section shall terminate
          immediately. Whenever the term of office of the trustees elected by
          the holders of the Series B Preferred Shares pursuant to this Section
          shall terminate and the special voting powers vested in the holders of
          the Series B Preferred Shares pursuant to this Section shall have
          expired, the maximum number of members of the Board of Trustees shall
          be such number as may be provided for in the Bylaws of the Trust
          irrespective of any increase made pursuant to the provisions of this
          Section.

          (D)  Except as otherwise provided herein or required by law, holders
of Series B Preferred Shares shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Shares as provided herein) for taking any trust action.

          (d)  Certain Restrictions.

          (A)  Whenever any quarterly dividends or other dividends or
distributions payable on the Series B Preferred Shares as provided in subsection
(b) are in arrears, then, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on Series B Preferred Shares
outstanding shall have been paid in full, the Trust shall not:

               (i)   declare or pay dividends on, make any other distributions
          on, or redeem or purchase or otherwise acquire for consideration any
          shares ranking junior (either as to dividends or upon liquidation,
          dissolution or winding up) to the Series B Preferred Shares, other
          than dividends paid or payable in such junior shares;

               (ii)  declare or pay dividends on or make any other distributions
          on any shares ranking on a parity (either as to dividends or upon
          liquidation, dissolution or winding up) with the Series B Preferred
          Shares, except dividends paid ratably on the Series B Preferred Shares
          and all such parity shares on which dividends are payable or in
          arrears in proportion to the total amounts to which the holders of all
          such shares are then entitled;

               (iii) redeem or purchase or otherwise acquire for consideration
          shares ranking on a parity (either as to dividends or upon
          liquidation, dissolution or winding up) with the Series B Preferred
          Shares, provided that the Trust may at any time redeem, purchase or
          otherwise acquire any such parity shares in exchange for shares of the
          Trust ranking junior (either as to dividends or upon dissolution,
          liquidation or winding up) to the Series B Preferred Shares; or

                                       B-4

<PAGE>

               (iv)  purchase or otherwise acquire for consideration any
         Series B Preferred Shares, except in accordance with a purchase offer
         made in writing or by publication (as determined by the Board of
         Trustees) to all holders of such shares upon such terms as the Board of
         Trustees, after consideration of the respective annual dividend rates
         and other relative rights and preferences of the respective series and
         classes, shall determine in good faith will result in fair and
         equitable treatment among the respective series or classes.

         (B)   The Trust shall not permit any subsidiary of the Trust to
purchase or otherwise acquire for consideration any shares of the Trust unless
the Trust could, under paragraph (A) of this Section, purchase or otherwise
acquire such shares at such time and in such manner.

         (e)   Reacquired Shares. Any Series B Preferred Shares purchased or
otherwise acquired by the Trust in any manner whatsoever shall become authorized
but unissued shares of beneficial interest and may be reissued as Common Shares
or as part of a new series of preferred shares to be created by resolution or
resolutions of the Board of Trustees, subject to the conditions and restrictions
on issuance set forth herein.

         (f)   Liquidation, Dissolution or Winding Up. (A) Upon any voluntary
liquidation, dissolution or winding up of the Trust, no distribution shall be
made to the holders of shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preferred Shares unless,
prior thereto, the holders of Series B Preferred Shares shall have received
$1.00 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series B Liquidation Preference"). Following the payment of the full amount of
the Series B Liquidation Preference, no additional distributions shall be made
to the holders of Series B Preferred Shares unless, prior thereto, the holders
of Common Shares shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Series B
Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph C below to reflect such events as share splits, share dividends and
recapitalizations with respect to the Common Shares) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of the
Series B Liquidation Preference and the Common Adjustment in respect of all
outstanding Series B Preferred Shares and Common Shares, respectively, holders
of Series B Preferred Shares and holders of Common Shares shall receive their
ratable and proportionate share of the remaining assets to be distributed in the
ratio, on a per share basis, of the Adjustment Number to 1 with respect to such
Series B Preferred Shares and Common Shares, on a per share basis, respectively.

         (B)   In the event, however, that there are not sufficient assets
available to permit payment in full of the Series B Liquidation Preference and
the liquidation preferences of all other series of preferred shares, if any,
which rank on a parity with the Series B Preferred Shares, then such remaining
assets shall be distributed ratably to the holders of the Series B Preferred
Shares and such parity shares in proportion to their respective liquidation
preferences.

                                       B-5

<PAGE>

         (C)  In the event the Trust shall at any time following August 31, 2001
(i) declare any dividend on Common Shares payable in Common Shares, (ii)
subdivide the outstanding Common Shares or (iii) combine the outstanding Common
Shares into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares that were outstanding
immediately prior to such event.

         (g)  Consolidation, Merger, etc. In case the Trust shall enter into any
consolidation, merger, combination or other transaction in which the Common
Shares are exchanged for or changed into other shares or securities, cash and/or
any other property, then in any such case, the Series B Preferred Shares shall
at the same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of shares, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each Common Share
is exchanged or changed. In the event the Trust shall at any time (i) declare
any dividend on Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares or (iii) combine the outstanding Common Shares into a
smaller number of shares, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of Series B Preferred
Shares shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of Common Shares outstanding immediately after such event
and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.

         (h)  Redemption. The Series B Preferred Shares shall not be redeemable
by the Trust. The preceding sentence shall not limit the ability of the Trust to
purchase or otherwise deal in such shares to the extent permitted by law.

         (i)  Ranking. The Series B Preferred Shares shall rank junior to all
other series of the Trust's preferred shares (whether with or without par value)
as to the payment of dividends and the distribution of assets, unless the terms
of any such series shall provide otherwise.

         (j)  Amendment. Neither the Trust's Declaration of Trust, nor any
articles supplementary relating to the Series B Preferred Shares shall be
amended in any manner which would materially alter or change the powers,
preferences, rights or other terms of the Series B Preferred Shares so as to
affect the holders of Series B Preferred Shares adversely without the
affirmative vote of the holders of a majority or more of the outstanding Series
B Preferred Shares, voting separately as a class.

         (k)  Fractional Shares. Series B Preferred Shares may be issued in
fractions of a share that are integral multiples of one-one hundredth of a
share, which shall entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends and participate in
distributions and to have the benefit of all other rights of holders of Series B
Preferred Shares.

                                       B-6

<PAGE>

                                     ANNEX C
                    SERIES C CUMULATIVE REDEEMABLE PREFERRED
                          SHARES OF BENEFICIAL INTEREST

     (a)  Number of Shares and Designation. This class of preferred Shares shall
be designated as Series C Cumulative Redeemable Preferred Shares of Beneficial
Interest ("Series C Preferred Shares") and the number of shares which shall
           -------------------------
constitute such series shall be not more than 1,969,100 Shares, par value $0.01
per Share, which number may be decreased (but not below the number then
outstanding plus the number required to fulfill the Trust's obligations under
options, warrants or similar rights issued by the Trust) from time to time by
the Board.

     (b)  Definitions. For purposes of the Series C Preferred Shares, the
following terms shall have the meanings indicated:

          "Board" shall mean the Board or any committee authorized by the Board
           -----
     to perform any of its duties or exercise any of its powers with respect to
     the Series C Preferred Shares.

          "Business Day" shall mean any day other than a Saturday, Sunday or a
           ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

          "Call Date" shall mean the date specified in the notice to holders
           ---------
     required under subsection (e)(v) of this Section 4 as the Call Date.

          "Common Shares" shall mean the common shares of beneficial interest,
           -------------
     par value $0.01 per share, of the Trust.

          "Dividend Payment Date" shall mean the last calendar day of March,
           ---------------------
     June, September and December in each year, commencing on the first of such
     days to occur following the Issue Date; provided, however, that if any
     Dividend Payment Date falls on any day other than a Business Day, the
     dividend payment due on such Dividend Payment Date shall be paid on the
     next succeeding Business Day.

          "Dividend Periods" shall mean quarterly dividend periods commencing on
           ---------------
     January 1, April 1, July 1 and October 1 of each year and ending on and
     including the day preceding the first day of the next succeeding Dividend
     Period.

          "Dividend Record Date" shall have the meaning set forth in subsection
           --------------------
     (c)(i) of this Section 4.

          "Fully Junior Shares" shall mean the Common Shares and any other class
           -------------------
     or series of Shares now or hereafter issued and outstanding to which the
     Series C Preferred Shares have

                                       C-1

<PAGE>
     preference or priority in both (i) the payment of dividends and (ii) the
     distribution of assets on any liquidation, dissolution or winding up of the
     Trust.

          "Issue Date" shall mean the first date on which the Series C Preferred
           ----------
     Shares were issued.

          "Junior Shares" shall mean the Common Shares and any other class or
           -------------
     series of Shares now or hereafter issued and outstanding to which the
     Series C Preferred Shares have preference or priority in either (i) the
     payment of dividends or (ii) the distribution of assets on any liquidation,
     dissolution or winding up of the Trust and, unless the context clearly
     indicates otherwise, shall include Fully Junior Shares.

          "Parity Shares" shall have the meaning set forth in subsection (g)(i)
           -------------
     of this Section 4.

          "Person" shall mean any individual, firm, partnership, corporation,
           ------
     real estate investment trust or other entity, and shall include any
     successor (by merger or otherwise) of such entity.

          "Series C Preferred Shares" shall have the meaning set forth in
           -------------------------
     subsection (a) of this Section 4.

          "set apart for payment" shall be deemed to include, without any action
           ---------------------
     other than the following, the recording by the Trust in its accounting
     ledgers of any accounting or bookkeeping entry which indicates, pursuant to
     authorization or declaration of dividends or other distribution by the
     Board, the allocation of funds to be so paid on any class or series of
     Shares; provided, however, that if any funds for any Junior Shares or any
     Parity Shares are placed in a separate account of the Trust or delivered to
     a disbursing, paying or other similar agent, then "set apart for payment"
     with respect to the Series C Preferred Shares shall mean placing such funds
     in a separate account or delivering such funds to a disbursing, paying or
     other similar agent.

          "Shares" shall mean the shares of beneficial interest of the Trust as
           ------
     may be authorized and issued from time to time pursuant to Article II of
     the Declaration of Trust.

          "Transfer Agent" means Mellon Investor Services LLC, New York City,
           --------------
     New York, or such other agent or agents of the Trust as may be designated
     by the Board or its designee as the transfer agent for the Series C
     Preferred Shares.

          "Voting Preferred Shares" shall have the meaning set forth in
           -----------------------
     subsection (h) of this Section 4.

                                       C-2

<PAGE>

     (c) Dividends.

          (i)   The holders of Series C Preferred Shares shall be entitled to
     receive, when, as and if authorized or declared by the Board, out of funds
     legally available for such purpose, cash dividends in an amount per share
     equal to 8.625% of the liquidation preference per annum (equivalent to
     $2.15625 per share). Such dividends shall begin to accrue and shall be
     fully cumulative from October 1, 2001, whether or not in any Dividend
     Period or Periods there are funds of the Trust legally available for the
     payment of such dividends, and shall be payable quarterly, when, as and if
     declared by the Board, in arrears on Dividend Payment Dates, commencing
     with the first Dividend Payment Date to occur following the Issue Date.
     Each such dividend shall be payable in arrears to the holders of record of
     Series C Preferred Shares, as they appear in the Share records of the Trust
     at the close of business on such record date as is fixed by the Board,
     which shall be not less than 10 nor more than 50 days prior to the
     corresponding Dividend Payment Date (each, a "Dividend Record Date").
                                                   --------------------
     Accrued and unpaid dividends for any past Dividend Periods may be
     authorized or declared and paid at any time and for such interim periods,
     without reference to any regular Dividend Payment Date, to holders of
     record on such record date as may be fixed by the Board, which shall be not
     less than 10 nor more than 50 days prior to the corresponding payment date.

          (ii)  The dividend for each full Dividend Period for the Series C
     Preferred Shares shall be computed by dividing the annual dividend rate by
     four. The dividend for any period shorter than a full Dividend Period on
     the Series C Preferred Shares shall be computed on the basis of a 360-day
     year of twelve 30-day months. Holders of Series C Preferred Shares shall
     not be entitled to any dividends, whether payable in cash, property or
     stock, in excess of full cumulative dividends, as provided herein, on the
     Series C Preferred Shares. No interest, or sum of money in lieu of
     interest, shall be payable in respect of any dividend payment or payments
     on the Series C Preferred Shares which may be in arrears.

          (iii) So long as any Series C Preferred Shares are outstanding, no
     dividends, except as described in the immediately following sentence, shall
     be declared or paid or set apart for payment on any Parity Shares for any
     period unless (A) full cumulative dividends have been or contemporaneously
     are paid or declared and a sum sufficient for the payment thereof set apart
     for payment for all past Dividend Periods with respect to the Series C
     Preferred Shares and (B) a sum sufficient for the payment thereof has been
     or contemporaneously is set apart for payment of the dividend for the
     current Dividend Period with respect to the Series C Preferred Shares. When
     dividends are not paid in full, or a sum sufficient for the payment thereof
     is not set apart for payment, on the Series C Preferred Shares and any
     Parity Shares as provided above, all dividends declared on the Series C
     Preferred Shares and any Parity Shares shall be declared ratably in
     proportion to the respective amounts of dividends accrued and unpaid on the
     Series C Preferred Shares and on such Parity Shares.

          (iv)  So long as any Series C Preferred Shares are outstanding, no
     dividends (other than dividends or distributions paid solely in, or
     options, warrants or rights to subscribe for

                                       C-3

<PAGE>

     or purchase, Fully Junior Shares) shall be declared or paid or set apart
     for payment or other distribution shall be declared or made on Junior
     Shares, nor shall any Junior Shares be redeemed, purchased or otherwise
     acquired (other than a redemption, purchase or other acquisition of Common
     Shares made for purposes of an employee incentive or benefit plan of the
     Trust or any subsidiary) for any consideration (or any moneys be paid to or
     made available for a sinking fund for the redemption of any Junior Shares)
     by the Trust, directly or indirectly (except by conversion into or exchange
     for Fully Junior Shares), unless in each case (A) full cumulative dividends
     have been or contemporaneously are paid or declared and a sum sufficient
     for the payment thereof set apart for payment for all past Dividend Periods
     with respect to the Series C Preferred Shares and all past dividend periods
     with respect to any Parity Shares and (B) a sum sufficient for the payment
     thereof has been or contemporaneously is set apart for payment of the
     dividend for the current Dividend Period with respect to the Series C
     Preferred Shares and the current dividend period with respect to any Parity
     Shares.

          (v)  No distributions on Series C Preferred Shares shall be declared
     or paid or set apart for payment by the Trust at such time as the terms and
     provisions of any agreement of the Trust, including any agreement relating
     to its indebtedness, prohibits such declaration, payment or setting apart
     for payment or provides that such declaration, payment or setting apart for
     payment would constitute a breach thereof or a default thereunder, or if
     such declaration, payment or setting apart for payment is restricted or
     prohibited by law.

     (d)  Liquidation Preference.

          (i)  Upon any liquidation, dissolution or winding up of the Trust,
     whether voluntary or involuntary, before any payment or distribution of the
     assets of the Trust (whether capital or surplus) is made to or set apart
     for the holders of the Common Shares or any other class or series of Shares
     now or hereafter issued and outstanding to which the Series C Preferred
     Shares have preference or priority in the distribution of assets on any
     liquidation, dissolution or winding up at the Trust, the holders of Series
     C Preferred Shares shall be entitled to receive out of assets of the Trust
     legally available for such purpose, liquidating distributions in the amount
     of $25.00 per Series C Preferred Share, plus an amount equal to all
     dividends (whether or not earned or authorized or declared) accrued and
     unpaid thereon to the date of final distribution to such holders, if any;
     but such holders shall not be entitled to any further payment. If, upon any
     liquidation, dissolution or winding up of the Trust, the assets of the
     Trust, or the proceeds thereof, distributable among the holders of Series C
     Preferred Shares are insufficient to pay in full such preferential amount
     with respect to the Series C Preferred Shares and the corresponding amounts
     with respect to all Parity Shares, then such assets, or the proceeds
     thereof, shall be distributed among the
     holders of Series C Preferred Shares and all such Parity Shares in
     proportion to the full liquidating distributions to which they would
     otherwise be respectively entitled.

          (ii) Subject to the rights of the holders of shares of any class or
     series of Shares ranking on a parity with or senior to the Series C
     Preferred Shares in the distribution of assets

                                       C-4

<PAGE>

     on any liquidation, dissolution or winding up of the Trust, upon any
     liquidation, dissolution or winding up of the Trust, whether voluntary or
     involuntary, after payment has been made in full to the holders of Series C
     Preferred Shares, as provided in this Section 4, the holders of any Junior
     Shares shall, subject to the respective terms and provisions (if any)
     applying thereto, be entitled to receive any and all assets remaining to be
     paid or distributed, and the holders of Series C Preferred Shares shall not
     be entitled to share therein.

          (iii) For the purposes of this Section 4, (A) a consolidation or
     merger of the Trust with or into one or more corporations, real estate
     investment trusts or other entities, (B) a sale or transfer of all or
     substantially all of the Trust's assets or (C) a statutory share exchange
     shall not be deemed to be a liquidation, dissolution or winding up of the
     Trust, whether voluntary or involuntary.

     (e)  Redemption at the Option of the Trust.

          (i)   Subject to subsection (i) of this Section 4, the Series C
     Preferred Shares are not redeemable by the Trust prior to August 20, 2002.
     On and after such date, the Trust, at its option, may redeem the Series C
     Preferred Shares, in whole at any time or in part from time to time, for
     cash at a redemption price of $25.00 per Series C Preferred Share, plus the
     amounts indicated in subsection (e)(ii) of this Section 4.

          (ii)  Upon any redemption of Series C Preferred Shares pursuant to
     this subsection (e), the Trust shall pay all dividends accrued and unpaid
     thereon, if any, in arrears for any Dividend Period ending on or prior to
     the Call Date. If the Call Date falls after a Dividend Record Date and
     prior to the corresponding Dividend Payment Date, then each holder of
     Series C Preferred Shares at the close of business on such Dividend Record
     Date shall be entitled to receive the dividend payable on such Series C
     Preferred Shares on the corresponding Dividend Payment Date notwithstanding
     the redemption of such Series C Preferred Shares before such Dividend
     Payment Date. Except as provided above, the Trust shall make no payment or
     allowance for unpaid dividends, whether or not in arrears, on Series C
     Preferred Shares called for redemption.

          (iii) Unless (A) full cumulative dividends have been or
     contemporaneously are paid or declared and a sum sufficient for the payment
     thereof set apart for payment for all past Dividend Periods with respect to
     the Series C Preferred Shares and all past dividend periods with respect to
     any Parity Shares and (B) a sum sufficient for the payment thereof has been
     or contemporaneously is set apart for payment of the dividend for the
     current Dividend Period with respect to the Series C Preferred Shares and
     the current dividend period with respect to any Parity Shares, the Series C
     Preferred Shares may not be redeemed under this subsection (e) in part and
     the Trust may not purchase or otherwise acquire Series C Preferred Shares,
     except pursuant to a purchase or exchange offer made on the same terms to
     all holders of Series C Preferred Shares or by conversion into or exchange
     for Fully Junior Shares or pursuant to subsection (i) of this Section 4.

                                       C-5

<PAGE>

          (iv) The redemption price to be paid upon any redemption of the Series
     C Preferred Shares (other than any amounts indicated in subsection (e)(ii)
     of this Section 4 and other than a redemption pursuant to subsection (i) of
     this Section 4) shall be payable solely out of the sale proceeds of other
     Shares and from no other source.

          (v)  Notice of the redemption of any Series C Preferred Shares under
     this subsection (e) shall be mailed by first class mail, not less than 30
     nor more than 90 days prior to the Call Date, to each holder of record of
     Series C Preferred Shares to be redeemed at the address of such holder as
     shown on the Trust's Share records. Neither the failure to mail any notice
     required by this subsection (e)(v), nor any defect therein or in the
     mailing thereof, to any particular holder, shall affect the sufficiency of
     the notice or the validity of the proceedings for redemption with respect
     to any other holder. Any notice which was mailed in the manner provided
     herein shall be conclusively presumed to have been duly given on the date
     mailed whether or not the holder receives the notice. Each such mailed
     notice shall state, as appropriate: (A) the Call Date; (B) the number of
     Series C Preferred Shares to be redeemed and, if fewer than all Series C
     Preferred Shares held by such holder are to be redeemed, the number of
     Series C Preferred Shares to be redeemed from such holder; (C) the
     redemption price; (D) the place or places at which certificates
     representing such Series C Preferred Shares are to be surrendered; and (E)
     that dividends on the Series C Preferred Shares to be redeemed shall cease
     to accrue on the Call Date except as otherwise provided herein. If notice
     of redemption of any Series C Preferred Shares has been mailed as provided
     above, then from and after the Call Date (unless the Trust fails to make
     available an amount of cash necessary to effect such redemption), (x)
     except as otherwise provided herein, dividends shall cease to accrue on the
     Series C Preferred Shares so called for redemption, (y) such Series C
     Preferred Shares shall no longer be deemed to be outstanding and (z) all
     rights of the holders thereof as holders of Series C Preferred Shares shall
     terminate (except the right to receive cash payable upon such redemption,
     without interest thereon, upon surrender and endorsement of their
     certificates if so required and to receive any dividends payable thereon).
     The Trust's obligation to provide cash in accordance with the preceding
     sentence shall be deemed fulfilled if, on or before the Call Date, the
     Trust deposits with a bank or trust company (which may be an affiliate of
     the Trust) which has an office in the Borough of Manhattan, City of New
     York, and which has, or is an affiliate of a bank or trust company which
     has, capital and surplus of at least $50,000,000, the funds necessary for
     such redemption, in trust, with irrevocable instructions that such cash be
     applied to the redemption of the Series C Preferred Shares so called for
     redemption. No interest shall accrue for the benefit of the holders of
     Series C Preferred Shares to be redeemed on any cash so set aside by the
     Trust. Subject to applicable escheat laws, any such cash unclaimed at the
     end of two years after the Call Date shall revert to the general funds of
     the Trust, after which reversion the holders of Series C Preferred Shares
     so called for redemption shall look only to the general funds of the Trust
     for the payment of such cash.

          As promptly as practicable after the surrender in accordance with such
     notice of the certificates representing any Series C Preferred Shares so
     redeemed (properly endorsed or

                                       C-6

<PAGE>

     assigned for transfer, if the Trust so requires and if the notice so
     states), such Series C Preferred Shares shall be exchanged for any cash
     (without interest thereon) for which such Series C Preferred Shares have
     been redeemed. If fewer than all the outstanding Series C Preferred Shares
     are to be redeemed, the Series C Preferred Shares to be redeemed shall be
     selected by the Trust from outstanding Series C Preferred Shares not
     previously called for redemption by lot or pro rata (as nearly as may be)
     or by any other method determined by the Board

     or the Chairman or any Co-Chairman of the Trust in its, his or her sole
     discretion to be equitable. If fewer than all the Series C Preferred Shares
     represented by any certificate are redeemed, then new certificates
     representing the unredeemed Series C Preferred Shares shall be issued
     without cost to the holder thereof.

     (f)  Shares To Be Retired. All Series C Preferred Shares which are issued
and reacquired in any manner by the Trust shall be restored to the status of
authorized but unissued shares of beneficial interest of the Trust, without
designation as to class or series.

     (g)  Ranking. Any class or series of Shares shall be deemed to rank:

          (i)   senior to the Series C Preferred Shares, in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if the holders of such class or series are
     entitled to the receipt of dividends or amounts distributable on any
     liquidation, dissolution or winding up of the Trust, as the case may be, in
     preference or priority to the holders of Series C Preferred Shares;

          (ii)  on a parity with the Series C Preferred Shares, in the payment
     of dividends and in the distribution of assets on any liquidation,
     dissolution or winding up of the Trust, whether or not the dividend rates,
     dividend payment dates or redemption or liquidation prices per share
     thereof are different from those of the Series C Preferred Shares, if the
     holders of such class or series and the holders of Series C Preferred
     Shares are entitled to the receipt of dividends and amounts distributable
     on any liquidation, dissolution or winding up of the Trust in proportion to
     their respective amounts of dividends accrued and unpaid per share or
     liquidation preferences, without preference or priority to each other
     ("Parity Shares");
       -------------

          (iii) junior to the Series C Preferred Shares, in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if such class or series is Junior Shares; and

          (iv)  junior to the Series C Preferred Shares, in the payment of
     dividends and in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if such class or series is Fully Junior Shares.

                                       C-7

<PAGE>

     (h)  Voting.

          (i) If and whenever six quarterly dividends (whether or not
     consecutive) payable on the Series C Preferred Shares or any Parity Shares
     are in arrears (which shall, with respect to any such quarterly dividend,
     mean that any such dividend has not been paid in full), whether or not
     earned or declared, the number of Trustees then constituting the Board
     shall be increased by two, and the holders of Series C Preferred Shares,
     together with the holders of any Parity Shares (any such Parity Shares, the
     "Voting Preferred Shares"), voting as a single class regardless of class or
      -----------------------
     series, shall have the right to elect two additional Trustees to serve on
     the Board at the next annual meeting of Shareholders or a special meeting
     held in lieu thereof, or at a special meeting of the holders of Series C
     Preferred Shares and Voting Preferred Shares called as provided
     hereinafter. Whenever all dividends in arrears on the Series C Preferred
     Shares and Voting Preferred Shares then outstanding have been paid and a
     sum sufficient for the payment thereof has been set apart for payment of
     the dividend for the current Dividend Period with respect to the Series C
     Preferred Shares and the current dividend period with respect to the Voting
     Preferred Shares, then the right of the holders of Series C Preferred
     Shares and Voting Preferred Shares to elect such additional two Trustees
     shall cease (but subject always to the same provision for the vesting of
     such voting rights in the case of any similar future arrearages in six
     quarterly dividends), and the terms of office of all persons elected as
     Trustees by the holders of Series C Preferred Shares and Voting Preferred
     Shares shall immediately terminate and the number of Trustees constituting
     the Board shall be reduced accordingly. At any time after such voting
     rights have so vested in the holders of Series C Preferred Shares and
     Voting Preferred Shares, the Secretary of the Trust may, and upon the
     written request of any holder of Series C Preferred Shares (addressed to
     the Secretary at the principal office of the Trust) shall, call a special
     meeting of the holders of Series C Preferred Shares and Voting Preferred
     Shares for the election of the two Trustees to be elected by them as
     provided herein, such call to be made by notice similar to that provided in
     the Bylaws of the Trust for a special meeting of the Shareholders or as
     required by law. If any such special meeting required to be called as
     provided above is not called by the Secretary within 20 days after receipt
     of any such request, then any holder of Series C Preferred Shares may call
     such meeting, upon the notice provided above, and for such purpose shall
     have access to the Share records of the Trust. The Trustees elected at any
     such special meeting shall hold office until the next annual meeting of the
     Shareholders or special meeting held in lieu thereof if the term of such
     Trustees has not previously terminated as provided above. If any vacancy
     occurs among the Trustees elected by the holders of Series C Preferred
     Shares and Voting Preferred Shares, a successor shall be elected by the
     Board, upon the nomination of the then remaining Trustee elected by the
     holders of Series C Preferred Shares and Voting Preferred Shares or the
     successor of such remaining Trustee, to serve until the next annual meeting
     of the Shareholders or special meeting held in lieu thereof if the term of
     such Trustees has not previously terminated as provided above.
     Notwithstanding any other provisions of this subsection (h), in any vote
     for the election of additional Trustees hereunder, any Series C Preferred
     Shares and Voting Preferred Shares beneficially owned by Security Capital
     Group, any of its direct or indirect subsidiaries, and any of their
     respective directors,

                                       C-8

<PAGE>

     trustees, officers or controlling stockholders (together, the "Restricted
                                                                    ----------
     Parties"), shall be voted in the same respective percentages as the Series
     -------
     C Preferred Shares and Voting Preferred Shares which are not beneficially
     owned by the Restricted Parties. The provisions in the preceding sentence
     shall cease and be of no further force and effect from and after such time,
     but only for so long as, the Restricted Parties together no longer
     beneficially own in excess of ten percent of the Trust's outstanding Common
     Shares.

          (ii) So long as any Series C Preferred Shares are outstanding, in
     addition to any other vote or consent of Shareholders required by this
     Declaration of Trust, the affirmative vote of at least two-thirds of the
     votes entitled to be cast by the holders of Series C Preferred Shares and
     Voting Preferred Shares similarly affected, at the time outstanding, voting
     as a single class regardless of class or series, given in person or by
     proxy, either in writing without a meeting or by vote at any meeting called
     for such purpose, shall be necessary for effecting or validating:

               (A)  any amendment, alteration or repeal of any of the provisions
          of this Declaration of Trust which materially and adversely affects
          the voting powers, rights or preferences of the holders of Series C
          Preferred Shares or Voting Preferred Shares; provided, however, that
          the amendment of the provisions of this Declaration of Trust so as to
          authorize or create or to increase the authorized amount of, any Fully
          Junior Shares, any Junior Shares which do not rank senior to the
          Series C Preferred Shares in any respect, or any Parity Shares shall
          not be deemed to materially and adversely affect the voting powers,
          rights or preferences of the holders of Series C Preferred Shares or
          Voting Preferred Shares, and provided, further, that, if any such
          amendment, alteration or repeal would materially and adversely affect
          any voting powers, rights or preferences of the holders of Series C
          Preferred Shares or another series of Voting Preferred Shares which
          are not enjoyed by the holders of some or all of the other series
          otherwise entitled to vote in accordance herewith, the affirmative
          vote of at least two-thirds of the votes entitled to be cast by the
          holders of all series similarly affected, similarly given, shall be
          required in lieu of the affirmative vote of at least two-thirds of the
          votes entitled to be cast by the holders of Series C Preferred Shares
          and Voting Preferred Shares otherwise entitled to vote in accordance
          herewith; or

               (B)  a share exchange which affects the Series C Preferred
          Shares, a consolidation with or merger of the Trust into another
          entity, or a consolidation with or merger of another entity into the
          Trust, unless in each such case each Series C Preferred Share (i)
          remains outstanding without a material and adverse change to its terms
          and rights or (ii) is converted into or exchanged for preferred stock
          of the surviving entity having preferences, rights, voting powers,
          restrictions, limitations as to dividends, qualifications and terms
          and conditions of redemption identical to those of a Series C
          Preferred Share (except for changes which do not materially and
          adversely affect the holders of Series C Preferred Shares); or

                                       C-9

<PAGE>


                (C)  the authorization, reclassification or creation of, or the
          increase in the authorized amount of, Shares of any class, or
          securities convertible into Shares of any class, ranking senior to the
          Series C Preferred Shares in the payment of dividends or in the
          distribution of assets on any liquidation, dissolution or winding up
          of the Trust;

     provided, however, that no such vote of the holders of Series C Preferred
     Shares shall be required if, at or prior to the time when such amendment,
     alteration or repeal is to take effect, or when the issuance of any such
     senior Shares or convertible security is to be made, as the case may be,
     provision is made for the redemption of all Series C Preferred Shares at
     the time outstanding. For purposes of the foregoing provisions, a "share
     exchange" means a transaction (including a forward or reverse triangular
     merger) in which an entity acquires all the issued or all the outstanding
     equity securities of one or more classes of another entity and which does
     not affect the existence of either entity, and the term "surviving entity"
     shall include the entity acquiring equity securities in a share exchange.

          (iii) For purposes of the foregoing provisions of this subsection (h),
     each Series C Preferred Share shall have one vote per Share, except that
     when any other series of preferred Shares has the right to vote with the
     Series C Preferred Shares as a single class on any matter, then the Series
     C Preferred Shares and such other series shall have with respect to such
     matters one vote per $25.00 of stated liquidation preference. Except as
     otherwise set forth herein, the Series C Preferred Shares shall not have
     any relative, participating, optional or other special voting rights and
     powers other than as set forth herein, and the consent of the holders
     thereof shall not be required for the taking of any Trust action.

     (i)  Limitation on Ownership.

          (i)   Notwithstanding any other provision of the terms of the Series C
     Preferred Shares, except as provided in the next sentence and in subsection
     (i)(ii) of this Section 4, no Person, or Persons acting as a group, shall
     at any time directly or indirectly acquire ownership of more than 25% of
     the outstanding Series C Preferred Shares. Any Series C Preferred Shares
     owned by a Person or Persons acting as a group in excess of such 25% shall
     be deemed "Excess Preferred Shares," except that any such Series C
                -----------------------
     Preferred Shares in excess of such 25% will not be considered Excess
     Preferred Shares if such 25% is exceeded solely as a result of the Trust's
     redemption of Series C Preferred Shares, provided that thereafter any
     additional Series C Preferred Shares acquired by such Person or Persons
     shall be considered Excess Preferred Shares. Within 10 days of becoming
     aware of the existence of Excess Preferred Shares (whether by notice on
     Schedule 13D or otherwise), the Trust shall redeem any and all Excess
     Preferred Shares by giving notice of redemption to the holder or holders
     thereof, unless prior to the giving of such notice the holders have
     disposed of such Excess Preferred Shares. Such notice shall set forth the
     number of Series C Preferred Shares constituting Excess Preferred Shares,
     the redemption price and the place or places at which certificates
     representing such Excess Preferred Shares are to be surrendered and such
     notice shall set forth the matters described in the following sentence.
     From and after the date of giving such notice

                                       C-10

<PAGE>

     of redemption, the Series C Preferred Shares so called for redemption shall
     cease to be outstanding and the holders thereof shall cease to be entitled
     to dividends (other than dividends authorized or declared but unpaid prior
     to the notice of redemption), voting rights and other benefits with respect
     to such Series C Preferred Shares except for the right to payment of the
     redemption price determined and payable as set forth in the next two
     sentences. Subject to the limitation on payment set forth in the following
     sentence, the redemption price of each Excess Preferred Share called for
     redemption shall be the average daily per Series C Preferred Share closing
     sales price, if the Series C Preferred Shares are listed on a national
     securities exchange or are reported on the NASDAQ National Market System,
     and if the Series C Preferred Shares are not so listed or reported, shall
     be the mean between the average per Series C Preferred Share closing bid
     prices and the average per Series C Preferred Share closing asked prices,
     in each case during the 30-day period ending on the business day prior to
     the redemption date, or if there have been no sales on a national
     securities exchange or the NASDAQ National Market System and no published
     bid quotations and no published asked quotations with respect to Series C
     Preferred Shares during such 30-day period, the redemption price shall be
     the price determined by the Board in good faith. Unless the Board
     determines that it is in the best interests of the Trust to make earlier
     payment of all of the amount determined as the redemption price per Series
     C Preferred Share in accordance with the preceding sentence, the redemption
     price may be payable, at the option of the Board, at any time or times up
     to, but not later than, the earlier of (A) five years after the redemption
     date or (B) the liquidation of the Trust, in which latter event the
     redemption price shall not exceed an amount which is equal to the sum of
     the per Series C Preferred Share distributions designated as liquidating
     distributions and return of capital distributions declared with respect to
     unredeemed Series C Preferred Shares with record dates subsequent to the
     redemption date; and in any event, no interest shall accrue with respect to
     the period subsequent to the redemption date to the date of such payment.
     Nothing in this subsection (i)(i) shall preclude the settlement of any
     transaction entered into through the facilities of the NYSE.

          (ii)  The limitation on ownership set forth in subsection (i)(i) of
     this Section 4 shall not apply to the acquisition of Series C Preferred
     Shares by an underwriter in a public offering of Series C Preferred Shares
     and shall not apply to the ownership of Series C Preferred Shares by a
     managing underwriter in the initial public offering of Series C Preferred
     Shares. The Board, in its sole and absolute discretion, may exempt from the
     ownership limitation set forth in subsection (i)(i) of this Section 4
     certain designated Series C Preferred Shares owned by a person (other than
     any of the Restricted Parties) who has provided the Board with evidence and
     assurances acceptable to the Board that the qualification of the Trust as a
     REIT would not be jeopardized thereby.

          (iii) Each certificate for Series C Preferred Shares shall bear a
     legend stating that the Trust will furnish information about the foregoing
     restrictions to any holder of Series C Preferred Shares on request and
     without charge.

                                       C-11

<PAGE>

          (j) Record Holders. The Trust and the Transfer Agent may deem and
     treat the record holder of any Series C Preferred Shares as the true and
     lawful owner thereof for all purposes, and neither the Trust nor the
     Transfer Agent shall be affected by any notice to the contrary.

          (k) Sinking Fund. The Series C Preferred Shares shall not be entitled
     to the benefit of any retirement or sinking fund.

                                       C-12

<PAGE>


                                     ANNEX D
                    SERIES D CUMULATIVE REDEEMABLE PREFERRED
                          SHARES OF BENEFICIAL INTEREST

     (a)  Number of Shares and Designation. This class of Preferred Shares of
Beneficial Interest shall be designated as Series D Cumulative Redeemable
Preferred Shares of Beneficial Interest (the "Series D Preferred Shares") and
                                              -------------------------
the number of shares which shall constitute such series shall be 1,989,956,
$0.01 par value per share, which number may be decreased (but not below the
number thereof then outstanding plus the number required to fulfill the Trust's
obligations under options, warrants or similar rights issued by the Trust) from
time to time by the Board of Trustees.

     (b)  Definitions. For purposes of the Series D Preferred Shares, the
following terms shall have the meanings indicated:

          "Board of Trustees" shall mean the Board of Trustees of the Trust or
           -----------------
     any committee authorized by such Board of Trustees to perform any of its
     responsibilities with respect to the Series D Preferred Shares.

          "Business Day" shall mean any day other than a Saturday, Sunday or a
           ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

          "Call Date" shall mean the date fixed for redemption of the Series D
           ---------
     Preferred Shares and specified in the notice to holders required under
     subsection (e)(v) of this Section 5 as the Call Date.

          "Common Shares" shall mean the Common Shares of Beneficial Interest of
           -------------
     the Trust, par value $0.01 per share.

          "Dividend Payment Date" shall mean the last calendar day of March,
           ---------------------
     June, September and December in each year, commencing on the first of such
     days to occur following the Issue Date; provided, however, that if any
     Dividend Payment Date falls on any day other than a Business Day, the
     dividend payment due on such Dividend Payment Date shall be paid on the
     Business Day immediately following such Dividend Payment Date.

          "Dividend Periods" shall mean quarterly dividend periods commencing on
           ----------------
     January 1, April 1, July 1 and October 1 of each year and ending on and
     including the day preceding the first day of the next succeeding Dividend
     Period.

          "Fully Junior Shares" shall mean the Common Shares and any other class
           -------------------
     or series of Shares now or hereafter issued and outstanding over which the
     Series D Preferred Shares have preference or priority in both (i) the
     payment of dividends and (ii) the distribution of assets on any
     liquidation, dissolution or winding up of the Trust.

                                       D-1

<PAGE>

          "Issue Date" shall mean the first date on which the Series D Preferred
           ----------
     Shares are issued.

          "Junior Shares" shall mean the Common Shares and any other class or
           -------------
     series of Shares now or hereafter issued and outstanding over which the
     Series D Preferred Shares have preference or priority in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust and, unless the context clearly indicates
     otherwise, shall include Fully Junior Shares.

          "Parity Shares" shall have the meaning set forth in subsection (g)(ii)
           -------------
     of this Section 5.

          "Person" shall mean any individual, firm, partnership, corporation or
           ------
     other entity, and shall include any successor (by merger or otherwise) of
     such entity.

          "Series D Preferred Shares" shall have the meaning set forth in
           -------------------------
     subsection (a) of this Section 5.

          "set apart for payment" shall be deemed to include, without any action
           ---------------------
    other than the following, the recording by the Trust in its accounting
     ledgers of any accounting or bookkeeping entry which indicates, pursuant to
     a declaration of dividends or other distribution by the Board of Trustees,
     the allocation of funds to be so paid on any series or class of shares of
     beneficial interest of the Trust; provided, however, that if any funds for
                                       --------  -------
     any class or series of Junior Shares or any class or series of shares of
     beneficial interest ranking on a parity with the Series D Preferred Shares
     as to the payment of dividends are placed in a separate account of the
     Trust or delivered to a disbursing, paying or other similar agent, then
     "set apart for payment" with respect to the Series D Preferred Shares shall
     mean placing such funds in a separate account or delivering such funds to a
     disbursing, paying or other similar agent.

          "Shares" shall mean the shares of beneficial interest of the Trust as
           ------
     may be authorized and issued from time to time pursuant to Article II of
     the Declaration of Trust.

          "Transfer Agent" means Mellon Investor Services LLC, New York city,
           --------------
     New York, or such other agent or agents of the Trust as may be designated
     by the Board of Trustees or their designee as the transfer agent for the
     Series D Preferred Shares.

          "Voting Preferred Shares" shall have the meaning set forth in
           -----------------------
     subsection (h) of this Section 5.

                                       D-2

<PAGE>
          c)   Dividends.

               (i)   The holders of Series D Preferred Shares shall be entitled
          to receive, when, as and if declared by the Board of Trustees out of
          funds legally available for that purpose, dividends payable in cash in
          an amount per share equal to $2.1875 per annum. Such dividends shall
          begin to accrue and shall be fully cumulative from October 1, 2001,
          whether or not in any Dividend Period or Periods there shall be funds
          of the Trust legally available for the payment of such dividends, and
          shall be payable quarterly, when, as and if declared by the Board of
          Trustees, in arrears on Dividend Payment Dates, commencing on the
          first Dividend Payment Date after the Issue Date. Each such dividend
          shall be payable in arrears to the holders of record of Series D
          Preferred Shares, as they appear on the stock records of the Trust at
          the close of business on such record dates, not less than 10 nor more
          than 50 days preceding such Dividend Payment Dates thereof, as shall
          be fixed by the Board of Trustees. Accrued and unpaid dividends on the
          Series D Preferred Shares for any past Dividend Periods may be
          declared and paid at any time and for such interim periods, without
          reference to any regular Dividend Payment Date, to holders of record
          on such date, not less than 10 nor more than 50 days preceding the
          payment date thereof, as may be fixed by the Board of Trustees.

               (ii)  The amount of dividends payable for each full Dividend
          Period for the Series D Preferred Shares shall be computed by dividing
          the annual dividend rate by four. The amount of dividends payable for
          any period shorter or longer than a full Dividend Period on the Series
          D Preferred Shares shall be computed on the basis of twelve 30-day
          months and a 360-day year. Holders of Series D Preferred Shares shall
          not be entitled to any dividends, whether payable in cash, property or
          stock, in excess of cumulative dividends, as herein provided, on the
          Series D Preferred Shares. No interest, or sum of money in lieu of
          interest, shall be payable in respect of any dividend payment or
          payments on the Series D Preferred Shares that may be in arrears.

               (iii) So long as any Series D Preferred Shares are outstanding,
          no full dividends, except as described in the immediately following
          sentence, shall be declared or paid or set apart for payment on any
          class or series of Parity Shares for any period unless full cumulative
          dividends have been or contemporaneously are declared and paid or
          declared and a sum sufficient for the payment thereof set apart for
          such payment on the Series D Preferred Shares for all past Dividend
          Periods terminating on or prior to the Dividend Payment Date on such
          class or series of Parity Shares. When dividends are not paid in full
          (or a sum sufficient for such full payment is not so set apart), as
          aforesaid, all dividends declared upon Series D Preferred Shares and
          all dividends declared upon any other class or series of Parity Shares
          shall be declared ratably in proportion to the respective amounts of
          dividends accumulated and unpaid on the Series D Preferred Shares and
          accumulated and unpaid on such Parity Shares.

               (iv)  So long as any Series D Preferred Shares are outstanding,
          no dividends (other than dividends or distributions paid solely in
          shares of, or options, warrants or rights to

                                       D-3

<PAGE>

          subscribe for or purchase shares of, Fully Junior Shares) shall be
          declared or paid or set apart for payment or other distribution
          declared or made upon Junior Shares, nor shall any Junior Shares be
          redeemed, purchased or otherwise acquired (other than a redemption,
          purchase or other acquisition of Common Shares made for purposes of an
          employee incentive or benefit plan of the Trust or any subsidiary) for
          any consideration (or any moneys be paid to or made available for a
          sinking fund for the redemption of any Junior Shares) by the Trust,
          directly or indirectly (except by conversion into or exchange for
          Fully Junior Shares), unless in each case (A) the full cumulative
          dividends on all outstanding Series D Preferred Shares and any other
          Parity Shares shall have been paid or declared and set apart for
          payment for all past Dividend Periods with respect to the Series D
          Preferred Shares and all past dividend periods with respect to such
          Parity Shares and (B) sufficient funds shall have been paid or
          declared and set apart for the payment of the dividend for the current
          Dividend Period with respect to the Series D Preferred Shares and the
          current dividend period with respect to such Parity Shares. Any
          dividend payment on the Series D Preferred Shares shall first be
          credited against the earliest accrued but unpaid dividend due which
          remains payable.

               (v)   No distributions on Series D Preferred Shares shall be
          declared by the Board of Trustees of the Trust or paid or set apart
          for payment by the Trust at such time as the terms and provisions of
          any agreement of the Trust, including any agreement relating to its
          indebtedness, prohibits such declaration, payment or setting apart for
          payment or provides that such declaration, payment or setting apart
          for payment would constitute a breach thereof or a default thereunder,
          or if such declaration or payment shall be restricted or prohibited by
          law.

          (d)  Liquidation Preference.

               (i)   In the event of any liquidation, dissolution or winding up
          of the Trust, whether voluntary or involuntary, before any payment or
          distribution of the assets of the Trust (whether capital or surplus)
          shall be made to or set apart for the holders of Junior Shares, the
          holders of the Series D Preferred Shares shall be entitled to receive
          Twenty-Five Dollars ($25.00) per Series D Preferred Share plus an
          amount equal to all dividends (whether or not earned or declared)
          accrued and unpaid thereon to the date of final distribution to such
          holders; but such holders shall not be entitled to any further
          payment. If, upon any liquidation, dissolution or winding up of the
          Trust, the assets of the Trust, or proceeds thereof, distributable
          among the holders of the Series D Preferred Shares shall be
          insufficient to pay in full the preferential amount aforesaid and
          liquidating payments on any other shares of any class or series of
          Parity Shares, then such assets, or the proceeds thereof, shall be
          distributed among the holders of Series D Preferred Shares and any
          such other Parity Shares ratably in accordance with the respective
          amounts that would be payable on such Series D Preferred Shares and
          any such other Parity Shares if all amounts payable thereon were paid
          in full. For the purposes of this subsection (d), (A) a consolidation
          or merger of the Trust with one or more corporations, real estate
          investment trusts or other entities, (B) a sale, lease or transfer of
          all or substantially all of the Trust's assets or (C) a statutory
          share exchange shall not be deemed to be a liquidation, dissolution or
          winding up, voluntary or involuntary, of the Trust.

                                       D-4

<PAGE>

          (ii)   Subject to the rights of the holders of shares of any series or
     class or classes of shares of beneficial interest ranking on a parity with
     or senior to the Series D Preferred Shares upon liquidation, dissolution or
     winding up, upon any liquidation, dissolution or winding up of the Trust,
     after payment shall have been made in full to the holders of the Series D
     Preferred Shares, as provided in this subsection (d), any other series or
     class or classes of Junior Shares shall, subject to the respective terms
     and provisions (if any) applying thereto, be entitled to receive any and
     all assets remaining to be paid or distributed, and the holders of the
     Series D Preferred Shares shall not be entitled to share therein.

     (e)  Redemption at the Option of the Trust.

          (i)    Subject to subsection (i) of this Section 5, the Series D
     Preferred Shares shall not be redeemable by the Trust prior to August 6,
     2004. On and after August 6, 2004, the Trust, at its option, may redeem the
     Series D Preferred Shares, in whole at any time or from time to time in
     part at the option of the Trust at a redemption price of Twenty-Five
     Dollars ($25.00) per Series D Preferred Share, plus the amounts indicated
     in subsection (e)(ii) of this Section 5.

          (ii)   Upon any redemption of Series D Preferred Shares pursuant to
     this subsection (e), the Trust shall pay any accrued and unpaid dividends
     in arrears for any Dividend Period ending on or prior to the Call Date. If
     the Call Date falls after a dividend payment record date and prior to the
     corresponding Dividend Payment Date, then each holder of Series D Preferred
     Shares at the close of business on such dividend payment record date shall
     be entitled to the dividend payable on such shares on the corresponding
     Dividend Payment Date notwithstanding the redemption of such shares before
     such Dividend Payment Date. Except as provided above, the Trust shall make
     no payment or allowance for unpaid dividends, whether or not in arrears, on
     Series D Preferred Shares called for redemption.

          (iii)  If full cumulative dividends on the Series D Preferred Shares
     and any other class or series of Parity Shares have not been paid or
     declared and set apart for payment, the Series D Preferred Shares may not
     be redeemed under this subsection (e) in part and the Trust may not
     purchase or acquire Series D Preferred Shares, otherwise than pursuant to a
     purchase or exchange offer made on the same terms to all holders of Series
     D Preferred Shares or pursuant to subsection (i) of this Section 5.

          (iv)   The redemption price to be paid upon any redemption of the
     Series D Preferred Shares (other than any amounts indicated in subsection
     (e)(ii) of this Section 5 and other than a redemption pursuant to
     subsection (i) of this Section 5) shall be payable solely out of the sale
     proceeds of other shares of beneficial interest of the Trust and from no
     other source.

          (v)    Notice of the redemption of any Series D Preferred Shares under
     this subsection (e) shall be mailed by first-class mail to each holder of
     record of Series D Preferred Shares to be redeemed at the address of each
     such holder as shown on the Trust's records, not

                                       D-5

<PAGE>

     less than 30 nor more than 90 days prior to the Call Date. Neither the
     failure to mail any notice required by this subsection (e)(v), nor any
     defect therein or in the mailing thereof, to any particular holder, shall
     affect the sufficiency of the notice or the validity of the proceedings for
     redemption with respect to the other holders. Any notice which was mailed
     in the manner herein provided shall be conclusively presumed to have been
     duly given on the date mailed whether or not the holder receives the
     notice. Each such mailed notice shall state, as appropriate: (A) the Call
     Date; (B) the number of Series D Preferred Shares to be redeemed and, if
     fewer than all the shares held by such holder are to be redeemed, the
     number of such shares to be redeemed from such holder; (C) the redemption
     price of $25.00 plus accrued and unpaid dividends through the Call Date;
     (D) the place or places at which certificates for such shares are to be
     surrendered; and (E) that dividends on the shares to be redeemed shall
     cease to accrue on such Call Date except as otherwise provided herein.
     Notice having been mailed as aforesaid, from and after the Call Date
     (unless the Trust shall fail to make available an amount of cash necessary
     to effect such redemption), (x) except as otherwise provided herein,
     dividends on the Series D Preferred Shares so called for redemption shall
     cease to accrue, (y) said shares shall no longer be deemed to be
     outstanding, and (z) all rights of the holders thereof as holders of Series
     D Preferred Shares of the Trust shall cease (except the right to receive
     cash payable upon such redemption, without interest thereon, upon surrender
     and endorsement of their certificates if so required and to receive any
     dividends payable thereon). The Trust's obligation to provide cash in
     accordance with the preceding sentence shall be deemed fulfilled if, on or
     before the Call Date, the Trust shall deposit with a bank or trust company
     (which may be an affiliate of the Trust) that has an office in the Borough
     of Manhattan, City of New York, and that has, or is an affiliate of a bank
     or trust company that has, capital and surplus of at least $50,000,000,
     funds necessary for such redemption, in trust, with irrevocable
     instructions that such cash be applied to the redemption of the Series D
     Preferred Shares so called for redemption. No interest shall accrue for the
     benefit of the holders of Series D Preferred Shares to be redeemed on any
     cash so set aside by the Trust. Subject to applicable escheat laws, any
     such cash unclaimed at the end of two years from the Call Date shall revert
     to the general funds of the Trust, after which reversion the holders of
     such shares so called for redemption shall look only to the general funds
     of the Trust for the payment of such cash.

     As promptly as practicable after the surrender in accordance with said
notice of the certificates for any such shares so redeemed (properly endorsed or
assigned for transfer, if the Trust shall so require and if the notice shall so
state), such shares shall be exchanged for any cash (without interest thereon)
for which such shares have been redeemed. If fewer than all the outstanding
Series D Preferred Shares are to be redeemed, shares to be redeemed shall be
selected by the Trust from outstanding Series D Preferred Shares not previously
called for redemption by lot or pro rata (as nearly as may be) or by any other
method determined by the Trust in its sole discretion to be equitable. If fewer
than all the Series D Preferred Shares represented by any certificate are
redeemed, then new certificates representing the unredeemed shares shall be
issued without cost to the holder thereof.

                                       D-6

<PAGE>

     (f)  Shares To Be Retired. All Series D Preferred Shares which shall have
been issued and reacquired in any manner by the Trust shall be restored to the
status of authorized but unissued shares of beneficial interest of the Trust,
without designation as to class or series.

     (g)  Ranking. Any class or series of shares of beneficial interest of the
Trust shall be deemed to rank:

          (i)    senior to the Series D Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if the holders of such class or
     series are entitled to the receipt of dividends or of amounts distributable
     upon any liquidation, dissolution or winding up of the Trust, as the case
     may be, in preference or priority to the holders of Series D Preferred
     Shares;

          (ii)   on a parity with the Series D Preferred Shares, in the payment
     of dividends and in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, whether or not the dividend rates,
     dividend payment dates or redemption or liquidation prices per share
     thereof are different from those of the Series D Preferred Shares, if the
     holders of such class of stock or series and the holders of the Series D
     Preferred Shares are entitled to the receipt of dividends and amounts
     distributable upon any liquidation, dissolution or winding up of the Trust
     in proportion to their respective amounts of dividends accrued and unpaid
     per share or liquidation preferences, without preference or priority to
     each other ("Parity Shares");
                  -------------

          (iii)  junior to the Series D Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such stock or series is Junior
     Shares; and

          (iv)   junior to the Series D Preferred Shares, as to the payment of
     dividends and in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such stock or series is Fully
     Junior Shares.

     (h)  Voting. If and whenever six quarterly dividends (whether or not
consecutive) payable on the Series D Preferred Shares or any series or class of
Parity Shares shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of trustees then constituting the
Board of Trustees shall be increased by two and the holders of Series D
Preferred Shares, together with the holders of shares of every other series of
Parity Shares (any such other series, the "Voting Preferred Shares"), voting as
                                           -----------------------
a single class regardless of series, shall be entitled to elect two additional
trustees to serve on the Board of Trustees at any annual meeting of shareholders
or special meeting held in place thereof, or at a special meeting of the holders
of the Series D Preferred Shares and the Voting Preferred Shares called as
hereinafter provided. Whenever all arrears in dividends on the Series D
Preferred Shares and the Voting Preferred Shares then outstanding shall have
been paid and dividends thereon for the current quarterly dividend period shall
have been paid or declared and set apart for payment, then the

                                      D-7

<PAGE>

right of the holders of the Series D Preferred Shares and the Voting Preferred
Shares to elect such additional two trustees shall cease (but subject always to
the same provision for the vesting of such voting rights in the case of any
similar future arrearages in six quarterly dividends), and the terms of office
of all persons elected as trustees by the holders of the Series D Preferred
Shares and the Voting Preferred Shares shall forthwith terminate and the number
of the Board of Trustees shall be reduced accordingly. At any time after such
voting power shall have been so vested in the holders of Series D Preferred
Shares and the Voting Preferred Shares, the secretary of the Trust may, and upon
the written request of any holder of Series D Preferred Shares (addressed to the
secretary at the principal office of the Trust) shall, call a special meeting of
the holders of the Series D Preferred Shares and of the Voting Preferred Shares
for the election of the two trustees to be elected by them as herein provided,
such call to be made by notice similar to that provided in the Bylaws of the
Trust for a special meeting of the shareholders or as required by law. If any
such special meeting required to be called as above provided shall not be called
by the secretary within 20 days after receipt of any such request, then any
holder of Series D Preferred Shares may call such meeting, upon the notice above
provided, and for that purpose shall have access to the stock records of the
Trust. The trustees elected at any such special meeting shall hold office until
the next annual meeting of the shareholders or special meeting held in lieu
thereof if such office shall not have previously terminated as above provided.
If any vacancy shall occur among the trustees elected by the holders of the
Series D Preferred Shares and the Voting Preferred Shares, a successor shall be
elected by the Board of Trustees, upon the nomination of the then-remaining
trustee elected by the holders of the Series D Preferred Shares and the Voting
Preferred Shares or the successor of such remaining trustee, to serve until the
next annual meeting of the shareholders or special meeting held in place thereof
if such office shall not have previously terminated as provided above.
Notwithstanding any other provisions of this paragraph, in any vote for the
election of additional trustees hereunder, the Series D Preferred Shares and
Voting Preferred Shares beneficially owned by Security Capital Group
Incorporated, a Maryland corporation, any of its direct or indirect subsidiaries
and any of their respective directors, officers or controlling stockholders
(together, the "Restricted Parties"), shall be voted in the same respective
                ------------------
percentages as the Series D Preferred Shares and Voting Preferred Shares that
are not beneficially owned by the Restricted Parties. The provisions in the
preceding sentence shall cease and be of no further force and effect from and
after such time, but only as long as, the Restricted Parties together no longer
beneficially own in excess of 10% of the Trust's outstanding Common Shares.

     So long as any Series D Preferred Shares are outstanding, in addition to
any other vote or consent of shareholders required by law or by the Declaration
of Trust, the affirmative vote of at least 662/3% of the votes entitled to be
cast by the holders of the Series D Preferred Shares and the Voting Preferred
Shares, at the time outstanding, acting as a single class regardless of series,
given in person or by proxy, either in writing without a meeting or by vote at
any meeting called for the purpose, shall be necessary for effecting or
validating:

          (i) Any amendment, alteration or repeal of any of the provisions of
     the Declaration of Trust that materially and adversely affects the voting
     powers, rights or preferences of the holders of the Series D Preferred
     Shares or the Voting Preferred Shares; provided, however,
                                            --------  -------

                                       D-8

<PAGE>
          that the amendment of the provisions of the Declaration of Trust so as
          to authorize or create or to increase the authorized amount of, any
          Fully Junior Shares, Junior Shares that are not senior in any respect
          to the Series D Preferred Shares, or any shares of any class ranking
          on a parity with the Series D Preferred Shares or the Voting Preferred
          Shares shall not be deemed to materially adversely affect the voting
          powers, rights or preferences of the holders of Series D Preferred
          Shares, and provided, further, that if any such amendment, alteration
                      --------  -------
          or repeal would materially and adversely affect any voting powers,
          rights or preferences of the Series D Preferred Shares or another
          series of Voting Preferred Shares that are not enjoyed by some or all
          of the other series otherwise entitled to vote in accordance herewith,
          the affirmative vote of at least 662/3% of the votes entitled to be
          cast by the holders of all series similarly affected, similarly given,
          shall be required in lieu of the affirmative vote of at least 662/3%
          of the votes entitled to be cast by the holders of the Series D
          Preferred Shares and the Voting Preferred Shares otherwise entitled to
          vote in accordance herewith; or

                  (ii) A share exchange that affects the Series D Preferred
          Shares, a consolidation with or merger of the Trust into another
          entity, or a consolidation with or merger of another entity into the
          Trust, unless in each such case each Series D Preferred Share (A)
          shall remain outstanding without a material and adverse change to its
          terms and rights or (B) shall be converted into or exchanged for
          preferred shares of the surviving entity having preferences, rights,
          voting powers, restrictions, limitations as to dividends,
          qualifications and terms or conditions of redemption thereof identical
          to that of a Series D Preferred Share (except for changes that do not
          materially and adversely affect the holders of the Series D Preferred
          Shares); or

                  (iii) The authorization or creation of, or the increase in the
          authorized amount of, any shares of any class or any security
          convertible into shares of any class ranking senior to the Series D
          Preferred Shares in the distribution of assets on any liquidation,
          dissolution or winding up of the Trust or in the payment of dividends;

provided, however, that no such vote of the holders of Series D Preferred Shares
--------  -------
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such prior shares or
convertible security is to be made, as the case may be, provision is made for
the redemption of all Series D Preferred Shares at the time outstanding. For
purposes of the foregoing provisions, a "share exchange" means a transaction
(including a forward or reverse triangular merger) in which an entity acquires
all the issued or all the outstanding equity securities of one or more classes
of another entity and which does not affect the existence of either entity, and
the term "surviving entity" shall include the entity acquiring equity securities
in a share exchange.

          For purposes of the foregoing provisions of this subsection (h), each
Series D Preferred Share shall have one (1) vote per share, except that when any
other series of Preferred Shares shall have the right to vote with the Series D
Preferred Shares as a single class on any matter, then the Series D Preferred
Shares and such other series shall have with respect to such matters one (1)
vote per Twenty-Five Dollars ($25.00) of stated liquidation preference. Except
as otherwise required by

                                       D-9

<PAGE>
applicable law or as set forth herein, the Series D
Preferred Shares shall not have any relative, participating, optional or other
special voting rights and powers other than as set forth herein, and the consent
of the holders thereof shall not be required for the taking of any trust action.

          (i)   Limitation on Ownership.

                (i) Limitation. Notwithstanding any other provision of the terms
          of the Series D Preferred Shares, except as provided in the next
          sentence and in subsection (i)(ii) of this Section 5, no Person, or
          Persons acting as a group, shall at any time directly or indirectly
          acquire ownership of more than 25% of the outstanding Series D
          Preferred Shares. Any Series D Preferred Shares owned by a Person or
          Persons acting as a group in excess of such 25% shall be deemed
          "Excess Preferred Shares," except that any such shares in excess of
           -----------------------
          25% will not be considered Excess Preferred Shares if the 25%
          limitation is exceeded solely as a result of the Trust's redemption of
          Series D Preferred Shares, provided that thereafter any additional
          Series D Preferred Shares acquired by such Person or Persons acting as
          a group shall be considered Excess Preferred Shares. Within 10 days of
          becoming aware of the existence of Excess Preferred Shares (whether by
          notice on Schedule 13D or otherwise), the Trust shall redeem any and
          all Excess Preferred Shares by giving notice of redemption to the
          holder or holders thereof, unless, prior to the giving of such notice
          the holder shall have disposed of its ownership in the Excess
          Preferred Shares. Such notice shall set forth the number of Series D
          Preferred Shares constituting Excess Preferred shares, the redemption
          price and the place or places at which the certificates representing
          such Excess Preferred Shares are to be surrendered and such notice
          shall set forth the matters described in the following sentence. From
          and after the date of giving such notice of redemption, the Series D
          Preferred Shares called for redemption shall cease to be outstanding
          and the holder thereof shall cease to be entitled to dividends (other
          than dividends declared but unpaid prior to the notice of redemption),
          voting rights and other benefits with respect to such shares excepting
          the rights to payment of the redemption price determined and payable
          as set forth in the next two sentences. Subject to the limitation on
          payment set forth in the following sentence, the redemption price of
          each Excess Preferred Share called for redemption shall be the average
          daily per Series D Preferred Share closing sales price, if the Series
          D Preferred Shares are listed on a national securities exchange or, if
          not, are reported on the NASDAQ National Market System, and if the
          Series D Preferred Shares are not so listed or reported, shall be the
          mean between the average per Series D Preferred Share closing bid
          prices and the average per Series D Preferred Share closing asked
          prices, in each case during the 30 day period ending on the business
          day prior to the redemption date, or if there have been no sales on a
          national securities exchange or the NASDAQ National Market System and
          no published bid quotations and no published asked quotations with
          respect to Series D Preferred Shares during such 30 day period, the
          redemption price shall be the price determined by the Trustees in good
          faith. Unless the Trustees determine that it is in the interest of the
          Trust to make earlier payment of all of the amount determined as the
          redemption price per Series D Preferred Share in accordance with the
          preceding sentence, the redemption price may be payable, at the option
          of the Trustees, at any time or times up to, but not later than the
          earlier of (A) five years after

                                       D-10

<PAGE>
         the redemption date, or (B) the liquidation of the Trust, in which
         latter event the redemption price shall not exceed an amount which is
         the sum of the per Series D Preferred Share distributions designated as
         liquidating distributions and return of capital distributions declared
         with respect to unredeemed Series D Preferred Shares of the Trust of
         record subsequent to the redemption date; and in any event, no interest
         shall accrue with respect to the period subsequent to the redemption
         date to the date of such payment.

         Nothing in this subsection (i)(i) of this Section 5 shall preclude the
         settlement of any transaction entered into through the facilities of
         the New York Stock Exchange.

                  (ii) Exemptions. The limitation on ownership set forth in
         subsection (i)(ii) of this Section 5 shall not apply to the acquisition
         of Series D Preferred Shares by an underwriter in a public offering of
         Series D Preferred Shares and shall not apply to the ownership of
         Series D Preferred Shares by a managing underwriter in the initial
         public offering of Series D Preferred Shares. The Trustees, in their
         sole and absolute discretion, may exempt from the ownership limitation
         set forth in subsection (i)(i) certain designated Series D Preferred
         Shares owned by a person (other than any of the Restricted Parties) who
         has provided the Trustees with evidence and assurances acceptable to
         the Trustees that the qualification of the Trust as a real estate
         investment trust would not be jeopardized thereby.

         (j) Record Holders. The Trust and the Transfer Agent may deem and treat
the record holder of any Series D Preferred Shares as the true and lawful owner
thereof for all purposes, and neither the Trust nor the Transfer Agent shall be
affected by any notice to the contrary.

         (k) Sinking Fund.  The Series D Preferred Shares shall not be entitled
to the benefits of any retirement or sinking fund.

                                       D-11

<PAGE>


                                     ANNEX E
                    SERIES E CUMULATIVE REDEEMABLE PREFERRED
                          SHARES OF BENEFICIAL INTEREST

    (i)  Number of Shares and Designation. This class of preferred Shares shall
be designated as Series E Cumulative Redeemable Preferred Shares of Beneficial
Interest ("Series E Preferred Shares") and the number of shares which shall
           -------------------------
constitute such series shall be 1,600,000 Shares, par value $0.01 per Share.

    (j)  Definitions. For purposes of the Series E Preferred Shares, the
following terms shall have the meanings indicated:

         "Board" shall mean the Board of Trustees or any committee authorized by
          -----
     the Board of Trustees to perform any of its duties or exercise any of its
     powers with respect to the Series E Preferred Shares.

         "Business Day" shall mean any day other than a Saturday, Sunday or a
          ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

         "Call Date" shall mean the date specified in the notice to holders
          ---------
     required under subsection (e) of this Section 6 as the Call Date.

         "Common Shares" shall mean the common shares of beneficial interest,
          -------------
     par value $0.01 per share, of the Trust.

         "Dividend Payment Date" shall mean the last calendar day of March,
          ---------------------
     June, September and December in each year, commencing on the first of such
     days to occur following the Issue Date; provided, however, that if any
     Dividend Payment Date falls on any day other than a Business Day, the
     dividend payment due on such Dividend Payment Date shall be paid on the
     next succeeding Business Day.

         "Dividend Periods" shall mean quarterly dividend periods commencing on
          ----------------
     January 1, April 1, July 1 and October 1 of each year and ending on and
     including the day preceding the first day of the next succeeding Dividend
     Period.

         "Dividend Record Date" shall have the meaning set forth in subsection
          --------------------
     (c) of this Section 6.

         "Fully Junior Shares" shall mean the Common Shares and any other class
          -------------------
     or series of Shares now or hereafter issued and outstanding to which the
     Series E Preferred Shares have

                                       E-1

<PAGE>
          preference or priority in both (i) the payment of dividends and (ii)
          the distribution of assets on any liquidation, dissolution or winding
          up of the Trust.

               "Issue Date" shall mean the first date on which the Series E
                ----------
          Preferred Shares are issued.

               "Junior Shares" shall mean the Common Shares and any other class
                -------------
          or series of Shares now or hereafter issued and outstanding to which
          the Series E Preferred Shares have preference or priority in either
          (i) the payment of dividends or (ii) the distribution of assets on any
          liquidation, dissolution or winding up of the Trust and, unless the
          context clearly indicates otherwise, shall include Fully Junior
          Shares.

               "Parity Shares" shall have the meaning set forth in subsection
                -------------
         (g) of this Section 6.

               "Person" shall mean any individual, firm, partnership,
                ------
          corporation, real estate investment trust, limited liability company
          or other entity, and shall include any successor (by merger or
          otherwise) of such entity.

               "set apart for payment" shall be deemed to include, without any
                ---------------------
          action other than the following, the recording by the Trust in its
          accounting ledgers of any accounting or bookkeeping entry which
          indicates, pursuant to authorization or declaration of dividends or
          other distribution by the Board, the allocation of funds to be so paid
          on any class or series of Shares; provided, however, that if any funds
          for any Junior Shares or any Parity Shares are placed in a separate
          account of the Trust or delivered to a disbursing, paying or other
          similar agent, then "set apart for payment" with respect to the Series
          E Preferred Shares shall mean placing such funds in a separate account
          or delivering such funds to a disbursing, paying or other similar
          agent.

               "Shares" shall mean the shares of beneficial interest of the
                --------
          Trust as may be authorized and issued from time to time pursuant to
          Article II of the Declaration of Trust.

               "Transfer Agent" means Mellon Investor Services LLC, New York
                --------------
          City, New York, or such other agent or agents of the Trust as may be
          designated by the Board or its designee as the transfer agent for the
          Series E Preferred Shares.

               "Voting Preferred Shares" shall have the meaning set forth in
                -----------------------
          subsection (h) of this Section 6.

          (k)  Dividends.

               (i) The holders of Series E Preferred Shares shall be entitled to
          receive, when, as and if authorized or declared by the Board, out of
          funds legally available for such purpose, cash dividends in an amount
          per share equal to 8.375% of the liquidation preference per

                                       E-2

<PAGE>
         annum (equivalent to $2.09375 per share). Such dividends shall begin to
         accrue and shall be fully cumulative from and including the Issue Date,
         whether or not in any Dividend Period or Periods there are funds of the
         Trust legally available for the payment of such dividends, and shall be
         payable quarterly, when, as and if declared by the Board, in arrears on
         each Dividend Payment Date. Each such dividend shall be payable in
         arrears to the holders of record of Series E Preferred Shares, as they
         appear in the Share records of the Trust at the close of business on
         such record date as is fixed by the Board, which shall be not less than
         10 nor more than 50 days prior to the corresponding Dividend Payment
         Date (each, a "Dividend Record Date"). Accrued and unpaid dividends for
                        --------------------
         any past Dividend Periods may be authorized or declared and paid at any
         time and for such interim periods, without reference to any regular
         Dividend Payment Date, to holders of record on such record date as may
         be fixed by the Board, which shall be not less than 10 nor more than 50
         days prior to the corresponding payment date.

               (ii) The dividend for each full Dividend Period for the Series E
          Preferred Shares shall be computed by dividing the annual dividend
          rate by four. The dividend for any period shorter than a full Dividend
          Period on the Series E Preferred Shares shall be computed on the basis
          of a 360-day year of twelve 30-day months. Holders of Series E
          Preferred Shares shall not be entitled to any dividends, whether
          payable in cash, property or shares, in excess of full cumulative
          dividends, as provided herein, on the Series E Preferred Shares. No
          interest, or sum of money in lieu of interest, shall be payable in
          respect of any dividend payment or payments on the Series E Preferred
          Shares which may be in arrears.

               (iii) So long as any Series E Preferred Shares are outstanding,
          no dividends, except as described in the immediately following
          sentence, shall be declared or paid or set apart for payment on any
          Parity Shares for any period unless (A) full cumulative dividends have
          been or contemporaneously are paid or declared and a sum sufficient
          for the payment thereof set apart for payment for all past Dividend
          Periods with respect to the Series E Preferred Shares and (B) a sum
          sufficient for the payment thereof has been or contemporaneously is
          set apart for payment of the dividend for the current Dividend Period
          with respect to the Series E Preferred Shares. When dividends are not
          paid in full, or a sum sufficient for the payment thereof is not set
          apart for payment, on the Series E Preferred Shares and any Parity
          Shares as provided above, all dividends declared on the Series E
          Preferred Shares and any Parity Shares shall be declared ratably in
          proportion to the respective amounts of dividends accrued and unpaid
          on the Series E Preferred Shares and on such Parity Shares.

               (iv) So long as any Series E Preferred Shares are outstanding, no
          dividends (other than dividends or distributions paid solely in, or
          options, warrants or rights to subscribe for or purchase, Fully Junior
          Shares) shall be declared or paid or set apart for payment or other
          distribution shall be declared or made on Junior Shares, nor shall any
          Junior Shares be redeemed, purchased or otherwise acquired (other than
          a redemption, purchase or other acquisition of Common Shares made for
          purposes of an employee incentive or benefit plan of the Trust or any
          subsidiary) for any consideration (or any moneys be paid to or made

                                       E-3

<PAGE>

available for a sinking fund for the redemption of any Junior Shares) by the
Trust, directly or indirectly (except by conversion into or exchange for Fully
Junior Shares), unless in each case (A) full cumulative dividends have been or
contemporaneously are paid or declared and a sum sufficient for the payment
thereof set apart for payment for all past Dividend Periods with respect to the
Series E Preferred Shares and all past dividend periods with respect to any
Parity Shares and (B) a sum sufficient for the payment thereof has been or
contemporaneously is set apart for payment of the dividend for the current
Dividend Period with respect to the Series E Preferred Shares and the current
dividend period with respect to any Parity Shares. Any dividend payment on the
Series E Preferred Shares shall first be credited against the earliest accrued
but unpaid dividend due which remains payable.

     (v)  No distributions on Series E Preferred Shares shall be declared or
paid or set apart for payment by the Trust at such time as the terms and
provisions of any agreement of the Trust, including any agreement relating to
its indebtedness, prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting apart for payment
would constitute a breach thereof or a default thereunder, or if such
declaration, payment or setting apart for payment is restricted or prohibited by
law.

(l)  Luidation Preference.

     (i)  Upon any liquidation, dissolution or winding up of the Trust, whether

voluntary or involuntary, before any payment or distribution of the assets of
the Trust (whether capital or surplus) is made to or set apart for the holders
of the Common Shares or any other class or series of Shares now or hereafter
issued and outstanding to which the Series E Preferred Shares have preference or
priority in the distribution of assets on any liquidation, dissolution or
winding up of the Trust, the holders of Series E Preferred Shares shall be
entitled to receive out of assets of the Trust legally available for such
purpose, liquidating distributions in the amount of $25.00 per Series E
Preferred Share, plus an amount equal to all dividends (whether or not earned or
authorized or declared) accrued and unpaid thereon to the date of final
distribution to such holders, if any; but such holders shall not be entitled to
any further payment. If, upon any liquidation, dissolution or winding up of the
Trust, the assets of the Trust, or the proceeds thereof, distributable among the
holders of Series E Preferred Shares are insufficient to pay in full such
preferential amount with respect to the Series E Preferred Shares and the
corresponding amounts with respect to all Parity Shares, then such assets, or
the proceeds thereof, shall be distributed among the holders of Series E
Preferred Shares and all such Parity Shares in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.

     (ii) Subject to the rights of the holders of shares of any class or series
of Shares ranking on a parity with or senior to the Series E Preferred Shares in
the distribution of assets on any liquidation, dissolution or winding up of the
Trust, upon any liquidation, dissolution or winding up of the Trust, whether
voluntary or involuntary, after payment has been made in full to the holders of
Series E Preferred Shares, as provided herein, the holders of any

                                       E-4

<PAGE>

Junior Shares shall, subject to the respective terms and provisions (if any)
applying thereto, be entitled to receive any and all assets remaining to be paid
or distributed, and the holders of Series E Preferred Shares shall not be
entitled to share therein.

     (iii) For the purposes hereof, (A) a consolidation or merger of the Trust
with or into one or more corporations, real estate investment trusts or other
entities, (B) a sale, lease or transfer of all or substantially all of the
Trust's assets or (C) a statutory share exchange shall not be deemed to be a
liquidation, dissolution or winding up of the Trust, whether voluntary or
involuntary.

(m)  Redemption at the Option of the Trust.

     (i)   Subject to subsection (i) of this Section 6 below, the Series E
Preferred Shares are not redeemable by the Trust prior to August 13, 2004. On
and after such date, the Trust, at its option, may redeem the Series E Preferred
Shares, in whole at any time or in part from time to time, for cash at a
redemption price of $25.00 per Series E Preferred Share, plus the amounts
indicated in subsection (e)(ii) of this Section 6.

     (ii)  Upon any redemption of Series E Preferred Shares pursuant to this
subsection (e), the Trust shall pay all dividends accrued and unpaid thereon, if
any, in arrears for any Dividend Period ending on or prior to the Call Date. If
the Call Date falls after a Dividend Record Date and prior to the corresponding
Dividend Payment Date, then each holder of Series E Preferred Shares at the
close of business on such Dividend Record Date shall be entitled to receive the
dividend payable on such Series E Preferred Shares on the corresponding Dividend
Payment Date notwithstanding the redemption of such Series E Preferred Shares
before such Dividend Payment Date. Except as provided above, the Trust shall
make no payment or allowance for unpaid dividends, whether or not in arrears, on
Series E Preferred Shares called for redemption.

     (iii) Unless (A) full cumulative dividends have been or contemporaneously
are paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past Dividend Periods with respect to the Series E Preferred
Shares and all past dividend periods with respect to any Parity Shares and (B) a
sum sufficient for the payment thereof has been or contemporaneously is set
apart for payment of the dividend for the current Dividend Period with respect
to the Series E Preferred Shares and
the current dividend period with respect to any Parity Shares, the Series E
Preferred Shares may not be redeemed under this subsection (e) in part and the
Trust may not purchase or otherwise acquire Series E Preferred Shares, except
pursuant to a purchase or exchange offer made on the same terms to all holders
of Series E Preferred Shares or by conversion into or exchange for Fully Junior
Shares or pursuant to subsection (i) of this Section 6.

     (iv)  The redemption price to be paid upon any redemption of the Series E
Preferred Shares (other than any amounts indicated in subsection (e)(ii) of this
Section 6 and other than

                                       E-5

<PAGE>

a redemption pursuant to subsection (i) of this Section 6) shall be payable
solely out of the sale proceeds of other shares of the Trust and from no other
source.

     (v)   Notice of the redemption of any Series E Preferred Shares under this
subsection (e) shall be mailed by first class mail, not less than 30 nor more
than 60 days prior to the Call Date, to each holder of record of Series E
Preferred Shares to be redeemed at the address of such holder as shown on the
Trust's Share records. Neither the failure to mail any notice required by this
subsection (e)(v), nor any defect therein or in the mailing thereof, to any
particular holder, shall affect the sufficiency of the notice or the validity of
the proceedings for redemption with respect to any other holder. Any notice
which was mailed in the manner provided herein shall be conclusively presumed to
have been duly given on the date mailed whether or not the holder receives the
notice. Each such mailed notice shall state, as appropriate: (A) the Call Date;
(B) the number of Series E Preferred Shares to be redeemed and, if fewer than
all Series E Preferred Shares held by such holder are to be redeemed, the number
of Series E Preferred Shares to be redeemed from such holder; (C) the redemption
price; (D) the place or places at which certificates representing such Series E
Preferred Shares are to be surrendered; and (E) that dividends on the Series E
Preferred Shares to be redeemed shall cease to accrue on the Call Date except as
otherwise provided herein. If notice of redemption of any Series E Preferred
Shares has been mailed as provided above, then from and after the Call Date
(unless the Trust fails to make available an amount of cash necessary to effect
such redemption), (x) except as otherwise provided herein, dividends shall cease
to accrue on the Series E Preferred Shares so called for redemption, (y) such
Series E Preferred Shares shall no longer be deemed to be outstanding and (z)
all rights of the holders thereof as holders of Series E Preferred Shares shall
terminate (except the right to receive cash payable upon such redemption,
without interest thereon, upon surrender and endorsement of their certificates
if so required and to receive any dividends payable thereon). The Trust's
obligation to provide cash in accordance with the preceding sentence shall be
deemed fulfilled if, on or before the Call Date, the Trust deposits with a bank
or trust company (which may be an affiliate of the Trust) which has an office in
the Borough of Manhattan, City of New York, and which has, or is an affiliate of
a bank or trust company which has, capital and surplus of at least $50,000,000,
the funds necessary for such redemption, in trust, with irrevocable instructions
that such cash be applied to the redemption of the Series E Preferred Shares so
called for redemption. No interest shall accrue for the benefit of the holders
of Series E Preferred Shares to be redeemed on any cash so set aside by the
Trust. Subject to applicable escheat laws, any such cash unclaimed at the end of
two years after the Call Date shall revert to the general funds of the Trust,
after which reversion the holders of Series E Preferred Shares so called for
redemption shall look only to the general funds of the Trust for the payment of
such cash.

     (vi)  As promptly as practicable after the surrender in accordance with
such notice of the certificates representing any Series E Preferred Shares so
redeemed (properly endorsed or assigned for transfer, if the Trust so requires
and if the notice so states), such Series E Preferred Shares shall be exchanged
for any cash (without interest thereon) for which such

                                       E-6

<PAGE>

     Series E Preferred Shares have been redeemed. If fewer than all the
     outstanding Series E Preferred Shares are to be redeemed, the Series E
     Preferred Shares to be redeemed shall be selected by the Trust from
     outstanding Series E Preferred Shares not previously called for redemption
     by lot or pro rata (as nearly as may be) or by any other method determined
     by the Board or the Chairman or any Co-Chairman of the Trust in its, his or
     her sole discretion to be equitable. If fewer than all the Series E
     Preferred Shares represented by any certificate are redeemed, then new
     certificates representing the unredeemed Series E Preferred Shares shall be
     issued without cost to the holder thereof.

     (n) Shares to Be Retired. All Series E Preferred Shares which are issued
and reacquired in any manner by the Trust shall be restored to the status of
authorized but unissued shares of beneficial interest of the Trust, without
designation as to class or series.

     (o) Ranking. Any class or series of Shares shall be deemed to rank:

         (i)    senior to the Series E Preferred Shares, in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if the holders of such class or series are
     entitled to the receipt of dividends or amounts distributable on any
     liquidation, dissolution or winding up of the Trust, as the case may be, in
     preference or priority to the holders of Series E Preferred Shares;

         (ii)   on a parity with the Series E Preferred Shares, in the payment
     of dividends and in the distribution of assets on any liquidation,
     dissolution or winding up of the Trust, whether or not the dividend rates,
     dividend payment dates or redemption or liquidation prices per share
     thereof are different from those of the Series E Preferred Shares, if the
     holders of such class or series and the holders of Series E Preferred
     Shares are entitled to the receipt of dividends and amounts distributable
     on any liquidation, dissolution or winding up of the Trust in proportion to
     their respective amounts of dividends accrued and unpaid per share or
     liquidation preferences, without preference or priority
     to each other ("Parity Shares");
                     -------------

         (iii)  junior to the Series E Preferred Shares, in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if such class or series is Junior Shares; and

         (iv)   junior to the Series E Preferred Shares, in the payment of
     dividends and in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if such class or series is Fully Junior Shares.

     (p) Voting. Holders of the Series E Preferred Shares will not have any
voting rights, except as set forth below.

         (i)    If at any time full distributions shall not have been timely
     made on any Series E Preferred Shares with respect to any six (6) prior
     quarterly distribution periods, whether or

                                       E-7

<PAGE>

not consecutive (a "Preferred Distribution Default"), the holders of such Series
                    ------------------------------
E Preferred Shares, voting together as a single class with the holders of each
class or series of Parity Shares upon which like voting rights have been
conferred and are exercisable, will have the right to elect two additional
Trustees to serve on the Board (the "Preferred Shares Trustees") at a special
meeting called by the holders of record of at least 10% of the outstanding
Series E Preferred Shares or any such class or series of Parity Shares or at the
next annual meeting of shareholders, and at each subsequent annual meeting of
shareholders or special meeting held in place thereof, until all such
distributions in arrears and distributions for the current quarterly period on
the Series E Preferred Shares and each such class or series of Parity Shares
have been paid in full.

     (ii)  At any time when such voting rights shall have vested, a proper
officer of the Trust shall call or cause to be called, upon written request of
holders of record of at least 10% of the outstanding Series E Preferred Shares,
a special meeting of the holders of Series E Preferred Shares and all the series
of Parity Shares upon which like voting rights have been conferred and are
exercisable (collectively, the "Voting Preferred Shares") by mailing or causing
                                -----------------------
to be mailed to such holders a notice of such special meeting to be held not
less than ten and not more than 45 days after the date such notice is given. The
record date for determining holders of the Voting Preferred Shares entitled to
notice of and to vote at such special meeting will be the close of business on
the third Business Day preceding the day on which such notice is mailed. At any
such special meeting, all of the holders of the Voting Preferred Shares, by
plurality vote, voting together as a single class without regard to series will
be entitled to elect two Trustees (the "Preferred Shares Trustees") on the basis
                                        -------------------------
of one vote per $25 of liquidation preference to which such Voting Preferred
Shares are entitled by their terms (excluding amounts in respect of accumulated
and unpaid dividends) and not cumulatively. The holder or holders of one-third
of the Voting Preferred Shares then outstanding, present in person or by proxy,
will constitute a quorum for the election of the Preferred Shares Trustees
except as otherwise provided by law. Notice of all meetings at which holders of
the Series E Preferred Shares shall be entitled to vote will be given to such
holders at their addresses as they appear in the transfer records. At any such
meeting or adjournment thereof in the absence of a quorum, subject to the
provisions of any applicable law, a majority of the holders of the Voting
Preferred Shares present in person or by proxy shall have the power to adjourn
the meeting for the election of the Preferred Shares Trustees, without notice
other than an announcement at the meeting, until a quorum is present. If a
Preferred Distribution Default shall terminate after the notice of a special
meeting has been given but before such special meeting has been held, the Trust
shall, as soon as practicable after such termination, mail or cause to be mailed
notice of such termination to holders of the Series E Preferred Shares that
would have been entitled to vote at such special meeting.

     (iii) If and when all accumulated distributions and the distribution for
the current distribution period on the Series E Preferred Shares shall have been
paid in full or a sum sufficient for such payment is irrevocably deposited in
trust for payment, the holders of the Series E Preferred Shares shall be
divested of the voting rights set forth in subsection (h)(ii)

                                       E-8

<PAGE>

of this Section 6 (subject to revesting in the event of each and every Preferred
Distribution Default) and, if all distributions in arrears and the distributions
for the current distribution period have been paid in full or set aside for
payment in full on all other classes or series of Parity Shares upon which like
voting rights have been conferred and are exercisable, the term and office of
each Preferred Shares Trustee so elected shall terminate. Any Preferred Shares
Trustee may be removed at any time with or without cause by the vote of, and
shall not be removed otherwise than by the vote of, the holders of record of a
majority of the outstanding Series E Preferred Shares when they have the voting
rights set forth in subsection (h)(ii) of this Section 6 (voting separately as a
single class with all other classes or series of Parity Shares upon which like
voting rights have been conferred and are exercisable). So long as a Preferred
Distribution Default shall continue, any vacancy in the office of a Preferred
Shares Trustee may be filled by written consent of the Preferred Shares Trustee
remaining in office, or if none remains in office, by a vote of the holders of
record of a majority of the outstanding Series E Preferred Shares when they have
the voting rights set forth in subsection (h)(ii) of this Section 6) (voting
separately as a single class with all other classes or series of Parity Shares
upon which like voting rights have been conferred and are exercisable). The
Preferred Shares Trustee shall each be entitled to one vote per Trustee on any
matter.

     (iv) So long as any Series E Preferred Shares remains outstanding, the
Trust shall not, without the affirmative vote of the holders of at least
two-thirds of the Series E Preferred Shares outstanding at the time (A)
designate or create, or increase the authorized or issued amount of, any class
or series of shares ranking senior to the Series E Preferred Shares with respect
to payment of distributions or rights upon liquidation, dissolution or
winding-up of the Trust or reclassify any authorized shares of the Trust into
any such shares, or create, authorize or issue any obligations or security
convertible into or evidencing the right to purchase any such shares, (B)
designate or create, or increase the authorized or issued amount of, any Parity
Shares or reclassify any authorized shares of the Trust into any such shares, or
create, authorize or issue any obligations or security convertible into or
evidencing the right to purchase any such shares, but only to the extent such
Parity Shares are issued to an Affiliate of the Trust, or (C) either (x)
consolidate, merge into or with, or convey, transfer or lease its assets
substantially as an entirety, to any corporation, real estate investment trust
or other entity, or (y) amend, alter or repeal the provisions of the Declaration
of Trust or Bylaws, whether by merger, consolidation or otherwise, in each case
that would materially and adversely affect the powers, special rights,
preferences, privileges or voting power of the Series E Preferred Shares or the
holders thereof; provided, however, that with respect to the occurrence of a
merger, consolidation or a sale or lease of all of the Trust's assets as an
entirety, so long as (1) the Trust is the surviving entity and the Series E
Preferred Shares remain outstanding with the terms thereof unchanged, or (2) the
resulting, surviving or transferee entity is a corporation or real estate
investment trust organized under the laws of any state and substitutes the
Series E Preferred Shares for other preferred shares having substantially the
same terms and same rights as the Series E Preferred Shares, including with
respect to distributions, voting rights and rights upon liquidation, dissolution
or winding-up, then the occurrence of any such event shall not be deemed to
materially and adversely affect

                                       E-9

<PAGE>

     such rights, privileges or voting powers of the holders of the Series E
     Preferred Shares and provided further that any increase in the amount of
     authorized preferred shares or the creation or issuance of any other class
     or series of preferred shares, or any increase in an amount of authorized
     shares of each class or series, in each case ranking either (m) junior to
     the Series E Preferred Shares with respect to payment of distributions and
     the distribution of assets upon liquidation, dissolution or winding-up, or
     (n) on a parity with the Series E Preferred Shares with respect to payment
     of distributions or the distribution of assets upon liquidation,
     dissolution or winding-up to the extent such preferred shares are not
     issued to an affiliate of the Trust, shall not be deemed to materially and
     adversely affect such rights, preferences, privileges or voting powers.

     (q) Transfer Restrictions. The Series E Preferred Shares shall be subject
to the provisions of Section 18, Article II of the Declaration of Trust.

     (r) No Conversion Rights. The holders of the Series E Preferred Shares
shall not have any rights to convert such shares into shares of any other class
or series of shares or into any other securities of, or interest in, the Trust.

     (s) No Preemptive Rights. No holder of the Series E Preferred Shares shall,
as such holder, have any preemptive rights to purchase or subscribe for
additional shares of shares of the Trust or any other security of the Trust
which it may issue or sell.

     (t) Record Holders. The Trust and the Transfer Agent may deem and treat the
record holder of any Series E Preferred Shares as the true and lawful owner
thereof for all purposes, and neither the Trust nor the Transfer Agent shall be
affected by any notice to the contrary.

     (u) Sinking Fund. The Series E Preferred Shares shall not be entitled to
the benefit of any retirement or sinking fund.

                                       E-10

<PAGE>


                                     ANNEX F
                    SERIES F CUMULATIVE REDEEMABLE PREFERRED
                          SHARES OF BENEFICIAL INTEREST

     (a) Number of Shares and Designation. This class of preferred Shares shall
be designated as Series F Cumulative Redeemable Preferred Shares of Beneficial
Interest ("Series F Preferred Shares") and the number of shares which shall
           -------------------------
constitute such series shall be 800,000 Shares, par value $0.01 per Share.

     (b)  Definitions. For purposes of the Series F Preferred Shares, the
following terms shall have the meanings
indicated:

          "Board" shall mean the Board of Trustees or any committee authorized
           -----
     by the Board of Trustees to perform any of its duties or exercise any of
     its powers with respect to the Series F Preferred Shares.

          "Business Day" shall mean any day other than a Saturday, Sunday or a
           ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

          "Call Date" shall mean the date specified in the notice to holders
           ---------
     required under subsection (e) of this Section 7 as the Call Date.

          "Common Shares" shall mean the common shares of beneficial interest,
           -------------
     par value $0.01 per share, of the Trust.

          "Dividend Payment Date" shall mean the 25th day of March, June,
           ---------------------
     September and December in each year, commencing with the first such date to
     occur following the issuance of Series F Preferred Shares; provided,
     however, that if any Dividend Payment Date falls on any day other than a
     Business Day, the dividend payment due on such Dividend Payment Date shall
     be paid on the next succeeding Business Day.

          "Dividend Periods" shall mean quarterly dividend periods commencing on
           ----------------
     the 26th day of March, June, September and December of each year and ending
     on and including the day preceding the first day of the next succeeding
     Dividend Period.

          "Dividend Record Date" shall have the meaning set forth in subsection
           --------------------
     (c) of this Section 7.

          "Fully Junior Shares" shall mean the Common Shares and any other class
           -------------------
     or series of Shares now or hereafter issued and outstanding to which the
     Series F Preferred Shares have preference or priority in both (i) the
     payment of dividends and (ii) the distribution of assets on any
     liquidation, dissolution or winding up of the Trust.

                                       F-1

<PAGE>

     "Issue Date" shall mean the first date on which Series F Preferred Shares
      ----------
are issued.

     "Junior Shares" shall mean the Common Shares and any other class or series
      -------------
of Shares now or hereafter issued and outstanding to which the Series F
Preferred Shares have preference or priority in either (i) the payment of
dividends or (ii) the distribution of assets on any liquidation, dissolution or
winding up of the Trust and, unless the context clearly indicates otherwise,
shall include Fully Junior Shares.

     "Parity Shares" shall have the meaning set forth in subsection (g) of this
      -------------
Section 7.

     "Person" shall mean any individual, firm, partnership, corporation, real
      ------
estate investment trust, limited liability company or other entity, and shall
include any successor (by merger or otherwise) of such entity.

     "set apart for payment" shall be deemed to include, without any action
      ---------------------
other than the following, the recording by the Trust in its accounting ledgers
of any accounting or bookkeeping entry which indicates, pursuant to
authorization or declaration of dividends or other distribution by the Board,
the allocation of funds to be so paid on any class or series of Shares;
provided, however, that if any funds for any Junior Shares or any Parity Shares
are placed in a separate account of the Trust or delivered to a disbursing,
paying or other similar agent, then "set apart for payment" with respect to the
Series F Preferred Shares shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.

     "Shares" shall mean the shares of beneficial interest of the Trust as may
      ------
be authorized and issued from time to time pursuant to Article II of the
Declaration of Trust.

     "Transfer Agent" means Mellon Investor Services LLC, New York City, New
      --------------
York, or such other agent or agents of the Trust as may be designated by the
Board or its designee as the transfer agent for the Series F Preferred Shares.

     "Voting Preferred Shares" shall have the meaning set forth in subsection
      -----------------------
(h) of this Section 7.

(c)  Dividends.

     (i) The holders of Series F Preferred Shares shall be entitled to receive,
when, as and if authorized or declared by the Board, out of funds legally
available for such purpose, cash dividends in an amount per share equal to
8.125% of the liquidation preference per annum (equivalent to $2.03125 per
share). Such dividends shall begin to accrue and shall be fully cumulative from
and including the Issue Date, whether or not in any Dividend Period or Periods
there are funds of the Trust legally available for the payment of such
dividends, and shall be payable quarterly, when, as and if declared by the
Board, in arrears on each Dividend

                                       F-2

<PAGE>

Payment Date. Each such dividend shall be payable in arrears to the holders of
record of Series F Preferred Shares, as they appear in the Share records of the
Trust at the close of business on such record date as is fixed by the Board,
which shall be not less than 10 nor more than 50 days prior to the corresponding
Dividend Payment Date (each, a "Dividend Record Date"). Accrued and unpaid
                                --------------------
dividends for any past Dividend Periods may be authorized or declared and paid
at any time and for such interim periods, without reference to any regular
Dividend Payment Date, to holders of record on such record date as may be fixed
by the Board, which shall be not less than 10 nor more than 50 days prior to the
corresponding payment date.

     (ii)  The dividend for each full Dividend Period for the Series F Preferred
Shares shall be computed by dividing the annual dividend rate by four. The
dividend for any period shorter than a full Dividend Period on the Series F
Preferred Shares shall be computed on the basis of a 360-day year of twelve
30-day months. Holders of Series F Preferred Shares shall not be entitled to any
dividends, whether payable in cash, property or shares, in excess of full
cumulative dividends, as provided herein, on the Series F Preferred Shares. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series F Preferred Shares which may be
in arrears.

     (iii) So long as any Series F Preferred Shares are outstanding, no
dividends, except as described in the immediately following sentence, shall be
declared or paid or set apart for payment on any Parity Shares for any period
unless (A) full cumulative dividends have been or contemporaneously are paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past Dividend Periods with respect to the Series F Preferred Shares and (B)
a sum sufficient for the payment thereof has been or contemporaneously is set
apart for payment of the dividend for the current Dividend Period with respect
to the Series F Preferred Shares. When dividends are not paid in full, or a sum
sufficient for the payment thereof is not set apart for payment, on the Series F
Preferred Shares and any Parity Shares as provided above, all dividends declared
on the Series F Preferred Shares and any Parity Shares shall be declared ratably
in proportion to the respective amounts of dividends accrued and unpaid on the
Series F Preferred Shares and on such Parity Shares.

     (iv) So long as any Series F Preferred Shares are outstanding, no dividends
(other than dividends or distributions paid solely in, or options, warrants or
rights to subscribe for or purchase, Fully Junior Shares) shall be declared or
paid or set apart for payment or other distribution shall be declared or made on
Junior Shares, nor shall any Junior Shares be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of Common
Shares made for purposes of an employee incentive or benefit plan of the Trust
or any subsidiary) for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any Junior Shares) by the
Trust, directly or indirectly (except by conversion into or exchange for Fully
Junior Shares), unless in each case (A) full cumulative dividends have been or
contemporaneously are paid or declared and a sum sufficient for the payment
thereof set apart for payment for all past Dividend Periods with

                                       F-3

<PAGE>

respect to the Series F Preferred Shares and all past dividend periods with
respect to any Parity Shares and (B) a sum sufficient for the payment thereof
has been or contemporaneously is set apart for payment of the dividend for the
current Dividend Period with respect to the Series F Preferred Shares and the
current dividend period with respect to any Parity Shares. Any dividend payment
on the Series F Preferred Shares shall first be credited against the earliest
accrued but unpaid dividend due which remains payable.

     (v)  No distributions on Series F Preferred Shares shall be declared or
paid or set apart for payment by the Trust at such time as the terms and
provisions of any agreement of the Trust, including any agreement relating to
its indebtedness, prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting apart for payment
would constitute a breach thereof or a default thereunder, or if such
declaration, payment or setting apart for payment is restricted or prohibited by
law.

(d)  Liquidation Preference.

     (i)  Upon any liquidation, dissolution or winding up of the Trust, whether
voluntary or involuntary, before any payment or distribution of the assets of
the Trust (whether capital or surplus) is made to or set apart for the holders
of the Common Shares or any other class or series of Shares now or hereafter
issued and outstanding to which the Series F Preferred Shares have preference or
priority in the distribution of assets on any liquidation, dissolution or
winding up of the Trust, the holders of Series F Preferred Shares shall be
entitled to receive out of assets of the Trust legally available for such
purpose, liquidating distributions in the amount of $25.00 per Series F
Preferred Share, plus an amount equal to all dividends (whether or not earned or
authorized or declared) accrued and unpaid thereon to the date of final
distribution to such holders, if any; but such holders shall not be entitled to
any further payment. If, upon any liquidation, dissolution or winding up of the
Trust, the assets of the Trust, or the proceeds thereof, distributable among the
holders of Series F Preferred Shares are insufficient to pay in full such
preferential amount with respect to the Series F Preferred Shares and the
corresponding amounts with respect to all Parity Shares, then such assets, or
the proceeds thereof, shall be distributed among the
holders of Series F Preferred Shares and all such Parity Shares in proportion to
the full liquidating distributions to which they would otherwise be respectively
entitled.

     (ii) Subject to the rights of the holders of shares of any class or series
of Shares ranking on a parity with or senior to the Series F Preferred Shares in
the distribution of assets on any liquidation, dissolution or winding up of the
Trust, upon any liquidation, dissolution or winding up of the Trust, whether
voluntary or involuntary, after payment has been made in full to the holders of
Series F Preferred Shares, as provided herein, the holders of any Junior Shares
shall, subject to the respective terms and provisions (if any) applying thereto,
be entitled to receive any and all assets remaining to be paid or distributed,
and the holders of Series F Preferred Shares shall not be entitled to share
therein.

                                       F-4

<PAGE>

     (iii) For the purposes hereof, (A) a consolidation or merger of the Trust
with or into one or more corporations, real estate investment trusts or other
entities, (B) a sale, lease or transfer of all or substantially all of the
Trust's assets or (C) a statutory share exchange shall not be deemed to be a
liquidation, dissolution or winding up of the Trust, whether voluntary or
involuntary.

(e)  Redemption at the Option of the Trust.

     (i)     Subject to subsection (i) of this Section 7, the Series F Preferred
Shares are not redeemable by the Trust prior to September 27, 2004. On and after
such date, the Trust, at its option, may redeem the Series F Preferred Shares,
in whole at any time or in part from time to time, for cash at a redemption
price of $25.00 per Series F Preferred Share, plus the amounts indicated in
subsection (e)(ii) of this Section 7.

     (ii)    Upon any redemption of Series F Preferred Shares pursuant to this
subsection (e), the Trust shall pay all dividends accrued and unpaid thereon, if
any, in arrears for any Dividend Period ending on or prior to the Call Date. If
the Call Date falls after a Dividend Record Date and prior to the corresponding
Dividend Payment Date, then each holder of Series F Preferred Shares at the
close of business on such Dividend Record Date shall be entitled to receive the
dividend payable on such Series F Preferred Shares on the corresponding Dividend
Payment Date notwithstanding the redemption of such Series F Preferred Shares
before such Dividend Payment Date. Except as provided above, the Trust shall
make no payment or allowance for unpaid dividends, whether or not in arrears, on
Series F Preferred Shares called for redemption.

     (iiii)  Unless (A) full cumulative dividends have been or contemporaneously
are paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past Dividend Periods with respect to the Series F Preferred
Shares and all past dividend periods with respect to any Parity Shares and (B) a
sum sufficient for the payment thereof has been or contemporaneously is set
apart for payment of the dividend for the current Dividend Period with respect
to the Series F Preferred Shares and the current dividend period with respect to
any Parity Shares, the Series F Preferred Shares may not be redeemed under this
subsection (e) in part and the Trust may not purchase or otherwise acquire
Series F Preferred Shares, except pursuant to a purchase or exchange offer made
on the same terms to all holders of Series F Preferred Shares or by conversion
into or exchange for Fully Junior Shares or pursuant to subsection (i) of this
Section 7.

     (iv)    The redemption price to be paid upon any redemption of the Series F
Preferred Shares (other than any amounts indicated in subsection (e)(ii) of this
Section 7 and other than a redemption pursuant to subsection (i) of this Section
7) shall be payable solely out of the sale proceeds of other shares of the Trust
and from no other source.

                                       F-5

<PAGE>

          (v)  Notice of the redemption of any Series F Preferred Shares under
     this subsection (e) shall be mailed by registered mail, not less than 10
     nor more than 60 days prior to the Call Date, to each holder of record of
     Series F Preferred Shares to be redeemed at the address of such holder as
     shown on the Trust's Share records. Neither the failure to mail any notice
     required by this subsection (e)(v), nor any defect therein or in the
     mailing thereof, to any particular holder, shall affect the sufficiency of
     the notice or the validity of the proceedings for redemption with respect
     to any other holder. Any notice which was mailed in the manner provided
     herein shall be conclusively presumed to have been duly given on the date
     mailed whether or not the holder receives the notice. Each such mailed
     notice shall state, as appropriate: (A) the Call Date; (B) the number of
     Series F Preferred Shares to be redeemed and, if fewer than all Series F
     Preferred Shares held by such holder are to be redeemed, the number of
     Series F Preferred Shares to be redeemed from such holder; (C) the
     redemption price; (D) the place or places at which certificates
     representing such Series F Preferred Shares are to be surrendered; and (E)
     that dividends on the Series F Preferred Shares to be redeemed shall cease
     to accrue on the Call Date except as otherwise provided herein. If notice
     of redemption of any Series F Preferred Shares has been mailed as provided
     above, then from and after the Call Date (unless the Trust fails to make
     available an amount of cash necessary to effect such redemption), (x)
     except as otherwise provided herein, dividends shall cease to accrue on the
     Series F Preferred Shares so called for redemption, (y) such Series F
     Preferred Shares shall no longer be deemed to be outstanding and (z) all
     rights of the holders thereof as holders of Series F Preferred Shares shall
     terminate (except the right to receive cash payable upon such redemption,
     without interest thereon, upon surrender and endorsement of their
     certificates if so required and to receive any dividends payable thereon).
     The Trust's obligation to provide cash in accordance with the preceding
     sentence shall be deemed fulfilled if, on or before the Call Date, the
     Trust deposits with a bank or trust company (which may be an affiliate of
     the Trust) which has an office in the Borough of Manhattan, City of New
     York, and which has, or is an affiliate of a bank or trust company which
     has, capital and surplus of at least $50,000,000, the funds necessary for
     such redemption, in trust, with irrevocable instructions that such cash be
     applied to the redemption of the Series F Preferred Shares so called for
     redemption. No interest shall accrue for the benefit of the holders of
     Series F Preferred Shares to be redeemed on any cash so set aside by the
     Trust. Subject to applicable escheat laws, any such cash unclaimed at the
     end of two years after the Call Date shall revert to the general funds of
     the Trust, after which reversion the holders of Series F Preferred Shares
     so called for redemption shall look only to the general funds of the Trust
     for the payment of such cash.

          As promptly as practicable after the surrender in accordance with such
notice of the certificates representing any Series F Preferred Shares so
redeemed (properly endorsed or assigned for transfer, if the Trust so requires
and if the notice so states), such Series F Preferred Shares shall be exchanged
for any cash (without interest thereon) for which such Series F Preferred Shares
have been redeemed. If fewer than all the outstanding Series F Preferred Shares
are to be redeemed, the Series F Preferred Shares to be redeemed shall be
selected by the Trust from outstanding Series F Preferred Shares not previously
called for redemption by lot or pro rata (as nearly as may be) or by

                                       F-6

<PAGE>

any other method determined by the Board or the Chairman or any Co-Chairman of
the Trust in its, his or her sole discretion to be equitable. If fewer than all
the Series F Preferred Shares represented by any certificate are redeemed, then
new certificates representing the unredeemed Series F Preferred Shares shall be
issued without cost to the holder thereof.

     (f)  Shares to Be Retired. All Series F Preferred Shares which are issued
and reacquired in any manner by the Trust shall be restored to the status of
authorized but unissued shares of beneficial interest of the Trust, without
designation as to class or series.

     (g)  Ranking. Any class or series of Shares shall be deemed to rank:

          (i)   senior to the Series F Preferred Shares, in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if the holders of such class or series are
     entitled to the receipt of dividends or amounts distributable on any
     liquidation, dissolution or winding up of the Trust, as the case may be, in
     preference or priority to the holders of Series F Preferred Shares;

          (ii)  on a parity with the Series F Preferred Shares, in the payment
     of dividends and in the distribution of assets on any liquidation,
     dissolution or winding up of the Trust, whether or not the dividend rates,
     dividend payment dates or redemption or liquidation prices per share
     thereof are different from those of the Series F Preferred Shares, if the
     holders of such class or series and the holders of Series F Preferred
     Shares are entitled to the receipt of dividends and amounts distributable
     on any liquidation, dissolution or winding up of the Trust in proportion to
     their respective amounts of dividends accrued and unpaid per share or
     liquidation preferences, without preference or priority to each other
     ("Parity Shares");

          (iii) junior to the Series F Preferred Shares, in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if such class or series is Junior Shares; and

          (iv)  junior to the Series F Preferred Shares, in the payment of
     dividends and in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if such class or series is Fully Junior Shares.

     (h)  Voting. Holders of the Series F Preferred Shares will not have any
voting rights, except as set forth below.

          (i)   If at any time full distributions shall not have been timely
     made on any Series F Preferred Shares with respect to any six (6) prior
     quarterly distribution periods, whether or not consecutive (a "Preferred
                                                                    ---------
     Distribution Default"), the holders of such Series F Preferred Shares,
     --------------------
     voting together as a single class with the holders of each class or series
     of Parity Shares upon which like voting rights have been conferred and are
     exercisable, will have the right to elect two additional Trustees to serve
     on the Board (the "Preferred Shares Trustees")
                        -------------------------

                                       F-7

<PAGE>

at a special meeting called by the holders of record of at least 10% of the
outstanding Series F Preferred Shares or any such class or series of Parity
Shares or at the next annual meeting of shareholders, and at each subsequent
annual meeting of shareholders or special meeting held in place thereof, until
all such distributions in arrears and distributions for the current quarterly
period on the Series F Preferred Shares and each such class or series of Parity
Shares have been paid in full.

     (ii)  At any time when such voting rights shall have vested, a proper
officer of the Trust shall call or cause to be called, upon written request of
holders of record of at least 10% of the outstanding Series F Preferred Shares,
a special meeting of the holders of Series F Preferred Shares and all the series
of Parity Shares upon which like voting rights have been conferred and are
exercisable (collectively, the "Voting Preferred Shares") by mailing or causing
                                -----------------------
to be mailed to such holders a notice of such special meeting to be held not
less than ten and not more than 45 days after the date such notice is given. The
record date for determining holders of the Voting Preferred Shares entitled to
notice of and to vote at such special meeting will be the close of business on
the third Business Day preceding the day on which such notice is mailed. At any
such special meeting, all of the holders of the Voting Preferred Shares, by
plurality vote, voting together as a single class without regard to series will
be entitled to elect two Trustees (the "Preferred Shares Trustees") on the basis
                                        -------------------------
of one vote per $25 of liquidation preference to which such Voting Preferred
Shares are entitled by their terms (excluding amounts in respect of accumulated
and unpaid dividends) and not cumulatively. The holder or holders of one-third
of the Voting Preferred Shares then outstanding, present in person or by proxy,
will constitute a quorum for the election of the Preferred Shares Trustees
except as otherwise provided by law. Notice of all meetings at which holders of
the Series F Preferred Shares shall be entitled to vote will be given to such
holders at their addresses as they appear in the transfer records. At any such
meeting or adjournment thereof in the absence of a quorum, subject to the
provisions of any applicable law, a majority of the holders of the Voting
Preferred Shares present in person or by proxy shall have the power to adjourn
the meeting for the election of the Preferred Shares Trustees, without notice
other than an announcement at the meeting, until a quorum is present. If a
Preferred Distribution Default shall terminate after the notice of a special
meeting has been given but before such special meeting has been held, the Trust
shall, as soon as practicable after such termination, mail or cause to be mailed
notice of such termination to holders of the Series F Preferred Shares that
would have been entitled to vote at such special meeting.

     (iii) If and when all accumulated distributions and the distribution for
the current distribution period on the Series F Preferred Shares shall have been
paid in full or a sum sufficient for such payment is irrevocably deposited in
trust for payment, the holders of the Series F Preferred Shares shall be
divested of the voting rights set forth in subsection (h)(ii) of this Section 7
(subject to revesting in the event of each and every Preferred Distribution
Default) and, if all distributions in arrears and the distributions for the
current distribution period have been paid in full or set aside for payment in
full on all other classes or series of Parity Shares upon which like voting
rights have been conferred and are exercisable, the term

                                       F-8

<PAGE>

     and office of each Preferred Shares Trustee so elected shall terminate. Any
     Preferred Shares Trustee may be removed at any time with or without cause
     by the vote of, and shall not be removed otherwise than by the vote of, the
     holders of record of a majority of the outstanding Series F Preferred
     Shares when they have the voting rights set forth in subsection (h)(ii) of
     this Section 7 (voting separately as a single class with all other classes
     or series of Parity Shares upon which like voting rights have been
     conferred and are exercisable). So long as a Preferred Distribution Default
     shall continue, any vacancy in the office of a Preferred Shares Trustee may
     be filled by written consent of the Preferred Shares Trustee remaining in
     office, or if none remains in office, by a vote of the holders of record of
     a majority of the outstanding Series F Preferred Shares when they have the
     voting rights set forth in subsection (h)(ii) of this Section 7) (voting
     separately as a single class with all other classes or series of Parity
     Shares upon which like voting rights have been conferred and are
     exercisable). The Preferred Shares Trustee shall each be entitled to one
     vote per Trustee on any matter.

          (iv) So long as any Series F Preferred Shares remains outstanding, the
     Trust shall not, without the approval of the holders of at least two-thirds
     of the Series F Preferred Shares outstanding at the time (A) designate or
     create, or increase the authorized or issued amount of, any class or series
     of shares ranking senior to the Series F Preferred Shares with respect to
     payment of distributions or rights upon liquidation, dissolution or
     winding-up of the Trust or reclassify any authorized shares of the Trust
     into any such shares, or create, authorize or issue any obligations or
     security convertible into or evidencing the right to purchase any such
     shares, (B) designate or create, or increase the authorized or issued
     amount of, any Parity Shares or reclassify any authorized shares of the
     Trust into any such shares, or create, authorize or issue any obligations
     or security convertible into or evidencing the right to purchase any such
     shares, but only to the extent such Parity Shares are issued to an
     Affiliate of the Trust, or (C) either (x) consolidate, merge into or with,
     or convey, transfer or lease its assets substantially as an entirety, to
     any corporation, real estate investment trust or other entity, or (y)
     amend, alter or repeal the provisions of the Declaration of Trust or
     Bylaws, whether by merger, consolidation or otherwise, in each case that
     would materially and adversely affect the powers, special rights,
     preferences, privileges or voting power of the Series F Preferred Shares or
     the holders thereof; provided, however, that with respect to the occurrence
     of a merger, consolidation or a sale or lease of all of the Trust's assets
     as an entirety, so long as (1) the Trust is the surviving entity and the
     Series F Preferred Shares remain outstanding with the terms thereof
     unchanged, or (2) the resulting, surviving or transferee entity is a
     corporation or real estate investment trust organized under the laws of any
     state and substitutes the Series F Preferred Shares for other preferred
     shares having substantially the same terms and same rights as the Series F
     Preferred Shares, including with respect to distributions, voting rights
     and rights upon liquidation, dissolution or winding-up, then the occurrence
     of any such event shall not be deemed to materially and adversely affect
     such rights, privileges or voting powers of the holders of the Series F
     Preferred Shares and provided further that any increase in the amount of
     authorized preferred shares or the creation or issuance of any other class
     or series of preferred shares, or any increase in an amount of authorized
     shares of each class or series, in each case ranking either (m) junior to
     the Series

                                       F-9

<PAGE>

     F Preferred Shares with respect to payment of distributions and the
     distribution of assets upon liquidation, dissolution or winding-up, or (n)
     on a parity with the Series F Preferred Shares with respect to payment of
     distributions or the distribution of assets upon liquidation, dissolution
     or winding-up to the extent such preferred shares are not issued to an
     affiliate of the Trust, shall not be deemed to materially and adversely
     affect such rights, preferences, privileges or voting powers.

     (i) Transfer Restrictions. The Series F Preferred Shares shall be subject
to the provisions of Section 18, Article II of the Declaration of Trust.

     (j) No Conversion Rights. The holders of the Series F Preferred Shares
shall not have any rights to convert such shares into shares of any other class
or series of shares or into any other securities of, or interest in, the Trust.

     (k) No Preemptive Rights. No holder of the Series F Preferred Shares shall,
as such holder, have any preemptive rights to purchase or subscribe for
additional shares of the Trust or any other security of the Trust which it may
issue or sell.

     (l) Record Holders. The Trust and the Transfer Agent may deem and treat the
record holder of any Series F Preferred Shares as the true and lawful owner
thereof for all purposes, and neither the Trust nor the Transfer Agent shall be
affected by any notice to the contrary.

     (m) Sinking Fund. The Series F Preferred Shares shall not be entitled to
the benefit of any retirement or sinking fund.

                                      F-10

<PAGE>

                                     ANNEX G
                    SERIES G CUMULATIVE REDEEMABLE PREFERRED
                          SHARES OF BENEFICIAL INTEREST

     (a)  Number of Shares and Designation. This class of preferred Shares shall
be designated as Series G Cumulative Redeemable Preferred Shares of Beneficial
Interest ("Series G Preferred Shares") and the number of shares which shall
           -------------------------
constitute such series shall be 600,000 Shares, par value $0.01 per Share.

     (b)  Definitions. For purposes of the Series G Preferred Shares, the
following terms shall have the meanings indicated:

          "Board" shall mean the Board of Trustees or any committee authorized
           -----
     by the Board of Trustees to perform any of its duties or exercise any of
     its powers with respect to the Series G Preferred Shares.

          "Business Day" shall mean any day other than a Saturday, Sunday or a
           ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

          "Call Date" shall mean the date specified in the notice to holders
           ---------
     required under subsection (e) of this Section 8 as the Call Date.

          "Common Shares" shall mean the common shares of beneficial interest,
           -------------
     par value $0.01 per share, of the Trust.

          "Dividend Payment Date" shall mean the 25th day of March, June,
           ---------------------
     September and December in each year, commencing with the first such date to
     occur following the issuance of Series G Preferred Shares; provided,
     however, that if any Dividend Payment Date falls on any day other than a
     Business Day, the dividend payment due on such Dividend Payment Date shall
     be paid on the next succeeding Business Day.

          "Dividend Periods" shall mean quarterly dividend periods commencing on
           ----------------
     the 26th day of March, June, September and December of each year and ending
     on and including the day preceding the first day of the next succeeding
     Dividend Period.

          "Dividend Record Date" shall have the meaning set forth in subsection
           --------------------
     (c) of this Section 8.

          "Fully Junior Shares" shall mean the Common Shares and any other class
           -------------------
     or series of Shares now or hereafter issued and outstanding to which the
     Series G Preferred Shares have preference or priority in both (i) the
     payment of dividends and (ii) the distribution of assets on any
     liquidation, dissolution or winding up of the Trust.

                                       G-1

<PAGE>

               "Issue Date" shall mean the first date on which Series G
                ----------
          Preferred Shares are issued.

               "Junior Shares" shall mean the Common Shares and any other class
                -------------
          or series of Shares now or hereafter issued and outstanding to which
          the Series G Preferred Shares have preference or priority in either
          (i) the payment of dividends or (ii) the distribution of assets on any
          liquidation, dissolution or winding up of the Trust and, unless the
          context clearly indicates otherwise, shall include Fully Junior
          Shares.

               "Parity Shares" shall have the meaning set forth in subsection
                -------------
          (g) of this Section 8.

               "Person" shall mean any individual, firm, partnership,
                ------
          corporation, real estate investment trust, limited liability company
          or other entity, and shall include any successor (by merger or
          otherwise) of such entity.

               "set apart for payment" shall be deemed to include, without any
                ---------------------
          action other than the following, the recording by the Trust in its
          accounting ledgers of any accounting or bookkeeping entry which
          indicates, pursuant to authorization or declaration of dividends or
          other distribution by the Board, the allocation of funds to be so paid
          on any class or series of Shares; provided, however, that if any funds
          for any Junior Shares or any Parity Shares are placed in a separate
          account of the Trust or delivered to a disbursing, paying or other
          similar agent, then "set apart for payment" with respect to the Series
          G Preferred Shares shall mean placing such funds in a separate account
          or delivering such funds to a disbursing, paying or other similar
          agent.

               "Shares" shall mean the shares of beneficial interest of the
                ------
         Trust as may be authorized and issued from time to time pursuant to
         Article II of the Declaration of Trust.

               "Transfer Agent" means Mellon Investor Services LLC, New York
                --------------
         City, New York, or such other agent or agents of the Trust as may be
         designated by the Board or its designee as the transfer agent for the
         Series G Preferred Shares.

               "Voting Preferred Shares" shall have the meaning set forth in
                -----------------------
          subsection (h) of this Section 8.

          (c)  Dividends.

               (i) The holders of Series G Preferred Shares shall be entitled to
          receive, when, as and if authorized or declared by the Board, out of
          funds legally available for such purpose, cash dividends in an amount
          per share equal to 8.625% of the liquidation preference per annum
          (equivalent to $2.15625 per share). Such dividends shall begin to
          accrue and shall be fully cumulative from and including the Issue
          Date, whether or not in any Dividend Period or Periods there are funds
          of the Trust legally available for the payment of such dividends, and
          shall be payable quarterly, when, as and if declared by the Board, in
          arrears on each Dividend

                                       G-2

<PAGE>

     Payment Date. Each such dividend shall be payable in arrears to the holders
     of record of Series G Preferred Shares, as they appear in the Share records
     of the Trust at the close of business on such record date as is fixed by
     the Board, which shall be not less than 10 nor more than 50 days prior to
     the corresponding Dividend Payment Date (each, a "Dividend Record Date").
                                                       --------------------
     Accrued and unpaid dividends for any past Dividend Periods may be
     authorized or declared and paid at any time and for such interim periods,
     without reference to any regular Dividend Payment Date, to holders of
     record on such record date as may be fixed by the Board, which shall be not
     less than 10 nor more than 50 days prior to the corresponding payment date.

          (ii)  The dividend for each full Dividend Period for the Series G
     Preferred Shares shall be computed by dividing the annual dividend rate by
     four. The dividend for any period shorter than a full Dividend Period on
     the Series G Preferred Shares shall be computed on the basis of a 360-day
     year of twelve 30-day months. Holders of Series G Preferred Shares shall
     not be entitled to any dividends, whether payable in cash, property or
     shares, in excess of full cumulative dividends, as provided herein, on the
     Series G Preferred Shares. No interest, or sum of money in lieu of
     interest, shall be payable in respect of any dividend payment or payments
     on the Series G Preferred Shares which may be in arrears.

          (iii) So long as any Series G Preferred Shares are outstanding, no
     dividends, except as described in the immediately following sentence, shall
     be declared or paid or set apart for payment on any Parity Shares for any
     period unless (A) full cumulative dividends have been or contemporaneously
     are paid or declared and a sum sufficient for the payment thereof set apart
     for payment for all past Dividend Periods with respect to the Series G
     Preferred Shares and (B) a sum sufficient for the payment thereof has been
     or contemporaneously is set apart for payment of the dividend for the
     current Dividend Period with respect to the Series G Preferred Shares. When
     dividends are not paid in full, or a sum sufficient for the payment thereof
     is not set apart for payment, on the Series G Preferred Shares and any
     Parity Shares as provided above, all dividends declared on the Series G
     Preferred Shares and any Parity Shares shall be declared ratably in
     proportion to the respective amounts of dividends accrued and unpaid on the
     Series G Preferred Shares and on such Parity Shares.

          (iv) So long as any Series G Preferred Shares are outstanding, no
     dividends (other than dividends or distributions paid solely in, or
     options, warrants or rights to subscribe for or purchase, Fully Junior
     Shares) shall be declared or paid or set apart for payment or other
     distribution shall be declared or made on Junior Shares, nor shall any
     Junior Shares be redeemed, purchased or otherwise acquired (other than a
     redemption, purchase or other acquisition of Common Shares made for
     purposes of an employee incentive or benefit plan of the Trust or any
     subsidiary) for any consideration (or any moneys be paid to or made
     available for a sinking fund for the redemption of any Junior Shares) by
     the Trust, directly or indirectly (except by conversion into or exchange
     for Fully Junior Shares), unless in each case (A) full cumulative dividends
     have been or contemporaneously are paid or declared and a sum sufficient
     for the payment thereof set apart for payment for all past Dividend Periods
     with

                                       G-3

<PAGE>

     respect to the Series G Preferred Shares and all past dividend periods with
     respect to any Parity Shares and (B) a sum sufficient for the payment
     thereof has been or contemporaneously is set apart for payment of the
     dividend for the current Dividend Period with respect to the Series G
     Preferred Shares and the current dividend period with respect to any Parity
     Shares. Any dividend payment on the Series G Preferred Shares shall first
     be credited against the earliest accrued but unpaid dividend due which
     remains payable.

          (v) No distributions on Series G Preferred Shares shall be declared or
     paid or set apart for payment by the Trust at such time as the terms and
     provisions of any agreement of the Trust, including any agreement relating
     to its indebtedness, prohibits such declaration, payment or setting apart
     for payment or provides that such declaration, payment or setting apart for
     payment would constitute a breach thereof or a default thereunder, or if
     such declaration, payment or setting apart for payment is restricted or
     prohibited by law.

     (d)  Liquidation Preference.

          (i) Upon any liquidation, dissolution or winding up of the Trust,
     whether voluntary or involuntary, before any payment or distribution of the
     assets of the Trust (whether capital or surplus) is made to or set apart
     for the holders of the Common Shares or any other class or series of Shares
     now or hereafter issued and outstanding to which the Series G Preferred
     Shares have preference or priority in the distribution of assets on any
     liquidation, dissolution or winding up of the Trust, the holders of Series
     G Preferred Shares shall be entitled to receive out of assets of the Trust
     legally available for such purpose, liquidating distributions in the amount
     of $25.00 per Series G Preferred Share, plus an amount equal to all
     dividends (whether or not earned or authorized or declared) accrued and
     unpaid thereon to the date of final distribution to such holders, if any;
     but such holders shall not be entitled to any further payment. If, upon any
     liquidation, dissolution or winding up of the Trust, the assets of the
     Trust, or the proceeds thereof, distributable among the holders of Series G
     Preferred Shares are insufficient to pay in full such preferential amount
     with respect to the Series G Preferred Shares and the corresponding amounts
     with respect to all Parity Shares, then such assets, or the proceeds
     thereof, shall be distributed among the holders of Series G Preferred
     Shares and all such Parity Shares in proportion to the full liquidating
     distributions to which they would otherwise be respectively entitled.

          (ii) Subject to the rights of the holders of shares of any class or
     series of Shares ranking on a parity with or senior to the Series G
     Preferred Shares in the distribution of assets on any liquidation,
     dissolution or winding up of the Trust, upon any liquidation, dissolution
     or winding up of the Trust, whether voluntary or involuntary, after payment
     has been made in full to the holders of Series G Preferred Shares, as
     provided herein, the holders of any Junior Shares shall, subject to the
     respective terms and provisions (if any) applying thereto, be entitled to
     receive any and all assets remaining to be paid or distributed, and the
     holders of Series G Preferred Shares shall not be entitled to share
     therein.

                                       G-4

<PAGE>

     (iii) For the purposes hereof, (A) a consolidation or merger of the Trust
with or into one or more corporations, real estate investment trusts or other
entities, (B) a sale, lease or transfer of all or substantially all of the
Trust's assets or (C) a statutory share exchange shall not be deemed to be a
liquidation, dissolution or winding up of the Trust, whether voluntary or
involuntary.

(e)  Redemption at the Option of the Trust.

     (i)   Subject to subsection (i) of this Section 8, the Series G Preferred
Shares are not redeemable by the Trust prior to March 3, 2005. On and after such
date, the Trust, at its option, may redeem the Series G Preferred Shares, in
whole at any time or in part from time to time, for cash at a redemption price
of $25.00 per Series G Preferred Share, plus the amounts indicated in subsection
(e)(ii) of this Section 8.

     (ii)  Upon any redemption of Series G Preferred Shares pursuant to this
subsection (e), the Trust shall pay all dividends accrued and unpaid thereon, if
any, in arrears for any Dividend Period ending on or prior to the Call Date. If
the Call Date falls after a Dividend Record Date and prior to the corresponding
Dividend Payment Date, then each holder of Series G Preferred Shares at the
close of business on such Dividend Record Date shall be entitled to receive the
dividend payable on such Series G Preferred Shares on the corresponding Dividend
Payment Date notwithstanding the redemption of such Series G Preferred Shares
before such Dividend Payment Date. Except as provided above, the Trust shall
make no payment or allowance for unpaid dividends, whether or not in arrears, on
Series G Preferred Shares called for redemption.

     (iii) Unless (A) full cumulative dividends have been or contemporaneously
are paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past Dividend Periods with respect to the Series G Preferred
Shares and all past dividend periods with respect to any Parity Shares and (B) a
sum sufficient for the payment thereof has been or contemporaneously is set
apart for payment of the dividend for the current Dividend Period with respect
to the Series G Preferred Shares and the current dividend period with respect to
any Parity Shares, the Series G Preferred Shares may not be redeemed under this
subsection (e) in part and the Trust may not purchase or otherwise acquire
Series G Preferred Shares, except pursuant to a purchase or exchange offer made
on the same terms to all holders of Series G Preferred Shares or by conversion
into or exchange for Fully Junior Shares or pursuant to subsection (i) of this
Section 8.

     (iv)  The redemption price to be paid upon any redemption of the Series G
Preferred Shares (other than any amounts indicated in subsection (e)(ii) of this
Section 8 and other than a redemption pursuant to subsection (i) of this Section
8) shall be payable solely out of the sale proceeds of other shares of the Trust
and from no other source.

                                       G-5

<PAGE>

     (v) Notice of the redemption of any Series G Preferred Shares under this
subsection (e) shall be mailed by registered mail, not less than 10 nor more
than 60 days prior to the Call Date, to each holder of record of Series G
Preferred Shares to be redeemed at the address of such holder as shown on the
Trust's Share records. Neither the failure to mail any notice required by this
subsection (e)(v), nor any defect therein or in the mailing thereof, to any
particular holder, shall affect the sufficiency of the notice or the validity of
the proceedings for redemption with respect to any other holder. Any notice
which was mailed in the manner provided herein shall be conclusively presumed to
have been duly given on the date mailed whether or not the holder receives the
notice. Each such mailed notice shall state, as appropriate: (A) the Call Date;
(B) the number of Series G Preferred Shares to be redeemed and, if fewer than
all Series G Preferred Shares held by such holder are to be redeemed, the number
of Series G Preferred Shares to be redeemed from such holder; (C) the redemption
price; (D) the place or places at which certificates representing such Series G
Preferred Shares are to be surrendered; and (E) that dividends on the Series G
Preferred Shares to be redeemed shall cease to accrue on the Call Date except as
otherwise provided herein. If notice of redemption of any Series G Preferred
Shares has been mailed as provided above, then from and after the Call Date
(unless the Trust fails to make available an amount of cash necessary to effect
such redemption), (x) except as otherwise provided herein, dividends shall cease
to accrue on the Series G Preferred Shares so called for redemption, (y) such
Series G Preferred Shares shall no longer be deemed to be outstanding and (z)
all rights of the holders thereof as holders of Series G Preferred Shares shall
terminate (except the right to receive cash payable upon such redemption,
without interest thereon, upon surrender and endorsement of their certificates
if so required and to receive any dividends payable thereon). The Trust's
obligation to provide cash in accordance with the preceding sentence shall be
deemed fulfilled if, on or before the Call Date, the Trust deposits with a bank
or trust company (which may be an affiliate of the Trust) which has an office in
the Borough of Manhattan, City of New York, and which has, or is an affiliate of
a bank or trust company which has, capital and surplus of at least $50,000,000,
the funds necessary for such redemption, in trust, with irrevocable instructions
that such cash be applied to the redemption of the Series G Preferred Shares so
called for redemption. No interest shall accrue for the benefit of the holders
of Series G Preferred Shares to be redeemed on any cash so set aside by the
Trust. Subject to applicable escheat laws, any such cash unclaimed at the end of
two years after the Call Date shall revert to the general funds of the Trust,
after which reversion the holders of Series G Preferred Shares so called for
redemption shall look only to the general funds of the Trust for the payment of
such cash.

         As promptly as practicable after the surrender in accordance with such
notice of the certificates representing any Series G Preferred Shares so
redeemed (properly endorsed or assigned for transfer, if the Trust so requires
and if the notice so states), such Series G Preferred Shares shall be exchanged
for any cash (without interest thereon) for which such Series G Preferred Shares
have been redeemed. If fewer than all the outstanding Series G Preferred Shares
are to be redeemed, the Series G Preferred Shares to be redeemed shall be
selected by the Trust from outstanding Series G Preferred Shares not previously
called for

                                       G-6

<PAGE>

     redemption by lot or pro rata (as nearly as may be) or by any other method
     determined by the Board or the Chairman or any Co-Chairman of the Trust in
     its, his or her sole discretion to be equitable. If fewer than all the
     Series G Preferred Shares represented by any certificate are redeemed, then
     new certificates representing the unredeemed Series G Preferred Shares
     shall be issued without cost to the holder thereof.

     (f) Shares to Be Retired. All Series G Preferred Shares which are issued
and reacquired in any manner by the Trust shall be restored to the status of
authorized but unissued shares of beneficial interest of the Trust, without
designation as to class or series.

     (g) Ranking. Any class or series of Shares shall be deemed to rank:

          (i)   senior to the Series G Preferred Shares, in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if the holders of such class or series are
     entitled to the receipt of dividends or amounts distributable on any
     liquidation, dissolution or winding up of the Trust, as the case may be, in
     preference or priority to the holders of Series G Preferred Shares;

          (ii)  on a parity with the Series G Preferred Shares, in the payment
     of dividends and in the distribution of assets on any liquidation,
     dissolution or winding up of the Trust, whether or not the dividend rates,
     dividend payment dates or redemption or liquidation prices per share
     thereof are different from those of the Series G Preferred Shares, if the
     holders of such class or series and the holders of Series G Preferred
     Shares are entitled to the receipt of dividends and amounts distributable
     on any liquidation, dissolution or winding up of the Trust in proportion to
     their respective amounts of dividends accrued and unpaid per share or
     liquidation preferences, without preference or priority to each other
     ("Parity Shares");
       -------------

          (iii) junior to the Series G Preferred Shares, in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if such class or series is Junior Shares; and

          (iv)  junior to the Series G Preferred Shares, in the payment of
     dividends and in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust, if such class or series is Fully Junior Shares.

     (h) Voting. Holders of the Series G Preferred Shares will not have any
voting rights, except as set forth below.

          (i)   If at any time full distributions shall not have been timely
     made on any Series G Preferred Shares with respect to any six (6) prior
     quarterly distribution periods, whether or not consecutive (a "Preferred
                                                                    ---------
     Distribution Default"), the holders of such Series G Preferred Shares,
     --------------------
     voting together as a single class with the holders of each class or series
     of Parity Shares upon which like voting rights have been conferred and are
     exercisable, will have the

                                       G-7

<PAGE>

right to elect two additional Trustees to serve on the Board (the "Preferred
Shares Trustees") at a special meeting called by the holders of record of at
least 10% of the outstanding Series G Preferred Shares or any such class or
series of Parity Shares or at the next annual meeting of shareholders, and at
each subsequent annual meeting of shareholders or special meeting held in place
thereof, until all such distributions in arrears and distributions for the
current quarterly period on the Series G Preferred Shares and each such class or
series of Parity Shares have been paid in full.

     (ii)  At any time when such voting rights shall have vested, a proper
officer of the Trust shall call or cause to be called, upon written request of
holders of record of at least 10% of the outstanding Series G Preferred Shares,
a special meeting of the holders of Series G Preferred Shares and all the series
of Parity Shares upon which like voting rights have been conferred and are
exercisable (collectively, the "Voting Preferred Shares") by mailing or causing
                                -----------------------
to be mailed to such holders a notice of such special meeting to be held not
less than ten and not more than 45 days after the date such notice is given. The
record date for determining holders of the Voting Preferred Shares entitled to
notice of and to vote at such special meeting will be the close of business on
the third Business Day preceding the day on which such notice is mailed. At any
such special meeting, all of the holders of the Voting Preferred Shares, by
plurality vote, voting together as a single class without regard to series will
be entitled to elect two Trustees (the "Preferred Shares Trustees") on the basis
                                        -------------------------
of one vote per $25 of liquidation preference to which such Voting Preferred
Shares are entitled by their terms (excluding amounts in respect of accumulated
and unpaid dividends) and not cumulatively. The holder or holders of one-third
of the Voting Preferred Shares then outstanding, present in person or by proxy,
will constitute a quorum for the election of the Preferred Shares Trustees
except as otherwise provided by law. Notice of all meetings at which holders of
the Series G Preferred Shares shall be entitled to vote will be given to such
holders at their addresses as they appear in the transfer records. At any such
meeting or adjournment thereof in the absence of a quorum, subject to the
provisions of any applicable law, a majority of the holders of the Voting
Preferred Shares present in person or by proxy shall have the power to adjourn
the meeting for the election of the Preferred Shares Trustees, without notice
other than an announcement at the meeting, until a quorum is present. If a
Preferred Distribution Default shall terminate after the notice of a special
meeting has been given but before such special meeting has been held, the Trust
shall, as soon as practicable after such termination, mail or cause to be mailed
notice of such termination to holders of the Series G Preferred Shares that
would have been entitled to vote at such special meeting.

     (iii) If and when all accumulated distributions and the distribution for
the current distribution period on the Series G Preferred Shares shall have been
paid in full or a sum sufficient for such payment is irrevocably deposited in
trust for payment, the holders of the Series G Preferred Shares shall be
divested of the voting rights set forth in subsection (h)(ii) of this Section 8
(subject to revesting in the event of each and every Preferred Distribution
Default) and, if all distributions in arrears and the distributions for the
current distribution period have been paid in full or set aside for payment in
full on all other classes or series of

                                       G-8

<PAGE>

Parity Shares upon which like voting rights have been conferred and are
exercisable, the term and office of each Preferred Shares Trustee so elected
shall terminate. Any Preferred Shares Trustee may be removed at any time with or
without cause by the vote of, and shall not be removed otherwise than by the
vote of, the holders of record of a majority of the outstanding Series G
Preferred Shares when they have the voting rights set forth in subsection
(h)(ii) of this Section 8 (voting separately as a single class with all other
classes or series of Parity Shares upon which like voting rights have been
conferred and are exercisable). So long as a Preferred Distribution Default
shall continue, any vacancy in the office of a Preferred Shares Trustee may be
filled by written consent of the Preferred Shares Trustee remaining in office,
or if none remains in office, by a vote of the holders of record of a majority
of the outstanding Series G Preferred Shares when they have the voting rights
set forth in subsection (h)(ii) of this Section 8 (voting separately as a single
class with all other classes or series of Parity Shares upon which like voting
rights have been conferred and are exercisable). The Preferred Shares Trustee
shall each be entitled to one vote per Trustee on any matter.

     (iv) So long as any Series G Preferred Shares remains outstanding, the
Trust shall not, without the approval of the holders of at least two-thirds of
the Series G Preferred Shares outstanding at the time (A) designate or create,
or increase the authorized or issued amount of, any class or series of shares
ranking senior to the Series G Preferred Shares with respect to payment of
distributions or rights upon liquidation, dissolution or winding-up of the Trust
or reclassify any authorized shares of the Trust into any such shares, or
create, authorize or issue any obligations or security convertible into or
evidencing the right to purchase any such shares, (B) designate or create, or
increase the authorized or issued amount of, any Parity Shares or reclassify any
authorized shares of the Trust into any such shares, or create, authorize or
issue any obligations or security convertible into or evidencing the right to
purchase any such shares, but only to the extent such Parity Shares are issued
to an Affiliate of the Trust, or (C) either (x) consolidate, merge into or with,
or convey, transfer or lease its assets substantially as an entirety, to any
corporation, real estate investment trust or other entity, or (y) amend, alter
or repeal the provisions of the Declaration of Trust or Bylaws, whether by
merger, consolidation or otherwise, in each case that would materially and
adversely affect the powers, special rights, preferences, privileges or voting
power of the Series G Preferred Shares or the holders thereof; provided,
however, that with respect to the occurrence of a merger, consolidation or a
sale or lease of all of the Trust's assets as an entirety, so long as (1) the
Trust is the surviving entity and the Series G Preferred Shares remain
outstanding with the terms thereof unchanged, or (2) the resulting, surviving or
transferee entity is a corporation or real estate investment trust organized
under the laws of any state and substitutes the Series G Preferred Shares for
other preferred shares having substantially the same terms and same rights as
the Series G Preferred Shares, including with respect to distributions, voting
rights and rights upon liquidation, dissolution or winding-up, then the
occurrence of any such event shall not be deemed to materially and adversely
affect such rights, privileges or voting powers of the holders of the Series G
Preferred Shares and provided further that any increase in the amount of
authorized preferred shares or the creation or issuance of any other class or
series of preferred shares, or any increase in an amount of

                                       G-9

<PAGE>

     authorized shares of each class or series, in each case ranking either (m)
     junior to the Series G Preferred Shares with respect to payment of
     distributions and the distribution of assets upon liquidation, dissolution
     or winding-up, or (n) on a parity with the Series G Preferred Shares with
     respect to payment of distributions or the distribution of assets upon
     liquidation, dissolution or winding-up to the extent such preferred shares
     are not issued to an affiliate of the Trust, shall not be deemed to
     materially and adversely affect such rights, preferences, privileges or
     voting powers.

     (i) Transfer Restrictions. The Series G Preferred Shares shall be subject
to the provisions of Section 18, Article II of the Declaration of Trust.

     (j) No Conversion Rights. The holders of the Series G Preferred Shares
shall not have any rights to convert such shares into shares of any other class
or series of shares or into any other securities of, or interest in, the Trust.

     (k) No Preemptive Rights. No holder of the Series G Preferred Shares shall,
as such holder, have any preemptive rights to purchase or subscribe for
additional shares of the Trust or any other security of the Trust which it may
issue or sell.

     (l) Record Holders. The Trust and the Transfer Agent may deem and treat the
record holder of any Series G Preferred Shares as the true and lawful owner
thereof for all purposes, and neither the Trust nor the Transfer Agent shall be
affected by any notice to the contrary.

     (m) Sinking Fund. The Series G Preferred Shares shall not be entitled to
the benefit of any retirement or sinking fund.

                                      G-10

<PAGE>

                                     ANNEX H
                         SERIES H CUMULATIVE CONVERTIBLE
                           REDEEMABLE PREFERRED SHARES

     (a)   Number of Shares and Designation. This class of preferred Shares
shall be designated as Series H Cumulative Convertible Redeemable Preferred
Shares and the number of Shares which shall constitute such series shall not be
more than 2,640,325 shares, par value $0.01 per share, which number may be
decreased (but not below the number thereof then outstanding) from time to time
by the Board.

     (b)   Definitions. For purposes of the Series H Preferred Shares, the
following terms shall have the meanings indicated:

           "Archstone-Smith Operating Trust" shall mean Archstone-Smith
            -------------------------------
     Operating Trust, a Maryland real estate investment trust, and its
     successors.

           "Board" shall mean the Board of Trustees or any committee authorized
            -----
     by the Board of Trustees to perform any of its responsibilities with
     respect to the Series H Preferred Shares.

           "Business Day" shall mean any day other than a Saturday, Sunday or a
            ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

           "Call Date" shall mean the date specified in the notice to holders
            ---------
     required under subsection (e)(iv) of this Section 9 as the Call Date.

            "Common Shares" shall mean the common shares of beneficial interest,
             -------------
     par value $0.01 per share, of the Trust.

           "Constituent Person" shall have the meaning set forth in subsection
            ------------------
     (f)(v) of this Section 9.

           "Conversion Price" shall mean the conversion price per Common Share
            ----------------
     for which the Series H Preferred Shares are convertible, as such Conversion
     Price may be adjusted pursuant to subsection (f) of this Section 9. The
     initial conversion price shall be $13.71 (equivalent to a conversion rate
     of 1.975 Common Shares for each Series H Preferred Share).

           "Current Market Price" of publicly traded common shares or any other
            --------------------
     class of shares or capital stock or other security of the Trust or any
     other issuer for any day shall mean the last reported sales price, regular
     way on such day, or, if no sale takes place on such day, the average of the
     reported closing bid and asked prices on such day, regular way, in either
     case as reported on the New York Stock Exchange ("NYSE") or, if such
                                                       ----
     security is not listed or

                                       H-1

<PAGE>

admitted for trading on the NYSE, on the principal national securities exchange
on which such security is listed or admitted for trading or, if not listed or
admitted for trading on any national securities exchange, on the Nasdaq Stock
Market ("NASDAQ") or, if such security is not quoted on such National Market
         ------
System, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, if bid and asked prices for
such security on such day shall not have been reported through NASDAQ, the
average of the bid and asked prices on such day as furnished by any NYSE member
firm regularly making a market in such security selected for such purpose by the
Board.

     "Dividend Payment Date" shall mean (i) for any Dividend Period with respect
      ---------------------
to which the Trust pays a dividend on the Common Shares, the date on which such
dividend is paid, or (ii) for any Dividend Period with respect to which the
Trust does not pay a dividend on the Common Shares, a date to be set by the
Board, which date shall not be later than the forty-fifth calendar day after the
end of the applicable Dividend Period.

     "Dividend Periods" shall mean quarterly dividend periods commencing on
      ----------------
January 1, April 1, July 1 and October 1 of each year and ending on and
including the day preceding the first day of the next succeeding Dividend Period
(other than the Dividend Period during which any Series H Preferred Shares shall
be redeemed pursuant to subsection (e) of this Section 9, which shall end on and
include the Call Date with respect to the Series H Preferred Shares being
redeemed).

     "Expiration Time" shall have the meaning set forth in subsection (f)(iv)(D)
      ---------------
of this Section 9.

     "Fair Market Value" shall mean the average of the daily Current Market
      -----------------
Prices of a Common Share on the five (5) consecutive Trading Days selected by
the Trust commencing not more than 20 Trading Days before, and ending not later
than, the earlier of the day in question and the day before the "ex date" with
respect to the issuance or distribution requiring such computation. The term "ex
date," when used with respect to any issuance or distribution, means the first
day on which the Common Shares trade regular way, without the right to receive
such issuance or distribution, on the exchange or in the market, as the case may
be, used to determine that day's Current Market Price.

     "Fully Junior Shares" shall mean the Common Shares and any other class or
      -------------------
series of Shares now or hereafter issued and outstanding over which the Series H
Preferred Shares have preference or priority in both (i) the payment of
dividends and (ii) the distribution of assets on any liquidation, dissolution or
winding up of the Trust.

     "Funds from Operations," for all dates and periods prior to the Issue Date,
      ---------------------
shall mean net income (loss) (computed in accordance with generally accepted
accounting principles) excluding gains (or losses) from debt restructuring, and
distributions in excess of earnings allocated to other Smith Operating
Partnership interests or minority interests (as reflected in

                                       H-2

<PAGE>

     the financial statements of Smith Realty) plus depreciation/amortization of
     assets unique to the real estate industry, all computed in a manner
     consistent with the revised definition of Funds From Operations adopted by
     the National Association of Real Estate Investment Trusts ("NAREIT"), in
     its White Paper dated March 1995, as such definitions may be modified from
     time to time, as determined by the Trust in good faith. "Funds from
     Operations," for all dates and periods from and after the Issue Date, shall
     mean net income (loss) (computed in accordance with generally accepted
     accounting principles) excluding gains (or losses) from debt restructuring,
     and distributions in excess of earnings allocated to Archstone-Smith
     Operating Trust interests or minority interests (as reflected in the
     financial statements of the Trust) plus depreciation/amortization of assets
     unique to the real estate industry, all computed in a manner consistent
     with the revised definition of Funds From Operations adopted by NAREIT, in
     its White Paper dated March 1995, as such definitions may be modified from
     time to time, as determined by the Trust in good faith.

          "Issue Date" shall mean the date on which the first Series H Preferred
           ----------
     Shares are issued.

          "Junior Shares" shall mean the Common Shares and any other class or
           -------------
     series of Shares now or hereafter issued and outstanding over which the
     Series H Preferred Shares have preference or priority in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust.

          "Non-Electing Share" shall have the meaning set forth in subsection
           ------------------
     (f)(v) of this Section 9.

          "Parity Shares" shall have the meaning set forth in subsection (h)(ii)
           -------------
     of this Section 9.

          "Person" shall mean any individual, firm, partnership, corporation,
           ------
     limited liability company or other entity, and shall include any successor
     (by merger or otherwise) of such entity.

          "Purchased Shares" shall have the meaning set forth in subsection
           ----------------
     (f)(iv)(D) of this Section 9.

          "REIT Termination Event" shall mean the earliest to occur of:
           ----------------------

           (i)    the filing of a federal income tax return by the Trust for any
                  taxable year on which the Trust does not elect to be taxed as
                  a real estate investment trust;

           (ii)   the approval by the shareholders of the Trust of a proposal
                  for the Trust to cease to qualify as a real estate investment
                  trust;

                                       H-3

<PAGE>

          (iii)  a determination by the Board, based on the advice of counsel,
                 that the Trust has ceased to qualify as a real estate
                 investment trust; or

          (iv)   a "determination" within the meaning of Section 1313(a) of the
                 Internal Revenue Code of 1986, as amended, that the Trust has
                 ceased to qualify as a real estate investment trust.

          "Securities" and "Security" shall have the meanings set forth in
           ----------       --------
     subsection (f)(iv)(C) of this Section 9.

          "Securities Act" shall mean the Securities Act of 1933, as amended.
           ---------- ---

          "Series H Preferred Shares" shall mean the shares of Series H
           -------------------------
     Cumulative Convertible Redeemable Preferred Shares.

          "Set apart for payment" shall be deemed to include, without any action
           ---------------------
     other than the following, the recording by the Trust in its accounting
     ledgers of any accounting or bookkeeping entry which indicates, pursuant to
     a declaration of dividends or other distribution by the Board, the
     allocation of funds to be so paid on any series or class of Shares;
     provided, however, that if any funds for any class or series of Junior
     --------  -------
     Shares or any class or series of Shares ranking on a parity with the Series
     H Preferred Shares as to the payment of dividends are placed in a separate
     account of the Trust or delivered to a disbursing, paying or other similar
     agent, then "set apart for payment" with respect to the Series H Preferred
     Shares shall mean placing such funds in a separate account or delivering
     such funds to a disbursing, paying or other similar agent.

          "Shares" shall mean the shares of beneficial interest of the Trust as
           ------
     may be authorized and issued from time to time pursuant to Article II of
     the Declaration of Trust.

          "Smith Operating Partnership" shall mean Charles E. Smith Residential
           ---------------------------
     Realty L.P., formerly a Delaware limited partnership.

          "Smith Preferred Shares" shall mean the Series H Preferred Shares,
           ----------------------
     Series I Preferred Shares, Series J Preferred Shares, Series K Preferred
     Shares and Series L Preferred Shares of the Trust or any of the foregoing.

          "Smith Realty" shall mean Charles E. Smith Residential Realty, Inc.,
           ------------
     formerly a Maryland corporation.

          "Trading Day" shall mean any day on which the securities in question
           -----------
     are traded on the NYSE, or if such securities are not listed or admitted
     for trading on the NYSE, on the principal national securities exchange on
     which such securities are listed or admitted, or if not listed or admitted
     for trading on any national securities exchange, on the National Market

                                       H-4

<PAGE>

System of NASDAQ, or if such securities are not quoted on such National Market
System, in the securities market in which the securities are traded.

     "Transaction" shall have the meaning set forth in subsection (f)(5) of this
      -----------
Section 9.

     "Transfer Agent" shall mean Mellon Investor Services LLC, New York City,
      --------------
New York, or such other agent or agents of the Trust as may be designated by the
Board or their designee as the transfer agent, registrar and dividend disbursing
agent for the Series H Preferred Shares.

     "Voting Preferred Shares" shall have the meaning set forth in subsection
      -----------------------
(i) of this Section 9.

     "Weighted Average Trading Price" shall mean, for any Trading Day, the
      ------------------------------
number obtained by dividing (i) the sum of the products, for each sale of Common
Shares on such Trading Day, of (a) the sale price per Common Share and (b) the
number of Common Shares sold by (ii) the total number of Common Shares sold on
such Trading Day.

(c)  Dividends.

     (i)   The holders of Series H Preferred Shares shall be entitled to
receive, when, as and if declared by the Board, out of funds legally available
for the payment of dividends, cumulative preferential dividends payable in cash
in an amount per share equal to the greater of (A) 7.459% of the Liquidation
Preference per annum (equivalent to $2.02 per share) or (B) the ordinary cash
dividends (determined on each Dividend Payment Date) on the Common Shares, or
portion thereof, into which a Series H Preferred Share is convertible. The
dividends referred to in clause (B) of the preceding sentence shall equal the
number of Common Shares, or portion thereof, into which a Series H Preferred
Share is convertible, multiplied by the most current quarterly dividend on a
Common Share on or before the applicable Dividend Payment Date. If the Trust
pays an ordinary cash dividend on the Common Shares with respect to a Dividend
Period after the date on which the Dividend Payment Date is declared pursuant to
clause (ii) of the definition of Dividend Payment Date and the dividend
calculated pursuant to clause (B) of this subsection (c)(i) with respect to such
Dividend Period is greater than the dividend previously declared on the Series H
Preferred Shares with respect to such Dividend Period, the Trust shall pay an
additional dividend to the holders of the Series H Preferred Shares on the date
on which the dividend on the Common Shares is paid, in an amount equal to the
difference between (y) the dividend calculated pursuant to clause (B) of this
subsection (c)(i) and (z) the amount of dividends previously declared on the
Series H Preferred Shares with respect to such Dividend Period. The dividends
shall begin to accrue and shall be fully cumulative from October 1, 2001,
whether or not in any Dividend Period or Periods there shall be funds of the
Trust legally available for the payment of such dividends, and shall be payable
quarterly, when, as and if declared by the Board, in arrears on Dividend Payment
Dates. Each such dividend shall be

                                       H-5

<PAGE>

payable in arrears to the holders of record of Series H Preferred Shares as they
appear in the records of the Trust at the close of business on such record
dates, not less than 10 nor more than 50 days preceding such Dividend Payment
Dates thereof, as shall be fixed by the Board. Accrued and unpaid dividends for
any past Dividend Periods may be declared and paid at any time and for such
interim periods, without reference to any regular Dividend Payment Date, to
holders of record on such date, not less than 10 nor more than 50 days preceding
the payment date thereof, as may be fixed by the Board. Any dividend payment
made on Series H Preferred Shares shall first be credited against the earliest
accrued but unpaid dividend due with respect to Series H Preferred Shares which
remains payable.

     (ii)   The amount of dividends referred to in clause (A) of subsection (c)
(i) of this Section 9 payable for each full Dividend Period on the Series H
Preferred Shares shall be computed by dividing the annual dividend rate by four.
The amount of dividends payable for any period shorter than a full Dividend
Period on the Series H Preferred Shares shall be computed on the basis of a
360-day year of twelve 30-day months. Holders of Series H Preferred Shares shall
not be entitled to any dividends, whether payable in cash, property or shares,
in excess of cumulative dividends, as herein provided, on the Series H Preferred
Shares. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series H Preferred Shares
which may be in arrears.

     (iii)  So long as any Series H Preferred Shares are outstanding, no
dividends, except as described in the immediately following sentence, shall be
declared or paid or set apart for payment on any class or series of Parity
Shares for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Series H Preferred Shares for
all Dividend Periods terminating on or prior to the dividend payment date on
such class or series of Parity Shares. When dividends are not paid in full or a
sum sufficient for such payment is not set apart, as aforesaid, all dividends
declared upon Series H Preferred Shares and all dividends declared upon any
other class or series of Parity Shares shall be declared ratably in proportion
to the respective amounts of dividends accumulated and unpaid on the Series H
Preferred Shares and accumulated and unpaid on such Parity Shares.

     (iv)   So long as any Series H Preferred Shares are outstanding, no
dividends (other than dividends or distributions paid solely in shares of, or
options, warrants or rights to subscribe for or purchase shares of, Fully Junior
Shares) shall be declared or paid or set apart for payment or other distribution
shall be declared or made or set apart for payment upon Junior Shares, nor shall
any Junior Shares be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of Common Shares made for purposes of
an employee incentive or benefit plan of the Trust or any subsidiary) for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any Junior Shares) by the Trust, directly or indirectly
(except by conversion into or exchange for Fully Junior Shares), unless in each
case (A) the full cumulative dividends on all outstanding Series H Preferred
Shares and any other Parity Shares shall have

                                       H-6

<PAGE>

been or contemporaneously are declared and paid or declared and set apart for
payment for all past Dividend Periods with respect to the Series H Preferred
Shares and all past dividend periods with respect to such Parity Shares and (B)
sufficient funds shall have been or contemporaneously are declared and paid or
declared and set apart for the payment of the dividend for the current Dividend
Period with respect to the Series H Preferred Shares and the current dividend
period with respect to such Parity Shares.

     (v)   No distributions on Series H Preferred Shares shall be declared by
the Board or paid or set apart for payment by the Trust at such time as the
terms and provisions of any agreement of the Trust, including any agreement
relating to its indebtedness, prohibits such declaration, payment or setting
apart for payment or provides that such declaration, payment or setting apart
for payment would constitute a breach thereof or a default thereunder, or if
such declaration or payment shall be restricted or prohibited by law.

(d)  Liquidation Preference.

     (i)   In the event of any liquidation, dissolution or winding up of the
Trust, whether voluntary or involuntary, before any payment or distribution of
the assets of the Trust (whether capital or surplus) shall be made to or set
apart for the holders of Junior Shares, the holders of the Series H Preferred
Shares shall be entitled to receive Twenty Seven Dollars and Eight Cents
($27.08) (the "Liquidation Preference") per Series H Preferred Share plus an
amount equal to all dividends (whether or not earned or declared) accrued and
unpaid thereon to the date of final distribution to such holders; but such
holders shall not be entitled to any further payment; provided, that the
                                                      --------
dividend payable with respect to the Dividend Period containing the date of
final distribution shall be equal to the greater of (A) the dividend provided in
subsection (c)(i)(A) of this Section 9 or (B) the dividend determined pursuant
to subsection (c)(i)(B) of this Section 9 for the preceding Dividend Period. If,
upon any liquidation, dissolution or winding up of the Trust, the assets of the
Trust, or proceeds thereof, distributable among the holders of the Series H
Preferred Shares shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other shares of any class or series of
Parity Shares, then such assets, or the proceeds thereof, shall be distributed
among the holders of Series H Preferred Shares and any such other Parity Shares
ratably in accordance with the respective amounts that would be payable on such
Series H Preferred Shares and any such other Parity Shares if all amounts
payable thereon were paid in full. For the purposes of this subsection (d), (x)
a consolidation or merger of the Trust with one or more corporations, real
estate investment trusts or other entities, (y) a sale, lease or conveyance of
all or substantially all of the Trust's property or business or (z) a statutory
share exchange shall not be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary, of the Trust.

     (ii)  Subject to the rights of the holders of shares of any series or class
or classes of Shares ranking on a parity with or senior to the Series H
Preferred Shares upon liquidation, dissolution or winding up, upon any
liquidation, dissolution or winding up of the

                                       H-7

<PAGE>

     Trust, after payment shall have been made in full to the holders of the
     Series H Preferred Shares, as provided in this subsection (d), any other
     series or class or classes of Junior Shares shall, subject to the
     respective terms and provisions (if any) applying thereto, be entitled to
     receive any and all assets remaining to be paid or distributed, and the
     holders of the Series H Preferred Shares shall not be entitled to share
     therein.

     (e)  Redemption at the Option of the Trust.

          (i)  The Series H Preferred Shares shall not be redeemable by the
     Trust prior to May 15, 2003. On and after May 15, 2003, the Trust, at its
     option, may redeem the Series H Preferred Shares, in whole at any time or
     from time to time in part as set forth herein, subject to the provisions
     described below:

               (A) Series H Preferred Shares may be redeemed, in whole or in
          part, at the option of the Trust, at any time on or after May 15, 2003
          by issuing and delivering to each holder for each Series H Preferred
          Share to be redeemed such number of authorized but previously unissued
          Common Shares as equals the Liquidation Preference (excluding any
          accumulated, accrued and unpaid dividends which are to be paid in cash
          as provided below) per Series H Preferred Share divided by the
          Conversion Price as in effect as of the opening of business on the
          Call Date; provided, however, that the Trust may redeem Series H
          Preferred Shares pursuant to this subsection (e)(i)(A) only if (i) the
          Weighted Average Trading Price, for twenty (20) Trading Days, within
          the last thirty (30) Trading Days immediately before the date of the
          notice given pursuant to subsection (e)(iv) of this Section 9, equals
          or exceeds 108% of the Conversion Price in effect on the date of the
          notice given pursuant to subsection (e)(iv) of this Section 9 and (ii)
          at least 1,000,000 Common Shares were traded during such 30 Trading
          Days.

               (B) Series H Preferred Shares may be redeemed, in whole or in
          part, at the option of the Trust at any time on or after May 15, 2003
          out of funds legally available therefor at a redemption price payable
          in cash equal to the Liquidation Preference per Series H Preferred
          Share (plus all accumulated, accrued and unpaid dividends as provided
          below).

          (ii)   Upon any redemption of Series H Preferred Shares pursuant to
     this subsection (e), the Trust shall pay all accrued and unpaid dividends,
     if any, thereon to the Call Date, without interest. If the Call Date falls
     after a dividend payment record date and prior to the corresponding
     Dividend Payment Date, then each holder of Series H Preferred Shares at the
     close of business on such dividend payment record date shall be entitled to
     the dividend payable on such shares on the corresponding Dividend Payment
     Date notwithstanding any redemption of such shares before such Dividend
     Payment Date. Except as provided above, the Trust shall make no payment or
     allowance for unpaid dividends, whether or not in arrears, on Series H
     Preferred Shares called for redemption.

                                       H-8

<PAGE>

          (iii) If full cumulative dividends on the Series H Preferred Shares
     and any other class or series of Parity Shares have not been declared and
     paid or declared and set apart for payment, the Series H Preferred Shares
     may not be redeemed under this subsection (e) in part and the Trust may not
     purchase or acquire Series H Preferred Shares, otherwise than pursuant to a
     purchase or exchange offer made on the same terms to all holders of Series
     H Preferred Shares.

          (iv)  Notice of the redemption of any Series H Preferred Shares under
     this subsection (e) shall be mailed by first-class mail to each holder of
     record of Series H Preferred Shares to be redeemed at the address of each
     such holder as shown on the Trust's records, not less than 30 nor more than
     90 days prior to the Call Date. Neither the failure to mail any notice
     required by this subsection (e)(iv), nor any defect therein or in the
     mailing thereof, to any particular holder, shall affect the sufficiency of
     the notice or the validity of the proceedings for redemption with respect
     to the other holders. Any notice which was mailed in the manner herein
     provided shall be conclusively presumed to have been duly given on the date
     mailed whether or not the holder receives the notice. Each such mailed
     notice shall state, as appropriate: (A) the Call Date; (B) the number of
     Series H Preferred Shares to be redeemed and, if fewer than all the shares
     held by such holder are to be redeemed, the number of such shares to be
     redeemed from such holder; (C) the redemption price if the Series H
     Preferred Shares are redeemed for cash and the number of Common Shares to
     be issued if the Series H Preferred Shares are redeemed for Common Shares;
     (D) the place or places at which certificates for such shares are to be
     surrendered; (E) the then-current Conversion Price; and (F) that dividends
     on the shares to be redeemed shall cease to accrue on such Call Date except
     as otherwise provided herein. Notice having been mailed as aforesaid, from
     and after the Call Date (unless the Trust shall fail to make available an
     amount of cash necessary to effect such redemption), (x) except as
     otherwise provided herein, dividends on the Series H Preferred Shares so
     called for redemption shall cease to accrue, (y) such shares shall no
     longer be deemed to be outstanding, and (z) all rights of the holders
     thereof as holders of Series H Preferred Shares of the Trust shall cease
     (except the rights to convert and to receive the Common Shares and/or cash
     payable upon such redemption, without interest thereon, upon surrender and
     endorsement of their certificates if so required and to receive any
     dividends payable thereon). The Trust's obligation to provide Common Shares
     and/or cash in accordance with the preceding sentence shall be deemed
     fulfilled if, on or before the Call Date, the Trust shall deposit with a
     bank or trust company (which may be an affiliate of the Trust) that has an
     office in the Borough of Manhattan, City of New York, and that has, or is
     an affiliate of a bank or trust company that has, capital and surplus of at
     least $50,000,000, necessary for such redemption, in trust, with
     irrevocable instructions that such Common Shares and/or cash be applied to
     the redemption of the Series H Preferred Shares so called for redemption.
     In the case of any redemption pursuant to subsection (e)(i)(A) of this
     Section 9, at the close of business on the Call Date, each holder of Series
     H Preferred Shares to be redeemed (unless the Trust defaults in the
     delivery of the Common Shares or cash payable on such Call Date) shall be
     deemed to be the

                                       H-9

<PAGE>

     record holder of the Common Shares into which such Series H Preferred
     Shares are to be converted at redemption, regardless of whether such holder
     has surrendered the certificates representing the Series H Preferred Shares
     to be so redeemed. No interest shall accrue for the benefit of the holders
     of Series H Preferred Shares to be redeemed on any cash so set aside by the
     Trust. Subject to applicable escheat laws, any such cash unclaimed at the
     end of two years from the Call Date shall revert to the general funds of
     the Trust, after which reversion the holders of such shares so called for
     redemption shall look only to the general funds of the Trust for the
     payment of such cash.

          As promptly as practicable after the surrender in accordance with such
     notice of the certificates for any such shares so redeemed (properly
     endorsed or assigned for transfer, if the Trust shall so require and if the
     notice shall so state), such shares shall be exchanged for any cash
     (without interest thereon) for which such shares have been redeemed. If
     fewer than all the outstanding Series H Preferred Shares are to be
     redeemed, shares to be redeemed shall be selected by the Trust from
     outstanding Series H Preferred Shares not previously called for redemption
     pro rata (as nearly as may be), by lot or by any other method determined by
     the Trust in its sole discretion to be equitable. If fewer than all the
     Series H Preferred Shares represented by any certificate are redeemed, then
     new certificates representing the unredeemed shares shall be issued without
     cost to the holder thereof.

          (v)  In the case of any redemption pursuant to subsection (e)(i)(A) of
     this Section 9,

               (A) no fractional Common Shares or scrip representing fractions
          of Common Shares shall be issued upon redemption of the Series H
          Preferred Common Shares. Instead of any fractional interest in Common
          Shares that would otherwise be deliverable upon redemption of Series H
          Preferred Shares, the Trust shall pay to the holder of such share an
          amount in cash (rounded to the nearest cent) based upon the Current
          Market Price of the Common Shares on the Trading Day immediately
          preceding the Call Date. If more than one Series H Preferred Share
          shall be surrendered for redemption at one time by the same holder,
          the number of full Common Shares issuable upon redemption thereof
          shall be computed on the basis of the aggregate number of Series H
          Preferred Shares so surrendered.

               (B) the Trust covenants that any Common Shares issued upon
          redemption of Series H Preferred Shares shall be validly issued, fully
          paid and non-assessable. The Trust shall endeavor to list the Common
          Shares required to be delivered upon any such redemption of Series H
          Preferred Shares, prior to such redemption, upon each national
          securities exchange, if any, upon which the outstanding Common Shares
          are listed at the time of such delivery.

     (f)  Conversion. Holders of Series H Preferred Shares shall have the right
to convert all or a portion of such shares into Common Shares, as follows:

                                      H-10

<PAGE>

          (i)  Subject to and upon compliance with the provisions of this
     subsection (f) and the provisions of Section 18A of Article II of the
     Declaration of Trust, a holder of Series H Preferred Shares shall have the
     right, at any time, at his or her option, to convert such shares into the
     number of fully paid and non-assessable Common Shares obtained by dividing
     the aggregate liquidation preference of such shares (exclusive of accrued
     but unpaid dividends) by the Conversion Price (as in effect at the time and
     on the date provided for in the last paragraph of subsection (f)(ii) of
     this Section 9) by surrendering such shares to be converted, such surrender
     to be made in the manner provided in subsection (f)(ii) of this Section 9,
     provided, however, that the right to convert shares called for redemption
     --------  -------
     pursuant to subsection (e) of this Section 9 shall terminate at the close
     of business on the fifth Business Day prior to the Call Date fixed for such
     redemption, unless the Trust shall default in making payment of the cash
     payable upon such redemption under subsection (e) of this Section 9.

          (ii) In order to exercise the conversion right, the holder of each
     Series H Preferred Share to be converted shall surrender the certificate
     representing such share, duly endorsed or assigned to the Trust or in
     blank, at the office of the Transfer Agent, accompanied by written notice
     to the Trust that the holder thereof elects to convert such Series H
     Preferred Shares. Unless the shares issuable on conversion are to be issued
     in the same name as the name in which such Series H Preferred Share is
     registered, each share surrendered for conversion shall be accompanied by
     instruments of transfer, in form satisfactory to the Trust, duly executed
     by the holder or such holder's duly authorized attorney and an amount
     sufficient to pay any transfer or similar tax (or evidence reasonably
     satisfactory to the Trust demonstrating that such taxes have been paid).

          Holders of Series H Preferred Shares at the close of business on a
     dividend payment record date shall be entitled to receive the dividend
     payable on such shares on the corresponding Dividend Payment Date
     notwithstanding the conversion thereof following such dividend payment
     record date and prior to such Dividend Payment Date. However, Series H
     Preferred Shares surrendered for conversion during the period between the
     close of business on any dividend payment record date and the opening of
     business on the corresponding Dividend Payment Date (except shares
     converted after the issuance of notice of redemption with respect to a Call
     Date during such period, such Series H Preferred Shares being entitled to
     such dividend on the Dividend Payment Date) must be accompanied by payment
     of an amount equal to the dividend payable on such shares on such Dividend
     Payment Date. A holder of Series H Preferred Shares on a dividend payment
     record date who (or whose transferee) tenders any such shares for
     conversion into Common Shares on the corresponding Dividend Payment Date
     will receive the dividend payable by the Trust on such Series H Preferred
     Shares on such date, and the converting holder need not include payment of
     the amount of such dividend upon surrender of Series H Preferred Shares for
     conversion. Except as provided above, the Trust shall make no payment or
     allowance for unpaid dividends, whether or not in arrears, on converted
     shares or for dividends on the Common Shares issued upon such conversion.

                                      H-11

<PAGE>

          As promptly as practicable after the surrender of certificates for
     Series H Preferred Shares as aforesaid, the Trust shall issue and shall
     deliver at such office to such holder, or on his or her written order, a
     certificate or certificates for the number of full Common Shares issuable
     upon the conversion of such shares in accordance with provisions of this
     subsection (f) of this Section 9, and any fractional interest in respect of
     a Common Share arising upon such conversion shall be settled as provided in
     subsection (f)(iii) of this Section 9.

          Each conversion shall be deemed to have been effected immediately
     prior to the close of business on the date on which the certificates for
     Series H Preferred Shares shall have been surrendered and such notice shall
     have been received by the Trust as aforesaid (and if applicable, payment of
     an amount equal to the dividend payable on such shares shall have been
     received by the Trust as described above), and the person or persons in
     whose name or names any certificate or certificates for Common Shares shall
     be issuable upon such conversion shall be deemed to have become the holder
     or holders of record of the shares represented thereby at such time on such
     date and such conversion shall be at the Conversion Price in effect at such
     time on such date unless the share transfer books of the Trust shall be
     closed on that date, in which event such person or persons shall be deemed
     to have become such holder or holders of record at the close of business on
     the next succeeding day on which such share transfer books are open, but
     such conversion shall be at the Conversion Price in effect on the date on
     which such shares shall have been surrendered and such notice received by
     the Trust.

          (iii) No fractional shares or scrip representing fractions of Common
     Shares shall be issued upon conversion of the Series H Preferred Shares.
     Instead of any fractional interest in a Common Share that would otherwise
     be deliverable upon the conversion of a Series H Preferred Share, the Trust
     shall pay to the holder of such share an amount in cash based upon the
     Current Market Price of the Common Shares on the Trading Day immediately
     preceding the date of conversion. If more than one Series H Preferred Share
     shall be surrendered for conversion at one time by the same holder, the
     number of full Common Shares issuable upon conversion thereof shall be
     computed on the basis of the aggregate number of Series H Preferred Shares
     so surrendered.

          (iv)  The Conversion Price shall be adjusted from time to time as
     follows:

                (A) If the Trust shall after the Issue Date (i) pay a dividend
          or make a distribution on its capital shares in Common Shares, (ii)
          subdivide its outstanding Common Shares into a greater number of
          shares, (iii) combine its outstanding Common Shares into a smaller
          number of shares or (iv) issue any Shares by reclassification of its
          Common Shares, the Conversion Price in effect at the opening of
          business on the day following the date fixed for the determination of
          shareholders entitled to receive such dividend or distribution or at
          the opening of business on the Business Day next following the day on
          which such subdivision, combination or reclassification becomes
          effective, as the case may be, shall be adjusted so that the

                                      H-12

<PAGE>

     holder of any Series H Preferred Share thereafter surrendered for
     conversion shall be entitled to receive the number of Common Shares that
     such holder would have owned or have been entitled to receive after the
     happening of any of the events described above as if such Series H
     Preferred Shares had been converted immediately prior to the record date in
     the case of a dividend or distribution or the effective date in the case of
     a subdivision, combination or reclassification. An adjustment made pursuant
     to this subparagraph (A) shall become effective immediately after the
     opening of business on the Business Day next following the record date
     (except as provided in subsection (f)(viii) of this Section 9) in the case
     of a dividend or distribution and shall become effective immediately after
     the opening of business on the Business Day next following the effective
     date in the case of a subdivision, combination or reclassification.

          (B) If the Trust shall issue after the Issue Date rights, options or
     warrants to all holders of Common Shares entitling them (for a period
     expiring within 45 days after the record date mentioned below) to subscribe
     for or purchase Common Shares at a price per share less than 94% (100% if a
     stand-by underwriter is used and charges the Trust a commission) of the
     Fair Market Value per Common Share on the record date for the determination
     of shareholders entitled to receive such rights, options or warrants, then
     the Conversion Price in effect at the opening of business on the Business
     Day next following such record date shall be adjusted to equal the price
     determined by multiplying (i) the Conversion Price in effect immediately
     prior to the opening of business on the Business Day next following the
     date fixed for such determination by (ii) a fraction, the numerator of
     which shall be the sum of (x) the number of Common Shares outstanding on
     the close of business on the date fixed for such determination and (y) the
     number of shares that the aggregate proceeds to the Trust from the exercise
     of such rights, options or warrants for Common Shares would purchase at 94%
     of such Fair Market Value (or 100% in the case of a stand-by underwriting),
     and the denominator of which shall be the sum of (x) the number of Common
     Shares outstanding on the close of business on the date fixed for such
     determination and (y) the number of additional Common Shares offered for
     subscription or purchase pursuant to such rights, options or warrants. Such
     adjustment shall become effective immediately after the opening of business
     on the day next following such record date (except as provided in
     subsection (f)(viii) of this Section 9 below). In determining whether any
     rights, options or warrants entitle the holders of Common Shares to
     subscribe for or purchase Common Shares at less than 94% of such Fair
     Market Value (or 100% in the case of a stand-by underwriting), there shall
     be taken into account any consideration received by the Trust upon issuance
     and upon exercise of such rights, options or warrants, the value of such
     consideration, if other than cash, to be determined by the Board.

          (C) If the Trust shall distribute to all holders of its Common Shares
     any securities of the Trust (other than Common Shares) or evidence of its
     indebtedness

                                      H-13

<PAGE>

     or assets (excluding cumulative cash dividends or distributions paid with
     respect to the Common Shares or the common shares of Smith Realty after
     December 31, 1996 which are not in excess of the following: the sum of (i)
     the cumulative undistributed Funds from Operations at December 31, 1996,
     plus (ii) the cumulative amount of Funds from Operations, as determined by
     the Board, after December 31, 1996, minus (iii) the cumulative amount of
     dividends accrued or paid in respect of the Series H Preferred Shares or
     any other class or series of preferred Shares of the Trust or preferred
     shares of Smith Realty after May 15, 1997) or rights, options or warrants
     to subscribe for or purchase any of its securities (excluding those rights,
     options and warrants issued to all holders of Common Shares entitling them
     for a period expiring within 45 days after the record date referred to in
     subsection (f)(iv)(B) of this Section 9 to subscribe for or purchase Common
     Shares, which rights and warrants are referred to in and treated under
     subsection (f)(iv)(B) of this Section 9) (any of the foregoing being
     hereinafter in this subsection (f)(iv)(C) collectively called the
     "Securities" and individually a "Security"), then in each such case the
      ----------                      --------
     Conversion Price shall be adjusted so that it shall equal the price
     determined by multiplying (x) the Conversion Price in effect immediately
     prior to the close of business on the date fixed for the determination of
     shareholders entitled to receive such distribution by (y) a fraction, the
     numerator of which shall be the Fair Market Value per Common Share on the
     record date mentioned below less the then fair market value (as determined
     by the Board, whose determination shall be conclusive), of the portion of
     the Securities or assets or evidences of indebtedness so distributed or of
     such rights, options or warrants applicable to one Common Share, and the
     denominator of which shall be the Fair Market Value per Common Share on the
     record date mentioned below. Such adjustment shall become effective
     immediately at the opening of business on the Business Day next following
     (except as provided in subsection (f)(viii) of this Section 9) the record
     date for the determination of shareholders entitled to receive such
     distribution. For the purposes of this subsection (f)(iv)(C), the
     distribution of a Security, which is distributed not only to the holders of
     the Common Shares on the date fixed for the determination of shareholders
     entitled to such distribution of such Security, but also is distributed
     with each Common Share delivered to a Person converting a Series H
     Preferred Share after such determination date, shall not require an
     adjustment of the Conversion Price pursuant to this subsection (f)(iv)(C);
     provided that on the date, if any, on which a person converting a Series H
     --------
     Preferred Share would no longer be entitled to receive such Security with a
     Common Share (other than as a result of the termination of all such
     Securities), a distribution of such Securities shall be deemed to have
     occurred and the Conversion Price shall be adjusted as provided in this
     subsection (f)(iv)(C) (and such day shall be deemed to be "the date fixed
     for the determination of the shareholders entitled to receive such
     distribution" and "the record date" within the meaning of the two preceding
     sentences).

                                      H-14

<PAGE>

          (D) In case a tender or exchange offer (which term shall not include
     open market repurchases by the Trust) made by the Trust or any subsidiary
     of the Trust for all or any portion of the Common Shares shall expire and
     such tender or exchange offer shall involve the payment by the Trust or
     such subsidiary of consideration per Common Share having a fair market
     value (as determined in good faith by the Board, whose determination shall
     be conclusive and described in a resolution of the Board), at the last time
     (the "Expiration Time") tenders or exchanges may be made pursuant to such
           ---------------
     tender or exchange offer, that exceeds the Current Market Price per Common
     Share on the Trading Day next succeeding the Expiration Time, the
     Conversion Price shall be reduced so that the same shall equal the price
     determined by multiplying the Conversion Price in effect immediately prior
     to the effectiveness of the Conversion Price reduction contemplated by this
     subparagraph, by a fraction of which the numerator shall be the number of
     Common Shares outstanding (including any tendered or exchanged shares) at
     the Expiration Time, multiplied by the Current Market Price per Common
     Share on the Trading Day next succeeding the Expiration Time, and the
     denominator shall be the sum of (i) the fair market value (determined as
     aforesaid) of the aggregate consideration payable to shareholders based
     upon the acceptance (up to any maximum specified in the terms of the tender
     or exchange offer) of all shares validly tendered or exchanged and not
     withdrawn as of the Expiration Time (the shares deemed so accepted, up to
     any maximum, being referred to as the "Purchased Shares") and (ii) the
                                            ----------------
     product of the number of Common Shares outstanding (less any Purchased
     Shares) at the Expiration Time and the Current Market Price per Common
     Share on the Trading Day next succeeding the Expiration Time, such
     reduction to become effective immediately prior to the opening of business
     on the day following the Expiration Time.

          (E) No adjustment in the Conversion Price shall be required unless
     such adjustment would require a cumulative increase or decrease of at least
     1% in such price; provided, however, that any adjustments that by reason of
                       --------  -------
     this subsection (f)(iv)(E) are not required to be made shall be carried
     forward and taken into account in any subsequent adjustment until made; and
     provided, further, that any adjustment shall be required and made in
     --------  -------
     accordance with the provisions of this subsection (f) of this Section 9
     (other than this subsection (f)(iv)(E)) not later than such time as may be
     required in order to preserve the tax-free nature of a distribution to the
     holders of Common Shares. Notwithstanding any other provisions of this
     subsection (f), the Trust shall not be required to make any adjustment of
     the Conversion Price for the issuance of any Common Shares pursuant to any
     plan providing for the reinvestment of dividends or interest payable on
     securities of the Trust and the investment of additional optional amounts
     in Common Shares under such plan. All calculations under this subsection
     (f) shall be made to the nearest cent (with $.005 being rounded upward) or
     to the nearest one-tenth of a share (with .05 of a share being rounded
     upward), as the case may be. Anything in this subsection (f)(iv)(E) to the
     contrary notwithstanding, the Trust shall be entitled, to the extent
     permitted by law, to make

                                      H-15

<PAGE>

               such reductions in the Conversion Price, in addition to those
               required by this subsection (f)(iv)(E), as it in its discretion
               shall determine to be advisable in order that any share
               dividends, subdivision of shares, reclassification or combination
               of shares, distribution of rights or warrants to purchase shares
               or securities, or distribution of other assets (other than cash
               dividends) hereafter made by the Trust to its shareholders shall
               not be taxable.

               (v) If the Trust shall be a party to any transaction (including
          without limitation a merger, consolidation, statutory share exchange,
          self tender offer for all or substantially all of its Common Shares,
          sale of all or substantially all of the Trust's assets or
          recapitalization of the Common Shares and excluding any transaction as
          to which subsection (f)(iv)(A) of this Section 9 applies) (each of the
          foregoing being referred to herein as a "Transaction"), in each case
                                                   -----------
          as a result of which all or substantially all of the Trust's Common
          Shares are converted into the right to receive shares, securities or
          other property (including cash or any combination thereof), each
          Series H Preferred Share which is not redeemed or converted into the
          right to receive shares, securities or other property prior to such
          Transaction shall thereafter be convertible into the kind and amount
          of shares, securities and other property (including cash or any
          combination thereof) receivable upon the consummation of such
          Transaction by a holder of that number of Common Shares into which one
          Series H Preferred Share was convertible immediately prior to such
          Transaction, assuming such holder of Common Shares (A) is not a Person
          with which the Trust consolidated or into which the Trust merged or
          which merged into the Trust or to which such sale or transfer was
          made, as the case may be ("Constituent Person"), or an affiliate of a
                                     ------------------
          Constituent Person and (B) failed to exercise his rights of election,
          if any, as to the kind or amount of shares, securities and other
          property (including cash) receivable upon such Transaction (provided
          that if the kind or amount of shares, securities and other property
          (including cash) receivable upon such Transaction is not the same for
          each Common Share held immediately prior to such Transaction by other
          than a Constituent Person or an affiliate thereof and in respect of
          which such rights of election shall not have been exercised
          ("Non-Electing Share"), then for the purpose of this subsection (f)(v)
            ------------------
          the kind and amount of shares, securities and other property
          (including cash) receivable upon such Transaction by each Non-Electing
          Share shall be deemed to be the kind and amount so receivable per
          share by a plurality of the Non-Electing Shares). The Trust shall not
          be a party to any Transaction unless the terms of such Transaction are
          consistent with the provisions of this subsection (f)(v), and it shall
          not consent or agree to the occurrence of any Transaction until the
          Trust has entered into an agreement with the successor or purchasing
          entity, as the case may be, for the benefit of the holders of the
          Series H Preferred Shares that will contain provisions enabling the
          holders of the Series H Preferred Shares that remain outstanding after
          such Transaction to convert into the consideration received by holders
          of Common Shares at the Conversion Price in effect immediately prior
          to such Transaction. The provisions of this subsection (f)(v) shall
          similarly apply to successive Transactions.

                                      H-16

<PAGE>

          (vi) If:

               (A) the Trust shall declare a dividend (or any other
          distribution) on its Common Shares (other than cash dividends or
          distributions paid with respect to the Common Shares or the common
          shares of Smith Realty after December 31, 1996 not in excess of the
          sum of the cumulative undistributed Funds from Operations at December
          31, 1996, plus the cumulative amount of Funds from Operations, as
          determined by the Board, after December 31, 1996, minus the cumulative
          amount of dividends accrued or paid in respect of the Series H
          Preferred Shares or any other class or series of preferred Shares of
          the Trust or preferred shares of Smith Realty after May 15, 1997); or

               (B) the Trust shall authorize the granting to all holders of
          Common Shares of rights, options or warrants to subscribe for or
          purchase any shares of any class or any other rights, options or
          warrants; or

               (C) there shall be any reclassification of the Common Shares
          (other than an event to which subsection (f)(iv)(A) of this Section 9
          applies) or any consolidation or merger to which the Trust is a party
          and for which approval of any shareholders of the Trust is required,
          or a statutory share exchange, or a self tender offer by the Trust for
          all or substantially all of its outstanding Common Shares or the sale
          or transfer of all or substantially all of the assets of the Trust as
          an entirety; or

               (D) there shall occur the voluntary or involuntary liquidation,
          dissolution or winding up of the Trust;

     then the Trust shall cause to be filed with the Transfer Agent and shall
     cause to be mailed to the holders of Series H Preferred Shares at their
     addresses as shown on the records of the Trust, as promptly as possible,
     but at least 10 days prior to the applicable date hereinafter specified, a
     notice stating (i) the date on which a record is to be taken for the
     purpose of such dividend, distribution or granting of rights, options or
     warrants, or, if a record is not to be taken, the date as of which the
     holders of Common Shares of record to be entitled to such dividend,
     distribution or rights, options or warrants are to be determined or (ii)
     the date on which such reclassification, consolidation, merger, statutory
     share exchange, sale, transfer, liquidation, dissolution or winding up is
     expected to become effective, and the date as of which it is expected that
     holders of Common Shares of record shall be entitled to exchange their
     Common Shares for securities or other property, if any, deliverable upon
     such reclassification, consolidation, merger, statutory share exchange,
     sale, transfer, liquidation, dissolution or winding up. Failure to give or
     receive such notice or any defect therein shall not affect the legality or
     validity of the proceedings described in this subsection (f) of this
     Section 9.

                                      H-17

<PAGE>

          (vii)  Whenever the Conversion Price is adjusted as herein provided,
     the Trust shall promptly file with the Transfer Agent an officer's
     certificate setting forth the Conversion Price after such adjustment and
     setting forth a brief statement of the facts requiring such adjustment
     which certificate shall be conclusive evidence of the correctness of such
     adjustment absent manifest error. Promptly after delivery of such
     certificate, the Trust shall prepare a notice of such adjustment of the
     Conversion Price setting forth the adjusted Conversion Price and the
     effective date of such adjustment and shall mail such notice of such
     adjustment of the Conversion Price to the holder of each Series H Preferred
     Share at such holder's last address as shown on the records of the Trust.

          (viii) In any case in which subsection (f)(iv) of this Section 9
     provides that an adjustment shall become effective on the day next
     following the record date for an event, the Trust may defer until the
     occurrence of such event (A) issuing to the holder of any Series H
     Preferred Share converted after such record date and before the occurrence
     of such event the additional Common Shares issuable upon such conversion by
     reason of the adjustment required by such event over and above the Common
     Shares issuable upon such conversion before giving effect to such
     adjustment and (B) paying to such holder any amount of cash in lieu of any
     fraction pursuant to subsection (f)(iii) of this Section 9.

          (ix)   There shall be no adjustment of the Conversion Price in case of
     the issuance of any Shares in a reorganization, acquisition or other
     similar transaction except as specifically set forth in this subsection (f)
     of this Section 9. If any action or transaction would require adjustment of
     the Conversion Price pursuant to more than one paragraph of this subsection
     (f) of this Section 9, only one adjustment shall be made and such
     adjustment shall be the amount of adjustment that has the highest absolute
     value.

          (x)    If the Trust shall take any action affecting the Common Shares,
     other than action described in this subsection (f) of this Section 9, that
     in the opinion of the Board would materially and adversely affect the
     conversion rights of the holders of the Series H Preferred Shares, the
     Conversion Price for the Series H Preferred Shares may be adjusted, to the
     extent permitted by law, in such manner, if any, and at such time, as the
     Board, in its sole discretion, may determine to be equitable in the
     circumstances.

          (xi)   The Trust covenants that it will at all times reserve and keep
     available, free from preemptive rights, out of the aggregate of its
     authorized but unissued Common Shares, for the purpose of effecting
     conversion of the Series H Preferred Shares, the full number of Common
     Shares deliverable upon the conversion of all outstanding Series H
     Preferred Shares not theretofore converted. For purposes of this subsection
     (f)(xi), the number of Common Shares that shall be deliverable upon the
     conversion of all outstanding Series H Preferred Shares shall be computed
     as if at the time of computation all such outstanding shares were held by a
     single holder.

                                       H-18

<PAGE>

          The Trust covenants that any Common Shares issued upon conversion of
     the Series H Preferred Shares shall be validly issued, fully paid and
     non-assessable. Before taking any action that would cause an adjustment
     reducing the Conversion Price below the then-par value of the Common Shares
     deliverable upon conversion of the Series H

          Preferred Shares, the Trust will take any action that, in the opinion
     of its counsel, may be necessary in order that the Trust may validly and
     legally issue fully paid and (subject to any customary qualification based
     upon the nature of a real estate investment trust) non-assessable Common
     Shares at such adjusted Conversion Price.

          The Trust shall endeavor to list the Common Shares required to be
     delivered upon conversion of the Series H Preferred Shares, prior to such
     delivery, upon each national securities exchange, if any, upon which the
     outstanding Common Shares are listed at the time of such delivery.

          The Trust shall endeavor to comply with all federal and state
     securities laws and regulations thereunder in connection with the issuance
     of any securities that the Trust shall be obligated to deliver upon
     conversion of the Series H Preferred Shares. In addition to any legend
     required by Section 18A of Article II of the Declaration of Trust, the
     certificates evidencing such securities shall bear such legends restricting
     transfer thereof in the absence of registration under applicable securities
     laws or an exemption therefrom as the Trust may in good faith deem
     appropriate.

          (xii) The Trust will pay any and all documentary stamp or similar
     issue or transfer taxes payable in respect of the issue or delivery of
     Common Shares or other securities or property on conversion of the Series H
     Preferred Shares pursuant hereto; provided, however, that the Trust shall
                                       --------  -------
     not be required to pay any tax that may be payable in respect of any
     transfer involved in the issue or delivery of Common Shares or other
     securities or property in a name other than that of the holder of the
     Series H Preferred Shares to be converted, and no such issue or delivery
     shall be made unless and until the person requesting such issue or delivery
     has paid to the Trust the amount of any such tax or established, to the
     reasonable satisfaction of the Trust, that such tax has been paid.

     (g)  Shares To Be Retired. All Series H Preferred Shares which shall have
been issued and reacquired in any manner by the Trust shall be restored to the
status of authorized but unissued shares of beneficial interest of the Trust,
without designation as to class or series.

     (h)  Ranking. Any class or series of Shares shall be deemed to rank:

          (i) senior to the Series H Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if the holders of such class or
     series are entitled to the receipt of dividends or of amounts distributable
     upon any liquidation, dissolution or winding up of the Trust, as the case
     may be, in preference or priority to the holders of Series H Preferred
     Shares;

                                       H-19

<PAGE>

          (ii)  on a parity with the Series H Preferred Shares, in the payment
     of dividends and in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, whether or not the dividend rates,
     dividend payment dates or redemption or liquidation prices per share
     thereof are different from those of the Series H Preferred Shares, if the
     holders of such class or series and the holders of the Series H Preferred
     Shares are entitled to the receipt of dividends and amounts distributable
     upon any liquidation, dissolution or winding up of the Trust in proportion
     to their respective amounts of dividends accrued and unpaid per share or
     liquidation preferences, without preference or priority to each other
     ("Parity Shares");
       -------------

          (iii) junior to the Series H Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such class or series is Junior
     Shares; and

          (iv) junior to the Series H Preferred Shares, in the payment of
     dividends and in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such class or series is Fully
     Junior Shares.

     (i)  Voting. If and whenever four quarterly dividends (whether or not
consecutive) payable on the Series H Preferred Shares or any series or class of
Parity Shares shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of Trustees then constituting the
Board shall be increased by two and the holders of Series H Preferred Shares,
together with the holders of shares of every other series of Parity Shares (any
such other series, the "Voting Preferred Shares"), voting as a single class
                        -----------------------
regardless of series, shall be entitled to elect the two additional Trustees to
serve on the Board at any annual meeting of shareholders or special meeting held
in place thereof, or at a special meeting of the holders of the Series H
Preferred Shares and the Voting Preferred Shares called as hereinafter provided.
Whenever all arrears in dividends on the Series H Preferred Shares and the
Voting Preferred Shares then outstanding shall have been paid and dividends
thereon for the current quarterly dividend period shall have been paid or
declared and set apart for payment, then the right of the holders of the Series
H Preferred Shares and the Voting Preferred Shares to elect such additional two
Trustees shall cease (but subject always to the same provision for the vesting
of such voting rights in the case of any similar future arrearage in quarterly
dividends), and the terms of office of all persons elected as Trustees by the
holders of the Series H Preferred Shares and the Voting Preferred Shares shall
forthwith terminate and the number of the Board shall be reduced accordingly. At
any time after such voting power shall have been so vested in the holders of
Series H Preferred Shares and the Voting Preferred Shares, the Secretary of the
Trust may, and upon the written request of any holder of Series H Preferred
Shares (addressed to the Secretary at the principal office of the Trust) shall,
call a special meeting of the holders of the Series H Preferred Shares and of
the Voting Preferred Shares for the election of the Trustees to be elected by
them as herein provided, such call to be made by notice similar to that provided
in the Bylaws of the Trust for a special meeting of the shareholders or as
required by law. If any such special meeting required to be called as above
provided shall not be called by the Secretary within 20 days after receipt of
any such

                                      H-20

<PAGE>

request, then any holder of Series H Preferred Shares may call such meeting,
upon the notice above provided, and for that purpose shall have access to the
records of the Trust. The Trustees elected at any such special meeting shall
hold office until the next annual meeting of the shareholders or special meeting
held in lieu thereof if such office shall not have previously terminated as
above provided. If any vacancy shall occur among the Trustees elected by the
holders of the Series H Preferred Shares and the Voting Preferred Shares, a
successor shall be elected by the Board, upon the nomination of the
then-remaining Trustee elected by the holders of the Series H Preferred Shares
and the Voting Preferred Shares or the successor of such remaining Trustee, to
serve until the next annual meeting of the shareholders or special meeting held
in place thereof if such office shall not have previously terminated as provided
above.

     So long as any Series H Preferred Shares are outstanding, in addition to
any other vote or consent of shareholders required by law or by the Declaration
of Trust, the affirmative vote of at least 66 2/3% of the votes entitled to be
cast by the holders of the Series H Preferred Shares given in person or by
proxy, either in writing without a meeting or by vote at any meeting called for
the purpose, shall be necessary for effecting or validating:

               (i)   Any amendment, alteration or repeal of any of the
          provisions of the Declaration of Trust or the By-Laws that materially
          and adversely affects the voting powers, rights or preferences of the
          holders of the Series H Preferred Shares; provided, however, that the
                                                    --------  -------
          amendment of the provisions of the Declaration of Trust so as to
          authorize or create or to increase the authorized amount of, any Fully
          Junior Shares, Junior Shares that are not senior in any respect to the
          Series H Preferred Shares or any Parity Shares shall not be deemed to
          materially adversely affect the voting powers, rights or preferences
          of the holders of Series H Preferred Shares; or

               (ii)  A share exchange that affects the Series H Preferred
          Shares, a consolidation with or merger of the Trust into another
          entity, or a consolidation with or merger of another entity into the
          Trust, unless in each such case each Series H Preferred Share (A)
          shall remain outstanding without a material and adverse change to its
          terms and rights or (B) shall be converted into or exchanged for
          convertible preferred shares of the surviving entity having
          preferences, conversion or other rights, voting powers, restrictions,
          limitations as to dividends, qualifications and terms or conditions of
          redemption thereof identical to that of a Series H Preferred Share
          (except for changes that do not materially and adversely affect the
          holders of the Series H Preferred Shares); or

               (iii) The authorization, reclassification or creation of, or the
          increase in the authorized amount of, any shares of any class or any
          security convertible into shares of any class ranking senior to the
          Series H Preferred Shares in the distribution of assets on any
          liquidation, dissolution or winding up of the Trust or in the payment
          of dividends;

provided, however, that no such vote of the holders of Series H Preferred Shares
--------  -------
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the

                                      H-21

<PAGE>

issuance of any such prior shares or convertible security is to be made, as the
case may be, provision is made for the redemption of all Series H Preferred
Shares at the time outstanding. For purposes of the foregoing provisions, a
"share exchange" means a transaction (including a forward or reverse triangular
merger) in which an entity acquires all the issued or all the outstanding equity
securities of one or more classes of another entity and which does not affect
the existence of either entity, and the term "surviving entity" shall include
the entity acquiring equity securities in a share exchange.

     For purposes of the foregoing provisions of this subsection (i), each
Series H Preferred Share shall have one (1) vote per share, except that when any
other series of preferred Shares shall have the right to vote with the Series H
Preferred Shares as a single class on any matter, then the Series H Preferred
Shares and such other series shall have with respect to such matters one (1)
vote per $25.00 of stated liquidation preference. Except as otherwise required
by applicable law or as set forth herein, the Series H Preferred Shares shall
not have any relative, participating, optional or other special voting rights
and powers other than as set forth herein, and the consent of the holders
thereof shall not be required for the taking of any Trust action.

     (j) Record Holders. The Trust and the Transfer Agent may deem and treat the
record holder of any Series H Preferred Shares as the true and lawful owner
thereof for all purposes, and neither the Trust nor the Transfer Agent shall be
affected by any notice to the contrary.

                                      H-22

<PAGE>

                                     ANNEX I
                               SERIES I CUMULATIVE
                          REDEEMABLE PREFERRED SHARES


     (a)  Number of Shares and Designation. This class of preferred Shares shall
be designated as Series I Cumulative Redeemable Preferred Shares and the number
of Shares which shall constitute such series shall not be more than 500 Shares,
par value $0.01 per share, which number may be decreased (but not below the
number thereof then outstanding) from time to time by the Board.

     (b)  Definitions. For purposes of the Series I Preferred Shares, the
following terms shall have the meanings indicated:

          "Board" shall mean the Board of Trustees or any committee authorized
           -----
     by the Board of Trustees to perform any of its responsibilities with
     respect to the Series I Preferred Shares.

          "Business Day" shall mean any day other than a Saturday, Sunday or a
           ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

          "Call Date" shall mean February 1, 2028.
           ---------

          "Common Shares" shall mean the common shares of beneficial interest,
           -------------
     par value $0.01 per share, of the Trust.

          "Dividend Payment Date" shall mean the 15th day (or if such day is not
           ---------------------
     a Business Day, the next Business Day thereafter) of February, May, August
     and November of each year; commencing on the first of such days to occur
     following the Issue Date.

          "Dividend Periods" shall mean the periods commencing on, and
           ----------------
     including, February 15, May 15, August 15, and November 15 of each year and
     ending on the date prior to the next succeeding Dividend Payment Date
     (other than the Dividend Period during which any Series I Preferred Shares
     shall be redeemed pursuant to subsection (e) of this Section 10, which
     shall end on and include the Redemption Date with respect to the Series I
     Preferred Shares being redeemed).

          "Dividend Rate" means $7,660.00 per share per annum.
           -------------
                                       I-1

<PAGE>

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

          "Fully Junior Shares" shall mean the Common Shares and any other class
           -------------------
     or series of Shares now or hereafter issued and outstanding over which the
     Series I Preferred Shares have preference or priority in both (i) the
     payment of dividends and (ii) the distribution of assets on any
     liquidation, dissolution or winding up of the Trust.

          "Issue Date" shall mean the date on which the first Series I Preferred
           ----------
     Shares are issued.

          "Junior Shares" shall mean the Common Shares and any other class or
           -------------
     series of Shares now or hereafter issued and outstanding over which the
     Series I Preferred Shares have preference or priority in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust.

          "Liquidation Preference" means an amount per Series I Preferred Share
           ----------------------
     equal to $100,000.

          "Parity Shares" shall have the meaning set forth in subsection (g)(ii)
           -------------
     of this Section 10.

          "Person" shall mean any individual, firm, partnership, corporation,
           ------
     association, limited liability company, trust or other entity or
     organization, (including a government or political subdivision or an agency
     or instrumentality thereof), and shall include any successor (by merger or
     otherwise) of such entity or organization.

          "Redemption Date" shall mean the date specified in the notice to
           ---------------
     holders required under subsection (e)(iv) of this Section 10 as the date
     for redemption of Series I Preferred Shares pursuant to subsection (e) of
     this Section 10.

          "Securities Act" shall mean the Securities Act of 1933, as amended.
           --------------

          "Series I Preferred Shares" shall mean the shares of Series I
           -------------------------
     Cumulative Redeemable Preferred Shares.

          "set apart for payment" shall be deemed to include, without any action
           ---------------------
     other than the following, the recording by the Trust in its accounting
     ledgers of any accounting or bookkeeping entry which indicates, pursuant to
     a declaration of dividends or other distribution by the Board, the
     allocation of funds to be so paid on any series or class of Shares;
     provided, however, that if any funds for any class or series of Junior
     --------  -------
     Shares or any

                                       I-2

<PAGE>

     class or series of Shares ranking on a parity with the Series I Preferred
     Shares as to the payment of dividends are placed in a separate account of
     the Trust or delivered to a disbursing, paying or other similar agent, then
     "set apart for payment" with respect to the Series I Preferred Shares shall
     mean placing such funds in a separate account or delivering such funds to a
     disbursing, paying or other similar agent.

          "Shares" shall mean the shares of beneficial interest of the Trust as
           ------
     may be authorized and issued from time to time pursuant to Article II of
     the Declaration of Trust.

          "Smith Operating Partnership" shall mean Charles E. Smith Residential
           ---------------------------
     Realty L.P., formerly a Delaware limited partnership.

          "Smith Preferred Shares" shall mean the Series H Preferred Shares,
           ----------------------
     Series I Preferred Shares, Series J Preferred Shares, Series K Preferred
     Shares and Series L Preferred Shares of the Trust or any of the foregoing.

          "Transfer Agent" shall mean Mellon Investor Services LLC, New York
           --------------
     City, New York, or such other agent or agents of the Trust as may be
     designated by the Board or their designee as the transfer agent, registrar
     and dividend disbursing agent for the Series I Preferred Shares.

          "Voting Preferred Shares" shall have the meaning set forth in
           -----------------------
     subsection (h) of this Section 10.

     (c)  Dividends.

          (i)  The holders of Series I Preferred Shares shall be entitled to
     receive, when, as and if declared by the Board, out of funds legally
     available for the payment of dividends, cumulative preferential dividends
     payable in cash in an amount per share equal to the Dividend Rate. The
     dividends shall begin to accrue and shall be fully cumulative from August
     15, 2001, whether or not in any Dividend Period or Periods there shall be
     funds of the Trust legally available for the payment of such dividends, and
     shall be payable quarterly, when, as and if declared by the Board, in
     arrears on Dividend Payment Dates. Each such dividend shall be payable in
     arrears to the holders of record of Series I Preferred Shares as they
     appear in the records of the Trust at the close of business on such record
     dates, not less than 10 nor more than 50 days preceding such Dividend
     Payment Dates thereof, as shall be fixed by the Board. Accrued and unpaid
     dividends for any past Dividend Periods may be declared and paid at any
     time and for such interim periods, without reference to any regular
     Dividend Payment Date, to holders of record on such date, not less than 10
     nor more than 50 days preceding the payment date thereof, as may be fixed
     by the Board. Any dividend

                                       I-3

<PAGE>

     payment made on Series I Preferred Shares shall first be credited against
     the earliest accrued but unpaid dividend due with respect to Series I
     Preferred Shares which remains payable.

          (ii)  Except as provided below, the amount of dividends referred to in
     subsection (c)(i) of this Section 10 payable for each full Dividend Period
     on the Series I Preferred Shares shall be computed by dividing the
     applicable Dividend Rate by four. The amount of dividends payable for any
     other period shorter than a full Dividend Period on the Series I Preferred
     Shares shall be computed on the basis of a 360-day year of twelve 30-day
     months. No interest, or sum of money in lieu of interest, shall be payable
     in respect of any dividend payment or payments on the Series I Preferred
     Shares which may be in arrears.

          (iii) So long as any Series I Preferred Shares are outstanding, no
     dividends, except as described in the immediately following sentence, shall
     be declared or paid or set apart for payment on any class or series of
     Parity Shares for any period unless full cumulative dividends have been or
     contemporaneously are declared and paid or declared and a sum sufficient
     for the payment thereof set apart for such payment on the Series I
     Preferred Shares for all Dividend Periods terminating on or prior to the
     dividend payment date on such class or series of Parity Shares. When
     dividends are not paid in full or a sum sufficient for such payment is not
     set apart, as aforesaid, all dividends declared upon Series I Preferred
     Shares and all dividends declared upon any other class or series of Parity
     Shares shall be declared ratably in proportion to the respective amounts of
     dividends accumulated and unpaid on the Series I Preferred Shares and
     accumulated and unpaid on such Parity Shares.

          (iv)  So long as any Series I Preferred Shares are outstanding, no
     dividends (other than dividends or distributions paid solely in shares of,
     or options, warrants or rights to subscribe for or purchase shares of,
     Fully Junior Shares) shall be declared or paid or set apart for payment or
     other distribution shall be declared or made or set apart for payment upon
     Junior Shares, nor shall any Junior Shares be redeemed, purchased or
     otherwise acquired (other than a redemption, purchase or other acquisition
     of Common Shares made for purposes of an employee incentive or benefit plan
     of the Trust or any subsidiary) for any consideration (or any moneys be
     paid to or made available for a sinking fund for the redemption of any
     Junior Shares) by the Trust, directly or indirectly (except by conversion
     into or exchange for Fully Junior Shares), unless in each case (A) the full
     cumulative dividends on all outstanding Series I Preferred Shares and any
     other Parity Shares shall have been or contemporaneously are declared and
     paid or declared and set apart for payment for all past Dividend Periods
     with respect to the Series I Preferred Shares and all past dividend periods
     with respect to such Parity Shares and (B) sufficient funds shall have been
     or contemporaneously are declared and paid or declared and set apart for
     the payment of the dividend for the current Dividend Period with respect to
     the Series I Preferred Shares and the current dividend period with respect
     to such Parity Shares.

                                       I-4

<PAGE>

          (v)   No distributions on Series I Preferred Shares shall be declared
     by the Board or paid or set apart for payment by the Trust at such time as
     the terms and provisions of any agreement of the Trust, including any
     agreement relating to its indebtedness, prohibits such declaration, payment
     or setting apart for payment or provides that such declaration, payment or
     setting apart for payment would constitute a breach thereof or a default
     thereunder, or if such declaration or payment shall be restricted or
     prohibited by law.

     (n)  Liquidation Preference.

          (i)   In the event of any liquidation, dissolution or winding up of
     the Trust, whether voluntary or involuntary, before any payment or
     distribution of the assets of the Trust (whether capital or surplus) shall
     be made to or set apart for the holders of Junior Shares, the holders of
     the Series I Preferred Shares shall be entitled to receive an amount per
     Series I Preferred Share equal to the sum of (A) the Liquidation Preference
     plus (B) an amount equal to all dividends (whether or not earned or
     declared) accrued and unpaid thereon to the date of final distribution to
     such holders; but such holders shall not be entitled to any further
     payment. If, upon any liquidation, dissolution or winding up of the Trust,
     the assets of the Trust, or proceeds thereof, distributable among the
     holders of the Series I Preferred Shares shall be insufficient to pay in
     full the preferential amount aforesaid and liquidating payments on any
     other shares of any class or series of Parity Shares, then such assets, or
     the proceeds thereof, shall be distributed among the holders of Series I
     Preferred Shares and any such other Parity Shares ratably in accordance
     with the respective amounts that would be payable on such Series I
     Preferred Shares and any such other Parity Shares if all amounts payable
     thereon were paid in full. For the purposes of this subsection (d), (x) a
     consolidation or merger of the Trust with one or more corporations, real
     estate investment trusts or other entities, (y) a sale, lease or conveyance
     of all or substantially all of the Trust's property or business or (z) a
     statutory share exchange shall not be deemed to be a liquidation,
     dissolution or winding up, voluntary or involuntary, of the Trust.

          (ii)  Subject to the rights of the holders of shares of any series or
     class or classes of Shares ranking on a parity with or senior to the Series
     I Preferred Shares upon liquidation, dissolution or winding up, upon any
     liquidation, dissolution or winding up of the Trust, after payment shall
     have been made in full to the holders of the Series I Preferred Shares, as
     provided in this subsection (d), any other series or class or classes of
     Junior Shares shall, subject to the respective terms and provisions (if
     any) applying thereto, be entitled to receive any and all assets remaining
     to be paid or distributed, and the holders of the Series I Preferred Shares
     shall not be entitled to share therein.

                                       I-5

<PAGE>

     (e)  Redemption at the Option of the Trust.

          (i)   The Series I Preferred Shares shall not be redeemable by the
     Trust except that on and after the Call Date and on any Dividend Payment
     Date thereafter, the Trust, at its option, may redeem the Series I
     Preferred Shares, in whole at any time, or from time to time in part, out
     of funds legally available therefor at a redemption price per Series I
     Preferred Share payable in cash equal to sum of (1) the Liquidation
     Preference plus (2) all dividends (whether or not earned or declared)
     accrued and unpaid thereon to the Redemption Date.

          (ii)  Upon any redemption of Series I Preferred Shares pursuant to
     this subsection (e), the Trust shall pay all accrued and unpaid dividends,
     if any, thereon to the Redemption Date, without interest. If the Redemption
     Date falls after a dividend payment record date and prior to the
     corresponding Dividend Payment Date, then each holder of Series I Preferred
     Shares at the close of business on such dividend payment record date shall
     be entitled to the dividend payable on such shares on the corresponding
     Dividend Payment Date notwithstanding any redemption of such shares before
     such Dividend Payment Date. Except as provided above, the Trust shall make
     no payment or allowance for unpaid dividends, whether or not in arrears, on
     Series I Preferred Shares called for redemption.

          (iii) If full cumulative dividends on the Series I Preferred Shares
     and any other class or series of Parity Shares have not been declared and
     paid or declared and set apart for payment for all dividend periods ended
     on or before the Redemption Date, the Series I Preferred Shares may not be
     redeemed under this subsection (e) in part and the Trust may not purchase
     or acquire Series I Preferred Shares, otherwise than pursuant to a purchase
     or exchange offer made on the same terms to all holders of Series I
     Preferred Shares.

          (iv)  Notice of the redemption of any Series I Preferred Shares under
     this subsection (e) shall be mailed by first-class mail to each holder of
     record of Series I Preferred Shares to be redeemed at the address of each
     such holder as shown on the Trust's records, not less than 30 nor more than
     90 days prior to the Redemption Date. Neither the failure to mail any
     notice required by this subsection (e)(iv), nor any defect therein or in
     the mailing thereof, to any particular holder, shall affect the sufficiency
     of the notice or the validity of the proceedings for redemption with
     respect to the other holders. Any notice which was mailed in the manner
     herein provided shall be conclusively presumed to have been duly given on
     the date mailed whether or not the holder receives the notice. Each such
     mailed notice shall state, as appropriate: (A) the Redemption Date; (B) the
     number of Series I Preferred Shares to be redeemed and, if fewer than all
     the shares held by such holder are to be redeemed, the number of such
     shares to be redeemed from such holder; (C) the Redemption Price; (D) the
     place or places at which certificates for such shares are to be
     surrendered; and (E) that dividends on the shares to be redeemed shall
     cease to accrue on such Redemption Date

                                       I-6

<PAGE>

     except as otherwise provided herein. Notice having been mailed as
     aforesaid, from and after the Redemption Date (unless the Trust shall fail
     to make available an amount of cash necessary to effect such redemption),
     except as otherwise provided herein, (x) dividends on the Series I
     Preferred Shares so called for redemption shall cease to accrue, (y) such
     shares shall no longer be deemed to be outstanding, and (z) all rights of
     the holders thereof as holders of Series I Preferred Shares of the Trust
     shall cease (except the rights to receive the cash payable upon redemption,
     without interest thereon, upon surrender and endorsement of their
     certificates if so required and to receive any dividends payable thereon).
     The Trust's obligation to provide cash in accordance with the preceding
     sentence shall be deemed fulfilled if, on or before the Redemption Date,
     the Trust shall deposit with a bank or trust company (which may be an
     affiliate of the Trust) that has an office in the Borough of Manhattan,
     City of New York, and that has, or is an affiliate of a bank or trust
     company that has, capital and surplus of at least $50,000,000, necessary
     for such redemption, in trust, with irrevocable instructions that such cash
     be applied to the redemption of the Series I Preferred Shares so called for
     redemption. No interest shall accrue for the benefit of the holders of
     Series I Preferred Shares to be redeemed on any cash so set aside by the
     Trust. Subject to applicable escheat laws, any such cash unclaimed at the
     end of two years from the Redemption Date shall revert to the general funds
     of the Trust, after which reversion the holders of such shares so called
     for redemption shall look only to the general funds of the Trust for the
     payment of such cash.

          As promptly as practicable after the surrender in accordance with such
     notice of the certificates for any such shares so redeemed (properly
     endorsed or assigned for transfer, if the Trust shall so require and if the
     notice shall so state), such shares shall be exchanged for any cash
     (without interest thereon) for which such shares have been redeemed. If
     fewer than all the outstanding Series I Preferred Shares are to be
     redeemed, shares to be redeemed shall be selected by the Trust from
     outstanding Series I Preferred Shares not previously called for redemption
     pro rata (as nearly as may be), by lot or by any other method determined by
     the Trust in its sole discretion to be equitable. If fewer than all the
     Series I Preferred Shares represented by any certificate are redeemed, then
     new certificates representing the unredeemed shares shall be issued without
     cost to the holder thereof.

     (f)  Shares To Be Retired. All Series I Preferred Shares which shall have
been issued and reacquired in any manner by the Trust shall be restored to the
status of authorized but unissued shares of beneficial interest of the Trust,
without designation as to class or series.

     (g)  Ranking. Any class or series of Shares shall be deemed to rank:

          (i)  senior to the Series I Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if the

                                       I-7

<PAGE>

     holders of such class or series are entitled to the receipt of dividends or
     of amounts distributable upon any liquidation, dissolution or winding up of
     the Trust, as the case may be, in preference or priority to the holders of
     Series I Preferred Shares;

          (ii)  on a parity with the Series I Preferred Shares, in the payment
     of dividends and in the distribution of assets upon liquidation,
     dissolution or winding up of the Trust, whether or not the dividend rates,
     dividend payment dates or redemption or liquidation prices per share
     thereof are different from those of the Series I Preferred Shares, if the
     holders of such class or series and the holders of the Series I Preferred
     Shares are entitled to the receipt of dividends and amounts distributable
     upon any liquidation, dissolution or winding up of the Trust in proportion
     to their respective amounts of dividends accrued and unpaid per share or
     liquidation preferences, without preference or priority to each other
     ("Parity Shares"); the Series H Cumulative Convertible Redeemable Preferred
       -------------
     Shares and Series I Cumulative Convertible Redeemable Preferred Shares of
     the Trust are Parity Shares;

          (iii) junior to the Series I Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such class or series is Junior
     Shares; and

          (iv)  junior to the Series I Preferred Shares, in the payment of
     dividends and in the distribution of assets upon liquidation, dissolution
     or winding up of the Trust, if such class or series is Fully Junior Shares.

     (h)  Voting. If and whenever six quarterly dividends (whether or not
consecutive) payable on the Series I Preferred Shares or any series or class of
Parity Shares shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of Trustees then constituting the
Board shall be increased by two and the holders of Series I Preferred Shares,
together with the holders of shares of every other series of Parity Shares (any
such other series, the "Voting Preferred Shares"), voting as a single class
                        -----------------------
regardless of series, shall be entitled to elect the two additional Trustees to
serve on the Board at any annual meeting of shareholders or special meeting held
in place thereof, or at a special meeting of the holders of the Series I
Preferred Shares and the Voting Preferred Shares called as hereinafter provided.
Whenever all arrears in dividends on the Series I Preferred Shares and the
Voting Preferred Shares then outstanding shall have been paid and dividends
thereon for the current quarterly dividend period shall have been paid or
declared and set apart for payment, then the right of the holders of the Series
I Preferred Shares and the Voting Preferred Shares to elect such additional two
Trustees shall cease (but subject always to the same provision for the vesting
of such voting rights in the case of any similar future arrearage in quarterly
dividends), and the terms of office of all persons elected as Trustees by the
holders of the Series I Preferred Shares and the Voting Preferred Shares shall
forthwith terminate and the number of the Board shall be reduced accordingly.

                                       I-8

<PAGE>

At any time after such voting power shall have been so vested in the holders of
Series I Preferred Shares and the Voting Preferred Shares, the Secretary of the
Trust may, and upon the written request of any holder of Series I Preferred
Shares (addressed to the Secretary at the principal office of the Trust) shall,
call a special meeting of the holders of the Series I Preferred Shares and of
the Voting Preferred Shares for the election of the Trustees to be elected by
them as herein provided, such call to be made by notice similar to that provided
in the Bylaws of the Trust for a special meeting of the shareholders or as
required by law. If any such special meeting required to be called as above
provided shall not be called by the Secretary within 20 days after receipt of
any such request, then any holder of Series I Preferred Shares may call such
meeting, upon the notice above provided, and for that purpose shall have access
to the records of the Trust. The Trustees elected at any such special meeting
shall hold office until the next annual meeting of the shareholders or special
meeting held in lieu thereof if such office shall not have previously terminated
as above provided. If any vacancy shall occur among the Trustees elected by the
holders of the Series I Preferred Shares and the Voting Preferred Shares, a
successor shall be elected by the Board, upon the nomination of the
then-remaining Trustee elected by the holders of the Series I Preferred Shares
and the Voting Preferred Shares or the successor of such remaining Trustee, to
serve until the next annual meeting of the shareholders or special meeting held
in place thereof if such office shall not have previously terminated as provided
above.

     So long as any Series I Preferred Shares are outstanding, in addition to
any other vote or consent of shareholders required by law or by the Declaration
of Trust, the affirmative vote of at least 662/3% of the votes entitled to be
cast by the holders of the Series I Preferred Shares given in person or by
proxy, either in writing without a meeting or by vote at any meeting called for
the purpose, shall be necessary for effecting or validating:

          (i)  Any amendment, alteration or repeal of any of the provisions of
     the Declaration of Trust or the By-Laws that materially and adversely
     affects the voting powers, rights or preferences of the holders of the
     Series I Preferred Shares; provided, however, that the amendment of the
     provisions of the Declaration of Trust so as to authorize or create or to
     increase the authorized amount of, any Fully Junior Shares, Junior Shares
     that are not senior in any respect to the Series I Preferred Shares or any
     Parity Shares shall not be deemed to materially adversely affect the voting
     powers, rights or preferences of the holders of Series I Preferred Shares;
     or

          (ii) A share exchange that affects the Series I Preferred Shares, a
     consolidation with or merger of the Trust into another entity, or a
     consolidation with or merger of another entity into the Trust, unless in
     each such case each Series I Preferred Share (A) shall remain outstanding
     without a material and adverse change to its terms and rights or (B) shall
     be converted into or exchanged for convertible preferred shares of the
     surviving entity having preferences, conversion or other rights, voting
     powers, restrictions, limitations as to

                                       I-9

<PAGE>

     dividends, qualifications and terms or conditions of redemption thereof
     identical to that of a Series I Preferred Share (except for changes that do
     not materially and adversely affect the holders of the Series I Preferred
     Shares); or

          (iii)  The authorization, reclassification or creation of, or the
     increase in the authorized amount of, any shares of any class or any
     security convertible into shares of any class ranking senior to the Series
     I Preferred Shares in the distribution of assets on any liquidation,
     dissolution or winding up of the Trust or in the payment of dividends;

provided, however, that no such vote of the holders of Series I Preferred Shares
--------  -------
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such prior shares or
convertible security is to be made, as the case may be, provision is made for
the redemption of all Series I Preferred Shares at the time outstanding. For
purposes of the foregoing provisions, a "share exchange" means a transaction
(including a forward or reverse triangular merger) in which an entity acquires
all the issued or all the outstanding equity securities of one or more classes
of another entity and which does not affect the existence of either entity, and
the term "surviving entity" shall include the entity acquiring equity securities
in a share exchange.

     For purposes of the foregoing provisions of this subsection (h), each
Series I Preferred Share shall have one (1) vote per share, except that when any
other series of preferred Shares shall have the right to vote with the Series I
Preferred Shares as a single class on any matter, then the Series I Preferred
Shares and such other series shall have with respect to such matters one (1)
vote per $25.00 of stated liquidation preference. Except as otherwise required
by applicable law or as set forth herein, the Series I Preferred Shares shall
not have any relative, participating, optional or other special voting rights
and powers other than as set forth herein, and the consent of the holders
thereof shall not be required for the taking of any Trust action.

     (i)  Record Holders. The Trust and the Transfer Agent may deem and treat
the record holder of any Series I Preferred Shares as the true and lawful owner
thereof for all purposes, and neither the Trust nor the Transfer Agent shall be
affected by any notice to the contrary.

                                       I-10

<PAGE>

                                     ANNEX J
                         SERIES J CUMULATIVE CONVERTIBLE
                           REDEEMABLE PREFERRED SHARES

     (a)  Number of Shares and Designation. This class of preferred Shares shall
be designated as Series J Cumulative Convertible Redeemable Preferred Shares and
the number of shares which shall constitute such series shall not be more than
684,931 shares, par value $0.01 per share, which number may be decreased (but
not below the number thereof then outstanding) from time to time by the Board.

     (b)  Definitions. For purposes of the Series J Preferred Shares, the
following terms shall have the meanings indicated:

          "Archstone-Smith Operating Trust" shall mean Archstone-Smith Operating
           -------------------------------
     Trust, a Maryland real estate investment trust, and its successors.

          "Board" shall mean the Board of Trustees or any committee authorized
           -----
     by the Board of Trustees to perform any of its responsibilities with
     respect to the Series J Preferred Shares.

          "Business Day" shall mean any day other than a Saturday, Sunday or a
           ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

          "Call Date" shall mean the date specified in the notice to holders
           ---------
     required under subsection (e)(iv) of this Section 11 as the Call Date.

          "Common Shares" shall mean the common shares of beneficial interest,
           -------------
     par value $0.01 per share, of the Trust.

          "Constituent Person" shall have the meaning set forth in subsection
           ------------------
     (f)(v) of this Section 11.

          "Conversion Price" shall mean the conversion price per Common Share
           ----------------
     for which the Series J Preferred Shares are convertible, as such Conversion
     Price may be adjusted pursuant to subsection (f) of this Section 11. The
     initial conversion price shall be $18.48 (equivalent to a conversion rate
     of 1.975 Common Shares for each Series J Preferred Share).

                                       J-1

<PAGE>

          "Current Market Price" of publicly traded common shares or any other
           --------------------
     class of shares or capital stock or other security of the Trust or any
     other issuer for any day shall mean the last reported sales price, regular
     way on such day, or, if no sale takes place on such day, the average of the
     reported closing bid and asked prices on such day, regular way, in either
     case as reported on the New York Stock Exchange ("NYSE") or, if such
                                                       ----
     security is not listed or admitted for trading on the NYSE, on the
     principal national securities exchange on which such security is listed or
     admitted for trading or, if not listed or admitted for trading on any
     national securities exchange, on the Nasdaq Stock Market ("NASDAQ") or, if
                                                                ------
     such security is not quoted on such National Market System, the average of
     the closing bid and asked prices on such day in the over-the-counter market
     as reported by NASDAQ or, if bid and asked prices for such security on such
     day shall not have been reported through NASDAQ, the average of the bid and
     asked prices on such day as furnished by any NYSE member firm regularly
     making a market in such security selected for such purpose by the Board.

          "Dividend Payment Date" shall mean (i) for any Dividend Period with
           ---------------------
     respect to which the Trust pays a dividend on the Common Shares, the date
     on which such dividend is paid, or (ii) for any Dividend Period with
     respect to which the Trust does not pay a dividend on the Common Shares, a
     date to be set by the Board, which date shall not be later than the
     forty-fifth calendar day after the end of the applicable Dividend Period.

          "Dividend Periods" shall mean quarterly dividend periods commencing on
           ----------------
     January 1, April 1, July 1 and October 1 of each year and ending on and
     including the day preceding the first day of the next succeeding Dividend
     Period (other than the Dividend Period during which any Series J Preferred
     Shares shall be redeemed pursuant to subsection (e) of this Section 11,
     which shall end on and include the Call Date with respect to the Series J
     Preferred Shares being redeemed).

          "Expiration Time" shall have the meaning set forth in subsection
           ---------------
     (f)(iv)(D) of this Section 11.

          "Fair Market Value" shall mean the average of the daily Current Market
           -----------------
     Prices of a Common Share on the five (5) consecutive Trading Days selected
     by the Trust commencing not more than 20 Trading Days before, and ending
     not later than, the earlier of the day in question and the day before the
     "ex date" with respect to the issuance or distribution requiring such
     computation. The term "ex date," when used with respect to any issuance or
     distribution, means the first day on which the Common Shares trade regular
     way, without the

                                       J-2

<PAGE>

     right to receive such issuance or distribution, on the exchange or in the
     market, as the case may be, used to determine that day's Current Market
     Price.

          "Fully Junior Shares" shall mean the Common Shares and any other class
           -------------------
     or series of Shares now or hereafter issued and outstanding over which the
     Series J Preferred Shares have preference or priority in both (i) the
     payment of dividends and (ii) the distribution of assets on any
     liquidation, dissolution or winding up of the Trust.

          "Funds from Operations," for all dates and periods prior to the Issue
           ---------------------
     Date, shall mean net income (loss) (computed in accordance with generally
     accepted accounting principles) excluding gains (or losses) from debt
     restructuring, and distributions in excess of earnings allocated to other
     Smith Operating Partnership interests or minority interests (as reflected
     in the financial statements of Smith Realty) plus depreciation/amortization
     of assets unique to the real estate industry, all computed in a manner
     consistent with the revised definition of Funds From Operations adopted by
     the National Association of Real Estate Investment Trusts ("NAREIT"), in
                                                                 ------
     its White Paper dated March 1995, as such definitions may be modified from
     time to time, as determined by the Trust in good faith. "Funds from
     Operations," for all dates and periods from and after the Issue Date, shall
     mean net income (loss) (computed in accordance with generally accepted
     accounting principles) excluding gains (or losses) from debt restructuring,
     and distributions in excess of earnings allocated to Archstone-Smith
     Operating Trust interests or minority interests (as reflected in the
     financial statements of the Trust) plus depreciation/amortization of assets
     unique to the real estate industry, all computed in a manner consistent
     with the revised definition of Funds From Operations adopted by NAREIT, in
     its White Paper dated March 1995, as such definitions may be modified from
     time to time, as determined by the Trust in good faith.

          "Issue Date" shall mean the date on which the first Series J Preferred
           ----------
     Shares are issued.

          "Junior Shares" shall mean the Common Shares and any other class or
           -------------
     series of Shares now or hereafter issued and outstanding over which the
     Series J Preferred Shares have preference or priority in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust.

          "Non-Electing Share" shall have the meaning set forth in subsection
           ------------------
     (f)(v) of this Section 11.

                                       J-3

<PAGE>

          "Parity Shares" shall have the meaning set forth in subsection (h)(ii)
           -------------
     of this Section 11.

          "Person" shall mean any individual, firm, partnership, corporation,
           ------
     limited liability company or other entity, and shall include any successor
     (by merger or otherwise) of such entity.

          "Purchased Shares" shall have the meaning set forth in subsection
           ----------------
     (f)(iv)(D) of this Section 11.

          "Securities" and "Security" shall have the meanings set forth in
           ----------       --------
     subsection (f)(iv)(C) of this Section 11.

          "Securities Act" shall mean the Securities Act of 1933, as amended.
           --------------

          "Series J Preferred Shares" shall mean the shares of Series J
           -------------------------
     Cumulative Convertible Redeemable Preferred Shares.

          "Set apart for payment" shall be deemed to include, without any action
           --------------------
     other than the following, the recording by the Trust in its accounting
     ledgers of any accounting or bookkeeping entry which indicates, pursuant to
     a declaration of dividends or other distribution by the Board, the
     allocation of funds to be so paid on any series or class of Shares;
     provided, however, that if any funds for any class or series of Junior
     --------  -------
     Shares or any class or series of Shares ranking on a parity with the Series
     J Preferred Shares as to the payment of dividends are placed in a separate
     account of the Trust or delivered to a disbursing, paying or other similar
     agent, then "set apart for payment" with respect to the Series J Preferred
     Shares shall mean placing such funds in a separate account or delivering
     such funds to a disbursing, paying or other similar agent.

          "Shares" shall mean the shares of beneficial interest of the Trust as
           ------
     may be authorized and issued from time to time pursuant to Article II of
     the Declaration of Trust.

          "Smith Operating Partnership" shall mean Charles E. Smith Residential
           ---------------------------
     Realty L.P., formerly a Delaware limited partnership.

                                       J-4

<PAGE>

          "Smith Preferred Shares"shall mean the Series H Preferred Shares,
           ----------------------
     Series I Preferred Shares, Series J Preferred Shares, Series K Preferred
     Shares and Series L Preferred Shares of the Trust or any of the foregoing.

          "Smith Realty" shall mean Charles E. Smith Residential Realty, Inc.,
           ------------
     formerly a Maryland corporation.

          "Trading Day" shall mean any day on which the securities in question
           -----------
     are traded on the NYSE, or if such securities are not listed or admitted
     for trading on the NYSE, on the principal national securities exchange on
     which such securities are listed or admitted, or if not listed or admitted
     for trading on any national securities exchange, on the National Market
     System of NASDAQ, or if such securities are not quoted on such National
     Market System, in the securities market in which the securities are traded.

          "Transaction" shall have the meaning set forth in subsection (f)(v) of
           -----------
     this Section 11.

          "Transfer Agent" shall mean Mellon Investor Services LLC, New York
           --------------
     City, New York, or such other agent or agents of the Trust as may be
     designated by the Board or their designee as the transfer agent, registrar
     and dividend disbursing agent for the Series J Preferred Shares.

          "Voting Preferred Shares" shall have the meaning set forth in
           -----------------------
     subsection (i) of this Section 11.

          "Weighted Average Trading Price" shall mean, for any Trading Day, the
           ------------------------------
     number obtained by dividing (i) the sum of the products, for each sale of
     Common Shares on such Trading Day, of (a) the sale price per Common Share
     and (b) the number of Common Shares sold by (ii) the total number of Common
     Shares sold on such Trading Day.

     (c)  Dividends.

          (i) The holders of Series J Preferred Shares shall be entitled to
     receive, when, as and if declared by the Board, out of funds legally
     available for the payment of dividends, cumulative preferential dividends
     payable in cash in an amount per share equal to the greater of (A) 8.50% of
     the Liquidation Preference per annum (equivalent to $3.1025 per Series J
     Preferred Share) or (B) the ordinary cash dividends (determined on each
     Dividend Payment

                                       J-5

<PAGE>

     Date) on the Common Shares, or portion thereof, into which a Series J
     Preferred Share is convertible. The dividends referred to in clause (B) of
     the preceding sentence shall equal the number of Common Shares, or portion
     thereof, into which a Series J Preferred Share is convertible, multiplied
     by the most current quarterly dividend on a Common Share on or before the
     applicable Dividend Payment Date. If the Trust pays an ordinary cash
     dividend on the Common Shares with respect to a Dividend Period after the
     date on which the Dividend Payment Date is declared pursuant to clause (ii)
     of the definition of Dividend Payment Date and the dividend calculated
     pursuant to clause (B) of this subsection (c)(i) with respect to such
     Dividend Period is greater than the dividend previously declared on the
     Series J Preferred Shares with respect to such Dividend Period, the Trust
     shall pay an additional dividend to the holders of the Series J Preferred
     Shares on the date on which the dividend on the Common Shares is paid, in
     an amount equal to the difference between (y) the dividend calculated
     pursuant to clause (B) of this subsection (c)(i) and (z) the amount of
     dividends previously declared on the Series J Preferred Shares with respect
     to such Dividend Period. The dividends shall begin to accrue and shall be
     fully cumulative from October 1, 2001, whether or not in any Dividend
     Period or Periods there shall be funds of the Trust legally available for
     the payment of such dividends, and shall be payable quarterly, when, as and
     if declared by the Board, in arrears on Dividend Payment Dates. Each such
     dividend shall be payable in arrears to the holders of record of Series J
     Preferred Shares as they appear in the records of the Trust at the close of
     business on such record dates, not less than 10 nor more than 50 days
     preceding such Dividend Payment Dates thereof, as shall be fixed by the
     Board. Accrued and unpaid dividends for any past Dividend Periods may be
     declared and paid at any time and for such interim periods, without
     reference to any regular Dividend Payment Date, to holders of record on
     such date, not less than 10 nor more than 50 days preceding the payment
     date thereof, as may be fixed by the Board. Any dividend payment made on
     Series J Preferred Shares shall first be credited against the earliest
     accrued but unpaid dividend due with respect to Series J Preferred Shares
     which remains payable.

          (ii)  The amount of dividends referred to in clause (A) of subsection
     (c)(i) of this Section 11 payable for each full Dividend Period on the
     Series J Preferred Shares shall be equal to $0.775625. The amount of
     dividends payable for any period shorter than a full Dividend Period on the
     Series J Preferred Shares shall be computed on the basis of a 360-day year
     of twelve 30-day months. Holders of Series J Preferred Shares shall not be
     entitled to any dividends, whether payable in cash, property or shares, in
     excess of cumulative dividends, as herein provided, on the Series J
     Preferred Shares. No interest, or sum of money

                                       J-6

<PAGE>

     in lieu of interest, shall be payable in respect of any dividend payment or
     payments on the Series J Preferred Shares which may be in arrears.

          (iii) So long as any Series J Preferred Shares are outstanding, no
     dividends, except as described in the immediately following sentence, shall
     be declared or paid or set apart for payment on any class or series of
     Parity Shares for any period unless full cumulative dividends have been or
     contemporaneously are declared and paid or declared and a sum sufficient
     for the payment thereof set apart for such payment on the Series J
     Preferred Shares for all Dividend Periods terminating on or prior to the
     dividend payment date on such class or series of Parity Shares. When
     dividends are not paid in full or a sum sufficient for such payment is not
     set apart, as aforesaid, all dividends declared upon Series J Preferred
     Shares and all dividends declared upon any other class or series of Parity
     Shares shall be declared ratably in proportion to the respective amounts of
     dividends accumulated and unpaid on the Series J Preferred Shares and
     accumulated and unpaid on such Parity Shares.

          (iv)  So long as any Series J Preferred Shares are outstanding, no
     dividends (other than dividends or distributions paid solely in shares of,
     or options, warrants or rights to subscribe for or purchase shares of,
     Fully Junior Shares) shall be declared or paid or set apart for payment or
     other distribution shall be declared or made or set apart for payment upon
     Junior Shares, nor shall any Junior Shares be redeemed, purchased or
     otherwise acquired (other than a redemption, purchase or other acquisition
     of Common Shares made for purposes of an employee incentive or benefit plan
     of the Trust or any subsidiary) for any consideration (or any moneys be
     paid to or made available for a sinking fund for the redemption of any
     Junior Shares) by the Trust, directly or indirectly (except by conversion
     into or exchange for Fully Junior Shares), unless in each case (A) the full
     cumulative dividends on all outstanding Series J Preferred Shares and any
     other Parity Shares shall have been or contemporaneously are declared and
     paid or declared and set apart for payment for all past Dividend Periods
     with respect to the Series J Preferred Shares and all past dividend periods
     with respect to such Parity Shares and (B) sufficient funds shall have been
     or contemporaneously are declared and paid or declared and set apart for
     the payment of the dividend for the current Dividend Period with respect to
     the Series J Preferred Shares and the current dividend period with respect
     to such Parity Shares.

          (v)   No distributions on Series J Preferred Shares shall be declared
     by the Board or paid or set apart for payment by the Trust at such time as
     the terms and provisions of any agreement of the Trust, including any
     agreement relating to its indebtedness, prohibits such

                                       J-7

<PAGE>

     declaration, payment or setting apart for payment or provides that such
     declaration, payment or setting apart for payment would constitute a breach
     thereof or a default thereunder, or if such declaration or payment shall be
     restricted or prohibited by law.

     (d)  Liquidation Preference.

          (i)  In the event of any liquidation, dissolution or winding up of the
     Trust, whether voluntary or involuntary, before any payment or distribution
     of the assets of the Trust (whether capital or surplus) shall be made to or
     set apart for the holders of Junior Shares, the holders of the Series J
     Preferred Shares shall be entitled to receive Thirty Six Dollars and Fifty
     Cents ($36.50) (the "Liquidation Preference") per Series J Preferred Share
     plus an amount equal to all dividends (whether or not earned or declared)
     accrued and unpaid thereon to the date of final distribution to such
     holders; but such holders shall not be entitled to any further payment;
     provided, that the dividend payable with respect to the Dividend Period
     --------
     containing the date of final distribution shall be equal to the greater of
     (A) the dividend provided in subsection (c)(i)(A) of this Section 11 or (B)
     the dividend determined pursuant to subsection (c)(i)(B) of this Section 11
     for the preceding Dividend Period. If, upon any liquidation, dissolution or
     winding up of the Trust, the assets of the Trust, or proceeds thereof,
     distributable among the holders of the Series J Preferred Shares shall be
     insufficient to pay in full the preferential amount aforesaid and
     liquidating payments on any other shares of any class or series of Parity
     Shares, then such assets, or the proceeds thereof, shall be distributed
     among the holders of Series J Preferred Shares and any such other Parity
     Shares ratably in accordance with the respective amounts that would be
     payable on such Series J Preferred Shares and any such other Parity Shares
     if all amounts payable thereon were paid in full. For the purposes of this
     subsection (d), (x) a consolidation or merger of the Trust with one or more
     corporations, real estate investment trusts or other entities, (y) a sale,
     lease or conveyance of all or substantially all of the Trust's property or
     business or (z) a statutory share exchange shall not be deemed to be a
     liquidation, dissolution or winding up, voluntary or involuntary, of the
     Trust.

          (ii) Subject to the rights of the holders of shares of any series or
     class or classes of Shares ranking on a parity with or senior to the Series
     J Preferred Shares upon liquidation, dissolution or winding up, upon any
     liquidation, dissolution or winding up of the Trust, after payment shall
     have been made in full to the holders of the Series J Preferred Shares, as
     provided in this subsection (d), any other series or class or classes of
     Junior Shares shall, subject to the respective terms and provisions (if
     any) applying thereto, be entitled to receive

                                       J-8

<PAGE>

     any and all assets remaining to be paid or distributed, and the holders of
     the Series J Preferred Shares shall not be entitled to share therein.

     (e)  Redemption at the Option of the Trust.

          (i)  The Series J Preferred Shares shall not be redeemable by the
     Trust prior to July 13, 2002. On and after July 13, 2002, the Trust, at its
     option, may redeem the Series J Preferred Shares, in whole at any time or
     from time to time in part as set forth herein, subject to the provisions
     described below:

               (A)  Series J Preferred Shares may be redeemed, in whole or in
          part, at the option of the Trust, at any time on or after July 13,
          2002 by issuing and delivering to each holder for each Series J
          Preferred Share to be redeemed such number of authorized but
          previously unissued Common Shares as equals the Liquidation Preference
          (excluding any accumulated, accrued and unpaid dividends which are to
          be paid in cash as provided below) per Series J Preferred Share
          divided by the Conversion Price as in effect as of the opening of
          business on the Call Date; provided, however, that the Trust may
          redeem Series J Preferred Shares pursuant to this subsection (e)(i)(A)
          only if (1) the Weighted Average Trading Price, for twenty (20)
          Trading Days, within the last thirty (30) Trading Days immediately
          before the date of the notice given pursuant to subsection (e)(iv) of
          this Section 11, equals or exceeds 108% of the Conversion Price in
          effect on the date of the notice given pursuant to subsection (e)(iv)
          of this Section 11 and (2) at least 1,000,000 Common Shares were
          traded during such 30 Trading Days.

               (B)  Series J Preferred Shares may be redeemed, in whole or in
          part, at the option of the Trust at any time on or after July 13, 2002
          out of funds legally available therefor at a redemption price payable
          in cash equal to the Liquidation Preference per Series J Preferred
          Share (plus all accumulated, accrued and unpaid dividends as provided
          below).

          (ii) Upon any redemption of Series J Preferred Shares pursuant to this
     subsection (e), the Trust shall pay all accrued and unpaid dividends, if
     any, thereon to the Call Date, without interest. If the Call Date falls
     after a dividend payment record date and prior to the corresponding
     Dividend Payment Date, then each holder of Series J Preferred Shares at the
     close of business on such dividend payment record date shall be entitled to
     the dividend

                                       J-9

<PAGE>

          payable on such shares on the corresponding Dividend Payment Date
          notwithstanding any redemption of such shares before such Dividend
          Payment Date. Except as provided above, the Trust shall make no
          payment or allowance for unpaid dividends, whether or not in arrears,
          on Series J Preferred Shares called for redemption.

               (iii) If full cumulative dividends on the Series J Preferred
          Shares and any other class or series of Parity Shares have not been
          declared and paid or declared and set apart for payment, the Series J
          Preferred Shares may not be redeemed under this subsection (e) in part
          and the Trust may not purchase or acquire Series J Preferred Shares,
          otherwise than pursuant to a purchase or exchange offer made on the
          same terms to all holders of Series J Preferred Shares.

               (iv)  Notice of the redemption of any Series J Preferred Shares
          under this subsection (e) shall be mailed by first-class mail to each
          holder of record of Series J Preferred Shares to be redeemed at the
          address of each such holder as shown on the Trust's records, not less
          than 30 nor more than 90 days prior to the Call Date. Neither the
          failure to mail any notice required by this subsection (e)(iv), nor
          any defect therein or in the mailing thereof, to any particular
          holder, shall affect the sufficiency of the notice or the validity of
          the proceedings for redemption with respect to the other holders. Any
          notice which was mailed in the manner herein provided shall be
          conclusively presumed to have been duly given on the date mailed
          whether or not the holder receives the notice. Each such mailed notice
          shall state, as appropriate: (A) the Call Date; (B) the number of
          Series J Preferred Shares to be redeemed and, if fewer than all the
          shares held by such holder are to be redeemed, the number of such
          shares to be redeemed from such holder; (C) the redemption price if
          the Series J Preferred Shares are redeemed for cash and the number of
          Common Shares to be issued if the Series J Preferred Shares are
          redeemed for Common Shares; (D) the place or places at which
          certificates for such shares are to be surrendered; (E) the
          then-current Conversion Price; and (F) that dividends on the shares to
          be redeemed shall cease to accrue on such Call Date except as
          otherwise provided herein. Notice having been mailed as aforesaid,
          from and after the Call Date (unless the Trust shall fail to make
          available an amount of cash necessary to effect such redemption), (x)
          except as otherwise provided herein, dividends on the Series J
          Preferred Shares so called for redemption shall cease to accrue, (y)
          such shares shall no longer be deemed to be outstanding, and (z) all
          rights of the holders thereof as holders of Series J Preferred Shares
          of the Trust shall cease (except the rights to convert and to receive
          the Common Shares and/or cash payable upon such redemption, without
          interest thereon, upon surrender and endorsement of their certificates

                                      J-10

<PAGE>

          if so required and to receive any dividends payable thereon). The
          Trust's obligation to provide Common Shares and/or cash in accordance
          with the preceding sentence shall be deemed fulfilled if, on or before
          the Call Date, the Trust shall deposit with a bank or trust company
          (which may be an affiliate of the Trust) that has an office in the
          Borough of Manhattan, City of New York, and that has, or is an
          affiliate of a bank or trust company that has, capital and surplus of
          at least $50,000,000, necessary for such redemption, in trust, with
          irrevocable instructions that such Common Shares and/or cash be
          applied to the redemption of the Series J Preferred Shares so called
          for redemption. In the case of any redemption pursuant to subsection
          (e)(i)(A) of this Section 11, at the close of business on the Call
          Date, each holder of Series J Preferred Shares to be redeemed (unless
          the Trust defaults in the delivery of the Common Shares or cash
          payable on such Call Date) shall be deemed to be the record holder of
          the Common Shares into which such Series J Preferred Shares are to be
          converted at redemption, regardless of whether such holder has
          surrendered the certificates representing the Series J Preferred
          Shares to be so redeemed. No interest shall accrue for the benefit of
          the holders of Series J Preferred Shares to be redeemed on any cash so
          set aside by the Trust. Subject to applicable escheat laws, any such
          cash unclaimed at the end of two years from the Call Date shall revert
          to the general funds of the Trust, after which reversion the holders
          of such shares so called for redemption shall look only to the general
          funds of the Trust for the payment of such cash.

               As promptly as practicable after the surrender in accordance with
          such notice of the certificates for any such shares so redeemed
          (properly endorsed or assigned for transfer, if the Trust shall so
          require and if the notice shall so state), such shares shall be
          exchanged for any cash (without interest thereon) for which such
          shares have been redeemed. If fewer than all the outstanding Series J
          Preferred Shares are to be redeemed, shares to be redeemed shall be
          selected by the Trust from outstanding Series J Preferred Shares not
          previously called for redemption pro rata (as nearly as may be), by
          lot or by any other method determined by the Trust in its sole
          discretion to be equitable. If fewer than all the Series J Preferred
          Shares represented by any certificate are redeemed, then new
          certificates representing the unredeemed shares shall be issued
          without cost to the holder thereof.

               (v)  In the case of any redemption pursuant to subsection
          (e)(i)(A) of this Section 11,

                    (A) no fractional Common Shares or scrip representing
               fractions of Common Shares shall be issued upon redemption of the
               Series J Preferred Common

                                      J-11

<PAGE>

          Shares. Instead of any fractional interest in Common Shares that would
          otherwise be deliverable upon redemption of Series J Preferred Shares,
          the Trust shall pay to the holder of such share an amount in cash
          (rounded to the nearest cent) based upon the Current Market Price of
          the Common Shares on the Trading Day immediately preceding the Call
          Date. If more than one Series J Preferred Share shall be surrendered
          for redemption at one time by the same holder, the number of full
          Common Shares issuable upon redemption thereof shall be computed on
          the basis of the aggregate number of Series J Preferred Shares so
          surrendered.

                (B) the Trust covenants that any Common Shares issued upon
          redemption of Series J Preferred Shares shall be validly issued, fully
          paid and non-assessable. The Trust shall endeavor to list the Common
          Shares required to be delivered upon any such redemption of Series J
          Preferred Shares, prior to such redemption, upon each national
          securities exchange, if any, upon which the outstanding Common Shares
          are listed at the time of such delivery.

     (f)  Conversion. Holders of Series J Preferred Shares shall have the right
to convert all or a portion of such shares into Common Shares, as follows:

          (i)   Subject to and upon compliance with the provisions of this
     subsection (f) and the provisions of Section 18A of Article II of the
     Declaration of Trust, a holder of Series J Preferred Shares shall have the
     right, at any time, at his or her option, to convert such shares into the
     number of fully paid and non-assessable Common Shares obtained by dividing
     the aggregate Liquidation Preference of such shares (exclusive of accrued
     but unpaid dividends) by the Conversion Price (as in effect at the time and
     on the date provided for in the last paragraph of subsection (f)(ii) of
     this Section 11) by surrendering such shares to be converted, such
     surrender to be made in the manner provided in subsection (f)(ii) of this
     Section 11; provided, however, that the right to convert shares called for
                 --------  -------
     redemption pursuant to subsection (e) shall terminate at the close of
     business on the fifth Business Day prior to the Call Date fixed for such
     redemption, unless the Trust shall default in making payment of the cash
     payable upon such redemption under subsection (e).

          (ii)  In order to exercise the conversion right, the holder of each
     Series J Preferred Share to be converted shall surrender the certificate
     representing such share, duly endorsed or assigned to the Trust or in
     blank, at the office of the Transfer Agent, accompanied by written notice
     to the Trust that the holder thereof elects to convert such Series J
     Preferred

                                      J-12

<PAGE>

          Shares. Unless the shares issuable on conversion are to be issued in
          the same name as the name in which such Series J Preferred Share is
          registered, each share surrendered for conversion shall be accompanied
          by instruments of transfer, in form satisfactory to the Trust, duly
          executed by the holder or such holder's duly authorized attorney and
          an amount sufficient to pay any transfer or similar tax (or evidence
          reasonably satisfactory to the Trust demonstrating that such taxes
          have been paid).

               Holders of Series J Preferred Shares at the close of business on
          a dividend payment record date shall be entitled to receive the
          dividend payable on such shares on the corresponding Dividend Payment
          Date notwithstanding the conversion thereof following such dividend
          payment record date and prior to such Dividend Payment Date. However,
          Series J Preferred Shares surrendered for conversion during the period
          between the close of business on any dividend payment record date and
          the opening of business on the corresponding Dividend Payment Date
          (except shares converted after the issuance of notice of redemption
          with respect to a Call Date during such period, such Series J
          Preferred Shares being entitled to such dividend on the Dividend
          Payment Date) must be accompanied by payment of an amount equal to the
          dividend payable on such shares on such Dividend Payment Date. A
          holder of Series J Preferred Shares on a dividend payment record date
          who (or whose transferee) tenders any such shares for conversion into
          Common Shares on the corresponding Dividend Payment Date will receive
          the dividend payable by the Trust on such Series J Preferred Shares on
          such date, and the converting holder need not include payment of the
          amount of such dividend upon surrender of Series J Preferred Shares
          for conversion. Except as provided above, the Trust shall make no
          payment or allowance for unpaid dividends, whether or not in arrears,
          on converted shares or for dividends on the Common Shares issued upon
          such conversion.

               As promptly as practicable after the surrender of certificates
          for Series J Preferred Shares as aforesaid, the Trust shall issue and
          shall deliver at such office to such holder, or on his or her written
          order, a certificate or certificates for the number of full Common
          Shares issuable upon the conversion of such shares in accordance with
          provisions of this subsection (f), and any fractional interest in
          respect of a Common Share arising upon such conversion shall be
          settled as provided in subsection (f)(iii) of this Section 11.

               Each conversion shall be deemed to have been effected immediately
          prior to the close of business on the date on which the certificates
          for Series J Preferred Shares shall have been surrendered and such
          notice shall have been received by the Trust as aforesaid (and if

                                      J-13

<PAGE>

          applicable, payment of an amount equal to the dividend payable on such
          shares shall have been received by the Trust as described above), and
          the person or persons in whose name or names any certificate or
          certificates for Common Shares shall be issuable upon such conversion
          shall be deemed to have become the holder or holders of record of the
          shares represented thereby at such time on such date and such
          conversion shall be at the Conversion Price in effect at such time on
          such date unless the share transfer books of the Trust shall be closed
          on that date, in which event such person or persons shall be deemed to
          have become such holder or holders of record at the close of business
          on the next succeeding day on which such share transfer books are
          open, but such conversion shall be at the Conversion Price in effect
          on the date on which such shares shall have been surrendered and such
          notice received by the Trust.

               (iii) No fractional shares or scrip representing fractions of
          Common Shares shall be issued upon conversion of the Series J
          Preferred Shares. Instead of any fractional interest in a Common Share
          that would otherwise be deliverable upon the conversion of a Series J
          Preferred Share, the Trust shall pay to the holder of such share an
          amount in cash based upon the Current Market Price of the Common
          Shares on the Trading Day immediately preceding the date of
          conversion. If more than one Series J Preferred Share shall be
          surrendered for conversion at one time by the same holder, the number
          of full Common Shares issuable upon conversion thereof shall be
          computed on the basis of the aggregate number of Series J Preferred
          Shares so surrendered.

               (iv)  The Conversion Price shall be adjusted from time to time as
          follows:

                     (A) If the Trust shall after the Issue Date (1) pay a
               dividend or make a distribution on its capital shares in Common
               Shares, (2) subdivide its outstanding Common Shares into a
               greater number of shares, (3) combine its outstanding Common
               Shares into a smaller number of shares or (4) issue any Shares by
               reclassification of its Common Shares, the Conversion Price in
               effect at the opening of business on the day following the date
               fixed for the determination of shareholders entitled to receive
               such dividend or distribution or at the opening of business on
               the Business Day next following the day on which such
               subdivision, combination or reclassification becomes effective,
               as the case may be, shall be adjusted so that the holder of any
               Series J Preferred Share thereafter surrendered for conversion
               shall be entitled to receive the number of Common Shares that
               such holder would have owned or have been entitled to receive
               after the happening of any of the events

                                      J-14

<PAGE>

               described above as if such Series J Preferred Shares had been
               converted immediately prior to the record date in the case of a
               dividend or distribution or the effective date in the case of a
               subdivision, combination or reclassification. An adjustment made
               pursuant to this subsection (f)(iv)(A) shall become effective
               immediately after the opening of business on the Business Day
               next following the record date (except as provided in subsection
               (f)(viii) of this Section 11) in the case of a dividend or
               distribution and shall become effective immediately after the
               opening of business on the Business Day next following the
               effective date in the case of a subdivision, combination or
               reclassification.

                     (B) If the Trust shall issue after the Issue Date rights,
               options or warrants to all holders of Common Shares entitling
               them (for a period expiring within 45 days after the record date
               mentioned below) to subscribe for or purchase Common Shares at a
               price per share less than 94% (100% if a stand-by underwriter is
               used and charges the Trust a commission) of the Fair Market Value
               per Common Share on the record date for the determination of
               shareholders entitled to receive such rights, options or
               warrants, then the Conversion Price in effect at the opening of
               business on the Business Day next following such record date
               shall be adjusted to equal the price determined by multiplying
               (1) the Conversion Price in effect immediately prior to the
               opening of business on the Business Day next following the date
               fixed for such determination by (2) a fraction, the numerator of
               which shall be the sum of (x) the number of Common Shares
               outstanding on the close of business on the date fixed for such
               determination and (y) the number of shares that the aggregate
               proceeds to the Trust from the exercise of such rights, options
               or warrants for Common Shares would purchase at 94% of such Fair
               Market Value (or 100% in the case of a stand-by underwriting),
               and the denominator of which shall be the sum of (x) the number
               of Common Shares outstanding on the close of business on the date
               fixed for such determination and (y) the number of additional
               Common Shares offered for subscription or purchase pursuant to
               such rights, options or warrants. Such adjustment shall become
               effective immediately after the opening of business on the day
               next following such record date (except as provided in subsection
               (f)(viii) of this Section 11). In determining whether any rights,
               options or warrants entitle the holders of Common Shares to
               subscribe for or purchase Common Shares at less than 94% of such
               Fair Market Value (or 100% in the case of a stand-by
               underwriting), there shall be taken into account any
               consideration received by the Trust upon

                                      J-15

<PAGE>

               issuance and upon exercise of such rights, options or warrants,
               the value of such consideration, if other than cash, to be
               determined by the Board.

                    (C) If the Trust shall distribute to all holders of its
               Common Shares any securities of the Trust (other than Common
               Shares) or evidence of its indebtedness or assets (excluding
               cumulative cash dividends or distributions paid with respect to
               the Common Shares or the common shares of Smith Realty after
               December 31, 1998 which are not in excess of the following: the
               sum of (1) the cumulative undistributed at December 31, 1998,
               plus (2) the cumulative amount of Funds from Operations, as
               determined by the Board, after December 31, 1998, minus (3) the
               cumulative amount of dividends accrued or paid in respect of the
               Series J Preferred Shares or any other class or series of
               preferred Shares of the Trust or preferred shares of Smith Realty
               after July 2, 1999) or rights, options or warrants to subscribe
               for or purchase any of its securities (excluding those rights,
               options and warrants issued to all holders of Common Shares
               entitling them for a period expiring within 45 days after the
               record date referred to in subsection (f)(iv)(B) of this Section
               11 to subscribe for or purchase Common Shares, which rights and
               warrants are referred to in and treated under subsection
               (f)(iv)(B) of this Section 11) (any of the foregoing being
               hereinafter in this subsection (f)(iv)(C) collectively called the
               "Securities" and individually a "Security"), then in each such
                ----------                      --------
               case the Conversion Price shall be adjusted so that it shall
               equal the price determined by multiplying (x) the Conversion
               Price in effect immediately prior to the close of business on the
               date fixed for the determination of shareholders entitled to
               receive such distribution by (y) a fraction, the numerator of
               which shall be the Fair Market Value per Common Share on the
               record date mentioned below less the then fair market value (as
               determined by the Board, whose determination shall be
               conclusive), of the portion of the Securities or assets or
               evidences of indebtedness so distributed or of such rights,
               options or warrants applicable to one Common Share, and the
               denominator of which shall be the Fair Market Value per Common
               Share on the record date mentioned below. Such adjustment shall
               become effective immediately at the opening of business on the
               Business Day next following (except as provided in subsection
               (f)(viii) of this Section 11) the record date for the
               determination of shareholders entitled to receive such
               distribution. For the purposes of this subsection (f)(iv)(C), the
               distribution of a Security, which is distributed not only to the
               holders of the Common Shares on the date fixed for the
               determination of shareholders entitled to such distribution of
               such Security, but also is distributed with each Common Share
               delivered to a Person

                                      J-16

<PAGE>

               converting a Series J Preferred Share after such determination
               date, shall not require an adjustment of the Conversion Price
               pursuant to this subsection (f)(iv)(C) of this Section 11;
               provided that on the date, if any, on which a person converting a
               --------
               Series J Preferred Share would no longer be entitled to receive
               such Security with a Common Share (other than as a result of the
               termination of all such Securities), a distribution of such
               Securities shall be deemed to have occurred and the Conversion
               Price shall be adjusted as provided in this subsection (f)(iv)(C)
               of this Section 11 (and such day shall be deemed to be "the date
               fixed for the determination of the shareholders entitled to
               receive such distribution" and "the record date" within the
               meaning of the two preceding sentences).

                    (D) In case a tender or exchange offer (which term shall not
               include open market repurchases by the Trust) made by the Trust
               or any subsidiary of the Trust for all or any portion of the
               Common Shares shall expire and such tender or exchange offer
               shall involve the payment by the Trust or such subsidiary of
               consideration per Common Share having a fair market value (as
               determined in good faith by the Board, whose determination shall
               be conclusive and described in a resolution of the Board), at the
               last time (the "Expiration Time") tenders or exchanges may be
                               ---------------
               made pursuant to such tender or exchange offer, that exceeds the
               Current Market Price per Common Share on the Trading Day next
               succeeding the Expiration Time, the Conversion Price shall be
               reduced so that the same shall equal the price determined by
               multiplying the Conversion Price in effect immediately prior to
               the effectiveness of the Conversion Price reduction contemplated
               by this subparagraph, by a fraction of which the numerator shall
               be the number of Common Shares outstanding (including any
               tendered or exchanged shares) at the Expiration Time, multiplied
               by the Current Market Price per Common Share on the Trading Day
               next succeeding the Expiration Time, and the denominator shall be
               the sum of (i) the fair market value (determined as aforesaid) of
               the aggregate consideration payable to shareholders based upon
               the acceptance (up to any maximum specified in the terms of the
               tender or exchange offer) of all shares validly tendered or
               exchanged and not withdrawn as of the Expiration Time (the shares
               deemed so accepted, up to any maximum, being referred to as the
               "Purchased Shares") and (ii) the product of the number of Common
                ----------------
               Shares outstanding (less any Purchased Shares) at the Expiration
               Time and the Current Market Price per Common Share on the Trading
               Day next succeeding the Expiration Time, such reduction to become
               effective immediately prior to the opening of business on the day
               following the Expiration Time.

                                      J-17

<PAGE>

                    (E) No adjustment in the Conversion Price shall be required
               unless such adjustment would require a cumulative increase or
               decrease of at least 1% in such price; provided, however, that
                                                      --------  -------
               any adjustments that by reason of this subsection (f)(iv)(E) are
               not required to be made shall be carried forward and taken into
               account in any subsequent adjustment until made; and provided,
                                                                    --------
               further, that any adjustment shall be required and made in
               -------
               accordance with the provisions of this subsection (f) (other than
               this subsection (f)(iv)(E)) not later than such time as may be
               required in order to preserve the tax-free nature of a
               distribution to the holders of Common Shares. Notwithstanding any
               other provisions of this subsection (f), the Trust shall not be
               required to make any adjustment of the Conversion Price for the
               issuance of any Common Shares pursuant to any plan providing for
               the reinvestment of dividends or interest payable on securities
               of the Trust and the investment of additional optional amounts in
               Common Shares under such plan. All calculations under this
               subsection (f) shall be made to the nearest cent (with $.005
               being rounded upward) or to the nearest one-tenth of a share
               (with .05 of a share being rounded upward), as the case may be.
               Anything in this subsection (f)(iv) to the contrary
               notwithstanding, the Trust shall be entitled, to the extent
               permitted by law, to make such reductions in the Conversion
               Price, in addition to those required by this subsection (f)(iv),
               as it in its discretion shall determine to be advisable in order
               that any share dividends, subdivision of shares, reclassification
               or combination of shares, distribution of rights or warrants to
               purchase shares or securities, or distribution of other assets
               (other than cash dividends) hereafter made by the Trust to its
               shareholders shall not be taxable.

               (v)  If the Trust shall be a party to any transaction (including
          without limitation a merger, consolidation, statutory share exchange,
          self tender offer for all or substantially all of its Common Shares,
          sale of all or substantially all of the Trust's assets or
          recapitalization of the Common Shares and excluding any transaction as
          to which subsection (f)(iv)(A) of this Section 11 applies) (each of
          the foregoing being referred to herein as a "Transaction"), in each
                                                       -----------
          case as a result of which all or substantially all of the Trust's
          Common Shares are converted into the right to receive shares,
          securities or other property (including cash or any combination
          thereof), each Series J Preferred Share which is not redeemed or
          converted into the right to receive shares, securities or other
          property prior to such Transaction shall thereafter be convertible
          into the kind and amount of shares, securities and other property
          (including cash or any combination thereof) receivable upon the
          consummation of such

                                      J-18

<PAGE>

          Transaction by a holder of that number of Common Shares into which one
          Series J Preferred Share was convertible immediately prior to such
          Transaction, assuming such holder of Common Shares (A) is not a Person
          with which the Trust consolidated or into which the Trust merged or
          which merged into the Trust or to which such sale or transfer was
          made, as the case may be ("Constituent Person"), or an affiliate of a
                                     ------------------
          Constituent Person and (B) failed to exercise his rights of election,
          if any, as to the kind or amount of shares, securities and other
          property (including cash) receivable upon such Transaction (provided
          that if the kind or amount of shares, securities and other property
          (including cash) receivable upon such Transaction is not the same for
          each Common Share held immediately prior to such Transaction by other
          than a Constituent Person or an affiliate thereof and in respect of
          which such rights of election shall not have been exercised
          ("Non-Electing Share"), then for the purpose of this subsection (f)(v)
            ------------------
          the kind and amount of shares, securities and other property
          (including cash) receivable upon such Transaction by each Non-Electing
          Share shall be deemed to be the kind and amount so receivable per
          share by a plurality of the Non-Electing Shares). The Trust shall not
          be a party to any Transaction unless the terms of such Transaction are
          consistent with the provisions of this subsection (f)(v), and it shall
          not consent or agree to the occurrence of any Transaction until the
          Trust has entered into an agreement with the successor or purchasing
          entity, as the case may be, for the benefit of the holders of the
          Series J Preferred Shares that will contain provisions enabling the
          holders of the Series J Preferred Shares that remain outstanding after
          such Transaction to convert into the consideration received by holders
          of Common Shares at the Conversion Price in effect immediately prior
          to such Transaction. The provisions of this subsection (f)(v) shall
          similarly apply to successive Transactions.

               (vi)  If:

                     (A) the Trust shall declare a dividend (or any other
               distribution) on its Common Shares (other than cash dividends or
               distributions paid with respect to the Common Shares or the
               common shares of Smith Realty after December 31, 1998 not in
               excess of the sum of the cumulative undistributed Funds from
               Operations at December 31, 1998, plus the cumulative amount of
               Funds from Operations, as determined by the Board, after December
               31, 1998, minus the cumulative amount of dividends accrued or
               paid in respect of the Series J Preferred Shares or any other
               class or series of preferred Shares of the Trust or preferred
               shares of Smith Realty after July 2, 1999); or

                                      J-19

<PAGE>

                     (B) the Trust shall authorize the granting to all holders
               of Common Shares of rights, options or warrants to subscribe for
               or purchase any shares of any class or any other rights, options
               or warrants; or

                     (C) there shall be any reclassification of the Common
               Shares (other than an event to which subsection (f)(iv)(A) of
               this Section 11 applies) or any consolidation or merger to which
               the Trust is a party and for which approval of any shareholders
               of the Trust is required, or a statutory share exchange, or a
               self tender offer by the Trust for all or substantially all of
               its outstanding Common Shares or the sale or transfer of all or
               substantially all of the assets of the Trust as an entirety; or

                     (D) there shall occur the voluntary or involuntary
               liquidation, dissolution or winding up of the Trust;

          then the Trust shall cause to be filed with the Transfer Agent and
          shall cause to be mailed to the holders of Series J Preferred Shares
          at their addresses as shown on the records of the Trust, as promptly
          as possible, but at least 10 days prior to the applicable date
          hereinafter specified, a notice stating (1) the date on which a record
          is to be taken for the purpose of such dividend, distribution or
          granting of rights, options or warrants, or, if a record is not to be
          taken, the date as of which the holders of Common Shares of record to
          be entitled to such dividend, distribution or rights, options or
          warrants are to be determined or (2) the date on which such
          reclassification, consolidation, merger, statutory share exchange,
          sale, transfer, liquidation, dissolution or winding up is expected to
          become effective, and the date as of which it is expected that holders
          of Common Shares of record shall be entitled to exchange their Common
          Shares for securities or other property, if any, deliverable upon such
          reclassification, consolidation, merger, statutory share exchange,
          sale, transfer, liquidation, dissolution or winding up. Failure to
          give or receive such notice or any defect therein shall not affect the
          legality or validity of the proceedings described in this subsection
          (f).

               (vii) Whenever the Conversion Price is adjusted as herein
          provided, the Trust shall promptly file with the Transfer Agent an
          officer's certificate setting forth the Conversion Price after such
          adjustment and setting forth a brief statement of the facts requiring
          such adjustment which certificate shall be conclusive evidence of the
          correctness of such adjustment absent manifest error. Promptly after
          delivery of such certificate, the Trust shall prepare a notice of such
          adjustment of the Conversion Price setting forth the adjusted
          Conversion Price and the effective date of such

                                      J-20

<PAGE>

          adjustment and shall mail such notice of such adjustment of the
          Conversion Price to the holder of each Series J Preferred Share at
          such holder's last address as shown on the records of the Trust.

               (viii) In any case in which subsection (f)(iv) of this Section 11
          provides that an adjustment shall become effective on the day next
          following the record date for an event, the Trust may defer until the
          occurrence of such event (A) issuing to the holder of any Series J
          Preferred Share converted after such record date and before the
          occurrence of such event the additional Common Shares issuable upon
          such conversion by reason of the adjustment required by such event
          over and above the Common Shares issuable upon such conversion before
          giving effect to such adjustment and (B) paying to such holder any
          amount of cash in lieu of any fraction pursuant to subsection (f)(iii)
          of this Section 11.

               (ix)   There shall be no adjustment of the Conversion Price in
          case of the issuance of any Shares in a reorganization, acquisition or
          other similar transaction except as specifically set forth in this
          subsection (f). If any action or transaction would require adjustment
          of the Conversion Price pursuant to more than one paragraph of this
          subsection (f), only one adjustment shall be made and such adjustment
          shall be the amount of adjustment that has the highest absolute value.

               (x)    If the Trust shall take any action affecting the Common
          Shares, other than action described in this subsection (f), that in
          the opinion of the Board would materially and adversely affect the
          conversion rights of the holders of the Series J Preferred Shares, the
          Conversion Price for the Series J Preferred Shares may be adjusted, to
          the extent permitted by law, in such manner, if any, and at such time,
          as the Board, in its sole discretion, may determine to be equitable in
          the circumstances.

               (xi)   The Trust covenants that it will at all times reserve and
          keep available, free from preemptive rights, out of the aggregate of
          its authorized but unissued Common Shares, for the purpose of
          effecting conversion of the Series J Preferred Shares, the full number
          of Common Shares deliverable upon the conversion of all outstanding
          Series J Preferred Shares not theretofore converted. For purposes of
          this subsection (f)(xi), the number of Common Shares that shall be
          deliverable upon the conversion of all outstanding Series J Preferred
          Shares shall be computed as if at the time of computation all such
          outstanding shares were held by a single holder.

                                      J-21

<PAGE>

               The Trust covenants that any Common Shares issued upon conversion
          of the Series J Preferred Shares shall be validly issued, fully paid
          and non-assessable. Before taking any action that would cause an
          adjustment reducing the Conversion Price below the then-par value of
          the Common Shares deliverable upon conversion of the Series J
          Preferred Shares, the Trust will take any action that, in the opinion
          of its counsel, may be necessary in order that the Trust may validly
          and legally issue fully paid and (subject to any customary
          qualification based upon the nature of a real estate investment trust)
          non-assessable Common Shares at such adjusted Conversion Price.

               The Trust shall endeavor to list the Common Shares required to be
          delivered upon conversion of the Series J Preferred Shares, prior to
          such delivery, upon each national securities exchange, if any, upon
          which the outstanding Common Shares are listed at the time of such
          delivery.

               The Trust shall endeavor to comply with all federal and state
          securities laws and regulations thereunder in connection with the
          issuance of any securities that the Trust shall be obligated to
          deliver upon conversion of the Series J Preferred Shares. In addition
          to any legend required by Section 18A of Article II of the Declaration
          of Trust, the certificates evidencing such securities shall bear such
          legends restricting transfer thereof in the absence of registration
          under applicable securities laws or an exemption therefrom as the
          Trust may in good faith deem appropriate.

               (xii) The Trust will pay any and all documentary stamp or similar
          issue or transfer taxes payable in respect of the issue or delivery of
          Common Shares or other securities or property on conversion of the
          Series J Preferred Shares pursuant hereto; provided, however, that the
                                                     --------  -------
          Trust shall not be required to pay any tax that may be payable in
          respect of any transfer involved in the issue or delivery of Common
          Shares or other securities or property in a name other than that of
          the holder of the Series J Preferred Shares to be converted, and no
          such issue or delivery shall be made unless and until the person
          requesting such issue or delivery has paid to the Trust the amount of
          any such tax or established, to the reasonable satisfaction of the
          Trust, that such tax has been paid.

          (g)  Shares To Be Retired. All Series J Preferred Shares which shall
have been issued and reacquired in any manner by the Trust shall be restored to
the status of authorized but unissued shares of beneficial interest of the
Trust, without designation as to class or series.

                                      J-22

<PAGE>

          (h)  Ranking. Any class or series of Shares shall be deemed to rank:

               (i)   senior to the Series J Preferred Shares, in the payment of
          dividends or in the distribution of assets upon any liquidation,
          dissolution or winding up of the Trust, if the holders of such class
          or series are entitled to the receipt of dividends or of amounts
          distributable upon any liquidation, dissolution or winding up of the
          Trust, as the case may be, in preference or priority to the holders of
          Series J Preferred Shares;

               (ii)  on a parity with the Series J Preferred Shares, in the
          payment of dividends and in the distribution of assets upon any
          liquidation, dissolution or winding up of the Trust, whether or not
          the dividend rates, dividend payment dates or redemption or
          liquidation prices per share thereof are different from those of the
          Series J Preferred Shares, if the holders of such class or series and
          the holders of Series J Preferred Shares are entitled to the receipt
          of dividends and amounts distributable upon any liquidation,
          dissolution or winding up of the Trust in proportion to their
          respective amounts of dividends accrued and unpaid per share or
          liquidation preferences, without preference or priority to each other
          ("Parity Shares");
            -------------

               (iii) junior to the Series J Preferred Shares, in the payment of
          dividends or in the distribution of assets upon any liquidation,
          dissolution or winding up of the Trust, if such class or series is
          Junior Shares; and

               (iv)  junior to the Series J Preferred Shares, in the payment of
          dividends and in the distribution of assets upon any liquidation,
          dissolution or winding up of the Trust, if such class or series is
          Fully Junior Shares.

          (i)  Voting. If and whenever four quarterly dividends (whether or not
consecutive) payable on the Series J Preferred Shares or any series or class of
Parity Shares shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of Trustees then constituting the
Board shall be increased by two and the holders of Series J Preferred Shares,
together with the holders of shares of every other series of Parity Shares (any
such other series, the "Voting Preferred Shares"), voting as a single class
                        -----------------------
regardless of series, shall be entitled to elect the two additional Trustees to
serve on the Board at any annual meeting of shareholders or special meeting held
in place thereof, or at a special meeting of the holders of the Series J
Preferred Shares and the Voting Preferred Shares called as hereinafter provided.
Whenever all arrears in dividends on the Series J Preferred Shares and the
Voting Preferred Shares then outstanding shall have been paid and dividends
thereon for the

                                      J-23

<PAGE>

current quarterly dividend period shall have been paid or declared and set apart
for payment, then the right of the holders of the Series J Preferred Shares and
the Voting Preferred Shares to elect such additional two Trustees shall cease
(but subject always to the same provision for the vesting of such voting rights
in the case of any similar future arrearage in quarterly dividends), and the
terms of office of all persons elected as Trustees by the holders of the Series
J Preferred Shares and the Voting Preferred Shares shall forthwith terminate and
the number of the Board shall be reduced accordingly. At any time after such
voting power shall have been so vested in the holders of Series J Preferred
Shares and the Voting Preferred Shares, the Secretary of the Trust may, and upon
the written request of any holder of Series J Preferred Shares (addressed to the
Secretary at the principal office of the Trust) shall, call a special meeting of
the holders of the Series J Preferred Shares and of the Voting Preferred Shares
for the election of the Trustees to be elected by them as herein provided, such
call to be made by notice similar to that provided in the Bylaws of the Trust
for a special meeting of the shareholders or as required by law. If any such
special meeting required to be called as above provided shall not be called by
the Secretary within 20 days after receipt of any such request, then any holder
of Series J Preferred Shares may call such meeting, upon the notice above
provided, and for that purpose shall have access to the records of the Trust.
The Trustees elected at any such special meeting shall hold office until the
next annual meeting of the shareholders or special meeting held in lieu thereof
if such office shall not have previously terminated as above provided. If any
vacancy shall occur among the Trustees elected by the holders of the Series J
Preferred Shares and the Voting Preferred Shares, a successor shall be elected
by the Board, upon the nomination of the then-remaining Trustee elected by the
holders of the Series J Preferred Shares and the Voting Preferred Shares or the
successor of such remaining Trustee, to serve until the next annual meeting of
the shareholders or special meeting held in place thereof if such office shall
not have previously terminated as provided above.

          So long as any Series J Preferred Shares are outstanding, in addition
to any other vote or consent of shareholders required by law or by the
Declaration of Trust, the affirmative vote of at least 662/3% of the votes
entitled to be cast by the holders of the Series J Preferred Shares given in
person or by proxy, either in writing without a meeting or by vote at any
meeting called for the purpose, shall be necessary for effecting or validating:

               (i)  Any amendment, alteration or repeal of any of the provisions
          of the Declaration of Trust or the By-Laws that materially and
          adversely affects the voting powers, rights or preferences of the
          holders of the Series J Preferred Shares; provided, however, that the
          amendment of the provisions of the Declaration of Trust so as to
          authorize or create or to increase the authorized amount of, any Fully
          Junior Shares, Junior Shares that are not

                                      J-24

<PAGE>

     senior in any respect to the Series J Preferred Shares or any Parity Shares
     shall not be deemed to materially adversely affect the voting powers,
     rights or preferences of the holders of Series J Preferred Shares; or

          (ii)  A share exchange that affects the Series J Preferred Shares, a
     consolidation with or merger of the Trust into another entity, or a
     consolidation with or merger of another entity into the Trust, unless in
     each such case each Series J Preferred Share (A) shall remain outstanding
     without a material and adverse change to its terms and rights or (B) shall
     be converted into or exchanged for convertible preferred shares of the
     surviving entity having preferences, conversion or other rights, voting
     powers, restrictions, limitations as to dividends, qualifications and terms
     or conditions of redemption thereof identical to that of a Series J
     Preferred Share (except for changes that do not materially and adversely
     affect the holders of the Series J Preferred Shares); or

          (iii) The authorization, reclassification or creation of, or the
     increase in the authorized amount of, any shares of any class or any
     security convertible into shares of any class ranking senior to the Series
     J Preferred Shares in the distribution of assets on any liquidation,
     dissolution or winding up of the Trust or in the payment of dividends;

provided, however, that no such vote of the holders of Series J Preferred Shares
--------  -------
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such prior shares or
convertible security is to be made, as the case may be, provision is made for
the redemption of all Series J Preferred Shares at the time outstanding to the
extent such redemption is authorized by subsection (e) of this Section 11. For
purposes of the foregoing provisions, a "share exchange" means a transaction
(including a forward or reverse triangular merger) in which an entity acquires
all the issued or all the outstanding equity securities of one or more classes
of another entity and which does not affect the existence of either entity, and
the term "surviving entity" shall include the entity acquiring equity securities
in a share exchange.

     For purposes of the foregoing provisions of this subsection (i), each
Series J Preferred Share shall have one (1) vote per share, except that when any
other series of preferred Shares shall have the right to vote with the Series J
Preferred Shares as a single class on any matter, then the Series J Preferred
Shares and such other series shall have with respect to such matters one (1)
vote per $25.00 of stated liquidation preference. Except as otherwise required
by applicable law or as set forth herein, the Series J Preferred Shares shall
not have any relative, participating, optional or other

                                      J-25

<PAGE>

special voting rights and powers other than as set forth herein, and the consent
of the holders thereof shall not be required for the taking of any Trust action.

     (j) Record Holders. The Trust and the Transfer Agent may deem and treat the
record holder of any Series J Preferred Shares as the true and lawful owner
thereof for all purposes, and neither the Trust nor the Transfer Agent shall be
affected by any notice to the contrary.

                                      J-26

<PAGE>

                                     ANNEX K
                         SERIES K CUMULATIVE CONVERTIBLE
                           REDEEMABLE PREFERRED SHARES

     (a) Number of Shares and Designation. This class of preferred Shares shall
be designated as Series K Cumulative Convertible Redeemable Preferred Shares and
the number of shares which shall constitute such series shall not be more than
666,667 shares, par value $0.01 per share, which number may be decreased (but
not below the number thereof then outstanding) from time to time by the Board.

     (b) Definitions. For purposes of the Series K Preferred Shares, the
following terms shall have the meanings indicated:

          "Archstone-Smith Operating Trust" shall mean Archstone-Smith Operating
           -------------------------------
     Trust, a Maryland real estate investment trust, and its successors.

          "Board" shall mean the Board of Trustees or any committee authorized
           -----
     by the Board of Trustees to perform any of its responsibilities with
     respect to the Series K Preferred Shares.

          "Business Day" shall mean any day other than a Saturday, Sunday or a
           ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

          "Call Date" shall mean the date specified in the notice to holders
           ---------
     required under subsection (e)(iv) of this Section 12 as the Call Date.

          "Common Shares" shall mean the common shares of beneficial interest,
           -------------
     par value $0.01 per share, of the Trust.

          "Constituent Person" shall have the meaning set forth in subsection
           ------------------
     (f)(v) of this Section 12.

          "Conversion Price" shall mean the conversion price per Common Share
           ----------------
     for which the Series K Preferred Shares are convertible, as such Conversion
     Price may be adjusted

                                       K-1

<PAGE>

     pursuant to subsection (f) of this Section 12. The initial conversion price
     shall be $18.99 (equivalent to a conversion rate of 1.975 Common Shares for
     each Series K Preferred Share).

          "Current Market Price" of publicly traded common shares or any other
           --------------------
     class of shares or capital stock or other security of the Trust or any
     other issuer for any day shall mean the last reported sales price, regular
     way on such day, or, if no sale takes place on such day, the average of the
     reported closing bid and asked prices on such day, regular way, in either
     case as reported on the New York Stock Exchange ("NYSE") or, if such
                                                       ----
     security is not listed or admitted for trading on the NYSE, on the
     principal national securities exchange on which such security is listed or
     admitted for trading or, if not listed or admitted for trading on any
     national securities exchange, on the Nasdaq Stock Market ("NASDAQ") or, if
                                                                ------
     such security is not quoted on such National Market System, the average of
     the closing bid and asked prices on such day in the over-the-counter market
     as reported by NASDAQ or, if bid and asked prices for such security on such
     day shall not have been reported through NASDAQ, the average of the bid and
     asked prices on such day as furnished by any NYSE member firm regularly
     making a market in such security selected for such purpose by the Board.

          "Dividend Payment Date" shall mean (i) for any Dividend Period with
           ---------------------
     respect to which the Trust pays a dividend on the Common Shares, the date
     on which such dividend is paid, or (ii) for any Dividend Period with
     respect to which the Trust does not pay a dividend on the Common Shares, a
     date to be set by the Board, which date shall not be later than the
     forty-fifth calendar day after the end of the applicable Dividend Period.

          "Dividend Periods" shall mean quarterly dividend periods commencing on
           ----------------
     January 1, April 1, July 1 and October 1 of each year and ending on and
     including the day preceding the first day of the next succeeding Dividend
     Period (other than the Dividend Period during which any Series K Preferred
     Shares shall be redeemed pursuant to subsection (e) of this Section 12,
     which shall end on and include the Call Date with respect to the Series K
     Preferred Shares being redeemed).

          "Expiration Time" shall have the meaning set forth in subsection
           ---------------
     (f)(iv)(D) of this Section 12.

          "Fair Market Value" shall mean the average of the daily Current Market
           -----------------
     Prices of a Common Share on the five (5) consecutive Trading Days selected
     by the Trust commencing not more than 20 Trading Days before, and ending
     not later than, the earlier of the day in

                                       K-2

<PAGE>

     question and the day before the "ex date" with respect to the issuance or
     distribution requiring such computation. The term "ex date," when used with
     respect to any issuance or distribution, means the first day on which the
     Common Shares trade regular way, without the right to receive such issuance
     or distribution, on the exchange or in the market, as the case may be, used
     to determine that day's Current Market Price.

               "Fully Junior Shares" shall mean the Common Shares and any other
                -------------------
     class or series of Shares now or hereafter issued and outstanding over
     which the Series K Preferred Shares have preference or priority in both (i)
     the payment of dividends and (ii) the distribution of assets on any
     liquidation, dissolution or winding up of the Trust.

               "Funds from Operations," for all dates and periods prior to the
                ---------------------
     Issue Date, shall mean net income (loss) (computed in accordance with
     generally accepted accounting principles) excluding gains (or losses) from
     debt restructuring, and distributions in excess of earnings allocated to
     other Smith Operating Partnership interests or minority interests (as
     reflected in the financial statements of Smith Realty) plus
     depreciation/amortization of assets unique to the real estate industry, all
     computed in a manner consistent with the revised definition of Funds From
     Operations adopted by the National Association of Real Estate Investment
     Trusts ("NAREIT"), in its White Paper dated March 1995, as such definitions
              ------
     may be modified from time to time, as determined by the Trust in good
     faith. "Funds from Operations," for all dates and periods from and after
     the Issue Date, shall mean net income (loss) (computed in accordance with
     generally accepted accounting principles) excluding gains (or losses) from
     debt restructuring, and distributions in excess of earnings allocated to
     Archstone-Smith Operating Trust interests or minority interests (as
     reflected in the financial statements of the Trust) plus
     depreciation/amortization of assets unique to the real estate industry, all
     computed in a manner consistent with the revised definition of Funds From
     Operations adopted by NAREIT, in its White Paper dated March 1995, as such
     definitions may be modified from time to time, as determined by the Trust
     in good faith.

               "Issue Date" shall mean the date on which the first Series K
                ----------
     Preferred Shares are issued.

               "Junior Shares" shall mean the Common Shares and any other class
                -------------
     or series of Shares now or hereafter issued and outstanding over which the
     Series K Preferred Shares have preference or priority in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust.

                                       K-3

<PAGE>

          "Non-Electing Share" shall have the meaning set forth in subsection
           ------------------
     (f)(v) of this Section 12. "Parity Shares" shall have the meaning set forth
     in subsection (h)(ii) of this Section 12.

          "Person" shall mean any individual, firm, partnership, corporation,
           ------
     limited liability company or other entity, and shall include any successor
     (by merger or otherwise) of such entity.

          "Purchased Shares" shall have the meaning set forth in subsection
           ----------------
     (f)(iv)(D) of this Section 12.

          "Securities" and "Security" shall have the meanings set forth in
           -------------------------
     subsection (f)(iv)(C) of this Section 12.

          "Securities Act" shall mean the Securities Act of 1933, as amended.
           --------------

          "Series K Preferred Shares" shall mean the shares of Series K
           -------------------------
     Cumulative Convertible Redeemable Preferred Shares.

          "Set apart for payment" shall be deemed to include, without any action
           ---------------------
     other than the following, the recording by the Trust in its accounting
     ledgers of any accounting or bookkeeping entry which indicates, pursuant to
     a declaration of dividends or other distribution by the Board, the
     allocation of funds to be so paid on any series or class of Shares;
     provided, however, that if any funds for any class or series of Junior
     --------  -------
     Shares or any class or series of Shares ranking on a parity with the Series
     K Preferred Shares as to the payment of dividends are placed in a separate
     account of the Trust or delivered to a disbursing, paying or other similar
     agent, then "set apart for payment" with respect to the Series K Preferred
     Shares shall mean placing such funds in a separate account or delivering
     such funds to a disbursing, paying or other similar agent.

          "Shares" shall mean the shares of beneficial interest of the Trust as
           ------
     may be authorized and issued from time to time pursuant to Article II of
     the Declaration of Trust.

                                       K-4

<PAGE>

          "Smith Operating Partnership" shall mean Charles E. Smith Residential
           ---------------------------
     Realty L.P., formerly a Delaware limited partnership.

          "Smith Preferred Shares" shall mean the Series H Preferred Shares,
           ----------------------
     Series I Preferred Shares, Series J Preferred Shares, Series K Preferred
     Shares and Series L Preferred Shares of the Trust or any of the foregoing.

          "Smith Realty" shall mean Charles E. Smith Residential Realty, Inc.,
           ------------
     formerly a Maryland corporation.

          "Trading Day" shall mean any day on which the securities in question
           -----------
     are traded on the NYSE, or if such securities are not listed or admitted
     for trading on the NYSE, on the principal national securities exchange on
     which such securities are listed or admitted, or if not listed or admitted
     for trading on any national securities exchange, on the National Market
     System of NASDAQ, or if such securities are not quoted on such National
     Market System, in the securities market in which the securities are traded.

          "Transaction" shall have the meaning set forth in subsection (f)(v) of
           -----------
     this Section 12.

          "Transfer Agent" shall mean Mellon Investor Services LLC, New York
           --------------
     City, New York, or such other agent or agents of the Trust as may be
     designated by the Board or their designee as the transfer agent, registrar
     and dividend disbursing agent for the Series K Preferred Shares.

          "Voting Preferred Shares" shall have the meaning set forth in
           -----------------------
     subsection (i) of this Section 12.

          "Weighted Average Trading Price" shall mean, for any Trading Day, the
           ------------------------------
     number obtained by dividing (i) the sum of the products, for each sale of
     Common Shares on such Trading Day, of (a) the sale price per Common Share
     and (b) the number of Common Shares sold by (ii) the total number of Common
     Shares sold on such Trading Day.

     (c)  Dividends.

          (i) The holders of Series K Preferred Shares shall be entitled to
     receive, when, as and if declared by the Board, out of funds legally
     available for the payment of dividends,

                                       K-5

<PAGE>

     cumulative preferential dividends payable in cash in an amount per share
     equal to the greater of (A) 8.50% of the Liquidation Preference per annum
     (equivalent to $3.1875 per Series K Preferred Share) or (B) the ordinary
     cash dividends (determined on each Dividend Payment Date) on the Common
     Shares, or portion thereof, into which a Series K Preferred Share is
     convertible. The dividends referred to in clause (B) of the preceding
     sentence shall equal the number of Common Shares, or portion thereof, into
     which a Series K Preferred Share is convertible, multiplied by the most
     current quarterly dividend on a Common Share on or before the applicable
     Dividend Payment Date. If the Trust pays an ordinary cash dividend on the
     Common Shares with respect to a Dividend Period after the date on which the
     Dividend Payment Date is declared pursuant to clause (ii) of the definition
     of Dividend Payment Date and the dividend calculated pursuant to clause (B)
     of this subsection (c)(i) with respect to such Dividend Period is greater
     than the dividend previously declared on the Series K Preferred Shares with
     respect to such Dividend Period, the Trust shall pay an additional dividend
     to the holders of the Series K Preferred Shares on the date on which the
     dividend on the Common Shares is paid, in an amount equal to the difference
     between (y) the dividend calculated pursuant to clause (B) of this
     subsection (c)(i) and (z) the amount of dividends previously declared on
     the Series K Preferred Shares with respect to such Dividend Period. The
     dividends shall begin to accrue and shall be fully cumulative from October
     1, 2001, whether or not in any Dividend Period or Periods there shall be
     funds of the Trust legally available for the payment of such dividends, and
     shall be payable quarterly, when, as and if declared by the Board, in
     arrears on Dividend Payment Dates. Each such dividend shall be payable in
     arrears to the holders of record of Series K Preferred Shares as they
     appear in the records of the Trust at the close of business on such record
     dates, not less than 10 nor more than 50 days preceding such Dividend
     Payment Dates thereof, as shall be fixed by the Board. Accrued and unpaid
     dividends for any past Dividend Periods may be declared and paid at any
     time and for such interim periods, without reference to any regular
     Dividend Payment Date, to holders of record on such date, not less than 10
     nor more than 50 days preceding the payment date thereof, as may be fixed
     by the Board. Any dividend payment made on Series K Preferred Shares shall
     first be credited against the earliest accrued but unpaid dividend due with
     respect to Series K Preferred Shares which remains payable.

          (ii) The amount of dividends referred to in subsection (c)(i)(A)
     payable for each full Dividend Period on the Series K Preferred Shares
     shall be computed by dividing the annual dividend rate by four. The amount
     of dividends payable for any period shorter than a full Dividend Period on
     the Series K Preferred Shares shall be computed on the basis of a 360-day
     year of twelve 30-day months. Holders of Series K Preferred Shares shall
     not be

                                       K-6

<PAGE>

     entitled to any dividends, whether payable in cash, property or shares, in
     excess of cumulative dividends, as herein provided, on the Series K
     Preferred Shares. No interest, or sum of money in lieu of interest, shall
     be payable in respect of any dividend payment or payments on the Series K
     Preferred Shares which may be in arrears.

          (iii) So long as any Series K Preferred Shares are outstanding, no
     dividends, except as described in the immediately following sentence, shall
     be declared or paid or set apart for payment on any class or series of
     Parity Shares for any period unless full cumulative dividends have been or
     contemporaneously are declared and paid or declared and a sum sufficient
     for the payment thereof set apart for such payment on the Series K
     Preferred Shares for all Dividend Periods terminating on or prior to the
     dividend payment date on such class or series of Parity Shares. When
     dividends are not paid in full or a sum sufficient for such payment is not
     set apart, as aforesaid, all dividends declared upon Series K Preferred
     Shares and all dividends declared upon any other class or series of Parity
     Shares shall be declared ratably in proportion to the respective amounts of
     dividends accumulated and unpaid on the Series K Preferred Shares and
     accumulated and unpaid on such Parity Shares.

          (iv)  So long as any Series K Preferred Shares are outstanding, no
     dividends (other than dividends or distributions paid solely in shares of,
     or options, warrants or rights to subscribe for or purchase shares of,
     Fully Junior Shares) shall be declared or paid or set apart for payment or
     other distribution shall be declared or made or set apart for payment upon
     Junior Shares, nor shall any Junior Shares be redeemed, purchased or
     otherwise acquired (other than a redemption, purchase or other acquisition
     of Common Shares made for purposes of an employee incentive or benefit plan
     of the Trust or any subsidiary) for any consideration (or any moneys be
     paid to or made available for a sinking fund for the redemption of any
     Junior Shares) by the Trust, directly or indirectly (except by conversion
     into or exchange for Fully Junior Shares), unless in each case (A) the full
     cumulative dividends on all outstanding Series K Preferred Shares and any
     other Parity Shares shall have been or contemporaneously are declared and
     paid or declared and set apart for payment for all past Dividend Periods
     with respect to the Series K Preferred Shares and all past dividend periods
     with respect to such Parity Shares and (B) sufficient funds shall have been
     or contemporaneously are declared and paid or declared and set apart for
     the payment of the dividend for the current Dividend Period with respect to
     the Series K Preferred Shares and the current dividend period with respect
     to such Parity Shares.

                                       K-7

<PAGE>

          (v)  No distributions on Series K Preferred Shares shall be declared
     by the Board or paid or set apart for payment by the Trust at such time as
     the terms and provisions of any agreement of the Trust, including any
     agreement relating to its indebtedness, prohibits such declaration, payment
     or setting apart for payment or provides that such declaration, payment or
     setting apart for payment would constitute a breach thereof or a default
     thereunder, or if such declaration or payment shall be restricted or
     prohibited by law.

     (d)  Liquidation Preference.

          (i)  In the event of any liquidation, dissolution or winding up of the
     Trust, whether voluntary or involuntary, before any payment or distribution
     of the assets of the Trust (whether capital or surplus) shall be made to or
     set apart for the holders of Junior Shares, the holders of the Series K
     Preferred Shares shall be entitled to receive Thirty Seven Dollars and
     Fifty Cents ($37.50) (the "Liquidation Preference") per Series K Preferred
     Share plus an amount equal to all dividends (whether or not earned or
     declared) accrued and unpaid thereon to the date of final distribution to
     such holders; but such holders shall not be entitled to any further
     payment; provided, that the dividend payable with respect to the Dividend
              --------
     Period containing the date of final distribution shall be equal to the
     greater of (A) the dividend provided in subsection (c)(i)(A) of this
     Section 12 or (ii) the dividend determined pursuant to subsection (c)(i)(B)
     of this Section 12 for the preceding Dividend Period. If, upon any
     liquidation, dissolution or winding up of the Trust, the assets of the
     Trust, or proceeds thereof, distributable among the holders of the Series K
     Preferred Shares shall be insufficient to pay in full the preferential
     amount aforesaid and liquidating payments on any other shares of any class
     or series of Parity Shares, then such assets, or the proceeds thereof,
     shall be distributed among the holders of Series K Preferred Shares and any
     such other Parity Shares ratably in accordance with the respective amounts
     that would be payable on such Series K Preferred Shares and any such other
     Parity Shares if all amounts payable thereon were paid in full. For the
     purposes of this subsection (d), (x) a consolidation or merger of the Trust
     with one or more corporations, real estate investment trusts or other
     entities, (y) a sale, lease or conveyance of all or substantially all of
     the Trust's property or business or (z) a statutory share exchange shall
     not be deemed to be a liquidation, dissolution or winding up, voluntary or
     involuntary, of the Trust.

          (ii) Subject to the rights of the holders of shares of any series or
     class or classes of Shares ranking on a parity with or senior to the Series
     K Preferred Shares upon liquidation, dissolution or winding up, upon any
     liquidation, dissolution or winding up of the

                                       K-8

<PAGE>

     Trust, after payment shall have been made in full to the holders of the
     Series K Preferred Shares, as provided in this subsection (d), any other
     series or class or classes of Junior Shares shall, subject to the
     respective terms and provisions (if any) applying thereto, be entitled to
     receive any and all assets remaining to be paid or distributed, and the
     holders of the Series K Preferred Shares shall not be entitled to share
     therein.

     (e)  Redemption at the Option of the Trust.

          (i)  The Series K Preferred Shares shall not be redeemable by the
     Trust prior to October 1, 2004. On and after October 1, 2004, the Trust, at
     its option, may redeem the Series K Preferred Shares, in whole at any time
     or from time to time in part as set forth herein, subject to the provisions
     described below:

               (A) Series K Preferred Shares may be redeemed, in whole or in
          part, at the option of the Trust, at any time on or after October 1,
          2004 by issuing and delivering to each holder for each Series K
          Preferred Share to be redeemed such number of authorized but
          previously unissued Common Shares as equals the Liquidation Preference
          (excluding any accumulated, accrued and unpaid dividends which are to
          be paid in cash as provided below) per Series K Preferred Share
          divided by the Conversion Price as in effect as of the opening of
          business on the Call Date; provided, however, that the Trust may
          redeem Series K Preferred Shares pursuant to this subsection (e)(i)(A)
          only if (1) the Weighted Average Trading Price, for twenty (20)
          Trading Days, within the last thirty (30) Trading Days immediately
          before the date of the notice given pursuant to subsection (e)(iv),
          equals or exceeds 108% of the Conversion Price in effect on the date
          of the notice given pursuant to subsection (e)(iv) and (2) at least
          1,000,000 Common Shares were traded during such 30 Trading Days.

               (B) Series K Preferred Shares may be redeemed, in whole or in
          part, at the option of the Trust at any time on or after October 1,
          2004 out of funds legally available therefor at a redemption price
          payable in cash equal to the Liquidation Preference per Series K
          Preferred Share (plus all accumulated, accrued and unpaid dividends as
          provided below).

          (ii) Upon any redemption of Series K Preferred Shares pursuant to this
     subsection (e), the Trust shall pay all accrued and unpaid dividends, if
     any, thereon to the

                                       K-9

<PAGE>

          Call Date, without interest. If the Call Date falls after a dividend
          payment record date and prior to the corresponding Dividend Payment
          Date, then each holder of Series K Preferred Shares at the close of
          business on such dividend payment record date shall be entitled to the
          dividend payable on such shares on the corresponding Dividend Payment
          Date notwithstanding any redemption of such shares before such
          Dividend Payment Date. Except as provided above, the Trust shall make
          no payment or allowance for unpaid dividends, whether or not in
          arrears, on Series K Preferred Shares called for redemption.

               (iii)  If full cumulative dividends on the Series K Preferred
          Shares and any other class or series of Parity Shares have not been
          declared and paid or declared and set apart for payment, the Series K
          Preferred Shares may not be redeemed under this subsection (e) in part
          and the Trust may not purchase or acquire Series K Preferred Shares,
          otherwise than pursuant to a purchase or exchange offer made on the
          same terms to all holders of Series K Preferred Shares.

               (iv)   Notice of the redemption of any Series K Preferred Shares
          under this subsection (e) shall be mailed by first-class mail to each
          holder of record of Series K Preferred Shares to be redeemed at the
          address of each such holder as shown on the Trust's records, not less
          than 30 nor more than 90 days prior to the Call Date. Neither the
          failure to mail any notice required by this subsection (e)(iv), nor
          any defect therein or in the mailing thereof, to any particular
          holder, shall affect the sufficiency of the notice or the validity of
          the proceedings for redemption with respect to the other holders. Any
          notice which was mailed in the manner herein provided shall be
          conclusively presumed to have been duly given on the date mailed
          whether or not the holder receives the notice. Each such mailed notice
          shall state, as appropriate: (1) the Call Date; (2) the number of
          Series K Preferred Shares to be redeemed and, if fewer than all the
          shares held by such holder are to be redeemed, the number of such
          shares to be redeemed from such holder; (3) the redemption price if
          the Series K Preferred Shares are redeemed for cash and the number of
          Common Shares to be issued if the Series K Preferred Shares are
          redeemed for Common Shares; (4) the place or places at which
          certificates for such shares are to be surrendered; (5) the
          then-current Conversion Price; and (6) that dividends on the shares to
          be redeemed shall cease to accrue on such Call Date except as
          otherwise provided herein. Notice having been mailed as aforesaid,
          from and after the Call Date (unless the Trust shall fail to make
          available an amount of cash necessary to effect such redemption), (A)
          except as otherwise provided herein, dividends on the Series K
          Preferred Shares so called for redemption shall cease to accrue, (B)
          such shares shall no longer be deemed to be outstanding, and (C) all
          rights of the

                                       K-10

<PAGE>

          holders thereof as holders of Series K Preferred Shares of the Trust
          shall cease (except the rights to convert and to receive the Common
          Shares and/or cash payable upon such redemption, without interest
          thereon, upon surrender and endorsement of their certificates if so
          required and to receive any dividends payable thereon). The Trust's
          obligation to provide Common Shares and/or cash in accordance with the
          preceding sentence shall be deemed fulfilled if, on or before the Call
          Date, the Trust shall deposit with a bank or trust company (which may
          be an affiliate of the Trust) that has an office in the Borough of
          Manhattan, City of New York, and that has, or is an affiliate of a
          bank or trust company that has, capital and surplus of at least
          $50,000,000, necessary for such redemption, in trust, with irrevocable
          instructions that such Common Shares and/or cash be applied to the
          redemption of the Series K Preferred Shares so called for redemption.
          In the case of any redemption pursuant to subsection (e)(i)(A) of this
          Section 12, at the close of business on the Call Date, each holder of
          Series K Preferred Shares to be redeemed (unless the Trust defaults in
          the delivery of the Common Shares or cash payable on such Call Date)
          shall be deemed to be the record holder of the Common Shares into
          which such Series K Preferred Shares are to be converted at
          redemption, regardless of whether such holder has surrendered the
          certificates representing the Series K Preferred Shares to be so
          redeemed. No interest shall accrue for the benefit of the holders of
          Series K Preferred Shares to be redeemed on any cash so set aside by
          the Trust. Subject to applicable escheat laws, any such cash unclaimed
          at the end of two years from the Call Date shall revert to the general
          funds of the Trust, after which reversion the holders of such shares
          so called for redemption shall look only to the general funds of the
          Trust for the payment of such cash.

               As promptly as practicable after the surrender in accordance with
          such notice of the certificates for any such shares so redeemed
          (properly endorsed or assigned for transfer, if the Trust shall so
          require and if the notice shall so state), such shares shall be
          exchanged for any cash (without interest thereon) for which such
          shares have been redeemed. If fewer than all the outstanding Series K
          Preferred Shares are to be redeemed, shares to be redeemed shall be
          selected by the Trust from outstanding Series K Preferred Shares not
          previously called for redemption pro rata (as nearly as may be), by
          lot or by any other method determined by the Trust in its sole
          discretion to be equitable. If fewer than all the Series K Preferred
          Shares represented by any certificate are redeemed, then new
          certificates representing the unredeemed shares shall be issued
          without cost to the holder thereof.

               (v) In the case of any redemption pursuant to subsection
          (e)(i)(A) of this Section 12,

                                       K-11

<PAGE>

               (A) no fractional Common Shares or scrip representing fractions
          of Common Shares shall be issued upon redemption of the Series K
          Preferred Common Shares. Instead of any fractional interest in Common
          Shares that would otherwise be deliverable upon redemption of Series K
          Preferred Shares, the Trust shall pay to the holder of such share an
          amount in cash (rounded to the nearest cent) based upon the Current
          Market Price of the Common Shares on the Trading Day immediately
          preceding the Call Date. If more than one Series K Preferred Share
          shall be surrendered for redemption at one time by the same holder,
          the number of full Common Shares issuable upon redemption thereof
          shall be computed on the basis of the aggregate number of Series K
          Preferred Shares so surrendered.

               (B) the Trust covenants that any Common Shares issued upon
          redemption of Series K Preferred Shares shall be validly issued, fully
          paid and non-assessable. The Trust shall endeavor to list the Common
          Shares required to be delivered upon any such redemption of Series K
          Preferred Shares, prior to such redemption, upon each national
          securities exchange, if any, upon which the outstanding Common Shares
          are listed at the time of such delivery.

          (f)  Conversion. Holders of Series K Preferred Shares shall have the
     right to convert all or a portion of such shares into Common Shares, as
     follows:

               (i) Subject to and upon compliance with the provisions of this
          subsection (f) and the provisions of Section 18A of Article II of the
          Declaration of Trust, a holder of Series K Preferred Shares shall have
          the right, at any time, at his or her option, to convert such shares
          into the number of fully paid and non-assessable Common Shares
          obtained by dividing the aggregate Liquidation Preference of such
          shares (exclusive of accrued but unpaid dividends) by the Conversion
          Price (as in effect at the time and on the date provided for in the
          last paragraph of subsection (f)(ii) of this Section 12) by
          surrendering such shares to be converted, such surrender to be made in
          the manner provided in subsection (f)(ii) of this Section 12;
          provided, however, that the right to convert shares called for
          --------  -------
          redemption pursuant to subsection (e) of this Section 12 shall
          terminate at the close of business on the fifth Business Day prior to
          the Call Date fixed for such redemption, unless the Trust shall
          default in making payment of the cash payable upon such redemption
          under subsection (e) of this Section 12.

                                       K-12

<PAGE>

               (ii) In order to exercise the conversion right, the holder of
          each Series K Preferred Share to be converted shall surrender the
          certificate representing such share, duly endorsed or assigned to the
          Trust or in blank, at the office of the Transfer Agent, accompanied by
          written notice to the Trust that the holder thereof elects to convert
          such Series K Preferred Shares. Unless the shares issuable on
          conversion are to be issued in the same name as the name in which such
          Series K Preferred Share is registered, each share surrendered for
          conversion shall be accompanied by instruments of transfer, in form
          satisfactory to the Trust, duly executed by the holder or such
          holder's duly authorized attorney and an amount sufficient to pay any
          transfer or similar tax (or evidence reasonably satisfactory to the
          Trust demonstrating that such taxes have been paid).

               Holders of Series K Preferred Shares at the close of business on
          a dividend payment record date shall be entitled to receive the
          dividend payable on such shares on the corresponding Dividend Payment
          Date notwithstanding the conversion thereof following such dividend
          payment record date and prior to such Dividend Payment Date. However,
          Series K Preferred Shares surrendered for conversion during the period
          between the close of business on any dividend payment record date and
          the opening of business on the corresponding Dividend Payment Date
          (except shares converted after the issuance of notice of redemption
          with respect to a Call Date during such period, such Series K
          Preferred Shares being entitled to such dividend on the Dividend
          Payment Date) must be accompanied by payment of an amount equal to the
          dividend payable on such shares on such Dividend Payment Date. A
          holder of Series K Preferred Shares on a dividend payment record date
          who (or whose transferee) tenders any such shares for conversion into
          Common Shares on the corresponding Dividend Payment Date will receive
          the dividend payable by the Trust on such Series K Preferred Shares on
          such date, and the converting holder need not include payment of the
          amount of such dividend upon surrender of Series K Preferred Shares
          for conversion. Except as provided above, the Trust shall make no
          payment or allowance for unpaid dividends, whether or not in arrears,
          on converted shares or for dividends on the Common Shares issued upon
          such conversion.

               As promptly as practicable after the surrender of certificates
          for Series K Preferred Shares as aforesaid, the Trust shall issue and
          shall deliver at such office to such holder, or on his or her written
          order, a certificate or certificates for the number of full Common
          Shares issuable upon the conversion of such shares in accordance with
          provisions of this subsection (f), and any fractional interest in
          respect of a Common Share arising upon such conversion shall be
          settled as provided in subsection (f)(iii) of this Section 12.

                                       K-13

<PAGE>

               Each conversion shall be deemed to have been effected immediately
          prior to the close of business on the date on which the certificates
          for Series K Preferred Shares shall have been surrendered and such
          notice shall have been received by the Trust as aforesaid (and if
          applicable, payment of an amount equal to the dividend payable on such
          shares shall have been received by the Trust as described above), and
          the person or persons in whose name or names any certificate or
          certificates for Common Shares shall be issuable upon such conversion
          shall be deemed to have become the holder or holders of record of the
          shares represented thereby at such time on such date and such
          conversion shall be at the Conversion Price in effect at such time on
          such date unless the share transfer books of the Trust shall be closed
          on that date, in which event such person or persons shall be deemed to
          have become such holder or holders of record at the close of business
          on the next succeeding day on which such share transfer books are
          open, but such conversion shall be at the Conversion Price in effect
          on the date on which such shares shall have been surrendered and such
          notice received by the Trust.

               (iii) No fractional shares or scrip representing fractions of
          Common Shares shall be issued upon conversion of the Series K
          Preferred Shares. Instead of any fractional interest in a Common Share
          that would otherwise be deliverable upon the conversion of a Series K
          Preferred Share, the Trust shall pay to the holder of such share an
          amount in cash based upon the Current Market Price of the Common
          Shares on the Trading Day immediately preceding the date of
          conversion. If more than one Series K Preferred Share shall be
          surrendered for conversion at one time by the same holder, the number
          of full Common Shares issuable upon conversion thereof shall be
          computed on the basis of the aggregate number of Series K Preferred
          Shares so surrendered.

               (iv)  The Conversion Price shall be adjusted from time to time as
          follows:

                     (A) If the Trust shall after the Issue Date (1) pay a
               dividend or make a distribution on its capital shares in Common
               Shares, (2) subdivide its outstanding Common Shares into a
               greater number of shares, (3) combine its outstanding Common
               Shares into a smaller number of shares or (4) issue any Shares by
               reclassification of its Common Shares, the Conversion Price in
               effect at the opening of business on the day following the date
               fixed for the determination of shareholders entitled to receive
               such dividend or distribution or at the opening of business on
               the Business Day next following the day on which such
               subdivision, combination or reclassification becomes effective,
               as the case may be, shall be adjusted so that the

                                       K-14

<PAGE>

          holder of any Series K Preferred Share thereafter surrendered for
          conversion shall be entitled to receive the number of Common Shares
          that such holder would have owned or have been entitled to receive
          after the happening of any of the events described above as if such
          Series K Preferred Shares had been converted immediately prior to the
          record date in the case of a dividend or distribution or the effective
          date in the case of a subdivision, combination or reclassification. An
          adjustment made pursuant to this subsection (f)(iv)(A) shall become
          effective immediately after the opening of business on the Business
          Day next following the record date (except as provided in subsection
          (f)(viii) of this Section 12) in the case of a dividend or
          distribution and shall become effective immediately after the opening
          of business on the Business Day next following the effective date in
          the case of a subdivision, combination or reclassification.

               (B) If the Trust shall issue after the Issue Date rights, options
          or warrants to all holders of Common Shares entitling them (for a
          period expiring within 45 days after the record date mentioned below)
          to subscribe for or purchase Common Shares at a price per share less
          than 94% (100% if a stand-by underwriter is used and charges the Trust
          a commission) of the Fair Market Value per Common Share on the record
          date for the determination of shareholders entitled to receive such
          rights, options or warrants, then the Conversion Price in effect at
          the opening of business on the Business Day next following such record
          date shall be adjusted to equal the price determined by multiplying
          (i) the Conversion Price in effect immediately prior to the opening of
          business on the Business Day next following the date fixed for such
          determination by (ii) a fraction, the numerator of which shall be the
          sum of (x) the number of Common Shares outstanding on the close of
          business on the date fixed for such determination and (y) the number
          of shares that the aggregate proceeds to the Trust from the exercise
          of such rights, options or warrants for Common Shares would purchase
          at 94% of such Fair Market Value (or 100% in the case of a stand-by
          underwriting), and the denominator of which shall be the sum of (x)
          the number of Common Shares outstanding on the close of business on
          the date fixed for such determination and (y) the number of additional
          Common Shares offered for subscription or purchase pursuant to such
          rights, options or warrants. Such adjustment shall become effective
          immediately after the opening of business on the day next following
          such record date (except as provided in subsection (f)(viii) of this
          Section 12). In determining whether any rights, options or warrants
          entitle the holders of Common Shares to subscribe for or purchase
          Common Shares at less than

                                      K-15

<PAGE>

          94% of such Fair Market Value (or 100% in the case of a stand-by
          underwriting), there shall be taken into account any consideration
          received by the Trust upon issuance and upon exercise of such rights,
          options or warrants, the value of such consideration, if other than
          cash, to be determined by the Board.

               (C) If the Trust shall distribute to all holders of its Common
          Shares any securities of the Trust (other than Common Shares) or
          evidence of its indebtedness or assets (excluding cumulative cash
          dividends or distributions paid with respect to the Common Shares or
          common shares of Smith Realty after December 31, 1998 which are not in
          excess of the following: the sum of (i) the cumulative undistributed
          Funds from Operations at December 31, 1998, plus (ii) the cumulative
          amount of Funds from Operations, as determined by the Board, after
          December 31, 1998, minus (iii) the cumulative amount of dividends
          accrued or paid in respect of the Series K Preferred Shares or any
          other class or series of preferred Shares of the Trust or preferred
          shares of Smith Realty after July 2, 1999) or rights, options or
          warrants to subscribe for or purchase any of its securities (excluding
          those rights, options and warrants issued to all holders of Common
          Shares entitling them for a period expiring within 45 days after the
          record date referred to in subsection (f)(iv)(B) of this Section 12 to
          subscribe for or purchase Common Shares, which rights and warrants are
          referred to in and treated under subsection (f)(iv)(B) of this Section
          12) (any of the foregoing being hereinafter in this subsection
          (f)(iv)(C) collectively called the "Securities" and individually a
                                              ----------
          "Security"), then in each such case the Conversion Price shall be
           --------
          adjusted so that it shall equal the price determined by multiplying
          (x) the Conversion Price in effect immediately prior to the close of
          business on the date fixed for the determination of shareholders
          entitled to receive such distribution by (y) a fraction, the numerator
          of which shall be the Fair Market Value per Common Share on the record
          date mentioned below less the then fair market value (as determined by
          the Board, whose determination shall be conclusive), of the portion of
          the Securities or assets or evidences of indebtedness so distributed
          or of such rights, options or warrants applicable to one Common Share,
          and the denominator of which shall be the Fair Market Value per Common
          Share on the record date mentioned below. Such adjustment shall become
          effective immediately at the opening of business on the Business Day
          next following (except as provided in subsection (f)(viii) of this
          Section 12) the record date for the determination of shareholders
          entitled to receive such distribution. For the purposes of this
          subsection (f)(iv)(C), the distribution of a Security, which is
          distributed not only to the holders of the Common Shares on the

                                      K-16

<PAGE>

          date fixed for the determination of shareholders entitled to such
          distribution of such Security, but also is distributed with each
          Common Share delivered to a Person converting a Series K Preferred
          Share after such determination date, shall not require an adjustment
          of the Conversion Price pursuant to this subsection (f)(iv)(C);
          provided that on the date, if any, on which a person converting a
          --------
          Series K Preferred Share would no longer be entitled to receive such
          Security with a Common Share (other than as a result of the
          termination of all such Securities), a distribution of such Securities
          shall be deemed to have occurred and the Conversion Price shall be
          adjusted as provided in this subsection (f)(iv)(C) (and such day shall
          be deemed to be "the date fixed for the determination of the
          shareholders entitled to receive such distribution" and "the record
          date" within the meaning of the two preceding sentences).

               (D) In case a tender or exchange offer (which term shall not
          include open market repurchases by the Trust) made by the Trust or any
          subsidiary of the Trust for all or any portion of the Common Shares
          shall expire and such tender or exchange offer shall involve the
          payment by the Trust or such subsidiary of consideration per Common
          Share having a fair market value (as determined in good faith by the
          Board, whose determination shall be conclusive and described in a
          resolution of the Board), at the last time (the "Expiration Time")
                                                           ---------------
          tenders or exchanges may be made pursuant to such tender or exchange
          offer, that exceeds the Current Market Price per Common Share on the
          Trading Day next succeeding the Expiration Time, the Conversion Price
          shall be reduced so that the same shall equal the price determined by
          multiplying the Conversion Price in effect immediately prior to the
          effectiveness of the Conversion Price reduction contemplated by this
          subparagraph, by a fraction of which the numerator shall be the number
          of Common Shares outstanding (including any tendered or exchanged
          shares) at the Expiration Time, multiplied by the Current Market Price
          per Common Share on the Trading Day next succeeding the Expiration
          Time, and the denominator shall be the sum of (i) the fair market
          value (determined as aforesaid) of the aggregate consideration payable
          to shareholders based upon the acceptance (up to any maximum specified
          in the terms of the tender or exchange offer) of all shares validly
          tendered or exchanged and not withdrawn as of the Expiration Time (the
          shares deemed so accepted, up to any maximum, being referred to as the
          "Purchased Shares") and (ii) the product of the number of Common
           ----------------
          Shares outstanding (less any Purchased Shares) at the Expiration Time
          and the Current Market Price per Common Share on the Trading Day next
          succeeding the Expiration

                                      K-17

<PAGE>

          Time, such reduction to become effective immediately prior to the
          opening of business on the day following the Expiration Time.

               (E) No adjustment in the Conversion Price shall be required
          unless such adjustment would require a cumulative increase or decrease
          of at least 1% in such price; provided, however, that any adjustments
                                        --------  -------
          that by reason of this subsection (f)(iv)(E) are not required to be
          made shall be carried forward and taken into account in any subsequent
          adjustment until made; and provided, further, that any adjustment
                                     --------  -------
          shall be required and made in accordance with the provisions of this
          subsection (f) (other than this subsection (f)(iv)(E)) not later than
          such time as may be required in order to preserve the tax-free nature
          of a distribution to the holders of Common Shares. Notwithstanding any
          other provisions of this subsection (f), the Trust shall not be
          required to make any adjustment of the Conversion Price for the
          issuance of any Common Shares pursuant to any plan providing for the
          reinvestment of dividends or interest payable on securities of the
          Trust and the investment of additional optional amounts in Common
          Shares under such plan. All calculations under this subsection (f)
          shall be made to the nearest cent (with $.005 being rounded upward) or
          to the nearest one-tenth of a share (with .05 of a share being rounded
          upward), as the case may be. Anything in this subsection (f)(iv) to
          the contrary notwithstanding, the Trust shall be entitled, to the
          extent permitted by law, to make such reductions in the Conversion
          Price, in addition to those required by this subsection (f)(iv), as it
          in its discretion shall determine to be advisable in order that any
          share dividends, subdivision of shares, reclassification or
          combination of shares, distribution of rights or warrants to purchase
          shares or securities, or distribution of other assets (other than cash
          dividends) hereafter made by the Trust to its shareholders shall not
          be taxable.

          (v)  If the Trust shall be a party to any transaction (including
     without limitation a merger, consolidation, statutory share exchange, self
     tender offer for all or substantially all of its Common Shares, sale of all
     or substantially all of the Trust's assets or recapitalization of the
     Common Shares and excluding any transaction as to which subsection
     (f)(iv)(A) of this Section 12 applies) (each of the foregoing being
     referred to herein as a "Transaction"), in each case as a result of which
                              -----------
     all or substantially all of the Trust's Common Shares are converted into
     the right to receive shares, securities or other property (including cash
     or any combination thereof), each Series K Preferred Share which is not
     redeemed or converted into the right to receive shares, securities or other
     property prior to such Transaction shall

                                      K-18

<PAGE>

          thereafter be convertible into the kind and amount of shares,
          securities and other property (including cash or any combination
          thereof) receivable upon the consummation of such Transaction by a
          holder of that number of Common Shares into which one Series K
          Preferred Share was convertible immediately prior to such Transaction,
          assuming such holder of Common Shares (i) is not a Person with which
          the Trust consolidated or into which the Trust merged or which merged
          into the Trust or to which such sale or transfer was made, as the case
          may be ("Constituent Person"), or an affiliate of a Constituent Person
                   ------------------
          and (ii) failed to exercise his rights of election, if any, as to the
          kind or amount of shares, securities and other property (including
          cash) receivable upon such Transaction (provided that if the kind or
          amount of shares, securities and other property (including cash)
          receivable upon such Transaction is not the same for each Common Share
          held immediately prior to such Transaction by other than a Constituent
          Person or an affiliate thereof and in respect of which such rights of
          election shall not have been exercised ("Non-Electing Share"), then
                                                   ------------------
          for the purpose of this subsection (f)(v) the kind and amount of
          shares, securities and other property (including cash) receivable upon
          such Transaction by each Non-Electing Share shall be deemed to be the
          kind and amount so receivable per share by a plurality of the
          Non-Electing Shares). The Trust shall not be a party to any
          Transaction unless the terms of such Transaction are consistent with
          the provisions of this subsection (f)(v), and it shall not consent or
          agree to the occurrence of any Transaction until the Trust has entered
          into an agreement with the successor or purchasing entity, as the case
          may be, for the benefit of the holders of the Series K Preferred
          Shares that will contain provisions enabling the holders of the Series
          K Preferred Shares that remain outstanding after such Transaction to
          convert into the consideration received by holders of Common Shares at
          the Conversion Price in effect immediately prior to such Transaction.
          The provisions of this subsection (f)(v) shall similarly apply to
          successive Transactions.

               (vi) If:

                    (A) the Trust shall declare a dividend (or any other
               distribution) on its Common Shares (other than cash dividends or
               distributions paid with respect to the Common Shares or the
               common shares of Smith Realty after December 31, 1998 not in
               excess of the sum of the cumulative undistributed Funds from
               Operations at December 31, 1998, plus the cumulative amount of
               Funds from Operations, as determined by the Board, after December
               31, 1998, minus the cumulative amount of dividends accrued or
               paid in respect of the Series K Preferred Shares or any other

                                      K-19

<PAGE>

          class or series of preferred Shares of the Trust or preferred shares
          of Smith Realty after July 2, 1999); or

                (B) the Trust shall authorize the granting to all holders of
          Common Shares of rights, options or warrants to subscribe for or
          purchase any shares of any class or any other rights, options or
          warrants; or

                (C) there shall be any reclassification of the Common Shares
          (other than an event to which subsection (f)(iv)(A) of this Section 12
          applies) or any consolidation or merger to which the Trust is a party
          and for which approval of any shareholders of the Trust is required,
          or a statutory share exchange, or a self tender offer by the Trust for
          all or substantially all of its outstanding Common Shares or the sale
          or transfer of all or substantially all of the assets of the Trust as
          an entirety; or

                (D) there shall occur the voluntary or involuntary liquidation,
          dissolution or winding up of the Trust;

     then the Trust shall cause to be filed with the Transfer Agent and shall
     cause to be mailed to the holders of Series K Preferred Shares at their
     addresses as shown on the records of the Trust, as promptly as possible,
     but at least 10 days prior to the applicable date hereinafter specified, a
     notice stating (1) the date on which a record is to be taken for the
     purpose of such dividend, distribution or granting of rights, options or
     warrants, or, if a record is not to be taken, the date as of which the
     holders of Common Shares of record to be entitled to such dividend,
     distribution or rights, options or warrants are to be determined or (2) the
     date on which such reclassification, consolidation, merger, statutory share
     exchange, sale, transfer, liquidation, dissolution or winding up is
     expected to become effective, and the date as of which it is expected that
     holders of Common Shares of record shall be entitled to exchange their
     Common Shares for securities or other property, if any, deliverable upon
     such reclassification, consolidation, merger, statutory share exchange,
     sale, transfer, liquidation, dissolution or winding up. Failure to give or
     receive such notice or any defect therein shall not affect the legality or
     validity of the proceedings described in this subsection (f).

          (vii) Whenever the Conversion Price is adjusted as herein provided,
     the Trust shall promptly file with the Transfer Agent an officer's
     certificate setting forth the Conversion Price after such adjustment and
     setting forth a brief statement of the facts requiring such adjustment
     which certificate shall be conclusive evidence of the correctness of such

                                      K-20

<PAGE>

          adjustment absent manifest error. Promptly after delivery of such
          certificate, the Trust shall prepare a notice of such adjustment of
          the Conversion Price setting forth the adjusted Conversion Price and
          the effective date of such adjustment and shall mail such notice of
          such adjustment of the Conversion Price to the holder of each Series K
          Preferred Share at such holder's last address as shown on the records
          of the Trust.

               (viii) In any case in which subsection (f)(iv) of this Section 12
          provides that an adjustment shall become effective on the day next
          following the record date for an event, the Trust may defer until the
          occurrence of such event (A) issuing to the holder of any Series K
          Preferred Share converted after such record date and before the
          occurrence of such event the additional Common Shares issuable upon
          such conversion by reason of the adjustment required by such event
          over and above the Common Shares issuable upon such conversion before
          giving effect to such adjustment and (B) paying to such holder any
          amount of cash in lieu of any fraction pursuant to subsection (f)(iii)
          of this Section 12.

               (ix)   There shall be no adjustment of the Conversion Price in
          case of the issuance of any Shares in a reorganization, acquisition or
          other similar transaction except as specifically set forth in this
          subsection (f). If any action or transaction would require adjustment
          of the Conversion Price pursuant to more than one paragraph of this
          subsection (f), only one adjustment shall be made and such adjustment
          shall be the amount of adjustment that has the highest absolute value.

               (x)    If the Trust shall take any action affecting the Common
          Shares, other than action described in this subsection (f), that in
          the opinion of the Board would materially and adversely affect the
          conversion rights of the holders of the Series K Preferred Shares, the
          Conversion Price for the Series K Preferred Shares may be adjusted, to
          the extent permitted by law, in such manner, if any, and at such time,
          as the Board, in its sole discretion, may determine to be equitable in
          the circumstances.

               (xi)   The Trust covenants that it will at all times reserve and
          keep available, free from preemptive rights, out of the aggregate of
          its authorized but unissued Common Shares, for the purpose of
          effecting conversion of the Series K Preferred Shares, the full number
          of Common Shares deliverable upon the conversion of all outstanding
          Series K Preferred Shares not theretofore converted. For purposes of
          this subsection (f)(xi), the number of Common Shares that shall be
          deliverable upon the conversion of all outstanding Series K

                                      K-21

<PAGE>

          Preferred Shares shall be computed as if at the time of computation
          all such outstanding shares were held by a single holder.

               The Trust covenants that any Common Shares issued upon conversion
          of the Series K Preferred Shares shall be validly issued, fully paid
          and non-assessable. Before taking any action that would cause an
          adjustment reducing the Conversion Price below the then-par value of
          the Common Shares deliverable upon conversion of the Series K
          Preferred Shares, the Trust will take any action that, in the opinion
          of its counsel, may be necessary in order that the Trust may validly
          and legally issue fully paid and (subject to any customary
          qualification based upon the nature of a real estate investment trust)
          non-assessable Common Shares at such adjusted Conversion Price.

               The Trust shall endeavor to list the Common Shares required to be
          delivered upon conversion of the Series K Preferred Shares, prior to
          such delivery, upon each national securities exchange, if any, upon
          which the outstanding Common Shares are listed at the time of such
          delivery.

               The Trust shall endeavor to comply with all federal and state
          securities laws and regulations thereunder in connection with the
          issuance of any securities that the Trust shall be obligated to
          deliver upon conversion of the Series K Preferred Shares. In addition
          to any legend required by Section 18A of Article II of the Declaration
          of Trust, the certificates evidencing such securities shall bear such
          legends restricting transfer thereof in the absence of registration
          under applicable securities laws or an exemption therefrom as the
          Trust may in good faith deem appropriate.

               (xii) The Trust will pay any and all documentary stamp or similar
          issue or transfer taxes payable in respect of the issue or delivery of
          Common Shares or other securities or property on conversion of the
          Series K Preferred Shares pursuant hereto; provided, however, that the
                                                     --------  -------
          Trust shall not be required to pay any tax that may be payable in
          respect of any transfer involved in the issue or delivery of Common
          Shares or other securities or property in a name other than that of
          the holder of the Series K Preferred Shares to be converted, and no
          such issue or delivery shall be made unless and until the person
          requesting such issue or delivery has paid to the Trust the amount of
          any such tax or established, to the reasonable satisfaction of the
          Trust, that such tax has been paid.

                                      K-22

<PAGE>

     (g) Shares To Be Retired. All Series K Preferred Shares which shall have
been issued and reacquired in any manner by the Trust shall be restored to the
status of authorized but unissued shares of beneficial interest of the Trust,
without designation as to class or series.

     (h) Ranking. Any class or series of Shares shall be deemed to rank:

         (i)   senior to the Series K Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if the holders of such class or
     series are entitled to the receipt of dividends or of amounts distributable
     upon any liquidation, dissolution or winding up of the Trust, as the case
     may be, in preference or priority to the holders of Series K Preferred
     Shares;

         (ii)  on a parity with the Series K Preferred Shares, in the payment
     of dividends and in distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, whether or not the dividend rates,
     dividend payment dates or redemption or liquidation prices per share
     thereof are different from those of the Series K Preferred Shares, if the
     holders of such class or series and the holders of the Series K Preferred
     Shares are entitled to the receipt of dividends and amounts distributable
     upon any liquidation, dissolution or winding up of the Trust in proportion
     to their respective amounts of dividends accrued and unpaid per share or
     liquidation preferences, without preference or priority to each other
     ("Parity Shares");
       -------------

         (iii) junior to the Series K Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such class or series is Junior
     Shares; and

         (iv)  junior to the Series K Preferred Shares, in the payment of
     dividends and in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such class or series is Fully
     Junior Shares.

     (i) Voting. If and whenever four quarterly dividends (whether or not
consecutive) payable on the Series K Preferred Shares or any series or class of
Parity Shares shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of Trustees then constituting the
Board shall be increased by two and the holders of Series K Preferred Shares,
together with the holders of shares of every other series of Parity Shares (any
such other series, the "Voting Preferred Shares"), voting as a single class
                        -----------------------
regardless of series, shall be entitled to elect the two additional Trustees to

                                      K-23

<PAGE>

serve on the Board at any annual meeting of shareholders or special meeting held
in place thereof, or at a special meeting of the holders of the Series K
Preferred Shares and the Voting Preferred Shares called as hereinafter provided.
Whenever all arrears in dividends on the Series K Preferred Shares and the
Voting Preferred Shares then outstanding shall have been paid and dividends
thereon for the current quarterly dividend period shall have been paid or
declared and set apart for payment, then the right of the holders of the Series
K Preferred Shares and the Voting Preferred Shares to elect such additional two
Trustees shall cease (but subject always to the same provision for the vesting
of such voting rights in the case of any similar future arrearage in quarterly
dividends), and the terms of office of all persons elected as Trustees by the
holders of the Series K Preferred Shares and the Voting Preferred Shares shall
forthwith terminate and the number of the Board shall be reduced accordingly. At
any time after such voting power shall have been so vested in the holders of
Series K Preferred Shares and the Voting Preferred Shares, the Secretary of the
Trust may, and upon the written request of any holder of Series K Preferred
Shares (addressed to the Secretary at the principal office of the Trust) shall,
call a special meeting of the holders of the Series K Preferred Shares and of
the Voting Preferred Shares for the election of the Trustees to be elected by
them as herein provided, such call to be made by notice similar to that provided
in the Bylaws of the Trust for a special meeting of the shareholders or as
required by law. If any such special meeting required to be called as above
provided shall not be called by the Secretary within 20 days after receipt of
any such request, then any holder of Series K Preferred Shares may call such
meeting, upon the notice above provided, and for that purpose shall have access
to the records of the Trust. The Trustees elected at any such special meeting
shall hold office until the next annual meeting of the shareholders or special
meeting held in lieu thereof if such office shall not have previously terminated
as above provided. If any vacancy shall occur among the Trustees elected by the
holders of the Series K Preferred Shares and the Voting Preferred Shares, a
successor shall be elected by the Board, upon the nomination of the
then-remaining Trustee elected by the holders of the Series K Preferred Shares
and the Voting Preferred Shares or the successor of such remaining Trustee, to
serve until the next annual meeting of the shareholders or special meeting held
in place thereof if such office shall not have previously terminated as provided
above.

     So long as any Series K Preferred Shares are outstanding, in addition to
any other vote or consent of shareholders required by law or by the Declaration
of Trust, the affirmative vote of at least 662/3% of the votes entitled to be
cast by the holders of the Series K Preferred Shares given in person or by
proxy, either in writing without a meeting or by vote at any meeting called for
the purpose, shall be necessary for effecting or validating:

                                      K-24

<PAGE>

         (i)   Any amendment, alteration or repeal of any of the provisions of
     the Declaration of Trust or By-Laws that materially and adversely affects
     the voting powers, rights or preferences of the holders of the Series K
     Preferred Shares; provided, however, that the amendment of the provisions
                       --------  -------
     of the Declaration of Trust so as to authorize or create or to increase
     the authorized amount of, any Fully Junior Shares, Junior Shares that are
     not senior in any respect to the Series K Preferred Shares or any Parity
     Shares shall not be deemed to materially adversely affect the voting
     powers, rights or preferences of the holders of Series K Preferred Shares;
     or

         (ii)  A share exchange that affects the Series K Preferred Shares, a
     consolidation with or merger of the Trust into another entity, or a
     consolidation with or merger of another entity into the Trust, unless in
     each such case each Series K Preferred Share (A) shall remain outstanding
     without a material and adverse change to its terms and rights or (B) shall
     be converted into or exchanged for convertible preferred shares of the
     surviving entity having preferences, conversion or other rights, voting
     powers, restrictions, limitations as to dividends, qualifications and terms
     or conditions of redemption thereof identical to that of a Series K
     Preferred Share (except for changes that do not materially and adversely
     affect the holders of the Series K Preferred Shares); or

         (iii) The authorization, reclassification or creation of, or the
     increase in the authorized amount of, any shares of any class or any
     security convertible into shares of any class ranking senior to the Series
     K Preferred Shares in the distribution of assets on any liquidation,
     dissolution or winding up of the Trust or in the payment of dividends;

provided, however, that no such vote of the holders of Series K Preferred Shares
--------  -------
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such prior shares or
convertible security is to be made, as the case may be, provision is made for
the redemption of all Series K Preferred Shares at the time outstanding to the
extent such redemption is authorized by subsection (e) of this Section 12. For
purposes of the foregoing provisions, a "share exchange" means a transaction
(including a forward or reverse triangular merger) in which an entity acquires
all the issued or all the outstanding equity securities of one or more classes
of another entity and which does not affect the existence of either entity, and
the term "surviving entity" shall include the entity acquiring equity securities
in a share exchange.

     For purposes of the foregoing provisions of this subsection (i), each
Series K Preferred Share shall have one (1) vote per share, except that when any
other series of preferred Shares shall have

                                       K-25

<PAGE>

the right to vote with the Series K Preferred Shares as a single class on any
matter, then the Series K Preferred Shares and such other series shall have with
respect to such matters one (1) vote per $25.00 of stated liquidation
preference. Except as otherwise required by applicable law or as set forth
herein, the Series K Preferred Shares shall not have any relative,
participating, optional or other special voting rights and powers other than as
set forth herein, and the consent of the holders thereof shall not be required
for the taking of any Trust action.

     (j) Record Holders. The Trust and the Transfer Agent may deem and treat the
record holder of any Series K Preferred Shares as the true and lawful owner
thereof for all purposes, and neither the Trust nor the Transfer Agent shall be
affected by any notice to the contrary.

                                      K-26

<PAGE>

                                     ANNEX L
                         SERIES L CUMULATIVE CONVERTIBLE
                           REDEEMABLE PREFERRED SHARES


     (a) Number of Shares and Designation. This class of preferred Shares shall
be designated as Series L Cumulative Convertible Redeemable Preferred Shares and
the number of shares which shall constitute such series shall not be more than
641,026 shares, par value $0.01 per share, which number may be decreased (but
not below the number thereof then outstanding) from time to time by the Board.

     (b) Definitions. For purposes of the Series L Preferred Shares, the
following terms shall have the meanings indicated:

         "Archstone-Smith Operating Trust" shall mean Archstone-Smith Operating
          -------------------------------
     Trust, a Maryland real estate investment trust, and its successors.

         "Board" shall mean the Board of Trustees or any committee authorized by
          -----
     the Board of Trustees to perform any of its responsibilities with respect
     to the Series L Preferred Shares.

         "Business Day" shall mean any day other than a Saturday, Sunday or a
          ------------
     day on which state or federally chartered banking institutions in New York
     City, New York are not required to be open.

         "Call Date" shall mean the date specified in the notice to holders
          ---------
     required under subsection (e)(iv) of this Section 13 as the Call Date.

         "Common Shares" shall mean the common shares of beneficial interest,
          -------------
     par value $0.01 per share, of the Trust.

         "Constituent Person" shall have the meaning set forth in subsection
          ------------------
     (f)(v) of this Section 13.

         "Conversion Price" shall mean the conversion price per Common Share for
          ----------------
     which the Series L Preferred Shares are convertible, as such Conversion
     Price may be adjusted pursuant to subsection (f) of this Section 13. The
     initial conversion price shall be $19.75 (equivalent to a conversion rate
     of 1.975 Common Shares for each Series L Preferred Share).

                                       L-1

<PAGE>

         "Current Market Price" of publicly traded common shares or any other
          --------------------
     class of shares or capital stock or other security of the Trust or any
     other issuer for any day shall mean the last reported sales price, regular
     way on such day, or, if no sale takes place on

         such day, the average of the reported closing bid and asked prices on
     such day, regular way, in either case as reported on the New York Stock
     Exchange ("NYSE") or, if such security is not listed or admitted for
                ----
     trading on the NYSE, on the principal national securities exchange on which
     such security is listed or admitted for trading or, if not listed or
     admitted for trading on any national securities exchange, on the Nasdaq
     Stock Market ("NASDAQ") or, if such security is not quoted on such National
                    ------
     Market System, the average of the closing bid and asked prices on such day
     in the over-the-counter market as reported by NASDAQ or, if bid and asked
     prices for such security on such day shall not have been reported through
     NASDAQ, the average of the bid and asked prices on such day as furnished by
     any NYSE member firm regularly making a market in such security selected
     for such purpose by the Board.

         "Dividend Payment Date" shall mean (i) for any Dividend Period with
          ---------------------
     respect to which the Trust pays a dividend on the Common Shares, the date
     on which such dividend is paid, or (ii) for any Dividend Period with
     respect to which the Trust does not pay a dividend on the Common Shares, a
     date to be set by the Board, which date shall not be later than the
     forty-fifth calendar day after the end of the applicable Dividend Period.

         "Dividend Periods" shall mean quarterly dividend periods commencing on
          ----------------
     January 1, April 1, July 1 and October 1 of each year and ending on and
     including the day preceding the first day of the next succeeding Dividend
     Period (other than the Dividend Period during which any Series L Preferred
     Shares shall be redeemed pursuant to subsection (e) of this Section 13,
     which shall end on and include the Call Date with respect to the Series L
     Preferred Shares being redeemed).

         "Expiration Time" shall have the meaning set forth in subsection
          ---------------
     (f)(iv)(D) of this Section 13.

         "Fair Market Value" shall mean the average of the daily Current Market
          -----------------
     Prices of a Common Share on the five (5) consecutive Trading Days selected
     by the Trust commencing not more than 20 Trading Days before, and ending
     not later than, the earlier of the day in question and the day before the
     "ex date" with respect to the issuance or distribution requiring such
     computation. The term "ex date," when used with respect to any issuance or
     distribution, means the first day on which the Common Shares trade regular
     way, without the

                                       L-2

<PAGE>

     right to receive such issuance or distribution, on the exchange or in the
     market, as the case may be, used to determine that day's Current Market
     Price.

         "Fully Junior Shares" shall mean the Common Shares and any other class
          -------------------
     or series of Shares now or hereafter issued and outstanding over which the
     Series L Preferred Shares have preference or priority in both (i) the
     payment of dividends and (ii) the distribution of assets on any
     liquidation, dissolution or winding up of the Trust.

         "Funds from Operations," for all dates and periods prior to the Issue
          ---------------------
     Date, shall mean net income (loss) (computed in accordance with generally
     accepted accounting principles) excluding gains (or losses) from debt
     restructuring, and distributions in excess of earnings allocated to other
     Smith Operating Partnership interests or minority interests (as reflected
     in the financial statements of Smith Realty) plus depreciation/amortization
     of assets unique to the real estate industry, all computed in a manner
     consistent with the revised definition of Funds From Operations adopted by
     the National Association of Real Estate Investment Trusts ("NAREIT"), in
                                                                 ------
     its White Paper dated March 1995, as such definitions may be modified from
     time to time, as determined by the Trust in good faith. "Funds from
     Operations," for all dates and periods from and after the Issue Date, shall
     mean net income (loss) (computed in accordance with generally accepted
     accounting principles) excluding gains (or losses) from debt restructuring,
     and distributions in excess of earnings allocated to Archstone-Smith
     Operating Trust interests or minority interests (as reflected in the
     financial statements of the Trust) plus depreciation/amortization of assets
     unique to the real estate industry, all computed in a manner consistent
     with the revised definition of Funds From Operations adopted by NAREIT, in
     its White Paper dated March 1995, as such definitions may be modified from
     time to time, as determined by the Trust in good faith.

         "Issue Date" shall mean the date on which the first Series L Preferred
          ----------
     Shares are issued.

         "Junior Shares" shall mean the Common Shares and any other class or
          -------------
     series of Shares now or hereafter issued and outstanding over which the
     Series L Preferred Shares have preference or priority in the payment of
     dividends or in the distribution of assets on any liquidation, dissolution
     or winding up of the Trust.

         "Non-Electing Share" shall have the meaning set forth in subsection
          ------------------
     (f)(v) of this Section 13.

                                       L-3

<PAGE>

     "Parity Shares" shall have the meaning set forth in subsection (h)(ii) of
      -------------
this Section 13.

     "Person" shall mean any individual, firm, partnership, corporation, limited
      ------
liability company or other entity, and shall include any successor (by merger or
otherwise) of such entity.

     "Purchased Shares" shall have the meaning set forth in subsection
      ----------------
(f)(iv)(D) of this Section 13.

     "Securities" and "Security" shall have the meanings set forth in subsection
      -------------------------
(f)(iv)(C) of this Section 13.

     "Securities Act" shall mean the Securities Act of 1933, as amended.
      --------------

     "Series L Preferred Shares" shall mean the shares of Series L Cumulative
      -------------------------
Convertible Redeemable Preferred Shares.

     "Set apart for payment" shall be deemed to include, without any action
      ---------------------
other than the following, the recording by the Trust in its accounting ledgers
of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board, the allocation of
funds to be so paid on any series or class of Shares; provided, however, that if
                                                      -----------------
any funds for any class or series of Junior Shares or any class or series of
Shares ranking on a parity with the Series L Preferred Shares as to the payment
of dividends are placed in a separate account of the Trust or delivered to a
disbursing, paying or other similar agent, then "set apart for payment" with
respect to the Series L Preferred Shares shall mean placing such funds in a
separate account or delivering such funds to a disbursing, paying or other
similar agent.

     "Shares" shall mean the shares of beneficial interest of the Trust as may
      ------
be authorized and issued from time to time pursuant to Article II of the
Declaration of Trust.

     "Smith Operating Partnership" shall mean Charles E. Smith Residential
      ---------------------------
Realty L.P., formerly a Delaware limited partnership.

                                       L-4

<PAGE>

     "Smith Preferred Shares" shall mean the Series H Preferred Shares, Series I
      ----------------------
Preferred Shares, Series J Preferred Shares, Series K Preferred Shares and
Series L Preferred Shares of the Trust or any of the foregoing.

     "Smith Realty" shall mean Charles E. Smith Residential Realty, Inc.,
      ------------
formerly a Maryland corporation.

     "Trading Day" shall mean any day on which the securities in question are
      -----------
traded on the NYSE, or if such securities are not listed or admitted for trading
on the NYSE, on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted for trading on
any national securities exchange, on the National Market System of NASDAQ, or if
such securities are not quoted on such National Market System, in the securities
market in which the securities are traded.

     "Transaction" shall have the meaning set forth in subsection (f)(v) of this
      -----------
Section 13.

     "Transfer Agent" shall mean Mellon Investor Services LLC, New York City,
      --------------
New York, or such other agent or agents of the Trust as may be designated by the
Board or their designee as the transfer agent, registrar and dividend disbursing
agent for the Series L Preferred Shares.

     "Voting Preferred Shares" shall have the meaning set forth in subsection
      -----------------------
(i) of this Section 13.

     "Weighted Average Trading Price" shall mean, for any Trading Day, the
      ------------------------------
number obtained by dividing (i) the sum of the products, for each sale of Common
Shares on such Trading Day, of (a) the sale price per Common Share and (b) the
number of Common Shares sold by (ii) the total number of Common Shares sold on
such Trading Day.

(c)  Dividends.

     (i) The holders of Series L Preferred Shares shall be entitled to receive,
when, as and if declared by the Board, out of funds legally available for the
payment of dividends, cumulative preferential dividends payable in cash in an
amount per share equal to the greater of (A) (i) 8.25% of the Liquidation
Preference per annum (equivalent to $3.2175 per Series L Preferred Share) from
the date for commencement of accrual specified below up to and

                                       L-5

<PAGE>

including November 5, 2001 and (ii) 8.50% of the Liquidation Preference per
annum (equivalent to $3.315 per Series L Preferred Share) thereafter or (B) the
ordinary cash dividends (determined on each Dividend Payment Date) on the Common
Shares, or portion thereof, into which a Series L Preferred Share is
convertible. The dividends referred to in clause (B) of the preceding sentence
shall equal the number of Common Shares, or portion thereof, into which a Series
L Preferred Share is convertible, multiplied by the most current quarterly
dividend on a Common Share on or before the applicable Dividend Payment Date. If
the Trust pays an ordinary cash dividend on the Common Shares with respect to a
Dividend Period after the date on which the Dividend Payment Date is declared
pursuant to clause (ii) of the definition of Dividend Payment Date and the
dividend calculated pursuant to clause (B) of this subsection (c)(i) with
respect to such Dividend Period is greater than the dividend previously declared
on the Series L Preferred Shares with respect to such Dividend Period, the Trust
shall pay an additional dividend to the holders of the Series L Preferred Shares
on the date on which the dividend on the Common Shares is paid, in an amount
equal to the difference between (y) the dividend calculated pursuant to clause
(B) of this subsection (c)(i) and (z) the amount of dividends previously
declared on the Series L Preferred Shares with respect to such Dividend Period.
The dividends shall begin to accrue and shall be fully cumulative from October
1, 2001, whether or not in any Dividend Period or Periods there shall be funds
of the Trust legally available for the payment of such dividends, and shall be
payable quarterly, when, as and if declared by the Board, in arrears on Dividend
Payment Dates. Each such dividend shall be payable in arrears to the holders of
record of Series L Preferred Shares as they appear in the records of the Trust
at the close of business on such record dates, not less than 10 nor more than 50
days preceding such Dividend Payment Dates thereof, as shall be fixed by the
Board. Accrued and unpaid dividends for any past Dividend Periods may be
declared and paid at any time and for such interim periods, without reference to
any regular Dividend Payment Date, to holders of record on such date, not less
than 10 nor more than 50 days preceding the payment date thereof, as may be
fixed by the Board. Any dividend payment made on Series L Preferred Shares shall
first be credited against the earliest accrued but unpaid dividend due with
respect to Series L Preferred Shares which remains payable.

     (ii)    The amount of dividends referred to in subsection (c)(i)(A) payable
for each full Dividend Period on the Series L Preferred Shares shall be computed
by dividing the annual dividend rate by four. The amount of dividends payable
for any period shorter than a full Dividend Period on the Series L Preferred
Shares shall be computed on the basis of a 360-day year of twelve 30-day months.
Holders of Series L Preferred Shares shall not be

                                       L-6

<PAGE>

entitled to any dividends, whether payable in cash, property or shares, in
excess of cumulative dividends, as herein provided, on the Series L Preferred
Shares. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series L Preferred Shares
which may be in arrears.

     (iii) So long as any Series L Preferred Shares are outstanding, no
dividends, except as described in the immediately following sentence, shall be
declared or paid or set apart for payment on any class or series of Parity
Shares for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Series L Preferred Shares for
all Dividend Periods terminating on or prior to the dividend payment date on
such class or series of Parity Shares. When dividends are not paid in full or a
sum sufficient for such payment is not set apart, as aforesaid, all dividends
declared upon Series L Preferred Shares and all dividends declared upon any
other class or series of Parity Shares shall be declared ratably in proportion
to the respective amounts of dividends accumulated and unpaid on the Series L
Preferred Shares and accumulated and unpaid on such Parity Shares.

     (iv) So long as any Series L Preferred Shares are outstanding, no dividends
(other than dividends or distributions paid solely in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Fully Junior Shares)
shall be declared or paid or set apart for payment or other distribution shall
be declared or made or set apart for payment upon Junior Shares, nor shall any
Junior Shares be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of Common Shares made for purposes of
an employee incentive or benefit plan of the Trust or any subsidiary) for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any Junior Shares) by the Trust, directly or indirectly
(except by conversion into or exchange for Fully Junior Shares), unless in each
case (A) the full cumulative dividends on all outstanding Series L Preferred
Shares and any other Parity Shares shall have been or contemporaneously are
declared and paid or declared and set apart for payment for all past Dividend
Periods with respect to the Series L Preferred Shares and all past dividend
periods with respect to such Parity Shares and (B) sufficient funds shall have
been or contemporaneously are declared and paid or declared and set apart for
the payment of the dividend for the current Dividend Period with respect to the
Series L Preferred Shares and the current dividend period with respect to such
Parity Shares.

                                       L-7

<PAGE>

     (v) No distributions on Series L Preferred Shares shall be declared by the
Board or paid or set apart for payment by the Trust at such time as the terms
and provisions of any agreement of the Trust, including any agreement relating
to its indebtedness, prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting apart for payment
would constitute a breach thereof or a default thereunder, or if such
declaration or payment shall be restricted or prohibited by law.

d)   Liquidation Preference.

     (i) In the event of any liquidation, dissolution or winding up of the
Trust, whether voluntary or involuntary, before any payment or distribution of
the assets of the Trust (whether capital or surplus) shall be made to or set
apart for the holders of Junior Shares, the holders of the Series L Preferred
Shares shall be entitled to receive Thirty Nine Dollars ($39.00) (the
"Liquidation Preference") per Series L Preferred Share plus an amount equal to
all dividends (whether or not earned or declared) accrued and unpaid thereon to
the date of final distribution to such holders; but such holders shall not be
entitled to any further payment; provided, that the dividend payable with
                                 --------
respect to the Dividend Period containing the date of final distribution shall
be equal to the greater of (A) the dividend provided in subsection (c)(i)(A) of
this Section 13 or (B) the dividend determined pursuant to subsection (c)(i)(B)
of this Section 13 for the preceding Dividend Period. If, upon any liquidation,
dissolution or winding up of the Trust, the assets of the Trust, or proceeds
thereof, distributable among the holders of the Series L Preferred Shares shall
be insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other shares of any class or series of Parity Shares, then such
assets, or the proceeds thereof, shall be distributed among the holders of
Series L Preferred Shares and any such other Parity Shares ratably in accordance
with the respective amounts that would be payable on such Series L Preferred
Shares and any such other Parity Shares if all amounts payable thereon were paid
in full. For the purposes of this subsection (d), (x) a consolidation or merger
of the Trust with one or more corporations, real estate investment trusts or
other entities, (y) a sale, lease or conveyance of all or substantially all of
the Trust's property or business or (z) a statutory share exchange shall not be
deemed to be a liquidation, dissolution or winding up, voluntary or involuntary,
of the Trust.

     (ii) Subject to the rights of the holders of shares of any series or class
or classes of Shares ranking on a parity with or senior to the Series L
Preferred Shares upon liquidation, dissolution or winding up, upon any
liquidation, dissolution or winding up of the Trust, after

                                       L-8

<PAGE>

payment shall have been made in full to the holders of the Series L Preferred
Shares, as provided in this subsection (d), any other series or class or classes
of Junior Shares shall, subject to the respective terms and provisions (if any)
applying thereto, be entitled to receive any and all assets remaining to be paid
or distributed, and the holders of the Series L Preferred Shares shall not be
entitled to share therein.

(e)    Redemption at the Option of the Trust.

       (i)     The Series L Preferred Shares shall not be redeemable by the
Trust prior to November 5, 2005. On and after November 5, 2005, the Trust, at
its option, may redeem the Series L Preferred Shares, in whole at any time or
from time to time in part as set forth herein, subject to the provisions
described below:

               (A) Series L Preferred Shares may be redeemed, in whole or in
          part, at the option of the Trust, at any time on or after November 5,
          2005 by issuing and delivering to each holder for each Series L
          Preferred Share to be redeemed such number of authorized but
          previously unissued Common Shares as equals the Liquidation Preference
          (excluding any accumulated, accrued and unpaid dividends which are to
          be paid in cash as provided below) per Series L Preferred Share
          divided by the Conversion Price as in effect as of the opening of
          business on the Call Date; provided, however, that the Trust may
          redeem Series L Preferred Shares pursuant to this subsection (e)(i)(A)
          only if (1) the Weighted Average Trading Price, for twenty (20)
          Trading Days, within the last thirty (30) Trading Days immediately
          before the date of the notice given pursuant to subsection (e)(iv),
          equals or exceeds 108% of the Conversion Price in effect on the date
          of the notice given pursuant to subsection (e)(iv) and (2) at least
          1,000,000 Common Shares were traded during such 30 Trading Days.

               (B) Series L Preferred Shares may be redeemed, in whole or in
          part, at the option of the Trust at any time on or after November 5,
          2005 out of funds legally available therefor at a redemption price
          payable in cash equal to the Liquidation Preference per Series L
          Preferred Share (plus all accumulated, accrued and unpaid dividends as
          provided below).

          (ii) Upon any redemption of Series L Preferred Shares pursuant to
this subsection (e), the Trust shall pay all accrued and unpaid dividends, if
any,thereon to the Call Date,

                                       L-9

<PAGE>

without interest. If the Call Date falls after a dividend payment record date
and prior to the corresponding Dividend Payment Date, then each holder of Series
L Preferred Shares at the close of business on such dividend payment record date
shall be entitled to the dividend payable on such shares on the corresponding
Dividend Payment Date notwithstanding any redemption of such shares before such
Dividend Payment Date. Except as provided above, the Trust shall make no payment
or allowance for unpaid dividends, whether or not in arrears, on Series L
Preferred Shares called for redemption.

     (iii) If full cumulative dividends on the Series L Preferred Shares and any
other class or series of Parity Shares have not been declared and paid or
declared and set apart for payment, the Series L Preferred Shares may not be
redeemed under this subsection (e) in part and the Trust may not purchase or
acquire Series L Preferred Shares, otherwise than pursuant to a purchase or
exchange offer made on the same terms to all holders of Series L Preferred
Shares.

     (iv) Notice of the redemption of any Series L Preferred Shares under this
subsection (e) shall be mailed by first-class mail to each holder of record of
Series L Preferred Shares to be redeemed at the address of each such holder as
shown on the Trust's records, not less than 30 nor more than 90 days prior to
the Call Date. Neither the failure to mail any notice required by this
subsection (e)(iv), nor any defect therein or in the mailing thereof, to any
particular holder, shall affect the sufficiency of the notice or the validity of
the proceedings for redemption with respect to the other holders. Any notice
which was mailed in the manner herein provided shall be conclusively presumed to
have been duly given on the date mailed whether or not the holder receives the
notice. Each such mailed notice shall state, as appropriate: (1) the Call Date;
(2) the number of Series L Preferred Shares to be redeemed and, if fewer than
all the shares held by such holder are to be redeemed, the number of such shares
to be redeemed from such holder; (3) the redemption price if the Series L
Preferred Shares are redeemed for cash and the number of Common Shares to be
issued if the Series L Preferred Shares are redeemed for Common Shares; (4) the
place or places at which certificates for such shares are to be surrendered; (5)
the then-current Conversion Price; and (6) that dividends on the shares to be
redeemed shall cease to accrue on such Call Date except as otherwise provided
herein. Notice having been mailed as aforesaid, from and after the Call Date
(unless the Trust shall fail to make available an amount of cash necessary to
effect such redemption), (A) except as otherwise provided herein, dividends on
the Series L Preferred Shares so called for redemption shall cease to accrue,
(B) such shares shall no longer be deemed to be outstanding, and (C) all rights
of the

                                      L-10

<PAGE>

holders thereof as holders of Series L Preferred Shares of the Trust shall cease
(except the rights to convert and to receive the Common Shares and/or cash
payable upon such redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required and to receive any dividends
payable thereon). The Trust's obligation to provide Common Shares and/or cash in
accordance with the preceding sentence shall be deemed fulfilled if, on or
before the Call Date, the Trust shall deposit with a bank or trust company
(which may be an affiliate of the Trust) that has an office in the Borough of
Manhattan, City of New York, and that has, or is an affiliate of a bank or trust
company that has, capital and surplus of at least $50,000,000, necessary for
such redemption, in trust, with irrevocable instructions that such Common Shares
and/or cash be applied to the redemption of the Series L Preferred Shares so
called for redemption. In the case of any redemption pursuant to subsection
(e)(i)(A) of this Section 13, at the close of business on the Call Date, each
holder of Series L Preferred Shares to be redeemed (unless the Trust defaults in
the delivery of the Common Shares or cash payable on such Call Date) shall be
deemed to be the record holder of the Common Shares into which such Series L
Preferred Shares are to be converted at redemption, regardless of whether such
holder has surrendered the certificates representing the Series L Preferred
Shares to be so redeemed. No interest shall accrue for the benefit of the
holders of Series L Preferred Shares to be redeemed on any cash so set aside by
the Trust. Subject to applicable escheat laws, any such cash unclaimed at the
end of two years from the Call Date shall revert to the general funds of the
Trust, after which reversion the holders of such shares so called for redemption
shall look only to the general funds of the Trust for the payment of such cash.

     As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares so redeemed (properly endorsed or
assigned for transfer, if the Trust shall so require and if the notice shall so
state), such shares shall be exchanged for any cash (without interest thereon)
for which such shares have been redeemed. If fewer than all the outstanding
Series L Preferred Shares are to be redeemed, shares to be redeemed shall be
selected by the Trust from outstanding Series L Preferred Shares not previously
called for redemption pro rata (as nearly as may be), by lot or by any other
method determined by the Trust in its sole discretion to be equitable. If fewer
than all the Series L Preferred Shares represented by any certificate are
redeemed, then new certificates representing the unredeemed shares shall be
issued without cost to the holder thereof.

     (v)     In the case of any redemption pursuant to subsection (e)(i)(A) of
this Section 13.

                                      L-11

<PAGE>

               (A) no fractional Common Shares or scrip representing fractions
          of Common Shares shall be issued upon redemption of the Series L
          Preferred Common Shares. Instead of any fractional interest in Common
          Shares that would otherwise be deliverable upon redemption of Series L
          Preferred Shares, the Trust shall pay to the holder of such share an
          amount in cash (rounded to the nearest cent) based upon the Current
          Market Price of the Common Shares on the Trading Day immediately
          preceding the Call Date. If more than one Series L Preferred Share
          shall be surrendered for redemption at one time by the same holder,
          the number of full Common Shares issuable upon redemption thereof
          shall be computed on the basis of the aggregate number of Series L
          Preferred Shares so surrendered.

               (B) the Trust covenants that any Common Shares issued upon
          redemption of Series L Preferred Shares shall be validly issued, fully
          paid and non-assessable. The Trust shall endeavor to list the Common
          Shares required to be delivered upon any such redemption of Series L
          Preferred Shares, prior to such redemption, upon each national
          securities exchange, if any, upon which the outstanding Common Shares
          are listed at the time of such delivery.

     (f)  Conversion. Holders of Series L Preferred Shares shall have the right
to convert all or a portion of such shares into Common Shares, as follows:

          (i) Subject to and upon compliance with the provisions of this
     subsection (f) and the provisions of Section 18A of Article II of the
     Declaration of Trust, a holder of Series L Preferred Shares shall have the
     right, at any time, at his or her option, to convert such shares into the
     number of fully paid and non-assessable Common Shares obtained by dividing
     the aggregate Liquidation Preference of such shares (exclusive of accrued
     but unpaid dividends) by the Conversion Price (as in effect at the time and
     on the date provided for in the last paragraph of subsection (f)(ii) of
     this Section 13) by surrendering such shares to be converted, such
     surrender to be made in the manner provided in subsection (f)(ii) of this
     Section 13; provided, however, that the right to convert shares called for
                 --------  -------
     redemption pursuant to subsection (e) of this Section 13 shall terminate at
     the close of business on the fifth Business Day prior to the Call Date
     fixed for such redemption, unless the Trust shall default in making payment
     of the cash payable upon such redemption under subsection (e) of this
     Section 13.

                                      L-12

<PAGE>

               (ii) In order to exercise the conversion right, the holder of
          each Series L Preferred Share to be converted shall surrender the
          certificate representing such share, duly endorsed or assigned to the
          Trust or in blank, at the office of the Transfer Agent, accompanied by
          written notice to the Trust that the holder thereof elects to convert
          such Series L Preferred Shares. Unless the shares issuable on
          conversion are to be issued in the same name as the name in which such
          Series L Preferred Share is registered, each share surrendered for
          conversion shall be accompanied by instruments of transfer, in form
          satisfactory to the Trust, duly executed by the holder or such
          holder's duly authorized attorney and an amount sufficient to pay any
          transfer or similar tax (or evidence reasonably satisfactory to the
          Trust demonstrating that such taxes have been paid).

               Holders of Series L Preferred Shares at the close of business on
          a dividend payment record date shall be entitled to receive the
          dividend payable on such shares on the corresponding Dividend Payment
          Date notwithstanding the conversion thereof following such dividend
          payment record date and prior to such Dividend Payment Date. However,
          Series L Preferred Shares surrendered for conversion during the period
          between the close of business on any dividend payment record date and
          the opening of business on the corresponding Dividend Payment Date
          (except shares converted after the issuance of notice of redemption
          with respect to a Call Date during such period, such Series L
          Preferred Shares being entitled to such dividend on the Dividend
          Payment Date) must be accompanied by payment of an amount equal to the
          dividend payable on such shares on such Dividend Payment Date. A
          holder of Series L Preferred Shares on a dividend payment record date
          who (or whose transferee) tenders any such shares for conversion into
          Common Shares on the corresponding Dividend Payment Date will receive
          the dividend payable by the Trust on such Series L Preferred Shares on
          such date, and the converting holder need not include payment of the
          amount of such dividend upon surrender of Series L Preferred Shares
          for conversion. Except as provided above, the Trust shall make no
          payment or allowance for unpaid dividends, whether or not in arrears,
          on converted shares or for dividends on the Common Shares issued upon
          such conversion.

               As promptly as practicable after the surrender of certificates
          for Series L Preferred Shares as aforesaid, the Trust shall issue and
          shall deliver at such office to such holder, or on his or her written
          order, a certificate or certificates for the number of full Common
          Shares issuable upon the conversion of such shares in accordance with
          provisions of this subsection (f), and any fractional interest in
          respect of a Common Share arising upon such conversion shall be
          settled as provided in subsection (f)(iii) of this Section 13.

                                      L-13

<PAGE>

               Each conversion shall be deemed to have been effected immediately
          prior to the close of business on the date on which the certificates
          for Series L Preferred Shares shall have been surrendered and such
          notice shall have been received by the Trust as aforesaid (and if
          applicable, payment of an amount equal to the dividend payable on such
          shares shall have been received by the Trust as described above), and
          the person or persons in whose name or names any certificate or
          certificates for Common Shares shall be issuable upon such conversion
          shall be deemed to have become the holder or holders of record of the
          shares represented thereby at such time on such date and such
          conversion shall be at the Conversion Price in effect at such time on
          such date unless the share transfer books of the Trust shall be closed
          on that date, in which event such person or persons shall be deemed to
          have become such holder or holders of record at the close of business
          on the next succeeding day on which such share transfer books are
          open, but such conversion shall be at the Conversion Price in effect
          on the date on which such shares shall have been surrendered and such
          notice received by the Trust.

               (iii) No fractional shares or scrip representing fractions of
          Common Shares shall be issued upon conversion of the Series L
          Preferred Shares. Instead of any fractional interest in a Common Share
          that would otherwise be deliverable upon the conversion of a Series L
          Preferred Share, the Trust shall pay to the holder of such share an
          amount in cash based upon the Current Market Price of the Common
          Shares on the Trading Day immediately preceding the date of
          conversion. If more than one Series L Preferred Share shall be
          surrendered for conversion at one time by the same holder, the number
          of full Common Shares issuable upon conversion thereof shall be
          computed on the basis of the aggregate number of Series L Preferred
          Shares so surrendered.

               (iv)  The Conversion Price shall be adjusted from time to time as
          follows:

                     (A) If the Trust shall after Issue Date (1) pay a dividend
               or make a distribution on its capital shares in Common Shares,
               (2) subdivide its outstanding Common Shares into a greater number
               of shares, (3) combine its outstanding Common Shares into a
               smaller number of shares or (4) issue any Shares by
               reclassification of its Common Shares, the Conversion Price in
               effect at the opening of business on the day following the date
               fixed for the determination of shareholders entitled to receive
               such dividend or distribution or at the opening of business on
               the Business Day next following the day on which such
               subdivision, combination or reclassification becomes effective,
               as the case may be, shall be adjusted so that the

                                      L-14

<PAGE>

          holder of any Series L Preferred Share thereafter surrendered for
          conversion shall be entitled to receive the number of Common Shares
          that such holder would have owned or have been entitled to receive
          after the happening of any of the events described above as if such
          Series L Preferred Shares had been converted immediately prior to the
          record date in the case of a dividend or distribution or the effective
          date in the case of a subdivision, combination or reclassification. An
          adjustment made pursuant to this subsection (f)(iv)(A) shall become
          effective immediately after the opening of business on the Business
          Day next following the record date (except as provided in subsection
          (f)(viii) of this Section 13) in the case of a dividend or
          distribution and shall become effective immediately after the opening
          of business on the Business Day next following the effective date in
          the case of a subdivision, combination or reclassification.

               (B) If the Trust shall issue after the Issue Date rights, options
          or warrants to all holders of Common Shares entitling them (for a
          period expiring within 45 days after the record date mentioned below)
          to subscribe for or purchase Common Shares at a price per share less
          than 94% (100% if a stand-by underwriter is used and charges the Trust
          a commission) of the Fair Market Value per Common Share on the record
          date for the determination of shareholders entitled to receive such
          rights, options or warrants, then the Conversion Price in effect at
          the opening of business on the Business Day next following such record
          date shall be adjusted to equal the price determined by multiplying
          (i) the Conversion Price in effect immediately prior to the opening of
          business on the Business Day next following the date fixed for such
          determination by (ii) a fraction, the numerator of which shall be the
          sum of (x) the number of Common Shares outstanding on the close of
          business on the date fixed for such determination and (y) the number
          of shares that the aggregate proceeds to the Trust from the exercise
          of such rights, options or warrants for Common Shares would purchase
          at 94% of such Fair Market Value (or 100% in the case of a stand-by
          underwriting), and the denominator of which shall be the sum of (x)
          the number of Common Shares outstanding on the close of business on
          the date fixed for such determination and (y) the number of additional
          Common Shares offered for subscription or purchase pursuant to such
          rights, options or warrants. Such adjustment shall become effective
          immediately after the opening of business on the day next following
          such record date (except as provided in subsection (f)(viii) of this
          Section 13). In determining whether any rights, options or warrants
          entitle the holders of Common Shares to subscribe for or purchase
          Common Shares at less than

                                      L-15

<PAGE>

          94% of such Fair Market Value (or 100% in the case of a stand-by
          underwriting), there shall be taken into account any consideration
          received by the Trust upon issuance and upon exercise of such rights,
          options or warrants, the value of such consideration, if other than
          cash, to be determined by the Board.

               (C) If the Trust shall distribute to all holders of its Common
          Shares any securities of the Trust (other than Common Shares) or
          evidence of its indebtedness or assets (excluding cumulative cash
          dividends or distributions paid with respect to the Common Shares or
          common shares of Smith Realty after December 31, 1998 which are not in
          excess of the following: the sum of (1) the cumulative undistributed
          Funds from Operations at December 31, 1998, plus (2) the cumulative
          amount of Funds from Operations, as determined by the Board, after
          December 31, 1998, minus (3) the cumulative amount of dividends
          accrued or paid in respect of the Series L Preferred Shares or any
          other class or series of preferred Shares of the Trust or preferred
          shares of Smith Realty after July 2, 1999) or rights, options or
          warrants to subscribe for or purchase any of its securities (excluding
          those rights, options and warrants issued to all holders of Common
          Shares entitling them for a period expiring within 45 days after the
          record date referred to in subsection (f)(iv)(B) to subscribe for or
          purchase Common Shares, which rights and warrants are referred to in
          and treated under subsection (f)(iv)(B)) (any of the foregoing being
          hereinafter in this subsection (f)(iv)(B)) collectively called the
          "Securities" and individually a "Security"), then in each such case
          the Conversion Price shall be adjusted so that it shall equal the
          price determined by multiplying (x) the Conversion Price in effect
          immediately prior to the close of business on the date fixed for the
          determination of shareholders entitled to receive such distribution by
          (y) a fraction, the numerator of which shall be the Fair Market Value
          per Common Share on the record date mentioned below less the then fair
          market value (as determined by the Board, whose determination shall be
          conclusive), of the portion of the Securities or assets or evidences
          of indebtedness so distributed or of such rights, options or warrants
          applicable to one Common Share, and the denominator of which shall be
          the Fair Market Value per Common Share on the record date mentioned
          below. Such adjustment shall become effective immediately at the
          opening of business on the Business Day next following (except as
          provided in subsection (f)(viii) of this Section 13) the record date
          for the determination of shareholders entitled to receive such
          distribution. For the purposes of this subsection (f)(iv)(C) of this
          Section 13, the distribution of a Security, which is distributed not
          only to the holders of the

                                      L-16

<PAGE>

          Common Shares on the date fixed for the determination of shareholders
          entitled to such distribution of such Security, but also is
          distributed with each Common Share delivered to a Person converting a
          Series L Preferred Share after such determination date, shall not
          require an adjustment of the Conversion Price pursuant to this
          subsection (f)(iv)(C) of this Section 13; provided that on the date,
                                                    --------
          if any, on which a person converting a Series L Preferred Share would
          no longer be entitled to receive such Security with a Common Share
          (other than as a result of the termination of all such Securities), a
          distribution of such Securities shall be deemed to have occurred and
          the Conversion Price shall be adjusted as provided in this subsection
          (f)(iv)(C) of this Section 13 (and such day shall be deemed to be "the
          date fixed for the determination of the shareholders entitled to
          receive such distribution" and "the record date" within the meaning of
          the two preceding sentences).

               (D)  In case a tender or exchange offer (which term shall not
          include open market repurchases by the Trust) made by the Trust or any
          subsidiary of the Trust for all or any portion of the Common Shares
          shall expire and such tender or exchange offer shall involve the
          payment by the Trust or such subsidiary of consideration per Common
          Share having a fair market value (as determined in good faith by the
          Board, whose determination shall be conclusive and described in a
          resolution of the Board), at the last time (the "Expiration Time")
                                                           ---------------
          tenders or exchanges may be made pursuant to such tender or exchange
          offer, that exceeds the Current Market Price per Common Share on the
          Trading Day next succeeding the Expiration Time, the Conversion Price
          shall be reduced so that the same shall equal the price determined by
          multiplying the Conversion Price in effect immediately prior to the
          effectiveness of the Conversion Price reduction contemplated by this
          subparagraph, by a fraction of which the numerator shall be the number
          of Common Shares outstanding (including any tendered or exchanged
          shares) at the Expiration Time, multiplied by the Current Market Price
          per Common Share on the Trading Day next succeeding the Expiration
          Time, and the denominator shall be the sum of (1) the fair market
          value (determined as aforesaid) of the aggregate consideration payable
          to shareholders based upon the acceptance (up to any maximum specified
          in the terms of the tender or exchange offer) of all shares validly
          tendered or exchanged and not withdrawn as of the Expiration Time (the
          shares deemed so accepted, up to any maximum, being referred to as the
          "Purchased Shares") and (2) the product of the number of Common Shares
           ----------------
          outstanding (less any Purchased Shares) at the Expiration Time and the
          Current Market Price per Common Share on the Trading Day next
          succeeding the Expiration

                                      L-17

<PAGE>

          Time, such reduction to become effective immediately prior to the
          opening of business on the day following the Expiration Time.

               (E)  No adjustment in the Conversion Price shall be required
          unless such adjustment would require a cumulative increase or decrease
          of at least 1% in such price; provided, however, that any adjustments
                                        --------  -------
          that by reason of this subsection (f)(iv)(E) are not required to be
          made shall be carried forward and taken into account in any subsequent
          adjustment until made; and provided, further, that any adjustment
                                     --------  -------
          shall be required and made in accordance with the provisions of this
          subsection (f) (other than this subsection (f)(iv)(E)) not later than
          such time as may be required in order to preserve the tax-free nature
          of a distribution to the holders of Common Shares. Notwithstanding any
          other provisions of this subsection (f), the Trust shall not be
          required to make any adjustment of the Conversion Price for the
          issuance of any Common Shares pursuant to any plan providing for the
          reinvestment of dividends or interest payable on securities of the
          Trust and the investment of additional optional amounts in Common
          Shares under such plan. All calculations under this subsection (f)
          shall be made to the nearest cent (with $.005 being rounded upward) or
          to the nearest one-tenth of a share (with .05 of a share being rounded
          upward), as the case may be. Anything in this subsection (f)(iv) to
          the contrary notwithstanding, the Trust shall be entitled, to the
          extent permitted by law, to make such reductions in the Conversion
          Price, in addition to those required by this subsection (f)(iv), as it
          in its discretion shall determine to be advisable in order that any
          share dividends, subdivision of shares, reclassification or
          combination of shares, distribution of rights or warrants to purchase
          shares or securities, or distribution of other assets (other than cash
          dividends) hereafter made by the Trust to its shareholders shall not
          be taxable.

          (v)  If the Trust shall be a party to any transaction (including
     without limitation a merger, consolidation, statutory share exchange, self
     tender offer for all or substantially all of its Common Shares, sale of all
     or substantially all of the Trust's assets or recapitalization of the
     Common Shares and excluding any transaction as to which subsection
     (f)(iv)(A) of this Section 13 applies) (each of the foregoing being
     referred to herein as a "Transaction"), in each case as a result of which
                              -----------
     all or substantially all of the Trust's Common Shares are converted into
     the right to receive shares, securities or other property (including cash
     or any combination thereof), each Series L Preferred Share which is not
     redeemed or converted into the right to receive shares, securities or other
     property prior to such Transaction shall

                                      L-18

<PAGE>

thereafter be convertible into the kind and amount of shares, securities and
other property (including cash or any combination thereof) receivable upon the
consummation of such Transaction by a holder of that number of Common Shares
into which one Series L Preferred Share was convertible immediately prior to
such Transaction, assuming such holder of Common Shares (A) is not a Person with
which the Trust consolidated or into which the Trust merged or which merged into
the Trust or to which such sale or transfer was made, as the case may be
("Constituent Person"), or an affiliate of a Constituent Person and (B) failed
  ------------------
to exercise his rights of election, if any, as to the kind or amount of shares,
securities and other property (including cash) receivable upon such Transaction
(provided that if the kind or amount of shares, securities and other property
(including cash) receivable upon such Transaction is not the same for each
Common Share held immediately prior to such Transaction by other than a
Constituent Person or an affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-Electing Share"), then for the
                                            ------------------
purpose of this subsection (f)(v) the kind and amount of shares, securities and
other property (including cash) receivable upon such Transaction by each
Non-Electing Share shall be deemed to be the kind and amount so receivable per
share by a plurality of the Non-Electing Shares). The Trust shall not be a party
to any Transaction unless the terms of such Transaction are consistent with the
provisions of this subsection (f)(v), and it shall not consent or agree to the
occurrence of any Transaction until the Trust has entered into an agreement with
the successor or purchasing entity, as the case may be, for the benefit of the
holders of the Series L Preferred Shares that will contain provisions enabling
the holders of the Series L Preferred Shares that remain outstanding after such
Transaction to convert into the consideration received by holders of Common
Shares at the Conversion Price in effect immediately prior to such Transaction.
The provisions of this subsection (f)(v) shall similarly apply to successive
Transactions.

     (vi) If:

          (A) the Trust shall declare a dividend (or any other distribution) on
     its Common Shares (other than cash dividends or distributions paid with
     respect to the Common Shares or the common shares of Smith Realty after
     December 31, 1998 not in excess of the sum of the cumulative undistributed
     Funds from Operations at December 31, 1998, plus the cumulative amount of
     Funds from Operations, as determined by the Board, after December 31, 1998,
     minus the cumulative amount of dividends accrued or paid in respect of the
     Series L Preferred Shares or any other

                                      L-19

<PAGE>

     class or series of preferred Shares of the Trust or preferred shares of
     Smith Realty after July 2, 1999); or

          (B) the Trust shall authorize the granting to all holders of Common
     Shares of rights, options or warrants to subscribe for or purchase any
     shares of any class or any other rights, options or warrants; or

          (C) there shall be any reclassification of the Common Shares (other
     than an event to which subsection (f)(iv)(A) of Section 13 applies) or any
     consolidation or merger to which the Trust is a party and for which
     approval of any shareholders of the Trust is required, or a statutory share
     exchange, or a self tender offer by the Trust for all or substantially all
     of its outstanding Common Shares or the sale or transfer of all or
     substantially all of the assets of the Trust as an entirety; or

          (D) there shall occur the voluntary or involuntary liquidation,
     dissolution or winding up of the Trust;

then the Trust shall cause to be filed with the Transfer Agent and shall cause
to be mailed to the holders of Series L Preferred Shares at their addresses as
shown on the records of the Trust, as promptly as possible, but at least 10 days
prior to the applicable date hereinafter specified, a notice stating (1) the
date on which a record is to be taken for the purpose of such dividend,
distribution or granting of rights, options or warrants, or, if a record is not
to be taken, the date as of which the holders of Common Shares of record to be
entitled to such dividend, distribution or rights, options or warrants are to be
determined or (2) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Shares of record shall be entitled to exchange
their Common Shares for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up. Failure to give or receive
such notice or any defect therein shall not affect the legality or validity of
the proceedings described in this subsection (f).

     (vii) Whenever the Conversion Price is adjusted as herein provided, the
Trust shall promptly file with the Transfer Agent an officer's certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment which certificate shall
be conclusive evidence of the correctness of such

                                      L-20

<PAGE>

adjustment absent manifest error. Promptly after delivery of such certificate,
the Trust shall prepare a notice of such adjustment of the Conversion Price
setting forth the adjusted Conversion Price and the effective date of such
adjustment and shall mail such notice of such adjustment of the Conversion Price
to the holder of each Series L Preferred Share at such holder's last address as
shown on the records of the Trust.

     (viii) In any case in which subsection (f)(iv) of this Section 13 provides
that an adjustment shall become effective on the day next following the record
date for an event, the Trust may defer until the occurrence of such event (A)
issuing to the holder of any Series L Preferred Share converted after such
record date and before the occurrence of such event the additional Common Shares
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Shares issuable upon such conversion before giving
effect to such adjustment and (B) paying to such holder any amount of cash in
lieu of any fraction pursuant to subsection (f)(iii).

     (ix)   There shall be no adjustment of the Conversion Price in case of the
issuance of any Shares in a reorganization, acquisition or other similar
transaction except as specifically set forth in this subsection (f). If any
action or transaction would require adjustment of the Conversion Price pursuant
to more than one paragraph of this subsection (f), only one adjustment shall be
made and such adjustment shall be the amount of adjustment that has the highest
absolute value.

     (x)    If the Trust shall take any action affecting the Common Shares,
other than action described in this subsection (f), that in the opinion of the
Board would materially and adversely affect the conversion rights of the holders
of the Series L Preferred Shares, the Conversion Price for the Series L
Preferred Shares may be adjusted, to the extent

permitted by law, in such manner, if any, and at such time, as the Board, in its
sole discretion, may determine to be equitable in the circumstances.

     (xi)   The Trust covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued Common Shares, for the purpose of effecting conversion of the
Series L Preferred Shares, the full number of Common Shares deliverable upon the
conversion of all outstanding Series L Preferred Shares not theretofore
converted. For purposes of this subsection (f)(xi), the number of Common Shares
that shall be deliverable upon the conversion of all outstanding Series L
Preferred

                                      L-21

<PAGE>
Shares shall be computed as if at the time of computation all such outstanding
shares were held by a single holder.

     The Trust covenants that any Common Shares issued upon conversion of the
Series L Preferred Shares shall be validly issued, fully paid and
non-assessable. Before taking any action that would cause an adjustment reducing
the Conversion Price below the then-par value of the Common Shares deliverable
upon conversion of the Series L Preferred Shares, the Trust will take any action
that, in the opinion of its counsel, may be necessary in order that the Trust
may validly and legally issue fully paid and (subject to any customary
qualification based upon the nature of a real estate investment trust)
non-assessable Common Shares at such adjusted Conversion Price.

     The Trust shall endeavor to list the Common Shares required to be delivered
upon conversion of the Series L Preferred Shares, prior to such delivery, upon
each national securities exchange, if any, upon which the outstanding Common
Shares are listed at the time of such delivery.

     The Trust shall endeavor to comply with all federal and state securities
laws and regulations thereunder in connection with the issuance of any
securities that the Trust shall be obligated to deliver upon conversion of the
Series L Preferred Shares. In addition to any legend required by Section 18A of
Article II of the Declaration of Trust, the certificates evidencing such
securities shall bear such legends restricting transfer thereof in the absence
of registration under applicable securities laws or an exemption therefrom as
the Trust may in good faith deem appropriate.

     (xii) The Trust will pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of Common Shares or
other securities or property on conversion of the Series L Preferred Shares
pursuant hereto; provided, however, that the Trust shall not be required to pay
                 --------  -------
any tax that may be payable in respect of any transfer involved in the issue or
delivery of Common Shares or other securities or property in a name other than
that of the holder of the Series L Preferred Shares to be converted, and no such
issue or delivery shall be made unless and until the person requesting such
issue or delivery has paid to the Trust the amount of any such tax or
established, to the reasonable satisfaction of the Trust, that such tax has been
paid.

                                      L-22

<PAGE>

     (g)  Shares To Be Retired. All Series L Preferred Shares which shall have
been issued and reacquired in any manner by the Trust shall be restored to the
status of authorized but unissued shares of beneficial interest of the Trust,
without designation as to class or series.

     (h)  Ranking. Any class or series of Shares shall be deemed to rank:

          (i)   senior to the Series L Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if the holders of such class or
     series are entitled to the receipt of dividends or of amounts distributable
     upon any liquidation, dissolution or winding up of the Trust, as the case
     may be, in preference or priority to the holders of Series L Preferred
     Shares;

          (ii)  on a parity with the Series L Preferred Shares, in the payment
     of dividends and in distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, whether or not the dividend rates,
     dividend payment dates or redemption or liquidation prices per share
     thereof are different from those of the Series L Preferred Shares, if the
     holders of such class or series and the holders of the Series L Preferred
     Shares shall be entitled to the receipt of dividends and amounts
     distributable upon any liquidation, dissolution or winding up of the Trust
     in proportion to their respective amounts of dividends accrued and unpaid
     per share or liquidation preferences, without preference or priority to
     each other ("Parity Shares");
                  -------------

          (iii) junior to the Series L Preferred Shares, in the payment of
     dividends or in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such class or series is Junior
     Shares; and

          (iv)  junior to the Series L Preferred Shares, in the payment of
     dividends and in the distribution of assets upon any liquidation,
     dissolution or winding up of the Trust, if such class or series is Fully
     Junior Shares.

     (i)  Voting. If and whenever four quarterly dividends (whether or not
consecutive) payable on the Series L Preferred Shares or any series or class of
Parity Shares shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of Trustees then constituting the
Board shall be increased by two and the holders of Series L Preferred Shares,
together with the holders of shares of every other series of Parity Shares (any
such other series, the "Voting Preferred Shares"),
                        -----------------------

                                      L-23

<PAGE>

voting as a single class regardless of series, shall be entitled to elect the
two additional Trustees to serve on the Board at any annual meeting of
shareholders or special meeting held in place thereof, or at a special meeting
of the holders of the Series L Preferred Shares and the Voting Preferred Shares
called as hereinafter provided. Whenever all arrears in dividends on the Series
L Preferred Shares and the Voting Preferred Shares then outstanding shall have
been paid and dividends thereon for the current quarterly dividend period shall
have been paid or declared and set apart for payment, then the right of the
holders of the Series L Preferred Shares and the Voting Preferred Shares to
elect such additional two Trustees shall cease (but subject always to the same
provision for the vesting of such voting rights in the case of any similar
future arrearage in quarterly dividends), and the terms of office of all persons
elected as Trustees by the holders of the Series L Preferred Shares and the
Voting Preferred Shares shall forthwith terminate and the number of the Board
shall be reduced accordingly. At any time after such voting power shall have
been so vested in the holders of Series L Preferred Shares and the Voting
Preferred Shares, the Secretary of the Trust may, and upon the written request
of any holder of Series L Preferred Shares (addressed to the Secretary at the
principal office of the Trust) shall, call a special meeting of the holders of
the Series L Preferred Shares and of the Voting Preferred Shares for the
election of the Trustees to be elected by them as herein provided, such call to
be made by notice similar to that provided in the Bylaws of the Trust for a
special meeting of the shareholders or as required by law. If any such special
meeting required to be called as above provided shall not be called by the
Secretary within 20 days after receipt of any such request, then any holder of
Series L Preferred Shares may call such meeting, upon the notice above provided,
and for that purpose shall have access to the records of the Trust. The Trustees
elected at any such special meeting shall hold office until the next annual
meeting of the shareholders or special meeting held in lieu thereof if such
office shall not have previously terminated as above provided. If any vacancy
shall occur among the Trustees elected by the holders of the Series L Preferred
Shares and the Voting Preferred Shares, a successor shall be elected by the
Board, upon the nomination of the then-remaining Trustee elected by the holders
of the Series L Preferred Shares and the Voting Preferred Shares or the
successor of such remaining Trustee, to serve until the next annual meeting of
the shareholders or special meeting held in place thereof if such office shall
not have previously terminated as provided above.

         So long as any Series L Preferred Shares are outstanding, in addition
to any other vote or consent of shareholders required by law or by the
Declaration of Trust, the affirmative vote of at least 662/3% of the votes
entitled to be cast by the holders of the Series L Preferred Shares given in
person or by proxy, either in writing without a meeting or by vote at any
meeting called for the purpose, shall be necessary for effecting or validating:

                                      L-24

<PAGE>

          (i)   Any amendment, alteration or repeal of any of the provisions of
     the Declaration of Trust or the By-Laws that materially and adversely
     affects the voting powers, rights or preferences of the holders of the
     Series L Preferred Shares; provided, however, that the amendment of the
     provisions of the Declaration of Trust so as to authorize or create or to
     increase the authorized amount of, any Fully Junior Shares, Junior Shares
     that are not senior in any respect to the Series L Preferred Shares or any
     Parity Shares shall not be deemed to materially adversely affect the voting
     powers, rights or preferences of the holders of Series L Preferred Shares;
     or

          (ii)  A share exchange that affects the Series L Preferred Shares, a
     consolidation with or merger of the Trust into another entity, or a
     consolidation with or merger of another entity into the Trust, unless in
     each such case each Series L Preferred Share (A) shall remain outstanding
     without a material and adverse change to its terms and rights or (B) shall
     be converted into or exchanged for convertible preferred shares of the
     surviving entity having preferences, conversion or other rights, voting
     powers, restrictions, limitations as to dividends, qualifications and terms
     or conditions of redemption thereof identical to that of a Series L
     Preferred Share (except for changes that do not materially and adversely
     affect the holders of the Series L Preferred Shares); or

          (iii) The authorization, reclassification or creation of, or the
     increase in the authorized amount of, any shares of any class or any
     security convertible into shares of any class ranking senior to the Series
     L Preferred Shares in the distribution of assets on any liquidation,
     dissolution or winding up of the Trust or in the payment of dividends;

provided, however, that no such vote of the holders of Series L Preferred Shares
--------  -------
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such prior shares or
convertible security is to be made, as the case may be, provision is made for
the redemption of all Series L Preferred Shares at the time outstanding to the
extent such redemption is authorized by subsection (e) of this Section 13. For
purposes of the foregoing provisions, a "share exchange" means a transaction
(including a forward or reverse triangular merger) in which an entity acquires
all the issued or all the outstanding equity securities of one or more classes
of another entity and which does not affect the existence of either entity, and
the term "surviving entity" shall include the entity acquiring equity securities
in a share exchange.

     For purposes of the foregoing provisions of this subsection (i), each
Series L Preferred Share shall have one (1) vote per share, except that when any
other series of preferred Shares shall have

                                      L-25

<PAGE>

the right to vote with the Series L Preferred Shares as a single class on any
matter, then the Series L Preferred Shares and such other series shall have with
respect to such matters one (1) vote per $25.00 of stated liquidation
preference. Except as otherwise required by applicable law or as set forth
herein, the Series L Preferred Shares shall not have any relative,
participating, optional or other special voting rights and powers other than as
set forth herein, and the consent of the holders thereof shall not be required
for the taking of any Trust action.

     (j) Record Holders. The Trust and the Transfer Agent may deem and treat the
record holder of any Series L Preferred Shares as the true and lawful owner
thereof for all purposes, and neither the Trust nor the Transfer Agent shall be
affected by any notice to the contrary.

                                      L-26