Document:

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                         WELLSFORD REAL PROPERTIES, INC.

                                       and

                            WILMINGTON TRUST COMPANY,

                                   as Trustee

                8.25% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES

                                    INDENTURE

                             Dated as of May 5, 2000

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<PAGE>

                         WELLSFORD REAL PROPERTIES, INC.

           Reconciliation and tie between Trust Indenture Act of 1939
                      and Indenture dated as of May 5, 2000

Trust Indenture
  Act Section                                                  Indenture Section
  -----------                                                  -----------------
310     (a)   (1).......................................              6.10
        (a)   (2).......................................              6.10
        (a)   (3).......................................         Not Applicable
        (a)   (4).......................................         Not Applicable
        (a)   (5).......................................              6.10
        (b)   ..........................................            6.8, 6.10
311     (a)   ..........................................              6.11
        (b)   ..........................................              6.11
312     (a)   ..........................................            4.1, 4.2
        (b)   ..........................................              4.2
        (c)   ..........................................               4.2
313(a)(1) -   (5) & (7) (8).............................              6.6
        (a)   (6).......................................         Not Applicable
        (b)   (1).......................................         Not Applicable
        (b)   (2).......................................              6.6
        (c)   ..........................................              6.6
        (d)   ..........................................              6.6
314(a)  (1) - (3).......................................              4.3
      (a(4)   ..........................................              3.4
      (b)     ..........................................         Not Applicable
      (c(1)   ..........................................              2.6
      (c(2)   ..........................................              2.6
      (c(3)   ..........................................         Not Applicable
      (d)     ..........................................         Not Applicable
      (e)     ..........................................              14.5
      (f)     ..........................................         Not Applicable
315(a)        ..........................................              6.1
      (b)     ..........................................              6.5
      (c)     ..........................................              6.1
      (d)     ..........................................              6.1
      (d)(1)  ..........................................              6.1
      (d)(2)  ..........................................              6.1
      (d)(3)  ..........................................              6.1

<PAGE>

Trust Indenture
  Act Section                                                  Indenture Section
  -----------                                                  -----------------
      (e)     ..........................................              5.10
316(a)        ..........................................              7.4
      (a(1)(A)..........................................              5.8
      (a(1)(B)..........................................            5.1, 5.9
      (a)(2)  ..........................................         Not Applicable
      (b)     ..........................................              5.6
      (c)     ..........................................              7.1
317(a)(1)     ..........................................              5.2
      (a)(2)  ..........................................              5.2
      (b)     ..........................................              3.3
318(a)        ..........................................             14.7

----------

Note:This  reconciliation  and tie shall not, for any  purpose,  be deemed to be
     part of the Indenture.
<PAGE>

                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----

ARTICLE I         DEFINITIONS..................................................1
   Section  1.1   Certain Terms Defined........................................1

ARTICLE II        THE CONVERTIBLE DEBENTURES..................................10
   Section  2.1   Designation and Principal Amount............................10
   Section  2.2   Maturity....................................................10
   Section  2.3   Form and Payment............................................11
   Section  2.4   Exchange and Registration of Transfer of Convertible
                  Debentures; Restrictions on Transfers; Depositary...........11
   Section  2.5   Interest....................................................15
   Section  2.6   Authentication and Delivery of Convertible Debentures.......16
   Section  2.7   Execution of Convertible Debentures.........................17
   Section  2.8   Certificate of Authentication...............................17
   Section  2.9   Denomination and Date of Convertible Debentures;
                  Payments of Interest........................................18
   Section  2.10  Registration, Transfer and Exchange.........................19
   Section  2.11  Mutilated, Defaced, Destroyed, Lost and Stolen Convertible
                  Debentures..................................................21
   Section  2.12  Cancellation of Convertible Debentures......................22
   Section  2.13  Temporary Convertible Debentures............................22

ARTICLE III       COVENANTS OF THE COMPANY....................................23
   Section  3.1   Payment of Principal and Interest...........................23
   Section  3.2   Offices for Payment, etc....................................23
   Section  3.3   Paying Agents...............................................23
   Section  3.4   Written Statement to Trustee................................24
   Section  3.5   Limitation on Dividends.  ..................................24
   Section  3.6   Covenants as to WRP Trust...................................25
   Section  3.7   Existence...................................................25

ARTICLE IV        HOLDERS OF CONVERTIBLE DEBENTURES LISTS AND
                  REPORTS BY THE COMPANY AND THE TRUSTEE......................25
   Section  4.1   Company to Furnish Trustee Information as to Names and
                  Addresses of Holders of Convertible Debentures..............25
   Section  4.2   Preservation and Disclosure of Holders of Convertible
                  Debentures Lists............................................26
   Section  4.3   Reports by the Company......................................27

<PAGE>

                                                                            Page
                                                                            ----

ARTICLE V         REMEDIES OF THE TRUSTEE AND HOLDERS OF
                  CONVERTIBLE DEBENTURES ON EVENT OF DEFAULT .................28
   Section  5.1   Event of Default Defined; Acceleration of Maturity;
                  Waiver of Default...........................................28
   Section  5.2   Collection of Indebtedness by Trustee; Trustee May
                  Prove Debt .................................................31
   Section  5.3   Application of Proceeds.....................................33
   Section  5.4   Restoration of Rights on Abandonment of Proceedings.........33
   Section  5.5   Limitations on Suits by Holders of Convertible Debentures...34
   Section  5.6   Unconditional Right of Holders of Convertible Debentures
                  to Institute Certain Suits..................................34
   Section  5.7   Powers and Remedies Cumulative; Delay or Omission Not
                  Waiver of Default...........................................34
   Section  5.8   Control by Holders of Convertible Debentures................35
   Section  5.9   Waiver of Past Defaults.....................................35
   Section  5.10  Right of Court to Require Filing of Undertaking to Pay
                  Costs ......................................................36
   Section  5.11  Suits for Enforcement.......................................36
   Section  5.12  Unconditional Right of Holders to Receive Principal
                  and Interest and to Convert.................................36

ARTICLE VI        CONCERNING THE TRUSTEE......................................37
   Section  6.1   Duties of the Trustee.......................................37
   Section  6.2   Rights of Trustee...........................................38
   Section  6.3   Individual Rights of Trustee................................39
   Section  6.4   Trustee's Disclaimer........................................39
   Section  6.5   Notice of Defaults..........................................39
   Section  6.6   Reports by Trustee to Holders...............................39
   Section  6.7   Compensation and Indemnity..................................40
   Section  6.8   Replacement of Trustee......................................40
   Section  6.9   Successor Trustee by Merger.................................41
   Section  6.10  Eligibility; Disqualification...............................41
   Section  6.11  Preferential Collection of Claims Against Company...........41

ARTICLE VII       CONCERNING THE HOLDERS OF CONVERTIBLE DEBENTURES............42
   Section  7.1   Evidence of Action Taken by Holders of Convertible
                  Debentures .................................................42
   Section  7.2   Proof of Execution of Instruments...........................42
   Section  7.3   Holders to be Treated as Owners.............................42
   Section  7.4   Convertible Debentures Owned by Company Deemed Not
                  Outstanding.................................................42
   Section  7.5   Right of Revocation of Action Taken.........................43

ARTICLE VIII      SUPPLEMENTAL INDENTURES.....................................43

<PAGE>

                                                                            Page
                                                                            ----

   Section  8.1   Supplemental Indentures Without Consent of Holders of
                  Convertible Debentures......................................43
   Section  8.2   Supplemental Indentures With Consent of Holders of
                  Convertible Debentures......................................44
   Section  8.3   Effect of Supplemental Indenture............................45
   Section  8.4   Documents to Be Given to Trustee............................46
   Section  8.5   Notation on Convertible Debentures in Respect of
                  Supplemental Indentures.....................................46

ARTICLE IX        CONSOLIDATION, MERGER, SALE OR CONVEYANCE ..................46
   Section  9.1   Company May Consolidate, etc., on Certain Terms.............46
   Section  9.2   Successor or Substituted....................................47
   Section  9.3   Opinion of Counsel to Trustee...............................47

ARTICLE X         REDEMPTION OF THE CONVERTIBLE DEBENTURES ...................47
   Section  10.1  Tax Event Redemption........................................47
   Section  10.2  Optional Redemption by Company..............................48
   Section  10.3  No Sinking Fund.............................................52
   Section  10.4  Election to Redeem; Notice of Redemption; Partial
                  Redemptions ................................................52
   Section  10.5  Payment of Convertible Debentures Called for Redemption.....53
   Section  10.6  Exclusion of Certain Convertible Debentures from
                  Eligibility for Selection for Redemption....................54
   Section  10.7  Required Redemption.........................................54

ARTICLE XI        CONVERSION OF CONVERTIBLE DEBENTURES........................55
   Section  11.1  Conversion Rights...........................................55
   Section  11.2  Conversion Procedures.......................................55
   Section  11.3  Conversion Price Adjustments................................57
   Section  11.4..............................................................61
   Section  11.5  Trustee Not Responsible for Determining Conversion Price or
                  Adjustments.................................................61
   Section  11.6  Reservation of Common Shares................................62
   Section  11.7  Payment of Certain Taxes upon Conversion....................62
   Section  11.8  Nonassessability............................................62

ARTICLE XII       SUBORDINATION OF CONVERTIBLE DEBENTURES.....................62
   Section  12.1  Convertible Debentures Subordinate to Senior Indebtedness...62
   Section  12.2  Payment Over of Proceeds upon Dissolution, Etc..............62
   Section  12.3  Prior Payment to Senior Indebtedness upon Acceleration
                  of Convertible Debentures...................................64
   Section  12.4  No Payment When Senior Indebtedness in Default..............64
   Section  12.5  Payment Permitted in Certain Situations.....................64

<PAGE>

                                                                            Page
                                                                            ----

   Section  12.6  Subrogation to Rights of Holders of Senior Indebtedness.....65
   Section  12.7  Provisions Solely to Define Relative Rights.................65
   Section  12.8  Trustee to Effectuate Subordination.........................66
   Section  12.9  No Waiver of Subordination Provisions.......................66
   Section  12.10 Notice to Trustee...........................................66
   Section  12.11 Reliance on Judicial Order or Certificate of
                  Liquidating Agent ..........................................67
   Section  12.12 Trustee Not Fiduciary for Holders of Senior Indebtedness....67
   Section  12.13 Rights of Trustee as Holder of Senior Indebtedness;
                  Preservation of Trustee's Rights............................67
   Section  12.14 Article Applicable to Paying Agents.........................68
   Section  12.15 Certain Conversions Deemed Payment..........................68
   Section  12.16 Further Subrogation.........................................68

ARTICLE XIII      EXPENSES....................................................69
   Section  13.1  Payment of Expenses.........................................69
   Section  13.2  Payment Upon Resignation or Removal.........................69

ARTICLE XIV       MISCELLANEOUS PROVISIONS....................................70
   Section  14.1  Incorporators, Shareholders, Officers and Directors of
                  Company Exempt from Individual Liability....................70
   Section  14.2  Provisions of Indenture for the Sole Benefit of Parties
                  and Holders of Convertible Debentures.......................70
   Section  14.3  Right to Assign; Successors and Assigns Bound by Indenture..70
   Section  14.4  Notices and Demands on Company, Trustee and Holders of
                  Convertible Debentures......................................70
   Section  14.5  Officers' Certificates and Opinions of Counsel;
                  Statements to Be Contained Therein..........................71
   Section  14.6  Payments Due on Saturdays, Sundays and Holidays.............72
   Section  14.7  Conflict of Any Provision of Indenture with Trust
                  Indenture Act ..............................................72
   Section  14.8  Delaware Law to Govern......................................72
   Section  14.9  Counterparts................................................73
   Section  14.10 Effect of Headings; Gender..................................73
   Section  14.11 Acceptable Counsel..........................................73

<PAGE>

                                                                            Page
                                                                            ----

EXHIBITS

Exhibit A   Specimen Copy of 8.25% Convertible Junior Subordinated Debentures

<PAGE>

     THIS INDENTURE, dated as of May 5, 2000, between WELLSFORD REAL PROPERTIES,
INC., a Maryland corporation  (the"Company"),  and WILMINGTON TRUST COMPANY (the
"Trustee").

                              W I T N E S S E T H:
                               -------------------

     WHEREAS,  the Company  desires and has  requested the Trustee to join it in
the execution  and delivery of this  Indenture in order to establish and provide
for the  issuance by the Company of  convertible  debentures  designated  as its
8.25% Convertible Junior Subordinated Debentures (the "Convertible Debentures"),
a specimen copy of which is attached hereto as Exhibit A, on the terms set forth
herein;

     WHEREAS, WRP Convertible Trust I, a Delaware statutory business trust ("WRP
Trust" or the "Trust"),  has offered to ERP Operating  Limited  Partnership,  an
Illinois limited  partnership,  in a private placement of $25,000,000  aggregate
liquidation  amount of its 8.25%  Convertible  Trust  Preferred  Securities (the
"Convertible Preferred Securities"), representing undivided beneficial interests
in the assets of the  Trust,  and  proposes  to invest  the  proceeds  from such
offering,  together  with the  proceeds of the issuance and sale by the Trust to
the Company of $775,000  aggregate  liquidation  amount of its 8.25% Convertible
Trust  Common  Securities,  in  $25,775,000  aggregate  principal  amount of the
Convertible Debentures; and

     WHEREAS,  all things  necessary to make this Indenture a valid agreement of
the Company and the Trustee, in accordance with its terms, have been done.

     NOW, THEREFORE:

     There is hereby  established the terms of the Convertible  Debentures to be
issued under this Indenture,  which shall be as set forth herein and in the form
of Convertible  Debentures attached hereto as Exhibit A, and in consideration of
the premises and the purchase and  acceptance of the  Convertible  Debentures by
the holders thereof, the Company mutually covenants and agrees with the Trustee,
for the  equal and  proportionate  benefit  of all  holders  of the  Convertible
Debentures, as follows:

                                    ARTICLE I

                                   DEFINITIONS

<PAGE>

     Section 1.1 Certain Terms Defined. The following terms (except as otherwise
expressly  provided or unless the context  otherwise  clearly  requires) for all
purposes of this Indenture and of any indenture  supplemental  hereto shall have
the respective meanings specified in this Section.  All other terms used in this
Indenture  that are defined in the Trust  Indenture Act of 1939, as amended (the
"Trust  Indenture  Act"),  or the  definitions of which in the Securities Act of
1933, as amended (the "Securities  Act"), are referred to in the Trust Indenture
Act,  including terms defined therein by reference to the Securities Act (except
as herein otherwise  expressly  provided or unless the context otherwise clearly
requires), shall have the meanings assigned to such terms in the Trust Indenture
Act and in the  Securities  Act as in force at the date of this  Indenture.  All
accounting  terms used herein and not expressly  defined shall have the meanings
assigned  to  such  terms  in  accordance  with  generally  accepted  accounting
principles,  and the term "generally accepted accounting  principles" means such
accounting  principles as are generally accepted at the time of any computation.
The words  "herein,"  "hereof" and "hereunder" and other words of similar import
refer to this  Indenture as a whole,  as  supplemented  and amended from time to
time, and not to any particular Article, Section or other subdivision. The terms
defined in this Article  have the meanings  assigned to them in this Article and
include the plural as well as the singular.

     "Additional Sums" shall have the meaning set forth in Section 2.5(d).

     "Affiliate"  has the same  meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.

     "Applicants" has the meaning specified in Section 4.2(b).

     "Board of Directors"  means either the Board of Directors of the Company or
any duly authorized committee of that Board.

     "Business  Day" means any day other than a Saturday,  Sunday,  or any other
day on which banking institutions in New York, New York or Wilmington,  Delaware
are permitted or required by any applicable law to close.

     "Capital  Stock"  means,  with  respect to any Person,  any and all shares,
interests,  units  representing  interests,  participations,  rights in or other
equivalents (however designated) of such Person's capital stock, including, with
respect to  partnerships,  limited  liability  companies  and  business  trusts,
partnership  interests  (whether  general  or  limited),  membership  interests,
beneficial interests and any other interest or participation that confers upon a
Person  the  right  to  receive  a  share  of the  profits  and  losses  of,  or
distributions  of assets of,  such  partnership,  limited  liability  company or
business  trust,  and any rights (other than debt  securities  convertible  into
capital stock),  warrants or options  exchangeable  for or convertible into such
capital stock.

<PAGE>

     "Closing  Price"  with  respect to any  security  on any day means the last
reported sale 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 American Stock  Exchange,  or, if
such  security  is not  listed or  admitted  to trading  on the  American  Stock
Exchange,  on the principal national  securities exchange on which such security
is listed or admitted to trading, or, if such security is not listed or admitted
to trading on a national securities  exchange,  on the National Market System of
the National  Association of Securities  Dealers,  Inc., or, if such security is
not quoted or admitted to trading on such  quotation  system,  on the  principal
quotation  system on which such  security  is listed or  admitted  to trading or
quoted,  or, if not listed or  admitted  to  trading  or quoted on any  national
securities  exchange  or  quotation  system,  the average of the closing bid and
asked  prices  of such  security  in the  over-the-counter  market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or, if not so available in such manner, as
furnished by any American Stock Exchange  member firm selected from time to time
by the Board of Directors  (or any  committee  duly  authorized  by the Board of
Directors)  of the Company  for that  purpose  or, if not so  available  in such
manner, as otherwise  determined in good faith by the Board of Directors (or any
committee duly authorized by the Board of Directors) of the Company.

     "Commission" means the Securities and Exchange Commission,  as from time to
time constituted,  created under the Exchange Act, as amended, or if at any time
after the  execution  and  delivery of this  Indenture  such  Commission  is not
existing and performing the duties now assigned to it under the Trust  Indenture
Act, then the body performing such duties on such date.

     "Common Securities" means undivided  beneficial  interests in the assets of
the WRP Trust which rank pari passu with the  Convertible  Preferred  Securities
issued by the WRP Trust; provided, however, that upon the occurrence of an Event
of Default, the rights of holders of the Common Securities to payment in respect
of  distributions  and payments upon  liquidation,  redemption and otherwise are
subordinated  to the rights to payment of holders of the  Convertible  Preferred
Securities.

     "Common  Securities   Guarantee"  means  the  Common  Securities  Guarantee
Agreement dated as of May 5, 2000 by the Guarantor.

     "Common Shares" includes shares of common stock,  $.01 par value per share,
of the Company.

     "Company" means Wellsford Real  Properties,  Inc., a Maryland  corporation,
until a successor  corporation shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Company" shall mean such successor
corporation.

<PAGE>

     "Convertible Debenture" or "Convertible  Debentures" has the meaning stated
in the  first  recital  of  this  Indenture  and  more  particularly  means  any
Convertible Debentures authenticated and delivered under this Indenture.

     "Convertible  Preferred  Securities"  has  the  meaning  specified  in  the
recitals to this Indenture.

     "Conversion Agent" has the meaning assigned thereto in the Declaration.

     "Conversion Date" has the meaning specified in Section 11.2(a).

     "Conversion Price" has the meaning set forth in Section 11.1.

     "Conversion Shares" has the meaning set forth in Section 11.3(c).

     "Corporate Trust Office" means the principal  corporate trust office of the
Trustee at which at any  particular  time its corporate  trust business shall be
administered, which office at the date of execution of this Indenture is located
at 1100  North  Market  Street,  9th  Floor,  Wilmington,  Delaware  19890-0001,
Attention: Corporate Trust Administration.

     "Coupon Rate" has the meaning specified in Section 2.5(a).

     "Declaration"  means the Declaration of Trust of WRP Convertible Trust I, a
Delaware statutory business trust, dated as of May 5, 2000.

     "Debt" of a Person  means,  all  indebtedness  of such Person  which is for
money borrowed.

     "defaulted interest" has the meaning specified in Section 2.9.

     "Delaware Trustee" has the meaning specified in the Declaration.

     "Distribution Date" has the meaning set forth in Section 11.3(c).

     "Dollar"  means the coin or currency of the United  States of America which
as of the time of payment is legal  tender for the payment of public and private
debts.

     "ERPLP"  means ERP  Operating  Limited  Partnership,  an  Illinois  limited
partnership.

     "Event of Default" has the meaning specified in Section 5.1.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

<PAGE>

     "Guarantor"  means the Company in its capacity as guarantor under any Trust
Securities Guarantees.

     "Holder" or "Holder of Convertible  Debentures" or other similar terms mean
the  person in whose  name  such  Convertible  Debenture  is  registered  in the
Security Register.

     "incur"  means  to  issue,  incur,   assume,   guarantee,   become  liable,
contingently or otherwise,  with respect to, or otherwise become responsible for
the payment of, any Debt.

     "Indenture"  means this instrument as originally  executed and delivered or
as it may from time to time be amended or supplemented as herein provided, as so
amended or  supplemented  or both,  and shall include the forms and terms of the
Convertible Debentures appearing as Exhibit A to this instrument.

     "Institutional Trustee" has the meaning specified in the Declaration.

     "Interest  Payment  Date,"  when  used  with  respect  to  any  Convertible
Debenture,  means the Stated  Maturity  of an  installment  of  interest on such
Convertible  Debenture,  which date shall fall on the  fifteenth day of January,
April, July and October of each year.

     "Interest Period" has the meaning set forth in Section 2.5(a).

     "Issuance Date" has the meaning set forth in Section 2.5(a).

     "Lien" means any mortgage or deed of trust,  pledge,  assignment,  security
interest,  lien,  charge,  or  other  encumbrance  or  preferential  arrangement
(including,  without  limitation,  any conditional sale or other title retention
agreement  having   substantially  the  same  economic  effect  as  any  of  the
foregoing).

     "Maturity"  when used with respect to any  Convertible  Debenture means the
date on which the principal of such  Convertible  Debenture or an installment of
principal  becomes  due and  payable as therein or herein  provided,  whether at
Stated  Maturity or by  declaration  of  acceleration,  call for  redemption  or
otherwise.

     "Maturity Date" means the date on which the Convertible  Debentures  mature
and on which the  principal  shall be due and payable  together with all accrued
and unpaid interest thereon including Additional Sums, if any.

     "Ministerial Action" has the meaning specified in Section 10.1(a).

     "90-Day Period" has the meaning specified in Section 10.1(a).

     "Notice of Conversion" has the meaning specified in Section 11.2(a).

<PAGE>

     "Offeror" has the meaning specified in Section 2.4(c).

     "Officers' Certificate" means a certificate signed on behalf of the Company
by the Chairman of the Board of Trustees or any vice  chairman or the  president
or any vice president and by the chief  financial  officer,  the treasurer,  the
controller, any assistant treasurer, the secretary or any assistant secretary of
the Company and delivered to the Trustee.  Each such  certificate  shall include
the statements provided for in Section 14.5.

     "Opinion of Counsel" means a written  opinion of legal counsel,  who may be
an employee of or counsel to the Company, and who shall be reasonably acceptable
to the Trustee.  Each Opinion of Counsel shall include the  statements  provided
for in Section 14.5, if and to the extent required hereby.

     "Optional Redemption Price" has the meaning specified in Section 10.2.

     "Outstanding" when used with reference to Convertible  Debentures,  subject
to the  provisions  of  Section  7.4,  means,  as of any  particular  time,  all
Convertible Debentures authenticated and delivered under this Indenture, except:

          (a)  Convertible  Debentures  theretofore  canceled  by the Trustee or
     delivered to the Trustee for cancellation;

          (b) Convertible  Debentures,  or portions thereof,  for the payment or
     redemption  of which  moneys in the  necessary  amount and in the  required
     currency  shall have been  deposited  in trust with the Trustee or with any
     Paying  Agent  (other  than the  Company)  or shall  have  been set  aside,
     segregated  and  held in  trust  by the  Company  for the  Holders  of such
     Convertible  Debentures (if the Company shall act as its own Paying Agent),
     provided that if such Convertible  Debentures,  or portions thereof, are to
     be redeemed prior to the Maturity thereof,  notice of such redemption shall
     have been  given as  herein  provided,  or  provision  satisfactory  to the
     Trustee shall have been made for giving such notice; and

          (c)  Convertible  Debentures  that have been paid  pursuant to Section
     2.11,  converted into Common Shares  pursuant to Article XI, or in exchange
     for  or  in  lieu  of  which  other   Convertible   Debentures   have  been
     authenticated and delivered  pursuant to the Indenture (except with respect
     to any such  Convertible  Debenture as to which proof  satisfactory  to the
     Trustee and the Company is  presented  that such  Convertible  Debenture is
     held by a person in whose  hands  such  Convertible  Debenture  is a legal,
     valid and binding obligation of the Company).

<PAGE>

     "Paying Agent" means any Person (which may include the Company)  authorized
by the Company to pay the principal of or interest,  if any, on any  Convertible
Debenture on behalf of the Company.

     "Persons" or "Person" means any individual, corporation, partnership, joint
venture,  limited liability company,  association,  joint stock company,  trust,
unincorporated organization or government or any agency or political subdivision
thereof.

     "Place of Payment",  when used with respect to the Convertible  Debentures,
means the place or places where the  principal of and  interest,  if any, on the
Convertible Debentures are payable as specified pursuant to Section 3.2.

     "Predecessor  Convertible Debenture" of a Convertible Debenture means every
previous  Convertible  Debenture evidencing all or a portion of the same debt as
that  evidenced  by such  Convertible  Debenture;  and, for the purposes of this
definition,  a Convertible  Debenture  authenticated and delivered under Section
2.11 in  exchange  for or in  lieu of a  mutilated,  destroyed,  lost or  stolen
Convertible  Debenture  shall  be  deemed  to  evidence  the  same  debt  as the
mutilated, destroyed, lost or stolen Convertible Debenture.

     "Preferred  Securities  Guarantee" means the Preferred Securities Guarantee
Agreement  dated as of May 5, 2000 between the  Guarantor and  Wilmington  Trust
Company, as Preferred Guarantee Trustee.

     "Preferred  Stock",  as applied to the Capital  Stock of any Person,  means
Capital Stock of such Person of any class or classes  (however  designated) that
ranks prior, as to the payment of dividends or as to the  distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.

     "principal"  whenever used with reference to the Convertible  Debentures or
any  Convertible  Debenture or any portion  thereof,  shall be deemed to include
"and premium, if any."

     "QIB"  or   "Qualified   Institutional   Buyer"   shall   mean   "Qualified
Institutional  Buyer" as such term is defined in Rule 144A under the  Securities
Act.

     "record date" has the meaning specified in Section 2.9.

     "Redemption Price" has the meaning specified in Section 10.1(a).

     "Registrar" has the meaning specified in Section 2.10.

     "Regular Trustees" has the meaning specified in the Declaration.

<PAGE>

     "Regulation S" means Regulation S under the Securities Act.

     "Representative" means (a) the indenture trustee or other trustee, agent or
representative  for any Senior  Indebtedness  or (b) with  respect to any Senior
Indebtedness that does not have any such trustee,  agent or other representative
(i) in the case of such Senior  Indebtedness  issued  pursuant  to an  agreement
providing for voting  arrangements as among the holders or owners of such Senior
Indebtedness,  any holder or owner of such Senior  Indebtedness  acting with the
consent of the required persons necessary to bind such holders or owners of such
Senior Indebtedness and (ii) in the case of all other such Senior  Indebtedness,
the holder or owner of such Senior Indebtedness.

     "Responsible  Officer"  when used with  respect  to the  Trustee  means any
officer within the corporate trust  department (or any successor  department) of
the Trustee  including any vice president,  assistant vice president,  assistant
secretary, senior trust officer, trust officer or any other officer or assistant
officer  of the  Trustee  customarily  performing  functions  similar  to  those
performed by the persons who at the time shall be such  officers,  respectively,
or to whom any corporate  trust matter is referred at the Corporate Trust Office
because of his or her knowledge of and familiarity with the particular subject.

     "Restricted  Convertible  Debenture"  has the meaning  specified in Section
2.4(a).

     "Rights" has the meaning specified in Section 11.3(c).

     "Rule 144" means Rule 144 under the Securities Act.

     "Rule 144A" means Rule 144A under the Securities Act.

     "Sales Notice" has the meaning specified in Section 2.4(c).

     "Securities Act" means the Securities Act of 1933, as amended.

     "Security Register" has the meaning specified in Section 2.10.

     "Senior   Indebtedness"  means,  with  respect  to  the  Company,  (i)  the
principal,  premium,  if any, and interest in respect of (a) indebtedness of the
Company for money borrowed (but excluding trade accounts  payable arising in the
ordinary course of business) under any credit agreements,  notes,  guarantees or
similar  documents and (b)  indebtedness  evidenced by  securities,  debentures,
bonds or other similar instruments issued by the Company; (ii) all capital lease
obligations  of the  Company;  (iii) all  obligations  of the Company  issued or
assumed  as the  deferred  purchase  price of  property,  all  conditional  sale
obligations  of the Company and all  obligations  of the Company under any title
retention  agreement  (but  excluding  trade  accounts

<PAGE>

payable arising in the ordinary course of business); (iv) all obligations of the
Company for reimbursement on any letter of credit, banker's acceptance, security
purchase  facility or similar  credit  transaction;  (v) all  obligations of the
Company  (contingent  or  otherwise)  with respect to an interest  rate or other
swap,  cap or collar  agreements or other similar  instruments  or agreements or
foreign currency hedge, exchange, purchase or similar instruments or agreements;
(vi) all  obligations  of the types  referred  to in clauses  (i) through (v) of
other Persons for the payment of which the Company is  responsible  or liable as
obligor, guarantor or otherwise; and (vii) all obligations of the types referred
to in clauses (i) through (vi) above of other Persons secured by any lien on any
property or asset of the Company  (whether or not such  obligation is assumed by
the Company),  whether  outstanding  on the date of this Indenture or thereafter
created, incurred,  assumed,  guaranteed or in effect guaranteed by the Company,
except for any such  indebtedness  that is by its terms  subordinated to or pari
passu with the Convertible  Debentures.  Such Senior Indebtedness shall continue
to be Senior Indebtedness irrespective of any deferrals, renewals, extensions or
refundings of, or amendments, modifications,  supplements or waivers of any term
of such Senior Indebtedness.

     "Stated  Maturity" when used with respect to any  Convertible  Debenture or
any  installment  of principal  thereof or interest  thereon,  means the date on
which  the  principal  of such  Convertible  Debenture  or such  installment  of
principal or interest is due and payable in accordance  with the terms  thereof,
including, with respect to interest, each Interest Payment Date.

     "Subsidiary"  means  any  corporation,  association,  partnership  or other
business  entity  of  which  more  than  50% of the  total  voting  power of the
outstanding  Capital Stock (or other interests)  entitled (without regard to the
occurrence of any  contingency)  to vote in the election of  directors,  general
partners,  managers, managing members, managing partners or trustees thereof or,
if such persons are not elected,  to vote on any matter that is submitted to the
vote of all persons holding  ownership  interests in such entity, is at the time
owned or  controlled,  directly  or  indirectly,  by (i) the  Company,  (ii) the
Company and one or more Subsidiaries or (iii) one or more Subsidiaries.

     "Trading  Day" shall mean a day on which any  securities  are traded on the
national  securities  exchange or quotation system used to determine the Closing
Price.

     "Transfer Restriction Termination Date" means the earlier of the first date
on which (i) the Convertible  Preferred Securities,  the Convertible  Debentures
and any Common Shares issued or issuable upon the conversion or exchange thereof
(other than (A) such securities acquired by the Company or any Affiliate thereof
since the Issue  Date of the  Convertible  Preferred  Securities  and (B) Common
Shares issued upon the conversion or exchange of any such security  described in
clause  (A)  above)  may be sold  pursuant  to  Rule  144(k)  (or any  successor
provision) and (ii) all of such Convertible  Preferred  Securities,  Convertible
Debentures  and/or  Common  Shares shall have been sold pursuant to an effective
registration statement.

<PAGE>

     "Trust" or "WRP Trust" means WRP Convertible Trust I, a Delaware  statutory
business trust.

     "Trust  Indenture  Act" or "TIA" (except as otherwise  provided in Sections
8.1 and 8.2) means the Trust  Indenture Act of 1939, as amended,  as in force at
the date as of which this Indenture was originally executed.

     "Trust   Securities"  means  the  Common  Securities  and  the  Convertible
Preferred Securities of WRP Trust.

     "Trust Securities Guarantees" means the Common Securities Guarantee and the
Preferred Securities Guarantee.

     "Trustee"  means the Person  identified as "Trustee" in the first paragraph
hereof  until a  successor  Trustee  shall  have  become  such  pursuant  to the
provisions hereof,  and thereafter,  "Trustee" shall mean or include each Person
who is then a Trustee hereunder.

     "United  States of America" or "United  States"  means the United States of
America  (including the states and the District of Columbia),  its  territories,
possessions,  the  Commonwealth  of Puerto Rico and other  areas  subject to its
jurisdiction.

     "U.S. Person" means (i) a citizen or resident of the United States,  (ii) a
corporation,  partnership  or other entity  created or organized in or under the
laws of the United States or any state or political  subdivision thereof,  (iii)
an  estate  the  income of which is  subject  to United  States  federal  income
taxation  regardless  of its  sources or (iv) a trust  whose  administration  is
subject to the primary supervision of a United States court and which has one or
more United States fiduciaries who have the authority to control all substantial
decisions of the Trust.

     "vice  president"  when used with  respect to the  Company or the  Trustee,
means any vice  president,  whether or not  designated  by a number or a word or
words added before or after the title of "vice president."

<PAGE>

                                   ARTICLE II

                           THE CONVERTIBLE DEBENTURES

     Section 2.1 Designation and Principal  Amount.  There are hereby authorized
Convertible  Debentures  designated the "8.25% Convertible  Junior  Subordinated
Debentures,"  in aggregate  principal  amount of at least  $25,775,000  plus any
additional Convertible Debentures issuable pursuant to Section 2.5(c) hereof and
any additional  Convertible Debentures issuable pursuant to the Trust Securities
Guarantees,  which  amount  shall be as set  forth in any  written  order of the
Company for the authentication and delivery of Convertible  Debentures  pursuant
to  Section  2.6 of this  Indenture.  In the event that  additional  Convertible
Debentures  are  issued  pursuant  to  the  Trust  Securities  Guarantees,  such
additional Convertible Debentures will be issued in replacement of the initially
issued  Convertible  Debentures  not  distributed  as provided  for in the Trust
Securities  Guarantees,  and such initially  issued  Debentures  shall be deemed
automatically  canceled and retired.  The Trustee agrees to promptly  deliver to
the  Company  and cancel any of the  Convertible  Debentures  originally  issued
hereunder or any  replacements  or  substitutions  therefor (which come into the
possession of the Trustee) the failure of which to not distribute to the Holders
of  Preferred  Securities  or Common  Securities  resulted  in the  issuance  of
additional  Convertible  Debentures  pursuant to the aforesaid Trust  Securities
Guarantees.

     Section 2.2 Maturity. The Maturity Date is May 4, 2022.

     Section 2.3 Form and Payment.

     (a) Except as provided in Section 2.6, the Convertible  Debentures shall be
issued in fully registered  certificated form, without coupons, in denominations
of $25.00 in principal  amount and integral  multiples  thereof.  Principal  and
interest  on the  Convertible  Debentures  issued in  certificated  form will be
payable,  the transfer of such  Convertible  Debentures  will be registrable and
such  Convertible  Debentures  will be exchangeable  for Convertible  Debentures
bearing  identical  terms and provisions at the office or agency of the Trustee;
provided,  however,  that  payment of interest  may be made at the option of the
Company  by check  mailed to the Holder at such  address as shall  appear in the
Security Register.  Notwithstanding the foregoing,  so long as the Holder of any
Convertible  Debentures  is  the  Institutional  Trustee,  the  payment  of  the
principal  of  and  interest  (including   Additional  Sums,  if  any)  on  such
Convertible  Debentures  held  by the  Institutional  Trustee  will  be  made in
immediately  available  funds  at  such  place  and to  such  account  as may be
designated by the Institutional Trustee.

<PAGE>

     (b) The  Convertible  Debentures are subject to the terms set forth in this
Indenture  including,  without limitation,  Exhibit A hereto, the terms of which
are hereby incorporated in their entirety by reference.

     (c)  The   Convertible   Debentures   and  the  Trustee's   Certificate  of
Authentication  to be endorsed  thereon are to be  substantially  in the form of
Exhibit A to this Indenture.

     (d) The definitive Convertible Debentures shall be printed, lithographed or
engraved on steel engraved  borders or may be produced in any other manner,  all
as  determined  by  the  officers  executing  such  Convertible  Debentures,  as
evidenced by their execution of such Convertible Debentures.

     Section  2.4  Exchange  and   Registration   of  Transfer  of   Convertible
Debentures; Restrictions on Transfers; Depositary.

     (a) Each Convertible Debenture that bears or is required to bear the legend
set forth in this Section 2.4(a) (a "Restricted Convertible Debenture") shall be
subject to the restrictions on transfer provided in the legend set forth in this
Section  2.4(a),  unless such  restrictions  on transfer  shall be waived by the
written consent of the Company,  and the Holder of each  Restricted  Convertible
Debenture,  by such  Holder's  acceptance  thereof,  agrees  to be bound by such
restrictions on transfer.  As used in this Section 2.4(a) and in Section 2.4(b),
the term "transfer" encompasses any sale, pledge,  transfer or other disposition
of any Restricted Convertible Debenture.

     Prior  to  the  Transfer  Restriction  Termination  Date,  any  certificate
evidencing a  Convertible  Debenture  shall bear a legend in  substantially  the
following  form,  unless  otherwise  agreed by the Company (with written  notice
thereof to the Trustee):

          THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
          SECURITIES  ACT OF 1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  AND,
          ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD  WITHIN THE UNITED  STATES OR
          TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
          IN THE FOLLOWING  SENTENCE.  BY ITS ACQUISITION HEREOF, THE HOLDER (1)
          REPRESENTS  THAT  (A)  IT IS A  "QUALIFIED  INSTITUTIONAL  BUYER"  (AS
          DEFINED  IN  RULE  144A  UNDER  THE  SECURITIES  ACT)  OR (B) IT IS AN
          INSTITUTIONAL  "ACCREDITED  INVESTOR"  (AS DEFINED IN RULE  501(A)(1),
          (2), (3) OR (7) UNDER THE SECURITIES ACT)  ("INSTITUTIONAL  ACCREDITED
          INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS

<PAGE>

          ACQUIRING THE SECURITY REPRESENTED HEREBY IN AN OFFSHORE  TRANSACTION,
          (2) AGREES  THAT IT WILL NOT PRIOR TO THE  EXPIRATION  OF THE  HOLDING
          PERIOD  APPLICABLE TO SALES OF THE SECURITY  REPRESENTED  HEREBY UNDER
          RULE 144(K)  UNDER THE  SECURITIES  ACT (OR ANY  SUCCESSOR  PROVISION)
          RESELL OR OTHERWISE  TRANSFER THE SECURITY  REPRESENTED  HEREBY OR, IF
          THIS SECURITY IS  CONVERTIBLE  INTO COMMON  SHARES,  THE COMMON SHARES
          ISSUABLE UPON  CONVERSION  OR EXCHANGE OF THIS SECURITY  EXCEPT (A) TO
          WELLSFORD  REAL  PROPERTIES,  INC. (THE  "COMPANY") OR ANY  SUBSIDIARY
          THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
          SECURITIES ACT, (C) TO A QUALIFIED  INSTITUTIONAL  BUYER IN COMPLIANCE
          WITH  RULE 144A  UNDER THE  SECURITIES  ACT,  (D) TO AN  INSTITUTIONAL
          ACCREDITED  INVESTOR THAT,  PRIOR TO SUCH  TRANSFER,  FURNISHES TO THE
          TRUSTEE UNDER THE INDENTURE (OR, IF THIS CERTIFICATE REPRESENTS COMMON
          SHARES,  THE TRANSFER  AGENT FOR THE COMMON  SHARES),  A SIGNED LETTER
          CONTAINING  CERTAIN  REPRESENTATIONS  AND  AGREEMENTS  RELATING TO THE
          RESTRICTIONS ON TRANSFER OF THE SECURITY  REPRESENTED HEREBY (THE FORM
          OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR TRANSFER  AGENT),
          (E) OUTSIDE THE UNITED  STATES IN  COMPLIANCE  WITH RULE 904 UNDER THE
          SECURITIES  ACT OR (F)  PURSUANT TO THE  EXEMPTION  FROM  REGISTRATION
          PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),  AND (3)
          AGREES  THAT IT WILL  DELIVER  TO EACH  PERSON  TO WHOM  THE  SECURITY
          REPRESENTED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
          OF THIS  LEGEND.  IN  CONNECTION  WITH ANY  TRANSFER  OF THE  SECURITY
          REPRESENTED  HEREBY  PRIOR TO THE  EXPIRATION  OF THE  HOLDING  PERIOD
          APPLICABLE  TO SALES OF THE  SECURITY  REPRESENTED  HEREBY  UNDER RULE
          144(K) UNDER THE  SECURITIES  ACT (OR ANY  SUCCESSOR  PROVISION),  THE
          HOLDER MUST CHECK THE  APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
          RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
          THE TRUSTEE UNDER THE INDENTURE  (OR, IF THIS  CERTIFICATE  REPRESENTS
          COMMON  SHARES,  SUCH HOLDER MUST FURNISH TO THE  TRANSFER  AGENT SUCH
          CERTIFICATIONS,  LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR
          WRP  CONVERTIBLE  TRUST I (THE  "TRUST")  MAY  REASONABLY  REQUIRE  TO
          CONFIRM  THAT SUCH  TRANSFER IS BEING MADE  PURSUANT  TO AN  EXEMPTION
          FROM,   OR  IN  A  TRANSACTION   NOT  SUBJECT  TO,  THE   REGISTRATION
          REQUIREMENTS  OF THE  SECURITIES  ACT). IF THIS  CERTIFICATE  DOES NOT
          REPRESENT COMMON SHARES AND IF THE

<PAGE>

          PROPOSED  TRANSFEREE  IS AN  INSTITUTIONAL  ACCREDITED  INVESTOR  OR A
          PURCHASER  WHO IS NOT A U.S.  PERSON,  THE HOLDER MUST,  PRIOR TO SUCH
          TRANSFER,   FURNISH  TO  THE  TRUSTEE   UNDER  THE   INDENTURE,   SUCH
          CERTIFICATIONS,  LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR
          THE TRUST MAY  REASONABLY  REQUIRE TO CONFIRM  THAT SUCH  TRANSFER  IS
          BEING MADE  PURSUANT TO AN EXEMPTION  FROM,  OR IN A  TRANSACTION  NOT
          SUBJECT TO, THE REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT. THIS
          LEGEND WILL BE REMOVED  AFTER THE  EXPIRATION  OF THE  HOLDING  PERIOD
          APPLICABLE  TO SALES OF THE  SECURITY  REPRESENTED  HEREBY  UNDER RULE
          144(K) UNDER THE SECURITIES  ACT. AS USED HEREIN,  THE TERMS "OFFSHORE
          TRANSACTION,"  "UNITED  STATES" AND "U.S.  PERSON"  HAVE THE  MEANINGS
          GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES  ACT. THIS SECURITY
          IS ALSO  SUBJECT  TO THE  RESTRICTIONS  ON  TRANSFER  SET FORTH IN THE
          INDENTURE.

     Following  the  Transfer  Restriction  Termination  Date,  any  Convertible
Debenture or security  issued in exchange or  substitution  therefor (other than
(i)  Convertible  Debentures  acquired by the Company or any  Affiliate  thereof
since the issue date of the  Convertible  Preferred  Securities  and (ii) Common
Shares  issued upon the  conversion  or exchange  of any  Convertible  Debenture
described in clause (i) above) may upon surrender of such Convertible  Debenture
or security for exchange to the Registrar in accordance  with the  provisions of
this Section 2.4, be exchanged for a new  Convertible  Debenture or  Convertible
Debentures  or security or  securities,  of like tenor and  aggregate  principal
amount,  which shall not bear the  restrictive  legend  required by this Section
2.4(a).

     (b) Any  Convertible  Debenture or Common Shares issued upon the conversion
or exchange of a Convertible  Debenture that, prior to the Transfer  Restriction
Termination  Date, is purchased or owned by the Company or any Affiliate thereof
may not be resold by the Company or such Affiliate  unless  registered under the
Securities  Act  or  resold  pursuant  to an  exemption  from  the  registration
requirements  of the  Securities  Act in a  transaction  which  results  in such
Convertible  Debentures  or Common  Shares,  as the case may be, no longer being
"restricted securities" (as defined under Rule 144).

     (c) Each  Convertible  Debenture  shall be subject to the  restrictions  on
transfer provided in this Section 2.4(c).

     (i) If a holder of a Convertible Debenture (the "Offeror") desires to sell,
assign,  transfer,  encumber,  or  otherwise  dispose of any of his  Convertible
Debentures,  he shall give written  notice to the Company of his desire to do so
and of the price per  debenture  and other  terms  under  which he  proposes  to
dispose of his Convertible  Debentures (the "Sales Notice"),  which Sales Notice
shall  constitute an offer

<PAGE>

on the  part  of the  Offeror  to  sell  to the  Company  any  such  Convertible
Debentures upon the terms and conditions set forth in such notice.

     (ii) Unless,  within ten (10)  Business  Days after the giving of the Sales
Notice by the Offeror pursuant to subparagraph  (i) of this Section 2.4(c),  the
Company  shall give written  notice to the Offeror that the Company  irrevocably
commits to purchase the  Convertible  Debentures  subject of the Sales Notice at
the  price  and under the  terms  specified  in the  Sales  Notice  given by the
Offeror,  the Company  shall be deemed to have rejected the offer of the Offeror
to sell the Convertible  Debentures  subject of the Sales Notice and the Offeror
shall  be free  without  restriction  under  this  Section  2.4(c)  to sell  the
Convertible Debentures subject of the Sales Notice to any other Person, provided
however,  if the price per debenture is less than the price,  or the other terms
are more favorable than those,  contained in the Sales Notice, the Offeror shall
again offer to sell the Convertible Debentures in accordance with the provisions
of subparagraph  (i) of this Section 2.4(c) before it may complete any such sale
and  provided  further,  that the  Convertible  Debentures  subject of the Sales
Notice  shall again be subject to the  provisions  of  subparagraph  (i) of this
Section  2.4(c) if within ninety (90) days after the giving of the Sales Notice,
the  Offeror  shall  not have  completed  the  disposition  of such  Convertible
Debentures.

     (iii) If the  Company  irrevocably  commits  to  purchase  the  Convertible
Debentures as  contemplated by  subparagraph  (ii) of this Section  2.4(c),  the
closing of such purchase shall take place at the principal  place of business of
the Company at 10:00 A.M.  (New York City time) on the third (3rd) day following
the expiration of the ten (10) day period  referred to in  subparagraph  (ii) of
this Section  2.4(c),  or if such day is not a Business  Day,  then the next day
that is a Business Day.

     (iv) The  provisions of this Section  2.4(c) shall not apply to one or more
transfers of the Convertible Debentures by ERPLP to any Affiliate of ERPLP.

     (v) The Convertible Debentures are not transferable by the Trustee,  except
as specifically permitted pursuant to the terms of this Indenture.

     Section 2.5 Interest.

     (a) Each Convertible  Debenture will bear interest at the rate of 8.25% per
annum of the  principal  amount of $25.00  ($2.0625  per  annum,  $0.515625  per
quarter),  from and including May 5, 2000 (the "Issuance Date") to and including
the  Maturity  Date (the rate of  interest  is  hereinafter  referred  to as the
"Coupon  Rate"),  until the  principal  thereof  becomes due and payable,  which
interest will be payable in equal quarterly payments in arrears of $0.515625 per
Convertible  Debenture on the fifteenth day of January,  April, July and October
of each year (each, an "Interest Payment Date"), commencing on July 17, 2000, to
the Person in whose name

<PAGE>

such Convertible Debenture is registered, at the close of business on the record
date for such interest installment,  which shall be the close of business on the
fifteenth day prior to that Interest  Payment Date. Each quarterly period ending
on an Interest Payment Date is hereinafter referred to as an "Interest Period."

     (b) The amount of interest  payable for the initial Interest Period and for
any Interest Period shorter than a full Interest Period shall be prorated and be
computed on the basis of a 360-day year of twelve  30-day  months.  In the event
that any date on which interest is payable on the Convertible  Debentures is not
a Business  Day,  then payment of interest  payable on such date will be made on
the next  succeeding  day that is a Business  Day (and  without any  interest or
other  payment in respect of any such delay),  except that, if such Business Day
is in the next  succeeding  calendar  year,  such  payment  shall be made on the
immediately  preceding Business Day, in each case with the same force and effect
as if made on such date.

     (c) For any  twelve  quarterly  interest  periods  during  the  term of the
Convertible  Debentures,  whether  or not  consecutive,  and  whether or not the
Company has available cash to pay interest,  the Company shall have the right to
pay the interest due on the Convertible Debentures by the issuance of additional
Convertible Debentures,  the number of which shall be determined by dividing the
total  amount of interest to be paid by the issuance of  additional  Convertible
Debentures by $25.00. Any such additional Convertible Debentures issued pursuant
to this Section  2.5(c) shall be governed by and subject to all of the terms and
conditions of this Indenture.  Notwithstanding  any other provision  hereof,  no
fractional  interests in  Convertible  Debentures  shall be issued in connection
with the  payment  of any  interest  on  Convertible  Debentures  in  additional
Convertible   Debentures.   Instead,  any  Holder  of  Outstanding   Convertible
Debentures having a fractional  interest arising upon the payment of interest in
additional  Convertible  Debentures shall, on the related Interest Payment Date,
be paid an amount in cash equal to $25.00  times the  fraction of a  Convertible
Debenture to which such Holder would otherwise be entitled.

     (d) If at any  time  the  Trust  is  required  to pay  any  taxes,  duties,
assessments or governmental  charges of whatever nature (other than  withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case,  the Company will pay as  additional  sums  ("Additional  Sums") such
additional  amounts as shall be required so that the net  amounts  received  and
retained by the Trust after paying any such taxes, duties,  assessments or other
governmental  charges  will not be less than the  amounts  the Trust  would have
received had no such taxes, duties, assessments or other government charges been
imposed so long as the Trust is the holder of the Convertible Debentures.

     Section 2.6 Authentication and Delivery of Convertible  Debentures.  At any
time and from time to time after the execution  and delivery of this  Indenture,
the Company may deliver Convertible Debentures in the aggregate principal amount
of $25,775,000 plus any additional  Convertible  Debentures

<PAGE>

issuable  pursuant  to  Section  2.5(c)  hereof and any  additional  Convertible
Debentures  issuable  pursuant to the  Preferred  Securities  Guarantee  and the
Common  Securities  Guarantee  executed  by  the  Company  to  the  Trustee  for
authentication,  and the Trustee shall thereupon authenticate and make available
for delivery  such  Convertible  Debentures  to or upon the written order of the
Company,  signed by both (i) the chairman of its Board of Directors, or any vice
chairman of its Board of Directors,  or its president or any vice  president and
(ii) its chief financial  officer,  chief accounting  officer,  treasurer or any
assistant  treasurer or its  secretary or any assistant  secretary,  without any
further action by the Company. In authenticating such Convertible Debentures and
accepting the  additional  responsibilities  under this Indenture in relation to
such  Convertible  Debentures,  the  Trustee  shall be  entitled  to receive and
(subject to Section 6.1) shall be fully protected in relying upon:

     (a) a copy of any  resolution  or  resolutions  of the  Board of  Directors
relating to the issuance of such Convertible Debentures,  in each case certified
by the secretary or an assistant secretary of the Company;

     (b) a supplemental indenture, if any;

     (c) an Opinion of Counsel,  prepared in accordance with Section 14.5, which
shall state that the Convertible Debentures have been duly authorized, and, when
authenticated  and  delivered  by the  Trustee  and issued by the Company in the
manner and subject to any conditions specified in such Opinion of Counsel,  will
constitute  valid  and  binding   obligations  of  the  Company  enforceable  in
accordance  with their  terms,  subject to  applicable  bankruptcy,  insolvency,
fraudulent conveyance, reorganization or other laws relating to or affecting the
enforcement of creditors' rights generally and by general equitable  principles,
regardless  of whether such  enforceability  is  considered  in a proceeding  in
equity or at law.

     Notwithstanding  the  provisions  of  the  preceding   paragraph,   if  the
Convertible Debentures are not to be originally issued at one time, it shall not
be necessary to deliver the  resolution  of the Board of Trustees and Opinion of
Counsel otherwise  required pursuant to such preceding  paragraph at or prior to
the time of authentication  of each Convertible  Debenture if such documents are
delivered at or prior to the time of  authentication  upon original  issuance of
the first  Convertible  Debentures to be issued.  After the original issuance of
the first  Convertible  Debenture  to be  issued,  any  separate  request by the
Company  that the  Trustee  authenticate  Convertible  Debentures  for  original
issuance  will be  deemed to be a  certification  by the  Company  that it is in
compliance with all conditions precedent provided for in this Indenture relating
to the authentication and delivery of such Convertible Debentures.

     The Trustee shall have the right to decline to authenticate and deliver any
Convertible  Debentures  under this Section if the Trustee is advised by counsel
in good faith that the issuance of such Convertible  Debentures would expose the
Trustee to personal liability or is unlawful.

<PAGE>

     Section 2.7 Execution of Convertible Debentures. The Convertible Debentures
shall be  signed  on  behalf  of the  Company  by the  chairman  of its Board of
Directors,  or any vice chairman of its Board of Directors,  or its president or
any vice president and attested by its chief financial officer, treasurer or any
assistant  treasurer or its  secretary  or any  assistant  secretary,  under its
corporate  seal.  Such  signatures may be the manual or facsimile  signatures of
such officers. The seal of the Company may be in the form of a facsimile thereof
and  may  be  impressed,  affixed,  imprinted  or  otherwise  reproduced  on the
Convertible  Debentures.  Typographical and other minor errors or defects in any
such  reproduction  of the seal or any  such  signature  shall  not  affect  the
validity  or  enforceability  of any  Convertible  Debenture  that has been duly
authenticated and delivered by the Trustee.

     In case any  officer  of the  Company  who  shall  have  signed  any of the
Convertible  Debentures  shall cease to be such officer  before the  Convertible
Debenture  so signed  shall be  authenticated  and  delivered  by the Trustee or
disposed of by the  Company,  such  Convertible  Debenture  nevertheless  may be
authenticated  and delivered or disposed of as though the person who signed such
Convertible  Debenture had not ceased to be such officer of the Company; and any
Convertible Debenture may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Convertible Debenture,  shall be the
proper  officers  of the  Company,  although  at the date of the  execution  and
delivery of this Indenture any such person was not such an officer.

     Section 2.8 Certificate of Authentication. Only such Convertible Debentures
as shall bear thereon a certificate of authentication  substantially in the form
attached hereto as a part of Exhibit A and executed by the Trustee by the manual
signature of one of its authorized signatories shall be entitled to the benefits
of this  Indenture or be valid or obligatory  for any purpose.  The execution of
such certificate by the Trustee upon any Convertible  Debenture  executed by the
Company  shall  be  conclusive  evidence  that  the  Convertible   Debenture  so
authenticated has been duly  authenticated and delivered  hereunder and that the
Holder is entitled to the benefits of this Indenture.

     Notwithstanding the foregoing, if any Convertible Debenture shall have been
duly  authenticated  and  delivered  hereunder  but never issued and sold by the
Company, the Company shall deliver such Convertible Debenture to the Trustee for
cancellation  as  provided in Section  2.12  together  with a written  statement
(which  need not comply  with  Section  14.5 and need not be  accompanied  by an
Opinion of  Counsel)  stating  that such  Convertible  Debenture  has never been
issued and sold by the  Company,  and for all  purposes of this  Indenture  such
Convertible  Debenture  shall be  deemed  never to have been  authenticated  and
delivered  hereunder  and  shall  never  be  entitled  to the  benefits  of this
Indenture.

     Section 2.9  Denomination and Date of Convertible  Debentures;  Payments of
Interest.  Convertible  Debentures  shall be issuable in denominations of $25.00
and any integral multiple

<PAGE>

thereof. The Convertible  Debentures shall be numbered,  lettered,  or otherwise
distinguished in such manner or in accordance with such plans as the officers of
the Company executing the same may determine with the approval of the Trustee as
evidenced by the execution and authentication thereof.

     Each Convertible Debenture shall be dated the date of its authentication.

     The term "record  date" as used with  respect to any Interest  Payment Date
(except for payment of defaulted  interest)  shall mean the close of business on
the  fifteenth day preceding  such  Interest  Payment Date,  whether or not such
record date is a Business Day.

     Any  interest on any  Convertible  Debenture  which is payable,  but is not
punctually  paid or duly  provided  for, on any  Interest  Payment  Date (called
"defaulted  interest" for purposes of this Section) shall remain due and payable
but, solely with respect to the previously  declared relevant record date, shall
forthwith  cease to be  payable to the Holder on such  relevant  record  date by
virtue of his having been such Holder;  and such defaulted  interest may be paid
by the  Company,  at its  election  in each case,  as  provided in clause (1) or
clause (2) below:

               (1) The  Company  may  elect  to make  payment  of any  defaulted
          interest to the persons in whose names any such Convertible Debentures
          (or  their   respective   Predecessor   Convertible   Debentures)  are
          registered  at the close of business on a special  record date for the
          payment  of such  defaulted  interest,  which  shall  be  fixed in the
          following  manner.  The Company shall notify the Trustee in writing of
          the  amount  of  defaulted  interest  proposed  to  be  paid  on  each
          Convertible Debenture and the date of the proposed payment, and at the
          same time the  Company  shall  deposit  with the  Trustee an amount of
          money equal to the aggregate  amount proposed to be paid in respect of
          such defaulted interest or shall make arrangements satisfactory to the
          Trustee for such deposit  prior to the date of the  proposed  payment,
          such money when  deposited  to be held in trust for the benefit of the
          persons  entitled  to  such  defaulted  interest  as  in  this  clause
          provided.  Thereupon the Trustee  shall fix a special  record date for
          the  payment of such  defaulted  interest  in  respect of  Convertible
          Debentures which shall not be more than 15 nor less than 10 days prior
          to the date of the  proposed  payment  and not less than 10 days after
          the receipt by the Trustee of the notice of the proposed payment.  The
          Trustee shall promptly  notify the Company of such special record date
          and, in the name and at the expense of the Company  shall cause notice
          of the  proposed  payment of such  defaulted  interest and the special
          record date thereof to be mailed, first class postage prepaid, to each
          Holder at his address as it appears in the Security Register, not less
          than 10 days prior to such special record date. Notice of the proposed
          payment  of such  defaulted  interest  and  the  special  record  date
          therefor having been mailed as aforesaid,  such defaulted  interest in
          respect of Convertible Debentures shall be paid to the person in whose
          names such  Convertible  Debentures (or their  respective  predecessor
          Convertible Debentures) are

<PAGE>

          registered  on such special  record date and such  defaulted  interest
          shall no longer be payable pursuant to the following clause (2).

               (2) The Company may make payment of any defaulted interest on the
          Convertible  Debentures  in any other lawful  manner not  inconsistent
          with  the  requirements  of  any  securities  exchange  on  which  the
          Convertible  Debentures may be listed,  and upon such notice as may be
          required by such  exchange,  if,  after notice given by the Company to
          the Trustee of the  proposed  payment  pursuant to this  clause,  such
          manner of payment shall be deemed practicable by the Trustee.

     Subject to the  foregoing  provisions  of this  Section,  each  Convertible
Debenture  delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other  Convertible  Debenture  shall carry the rights to interest
accrued and unpaid, and to accrue,  which were carried by such other Convertible
Debenture.

     In the case of any  Convertible  Debenture  which is converted  into Common
Shares  of the  Company  after  any  record  date  and on or  prior  to the next
succeeding  Interest  Payment Date (other than any  Convertible  Debenture whose
Maturity is prior to such Interest Payment Date), interest whose Stated Maturity
is on such Interest  Payment Date shall be payable on such Interest Payment Date
notwithstanding  such conversion,  and such interest  (whether or not punctually
paid or duly  provided  for)  shall be paid to the  Person  in whose  name  that
Convertible  Debenture (or one or more  Predecessor  Convertible  Debentures) is
registered  at the  close  of  business  on  such  record  date.  However,  if a
redemption date falls between a record date and the subsequent  Interest Payment
Date, the amount of such payment shall include  accumulated  and unpaid interest
accrued to, but excluding,  such redemption date. Except as otherwise  expressly
provided  in the  first  two  sentences  of this  paragraph,  in the case of any
Convertible  Debenture  which is converted,  interest  whose Stated  Maturity is
after the date of conversion of such Convertible Debenture shall not be payable.

     Section 2.10  Registration,  Transfer and Exchange.  The provisions of this
Section  2.10 shall be subject in their  entirety to the  provisions  of Section
2.4. The Company will cause to be kept at each office or agency to be maintained
for the  purpose as provided  in Section  3.2 a register  or  registers  (herein
sometimes  referred to as the  "Security  Register")  in which,  subject to such
reasonable  regulations  as it may  prescribe,  the Company will provide for the
registration and the registration of the transfer or exchange of the Convertible
Debentures.  The Trustee is hereby  appointed  and accepts  the  appointment  as
Registrar  (the  "Registrar")  for  purposes  of  registering,  and  registering
transfers of, the Convertible Debentures.

     Upon surrender for registration of transfer of any Convertible Debenture at
any such  office or agency to be  maintained  for the  purpose  as  provided  in
Section 3.2, the Company shall execute and the Trustee  shall  authenticate  and
make  available for delivery in the name of the

<PAGE>

transferee or transferees a new Convertible Debenture or Convertible  Debentures
of a like tenor and containing  the same terms (other than the principal  amount
thereof, if more than one Convertible  Debenture is executed,  authenticated and
delivered in respect of any  Convertible  Debenture so presented,  in which case
the  aggregate  principal  amount of the executed,  authenticated  and delivered
Convertible  Debentures  shall  equal the  principal  amount of the  Convertible
Debenture presented in respect thereof) and conditions.

     At  the  option  of  the  Holder  thereof,  Convertible  Debentures  may be
exchanged  for  a  Convertible   Debenture  or  Convertible   Debentures  having
authorized denominations and an equal aggregate principal amount, upon surrender
of such Convertible Debentures to be exchanged at the agency of the Company that
shall be  maintained  for such purpose in  accordance  with Section 3.2 and upon
payment,  if the Company shall so require,  of the charge hereinafter  provided.
Whenever any Convertible Debentures are so surrendered for exchange, the Company
shall execute,  and the Trustee shall authenticate and deliver,  the Convertible
Debentures  which the Holder  making the  exchange is  entitled to receive.  All
Convertible Debentures surrendered upon any exchange or transfer provided for in
this  Indenture  shall be promptly  canceled by the Trustee and the Trustee will
deliver a certificate of cancellation thereof to the Company.

     All  Convertible  Debentures  issued  upon  any  transfer  or  exchange  of
Convertible Debentures shall be the valid obligations of the Company, evidencing
the same debt,  and entitled to the same benefits under this  Indenture,  as the
Convertible Debentures surrendered upon such transfer or exchange.

     Every  Convertible  Debenture  presented or surrendered for registration of
transfer  or exchange  shall (if so  required by the Company or the  Trustee) be
duly endorsed,  or be  accompanied  by a written  instrument of transfer in form
satisfactory  to the Company and the Trustee duly executed by the Holder thereof
or his attorney duly authorized in writing.

     No  service  charge  shall be made to the Holder  for any  registration  of
transfer  or  exchange of  Convertible  Debentures,  but the company may require
payment of a sum sufficient to cover any tax or other  governmental  charge that
may be imposed in  connection  with any  transfer  or  exchange  of  Convertible
Debentures,  other than  exchanges  pursuant to Sections  2.13,  8.5 or 11.5 not
involving any transfer.

     The Company shall not be required (i) to issue, register the transfer of or
exchange any  Convertible  Debenture  during a 15-day period prior to the day of
mailing of the relevant notice of redemption or (ii) to register the transfer of
or exchange any Convertible  Debenture so selected for redemption in whole or in
part,  except, in the case of any Convertible  Debenture to be redeemed in part,
the portion thereof not redeemed.

     Section 2.11 Mutilated,  Defaced,  Destroyed,  Lost and Stolen  Convertible

<PAGE>

Debentures.  In case any temporary or  definitive  Convertible  Debenture  shall
become  mutilated  or defaced or be  destroyed,  lost or  stolen,  then,  in the
absence of notice to the Company or the Trustee that the  Convertible  Debenture
has been acquired by a bona fide purchaser,  the Company shall execute, and upon
the  written  request  of  any  officer  of  the  Company,   the  Trustee  shall
authenticate and make available for delivery a new Convertible Debenture of like
tenor and  principal  amount and with the same terms and  conditions,  bearing a
number not contemporaneously  outstanding,  in exchange and substitution for the
mutilated or defaced  Convertible  Debenture or in lieu of and  substitution for
the  Convertible  Debenture  so  destroyed,  lost or  stolen.  In every case the
applicant for a substitute  Convertible  Debenture  shall furnish to the Company
and to the Trustee and to any agent of the Company or the Trustee such  security
or indemnity as may be required by them to indemnify and defend and to save each
of them harmless and, in every case of destruction,  loss or theft,  evidence to
their  satisfaction  of the  destruction,  loss or  theft  of  such  Convertible
Debenture  and of  the  ownership  thereof  and in the  case  of  mutilation  or
defacement  shall  surrender  the  Convertible  Debenture to the Trustee or such
agent.

     Upon the issuance of any substitute Convertible Debenture,  the Company may
require the payment of a sum  sufficient to cover any tax or other  governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee or its agent) connected therewith.  In case
any  Convertible  Debenture  which has matured or is about to mature or has been
called for redemption in full shall become mutilated or defaced or be destroyed,
lost or stolen,  the Company may,  instead of issuing a  substitute  Convertible
Debenture,  pay or authorize, the payment of the same (without surrender thereof
except in the case of a mutilated or defaced Convertible  Debenture);  provided,
however, that the applicant for such payment shall furnish to the Company and to
the  Trustee  and any agent of the  Company  or the  Trustee  such  security  or
indemnity  as any of them may  require to save each of them  harmless,  and,  in
every case of  destruction,  loss or theft,  the applicant shall also furnish to
the Company and the Trustee and any agent of the Company or the Trustee evidence
to their  satisfaction  of the  destruction,  loss or theft of such  Convertible
Debenture and of the ownership thereof.

     Every substitute Convertible Debenture issued pursuant to the provisions of
this Section by virtue of the fact that any Convertible  Debenture is destroyed,
lost or stolen shall  constitute a contractual  obligation  of the Company,  and
shall be  entitled  to all the  benefits  of (but  shall be  subject  to all the
limitations of rights set forth in) this Indenture  equally and  proportionately
with any and all other Convertible  Debentures duly  authenticated and delivered
hereunder.  All Convertible  Debentures shall be held upon the express condition
that,  to the extent  permitted by law, the foregoing  provisions  are exclusive
with respect to the  replacement  or payment of mutilated,  defaced,  destroyed,
lost or  stolen  Convertible  Debentures  and shall  preclude  any and all other
rights or remedies  notwithstanding  any law or statute  existing  or  hereafter
enacted to the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.

<PAGE>

     Section  2.12  Cancellation  of  Convertible  Debentures.  All  Convertible
Debentures  surrendered  for payment,  redemption,  conversion,  registration of
transfer or exchange,  or for credit against any payment in respect of a sinking
or analogous  fund,  shall,  if  surrendered  to the Company or any agent of the
Company or the  Trustee,  be delivered  to the Trustee for  cancellation  or, if
surrendered  to  the  Trustee,  shall  be  canceled  by it;  and no  Convertible
Debentures shall be issued in lieu thereof, except as expressly permitted by any
of the provisions of this Indenture.  The Company may at any time deliver to the
Trustee for cancellation  any Convertible  Debentures  previously  authenticated
hereunder  which  the  Company  has not  issued  and  sold  and all  Convertible
Debentures  so  delivered  shall be  promptly  canceled by the  Trustee.  If the
Company shall acquire any of the Convertible Debentures,  such acquisition shall
not operate as a redemption or satisfaction of the  indebtedness  represented by
such  Convertible  Debentures  unless  and until the same are  delivered  to the
Trustee for cancellation.  All canceled Convertible Debentures shall be disposed
of as directed by a Company Order or, in the absence of such Company  Order,  in
accordance with the Trustee's customary  practices.  The Trustee shall provide a
certificate  of  destruction  to the  Company  with  respect to all  Convertible
Debentures disposed of by the Trustee.

     Section 2.13 Temporary Convertible  Debentures.  Pending the preparation of
definitive Convertible Debentures, the Company may execute and the Trustee shall
authenticate and make available for delivery  temporary  Convertible  Debentures
(printed,  lithographed,  typewritten or otherwise  reproduced,  in each case in
form reasonably  acceptable to the Trustee).  Temporary  Convertible  Debentures
shall be issuable in any authorized denomination,  and substantially in the form
of the definitive Convertible Debentures but with such omissions, insertions and
variations as may be appropriate for temporary  Convertible  Debentures,  all as
may be determined by the Company with the reasonable concurrence of the Trustee.
Temporary Convertible Debentures may contain such reference to any provisions of
this Indenture as may be  appropriate.  Every  temporary  Convertible  Debenture
shall be executed by the Company and be  authenticated  by the Trustee  upon the
same conditions and in substantially  the same manner,  and with like effect, as
the definitive  Convertible  Debentures.  Without unreasonable delay the Company
shall execute and shall furnish definitive  Convertible Debentures and thereupon
temporary Convertible Debentures may be surrendered in exchange therefor without
charge to the Holder at each  office or agency to be  maintained  by the Company
for that purpose pursuant to Section 3.2, and the Trustee shall authenticate and
make  available  for  delivery  in  exchange  for  such  temporary   Convertible
Debentures  an  equal  aggregate  principal  amount  of  definitive  Convertible
Debentures  of  authorized  denominations.  Until so  exchanged,  the  temporary
Convertible  Debentures  shall be  entitled  to the  same  benefits  under  this
Indenture as definitive Convertible Debentures.

                                   ARTICLE III

<PAGE>

                            COVENANTS OF THE COMPANY

     Section 3.1 Payment of Principal  and Interest.  The Company  covenants and
agrees for the benefit of the Holders of the Convertible Debentures that it will
duly and  punctually  pay or cause to be paid the principal of, and interest on,
each  of the  Convertible  Debentures  in  accordance  with  the  terms  of such
Convertible  Debentures  and of this  Indenture.  The  interest  on  Convertible
Debentures  (together with any additional  amounts payable pursuant to the terms
of such Convertible Debentures) shall be payable only to the Holders thereof and
at the option of the Company may be paid by wire  transfer or by mailing  checks
for such interest payable to such Holders at their last addresses as they appear
on the Security Register.

     Section  3.2 Offices for  Payment,  etc. So long as any of the  Convertible
Debentures  remain  outstanding,  the Company will  maintain the  following:  an
office or agency in the  Borough  of  Manhattan,  City of New York (a) where the
Convertible  Debentures may be presented for payment,  (b) where the Convertible
Debentures  may be presented  for  registration  of transfer and for exchange as
provided in this Indenture, and (c) where notices and demands may be served upon
the Company in respect of the Convertible Debentures, or this Indenture.

     The Company will give to the Trustee  written notice of the location of any
such office or agency and of any change of location thereof. In case the Company
shall fail to so  designate  or maintain any such office or agency or shall fail
to give such notice of the  location or of any change in the  location  thereof,
presentations and demands may be made and notices may be served at the Corporate
Trust Office.

     Section 3.3 Paying Agents. Whenever the Company is not the Paying Agent, it
shall  appoint  a Paying  Agent  other  than the  Trustee  with  respect  to the
Convertible  Debentures,  it will cause such Paying Agent to execute and deliver
to the Trustee an  instrument  in which such  Paying  Agent shall agree with the
Trustee, subject to the provisions of this Section:

               (a)  that it will  hold all sums  received  by it as such  Paying
          Agent  for  the  payment  of  the  principal  of or  interest  on  the
          Convertible  Debentures (whether such sums have been paid to it by the
          Company or by any other  obligor  on the  Convertible  Debentures)  in
          trust for the benefit of the Holders of the Convertible  Debentures or
          of the  Trustee,  and upon the  occurrence  of an Event of Default and
          upon the  written  request  of the  Trustee,  pay  over all such  sums
          received by it to the Trustee; and

               (b) that it will give the  Trustee  notice of any  failure by the
          Company (or by any other  obligor on the  Convertible  Debentures)  to
          make any payment of the

<PAGE>

          principal of or interest on the  Convertible  Debentures when the same
          shall be due and payable.

     The Company  hereby  appoints  the Trustee as Paying  Agent and the Trustee
accepts such appointment as Paying Agent and agrees to hold all sums received by
it as such Paying Agent for the payment of the principal of, or interest on, the
Convertible Debentures (whether such sums have been paid to it by the Company or
by any other obligor on the Convertible  Debentures) in trust for the benefit of
the Holders of the Convertible Debentures.

     The  Company  will,  on or prior to each  due date of the  principal  of or
interest  on the  Convertible  Debentures,  deposit in a timely  manner with the
Paying Agent a sum sufficient to pay such principal or interest so becoming due,
and (unless such Paying Agent is the Trustee) the Company will  promptly  notify
the Trustee of any failure to take such action.

     If the  Company  shall act as its own  Paying  Agent  with  respect  to the
Convertible Debentures,  it will, on or before each due date of the principal of
or interest on the  Convertible  Debentures,  set aside,  segregate  and hold in
trust  for the  benefit  of the  holders  of the  Convertible  Debentures  a sum
sufficient  to pay such  principal or interest so becoming due. The Company will
promptly notify the Trustee of any failure to take such action.

     Section 3.4 Written  Statement to Trustee.  The Company will deliver to the
Trustee, within 120 days after the end of each fiscal year of the Company ending
after the date hereof, a brief  certificate  (which need not comply with Section
14.5) from the  principal  executive,  financial  or  accounting  officer of the
Company  as to  his  or her  knowledge,  after  due  inquiry,  of the  Company's
compliance  with  all  conditions  and  covenants  under  this  Indenture  (such
compliance to be determined without regard to any period of grace or requirement
of notice  provided  under this  Indenture),  and if the Company shall not be in
compliance,  specifying all such defaults or  non-compliance  and the nature and
status thereof.

     Section 3.5  Limitation on Dividends.  If any  Convertible  Debentures  are
outstanding  and (i) there shall have occurred any Event of Default or any event
that,  with the giving of notice or lapse of time or both,  would  constitute an
Event of Default,  or (ii) the Guarantor shall be in default with respect to its
payment or other obligations pursuant to Section 5.1 of the Preferred Securities
Guarantee or Section 2.1 of the Common  Securities  Guarantee,  then the Company
shall not (a) declare or pay any dividend on, make any distribution with respect
to, or redeem,  purchase or make a  liquidation  payment with respect to, any of
its Capital Stock or (b) make any payment of interest,  principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the Company
that rank pari passu with or junior in interest to the Convertible Debentures or
make any guarantee  payments with respect to any guarantee by the Company of the
debt  securities of any subsidiary of the Company if such  guarantee  ranks pari
passu with or junior in interest to the Convertible  Debentures  (other than (i)
as a result of a reclassification of the Capital Stock of the Company or

<PAGE>

the exchange or  conversion  of one class or series of the Capital  Stock of the
Company for another  class or series of the Capital  Stock of the Company,  (ii)
the  purchase of  fractional  interests  in shares of the  Capital  Stock of the
Company pursuant to the conversion or exchange  provisions of such Capital Stock
or the security being converted into or exchanged for such Capital Stock,  (iii)
dividends or distributions in Common Shares of the Company, (iv) any declaration
of a dividend in connection with the  implementation  of a shareholders'  rights
plan, or the issuance of Capital Stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (v) payments under
the Trust Securities Guarantees,  (vi) purchases of Common Shares of the Company
related to the  issuance of Common  Shares of the Company or rights under any of
the Company's  benefit plans for its directors,  officers or employees and (vii)
prior  obligations  under any dividend  reinvestment and stock purchase plans to
issue shares other than as a result of the payment of a dividend),  in each case
unless and until such default or Event of Default shall have been cured.

     Section 3.6 Covenants as to WRP Trust.  For so long as the Trust Securities
remain  outstanding,  the  Company  will (a)  maintain  100%  direct or indirect
ownership of the Common  Securities of WRP Trust,  provided,  however,  that any
permitted  successor  of the  Company  under this  Indenture  may succeed to the
Company's ownership of the Common Securities,  (b) use its best efforts to cause
WRP Trust (i) to remain a statutory  business  trust,  except in connection with
the distribution of Convertible Debentures to the holders of Trust Securities in
liquidation of WRP Trust,  the redemption of all of the Trust  Securities of WRP
Trust,  or  certain  mergers  or  consolidations,   each  as  permitted  by  the
Declaration, and (ii) to continue to be classified as a grantor trust for United
States  federal  income tax  purposes and (c) use its best efforts to cause each
holder of Trust  Securities  to be  treated  as owning an  undivided  beneficial
interest in the Convertible Debentures.

     Section 3.7 Existence.  Except as permitted by the  Declaration and Article
IX  hereof,  the  Company  will do or cause to be done all things  necessary  to
preserve  and keep in full  force and  effect the  Company's  existence,  rights
(charter and  statutory) and  franchises;  provided,  however,  that the Company
shall not be required to preserve  any such right or  franchise  if the Board of
Directors shall determine that the  preservation  thereof is no longer desirable
in the conduct of the  business of the Company and that the loss  thereof is not
disadvantageous in any material respect to the Holders.

                                   ARTICLE IV

               HOLDERS OF CONVERTIBLE DEBENTURES LISTS AND REPORTS
                         BY THE COMPANY AND THE TRUSTEE

<PAGE>

     Section  4.1  Company  to  Furnish  Trustee  Information  as to  Names  and
Addresses of Holders of Convertible Debentures. The Company covenants and agrees
that it will furnish or cause to be furnished to the Trustee a list in such form
as the Trustee may reasonably  require of the names and addresses of the Holders
of the Convertible Debentures:

               (i) semiannually and not more than 15 days after each record date
          for the  payment  of  interest  on  such  Convertible  Debentures,  as
          hereinabove specified, as of such record date, and

               (ii) at such other times as the Trustee may reasonably request in
          writing,  within 30 days  after  receipt  by the  Company  of any such
          request,  such list to be as of a date not more than 15 days  prior to
          the time such  information is furnished,  provided that if and so long
          as the Trustee shall be the Registrar, such list shall not be required
          to be furnished.

     Section  4.2   Preservation   and  Disclosure  of  Holders  of  Convertible
Debentures Lists.

     (a) The  Trustee  shall  preserve,  in as  current a form as is  reasonably
practicable,  all  information  as to the names and  addresses of the Holders of
Convertible  Debentures  contained  in the most recent list  furnished  to it as
provided  in  Section  4.1 or  maintained  by the  Trustee  in its  capacity  as
Registrar,  if so acting.  The Trustee may destroy any list  furnished  to it as
provided in Section 4.1 upon receipt of a new list so furnished.

     (b) In case three or more Holders of  Convertible  Debentures  or, if there
are less than five Holders, the Holders of not less than a majority in aggregate
principal  amount of the  Convertible  Debentures  (hereinafter  referred  to as
"applicants")  apply in  writing  to the  Trustee  and  furnish  to the  Trustee
reasonable proof that each such applicant has owned a Convertible  Debenture for
a period of at least 30 days  preceding the date of such  application,  and such
application  states that the applicants desire to communicate with other Holders
of  Convertible   Debentures  (in  which  case  the  applicants  must  all  hold
Convertible  Debentures)  or with  Holders of all  Convertible  Debentures  with
respect  to  their  rights  under  this  Indenture  or  under  such  Convertible
Debentures and such application is accompanied by a copy of the form of proxy or
other communication which such applicants propose to transmit,  then the Trustee
shall,  within five business days after the receipt of such  application,  at is
election, either

               (i) afford to such applicants access to the information preserved
          at the  time by the  Trustee  in  accordance  with the  provisions  of
          subsection (a) of this Section, or

<PAGE>

               (ii)  inform  such  applicants  as to the  approximate  number of
          Holders of Convertible Debentures or of all Convertible Debentures, as
          the case may be, whose names and addresses  appear in the  information
          preserved  at  the  time  by  the  Trustee,  in  accordance  with  the
          provisions of subsection  (a) of this Section,  as to the  approximate
          cost of mailing to such Holders of Convertible  Debentures the form of
          proxy or other communication, if any, specified in such application.

     If the Trustee shall elect not to afford to such applicants  access to such
information,  the Trustee shall,  upon the written  request of such  applicants,
mail to each Holder of  Convertible  Debentures  or all  Holders of  Convertible
Debentures,  as  the  case  may  be,  whose  name  and  address  appears  in the
information  preserved  at the  time  by the  Trustee  in  accordance  with  the
provisions  of subsection  (a) of this  Section,  a copy of the form of proxy or
other  communication  which  is  specified  in  such  request,  with  reasonable
promptness  after a tender to the  Trustee of the  material  to be mailed and of
payment,  or provision for the payment,  of the reasonable  expenses of mailing,
unless  within  five days  after such  tender,  the  Trustee  shall mail to such
applicants and file with the Commission  together with a copy of the material to
be  mailed,  a written  statement  to the  effect  that,  in the  opinion of the
Trustee,  such mailing would be contrary to the best interests of the Holders of
Convertible  Debentures or could be in violation of applicable law. Such written
statement  shall specify the basis of such  opinion.  If the  Commission,  after
opportunity for a hearing upon the objections specified in the written statement
so filed, shall enter an order refusing to sustain any of such objections or if,
after the entry of such order  sustaining  one or more of such  objections,  the
Commission  shall find,  after notice and opportunity for hearing,  that all the
objections  so sustained  have been met, and shall enter an order so  declaring,
the  Trustee  shall  mail  copies  of  such  material  to all  such  Holders  of
Convertible  Debentures with reasonable promptness after the entry of such order
and the renewal of such tender;  otherwise  the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.

     (c) Each and every  Holder of  Convertible  Debentures,  by  receiving  and
holding the same,  agrees with the  Company  and the  Trustee  that  neither the
Company nor the  Trustee  nor any agent of the  Company or the Trustee  shall be
held  accountable by reason of the disclosure of any such  information as to the
names and addresses of the Holders of Convertible  Debentures in accordance with
the provisions of subsection (b) of this Section,  regardless of the source from
which such  information  was  derived,  and that the  Trustee  shall not be held
accountable  by reason of mailing any material  pursuant to a request made under
such subsection (b).

     Section 4.3 Reports by the Company. The Company covenants:

               (a) to file with the Trustee, within 15 days after the Company is
          required  to file the same with the  Commission,  copies of the annual
          reports  and of the  information,  documents,  and other  reports  (or
          copies of such portions and any of the

<PAGE>

          foregoing  as the  Commission  may  from  time to time  by  rules  and
          regulations  prescribe) which the Company may be required to file with
          the Commission pursuant to Section 13 or Section 15(d) of the Exchange
          Act, or if the Company is not required to file information, documents,
          or reports pursuant to either of such Sections,  then to file with the
          Trustee and the Commission to the extent permitted, in accordance with
          rules and regulations  prescribed from time to time by the Commission,
          such of the supplementary  and periodic  information,  documents,  and
          reports  which may be required  pursuant to Section 13 of the Exchange
          Act,  in  respect of a security  listed and  registered  on a national
          securities  exchange  as may be  prescribed  from time to time in such
          rules and regulations;

               (b) to file with the Trustee and the  Commission,  in  accordance
          with  rules  and  regulations  prescribed  from  time  to  time by the
          Commission,  such additional information,  documents, and reports with
          respect to compliance by the Company with the conditions and covenants
          provided for in this Indenture as may be required from time to time by
          such rules and regulations; and

               (c) to transmit by mail to the Holders of Convertible  Debentures
          in the manner and to the extent  required  by  Sections  6.6 and 14.4,
          within  30 days  after  the  filing  thereof  with the  Trustee,  such
          summaries of any  information,  documents,  and reports required to be
          filed  by the  Company  pursuant  to  subsections  (a) and (b) of this
          Section as may be required to be  transmitted to such Holders by rules
          and regulations prescribed from time to time by the Commission.

                                    ARTICLE V

                     REMEDIES OF THE TRUSTEE AND HOLDERS OF
                   CONVERTIBLE DEBENTURES ON EVENT OF DEFAULT

     Section 5.1 Event of Default Defined;  Acceleration of Maturity;  Waiver of
Default.  "Event of Default" with respect to the Convertible Debentures wherever
used  herein,  means any one or more of the  following  events  which shall have
occurred and be  continuing  (whatever  the reason for such Event of Default and
whether it shall be voluntary or  involuntary or be effected by operation of law
or pursuant to any judgment,  decree or order of any court or any order, rule or
regulation of any administrative or governmental body):

               (a)  default in the payment of any  interest  on the  Convertible
          Debentures,  in  cash or by the  issuance  of  additional  Convertible
          Debentures pursuant to Section

<PAGE>

          2.5(c) hereof  (including  any  Additional  Sums),  or any  additional
          amounts  payable  in  respect of any  Convertible  Debentures  when it
          becomes due and payable,  and continuance of such default for a period
          of 30 days,  without regard to the  application of Section 2.9 hereof;
          or

               (b) default in the payment of the  principal  of, or premium,  if
          any, on any  Convertible  Debentures as and when the same shall become
          due and payable whether at maturity,  upon redemption,  by declaration
          or otherwise; or

               (c)  default in the  performance,  or breach of any  covenant  or
          warranty of the Company contained in the Convertible  Debentures or in
          this  Indenture  (other than a covenant or warranty a default in whose
          performance or whose breach is elsewhere in this Section  specifically
          dealt with), and continuance of such default or breach for a period of
          30 days after there has been given,  by registered or certified  mail,
          to the Company by the Trustee or to the Company and the Trustee by the
          Holders  of  at  least  25%  in  aggregate  principal  amount  of  the
          Outstanding  Convertible  Debentures a written notice  specifying such
          default or breach and  requiring  it to be remedied  and stating  that
          such notice is a "Notice of Default" hereunder; or

               (d) the entry by a court having  jurisdiction  in the premises of
          (A) a decree  or order for  relief in  respect  of the  Company  in an
          involuntary case or proceeding  under any applicable  federal or state
          bankruptcy,  insolvency,  reorganization or other similar law or (B) a
          decree or order  adjudging  the  Company a bankrupt or  insolvent,  or
          approving  as  properly  filed  a  petition  seeking   reorganization,
          arrangement, adjustment or composition of or in respect of the Company
          under any applicable  federal or state law, or appointing a custodian,
          receiver, liquidator, assignee, trustee, sequestrator or other similar
          official  of the  Company  or of all or any  substantial  part  of its
          property,  or ordering the winding up or  liquidation  of its affairs,
          and the continuance of any such decree or order for relief or any such
          other  decree  or order  unstayed  and in  effect  for a period  of 90
          consecutive days; or

               (e)  the  commencement  by the  Company  of a  voluntary  case or
          proceeding   under  any  applicable   federal  or  state   bankruptcy,
          insolvency,  reorganization  or other similar law or of any other case
          or  proceeding  to be  adjudicated  a bankrupt  or  insolvent,  or the
          consent  by it to the entry of a decree or order for relief in respect
          of  the  Company  in an  involuntary  case  or  proceeding  under  any
          applicable federal or state bankruptcy, insolvency,  reorganization or
          other  similar  law  or to  the  commencement  of  any  bankruptcy  or
          insolvency  case or  proceeding  against  it, or the filing by it of a
          petition or answer or consent seeking  reorganization  or relief under
          any  applicable  federal  or state  law,  or the  consent by it to the
          filing of such petition or to the appointment of or taking  possession
          by a custodian, receiver, liquidator,  assignee, trustee, sequestrator
          or similar official of the Company or of all or any substantial

<PAGE>

          part of its  property,  or the making by it of an  assignment  for the
          benefit  of  creditors,  or  the  admission  by it in  writing  of its
          inability to pay its debts generally as they become due, or the taking
          of corporate  action by the Company in furtherance of any such action;
          or

               (f) failure by the Company to convert Convertible Debentures into
          Common Shares of the Company upon an appropriate  election by a holder
          of Trust  Securities or a Holder of Convertible  Debentures to convert
          such Trust Securities or Convertible  Debentures,  as the case may be,
          into such  Common  Shares  (whether or not  conversion  or exchange is
          prohibited by the subordination provisions set forth herein); or

               (g)  the  WRP  Trust  shall  have  voluntarily  or  involuntarily
          dissolved,   wound-  up  its  business  or  otherwise  terminated  its
          existence   except  in  connection   with  (i)  the   distribution  of
          Convertible  Debentures to holders of Trust  Securities in liquidation
          of their  interest in the WRP Trust upon the  occurrence  of a Special
          Event, as defined in the Declaration, or upon the occurrence of events
          as  described  in  Section 3 of Annex I to the  Declaration,  (ii) the
          redemption  of all of the  outstanding  Trust  Securities  of the  WRP
          Trust, (iii) the conversion of all outstanding  Convertible  Preferred
          Securities  into Common Shares of the Company or (iv) certain  mergers
          or consolidations,  each as permitted by the Declaration or Article IX
          hereof;

               (h) the Company shall have  consummated a merger or consolidation
          in which the  successor  will be taxed as a  partnership  for  federal
          income tax purposes;

               (i) the Company  shall  convert into, or otherwise be taxed as, a
          partnership for federal income tax purposes; or

               (j) all or  substantially  all of the assets of the Company  have
          been  transferred  to an entity  taxable as a partnership  for federal
          income  tax  purposes  (for  purposes  of  this   paragraph  (j),  the
          "partnership"),  unless  the  Company  is  taxable  as a REIT,  is the
          managing general partner of the partnership,  owns in excess of 90% of
          the partnership  interests of the partnership,  causes the partnership
          to issue debentures to the Company with the same rights and privileges
          as the  Convertible  Debentures,  and the partnership has succeeded to
          substantially  all of the  assets  of the  Company  and has  taken the
          assets in exchange for a guarantee of the Convertible Debentures.

     If an Event of Default occurs and is continuing, then and in each and every
such case, unless the principal of all Convertible Debentures shall have already
become due and  payable,  either the Trustee or the Holders of not less than 25%
in aggregate  principal  amount of the

<PAGE>

Convertible Debentures then Outstanding  hereunder,  by notice in writing to the
Company  (and to the Trustee if given by such  Holders),  may declare the entire
principal  of,  plus  accrued  and  unpaid  interest  on,  all  the  Convertible
Debentures  (including  Additional  Sums, if any) and any other amounts  payable
under  this  Indenture  to be due and  payable  immediately,  and  upon any such
declaration  the same shall  become and shall be  immediately  due and  payable.
These  provisions,  however,  are subject to the  condition  that if at any time
after the principal and other amounts due on the  Convertible  Debentures  shall
have been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall  have been  obtained  or entered as  hereinafter
provided,  the  Company  shall  pay or  shall  deposit  with the  Trustee  a sum
sufficient  to pay all matured  installments  of interest,  if any, upon all the
Convertible  Debentures and the principal of any and all Convertible  Debentures
which shall have become due otherwise than by such  acceleration  (with interest
upon such principal) or deposit in Dollars such amount as shall be sufficient to
cover reasonable compensation to the Trustee, its agents,  attorneys and counsel
and all other expenses and liabilities incurred,  and all advances with interest
made,  by the  Trustee,  its  agents,  attorneys  and counsel and if any and all
defaults  under this  Indenture,  other than the nonpayment of the principal and
interest  of  Convertible  Debentures  which  shall  have  become  due  by  such
acceleration,  shall have been cured or waived as provided  herein,  then and in
every such case the Holders of a majority in aggregate  principal  amount of the
Convertible Debentures then Outstanding, by written notice to the Company and to
the Trustee for the Convertible  Debentures,  may waive all defaults and rescind
and  annul  such  declaration  and  its  consequences;  but no  such  waiver  or
rescission and annulment shall extend to or shall affect any subsequent  default
or shall impair any right consequent thereon.

     Section 5.2 Collection of Indebtedness by Trustee;  Trustee May Prove Debt.
The Company  covenants  that (a) in case default shall be made in the payment of
any  installment  of interest  on any of the  Convertible  Debentures  when such
interest  shall  have  become  due and  payable,  and such  default  shall  have
continued  for a period of 30 days,  or (b) in case default shall be made in the
payment of all or any part of the principal of any of the Convertible Debentures
when the same shall have become due and payable,  whether upon  Maturity or upon
any redemption or by  declaration or otherwise,  then upon demand of the Trustee
for the  Convertible  Debentures,  the  Company  will pay to the Trustee for the
benefit of the Holders of the Convertible  Debentures the whole amount that then
shall have become due and payable on all Convertible Debentures for principal of
or interest,  as the case may be (with interest to the date of such payment upon
the  overdue  principal  and,  to the extent  that  payment of such  interest is
enforceable  under  applicable  law, on overdue  installments of interest at the
same rate as the rate of interest specified in the Convertible Debentures);  and
in addition  thereto,  such further  amount as shall be  sufficient to cover the
costs and expenses of collection,  including reasonable compensation to, and all
expenses and  liabilities  incurred and all advances  with interest made by, the
Trustee and each predecessor Trustee except as a result of its negligence or bad
faith.

<PAGE>

     Until such demand is made by the Trustee, the Company may pay the principal
of and interest on the Convertible  Debentures to the persons entitled  thereto,
whether or not the principal of and interest on the  Convertible  Debentures are
overdue.

     In case the Company  shall fail  forthwith  to pay such  amounts  upon such
demand,  the  Trustee  for the  Convertible  Debentures,  in its own name and as
trustee of an express  trust,  shall be entitled and  empowered to institute any
action or  proceedings at law or in equity for the collection of the sums so due
and unpaid,  and may  prosecute  any such action or  proceedings  to judgment or
final  decree,  and may enforce any such  judgment or final  decree  against the
Company or other  obligor upon such  Convertible  Debentures  and collect in the
manner  provided by law out of the property of the Company or other obligor upon
such Convertible  Debentures,  wherever situated, the moneys adjudged or decreed
to be payable.

     In case there shall be pending  proceedings  relative to the Company or any
other  obligor upon the  securities  under Title 11 of the United States Code or
any other applicable  federal or state  bankruptcy,  insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator,  sequestrator  or similar  official shall have been appointed for or
taken  possession  of the Company or its property or such other  obligor,  or in
case of any other  comparable  judicial  proceedings  relative to the Company or
other  obligor  under the  Convertible  Debentures,  or to the  property  of the
Company  or such  other  obligor,  the  Trustee,  irrespective  of  whether  the
principal of any Convertible Debentures shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section,  shall be
entitled and empowered, by intervention in such proceeding or otherwise:

               (a) to file and prove a claim or claims  for the whole  amount of
          principal and interest owing and unpaid in respect of the  Convertible
          Debentures,  and to file  such  other  papers or  documents  as may be
          necessary  or  advisable  in order to have the  claims of the  Trustee
          (including any claim for reasonable  compensation to, and all expenses
          and  liabilities  incurred and all advances with interest made by, the
          Trustee and each predecessor  Trustee,  and their  respective  agents,
          attorneys and counsel,  except as a result of negligence or bad faith)
          and of the Holders of Convertible  Debentures  allowed in any judicial
          proceedings  relative  to  the  Company  or  other  obligor  upon  all
          Convertible  Debentures,  or to the  property  of the  Company or such
          obligor, and

               (b) to collect and receive any moneys or other  property  payable
          or  deliverable  on any such  claims,  and to  distribute  all amounts
          received  with  respect  to the claims of the  Holders of  Convertible
          Debentures  and of the  Trustee  on  their  behalf;  and any  trustee,
          receiver,  liquidator,  custodian or other similar  official is hereby
          authorized  by each of the Holders of  Convertible  Debentures to make
          payments to the Trustee for the  Convertible  Debentures,  and, in the
          event that such Trustee shall consent to

<PAGE>

          the  making  of  payments  directly  to  the  Holders  of  Convertible
          Debentures, to pay to such Trustee such amounts as shall be sufficient
          to cover reasonable  compensation to, and all expenses and liabilities
          incurred and all advances with  interest  made by, such Trustee,  each
          predecessor Trustee and their respective agents, attorneys and counsel
          and all other amounts due to such Trustee or any  predecessor  Trustee
          pursuant to Section 6.7, except as a result of Trustee's negligence or
          bad faith.

     Nothing  herein  contained  shall be deemed to  authorize  the  Trustee  to
authorize  or  consent  to or  accept  or  adopt  on  behalf  of any  Holder  of
Convertible  Debentures any plan of reorganization,  arrangement,  adjustment or
composition  affecting  the  Convertible  Debentures or the rights of any Holder
thereof,  or to  authorize  the  Trustee  to vote in respect of the claim of any
Holder of Convertible Debentures in any such proceeding.

     All rights of action and of asserting claims under this Indenture, or under
any of the  Convertible  Debentures,  may be  enforced  by the  Trustee  for the
Convertible  Debentures  without  the  possession  of  any  of  the  Convertible
Debentures or the production thereof at any trial or other proceedings  relative
thereto,  any such action or  proceedings  instituted  by the  Trustee  shall be
brought  in its own name as trustee of an express  trust,  and any  recovery  of
judgment, subject to the payment of the expenses, disbursements and compensation
of the  Trustee,  each  predecessor  Trustee  and their  respective  agents  and
attorneys,  shall be for the ratable  benefit of the Holders of the  Convertible
Debentures in respect of which such action was taken.

     In any proceedings  brought by the Trustee for the  Convertible  Debentures
(and also any proceedings  involving the interpretation of any provision of this
Indenture to which the Trustee  shall be a party),  the Trustee shall be held to
represent all the Holders of the Convertible Debentures in respect of which such
action  was taken,  and it shall not be  necessary  to make any  Holders of such
Convertible Debentures parties to any such proceedings.

     Section 5.3  Application of Proceeds.  Any moneys  collected by the Trustee
for the  Convertible  Debentures  pursuant  to this  Article  in  respect of the
Convertible  Debentures  shall be applied in the following  order at the date or
dates fixed by such Trustee and, in case of the  distribution  of such moneys on
account of principal or interest,  upon presentation of the several  Convertible
Debentures  in respect of which  moneys have been  collected  and  stamping  (or
otherwise  noting)  thereon the payment,  or issuing  Convertible  Debentures in
reduced principal amounts in exchange for the presented  Convertible  Debentures
if only partially paid, or upon surrender thereof if fully paid:

               FIRST: To the payment of costs and expenses applicable in respect
          of which moneys have been collected, including reasonable compensation
          to, and all expenses and  liabilities  incurred and all advances  with
          interest made by, the Trustee and each  predecessor  Trustee and their
          respective agents and attorneys and all other amounts

<PAGE>

          due to the Trustee or any predecessor Trustee pursuant to Section 6.7,
          except as a result of Trustee's negligence or bad faith;

               SECOND:  To the  payment of the  amounts  then due and unpaid for
          interest on the Convertible  Debentures for which principal is not yet
          due and payable in respect of which moneys have been  collected,  such
          payments to be made ratably to the persons entitled  thereto,  without
          discrimination  or  preference,  according to the amounts then due and
          payable on such Convertible Debentures for interest;

               THIRD:  To the  payment  of the  amounts  then due and unpaid for
          principal  of and  interest on the  Convertible  Debentures  for which
          principal  is due and  payable in respect  of which  moneys  have been
          collected,  such  payments to be made ratably to the persons  entitled
          thereto,  without  discrimination  or  preference,  according  to  the
          amounts  then  due and  payable  on  such  Convertible  Debentures  of
          principal and interest, respectively; and

               FOURTH:  To the payment of the remainder,  if any, to the Company
          or any other Person lawfully entitled thereto.

     Section 5.4  Restoration of Rights on Abandonment of  Proceedings.  In case
the Trustee for the Convertible Debentures or any Holder shall have proceeded to
enforce  any right under this  Indenture  and such  proceedings  shall have been
discontinued  or  abandoned  for any  reason,  or  shall  have  been  determined
adversely to the Trustee or to such Holder, then and in every such case, subject
to the  determination in any such proceeding,  the Company,  the Trustee and the
Holders  shall be restored  respectively  to their former  positions  and rights
hereunder,  and all rights,  remedies and powers of the Company, the Trustee and
the  Holders  of  Convertible  Debentures  shall  continue  as  though  no  such
proceedings had been taken.

     Section 5.5 Limitations on Suits by Holders of Convertible  Debentures.  No
Holder  of any  Convertible  Debenture  shall  have any  right by  virtue  or by
availing  of any  provision  of  this  Indenture  to  institute  any  action  or
proceeding at law or in equity or in bankruptcy or otherwise  upon or under with
respect  to this  Indenture,  or for the  appointment  of a  trustee,  receiver,
liquidator,  custodian  or  other  similar  official  or for  any  other  remedy
hereunder, unless such Holder previously shall have given to the Trustee written
notice of any Event of Default and of the continuance  thereof,  as hereinbefore
provided,  and  unless  also  the  Holders  of not less  than  25% in  aggregate
principal amount of the Convertible  Debentures then Outstanding shall have made
written  request upon the Trustee to institute such action or proceedings in its
own name as  trustee  hereunder  and shall  have  offered  to the  Trustee  such
reasonable  indemnity,  as it may  require,  against  the  costs,  expenses  and
liabilities to be incurred  therein or thereby and the Trustee for 30 days after
its receipt of such notice,  request and offer of indemnity shall have failed to
institute any such action

<PAGE>

or proceeding and no direction inconsistent with such written request shall have
been given to the Trustee  during such 30 day period by Holders of a majority in
principal  amount  of the  Convertible  Debentures  then  Outstanding;  it being
understood and intended,  and being expressly covenanted by the taker and Holder
of  every  Convertible  Debenture  with  every  other  taker  and  Holder  of  a
Convertible  Debenture  and  the  Trustee,  that  no  one  or  more  Holders  of
Convertible Debentures shall have any right in any manner whatever, by virtue or
by availing of any provision of this  Indenture to affect,  disturb or prejudice
the rights of any other such Holder of Convertible  Debentures,  or to obtain or
seek to  obtain  priority  over or  preference  to any other  such  Holder or to
enforce any right under this Indenture, except in the manner herein provided and
for the  equal,  ratable  and  common  benefit  of all  Holders  of  Convertible
Debentures.

     Section 5.6  Unconditional  Right of Holders of  Convertible  Debentures to
Institute Certain Suits. Notwithstanding any provision in this Indenture and any
provision  of  any  Convertible  Debenture,  the  right  of  any  Holder  of any
Convertible  Debenture  to receive  payment of the  principal of and (subject to
Section 2.9) interest on such Convertible  Debenture at the respective rates, in
the respective  amount on or after the  respective  due dates  expressed in such
Convertible  Debenture,  and to institute  suit for the  enforcement of any such
payment on or after such  respective  dates,  shall not be  impaired or affected
without the consent of such Holder.

     Section 5.7 Powers and Remedies Cumulative; Delay or Omission Not Waiver of
Default.  Except as provided in Section 2.11 and Section 5.5, no right or remedy
herein  conferred  upon  or  reserved  to  the  Trustee  or to  the  Holders  of
Convertible Debentures is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent  permitted by law, be cumulative
and in  addition  to every  other  right and remedy  given  hereunder  or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

     No delay  or  omission  of the  Trustee  or of any  Holder  of  Convertible
Debentures  to exercise  any right or power  accruing  upon any Event of Default
occurring and  continuing  as aforesaid  shall impair any such right or power or
shall  be  construed  to  be a  waiver  of  any  such  Event  of  Default  or an
acquiescence  therein; and, subject to Section 5.5, every power and remedy given
by this  Indenture  or by law to the  Trustee or to the  Holders of  Convertible
Debentures  may be exercised  from time to time, and as often as shall be deemed
expedient, by the Trustee or the Holders of Convertible Debentures.

     Section 5.8 Control by Holders of Convertible Debentures.  The Holders of a
majority in aggregate principal amount of the Convertible Debentures at the time
Outstanding  shall  have the  right to  direct  the  time,  method  and place of
conducting any proceeding for any remedy available to the Trustee, or

<PAGE>

exercising  any trust or power  conferred  on the  Trustee  with  respect to the
Convertible Debentures by this Indenture; provided that such direction shall not
be in conflict  with any rule of law or the  provisions of this  Indenture;  and
provided  further that the  Trustee,  being  advised by counsel,  shall have the
right to decline to follow any such  direction  if the Trustee  shall  determine
that the action or proceedings so directed would involve the Trustee in personal
liability or if the Trustee in good faith shall so determine that the actions or
forbearance  specified  in  or  pursuant  to  such  direction  would  be  unduly
prejudicial to the interest of Holders of the Convertible Debentures not joining
in the giving of said direction.

     Section  5.9  Waiver  of Past  Defaults.  The  Holders  of not less  than a
majority in aggregate principal amount of the Convertible Debentures at the time
Outstanding may on behalf of the Holders of all the Convertible Debentures waive
any past default hereunder or its consequences, except a default:

               (a) in the payment of the  principal of (or  premium,  if any) or
          any interest on any  Convertible  Debenture as and when the same shall
          become due by the terms of  Convertible  Debentures  otherwise than by
          acceleration  (unless such default has been cured and sums  sufficient
          to pay all matured  installments  of interest  and  principal  and any
          premium  has been  deposited  with the  Trustee  (in  accordance  with
          Section 5.1)), or

               (b) in respect of a covenant  or  provision  hereof  which  under
          Article VIII cannot be modified or amended  without the consent of the
          Holder of each Outstanding Convertible Debenture affected;

provided,  however, that if the Convertible Debentures are held by the WRP Trust
or the Institutional  Trustee of such Trust, such waiver or modification to such
waiver  shall not be  effective  until the  holders of a majority  in  aggregate
liquidation  amount of Trust Securities of the WRP Trust shall have consented to
such  waiver or  modification  to such  waiver;  provided  further,  that if the
consent of the Holder of each  Outstanding  Convertible  Debenture  is required,
such waiver shall not be effective until each holder of the Trust  Securities of
the WRP Trust shall have consented to such waiver.

     Upon any such waiver,  such  default  shall cease to exist and be deemed to
have been  cured and not to have  occurred,  and any  Event of  Default  arising
therefrom  shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture; but no such waiver
shall extend to any  subsequent  or other  default or Event of Default or impair
any right consequent thereon.

     Section 5.10 Right of Court to Require  Filing of Undertaking to Pay Costs.
All  parties  to this  Indenture  agree,  and  each  Holder  of any  Convertible
Debenture, by his acceptance thereof, shall be deemed

<PAGE>

to have agreed,  that any court may in its discretion  require,  in any suit for
the  enforcement  of any right or remedy  under  this  Indenture  or in any suit
against the Trustee for any action taken,  suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such  suit,  having  due  regard to the  merits  and good faith of the claims or
defenses made by such party  litigant;  but the provisions of this Section shall
not apply to any suit  instituted by the Trustee,  to any suit instituted by any
Holder of Convertible  Debentures or group of Holders of Convertible  Debentures
holding in the aggregate  more than 10% in principal  amount of the  Outstanding
Convertible  Debentures,  or to any suit  instituted by a Holder of  Convertible
Debentures for the enforcement of the payment of the principal of or interest on
any Convertible Debenture on or after the due date expressed in such Convertible
Debenture or any date fixed for redemption.

     Section  5.11  Suits  for  Enforcement.  In case an  Event of  Default  has
occurred,  has  not  been  waived  and is  continuing,  the  Trustee  may in its
discretion  proceed  to protect  and  enforce  the  rights  vested in it by this
Indenture by such  appropriate  judicial  proceedings  as the Trustee shall deem
most  effectual to protect and enforce any of such  rights,  either at law or in
equity or in bankruptcy or otherwise,  whether for the specific  enforcement  of
any covenant or agreement  contained in this Indenture or in aid of the exercise
of any  power  granted  in this  Indenture  or to  enforce  any  other  legal or
equitable right vested in the Trustee by this Indenture or by law.

     Section  5.12  Unconditional  Right of  Holders to  Receive  Principal  and
Interest and to Convert.  Notwithstanding any other provision in this Indenture,
the Holder of any Convertible  Debenture shall have the right, which is absolute
and  unconditional,  to  receive  payment  of  the  principal  of  and  interest
(including  Additional  Sums,  if  any)  on such  Convertible  Debenture  on the
respective Stated Maturities expressed in such Convertible Debenture (or, in the
case of  redemption,  on the  redemption  date) and to convert such  Convertible
Debenture  in  accordance  with  Article  XI  and  to  institute  suit  for  the
enforcement of any such payment and right to convert,  and such rights shall not
be impaired without the consent of such Holder. If the Institutional  Trustee is
the sole  Holder of the  Convertible  Debentures,  any  holder of the  Preferred
Securities shall have the right to institute suit on behalf of the Trust for the
enforcement of any such payment and right to convert.  The Company may not amend
the Indenture to remove the foregoing right to institute a suit directly against
the  Company  without  the prior  written  consent of the  holders of all of the
Preferred  Securities.  If the right to  institute a suit  directly  against the
Company is removed  following the  effectiveness of a registration  statement in
respect  of the  Convertible  Debentures,  the Trust may  become  subject to the
reporting  obligations under the Exchange Act. The Company shall have a right of
set-off to the extent of any payments  made by the Company to such holder in any
such suit.

                                   ARTICLE VI

                             CONCERNING THE TRUSTEE

     Section 6.1 Duties of the Trustee.

     (a) If an Event of Default has occurred and is  continuing  with respect to
the  Convertible  Debentures,  the Trustee shall  exercise the rights and powers
vested in it by this  Indenture and use the same degree of care and skill in its
exercise as a prudent  person would exercise or use under the  circumstances  in
the conduct of his or her own affairs.

     (b) Except  during the  continuance  of an Event of Default with respect to
the Convertible Debentures:

               (i)  the  Trustee   need  perform  only  those  duties  that  are
          specifically set forth in this Indenture and no others; and

               (ii) in the  absence of bad faith on its part,  the  Trustee  may
          conclusively  rely,  as  to  the  truth  of  the  statements  and  the
          correctness of the opinions  expressed  therein,  upon certificates or
          opinions  furnished to the Trustee and conforming on their face to the
          requirements  of this  Indenture.  However,  in the  case of any  such
          certificates   or  opinions   which  by  any   provision   hereof  are
          specifically  required to be  furnished  to the  Trustee,  the Trustee
          shall examine the  certificates  and opinions to determine  whether or
          not they conform on their face to the requirements of this Indenture.

     (c) The Trustee may not be relieved  from  liability  for its own negligent
failure to act or its own willful misconduct, except that:

               (i) this paragraph (c) does not limit the effect of paragraph (b)
          of this Section 6.1;

               (ii) the  Trustee  shall not be liable for any error of  judgment
          made in good faith by a Responsible  Officer  unless it is proved that
          the Trustee was negligent in ascertaining the pertinent facts; and

               (iii) the Trustee  shall not be liable with respect to any action
          it takes or omits to take in good faith in accordance with a direction
          received by it pursuant to Section 5.8.

     (d)  Every  provision  of this  Indenture  that in any way  relates  to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 6.1.

<PAGE>

     (e) The Trustee  may refuse to perform  any duty or  exercise  any right or
power or extend or risk its own funds or otherwise incur any financial liability
unless it receives indemnity  satisfactory to it against any loss,  liability or
expense.

     (f) Money held by the  Trustee in trust  hereunder  need not be  segregated
from other  funds  except to the extent  required by law.  The Trustee  shall be
under no liability for interest on any money received by it hereunder  except as
otherwise agreed in writing with the Company.

     Section 6.2 Rights of Trustee. Subject to Section 6.1 and the provisions of
the Trust Indenture Act:

     (a) The Trustee may rely on any  document  believed by it to be genuine and
to have been signed or  presented  by the proper  person.  The Trustee  need not
investigate any fact or matter stated in the document.

     (b) Before the Trustee  acts or  refrains  from  acting,  it may require an
Officers'  Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any  action  it takes or omits  to take in good  faith in  reliance  on such
Officers' Certificate or Opinion of Counsel.

     (c) Subject to the provisions of Section  6.1(c),  the Trustee shall not be
liable for any action it takes or omits to take in good faith  which it believes
to be authorized or within its rights or powers.

     (d) The Trustee may consult with counsel of its selection and the advice of
such counsel or any opinion of counsel shall be full and complete  authorization
and  protection  in  respect  of any  action  taken,  suffered  or omitted by it
hereunder in good faith and in reliance  thereon in accordance  with such advice
or opinion of counsel.

     (e) The Trustee  shall be under no obligation to exercise any of the rights
or powers  vested in it by this  Indenture at the request or direction of any of
the Holders  pursuant to this Indenture,  unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs,  expenses and
liabilities  which might be incurred by it in  compliance  with such  request or
direction.

     (f) The  Trustee  may  execute  any of the  trusts or powers  hereunder  or
perform  any  duties  hereunder  either  directly  or by or  through  agents  or
attorneys  and the  Trustee  shall  not be  responsible  for any  misconduct  or
negligence  on the part of any agent or attorney  appointed  with due care by it
hereunder.

<PAGE>

     Section 6.3 Individual Rights of Trustee.  The Trustee in its individual or
any other capacity may become the owner or pledgee of Convertible Debentures and
may otherwise  deal with the Company or its  Affiliates  with the same rights it
would have if it were not Trustee. Any Paying Agent,  Registrar or co- Registrar
may do the same with like rights. However, the Trustee must comply with Sections
6.10 and 6.11.

     Section 6.4 Trustee's Disclaimer. The Trustee makes no representation as to
the validity or adequacy of this  Indenture or the  Convertible  Debentures,  it
shall  not be  accountable  for  the  Company's  use of the  proceeds  from  the
Convertible  Debentures and it shall not be responsible for any statement in the
registration  statement  for the  Common  Shares of the  Company  into which the
Convertible  Debentures  are  convertible  under  the  Securities  Act or in the
Indenture  or  the  Convertible   Debentures  (other  than  its  certificate  of
authentication).

     Section 6.5 Notice of Defaults.  If a default occurs and is continuing with
respect to any Convertible  Debentures and if it is known to the Trustee through
oral or written notice to a Responsible  Officer, the Trustee shall give to each
Holder of Convertible Debentures notice of the default within 30 days after such
default occurs.  Except in the case of a default  described in Section 5.1(a) or
(b),  the Trustee may  withhold  the notice if and so long as a committee of its
Responsible  Officers in good faith determines that withholding the notice is in
the interest of Holders of Convertible Debentures.

     Section  6.6  Reports  by  Trustee  to  Holders.  Within 60 days after each
December 31 beginning with the December 31 following the date of this Indenture,
the Trustee shall mail to each Holder of  Convertible  Debentures and each other
person  specified in TIA Section 313(c) a brief report dated as of such December
31 that complies with TIA Section  313(a) to the extent  required  thereby.  The
Trustee also shall comply with TIA Section 313(b).

     A copy of each report at the time of its mailing to Holders of  Convertible
Debentures  shall be filed with the Commission and each  securities  exchange on
which the  Convertible  Debentures are listed.  The Company  agrees  promptly to
notify the Trustee  whenever the  Convertible  Debentures  become  listed on any
securities exchange and of any delisting thereof.

     Section 6.7 Compensation and Indemnity. The Company agrees:

               (a) to pay to the  Trustee  from  time to time  in  Dollars  such
          compensation  as shall be agreed to in writing between the Company and
          the  Trustee  for  all  services   rendered  by  it  hereunder  (which
          compensation shall not be limited by any provision of law in regard to
          the compensation of a trustee of an express trust);

<PAGE>

               (b) to reimburse the Trustee upon its request for all  reasonable
          expenses, disbursements and advances with interest thereon incurred or
          made by the Trustee in accordance with any provision of this Indenture
          (including the reasonable compensation and the expenses, advances with
          interest thereon and disbursements of its agents and counsel),  except
          to the  extent  any  such  expense,  disbursement  or  advance  may be
          attributable to its negligence or bad faith; and

               (c) to  indemnify  the  Trustee  in Dollars  for,  and to hold it
          harmless against,  any loss, liability or expense arising out of or in
          connection with the acceptance or  administration of this trust or the
          performance of its duties hereunder,  including the costs and expenses
          of defending  itself against any claim or liability in connection with
          the exercise or performance  of any of its powers or duties  hereunder
          (including the reasonable compensation and the expenses, advances with
          interest thereon and disbursements of its agents and counsel),  except
          to the  extent  that  any  such  loss,  liability  or  expense  may be
          attributable to its negligence or bad faith.

     As security for the  performance of the  obligations of the Company in this
Section 6.7, the Trustee shall have a lien prior to the  Convertible  Debentures
on all money or property  held or collected by the Trustee,  except that held in
trust to pay the  principal of or interest,  if any, on  particular  Convertible
Debentures.

     "Trustee"  for  purposes  of this  Section  6.7  includes  any  predecessor
Trustee,  provided that the  negligence or bad faith of any Trustee shall not be
attributable to any other Trustee.

     The  Company's  payment  obligations  pursuant  to this  Section  6.7 shall
survive the discharge of this Indenture.  When the Trustee incurs expenses after
the  occurrence  of a default  specified  in Sections  5.1(d) and  5.1(e),  such
expenses are intended to constitute expenses of administration  under bankruptcy
law.

     Section 6.8 Replacement of Trustee. The Trustee may resign at any time with
respect  to  Convertible  Debentures  by so  notifying  the  Company;  provided,
however,  no such resignation  shall be effective until a successor  Trustee has
accepted its appointment pursuant to this Section 6.8. The Holders of a majority
in aggregate  principal  amount of the  Outstanding  Convertible  Debentures may
remove the Trustee at any time by so notifying the Trustee and the Company.  The
Company shall remove the Trustee if:

               (1) the Trustee fails to comply with Section 6.10;

               (2) the Trustee is adjudged bankrupt or insolvent;

               (3) a receiver or public  officer  takes charge of the Trustee or
          its property; or

<PAGE>

               (4) the Trustee otherwise becomes incapable of acting.

     If the Trustee  resigns or is removed or if a vacancy  exists in the office
of Trustee for any  reason,  with  respect to the  Convertible  Debentures,  the
Company  shall  promptly  appoint,  by  resolution  of its Board of Trustees,  a
successor Trustee with respect to the Convertible Debentures.

     A successor  Trustee shall deliver a written  acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective,  and the successor Trustee shall
have all the rights,  powers and duties of the Trustee under this Indenture with
respect to the Convertible Debentures. The successor Trustee shall mail a notice
of its succession to Holders of Convertible Debentures so affected. The retiring
Trustee  shall  promptly  transfer  all  property  held by it as  Trustee to the
successor Trustee, subject to the lien provided for in Section 6.7.

     If a  successor  Trustee  does not take  office  within  30 days  after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders  of  a  majority  in  aggregate  principal  amount  of  the  Convertible
Debentures  at  the  time  Outstanding  may  petition  any  court  of  competent
jurisdiction for the appointment of a successor Trustee.

     If the Trustee fails to comply with Section 6.10, any Holder of Convertible
Debentures may petition any court of competent  jurisdiction  for the removal of
the Trustee and the appointment of a successor Trustee.

     Section 6.9 Successor Trustee by Merger. If the Trustee  consolidates with,
merges or converts  into,  or transfers all or  substantially  all its corporate
trust business or assets to, another  corporation,  the resulting,  surviving or
transferee corporation without any further act shall be the successor Trustee.

     Section 6.10 Eligibility;  Disqualification. The Trustee shall at all times
satisfy the  requirements of TIA Section  310(a)(1) and Section  310(a)(5).  The
Trustee shall have combined  capital and surplus of at least  $50,000,000 as set
forth in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b).

     Section 6.11 Preferential Collection of Claims Against Company. The Trustee
shall comply with TIA Section 311(a), excluding any creditor relationship listed
in TIA Section  311(b).  A Trustee who has  resigned  or been  removed  shall be
subject to TIA Section 311(a) to the extent indicated therein.

                                   ARTICLE VII

<PAGE>

                CONCERNING THE HOLDERS OF CONVERTIBLE DEBENTURES

     Section 7.1 Evidence of Action Taken by Holders of Convertible Debentures.

     (a) Any request, demand, authorization,  direction, notice, consent, waiver
or other action  provided in this  Indenture to be given or taken by a specified
percentage in principal  amount of the Holders of Convertible  Debentures may be
embodied in and evidenced by one or more  instruments of  substantially  similar
tenor signed by such specified  percentage of Holders of Convertible  Debentures
in person or by agent duly appointed in writing; and, except as herein otherwise
expressly  provided,  such action shall become effective when such instrument or
instruments  are delivered to the Trustee.  Proof of execution of any instrument
or of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Sections 6.1 and 6.2)  conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Article.

     (b) The  ownership of such  Convertible  Debentures  shall be proved by the
Security Register.

     Section 7.2 Proof of Execution of Instruments.  Subject to Sections 6.1 and
6.2, the execution of any  instrument by a Holder of  Convertible  Debentures or
his agent or proxy may be proved in accordance  with such  reasonable  rules and
regulations  as may be  prescribed  by the Trustee or in such manner as shall be
satisfactory to the Trustee.

     Section 7.3 Holders to be Treated as Owners.  The Company,  the Trustee and
any agent of the  Company or the  Trustee may deem and treat the person in whose
name any Convertible Debenture shall be registered upon the Security Register as
the  absolute  owner  of  such  Convertible   Debenture  (whether  or  not  such
Convertible  Debenture shall be overdue and  notwithstanding any notification of
ownership or other writing  thereon) for the purpose of receiving  payment of or
on account of the  principal of and  (subject to Section  2.9)  interest on such
Convertible  Debenture and for all other  purposes;  and neither the Company nor
the Trustee nor any agent of the Company or the Trustee shall be affected by any
notice to the contrary.

     Section 7.4 Convertible Debentures Owned by Company Deemed Not Outstanding.
In determining  whether the Holders of the requisite  aggregate principal amount
of Outstanding  Convertible Debentures have concurred in any direction,  consent
or waiver under this Indenture,  Convertible  Debentures  which are owned by the
Company or any other obligor on the Convertible Debentures with respect to which
such determination is being made or by any

<PAGE>

person  directly or indirectly  controlling  or controlled by or under direct or
indirect common control with the Company or any other obligor on the Convertible
Debentures  with  respect  to which  such  determination  is being made shall be
disregarded  and  deemed  not to be  Outstanding  for the  purpose  of any  such
determination  (it being  understood that ERPLP and any affiliate of ERPLP shall
not be deemed to be under common control with the Company),  except that for the
purpose of determining  whether the Trustee shall be protected in relying on any
such direction,  consent or waiver only Convertible Debentures which the Trustee
knows are so owned  shall be so  disregarded.  Convertible  Debentures  so owned
which have been  pledged in good faith may be  regarded  as  Outstanding  if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Convertible  Debentures and that the pledgee is not the
Company  or any other  obligor  upon the  Convertible  Debentures  or any person
directly or indirectly  controlling or controlled by or under direct or indirect
common  control  with  the  Company  or any  other  obligor  on the  Convertible
Debentures.

     Section 7.5 Right of Revocation of Action Taken.  At any time prior to (but
not after) the  evidencing  to the  Trustee,  as provided in Section 7.1, of the
taking of any action by the Holders of the  percentage  in  aggregate  principal
amount of the  Convertible  Debentures,  as the case may be,  specified  in this
Indenture in connection with such action, any Holder of a Convertible  Debenture
the serial  number of which is shown by the  evidence to be  included  among the
serial numbers of the Convertible Debentures the Holders of which have consented
to such action may, by filing written  notice at the Corporate  Trust Office and
upon proof of holding as provided in this Article,  revoke such action so far as
concerns such Convertible  Debenture.  Except as aforesaid any such action taken
by the Holder of any Convertible Debentures shall be conclusive and binding upon
such Holder and upon all future Holders and owners of such Convertible Debenture
and of any Convertible  Debentures issued in exchange or substitution  therefor,
irrespective  of whether or not any notation in regard  thereto is made upon any
such Convertible Debenture. Any action taken by the Holders of the percentage in
aggregate  principal amount of the Convertible  Debentures,  as the case may be,
specified in this Indenture in connection with such action shall be conclusively
binding  upon the  Company,  the Trustee and the Holders of all the  Convertible
Debentures affected by such action.

                                  ARTICLE VIII

                             SUPPLEMENTAL INDENTURES

     Section  8.1  Supplemental   Indentures   Without  Consent  of  Holders  of
Convertible  Debentures.  The Company,  when  authorized  by a resolution of its
Board of Directors, and the Trustee for the Convertible Debentures may from time
to time and at any time  enter  into an  indenture  or  indentures  supplemental
hereto (which shall conform to the provisions of the Trust

<PAGE>

Indenture  Act as in  force  at the  date  of the  execution  thereof),  in form
satisfactory to such Trustee, for one or more of the following purposes:

               (a) to  convey,  transfer,  assign,  mortgage  or  pledge  to the
          Trustee as security  for the  Convertible  Debentures  any property or
          assets;

               (b) to evidence  the  succession  of another  corporation  to the
          Company,  or  successive  successions,   and  the  assumption  by  the
          successor corporation of the covenants,  agreements and obligations of
          the Company pursuant to Article IX;

               (c) to add to the  covenants  of the Company  further  covenants,
          restrictions,  conditions  or  provisions  for the  protection  of the
          Holders of Convertible Debentures;

               (d) to  cure  any  ambiguity  or to  correct  or  supplement  any
          provision contained herein or in any supplemental  indenture which may
          be defective or inconsistent with any other provision contained herein
          or in any supplemental  indenture, or to make such other provisions in
          regard to matters or questions  arising under this  Indenture or under
          any  supplemental  indenture  as  the  Board  of  Directors  may  deem
          necessary or desirable,  and which shall not  materially and adversely
          affect the interests of the Holders of the Convertible Debentures; or

               (e) to evidence  and provide for the  acceptance  of  appointment
          hereunder  by a  successor  Trustee  with  respect to the  Convertible
          Debentures.

     The Trustee is hereby  authorized to join with the Company in the execution
of any such supplemental  indenture,  to make any further appropriate agreements
and  stipulations  which may be therein  contained and to accept the conveyance,
transfer,  assignment,  mortgage or pledge of any property  thereunder,  but the
Trustee  shall not be  obligated to enter into any such  supplemental  indenture
which  affects  the  Trustee's  own  rights,  duties or  immunities  under  this
Indenture or otherwise.

     Any supplemental indenture authorized by the provisions of this Section may
be  executed  without  the  consent  of the  Holders  of any of the  Convertible
Debentures at the time  Outstanding,  notwithstanding  any of the  provisions of
Section 8.2.

     Section 8.2 Supplemental  Indentures With Consent of Holders of Convertible
Debentures.  With the consent  (evidenced  as  provided  in Article  VII) of the
Holders  of not less  than a  majority  in  aggregate  principal  amount  of the
Convertible  Debentures  at the time  Outstanding  (voting  as one  class),  the
Company,  when  authorized  by a resolution  of its Board of  Trustees,  and the
Trustee  may,  from time to time and at any time,  enter  into an  indenture  or
indentures  supplemental  hereto (which shall  conform to the  provisions of the
Trust Indenture Act

<PAGE>

as in force at the date of  execution  thereof)  for the  purpose  of adding any
provisions to or changing in any manner or eliminating  any of the provisions of
this  Indenture or of any  supplemental  indenture or of modifying in any manner
the rights of the Holders of the Convertible Debentures; provided, however, that
no such  supplemental  indenture  shall (a) extend the  Stated  Maturity  of any
Convertible  Debenture,  or reduce the principal  amount  thereof or any premium
thereon,  or reduce the rate or extend the time of payment of interest  thereon,
or reduce  any amount  payable  on  redemption  thereof,  or make the  principal
thereof or  interest  thereon  payable in any coin or  currency  other than that
provided in the Convertible  Debentures or in accordance with the terms thereof,
or impair  or  affect  the right of any  Holder  of  Convertible  Debentures  to
institute  suit for payment  thereof,  or adversely  affect the right to convert
Convertible Debentures, or modify the subordination provisions of this Indenture
in any manner  adverse to the  Holders of  Convertible  Debentures  without  the
consent of the Holders of each Convertible  Debenture so affected, or (b) reduce
the aforesaid percentage of Convertible  Debentures,  the consent of the Holders
of which is required for any such supplemental indenture, without the consent of
the Holders of each Convertible Debenture so affected; provided further, that no
such  supplemental  indenture  shall  result  in the  realization  of  unrelated
business  income  for the  Holders of the  Convertible  Debentures  without  the
consent of each Holder of Convertible Debentures.

     Upon the request of the Company,  accompanied  by a copy of a resolution of
the Board of Trustees  certified by the secretary or assistant  secretary of the
Company authorizing the execution of any such supplemental  indenture,  and upon
the filing with the Trustee of evidence of the consent of Holders of Convertible
Debentures as aforesaid and other  documents,  if any,  required by Section 7.1,
the Trustee  shall join with the Company in the  execution of such  supplemental
indenture or otherwise,  in which case such Trustee may in its  discretion,  but
shall not be obligated to, enter into such supplemental  indenture which affects
the  Trustee's  own  rights,  duties  or  immunities  under  this  Indenture  or
otherwise.

     It shall not be  necessary  for the consent of the  Holders of  Convertible
Debentures  under this  Section to approve the  particular  form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.

     Promptly  after  the  execution  by the  Company  and  the  Trustee  of any
supplemental  indenture pursuant to the provisions of this Section,  the Company
shall  give  notice  thereof  to the  Holders  of then  Outstanding  Convertible
Debentures,  by mailing a notice thereof by first-class  mail to such Holders at
their addresses as they shall appear on the Security Register,  and in each case
such notice shall set forth in general terms the substance of such  supplemental
indenture.  Any  failure  of the  Company  to give such  notice,  or any  defect
therein,  shall not,  however,  in any way impair or affect the  validity of any
such supplemental indenture.

     Section 8.3 Effect of Supplemental Indenture.  Every supplemental indenture
executed  pursuant to this Article VIII

<PAGE>

shall conform to the requirements of the Trust Indenture Act. Upon the execution
of any supplemental  indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in  accordance  therewith  and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee,  the Company and the Holders of Convertible
Debentures  shall  thereafter be  determined,  exercised and enforced  hereunder
subject in all respects to such modifications and amendments,  and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be a
part of the terms and conditions of this Indenture for any and all purposes.

     Section 8.4 Documents to Be Given to Trustee.  The Trustee,  subject to the
provisions of Sections 6.1 and 6.2, shall receive an Officers'  Certificate  and
an Opinion of Counsel as  conclusive  evidence that any  supplemental  indenture
executed  pursuant to this Article VIII complies with the applicable  provisions
of this Indenture.

     Section 8.5 Notation on Convertible  Debentures in Respect of  Supplemental
Indentures.   Convertible  Debentures  authenticated  and  delivered  after  the
execution  of any  supplemental  indenture  pursuant to the  provisions  of this
Article VIII may bear,  upon the  direction  of the Company,  a notation in form
satisfactory  to the Trustee  for the  Convertible  Debentures  as to any matter
provided for by such supplemental indenture. If the Company or the Trustee shall
so  determine,  new  Convertible  Debentures  so modified as to conform,  in the
opinion of the Trustee and the Company,  to any  modification  of this Indenture
contained  in any such  supplemental  indenture  may be prepared by the Company,
authenticated  by the Trustee and  delivered  in  exchange  for the  Convertible
Debentures then Outstanding.

                                   ARTICLE IX

                    CONSOLIDATION, MERGER, SALE OR CONVEYANCE

     Section 9.1 Company May  Consolidate,  etc., on Certain Terms.  The Company
may sell,  transfer,  lease or otherwise convey all or substantially  all of its
assets on a  consolidated  basis to any Person,  or consolidate or merge with or
into,  any other  Person,  provided  that in any such  case,  (a) either (i) the
Company  shall  be the  continuing  entity,  or (ii) if the  Company  is not the
continuing  entity,  the  successor  entity or Person  which  acquires  by sale,
transfer,  lease or other conveyance all or  substantially  all of the assets of
the Company,  shall be a Person organized and validly existing under the laws of
the United  States of America or any state  thereof or the  District of Columbia
and shall  expressly  assume the due and punctual  payment of the  principal of,
premium,  if  any,  and  interest  (including  Additional  Sums)  on  all of the
Convertible  Debentures  according  to  their  tenor,  and the due and  punctual
performance and observance of all of the covenants, agreements

<PAGE>

and  conditions of this  Indenture to be performed or observed by the Company by
supplemental  indenture  satisfactory to the Trustee,  executed and delivered to
the Trustee by such corporation or entity or Person, by amendment  thereto,  (b)
immediately after such merger or consolidation, or such sale, transfer, lease or
other conveyance, no Event of Default, and no event which, after notice or lapse
of time or both,  would become an Event of Default,  shall have  occurred and be
continuing,  and (c) the  Company  has  delivered  to the  Trustee an  Officers'
Certificate  and an Opinion of Counsel,  each stating that the  requirements  of
this Section have been complied with.

     Section  9.2  Successor  or  Substituted   Person.  In  case  of  any  such
consolidation, merger, sale, transfer, or conveyance (but not in the case of any
such lease),  and following  such an assumption  by the successor  person,  such
successor  person shall succeed to and be substituted for the Company,  with the
same effect as if it had been named herein,  and the Company shall be discharged
from all  obligations  and covenants  under this  Indenture and the  Convertible
Debentures and may be liquidated and dissolved.  Such successor person may cause
to be signed, and may issue either in its own name or in the name of the Company
any or all of the Convertible  Debentures  issuable  hereunder which theretofore
shall not have been signed by the Company and be delivered to the Trustee;  and,
upon the order of such successor  corporation instead of the Company and subject
to all the terms,  conditions and limitations in this Indenture prescribed,  the
Trustee shall authenticate and shall make available for delivery any Convertible
Debentures which previously shall have been signed and delivered by the officers
of  the  Company  to  the  Trustee  for  authentication,   and  any  Convertible
Debentures,  which such successor person thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All of the Convertible  Debentures so
issued  shall in all  respects  have the same legal rank and benefit  under this
Indenture as the  Convertible  Debentures  theretofore  or thereafter  issued in
accordance  with the terms of this  Indenture as though all of such  Convertible
Debentures had been issued at the date of the execution hereof.

     In case  of any  such  consolidation,  merger,  sale,  transfer,  lease  or
conveyance  such changes in  phraseology  and form (but not in substance) may be
made  in  the  Convertible   Debentures  thereafter  to  be  issued  as  may  be
appropriate.

     Section  9.3  Opinion of Counsel to Trustee.  The  Trustee,  subject to the
provisions of Sections 6.1 and 6.2, may receive an Opinion of Counsel,  prepared
in  accordance  with  Section  14.5,  as  conclusive   evidence  that  any  such
consolidation,  merger, sale, lease or conveyance,  and any such assumption, and
any such liquidation or dissolution,  complies with the applicable provisions of
this Indenture.

                                    ARTICLE X

                    REDEMPTION OF THE CONVERTIBLE DEBENTURES

<PAGE>

     Section 10.1 Tax Event Redemption.

     If a Tax  Event  (as  defined  in  the  Declaration)  has  occurred  and is
continuing and:

               (i) the Company has received a Redemption Tax Opinion (as defined
          in Annex I to the Declaration); or

               (ii) after  receiving  a  Dissolution  Tax Opinion (as defined in
          Annex I to the  Declaration),  the  Regular  Trustees  shall have been
          informed by tax counsel  rendering the  Dissolution Tax Opinion that a
          No  Recognition  Opinion  (as  defined in Annex I to the  Declaration)
          cannot be delivered to the Trust,

then,  notwithstanding  Section  10.2(a)  but  subject to Section  10.2(b),  the
Company shall have the right, at its option, upon not less than 30 days nor more
than 60 days notice to the Holders of the  Convertible  Debentures to redeem the
Convertible  Debentures,  in whole or in part, for cash within 90 days following
the  occurrence  of such Tax Event (the "90-Day  Period") at a redemption  price
equal to 100% of the principal amount to be redeemed plus any accrued and unpaid
interest  thereon  to the  date of such  redemption  (the  "Redemption  Price"),
provided  that if at the time there is available to the Company or the Trust the
opportunity to eliminate, within the 90-Day Period, the Tax Event by taking some
ministerial  action,  such as filing a form or making an  election,  or pursuing
some  other  similar  reasonable  measure  which  has no  adverse  effect on the
Company,  the Trust or the Holders of the Trust  Securities  issued by the Trust
("Ministerial Action"), the Company shall pursue such Ministerial Action in lieu
of redemption.

     Section 10.2 Optional Redemption by Company.

     (a) Subject to the  provisions of Section  10.2(b) and to the provisions of
this Article X generally,  except as otherwise  may be specified in Section 10.1
or elsewhere in this  Indenture,  the Company shall have the right to redeem the
Convertible Debentures,  in whole or in part, from time to time, on or after May
30, 2002. Any  redemption  pursuant to this paragraph will be made upon not less
than 30 days nor more than 60 days  notice  to the  Holders  of the  Convertible
Debentures,  at a price equal to 100% of the principal amount of the Convertible
Debentures (the "Optional  Redemption  Price")  together with accrued and unpaid
interest (including  Additional Sums, if any) to, but excluding,  the redemption
date.

     If Convertible Debentures are redeemed on any January 15, April 15, July 15
or October 15, accrued and unpaid interest shall be payable to holders of record
on the relevant record date.

<PAGE>

     The Company may not redeem  fewer than all of the  Outstanding  Convertible
Debentures  unless  all  accrued  and  unpaid  interest  has  been  paid  on all
Convertible Debentures for all quarterly interest payment periods terminating on
or prior to the date of redemption.

     So long as the corresponding Trust Securities are outstanding, the proceeds
from the  redemption of the  Convertible  Debentures  will be used to redeem the
Trust Securities.

     If the Convertible  Debentures are only partially redeemed pursuant to this
Section 10.2, the Convertible Debentures will be redeemed pro rata. The Optional
Redemption Price, together with any required interest payment,  shall be paid in
immediately  available  funds  prior to 12:00 noon,  New York City time,  on the
redemption date or at such earlier time as the Company determines  provided that
the  Company  shall  deposit  with the Trustee an amount  sufficient  to pay the
Optional Redemption Price, together with any required interest payment, by 10:00
a.m.,  New York City  time,  on the date such  amounts  are to be paid.  Partial
redemptions  must be in an  amount  not less  than  $25.00  principal  amount of
Convertible Debentures.

     If Convertible  Debentures selected for partial redemption are converted in
part before  termination of the conversion  right with respect to the portion of
the Convertible Debentures so selected, the converted portion of the Convertible
Debentures  shall be deemed (so far as may be) to be the  portion  selected  for
redemption.  Convertible  Debentures  (or  portions  thereof)  which  have  been
converted  during a selection of Convertible  Debentures to be redeemed shall be
treated by the Trustee as Outstanding for the purpose of such selection.  In any
case where more than one  Convertible  Debenture is registered in the same name,
the  Trustee  in its  discretion  may treat the  aggregate  principal  amount so
registered as if it were represented by one Convertible Debenture.

     If any Convertible Debenture called for redemption is converted into Common
Shares of the Company,  any money  deposited with the Trustee or with any Paying
Agent or so segregated and held in trust for the redemption of such  Convertible
Debenture  shall  (subject  to any  right  of the  Holder  of  such  Convertible
Debenture  or any  Predecessor  Convertible  Debenture  to receive  interest  as
provided in the last  paragraph  of Section 2.9) be paid to the Company upon the
Company's request or, if then held by the Company, shall be discharged from such
trust.

     (b) If (i) a holder of Convertible  Preferred Securities desires to convert
any of its Convertible  Preferred  Securities  called for redemption into Common
Shares (effectively by converting such holder's share of the related Convertible
Debentures  into Common Shares in accordance with the terms of the Indenture and
the  Declaration)  but such conversion would cause any direct or indirect holder
of  Convertible  Preferred  Securities  which  is  classified  as a real  estate
investment trust ("REIT") under Section 856 of the Code ("Preferred Holder") to:
(A) own more than 5% of the total outstanding  voting securities of the Company,
(B) own more  than 5% of the value of the total  outstanding  securities  of the
Company,  (C) violate the  requirements  of Code  Section  856(c)(4)(B),  or (D)
otherwise lose its status as a REIT under the Code (such  Convertible  Preferred
Securities  which upon  conversion  into Common  Shares  would  result in a REIT
owning

Common  Shares in a manner  described in subclause  (A), (B), (C) or (D) of this
Section 10.2(b)(i) are referred to herein as the  "Unconvertible  Shares" and an
amount of Convertible  Debentures equal to the aggregate  liquidation  amount of
the  Unconvertible   Shares  is  referred  to  herein  as,  the   "Unconvertible
Debentures"),  and (ii) any Preferred Holder has delivered to the Company, prior
to the date on which the Company would  otherwise have redeemed the  Convertible
Preferred  Securities (the  "Redemption  Date"), a written notice signed by each
holder of  Convertible  Preferred  Securities who desires to convert any of such
holder's Convertible  Preferred Securities into Common Shares in accordance with
the terms of the Indenture and the  Declaration  which written notice sets forth
both the  number of  Convertible  Preferred  Securities  that  each such  holder
desires to convert and the number of such  Convertible  Preferred  Securities of
such holder that constitute  Unconvertible  Shares;  then the Trust shall notify
the  Company and the  Company  shall:  (x)  convert  such  Holder's  Convertible
Debentures  (other  than the  Unconvertible  Debentures)  for  Common  Shares in
accordance  with the terms of the  Indenture and the  Declaration,  (y) pay each
Holder of  Convertible  Debentures so converted in subsection (x) above and each
Holder of Unconvertible  Debentures an amount of cash equal to the amount of any
accrued but unpaid  interest  owing on such Holder's  Convertible  Debentures so
converted and such Holder's Unconvertible Debentures, and (z) pay each Holder of
Unconvertible  Debentures  an amount  of cash  equal to the  product  of (A) the
Closing  Price of a Common  Share on the trading date  immediately  prior to the
Redemption  Date,  multiplied  by (B) the maximum  number of Common  Shares into
which the Unconvertible Debentures held by such Holder could have been converted
in accordance with the terms of the Indenture and the Declaration on the trading
date  immediately  prior to the  Redemption  Date. For purposes of clause (i) of
this Section  10.2(b),  a REIT shall be  considered  to own directly each of the
securities  of the Company that are owned by such REIT  directly or  indirectly.
The Company shall  reasonably and timely cooperate in furnishing the information
necessary  to apply  the  provisions  of this  Section  10.2(b)  to a holder  of
Convertible Preferred Securities who requests such information in writing.

     (c) If mutually  agreed on or after  January 1, 2001 by the Company and any
holder of Convertible Preferred Securities otherwise subject to Section 10.2(b),
a conversion of Convertible  Debentures  having a principal  amount equal to the
liquidation amount of the Convertible  Preferred  Securities held by such holder
(and such holder's related Convertible  Preferred Securities) into Common Shares
shall occur without regard to Section 10.2(b)  provided the Company  receives an
opinion of counsel in a form which is reasonably  acceptable to the Holders that
the Company, or any successor thereto,  qualifies as either a REIT under Section
856(a) of the Code or as a "taxable  REIT  subsidiary"  of EQR (or any successor
thereto) under Section 856(l) of the Code.

     (d) If a partial  redemption of the Convertible  Debentures would result in
the delisting of the Convertible  Preferred  Securities issued by the Trust from
any national  securities exchange or other organization on which the Convertible
Preferred  Securities  are then  listed,  the Company  shall not be permitted to
effect such partial redemption and may only redeem the Convertible Debentures in
whole.

<PAGE>

     (e) Notwithstanding anything in this Indenture to the contrary:

     (i) If (A) the Company enters into an agreement for a business  combination
with  another  entity,  whether  by  merger  or  other  reorganization,  and the
resulting  or  surviving  entity (the  "Survivor")  wants to either (i) revoke a
prior election to be a taxable REIT  subsidiary  ("TRS") under Section 856(l) of
the Code,  or (ii) desires to not become a TRS or a REIT in the future,  and (B)
following such business combination, on an as converted pro forma basis (without
duplication),   the  aggregate  outstanding  Convertible  Preferred  Securities,
Convertible  Debentures held in exchange for Convertible  Preferred  Securities,
and Common Shares held by reason of converting  any of the foregoing held by any
Preferred  Holder have an  aggregate  vote or value in excess of 5% of the total
voting power or total value of the outstanding securities of the Survivor,  then
the Company  shall give written  notice of the foregoing (at least 45 days prior
to consummating  such business  combination) to each Preferred Holder. If within
thirty (30) days after receipt of such notice,  such  Preferred  Holder fails to
(i)  notify the  Company  in  writing of its desire to not have the  Convertible
Debentures  redeemed,  (ii)  furnish to the  Company  its  written  consent  and
election to revoke any prior TRS  election  jointly  made by the Company (or any
successor)  and the  Preferred  Holder or its  Affiliates,  and  (iii)  waive in
writing any future  obligation of the Company (or any successor) to become a TRS
or a REIT, then, immediately prior to and in connection with the consummation of
the business  combination  described in subsection  (e)(i)(A) above, the Company
shall  redeem  all  of the  Unconvertible  Debentures  (as  determined  by  such
Preferred  Holder with  reference to  Unconvertible  Shares  pursuant to Section
10.2(b)(ii)  above)  held by the WRP  Trust  or such  Preferred  Holder  and its
Affiliates  (including  prior to May 30,  2002) in the manner and in the amounts
provided in Sections 10.2(b)(ii)(y) and (z) of the Indenture; provided, however,
that  if  the  amount  of  payment   calculated  in   accordance   with  Section
10.2(b)(ii)(z)  above with respect to the Unconvertible  Debentures is less than
the Optional Redemption Price with respect to the Unconvertible  Debentures,  in
lieu of paying such amount calculated in accordance with Section 10.2(b)(ii)(z),
the  Company  shall  pay the  Optional  Redemption  Price  with  respect  to the
Unconvertible  Debentures.  Upon  consummation  of the  foregoing,  any  and all
obligations  of the  Company  to become or remain a TRS or a REIT or to  deliver
opinions to that effect shall be terminated.  All other  Convertible  Debentures
and related Convertible Preferred Securities shall remain outstanding unless the
liquidation amount of such outstanding  Convertible Preferred Securities is less
than  $10,000,000,  in which event the Company shall redeem for cash all of such
Convertible  Debentures  equal  to the  liquidation  amount  of the  outstanding
Convertible  Preferred  Securities in accordance with Section 10.2(a) above. For
purposes of calculating  the 5% limitation  described  above,  the Company shall
reasonably  and  timely  cooperate  in  furnishing  relevant  information  to  a
Preferred Holder that requests such information in writing. For purposes of this
Section  10.2(e),  a Preferred  Holder shall be  considered to hold directly all
securities it owns directly and indirectly.

     (ii) If the events  described in subsection  (e)(1)(A) above have occurred,
the Company gives written notice thereof to each Preferred  Holder,  and the pro
forma

<PAGE>

computation  described in  subsection  (e)(1)(B)  results in a Preferred  Holder
otherwise  subject to Section  10.2(b) and its  Affiliates  owning 5% or less of
both the total  voting  power (on an as  converted  basis) or total value of the
outstanding  securities of the Company, then the Convertible Debentures need not
be redeemed and any and all obligations of the Company to become or remain a TRS
or a REIT or to deliver opinions to that effect shall be terminated.

     (iii) If the  Company  desires to take any action  that would  violate  the
terms of Section  5.1(h),  (i) or (j),  then the  Company  can take such  action
provided the Company  redeems all  outstanding  Common  Securities,  Convertible
Debentures,  Convertible  Preferred Securities and any Common Shares acquired in
conversion  thereof,  by paying to the  respective  holders  thereof  in cash an
amount equal to (i) the Closing Price on the trading date  immediately  prior to
the  Redemption  Date of each such Common Share  acquired in the  aforementioned
conversion, and (ii) with respect to outstanding Convertible Debentures,  Common
Securities  and  Convertible   Preferred  Securities  the  greater  of,  without
duplication (x) the Optional  Redemption  Price for all outstanding  Convertible
Debentures  (together with any required  interest  payment under Section 10.2(a)
above) plus the Redemption  Price (as defined in the Declaration) for the Common
Securities and Convertible Preferred Securities and (y) the Closing Price of the
Common Shares into which such  Convertible  Debentures,  Common  Securities  and
Convertible  Preferred Securities,  without duplication,  are convertible on the
trading date immediately prior to the Redemption Date.

     Section 10.3 No Sinking Fund. The  Convertible  Debentures are not entitled
to the benefit of any sinking fund or subject to any sinking fund.

     Section 10.4 Election to Redeem; Notice of Redemption; Partial Redemptions.
The  election  of the  Company to redeem  any  Convertible  Debentures  shall be
evidenced by, or pursuant to, a resolution of the Board of Directors.  Notice of
redemption to the Holders of Convertible  Debentures  required to be redeemed or
to be redeemed as a whole or in part at the option of the Company shall be given
by giving  notice of such  redemption  as provided in Section  15.4, at least 30
days and not more than 60 days  prior to the date fixed for  redemption  to such
Holders of  Convertible  Debentures.  Any  notice  which is mailed in the manner
herein provided shall be conclusively  presumed to have been duly given, whether
or not the Holder  receives  the  notice.  Neither the failure to give notice by
mail,  nor any defect in the  notice so mailed to the Holder of any  Convertible
Debenture  designated  for  redemption  as a whole or in part  shall  affect the
validity of the proceedings for such redemption.

     The notice of  redemption  to each such Holder shall specify the date fixed
for redemption,  the "CUSIP" number or numbers for such Convertible  Debentures,
the redemption price, the Place or Places of Payment,  that payment will be made
upon  presentation and surrender of such Convertible  Debentures,  that interest
accrued  to the date  fixed for  redemption  will be paid as  specified  in such
notice and that on and after said date interest thereon or on the

<PAGE>

portions  thereof to be redeemed will cease to accrue,  the  conversion  rate or
price,  the date on which the right to convert the Convertible  Debentures to be
redeemed  will  terminate  and  the  place  or  places  where  such  Convertible
Debentures  may  be  surrendered  for  conversion.  If  less  than  all  of  the
Convertible  Debentures  are to be  redeemed,  the  notice of  redemption  shall
specify the number of the  Convertible  Debentures  to be redeemed.  In case any
Convertible  Debenture is to be redeemed in part, the notice of redemption shall
state the portion of the principal amount thereof to be redeemed and shall state
that on and  after  the  date  fixed  for  redemption,  upon  surrender  of such
Convertible  Debenture, a new Convertible Debenture or Convertible Debentures in
principal amount equal to the unredeemed portion thereof will be issued.

     The notice of  redemption of  Convertible  Debentures to be redeemed at the
option  of the  Company  shall be  given by the  Company  or,  at the  Company's
request,  by the Trustee in the name and at the expense of the Company.  If such
notice is to be given by the Trustee,  the Company shall provide  notice of such
redemption  to the  Trustee  at  least  60 days  prior  to the  date  fixed  for
redemption  (unless a shorter notice shall be satisfactory  to the Trustee).  If
such notice is given by the Company,  the Company  shall  provide a copy of such
notice  given to the Holders of such  redemption  to the Trustee at least 2 days
prior to the date  such  notice  is given to such  Holders,  but in any event at
least 30 days and not more than 60 days prior to the date fixed for redemption.

     Not later than the  redemption  date  specified in the notice of redemption
given as provided in this  Section,  the Company  will have on deposit  with the
Trustee or with one or more  Paying  Agents (or, if the Company is acting as its
own Paying Agent, set aside,  segregate and hold in trust as provided in Section
3.3) in funds available on such date an amount of money  sufficient to redeem on
the redemption date all the  Convertible  Debentures so called for redemption at
the appropriate  redemption  price,  together with accrued  interest to the date
fixed for redemption. If less than all of the Outstanding Convertible Debentures
are to be redeemed at the election of the  Company,  the Company will deliver to
the  Trustee at least 60 days prior to the date fixed for  redemption  (unless a
shorter notice shall be  satisfactory  to the Trustee) an Officers'  Certificate
stating the aggregate principal amount of Convertible Debentures to be redeemed.

     For all purposes of this Indenture,  unless the context otherwise requires,
all  provisions  relating to the  redemption  of  Convertible  Debentures  shall
relate, in the case of any Convertible Debenture redeemed or to be redeemed only
in part, to the portion of the principal  amount of such  Convertible  Debenture
which has been or is to be redeemed.

     Section 10.5 Payment of Convertible  Debentures  Called for Redemption.  If
notice  of  redemption  has  been  given  as  above  provided,  the  Convertible
Debentures or portions of Convertible  Debentures specified in such notice shall
become due and payable on the date and at the place stated in such notice at the
Redemption  Price,  and on and after said date (unless the Company shall default
in the payment of such Convertible  Debentures at the Redemption Price) interest
on the  Convertible  Debentures or portions of Convertible  Debentures so called
for redemption shall cease to accrue,

<PAGE>

and, except as provided in Section 6.1, such Convertible  Debentures shall cease
from and after the date fixed for  redemption  to be  entitled to any benefit or
security under this  Indenture,  and the Holders  thereof shall have no right in
respect  of  such  Convertible  Debentures  except  the  right  to  receive  the
redemption  price thereof and unpaid  interest to the date fixed for redemption.
On  presentation  and  surrender of such  Convertible  Debentures  at a Place of
Payment specified in said notice,  said Convertible  Debentures or the specified
portions  thereof  shall be paid and  redeemed by the Company at the  applicable
redemption  price,  together with interest accrued thereon to the date fixed for
redemption;  provided that,  payment of interest becoming due on or prior to the
date fixed for  redemption  shall be payable to the Holders of such  Convertible
Debentures  registered as such on the relevant  record date subject to the terms
and provisions of Section 2.9 hereof.

     If any  Convertible  Debenture  called for redemption  shall not be so paid
upon surrender thereof for redemption,  the principal shall,  until paid or duly
provided for,  bear  interest  from the date fixed for  redemption at the Coupon
Rate.

     Upon presentation of any Convertible  Debenture  redeemed in part only, the
Company shall execute and the Trustee shall  authenticate and make available for
delivery  to or on the  order  of the  Holder  thereof,  at the  expense  of the
Company, a new Convertible  Debenture or Convertible  Debentures,  of authorized
denominations,  in  principal  amount  equal to the  unredeemed  portion  of the
Convertible Debenture so presented.

     Section 10.6 Exclusion of Certain  Convertible  Debentures from Eligibility
for  Selection for  Redemption.  Convertible  Debentures  shall be excluded from
eligibility  for selection for redemption if they are identified by registration
and certificate number in a written statement signed by an authorized officer of
the Company and delivered to the Trustee at least 30 days prior to the last date
on  which  notice  of  redemption  may be given as  being  owned of  record  and
beneficially  by, and not pledged or hypothecated  by, either (a) the Company or
(b) an entity  specifically  identified in such written statement as directly or
indirectly  controlling  or  controlled  by or under  direct or indirect  common
control with the Company (it being  understood  that ERPLP and any  Affiliate of
ERPLP shall not be deemed to be under common control with the Company).

     Section 10.7 Required Redemption. Upon the occurrence of the earlier of (i)
an Event of Default (for purposes of this Section an Event of Default shall have
the meaning given it in Section 4(j) of Annex I to the  Declaration) or (ii) May
30, 2012, the holder of any Convertible Preferred Securities may, at its option,
cause  the  Trust  to  redeem  at any  time  all of  the  Convertible  Preferred
Securities held by such holder at the Redemption Price,  payable in cash. In the
event a holder of the  Convertible  Preferred  Securities  requires the Trust to
redeem such  Securities,  then the Trust  shall  require the Company to redeem a
like  aggregate  principal  amount of  Convertible  Debentures  from  Holders of
Convertible   Debentures  which  aggregate  principal  amount  shall  equal  the
aggregate Redemption Price of

<PAGE>

such  Convertible   Preferred   Securities  so  redeemed.   Notwithstanding  the
provisions of this Section 10.7,  provided an Event of Default has not occurred,
the  Regular  Trustees  shall have the right to extend the date  during  which a
required redemption of Convertible Preferred Securities is not permitted for two
separate  additional  five (5) year periods if the Coupon Rate is changed to the
then market rate of preferred  stock  comparable  to the  Convertible  Preferred
Securities on the first day of each such additional five year period;  provided,
however,  in no event shall the Coupon  Rate be  reduced.  In the event that the
Trust  increases  the Coupon Rate on the  Convertible  Preferred  Securities  in
accordance  with the preceding  sentence,  then the Company  shall  increase the
Coupon Rate on the Convertible Debentures in a like percentage amount for a like
period.

                                   ARTICLE XI

                      CONVERSION OF CONVERTIBLE DEBENTURES

     Section 11.1  Conversion  Rights.  Subject to and upon  compliance with the
provisions of this Article XI, the Convertible  Debentures are  convertible,  at
the option of the Holders, at any time through the close of business on the last
Business  Day  prior  to the  Maturity  Date  (or,  in the  case of  Convertible
Debentures called for redemption, prior to the close of business on the Business
Day  prior  to  the   corresponding   redemption   date)  into  fully  paid  and
nonassessable  Common  Shares of the  Company at an initial  conversion  rate of
2.2474  Common  Shares  for each  $25.00  in  principal  amount  of  Convertible
Debentures  (equivalent  to a  conversion  price of $11.124  per  Common  Share,
subject to certain adjustments set forth in this Article XI (as so adjusted, the
"Conversion  Price")),  subject to  adjustment  and reset as  described  in this
Article  XI.  Subject  to  the  following  sentence,  a  Holder  of  Convertible
Debentures  may convert any portion of the principal  amount of the  Convertible
Debentures  into  that  number of fully  paid and  nonassessable  Common  Shares
obtained by dividing the principal  amount of the  Convertible  Debentures to be
converted by such Conversion Price. All calculations under this Article XI shall
be made to the nearest  cent or to the nearest  1/100th of a share,  as the case
may be.

     Section 11.2 Conversion Procedures.

     (a) In order to convert all or a portion of the Convertible Debentures, the
Holder  thereof shall deliver to the Conversion  Agent an irrevocable  notice of
conversion  (the "Notice of Conversion")  setting forth the principal  amount of
Convertible  Debentures  to be converted,  together  with the name or names,  if
other  than the  Holder,  in which the  Common  Shares  should  be  issued  upon
conversion and, surrender to the Conversion Agent the Convertible  Debentures to
be converted, duly endorsed or assigned to the Company or in blank. In addition,
a holder of  Convertible  Preferred  Securities may exercise its right under the
Declaration to convert

<PAGE>

such  Convertible  Preferred  Securities into Common Shares by delivering to the
Conversion  Agent  an  irrevocable   Notice  of  Conversion  setting  forth  the
information  called for by the preceding  sentence and directing the  Conversion
Agent (i) to exchange such Convertible Preferred Securities for a portion of the
Convertible  Debentures  held  by the  Trust  (at an  exchange  rate  of  $25.00
principal  amount  of  Convertible  Debentures  for each  Convertible  Preferred
Security) and (ii) to immediately convert such Convertible Debentures, on behalf
of such holder,  into Common  Shares of the Company  pursuant to this Article XI
and  surrendering  such  Convertible  Preferred  Securities,  duly  endorsed  or
assigned  to the  Company  or in  blank.  So long as any  Convertible  Preferred
Securities  are  outstanding,  the  Trust  shall  not  convert  any  Convertible
Debentures except pursuant to a Notice of Conversion delivered to the Conversion
Agent by a holder of Convertible Preferred Securities.

     If a Notice of  Conversion  is  delivered  on or after the record  date and
prior to the  subsequent  Interest  Payment Date, the Holder will be entitled to
receive the  interest  payable on the  subsequent  Interest  Payment Date on the
portion of Convertible Debentures to be converted notwithstanding the conversion
thereof prior to such Interest Payment Date. However, if a redemption date falls
between a record date and the subsequent  Interest Payment Date, the Holder will
be entitled to receive,  on such Interest Payment Date, the interest accrued to,
but excluding,  the redemption date.  Except as otherwise  provided in the first
and second sentences of this paragraph, in the case of any Convertible Debenture
which is converted,  interest the Stated  Maturity of which is after the date of
conversion of such Convertible  Debenture shall not be payable,  and the Company
shall  not make  nor be  required  to make  any  other  payment,  adjustment  or
allowance  with  respect  to  accrued  but unpaid  interest  on the  Convertible
Debentures  being  converted,  which  shall be deemed  to be paid in full.  Each
conversion shall be deemed to have been effected  immediately prior to the close
of  business  on the day on which the Notice of  Conversion  was  received  (the
"Conversion  Date") by the Conversion  Agent from the Holder or from a holder of
the Convertible  Preferred Securities effecting a conversion thereof pursuant to
its conversion  rights under the Declaration,  as the case may be. The Person or
Persons  entitled to receive the Common  Shares  issuable  upon such  conversion
shall be treated for all purposes as the record holder or holders of such Common
Shares as of the  Conversion  Date. As promptly as  practicable  on or after the
Conversion  Date,  the  Company  shall  issue and  deliver  at the office of the
Conversion  Agent,  unless  otherwise  directed  by the  Holder in the Notice of
Conversion,  a certificate or certificates  for the number of full Common Shares
issuable upon such conversion,  together with the cash payment,  if any, in lieu
of any  fraction  of any share to the Person or Persons  entitled to receive the
same. The Conversion  Agent shall deliver such  certificate or  certificates  to
such Person or Persons.

     (b) The Company's  delivery  upon  conversion of the fixed number of Common
Shares into which the Convertible  Debentures are convertible (together with the
cash payment,  if any, in lieu of any fractional  share and the interest payable
pursuant to Section 11.2(a)) shall be deemed to satisfy the Company's obligation
to pay the principal amount at

<PAGE>

Maturity of the portion of  Convertible  Debentures  so converted and any unpaid
interest accrued on such Convertible Debentures at the time of such conversion.

     (c) The Company shall pay to the Conversion  Agent a cash  adjustment in an
amount  equal to the  same  fraction  of the  Closing  Price of such  fractional
interest on the date on which the Convertible  Debentures were duly  surrendered
to the Conversion Agent for conversion, or, if such day is not a Trading Day, on
the next Trading Day, and the  Conversion  Agent in turn will make such payment,
if any,  to the  Holder  of the  Convertible  Debentures  or the  holder  of the
Convertible Preferred Securities so converted.

     (d) In the event of the  conversion  of any  Convertible  Debenture in part
only,  the Company  shall execute and the Trustee  shall  authenticate  and make
available for delivery to or on the order of the Holder thereof,  at the expense
of the Company,  a new  Convertible  Debenture or Convertible  Debentures in the
aggregate principal amount equal to the unconverted portion thereof.

     (e) In  effecting  the  conversion  transactions  described in this Section
11.2,  the  Conversion  Agent is acting as agent of the  holders of  Convertible
Preferred  Securities (in the exchange of Convertible  Preferred  Securities for
Convertible  Debentures)  and as agent of the Holders of Convertible  Debentures
(in the conversion of Convertible  Debentures into Common  Shares),  as the case
may be. The Conversion  Agent is hereby  authorized (i) to exchange  Convertible
Debentures  held  by the  Trust  from  time to time  for  Convertible  Preferred
Securities  in connection  with the  conversion  of such  Convertible  Preferred
Securities  in  accordance  with this  Article XI and (ii) to  convert  all or a
portion of the  Convertible  Debentures  into  Common  Shares and  thereupon  to
deliver such Common Shares in accordance  with the provisions of this Article XI
and  to  deliver  to  the  Trust  a new  Convertible  Debenture  or  Convertible
Debentures for any resulting unconverted principal amount.

     Section 11.3 Conversion  Price  Adjustments.  The Conversion Price shall be
adjusted from time to time as follows:

     (a) In case the  Company  shall  (1) pay or make a  distribution  in Common
Shares to holders of the Common Shares,  (2) reclassify the  outstanding  Common
Shares into shares of some other class or series of shares,  (3)  subdivide  the
outstanding  Common Shares into a greater number of Common Shares or (4) combine
the  outstanding  Common  Shares  into a smaller  number of Common  Shares,  the
conversion rate  immediately  prior to such action shall be adjusted so that the
Holder of any Convertible Debentures thereafter surrendered for conversion shall
be  entitled to receive  the number of Common  Shares  which he would have owned
immediately following such action had such Convertible Debentures been converted
immediately  prior thereto.  An adjustment made pursuant to this Section 11.3(a)
shall  become  effective  immediately  after  the  record  date in the case of a
distribution and shall become effective  immediately after the effective date in
the case of a subdivision, combination or reclassification.

<PAGE>

     (b) In case the  Company  shall  issue  rights,  options or warrants to all
holders of the Common Shares  entitling them to subscribe for or purchase Common
Shares (or securities  convertible into Common Shares) at a price per share less
than the current market price (as determined pursuant to Section 11.3(d)) of the
Common  Shares on such  record  date,  or shall  issue  options in excess of the
limitations  set forth in Section 11.4 hereof,  the number of Common Shares into
which each Convertible  Debenture shall be convertible shall be adjusted so that
the same shall be equal to the number  determined by  multiplying  the number of
Common Shares into which such Convertible Debenture was convertible  immediately
prior to such  record  date by a fraction  of which the  numerator  shall be the
number of Common  Shares  outstanding  on such  record  date plus the  number of
additional  Common Shares offered (or into which the  convertible  securities so
offered are  convertible),  and of which the denominator  shall be the number of
Common Shares  outstanding on such record date, plus the number of Common Shares
which the aggregate  offering price of the additional  Common Shares offered (or
into which the convertible securities so offered are convertible) would purchase
at  such  current  market  price.   Such  adjustments   shall  become  effective
immediately  after such record date for the  determination of the holders of the
Common  Shares  entitled  to receive  such  distribution.  For  purposes of this
subsection  (b), the number of Common Shares at any time  outstanding  shall not
include Common Shares purchased by the Company.

     (c) In case the  Company  shall  distribute  to all  holders  of the Common
Shares  any class of shares of stock  other than  Common  Shares,  evidences  of
indebtedness  or assets of the  Company  (other than cash  distributions  out of
current or retained earnings),  or shall distribute to all holders of the Common
Shares rights or warrants to subscribe for securities (other than those referred
to in Section 11.3(b)),  then in each such case the number of Common Shares into
which each Convertible  Debenture shall be convertible shall be adjusted so that
the same shall equal the number  determined by multiplying  the number of Common
Shares into which such Convertible  Debenture was convertible  immediately prior
to the date of such  distribution  by a fraction of which the numerator shall be
the current  market  price  (determined  as provided in Section  11.3(d)) of the
Common Shares on the record date mentioned  below,  and of which the denominator
shall be such  current  market  price of the Common  Shares,  less the then fair
market value (as  determined  by the Board of  Directors  of the Company,  whose
determination  shall be  conclusive  evidence of such fair market  value) of the
portion  of the  securities  or assets so  distributed  or of such  subscription
rights or warrants  applicable to one Common Share. Such adjustment shall become
effective immediately after the record date for the determination of the holders
of the Common Shares entitled to receive such distribution.  Notwithstanding the
foregoing,  in the event that the Company  shall  distribute  rights or warrants
(other than those referred to in Section 11.3(b)) ("Rights") pro rata to holders
of the Common Shares, the Company may, in lieu of making any adjustment pursuant
to this  Section  11.3(c),  make  proper  provision  so that  each  holder  of a
Convertible  Debenture who converts such security after the record date for such
distribution  and prior to the  expiration  or redemption of the Rights shall be
entitled to receive  upon such  conversion,  in  addition  to the Common  Shares
issuable upon such

<PAGE>

conversion  (the  "Conversion  Shares"),  a number of Rights to be determined as
follows:  (1) if  such  conversion  occurs  on or  prior  to the  date  for  the
distribution to the holders of Rights of separate  certificates  evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder of
a number of Common Shares equal to the number of  Conversion  Shares is entitled
at the time of such  conversion in accordance  with the terms and  provisions of
and  applicable  to the  Rights;  and (2) if such  conversion  occurs  after the
Distribution  Date, the same number of Rights to which a holder of the number of
Common  Shares into which a Convertible  Debenture so converted was  convertible
immediately  prior to the  Distribution  Date  would have been  entitled  on the
Distribution  Date in accordance with the terms and provisions of and applicable
to the Rights.

     (d) The  current  market  price per share of the Common  Shares on any date
shall be deemed to be the average of the daily closing prices for 30 consecutive
Trading Days commencing 45 Trading Days before the date in question. The closing
price for each day shall be the last  reported  sales  price or, in case no such
reported sale takes place on such date, the average of the reported  closing bid
and asked prices regular way, in either case on the American Stock Exchange,  or
if the Common Shares are not listed or admitted to trading on such exchange,  on
the principal national securities exchange on which the Common Shares are listed
or admitted to trading or, if not listed or admitted to trading on any  national
securities exchange,  the closing sale price of the Common Shares or, in case no
reported sale takes place,  the average of the closing bid and asked prices,  on
Nasdaq or any  comparable  system,  or if the  Common  Shares  are not quoted on
Nasdaq or any comparable  system, the closing sale price or, in case no reported
sale takes place, the average of the closing bid and asked prices,  as furnished
by any two members of the  National  Association  of  Securities  Dealers,  Inc.
selected from time to time by the Company for that purpose.

     (e) In any case in which this Section 11.3 shall require that an adjustment
be made immediately following a record date, the Company may elect to defer (but
only until five Business Days  following the mailing of the notice  described in
Section 11.2) issuing to the Holder of any Convertible Debenture converted after
such  record  date the Common  Shares and other  shares of stock of the  Company
issuable upon such  conversion over and above the Common Shares and other shares
of stock of the Company  issuable upon such  conversion only on the basis of the
conversion rate prior to adjustment;  and, in lieu of the shares the issuance of
which is so deferred,  the Company  shall issue or cause its transfer  agents to
issue appropriate evidence of the right to receive such shares.

     (f) No adjustment in the conversion rate shall be required until cumulative
adjustments  result  in a  change  of 1% or more of the  conversion  price as in
effect prior to the last adjustment of the conversion rate;  provided,  however,
that any adjustment  which by reason of this Section  11.3(f) is not required to
be made  shall be carried  forward  and taken  into  account  in any  subsequent
adjustment.  All  calculations  under  this  Section  11.3  shall be made to the
nearest

<PAGE>

cent ($.01) or the nearest  one-hundredth  (1/100th) of a share, as the case may
be. No adjustment to the conversion rate shall be made for cash dividends.

     (g) In the  event  that,  as a result of an  adjustment  made  pursuant  to
Section 11.3, the Holder of any Convertible  Debentures  thereafter  surrendered
for  conversion  shall  become  entitled  to receive  any shares of stock of the
Company other than Common Shares,  thereafter the number of such other shares so
receivable  upon  conversion of any  Convertible  Debenture  shall be subject to
adjustment  from time to time in a manner and on terms as nearly  equivalent  as
practicable  to the  provisions  with respect to the Common Shares  contained in
this Section 11.3.

     (h) The Company may make such increases in the conversion rate, in addition
to any increases or decreases  required by Sections 11.3(a),  (b) and (c), as is
considered  to be advisable in order that any event  treated for federal  income
tax purposes as a distribution of shares or share rights shall not be taxable to
the recipients thereof.

     (i) Whenever the  conversion  rate is adjusted,  the Company shall promptly
mail to all  Holders  of  record  of  Convertible  Debentures  a  notice  of the
adjustment  and shall cause to be prepared a  certificate  signed by a principal
financial officer of the Company setting forth the adjusted  conversion rate and
a brief  statement of the facts  requiring such  adjustment and the  computation
thereof;  such certificate shall forthwith be filed with each transfer agent for
the Convertible Debentures.

     (j) In the event that:

               (i)  the  Company   takes  any  action  which  would  require  an
          adjustment in the conversion rate,

               (ii) the Company consolidates or merges with, or transfers all or
          substantially   all  of  its  assets  to,  another   corporation   and
          shareholders of the Company must approve the transaction, or

               (iii) there is a  dissolution,  winding up or  liquidation of the
          Company,

a Holder  of  Convertible  Debentures  may wish to  convert  some or all of such
Convertible  Debentures  into Common Shares prior to the record date for, or the
effective date of, the transaction so that he may receive the rights,  warrants,
securities  or assets which a holder of Common  Shares on that date may receive.
Therefore,  the Company shall mail to holders of Convertible Debentures a notice
stating the proposed  record or effective date of the  transaction,  as the case
may be. The  Company  shall mail the notice at least ten days  before such date;
however,  failure to mail such notice or any defect therein shall not affect the
validity of any  transaction  referred  to in clause (i),  (ii) or (iii) of this
Section 11.3(j).

<PAGE>

     (k) If any of the following shall occur,  namely: (i) any  reclassification
or change of outstanding  Common Shares  issuable upon conversion of Convertible
Debentures (other than a change in par value, or from par value to no par value,
or  from  no  par  value  to par  value,  or as a  result  of a  subdivision  or
combination),  (ii) any  consolidation or merger to which the Company is a party
other than a  consolidation  or merger in which the  Company  is the  continuing
corporation  and which  does not  result in any  reclassification  of, or change
(other than a change in name,  or par value,  or from par value to no par value,
or  from  no  par  value  to par  value,  or as a  result  of a  subdivision  or
combination) in, outstanding Common Shares or (iii) any sale,  transfer or lease
of all or  substantially  all of the  property  or business of the Company as an
entirety,  then the Company, or such successor or purchasing entity, as the case
may be,  shall,  as a  condition  precedent  to such  reclassification,  change,
consolidation,  merger,  sale,  transfer  or lease,  agree in writing  that each
Convertible Debenture shall be convertible into the kind and amount of shares of
stock and other  securities and property  (including  cash) receivable upon such
reclassification,  change,  consolidation,  merger, sale, transfer or lease by a
holder of the  number of  Common  Shares  deliverable  upon  conversion  of such
Convertible  Debentures  immediately  prior  to such  reclassification,  change,
consolidation,  merger,  sale, transfer or lease. Such writing shall provide for
adjustments  which shall be as nearly  equivalent as may be  practicable  to the
adjustments provided for in this Section 11. The foregoing,  however,  shall not
in any way  affect  the  right  that a  Holder  of  Convertible  Debentures  may
otherwise  have,  pursuant  to clause (2) of the last  sentence  of  11.3.(c) to
receive Rights upon conversion of Convertible Debentures. If, in the case of any
such reclassification,  change, consolidation,  merger, sale, transfer or lease,
the shares of stock or other securities and property (including cash) receivable
thereupon  by a  holder  of the  Common  Shares  includes  shares  of  stock  or
beneficial  interest or other  securities and property of a corporation or other
entity other than the successor or purchasing  corporation,  as the case may be,
in such  reclassification,  change,  consolidation,  merger,  sale,  transfer or
lease,  then such other  corporation  or other  entity shall agree in writing to
additional  provisions  to protect the  interests of the Holders of  Convertible
Debentures  as the Board of Directors of the Company shall  reasonably  consider
necessary by reason of the  foregoing.  The  provisions of this Section  11.3(k)
shall similarly apply to successive consolidations, mergers, sales, transfers or
leases.

     No holder of Convertible  Debentures will possess any preemptive  rights to
subscribe  for or acquire any  unissued  shares of the Company  (whether  now or
hereafter  authorized) or securities of the Company convertible into or carrying
a right to subscribe to or acquire shares of the Company.

     Section 11.4 So long as any  Convertible  Debentures are  Outstanding,  WRP
shall not issue any options to purchase  Common Shares of WRP  ("Employee  Stock
Options")  to  officers,  directors or  employees  of, or  consultants  to, WRP,
whether pursuant to employee stock option or purchase plans of WRP or employment
or consulting  agreements or otherwise for an exercise  price which is less than
the Closing Price of such Common  Shares on

<PAGE>

the date of grant.  In the event the number of Common Shares subject to Employee
Stock  Options,  excluding  any  Employee  Stock  Options  which were  issued in
exchange for options to purchase shares of Wellsford Residential Property Trust,
at  any  time  exceeds,  in the  aggregate,  10% of  the  Common  Shares  of WRP
outstanding at such time, all Employee Stock Options outstanding at such time in
excess of such 10%,  shall be deemed for purposes of Section  12.3(b)  hereof to
have an exercise price per share equal to 20% of the average  Closing Price of a
Common Share on each date of grant of Employee  Stock  Options  exercisable  for
Common Shares in excess of such 10%.

     Section 11.5 Trustee Not Responsible for  Determining  Conversion  Price or
Adjustments.  Neither the Trustee nor any Conversion  Agent shall at any time be
under any duty or responsibility  to any Holder of any Convertible  Debenture to
determine  whether  any facts exist  which may  require  any  adjustment  of the
Conversion Price, or with respect to the nature or extent of any such adjustment
when made, or with respect to the method  employed.  Neither the Trustee nor any
Conversion  Agent shall be accountable with respect to the validity or value (or
the kind or amount) of any Common Shares or of any securities or property, which
may at any time be issued or delivered  upon the  conversion of any  Convertible
Debenture;   and  neither  the  Trustee  nor  any  Conversion  Agent  makes  any
representation  with  respect  thereto.  Neither the Trustee nor any  Conversion
Agent  shall be  responsible  for any  failure  of the  Company to make any cash
payment or to issue,  transfer  or deliver  any Common  Shares of the Company or
stock  certificates  or other  securities  or property upon the surrender of any
Convertible Debenture for the purpose of conversion.  All Convertible Debentures
delivered for conversion  shall be delivered to the Trustee to be canceled by or
at the discretion of the Trustee, which shall dispose of the same as provided in
Section 2.12 of this Indenture.

     Section 11.6  Reservation of Common Shares.  The Company shall at all times
reserve and keep available,  free from preemptive  rights, out of its authorized
but unissued  Common  Shares,  for the purpose of effecting  the  conversion  of
Convertible  Debentures,  the full number of Common  Shares of the Company  then
issuable upon the conversion of all Outstanding Convertible Debentures.

     Section 11.7 Payment of Certain Taxes upon Conversion. The Company will pay
any and all taxes that may be payable in respect of the issue or delivery of its
Common Shares on conversion  of  Convertible  Debentures  pursuant  hereto.  The
Company shall not,  however,  be required to pay any tax which may be payable in
respect of any transfer  involved in the issue and delivery of its Common Shares
in a name  other  than  that  of the  Holder  of the  Convertible  Debenture  or
Convertible  Debentures to be converted,  and no such issue or delivery shall be
made unless and until the person  requesting  such issue has paid to the Company
the  amount of any such tax,  or has  established,  to the  satisfaction  of the
Company, that such tax has been paid.

<PAGE>

     Section 11.8 Nonassessability. The Company covenants that all Common Shares
which may be issued upon conversion of Convertible Debentures will upon issue in
accordance  with the terms hereof be duly and validly  issued and fully paid and
nonassessable.

                                   ARTICLE XII

                     SUBORDINATION OF CONVERTIBLE DEBENTURES

     Section 12.1 Convertible Debentures Subordinate to Senior Indebtedness. The
Company covenants and agrees, and each Holder of a Convertible Debenture, by the
Holder's acceptance thereof,  likewise covenants and agrees, that, to the extent
and in the  manner  hereinafter  set  forth in this  Article,  the  indebtedness
represented  by the  Convertible  Debentures and the payment of the principal of
(and premium, if any) and interest on each and all of the Convertible Debentures
are  hereby  expressly  made  subordinate  and junior in right of payment to the
prior  payment  in full  of all  Senior  Indebtedness  of the  Company,  whether
outstanding at the date of this Indenture or thereafter  incurred.  No provision
of this Article shall prevent the  occurrence of any default or Event of Default
hereunder.

     Section 12.2 Payment Over of Proceeds upon  Dissolution,  Etc. In the event
of (i) any insolvency, bankruptcy,  receivership,  liquidation,  reorganization,
readjustment,  composition or other similar proceeding  relating to the Company,
its  creditors  or its  property,  (ii)  any  proceeding  for  the  liquidation,
dissolution  or other winding up of the Company  voluntarily  or  involuntarily,
whether  or not  involving  insolvency  or  bankruptcy  proceedings,  (iii)  any
assignment  by the  Company  for the  benefit  of  creditors  or (iv) any  other
marshalling  of  assets  of  the  Company,  all  amounts  due  upon  all  Senior
Indebtedness of the Company  (including any interest  thereon accruing after the
commencement  of such  proceedings)  shall  first  be paid in full,  or  payment
thereof  provided for in money in accordance with its terms,  before any payment
is made by the  Company on account of the  principal  (and  premium,  if any) or
interest  on the  Convertible  Debentures;  and any payment by the  Company,  or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities,  which the Holders of the Convertible  Debentures or the
Trustee would be entitled to receive from the Company, except for the provisions
of this  Article,  shall be paid by the Company or by any  receiver,  trustee in
bankruptcy,  liquidation  trustee,  agent or other Person making such payment or
distribution,  or by the Holders of the Convertible Debentures or by the Trustee
under this  Indenture  if  received  by them or it,  directly  to the holders of
Senior Indebtedness of the Company (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders, as calculated by
the Company) or their  representative or  representatives,  or to the trustee or
trustees under any indenture  pursuant to which any instruments  evidencing such
Senior  Indebtedness  may have been issued,  as their

<PAGE>

respective  interests  may appear,  to the extent  necessary  to pay such Senior
Indebtedness  (including any interest thereon accruing after the commencement of
such  proceedings)  in full,  after giving effect to any  concurrent  payment or
distribution  to or for the  holders  of such  Senior  Indebtedness,  before any
payment or distribution is made to the Holders of the Convertible  Debentures or
to the Trustee.

     In  the  event  that,   notwithstanding  the  foregoing,   any  payment  or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities,  prohibited by the  foregoing,  shall be received by the
Trustee  before  all Senior  Indebtedness  of the  Company  is paid in full,  or
provision is made for such payment,  such payment or distribution  shall be held
in trust for the benefit of and shall be paid over or  delivered  to the holders
of such Senior Indebtedness or their  representative or  representatives,  or to
the trustee or trustees  under any indenture  pursuant to which any  instruments
evidencing such Senior  Indebtedness  may have been issued,  as their respective
interests  may appear,  as  calculated by the Company,  for  application  to the
payment of all  Senior  Indebtedness  of the  Company,  remaining  unpaid to the
extent necessary to pay such Senior Indebtedness in full, after giving effect to
any concurrent  payment or  distribution to or for the benefit of the holders of
such Senior Indebtedness.

     For purposes of this Article only, the words "cash, property or securities"
shall  not be deemed  to  include  shares of  Capital  Stock of the  Company  as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment  which are subordinated
in  right  of  payment  to all  Senior  Indebtedness  which  may at the  time be
outstanding  to  substantially  the same extent as, or to a greater extent than,
the Convertible  Debentures are so subordinated as provided in this Article. The
consolidation  of the Company with,  or the merger of the Company into,  another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of its properties and assets substantially as an entirety to another
Person upon the terms and  conditions  set forth in Article IX of this Indenture
shall not be deemed a  dissolution,  winding  up,  liquidation,  reorganization,
readjustment,   composition,   assignment   for  the  benefit  of  creditors  or
marshalling  of assets and  liabilities  of the Company for the purposes of this
Section if the Person formed by such  consolidation or into which the Company is
merged or the Person which  acquires by conveyance  or transfer such  properties
and assets substantially as an entirety, as the case may be, shall, as a part of
such consolidation,  merger,  conveyance or transfer, comply with the conditions
set forth in Article IX of this Indenture.

     Section 12.3 Prior  Payment to Senior  Indebtedness  upon  Acceleration  of
Convertible  Debentures.  In the  event  that  any  Convertible  Debentures  are
declared due and payable  before their Stated  Maturity,  then and in such event
the holders of Senior  Indebtedness shall be entitled to receive payment in full
of all amounts then due on or in respect of all Senior Indebtedness or provision
shall be made for such  payment in cash,  before the Holders of the  Convertible
Debentures are entitled to receive any payment  (including any payment which may

<PAGE>

be payable by reason of the  payment of any other  indebtedness  of the  Company
being subordinated to the payment of the Convertible  Debentures) by the Company
on  account  of the  principal  of (or  premium,  if  any)  or  interest  on the
Convertible  Debentures  or on account of the purchase or other  acquisition  of
Convertible Debentures.

     In the event that,  notwithstanding  the foregoing,  the Company shall make
any payment to the Trustee or the Holder of any Convertible Debenture prohibited
by the foregoing provisions of this Section, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder,  then and in such event such payment shall be paid over and
delivered forthwith to the Company.

     The  provisions of this Section shall not apply to any payment with respect
to which Section 12.2 would be applicable.

     Section 12.4 No Payment When Senior  Indebtedness in Default.  In the event
and during the  continuation  of any  default by the  Company in the  payment of
principal,  premium,  if any,  interest  or any other  payment due on any Senior
Indebtedness  of the Company,  as the case may be, beyond any  applicable  grace
period with  respect  thereto,  or in the event that the  maturity of any Senior
Indebtedness of the Company has been accelerated because of a default,  then, in
any such  case,  no payment  shall be made by the  Company  with  respect to the
principal  (including  redemption  payments,  if any) of,  premium,  if any,  or
interest on the Convertible  Debentures until such default is cured or waived or
ceases  to  exist  or any such  acceleration  or  demand  for  payment  has been
rescinded.

     Section 12.5 Payment Permitted in Certain Situations.  Nothing contained in
this  Article or elsewhere in this  Indenture or in the  Convertible  Debentures
shall  prevent (a) the  Company,  at any time except  during the pendency of any
dissolution,  winding-up,  liquidation or reorganization of the Company, whether
voluntary or involuntary, or any bankruptcy,  insolvency,  receivership or other
proceedings  of the Company  referred to in Section 12.2 or under the conditions
described in Section 12.3 or 12.4, from making payments at any time of principal
of or premium,  if any, or interest on the  Convertible  Debentures,  or (b) the
application  by the  Trustee of any money  deposited  with it  hereunder  to the
payment of or on account of the principal of, or premium, if any, or interest on
the Convertible  Debentures or the retention of such payment by the Holders, if,
at the time of such  application by the Trustee,  it did not have knowledge that
such payment would have been prohibited by the provisions of this Article.

     Section  12.6  Subrogation  to Rights of  Holders  of Senior  Indebtedness.
Subject to the payment in full of all Senior  Indebtedness  or the provision for
such payment in cash or cash  equivalents or otherwise in a manner  satisfactory
to the holders of Senior  Indebtedness,  the Holders of  Convertible  Debentures
shall be subrogated to the extent of the payments or  distributions  made to the
holders

<PAGE>

of such Senior Indebtedness  pursuant to the provisions of this Article (equally
and ratably with the holders of indebtedness of the Company which by its express
terms is subordinated to indebtedness of the Company to  substantially  the same
extent as the Convertible Debentures are subordinated to the Senior Indebtedness
and is entitled to like rights of  subrogation)  to the rights of the holders of
such Senior Indebtedness to receive payments and distributions of cash, property
and securities applicable to the Senior Indebtedness until the principal of (and
premium,  if any) and interest on the  Convertible  Debentures  shall be paid in
full.  For purposes of such  subrogation,  no payments or  distributions  to the
holders of the Senior  Indebtedness of any cash, property or securities to which
the Holders of  Convertible  Debentures or the Trustee would be entitled  except
for the  provisions  of this  Article,  and no  payments  over  pursuant  to the
provisions  of this  Article  to or for the  benefit  of the  holders  of Senior
Indebtedness  by Holders of  Convertible  Debentures or the Trustee,  shall,  as
among the Company,  its creditors other than holders of Senior  Indebtedness and
the Holders of Convertible Debentures, be deemed to be a payment or distribution
by the Company to or on account of the Senior Indebtedness.

     Section 12.7 Provisions Solely to Define Relative Rights. The provisions of
this  Article  are and are  intended  solely  for the  purpose of  defining  the
relative rights of the Holders of Convertible Debentures on the one hand and the
holders of Senior  Indebtedness  on the other hand.  Nothing  contained  in this
Article or  elsewhere  in this  Indenture or in the  Convertible  Debentures  is
intended to or shall (a) impair, as among the Company,  its creditors other than
holders of Senior  Indebtedness and the Holders of Convertible  Debentures,  the
obligation  of the  Company,  which is absolute  and  unconditional  (and which,
subject to the rights under this Article of the holders of Senior  Indebtedness,
is intended to rank equally with all other general  obligations of the Company),
to pay to the Holders of  Convertible  Debentures the principal of (and premium,
if any) and interest on the  Convertible  Debentures  as and when the same shall
become  due and  payable  in  accordance  with  their  terms;  or (b) affect the
relative rights against the Company of the Holders of Convertible Debentures and
creditors of the  Company,  as the case may be, other than the holders of Senior
Indebtedness;  or (c)  prevent  the  Trustee  or the  Holder of any  Convertible
Debenture  from  exercising all remedies  otherwise  permitted by applicable law
upon default under this  Indenture,  subject to the rights,  if any,  under this
Article of the holders of Senior  Indebtedness  to receive  cash,  property  and
securities otherwise payable or deliverable to the Trustee or such Holder.

     Section  12.8  Trustee  to  Effectuate  Subordination.  Each  Holder  of  a
Convertible Debenture by such Holder's acceptance thereof authorizes and directs
the Trustee on such  Holder's  behalf to take such action as may be necessary or
appropriate  to  effectuate  the  subordination  provided  in this  Article  and
appoints  the  Trustee  such  Holder's  attorney-in-fact  for any  and all  such
purposes.

     Section 12.9 No Waiver of Subordination Provisions. No right of any present
or future holder of any Senior  Indebtedness to enforce  subordination as herein
provided  shall at any time in any way be  prejudiced  or impaired

<PAGE>

by any act or failure to act on the part of the Company or by any act or failure
to act,  in good  faith,  by any such  holder,  or by any  noncompliance  by the
Company with the terms,  provisions and covenants of this Indenture,  regardless
of any knowledge thereof any such holder may have or be otherwise charged with.

     Without in any way limiting the generality of the foregoing paragraph,  the
holders of Senior  Indebtedness may, at any time and from time to time,  without
the  consent  of or notice to the  Trustee  or the  Holders  of the  Convertible
Debentures,  without  incurring  responsibility  to the  Holders of  Convertible
Debentures and without impairing or releasing the subordination provided in this
Article or the obligations hereunder of the Holders of Convertible Debentures to
the  holders of Senior  Indebtedness  do any one or more of the  following:  (a)
change the  manner,  place or terms of payment or extend the time of payment of,
or renew or alter,  Senior  Indebtedness or otherwise amend or supplement in any
manner  Senior  Indebtedness  or  any  instrument  evidencing  the  same  or any
agreement under which Senior  Indebtedness is outstanding;  (b) sell,  exchange,
release or  otherwise  deal with any  property  pledged,  mortgaged or otherwise
securing  Senior  Indebtedness;  (c) release any Person liable in any manner for
the  collection  of  Senior  Indebtedness;  and (d)  exercise  or  refrain  from
exercising any rights against the Company and any other Person.

     Section  12.10  Notice to Trustee.  The Company  shall give prompt  written
notice to a Responsible  Officer of the Trustee of any fact known to the Company
which would  prohibit  the making of any payment to or by the Trustee in respect
of the  Convertible  Debentures  pursuant  to the  provisions  of this  Article.
Notwithstanding  the  provisions of this Article or any other  provision of this
Indenture,  the Trustee shall not be charged with  knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect  of the  Convertible  Debentures  pursuant  to the  provisions  of  this
Article,  unless  and until a  Responsible  Officer  of the  Trustee  shall have
received  written  notice  thereof  from the  Company  or a holder or holders of
Senior  Indebtedness or from any trustee therefor;  and, prior to the receipt of
any such written notice,  the Trustee,  subject to the provisions of Section 6.2
of this  Indenture,  shall be  entitled  in all  respects to assume that no such
facts exist; provided,  however, that if the Trustee shall have not received the
notice provided for in this Section at least two Business Days prior to the date
upon  which by the terms  hereof any money may become  payable  for any  purpose
(including,  without limitation, the payment of the principal of (or premium, if
any) or interest on any Convertible Debentures), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and authority
to receive  such money and to apply the same to the purposes for which they were
received,  and shall not be affected by any notice to the  contrary  that may be
received by it within two Business Days prior to such date.

     Subject to the  provisions  of Section 6.2 of this  Indenture,  the Trustee
shall be entitled to rely on the delivery to it of a written  notice by a Person
representing  himself  to be a  holder  of  Senior  Indebtedness  (or a  trustee
therefor) to establish that such notice has been given by a

<PAGE>

holder of Senior  Indebtedness  (or a trustee  therefor).  In the event that the
Trustee  determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior  Indebtedness to participate in
any payment or  distribution  pursuant to this Article,  the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior  Indebtedness  held by such Person,  the extent to which
such Person is entitled to participate in such payment or  distribution  and any
other facts  pertinent to the rights of such Person under this  Article,  and if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending  judicial  determination  as to the right of such Person to receive such
payment.

     Section 12.11  Reliance on Judicial  Order or  Certificate  of  Liquidating
Agent.  Upon any payment or distribution of assets of the Company referred to in
this  Article,  the Trustee,  subject to the  provisions  of Section 6.2 of this
Indenture,  and the  Holders of  Convertible  Debentures  shall be  entitled  to
conclusively  rely upon any order or decree  entered  by any court of  competent
jurisdiction in which such insolvency,  bankruptcy,  receivership,  liquidation,
reorganization,  dissolution,  winding  up or  similar  case  or  proceeding  is
pending,  or a certificate of the trustee in bankruptcy,  receiver,  liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution,  delivered to the Trustee or to the Holders
of Convertible Debentures,  for the purpose of ascertaining the Persons entitled
to  participate  in  such  payment  or  distribution,   the  holders  of  Senior
Indebtedness  and other  indebtedness  of the  Company,  as the case may be, the
amount  thereof or payable  thereon,  the amount or amounts paid or  distributed
thereon and all other facts pertinent thereto or to this Article.

     Section 12.12  Trustee Not  Fiduciary  for Holders of Senior  Indebtedness.
With respect to the holders of Senior  Indebtedness,  the Trustee  undertakes to
perform  or to  observe  only  such  of its  covenants  and  obligations  as are
specifically set forth in this Article,  and no implied covenants or obligations
with respect to the holders of such Senior  Indebtedness shall be read into this
Indenture against the Trustee.  Except with respect to Section 12.4, the Trustee
shall  not be  deemed  to owe  any  fiduciary  duty  to the  holders  of  Senior
Indebtedness  and shall not be liable to any such  holders  or  creditors  if it
shall in good faith pay over or distribute to Holders of Convertible  Debentures
or to the Company or to any other Person cash,  property or  securities to which
any holders of Senior  Indebtedness  shall be entitled by virtue of this Article
or otherwise.

     Section  12.13  Rights  of  Trustee  as  Holder  of  Senior   Indebtedness;
Preservation of Trustee's Rights.  The Trustee in its individual  capacity shall
be  entitled  to all the rights set forth in this  Article  with  respect to any
Senior  Indebtedness  which may at any time be held by it, to the same extent as
any other  holder of Senior  Indebtedness  and nothing in this  Indenture  shall
deprive the Trustee of any of its rights as such holder.

<PAGE>

     Nothing in this  Article XII shall apply to claims of, or payments  to, the
Trustee under or pursuant to Section 6.7 of this Indenture.

     Section 12.14 Article  Applicable to Paying Agents. In case at any time any
Paying Agent other than the Trustee shall have been appointed by the Company and
be then acting  hereunder,  the term  "Trustee" as used in this Article shall in
such case (unless the context  otherwise  requires) be construed as extending to
and including  such Paying Agent within its meaning as fully for all intents and
purposes as if such Paying Agent were named in this Article in addition to or in
place of the Trustee;  provided,  however, that Section 12.13 shall not apply to
the  Company or any  Affiliate  of the Company if it or such  Affiliate  acts as
Paying Agent.

     Section  12.15 Certain  Conversions  Deemed  Payment.  For purposes of this
Article only,  (a) the issuance and delivery of junior  securities (or cash paid
in lieu of fractional  shares) upon  conversion  or  redemption  of  Convertible
Debentures  in  accordance  with Article XI shall not be deemed to  constitute a
payment or distribution on account of the principal of or premium or interest on
Convertible  Debentures  or on account of the purchase or other  acquisition  of
Convertible  Debentures,  and (b) the  payment,  issuance  or  delivery of cash,
property or securities  (other than junior  securities  and cash paid in lieu of
fractional  shares) upon  conversion or  redemption  of a Convertible  Debenture
shall be deemed to  constitute  payment  on  account  of the  principal  of such
Convertible  Debenture.  For the  purposes  of this  Section,  the term  "junior
securities"  means (i) shares of any  Capital  Stock of any class of the Company
and (ii) securities of the Company which are subordinated in right of payment to
all Senior  Indebtedness  which may be  outstanding  at the time of  issuance or
delivery of such securities to substantially the same extent as, or to a greater
extent than, the Convertible  Debentures are so subordinated as provided in this
Article.  Nothing contained in this Article or elsewhere in this Indenture or in
the Convertible Debentures is intended to or shall impair, as among the Company,
its  creditors  other than  holders of Senior  Indebtedness  and the  Holders of
Convertible Debentures,  the right, which is absolute and unconditional,  of the
Holder of any  Convertible  Debenture to convert such  Convertible  Debenture in
accordance with Article XI.

     Section 12.16 Further  Subrogation.  The Company shall be subrogated to all
(if any)  rights of the Trust and any  holder  of  beneficial  interests  in the
assets of the Trust  against the Trustee in respect of any breach by the Trustee
of any of its obligations under this Indenture.

                                  ARTICLE XIII

                                    EXPENSES

<PAGE>

     Section 13.1 Payment of Expenses. In connection with the offering, sale and
issuance  of the  Convertible  Debentures  to the  Institutional  Trustee and in
connection with the sale of the Trust Securities by the Trust,  the Company,  in
its capacity as borrower with respect to the Convertible Debentures, shall:

               (a) pay all costs and expenses of the Trust  (including,  but not
          limited to, costs and  expenses  relating to the  organization  of the
          Trust,  the fees and  expenses  of the  Institutional  Trustee and the
          Delaware Trustee,  the costs and expenses relating to the operation of
          the  Trust,  including  without  limitation,  costs  and  expenses  of
          accountants,  attorneys, statistical or bookkeeping services, expenses
          for printing and  engraving  and  computing or  accounting  equipment,
          paying agent(s), registrar(s),  transfer agent(s), duplicating, travel
          and  telephone  and other  telecommunications  expenses  and costs and
          expenses incurred in connection with the acquisition,  financing,  and
          disposition of Trust assets);

               (b) pay all costs and expenses  related to the enforcement by the
          Institutional  Trustee  of the  rights  of the  holders  of the  Trust
          Securities;

               (c) be  primarily  liable  for  any  indemnification  obligations
          arising with respect to the Declaration; and

               (d) pay any and all taxes  (other than United  States  income and
          withholding  taxes  attributable  to the Trust or its  assets) and all
          liabilities,  costs and  expenses  with  respect  to such taxes of the
          Trust.

     Section 13.2 Payment Upon Resignation or Removal.  Upon termination of this
Indenture or the removal or resignation  of the Trustee  pursuant to Section 6.8
of this  Indenture,  the Company shall pay to the Trustee all amounts accrued to
the date of such  termination,  removal or resignation.  Upon termination of the
Declaration  or the  removal  or  resignation  of the  Delaware  Trustee  or the
Institutional  Trustee,  as the  case may be,  pursuant  to  Section  5.6 of the
Declaration,  the Company shall pay to the Delaware Trustee or the Institutional
Trustee,  and their respective  counsel, as the case may be, all amounts accrued
to the date of such termination, removal or resignation.

                                   ARTICLE XIV

                            MISCELLANEOUS PROVISIONS

     Section 14.1 Incorporators, Shareholders, Officers and

<PAGE>

Directors of Company Exempt from Individual Liability. No recourse under or upon
any  obligations,  covenant or  agreement  contained in this  Indenture,  in any
Convertible  Debenture,  or because of any indebtedness evidenced thereby, shall
be had against any incorporator,  as such or against any past, present or future
shareholder,  officer or director, as such, of the Company or of any predecessor
or successor  thereof,  either directly or through the Company or any successor,
under any rule of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or otherwise, all such
liability  being  expressly  waived  and  released  by  the  acceptance  of  the
Convertible  Debentures by the Holders thereof and as part of the  consideration
of the issue of the Convertible Debentures.

     Section 14.2  Provisions  of Indenture  for the Sole Benefit of Parties and
Holders  of  Convertible  Debentures.  Nothing  in  this  Indenture  or  in  the
Convertible Debentures, expressed or implied, shall give or be construed to give
to any Person,  firm or corporation,  other than the parties hereto,  any Paying
Agent and their successors  hereunder,  the holders of Senior Indebtedness,  the
holders of Convertible  Preferred Securities (to the extent provided herein) and
the Holders of the Convertible  Debentures any legal or equitable right,  remedy
or claim  under  this  Indenture  or under  any  covenant  or  provision  herein
contained,  all such covenants and provisions  being for the sole benefit of the
parties  hereto  and their  successors  and of the  Holders  of the  Convertible
Debentures.

     Section 14.3 Right to Assign;  Successors  and Assigns  Bound by Indenture.
The  Company  shall have the right at all times to assign any of its  respective
rights or obligations under this Indenture to a direct or indirect  wholly-owned
Subsidiary  of the  Company,  other  than an  entity  which  will be  taxed as a
partnership for federal income tax purposes;  provided that, in the event of any
such  assignment,  the Company  shall remain  liable for all of its  obligations
under this Indenture.  Subject to the foregoing,  this Indenture will be binding
upon and  inure to the  benefit  of the  parties  hereto  and  their  respective
successors  and assigns.  The rights and  obligations  of the parties under this
Indenture may not otherwise be assigned by such parties.

     All the covenants, stipulations,  promises and agreements in this Indenture
by the  parties  hereto  shall bind their  respective  successors  and  assigns,
whether so expressed or not.

     Section  14.4  Notices  and  Demands on  Company,  Trustee  and  Holders of
Convertible  Debentures.  Any notice or demand  which by any  provision  of this
Indenture  is required or  permitted  to be given or served by the Trustee or by
the  Holders of  Convertible  Debentures  to or on the  Company  may be given or
served by being deposited postage prepaid, first-class mail (except as otherwise
specifically provided herein) addressed (until another address of the Company is
filed by the Company with the Trustee) to Wellsford Real  Properties,  Inc., 535
Madison  Avenue,  26th Floor,  New York, New York 10022,  Attention:  Jeffrey H.

<PAGE>

Lynford. Any notice,  direction,  request or demand by the Company or any Holder
of  Convertible  Debentures  to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes,  if given or made at the Corporate
Trust Office.

     Where  this  Indenture  provides  for  notice  to  Holders  of  Convertible
Debentures  of any  event  such  notice  shall  be  sufficiently  given  (unless
otherwise  herein  expressly  provided) if in writing and mailed by  first-class
mail, postage prepaid to such Holders as their names and addresses appear in the
Security Register within the time prescribed.  Where this Indenture provides for
notice  in any  manner,  such  notice  may be waived in  writing  by the  Person
entitled to receive  such  notice,  either  before or after the event,  and such
waiver  shall be the  equivalent  of such  notice.  Waivers of notice by Holders
shall be filed  with the  Trustee,  but such  filing  shall  not be a  condition
precedent to the validity of any action taken in reliance  upon such waiver.  In
any case where  notice to Holders is given by mail,  neither the failure to mail
such  notice,  nor  any  defect  in any  notice  so  mailed,  shall  affect  the
sufficiency of such notice,  and any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given.

     In case, by reason of the suspension of or  irregularities  in regular mail
service,  it shall be impracticable to mail notice to the Company and Holders of
Convertible  Debentures when such notice is required to be given pursuant to any
provision of this  Indenture,  then any manner of giving such notice as shall be
reasonably  acceptable to the Trustee shall be deemed to be a sufficient  giving
of such notice.

     Section 14.5 Officers' Certificates and Opinions of Counsel;  Statements to
Be  Contained  Therein.  Upon any  application  or demand by the  Company to the
Trustee  to take  action  under any of the  provisions  of this  Indenture,  the
Company shall furnish to the Trustee an Officers'  Certificate  stating that all
conditions  precedent,  if any,  provided for in this Indenture  relating to the
proposed  action have been complied with and an Opinion of Counsel  stating that
in the opinion of such counsel all such conditions precedent,  if any, have been
complied with,  except that in the case of any such  application or demand as to
which the furnishing of such documents is specifically required by any provision
of this  Indenture  relating  to  such  particular  application  or  demand,  no
additional certificate or opinion need be furnished.

     Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this  Indenture  shall  include (a) a statement  that the person  making such
certificate  or opinion has read such covenant or condition and the  definitions
herein relating thereto, (b) a brief statement as to the nature and scope of the
examination or investigation  upon which the statements or opinions contained in
such  certificate or opinion are based,  (c) a statement that, in the opinion of
such person,  he has made such  examination or  investigation as is necessary to
enable him to express an informed  opinion as to whether or not such covenant or
condition has been complied with and (d) a

<PAGE>

statement as to whether or not, in the opinion of such person, such condition or
covenant has been complied with.

     Any certificate,  statement or opinion of any officer of the Company may be
based, insofar as it relates to legal matters,  upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion  or  representations   with  respect  to  the  matters  upon  which  his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of  reasonable  care should know that the same are  erroneous.  Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters or information  with respect to which is in the possession of
the Company, upon the certificate, statement or opinion of or representations by
an officer or  officers  of the  Company,  unless  such  counsel  knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his  certificate,  statement or opinion may be based as aforesaid are
erroneous,  or in the exercise of reasonable  care should know that the same are
erroneous.

     Any  certificate,  statement  or opinion of an officer of the Company or of
counsel  may be based,  insofar  as it  relates to  accounting  matters,  upon a
certificate  or  opinion  of or  representations  by an  accountant  or  firm of
accountants in the employ of the Company, unless such officer or counsel, as the
case may be,  knows that the  certificate  or opinion  or  representations  with
respect to the  accounting  matters  upon which his  certificate,  statement  or
opinion  may  be  based  as  aforesaid  are  erroneous,  or in the  exercise  of
reasonable care should know that the same are erroneous.

     Any  certificate or opinion of any independent  firm of public  accountants
filed with and directed to the Trustee shall contain a statement  that such firm
is independent.

     Section 14.6  Payments Due on Saturdays,  Sundays and  Holidays.  Except as
otherwise  provided  in Section  2.5,  if the date of Maturity of interest on or
principal of the  Convertible  Debentures  or the date fixed for  redemption  or
repayment of any such  Convertible  Debenture  shall not be a Business Day, then
payment of interest or principal  need not be made on such date, but may be made
on the next  succeeding  Business  Day;  provided  that if such next  succeeding
Business Day falls in the next  succeeding  calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on the date of Maturity or the date fixed for  redemption,
and no interest shall accrue for the period after such date.

<PAGE>

     Section 14.7  Conflict of Any Provision of Indenture  with Trust  Indenture
Act. If and to the extent that any provision of this Indenture limits, qualifies
or conflicts with another provision included in this Indenture which is required
by the Trust Indenture Act, such required provision shall control.

     Section 14.8 Delaware Law to Govern.  THIS  INDENTURE  AND THE  CONVERTIBLE
DEBENTURES SHALL BE DEEMED TO BE CONTRACTS MADE AND TO BE PERFORMED  ENTIRELY IN
THE STATE OF DELAWARE,  AND FOR ALL PURPOSES  SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT REGARD TO THE CONFLICTS OF LAW
RULES OF SAID STATE.

     Section 14.9 Counterparts.  This Indenture may be executed in any number of
counterparts,  each of which shall be an original;  but such counterparts  shall
together constitute but one and the same instrument.

     Section 14.10 Effect of Headings;  Gender. The Article and Section headings
herein and the Table of Contents are for  convenience  only and shall not affect
the  construction  hereof.  The use of the masculine,  feminine or neuter gender
herein  shall not limit in any way the  applicability  of any term or  provision
hereof.

     Section 14.11 Acceptable Counsel. In each instance herein which states that
legal counsel  needs to be  acceptable  to a party (or similar  language to that
affect),  the law firm of Robinson  Silverman Pearce Aronsohn & Berman LLP shall
be deemed to be acceptable legal counsel.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Indenture to be
duly executed,  and their  respective  corporate  seals to be hereto affixed and
attested, all as of the day and year first above written.

                 WELLSFORD REAL PROPERTIES, INC.

                 By:   /s/ Edward Lowenthal
                       ----------------------------------
                       Name: Edward Lowenthal
                       Title: President

                 WILMINGTON TRUST COMPANY,
                 as Trustee

                 By:   /s/ Jennifer Matz
                       ----------------------------------
                       Name: Jennifer Matz
                       Title: Assistant Vice President

<PAGE>

No. 1                                                               $ 25,775,000

                      WELLSFORD REAL PROPERTIES, INC.
                 8.25% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE

     PRIOR  TO  THE  TRANSFER  RESTRICTION  TERMINATION  DATE,  ANY  CERTIFICATE
EVIDENCING A  CONVERTIBLE  DEBENTURE  SHALL BEAR A LEGEND IN  SUBSTANTIALLY  THE
FOLLOWING  FORM,  UNLESS  OTHERWISE  AGREED BY THE COMPANY (WITH WRITTEN  NOTICE
THEREOF TO THE TRUSTEE):  THE SECURITY  EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S.  SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"), AND,
ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED  STATES OR TO, OR FOR
THE  ACCOUNT OR BENEFIT OF, U.S.  PERSONS  EXCEPT AS SET FORTH IN THE  FOLLOWING
SENTENCE.  BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED  INSTITUTIONAL  BUYER" (AS DEFINED IN RULE 144A UNDER THE  SECURITIES
ACT) OR (B) IT IS AN  INSTITUTIONAL  "ACCREDITED  INVESTOR"  (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL  ACCREDITED
INVESTOR")  OR (C)  IT IS  NOT A U.S.  PERSON  AND  IS  ACQUIRING  THE  SECURITY
EVIDENCED HEREBY IN AN OFFSHORE  TRANSACTION,  (2) AGREES THAT IT WILL NOT PRIOR
TO THE  EXPIRATION  OF THE HOLDING  PERIOD  APPLICABLE  TO SALES OF THE SECURITY
EVIDENCED  HEREBY UNDER RULE 144(K) UNDER THE  SECURITIES  ACT (OR ANY SUCCESSOR
PROVISION),  RESELL OR OTHERWISE  TRANSFER THE SECURITY  EVIDENCED HEREBY OR, IF
THIS SECURITY IS CONVERTIBLE INTO COMMON SHARES, THE COMMON SHARES ISSUABLE UPON
CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO WELLSFORD REAL PROPERTIES,
INC. (THE  "COMPANY") OR ANY  SUBSIDIARY  THEREOF,  (B) PURSUANT TO AN EFFECTIVE
REGISTRATION   STATEMENT   UNDER  THE   SECURITIES   ACT,  (C)  TO  A  QUALIFIED
INSTITUTIONAL  BUYER IN COMPLIANCE  WITH RULE 144A UNDER THE SECURITIES ACT, (D)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,  FURNISHES
TO THE TRUSTEE UNDER THE INDENTURE  (OR, IF THIS  CERTIFICATE  EVIDENCES  COMMON
SHARES,  THE TRANSFER AGENT FOR THE COMMON SHARES),  A SIGNED LETTER  CONTAINING
CERTAIN  REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THE SECURITY  EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
SUCH TRUSTEE OR TRANSFER  AGENT),  (E) OUTSIDE THE UNITED  STATES IN  COMPLIANCE
WITH RULE 904 UNDER THE  SECURITIES  ACT OR (F) PURSUANT TO THE  EXEMPTION  FROM
REGISTRATION  PROVIDED BY RULE 144 UNDER THE  SECURITIES  ACT (IF AVAILABLE) AND
(3) AGREES THAT IT WILL  DELIVER TO EACH PERSON TO WHOM THE  SECURITY  EVIDENCED
HEREBY IS TRANSFERRED A NOTICE  SUBSTANTIALLY  TO THE EFFECT OF THIS LEGEND.  IN
CONNECTION  WITH ANY  TRANSFER OF THE  SECURITY  EVIDENCED  HEREBY  PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD  APPLICABLE TO SALES OF THE SECURITY  EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR  PROVISION),
THE  HOLDER  MUST  CHECK THE  APPROPRIATE  BOX SET FORTH ON THE  REVERSE  HEREOF
RELATING  TO THE MANNER OF SUCH  TRANSFER  AND SUBMIT  THIS  CERTIFICATE  TO THE
TRUSTEE UNDER THE INDENTURE (OR, IF THIS  CERTIFICATE  EVIDENCES  COMMON SHARES,
SUCH  HOLDER  MUST  FURNISH TO THE  TRANSFER  AGENT SUCH  CERTIFICATIONS,  LEGAL
OPINIONS OR OTHER  INFORMATION  AS THE COMPANY OR WRP  CONVERTIBLE  TRUST I (THE
"TRUST")  MAY  REASONABLY  REQUIRE TO CONFIRM  THAT SUCH  TRANSFER IS BEING MADE
PURSUANT  TO AN  EXEMPTION  FROM,  OR  IN A  TRANSACTION  NOT  SUBJECT  TO,  THE
REGISTRATION  REQUIREMENTS OF THE SECURITIES  ACT). IF THIS CERTIFICATE DOES NOT
EVIDENCE  COMMON  SHARES  AND IF THE  PROPOSED  TRANSFEREE  IS AN  INSTITUTIONAL
ACCREDITED  INVESTOR OR A PURCHASER WHO IS NOT A U.S.  PERSON,  THE HOLDER MUST,
PRIOR TO SUCH  TRANSFER,  FURNISH  TO THE  TRUSTEE  UNDER  THE  INDENTURE,  SUCH
CERTIFICATIONS,  LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST
MAY  REASONABLY  REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN  EXEMPTION  FROM,  OR IN A  TRANSACTION  NOT  SUBJECT  TO,  THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT.  THIS  LEGEND  WILL BE REMOVED  AFTER THE
EXPIRATION OF THE HOLDING PERIOD  APPLICABLE TO SALES OF THE SECURITY  EVIDENCED
HEREBY UNDER RULE 144(K)  UNDER THE  SECURITIES  ACT. AS USED HEREIN,  THE TERMS
"OFFSHORE  TRANSACTION,"  "UNITED  STATES" AND "U.S.  PERSON"  HAVE THE MEANINGS
GIVEN TO THEM BY  REGULATION S UNDER THE  SECURITIES  ACT. THIS SECURITY IS ALSO
SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE INDENTURE.

     Wellsford Real  Properties,  Inc., a Maryland  corporation  (the "Company",
which  term  includes  any  successor  corporation  or other  entity  under  the
Indenture  hereinafter referred to), for value received,  hereby promises to pay
to,  Wilmington  Trust Company,  as  Institutional  Trustee (the  "Institutional
Trustee") for WRP Convertible Trust I or registered  assigns,  the principal sum
of Twenty-Five Million Seven Hundred Seventy Five Thousand Dollars ($25,775,000)
and to pay  interest  on said  principal  sum from May 5,  2000  (the  "Issuance
Date"), or from the most recent interest payment date to which interest has been
paid or duly  provided  for,  quarterly in arrears by payment of  $0.515625  per
Convertible  Debenture on the fifteenth  day of January,  April July and October
(each such date, an "Interest  Payment Date") of each year  commencing  July 17,
2000, at the rate of 8.25% per annum ($2.0625 per annum,  $0.515625 per quarter)
from and including the Issuance Date to and including the Maturity  Date,  until
the  principal  hereof  shall have  become due and  payable,  and on any overdue
principal and premium,  if any, and (without  duplication and to the extent that
payment of such interest is  enforceable  under  applicable  law) on any overdue
installment of interest at the same rate per annum  compounded  quarterly.  Each
quarterly period ending on an Interest Payment Date is hereafter  referred to as
an "Interest  Period." The amount of interest  payable for the initial  Interest
Period and for any Interest  Period shorter than a full Interest Period shall be
prorated and shall be computed on the basis of a 360-day  year of twelve  30-day
months.  For any  twelve  quarterly  interest  periods  during  the  term of the
Convertible  Debentures,  whether  or not  consecutive,  and  whether or not the
Company has available  cash with which to pay  interest,  the Company shall have
the right to pay the interest due on the Convertible  Debentures by the issuance
of additional Convertible Debentures, the number of which shall be determined by
dividing the total  amount of interest to be paid by the issuance of  additional
Convertible  Debentures by $25.00.  In the event that any date on which interest
is payable on this Convertible  Debenture is not a Business Day, then payment of
interest  payable on such date will be made on the next succeeding day that is a
Business Day (and  without any interest or other  payment in respect of any such
delay),  except that,  if such Business Day is in the next  succeeding  calendar
year, such payment shall be made on the immediately  preceding  Business Day, in
each case with the same force and effect as if made on such date.  The  interest
installment  so  payable,  and  punctually  paid or duly  provided  for,  on any
Interest  Payment Date will,  as provided in the  Indenture  (referred to on the
reverse hereof) be paid to the person in whose name this  Convertible  Debenture
(or  one  or  more  Predecessor  Convertible  Debentures,  as  defined  in  said
Indenture) is registered on the record date for such interest installment, which
shall be the close of  business  on the  fifteenth  day  prior to such  Interest
Payment Date. Any such interest installment not punctually paid or duly provided
for shall forthwith cease to be payable to the registered Holders on such record
date and may be paid to the Person in whose name this Convertible  Debenture (or
one or more  Predecessor  Convertible  Debentures) is registered at the close of
business on a special  record date to be fixed by the Trustee for the payment of
such defaulted interest, notice whereof shall be given to the registered Holders
of the Convertible Debentures not less than 10 days prior to such special record
date,  or may be paid at any time in any other  lawful  manner not  inconsistent
with the  requirements  of any  securities  exchange  on which  the  Convertible
Debentures  may be  listed,  and upon  such  notice as may be  required  by such
exchange,  all as more fully  provided in the  Indenture.  The principal of (and
premium, if any) and the interest on this Convertible Debenture shall be payable
at the office or agency of the Trustee  maintained  for that purpose in any coin
or currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts; provided,  however, that payment
of  interest  may be made at the option of the  Company  by check  mailed to the
registered  Holder at such  address as shall  appear in the  Security  Register.
Notwithstanding  the  foregoing,  so long  as the  Holder  of  this  Convertible
Debenture is the  Institutional  Trustee,  the payment of the  principal of (and
premium, if any) and interest on this Convertible Debenture will be made at such
place and to such account as may be designated by the Institutional Trustee.

     The indebtedness  evidenced by this Convertible Debenture is, to the extent
provided  in the  Indenture,  subordinate  and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Convertible Debenture
is issued subject to the provisions of the Indenture with respect thereto.  Each
Holder of this Convertible  Debenture,  by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on his
or her  behalf  to take  such  action  as may be  necessary  or  appropriate  to
acknowledge  or effectuate  the  subordination  so provided and (c) appoints the
Trustee his or her attorney-in-fact  for any and all such purposes.  Each Holder
hereof,  by his or her  acceptance  hereof,  hereby  waives  all  notice  of the
acceptance of the subordination provisions contained herein and in the Indenture
by each holder of Senior  Indebtedness,  whether now  outstanding  or  hereafter
incurred, and waives reliance by each such holder upon said provisions.

     This  Convertible  Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of  Authentication  hereon shall have been signed by or on
behalf  of the  Trustee.  The  provisions  of  this  Convertible  Debenture  are
continued on the reverse side hereof and such continued provisions shall for all
purposes  have the  same  effect  as  though  fully  set  forth  at this  place.
Capitalized  terms used but not defined herein shall have the meaning given them
in the Indenture.

     IN WITNESS WHEREOF, the Company has caused this instrument to be executed.

WELLSFORD REAL PROPERTIES, INC.

By: /s/ Edward Lowenthal
    -----------------------------------------
     Name: Edward Lowenthal
     Title: President

Attest:

By: /s/ James J. Burns
    -----------------------------------------
      Name: James J. Burns
      Title: Senior Vice President

                        CERTIFICATE OF AUTHENTICATION

This is one of the  Convertible  Debentures  described  in the  within-mentioned
Indenture.

Dated: May 5, 2000
WILMINGTON TRUST COMPANY,           By:
as Trustee                              ----------------------------------------
                                        Authorized Signatory

<PAGE>

                          FORM OF REVERSE OF DEBENTURE

     This  Convertible   Debenture  is  one  of  the  8.25%  Convertible  Junior
Subordinated  Debentures  (herein referred to as the "Convertible  Debentures"),
issued or to be issued  under and  pursuant to an  Indenture  dated as of May 5,
2000,  duly  executed and  delivered  between the Company and  Wilmington  Trust
Company,  as Trustee (the "Trustee") (the  "Indenture"),  to which Indenture and
all indentures  supplemental  thereto reference is hereby made for a description
of the  rights,  limitations  of  rights,  obligations,  duties  and  immunities
thereunder  of the  Trustee,  the  Company  and the  Holders of the  Convertible
Debentures. The Convertible Debentures are limited in aggregate principal amount
as specified in the Indenture.

     Because of the  occurrence  and  continuation  of a Tax  Event,  in certain
circumstances,  this Convertible  Debenture may be redeemed prior to maturity at
the  principal  amount  specified on the face hereof  together with any interest
accrued thereon (the  "Redemption  Price").  The Redemption  Price shall be paid
prior to 12:00 noon,  New York City time,  on the date of such  redemption or at
such earlier time as the Company determines. The Company shall have the right to
redeem this  Convertible  Debenture at the option of the Company,  upon not less
than 30 nor more than 60 days notice, without premium or penalty, in whole or in
part at any time on or after May 30, 2002 (an "Optional  Redemption") at a price
equal  to  100% of the  principal  amount  of the  Convertible  Debentures  (the
"Optional   Redemption   Price")  together  with  accrued  and  unpaid  interest
(including Additional Sums, if any) to, but excluding,  the redemption date. The
Holder of this  Convertible  Debenture  also has the right to require  that this
Convertible Debenture be redeemed pursuant to the terms of the Indenture.

     If Convertible Debentures are redeemed on any January 15, April 15, July 15
or October 15, accrued and unpaid interest shall be payable to holders of record
on the relevant record date.

     So long as the corresponding Trust Securities are outstanding, the proceeds
from the redemption of any of the Convertible  Debentures will be used to redeem
Trust Securities.

     If the  Convertible  Debentures are only partially  redeemed by the Company
pursuant to an Optional Redemption,  the Convertible Debentures will be redeemed
pro rata.

     In the event of  redemption of this  Convertible  Debenture in part only, a
new Convertible  Debenture or Convertible  Debentures for the unredeemed portion
hereof  will be issued in the name of the Holder  hereof  upon the  cancellation
hereof.

     In case an Event of  Default,  as  defined  in the  Indenture,  shall  have
occurred and be continuing,  the principal of all of the Convertible  Debentures
and the  interest  accrued  thereon may be declared,  and upon such  declaration
shall become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.

     The Indenture contains  provisions  permitting the Company and the Trustee,
with the consent of the Holders of a majority of the aggregate  principal amount
of the Convertible Debentures at the time Outstanding,  evidenced as provided in
the Indenture,  to execute  supplemental  indentures adding any provisions to or
changing in any manner or eliminating  any of the provisions of the Indenture or
of any  supplemental  indenture  or  modifying  in any  manner the rights of the
Holders  of  the  Convertible  Debentures;   provided,  however,  that  no  such
supplemental  indenture  shall (i) extend the Stated Maturity of any Convertible
Debenture,  or reduce the principal  amount thereof or any premium  thereon,  or
reduce the rate or extend the time of payment of interest thereon, or reduce any
amount  payable upon  redemption  thereof,  or impair or affect the right of any
Holder to  institute  suit for the payment  thereof,  without the consent of the
Holder of each Convertible  Debenture so affected,  or (ii) reduce the aforesaid
percentage  of  Convertible  Debentures,  the  Holders of which are  required to
consent to any such supplemental indenture, without the consent of the Holder of
each  Convertible  Debenture.  It is also provided in the Indenture  that,  with
respect  to certain  defaults  or Events of Default  regarding  the  Convertible
Debentures,   prior  to  any  declaration  accelerating  the  maturity  of  such
Convertible Debentures,  the Holders of a majority in aggregate principal amount
Outstanding of the Convertible  Debentures (or, in the case of certain  defaults
or Events of Default, all of the Convertible  Debentures),  may on behalf of the
Holders of all the Convertible  Debentures  waive any such past default or Event
of Default and its  consequences.  The preceding  sentence  shall not,  however,
apply to a default in the payment of the  principal  of or  premium,  if any, or
interest on any of the Convertible Debentures. Any such consent or waiver by the
Holder  of  this  Convertible  Debenture  (unless  revoked  as  provided  in the
Indenture)  shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Convertible  Debenture and any Convertible  Debenture
which  may be issued in  exchange  or  substitution  therefor,  irrespective  of
whether or not any notation thereof is made upon this  Convertible  Debenture or
such other Convertible Debenture.

     No reference  herein to the Indenture and no provision of this  Convertible
Debenture  or of the  Indenture  shall  alter or impair  the  obligation  of the
Company,  which is  absolute  and  unconditional,  to pay the  principal  of and
premium,  if any,  and  interest on this  Convertible  Debenture at the time and
place and at the rate and in the money herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set
forth,  this  Convertible  Debenture is  transferable  by the registered  Holder
hereof  on the  Security  Register  of  the  Company,  upon  surrender  of  this
Convertible  Debenture for  registration  of transfer at the office or agency of
the  Trustee  in the  City  and  State  of New  York  accompanied  by a  written
instrument or instruments of transfer in form satisfactory to the Company or the
Trustee duly  executed by the  registered  Holder  hereof or his  attorney  duly
authorized in writing,  and thereupon one or more new Convertible  Debentures of
authorized  denominations  and for the same aggregate  principal  amount will be
issued to the designated  transferee or  transferees.  No service charge will be
made for any  such  transfer,  but the  Company  may  require  payment  of a sum
sufficient  to cover any tax or other  governmental  charge  payable in relation
thereto.

     Prior to due presentment for  registration of transfer of this  Convertible
Debenture, the Company, the Trustee, any paying agent and the Registrar may deem
and treat the registered  Holder hereof as the absolute owner hereof (whether or
not this Convertible  Debenture shall be overdue and  notwithstanding any notice
of ownership or writing  hereon made by anyone other than the Registrar) for the
purpose  of  receiving  payment of or on  account  of the  principal  hereof and
premium, if any, and interest due hereon and for all other purposes, and neither
the  Company nor the Trustee  nor any paying  agent nor any  Registrar  shall be
affected by any notice to the contrary.

     No  recourse  shall  be had  for the  payment  of the  principal  of or the
interest  on this  Convertible  Debenture,  or for any claim  based  hereon,  or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator,  shareholder,  officer or director,  trustee, past, present or
future, as such, of the Company or of any predecessor or successor  corporation,
whether  by  virtue  of any  constitution,  statute  or rule  of law,  or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the  acceptance  hereof  and as part of the  consideration  for the  issuance
hereof, expressly waived and released.

     The Holder of any Convertible  Debenture has the right,  exercisable at any
time through the close of business (New York City time) on the last Business Day
prior to the Maturity  Date (or, in the case of a Convertible  Debenture  called
for redemption,  prior to the close of business on the Business Day prior to the
corresponding  redemption date), to convert the principal amount thereof (or any
portion  thereof that is an integral  multiple of $25.00) into Common  Shares of
the  Company at the initial  conversion  rate of 2.2474  Common  Shares for each
Convertible  Debenture  (equivalent to a Conversion  Price of $11.124 per Common
Share), subject to adjustment under certain circumstances.

     To convert a Convertible  Debenture,  a Holder must (a) complete and sign a
conversion notice  substantially in the form attached hereto,  (b) surrender the
Convertible   Debenture  to  a  Conversion   Agent,   (c)  furnish   appropriate
endorsements or transfer  documents if required by the Conversion  Agent and (d)
pay any transfer or similar tax, if required. Upon conversion,  no adjustment or
payment will be made for interest or dividends,  but if any Holder  surrenders a
Convertible Debenture for conversion on or after the record date for the payment
of an  installment  of interest and prior to

<PAGE>

the opening of business on the next Interest Payment Date, then, notwithstanding
such conversion, the interest payable on such Interest Payment Date will be paid
to the registered  Holder of such Convertible  Debenture on such record date. In
such event, such Convertible  Debenture,  when surrendered for conversion,  need
not be accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the portion so converted. The number of shares issuable
upon  conversion  of a  Convertible  Debenture  is  determined  by dividing  the
principal amount of the Convertible  Debenture converted by the Conversion Price
in effect on the  Conversion  Date.  No  fractional  shares  will be issued upon
conversion but a cash adjustment will be made for any fractional  interest.  The
outstanding  principal  amount of any Convertible  Debenture shall be reduced by
the portion of the principal amount thereof converted into Common Shares.

     The  Convertible  Debentures  are issuable only in registered  form without
coupons  in  denominations  of $25.00  and any  integral  multiple  thereof.  As
provided in the Indenture and subject to certain  limitations therein set forth,
Convertible Debentures are exchangeable for a like aggregate principal amount of
Convertible Debentures of a different authorized  denomination,  as requested by
the Holder surrendering the same.

     THE  INDENTURE  AND  THE  CONVERTIBLE  DEBENTURES  SHALL  BE  DEEMED  TO BE
CONTRACTS  MADE AND TO BE PERFORMED  ENTIRELY IN THE STATE OF DELAWARE,  AND FOR
ALL PURPOSES  SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH THE LAWS OF
SAID STATE WITHOUT REGARD TO THE CONFLICTS OF LAW RULES OF SAID STATE.

     This Indenture is subject to the Election to Convert and  Assignment  forms
annexed hereto and made a part hereof.

<PAGE>

                               ELECTION TO CONVERT

To: Wellsford Real Properties, Inc.

     The undersigned  owner of this  Convertible  Debenture  hereby  irrevocably
exercises the option to convert this Convertible Debenture, or the portion below
designated,  into Common Shares of WELLSFORD REAL PROPERTIES, INC. in accordance
with the terms of the Indenture referred to in this Convertible  Debenture,  and
directs that the shares issuable and deliverable upon conversion,  together with
any  check in  payment  for  fractional  shares,  be  issued  in the name of and
delivered to the undersigned,  unless a different name has been indicated in the
assignment  below. If shares are to be issued in the name of a person other than
the  undersigned,  the  undersigned  will pay all  transfer  taxes  payable with
respect thereto.

Date:    _______________, ____

          Conversion in whole _____ in part _____

          Portion of  Convertible  Debenture  to be converted  (if  applicable):
          ($25.00 or integral multiples thereof): $_________________

          Please  indicate  in  the  spaces  below  the  name(s)  in  which  the
          _________________________  Common  Shares  are to be  issued,  if such
          name(s) is other than the  undersigned,  along with the address(es) of
          such person(s).

          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          Signature (for conversion only)

          Please Print or Typewrite  Name and Address,  Including Zip Code,  and
          Social Security or Other Identifying Number

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

                                   ASSIGNMENT

     For value received__________________________  hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
(Please  insert  social  security  or other  taxpayer  identification  number of
assignee) the within Convertible  Debenture and hereby  irrevocably  constitutes
and appoints _____________________________ attorney-in-fact to transfer the said
Convertible  Debenture  on  the  books  of  the  Company,  with  full  power  of
substitution in the premises.

     In  connection  with  any  transfer  of the  within  Convertible  Debenture
occurring prior to the Transfer  Restriction  Termination  Date, the undersigned
confirms that such Convertible Debenture is being transferred:

          / / To Wellsford Real Properties, Inc. or a subsidiary thereof; or

          / / Pursuant to and in compliance  with Rule 144A under the Securities
          Act of 1933, as amended; or

          / / To  an  Institutional  Accredited  Investor  pursuant  to  and  in
          compliance with the Securities Act of 1933, as amended; or

          / /  Pursuant  to  and in  compliance  with  Regulation  S  under  the
          Securities Act of 1933, as amended; or

          / / Pursuant to and in compliance  with Rule 144 under the  Securities
          Act of 1933, as amended;

          / / Pursuant to an effective registration statement;

          / / To ERPOLP; or

          / / To a taxable  REIT  subsidiary  of Equity  Residential  Properties
          Trust or any successor thereto.

and  unless  the box  below is  checked,  the  undersigned  confirms  that  such
Convertible  Debenture is not being transferred to an "affiliate" of the Company
as  defined  in Rule 144  under  the  Securities  Act of 1933,  as  amended  (an
"Affiliate"):

          / / The transferee is an Affiliate of the Company.

Dated:
      ----------------                      ------------------------------------

                                            ------------------------------------
                                            Signature(s)

NOTICE:  The above  signatures of the holder(s)  hereof must correspond with the
name as written upon the face of this Convertible  Debenture in every particular
without alteration or enlargement or any change whatever.

<PAGE>PREFERRED SECURITIES PURCHASE AGREEMENT

                                      among

                        WELLSFORD REAL PROPERTIES, INC.,

                             WRP CONVERTIBLE TRUST I

                                       and

                        ERP OPERATING LIMITED PARTNERSHIP

                                   MAY 5, 2000

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

SECTION  1.         PURCHASE AND SALE OF SECURITIES...........................2

SECTION  2.         REPRESENTATIONS AND WARRANTIES OF THE OFFERORS............2
         2.1        Organization; Powers......................................2
         2.2        Authorizations............................................3
         2.3        The Capital Stock.........................................5
         2.4        Company SEC Reports and Filings...........................5
         2.5        Company Financial Statements; Material Changes............6
         2.6        Absence of Defaults, Conflicts, etc.......................7
         2.7        Pending Actions...........................................7
         2.8        Private Offering; Integration.............................7
         2.9        Brokerage.................................................8
         2.10       Subordination.............................................8
         2.11       No Material Misstatements.................................8
         2.12       Tax Matters...............................................8
         2.13       Reservation and Valid Issuance of Shares..................8
         2.14       Preferred Securities Guarantee............................9

SECTION  3.         REPRESENTATIONS AND WARRANTIES OF THE INVESTOR............9
         3.1        Certain Representations and Warranties....................9
         3.2        Additional Representations and Warranties................10

SECTION  4.         COVENANTS................................................10
         4.1        Tax Matters..............................................10

SECTION  5.         OFFERORS' CLOSING CONDITIONS.............................12
         5.1        Compliance with Agreement................................12
         5.2        Investor to Close........................................12
         5.3        Representations and Warranties...........................12

SECTION  6.         INVESTOR'S CLOSING CONDITIONS............................12
         6.1        No Material Adverse Effect...............................12
         6.2        Representations and Warranties...........................13
         6.3        Compliance with Agreement and Purchase Agreement.........13
         6.4        Approval of Proceedings..................................13
         6.5        Injunction...............................................14
         6.6        Additional Agreements....................................14
         6.7        Opinions.................................................14

<PAGE>

SECTION  7.         INDEMNIFICATION..........................................15
         7.1        Indemnification Generally................................15
         7.2        Indemnification Procedures for Third Party Claims........15

SECTION  8.         INTERPRETATION OF THIS AGREEMENT.........................16
         8.1        Terms Defined............................................16
         8.2        Governing Law............................................18
         8.3        Paragraph and Section Headings...........................19

SECTION  9.         MISCELLANEOUS............................................19
         9.1        Expenses.................................................19
         9.2        Notices..................................................19
         9.3        Survival.................................................20
         9.4        Entire Agreement; Amendment and Waiver...................21
         9.5        Counterparts.............................................21
         9.6        Successors and Assigns...................................21
         9.7        Severability.............................................21
         9.8        Jurisdiction; Consent to Service of Process..............21
         9.9        Trustee Exculpation......................................22

SCHEDULES

Schedule 2.3(a) Options, Warrants, Etc.
Schedule 2.5(b) Material Adverse Change
Schedule 6.2 Representations and Warranties

EXHIBITS

Exhibit A Form of Amendment to Registration Rights Agreement
Exhibit B Opinion of Ballard Spahr Andrews & Ingersoll, LLP
Exhibit C Opinion of Richards, Layton & Finger, P.A.
Exhibit D Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP

<PAGE>

                     PREFERRED SECURITIES PURCHASE AGREEMENT

     This PREFERRED  SECURITIES PURCHASE AGREEMENT (this "Agreement") is made as
of May 5, 2000 among  Wellsford Real  Properties,  Inc., a Maryland  corporation
(the "Company"),  WRP Convertible Trust I, a Delaware  statutory  business trust
(the "Trust" and together with the Company, the "Offerors"),  as issuer, and ERP
Operating Limited Partnership, an Illinois limited partnership (the "Investor"),
as purchaser.

                              PRELIMINARY STATEMENT

     The Trust is a statutory  business trust organized under the Business Trust
Act (the "Delaware Act") of the State of Delaware  (Chapter 38, Title 12, of the
Delaware Code, 12 Del. C. Sections 3801 et seq.) pursuant to the  Declaration of
Trust,  dated and  effective as of May 5, 2000, by the Company and the Trustees,
as defined therein, and the holders,  from time to time, of undivided beneficial
interests in the assets of the Trust (the  "Declaration").  The Offerors confirm
their  agreement  with the  Investor,  with respect to the offer and sale by the
Trust and the purchase by the Investor of $25,000,000  in aggregate  liquidation
amount of 8.25% Convertible Trust Preferred  Securities  (Liquidation Amount $25
per Security) representing  undivided  preferential  beneficial interests in the
assets of the Trust (the  "Preferred  Securities").  The  definitions of certain
capitalized  terms used herein are set forth in Section 8.1.  Capitalized  terms
used herein and not otherwise  defined  herein shall have the meanings  assigned
such terms in the Declaration.

     The Preferred  Securities will be guaranteed by the Company with respect to
distributions  and amounts payable upon  liquidation or redemption and otherwise
pursuant to the Preferred  Securities  Guarantee  Agreement,  dated as of May 5,
2000, of the Company (the "Preferred Securities Guarantee").

     The  entire  proceeds  from the sale of the  Preferred  Securities  will be
combined  with the entire  proceeds from the sale by the Trust to the Company of
$775,000 in aggregate  liquidation amount of its securities  representing common
beneficial  interests in the assets of the Trust (the "Common  Securities")  and
will be used by the Trust to purchase  $25,775,000 in aggregate principal amount
of  8.25%  Convertible  Junior  Subordinated  Debentures  due May 4,  2022  (the
"Subordinated Debentures") issued by the Company pursuant to an Indenture, dated
and  effective as of May 5, 2000,  by the Company and  Wilmington  Trust Company
(the  "Trustee")  (the  "Indenture").  The Preferred  Securities  and the Common
Securities will be issued pursuant to the Declaration.

     The  Preferred  Securities,  the  Preferred  Securities  Guarantee  and the
Subordinated  Debentures are  collectively  referred to herein as the "Preferred
Instruments."  The  Declaration,   the  Indenture,   the  Preferred   Securities
Guarantee,   and  the  Common  Securities   Guarantee  and  this  Agreement  are
hereinafter referred to collectively as the "Operative Documents."

<PAGE>

     The  Preferred  Securities  are  offered and sold to the  Investor  without
registration  under the  Securities  Act of 1933,  as amended  (the  "Securities
Act"),  in reliance upon exemptions  therefrom,  and Investor may only resell or
otherwise  transfer such Preferred  Securities if such Preferred  Securities are
hereafter  registered  under  the  Securities  Act or if an  exemption  from the
registration requirements of the Securities Act is available.

     The parties hereto desire that the foregoing  transaction be subject to the
terms and  conditions  set  forth  herein.  Accordingly,  the  parties  agree as
follows:

SECTION 1. PURCHASE AND SALE OF SECURITIES

     (a) Subject to the terms and  conditions set forth in this Agreement and in
reliance upon  representations and warranties  contained in this Agreement,  the
Trust agrees to sell to the Investor,  and the Investor  agrees to purchase from
the  Trust,  at a  purchase  price  of $25  per  Preferred  Security,  1,000,000
Preferred Securities.

     (b) Such  sale and  purchase  shall be  effected  at the  Closing  Time (as
defined  below)  when  delivery  of the  certificates,  duly  registered  in the
Investor's name evidencing the Preferred Securities being purchased by it, shall
be made against delivery by the Investor to the Trust of the aggregate  purchase
price  therefor  by wire  transfer(s)  of  immediately  available  funds to such
account as the Trust shall designate prior to the Closing Time.

     (c) The closing (the  "Closing") of such sale and purchase shall take place
at 11:00  A.M.,  New York City time,  on May 5, 2000,  or at such other time not
later than five  business  days after such date as the Investor and the Offerors
agree  to in  writing  (such  time  and  date  of  payment  and  delivery  being
hereinafter  referred  to as the  "Closing  Time"),  at the  offices of Robinson
Silverman  Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas,  New York,
New York 10104, or at such other location as the Investor and the Offerors shall
select and agree to.

SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE OFFERORS

     The Offerors, jointly and severally,  represent and warrant to the Investor
as of the date hereof and as of the Closing Time  referred to in Section  (1)(c)
hereof, and agree with the Investor as follows:

     2.1 Organization; Powers

     (a)  The  Company  and  each  of its  Subsidiaries  (a) is an  entity  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of its
respective  jurisdiction  of its

<PAGE>

organization,  (b) has all requisite power and authority to own its property and
assets and to carry on its  business  as now  conducted  and as  proposed  to be
conducted,  (c) is  qualified  to do business in every  jurisdiction  where such
qualification  is  required,  except  where the failure so to qualify  would not
result in a Company Material Adverse Effect,  as defined in Section 2.5(b),  and
(d) in the  case of the  Company,  has the  corporate  power  and  authority  to
execute, deliver and perform its obligations under this Agreement.

     (b) The Trust has been duly  created  and is validly  existing  and in good
standing  as a business  trust under the  Delaware  Act with the trust power and
authority  to own its  properties  and to conduct its business and to enter into
and perform its  obligations  under this  Agreement,  the  Preferred  Securities
Guarantee,  the Common Securities Guarantee,  and the Declaration.  The Trust is
duly qualified to transact business and is in good standing in each jurisdiction
in which such qualification is necessary,  except to the extent that the failure
to so qualify or be in good  standing  would not have a Trust  Material  Adverse
Effect, as defined in Section 2.5(b) hereof; and except as set forth on Schedule
2.5(a),  the Trust is not a party to or otherwise  bound by any agreement  other
than documents  referred to in this Agreement or entered into in connection with
the transactions referred to in this Agreement.  The Trust is and will be, under
current  law,  classified  for United  States  federal  income tax purposes as a
grantor  trust and not as an  association  taxable as a  corporation.  As of the
Closing  Time,  the Trust is and will be treated as a subsidiary  of the Company
pursuant to GAAP.

     2.2 Authorizations

     (a)  The  execution,  delivery  and  performance  by the  Company  of  this
Agreement and the transactions contemplated hereby (a) have been duly authorized
by all  requisite  corporate  action,  and  (b)  will  not (i)  violate  (A) any
provision of law,  statute,  rule or regulation to which the Company is subject,
or of the  certificate  or  articles  of  incorporation,  or other  constitutive
documents or bylaws of the Company,  or any subsidiary  thereof, as the case may
be, (B) any order of any  Governmental  Authority (as defined  below) or (C) any
provision of any  indenture or other  material  agreement or instrument to which
the Company,  or its  Subsidiaries  is a party or by which any of them or any of
their property is or may be bound,  (ii) be in conflict with, result in a breach
of or constitute (alone or with notice or lapse of time or both) a default under
any such  indenture,  agreement  or other  instrument  or  (iii)  result  in the
creation  or  imposition  of any  security  interest,  mortgage,  pledge,  lien,
encumbrance,  claim or  equitable  right upon or with respect to any property or
assets  now  owned  or  hereafter  acquired  by  the  Company,  or  any  of  its
Subsidiaries (a "Lien").

     (b) The execution,  delivery and performance by the Trust of this Agreement
and the  transactions  contemplated  hereby (a) have been duly authorized by all
requisite  trust action,  and (b) will not (i) violate (A) any provision of law,
statute, rule or regulation to which the Trust is subject, or of the certificate
of trust of the Trust,  (B) any order of any  Governmental  Authority or (C) any
provision of any  indenture or other  material  agreement or instrument to

<PAGE>

which  the Trust is a party or by which it or any of its  property  is or may be
bound,  (ii) be in conflict with,  result in a breach of or constitute (alone or
with  notice  or lapse  of time or both) a  default  under  any such  indenture,
agreement or other  instrument  or (iii) result in the creation or imposition of
any Lien.

     (c)  This  Agreement  is a valid  and  legally  binding  obligation  of the
Offerors,  enforceable  against the Offerors in accordance with its terms except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium,  fraudulent  conveyance or other similar laws  affecting  creditors'
rights generally or by general  principles of equity,  including but not limited
to,   principles   governing  the  availability  of  the  remedies  of  specific
performance  and  requisite  relief   (regardless  of  whether   enforcement  is
considered in a proceeding at law or in equity) (the "Bankruptcy Exceptions").

     (d) The  Declaration  and the  Indenture  have been duly  authorized by the
Company and, to the Company's knowledge,  have been duly authorized by the other
parties  thereto,  and, at the Closing  Time,  will have been duly  executed and
delivered by the Company and, to the Company's  knowledge,  by the other parties
thereto,  and each agreement will be a valid and legally  binding  obligation of
the Company,  and to the  Company's  knowledge,  of the other  parties  thereto,
enforceable  against the parties thereto in accordance with its terms, except to
the extent that enforcement thereof may be limited by Bankruptcy Exceptions.

     (e) The  Registration  Rights  Agreement  has been duly  authorized  by the
Company and, at the Closing Time,  will have been duly executed and delivered by
the Company and assuming the due  authorization,  execution  and delivery by the
Investor,  the  Registration  Rights  Agreement  will, at the Closing Time, be a
valid and legally  binding  obligation of the Company,  enforceable  against the
Company in  accordance  with its terms,  except to the extent  that  enforcement
thereof  may be  limited  by (i)  Bankruptcy  Exceptions  or (ii) the  effect of
applicable  public  policy  on the  enforceability  of  provisions  relating  to
indemnification and contribution.

     (f) The Preferred  Securities  have been duly authorized by the Declaration
and,  when issued and  delivered by the Trust to the  Investor  pursuant to this
Agreement  against payment therefor as provided  herein,  will be validly issued
and fully paid and non-assessable undivided preferential beneficial interests in
the assets of the Trust. The issuance of the Preferred Securities is not subject
to  preemptive  or  other  similar  rights;  and  (subject  to the  terms of the
Declaration)  holders  of  Preferred  Securities  will be  entitled  to the same
limitation  of  personal   liability   extended  to   stockholders   of  private
corporations for profit incorporated under the laws of the State of Delaware.

     (g) The Common Securities have been duly authorized by the Declaration and,
when issued and delivered by the Trust to the Company against payment  therefor,
will be validly issued and will represent undivided common beneficial  interests
in the assets of the Trust.

<PAGE>

The  issuance of the Common  Securities  is not subject to  preemptive  or other
similar  rights;  and, at the Closing  Time,  all of the issued and  outstanding
Common  Securities  of the Trust will be  directly  or  indirectly  owned by the
Company, free and clear of any Lien.

     (h) The  Preferred  Securities  Guarantee  has been duly  authorized by the
Company and, at the Closing Time, the Preferred  Securities  Guarantee will have
been duly executed and delivered by the Company and will  constitute a valid and
legally  binding  obligation of the Company,  enforceable in accordance with its
terms,  except to the  extent  that  enforcement  thereof  may be limited by the
Bankruptcy Exceptions.

     (i) The  Subordinated  Debentures  have been duly authorized by the Company
and,  at the  Closing  Time,  the  Subordinated  Debentures  will have been duly
executed,  authenticated,  issued and  delivered and will  constitute  valid and
legally binding  obligations of the Company entitled to the benefits provided by
the Indenture,  enforceable in accordance with their terms, except to the extent
that enforcement thereof may be limited by the Bankruptcy Exceptions.

     2.3 The Capital Stock

     (a) Pursuant to the Articles of Amendment  and  Restatement,  dated May 30,
1997,  the Company is  authorized to issue  199,650,000  shares of Common Stock,
16,636,955  of which  are  issued  and  outstanding.  Pursuant  to the  Articles
Supplementary  of the Company,  dated May 30, 1997, the Company is authorized to
issue 2,000,000 shares of Preferred Stock,  none of which have been issued as of
the date hereof and 350,000 shares of Class A Common Stock, 339,806 of which are
issued  and  outstanding  as of  the  date  hereof.  Upon  consummation  of  the
transactions contemplated by the Operative Documents: (i) no shares of the Class
A  Common  Stock  will be  issued  and  outstanding,  (ii) the  Company  will be
authorized  to issue  350,000  shares of Class A-1 Common  Stock,  and (iii) the
Company will have issued  339,806  shares of Class A-1 Common  Stock.  Except as
disclosed  on  Schedule  2.3(a)  hereto and in a letter  agreement  of even date
herewith  relating to the  issuance by the Company of shares of Class A-1 Common
Stock of the Company executed by the Company and the Investor,  and as issued or
entered  into  with  current  or former  directors  or  employees,  there are no
existing options,  warrants,  calls,  subscriptions,  convertible securities, or
other rights,  agreements or  commitments  which  obligate the Company to issue,
transfer or sell any shares of stock or equity interest of the Company.

     (b) As of the date hereof,  there are no issued and outstanding  beneficial
interests in the Trust. Upon consummation of the transaction contemplated by the
Operative Documents and a Subscription  Agreement of even date herewith executed
by the  Company,  the Trust will have  issued  and  outstanding  $25,000,000  of
Preferred  Securities and $775,000 of Common Securities.  Except as provided for
in the Operative  Documents,  there are no existing  options,  warrants,  calls,
subscriptions,   convertible   securities,   or  other  rights,   agreements  or

<PAGE>

commitments  which obligate the Trust to issue,  transfer or sell any beneficial
interests in the Trust.

     2.4 Company SEC Reports and Filings

     (a) The Company has caused to be delivered  to the  Investor  copies of the
following documents,  without exhibits thereto  (collectively,  the "SEC Reports
and Filings"):

     (i) The  Company's  Annual  Report on Form 10-K for the  fiscal  year ended
December 31, 1999 (File No.  001-12917),  as filed with the  Commission on March
29, 2000;

     (ii) The Company's  Proxy  Statement for the June 9, 2000 annual meeting of
shareholders, as filed with the Commission; and

     (iii) The Company's  registration  statement on Form S-3,  Registration No.
33356763,  as filed with the Commission on June 12, 1998, and declared effective
on June 29, 1998.

     (b) The SEC  Reports and  Filings,  when  filed,  complied in all  material
respects  with  all  applicable  requirements  of the  Securities  Act  and  the
Securities  Exchange Act of 1934 and the rules and regulations of the Commission
promulgated  thereunder.  None of the SEC  Reports and  Filings,  at the time of
filing  contained any untrue  statement of a material fact or omitted to state a
material  fact  required to be stated  therein or necessary in order to make the
statements  therein not misleading in light of the  circumstances  in which they
were made.

     2.5 Company Financial Statements; Material Changes

     (a) The audited  consolidated  balance  sheet of the Company as at December
31, 1999 included in the SEC Reports and Filings fairly presents in all material
respects the consolidated financial position of the Company and its Subsidiaries
at the date thereof,  and the related  consolidated  statements  of  operations,
equity and cash flows for the year ended  December 31, 1999  included in the SEC
Reports and  Filings  fairly  present in all  material  respects  the results of
operations and other information therein of the Company and its Subsidiaries for
the respective periods indicated (collectively, the "Financial Statements"). All
such  Financial  Statements,  including the schedules  and notes  thereto,  were
prepared in accordance with generally accepted  accounting  principles  ("GAAP")
applied consistently throughout the periods involved.

     (b) Since  December 31, 1999 with respect to the Company and since the date
of its  formation  with  respect  to the Trust,  (A) there has been no  material
adverse  change in or  affecting  the  management,  assets,  business,  business
prospects, earnings or condition (financial

<PAGE>

or otherwise) of the Trust (a "Trust  Material  Adverse  Effect") or the Company
and its Subsidiaries  considered as one enterprise (a "Company  Material Adverse
Effect,"  together with a Trust Material  Adverse  Effect,  a "Material  Adverse
Effect"),  whether or not arising in the ordinary course of business,  (B) there
have been no transactions entered into by the Trust or the Company or any of its
Subsidiaries which are material with respect to the Trust or the Company and its
Subsidiaries  considered  as one  enterprise,  other than those in the  ordinary
course of business,  (C) except as set forth in Schedule  2.5(b),  there has not
been any material  change in the total  assets,  except  assets  acquired in the
ordinary  course of  business,  or long term debt of the Company and (D) neither
the Trust nor the Company nor any of its Subsidiaries has sustained any material
loss or  interference  with its business  from fire,  explosion,  flood or other
calamity,  whether or not  covered by  insurance,  or from any labor  dispute or
court or governmental action, order or decree.

     2.6 Absence of Defaults, Conflicts, etc.

     The execution and delivery of the Operative  Documents and the Registration
Rights Agreement,  the issuance,  sale and delivery of the Preferred Instruments
and the consummation of the transactions  contemplated herein and therein do not
and will not  conflict  with,  or result in a breach or  violation of any of the
terms, conditions or provisions of, or constitute a default under, or permit the
acceleration  of rights under or  termination  of, any of the Key Agreements and
Instruments of the Company, or any of its Subsidiaries or the Trust or result in
the creation or imposition of any Lien,  charge or encumbrance upon any property
or assets of the Company or any of its  Subsidiaries or the Trust,  and will not
result in any violation of the Organizational Documents of the Company or any of
its Subsidiaries or the Trust, or any existing Requirements of Law applicable to
the Company, or any of its Subsidiaries or the Trust.

     2.7 Pending Actions

     There is no action,  suit,  investigation or proceeding  pending or, to the
Company's  knowledge,  threatened or contemplated  against the Company or any of
its  properties  or  assets  by or  before  any  Governmental  Authority,  which
questions the validity of the Operative  Documents,  the issuance or validity of
the Preferred  Securities or any action taken or to be taken pursuant  hereto or
thereto, or which could reasonably be expected  individually or in the aggregate
to result in any Material Adverse Effect.

     2.8 Private Offering; Integration

     (a) None of the Offerors, their affiliates (as such term is defined in Rule
501(b) under the Securities Act for any person or entity) ("Affiliates"), or any
person acting on their or any of their Affiliates'  behalf has engaged,  or will
engage,  in  connection  with the offering of the Preferred  Securities,  in any
communication  or other form of  general  solicitation  or  general  advertising
within the  meaning of Rule  502(c)  under the  Securities  Act.  Based upon the

<PAGE>

representations of the Investor set forth in Section 3, the offer,  issuance and
sale of the Preferred  Securities in the manner  contemplated  by this Agreement
are exempt from the  registration  and prospectus  delivery  requirements of the
Securities  Act,  and have been  registered  or  qualified  (or are exempt  from
registration and qualification) under the registration,  permit or qualification
requirements of all applicable state securities laws.

     (b) The Offerors have not,  directly or indirectly,  solicited any offer to
buy or offered to sell, and will not, directly or indirectly,  solicit any offer
to buy or offer to sell, in the United States or to any United States citizen or
resident,  any  security  which is or would be  integrated  with the sale of the
Preferred  Securities in a manner that would require the Preferred Securities to
be registered under the Securities Act.

     2.9 Brokerage

     There are no claims for brokerage  commissions  or finder's fees or similar
compensation in connection with the transactions  contemplated by this Agreement
based on any  arrangement  made by or on behalf of the Company or the Trust with
any other person.

     2.10 Subordination

         The  Subordinated  Debentures,  upon issuance,  will be subordinate and
junior  in right of  payment  to all  Senior  Indebtedness  (as  defined  in the
Indenture) of the Company.

     2.11 No Material Misstatements

     No  representation  or warranty herein or in any Exhibit or Schedule hereto
contains any material  misstatement  of fact or omits to state any material fact
necessary  to make the  statements  therein,  in the light of the  circumstances
under which they are made not misleading.

     2.12 Tax Matters

     (a) The Company is taxed under  Subchapter  C of the Code as a  corporation
for United States federal income tax purposes.

     (b) The Trust,  at the Closing Time,  will be classified  for United States
federal income tax purposes as a grantor trust and not as an association taxable
as a corporation.

     (c) The  Subordinated  Debentures,  at the Closing Time, will be classified
for United States federal income tax purposes as indebtedness of the Company.

     2.13 Reservation and Valid Issuance of Shares

<PAGE>

     The Common Shares issuable upon conversion of the  Subordinated  Debentures
and the Preferred  Securities  have been duly and validly  reserved for issuance
and,  upon  issuance  in  accordance  with the  terms of the  Indenture  and the
Declaration,  will be duly and validly issued, fully paid and non-assessable and
free of restrictions  on transfer other than  restrictions on transfer under the
Indenture and under applicable  federal and state  securities  laws.  Holders of
Common Shares shall not be personally liable as such for any liabilities,  debts
or obligations  of, or claims  against,  the Company,  whether arising before or
after such holder became the owner or holder of the Common Shares.

     2.14 Preferred Securities Guarantee

     The Preferred Securities Guarantee,  when taken together with the Company's
obligations  under  the  Subordinated   Debentures,   the  Declaration  and  the
Indenture,  including its  obligations to pay costs,  expenses,  debts and other
obligations  of the Trust,  provides  a full and  unconditional  guarantee  on a
subordinated basis by the Company of amounts due on the Preferred Securities and
the Subordinated Debentures.  The obligations of the Company under the Preferred
Securities Guarantee and under the Subordinated  Debentures,  upon execution and
delivery  thereof,  will be  subordinate  and  junior in right of payment to all
present and future  Senior  Indebtedness  (as defined in the  Indenture)  of the
Company.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

     3.1 Certain Representations and Warranties

     The Investor represents and warrants to the Offerors as follows:

     (a) It is  acquiring  the  Preferred  Securities  for its own  account  for
investment  and not with a view  towards  the resale,  transfer or  distribution
thereof,   nor  with  any  present   intention  of  distributing  the  Preferred
Securities,  but  subject,  nevertheless,  to any  requirement  of law  that the
disposition  of the  Investor's  property  shall  at all  times  be  within  the
Investor's  control,  and without prejudice to the Investor's right at all times
to sell or  otherwise  dispose  of all or any  part of such  securities  under a
registration   under  the  Securities  Act  or  under  an  exemption  from  said
registration available under the Securities Act.

     (b) It has full power and legal right to execute and deliver this Agreement
and to perform its obligations hereunder.

     (c) It has taken all action  necessary  for the  authorization,  execution,
delivery, and performance of this Agreement and its obligations hereunder,  and,
upon execution and delivery by the Company,  this Agreement shall constitute the
valid and binding obligations of

<PAGE>

the Investor,  enforceable  against the Investor in  accordance  with its terms,
except as such enforcement may be limited by Bankruptcy Exceptions.

     (d) There are no claims  for  brokerage  commissions  or  finder's  fees or
similar  compensation in connection with the  transactions  contemplated by this
Agreement based on any arrangement made by or on behalf of the Investor.

     (e) It has such knowledge and experience in financial and business  matters
that it is capable of evaluating  the merits and risks of its  investment in the
Trust and the Company as contemplated by this Agreement, and is able to bear the
economic risk of such  investment for an indefinite  period of time. It has been
furnished  access to such  information and documents as it has requested and has
been  afforded an  opportunity  to ask  questions  of and receive  answers  from
representatives of the Company and the Trust concerning the terms and conditions
of this  Agreement  and the purchase of the  Preferred  Securities  contemplated
hereby and the business and financial condition of the Company and the Trust.

     (f) It is an  "accredited  investor"  as such term is  defined  in Rule 501
under the Securities Act.

     (g) It acknowledges that the Preferred  Securities have not been registered
under the  Securities  Act and may not be  offered  or sold  within  the  United
States, except pursuant to an exemption from, or in a transaction not subject to
or pursuant to, the registration  requirements of the Securities Act. It has not
offered or sold, and will not offer or sell, the Preferred Securities within the
United States,  except  pursuant to an exemption  from, or in a transaction  not
subject to or pursuant to, the registration requirements of the Securities Act.

     3.2 Additional Representations and Warranties

     The Investor  represents  and warrants to the Offerors that it is a limited
partnership,  duly  authorized  and  existing  under  the  laws of the  State of
Illinois and has the  requisite  power and authority to carry on its business as
now being conducted.

SECTION 4. COVENANTS

     4.1 Tax Matters.

     (a) The Company shall not cause itself to be taxable for federal income tax
purposes as (i) a  partnership,  or (ii) a  "publicly  traded  partnership"  (as
defined in Section 7704(b) of the Code).

<PAGE>

     (b) The Company and the Trust shall treat the  Subordinated  Debentures  as
indebtedness  for United States  federal  income tax purposes  unless  otherwise
required by a determination made by the Internal Revenue Service or the Investor
receives  an opinion of counsel  in a form  which is  reasonably  acceptable  to
Investor that as a result of a change in law or applicable legal authority,  the
Subordinated  Debentures  are  required  to be treated  for  federal  income tax
purposes as something other than indebtedness.

     (c) The  Company (or any  successor  thereto)  will file a joint  election,
together  with Equity  Residential  Properties  Trust  ("EQR") (or any successor
thereto),  a Maryland real estate  investment  trust and the general  partner of
Investor,  to be treated as a taxable  REIT  subsidiary  (as  defined in Section
856(l)  of  the  Code)  of  EQR  to be  effective  beginning  January  1,  2001.
Thereafter,  except  as  provided  in  section  10.2  (e) of the  Indenture,  if
requested by any party,  any  successor  to the Company  shall make such a joint
election with EQR (or any successor thereto) and any successor to EQR shall make
such a joint  election  with the Company (or any  successor  thereto).  From and
after January 1, 2001,  unless  Investor has received an opinion of counsel in a
form which is reasonably  acceptable to Investor that the Company qualifies as a
REIT under Section 856(a) of the Code or the provisions of Section 10.2(e)(2) of
the Indenture apply, (a) the Company shall not take any of the actions listed in
Section  856(l)(3)(A)  or (B) or any other  action  that  would  cause it to not
constitute  a taxable REIT  subsidiary  under Code  Section  856(l)(1),  and (b)
within five (5) days prior to the close of each quarter of each of EQR's taxable
years which begins after  December 31, 2000,  the Company  shall  deliver to EQR
written  certification  in a form reasonably  acceptable to EQR that the Company
qualifies as a taxable REIT subsidiary under Code Section 856(l)(1).

     (d) In the following  circumstances,  EQR shall,  upon receipt of a written
request of the  Company,  revoke its  election to treat the Company as a taxable
REIT  subsidiary  or, if such an election  has not already  been made,  waive in
writing  all  future  obligations  of the  Company  to  become  a  taxable  REIT
subsidiary or a REIT or to deliver any opinions to that effect:

     (i) that (A) the  total  value of the  Preferred  Securities,  Subordinated
Debentures and Common Shares into which any Preferred Securities or Subordinated
Debentures  have been  converted  that are owned by EQR or any of its Affiliates
constitute  1% or less of the total value of the  outstanding  securities of the
Company and (B) the total amount of the Preferred  Securities  and  Subordinated
Debentures  on an as converted  basis and Common Shares into which any Preferred
Securities or  Subordinated  Debentures have been converted then owned by EQR or
any of its  Affiliates  would  constitute  1% or less of the  total  outstanding
voting securities of the Company; or

     (ii) that the  events  described  in  Sections  10.2(e)(1),  10.2(e)(2)  or
10.2(e)(3) of the  Indenture  have occurred and the Company has satisfied all of
its obligations under such Sections 10.2(e)(1), 10.2(e)(2) or 10.2(e)(3), as the
case may be.

<PAGE>

     (1) The Company  shall file all  applicable  tax  returns  and  information
reports  required  to be filed in  order  for the  Company  to  qualify  for any
exemption from any federal, state or local withholding taxes.

     (2) To the extent not terminated in accordance with their terms, all of the
covenants  set  forth  in  this  Agreement  shall  terminate  when  none  of the
Subordinated  Debentures  or Preferred  Securities  are  outstanding;  provided,
however,  if EQR or any of its  Affiliates  has  acquired  any Common  Shares in
conversion of the  Subordinated  Debentures or the  Preferred  Securities,  then
before the Company shall cease to comply with any of such covenants, the Company
shall give EQR at least  ninety (90) days prior  written  notice  following  the
declaration  by  the   Securities  and  Exchange   Commission  of  an  effective
registration  statement with respect to all such Common Shares, so EQR or any of
its  Affiliates  can  dispose of such Common  Shares,  as  contemplated  by that
Registration Rights Agreement.

SECTION 5. OFFERORS' CLOSING CONDITIONS

     The  obligation  of the Offerors to sell the  Preferred  Securities  at the
Closing Time, as provided in Section 1 hereof shall be subject to:

     5.1 Compliance with Agreement

     The  Investor  shall  have  performed  and  complied  with in all  material
respects all of its obligations and conditions contained in this Agreement which
are required to be performed or complied with by the Investor prior to or at the
Closing Time.

     5.2 Investor to Close

         The Investor shall have purchased and paid for the Preferred Securities
at the Closing Time pursuant to Section 1 hereof.

     5.3 Representations and Warranties

     The  representations  and  warranties  of the  Investor  contained  in this
Agreement  shall be true and correct in all  material  respects at and as of the
Closing Time as though such  representations  and  warranties  were made at such
time (unless any such  representation and warranty is made as of a specific date
and then it shall be true and correct as of such date).

SECTION 6. INVESTOR'S CLOSING CONDITIONS

<PAGE>

     The  obligation  of the  Investor  to  purchase  and pay for the  Preferred
Securities  at the  Closing  Time,  as  provided  in Section 1 hereof,  shall be
subject,  in its discretion,  to the performance by the Offerors of all of their
agreements theretofore to be performed hereunder and to the satisfaction,  prior
thereto or concurrently therewith, of the following further conditions:

     6.1 No Material Adverse Effect

     At the Closing Time,  there shall not have  occurred  since the date of the
Common Stock and Preferred  Stock Purchase  Agreement dated May 30, 1997 between
ERP Operating  Limited  Partnership  and Wellsford  Real  Properties,  Inc. (the
"Purchase  Agreement")  any change which has resulted in or could be expected to
result in a Company  Material  Adverse  Effect  other than an event which can be
completely  cured by  applying  the  proceeds  of the  sale of the  Subordinated
Debentures, in which case the Company covenants and agrees to apply the proceeds
of the sale of the Subordinated Debentures to the extent required to effect such
cure.  On or after the date  hereof  there  shall not have  occurred  any of the
following:  (i) a suspension  or material  limitation  in trading in  securities
generally  on the New York Stock  Exchange,  the American  Stock  Exchange or on
Nasdaq;  (ii) a suspension  or material  limitation  in trading in the Company's
securities  on the  American  Stock  Exchange;  (iii) a  general  moratorium  on
commercial  banking activities  declared by federal,  Illinois or New York State
authorities;  or (iv) the outbreak or  escalation of  hostilities  involving the
United States or the declaration by the United States of a national emergency or
war.

     6.2 Representations and Warranties

     (a) The  representations  and warranties of the Offerors  contained in this
Agreement  shall be true and correct in all  material  respects at and as of the
Closing Time as though such  representations  and  warranties  were made at such
time (unless any such  representation and warranty is made as of a specific date
and then it shall be true and correct as of such date).

     (b) The  representations  and  warranties  contained  in  Article  3 of the
Purchase  Agreement,  are true and correct in all material  respects,  except as
otherwise disclosed in this Agreement or any Schedule hereto.

     6.3 Compliance with Agreement and Purchase Agreement

     (a) The Offerors shall have performed and complied in all material respects
with all of their  obligations and conditions  contained in this Agreement which
are required to be performed or complied with by the Offerors prior to or at the
Closing Time.

<PAGE>

     (b) The Company shall be in  compliance  in all material  respects with all
the terms and  provisions  on its part to be  observed  or  performed  under the
Purchase  Agreement,  and at the  time of and as a  result  of the  Closing,  no
Company  Material  Adverse Effect shall have occurred and be  continuing,  other
than an event which can be completely cured by applying the proceeds of the sale
of the Subordinated  Debentures,  in which case the Company covenants and agrees
to apply the proceeds of the sale of the  Subordinated  Debentures to the extent
required  to effect such cure and shall  provide  notice to Investor of any such
use of proceeds.

     6.4 Approval of Proceedings

     All   proceedings  to  be  taken  in  connection   with  the   transactions
contemplated by the Operative  Documents and the  Registration  Rights Agreement
and the other Preferred Instruments and all documents incident thereto, shall be
reasonably  satisfactory  in form and substance to the Investor and its counsel;
and the Investor  shall have received  copies of all documents or other evidence
which it and such  counsel  may  reasonably  request  in  connection  with  such
transactions and of all records of corporate proceedings in connection therewith
in form and substance reasonably satisfactory to the Investor and its counsel.

     6.5 Injunction

     There shall be no effective injunction, writ, preliminary restraining order
or any order of any nature issued by a court of competent jurisdiction directing
that the transactions provided for herein or in the other Operative Documents or
any of them not be consummated as herein or therein provided.

     6.6 Additional Agreements.

     The Company and the Investor shall have entered into this Agreement and the
Registration Rights Agreement,  as required thereby.  The Company and Wilmington
Trust  Company  shall have entered into the  Indenture,  and the Company and the
trustees shall have entered into the Declaration. The Company shall have entered
into the Preferred Securities Guarantee.

     6.7 Opinions

     (a) The Investor shall have received an opinion of counsel, dated as of the
Closing Time,  of Ballard Spahr Andrews & Ingersoll,  LLP, in the form set forth
in Exhibit B hereto.

     In rendering  such opinion,  such counsel may rely as to matters  involving
the application of laws other than the laws of Maryland, to the extent they deem
proper and  specified in such  opinion,  upon the opinion of Richards,  Layton &
Finger, P.A.

<PAGE>

     (b) The Investor shall have received an opinion of counsel, dated as of the
Closing  Time,  of  Richards,  Layton &  Finger,  P.A.  in the form set forth in
Exhibit C hereto.

     In rendering  such opinion,  such counsel may rely as to matters  involving
the  application  of laws other than the laws of Delaware and federal law of the
United  States,  to the extent they deem proper and  specified in such  opinion,
upon the opinion of Ballard Spahr Andrews & Ingersoll, LLP.

     (c) The  Investor  shall  receive an opinion of Robinson  Silverman  Pearce
Aronsohn & Berman  LLP,  special tax  counsel to the  Offerors,  in the form set
forth in Exhibit D hereto.

     Such opinion may be  conditioned  on, among other  things,  the initial and
continuing accuracy of the facts, financial and other information, covenants and
representations  set forth in  certificates  of  officers of the Company and the
Trust and other documents deemed necessary for such opinion.

SECTION 7. INDEMNIFICATION

     7.1 Indemnification Generally

     The  Offerors  and the  Investor  (each  an  "Indemnifying  Party"),  shall
indemnify the other from and against any and all losses,  damages,  liabilities,
claims, charges, actions, proceedings,  demands, judgments, settlement costs and
expenses of any nature whatsoever  (including,  without  limitation,  attorneys'
fees  and   expenses)   or   deficiencies   resulting   from  any  breach  of  a
representation,  warranty or covenant by the Indemnifying  Party and all claims,
charges,  actions or  proceedings  incident to or arising out of the  foregoing.
Except with respect to third party claims being defended in good faith or claims
for indemnification with respect to which there exists a good faith dispute, the
Indemnifying  Party shall satisfy its obligations  hereunder  within thirty (30)
days of receipt of a notice of claim under this Section 6.1.

<PAGE>

     7.2 Indemnification Procedures for Third Party Claims

     If a  claim  by a  third  party  is  made  against  a  Person  entitled  to
indemnification under this Section (an "Indemnified Party") and such Indemnified
Party  intends to seek  indemnity  with respect  thereto  from any  Indemnifying
Party,  such  Indemnified  Party  shall give  notice in writing as  promptly  as
reasonably  practicable to each such Indemnifying  Party of any action commenced
against or by it in  respect of which  indemnity  may be sought  hereunder,  but
failure to so notify an  Indemnified  Party shall not relieve such  Indemnifying
Party  from any  liability  that it may have  otherwise  than on account of this
indemnity agreement so long as such failure shall not have materially prejudiced
the position of the Indemnifying Party. Upon such notification, the Indemnifying
Party  shall  assume the defense of such action  brought by a third  party,  and
after  such  assumption  the   Indemnified   Party  shall  not  be  entitled  to
reimbursement  of any  expenses  incurred by it in  connection  with such action
except as described below. In any such action,  any Indemnified Party shall have
the right to retain its own  counsel,  but the fees and expenses of such counsel
shall be at the expense of such  Indemnified  Party unless (i) the  Indemnifying
Party  shall have  failed to  promptly  assume and  thereafter  with  reasonable
diligence conduct such defense,  (ii) the Indemnifying Party and the Indemnified
Party shall have  mutually  agreed to the contrary or (iii) the named parties in
any such action (including any impleaded  parties) include both the Indemnifying
Party and the Indemnified  Party and  representation of both parties by the same
counsel  would  be  inappropriate  due  to  actual  or  potential  differing  or
conflicting  interests between them. No Indemnifying  Party, in the defense of a
third party claim  shall,  except  with the  consent of the  Indemnified  Party,
consent to entry of any  judgment  or enter into any  settlement  which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such  Indemnified  Party of a release  from all  liability in respect of such
claim.  The  Indemnifying  Party shall not be liable for any  settlement  of any
proceeding  effected without its written consent which shall not be unreasonably
withheld or delayed by such Indemnifying Party, but if settled with such consent
or if there be final judgment for the plaintiff,  the  Indemnifying  Party shall
indemnify the Indemnified  Party from and against any loss,  damage or liability
by reason of such settlement or judgment.

<PAGE>

SECTION 8. INTERPRETATION OF THIS AGREEMENT

     8.1 Terms Defined

     As used in this Agreement, the following terms have the respective meanings
set forth below or set forth in the Section hereof following such term:

     Affiliates: shall have the meaning set forth in Section 2.8(a).

     Bankruptcy Exceptions: shall have the meaning set forth in Section 2.2(b).

<PAGE>

     Business Day:  shall mean a day other than a Saturday,  Sunday or other day
on which banking institutions in New York, New York are permitted or required by
any applicable law to close.

     Certificate of Trust: shall mean the  organizational  document filed on May
5, 2000 in Delaware with respect to the Trust.

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

     Closing:  shall  mean  the  consummation  of the  purchase  and sale of the
Preferred Securities described in Section 1(c).

     Closing Time: shall have the meaning set forth in Section 1(c).

     Commission: shall mean the Securities and Exchange Commission.

     Common  Securities:  shall have the  meaning  set forth in the  preliminary
statement hereof.

     Common  Shares:  shall mean the shares of common stock of the Company,  par
value $.01 per share.

     Company: shall have the meaning set forth in the preamble hereof.

     Company  Material  Adverse  Effect:  shall  have the  meaning  set forth in
Section 2.5(b).

     Controlled: shall mean the possession,  direct or indirect, of the power to
direct  or cause the  direction  of the  management  and  policies  of a Person,
whether through the ownership of voting securities, by contract or otherwise.

     Declaration:  shall have the meaning set forth in the preliminary statement
hereof.

     Delaware Act: shall have the meaning set forth in the preliminary statement
hereof.

     Financial Statements: shall have the meaning set forth in Section 2.5(a).

     GAAP: shall have the meaning set forth in Section 2.5(a).

     Governmental Authority:  shall mean any nation or government,  any state or
other   political    subdivision   thereof,   and   any   department,    agency,
instrumentality,  bureau, entity or official exercising executive,  legislative,
judicial, regulatory or administrative functions of or pertaining to government.

<PAGE>

     Indemnified Party: shall have the meaning set forth in Section 7.2.

     Indemnifying Party: shall have the meaning set forth in Section 7.1.

     Indenture:  shall have the meaning set forth in the  preliminary  statement
hereof.

     Investor: shall have the meaning set forth in the preamble hereof.

     Key Agreements and Instruments:  shall mean as to any Person any indenture,
mortgage,  declaration,  deed of trust, credit agreement, note or other evidence
of indebtedness,  or other material agreement or instrument to which such Person
is a party or by which it is bound or, to which any of its property or assets is
subject.

     Lien: shall have the meaning set forth in Section 2.2(a).

     Material  Adverse  Effect:  shall  have the  meaning  set forth in  Section
2.5(b).

     Offerors: shall have the meaning set forth in the preamble hereof.

     Operative  Documents:  shall have the meaning set forth in the  preliminary
statement hereof.

     Organizational  Documents:  shall  mean as to any Person  the  articles  or
certificate  of  incorporation,   declaration  of  trust,  bylaws,   partnership
agreement or other organizational or governing documents of such Person.

     Person:  shall  mean an  individual,  partnership,  corporation,  trust  or
unincorporated  organization,  limited  liability  company  or other  entity,  a
government or agency or political subdivision thereof.

     Preferred Instruments:  shall have the meaning set forth in the preliminary
statement hereof.

     Preferred  Securities:  shall have the meaning set forth in the preliminary
statement hereof.

     Preferred  Securities  Guarantee:  shall have the  meaning set forth in the
preliminary statement hereof.

     Purchase Agreement: Shall have the meaning set forth in Section 6.1.

     Registration  Rights  Agreement:  shall mean the Amendment to  Registration
Rights Agreement in the form attached hereto as Exhibit A.

<PAGE>

     Requirements  of Law:  means as to any Person,  any domestic or foreign and
federal, state or local law, rule, regulation, statute or ordinance or judgment,
order,   decree  or  determination  of  any  arbitrator  or  a  court  or  other
Governmental  Authority,  in each case applicable to or binding upon such Person
or any of its  properties  or to which  such  Person or any of its  property  is
subject.

     SEC  Reports  and  Filings:  shall  have the  meaning  set forth in Section
2.4(a).

     Securities  Act:  shall  have the  meaning  set  forth  in the  preliminary
statement.

     Share: shall mean a share of common stock, $.01 par value per share, of the
Company.

     Subordinated   Debentures:   shall  have  the  meaning  set  forth  in  the
preliminary statement hereof.

     Subsidiary:  shall mean, with respect to any Person (herein  referred to as
the  "Parent"),  any  corporation,  partnership,  association  or other business
entity (a) of which securities or other ownership  interests  representing  more
than 50% of the  equity or more than 50% of the  ordinary  voting  power or more
than 50% of the general partnership interests are, at the time any determination
is being  made,  owned,  Controlled  or held,  or (b)  which is, at the time any
determination  is  made,  otherwise  Controlled,  by the  Parent  or one or more
subsidiaries of the Parent or by the Parent and one or more  subsidiaries of the
Parent.

     Trust: shall have the meaning set forth in the preamble hereof.

     Trust Material Adverse Effect:  shall have the meaning set forth in Section
2.5(b).

     8.2 Governing Law

     This  Agreement  shall be governed by and construed in accordance  with the
laws of the State of Delaware  without  regard to its principles of conflicts of
law.

     8.3 Paragraph and Section Headings

     The headings of the sections and subsections of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part thereof.

SECTION  9.       MISCELLANEOUS

     9.1 Expenses

<PAGE>

     Each  party to this  Agreement  shall  bear its own  respective  costs  and
expenses incurred in connection with the preparation,  execution and delivery of
this Agreement and the agreements and  transactions  contemplated  hereby except
that the Company  agrees to reimburse the Investor for that portion of its legal
fees attributable  solely to the review of the Key Agreements and Instruments in
connection  with the  transactions  referred to in this  Agreement  by paying an
amount equal to $ 110,000  directly to Piper Marbury Rudnick & Wolfe on the date
of the Closing.

     9.2 Notices.

     All  notices  or  other   communications  under  this  Agreement  shall  be
sufficient  if in writing and  delivered by hand or sent by  telecopy,  or sent,
postage  prepaid by  registered,  certified or express  mail,  or by  recognized
overnight  air courier  service and shall be deemed  given when so  delivered by
hand or telecopied,  or if mailed or sent by overnight  courier service,  on the
third (3rd)  Business Day after mailing (one Business Day in the case of express
mail or overnight courier service) to the parties at the following addresses:

               (a)  if to the Investor, to:

                    ERP Operating  Limited  Partnership
                    c/o Equity  Residential Properties Trust
                    Two North Riverside Plaza, Suite 400
                    Chicago, IL  60606
                    Attention:  Bruce Strohm

                    with a copy to:

                    Piper Marbury Rudnick & Wolfe
                    203 North Lasalle Street, Suite 1800
                    Chicago, IL  60601-1293
                    Attention:  Errol Halperin

               (b)  if to the Company, to:

                    Wellsford Real Properties, Inc.
                    535 Madison Avenue, 26th floor
                    New York, New York 10022
                    Attention: Jeffrey H. Lynford

<PAGE>

                    with a copy to:

                    Robinson Silverman Pearce Aronsohn & Berman LLP
                    1290 Avenue of the Americas
                    New York, New York  10104
                    Attention:  Alan S. Pearce

               (c)  if to the Trust, to:

                    WRP Convertible Trust I
                    c/o Wellsford Real Properties, Inc.
                    535 Madison Avenue, 26th floor
                    New York, New York 10022
                    Attention: Jeffrey H. Lynford

                    with a copy to:

                    Robinson Silverman Pearce Aronsohn & Berman LLP
                    1290 Avenue of the Americas
                    New York, New York  10104
                    Attention:  Alan S. Pearce

or at such other address as the  addressee may have  furnished in writing to the
sender as provided herein.

     9.3 Survival

     All warranties, representations, and covenants made by the Investor and the
Offerors  herein or in any  certificate  or other  instrument  delivered  by the
Investor or the Offerors under this  Agreement  shall be considered to have been
relied  upon by the  Offerors  or the  Investor,  as the case may be,  and shall
survive for a period of one year from the closing of the sale to the Investor of
the  Preferred  Securities,  or  payment  by the  Investor  for  such  Preferred
Securities,  regardless  of  any  investigation  made  by  the  Offerors  or the
Investor,  as the case may be, or on the Offerors' or the Investor's behalf. All
statements  in  any  such  certificate  or  other  instrument  shall  constitute
warranties and representations by the Offerors or the Investor,  as the case may
be, hereunder.

         9.4      Entire Agreement; Amendment and Waiver

<PAGE>

     This Agreement  shall inure to the benefit of and shall be binding upon the
successors and assigns of each of the parties. This Agreement and the agreements
attached as Exhibits hereto constitute the entire  understandings of the parties
hereto and supersede all prior agreements or understandings  with respect to the
subject matter hereof between such parties.  This Agreement may be amended,  and
the observance of any term of this Agreement may be waived, with (and only with)
the written consent of the Offerors and the Investor.

     9.5 Counterparts

     This  Agreement may be executed in one or more  counterparts  with the same
effect as if the  parties  executing  the  counterparts  had each  executed  one
instrument as of the day and year first above written.

     9.6 Successors and Assigns

     This  Agreement  and all of the  provisions  hereof,  including  all of the
rights of the  Investor  hereunder,  shall  inure to the  benefit of the parties
hereto and their respective successors and assigns.

     9.7 Severability

     In the event any one or more of the provisions  contained in this Agreement
should be held invalid,  illegal or unenforceable in any respect,  the validity,
legality and  enforceability  of the remaining  provisions  contained herein and
therein shall not in any way be affected or impaired thereby.

     9.8 Jurisdiction; Consent to Service of Process

     (a)  Each  of  the  Investor  and  the  Company  hereby   irrevocably   and
unconditionally  submits,  for  itself  and its  property,  to the  nonexclusive
jurisdiction of any Delaware,  Illinois or New York State court or Federal court
of the United States of America  sitting in the City of  Wilmington,  Chicago or
New York, and any appellate court from any thereof,  in any action or proceeding
arising out of or relating to this Agreement,  or for recognition or enforcement
of any  judgment,  and  each  of  the  parties  hereto  hereby  irrevocably  and
unconditionally  agrees  that  all  claims  in  respect  of any such  action  or
proceeding may be heard and  determined in such  Delaware,  Illinois or New York
State or, to the extent  permitted  by law, in such Federal  court.  Each of the
parties  hereto  agrees that a final  judgment in any such action or  proceeding
shall be conclusive  and may be enforced in other  jurisdictions  by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any

<PAGE>

right  that any  party may  otherwise  have to bring  any  action or  proceeding
relating to this Agreement in the courts of any jurisdiction.

     (b)  Each  of  the  Purchaser  and  the  Company  hereby   irrevocably  and
unconditionally  waives, to the fullest extent it may legally and effectively do
so, any objection  which it may now or hereafter  have to the laying of venue of
any suit,  action or proceeding  arising out of or relating to this Agreement in
any Delaware,  Illinois or New York State or Federal court.  Each of the parties
hereto hereby  irrevocably  waives,  to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

     9.9 Trustee Exculpation

     This  Agreement  and  all   documents,   agreements,   understandings   and
arrangements  relating  hereto  and to the  transactions  contemplated  by  this
Agreement  have been  executed or entered  into by a trustee of the Trust in his
capacity  as a trustee of the Trust  which has been  formed as a Delaware  trust
pursuant to a Certificate of Trust dated as of May 5, 2000, as amended,  and not
individually,  and the  trustees  of the  Trust  shall  not be bound or have any
personal liability  hereunder or thereunder.  All persons dealing with the Trust
shall look solely to the assets of the Trust for  satisfaction  of any liability
of the  Trust  in  respect  of this  Agreement  and all  documents,  agreements,
understandings  and  arrangements   relating  hereto  and  to  the  transactions
contemplated by this Agreement and will not seek recourse or commence any action
against any of the trustees of the Trust or any of their personal assets for the
performance or payment of any obligation hereunder or thereunder.  The foregoing
shall  also  apply  to  any  future   documents,   agreements,   understandings,
arrangements and transactions between the parties hereto.

<PAGE>

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the day and year first above written.

                                OFFERORS:

                                WELLSFORD REAL PROPERTIES, INC.

                                By: /s/ Edward Lowenthal
                                   -----------------------------------
                                      Name: Edward Lowenthal
                                      Title: President

                                WRP CONVERTIBLE TRUST I

                                By: /s/ James J. Burns
                                   -----------------------------------
                                      Name: James J. Burns
                                      Title: Regular Trustee

                                INVESTOR:

                                ERP OPERATING LIMITED PARTNERSHIP

                                By: Equity Residential Properties Trust,
                                      as its general partner

                                By: /s/ Bruce C. Strohm
                                   -----------------------------------
                                           Name: Bruce C. Strohm
                                           Title: Executive Vice President

                                EQUITY RESIDENTIAL PROPERTIES TRUST

                                By: /s/ Bruce C. Strohm
                                   -----------------------------------
                                      Name: Bruce C. Strohm
                                      Title: Executive Vice President

<PAGE>

                                 SCHEDULE 2.3(A)

                             OPTIONS, WARRANTS, ETC.

Warrant  Agreement,  dated as of August 28, 1997, by and between  Wellsford Real
Properties, Inc. ("Wellsford"),  and the United States Trust Company of New York
("U.S.  Trust")(the "Warrant Agreement"),  pursuant to which Wellsford issued to
WHWEL Real Estate Limited  Partnership  warrants to purchase 4,132,230 shares of
Wellsford's  common stock,  as amended by Amendment No. 1 to Warrant  Agreement,
dated July 16, 1998,  and  Amendment No. 2 to Warrant  Agreement,  dated May 28,
1999.

Warrant  Agreement,  dated as of May 28, 1999, by and between Wellsford and U.S.
Trust, pursuant to which Wellsford issued to W/W Group Holdings, L.L.C. warrants
to purchase 123,967 shares of Wellsford's common stock.

Letter Agreement  between  Wellsford and WHWEL Real Estate Limited  Partnership,
dated May 28, 1999, pursuant to which Wellsford agrees to exchange shares of its
common  stock for Excess  Membership  Units (as  defined  therein)  issued  with
respect   to   Capital    Contributions    (as   defined    therein)   made   to
Wellsford/Whitehall  Properties Group, L.L.C. in excess of $50,000,000 and up to
$75,000,000.

Warrant  Agreement,  dated  January 20, 1998,  by and between  Michael J. Vitale
("Vitale") and Wellsford, pursuant to which Wellsford issued a warrant to Vitale
to purchase up to 74,000  shares of  Wellsford's  common  stock,  at an exercise
price of $15.1750.

Warrant Agreement,  dated January 20, 1998, by and between Frank G. Creamer, Jr.
("Creamer")  and  Wellsford,  pursuant  to which  Wellsford  issued a warrant to
Creamer to purchase  up to 74,000  shares of  Wellsford's  common  stock,  at an
exercise price of $15.1750.

<PAGE>

                                 SCHEDULE 2.5(B)

                                 MATERIAL CHANGE

     On February  25,  2000,  the Company  repurchased  2,573,632  shares of its
outstanding  common  stock  from an  institutional  investor  for  approximately
$20,589,000.
<PAGE>

                                                                       EXHIBIT A

               FORM OF AMENDMENT TO REGISTRATION RIGHTS AGREEMENT

                   AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
                   ------------------------------------------

                  Agreement  dated as of May 5,  2000 by and  between  Wellsford
Real Properties,  Inc. a Maryland corporation (the "Company"), and ERP Operating
Limited Partnership, an Illinois limited partnership ("ERPOLP")

                               W I T N E S S E T H

     WHEREAS,  the  Company  and  ERPOLP  entered  into  a  Registration  Rights
Agreement dated as of May 30, 1997 (the "RR Agreement");

     WHEREAS, the Company does not intend to issue and ERPOLP does not intend to
acquire, the Preferred Stock, as defined in the RR Agreement;

     WHEREAS, pursuant to a Declaration of Trust of WRP Convertible Trust I (the
"Trust"), dated May 5, 2000, the Trust intends to issue to ERPOLP $25,000,000 of
8.25% Preferred  Securities (as defined below) which are convertible into Common
Stock as defined in the RR Agreement; and

     WHEREAS, the parties hereto wish to amend the RR Agreement to eliminate the
registration  rights granted therein to ERPOLP to have  registered  Common Stock
issuable  upon  conversion  of  Preferred  Stock  and to  grant  to  ERPOLP  the
registration  rights  previously  granted with respect to Common Stock  issuable
upon the  conversion  of the Preferred  Stock to the Common Stock  issuable upon
conversion of the Securities.

     WHEREAS,  all of the  Company's  shares  of Class A Common  Stock are being
exchanged for an equal number of shares of the Company's Class A-1 Common Stock.

     NOW THEREFORE,  in  consideration  of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
sufficiency  of which are hereby  acknowledged,  and subject to and on the terms
and conditions herein set forth, the parties hereto agree as follows:

               1.   The  definition  of  Shares  in the RR  Agreement  is hereby
                    deleted and a new definition of shares to read as follows is
                    hereby inserted in lieu thereof:

<PAGE>

                    "Shares  shall mean  Common  Stock  issuable  or issued upon
                    conversion of all or any portion of the Preferred Securities
                    or Class A-1 common stock,  par value $.01 per share, of the
                    Company of May 5, 2000".

               2.   The  definition of "Preferred  Stock" in the RR Agreement is
                    hereby deleted.  A new definition of "Preferred  Securities"
                    to read as follows is hereby inserted:

                    "Preferred  Securities"  shall  mean the  8.25%  Convertible
                    Trust Preferred  Securities  issued by WRP Convertible Trust
                    I.

               3.   Section 7 of the RR  Agreement  is amended to state that the
                    address  of the  Company  to which  notice  shall be sent is
                    Wellsford Real  Properties,  Inc. 535 Madison  Avenue,  26th
                    Floor, New York, New York 10022,  Attention:  Chairman;  Fax
                    No. (212) 421-7244.

               4.   The RR  Agreement  shall  remain in full force and effect as
                    hereby modified.

     This  Agreement may be executed in one or more  counterparts  with the same
effect as if the  parties  executing  the  counterparts  had each  executed  one
instrument as of the day and year first above written.

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

     ERP OPERATING LIMITED PARTNERSHIP           WELLSFORD REAL PROPERTIES, INC.

By: Equity Residential Properties Trust,         By:
      its general partner                            ---------------------------
                                                     Name:
                                                     Title:
By:
   ---------------------------
    Name:
    Title:

                                                                       EXHIBIT B

                OPINION OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP

<PAGE>

                                                                       EXHIBIT C

                   OPINION OF RICHARDS, LAYTON & FINGER, P.A.

<PAGE>

                                                                       EXHIBIT D

           OPINION OF ROBINSON SILVERMAN PEARCE ARONSOHN & BERMAN LLP
<PAGE>

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