WELLSFORD REAL PROPERTIES INC, 10-12B/A, 1997-05-21

WELLSFORD REAL PROPERTIES INC
10-12B/A, 1997-05-21
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

________________

FORM 10/A

Amendment No. 1

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934

Wellsford Real Properties, Inc.
- -----------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)

Maryland 13-3926898
- --------------------------------------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

610 Fifth Avenue, New York, New York 10020
- --------------------------------------------- ------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code (212) 333-2300
------------------
Securities to be registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
------------------- ------------------------------

Common Stock, $.01 par American Stock Exchange
value per share
---------------------- ------------------------------

Securities to be registered pursuant to Section 12(g) of the Act:

None
- -----------------------------------------------------------------------------
(Title of Class)
<PAGE>

WELLSFORD REAL PROPERTIES, INC.

Note: Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended (each, Application of Safe
Harbor for Forward-Looking Statements), do not apply to this Registration
Statement on Form 10.

Form 10 Item No. and Heading

1. Business............... Incorporated herein by reference to Exhibit
10.35 pages 2, 17-23, 101-115 and 121-134.

2. Financial Information

Financial information for year ended December 31, 1996 is incorporated
herein by reference to Exhibit 10.35, pages 22-23 and 121.

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

The following tables set forth the summary unaudited pro forma combined
financial data for Wellsford Real Properties, Inc. (Predecessor) as a combined
entity, giving effect to the Merger, Contribution and Distribution as if they
had occurred on the dates indicated herein, after giving effect to the pro
forma adjustments described in the notes to the unaudited pro forma combined
financial statements included elsewhere in this Registration Statement on Form
10.

The summary unaudited pro forma combined operating data are presented as
if the Merger, Contribution and Distribution had been consummated on January 1,
1997. In addition to the Merger, Contribution and Distribution, the pro forma
combined operating data gives effect to certain material events which occurred
between January 1, 1997 and April 30, 1997, as if they had occurred on January
1, 1997. See the notes to the unaudited Pro Forma Combined Income Statement
for the three months ended March 31, 1997 included elsewhere in this
Registration Statement on Form 10.

The summary unaudited pro forma combined balance sheet data are presented
as if the Merger, Contribution and Distribution had occurred on March 31, 1997.
In addition to the Merger, Contribution and Distribution, the pro forma
combined balance sheet data gives effect to certain material events set forth
in the previous paragraph which occurred between April 1, 1997 and April 30,
1997 as if they had occurred on March 31, 1997. See the notes to the unaudited
Pro Forma Combined Balance Sheet at March 31, 1997 included elsewhere in this
Registration Statement on Form 10. In the opinion of management, all necessary
adjustments necessary to reflect the effects of the Merger, Contribution and
Distribution have been made.

The summary unaudited pro forma financial data should be read in
conjunction with, and is qualified in its entirety by, the historical financial
statements and notes thereto of Wellsford Real Properties, Inc. (Predecessor)
included in this Registration Statement on Form 10.
<PAGE>

The summary unaudited pro forma operating and balance sheet data are
presented for comparative purposes only and are not necessarily indicative of
what the actual combined results of Wellsford Real Properties, Inc.
(Predecessor) would have been for the period and as of the date presented, nor
does such data purport to represent the results of future periods.
<PAGE>

Wellsford Real Properties, Inc. (Predecessor)
Summary Unaudited Combined Financial Data
<TABLE>
<CAPTION>

Pro Forma Historical
Three Months Three Months
Ended March 31, 1997 Ended March 31, 1997
-------------------- --------------------
(Unaudited) (Unaudited)
(In thousands except per share data)
<S> <C> <C>
OPERATING DATA:
Revenues:
Rental income $762
Other income 40
Interest income 989 $401
_____ ___
1,791 401
_____ ___

Expenses:
Property operating and maintenance 211
Real estate taxes 107
Interest 388
General and administrative 438
Depreciation 128
Property management 34
_____ ___
1,306 0
_____ ___

Income before income taxes 485 401
Provision for income taxes 198
_____ ____
Net income $287 $401
===== ====

Net income per common share $0.06

Weighted average common shares
outstanding 4,877

<CAPTION>
Pro Forma Historical
March 31, 1997 March 31, 1997
-------------- --------------
(Unaudited) (Unaudited)
(In thousands)
<CAPTION> <C> <C>
BALANCE SHEET DATA:
Real estate (prior to depreciation) $71,506 $47,806
Mortgage notes and interest receivable $37,934 $17,934
Cash and cash equivalents $1,743 $0
Restricted cash $3,198 $3,198
Total assets $114,381 $68,938
Total debt $62,755 $36,366
Total equity $49,185 $32,572

OTHER DATA:
Funds from Operations $415 $401
EBITDA $1,001 $401
</TABLE>
<PAGE>

<TABLE>

<S> <C> <C>
Cash flows from operating activities $2,609 $2,723
Cash flows from investing activities ($70,200) ($26,500)
Cash flows from financing activities $69,220 $23,777
</TABLE>
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
OF WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

Overview

The following discussion should be read in conjunction with the Wellsford
Real Properties Inc. (Predecessor) (the "Company") financial statements
contained herein.

Results of Operations

The Company's operations during the three months ended March 31, 1997
consisted of owning a mortgage note receivable, upon which the Company earned
$401,000 of interest income, and developing two multifamily communities located
in a suburb of Denver, Colorado with a total of 760 units under development.
In addition, the Company purchased four commercial office properties, all of
which are currently vacant and undergoing renovations.

Liquidity and Capital Resources

The Company expects to meet its short-term liquidity requirements
generally through its working capital and cash flow provided by operations.
The Company considers its ability to generate cash to be adequate and expects
it to continue to be adequate to meet operating requirements both in the short
and long terms.

The Company expects to meet its long-term liquidity requirements such as
refinancing mortgages, financing acquisitions and development, and financing
capital improvements and debt and equity investments in real estate companies
by long-term borrowings, through the issuance of debt and the offering of
additional debt and equity securities.

The Company has received a commitment from the Bank of Boston and Morgan
Guaranty that they will provide a $50 million credit facility, subject to
customary conditions, which would be available to fund acquisitions, debt and
equity investments, development, capital expenditures, repayment of
indebtedness and related expenditures. The Company expects to obtain this
credit facility concurrently with the closing of the Merger and Distribution.
The commitment received is subject to customary conditions and documentation.

In December 1995, the Company marketed and sold $14.8 million of tax-
exempt bonds to fund construction at Palomino Park. The bonds have a variable
rate of interest and a term of 40 years. At March 31, 1997, $3.2 million of
the bond proceeds were being held in escrow pending their use for the funding
of development.

In July 1996, the Company originated the Sonterra Loan. The Sonterra Loan
bears interest at 9% per annum and matures in July 1999. The Company also has
the exclusive option to purchase the community for $20.5 million through
December 1997 and for $21 million during 1998.

3. Properties.............. Incorporated herein by reference to Exhibit
10.35, pages 20-21 and 105-110.
4. Security Ownership of
Certain Beneficial
Owners and Management........ Incorporated herein by reference to Exhibit
<PAGE>

10.35, page 120.
5. Directors and Executive
Officers..................... Incorporated herein by reference to Exhibit
10.35, pages 17-19 and 116-117.
6. Executive Compensation....... Incorporated herein by reference to Exhibit
10.35, pages 117-119.
7. Certain Relationships and
Related Transactions......... Incorporated herein by reference to Exhibit
10.35, page 121.
8. Legal Proceedings............ Incorporated herein by reference to Exhibit
10.35, page 110.
9. Market Price of and Dividends
on the Registrant's Common
Equity and Related Stockholder
Matters...................... Incorporated herein by reference to Exhibit
10.35, pages 105, 135 and 143.
10. Recent Sales of Unregistered Securities

The following table is a summary of certain information relating to all
securities of the Company sold by the Company within the past three years that
were not registered under the Securities Act (the "Private Placement"):

Persons or Class
Type of Date Amount of of Persons to
Securities of Securities Whom Securities
Sold Sale Sold Sold Consideration
- ---------- ---- ---------- ------------------- -------------
Common Stock 2/28/97 (1) Wellsford Commercial (1)
Properties, L.L.C.

(1) The contracts to purchase Chatham, the Point View office complex and
Greenbrook were transferred to the Company by Wellsford Commercial
Properties, L.L.C. ("Wellsford Commercial") for shares of Common Stock
having an aggregate value of approximately $2.25 million and the Company's
agreement to repay a $1.0 million advance used for the down payment on the
Point View office complex. The number of shares of Common Stock issued to
Wellsford Commercial upon consummation of the Distribution and Merger will
be approximately 215,000, subject to adjustment based upon an issuance
price per share equal to the book value per share of the Common Stock on
date of closing of the Merger. The members of Wellsford Commercial
include Jeffrey H. Lynford, Edward Lowenthal and the wife of Mark Germain
who will be a director of the Company who hold 16.4%, 16.4% and 13.8%,
respectively, of the ownership interests in Wellsford Commercial.

The Company conducted the Private Placement pursuant to Section 4(2) of
the Securities Act. There was no underwriter involved in the Private
Placement.

11. Description of Registrant's
Securities to be Registered.. Incorporated herein by reference to Exhibit
10.35, pages 135-143.

12. Indemnification of Directors
and Officers................ Incorporated herein by reference to Exhibit
10.35, pages 142-143.
<PAGE>

13. Financial Statements and Supplementary Data

Financial statements and supplementary data for year ended December 31, 1996
are incorporated herein by reference to Exhibit 10.35, pages 122-134.

Wellsford Real Properties, Inc. (Predecessor)
Combined Balance Sheet
(In thousands)
March 31,
1997
_________
(Unaudited)
ASSETS
Real estate assets, at cost:
Land $ 3,159
Buildings and improvements 17,902
___________
21,061
Construction in process 23,945
___________
45,006
Property held for sale 2,800
___________
47,806

Restricted cash 3,198
Mortgage note and interest receivable 17,934
___________

Total Assets $68,938
===========
LIABILITIES AND EQUITY

Tax exempt mortgage note payable $14,755
Note payable to Wellsford 21,611
___________

Total Liabilities 36,366
___________

Commitments and contingencies --

Common stock, $.01 par value per share,
100 shares issued and outstanding 1
Paid in capital in excess of
par value 30,321
Common stock to be issued 2,250
___________

Total Equity 32,572
___________

Total Liabilities and Equity $68,938
===========

See accompanying notes.
<PAGE>

Wellsford Real Properties, Inc. (Predecessor)
Combined Statement of Income and Equity
(In thousands)

Three Months
Ended
March 31,
1997
_____

(Unaudited)

Interest income $401
_______

Net income $401
_______

Equity, January 1, 1997 $30,005
Contributions 2,166
_______

Equity, March 31, 1997 $32,572
=======

See accompanying notes.
<PAGE>

Wellsford Real Properties, Inc. (Predecessor)
Combined Statement of Cash Flow
(In thousands)

Three Months
Ended
March 31,
1997
____
(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income $401
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease (increase) in assets:
Debt service reserve 2,322
_______

Net cash provided by operating activities 2,723
_______

CASH FLOWS FROM INVESTING ACTIVITIES:

Investments in real estate assets (26,500)
_______

Net cash (used) in investing activities (26,500)
_______

CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance of note payable to Wellsford 21,611
Equity contributions 2,166
_______

Net cash provided by financing activities 23,777
_______

Net increase (decrease) in cash and cash
equivalents 0
Cash and cash equivalents, beginning of period 0
_______

Cash and cash equivalents, end of period $ 0
=======

Cash paid during the period for interest $343

See accompanying notes.
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS
(Unaudited)

(1) Organization and Basis of Presentation

Wellsford Real Properties, Inc. ("WRP Newco"), a C corporation formed on
January 8, 1997, is a subsidiary of Wellsford Residential Property Trust
("Wellsford"). On January 16, 1997 Wellsford announced its intention to
merge with Equity Residential Properties Trust ("EQR"). Immediately prior
to the Merger, Wellsford intends to contribute certain of its assets to
WRP Newco and have WRP Newco assume certain liabilities of Wellsford.
Immediately after the contribution of assets to WRP Newco and immediately
prior to the Merger, Wellsford intends to distribute to its common
shareholders all the outstanding shares of WRP Newco owned by Wellsford.
The common shareholders of Wellsford will receive .25 of a common share of
WRP Newco for each one common share of Wellsford owned.

The accompanying combined financial statements of the predecessor of WRP
Newco (the "Company") include approximately $45 million and $14.8 million
of Wellsford's assets and liabilities, respectively, to be contributed to
and assumed by WRP Newco, immediately prior to the Merger. These assets
and liabilities include the restricted cash (Note 3), the Sonterra
Mortgage (Note 4), the Development Communities (Note 4), and the tax
exempt mortgage notes payable (Note 5). Such financial statements have
been prepared using the historical basis of the assets and liabilities and
historical results of operations related to such assets and liabilities.

(2) Summary of Significant Accounting Policies

Principles of Combination. All significant intercompany transactions
between Wellsford and the subsidiaries relating to the assets and
liabilities that are to be contributed or assumed by WRP Newco have been
eliminated in combination.

Income Recognition. Residential communities are leased under operating
leases with terms generally one year or less; rental revenue is recognized
monthly as it is earned. Commercial properties are leased under operating
leases; rental revenue is recognized on a straight-line basis over the
terms of the leases.

Cash and Cash Equivalents. The Company considers all demand and money
market accounts and short term investments in government funds with an
original maturity of three months or less to be cash and cash equivalents.

Real Estate and Depreciation. Costs directly related to the acquisition
and improvement of real estate are capitalized, including interest expense
incurred during and related to construction and including all improvements
identified during the underwriting of a property acquisition.

Depreciation is computed over the expected useful lives of depreciable
property on a straight line basis, principally 40 years for buildings and
improvements and 5 to 12 years for furnishings and equipment.

to be held and used be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable and that long-lived assets to be disposed of be measured at
the lower of carrying amount or net realizable value. The adoption of
SFAS 121 has not had an impact on the Company's combined financial
position or results of operations.

Mortgage Note Receivable Impairment. The Company considers a note
impaired if, based on current information and events, it is probable that
all amounts due under the note agreement are not collectable. Impairment
is measured based upon the fair value of the underlying collateral. No
impairment has been recorded through March 31, 1997.

Financing Costs. Financing and refinancing costs are capitalized and
amortized over the term of the related loan under the interest method.
Credit facility fees are capitalized and amortized over the term of the
commitment on a straight-line basis.

Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.

(3) Restricted Cash

Restricted cash primarily consists of the remaining proceeds from the
Palomino Park tax-exempt mortgage note (Note 5) which are restricted in
their use to construction costs and capitalized interest related to the
Palomino Park development project (Note 4).

(4) Real Estate Assets, Mortgage Note Receivable and Note Payable

The Company holds a $17.8 million mortgage on a 344 unit, newly
constructed community in Tucson, Arizona known as Sonterra at Williams
Centre (the "Sonterra Mortgage"). The Sonterra Mortgage was originated in
July 1996, bears interest at 9% per annum and matures in July 1999. The
Company also has the exclusive option to purchase the community for $20.5
million through December 1997 and $21 million during 1998. Interest
receivable of $0.1 million is included in the March 31, 1997 balance. The
fair market value of the Company's mortgage note receivable, estimated by
using a discounted cash flow analysis, approximates the carrying amount.

purchase 100% of the Development Communities upon completion and the
achievement of certain occupancy levels. At March 31, 1997 the Company
had invested $24 million related to the land for the Development
Communities, the recreation center and general infrastructure work. A
portion of such infrastructure will become the property of certain local
governmental entities at the date of completion and retirement of the tax-
exempt mortgage note payable described in Note 5. In addition,
approximately $26.5 million was outstanding at March 31, 1997 on a
construction loan to the developer, which the Company would repay upon
purchase assuming completion and achievement of certain occupancy levels.
During the period ended March 31, 1997, the Company capitalized $0.3
million of interest to the Development Communities. The Company expects
to fund the construction of its Development Communities from its working
capital and with proceeds from a credit facility and a $14.8 million tax-
exempt mortgage note (Note 5).

The Company has entered into contracts on five commercial office
properties for $47.6 million in aggregate, and has closed on four of the
properties during the first quarter of 1997. The purchase prices for
these commercial properties include approximately $2.25 million in value
of shares of WRP Newco Common to be issued to an entity in consideration
for the assignment of the purchase contracts entered into by such entity.
This amount has been classified as Common Stock to be Issued at March 31,
1997. Upon liquidation of such entity, each of the Chairman of the Board
and President of Wellsford, Messrs. Lynford and Lowenthal, will receive
approximately 16.4% of such shares, and the wife of Mark Germain, a
trustee of Wellsford, will receive approximately 13.8% of such shares.
Each are owners of such entity. The cash portion of the purchase prices
for these commercial properties was funded with a loan from Wellsford
which bears interest at LIBOR plus 1.50% and is expected to be repaid on
the date of the Merger.

Greenbrook Corporate Center ($23.7 million) is a Class A, three-story
office building with a 35 foot atrium, located in Fairfield, NJ, and
comprising approximately 190,000 rentable square feet. It is situated on
a 20 acre developed site with 7 acres of additional, contiguous
undeveloped land.

Point View ($15.8 million) consists of 194 acres containing two office
buildings, totaling approximately 560,000 square feet, an adjacent 10-acre
undeveloped site, and a central utility plant located in Wayne, NJ. The
site is currently undergoing a major renovation. The purchase of this
building was closed in February 1997.

1700 Valley Road ($1.0 million) is a Class B+, two-story vacant office
building located in Wayne, NJ and comprising approximately 70,600 square
feet. It is situated on a nine acre site. The purchase of this building
was closed in February 1997.

1800 Valley Road ($2.0 million) is a Class B+, two-story vacant office
building located in Wayne, NJ and comprising approximately 54,800 square
feet. It is situated on a 14 acre site. The purchase of this building
was closed in February 1997.

The Chatham Building ($5.1 million) is a three-story office building
located in Chatham, NJ and comprising approximately 65,000 square feet.
The site is currently undergoing a major renovation. The purchase of this
building was closed in January 1997.
<PAGE>

(5) Tax Exempt Mortgage Notes Payable

At March 31, 1997, the Company had $14.8 million of tax exempt mortgage
notes payable outstanding. The Company's tax exempt mortgage note payable
is secured by certain infrastructure at the Company's Palomino Park
development and bears interest-only payments at a variable rate (which
approximates the Standard & Poor's / J.J. Kenney index for short-term high
grade tax-exempt bonds, currently 3.65 %) until it matures in December
2035.

The tax-exempt mortgage note payable is security for tax-exempt bonds
which are backed by a letter of credit from a AAA rated financial
institution. Wellsford has guaranteed the reimbursement of the financial
institution in the event that the letter of credit is drawn upon. It is
anticipated that as a result of the Merger, this guaranty will be replaced
by the guarantees of WRP Newco and EQR. These bonds require the Company
to obtain the approval of both the trustee, as defined in the bond
documents, and the above mentioned financial institution for transactions
such as those anticipated in connection with the Merger and Distribution.
The Company expects to receive such approvals.

The fair market value of the variable rate tax exempt mortgage note is
considered to be the carrying amount.

(6) Commitments and Contingencies

WRP Newco will enter into employment agreements with certain of its
officers. Such agreements will be for terms which expire between 1999 and
2002, and will provide for aggregate annual base salaries of $0.8
million, $0.8 million and $0.6 million in 1997, 1998 and 1999 through
2002, respectively. The Company is obligated under an operating lease
covering its corporate headquarters for $0.2 million in 1997, $0.2 million
in 1998, and $0.2 million in 1999, plus certain operating expense
escalations.

As a commercial real estate owner, the Company is subject to potential
environmental costs. The Company's Point View site contains asbestos
containing materials ("ACMs"); the Company is proceeding with the removal
of all ACMs in such property which is anticipated to cost $3.5 million. At
this point in time, management of the Company is not aware of any
environmental concerns that would have a material adverse effect on the
Company's financial position or future results of operations except as
just described.

In 1997 WRP Newco will adopt a defined contribution savings plan pursuant
to Section 401 of the Internal Revenue Code. Under such a plan there are
no prior service costs. All employees will be eligible to participate in
the plan after one year of service. Employer contributions will be made
based on a discretionary amount determined by WRP Newco's management.
Employer contributions, if any, will be based upon the amount contributed
by an employee.

Subsequent to March 31, 1997, the Company has lent $20 million of an $80
million secured subordinated mezzanine loan to an entity which owns
substantially all of the equity interest (the "Equity Interests") in the
owner of a 52-story, approximately 1.75 million sq.ft. Class A office
building located at 277 Park Avenue, New York City (the "277 Park Loan").
<PAGE>

The loan will be secured primarily by a pledge of the Equity Interests.
The 277 Park Loan will be due in April 2007 and will bear interest at the
rate of approximately 12% per annum.
<PAGE>

Wellsford Real Properties, Inc. (Predecessor)
Pro Forma Combined Income Statement

For the Three Months Ended March 31, 1997
(In Thousands Except Per Share Data)
(Unaudited)

During the period from January 1, 1997 to April 30, 1997, Wellsford Real
Properties, Inc. (Predecessor) (the "Company") originated a real estate note
receivable and purchased five commercial office properties. One of the
commercial office properties, the Greenbrook Corporate Center, is currently
occupied.

This unaudited Pro Forma Combined Income Statement is presented as if the
Company's transactions, each as referred to above, and the Merger and
Distribution had been consummated on January 1, 1997. All of the pro forma
adjustments shown are solely attributed to the transactions described. In the
opinion of the Company's management, all adjustments necessary to reflect the
effects of these transactions have been made.

This unaudited Pro Forma Combined Income Statement is presented for
comparative purposes only, and is not necessarily indicative of what the actual
results of operations of the Company would have been for the period presented;
nor does it purport to represent the results for future periods. This
unaudited Pro Forma Combined Income Statement should be read in conjunction
with, and is qualified in its entirety by, the historical financial statements
and notes thereto of the Company included in this Registration Statement on
Form 10.
<PAGE>

Wellsford Real Properties, Inc. (Predecessor)
Pro Forma Combined Income Statement
Three Months Ended March 31, 1997
(In thousands)
(Unaudited)

Pro Forma
Merger
Historical Adjustments Pro Forma
___________ ___________ __________
REVENUE

Rental income $ 762 (A) $ 762
Other income 40 (A) 40
Interest income $ 401 588 (B) 989
_________ ________ _______
Total Revenue 401 1,390 1,791
_________ ________ _______

EXPENSES

Property operating and maintenance 211 (A) 211
Real estate taxes 107 (A) 107
Interest 388 (C) 388
General and administrative 438 (D) 438
Depreciation 128 (E) 128
Property management 34 (A) 34
_________ ________ _______
Total Expenses 0 1,306 1,306
_________ ________ _______

Income before income taxes $ 401 $ 84 485
========= ========

Provision for income taxes 198 (F)
_______

Net Income $ 287
=======

Net income per common share $ 0.06 (G)
=======

Weighted average common
shares outstanding 4,877 (G)
=====
<PAGE>

Wellsford Real Properties, Inc. (Predecessor)
Notes to Unaudited Pro Forma Combined Income Statement
March 31, 1997

(A) Represents historical operating revenues and expenses of Greenbrook
Corporate Center, which was acquired in April 1997, for the three
months ended March 31, 1997. The Company's other four commercial
properties are currently vacant.

(B) Represents interest income from the 277 Park Loan for three months
($20 million at approximately 12%).

(D) Represents the estimated general and administrative costs of WRP
Newco for three months.

(E) Represents depreciation on Greenbrook Corporate Center for the three
months ended March 31, 1997 utilizing a 40 year estimated useful
life.

(F) Represents provision for federal and state income taxes at rates of
35% and 9%, respectively.

(G) Represents the aggregate of the shares of WRP Newco Common issued in
connection with the Distribution (.25 of a share for every one share
of Wellsford Common), the approximately 215,000 shares to be issued
in connection with the acquisition of the commercial properties, and
335,000 shares (estimated) of WRP Newco Class A Common to be
purchased by ERP Operating Partnership for $3.5 million.
<PAGE>

Wellsford Real Properties, Inc. (Predecessor)
Pro Forma Combined Balance Sheet

March 31, 1997
(In Thousands)
(Unaudited)

This unaudited Pro Forma Combined Balance Sheet is presented as if the
Merger, Contribution and Distribution and the proposed credit facility
agreement with Bank of Boston and Morgan Guaranty had been consummated on March
31, 1997, the real estate note receivable had been originated on March 31, 1997
and the commercial office properties purchased by Wellsford Real Properties,
Inc. (Predecessor) (the "Company") had been purchased on March 31, 1997,
utilizing proceeds from the Merger and Contribution and a draw from the credit
facility. All of the assets and liabilities of the Company which are being
transferred to the Company in connection with the Merger, Contribution and
Distribution are recorded at their respective historical costs.

This unaudited Pro Forma Combined Balance Sheet is presented for
comparative purposes only, and is not necessarily indicative of what the actual
financial position of the Company would have been at March 31, 1997; nor does
it purport to represent the future financial position of the Company. This
unaudited Pro Forma Combined Balance Sheet should be read in conjunction with,
and is qualified in its entirety by, the historical financial statements and
notes thereto of the Company included in this Registration Statement on Form
10.
<PAGE>

Wellsford Real Properties, Inc. (Predecessor)
Pro Forma Combined Balance Sheet
March 31, 1997
(In thousands)
(Unaudited)

Pro Forma
Merger
Historical Adjustments Pro Forma
__________ ___________ __________
ASSETS
Real estate assets, at cost:
Land $ 3,159 $ 3,555 $ 6,714
Buildings and improvements 17,902 20,145 38,047
________ ________ _______
21,061 23,700 44,761
Construction in process 23,945 23,945
________ ________ _______
45,006 23,700 68,706
Property held for sale 2,800 2,800
________ ________ ________
47,806 23,700 (A) 71,506

Cash and cash equivalents 0 1,743 (B) 1,743
Restricted cash 3,198 3,198
Mortgage notes and
interest receivable 17,934 20,000 (C) 37,934
________ ________ ________
Total Assets $ 68,938 $ 45,443 $114,381
======== ======== ========
LIABILITIES AND EQUITY

Liabilities:
Tax exempt mortgage note payable $ 14,755 $ 14,755
Credit facility 48,000 (D) 48,000
Note payable to Wellsford 21,611 ($21,611)(E) 0
________ ________ ________
Total Liabilities 36,366 26,389 62,755
________ ________ ________

Commitments and contingencies -- -- --

Minority interest 2,441 (F) 2,441

Equity:
Common stock, $.01 par value
per share, 4,877,066 shares
issued and outstanding
as adjusted 1 48 49
Paid in capital in excess of
par value 30,321 18,815 49,136
Common stock to be issued 2,250 (2,250) 0
________ ________ ________
Total Equity 32,572 16,613 (G) 49,185
________ ________ ________

Total Liabilities and Equity $ 68,938 $ 45,443 $114,381
======== ======== ========
<PAGE>

Wellsford Real Properties, Inc. (Predecessor)
Notes to Unaudited Pro Forma Combined Balance Sheet
March 31, 1997

(A) Reflects the acquisition of one commercial office property as follows:

Purchase
Square Purchase Price Per
Name Location Footage Price Sq. Foot
---- -------- ------- ----- --------

Greenbrook Corp. Ctr Fairfield, NJ 190,000 $23.7 million $125

Purchase
Price & Actual/
Planned Planned Impr. Scheduled
Name Improvements Per Sq. Foot Closing Date
---- ------------ ------------ ------------
Greenbrook Corp. Ctr $0.5 million $127 April 1997

Greenbrook Corporate Center is currently in operation. The Company's
other four commercial properties are currently vacant. The purchase price
is being funded with proceeds from the credit facility.

(B) Reflects the net cash effect of the following transactions (in thousands):

. Cash contribution to WRP Newco at Contribution $15,554
. ERP Operating Partnership's purchase of
WRP Newco Common 3,500
. Repayment of note payable to Wellsford (17,311)
_______
$ 1,743
=======

(C) Represents the 277 Park Loan, a $20 million portion of an $80 million
subordinated mezzanine loan bearing interest at approximately 12% per
annum.

(D) Represents draws on the credit facility to fund the acquisition of
Greenbrook Corporate Center and the 277 Park Loan and to repay the note
payable to Wellsford.

(E) Represents the repayment of the note payable to Wellsford which was used
to fund the acquisition of the commercial office properties other than
Greenbrook Corporate Center, utilizing cash on hand ($17.3 million) and
proceeds from the credit facility ($4.3 million).

(F) Represents ERP Operating Partnership's 20% minority interest in Palomino
Park, which has been combined in the Company's Pro Forma Combined Balance
Sheet.

(G) Represents the aggregate of the shares of WRP Newco Common issued in
connection with the Distribution (.25 of a share for every one share of
Wellsford Common), the approximately 215,000 shares to be issued in
connection with the acquisition of the commercial properties, and the
335,000 shares (estimated) of WRP Newco Class A Common to be purchased by
ERP Operating Partnership for $3.5 million.
<PAGE>

14. Changes in and Disagreements
With Accountants on
Accounting and Financial Disclosure.... Not Applicable.

15. Financial Statements and Exhibits

(a) HISTORICAL

Report of Independent Auditors
Combined Balance Sheets at December 31, 1995, December 31, 1996
and March 31, 1997 (Unaudited)
Combined Statements of Income and Equity For the Year Ended December 31,
1996 and For the Three Months Ended March 31, 1997 (Unaudited)
Combined Statements of Cash Flow For the Period From March 22, 1995 to
December 31, 1995, For the Year Ended December 31, 1996 and For the Three
Months Ended March 31, 1997 (Unaudited)
Notes to Combined Financial Statements

PRO FORMA

Combined Income Statements For the Year Ended December 31, 1996
(Unaudited) and For the Three Months Ended March 31, 1997 (Unaudited)
Notes to Unaudited Combined Income Statements
Combined Balance Sheets For the Year Ended December 31, 1996 (Unaudited)
and For the Three Months Ended March 31, 1997 (Unaudited)
Notes to Unaudited Combined Balance Sheets

(b) See Exhibits listed below.

Exhibit No. Description***

3.1 Form of Articles of Amendment and Restatement of the Company.**
3.2 Form of Bylaws of the Company.**
4.1 Specimen certificate for Common Stock.*
10.1 $17.8 million Loan Agreement, dated as of June 28, 1996, by and
between Wellsford Residential Property Trust, as lender, and
Specified Properties VIII, L.P., as borrower, relating to Sonterra.**
10.2 Option Agreement between Wellsford Residential Property Trust, as
purchaser, and Specified Properties VIII, as seller, dated as of June
28, 1996, relating to Sonterra.**
10.3 Operating Agreement of Park at Highlands LLC, dated as of April 27,
1995, between Wellsford Park Highlands Corp. and Al Feld.
10.4 First Amendment to Operating Agreement of Park at Highlands LLC,
dated as of December 29, 1995, between Wellsford Park Highlands Corp.
and Al Feld.**
10.5 Tri-Party Agreement by and among Park at Highlands LLC, NationsBank
of Texas, N.A., Wellsford Park Highlands Corp., Wellsford Residential
Property Trust and Al Feld dated December 29, 1995, relating to Blue
Ridge.**
10.6 Operating Agreement of Red Canyon at Palomino Park LLC between
Wellsford Park Highlands Corp. and Al Feld, dated as of April 17,
1996, relating to Red Canyon.**
10.7 Second Amended and Restated Vacant Land Purchase and Sale Agreement
between Mission Viejo Company and The Feld Company dated March 23,
1995, as amended by First Amendment, dated May 1, 1996, relating to
the land underlying Palomino Park.**
<PAGE>

10.8 Trust Indenture, dated as of December 1, 1995, between Palomino Park
Public Improvements Corporation ("PPPIC") and United States Trust
Company of New York, as trustee, securing Wellsford Residential
Property Trust's Assessment Lien Revenue Bonds Series 1995 -
$14,755,000.
10.9 Letter of Credit Reimbursement Agreement, dated as of December 1,
1995, between PPPIC, Wellsford Residential Property Trust and
Dresdner Bank AG, New York Branch.
10.10 Purchase and Sale Agreement, dated as of November 21, 1996, between
Wellsford Commercial Properties, L.L.C. and American Cyanamid Company
relating to Point View office complex, as amended by Amendment dated
January 13, 1997, Second Amendment dated February 13, 1997 and Third
Amendment dated February 28, 1997, and Indemnification and Stock
Transfer Agreement, dated February 28, 1997, between American
Cyanamid Company and Wellsford Wayne Corp.**
10.11 Agreement of Sale, dated December 2, 1996, between Wellsford
Commercial Properties, L.L.C. and Barlax, relating to Chatham, as
amended by Amendment dated December 23, 1996 and Second Amendment
dated April 1, 1997.**
10.12 Agreement of Sale, dated December 23, 1996, between Wellsford
Commercial Properties, L.L.C. and N.J. Greenbrook Partners, L.P,
relating to Greenbrook.**
10.13 Credit Agreement, dated as of April 25, 1997, between Park Avenue
Financing Company LLC, PAMC Co-Manager Inc., PAFC Management, Inc.,
Stanley Stahl, The First National Bank of Boston, the Company, Other
Banks that may become parties to the Agreement and The First National
Bank of Boston, as Agent, relating to 277 Park Avenue.
10.14 Assignment of Member's Interest, dated as of April 25, 1997, by PAFC
Management, Inc. and Stanley Stahl to The First National Bank of
Boston, relating to 277 Park Avenue (relating to interests in the
Park Avenue Financing Company, LLC).
10.15 Assignment of Member's Interest, dated as of April 25, 1997, by PAMC
Co-Manager Inc. and Park Avenue Financing Company, LLC to The First
National Bank of Boston, relating to 277 Park Avenue (relating to
interests in 277 Park Avenue, LLC).
10.16 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl
to The First National Bank of Boston, relating to 277 Park Avenue
(relating to stock in Park Avenue Management Corporation).
10.17 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl
to The First National Bank of Boston, relating to 277 Park Avenue
(relating to stock in PAMC Co-Manager Inc.).
10.18 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl
to The First National Bank of Boston, relating to 277 Park Avenue
(relating to stock in PAFC Management, Inc.).
10.19 Conditional Guaranty of Payment and Performance, dated as of April
25, 1997, by Stanley Stahl, relating to 277 Park Avenue.
10.20 Cash Collateral Account Security, Pledge and Assignment Agreement,
dated as of April 25, 1997, between 277 Park Avenue, LLC, Park Avenue
Management Corporation, Park Avenue Financing Company LLC, PAMC Co-
Manager Inc., Stanley Stahl and The First National Bank of Boston,
relating to 277 Park Avenue.
10.21 Recognition Agreement, dated as of April 25, 1997, between The First
National Bank of Boston, the Company, Column Financial, Inc., Park
Avenue Financing Company LLC, PAMC Co-Manager, Inc. and 277 Park
Avenue, LLC, relating to 277 Park Avenue.
10.22 Intercreditor Agreement, dated as of April 25, 1997, between the
Company and The First National Bank of Boston, as Agent, relating to
277 Park Avenue.
<PAGE>

10.23 Form of Contribution and Distribution Agreement by and between
Wellsford Residential Property Trust and the Company.**
10.24 Form of Common Stock and Preferred Stock Purchase Agreement by and
between the Company and ERP Operating Limited Partnership.**
10.25 Form of Registration Rights Agreement by and between the Company and
ERP Operating Limited Partnership.**
10.26 Form of Agreement Regarding Palomino Park by and between the Company
and ERP Operating Limited Partnership.**
10.27 Form of Credit Enhancement Agreement by and between the Company and
ERP Operating Limited Partnership, relating to Palomino Park.**
10.28 Form of Sonterra Agreement by and between the Company and ERP
Operating Partnership.**
10.29 Form of 1997 Management Incentive Plan of the Company.
10.30 Form of Rollover Stock Option Plan of the Company.
10.31 Form of Employment Agreement between the Company and Jeffrey H.
Lynford.*
10.32 Form of Employment Agreement between the Company and Edward
Lowenthal.*
10.33 Form of Employment Agreement between the Company and Gregory F.
Hughes.*
10.34 Form of Employment Agreement between the Company and David M.
Strong.*
10.35 Joint Proxy Statement/Prospectus/Information Statement of Wellsford
Residential Property Trust, Equity Residential Properties Trust
("EQR") and the Company, included in EQR's Registration Statement on
Form S-4 declared effective on April 24, 1997.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
______________________________
* To be filed by amendment
** Previously filed as an exhibit to the Form 10 filed on April 23,
1997.
*** The Company acquired its interest in a number of these documents by
assignment.
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.

WELLSFORD REAL PROPERTIES, INC.

By:/s/ Edward Lowenthal
---------------------------------------
Edward Lowenthal
President and Chief Executive Officer
Dated: May 20, 1997

<PAGE>

EXHIBIT INDEX

Exhibit
Number Description of Document***

3.1 Form of Articles of Amendment and Restatement of the Company.**

3.2 Form of Bylaws of the Company.**

4.1 Specimen certificate for Common Stock.*

10.1 $17.8 million Loan Agreement, dated as of June 28, 1996, by and
between Wellsford Residential Property Trust, as lender, and
Specified Properties VIII, L.P., as borrower, relating to Sonterra.**

10.2 Option Agreement between Wellsford Residential Property Trust, as
purchaser, and Specified Properties VIII, as seller, dated as of June
28, 1996, relating to Sonterra.**

10.3 Operating Agreement of Park at Highlands LLC, dated as of April 27,
1995, between Wellsford Park Highlands Corp. and Al Feld.

10.4 First Amendment to Operating Agreement of Park at Highlands LLC,
dated as of December 29, 1995, between Wellsford Park Highlands Corp.
and Al Feld.**

10.5 Tri-Party Agreement by and among Park at Highlands LLC, NationsBank
of Texas, N.A., Wellsford Park Highlands Corp., Wellsford Residential
Property Trust and Al Feld dated December 29, 1995, relating to Blue
Ridge.**

10.6 Operating Agreement of Red Canyon at Palomino Park LLC between
Wellsford Park Highlands Corp. and Al Feld, dated as of April 17,
1996, relating to Red Canyon.**

10.7 Second Amended and Restated Vacant Land Purchase and Sale Agreement
between Mission Viejo Company and The Feld Company dated March 23,
1995, as amended by First Amendment, dated May 1, 1996, relating to
the land underlying Palomino Park.**

10.9 Letter of Credit Reimbursement Agreement, dated as of December 1,
1995, between PPPIC, Wellsford Residential Property Trust and
Dresdner Bank AG, New York Branch.

10.10 Purchase and Sale Agreement, dated as of November 21, 1996, between
Wellsford Commercial Properties, L.L.C. and American Cyanamid Company
relating to Point View office complex, as amended by Amendment dated
January 13, 1997, Second Amendment dated February 13, 1997 and Third
Amendment dated February 28, 1997 and Indemnification and Stock
Transfer Agreement, dated February 28, 1997, between American
Cyanamid Company and Wellsford Wayne Corp.**
<PAGE>

10.11 Agreement of Sale, dated December 2, 1996, between Wellsford
Commercial Properties, L.L.C. and Barlax, relating to Chatham, as
amended by Amendment dated December 23, 1996 and Second Amendment
dated April 1, 1997.**

10.12 Agreement of Sale, dated December 23, 1996, between Wellsford
Commercial Properties, L.L.C. and N.J. Greenbrook Partners, L.P,
relating to Greenbrook.**

10.13 Credit Agreement, dated as of April 25, 1997, between Park Avenue
Financing Company LLC, PAMC Co-Manager Inc., PAFC Management, Inc.,
Stanley Stahl, The First National Bank of Boston, the Company, Other
Banks that may become parties to the Agreement and The First National
Bank of Boston, as Agent, relating to 277 Park Avenue.

10.14 Assignment of Member's Interest, dated as of April 25, 1997, by PAFC
Management, Inc. and Stanley Stahl to The First National Bank of
Boston, relating to 277 Park Avenue (relating to interests in the
Park Avenue Financing Company, LLC).

10.15 Assignment of Member's Interest, dated as of April 25, 1997, by PAMC
Co-Manager Inc. and Park Avenue Financing, LLC to The First National
Bank of Boston, relating to 277 Park Avenue (relating to interests in
277 Park Avenue, LLC).

10.16 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl
to The First National Bank of Boston, relating to 277 Park Avenue
(relating to stock in Park Avenue Management Corporation).

10.17 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl
to The First National Bank of Boston, relating to 277 Park Avenue
(relating to stock in PAMC Co-Manager Inc.).

10.18 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl
to The First National Bank of Boston, relating to 277 Park Avenue
(relating to stock in PAFC Management, Inc.).

10.19 Conditional Guaranty of Payment and Performance, dated as of April
25, 1997, by Stanley Stahl, relating to 277 Park Avenue.

10.20 Cash Collateral Account Security, Pledge and Assignment Agreement,
dated as of April 25, 1997, between 277 Park Avenue, LLC, Park Avenue
Management Corporation, Park Avenue Financing Company LLC, PAMC Co-
Manager Inc., Stanley Stahl and The First National Bank of Boston,
relating to 277 Park Avenue.

10.21 Recognition Agreement, dated as of April 25, 1997, between The First
National Bank of Boston, the Company, Column Financial, Inc., Park
Avenue Financing Company LLC, PAMC Co-Manager, Inc. and 277 Park
Avenue, LLC, relating to 277 Park Avenue.

10.22 Intercreditor Agreement, dated as of April 25, 1997, between the
Company and The First National Bank of Boston, as Agent, relating to
277 Park Avenue.

10.23 Form of Contribution and Distribution Agreement by and between
Wellsford Residential Property Trust and the Company.**
<PAGE>

10.24 Form of Common Stock and Preferred Stock Purchase Agreement by and
between the Company and ERP Operating Limited Partnership.**

10.25 Form of Registration Rights Agreement by and between the Company and
ERP Operating Limited Partnership.**

10.26 Form of Agreement Regarding Palomino Park by and between the Company
and ERP Operating Limited Partnership.**

10.27 Form of Credit Enhancement Agreement by and between the Company and
ERP Operating Limited Partnership, relating to Palomino Park.**

10.28 Form of Sonterra Agreement by and between the Company and ERP
Operating Partnership.**

10.29 Form of 1997 Management Incentive Plan of the Company.

10.30 Form of Rollover Stock Option Plan of the Company.

10.31 Form of Employment Agreement between the Company and Jeffrey H.
Lynford.*

10.32 Form of Employment Agreement between the Company and Edward
Lowenthal.*

10.33 Form of Employment Agreement between the Company and Gregory F.
Hughes.*

10.34 Form of Employment Agreement between the Company and David M.
Strong.*

10.35 Joint Proxy Statement/Prospectus/Information Statement of Wellsford
Residential Property Trust, Equity Residential Properties Trust
("EQR") and the Company, included in EQR's Registration Statement on
Form S-4 declared effective on April 24, 1997.

21.1 Subsidiaries of the Registrant.

27.1 Financial Data Schedule.
______________________________
* To be filed by amendment.
** Previously filed as an exhibit to the Form 10 filed on April 23,
1997.
*** The Company acquired its interest in a number of these documents by
assignment.

<PAGE>

EXHIBIT 10.3

OPERATING AGREEMENT

PARK AT HIGHLANDS LLC,
A COLORADO LIMITED LIABILITY COMPANY

AS OF APRIL 27, 1995
<PAGE>

TABLE OF CONTENTS

Page

ARTICLE 1 - DEFINITIONS. . . . . . . . . . . . . . . . . . . . 1

ARTICLE 2 - FORMATION OF COMPANY . . . . . . . . . . . . . . . 14
2.1 Formation . . . . . . . . . . . . . . . . . . . . 14
2.2 Name. . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Principal Place of Business . . . . . . . . . . . 14
2.4 Registered Office and Registered Agent. . . . . . 14
2.5 Articles of Organization. . . . . . . . . . . . . 15
2.6 Term. . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE 3 - BUSINESS OF COMPANY. . . . . . . . . . . . . . . . 15
3.1 Permitted Businesses. . . . . . . . . . . . . . . 15
3.2 Other Activity or Business. . . . . . . . . . . . 15

ARTICLE 4 - CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS AND LOANS TO
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 15
4.1 Capital Contributions . . . . . . . . . . . . . . 15
4.2 Withdrawal or Reduction of Members'
Contributions to Capital. . . . . . . . . . . . . 16
4.3 Development Deficit Payments. . . . . . . . . . . 16
4.4 Operating Deficit Payments. . . . . . . . . . . . 16
4.5 Additional Capital Contributions. . . . . . . . . 16
4.6 Miscellaneous . . . . . . . . . . . . . . . . . . 16

ARTICLE 5 - INITIAL CLOSING; INFRASTRUCTURE LAND CLOSING;
CONSTRUCTION LOAN CLOSING . . . . . . . . . . . . . . . . 17
5.1 Initial Closing . . . . . . . . . . . . . . . . . 17
5.2 Construction . . . . . . . . . . . . . . . . . . 18
5.3 Infrastructure Land Closing and Bond Financing
of Infrastructure . . . . . . . . . . . . . . . . 21
5.4 Failure of Initial Closing or Construction Loan
Closing to Occur. . . . . . . . . . . . . . . . . 22

ARTICLE 6 - DEVELOPMENT OF PROJECT; OPERATIONS PRIOR TO THE FINAL
CLOSING DATE. . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Duties of Feld. . . . . . . . . . . . . . . . . . 22
6.2 Construction Completion . . . . . . . . . . . . . 24
6.3 Development Deficit Guaranty. . . . . . . . . . . 24
6.4 Operating Deficit Guaranty. . . . . . . . . . . . 25
6.5 Liabilities of the Company. . . . . . . . . . . . 25
6.6 Construction Contracts. . . . . . . . . . . . . . 25
6.7 Administration of the Construction Loan . . . . . 25
6.8 Change Orders . . . . . . . . . . . . . . . . . . 26
6.9 Retainage . . . . . . . . . . . . . . . . . . . . 26
6.10 Agreements with Affiliates. . . . . . . . . . . . 26
6.11 Warranty by Feld. . . . . . . . . . . . . . . . . 27
6.12 Insurance . . . . . . . . . . . . . . . . . . . . 27
6.13 Personal Obligation . . . . . . . . . . . . . . . 29
6.14 Force Majeure . . . . . . . . . . . . . . . . . . 29
6.15 Limitations of Feld's Authority . . . . . . . . . 29
6.16 Pre-Existing Environmental Condition. . . . . . . 29

ARTICLE 7 - COMPENSATION TO FELD . . . . . . . . . . . . . . . 30
<PAGE>

7.1 Development Management Fee. . . . . . . . . . . . 30
7.2 Construction Management Fee . . . . . . . . . . . 30
7.3 Construction Loan Guarantee Fee . . . . . . . . . 30
7.4 Cost Savings Fee. . . . . . . . . . . . . . . . . 30
7.5 Incentive Fee . . . . . . . . . . . . . . . . . . 30
7.6 Conditions to Payment of Fees; Right of Offset. . 30

ARTICLE 8 - FINAL CLOSING. . . . . . . . . . . . . . . . . . . 31
8.1 Conditions to Final Closing . . . . . . . . . . . 31
8.2 Initiation of Final Closing . . . . . . . . . . . 31
8.3 Actions at the Final Closing. . . . . . . . . . . 31
8.4 Certain Rights of Feld Upon Satisfaction of
Final Closing Funding Conditions. . . . . . . . . 32

ARTICLE 9 - ALLOCATIONS. . . . . . . . . . . . . . . . . . . . 33
9.1 Profits and Losses. . . . . . . . . . . . . . . . 33
9.2 General Provisions. . . . . . . . . . . . . . . . 33
9.3 Special Provisions. . . . . . . . . . . . . . . . 33
9.4 Code Section 704(c) Allocations . . . . . . . . . 35
9.5 Allocations Relating to Taxable Issuance of
Interest. . . . . . . . . . . . . . . . . . . . . 35

ARTICLE 10 - DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 35
10.1 Cash Flow . . . . . . . . . . . . . . . . . . . . 36
10.2 Division Among Members. . . . . . . . . . . . . . 36
10.3 Special Distributions to WPHC . . . . . . . . . . 36

ARTICLE 11 - BOOKS, RECORDS, AND ACCOUNTING. . . . . . . . . . 36
11.1 Books and Records . . . . . . . . . . . . . . . . 36
11.2 Reports . . . . . . . . . . . . . . . . . . . . . 36
11.3 Tax Returns . . . . . . . . . . . . . . . . . . . 37
11.4 Special Basis Adjustment. . . . . . . . . . . . . 37
11.5 Tax Matters Partner . . . . . . . . . . . . . . . 37
11.6 Bank Accounts . . . . . . . . . . . . . . . . . . 38

ARTICLE 12 - MANAGEMENT. . . . . . . . . . . . . . . . . . . . 38
12.1 Management. . . . . . . . . . . . . . . . . . . . 38
12.2 Number, Tenure and Qualifications . . . . . . . . 38
12.3 Appointment of Feld as Manager. . . . . . . . . . 38
12.4 Certain Powers of Managers. . . . . . . . . . . . 38
12.5 Member Approval of Certain Acts . . . . . . . . . 39
12.6 Liability for Certain Acts. . . . . . . . . . . . 40
12.7 Indemnity of the Members and the Managers . . . . 40
12.8 Manner of Acting. . . . . . . . . . . . . . . . . 40
12.9 Informal Act by Managers. . . . . . . . . . . . . 40
12.10 Participation by Electronic Means . . . . . . . . 41
12.11 Resignation . . . . . . . . . . . . . . . . . . . 41
12.12 Removal . . . . . . . . . . . . . . . . . . . . . 41
12.13 Death or Disability of Feld . . . . . . . . . . . 43
12.14 Vacancies . . . . . . . . . . . . . . . . . . . . 43
12.15 Prohibition Against Publicly Traded
Partnership . . . . . . . . . . . . . . . . . . . 43

ARTICLE 13 - REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . 43
13.1 Representations and Warranties of Each Member . . 43
13.2 Representations, Warranties and Covenants of
Feld. . . . . . . . . . . . . . . . . . . . . . . 44
13.3 General Representation. . . . . . . . . . . . . . 47
<PAGE>

13.4 Survival; Indemnity . . . . . . . . . . . . . . . 47

ARTICLE 14 - RIGHTS AND OBLIGATIONS OF MEMBERS . . . . . . . . 48
14.1 Limitation of Liability . . . . . . . . . . . . . 48
14.2 Company Debt Liability. . . . . . . . . . . . . . 49
14.3 List of Members . . . . . . . . . . . . . . . . . 49
14.4 Company Books . . . . . . . . . . . . . . . . . . 49
14.5 Priority and Return of Capital. . . . . . . . . . 49
14.6 Outside Activity. . . . . . . . . . . . . . . . . 49

ARTICLE 15 - MEETINGS OF MEMBERS . . . . . . . . . . . . . . . 50
15.1 Annual Meeting. . . . . . . . . . . . . . . . . . 50
15.2 Special Meetings. . . . . . . . . . . . . . . . . 50
15.3 Place of Meetings . . . . . . . . . . . . . . . . 50
15.4 Notice of Meetings. . . . . . . . . . . . . . . . 50
15.5 Meeting of all Members. . . . . . . . . . . . . . 50
15.6 Record Date . . . . . . . . . . . . . . . . . . . 51
15.7 Quorum. . . . . . . . . . . . . . . . . . . . . . 51
15.8 Manner of Acting. . . . . . . . . . . . . . . . . 51
15.9 Proxies . . . . . . . . . . . . . . . . . . . . . 51
15.10 Action by Members Without a Meeting . . . . . . . 51
15.11 Voting by Ballot. . . . . . . . . . . . . . . . . 52
15.12 Waiver of Notice. . . . . . . . . . . . . . . . . 52

ARTICLE 16 - TRANSFERABILITY; PUT-CALL PROVISIONS. . . . . . . 52
16.1 Restrictions on Transferability . . . . . . . . . 52
16.2 Put-Call Rights . . . . . . . . . . . . . . . . . 52
16.3 Calculation of Option Price . . . . . . . . . . . 53
16.4 Right of Offset . . . . . . . . . . . . . . . . . 54
16.5 Restrictions on Resignation . . . . . . . . . . . 54
16.6 Permitted WPHC Transfer . . . . . . . . . . . . . 54

ARTICLE 17 - ADMISSION OF ADDITIONAL MEMBERS . . . . . . . . . 54

ARTICLE 18 - DISSOLUTION AND TERMINATION . . . . . . . . . . . 55
18.1 Dissolution . . . . . . . . . . . . . . . . . . . 55
18.2 Effect of Filing of Dissolving Statement. . . . . 55
18.3 Distribution of Assets Upon Dissolution . . . . . 55
18.4 Articles of Dissolution . . . . . . . . . . . . . 56
18.5 Filing of Articles of Dissolution . . . . . . . . 56
18.6 Winding Up. . . . . . . . . . . . . . . . . . . . 56
18.7 No Restoration of Deficit Capital Accounts. . . . 56
18.8 Deemed Liquidation. . . . . . . . . . . . . . . . 57
18.9 Permitted Withdrawal by Feld. . . . . . . . . . . 57

ARTICLE 19 - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . 57
19.1 Statement of Intent of Parties. . . . . . . . . . 57
19.2 Notices . . . . . . . . . . . . . . . . . . . . . 58
19.3 Application of Colorado Law . . . . . . . . . . . 59
19.4 Waiver of Action for Partition. . . . . . . . . . 59
19.5 Amendments. . . . . . . . . . . . . . . . . . . . 59
19.6 Construction. . . . . . . . . . . . . . . . . . . 59
19.7 Headings. . . . . . . . . . . . . . . . . . . . . 59
19.8 Waivers . . . . . . . . . . . . . . . . . . . . . 59
19.9 Time of the Essence . . . . . . . . . . . . . . . 59
19.10 Remedies for Default. . . . . . . . . . . . . . . 59
19.11 Rights and Remedies Cumulative. . . . . . . . . . 59
19.12 Severability. . . . . . . . . . . . . . . . . . . 60
<PAGE>

19.13 Heirs, Successors and Assigns . . . . . . . . . . 60
19.14 Counterparts. . . . . . . . . . . . . . . . . . . 60
19.15 Further Assurances. . . . . . . . . . . . . . . . 60
19.16 Entire Agreement. . . . . . . . . . . . . . . . . 60
<PAGE>

THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON DELIVERY
TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE
MANAGERS OF THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR
SUCH TRANSFER OR THE SUBMISSION TO THE MANAGERS OF THE COMPANY OF
SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE MANAGERS TO THE
EFFECT THAT ANY SUCH TRANSFER OR SALE WILL NOT BE IN VIOLATION OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.

OPERATING AGREEMENT OF
PARK AT HIGHLANDS LLC,
A COLORADO LIMITED LIABILITY COMPANY

THIS OPERATING AGREEMENT is made as of the 27th day of
April, 1995 by and among AL FELD, an individual ("Feld"), and
WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation ("WPHC"),
as the members of PARK AT HIGHLANDS LLC, a Colorado limited
liability company (the "Company").

NOW THEREFORE, pursuant to the Act, the following shall
constitute the Operating Agreement of PARK AT HIGHLANDS LLC, a
Colorado limited liability company.

ARTICLE 1
DEFINITIONS

The following terms used in this Operating Agreement shall
have the following meanings (unless otherwise expressly provided
herein):

(a) "Accountants" means Ernst & Young or such other
accountant engaged by the Company with the unanimous consent of
the Members.

(b) "Act" means the version of the Colorado Limited
Liability Company Act adopted by the State of Colorado, Colo.
Rev. Stat. Sections7-80-101 to 7-80-913, as amended from time to
time.

(c) "Adjusted Capital Account Deficit" with respect to any
Member means the deficit balance, if any, in such Member's
Capital Account as of the end of any Fiscal Year after giving
effect to the following adjustments: (i) credit to such Capital
Account the sum of (A) any amount which such Member is obligated
to restore to such Capital Account pursuant to any provision of
this Agreement, plus (B) an amount equal to such Member's share
of Partnership Minimum Gain as determined under Regulation
Section 1.704-2(g)(1) and such Member's share of Partner
Nonrecourse Debt Minimum Gain as determined under Regulation
Section 1.704-2(i)(5), plus (C) any amounts which such Member is
<PAGE>

deemed to be obligated to restore pursuant to Regulation Section
1.704-1(b)(2)(ii)(c); and (ii) debit to such Capital Account the
items described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
(5) and (6).

(d) "Affiliate" means any Person controlling the
outstanding equity interests or profits interests of any other
Person, any Person whose outstanding equity interests are
controlled by any other Person, or any Person controlling,
controlled by, or under common control with any other Person.

(e) "Agreement" shall mean this Operating Agreement as
originally executed and as it may be amended from time to time.

(f) "Approved Affiliate Agreements" shall have the meaning
set forth in Section 5.2.6 hereof.

(g) "Architect's Agreement" means the agreement to be
entered into between the Company and Feld Design, Inc.
("Architect"), an Affiliate of Feld, at or prior to the
Construction Loan Closing.

(h) "Asset Value" with respect to any Company asset means:

(i) The fair market value, when contributed, of any
asset contributed to the Company by any Member;

(ii) The fair market value on the date of distribution
of any asset distributed by the Company to any Member as
consideration for an Interest in the Company;

(iii) The fair market value of all Property at the time
of the happening of any of the following events: (A) the
admission of a Member to, or the increase of an Interest of an
existing Member in, the Company in exchange for a Capital
Contribution; or (B) the liquidation of the Company under
Regulation Section 1.704-1(b)(2)(ii)(g); or

(iv) The Basis of the asset in all other circumstances.

(i) "Bankruptcy Event" with respect to the Company or any
Member means any one of:

(A) Filing a voluntary petition in bankruptcy or for
reorganization or for adoption of an arrangement under the
Bankruptcy Code;

(B) Making a general assignment for the benefit of
creditors;

(C) The appointment by a court of a receiver for all
or a portion of the property of the Company or for all or a
portion of a Member's property having an aggregate value in
excess of $500,000;

(D) The entry of an order for relief in the case of an
involuntary petition in bankruptcy; or
<PAGE>

(E) The assumption of custody or sequestration by a
court of competent jurisdiction of all or substantially all of
the Company's or such Member's property, as appropriate.

(j) "Basis" with respect to an asset means the adjusted
basis from time to time of such asset for federal income tax
purposes.

(k) "Call Option" means the call option of WPHC with
respect to the Interest of Feld as described in Section 16.2.1
hereof.

(l) "Capital Account" means an account maintained for each
Member in accordance with Regulation Sections 1.704-1(b) and
1.704-2 and to which the following provisions apply to the extent
not inconsistent with such Regulations:

(i) There shall be credited to each Member's Capital
Account (A) such Member's Capital Contributions; (B) such
Member's distributive share of Profits; (C) any items of income
or gain specially allocated to such Member under Section 9.3 of
this Agreement; and (D) the amount of any Company liabilities
(determined as provided in Code Section 752(c) and the
Regulations thereunder) assumed by such Member or to which
Property distributed to such Member is subject;

(ii) There shall be debited to each Member's Capital
Account (A) the amount of money and the Asset Value of any
Property distributed to such Member pursuant to this Agreement;
(B) such Member's distributive share of Losses; (C) any items of
expense or loss which are specially allocated to such Member
under Section 9.3 of this Agreement, and (D) the amount of
liabilities (determined as provided in Code Section 752(c) and
the Regulations thereunder) of such Member assumed by the Company
or to which Property contributed to the Company by such Member is
subject; and

(iii) The Capital Account of any transferee Member
shall include the appropriate portion of the Capital Account of
the Member from whom the transferee Member's Interest was
obtained.

(m) "Capital Contribution" means the amount of money and
the Asset Value of any property other than money contributed to
the Company by a Member with respect to such Member's Interest in
the Company.

(n) "Capital Contribution Balance" means with respect to
any Member the aggregate Capital Contributions made by such
Member, plus an amount corresponding to interest thereon at an
annual rate of twelve percent (12%) from the date(s) such Capital
Contributions are made until the Option Closing Date. The
parties acknowledge that the definition of Capital Contribution
Balance is only used in connection with the determination of Fair
Market Value of Feld's Interest.

(o) "Cash Flow" means the Operating Cash Flow and Sales or
Refinancing Cash Flow for any given period.
<PAGE>

(p) "Code" means the Internal Revenue Code of 1986, as
amended, or corresponding provisions of subsequent superseding
federal revenue laws.

(q) "Company" means PARK AT HIGHLANDS LLC, a Colorado
limited liability company.

(r) "Construction Consultant" means the Construction
Consultant selected by WPHC to monitor construction on behalf of
WPHC, or such other consultant as may be selected by WPHC.

(s) "Construction Lender" means the maker of the
Construction Loan, or its successor and assigns in such capacity.

(t) "Construction Loan" means the Construction Loan in the
anticipated principal amount of $35,000,000 to be made to the
Company by the Construction Lender at the Construction Loan
Closing.

(u) "Construction Loan Closing" means the closing of the
transactions described in Section 5.2 hereof.

(v) "Construction Loan Closing Date" means the date on
which the Construction Loan Closing occurs.

(w) "Construction Loan Outside Date" has the definition
given it in Section 5.2.4 hereof.

(x) "Construction Procedures" means the requirements
regarding construction procedures set forth on Exhibit B attached
hereto.

(y) "Conversion Date" means the later of (A) the date on
which Substantial Completion has occurred, or (B) the date which
is the earlier of (i) twenty-eight (28) months from the
Construction Loan Closing Date, or (ii) the date upon which the
construction period interest line item in the budget for the
Construction Loan has been exhausted.

(y) "Control" means the direct or indirect ownership of at
least 50% of the equity interests or profits interests of any
other Person.

(z) "Cost Savings" means the positive amount, if any, by
which the Total Budgeted Development Costs exceed the actual
Development Costs incurred through the Final Closing Date.

(aa) "Deposit Agreement" means the Deposit and Contract
Administration Agreement between WPHC and The Feld Company
regarding the Land Contract, which Deposit and Contract
Administration Agreement is attached hereto as Exhibit C.

(ab) "Depreciation" for any Fiscal Year or other period
means the cost recovery deduction with respect to an asset for
such year or other period as determined for federal income tax
purposes, provided that if the Asset Value of such asset differs
from its Basis at the beginning of such year or other period,
<PAGE>

depreciation shall be determined as provided in Regulation
Section 1.704-1(b)(2)(iv)(g)(3).

(ac) "Development Costs" means the direct or indirect costs
paid or accrued by the Company related to the acquisition of the
Project Land and the development of the Project, including
without limitation: (i) all costs of construction and development
of the Project; (ii) all costs of causing the Project and its
operations to comply with laws prior to the Conversion Date;
(iii) all real estate taxes, assessments and personal property
taxes relating to the period prior to the Conversion Date; (iv)
all costs of insurance incurred by or charged to the Company
relating to the period prior to the Conversion Date; (v) all fees
paid to Feld or its Affiliates (excluding the property management
fee paid to The Feld Company after the Conversion Date); (vi) all
financing costs relating to the period prior to the Conversion
Date, including origination fees, reimbursement of expenses of
the Construction Lender and interest; (vii) all costs of
administration of the Company, including legal and accounting
fees prior to or on the Final Closing Date; (viii) all Operating
Expenses incurred prior to the Conversion Date; and (ix) costs of
title insurance endorsements deleting the mechanic's lien
exception from the owner's title policy and bringing the date of
the owner's title policy down to the date of Final Closing.

(ad) "Development Deficits" means the positive amount, if
any, by which (a) Development Costs exceed (b) the sum of the
Capital Contributions of the Members required to be made at the
Initial Closing, the Final Closing Capital Contribution and the
Net Operating Income for the period prior to the Conversion Date.

(ae) "Development Deficit Payments" shall mean the
Development Deficit Payments to be paid by Feld pursuant to
Section 6.3 of this Agreement.

(af) "Entity" means any general partnership, limited
partnership, limited liability company, corporation, joint
venture, trust, business trust, cooperative or association, or
any governmental or quasi-governmental agency or body.

(ag) "Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C.A. Section 9601, et. seq.; the Hazardous Materials
Transportation Act, 49 U.S.C.A. Section 1801, et. seq.; the
Resource Conversation and Recovery Act, 42 U.S.C.A. Section 6901,
et. seq.; the Toxic Substances Control Act, 15 U.S.C.A. Section
2601, et. seq.; the Federal Water Pollution Control Act, 33
U.S.C.A. Section 1251, et. seq.; any Colorado environmental laws;
or any successor to such laws (in existence on the date any
relevant representation is made or updated), or any other
federal, state or local environmental, health or safety statute,
ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards concerning or in
connection with hazardous or toxic wastes, substances, material,
smoke, gas or particulate matter as now or at any time hereafter
in effect, or any common law theory based on nuisance or strict
liability.
<PAGE>

(ah) "Environmental Reports" means the Environmental Site
Assessment prepared by ATEC Associates dated March 16, 1994,
concerning the Land.

(ai) "Fair Market Value of Feld's Interest" means the
following:

(i) one percent (1.0%) of the following: (A) the fair
market value of the Partnership's assets as determined by the
Accountants based on the books and records of the Company and on
a current appraisal of the Project, minus (B) the amount of the
Company's debts and liabilities, including without limitation,
any debt encumbering the Project, trade payables, accrued
expenses and adjustments for any reasonably foreseeable
contingent liabilities as determined by the Accountants and
accrued but unpaid Incentive Fees and any other fees payable to
Feld, minus (C) the Infrastructure Cost allocable to the Project
made on the same basis that such allocation of Infrastructure
Cost is made in connection with the calculation of the Incentive
Fee; minus

(ii) the amount determined as of the Option Closing
Date by which (A) one percent (1.0%) of the aggregate Capital
Contribution Balances of Feld and WPHC exceeds (B) the Capital
Contribution Balance of Feld.

(aj) "Final Closing" means the closing of the transactions
described in Article 8 hereof.

(ak) "Final Closing Date" means the date on which the Final
Closing occurs.

(al) "Final Closing Capital Contribution" means the Capital
Contribution to be made by WPHC pursuant to Section 4.1.2(b)
hereof, when, as and if required by this Agreement.

(am) "Final Closing Funding Conditions" means the conditions
to the obligations of WPHC to make the Final Closing Capital
Contribution, which conditions are set forth on Exhibit D
attached hereto.

(an) "Final Completion" means the lien-free completion of
construction of the improvements in accordance with the Plans and
Specifications (subject only to minor and inconsequential field
changes and other changes consented to by WPHC), including
without limitation, completion or correction of all punchlist
items and seasonal items such as landscaping to the reasonable
satisfaction of WPHC, payment and release of all liens of
subcontractors, materialmen, and other providers of labor,
equipment, material and/or services to the Property and the
Project as evidenced by the receipt of all unconditional lien
releases from all such subcontractors, materialmen and all other
providers of labor, equipment, material and/or services to the
Property and the Project, or in the event a lien is being
contested, the posting by Feld of collateral in an amount and
form reasonably satisfactory to WPHC, which may include providing
a surety bond to which the lien is transferred and providing
title insurance coverage against such liens.
<PAGE>

(ao) "Fiscal Year" means the taxable year of the Company for
federal income tax purposes as determined under Code Section 706
and the Regulations thereunder.

(ap) "Force Majeure" means acts of God, strikes, shortages
of labor or materials, weather conditions or other matters not
reasonably within Feld's control ("Force Majeure"), except that
under no circumstances shall lack of available funds be
considered an event of Force Majeure.

(aq) "Gross Operating Revenues" shall mean, with respect to
any given period of time, all gross operating income and rental
revenues actually received by or paid to or for the account of
the Company with respect to the ownership, operation, leasing and
occupancy of the Project, excluding tenant security deposits paid
under Leases but including, but not limited to, any and all of
the following: (i) rentals paid by tenants under leases of space
in the Project ("Leases"); (ii) late charges and interest paid by
tenants under Leases; (iii) rents and receipts from vending
machines and similar items; (iv) fees from parking garages or
carports, if applicable; and (v) cable television and telephone
revenues.

(ar) "Hazardous Materials" means without limitation,
(i) asbestos or any material composed of or containing asbestos
or urea formaldehyde in any form and in any type; (ii)
polychlorinated biphenyl compounds; (iii) oil hydrocarbons,
petroleum, petroleum products or products containing or derived
from petroleum; (iv) any hazardous or toxic waste, substance,
material, smoke, gas or particulate matter, as presently defined
by or for purposes of Environmental Laws.

(as) "Incentive Fee" has the meaning set forth in Section
7.5 hereof.

(at) "Infrastructure" means the interior street
improvements, utilities, landscaping, a perimeter wall and gate,
a guardhouse, a recreational center and amenities, and a park and
recreational amenities to be constructed on the Infrastructure
Land, as more particularly described on Exhibit E attached
hereto.

(au) "Infrastructure Costs" means the actual cost of
acquiring, constructing and developing all of the Infrastructure,
including without limitation the cost of the Infrastructure Land,
design and engineering costs, construction management fees,
general contractor fees, property taxes on the Infrastructure
Land prior to completion of the Infrastructure, interest expense
on the Infrastructure Land and the Infrastructure at an assumed
nine percent (9.0%) rate of interest for the period prior to the
completion of each applicable phase of the Infrastructure.
Infrastructure shall not include the cost of issuance of bonds to
finance the Infrastructure. If all of the Infrastructure has not
been finally completed at the time of determination of
Infrastructure Costs due to phasing of the construction of
Infrastructure or for any other reason, then Infrastructure Costs
shall include an amount equal to the expected amount of
<PAGE>

Infrastructure Costs upon final completion of the Infrastructure
as reasonably determined by WPHC.

(av) "Infrastructure Land" means an approximately thirty
(30) acre parcel of the Land on which the Infrastructure
improvements shall be constructed, which parcel is described on
Exhibit F attached hereto.

(aw) "Infrastructure Improvements Agreement" has the meaning
set forth in Section 5.3.3 hereof.

(ax) "Initial Closing" means the closing of the transactions
described in Section 5.1 hereof.

(ay) "Initial Closing Date" means the date on which the
Initial Closing occurs.

(az) "Interest" means the ownership interest of a Member in
the Company at any particular time, including the right of such
Member to any and all benefits to which such member may be
entitled as provided in this Agreement or the Act, together with
the obligations of such Member to comply with all the terms and
provisions of this Agreement and the Act. Such Interest of each
Member shall, except as specifically provided herein, be the
percentage of the aggregate of such benefits or obligations
specified in this Agreement as such Member's Percentage Interest.

(ba) "Land" means the parcel of land located in Douglas
County, Colorado, which parcel is described on Exhibit G attached
hereto.

(bb) "Land Contract" means that certain Second Amended and
Restated Vacant Land Purchase and Sale Agreement dated March 23,
1995, between Mission Viejo Company, as Seller, and The Feld
Company, as Purchaser, as assigned to and assumed by WPHC by that
certain Assignment and Assumption Agreement - Purchase Agreement
dated May 2, 1995, and that portion of which relating to the Land
will be assigned to and assumed by the Company by that certain
Assignment and Assumption Agreement - Phase I dated May 2, 1995.

(bc) "Majority In Interest" shall mean Members holding a
majority of the Percentage Interests.

(bd) "Managers" shall mean one or more managers.
Specifically, "Managers" shall mean Feld or any other Persons
that succeed such Manager in that capacity. Managers need not be
residents of the State of Colorado or Members of the Company.
References to the Manager in the singular or as him, her, it,
itself, or other like references shall also, where the context so
requires, be deemed to include the plural or the masculine or
feminine reference, as the case may be.

(be) "Master Development" means a five-phase, gated
apartment community to be constructed on the Master Development
Land, including a central 23-acre park containing a clubhouse,
swimming pool and health club. The approximate anticipated
number of units in each phase of the Master Development is as
follows: Phase I - 456; Phase II - 316; Phase III - 320; Phase
<PAGE>

IV - 436; and Phase V - 352, for a total of 1,880 units if fully
developed.

(bf) "Master Development Land" means the Land described on
Exhibit H attached hereto, which land is all of the land to be
sold and conveyed pursuant to the Land Contract.

(bg) "Material Default" means a default by Feld in any of
its obligations hereunder which in the reasonable judgment of
WPHC has caused or is likely to cause damages to WPHC of $250,000
or more.
(bh) "Members" shall mean Feld and WPHC and each of the
parties who may hereafter become additional or substituted
Members.

(bi) "Minimum Option Price" means $50,000.

(bj) "Multi-Family Project" shall mean an apartment project,
condominium project, town-home project or other multi-family
residential project.

(bk) "Net Operating Income" means, with respect to any given
period of time, the aggregate Gross Operating Revenue for such
period of time minus the aggregate Operating Expenses for such
period of time. Notwithstanding the foregoing, in connection
with the calculation of the Incentive Fee, Net Operating Income
shall be determined on an accrual basis for the relevant period
with the following additional adjustments: if property taxes do
not fully reflect the completion of the Project, then the
property taxes shall be increased to the amount of property taxes
that would have been assessed had the Project been completed and
included in the calculation of the property taxes.

(bl) "Operating Cash Flow" means with respect to any given
period the Net Operating Income of the Company actually received
and attributable to such period reduced by all debt service
charges and expenses related to such period and by expenditures
required to be capitalized for federal income tax purposes
incurred during such period (other than Development Costs).

(bm) "Operating Deficits" means, for any specified period,
the greater of 0 or the following: (A) the interest payments,
accruals and periodic charges and expenses on the Construction
Loan for such period; plus (B) the aggregate Operating Expenses
for such period of time; minus (c) Gross Operating Revenue for
such period of time.

(bn) "Operating Deficit Payments" shall mean the Operating
Deficit Payments to be paid by Feld pursuant to Section 6.4 of
this Agreement.

(bo) "Operating Expenses" shall mean with respect to any
given period of time all expenses of the Company in connection
with the ownership, operation, leasing and occupancy of buildings
in the Project, which either are rent-ready or all or any portion
of which are occupied by tenants, attributable to such period of
time as determined on an accrual basis, excluding interest
payments and accruals on the Construction Loan but including, but
<PAGE>

not limited to, any and all of the following: (i) general real
estate taxes; (ii) special assessments or similar charges; (iii)
personal property taxes, if any; (iv) sales and use taxes
applicable to such operating expenses; (v) cost of utilities for
the Project; (vi) maintenance and repair costs of the Project;
(vii) operating and management expenses and fees; (viii) premiums
of insurance carried on or with respect to the Project; (ix)
costs, including leasing commissions, advertisement and
promotional costs, to obtain leases and the cost of work
performed to ready space in the Project for occupancy under
leases; (x) accounting and auditing fees and costs, attorneys'
fees and other administrative and general expenses and
disbursements of the Company in connection with the ownership,
operation, leasing and management of the Project; (xi) expensed
improvements in accordance with the accounting practices of WRPT;
(xii) an allocable share of the costs and expenses of operating
and maintaining the Infrastructure, excluding such costs and
expenses that are paid by the owner of any other phase of the
Master Development or are paid from operating reserves of the
Infrastructure owner established in connection with the financing
of the Infrastructure (the method of allocation of such costs and
expenses shall be agreed upon by the Members at or prior to the
Construction Loan Closing); and (xiii) any other costs, charges
or expenses incurred by the Company which are not Development
Costs.

(bp) "Option Closing Date" means the date on which the Call
Option or the Put Option shall close.

(bq) "Option Price" means the greater of the Fair Market
Value of Feld's Interest and the Minimum Option Price.

(br) "Outside Date" means the date that is thirty-six (36)
months following the closing of the Construction Loan Closing
Date. Such Outside Date may be extended by Force Majeure, but in
no event by more than 120 days.

(bs) "Percentage Interest" shall mean the following: (i)
with respect to Feld, one percent (1.0%); and (ii) with respect
to WPHC, ninety-nine percent (99.0%).

(bt) "Person" shall mean any individual or Entity, and the
heirs, executors, administrators, legal representatives,
successors, and assigns of such Person where the context so
admits.

(bu) "Plans and Specifications" means the for-construction
plans and specifications for the construction of the Project,
which plans and specifications are to be prepared and approved by
the Members as described in Section 5.2.2 hereof.

(bv) "Pre-Existing Environmental Condition" means the
presence, if any, of Hazardous Materials on or about the Project
Land on the Initial Closing Date which at any subsequent time
constitutes a violation of Environmental Laws or which subjects
or is reasonably expected to subject the Company or its Members
or Managers to liability to any Person.
<PAGE>

(bw) "Pre-Existing Environmental Condition Liability" means
any liability, loss, damage or cost incurred by the Company prior
to the Final Closing Date arising from a Pre-Existing
Environmental Condition, including without limitation, any
increase in Development Costs or Operating Expenses arising
directly from a Pre-Existing Environmental Condition.

(bx) "Profits" and "Losses" for any Fiscal Year or other
period means an amount equal to the Company's taxable income or
loss for such year or period determined in accordance with Code
Section 703(a) and the Regulations thereunder with the following
adjustments:

(i) All items of income, gain, loss and deduction of
the Company required to be stated separately shall be included in
taxable income or loss;

(ii) Income of the Company exempt from federal income
tax shall be treated as taxable income;

(iii) Expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as such expenditures under
Regulation Section 1.704-1(b)(2)(iv)(i) shall be subtracted from
taxable income;

(iv) The difference between Basis and Asset Value shall
be treated as gain or loss upon the happening of any event
described in Article 1(h)(i), (ii) or (iii);

(v) Gain or loss resulting from the disposition of
Property from which gain or loss is recognized for federal income
tax purposes shall be determined with reference to the Asset
Value of such Property;

(vi) Depreciation shall be determined based upon Asset
Value instead of as determined for federal income tax purposes;
and

(vii) Items which are specially allocated under Article
9 of this Agreement shall not be taken into account.

(by) "Project" means the 456-unit apartment complex and
related facilities and amenities to be constructed on the Project
Land in accordance with the Plans and Specifications. Project
does not include the Infrastructure.

(bz) "Project Budget" means the budget for construction and
development of the Project by the Company. An "Initial Project
Budget is attached hereto as Exhibit I. As described in Section
5.2.3 hereof, in connection with the Construction Loan Closing,
the Members shall agree upon the "Final Project Budget."

(ca) "Project Land" means the Land excluding the
Infrastructure Land.

(cb) "Property" means all real and personal property,
tangible and intangible, owned by the Company.
<PAGE>

(cc) "Property Management Agreement" means the Property
Management Agreement to be entered into between the Company and
The Feld Company, an Affiliate of Feld, in the form attached
hereto as Exhibit J. The Property Management Agreement provides
that it shall terminate on the first to occur of the following:
(i) at the option of either party, upon the Removal of Feld; and
(ii) after the Final Closing Date, upon 30 days' written notice
of termination from one party to the other.

(cd) "Put Option" means the put option of Feld with respect
to the Interest of Feld as described in Section 16.2.2 hereof.

(ce) "Regulations" means the federal income tax regulations,
including temporary (but not proposed) regulations, promulgated
under the Code.

(cf) "Removal" means the removal of Feld pursuant to Section
12.12 hereof.

(cg) "Removal Event" has the meaning set forth in
Section 12.12 hereof.

(ch) "Restricted Party" has the meaning set forth in Section
14.6.4 hereof.

(ci) "Sales or Refinancing Cash Flow" means, for any given
period, the cash proceeds received from the Company from the
sale, other disposition, or refinancing of any or all of the
Property (including payments of principal and interest on
obligations received by the Company in connection with such sale
or other disposition) in excess of amounts necessary to discharge
Company obligations with respect to such Property.

(cj) "Substantial Completion" means satisfaction of all of
the following: (i) completion of construction of the Project in
compliance with the Plans and Specifications (subject only to
minor and inconsequential field changes and other changes
consented to by WPHC, punch list items and seasonal items such as
landscaping which do not interfere with the occupancy and use of
the Project, and liens of subcontractors, materialmen, and other
providers of labor, equipment, material and/or services to the
Property and the Project not yet due and payable or for which
either a surety bond or title insurance reasonably acceptable to
WPHC is provided by Feld), as evidenced by temporary or permanent
certificate(s) of occupancy, or the equivalent, issued by the
applicable governmental authority for all buildings which are
part of the Project, which permit the occupancy and use of all
the apartment units; and (ii) each unit in the Project having
been made rent-ready, including, without limitation, the
installation of all appliances (including, without limitation,
refrigerators and ranges), light fixtures, floor coverings and
window coverings required by the Plans and Specifications or
otherwise required for the use, occupancy, and operation of the
units.

(ck) "Substitute Member" shall mean any Person who or which
is admitted to the Company as a substitute Member pursuant to
Colo. Rev. Stat. Section 7-80-702(2) (1991), as it may be
<PAGE>

amended.

(cl) "Total Budgeted Development Costs" means the Total
Development Costs as shown on the Final Project Budget.

(cm) "WRPT" means Wellsford Residential Property Trust, a
Maryland real estate investment trust, which is an Affiliate of
WPHC.

(cn) "WPHC" means Wellsford Park Highlands Corp., a Colorado
corporation.

ARTICLE 2
FORMATION OF COMPANY

2.1 Formation. On April 27, 1995, the parties hereto
organized the Company as a Colorado limited liability company
under and pursuant to the Act.

2.2 Name. The name of the Company is Park at Highlands
LLC, a Colorado limited liability company.

2.3 Principal Place of Business. The principal place of
business of the Company within the State of Colorado shall be
370 Seventeenth Street, Suite 3100, Denver, Colorado 80202. The
Company may locate its places of business and registered office
at any other place or places as the Managers may from time to
time deem advisable.

2.4 Registered Office and Registered Agent. The Company's
registered office shall be at the office of its registered agent
at 370 Seventeenth Street, Suite 3100, Denver, Colorado 80202 and
the name of its initial registered agent at such address shall be
Wellsford Park Highlands Corp., a Colorado corporation. The
registered agent shall provide promptly to the Managers copies of
all written notices, summonses and other documents received by
the registered agent on behalf of the corporation (other than
general advertising and promotional materials) and, in any event,
such copies shall be provided not more than ten (10) business
days after receipt thereof by such registered agent. The
Managers shall have no liability for the effects of any failure
by the registered agent to timely deliver any such items to the
Managers except to the extent the Managers had actual notice of
such items prior to delivery by the registered agent. In any
contracts, subcontracts, loan agreements or other documents
entered into by the Company, the Managers shall provide that the
addresses for notice to be given under any such agreements shall
include both the registered agent and the Managers.

2.5 Articles of Organization. The Articles of Organization
are hereby adopted and incorporated by reference into this
Agreement. In the event of any inconsistency between the
Articles of Organization and this Agreement, the terms of the
Articles of Organization shall govern.

2.6 Term. The term of the Company shall be thirty (30)
years from the date of filing of Articles of Organization with
<PAGE>

the Secretary of State of the State of Colorado, unless the
Company is earlier dissolved in accordance with either the
provisions of this Agreement or the Act.

ARTICLE 3
BUSINESS OF COMPANY

3.1 Permitted Businesses. The business of the Company
shall be:

3.1.1 To acquire the Land and to construct,
develop, own, operate, manage, lease, finance, improve and sell
or otherwise dispose of the Project; and

3.1.2 To engage in all activities necessary,
customary, convenient, or incidental to any of the foregoing.

3.2 Other Activity or Business. The Company shall not
engage in any other activity or business unless approved by all
Members.

ARTICLE 4
CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS
AND LOANS TO THE COMPANY

4.1 Capital Contributions. Subject to the provisions of
this Agreement, the Members shall be obligated to make the
following Capital Contributions to the Company:

4.1.1 Capital Contributions by Feld. At the Initial
Closing, Feld shall make a Capital Contribution of $1,000.

4.1.2 Capital Contributions by WPHC. WPHC shall make
the following Capital Contributions:

(a) At the Initial Closing, WPHC shall make a
Capital Contribution in the amount of approximately $5,118,024,
which the Company shall use as follows: (i) approximately
$4,834,016 shall be used to fund the acquisition of the Land; and
(ii) approximately $284,008 shall be used to reimburse Feld as
described in Section 5.1.2. hereof.

(b) At the Final Closing and contingent on
satisfaction of all of the Final Closing Funding Conditions, WPHC
shall make the Final Closing Capital Contribution in an amount
equal to the following: (i) the Total Budgeted Development
Costs, minus (ii) any Capital Contributions made prior to the
Final Closing Date by WPHC, plus (iii) any distributions made to
WPHC pursuant to Section 10.3 hereof, minus (iv) an amount equal
to fifty percent (50%) of Cost Savings.

WRPT shall guaranty the obligation of WPHC to make the Final
Closing Capital Contribution by executing the Guaranty attached
hereto.

4.2 Withdrawal or Reduction of Members' Contributions to
<PAGE>

Capital.

4.2.1 A Member shall not receive out of the Company's
Property any part of such Member's Capital Contributions in
violation of the Act.

4.2.2 A Member, irrespective of the nature of such
Member's Capital Contribution, has the right to demand and
receive only cash in return for such Member's Capital
Contribution and then only in accordance with the terms of this
Agreement.

4.3 Development Deficit Payments. Feld shall have the
obligation to make Development Deficit Payments when and as
required under Article 6 of this Agreement.

4.4 Operating Deficit Payments. Feld shall have the
obligation to make Operating Deficit Payments when and as
required under Article 6 of this Agreement.

4.5 Additional Capital Contributions. Except as expressly
described in this Article 4, no Member has an obligation to make
any Capital Contributions or loans or advances to the Company.

4.6 Miscellaneous.

4.6.1 No Interest on Capital Contribution. No Member
shall be entitled to or shall receive interest on such Member's
Capital Contribution.

4.6.2 No Withdrawal of Capital Contribution. No
Member may withdraw any capital from the capital of the Company
except as expressly provided herein or under the Act.

4.6.3 No Priority of Return of Capital Contribution.
No Member shall have any priority over any other Member with
respect to the return of any Capital Contribution, except as
expressly provided herein.

4.6.4 No Third Party Beneficiaries. The provisions of
this Article 4 are not intended to be for the benefit of and
shall not confer any rights on any creditor or other Person
(other than a Member in such Member's capacity as a Member) to
whom any debts, liabilities or obligations are owed by the
Company or any of the Members.

ARTICLE 5
INITIAL CLOSING; INFRASTRUCTURE LAND CLOSING;
CONSTRUCTION LOAN CLOSING

5.1 Initial Closing. The Members of the Company shall
cooperate to cause an Initial Closing at which the following
shall occur:

5.1.1 Land Closing. The Company shall acquire the
Land pursuant to the Land Contract to be partially assigned to
the Company. The Company shall obtain an Owner's Policy of Title
<PAGE>

Insurance from a title insurer acceptable to the Members (the
"Title Company") in accordance with the terms of the Land
Contract.

5.1.2 Reimbursement of Feld Expenses. At the Initial
Closing, the Company shall reimburse Feld and its Affiliates for
those costs and expenses incurred by Feld and its Affiliates as
set forth on Exhibit A attached hereto and for accrued pre-
development costs incurred by Feld on or prior to the Initial
Closing for which Feld has not previously been billed
("Reimbursable Expenses"). Feld represents and warrants that
such Exhibit A and additional invoices and schedules to be
provided by Feld with respect to the balance of the Reimbursable
Expenses set forth and shall set forth the costs and expenses
actually incurred by Feld in connection with the Project.
Notwithstanding anything to the contrary herein, only those
Reimbursable Expenses which constitute actual, third party costs
of Feld shall be paid at the Initial Closing. Any Reimbursable
Expenses for in-house architectural services or other services
provided by Feld or The Feld Company ("In House Reimbursable
Expenses") shall be paid as follows: (i) if and when a bond
financing of the Infrastructure occurs, then proceeds of such
bond financing shall be used to pay In House Reimbursable
Expenses relating to the Infrastructure only; and (ii) if and
when a Construction Loan Closing occurs, the Company shall pay
the In House Reimbursable Expenses, including any In House
Reimbursable Expenses related to the Infrastructure which were
not previously paid. In connection with any request for the
payment of In House Reimbursable Expenses, Feld shall submit to
WPHC for approval the following: (i) detailed invoices setting
forth the services performed and work delivered by Feld and its
Affiliates; and (ii) receipts, releases and documents of transfer
and conveyance in connection with the work performed and services
provided as may be reasonably requested by WPHC. The payment of
any In House Reimbursable Expenses shall be subject to the
approval of WPHC, which approval shall not be unreasonably
withheld. If Feld is removed or withdraws as a Member and a
Construction Loan Closing has not occurred by the date of such
removal or withdrawal, then the Company shall have no obligation
to pay Feld, The Feld Company or their Affiliates for any In
House Reimbursable Expenses. Except as set forth in this Section
5.1.2, neither Feld nor The Feld Company shall have any right of
reimbursement from the Company with respect to any other costs
and expenses incurred in connection with the Project prior to the
Initial Closing Date.

5.1.3 Approval of Land Documents. The Company shall
not proceed with the Initial Closing unless and until the form of
documents related to the closing of the acquisition of the Land
have been approved by all the Members.

5.1.4 Pledge of Interest.

5.1.4.1 As collateral for the performance by
Feld of its obligations under this Agreement, at the Initial
Closing Feld shall execute a Pledge and Security Agreement in the
form of Exhibit L attached hereto, wherein Feld grants WPHC a
first lien security interest in Feld's Interest in the Company
<PAGE>

and in Feld's right to receive all fees, payments and
distributions from the Company. Any uncured default under this
Agreement shall constitute an Event of Default (as such term is
defined in said Pledge and Security Agreement) under said Pledge
and Security Agreement, and any Event of Default under said
Pledge and Security Agreement shall be a default under this
Agreement.

5.1.4.2 As collateral for the performance by WPHC
of their obligations to make Capital Contributions as required
under this Agreement, at the Initial Closing WPHC shall execute a
Pledge and Security Agreement in the form of Exhibit M attached
hereto, wherein it grants Feld a first lien security interest in
its Interest in the Company and in its right to receive all fees,
payments and distributions from the Company. Any uncured default
under this Agreement shall constitute an Event of Default (as
such term is defined in said Pledge and Security Agreement) under
said Pledge and Security Agreement, and any Event of Default
under said Pledge and Security Agreement shall be a default under
this Agreement.

5.2 Construction Procedures and Closing.

5.2.1 Predevelopment Activities.

5.2.1.1 Feld shall pursue, with reasonable
diligence and subject to the reasonable direction of WPHC, all
approvals required to commence construction of the Project.
Subject to the input and approval of WPHC, Feld shall develop
appropriate site plans and other plans as may be required to
obtain such approvals. Feld shall not submit any proposed plans
or other materials to any governmental agency without the prior
approval of WPHC. In addition, Feld shall not incur any third
party expense without the prior approval of WPHC. WPHC agrees to
reasonably cooperate with Feld in obtaining the Approvals, which
cooperation shall include, without limitation, prompt review of
any matters submitted to WPHC and prompt response to Feld in
connection with any matters submitted to WPHC. Copies of all
reports, studies and other information and material generated for
or on behalf of Feld in connection with its review and evaluation
of the Property shall promptly be delivered to WPHC, including,
without limitation, the full text of all drawings, reports and
memoranda supplied by engineers and other consultants and any
memoranda of discussions with governmental officials and
neighborhood groups.

5.2.1.2 Feld shall prepare and submit to WPHC
for a approval a pre-development budget for the activities of the
Company prior to the Construction Loan Closing Date. If and when
WPHC approves in writing a pre-development budget, Feld shall be
authorized to incur costs in accordance with such pre-development
budget and WPHC shall be obligated to fund such approved pre-
development budget.

5.2.2 Plans and Specifications. Prior to the
Construction Loan Closing and after consultation with WPHC, Feld
shall cause to be prepared detailed construction Plans and
Specifications for the Project, and shall submit such Plans and
<PAGE>

Specifications to WPHC for approval. If and when WPHC approves
the Plans and Specifications, the Members shall initial a
description of the Plans and Specifications and attach the
description to this Agreement as Exhibit N.

5.2.3 Project Budget. Prior to the Construction Loan
Closing and after consultation with WPHC, Feld shall cause to be
prepared a revised Project Budget based on the approved Plans and
Specifications, and shall submit such Project Budget to WPHC for
approval. If and when WPHC approves the revised Project Budget,
the Members shall initial such Project Budget and attach it to
this Agreement as Exhibit O. Upon approval, such revised Project
Budget shall for all purposes be the "Final Project Budget."

5.2.4 Obtaining a Construction Loan. Feld shall use
its best efforts to cause the Company to obtain a Construction
Loan for construction of the Project on terms and from a
Construction Lender acceptable to the Members, including, but not
limited to, the following: (a) the Construction Loan amount must
be sufficient to reimburse WPHC at the Construction Loan Closing
for the acquisition cost of the Project Land and any advances it
made to the Company for predevelopment activities; (b) the
interest rate shall be a variable rate equal to LIBOR plus a
spread reasonably acceptable to the Members; (c) the
Construction Loan Closing must take place on or before October
31, 1995, provided, however, such date shall be extended to a
date not later than December 31, 1995, if Feld is diligently
pursuing his obligations and if the delay is not attributable to
a default by Feld (such date as it may be extended is referred to
herein as the "Construction Loan Outside Date"); (d) Feld shall
personally guarantee the Construction Loan if required by the
Construction Lender; (e) the Construction Loan shall have a
maturity date of at least thirty-six (36) months from the date of
the Construction Loan Closing; and (f) the other terms shall be
reasonably acceptable to WPHC.

5.2.5 Construction Loan Documents. The Company shall
not proceed with the Construction Loan Closing unless and until
the form of documents related to the Construction Loan and the
Tri-Party Agreement have been approved by all the Members. There
shall be no modification to the Construction Loan documents
without the prior written approval of all Members.

5.2.6 Approved Affiliate Agreements. On or prior to
the Construction Loan Closing Date and only with the approval of
all of the Members, the Company shall enter into (a) a
construction management agreement with Tricor Construction
Company, an Affiliate of Feld ("Contractor"), (b) a construction
contract with Contractor, and (c) the Architect's Agreement with
Architect. Except for a reasonable fee to be paid pursuant to
the Architect's Agreement with the approval of WPHC, no fees or
other compensation, profit or cost savings shall be paid to
Contractor under such agreements except the fees provided for in
Article 7 below. The Company hereby agrees that Contractor may
enter into a landscape design contract and an interior design
contract with Architect, and all subcontracts entered into by
Contractor and/or Architect shall be included in the Final
Project Budget, but such subcontracts shall provide for the
<PAGE>

subcontractor to look only to Contractor or Architect, as
applicable, for payment under the subcontracts. Fees or other
profit, compensation or sharing of cost savings under such
subcontracts shall not exceed the amount a prudent owner would
pay in a bona fide arm's length transaction after obtaining
competitive bids. The agreements described in this Section
5.2.6, together with the Property Management Agreement, are
hereinafter called the "Approved Affiliate Agreements." Neither
Feld nor Contractor nor Architect shall enter into any other
agreements with parties affiliated with Feld without specific
disclosure to all Members in writing of such affiliation and
without prior written consent of all the Members in each
instance. In the event of any conflict between this Agreement
and such Approved Affiliate Agreements, this Agreement shall
control. In the event of an uncured default by Feld under this
Agreement, the Approved Affiliate Agreements shall be terminated
at the option of WPHC. An uncured default by Feld under any
Approved Affiliate Agreement shall be a default hereunder. There
shall be no modification to the Approved Affiliate Agreements
without the prior written approval of all Members. Each Approved
Affiliate Agreement shall provide that the Company shall have the
right to terminate such agreement upon the Removal of Feld
without such termination constituting a default.

5.2.7 Feld Guarantee. Feld shall personally guarantee
to the Construction Lender the payment and performance of all
obligations of the Company under the Construction Loan, subject
to such limitations on liability of Feld and guaranty termination
provisions that are acceptable to the Construction Lender.

5.2.8 Tri-Party Agreement. At the Construction Loan
Closing, the Company, the Construction Lender and WRPT shall
enter into a Tri-Party Agreement containing the following
principal terms: (a) if the Construction Loan has not been paid
in full by its maturity date, the Construction Lender shall have
the right to require that WRPT purchase the Construction Loan
from the Lender, or at WRPT's option, cause the Construction Loan
to be repaid; (b) the obligation of WRPT under the Tri-Party
Agreement shall be conditioned on timely satisfaction of all of
the Final Closing Funding Conditions; and (c) the purchase price
for the Construction Loan shall equal the lesser of the
outstanding balance of the Construction Loan, including accrued
interest, principal and other amounts due thereunder or the
amount of the Final Closing Capital Contribution.

5.2.9 Property Management Agreement. At the
Construction Loan Closing, the Company shall enter into the
Property Management Agreement with The Feld Company, an Affiliate
of Feld.

5.3 Infrastructure Land Closing and Bond Financing of
Infrastructure. It is the intent of the Members that the
Infrastructure be acquired and developed by an entity that will
enable the financing of the Infrastructure to be accomplished by
the issuance of tax-exempt bonds.

5.3.1 Subdivision of the Land; Sale of the
Infrastructure Land. After the date hereof and prior to the
<PAGE>

Construction Loan Closing, unless WPHC otherwise agrees, Feld
shall cause the Company to effect the legal subdivision of the
Land into not fewer than two legally separate parcels. At least
one or more parcels shall comprise the Infrastructure Land, and
at least one or more parcels shall comprise the Project Land. At
or prior to the Construction Loan Closing, the Company shall sell
the Infrastructure Land and any improvements located thereon to
an entity designated by WPHC for a purchase price designated by
WPHC and on terms designated by WPHC.

5.3.2 Control Over Matters Related to Infrastructure.
Notwithstanding anything to the contrary herein, WPHC shall have
sole and exclusive control over all decisions of the Company
relating to the sale, financing, construction and development of
the Infrastructure. In connection with the financing of the
Infrastructure and as directed by WPHC, the Company shall cause
the Land to be included within a special assessment district or
similar district in connection with the financing of the
Infrastructure and/or shall cause the Project to be subject to
special assessments, general assessments and/or consensual liens.
In addition, the Company shall enter into such agreements as WPHC
may require, which agreements obligate the Company to pay or
reimburse the costs of operating and maintaining the
Infrastructure.

5.3.3 Construction of Infrastructure. After the date
hereof and at or prior to the Construction Loan Closing, an
Affiliate of Feld shall enter into one or more agreements
(collectively, the "Infrastructure Improvements Agreement") with
the owner of the Infrastructure Land (or its contractor) to
construct the Infrastructure for a guaranteed maximum price,
including a fee to Feld not to exceed three percent (3%) of the
hard costs of construction of the Infrastructure. A default by
Feld in the performance of its obligations under that contract
not cured within any applicable cure period shall constitute a
default under this Agreement. WPHC may in its discretion cause
the phasing of the construction of the Infrastructure
Improvements. An initial budget for the costs of acquisition and
development of the Infrastructure is attached hereto as Exhibit
T.

5.4 Failure of Initial Closing or Construction Loan Closing
to Occur. Feld covenants to cause the Initial Closing to occur
by May 15, 1995 and the Construction Loan Closing to occur by the
Construction Loan Outside Date. If for any reason the Initial
Closing has not occurred by May 15, 1995, or the Construction
Loan Closing has not occurred by the Construction Loan Outside
Date, then WPHC shall have the right to remove Feld as a Member
and Manager of the Company in accordance with the provisions of
Section 12.12.

ARTICLE 6
DEVELOPMENT OF PROJECT; OPERATIONS PRIOR TO THE
FINAL CLOSING DATE

6.1 Duties of Feld. Feld shall have the authority, duty
and the obligation to:
<PAGE>

6.1.1 act on behalf of the Company in relation with
any governmental agency or authority, the Construction Lender,
and all contractors and subcontractors with respect to all
matters relating to the construction and development of the
Project;

6.1.2 use its best efforts to cause the Company to
obtain a commitment for the Construction Loan on terms and
conditions acceptable to all the Members and satisfy the
conditions for the Construction Loan Closing;

6.1.3 coordinate with Architect the preparation of the
Plans and Specifications, ensure that the Plans and
Specifications are in compliance with all applicable codes, laws,
ordinances, rules and regulations, and recommend alternative
solutions whenever design details affect construction feasibility
or schedules;

6.1.4 negotiate all necessary contracts and
subcontracts for the construction of the Project and monitor
disbursement and payment of amounts owed the Architect,
Contractor and subcontractors;

6.1.5 choose the products and materials necessary to
equip the Project in a manner which satisfies all requirements of
the Construction Lender and the Plans and Specifications;

6.1.6 secure all building code approvals and obtain
certificates of occupancy for all of the apartment units of the
Project;

6.1.7 cause the Project to be commenced not more than
thirty (30) days after the Construction Loan Closing, or by such
earlier date as may be required under the Construction Loan
documents, and completed in a prompt and expeditious manner,
consistent with good workmanship, and in compliance with the
following:

(a) the Plans and Specifications as they may be
amended in accordance with the terms of this Agreement;

(b) any and all zoning regulations, county
ordinances, including health, fire and safety regulations, and
any other requirements of federal, state and local laws, rules,
regulations and ordinances applicable to construction of the
Project;

6.1.8 cause to be performed in a diligent and
efficient manner the following:

(a) construction of the Project pursuant to and
in substantial accordance with the Plans and Specifications, free
and clear (except as otherwise permitted herein) of all mechanics
and materialmen's liens; and

(b) general administration and supervision of
construction of the Project, including but not limited to
<PAGE>

activities of subcontractors and their employees and agents, and
others employed as to the Project in a manner which complies in
all respects with the Construction Loan, the Plans and
Specifications and the Construction Procedures;

6.1.9 keep, or cause to be kept, accounts and cost
records as to the construction of the Project and make available
to WPHC, during normal business hours copies of all material
contracts and subcontracts;

6.1.10 provide regular monitoring, and periodically
(at least monthly, or more often if requested by any Member)
update the Project construction time schedule and summarize
potential variances between scheduled and probable completion
dates, the schedule for work not started or incomplete;

6.1.11 revise and refine the approved estimate of
Development Costs, incorporate changes as they occur, and develop
cash flow reports and forecasts as needed;

6.1.12 develop and implement a system for review and
processing of change orders as to construction of the Project;

6.1.13 develop and implement a procedure for the
review and processing of applications by subcontractors for
progress and final payments; and

6.1.14 record the progress of the Project and submit
written progress reports to WPHC, including the percentage of
completion and the number and amounts of change orders.

6.2 Construction Completion. Feld hereby unconditionally
covenants and warrants as follows: (i) the Project shall be
constructed in a good and workmanlike manner and all work shall
be performed in accordance with the terms of Section 6.11 hereof;
(ii) Feld shall fully and timely perform all of its other
obligations under this Agreement; and (iii) subject to Force
Majeure, it shall cause (a) Substantial Completion of the Project
to occur within twenty-eight (28) months after the Construction
Loan Closing Date; (b) Final Completion to occur within thirty
(30) months after the Construction Loan Closing Date; (c) all
Final Closing Funding Conditions shall be satisfied prior to the
Outside Date; and (d) completion of the Infrastructure by the
date set forth and in accordance with the Infrastructure
Improvements Agreement.

6.3 Development Deficit Guaranty. Feld hereby guarantees
Feld shall advance to or for the account of the Company amounts
equal to all Development Deficits at such time as such
Development Deficits occur ("Development Deficit Payments").
Feld shall make Development Deficit Payments required of him by
the earlier of (A) the date required to avoid a default under
Company obligations, including without limitation the
Construction Loan, and (B) the date required to keep all sources
of funding for the Project "in balance" as adequate sources of
funds to timely cause Final Completion of the Project and
satisfaction of other obligations of the Company. In any event,
all Development Deficits shall be paid by Feld in full prior to
<PAGE>

the Final Closing Date. All Development Deficit Payments made to
the Company shall be non-reimbursable payments, and Feld shall
not be entitled to any repayment from the Company (unless
advances of the Construction Loan are later available to
reimburse Feld for the same), and the Capital Account of Feld
shall not be affected by any Deficit Payments made by Feld.
Without limiting the generality of the foregoing, Feld shall not
be entitled to reimburse himself for any Development Deficits.

6.4 Operating Deficit Guaranty. Feld hereby guarantees
Feld shall advance to or for the account of the Company amounts
equal to all Operating Deficits, at such time as such Operating
Deficits occur ("Operating Deficit Payments"). Feld shall make
Operating Deficit Payments required of him by the date required
to avoid a default under Company obligations, including without
limitation the Construction Loan and obligations to trade
creditors. In any event, all Operating Deficits shall be paid by
Feld in full prior to the Final Closing Date. All Operating
Deficit Payments made to the Company shall be non-reimbursable
payments, except to the extent that, subsequent to the making of
any such Operating Deficit Payment by Feld, there is sufficient
Net Operating Income prior to the earliest of the Final Closing
Date, the Outside Date or the date of the Removal of Feld by WPHC
to reimburse Feld for the same. In no event, shall the Capital
Account of Feld be affected by any Operating Deficit Payments
made by Feld. Notwithstanding anything to the contrary herein,
upon the Removal of Feld, Feld shall not have any obligation
hereunder to fund Operating Deficits incurred after the date of
his Removal.

6.5 Liabilities of the Company. Feld covenants that by the
earlier of the Final Closing Date or the Outside Date, provided
WPHC has satisfied its obligation to make the Final Closing
Capital Contribution, Feld shall cause the Company to have no
unsatisfied debts or liabilities other than obligations under
service contracts and other agreements relating to the Project
permitted by this Agreement related to the period after the Final
Closing, or related to the period prior to the Final Closing if
adequate cash reserves are held by the Company to pay such
liabilities.

6.6 Construction Contracts. Feld shall obtain and the
Company shall enter into such contracts, agreements or
obligations, as are necessary to construct and develop the
Project. Feld shall not, without the consent of WPHC, which
consent shall not be unreasonably withheld, do or permit to be
done any of the following:

6.6.1 Enter into or cause the Company to enter into
any other primary contract relating to the construction of the
Project; and

6.6.2 Amend or modify any Approved Affiliate
Agreements.

6.7 Administration of the Construction Loan. Feld shall
administer the Construction Loan on behalf of the Company and in
accordance with the Construction Procedures. The Company shall
<PAGE>

engage the Construction Consultant to monitor the progress of
construction of the Project and to review draw requests on behalf
of WPHC. Feld shall cooperate with the Construction Consultant
and shall provide access to the Construction Consultant for
inspection of the construction work of the Project as it
progresses. Feld shall approve and submit Construction Loan draw
requests to the Construction Lender on behalf of the Company,
which requests shall be accompanied by those items of information
required by the Construction Lender and the Title Company.
Copies of all draw requests and of the monthly construction
ledger shall be delivered to WPHC simultaneously with delivery to
the Construction Lender. If the Construction Consultant
determines that a draw request is not justified on a percentage
of completion basis and the draw would result in construction
funding being out of balance by an amount in excess of $250,000,
WPHC shall have the right to disapprove such draw request in its
sole discretion unless Feld modifies such draw request to
correspond to percentage of completion and/or makes a Development
Deficit Payment such that the Construction Loan shall not be out
of balance by more than $250,000. After any such disapproval of
a draw request by WPHC, all subsequent draw requests shall
require the prior approval of WPHC unless and until such right to
prior approval is waived in writing by WPHC.

6.8 Change Orders. No change orders with respect to the
Plans and Specifications may be made without the prior written
consent of WPHC, except that Feld shall have the right to approve
minor change orders which comply with the Construction
Procedures, do not have a material adverse effect on the Project,
do not increase Total Development Costs, do not reduce the amount
available from the Construction Loan for payment of interest on
the Construction Loan, and do not exceed $10,000 as to any one
change order or $350,000 in the aggregate. Unless expressly
approved in writing by all Members, no change order shall be
permitted or approved that would cause total Development Costs to
exceed Total Budgeted Development Costs.

6.9 Retainage. Feld shall cause all agreements with
contractors and subcontractors to provide for retainages at
levels acceptable to Construction Lender and the release of
retainages as set forth in the Construction Loan documents as
executed at the Construction Loan Closing.

6.10 Agreements with Affiliates. Feld shall cause the
Company to enforce each Approved Affiliate Agreement to which the
Company is a party as would a prudent manager of a limited
liability company, and Feld shall cause each other Approved
Affiliate Agreement to be enforced in a prudent manner and for
the benefit of the Company. Feld hereby agrees, for himself and
on behalf of each Person affiliated with Feld that is a party to
an Approved Affiliate Agreement: (i) in the event of any
conflict between this Agreement and any Approved Affiliate
Agreement, this Agreement shall control; (ii) in the event of any
uncured material default by Feld under this Agreement, the
Company shall have the right to terminate any or all of the
Approved Affiliate Agreements; (iii) an uncured default by Feld
or any person affiliated with Feld under an Approved Affiliate
Agreement shall constitute a default by Feld under this
<PAGE>

Agreement; and (iv) Feld shall defend, indemnify and hold the
Company harmless with respect to the effects of any default by
any Person affiliated with Feld under such Approved Affiliate
Agreements, including, without limitation, any mechanics liens
with respect to claims under any Approved Affiliate Agreements.

6.11 Warranty by Feld. If, within one (1) year after the
date of Final Completion of the Project, any of the structural or
non-structural work performed to construct the Project is found
to be materially defective or not in accordance in all material
respects with the Plans and Specifications and with all
applicable building codes, laws, rules and regulations, Feld
shall correct or shall cause the construction contractor to
correct such defect promptly after receipt of written notice from
WPHC to do so, unless WPHC has previously given Feld specific
written acceptance of such defective condition. With respect to
portions of the work first performed after Final Completion, this
period of one (1) year shall be extended by the period of time
between Final Completion and the actual performance of the work.
The obligation under this Section shall survive acceptance of the
work performed to construct the Project. WPHC shall give such
notice promptly after discovery of the condition. In the event a
material defect is discovered more than one (1) year after the
date of Final Completion, as such period may be extended under
this Section 6.11, and such defect was known to Feld or a Person
affiliated with Feld and was not disclosed to WPHC or was
intentionally concealed by Feld or such affiliated Person, then
Feld shall promptly take such action as may be necessary at
Feld's sole expense to correct such defective work. WPHC shall
report to Feld within thirty (30) days after discovery any such
defective condition discovered more than one (1) year after Final
Completion, as such period may be extended under this Section
6.11. Nothing contained herein shall require Feld to correct
defective work that is discovered more than three (3) years
following Final Completion, as such period may be extended under
this Section 6.11.

6.12 Insurance. Feld shall at all times keep in force the
following policies of insurance naming the Company as the
insured:

6.12.1 During the construction period (which ends on
the date a certificate of occupancy for each building comprising
the Project is issued), "Builder's Risk" insurance as required by
the holder(s) of the Construction Loan;

6.12.2 After issuance of a certificate of occupancy
for each building comprising the Project, all risk property and,
if applicable, boiler and machinery insurance against loss or
damage to the Property or the Project (including contents)
including but not limited to fire and extended coverage perils
(but excluding flood and earthquake unless either or both are
required by the Construction Lender) as WPHC may from time to
time require, but in no event less than one hundred percent
(100%) of the full replacement cost of the Property or the
Project without deduction for physical depreciation, or the
unpaid balance of any loans secured by the Property or the
Project, whichever is greater;
<PAGE>

6.12.3 After issuance of a certificate of occupancy
for each building comprising the Project, insurance against the
loss of "rental value" of the improvements on a "rented or vacant
basis" arising out of the perils insured against pursuant to
Section 6.12.2 above, in any reasonable amount required by WPHC
but in no event less than 100% of one year's gross "rental value"
of the improvements with co-insurance waived. "Rental value" as
used herein is defined as the sum of (A) the total anticipated
gross rental income from tenant occupancy of the Project, (B) the
amount of all charges which are the legal obligation of tenants,
and (C) the fair rental value of any portion of the Project
occupied by the Company, if any; and

6.12.4 At all times, (i) commercial general liability
insurance in an amount of not less than Five Million Dollars
($5,000,000) against claims for personal injury, death or
property damage occurring on, in or about the Property or the
Project or arising from or connected with use, conduct or
operation of the Company's business in the amount from time to
time required by WPHC; (ii) automobile liability insurance with a
combined single limit of One Million Dollars ($1,000,000); and
(iii) workers compensation coverage with statutory limits and
employers liability insurance with limits of One Million Dollars
($1,000,000). Any workers compensation insurance shall be
accompanied by a waiver of subrogation from the insurer endorsed
on the policy.

All insurance policies and renewals thereof shall be in
a form and issued by insurers acceptable to WPHC and shall
provide for deductibles not to exceed $2,500.00. WPHC and Feld
(but only as long as Feld is a Manager and a Member of the
Company) shall each be additional named insureds on all such
policies and renewals. Feld hereby irrevocably appoints WPHC as
Feld's attorney in fact for purposes of endorsing payments,
submitting claims and otherwise dealing with all such insurance
and the proceeds thereof in the name, place and stead of Feld,
such power of attorney to take effect immediately upon
withdrawal, Removal or resignation of Feld as Manager of the
Company and member of the LLC, and Feld agrees that such power
shall be coupled with an interest and shall survive the
disability or death of Feld. Each policy shall provide that it
will not be modified or canceled without thirty (30) days prior
written notice to WPHC. Feld shall promptly furnish to WPHC all
renewal notices and all receipts of paid premiums. At least
thirty (30) days prior to the expiration date of a policy, Feld
shall deliver to WPHC a renewal policy in form satisfactory to
WPHC, together with a receipt showing payment of annual premiums.
Any excess insurance proceeds or refunds of insurance premiums
shall be the property of the Company.

6.13 Personal Obligation. The obligations of Feld under
this Agreement are personal recourse obligations of Feld, as
limited by Section 14.1.3 of this Agreement, for which Feld shall
be fully responsible to the Company and WPHC.

6.14 Force Majeure. Feld shall not be liable for delay in
performance of his obligations under this Agreement to the extent
<PAGE>

such failure or delay results solely from an event of Force
Majeure, and in no event shall any delay for an event of Force
Majeure exceed one hundred twenty (120).

6.15 Limitations of Feld's Authority. Anything to the
contrary herein notwithstanding, Feld shall not have the power or
authority to do any of the following without the prior written
consent of all the other Members:

6.15.1 to commit any act contrary to the purpose of
the Company;

6.15.2 to refinance the Project or incur any
indebtedness other than the Construction Loan;

6.15.3 to enter into any agreements with affiliates of
Feld except as specified above;

6.15.4 to modify the Construction Loan documents or
any agreement with any affiliate of Feld which previously was
consented to by the other Members; or

6.15.5 to sell or dispose of any portion of the
Project.

6.16 Pre-Existing Environmental Condition Liability. Feld
agrees to promptly disclose to WPHC in writing if it becomes
aware of any Pre-Existing Environmental Condition Liability. If
the Company incurs any Pre-Existing Environmental Condition
Liability, it shall use any available contingency in the Project
Budget or any Cost Savings to satisfy such Pre-Existing
Environmental Condition Liability. If such sources of funds are
not adequate to satisfy the Pre-Existing Environmental Condition
Liability, then WPHC shall make a Capital Contribution to the
Company equal to one-half of the amount of the Pre-Existing
Environmental Condition Liability which is then due and Feld
shall make either a Development Deficit Payment or an Operating
Deficit Payment equal to one-half of the amount of such Pre-
Existing Environmental Condition Liability. This provision is
solely for the benefit of the members and no other Person shall
have the right to rely on or enforce this provision. A Pre-
Existing Environmental Condition Liability shall not be satisfied
from Net Operating Income.

ARTICLE 7
COMPENSATION TO FELD

In consideration of the performance by Feld of his
obligations under Article 6 of this Agreement, the Company shall
pay Feld or his designee the fees described in this Article 7 at
the time, in the manner and subject to the conditions set forth
herein.

7.1 Development Management Fee. Feld shall receive a
development management fee equal to $1,000 per unit. Such
development management fee shall be payable from monthly draws on
the Construction Loan, on a percentage of completion basis as
<PAGE>

certified by the Construction Consultant.

7.2 Construction Management Fee. Contractor shall receive
a construction management fee under the construction management
agreement to be executed at or before the Construction Loan
Closing equal to $2,000 per unit, payable from monthly draws on
the Construction Loan based on percentage of completion as
certified by the Construction Consultant as certified by the
Construction Consultant, minus $49,000. All amounts paid to
Contractor under the construction management agreement described
in Section 5.2.6 above shall be applied against and reduce the
amount due under this Section 7.2.

7.3 Construction Loan Guarantee Fee. Feld shall receive a
construction loan guarantee fee equal to 1.5% of the final
committed loan amount of the Construction Loan, payable at the
Construction Loan Closing from a draw on the Construction Loan.

7.4 Cost Savings Fee. The Partnership shall pay Feld at
Final Closing a cost savings fee equal to fifty percent (50%) of
Cost Savings, if any. Feld shall submit to WPHC a proposed
calculation of the amount of the fee to be paid under this
Section 7.4. WPHC shall be entitled, at its sole discretion, to
submit such calculation to the Company's Accountants for
verification or auditing prior to approving such calculation.
For a period of twelve (12) months after the Final Closing Date,
each Member shall have the right to cause the recalculation of
the Cost Savings Fee and the post-closing adjustment of the
amount of the Cost Savings Fee, if such Member pays the costs of
the Company's Accountants in making such recalculation and if the
amount of the adjustment is in excess of $5,000. No post-closing
adjustment shall be made for amounts of $5,000 or less or based
on a recalculation made more than twelve (12) months after the
Final Closing Date.

7.5 Incentive Fee. Feld shall receive an incentive fee, to
be calculated and paid in accordance with Exhibit P attached
hereto.

7.6 Conditions to Payment of Fees; Right of Offset. Each
payment of fees described in this Article 7 shall be conditioned
upon there being no uncured event of default by Feld under this
Agreement or any Approved Affiliate Agreement. All fees except
the Incentive Fee and any fees paid pursuant to the
Infrastructure Improvements Agreement(s) will be included in the
Final Project Budget to be approved by WPHC. With respect to
fees payable prior to Final Closing, if the Construction Loan
does not provide a source of funding for such fees, then payment
of such fees shall be deferred until the later of the date(s) the
Construction Loan permits such funding or until the Final
Closing. All fees payable to Feld shall be subject to a right of
offset in favor of the Company and WPHC with respect to any
claims or damages they may have against Feld and for any
Development Deficits and Operating Deficits. In the event of the
withdrawal, resignation or Removal of Feld as a Member and
Manager prior to the Final Closing Date, except in the case of
Removal of Feld due to Feld failing to provide a Construction
Loan acceptable to all the Members, in which case no fees shall
<PAGE>

have been earned by or be due to Feld, Feld shall be entitled to
fees, except the Incentive Fee, fully earned and accrued through
the date of his Removal when and as such fees are otherwise
payable pursuant to this Agreement, subject to the foregoing
right of offset and provided that WPHC has been fully compensated
for its out of pocket expenses with respect to the Project. In
no event shall the Removal of Feld accelerate the due date for
any fees earned by Feld during the period prior to his Removal.

ARTICLE 8
FINAL CLOSING

8.1 Conditions to Final Closing. The obligation of WPHC to
participate in the Final Closing shall be conditioned on all of
the Final Closing Funding Conditions being satisfied either prior
to the Final Closing or concurrently with the Final Closing.
WPHC shall have the right, but not the obligation, to waive one
or more of the Final Closing Funding Conditions. Any Member
shall have the right to require an escrow closing to effect the
Final Closing, and the other Members shall cooperate with regard
to such escrow closing.

8.2 Initiation of Final Closing. Upon ten (10) days prior
written notice from WPHC to Feld, the Final Closing shall be held
on the date designated by WPHC. If WPHC has not designated a
date for the Final Closing by the Outside Date, upon ten (10)
days prior written notice from Feld to WPHC, the Final Closing
shall be held, the Final Closing shall be held on the date
designated by Feld, provided such date for the Final Closing
designated by Feld shall be not less than thirty-six (36) months
after the Construction Loan Closing Date.

8.3 Actions at the Final Closing. Once the date for the
Final Closing has been designated as provided herein and provided
that the Final Closing Funding Conditions have been satisfied by
Feld, the Members shall cooperate to cause a Final Closing at
which the following shall occur:

8.3.1 WPHC shall fund its Final Closing Capital
Contribution.

8.3.2 The Company shall pay the Construction Loan in
full or shall effect a release of Feld from its guaranty of the
Construction Loan.

8.3.3 Any accrued and unpaid fees due to Feld shall be
paid, excluding, however the Incentive Fee.

8.3.4 If either WPHC or Feld has exercised its (his)
option under the Put-Call provisions of Article 16 hereof, the
closing of the transfer of the Interest of Feld to WPHC shall
occur.

8.3.5 At the election of WPHC, the responsibility for
maintaining insurance coverage on the Project or any portion
thereof may be transferred to WPHC.

8.4 Certain Rights of Feld Upon Satisfaction of Final
<PAGE>

Closing Funding Conditions. At any time after Final Completion
and satisfaction of all of the other Final Closing Funding
Conditions but prior to the Outside Date, Feld may provide WPHC
notice that all of the Final Closing Funding Conditions have been
satisfied and that it is prepared to proceed with the Final
Closing, which notice shall be accompanied by all documents
necessary to verify that the Final Closing Funding Conditions
have been satisfied. Within fifteen (15) days of its receipt of
its notice, WPHC shall notify Feld of the election of WPHC to do
one of the following by the date that is within forty-five (45)
days of WPHC's receipt of notice from Feld: (the "Release
Date"): (i) WPHC shall participate in the Final Closing and make
its Final Closing Capital Contribution; (ii) WPHC shall cause
Feld to be released from its guaranty of the Construction Loan;
or (iii) WPHC shall deliver to Feld an indemnity agreement
executed by WRPT, wherein WRPT agrees to indemnify Feld against
any loss or liability it may suffer as a guarantor of the
Construction Loan, provided that such guaranty shall be subject
to a right of offset in favor of WRPT and WPHC with respect to
any liability of WRPT to WPHC arising under this Agreement (the
form of such indemnity agreement shall be reasonably acceptable
to Feld). If all of the Final Closing Funding Conditions have
been and remain satisfied on the Release Date, WPHC shall take
the action specified in its notice to Feld.

ARTICLE 9
ALLOCATIONS

9.1 Profits and Losses. Subject to the special allocation
provisions in this Article 9, the Members' distributive shares of
the Profits or Losses of the Company for any Fiscal Year shall be
as follows:

9.1.1 Profits. Profits shall be allocated to each
Member pro rata in proportion with such Member's respective
Percentage Interest.

9.1.2 Losses. Losses shall be allocated to each
Member pro rata in proportion to such Member's respective
Percentage Interest.

9.2 General Provisions.

9.2.1 Except as otherwise provided in this Agreement,
the Members' distributive shares of all items of Company income,
gain, loss, and deduction are the same as their distributive
shares of Profits and Losses.

9.2.2 The Managers shall allocate Profits, Losses, and
other items properly allocable to any period using any method
permitted by Code Section 706 and the Regulations thereunder.

9.2.3 To the extent permitted by Regulations Section
1.704-2(h) and Section 1.704-2(i)(6), the Managers shall endeavor
to avoid treating distributions of Operating Cash Flow and of
Sales and Refinancing Cash Flow as being from the proceeds of a
Nonrecourse Liability or a Partner Nonrecourse Debt (as defined
<PAGE>

in Regulation Sections 1.704-2(b)(3) and 1.704-2(b)(4),
respectively).

9.2.4 If there is a change in any Member's Interest in
the Company during a Fiscal Year, each Member's distributive
share of Profits or Losses or any item thereof for such Fiscal
Year, shall be determined by any method prescribed by Code
Section 706(d) or the Regulations thereunder that takes into
account the varying Interests of the Members in the Company
during such Fiscal Year.

9.2.5 The Members agree to report their shares of
income and loss for federal income tax purposes in accordance
with the provisions of this Agreement.

9.3 Special Provisions.

9.3.1 Minimum Gain Chargeback. Notwithstanding any
other provision of this Article 9, if there is a net decrease in
Partnership Minimum Gain (as defined in Regulation Section
1.704-2(d)) during any Fiscal Year, then each Member shall be
allocated such amount of income and gain for such year (and
subsequent years, if necessary) determined under and in the
manner required by Regulation Section 1.704-2(f) as is necessary
to meet the requirements for a minimum gain chargeback as
provided in that Regulation.

9.3.2 Partner Nonrecourse Debt Minimum Gain
Chargeback. Notwithstanding any other provision of this Article
9, except Section 9.3.1, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain (as defined in accordance with
Regulation Section 1.704-2(i)(3)) attributable to a Partner
Nonrecourse Debt (as defined in Regulation Section 1.704-2(b)(4))
during any Fiscal Year, any Member who has a share of the Partner
Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt determined in accordance with Regulation Section
1.704-2(i)(5), shall be allocated such amount of income and gain
for such year (and subsequent years, if necessary) determined
under and in the manner required by Regulation Section 1.704-
2(i)(4) as is necessary to meet the requirements for a chargeback
of Partner Nonrecourse Debt Minimum Gain as is provided in that
Regulation.

9.3.3 Qualified Income Offset. If a Member
unexpectedly receives any adjustment, allocation or distribution
described in Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or
(6), items of Company income and gain shall be specifically
allocated to such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as
possible, provided that an allocation pursuant to this Section
9.3.3 shall be made only if and to the extent that such Member
would have an Adjusted Capital Account Deficit after all other
allocations provided for in Section 9.1 and this Section 9.3 of
this Agreement tentatively have been made as if this Section
9.3.3 were not in this Agreement.

9.3.4 Limitation on Losses. Notwithstanding anything
<PAGE>

else contained in this Agreement, Losses allocated to any Member
pursuant to Section 9.1 of this Agreement shall not exceed the
maximum amount of Losses that may be allocated without causing
such Member to have an Adjusted Capital Account Deficit at the
end of the Fiscal Year for which the allocation is made.

9.3.5 Code Section 754 Adjustment. To the extent that
an adjustment to the Basis of any asset pursuant to Code Section
734(b) or Code Section 743(b) is required to be taken into
account in determining Capital Accounts as provided in Regulation
Section 1.704-1(b)(2)(iv)(m), the adjustment shall be treated (if
an increase) as an item of gain or (if a decrease) as an item of
loss, and such gain or loss shall be allocated to the Members
consistent with the allocation of the adjustment pursuant to such
Regulation.

9.3.6 Nonrecourse Deductions. Nonrecourse Deductions
(as determined under Regulation Section 1.704-2(c)) for any
Fiscal Year shall be allocated among the Members in proportion to
their Percentage Interests.

9.3.7 Partner Nonrecourse Deductions. Any Partner
Nonrecourse Deductions (as defined under Regulation Section
1.704-2(i)(2)) shall be allocated pursuant to Regulation Section
1.704-2(i) to the Member who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which it is
attributable.

9.3.8 Purpose and Application. The purpose and the
intent of the special allocations provided for in this Section
9.3 are to comply with the provisions of Regulation Sections
1.704-1(b) and 1.704-2, and such special allocations are to be
made so as to accomplish that result. However, to the extent
possible, the Managers, in allocating items of income, gain,
loss, or deduction among the Members, shall take into account the
special allocations in such a manner that the net amount of
allocations to each Member shall be the same as such Member's
distributive share of Profits and Losses would have been had the
events requiring the special allocations not taken place. The
Managers shall apply the provisions of this Section 9.3 in
whatever order the Managers reasonably believe will minimize any
economic distortion that otherwise might result from the
application of the special allocations.

9.4 Code Section 704(c) Allocations. Solely for federal,
state, and local income tax purposes and not with respect to
determining any Member's Capital Account, distributive shares of
Profits, Losses, other items, or distributions, a Member's
distributive share of income, gain, loss, or deduction with
respect to any Property (other than money) contributed to the
Company, or with respect to any Property the Asset Value of which
was adjusted as provided in Article 1(g)(iii) of this Agreement
upon the acquisition of an additional Interest in the Company by
a new Member or existing Member in exchange for a Capital
Contribution, shall be determined in accordance with Code Section
704(c) and the Regulations thereunder or with the principles of
such provisions.
<PAGE>

9.5 Allocations Relating to Taxable Issuance of Interest.
Any income, gain, loss or deduction realized by the Company as a
direct or indirect result of the issuance of an Interest by the
Company (the "Issuance Items") shall be allocated among the
Members so that, to the extent possible, the net amount of such
Issuance Items, together with all other allocations under this
Agreement to each Member, shall be equal to the net amount that
would have been allocated to each such Member if the Issuance
Items had not been realized.

ARTICLE 10
DISTRIBUTIONS

10.1 Cash Flow. Except when the Company is in the process
of dissolution and winding up as provided in Article 18 of this
Agreement and except as otherwise provided in Section 10.3
hereof, the Managers shall determine and distribute the Cash Flow
on a quarterly basis, less reserves determined by the Managers
for future expenditures, to the Members in accordance with their
respective Percentage Interests. Notwithstanding the foregoing,
no distributions shall be made at or prior to the completion of
the Final Closing without the consent of WPHC.

10.2 Division Among Members. If there is a change in a
Member's Interest in the Company during a Fiscal Year, any
distributions thereafter shall be made so as to take into account
the varying Interests of the Members during the period to which
the distribution relates in any manner chosen by the Managers
that is provided in Code Section 706(d) and the Regulations
thereunder.

10.3 Special Distributions to WPHC.

10.3.1 Immediately after the Construction Loan
Closing, the Company shall make a distribution to WPHC as a
return of its capital in the amount allowed for such purpose
under the terms of the Construction Loan.

10.3.2 Immediately after the closing of the sale of
the Infrastructure Land, the Company shall make a distribution to
WPHC as a return of its capital in the amount of the net proceeds
from the sale of the Infrastructure Land and any related
improvements or property.

ARTICLE 11
BOOKS, RECORDS, AND ACCOUNTING

11.1 Books and Records. The Company shall maintain at its
principal place of business books of account that accurately
record all items of income and expenditure relating to the
business of the Company and that accurately and completely
disclose the results of the operations of the Company. Such
books of account shall be maintained according to generally
accepted accounting principles consistently applied and, unless
otherwise agreed by the Members, on the basis of the Fiscal Year.
Each Member shall have the right to inspect, copy, and audit the
<PAGE>

Company's books and records at any time during normal business
hours without notice to any other Member.

11.2 Reports. Within thirty (30) days after the close of
each Fiscal Year, the Managers shall furnish to each Member a
copy of the income and loss statement and of the balance sheet of
the Company for such Fiscal Year, and a statement disclosing all
allocations of income, gain, loss, or deduction among the
Members and distributions made by the Company to the Members
during such year. The statements of income and loss and balance
sheets to be delivered hereunder may be unaudited in the sole
discretion of WPHC.

11.3 Tax Returns. The Managers shall cause independent
certified public accountants of the Company to prepare and timely
file all income tax and other tax returns of the Company. The
Managers shall furnish to each Member a copy of all such returns
together with all schedules thereto and such other information
which each Member may request in connection with such Member's
own tax affairs.

11.4 Special Basis Adjustment. At the request of either the
transferor or transferee in connection with a transfer of an
Interest in the Company approved by the Members pursuant to
Article 16 of this Agreement, the Managers shall cause the
Company to make the election provided for in Code Section 754 and
maintain a record of the adjustments to Basis of Property
resulting from that election. Any such transferee shall pay all
costs incurred by the Company in connection with such election
and the maintenance of such records.

11.5 Tax Matters Partner.

11.5.1 WPHC is hereby designated the Tax Matters
Partner (as defined in the Code) on behalf of the Company.

11.5.2 Without the unanimous consent of the Members,
the Tax Matters Partner shall have no right to extend the statute
of limitations for assessing or computing any tax liability
against the Company or the amount of any Company tax item.

11.5.3 If the Tax Matters Partner elects to file a
petition for readjustment of any Company tax item (in accordance
with Code Section 6226(a)) such petition shall be filed in the
United States Tax Court unless the Members unanimously agree
otherwise.

11.5.4 The Tax Matters Partner shall, within ten (10)
business days of receipt thereof, forward to each Member a
photocopy of any correspondence relating to the Company received
from the Internal Revenue Service. The Tax Matters Partner
shall, within ten (10) business days thereof, advise each Member
in writing of the substance of any conversation held with any
representative of the Internal Revenue Service and of any
petition for readjustment.

11.5.5 Any reasonable costs incurred by the Tax
Matters Partner for retaining accountants and/or lawyers on
<PAGE>

behalf of the Company in connection with any Internal Revenue
Service audit of the Company shall be expenses of the Company.
Any accountants and/or lawyers retained by the Company in
connection with any Internal Revenue Service audit of the Company
shall be selected by the Tax Matters Partner and the fees
therefor shall be expenses of the Company.

11.6 Bank Accounts. The Managers shall establish and
maintain one or more separate accounts in the name of the Company
in one or more federally insured banking institutions acceptable
to all the Members into which shall be deposited all funds of the
Company and from which all Company expenditures and other
disbursements shall be made. At least one such account shall be
maintained at First Interstate Bank. Unless otherwise decided by
the Managers, funds may be withdrawn from such accounts on the
signatures of all of the Managers, collectively and not
individually, or such other Person or Persons that the Managers
shall determine, provided, however, that two signatures shall be
required on all checks.

ARTICLE 12
MANAGEMENT

12.1 Management. The business and affairs of the Company
shall be managed by the designated Managers. Subject to the
terms and limitations of this Agreement, the Managers shall
direct, manage and control the business of the Company to the
best of such Managers' ability with reasonable diligence and
prudence and, subject to the terms and limitations of this
Agreement, shall have the authority, power and discretion to make
any and all decisions and to do any and all things which the
Managers shall deem to be reasonably required in light of the
Company's business and objectives.

12.2 Number, Tenure and Qualifications. The number of
Managers of the Company and the length of the term of each
Manager shall be fixed from time to time by the Members who hold
a Majority In Interest. Each Manager shall hold office until
removed pursuant to Section 12.12 hereof or until such Manager's
successor shall have been selected. Managers need not be
residents of the State of Colorado or Members of the Company.

12.3 Appointment of Feld as Manager. Feld is appointed as
the Manager to serve from the date hereof until the earliest to
occur of (i) the Final Closing Date, (ii) his withdrawal or
Removal as a Member and Manager, or (iii) the Outside Date.
Notwithstanding the provisions of Section 12.2, Feld shall serve
as Manager for the duration of his initial term unless and until
removed in accordance with the terms of this Agreement.

12.4 Certain Powers of Managers. Without limiting the
generality of Section 12.1, the Managers shall have the power and
authority, upon the unanimous agreement of all Managers, on
behalf of the Company:

12.4.1 To cause the Company to develop the Project
in accordance with the Plans and Specifications;
<PAGE>

12.4.2 To purchase liability and other insurance to
protect the Company's Property and business;

12.4.3 To hold and own any and all Company Property
on behalf of and in the name of the Company;

12.4.4 To invest any Company funds temporarily in
time deposits with federally insured financial institutions or
short-term United States governmental obligations;

12.4.5 Subject to the provisions of this Agreement,
to employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and to compensate
them from Company funds; and

12.4.6 To do and perform all other acts as may be
necessary or appropriate to the conduct of the Company's ordinary
course of business.

Unless authorized to do so by this Agreement or by the
Managers of the Company, no Member, agent, or employee of the
Company shall have any power or authority to bind the Company in
any way, to pledge its credit or to render it liable pecuniarily
for any purpose. However, the Managers may act by a duly
authorized attorney-in-fact.

12.5 Member Approval of Certain Acts. The Managers shall
have the power and authority, but only upon the unanimous written
consent of all Members, on behalf of the Company:

12.5.1 to amend or modify any of the documents
executed in connection with the Construction Loan at the
Construction Loan Closing or to waive any rights under such
documents;

12.5.2 to borrow money or incur any indebtedness
(other than the Construction Loan) or to grant any liens on any
assets of the Company;

12.5.3 to enter into any agreements with affiliates
of the Managers other than the Approved Affiliate Agreements;

12.5.4 to amend or modify the Approved Affiliate
Agreements or to waive any rights thereunder;

12.5.5 except for the Management Agreement, to
execute any agreement which will impose any obligations on the
Company which will survive the Final Closing Date; and

12.5.6 to sell or dispose of any portion of the
Project or any other material assets of the Company.

12.6 Liability for Certain Acts. A Manager of the Company
shall perform such Manager's duties, including duties as a member
of any committee upon which such Manager may serve, in good
faith, in a manner such Manager reasonably believes to be in the
best interests of the Company, and with such care as an
<PAGE>

ordinarily prudent person in a like position would use under
similar circumstances. A Person who so performs such Person's
duties shall not have any liability by reason of being or having
been a Manager of the Company except as otherwise provided in
this Agreement. Nothing in this Section 12.6 shall limit Feld's
liability to the other Members to perform its obligations with
respect to the development of the Project, to make Development
Deficit Payments and to perform its other obligations to the
other Members arising under this Agreement.

12.7 Indemnity of the Members and the Managers.

12.7.1 The Company shall indemnify every Member and
Manager in respect to the payments made and personal liabilities
reasonably incurred by that Member or Manager in the ordinary and
proper conduct of the Company's business or property. No
indemnification shall be provided if and to the extent that such
liability was incurred based on the breach of this Agreement by
the Manager, his negligence (to the extent not reimbursed by
insurance), fraud or misconduct.

12.7.2 Provided that Feld has fully and timely
performed his obligations under this Agreement, the Company shall
indemnify Feld against any liability he may incur as a result of
his guaranty of the Construction Loan; the Company shall,
nevertheless, have a right of offset with respect to all damages
incurred by the Company or any Member resulting from any breach
by Feld of his obligations hereunder, in addition to all other
rights and remedies that the Company and the other Members may
have with respect to such breach by Feld.

12.7.3 The indemnification set forth in this Article
12 shall in no event cause the Members to incur any liability, or
result in any liability of the Members to any third party, beyond
those liabilities specifically enumerated in the Articles of
Organization, the Act or this Agreement.

12.8 Manner of Acting. In all actions to be taken by the
Managers pursuant to this Agreement, the unanimous act of the
Managers shall be required.

12.9 Informal Act by Managers. Any action required or
permitted to be taken at a meeting of the Managers or of any
committee designated by said Managers may be taken without a
meeting if the action is evidenced by one or more written
consents describing the action taken, signed by each Manager or
committee member, and delivered to the Person having custody of
the Company records for inclusion in the minutes or for filing
with the records. Action taken under this Section 12.9 is
effective when all Managers or committee members have signed the
consent, unless the consent specifies a different effective date.
Such consent has the same force and effect as an unanimous vote
of the Managers or committee members and may be stated as such in
any document.

12.10 Participation by Electronic Means. Any Manager or
any committee designated by the Managers may participate in a
meeting of the Managers or committee by means of telephone
<PAGE>

conference or similar communications equipment by which all
Persons participating in the meeting can hear each other at the
same time. Such participation shall constitute presence in
person at the meeting.

12.11 Resignation. Feld covenants and agrees to serve as
the sole Manager until the earlier of the Final Closing Date or
the Outside Date. Otherwise, any Manager of the Company may
resign at any time by giving written notice to the Members of the
Company. The resignation of any Manager shall take effect upon
receipt of notice thereof or at such later time as shall be
specified in such notice.

12.12 Removal.

12.12.1 Causes for Removal. WPHC shall have the right
to remove Feld as the Manager and as a Member ("Removal") and
substitute WPHC as Manager or appoint a new Manager upon any of
the following (a "Removal Event"):

12.12.1.1 If the Initial Closing has not occurred
by May 15, 1995;

12.12.1.2 If the Construction Loan Closing has not
occurred by the Construction Loan Closing Outside Date;

12.12.1.3 Delays in construction not caused by
Force Majeure which result in the Project falling behind schedule
by six (6) months or more based on the Construction Schedule
approved by the parties prior to the Construction Loan Closing,
or delays in construction, whether or not caused by Force Majeure
which cause WPHC to reasonably conclude that the Project will not
or cannot be completed by the Outside Date;

12.12.1.4 The Project having incurred Development
Deficits in excess of $250,000 which have not been funded by
Development Deficit Payments from Feld within thirty (30) days of
notice from WPHC requiring such funding;

12.12.1.5 The Project having incurred any
Operating Deficits which have not been funded by Operating
Deficit Payments from Feld within thirty (30) days of notice from
WPHC requiring such funding;

12.12.1.6 The death or disability of Feld;

12.12.1.7 If the Final Closing has not occurred by
the Outside Date;

12.12.1.8 If Feld shall be in Material Default
Feld under this Agreement, and such Material Default is not cured
within thirty (30) days after written notice thereof from WPHC
or, if such Material Default cannot be cured within such 30-day
period, Feld does not commence within such thirty (30) days and
diligently proceed to cure such breach and actually completes
such cure in any event within ninety (90) days after such notice;
or
<PAGE>

12.12.1.9 If any breach or default under the
Construction Loan is not cured within any applicable cure period
provided for under the Construction Loan.

12.12.2 Documentation In Connection With Removal.
Upon Removal of Feld, Feld shall cease to have any interest in
the Company and Feld shall cease to be a Member of the Company.
Such removal shall be effective without the necessity of the
execution of any documents by Feld. Nevertheless, Feld shall
promptly execute such assignment and transfer documents as WPHC
may reasonably request to evidence the Removal of Feld.

12.12.3 Effect of Removal on Certain Obligations of
Feld.

12.12.3.1 If Feld is removed prior to the
Construction Loan Closing Date, he shall have no continuing
obligations for the performance of his obligations under Article
6 after the date of his Removal and no obligation to perform any
continuing covenants set forth in Article 13. Feld shall be
liable, however, for any breach of any representation or warranty
which occurred prior to his Removal.

12.12.3.2 If Feld is removed after the
Construction Loan Closing Date, Feld shall not be released from
his ongoing performance obligations under Sections 6.3 or 6.10 or
Article 13 of this Agreement and Feld shall be liable to WPHC for
damages resulting from any breach of his obligations arising
under Sections 6.1, 6.2, 6.3, 6.6, 6.7, 6.10 or 6.11 or Article
13 of this Agreement, including without limitation, damages
relating to the period after Feld's Removal. WPHC shall have the
obligation to make reasonable efforts to mitigate its damages
following a Removal of Feld after the Construction Loan Closing
Date.

12.13 Death or Disability of Feld. Prior to the
Construction Loan Closing, Feld, WPHC and The Feld Company shall
execute the "Substitution Agreement" in the form attached hereto
as Exhibit U. The Substitution Agreement shall include the
following principle terms: (i) upon the death or disability of
Feld, at the written request of WPHC, The Feld Company shall
acquire from Feld (or his estate) the entire interest of Feld in
the Company, The Feld Company shall be admitted as the Managing
Member, and The Feld Company shall assume in writing all of the
obligations of the Managing Member hereunder; (ii) Feld (or his
estate) shall remain obligated for the performance of all of the
obligations of the Managing Member, whether relating to the
period before or after Feld's Removal; and (iii) if WPHC fails to
exercise its option under this Section 12.13 to cause The Feld
Company to be substituted as the Managing Member within ninety
(90) days of the date of Removal, then such option shall lapse
and Feld (or his estate) shall be released from any obligation
hereunder related to the period after his withdrawal in
connection with his death or disability.

12.14 Vacancies. Any vacancy occurring for any reason in
the number of Managers of the Company may be filled by WPHC or a
Manager appointed by WPHC.
<PAGE>

12.15 Prohibition Against Publicly Traded Partnership. The
Manager shall take all action necessary to prevent the Company
from qualifying as a publicly traded partnership within the
meaning of Code Section 7704, including, without limitation,
limiting the number of Members to less than 500 in compliance
with the safe harbor under IRS Notice 88-75.

ARTICLE 13
REPRESENTATIONS, WARRANTIES AND COVENANTS

13.1 Representations and Warranties of Each Member. Each
Member hereby represents and warrants as of the date hereof as
follows:

13.1.1 Such Member, if other than an individual, is a
duly organized entity under the laws of its state of organization
and has the requisite power and authority to enter into and carry
out the terms of this Agreement, and all required action has been
taken to authorize such Member to execute and consummate this
Agreement.

13.1.2 Such Member has been duly authorized to enter
into this Agreement, and such Member is not a foreign person as
defined under Code Section 1445(f)(3).

13.1.3 To the best of such Member's knowledge, neither
the execution of nor the compliance with this Agreement has
resulted or will result in a default under, or will create, any
encumbrance on the Property, and there is no action pending or
threatened which questions the validity or enforceability of this
Agreement as to such Member.

13.1.4 The Interests to be acquired hereunder are
being acquired by the Member for investment only and for such
Member's own account; no Person other than the Member has or
shall have any beneficial interest in the Interests; and the
Member has no present intention of distributing, reselling or
assigning the Interests.

13.1.5 Such Member understands that the Interests have
not been registered under the Securities Act of 1933, as amended
(the "1933 Act"), or under the laws of any jurisdiction; that the
Company does not intend and is under no obligation to so register
the Interests; that the Interests may not be sold, assigned,
pledged or otherwise transferred except upon delivery to the
Company of an opinion of counsel satisfactory to the Managers
that registration under the 1933 Act is not required for such
transfer, or the submission to the Managers of such other
evidence as may be satisfactory to the Managers, to the effect
that any such transfer will not be in violation of the 1933 Act,
applicable state securities laws or any rule or regulation
promulgated thereunder; and that legends to the foregoing effect
will be placed on all documents evidencing the Interests. The
Member understands that the foregoing does not limit other
restrictions regarding the transfer of its Interests set forth in
this Agreement or in the Act.
<PAGE>

13.1.6 Such Member, either itself or through its
shareholders, partner or advisors, is sophisticated and
experienced in investment matters, and, as a result, is in a
position to evaluate the merits and risks of an investment in the
Company.

13.1.7 Such Member is an "Accredited Investor" as
defined in Regulation D promulgated under the 1933 Act.

13.1.8 Except as may be disclosed in the Environmental
Report, each Member represents that it does not have current
actual knowledge of any Pre-existing Environmental Condition.

13.2 Representations, Warranties and Covenants of Feld. In
addition to the warranties provided for in Article 6 of this
Agreement, as of the date hereof and as of the date of Final
Closing, Feld hereby represents, warrants and covenants to the
Company and the Members as follows:

13.2.1 To the best of Feld's knowledge, the Master
Development Land is zoned to permit its use as a matter of right
for multi-family residential use, subject to compliance with
statutory requirements regarding obtaining approval of a site
development plan. Under the Land Contract and the closing
documents executed in connection therewith, Mission Viejo Company
has irrevocably allocated the right to build 1880 multi-family
residential units on the Master Development Land.

13.2.2 Feld shall use his best efforts to cause the
approval by Douglas County and any other governmental authority
whose approval may be required of a site development plan for the
Land (the "Land Use Approval"), which approval will permit as a
matter of right the construction of a multi-family project having
not less than 456 units on the Project Land and the construction
of the Infrastructure pursuant to the Infrastructure
Agreement(s).

13.2.3 Feld shall use its best efforts to cause by the
earlier of the Construction Loan Closing Date and the
Construction Loan Outside Date, the County of Douglas to approve
the Plans and Specifications for issuance of building permits for
construction of the Project (the "Building Permits") and to issue
all of the Building Permits necessary for construction of the
Project.

13.2.4 Feld shall use its best efforts to cause the
Company to obtain prior to the earlier of the starting
construction of the Project or the Construction Loan Outside
Date, such permits licenses, waivers, consents, approvals and
authorizations, and Feld has made such material registrations,
qualifications, designations, declarations and filings required
(collectively, the "Approvals") as determined or as may be
determined necessary by Feld to the best of his knowledge so that
the Project may be constructed and, subject only to the issuance
of customary temporary or permanent certificates of occupancy by
the County of Douglas and any other necessary operating permits,
operated as a multi-family housing development with related
<PAGE>

facilities as depicted on the Plans and Specifications. As of
the date hereof, Feld has no reason to believe such certificates
of occupancy will not be issued in the ordinary course of
business following completion of construction of the Project
substantially in accordance with the Plans and Specifications.
Feld shall use its best efforts to cause all of the Approvals
at the commencement of construction of the Project to be in full
force and effect. Feld shall, promptly upon receipt of any
Approvals, deliver to WPHC true, correct and complete copies of
all such Approvals.

13.2.5 The Land is, and at the Final Closing shall be,
free from delinquent water charges, sewer rents, taxes and
assessments.

13.2.6 To the best knowledge of Feld, all utility
services, including but not limited to storm and sanitary sewer,
water, gas, electric power and telephone service will be prior to
the earlier of Substantial Completion of the Project or the
Outside Date, available to the Project Land in form and capacity
sufficient for the useful enjoyment and operation of the Project
and there will be no unpaid assessments, impact fees, development
fees, tap-on fees or recapture costs payable in connection
therewith except for charges shown on the tax certificates and
the usual and customary charges involved in the ordinary course
of business and specifically identified in the Final Project
Budget.

13.2.7 To the best of Feld's knowledge, when
constructed substantially in accordance with the Plans and
Specifications, the Project shall not violate in any material
respects all applicable covenants, conditions and restrictions,
zoning ordinances and regulations, building codes, environmental
and all other federal, state and local laws, ordinances,
statutes, rules and regulations applicable to the Project. To
the best of Feld's knowledge, as of the date hereof, the Project
is not subject to any laws, rules, regulations, orders or
requirements, which require the Company to designate any of the
Project as affordable housing, low income housing or moderate
income housing.

13.2.8 The construction and development of the Project
shall be undertaken and shall be completed in a timely and
workmanlike manner in substantial compliance with (a) all
applicable requirements of the Construction Loan, (b) to the best
of Feld's knowledge, all applicable requirements of all
appropriate governmental entities, the violation of which would
have, or would be likely to have, an adverse effect on the
Project or the Company, and (c) the Plans and Specifications for
the Project that have been or shall be hereafter approved by the
Construction Lender, WPHC, and if required, any applicable
governmental entities, as such Plans and Specifications may be
changed from time to time with the approval of the Construction
Lender, WPHC, and any applicable governmental entities, if such
approval shall be required.

13.2.9 To the best of Feld's knowledge and based on
Feld's review of the Environmental Reports, copies of which have
<PAGE>

been provided to the, Land is not designated by any governmental
or quasi-governmental authority to be subject to environmental,
wetlands or other regulation that would materially adversely
affect the use of the Land for the Project as contemplated by
this Agreement, and at the Final Closing the Land and the Project
shall be in compliance with all Environmental Laws and free of
Hazardous Materials except for those necessary for and lawfully
used in operation and maintenance of the Project, and then only
in reasonable amounts which shall be labeled, stored and used in
compliance with Environmental Laws.

13.2.10 To the best of Feld's knowledge, the Land is
or will be prior to Final Closing benefitted by such easements of
unlimited duration as are necessary for the operation of the
Project. No additional easements will, subsequent to the Final
Closing, be required for the provision of utilities, access,
egress and drainage to or for the benefit of the Land or the
Project in connection with the use and operation of the Land as
the Project contemplated by this Agreement.

13.2.11 Feld shall use his best efforts to cause the
Company to obtain, prior to the earlier of the date of Final
Closing or the Outside Date, all permanent certificates of
occupancy and other consents and approvals required from the
County of Douglas and other governmental authorities and
associations and boards with jurisdiction over the Project and
such consents, approvals and certificates shall be in full force
and effect without the presence or existence of any unsatisfied
conditions or requirements with respect thereto, and true,
correct and complete copies of such consents, approvals and
certificates of occupancy shall be delivered to WPHC upon
issuance thereof.

13.2.12 For the purpose of this Section 13.2, the
terms "to the best of Feld's knowledge," "to the best of his
knowledge" and "to the best knowledge of Feld" shall mean and
include such information as is actually known to Feld or should
have been known to him upon diligent inquiry or of which Feld has
received constructive notice. If, prior to the Final Closing,
any of the foregoing representations, warranties or covenants
become incorrect or misleading in any material respect, Feld
shall immediately notify WPHC in writing and such representation,
warranty or covenant shall be deemed remade by Feld as of the
date of such notification based upon such new information.

13.2.13 Feld, all Affiliates of Feld and all other
parties related to or affiliated with Feld or with such
Affiliates shall receive no fees, compensation or other profit or
share of cost savings with respect to the Project except the
amounts set forth in Article 7 hereof or in any Approved
Affiliate Agreement. In the event of any breach of this Section
13.2.14, any amount improperly received by such parties shall be
immediately paid over to the Company, together with interest
thereon from the date received at twelve percent (12%) per annum,
compounded monthly.

13.2.14 Feld shall cause the Project to be at least
75% leased on terms reasonably acceptable to WPHC within thirty-
<PAGE>

six (36) months after the Construction Loan Closing. Failure to
do so shall be a default under this Agreement and shall give WPHC
the right to cause the Removal of Feld.

13.3 General Representation. No representation, warranty or
statement of Feld in this Agreement or in any document,
certificate or schedule furnished or to be furnished by Feld or
its agents or contractors to WPHC pursuant hereto contains or
will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the
statements or facts contained therein not misleading.

13.4 Survival; Indemnity. All of the representations,
warranties and covenants of Feld contained in this Article 13
shall survive the resignation or withdrawal of Feld as Manager
and/or Member of the Company and shall survive the Final Closing
Date for a period of one (1) year after the Final Closing Date
except that, in the case of any material matter intentionally
concealed or intentionally not disclosed by Feld, such period
shall be extended to three (3) years after the Final Closing
Date. Feld shall defend, indemnify and hold harmless WPHC
against a breach of any of the foregoing representations,
warranties and covenants and any damage, loss or claim caused
thereby, including reasonable attorneys' fees and costs and
expenses of litigation and collection.

ARTICLE 14
RIGHTS AND OBLIGATIONS OF MEMBERS

14.1 Limitation of Liability.

14.1.1 Each Member's liability to Persons other than
the other Members shall be limited as set forth in the Act and
other applicable law.

14.1.2 No officer, director or shareholder of WPHC
shall be bound by or have any personal liability hereunder or
under any document, agreement, understanding or arrangement
relating to this transaction. The parties to this Agreement
shall look solely to the assets of WPHC for satisfaction of any
liability of WPHC in respect of this Agreement and all documents,
agreements, understandings and arrangements relating to this
transaction and will not seek recourse or commence any action
against any of the directors, officers or shareholders of WPHC or
any of their personal assets for the performance or payment of
any obligation hereunder or thereunder. The foregoing shall also
apply to any and all future documents, agreements,
understandings, arrangements and transactions between the parties
hereto with respect to the Project or this Agreement.

14.1.3 The Members acknowledge that Feld has made
certain transfers to the LES Trust and the LF Trust prior to
November 4, 1991, and agree that no Member will assert any right
to recover against either of such trusts by reason of any
transfer made prior to November 4, 1991, regardless of the
consideration or lack of consideration for such transfer. Feld
shall make no further transfers to either of such trusts as long
<PAGE>

as all or any part of Feld's obligations under this Agreement
remain outstanding. In addition to the foregoing, the Members
hereby agree that the personal residence of Feld located at One
Dexter Street, Denver, Colorado is not available to support the
obligations of Feld under this Agreement and agree not to assert
any right to recover against such personal residence, and the
Members hereby disclaim, quitclaim, release and relinquish any
right to proceed against such personal residence for amounts owed
by Feld under this Agreement.

14.2 Company Debt Liability. A Member will not personally
be liable for any debts or losses of the Company, except as
provided herein or in the Act.

14.3 List of Members. Upon written request of any Member,
the Managers shall provide a list showing the names, addresses
and Percentage Interests of all Members in the Company.

14.4 Company Books. The Managers shall maintain and
preserve, during the term of the Company, and for five (5) years
thereafter, all accounts, books, and other relevant Company
documents. Upon reasonable request, each Member shall have the
right, during ordinary business hours, to inspect and copy such
Company documents at the Member's expense.

14.5 Priority and Return of Capital. Except as specifically
provided herein, no Member shall have priority over any other
Member, either as to the return of Capital Contributions or as to
Profits, Losses or distributions; provided that this Section
shall not apply to loans (as distinguished from Capital
Contributions) which a Member may make to the Company.

14.6 Outside Activity.

14.6.1 Except for the limitations on the activities
of Feld and certain Affiliates set forth herein, each Member,
including but not limited to the Manager, may engage in any
capacity (as owner, employee, consultant, or otherwise) in any
activity, whether or not such activity competes with or is
benefitted by the business of the Company, without being liable
to the Company or the other Members for any income or profit
derived from such activity.

14.6.2 From the date hereof until the earlier of
November 1, 1996 or the date that Feld ceases to be a Member of
the Company, neither Feld nor any other Restricted Party shall
construct or commence construction of any Multi-Family Project
located in the Denver metropolitan area (including without
limitation Boulder). The restrictions under this Section 14.6.2
shall not apply to the existing "Breakers" project, which is
located in Denver, or to any subsequent phases of the Breakers,
or to the Village at the Bear project, which is located in
Jefferson County, Colorado, and is owned by Village At Bear Creek
LLC.

14.6.3 From the date hereof until the date that Feld
ceases to be a Member of the Company, neither Feld nor any other
Restricted Party shall purchase, construct or commence
<PAGE>

construction of any Multi-Family Project any part of which Multi-
Family Project is located within 3 miles of any portion of the
Land.

14.6.4 "Restricted Parties" shall mean Feld, The
Feld Company and any entity in which they individually or
collectively, directly or indirectly, have an ownership interest
of in excess of 20 percent of any class of security. Feld
covenants that it shall cause each Restricted Party to comply
with the restrictions in this Section 14.6, and a failure of a
Restricted Party to comply with the terms of this Agreement shall
constitute a breach of this Agreement by Feld. Feld shall comply
with the restrictions set forth in this Section 14.6 in good
faith and shall not employ any artifice or device to evade the
intent of this provision. The restrictions in Subsections 14.6.2
and 14.6.3 are cumulative, and shall apply to a Restricted Party
as an owner for its own account or as a developer, construction
manager, general contractor or partner of any other Person. This
Section 14.6 shall not prohibit any Restricted Party from
conducting pre-development activities in connection with a Multi-
Family Project, provided that construction activity (including
any activity for which a building permit is required) has not
commenced on such Multi-Family Project.

ARTICLE 15
MEETINGS OF MEMBERS

15.1 Annual Meeting. The annual meeting of the Members
shall be held on the first business day of May or at such other
time as shall be determined by resolution of the Members,
commencing with the year 1996, for the purpose of the
transaction of such business as may come before the meeting.

15.2 Special Meetings. Special meetings of the Members, for
any purpose or purposes, unless otherwise prescribed by statute,
may be called by any Manager or by any Member or Members holding
at least 1% of the Percentage Interests.

15.3 Place of Meetings. The Members may designate any
place, either within or outside the State of Colorado, as the
place of meeting for any meeting of the Members. If no
designation is made, or if a special meeting be otherwise called,
the place of meeting shall be the principal business office of
the Company in the State of Colorado.

15.4 Notice of Meetings. Except as otherwise provided for
herein, written notice stating the place, day and hour of the
meeting and the purpose or purposes for which the meeting is
called shall be delivered not less than ten (10) nor more than
fifty (50) days before the date of the meeting, either personally
or by mail, by or at the direction of the Managers or Person
calling the meeting, to each Member entitled to vote at such
meeting.

15.5 Meeting of all Members. If all of the Members shall
meet at any time and place, either within or outside of the State
of Colorado, and consent to the holding of a meeting at such time
<PAGE>

and place, such meeting shall be valid without call or notice,
and at such meeting lawful action may be taken.

15.6 Record Date. For the purpose of determining Members
entitled to notice of or to vote at any meeting of Members or any
adjournment thereof, or Members entitled to receive payment of
any distribution, or in order to make a determination of Members
for any other purpose, the date on which notice of the meeting is
sent or the date on which the resolution declaring such
distribution is adopted, as the case may be, shall be the record
date for such determination of Members. When a determination of
Members entitled to vote at any meeting of Members has been made
as provided in this Section, such determination shall apply to
any adjournment thereof.

15.7 Quorum. Members holding at least a Majority In
Interest, represented in person or by proxy, shall constitute a
quorum at any meeting of Members. In the absence of a quorum at
any such meeting, a majority of the Percentage Interests so
represented may adjourn the meeting from time to time for a
period not to exceed sixty (60) days without further notice.
However, if the adjournment is for more than sixty (60) days, or
if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be
given to each Member of record entitled to vote at the meeting.

At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. The
Members present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the
withdrawal during such meeting of Members owning that number of
Percentage Interests whose absence would cause less than a
quorum.

15.8 Manner of Acting. If a quorum is present, the
affirmative vote of Members holding at least a Majority In
Interest and entitled to vote on the subject matter shall be the
act of the Members, unless the vote of a greater or lesser
proportion or number is otherwise required by the Act, by the
Articles of Organization, or by this Agreement.

15.9 Proxies. At all meetings of Members, a Member may vote
in person or by proxy executed in writing by the Member or by a
duly authorized attorney-in-fact. Such proxy shall be filed with
the Managers of the Company before or at the time of the meeting.
No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.

15.10 Action by Members Without a Meeting. Action required
or permitted to be taken at a meeting of Members may be taken
without a meeting if the action is evidenced by one or more
written consents describing the action taken, signed by each
Member entitled to vote and delivered to the Managers of the
Company for inclusion in the minutes or for filing with the
Company records. Action taken under this Section 15.10 is
effective when all Members entitled to vote have signed the
consent, unless the consent specifies a different effective date.
<PAGE>

The record date for determining Members entitled to take
action without a meeting shall be the date the first Member signs
a written consent.

15.11 Voting by Ballot. Voting on any question or in any
election may be by voice vote unless the Managers or any Member
shall demand that voting be by ballot.

15.12 Waiver of Notice. When any notice is required to be
given to any Member, a waiver thereof in writing signed by the
Person entitled to such notice, whether before, at, or after the
time stated therein, shall be equivalent to the giving of such
notice.

ARTICLE 16
TRANSFERABILITY; PUT-CALL PROVISIONS

16.1 Restrictions on Transferability. Except as provided in
Section 16.2 and Section 16.6, no transfer, pledge or assignment
of all or any part of a Member's Interest in the Company
(including the transfer of any rights to receive or share in
profits, losses, income or the return of contributions) shall be
effective unless and until written notice (including the name and
address of the proposed purchaser, transferee, or assignee and
the date of such transfer) has been provided to the Company and
the non-transferring Members approve of the proposed sale, pledge
or assignment of a selling, pledging or assigning Member's
Interest by unanimous written consent, which may be withheld in
their sole discretion.

16.2 Put-Call Rights.

16.2.1 WPHC shall have the option (the "Call Option")
to acquire the Interest of Feld in the Company, including his
right to receive any distributions related to any periods prior
to and including the Option Closing Date: (i) on and after the
Final Closing for the Option Price, or (ii) on or after the
Construction Loan Outside Date, for $100.00 if the Construction
Loan Closing has not occurred by the Construction Loan Outside
Date for any reason whatsoever, or (iii) at any time for $100.00
if Feld fails to timely cure any default by Feld under this
Agreement. The exercise by WPHC of the Call Option described in
item (i) of this Section is conditioned on WPHC performing its
obligation to make the Final Closing Capital Contribution when
and as required under this Agreement. To exercise its Call
Option, WPHC shall provide written notice of exercise to Feld.

16.2.2 Feld shall have the right to cause WPHC to
acquire the Interest of Feld in the Company, including his right
to receive any distributions related to any periods prior to and
including the Option Closing Date, at Final Closing for the
Option Price (the "Put Option") by providing written notice to
WPHC of Feld's intention to exercise the Put Option, provided
that all the Final Closing Funding Conditions have been
satisfied.
<PAGE>

16.2.3 If the Call Option or Put Option is exercised,
Feld shall forthwith upon request of WPHC execute an Assignment
of Interest in the form of Exhibit Q or Exhibit R, as applicable,
attached hereto, wherein Feld shall assign its Interest in the
Company free and clear of all liens, security interests and
competing claims. Feld shall execute such other instruments of
transfer and of due authorization, execution and delivery and of
the absence of any such liens, security interests or competing
claims as WPHC may reasonably request. Feld shall have no duty,
obligation or right to continue as Manager of the Company after
such transfer of its Interest.

16.3 Calculation of Option Price.

16.3.1 The Members shall use their respective, good
faith efforts to determine the Option Price prior to the Option
Closing Date. For a period of at least ten (10) business days
prior to ordering an appraisal in connection with the
determination of the Option Price, WPHC and Feld shall attempt in
good faith to negotiate the fair market value of the Project to
be used in such determination. Each of WPHC and Feld shall be
entitled to submit the calculation of the Option Price to the
Company's Accountants for verification or auditing. If WPHC and
Feld are unable to determine the Option Price by the Option
Closing Date, then WPHC shall pay Feld the Minimum Option Price
as estimated by WPHC in its good faith judgment. The parties
shall make a determination of the Option Price promptly after the
Option Closing, and (i) if the Option Price as so determined
exceeds the estimated Minimum Option Price paid at the Option
Closing, then WPHC shall pay Feld such excess within five (5)
business days after the determination of the Option Price, or
(ii) if the Option Price as so determined is less than the
estimated Minimum Option Price paid at the Option Closing, then
Feld shall pay the difference to WPHC within five (5) business
days after the determination of the Option Price. In addition,
for a period of twelve (12) months after the Final Closing Date,
WPHC and Feld shall each have the right to cause the
recalculation of the Option Price, if such Member pays the costs
of the Company's Accountants in making such recalculation. If
the amount of the adjustment is in excess of $5,000, then WPHC
and Feld shall adjust the Option Price with five (5) business
days after the recalculation of the Option Price. No post-
closing adjustment in the Option Price shall be made for amounts
of $5,000 or less or based on a recalculation made more than
twelve (12) months after the Option Closing Date.
Notwithstanding anything to the contrary herein, the appraised
value of the Project as determined shall be final and shall not
be subject to challenge or recalculation by any Member.

16.4 Right of Offset. Payment of the Option Price shall be
subject to a right of offset in favor of the Company and WPHC
with respect to any claims or damages they may have against Feld.

16.5 Restrictions on Resignation. Notwithstanding anything
to the contrary contained herein or under the Act, no Member
shall have the right to resign from the Company. In the event a
Member does resign in violation of the foregoing provision, (i)
the Company shall not be obligated to pay any amounts to the
<PAGE>

Member, nor to distribute any of the Property to the Member or
any interest therein, (ii) the Member shall be deemed to have
forfeited any rights to legal or beneficial ownership of its
Interest, and (iii) the Company may recover from the resigning
Member damages for breach of this Agreement.

16.6 Permitted WPHC Transfer. WPHC shall have the right to
transfer a portion of WPHC's Interest in the Company (a "WPHC
Permitted Transfer") to a Person (a "WPHC Permitted Transferee"),
provided that WPHC at all times during the term of this Agreement
shall retain an Interest in the Company of at least twenty-one
percent (21%) of the total Interests in capital, income, gain,
loss, deduction and credit. WPHC acknowledges that any transfer
pursuant to this Section 16.6 shall be solely from the Interest
of WPHC and shall not result in the dilution of the Interest of
Feld. In the event of a Permitted WPHC Transfer, (I) WPHC shall
have the exclusive authority to communicate all decisions, votes
and elections ("Decisions") made by it and by the WPHC Permitted
Transferee with respect to the Interest of WPHC and such
transferee in the Company, (II) Feld shall be entitled to rely
exclusively on communications made by WPHC with respect to all
such Decisions, and any communications by a WPHC Permitted
Transferee with respect to a Decision other than through WPHC
shall be invalid, and (III) prior to and as a condition to the
admission of a WPHC Permitted Transferee as a Member, the WPHC
Permitted Transferee shall execute an admission agreement wherein
it agrees to be bound by all the terms of this Agreement,
including without limitation, this Section 16.6.

ARTICLE 17
ADMISSION OF ADDITIONAL MEMBERS

From the date of the formation of the Company, with the
unanimous written consent of the Members, any Person acceptable
to the Members may, subject to the terms and conditions of this
Agreement: (i) become an additional Member in this Company by
the sale of new Interests for such consideration as the Members
by unanimous vote shall determine, or (ii) become a Substitute
Member as a transferee of a Member's Interest or any portion
thereof.

ARTICLE 18
DISSOLUTION AND TERMINATION

18.1 Dissolution.

18.1.1 The Company shall be dissolved upon the
occurrence of any of the following events ("Dissolution Event"):

(a) When the period fixed for the duration of the
Company shall expire;

(b) by the unanimous written agreement of all
Members; or

expulsion, removal, bankruptcy, dissolution of a Member or
occurrence of any other event which terminates the continued
membership of a Member in the Company (a "Withdrawal Event"),
unless the business of the Company is continued by the consent of
a majority of the Interests of the remaining Members in the
capital and profits of the Company, as determined in accordance
with Revenue Procedure 94-46 within ninety (90) days after the
termination and there are at least two remaining Members.

18.1.2 As soon as possible following the occurrence of
any of the events specified in this Section effecting the
dissolution of the Company, the appropriate representative of the
Company shall execute a statement of intent to dissolve in such
form as shall be prescribed by the Colorado Secretary of State
and file duplicate originals of the same with the Colorado
Secretary of State's office.

18.2 Effect of Filing of Dissolving Statement. Upon the
filing with the Colorado Secretary of State of a statement of
intent to dissolve, the Company shall cease to carry on its
business, except insofar as may be necessary for the winding up
of its business, but its separate existence shall continue until
articles of dissolution have been filed with the Secretary of
State or until a decree dissolving the Company has been entered
by a court of competent jurisdiction.

18.3 Distribution of Assets Upon Dissolution. In settling
accounts after dissolution, the liabilities of the Company shall
be entitled to payment in the following order:

18.3.1 to creditors, in the order of priority as
provided by law (except to Members on account of their Capital
Contributions);

18.3.2 to Members and former Members in satisfaction
of liabilities for distributions under Section 7-80-601 or 7-80-
603 of the Act; and

18.3.3 to Members pro rata in accordance with the
positive balances in their Capital Accounts after taking into
account all adjustments to the Capital Accounts for all periods.

18.4 Articles of Dissolution. When all debts, liabilities
and obligations have been paid and discharged or adequate
provisions have been made therefor and all of the remaining
Property and assets have been distributed to the Members,
articles of dissolution shall be executed in duplicate and
verified by the Person signing the articles, which articles shall
set forth the information required by the Act.

18.5 Filing of Articles of Dissolution.

18.5.1 Duplicate originals of such articles of
dissolution shall be delivered to the Colorado Secretary of
State.

18.5.2 Upon the filing of the articles of dissolution,
the existence of the Company shall cease, except for the purpose
<PAGE>

of suits, other proceedings and appropriate action as provided in
the Act. The Managers shall thereafter be trustees for the
Members and creditors of the Company and as such shall have
authority to distribute any Property of the Company discovered
after dissolution, convey real estate and take such other action
as may be necessary on behalf of and in the name of the Company.

18.6 Winding Up. If the Property of the Company remaining
after the payment or discharge of the debts and liabilities of
the Company is insufficient to return the Capital Contribution of
each Member, such Member shall have no recourse against any other
Member. The winding up of the affairs of the Company and the
distribution of its assets shall be conducted exclusively by the
Managers, who are hereby authorized to take all actions necessary
to accomplish such distribution, including without limitation,
selling the assets of the Company. In the discretion of the
Managers, a pro rata portion of the amounts that otherwise would
be distributed to the Members under this Article 18 may be
withheld to provide a reasonable reserve for unknown or
contingent liabilities of the Company.

18.7 No Restoration of Deficit Capital Accounts. If the
Company is deemed to be liquidated for federal income tax
purposes within the meaning of Regulation Section 1.704-
1(b)(2)(ii)(g), distributions under Section 14.3(c) shall be
made in compliance with Regulation Section 1.704-1
(b)(2)(ii)(b)(2) to those Members who have positive Capital
Accounts. If the Capital Account of any Member has a deficit
balance after such distributions (after giving effect to all
contributions, distributions, and allocations for all taxable
years), such Member shall have no obligation to make any
contribution to the capital of the Company with respect to such
deficit and such deficit shall not be considered a debt owed to
the Company or any other Person for any purpose whatsoever.

18.8 Deemed Liquidation. If no Dissolution Event has
occurred, but the Company is deemed liquidated for federal income
tax purposes within the meaning of Regulation Section 1.704-1
(b)(2)(ii)(g), the Company shall not be wound up and dissolved
but its assets and liabilities shall be deemed to have been
distributed to the Members and contributed to a new limited
liability company which shall operate and be governed by the
terms of this Agreement.

18.9 Permitted Withdrawal by Feld. If the Construction Loan
Closing has not occurred by the Construction Loan Outside Date,
upon not less than ten (10) days prior written notice to WPHC,
Feld may withdraw as the Manager and as a Member without such
withdrawal (a "Permitted Withdrawal") constituting a breach of
this Agreement. In the event of a Permitted Withdrawal, Feld
shall not have any obligation under the Development Deficit
Guaranty or the Operating Deficit Guaranty, and Feld shall be
released from any obligation hereunder related to the period
after his Withdrawal. Upon a Permitted Withdrawal, Feld shall
have no right to any fees or payments from the Company or any
interest in any property of the Company. Feld shall execute such
documents or instruments evidencing his withdrawal as WPHC may
reasonably request. Except for a Permitted Withdrawal or a
<PAGE>

withdrawal upon the death or disability of Feld, any withdrawal
by Feld from the Company shall constitute a default by Feld under
this Agreement and WPHC shall be entitled to damages and any
other legally available relief based upon such default.

ARTICLE 19
MISCELLANEOUS PROVISIONS

19.1 Statement of Intent of Parties. It is the present
intent of WPHC and Feld to jointly develop the Project and the
Infrastructure as an initial phase leading to the eventual
development of the Master Development. Due to the changes that
may take place in the capital and real estate markets and other
events, unknown at this time, which may alter either WPHC's or
Feld's interest in or outlook on future phases, no specific
provision is made in this Agreement in regard to future phases.
It is the present intent of the parties to use the basic economic
and transaction structure of this operating agreement on future
phases. However, either party may require changes or elect not
to participate in the joint development of future phases. The
Members acknowledge that Feld has diligently pursued the purchase
of the Land and the development plan of the Land for a
significant period and has agreed to WPHC's assumption of the
Land Contract due to and in consideration of WPHC's and WRPT's
financial commitment to the transaction. It is imperative to
WPHC that it control the future of this development in regard to
all issues, including timing, cost, design, etc. While this
control is absolute, it is WRPT's and Feld's present intent that
Feld continue as development partner. Notwithstanding the
foregoing statement of intent, the provisions of this Agreement
and related documents governing the duties and relationships
among the parties shall control over the foregoing statement of
intent and neither party shall have any obligation, express or
implied, to jointly develop another phase of the Master
Development with the other party.

19.2 Notices. Any notice or communication required or
permitted to be given by any provision of this Agreement,
including but not limited to any consents, shall be in writing
and shall be deemed to have been given and received by the Person
to whom directed (a) when delivered personally to such Person or
to an officer or partner of the Member to which directed, (b)
twenty-four (24) hours after transmitted by facsimile, evidence
of transmission attached, to the facsimile number of such Person
who has notified the Company and all of the Members of its
facsimile number, or (c) three (3) business days after being
posted in the United States mails if sent by registered or
certified mail, return receipt requested, postage and charges
prepaid, or one (1) business day after deposited with overnight
courier, return receipt requested, delivery charges prepaid, in
either case addressed to the Person to which directed at the
address of such Person as it appears in this Agreement or such
other address of which such Person has notified the Company and
all of the Members.

WPHC: c/o Wellsford Residential Property Trust
370 Seventeenth Street, Suite 3100
<PAGE>

Denver, Colorado 80202
Attention: Donald D. MacKenzie
Facsimile No. (303) 595-7799

with copies to:

Wellsford Residential Property Trust
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attention: Jeffrey Lynford
Facsimile No. (212) 333-2323

and to:

Wayne H. Hykan, Esq.
Brownstein Hyatt Farber & Strickland, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
Facsimile No. (303) 623-1956

Feld: Mr. Al Feld
The Feld Company
4600 South Ulster Street, Suite 350
Denver, Colorado 80237
Facsimile No. (303) 721-9418

with a copy to:

Alan B. Lottner, Esq.
Haligman & Lottner, P.C.
633 17th Street, Suite 2700, North Tower
Denver, Colorado 80202
Facsimile No. (303) 292-1300

19.3 Application of Colorado Law. This Agreement, and the
application or interpretation hereof, shall be governed
exclusively by its terms and by the laws of the State of
Colorado, and specifically by the Act.

19.4 Waiver of Action for Partition. Each Member
irrevocably waives during the term of the Company any right that
such Member may have to maintain any action for partition with
respect to the Property of the Company.

19.5 Amendments. This Agreement may be amended only upon
the written Agreement of all of the Members.

19.6 Construction. Whenever the singular number is used in
this Agreement and when required by the context, the same shall
include the plural, and the masculine gender shall include the
feminine and neuter genders, and vice versa.

19.7 Headings. The headings in this Agreement are inserted
for convenience only and are in no way intended to describe,
interpret, define, or limit the scope, extent or intent of this
Agreement or any provision hereof.

19.8 Waivers. The failure of any party to seek redress for
<PAGE>

violation of or to insist upon the strict performance of any
covenant or condition of this Agreement shall not prevent a
subsequent act, which would have originally constituted a
violation, from having the effect of an original violation.

19.9 Time of the Essence. Time is of the essence in regard
to the obligations of the parties set forth in this Agreement.

19.10 Remedies for Default. If any party hereto fails
to perform any of its obligations under this Agreement, at the
time and in the manner set forth herein, and such failure
continues uncured after any applicable notice and cure period,
then any other party may assert a claim against the defaulting
party for damages and, to the extent damages are not an adequate
remedy, for specific performance of this Agreement.

19.11 Rights and Remedies Cumulative. The rights and
remedies provided by this Agreement are cumulative and the use of
any one right or remedy by any party shall not preclude or waive
the right to use any or all other remedies. Said rights and
remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.

19.12 Severability. If any provision of this Agreement or
the application thereof to any Person or circumstance shall be
invalid, illegal or unenforceable to any extent, the remainder of
this Agreement and the application thereof shall not be affected
and shall be enforceable to the fullest extent permitted by law.

19.13 Heirs, Successors and Assigns. Each and all of the
covenants, terms, provisions and agreements herein contained
shall be binding upon and inure to the benefit of the parties
hereto and, to the extent permitted by this Agreement, their
respective heirs, legal representatives, successors and assigns.

19.14 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same instrument.

19.15 Further Assurances. The Members and the Company
agree that they and each of them will take whatever action or
actions as are reasonably necessary or desirable from time to
time to effectuate the provisions or intent of this Agreement,
and to that end, the Members and the Company agree that they will
execute, acknowledge, seal, and deliver any further instruments
or documents which may be necessary to give force and effect to
this Agreement or any of the provisions hereof, or to carry out
the intent of this Agreement or any of the provisions hereof.

19.16 Entire Agreement. This Agreement and each of the
exhibits attached hereto set forth all (and are intended by all
parties hereto to be an integration of all) of the promises,
agreements, conditions, understandings, warranties, and
representations among the parties hereto with respect to the
formation and operations of the Company; and there are no
promises, agreements, conditions, understandings, warranties, or
representations, oral or written, express or implied, among them
other than as set forth herein. The exhibits attached hereto are
<PAGE>

incorporated herein by reference.
<PAGE>

CERTIFICATE

The undersigned hereby agree, acknowledge and certify that
the foregoing Agreement constitutes the Operating Agreement of
Park at Highlands LLC adopted by the Members of the Company
effective as of April 27, 1995.

/s/ Al Feld
---------------------------------
Al Feld

WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation

By: /s/ Donald D. MacKenzie
-----------------------------
Name: Donald D. MacKenzie
Title: Vice President
<PAGE>

GUARANTY

By its execution hereof, WELLSFORD RESIDENTIAL PROPERTY
TRUST, a Maryland real estate investment trust ("WRPT"), hereby
guarantees to Al Feld ("Feld") that Wellsford Park Highlands
Corp., a Colorado corporation, shall timely and fully satisfy its
obligation to fund the Final Closing Capital Contribution when,
as and if required by the foregoing Operating Agreement, as such
Agreement may be amended from time to time (the "Obligation").

This guaranty is a guaranty of payment and performance of
the Obligations, not merely of collection. Any amendment or
modification of the Obligations made by WPHC and Feld shall not
release the duties and obligations of WRPT hereunder, and this
Guaranty shall extend to the Obligations as so amended or
modified. This Guaranty shall be continuing and irrevocable
until the Obligations have been satisfied in full. WRPT hereby
waives notice of acceptance of this Guaranty.

WRPT waives and agrees not to assert or take advantage of:
(a) any right to require Feld to proceed against any other
person or to proceed against or exhaust any security held by Feld
at any time or to pursue any other remedy in Feld's power before
proceeding against WRPT; (b) any right to require Feld to
proceed against WPHC or any other person or to proceed against or
exhaust any security held by Feld at any time or to pursue any
other remedy in Feld's power before proceeding against WRPT; and
(c) any requirement that notice be provided to WRPT.

This Guaranty and all documents, agreements, understandings
and arrangements relating to this Guaranty have been executed by
the undersigned on behalf of WRPT in his/her capacity as an
officer or trustee of WRPT which has been formed as a Maryland
real estate investment trust pursuant to a Declaration of Trust
of WRPT dated as of July 10, 1992, and not individually, and
neither the trustees, officers or shareholders of WRPT shall be
bound by or have any personal liability hereunder or thereunder.
The beneficiary of this Guaranty shall look solely to the assets
of WRPT for satisfaction of any liability of WRPT in respect of
this Agreement and all documents, agreements, understandings and
arrangements relating to this transaction and will not seek
recourse or commence any action against any of the trustees,
officers or shareholders of WRPT or any of their personal assets
for the performance or payment of any obligation hereunder or
thereunder. The foregoing shall also apply to all and any future
documents, agreements, understandings, arrangements and
transactions between the parties hereto with respect to the this
Guaranty or any matter related thereto.

Should any one or more provisions of this Guaranty Agreement
be determined to be illegal or unenforceable, all other
provisions nevertheless shall be effective.

This Guaranty Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado.
<PAGE>

EXECUTED as of April 27, 1995.

WELLSFORD RESIDENTIAL PROPERTY TRUST,
a Maryland real estate investment
trust

By: /s/ Donald D. Mackenzie
----------------------------
Name:
Title:
<PAGE>

STATE OF ___________________ )
) ss.
COUNTY OF __________________ )

The foregoing operating agreement was acknowledged before me
this _____ day of ______________, 1995 by Al Feld.

WITNESS my hand and official seal.

My commission expires:

___________________________________
Notary Public

STATE OF COLORADO )
) ss.
COUNTY OF DENVER )

The foregoing operating agreement was acknowledged before me
this _____ day of _____________, 1995 by Donald D. MacKenzie as
Vice President of Wellsford Park Highlands Corp., a Colorado
corporation.

WITNESS my hand and official seal.

My commission expires:

________________________________
Notary Public

STATE OF COLORADO )
) ss.
COUNTY OF DENVER )

The foregoing guaranty was acknowledged before me this _____
day of _____________, 1995 by __________________ as _____________
of Wellsford Residential Property Trust, a Maryland real estate
investment trust.

WITNESS my hand and official seal.

My commission expires:

________________________________
Notary Public
<PAGE>

EXHIBITS

EXHIBIT A Feld Reimbursable Expenses
EXHIBIT B Construction Procedures
EXHIBIT C Deposit and Contract Administration Agreement
EXHIBIT D Final Closing Funding Conditions
EXHIBIT E Description of Infrastructure
EXHIBIT F Description of Infrastructure Land
EXHIBIT G Description of the Land
EXHIBIT H Description of the Master Development Land
EXHIBIT I Initial Project Budget
EXHIBIT J Property Management Agreement
EXHIBIT K Intentionally Omitted
EXHIBIT L Pledge and Security Agreement -- Feld to WPHC
EXHIBIT M Pledge and Security Agreement -- WPHC to Feld
EXHIBIT N Description of Plan and Specifications
EXHIBIT O Final Project Budget
EXHIBIT P Calculation of the Feld Incentive Fee
EXHIBIT Q Assignment of Interest -- Call Option
EXHIBIT R Assignment of Interest -- Put Option
EXHIBIT S-1 Architect's Certificate
EXHIBIT S-2 Engineer's Certificate
EXHIBIT T Infrastructure Budget
EXHIBIT U Substitution Agreement
<PAGE>

EXHIBIT A

FELD REIMBURSABLE EXPENSES
<PAGE>

EXHIBIT B

CONSTRUCTION PROCEDURES

1. Requests for advances by the Construction Lender for payment
of costs of labor, materials, and services supplied for the
construction of the improvements and other items shown in
the Project Budget shall be submitted by Feld, not more
frequently then as specified in the Construction Loan,
after actual commencement of construction of the
improvements. WPHC, and the Construction Consultant shall
be provided with copies of the application for advance
simultaneously with delivery to the Construction Lender,
except as otherwise provided in Section 6.6 of the Operating
Agreement.

2. WPHC and the Construction Consultant shall have the right
and Feld shall permit them to enter upon the Property and
any location where materials which are intended to be
utilized in the construction of the improvements are stored
for purpose of inspection of the Property and such materials
at all reasonable times.

3. Feld shall timely comply with and promptly furnish to WPHC
and Construction Consultant a true and complete copy of any
notice or claim by any governmental authority pertaining to
the Property and of any notice or claim from the
Construction Lender or any subcontractor or supplier with
respect to the Project.

4. Feld shall disburse all advances for payment of costs and
expenses for purposes specified in the Project Budget, and
for no other purpose.

5. WPHC and Construction Consultant shall be advised, in
advance of, and shall have the right to attend all meetings
pertaining to the construction of the improvements. Feld
agrees to use his best efforts to attempt to notify WPHC and
Construction Consultant reasonably in advance of such
meetings in order to allow attendance at such meeting by
representatives of WPHC and the Construction Consultant.

6. Feld shall not reallocate to other line items any portion of
the line items in the Project Budget that relate to
Construction Loan interest or loan fees.

7. Feld shall deliver copies of the monthly construction ledger
to WPHC on or before the 10th day of the following month.

8. Change orders shall be dealt with as provided in Section 6.7
of the Operating Agreement.
<PAGE>

EXHIBIT C

DEPOSIT AND CONTRACT ADMINISTRATION AGREEMENT
<PAGE>

EXHIBIT D

FINAL CLOSING FUNDING CONDITIONS

(a) No Default; Certificate From Feld. There shall be
no uncured default by Feld under this Agreement and no uncured
default under the Construction Loan, and WPHC shall have received
a certificate from Feld that the representations, warranties and
covenants of Feld in Articles 6 and 13 are materially true and
accurate as of the date of the proposed Final Closing and that
Feld and the Company are not in default of any of their
obligations hereunder or under any contracts or agreements
relating to the Project as of the date of the proposed Final
Closing.

(b) Construction Loan. Feld shall provide evidence
satisfactory to WPHC that the principal amount of the
Construction Loan and all accrued interest thereon have either
been paid in full or will be paid in full from the proceeds of
the Final Closing Capital Contribution immediately upon the
funding of the Final Closing Capital Contribution. Such evidence
may consist of a payoff letter in form sufficient to allow the
title insurer to insure over the lien of the Construction Loan.

(c) Physical Inspection. The Construction Consultant
shall have prepared a physical inspection report reasonably
satisfactory to WPHC.

(d) Final Completion; Development Deficits. Final
Completion of the Project shall have occurred, and all
Development Deficit Payments shall have been made by Feld.

(e) Lien Waivers. Feld shall obtain and provide
copies to WPHC of unconditional lien releases from all
subcontractors, materialmen and providers of labor, equipment,
material and/or services to the Property and the Project, as to
all work performed and materials purchased in connection with the
construction of the Project, in form reasonably satisfactory to
WPHC or, with respect to any liens not so released, Feld shall
have provided surety bonds to which any contested liens are
transferred (and released from the Property) and title insurance
over any such liens.

(f) Title Policy. The title insurance company shall
have issued the following endorsements to the Company's title
policy: (1) an endorsement indicating that the Company owns fee
simple title to the Project Land and that the Project Land will
be free and clear of the Construction Loan upon payment of the
Final Closing Capital Contribution; (2) a "date down" endorsement
to the title policy extending the effective date of the title
policy to the date of Final Closing and showing no exceptions to
title other than the exceptions reflected on the title policy as
of Initial Closing, except as shall be acceptable to WPHC in its
reasonable judgment; (3) an endorsement affording mechanics lien
coverage; (4) an endorsement increasing the amount of insurance
by an amount equal to the Final Closing Capital Contribution; and
(5) such other endorsements as WPHC may reasonably require,
<PAGE>

including without limitation, the following: (i) 103.1 and 103.2
(Encroachments) to the extent required and available; (ii) 103.7
(Property Abuts Open Street); (iii) 107.2 (Increase Policy
Amount) for the amount of the Final Closing Capital Contribution
plus the Initial Closing Capital Contribution; (iv) 110.1
(Deleting Standard Exceptions) if not already provided; (v) 110.2
(Special Exceptions) if any new exceptions appear that are not
acceptable to WPHC in its sole discretion; (vi) 115.2 (PUD);
(vii) 116.1 (Survey); (viii) 123.2 (Zoning).

(g) Survey. WPHC shall have received and approved an
updated and recertified as-built survey reasonably satisfactory
to WPHC dated no more than thirty (30) days prior to the date of
Final Closing, showing no encroachments or other adverse matters
affecting title to the Project, except as shall be reasonably
acceptable to or have been previously approved in writing by
WPHC.

(h) As-Built Plans and Specifications. Feld shall
have submitted to WPHC a written document executed by Feld, the
architect and the general contractor certifying no material
change to the approved "for-construction" Plans and
Specifications except any changes stated therein that have
previously been approved by WPHC.

(i) Permits, Licenses and Certificates of Occupancy.
WPHC shall have received a copy of the final and unconditional
certificate or certificates of occupancy issued by the
appropriate governmental authorities for the Project in its
entirety and a copy of any permits and licenses which are
required for the operation and use of the Project.

(j) Architect's and Engineer's Certificates. Feld
shall have delivered to WPHC an architect's certificate in the
form attached hereto as Exhibit S-1 and an Engineer's Certificate
in the form attached hereto as Exhibit S-2.

(k) Payment of Taxes. WPHC shall have received
satisfactory evidence (which may be included in the title policy
described in subsection (f) of these Final Closing Funding
Conditions) that all real property taxes and assessments for the
Project due and payable through the date of funding have been
timely and fully paid.

(l) Release and Waiver. Feld and each affiliate of
Feld that is a party to an Approved Affiliate Agreement shall
have executed for the benefit of the Members a Release and
Waiver, substantially in the form attached hereto as Exhibit B-3
with respect to all liabilities incurred by Feld during its
period of membership in the Company, including, without
limitation, all liabilities incurred by Feld under the
Architect's Agreement, the construction contract for the
construction of the Project, and any contracts, agreements, or
other instruments entered into by Feld in connection with the
construction of the Project or the business of the Company.
<PAGE>

EXHIBIT E

DESCRIPTION OF INFRASTRUCTURE

TO BE AGREED UPON BY PARTIES PRIOR TO CONSTRUCTION LOAN CLOSING
<PAGE>

EXHIBIT F

DESCRIPTION OF INFRASTRUCTURE LAND

TO BE AGREED UPON BY PARTIES PRIOR TO CONSTRUCTION LOAN CLOSING
<PAGE>

EXHIBIT G

DESCRIPTION OF THE LAND

LOT 1, HIGHLANDS RANCH FILING 126-A, DOUGLAS COUNTY, COLORADO.
<PAGE>

EXHIBIT H

DESCRIPTION OF THE MASTER DEVELOPMENT LAND

LOTS 2 THROUGH 5, INCLUSIVE, HIGHLANDS RANCH FILING 126-A,
DOUGLAS COUNTY, COLORADO
<PAGE>

EXHIBIT I

INITIAL PROJECT BUDGET
<PAGE>

EXHIBIT J

PROPERTY MANAGEMENT AGREEMENT

TO BE AGREED UPON BY PARTIES PRIOR TO CONSTRUCTION LOAN CLOSING
<PAGE>

EXHIBIT K

INTENTIONALLY OMITTED
<PAGE>

EXHIBIT L

PLEDGE AND SECURITY AGREEMENT BY FELD

TO BE AGREED UPON BY PARTIES PRIOR TO CONSTRUCTION LOAN CLOSING
<PAGE>

EXHIBIT M

PLEDGE AND SECURITY AGREEMENT BY WPHC

TO BE AGREED UPON BY PARTIES PRIOR TO CONSTRUCTION LOAN CLOSING
<PAGE>

EXHIBIT N

PLANS AND SPECIFICATIONS

(to be approved by all Members prior to the closing of
the Construction Loan and a description thereof to be
attached hereto at or before Construction Loan Closing)
<PAGE>

EXHIBIT O

FINAL PROJECT BUDGET
<PAGE>

EXHIBIT P

CALCULATION AND PAYMENT OF THE INCENTIVE FEE

1. Definitions. The following definitions shall apply for
the purpose of calculation of the Incentive Fee:

a. "Cost Recovery" shall mean that (I) the sum of
Disposition Recovery, Land Recovery, and Ownership Recovery,
exceeds (II) Infrastructure Costs for any an all phases of the
Infrastructure, plus interest on Infrastructure Costs at an
annual rate of nine percent, compounded monthly. Cost Recovery
shall be determined on a calendar year basis; such determination
shall be made by March 31 of each year for the preceding calendar
year.

b. "Disposition Recovery" shall mean (I) the sale
proceeds net of all costs of closing and brokerage costs received
by the Company from a sale of the Project by the Company, plus
(II) the sale proceeds net of all costs of closing and brokerage
costs received from the sale of Future Projects by the initial
owner(s) of such Future Projects, minus (III) Total Development
Costs for the Project (if sold by the Company) and Total
Development Costs for all Future Projects (which have been sold).

c. "Future Project" shall mean any apartment project
constructed by WPHC, WRPT or an Affiliate of them (provided that
WPHC or WRPT directly or indirectly owns 50% or more of such
Affiliate), which project is constructed on the Master
Development Land. "Future Project" shall not include, however,
the Project which is the subject of the Operating Agreement.

d. "Incentive Cap" shall mean the lesser of
$1,957,447.00 or the product of $4,255.32 and the number of
apartment units actually constructed in Phase I. If subsequent
phases are developed, each will have an Incentive Cap based on
the number of units in such phases and a per unit limit of
$4,255,32. In no event shall the Incentive Cap for all phases
exceed an aggregate of $8,000,000.

e. "Land Recovery" shall mean (I) the amount(s)
received by WPHC in connection with the sale(s) of all or a
portion of its interest in the Land Contract or in the Master
Development Land acquired by it pursuant to the Land Contract,
minus (II) the purchase price paid by the WPHC or its Affiliates
for such Master Development Land, plus all closing costs and
incidental holding and carrying costs at an assumed annual
interest rate of nine percent (9%), and the earnest money deposit
in connection with the Land Contract unless and until such
earnest money deposit is applied against the purchase price of
Master Development Land. Land Recovery shall not include any
amounts received from the sale of the Project or a Future
Project.

f. "Ownership Recovery" shall mean (I) the Project
<PAGE>

Value for the Project and any Future Projects, minus (II) Total
Development Costs for the Project and all such Future Projects.
If the Project or a Future Project is sold anytime during the
calendar year preceding the date of determination of Cost
Recovery, such Project or Future Project shall not be included in
the calculation of Ownership Recovery for such calendar year.

g. "Project NOI" shall mean the Net Operating Income
for the Project or a Future Project for the calendar year
preceding the date of determination of Cost Recovery.

h. "Project Value" shall mean with respect to the
Project or any Future Project the Project NOI for such Project or
Future Project divided by ten percent (10.0%).

i. "Stabilized NOI" shall mean the Net Operating
Income for Phase I for the 12 month period following the
Stabilization Date.

j. "Stabilization Date" shall mean the first day of
the month following the date on which any one of the following
shall have occurred: (i) 93% occupancy in the operations of the
Project at any point in time; (ii) 6 months after issuance of a
certificate of occupancy for all of the apartments comprising the
Project; or (iii) forty-two (42) months after the Initial
Closing.

k. "Total Development Costs" with respect to the
Project shall mean Total Development Costs as set forth in the
Operating Agreement, and with respect to any Future Phase shall
have an equivalent meaning. Total Development Costs does not
include an allocation of Infrastructure Costs.

l. "Target Fee" shall mean an amount equal to 3% of
Total Development Costs (including any Cost Saving Fee paid to
Feld).

m. "Yield" shall mean (i) Stabilized NOI, divided by
(ii) the sum of (A) Total Development Costs (including any Cost
Saving Fee paid to Feld), (B) the Incentive Fee, (C) the
Infrastructure Costs allocable to the Project (i.e. for Phase I,
24.26% of total Infrastructure Cost), and (D) interest at 9%,
compounded monthly, on the pro rata share of the Infrastructure
Cost.

2. Calculation of Incentive Fee. The LLC's accountants
shall calculate the Incentive Fee promptly after they have
sufficient information to accurately calculate Stabilized NOI.
The Incentive Fee shall equal the following, provided that in no
event shall the Incentive Fee exceed the Incentive Cap:

a. If the Yield is 9% or less, the Incentive Fee
shall equal zero;

b. If the Yield is greater than 9% and less than or
equal to 10%, then the Incentive Fee shall equal (A) the Target
Fee, multiplied by (B) the Yield minus 9%, multiplied by (C) 100.
<PAGE>

c. If the Yield is greater than 10% and less than or
equal to 11.5%, then the Incentive Fee shall equal the following:

(i) the Target Fee, plus

(ii) (A) the Incentive Cap minus the Target Fee,
multiplied by (B) the Yield minus 10%, divided by (C)
1.5, multiplied by (D) 100.

d. If the Yield is greater than 11.5%, then the
Incentive Fee shall equal the Incentive Cap.

3. Payment of Incentive Fee. The Incentive Fee shall
be deemed earned at the time it is calculated but shall not be
due or payable unless and until Cost Recovery has occurred. The
Incentive Fee shall accrue simple interest at 9% per annum from
the date it is deemed earned until paid.

4. Accelerated Payment of Incentive Fee. Notwithstanding
anything to the contrary in this Exhibit C, if WPHC, in its sole
discretion, causes the Final Closing to occur more than thirty
(30) days prior to the Outside Date, then the Incentive Fee shall
equal the Target Fee and the Company shall pay 50 percent of such
Incentive Fee at the Final Closing and 50 percent of such
Incentive Fee within two years of the date of Final Closing.

5. Allocation of Infrastructure Costs. The allocation of
Infrastructure Costs for purposes of the calculation of the
Incentive Fee is solely for such purpose and is distinct from and
will not be modified by the actual allocation of Infrastructure
Costs per unit.
<PAGE>

EXHIBIT Q

EXERCISE OF CALL OPTION; ASSIGNMENT OF INTEREST
POWER OF ATTORNEY

THIS ASSIGNMENT OF INTEREST (this "Assignment") is made and
entered into as of the ____ day of ______________ 19__, by and
between Al Feld, an individual ("Assignor"), and Wellsford Park
Highlands Corp., a Colorado corporation ("Assignee").

RECITALS

a. Pursuant to that certain Operating Agreement (the
"Operating Agreement") of Park at Highlands LLC, a Colorado
limited liability company (the "Company") dated as of
______________, 1995, by and among Assignor and Assignee,
Assignee is the owner of an option (the "Call Option") to acquire
the ownership interest of Assignor in the Company as of the date
hereof (including the right of Assignor to receive any
distributions related to any periods prior to and including the
date hereof), which ownership interest includes the right of
Assignor to any and all benefits to which Assignor may be
entitled as a Member and as a Manager (each as defined in the
Operating Agreement), as provided in the Operating Agreement or
the version of the Colorado Limited Liability Company Act adopted
by the State of Colorado, Co. Rev. Stat. Sections7-80-101 to 7-
80-913, as amended from time to time (the "Act"), together with
the unaccrued obligations of Assignor, in its capacity as a
Member and Manager, to comply with all the terms and provisions
of the Operating Agreement and the Act (collectively, the
"Ownership Interest").

b. In accordance with Section 16.2.1 of the Operating
Agreement, Assignee, by its execution and delivery of this
Assignment to Assignor, hereby desires (i) to exercise the Call
Option as contemplated therein and (ii) to cause Assignor to
resign as Member and Manager of the Company.

c. Assignor has agreed, concurrently with the exercise of
the Call Option by Assignee: (i) to assign and sell the Ownership
Interest to Assignee pursuant to the terms and conditions set
forth in the Operating Agreement and (ii) to appoint Assignee as
its true and lawful attorney-in-fact, as set forth herein.

d. Terms not otherwise defined herein shall have the
meanings set forth in the Operating Agreement.

AGREEMENT

In consideration of the receipt of Ten and no/100 Dollars
($10.00) and other good and valuable consideration in hand paid
by Assignee to Assignor, the receipt and sufficiency of which are
hereby acknowledged and confessed by Assignor, Assignor and
Assignee hereby agree as follows:

1. Assignment and Assumption. Concurrently with and
<PAGE>

conditioned upon the satisfaction of all of the conditions and
covenants of Section 16.2.1 of the Operating Agreement, Assignor
hereby assigns, grants and conveys to Assignee all of Assignor's
right, title and interest in and to the Ownership Interest.
Assignee hereby assumes the Ownership Interest and agrees to be
bound by and comply with and perform all of the obligations of
Assignor in its capacity as a Member and as a Manager arising
under the Operating Agreement which accrue after the date hereof.
Assignor shall remain obligated to perform all of the obligations
of Assignor under the Operating Agreement (i) which are not
expressly assumed hereunder or (ii) which have accrued on or
prior to the date hereof. Further, all benefits of the
Operating Agreement relating to Assignor, including, without
limitation, the right to receive any distributions related to any
periods prior to and including the date hereof, shall inure to
the benefit of Assignee.

2. Representation and Warranty of Assignor. Assignor
represents and warrants that: (i) Assignor is the sole owner of
the entire Ownership Interest; (ii) Assignor is not in default
under or in breach of any of the terms, covenants or provisions
of the Operating Agreement, and Assignor knows of no event which,
but for the passage of time or the giving of notice, or both,
would constitute an event of default under or a breach of the
Operating Agreement by Assignor; (iii) Assignor is duly
authorized to execute and deliver this Assignment; and (iv) the
Ownership Interest is free and clear of any and all liens,
security interests, encumbrances, and competing claims.

3. Appointment of Assignee as Attorney-in-Fact.
Effective as of the date hereof, Assignor hereby irrevocably
constitutes and appoints Assignee to be its true and lawful
attorney-in-fact to act for Assignor, in the name, place and
stead of Assignor, for the following purposes:

to endorse any check or other instrument payable to
Assignor in connection with the Project, to submit
claims and otherwise deal with all insurance and
insurance proceeds with respect to the Project, to
execute and file with the appropriate governmental
authority or office any and all certificates, reports
or other evidence of the withdrawal of Assignor from
the Company, and to perform such other acts as may be
necessary to carry out the purpose and intent of the
within assignment or to continue the business of the
Company.

Assignor hereby ratifies, acknowledges and confirms all acts
taken by Assignee, as attorney-in-fact, pursuant to this
appointment. Assignor hereby revokes, annuls and cancels any and
all powers of attorney, if any, previously executed by Assignor
with respect to such stated purposes, and the same shall be of no
further force or effect. Assignor hereby acknowledges that such
power shall be coupled with an interest and shall survive the
disability or death of the Assignor.

4. Indemnity. Assignor hereby agrees to indemnify
and defend Assignee and hold it harmless against any claim, loss
<PAGE>

or liability arising from any of the following: (i) any breach
of any representation or warranty hereunder; or (ii) any
assertion that Assignee is liable for any debts or obligations of
Assignor, whether based on any act or omission of Assignor which
occurs prior or subsequent to the date of this Assignment.

5. Governing Law. This Assignment shall be governed
by and construed under the laws of the State of Colorado.

6. Successors and Assigns. This Assignment shall
inure to the benefit and be binding upon the successors and
assigns of Assignor and Assignee.

7. Counterparts. This Assignment may be executed in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.

This Assignment is executed to be effective as of the date
first set forth above.

ASSIGNOR:

________________________________
AL FELD, an individual

ASSIGNEE:

WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation
_________________________________
By: ____________________________
Name:_______________________
Title:______________________
<PAGE>

CONSENT:

Pursuant to Section 18.1.1 of the Operating Agreement and
Section 7-80-801(1)(c) of the Act, Assignee hereby consents to
the continuation of the business of the Company, notwithstanding
the withdrawal and resignation of Assignor as a Member of the
Company.

ASSIGNEE:

WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation

By: ___________________________
Name:______________________
Title:_____________________

[NOTE: Continuing Members to execute Unanimous Written Consent
per Schedule A attached hereto.]

STATE OF _____________________}
}ss
COUNTY OF ____________________}

The foregoing instrument was acknowledged before me on __________
__, 19__, by AL FELD, an individual.

________________________________ Commission expires:___________
Notary Public

STATE OF _____________________}
}ss
COUNTY OF ____________________}

The foregoing instrument was acknowledged before me on __________
__, ____, by __________________________________________, as
____________ of Wellsford Park Highlands Corp., a Colorado
corporation.

________________________________ Commission expires:___________
Notary Public
<PAGE>

SCHEDULE A TO
EXHIBIT Q

UNANIMOUS WRITTEN CONSENT
IN LIEU OF MEETING
BY
THE MEMBERS OF
PARK AT HIGHLANDS LLC,
a Colorado Limited Liability Company
__________________ ___, 19___

Section 7-80-711 of the Colorado Limited Liability Company
Act, as amended (the "Act") provides that any action required or
permitted to be taken at a meeting of the members of a limited
liability company may be taken without a meeting if a written
consent, setting forth the action so taken, shall be signed by
all the members entitled to vote with respect to the subject
matter thereof and delivered to the limited liability company in
the manner described in the Act. Section 15.10 of that certain
Operating Agreement ("Operating Agreement") of Park at Highlands
LLC (the "Company"), a Colorado limited liability company, dated
as of _______________, 1995 by and between Al Feld and Wellsford
Park Highlands Corp., a Colorado corporation ("WPHC"), provides
that action required or permitted to be taken at a meeting of
Members of the Company, may be taken without a meeting under
similar circumstances.

The undersigned, which constitute all of the Remaining Members
(defined below) of the Company, by signing this document, waive
any and all notice that may be required for a meeting of the
members of the Company and take the following action:

WHEREAS, pursuant to Section 16.2.1 of the Operating
Agreement, WPHC, by executing the attached Exercise of Call
Option, Assignment of Interest and Power of Attorney attached
hereto as Exhibit L-1, has given notice to the Company of its
desire (i) to exercise the Call Option as contemplated in the
Operating Agreement and (ii) to cause Al Feld to resign as Member
and Manager of the Company; and

WHEREAS, the Members other than Al Feld (the "Remaining
Members") desire (i) to accept the withdrawal and resignation of
Al Feld as Member and Manager of the Company, (ii) to consent to
the transfer and assignment of the Ownership Interest (as defined
in the attached exhibit) of Al Feld to WPHC, (iii) to appoint and
elect WPHC as the successor Manager to Al Feld, to hold office
until removed pursuant to Section 12.12 of the Operating
Agreement or until its successor has been elected and qualified;
and (iv) to consent to continue the business of the Company after
the resignation and termination of Al Feld as Member and Manager
of the Company;

RESOLVED, that the Remaining Members hereby accept the
withdrawal and resignation of Al Feld as Member and Manager of
the Company; and

FURTHER RESOLVED, that the Remaining Members hereby (i)
<PAGE>

consent to the transfer and assignment of the Ownership Interest
(as defined in the attached exhibit) of Al Feld to WPHC, (ii)
appoint, elect and qualify WPHC as the successor Manager to Al
Feld, to hold office until removed pursuant to Section 12.12 of
the Operating Agreement or until its successor has been elected
and qualified; (iii) consent to continue the business of the
Company after the resignation and termination of Al Feld as
Member and Manager of the Company; and (iv) authorize the Members
to execute, deliver and take all action necessary to effectuate
the actions contemplated under the attached Exhibit L-1.

This Consent, when signed by all of the Remaining Members of
the Company and delivered to the Company in the manner prescribed
in the Act, shall have the same force and effect as a unanimous
vote, and may be stated as such in any document.

IN WITNESS WHEREOF, the undersigned have executed this
Consent as of the date above written.

WELLSFORD PARK HIGHLANDS CORP.,
a Colorado corporation, Member

By: ____________________________
Title:
<PAGE>

EXHIBIT R

EXERCISE OF PUT OPTION; ASSIGNMENT OF INTEREST
POWER OF ATTORNEY

This ASSIGNMENT OF INTEREST (this "Assignment") is made and
entered into as of the ____ day of _____________, 19__ by and
between Al Feld, an individual ("Assignor"), and Wellsford Park
Highlands Corp., a Colorado corporation ("Assignee").

RECITALS

A. Pursuant to that certain Operating Agreement (the
"Operating Agreement") of Park at Highlands LLC, a Colorado
limited liability company (the "Company") dated as of _________,
1995, by and between Assignor and Assignee, Assignor is the owner
of an option (the "Put Option") to cause Assignee to acquire the
ownership interest of Assignor in the Company as of the date
hereof (including the right of Assignor to receive any
distributions related to any periods prior to and including the
date hereof), which ownership interest includes the right of
Assignor to any and all benefits to which Assignor may be
entitled as a Member and as a Manager (each as defined in the
Operating Agreement), as provided in the Operating Agreement or
the version of the Colorado Limited Liability Company Act adopted
by the State of Colorado, Co. Rev. Stat. Sections 7-80-101 to 7-80-913,
as amended from time to time (the "Act"), together with the
unaccrued obligations of Assignor, in its capacity as a Member
and Manager, to comply with all the terms and provisions of the
Operating Agreement and the Act (collectively, the "Ownership
Interest").

B. In accordance with Section 16.2.2 of the Operating
Agreement, Assignor, by its execution and delivery of this
Assignment to Assignee, hereby desires (i) to exercise the Put
Option as contemplated therein and (ii) to resign as Member and
Manager of the Company.

C. At Final Closing (as defined in the Operating
Agreement), concurrently with the above exercise of the Put
Option by Assignor, (i) Assignee has agreed to acquire and buy
the Ownership Interest from Assignor pursuant to the terms and
conditions set forth in the Operating Agreement, provided that
all of the Final Closing Funding Conditions have been satisfied
and (ii) Assignor has agreed to appoint Assignee as its true and
lawful attorney-in-fact, as set forth herein.

D. Terms not otherwise defined herein shall have the
meanings set forth in the Operating Agreement.

AGREEMENT

In consideration of the receipt of Ten and no/100 Dollars
($10.00) and other good and valuable consideration in hand paid
by Assignor to Assignee, the receipt and sufficiency of which are
<PAGE>

hereby acknowledged and confessed by Assignee, Assignor and
Assignee hereby agree as follows:

1. Assignment and Assumption. At Final Closing (as
defined in the Operating Agreement), concurrently with and
conditioned upon the satisfaction of all of the conditions and
covenants of Section 16.2.2 of the Operating Agreement, (i)
Assignor hereby assigns, grants and conveys to Assignee all of
Assignor's right, title and interest in and to the Ownership
Interest and (ii) Assignee hereby assumes the Ownership Interest
and agrees to be bound by and comply with and perform all of the
obligations of Assignor in its capacity as a Member and as
Manager, arising under the Operating Agreement which accrue
after the date hereof. Assignor shall remain obligated to
perform all of the obligations of Assignor under the Operating
Agreement (i) which are not expressly assumed hereunder or (ii)
which have accrued on or prior to the date hereof. Further, all
benefits of the Operating Agreement relating to Assignor,
including, without limitation, the right to receive any
distributions related to any periods prior to and including the
date hereof, shall inure to the benefit of Assignee.

3. Appointment of Assignee as Attorney-in-Fact.
Effective as of the date hereof, Assignor hereby constitutes and
appoints Assignee to be its true and lawful attorney-in-fact to
act for Assignor, in the name, place and stead of Assignor, for
the following purposes:

power shall be coupled with an interest and shall survive the
disability or death of the Assignor.

4. Indemnity. Assignor hereby agrees to indemnify
and defend Assignee and hold it harmless against any claim, loss
or liability arising from any of the following: (i) any breach
of any representation or warranty hereunder; or (ii) any
assertion that Assignee is liable for any debts or obligations of
Assignor, whether based on any act or omission of Assignor which
occurs prior or subsequent to the date of this Assignment.

5. Governing Law. This Assignment shall be governed
by and construed under the laws of the State of Colorado.

6. Successors and Assigns. This Assignment shall
inure to the benefit and be binding upon the successors and
assigns of Assignor and Assignee.

7. Counterparts. This Assignment may be executed in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.

This Assignment is executed to be effective as of the date
first set forth above.

ASSIGNOR:

__________________________________
AL FELD, an individual

ASSIGNEE:

WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation

By:_______________________________
Name:________________________
Title:_______________________

CONSENT:

Pursuant to Section 18.1.1 of the Operating Agreement and Section
7-80-801(1)(c) of the Act, Assignee hereby consents to the
continuation of the business of the Company, notwithstanding the
withdrawal and resignation of Assignor as a Member of the
Company.

ASSIGNEE:

WELLSFORD PARK HIGHLANDS CORP., a
<PAGE>

Colorado corporation

By:_______________________________
Name:________________________
Title:_______________________

[NOTE: Continuing Members to execute Unanimous Written Consent
per Schedule A attached hereto.]

STATE OF ________________}
}ss
COUNTY OF _______________}

The foregoing instrument was acknowledged before me on
___________ __, ____, by AL FELD, an individual.

____________________________ Commission expires: ______________
Notary Public

STATE OF ________________}
}ss
COUNTY OF _______________}

The foregoing instrument was acknowledged before me on
___________, 199__, by ________________________________, as
__________________________________ of WELLSFORD PARK HIGHLANDS
CORP., a Colorado corporation.

_____________________________ Commission expires: ____________
Notary Public
<PAGE>

SCHEDULE A
TO EXHIBIT R

UNANIMOUS WRITTEN CONSENT
IN LIEU OF MEETING
BY
THE MEMBERS OF
PARK AT HIGHLANDS LLC,
a Colorado Limited Liability Company
__________________ ___, 19__

Section 7-80-711 of the Colorado Limited Liability Company
Act, as amended (the "Act") provides that any action required or
permitted to be taken at a meeting of the members of a limited
liability company may be taken without a meeting if a written
consent, setting forth the action so taken, shall be signed by
all the members entitled to vote with respect to the subject
matter thereof and delivered to the limited liability company in
the manner described in the Act. Section 15.10 of that certain
Operating Agreement ("Operating Agreement") of Park at Highlands
LLC (the "Company"), a Colorado limited liability company, dated
as of __________, 1995 by and between Al Feld and Wellsford Park
Highlands Corp., a Colorado corporation ("WPHC"), provides that
action required or permitted to be taken at a meeting of Members
of the Company, may be taken without a meeting under similar
circumstances.

WHEREAS, pursuant to Section 16.2.2 of the Operating
Agreement, Al Feld, by executing the attached Exercise of Put
Option, Assignment of Interest and Power of Attorney attached
hereto as Exhibit L-2, has given notice to the Company of its
desire (i) to exercise the Put Option as contemplated in the
Operating Agreement and (ii) to resign as Member and Manager of
the Company; and

RESOLVED, that the Remaining Members hereby accept the
withdrawal and resignation of Al Feld as Member and Manager of
the Company; and

FURTHER RESOLVED, that the Remaining Members hereby (i)
<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this
Consent as of the date above written.

WELLSFORD PARK HIGHLANDS CORP.,
a Colorado Corporation, Member

By:______________________________
Title:______________________
<PAGE>

EXHIBIT S-1

Form of Architect's Certificate

(Letterhead of Architect)

CERTIFICATE OF ARCHITECT

______________, 1996

Park at Highlands LLC
Wellsford Residential Property Trust
370 17th Street, Suite 3100
Denver, CO 80202

Reference: ______________________
____________, Colorado

Ladies and Gentlemen:

Please refer to the final architectural plans and specifications
reflecting all field notes and field changes as built described
in the attached Exhibit A (the "Plans"). The undersigned
understands that ______________________________ or its designee
("Wellsford") is acquiring an interest in or is causing the
repayment of the construction loan for a residential complex
owned by Park at Highlands LLC, a Colorado limited liability
company ("Owner"), located on that certain parcel of real
property having an address of ___________________________ in the
City of ______, County of ______, State of Colorado and described
on Exhibit B attached hereto (the "Site"), on which Owner has
constructed a complex of ______ apartment units known as
_______________________ (the "Project"). This Certificate is a
condition precedent to Wellsford's acquiring the Project or
repaying such loan, and the undersigned acknowledges that
Wellsford will be relying upon this Certificate in consummating
such transaction.

With such understanding, the undersigned has reviewed the Plans,
the construction of the Project in relationship to the Plans, and
its conformity and compliance with applicable laws and
regulations (i.e., applicable federal, state, county and
municipal laws and regulations and ordinances, including without
limitation, governing building and fire codes, zoning,
subdivision and land use laws and regulations, environmental and
safety statutes and regulations, and the rules and regulations of
other governmental agencies having jurisdiction over the Site or
the Project ("Applicable Laws"). Based upon these reviews and
upon due professional investigation, the undersigned declares and
certifies to and for the benefit of Owner and Wellsford that:

1. The undersigned is the architect who prepared the Plans
and coordinated and supervised the construction of the
<PAGE>

Project.

2. The Project commonly known as ______________ contains
456 apartment units in __ buildings, and _______
parking spaces, with related amenities and facilities.
The Site is zoned _______________ under the applicable
ordinances of the City of ____________, Colorado.

3. We have examined all applicable materials relative to
those types of restrictions and requirements sometimes
referred to as use, dimensional, bulk and parking
restrictions, jurisdictional wetlands requirements,
setback and buffering requirements, density restraints,
landscaping and vegetation preservation ordinances,
laws, rules and regulations and environmental
restraints, which relate to the Site (hereinafter
referred to as "Development Constraints") and have
determined that the Project is permitted as a matter of
right except for the following variances: ____________
______________________________________________________
, and that the following restrictions and requirements
(the "Restrictions and Requirements") are applicable to
the Project:

Minimum Lot Area:

Height Limitation:

Maximum Floor Area Ratio
(or other type of bulk
bulk restriction):

Limitation on Number of
Dwelling Units (if any):

Front Yard Requirements:

Side and Rear Yard
Requirements:

Parking Requirements:

4. The Project and the Site are in compliance with the
Development Constraints and the Restrictions and
Requirements.

5. The improvements contemplated by the Plans have been
completed in substantial compliance with the Plans,
except for the items in the attached Exhibit C which
are incomplete to the extent indicated and for which
the estimated cost to complete is indicated on said
Exhibit C.

6. We are of the opinion that the Project has been
designed in accordance with the applicable provisions
of Colorado law, the Americans with Disabilities Act of
1990, 42 U.S.C. Section 12101, et seq., as amended, and
<PAGE>

any other applicable law, rule or regulation of any
kind or description relating to the elimination of
architectural barriers for the handicapped.

7. We certify that any and all amounts due and payable to
us under or in connection with the Standard Form of
Agreement between Owner and Architect for Housing
Services (AIA-Document B181) dated ______________ with
regard to the Project have been paid in full.

8. The Project, the Plans and all improvements comply with
Applicable Laws, including without limitation, the
applicable PUD, and with all necessary and required
notices, permits or license agreements in connection
with the Plans, and all permits, licenses and approvals
required for the construction of the improvements
contemplated by the Plans and for the use and occupancy
of the Project (including, without limitation, all
final certificates of occupancy) have been obtained
from the applicable governmental or quasi-governmental
agency having jurisdiction or any private party from
whom any license is required.

9. The improvements are ready for occupancy.

10. The improvements on the Property, contain a minimum of
_________ square feet of net rentable living area (as
measured from inside face of exterior wall to apartment
side of corridor wall to centerline of tenant
separation wall) for the apartments.

11. The undersigned is a licensed architect and has the
power and authority to render this Certificate and to
execute and deliver it on behalf of Feld Design, Inc.

This Certificate may be relied upon only by Wellsford and
the Owner.

Very truly yours,

By: Pamela J.L. English
Supervising Architect

Dated:________________________
<PAGE>

EXHIBIT A TO
CERTIFICATE OF ARCHITECT

______________
_______________________
____________, Colorado

DRAWING LIST

ARCHITECTURAL: ______________________________
______________________________
______________________________

STRUCTURAL: ______________________________
______________________________
______________________________

FOUNDATION: ______________________________

MECHANICAL: ______________________________
______________________________
______________________________

PLUMBING: ______________________________
______________________________
______________________________

ELECTRICAL: ______________________________
______________________________
______________________________

LANDSCAPING: ______________________________
______________________________
______________________________
<PAGE>

EXHIBIT B TO
CERTIFICATE OF ARCHITECT

LEGAL DESCRIPTION
<PAGE>

EXHIBIT C TO
CERTIFICATE OF ARCHITECT

Incomplete Items Cost of Completion
---------------- ------------------
<PAGE>

EXHIBIT S-2

Form of Engineer's Certificate

(Letterhead of Project Engineer)

ENGINEER'S CERTIFICATE

__________________, 1996

Park at Highlands LLC
Wellsford Residential Property Trust
370 17th Street, Suite 3100
Denver, Colorado 80202

Reference: ______________
_________________, Colorado

Ladies and Gentlemen:

The undersigned understands that __________________________ or
its designee ("Wellsford") is acquiring an interest in or is
causing the repayment of the construction loan for a residential
complex owned by Park at Highlands LLC, a Colorado limited
liability company ("Owner"), located on that certain parcel of
real property having an address of ______________________ in the
City of ___________, County of __________, State of Colorado and
described on Exhibit A attached hereto (the "Site"), on which
Owner has constructed a complex of ______ apartment units known
as ______________ (the "Project"). This Certificate is a
condition precedent to Wellsford's acquiring the Project or
repaying such loan, and the undersigned acknowledges that
Wellsford will be relying upon this Certificate in consummating
such transaction.

With such understanding, the undersigned has reviewed those
portions of the plans and specifications for the Project that are
listed on Exhibit B attached hereto (the "Engineering Plans"),
the construction of the Project in relationship to the
Engineering Plans, and its conformity and compliance with certain
applicable laws and regulations. Based upon these reviews and
upon due professional investigation, the undersigned declares and
certifies to and for the benefit of Owner and Wellsford that:

1. Satisfactory methods of access to and egress from the
Site and the Project and adjoining or nearby public
ways are available and are sufficient to meet the
reasonable needs of the Project and all applicable
requirements of public authorities. Sanitary water
supply and storm sewer and sanitary sewer facilities
and other required utilities (gas, electricity,
telephone, etc.) are likewise available and are
sufficient to meet the reasonable needs of the Project
and all applicable requirements of public authorities.
<PAGE>

2. We are of the opinion that the Property is not located
in a 100-Year Flood Plain or in an identified "flood
prone area," as defined by the U.S. Department of
Housing and Urban Development, pursuant to the Flood
Disaster Protection Act of 1973, as amended, and is not
subject to any federal, state or local "wetlands"
rules, regulations, ordinances or requirements.

3. We have reviewed and are familiar with all tests and
analyses performed and professional recommendations
made by soil engineers and other consultants regarding
the condition of the soil of the Site. In our
professional opinion, the condition of the soil of the
Site is adequate to support the Project as completed.

4. We have reviewed the locations of all easements,
rights-of-way, subsurface rights or jurisdictional
wetlands, and all rules and regulations pertaining to
the same in force relating to the Site, and the Plans
are prepared so that the Project does not encroach
over, across or upon any such easements, rights-of-way,
subsurface rights or jurisdictional wetlands and the
like, and all necessary permits and approvals required
for the Project have been obtained.

5. We have reviewed all deeds, easements, covenants,
restrictions and other matters set forth in Schedule B
of Title Commitment No. __________ issued by Land Title
Guaranty Company, and the Project satisfies and/or does
not violate any provisions concerning construction of
improvements on the Site set forth in such deeds,
easements, covenants, restrictions and other matters.

This Certificate may be relied upon only by Owner and Wellsford.

Very Truly yours,

[ENGINEER]
_______________________________

By:____________________________
Title:____________________
Dated:_________________________
<PAGE>

EXHIBIT A TO
CERTIFICATE OF ENGINEERING

LEGAL DESCRIPTION
<PAGE>

EXHIBIT B TO
CERTIFICATE OF ENGINEERING

______________
____________________
______________, Colorado

DRAWING LIST

CIVIL ENGINEERING
DRAWINGS: ______________________________
______________________________
______________________________

STRUCTURAL: ______________________________
______________________________
______________________________

FOUNDATION: ______________________________

MECHANICAL: ______________________________
______________________________
______________________________

PLUMBING: ______________________________
______________________________
______________________________

ELECTRICAL: ______________________________
______________________________
______________________________

LANDSCAPING: ______________________________
______________________________
______________________________
<PAGE>

EXHIBIT T

INFRASTRUCTURE BUDGET

TO BE AGREED UPON BY PARTIES PRIOR TO CONSTRUCTION LOAN CLOSING
<PAGE>

EXHIBIT U

SUBSTITUTION AGREEMENT

TO BE AGREED UPON BY PARTIES PRIOR TO CONSTRUCTION LOAN CLOSING

<PAGE>

EXHIBIT 10.8

TRUST INDENTURE

dated as of
December 1, 1995

between

PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION
a Colorado nonprofit corporation
and

UNITED STATES TRUST COMPANY OF NEW YORK
as trustee

securing

Palomino Park Public Improvements Corporation
Assessment Lien Revenue Bonds
Series 1995 - $14,755,000
<PAGE>

TABLE OF CONTENTS

Page
Preambles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Granting Clauses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE I

DEFINITIONS

SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.02. Interpretation; Time of Day. . . . . . . . . . . . . . . . 17
SECTION 1.03. Captions, Headings and Table of Contents . . . . . . . . . 18

ARTICLE II

AUTHORIZATION AND TERMS OF BONDS

SECTION 2.01. Amount, Form and Issuance of Bonds . . . . . . . . . . . . 19
SECTION 2.02. Designation, Denominations, Maturity, Dated Dates, Interest
Accrual and Tender . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.03. Weekly Rate. . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.04. Term Rate. . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.05. Fixed Rate . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.06. Conversion at Option of Corporation. . . . . . . . . . . . 23
SECTION 2.07. Execution and Authentication of Bonds. . . . . . . . . . . 25
SECTION 2.08. Special and Limited Obligations. . . . . . . . . . . . . . 25
SECTION 2.09. Payment and Ownership of Bonds.. . . . . . . . . . . . . . 26
SECTION 2.10. Registration, Transfer and Exchange of Bonds . . . . . . . 27
SECTION 2.11. Mutilated, Lost, Wrongfully Taken or Destroyed Bonds . . . 28
SECTION 2.12. Cancellation of Bonds. . . . . . . . . . . . . . . . . . . 29
SECTION 2.13. Special Agreement with Holders . . . . . . . . . . . . . . 30
SECTION 2.14. Book-Entry System for the Bonds. . . . . . . . . . . . . . 30

ARTICLE III

REDEMPTION OR PURCHASE OF BONDS

SECTION 3.01. Terms of Redemption. . . . . . . . . . . . . . . . . . . . 33
SECTION 3.02. Partial Redemption . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.03. Election to Redeem . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.04. Notice of Redemption.. . . . . . . . . . . . . . . . . . . 35
SECTION 3.05. Payment of Redeemed Bonds. . . . . . . . . . . . . . . . . 37
SECTION 3.06. Purchase of Bonds. . . . . . . . . . . . . . . . . . . . . 37

ARTICLE IV

PURCHASE AND REMARKETING OF BONDS

SECTION 4.01. Purchase on Demand of Holder During Weekly Mode. . . . . . 38
SECTION 4.02. Mandatory Purchase on Each Conversion Date, at End of Each
Term Rate Period and Prior to the Expiration Date. . . . . 41
<PAGE>

SECTION 4.03. Remarketing. . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.04. Drawings on Letter of Credit for Purchase of Bonds . . . . 45
SECTION 4.05. Bonds Purchased with Proceeds of Letter of Credit. . . . . 46
SECTION 4.06. Corporation Bonds. . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.07. No Purchases After Acceleration; Inadequate Funds for
Purchases. . . . . . . . . . . . . . . . . . . . . . . . . 48

ARTICLE V

FUNDS AND LETTER OF CREDIT

SECTION 5.01. Source of Payment of Bonds . . . . . . . . . . . . . . . . 49
SECTION 5.02 Creation of Funds. . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.03 Application of Bond Proceeds; Other Moneys; Redemption of
the Bonds. . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.04. Bond Fund. . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.05. Use of Moneys in the Construction Fund . . . . . . . . . . 52
SECTION 5.06. Completion of Public Improvements. . . . . . . . . . . . . 52
SECTION 5.07. Use of Moneys in the Costs of Issuance Fund. . . . . . . . 53
SECTION 5.08. Use of Moneys in the Prepayment Fund . . . . . . . . . . . 53
SECTION 5.09. Use of Moneys in the Receipts Fund . . . . . . . . . . . . 53
SECTION 5.10. Repayment to the Corporation From Bond Fund, Prepayment Fund
and Construction Fund. . . . . . . . . . . . . . . . . . . 54
SECTION 5.11. Reports From the Trustee . . . . . . . . . . . . . . . . . 54
SECTION 5.12. Certain Verifications. . . . . . . . . . . . . . . . . . . 54
SECTION 5.13. Moneys to be Held in Trust . . . . . . . . . . . . . . . . 55
SECTION 5.14. Nonpresentment of Bonds. . . . . . . . . . . . . . . . . . 55
SECTION 5.15. Letter of Credit . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.16. Investment of Moneys.. . . . . . . . . . . . . . . . . . . 57
SECTION 5.17. Rebate Fund. . . . . . . . . . . . . . . . . . . . . . . . 58

ARTICLE VI

COVENANTS AND REPRESENTATIONS
OF CORPORATION

SECTION 6.01. Existence; Compliance with Laws. . . . . . . . . . . . . . 59
SECTION 6.02. Payment of Bond Service. . . . . . . . . . . . . . . . . . 59
SECTION 6.03. No Further Assignment of Revenues. . . . . . . . . . . . . 59
SECTION 6.04. Filings. . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.05. Further Assurances . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.06. Observance and Performance of Agreements . . . . . . . . . 60
SECTION 6.07. Representations and Warranties . . . . . . . . . . . . . . 60

ARTICLE VII

DEFAULT AND REMEDIES

SECTION 7.01. Defaults; Events of Default. . . . . . . . . . . . . . . . 61
SECTION 7.02. Notice of Default. . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.03. Acceleration . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.04. Other Remedies; Rights of Holders. . . . . . . . . . . . . 64
SECTION 7.05. Right of Holders to Direct Proceedings . . . . . . . . . . 65
SECTION 7.06. Application of Moneys. . . . . . . . . . . . . . . . . . . 65
SECTION 7.07. Remedies Vested in Trustee . . . . . . . . . . . . . . . . 67
SECTION 7.08. Rights and Remedies of Holders . . . . . . . . . . . . . . 68
SECTION 7.09. Termination of Proceedings . . . . . . . . . . . . . . . . 69
SECTION 7.10. Waivers of Events of Default . . . . . . . . . . . . . . . 69
<PAGE>

SECTION 7.11. Trustee's Right to Appointment of Receiver . . . . . . . . 69
SECTION 7.12. Trustee and Holders Entitled to All Benefits Under Law . . 69
SECTION 7.13. Trustee's Obligation to Bank and Wellsford REIT Upon Payment
Of All Amounts Due Bondholders . . . . . . . . . . . . . . 70

ARTICLE VIII

TRUSTEE AND REMARKETING AGENT

SECTION 8.01. Trustee's Acceptance and Responsibilities. . . . . . . . . 71
SECTION 8.02. Certain Rights and Obligations of Trustee. . . . . . . . . 73
SECTION 8.03. Fees, Charges and Expenses of Trustee. . . . . . . . . . 76
SECTION 8.04. Intervention by Trustee. . . . . . . . . . . . . . . . . . 77
SECTION 8.05. Successor Trustee. . . . . . . . . . . . . . . . . . . . . 77
SECTION 8.06. Resignation by Trustee . . . . . . . . . . . . . . . . . . 78
SECTION 8.07. Removal of Trustee . . . . . . . . . . . . . . . . . . . . 78
SECTION 8.08. Appointment of Successor Trustee . . . . . . . . . . . . . 78
SECTION 8.09. Adoption of Authentication.. . . . . . . . . . . . . . . . 80
SECTION 8.10. Designation and Succession of Paying Agent, Registrar,
Transfer Agent, Tender Agent and Authenticating Agent. . . 80
SECTION 8.11. Dealing in Bonds . . . . . . . . . . . . . . . . . . . . . 81
SECTION 8.12. Representations, Agreements and Covenants of Trustee . . . 81
SECTION 8.13. Appointment of Remarketing Agent . . . . . . . . . . . . . 81
SECTION 8.14. Qualifications of Remarketing Agent. . . . . . . . . . . . 82
SECTION 8.15. Compensation and Expenses of Remarketing Agent . . . . . . 83

ARTICLE IX

SUPPLEMENTS AND AMENDMENTS

SECTION 9.01. Supplemental Indentures Not Requiring Consent of Holders . 84
SECTION 9.02. Supplemental Indentures Requiring Consent of Holders . . . 85
SECTION 9.03. Authorization to Trustee; Effect of Supplement . . . . . . 85
SECTION 9.04. Modification by Unanimous Consent. . . . . . . . . . . . . 86
SECTION 9.05. Amendment of Letter of Credit. . . . . . . . . . . . . . . 86
SECTION 9.06. Trustee Authorized to Join in Supplements and Amendments;
Reliance on Counsel. . . . . . . . . . . . . . . . . . . . 86
SECTION 9.07. Consent of Bank or Wellsford REIT. . . . . . . . . . . . . 87
SECTION 9.08. Notice to Rating Service . . . . . . . . . . . . . . . . . 87

ARTICLE X

DEFEASANCE

SECTION 10.01. Defeasance . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 10.02. Provision for Payment. . . . . . . . . . . . . . . . . . . 89
SECTION 10.03. Deposit of Funds for Payment of Bonds. . . . . . . . . . . 90
SECTION 10.04. Survival of Certain Provisions . . . . . . . . . . . . . . 91
SECTION 10.05. District's Rights. . . . . . . . . . . . . . . . . . . . . 91

ARTICLE XI

MISCELLANEOUS

SECTION 11.01. Limitation of Rights; No Personal Recourse . . . . . . . . 94
SECTION 11.02. Severability . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.03. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.04. Suspension of Mail . . . . . . . . . . . . . . . . . . . . 95
<PAGE>

SECTION 11.05. Payments Due on Saturdays, Sundays and Holidays. . . . . . 96
SECTION 11.06. Instruments of Holders . . . . . . . . . . . . . . . . . . 96
SECTION 11.07. Binding Effect . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 11.08. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 11.09. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 97
<PAGE>

THIS TRUST INDENTURE, dated as of December 1, 1995 (this "Indenture"),
is between PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION (the "Corporation"), a
nonprofit corporation duly organized and validly existing under the laws of the
State of Colorado, and UNITED STATES TRUST COMPANY OF NEW YORK, as trustee (the
"Trustee"), a corporation possessing and exercising trust powers, duly
organized and validly existing under the laws of the State of New York,

WITNESSETH:

WHEREAS, the Corporation has been duly organized pursuant to the
provisions of the Colorado Nonprofit Corporation Act, articles 20 through 29 of
title 7, Colorado Revised Statutes, as amended; and

WHEREAS, the Corporation, in furtherance of the purposes of Highlands
Ranch Metropolitan District No. 2, Douglas County, Colorado (the "District"),
is authorized on behalf of the District to impose assessments and issue bonds
and other obligations payable from such assessments or any other property of
the Corporation; and

WHEREAS, Park at Highlands LLC ("the Developer") is the owner in fee
simple, subject to no encumbrances other than permitted encumbrances, of
certain real property located within the District (the "Property"); and

WHEREAS, the Developer proposes to develop the Property, which will
advance the economic growth of the District and will inure to the benefit of
the residents of the District; and

WHEREAS, the Corporation proposes to acquire, construct and install on
behalf of the District certain public improvements consisting of water
facilities, sanitation facilities, street improvements and parks and
recreational facilities, together with all necessary incidental and appurtenant
properties, facilities, equipment and costs (the "Public Improvements"), all
located or to be located within the District; and

WHEREAS, the Corporation has determined to issue its Assessment Lien
Revenue Bonds, Series 1995, in the aggregate principal amount of $14,755,000
(the "Bonds") in order to acquire, construct and install the Public
Improvements; and

WHEREAS, the Corporation and the Developer have entered into an
Assessment Agreement, dated as of December 1, 1995 (the "Assessment
Agreement"); and

WHEREAS, the Corporation and the Developer have entered into a Public
Improvements Assessment and Lien, dated as of December 1, 1995 (the "Assessment
and Lien"), providing for the imposition and allocation of certain charges (the
"Allocated Assessment Charges") against the parcels, lots and tracts comprising
the Property and for the grant by the Developer to the Corporation, for
assignment to the Trustee, in order to secure the payment of the Allocated
Assessment Charges, of a good and sufficient lien, subject to no encumbrances
other than permitted encumbrances, upon the Property; and

WHEREAS, the Bonds are issued on behalf of the District, and pursuant to
an Operating Agreement, dated as of December 1, 1995 (the "Operating
Agreement"), between the Corporation and the District, the District is
entitled, not later than upon discharge of the obligations of the Corporation,
<PAGE>

including the Bonds, to acquire unencumbered fee title to the Public
Improvements without cost; and

WHEREAS, to secure and provide a source for the payment of the
principal, redemption price and purchase price of and interest on certain of
the Bonds, the Corporation will cause to be delivered to the Trustee an
irrevocable, direct-pay letter of credit (the "Letter of Credit") issued by
Dresdner Bank, AG, New York Branch (the "Bank"), pursuant to a Letter of Credit
Reimbursement Agreement, dated as of December 1, 1995 (the "Letter of Credit
Reimbursement Agreement"), between the Corporation and Wellsford Residential
Property Trust ("Wellsford REIT") and the Bank; and

WHEREAS, the payment obligations of the Corporation and Wellsford REIT
(the "Account Parties") under the Letter of Credit Reimbursement Agreement are
evidenced by promissory notes, dated December 20, 1995 (the "Letter of Credit
Notes"), from the Account Parties to the Bank; and

WHEREAS, the Corporation is also obligated to reimburse Wellsford REIT
for payments made by Wellsford REIT to the Bank pursuant to a Reimbursement
Agreement, dated as of December 1, 1995 (the "Wellsford REIT Reimbursement
Agreement"), between the Corporation and Wellsford REIT; and

WHEREAS, the payment obligations of the Corporation under the Wellsford
REIT Reimbursement Agreement are evidenced by a promissory note, dated
December 20, 1995 (the "Wellsford REIT Note"), from the Corporation to
Wellsford REIT; and

WHEREAS, the obligations of the Corporation under the Indenture and the
Bonds are additionally secured by a promissory note, dated December 20, 1995
(the "Secured Note"), from the Corporation to the Trustee, and the Secured Note
and the Corporation's Letter of Credit Note are additionally secured by a Deed
of Trust, Security Agreement, Financing Statement and Assignment of Rents and
Leases, dated as of December 1, 1995 (the "Deed of Trust"), from the
Corporation to the Public Trustee of Douglas County, Colorado, for the use of
the Trustee and the Bank; and

WHEREAS, the Bonds are issued under the authority of and are secured by
this Indenture, and the Corporation is authorized to execute and deliver this
Indenture and to do or cause to be done all acts provided or required herein or
therein to be performed on its part; and

WHEREAS, all acts and conditions required to happen, exist and be
performed precedent to and in the issuance of the Bonds and the execution and
delivery of this Indenture have happened, exist and have been performed to make
the Bonds, when issued, delivered and authenticated, valid and binding legal
obligations of the Corporation and to make this Indenture a valid, binding and
legal trust agreement for the security of the Bonds.

NOW, THEREFORE, the Corporation, intending to be legally bound, in
consideration of the acceptance by the Trustee of the trusts hereby created and
of the purchase and acceptance of the Bonds by the holders thereof, and of the
sum of One Dollar, lawful money of the United States of America, to it duly
paid by the Trustee at or before the execution and delivery of these presents,
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, in order to secure, in the following order of priority, except as
otherwise provided herein, first, the payment of the principal of, premium, if
any, on and interest on the Bonds according to their tenor and effect and the
performance and observance by the Corporation of all the covenants expressed or
<PAGE>

implied herein and in the Bonds, and, second, the payment to the Bank of the
principal of and interest on the Letter of Credit Notes and the performance of
the reimbursement and other obligations of the Account Parties under the Letter
of Credit Reimbursement Agreement, and, third, the payment to Wellsford REIT of
the principal of and interest on the Wellsford REIT Note and the performance of
the reimbursement and other obligations of the Corporation under the Wellsford
REIT Reimbursement Agreement, does hereby assign, transfer and pledge to the
Trustee and its successors in trust and its and their assigns forever and grant
to the Trustee and its successors in trust and its and their assigns a security
interest in:

(a) the Assessment Agreement and the Assessment and Lien, including all
extensions and renewals of the term thereof, if any, together with all right,
title and interest of the Corporation in and to the Assessment Agreement and
the Assessment and Lien, including, but not limited to, the present and
continuing right to make claim for, collect and receive any of the sums,
amounts, income, revenues, issues and profits and any other sums of money
payable or receivable under the Assessment Agreement and the Assessment and
Lien, to bring actions and proceedings thereunder or for the enforcement
thereof, and to do any and all things that the Corporation under the Assessment
Agreement and the Assessment and Lien is or may become entitled to do;

(b) the Secured Note and the Deed of Trust, together with all right,
title and interest of the Corporation in and to the real estate described in
the Deed of Trust, including, but not limited to, the present and continuing
right to make claim for, collect and receive any of the sums, amounts, income,
revenues, issues and profits derived from such real estate and any other sums
of money payable or receivable under the Secured Note and the Deed of Trust, to
bring actions and proceedings thereunder or for the enforcement thereof, and to
do any and all things that the Corporation under the Secured Note and the Deed
of Trust is or may become entitled to do; and

(c) all moneys and securities from time to time held by the Trustee
under the terms of this Indenture, except for moneys deposited with or paid to
the Trustee for the redemption of Bonds, notice of the redemption of which has
been duly given, and except for moneys deposited with or paid to the Trustee
for payment of arbitrage rebate obligations of the Corporation.

TO HAVE AND TO HOLD all and singular the foregoing property, rights and
interests, whether now owned or hereafter acquired;

PROVIDED, HOWEVER, that if the Corporation, its successors or assigns,
shall well and truly pay, or cause to be paid, the principal of the Bonds and
the interest and premium, if any, due or to become due thereon, at the times
and in the manner mentioned in the Bonds according to the true intent and
meaning thereof, or shall provide, as permitted hereby, for the payment thereof
by depositing with the Trustee the entire amount due or to become due thereon,
and shall well and truly keep, perform and observe all the covenants and
conditions pursuant to the terms of this Indenture to be kept, performed and
observed by the Corporation, and shall pay or cause to be paid to the Trustee
all sums due or to become due to it in accordance with the terms and provisions
hereof, and if the Account Parties shall pay the principal of and interest on
the Letter of Credit Notes and perform or cause to be performed all of their
reimbursement and other obligations under the Letter of Credit Reimbursement
Agreement, and if the Corporation shall pay the principal of and interest on
the Wellsford REIT Note and perform or cause to be performed all of its
reimbursement and other obligations under the Wellsford REIT Reimbursement
Agreement, then, upon such final payments and subject to the provisions of
<PAGE>

Article X, this Indenture and the rights hereby granted shall cease, determine
and be void, and the Trustee shall forthwith release, surrender and otherwise
cancel any interest it may have in the Trust Estate; otherwise this Indenture
shall be and remain in full force and effect.

THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that
all Bonds issued and secured hereunder are to be issued, authenticated and
delivered, and the Trust Estate, including all said payments, revenues and
receipts hereby pledged, is to be dealt with and disposed of, under, upon and
subject to the terms, conditions, stipulations, covenants, agreements, trusts,
uses and purposes as hereinafter expressed, and the Corporation has agreed and
covenanted, and does hereby agree and covenant, with the Trustee and with the
respective holders, from time to time, of the Bonds, or any part thereof, as
follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Definitions. In this Indenture, the following terms
shall have the meanings specified in this Article I, unless the context
otherwise requires:

"Account Parties" means the Corporation and Wellsford REIT.

"Allocated Assessment Charges" means the assessment charges allocated
against the Property or the parcels, lots or tracts of land comprising the
Property under Article V of the Assessment and Lien.

"Alternate Letter of Credit" means an irrevocable letter of credit
authorizing drawings thereunder by the Trustee, issued by a national banking
association, a bank, a trust company or other financial institution such as the
Bank, satisfying the requirements of Section 5.15.

"Alternate Credit Facility" means a surety bond, insurance policy,
agreement guaranteeing payment or other undertaking by a financial institution,
satisfying the requirements of Section 5.15.

"Assessment Agreement" means the Assessment Agreement, dated as of
December 1, 1995, between the Corporation and the Developer and any amendments
or supplements thereto, including the exhibit thereto.

"Assessment and Lien" means the Public Improvements Assessment and Lien,
dated as of December 1, 1995, between the Corporation and the Developer, and
any amendments and supplements thereto, including the exhibit thereto.

"Authorized Representative" means such Person or Persons as are duly
designated by resolution of the Corporation or otherwise to act on its behalf.

"Available Moneys" means (i) proceeds of a drawing under the Letter of
Credit or any Alternate Credit Facility and (ii) any moneys paid to the Trustee
and with respect to which the Trustee has received an opinion of nationally
recognized counsel experienced in bankruptcy matters and acceptable to the
Trustee and the Rating Service to the effect that the use of such moneys to pay
principal of, premium, if any, on or interest on the Bonds, as applicable, will
not constitute an avoidable transfer under Section 547 of the United States
Bankruptcy Code in the event of a bankruptcy case under the United States

<PAGE>

Bankruptcy Code by or against the Corporation, as debtor; provided that when
used with respect to payment of amounts due in respect of any Pledged Bonds or
Corporation Bonds, "Available Moneys" means any moneys held by the Trustee and
available for such payment pursuant to the terms of this Indenture, except for
moneys drawn under the Letter of Credit or any Alternate Credit Facility.

"Bank" means, initially, Dresdner Bank, AG, New York Branch, as issuer
of the Letter of Credit, and its successors and assigns in that capacity and,
in the event an Alternate Letter of Credit is outstanding, the issuer of the
Alternate Letter of Credit.

"Board" means the board of directors of the Corporation.

"Bond Counsel" means an attorney-at-law or a firm of attorneys of
nationally recognized standing in matters pertaining to bonds issued by states
and their political subdivisions, duly admitted to the practice of law before
the highest court of any state of the United States of America.

"Bond Fund" means the fund created and established by Section 5.02.

"Bond Service" means the principal of, premium, if any, on and interest
on the Bonds for that period or payable at that time whether due at maturity or
upon acceleration or redemption.

"Bondholder Tender Notice" means a written notice in the form attached
hereto as Exhibit C.

"Bonds" means the Palomino Park Public Improvements Corporation,
Assessment Lien Revenue Bonds, Series 1995, in the aggregate principal amount
of $14,755,000, issued, authenticated and delivered pursuant to Article II.

"Business Day" means any day other than a Saturday or Sunday or a day on
which banks located in Denver, Colorado, or any other city in which the
principal corporate trust office of the Trustee or the office of the Bank at
which drawing documents are required to be presented under the Letter of Credit
is located are required or authorized to close or on which The New York Stock
Exchange is closed.

"Closing Date" means December 20, 1995, the date of initial issuance and
delivery of the Bonds.

"Code" means the Internal Revenue Code of 1986, as amended.

"Completion Date" means the date upon which the acquisition,
construction and installation of the Public Improvements are completed, as such
date shall be certified by the Consulting Engineers and the Corporation as
required under the provisions of Section 3.3 of the Assessment Agreement.

"Construction Fund" means the fund created and established by Section
5.02.

"Consulting Engineers" means the firm of Construction Asset Advisors and
any successor or successors thereof, retained as provided in the Assessment
Agreement.

"Conversion Date" means any Interest Payment Date on which the Rate Mode
of the Bonds is converted to another Rate Mode pursuant to Section 2.06.
<PAGE>

"Corporation" means Palomino Park Public Improvements Corporation, a
Colorado nonprofit corporation, and its successors and assigns.

"Corporation Bonds" means any Bonds of which ownership is registered in
the name of the Corporation.

"Costs of Construction" means the following:

(a) all costs which the Corporation is required to pay, under the
terms of any contract or contracts, for the acquisition, construction or
installation of the Public Improvements;

(b) obligations of the Corporation incurred for labor and
materials in connection with the acquisition, construction or installation of
the Public Improvements, including reimbursement to the Corporation or the
Developer for all advances and payments made;

(c) the cost of performance or other bonds and any and all types
of insurance that may be necessary or appropriate to have in effect during
the course of construction of the Public Improvements;

(d) all costs of engineering services, including the costs for
test borings, surveys, estimates, plans and specifications and preliminary
investigations therefor, and for supervising construction, as well as the
performance of all other duties required by or consequent to the proper
construction of the Public Improvements; and

(e) interest on the Bonds prior to the Completion Date.

"Costs of Issuance Fund" means the fund created and established by
Section 5.02.

"Deed of Trust" means the Deed of Trust, Security Agreement, Financing
Statement and Assignment of Rents and Leases, dated as of December 1, 1995,
from the Corporation to the Public Trustee of Douglas County, Colorado, for the
use of the Trustee and the Bank, granting a lien upon the real estate described
therein.

"Developer" means Park at Highlands LLC, a Colorado limited liability
company.

"District" means Highlands Ranch Metropolitan District No. 2, Douglas
County, Colorado, a quasi-municipal corporation organized under the laws of the
State of Colorado.

"DTC" means The Depository Trust Company, a limited purpose trust
company organized under the laws of the State of New York, or its successors.

"Eligible Investments" means

(i) Government Obligations; the Trustee, in purchasing
Government Obligations, (a) may make any such purchase subject to
agreement with the seller for repurchase by the seller at a later date,
and in such connection may accept the seller's agreement for the payment
of interest in lieu of the right to receive the interest payable by the
issuer of the securities purchased, provided that the Government
Obligations are marketable, that title to the Government Obligations so
purchased by the Trustee shall vest in the Trustee, that the Trustee
<PAGE>

shall have actual or constructive possession of such Government
Obligations, and that the current market value of such Government
Obligations (or of cash or additional Government Obligations pledged
with the Trustee as collateral for the purpose) is at all times at least
equal to the principal and interest thereafter to become payable by the
seller under said agreement, or (b) may purchase shares of a money
market fund registered as an investment company under the Investment
Company Act of 1940, as amended, if the investment policies of the fund
seek to maintain a constant share price, no sales or load fee is added
to the purchase price or deducted from the redemption price of the
investments in the fund and the investments in the fund are of a type
described in this clause (i) and such repurchase agreements thereof
having a maximum maturity of one year and an average maturity of 120
days or less;

(ii) obligations issued by any state or political subdivision
thereof and rated in the highest category, if rated as short-term
obligations, or not lower than the third highest category in the case of
general obligations or the second highest category in the case of
revenue obligations, if rated as long term obligations, by Moody's or
Standard & Poor's;

(iii) commercial paper which is rated in the highest rating
category by either Moody's or Standard & Poor's;

(iv) banker's acceptances issued by a bank organized under the
laws of the United States of America or any state thereof having a
combined capital and surplus of at least $250,000,000 whose deposits are
insured by the Federal Deposit Insurance Corporation and whose long-term
debt or the long-term debt of whose holding company is rated in one of
the three highest rating categories by Moody's or Standard & Poor's;

(v) deposit accounts, certificates of deposit or bearer
deposit notes in any bank, trust company or savings and loan association
(including without limitation the Trustee or any bank affiliated with
the Trustee) organized under the laws of the United States of America or
any state thereof collateralized as provided by the laws of the State of
Colorado for securing public deposits; and

(vi) other investments approved by the Bank.

"Event of Default" means any of the events described as an Event of
Default in Section 7.01.

"Expiration Date" means the stated expiration date of the Letter of
Credit, as extended or renewed, or, if such day is not a Business Day, on the
next succeeding Business Day.

"Extraordinary Services" and "Extraordinary Expenses" mean all services
rendered and all reasonable expenses properly incurred by the Trustee or any of
its agents under this Indenture, other than Ordinary Services and Ordinary
Expenses.

"Fixed Mode" means the mode in which the Bonds bear interest at a Fixed
Rate.

"Fixed Rate" means a fixed rate of interest on the Bonds established in
accordance with Section 2.05.
<PAGE>

"Fixed Rate Calculation Date" means a Business Day not more than 15 days
and not less than one day prior to the first date of the corresponding Fixed
Rate Period.

"Fixed Rate Period" means, with respect to conversion to the Fixed Mode,
the period commencing on the Conversion Date and ending on the date payment of
the principal or redemption price of the Bonds is made or provided in
accordance with the provisions of the Indenture, whether at maturity, upon
redemption or otherwise.

"General Account" means the account established by the Trustee pursuant
to Section 5.02.

"Government Obligations" means direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the
United States of America, including obligations issued or held in book-entry
form on the books of the Department of the Treasury of the United States of
America and including a receipt, certificate or any other evidence of an
ownership interest in such obligations or in specified portions thereof (which
may consist of specified portions of interest thereon).

"Holder" or "Bondholder" means the Person in whose name a Bond is
registered on the Register.

"Indenture" means this Trust Indenture, as amended or supplemented from
time to time.

"Interest Payment Date" means, with respect to Bonds in the Weekly Mode,
the first day of each month and, with respect to Bonds in the Term Mode or the
Fixed Mode, each Semiannual Date.

"Interest Rate for Advances" means the rate per annum which is two
percentage points in excess of that interest rate announced by the Trustee in
its commercial lending capacity as a bank as its "base rate."

"Letter of Credit" means the irrevocable, direct-pay letter of credit
issued by the Bank to the Trustee on the date of execution and delivery of this
Indenture and any Alternate Letter of Credit, under which the Trustee is
authorized, subject to the terms and conditions thereof, to draw up to (a) an
amount equal to the principal amount of the Outstanding Bonds (i) to enable the
Trustee to pay the principal amount of the Bonds when due at maturity, upon
redemption or upon acceleration and (ii) to enable the Trustee to pay the
portion of the purchase price of Bonds tendered to it and not remarketed
corresponding to the principal amount of such Bonds, plus (b) while the Bonds
bear interest at a Weekly Rate, an amount equal to interest to accrue at the
Maximum Rate on the Outstanding Bonds for 210 days and, while the Bonds bear
interest at a Term Rate or the Fixed Rate, an amount equal to interest to
accrue at a rate not less than the Maximum Rate or the Fixed Rate then in
effect on the Outstanding Bonds for 210 days (i) to enable the Trustee to pay
interest on the Bonds when due and (ii) to enable the Trustee to pay the
portion of the purchase price of Bonds tendered to it and not remarketed
corresponding to the accrued interest on such Bonds, as the same may be
amended, transferred, reissued or extended in accordance with this Indenture,
plus (c) while the Bonds bear interest at a Fixed Rate, an amount equal to the
sum of the optional redemption premiums (if any).

"Letter of Credit Debt Service Account" means the account established by
<PAGE>

the Trustee pursuant to Section 5.02.

"Letter of Credit Notes" means the promissory notes, dated December 20,
1995, issued and evidencing reimbursement obligations of the Account Parties
under the Letter of Credit Reimbursement Agreement.

"Letter of Credit Reimbursement Agreement" means the Letter of Credit
Reimbursement Agreement, dated as of December 1, 1995, between the Account
Parties and the Bank relating to the Letter of Credit and the Bonds, as
amended, supplemented or replaced from time to time.

"Letter of Credit Purchase Account" means the account established by the
Trustee pursuant to Section 4.04.

"Maximum Rate" means the lesser of (i) the rate of interest agreed to by
the provider of the Letter of Credit or any Alternate Letter of Credit which is
initially 12%, or, (ii) the maximum rate permitted by applicable law.

"Moody's" means Moody's Investors Service, Inc. or its successors.

"Nominal Term Rate Period" means, with respect to a Term Mode, a period
of two or more consecutive Semiannual Periods (expressed in years and half
years) determined pursuant to Sections 2.04 and 2.06.

"Operating Agreement" means the Operating Agreement, dated as of
December 1, 1995, between the District and the Corporation, as amended,
supplemented or replaced from time to time.

"Ordinary Services" and "Ordinary Expenses" mean those services normally
rendered, and those expenses normally incurred, by a trustee under instruments
similar to this Indenture.

"Outstanding Bonds", "Bonds Outstanding" or "Outstanding" as applied to
Bonds mean, as of the applicable date, all Bonds which have been authenticated
and delivered, or which are being delivered by the Trustee under this
Indenture, except:

(a) Bonds cancelled or required to be cancelled upon surrender,
exchange or transfer, or cancelled or required to be cancelled
because of payment or redemption on or prior to that date pursuant
to Section 2.12;

(b) On or after any purchase date for Bonds to be purchased pursuant to
Article IV, all Undelivered Bonds (or portions of Bonds) which are
purchased on such date, provided that funds sufficient for such
purchase are on deposit with the Trustee;

(d) Bonds in substitution for which others have been authenticated and
delivered under Section 2.11.

For purposes of approval or consent by the Holders, "Outstanding Bonds,"
"Bonds Outstanding" or "Outstanding" as applied to Bonds shall not include
Bonds owned by or on behalf of the Corporation (other than Pledged Bonds, which
for such purposes shall be deemed owned by the pledgee) unless all of the
Outstanding Bonds are so owned.
<PAGE>

"Person" or words importing persons means firms, associations,
partnerships (including without limitation general and limited partnerships),
joint ventures, societies, estates, trusts, corporations, limited liability
companies, public or governmental bodies, other legal entities and natural
persons.

"Pledge and Security Agreement" means the Bond Pledge and Security
Agreement, dated as of December 1, 1995, between the Corporation and Wellsford
REIT, the Bank and the Trustee.

"Pledged Bonds" mean the Bonds described in Section 4.05.

"Predecessor Bond" of any particular Bond means every previous Bond
evidencing all or a portion of the same obligation as that evidenced by the
particular Bond. For purposes of this definition, any Bond authenticated and
delivered under Section 2.11 in substitution for a lost, wrongfully taken or
destroyed Bond shall, except as otherwise provided in Section 2.11, be deemed
to evidence the same obligation as the lost, wrongfully taken or destroyed
Bond.

"Prepayment Fund" means the fund created and established by
Section 5.02.

"Property" means the real property described in Exhibit A to the
Assessment and Lien, as amended.

"Public Improvements" means certain public improvements consisting of
water facilities, sanitation facilities, street improvements and parks and
recreational facilities, together with all necessary, incidental and
appurtenant properties, facilities, equipment and costs, all in substantial
accord with certain plans and specifications approved by and on file with the
Corporation and the Developer, with such amendments, modifications and
alterations as shall be approved by and filed with the Corporation and the
Developer, all located or to be located within the District.

"Purchase Date" means (a) with respect to any optional tender for
purchase pursuant to Section 4.01 of Bonds in the Weekly Mode, any Business Day
designated as the date of such purchase pursuant to Section 4.01 and (b) with
respect to any mandatory tender pursuant to Section 4.02 in the case of Bonds
which are to be purchased upon conversion from one Rate Mode to another Rate
Mode, the Conversion Date, or if such Conversion Date is not a Business Day,
the first Business Day succeeding such Conversion Date, and (2) in the case of
Bonds which are to be purchased upon expiration of a Term Rate Period, the
first Business Day following the end of such Term Rate Period.

"Rate Mode" means the Weekly Mode, Term Mode or Fixed Mode.

"Rating Service" means Moody's, if the Bonds are rated by Moody's at the
time, and Standard & Poor's, if the Bonds are rated by Standard & Poor's at the
time, or if either shall be dissolved or no longer assigning credit ratings to
long term debt, then any other nationally recognized entity assigning credit
ratings to long term debt designated by the Corporation and satisfactory to the
Trustee.

"Rebate Fund" means the fund created and established by Section 5.02.

"Receipts Fund" means the fund created and established by Section 5.02.
<PAGE>

"Register" means the books of the Corporation kept and maintained by the
Trustee for registration and transfer of Bonds pursuant to Section 2.09.

"Regular Record Date" means, while the Bonds are in the Weekly Mode, the
close of business on the last Business Day preceding an Interest Payment Date
and, while the Bonds are in the Term Mode or Fixed Mode, the close of business
on the fifteenth day of the calendar month next preceding an Interest Payment
Date.

"Remarketing Agent" means, initially, First Interstate Bank of Arizona,
N.A. and any Person meeting the qualifications of, and designated from time to
time to act as remarketing agent under, Section 8.14. "Principal Office" of
the Remarketing Agent means the principal office of the Remarketing Agent at
the address of the Remarketing Agent set forth in Section 11.03, or any other
office so designated in writing by the Remarketing Agent to the Corporation,
the Trustee and the Bank.

"Remarketing Agreement" means the Remarketing Agreement, dated as of
December 1, 1995, between the Corporation and the Remarketing Agent, as
amended, supplemented or replaced from time to time.

"Remarketing Proceeds Purchase Account" means the account established by
the Trustee pursuant to Section 4.03.

"Representation Letter" means the Blanket Issuer Letter of
Representations, dated as of December 1, 1995, from the Corporation to DTC in
the form attached hereto as Exhibit B.

"Resolution" means the resolution of the Board authorizing the issuance
of the Bonds and the execution and delivery of the Assessment Agreement, the
Assessment and Lien, the Deed of Trust and this Indenture.

"Revenues" means (a) the Corporation's interest in the Assessment and
Lien, (b) all amounts payable to the Corporation under the Assessment and Lien,
(c) all other moneys received or to be received by the Corporation or the
Trustee in respect of repayment of the Bonds, including without limitation, all
moneys and investments in the Receipts Fund, the Bond Fund and the Prepayment
Fund, (d) any proceeds of Bonds originally deposited with the Trustee for the
payment of interest accrued on the Bonds or otherwise paid to the Trustee by or
on behalf of the Corporation for deposit in the Bond Fund, (e) investment
income with respect to any moneys held by the Trustee under the Indenture, and
(f) any moneys paid to the Trustee under the Letter of Credit or any Alternate
Credit Facility; provided that the term "Revenues" does not include any moneys
or investments in the Remarketing Proceeds Purchase Account or the Letter of
Credit Purchase Account.

"Secured Note" means the promissory note, dated December 20, 1995, from
the Corporation to the Trustee.

"Semiannual Date" means each June 1 and each December 1, commencing
June 1, 1996.

"Semiannual Period" means a six-month period commencing on a Semiannual
Date and ending on and including the day immediately preceding the next
Semiannual Date.

"Special Record Date" means, with respect to any Bond, the date
established by the Trustee in connection with the payment of overdue interest
<PAGE>

on that Bond pursuant to Section 2.09.

"Standard & Poor's" means Standard & Poor's Ratings Services, a division
of McGraw Hill, or its successors.

"Supplemental Indenture" means any indenture supplemental to this
Indenture entered into between the Corporation and the Trustee in accordance
with Article IX.

"Term Mode" means the mode in which the Bonds bear interest at a Term
Rate based on a constant Nominal Term Rate Period.

"Term Rate" means the rate of interest borne by the Bonds for a Term
Rate Period determined pursuant to Section 2.04.

"Term Rate Calculation Date" means a Business Day not more than 15 days
and not less than one day prior to the first day of the corresponding Term Rate
Period.

"Term Rate Period" means a period of two or more consecutive Semiannual
Periods equal to the applicable Nominal Term Rate Period determined pursuant to
Section 2.06 commencing on the Semiannual Date immediately following the last
day of the immediately preceding Term Rate Period and running through and
ending on the day immediately preceding the Semiannual Date which follows such
commencement date by a period equal to such Nominal Term Rate Period; except
that the first Term Rate Period after conversion from a Weekly Rate to a Term
Rate shall commence on the Conversion Date of such conversion and end on and
include the day immediately preceding the Semiannual Date which follows the
Semiannual Date occurring on or immediately preceding such Conversion Date by a
period equal to such Nominal Term Rate Period.

"Term Rate Period End Interest Payment Date" means the Semiannual Date
immediately following the last day of a Term Rate Period.

"Trustee" means United States Trust Company of New York, as trustee,
until a successor trustee shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter, "Trustee" shall mean the
successor trustee. "Principal Office" of the Trustee means the principal
corporate trust office or other office of the Trustee at the address of the
Trustee set forth in Section 11.03, or any other corporate trust office so
designated in writing by the Trustee to the Corporation, the Remarketing Agent
and the Bank. "Delivery Office" of the Trustee means the office, in addition
to its Principal Office, at which Bondholder Tender Notices may be delivered
and where Bonds surrendered for purchase may be delivered to the Trustee, which
office may be the office of an agent of the Trustee for such purpose and shall
be designated in Section 11.03 or in a separate writing by the Trustee to the
Corporation, the Remarketing Agent and the Bank.

"Trust Estate" means those property and contract rights and Revenues
specified in the granting clauses of this Indenture.

"Undelivered Bonds" means any Bonds subject to purchase pursuant to
Section 4.01 or 4.02 which the Holder thereof has failed to deliver as
described in Section 4.01 or 4.02.

"Weekly Mode" means the mode in which Bonds bear interest at a Weekly
Rate.
<PAGE>

"Weekly Rate" means a floating weekly interest rate on the Bonds
established and adjusted in accordance with Section 2.03.

"Weekly Rate Calculation Date" means Tuesday in each calendar week or,
if any Tuesday is not a Business Day, the first Business Day preceding such
Tuesday.

"Weekly Rate Period" means the seven-day period commencing on the first
Wednesday following the corresponding Weekly Rate Calculation Date and running
through Tuesday of the following calendar week; except that (i) the first
Weekly Rate Period shall commence on the Closing Date and end on and include
the first Tuesday occurring after the Closing Date, (ii) the first Weekly Rate
Period following a conversion from a Term Mode to the Weekly Mode shall
commence on the Conversion Date for such conversion and end on and include the
first Tuesday occurring after such date, and (iii) the last Weekly Rate Period
prior to a conversion from the Weekly Mode to the Term Mode or the Fixed Mode
shall end on and include the last day immediately preceding the Conversion Date
for such conversion.

"Wellsford Pledge and Security Agreement" means the Wellsford Bond
Pledge and Security Agreement, dated as of December 1, 1995, between the
Corporation, Wellsford REIT and the Trustee.

"Wellsford REIT" means Wellsford Residential Property Trust.

"Wellsford REIT Note" means the promissory note, dated December 20,
1995, from the Corporation to Wellsford REIT.

"Wellsford REIT Reimbursement Agreement" means the Reimbursement
Agreement, dated as of December 1, 1995, between the Corporation and Wellsford
REIT.

SECTION 1.02. Interpretation; Time of Day. Unless the context
indicates otherwise, words importing the singular number include the plural
number, and vice versa. The terms "hereof", "hereby", "herein", "hereto",
"hereunder", "hereinafter" and similar terms refer to this Indenture; and the
term "hereafter" means after, and the term "heretofore" means before, the
Closing Date. Words of any gender include the correlative words of the other
genders, unless the context indicates otherwise.

In this Indenture, unless otherwise indicated, all references to
particular Articles, Sections or Subsections are references to the Articles,
Sections or Subsections of this Indenture.

In this Indenture, all references to any time of the day shall refer to
Eastern standard time or Eastern daylight saving time, as in effect in New
York, New York, on such day.

SECTION 1.03. Captions, Headings and Table of Contents. The captions,
headings and table of contents in this Indenture are solely for convenience of
reference and in no way define, limit or describe the scope of any Articles,
Sections, Subsections, paragraphs, subparagraphs or clauses hereof.

(End of Article I)
<PAGE>

ARTICLE II

AUTHORIZATION AND TERMS OF BONDS

SECTION 2.01. Amount, Form and Issuance of Bonds. The Bonds shall,
except as provided in Section 2.11, be limited to $14,755,000 in aggregate
principal amount and shall contain substantially the terms recited in the forms
of Bond set forth in Exhibit A to this Indenture. No additional series of Bond
may be issued under this Indenture. All Bonds shall provide that Bond Service
in respect thereof shall be payable out of the Revenues. The Corporation may
cause a copy of the text of the opinion of Bond Counsel delivered in connection
with the issuance of the Bonds to be printed on, or attached to, the Bonds,
and, upon request of the Corporation and deposit with the Trustee of an
executed counterpart of such opinion, the Trustee shall certify by manual or
facsimile signature that printed on, or attached to, the Bonds is the complete
text of such opinion. Pursuant to recommendations promulgated by the Committee
on Uniform Security Identification Procedures, "CUSIP" numbers may be printed
on the Bonds. The Bonds may bear such endorsement or legend satisfactory to
the Trustee as may be required to conform to usage or law with respect thereto.

Upon the execution and delivery hereof, the Corporation shall execute
the Bonds and deliver them to the Trustee for authentication. The Trustee
shall authenticate the Bonds and deliver them to, or on the order of, the
initial purchaser thereof upon receipt of a written request and authorization
to the Trustee on behalf of the Corporation, signed by an Authorized
Representative of the Corporation, and upon payment to the Trustee of the
amount specified therein.

SECTION 2.02. Designation, Denominations, Maturity, Dated Dates,
Interest Accrual and Tender.

(a) The Bonds shall be designated "Palomino Park Public Improvements
Corporation, Assessment Lien Revenue Bonds, Series 1995," and shall be
substantially in the form attached hereto as Exhibit A-1 if the Bonds are in
the Weekly Mode or the Term Mode or Exhibit A-2 if the Bonds are in the Fixed
Mode.

(b) The Bonds shall be issuable in denominations of $100,000 and
integral multiples of $5,000 in excess thereof.

(c) The Bonds shall mature, subject to prior redemption as provided in
the form thereof recited in this Indenture, on December 1, 2035.

(d) The Closing Date shall be set forth on the face side of all Bonds
authenticated by the Trustee. Each Bond shall bear the date of its
authentication.

(e) Each Bond shall bear interest from (a) the Closing Date, if
authenticated prior to the first Interest Payment Date, (b) from the date of
authentication, if authenticated on an Interest Payment Date to which interest
has been paid or (c) from the Conversion Date if converted to the Fixed Mode.
Interest on the Bonds shall be paid on each Interest Payment Date. Each Bond
shall bear interest on overdue principal at the rates borne by the Bonds during
the period such principal is overdue. So long as the Bonds bear interest at a
Weekly Rate, interest on the Bonds shall be computed on the basis of a year of
365 or 366 days, as applicable, for the number of days actually elapsed and
<PAGE>

shall be paid on each Interest Payment Date for the interest accrued from the
prior Interest Payment Date to the day immediately preceding the Interest
Payment Date. Interest accruing on the Bonds at a Term Rate or Fixed Rate
shall be computed on the basis of a 360-day year of twelve 30-day months.

(f) All Bonds shall initially bear interest at a Weekly Rate from the
Closing Date determined in accordance with Section 2.03. The Bonds may be
converted from one Rate Mode to another Rate Mode as provided in Section 2.06.

(g) The Bonds shall be subject to optional and mandatory tender for
purchase as provided in Article IV.

SECTION 2.03. Weekly Rate. A Weekly Rate shall be determined for each
Weekly Rate Period as described below. For each Weekly Rate Period and so long
as the Bonds are in the Weekly Mode, the interest rate on the Bonds shall be
the current market rate determined by the Remarketing Agent on the immediately
preceding Weekly Rate Calculation Date, in accordance with this Section 2.03.
On each Weekly Rate Calculation Date, the Remarketing Agent shall determine the
Weekly Rate for the next succeeding Weekly Rate Period as the rate which if
borne by the Bonds would, in the judgment of the Remarketing Agent, taking into
account prevailing financial market conditions, be the interest rate necessary,
but would not exceed the interest rate necessary, to enable the Remarketing
Agent to arrange for the sale of all of the Outstanding Bonds at a price equal
to the principal amount thereof plus accrued interest thereon. Notice of such
Weekly Rate shall be given by the Remarketing Agent to the Trustee by the close
of business on the Weekly Rate Calculation Date. Except as hereinafter
provided, no notice of Weekly Rates will be given to the Corporation, the Bank
or the Holders; however, the Corporation, the Bank and the Holders may obtain
Weekly Rates from the Trustee or the Remarketing Agent. Anything herein to the
contrary notwithstanding, in no event shall the Weekly Rate borne by the Bonds
exceed the Maximum Rate. The Remarketing Agent shall file such certification
with the Trustee by the close of business on the Weekly Rate Calculation Date.

In determining each Weekly Rate to be effective pursuant to this
Section 2.03, prevailing financial market conditions which the Remarketing
Agent shall take into account shall include (i) existing short-term tax-exempt
market rates and indexes of such short-term rates, (ii) the existing market
supply and demand for short-term tax-exempt securities, (iii) existing yield
curves for short-term tax-exempt securities for obligations of credit quality
comparable to the Bonds, (iv) general economic conditions, (v) industry,
economic and financial conditions that may affect or be relevant to the Bonds,
and (vi) such other facts, circumstances and conditions as the Remarketing
Agent, in its sole discretion, shall determine to be relevant.

If for any reason the Remarketing Agent does not determine a Weekly Rate
for any Weekly Rate Period as aforesaid, or if a court holds a rate for any
Weekly Rate Period to be invalid or unenforceable, the Weekly Rate for that
Weekly Rate Period shall be equal to the Weekly Rate in effect for the
immediately preceding Weekly Rate Period. The Weekly Rate for any consecutive
succeeding Weekly Rate Period for which the Remarketing Agent does not
determine a Weekly Rate, or a court holds a rate to be invalid or
unenforceable, shall be the arithmetic average of the daily 30-day (one-month)
dealer (non-finance company) commercial paper rates for the Business Days
during the seven-day Monday through Sunday period ending on the Sunday next
preceding the first day of such Weekly Rate Period as reported in the weekly
statistical release published by the Board of Governors of the Federal Reserve
System entitled H.15 (519) for such Business Days; provided that if such
statistical release (or a substitute therefor) ceases to be published by the
<PAGE>

Federal Reserve System, then the dealer commercial paper rates to be used shall
be the rates published in the money rates section of The Wall Street Journal
(or any successor publication) as the rates of high-grade unsecured notes sold
through dealers by major corporations in multiples of $1,000 for such Business
Days.

The determination of the Weekly Rate by the Remarketing Agent pursuant
to this Indenture shall be conclusive and binding upon the Corporation, the
Trustee, the Bank and the Holders.

SECTION 2.04. Term Rate. A Term Rate shall be determined for each Term
Rate Period as described below. Upon conversion to a Term Mode, a Nominal Term
Rate Period shall be fixed by the Corporation pursuant to Section 2.06 as a
term of two or more consecutive Semiannual Periods constituting the nominal
length of each Term Rate Period thereafter until the date of a conversion to
another Rate Mode. A Term Mode based on one Nominal Term Rate Period and a
Term Mode based on another Nominal Term Rate Period are different Rate Modes.
Each Term Rate shall be determined by the Remarketing Agent, on the Term Rate
Calculation Date, as the lowest rate of interest that, in the judgment of the
Remarketing Agent, taking into account prevailing financial market conditions,
would be necessary to enable the Remarketing Agent to arrange for the sale of
the Bonds in the respective Term Mode in a secondary market sale at a price
equal to the principal amount thereof, plus accrued interest, on the first
Business Day of the respective Term Rate Period; provided that (1) if the
Remarketing Agent fails for any reason to determine the Term Rate for any Term
Rate Period, such Term Rate shall be equal to 120% of the average of the annual
bond equivalent yield evaluations at par as of the first day of the
corresponding Term Rate Period or, if such day is not a Business Day, the next
preceding Business Day of United States Treasury obligations having a term to
maturity similar to such Term Rate Period, and (2) no Term Rate shall exceed
the lesser of (i) the interest rate at which the Letter of Credit then in
effect provides coverage for at least 210 days' interest and (ii) the Maximum
Rate. In determining a Term Rate pursuant to this Section 2.04, prevailing
financial market conditions which the Remarketing Agent shall take into account
shall include (i) existing long-term tax-exempt market rates and indexes of
such long-term rates, (ii) the existing market supply and demand for long-term
tax-exempt securities, (iii) existing yield curves for long-term tax-exempt
securities for obligations of credit quality comparable to the Bonds, (iv)
general economic conditions, (v) industry, economic and financial conditions
that may affect or be relevant to the Bonds, and (vi) such other facts,
circumstances and conditions as the Remarketing Agent, in its sole discretion,
shall determine to be relevant. Notice of each Term Rate shall promptly be
given by telephone (promptly confirmed in writing) by the Remarketing Agent to
the Trustee, the Corporation and the Bank. Determinations of Term Rates
pursuant to this Section 2.04 shall be conclusive and binding upon the
Corporation, the Trustee, the Bank and the Holders.

SECTION 2.05. Fixed Rate. Bonds in the Fixed Mode shall not be secured
by the Letter of Credit, any Alternate Letter of Credit or any Alternate Credit
Facility. A Fixed Rate shall be determined for each Fixed Rate Period as
described below. The Fixed Rate shall be determined by the Remarketing Agent,
on the Fixed Rate Calculation Date, as the lowest rate of interest that, in the
judgment of the Remarketing Agent, taking into account prevailing financial
market conditions, would be necessary to enable the Remarketing Agent to
arrange for the sale of the Bonds in the Fixed Mode in a secondary market sale
at a price equal to the principal amount thereof plus accrued interest, on the
first Business Day of the Fixed Rate Period; provided that in no event shall
the Fixed Rate exceed the Maximum Rate. In determining a Fixed Rate pursuant
<PAGE>

to this Section 2.05, prevailing financial market conditions which the
Remarketing Agent shall take into account shall include (i) existing long-term
tax-exempt market rates and indexes of such long-term rates, (ii) the existing
market supply and demand for long-term tax-exempt securities, (iii) existing
yield curves for long-term tax-exempt securities for obligations of credit
quality comparable to the Bonds, (iv) general economic conditions, (v)
industry, economic and financial conditions that may affect or be relevant to
the Bonds, and (vi) such other facts, circumstances and conditions as the
Remarketing Agent, in its sole discretion, shall determine to be relevant.
Notice of each Fixed Rate shall promptly be given by telephone (promptly
confirmed in writing) by the Remarketing Agent to the Trustee, the Corporation
and the Bank. Determinations of Fixed Rates pursuant to this Section 2.05
shall be conclusive and binding upon the Corporation, the Trustee, the Bank and
the Holders.

SECTION 2.06. Conversion at Option of Corporation. The Corporation
shall have the option to convert the Bonds in whole or in part from one Rate
Mode to another Rate Mode as herein provided on any Conversion Date the
Corporation shall select; provided that (i) each Conversion Date shall be an
Interest Payment Date, (ii) Bonds in a Term Mode may not be converted to
another Rate Mode prior to the date on or after which the Bonds may first be
redeemed at a redemption price of par plus accrued interest pursuant to their
terms, (iii) Bonds in the Weekly Mode may not be converted to a Term Mode or
Fixed Mode prior to the first Semiannual Date following the Closing Date or the
Conversion Date on which the interest rate borne by the Bonds was converted to
the Weekly Mode, (iv) Bonds in a Fixed Mode may not be converted to either the
Weekly Mode or Term Mode and (v) in the case of a conversion of less than all
the Bonds to the Fixed Mode, this Indenture shall be amended pursuant to the
requirements of Section 9.07 to specify the Allocated Assessment Charges
securing the Bonds so converted and the Allocated Assessment Charges securing
the remainder of the Bonds and provide for the deposit of such Allocated
Assessment Charges in separate accounts within the Bond Fund and the Prepayment
Fund, the application of the moneys so deposited and such other changes to the
Indenture as shall be necessary to secure the Bonds as contemplated hereby, and
separate CUSIP numbers shall be assigned to Bonds in the Fixed Mode. The
Corporation may exercise its option to convert the Bonds regardless of the
number of times the Bonds have previously been converted pursuant to the
exercise of its option to convert. The Corporation shall exercise such option
by giving written notice from an Authorized Representative of the Corporation
to the Trustee, the Remarketing Agent and the Bank, stating its election to
convert the Rate Mode of the Bonds to another Rate Mode specified in such
notice and stating the Conversion Date therefor, not less than 45 days prior to
such Conversion Date. Upon receipt of such notice by the Trustee, the Trustee
may conclusively assume that the Remarketing Agent and the Bank also received a
copy of such notice and that such condition has been complied with. In
connection with each conversion to a Term Mode, the Nominal Term Rate Period
shall be selected by the Corporation and designated in such notice. Notice of
the exercise of an option to convert shall not be effective unless, within 10
days after the delivery of such notice, there shall have been delivered to the
Trustee (1) an opinion of Bond Counsel addressed to the Trustee, the Bank and
the Remarketing Agent stating that such conversion is authorized or permitted
by this Indenture, which opinion shall be confirmed by such Bond Counsel on the
Conversion Date, (2) written consent of the Bank to such conversion, (3) in the
case of a conversion to a Term Mode, an amendment to the Letter of Credit which
provides for (i) an Expiration Date not earlier than the Expiration Date of the
Letter of Credit and (ii) on and after such Conversion Date, coverage of 210
days' accrued interest on the Bonds at a rate not less than the interest rate
at which the then current Letter of Credit provides coverage, subject to
<PAGE>

adjustment on the Conversion Date to the Maximum Rate, (4) in the case of a
conversion from the Term Mode to the Weekly Mode an amendment to the Letter of
Credit which provides for (i) an Expiration Date not earlier than the
Expiration Date of the Letter of Credit and (ii) on and after the Conversion
Date, coverage for 210 days' accrued interest on the Bonds at the Maximum Rate,
and (5) written notice from the Rating Service that such conversion and the
related amendment to the Letter of Credit or delivery of an Alternate Letter of
Credit will not result in a withdrawal or reduction of the then current rating
or ratings on the Bonds or setting forth a new rating or ratings on the Bonds
effective upon such conversion. In the case of a conversion from one Rate Mode
to another Rate Mode, the Trustee shall give notice by first-class mail,
postage-prepaid, to the Holders not less than 30 days prior to the proposed
Conversion Date stating (i) that, in the case of a conversion to a Term Mode,
the interest rate on the Bonds is scheduled to be converted to a Term Rate and
stating the Nominal Term Rate Period on which such Term Rate will be based, or
in the case of a conversion to the Weekly Mode or the Fixed Mode, the interest
rate on the Bonds is scheduled to be converted to a Weekly Rate or the Fixed
Rate, (ii) the proposed Conversion Date, (iii) that the Corporation, on or
before the tenth day prior to the proposed Conversion Date, may determine not
to convert the Bonds in which case the Trustee shall notify the Bondholders in
writing to such effect, and (iv) that all outstanding Bonds will be subject to
a mandatory purchase on the Conversion Date, or if such Conversion Date is not
a Business Day, the first Business Day following such Conversion Date at a
price of par plus accrued interest. The Corporation, the Trustee, the Bank and
the Remarketing Agent shall not be liable to any Holders for failure to give
any notice required above or for failure of any Holders to receive any such
notice. Upon each conversion under this Section 2.06, the Bonds shall be
subject to mandatory purchase pursuant to Section 4.02 on the Conversion Date
or if such Conversion Date is not a Business Day, the first Business Day
following such Conversion Date.

SECTION 2.07. Execution and Authentication of Bonds. The Bonds shall
be executed by the manual or facsimile signature of the President of the
Corporation, and the corporate seal of the Corporation or a facsimile thereof
shall be affixed, imprinted, lithographed or reproduced thereon and attested by
the manual or facsimile signature of the Secretary or Assistant Secretary of
the Corporation. In case any officer whose signature or a facsimile of whose
signature shall appear on any Bond shall cease to be that officer before the
authentication of the Bond, the signature of such officer or the facsimile
thereof nevertheless shall be valid and sufficient for all purposes, the same
as if he had remained in office until that time. Any Bond may be executed on
behalf of the Corporation by an officer who, on the date of execution is the
proper officer, although on the date of authentication of the Bond that person
was not the proper officer.

No Bond shall be valid or become obligatory for any purpose or shall be
entitled to any security or benefit under this Indenture unless and until a
certificate of authentication, substantially in the form set forth in Exhibit A
to this Indenture, has been signed by the Trustee. The authentication by the
Trustee upon any Bond shall be conclusive evidence that the Bond so
authenticated has been duly authenticated and delivered hereunder and is
entitled to the security and benefit of this Indenture. The certificate of the
Trustee may be executed by any person authorized by the Trustee, and it shall
not be necessary that the same authorized person sign the certificates of
authentication on all of the Bonds.

SECTION 2.08. Special and Limited Obligations. The Bonds and the
interest thereon are special and limited obligations of the Corporation,
<PAGE>

payable solely from Allocated Assessment Charges, other amounts payable under
the Assessment Agreement and the Assessment and Lien and other amounts
attributable from the Trust Estate, including, without limitation, except as
otherwise provided herein, the Letter of Credit or any Alternate Credit
Facility, and do not now, and shall never constitute a general obligation of
the Corporation. Neither the Corporation, the District, the State of Colorado
nor any other political subdivision of the State of Colorado shall be obligated
to pay the principal, purchase price, or redemption price of or interest on the
Bonds or other costs incident thereto, except from the Trust Estate, including
the Letter of Credit or any Alternate Credit Facility.

SECTION 2.09. Payment and Ownership of Bonds. Bond Service shall be
payable in lawful money of the United States of America without deduction for
the services of the Trustee. The Trustee shall act as paying agent for the
Bonds. Subject to the provisions of the second paragraph of this Section 2.09
and Sections 2.13 and 2.14, (i) the principal of and any premium on any Bond
shall be payable when due to a Holder upon presentation and surrender of such
Bond at the Principal Office of the Trustee, and (ii) interest on any Bond
shall be paid on each Interest Payment Date by check or draft which the Trustee
shall cause to be mailed on that date to the Person in whose name the Bond (or
one or more Predecessor Bonds) is registered at the close of business on the
Regular Record Date applicable to that Interest Payment Date on the Register at
the address appearing therein. If and to the extent, however, that the
Corporation fails to make payment or provision for payment of interest on any
Bond on any Interest Payment Date, that interest shall cease to be payable to
the Person who was the Holder of that Bond (or of one or more Predecessor
Bonds) as of the applicable Regular Record Date. When moneys become available
for payment of that interest, (a) the Trustee shall, pursuant to Subsection
7.06(d), establish a Special Record Date for the payment of that interest which
shall be not more than 15 nor fewer than 10 days prior to the date of the
proposed payment, and (b) the Trustee shall cause notice of the proposed
payment and of the Special Record Date to be mailed by first-class mail,
postage-prepaid, to each Holder at its address as it appears on the Register
not fewer than 15 days prior to the Special Record Date and, thereafter, that
interest shall be payable to the Persons who are the Holders of the Bonds (or
their respective Predecessor Bonds) at the close of business on the Special
Record Date.

The interest and the principal or redemption price and purchase price
becoming due with respect to the Bonds shall, at the written request of the
Holder of at least $1,000,000 aggregate principal amount of such Bonds received
by the Trustee at least two Business Days before the corresponding Regular
Record Date or maturity, redemption or purchase date, be paid by wire transfer
within the continental United States in immediately available funds to the bank
account number of such Holder specified in such request and entered by the
Trustee on the Register, but, in the case of principal or redemption price and
purchase price, only upon presentation and surrender of such Bonds at the
Principal Office of the Trustee.

Subject to the foregoing, each Bond delivered under this Indenture upon
transfer thereof, or in exchange for or in replacement of any other Bond, shall
carry the rights to interest accrued and unpaid, and to accrue on that Bond, or
which were carried by that Bond.

Except as provided in this Section 2.09 and in the first paragraph of
Section 2.10, (i) the Holder of any Bond shall be deemed and regarded as the
absolute owner thereof for all purposes of this Indenture, (ii) payment of or
on account of the Bond Service on any Bond shall be made only to or upon the
<PAGE>

order of that Holder or its duly authorized attorney in the manner permitted by
this Indenture, and (iii) neither the Corporation nor the Trustee shall, to the
extent permitted by law, be affected by notice to the contrary. All of those
payments shall be valid and effective to satisfy and discharge the liability
upon that Bond, including without limitation the interest thereon to the extent
of the amount or amounts so paid.

SECTION 2.10. Registration, Transfer and Exchange of Bonds. All Bonds
shall be issued in fully registered form. The Bonds shall be registered upon
original issuance and upon subsequent transfer or exchange as provided in this
Indenture. The Trustee shall act as registrar and transfer agent for the
Bonds. So long as any of the Bonds remain outstanding, the Corporation shall
cause books for the registration and transfer of Bonds, as provided in this
Indenture, to be maintained and kept at the Principal Office of the Trustee.

Bonds may be exchanged, at the option of their Holder, for Bonds of any
authorized denomination or denominations in an aggregate principal amount equal
to the unmatured and unredeemed principal amount of, and bearing interest at
the same rate and maturing on the same date or dates as, the Bonds being
exchanged. The exchange shall be made upon presentation and surrender of the
Bonds being exchanged at the Principal Office of the Trustee, together with an
assignment duly executed by the Holder or its duly authorized attorney in form
and with guarantee of signature satisfactory to the Trustee.

Any Bond may be transferred upon the Register, upon presentation and
surrender thereof at the Principal Office of the Trustee, together with an
assignment duly executed by the Holder or its duly authorized attorney in form
and with guarantee of signature satisfactory to the Trustee. Upon transfer of
any Bond, the Corporation shall execute in the name of the transferee, and the
Trustee shall authenticate and deliver, a new Bond or Bonds of any authorized
denomination or denominations in an aggregate principal amount equal to the
unmatured and unredeemed principal amount of, and bearing interest at the same
rate and maturing on the same date or dates as, the Bonds presented and
surrendered for transfer.

In all cases in which Bonds shall be exchanged or transferred hereunder,
the Corporation shall execute, and the Trustee shall authenticate and deliver,
Bonds in accordance with the provisions of this Indenture. The exchange or
transfer shall be made without charge; provided that the Corporation or the
Trustee may make a charge for every exchange or transfer of Bonds sufficient to
reimburse them for any tax or excise required to be paid with respect to the
exchange or transfer. The charge shall be paid before a new Bond is delivered.

All Bonds issued upon any transfer or exchange of Bonds shall be the
valid obligations of the Corporation, evidencing the same obligation, and
entitled to the same benefits under this Indenture, as the Bonds surrendered
upon transfer or exchange. While the Bonds are in the Fixed Mode, the Trustee
shall not be required to exchange or transfer (i) any Bond during a period
beginning at the opening of business ten days before the date of the mailing of
a notice of redemption of Bonds and ending at the close of business on the day
of such mailing, (ii) any Bond selected for redemption, in whole or in part, or
(iii) any Bond during the period of 15 days preceding any Interest Payment
Date.

In case any Bond is redeemed in part only, on or after the redemption
date and upon presentation and surrender of the Bond, the Corporation, subject
to the provisions of Sections 2.13 and 2.14, shall cause execution of, and the
Trustee shall authenticate and deliver, a new Bond or Bonds in authorized
<PAGE>

denominations in an aggregate principal amount equal to the unmatured and
unredeemed portion of, and bearing interest at the same rate and maturing on
the same date or dates as, the Bond redeemed in part.

SECTION 2.11. Mutilated, Lost, Wrongfully Taken or Destroyed Bonds. If
any Bond is mutilated, lost, wrongfully taken or destroyed, in the absence of
written notice to the Corporation or the Trustee that a lost, wrongfully taken
or destroyed Bond has been acquired by a bona fide purchaser, the Corporation
shall execute, and the Trustee shall authenticate and deliver, a new Bond of
like date, maturity and denomination and of the same series as the Bond
mutilated, lost, wrongfully taken or destroyed; provided that (i) in the case
of any mutilated Bond, the mutilated Bond first shall be surrendered to the
Trustee, and (ii) in the case of any lost, wrongfully taken or destroyed Bond,
there first shall be furnished to the Corporation and the Trustee evidence of
the loss, wrongful taking or destruction satisfactory to the Trustee, together
with indemnity satisfactory to it and to the Authorized Representative of the
Corporation. The Corporation and the Trustee may charge the Holder of a
mutilated, lost, wrongfully taken or destroyed Bond their reasonable fees and
expenses in connection with their actions pursuant to this Section.

Notwithstanding the foregoing, the Trustee shall not be required to
authenticate and deliver any substitute Bond for a Bond which has been called
for redemption or which has matured or is about to mature and, in any such
case, the principal or redemption price and interest then due or becoming due
shall be paid by the Trustee in accordance with the terms of the mutilated,
lost, wrongfully taken or destroyed Bond without substitution therefor.

Every substituted Bond issued pursuant to this Section 2.11 shall
constitute an additional contractual obligation of the Corporation and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Bonds duly issued hereunder unless the Bond alleged to have
been lost, wrongfully taken or destroyed shall be at any time enforceable by a
bona fide purchaser for value without notice. In the event the Bond alleged to
have been lost, wrongfully taken or destroyed shall be enforceable by anyone,
the Corporation may recover the substitute Bond from the Bondholder to whom it
was issued or from anyone taking under the Bondholder except a bona fide
purchaser for value without notice.

All Bonds shall be held and owned on the express condition that the
foregoing provisions of this Section 2.11 are exclusive with respect to the
replacement or payment of mutilated, lost, wrongfully taken or destroyed Bonds
and, to the extent permitted by law, shall preclude any and all other rights
and remedies with respect to the replacement or payment of negotiable
instruments or other investment securities without their surrender,
notwithstanding any law or statute to the contrary now existing or hereafter
enacted.

SECTION 2.12. Cancellation of Bonds. Any Bond surrendered pursuant to
this Article II for the purpose of payment, redemption, retirement or for
exchange, replacement or transfer shall be cancelled upon presentation and
surrender thereof to the Trustee. Bonds purchased pursuant to Section 4.01 or
4.02 shall not be surrendered Bonds and shall be Outstanding Bonds, unless
otherwise specifically provided in this Indenture.

The Corporation may deliver at any time to the Trustee for cancellation
any Bonds previously authenticated and delivered hereunder, which the
Corporation may have purchased pursuant to the provisions of this Indenture.
All Bonds so delivered shall be cancelled promptly by the Trustee.
<PAGE>

Certification of the surrender and cancellation shall be made to the
Corporation by the Trustee at least twice each calendar year. Cancelled Bonds
shall be destroyed by the Trustee by shredding or incineration immediately
after their cancellation. The Trustee shall provide certificates describing
the destruction of cancelled Bonds to the Corporation.

SECTION 2.13. Special Agreement with Holders. Notwithstanding any
provision of this Indenture or of any Bond to the contrary, the Trustee may
enter into an agreement with any Holder providing for making all payments to
that Holder of principal of and interest and any premium on that Bond or any
part thereof at a place and by a method (including wire transfer of federal
funds) other than as provided in this Indenture and in the Bond, without
presentation or surrender of the Bond, upon any conditions which shall be
satisfactory to the Trustee; provided that (i) except as otherwise provided in
Section 2.14, payment of principal shall be made only upon presentation and
surrender of the Bond and (ii) payment in any event shall be made to the Person
in whose name a Bond shall be registered on the Register, with respect to
payment of principal and premium, on the date such principal and premium is
due, and, with respect to the payment of interest, as of the applicable Regular
Record Date, Special Record Date or other date agreed upon, as the case may be.
The Trustee will furnish a copy of each such agreement, upon request, to the
Corporation and the Bank. Any payment of principal, premium or interest
pursuant to such an agreement shall constitute payment thereof pursuant to, and
for all purposes of, this Indenture.

SECTION 2.14. Book-Entry System for the Bonds.

(a) Notwithstanding the foregoing provisions of this Article II, the
Bonds shall initially be issued in the form of one fully-registered bond for
the aggregate principal amount of the Bonds of each maturity date, which Bonds
shall be registered in the name of Cede & Co., as nominee of DTC. Except as
provided in paragraph (g) below, all of the Bonds shall be registered in the
Register in the name of Cede & Co., as nominee of DTC; provided that if DTC
shall request that the Bonds be registered in the name of a different nominee,
the Trustee shall exchange all or any portion of the Bonds for an equal
aggregate principal amount of Bonds registered in the name of such nominee or
nominees of DTC. No person other than DTC or its nominee shall be entitled to
receive from the Corporation or the Trustee either a Bond or any other evidence
of ownership of the Bonds, or any right to receive any payment in respect
thereof, unless DTC or its nominee shall transfer record ownership of all or
any portion of the Bonds on the Register in connection with discontinuing the
book-entry system as provided in paragraph (g) below or otherwise.

(b) So long as the Bonds or any portion thereof are registered in the
name of DTC or any nominee thereof, all payments of the principal or redemption
price of or interest on such Bonds shall be made to DTC or its nominee in
accordance with the Representation Letter on the dates provided for such
payments under this Indenture. Each such payment to DTC or its nominee shall
be valid and effective to fully discharge all liability of the Corporation or
the Trustee with respect to the principal or redemption price of or interest on
the Bonds to the extent of the sum or sums so paid. In the event of the
redemption of less than all of the Bonds outstanding of any maturity, the
Trustee shall not require surrender by DTC or its nominee of the Bonds so
redeemed, but DTC (or its nominee) may retain such Bonds and make an
appropriate notation on the Bond certificate as to the amount of such partial
redemption; provided that DTC shall deliver to the Trustee, upon request, a
written confirmation of such partial redemption and thereafter the records
maintained by the Trustee shall be conclusive as to the amount of the Bonds of
<PAGE>

such maturity which have been redeemed.

(c) The Corporation and the Trustee may treat DTC (or its nominee) as
the sole and exclusive owner of the Bonds registered in its name for the
purposes of payment of the principal or redemption price of or interest on the
Bonds, selecting the Bonds or portions thereof to be redeemed, giving any
notice permitted or required to be given to Holders under this Indenture,
registering the transfer of Bonds, obtaining any consent or other action to be
taken by Bondholders and for all other purposes whatsoever; and neither the
Corporation nor the Trustee shall be affected by any notice to the contrary.
Neither the Corporation nor the Trustee shall have any responsibility or
obligation to any participant in DTC, any person claiming a beneficial
ownership interest in the Bonds under or through DTC or any such participant,
or any other person which is not shown on the Register as being a Holder, with
respect to either: (1) the Bonds, (2) the accuracy of any records maintained
by DTC or any such participant, (3) the payment by DTC or any such participant
of any amount in respect of the principal or redemption price of or interest on
the Bonds, (4) any notice which is permitted or required to be given to Holders
under this Indenture, (5) the selection by DTC or any such participant of any
person to receive payment in the event of a partial redemption of the Bonds,
and (6) any consent given or other action taken by DTC as Holder.

(d) So long as the Bonds or any portion thereof are registered in the
name of DTC or any nominee thereof, all notices required or permitted to be
given to the Bondholders under this Indenture shall be given to DTC as provided
in the Representation Letter.

(e) In connection with any notice or other communication to be provided
to Bondholders pursuant to this Indenture by the Corporation or the Trustee
with respect to any consent or other action to be taken by Bondholders, DTC
shall consider the date of receipt of notice requesting such consent or other
action as the record date for such consent or other action, provided that the
Corporation or the Trustee may establish a special record date for such consent
or other action. The Corporation or the Trustee shall give DTC notice of such
special record date not less than 15 calendar days in advance of such special
record date to the extent possible.

(f) At or prior to settlement for the Bonds, the Corporation and the
Trustee shall execute or signify their approval of the Representation Letter in
substantially the form attached hereto as Exhibit B. Any successor trustee
shall, in its written acceptance of its duties under this Indenture, agree to
take any actions necessary from time to time to comply with the requirements of
the Representation Letter.

(g) The book-entry system for registration of the ownership of the
Bonds may be discontinued at any time if either (1) after notice to the
Corporation and the Trustee, DTC determines to resign as securities depository
for the Bonds, or (2) after notice to DTC and the Trustee, the Corporation
determines that continuation of the system of book-entry transfers through DTC
(or through a successor securities depository) is not in the best interests of
the Corporation. In either of such events (unless in the case described in
clause (2) above, the Corporation appoints a successor securities depository),
the Bonds shall be delivered in registered certificate form to such persons,
and in such maturities and principal amounts, as may be designated by DTC, but
without any liability on the part of the Corporation or the Trustee for the
accuracy of such designation. Whenever DTC requests the Corporation and the
Trustee to do so, the Corporation and the Trustee shall cooperate with DTC in
taking appropriate action after reasonable notice to arrange for another
<PAGE>

securities depository to maintain custody of certificates evidencing the Bonds.

(h) Upon remarketing of Bonds in accordance with Section 4.03 herein,
payment of the purchase price thereof shall be made to DTC, and no surrender of
certificates is expected to be required. Such sales shall be made through DTC
participants (which may include the Remarketing Agent) and the new beneficial
owners of such Bonds shall not receive delivery of Bond certificates. DTC
shall transmit payment to DTC participants, and DTC participants shall transmit
payment to beneficial owners whose Bonds were purchased pursuant to a
remarketing. Neither the Corporation, the Trustee nor the Remarketing Agent is
responsible for transfers of payment to DTC participants or beneficial owners.

(i) The provisions of this Section 2.14 are subject to the provisions
of Article IV relating to Pledged Bonds.

(End of Article II)
<PAGE>

ARTICLE III

REDEMPTION OR PURCHASE OF BONDS

SECTION 3.01. Terms of Redemption. The Bonds shall be subject to
redemption prior to maturity as follows:

(a) Mandatory Redemption-Prepayments and Other Moneys. The Bonds shall
be subject to mandatory redemption, in whole or in part, on any Interest
Payment Date to the extent that there are deposits in the Prepayment Fund
pursuant to provisions of Section 5.08 or on the dates and in the amounts
determined by the Corporation in connection with conversion to a Term Rate or a
Fixed Rate and implemented by amendment hereto, at a redemption price
(expressed as a percentage of principal amount) of 100% plus accrued interest
to the redemption date. Bonds in the Weekly Mode or the Term Mode shall be
redeemable only if moneys are on deposit in the Letter of Credit Debt Service
Account for reimbursement to the Bank of the redemption price. In such case,
the Trustee shall draw on the Letter of Credit in the manner provided by
Section 5.04 to pay the principal of and interest on any Bonds called for
redemption pursuant to this Subsection 3.01(a). Except as otherwise provided
in this Subsection 3.01(a), the Trustee shall pay the redemption price on all
Bonds redeemed under this Subsection 3.01(a) in the manner and from the sources
set forth in Section 5.04 with respect to the payment of Bond Service.

(b) Optional Redemption. Bonds in the Weekly Mode shall be subject to
optional redemption, in whole or in part, on any Interest Payment Date, from
any moneys of the Corporation excluding deposits in the Prepayment Fund, at a
redemption price (expressed as a percentage of principal amount) of 100% plus
accrued interest to the redemption date. Bonds in the Term Mode shall not be
subject to optional redemption. Bonds in the Fixed Mode shall be subject to
optional redemption, in whole or in part, on any Interest Payment Date after
the expiration of the periods during which optional redemption is not permitted
set forth below, from any moneys of the Corporation excluding deposits in the
Prepayment Fund, at the redemption prices (expressed as percentages of the
principal amount) set forth below plus accrued interest to the redemption date.

Fixed Rate Period
- -----------------
Equal to Initial Annual
or Greater But Less No Call Redemption Reduction No Premium
Than Than Period Price in Premium After
- ------------ -------- ------- ---------- ---------- ----------

15 Years N/A 10 Years 102% 1/2% 14th Year
10 Years 15 Years 8 Years 102 1/2 12th Year
5 Years 10 Years 5 Years 101 1/2 7th Year
N/A 5 Years 2 Years 101 1/2 4th Year

Bonds in the Weekly Mode shall be redeemable only if moneys are on deposit in
the Letter of Credit Debt Service Account for reimbursement to the Bank of the
redemption price, unless the Bank has requested the redemption and agreed to
waive this requirement. In such case, the Trustee shall draw on the Letter of
Credit in the manner provided by Section 5.04 to pay the principal of, premium,
if any, on and interest on any Bonds called for redemption pursuant to this
<PAGE>

Subsection 3.01(b). Except as otherwise provided in this Subsection 3.01(b),
the Trustee shall pay the redemption price on all Bonds redeemed under this
Subsection 3.01(b) in the manner and from the sources set forth in Section 5.04
with respect to the payment of Bond Service.

SECTION 3.02. Partial Redemption. If fewer than all of the Bonds are
to be redeemed, the selection of Bonds to be redeemed, or portions thereof in
amounts of $5,000 in excess of $100,000, shall be made by lot or by such other
method as the Trustee deems fair and appropriate; provided that Bonds owned by
holders other than the Bank, Wellsford and the Corporation shall be redeemed
first, any Pledged Bonds pledged to the Bank shall be redeemed second, any
Pledged Bonds pledged to Wellsford shall be redeemed third and any Corporation
Bonds shall be redeemed fourth. In the case of a partial redemption of Bonds
when Bonds of denominations greater than $5,000 are then outstanding, each
$5,000 unit of face value of principal thereof shall be treated as though it
were a separate Bond of the denomination of $5,000. If it is determined that
one or more, but not all, of the $5,000 units of face value represented by a
Bond are to be called for redemption, then upon notice of redemption of a
$5,000 unit or units, the Holder of that Bond shall, subject to Section 2.12,
surrender the Bond to the Trustee (a) for payment of the redemption price of
the $5,000 unit or units of face value called for redemption (including without
limitation the interest accrued to the date fixed for redemption and any
premium) and (b) for delivery, without charge to the Holder thereof, of a new
Bond or Bonds of any authorized denomination or denominations in an aggregate
principal amount equal to the unmatured and unredeemed portion of, and bearing
interest at the same rate and maturing on the same date as, the Bond
surrendered.

SECTION 3.03. Election to Redeem. Except in the case of redemption
pursuant to any mandatory redemption provisions of this Indenture, Bonds shall
be redeemed only after written notice from the Corporation to the Trustee and
the Bank or by written notice from the Bank to the Corporation and the Trustee.
Such notice shall specify the redemption date and the principal amount of Bonds
to be redeemed, and shall be given at least 45 days prior to the redemption
date.

SECTION 3.04. Notice of Redemption.

(a) When required to redeem Bonds under any provision of this
Indenture, or when directed to do so by the Corporation or the Bank pursuant to
the provisions of this Indenture, the Trustee shall cause notice of the
redemption to be given not more than 60 days and not less than 30 days prior to
the redemption date, by mailing copies of such notice of redemption by first-
class mail, postage-prepaid, to all Holders of Bonds to be redeemed at their
registered addresses, but failure to mail any such notice or defect in the
mailing thereof in respect of any Bond shall not affect the validity of the
redemption of any other Bond with respect to which notice was properly given.
Each such notice shall be dated and shall be given in the name of the
Corporation and shall state the following information:

(i) the identification numbers, as established under the
Indenture, and the CUSIP numbers, if any, of the Bonds being redeemed,
provided that any such notice shall state that no representation is made as
to the correctness of CUSIP numbers either as printed on such Bonds or as
contained in the notice of redemption and that reliance may be placed only on
the identification numbers contained in the notice or printed on such Bonds;

(ii) any other descriptive information needed to identify
<PAGE>

accurately the Bonds being redeemed;

(iii) in the case of partial redemption of any Bonds, the respective
principal amounts thereof to be redeemed;

(iv) the redemption date;

(v) the redemption price;

(vi) that on the redemption date the redemption price will become
due and payable upon each such Bond or portion thereof called for redemption,
and that interest thereon shall cease to accrue from and after said date; and

(vii) the place where such Bonds are to be surrendered for payment
of the redemption price, which place of payment shall be the Principal Office
of the Trustee.

In addition, the Trustee shall at all reasonable times make available to any
interested party complete information as to Bonds which have been redeemed or
called for redemption.

(b) In addition to the foregoing notice, further notice of any
redemption of Bonds hereunder shall be given by the Trustee, by registered or
certified mail or overnight delivery service to (i) the Rating Service and to
The Bond Buyer, or their respective successors, if any, and to (ii) Financial
Information, Inc.'s "Daily Called Bond Service," 30 Montgomery Street, 10th
Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information
Services' "Called Bond Service," 55 Bond Street, 28th Floor, New York, New York
10004; Moody's "Municipal and Government," 99 Church Street, 8th Floor, New
York, New York 10007, Attention: Municipal News Report; and Standard and Poor's
"Called Bond Record," 26 Broadway, 3rd Floor, New York, New York 10004; or, in
accordance with then-current guidelines of the Securities and Exchange
Commission, to such other addresses and/or such other services, as the
Corporation may designate with respect to the Bonds, or no such services, as
the Corporation may designate in a certificate delivered to the Trustee. So
long as the Bonds or any portion thereof are held by DTC, the Trustee shall
send each notice of redemption of the Bonds to DTC at 711 Stewart Avenue,
Garden City, New York, 11530, Attention: Call Notification Department
(FAX - (516) 227-4039) or at such other address as may be provided in writing
to the Trustee from time to time. The foregoing notice of redemption shall be
sent to DTC at least 30 days prior to the redemption date by legible facsimile
transmission, certified or registered mail, overnight delivery service or
another secure method which enables the Trustee subsequently to verify the
transmission of such notice. Such further notice shall contain the information
required in Subsection 3.04(a). Failure to give all or any portion of such
further notice shall not in any manner defeat the effectiveness of a call for
redemption if notice thereof is given to the Bondholders as prescribed in
Subsection 3.04(a).

(c) If at the time of mailing of notice of any optional redemption
there shall not have been deposited moneys in the Bond Fund available for
payment pursuant to Subsection 5.04(c) sufficient to redeem all the Bonds
called for redemption, such notice may state that it is conditional in that it
is subject to the deposit of the redemption moneys in the Bond Fund available
for payment pursuant to Section 5.04 not later than 12:00 noon on the
redemption date, in which case such notice shall be of no effect unless moneys
are so deposited.
<PAGE>

SECTION 3.05. Payment of Redeemed Bonds. If (a) unconditional notice
of the redemption has been duly given or duly waived by the Holders of all
Bonds called for redemption or (b) conditional notice of redemption has been so
given or waived and Available Moneys for such redemption have been duly
deposited with the Trustee, then in either such case the Bonds called for
redemption shall be payable on the redemption date at the applicable redemption
price. Payment of the redemption price together with accrued interest shall be
made by the Trustee as described in Subsection 3.01(b) to or upon the order of
the Holders of the Bonds called for redemption upon surrender of such Bonds,
except as otherwise provided in Section 2.13.

Upon the payment of the redemption price of Bonds being redeemed, each
check or other transfer of funds issued for such purpose shall bear the CUSIP
number identifying, by issue and maturity, the Bonds being redeemed with the
proceeds of such check or other transfer.

All moneys deposited in the Bond Fund or the Prepayment Fund and held by
the Trustee for the redemption of particular Bonds shall be held in trust for
the account of the Holders thereof and shall be paid to them, respectively,
upon presentation and surrender of those Bonds, except as otherwise provided in
Section 2.14.

SECTION 3.06. Purchase of Bonds. In lieu of redemption and payment the
Bonds may be purchased and held by the Corporation or the Bank upon the terms
and subject to the provisions contained in this Article III.

(End of Article III)
<PAGE>

ARTICLE IV

PURCHASE AND REMARKETING OF BONDS

SECTION 4.01. Purchase on Demand of Holder During Weekly Mode. While
the Bonds are in the Weekly Mode, any Bond (or portion thereof in an authorized
denomination) shall be purchased on the demand of the Holder thereof on any
Business Day designated by such Holder in a Bondholder Tender Notice at a
purchase price equal to 100% of the principal amount thereof plus accrued
interest, if any, to the Purchase Date, if there is delivered to the Trustee at
its Principal Office and to the Remarketing Agent at its Principal Office, a
Bondholder Tender Notice which (i) states the principal amount (or portion
thereof) of such Bond and (ii) states the Purchase Date on which such Bond (or
portion thereof) shall be purchased pursuant to this Section 4.01, which date
shall be a Business Day not prior to the seventh day next succeeding the date
of the delivery of such notice to the Trustee and the Remarketing Agent;
provided that, if the principal amount of Bonds to be purchased from a Holder
pursuant to a demand under this Section 4.01 is less than the total principal
amount of Bonds held by such Holder, then the principal amount of Bonds so
demanded to be purchased from such Holder shall be equal to at least $100,000
and the principal amount of Bonds retained by such Holder after such purchase
shall be at least $100,000. By delivering the Bondholder Tender Notice, the
Holder irrevocably agrees to deliver such Bond, if not held in book-entry form,
duly endorsed for transfer in blank and with guarantee of signature
satisfactory to the Trustee, to the Delivery Office of the Trustee or any other
address designated by the Trustee at or prior to 12:00 noon on the Purchase
Date specified in the Bondholder Tender Notice. The determination by the
Trustee of a Holder's compliance with the Bondholder Tender Notice and Bond
delivery requirements of this Section 4.01 is in the sole discretion of the
Trustee and binding on the Corporation, the Remarketing Agent, the Bank and the
Holder of the Bonds. Any Bondholder Tender Notice which the Trustee determines
is not in compliance with this Section shall be of no force or effect.

So long as the Bonds are registered to, and held in book-entry form by,
DTC or its nominee, the beneficial owner of Bonds is responsible for submitting
the Bondholder Tender Notice and shall be treated as the Holder of such Bonds
for such purpose, and such notice need only be submitted to the Remarketing
Agent.

Any election by a Holder to tender a Bond (or portion thereof) for
purchase on a Business Day in accordance with this Section 4.01 shall be
irrevocable and shall be binding on the Holder making such election and on any
transferee of such Holder. Each Bondholder Tender Notice shall automatically
constitute (i) an irrevocable offer to sell the Bond (or portion thereof) to
which such notice relates on the Purchase Date at a price equal to the purchase
price of such Bond (or portion thereof), (ii) an irrevocable authorization and
instruction to the Trustee to effect transfer of such Bond (or portion thereof)
upon payment of the purchase price to the Trustee on the Purchase Date, (iii)
with respect to a tender of a portion of a Bond, an irrevocable authorization
and instruction to the Trustee to effect the exchange of such Bond in part for
other Bonds a principal amount equal to the retained portion so as to
facilitate the sale of the tendered portion of such Bond, and (iv) an
acknowledgment that such Holder will have no further rights with respect to
such Bond (or portion thereof) upon payment of the purchase price thereof to
the Trustee on the Purchase Date, except for the right of such Holder to
receive such purchase price upon surrender of such Bond, if not held in
<PAGE>

book-entry form, to the Trustee endorsed for transfer in blank and with
guarantee of signature satisfactory to the Trustee and that after the Purchase
Date such Holder will hold such Bond as agent for the Trustee. If the Bonds
are not held in book-entry form and, after delivery to the Trustee and the
Remarketing Agent of a Bondholder Tender Notice in accordance with this
Section 4.01, the Holder making such election shall fail to deliver such Bond
or Bonds described in the Bondholder Tender Notice to the Trustee at its
Delivery Office on or before 12:00 noon on the applicable Purchase Date as
required by this Section 4.01, then the Undelivered Bond or portion thereof
described in such Bondholder Tender Notice shall be deemed to have been
tendered for purchase to the Trustee and, to the extent that there shall be
held by the Trustee on or before the applicable Purchase Date an amount
sufficient to pay the purchase price thereof and available for such purpose
pursuant to the terms of this Section 4.01, such Undelivered Bond shall on such
Purchase Date cease to bear interest and no longer shall be considered to be
outstanding. Moneys held by the Trustee for the purchase of the Undelivered
Bonds in accordance with the provisions of this Section 4.01 shall be held in a
special separate trust account for the Holders of such Undelivered Bonds. Such
moneys shall be held by the Trustee uninvested and without liability for
interest pending delivery of such Undelivered Bonds to the Trustee.

The Trustee shall, as to any Undelivered Bond, promptly place a stop
transfer against an appropriate amount of Bonds registered in the name of the
Holder thereof on the Register. The Trustee shall place such stop transfer
commencing with the lowest serial number Bond registered in the name of such
Holder (until stop transfers have been placed against an appropriate amount of
Bonds) until the appropriate tendered Bonds are delivered to the Trustee. Upon
such delivery, the Trustee shall make any necessary adjustments to the
Register.

If the Bonds are not held in book-entry form and if for any reason a
Holder fails to deliver a tendered Bond to the Trustee on the Purchase Date,
the Corporation shall execute and the Trustee shall authenticate and deliver in
accordance with Section 4.03 a new Bond or Bonds in replacement of the
Undelivered Bond. The replacement of any such Undelivered Bond shall not be
deemed to create a new obligation, but such Bond as is issued in replacement
shall be deemed to evidence the obligation previously evidenced by the
Undelivered Bond.

A Holder who gives a Bondholder Tender Notice may repurchase the Bonds
so tendered on the Purchase Date if the Remarketing Agent agrees to remarket
such Bond to such Holder, and if the Remarketing Agent agrees to remarket the
specified Bond to such Holder prior to delivery of such Bonds as set forth
above, the delivery requirement set forth above shall be waived.

Upon surrender of any Bond which is not held in book-entry form for
purchase in part only, the Corporation shall execute and the Trustee shall
authenticate and deliver to the Holder thereof a new Bond or Bonds of the same
maturity, of authorized denominations, in an aggregate principal amount equal
to the unpurchased portion of the Bond surrendered.

On the date set for purchase of Bonds to be purchased pursuant to this
Section 4.01 and upon receipt by the Trustee of 100% of the aggregate purchase
price of such Bonds, the Trustee shall pay the purchase price of such Bonds to
the selling Holders thereof at its Principal Office or Delivery Office at or
before 5:00 p.m.; provided that such Bond (if not held in book-entry form)
shall have been surrendered to the Trustee properly endorsed for transfer on
such date with all signatures guaranteed at or prior to 12:00 noon on such
<PAGE>

Purchase Date. Such payment shall be made in immediately available funds and
shall be made only with the following funds in the following order of
availability:

(1) moneys held in the Remarketing Proceeds Purchase Account
representing proceeds from the remarketing of such Bonds by the Remarketing
Agent to any Person other than the Corporation;

(2) proceeds from a drawing on the Letter of Credit deposited directly
into the Letter of Credit Purchase Account (provided that such proceeds shall
not be applied to purchase Pledged Bonds or Corporation Bonds); and

(3) moneys constituting Available Moneys held in the Bond Fund and
available to make such payment.

No purchase of Bonds pursuant to this Section 4.01 shall be deemed to be
a payment or a redemption of such Bonds or any portion thereof and such
purchase will not operate to extinguish or discharge the obligation of such
Bonds.

SECTION 4.02. Mandatory Purchase on Each Conversion Date, at End of
Each Term Rate Period and Prior to the Expiration Date. The Bonds shall be
subject to mandatory purchase at a purchase price equal to the principal amount
thereof plus, in the case of purchases on a Purchase Date which is not an
Interest Payment Date, accrued interest thereon, as follows:

(a) on each Conversion Date or at the end of each Term Rate
Period, or if such date is not a Business Day, the first Business Day
succeeding such date;

(b) while the Bonds are in the Weekly Mode or the Term Mode, on
the Interest Payment Date next preceding but not less than five days prior to
the Expiration Date of the Letter of Credit unless at least 45 days prior to
such Interest Payment Date the Trustee has received notice that the Letter of
Credit has been or will be extended or an Alternate Letter of Credit or
Alternate Credit Facility will be provided pursuant to Section 5.15; and

(c) on any Business Day within 20 days after the occurrence of an
Event of Default under Section 7.01(e) at the direction of the Bank.

In the case of any mandatory purchase of the Bonds pursuant to clause (b)
above, the Trustee shall cause notice of such mandatory purchase to be given
not more than 45 and not less than 15 days prior to the Purchase Date, and in
the case of any mandatory purchase of the Bonds pursuant to clause (c) above,
the Trustee shall cause notice of such mandatory purchase to be given not more
than 20 and not less than 15 days prior to the Purchase Date. Copies of such
notices of mandatory purchase shall be sent by first-class mail, postage-
prepaid, to all Holders of Bonds to be purchased at their registered addresses,
but failure to mail any such notice or defect in the mailing thereof in respect
of any Bond shall not affect the validity of the mandatory purchase of any
other Bond with respect to which notice was properly given. Each such notice
shall be dated and shall be given in the name of the Corporation and shall
state the following information: (i) the identification numbers, as
established under this Indenture, and the CUSIP numbers, if any, of the Bonds
being purchased; (ii) any other descriptive information needed to identify
accurately the Bonds; (iii) the Purchase Date; (iv) the purchase price; (v)
that on the Purchase Date the purchase price will become due and payable upon
each Bond; (vi) the place where the Bonds are to be delivered for payment of
<PAGE>

the purchase price, which place of payment shall be the Principal Office or
Delivery Office of the Trustee; and (vii) the Holders of Bonds subject to
mandatory purchase shall be required to deliver their Bonds for purchase to the
Trustee at its Delivery Office prior to 12:00 noon on the corresponding
Purchase Date, and any Undelivered Bond shall be deemed to have been tendered
to the Trustee as of such Purchase Date and, from and after such Purchase Date,
shall cease to bear interest and no longer shall be considered to be
outstanding. In the event of a failure by a Holder to deliver such Holder's
Bond on or before the applicable Purchase Date, such Holder shall not be
entitled to any payment (including any interest to accrue subsequent to such
Purchase Date) other than the purchase price for such Undelivered Bond, such
Undelivered Bond shall no longer be entitled to the benefits of the Indenture
or the Letter of Credit, except for the purpose of payment of the purchase
price therefor by the Corporation, and such Holder shall thereafter hold such
Undelivered Bond as agent for the Trustee. If for any reason a Holder fails to
deliver such Bond to the Trustee on or before the applicable Purchase Date, the
Corporation shall execute and the Trustee shall authenticate and deliver to the
Remarketing Agent for redelivery to the purchaser a new Bond or Bonds in
replacement of the Undelivered Bond. The replacement of any such Undelivered
Bond shall not be deemed to create a new obligation, but such Bond as is issued
in replacement shall be deemed to evidence the obligation previously evidenced
by the Undelivered Bond.

On the date set for purchase of Bonds to be purchased pursuant to this
Section 4.02 and upon receipt by the Trustee of 100% of the aggregate purchase
price of such Bonds, the Trustee shall pay the purchase price of such Bonds to
the selling Holders thereof at its Principal Office or Delivery Office at or
before 5:00 p.m.; provided that such Bonds shall have been surrendered to the
Trustee properly endorsed for transfer on such date with all signatures
guaranteed at or prior to 12:00 noon on such purchase date. Such payment shall
be made in immediately available funds and payment for Bonds purchased pursuant
to this Section 4.02 shall be made only with the following funds in the
following order of availability:

(1) moneys held in the Remarketing Proceeds Purchase Account
representing proceeds from the remarketing of such Bonds by the Remarketing
Agent to any Person other than the Corporation;

(3) moneys constituting Available Moneys held in the Bond Fund and
available to make such payment.

No purchase of Bonds pursuant to this Section 4.02 shall be deemed to be
a payment or a redemption of such Bonds or any portion thereof and such
purchase will not operate to extinguish or discharge the obligation of such
Bonds.

SECTION 4.03. Remarketing. Upon delivery of a Bondholder Tender Notice
to the Trustee and the Remarketing Agent (or to the Remarketing Agent only in
the case of Bonds held in book-entry form) pursuant to Section 4.01 and not
later than the fifth day preceding the Purchase Date for each mandatory
purchase pursuant to Section 4.02, the Remarketing Agent shall use its best
efforts to find purchasers for and arrange for the sale of the Bonds identified
in the Bondholder Tender Notice pursuant to Section 4.01 or all Bonds subject
to mandatory purchase pursuant to Section 4.02, as the case may be, at a price
<PAGE>

equal to the principal amount thereof plus, in the case of purchases on a
Purchase Date which is not an Interest Payment Date, accrued interest thereon,
for settlement in immediately available funds at or before 3:00 p.m. on the
applicable Purchase Date. The Remarketing Agent may not remarket to the
Corporation any Bonds to be purchased pursuant to Section 4.01 or 4.02.
Whenever the aggregate amount of Bonds to be remarketed is greater than
$100,000 in principal amount, the Remarketing Agent shall remarket those Bonds
in a principal amount of not less than $100,000 to each individual purchaser.
In its capacity as a registered broker-dealer, the Remarketing Agent may, but
is not obligated to, acquire for its own account any Bonds to be so purchased,
but not otherwise remarketed, in which case the Remarketing Agent shall have
remarketed such Bonds to itself. The Remarketing Agent may purchase and sell
Bonds for its own account at any time.

At or before 2:00 p.m. on the Business Day preceding the Purchase Date
of Bonds to be purchased pursuant to Section 4.01 or 4.02 (or such other time
as to which the Trustee and the Remarketing Agent may agree), the Remarketing
Agent shall give notice by telegram, telex, telecopy or other similar
communication to the Trustee of the names, addresses and taxpayer
identification numbers of the purchasers and the denominations of Bonds to be
delivered to each purchaser.

The Remarketing Agent shall, at or before 2:00 p.m. on the Business Day
preceding the Purchase Date of Bonds to be purchased pursuant to Section 4.01
or 4.02, give telephonic notice, promptly confirmed in writing, to the Trustee
specifying the principal amounts of Bonds remarketed and not remarketed,
respectively, and the amount, if any, of the aggregate purchase price of Bonds
which the Remarketing Agent does not then hold in trust. The Trustee shall,
upon receipt of such notice from the Remarketing Agent, give telephonic notice,
promptly confirmed in writing, to the Bank, specifying such amounts.

The Remarketing Agent shall cause to be paid to the Trustee in
immediately available funds by 3:00 p.m. on the Purchase Date of Bonds to be
purchased pursuant to Section 4.01 or 4.02, all amounts (if any) then held by
the Remarketing Agent representing proceeds of the remarketing of such Bonds.
All such remarketing proceeds received by the Trustee shall be deposited by the
Trustee in the special trust account designated as the Remarketing Proceeds
Purchase Account which the Trustee shall establish and use for the payment of
the purchase price of tendered Bonds as provided in this Article IV and shall
not be commingled with other funds held by the Trustee. All moneys in the
Remarketing Proceeds Purchase Account shall be held in trust, uninvested and
without liability for interest thereon, pending application of such moneys by
the Trustee pursuant to this Article IV.

On the Purchase Date of Bonds to be purchased pursuant to Section 4.01
or 4.02, the Trustee shall register or hold all Bonds purchased on such date as
follows:

(a) Bonds remarketed by the Remarketing Agent shall be registered
and made available (at the Principal Office or Delivery Office of the
Trustee) to the Remarketing Agent or the purchasers thereof in accordance
with the instructions of the Remarketing Agent delivered to the Trustee
pursuant to this Section 4.03; and

(b) Bonds purchased with proceeds of a drawing on the Letter of
Credit which are Pledged Bonds shall be held as Pledged Bonds in accordance
with Section 4.05.
<PAGE>

Any Bond (or portion thereof) with respect to which the Trustee receives
a Bondholder Tender Notice pursuant to Section 4.01 on or after the date notice
of a mandatory purchase pursuant to Section 4.02 or redemption pursuant to
Section 3.04 is given and before the corresponding mandatory Purchase Date or
redemption date, respectively, shall not be remarketed except to a buyer who
receives and acknowledges the binding effect of such notice. In addition,
Bonds which are deemed paid pursuant to Article X shall not be remarketed but
shall be canceled upon being purchased pursuant to Section 4.01 or 4.02 in
accordance with the Bond cancellation provisions of Section 2.12.

Anything in this Indenture to the contrary notwithstanding, the
Remarketing Agent shall have no obligation to determine Term Rates or to find
purchasers for and arrange for the sale of the Bonds on or after a Conversion
Date or to make any effort to such end, except to the extent the Remarketing
Agent shall have expressly and specifically agreed in writing with the
Corporation to perform such duties, and, if the Bank, or, after all obligations
to the Bank under the Letter of Credit Notes, the Letter of Credit
Reimbursement Agreement, the Secured Note, the Pledged Bonds and this Indenture
have been paid in full and the Letter of Credit and any Alternate Letter of
Credit replacing the Letter of Credit have terminated, Wellsford REIT so
requests, shall not remarket the Bonds after the occurrence of and during the
continuance of an Event of Default until the Bank requests otherwise.

SECTION 4.04. Drawings on Letter of Credit for Purchase of Bonds. As
provided by Section 4.03, the Remarketing Agent shall advise the Trustee of the
amounts not held by the Remarketing Agent which shall be drawn under the Letter
of Credit in order for the Trustee to make timely payments of purchase price of
Bonds from remarketing proceeds or moneys drawn under the Letter of Credit. In
the absence of such notice, the Trustee shall be deemed to have received notice
from the Remarketing Agent specifying that no portion of the purchase price of
such Bonds is held by the Remarketing Agent, in which case the Trustee shall
draw the entire amount thereof under the Letter of Credit. Prior to 4:00 p.m.
on the Business Day before each Purchase Date, the Trustee shall take all
action necessary to draw on the Letter of Credit in accordance with its terms,
the amounts specified (or deemed specified) for receipt by the Trustee on such
Purchase Date. The Trustee shall establish a special trust account designated
as the Letter of Credit Purchase Account into which the Trustee shall deposit
and hold in trust, uninvested and without liability for interest thereon, all
such amounts (and only such amounts) received by the Trustee from drawings on
the Letter of Credit for purchases of Bonds pending application of such amounts
by the Trustee pursuant to this Article IV. Any remaining amounts in the
Letter of Credit Purchase Account after any application required by this
Article IV shall be paid over by the Trustee to the Bank as reimbursement for
the drawing on the Letter of Credit from which such amounts were derived;
provided that the Letter of Credit shall be reinstated to the extent of such
reimbursement and the Trustee shall take all necessary action on its part
pursuant to the Letter of Credit to effect such reinstatement. Anything herein
to the contrary notwithstanding, no amounts drawn on the Letter of Credit shall
be applied to the purchase of Bonds in the Fixed Mode, Pledged Bonds or
Corporation Bonds.

SECTION 4.05. Bonds Purchased with Proceeds of Letter of Credit.

(a) Pledged Bonds. Bonds purchased with proceeds of a drawing on the
Letter of Credit pursuant to this Article IV shall constitute Pledged Bonds and
shall be held by the Trustee as agent for the Bank as pledgee of the
Corporation until such Bonds are released by the Bank in accordance with the
Pledge and Security Agreement and in the event Wellsford REIT has provided
<PAGE>

reimbursement to the Bank under the Letter of Credit Reimbursement Agreement,
the Pledged Bonds for which such reimbursement has been made shall thereafter
be held by the Trustee as agent for Wellsford REIT as pledgee of the
Corporation pursuant to the Wellsford REIT Reimbursement Agreement (and shall
be shown as such on the Register or, if held in book-entry form, in the
ownership records maintained by DTC and any applicable DTC participant) unless
and until (1) the Trustee has confirmation from the Bank to the extent
contemplated by the terms of the Letter of Credit that the Letter of Credit has
been reinstated with respect to such drawing, (2) in the event that Wellsford
REIT has provided reimbursement to the Bank pursuant to the Letter of Credit
Reimbursement Agreement, the Trustee has received confirmation from Wellsford
REIT that the Corporation has satisfied its obligations under the Wellsford
REIT Reimbursement Agreement, and (3) the Bank has notified the Trustee by
telephone (thereafter promptly confirmed in writing) that such Bonds have been
released from the pledge under the Pledge and Security Agreement (if held
thereunder) or Wellsford REIT has notified the Trustee by telephone (thereafter
promptly confirmed in writing) that such Bonds have been released from the
pledge under the Wellsford Pledge and Security Agreement (if held thereunder),
and are no longer Pledged Bonds. If such release is accomplished through
payment by the Corporation of principal and interest due on the Letter of
Credit Notes or the Wellsford REIT Note, the Bonds so released shall thereupon
constitute Corporation Bonds. Pending reinstatement of the Letter of Credit
and release of such pledge as aforesaid, the Bank or Wellsford REIT as pledgee
of the Corporation (as applicable) shall be entitled to receive all payments of
principal of and interest on Pledged Bonds at the rate specified in the Letter
of Credit Reimbursement Agreement or the Wellsford REIT Reimbursement Agreement
(as applicable), and such Bonds shall not be transferable or deliverable to any
party (including the Corporation) except the Bank or Wellsford REIT (as
applicable).

(b) Remarketing of Pledged Bonds. Unless the Remarketing Agent has
received a request from the Bank not to remarket the Bonds in accordance with
the last sentence of Section 4.03, the Remarketing Agent shall continue to use
its best efforts to arrange for the sale of any Pledged Bonds at a price equal
to the principal amount thereof plus accrued interest.

(c) Notice of Remarketing. At or prior to 2:00 p.m. on the Business
Day preceding each day on which any Pledged Bonds that are successfully
remarketed by the Remarketing Agent are to be purchased, the Remarketing Agent
shall give telephonic notice, promptly confirmed in writing, to the Trustee,
Wellsford REIT and the Corporation specifying:

(1) the Business Day on which such purchase will take place and
the principal amount of Pledged Bonds successfully remarketed by the
Remarketing Agent, and

(2) to the Trustee only, the names, addresses and tax
identification numbers of the proposed purchasers thereof and the
denominations of Bonds to be delivered to each purchaser.

The Trustee shall, upon receipt of such notice from the Remarketing Agent, give
telephonic notice, promptly confirmed in writing, to the Bank, specifying the
Business Day on which such purchase will take place and the principal amount of
Pledged Bonds successfully remarketed by the Remarketing Agent.

(d) Delivery of Remarketed Pledged Bonds and Proceeds Thereof. Upon
reinstatement of the Letter of Credit as described in Subsection 4.05(a) and
the sale of Pledged Bonds arranged by the Remarketing Agent as described in
<PAGE>

Subsection 4.05(b), (i) such Bonds (if not held in book-entry form) shall be
made available (at the Principal Office or Delivery Office of the Trustee) to
the Remarketing Agent or the purchasers thereof in accordance with the
instructions of the Remarketing Agent and (ii) the proceeds of such sale shall
be delivered to the Bank or Wellsford REIT for the account of the Corporation
to be applied to any unpaid reimbursement obligation with respect to the prior
drawings made on the Letter of Credit in respect of the purchase of such Bonds.

SECTION 4.06. Corporation Bonds.

(a) Remarketing of Corporation Bonds. Subject to the provisions and
limitations of the Remarketing Agreement and Section 4.03, the Remarketing
Agent shall, if so directed by the Corporation, use its best efforts to arrange
for the sale of any Corporation Bonds, at a price equal to the principal amount
thereof plus accrued interest.

(b) Notice of Remarketing. At or prior to 2:00 p.m. on the Business
Day preceding each day on which any Corporation Bonds that are successfully
remarketed by the Remarketing Agent pursuant to Subsection 4.06(a) are to be
purchased, the Remarketing Agent shall give telephonic notice, promptly
confirmed in writing, to the Trustee, Wellsford REIT and the Corporation
specifying:

(1) the Business Day on which such purchase will take place and
the principal amount of Corporation Bonds successfully remarketed by the
Remarketing Agent, and

(2) to the Trustee only, the names, addresses and tax
identification numbers of the proposed purchasers thereof, the denominations
of Bonds to be delivered to each purchaser and, if available, the payment
instructions for regularly scheduled interest payments.

The Trustee shall, upon receipt of such notice from the Remarketing Agent, give
telephonic notice, promptly confirmed in writing, to the Bank, specifying the
Business Day on which such purchase will take place and the principal amount of
Corporation Bonds successfully remarketed by the Remarketing Agent.

(c) Delivery of Remarketed Corporation Bonds and Proceeds Thereof.
Upon the sale of Corporation Bonds arranged by the Remarketing Agent pursuant
to Subsection 4.06(a), (i) such Bonds (if not held in book-entry form) shall be
made available (at the Principal Office or Delivery Office of the Trustee) to
the Remarketing Agent or the purchasers thereof in accordance with the
instructions of the Remarketing Agent and (ii) the proceeds of such sale shall
be delivered to the Corporation.

SECTION 4.07. No Purchases After Acceleration; Inadequate Funds for
Purchases. Anything in this Indenture to the contrary notwithstanding, there
shall be no purchases of Bonds pursuant to this Article IV if the Bonds have
been declared immediately due and payable pursuant to Section 7.03 and such
declaration has not been annulled, stayed or otherwise suspended.

If the funds available for purchases of Bonds are inadequate for the
purchase of all Bonds tendered on any Purchase Date pursuant to this
Article IV, the Trustee shall, after any applicable grace period: (a) return
all tendered Bonds to the Holders thereof; and (b) return all moneys received
for the purchase of such Bonds (other than moneys provided by the Corporation
and other than Letter of Credit proceeds, unless the Letter of Credit is
reinstated with respect thereto or will be reinstated upon receipt of such
<PAGE>

funds) to the persons providing such moneys.

(End of Article IV)
<PAGE>

ARTICLE V

FUNDS AND LETTER OF CREDIT

SECTION 5.01. Source of Payment of Bonds. The Bonds herein authorized
and all payments by the Corporation hereunder are not general obligations of
the Corporation but are special and limited obligations payable solely from the
Allocated Assessment Charges and other amounts derived from the Trust Estate as
provided herein.

The Allocated Assessment Charges and other amounts provided for in and
payable under the Assessment Agreement and the Assessment and Lien are to be
remitted directly to the Trustee for the account of the Corporation and
deposited in the Receipts Fund. Such payments, sufficient in amount to insure
the prompt payment of the principal of, premium, if any, on and interest on the
Bonds and certain costs and expenses provided herein, are pledged to such
payment.

SECTION 5.02 Creation of Funds. There is hereby created by the
Corporation and ordered established with the Trustee the following funds and
accounts to be held by the Trustee: (a) the Bond Fund and therein the General
Account and the Letter of Credit Debt Service Account, (b) the Construction
Fund, (c) the Cost of Issuance Fund, (d) the Prepayment Fund, (e) the Receipts
Fund, and (f) the Rebate Fund.

SECTION 5.03 Application of Bond Proceeds; Other Moneys; Redemption of
the Bonds. The proceeds of the Bonds, less the fee of $184,437.50 paid to the
placement agent for the Bonds, upon the issuance and delivery thereof, shall be
deposited with the Trustee as follows:

(a) in the Construction Fund, the sum of $13,947,755.50 to be applied
as provided in Section 5.05, including $1,856,652.63 capitalized interest to
be applied to the payment of interest on the Bonds.

(b) in the Costs of Issuance Fund, the sum of $622,807 to be applied as
provided in Section 5.07;

SECTION 5.04. Bond Fund.

(a) Revenues to be Paid Over to the Trustee. The Corporation shall
cause the Revenues to be paid to the Trustee, and the Trustee shall deposit
moneys in the Bond Fund as provided in Section 5.09. Moneys held by the
Trustee in the General Account shall be applied in accordance with Section
5.04(b)(2) and the other provisions of this Indenture (i) first, to reimburse
the Bank for amounts due under the Letter of Credit Reimbursement Agreement and
the Letter of Credit Notes, until all such obligations are paid in full, (ii)
second, to reimburse Wellsford REIT for amounts due under the Wellsford REIT
Reimbursement Agreement and the Wellsford REIT Note until all such amounts are
paid in full, and (iii) third, to make payments of principal of, premium, if
any, on and interest on the Bonds. All moneys (and only those moneys) received
by the Trustee from drawings under the Letter of Credit to pay principal of,
premium, if any, on and interest on the Bonds shall be deposited in the Letter
of Credit Debt Service Account and applied to such purpose.

(b) Application of Bond Fund. Except as otherwise provided in Section
7.06, moneys in the Bond Fund shall be applied as follows:
<PAGE>

(1) Moneys in the Letter of Credit Debt Service Account shall be
applied to the payment when due of principal of, premium, if any, on and
interest on the Bonds (other than Bonds in the Fixed Mode, Pledged Bonds or
Corporation Bonds, for which such moneys shall not be Available Moneys).

(2) Moneys in the General Account shall be applied to the
following in the order of priority indicated:

(A) when insufficient moneys have been received under the
Letter of Credit for application pursuant to Subsection 5.04(b)(1), the
payment when due of principal of, premium, if any, on and interest on
the Bonds, other than Corporation Bonds or Pledged Bonds;

(B) the immediate payment, first, of interest on and
principal of the Letter of Credit Notes until all such amounts are paid
in full, and, second, of interest on and principal of the Wellsford REIT
Note, in each case to reimburse the Bank or Wellsford REIT (if Wellsford
REIT has previously reimbursed the Bank) for moneys drawn under the
Letter of Credit and deposited in the Letter of Credit Debt Service
Account or the Letter of Credit Purchase Account for payment of
principal of, premium, if any, on and interest on the Bonds (in applying
moneys pursuant to this clause, the Trustee shall transfer such moneys
by wire transfer of immediately available funds); and

(C) the payment when due of principal of, premium, if any, on
and interest on Corporation Bonds, provided that if the Trustee shall
have received written notice from the Bank or Wellsford REIT that any
amounts are due and owing under the Letter of Credit Reimbursement
Agreement or the Letter of Credit Notes or the Wellsford REIT
Reimbursement Agreement, such payments shall be made, first, to the Bank
until all such amounts are paid in full, and, second, to Wellsford REIT
for the account of the Corporation.

(c) Drawings on Letter of Credit. By 4:00 p.m. on the Business Day
immediately preceding each Interest Payment Date, each redemption date and the
maturity date of the Bonds, the Trustee shall present the requisite draft and
certificate for a drawing on the Letter of Credit so as to comply with the
provisions of the Letter of Credit for payment to be made in sufficient time
for the Trustee to receive the proceeds of such drawing at or before 10:00 a.m.
on such Interest Payment Date, maturity date, redemption date or acceleration
date, as the case may be, to pay principal of, premium, if any, on and interest
on the Bonds, except Bonds in the Fixed Mode, Pledged Bonds and Corporation
Bonds, due on such date. In addition, the Trustee shall draw on the Letter of
Credit pursuant to its terms in accordance with and in order to satisfy the
requirements of Section 7.03. By 5:00 p.m. on each date it presents the
requisite documents for a drawing on the Letter of Credit, the Trustee shall
give notice to the Corporation by telephone, promptly confirmed in writing, of
the amount so drawn. The Trustee shall promptly notify the Corporation by oral
or telephonic communication confirmed in writing if the Bank fails to transfer
funds in accordance with the Letter of Credit upon the presentment of the
requisite draft and certificate. In calculating the amount to be drawn on the
Letter of Credit for the payment of principal of and interest on the Bonds,
whether on an Interest Payment Date, at maturity or upon redemption or
acceleration, the Trustee shall not take into account the potential receipt of
funds from the Corporation on such Interest Payment Date, or the existence of
any other moneys in the Bond Fund, but shall draw on the Letter of Credit for
the full amount of principal and interest coming due on the Bonds.
<PAGE>

(d) Payment in Full. Whenever the amount in the Bond Fund and the
Prepayment Fund available for the payment of principal or redemption price and
interest in accordance with Subsection 5.04(c) is sufficient to pay all
principal and interest due on the Letter of Credit Notes and to redeem all of
the outstanding Bonds and to pay interest accrued to the redemption date, the
Corporation shall pursuant to Section 3.01(a) cause the Trustee to redeem all
such Bonds on the redemption date specified by the Corporation pursuant to the
Bonds and the Indenture. Any amounts remaining in the Bond Fund, the
Construction Fund and the Prepayment Fund after payment in full of the
principal of and premium, if any, and interest on the Bonds (or provision for
payment thereof) and the fees, charges and expenses of the Trustee shall be
paid to the person entitled thereto in accordance with Section 10.01.

SECTION 5.05. Use of Moneys in the Construction Fund. Except as
provided in Section 5.06, moneys in the Construction Fund shall be used solely
for the purpose of paying the Costs of Construction of the Public Improvements
or to reimburse the Corporation or the Developer for any Costs of Construction
paid by the Corporation or the Developer. The Corporation covenants and agrees
to take all necessary and appropriate action promptly in approving and ordering
disbursements from the Construction Fund in accordance with provisions of this
Section 5.05. Disbursements from the Construction Fund shall be made by the
Trustee in an amount not less than $5,000 not more than once each calendar
month, upon receipt of a requisition signed by the Consulting Engineers,
stating (a) the requisition number, (b) the name and address of the Person to
whom or which payment is due, (c) the amount of the payment due and (d) that
each obligation described therein has been properly incurred, is a proper
charge against the Construction Fund (i.e. in payment of Costs of Construction
of Public Improvements designed and constructed in accordance with District
standards as set forth in the Operating Agreement on real property owned by the
District or by the Corporation for the benefit of the District) and has not
been the subject of any previous disbursement. The Trustee is hereby
authorized and directed to make each disbursement required by the provisions of
this Section 5.05 and to issue its checks therefor within five Business Days of
receipt of a requisition. No requisition shall be required for the Trustee to
apply amounts in the Construction Fund not to exceed the amount specified in
Section 5.03(a) hereof to the payment of interest on the Bonds until the
Completion Date. The Trustee shall keep and maintain adequate records
pertaining to the Construction Fund and all disbursements therefrom, and after
the Public Improvements have been completed and a certificate of payment of all
costs is or has been filed as provided in Section 5.06 hereof, the Trustee
shall file an accounting thereof with the Corporation.

SECTION 5.06. Completion of Public Improvements. The completion of the
Public Improvements and payment or provision made for payment of all Costs of
Construction shall be evidenced by the filing with the Trustee of the
certificate described in this Section 5.06. The Completion Date shall be
evidenced to the Corporation and the Trustee by a certificate signed by the
Consulting Engineers and the Corporation stating that, except for amounts
retained by the Trustee at the direction of the Corporation for any Costs of
Construction not then due and payable, (a) acquisition, construction and
installation of the Public Improvements have been completed and all labor,
services, materials and supplies used in such construction have been paid, (b)
all equipment for the Public Improvements has been installed to the
satisfaction of the Corporation; such equipment so installed is suitable and
sufficient for the operation of the Public Improvements; and all costs and
expenses incurred in the acquisistion and installation of such equipment have
been paid and (c) all other facilities necessary in connection with the Public
Improvements have been acquired, constructed and installed and all costs and
<PAGE>

expenses incurred in connection therewith have been paid. Notwithstanding the
foregoing, such certificate shall state that it is given without prejudice to
any rights against third parties which exist at the date of such certificate or
which may subsequently come into being. Upon receipt of such certificate, the
Trustee shall retain in the Construction Fund a sum equal to the amounts
necessary for payment of the Costs of Construction not then due and payable.
Any amount not to be retained in the Construction Fund for payment of the Costs
of Construction and all amounts so retained but not subsequently used shall be
transferred by the Trustee into the Prepayment Fund.

SECTION 5.07. Use of Moneys in the Costs of Issuance Fund. Moneys in
the Costs of Issuance Fund shall be used to pay the cost of issuing the Bonds,
including all printing and recording expenses in connection with the Assessment
Agreement, the Assessment and Lien, the Deed of Trust, this Indenture and the
Bonds, legal fees, any accounting expenses incurred in connection with the
Bonds and the Trustee's initial fee, upon the submission of requisitions to the
Trustee by the Corporation stating that the amount thereon is justly due and
owing, has not been the subject of another requisition which was paid and is a
proper expense of issuing the Bonds. Any funds remaining in the Cost of
Issuance Fund 90 days after the Closing Date, shall be transferred to the
Construction Fund.

SECTION 5.08. Use of Moneys in the Prepayment Fund. Moneys transferred
from the Receipts Fund in accordance with Subsection 5.09(d), moneys
transferred from the Construction Fund in accordance with Section 5.06 and any
other moneys for the redemption of the Bonds shall be deposited in the
Prepayment Fund. Such moneys shall be transferred to the General Account of the
Bond Fund at least 45 days preceding each redemption date in such amount as is
necessary to redeem a like principal amount of Bonds to be called for
redemption.

SECTION 5.09. Use of Moneys in the Receipts Fund. The Trustee shall
deposit in the Receipts Fund, immediately upon receipt, all Revenues. Moneys
in the Receipts Fund shall be withdrawn on the date which shall be one day
prior to any principal or Interest Payment Date for the Bonds, and used to make
the following payments in the following order of priority:

(a) the Trustee shall withdraw from the Receipts Fund and deposit in
the General Account of the Bond Fund all amounts then on deposit in the
Receipts Fund up to an amount equal to the total principal and interest on
the Bonds payable on the next occurring Interest Payment Date for the Bonds;

(b) withdrawals shall be made from the Receipts Fund to pay the fees
and expenses of the Trustee and the service fee of the Trustee for the
collection of Allocated Assessment Charges;

(c) withdrawals shall be made in such amounts as are necessary to pay
the cost of any verification of the mathematical accuracy of cash flow and
arbitrage calculations to the extent authorized by Section 5.12 of this
Indenture;

(d) the Trustee shall withdraw from the Receipts Fund and deposit in
the Letter of Credit Debt Service Account up to an amount equal to the total
principal and interest due on the Letter of Credit Notes;

(e) the Trustee shall withdraw from the Receipts Fund and deposit in
the Letter of Credit Debt Service Account up to an amount equal to the total
principal and interest due on the Wellsford REIT Note; and
<PAGE>

(f) all moneys then remaining in the Receipts Fund shall be deposited
in the Prepayment Fund.

SECTION 5.10. Repayment to the Corporation From Bond Fund, Prepayment
Fund and Construction Fund. Any amounts remaining in the Bond Fund, the
Prepayment Fund and the Construction Fund after payment in full of the
principal of, premium, if any, on and interest on the Bonds, all reimbursement
obligations of the Corporation under the Letter of Credit Reimbursement
Agreement and the Wellsford REIT Reimbursement Agreement, the fees, charges and
expenses of the Trustee and all other amounts required to be paid hereunder
shall be paid immediately to the Corporation.

SECTION 5.11. Reports From the Trustee. The Trustee shall furnish to
the Corporation (a) monthly statements of the activity and assets held in the
Receipts Fund and, as long as it exists, the Construction Fund, and (b)
semiannual statements of the activity and assets held in the Prepayment Fund
and Bond Fund.

SECTION 5.12. Certain Verifications. The Corporation and the Trustee
from time to time may cause a firm of independent public accountants to supply
such information as the Corporation shall request in order to determine in a
manner reasonably satisfactory to the Corporation all matters relating to (a)
the sufficiency of projected cash flow receipts and disbursements and the
Allocated Assessment Charges to pay the principal of and interest on the Bonds
and (b) the actuarial yields on the Bonds as the same may relate to any data or
conclusions necessary to verify that the Bonds are not arbitrage bonds within
the meaning of the Code. Payment for costs and expenses incurred in connection
with supplying the foregoing information shall be paid from moneys in the
Receipts Fund pursuant to Subsection 5.09(c).

SECTION 5.13. Moneys to be Held in Trust. Revenues and investments
thereof in the Receipts Fund, the Bond Fund and the Prepayment Fund shall,
until applied as provided in this Indenture, be held by the Trustee for the
benefit of the Holders of all outstanding Bonds, the Bank and Wellsford REIT in
the order of priority set forth in the granting clauses of this Indenture,
except that any portion of the Revenues representing principal of, and premium,
if any, on and interest on, any Bonds previously matured or called for
redemption in accordance with Article III, shall be held for the benefit of the
Holders of such Bonds only.

SECTION 5.14. Nonpresentment of Bonds. In the event that any Bond
shall not be presented for payment when the principal thereof becomes due in
whole or in part, either at stated maturity or by redemption or a check or
draft for interest is uncashed, all liability of the Corporation to that Holder
for such Bond or such check or draft thereupon shall cease and be discharged
completely; provided that moneys sufficient to pay the principal and accrued
interest then due of that Bond or such check or draft shall have been made
available to the Trustee for the benefit of its Holder. Thereupon, it shall be
the duty of the Trustee to hold those moneys subject to the provisions of
Section 10.03.

SECTION 5.15. Letter of Credit.

(a) Expiration. The Letter of Credit shall expire upon the earliest to
occur of the dates specified therein.

(b) Replacement. If at any time the Corporation shall deliver to the
<PAGE>

Trustee (1) an Alternate Letter of Credit or an Alternate Credit Facility which
shall have terms which are at least as favorable to the Trustee and the Holders
as the Letter of Credit and sufficient to enable the Remarketing Agent to
remarket the Bonds, which shall be issued by a national banking association, a
bank, a trust company or other financial institution or credit provider, and
(2) an opinion of counsel satisfactory to the Trustee with respect to the
validity, binding effect and enforceability of such Alternate Letter of Credit
or an Alternate Credit Facility, and if the requirements set forth in this
Subsection 5.15(b) and Subsection 5.15(c) are met, then the Trustee shall
accept such Alternate Letter of Credit or Alternate Credit Facility and
promptly surrender for cancellation the previously held Letter of Credit to the
issuer thereof in accordance with the terms of such Letter of Credit. Any
Alternate Letter of Credit or Alternate Credit Facility shall provide for
drawings to pay up to (i) while the Bonds are in the Weekly Mode, an amount
equal to the principal amount of the outstanding Bonds, plus 210 days' interest
thereon computed at 12% per annum based on a 365-day year, and (ii) while the
Bonds are in a Term Mode, an amount equal to the principal amount of the
outstanding Bonds, plus 210 days' interest thereon at a rate not less than the
Maximum Rate based on a 360-day year. The institution issuing the Alternate
Letter of Credit or Alternate Credit Facility must be such as to maintain a
rating on the Bonds equal to or higher than the then current rating on the
Bonds given by the Rating Service. The replacement of the Letter of Credit by
the Alternate Letter of Credit or an Alternate Credit Facility must not, by
itself, adversely affect the current rating or ratings on the Bonds, and the
absence of such an adverse effect shall be evidenced in writing by the
appropriate Rating Service to the Trustee prior to such replacement.

(c) Notice to Holders. While the Bonds are in the Weekly Mode or the
Term Mode, the Trustee shall give notice to the Holders of the Bonds, in the
name of the Corporation, of the proposed replacement of the current Letter of
Credit with an Alternate Letter of Credit or an Alternative Credit Facility,
which notice shall specify (i) the proposed replacement date and (ii) the last
dates prior to such proposed replacement on which Bondholder Tender Notices
must be delivered and Bonds must be delivered (if not held in book-entry form)
for the purchase of Bonds pursuant to Section 4.01 and the places where such
Bondholder Tender Notices and Bonds must be delivered for such purchase. Such
notice shall be given by first-class mail, postage-prepaid, not less than 30
days prior to the Interest Payment Date next preceding the proposed replacement
date.

(d) Reduction. In each case that Bonds are redeemed or deemed to have
been paid pursuant to Section 10.01, the Trustee shall take such action as may
be permitted under the Letter of Credit to reduce the amount available
thereunder to an amount equal to the principal amount of the outstanding Bonds,
plus (i) while the Bonds are in the Weekly Mode, 210 days' interest on such
principal amount computed at 12% per annum based on a 365-day year, and (ii)
while the Bonds are in Term Mode, 210 days' interest on such principal amount
computed at the Maximum Rate based on a 360-day year.

(e) Substitution by Bank. Upon reduction of the amount available under
the Letter of Credit pursuant to the terms of the Letter of Credit and
Subsection 5.15(d) as a result of redemption of Bonds, the Bank shall have the
right, at its option, to require the Trustee to promptly surrender the
outstanding Letter of Credit to the Bank and to accept in substitution therefor
a substitute Letter of Credit in the same form, dated the date of such
substitution, for an amount equal to the amount available under the Letter of
Credit as so reduced, but otherwise having terms identical to the then
outstanding Letter of Credit.
<PAGE>

SECTION 5.16. Investment of Moneys. Except as herein provided, any
moneys held as part of any fund described herein shall be invested or
reinvested in Eligible Investments. All such investments shall at all times be
part of the fund from whence the moneys used to acquire such investments shall
have come, and all income and profits on such investments shall be first used
to offset any investment losses (excluding losses resulting from the sale of
investments) in such fund, and then shall be credited to the Receipts Fund
(except that income and losses from the investment of all funds which is earned
or incurred prior to the Completion Date shall be deposited in or deducted from
the Construction Fund). Investments shall be made in accordance with written
instructions of an authorized representative of the Corporation. The Trustee
may make any and all such investments through its bond department. The Trustee
shall sell and reduce to cash a sufficient amount of such investments in the
respective fund whenever the cash balance therein is insufficient to pay the
amounts contemplated to be paid therefrom. The Trustee shall have no liability
for any loss for an investment undertaken in accordance with the instructions
of the Corporation as provided in this Section.

In computing the amount in any fund held under the provisions of this
Indenture, obligations purchased as an investment of moneys therein shall be
valued at the market price thereof, exclusive of accrued interest. Where
market prices for obligations held hereunder are not readily available, the
market price for such obligations may be determined in such manner as the
Trustee deems reasonable.

Except as otherwise provided in Section 10.02, moneys deposited in the
Letter of Credit Debt Service Account, the Letter of Credit Purchase Account or
the Remarketing Proceeds Purchase Account shall not be invested but shall be
held in their respective accounts pending application pursuant to the terms of
Section 5.04 or Article IV, as applicable.

The Corporation shall neither make nor instruct the Trustee to make any
investment or other use of the proceeds of the Bonds at any time during the
term thereof which, if such investment or other use had been reasonably
expected on the date the Bonds are issued, would have caused the Bonds to be
arbitrage bonds within the meaning of the Code and the regulations thereunder
and shall comply with the requirements of the Code and said regulations
throughout the term of the Bonds.

SECTION 5.17. Rebate Fund. The Trustee shall transfer into the Rebate
Fund the estimated amounts of arbitrage rebate, if any, and penalties, if any,
due to the federal government under Sections 103 and 148 of the Code and the
regulations promulgated thereunder. Transfer of said amounts shall be made
from any of the Funds to the extent of moneys available therefor, but the
required arbitrage rebate payments shall be made to the federal government from
any legally available funds if there are no Revenues available for such
purpose. The amounts so transferred shall be such that within 60 days after
each computation date selected by the Corporation in accordance with
Section 148(f) of the Code and the regulations promulgated thereunder the
amount in the Rebate Fund is at least equal to the greater of (a) the amount
that the Corporation estimates is rebatable on account of investment during the
applicable period or (b) such other amount as the Corporation deems necessary
or prudent to provide for payment of the amount actually rebatable in
accordance with Section 148(f) of the Code and the regulations promulgated
thereunder.

The Corporation shall compute the amount actually rebatable as of each
<PAGE>

computation date and pay the United States Treasury 90% thereof within 60 days
and the balance, together with interest and penalties, if any, as required by
Section 148(f) of the Code and the regulations promulgated thereunder, within
60 days after all the Bonds have been discharged, provided that computations
and payments may be made on other bases, at other times, and in other amounts,
or omitted altogether, to the extent Bond Counsel opines that such action will
not adversely affect the tax treatment of interest on the Bonds.

The Trustee shall maintain the Rebate Fund separate and apart from all
other Funds and shall maintain the Rebate Fund until 60 days after all the
Bonds have been discharged. The Trustee shall retain records of the
determinations of the amounts required to be deposited in the Rebate Fund, of
the proceeds of any investments of moneys in the Rebate Fund and of the amounts
paid to the United States Treasury until the date six years after the last
discharge of the Bonds.

(End of Article V)
<PAGE>

ARTICLE VI

COVENANTS AND REPRESENTATIONS
OF CORPORATION

SECTION 6.01. Existence; Compliance with Laws. The Corporation shall
maintain its existence; shall use its best efforts to maintain and renew all
its rights, powers, privileges and franchises; and shall comply with all valid
and applicable laws, rules, regulations, orders, requirements and directions of
any legislative, executive, administrative or judicial body relating to the
Corporation's issuance of the Bonds.

SECTION 6.02. Payment of Bond Service. The Corporation will pay all
Bond Service, or cause it to be paid, from the sources provided herein, on the
dates, at the places and in the manner provided in this Indenture.

SECTION 6.03. No Further Assignment of Revenues. The Corporation will
not assign the Revenues or create any obligation payable therefrom or lien or
charge thereon, other than the assignment thereof under this Indenture without
the consent of the Trustee and the Bank.

SECTION 6.04. Filings. The Corporation shall cause this Indenture or
financing statements relating hereto to be filed, in such manner and at such
places as may be required by law fully to protect the security of the Holders
and the right, title and interest of the Trustee in and to the Trust Estate or
any part thereof, all as may be reasonably requested by the Trustee. From time
to time, the Trustee may, but shall not be required to, obtain an opinion of
counsel setting forth what, if any, actions by the Corporation or Trustee
should be taken to preserve such security. The Corporation shall execute or
cause to be executed any and all further instruments as shall reasonably be
requested by the Trustee for such protection of the interests of the Holders,
and shall furnish satisfactory evidence to the Trustee of filing and refiling
of such instruments and of every additional instrument which shall be necessary
to preserve the lien of the Indenture upon the Trust Estate or any part thereof
until the principal of and interest on the Bonds issued hereunder shall have
been paid. The Trustee shall execute or join in the execution of any such
further or additional instrument and file or join in the filing thereof at such
time or times and in such place or places as it may be advised by an opinion of
counsel will preserve the lien of this Indenture upon the Trust Estate or any
part thereof until the aforesaid principal and interest shall have been paid.

SECTION 6.05. Further Assurances. Except to the extent otherwise
provided in this Indenture, the Corporation shall not enter into any contract
or take any action by which the rights of the Trustee or the Holders may be
impaired and shall, from time to time, execute and deliver such further
instruments and take such further action as may be required to carry out the
purposes of this Indenture.

SECTION 6.06. Observance and Performance of Agreements. The
Corporation will observe and perform faithfully at all times covenants,
agreements, authority, actions, undertakings, stipulations and provisions to be
observed or performed on its part under this Indenture and the Bonds, and under
all proceedings of the Corporation pertaining thereto.

SECTION 6.07. Representations and Warranties. The Corporation
represents and warrants that:
<PAGE>

(a) It is duly authorized by the laws of the State of Colorado to
issue the Bonds, to execute and deliver this Indenture and to provide the
security for payment of the Bond Service in the manner and to the extent set
forth in this Indenture.

(b) All actions required on its part to be performed for the
issuance, sale and delivery of the Bonds and for the execution and delivery
of this Indenture have been or will be taken duly and effectively.

(End of Article VI)
<PAGE>

ARTICLE VII

DEFAULT AND REMEDIES

SECTION 7.01. Defaults; Events of Default. The occurrence of any of
the following events is defined as and declared to be and to constitute an
Event of Default hereunder:

(a) Failure to pay the principal of or any premium on any Bond
when such principal or premium shall become due and payable, whether at
stated maturity, by redemption, by acceleration or otherwise;

(b) Failure to pay any interest on any Bond when such interest
shall become due and payable;

(c) Failure to pay the purchase price due to the Holder of any
Bond who has tendered such Bond for purchase pursuant to Article IV when such
purchase price shall have become due and payable;

(d) Failure by the Corporation to comply with the provisions of
the Bonds or to observe or perform any other covenant, agreement or
obligation on its part to be observed or performed and which is contained in
this Indenture or in the Bonds, which failure shall have continued for a
period of 90 days after written notice, by registered or certified mail, to
the Corporation and the Bank specifying the failure and requiring that it be
remedied, which notice may be given by the Trustee in its discretion and
shall be given by the Trustee at the written request of the Holders of not
less than 25% in aggregate principal amount of Bonds outstanding;

(e) Receipt by the Trustee of a written notice from the Bank that
an event of default has occurred under the Letter of Credit Reimbursement
Agreement and directing the Trustee to require the Bonds to be tendered for
mandatory purchase pursuant to Section 4.02(c);

(f) Wrongful dishonor by the Bank of a proper drawing under the
Letter of Credit; and

(g) A decree or order of a court or agency or supervisory
authority, having jurisdiction in the premises, for the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or with
respect to the Bank, or for the winding-up or liquidation of its affairs,
shall have been entered against the Bank or the Bank shall have consented to
the appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or with respect to the Bank or all or substantially all of its
property.

The term "default" or "failure" as used in this Article VII means a
default or failure by the Corporation in the observance or performance of any
of the covenants, agreements or obligations on its part to be observed or
performed contained in this Indenture or in the Bonds, exclusive of any period
of grace or notice required to constitute an Event of Default as provided
above.

SECTION 7.02. Notice of Default. If an Event of Default shall occur,
<PAGE>

the Trustee shall give written notice of the Event of Default, by registered or
certified mail, to the Corporation, the Bank and the Remarketing Agent within
five days after the Trustee acquires actual knowledge of the Event of Default.
If an Event of Default occurs of which the Trustee has notice pursuant to this
Indenture, the Trustee shall give written notice thereof, within 30 days after
the Trustee's receipt of notice of its occurrence, to the Holders of all Bonds
outstanding as shown by the Register at the close of business 15 days prior to
the mailing of that notice.

SECTION 7.03. Acceleration. Upon the occurrence of any Event of
Default under Subsection 7.01(d) or (e), the Trustee shall, upon the written
direction of the Bank or, if all obligations to the Bank under the Letter of
Credit Reimbursement Agreement, the Letter of Credit Notes, the Secured Note,
the Pledged Bonds and this Indenture have been paid in full and the Letter of
Credit and any Alternate Letter of Credit has been terminated, at the written
direction of Wellsford REIT, (or, in the case of an Event of Default under
Subsection 7.01(d), upon the written request of 100% of the Holders of the
Outstanding Bonds), declare, by a notice in writing delivered to the
Corporation, the principal of all Bonds outstanding (if not then already due
and payable), together with interest accrued thereon, to be due and payable
immediately. Upon the occurrence of an Event of Default under Subsection
7.01(f) or (g), the Trustee shall, and upon the occurrence of an Event of
Default under Subsection 7.01(a), (b) or (c) the Trustee may, on the request of
the Bank, declare the principal of all Bonds outstanding (if not then already
due and payable), and the interest accrued thereon, to be due and payable
immediately.

Written notice of any such declaration shall be given concurrently to
the Bank and the Remarketing Agent. The Trustee immediately upon such
declaration shall give notice thereof in the same manner as provided in Section
3.04 with respect to redemption of the Bonds, except that there shall be no
minimum period of notice prior to the date of payment. Such notice shall
specify the date on which payment of principal and interest shall be tendered
to the Holders of the Bonds.

Upon any such declaration hereunder, the Trustee shall immediately draw
upon the Letter of Credit to the full extent permitted by the terms thereof
(such drawing to provide for payment by the Bank to be due at the earliest time
which the Trustee may require under the Letter of Credit and in no case later
than six days after the date of declaration of acceleration and to include
amounts in respect of interest accruing on the Bonds through the date payment
of such drawing by the Bank is due). Upon receipt by the Trustee of payment of
the full amount drawn on the Letter of Credit and provided sufficient moneys
are available in the Bond Fund to pay pursuant to Section 5.04 all sums due on
the Bonds, (i) interest on the Bonds shall cease to accrue as provided in
Section 10.03 and (ii) the Bank, or in the event Wellsford REIT has provided
reimbursement to the Bank under the Letter of Credit Reimbursement Agreement
and all obligations to the Bank under the Letter of Credit Reimbursement
Agreement, the Letter of Credit Notes, the Secured Note, the Pledged Bonds and
this Indenture have been paid in full, Wellsford REIT shall succeed to and be
subrogated to the right, title and interest of the Trustee and the Bondholders
in and to all funds held under this Indenture (except any funds held in the
Bond Fund or any account with respect to Undelivered Bonds which are identified
for the payment of the Bonds or of the purchase price of Undelivered Bonds) and
any other security held for the payment of the Bonds, all of which, upon
payment of any fees and expenses due and payable to the Trustee pursuant to
this Indenture, shall be assigned by the Trustee to the Bank or Wellsford REIT,
as applicable.
<PAGE>

If, after the principal of the Bonds has been so declared to be due and
payable, all arrears of principal of and interest on the Bonds outstanding are
paid, and the Corporation also performs all other things in respect of which it
may have been in default hereunder and pays the reasonable charges of the
Trustee, the Bank and the Holders, including reasonable attorney's fees, then,
and in every such case, the Trustee or the Holders of a majority in principal
amount of the Bonds then outstanding, by notice to the Corporation (and to the
Holders or the Trustee, as the case may be), may annul such declaration and its
consequences, and such annulment shall be binding upon the Trustee and all
Holders; provided that there shall be no annulment of any declaration resulting
from (1) any Event of Default specified in Subsection 7.01(f) without the prior
written consent of the Bank or (2) any Event of Default which has resulted in a
drawing under the Letter of Credit unless the Trustee has received written
notice from the Bank that the Letter of Credit has been reinstated (i) while
the Bonds are in the Weekly Mode, to an amount equal to the principal amount of
the Bonds outstanding, plus 210 days' interest thereon at the rate of 12% per
annum, and (ii) while the Bonds are in the Term Mode, to an amount equal to the
principal amount of the Bonds outstanding, plus 210 days' interest thereon at
the Maximum Rate. No annulment shall extend to or affect any subsequent Event
of Default or shall impair any rights consequent thereon.

SECTION 7.04. Other Remedies; Rights of Holders. With or without
taking action under Section 7.03, upon the occurrence and continuance of an
Event of Default, the Trustee may, with the written consent of the Bank, if the
Bank is not in default under the Letter of Credit, or after all obligations to
the Bank under the Letter of Credit Notes, the Letter of Credit Reimbursement
Agreement, the Secured Note, the Pledged Bonds and this Indenture have been
paid in full and the Letter of Credit and any Alternate Letter of Credit
replacing the Letter of Credit have terminated, with the written consent of
Wellsford REIT, pursue any available remedy to enforce the payment of Bond
Service or the observance and performance of any other covenant, agreement or
obligation under this Indenture or the Letter of Credit or any other instrument
providing security, directly or indirectly, for the Bonds.

If any Event of Default has occurred and is continuing, the Trustee in
its discretion may, with the written consent of the Bank, if the Bank is not in
default under the Letter of Credit, or after all obligations to the Bank under
the Letter of Credit Notes, the Letter of Credit Reimbursement Agreement, the
Secured Note, the Pledged Bonds and this Indenture have been paid in full and
the Letter of Credit and any Alternate Letter of Credit replacing the Letter of
Credit have terminated, with the written consent of Wellsford REIT, and upon
the written request of Holders of a majority in principal amount of all Bonds
outstanding and receipt of indemnity to its satisfaction shall, with the
written consent of the Bank, if the Bank is not in default under the Letter of
Credit, or after all obligations to the Bank under the Letter of Credit Notes,
the Letter of Credit Reimbursement Agreement, the Secured Note, the Pledged
Bonds and this Indenture have been paid in full and the Letter of Credit and
any Alternate Letter of Credit replacing the Letter of Credit have terminated,
with the written consent of Wellsford REIT, in its own name:

(a) By mandatory injunction or other suit, action or proceeding at
law or in equity, enforce all rights of the Bondholders, including the right
to require the Corporation to carry out the provisions of this Indenture for
the benefit of the Bondholders;

(b) Bring suit upon the Bonds;
<PAGE>

(c) By action or suit in equity require the Corporation to account
as if it were the trustee of an express trust for the Bondholders; and

(d) By action or suit in equity enjoin any acts or things which
may be unlawful or in violation of the rights of the Bondholders.

No remedy conferred upon or reserved to the Trustee (or to the Holders)
by this Indenture is intended to be exclusive of any other remedy. Each remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or otherwise to the Trustee or to the Holders now or hereafter
existing.

No delay in exercising or omission to exercise any remedy, right or
power accruing upon any default or Event of Default shall impair that remedy,
right or power or shall be construed to be a waiver of any default or Event of
Default or acquiescence therein. Every remedy, right and power may be
exercised from time to time and as often as may be deemed to be expedient.

No waiver of any default or Event of Default hereunder, whether by the
Trustee or by the Holders, shall extend to or shall affect any subsequent
default or Event of Default or shall impair any remedy, right or power
consequent thereon.

SECTION 7.05. Right of Holders to Direct Proceedings. The Holders of a
majority in aggregate principal amount of Bonds outstanding shall have the
right to direct, by an instrument or document in writing executed and delivered
to the Trustee, the method and place of conducting all remedial proceedings
hereunder; provided that (i) any direction shall be in accordance with the
provisions of law and of this Indenture, (ii) the Trustee shall be indemnified
as provided in Sections 8.01 and 8.02, and (iii) the Trustee may take any other
action which it deems to be proper and which is not inconsistent with the
direction.

SECTION 7.06. Application of Moneys. All moneys received by the
Trustee pursuant to any drawing made upon the Letter of Credit pursuant to
Section 7.03 shall be applied by the Trustee to and only to the payment of
principal of or interest on the Bonds (other than Pledged Bonds and Corporation
Bonds until after all Bonds other than Pledged Bonds and Corporation Bonds have
been paid in full). After payment of any costs, expenses, liabilities and
advances paid, incurred or made by the Trustee in the collection of moneys
pursuant to any right given or action taken under the provisions of this
Article VII or the Letter of Credit (including, without limitation, reasonable
attorneys' fees and expenses, except as limited by law or judicial order or
decision entered in any action taken under this Article VII), all moneys so
received by the Trustee, shall be applied as follows, subject to Sections 3.05,
5.06 and 5.07:

(a) Unless the principal of all of the Bonds shall have become, or
shall have been declared to be, due and payable, all of those moneys shall be
deposited in the Bond Fund and shall be applied:

First -- To the payment to the Holders entitled thereto of all
installments of interest then due on the Bonds, in the order of the
dates of maturity of the installments of that interest, beginning with
the earliest date of maturity and, if the amount available is not
sufficient to pay in full any particular installment, then to the
payment thereof ratably, according to the amounts due on that
installment, to the Holders entitled thereto, without any discrimination
<PAGE>

or privilege, except as to any difference in the respective rates of
interest specified in the Bonds; and

Second -- To the payment to the Holders entitled thereto of
the unpaid principal of any of the Bonds which shall have become due
(other than Bonds previously called for redemption for the payment of
which moneys are held pursuant to the provisions of this Indenture),
whether at stated maturity or by redemption, in the order of their due
dates, beginning with the earliest due date, with interest on those
Bonds from the respective dates upon which they became due at the rates
specified in those Bonds, and if the amount available is not sufficient
to pay in full all Bonds due on any particular date, together with that
interest, then to the payment thereof ratably, according to the amounts
of principal due on that date, to the Holders entitled thereto, without
any discrimination or privilege.

The surplus, if any, remaining after the application of the moneys as set
forth above shall, to the extent of any unreimbursed drawing under the Letter
of Credit, or other obligations owing to the Bank under the Letter of Credit
Reimbursement Agreement, be paid to the Bank until all such obligations are
paid in full and then shall, to the extent of any amounts owing to Wellsford
REIT under the Wellsford REIT Reimbursement Agreement, be paid to Wellsford
REIT. Any remaining moneys shall be paid to the Corporation or the Person
lawfully entitled to receive the same as a court of competent jurisdiction
may direct.

(b) If the principal of all of the Bonds shall have become due or
shall have been declared to be due and payable pursuant to this Article VII,
all of those moneys shall be deposited into the Bond Fund and shall be
applied to the payment of the principal and interest then due and unpaid upon
the Bonds, without preference or priority of principal over interest, of
interest over principal, of any installment of interest over any other
installment of interest, or of any Bond over any other Bond, ratably,
according to the amounts due respectively for principal and interest, to the
Holders entitled thereto, without any discrimination or privilege, except as
to any difference in the respective rates of interest specified in the Bonds.

(c) If the principal of all of the Bonds shall have been declared
to be due and payable pursuant to this Article VII, and if that declaration
thereafter shall have been rescinded and annulled under the provisions of
Section 7.03 or 7.10, subject to the provisions of this Subsection 7.06(b) in
the event that the principal of all of the Bonds shall become due and payable
later, the moneys shall be deposited in the Bond Fund and shall be applied in
accordance with the provisions of Article V.

(d) Whenever moneys are to be applied pursuant to the provisions
of this Section 7.06, those moneys shall be applied at such times, and from
time to time, as the Trustee shall determine, having due regard to the amount
of moneys available for application and the likelihood of additional moneys
becoming available for application in the future. Whenever the Trustee shall
direct the application of those moneys, it shall fix the date upon which the
application is to be made (and with respect to acceleration such date shall
be fixed in accordance with Section 7.03), and upon that date, interest shall
cease to accrue on the amounts of principal, if any, to be paid on that date,
provided the moneys are available therefor. The Trustee shall give notice of
the deposit with it of any moneys and of the fixing of that date, all
consistent with the requirements of Section 2.08 for the establishment of,
and for giving notice with respect to, a Special Record Date for the payment
<PAGE>

of overdue interest. Except as otherwise provided in Section 2.13, the
Trustee shall not be required to make payment of principal of and any premium
on a Bond to the Holder thereof, until the Bond shall be presented to the
Trustee for appropriate endorsement or for cancellation if it is paid fully.

SECTION 7.07. Remedies Vested in Trustee. All rights of action
(including without limitation, the right to file proof of claims) under this
Indenture or under any of the Bonds may be enforced by the Trustee without the
possession of any of the Bonds or the production thereof in any trial or other
proceeding relating thereto. Any suit or proceeding instituted by the Trustee
shall be brought in its name as Trustee without the necessity of joining any
Holders as plaintiffs or defendants. Any recovery of judgment shall be for the
benefit of the Holders of the outstanding Bonds and the Bank, subject to the
provisions of this Indenture.

SECTION 7.08. Rights and Remedies of Holders. A Holder shall not have
any right to institute any suit, action or proceeding for the enforcement of
this Indenture, for the execution of any trust hereof, or for the exercise of
any other remedy hereunder, unless:

(a) there has occurred and is continuing an Event of Default of
which the Trustee has been notified, as provided in Subsection 8.02(f), or of
which it is deemed to have notice under Subsection 8.02(f),

(b) the Holders of at least a majority in aggregate principal
amount of Bonds then outstanding shall have made written request to the
Trustee and shall have afforded the Trustee reasonable opportunity to proceed
to exercise the remedies, rights and powers granted herein or to institute
the suit, action or proceeding in its own name, and shall have offered
indemnity to the Trustee as provided in Sections 8.01 and 8.02, and

(c) the Trustee thereafter shall have failed or refused to
exercise the remedies, rights and powers granted herein or to institute the
suit, action or proceeding in its own name.

At the option of the Trustee, such notification (or notice), request,
opportunity and offer of indemnity are conditions precedent in every case, to
the institution of any suit, action or proceeding described above.

No one or more Holders shall have any right to affect, disturb or
prejudice in any manner whatsoever the security or benefit of this Indenture by
its or their action, or to enforce, except in the manner provided herein, any
remedy, right or power hereunder. Any suit, action or proceedings shall be
instituted, had and maintained in the manner provided herein for the benefit of
the Holders of all Bonds outstanding. Notwithstanding the foregoing provisions
of this Section 7.08 or any other provision of this Indenture, the obligation
of the Corporation shall be absolute and unconditional to pay hereunder from
the Revenues and other funds pledged under this Indenture the principal of,
premium, if any, on and interest on the Bonds to the respective Holders thereof
on the respective due dates thereof, and nothing herein shall affect or impair
the right of action, which is absolute and unconditional, of such Holders to
enforce such payment; provided that no Holder shall have a right to draw upon
the Letter of Credit.

SECTION 7.09. Termination of Proceedings. In case the Trustee shall
have proceeded to enforce any remedy, right or power under this Indenture in
any suit, action or proceeding, and the suit, action or proceeding shall have
been discontinued or abandoned for any reason, or shall have been determined
<PAGE>

adversely to the Trustee, the Corporation, the Trustee, the Bank and the
Holders shall be restored to their former positions and rights hereunder,
respectively, and all rights, remedies and powers of the Trustee shall continue
as if no suit, action or proceeding had been taken.

SECTION 7.10. Waivers of Events of Default. Except as hereinafter
provided, at any time, in its discretion, the Trustee, but only with the prior
written consent of the Bank, may (and, upon the written request of the Holders
of at least a majority in aggregate principal amount of all Bonds outstanding,
shall) waive any Event of Default hereunder and its consequences and annul any
corresponding acceleration of maturity of principal of the Bonds. There shall
not be so waived, however, any Event of Default described in Section 7.01, nor
shall any acceleration in connection therewith be annulled, except with written
consent of the Bank or after all obligations to the Bank under the Letter of
Credit Notes, the Letter of Credit Reimbursement Agreement, the Secured Note,
the Pledged Bonds and this Indenture have been paid in full and the Letter of
Credit and the Alternate Letter of Credit replacing the Letter of Credit have
terminated, with the written consent of Wellsford REIT and unless at the time
of that waiver or annulment payments of the amounts and satisfaction of the
other conditions provided in Section 7.03 for annulment have been made or
provision has been made therefor; provided that the written consent of the Bank
to any waiver shall not be required if there has occurred an Event of Default
under Subsection 7.01(f) or (g). No waiver shall extend to any subsequent or
other Event of Default or impair any right consequent thereon.

SECTION 7.11. Trustee's Right to Appointment of Receiver. The Trustee
shall be entitled as of right to the appointment of a receiver, and the
Trustee, the Bondholders and any receiver so appointed shall have such rights
and powers and be subject to such limitations and restrictions as are provided
by law.

SECTION 7.12. Trustee and Holders Entitled to All Benefits Under Law.
It is the purpose of this Article VII to provide such remedies to the Trustee
and the Bondholders as may be lawfully granted under the provisions of law, but
should any remedy herein granted be held unlawful, the Trustee and the
Bondholders shall nevertheless be entitled to every remedy provided by law. It
is further intended that, insofar as lawfully possible, the provisions of this
Article VII shall apply to and be binding upon any trustee or receiver
appointed hereunder.

SECTION 7.13. Trustee's Obligation to Bank and Wellsford REIT Upon
Payment Of All Amounts Due Bondholders. Once the principal of, premium, if
any, on and interest on all Bonds issued hereunder have been paid, or provision
has been made pursuant to Article X for payment of the same together with any
purchase price of Bonds that is payable pursuant to Article IV, the Trustee's
sole obligation hereunder shall be to assign promptly and turn over, first, to
the Bank until all reimbursement obligations of the Corporation and Wellsford
REIT under the Letter of Credit Reimbursement Agreement have been satisfied,
and, second, to Wellsford REIT, until all reimbursement obligations of the
Corporation under the Wellsford REIT Reimbursement Agreement have been
satisfied, as successor, subrogee or otherwise, all of the Trustee's right,
title and interest in, to and under the Assessment Agreement, the Assessment
and Lien, the Secured Note, the Deed of Trust, this Indenture and all balances
held hereunder (excluding the Rebate Fund) not required for the payment of the
Bonds. The Trustee shall have no obligation hereunder to exercise rights or
enforce remedies against the Account Parties under the Letter of Credit Notes
for the benefit of the Bank or against the Corporation under the Wellsford REIT
Note for the benefit of Wellsford REIT.
<PAGE>

(End of Article VII)
<PAGE>

ARTICLE VIII

TRUSTEE AND REMARKETING AGENT

SECTION 8.01. Trustee's Acceptance and Responsibilities.

(a) The Trustee accepts the trusts imposed upon it by this Indenture
and agrees to observe and perform those trusts and duties, but only upon and
subject to the terms and conditions set forth in this Article VIII, to all of
which the parties hereto and thereto and the Holders agree. In its capacity as
Trustee hereunder, the Trustee shall authenticate the Bonds and shall act as
Bond paying agent, registrar, transfer agent and tender agent, all as provided
herein.

(b) Prior to the occurrence of a default or an Event of Default of
which the Trustee has been notified, as provided in Subsection 8.02(f), or of
which by Subsection 8.02(f) the Trustee is deemed to have notice, and after the
cure or waiver of all defaults or Events of Default which may have occurred,

(i) the Trustee undertakes to perform only those duties and
obligations which are set forth specifically in this Indenture, and no duties
or obligations shall be implied to the Trustee; and

(ii) in the absence of bad faith on its part, the Trustee may rely
conclusively, 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 to the requirements of this Indenture; but in the case
of any such certificates or opinions which by any provision hereof are
required specifically to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not they conform to
the requirements of this Indenture.

(c) In case a default or an Event of Default has occurred and is
continuing hereunder (of which the Trustee has been notified, or is deemed to
have notice), the Trustee shall exercise those rights and powers vested in it
by this Indenture and shall use the same degree of care and skill in their
exercise as a prudent Person would exercise or use under the circumstances in
the conduct of its own affairs.

(d) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that

(i) this Subsection 8.01(d) shall not be construed to affect the
limitation of the Trustee's duties and obligations provided in Subsection
8.01(b)(i) or the Trustee's right to rely on the truth of statements and the
correctness of opinions as provided in Subsection 8.01(b)(ii);

(ii) the Trustee shall not be liable for any error of judgment made
in good faith by any one of its officers, unless it shall be established that
the Trustee was negligent in ascertaining the pertinent facts;

(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of not less than a majority in principal amount of
the Bonds then outstanding relating to the time, method and place of
<PAGE>

conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture; and

(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it; provided that this clause (iv) not relieve
the Trustee of its duties to take actions required to be taken under Section
7.03 and with respect to drawings to be made under the Letter of Credit and
making payments on the Bonds when due.

(e) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 8.01.

(f) The Trustee acknowledges that the Assessment Agreement, the
Assessment and Lien and the Deed of Trust have been entered into for the
purpose of providing security for the payment of the principal of, premium, if
any, on and interest on the Bonds, and the Trustee agrees to be bound by the
terms thereof, and to perform its obligations thereunder, in accordance
therewith and with this Indenture.

(g) The Trustee agrees to cause Allocated Assessment Charges to be
collected in accordance with the Assessment and Lien. The Trustee acknowledges
that the Assessment and Lien provides for a schedule of Allocated Assessment
Charges against each parcel, lot or tract of the Property.

In accordance with its obligations under the Assessment and Lien and
this Indenture, the Trustee shall obtain and maintain, at all times during
which the Bonds shall remain outstanding, records with respect to the Property
showing (a) a description of each Single Family Lot or Multifamily Unit located
on the Property, (b) the identity of each owner of the parcels, lots or tracts
constituting portions of the Property, (c) a schedule of the unpaid Allocated
Assessment Charges to be paid by each owner of any parcel, lot or tract
constituting a portion of the Property and (d) such other information as shall
be required, in the discretion of the Trustee, in order to insure timely
semiannual billings of Allocated Assessment Charges by the Trustee (which
billings are to be made not later than the first day of each month next
preceding an Interest Payment Date and timely collection of Allocated
Assessment Charges in accordance with the Assessment and Lien.

The Trustee shall, upon the written request of the Developer or any
owner of a parcel, lot or tract constituting a portion of the Property, deliver
to the Developer, such owner or the beneficiary of any permitted encumbrance
described in the Assessment and Lien a written acknowledgement that the lien
described in the Assessment and Lien is subordinate to any permitted
encumbrance described in the Assessment and Lien and to the Developer or such
owner releases permitted under the Assessment and Lien.

(h) The Trustee shall keep and maintain or cause the Developer to keep
and maintain books and records with respect to the amount of the Assessment
Obligation and Allocated Assessment Charges against each parcel, lot or tract
constituting a portion of the Property and the amount paid on account of each
Allocated Assessment Charge.
<PAGE>

(i) The Trustee accepts and agrees to perform any and all duties which
are imposed upon the Trustee or the Corporation under the Representation
Letter.

SECTION 8.02. Certain Rights and Obligations of Trustee. Except as
otherwise provided in Section 8.01:

(a) The Trustee (i) may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents, receivers or
employees (but shall be answerable therefor only in accordance with the
standard specified above), (ii) shall be entitled to the advice of counsel
concerning all matters of trusts hereof and duties hereunder, and (iii) may pay
reasonable compensation in all cases to all of those attorneys, agents,
receivers and employees reasonably employed by it in connection with the trusts
hereof. The Trustee may act upon the opinion or advice of any attorney (who
may be the attorney or attorneys for the Corporation) approved by the Trustee
in the exercise of reasonable care. The Trustee shall not be responsible for
any loss or damage resulting from any action taken or omitted to be taken in
good faith in reliance upon that opinion or advice.

(b) Except for its certificate of authentication on the Bonds, the
Trustee shall not be responsible for (i) any recital in this Indenture or in
the Bonds, (ii) the validity, priority, recording, rerecording, filing or
refiling of this Indenture or any Supplemental Indenture, (iii) any instrument
or document of further assurance or collateral assignment, (iv) any financing
statements, amendments thereto or continuation statements, (v) the validity of
the execution by the Corporation of this Indenture, any Supplemental Indenture
or instruments or documents of further assurance, (vi) the sufficiency of the
security for the Bonds issued hereunder or intended to be secured hereby, or
(vii) the maintenance of the security hereof.

(c) The Trustee shall not be accountable for the application by the
Corporation or any other Person of the proceeds of any Bonds authenticated or
delivered hereunder.

(d) The Trustee may, in the absence of bad faith on its part, act upon
any notice, request, consent, certificate, order, affidavit, letter, telegram
or other paper or document reasonably believed by it to be genuine and correct
and to have been signed or sent by the proper Person or Persons. Any action
taken by the Trustee pursuant to this Indenture upon the request or authority
or consent of any Person who is the Holder of any Bonds at the time of making
the request or giving the authority or consent, shall be conclusive and binding
upon all future Holders of the same Bond and of Bonds issued in exchange
therefor or in place thereof.

(e) As to the existence or nonexistence of any fact for which the
Corporation or the Bank may be responsible or as to the sufficiency or validity
of any instrument, document, report, paper or proceeding, the Trustee, in the
absence of bad faith on its part, shall be entitled to rely upon a certificate
signed on behalf of the Corporation or the Bank by an Authorized Representative
or authorized officer thereof, as applicable, as sufficient evidence of the
facts recited therein. Prior to the occurrence of a default or Event of
Default hereunder of which the Trustee has been notified, as provided in
Subsection 8.02(f), or of which by Subsection 8.02(f) is deemed to have notice,
the Trustee may accept a similar certificate to the effect that any particular
dealing, transaction or action is necessary or expedient; provided that the
Trustee in its discretion may require and obtain any further evidence which it
deems to be necessary or advisable; and provided further that the Trustee shall
<PAGE>

not be bound to secure any further evidence. The Trustee may accept a
certificate of the officer, or an assistant thereto, having charge of the
appropriate records, to the effect that a resolution has been adopted by the
Corporation in the form recited in that certificate, as conclusive evidence
that the resolution has been duly adopted and is in full force and effect.

(f) The Trustee shall not be required to take notice, and shall not be
deemed to have notice, of any default or Event of Default hereunder, except
Events of Default described in Subsections 7.01(a), (b), (c), (e) and (f),
unless the Trustee shall be notified specifically of the default or Event of
Default in a written instrument or document delivered to it by the Corporation,
the Bank or by the Holders of at least 12% of the aggregate principal amount of
Bonds outstanding. In the absence of delivery of a notice satisfying those
requirements, the Trustee may assume conclusively that there is no default or
Event of Default, except as noted above.

(g) At any reasonable time, the Trustee and its duly authorized agents,
attorneys, experts, engineers, accountants and representatives (i) may inspect
and copy fully all books, papers and records of the Corporation pertaining to
the Bonds, and (ii) may make any memoranda from and in regard thereto as the
Trustee may desire.

(h) The Trustee shall not be required to give any bond or surety with
respect to the execution of these trusts and powers or otherwise in respect of
the premises.

(i) Notwithstanding anything contained elsewhere in this Indenture to
the contrary, the Trustee may demand any showings, certificates, reports,
opinions, appraisals and other information, and any corporate action and
evidence thereof, in addition to that required by the terms hereof, as a
condition to the authentication of any Bonds or the taking of any action
whatsoever within the purview of this Indenture, if the Trustee deems it to be
desirable for the purpose of establishing the right of the Corporation to the
authentication of any Bonds or the right of any Person to the taking of any
other action by the Trustee; provided that the Trustee shall not be required to
make such demand.

(j) Before taking action hereunder pursuant to Section 8.04 or Article
VII (with the exception of any action required to be taken under Section 7.03
and except with respect to drawings made under the Letter of Credit and with
respect to payment on the Bonds when due), the Trustee may require that a
satisfactory indemnity bond be furnished to it for the reimbursement of all
expenses which it may incur and to protect it against all liability by reason
of any action so taken, except liability which is adjudicated to have resulted
from its negligence or willful misconduct; provided that no such bond shall be
required from the Corporation. The Trustee may take action without that
indemnity, and in that case, the Corporation shall reimburse the Trustee for
all of the Trustee's expenses pursuant to Section 8.03.

(k) Unless otherwise provided herein, all moneys received by the
Trustee under this Indenture shall be held in trust for the purposes for which
those moneys were received, until those moneys are used, applied or invested as
provided herein; provided that those moneys need not be segregated from other
moneys, except to the extent required by this Indenture or by law. The Trustee
shall not have any liability for interest on any moneys received hereunder,
except to the extent expressly provided herein or agreed with the Corporation.

(l) Any resolution of the Corporation and any opinions, certificates
<PAGE>

and other instruments and documents for which provision is made in this
Indenture may be accepted by the Trustee, in the absence of bad faith on its
part, as conclusive evidence of the facts and conclusions stated therein and
shall be full warrant, protection and authority to the Trustee for its actions
taken hereunder.

(m) The Trustee may construe any ambiguous or inconsistent provisions
of this Indenture, and any construction of such provisions by the Trustee shall
be binding upon the Bondholders.

SECTION 8.03. Fees, Charges and Expenses of Trustee. The Trustee shall
be entitled to payment or reimbursement by the Corporation for reasonable fees
for the Ordinary Services of the Trustee and its agents rendered hereunder and
for all advances, counsel fees and other Ordinary Expenses reasonably and
necessarily paid or incurred by it and its agents in connection with the
provision of Ordinary Services. For purposes hereof, fees for Ordinary
Services provided for by their respective standard fee schedule shall be
considered reasonable. In the event that it should become necessary for any of
them to perform Extraordinary Services, they shall be entitled to reasonable
extra compensation therefor and to reimbursement for reasonable and necessary
Extraordinary Expenses incurred in connection therewith. The Trustee shall not
be entitled to compensation or reimbursement for Extraordinary Services or
Extraordinary Expenses occasioned by its negligence or willful misconduct.

The Trustee shall be indemnified by the Corporation for all claims and
liabilities arising out of the discharge of its duties hereunder, except for
those claims resulting from its negligence or wilful misconduct.

The initial or acceptance fees of the Trustee and the fees for the
Trustee's Ordinary Services and Ordinary Expenses and Extraordinary Service and
Extraordinary Expenses shall be payable upon demand and shall bear interest
from five Business Days following the date of demand therefor at the Interest
Rate for Advances.

SECTION 8.04. Intervention by Trustee. The Trustee may intervene on
behalf of the Holders, and shall intervene if requested to do so in writing by
the Holders of at least 25% of the aggregate principal amount of Bonds
outstanding, in any judicial proceeding to which the Corporation is a party and
which in the opinion of the Trustee and its counsel has a substantial bearing
on the interests of Holders of the Bonds. The rights and obligations of the
Trustee under this Section 8.04 are subject to the approval of that
intervention by a court of competent jurisdiction. The Trustee may require
that a satisfactory indemnity bond be provided to it in accordance with
Sections 8.01 and 8.02 before it takes action hereunder.

SECTION 8.05. Successor Trustee. Anything herein to the contrary
notwithstanding,

(a) any corporation or association (i) into which the Trustee may
be converted or merged, (ii) with which the Trustee or any successor to it
may be consolidated, or (iii) to which the Trustee may sell or transfer its
assets and trust business as a whole or substantially as a whole, or any
corporation or association resulting from any such conversion, merger,
consolidation, sale or transfer, ipso facto, shall be and become successor
Trustee hereunder and shall be vested with all of the title to the whole
property or trust estate hereunder; and

(b) that corporation or association, as successor Trustee, shall
<PAGE>

be vested further, as was its predecessor, with each and every trust,
property, remedy, power, right, duty, obligation, discretion, privilege,
claim, demand, cause of action, immunity, estate, title, interest and lien
expressed or intended by this Indenture to be exercised by, vested in or
conveyed to the Trustee, without the execution or filing of any instrument or
document (except the Pledge and Security Agreement) or any further act on the
part of any of the parties hereto.

Any successor trustee, however, (i) shall be a trust company or a bank having
the powers of a trust company, (ii) shall be in good standing within the State
of Colorado, (iii) shall be duly authorized to exercise trust powers within the
State of Colorado, and (iv) shall have and maintain a reported capital and
surplus of not less than $25,000,000.

SECTION 8.06. Resignation by Trustee. The Trustee may resign at any
time from the trusts created hereby by giving written notice of the resignation
to the Corporation, the Bank and the Remarketing Agent and by mailing written
notice of the resignation to the Holders as their names and addresses appear on
the Register at the close of business 15 days prior to the mailing. The
resignation shall take effect only upon the appointment of a successor Trustee.

SECTION 8.07. Removal of Trustee. The Trustee may be removed at any
time by an instrument or document or concurrent instruments or documents
delivered to the Trustee at least five Business Days prior to the date of
removal, with copies thereof mailed to the Corporation, the Bank and the
Remarketing Agent, and signed by or on behalf of the Holders of not less than a
majority in aggregate principal amount of the Bonds outstanding or by the
Corporation, the Bank and Wellsford REIT.

The Trustee also may be removed at any time for any breach of trust or
for acting or proceeding in violation of, or for failing to act or proceed in
accordance with, any provision of this Indenture with respect to the duties and
obligations of the Trustee by any court of competent jurisdiction upon the
application of the Corporation or the Holders of not less than 25% in aggregate
principal amount of the Bonds outstanding.

The removal of the Trustee pursuant to this Section 8.07 shall take
effect only upon the appointment of a successor Trustee.

SECTION 8.08. Appointment of Successor Trustee. If (i) the Trustee
shall resign, shall be removed, shall be dissolved, or shall become otherwise
incapable of acting hereunder, (ii) the Trustee shall be taken under the
control of any public officer or officers, or (iii) a receiver shall be
appointed for the Trustee by a court, then a successor Trustee shall be
appointed by the Corporation with the written consent of the Bank; provided
that if a successor Trustee is not so appointed within 10 days after (a) a
notice of resignation or an instrument or document of removal is received by
the Corporation, as provided in Sections 8.06 and 8.07, respectively, or (b)
the Trustee is dissolved, taken under control, becomes otherwise incapable of
acting or a receiver is appointed, in each case, as provided above, then, so
long as the Corporation shall not have appointed a successor trustee, the
Holders of a majority in aggregate principal amount of Bonds outstanding may
designate a successor trustee by an instrument or document or concurrent
instruments or documents in writing signed by or on behalf of those Holders.
If no appointment of a successor trustee shall be made pursuant to the
foregoing provisions of this Section 8.08, the Holder of any Bond outstanding
or any retiring trustee may apply to any court of competent jurisdiction to
appoint a successor trustee. Such court may thereupon, after such notice, if
<PAGE>

any, as such court may deem proper and prescribe, appoint a successor trustee.

Every successor trustee appointed hereunder shall execute and
acknowledge, and shall deliver to its predecessor, the Corporation, the Bank
and the Remarketing Agent, an instrument or document in writing accepting the
appointment. Thereupon, without any further act, the successor shall become
vested with all of the trusts, properties, claims, demands, causes of action,
immunities, estates, titles, interests and liens of its predecessor. Upon the
written request of its successor, the Corporation, the Bank or the Remarketing
Agent, the predecessor trustee (i) shall execute and deliver an instrument or
document transferring to its successor all of the trusts, properties, remedies,
powers, rights, duties, obligations, discretions, privileges, claims, demands,
causes of action, immunities, estates, titles, interests and liens of the
predecessor trustee hereunder, and (ii) shall take any other action necessary
to duly assign, transfer and deliver to its successor all property (including,
without limitation, all securities and moneys and the Letter of Credit (in
accordance with its terms) or any Alternate Credit Facility) held by it as
trustee. Should any instrument or document in writing from the Corporation be
requested by any successor trustee for vesting and conveying more fully and
certainly in and to that successor the trusts, properties, remedies, powers,
rights, duties, obligations, discretions, privileges, claims, demands, causes
of action, immunities, estates, titles, interests and liens vested or conveyed
or intended to be vested or conveyed hereby in or to the predecessor trustee,
the Corporation shall execute, acknowledge and deliver that instrument or
document.

In the event of a change in the trustee, the predecessor trustee shall
cease to be custodian of any moneys which it may hold pursuant to this
Indenture and shall cease to be Bond paying agent, registrar, transfer agent,
tender agent and authenticating agent for the Bonds. The successor trustee
shall become custodian for moneys held under this Indenture and Bond paying
agent, registrar, transfer agent, tender agent and authenticating agent as and
to the extent provided herein.

SECTION 8.09. Adoption of Authentication. In case any of the Bonds
shall have been authenticated, but shall not have been delivered, any successor
trustee may adopt the certificate of authentication of any predecessor trustee
and may deliver those Bonds so authenticated as provided herein. In case any
Bonds shall not have been authenticated, any successor trustee may authenticate
those Bonds either in the name of any predecessor or in its own name. In all
cases, the certificate of authentication shall have the same force and effect
as provided in the Bonds or in this Indenture with respect to the certificate
of authentication of the predecessor trustee.

SECTION 8.10. Designation and Succession of Paying Agent, Registrar,
Transfer Agent, Tender Agent and Authenticating Agent. The Trustee may, with
the consent of the Corporation and the Bank, appoint an agent or agents, with
power to act on the Trustee's behalf and subject to the Trustee's direction in
the authentication, registration, transfer and exchange and tender of Bonds and
payment of Bond Service under the provisions of this Indenture. For all
purposes of this Indenture, the authentication, registration and delivery of
Bonds by any such agent pursuant to this Section 8.10 shall be deemed to be
authentication, registration and delivery of those Bonds by the Trustee.

Any corporation or association with or into which any such agent may be
merged or converted or with which it may be consolidated, or any corporation or
association resulting from any merger, consolidation or conversion to which any
such agent shall be a party, or any corporation or association succeeding to
<PAGE>

the trust business of any such agent, shall be the successor of that agent
hereunder, if that successor corporation or association is otherwise eligible
hereunder, without the execution or filing of any paper or any further act on
the part of the parties hereto or the such agent or such successor corporation.

Any such agent may at any time resign by giving written notice of
resignation to the Trustee and to the Corporation, the Bank and the Remarketing
Agent. The Trustee may at any time terminate the agency of any such agent by
giving written notice of termination to such agent and to the Corporation and
the Remarketing Agent. Upon receiving such a notice of resignation or upon
such a termination, or in the case at any time any such agent shall cease to be
eligible under this Section 8.10, the Trustee may appoint a successor agent.
The Trustee shall give written notice of appointment of a successor agent to
the Corporation and the Remarketing Agent and shall mail, within 10 days after
that appointment, notice thereof to all Holders as their names and addresses
appear on the Register on the date of that appointment.

The Trustee shall pay to any such agent from time to time reasonable
compensation for its services, and the Trustee shall be entitled to be
reimbursed for such payments as Ordinary Expenses, subject to Section 8.03.

The pertinent provisions of Subsections 8.02(b), (c), (d), (h) and (i)
shall be applicable to any such agent.

SECTION 8.11. Dealing in Bonds. The Trustee, the Bank and the
Remarketing Agent, their affiliates, and any directors, officers, employees or
agents thereof, in good faith, may become the owners of Bonds secured hereby
with the same rights which it or they would have hereunder if the Trustee, the
Bank or the Remarketing Agent did not serve in those capacities. The Trustee
may be, or be affiliated with, the Remarketing Agent or the Bank. The Trustee
may also engage in or be interested in any financial or other transaction with
the Corporation or any related party.

SECTION 8.12. Representations, Agreements and Covenants of Trustee.
The Trustee represents and covenants that it is a national banking association
duly organized and validly existing under the laws of the United States of
America, in good standing and duly authorized to exercise corporate trust
powers in the State of Colorado and that it will take such action, if any, as
is necessary to remain in good standing and duly authorized to exercise
corporate trust powers in the State of Colorado.

SECTION 8.13. Appointment of Remarketing Agent. The Corporation shall
appoint the Remarketing Agent for the Bonds, subject to the conditions set
forth in Section 8.14. The Remarketing Agent shall designate to the Trustee
its Principal Office and signify its acceptance of the duties and obligations
imposed upon it hereunder by a written instrument of acceptance delivered to
the Corporation and the Trustee under which the Remarketing Agent will agree,
particularly:

(a) to hold all Bonds delivered to it by the Trustee for resale
and delivery to the purchasers of such Bonds;

(b) to hold all moneys representing the purchase price of Bonds
for the benefit of the Person or entity entitled to receive the payment of
such purchase price;

(c) to determine the Weekly Rate, the Term Rate and the Fixed Rate
in accordance with Sections 2.03, 2.04 and 2.05 of this Indenture, and to
<PAGE>

give notice to the Trustee of the Weekly Rate, and to the Trustee, the
Corporation and the Bank of the Term Rate and the Fixed Rate, on the date of
the determination thereof; and

(d) to keep such books and records as shall be consistent with
prudent industry practice and to make such books and records available for
inspection by the Corporation, the Trustee and the Bank at all reasonable
times.

In addition, the Remarketing Agent will enter into the Remarketing Agreement
with the Corporation in form and substance mutually satisfactory to them. The
Remarketing Agent shall be entitled to advice of legal counsel on any matter
relating to the Remarketing Agent's obligations hereunder and shall be entitled
to act upon the opinion of such counsel in the exercise of reasonable care in
fulfilling such obligations.

SECTION 8.14. Qualifications of Remarketing Agent. The Remarketing
Agent shall be a national banking association or a bank or trust company or a
member of the National Association of Securities Dealers, Inc., authorized by
law to perform all the duties imposed upon it by this Indenture. The
Remarketing Agent may at any time resign and be discharged of the duties and
obligations created by this Indenture by giving at least 30 days' prior written
notice by registered or certified mail to the Trustee, the Corporation and the
Bank. The Remarketing Agent may be removed at any time by the Corporation upon
30 days' notice which shall be in writing, signed by the Corporation and
delivered to the Remarketing Agent, the Trustee and the Bank.

In the event of the resignation or removal of the Remarketing Agent, the
Corporation, with the consent of the Bank (provided that the Bank shall be
deemed to have consented to the removal of a Remarketing Agent which has ceased
to meet the foregoing qualifications), shall appoint a successor remarketing
agent meeting the qualifications set forth in this Section 8.14, and the
Remarketing Agent shall pay over, assign and deliver any moneys and Bonds held
by it in such capacity to its successor or if there be no successor, to the
Trustee as hereinafter provided. The Trustee shall provide prompt written
notice to the Holders of the appointment of a successor remarketing agent.

In the event that the Remarketing Agent shall resign or be removed, or
be dissolved, or if the property or affairs of the Remarketing Agent shall be
taken under the control of any state or federal court or administrative body
because of bankruptcy or insolvency, or for any other reason, and the
Corporation shall not have appointed its successor as Remarketing Agent, the
Trustee, notwithstanding the provisions of the first paragraph of this
Section 8.14, shall ipso facto be deemed to be the remarketing agent for all
purposes of this Indenture until the appointment by the Corporation of the
successor remarketing agent; provided that the Trustee, in its capacity as
remarketing agent, shall not be required to remarket Bonds nor to establish the
Weekly Rate or the Term Rate.

SECTION 8.15. Compensation and Expenses of Remarketing Agent. The
Corporation is obligated to pay directly reasonable compensation to and the
reasonable expenses of the Remarketing Agent. The terms of such obligation
shall be set forth in the Remarketing Agreement.

(End of Article VIII)
<PAGE>

ARTICLE IX

SUPPLEMENTS AND AMENDMENTS

SECTION 9.01. Supplemental Indentures Not Requiring Consent of Holders.
Without the consent of or notice to any Holders, the Corporation and the
Trustee may enter into indentures supplemental to this Indenture for any one or
more of the following purposes:

(a) To cure any ambiguity, inconsistency or formal defect or
omission in this Indenture;

(b) To grant to or confer upon the Trustee for the benefit of the
Holders any additional rights, remedies, powers or authority;

(c) To confirm any pledge of or lien on the Revenues, to assign
additional revenues under this Indenture or to accept additional security or
instruments of further assurance;

(d) To add to the covenants, agreements and obligations of the
Corporation under this Indenture, other covenants, agreements and obligations
to be observed for the protection of the Holders, or to surrender or limit
any right, power or authority reserved to or conferred upon the Corporation
in this Indenture;

(e) To permit the use of a book-entry system to identify the owner
of an interest in an obligation issued by the Corporation under this
Indenture, whether that obligation was formerly, or could be, evidenced by a
tangible security;

(f) To permit the Trustee to comply with any obligations imposed
upon it by law;

(g) To specify further the duties and responsibilities of, and to
define further the relationship among, the Trustee and the Remarketing Agent;

(h) To achieve compliance of this Indenture with any applicable
federal securities or tax laws;

(i) To evidence the appointment of a new Remarketing Agent;

(j) To provide for an Alternate Letter of Credit or an Alternate
Credit Facility;

(k) To make any amendments required to secure a rating on the
Bonds from a Rating Service equal to the rating of the Bank's unsecured
indebtedness;

(l) To implement a conversion in whole or in part to a Term Rate
or a Fixed Rate and to fix mandatory sinking fund redemption dates and
amounts in connection therewith; or

(m) To permit any other amendment which is not materially adverse
to the interests of the Trustee or the Holders.

Before the Corporation and the Trustee shall enter into any supplemental
<PAGE>

indenture pursuant to this Section 9.01, there shall have been delivered to the
Trustee and the Corporation the written consent of the Bank and an opinion of
Bond Counsel stating that such Supplemental Indenture is authorized or
permitted by this Indenture and will, upon the execution and delivery thereof,
be valid and binding upon the Corporation in accordance with its terms.

SECTION 9.02. Supplemental Indentures Requiring Consent of Holders. In
addition to the Supplemental Indentures permitted by Section 9.01, this
Indenture may be amended or supplemented from time to time by a Supplemental
Indenture approved by the Bank and the Holders of a majority in aggregate
principal amount of the Bonds then outstanding, except that, other than as
permitted by Section 9.01, this Indenture may not be amended with respect to
(a) the principal or redemption price or interest payable upon any Bonds,
(b) the Interest Payment Dates, the dates of maturity or the redemption or
purchase provisions of any Bonds, and (c) this Article IX. This Indenture may
be amended with respect to the matters enumerated in clauses (a) to (c) of the
preceding sentence only with the unanimous consent of the Bank and all Holders.
Before the Corporation and the Trustee may enter into such Supplemental
Indenture, there shall have first been delivered to the Trustee the required
consents, in writing, of the Bank and the Holders and an opinion of Bond
Counsel stating that such Supplemental Indenture is authorized or permitted by
this Indenture and will, upon the execution and delivery thereof, be valid and
binding upon the Corporation in accordance with its terms. The Remarketing
Agent may consent on behalf of any Holders who have tendered their Bonds for
purchase prior to the remarketing of such Bonds.

SECTION 9.03. Authorization to Trustee; Effect of Supplement. The
Trustee is authorized to join with the Corporation in the execution and
delivery of any Supplemental Indenture in accordance with this Article IX and
to make the further agreements and stipulations which may be contained therein.
Thereafter, (a) such Supplemental Indenture shall form a part of this
Indenture; (b) all terms and conditions contained in that Supplemental
Indenture as to any provision authorized to be contained therein shall be
deemed to be a part of the terms and conditions of this Indenture for any and
all purposes; (c) this Indenture shall be deemed to be modified and amended in
accordance with the Supplemental Indenture; and (d) the respective rights,
duties and obligations under this Indenture of the Corporation, the Trustee,
the Remarketing Agent, the Bank and all Holders of Bonds outstanding shall be
determined, exercised and enforced hereunder in a manner which is subject in
all respects to those modifications and amendments made by the Supplemental
Indenture. The Trustee shall not be required to execute any Supplemental
Indenture containing provisions adverse to the Trustee.

SECTION 9.04. Modification by Unanimous Consent. Notwithstanding
anything contained elsewhere in this Indenture, the rights and obligations of
the Corporation and of the Holders, and the terms and provisions of the Bonds
and this Indenture or any Supplemental Indenture, may be modified or altered in
any respect with the consent of the Holders of all of the Bonds outstanding and
the Bank.

SECTION 9.05. Amendment of Letter of Credit. If the Bank proposes to
amend the Letter of Credit, the Trustee may consent thereto, provided that (a)
if such proposal would amend the Letter of Credit in such a way as would
materially adversely affect the interests of the Holders, the Trustee shall
notify the Holders and the Rating Service (if the Bonds are then rated by a
Rating Service) of the proposed amendment and may consent thereto only with (i)
the prior written consent of the Holders of a majority in aggregate principal
amount of the Bonds then outstanding and (ii) the confirmation by such Rating
<PAGE>

Service that such amendment will not result in a withdrawal or reduction of its
rating of the Bonds, and (b) the Trustee shall not, without the unanimous
consent of all Holders, consent to any amendment materially adversely affecting
the interests of the Holders which would decrease or delay the amounts payable
under the Letter of Credit in respect of outstanding Bonds on any Interest
Payment Date or on any date of redemption, acceleration, payment at maturity or
purchase of the Bonds, or advance the stated expiration date of the Letter of
Credit to an earlier date. No consent of the Holders shall be required for
amendments to the Letter of Credit which are provided for or contemplated by
this Indenture.

SECTION 9.06. Trustee Authorized to Join in Supplements and Amendments;
Reliance on Counsel. The Trustee is authorized to join with the Corporation in
the execution and delivery of any Supplemental Indenture or amendment permitted
by this Article IX and in so doing shall be fully protected by an opinion of
counsel that such Supplemental Indenture or amendment is so permitted.

SECTION 9.07. Consent of Bank or Wellsford REIT. Notwithstanding
anything herein contained, so long as the Letter of Credit remains outstanding
or any obligations to the Bank under the Letter of Credit Reimbursement
Agreement, the Letter of Credit Notes, the Pledged Bonds or this Indenture
remain unpaid, no amendment shall be made to the Assessment Agreement, the
Assessment and Lien or this Indenture (except to add to the Property described
therein) or to the Deed of Trust without the prior written consent of the Bank.
Whenever the direction or consent of the Bank or Wellsford REIT is required by
this Indenture as a condition of any action to be taken by the Trustee
hereunder, the direction or consent of the Bank shall be required so long as
the Letter of Credit remains outstanding or any obligations to the Bank under
the Letter of Credit Reimbursement Agreement, the Letter of Credit Notes, the
Pledged Bonds or this Indenture remain unpaid, and the direction or consent of
Wellsford REIT shall be required at the times and on the conditions set forth
herein. Notwithstanding any provision of this Indenture to the contrary, so
long as the Letter of Credit remains outstanding and Wellsford REIT remains a
party to the Letter of Credit Reimbursement Agreement or Wellsford REIT remains
unreimbursed by the Corporation for amounts owed to it under the Wellsford
Reimbursement Agreement, no amendment shall be made to the Assessment
Agreement, the Assessment and Lien or this Indenture (except to add to the
Property described therein) or to the Deed of Trust without the prior written
consent of Wellsford REIT. Notwithstanding any provision of this Indenture to
the contrary, the direction or consent of the Bank or Wellsford REIT shall not
be required to enforce the rights of the Holders under or with respect to the
Letter of Credit.

SECTION 9.08. Notice to Rating Service. The Trustee shall promptly
notify the Rating Service (if the Bonds are then rated by a Rating Service) of
any resignation or removal of the Trustee or the Remarketing Agent, any
termination, extension or replacement of the Letter of Credit, any conversion
of the Bonds from one Rate Mode to another, any mandatory tender, acceleration
or defeasance of the Bonds and any material supplement or amendment to this
Indenture, the Remarketing Agreement, the Letter of Credit or the Letter of
Credit Reimbursement Agreement, and not more than 45 days nor less than 30 days
prior to the Expiration Date of the Letter of Credit shall notify the Rating
Service (if the Bonds are then rated by a Rating Service) of the Expiration
Date of the Letter of Credit.

(End of Article IX)
<PAGE>

ARTICLE X

DEFEASANCE

SECTION 10.01. Defeasance. When the principal of, premium, if any, on
and interest on all Bonds issued hereunder have been paid, or provision has
been made for payment of the same and any tender purchase price which may
become payable pursuant to Article IV, together with the compensation and
expenses of the Trustee and all other sums payable hereunder by the
Corporation, the right, title and interest of the Trustee in and to the Trust
Estate shall thereupon cease and the Trustee, on demand of the Corporation,
shall release this Indenture and shall execute such documents to evidence such
release as may be reasonably required by the Corporation and shall turn over to
the Corporation or to such person, body or authority as may be entitled to
receive the same all balances then held by it hereunder not required for the
payment of the Bonds and such other sums and shall surrender the Letter of
Credit to the Bank; provided that (a) any proceeds of the Letter of Credit not
required for payment of the Bonds shall be turned over to the Bank and (b) in
the event there has been a drawing under the Letter of Credit for which the
Bank or Wellsford REIT has not been fully reimbursed pursuant to the Letter of
Credit Reimbursement Agreement or the Wellsford REIT Reimbursement Agreement or
any other obligations are then due and owing to the Bank or Wellsford REIT
under the Letter of Credit Reimbursement Agreement or the Wellsford REIT
Reimbursement Agreement, the Trustee shall assign and turn over, first, to the
Bank until all reimbursement obligations of the Corporation and Wellsford REIT
under the Letter of Credit Reimbursement Agreement have been satisfied, and,
second, to Wellsford REIT, until all reimbursement obligations of the
Corporation under the Wellsford REIT Reimbursement Agreement have been
satisfied, as successor, subrogee or otherwise, all of the Trustee's right,
title and interest under this Indenture, all balances held hereunder (excluding
the Rebate Fund) not required for the payment of the Bonds and such other sums
and the Trustee's right, title and interest in, to and under any property
comprising the Trust Estate. If payment or provision therefor is made with
respect to less than all of the Bonds, the particular Bonds (or portions
thereof) for which provision for payment shall have been considered made shall
be selected by lot or by such other method as the Trustee deems fair and
appropriate, first, from Bonds other than Pledged Bonds and Corporation Bonds,
second, from Pledged Bonds of the Bank, third, from Pledged Bonds of Wellsford
REIT, and, fourth, from Corporation Bonds, and thereupon the Trustee shall take
similar action for the release of this Indenture with respect to such Bonds.

SECTION 10.02. Provision for Payment.

(a) Provision for the payment of Bonds shall be deemed to have been
made when the Trustee holds in the Bond Fund (1) cash in an amount sufficient
to make all payments (including principal, premium, if any, interest and tender
purchase price payments, if any) specified in Section 10.01 with respect to
such Bonds, or (2) noncallable, non-prepayable direct obligations issued by the
United States of America, maturing on or before the date or dates when the
payments specified above shall become due, the principal amount of which and
the interest thereon, when due, is or will be, in the aggregate, sufficient
without reinvestment to make all such payments, or (3) any combination of cash
and such obligations the amounts of which and interest thereon, when due, are
or will be, in the aggregate, sufficient without reinvestment to make all such
payments; provided that (i) such amount on deposit shall be deemed sufficient
only if (A) while the Bonds bear interest at a Weekly Rate, it provides for
<PAGE>

payment of interest at the rate of 12% per annum and the Corporation shall have
surrendered any power hereunder thereafter to increase the Maximum Rate for
Bonds in the Weekly Mode, or (B) while the Bonds bear interest at a Term Rate,
it provides for payment of interest at such Term Rate and the Bonds have been
called for redemption on or before the Term Rate Period End Interest Payment
Date of the Term Period for which such Term Rate has been set, and (ii)
provision for payment of Bonds shall be deemed to be made only if (A) the
Trustee holds in the Bond Fund cash constituting Available Moneys and/or such
obligations purchased with Available Moneys for payment of such Bonds pursuant
to Section 5.04 in amounts sufficient to make all payments specified above with
respect to such Bonds, as verified by an accountant's certification in form and
by an accountant acceptable to the Trustee and the Rating Service, and (B) in
the case of Bonds in the Weekly Mode, the Bonds have been called for redemption
on a date not more than 60 days from the date provision for payment is being
made pursuant to this Section 10.02 and, in determining the sufficiency of
amounts held to make payments with respect to the Bonds, there shall be
excluded any and all interest expected to be earned on obligations held by the
Trustee. Prior to providing for the payment of any Bonds in the Weekly Mode,
the Corporation shall obtain written evidence from the Rating Service that the
Rating Service has reviewed the proposed provision for payment and that such
provision will not result in the reduction or withdrawal of the then-current
rating of the Bonds.

(b) Neither the moneys nor the obligations deposited with the Trustee
pursuant to this Article X shall be withdrawn or used for any purpose other
than, and such obligations and moneys shall be segregated and held in trust
for, the payment of the principal of, premium, if any, on and interest on the
Bonds (or portions thereof), or for the payment of the purchase price of such
Bonds in accordance with Article IV, in order for the Holders of such Bonds to
be no longer entitled to the lien of this Indenture; provided that, while the
Bonds are in the Weekly Mode, such moneys, if not then needed for such purpose,
shall, to the extent practicable, be invested and reinvested in direct
obligations issued by the United States of America maturing on or prior to the
earlier of (i) the date moneys may be required for the purchase of Bonds
pursuant to Article IV and (ii) the Interest Payment Date next succeeding the
date of investment or reinvestment.

(c) Whenever moneys or obligations shall be deposited with the Trustee
for the payment or redemption of Bonds more than 60 days prior to the date that
such Bonds are to mature or be redeemed, the Trustee shall mail a notice to the
Holders of Bonds for the payment of which such moneys or obligations are being
held at their registered addresses stating that such moneys or obligations have
been deposited. Such notice shall also be sent by the Trustee to the Rating
Service. Notwithstanding the foregoing, no delivery to the Trustee under this
Section shall be deemed a payment of any Bonds which are to be redeemed prior
to their stated maturity until such Bonds shall have been irrevocably called or
designated for redemption on a date thereafter on which such Bonds may be
redeemed in accordance with the provisions of this Indenture and proper notice
of such redemption shall have been given in accordance with Article III or the
Corporation shall have given the Trustee, in form satisfactory to the Trustee,
irrevocable instructions to give, in the manner and at the times prescribed by
Article III, notice of redemption.

SECTION 10.03. Deposit of Funds for Payment of Bonds. If the principal
or tender purchase price of any Bonds becoming due, either at maturity or by
call for redemption or tender or otherwise, together with all interest accruing
thereon to the due date, has been paid or provision therefor made in accordance
with Section 10.02, all interest on such Bonds shall cease to accrue on the due
<PAGE>

date and all liability of the Corporation with respect to such Bonds shall
likewise cease, except as hereinafter provided. Thereafter, the Holders of
such Bonds shall be restricted exclusively to the funds so deposited for any
claim of whatsoever nature with respect to such Bonds, and the Trustee shall
hold such funds in trust for such Holders uninvested and without liability for
interest thereon. Moneys so deposited with the Trustee which remain unclaimed
five years after the date payment thereof becomes due shall, at the request of
the Corporation (or the Bank) and if the Corporation is not at the time to the
knowledge of the Trustee in default with respect to any covenant contained in
the Indenture or the Bonds, be paid to the Corporation (or to the Bank or
Wellsford REIT as provided in Section 10.01 with respect to surplus balances),
and the Holders of the Bonds for which the deposit was made shall thereafter be
limited to a claim against the Corporation; provided that (i) such moneys shall
not be remitted to the Corporation unless the Trustee shall have received an
opinion of counsel experienced in matters pertaining to the United States
Bankruptcy Code that the contemplated delivery of such moneys to the
Corporation will not cause any other moneys paid to the Holders to be transfers
of property voidable under Section 547 of the United States Bankruptcy Code
should the Corporation become a debtor under the United States Bankruptcy Code,
and (ii) the Trustee, before making payment to the Corporation, may, at the
expense of the Corporation, cause a notice to be given to the Holders at their
registered addresses, stating that the moneys remaining unclaimed will be
returned to the Corporation after a specified date.

SECTION 10.04. Survival of Certain Provisions. Notwithstanding the
foregoing, any provisions of this Indenture which relate to the maturity of
Bonds, interest payments and dates thereof, optional and mandatory redemption
provisions, credit against mandatory sinking fund requirements, exchange,
transfer and registration of Bonds, replacement of mutilated, lost, wrongfully
taken or destroyed Bonds, safekeeping and cancellation of Bonds, nonpresentment
of Bonds, holding of moneys in trust, payment of moneys to the Bank, and the
duties of the Trustee in connection with all of the foregoing, shall remain in
effect and be binding upon the Trustee and the Holders notwithstanding the
release and discharge of this Indenture. The provisions of this Article X
shall survive the release, discharge and satisfaction of this Indenture.

SECTION 10.05. District's Rights.

(a) The Corporation covenants and agrees that all activities of
the Corporation shall be undertaken for the benefit of the District. Not later
than upon discharge of all obligations of the Corporation, including the Bonds,
the Letter of Credit Notes, the Secured Note and the Wellsford REIT Note, the
District shall be entitled to acquire fee title to the Public Improvements
without cost and unencumbered except as provided in the Operating Agreement.

(b) The District is hereby granted the right to obtain, at any
time, fee title and exclusive possession of property (including the Public
Improvements) financed by obligations of the Corporation, including the Bonds,
the Letter of Credit Notes, the Secured Note and the Wellsford REIT Note, free
from liens and encumbrances created by the Corporation related to the Bonds
(but subject to such encumbrances as are permitted under the Operating
Agreement), and any additions to such property by (1) placing into escrow an
amount that will be sufficient to defease such Bonds and other obligations, and
(2) paying reasonable costs incident to the defeasance, each as provided in
Section 10.02. The District, at any time before it defeases such obligations,
shall not agree or otherwise be obligated to convey any interest in such
property to any person (including the United States of America or its agencies
or instrumentalities) for any period extending beyond or beginning after the
<PAGE>

District defeases such obligations. In addition, the District shall not agree or
otherwise be obligated to convey a fee interest in such property to any person
who was a user thereof, (or a related person) before the defeasance within 90
days after the District defeases such obligations.

(c) If the District exercises its option under Subsection 10.05(b),
the Corporation shall immediately cancel all encumbrances on such property,
including all leases and management agreements (subject to permitted
encumbrances as aforesaid). Any lease, management contract, or similar
encumbrance on such property will be considered immediately cancelled if the
lessee, management company, or other user vacates such property within a
reasonable time, not to exceed 90 days, after the date the District exercises
its rights under Subsection 10.05(b).

(d) In addition to the foregoing, if pursuant to Section 7.03, the
Trustee declares the principal of any Bonds then Outstanding to be due and
payable and any foreclosure proceeding or other action is commenced under this
Indenture which could lead to the sale or other disposition of the property
pledged thereunder, the District is hereby granted an exclusive option to
purchase all such property (including the Public Improvements) for the amount
of the outstanding obligations of the Corporation, including all amounts due
hereunder, under the Bonds, the Letter of Credit Notes, the Secured Note and
the Wellsford REIT Note, and accrued interest thereon to the date of default.
The Trustee shall provide notice to the District of the commencement of any
such action within 30 days of the occurrence thereof. The District shall have
90 days from the date it is notified by the Trustee of such action in which to
both exercise the option (which shall be exercised by giving written notice of
such exercise to the Trustee and the Corporation) and purchase the property.
Other than the foregoing requirement, the provisions of this Section 10.05 are
not intended and shall not be interpreted so as to limit the Holders' rights to
pursue their remedies hereunder.

(e) In the event the District exercises its options under
Subsection 10.05(b) or 10.05(d), the District shall receive a credit towards
its defeasance or purchase costs in the amount of any fund or account balances
held under this Indenture with the exception of (1) the Rebate Fund, (2) any
amount needed to pay additional interest on the Bonds or expenses in connection
with such defeasance under Section 10.02.

(f) Unencumbered fee title (subject to permitted encumbrances as
aforesaid) to the Public Improvements and any additions thereto and exclusive
possession and use thereof (subject to permitted encumbrances as aforesaid)
will vest in the District without demand or further action on its part when all
obligations of the Corporation, including the Bonds, the Letter of Credit
Notes, the Secured Note and the Wellsford REIT Note, are discharged. For
purposes of this Subsection 10.05(f), such obligations will be discharged when
(1) cash is available at the place of payment on the date that the obligations
are due (whether at maturity or upon call for redemption) and (2) interest
ceases to accrue on the obligations. All leases, management contracts and
similar encumbrances on the Public Improvements shall terminate upon discharge
of said obligations. Encumbrances that do not significantly interfere with the
enjoyment of such property, such as most easements granted to utility
companies, are not considered encumbrances for purposes of this Section 10.05.

(g) Any additional obligations issued by the Corporation either to
complete or add to the Public Improvements or to refund the Bonds will be
discharged no later than the latest maturity date of the Bonds, which may not
be extended.
<PAGE>

(End of Article X)
<PAGE>

ARTICLE XI

MISCELLANEOUS

SECTION 11.01. Limitation of Rights; No Personal Recourse. With the
exception of rights conferred expressly in this Indenture, nothing expressed or
mentioned in or to be implied from this Indenture or the Bonds is intended or
shall be construed to give to any Person other than the parties hereto, the
Remarketing Agent, the Bank, Wellsford REIT and the Holders of the Bonds any
legal or equitable rights, remedy, power or claim under or with respect to this
Indenture or any covenants, agreements, conditions and provisions contained
herein.

No covenant or agreement contained in this Indenture or the Bonds shall
be deemed to be the covenant or agreement of any member, director, officer,
attorney, agent or employee of the Corporation in an individual capacity. No
recourse shall be had for the payment of any claim based thereon against any
member, director, officer, agent, attorney or employee of the Corporation,
past, present or future, or its successors or assigns, as such, either directly
or through the Corporation, or any such successor, whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or penalty, or otherwise.

SECTION 11.02. Severability. In case any section or provision of this
Indenture, or any covenant, agreement, stipulation, obligation, act or action,
or part thereof, made, assumed, entered into or taken under this Indenture, or
any application thereof, is held to be illegal or invalid for any reason, or is
inoperable at any time, such illegality, invalidity or inoperability shall not
affect the remainder thereof or any other section or provision of this
Indenture or any other covenant, agreement, stipulation, obligation, act or
action, or part thereof, made, assumed, entered into or taken under this
Indenture, all of which shall be construed and enforced at the time as if the
illegal, invalid or inoperable portion were not contained therein.

SECTION 11.03. Notices. Except as provided in Sections 3.04 and 7.02,
it shall be sufficient service or giving of any notice, request, complaint,
demand or other instrument or document, if it is duly mailed by first class
mail. Notices to the Corporation, the Trustee, the Bank and the Remarketing
Agent shall be addressed as follows:

(a) If to the Corporation, at 370 17th Street, Suite 3100, Denver,
Colorado 80202, Attention: President;

(b) If to the Trustee, at 114 West 47th Street, 15th Floor, New York,
New York 10036-1532, Attention: Mr. Christopher J. Grell, Assistant
Secretary;

(d) If to the Remarketing Agent, at 633 17th Street, 3rd Floor South,
Denver, Colorado 80270.

The foregoing parties may designate, by notice given hereunder, any further or
different addresses to which any subsequent notice, request, demand or other
instrument or document shall be sent. The Trustee shall designate, by notice
<PAGE>

to the Corporation, the Bank and the Remarketing Agent addresses to which
notices or copies thereof shall be sent to the Trustee's agents hereunder.

In connection with any notice mailed pursuant to the provisions of this
Indenture, a certificate of the Trustee, the Corporation, the Bank, the
Remarketing Agent or the Holders, whichever mailed that notice, that the notice
was so mailed shall be conclusive evidence of the proper mailing of the notice.

The Trustee hereby agrees to send written notice to the Rating Service
upon the occurrence of any of the following events: (1) any change in the
Trustee or the Remarketing Agent or any paying agent or tender agent; (2) any
amendment to the Indenture, the Letter of Credit Reimbursement Agreement or the
Letter of Credit; (3) any termination, expiration or extension of the Letter of
Credit; (4) each conversion of the interest rate on the Bonds; and (5) payment
of all principal, interest and premium, if any, on all of the Bonds.

The Delivery Office of the Trustee is 111 Broadway, New York, New York
10006, Attention: Corporate Trust. Such Delivery Office is subject to change
as provided in this Indenture.

SECTION 11.04. Suspension of Mail. If because of the suspension of
delivery of first class mail or, for any other reason, the Trustee shall be
unable to mail by first class of mail any notice required to be mailed by the
provisions of this Indenture, the Trustee shall give such notice in such other
manner as in the judgment of the Trustee shall most effectively approximate
first class mailing thereof, and the giving of that notice in that manner for
all purposes of this Indenture shall be deemed to be in compliance with the
requirement for the mailing thereof. Except as otherwise provided herein, the
mailing of any notice shall be deemed complete upon deposit of that notice in
the mail and the giving of any notice by any other means of delivery shall be
deemed complete upon receipt of the notice by the delivery service.

SECTION 11.05. Payments Due on Saturdays, Sundays and Holidays. If any
Interest Payment Date, date of maturity of any Bonds, or date fixed for
redemption of any Bonds is a Saturday, Sunday or a day on which the Trustee or
any paying agent is required, authorized or not prohibited, by law (including
without limitation executive orders) to close and is closed, then payment of
interest, principal and any redemption premium need not be made by the Trustee
or any paying agent on that date, but that payment may be made on the next
succeeding Business Day on which the Trustee or any paying agent is open for
business with the same force and effect as if that payment were made on the
Interest Payment Date, date of maturity or date fixed for redemption, and no
interest shall accrue for the period after that date; provided that if the
Trustee is open for business on the applicable Interest Payment Date, date of
maturity or date fixed for redemption, it shall make any payment required
hereunder with respect to payment of interest on outstanding Bonds and payment
of principal of and premium on Bonds presented to it for payment, regardless of
whether any paying agent shall be open for business or closed on the applicable
Interest Payment Date, date of maturity or date fixed for redemption.

SECTION 11.06. Instruments of Holders. Any writing, including without
limitation any consent, request, direction, approval, objection or other
instrument or document, required under this Indenture to be executed by any
Holder may be in any number of concurrent writings of similar tenor and may be
executed by that Holder in person or by an agent or attorney appointed in
writing. Proof of (i) the execution of any such writing, (ii) the execution of
any writing appointing any agent or attorney, and (iii) the ownership of Bonds,
shall be sufficient for any of the purposes of this Indenture, if made in the
<PAGE>

following manner, and if so made, shall be conclusive in favor of the Trustee
with regard to any action taken thereunder, namely:

(a) The fact and date of the execution by any person of any
writing may be proved by the certificate of any officer in any jurisdiction,
who has power by law to take acknowledgments within that jurisdiction, that
the person signing the writing acknowledged that execution before that
officer, or by affidavit of any witness to that execution; and

(b) The fact of ownership of Bonds shall be proved by the Register
maintained by the Trustee.

Nothing contained herein shall be construed to limit the Trustee to the
foregoing proof, and the Trustee may accept any other evidence of the matters
stated therein which it deems to be sufficient. Any writing, including without
limitation any consent, request, direction, approval, objection or other
instrument or document, of the Holder of any Bond shall bind every future
Holder of the same Bond, with respect to anything done or suffered to be done
by the Corporation, the Trustee or the Remarketing Agent pursuant to that
writing.

SECTION 11.07. Binding Effect. This Indenture shall inure to the
benefit of and shall be binding upon the Corporation and the Trustee and their
respective successors and assigns, subject, however, to the limitations
contained herein.

SECTION 11.08. Counterparts. This Indenture may be executed in any
number of counterparts, each of which shall be regarded as an original and all
of which shall constitute but one and the same instrument.

SECTION 11.09. Governing Law. This Indenture and the Bonds shall be
deemed to be contracts made under the laws of the State of Colorado and for all
purposes shall be governed by and construed in accordance with the laws of the
State of Colorado.

(End of Article XI)
<PAGE>

IN WITNESS WHEREOF, the Corporation has caused this Indenture to be
executed and delivered on its behalf by one of its duly authorized officers and
its corporate seal to be hereunto affixed and attested by one of its duly
authorized officers and the Trustee has caused this Indenture to be executed
and delivered on its behalf by one of its duly authorized officers and its
corporate seal to be hereunto affixed and attested by one of its duly
authorized officers all as of the day and year first above written.

[SEAL] PALOMINO PARK PUBLIC
IMPROVEMENTS CORPORATION
a Colorado nonprofit corporation

Attest By /s/ Donald D. MacKenzie
-------------------------- ---------------------------
Secretary President
<PAGE>

[SEAL]
UNITED STATES TRUST COMPANY OF
NEW YORK
as trustee

Attest By /s/ H. William Weber
------------------------- ---------------------------
Title Title Vice President
------------------------- ---------------------------

<PAGE>

EXHIBIT A-1

Form of
Weekly Rate or Term Rate Bond
-----------------------------

REGISTERED United States of America REGISTERED
State of Colorado
NO. $

PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION
Assessment Lien Revenue Bond
Series 1995

(FOR WEEKLY RATE BONDS):
Interest Maturity
Rate Issuance Date Date CUSIP
- -------- -------------- -------- -----------
Variable December 20, 1995 December 1, 2035 69754R AA 1

(FOR TERM RATE BONDS):
Term Rate
Interest Conversion End of Term Maturity
Rate Date Rate Period Date CUSIP
- -------- ----------- ------------ ---------- ------
___% ____ __, ____ ____ __, ____ December 1, 2035 69754R AA 1

Issuance Date: December 20, 1995

REGISTERED OWNER: Cede & Co.

PRINCIPAL AMOUNT:

Palomino Park Public Improvements Corporation, a Colorado nonprofit
corporation (the "Corporation"), for value received, promises to pay to the
registered owner specified above, or registered assigns, upon surrender hereof,
solely from the special funds herein described, the Principal Amount specified
above on the Maturity Date specified above, unless this Bond has been called
for earlier redemption and payment of the redemption price shall have been duly
made or provided for, and to pay interest thereon from the most recent Interest
Payment Date (hereinafter defined) to which interest has been paid or duly
provided for or from the Issuance Date specified above if no interest has been
paid, at the rates determined as provided herein, until the Principal Amount is
paid or duly provided for, commencing on the first Interest Payment Date after
the Date of Authentication hereof.

So long as this Bond bears interest at a Weekly Rate (hereinafter
defined) as specified above, this Bond is to be purchased on demand of the
registered owner hereof as hereinafter described.
<PAGE>

The principal of and any premium on this Bond are payable upon
presentation and surrender hereof at the delivery office of United States Trust
Company of New York, as trustee (the "Trustee"), or at the duly designated
office of any duly appointed alternate or successor trustee. Interest on this
Bond is payable on each Interest Payment Date by check or draft mailed to the
registered owner of this Bond (the "Holder") in whose name ownership of this
Bond is registered, at such Holder's address as it appears on the registration
books (the "Register") for this issue maintained by the Trustee at the close of
business on (i) the last Business Day preceding an Interest Payment Date while
this Bond bears interest at a Weekly Rate, and (ii) the fifteenth day of the
calendar month next preceding the Interest Payment Date while this Bond bears
interest at a Term Rate (hereinafter defined) (the "Regular Record Date"). Any
interest which is not timely paid or duly provided for will cease to be payable
to the Holder as of the Regular Record Date, and will be payable to the Holder
in whose name this Bond is registered at the close of business on a Special
Record Date to be fixed by the Trustee for the payment of such overdue
interest. Notice of the Special Record Date is to be mailed to Holders not
less than 15 days prior thereto. The interest and the principal or redemption
price and purchase price becoming due with respect to the Bonds (hereinafter
defined) will, at the written request of the Holder of at least $1,000,000
aggregate principal amount of such Bonds, be paid by wire transfer within the
continental United States in immediately available funds to the bank account
number of such Holder appearing on the Register, but, in the case of principal
or redemption price and purchase price, only upon presentation and surrender of
such Bonds at the delivery office of the Trustee. The principal or purchase
price of and interest and any premium on this Bond are payable in lawful money
of the United States of America.

No covenant or agreement contained herein will be deemed to be the
covenant or agreement of any member, director, officer, attorney, agent or
employee of the Corporation in any individual capacity. No recourse may be had
for the payment of any claim based thereon against any member, director,
officer, agent, attorney or employee of the Corporation, past, present or
future, or its successor or assigns, as such, either directly or through the
Corporation, or any such successor whether by virtue of any constitutional
provision, statute or rule of law, or by the enforcement of any assessment or
penalty, or otherwise.

REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON
THE REVERSE SIDE HEREOF. THOSE PROVISIONS SHALL HAVE THE SAME EFFECT FOR ALL
PURPOSES AS IF SET FORTH HERE.

This Bond will not be entitled to any security or benefit under the
Indenture or be valid or become obligatory for any purpose until the
Certificate of Authentication hereon has been signed.
<PAGE>

IN WITNESS WHEREOF, the Corporation has caused this Bond to be executed
in its name by the manual signature of its President and its corporate seal to
be affixed hereon and attested by the manual signature of its Assistant
Secretary.

PALOMINO PARK PUBLIC
IMPROVEMENTS CORPORATION
[Seal] a Colorado nonprofit corporation

Attest

By: ___________________________ By: ________________________________
Assistant Secretary President

[Form of Certificate of Authentication]

This Bond is one of the Bonds described in the within-mentioned
Indenture. Attached hereto is the complete text of the opinion of Ballard
Spahr Andrews & Ingersoll, Denver, Colorado, Bond Counsel, dated the date of
initial delivery of and payment for the Bonds, a signed original of which is on
file with the Trustee.

Date of Authentication: UNITED STATES TRUST COMPANY OF
NEW YORK
as trustee

By: __________________________
__________________________
<PAGE>

[Form of Reverse of Bond]

For the purpose of providing security for the payment of the Bonds, the
Trustee has agreed to collect or cause to be collected certain charges (the
"Allocated Assessment Charges") in accordance with a Public Improvements
Assessment and Lien, dated as of December 1, 1995 (the "Assessment and Lien"),
by and between the Corporation and Park at Highlands LLC, a Colorado limited
liability company (the "Developer"). Payment of such Allocated Assessment
Charges is secured by a lien, subject to certain permitted encumbrances,
created under the Assessment and Lien.

The Bonds are all issued under and are equally and ratably secured by
and entitled to the protection of the Indenture which has been duly executed
and delivered by the Corporation to the Trustee and pursuant to which the
Trustee has agreed to apply the proceeds from the collection of Allocated
Assessment Charges to the payment of the principal of, premium, if any, on and
interest on the Bonds, and pursuant to which all payments due under the
Assessment and Lien are assigned to the Trustee to secure the payment of the
principal of, premium, if any, on and interest on the Bonds. Reference is
hereby made to the Indenture for a description of the property pledged and
assigned, the provisions, among others, with respect to the nature and extent
of the security, the rights, duties and obligations of the Corporation, the
Trustee and the owners of the Bonds and the terms upon which the Bonds are
issued and secured.

The acceptance of the terms and conditions of such documents, copies of
which are on file at the principal corporate trust office of the Trustee, is an
explicit and material part of the consideration of the Corporation's issuance
hereof, and each Holder by acceptance of this Bond accepts and assents to all
such terms and conditions as if fully set forth herein. The Holder shall have
no right to enforce the provisions of the Indenture or the rights and remedies
thereunder, except as provided in the Indenture. Capitalized terms used in
this Bond which are not defined herein but which are defined in the Indenture
shall have the respective meanings set forth in the Indenture.

The Corporation has caused to be issued and delivered to the Trustee by
Dresdner Bank, AG, New York Branch, an irrevocable direct-pay letter of credit
pursuant to which the Trustee is authorized, subject to the terms and
conditions thereof, to draw up to (a) an amount equal to the principal amount
of the Bonds (i) to enable the Trustee to pay the principal amount of the Bonds
when due at maturity or upon redemption or acceleration and (ii) to enable the
Trustee to pay the portion of the purchase price of Bonds tendered to it and
not remarketed corresponding to the principal amount of such Bonds, plus (b) an
amount equal to 210 days' accrued interest on the outstanding Bonds at 12% per
annum while the Bonds bear interest at the Weekly Rate, (i) to enable the
Trustee to pay interest on the Bonds when due and (ii) to enable the Trustee to
pay the portion of the purchase price of Bonds tendered to it and not
remarketed corresponding to the accrued interest on such Bonds. Such
irrevocable letter of credit or any alternate letter of credit delivered to the
Trustee in accordance with the terms of the Indenture is herein called the
"Letter of Credit". The Indenture provides that, while the Bonds bear interest
at a Term Rate, the Letter of Credit must provide for (i) 210 days' accrued
interest on the outstanding Bonds at a rate not less than the applicable
Maximum Rate and (ii) coverage of the optional redemption premium (if any). As
used herein, the term "Bank" shall mean Dresdner Bank, AG, New York Branch, as
issuer of the Letter of Credit or the bank issuing any Alternate Letter of
Credit. The Letter of Credit expires on June 20, 1998, or, if such day is not
<PAGE>

a Business Day, on the next succeeding Business Day, unless terminated earlier
pursuant to its terms or extended. The Letter of Credit is being issued
pursuant to a Letter of Credit Reimbursement Agreement, dated as of December 1,
1995 (the "Letter of Credit Reimbursement Agreement"), between the Corporation
and Wellsford Residential Property Trust (together, the "Account Parties") and
the Bank. The Account Parties are jointly and severally obligated, among other
things, to reimburse the Bank for all drawings under the Letter of Credit. The
payment obligations under the Letter of Credit Reimbursement Agreement are
evidenced by promissory notes, dated December 20, 1995 (the "Letter of Credit
Notes"), from the Account Parties to the Bank. The Corporation is also
obligated to reimburse Wellsford Residential Property Trust ("Wellsford REIT")
for payments made by Wellsford REIT to the Bank pursuant to a Reimbursement
Agreement, dated as of December 1, 1995 (the "Wellsford REIT Reimbursement
Agreement"), between the Corporation and Wellsford REIT. The payment
obligations of the Corporation under the Wellsford REIT Reimbursement Agreement
are evidenced by a promissory note, dated December 20, 1995 (the "Wellsford
REIT Note"), from the Corporation to Wellsford REIT. The obligations of the
Corporation under the Indenture and the Bonds are additionally secured by a
promissory note from the Corporation to the Trustee, and said promissory note
and the Corporation's Letter of Credit Note are additionally secured by a Deed
of Trust, Security Agreement, Financing Statement and Assignment of Rents and
Leases, dated as of December 1, 1995, from the Corporation to the Public
Trustee of Douglas County, Colorado, for the use of the Trustee and the Bank.

INTEREST ON BONDS

General. This Bond bears interest at a Weekly Rate, a Term Rate or a
Fixed Rate, as specified above and described below. The Bonds initially bear
interest at a Weekly Rate, subject to conversion to a Term Rate or a Fixed
Rate, as described herein. A "Weekly Rate" is an interest rate for a Weekly
Rate Period determined and adjusted weekly as described below. A "Term Rate"
is an interest rate for a Term Rate Period determined as described below. A
"Fixed Rate" is an interest rate for a Fixed Rate Period determined as
described below. The Bonds are in the "Weekly Mode" if they bear interest at a
Weekly Rate, a "Term Mode" if they bear interest at a Term Rate and the "Fixed
Mode" if they bear interest at a Fixed Rate. The Weekly Mode, each Term Mode
and the Fixed Mode are each a "Rate Mode." All computations of interest at a
Weekly Rate are based on a year of 365 or 366 days, as appropriate; and all
computations of interest at a Term Rate or a Fixed Rate are based on a 360-day
year of twelve 30-day months. As used herein, the term "Interest Payment Date"
means, in the case of Bonds in the Weekly Mode, the first day of each month
and, in the case of Bonds in the Term Mode, each June 1 and December 1.

Weekly Rate. A Weekly Rate is to be determined for each Weekly Rate
Period as described below. On each Weekly Rate Calculation Date, the
remarketing agent under the Indenture (the "Remarketing Agent"), initially
First Interstate Bank of Arizona, N.A., is to determine the Weekly Rate (for
the Weekly Rate Period commencing on the next Wednesday) as the rate which if
borne by the Bonds would, in the judgment of the Remarketing Agent, taking into
account prevailing financial market conditions, be the lowest interest rate
necessary to enable the Remarketing Agent to arrange for the sale of all of the
outstanding Bonds at a price equal to the principal amount thereof plus accrued
interest thereon. Anything herein to the contrary notwithstanding, in no event
may any Weekly Rate exceed 12% per annum. As used in this Bond, "Weekly Rate
Calculation Date" means Tuesday in each calendar week or, if any Tuesday is not
a Business Day, the first Business Day preceding such Tuesday and "Weekly Rate
Period" means the seven-day period commencing on the first Wednesday following
the corresponding Weekly Rate Calculation Date and running through Tuesday of
<PAGE>

the following calendar week, except that (i) the first Weekly Rate Period
commences on the Issuance Date and ends on and includes the first Tuesday
occurring after the Issuance Date, (ii) the first Weekly Rate Period following
a conversion from a Term Mode to the Weekly Mode commences on the date of such
conversion and ends on and includes the first Tuesday occurring after such
conversion date and (iii) the last Weekly Rate Period prior to a conversion
from the Weekly Mode to a Term Mode or Fixed Mode ends on and includes the last
day immediately preceding the date of such conversion.

If for any reason the Remarketing Agent does not determine a Weekly Rate
for any Weekly Rate Period as aforesaid, or if a court holds a rate for any
Weekly Rate Period to be invalid or unenforceable, the Weekly Rate for that
Weekly Rate Period will be equal to the Weekly Rate in effect for the
immediately preceding Weekly Rate Period. The Weekly Rate for any consecutive
Weekly Rate Period for which the Remarketing Agent does not determine a Weekly
Rate, or a court holds a rate to be invalid or unenforceable, will be the
arithmetic average of the daily 30-day (one-month) dealer (non-finance company)
commercial paper rates for the Business Days during the seven-day Monday
through Sunday period ending on the Sunday next preceding the first day of such
Weekly Rate Period as reported in the weekly statistical release published by
the Board of Governors of the Federal Reserve System entitled H.15 (519) for
such Business Days; provided that if such statistical release (or a substitute
therefor) ceases to be published by the Federal Reserve System, then the dealer
commercial paper rates to be used will be the rates published in the money
rates section of The Wall Street Journal (or any successor publication) as the
rates of high-grade unsecured notes sold through dealers by major corporations
in multiples of $1,000 for such Business Days.

No notice of Weekly Rates will be given to the Holders of the Bonds;
however, the Holders may obtain Weekly Rates from the Trustee or the
Remarketing Agent. The determination of the Weekly Rate by the Remarketing
Agent will be conclusive and binding upon the Corporation, the Trustee, the
Bank and the Holders.

Term Rate. A Term Rate is to be determined for each Term Rate Period as
described below. Upon conversion to a Term Mode, a Nominal Term Rate Period is
to be fixed by the Corporation as a term of two or more consecutive Semiannual
Periods constituting the nominal length of each Term Rate Period thereafter
until the date of a conversion to another Rate Mode. A Term Mode based on one
Nominal Term Rate Period and a Term Mode based on another Nominal Term Rate
Period are different Rate Modes. Each Term Rate shall be determined by the
Remarketing Agent, on the Term Rate Calculation Date, as the lowest rate of
interest that, in the judgment of the Remarketing Agent, taking into account
prevailing financial market conditions, would be necessary to enable the
Remarketing Agent to arrange for the sale of the Bonds in the respective Term
Mode in a secondary market sale at a price equal to the principal amount
thereof on the first Business Day of the respective Term Rate Period; provided
that (1) if the Remarketing Agent fails for any reason to determine the Term
Rate for any Term Rate Period, such Term Rate will be equal to 120% of the
average of the annual bond equivalent yield evaluations at par as of the first
day of the corresponding Term Rate Period or, if such day is not a Business
Day, the next preceding Business Day of United States Treasury obligations
having a term to maturity similar to such Term Rate Period, and (2) no Term
Rate may exceed the interest rate at which the Letter of Credit then in effect
provides coverage for at least 210 days' interest. Determinations of Term
Rates will be conclusive and binding upon the Corporation, the Trustee, the
Bank and the Holders. As used in this Bond, "Nominal Term Rate Period" means,
with respect to a Term Mode, a period of two or more consecutive Semiannual
<PAGE>

Periods (expressed in years and half years); "Semiannual Date" means each
June 1 and each December 1; "Semiannual Period" means a six-month period
commencing on a Semiannual Date and ending on and including the day immediately
preceding the next Semiannual Date; "Term Rate Calculation Date" means a
Business Day not more than 15 days and not less than one day prior to the first
day of the corresponding Term Rate Period; "Term Rate Period" means a period of
two or more consecutive Semiannual Periods equal to the applicable Nominal Term
Rate Period commencing on the Semiannual Date immediately following the last
day of the immediately preceding Term Rate Period and running through and
ending on the day immediately preceding the Semiannual Date which follows such
commencement date by a period equal to such Nominal Term Rate Period, except
that the first Term Rate Period after conversion from a Weekly Rate to a Term
Rate commences on the date of conversion and ends on and includes the day
immediately preceding the Semiannual Date which follows the Semiannual Date
occurring on or immediately preceding such conversion date by a period equal to
such Nominal Term Rate Period.

Fixed Rate. Bonds in the Fixed Mode are not secured by the Letter of
Credit, any Alternate Letter of Credit or any Alternate Credit Facility. A
Fixed Rate is to be determined for a Fixed Rate Period as described below. The
Fixed Rate will be determined by the Remarketing Agent, on the Fixed Rate
Calculation Date, as the lowest rate of interest that, in the judgment of the
Remarketing Agent, taking into account prevailing financial market conditions,
would be necessary to enable the Remarketing Agent to arrange for the sale of
the Bonds in the Fixed Mode in a secondary market sale at a price equal to the
principal amount thereof plus accrued interest, on the first Business Day of
the Fixed Rate Period; provided that in no event may the Fixed Rate exceed the
applicable Maximum Rate. As used in this Bond, "Fixed Rate Calculation Date"
means a Business Day not more than 15 days and not less than one day prior to
the first day of the Fixed Rate Period; and "Fixed Rate Period" means a period
commencing on the date of conversion and ending on the date payment of the
principal or redemption price of the Bonds shall have been made or provided in
accordance with the provisions of the Indenture, whether at maturity, upon
redemption or otherwise.

Conversion. The Indenture provides that the Corporation has the option
to convert the Bonds in whole or in part from the Weekly Mode to a Term Mode or
the Fixed Mode, from a Term Mode to the Weekly Mode or the Fixed Mode and from
one Term Mode to another Term Mode on any Conversion Date the Corporation shall
select; provided that (i) each Conversion Date must be an Interest Payment
Date, (ii) Bonds in the Term Mode may not be converted to another Rate Mode
prior to the date on or after which the Bonds may first be redeemed at a
redemption price of par plus accrued interest pursuant to their terms,
(iii) Bonds in the Weekly Mode may not be converted to the Term Mode or the
Fixed Mode prior to the first Semiannual Date following the Issuance Date or
the Conversion Date on which the interest rate on the Bonds was converted to
the Weekly Mode, (iv) Bonds in the Fixed Mode may not be converted to either
the Weekly Mode or the Term Mode and (v) in the case of a conversion of less
than all the Bonds to the Fixed Mode, the Indenture is to be amended as
provided therein, and separate CUSIP numbers are to be assigned to Bonds in the
Fixed Mode. The Corporation may exercise such option by giving written notice
to the Trustee, the Remarketing Agent and the Bank, stating its election to
convert the Rate Mode of the Bonds to another Rate Mode specified in such
notice and stating the Conversion Date therefor, not less than 45 days prior to
such Conversion Date. In connection with each conversion to the Term Mode, the
Nominal Term Rate Period shall be selected by the Corporation and designated in
such notice. Notice of the exercise of an option to convert from one Rate Mode
to another Rate Mode will not be effective unless certain conditions set forth
<PAGE>

in the Indenture are satisfied with respect to such conversion. In the case of
a conversion from one Rate Mode to another Rate Mode, the Trustee is to give
notice by first-class mail to the Holders of the Bonds not less than 30 days
prior to the proposed Conversion Date stating (i) that, in the case of a
conversion to the Term Mode, the interest rate on the Bonds is scheduled to be
converted to a Term Rate and the Nominal Term Rate Period on which such Term
Rate will be based, or in the case of a conversion to the Weekly Mode or the
Fixed Mode, the interest rate on the Bonds is scheduled to be converted to a
Weekly Rate or a Fixed Rate, (ii) the proposed Conversion Date, (iii) that the
Corporation may determine not to convert the Bonds in which case the Trustee
shall notify the Holders in writing to such effect, and (iv) that all
outstanding Bonds will be subject to a mandatory purchase on the Conversion
Date, or if such Conversion Date is not a Business Day, the first Business Day
immediately following such Conversion Date, at a price of par plus accrued
interest. Upon each conversion the Bonds shall be subject to mandatory
purchase on the Conversion Date, or if such Conversion Date is not a Business
Day, the first Business Day immediately following such Conversion Date. As
used in this Bond, "Conversion Date" means any Interest Payment Date on which
the Rate Mode of the Bonds is converted to another Rate Mode.

OPTIONAL AND MANDATORY TENDER

Optional Tender for Purchase in Weekly Mode. While the Bonds bear
interest at a Weekly Rate, any Bond shall be purchased on the demand of the
Holder thereof on any Business Day designated by such Holder in a Bondholder
Tender Notice (hereinafter defined) at a purchase price equal to 100% of the
principal amount thereof plus accrued interest, if any, to the date of
purchase, if there is delivered to the Trustee at its delivery office and to
the Remarketing Agent at its Principal Office, of a written notice (the
"Bondholder Tender Notice") which (i) states the principal amount (or portion
thereof) of such Bond and (ii) states the date on which such Bond (or portion
thereof) is to be purchased, which date must be a Business Day not prior to the
seventh day next succeeding the date of the delivery of such notice to the
Trustee and the Remarketing Agent; provided that, if the principal amount of
Bonds to be purchased from a Holder pursuant to a demand under this paragraph
is less than the total principal amount of Bonds held by such Holder, then the
principal amount of Bonds so demanded to be purchased from such Holder shall be
equal to at least $100,000 and the principal amount of Bonds retained by such
Holder after such purchase shall be at least $100,000. By delivering the
Bondholder Tender Notice, the Holder irrevocably agrees to deliver such Bond,
if held in certificated form, duly endorsed for transfer in blank and with
guarantee of signature satisfactory to the Trustee, to the Principal Office or
the Delivery Office of the Trustee or any other address designated by the
Trustee at or prior to 12:00 noon Eastern time on the Business Day specified in
the Bondholder Tender Notice. The determination by the Trustee of a Holder's
compliance with such Bondholder Tender Notice and Bond delivery requirements is
in the sole discretion of the Trustee and binding on the Corporation, the
Remarketing Agent, the Bank and the Holder. Any Bondholder Tender Notice which
the Trustee determines is not in compliance with the provisions of this
paragraph shall be of no force or effect.

Any election by a Holder to tender a Bond (or portion thereof) for
purchase on a Business Day will be irrevocable and will be binding on the
Holder making such election and on any transferee of such Holder. Each
Bondholder Tender Notice will automatically constitute (i) an irrevocable offer
to sell the Bond (or portion thereof) to which such notice relates on the
purchase date at a price equal to the purchase price of such Bond (or portion
<PAGE>

thereof) described above, (ii) an irrevocable authorization and instruction to
the Trustee to effect transfer of such Bond (or portion thereof) upon payment
of the purchase price to the Trustee on the purchase date, (iii) with respect
to a tender of a portion of a Bond, an irrevocable authorization and
instruction to the Trustee to effect the exchange of such Bond in part for
other Bonds in a principal amount equal to the retained portion so as to
facilitate the sale of the tendered portion of such Bond, and (iv) an
acknowledgment that such Holder will have no further rights with respect to
such Bond (or portion thereof) upon payment of the purchase price thereof to
the Trustee on the purchase date, except for the right of such Holder to
receive such purchase price upon surrender of such Bond, if held in
certificated form, to the Trustee endorsed for transfer in blank and with
guarantee of signature satisfactory to the Trustee and that after the purchase
date such Holder will hold such Bond as agent for the Trustee. If the Bonds
are not held in book-entry form and, after delivery to the Trustee and the
Remarketing Agent of such Bondholder Tender Notice, the Holder making such
election shall fail to deliver such Bond or Bonds described in the Bondholder
Tender Notice to the Trustee on or before 12:00 noon Eastern time on the
applicable purchase date as described herein, then the undelivered Bond or
portion thereof (the "Undelivered Bond") described in such Bondholder Tender
Notice will be deemed to have been tendered for purchase to the Trustee and, to
the extent that there is held by the Trustee on or before the applicable
purchase date an amount sufficient to pay the purchase price thereof and
available for such purpose pursuant to the Indenture, such Undelivered Bond (or
portion thereof) will on such purchase date cease to bear interest and no
longer will be considered to be outstanding under the Indenture. Moneys held
by the Trustee for the purchase of the Undelivered Bonds in accordance with the
foregoing shall be held in a special separate trust account for the Holders of
such Undelivered Bonds. Such moneys will be held by the Trustee uninvested and
without liability for interest pending delivery of such Undelivered Bonds to
the Trustee.

Mandatory Tender. This Bond is subject to mandatory tender for
purchase, at a price equal to the principal amount hereof plus accrued
interest, as follows (i) on each Conversion Date or at the end of each Term
Rate Period, or if such date is not a Business Day, the first Business Day
immediately following such date and (ii) while the Bonds are in the Weekly
Mode, on the Interest Payment Date next preceding the expiration date of the
Letter of Credit unless at least 45 days (or such shorter period as may be
acceptable to the Trustee) prior to such Interest Payment Date the Trustee has
received notice that the Letter of Credit has been or will be extended or an
Alternate Letter of Credit or Alternate Credit Facility will be provided. Any
Bond which is not delivered for purchase prior to 12:00 noon Eastern time on
the Conversion Date will be deemed to have been tendered to the Trustee as of
such Conversion Date, and interest on such Undelivered Bond shall cease to
accrue on such Conversion Date. Thereafter, the Holder of such Undelivered
Bond will not be entitled to any payment other than the purchase price for such
Undelivered Bond upon surrender thereof to the Trustee endorsed for transfer in
blank and with guaranty of signature satisfactory to the Trustee. Except for
payment of such purchase price from moneys held by the Trustee for such
purpose, such Undelivered Bond will no longer be outstanding and entitled to
the benefits of the Indenture.

BY ACCEPTANCE OF THIS BOND, THE HOLDER HEREOF AGREES THAT THIS BOND WILL
BE PURCHASED, WHETHER OR NOT SURRENDERED, ON ANY DATE SPECIFIED BY THE HOLDER
HEREOF IN THE EXERCISE OF THE OPTIONAL TENDER FOR PURCHASE DESCRIBED ABOVE AND
ON THE MANDATORY TENDER DATE IN CONNECTION WITH A CONVERSION OF THE RATE MODE
OR THE TERMINATION OF A TERM RATE PERIOD OR THE EXPIRATION OF THE LETTER OF
<PAGE>

CREDIT. IN SUCH EVENT, THE HOLDER OF THIS BOND WILL NOT BE ENTITLED TO RECEIVE
FURTHER INTEREST HEREON, WILL HAVE NO FURTHER RIGHTS UNDER THIS BOND OR THE
INDENTURE EXCEPT FOR PAYMENT OF THE PURCHASE PRICE HELD THEREFOR, AND, IF THIS
BOND IS NOT SURRENDERED ON SUCH DATE, WILL THEREAFTER HOLD THIS BOND AS AGENT
FOR THE TRUSTEE.

OPTIONAL AND MANDATORY REDEMPTION

Mandatory Redemption. The Bonds are subject to mandatory redemption, in
whole or in part, on any Interest Payment Date, from and to the extent there
are deposits in a prepayment fund (the "Prepayment Fund") or on the dates and
in the amounts determined by the Corporation in connection with conversion to a
Term Rate pursuant to provisions of the Indenture, at a redemption price
(expressed as a percentage of principal amount) of 100% plus accrued interest
to the redemption date.

Optional Redemption. Bonds in the Weekly Mode are subject to optional
redemption, in whole or in part, on any Interest Payment Date, from any moneys
of the Corporation excluding deposits in the Prepayment Fund, at a redemption
price (expressed as a percentage of principal amount) of 100% plus accrued
interest to the redemption date. Bonds in the Term Mode are not subject to
optional redemption. Bonds in the Weekly Mode are redeemable only if moneys
are on deposit in the Letter of Credit Debt Service Account for reimbursement
to the Bank of the redemption price.

If fewer than all of the Bonds are to be redeemed, the selection of
Bonds to be redeemed, or portions thereof in amounts in excess of $100,000, are
to be made by lot or by such other method as the Trustee deems fair and
appropriate.

In the event any of the Bonds or portions thereof (which are to be in
denominations of $100,000 or any integral multiple of $5,000 in excess thereof)
are called for redemption as aforesaid, notice thereof identifying the Bonds or
portions thereof to be redeemed is to be given by mailing a copy of the
redemption notice by first-class postage-prepaid mail not more than 60 days and
not less than 30 days prior to the date fixed for redemption to the registered
owner of each Bond to be redeemed at the address shown on the registration
books; but failure to mail such notice, or any defect in the mailing thereof in
respect of any Bond, shall not affect the validity of the redemption of any
other Bond with respect to which notice was properly given. All Bonds so called
for redemption cease to bear interest after the specified redemption date
provided funds for their redemption are on deposit at the place of payment at
that time.

The Bonds are issued pursuant to and in full compliance with the laws of
the State of Colorado and pursuant to a resolution adopted by the Board of
Directors of the Corporation which authorizes the execution and delivery of the
Assessment and Lien and the Indenture. Payments sufficient for the prompt
payment, when due, of the principal of, premium, if any, on and interest on the
Bonds are to be paid to the Trustee for the account of the Corporation under
the Assessment and Lien, all of which have been duly pledged and assigned for
that purposes.

CREDIT, AND DO NOT NOW AND SHALL NEVER CONSTITUTE A GENERAL OBLIGATION OF THE
CORPORATION. NEITHER THE CORPORATION, THE DISTRICT, THE STATE OF COLORADO NOR
ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF COLORADO IS OBLIGATED TO PAY
THE PRINCIPAL, PURCHASE PRICE OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS
OR OTHER COSTS INCIDENT THERETO, EXCEPT FROM THE TRUST ESTATE, INCLUDING THE
LETTER OF CREDIT.

If an Event of Default as defined in the Indenture occurs, the principal
of all Bonds issued under the Indenture may be declared due and payable upon
the conditions and in the manner and with the effect provided in the Indenture.

If at any time the Trustee holds moneys or securities as described in
the Indenture sufficient to pay at redemption or maturity the principal of,
premium, if any, on and interest on all Bonds outstanding under the Indenture
and any purchase price payable pursuant to the Indenture in respect thereof,
and if all other sums then payable by the Corporation under the Indenture have
been paid, then subject to the provisions of the Indenture the lien of the
Indenture and other security held by the Trustee for the benefit of the Holders
will be discharged. After such discharge, Holders must look only to the
deposited moneys and securities for payment.

The Indenture permits certain amendments or supplements to the Indenture
not materially prejudicial to the Holders to be made without the consent of or
notice to the Holders, and other amendments or supplements thereto to be made
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Bonds outstanding.

The Holder of each Bond has only those remedies provided in the
Indenture.

The Bonds are issuable only as fully registered bonds in the
denominations of $100,000 and integral multiple of $5,000 in excess thereof and
are exchangeable for Bonds of other authorized denominations in equal aggregate
principal amounts at the Principal Office of the Trustee, but only in the
manner and subject to the limitations provided in the Indenture. This Bond is
transferable at the Principal Office of the Trustee, by the Holder in person or
by his attorney, duly authorized in writing, upon presentation and surrender
hereof to the Trustee. While the Bonds bear interest at a Fixed Rate, the
Trustee is not required to transfer or exchange (i) any Bond during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption of Bonds and ending at the close of business on the day of
such mailing, (ii) any Bonds so selected for redemption in whole or in part, or
(iii) any Bond during the period of 15 days preceding any Interest Payment
Date.
<PAGE>

[Form of Assignment]

Assignment

For value received, the undersigned sells, assigns and transfers unto
____________________ this Bond and irrevocably constitutes and appoints
____________________ attorney to transfer this Bond on the books kept for
registration thereof, with full power of substitution in the premises.

Assignor's Signature:

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

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

Signature Guaranteed:

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

Social Security Number or Other
Identifying Number of Assignee:

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

Notice: The assignor's signature to this assignment must correspond with
the name as it appears upon the face of this Bond in every
particular, without alteration or any change whatever.

[Form of Abbreviations]

The following abbreviations, when used in the inscription on the face of
this Bond, shall be construed as though they were written out in full according
to applicable laws or regulations.

TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with the right of
survivorship and not as tenants in common

UNIFORM TRANS MIN ACT - ____________________ Custodian

---------------------- ------------------------------
(Cust) (Minor)

under Uniform Transfers to Minors Act

-------------------------------
(State)

Additional abbreviations may also be used though not in the above list.
<PAGE>

EXHIBIT A-2

Form of
Fixed Rate Bond
---------------

REGISTERED United States of America REGISTERED
State of Colorado
NO. $

PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION
Assessment Lien Revenue Bond
Series 1995

Interest First Interest Maturity
Rate Payment Date Date CUSIP
-------- -------------- -------- -----
____% ___________________ December 1, 2035 __________

Effective Date of Interest Rate:
Issuance Date: December 20, 1995

REGISTERED OWNER: Cede & Co.

PRINCIPAL AMOUNT:

Palomino Park Public Improvements Corporation, a Colorado nonprofit
corporation (the "Corporation"), for value received, promises to pay to the
registered owner specified above, or registered assigns, upon surrender hereof,
solely from the special funds herein described, the Principal Amount specified
above on the Maturity Date specified above, unless this Bond has been called
for earlier redemption and payment of the redemption price shall have been duly
made or provided for, and to pay interest thereon from the most recent Interest
Payment Date (hereinafter defined) to which interest has been paid or duly
provided for or from the Effective Date of Interest Rate specified above if no
interest has been paid, at the rates determined as provided herein, until the
Principal Amount is paid or duly provided for, commencing on the first Interest
Payment Date after the Date of Authentication hereof. As used herein, the term
"Interest Payment Date" means each June 1 and December 1.

Record Date is to be mailed to Holders not less than 15 days prior thereto.
The interest and the principal or redemption price and purchase price becoming
due with respect to the Bonds (hereinafter defined) will, at the written
request of the Holder of at least $1,000,000 aggregate principal amount of such
Bonds, be paid by wire transfer within the continental United States in
immediately available funds to the bank account number of such Holder appearing
on the Register, but, in the case of principal or redemption price and purchase
price, only upon presentation and surrender of such Bonds at the delivery
office of the Trustee. The principal or purchase price of and interest and any
premium on this Bond are payable in lawful money of the United States of
America.

This Bond is one of a duly authorized issue of Assessment Lien Revenue
Bonds, Series 1995 (the "Bonds"), issued for the purpose of providing funds to
finance the acquisition, construction and installation of certain public
improvements (the "Public Improvements") for Highlands Ranch Metropolitan
District No. 2, Douglas County, Colorado (the "District"), and for paying
necessary expenses incidental thereto. This Bond is secured by a Trust
Indenture, dated as of December 1, 1995 (the "Indenture"), between the
Corporation and the Trustee. The obligations of the Corporation under the
Indenture and the Bonds are additionally secured by a promissory note, dated
December 20, 1995, from the Corporation to the Trustee, and said promissory
note and another promissory note of the Corporation, which may or may not be
outstanding, are additionally secured by a Deed of Trust, Security Agreement,
Financing Statement and Assignment of Rents and Leases, dated as of December 1,
1995, from the Corporation to the Public Trustee of Douglas County, Colorado,
for the use of the Trustee and the payee of such other promissory note.

REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON
THE REVERSE SIDE HEREOF. THOSE PROVISIONS SHALL HAVE THE SAME EFFECT FOR ALL
PURPOSES AS IF SET FORTH HERE.

This Bond will not be entitled to any security or benefit under the
Indenture or be valid or become obligatory for any purpose until the
Certificate of Authentication hereon has been signed.

PALOMINO PARK PUBLIC
IMPROVEMENTS CORPORATION
[Seal] a Colorado nonprofit corporation

Attest

By: ___________________________ By: __________________________
Secretary President
<PAGE>

[Form of Certificate of Authentication]

Date of Authentication: UNITED STATES TRUST COMPANY OF
NEW YORK
as trustee

By:
--------------------------

---------------------
<PAGE>

[Form of Reverse of Bond]

OPTIONAL AND MANDATORY REDEMPTION

Mandatory Redemption. The Bonds are subject to mandatory redemption, in
whole or in part, on any Interest Payment Date, from and to the extent there
are deposits in a prepayment fund (the "Prepayment Fund") or on dates and in
amounts determined by the Corporation in connection with conversion to a Fixed
Rate pursuant to provisions of the Indenture, at a redemption price (expressed
as a percentage of principal amount) of 100% plus accrued interest to the
redemption date.

Optional Redemption. Bonds in the Fixed Rate Mode are subject to
optional redemption, in whole or in part, on any Interest Payment Date after
expiration of the periods during which optional redemption is not permitted set
forth below, from any moneys of the Corporation excluding deposits in the
Prepayment Fund, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued interest to the redemption date.

Fixed Rate Period

Equal to Initial Annual
<PAGE>

or Greater But Less No Call Redemption Reduction No Premium
Than Than Period Price in Premium After
- ---------- -------- -------- ---------- ---------- ----------

15 Years N/A 10 Years 102% 1/2% 14th Year
10 Years 15 Years 8 Years 102 1/2 12th Year
5 Years 10 Years 5 Years 101 1/2 7th Year
N/A 5 Years 2 Years 101 1/2 4th Year

In the event any of the Bonds or portions thereof (which are to be in
denominations of $100,000 or any integral multiple of $5,000 in excess thereof)
are called for redemption as aforesaid, notice thereof identifying the Bonds or
portions thereof to be redeemed is to be given by mailing a copy of the
redemption notice by first-class postage-prepaid mail not more than 60 days and
not less than 30 days prior to the date fixed for redemption to the registered
owner of each Bond to be redeemed at the address shown on the registration
books; but failure to mail such notice, or any defect in the mailing thereof in
respect of any Bond, shall not affect the validity of the redemption of any
other Bond with respect to which notice was properly given. All Bonds so
called for redemption cease to bear interest after the specified redemption
date provided funds for their redemption are on deposit at the place of payment
at that time.

The Bonds are issued pursuant to and in full compliance with the laws
of the State of Colorado and pursuant to a resolution adopted by the Board of
Directors of the Corporation which authorizes the execution and delivery of the
Assessment and Lien and the Indenture. Payments sufficient for the prompt
payment, when due, of the principal of, premium, if any, on and interest on the
Bonds are to be paid to the Trustee for the account of the Corporation under
the Assessment and Lien, all of which have been duly pledged and assigned for
that purposes.

THE BONDS ARE SPECIAL AND LIMITED OBLIGATIONS OF THE CORPORATION,
PAYABLE SOLELY FROM ALLOCATED ASSESSMENT CHARGES, OTHER AMOUNTS PAYABLE UNDER
THE ASSESSMENT AND LIEN AND OTHER AMOUNTS ATTRIBUTABLE TO THE TRUST ESTATE
REFERENCED IN THE INDENTURE, AND DO NOT NOW AND SHALL NEVER CONSTITUTE A
GENERAL OBLIGATION OF THE CORPORATION. NEITHER THE CORPORATION, THE DISTRICT,
THE STATE OF COLORADO NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF
COLORADO IS OBLIGATED TO PAY THE PRINCIPAL, PURCHASE PRICE OR REDEMPTION PRICE
OF OR INTEREST ON THE BONDS OR OTHER COSTS INCIDENT THERETO, EXCEPT FROM THE
TRUST ESTATE, INCLUDING THE LETTER OF CREDIT.

If an Event of Default as defined in the Indenture occurs, the
principal of all Bonds issued under the Indenture may be declared due and
payable upon the conditions and in the manner and with the effect provided in
the Indenture.

Indenture and other security held by the Trustee for the benefit of the Holders
will be discharged. After such discharge, Holders must look only to the
deposited moneys and securities for payment.

The Indenture permits certain amendments or supplements to the
Indenture not materially prejudicial to the Holders to be made without the
consent of or notice to the Holders, and other amendments or supplements
thereto to be made with the consent of the Holders of not less than a majority
in aggregate principal amount of the Bonds outstanding.

The Holder of each Bond has only those remedies provided in the
Indenture.

[Form of Assignment]

Assignment

Assignor's Signature:

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

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

Signature Guaranteed:

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

Social Security Number or Other
Identifying Number of Assignee:

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

Notice: The assignor's signature to this assignment must correspond with the
name as it appears upon the face of this Bond in every particular,
without alteration or any change whatever.

[Form of Abbreviations]

The following abbreviations, when used in the inscription on the face
of this Bond, shall be construed as though they were written out in full
according to applicable laws or regulations.

TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with the right of
survivorship and not as tenants in common

UNIFORM TRANS MIN ACT - ____________________ Custodian

______________________ ______________________________
(Cust) (Minor)

under Uniform Transfers to Minors Act
_______________________________
(State)

Additional abbreviations may also be used though not in the above list.
<PAGE>

EXHIBIT B

Form of Representation Letter
<PAGE>

EXHIBIT C

Form of Bondholder Tender Notice

____________ __, ____

United States Trust Company of New York, as trustee
114 West 47th Street, 15th Floor
New York, New York 10036-1532

First Interstate Bank of Arizona, N.A.
633 17th Street
3rd Floor South
Denver, Colorado 80270

Re: Palomino Park Public Improvements Corporation
Assessment Lien Revenue Bonds
Series 1995 - $14,755,000

Ladies and Gentlemen:

The undersigned, the [registered]* [beneficial]** owner of
$____________ aggregate principal amount of the Bonds registered in the name of
[the undersigned]* [Cede & Co., as nominee for The Depository Trust Company]**,
hereby notifies you of [his] [her] [its] intention to tender and demands that
you purchase on __________ __, ____ (if the Bonds are in the Weekly Mode, a
Business Day not prior to the seventh day next succeeding the date of delivery
to you of this notice or, if the Bonds are being converted to the Term Mode or
the Fixed Mode, the Conversion Date or the first Business Day thereafter if the
Conversion Date is not a Business Day or, if the Term Rate Period is expiring,
the first Business Day immediately following the end of the Term Rate Period),
$_________ aggregate principal amount of the Bonds (an amount, if less than all
of the Bonds [beneficially]** owned by the undersigned, which is an integral
multiple of $5,000 not less than $100,000 and results in the remainder of the
Bonds [beneficially]** owned by the undersigned being an integral multiple of
$5,000 less than $100,000) at a price equal to 100% of the principal amount
thereof plus accrued interest, if any, to the Purchase Date specified above
plus any premium due. [By delivery of this notice the undersigned irrevocably
agrees to deliver the Bond or Bonds (or portion or portions thereof) to be
tendered, duly endorsed for transfer in blank with guarantee of signature
satisfactory to the Trustee, to the Trustee on the above address at or prior to
12:00 noon, Eastern time, on the Purchase Date specified above.]*

The undersigned hereby acknowledges that the election represented by
this notice is irrevocable and binding on the undersigned and any transferee of
the undersigned.

______________________________
<PAGE>

By: __________________________
Title: _______________________

* Omit if Bonds are in book-entry form.
** Omit if Bonds are in certificated form.

<PAGE>

EXHIBIT 10.9

LETTER OF CREDIT REIMBURSEMENT AGREEMENT

Among

PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION
and
WELLSFORD RESIDENTIAL PROPERTY TRUST

and

DRESDNER BANK AG, NEW YORK BRANCH

Relating to

Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995 - $14,755,000

Dated as of December 1, 1995

(Letter of Credit No. 967-95)
<PAGE>

LETTER OF CREDIT REIMBURSEMENT AGREEMENT

TABLE OF CONTENTS

This Table of Contents is not a part of the Letter of Credit Reimbursement
Agreement and is for convenience only. The captions herein are of no legal
effect and do not vary the meaning or legal effect of any part of the Letter of
Credit Reimbursement Agreement.

Page

PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

PREAMBLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . .11
Section 1.2 Accounting Matters. . . . . . . . . . . . . . . . . . . .11
Section 1.3 Interpretation. . . . . . . . . . . . . . . . . . . . . .11
Section 1.4 Relation to Other Documents . . . . . . . . . . . . . . .11
Section 1.5 Time for Performance. . . . . . . . . . . . . . . . . . .11

ARTICLE 2 REIMBURSEMENT, FEES AND PAYMENT PROVISIONS . . . . . . . . . . . .11
Section 2.1 Same Day Reimbursement. . . . . . . . . . . . . . . . . .11
Section 2.2 Reimbursement of Liquidity Drawing Amounts and LC
Loans . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 2.3 Limitation on Interest. . . . . . . . . . . . . . . . . .12
Section 2.4 Remarketing of Pledged Bonds. . . . . . . . . . . . . . .13
Section 2.5 Transfer/Amendment Fee. . . . . . . . . . . . . . . . . .14
Section 2.6 Costs, Expenses and Taxes . . . . . . . . . . . . . . . .14
Section 2.7 Drawing Fee . . . . . . . . . . . . . . . . . . . . . . .15
Section 2.8 Letter of Credit Facing Fee . . . . . . . . . . . . . . .15
Section 2.9 Capital Adequacy. . . . . . . . . . . . . . . . . . . . .15
Section 2.10 Method of Payment . . . . . . . . . . . . . . . . . . . .16
Section 2.11 Maintenance of Accounts . . . . . . . . . . . . . . . . .16
Section 2.12 Cure. . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 2.13 Withholding . . . . . . . . . . . . . . . . . . . . . . .16
Section 2.14 Reduction and Reinstatement of the Letter of Credit . . .17
Section 2.15 Loan Documents. . . . . . . . . . . . . . . . . . . . . .17

ARTICLE 3 CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . .17
Section 3.1 Account Parties' Resolutions; Bylaws. . . . . . . . . . .17
Section 3.2 Highlands' Resolutions; Bylaws. . . . . . . . . . . . . .17
Section 3.3 Account Parties' Organizational Documents . . . . . . . .17
Section 3.4 Highlands' Organizational Documents . . . . . . . . . . .17
Section 3.5 Regulatory Approvals. . . . . . . . . . . . . . . . . . .18
Section 3.6 Incumbency Certificates . . . . . . . . . . . . . . . . .18
Section 3.7 Opinions of Counsel . . . . . . . . . . . . . . . . . . .18
Section 3.8 Related Documents . . . . . . . . . . . . . . . . . . . .18
Section 3.9 Amendment to the Wellsford REIT Loan Agreement. . . . . .18
Section 3.10 Compliance Certificate. . . . . . . . . . . . . . . . . .18
Section 3.11 Ratings . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 3.12 Account Parties Certificate(s). . . . . . . . . . . . . .18
Section 3.13 Title . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 3.14 Payment of Fees and Expenses. . . . . . . . . . . . . . .18
Section 3.15 Financial Statements. . . . . . . . . . . . . . . . . . .19
Section 3.16 Highlands Certificate(s). . . . . . . . . . . . . . . . .19
<PAGE>

Section 3.17 Remarketing Agent Certificate . . . . . . . . . . . . . .19
Section 3.18 Bond Trustee Certificate. . . . . . . . . . . . . . . . .19
Section 3.19 Recordings and Filings. Evidence that the Assessment
and Lien. . . . . . . . . . . . . . . . . . . . . . . . .19
Section 3.20 Other Documents . . . . . . . . . . . . . . . . . . . . .19

ARTICLE 4 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . .19
Section 4.1 Corporate Authority, Etc. . . . . . . . . . . . . . . . .19
Section 4.2 Governmental Approvals. . . . . . . . . . . . . . . . . .21
Section 4.3 Title to Properties: Leases . . . . . . . . . . . . . . .21
Section 4.4 Financial Statements. . . . . . . . . . . . . . . . . . .21
Section 4.5 No Material Changes . . . . . . . . . . . . . . . . . . .22
Section 4.6 Franchises, Patents, Copyrights, Etc. . . . . . . . . . .22
Section 4.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . .22
Section 4.8 No Materially Adverse Contracts, Etc. . . . . . . . . . .22
Section 4.9 Compliance with Other Instruments, Laws, Etc. . . . . . .22
Section 4.10 Tax Status. . . . . . . . . . . . . . . . . . . . . . . .23
Section 4.11 No Event of Default . . . . . . . . . . . . . . . . . . .23
Section 4.12 Holding Company and Investment Company Acts, Etc. . . . .23
Section 4.13 Absence of UCC Financing Statements, Etc. . . . . . . . .23
Section 4.14 Noncontravention. . . . . . . . . . . . . . . . . . . . .23
Section 4.15 Certain Transactions. . . . . . . . . . . . . . . . . . .23
Section 4.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . .24
Section 4.17 Regulations U and X . . . . . . . . . . . . . . . . . . .24
Section 4.18 Environmental Compliance. . . . . . . . . . . . . . . . .24
Section 4.19 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . .26
Section 4.20 Related Documents . . . . . . . . . . . . . . . . . . . .26
Section 4.21 Property. . . . . . . . . . . . . . . . . . . . . . . . .26
Section 4.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . .27
Section 4.23 Other Debt. . . . . . . . . . . . . . . . . . . . . . . .27
Section 4.24 Solvency. . . . . . . . . . . . . . . . . . . . . . . . .27
Section 4.25 Complete and Correct Information. . . . . . . . . . . . .27
Section 4.26 Public Improvements Liens . . . . . . . . . . . . . . . .27
Section 4.27 Pledge of Pledged Bonds . . . . . . . . . . . . . . . . .27
Section 4.28 Security for Pledged Bonds. . . . . . . . . . . . . . . .27

ARTICLE 5 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . .28
Section 5.1 Compliance with Bond Indenture and Related Documents. . .28
Section 5.2 Maintenance of Office . . . . . . . . . . . . . . . . . .28
Section 5.3 Records and Accounts. . . . . . . . . . . . . . . . . . .28
Section 5.4 Financial Statements, Certificates and Information. . . .28
Section 5.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 5.6 Existence; Maintenance of Properties. . . . . . . . . . .31
Section 5.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . .32
Section 5.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 5.9 Inspection of Properties and Books. . . . . . . . . . . .32
Section 5.10 Compliance with Laws, Contracts, Licenses and Permits . .33
Section 5.11 Further Assurances. . . . . . . . . . . . . . . . . . . .33
Section 5.12 Wellsford REIT Status . . . . . . . . . . . . . . . . . .33
Section 5.13 Wellsford REIT Unencumbered Operating Properties. . . . .33
Section 5.14 Wellsford REIT Limiting Agreements. . . . . . . . . . . .34

ARTICLE 6 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .35
Section 6.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . .35
Section 6.2 Optional Redemption . . . . . . . . . . . . . . . . . . .35
Section 6.3 Restrictions on Indebtedness. . . . . . . . . . . . . . .35
Section 6.4 Restrictions on Liens, Etc. . . . . . . . . . . . . . . .37
Section 6.5 Restrictions on Investments . . . . . . . . . . . . . . .37
<PAGE>

Section 6.6 Merger, Consolidation . . . . . . . . . . . . . . . . . .39
Section 6.7 Sale and Leaseback. . . . . . . . . . . . . . . . . . . .39
Section 6.8 Compliance with Environmental Laws. . . . . . . . . . . .39
Section 6.9 Distributions . . . . . . . . . . . . . . . . . . . . . .40
Section 6.10 Asset Sales . . . . . . . . . . . . . . . . . . . . . . .41
Section 6.11 Development Activity. . . . . . . . . . . . . . . . . . .41
Section 6.12 Sources of Capital. . . . . . . . . . . . . . . . . . . .42
Section 6.13 Restriction on Prepayment of Indebtedness . . . . . . . .42
Section 6.14 Additional Restrictions on Wellsford REIT Liens on
Real Estate and Indebtedness. . . . . . . . . . . . . . .42
Section 6.15 Restrictions Upon Rate Modes and Interest Periods for
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . .42
Section 6.16 Accounting Methods and Fiscal Year. . . . . . . . . . . .43
Section 6.17 Financial Covenants of Wellsford REIT . . . . . . . . . .43
Section 6.18 Official Statement and Other Documents. . . . . . . . . .43
Section 6.19 Remarketing . . . . . . . . . . . . . . . . . . . . . . .43
Section 6.20 Substitute Credit Facility. . . . . . . . . . . . . . . .43
Section 6.21 Remarketing Agent and Bond Trustee. . . . . . . . . . . .44

ARTICLE 7 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . .44
Section 7.1 Events of Default . . . . . . . . . . . . . . . . . . . .44
Section 7.2 Rights and Remedies . . . . . . . . . . . . . . . . . . .47

ARTICLE 8 NATURE OF OBLIGATIONS; INDEMNIFICATION . . . . . . . . . . . . . .48
Section 8.1 Obligations Absolute. . . . . . . . . . . . . . . . . . .48
Section 8.2 Continuing Obligation . . . . . . . . . . . . . . . . . .48
Section 8.3 Liability of the Bank . . . . . . . . . . . . . . . . . .48
Section 8.4 Indemnification . . . . . . . . . . . . . . . . . . . . .49
Section 8.5 Telecopied Documents. . . . . . . . . . . . . . . . . . .50

ARTICLE 9 ISSUANCE, TRANSFER, REDUCTION OR EXTENSION OF LETTER OF
CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Section 9.1 Issuance. . . . . . . . . . . . . . . . . . . . . . . . .50
Section 9.2 Transfer, Reduction and Reinstatement . . . . . . . . . .50
Section 9.3 Extension . . . . . . . . . . . . . . . . . . . . . . . .50

ARTICLE 10 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .50
Section 10.1 Right of Setoff . . . . . . . . . . . . . . . . . . . . .50
Section 10.2 Amendments and Waivers. . . . . . . . . . . . . . . . . .51
Section 10.3 No Waiver; Remedies . . . . . . . . . . . . . . . . . . .51
Section 10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . .51
Section 10.5 Severability. . . . . . . . . . . . . . . . . . . . . . .52
Section 10.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . .53
Section 10.7 Consent to Jurisdiction and Venue, Etc. . . . . . . . . .53
Section 10.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . .53
Section 10.9 Participation . . . . . . . . . . . . . . . . . . . . . .53
Section 10.10 Issuing Branch of the Bank. . . . . . . . . . . . . . . .53
Section 10.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . .54
Section 10.12 Complete and Controlling Agreement. . . . . . . . . . . .54
Section 10.13 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . .54
Section 10.14 Assignability to Federal Reserve. . . . . . . . . . . . .54

SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
<PAGE>

LETTER OF CREDIT REIMBURSEMENT AGREEMENT

THIS LETTER OF CREDIT REIMBURSEMENT AGREEMENT (this "Reimbursement
Agreement") is executed and entered into as of December 1, 1995, by and among
Palomino Park Public Improvements Corporation (the "Bond Issuer"), a Colorado
nonprofit corporation, Wellsford Residential Property Trust ("Wellsford REIT"),
a Maryland real estate investment trust (collectively, the Bond Issuer and
Wellsford REIT are referred to herein as "Account Parties"), and Dresdner Bank
AG, a banking corporation organized and existing under the laws of The Federal
Republic of Germany, acting by and through its New York Branch (the "Bank").
All capitalized terms used herein and not otherwise defined in connection with
such use shall have the meanings set forth in Article 1.

WHEREAS, substantially concurrently herewith (a) the Bond Issuer is
issuing pursuant to the Bond Indenture, on behalf of the District, and at the
request of Wellsford REIT and its subsidiary Park at Highlands LLC
("Highlands"), a Colorado limited liability company, its "Palomino Park Public
Improvements Corporation Assessment Lien Revenue Bonds Series 1995 -
$14,755,000" (the "Bonds"), the proceeds of which will be used primarily to
finance certain water, sewer, street and park facilities for The Park at
Highlands Ranch, Phase I of which is owned by Highlands, and (b) Highlands is
entering into the Assessment Agreement and the Assessment and Lien to support
repayment of the Bonds; and

WHEREAS, to enhance the marketability of the Bonds and to provide
additional security for the repayment of the Bonds, Account Parties have
requested that the Bank issue the Letter of Credit to secure certain payments
to be made with respect to the Bonds in the amount of $15,773,702 of which
(subject to the terms of the Letter of Credit) $14,755,000 will be available to
pay principal of the Bonds either at maturity or upon redemption or
acceleration thereof or to pay the portion of the purchase price of Bonds
representing the principal amount thereof, and of which $1,018,702
(representing 210 days interest on the initial outstanding principal amount of
Bonds, calculated at a maximum interest rate of 12% per annum computed on the
basis of a year of 365 days) will be available to pay interest on the Bonds as
interest becomes due or to pay the portion of the purchase price of the Bonds
representing the accrued interest thereon; and

WHEREAS, it is contemplated that the draws under the direct-pay Letter of
Credit to make principal or interest payments under the Bonds (other than
principal and interest payments relating to a Purchase Drawing (as defined
below)) will be reimbursed hereunder on the day such draws are made, and that
Purchase Drawings will be reimbursed upon the remarketing of the Bonds tendered
in connection with such Purchase Drawings, as more fully set forth in Article
IV of the Bond Indenture and Article 2 below; and

WHEREAS, to secure their obligations to the Bank under this Reimbursement
Agreement and the other Related Documents, Account Parties substantially
concurrently herewith are executing and delivering to the Bank the Pledge
Agreement; and

WHEREAS, in order to further evidence and secure their respective
obligations to the Bank under this Reimbursement Agreement and the other
Related Documents, Wellsford REIT and the Bond Issuer concurrently herewith are
each executing and delivering to the Bank their Promissory Notes; and

WHEREAS, Wellsford REIT has heretofore entered into a Second Amended and
<PAGE>

Restated Revolving Credit Agreement dated as of June 30, 1995 as amended by
that certain First Amendment dated as of December 1, 1995 (as amended, modified
or restated from time to time in accordance with its terms, the "Wellsford REIT
Loan Agreement") with The First National Bank of Boston ("Bank Boston") and the
other parties listed therein (including the Bank), and Bank Boston and the
other parties listed in the Wellsford REIT Loan Agreement have entered into an
Intercreditor Agreement, dated as of June 30, 1995, as amended by that certain
First Amendment dated as of December 1, 1995 (as amended, modified and restated
in accordance with its terms from time to time, the "Intercreditor Agreement"),
which further support Account Parties' ability to honor their obligations
hereunder and under the other Related Documents.

NOW, THEREFORE, in consideration of the agreements set forth herein and in
order to induce the Bank to issue the Letter of Credit, the Bank and Account
Parties agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.1 Definitions. In addition to terms defined at other places in
this Reimbursement Agreement, the following defined terms are used throughout
this Reimbursement Agreement with the following meanings:

"Account Parties" means the Bond Issuer and Wellsford REIT collectively
and jointly and severally.

"Accountant" means an independent certified public accountant or a firm of
independent certified public accountants, selected by Wellsford REIT and
satisfactory to the Bank.

"Affiliate" means a corporation, partnership, joint venture, limited
liability company, limited liability partnership, association, business trust
or similar entity organized under the laws of the United States of America or
any state thereof which is directly or indirectly controlled by any Person.
For purposes of this definition, control means the power to direct the
management and policies of a Person through the ownership directly or
indirectly of not less than a majority of its voting securities or the right to
designate or elect not less than a majority of the members of its board of
directors or other governing board or body by law, contract or otherwise.

"Agent" means the Person acting from time to time as agent for the Lenders
under the Wellsford REIT Loan Agreement which, as of the date hereof, is Bank
Boston.

"Assessment Agreement" means the Assessment Agreement of even date
herewith by and between the Bond Issuer and Highlands, including such
amendments, modifications or supplements permitted pursuant to its terms and
Section 6.1.

"Assessment and Lien" means the Public Improvements Assessment and Lien of
even date herewith by and between the Bond Issuer and Highlands. including such
amendments, modifications or supplements permitted pursuant to its terms and
Section 6.1.

"Asset Value" means the purchase price of Real Estate (including
improvements) and ordinary related purchase transaction costs, without
deduction for depreciation. If the Real Estate is purchased as a part of a
<PAGE>

group of properties, the Asset Value shall be calculated based upon a
reasonable allocation by Wellsford REIT of the aggregate purchase price among
all Real Estate purchased in such transaction.

"Balance Sheet Date" means September 30, 1995.

"Bank" means Dresdner Bank AG, a banking corporation organized and
existing under the laws of The Federal Republic of Germany, acting by and
through its New York Branch.

"Bank Boston" means The First National Bank of Boston.

"Banking Arrangements" means the agreements of the Bank and Account
Parties set forth in this Reimbursement Agreement and the transactions
contemplated thereby, including, without limitation, (a) any commitment to
extend credit, to issue any letter of credit or other credit or liquidity
facility, to purchase any obligation of or for the benefit of either of the
Account Parties, or to extend any other financial accommodation, (b) any
issuance, extension or maintenance of any of the foregoing, and (c) any pledge,
purchase or carrying of any obligation of or for the benefit of either of the
Account Parties.

"Base Rate" means the higher of (i) the annual rate of interest announced
from time to time by Bank Boston at its head office in Boston, Massachusetts as
its "base rate" and (ii) one half of one percent (0.5%) above the Federal Funds
Effective Rate (rounded upwards, if necessary, to the next one-eighth of one
percent); any change in the rate of interest payable hereunder resulting from a
change in the rate defined herein shall become effective as of the opening of
business on the day on which such change in the rate becomes effective.

"Base Rate Loans" has the meaning given such term in the Wellsford REIT
Loan Agreement.

"Bond Purchase Contract" means the Placement Agency Agreement dated
December 20, 1995 among the Bond Issuer and the Remarketing Agent, including
such amendments, modifications or supplements permitted pursuant to its terms
and Section 6.1.

"Bonds" means the Palomino Park Public Improvements Corporation Assessment
Lien Revenue Bonds Series 1995 - $14,755,000.

"Bond Indenture" means the Trust Indenture dated as of September 1, 1995
between the Bond Issuer and the Bond Trustee, including such amendments,
modifications or supplements permitted pursuant to its terms and permitted
hereunder.

"Bond Issuer" means Palomino Park Public Improvements Corporation, a
Colorado nonprofit corporation, and the issuer of the Bonds.

"Bond Trustee" means United States Trust Company of New York or its
permitted successor as trustee under the Bond Indenture and as permitted
hereunder.

"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which commercial banks in Denver, Colorado, New York, New York or the
city or cities in which are located the principal corporate trust offices of
the Bond Trustee and the Remarketing Agent and the office of the Bank at which
demands for payment under the Letter of Credit are to be presented are
<PAGE>

authorized or required by law or executive order to close, or (iii) a day on
which the New York Stock Exchange is closed.

"Closing Date" means the date on which the executed Letter of Credit is
delivered to the Bond Trustee and the Bonds are initially issued and delivered.

"CERCLA" has the meaning set forth in Section 4.18(1).

"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and all rules and regulations from time to time promulgated thereunder.

"Collateral" has the meaning set forth in Section 4.27.

"Compliance Certificate" has the meaning set forth in Section 5.4(d).

"Consolidated Operating Cash Flow" means, with respect to any period of
any Person, an amount equal to the Operating Cash Flow of such Person and its
Subsidiaries for such period consolidated in accordance with generally accepted
accounting principles.

"Consolidated Total Assets" means, with respect to any Person, all assets
of such Person and its Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles. In the event that
such Person or any of its Subsidiaries has entered into an agreement of the
type described in Section 6.11, the properties to be acquired under such
agreements shall be treated as assets of such Person and valued at the lesser
of fair market value or acquisition cost. All real estate assets shall be
valued on an undepreciated cost basis. The assets of such Person on the
consolidated financial statements of such Person shall be adjusted to reflect
such Person's allocable share of such asset, for the relevant period or as of
the date of determination, taking into account (a) the relative proportion of
each such item derived from assets directly owned by such Person and from
assets owned by its Subsidiaries, and (b) such Person's respective ownership
interest in its Subsidiaries.

"Consolidated Total Liabilities" means, with respect to any Person, all
liabilities of such Person determined on a consolidated basis in accordance
with generally accepted accounting principles and all Indebtedness of such
Person, whether or not so classified.

"Debt Service" means, for any period, the sum of all interest (including
capitalized interest) and scheduled principal payments due and payable during
such period, reduced by any balloon payments due upon maturity of any
Indebtedness.

"Deed of Trust" means that certain Deed of Trust, Security Agreement,
Financing Statement, and Assignment of Leases from the Bond Issuer to The
Public Trustee of Douglas County, Colorado for the use of the Bond Trustee and
the Bank dated December 1, 1995.

"Default" means the occurrence of any event which with the giving of
notice or the passage of time or both would constitute an Event of Default.

"Default Rate" means the Base Rate plus four and three-quarters percent
(4.75%) per annum. The Default Rate shall change as and when the Base Rate
changes.

"Development" means The Park at Highlands Ranch, a master-planned
<PAGE>

residential community in Douglas County, Colorado.

Distribution" means the declaration or payment of any dividend or
distribution on or in respect of any shares of beneficial interest of Wellsford
REIT, other than dividends or distributions payable solely in equity securities
of Wellsford REIT; the purchase, redemption, exchange or other retirement of
any shares of beneficial interest of Wellsford REIT, directly or indirectly
through a Subsidiary of Wellsford REIT or otherwise; the return of capital by
Wellsford REIT to its shareholders or partners as such; or any other
distribution on or in respect of any shares of beneficial interest of Wellsford
REIT.

"District" means Highlands Ranch Metropolitan District No. 2, Douglas
County, Colorado, a quasi-municipal corporation organized under the laws of the
State of Colorado.

"Drawing" means an Interest Drawing, a Principal Drawing or a Purchase
Drawing.

"Environmental Laws" has the meaning set forth in Section 4.18(1).

"EPA" has the meaning set forth in Section 4.18(2).

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules and regulations from time to time
promulgated thereunder.

"ERISA Affiliate" means, with respect to any Person, any Person which is
treated as a single employer with such Person under Section 414 of the Code.

"ERISA Reportable Event" means a reportable event with respect to a
Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the
regulations promulgated thereunder as to which the requirement of notice has
not been waived.

"Event of Default" means any of the events defined as such in Section 7.1.

"Expiration Date" means the date on which the Letter of Credit terminates
or expires as described under paragraph 1 of the Letter of Credit; provided,
however, that in no event shall the Expiration Date occur after the Maturity
Date of the Wellsford REIT Loan Agreement.

"Federal Funds Effective Rate" means, for any day, the rate per annum,
equal to the weighted average of the rates of overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers as published for such day (or if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by Agent
from three (3) federal funds brokers of recognized standing selected by Agent,
as provided for in the Wellsford REIT Loan Agreement.

"Funds from Operations" means, with respect to any Person for any fiscal
period, the net income (or deficit) of such Person computed in accordance with
generally accepted accounting principles, excluding financing costs and gains
(or losses) from debt restructuring and sales of property, plus depreciation
and amortization and other non-cash items.
<PAGE>

"Hazardous Substance" has the meaning set forth in Section 4.18(2).

"Highlands" means Park at Highlands LLC, a Colorado limited liability
company and a Subsidiary of Wellsford REIT.

"Implied Ratings" means, with respect to Wellsford REIT, the most recent
rating issued from time to time by each Rating Agency as is applicable to
senior unsecured long-term debt of Wellsford REIT, or if no such senior
unsecured long-term debt is outstanding, then the most recent rating issued
from time to time by each Rating Agency as would hypothetically be applicable
to senior unsecured long-term debt of Wellsford REIT (i.e., an implied rating).

"Indebtedness" means all obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should
be made by footnotes thereto, including in any event and whether or not so
classified (a) all debt and similar monetary obligations, whether direct or
indirect (including, without limitation, any obligations evidenced by bonds,
debentures, notes or similar debt instruments and the obligations described in
Section 6.3(i)); (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of Indebtedness of others,
including any obligation to supply funds to or in any manner to invest directly
or indirectly in a Person, to purchase Indebtedness, or to assure the owner of
indebtedness against loss through an agreement to purchase goods, supplies or
services for the purpose of enabling the debtor to make payment of the
indebtedness held by such owner or otherwise, and the obligation to reimburse
the issuer in respect of any letter of credit: (d) all obligations to purchase
under agreements to acquire, or otherwise to contribute money with respect to,
properties under "development" within the meaning of Section 6.11; (e) a
Person's pro rata share of any of the above-described obligations of its
unconsolidated affiliates; and (f) all amounts available to be drawn under
letters of credit, including but not limited to, the Letter of Credit.

"Indemnified Party" has the meaning set forth in Section 8.4.

"Intercreditor Agreement" means that certain Intercreditor Agreement dated
as of June 30, 1995 by and among Bank Boston and the other parties listed
therein, as amended by that certain First Amendment dated as of December 1,
1995, including such amendments, modifications or supplements permitted
pursuant to its terms and Section 6.1.

"Interest Drawing" means a drawing under the Letter of Credit pursuant to
an Interest Drawing, as defined in the Letter of Credit, to pay interest on the
Bonds when due.

"Investments" means, with respect to any Person, all shares of capital
stock, evidences of Indebtedness and other securities issued by any other
Person, all loans, advances, or extensions of credit to, or contributions to
the capital of, any other Person, all purchases of the securities or business
or integral part of the business of any other Person and commitments and
options to make such purchases, all interest in real property, and all other
investments; provided, however, that the term "Investments" shall not include
(i) equipment, inventory and other tangible personal property acquired in the
ordinary course of business, or (ii) current trade and customer accounts
receivable for services rendered in the ordinary course of business and payable
<PAGE>

in accordance with customary trade terms. In determining the aggregate amount
of Investments outstanding at any particular time: (a) the amount of any
investment represented as a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (d)
there shall not be deducted in respect of any Investment any amounts received
as earnings on such Investment, whether as dividends, interest or otherwise,
except that accrued interest included as provided in the foregoing clause (b)
may be deducted when paid; and (e) there shall not be deducted from the
aggregate amount of Investments any decrease in the value thereof.

"LC Loan" has the meaning set forth in Section 2.2(1).

"LC Loan Eligibility Date" has the meaning set forth in Section 2.2(1).

"Lenders" means the lending institutions party to the Wellsford REIT Loan
Agreement and any other Person who becomes an assignee of any rights of a
Lender pursuant to the Wellsford REIT Loan Agreement (but not including any
Participants).

"Letter of Credit" means the Letter of Credit No. 967-95 issued by the
Bank dated December 1, 1995, including such amendments, modifications or
supplements permitted pursuant to its terms and Section 6.1.

"Liens" has the meaning set forth in Section 6.4.

"Liquidity Drawing" means a Drawing made pursuant to a Purchase Drawing on
the Letter of Credit, but only until the amount of such Drawing is repaid as
required by Section 2.2 or becomes an LC Loan pursuant to Section 2.2(1).

"Liquidity Drawing Amount" has the meaning set forth in Section 2.2.

"Loans" has the meaning given such term in the Wellsford REIT Loan
Agreement.

"Loan Documents" has the meaning given such term in the Wellsford REIT
Loan Agreement.

"Moody's" means Moody's Investors Service, Inc. or its successors.

"Net Capital Expenditures" means, with respect to any Person or asset for
any fiscal period, an amount equal to the amount of capital expenditures
incurred by such Person or with respect to such asset during such fiscal period
determined in accordance with generally accepted accounting principles.

"Net Income (or Deficit)" means, with respect to any Person (or any asset
of any Person) for any fiscal period, the net income (or deficit) of such
Person (or attributable to such asset), after deduction of all expenses, taxes
and other proper charges, determined in accordance with generally accepted
accounting principles.

"Official Statement" means collectively, the Preliminary Private Placement
Memorandum and the Private Placement Memorandum used in connection with the
sale of the Bonds.
<PAGE>

"Operating Agreement" means the Operating Agreement of even date herewith
by and between the Bond Issuer and the District, including such amendments,
modifications or supplements permitted pursuant to its terms and Section 6.1.

"Operating Cash Flow" means, with respect to any Person (or any asset of
any person) for any period, an amount equal to the sum of (a) the Net Income of
such Person (or attributable to such asset) for such period plus (b)
depreciation and amortization, interest expense, and any extraordinary or non-
recurring losses deducted in calculating such Net Income minus (c) any extra-
ordinary or nonrecurring gains included in calculating such Net Income minus
(d) all Net Capital Expenditures incurred by such Person (or with respect to
such asset) during such period, all as determined in accordance with generally
accepted accounting principles but only to the extent such Net Capital
Expenditures are funded from Net Income and not from any capital funds,
including proceeds of (i) any debt or equity offering by such Person, (ii) any
permitted Indebtedness or (iii) any sale of an asset of such Person.

"Participant(s)" means any bank(s) or other financial institution(s) which
may purchase a participation interest from the Bank in the Letter of Credit,
this Reimbursement Agreement and certain of the other Related Documents
pursuant to a participation or similar agreement (including without limitation
the Intercreditor Agreement) among the Bank and the Participant(s).

"Permitted Liens" means liens, security interests and other encumbrances
permitted by Section 6.4.

"Person" means any natural person, corporation, partnership, association,
trust, joint venture, public body, limited liability company or other legal
entity.

"Phase I of the Development" means the first phase of the Development,
consisting of 456 units, and the Public Improvements to be constructed on the
real property described on Exhibit A of the Assessment and Lien.

"Plan" has the meaning set forth in Section 4.16.

"Pledge Agreement" means the Bond Pledge and Security Agreement attached
hereto as Exhibit B dated as of the date hereof by and among Account Parties,
the Bank and the Bond Trustee, as custodian, including such amendments,
modifications or supplements permitted pursuant to its terms and Section 6.1.

"Pledged Bonds" means Bonds which have been purchased with the proceeds of
a Purchase Drawing on the Letter of Credit and are pledged to the Bank under
the Bond Indenture and the Pledge Agreement.

"Principal Drawing" means a drawing under the Letter of Credit pursuant to
a Principal Drawing, as defined in the Letter of Credit, to pay principal of
the Bonds.

"Pro Forma Debt Service Charges" means for any period of four consecutive
fiscal quarters the sum of principal and interest which would have been payable
during such period on a loan in the original principal amount equal to the
outstanding principal balance of all unsecured Indebtedness (including, without
limitation, the Wellsford REIT Loan Obligations and the Letter of Credit,
without duplication) as of the date of such determination bearing interest at a
rate per annum equal to the sum of the then-current annual yield on seven (7)
year obligations issued by the United States Treasury most recently prior to
<PAGE>

the date of such determination plus one and three-fourths percent (1.75%) and
being payable based on a 25 year mortgage style amortization schedule. Such
determination of the Pro Forma Debt Service Charges by the Bank shall, so long
as the same shall be determined in good faith, be conclusive and binding absent
manifest error.

"Promissory Notes" means the promissory notes of even date herewith
attached hereto as Exhibit C-1 and Exhibit C-2 made by Wellsford REIT and the
Bond Issuer, respectively, in favor of the Bank, including such amendments,
modifications or supplements permitted pursuant to Section 6.1.

"Prospectus" means the 10-K of Wellsford REIT dated December, 1994 and
filed with the SEC.

"Public Improvements" has the meaning assigned in the Bond Indenture.

"Purchase Drawing" means a drawing under the Letter of Credit pursuant to
a Purchase Drawing, as defined in the Letter of Credit, to purchase Bonds that
are tendered or deemed tendered.

"Rate Mode" has the meaning assigned in the Bond Indenture.

"Rate Period" means each Weekly Rate Period or Term Rate Period, as
applicable.

"Rating Agency" means Standard & Poor's, Moody's or any successor or
additional rating agency that rates the Bonds or Wellsford REIT's senior
unsecured long-term debt (as applicable) at the written request of the Bond
Issuer or Wellsford (as applicable) with the written consent of the Bank, which
consent will not be unreasonably withheld.

"Rating Notice" has the meaning set forth in Section 5.4(h).

"RCRA" has the meaning set forth in Section 4.18(1).

"Real Estate" means all real property at any time owed or leased (as
lessee or sublessee) by Wellsford REIT or any of its Subsidiaries.

"Release" has the meaning set forth in Section 4.18(3).

"Reimbursement Agreement" means this Letter of Credit Reimbursement
Agreement, including such amendments, modifications or supplements permitted
pursuant to Section 10.2.

"REIT Status" means, with respect to Wellsford REIT, its status as a real
estate investment trust as defined in section 856(a) of the Code.

"Related Documents" means this Reimbursement Agreement, the Letter of
Credit, the Bond Indenture, the Remarketing Agreement, the Promissory Notes,
the Pledge Agreement, the Bonds, the Bond Purchase Contract, the Operating
Agreement, the Assessment Agreement, the Assessment and Lien, the Deed of
Trust, the Wellsford REIT Loan Agreement, the Intercreditor Agreement and the
Loan Documents, and, in each case, all exhibits, instruments or agreements
relating to each.

"Remarketing Agent" means the remarketing agent at the time serving as
such under the Remarketing Agreement; initially, First Interstate Bank of
Arizona, N.A.
<PAGE>

"Remarketing Agreement" means the Remarketing Agreement dated as of
December 1, 1995 among the Bond Issuer and the Remarketing Agent, including
such amendments, modifications or supplements permitted pursuant to its terms
and Section 6.1.

"SARA" has the meaning set forth in Section 4.18(1).

"SEC" means the federal Securities and Exchange Commission.

"Standard & Poor's" means Standard & Poor's Ratings Service, a division of
McGraw Hill, or its successors.

"Stated Amount" has the meaning given to such term in paragraph 2 of the
Letter of Credit.

"Subsidiary" means any corporation, association, partnership, trust or
other business entity of which the designated parent shall at any time own
directly or indirectly through a Subsidiary or Subsidiaries at least a majority
(by number of votes or controlling interests) of the outstanding Voting
Interests.

"Test Period" has the meaning set forth in Section 6.17(2).

"Term Rate Period" has the meaning assigned in the Bond Indenture.

"Unencumbered Operating Properties" means Real Estate which is owned one
hundred percent (100%) in fee simple by Wellsford REIT which satisfies all of
the following conditions:

(a) each of the Unencumbered Operating Properties shall be free and
clear of all Liens other than the Liens permitted in subsections 6.4(b)
and (d).

(b) to the best of Wellsford REIT's knowledge and belief, none of the
Unencumbered Operating Properties shall have any material title, survey or
other defects that would give rise to a materially adverse effect as to
the value, use of or ability to sell or refinance such property; and

(c) each of the Unencumbered Operating Properties shall consist
solely of Real Estate (i) which are income-producing operating properties
utilized principally for multi-family housing, (ii) which are fully
operating, and (iii) with respect to which valid certificates of occupancy
for all buildings thereon have been issued and are in full force and
effect.

"Voting Interest" means stock, partnership or similar ownership interests,
of any class or classes (however designated), the holders of which are at the
time entitled, as such holders, (a) to vote for the election of a majority of
the directors (or persons performing similar functions) of the corporation,
association, partnership, trust or other business entity involved, or (b) to
control, manage, or conduct the business of the corporation, partnership,
association, trust or other business entity involved.

"Weekly Rate Period" has the meaning assigned in the Bond Indenture.

"Wellsford Reimbursement Agreement" means that certain Reimbursement
Agreement dated as of December 1, 1995 between the Bond Issuer and Wellsford
<PAGE>

REIT.

"Wellsford REIT" means Wellsford Residential Property Trust, a Maryland
real estate investment trust having its principal place of business in New York
City.

"Wellsford REIT Loan Agreement" means that certain Second Amended and
Restated Revolving Credit Agreement dated as of June 30, 1995 by and between
Wellsford REIT and Bank Boston and the other parties listed therein and any
exhibits, instruments or agreements relating thereto, as amended by that
certain First Amendment dated as of December 1, 1995, including such
amendments, modifications or supplements permitted pursuant to its terms and
Section 6.1.

"Wellsford REIT Loan Obligations" means all indebtedness, obligations and
liabilities of Wellsford REIT to any of the Lenders, including the Bank and
Bank Boston, individually or collectively, under the Wellsford REIT Loan
Agreement or any of the other Loan Documents or in respect of any of the Loans
or the Notes (each as defined in the Wellsford REIT Loan Agreement) thereunder,
or other instruments at any tine evidencing any of the foregoing, whether
existing on the date of hereof or thereof or arising or incurred hereafter,
direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise.

Section 1.2 Accounting Matters. All accounting terms used herein without
definition shall be interpreted in accordance with generally accepted
accounting principles, and except as otherwise expressly provided herein all
accounting determinations required to be made pursuant to this Reimbursement
Agreement shall be made in accordance with generally accepted accounting
principles.

Section 1.3 Interpretation. All words used herein shall be construed to
be of such gender or number as the circumstances require. Reference to any
document means such document as amended or supplemented from time to time as
permitted under Section 6.1 and in accordance with the terms of such document.

Section 1.4 Relation to Other Documents. Nothing in this Reimbursement
Agreement shall be deemed to amend, or to relieve either Account Party of any
of its obligations under, any other Related Document. To the extent any
provision of this Reimbursement Agreement conflicts with any provision of any
other Related Document to which either Account Party or the Bank are parties,
the provisions of this Reimbursement Agreement shall control.

Section 1.5 Time for Performance. Time is of the essence to this
Reimbursement Agreement and the performance of obligations hereunder.
Notwithstanding the immediately preceding sentence, whenever any obligation
hereunder shall be stated to be due on a day which is not a Business Day, such
obligation shall be due on the next succeeding Business Day (provided that if
the obligation involves the payment of money upon which interest is accruing,
then the payment made on the next succeeding Business Day shall include
interest through such next succeeding Business Day).

ARTICLE 2

REIMBURSEMENT, FEES AND PAYMENT PROVISIONS

Section 2.1 Same Day Reimbursement. The Account Parties jointly and
<PAGE>

severally agree to pay the Bank for the following:

(1) Subject to the provisions of Section 2.2 relating to Liquidity
Drawing Amounts and LC Loans, the Bank shall be reimbursed for all amounts
advanced by the Bank in connection with a Drawing under the Letter of
Credit by 2:00 p.m., New York time, on the same day as the Drawing is made
under the Letter of Credit and honored by the Bank (a "Drawing Date"); and

(2) To the extent permitted by law all amounts required to be
reimbursed to the Bank pursuant to the foregoing clause (1) of this
Section 2.1 shall bear interest at the Base Rate for three days from the
date such amounts are required to be reimbursed, and thereafter at the
Default Rate until paid in full. In addition, to the extent permitted by
law, the Account Parties shall pay a late charge equal to three percent
(3%) of any amounts payable hereunder which are not paid within ten days
of the date when due. Such amounts shall be due and payable on demand.

If the Bank actually receives in immediately available funds from either
Account Party or the Bond Trustee reimbursement in full for any Drawing by 2:00
p.m., New York time, on the Drawing Date for such Drawing, then no interest
shall accrue on such Drawing for such day. To the extent not repaid in full,
including interest thereon in accordance with clause (2) of this Section 2.1,
by the Account Parties or the Bond Trustee by 8:00 a.m. New York time on the
Business Day next succeeding the Drawing Date, the Bank shall deliver to the
Agent a notice pursuant to Section 2.9 of the Wellsford REIT Loan Agreement,
and upon payment by the Lenders pursuant to Section 2.9 of the Wellsford REIT
Loan Agreement with respect to such Drawing, the obligation of Account Parties
to Bank to repay such amounts pursuant to this Reimbursement Agreement shall be
extinguished and such obligation shall instead be evidenced by the Notes under
Wellsford REIT Loan Agreement as provided therein.

Section 2.2 Reimbursement of Liquidity Drawing Amounts and LC Loans. The
Account Parties agree that they shall reimburse the Bank for amounts drawn
under Liquidity Drawings in accordance with the following provision of this
Section 2.2:

(1) To the extent not repaid in full, including interest thereon in
accordance with clause (2) of Section 2.1, by the Account Parties or the
Bond Trustee by 8:00 a.m. New York time on the Business Day next
succeeding the Drawing Date (the "LC Loan Eligibility Date"), (i) all
Liquidity Drawings shall immediately and without further action by the
Account Parties, the Bond Trustee or the Bank constitute a loan under this
Reimbursement Agreement (an "LC Loan") and (ii) the Bank shall deliver to
the Agent a notice pursuant to Section 2.9 of the Wellsford REIT Loan
Agreement, and upon payment by the Lenders pursuant to Section 2.9 of the
Wellsford REIT Loan Agreement with respect to such Drawing, the obligation
of Account Parties to Bank to repay such amounts pursuant to this
Reimbursement Agreement shall be extinguished and such obligation shall
instead be evidenced by the Notes under Wellsford REIT Loan Agreement as
provided therein. From and after the LC Loan Eligibility Date and until
either the LC Loans have been repaid in full or advances have been made
pursuant to Section 2.9 of the Wellsford REIT Loan Agreement, the LC Loans
shall bear interest at the Base Rate and shall be payable in arrears on
each Interest Payment Date (as defined in the Wellsford REIT Loan
Agreement). Such LC Loans may be prepaid in accordance with Section 2.4,
and shall be prepaid as and when required under Section 3.2 of the
Wellsford REIT Loan Agreement.
<PAGE>

(2) Notwithstanding the foregoing, all unreimbursed Liquidity
Drawing Amounts and LC Loans shall be accelerated and become immediately
due and payable on the Expiration Date. To the extent permitted by law,
any unreimbursed Liquidity Drawing Amounts or LC Loans, and any interest
accruing thereon, that are not paid when due thereafter shall bear
interest at the Default Rate. In addition, to the extent permitted by
law, the Account Parties shall pay a late charge equal to three percent
(3%) of any amounts payable hereunder which are not paid within ten days
of the date when due. While held by or for the benefit of the Bank,
Pledged Bonds shall bear interest at the Base Rate.

Section 2.3 Limitation on Interest. Notwithstanding anything in this
Reimbursement Agreement to the contrary, all agreements between the Account
Parties and the Bank, whether now existing or hereafter arising and whether
written or oral, are hereby limited so that in no contingency, whether by
reason of acceleration of the maturity of any of the obligations to the Bank
hereunder or under any other Related Document or otherwise, shall the interest
contracted for, charged or received by the Bank exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever,
interest would otherwise be payable to the Bank in excess of the maximum lawful
amount, the interest payable to the Bank shall be reduced to the maximum amount
permitted under applicable law; and if from any circumstance the Bank shall
ever receive anything of value deemed interest by applicable law in excess of
the maximum lawful amount, an amount equal to any excessive interest shall be
applied to the reduction of the principal balance of the obligations to the
Bank hereunder or under the other Related Documents (including the period of
any renewal or extension thereof) so that the interest thereon for such full
period shall not exceed the maximum amount permitted by applicable law. This
section shall control all agreements between the Account Parties and the Bank.

Section 2.4 Remarketing of Pledged Bonds. As security for the amounts
owed to the Bank and the Lenders and in order to reimburse the Bank and the
Lenders for amounts drawn under the Letter of Credit and interest thereon
pursuant to Sections 2.1 and 2.2, Account Parties have granted to the Bank,
pursuant to the Pledge Agreement, security interests in all of their respective
right, title and interest in and to the Pledged Bonds. Each Account Party
shall take such further steps and execute such further documents as are within
its authority as the Bank may from time to time request in order to more fully
evidence, perfect and protect such security interests. Account Parties shall
have the right to effect a release of Pledged Bonds from such pledge and
security interest by paying or prepaying portions of the unreimbursed Liquidity
Drawing Amounts and/or unpaid LC Loans (including, without limitation, with
advances under the Wellsford REIT Loan Agreement) in accordance with the
following provisions:

(1) Account Parties shall cause the Bond Trustee to provide the Bank
with at least one (1) Business Day's prior written notice or telephonic
notice (confirmed in writing) of: (a) Account Parties' intent to pay or
prepay any Liquidity Drawing Amounts or LC Loans; (b) the principal amount
of Pledged Bonds to be released and the amounts of the required payment or
prepayment as determined pursuant to clause (2) of this Section 2.4 (with
separate designation of the principal, interest and other amounts to be
included in the payment and/or prepayment); and (c) the particular
Liquidity Drawing Amounts and/or LC Loans which are to be prepaid and the
particular Pledged Bonds to be released. The written notice required by
this clause (1) shall be in the form of Exhibit I to the Letter of Credit.

(2) As a condition to release of Pledged Bonds from the Bank's
<PAGE>

pledge and security interests, the Bank shall receive a payment
(including, if and to the extent applicable, pursuant to Section 2.9 of
the Wellsford REIT Loan Agreement) in an amount equal to the sum of:

(a) The amount of the Liquidity Drawings (irrespective of
whether such amounts then constitute Liquidity Drawing Amounts or LC
Loans) under the Letter of Credit made in connection with the
purchase of such Pledged Bonds, to the extent not previously paid;

(b) Interest pursuant to Sections 2.1 and 2.2 on the sums
described in clause (a) above to the date of such payment, to the
extent not previously paid; and

(c) Any other amounts due and payable under this Reimbursement
Agreement as of the date of such payment, to the extent not
previously paid.

(3) No amounts received by the Bank pursuant to clause (2) of this
Section 2.4 shall be applied against LC Loans until all unreimbursed
Liquidity Drawing Amounts have been reimbursed to the Bank in full,
together with any other amounts required to be paid with respect thereto
pursuant to the said clause (2). As among outstanding Liquidity Drawing
Amounts, payments received pursuant to clause (2) of this Section 2.4
shall be applied against Liquidity Drawing Amounts (and unpaid accrued
interest thereon) in order based upon the time that the Liquidity Drawing
Amounts have been outstanding, starting with those Liquidity Drawing
Amounts that have been outstanding the longest.

(4) Upon payment to the Bank of the sums described in clause (2) of
this Section 2.4, and acknowledgement by the Bank of the receipt thereof,
the Bank or designated agent shall deliver to the Bond Trustee (to the
extent that the payment is on account of the remarketing of the Bonds, or
for delivery to the Bond Issuer, to the extent that the payment is on
account of a payment or prepayment of Liquidity Drawing Amounts or LC
Loans other than in connection with a remarketing of Bonds) a principal
amount of Pledged Bonds equal to the principal amount of Liquidity
Drawings made in connection with the purchase of the Bonds, and said
Pledged Bonds shall be deemed released from the pledge and security
interests under the Pledge Agreement.

Section 2.5 Transfer/Amendment Fee. Upon each transfer of the Letter of
Credit in accordance with paragraph 8 thereof, Account Parties agree to pay to
the Bank the sum of $1,500 plus the Bank's actual costs and expenses associated
with such transfer (and interest on such costs and expenses from the date
expended by the Bank to the date reimbursed by Account Parties at the interest
rate specified in Section 2.2), payable on the date of such transfer. Upon each
amendment of the Letter of Credit, this Reimbursement Agreement or any of the
other Related Documents, the Account Parties shall pay to the Bank such
amendment fees, plus the Bank's actual costs and expenses associated with such
amendment (and interest on such costs and expenses from the date expended by
the Bank to the date reimbursed by Account Parties at the interest rate
specified in Section 2.2), payable on the effective date of such amendment, as
shall be agreed upon by the Account Parties and the Bank at such time;
provided, however, that no amendment fee shall be payable by Account Parties
solely by reason of a reduction in the Stated Amount of the Letter of Credit.

Section 2.6 Costs, Expenses and Taxes.
<PAGE>

(1) Account Parties agree to pay on demand all reasonable costs and
expenses in connection with the preparation, execution, delivery and
administration of this Reimbursement Agreement, the other Related
Documents and any other documents which may be delivered in connection
with this Reimbursement Agreement and the other Related Documents,
including, without limitation, the fees and out-of-pocket expenses of
counsel for the Bank with respect thereto and with respect to advising the
Bank as to its rights and responsibilities under this Reimbursement
Agreement and the other Related Documents and all costs and expenses, if
any, in connection with the enforcement of this Reimbursement Agreement,
the other Related Documents and such other documents which may be
delivered in connection with this Reimbursement Agreement. The fees and
expenses of Bank's counsel in connection with the initial negotiation and
preparation of this Reimbursement Agreement and the other Related
Documents payable by Account Parties shall be as set forth in that certain
letter agreement by and between the Bank and Wellsford REIT dated October
16, 1995. In addition, Account Parties shall pay any and all stamp and
other taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing and recording of this Reimbursement
Agreement, the other Related Documents and such other documents, and
agrees to save the Bank harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay
such taxes and fees.

(2) Notwithstanding anything herein to the contrary, if any future
applicable law or any amendment or modification of present applicable law
(including, without limitation, statutes, rules and regulations thereunder
and legally binding interpretations thereof by any competent court or by
any governmental or other regulatory body or official with appropriate
jurisdiction charged with the administrative or the interpretation
thereof, and requests, directives, instructions and notices at any time or
from time to time hereafter made upon or otherwise issued to the Bank by
any central bank or other fiscal, monetary or other authority, whether or
not having the force of law) shall: (a) subject the Bank to any tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature
with respect to this Reimbursement Agreement, the other Related Documents
or the Banking Arrangements (other than taxes based upon or measured by
the income or profits of the Bank), or (b) materially change the basis of
taxation (except for changes in taxes on income or profits) of payments to
the Bank of the principal of or the interest on any Drawings or LC Loans
or any other amounts payable to the Bank under this Reimbursement
Agreement or the other Related Documents, or (c) impose or increase or
render applicable any special deposit, reserve, assessment, liquidity,
capital adequacy or other similar requirements (whether or not having the
force of law) against assets held by, or deposits in or for the account
of, or Drawings or LC Loans by, or the Letters of Credit from, or
commitments of the Bank beyond those in effect as of the date hereof, or
(d) impose on the Bank any other conditions or requirements with respect
to this Reimbursement Agreement, the other Related Documents, the LC
Loans, any Drawings, the Letter of Credit, or any class of loans or
commitments of which any of the same forms a part; and the result of any
of the foregoing is: (i) to increase the cost to the Bank of making,
funding, issuing, renewing, extending or maintaining any of the LC Loans,
any Liquidity Drawing Amounts, the Letter of Credit or any Banking
Arrangements hereunder, or (ii) to reduce the amount of principal,
interest or other amount payable to the Bank hereunder on account of any
Banking Arrangements hereunder or any of the LC Loans, Liquidity Drawing
Amounts or Letters of Credit, or (iii) to require the Bank to make any
<PAGE>

payment or to forego any interest or other sum payable hereunder, the
amount of which payment or foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable or deemed received by
the Bank from the Account Parties hereunder, then, and in each such case,
the Account Parties will, within fifteen (15) days of demand made by the
Bank at any time and from time to time and as often as the occasion
therefor may arise, pay to the Bank such additional amounts as the Bank
shall determine in good faith to be sufficient to compensate the Bank for
such additional cost, reduction, payment or foregone interest or other
sum. The Bank, in determining such amounts, may use any reasonable
averaging and attribution methods, generally applied by the Bank.

Section 2.7 Drawing Fee. Account Parties agree to pay a drawing fee (the
"Drawing Fee") to the Bank on each Drawing Date in the amount of $200 for each
Drawing made on such Drawing Date.

Section 2.8 Letter of Credit Facing Fee. Account Parties agree to pay to
the Bank a nonrefundable letter of credit facing fee, payable without any
requirement of notice or demand by the Bank, with the first such payment due on
January 1, 1996 for the period from the Closing Date through December 31, 1995,
and payable quarterly in arrears thereafter on or before each Wellsford REIT
Loan Agreement Interest Payment Date in an amount equal to 0.50% per annum of
the Stated Amount (without regard to reductions of the Stated Amount subject to
reinstatement, it being understood that reductions effected by submission of a
Certificate in the form of Exhibit "D" attached to the Letter of Credit are not
subject to reinstatement) (said quarterly payment to be computed on the basis
of a year of 360 days and the actual number of days elapsed during the
quarter).

Section 2.9 Capital Adequacy. If after the date hereof the Bank
determines that (a) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements of general application for banks or
bank holding companies or any change in the interpretation or application
thereof by any governmental authority charged with the administration thereof,
or (b) compliance by the Bank or its parent bank holding company with any
future guideline, request or directive of any such entity regarding capital
adequacy or any amendment or change in interpretation of any existing
guideline, request or directive (whether or not having the force of law), has
the effect of reducing the return on the Bank's or such holding company's
capital as a consequence of the Banking Arrangements hereunder to a level below
that which the Bank or holding company could have achieved but for such
adoption, change or compliance (taking into consideration the Bank's or such
holding company's then existing policies with respect to capital adequacy and
assuming the full utilization of such entity's capital) by any amount deemed by
the Bank to be material, then the Bank may notify the Account Parties thereof.
The Account Parties agree to pay to the Bank the amount of such reduction in
the return on capital as and when such reduction is determined, upon
presentation by the Bank of a statement of the amount setting for the Bank's
calculation thereof. In determining such amount, the Bank may use any
reasonable averaging and attribution methods, generally applied by the Bank.

Section 2.10 Method of Payment. All payments by Account Parties to the
Bank hereunder or under any of the other Related Documents (other than the Loan
Documents) shall be fully earned when due and nonrefundable when paid and made
in lawful currency of the United States and in immediately available funds.
Amounts payable to the Bank hereunder shall be transferred to the Bank's
account at The Chase Manhattan Bank, N.A., One Chase Plaza, New York, New York
10081, ABA 021-000-021, for credit to the account of Dresdner Bank AG, New York
<PAGE>

and Cayman Islands Branches, Account No. 920-1-059-07, Reference: Palomino
Park Bonds (or to such other account of the Bank as the Bank may specify by
written notice to Account Parties) not later than 2:00 p.m. New York, New York
time, on the date payment is due. Any payment received by the Bank after 2:00
p.m., New York, New York time, shall be deemed to have been received by the
Bank on the next Business Day. If any payment hereunder is due on a day that
is not a Business Day, then such payment shall be due on the immediately
succeeding Business Day.

Section 2.11 Maintenance of Accounts. The Bank shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of Account Parties and the amounts payable and paid from time to
time hereunder. In any legal action or proceeding in respect of this
Reimbursement Agreement, the entries made in such account or accounts shall be
presumptive evidence of the existence and amounts of the obligations of Account
Parties therein recorded. The failure to record any such amount shall not,
however, limit or otherwise affect the obligations of Account Parties hereunder
to repay all amounts owed hereunder, together with all interest accrued thereon
as provided in this Article 2.

Section 2.12 Cure. Account Parties agree to pay to the Bank on demand any
amounts advanced by or on behalf of the Bank to the extent required to cure any
default, event of default or event of nonperformance under this Reimbursement
Agreement or any other Related Document. The Bank shall give Account Parties
reasonably prompt notice of any such advances. The Bank shall have the right,
but not the obligation, to cure any such default, event of default or event of
nonperformance.

Section 2.13 Withholding. All payments of principal, interest and any
other sums due hereunder shall be made in the amounts required hereunder
without any reduction or setoff, notwithstanding the assertion of any right of
recoupment or setoff or of any counterclaim by Account Parties, and without any
withholding on account of taxes, levies, duties or any other deduction
whatsoever. If Account Parties are required by law to withhold or deduct any
sum from payments required under this Reimbursement Agreement. Account Parties
shall, to the extent permitted by applicable law, increase the amount paid by
them to the Bank so that, after all withholdings and deductions, the amount
received by the Bank shall equal the amount the Bank would have received
without any such withholding or deduction.

Section 2.14 Reduction and Reinstatement of the Letter of Credit. The
Stated Amount shall be reduced and reinstated as specified in the Letter of
Credit.

Section 2.15 Loan Documents. Each Account Party acknowledges and agrees
that the terms and conditions of the Wellsford REIT Loan Agreement and the
other Loan Documents are independent of the terms and provisions of this
Agreement and the other Related Documents and shall not diminish, restrict or
otherwise limit the terms of this Agreement or any of the other Related
Documents. The Wellsford REIT Loan Agreement and the other Loan Documents are
not, and shall not be deemed to be, a novation, cancellation, satisfaction or
substitution of this Agreement or any of the other Related Documents or the
obligations arising hereunder or thereunder.

ARTICLE 3

CONDITIONS PRECEDENT
<PAGE>

As a condition precedent to the issuance of the Letter of Credit, the Bank
shall have received the following items on or before the Closing Date, each in
form and substance satisfactory to the Bank and its counsel:

Section 3.1 Account Parties' Resolutions; Bylaws. Copies of resolutions
of the Board of Trustees of Wellsford REIT and the Bond Issuer approving this
Reimbursement Agreement, the other Related Documents to which Wellsford REIT or
the Bond Issuer (as applicable) is a party, the form and content of the Letter
of Credit and the other matters contemplated hereby and copies of all other
documents evidencing any other necessary organizational action and copies of
Wellsford REIT's Bylaws and the Bond Issuer's Bylaws, all certified by the
Secretary of Wellsford REIT and the Secretary of the Bond Issuer, as applicable
(which certificate shall state that such resolutions and Bylaws are true,
complete and in full force and effect on the Closing Date).

Section 3.2 Highlands' Resolutions; Bylaws. Copies of resolutions of the
Members of Highlands approving the Assessment Agreement, the Assessment and
Lien and the other Related Documents to which Highlands is a party and the
other matters contemplated hereby, copies of all other documents evidencing any
other necessary corporate action and copies of Highlands' Bylaws, all certified
by a duly authorized Member of Highlands (which certificate shall state that
such resolutions and Bylaws are true, complete and in full force and effect on
the Closing Date).

Section 3.3 Account Parties' Organizational Documents. Copies certified as
of recent date by the appropriate officer of each State in which Wellsford REIT
and the Bond Issuer each are organized or authorized to do business, and by a
duly authorized officer of Wellsford REIT or the Bond Issuer (as applicable) to
be true and complete, of the declaration of trust of Wellsford REIT and the
Articles of Incorporation of the Bond Issuer, as applicable, or its
qualifications to do business, as applicable, as in effect on such date of
certification.

Section 3.4 Highlands' Organizational Documents. Copies certified as of
recent date by the appropriate officer of the State of Colorado and any other
State in which Highlands is authorized to do business, and by a duly authorized
Member of Highlands to be true and complete, of the Operating Agreement or its
qualifications to do business, as applicable, as in effect on such date of
certification.

Section 3.5 Regulatory Approvals. Certified copies of all approvals or
authorizations by, or consents of, or notices to or registrations with, any
governmental body or agency required for Wellsford REIT, the Bond Issuer,
Highlands or the District to enter into this Reimbursement Agreement or the
other Related Documents to which each of them is a party, and copies of all
such approvals, authorizations, consents, notices or registrations required to
be obtained or made prior to the Closing Date in connection with the
transactions contemplated by the Related Documents.

Section 3.6 Incumbency Certificates. Certificates from the Secretaries of
Wellsford REIT and the Bond Issuer, and from a duly authorized Member of
Highlands, certifying the names and true signatures of the officers of
Wellsford REIT, the Bond Issuer and Highlands, respectively, authorized to sign
this Reimbursement Agreement and/or the other Related Documents to which
Wellsford REIT, the Bond Issuer and/or Highlands is a party.

Section 3.7 Opinions of Counsel. Opinions, in form and substance
acceptable to the Bank and upon which the Bank may rely, of (a) counsel to
<PAGE>

Wellsford REIT, (b) counsel to Highlands, (c) Bond counsel and counsel to the
Bond Issuer, (d) special counsel to the Bank and (e) German in-house counsel to
the Bank.

Section 3.8 Related Documents. An executed copy of each of the Related
Documents.

Section 3.9 Amendment to the Wellsford REIT Loan Agreement. The Wellsford
REIT Loan Agreement and the Intercreditor Agreement shall have been amended in
form and substance acceptable to the Bank and its counsel.

Section 3.10 Compliance Certificate. A Compliance Certificate in the form
of Exhibit D hereto dated as of the Closing Date demonstrating compliance with
each of the covenants calculated therein as of the most recent fiscal quarter
end of Wellsford REIT shall have been delivered to the Bank.

Section 3.11 Ratings. A rating letter from Moody's which confirms that the
Bonds have received long- and short-term ratings at least equal to the long-
and short-term ratings of the Bank.

Section 3.12 Account Parties Certificate(s). Certificates signed by duly
authorized officers of Wellsford REIT and the Bond Issuer, respectively, dated
the Closing Date, stating that: (a) the representations and warranties of
Wellsford REIT and/or the Bond Issuer, respectively, contained in Article 4 and
in the other Related Documents are correct on and as of the Closing Date as
though made on and as of such date; (b) Wellsford REIT and/or the Bond Issuer,
respectively, are in compliance with all of the covenants set forth in Articles
5 and 6; (c) no petition by or against Wellsford REIT and/or the Bond Issuer
has at any time been filed under the United States Bankruptcy Code or under any
similar act; (d) no Event of Default or Default has occurred and is continuing,
or would result from the issuance of the Letter of Credit and execution,
delivery or performance of this Reimbursement Agreement or the other Related
Documents; and (e) such other matters as the Bank or its counsel may request.

Section 3.13 Title. Title reports in form and substance satisfactory to
the Bank on all property securing payment of the assessments to be paid to pay
debt service on the Bonds.

Section 3.14 Payment of Fees and Expenses. Payment of all amounts
(including attorney's fees and expenses) payable at the Closing Date pursuant
to Section 2.6.

Section 3.15 Financial Statements. The most recent annual audited
financial statements of Wellsford REIT, and the unaudited financial statements
as of the Balance Sheet Date of Wellsford REIT and, to the extent available,
Highlands. The most recent unaudited financial statements of the Bond Issuer.
All of such statements shall be accompanied with a certificate from an officer
of Wellsford REIT, Highlands or the Bond Issuer, as applicable, stating that no
material adverse change in the consolidated assets, liabilities, operations or
financial condition of Wellsford REIT, Highlands or the Bond Issuer, as
applicable, has occurred since the date of the most recent financial
statements.

Section 3.16 Highlands Certificate(s). Certificates signed by duly
authorized officers of Highlands, dated the Closing Date, stating that: (a) no
petition by or against Highlands has at any time been filed under the United
States Bankruptcy Code or under any similar act; (b) no event of default nor
any occurrence, circumstance or event or any combination thereof which with the
<PAGE>

lapse of time and/or giving of notice would constitute an event of default
under any of the Related Documents to which Highlands is a party has occurred
and is continuing, or would result from the execution, delivery or performance
of any of the Related Documents; (c) the representations and warranties of
Highlands contained in the Assessment Agreement are correct on and as of the
Closing Date; and (d) such other matters as the Bank or its counsel may
request.

Section 3.17 Remarketing Agent Certificate. A certificate from the
Remarketing Agent in form and substance satisfactory to the Bank and its
counsel.

Section 3.18 Bond Trustee Certificate. A certificate of the Bond Trustee
in form and substance satisfactory to the Bank and its counsel.

Section 3.19 Recordings and Filings. Evidence that the Assessment and
Lien and the Deed of Trust have been recorded in the appropriate county
recorder's office and that all appropriate UCC-1 financing statements have been
filed in the appropriate filing office(s).

Section 3.20 Other Documents. Such other documents. instruments,
approvals and, if requested by the Bank, certified duplicates of executed
copies thereof, and opinions as the Bank may reasonably request.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

Each Account Party represents and warrants to the Bank, for itself and not
with respect to the other Account Party, as follows:

Section 4.1 Corporate Authority, Etc.

(1) Incorporation; Good Standing. (a) Wellsford REIT: (i) is a
Maryland real estate investment trust duly organized pursuant to its
organizational documents and amendments thereto filed with the Secretary
of State of Maryland and is validly existing and in good standing under
the laws of Maryland, (ii) has all requisite power to own its property, to
conduct its business as now conducted and as presently contemplated and to
enter into and satisfy its obligations under this Reimbursement Agreement
and the other Related Documents to which it is a party, (iii) is in good
standing as a foreign entity and is duly authorized to do business in
Denver, Colorado and in any jurisdictions where the Unencumbered Operating
Properties are located and in each other jurisdiction where a failure to
be so qualified in such other jurisdiction could have a materially adverse
effect on the business, assets or financial condition of Wellsford REIT,
and (iv) is a real estate investment trust in full compliance with and
entitled to the benefits of Section 856 of the Code. (b) Bond Issuer:
(i) is a Colorado non-profit corporation, duly organized, incorporated,
validly existing and in good standing under the laws of the State of
Colorado, (ii) has all requisite power to own its property, to conduct its
business as now conducted and as presently contemplated and to enter into
and satisfy its obligations under the Reimbursement Agreement and the
other Related Documents to which it is a party, and (iii) is in good
standing and authorized to do business in Colorado and in such other
jurisdictions where a failure to be so qualified could have a material
adverse effect on the business, assets on financial condition of Bond
Issuer. (c) Highlands: (i) is a limited liability company duly
<PAGE>

organized, incorporated, validly existing and in good standing under the
laws of the State of Colorado, (ii) has all requisite power to own its
property, to conduct its business as now conducted and as presently
contemplated and to enter into and satisfy its obligations under the
Related Documents to which it is a party, and (iii) is in good standing
and authorized to do business in Denver, Colorado and in such other
jurisdictions where a failure to be so qualified could have a material
adverse effect on the business, assets or financial condition of
Highlands. (d) Each of the Subsidiaries of Wellsford REIT: (i) is a
corporation, limited partnership, limited liability company or trust duly
organized under the laws of its state of organization and is validly
existing and in good standing under the laws thereof, (ii) has all
requisite power to own its property and conduct its business as now
conducted and as presently contemplated, and (iii) is in good standing and
is duly authorized to do business in each jurisdiction where a failure to
be so qualified could have a materially adverse effect on the business,
assets or financial condition of Wellsford REIT, Highlands or such
Subsidiary.

(2) Authorization. The execution, delivery and performance of this
Reimbursement Agreement and the other Related Documents and the
transactions contemplated hereby and thereby (a) are within the authority
of Wellsford REIT, the Bond Issuer and Highlands, respectively, (b) have
been duly authorized by all necessary proceedings on the part of Wellsford
REIT, the Bond Issuer and Highlands, respectively, (c) do not and will not
conflict with or result in any breach or contravention of any provision of
law, statute, rule or regulation to which Wellsford REIT, the Bond Issuer
or Highlands is subject or any judgment, order, writ, injunction, license
or permit applicable to Wellsford REIT, the Bond Issuer or Highlands or
any of their respective properties, (d) do not and will not conflict with
or constitute a default (whether with the passage of time or the giving of
notice, or both) under any provision of the charter documents, partnership
agreement, declaration of trust or other charter documents or bylaws of,
or any agreement or other instrument binding upon, Wellsford REIT, the
Bond Issuer, Highlands or any of their respective properties, and (e) do
not and will not result in or require the imposition of any lien or other
encumbrance on any of the properties, assets or rights of Wellsford REIT,
the Bond Issuer or Highlands or any of their respective properties other
than the liens for the benefit of the holders of the Bonds created by the
Bond Indenture and the lien of the Assessment and Lien.

(3) Enforceability. The execution and delivery of this Reimbursement
Agreement and the other Related Documents to which each of them are
parties are valid and legally binding obligations of Wellsford REIT, the
Bond Issuer and Highlands, enforceable against each of them in accordance
with the respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding
therefor may be brought

Section 4.2 Governmental Approvals. The execution, delivery and
performance by Wellsford REIT and the Bond Issuer of this Reimbursement
Agreement and the execution, delivery and performance by Wellsford REIT, the
Bond Issuer and Highlands of the Related Documents to which each of them are
parties and the transactions contemplated hereby and thereby do not require the
<PAGE>

approval or consent of, or filing with, any governmental agency or authority
other than those already obtained.

Section 4.3 Title to Properties; Leases. Except as indicated on
Schedule A hereto, Wellsford REIT and its Subsidiaries, the Bond Issuer and its
Subsidiaries, and Highlands and its Subsidiaries own all of the assets
reflected in their respective consolidated balance sheets as at the Balance
Sheet Date or acquired since that date (except property and assets sold or
otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances
except Permitted Liens. Except as set forth in the title report delivered in
accordance with Section 3.13, Highlands holds fee title to all of the property
securing payment of the assessments to be paid to pay debt service on the
Bonds, subject to no rights of others, including any mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances and Permitted Liens described in Sections 6.4(b) and 6.4(d).
Without limiting the foregoing, Wellsford REIT and its Subsidiaries and
Highlands and its Subsidiaries each have good and marketable fee simple title
to, or a valid and subsisting leasehold interest in, all real property
reasonably necessary for the operation of their respective businesses, free
from all liens or encumbrances of any nature whatsoever, except for Permitted
Liens. Wellsford REIT or its Subsidiary, and Highlands or its Subsidiary, as
the case may be, is the insured under owner's policies of title insurance
covering all real property owned by it, in each case in an amount not less than
the purchase price for such real property.

Section 4.4 Financial Statements. Wellsford REIT and Highlands have
furnished to the Bank: (a) the consolidated balance sheet of Wellsford REIT as
of December 31, 1994 and its related consolidated statements of income, changes
in stockholder equity and cash flows for the fiscal year then ended, audited
and certified by Ernst & Young LLP; (b) an unaudited consolidated balance sheet
and an unaudited consolidated statement of income and cash flows of each of
them for each of the fiscal quarters of each of them ended since December 31,
1994 certified by their respective chief financial or chief accounting officers
to have been prepared in accordance with generally accepted accounting
principles consistent with those used in the preparation of the annual audited
statements delivered pursuant to subsection (a) above and to fairly present the
financial condition of Wellsford REIT and its Subsidiaries and Highlands and
its Subsidiaries as at the close of business on the dates thereof and the
results of operations for the fiscal quarters then ended (subject to year-end
adjustments); and (c) an unaudited consolidated statement of operating income
for each of them and, with respect to Wellsford REIT and its Subsidiaries, an
unaudited statement of operating income for each of the properties within the
Unencumbered Operating Properties for the fiscal quarter ended the Balance
Sheet Date satisfactory in form and substance to the Bank and certified by
Wellsford REIT's chief financial officer as fairly presenting the operating
income for such parcels for such periods. Such balance sheet and statements of
income, stockholder's equity and cash flows have been prepared in accordance
with generally accepted accounting principles, are complete, true and correct
and fairly present the financial condition of Wellsford REIT and its
Subsidiaries and Highlands and its Subsidiaries, respectively, as of such dates
and the results of the operations of each of them. There are no liabilities,
contingent or otherwise, of Wellsford REIT or Highlands or any of their
respective Subsidiaries involving material amounts not disclosed in said
financial statements and the related notes thereto.

Section 4.5 No Material Changes. Since the Balance Sheet Date, there
<PAGE>

has occurred no materially adverse change in the financial condition or
business of Wellsford REIT and its Subsidiaries taken as a whole or Highlands
and its Subsidiaries taken as a whole from that shown on or reflected in the
consolidated balance sheet of each of them as of the Balance Sheet Date, or
their respective consolidated statement of income or cash flows for the fiscal
year then ended, other than changes in the ordinary course of business that
have not had any materially adverse effect either individually or in the
aggregate on the business or financial condition of Wellsford REIT or
Highlands.

Section 4.6 Franchises, Patents, Copyrights, Etc. Wellsford REIT and
its Subsidiaries, the Bond Issuer and its Subsidiaries and Highlands and its
Subsidiaries, respectively, each possess all franchises, parents, copyrights,
trademarks, trade names, servicemarks, licenses and permits, and rights in
respect of the foregoing, adequate for the conduct of their business
substantially as now conducted without known conflict with any rights of
others. Highlands possesses all franchises, patents, copyrights, trade names,
servicemarks, licenses and permits, and rights in respect of the foregoing,
including without limitation land use approvals, adequate for the construction
and completion of Phase I of the Development.

Section 4.7 Litigation. Except as stated on Schedule B there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against Wellsford REIT or any of its Subsidiaries, the Bond Issuer or any of
its Subsidiaries or Highlands or any of its Subsidiaries before any court,
tribunal or administrative agency or board that, if adversely determined,
might, either in any case or in the aggregate, materially adversely affect the
properties, assets, financial condition or business of such Person or
materially impair the right of such Person to carry on business substantially
as now conducted by it or result in any liability not adequately covered by
insurance, or for which adequate reserves are not maintained on the balance
sheet of such Person, or which question the validity of this Reimbursement
Agreement or any of the other Related Documents, any action taken or to be
taken pursuant hereto or thereof or any lien or security interest created or
intended to be created pursuant hereto or thereto, or which will adversely
affect the ability of Wellsford REIT, the Bond Issuer and/or the Highlands to
pay and perform their respective obligations in the manner contemplated by this
Reimbursement Agreement and the other Related Documents, or of Wellsford REIT
to pay and perform the Wellsford REIT Loan Obligations in the manner
contemplated by the Wellsford REIT Loan Agreement and the Loan Documents.

Section 4.8 No Material, Adverse Contracts, Etc. None of Wellsford
REIT, the Bond Issuer, Highlands or any of their respective Subsidiaries is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation that has or is expected in the future to have
a materially adverse effect on the business, assets or financial condition of
such Person. None of Wellsford REIT, the Bond Issuer, Highlands or any of
their respective Subsidiaries is a party to any contract or agreement that has
or is expected, in the judgment of the officers of such Person, to have any
materially adverse effect on the business of any of them.

Section 4.9 Compliance with Other Instruments, Laws, Etc. None of
Wellsford REIT, the Bond Issuer, Highlands or any of their respective
Subsidiaries is in violation of any provision of its charter or other
organizational documents, by-laws, or any agreement or instrument to which it
may be subject or by which it or any of its properties may be bound or any
decree, order, judgment, statute, license, rule or regulation, in any of the
foregoing cases in a manner that could result in the imposition of substantial
<PAGE>

penalties or materially and adversely affect the financial condition,
properties or business of such Person.

Section 4.10 Tax Status. Wellsford REIT, the Bond Issuer, Highlands
and each of their respective Subsidiaries (a) has made or filed all federal and
state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject, (b) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and by appropriate proceedings, and (c) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of Wellsford REIT, the Bond Issuer and
Highlands know of no basis for any such claim.

Section 4.11 No Event of Default. No Default or Event of Default has
occurred and is continuing.

Section 4.12 Holding Company and Investment Company Acts, Etc. None
of Wellsford REIT, the Bond Issuer, Highlands or any of their respective
Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company," as such terms are defined
in the Public Utility Holding Company Act of 1935; nor is it an "investment
company," or an "affiliated company" or a "principal underwriter" of an
"investment company," as such terms are defined in the Investment Company Act
of 1940. Neither Account Party is subject to regulation under the Federal
Power Act, the Interstate Commerce Act or to its knowledge any federal or state
statute or regulation which regulates the issuance of securities and/or debt of
companies limiting its ability to incur indebtedness for money borrowed, except
federal and state securities laws.

Section 4.13 Absence of UCC Financing Statements, Etc. Except with
respect to Permitted Liens, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any filing records, registry or other public office, that
purports to cover, affect or give notice of any present or possible future lien
on, or security interest or security title in, any property of Wellsford REIT,
the Bond Issuer, Highlands or any of their respective Subsidiaries.

Section 4.14 Noncontravention. The execution and delivery by
Wellsford REIT, the Bond Issuer and Highlands of this Reimbursement Agreement
and the other Related Documents to which each of them is a party, and the
performance of their respective obligations hereunder and thereunder, will not
violate any existing law or regulation or result in a breach of any of the
terms of, or constitute a default under, any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which either of them is a
party or by which either of them or any of their respective property is bound
or their respective articles of incorporation, declarations of trust (as
applicable), bylaws or any of the rules or regulations applicable to either of
them or to their respective property or decree or order of any court or other
governmental body.

Section 4.15 Certain Transactions. Except as set forth in the
Prospectus with respect to Wellsford REIT, none of the officers, trustees,
directors or employees of Wellsford REIT, the Bond Issuer, Highlands or any of
their respective Subsidiaries is a party to any transaction with Wellsford
REIT, the Bond Issuer, Highlands or any of their respective Subsidiaries
<PAGE>

requiring or permitting the payment of annual consideration in excess of
$100,000.00 (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
trustee, director or such employee or, to the knowledge of Wellsford REIT, the
Bond Issuer and Highlands, any corporation, partnership, trust or other entity
in which any officer, trustee, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.

Section 4.16 Employee Benefit Plans. Wellsford REIT, the Bond
Issuer, Highlands and each ERISA Affiliate of each of them have fulfilled their
obligations under the minimum funding standards of ERISA and the Code with
respect to each Employee Benefit Plan, Multi-employer Plan or Guaranteed
Pension Plan (referred to each individually as a "Plan" and collectively as
"Plans") and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Code with respect to each Plan. None of
Wellsford REIT, the Bond Issuer, Highlands or any ERISA Affiliate of either of
them has (a) sought a waiver of the minimum funding standard under Section 412
of the Code in respect of any Plan, (b) failed to make any contribution or
payment to any Plan, or made any amendment to any Plan. which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security under ERISA or the Code, or (c) incurred any liability under Title IV
of ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA.

Section 4.17 Regulations U and X. No portion of any Drawing,
Liquidity Drawing Amount, LC Loan or any Loan (as that term is defined in the
Wellsford REIT Loan Agreement) under this Reimbursement Agreement, the Letter
of Credit or the Wellsford REIT Loan Agreement is intended to be used for the
purpose of purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.

Section 4.18 Environmental Compliance. Account Parties have
conducted or caused to be conducted Phase I environmental site assessments with
respect to the past usage and condition of the Real Estate (including Phase I
of the Development) and the Development and, in each case, the operations
conducted thereon, and are familiar with the present condition and usage of the
Real Estate (including Phase I of the Development) and the Development and the
operations conducted thereon and, based upon such reports and knowledge, makes
the following representations and warranties.

(1) To the best of Account Parties' knowledge, none of Wellsford
REIT, the Bond Issuer, Highlands and their respective Subsidiaries or any
operator of the Real Estate (including Phase I of the Development) or the
Development, or any operations thereon is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, or any state or
local statute, regulation, ordinance, order or decree relating to the
environment (hereinafter "Environmental Laws"), which violation involves
the Real Estate (including Phase I of the Development) or the Development
and would have a material adverse effect on the environment or the
<PAGE>

business, assets or financial condition of Wellsford REIT, the Bond Issuer
or Highlands or the development of Phase I of the Development or the
Development as a whole.

(2) None of Wellsford REIT, the Bond Issuer, Highlands or their
respective Subsidiaries has received notice from any third party
including, without limitation, any federal, state or local governmental
authority, (a) that it has been identified by the United States
Environmental Protection Agency ("EPA") as a potentially responsible party
under CERCLA with respect to a site listed on the National Priorities
List, 40 C.F.R. Part 300 Appendix B (1986); (b) that any hazardous waste,
as defined by 42 U.S.C. Section 9601(5), any hazardous substances as
defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as
defined by 42 U.S.C. Section 9601(33) or any toxic substances, oil or
hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which it has generated,
transported or disposed of have been found at any site at which a federal,
state or local agency or other third party has conducted or has ordered
that any such Person conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (c) that it is or
shall be a named party to any claim, action, cause of action, complaint,
or legal or administrative proceeding (in each case, contingent or
otherwise) arising out of any third party's incurrence of costs, expenses,
losses or damages of any kind whatsoever in connection with the release of
Hazardous Substances.

(3) To the best of Account Parties' knowledge, except as set forth in
Schedule C or, in the case of Real Estate (including any portion of the
Development other than Phase I of the Development) acquired after the date
hereof, except as may be disclosed in writing to the Bank upon the
acquisition of the same: (i) no portion of the Real Estate or the
Development has been used for the handling, processing, storage or
disposal of Hazardous Substances except in accordance with applicable
Environmental Laws, and no underground tank or other underground storage
receptacle for Hazardous Substances is located on any portion of the Real
Estate or the Development; (ii) in the course of any activities conducted
by Wellsford REIT, the Bond Issuer, Highlands and their respective
Subsidiaries, the District or the operators of any properties of any of
them, no Hazardous Substances have been generated or are being used on the
Real Estate or the Development except in the ordinary course of business
and in accordance with applicable Environmental Laws; (iii) there has been
no past or present releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, disposing or dumping
(a "Release") or threatened Release of Hazardous Substances on, upon, into
or from the Real Estate or the Development, or, to the best of Account
Parties' knowledge, on, upon, into or from the other properties of
Wellsford REIT, the Bond Issuer, Highlands or their respective
Subsidiaries, which Release would have a material adverse effect on the
value of any of the Real Estate, Phase I of the Development, the
Development as a whole or adjacent properties of either of them or the
environment; (iv) to the best of Account Parties' knowledge, there have
been no Releases on, upon, from or into any real property in the vicinity
of any of the Real Estate, Phase I of the Development or the Development
as a whole which, through soil or groundwater contamination, may have come
to be located on, and which would have a material adverse effect on the
value of, the Real Estate, Phase I of the Development or the Development
as a whole; and (v) any Hazardous Substances that have been generated on
any of the Real Estate, Phase I of the Development or the Development as a
<PAGE>

whole have been transported off-site only by carriers having an
identification number issued by the EPA or approved by a state or local
environmental regulatory authority having jurisdiction regarding the
transportation of such substance and, to the best knowledge of Account
Parties without independent investigation, treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required
under all applicable Environmental Laws, which transporters and facilities
have been and are, to the best of Account Parties' knowledge without
independent investigation, operating in compliance with such permits and
applicable Environmental Laws.

(4) None of Wellsford REIT, the Bond Issuer, Highlands and their
respective Subsidiaries, any Real Estate, Phase I of the Development or
any other portion of the Development is subject to any applicable
Environmental Law requiring the performance of Hazardous Substances site
assessments, or the removal or remediation of Hazardous Substances, or the
giving of notice to any governmental agency or the recording or delivery
to other Persons of an environmental disclosure document or statement by
virtue of the transactions set forth herein and contemplated hereby, or as
a condition to the effectiveness of any other transactions contemplated
hereby.

Section 4.19 Subsidiaries. Schedule D sets forth all of the
Subsidiaries of Wellsford REIT, the Bond Issuer and Highlands, respectively.
The form and jurisdiction of organization of each of such Subsidiaries, and
Wellsford REIT's, the Bond Issuer's and Highlands' ownership interest therein,
is set forth in said Schedule D.

Section 4.20 Related Documents. All of the representations and
warranties of Wellsford REIT, the Bond Issuer and Highlands made in this
Reimbursement Agreement and the other Related Documents or any document or
instrument delivered to the Bank pursuant to or in connection with any of such
Related Documents are true and correct in all material respects, and none of
Wellsford REIT, the Bond Issuer or Highlands has failed to disclose such
information as is necessary to make such representations and warranties not
misleading.

Section 4.21 Property. All of Wellsford REIT's, the Bond Issuer's
Highlands' and their respective Subsidiaries' properties (including without
limitation Phase I of the Development) are in good repair and condition,
subject to ordinary wear and tear, other than with respect to deferred
maintenance existing as of the date of acquisition of such property as
permitted in this Section 4.21. Without limiting the foregoing, Wellsford REIT
has completed an appropriate investigation of the physical condition of each
such property as of the later of the date of Wellsford REIT's or such other
Person's purchase thereof or the date upon which such property was last
security for Indebtedness of Wellsford REIT or such Person, including without
limitation an analysis of the structural condition and existence of any
material deferred maintenance, and such property is in good condition, order
and repair, and any material deferred maintenance existing as of the date of
acquisition of such property has been corrected or satisfactory remediation
actions are being taken. Wellsford REIT further has completed an appropriate
investigation of the environmental condition of each such property as of the
later of the date of Wellsford REIT's or such other Person's purchase thereof
or the date upon which such property was last security for Indebtedness of
Wellsford REIT or such Person, including preparation of a "Phase I" report and,
if appropriate, a "Phase II" report, in each case prepared by a recognized
environmental engineer in accordance with customary standards which discloses
<PAGE>

that such property is not in violation of the representations and covenants set
forth in this Reimbursement Agreement, unless satisfactory remediation actions
are being taken. There are no unpaid or outstanding real estate or other taxes
or assessments on or against any property of Wellsford REIT, the Bond Issuer,
Highlands or any of their respective Subsidiaries (including without limitation
Phase I of the Development) which are payable by Wellsford REIT, the Bond
Issuer, Highlands or their respective Subsidiaries (except only real estate or
other taxes or assessments, that are not yet due and payable). There are no
pending eminent domain proceedings against the Development or any property of
Wellsford REIT, the Bond Issuer, Highlands or their respective Subsidiaries or
any part thereof, and, to the knowledge of Account Parties, no such proceedings
are presently threatened or contemplated by any taking authority which may
individually or in the aggregate have any materially adverse effect on the
business or financial condition of Wellsford REIT, the Bond Issuer or
Highlands. None of the Development, Phase I of the Development or any other
property of Wellsford REIT, the Bond Issuer, Highlands or their respective
Subsidiaries is now damaged or injured as a result of any fire, explosion,
accident, flood or other casualty in any manner which individually or in the
aggregate would have any materially adverse effect on the business or financial
condition of Wellsford REIT, the Bond Issuer or Highlands.

Section 4.22 Brokers. None of Wellsford REIT, the Bond Issuer,
Highlands or any of their respective Subsidiaries has engaged or otherwise
dealt with any broker, finder or similar entity in connection with this
Reimbursement Agreement, the Letter of Credit contemplated hereunder or any
other Related Document.

Section 4.23 Other Debt. None of Wellsford REIT, the Bond Issuer,
Highlands and their respective Subsidiaries is in default in the payment of any
other Indebtedness or under any agreement, mortgage, deed of trust, security
agreement, financing agreement, indenture or lease to which any of them is a
party. None of Wellsford REIT, the Bond Issuer or Highlands is a party to or
bound by any agreement, instrument or indenture that may require the
subordination in right or time of payment of any of the obligations of any of
them under this Reimbursement Agreement or any of the other Related Documents
to which they are a party or the Wellsford REIT Loan Obligations to any other
indebtedness or obligation of Wellsford REIT, the Bond Issuer or Highlands.

Section 4.24 Solvency. As of the Closing Date and after giving
effect to the transactions contemplated by this Reimbursement Agreement and the
other Related Documents, none of Wellsford REIT, the Bond Issuer or Highlands
is insolvent on a balance sheet basis such that the sum of such Person's assets
exceeds the sum of such Person's liabilities. Each of Wellsford REIT, the Bond
Issuer and Highlands is able to pay its debts as they become due, and has
sufficient capital to carry on its business.

Section 4.25 Complete and Correct Information. All information,
reports and other papers and data with respect to Wellsford REIT, the Bond
Issuer, Highlands and their respective Subsidiaries furnished to the Bank were,
at the time the same were so furnished, complete and correct in all material
respects, to the extent necessary to give the Bank a true and accurate
knowledge of the subject matter. No fact is known to Wellsford REIT, the Bond
Issuer or Highlands which adversely affects or in the future may (so far as it
can foresee) adversely affect its business, assets or liabilities, financial
condition, results of operations, or its business prospects or the development
of Phase I of the Development or any other portion of the Development which has
not been set forth in the financial statements referred to in Section 4.4 above
or in such information, reports, papers and data or otherwise disclosed in
<PAGE>

writing to the Bank. No document furnished or statement made by Wellsford
REIT, the Bond Issuer or Highlands in connection with the negotiation,
preparation or execution of this Reimbursement Agreement, any other Related
Document, the Wellsford REIT Loan Agreement or the Loan Documents related
thereto contains any untrue statement of a fact material to its credit
worthiness or omits to state a material fact necessary in order to make the
statements contained therein not misleading.

Section 4.26 Public Improvements Liens. There are no liens or
encumbrances of any kind on the Public Improvements or Phase I of the
Development other than Permitted Liens.

Section 4.27 Pledge of Pledged Bonds. The security interests granted
to the Bank pursuant to the Pledge Agreement (a) constitute a perfected
security interest in the collateral pledged pursuant to the Pledge Agreement
(the "Collateral") under the Uniform Commercial Code of the State of New York
and (b) are superior and prior to the rights of all third Persons now existing
or hereafter arising whether by way of mortgage, lien, security interests,
encumbrances, assignments or otherwise. All such actions as are necessary have
been taken to establish and perfect the Bank's rights in and to the Collateral.

Section 4.28 Security for Pledged Bonds. The Bond Indenture creates,
for the benefit and security of the Bonds, the legally valid and binding Lien
on and pledge of the Revenues and the funds ("Funds") in which they are from
time to time on deposit which the Bond Indenture purports to create. There are
no Liens on the Revenues or the Funds other than the Lien created by the Bond
Indenture. No filing, registering, recording or publication of the Bond
Indenture or any other document or instrument is required (or, if required, has
been completed) to establish the pledge under the Bond Indenture or to perfect,
protect or maintain the Lien created thereby on the Revenues and the Funds.

ARTICLE 5

AFFIRMATIVE COVENANTS

Each Account Party covenants and agrees that, so long as the
Expiration Date has not occurred or any amount is due or owing to the Bank with
respect to the Letter of Credit under this Reimbursement Agreement or any other
Related Document, such Account Party will comply with each of the covenants
contained in this Article 5, unless the Bank shall otherwise consent in
writing:

Section 5.1 Compliance with Bond Indenture and Related Docents.
Wellsford REIT, the Bond Issuer and Highlands shall comply with each of the
covenants of each of them set forth in the Bond Indenture and all other Related
Documents.

Section 5.2 Maintenance of Office. Wellsford REIT will maintain its
chief executive office at 610 Fifth Avenue, New York, New York, and the Bond
Issuer will maintain its chief executive office at 370 17th Street, Suite 3100,
Denver, Colorado 80202, or, in each case, at such other place in the United
States of America as Wellsford REIT or the Bond Issuer shall designate upon
prior written notice to the Bank, where notices, presentations and demands to
or upon each of them in respect of this Reimbursement Agreement and the other
Related Documents to which they are parties may be given or made.

Section 5.3 Records and Accounts. Wellsford REIT and Bond Issuer
will (a) keep, and cause each of their respective Subsidiaries (including but
<PAGE>

not limited to Highlands) to keep, true and accurate records and books of
account in which full, true and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of such Person in
accordance with generally accepted accounting principles and (b) maintain
adequate accounts and reserves for all taxes (including income taxes),
depreciation and amortization of its properties and the properties of their
respective Subsidiaries, contingencies and other reserves.

Section 5.4 Financial Statements, Certificates and Information.
Wellsford REIT and the Bond Issuer will each deliver to the Bank:

(a) as soon as practicable, but in any event not later than 90
days after the end of their respective fiscal years, the audited consolidated
balance sheet of each of them and their respective Subsidiaries (including, if
available, Highlands) at the end of such year, and the related audited
consolidated statements of income, changes in shareholder's equity and cash
flows for such year, each setting forth in comparative form the figures for the
previous fiscal year and all such statements to be in reasonable detail,
prepared in accordance with generally accepted accounting principles, and
accompanied by an auditor's report prepared without qualification by Ernst &
Young LLP or by another "Big Six" accounting firm, the Form 10-K filed with the
SEC for Wellsford REIT (unless the SEC has approved an extension, in which
event Wellsford REIT will deliver to the Bank a copy of the Form 10-K
simultaneously with delivery to the SEC), and any other information the Bank
may need to complete a financial analysis of Wellsford REIT, the Bond Issuer
and Highlands;

(b) as soon as practicable, but in any event not later than 60
days after the end of each of the first three fiscal quarters of each of
Wellsford REIT and the Bond Issuer, copies of the unaudited consolidated
balance sheet of Wellsford REIT and the Bond Issuer, respectively, and their
respective Subsidiaries (including but not limited to Highlands) as at the end
of such quarter, and the related unaudited consolidated statements of income,
changes in shareholder's equity and cash flows for the portion of Account
Parties' fiscal year then elapsed, all in reasonable detail and prepared in
accordance with generally accepted accounting principles (which may be provided
by inclusion in the Form 10-Q of Wellsford REIT for such period provided
pursuant to subsection (c) below), together with a certification by the
principal financial officer of Wellsford REIT and the Bond Issuer,
respectively, that the information contained in such financial statements
fairly presents the financial position of Wellsford REIT and the Bond Issuer,
respectively, and their respective Subsidiaries on the date thereof (subject to
year-end adjustments);

(c) as soon as practicable, but in any event not later than 60
days after the end of the first three fiscal quarters of Wellsford REIT in each
year, copies of Form 10-Q filed with the SEC for Wellsford REIT (unless the SEC
has approved an extension in which event Wellsford REIT will deliver such
copies of the Form 10-Q to the Bank simultaneously with delivery to the SEC);

(d) simultaneously with the delivery of the financial
statements referred to in Sections 5.4(a) and 5.4(b) above, and within 30 days
of the filing by Wellsford REIT of a Form 8-K with the SEC or the filing with
the SEC of any other document amending any other filing previously made by
Wellsford REIT, a statement (a "Compliance Certificate") certified by the
principal financial officer of Wellsford REIT in the form of Exhibit D hereto
setting forth in reasonable detail computations evidencing compliance with the
covenants contained in Section 6, and (if applicable) reconciliations to
<PAGE>

reflect changes in generally accepted accounting principles since the Balance
Sheet Date;

(e) concurrently with the delivery of the financial statements
described in subsections (b) and (c) above, a certificate signed by the
President or Chief Financial Officer of Wellsford REIT and the Bond Issuer (as
applicable) to the effect that, having read this Reimbursement Agreement, and
based upon an examination which they deem sufficient to enable them to make an
informed statement, there does not exist any Default or Event of Default, or if
such Default or Event of Default has occurred, specifying the facts, nature and
status with respect thereto; and any remedial steps taken or proposed to
correct each such default;

(f) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the SEC or sent to the
stockholders of Wellsford REIT;

(g) simultaneously with the delivery of the financial statement
referred to in subsection (a) above, a statement (i) listing the Real Estate
owned by Wellsford REIT, the Bond Issuer and their respective Subsidiaries
(including but not limited to Highlands) (or in which any such Person owns an
interest) and stating the location thereof, the date acquired and the
acquisition cost, (ii) listing the Indebtedness of Wellsford REIT, the Bond
Issuer and their respective Subsidiaries (including but not limited to
Highlands) (excluding Indebtedness of the type described in Sections 6.3(a) -
6.3(e)), which statement shall include, without limitation, a statement of the
original principal amount of such Indebtedness and the current amount outstand-
ing, the holder thereof, the maturity date and any extension options, the
interest rate, the collateral provided for such Indebtedness and whether such
Indebtedness is recourse or nonrecourse, and (iii) listing the properties of
Wellsford REIT, the Bond Issuer and their respective Subsidiaries (including
but not limited to Highlands) which are under "development" (as used in Section
6.13) and providing a brief summary of the status of such development;

(h) not later than two (2) Business Days after Wellsford REIT
receives notice of the same from a Rating Agency or otherwise learns of the
same, notice of the issuance of or any change in the rating by the Rating
Agency in respect of any debt of Wellsford REIT (including any change in an
implied Rating), together with the details thereof, and of any announcement by
the Rating Agency that any such rating is "under review" or that any such
rating has been placed on a watch list or that any similar action has been
taken by the Rating Agency (collectively a "Rating Notice"); and (i) from time
to time such other financial data and information in the possession of
Wellsford REIT, the Bond Issuer or Highlands (including without limitation
auditors' management letters, property inspection and environmental reports and
information as to zoning and other legal and regulatory changes affecting
Wellsford REIT, the Bond Issuer, Highlands, the Public Improvements, Phase I of
the Development or the Development) as the Bank may reasonably request.

Section 5.5 Notices

(1) Defaults. Each Account Party will promptly notify the Bank
in writing of the occurrence of any Default or Event of Default. If any Person
shall give any notice or take any other action in respect of a claimed default
(whether or not constituting an Event of Default) under this Reimbursement
Agreement, any other Related Document or under any note, evidence of
indebtedness, indenture or other obligation to which or with respect to which
Wellsford REIT, the Bond Issuer or any of their respective Subsidiaries
<PAGE>

(including but not limited to Highlands) is a party or obligor, whether as
principal or surety, and such default would permit the holder of such note or
obligation or other evidence of indebtedness to accelerate the maturity
thereof, which acceleration would have a material adverse effect on Wellsford
REIT, the Bond Issuer or Highlands, or the existence of which claimed default
might become an Event of Default under Sections 7.1(f) or 7.1(g), Account
Parties shall forthwith give written notice thereof to the Bank, describing the
notice or action and the nature of the claimed default.

(2) Environmental Events. Each Account Party will promptly
give notice to the Bank (i) upon Wellsford REIT, Highlands or the Bond Issuer
obtaining knowledge of any potential or known Release, or threat of Release, of
any Hazardous Substances at or from any portion of Phase I of the Development
or any other portion of the Development or any Real Estate of Wellsford REIT,
the Bond Issuer or their respective Subsidiaries (including without limitation
Highlands); (ii) of any violation of any Environmental Law that Wellsford REIT,
the Bond Issuer or any of their respective Subsidiaries (including without
limitation Highlands) reports in writing or is reportable by such Person in
writing (or for which any written report supplemental to any oral report is
made) to any federal, state or local environmental agency; and (iii) upon
becoming aware thereof, of any inquiry, proceeding, investigation or other
action, including a notice from any agency of potential environmental
liability, of any federal, state or local environmental agency or board, that
in either case involves any portion of Phase I of the Development or any other
portion of the Development or Real Estate of Wellsford REIT, the Bond Issuer or
their respective Subsidiaries (including without limitation Highlands) or has
the potential to materially affect the assets, liabilities, financial
conditions or operations of Wellsford REIT, the Bond Issuer or their respective
Subsidiaries (including without limitation Highlands).

(3) Notice of Litigation and Judgments. Each Account Party will
give notice to the Bank in writing within 15 days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation and
proceedings affecting Phase I of the Development, the balance of the
Development or the Public Improvements or Wellsford REIT, the Bond Issuer or
any of their respective Subsidiaries (including but not limited to Highlands)
or to which Wellsford REIT, the Bond Issuer or any of their respective
Subsidiaries (including but not limited to Highlands) is or is to become a
party involving an uninsured claim against any such Person that could
reasonably be expected to have a materially adverse effect on Wellsford REIT,
the Bond Issuer or Highlands and stating the nature and status of such
litigation or proceedings. Such Account Parry will give notice to the Bank, in
writing, in form and detail satisfactory to the Bank within ten days of any
judgment not covered by insurance, whether final or otherwise, against
Wellsford REIT, the Bond Issuer or any of their respective Subsidiaries
(including but not limited to Highlands) in an amount in excess of $250,000.

(4) Notice of Proposed Sales, Encumbrances, Refinance or
Transfer. Wellsford REIT will give notice to the Bank of any proposed or
completed sale, encumbrance, refinance or transfer of any Real Estate or other
Investment described in Section 6.5(j) of Wellsford REIT or its Subsidiaries
within any fiscal quarter of Wellsford REIT, such notice to be submitted
together with the Compliance Certificate provided or required to be provided to
the Bank under Section 5.4 with respect to such fiscal quarter. The Compliance
Certificate shall with respect to any proposed or completed sale, encumbrance,
refinance or transfer be adjusted in the best good-faith estimate of Wellsford
REIT to give effect to such sale, encumbrance, refinance or transfer and
demonstrate that no Default or Event of Default with respect to the covenants
<PAGE>

referred to therein shall exist after giving effect to such sale, encumbrance,
refinance or transfer. Notwithstanding the foregoing, in the event of any sale,
encumbrance, refinance or transfer of any Real Estate or other Investment
described in Section 6.5(j) of Wellsford REIT or its Subsidiaries involving an
amount in excess of $30,000,000.00, Wellsford REIT shall promptly give notice
to the Bank of such transaction, which notice shall be accompanied by a
certification of the chief financial officer of Wellsford REIT that no Default
or Event of Default shall exist after giving affect to such event.

(5) Location, Name and Business. Account Parties shall
promptly provide the Bank with notice of (a) any change of the location of
their respective Executive Offices or the Executive Office of Highlands, (b)
any change in their respective names or the name of Highlands or any intention
of either of them or Highlands to alter the nature of its business.

(6) Highlands Indebtedness. Account Parties will promptly give
notice to the Bank of the incurrence of any Indebtedness secured in whole or in
part by any real property owned by Highlands and securing any portion of the
assessments to be paid under the Assessment Agreement, including a description
of such Indebtedness and the terms and provisions thereof.

Section 5.6 Existence; Maintenance of Properties

(1) Wellsford REIT will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence as a
Maryland real estate investment trust and Highlands' existence as a Colorado
limited liability company. The Bond Issuer will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence as
a Colorado nonprofit corporation. Wellsford REIT and the Bond Issuer will cause
each of their respective Subsidiaries to do or cause to be done all things
necessary to preserve and keep in full force and effect its legal existence.
Wellsford REIT and the Bond Issuer will do or cause to be done all things
necessary to preserve and keep in full force all of its rights and franchises
and those of its Subsidiaries (including but not limited to Highlands).
Wellsford REIT and the Bond Issuer will, and will cause each of their
respective Subsidiaries (including but not limited to Highlands) to, continue
to engage primarily in the businesses now conducted by it and in related
businesses.

(2) Account Parties (i) will cause all of their properties and
those of their respective Subsidiaries (including but not limited to Highlands)
used or useful in the conduct of its business or the business of such
Subsidiaries to be maintained and kept in good condition, repair and working
order (ordinary wear and tear excepted) and supplied with all necessary
equipment, and (ii) will cause to be made all necessary repairs, renewals,
replacements, betterment and improvements thereof in all cases in which the
failure so to do would have a material adverse effect on the condition of its
properties or on the financial condition, assets or operations of Wellsford
REIT and its Subsidiaries (including but not limited to Highlands) or the Bond
Issuer and its Subsidiaries, respectively.

Section 5.7 Insurance. Wellsford REIT and the Bond Issuer will, at
their expense, procure and maintain or cause to be procured and maintained
insurance covering them, their respective Subsidiaries (including but not
limited to Highlands) and their respective properties in such amounts and
against such risks and casualties as are customary for properties of similar
character and location, due regard being given to the type of improvements
thereon, their construction, location, use and occupancy.
<PAGE>

Section 5.8 Taxes. Wellsford REIT, the Bond Issuer and each
Subsidiary of each of them will duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all taxes, assessments and
other governmental charges imposed upon it and upon Phase I of the Development
or other Real Estate, sales and activities, or any part thereof, or upon the
income or profits therefrom, as well as all claims for labor, materials or
supplies that if unpaid might by law become a lien or charge upon any of their
respective property; provided that any such tax, assessment, charge, levy or
claim need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings and if Wellsford REIT, the
Bond Issuer or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto; and provided, further, that forthwith upon the
commencement of proceedings to foreclose any lien that may have attached as
security therefor, Wellsford REIT, the Bond Issuer and each of their respective
Subsidiaries either (i) will provide a bond issued by a surety reasonably
acceptable to the Bank and sufficient to stay all such proceedings or (ii) if
no such bond is provided, will pay each such tax, assessment, charge, levy or
claim. Wellsford REIT shall certify annually to the Bank that Wellsford REIT is
in compliance with this Section 5.8 with respect to the Unencumbered Operating
Properties.

Section 5.9 Inspection of Properties and Books. Wellsford REIT and
the Bond Issuer shall, and shall cause Highlands to, permit the Bank, or any
representative designated by the Bank, at Account Parties' expense, to visit
and inspect the Public Improvements. Phase I of the Development, the balance of
the Development or any of the other properties of any of them, to examine the
books of account of each of them and their Subsidiaries (and to make copies
thereof and extracts therefrom) and to discuss the affairs, finances and
accounts of each of them and their Subsidiaries with, and to be advised as to
the same by, its officers, all at such reasonable times and intervals as the
Bank may reasonably request. The Bank shall use good faith efforts to
coordinate such visits and inspections so as to minimize the interference with
and disruption to Wellsford REIT's, the Bond Issuer's and/or Highland's normal
business operations.

Section 5.10 Compliance with Laws, Contracts, Licenses and Permits.
Wellsford REIT and the Bond Issuer will each comply with, and will cause each
of its Subsidiaries (including but not limited to Highlands) to comply in all
respects with (i) all applicable laws and regulations now or hereafter in
effect wherever its business is conducted, including all Environmental Laws,
(ii) the provisions of its corporate charter, partnership agreement or
declaration of trust, as the case may be, and other charter documents and
bylaws, (iii) all agreements and instruments to which it is a party or by which
it or any of its properties may be bound, (iv) all applicable decrees, orders
and judgments, and (v) all licenses and permits required by applicable laws and
regulations for the conduct of its business or the ownership, use or operation
of its properties. If at any time before the Expiration Date has occurred or
any amount is due or owing to the Bank under this Reimbursement Agreement or
any other Related Document, any authorization, consent, approval, permit or
license from any officer, agency or instrumentality of any government shall
become necessary or required in order that either Account Party may fulfill any
of its obligations hereunder, such Account Party will immediately take or cause
to be taken all steps necessary to obtain such authorization, consent,
approval, permit or license and furnish the Bank with evidence thereof.

Section 5.11 Further Assurances. Each Account Party shall, and
Wellsford REIT shall cause Highlands to, upon the request of the Bank, from
<PAGE>

time to time, execute and deliver and, if necessary, file, register and record
such further financing statements, amendments, confirmation statements and
other documents and instruments and take such further action as may be
reasonably necessary to effectuate the provisions of this Reimbursement
Agreement and the other Related Documents. Except to the extent it is exempt
therefrom, each Account Party will pay or cause to be paid all filing,
registration and recording fees incident to such filing, registration and
recording, and all expenses incident to the preparation, execution and
acknowledgement of such instruments or further assurance, and all federal or
state fees and other similar fees, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery of this
Reimbursement Agreement, the other Related Documents and such instruments of
further assurance.

Section 5.12 Wellsford REIT Status. Subject to the terms of Section
6.9, Wellsford REIT shall at all times comply with all requirements of
applicable laws and regulations necessary to maintain REIT Status and shall
operate its business as described in the Prospectus and in compliance with the
terms and conditions of this Reimbursement Agreement and the other Related
Documents.

Section 5.13 Wellsford REIT Unencumbered Operating Properties

(1) Wellsford REIT shall at all times own Unencumbered
Operating Properties which satisfy all of the following conditions:

(a) the Unencumbered Operating Properties shall have an
aggregate Asset Value of at least one hundred eighty percent (180%) of the
principal balance of all unsecured Indebtedness outstanding from time to time
of Wellsford REIT and its Subsidiaries (including without limitation the Letter
of Credit, all LC Loans, all Liquidity Drawing Amounts and any loans or
Indebtedness under the Wellsford REIT Loan Agreement);

(b) the difference of (I) the combined Operating Cash Flow
of the Unencumbered Operating Properties for the four preceding consecutive
fiscal quarters less (II) an amount equal to $100 multiplied by the number of
units within the Unencumbered Operating Properties, shall not be less than 1.5
times the Pro Forma Debt Service Charges for such period. In the event that
Wellsford REIT shall have owned a property within the Unencumbered Operating
Properties for less than four consecutive fiscal quarters, then for the
purposes of performing the calculation in this Section 5.13(1)(b), the
Operating Cash Flow with respect to such property shall include the Operating
Cash Flow from such property for such period of time prior to the acquisition
thereof by Wellsford REIT so as to allow such calculation to be performed with
respect to four consecutive fiscal quarters; and

(c) the Unencumbered Operating Properties shall consist
solely of Real Estate which has an aggregate occupancy level based on bona fide
arm's-length tenant leases requiring current rental payments at market rents of
at least ninety percent (90%) for the previous two (2) fiscal quarters of
Wellsford REIT, with each individual property comprising the Unencumbered
Operating Properties having such an occupancy level of at least eighty percent
(80%) for the previous two (2) operating fiscal quarters of Wellsford REIT.

(2) Wellsford REIT shall provide to the Bank as of the Closing
Date and concurrently with the delivery of the financial statements described
in Section 5.4(a): (i) a list of the Unencumbered Operating Properties, (ii)
the certification of the chief financial officer of Wellsford REIT of the Asset
<PAGE>

Values and that such properties are in compliance with Section 5.13(a) and
(iii) operating statements setting forth the Operating Cash Flow and capital
expenditures for each of the Unencumbered Operating Properties for the previous
four (4) fiscal quarters certified as true and correct by the chief financial
officer of Wellsford REIT. In the event that all or any material portion of a
property within the Unencumbered Operating Properties shall be damaged or taken
by condemnation, then such property shall no longer be a part of the
Unencumbered Operating Properties unless and until any damage to such Real
Estate is repaired or restored, such Real Estate becomes fully operational and
the Bank shall receive evidence satisfactory to the Bank of the value and
Operating Cash Flow of such Real Estate following such repair or restoration.

(3) Nothing herein shall be construed as an obligation of
Wellsford REIT to grant any mortgage, pledge or security interest to the Bank
in any of the Unencumbered Operating Properties, nor as an obligation of
Wellsford REIT to reserve any particular Unencumbered Operating Property as
potential collateral for the Bank.

Section 5.14 Wellsford REIT Limiting Agreements

(1) Neither Wellsford REIT nor any of its Subsidiaries shall
enter into any agreement, instrument or transaction which has or may have the
effect of prohibiting or limiting Wellsford REIT's ability to pledge to the
bank group under the Wellsford REIT Loan Agreement Real Estate which is owned
one hundred percent (100%) in fee simple by Wellsford REIT which is free and
clear of all Liens other than the Liens permitted in Section 6.4(a) and 6.4(d)
and which has an aggregate Asset Value equal to one hundred eighty percent
(180%) of the loans under the Wellsford REIT Loan Agreement as security for
such loans. Wellsford REIT shall take, and shall cause its Subsidiaries to
take, such actions as are necessary to preserve the right and ability of
Wellsford REIT to pledge those Real Estate assets subject to the one hundred
eighty percent (180%) limitation described above, as security for the loans
under the Wellsford REIT Loan Agreement without any such pledge after the date
hereof causing or permitting the acceleration (after the giving of notice or
the passage of time, or otherwise) of any other Indebtedness of Wellsford REIT
or any of its Subsidiaries.

(2) Wellsford REIT shall, upon demand, provide to the Bank such
evidence as the Bank may reasonably require to evidence Wellsford REIT's
compliance with this Section 5.14, which evidence shall include, without
limitation, copies of any agreements or instruments which would in any way
restrict or limit Wellsford REIT's ability to pledge assets as security for
Indebtedness, or which provide for the occurrence of a default (after the
giving of notice or the passage of time, or otherwise) if assets are pledged in
the future as security for Indebtedness of Wellsford REIT or any of its
Subsidiaries.

ARTICLE 6

NEGATIVE COVENANTS

Account Parties covenant and agree that, so long as the Expiration
Date has not occurred or any amount is due or owing to the Bank under this
Reimbursement Agreement or any other Related Document, each of them shall
comply with each of the negative covenants contained in this Article 6 unless
the Bank shall have given its prior written consent:
<PAGE>

Section 6.1 Amendments. Each Account Party shall not, and Wellsford
REIT shall not permit Highlands to, amend, modify, or supplement, or agree to
any amendment or modification of, or supplement to, any of the Related
Documents to which it is a party, other than with respect to the Loan Documents
pursuant to the terms thereof.

Section 6.2 Optional Redemption. Account Parties shall not cause or
permit an optional redemption of the Bonds pursuant to the Bond Indenture
unless such optional redemption (a) will be funded without a drawing on the
Letter of Credit or (b) the Bank has consented thereto in writing (which
consent may be granted or withheld by the Bank in its sole discretion).

Section 6.3 Restrictions on Indebtedness. Account Parties will not,
and will not permit any of their respective Subsidiaries to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:

(a) Indebtedness to the Bank and the holders of the Bonds
arising under any of the Reimbursement Agreement and the other Related
Documents, Indebtedness to the bank group under the Wellsford REIT Loan
Agreement and the Loan Documents related thereto, and Indebtedness of Highlands
in a principal amount not to exceed $45,000,000, the proceeds of which will be
used to construct Phase I of the Development;

(b) current liabilities of Account Parties or their respective
Subsidiaries incurred in the ordinary course of business but not incurred
through (i) the borrowing of money, or (ii) the obtaining of credit except for
credit on an open account basis customarily extended and in fact extended in
connection with normal purchases of goods and services;

(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the extent
that payment therefor shall not at the time be required to be made in
accordance with the provisions of Section 5.8;

(d) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal so long
as execution is not levied thereunder or in respect of which the affected
Account Parties shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution shall have
been obtained pending such appeal or review;

(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business;

(f) subject to the provisions of Section 6.17, Indebtedness of
Wellsford REIT or any Subsidiary of Wellsford REIT which is permitted by
Section 6.14;

(g) Indebtedness in respect of reverse repurchase agreements
having a term of not more than 180 days with respect to Investments described
in Section 6.5(d) or 6.5(e);

(h) subject to the provisions of Section 6.17, other secured or
unsecured recourse Indebtedness of Wellsford REIT and its Subsidiaries (other
than Highlands) in an aggregate outstanding principal amount (excluding the
Indebtedness permitted pursuant to Section 6.3(i) and the Wellsford REIT Loan
<PAGE>

Obligations but including LC Loans, Liquidity Drawing Amounts and amounts
available to be drawn under the Letter of Credit) not exceeding $25,000,000.00;

(i) subject to the provisions of Section 6.17, unsecured
subordinated debt or senior unsecured long-term debt of Wellsford REIT and its
Subsidiaries, provided that (x) at the time such Indebtedness is issued the
scheduled maturity date of such Indebtedness is not sooner than 270 days after
the Maturity Date (after giving effect to any extension of the Maturity Date
which may have been requested by Wellsford REIT prior to the issuance of such
Indebtedness and approved by the Bank, whether or not the same has become
effective), and (y) any covenants or restrictions imposed upon Wellsford REIT
or its Subsidiaries in connection with such Indebtedness shall not individually
or in the aggregate be more restrictive against Wellsford REIT and its
Subsidiaries than the covenants and restrictions imposed pursuant to this
Reimbursement Agreement or the other Related Documents, and provided, further,
that neither Wellsford REIT nor any of its Subsidiaries shall incur any of the
Indebtedness described in this Section 6.3(i) unless it shall have provided to
the Bank (A) prior written notice of the proposed issuance of such
Indebtedness, a statement that no Default or Event of Default exists and a
certificate that Wellsford REIT will be in compliance with its covenants
referred to therein after giving effect to such incurrence, (B) evidence
reasonably satisfactory to the Bank that each Rating Agency has been advised of
the issuance of such Indebtedness within five (5) days of such issuance, and
(C) upon the request of the Bank. evidence that the annual rating maintenance
fee has been paid to each Rating Agency;

(j) subject to the provisions of this Article 6, Indebtedness
of Wellsford REIT or its Subsidiaries under agreements to purchase property or
any interest therein; and

(k) Indebtedness of the Bond Issuer to Wellsford REIT under the
Wellsford Reimbursement Agreement.

Section 6.4 Restrictions on Liens, Etc. Account Parties will not, and
will not permit any of their respective Subsidiaries (including but not limited
to Highlands) to, (i) create or incur or suffer to be created or incurred or to
exist any lien, encumbrance, mortgage, pledge, charge, restriction or other
security interest of any kind upon any of its property or assets of any
character whether now owned or hereafter acquired, or upon the income or
profits therefrom; (ii) transfer any of its property or assets or the income or
profits therefrom for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors; (iii) acquire, or agree or have an option to acquire,
any property or assets upon conditional sale or other title retention or
purchase money security agreement, device or arrangement; (iv) suffer to exist
for a period of more than 30 days after the same shall have been incurred any
Indebtedness or claim or demand against it that if unpaid might by law or upon
bankruptcy or insolvency, or otherwise, be given any priority whatsoever over
its general creditors; (v) sell, assign, pledge or otherwise transfer any
accounts, contract rights, general intangibles, chattel paper or instruments,
with or without recourse; or (vi) incur or maintain any obligation to any
holder of Indebtedness of either Account Party or such Subsidiary which
prohibits the creation or maintenance of any lien securing the obligations
thereof (collectively "Liens"); provided that, subject to Section 6.14, the
Account Parties and any Subsidiary thereof may create or incur or suffer to be
created or incurred or to exist:

(a) liens in favor of Wellsford REIT or its Subsidiaries on all
<PAGE>

or part of the assets of Subsidiaries securing Indebtedness owing by such
Subsidiaries to their parent;

(b) liens on properties to secure taxes, assessments and other
governmental charges or claims for labor, material or supplies in respect of
obligations not overdue;

(c) liens on properties in respect of judgments, awards or
indebtedness, the Indebtedness with respect to which is permitted by Section
6.3(d), Section 6.3(f) or Section 4.5;

(d) encumbrances on properties consisting of easements, rights
of way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's liens
under leases to which either Account Party or a Subsidiary thereof is a party,
and other minor liens or encumbrances none of which interferes materially with
the use of the property affected in the ordinary conduct of the business of the
Account Parties and their Subsidiaries, which defects do not individually or in
the aggregate have a materially adverse effect on the business of either
Account Party individually or of each Account Party and its Subsidiaries on a
consolidated basis;

(e) liens on Real Estate and Short-term Investments securing
Indebtedness permitted by Section 6.3;

(f) liens in favor of the Bank, liens in favor of the Lenders
under the Wellsford REIT Loan Agreement and the Loan Documents. and liens
in favor of the lender to Highlands securing Indebtedness of Highlands
permitted under Section 6.3(a); and

(g) liens arising under the Assessment and Lien.

Section 6.5 Restrictions on Investments. Account Parties will not,
and will not permit any of their respective Subsidiaries (including but not
limited to Highlands) to, make or permit to exist or to remain outstanding any
Investment except Investments in:

(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of purchase by
such Account Party or such Subsidiaries;

(b) marketable direct obligations of any of the following:
Federal Home Loan Mortgage Corporation, Student Loan Marketing Association,
Federal Home Loan Banks, Federal National Mortgage Association, Government
National Mortgage Association, Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Financing Banks, Export-Import Bank of the United States,
Federal Land Banks, or any other agency or instrumentality of the United States
of America;

(c) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total assets in
excess of $100,000,000; provided, however, that the aggregate amount at any
time so invested with any single bank having total assets of less than
$1,000,000,000 will not exceed $200,000;

(d) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any State which at the time of purchase are rated by Moody's or by
<PAGE>

Standard & Poor's at not less than "P 1" if then rated by Moody's, and not less
than "A 1", if then rated by Standard & Poor's;

(e) mortgage-backed securities guaranteed by the Government
National Mortgage Association, the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation and other mortgage-backed bonds which at
the time of purchase are rated by Moody's or by Standard & Poor's at not less
than "Aa" if then rated by Moody's and not less than "AA" if then rated by
Standard & Poor's;

(f) repurchase agreements having a term not greater than 90
days and fully secured by securities described in the foregoing Sections
6.5.(a), 6.5(b) or 6.5(e) with banks described in the foregoing Section 6.5(c)
or with financial institutions or other corporations having total assets in
excess of $500,000,000:

(g) shares of so-called "money market funds" registered with
the SEC under the Investment Company Act of 1940 which maintain a level
per-share value, invest principally in investments described in the foregoing
Sections 6.5(a) through 6.5(f) and have total assets in excess of $50,000,000;

(h) with respect to Wellsford REIT and its Subsidiaries,
Investments in fee interests in Real Estate utilized principally for
multifamily housing, including earnest money deposits relating thereto and
transaction costs;

(i) Investments of Wellsford REIT in its Subsidiaries;

(j) with respect to Wellsford REIT and its Subsidiaries, loans
secured principally by mortgages or deeds of trust on real property upon which
are located completed improvements which are principally used for multifamily
housing (provided that Wellsford REIT shall not originate any loans described
in this Section 6.5(j)). Leasehold interests in properties which are used
principally for multifamily housing under ground leases having not less than
fifty (50) years of the leasehold term remaining at the time of acquisition
thereof by Wellsford REIT, or interests in partnerships, corporations or other
entities which own real property or an interest therein which is used
principally for multifamily housing, provided that in no event shall the
aggregate cost of all Investments pursuant to this Section 6.5(j) exceed the
lesser of (A) ten percent (10%) of the Consolidated Total Assets of Wellsford
REIT and its Subsidiaries, and (B) $35,000,000.00; and

(k) with respect to Wellsford REIT, Investments in shares of
beneficial interest in Wellsford REIT, provided that Wellsford REIT shall give
notice to the Bank concurrently with the financial statements provided in
Section 5.4(b) of any such Investments that have occurred during the preceding
fiscal quarter of Wellsford REIT.

Section 6.6 Merger, Consolidation. Account Parties will not, and
will not permit any of their respective Subsidiaries (including without
limitation Highlands) to, become a party to any merger or consolidation without
the prior written consent of the Bank except (i) the merger or consolidation of
one or more of the Subsidiaries of Wellsford REIT with and into Wellsford REIT;
and (ii) the merger or consolidation of two or more Subsidiaries of Wellsford
REIT.

Section 6.7 Sale and Leaseback. Account Parties will not, and will
not permit any of their respective Subsidiaries (including without limitation
<PAGE>

Highlands) to, enter into any arrangement, directly or indirectly, whereby
either Account Party or any Subsidiary thereof shall sell or transfer any Real
Estate owned by it in order that then or thereafter either Account Party or any
Subsidiary of either of them shall lease back such Real Estate.

Section 6.8 Compliance with Environmental Laws

(1) Account Parties will not, and will not permit any of their
Subsidiaries (including without limitation Highlands) to, do any of the
following: (a) use any portion of Phase I of the Development or any of the Real
Estate or any portion thereof as a facility for the handling, processing,
storage or disposal of Hazardous Substances, except for small quantities of
Hazardous Substances used in the ordinary course of business and in compliance
with all applicable Environmental Laws, (b) cause or permit to be located on
any portion of Phase I of the Development or any of the Real Estate any
underground tank or other underground storage receptacle for Hazardous
Substances except in full compliance with Environmental Laws, (c) generate any
Hazardous Substances on any portion of Phase I of the Development or any of the
Real Estate except in full compliance with Environmental Laws, (d) conduct any
activity at any portion of Phase I of the Development or any Real Estate or use
any portion of Phase I of the Development or any Real Estate in any manner so
as to cause a Release of Hazardous Substances on, upon or into Phase I of the
Development or the Real Estate or any surrounding properties or any threatened
Release of Hazardous Substances which might give rise to liability under CERCLA
or any other Environmental Law, or (e) directly or indirectly transport or
arrange for the transport of any Hazardous Substances (except in compliance
with all Environmental Laws).

(2) Account Parties shall:

(a) in the event of any change in Environmental Laws governing
the assessment, release or removal of Hazardous Substances, which change would
lead a prudent lender to require additional testing to avail itself of any
statutory insurance or limited liability, take all action (including, without
limitation, the conducting of engineering tests at the sole expense of Account
Parties) to confirm that no Hazardous Substances are or ever were Released or
disposed of on Phase I of the Development or the Real Estate; and

(b) if any Release or disposal of Hazardous Substances shall
occur or shall have occurred on Phase I of the Development or the Real Estate
(including without limitation any such Release or disposal occurring prior to
the acquisition of such Development or Real Estate by either Account Party),
cause the prompt Containment and removal of such Hazardous Substances and
remediation of Phase I of the Development or the Real Estate in full compliance
with all applicable laws and regulations and to the satisfaction of the Bank:
provided, that Account Parties shall be deemed to be in compliance with
Environmental Laws for the purpose of this subsection (b) so long as it or a
responsible third party with sufficient financial resources is taking
reasonable action to remediate or manage any event of noncompliance to the
satisfaction of the Bank and no action shall have been commenced by any
enforcement agency. The Bank may engage its own Environmental Engineer to
review the environmental assessments and Account Parties' compliance with the
covenants contained herein.

At any time after an Event of Default shall have occurred hereunder,
or, whether or not an Event of Default shall have occurred, at any time that
the Bank shall have reasonable grounds to believe that a Release or threatened
Release of Hazardous Substances may have occurred, relating to Phase I of the
<PAGE>

Development or any Real Estate, or that any of Phase I of the Development or
the Real Estate is not in compliance with the Environmental Laws, the Bank may
at its election (and will at the request of the Bank) obtain such environmental
assessments of Phase I of the Development or such Real Estate prepared by an
Environmental Engineer as may be necessary or advisable for the purpose of
evaluating or confirming (i) whether any Hazardous Substances are present in
the soil or water at or adjacent to Phase I of the Development or such Real
Estate and (ii) whether the use and operation of Phase I of the Development or
such Real Estate comply with all Environmental Laws. Environmental assessments
may include detailed visual inspections of Phase I of the Development or such
Real Estate including, without limitation, any and all storage areas, storage
tanks, drains, dry wells and leaching areas, and the taking of soil samples, as
well as such other investigations or analyses as are necessary or appropriate
for a complete determination of the compliance of such Real Estate and the use
and operation thereof with all applicable Environmental Laws. All such
environmental assessments shall be at the sole cost and expense of Account
Parties.

Section 6.9 Distributions. Wellsford REIT will not make any
Distributions which would cause it to violate any of the following covenants:

(a) Wellsford REIT shall not pay any Distribution to the
shareholders of Wellsford REIT if such Distribution is in excess of the greater
of (i) the minimum Distributions required under the Code to maintain the REIT
status of Wellsford REIT and (ii) the amount which, when added to the amount of
all other Distributions paid in the same fiscal quarter and the preceding three
(3) fiscal quarters would exceed ninety percent (90%) of its Funds from
Operations for the four consecutive fiscal quarters ending prior to the quarter
in which such Distribution is paid;

(b) In the event that an Event of Default shall have occurred
and be continuing, Wellsford REIT shall make no Distributions other than the
minimum Distributions required under the Code to maintain the REIT Status of
Wellsford REIT, as evidenced by a certification of the principal financial or
accounting officer of Wellsford REIT containing calculations in reasonable
detail satisfactory in form and substance to the Bank; and

(c) Notwithstanding the foregoing, at any time when an Event of
Default shall have occurred and the maturity of the Bonds, the Promissory
Notes, Liquidity Drawing Amounts, LC Loans or the Wellsford REIT Loan
Obligations has been accelerated, Wellsford REIT shall not make any
Distributions whatsoever, directly or indirectly.

Section 6.10 Asset Sales

(1) Neither Wellsford REIT nor any of its Subsidiaries shall
sell, transfer or otherwise dispose of any Real Estate or other Investment
described in Section 6.5(j) or any of the Unencumbered Operating Properties in
excess of $30,000,000.00 (except as the result of a condemnation or casualty
and except for the granting of Permitted Liens, as applicable) unless there
shall have been delivered to the Banks a statement that no Default or Event of
Default exists and a certification that Wellsford REIT will be in compliance
with its covenants referred to therein after giving effect to such sale,
transfer or other disposition.

(2) Wellsford REIT shall not sell, transfer or otherwise
dispose of any of its interest in Highlands or any of its interest in any
portion of the Development without the Bank's prior written consent.
<PAGE>

(3) Highlands shall not sell, transfer or otherwise dispose of
Phase I of the Development or any portion thereof or any of its interest in any
other portion of the Development without the Bank's prior written consent.

Section 6.11 Development Activity. Neither Wellsford REIT nor any
Subsidiary thereof shall engage, directly or indirectly, in the development of
properties to be used principally for multifamily housing or otherwise, except
that Wellsford REIT or a Subsidiary thereof may develop for its own account
during a fiscal year of Wellsford REIT properties to be used principally for
multifamily housing provided that in any fiscal year such development shall be
limited to the lesser of (i) any number of projects with respect to which the
aggregate cost of acquiring the Real Estate and developing the improvements
thereon is not reasonably anticipated to exceed $100,000,000.00 (including
development of the Development) and (ii) any number of projects with respect to
which the aggregate number of multifamily units to be developed (including
development of the Development) does not exceed ten percent (10%) of the total
number of multifamily units located on Real Estate owned in fee by Wellsford
REIT and its Subsidiaries for the preceding four fiscal quarters (excluding
such units under development). For purposes of this Section 6.11, the term
"development" shall include the new construction of an apartment complex or the
substantial renovation of improvements to real property, but shall not include
the addition of amenities or other related facilities to existing Real Estate
which is already used principally for multifamily housing. A project shall be
considered to be under development until final certificates of occupancy or the
equivalent have been issued for the entire project and the project is 80%
occupied and such project has had a positive Net Income for at least one (1)
month. Without limiting the generality of the foregoing, Wellsford REIT
acknowledges that for the purposes of this Reimbursement Agreement, (i) any
interest by either Account Party or any Subsidiary thereof in a property which
is proposed to be developed, or any other agreement or arrangement by such
party to purchase a property or any interest therein pursuant to which either
Account Party or any Subsidiary thereof has the right to approve site plans or
other plans and specifications or pursuant to which such party's obligations
are conditioned upon the achievement of certain initial lease-up levels, or
(ii) any agreement by either Account Party or any Subsidiary thereof which
obligates such party to contribute or otherwise advance funds in connection
with or upon completion of the development of a property, or (iii) any
agreement by either Account Party or any Subsidiary thereof to acquire a
property to be used principally for multifamily housing or any interest therein
which is proposed to be developed or which is under development and initial
lease-up at the time such agreement is entered into, shall be considered a
"development" for the purposes of this Section 6.11; provided, however, that
nothing in this Section 6.11 shall prohibit Wellsford REIT or any Subsidiary
from entering into an agreement to acquire Real Estate at a time when such Real
Estate has been developed and initially leased by another Person.

Section 6.12 Sources of Capital. Wellsford REIT shall, at all times
that either Account Party or any of its Subsidiaries is engaging in any
development as provided in Section 6.11 or has entered into any agreement to
acquire properties under purchase agreements, maintain available sources of
capital equal to the total cost to acquire and complete such developments and
to purchase such properties, which sources of capital shall be acceptable to
the Bank in its reasonable discretion. Amounts available to be disbursed for
such purposes pursuant to this Reimbursement Agreement may be considered as a
source of capital for the purposes of this Section 6.12.

Section 6.13 Restriction on Prepayment of Indebtedness. After the
<PAGE>

occurrence of any Event of Default, no Account Party shall prepay the principal
amount, in whole or in part, of any Indebtedness other than the obligations (i)
to the Bank under the Reimbursement Agreement and the other Related Documents
and (ii) to the Agent and the Lenders under the Wellsford REIT Loan Agreement
and the other Loan Documents; provided, however, that after the occurrence of
an Event of Default, each Account Party may prepay the Indebtedness described
in Section 6.3(b) in the ordinary course of business.

Section 6.14 Additional Restrictions on Wellsford REIT Liens on Real
Estate and Indebtedness

(1) Wellsford REIT shall not at any time permit the number of
Real Estate projects owned in fee simple by Wellsford REIT which are subject to
any Liens (other than the Liens permitted in Section 6.4(b) and 6.4(e) to
exceed 40% of the total number of Real Estate projects owned in fee simple by
Wellsford REIT. For purposes of this Section 6.14, a Real Estate project shall
be considered a separate project only if it is functionally and operationally
distinct from other Real Estate projects owned by Wellsford REIT.

(2) Except as permitted in Section 6.3, Wellsford REIT will
not, and will not permit any of its Subsidiaries to, create, incur, assume,
guaranty or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than, subject to the provisions of Section 6.17, secured (in
whole or in part) Indebtedness of Wellsford REIT or such Subsidiary in an
aggregate outstanding principal amount not exceeding an amount equal to forty
percent (40%) of the value of the Real Estate owned in fee simple by Wellsford
REIT and its Subsidiaries, with such value being determined based on
undepreciated cost basis.

Section 6.15 Restrictions Upon Rate Modes and Interest Periods for
Bonds. Each Account Party covenants that, until after the Expiration Date: (a)
the Account Parties will not permit any Rate Period to be in effect which has a
duration of longer than two hundred and ten (210) days or which ends after the
Expiration Date; (b) the Account Parties will nor permit a particular Rate
Period to be in effect with respect to a particular Rate Mode if the initial
principal amount of the Bonds covered by such Rate Period and Rate Mode is less
than $3,000,000; and (c) the Account Parties will not permit the Bonds to bear
interest at a rate other than the Weekly Rate without the prior written consent
of the Bank.

Section 6.16 Accounting Methods and Fiscal Year. Account Parties will
not and will not permit any of their Subsidiaries to adopt, permit or consent
to any change in accounting practices other than as required by generally
accepted accounting principles.

Section 6.17 Financial Covenants of Wellsford REIT

(1) Liabilities to Assets Ratio. Wellsford REIT will not, at
the end of any fiscal quarter, permit the ratio of Consolidated Total
Liabilities to Consolidated Total Assets of Wellsford REIT to exceed 0.55 to 1.

(2) Consolidated Operating Cash Flow Coverage. Wellsford REIT
will not, at the end of any fiscal quarter, permit the Consolidated Operating
Cash Flow of Wellsford REIT and its Subsidiaries for any period of four
consecutive fiscal quarters (treated as a single accounting period) (the "Test
Period") to be less than 2 times the Debt Service for the Test Period. In the
event that Wellsford REIT or any of its Subsidiaries shall have issued any
Indebtedness of the type described in Section 6.3(i), then for the purposes of
<PAGE>

this Section 6.17(2), the Debt Service applicable to such Indebtedness for the
Test Period shall, commencing one year prior to the maturity of such
Indebtedness and continuing each quarter thereafter, be calculated at the
greater of (a) the Debt Service due with respect to such Indebtedness and (b)
the Debt Service which would be payable with respect to such Indebtedness in
the event that the principal balance thereof was bearing interest at a rate per
annum equal to the sum of the then-current annual yield on five (5) year
obligations issued by the United States Treasury most recently prior to such
determination date plus one and one-half percent (1.5%). The determination of
such imputed amount and the components thereof by the Bank shall, so long as
the same shall be determined in good faith, be conclusive and binding absent
manifest error.

Section 6.18 Official Statement and Other Documents. Other than the
sections of the Official Statement entitled "THE LETTER OF CREDIT" and
"APPENDIX B - Dresdner Bank AG, New York Branch" on pages B-1 to B-3 inclusive,
thereof, and the references to and summaries of such Sections throughout the
Official Statement, Account Parties shall not include or permit to be included
any material or reference relating to the Bank or the Letter of Credit in any
offering circular or any other document or any tombstone, unless such material
or reference is approved in writing by the Bank prior to its inclusion therein,
provided that Account Parties may disclose the existence of the Letter of
Credit to the extent required in connection with their reporting or disclosure
requirements; or distribute, or permit to be distributed or used, any offering
circular unless a copy of such offering circular has been furnished to the
Bank.

Section 6.19 Remarketing. Account Parties shall not permit the
Remarketing Agent for the Bonds to remarket any Bonds, (i) if an Event of
Default shall have occurred and be continuing and the Bank shall have
instructed Account Parties not to permit the remarketing of such Bonds, or (ii)
at a price less than the principal amount thereof plus accrued interest, if
any, thereon to the respective dates of remarketing.

Section 6.20 Substitute Credit Facility. Account Parties shall not
authorize, permit or consent to any substitution of another credit or liquidity
facility for the Letter of Credit unless (a) there shall be paid to the Bank,
prior to or simultaneously with such substitution, any and all amounts due and
owing and to become due and owing to the Bank (including without limitation all
unpaid Drawings, Liquidity Drawing Amounts, LC Loans and the pro rata portion
of all accrued and unpaid fees) under this Reimbursement Agreement and the
other Related Documents, and (ii) a substitution occurs for the Letter of
Credit.

Section 6.21 Remarketing Agent and Bond Trustee. Account Parties
shall not appoint or permit or suffer to be appointed any successor Remarketing
Agent or successor Bond Trustee without the prior written approval of the Bank
(which approval shall not be unreasonably withheld); or enter into any
successor Remarketing Agreement without the prior written approval of the Bank
(which approval shall not be withheld if and so long as such successor
Remarketing Agreement contains provisions that are substantially the same as
those contained in, and affords protection to the rights and interests of the
Bank that is substantially the same as that afforded by, the predecessor
Remarketing Agreement, as the case may be). Any approvals required from the
Bank hereunder shall be given or denied within 10 days of the request therefor,
accompanied, in the case of a successor Remarketing Agreement, by a draft of
such proposed Remarketing Agreement in final form, and the failure of the Bank
to respond to such request by the close of business on the tenth day shall be
<PAGE>

deemed, on the eleventh day, to constitute consent by the Bank hereunder. Prior
to its appointment. any substitute Bond Trustee must sign an agreement assuming
the obligations of its predecessor under the Pledge Agreement.

ARTICLE 7

EVENTS OF DEFAULT

Section 7.1 Events of Default. The occurrence of any of the
following events (including the expiration of any specified time) shall
constitute an "Event of Default," unless waived by the Bank in writing:

(a) failure of the Account Parties to pay when due any amount
due under this Reimbursement Agreement or under any of the other Related
Documents (other than amounts drawn under the Letter of Credit pursuant to a
Liquidity Drawing or an LC Loan), and to remedy such failure within five days
thereof, provided that no cure period shall apply to principal payments due
hereunder or under any of the other Related Documents;

(b) failure of the Account Parties to pay when due and payable,
whether at the stated date of maturity or any accelerated date of maturity or
at any other date fixed for payment, any amount drawn under the Letter of
Credit pursuant to a Liquidity Drawing or an LC Loan, except as permitted by
Section 2.2;

(c) failure of the Account Parties to observe or perform any of
the covenants, conditions or provisions set forth in Sections 5.4, 5.13, 5.14,
6.1, 6.2, 6.10(2), 6.10(3), 6.15 or 6.19 of this Reimbursement Agreement; or
failure of the Account Parties to observe or perform any of the covenants set
forth in Section 6.17 and to remedy such failure within 45 days of such
failure, provided that such cure period shall apply only if not more than two
such cure periods, or portions thereof, have occurred in the prior 12 months;

(d) failure of the Account Partes to observe or perform any of
the covenants, conditions or provisions of this Reimbursement Agreement (other
than as specified in Sections 7.1(a), (b) and (c), above), and to remedy such
failure within 30 days of such failure;

(e) any representation or warranty made by either Account Party
or its Subsidiaries (including without limitation Highlands) herein or in any
other Related Documents, certificate, financial or other statement furnished
pursuant to this Reimbursement Agreement or other Related Documents shall prove
to have been untrue or incomplete in any material respect when made;

(f) the occurrence and continuation of a default or an event of
default under the Bond Indenture or any of the other Related Documents (except
the Loan Documents); or the occurrence and continuation of an event of default
under any of the Loan Documents;

(g) default by either Account Party in the payment of the
principal of or interest on any obligation or Indebtedness owed to the Bank or
the default by either Account Party in the payment of the principal of or
interest on any other obligation, for borrowed money, credit received or other
indebtedness, as and when the same shall become due, or failure to observe or
perform any material term, covenant or agreement contained in any agreement by
which it is bound, evidencing or securing any such borrowed money or credit
received or other Indebtedness for each period of time as would permit
<PAGE>

(assuming the giving of appropriate notice if required) the holder or holders
thereof or of any obligations issued thereunder to accelerate the maturity
thereof; provided that the failure of either Account Party to pay an amount
which is timely paid by the other Account Party shall not be a Default
hereunder;

(h) entry or filing of any judgment, writ or warrant of
attachment or of any similar process against either Account Party or any of
their respective Subsidiaries or against any property of either Account Party
or any such Subsidiary, in an amount in excess of the sum of (i) the amount
available to the Account Parties in connection with such litigation under any
insurance policies held by the Account Parties or their Subsidiaries plus (ii)
in the case of Wellsford REIT and its Subsidiaries, $1.000.000, and failure of
either Account Party or by its Subsidiaries to vacate, bond. stay or contest in
good faith such judgment, writ, warrant of attachment or other process for a
period of 30 days or failure to pay or satisfy such judgment within 60 days;

(i) admission by either Account Party or any of their
respective Subsidiaries of insolvency or bankruptcy or its inability or failure
generally to pay its debts as they become due, or either Account Party or any
of their respective Subsidiaries makes an assignment for the benefit of
creditors or applies for or consents to the appointment of a trustee, custodian
or receiver for such Person, or for a major part of its property;

(j) filing of a petition or application for the appointment of
a trustee or other custodian, liquidator or receiver in bankruptcy, custodian
or receiver for either Account Party or any of their respective Subsidiaries or
all or part of their respective assets and property or any thereof or a case or
other proceeding shall be commenced against either Account Party or any of
their respective Subsidiaries under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution of liquidation or
similar law of any jurisdiction, now or hereafter in effect, and such Account
Party or any of its Subsidiaries shall indicate its approval thereof, consent
thereto or acquiescence therein or such petition, application, case or
proceeding shall not have been dismissed within 60 days following the filing or
commencement thereof;

(k) institution of bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings for relief under
any bankruptcy law or similar law for the relief of debtors, by or against
either Account Party or any of their respective Subsidiaries (other than
bankruptcy proceedings instituted by either Account Party against third
parties), and, if instituted against either Account Party or any of their
respective Subsidiaries, allowance or consent by such Person to such
proceedings or failure to obtain dismissal, stay or other nullification within
thirty (30) days after such institution;

(l) entrance of a decree or order appointing any such trustee,
custodian, liquidator or receiver or adjudicating either Account Party or any
of their respective Subsidiaries bankrupt or insolvent, or approving a petition
in any such case or other proceeding, or a decree or order for relief is
entered in respect of either Account Party or any of their respective
Subsidiaries, in each case of the foregoing in an involuntary case under
federal bankruptcy laws as now or hereafter constituted;

(m) remaining in force, undischarged, unsatisfied and unstayed,
for more than 60 days, whether or nor consecutive, any uninsured final judgment
against either Account Party or any of their respective Subsidiaries that, with
<PAGE>

other outstanding uninsured final judgments, undischarged, against either
Account Party or any of their respective Subsidiaries exceeds in the aggregate
$1,000,000;

(n) cancellation, termination, revocation or rescission of this
Reimbursement Agreement or any of the other Related Documents otherwise than in
accordance with the terms thereof or with the express prior written agreement,
consent or approval of the Bank, or any action at law, suit in equity or other
legal proceeding to cancel, revoke or rescind any of this Reimbursement
Agreement or the other Related Documents shall be commenced by or on behalf of
either Account Party or any of its holders of Voting Interests, Highlands, the
Bond Trustee or the Remarketing Agent or any Bond holder or any court or any
other governmental or regulatory authority or agency of competent jurisdiction
shall make a determination that, or issue a judgment, order, decree or ruling
to the effect that, any one or more of this Reimbursement Agreement or the
other Related Documents is illegal, invalid or unenforceable in accordance with
the terms thereof in any material respect as determined by the Bank;

(o) any dissolution, termination, partial or complete
liquidation, merger or consolidation of either Account Party or Highlands or
any sale, transfer or other disposition of the assets of either Account Party
or its Subsidiaries (including Highlands), other than as permitted under the
terms of this Reimbursement Agreement or the other Related Documents;

(p) any suit or proceeding shall be filed against either
Account Party or Highlands, or any of their respective assets, which in the
good faith business judgment of the Bank after giving consideration to the
likelihood of success of such suit or proceeding and the availability of
insurance to cover any judgment with respect thereto and based on the
information available to them, if adversely determined, would have a materially
adverse affect on the ability of such Account Party or Highlands to perform
each and every one of its obligations under and by virtue of this Reimbursement
Agreement and the other Related Documents;

(q) either Account Party shall be indicted for a federal crime,
a punishment for which could include the forfeiture of any assets of any of
them;

(r) Jeffrey H. Lynford shall cease to be the Chairman of the
Board of, or Edward Lowenthal shall cease to be the President of, Wellsford
REIT, and a competent and experienced successor for such Person shall not be
approved by the Bank within six (6) months of such event;

(s) this Reimbursement Agreement or any of the other Related
Documents ceases to be valid and binding on either Account Party or Highlands
(as applicable); or this Reimbursement Agreement or any of the other Related
Documents is declared null and void, or the validity or enforceability thereof
is contested by either Account Party or Highlands (as applicable); or either
Account Party or Highlands (as applicable) denies it has any or further
liability under this Reimbursement Agreement or any of the other Related
Documents; or

(t) the substitution or replacement of the Letter of Credit
with an Alternate Letter of Credit (as defined in the Bond Indenture) while any
amounts are owed to the Bank hereunder or under the Letter of Credit; and

(u) failure of any Lender to honor its obligations pursuant to
Section 2.1 and 2.2 hereof and Section 2.9 of the Wellsford REIT Loan
<PAGE>

Agreement, if such failure results in the Bank not receiving the entire amount
payable to the Bank thereunder;

then, and in any such event, the Bank may, by notice in writing to the Account
Parties, declare all amounts owing with respect to this Reimbursement Agreement
and the other Related Documents to be, and they shall thereupon forthwith
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by each
Account Party; provided that in the event of any Event of Default specified in
Section 7.1(j), or 7.1(k) or 7.1(l), all such amounts shall become immediately
due and payable automatically and without any requirement of notice from the
Bank.

Section 7.2 Rights and Remedies. Upon the occurrence and
continuation of an Event of Default, the Bank, in its sole discretion, (a) may
by notice to the Account Parties and the Bond Trustee, declare the obligations
of the Account Parties hereunder and under the Promissory Notes to be
immediately due and payable, and the same shall thereupon become immediately
due and payable (provided that the obligations of the Account Parties hereunder
shall be and become automatically and immediately due and payable without such
notice upon the occurrence of an Event of Default described in Section 7.1(j),
7.1(k) or 7.1(l) above), without demand, presentment, protest or further notice
of any kind, all of which are hereby expressly waived by each Account Party,
(b) may deliver to the Bond Trustee written notice that an Event of Default has
been declared under this Reimbursement Agreement and that the Letter of Credit
will terminate ten (10) days after receipt of such notice together with a
written request that the Bonds be accelerated, (c) may cure any default, event
of default or event of nonperformance under this Reimbursement Agreement or
under any of the other Related Documents (in which event the Account Parties
shall reimburse the Bank therefor pursuant to Section 2.12 hereof), (d) may
direct the Bond Trustee to cause a mandatory tender of the Bonds pursuant to
Section 4.02(c) of the Bond Indenture, (e) may direct the Account Parties not
to permit or the Remarketing Agent to cease remarketing the Bonds, or (f) may
exercise any other rights or remedies available under this Reimbursement
Agreement, any other Related Document, any other agreement or at law or in
equity. The rights and remedies of the Bank specified herein are for the sole
and exclusive benefit, use and protection of the Bank, and the Bank is
entitled, but shall have no duty or obligation to either Account Party, the
Bond Trustee, the Bondholders or otherwise, (i) to exercise or to refrain from
exercising any right or remedy reserved to the Bank hereunder, or (ii) to cause
the Bond Trustee or any other party to exercise or to refrain from exercising
any right or remedy available to it under any of the Related Documents.

ARTICLE 8

NATURE OF OBLIGATIONS; INDEMNIFICATION

Section 8.1 Obligations Absolute. The obligations of each Account
Party under this Reimbursement Agreement shall be absolute, unconditional and
irrevocable, and shall not be subject to any right of setoff or counterclaim
against the Bank, any Lender or any Participant, and shall be paid or performed
strictly in accordance with the terms of this Reimbursement Agreement and the
other Related Documents under all circumstances whatsoever, including without
limitation the following circumstances: (a) any lack of validity or
enforceability of this Reimbursement Agreement or any other Related Document;
(b) any amendment or waiver of, or any consent to departure from, all or any of
the Related Documents, other than, with respect to any particular obligation,
<PAGE>

the specific waiver by the Bank of such particular obligation under such
Related Document; (c) the existence of any claim, set-off, defense or other
right which either Account Party may have at any time against the Bond Trustee,
any beneficiary or any transferee of the Letter of Credit (or any Persons for
whom the Bond Trustee, any such beneficiary or any such transferee may be
acting), the Bank or any other Person, whether in connection with this
Reimbursement Agreement, any other Related Document, the transactions
contemplated herein or therein or any unrelated transaction; (d) any breach of
contract or dispute among or between either Account Party, Highlands, the Bond
Trustee, the Remarketing Agent, the Bank or any other Person; (e) any
certificate, statement or any other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect (unless the
Account Parties prove that any Bank action taken in reliance on such
certificate, statement or other document constituted gross negligence or
willful misconduct); (f) any nonapplication or misapplication by the Bond
Trustee of the proceeds of any Drawing under the Letter of Credit or any other
act or omission of the Bond Trustee, the Remarketing Agent or any other Person
in connection with the Letter of Credit; (g) payment by the Bank under the
Letter of Credit against presentation of a certificate which does not comply
with the terms of the Letter of Credit; provided that such payment by the Bank
shall not have constituted gross negligence or willful misconduct of the Bank;
(h) any extension of time for or delay, renewal or compromise of or other
indulgence or modification granted or agreed to by the Bank with or without
notice to or approval by the Account Parties with respect to the Banking
Arrangements other than, with respect to any particular obligation or cost, the
specific modification to the Account Parties by the Bank of such particular
obligation or cost; or (i) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, provided that such circumstance
or happening shall not have constituted gross negligence or willful misconduct
of the Bank.

Section 8.2 Continuing Obligation. This Reimbursement Agreement is a
continuing obligation, shall survive the expiration of the Letter of Credit and
shall (a) be binding upon the Bank, the Account Parties and their respective
successors and assigns, and (b) inure to the benefit of and be enforceable by
the Bank and its successors, transferees and assigns; provided that neither
Wellsford REIT nor the Bond Issuer may assign all or any part of this
Reimbursement Agreement without the prior written consent of the Bank.

Section 8.3 Liability of the Bank. Account Parties assume all risks
of the acts or omissions of the Bond Trustee and any transferee of the Letter
of Credit with respect to its use of the Letter of Credit. Neither the Bank nor
any of its officers or directors shall be liable or responsible for: (a) the
use which may be made of the Letter of Credit or for any acts or omissions of
the Bond Trustee and any beneficiary or transferee in connection therewith; (b)
any reference which may be made to this Reimbursement Agreement or the Letter
of Credit in any agreements, instruments or other documents; (c) the validity,
sufficiency or genuineness of documents, or of any endorsement(s) thereon, even
if such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (d) payment by the Bank against
presentation of documents which do not comply with the terms of the Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (e) any other circumstances whatsoever in
making or failing to make payment under the Letter of Credit. Without limiting
the foregoing, the Bank may accept any document that appears on its face to be
in order, without responsibility for further investigation. The determination
of whether a drawing has been made under the Letter of Credit prior to the
<PAGE>

Expiration Date or whether a drawing made under the Letter of Credit is in
proper and sufficient form shall be made by the Bank in its sole discretion,
which determination shall be conclusive and binding upon Account Parties to the
extent permitted by law except to the extent Account Parties proves that such
determination constituted gross negligence or willful misconduct of the Ban;
Account Parties hereby waive any right to object to any payment made under the
Letter of Credit with regard to a drawing that is in the form provided in the
Letter of Credit, but which varies with respect to punctuation, capitalization,
spelling or similar matters of form. Notwithstanding the foregoing, the Bank
shall be liable to Account Parties for acts or events described in subsections
(a) through (e) above to the extent, but only to the extent, of any direct, as
opposed to indirect or special or consequential, damages, suffered by Account
Parties which Account Parties proves were caused by: (i) the gross negligence
or willful misconduct of the Bank, in determining whether a drawing made under
the Letter of Credit complies with the terms and conditions therefor stated in
the Letter of Credit, or (ii) the gross negligence or willful failure of the
Bank to pay under the Letter of Credit after a drawing by the Bond Trustee
strictly complying with the terms and conditions of the Letter of Credit;
provided, however, that the maximum amount of damages recoverable by Account
Parties as provided above is expressly limited to the Stated Amount of the
Letter of Credit.

Section 8.4 Indemnification. In addition to any and all rights of
reimbursement, indemnification, subrogation or any other rights pursuant hereto
or under law or equity, Wellsford REIT and the Bond Issuer, jointly and
severally, hereby agree to indemnify and hold harmless the Bank and its
officers, directors and agents (each an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities, reasonable costs or expenses
whatsoever (including attorneys' fees) which the Indemnified Party may incur
(or which may be claimed against the Indemnified Party by any person or entity
whatsoever) by reason of or in connection with the execution, delivery and
performance of this Reimbursement Agreement or any of the other Related
Documents or any other matter arising therefrom, including, without limitation,
any of the following: (a) any untrue statement or alleged untrue statement of
any material fact contained or incorporated by reference in the Official
Statement (other than information relating to the Bank and provided by the Bank
for inclusion therein) or the omission or alleged omission to state in the
Official Statement of a material fact (other than an omission by the Bank with
respect to the Bank) necessary to make such statements, in the light of the
circumstances under which they are or were made, not misleading; (b) the
execution and delivery or transfer of, or payment or failure to pay under, the
Letter of Credit; (c) the issuance and sale of the Bonds; or (d) the use of the
proceeds of the Bonds; provided that no Account Party shall be required to
indemnify the Indemnified Party for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent caused by (A) the
willful misconduct of the Indemnified Party or (B) gross negligence of the
Indemnified Party. If any proceeding shall be brought or threatened against an
Indemnified Party by reason of or in connection with the events described above
(except as otherwise provided in (A) or (B) above), the Indemnified Party shall
promptly notify the Account Parties in writing and the Account Parties shall
assume the defense thereof, including the employment of counsel and the payment
of all costs of litigation. Notwithstanding the preceding sentence, the
Indemnified Party shall have the right to employ its own counsel and to
determine its own defense of such action in any such case, but the fees and
expenses of such counsel shall be at the expense of the Indemnified Party
unless (i) the employment of such counsel shall have been authorized in writing
by an Account Party or (ii) no Account Party, after due notice of the action,
shall not have employed counsel to have charge of such defense, in either of
<PAGE>

which events the reasonable fees and expenses of counsel for the Indemnified
Party shall be borne by the Account Party. The Account Party shall not be
liable for any settlement of any such action effected without its consent.
Nothing under this Section 8.4 is intended to limit payment obligations of
Wellsford REIT or the Bond Issuer.

Section 8.5 Telecopied Documents. At the request of Account Parties,
the Letter of Credit provides that demands for payment thereunder may be
presented to the Bank by, among other methods, telecopy. The Account Parties
acknowledge and assume all risks relating to the use of such telecopied demands
for payment and agrees that its obligations under this Reimbursement Agreement
and the other Related Documents shall remain absolute, unconditional and
irrevocable as provided in Section 8.1 above if the Bank honors such telecopied
demands for payment.

ARTICLE 9

ISSUANCE, TRANSFER, REDUCTION OR
EXTENSION OF LETTER OF CREDIT

Section 9.1 Issuance. Subject to the terms and conditions of this
Reimbursement Agreement, the Bank agrees to issue the Letter of Credit to the
Bond Trustee in substantially the form of Exhibit A hereto, having a term
beginning on the Closing Date and ending on the Expiration Date and having a
Stated Amount as set forth therein, as such Stated Amount may be reduced and
reinstated in accordance with the terms of the Letter of Credit.

Section 9.2 Transfer, Reduction and Reinstatement. The Letter of
Credit may be transferred, reduced and reinstated in accordance with the
provisions set forth therein.

Section 9.3 Extension. Subject to the terms of the Wellsford REIT
Loan Agreement, the Expiration Date of the Letter of Credit may be extended by
the Bank upon the written request of Wellsford REIT given to the Bank at least
120 days prior to, but no earlier than 180 days prior to the Expiration Date.
Within 60 days of receipt of a request for extension, the Bank shall, at its
sole option, either notify Wellsford REIT, the Bond Issuer and the Bond Trustee
that the Letter of Credit will be extended to the new expiration date set forth
in such notice in accordance with the terms of the Letter of Credit or notify
Wellsford REIT and the Bond Issuer that the Letter of Credit will not be so
extended. Failure of the Bank to respond to any requested extension shall
constitute the Bank's denial of such request.

ARTICLE 10

MISCELLANEOUS

Section 10.1 Right of Setoff. Upon the occurrence of an Event of
Default, the Bank may, at any time and from time to time, without notice to
either Account Party or any other person (any such notice being expressly
waived), set off and appropriate and apply, against and on account of, any
obligations and liabilities of either Account Party to the Bank arising under
or connected with this Reimbursement Agreement and the other Related Documents,
without regard to whether or not the Bank shall have made any demand therefor,
and although such obligations and liabilities may be contingent or unmatured,
any and all deposits (general or special, including but not limited to
<PAGE>

indebtedness evidenced by certificates of deposit, whether matured or
unmatured, but not including trust accounts) and any other indebtedness at any
time held or owing by the Bank to or for the credit or the account of either
Account Party.

Section 10.2 Amendments and Waivers. No amendment or waiver of any
provision of this Reimbursement Agreement nor consent to any departure by
either Account Party from any such provision shall in any event be effective
unless the same shall be in writing and signed by the Bank. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. In the event any agreement contained in this
Reimbursement Agreement should be breached by either Account Party and
thereafter waived by the Bank, such waiver shall be limited to the particular
breach so waived for the specific period set out in such waiver and such waiver
shall not constitute a waiver of such breach for any other period and shall not
waive any other or similar breach hereunder.

Section 10.3 No Waiver; Remedies. No failure on the part of the Bank
to exercise, and no delay in exercising, any right under this Reimbursement
Agreement shall operate as a waiver of such right; nor shall any single or
partial exercise of any right under this Reimbursement Agreement preclude any
other further exercise of such right or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.

Section 10.4 Notices. Unless specifically indicated otherwise
herein, all notices and other communications provided for hereunder shall be in
writing and, if to either Account Party, addressed to it at:

Wellsford Residential Property Trust
610 Fifth Avenue
New York, New York 10020
Attention: Gregory F. Hughes
Telephone No.: (212) 333-2300
Telecopy No.: (212) 333-2323

Palomino Park Public
Improvements Corporation
370 17th Street, Suite 3100
Denver, Colorado 80202
Attention: Donald MacKenzie
Telephone No.: (303) 595-7750
Telecopy No.: (303) 595-7799

With a copy to:

Brownstein Hyatt Farber & Strickland
410 17th Street, 22nd Floor
Denver, Colorado 80202-4437
Attention: Thomas J. Mancuso, Esq.
Telephone No.: (303) 534-6335
Telecopy No.: (303) 623-1956

and:

Robinson, Silverman, Pearce, Aronsohn & Berman
1290 Avenue of the Americas
New York, New York 10104
<PAGE>

Attention: Alan S. Pearce, Esq.
Telephone No.: (212) 541-2000
Telecopy No.: (212) 541-4630

or if to the Bank, addressed to it at:

Dresdner Bank AG
New York Branch
75 Wall Street
New York. New York 10005
Attention: Richard Conroy
Telephone No.: (212) 429-2206
Telecopy No.: (212) 429-2129

or if to the Bond Trustee, addressed to it at:

United States Trust Company of New York
114 West 57th Street, 15th Floor
New York, New York 10036-1532
Attention: Christopher Grell
Telephone No.: (212) 852-1034
Telecopy No.: (212) 852-1625

or if to the Remarketing Agent addressed to it at:

First Interstate Bank of Arizona, N.A.
633 Seventeenth Street
Denver, CO 80202
Attention: Alan T. Fair
Telephone No.: (303) 293-5990
Telecopy No.: (303) 293-5132

or as to each party at such other address as shall be designated by such party
in a written notice to the other parties.

Any notice or other communication shall be sufficiently given and
shall be deemed given when delivered to the addressee in writing or when given
by telephone immediately confirmed in writing by tested telex, telecopier or
other telecommunication device.

Section 10.5 Severability. Any provision of this Reimbursement
Agreement which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or nonauthorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.

Section 10.6 GOVERNING LAW. THIS REIMBURSEMENT AGREEMENT SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK AND
APPLICABLE FEDERAL LAW WITHOUT REGARD TO CHOICE OF LAW RULES.

Section 10.7 Consent to Jurisdiction and Venue, Etc. Each Account
Party irrevocably (a) agrees that any suit, action or other legal proceeding
arising out of or relating to this Reimbursement Agreement or any of the other
Related Documents (other than the Loan Documents) may be brought in a court of
record in the State of New York or in the Courts of the United States of
America located in such state, (b) consents to the jurisdiction of each such
court in any such suit, action or proceeding and (c) waives any objection which
<PAGE>

it may have to the laying of venue of any such suit, action or proceeding in
any of such courts and any claim that any such suit, action or proceeding has
been brought in an inconvenient forum. Each Account Party agrees that a final
judgment in any such suit, 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. All mailings under this Section 10.7 shall be by certified
mail, return receipt requested.

Nothing in this Section 10.7 shall affect the right of the Bank to
serve legal process in any other manner permitted by law or affect the right of
the Bank to bring any suit, action or proceeding against either Account Party
or their respective property or any property encumbered by the Assignment and
Lien in the courts of any other jurisdiction.

Section 10.8 Headings. Section headings in this Reimbursement
Agreement are included herein for convenience of reference only and shall not
have any effect for purposes of interpretation or construction of the terms of
this Reimbursement Agreement.

Section 10.9 Participation. Each Account Party each acknowledges and
agrees that the Bank may participate portions of its obligations under the
Letter of Credit and the obligations of the Account Parties under the Pledged
Bonds, the Promissory Notes, this Reimbursement Agreement and any other Related
Documents (collectively, the "Participated Obligations") to other financial
institutions. The Account Parties waive any right to receive notice of such
participation. The Account Parties agree to reasonably cooperate to the extent
required by the Bank in effecting such participation, provided that neither
Account Party shall be required to incur any additional expense as a
consequence of such participation. Each Account Party further acknowledges and
agrees that upon any such participation the Participants will become owners of
a pro rata portion of the Participated Obligations and each waives any right of
setoff it may at any time have against the Bank or any Participant with regard
to the Participated Obligations.

Section 10.10 Issuing Branch of the Bank. The Letter of Credit will
be issued on the Closing Date by the New York Branch of the Bank but the Bank
may, at its sole option, transfer such Letter of Credit obligation on its books
to any other United States branch or agency of the Bank authorized to issue
such Letter of Credit. The Bond Trustee shall accept such replacement letter of
credit and return the prior Letter of Credit to the Bank upon receipt by the
Bond Trustee of (a) notice of such replacement, (b) the replacement letter of
credit issued by such other branch or agency of the Bank, which replacement
letter of credit is identical in all material respects to the Letter of Credit
but for any revisions to the addresses to which demand for payment must be
delivered, (c) opinions from counsel to the Bank with respect to such
replacement letter of credit restating and confirming the opinions delivered by
such counsel at the Closing Date and (d) if the Bonds are then rated by a
Rating Agency, evidence that such replacement letter of credit would not, in
and of itself, result in the lowering of the rating on the Bonds by such Rating
Agency. No amendments to this Reimbursement Agreement or any of the other
Related Documents shall be required to effect such transfer.

Section 10.11 Counterparts. This Reimbursement Agreement may be
signed in any number of counterpart copies, but all such copies shall
constitute one and the same instrument.

Section 10.12 Complete and Controlling Agreement. This Reimbursement
Agreement and the other Related Documents completely set forth the agreements
<PAGE>

between the Bank and the Account Parties with respect to matters herein and
fully supersede all prior agreements, both written and oral, between the Bank
and the Account Parties relating to the issuance of the Letter of Credit and
all matters set forth herein and in the other Related Documents.

Section 10.13 WAIVER OF JURY TRIAL. WELLSFORD REIT AND THE BOND
ISSUER EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO
TRIAL BY JURY FOR ANY TRIAL RESULTING EITHER DIRECTLY OR INDIRECTLY OUT OF,
UNDER OR IN CONNECTION WITH THIS REIMBURSEMENT AGREEMENT OR ANY OF THE OTHER
RELATED DOCUMENTS. WELLSFORD REIT AND THE BOND ISSUER EACH FURTHER AGREES
THAT, IN THE EVENT OF LITIGATION, IT WILL NOT PERSONALLY OR THROUGH ITS AGENTS
OR ATTORNEYS SEEK TO REPUDIATE THE VALIDITY OF THIS SECTION 10.13, AND IT
ACKNOWLEDGES THAT IT FREELY AND VOLUNTARILY ENTERED INTO THIS AGREEMENT TO
WAIVE TRIAL BY JURY IN ORDER TO INDUCE THE BANK TO ISSUE THE LETTER OF CREDIT.

Section 10.14 Assignability to Federal Reserve. The Bank may assign
and pledge all or any portion of the obligations owing to it hereunder or under
any of the other Related Documents to any Federal Reserve Bank or the United
States Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such
assigned obligations made by either Account Party to the Bank in accordance
with the terms of this Reimbursement Agreement or such Related Documents shall
satisfy such Account Party's obligations hereunder or thereunder in respect of
such assigned obligation to the extent of such payment. No such assignment
shall release the Bank from its obligations hereunder or under any other
Related Document.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have caused this Letter of
Credit Reimbursement Agreement to be duly executed and delivered by their
respective officers "hereunto duly authorized as of the date first above
written.

PALOMINO PARK PUBLIC IMPROVEMENTS
CORPORATION, a Colorado nonprofit
corporation

By: /s/ Donald D. MacKenzie
________________________________
Name: Donald D. MacKenzie
Title: President

WELLSFORD RESIDENTIAL PROPERTY
TRUST, a Maryland real estate
investment trust

By: /s/ Donald D. MacKenzie
________________________________
Name: Donald D. MacKenzie
Title: Vice President

DRESDNER BANK AG, New York Branch

By: /s/ Richard W. Conroy
________________________________
Name: Richard W. Conroy
Title: Vice President

By:/s/ Andrew K. Mittag
________________________________
Name: Andrew K. Mittag
Title: Vice President
<PAGE>

EXHIBIT A

FORM OF
LETTER OF CREDIT

December 1, 1995

Irrevocable Letter of Credit No. 967-95

United States Trust Company of New York
114 West 47th Street, 15th Floor
New York, New York 10036-1532
Attention: Christopher Grell

Palomino Park Public Improvements Corporation
Assessment Lien Revenue Bonds
Series 1995 - $14,755,000

Ladies and Gentlemen:

At the request and for the account of Palomino Park Public Improvements
Corporation (the "Bond Issuer") and Wellsford Residential Property Trust
("Wellsford REIT") (collectively Wellsford REIT and the Bond Issuer are
referred to as the "Account Parties") pursuant to the Letter of Credit
Reimbursement Agreement among us and the Account Parties dated as of December
1, 1995 (as amended or supplemented from time to time pursuant to its terms,
the "Reimbursement Agreement"), we hereby establish this Irrevocable Letter of
Credit (the "Letter of Credit") in your favor as Bond Trustee under the Trust
Indenture, dated as of December 1, 1995, between Bond Issuer and you, as
trustee (as amended or supplemented from time to time pursuant to its terms,
the "Bond Indenture"), for the benefit of the holders of the Bond Issuer's
above-referenced series of bonds issued under the Bond Indenture (the "Bonds")
in accordance with the following terms and conditions.

1. Expiration. This Letter of Credit automatically shall expire at
5:00 p.m., New York time, on the earliest of:

(a) June 20, 1998; provided that, if on or before the 45th day
prior to the Interest Payment Date (as defined in the Bond Indenture) next
preceding the then-stated expiration date of this Letter of Credit, we provide
you as Bond Trustee with a written notice in the of Exhibit H hereto that this
Letter of Credit shall be extended, then the term of this Letter of Credit
shall be extended to the date provided in such notice (it being understood that
we shall have the right in our sole discretion to determine whether to extend
the term of this Letter of Credit);

(b) our receipt of your certificate in the form of Exhibit E or
Exhibit F hereto appropriately completed, together with this Letter of Credit;

(c) 10 days after you have received notice from us, pursuant to
Section 7.2(b) of the Reimbursement Agreement, stating that an Event of Default
has occurred under the Reimbursement Agreement and requesting the acceleration
of the Bonds;

(d) immediately following our payment of a Drawing in order to
pay the Purchase Price (as defined below) of Bonds tendered pursuant to clause
(b) or clause (c) of Section 4.02 of the Bond Indenture; and
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(e) the date of payment of an Interest Drawing (as defined
below) and a Principal Drawing (as defined below) which when added to all other
Interest Drawings and Principal Drawings honored hereunder and not subject to
reinstatement in the aggregate equals the initial amount of the Stated Amount
(as defined below), as the same previously may have been reduced pursuant to
the Bank's receipt of a certificate in the form of Exhibit D.

In the event such expiration date shall not be a Business Day (as
hereinafter defined), then this Letter of Credit shall expire at the opening of
business on the next succeeding Business Day.

2. Stated Amount. The maximum aggregate amount available under
this Letter of Credit shall be $15,773,702, which amount as from time to time
reduced and reinstated as provided in paragraphs 3 and 4 is hereinafter
referred to as the "Stated Amount." Of the Stated Amount, up to $14,755,000 is
available for the payment of the unpaid principal of, or the portion of the
purchase price of Bonds tendered or deemed tendered for purchase under Sections
4.01 or 4.02 of the Bond Indenture corresponding to principal of, the Bonds
(the "Principal Portion"), and up to $1,018,702 is available for the payment of
the unpaid interest accrued on, or the portion of the purchase price of Bonds
tendered for purchase under said Sections of the Bond Indenture corresponding
to interest accrued on, the Bonds (the "Interest Portion"), which amount
represents 210 days of interest on the Principal Portion at 12% per annum based
on a year of 365 days. The amount paid to purchase Bonds tendered for purchase
pursuant to the Bond Indenture is herein referred to as the "Purchase Price"
for such Bonds.

3. Reductions in the Stated Amount. The Stated Amount, the
Principal Portion and the Interest Portion, as applicable, shall be reduced
automatically from time to time as follows:

(a) Upon our honoring of a demand for payment hereunder, the
Stated Amount, the Principal Portion and the Interest Portion, as applicable,
shall be reduced by an amount equal to the amount of such demand for payment.
More specifically:

(i) In connection with each Interest Drawing, the Interest
Portion shall be reduced by the amount requested for payment on the submitted
Drawing Certificate;

(ii) In connection with each Principal Drawing, the
Principal Portion shall be reduced by the amount requested for payment on the
submitted Drawing Certificate;

(iii) In connection with each Purchase Drawing, the
Principal Portion shall be reduced by the amount referenced in paragraph 3(a)
of the submitted Drawing Certificate and the Interest Portion shall be reduced
by the amount referenced in paragraph 3(b) of the submitted Drawing
Certificate.

(b) Upon our receipt of your certificate in the form of Exhibit
D hereto appropriately completed, the Stated Amount, the Principal Portion and
the Interest Portion, as applicable, shall be reduced by an amount equal to the
amount specified in such certificate, provided that no reduction under this
clause (b) shall duplicate any reduction under clause (a) above.

Upon such a reduction, we may require you to return this Letter of Credit and
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to accept in substitution hereof a substitute Letter of Credit for a Stated
Amount reflecting such reduction, but otherwise identical in form and substance
to this Letter of Credit.

4. Automatic Reinstatement.

(a) Reductions under paragraph 3(a) with respect to any demand
for payment of interest on the Bonds (except for that portion of the Purchase
Price corresponding to unpaid interest, if any, on such Bonds) shall be
reinstated automatically unless you receive notice in writing from us (which
may include delivery by prepaid telecopier, telex, telegram or other
telecommunication) on or before the close of business on the tenth day after
such demand for payment was honored by us stating that an Event of Default
under the Reimbursement Agreement has occurred and requesting acceleration of
the Bonds, as permitted by Section 7.2(b) of the Reimbursement Agreement, or
mandatory tender of the Bonds, as permitted by Section 7.2(d) of the
Reimbursement Agreement.

(b) Reductions under paragraph 3(a) with respect to any demand
for payment of the Purchase Price of Bonds tendered or deemed to have been
tendered pursuant to Section 4.01 or upon the occurrence of a Conversion Date
and a mandatory tender under and in accordance with Section 4.02 of the Bond
Indenture shall be reinstated automatically upon the receipt by the Bank of (i)
a certificate from you in the form of Exhibit I attached hereto, (ii) monies in
the amount drawn under such Drawing for the reimbursement to the Bank of such
amounts in accordance with Section 2.4 of the Reimbursement Agreement and (iii)
such additional monies as are required pursuant to Section 2.4 of the
Reimbursement Agreement in order to effect a release from the Bank's security
interest in the Bonds ("Pledged Bonds") purchased with said drawing and pledged
to the Bank under that certain Bond Pledge and Security Agreement dated as of
December 1, 1995 by and among us, the Account Parties and you, as custodian
(the "Pledge Agreement").

(c) Reductions under paragraph 3(b) shall not be subject to
reinstatement. Reductions under paragraph 3(a) with respect to (i) any demand
for payment of the principal of the Bonds or (ii) the Purchase Price of Bonds
tendered or deemed to have been tendered pursuant to any section of the Bond
Indenture other than pursuant to Section 4.01 or upon the occurrence of a
Conversion Date and a mandatory tender under and in accordance with Section
4.02 of the Bond Indenture shall not be subject to reinstatement.

5. Documents To Be Presented. Funds under this Letter of Credit
are available to you, against presentment to us of the following drawings
(collectively, a "Drawing") in accordance with Section 6 below:

(a) in the case of a demand for payment of the unpaid interest
accrued on the Bonds, a certificate signed by you in the form of Exhibit A
hereto appropriately completed (an "Interest Drawing");

(b) in the case of a demand for payment of the unpaid principal
of the Bonds, a Certificate signed by you in the form of Exhibit B hereto
appropriately completed (a "Principal Drawing"); and

(c) in the case of a demand for payment of the Purchase Price
of the Bonds pursuant to Article IV of the Bond Indenture, a certificate signed
by you in the form of Exhibit C hereto appropriately completed (a "Purchase
Drawing").
<PAGE>

6. Method and Notice of Presentment.

(a) The certificates referenced in paragraph 5 (a "demand for
payment") may be delivered to us in person, by mail, by an express delivery
service, by telecopy or by tested telex, answerback received, at such number or
numbers as we shall notify you from time to time in writing. A demand for
payment shall be presented during our business hours on a Business Day prior to
the expiration hereof at our office at Dresdner Bank AG, New York Branch, 75
Wall Street, New York, NY 10005, Telecopy Number: (212) 429-2130, Attn: Lora
Lan, or at such other address as we may notify you in writing from time to
time. As used herein, "Business Day" means any day other than (i) a Saturday or
Sunday or (ii) a day on which commercial banks in Denver, Colorado, New York,
New York or the city or cities in which are located the principal corporate
trust offices of the Bond Trustee under the Bond Indenture and our office at
which demands for payment under this Letter of Credit are required to be made
are authorized or required by law or executive order to close, or (iii) a day
on which the New York Stock Exchange is closed.

(b) Prior to the delivery of any demand for payment, you shall
endeavor in good faith to give us telephonic notice of your intention to
deliver such demand for payment, stating the method of presentment and the type
and amount of such demand for payment; provided, that your failure to give such
telephonic notice will not affect our obligation to honor demands for payment
in strict conformity with the terms hereof. The telephonic notice required
hereunder shall be given to Dresdner Bank AG, New York Branch, Attention: Lora
Lan, at (212) 429-2288, or such other person or persons as we shall notify you
in writing from time to time. Such telephonic notice may be waived at our sole
discretion.

7. Time and Method for Payment.

(a) If demand for payment is made on a Business Day in strict
conformity with the terms and conditions hereof, payment shall be made to you
(i) in the case of a Principal Drawing or an Interest Drawing, if a demand for
payment is received by us prior to 4:00 p.m. New York time, not later than
10:00 a.m. New York time on the next succeeding Business Day or such later date
as you may specify in such demand for payment; and (ii) in the case of a
Purchase Drawing for, if a demand for payment is received by us prior to 4:00
p.m. New York time, not later than 10:00 a.m. New York time on the next
succeeding Business Day or such later date as you may specify in such demand
for payment. If such demand for payment is received by us after the applicable
times, such demand shall be deemed to have been received on the next Business
Day. All times referenced herein are as of New York, New York time.

(b) Unless otherwise agreed, payment under this Letter of
Credit pursuant to an Interest Drawing, a Principal Drawing or a Purchase
Drawing shall be made by Fedwire in immediately available funds to the Bond
Trustee's account at The Chase Manhattan Bank, N.A., One Chase Plaza, New York,
New York 10081, ABA 021-000-021, for credit to the account of United States
Trust Company of New York, Account No. _________________. For the purposes of
determining compliance with the times for payment specified in (a) above,
payment shall be deemed to have been made by us when we have delivered
appropriate wire transfer instructions to an appropriate Federal Reserve Bank.

8. Transferability. This Letter of Credit is transferable in its
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entirety, but not in part, to any transferee who has succeeded you as Bond
Trustee under the Bond Indenture and may be successively transferred. Transfer
of the available balance under this Letter of Credit to such transferee shall
be effected by the presentation to us of this Letter of Credit accompanied by a
certificate substantially in the form of Exhibit G hereto.

9. GOVERNING LAW AND CUSTOMS. TO THE EXTENT CONSISTENT WITH THE
EXPRESS PROVISIONS HEREOF, THIS LETTER OF CREDIT SHALL BE GOVERNED BY THE
UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION),
INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500 (THE "UCP"), AND, TO THE
EXTENT CONSISTENT WITH THE UCP AND THE EXPRESS PROVISIONS HEREOF, THE LAWS OF
THE STATE OF NEW YORK.

10. Irrevocability. This Letter of Credit shall be irrevocable.

11. No Negotiation. A demand for payment under this Letter of
Credit shall be presented directly to us and shall not be negotiated to or by
any third party.

12. Excluded Bonds. No demand for payment under this Letter of
Credit may be made with respect to any Corporation Bond or any Pledged Bond (as
each such term is defined in the Bond Indenture) (each an "Excluded Bond").

13. Address for Communications. Communications with respect to this
Letter of Credit, other than demands for payment pursuant to paragraph 6, shall
be in writing and shall be addressed to us at Dresdner Bank AG, New York
Branch, 75 Wall Street, New York, NY 10005, Attn: Richard Conroy, Telecopy No.
(212) 429-2129, specifically referring thereon to our Irrevocable Letter of
Credit No. 967-95. In addition, copies of any demand for payment shall be sent
to us at Dresdner Bank AG, New York Branch, 75 Wall Street, New York, NY 10005,
Attn: Richard Conroy, Telecopy No. (212) 499-2129; provided, however, that the
failure to send such copies shall not affect our obligations hereunder.

14. Complete Agreement. This Letter of Credit, including Exhibits A
through I hereto, sets forth in full the terms of our undertaking. Reference
in this Letter of Credit to other documents or instruments is for
identification purposes only and such reference shall not modify or affect the
terms hereof or cause such documents or instruments to be deemed incorporated
herein.

We hereby agree with you to honor your demand for payment presented
in strict compliance with the terms and conditions of this Letter of Credit.

Very truly yours,

DRESDNER BANK AG, New York Branch

By:________________________________
Name:
Title:

By:________________________________
Name:
Title:
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EXHIBIT A

CERTIFICATE FOR INTEREST DRAWING

Palomino Park Public Improvements Corporation
Assessment Lien Revenue Bonds
Series 1995

Irrevocable Letter of Credit No. 967-95

The undersigned, a duly authorized officer of United States Trust
Company of New York (the "Bond Trustee"), hereby certifies to Dresdner Bank AG,
New York Branch (the "Bank"), with reference to Irrevocable Letter of Credit
No. 967-95 (the "Letter of Credit"; any capitalized term used herein and not
defined shall have its respective meaning as set forth in the Letter of Credit)
issued by the Bank in favor of the Bond Trustee, that:

(1) The Bond Trustee is the Bond Trustee under the Bond Indenture
and is making this demand for payment of interest accrued through ___________
(the "Payment Date") on the Bonds in accordance with the Bond Indenture. Said
interest consists of $___________ of interest accrued on Bonds bearing interest
at a [Weekly Rate/Term Rate] (as such term is defined in the Bond Indenture),
which amount of interest is payable on such Bonds on the Payment Date.

(2) Demand is hereby made under the Letter of Credit for
$___________, which amount does not exceed (i) the amount in paragraph (1) of
this Certificate or (ii) the Interest Portion of the Stated Amount.

(3) The amount demanded hereunder does not include any amount
payable with respect to any Excluded Bond.

(4) The proceeds of this demand for payment equal to the amount set
forth in paragraph (1) of this Certificate shall be deposited in the Letter of
Credit Debt Service Account (as defined in the Bond Indenture) and shall be
applied solely to the payment of unpaid interest on Bonds bearing interest at a
[Weekly Rate Term Rate] in accordance with the Bond Indenture.

(5) (a) Payment of this demand for payment is requested on or
before 10:00 a.m. New York time, on the later of (i) the Payment Date (or if
the Payment Date is not a Business Day, the next succeeding Business Day) and
(ii) the Business Day next succeeding the Business Day on which this
Certificate is received or deemed to have been received by the Bank in
accordance with paragraph 7(a) of the Letter of Credit.

(b) Payment of this demand for payment shall be made in
accordance with the payment instructions provided in paragraph 7(b) of the
Letter of Credit.

IN WITNESS WHEREOF, the Bond Trustee has executed and delivered this
Certificate as of the ____ day of ________, ____.

UNITED STATES TRUST OF NEW
YORK, as Bond Trustee

By:________________________________
Name:
Title:
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EXHIBIT B

FORM OF
BOND PLEDGE AND SECURITY AGREEMENT

THIS BOND PLEDGE AND SECURITY AGREEMENT (the "Pledge Agreement"), dated as
of December 1, 1995, is made by and among Palomino Park Public Improvements
Corporation, a Colorado nonprofit corporation (the "Bond Issuer"), Wellsford
Residential Property Trust, a Maryland real estate investment trust ("Wellsford
REIT" and, collectively with the Bond Issuer, the "Pledgors"), Dresdner Bank
AG, a banking corporation organized and existing under the laws of The Federal
Republic of Germany, acting by and through its New York Branch (the "Bank"),
and United States Trust Company of New York, as custodian for the Bank (the
"Bond Trustee"), pursuant to the Letter of Credit Reimbursement Agreement dated
as of December 1, 1995, between the Pledgors and the Bank (hereinafter, as the
same may from time to time be amended or supplemented, called the
"Reimbursement Agreement ").

W I T N E S S E T H:

WHEREAS, the Bond Issuer is issuing at the request of and for the benefit
of Wellsford REIT and its Subsidiary, Park at Highlands LLC, a Colorado limited
liability company ("Highlands"), its "Palomino Park Public Improvements
Corporation Assessment Lien Revenue Bonds Series 1995 - $14,755,000" (the
"Bonds") pursuant to a Trust Indenture dated as of December 1, 1995 (the "Bond
Indenture") between the Bond Issuer and the Bond Trustee;

WHEREAS, the Bond Indenture requires the purchase of Bonds under certain
circumstances as set forth in Section 4.04 of the Bond Indenture from the
holders thereof:

WHEREAS, the Pledgors have entered into the Reimbursement Agreement in
order to cause the Bank to issue its Letter of Credit No. 967-95 dated December
1, 1995, which may be used, inter alia, to pay the purchase price of certain
Bonds (to the extent moneys drawn under the Letter of Credit are used to
purchase such Bonds, and until such Bonds have been released from the security
interest therein created hereby, such Bonds are referred to herein as "Pledged
Bonds"); and

WHEREAS, it is a condition precedent to the obligation of the Bank to
issue the Letter of Credit that the Pledgors shall have executed and delivered
this Pledge Agreement to the Bank;

NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to enter into the Reimbursement Agreement and issue the Letter of
Credit thereunder and for other good and valuable consideration, receipt of
which is hereby acknowledged, each Pledgor hereby agrees with the Bank as
follows:

1. Defined Terms. Unless otherwise defined herein, terms defined in the
Reimbursement Agreement shall have such defined meanings when used herein.

2. Pledge. Each Pledgor hereby pledges, assigns, hypothecates, transfers
and delivers to the Bank all of its right, title and interest in and to the
Pledged Bonds as the same may be from time to time delivered to the Bond
Trustee by the holders thereof and each Pledgor hereby grants to the Bank a
first lien on, and security interest in, its right, title and interest in and
<PAGE>

to the Pledged Bonds, all interest or other income thereon and all proceeds
thereof (the "Collateral"), as collateral security for the prompt and complete
payment when due of all amounts due in respect of the obligations of the
Pledgors under the Reimbursement Agreement and interest on such amounts (all
the foregoing being hereinafter called the "Obligations"). Each Pledgor hereby
consents to the Bond Trustee acting as the agent and bailee of the Bank for
purposes of perfecting the Lien of this Pledge Agreement and of holding the
Collateral for the benefit of the Bank.

Payments on the Pledged Bonds. If, while this Pledge Agreement is in
effect either Pledgor shall become entitled to receive or shall receive any
principal or interest payment in respect of the Pledged Bonds, such Pledgor
agrees to accept the same as the Bank's agent and to hold the same in trust on
behalf of the Bank and to deliver the same forthwith to the Bank. The Pledgors
instruct and authorize the Bond Trustee to deliver forthwith to the Bank any
payment to be made on Pledged Bonds and instruct and authorize the Bond Trustee
to hold and receive on behalf of the Bank and deliver forthwith to the Bank any
payments to be made or received in respect of Pledged Bonds (including all
proceeds of any remarketing of the Pledged Bonds). All sums of money so paid in
respect of the Pledged Bonds which are received by either Pledgor and paid to
the Bank shall be credited against the obligations of the Pledgors to the Bank
first to any fees, costs, charges or expenses payable to the Bank under the
Reimbursement Agreement or the Letter of Credit, next to any accrued but unpaid
interest under Sections 2.1 or 2.2 of the Reimbursement Agreement, next to any
current interest due, and then to outstanding principal.

4. Release of Pledged Bonds. Subject to and in accordance with the terms
and conditions of Section 2.4 of the Reimbursement Agreement, the Pledgors
shall have the right to effect releases of Pledged Bonds from the security
interest created by this Pledge Agreement.

5. Rights of the Bank. The Bank shall not be liable for failure to
collect or realize upon the Obligations or any collateral security or guarantee
therefor, or any part thereof, or for any delay in so doing, and shall be under
no obligation to take any action whatsoever with regard thereto. If an Event of
Default has occurred and is continuing, the Bank may thereafter, without
notice, exercise all rights, privileges or options pertaining to any Pledged
Bonds as if it were the absolute owner thereof, upon such terms and conditions
as it may determine, all without liability except to account for property
actually received by it, but the Bank shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible for any
failure to do so or delay in so doing.

6. Remedies. In the event of any Event of Default under the
Reimbursement Agreement, the Bank, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon the Pledgors or any
other Person (all and each of which demands, advertisements and/or notices are
hereby expressly waived) in its sole discretion (a) may exercise any or all of
its rights and remedies under any or all of the Related Documents or any other
instrument or agreement securing, evidencing or relating to the Obligations or
under applicable law (including all of the rights and remedies of a secured
creditor under the Uniform Commercial Code of the State of New York (the "UCC")
or any other applicable law), (b) may forthwith collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or (c) may forthwith
sell, assign, give option or options to purchase, contract to sell or otherwise
dispose of and deliver said Collateral, or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange, broker's board or
<PAGE>

at any of the Bank's offices or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk, with the
right to the Bank upon any such sale or sales, public or private, to purchase
the whole or any part of said Collateral so sold, free of any right or equity
of redemption in the Pledgors, which right or equity is hereby expressly waived
or released. The Bank shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any and all of the Collateral or in any
way relating to the rights of the Bank hereunder, including reasonable
attorney's fees and legal expenses, to the payment, in whole or in part, of the
Obligations in such order as the Bank may elect, the Pledgors remaining liable
for any deficiency remaining unpaid after such application, and only after so
applying such net proceeds and after the payment by the Bank of any other
amount required to be paid by any provision of law, including, without
limitation, Section 9-504(1)(c) of the UCC, need the Bank account for the
surplus, if any, to the Pledgors. Each Pledgor agrees that the Bank need not
give more than ten days' notice of the time and place of any public sale or of
the time after which a private sale or other intended disposition is to take
place and that such notice is reasonable notification of such matters. No
notification need be given to the Pledgors if they have signed after default a
statement renouncing or modifying any right to notification of sale or other
intended disposition. In addition to the rights and remedies granted to it in
this Pledge Agreement and in any other instrument or agreement securing,
evidencing or relating to any of the Obligations, the Bank shall have all the
rights and remedies of a secured party under the UCC. Each Pledgor further
agrees to waive and agrees not to assert any rights or privileges which it may
acquire under Section 9-112 of the UCC and the Pledgors shall be liable for the
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all amounts to which the Bank is entitled, and the fees
and costs of any attorneys employed by the Bank to collect such deficiency. The
Bond Trustee, in its capacity as custodian for the Bank, agrees to take such
steps as Bank reasonably requests in order to effect or implement any of the
foregoing remedies.

7. Representations, Warranties and Covenants of the Pledgors. Each
Pledgor represents and warrants that: (a) on the date that any Bonds become
Pledged Bonds, none of the Bond Issuer, Wellsford REIT nor the Bond Trustee
(except in its capacity as the Bank's designated custodian to hold the Pledged
Bonds) will have any right, title or interest in and to the Pledged Bonds; (b)
each Pledgor has, and on the date that such Bonds become Pledged Bonds will
have, full power, authority and legal right to pledge all of its right, title
and interest in and to the Pledged Bonds pursuant to this Pledge Agreement; (c)
this Pledge Agreement has been duly authorized, executed and delivered by each
Pledgor and constitutes a legal, valid and binding obligation of such Pledgor
enforceable in accordance with its terms; (d) no consent of any other party
(including, without limitation, creditors of either Pledgor) and no consent,
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority,
domestic or foreign, is required to be obtained by either Pledgor in connection
with the execution, delivery or performance of this Pledge Agreement; (e) the
execution, delivery and performance of this Pledge Agreement will not violate,
in any material respect, any provision of any applicable law or regulation or
of any order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, or of any mortgage, indenture,
lease, contract, or other agreement, instrument or undertaking to which either
Pledgor is a party or which purports to be binding upon either Pledgor or upon
<PAGE>

its assets and will not result in the creation or imposition of any lien,
charge or encumbrance on or security interest in any of the assets of such
Pledgor except as contemplated by this Pledge Agreement; and (f) the pledge,
assignment and delivery of such Pledged Bonds pursuant to this Pledge Agreement
will create a valid first lien on and a first perfected security interest in,
all right, title or interest of the Pledgors in or to such Pledged Bonds, and
the proceeds thereof, subject to no prior pledge, lien, mortgage,
hypothecation, security interest, charge, option or encumbrance or to any
agreement purporting to grant to any third party a security interest in the
property or assets of either Pledgor which would include the Pledged Bonds.
Each Pledgor covenants and agrees that it will defend the Bank's right, title
and security interest in and to the Pledged Bonds and the proceeds thereof
against the claims and demands of all persons whomsoever; and covenants and
agrees that it will have like title to and right to pledge any other property
at any time hereafter pledged to the Bank as Collateral hereunder and will
likewise defend the Bank's right thereto and security interest therein.

8. No Disposition, etc. Without the prior written consent of the Bank,
the Pledgors and the Bond Trustee each agree that they will not sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with respect
to, the Collateral, nor will they create, incur or permit to exist any pledge,
lien, mortgage, hypothecation, security interest, charge, option or any other
encumbrance with respect to any of the Collateral, or any interest therein, or
any proceeds thereof, except for the lien and security interest provided for by
this Pledge Agreement and sale of the Pledged Bonds pursuant to Section 4.05 of
the Bond Indenture, subject to Section 4 of this Pledge Agreement.

9. Sale of Collateral.

(a) Each Pledgor recognizes that the Bank may be unable to effect a
public sale of any or all of the Pledged Bonds by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws, but may be compelled
to resort to one or more private sales thereof to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
securities for its own account for investment and not with a view to the
distribution or resale thereof. Each Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable to the
seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Bank shall be under no obligation
to delay a sale of any of the Pledged Bonds for the period of time necessary to
permit the issuer of such securities to register such securities for public
sale under the Securities Act, or under applicable state securities laws, even
if the issuer would agree to do so.

(b) Each Pledgor further agrees to do or cause to be done all such
other acts and things as may be necessary to make such sale or sales of any
portion or all of the Pledged Bonds valid and binding and in compliance with
any and all applicable laws, regulations, orders, writs, injunctions, decrees
or awards of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales, all at
the Pledgors' expense. Each Pledgor further agrees that a breach of any of the
covenants contained in this Pledge Agreement will cause irreparable injury to
the Bank, that the Bank has no adequate remedy at law in respect of such breach
and, as a consequence, agrees that each and every covenant contained in this
Pledge Agreement shall be specifically enforceable against the Pledgors and
each Pledgor hereby waives and agrees not to assert any defenses against an
<PAGE>

action for specific performance of such covenants except for a defense that no
Event of Default has occurred under the Reimbursement Agreement. Each Pledgor
further acknowledges the impossibility of ascertaining the amount of damages
which would be suffered by the Bank by reason of a breach of any of such
covenants and, consequently, agrees that, if the Bank shall sue for damages for
breach, the Pledgors shall pay, as liquidated damages and not as a penalty, an
amount equal to the outstanding principal amount of, accrued premium, if any,
and accrued interest on the Pledged Bonds and all other amounts payable
pursuant to Article 2 of the Reimbursement Agreement on the date the Bank shall
demand compliance with this Paragraph.

(c) The Bond Trustee, as custodian for the Bank, agrees to cooperate
with the Bank and the Pledgors and to do or cause to be done all such acts and
things as may be necessary to permit the Pledgors to make such sale or sales of
any portion or all of the Pledged Bonds valid and binding and in compliance
with any and all applicable laws, regulations, orders, writs, injunctions,
decrees or awards of any and all courts, arbitrators or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such sale
or sales.

10. Bond Trustee.

(i) If a book-entry depository administered by the Depository
Trust Company or any successor or nominee thereto (the "Depository") is in use
pursuant to the Bond Indenture, the Bond Trustee shall notify the Depository
(in a form acceptable to the Depository for such notice) of the principal
amount(s) of the Bonds which are to become Pledged Bonds prior to or
concurrently with its receipt from the Bank of a federal funds tracking number
for a wire transfer in payment of a drawing under the Letter of Credit to
purchase such Bonds. Said notice shall further instruct the Depository to
record in its system a corresponding increase in the principal amount of the
Bonds credited to the account of the Bond Trustee as the agent and bailee of
the Bank or such other Person identified by the Bank (through notice to the
Bond Trustee and the Pledgors) as the entity which should hold Pledged Bonds in
a book-entry system (the Bond Trustee or such other Person, the "Bank's DTC
Participant"). Concurrently with the delivery of such notice to the Depository,
the Bond Trustee shall provide a copy of such notice to the Bank and the
Pledgors. The Bond Trustee and the Pledgors shall provide the Bank with any
confirmation or like notice received by any of them from the Depository
evidencing the Depository's compliance with the instructions.

(ii) Whenever a book-entry depository is in use pursuant to the
Bond Indenture and Pledged Bonds are held on behalf of the Bank by the Bank's
DTC Participant, the Bank shall have the right to obtain a separate bond
certificate to evidence the Pledged Bonds, and upon request by the Bank, the
Pledgors will cause the Bond Trustee to authenticate and deliver such
certificate, and such certificate shall be deposited with the Depository or
delivered to the Bank or a Person designated by the Bank, as the Bank shall
direct.

(iii) If a book-entry depository ever ceases to be in use with
respect to the Bonds, the Bond Trustee and the Pledgors each hereby agree to
hold any Pledged Bonds received by any of them as the Bank's agent and bailee
and to make a notation in its respective records with respect to the Pledged
Bonds. Upon request of the Bank, each of the Bond Trustee and the Pledgors will
deliver all or a portion of such Pledged Bonds to the Bank or to such Person as
the Bank may direct without termination of this Pledge Agreement.
<PAGE>

(iv) Except at the written direction of the Bank, the Bond
Trustee shall not enter into any agreement other than this Pledge Agreement
regarding possession of the Pledged Bonds or any other Collateral without prior
written consent of the Bank. The Bond Trustee will not release any Pledged
Bonds for remarketing unless the Bank has delivered to the Bond Trustee written
notice (which may be by telecopy) pursuant to Section 2.4 of the Reimbursement
Agreement and Section 4.05(a) of the Bond Indenture.

(v) Upon appointment of a successor Bond Trustee under and in
accordance with the terms of the Bond Indenture, release and delivery to the
Bank or its designee of any Collateral then held by the Bond Trustee pursuant
to this Pledge Agreement, and the assumption in writing by its successor of its
obligations hereunder, the Bond Trustee shall have the right to terminate its
position as Bond Trustee for the Bonds and its obligations under this Pledge
Agreement.

(vi) In acting under this Pledge Agreement, the Bond Trustee
shall not be liable to the Bank except for negligence or willful misconduct in
the performance of its obligations hereunder.

11. Further Assurances. Each Pledgor agrees that at any time and from
time to time upon the written request of the Bank, such Pledgor will execute
and deliver such further documents and do such further acts and things as the
Bank may reasonably request in order to effect the purposes of this Pledge
Agreement.

12. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

13. No Waiver: Remedies Cumulative. The Bank shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder and no waiver shall be valid unless in writing, signed by the Bank,
and then only to the extent therein set forth. A waiver by the Bank of any
right or remedy hereunder on any one occasion shall not be construed as a bar
to any right or remedy which the Bank would otherwise have on any future
occasion. No failure to exercise nor any delay in exercising on the part of the
Bank, any right, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided are cumulative and may be exercised singly or concurrently, and are
not exclusive of any rights or remedies provided by law.

14. Waivers; Amendments; Applicable Law. None of the terms or provisions
of this Pledge Agreement may be waived, altered, modified or amended except by
an instrument in writing, duly executed by the Bank. This Pledge Agreement and
all obligations of the Pledgors and the Bond Trustee hereunder shall be binding
upon the successors and assigns of their respective successor and assigns, and
shall, together with the rights and remedies of the Bank hereunder, inure to
the benefit of the Bank and its successors and assigns. This Pledge Agreement
shall be governed by, and be construed and interpreted in accordance with, the
laws of the State of New York.

15. Designation of Custodian. The Bank hereby designates the Bond Trustee
<PAGE>

as the Bank's custodian and agent for the purpose of holding the Pledged Bonds
on behalf of the Bank and with such authority for taking actions with respect
to the Pledged Bonds as set forth herein and as may be directed by, and on
behalf of, the Bank. The parties hereto acknowledge that the Bank may designate
any successor Bond Trustee under the Bond Indenture, or any substitute Person
that the Bank may elect to designate, as the Bank's custodian and agent for the
purpose of holding the Pledged Bonds on behalf of the Bank and with such
authority for taking actions with respect to the Pledged Bonds as set forth
herein and as may be directed by, and on behalf of, the Bank.
<PAGE>

IN WITNESS WHEREOF, the Pledgors, the Bank and the Bond Trustee have
caused this Bond Pledge and Security Agreement to be duly executed and
delivered on the day and year first above written.

PLEDGORS:

PALOMINO PARK PUBLIC IMPROVEMENTS
CORPORATION, a Colorado nonprofit
corporation

By:_____________________________
Name:
Title:

WELLSFORD RESIDENTIAL PROPERTY
TRUST, a
Maryland real estate investment
trust

By:_____________________________
Name:
Title:

BANK:

DRESDNER BANK AG, New York Branch

By:_____________________________
Name:
Title:

BOND TRUSTEE:

UNITED STATES TRUST COMPANY OF NEW
YORK

By:_____________________________
Name:
Title:

<PAGE>

EXHIBIT C-1

FORM OF
WELLSFORD REIT PROMISSORY NOTE

Dated: December 13, 1995

FOR VALUE RECEIVED, the undersigned, Wellsford Residential Property Trust
("Wellsford REIT"), a Maryland real estate investment trust, HEREBY PROMISES TO
PAY on the Expiration Date to the order of Dresdner Bank AG, New York Branch, a
banking corporation organized and existing under the laws of The Federal
Republic of Germany acting through its New York Branch (the "Bank"), the unpaid
amount of all obligations of Wellsford REIT to the Bank pursuant to that
certain Letter of Credit Reimbursement Agreement among Wellsford REIT, Palomino
Park Public Improvements Corporation and the Bank dated as of December 1, 1995
(the "Reimbursement Agreement") and the other Related Documents. Wellsford REIT
promises to pay interest on the unpaid principal amount of this Promissory Note
from the date hereof until such principal amount is paid in full, at such
interest rates, and payable at such times, as are specified in the
Reimbursement Agreement. (Capitalized terms used in this Promissory Note which
are not otherwise defined herein have the same meaning as provided in the
Reimbursement Agreement.)

Both principal and interest are payable in lawful money of the United
States of America in immediately available funds at the office of the Bank set
forth in the Reimbursement Agreement.

This Promissory Note is one of the Promissory Notes referred to in, and is
entitled to the benefits of, the Reimbursement Agreement and the other Related
Documents. The Reimbursement Agreement, among other things, contains provisions
for acceleration of the maturity hereof upon the happening of certain stated
events and also for optional and mandatory prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.

Wellsford REIT waives presentment, demand, protest or notice of any kind
in connection with this Promissory Note. Wellsford REIT agrees to pay to the
holder hereof, on demand, all costs and expenses (including legal fees and
disbursements) incurred in connection with the enforcement and collection of
this Promissory Note.

This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York.

WELLSFORD RESIDENTIAL PROPERTY TRUST

By:_____________________________
Name:
Title:
<PAGE>

EXHIBIT C-2

FORM OF
PALOMINO PARK PROMISSORY NOTE

Dated: December 13, 1995

FOR VALUE RECEIVED, the undersigned, Palomino Park Public Improvements
Corporation (the "Bond Issuer"), a Colorado nonprofit corporation, HEREBY
PROMISES TO PAY on the Expiration Date to the order of Dresdner Bank AG, New
York Branch, a banking corporation organized and existing under the laws of The
Federal Republic of Germany acting through its New York Branch (the "Bank"),
the unpaid amount of all obligations of the Bond Issuer to the Bank pursuant to
that certain Letter of Credit Reimbursement Agreement among the Bond Issuer,
the Bank and Wellsford Residential Property Trust dated as of December 1, 1995
(the "Reimbursement Agreement") and the other Related Documents. The Bond
Issuer promises to pay interest on the unpaid principal amount of this
Promissory Note from the date hereof until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in
the Reimbursement Agreement. (Capitalized terms used in this Promissory Note
which are not otherwise defined herein have the same meaning as provided in the
Reimbursement Agreement.)

Both principal and interest are payable in lawful money of the United
States of America in immediately available funds at the office of the Bank set
forth in the Reimbursement Agreement.

The Bond Issuer waives presentment, demand, protest or notice of any kind
in connection with this Promissory Note. The Bond Issuer agrees to pay to the
holder hereof, on demand, all costs and expenses (including legal fees and
disbursements) incurred in connection with the enforcement and collection of
this Promissory Note.

This Promissory Note shall be governed by, and construed in accordance
with. the laws of the State of New York.

PALOMINO PARK PUBLIC
IMPROVEMENTS CORPORATION
By:____________________________
Name:
Title:
<PAGE>

EXHIBIT D

FORM OF
COMPLIANCE CERTIFICATE

Dresdner Bank AG
New York Branch
75 Wall Street
New York, New York 10005
Attn: Richard W. Conroy

Letter of Credit Reimbursement Agreement

Ladies and Gentlemen:

Reference is made to the Letter of Credit Reimbursement Agreement dated as
of December 1, 1995 (the "Reimbursement Agreement") by and among Wellsford
Residential Property Trust ("Wellsford REIT"), Palomino Park Public
Improvements Corporation and Dresdner Bank AG, New York Branch ("Bank"). Terms
defined in the Reimbursement Agreement and not otherwise defined herein are
used herein as defined in the Credit Agreement.

Pursuant to the Reimbursement Agreement, Wellsford REIT is furnishing to
you herewith (or has recently furnished to you) the financial statements of
Wellsford REIT and its Subsidiaries for the fiscal period ended
___________________________ (the "Balance Sheet Date"). Such financial
statements have been prepared in accordance with generally accepted accounting
principles and present fairly the financial position of Wellsford REIT and the
Subsidiaries covered thereby at the date thereof and the results of their
operations for the periods covered thereby, subject in the case of interim
statements only to normal year-end audit adjustments.

This certificate is submitted in compliance with requirements of Section
5.4(d), Section 5.5(4) and Section 3.10 of the Reimbursement Agreement. If this
certificate is provided under a provision other than Section 5.4(d), the
calculations provided below are made using the financial statements of
Wellsford REIT and its Subsidiaries as of the Balance Sheet Date adjusted in
the best good faith estimate of Wellsford REIT to give effect to the
transactions on the Closing Date, extension of the Maturity Date, acquisition
or disposition of property or other event that occasions the preparation of
this certificate; and the nature of such event and Wellsford REIT's estimate of
its effects are set forth in reasonable detail in an attachment hereto. The
undersigned officer of Wellsford REIT is its chief financial officer.

The undersigned officer has caused the provisions of the Reimbursement
Agreement to be reviewed and has no knowledge of any Default or Event of
Default. (Note: If the signer does have knowledge of any Default or Event of
Default, the form of certificate should be revised to specify the Default or
Event of Default, the nature thereof and the actions taken, being taken or
proposed to be taken by Wellsford REIT with respect thereto.)

Wellsford REIT is providing the following information to demonstrate
compliance as of the date hereof with the following covenants:

1. Implied Rating.
<PAGE>

Wellsford REIT's Implied Rating is:

A. S&P __________

Date Rating Issued: __________
Date Rating Last Reaffirmed __________

B. Moody's __________

Date Rating Issued: __________
Date Rating Last Reaffirmed: __________

2. Section 5.13. Unencumbered Operating Properties __________

A. Value of Unencumbered Operating Properties __________

1. Total unsecured Indebtedness of
Wellsford REIT and its Subsidiaries __________

Loans $__________
Letters of Credit Outstanding $__________
Other Unsecured Indebtedness $__________
(Attach schedule and specifically
identify facilities)

Total Unsecured Indebtedness $__________

2. Asset Value of Unencumbered Operating
Properties $__________

Ratio of A.2 to A. 1 __________

Ratio of A.2 to A. 1 must be equal to
or greater than 1.8 to 1

The Ratio of A.2 to A. 1
for the previous three quarters ________, ________, _______

B. Cash Flow of Unencumbered Operating Properties

1. Consolidated Operating Cash Flow
from Unencumbered Operating Properties
for most recent quarter $__________

Consolidated Operating Cash Flow
for three prior quarters: $__________

Quarter ended_______ $__________

Total
(Attach Schedule satisfactory to Bank)

2. $100 multiplied by number of units within Unencumbered Operating
<PAGE>

Properties $__________

3. Total of 1 minus 2 $__________

4. Pro Forma Debt Service Charge $__________

Total outstanding principal balance of
unsecured Indebtedness $__________

Interest Rate (7 year Treasuries plus
1.75%) $__________

Amortization (25-year schedule) $__________

Aggregate principal and interest
payments payable over 12 months
on such balance at such rate $__________

Ratio of B.3 to B.4

B.3 must not be less than 1.5 times B.4.

Coverage for previous
three quarters ________,_________,_________

C. 1. Average Occupancy of
Unencumbered Operating
Properties for current quarter $__________

2. Average Occupancy of prior quarter $__________

3. Quarter ended $__________

4. Average Occupancy for two prior $__________
quarters

Average Occupancy may not be less than 90%

4. Average Occupancy for each Unencumbered
Operating Property for two prior quarters

Average Occupancy may not be less than 80%
for any Unencumbered Operating Property

(Attach Schedule)

3. Section 6.3(h). Recourse Indebtedness.

A. Amount of recourse Indebtedness
pursuant to Section 6.3(h) $__________

Amount may not exceed $25,000,000

The amount for the previous
three quarters
<PAGE>

4. Section 6.3(i). Subordinated Debt and Senior
Unsecured Long-Term Debt.

Attach description of any such Indebtedness, including principal
amount, maturity and key covenants and restrictions.

5. Section 6.5(j). Other Investments.

A. Consolidated Total Assets $__________

B. Other Investments $__________

Aggregate book value of other
Investments referred to in
Section 6.5(j) $__________

C. A + B $__________

B may not exceed the lesser of
(i) 10% of A and (ii) $35,000,000

The amount of B for the previous
three quarters ________,__________,_________

6. Section 6.9. Distributions.

A. Amount of Distributions for
Quarter most recently ended $__________

For Prior Quarters:

Quarter ended ________ $__________

Total

B. Funds from Operations

Funds from Operations for
Quarter most recently ended $__________

Funds from Operations for Prior Quarters:

Quarter ended ________ $__________

Total

C. Minimum Distributions required
to maintain REIT status of the
<PAGE>

Wellsford REIT $__________

D. A is % of B

A may be at least equal to C, but may
not exceed 90% of B.

7. Section 6.14(1). Additional Restrictions
on Liens on Real Estate.

A. Number of Real Estate projects owned
in fee simple by Wellsford REIT __________

B. Number of such Real Estate projects
which are subject to Liens (other
than the Liens permitted by
Section 6.4(b) and (d)) __________

C. B is % of A

B may not exceed 60% of A.

(At such time as Wellsford REIT's $115,000,000 non-recourse
structured real estate mortgage loan described in the Prospectus is
repaid, B may not exceed 40% of A)

8. Section 6.14(2). Additional Restrictions on Indebtedness.

A. Amount of Indebtedness
pursuant to Section 6.14(2) $__________

B. Undepreciated Cost of Fee Simple
Real Estate $__________

________ A is ________ % of B

A may not exceed 40% of B

Percentage for the previous
three quarters ________,__________,_________

9. Section 6.17(1). Liabilities to Assets Ratio.

A. Consolidated Total Liabilities
per balance sheet $__________

B. Consolidated Total Assets $__________

Ratio of A to B __________

Ratio of A to B may not exceed 0.55 to 1.

The ratio of A to B for the
previous three quarters ________,__________,_________

10. Section 6.17(2). Consolidated Operating Cash Flow Coverage
<PAGE>

A. Consolidated Operating Cash Flow

Consolidated Net Income
for most recent quarter $__________

Plus Depreciation and
amortization $__________

Plus Interest expense $__________

Plus Extraordinary or non-
recurring losses $__________

Minus extraordinary or non
recurring gains $__________

Minus Net Capital Expenditures $__________

Subtotal for most recent quarter $__________

Consolidated Operating Cash
Flow for three prior quarters:

Quarter ended ________ $__________

Total $__________

B. Debt Service for four prior
quarters $__________

A divided by B (expressed as
a percentage) __________

A must equal or exceed 200% of B. __________

Coverage for previous ________,__________,_________
three quarters

11. Section 5.5(4). Transfers and Encumbrances.

Describe sales, encumbrances, refinances
and other transfers referred to in Section 7.5(e).

12. Section 6.11. Development Activity.

A. Number of multifamily units owned by
Wellsford REIT and its
Subsidiaries __________

B. Number of multifamily units under
development pursuant to
<PAGE>

Section 8.9 __________

C. B divided by A __________

D. Aggregate Cost of acquiring or
completing projects under
development pursuant to
Section 8.9 $__________

E. Attach schedule describing the projects under development or
to be acquired, the name of the seller (if applicable), the
status of development, the targeted completion or closing
date, the sources of capital to complete development or
acquire projects under development, the name of the lender or
other party providing such capital, the amount of the
facility, the nature of the facility and material funding
restrictions.

F. Development may not exceed the lesser of (1) any number of
projects whose cost does not exceed $100,000,000 and (2) 10%
of A.

IN WITNESS WHEREOF, I have hereunto set my hand this___ day of
____________, 199_.

WELLSFORD RESIDENTIAL PROPERTY TRUST

By:_____________________________________
Chief Financial Officer
<PAGE>

SCHEDULE A
TO
LETTER OF CREDIT REIMBURSEMENT AGREEMENT

None.
<PAGE>

SCHEDULE B
TO
LETTER OF CREDIT REIMBURSEMENT AGREEMENT

None.
<PAGE>

SCHEDULE C

None.
<PAGE>

SCHEDULE D

SUBSIDIARIES

NAME FORM & JURISDICTION OWNERSHIP
INTEREST

Wellsford Ironwood Corp. Delaware corporation 100%
Wellsford Marks B Corp. Colorado corporation 100%
Wellsford Warwick Corp. Colorado corporation 100%
Wellsford San Tropez Corp. Arizona corporation 100%
Wellsford Property Management
Corp. Colorado corporation 100%
Wellsford Oklahoma, Inc. Oklahoma corporation 100%
WOP Limited Partnership Oklahoma limited partnership 100%
Wellsford Holly Residential
Properties, Inc. Maryland corporation 100%
Holly Property Holdings, Inc. Washington corporation 100%
Wellsford Park Highlands Corp. Colorado corporation 100%
Wellsford Holly Management,
Inc. Washington corporation 100%
Wellsford Development Corp. Colorado corporation 100%
Village at Bear Creek, LLC Colorado limited liability 99%
company
Park at Highlands LLC Colorado limited liability 99%
company
Roy Street Associates Washington general partnership 50%
Upland North Associates Washington general partnership 50%

<PAGE>

EXHIBIT 10.13

CREDIT AGREEMENT

DATED AS OF APRIL 25, 1997

among

PARK AVENUE FINANCING COMPANY, LLC,

PAMC CO-MANAGER INC.,

PAFC MANAGEMENT, INC.,

STANLEY STAHL,

and

THE FIRST NATIONAL BANK OF BOSTON,

WELLSFORD REAL PROPERTIES, INC.,

and

OTHER BANKS THAT MAY BECOME
PARTIES TO THIS AGREEMENT

and

THE FIRST NATIONAL BANK OF BOSTON,
AS AGENT
<PAGE>

TABLE OF CONTENTS

Section 1. DEFINITIONS AND RULES OF INTERPRETATION. -1-
Section 1.1 Definitions. -1-
Section 1.2 Rules of Interpretation. -12-

Section 2. THE CREDIT FACILITY. -13-
Section 2.1 Commitment to Lend. -13-
Section 2.2 Notes. -13-
Section 2.3 Interest on Loans -13-

Section 3. REPAYMENT OF THE LOANS. -15-
Section 3.1 Stated Maturity. -15-
Section 3.2 Mandatory Prepayments. -15-
Section 3.3 Optional Prepayments. -15-
Section 3.4 Effect of Prepayments. -17-

Section 4. CERTAIN GENERAL PROVISIONS. -17-
Section 4.1 Conversion Options. -17-
Section 4.2 Funds for Payments. -18-
Section 4.3 Computations. -19-
Section 4.4 Additional Costs, Etc. -19-
Section 4.5 Capital Adequacy. -20-
Section 4.6 Inability to Determine LIBOR Rate. -20-
Section 4.7 Illegality. -21-
Section 4.8 Additional Interest. -21-
-21-
Section 4.9 Indemnity of Borrower. -21-
Section 4.10 Interest on Overdue Amounts; Late Charge. -21-
Section 4.11 Certificate. -22-
Section 4.12 Limitation on Interest. -22-
Section 4.13 Additional Cost Resulting from Syndication. -22-

Section 5. COLLATERAL SECURITY. -23-
Section 5.1 Collateral. -23-
Section 5.2 Appraisals. -23-

Section 6. REPRESENTATIONS AND WARRANTIES. -23-
Section 6.1 Authority, Etc. -24-
Section 6.2 Approvals. -25-
Section 6.3 Title to Properties. -25-
Section 6.4 Financial Statements. -25-
Section 6.5 No Material Changes. -25-
Section 6.6 Franchises, Patents, Copyrights, Etc. -26-
Section 6.7 Litigation; Judgments. -26-
Section 6.8 No Materially Adverse Contracts, Etc. -26-
Section 6.9 Compliance with Other Instruments, Laws, Etc. -26-
Section 6.10 Tax Status. -27-
Section 6.11 No Event of Default. -27-
Section 6.12 Holding Company and Investment Company Acts. -27-
Section 6.13 Absence of U.C.C. Financing Statements, Etc. -27-
Section 6.14 Setoff, Etc. -27-
Section 6.15 Certain Transactions. -27-
Section 6.16 Employee Benefit Plans. -28-
Section 6.17 ERISA Taxes. -28-
<PAGE>

Section 6.18 Plan Payments. -28-
Section 6.19 Regulations U and X. -28-
Section 6.20 Environmental Compliance. -29-
Section 6.21 Loan Documents. -29-
Section 6.22 Brokers. -29-
Section 6.23 Ownership -29-
Section 6.24 Other Debt. -30-
Section 6.25 Solvency. -30-
Section 6.26 Mortgaged Property; Property Owner. -30-
Section 6.27 Leases. -32-
Section 6.28 Use of Proceeds. -33-
Section 6.29 Taxation as Partnership. -33-
Section 6.30 Management Agreements. -33-
Section 6.31 Managing Member. -33-

Section 7. AFFIRMATIVE COVENANTS OF THE BORROWER. -34-
Section 7.1 Punctual Payment. -34-
Section 7.2 Maintenance of Office. -34-
Section 7.3 Records and Accounts. -34-
Section 7.4 Financial Statements, Certificates and Information. -34-
Section 7.5 Notices. -36-
Section 7.6 Existence. -37-
Section 7.7 Insurance. -38-
Section 7.8 Condemnation. -38-
Section 7.9 Taxes; Liens. -39-
Section 7.10 Inspection of Properties and Books. -40-
Section 7.11 Compliance with Laws, Contracts, Licenses, and Permits.-40-
Section 7.12 Further Assurances. -41-
Section 7.13 Management. -41-
Section 7.14 Leases of the Property. -42-
Section 7.15 Budgets -43-
Section 7.16 Preservation and Maintenance -44-
Section 7.17 Use of Mortgaged Property -45-
Section 7.18 Curing of Misrepresentation. -45-
Section 7.19 Property Owner to Remain a Single-Purpose Entity. -46-
Section 7.20 Condominium. -46-
Section 7.21 ERISA Compliances. -48-

Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. -48-
Section 8.1 Covenants with Respect to Indebtedness, Operations,
Fundamental Changes of the Borrower -48-
Section 8.2 Restrictions on Liens, Etc. -50-
Section 8.3 Sale and Leaseback; Ground Lease. -50-
Section 8.4 Compliance with Environmental Laws. -50-
Section 8.5 Distributions. -52-
Section 8.6 Restriction on Leases -52-
Section 8.7 Additional Restrictions Concerning the
Mortgaged Property -53-
Section 8.8 Mortgage Loan Documents. -54-
Section 8.9 Permitted Transfer. -54-
Section 8.10 Managing Member. -55-

Section 9. CLOSING CONDITIONS. -55-
Section 9.1 Loan Documents. -55-
Section 9.2 Certified Copies of Organizational Documents. -55-
Section 9.3 Bylaws; Resolutions. -56-
Section 9.4 Incumbency Certificate; Authorized Signers. -56-
Section 9.5 Opinion of Counsel. -56-
<PAGE>

Section 9.6 Appraisal. -56-
Section 9.7 Environmental Reports. -56-
Section 9.8 Insurance. -56-
Section 9.9 Performance; No Default. -56-
Section 9.10 Representations and Warranties. -57-
Section 9.11 Proceedings and Documents. -57-
Section 9.12 Mortgage Loan -57-
Section 9.13 Due Diligence. -57-
Section 9.14 Other Documents. -57-
Section 9.15 No Condemnation/Taking. -57-
Section 9.16 Other. -57-

Section 10. EVENTS OF DEFAULT; ACCELERATION; ETC. -58-
Section 10.1 Events of Default and Acceleration. -58-
Section 10.lA. Limitation of Cure Periods. -62-
Section 10.2 Remedies. -63-
Section 10.3 Default under Mortgage Loan Documents. -64-
Section 10.4 Distribution of Collateral Proceeds. -64-

Section 11. BANKRUPTCY. -65-
Section 11.1 Material Inducement. -65-
Section 11.2 No Fraudulent Intent. -65-
Section 11.3 No Bankruptcy Intent. -65-
Section 11.4 Agreement in Best Interests of Parties; Consideration -66-
Section 11.5 Subsequent Bankruptcy; Waiver of Automatic Stay. -66-
Section 11.6 Waiver of Automatic and Supplemental Stays. -67-
Section 11.7 Approval Rights Regarding Bankruptcy Proceeding -68-
Section 11.8 Miscellaneous Representations. -68-
Section 11.9 Covenant of Noninterference and Cooperation -69-

Section 12. SETOFF. -69-

Section 13. THE AGENT. -70-
Section 13.1 Authorization. -70-
Section 13.2 Employees and Agents. -70-
Section 13.3 No Liability. -70-
Section 13.4 No Representations. -70-
Section 13.5 Payments. -71-
Section 13.6 Holders of Notes. -72-
Section 13.7 Indemnity. -72-
Section 13.8 Agent as Bank. -72-
Section 13.9 Resignation. -72-
Section 13.10 Duties in the Case of Enforcement. -73-
Section 13.11 Notification of Banks. -73-

Section 14. EXPENSES. -73-

Section 15. INDEMNIFICATION. -74-

Section 16. SURVIVAL OF COVENANTS, ETC. -75-

Section 17. ASSIGNMENT AND PARTICIPATION. -76-
Section 17.1 Conditions to Assignment by Banks. -76-
Section 17.2 Register. -77-
Section 17.3 New Notes. -77-
Section 17.4 Participations. -78-
Section 17.5 Pledge by Bank. -78-
Section 17.6 No Assignment by Borrower. -78-
<PAGE>

Section 17.7 Disclosure. -78-
Section 17.8 Amendments to Loan Documents. -79-

Section 18. NOTICES. -79-

Section 19. RELATIONSHIP. -80-

Section 20. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. -80-

Section 21. HEADINGS. -80-

Section 22. COUNTERPARTS. -81-

Section 23. ENTIRE AGREEMENT, ETC. -81-

Section 24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS. -81-

Section 25. DEALINGS WITH THE BORROWER. -81-

Section 26. CONSENTS, AMENDMENTS, WAIVERS, ETC. -82-

Section 27. RIGHTS OF THIRD PARTIES -82-

Section 28. SEVERABILITY. -83-

Section 29. TIME OF THE ESSENCE. -83-

Section 30. NO UNWRITTEN AGREEMENTS. -83-

Section 31. JOINT AND SEVERAL LIABILITY. -83-

Section 32. NONRECOURSE OBLIGATIONS. -83-
<PAGE>

CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this "Agreement") is made as of the 25th day of
April, 1997, by and among PARK AVENUE FINANCING COMPANY LLC, a Delaware limited
liability company ("Holding Company"), PAMC CO-MANAGER INC., a Delaware
corporation ("Co-Managing Member"; Holding Company and Co-Managing Member are
hereinafter referred to collectively as "Borrower"), PAFC MANAGEMENT, INC., a
Delaware corporation ("Holding Company Managing Member"), and STANLEY STAHL, a
resident of the State of New York ("Guarantor"), each having its principal
place of business at 277 Park Avenue, 47th Floor, New York, New York, 10172,
THE FIRST NATIONAL BANK OF BOSTON, WELLSFORD REAL PROPERTIES, INC. and the
other parties that may become parties hereto pursuant to Section 17
(collectively the "Banks"), and THE FIRST NATIONAL BANK OF BOSTON, as Agent for
the Banks (the "Agent").

RECITALS

WHEREAS, Borrower has requested that the Banks provide an $80,000,000.00
loan to the Borrower; and

WHEREAS, Agent and the Banks are willing to provide such loan to the
Borrower upon the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the recitals herein and the mutual
covenants contained herein, the parties hereto hereby covenant and agree as
follows:

Section I. DEFINITIONS AND RULES OF INTERPRETATION.

Section A. Definitions. The following terms shall have the meanings set
forth in this Section l or elsewhere in the provisions of this Agreement
referred to below:

Additional Pledgors. Guarantor and Holding Company Managing Member.

Agent. The First National Bank of Boston acting as agent for the Banks,
its successors and assigns.

Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time by notice to the Borrower and the Banks.

Agent's Special Counsel. Long Aldridge Norman L.L.P. or such other
counsel as may be approved by the Agent.

Agreement. This Credit Agreement, including the Schedules and Exhibits
hereto.

Alteration. See Section 7.16(b).

Approved Budget. The annual Budgets as approved by the Agent in
accordance with the terms of this Agreement.

Assignments of Member's Interest. The Assignments of Member's Interest
from (a) Borrower and (b) Holding Company Managing Member and Guarantor,
respectively, to the Agent, as the same may be modified or amended, pursuant to
<PAGE>

which there shall be assigned to the Agent for the benefit of the Banks a
security interest in the interest of the Borrower in the Property Owner and of
Holding Company Managing Member and Guarantor in the Holding Company.

Balance Sheet Date. April 25, 1997.

Bankruptcy Code. Title 11, U.S.C.A., as amended from time to time or any
successor statute thereto.

Banks. FNBB, Wellsford and any other Person who becomes an assignee of
any rights of a Bank pursuant to Section 17 (but not including any participant
as described in Section 17).

Base Rate. The greater of (a) the annual rate of interest announced from
time to time by Agent at Agent's Head Office as its "base rate" or (b) one-half
of one percent (0.5%) above the Federal Funds Effective Rate (rounded upwards,
if necessary, to the next one-eighth of one percent). Any change in the rate
of interest payable hereunder resulting from a change in the Base Rate shall
become effective as of the opening of business on the day on which such change
in the Base Rate becomes effective.

Base Rate Loans. The Loans when bearing interest calculated by reference
to the Base Rate.

Board of Managers. The Board of Managers of the Condominium.

Borrower. As defined in the preamble hereto.

Budget. The annual budget of the Property Owner with respect to the
Mortgaged Property, as approved by the Agent (which approval shall not be
unreasonably withheld, conditioned or delayed), which Budget shall be an
estimate of the monthly income and expenditures for the management, leasing,
maintenance, supervision, direction and operation of the Mortgaged Property for
the calendar year in question, including a schedule of anticipated receipts and
a schedule of any routine and non-routine repairs or maintenance and preventive
maintenance projects to be carried out during such calendar year. Each Budget
shall be a complete and reasonable estimate of the income and expenditures for
the Mortgaged Property for the period covered thereby, and shall be prepared in
good faith and consistent with prior years (taking into account reasonably
anticipated changes from prior years), and in accordance with sound real estate
accounting standards applied on a consistent basis. The Budget shall include
the Capital Budget for the applicable year. Notwithstanding anything herein to
the contrary, any fees or expenses to be paid to the Property Owner, the
Borrower, any Additional Pledgor, Managing Member or any affiliate of any of
such Persons shall not exceed an amount which would be paid to an unaffiliated
entity in any arms-length transaction; provided, however, that the management
and leasing fee payable to Stahl Real Estate Co. shall not exceed the fee
payable pursuant to the Management Agreement between Property Owner and Stahl
Real Estate Co. dated April 25, 1997. The Agent shall not be permitted to
withhold its consent as to any line item or sum set forth in a Budget that is
required to be deposited with the Mortgagee pursuant to the Mortgage Cash
Collateral Agreement.

Building. With respect to the Mortgaged Property, all of the buildings,
structures and improvements now or hereafter located thereon.

Business Day. Any day on which banking institutions located in the same
city and State as the Agent's Head Office are located and are open for the
<PAGE>

transaction of banking business, and in the case of the LIBOR Rate Loans, which
is also a LIBOR Business Day.

Bylaws. The bylaws of the Condominium, as the same may be amended from
time to time pursuant to the terms thereof.

Capital Budget. The budget of capital improvements, repairs,
replacements, tenant improvements and leasing commissions and other similar
tenant-related expenses with respect to the Mortgaged Property for the calendar
year in question, which shall be a complete and reasonable estimate of the
capital expenditures, and expenditures for tenant improvements and leasing
commissions and other similar tenant-related expenses, for the Mortgaged
Property for the period covered thereby, and shall be prepared in good faith
and consistent with prior years (taking into account reasonably anticipated
changes from prior years), and in accordance with sound real estate accounting
standards applied on a consistent basis.

Capitalization Date. See Section 2.3.

Capitalized Interest. See Section 2.3.

Capitalized Lease. A lease under which a Person is the lessee or obligor,
the discounted future rental payment obligations under which are required to be
capitalized on the balance sheet of the lessee or obligor in accordance with
generally accepted accounting principles.

Cash Collateral Agreement. The Cash Collateral Account Security, Pledge
and Assignment Agreement dated of even date herewith among the Borrower, the
Property Owner, the Managing Member, Guarantor and the Agent, as the same may
be modified or amended, such agreement to be in form and substance satisfactory
to the Majority Banks.

Closing Date. The first date on which all of the conditions set forth in
Section 9 have been satisfied.

Code. The Internal Revenue Code of 1986, as amended.

Collateral. All of the property, rights and interests of the Borrower and
the Additional Pledgors which are or are intended to be subject to the security
interests, security title and liens created by the Security Documents.

Co-Managing Member. As defined in the preamble hereto.

Commitment. With respect to each Bank, the amount set forth on Schedule 1
hereto as the amount of such Bank's Commitment Percentage of the aggregate
principal amount of the Loans from time to time outstanding.

Commitment Percentage. With respect to each Bank, the percentage set
forth on Schedule 1 hereto as such Bank's percentage of the aggregate
Commitments of all of the Banks.

Condominium. The 277 Park Avenue Condominium created pursuant to the
Condominium Declaration.

Condominium Act. Article 9-B of the New York Real Property Law and
successor statutes.

Condominium Declaration. The Declaration of 277 Park Avenue Condominium,
<PAGE>

dated as of December 1, 1994 and recorded in the Office of the City Register,
New York County, on August 24, 1995 in Reel 2237, Page 494, as amended by First
Amendment to Declaration of Condominium dated as of December 1, 1995, and
recorded in the Office of the City Register, New York County, on January 4,
1996 in Reel 2278, Page 2097, as the same may be hereafter amended in accor-
dance with the provisions of the Mortgage Loan Documents and this Agreement.

Condominium Documents. The Condominium Declaration, the Bylaws, the rules
and regulations and other constituent documents of the Condominium, as the same
may be amended from time to time pursuant to the terms of the Mortgage Loan
Documents and this Agreement.

Conversion Request. A notice given by the Borrower to the Agent of its
election to convert or continue a Loan in accordance with Section 4.1.

Default. See Section 10.1.

Distribution. With respect to any Person, the declaration or payment of
any cash, cash flow, dividend or distribution on or in respect of any member's
interest, shares of any class of capital stock or other beneficial interest of
such Person; the purchase, redemption, exchange or other retirement of any
member's interest, shares of any class of capital stock or other beneficial
interest of such Person, directly or indirectly; the return of capital by such
Person to its members, shareholders or partners as such; or any other
distribution on or in respect of any member's interest, shares of any class of
capital stock or other beneficial interest of such Person.

Dollars or $. Dollars in lawful currency of the United States of America.

Drawdown Date. The date on which the Loans are initially funded to the
Borrower.

Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by either of the Borrower or
any ERISA Affiliate, other than a Multiemployer Plan.

Environmental Engineer. IVI Environmental, Inc., or another firm of
independent professional engineers or other scientists generally recognized as
expert in the detection, analysis and remediation of Hazardous Substances,
compliance with Environmental Laws and related environmental matters and
reasonably acceptable to the Agent.

Environmental Laws. Such term shall have the meaning as set forth in the
Mortgage.

ERISA. The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time.

ERISA Affiliate. Any Person which is treated as a single employer with the
Borrower under Section 414 of the Code.

ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.

Event of Default. See Section 10.1.
<PAGE>

Excess Cash Flow. Such term shall have the meaning set forth in the
Mortgage Cash Collateral Agreement. For the purposes of the Agreement, Excess
Cash Flow shall also include any and all amounts that pursuant to the terms of
the Mortgage Cash Collateral Agreement are to be deposited with the Agent.

Federal Funds Effective Rate. For any day, the rate per annum equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
(3) Federal funds brokers of recognized standing selected by the Agent.

FNBB. The First National Bank of Boston.

generally accepted accounting principles. Principles that are (a)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time
and (b) consistently applied with past financial statements of the Person
adopting the same principles; provided that a certified public accountant
would, insofar as the use of such accounting principles is pertinent, be in a
position to deliver an unqualified opinion (other than a qualification
regarding changes in generally accepted accounting principles) as to financial
statements in which such principles have been properly applied.

Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower
or any ERISA Affiliate the benefits of which are guaranteed on termination in
full or in part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer Plan.

Guarantor. Stanley Stahl, an individual resident of the State of New
York, having an address in care of Stahl Real Estate Co., 277 Park Avenue, New
York, New York 10172 and a residence at 923 Fifth Avenue, Apt. #18A, New York,
New York 10021.

Guaranty. The Conditional Guaranty of Payment and Performance dated of
even date herewith made by Guarantor in favor of Agent and the Banks, as the
same may be modified or amended.

Hazardous Substance. Such term shall have the meaning set forth in the
Mortgage.

Holding Company. As defined in the preamble hereto.

Holding Company Managing Member. As defined in the preamble hereto.

Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should
be made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect (including, without limitation, any obligations evidenced by bonds,
debentures, notes or similar debt instruments and all subordinated debt);
(b) all liabilities secured by any mortgage, pledge, security interest, lien,
charge or other encumbrance existing on property owned or acquired subject
thereto, whether or not the liability secured thereby shall have been assumed;
<PAGE>

(c) all guarantees, endorsements and other contingent obligations whether
direct or indirect in respect of indebtedness of others, including any
obligation to supply funds to or in any manner to invest directly or indirectly
in a Person, to purchase indebtedness, or to assure the owner of indebtedness
against loss through an agreement to purchase goods, supplies or services for
the purpose of enabling the debtor to make payment of the indebtedness held by
such owner or otherwise, and the obligation to reimburse the issuer in respect
of any letter of credit; and (d) any obligation as a lessee or obligor under a
Capitalized Lease.

Indemnity Agreement. The Indemnity Agreement Regarding Hazardous
Materials made by the Borrower in favor of the Agent and the Banks, as the
same may be modified or amended, pursuant to which the Borrower agrees to
indemnify the Agent and the Banks with respect to Hazardous Substances and
Environmental Laws.

Interest Payment Date. The first day of each calendar month during the
term of the Loan, commencing May 1, 1997.

Interest Period. With respect to each LIBOR Rate Loan (a) initially, the
period commencing on the first day of the applicable Interest Period and ending
one, two or three months thereafter, and (b) thereafter, each period commencing
on the day following the last day of the next preceding Interest Period
applicable to such Loan and ending on the last day of one of the periods set
forth above, as selected by the Borrower in a Conversion Request; provided that
all of the foregoing provisions relating to Interest Periods are subject to the
following:

(i) if any Interest Period with respect to a LIBOR Rate Loan would
otherwise end on a day that is not a LIBOR Business Day, that Interest
Period shall end and the next Interest Period shall commence on the next
preceding or succeeding LIBOR Business Day as determined conclusively by
the Reference Bank in accordance with the then current bank practice in
the applicable LIBOR interbank market;

(ii) if the Borrower shall fail to give notice as provided in Section
4.1, the Borrower shall be deemed to have requested a conversion of the
affected LIBOR Rate Loan to a Base Rate Loan on the last day of the then
current Interest Period with respect thereto; and

(iii) no Interest Period relating to any LIBOR Rate Loan shall
extend beyond the Maturity Date.

Investments. With respect to any Person, all shares of capital stock,
evidences of Indebtedness and other securities or other ownership interests
issued by any other Person, all loans, advances, or extensions of credit to, or
contributions to the capital of, any other Person, all purchases of the
securities or other ownership interests or business or integral part of the
business of any other Person and commitments and options to make such
purchases, all interests in real property, and all other investments; provided,
however, that the term "Investment" shall not include (i) equipment, inventory
and other tangible personal property acquired in the ordinary course of
business, or (ii) current trade and customer accounts receivable for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms.

Leases. Leases, licenses and agreements whether written or oral, relating
to the use or occupation of space in or on the Building or on the Mortgaged
<PAGE>

Property.

LIBOR Bid Rate. For any Interest Period with respect to a LIBOR Rate
Loan, the rate per annum as determined by the Reference Bank's LIBOR Lending
Office to be the rate (rounded upwards to the nearest 1/16 of one percent) at
which Dollar deposits are offered to prime banks by such banks in the London
Interbank Market as are selected in good faith by the Reference Bank at
approximately 11:00 a.m. London time two LIBOR Business Days prior to the
beginning of such Interest Period for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the LIBOR Rate Loan to which such Interest Period
applies.

LIBOR Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in the London
interbank market.

LIBOR Rate. For any Interest Period with respect to a LIBOR Rate Loan, the
interest rate per annum determined by the Agent pursuant to the following
formula:

LIBOR Rate = LIBOR Bid Rate
1.00 - Reserve Rate

LIBOR Rate Loans. The Loans when bearing interest calculated by reference
to a LIBOR Rate.

Loan Documents. This Agreement, the Notes, the Security Documents and all
other documents, instruments or agreements now or hereafter executed or
delivered by or on behalf of the Borrower, the Guarantor or the Additional
Pledgors in connection with the Loans.

Loans. The aggregate Loans to be made by the Banks hereunder.

Lockout Expiration Date. April 30, 2002.

Majority Banks. As of any date, the Bank or Banks whose aggregate
Commitment Percentage is equal to or greater than the required percentage, as
determined by the Banks, required to approve such matter, as disclosed by the
Agent to the Borrower from time to time.

Management Agreement. The agreement or agreements, whether written or
oral, providing for the management and/or leasing of the Mortgaged Property.

Managing Member. Park Avenue Management Corporation, a Delaware
corporation.

Maturity Date. May 1, 2007 or such earlier date on which the Loans shall
become due and payable pursuant to the terms hereof.

Mortgage. The Consolidated, Amended and Restated Mortgage, Security
Agreement and Assignment of Leases and Rents dated of even date herewith by the
Property Owner in favor of Mortgagee, which relates to the Real Estate.

Mortgage Cash Collateral Agreement. The Cash Management and Collateral
Account Security, Pledge and Assignment Agreement dated of even date herewith
between the Property Owner and the Mortgagee.
<PAGE>

Mortgagee. Initially, Column Financial, Inc., and its successors and
assigns as the holder or holders of the Mortgage Loan Documents, and any
servicer or trustee acting on behalf of the holder or holders of interests in
the note secured thereby, as the case may be.

Mortgage Loan. The $345,000,000.00 first mortgage loan to the Property
Owner that is evidenced and secured by the Mortgage Loan Documents.

Mortgage Loan Documents. Collectively, the Mortgage, that certain
Consolidated, Amended and Restated Promissory Note dated of even date herewith
made by the Property Owner to the order of the Mortgagee in the principal face
amount of $345,000,000.00, that certain Assignment of Leases and Rents dated of
even date herewith by the Property Owner to the Mortgagee, the Mortgage Cash
Collateral Agreement, and all other documents, instruments or agreements now or
hereafter executed or delivered by or on behalf of the Property Owner in
connection with the Mortgage Loan.

Mortgaged Property. The Mortgaged Property, as defined in the Mortgage.

Multiemployer Plan. Any multiemployer plan within the meaning of Section
3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.

Notes. See Section 2.2.

Notice. See Section 18.

Obligations. All indebtedness, obligations and liabilities of the
Borrower and the Additional Pledgors to any of the Banks and the Agent,
individually or collectively, under this Agreement or any of the other Loan
Documents or in respect of any of the Loans or the Notes, or other instruments
at any time evidencing any of the foregoing, whether existing on the date of
this Agreement or arising or incurred hereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise.

Outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.

PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of
ERISA and any successor entity or entities having similar responsibilities.

Permitted Liens. Those liens and encumbrances described in Exhibit B
attached to and made a part of the Mortgage.

Permitted Transfer. See Section 8.9.

Person. Any individual, corporation, limited liability company,
partnership, trust, unincorporated association, business, or other legal
entity, and any government or any governmental agency or political subdivision
thereof.

Pledge Agreement. Collectively, the Stock Pledge Agreements dated of even
date herewith made by the Guarantor pledging its ownership interest in the
Managing Member, Co- Managing Member and the Holding Company Managing Member,
respectively, in favor of the Agent for the benefit of the Banks, as the same
may be modified and amended.
<PAGE>

Property Owner. 277 Park Avenue, LLC, a Delaware limited liability
company.

Rating Agency. As defined in the Mortgage.

Real Estate. The real property more particularly described in Exhibit A
attached hereto and made a part hereof.

Record. The record, including computer records, maintained by the Agent
with respect to the Loans referred to in the Notes.

Reference Bank. The Agent.

Refinance Commitment. The "Commitment", as such term is defined in the
Mortgage Cash Collateral Agreement.

Release. Any releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing, or dumping (other than
the storing of materials in reasonable quantities to the extent necessary for
the operation of an office building in the ordinary course of business, and in
any event in compliance with all the Environmental Laws) of Hazardous
Substances.

Rent Roll. A report prepared by the Borrower showing for the Mortgaged
Property its occupancy, lease expiration dates, lease rent and other
information in substantially the form presented to the Banks prior to the date
hereof or in such other form as may have been approved by the Agent, such
approval not to be unreasonably withheld.

Reportable Event. Any of the events set forth in Section 4043(b) of ERISA
or the regulations thereunder.

Reserve Account. The "Notes Reserve Fund Sub-Account" established by the
Borrower with the Agent as described in the Cash Collateral Agreement.

Reserve Rate. For any day with respect to a LIBOR Rate Loan, the maximum
rate (expressed as a decimal) at which any lender subject thereto would be
required to maintain reserves under Regulation D of the Board of Governors of
the Federal Reserve System (or any successor or similar regulations relating to
such reserve requirements) against "Eurocurrency Liabilities" (as that term is
used in Regulation D or such other regulations) if such liabilities were
outstanding. The Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Rate.

Security Documents. The Assignments of Member's Interest, the Pledge
Agreement, the Cash Collateral Agreement, the Indemnity Agreement, the
Guaranty, any further collateral assignment for the benefit of the Banks,
including, without limitation, UCC-1 financing statements executed and
delivered in connection therewith.

State. A state of the United States of America.

Subsidiary. Any corporation, limited liability company, association,
partnership, trust, or other business which the designated parent shall at any
time own directly or indirectly through a Subsidiary or Subsidiaries at least
<PAGE>

five percent (5%) of the outstanding Voting Interests or other economic
interest.

Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time.

Type. As to any Loan, its nature as a Base Rate Loan or a LIBOR Rate
Loan.

Voting Interests. Stock or similar ownership interests, of any class or
classes (however designated), the holders of which are at the time entitled, as
such holders, (a) to vote for the election of a majority of the directors (or
persons performing similar functions) of the corporation, association,
partnership, limited liability company, trust or other business entity
involved, or (b) to control, manage, or conduct the business of the
corporation, partnership, association, limited liability company, trust or
other business entity involved.

Wellsford. Wellsford Real Properties, Inc.

Yield Maintenance Expiration Date. April 30, 2006.

Section B. Rules of Interpretation.

1. A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Agreement.

2. The singular includes the plural and the plural includes the
singular.

3. A reference to any law includes any amendment or modification to
such law.

4. A reference to any Person includes its permitted successors and
permitted assigns.

5. Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.

6. The words "include", "includes" and "including" are not
limiting.

7. The words "approval" and "approved", as the context so
determines, means an approval in writing given to the party seeking approval
after full and fair disclosure to the party giving approval of all material
facts necessary in order to determine whether approval should be granted.

8. All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the State of New York, have the meanings
assigned to them therein.

9. Reference to a particular "Section ", refers to that section of
this Agreement unless otherwise indicated.

10. The words "herein", "hereof", "hereunder" and words of like
<PAGE>

import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.

Section II. THE CREDIT FACILITY.

Section A. Commitment to Lend. Subject to the terms and conditions set
forth in this Agreement, each of the Banks severally agrees to lend to the
Borrower on the Closing Date the amount of its Commitment, which Commitments in
the aggregate total $80,000,000.00.

Section B. Notes. The Loans shall be evidenced by separate promissory
notes of the Borrower in substantially the form of Exhibit B hereto
(collectively, the "Notes"), dated as of the Closing Date and completed with
appropriate insertions. One Note shall be payable to the order of each Bank in
the principal amount equal to such Bank's Commitment or, if less, the
outstanding amount of all Loans made by such Bank, plus interest accrued
thereon, as set forth below. The Borrower irrevocably authorizes the Agent to
make or cause to be made, at or about the time of receipt of any payment of
principal thereof, an appropriate notation on the Agent's Record reflecting the
receipt of such payment. The outstanding amount of the Loans set forth on the
Agent's Record shall be prima facie evidence of the principal amount thereof
owing and unpaid to each Bank, but the failure to record, or any error in so
recording, any such amount on the Agent's Record shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any Note to make
payments of principal of or interest on any Note when due.

Section C. Interest on Loans.

1. The Loans shall bear interest as follows:

a. For the period commencing with the Drawdown Date thereof
through and including the Yield Maintenance Expiration Date at the rate of
twelve percent (12.0%) per annum.

b. From and after the Yield Maintenance Expiration Date, each
Base Rate Loan shall bear interest for the period commencing with the date
the election for the Loans to be Base Rate Loans shall commence or be
deemed to have commenced and ending on the date on which such Base Rate
Loan is repaid or converted to a LIBOR Rate Loan at the rate per annum
equal to the sum of the Base Rate plus five and 15/100 percent (5.15%).

c. From and after the Yield Maintenance Expiration Date, each
LIBOR Rate Loan shall bear interest for the period commencing with the
date the election for the Loans to bear interest or be continued as LIBOR
Rate Loans shall have commenced or be deemed to have commenced and ending
on the last day of the Interest Period with respect thereto at the rate
per annum equal to the sum of the LIBOR Rate determined for such Interest
Period plus five and 15/100 percent (5.15%).

d. Base Rate Loans and LIBOR Rate Loans may be converted to
Loans of the other Type as provided in Section 4.1.

2. The Borrower promises to pay interest on the Loans in arrears as
follows:

a. From and after the Drawdown Date through and including the
Yield Maintenance Expiration Date, interest on the outstanding principal
balance of the Loans shall be due and payable on each Interest Payment
<PAGE>

Date (which for the purposes hereof shall include the Interest Payment
Date on May 1, 2006) at an interest rate equal to ten percent (10%) per
annum; and

b. In addition, from and after the Drawdown Date through and
including the Yield Maintenance Expiration Date, interest on the
outstanding principal balance of the Loans shall be due and payable on
each Interest Payment Date (which for the purposes hereof shall include
the Interest Payment Date on May 1, 2006) at a rate equal to two percent
(2.0%) per annum first from funds available for such purpose pursuant to
the Cash Collateral Agreement or, in the event that the funds available
for such purpose pursuant to the Cash Collateral Agreement are
insufficient to fully pay such interest, then from the Reserve Account to
the extent funds are available in the Reserve Account for the payment of
such interest; and

c. From and after the Yield Maintenance Expiration Date until
the repayment in full of the Loans, the Borrower promises to pay interest
on each Loan in arrears on each Interest Payment Date thereafter
(commencing June 1, 2006) with respect thereto.

3. On the first day of each calendar month through and including
May 1, 2006, all accrued but unpaid interest due under each Note pursuant to
Section 2.3(b)(ii) shall be added to the outstanding principal balance of such
Note (each such date is hereinafter referred to as a "Capitalization Date", and
the amount of interest from time to time so added to the outstanding principal
balance of the Notes is hereinafter referred to as the "Capitalized Interest"),
and from and after each Capitalization Date, such amount shall bear interest as
provided herein and shall otherwise constitute a portion of the principal
indebtedness evidenced by such Note for all purposes. The Agent shall maintain
a separate record of the Capitalized Interest, and such record shall be prima
facie evidence of the amount thereof, but the failure to record, or any error
in so recording, any such amount shall not limit or otherwise affect the
obligations of the Borrower hereunder or under any Note. Notwithstanding the
foregoing, any amount of Capitalized Interest that has not previously been
repaid shall be paid without penalty or premium from funds available for such
purpose pursuant to the Cash Collateral Agreement, and shall reduce the
outstanding principal balance of such Note.

4. On the Maturity Date, all accrued but unpaid interest
(including, without limitation, any interest accrued pursuant to Section
2.3(b)(ii) which has not been paid) shall be due and payable.

Section III. REPAYMENT OF THE LOANS.

Section A. Stated Maturity. The Borrower promises to pay on the
Maturity Date and there shall become absolutely due and payable on the Maturity
Date all of the Loans outstanding on such date, together with any and all
accrued and unpaid interest thereon.

Section B. Mandatory Prepayments.

1. If at any time the outstanding principal amount of the Mortgage
Loan is prepaid in full, whether voluntarily, involuntarily or as the result of
an acceleration of the maturity date thereof, all of the Loans outstanding on
such date, together with any and all accrued but unpaid interest thereon and
prepayment fees (except as otherwise provided in Section 2.3(c) and Section
3.3(b), as applicable) shall become absolutely due and payable. For the
<PAGE>

purposes hereof, and without limiting the generality of the foregoing, the
Mortgage Loan shall be deemed to have been prepaid in the event that (i) the
Mortgage is assigned by the holder thereof to a new holder for the purpose of
facilitating a refinance of the indebtedness secured thereby, or (ii) the
Property Owner defenses the Mortgage Loan as permitted by Section 44 of the
Mortgage.

2. If at any time there shall occur, whether voluntarily,
involuntarily or by operation of law, a sale, transfer, assignment, conveyance,
option or other disposition of, or any mortgage, hypothecation, encumbrance,
financing or refinancing of (i) any assets or properties of the Property Owner,
except as provided in Section 7.16(a) with respect to the replacement of
fixtures, equipment, machinery and other personal property and the leasing of
equipment by the Property Owner in connection with the operation of the
Mortgaged Property in the ordinary course of business, (ii) any of the
Collateral, (iii) any other assets or properties of the Borrower, Managing
Member or the Holding Company Managing Member, (iv) any direct or indirect
interest of the Borrower or Managing Member in the Property Owner, (v) any
direct or indirect interest of Guarantor or Holding Company Managing Member in
Holding Company, or (vi) any direct or indirect interest of Guarantor in the
Managing Member, Co-Managing Member or Holding Company Managing Member (unless
such event is a Permitted Transfer), all of the Loans outstanding on such date,
together with any and all accrued but unpaid interest thereon and prepayment
fees shall become absolutely due and payable.

Section C. Optional Prepayments.

1. The Borrower shall have the right, at its election, to prepay
the outstanding amount of the Loans, as a whole but not in part (except as
otherwise specifically provided herein), at any time after the Lockout
Expiration Date, provided (i) written notice of such prepayment specifying the
date of prepayment is received by Agent not more than sixty (60) days and not
less than twenty (20) days prior to the date of such prepayment, (ii) such
prepayment is accompanied by all interest accrued hereunder (including without
limitation all interest due under Section 2.3(b)(ii)) and all other sums due
hereunder or under the other Loan Documents as of the date of such prepayment,
and (iii) if such prepayment occurs on or prior to the Yield Maintenance
Expiration Date, Agent is paid for the account of the Banks a prepayment fee in
an amount equal to the positive excess of (A) the present value ("PV") of all
future installments of principal and interest due under the Notes including the
principal amount due at maturity, assuming for the purposes hereof that the
Notes were due and payable in full on the Yield Maintenance Expiration Date
(collectively, "All Future Payments"), determined by discounting the same at an
interest rate per annum equal to the sum of (1) the Treasury Constant Maturity
Yield Index published during the second full week preceding the date on which
such premium is payable for instruments having a maturity coterminous with the
Yield Maintenance Expiration Date, and (2) two hundred (200) basis points for
any period through and including May 1, 2003 and three hundred (300) basis
points for any period thereafter over (B) the principal amount of the Notes
outstanding immediately before such prepayment [(PV of All Future Payments) -
(principal balance at time of prepayment) = prepayment fee]. "Treasury
Constant Maturity Yield Index" shall mean the average yield for "This Week" as
reported by the Federal Reserve Board in Federal Reserve Statistical Release
H.15 (519). If there is no Treasury Constant Maturity Yield Index for
instruments having a maturity coterminous with the Yield Maintenance Expiration
Date, then the index shall be equal to the weighted average yield to maturity
of the Treasury Constant Maturity Yield Indices with maturities next longer and
shorter than such remaining average life to the Yield Maintenance Expiration
<PAGE>

Date, calculated by averaging (and rounding upward to the nearest whole
multiple of 1/100 of 1% per annum, if the average is not such a multiple) the
yields of the relevant Treasury Constant Maturity Yield indices (rounded, if
necessary, to the nearest 1/100 of 1% with any figure of 1/200 of 1% or above
rounded upward). In the event that any prepayment fee is due hereunder, Agent
shall deliver to Borrower a statement not less than five (5) days prior to the
proposed date of prepayment setting forth the amount and determination of the
prepayment fee, and, provided that Agent shall have in good faith applied the
formula described above, Borrower shall not have the right to challenge the
calculation or the method of calculation set forth in any such statement in the
absence of manifest error, which calculation may be made by Agent on any day
preceding the date of such prepayment and prior to the delivery of such notice
by Agent to the Borrower. Neither Agent nor any Bank shall be obligated or
required to have actually reinvested the prepaid principal balance at the
Treasury Constant Maturity Yield or otherwise as a condition to receiving the
prepayment fee. No prepayment fee or premium shall be due or payable in
connection with any prepayment of the indebtedness evidenced by the Notes made
after the Yield Maintenance Expiration Date (provided that after the Yield
Maintenance Expiration Date the Borrower shall be required to pay any amounts
due pursuant to Section 3.3(d)), or except as otherwise provided below, upon
prepayment resulting from application of insurance or condemnation proceeds as
provided in this Agreement at any time during the loan term.

2. Partial prepayments of this Note shall not be permitted, except
partial prepayments resulting from Agent applying excess insurance or
condemnation proceeds to reduce the outstanding principal balance of the Notes
as provided in this Agreement, in which event, so long as no Event of Default
has occurred, no prepayment fee or premium shall be due. No notice of
prepayment shall be required under the circumstance specified in the preceding
sentence.

3. Except as otherwise expressly provided in Section 2.3(c) and
Section 3.3(b), the prepayment fees provided above shall be due, to the extent
permitted by applicable law, under any and all circumstances where all or any
portion of the Notes is paid prior to the Yield Maintenance Expiration Date,
whether such prepayment is voluntary or involuntary, even if such prepayment
results from Agent's exercise of its rights upon the occurrence of an Event of
Default and acceleration of the Maturity Date of the Notes (irrespective of
whether foreclosure proceedings have been commenced), and shall be in addition
to any other sums due hereunder or under any of the other Loan Documents. No
tender of a prepayment of the Notes with respect to which a prepayment fee is
due shall be effective unless such prepayment is accompanied by the prepayment
fee. If the Obligations shall have been declared due and payable by Agent due
to an Event of Default, then any tender of payment of such indebtedness made
prior to the Lockout Expiration Date must include a prepayment fee computed as
provided in Section 3.3(a) above (provided that the reference to two hundred
(200) basis points and three hundred (300) basis points in Section 3.3(a)
(iii)(A)(2) shall for the purposes of this Section 3.3(c) be modified to five
hundred (500) basis points).

4. Any optional prepayment of the outstanding amount of the LIBOR
Rate Loans may be made only on the last day of the Interest Period relating
thereto except as otherwise required pursuant to Section 4.7, unless payment is
made of the amounts due pursuant to Section 4.8.

Section D. Effect of Prepayments. Amounts of the Loans prepaid may not
be reborrowed. Except as otherwise provided herein, all payments shall first be
applied to accrued but unpaid interest and then to principal.
<PAGE>

Section IV. CERTAIN GENERAL PROVISIONS.

Section A. Conversion Options.

1. Not less than four (4) Business Days prior to May 1, 2006, the
Borrower shall deliver a written notice to the Agent specifying whether the
Borrower is requesting that the entire principal balance of the Loans be a Base
Rate Loan or a LIBOR Rate Loan and, if the Borrower is requesting a LIBOR Rate
Loan, specifying the Interest Period requested in connection therewith. Such
notice shall be irrevocable and binding on the Borrower. If no such notice is
given by the Borrower to the Agent, the Borrower shall be deemed to have
elected a Base Rate Loan to commence on May 1, 2006. Promptly upon receipt of
any such notice, the Agent shall notify the other Banks. The entire principal
balance of the Loans shall either be a Base Rate Loan or a LIBOR Rate Loan.

2. Thereafter the Borrower may elect from time to time to convert
all of the Loans to another Type and thereafter the entire principal balance of
the Notes shall bear interest as a Base Rate Loan or a LIBOR Rate Loan, as
applicable; provided that (i) with respect to any such conversion of a LIBOR
Rate Loan to a Base Rate Loan, the Borrower shall give the Agent at least three
Business Days' prior written notice of such election, and such conversion shall
only be made on the last day of the Interest Period with respect to such LIBOR
Rate Loan; (ii) with respect to any such conversion of a Base Rate Loan to a
LIBOR Rate Loan, the Borrower shall give the Agent at least four LIBOR Business
Days' prior written notice of such election and the Interest Period requested
for all of the Loans; and (iii) no Loan may be converted into a LIBOR Rate Loan
when any Default or Event of Default has occurred and is continuing. Promptly
upon receipt of any such Conversion Request, the Agent shall notify each of the
Banks thereof. Each Conversion Request relating to the conversion of a Base
Rate Loan to a LIBOR Rate Loan shall be irrevocable by the Borrower.

3. Any Loan may be continued as such Type upon the expiration of an
Interest Period with respect thereto by compliance by the Borrower with the
terms of Section 4.1; provided that no LIBOR Rate Loan may be continued as such
when any Default or Event of Default has occurred and is continuing, but shall
be automatically converted to a Base Rate Loan on the last day of the Interest
Period relating thereto ending during the continuance of any Default or Event
of Default.

4. In the event that the Borrower does not notify the Agent of its
election hereunder with respect to any Loan, such Loan shall be automatically
converted to a Base Rate Loan at the end of the applicable Interest Period.

Section B. Funds for Payments.

1. All payments of principal, interest, loan fees, closing fees and
any other amounts due hereunder or under any of the other Loan Documents shall
be made to the Agent, for the respective accounts of the Banks and the Agent,
as the case may be, at the Agent's Head Office, not later than 12:00 p.m.
(Boston time) on the day when due, in each case in immediately available funds.
The Agent is hereby authorized to charge the accounts of the Borrower with
Agent, on the dates when the amount thereof shall become due and payable, with
the amounts of the principal of and interest on the Loans and all fees,
charges, expenses and other amounts owing to the Agent and/or the Banks under
the Loan Documents.

2. All payments by the Borrower hereunder and under any of the
<PAGE>

other Loan Documents shall be made without set off or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts, duties, charges,
fees, deductions, withholdings, compulsory loans, restrictions or conditions of
any nature now or hereafter imposed or levied by any jurisdiction or any
political subdivision thereof or taxing or other authority therein unless the
Borrower is compelled by law to make such deduction or withholding. If any
such obligation is imposed upon the Borrower with respect to any amount payable
by it hereunder or under any of the other Loan Documents, the Borrower will pay
to the Agent, for the account of the Banks or (as the case may be) the Agent,
on the date on which such amount is due and payable hereunder or under such
other Loan Document, such additional amount in Dollars as shall be necessary to
enable the Banks or the Agent to receive the same net amount which the Banks or
the Agent would have received on such due date had no such obligation been
imposed upon the Borrower. The Borrower will deliver promptly to the Agent
certificates or other valid vouchers for all taxes or other charges deducted
from or paid with respect to payments made by the Borrower hereunder or under
such other Loan Document.

Section C. Computations. All computations of interest on the Loans and
of other fees to the extent applicable shall be based on a 360-day year and
paid for the actual number of days elapsed. Whenever a payment hereunder or
under any of the other Loan Documents becomes due on a day that is not a
Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Loans as reflected on the records of the Agent from
time to time shall be considered prima facie evidence of such amount.

Section D. Additional Costs, Etc. Notwithstanding anything herein to
the contrary, if any present or future applicable law, which expression, as
used herein, includes statutes, rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at
any time or from time to time hereafter made upon or otherwise issued to any
Bank or the Agent by any central bank or other fiscal, monetary or other
authority (whether or not having the force of law), shall:

1. subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Agreement, the other Loan Documents, such Bank's Commitment or the Loans (other
than taxes based upon or measured by the income or profits of such Bank or the
Agent or its franchise tax), or

2. materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or the
interest on any Loans or any other amounts payable to any Bank under this
Agreement or the other Loan Documents, or

3. impose or increase or render applicable any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar requirements
(whether or not having the force of law and which are not already reflected in
any amounts payable by Borrower hereunder) against assets held by, or deposits
in or for the account of, or loans by, or commitments of an office of any Bank,
or

4. impose on any Bank or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents, the
Loans, such Bank's Commitment, or any class of loans or commitments of which
<PAGE>

any of the Loans or such Bank's Commitment forms a part; and the result of any
of the foregoing is

a. to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such
Bank's Commitment, or

b. to reduce the amount of principal, interest or other
amount payable to such Bank or the Agent hereunder on account of such
Bank's Commitment or any of the Loans, or

c. to require such Bank or the Agent to make any
payment or to forego any interest or other sum payable hereunder, the
amount of which payment or foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable or deemed received by
such Bank or the Agent from the Borrower hereunder, then, and in each such
case, the Borrower will, within fifteen (15) days of demand made by such
Bank or (as the case may be) the Agent at any time and from time to time
and as often as the occasion therefor may arise, pay to such Bank or the
Agent such additional amounts as such Bank or the Agent shall determine in
good faith to be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or other sum.
Each Bank and the Agent in determining such amounts may use any reasonable
averaging and attribution methods, generally applied by such Bank or the
Agent.

Section E. Capital Adequacy. If after the date hereof any Bank
determines that (a) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies or
any change in the interpretation or application thereof by any governmental
authority charged with the administration thereof, or (b) compliance by such
Bank or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Bank's or such
holding company's capital as a consequence of such Bank's commitment to make
Loans hereunder to a level below that which such Bank or holding company could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or such holding company's then existing policies with
respect to capital adequacy and assuming the full utilization of such entity's
capital) by any amount deemed by such Bank to be material, then such Bank may
notify the Borrower thereof. The Borrower agrees to pay to such Bank the
amount of such reduction in the return on capital as and when such reduction is
determined, upon presentation by such Bank of a statement of the amount setting
forth the Bank's calculation thereof. In determining such amount, such Bank
may use any reasonable averaging and attribution methods.

Section F. Inability to Determine LIBOR Rate. In the event that, prior
to the commencement of any Interest Period relating to any LIBOR Rate Loan, the
Agent shall determine that adequate and reasonable methods do not exist for
ascertaining the LIBOR Rate for such Interest Period, the Agent shall forthwith
give notice of such determination (which shall be conclusive and binding on the
Borrower and the Banks) to the Borrower and the Banks. In such event (a) any
Loan Request with respect to LIBOR Rate Loans shall be automatically withdrawn
and shall be deemed a request for Base Rate Loans, and (b) each LIBOR Rate Loan
will automatically, on the last day of the then current Interest Period
thereof, become a Base Rate Loan, and the obligations of the Banks to make
LIBOR Rate Loans shall be suspended until the Agent determines that the
circumstances giving rise to such suspension no longer exist, whereupon the
<PAGE>

Agent shall so notify the Borrower and the Banks.

Section G. Illegality. Notwithstanding any other provisions herein, if
any present or future law, regulation, treaty or directive or the
interpretation or application thereof shall make it unlawful, or any central
bank or other governmental authority having jurisdiction over a Bank or its
LIBOR Lending Office shall assert that it is unlawful, for any Bank to make or
maintain LIBOR Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Agent and the Borrower and thereupon (a) the commitment of
the Banks to make LIBOR Rate Loans or convert Loans of another type to LIBOR
Rate Loans shall forthwith be suspended and (b) the LIBOR Rate Loans then
outstanding shall be converted automatically to Base Rate Loans on the last day
of each Interest Period applicable to such LIBOR Rate Loans or within such
earlier period as may be required by law.

Section H. Additional Interest. If any LIBOR Rate Loan or any portion
thereof is repaid or is converted to a Base Rate Loan for any reason on a date
which is prior to the last day of the Interest Period applicable to such LIBOR
Rate Loan, the Borrower will pay to the Agent upon demand for the account of
the Banks in accordance with their respective Commitment Percentages, in
addition to any amounts of interest otherwise payable hereunder, any amounts
required to compensate the Banks for any losses, costs or expenses which may
reasonably be incurred as a result of such payment or conversion, including,
without limitation, an amount equal to daily interest for the unexpired portion
of such Interest Period on the LIBOR Rate Loan or portion thereof so repaid or
converted at a per annum rate equal to the excess, if any, of (a) the interest
rate calculated on the basis of the LIBOR Rate (including any spread over such
rate pursuant to Section 2.3(a)(iii)) applicable to such LIBOR Rate Loan minus
(b) the yield obtainable by the Agent upon the purchase of debt securities
customarily issued by the Treasury of the United States of America which have a
maturity date most closely approximating the last day of such Interest Period
(it being understood that the purchase of such securities shall not be required
in order for such amounts to be payable and that a Bank shall not be obligated
or required to have actually obtained funds at the LIBOR Rate or to have
actually reinvested such amount as described above).

Section I. Indemnity of Borrower. The Borrower agrees to indemnify each
Bank and to hold each Bank harmless from and against any loss, cost or expense
that such Bank may sustain or incur as a consequence of (a) default by the
Borrower in payment of the principal amount of or any interest on any LIBOR
Rate Loans as and when due and payable, including any such loss or expense
arising from interest or fees payable by such Bank to lenders of funds obtained
by it in order to maintain its LIBOR Rate Loans, or (b) default by the Borrower
in making a conversion after the Borrower has given (or is deemed to have
given) a Conversion Request.

Section J. Interest on Overdue Amounts; Late Charge. Overdue principal
and (to the extent permitted by applicable law) interest on the Loans and all
other overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest payable on demand at a rate per annum equal to
four percent (4.0%) plus the interest rate which would be in effect hereunder
until such amount shall be paid in full (after as well as before judgment). In
addition, the Borrower shall pay a late charge equal to three percent (3%) of
any amount of interest and/or principal payable on the Loans or any other
amounts payable hereunder or under the Loan Documents, which is not paid by the
Borrower within ten days of the date when due.

Section K. Certificate. A certificate setting forth any amounts payable
<PAGE>

pursuant to Section 4.4, Section 4.5, Section 4.8, Section 4.9 or Section 4.10
and a brief explanation of such amounts which are due, submitted by any Bank or
the Agent to the Borrower, shall be considered prima facie evidence of such
amount. Any such certificate shall be delivered to the Borrower promptly
following the occurrence of the event causing the Borrower to incur such
additional payment obligations; provided, however, that any delay in delivering
such notice shall not relieve the Borrower of its obligation to pay such
amounts. Before giving any such certificate, the applicable Bank shall take
such actions as may be reasonably available to such Bank to minimize such costs
provided such actions shall not in the judgment of such Bank be otherwise
materially disadvantageous to such Bank.

Section L. Limitation on Interest. Notwithstanding anything in this
Agreement to the contrary, all agreements between the Borrower and the Banks
and the Agent, whether now existing or hereafter arising and whether written or
oral, are hereby limited so that in no contingency, whether by reason of
acceleration of the maturity of any of the Obligations or otherwise, shall the
interest contracted for, charged or received by the Banks exceed the maximum
amount permissible under applicable law. If, from any circumstance whatsoever,
interest would otherwise be payable to the Banks in excess of the maximum
lawful amount, the interest payable to the Banks shall be reduced to the
maximum amount permitted under applicable law; and if from any circumstance the
Banks shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive interest
shall be applied to the reduction of the principal balance of the Obligations
of the Borrower and to the payment of interest or, if such excessive interest
exceeds the unpaid balance of principal of the Obligations of the Borrower,
such excess shall be refunded to the Borrower. All interest paid or agreed to
be paid to the Banks shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period until
payment in full of the principal of the Obligations of the Borrower (including
the period of any renewal or extension thereof) so that the interest thereon
for such full period shall not exceed the maximum amount permitted by
applicable law. This section shall control all agreements between the Borrower
and the Banks and the Agent.

Section M. Additional Cost Resulting from Syndication. Notwithstanding
the terms of Section s4.2(b), 4.4, 4.5, 14(a) and 14(b), the Borrower shall not
be required to pay to any Bank (other than FNBB and Wellsford) any additional
amounts pursuant to Section 4.2(b) as a result of the imposition of any
withholding requirement, the incurrence of any additional cost pursuant to
Section 4.4 and Section 4.5, costs pursuant to 14(a), or any taxes pursuant to
Section 14(b) unless such withholding requirement pursuant to Section 4.2(b),
the obligation to pay any additional costs pursuant to Section 4.4, Section
4.5, or Section 14(a), or the obligation to pay such taxes pursuant to Section
14(b) as a result of the same circumstances shall also exist with respect to
FNBB or Wellsford.

Section V. COLLATERAL SECURITY.

Section A. Collateral. The Obligations of the Borrower shall be secured
by (i) a perfected first priority security title to be held by the Agent for
the benefit of the Banks in the Collateral, and (ii) such additional collateral
from the Borrower or other Persons, if any, as the Agent for the benefit of the
Banks from time to time may accept as security for the Obligations of the
Borrower, with the consent of the Majority Banks, which consent may be given or
withheld in the sole and absolute discretion of the Majority Banks. Certain of
the Obligations shall also be guaranteed pursuant to and subject to the terms
<PAGE>

of the Guaranty.

Section B. Appraisals.

1. The Agent on behalf of the Banks may require an appraisal or
appraisal updating or revising a prior appraisal of the Mortgaged Property, in
order to determine the current appraised value of the Mortgaged Property, and
the Borrower shall pay to the Agent on demand all reasonable costs of all such
appraisals relating to the Mortgaged Property; provided, however, that so long
as no Event of Default shall have occurred and be continuing and regulatory
requirements of any Bank generally applicable to loans of the category made
under this Agreement as reasonably interpreted by such Bank shall not require
more frequent appraisals, the Borrower shall not be required to pay for
appraisals for the Mortgaged Property more often than once in any 60-month
period. The foregoing shall not limit the right of the Agent to obtain an
appraisal of the Mortgaged Property for the purposes of determining the net
worth of the Guarantor pursuant to the Guaranty.

(b) The Borrower acknowledges that the Majority Banks are not bound
by the value set forth in any appraisal performed pursuant to this Agreement
and do not make any representations or warranties with respect to any such
appraisal. The Borrower further agrees that the Banks shall have no liability
as a result of or in connection with any such appraisal for statements
contained in such appraisal, including without limitation, the accuracy and
completeness of information, estimates, conclusions and opinions contained in
such appraisal, or variance of such appraisal from the fair value of the
Mortgaged Property that is the subject of such appraisal given by the local tax
assessor's office, or the Borrower's idea of the value of the Mortgaged
Property.

Section VI. REPRESENTATIONS AND WARRANTIES.

The Borrower represents and warrants to the Agent and the Banks as
follows.

Section A. Authority, Etc.

1. Organization; Good Standing. Holding Company is a Delaware
limited liability company duly organized pursuant to a Certificate of Formation
filed December 9, 1996 with the Delaware Secretary of State and is validly
existing and in good standing under the laws of Delaware. Managing Member is a
Delaware corporation duly organized pursuant to its Articles of Incorporation
filed April 11, 1997 with the Delaware Secretary of State and is validly
existing and in good standing under the laws of Delaware. Co-Managing Member is
a Delaware corporation duly organized pursuant to its Articles of Incorporation
filed April 14, 1997 with the Delaware Secretary of State and is validly
existing and in good standing under the laws of Delaware. Holding Company
Managing Member is a corporation duly organized pursuant to its Articles of
Incorporation filed April 11, 1997 with the Secretary of State of Delaware and
is validly existing and in good standing under the laws of Delaware. Property
Owner is a Delaware limited liability company duly organized pursuant to a
Certificate of Formation filed December 9, 1996 with the Delaware Secretary of
State and is validly existing and in good standing under the laws of Delaware.
Each of the Borrower, Managing Member, Co-Managing Member, Holding Company
Managing Member and Property Owner (i) has all requisite power to own its
respective property and conduct its respective business as now conducted and as
presently contemplated, and (ii) is, to the extent necessary or required by
law, in good standing and is duly authorized to do business in the jurisdiction
<PAGE>

where the Mortgaged Property is located and in each other jurisdiction where a
failure to be so qualified in such other jurisdiction could have a materially
adverse effect on the business, assets or financial condition of such Person.

2. Subsidiaries. Neither the Property Owner, the Borrower,
Managing Member nor Holding Company Managing Member has any Subsidiaries, other
than those which own their respective interests in the Property Owner.

3. Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which any of the Borrower, Guarantor
or any other Additional Pledgor is or is to become a party and the transactions
contemplated hereby and thereby (i) are within the authority of such Person,
(ii) have been duly authorized by all necessary proceedings on the part of such
Person, (iii) do not and will not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
such Person is subject or any judgment, order, writ, injunction, license or
permit applicable to such Person, (iv) do not and will not conflict with or
constitute a default (whether with the passage of time or the giving of notice,
or both) under any provision of the certificate of formation, operating
agreement, articles of incorporation or other charter documents or bylaws of,
or any mortgage, indenture, agreement, contract or other instrument binding
upon, such Person or any of its properties or to which such Person is subject,
and (v) do not and will not result in or require the imposition of any lien or
other encumbrance on any of the properties, assets or rights of such Person,
other than the liens and encumbrances created by the Loan Documents.

4. Enforceability. The execution and delivery of this Agreement
and the other Loan Documents to which any of the Borrower, Guarantor or any
other Additional Pledgor is to is to become a party are valid and legally
binding obligations of such Person enforceable in accordance with the
respective terms and provisions hereof and thereof, except as enforceability is
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of creditors' rights and the
effect of general principles of equity.

Section B. Approvals. The execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower, the Guarantor or
any other Additional Pledgor is to become a party and the transactions
contemplated hereby and thereby do not require the approval or consent of or
approval of any Person or the authorization, consent, approval of or any
license or permit issued by, or any filing or registration with, or the giving
of any notice to, any court, department, board, commission or other
governmental agency or authority other than those already obtained and the
filing of the Security Documents in the appropriate records office with respect
thereto.

Section C. Title to Properties. The Borrower owns all of the assets
reflected in the pro forma balance sheet of the Borrower as at the Balance
Sheet Date, subject to no rights of others, including any mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances.

Section D. Financial Statements. The Borrower has furnished or caused
to be furnished to each of the Banks: (a) the pro forma balance sheet of the
Borrower as of the Balance Sheet Date, (b) the pro forma balance sheet of the
Property Owner as of the Balance Sheet Date, (c) the unaudited statement of
operating income for the Mortgaged Property for calendar year 1996, reasonably
satisfactory in form to the Agent and certified by the chief financial or
<PAGE>

accounting officer of the Borrower as fairly presenting the operating income
for the Mortgaged Property for such period, and (d) certain other financial
information relating to the Borrower, the Property Owner, the Guarantor and the
Mortgaged Property. Such balance sheet and statements have been prepared in
accordance with tax basis accounting principles and fairly present the
financial condition of the Borrower and the Property Owner as of such date and
the results of the operations of the Borrower, the Property Owner and the Mort-
gaged Property for such periods. There are no liabilities, contingent or
otherwise, of the Borrower involving material amounts not disclosed in said
financial statements and the related notes thereto other than the Property
Owner's obligations under the Mortgage Loan Documents and the Borrower's, the
Guarantors and the other Additional Pledgors' obligations under the Loan
Documents.

Section E. No Material Changes. Since the Balance Sheet Date, there has
occurred no materially adverse change in the financial condition or business of
the Borrower or the Property Owner taken as a whole as shown on or reflected in
the balance sheet of the Borrower and the Property Owner, respectively, as of
the Balance Sheet Date, or their respective statement of income or cash flows
for the fiscal year then ended, other than changes in the ordinary course of
business that have not had any materially adverse effect either individually or
in the aggregate on the business or financial condition of such Person.

Section F. Franchises, Patents, Copyrights, Etc. The Borrower possesses
all franchises, patents, copyrights, trademarks, trade names, servicemarks,
licenses and permits, and rights in respect of the foregoing, adequate for the
conduct of its business substantially as now conducted without known conflict
with any rights of others.

Section G. Litigation; Judgments. Except as stated on Schedule 6.7,
there are no actions, suits, proceedings or investigations of any kind pending
or to the actual knowledge of the Borrower threatened against or affecting the
Borrower, Managing Member, the Property Owner, the Guarantor, any of the other
Additional Pledgors, the Collateral or the Mortgaged Property before any court,
tribunal, administrative agency or board, mediator or arbitrator that, if
adversely determined, might, either in any case or in the aggregate, materially
adversely affect the properties, assets, financial condition or business of
such Person or materially impair the right of such Person to carry on business
substantially as now conducted by it, or result in any liability not adequately
covered by insurance, or for which adequate reserves are not maintained on the
balance sheet of such Person, or which question the validity of this Agreement,
any of the other Loan Documents or any of the Mortgage Loan Documents, any
action taken or to be taken pursuant hereto or thereto or any lien, security
title or security interest created or intended to be created pursuant hereto or
thereto, or which will adversely affect the ability of the Borrower to pay and
perform the Obligations in the manner contemplated by this Agreement and the
other Loan Documents. There are no judgments outstanding against or affecting
the Borrower, Managing Member, the Property Owner, the Guarantor, any of the
other Additional Pledgors, the Collateral or the Mortgaged Property.

Section H. No Materially Adverse Contracts, Etc. None of the Borrower,
Managing Member, the Property Owner, the Guarantor or any of the other
Additional Pledgors is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a materially adverse effect on the business,
assets or financial condition of such Person. None of the Borrower, Managing
Member, the Property Owner, the Guarantor or any of the other Additional
Pledgors is a party to any mortgage, indenture, contract, agreement or other
<PAGE>

instrument that has or is expected, in the judgment of the members or officers
of such Person, to have any materially adverse effect on the business, assets
or financial condition of any of them.

Section I. Compliance with Other Instruments, Laws, Etc. None of the
Borrower, Managing Member, the Property Owner, the Guarantor or any of the
other Additional Pledgors is in violation of any provision of its charter or
other organizational documents, bylaws, or any agreement or instrument to which
it may be subject or by which it or any of its properties may be bound or any
decree, order, judgment, statute, license, rule or regulation, in any of the
foregoing cases in a manner that could materially and adversely affect the
financial condition, properties or business of such Person.

Section J. Tax Status. Each of the Borrower, Managing Member, the
Property Owner, the Guarantor and the other Additional Pledgors (a) has made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, as the filing
periods may have been extended, (b) has paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and by appropriate
proceedings and (c) has set aside on its books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. Except as provided in the
foregoing sentence, there are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of such
Person know of no basis for any such claim.

Section K. No Event of Default. No Default or Event of Default has
occurred and is continuing.

Section L. Holding Company and Investment Company Acts. None of the
Borrower, Managing Member, the Property Owner, the Guarantor or any of the
Additional Pledgors is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is any of them
an "investment company", or an "affiliated company" or a "principal
underwriter" of an "investment company", as such terms are defined in the
Investment Company Act of 1940.

Section M. Absence of U.C.C. Financing Statements, Etc. Except with
respect to Permitted Liens, the Mortgage Loan Documents and the Loan Documents,
there is no financing statement, security agreement, chattel mortgage, real
estate mortgage or other document filed or recorded with any filing records,
registry, or other public office, that purports to cover, affect or give notice
of any present or possible future lien on, or security interest or security
title in, any property of the Borrower, Managing Member, the Property Owner,
the Guarantor (as to its interest in the Mortgaged Property and the Collateral)
or any of the other Additional Pledgors.

Section N. Setoff, Etc. The Collateral and the rights of the Agent and
the Banks with respect to the Collateral are not subject to any setoff, claims,
withholdings or other defenses.

Section O. Certain Transactions. Except as disclosed in writing to the
Agent (including, without limitation, the Management Agreement between Property
Owner and Stahl Real Estate Co.), none of the members, partners, officers,
trustees, directors, or employees of the Borrower, Managing Member, the
Property Owner, the Guarantor or any of the other Additional Pledgors is a
<PAGE>

party to any transaction with each other (other than for services as members,
partners, employees, officers and directors), including any contract, agreement
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any member, partner, officer, trustee, director
or such employee or, to the knowledge of the Borrower, any limited liability
company, corporation, partnership, trust or other entity in which any member,
partner, officer, trustee, director, or any such employee has a substantial
interest or is a member, officer, director, trustee or partner.

Section P. Employee Benefit Plans. The Borrower and the Property Owner
are in compliance in all material respects with ERISA. There has been no
Reportable Event with respect to any Employee Benefit Plan, Multiemployer Plan
or Guaranteed Pension Plan. There has been no institution of proceedings or
any other action by PBGC, the Borrower, the Property Owner or any ERISA
Affiliate to terminate or withdraw or partially withdraw from any such Plan
under any circumstances which could lead to material liabilities to PBGC or,
with respect to a Multiemployer Plan, the "Reorganization" or "Insolvency" (as
each such term is defined in ERISA) of any such Plan. No "prohibited
transaction" (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) has occurred with respect to any such Plan, and neither the consummation
of the transactions provided for in this Agreement and compliance by the
Borrower with the provisions hereof and the other Loan Documents, nor the
consummation of the transactions provided for in the Mortgage Loan Documents
and compliance by the Property Owner with the provisions thereof, will involve
any prohibited transaction.

Section Q. ERISA Taxes. Neither the Borrower, the Property Owner nor
any ERISA Affiliate thereof is currently and the Borrower has no reason to
believe that the Borrower, the Property Owner or any ERISA Affiliate thereof
will become subject to any liability (other than routine expenses or
contributions relating to the Plans set forth on Schedule 6.17, if timely
paid), tax or penalty whatsoever to any person whomsoever, which liability, tax
or penalty is directly or indirectly related to any Plans set forth on Schedule
6.17 including, but not limited to, any penalty or liability arising under
Title I or Title IV of ERISA, any tax or penalty resulting from a loss of
deduction under Section s 404 and 419 of the Code, or any tax or penalty under
Chapter 43 of the Code, except such liabilities, taxes or penalties (when taken
as a whole) as will not have a material adverse effect on the Borrower, the
Property Owner or upon their respective financial condition, assets, business,
operations, liabilities or prospects.

Section R. Plan Payments. The Borrower, the Property Owner and each
ERISA Affiliate has made full and timely payment of all amounts (i) required to
be contributed under the terms of each Plan set forth on Schedule 6.17 and
applicable law and (ii) required to be paid as expenses of each Plan set forth
on Schedule 6.17. No Plan set forth on Schedule 6.17 would have an "amount of
unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) if
such Plan were terminated as of the date on which this representation and
warranty is made.

Section S. Regulations U and X. No portion of any Loan is to be used
for the purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. The Borrower is
not engaged, nor will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or carrying any "margin security" or "margin stock" as such terms are used in
<PAGE>

Regulations U and X of the Board of Governors of the Federal Reserve System, 12
C.F.R. Parts 221 and 224.

Section T. Environmental Compliance. Neither the Borrower, the
Additional Pledgors nor the Mortgaged Property is subject to any applicable Law
requiring the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement, in each case by virtue of the
transactions set forth herein and contemplated hereby, or as a condition to the
recording of the Security Documents or to the effectiveness of any other
transactions contemplated hereby.

Section U. Loan Documents. All of the representations and warranties
made by or on behalf of the Borrower, Managing Member, the Property Owner, the
Guarantor and the other Additional Pledgors in this Agreement and the other
Loan Documents or any document or instrument delivered to the Agent or the
Banks pursuant to or in connection with any of such Loan Documents are true and
correct in all material respects as of the date hereof, and, neither the
Borrower, Managing Member, the Guarantor nor any other Additional Pledgor has
failed to disclose such information as is necessary to make such
representations and warranties not misleading in any material respect.

Section V. Brokers. Neither the Borrower, Managing Member, the Property
Owner, the Guarantor nor any of the other Additional Pledgors has engaged or
otherwise dealt with any broker, finder or similar entity in connection with
this Agreement or the Loans contemplated hereunder, other than Donaldson,
Lufkin & Jenrette Securities Corporation, the fees of which, if any, shall be
paid by the Borrower.

Section W. Ownership. Holding Company, Managing Member and Co-Managing
Member are the sole members of the Property Owner, and no other Person owns any
legal, equitable or beneficial interest in the Property Owner. Managing Member
and Co-Managing member are the sole co-managing members of the Property Owner.
Holding Company Managing Member and Guarantor are the sole members of Holding
Company, and no other Person owns any legal, equitable or beneficial interest
in Holding Company. Holding Company Managing Member is the sole Managing
Member of the Holding Company. Guarantor is the sole shareholder of Managing
Member, Co-Managing Member and Holding Company Managing Member, and no other
Person directly owns any legal, equitable or beneficial interest in the
Managing Member, Co-Managing Member or the Holding Company Managing Member.
Property Owner owns no assets other than the Mortgaged Property, and no other
Person owns any legal, equitable or beneficial interest in the Mortgaged
Property, other than the interests as tenants only of the tenants listed on the
Rent Roll delivered to the Agent pursuant to Section 6.27 and the rights in and
to the Mortgaged Property pursuant to the Permitted Exceptions. Holding
Company, Managing Member and Co-Managing Member own no assets other than their
respective interest in the Property Owner. Holding Company Managing Member owns
no assets other than its interest in Holding Company.

Section X. Other Debt. Neither the Borrower, Managing Member, the
Property Owner nor Holding Company Managing Member is in default of the payment
of any Indebtedness or under any other agreement, mortgage, deed of trust,
security agreement, financing agreement, indenture or lease to which any of
them is a party. The Guarantor is not in default of the payment of any
Indebtedness or under any other agreement, mortgage, deed of trust, security
agreement, financing agreement, indenture or lease to which it is a party
involving obligations individually or in the aggregate in excess of
<PAGE>

$1,000,000.00. Neither the Borrower nor the Guarantor is a party to or bound
by any agreement, instrument or indenture that may require the subordination
in right or time of payment of any of the Obligations to any other indebtedness
or obligation of the Borrower or the Guarantor. The Borrower has provided to
the Agent copies of all agreements, mortgages, deeds of trust, financing
agreements or other material agreements binding upon the Borrower, Managing
Member, the Property Owner and Holding Company Managing Member or their
respective properties and entered into by the Borrower, Managing Member, the
Property Owner or Holding Company Managing Member as of the date of this
Agreement with respect to any Indebtedness of the Borrower and the Property
Owner. Attached hereto as Schedule 6.24 is a true, accurate and complete list
of all of the Mortgage Loan Documents. The Borrower has delivered to the Agent
true, correct and complete copies of the Mortgage Loan Documents, and none of
the Mortgage Loan Documents has been modified or amended in any respect except
as set forth in Schedule 6.24. As of the date hereof, the outstanding
principal balance secured by the Mortgage is $345,000,000.00.

Section Y. Solvency. As of the Closing Date and after giving effect to
the transactions contemplated by this Agreement, the other Loan Documents and
the Mortgage Loan Documents, including all Loans made or to be made hereunder
or thereunder, neither the Borrower, the Property Owner, the Guarantor nor any
of the other Additional Pledgors is insolvent on a balance sheet basis such
that the sum of such Person's assets exceeds the sum of the such Person's
liabilities, each such Person is able to pay its debts as they become due, and
each such Person has sufficient capital to carry on its business.

Section Z. Mortgaged Property; Property Owner.

1. The Borrower hereby restates and reaffirms each of the
representations and warranties made by the Property Owner set forth in Section
s 2, 4, 35 and 46 of the Mortgage as if the same were more fully set forth
herein and were made to the Agent and the Banks herein.

2. The Borrower makes the following additional representations and
warranties concerning the Mortgaged Property:

(i) The Building is fully independent in all respects
including, without limitation, in respect of structural integrity,
heating, ventilating and air conditioning, plumbing, mechanical and other
operating and mechanical systems, and electrical, sanitation and water
systems. The Building is located on lots which are separately assessed
for purposes of real estate tax assessment and payment; provided, however,
that no part of the Mortgaged Property is assessed with any other property
that is not included within the Mortgaged Property. The Building, all
equipment serving the Building and all paved or landscaped areas related
to or used in connection with the Building are located wholly within the
perimeter lines of the lot or lots on which the Mortgaged Property is
located, except as may be specifically shown on the Survey for such
Mortgaged Property.

(ii) The Building is structurally sound, in good repair and free
of material defects in materials and workmanship. All major building
systems located within the Building, including without limitation heating,
ventilating and air conditioning, electrical, sprinkler, plumbing or other
mechanical systems, are in good working order and condition. No asbestos
is located in or on the Building, except for nonfriable asbestos or
contained friable asbestos which is being monitored and/or remediated in
accordance with the recommendations of an Environmental Engineer.
<PAGE>

(iii) The Building as presently constructed, used, occupied
and operated does not violate in any material respect any applicable
federal or state law or governmental regulation, or any local ordinance,
order or regulation, including but not limited to laws, regulations, or
ordinances relating to zoning, building use and occupancy, subdivision
control, fire protection, health, sanitation, safety, handicapped access,
historic preservation and protection, tidelands, wetlands, flood control
and Environmental Laws. The Building complies with applicable zoning laws
and regulations and is not a so-called non-conforming use. The zoning
laws permit use of the Building for its current use. There is such number
of parking spaces on the lot or lots on which the Mortgaged Property is
located as is adequate under the zoning laws and regulations to permit use
of the Building for its current use.

(iv) Neither of the Borrower nor the Property Owner has received
any notice of, and has no knowledge of, any approvals, consents, licenses,
permits, utility installations and connections (including, without
limitation, drainage facilities), curb cuts and street openings, required
by applicable laws, rules, ordinances or regulations or any agreement
affecting the Mortgaged Property for the maintenance, operation, servicing
and use of the Mortgaged Property or the Building for its current use
which have not been granted, effected, or performed and completed (as the
case may be) (other than the issuance of a temporary certificate of
occupancy for the lobby area of the Building), or any fees or charges
therefor which have not been fully paid, or which are no longer in full
force and effect. To the best knowledge of the Borrower, there are no
outstanding notices, suits, orders, decrees or judgments relating to
zoning, building use and occupancy, fire, health, sanitation or other
violations affecting, against, or with respect to, the Mortgaged Property
or any part thereof, other than (A) notices with respect to potential
building code violations, none of which would have any material adverse
affect on the Mortgaged Property or the operation thereof or materially
affect the Property Owner's ability to comply with the Leases, and (B)
judgments relating to potential building code violations with respect to
which the aggregate amount involved does not exceed $100,000.00.

(v) Neither the Borrower nor the Property Owner has received
any notice from any insurer or its agent requiring performance of any work
with respect to the Mortgaged Property or canceling or threatening to
cancel any policy of insurance, and the Mortgaged Property complies with
the requirements of all of the Property Owner's insurance carriers.

(vi) There are no unpaid or outstanding real estate or other
taxes or assessments on or against the Mortgaged Property or any part
thereof which are currently payable by the Property Owner (except only
real estate or other taxes or assessments, that are not yet due and
payable).

Section AA. Leases. An accurate and complete Rent Roll for the
Mortgaged Property as of the date hereof has been certified on behalf of the
Borrower and provided to the Agent. The Borrower has delivered to the Agent
true, correct and complete copies of the Leases and any amendments or
supplements thereto relating to the Mortgaged Property. The Leases reflected
on such Rent Roll constitute as of the date thereof the sole agreements and
understandings relating to leasing or licensing of space at such Mortgaged
Property and in the Building. There are no tenants in possession or Persons
having rights to occupy the Mortgaged Property or portion thereof as a tenant
<PAGE>

other than pursuant to the Leases reflected in such Rent Roll. Except as set
forth in Schedule 6.27 attached hereto, the Leases reflected therein are in
full force and effect in accordance with their respective terms, without any
payment default or any other material default thereunder, nor are there any
defenses, counterclaims, offsets, free rent, partial rent, credit or deduction
in rent, lease support payments, lease buy-outs, concessions or rebates
available to any tenant thereunder (other than such free rent, lease support
payments or other concessions available to such tenants as expressly provided
in the applicable Lease). Except as set forth in Schedule 6.27 attached
hereto, neither the Property Owner nor any Person acting on its behalf has
given or made any notice of any non-payment or other material default or any
claim which remains uncured or unsatisfied with respect to any of the Leases.
The Rent Roll furnished to the Agent accurately and completely sets forth all
rents payable by tenants, no tenant having paid more than one month's base rent
in advance (excluding security deposits). Schedule 6.27 attached hereto
accurately and completely sets forth all security, if any, deposited by
tenants. Neither the Property Owner nor anyone acting on its behalf has
received any notice from any tenant claiming the existence of any default by
the landlord under any of the Leases or any defense, counterclaim or right of
offset or other credit, and to the best of the Borrower's knowledge there is no
basis for any such claim or notice of default by any tenant. The Borrower has
reviewed the estoppel certificates delivered by the tenants or subtenants of
the Mortgaged Property to the Agent on or prior to the date hereof and, except
as set forth on Schedule 6.27 attached hereto, such estoppel certificates are
true and correct in all material respects. Except as set forth in Schedule
6.27 attached hereto, all tenant improvements or work to be done, furnished or
paid for by the Property Owner, or credited or allowed to a tenant, for, or in
connection with, the Building as of the date hereof pursuant to any Lease has
been completed and paid for. Except as set forth in Schedule 6.27 attached
hereto, no material leasing, brokerage or like commissions, fees or payments
are due from the Property Owner in respect of the Leases.

Section AB. Use of Proceeds. The proceeds of the Loan shall be used,
together with the proceeds of the Mortgage Loan, to satisfy the Indebtedness
encumbering the Mortgaged Property as of the date hereof and the payment of
other fees and expenses in connection with the closing of the transactions
contemplated by the Mortgage Loan Documents and the Loan Documents. No portion
of the proceeds of the Loans shall be used for personal, family or household
purposes; provided, however, that the foregoing shall not prohibit the
distribution of any proceeds of the Loans to the members of the Borrower
following the payment of the foregoing items.

Section AC. Taxation as Partnership. The Property Owner and the Holding
Company have elected to be taxed as partnerships under federal income tax law.

Section AD. Management Agreements. The Mortgaged Property is managed by
Stahl Real Estate Co. pursuant to a Management Agreement between the Property
Owner and Stahl Real Estate Co. dated April 25, 1997. Stahl Real Estate Co.
has an exclusive agreement with Colliers ABR Inc. to provide leasing and
management services to the Mortgaged Property. The Borrower has delivered to
the Agent true, correct and complete copies of such Management Agreements for
the Mortgaged Property. Each of the Management Agreements for the Mortgaged
Property is terminable upon thirty (30) days notice. There are no claims or
any basis for any claim in respect of the Mortgaged Property or its operation
by any party to any Management Agreement.

Section AE. Managing Member.
<PAGE>

1. All duties, obligations and responsibilities required to be
performed by Managing Member as of the date hereof under the organizational
agreements for the Property Owner have been performed, and no default or
condition which with the passage of time or the giving of notice, or both,
would constitute a default exists under such organizational agreements.

2. Except for the Loan Documents and the Mortgage Loan Documents,
Managing Member is not a party to and is not bound by any indenture, contract
or other agreement which purports to prohibit, restrict, limit, or control the
transfer or pledge of Managing Member's interest in the Property Owner, the
exercise of voting rights with respect to the Property Owner or the management
of the Property Owner.

3. Managing Member is and shall remain the sole, lawful, beneficial
and record owner of its interest in the Property Owner, free and clear of all
liens, restrictions, claims, pledges, encumbrances, charges, claims of third
parties and rights of set-off or recoupment whatsoever.

Section VII. AFFIRMATIVE COVENANTS OF THE BORROWER.

The Borrower covenants and agrees that, until all of the Obligations have
been paid and performed in full:

Section A. Punctual Payment. The Borrower will duly and punctually pay
or cause to be paid the principal and interest on the Loans and all interest,
fees and premiums provided for in this Agreement, all in accordance with the
terms of this Agreement and the Notes as well as all other sums owing pursuant
to the Loan Documents.

Section B. Maintenance of Office. The Borrower will maintain its chief
executive office at 277 Park Avenue, 47th Floor, New York, New York 10172 or at
such other place in the United States of America as the Borrower shall
designate upon prior written notice to the Agent and the Banks, where notices,
presentations and demands to or upon the Borrower in respect of the Loan
Documents may be given or made.

Section C. Records and Accounts. The Borrower will (a) keep true and
accurate records and books of account in which full, true and correct entries
will be made in accordance with tax basis accounting principles and (b)
maintain adequate accounts and reserves for all taxes (including income taxes),
depreciation and amortization of its properties, contingencies and other
reserves. The Borrower shall not, without the prior written consent of the
Majority Banks, (x) make any material change to the accounting procedures used
by the Borrower in preparing the financial statements and other information
described in Section 6.4 or Section 7.4, or (y) change its fiscal year.

Section D. Financial Statements, Certificates and Information. The
Borrower will deliver or cause to be delivered to the Agent:

1. a copy of each statement, report, Rent Roll, tax return or other
matter required to be delivered to the Mortgagee pursuant to Section 15 of the
Mortgage as and when the same is required to be delivered to the Mortgagee
pursuant to the terms thereof;

2. as soon as practicable, but in any event not later than 45 days
after the end of the first three calendar quarters of each year, copies of the
unaudited balance sheet of each Borrower as at the end of such quarter, and the
related unaudited statement of income, changes in capital and cash flows for
<PAGE>

the portion of such Borrower's fiscal year then elapsed, all in reasonable
detail prepared in accordance with the terms of this Agreement, together with a
certification by the financial or accounting officer of each Borrower that the
information contained in such financial statements fairly presents the
financial position of each Borrower on the date thereof (subject to year-end
adjustments);

3. as soon as practicable, but in any event not later than 90 days
after the end of each calendar year, the unaudited balance sheet of each
Borrower at the end of such year, and the related unaudited statements of
income, changes in capital and cash flow for such year, all in reasonable
detail prepared according to the terms of this Agreement, together with the
certification by the principal financial or accounting officer of each Borrower
that the information contained in such financial statements fairly presents the
financial position of each Borrower on the date thereof;

4. not later than 45 days after the end of each calendar quarter
(including the fourth quarter), a statement showing the aging of the
receivables for the Mortgaged Property, and a statement of the amount of
deposits to, and disbursements from, each account and sub-account established
pursuant to the Mortgage Cash Collateral Agreement for such quarter and showing
any variations for such quarter and the year-to-date of actual operations from
the Approved Budget, all in a form reasonably satisfactory to Agent together
with a certification by the principal financial or accounting officer of each
Borrower that the information contained in such statements fairly presents the
information therein for such periods;

5. not later than 45 days after the end of each calendar quarter
(including the fourth quarter), a certification by the principal financial or
accounting officer of each Borrower to the effect that such Person has read the
Loan Documents and the Mortgage Loan Documents, and that to such Person's
knowledge no Default or Event of Default exists, or if such Person shall obtain
knowledge of any then existing Default of Event of Default, they shall disclose
in such statement such Defaults or Event of Defaults;

6. not later than 45 days after the end of each calendar quarter
(including the fourth quarter), (i) a statement listing each Lease within the
Mortgaged Property covering 85,000 square feet or more that has expired
(without renewal) or terminated during the preceding quarter, stating the name
of the tenant, (ii) a statement listing the name of each tenant that has taken
occupancy of the Mortgaged Property during the preceding quarter, the date of
occupancy, and the area so occupied, and (iii) a copy of each Lease entered
into by or on behalf of the Property Owner during such quarter;

7. promptly upon receipt or issuance of the same by Property Owner,
either Borrower, Managing Member, Holding Company Managing Member or Guarantor,
duplicate copies of any and all notices of any proposed sale or other
disposition, or financing or refinancing, of any interest of Borrower or
Managing Member in the Property Owner or of the Mortgaged Property, or any
interest of Guarantor or Holding Company Managing Member in Holding Company, or
any interest of Guarantor in the Borrower or Managing Member, or of the
Collateral, together with all material documents related thereto and a
description of the material terms thereof;

8. duplicate copies of any and all notices of default by Borrower
under the organizational agreements of Property Owner or of any failure by
Borrower to perform any obligation under such agreements;
<PAGE>

9. duplicate copies of any and all notices sent by the Property
Owner to any rating agency which has now or may hereafter have issued a rating
with respect to any portion of the indebtedness secured by the Mortgage, or
sent by such rating agency to the Property Owner;

10. not later than 45 days after the end of each calendar year,
evidence that the Borrower, Managing Member and Holding Company Managing Member
and Property Owner have taken all actions required by New York, as applicable
and Delaware law to remain in good standing;

11. duplicate copies of any and all appraisals or updates thereof
that are required to be delivered by the Property Owner to the Mortgagee
pursuant to the Mortgage as and when the same are required to be delivered to
the Mortgagee; and

12. from time to time such other financial data and information in
the possession of or reasonably obtainable by the Borrower or the Property
Owner relating to the Borrower, Managing Member, the Additional Pledgors, the
Property Owner or the Mortgaged Property (including without limitation
auditors' management letters, property inspection and environmental reports and
information as to zoning and other legal and regulatory changes affecting the
Borrower) as the Agent may reasonably request.

Section E. Notices.

1. Defaults. The Borrower will promptly notify the Agent in
writing of the occurrence of any Default or Event of Default of which Borrower
has knowledge. If any Person shall give any notice or take any other action in
respect of a claimed default (whether or not constituting an Event of Default)
under this Agreement or under any note, evidence of indebtedness, indenture or
other obligation to which or with respect to which any of the Borrower,
Managing Member, the Property Owner or Holding Company Managing Member is a
party or obligor, whether as principal or surety, involving individually or in
the aggregate an amount in excess of $500,000.00, or with respect to which the
Guarantor is a party or obligor, whether as principal or surety, involving
individually or in the aggregate an amount in excess of $80,000,000.00 which is
recourse to Guarantor, and such default would permit the holder of such note or
obligation or other evidence of indebtedness to accelerate the maturity
thereof, the Borrower shall forthwith give written notice thereof to the Agent
and each of the Banks, describing the notice or action and the nature of the
claimed default.

2. Environmental Events. The Borrower will promptly give notice to
the Agent (i) upon the Borrower obtaining knowledge of any potential or known
Release, or threat of Release, of any Hazardous Substances in any material
respect at or from the Mortgaged Property; (ii) of any violation of any
Environmental Law that the Property Owner reports in writing or is reportable
by such Person in writing (or for which any written report supplemental to any
oral report is made) to any federal, state or local environmental agency and
(iii) upon becoming aware thereof, of any inquiry, proceeding, investigation,
or other action, including a notice from any agency of potential environmental
liability, of any federal, state or local environmental agency or board, that
in either case involves the Mortgaged Property or has the potential to
materially adversely affect the assets, liabilities, financial conditions or
operations of the Borrower or the Property Owner or the Agent's liens or
security title on the Collateral pursuant to the Security Documents.

3. Notification of Claims. The Borrower will, immediately upon
<PAGE>

becoming aware thereof, notify the Agent in writing of any set off, claims
(including, with respect to the Mortgaged Property, environmental claims)
withholdings that individually or in the aggregate involve amounts in excess of
$100,000.00 (or $10,000,000.00 as to Guarantor) or other defenses to which the
Mortgaged Property or the rights of the Borrower, Managing Member, the Holding
Company Managing Member, the Guarantor, the Agent or the Banks with respect to
the Mortgaged Property or any of the Collateral, or the rights of the Agent or
the Banks with respect to the Collateral, are subject. In addition, the
Borrower will, immediately upon becoming aware thereof, notify the Agent in
writing of the occurrence of any material default under any Lease, the
intention of any tenant under a Lease to withhold any fixed or base rent or the
actual withholding thereof, or any bankruptcy, insolvency or cessation of
operations by any tenant under a Lease.

4. Notice of Litigation and Judgments. The Borrower will give
notice to the Agent in writing within 15 days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation and
proceedings affecting the Borrower, Managing Member, the Property Owner, the
Guarantor or any other Additional Pledgor or to which any of such Persons is or
is to become a party involving an uninsured claim against any of such Persons
in an amount in excess of $500,000 (or $10,000,000.00 as to Guarantor) and
stating the nature and status of such litigation or proceedings. The Borrower
will give notice to the Agent, in writing, in form and detail satisfactory to
the Agent and each of the Banks, within ten days of any judgment in excess of
$500,000 (or $10,000,000.00 as to Guarantor) not covered by insurance, whether
final or otherwise, against any of the Borrower, Managing Member, the Property
Owner, the Guarantor or any other Additional Pledgor.

Section F. Existence. Holding Company will do or cause to be done all
things necessary to preserve and keep in full force and effect and in good
standing its existence and the existence of the Property Owner as a Delaware
limited liability company. The Borrower will cause each of the Property Owner,
the Managing Member, Co-Managing Member and any Additional Pledgor to do or
cause to be done all things necessary to preserve and keep in full force and
effect and in good standing their legal existence. Without limiting the
foregoing, Property Owner and Holding Company shall take all actions as are
necessary to maintain all protections afforded to limited liability companies
by the States of New York, as applicable, and Delaware. The Borrower will do
or cause to be done all things necessary to preserve and keep in full force all
of its rights and franchises and those of the Property Owner, the Managing
Member and any Additional Pledgor. The Borrower will, and will cause each of
the Property Owner, the Managing Member and any Additional Pledgor to, continue
to engage primarily in the businesses now conducted by them.

Section G. Insurance.

1. The Borrower will cause the Property Owner, at its expense, to
procure and maintain the insurance policies required by the Mortgage Loan
Documents. Each commercial general liability or umbrella liability policy with
respect to the Mortgaged Property shall name the Agent and each Bank as an
additional insured and shall contain a cross liability/severability
endorsement. The Borrower shall deliver duplicate originals or certified
copies of all such policies to the Agent, and the Borrower shall promptly
furnish to the Agent all renewal notices and evidence that all premiums or
portions thereof then due and payable have been paid. At least 30 days prior
to the expiration date of all such policies, the Borrower shall deliver to the
Agent evidence of continued coverage, including a certificate of insurance, as
may be reasonably satisfactory to the Agent.
<PAGE>

2. In the event of any loss or damage to the Mortgaged Property,
the Borrower shall give prompt written notice to the insurance carrier and the
Agent, and the Agent shall furnish a copy of such notice promptly to each of
the Banks. The Agent and the Banks acknowledge that the Property Owner's
rights to any insurance proceeds are subject to the terms of the Mortgage. The
Borrower may not and shall not permit the Property Owner to settle, adjust or
compromise any claim under such insurance policies without the prior written
consent of the Agent; provided, further, that the Property Owner may make proof
of loss and adjust and compromise any claim under casualty insurance policies
which is of an amount less than $10,000,000.00 so long as no Default or Event
of Default has occurred. Any proceeds of such claim which are not used to
reconstruct or repair the Mortgaged Property, or applied to the balance of the
loan evidenced by the Mortgage Loan Documents, shall be deposited into the
accounts established pursuant to the Mortgage Cash Collateral Agreement to the
extent required thereby, or if such deposit is not required thereunder, then
such proceeds shall be paid to the Agent and applied to the payment of the
Obligations whether or not then due.

3. In the event that the Property Owner is permitted pursuant to
the terms of the Mortgage to reconstruct, restore or repair the Mortgaged
Property following a casualty to any portion of the Mortgaged Property, the
Borrower shall cause the Property Owner to promptly and diligently repair and
restore the Mortgaged Property in the manner and within the time periods
required by the Mortgage, the Leases and any other agreements affecting the
Mortgaged Property. In the event that Property Owner is permitted pursuant to
terms of the Mortgage to elect to not reconstruct, restore or repair the
Mortgaged Property following a casualty to any portion of the Mortgaged
Property, the Borrower shall not permit the Property Owner to elect not to
reconstruct, restore or repair the Mortgaged Property without the prior written
consent of the Agent.

Section H. Condemnation. In the event that all or any portion of the
Mortgaged Property shall be damaged or taken through condemnation (which term
shall include any damage or taking by any governmental authority, quasi-
governmental authority, any party having the power of condemnation, or any
transfer by private sale in lieu thereof), or any such condemnation shall be
threatened, the Borrower shall give prompt written notice to the Agent, and the
Agent shall furnish a copy of such notice promptly to each of the Banks. The
Agent and the Banks acknowledge that the Property Owner's rights to any
condemnation award is subject to the terms of the Mortgage. The Borrower may
not and shall not permit the Property Owner to settle or compromise any claim,
action or proceeding relating to such damage or condemnation without the prior
written consent of the Agent; provided, further, that the Property Owner may
settle, adjust and compromise any such claim, action or proceeding which is of
an amount less than $10,000,000.00 so long as no Default or Event of Default
has occurred. Any proceeds, award or damages from such damage or condemnation
which are not used to reconstruct or repair the Mortgaged Property, or applied
to the balance of the loan evidenced by the Mortgage Loan Documents, shall be
paid to the Agent and applied to the payment of the Obligations whether or not
then due. In the event that the Property Owner is permitted pursuant to the
terms of the Mortgage to reconstruct, restore or repair the Mortgaged Property
following a condemnation of any portion of the Mortgaged Property, the Borrower
shall cause the Property Owner to promptly and diligently repair and restore
the Mortgaged Property in the manner and within the time periods required by
the Mortgage, the Leases and any other agreements affecting the Mortgaged
Property. In the event that the Property Owner is permitted pursuant to the
terms of the Mortgage to elect not to reconstruct, restore or repair the
<PAGE>

Mortgaged Property following a condemnation of any portion of the Mortgaged
Property, the Borrower shall not permit the Property Owner to elect not to
reconstruct, restore or repair the Mortgaged Property without the prior written
consent of the Agent.

Section I. Taxes; Liens.

1. The Borrower will duly pay and discharge, or cause to be paid
and discharged, before the same shall become overdue (taking into account
extensions thereto), all taxes, assessments and other governmental or private
charges imposed upon the Borrower, Managing Member, the Guarantor, the other
Additional Pledgors and upon the Collateral and such Person's sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid or unbonded
might by law become a lien or charge upon any of its property, and shall in any
event cause the prompt, full and unconditional discharge of all liens imposed
on or against the Collateral or any portion thereof within thirty (30) Business
Days after receiving written notice (whether from Mortgagee, the Agent, the
lienholder or any other Person) of the filing thereof; provided that so long as
no Event of Default has occurred, any such tax, assessment, charge, levy or
claim need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings which shall suspend the
collection thereof with respect to such property, neither such property nor any
portion thereof or interest therein would be in any danger of sale, forfeiture
or loss by reason of such proceeding and the Borrower or such Person shall have
set aside adequate reserves with respect thereto as the Agent may reasonably
require; and provided, further, that forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security therefor,
the Borrower either (i) will provide a bond issued by a surety reasonably
acceptable to the Agent and sufficient to stay all such proceedings or (ii) if
no such bond is provided, will pay or cause to be paid each such tax,
assessment, charge, levy or claim. Notwithstanding anything in this Section
7.9(a) to the contrary, the Borrower shall not be required to cause the
Guarantor to pay any income taxes of the Guarantor in an amount not to exceed
$10,000,000.00 before the same shall become overdue; provided, however, that
the Borrower shall cause the Guarantor to immediately pay any and all such
taxes in the event that any lien or charge arises upon any of its property as a
result of such non-payment.

2. The Borrower shall cause the Property Owner to pay all
"Impositions" (as defined in the Mortgage), to pay all claims for labor,
material or supplies that if unpaid or unbonded might by law become a lien or
charge upon any of its property (including the Mortgaged Property), and to keep
the Mortgaged Property free from all "Liens" (as such term is defined in the
Mortgage) (other than the lien of the Mortgage and the Permitted Exceptions),
and shall in any event cause the prompt, full and unconditional discharge of
all Liens imposed upon the Mortgaged Property or any portion thereof within
thirty (30) Business Days after receiving written notice (whether from
Mortgagee, the Agent, the lienholder or any other Person) of the filing
thereof; subject in each case to the Property Owner's right to contest the same
as permitted in but subject to the conditions set forth in the Mortgage so long
as no Event of Default has occurred. In the event that the Property Owner
elects to commence any contest or similar proceeding with respect to any such
Impositions, Liens or other claims described herein, the Borrower shall provide
prompt written notice thereof to the Agent together with such evidence as the
Agent may reasonably require showing the Property Owner's satisfaction of the
requirements set forth in Section 8 of the Mortgage to the Property Owner
conducting such contest. Notwithstanding the foregoing, the Borrower shall
<PAGE>

cause the Property Owner promptly to pay any contested Imposition, Lien or
claim and the payment thereof shall not be deferred, if Mortgagee or the
Property Owner may be subject to civil or criminal damages as a result thereof.
If such action or proceeding is terminated or discontinued adversely to the
Property Owner, then the Property Owner shall deliver to the Agent reasonable
evidence of payment of such contested Imposition or Lien.

Section J. Inspection of Properties and Books. The Borrower shall
permit the Banks, through the Agent or any representative designated by the
Agent, at the Borrower's expense to visit and inspect the Mortgaged Property
during normal business hours at any time after reasonable advance notice, to
examine the books of account of the Borrower and the Property Owner (and to
make copies thereof and extracts therefrom) and to discuss the affairs,
finances and accounts of the Borrower and the Property Owner with, and to be
advised as to the same by, its members and officers, all at such reasonable
times and intervals as the Agent or any Bank may reasonably request. The Banks
shall use good faith efforts to coordinate such visits and inspections so as to
minimize the interference with and disruption to the Borrower's and the
Property Owner's normal business operations.

Section K. Compliance with Laws, Contracts, Licenses, and Permits. The
Borrower will comply with, and will cause the Property Owner and Managing
Member to comply with, (i) all applicable laws, ordinances, regulations and
requirements now or hereafter in effect wherever its business is conducted,
including all Environmental Laws in all material respects, (ii) the provisions
of its certificate of formation, operating agreement, corporate charter,
partnership agreement or declaration of trust, as the case may be, and other
charter documents and bylaws, (iii) the Mortgage Loan Documents, the Loan
Documents, the Leases and in all material respects all other mortgages,
indentures, contracts, agreements and instruments to which it is a party or by
which it or any of its properties may be bound, (iv) all applicable decrees,
orders, and judgments, and (v) all material licenses and permits required by
applicable laws and regulations for the conduct of its business or the
ownership, use or operation of its properties. Borrower covenants and agrees
to give the Agent prompt notice of any non-compliance with such laws,
ordinances, regulations or requirements and of any notice of non-compliance
therewith which it, Managing Member or Property Owner receives or any
threatened or pending proceedings in respect thereto or with respect to the
Mortgaged Property (including, without limitation, changes in zoning) of which
the Property Owner, Managing Member or the Borrower receives notice. If at any
time while any Loan or Note is outstanding, any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of any
government shall become necessary or required in order that the Borrower,
Managing Member or the Property Owner may fulfill any of its obligations
hereunder, the Borrower, Managing Member or the Property Owner will immediately
take or cause to be taken all steps necessary to obtain such authorization,
consent, approval, permit or license and furnish the Agent and the Banks with
evidence thereof. Notwithstanding the foregoing, the Property Owner shall have
the right to contest the applicability of any legal requirement subject to the
terms and conditions of Section 8(c) of the Mortgage so long as Property Owner
is in good faith, and by proper legal proceedings, diligently contesting the
application thereof, provided no Event of Default shall exist and be continuing
hereunder, and the Borrower provides evidence to the Agent that the Property
Owner is otherwise fully complying with each of the conditions set forth in
Section 8(c) of the Mortgage applicable to such contest. The Borrower shall
promptly notify the Agent of the commencement of any contest or similar
proceeding hereunder. Notwithstanding the foregoing, the Borrower shall cause
the Property Owner promptly to comply with any contested legal requirement, and
<PAGE>

compliance therewith shall not be deferred, if the Property Owner or the
Mortgagee may be subject to civil or criminal charges or damages a result
thereof. If such action or proceeding is terminated or discontinued adversely
to the Property Owner, then, the Borrower shall, upon written demand, deliver
to the Agent reasonable evidence of compliance by the Property Owner with such
contested legal requirement.

Section L. Further Assurances. The Borrower will cooperate with the
Agent and the Banks and execute such further instruments and documents as the
Banks or the Agent shall reasonably request to carry out to their reasonable
satisfaction the transactions contemplated by this Agreement and the other Loan
Documents (provided that the foregoing shall not expand the obligations or
reduce the rights of Borrower under the Loan Documents).

Section M. Management. Without the prior written consent of the Agent,
such consent not to be unreasonably withheld or delayed, the Management
Agreements shall not be modified or amended in any manner. The Borrower shall
not permit the Property Owner to enter into any other Management Agreement for
or otherwise manage the Mortgaged Property itself without the prior written
consent of the Agent, such consent not to be unreasonably withheld. Any
Management Agreement shall be in form and substance reasonably satisfactory to
the Agent. Notwithstanding the foregoing, any manager of the Mortgaged Property
shall satisfy any conditions or requirements contained in the Mortgage to such
entity acting as the manager of the Mortgaged Property. In no event shall any
management fee be paid to any manager that is affiliated with the Property
Owner, the Borrower, the Guarantor or any other Additional Pledgor (including
without limitation, Stahl Real Estate Co.) until any and all amounts then due
and payable to the Agent or the Banks pursuant to the Loan Documents have been
paid in full.

Section N. Leases of the Property. The Borrower will cause the Property
Owner to take or cause to be taken all reasonable steps within the power of the
Property Owner to market and lease the leasable area of the Mortgaged Property.
Any proposed standard form of lease (a "Standard Form Lease") to be used by the
Property Owner in connection with the Mortgaged Property shall be submitted to
and approved by the Agent in its reasonable discretion prior to its submission
to any proposed tenant, and the Borrower will cause the Property Owner to make
such amendments, modifications or additions thereto as may be reasonably
required by the Agent. As used herein, "Leasing Parameters" means leasing
parameters for the Mortgaged Property approved by the Agent from time to time
in its reasonable discretion. Leasing Parameters shall include, without
limitation, the minimum and maximum term, the minimum rent, tax and operating
stops, tenant standard improvements, tenant allowances and other tenant
inducements and leasing commissions, and shall be submitted to and approved by
the Agent prior to the commencement of each calendar year during the term of
the Loans in connection with the approval of the Budget. So long as any Lease
covers less than 85,000 square feet of the Mortgaged Property, is a bona fide
arm's length lease with a party unaffiliated with the Property Owner, the
Borrower, the Guarantor, the Managing Member or any Additional Pledgor, falls
within the Leasing Parameters and is on the Standard Form Lease (without
material modification or addition), the Property Owner shall be entitled to
enter into such Lease without any approval of such lease by the Agent. Each
other Lease shall be submitted to the Agent for approval, which approval shall
not be unreasonably withheld, conditioned or delayed. Any such Lease submitted
to the Agent for approval shall be deemed approved by the Agent unless the
Agent expressly disapproves the same by written notice delivered to the
Borrower (which shall state the reasons for disapproval) within ten (10)
Business Days after the date of the delivery of such Lease to the Agent for
<PAGE>

approval and all other information reasonably requested by the Agent in order
to make such determination. If any Lease submitted to the Agent for approval
covers more than 85,000 square feet of the Mortgaged Property, the request to
the Agent for approval must be accompanied by any financial statement or
statements obtained by the Borrower with respect to the proposed tenant. The
Agent shall have the right, and the Borrower hereby authorizes the Agent, to
communicate directly with any tenant under a Lease to verify any information
delivered to the Agent by the Borrower concerning such tenant or such tenant's
Lease.

Section O. Budgets.

1. The Borrower shall cause the Property Owner to manage, lease,
maintain, supervise, direct and operate the Mortgaged Property in accordance
with the Approved Budget. Without the prior written consent of the Agent, which
consent shall not be unreasonably withheld or delayed, and except for emergency
conditions as hereinafter permitted, the Borrower shall not permit the Property
Owner to use any income from the Mortgaged Property for any purpose other than
(i) the payment of expense items identified in the Approved Budget, (ii) the
funding of the accounts and sub-accounts pursuant to the Mortgage Cash
Collateral Agreement (to the extent such funding is in excess of the amounts
set forth in the Approved Budget), and (iii) the funding of any balance to the
Agent to be disbursed as provided in the Cash Collateral Agreement. The Agent
shall not be permitted to withhold its consent as to any line item or sum shown
in any proposed Budget that is required to be deposited with the Mortgagee
pursuant to the Mortgage Cash Collateral Agreement. Notwithstanding the
foregoing, the Borrower may permit the Property Owner without the prior written
consent of the Agent to make expenditures in excess of the amount set forth in
the applicable Approved Budget as a result in changes in occupancy of the
Mortgaged Property to which such Budget relates or increased cost of operations
to the extent required to maintain the same level of service and coverage for
the Mortgaged Property to which such Budgets relates, provided that such
expenditures shall not result in the amount of any category of an applicable
approved Budget being exceeded by ten percent (10%). After approval, the
Borrower may request that the Agent approve adjustments in the Budget, which
approval shall not be unreasonably withheld, conditioned or delayed. In the
event that the Agent does not notify the Borrower within ten (10) business days
that any revised Budget has been disapproved, said revised Budget shall be
deemed approved. Attached hereto as Exhibit C is the initial Approved Budget.

2. On or before November 15 of each year, the Borrower shall cause
the Property Owner to submit to the Agent for the Agent's approval a proposed
Budget for the Mortgaged Property for the next succeeding calendar year. Each
proposed Budget shall be submitted to the Agent together with a narrative
description of the assumptions upon which the proposed Budget is based and such
other information as the Agent may reasonably request. Upon the request of the
Agent, the Borrower shall cause the Property Owner and such other Persons as
the Agent may reasonably request to meet with the Agent to review and discuss
the proposed Budget and any proposed revisions thereto. Within thirty (30)
calendar days after the receipt by the Agent of the proposed Budget and all
supporting information reasonably required by the Agent, the Agent shall either
approve such proposed Budget or notify the Property Owner of its proposed
revisions. Upon approval by the Agent, such proposed Budget for each
subsequent period, together with any revisions approved by the Agent, shall be
deemed to constitute the "Approved Budget" for the period in question for all
purposes. If the Agent fails to approve a Budget for any period prior to the
commencement thereof, then, pending the final resolution of any dispute, the
Property Owner shall continue to manage, lease, maintain, supervise, direct and
<PAGE>

operate the Mortgaged Property in accordance with the applicable Budget
approved for the previous period until a new Budget is approved; provided,
however, that Property Owner shall be authorized during any interim period to
reasonably exceed the budgeted amounts for taxes, utilities, contract services
and pre-existing contractual obligations and personnel and insurance costs to
the extent required to maintain the same level of service and coverage provided
during the previous calendar year.

3. In the event that any emergency repairs are required or any
emergency conditions exist, the Borrower shall have the right to permit the
Property Owner to expend such monies as are reasonably necessary to make any
emergency repairs or correct such emergency conditions. The Borrower shall
cause the Property Owner to confer with the Agent as soon as practical after
the occurrence of such emergency and to furnish to the Agent a complete report
promptly thereafter. For all purposes herein, "emergency conditions" or
"emergency repairs" shall refer to repairs or conditions requiring corrective
acts or repair (i) immediately necessary for the preservation and safety of the
Mortgaged Property, (ii) to avoid the immediate suspension of utility or
similar services to the Mortgaged Property or (iii) because of danger to life
or property.

Section P. Preservation and Maintenance.

1. Borrower (i) shall not permit or commit waste, impairment, or
deterioration of the Mortgaged Property or permit Property Owner to abandon the
Mortgaged Property, (ii) shall cause Property Owner to restore or repair
promptly and in a good and workmanlike manner all or any part of the Mortgaged
Property in the event of any damage, injury or loss thereto, to the equivalent
of its condition prior to such damage, injury or loss, or such other condition
as the Agent may approve in writing, (iii) shall cause Property Owner to keep
the Mortgaged Property, including the Building and any fixtures, equipment,
machinery and personal property, in good order, repair and tenantable condition
(subject to ordinary wear and tear) and shall replace fixtures, equipment,
machinery and personal property on the Mortgaged Property when necessary to
keep such items in good order, repair, and tenantable condition, and (iv) shall
cause Property Owner to keep all trademarks, tradenames, servicemarks and
licenses and permits necessary for the use and occupancy of the Mortgaged
Property in good standing and in full force and effect. Neither the Borrower,
Property Owner nor any tenant or other Person shall remove, demolish or alter
any Building now existing or hereafter erected on the Mortgaged Property or any
other fixtures, equipment, machinery or personal property in or on the
Mortgaged Property except when incident to the replacement of fixtures,
equipment, machinery or other personal property with items of like kind and
value. The Borrower shall cause the Property Owner to comply with the asbestos
operations and maintenance program in effect as of the date hereof, and shall
not permit the Property Owner to discontinue or materially modify such program
without the Agent's prior written consent. In the event that the Property
Owner shall remove any asbestos or asbestos-containing materials after the date
hereof, such removal shall be performed in accordance with all applicable laws
and, upon the request of the Agent, the Borrower shall provide evidence of such
compliance to the Agent.

2. Provided that no Event of Default shall have occurred and be
continuing hereunder, the Borrower may permit the Property Owner to undertake
any alteration, improvement, demolition or removal of Mortgaged Property or any
portion thereof (an "Alteration") so long as such Alteration (i) is performed
strictly in compliance with the terms and conditions of the Mortgage and the
other Mortgage Loan Documents, (ii) is permitted by the Leases, (iii) shall not
<PAGE>

materially adversely effect the value of the Mortgaged Property taken as a
whole or materially reduce the income from the level available immediately
prior to commencement of such Alteration, (iv) shall not have a material
adverse effect on the ability of the Property Owner to perform its obligations
under the Mortgage Loan Documents and the Leases or of the Borrower to perform
its obligations under the Loan Documents, and (v) was approved as a part of the
current Approved Budget (or is otherwise permitted in Section 7.15) or is
required pursuant to the terms of the Mortgage Cash Collateral Agreement. Any
other Alteration shall require the prior written consent of the Agent, such
consent not to be unreasonably withheld or delayed. All work performed in
connection with any Alteration shall be performed in accordance with all
applicable laws. The Borrower shall cause the Property Owner to provide to the
Agent such evidence as the Agent may reasonably require to evidence the
Property Owner's compliance with the terms of the Mortgage and this Agreement
in connection with any Alteration.

Section Q. Use of Mortgaged Property. Unless required by applicable law
or unless the Agent has otherwise agreed in writing, the Borrower shall not
allow or permit the Property Owner to allow material changes in the nature of
the occupancy or use for which the Mortgaged Property was intended at the time
this Agreement was executed. The Borrower shall not initiate, permit to occur
or acquiesce in or permit the Property Owner to initiate, permit to occur or
acquiesce in a change in the zoning classification of the Mortgaged Property or
subject the Mortgaged Property to restrictive, negative or other covenants
without the Agent's written consent, which consent shall not be unreasonably
withheld or delayed. The Borrower shall cause the Property Owner to comply
with, observe and perform in all material respects all zoning and other laws
affecting the Mortgaged Property, all agreements and other covenants affecting
the Mortgaged Property (including without limitation the Mortgage Loan
Documents), and all licenses and permits affecting the Mortgaged Property.
Without limiting the foregoing, the Borrower shall cause the Property Owner to
take all actions as are necessary to cause the prompt distribution to Agent of
all "Excess Cash Flow" (as such term is defined in the Mortgage Cash
Collateral Agreement) to Agent as provided in the Mortgagee Cash Management
Agreement.

Section R. Curing of Misrepresentation. The Borrower covenants and
agrees that in the event that the Borrower obtains any knowledge that any
representation or warranty made by the Borrower, the Guarantor, the Managing
Member or any other Additional Pledgor in this Agreement or any of the other
Loan Documents or any acknowledgment delivered by any such of Persons to Agent
or the Banks in connection with the Loans shall be untrue or misleading, the
Borrower shall promptly notify the Agent in writing of the same and shall,
within thirty (30) days after learning such representation or warranty is
untrue or misleading, take such actions as are required to cause such warranty
or representation to be correct, which thirty (30) day period shall serve as a
cure period for such representation or warranty.

Section S. Property Owner to Remain a Single-Purpose Entity. The
Borrower shall cause the Property Owner to be and remain a "Single-Purpose
Entity" (as such term is defined in the Mortgage), shall cause the Property
Owner to do all things necessary to observe limited liability company
formalities and to preserve its existence, and will not permit the Property
Owner to amend, modify or otherwise change its operating agreement, articles of
incorporation, bylaws or other organizational documents.

Section T. Condominium. The Borrower hereby represents, warrants and
covenants that:
<PAGE>

1. The Condominium Documents and all of the easements and other
rights granted thereby are now valid and subsisting.

2. Borrower will cause the Property Owner to fully and faithfully
pay when due and payable the assessments, common charges and other charges
mentioned in and made payable by the Property Owner under the Condominium
Documents, and shall cause the Property Owner to fully and faithfully perform
all obligations on the part of the Property Owner to be performed under the
Condominium Documents in the time and manner therein prescribed.

3. Borrower shall cause the Property Owner to do all things
necessary to preserve and to keep unimpaired its rights, powers and privileges
under the Condominium Documents and (subject to the provisions of subsection
7.20(i) below) to prevent the termination or expiration of the Condominium
Documents, or the withdrawal of the Building from a condominium form of
ownership under the Condominium Act, to the end that the Property Owner may
enjoy all of the rights granted to it as a party to the Condominium Documents.

4. The Borrower will promptly notify Agent of any failure by the
Property Owner to comply with the Condominium Documents.

5. The Borrower will (i) promptly notify Agent of the receipt by
Borrower, the Managing Member or the Property Owner of any notice from the
Board of Managers or owner of any other unit of the Condominium, asserting or
claiming a default by the Property Owner under, or lack of compliance by the
Property Owner with, the Condominium Documents, (ii) promptly notify Agent of
the receipt by the Borrower, the Managing Member or the Property Owner of any
notice or request from the Board of Managers or owner of any unit of a
termination or purported termination of the Condominium Documents or of the
condominium or of or for the commencement or taking of or intent to commence to
take any action to terminate the Condominium or the Condominium Documents or to
withdraw the Building from the Condominium ownership pursuant to the
Condominium Act or to seek any action for partition of the Condominium,
(iii) promptly notify Agent of the receipt by Borrower, the Managing Member or
the Property Owner of any notice or request from the Board of Managers or owner
of any unit of a modification or change or proposed modification or change of
or to the Condominium Documents, and (iv) promptly cause a copy of each such
notice or request received by the Property Owner, the Managing Member or the
Borrower from the Board of Managers or any unit owner, to be delivered to
Agent. Borrower will promptly notify Agent of the institution by the Board of
Mangers or owner of any other unit or any other person of a proceeding to
partition the Condominium or withdraw same from condominium ownership pursuant
to the Condominium Act, and of the institution of any such partition or
withdrawal proceeding. The Borrower will promptly deliver to Agent a copy of
each notice, pleading, brief and preliminary, interim and final determination
or decision and other papers received by it in each such partition or
withdrawal proceeding.

6. Subject to the provisions of subsection 7.20(i) below, Borrower
will not, without the prior consent of Agent, allow or suffer the Property
Owner to wholly or partially terminate, modify, subordinate or surrender or
suffer or permit in whole or in part any termination, modification, surrender
or expiration of any of the Condominium Documents, or withdraw or cause or
permit the withdrawal of the Condominium by operation of law or otherwise from
condominium ownership pursuant to the Condominium Act, or allow or suffer the
Property Owner to commence or prosecute any action or proceeding to partition
the Condominium or cause or permit the Condominium to be partitioned pursuant
<PAGE>

to the Condominium Act or otherwise.

7. Borrower will, within 20 days after receipt of a demand from
Agent, obtain from the Board of Managers and deliver to Agent a duly signed and
acknowledged certificate certifying that the Condominium Documents are
unmodified and in full force and effect (or, if the same have been modified in
compliance with the Mortgage Loan Documents and this Agreement, that the
Condominium Documents are in full force and effect as so modified and that
there have been no other modifications, stating the dates to which the
assessments, common charges and other charges payable under the Condominium
Documents have been paid and stating whether to the certifying party's
knowledge the Property Owner is in compliance with the Condominium Documents
or, if not, specifying each default or failure of compliance of which the
certifying party has knowledge. Borrower will, promptly upon receipt thereof
by Borrower, the Managing Member or the Property Owner, furnish Agent with a
copy of all notices and statements, however characterized, issued by the Board
of Managers relating to the Condominium.

8. Borrower will not permit or suffer the Property Owner to
exercise any of the Property Owner's rights under the Condominium Documents,
or, to the extent not prohibited by applicable laws, vote at any meeting of the
Board of Mangers, in any way that is inconsistent with its duties or
obligations under the Mortgage Loan Documents or this Agreement.
Notwithstanding the foregoing, after the occurrence of an Event of Default
hereunder and for so long as such Event of Default is continuing, Borrower will
notify Agent of all meetings of the Board of Managers, at least five (5)
business days prior thereto, and, to the extent not prohibited by applicable
law, Borrower will cause the Property Owner to exercise all of its rights under
the Condominium Documents, and vote at all meetings of the Board of Managers,
in accordance with any instructions delivered by the Agent to the Borrower.

9. Notwithstanding anything contained in this Section 7.20 to the
contrary, Borrower may permit the Property Owner to terminate the Condominium
Documents and withdraw the Building from a condominium form of ownership,
provided that immediately upon the cessation of the condominium form of
ownership, fee simple title to the Building and the land described in the
Condominium Declaration shall vest in the Property Owner.

Section U. ERISA Compliances. The Borrower will not permit the present
value of all employee benefits vested in all Employee Benefit Plans,
Multiemployer Plans and Guaranteed Pension Plans maintained by the Borrower,
the Property Owner and any ERISA Affiliate thereof to exceed the present value
of the assets allocable to such vested benefits by an amount greater than
$500,000.00 in the aggregate. Neither the Borrower, the Property Owner nor any
ERISA Affiliate thereof will at any time permit any such Plan maintained by it
to engage in any "prohibited transaction" as such term is defined in Section
4975 of the Code or Section 406 of ERISA, incur any "accumulated funding
deficiency" as such term is defined in Section 302 of ERISA, whether or not
waived, or terminate any such Plan in any manner which could result in the
imposition of a lien on the property of the Borrower, the Property Owner, the
Managing Member or any Additional Pledgor pursuant to Section 4068 of ERISA.

Section VIII. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.

The Borrower covenants and agrees that, until all of the Obligations have
been paid and performed in full:

Section A. Covenants with Respect to Indebtedness, Operations,
<PAGE>

Fundamental Changes of the Borrower. The Borrower represents, warrants and
covenants as of the date hereof and until such time as the Obligations are paid
in full, that each Borrower and Managing Member:

1. does not own and will not own any encumbered asset other than,
as to the Borrower only, its interest as a member in the Property Owner (which
will only be encumbered by liens in favor of the Agent);

2. is not engaged and will not engage in any business other than
the ownership, operation and, as to the Borrower only, financing of its
interest as a member in the Property Owner;

3. does not and will not have any subsidiaries (whether the same
would constitute an entity that could be consolidated on the Borrower's or
Managing Member's financial statements or a minority interest) other than the
Property Owner;

4. will not enter into any contract or agreement with any member,
shareholder, principal or affiliate of the Borrower or Managing Member or any
affiliate of any such member, shareholder, principal or affiliate, except upon
terms and conditions that are intrinsically fair and substantially similar to
those that would be available on an arms-length basis with third parties other
than an affiliate;

5. has not incurred and will not incur any Indebtedness, other
than, as to the Borrower only, the Obligations, and other than current
liabilities of the Borrower and Managing Member incurred in the ordinary
course of business in connection with normal purchases of goods and services;
no other debt of Borrower may be secured (senior, subordinate or pari passu) by
any right or asset of the Borrower;

6. has not made and will not make any loans or advances to any
third party (including the Property Owner or any affiliate of the Borrower or
Managing Member or any member or shareholder of the Borrower or Managing
Member);

7. is and will remain solvent and pay its debts and liabilities
(including, without limitation, employment and overhead expenses) from its
assets as the same shall become due;

8. has done or caused to be done and will do all things necessary
to observe limited liability company, corporate and partnership formalities (as
applicable) and to preserve its existence, and will not, nor will any member or
shareholder thereof, amend, modify or otherwise change its operating agreement,
articles of incorporation, by-laws or other organizational documents in a
manner which adversely affects the Borrower's or Managing Member's or such
member's or shareholder's existence as a single purpose entity;

9. will conduct and operate its business as presently conducted and
operated;

10. will maintain books and records and bank accounts separate from
those of its affiliates, including its members and shareholders;

11. will be, and at all times will hold itself out to the public as,
a legal entity separate and distinct from any other entity (including any
affiliate thereof, including any member, shareholder or any affiliate of any
member of the Borrower, Managing Member or Guarantor) and shall maintain and
<PAGE>

use separate stationery, invoices and checks;

12. will file its own separate tax returns;

13. will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;

14. will not, nor shall any member, shareholder or affiliate, seek
the dissolution or winding up, in whole or in part, of the Borrower or Managing
Member;

15. will not enter into any transaction of merger, consolidation or
other business combination, or acquire by purchase or otherwise all or
substantially all of the business or assets of, or any stock or beneficial
ownership of, any entity;

16. will not commingle the funds and other assets of the Borrower or
Managing Member with those of any member, shareholder, any affiliate or any
other Person;

17. has and will maintain its assets in such a manner that it is not
costly or difficult to segregate, ascertain or identify its individual assets
from those of any affiliate or any other Person;

18. does not and will not hold itself out to be responsible for the
debts or obligations of any other Person;

19. shall comply with the provisions of its operating agreement,
articles of incorporation or bylaws or other organizational documents, as
applicable; and

20. shall be organized and conduct its business so that, and
otherwise cause, the assumptions of fact made with respect to the Borrower, the
Managing Member, the Guarantor, Holding Company Managing Member, the Property
Owner and 277 Park Avenue Finance Corp. in that certain opinion letter dated
the date hereof delivered by Latham & Watkins with respect to non-consolidation
issues, delivered in connection with the execution and delivery of the Loan
Documents shall be true and correct, in all material respects at all times.

Section B. Restrictions on Liens, Etc. The Borrower will not, and will
not permit Managing Member to, (a) create or incur or suffer to be created or
incurred or to exist any lien, security title, encumbrance, mortgage, pledge,
negative pledge, charge, restriction or other security interest of any kind
upon any of its property or assets of any character whether now owned or
hereafter acquired, or upon the income or profits therefrom; (b) transfer any
of its property or assets or the income or profits therefrom for the purpose of
subjecting the same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; (c) acquire, or
agree or have an option to acquire, any property or assets upon conditional
sale or other title retention or purchase money security agreement, device or
arrangement; (d) suffer to exist for a period of more than 30 days after the
same shall have been incurred any Indebtedness or claim or demand against it
that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be
given any priority whatsoever over its general creditors; (e) sell, assign,
pledge or otherwise transfer any accounts, contract rights, general
intangibles, chattel paper or instruments, with or without recourse; or (f)
incur or maintain any obligation to any holder of Indebtedness of the Borrower
<PAGE>

which prohibits the creation or maintenance of any lien securing the
Obligations.

Section C. Sale and Leaseback; Ground Lease. The Borrower will not
permit the Property Owner to enter into any arrangement, directly or
indirectly, whereby the Property Owner shall sell or transfer the Mortgaged
Property in order that then or thereafter the Property Owner or any affiliate
thereof shall lease back the Mortgaged Property. The Borrower will not permit
the Property Owner to enter into a ground lease or similar lease for the
Mortgaged Property.

Section D. Compliance with Environmental Laws.

1. The Borrower will not permit the Property Owner to do any of the
following: (i) use any of the Mortgaged Property or any portion thereof as a
facility for the handling, processing, storage or disposal of Hazardous
Substances, except for small quantities of Hazardous Substances used in the
ordinary course of business and in compliance with all applicable Environmental
Laws and the presence of asbestos or asbestos-containing materials located in
the Building as of the date hereof which are to be maintained, contained and
removed in accordance with the terms of the Mortgage Loan Documents and this
Agreement, (ii) cause or permit to be located on the Mortgaged Property any
underground tank or other underground storage receptacle for Hazardous
Substances except in full compliance with Environmental Laws, (iii) generate
any Hazardous Substances on the Mortgaged Property, (iv) conduct any activity
at the Mortgaged Property or use the Mortgaged Property in any manner so as to
cause a Release of Hazardous Substances on, upon or into the Mortgaged Property
or any surrounding properties or any threatened Release of Hazardous Substances
which might give rise to liability under any Environmental Law, or (v) directly
or indirectly transport or arrange for the transport of any Hazardous
Substances (except in compliance with all Environmental Laws).

2. The Borrower shall, if any Release or disposal of Hazardous
Substances shall occur or shall have occurred on the Mortgaged Property
(including without limitation any such Release or disposal occurring prior to
the acquisition of such Mortgaged Property by the Property Owner), cause the
Property Owner to cause the prompt containment and removal of such Hazardous
Substances and remediation of the Mortgaged Property in full compliance with
all applicable laws and regulations and to the reasonable satisfaction of the
Majority Banks; provided, that the Borrower shall be deemed to be in compliance
with Environmental Laws for the purpose of this subparagraph (b) so long as the
Property Owner or a responsible third party with sufficient financial resources
is taking reasonable action to remediate or manage any event of noncompliance
to the satisfaction of the Majority Banks and no action shall have been
commenced by any enforcement agency. The Majority Banks may engage their own
Environmental Engineer to review the environmental assessments and the
Borrower's compliance with the covenants contained herein.

3. At any time after an Event of Default shall have occurred
hereunder, or, whether or not an Event of Default shall have occurred, at any
time that the Agent or the Majority Banks shall have reasonable grounds to
believe that a Release or threatened Release of Hazardous Substances may have
occurred, relating to the Mortgaged Property, or that the Mortgaged Property is
not in compliance with the Environmental Laws, the Agent may at its election
(and will at the request of the Majority Banks) obtain such environmental
assessments of the Mortgaged Property prepared by an Environmental Engineer as
may be necessary or advisable for the purpose of evaluating or confirming (i)
whether any Hazardous Substances are present in the soil or water at or
<PAGE>

adjacent to the Mortgaged Property and (ii) whether the use and operation of
the Mortgaged Property comply with all Environmental Laws. Environmental
assessments may include detailed visual inspections of the Mortgaged Property
including, without limitation, any and all storage areas, storage tanks,
drains, dry wells and leaching areas, and the taking of soil samples, as well
as such other investigations or analyses as are necessary or appropriate for a
complete determination of the compliance of the Mortgaged Property and the use
and operation thereof with all applicable Environmental Laws. All such
environmental assessments shall be at the sole cost and expense of the
Borrower.

Section E. Distributions. In the event that an Event of Default shall
have occurred and be continuing, at the option of the Majority Banks and
following receipt of written notice of such election, the Borrower shall make
no, and shall not permit the Managing Member to make any, Distributions
whatsoever, directly or indirectly, other than Distributions that are paid to
the Agent pursuant to the Cash Management Agreement.

Section F. Restriction on Leases. Except as provided in Section 7.14,
the Borrower will not permit the Property Owner to become a party to, or agree
to become a party to, any Lease without the prior approval of the Agent, which
approval shall not be unreasonably withheld, conditioned or delayed. The
Borrower shall not permit the Property Owner to collect any rents, issues,
profits, revenues, income or other benefits payable under any of the Leases
more than one (1) month in advance (provided that the foregoing shall not
prohibit the collection of security deposits). The Borrower will not permit
the Property Owner to amend, supplement or otherwise modify, or terminate or
cancel, or accept the surrender of, or consent to the assignment or subletting
of, or grant any concessions to or waive the performance of any obligations of
any tenant under, any Lease, without the prior approval of the Agent.
Notwithstanding anything herein to the contrary, (a) the Property Owner may,
without the prior written consent of the Agent, terminate the Lease of any
tenant of the Mortgaged Property which is not affiliated with the Property
Owner, the Borrower, the Guarantor, the Managing Member or any Additional
Pledgor and which provides for the payment of annual base or minimum rent of
less than $1,000,000.00 and which is then in default, provided that such
determination is made by the Property Owner in the normal course of business
and is consistent with sound and customary leasing and management practices for
similar properties, such termination shall not permit any other tenant or
occupant of the Mortgaged Property to terminate its Lease or cease the
operation of business from the Mortgaged Property or reduce or abate rent, and
such action shall not cause (with the passage of time or otherwise) a default
under the Loan Documents, and (b) the Property Owner may, without the prior
written consent of the Agent, supplement, modify (including, without
limitation, deferring or adjusting rent) and/or consent to an assignment or
sublease with respect to the Lease of any tenant of the Mortgaged Property
which is not affiliated with the Property Owner, the Borrower, the Guarantor,
the Managing Member or any Additional Pledgor, provided that (i) the floor area
of the Lease involved is less than 50,000 rentable square feet, (ii) the
Property Owner may not, in any 36 month period, amend, supplement or modify
such Leases, or consent to an assignment or sublease with respect to such
Leases covering more than 200,000 rentable square feet in the aggregate,
(iii) the maximum aggregate amount of rent which at any time may be deferred or
adjusted pursuant to this provision with respect to the Mortgaged Property
shall not exceed $1,000,000.00, (iv) such action taken by the Property Owner is
taken in the normal course of business and is consistent with sound and
customary leasing and management practices for similar properties, and (v) such
action shall not cause (with the passage of time or otherwise) a default under
<PAGE>

the Loan Documents. In the event that the consent of the Agent is required
under this Section 8.6, the Agent shall be deemed to have consented unless the
Agent notifies the Borrower that such consent has not been granted within ten
(10) Business Days after the receipt by the Agent of all documents and informa-
tion reasonably requested by the Agent in order to make such determination.
The Borrower shall promptly furnish to the Agent copies of any such termination
agreements or lease amendments which are permitted to be made hereunder without
the consent of the Agent. The Borrower will not, directly or indirectly, cause
or permit to exist, or allow the Property Owner to cause or permit to exist,
any condition which would result in the termination or cancellation of, or
which would relieve the performance of any obligations of any tenant under, any
Lease.

Section G. Additional Restrictions Concerning the Mortgaged Property.

1. Except as expressly provided in Section 7.14, Section 8.6, the
Mortgage and any assignment of leases executed by the Property Owner in favor
of the Mortgagee in connection with the Mortgage Loan and for Permitted
Transfers, the Borrower will not, without the prior written consent of the
Agent in each instance, permit the Property Owner, directly or indirectly to:
(i) sell, convey, assign, transfer, contribute, lease, option, mortgage,
pledge, encumber, charge, hypothecate or dispose of the Mortgaged Property, or
any part thereof or interest therein; or any income or profits therefrom, or
any other accounts, contract rights, general intangibles, instruments, chattel
paper or other assets or claims, whether now owned or hereafter acquired; or
(ii) create or suffer to be created or to exist any lien, encumbrance, security
interest, mortgage, pledge, restriction, attachment or other charge of any kind
upon, or any levy, seizure, attachment or foreclosure of, the Mortgaged
Property, or any part thereof or interest therein, or any income or profit
therefrom, or any other accounts, contract rights, general intangibles,
instruments, chattel paper or other assets or claims, whether now owned or
hereafter acquired, except for Permitted Liens. For the purposes of this
Section , the sale, conveyance, transfer, disposition, alienation,
hypothecation or encumbering of all or any portion of the interest of Borrower
or Managing Member in the Property Owner, or the creation or addition of a new
member or other owner of any interest in the Property Owner, shall be deemed to
be a transfer of an interest in the Property.

2. The Borrower will not permit the Property Owner to, create,
incur, assume, guarantee or be or remain liable, contingently or otherwise,
with respect to any Indebtedness other than:

(i) Indebtedness arising under the Mortgage Loan Documents (it
being acknowledged and agreed that any refinancing of such
Indebtedness in connection with an assignment and restatement of the
Mortgage Loan Documents shall not constitute permitted Indebtedness);

(ii) current liabilities of the Property Owner permitted
pursuant to the Approved Budget incurred in the ordinary course of
business but not incurred through (A) the borrowing of money, or (B) the
obtaining of credit except for credit on an open account basis customarily
extended and in fact extended in connection with normal purchases of goods
and services and leases of equipment in the ordinary course of business;
and

(iii) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be
<PAGE>

required to be made in accordance with the provisions of Section 7.9.

Section H. Mortgage Loan Documents. The Borrower agrees to cause the
Property Owner to deliver immediately to the Agent copies of any notices,
certificates, requests, demands or other instruments furnished or delivered to
or by the Property Owner under or in any way relating to the Mortgage Loan
Documents. The Borrower shall not permit the Property Owner to seek nor to
obtain additional advances from the holder or holders of the Mortgage Loan
Documents (provided that the foregoing shall not be deemed violated in the
event that the holder or holders of the Mortgage Loan Documents shall make a
protective advance or advances for the payment of taxes, insurance premiums or
to protect the Mortgaged Property pursuant to the terms of the Mortgage,
provided that such advance may otherwise constitute a Default or Event of
Default hereunder to the extent that such protected advance is made by the
Mortgagee as a result of a Default or Event of Default under the Mortgage Loan
Documents), or to modify, amend, terminate, extend or seek a consent or waiver
under the Mortgage Loan Documents in any respect without the prior written
approval of the Agent.

Section I. Permitted Transfer. Notwithstanding anything herein or in the
other Loan Documents to the contrary, the Banks shall not withhold their
consent to a transfer (the "Permitted Transfer") by the Guarantor of its
interest in the Managing Member, Co-Managing Member, Holding Company and
Holding Company Managing Member provided that each of the following conditions
is satisfied: (a) no Default or Event of Default shall have occurred, nor
shall such transfer cause a Default or Event of Default; (b) such transfer
shall be a transfer by the Guarantor of all of its interest in each of the
foregoing entities, and such transfer shall be to a single trust controlled by
Stanley Stahl in the event that Stanley Stahl is alive and not otherwise
incapacitated, or in the event of the death or mental incapacity of Stanley
Stahl, then to a trust controlled by Gregg Wolpert and/or Richard Czaja
(provided that in the event that the Guarantor for compelling tax or liability
reasons relating to the current ownership structure of such interests desires
to transfer such interests to another entity, the Agent shall not unreasonably
withhold its consent to a transfer to another form of entity provided that the
same shall not cause a default or event of default under the Mortgage Loan
Documents or a Default or Event of Default, and the Borrower shall cause such
Persons as Agent may require to execute such amendments to the Loan Documents
or provide such additional pledges or assignments as the Agent may require in
order to provide the Agent with the same rights, pledges and security afforded
under the Loan Documents); (c) such transferee shall execute and deliver an
assumption agreement in form and substance satisfactory to the Agent assuming
the obligations of the Guarantor under the Loan Documents; (d) Guarantor shall
deliver to the Agent evidence satisfactory to the Agent that such transfer
shall not, or will not with the giving of notice or the passage of time,
constitute a default under the Mortgage Loan Documents or result in the
withdrawal, qualification or downgrading of the current ratings assigned to any
certificates relating to the Mortgage Loan (in the event that the same has been
securitized), to the extent the same is a condition to such transfer pursuant
to the Mortgage Loan Documents; and (e) the Agent receives and approves (such
approval not to be unreasonably withheld) certified copies of the
organizational documents and authorizing resolutions for such transferee and
such opinions of counsel to such transferee as may be reasonably required by
the Agent. From and after any such Permitted Transfer, such transferee shall
constitute an "Additional Pledgor" under this Agreement.

Section J. Managing Member.
<PAGE>

1. Except for a Permitted Transfer, the Borrower shall not permit
the Managing Member, without the prior written consent of Agent, which consent
may be withheld by Agent in its sole and absolute discretion, directly,
indirectly or by operation of law, to sell, transfer, assign, dispose of,
pledge, convey, option, mortgage, hypothecate or encumber any of Managing
Member's interest, rights or claims in and to the Property Owner (including
without limitation any right to receive distributions from the Property Owner),
to withdraw from the Property Owner or to seek a partition of the assets of the
Property Owner.

2. (i) The Borrower shall not permit Managing Member, without the
prior written consent of Agent, which consent may be withheld by Agent in its
sole and absolute discretion, to take any action which could result in the
sale, reduction, cancellation, dilution, diminution or conversion of any
interest of Managing Member in the Property Owner, or omit to take any action
necessary to prevent any such sale, cancellation, reduction, dilution,
diminution or conversion.

Section IX. CLOSING CONDITIONS.

The obligations of the Agent and the Banks to make the Loans shall be
subject to the satisfaction of the following conditions precedent on or prior
to April 25, 1997.

Section A. Loan Documents. Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto, shall be in full
force and effect and shall be in form and substance satisfactory to the
Majority Banks. The Agent shall have received a fully executed copy of each
such document, except that each Bank shall have received the fully executed
counterpart of its Note.

Section B. Certified Copies of Organizational Documents. The Agent
shall have received from the Borrower a copy, certified as true and complete as
of a recent date by the appropriate officer of each State in which the
Borrower, the Managing Member, the Property Owner, and each Additional Pledgor,
as applicable, is organized and in which the Mortgaged Property is located, and
a duly authorized officer of such Person, of the certificate of formation,
operating agreement, corporate charter or other organizational documents of
such Person, and their qualifications to do business, as applicable, as in
effect on such date of certification.

Section C. Bylaws; Resolutions. All action on the part of the Borrower
and the Additional Pledgors, as applicable, necessary for the valid execution,
delivery and performance by such Person of this Agreement and the other Loan
Documents to which such Person is or is to become a party shall have been duly
and effectively taken, and evidence thereof satisfactory to the Agent shall
have been provided to the Agent. The Agent shall have received from the
Borrower and the Additional Pledgors true copies of its operating agreement or
bylaws, as applicable, and the resolutions adopted by its members or board of
directors authorizing the transactions described herein, certified by its
managing member or secretary as of a recent date to be true and complete. The
Agent shall have received from the Borrower true copies of the bylaws of
Managing Member certified by its secretary as of a recent date to be true and
complete.

Section D. Incumbency Certificate; Authorized Signers. The Agent shall
have received from the Borrower and the Additional Pledgors an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized officer
<PAGE>

of such Person and giving the name and bearing a specimen signature of each
individual who shall be authorized to sign, in the name and on behalf of such
Person, each of the Loan Documents to which such Person is or is to become a
party.

Section E. Opinion of Counsel. The Agent shall have received a
favorable opinion or opinions addressed to the Banks and the Agent and dated as
of the Closing Date, in form and substance satisfactory to the Banks and the
Agent, from counsel of the Borrower, the Guarantor and the Additional Pledgors,
as to such matters as the Agent shall reasonably request.

Section F. Appraisal. The Agent shall have received an appraisal of the
Mortgaged Property in form and substance satisfactory to the Majority Banks.

Section G. Environmental Reports. The Agent shall have received
environmental site assessment reports for the Mortgaged Property prepared by an
Environmental Engineer no more than three months prior to the Closing Date
(unless otherwise approved by the Majority Banks), which indicate the condition
of the Mortgaged Property and the Building and which set forth no
qualifications except those that are acceptable to the Majority Banks in their
sole and absolute discretion, and disclosing that the Mortgaged Property and
the Building is free of oil, underground storage tanks, asbestos or asbestos
containing material, lead paint and other Hazardous Substances (except to the
extent acceptable to the Majority Banks in their sole and absolute discretion),
and which reports are otherwise in form and substance satisfactory to the
Agent.

Section H. Insurance. The Agent shall have received duplicate originals
or certified copies of all policies of insurance required by this Agreement.

Section I. Performance; No Default. The Borrower shall have performed
and complied with all terms and conditions herein required to be performed or
complied with by it on or prior to the Closing Date, and on the Closing Date
there shall exist no Default or Event of Default.

Section J. Representations and Warranties. The representations and
warranties made by the Borrower, the Guarantor and the Additional Pledgors in
the Loan Documents or otherwise made by or on behalf of the Borrower, Managing
Member, the Property Owner, the Guarantor and the other Additional Pledgors in
connection therewith or after the date thereof shall have been true and correct
in all respects when made and shall also be true and correct in all respects on
the Closing Date.

Section K. Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be reasonably satisfactory to the Agent and the Agent's Special
Counsel in form and substance, and the Agent shall have received all
information and such counterpart originals or certified copies of such
documents and such other certificates, opinions or documents as the Agent and
the Agent's Special Counsel may reasonably require.

Section L. Mortgage Loan. The Agent shall have received evidence
satisfactory to the Agent that the transactions contemplated by the Mortgage
Loan Documents have closed and that the Property Owner has received gross
proceeds therefrom in the amount of $345,000,000.00. In addition, the Agent
shall have received fully executed copies of each of the Mortgage Loan
Documents.
<PAGE>

Section M. Due Diligence. The Banks shall have completed and found
satisfactory their due diligence regarding the Borrower, Managing Member, the
Guarantor, the Additional Pledgors, the Property Owner, the Mortgaged Property
and the Collateral.

Section N. Other Documents. To the extent requested by the Agent, the
Agent shall have received executed copies of all material agreements of any
nature whatsoever to which the Borrower or the Property Owner is a party
affecting or relating to the use, operation, development, construction or
management of the Mortgaged Property.

Section O. No Condemnation/Taking. The Agent shall have received
written confirmation from the Borrower that no condemnation proceedings are
pending or to the Borrower's knowledge threatened against the Mortgaged
Property or, if any such proceedings are pending or threatened, identifying the
same and the Agent shall have determined that none of such proceedings is or
will be material to the Mortgaged Property.

Section P. Other. The Agent shall have reviewed such other documents,
instruments, certificates, opinions, assurances, consents and approvals as the
Agent or the Agent's Special Counsel may reasonably have requested.

Section X. EVENTS OF DEFAULT; ACCELERATION; ETC.

Section A. Events of Default and Acceleration. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults")
shall occur:

1. the Borrower shall fail to pay any principal of the Loans when
the same shall become due and payable, whether at the stated date of maturity
or any accelerated date of maturity or at any other date fixed for payment;

2. the Borrower shall fail to pay any interest on the Loans or any
other sums due hereunder or under any of the other Loan Documents, when the
same shall become due and payable, whether at the stated date of maturity or
any accelerated date of maturity or at any other date fixed for payment;

3. the Borrower, Managing Member, the Property Owner, any
Additional Pledgor or any other Person acting on behalf of any of them shall
cause less than all of the Excess Cash Flow to be deposited with the Agent as
and when provided in the Cash Collateral Agreement,

4. any of the Borrower, Managing Member, the Property Owner, the
Guarantor or the other Additional Pledgors shall fail to perform any other
term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified above in this Section 10);

5. any representation or warranty made by the Borrower, Managing
Member, the Property Owner, the Guarantor, the other Additional Pledgors,
Richard F. Czaja or Gregg S. Wolpert in this Agreement or any other Loan
Document, or in any report, certificate, financial statement, or in any other
document or instrument delivered pursuant to or in connection with this
Agreement, any of the other Loan Documents or otherwise made in connection with
the transactions contemplated hereby, or any of such Person's respective
members, principals, directors, officers, or partners, or any agent, employee
or other person authorized or apparently authorized to make statements or
representations on behalf of any such Person to the extent of statements and
<PAGE>

representations made to FNBB and Wellsford on their tour of the Mortgaged
Property on or about February 10, 1997, shall prove to have been false or
misleading in any respect upon the date when made or deemed to have been made
or repeated, subject to the provisions of Section 7.18 hereof.

6. any of the Borrower, Managing Member, the Property Owner, the
Guarantor or the other Additional Pledgors shall fail to pay at maturity, or
within any applicable period of grace, any obligation for borrowed money or
credit received or other Indebtedness in an amount individually or in the
aggregate in excess of $500,000.00 (or as to Guarantor, involving a recourse
obligation individually or in the aggregate in excess of $80,000,000.00), or
fail to observe or perform any term, covenant or agreement contained in any
agreement by which it is bound (including without limitation the Mortgage Loan
Documents), evidencing or securing any such borrowed money or credit received
or other Indebtedness in an amount individually or in the aggregate in excess
of $500,000.00 (or as to Guarantor, involving a recourse obligation
individually or in the aggregate in excess of $80,000,000.00) for such period
of time as would permit (assuming the giving of appropriate notice if required)
the holder or holders thereof or of any obligations issued thereunder to
accelerate the maturity thereof;

7. any of the Borrower, Managing Member, the Property Owner, the
Guarantor or the other Additional Pledgors (i) shall make an assignment for the
benefit of creditors, or admit in writing its general inability to pay or
generally fail to pay its debts as they mature or become due, or shall petition
or apply for the appointment of a trustee or other custodian, liquidator or
receiver of any such Person or of any substantial part of the assets of any
thereof, (ii) shall commence any case or other proceeding relating to any such
Person under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or (iii) shall take any action to
authorize or in furtherance of any of the foregoing;

8. a petition or application shall be filed for the appointment of
a trustee or other custodian, liquidator or receiver of any of the Borrower,
Managing Member, the Property Owner, the Guarantor or the other Additional
Pledgors or any substantial part of the assets of any thereof, or a case or
other proceeding shall be commenced against any such Person under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or hereafter
in effect, and any such Person shall indicate its approval thereof, consent
thereto or acquiescence therein or such petition, application, case or
proceeding shall not have been dismissed within 120 days following the filing
or commencement thereof;

9. a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating any of the Borrower, Managing
Member, the Property Owner, the Guarantor or the Additional Pledgors bankrupt
or insolvent, or a decree or order for relief is entered in respect of any such
Person, in an involuntary case under federal bankruptcy laws as now or
hereafter constituted and, as to the Guarantor and the Property Owner only, any
decree or order appointing any such trustee, custodian, liquidator or receiver
as a result of an ex parte hearing shall not be vacated or reversed within
thirty (30) days of the entry of such decree or order (it being acknowledged
that such cure period shall not apply to the Borrower, the Managing Member or
any other Additional Pledgor other than Guarantor and shall not extend any cure
period that may have been available under Section 10.1(h) or be applicable in
the event that the provisions of Section 10.1(h) were applicable);
<PAGE>

10. there shall remain in force, undischarged, unsatisfied and
unstayed, for more than 60 days, whether or not consecutive, any uninsured
final judgment against any of the Borrower, Managing Member, the Property
Owner, the Guarantor or the other Additional Pledgors that, with other
outstanding uninsured final judgments, undischarged (and not bonded), against
such Persons exceeds in the aggregate $500,000.00 as to the Borrower, Managing
Member, or any Additional Pledgor other than Guarantor, $10,000,000.00 as to
the Property Owner, or $80,000,000.00 as to Guarantor (provided that in any
event such judgment shall be sooner removed prior to any foreclosure, levy or
other sale pursuant thereto);

11. if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof or
with the express prior written agreement, consent or approval of the Banks, or
any action at law, suit in equity or other legal proceeding to cancel, revoke
or rescind any of the Loan Documents shall be commenced by or on behalf of any
of the Borrower, the Property Owner, the Guarantor or the other Additional
Pledgors or any of their respective holders of Voting Interests, or any court
or any other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment, order,
decree or ruling to the effect that, any one or more of the Loan Documents is
illegal, invalid or unenforceable in accordance with the terms thereof, and in
each case, such Loan Document is not replaced within five (5) Business Days by
the parties thereto with a document providing comparable warranties,
representations, covenants, rights, remedies and protections as determined by
the Agent;

12. any dissolution, termination, partial or complete liquidation,
merger or consolidation of any of the Borrower, Managing Member, the Property
Owner, the Guarantor or the other Additional Pledgors or any sale, transfer or
other disposition of the assets of any of the Borrower, Managing Member, the
Property Owner, the Guarantor or the Additional Pledgors other than as
permitted under the terms of this Agreement or the other Loan Documents;

13. any suit or proceeding shall be filed against the Borrower,
Managing Member, the Property Owner, the Guarantor, the other Additional
Pledgors, the Mortgaged Property or the Collateral which in the good faith
business judgment of the Majority Banks after giving consideration to the
likelihood of success of such suit or proceeding and the availability of
insurance to cover any judgment with respect thereto and based on the
information available to them, if adversely determined, would have a materially
adverse affect on the ability of the Property Owner to perform each and every
one of its obligations under and by virtue of the Mortgage Loan Documents or
Borrower, the Guarantor or the other Additional Pledgors to perform each and
every one of their respective obligations under and by virtue of the Loan
Documents, and such suit or proceeding shall not have been dismissed within 120
days following receipt of written notice of such determination from the Agent;

14. the Borrower, Managing Member, the Property Owner, the Guarantor
or any Additional Pledgor shall be indicted for a federal crime, a punishment
for which could include the forfeiture of any assets of such Person; provided,
however, that with respect to the Guarantor only, the foregoing shall be an
Event of Default only if the forfeiture of such assets would in the good faith
business judgment of the Agent likely reduce the net worth of the Guarantor (as
determined in accordance with the terms of the Guaranty) below $160,000,000.00;

15. with respect to any Guaranteed Pension Plan, an ERISA Reportable
<PAGE>

Event shall have occurred and the Majority Banks shall have determined in their
reasonable discretion that such event reasonably could be expected to result in
liability of any of the Borrower, Managing Member, the Property Owner, the
Guarantor or the Additional Pledgors to the PBGC or such Guaranteed Pension
Plan in an aggregate amount exceeding $1,000,000 and such event in the
circumstances occurring reasonably could constitute grounds for the termination
of such Guaranteed Pension Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such
Guaranteed Pension Plan; or a trustee shall have been appointed by the United
States District Court to administer such Plan; or the PBGC shall have
instituted proceedings to terminate such Guaranteed Pension Plan;

16. the Guarantor denies that the Guarantor has any liability or
obligations under the Guaranty, or shall notify the Agent or any Bank of the
Guarantor's intention to attempt to cancel or terminate the Guaranty, or shall
fail to observe or comply with any term, covenant, condition or agreement under
the Guaranty (after the expiration of any applicable notice and cure period) or
any "Triggering Event" (as defined in the Guaranty) shall occur;

17. the death or mental incapacity of the Guarantor;

18. the failure of the Property Owner to deliver a Refinance
Commitment on or before November 1, 2006, or the commencement of a "Curtailment
Period" (as defined in the Mortgage Cash Collateral Agreement); or

19. any warranty or representation of the Property Owner or the
Managing Member in any acknowledgment delivered to the Agent in connection with
the Loans shall prove to have been false or misleading in any respect upon the
date when made, subject to the provisions of Section 7.18 hereof, or the
Property Owner or the Managing Member shall fail to perform any term, covenant
or agreement contained in any such acknowledgment; or

20. any Event of Default as defined in any of the other Loan
Documents, shall occur and be continuing;

then, and in any such event, but subject to the terms of Section 10.1A, the
Agent may, and upon the request of the Majority Banks shall, by notice in
writing to the Borrower declare all amounts owing with respect to this
Agreement, the Notes and the other Loan Documents to be, and they shall
thereupon forthwith become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrower; provided that in the event of any Event of Default
specified in Section 10.1(g), Section 10.1(h) or Section 10.1(i), all such
amounts shall become immediately due and payable automatically and without any
requirement of notice from any of the Banks or the Agent.

Section 10.l(1) Limitation of Cure Periods.

(a) Notwithstanding anything contained in Section 10.1 to the
contrary, (i) no Event of Default shall exist hereunder upon the occurrence of
any failure described in Section 10.1(a) or Section 10.1(b) in the event that
the Borrower cures such default within five (5) days following receipt of
written notice of such default, provided, however, that the Borrower shall not
be entitled to receive more than two (2) notices in the aggregate pursuant to
this clause (i) in any period of 365 days ending on the date of any such
occurrence of default, and provided further that no such cure period shall
apply to any payments due upon the maturity of the Notes, and (ii) no Event of
Default shall exist hereunder upon the occurrence of any failure described in
<PAGE>

Section 10.1(d) in the event that the Borrower cure such default with in thirty
(30) days following receipt of written notice of such default (provided,
however, that if such Default is not reasonably susceptible of being cured with
diligence within said thirty (30) day period, the same shall not constitute an
Event of Default in the event that the Borrower shall commence such cure
promptly within such thirty (30) day period and thereafter diligently and
continuously pursue such cure, provided further that in no event shall such
additional period exceed sixty (60) days, and provided further, that with
respect to any violations of applicable building codes, such cure period may be
extended for an additional period not to exceed ninety (90) days (for a total
cure period of 180 days) so long as the Borrower diligently and continuously
pursues such cure and provided that the Property Owner shall be permitted such
additional cure period pursuant to the Mortgage Loan Documents), provided that
the provisions of this clause (ii) shall not pertain to defaults consisting of
a failure to provide insurance as required by Section 7.7, to any default
consisting of a failure to comply with Section 7.7(c), Section 7.8, Section
7.15, Section 8.1, Section 8.2, Section 8.5, Section 8.7, Section 8.8 or
Section 10.3, or to any default excluded from any provision of cure of defaults
contained in any other of the Loan Documents.

(b) Notwithstanding anything in this Agreement or any other Loan
Document to the contrary, any reference in this Agreement or any other Loan
Document to "the continuance of a default" or "the continuance of an Event of
Default" or any similar phrase shall not create or be deemed to create any
right on the part of Borrower or any other party to cure any default following
the expiration of any applicable grace or notice and cure period.

(c) Notwithstanding anything contained herein to the contrary, the
occurrence of any of the events described in Section 10.1(q) shall not
constitute an Event of Default hereunder so long as within twelve (12) months
from the date of such death or mental incapacitation (and in any event prior to
the distribution of any assets from Guarantor's estate) (i) the Borrower shall
establish to the satisfaction of the Agent that the value of the Mortgaged
Property, the Collateral and the assets of Guarantor pledged or negatively
pledged to the Agent pursuant to the Guaranty will not be adversely affected by
such death or mental incapacitation, (ii) with respect to a death only, all of
the material assets of the Guarantor (including, without limitation, the
"Protected Apple Stock" or the "Replacement Assets" (as such terms are defined
in the Guaranty), as applicable) shall have been transferred to a trust
pursuant to a Permitted Transfer (or in the event that a transfer pursuant to
Section 8.9 shall have previously occurred, Guarantor's assets shall be
transferred to the same trust or other entity that has been approved by the
Agent), and the requirements in Section 8.9 to a Permitted Transfer shall have
been satisfied, and (iv) such entity shall thereafter be the "Guarantor" under
the Loan Documents.

Section B. Remedies.

1. In case any one or more of the Events of Default shall have
occurred and be continuing, and whether or not the Banks shall have accelerated
the maturity of the Loans pursuant to Section 10.1, the Agent on behalf of the
Banks, may, with the consent of the Majority Banks but not otherwise, proceed
to protect and enforce their rights and remedies under this Agreement, the
Notes or any of the other Loan Documents by suit in equity, action at law or
other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Agreement and the other Loan Documents
or any instrument pursuant to which the Obligations are evidenced, including to
the full extent permitted by applicable law the obtaining of the ex parte
<PAGE>

appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right. No remedy herein conferred upon the Agent or the
holder of any Note is intended to be exclusive of any other remedy and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or any other provision of law. In the event that all or any portion of the
Obligations is collected by or through an attorney-at-law, the Borrower shall
pay all costs of collection including, but not limited to, reasonable
attorney's fees.

2. Upon the occurrence and during the continuance of any Event of
Default, the Agent may direct the Borrower to, and the Borrower shall cause the
Property Owner to, replace the existing property manager and leasing agent, for
the Mortgaged Property with a property manager and leasing agent approved by
the Agent, subject to any conditions in the Mortgage to the qualifications of
such manager and leasing agent. Upon the occurrence and during the continuance
of an Event of Default, the Agent may direct the Borrower to, and the Borrower
shall, cause Co-Managing Member to become the sole managing member of the
Property Owner. The Borrower hereby irrevocably constitutes and appoints the
Agent its true and lawful attorney-in-fact, with full power of substitution, to
execute, acknowledge and deliver any instruments and to do and perform any acts
which are referred to in this Section 10.2(b), in the name and on behalf of the
Borrower. The power vested in such attorney-in-fact is, and shall be deemed to
be, coupled with an interest and irrevocable.

3. Upon the demand of the Agent following the occurrence of an
Event of Default, the Borrower shall deliver to the Agent or the Agent's
designee all books, records, contracts, Leases, files and other correspondence
relating to the Mortgaged Property. In addition, the Borrower shall upon the
demand of the Agent cause all tenant security deposits (whether in the form of
cash, letter of credit or otherwise) and other refundable deposits paid to or
held by or on behalf of the Property Owner in connection with the Leases to be
delivered to the Agent, subject to the rights of the Mortgagee under the
Mortgage Loan Documents.

Section C. Default under Mortgage Loan Documents. The Borrower hereby
expressly agrees that any "Event of Default" (as defined in the Mortgage Loan
Documents) under the Mortgage Loan Documents (which shall be deemed to include
maturity of the debt secured by the Mortgage Loan Document or any other
occurrence which would give the holder of the Mortgage Loan Documents the right
to exercise remedies thereunder) shall constitute and be deemed to be an Event
of Default under this Agreement for which no right to cure shall be available.
Upon the occurrence of any "Default" (as defined in the Mortgage), the Borrower
shall cause the Property Owner to deliver to the Agent within five (5) Business
Days after the first to occur of (a) receipt by the Property Owner of notice of
such "Default" from the Mortgagee or (b) the date the Property Owner obtains
actual knowledge of the occurrence of such "Default", a detailed description of
the actions to be taken by the Property Owner to cure such "Default" and the
dates by which each such action shall occur. Such schedule shall be subject to
the approval of the Agent. The Borrower shall cause the Property Owner to take
all such actions as are necessary to cure such "Default" under the Mortgage
Loan Documents by the date approved by the Agent, and shall deliver to the
Agent not less frequently than weekly thereafter written updates concerning the
status of the Property Owner's efforts to cure such "Default". The Agent shall
have the right, but not the obligation, to pay any sums or to take any action
which the Agent deems necessary or advisable to cure any default or alleged
default under the Mortgage Loan Documents (whether or not the Property Owner is
<PAGE>

undertaking efforts to cure such default or the same is an "Event of Default"
under the Mortgage Loan Documents or an Event of Default hereunder), and such
payment or such action is hereby authorized by the Borrower, and any sum so
paid and any expense incurred by the Agent in taking any such action shall be
evidenced by this Agreement and secured by the Security Documents and shall be
immediately due and payable by Borrower to the Agent with interest at the rate
for overdue amounts set forth in Section 4.6 until paid. The consent or waiver
by the Mortgagee of any "Event of Default" under the Mortgage Loan Documents
shall not annul the occurrence of an Event of Default hereunder unless
otherwise approved by the Majority Banks. The Borrower shall cause the
Property Owner to permit Agent to enter upon the Mortgaged Property for the
purpose of curing any default or alleged default under the Mortgage Loan
Documents or hereunder. Borrower hereby transfers and assigns any excess
proceeds arising from any foreclosure or sale under power pursuant to the
Mortgage or any instrument evidencing the indebtedness secured thereby, and
Borrower hereby authorizes and directs the holder or holders of the Mortgage to
pay such excess proceeds directly to the Agent up to the amount of the
Obligations.

Section D. Distribution of Collateral Proceeds. In the event that,
following the occurrence or during the continuance of any Event of Default, any
monies are received in connection with the enforcement of any of the Security
Documents, or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:

1. First, to the payment of, or (as the case may be) the
reimbursement of, the Agent and the Banks for or in respect of all reasonable
costs, expenses, disbursements and losses which shall have been incurred or
sustained by the Agent and the Banks to protect or preserve the collateral or
in connection with the collection of such monies by the Agent and the Banks,
for the exercise, protection or enforcement by the Agent and the Banks of all
or any of the rights, remedies, powers and privileges of the Agent and the
Banks under this Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Agent and the Banks against any taxes or liens which by law shall have, or may
have, priority over the rights of the Agent and the Banks to such monies;

2. Second, to all other Obligations in such order or preference as
the Majority Banks shall determine; provided, however, that Obligations owing
to the Banks with respect to each type of Obligation such as interest,
principal, fees and expenses shall be made among the Banks pro rata; and
provided, further that the Majority Banks may in their discretion make proper
allowance to take into account any Obligations not then due and payable; and

3. Third, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.

Section XI. BANKRUPTCY.

Section A. Material Inducement. Each of the Borrower, the Guarantor and
the other Additional Pledgors, jointly and severally, acknowledges and agrees
that the representations, warranties, covenants and agreements contained in
this Section 11.1 constitute a material inducement to the Agent and the Banks
to enter into this Agreement, the other Loan Documents and the transactions
contemplated hereby and thereby and that without the inclusion of this Section
11.1 herein the Agent and the Banks would not have entered into this Agreement
and the other Loan Documents.
<PAGE>

Section B. No Fraudulent Intent. Each of the Borrower, the Guarantor and
the other Additional Pledgors, jointly and severally, hereby acknowledges,
warrants, represents and agrees that neither the execution and delivery of this
Agreement and the other Loan Documents nor the performance of any actions
required hereunder or thereunder is being consummated by the Borrower, the
Managing Member, the Property Owner, the Guarantor or any other Additional
Pledgor with or as a result of any actual intent by such Persons, or any of
them, to hinder, delay or defraud any entity to which such Persons, or any of
them, are now or will hereafter become indebted.

Section C. No Bankruptcy Intent. Each of the Borrower, the Guarantor and
the other Additional Pledgors, jointly and severally, hereby represents,
covenants and agrees that none of the Borrower, the Managing Member, the
Property Owner, the Guarantor nor any of the other Additional Pledgors has any
intent (a) to file any voluntary petition in bankruptcy under any Chapter of
the Bankruptcy Code or in any manner to seek relief, protection, reorganiza-
tion, liquidation, dissolution or similar relief for debtors under any local,
state, federal or other insolvency laws or laws providing for relief of
debtors, or in equity, or directly or indirectly to cause any of the other of
such Persons to file any such petition or to seek any such relief, either at
the present time, or at any time hereafter, or (b) directly or indirectly to
cause any involuntary petition under any Chapter of the Bankruptcy Code to be
filed against any of such Persons or directly or indirectly to cause any of
such Persons to become the subject of any dissolution, liquidation or
insolvency proceeding or any other proceeding pursuant to any local, state,
federal, or other insolvency laws or laws providing for relief of debtors, or
in equity, either at the present time, or at any time hereafter, or (c)
directly or indirectly to cause the Mortgaged Property, the Collateral or any
portion thereof or any interest of such Persons in the Mortgaged Property or
the Collateral to become the property of any bankruptcy estate or the subject
of any local, state, federal or other bankruptcy, dissolution, liquidation or
insolvency proceedings, either at the present time or at any time hereafter.

Section D. Agreement in Best Interests of Parties; Consideration. Each
of the Borrower, the Guarantor and the other Additional Pledgors, jointly and
severally, hereby acknowledges and agrees that (a) the transactions evidenced
by this Agreement and the other Loan Documents are in the best interests of
such Persons and the creditors of such Persons, and (b) the benefit to inure to
such Persons pursuant to this Agreement and the other Loan Documents constitute
substantially more than "reasonable equivalent value" (as such term is used in
Section 548 of the Bankruptcy Code) and "fair consideration" (as such term is
defined and used in the New York Debtor and Creditor Law Section s272-279), in
exchange for the benefits to be provided by such Persons to the Agent and the
Banks pursuant to this Agreement and the other Loan Documents.

Section E. Subsequent Bankruptcy; Waiver of Automatic Stay.

1. It is expressly agreed and understood by the parties hereto
that, in the event the Property Owner, the Borrower, the Managing Member, the
Guarantor, any of the other Additional Pledgors or the Collateral, or any
portion thereof, shall be or become the subject of any bankruptcy proceeding or
the property of any bankruptcy estate, the United States Bankruptcy Court for
the Southern District of New York, (hereinafter referred to as the "Bankruptcy
Court") shall have the sole and exclusive jurisdiction of such bankruptcy
proceeding. The parties hereto hereby further acknowledge and agree that any
voluntary bankruptcy petition filed by the Property Owner, the Borrower, the
Managing Member, the Guarantor or any other Additional Pledgor, or any
involuntary bankruptcy petition caused to be filed by the Property Owner, the
<PAGE>

Borrower, the Managing Member, the Guarantor, any other Additional Pledgor or
any affiliate thereof against the Property Owner, the Borrower, the Managing
Member, the Guarantor or any other Additional Pledgor (any such bankruptcy
filing being hereinafter referred to as a "Bad Faith Filing"), or any other
action by Borrower or such Persons, or any of them, to attempt in any manner to
hinder, delay, impede, stay, void, rescind or nullify any lawful action taken
by Agent to exercise its rights and remedies under this Agreement or any of the
other Loan Documents, or at law or in equity, from and after the date hereof,
or pursuant to any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar proceedings, would be in bad faith and contrary to the
purposes of the bankruptcy laws, would be for the sole purpose of delaying,
inhibiting or interfering with the exercise by Agent of its rights and remedies
under this Agreement and the Loan Documents and would, in and of itself,
constitute "cause" for relief from the automatic stay pursuant to the
provisions of Section 362(d)(1) of the Bankruptcy Code. Without limitation of
the foregoing, the parties hereto hereby further acknowledge and agree that, in
the event of any Bad Faith Filing by or against the Property Owner, the
Borrower, the Managing Member, the Guarantor or any other Additional Pledgor,
or their respective successors, successors-in-interest or assigns, Agent shall
be entitled to obtain upon ex parte application therefor, and without further
notice or action of any kind or nature whatsoever, (i) an order from the
Bankruptcy Court prohibiting the use of Agent's "cash collateral" (as such term
is defined in Section 363 of the Bankruptcy Code) in connection with the Loans,
and (ii) an order from the Bankruptcy Court granting immediate relief from the
automatic stay pursuant to Section 362 of the Bankruptcy Code so as to permit
Agent to exercise all of its rights and remedies pursuant to this Agreement,
the Loan Documents, and at law and in equity.

2. The Borrower, the Guarantor and the other Additional Pledgors
covenant not to directly or indirectly oppose or otherwise defend against
Agent's effort to obtain relief from the stay pursuant to Section 11.5(a),
above, and covenant and agree that Agent shall be entitled to the lifting of
the stay pursuant to Section 11.5(a), above, without the necessity of an
evidentiary hearing and without the necessity or requirement that Agent
establish or prove the value of the Collateral, the lack of adequate protection
of Agent's interest in the Collateral, the lack of any reasonable prospect of
reorganization with respect either to the Property Owner, the Borrower, the
Managing Member, the Guarantor, the other Additional Pledgor or the Collateral,
or the Borrower's, the Managing Member's, the Guarantor's or the other
Additional Pledgor's lack of equity in the Collateral.

3. The waiver by the Borrower, the Guarantor, and the other
Additional Pledgors of the Section 362 automatic stay contained in the
Bankruptcy Code pursuant to Section s 11.5(a) and(b) above, and the waiver of
the Section 362 automatic and Section 105 supplemental stay contained in the
Bankruptcy Code pursuant to Section 11.6, below, shall be unconditional and
absolute, and each of the Borrower, the Guarantor, and the other Additional
Pledgors hereby agree never to directly or indirectly maintain before any court
that such waiver of the automatic stay and supplemental stay should not be
strictly enforced.

Section F. Waiver of Automatic and Supplemental Stays. Each of the
Borrower, the Guarantor, and the other Additional Pledgors, on behalf of itself
or himself only, hereby represents, covenants and agrees, in the event of the
filing of any voluntary or involuntary petition in bankruptcy by or against the
Property Owner, the Borrower, the Managing Member, the Guarantor or any other
Additional Pledgor, not to assert or request any other party to assert that the
automatic stay provided by Section 362 of the Bankruptcy Code shall operate or
<PAGE>

be interpreted to stay, interdict, condition, reduce or inhibit the ability of
Agent to enforce any rights it has by virtue of this Agreement or the Loan
Documents, or any other rights Agent has, whether now or hereafter acquired,
against the Property Owner, the Borrower, the Managing Member, the Guarantor,
the other Additional Pledgors or against any Collateral; and further, in the
event of the filing of any voluntary or involuntary petition in bankruptcy by
or against the Property Owner, the Borrower, the Managing Member, the Guarantor
or the other Additional Pledgors, not to seek a supplemental stay or any other
relief, whether injunctive or otherwise, pursuant to Section 105 of the
Bankruptcy Code or any other provision of the Bankruptcy Code, to stay,
interdict, condition, reduce or inhibit the ability of Agent to enforce any
rights it has by virtue of this Agreement or the Loan Documents, or at law or
in equity, or any other rights Agent has, whether now or hereafter acquired
against the Property Owner, the Borrower, the Managing Member, the Guarantor,
the other Additional Pledgors or against any Collateral. The parties hereto
acknowledge that the waivers in this Section with respect to an involuntary
petition shall not be effective until the occurrence of an Event of Default.

Section G. Approval Rights Regarding Bankruptcy Proceeding. Upon the
occurrence and during the continuance of any Event of Default, all rights of
the Borrower, the Managing Member, Guarantor and the other Additional Pledgors
to exercise their Voting Interests in the Property Owner, the Borrower, the
Managing Member or the other Additional Pledgors, as the case may be, shall
automatically terminate and cease to exist and all such rights shall thereupon
be automatically vested in the Agent who shall thereupon have the sole and
exclusive right to exercise such Voting Interests. Without limiting the
foregoing, in the event of a Bad Faith Filing or any other voluntary or
involuntary bankruptcy filing or any other insolvency proceeding of any kind
under local, state, federal or other insolvency laws involving the Property
Owner, the Borrower, the Managing Member, the other Additional Pledgors or the
Guarantor, or all of them, or any of their properties (collectively the
"Bankruptcy Filings") the Borrower, the other Additional Pledgors, and the
Guarantor each acknowledge and agree to recognize the rights and powers granted
to the Agent in this Section 11.7 and agree not to oppose or object on any
basis whatsoever to the exercise by the Agent of such rights in connection with
the Bankruptcy Filings. Further, upon the commencement of one or more
Bankruptcy Filings, the Borrower, the other Additional Pledgors and the
Guarantor, jointly and severally, covenant and agree: (i) not to propose,
approve, vote for, or acquiesce in a plan of reorganization concerning the
Property Owner, the Borrower, the Managing Member, the other Additional
Pledgors or the Guarantors, or all of them, without the consent of Agent; (ii)
not to challenge or object on any basis whatsoever to the standing of Agent to
be recognized as a creditor and/or party-in-interest in the Bankruptcy Filings;
and (iii) not to violate or breach any of the covenants or agreements contained
in any of the Loan Documents.

Section H. Miscellaneous Representations. Borrower and Holding
Company Managing Member and each of them, jointly and severally, warrant and
represent to Agent that, other than Agent and applicable taxing authorities,
Borrower and Holding Company Managing Members have no creditors; that neither
Borrower nor Holding Company Managing Member has any employees; that Borrower
and Holding Company Managing Member are single asset entities such that
Borrower and Holding Company Managing Member do not own or hold any beneficial
interest in any property of any kind or nature whatsoever other than their
direct or indirect interests in the Property Owner; and that any dispute which
may arise between Agent and Borrower and Holding Company Managing Member would
be, for all intents and purposes, a two (2) party dispute, involving only Agent
and Borrower and Holding Company Managing Member.
<PAGE>

Section I. Covenant of Noninterference and Cooperation.

1. The Borrower, the Guarantor and the other Additional Pledgors,
jointly and severally, covenant and agree that none of them shall take any
action of any kind or nature whatsoever, either directly or indirectly, to
oppose, impede, obstruct, hinder, frustrate, enjoin or otherwise interfere with
the exercise by Agent of any of Agent's rights and remedies against or with
respect to the Loan, the Collateral, this Agreement or the other Loan
Documents, including specifically, but without limitation, those rights and
remedies contained in this Section 11, at law or in equity, and shall not,
either directly or indirectly cause any other Person to take any of the
foregoing actions.

2. The Borrower, the Guarantor and the other Additional Pledgors,
jointly and severally, covenant and agree to cooperate fully and completely
with the exercise by Agent of any of Agent's rights and remedies against or
with respect to the Collateral, this Agreement or the other Loan Documents,
including specifically, but without limitation, those rights and remedies
contained in this Section 11.

3. The Borrower, the Guarantor and the other Additional Pledgors,
jointly and severally covenant and agree that any violation of either Section
11.9(a) or (b), above, or the occurrence of any Triggering Event, will
constitute an act of bad faith undertaken with intent to hinder, delay and
defraud Agent and the Banks.

Section XII. SETOFF.

Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits (general or specific, time or demand,
provisional or final, regardless of currency, maturity, or the branch of where
such deposits are held) or other sums credited by or due from any of the Banks
to the Borrower, the Guarantor or any other Additional Pledgor and any
securities or other property of the Borrower, the Guarantor or any other
Additional Pledgor in the possession of such Bank may be applied to or set off
against the payment of Obligations and any and all other liabilities, direct,
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of such Person to such Bank. Each of the Banks agrees with
each other Bank that if such Bank shall receive from the Borrower, the
Guarantor or any other Additional Pledgor, whether by voluntary payment,
exercise of the right of setoff, or otherwise, and shall retain and apply to
the payment of the Note or Notes held by such Bank any amount in excess of its
ratable portion of the payments received by all of the Banks with respect to
the Notes held by all of the Banks, such Bank will make such disposition and
arrangements with the other Banks with respect to such excess, either by way of
distribution, pro tanto assignment of claims, subrogation or otherwise as shall
result in each Bank receiving in respect of the Notes held by it its
proportionate payment as contemplated by this Agreement; provided that if all
or any part of such excess payment is thereafter recovered from such Bank, such
disposition and arrangements shall be rescinded and the amount restored to the
extent of such recovery, but without interest.

Section XIII. THE AGENT.

Section A. Authorization. The Agent is authorized to take such action
on behalf of each of the Banks and to exercise all such powers as are hereunder
and under any of the other Loan Documents and any related documents delegated
<PAGE>

to the Agent, together with such powers as are reasonably incident thereto,
provided that no duties or responsibilities not expressly assumed herein or
therein shall be implied to have been assumed by the Agent. The obligations of
Agent hereunder are primarily administrative in nature, and nothing contained
in this Agreement or any of the other Loan Documents shall be construed to
constitute the Agent as a trustee for any Bank or to create an agency or
fiduciary relationship. The Borrower and any other Person shall be entitled to
conclusively rely on a statement from the Agent that it has the authority to
act for and bind the Banks pursuant to this Agreement and the other Loan
Documents.

Section B. Employees and Agents. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to
its rights and duties under this Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent may reasonably
determine.

Section C. No Liability. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent, or employee thereof, shall be liable to any of the Banks
for any waiver, consent or approval given or any action taken, or omitted to be
taken, in good faith by it or them hereunder or under any of the other Loan
Documents, or in connection herewith or therewith, or be responsible for the
consequences of any oversight or error of judgment whatsoever, except that the
Agent or such other Person, as the case may be, may be liable for losses due to
its willful misconduct or gross negligence.

Section D. No Representations. The Agent shall not be responsible for
the execution or validity or enforceability of this Agreement, the Notes, any
of the other Loan Documents or any instrument at any time constituting, or
intended to constitute, collateral security for the Notes, or for the value of
any such collateral security or for the validity, enforceability or
collectability of any such amounts owing with respect to the Notes, or for any
recitals or statements, warranties or representations made herein or in any of
the other Loan Documents or in any certificate or instrument hereafter
furnished to it by or on behalf of the Borrower or any other Person, or be
bound to ascertain or inquire as to the performance or observance of any of the
terms, conditions, covenants or agreements herein or in any other of the Loan
Documents. The Agent shall not be bound to ascertain whether any notice,
consent, waiver or request delivered to it by the Borrower or any holder of any
of the Notes or any other Person shall have been duly authorized or is true,
accurate and complete. The Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Banks, with respect to the creditworthiness or financial
condition of the Borrower, the Guarantor, the Additional Pledgors, or the
Property Owner, or the value of the Collateral, the Mortgaged Property or any
other assets of the Borrower, the Guarantor, the Additional Pledgors or the
Property Owner. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information and
documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it
will, independently and without reliance upon the Agent or any other Bank,
based upon such information and documents as it deems appropriate at the time,
continue to make its own credit analysis and decisions in taking or not taking
action under this Agreement and the other Loan Documents.

Section E. Payments.
<PAGE>

1. A payment by the Borrower to the Agent hereunder or under any of
the other Loan Documents for the account of any Bank shall constitute a payment
to such Bank. The Agent agrees to distribute to each Bank not later than one
Business Day after the Agent's receipt of good funds, determined in accordance
with the Agent's customary practices, such Bank's pro rata share of payments
received by the Agent for the account of the Banks except as otherwise
expressly provided herein or in any of the other Loan Documents.

2. If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of the
other Loan Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been adjudicated
by a court of competent jurisdiction. If a court of competent jurisdiction
shall adjudge that any amount received and distributed by the Agent is to be
repaid, each Person to whom any such distribution shall have been made shall
either repay to the Agent its proportionate share of the amount so adjudged to
be repaid or shall pay over the same in such manner and to such Persons as
shall be determined by such court.

3. Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Bank that fails to comply
with the provisions of Section 12 with respect to making dispositions and
arrangements with the other Banks, where such Bank's share of any payment
received, whether by setoff or otherwise, is in excess of its pro rata share of
such payments due and payable to all of the Banks, in each case as, when and to
the full extent required by the provisions of this Agreement, shall be deemed
delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank until
such time as such delinquency is satisfied. A Delinquent Bank shall be deemed
to have assigned any and all payments due to it from the Borrower and the
Guarantor, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective pro rata shares of all outstanding Loans. The
Delinquent Bank hereby authorizes the Agent to distribute such payments to the
nondelinquent Banks in proportion to their respective pro rata shares of all
outstanding Loans. A Delinquent Bank shall be deemed to have satisfied in full
a delinquency when and if, as a result of application of the assigned payments
to all outstanding Loans of the nondelinquent Banks or as a result of other
payments by the Delinquent Banks to the nondelinquent Banks, the Banks'
respective pro rata shares of all outstanding Loans have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.

Section F. Holders of Notes. Subject to the terms of Article 17, the
Agent may deem and treat the payee of any Note as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished in
writing with a different name by such payee or by a subsequent holder, assignee
or transferee.

Section G. Indemnity. The Banks ratably agree hereby to indemnify and
hold harmless the Agent (in its capacity as the Agent and not as a Bank) from
and against any and all claims, actions and suits (whether groundless or
otherwise), losses, damages, costs, expenses (including any expenses for which
the Agent has not been reimbursed by the Borrower as required by Section 14),
and liabilities of every nature and character arising out of or related to this
Agreement, the Notes, or any of the other Loan Documents or the transactions
contemplated or evidenced hereby or thereby, or the Agent's actions taken
hereunder or thereunder to the extent not paid by the Borrower within thirty
<PAGE>

(30) days of demand, except to the extent that any of the same shall be
directly caused by the Agent's willful misconduct or gross negligence.

Section H. Agent as Bank. In its individual capacity, FNBB shall have
the same obligations and the same rights, powers and privileges in respect to
its Commitment and the Loans made by it, and as the holder of any of the Notes
as it would have were it not also the Agent.

Section I. Resignation. Subject to Section 17.1, the Agent may resign
at any time by giving 30 days' prior written notice thereof to the Banks and
the Borrower. In addition, the Majority Banks may remove the Agent from its
capacity as agent in the event of the Agent's gross negligence or willful
misconduct. In the event of any such removal, the Majority Banks shall give
notice of such removal to the Borrower. Upon any such resignation or removal,
the Majority Banks shall have the right to appoint as a successor Agent any
Bank or any other sophisticated investor knowledgeable in the lending to and
operation of real estate similar to the Mortgaged Property, subject to the
approval of the successor Agent by the Rating Agency as provided in Section
17.1. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the
Borrower. If no successor Agent shall have been so appointed by the Majority
Banks and shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation, then subject to the terms of
Section 17.1 the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be any Bank or any other entity which shall be a
sophisticated investor knowledgeable in the lending and/or operation of real
estate similar to the Mortgaged Property. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, notice thereof shall be
delivered to the Borrower and such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed Agent, and the retiring or removed Agent shall be
discharged from its duties and obligations hereunder as Agent. After any
retiring or removed Agent's resignation or removal, the provisions of this
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was
acting as Agent.

Section J. Duties in the Case of Enforcement. In case one or more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a) so
requested by the Majority Banks and (b) the Banks have provided to the Agent
such additional indemnities and assurances against expenses and liabilities as
the Agent may reasonably request, proceed to enforce the provisions of the
Security Documents authorizing the sale or other disposition of all or any part
of the Collateral and exercise all or any such other legal and equitable and
other rights or remedies as it may have in respect of such Collateral. The
Majority Banks may direct the Agent in writing as to the method and the extent
of any such sale or other disposition, the Banks hereby agreeing to indemnify
and hold the Agent harmless from all liabilities incurred in respect of all
actions taken or omitted in accordance with such directions, provided that the
Agent need not comply with any such direction to the extent that the Agent
reasonably believes the Agent's compliance with such direction to be unlawful
or commercially unreasonable in any applicable jurisdiction.

Section K. Notification of Banks. Promptly after receiving any notice
under Section 7.5 or any other material information from the Borrower, the
Agent will forward a copy thereof to each of the Banks, together with copies of
any certificates or other written information that accompanied such notice.
<PAGE>

Section XIV. EXPENSES.

The Borrower agrees to pay upon demand (a) the reasonable costs of
producing and reproducing this Agreement, the other Loan Documents and the
other agreements and instruments mentioned herein, (b) any taxes (including any
interest and penalties in respect thereto) payable by the Agent or any of the
Banks (other than taxes based upon the Agent's or any Bank's gross or net
income, except that the Agent and the Banks shall be entitled to
indemnification for any and all amounts paid by them in respect of taxes based
on income or other taxes assessed by any State in which Mortgaged Property or
other Collateral is located, such indemnification to be limited to taxes due
solely on account of the granting of Collateral under the Security Documents
and to be net of any credit allowed to the indemnified party from any other
State on account of the payment or incurrence of such tax by such indemnified
party, subject to the limitations in Section 4.13), including any recording,
mortgage, transfer, documentary or intangibles taxes in connection with the
Loan Documents, or other taxes payable on or with respect to the transactions
(other than remedies) contemplated by this Agreement, including any such taxes
payable by the Agent or any of the Banks after the Closing Date (the Borrower
hereby agreeing to indemnify the Agent and each Bank with respect thereto), (c)
all title examination charges, appraisal fees, engineer's fees, reasonable
internal charges of the Agent (determined in good faith and in accordance with
the Agent's internal policies applicable generally to its customers) for
commercial finance exams and engineering and environmental reviews and the
reasonable fees, expenses and disbursements of the counsel to the Agent, FNBB,
Wellsford and any local counsel to the Agent incurred in connection with the
preparation, administration or interpretation of the Loan Documents and other
instruments mentioned herein (excluding, however, the preparation of agreements
evidencing participation granted under Section 17.4), each closing hereunder,
and the reasonable fees, expenses and disbursements of the counsel to the Agent
and each Bank incurred in connection with amendments, modifications, approvals,
consents or waivers hereto or hereunder, (d) the reasonable fees, expenses and
disbursements of the Agent incurred by the Agent in connection with the
preparation or interpretation of the Loan Documents and other instruments
mentioned herein, or the addition or substitution of other Collateral, (e) all
reasonable out-of-pocket expenses (including reasonable attorneys' fees and
costs, which attorneys may be employees of any Bank or the Agent and the
reasonable fees and costs of appraisers, engineers, investment bankers or other
experts retained by any Bank or the Agent) incurred by any Bank or the Agent in
connection with (i) the enforcement of or preservation of rights under any of
the Loan Documents against the Borrower or any other Person or the
administration thereof after the occurrence of a Default or Event of Default,
(ii) the sale of, collection from or other realization upon any of the
Collateral, (iii) the failure by the Property Owner, the Borrower, the Managing
Member, the Guarantor or any other Additional Pledgor to perform or observe any
provision of the Loan Documents, and (iv) any litigation, proceeding or
dispute whether arising hereunder or otherwise, in any way related to the
Agent's or any of the Bank's relationship with the Borrower, the Guarantor or
any other Additional Pledgor, (f) all reasonable fees, expenses and
disbursements of any Bank or the Agent incurred in connection with U.C.C.
searches, U.C.C. filings, title rundowns or title searches and (g) all
reasonable fees, expenses and disbursements (including reasonable attorneys'
fees and costs) which may be reasonably incurred by FNBB and the other Banks in
connection with the execution and delivery of this Agreement and the other Loan
Documents. The Borrower shall not be liable for the payment of the
registration fee pursuant to Section 17.2. The covenants of this Section 14
shall survive payment or satisfaction of payment of amounts owing with respect
<PAGE>

to the Notes.

Section XV. INDEMNIFICATION.

The Borrower agrees to indemnify and hold harmless the Agent and the
Banks and each director, officer, employee, agent and Person who controls the
Agent or any Bank from and against any and all claims, actions and suits,
whether groundless or otherwise, and from and against any and all liabilities,
losses, damages and expenses of every nature and character arising out of or
relating to this Agreement or any of the other Loan Documents or the
transactions contemplated hereby and thereby including, without limitation, (a)
any brokerage, leasing, finders or similar fees asserted against any Person
indemnified under this Section 15 based upon any agreement, arrangement or
action made or taken, or alleged to have been made or taken, by the Borrower,
the Property Owner, the Guarantor, the Managing Member or any Additional
Pledgor (other than claims that are finally determined by court of competent
jurisdiction to have resulted from agreements (actual or de facto) made by a
Bank for the payment of such fees), (b) any condition, use, operation or
occupancy of the Mortgaged Property or the other Collateral first occurring
prior to the Agent or its nominee becoming the owner of the Collateral
following a foreclosure thereof or prior to a foreclosure of the Mortgage,
(c) any actual or proposed use by the Borrower of the proceeds of any of the
Loans, (d) any actual or alleged infringement of any patent, copyright,
trademark, service mark or similar right of the Borrower, the Guarantor or any
Additional Pledgor comprised in the Collateral, (e) the Borrower, the Guarantor
and the Additional Pledgors entering into or performing this Agreement or any
of the other Loan Documents, (f) any actual or alleged violation of any law,
ordinance, code, order, rule, regulation, approval, consent, permit or license
relating to the Mortgaged Property first occurring prior to the Agent or its
nominee becoming the owner of the Collateral following a foreclosure thereof or
prior to a foreclosure of the Mortgage, (g) in the event that the Agent or any
nominee of the Agent or the Banks shall foreclose or otherwise obtain title to
all or any portion of the Collateral, any obligations, duties or liabilities of
the Property Owner, the Borrower, the Managing Member, or any Additional
Pledgor other than those pursuant to the Mortgage Loan Documents (subject to
the terms of the Loan Documents) or the Approved Budget (except as provided in
Section 7.15), first occurring prior to the Agent or its nominee becoming the
owner of the Collateral following a foreclosure thereof or prior to a
foreclosure of the Mortgage, (h) with respect to the Borrower, the Property
Owner, the Managing Member and the Additional Pledgors and their respective
properties and assets, the violation of any Environmental Law, the Release or
threatened Release of any Hazardous Substances or any action, suit, proceeding
or investigation brought or threatened with respect to any Hazardous Substances
(including, but not limited to claims with respect to wrongful death, personal
injury or damage to property) first occurring prior to the Agent or its nominee
becoming the owner of the Collateral following a foreclosure thereof or prior
to a foreclosure of the Mortgage, (i) the exercise by the Agent or the Banks of
the rights and remedies set forth in Article 11, or (j) any statement or
omission in any offering statement or memorandum used in connection with any
securitization of interests in the Mortgage Loan, in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding; provided, however, that the
Borrower shall not be obligated under this Section 15 to indemnify any Person
for liabilities arising from such Person's own gross negligence or willful
misconduct. In litigation, or the preparation therefor, the Banks and the
Agent shall be entitled to select a single law firm as their own counsel and,
in addition to the foregoing indemnity, the Borrower agrees to pay promptly the
<PAGE>

reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Borrower under this Section 15 are unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment in satisfaction of such obligations which is permissible under
applicable law. The provisions of this Section 15 shall survive the repayment
of the Loans and the termination of the obligations of the Banks hereunder.

Section XVI. SURVIVAL OF COVENANTS, ETC.

All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by the Borrower, the Managing Member, the Property Owner, the
Guarantor, any other Additional Pledgor, Richard F. Czaja or Gregg S. Wolpert
pursuant hereto or thereto or any of such Person's respective members,
principals, directors, officers, partners, or any agent, employee or any other
Person authorized or apparently authorized to make statements or representa-
tions on behalf of any such Person to the extent of statements and
representations made to FNBB and Wellsford on their tour of the Mortgaged
Property on or about February 10, 1997 shall be deemed to have been relied upon
by the Banks and the Agent, notwithstanding any investigation heretofore or
hereafter made by any of them, and shall survive the making by the Banks of any
of the Loans, as herein contemplated, and shall continue in full force and
effect so long as any amount due under this Agreement or the Notes or any of
the other Loan Documents remains outstanding. The indemnification obligations
of the Borrower provided herein and the other Loan Documents shall survive the
full repayment of amounts due and the termination of the obligations of the
Banks hereunder and thereunder to the extent provided herein and therein. All
statements contained in any certificate or other paper delivered to any Bank or
the Agent at any time by or on behalf of the Borrower, the Managing Member, the
Property Owner, the Guarantor or any Additional Pledgor pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by such Person hereunder.

Section XVII. ASSIGNMENT AND PARTICIPATION.

Section A. Conditions to Assignment by Banks. Except as provided
herein, each Bank may assign to one or more banks or other entities all or a
portion of its interests, rights and obligations under this Agreement
(including all or a portion of its Commitment Percentage and Commitment and the
same portion of the Loans at the time owing to it, and the Notes held by it);
provided that (a) the Agent shall have given its prior written consent to such
assignment, which consent shall not be unreasonably withheld, conditioned or
delayed (provided that such consent shall not be required for any assignment to
another Bank, to a bank which is under common control with the assigning Bank
or to a wholly-owned Subsidiary of such Bank provided that such assignee shall
remain a wholly-owned Subsidiary of such Bank), (b) each such assignment shall
be of a constant, and not a varying, percentage of all the assigning Bank's
rights and obligations under this Agreement, (c) the parties to such assignment
shall execute and deliver to the Agent, for recording in the Register (as
hereinafter defined), a notice of such assignment, together with any Notes
subject to such assignment, (d) in no event shall any voting, consent or
approval rights of a Bank be assigned to any Person controlling, controlled by
or under common control with, or which is not otherwise free from influence or
control by, any of the Borrower, the Managing Member, the Guarantor or any
Additional Pledgor, which rights shall instead be allocated pro rata among the
other remaining Banks, (e) such assignee shall have a net worth as of the date
of such assignment of not less than $500,000,000, unless otherwise approved by
the Agent, such consent not to be unreasonably withheld, conditioned or

<PAGE>

delayed, (f) such assignee shall acquire an interest in the Loans of not less
than $10,000,000.00, unless otherwise approved by the Agent, such consent not
to be unreasonably withheld, conditioned or delayed, and (g) such assignment
shall be of an equal percentage of such assignee's Commitment Percentage. Upon
such execution, delivery, acceptance and recording on the Register of such
notice of assignment, (i) the assignee thereunder shall be a party hereto and
all other Loan Documents executed by the Banks and, to the extent provided in
such assignment, have the rights and obligations of a Bank hereunder, (ii) the
assigning Bank shall, to the extent provided in such assignment and upon
payment to the Agent of the registration fee referred to in Section 17.2, be
released from its obligations under this Agreement, and (iii) the Agent may
unilaterally amend Schedule 1 to reflect such assignment. In connection with
each assignment, the assignee shall represent and warrant to the Agent, the
assignor and each other Bank as to whether such assignee is controlling,
controlled by, under common control with or is not otherwise free from
influence or control by, the Borrower, the Managing Member, the Guarantor or
any Additional Pledgor. FNBB may assign all or any portion of its interest,
rights and obligations under this Agreement; provided, however, that
notwithstanding anything herein to the contrary, in the event that FNBB desires
to resign its position as Agent under the Loan Documents, then FNBB shall first
provide written notice thereof to the Banks and the Rating Agency and allow the
Banks, with the approval of the Rating Agency a period of thirty (30) calendar
days following the receipt of such notice within which to select a replacement
Agent. In the event that the Majority Banks are unable to select a successor
Agent as provided above that is approved by the Rating Agency, FNBB may
thereafter resign as Agent as provided in this Agreement in the event that FNBB
selects a successor Agent that is approved by the Rating Agency. Each Agent,
as a condition to any resignation of its position as Agent, shall be required
to comply with the foregoing provisions. Upon any change in the Agent under
this Agreement, the resigning Agent shall execute such assignments of and
amendments to the Loan Documents as may be necessary to substitute the
successor Agent for the resigning Agent.

Section B. Register. The Agent shall maintain a copy of each assignment
delivered to it and a register or similar list (the "Register") for the
recordation of the names and addresses of the Banks and the Commitment
Percentages of, and principal amount of the Loans owing to the Banks from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
and the Banks at any reasonable time and from time to time upon reasonable
prior notice. Upon each such recordation, the assigning Bank agrees to pay to
the Agent a registration fee in the sum of $2,000.

Section C. New Notes. Upon its receipt of an assignment executed by the
parties to such assignment, together with each Note subject to such assignment,
the Agent shall (a) record the information contained therein in the Register,
and (b) give prompt notice thereof to the Borrower and the Banks (other than
the assigning Bank). Within five Business Days after receipt of such notice,
the Borrower, at its own expense, shall execute and deliver to the Agent, in
exchange for each surrendered Note, a new Note to the order of such assignee in
an amount equal to the amount assumed by such assignee pursuant to such
assignment and, if the assigning Bank has retained some portion of its
obligations hereunder, a new Note to the order of the assigning Bank in an
amount equal to the amount retained by it hereunder, and shall cause the
Guarantor and each Additional Pledgor to deliver to the Agent an acknowledgment
in form and substance satisfactory to the Agent to the effect that the Loan
<PAGE>

Documents executed by such Persons extend to and are applicable to each new
Note. Such new Notes shall provide that they are replacements for the
surrendered Notes, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Notes, shall be dated the
effective date of such assignment and shall otherwise be in substantially the
form of the assigned Notes. The surrendered Notes shall be canceled and
returned to the Borrower.

Section D. Participations. Each Bank may sell participations to one or
more banks or other entities in all or a portion of such Bank's rights and
obligations under this Agreement and the other Loan Documents; provided that
(a) any such sale or participation shall not affect the rights and duties of
the selling Bank hereunder to the Borrower, (b) such participation shall not
entitle such participant to any rights or privileges under this Agreement or
any Loan Documents, including without limitation, the right to approve waivers,
amendments or modifications, (c) such participant shall have no direct rights
against the Borrower except the rights granted to the Banks pursuant to Section
12, (d) such sale is effected in accordance with all applicable laws, and (e)
such participant shall not be a Person controlling, controlled by or under
common control with, or which is not otherwise free from influence or control
by any of the Borrower or the General Partner. Any Bank which sells a
participation shall promptly notify the Agent of such sale and the identity of
the purchaser of such interest.

Section E. Pledge by Bank. Any Bank may at any time pledge all or any
portion of its interest and rights under this Agreement (including all or any
portion of its Note) to any of the twelve Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341 or as otherwise
approved by the Agent, such consent not to be unreasonably withheld,
conditioned or delayed. No such pledge or the enforcement thereof shall
release the pledgor Bank from its obligations hereunder or under any of the
other Loan Documents.

Section F. No Assignment by Borrower. The Borrower shall not assign or
transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Banks.

Section G. Disclosure. The Borrower agrees that in addition to
disclosures made in accordance with standard banking practices any Bank may
disclose information obtained by such Bank pursuant to this Agreement to
assignees or participants and potential assignees or participants hereunder.
The financial statements and other reports delivered by the Borrower to the
Agent hereunder will be treated as confidential by the Agent and the Banks, and
each assignee and participant hereunder and each potential assignee or
participant hereunder, and such parties for themselves agree not to disclose
such information to any Person, provided that such information may be disclosed
to any of the following in connection with their participation in the
transactions contemplated by the Loan Documents: directors, officers,
employees, representatives, legal counsel, accountants and prospective
investors of any of such Persons, it being understood that such Persons shall
be informed of the confidential nature of such information and shall agree to
treat such information confidentially. Notwithstanding the foregoing, such
Persons shall be permitted to disclose such information (a) to the extent
required by law, (b) to the extent such confidential information becomes
publicly available other than as a result of the breach of this Agreement,
(c) to the extent such information becomes available to any of such Persons on
a non-confidential basis, or (d) to the extent necessary to enforce the Loan
Documents (provided that in connection with such enforcement the Agent shall
<PAGE>

take reasonable efforts to cause such information to remain confidential).

Section H. Amendments to Loan Documents. Upon any such assignment or
participation, the Borrower shall, upon the request of the Agent, enter into
such documents and cause the Guarantor and the Additional Pledgors to enter
into such documents as may be reasonably required by the Agent to modify the
Loan Documents to reflect such assignment or participation.

Section XVIII. NOTICES.

Each notice, demand, election or request provided for or permitted to be
given pursuant to this Agreement (hereinafter in this Section 18 referred to as
"Notice"), but specifically excluding to the maximum extent permitted by law
any notices of the institution or commencement of foreclosure proceedings, must
be in writing and shall be deemed to have been properly given or served by
personal delivery or by sending same by overnight courier or by depositing same
in the United States Mail, postpaid and registered or certified, return receipt
requested, or as expressly permitted herein, by telegraph, telecopy, telefax or
telex, and addressed as follows:

If to the Agent or any Bank, at the address set forth on the signature
page for the Agent or such Bank; and

If to the Borrower or Holding Company Managing Member, to such party at:

277 Park Avenue
47th Floor
New York, New York 10172
Attn: Richard Czaja
Fax: 212/223-4609

with a copy to:

Richard L. Chadakoff, Esq.
Latham & Watkins
885 Third Avenue
New York, New York 10022

If to Guarantor, in the manner provided in the Guaranty; and

and to each other Bank which may hereafter become a party to this Agreement at
such address as may be designated by such Bank. Each Notice shall be effective
upon being personally delivered or upon being sent by overnight courier or upon
being deposited in the United States Mail as aforesaid. The time period in
which a response to such Notice must be given or any action taken with respect
thereto (if any), however, shall commence to run from the date of receipt if
personally delivered or sent by overnight courier, or if so deposited in the
United States Mail, the earlier of three (3) Business Days following such
deposit or the date of receipt as disclosed on the return receipt. Rejection
or other refusal to accept or the inability to deliver because of changed
address for which no notice was given shall be deemed to be receipt of the
Notice sent. By giving at least fifteen (15) days prior Notice thereof, the
Borrower, a Bank or Agent shall have the right from time to time and at any
time during the term of this Agreement to change their respective addresses and
each shall have the right to specify as its address any other address within
the United States of America.

Section XIX. RELATIONSHIP.
<PAGE>

The relationship between each Bank and the Borrower is solely that of a
lender and borrower, and nothing contained herein or in any of the other Loan
Documents shall in any manner be construed as making the parties hereto
partners, joint venturers or any other relationship other than lender and
borrower.

Section XX. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.

THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS
OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE INTERNAL LAWS
OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). THE BORROWER, THE GUARANTOR AND THE OTHER
ADDITIONAL PLEDGORS AGREE THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF
NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENT TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING
MADE UPON SUCH PERSON BY MAIL AT THE ADDRESS SPECIFIED IN Section 18. THE
BORROWER, THE GUARANTOR AND THE OTHER ADDITIONAL PLEDGORS HEREBY WAIVE ANY
OBJECTION THAT ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

Section XXI. HEADINGS.

The captions in this Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.

Section XXII. COUNTERPARTS.

This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.

Section XXIII. ENTIRE AGREEMENT, ETC.

The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to
the transactions contemplated hereby. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
Section 26.

Section XXIV. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.

EACH OF THE BORROWER, THE GUARANTOR AND THE OTHER ADDITIONAL PLEDGORS, THE
AGENT AND THE BANKS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE
BORROWER, THE GUARANTOR AND THE OTHER ADDITIONAL PLEDGORS (A) CERTIFY THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGE THAT THE
AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE
<PAGE>

WAIVERS AND CERTIFICATIONS CONTAINED IN THIS Section 24. BORROWER, THE
GUARANTOR AND THE OTHER ADDITIONAL PLEDGORS, ACKNOWLEDGES THAT IT HAS HAD AN
OPPORTUNITY TO REVIEW THIS Section 24 WITH ITS LEGAL COUNSEL AND THAT BORROWER
AGREES TO THE FOREGOING AS ITS FREE, KNOWING AND VOLUNTARY ACT.

Section XXV. DEALINGS WITH THE BORROWER.

The Banks and their affiliates may accept deposits from, extend credit to
and generally engage in any kind of banking, trust or other business with the
Borrower, the Managing Member, the Property Owner, the Guarantor and the
Additional Pledgors or any of their affiliates regardless of the capacity of
the Bank hereunder.

Section XXVI. CONSENTS, AMENDMENTS, WAIVERS, ETC.

Except as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given, and any term of
this Agreement or of any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower, the Property
Owner, the Guarantor and the Additional Pledgors of any terms of this Agreement
or such other instrument or the continuance of any Default or Event of Default
may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of the
Majority Banks. Notwithstanding the foregoing, none of the following may occur
without the written consent of each Bank: a change in the rate of interest on
and the term of the Notes; a change in the amount of the Commitments of the
Banks; a forgiveness, reduction or waiver of the principal of any unpaid Loan
or any interest thereon or fee payable under the Loan Documents; a change in
the amount of any fee payable to a Bank hereunder; the postponement of any date
fixed for any payment of principal of or interest on the Loan; an extension of
the Maturity Date; a change in the manner of distribution of any payments to
the Banks or the Agent; the release of the Borrower, the Guarantor, an
Additional Pledgor or any Collateral except as otherwise provided herein; an
amendment of the definition of Majority Banks or of any requirement for consent
by all of the Banks; an amendment of this Section 26; or an amendment of any
provision of this Agreement or the Loan Documents which requires the approval
of all of the Banks or the Majority Banks to require a lesser number of Banks
to approve such action. The provisions of Section 13 may not be amended
without the written consent of the Agent and the Majority Banks. No waiver
under the Loan Documents shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon. No course of dealing or delay
or omission on the part of the Agent or any Bank in exercising any right under
the Loan Documents shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in similar or other
circumstances.

Section XXVII. RIGHTS OF THIRD PARTIES

All conditions to the performance of the obligations of the Agent and the
Banks under this Agreement and the other Loan Documents are imposed solely and
exclusively for the benefit of the Agent and the Banks and no other Person
shall have standing to require satisfaction of such conditions in accordance
with their terms, and no other Person shall, under any circumstances, be deemed
to be a beneficiary of such conditions, any and all of which may be freely
waived in whole or in part by the Agent and the Banks at any time if in their
sole and absolute discretion they deems it desirable to do so.
<PAGE>

Section XXVIII. SEVERABILITY.

The provisions of this Agreement are severable, and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.

Section XXIX. TIME OF THE ESSENCE.

Time is of the essence with respect to each and every covenant, agreement
and obligation of the Borrower, the Agent and the Banks under this Agreement
and the other Loan Documents.

Section XXX. NO UNWRITTEN AGREEMENTS.

THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. ANY ADDITIONAL TERMS OF THE AGREEMENT BETWEEN
THE PARTIES ARE SET FORTH BELOW.

Section XXXI. JOINT AND SEVERAL LIABILITY.

Each of the Borrowers covenants and agrees that each and every covenant
and obligation of Borrower hereunder and under the other Loan Documents shall
be the joint and several obligations of each Borrower.

Section XXXII. NONRECOURSE OBLIGATIONS.

Anything contained in this Agreement or the other Loan Documents to the
contrary notwithstanding (except as provided below), Agent's and the Banks'
recourse for the payment and performance of all of the Obligation of Borrower
and the Additional Pledgors (but excluding Guarantor's liability under the
Guaranty and the Indemnity Agreement) under this Agreement or the other Loan
Documents shall be limited solely to the interest of such Person in the
Collateral, and none of such Persons, any partner, member, principal, officer,
controlling person, beneficiary, trustee, advisor, shareholder, employee, agent
or director of any such Person shall be personally liable for the performance
of any of the Obligations; provided, however, that (a) the foregoing limitation
on the personal liability of the Persons described above shall not impair the
validity of any lien, pledge, security interest or other encumbrance created by
the Loan Documents, or the right of Agent to foreclose and/or enforce any of
its rights or remedies in and to the Collateral upon the occurrence of an Event
of Default as provided in this Agreement or the other Loan Documents or be
deemed to be a release or impairment of the Obligations, (b) Borrower and
Guarantor will be fully and personally liable and subject to legal action for
(i) misapplication or misappropriation by any of the persons described above
(excluding agents) of insurance proceeds, condemnation proceeds, tenant
security deposits, rents and any other funds due Agent under the Loan
Documents, and (ii) fraud by any of the Persons described in Section 10.1(e) to
the full extent of any losses, damages and expenses of the Agent or the Banks
on account thereof and (c) Borrower shall be fully liable for any and all
losses or damages (including those resulting from diminution in value of the
Mortgaged Property) incurred by the Agent or the Banks relating to the presence
or release of any Hazardous Substances on or about the Mortgaged Property as a
result of the acts or omissions of Property Owner, Borrower, Managing Member or
<PAGE>

any Additional Pledgor or any principal, officer, member or partner of any of
such Persons from and after the date hereof. Nothing herein shall be deemed to
be a waiver of any right which Agent may have under Section 506(a), 506(b),
1111(b) or any other provision of the Bankruptcy Code or any successor thereto
or similar provisions under applicable state law to file a claim for the full
amount of the Obligations or to require that all the Collateral shall continue
to secure al of the Obligations in accordance with this Agreement and the other
Loan Documents. Noting herein shall relieve, reduce or impair any obligation of
Guarantor under the Guaranty or the Indemnity Agreement.
<PAGE>

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument as of the date first set forth above.

PARK AVENUE FINANCING COMPANY, LLC, a Delaware
limited liability company, by its managing member

By: PAFC Management, Inc., a Delaware
corporation

By: /s/ Stanley Stahl
-----------------------------------
Title:

[CORPORATE SEAL]

PAMC CO-MANAGER INC., a Delaware
corporation

By: /s/ Stanley Stahl
-----------------------------------
Title:

[CORPORATE SEAL]

PAFC MANAGEMENT, INC., a Delaware corporation

By: /s/ Stanley Stahl
-----------------------------------
Title:

[CORPORATE SEAL]

/s/ Stanley Stahl
-----------------------------------
STANLEY STAHL
<PAGE>

FIRST NATIONAL BANK OF BOSTON, individually and as
Agent

By: /s/ Mark E. Basham
-----------------------------------
Mark E. Basham, Managing Director

[BANK SEAL]

The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division

With a copy to:

The First National Bank of Boston
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Mark E. Basham
Fax: 770/390-8434
<PAGE>

WELLSFORD REAL PROPERTIES, INC.

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

[CORPORATE SEAL]

Wellsford Real Properties, Inc.
610 Fifth Avenue
7th Floor
New York, New York 10020
Attn: Gregory Hughes
Fax: 212/333-2323
<PAGE>

EXHIBIT A

LEGAL DESCRIPTION
<PAGE>

EXHIBIT B

FORM OF NOTE

$______________ ____________, 1997

FOR VALUE RECEIVED, the undersigned PARK AVENUE FINANCING COMPANY, LLC, a
Delaware limited liability company, and PAMC CO-MANAGER INC., a Delaware
corporation, hereby jointly and severally promise to pay to
_______________________ _______________________________________ or order, in
accordance with the terms of that certain Credit Agreement dated as of April
__, 1997 (the "Credit Agreement"), as from time to time in effect, among the
undersigned, The First National Bank of Boston, for itself and as Agent, such
other Banks as may be from time to time named therein, the Additional Pledgors
and Guarantor, to the extent not sooner paid, on or before the Maturity Date,
the principal sum of _________________________
________________________________________________ DOLLARS ($___________), or
such amount as may be outstanding hereunder with daily interest from the date
hereof, computed as provided in the Credit Agreement, on the principal amount
hereof from time to time unpaid, at a rate per annum on each portion of the
principal amount which shall at all times be equal to the rate of interest
applicable to such portion in accordance with the Credit Agreement, and with
interest on overdue principal and, to the extent permitted by applicable law,
on overdue installments of interest and late charges at the rates provided in
the Credit Agreement. Unpaid interest shall be added to the outstanding
principal balance hereof as provided in the Credit Agreement. Interest shall
be payable on the dates specified in the Credit Agreement, except that all
accrued interest shall be paid at the stated or accelerated maturity hereof or
upon the prepayment in full hereof. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.

Payments hereunder shall be made to The First National Bank of Boston, as
Agent for the payee hereof, 100 Federal Street, Boston, Massachusetts 02110.

This Note is one of one or more Notes evidencing borrowings under and is
entitled to the benefits and subject to the provisions of the Credit Agreement.
The principal of this Note may be due and payable in whole or in part prior to
the maturity date stated above and is subject to mandatory prepayment in the
amounts and under the circumstances set forth in the Credit Agreement, and may
be prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement.

Notwithstanding anything in this Note to the contrary, all agreements between
the undersigned Borrower and the Banks and the Agent, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of acceleration of the maturity of any of the
Obligations or otherwise, shall the interest contracted for, charged or
received by the Banks exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, interest would otherwise be payable
to the Banks in excess of the maximum lawful amount, the interest payable to
the Banks shall be reduced to the maximum amount permitted under applicable
law; and if from any circumstance the Banks shall ever receive anything of
value deemed interest by applicable law in excess of the maximum lawful amount,
an amount equal to any excessive interest shall be applied to the reduction of
the principal balance of the Obligations of the undersigned Borrower and to the
<PAGE>

payment of interest or, if such excessive interest exceeds the unpaid balance
of principal of the Obligations of the undersigned Borrower, such excess shall
be refunded to the undersigned Borrower. All interest paid or agreed to be
paid to the Banks shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period until
payment in full of the principal of the Obligations of the undersigned Borrower
(including the period of any renewal or extension thereof) so that the interest
thereon for such full period shall not exceed the maximum amount permitted by
applicable law. This paragraph shall control all agreements between the
undersigned Borrower and the Banks and the Agent.

In case an Event of Default shall occur, the entire principal amount of this
Note may become or be declared due and payable in the manner and with the
effect provided in said Credit Agreement.

This Note shall be governed by and construed in accordance with the internal
laws of the State of New York (without giving effect to the conflict of laws
rules of any jurisdiction).

The liability and obligations of the undersigned makers and their respective
officers, members, shareholders, partners or other person or entity having an
interest therein to perform and observe the obligations contained in this Note
shall be subject and limited by the terms of Section 32 of the Credit
Agreement.

The undersigned makers and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest, notice of intention to accelerate the
indebtedness evidenced hereby, notice of acceleration of the indebtedness
evidenced hereby and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, except as
specifically otherwise provided in the Credit Agreement, and assent to
extensions of time of payment or forbearance or other indulgence without
notice.

IN WITNESS WHEREOF the undersigned have duly executed this Note under seal as
of the day and year first above written.

PARK AVENUE FINANCING COMPANY, LLC, a Delaware
limited liability company, by its managing member

By: PAFC Management, Inc., a Delaware
corporation

By: __________________________________
Title:

[CORPORATE SEAL]

PAMC CO-MANAGER INC., a Delaware
corporation

By: _______________________________________
Title:
<PAGE>

[CORPORATE SEAL]
<PAGE>

EXHIBIT C

APPROVED BUDGET
<PAGE>

SCHEDULE 1

BANKS AND COMMITMENTS

Commitment
Commitment Percentage

The First National Bank of $60,000,000.00 75.0%
Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division

Wellsford Real Properties, Inc. $20,000,000.00 25.0%
610 Fifth Avenue
7th Floor
New York, New York 10020
______________ _____
$80,000,000.00 100%
<PAGE>

SCHEDULE 6.7

LITIGATION

NONE
<PAGE>

SCHEDULE 6.17

ERISA PLANS

NONE
<PAGE>

SCHEDULE 6.24

MORTGAGE LOAN DOCUMENTS

<PAGE>

EXHIBIT 10.14

ASSIGNMENT OF MEMBER'S INTEREST

THIS ASSIGNMENT OF MEMBER'S INTEREST (this "Assignment"), made as of the
25th day of April, 1997, by PAFC MANAGEMENT, INC., a Delaware corporation
("Holding Company Managing Member"), and STANLEY STAHL, a resident of the State
of New York ("Stahl"; Holding Company Managing Member and Stahl are hereinafter
referred to collectively as "Assignors"), to THE FIRST NATIONAL BANK OF BOSTON,
a national banking association ("FNBB"), as Agent for itself and the other
Banks from time to time party to the Credit Agreement (as hereafter defined)
(FNBB, in its capacity as Agent, is hereinafter referred to as "Lender").

W I T N E S S E T H:

WHEREAS, Assignors are the sole members of Park Avenue Financing Company,
LLC, a limited liability company formed under the laws of the State of Delaware
(the "Company"); and

WHEREAS, the Company is presently governed by that certain Certificate of
Formation filed December 9, 1996 with the Delaware Secretary of State, and that
certain Operating Agreement dated as of April 25, 1997 (collectively the
"Organizational Agreements"); and

WHEREAS, pursuant to that certain Credit Agreement dated of even date
herewith among the Company, PAMC Co-Manager Inc. ("Co-Managing Member"; the
Company and Co-Managing Member are hereinafter referred to collectively as
"Borrower"), FNBB, the other lenders that are a party thereto, Lender and
certain other parties (as the same may be varied, extended, supplemented,
consolidated, amended, replaced, renewed, modified or restated, the "Credit
Agreement"), the Banks have agreed to provide a loan to the Borrower of
$80,000,000.00 (the "Loan"), which Loan is evidenced by those certain Notes
made by the Borrower to the order of the Banks in the aggregate principal face
amount of $80,000,000.00 (such Notes, and each other note as may be issued
under the Credit Agreement, as the same may be varied, extended, supplemented,
consolidated, amended, replaced, renewed, modified or restated, is hereinafter
referred to collectively as the "Note"); and

WHEREAS, Lender has required, as a condition to the making of the Loan to
the Borrower, that Assignors execute this Assignment to secure the obligations
of the Borrower under the Note, the Credit Agreement and certain other
agreements; and

WHEREAS, the extension of the Loan by the Banks to the Borrower shall
inure to the direct interest and advantage of Assignors;

NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00), and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby
covenant and agree as follows:

1. Definitions. Capitalized terms used herein that are not otherwise
defined herein shall have the meaning set forth in the Credit Agreement.
<PAGE>

2. Grant of Security Interest. As security for the payment and
performance by Assignors of each and all of the duties, responsibilities and
obligations under this Assignment, and the duties, responsibilities and
obligations of the Borrower under the Credit Agreement, the Note and any and
all agreements evidencing, securing or otherwise relating to the obligations
evidenced by the Note and the Credit Agreement (this Assignment, the Credit
Agreement, the Note and such other agreements, together with any and all
renewals, modifications, consolidations and extensions thereof, are hereinafter
referred to collectively as the "Loan Documents"; and said duties,
responsibilities and obligations of Assignors and the Borrower are hereinafter
referred to collectively as the "Obligations"), Assignors do hereby transfer,
assign, pledge, convey and grant to Lender, and does hereby grant a security
interest to Lender in, all of Assignor's right, title and interest in and to
the following:

(a) All right, title, interest, claims or rights of Assignors now or
hereafter in, to or against the Company (including, without limitation, the
Assignors' membership interest in the Company, the interest of Assignors in and
to the Organizational Agreements, the capital of the Company, and the property
and assets of the Company and any rights pertaining thereto), which interest is
evidenced by Certificate Nos. 1 and 2 (collectively the "Certificates"),
together with any and all other securities, cash, certificates or other
property, option or right in respect of, in addition to or substitution or
exchange for the Certificates, or other property at any time and from time to
time receivable or otherwise distributed in respect of or in exchange for all
or any thereof; and

(b) All right, title and interest of Assignor, if any, in and to the
Cash Collateral Agreement or any account maintained or funds held pursuant
thereto; and

(c) Any and all profits, proceeds, accounts, income, distributions,
payments upon dissolution or liquidation of the Company or the sale, financing
or refinancing of any of the property or assets of the Company, proceeds of a
casualty or condemnation, return of capital, repayment of loans, and payments
of any kind or nature whatsoever, now or hereafter distributable or payable by
the Company or any member of the Company (in such member's capacity as a
member) to Assignors, by reason of Assignors' interest in the Company or
otherwise, or now or hereafter distributable or payable to Assignors from any
other source by reason of Assignors being a member in the Company, or on
account of any interest in or claim or rights against the Company held by
Assignors, or by reason of services performed by Assignors for or on behalf of
the Company or with respect to the assets of the Company, and any and all
proceeds from any transfer, assignment or pledge of any interest of Assignors
in, or claim or right against, the Company (regardless of whether such
transfer, assignment or pledge is permitted under the terms hereof or the other
Loan Documents), and all claims, chooses in action or things in action now or
hereafter arising against the Company; and

(d) All accounts, contract rights and general intangibles now or
hereafter arising from any of the foregoing; and

(e) All notes or other documents or instruments now or hereafter
evidencing or securing any of the foregoing; and

(f) All right of Assignors to collect and enforce payments
distributable or payable by the Company or any member of the Company to
Assignors pursuant to the terms of the Organizational Agreements; and
<PAGE>

(g) All documents, writings, leases, books, files, records, computer
tapes, programs, ledger books and ledger pages arising from or used in
connection with any of the foregoing; and

(h) All renewals, extensions, additions, substitutions or
replacements of any of the foregoing; and

(i) All powers, options, rights, privileges and immunities
pertaining to any of the foregoing; and

(j) All proceeds of any of the foregoing and all cash, security or
other property distributed on account of any of the foregoing.

All of the foregoing described in this paragraph 2 are hereinafter referred to
collectively as the "Collateral". The items described in (a), above, are
sometimes hereinafter referred to as the "Member Interests"; and the items
described in (b) - (j), above, are sometimes hereinafter referred to
collectively as the "Distributions."

3. Obligations Secured. This Assignment secures the payment and
performance by Assignors and the Borrower of the Obligations.

4. Collection of Distributions.

(a) It is acknowledged and agreed by the parties hereto that Lender
shall have sole and exclusive possession of the Distributions and that this
Assignment constitutes a present, absolute and current assignment of all the
Distributions and is effective upon the execution and delivery hereof.
Payments under or with respect to the Distributions shall be made as follows:

(i) Assignors shall have no right to receive payments made
under or with respect to the Distributions, and all such payments
shall be delivered directly by the Company to Lender.

(ii) If Assignors shall receive any payments made under or with
respect to the Distributions, Assignors shall hold all such payments
in trust for Lender, will not co-mingle such payments with other
funds of Assignors, and will immediately pay and deliver in kind, all
such payments directly to Lender for application by Lender in
satisfaction of the Obligations in such order as set forth in the
Credit Agreement.

(iii) Assignors hereby agree for the benefit of the Company that
all payments actually received by Lender shall be deemed payments to
Assignors by the Company. Lender shall apply any and all such payments
actually received by Lender in satisfaction of the Obligations in such
order as set forth in the Credit Agreement. Lender shall return to
Assignors that portion of any payments actually received by Lender
from the Company which Lender determines, in the exercise of its sole
and absolute discretion but in good faith, is not needed to repay the
Obligations.

(iv) In furtherance of the foregoing, Assignors do hereby notify
and direct the Company and its members that all payments under or
with respect to the Distributions shall be made directly to Lender at
the address of Lender set forth in the Cash Collateral Agreement.
<PAGE>

Notwithstanding anything in this Paragraph 4 to the contrary, so long as no
Event of Default has occurred, Assignors shall have a license (revocable upon
the occurrence of an Event of Default) to receive such amounts as are
distributable to Assignors following a distribution to Borrower pursuant to the
terms of the Cash Collateral Agreement; it being understood and agreed that
such license shall not extend to other amounts payable or distributable to
Assignors, including, without limitation, any amounts arising from the sale,
transfer, assignment conveyance, option or other disposition of, or any
mortgage, hypothecation, encumbrance, financing or refinancing of any interest
of Assignors in the Company, any of the assets or properties of the Company or
any assets or properties of any other Person in which the Company directly or
indirectly owns an interest (regardless of whether such event is permitted
under the terms of the Loan Documents).

(b) Assignors shall cause the Company promptly to distribute all net
proceeds of the sale, transfer, assignment, conveyance, option or other
disposition of, or any mortgage, hypothecation, encumbrance, financing or
refinancing of, any of its assets or properties, and any and all other
Distributions distributable or payable by the Company or any member thereof
under the terms of the Organizational Agreements.

(c) Each Assignor hereby irrevocably designates and appoints Lender
its true and lawful attorney-in-fact, which appointment is coupled with an
interest, either in the name of Lender, or in the name of such Assignor, at
such Assignor's sole cost and expense, and regardless of whether Lender becomes
a member in the Company or not, to take any or all of the following actions:

(i) to ask, demand, sue for, attach, levy, settle, compromise,
collect, compound, recover, receive and give receipt and acquittances
for any and all Collateral and to take any and all actions as Lender
may deem necessary or desirable in order to realize upon the
Collateral, or any portion thereof, including, without limitation,
making any statements and doing and taking any actions on behalf of
such Assignor which are otherwise required of such Assignor under the
terms of any agreement as conditions precedent to the payment of the
Distributions, and the right and power to receive, endorse, assign
and deliver, in the name of such Assignor, any checks, notes, drafts,
instruments or other evidences of payment received in payment of or
on account of all or any portion of the Collateral, and Assignors
hereby waive presentment, demand, protest and notice of demand,
protest and non-payment of any instrument so endorsed; and

(ii) to institute one or more actions against the Company or any
member thereof in connection with the collection of the Distributions,
to prosecute to judgment, settle or dismiss any such actions, and to
make any compromise or settlement deemed desirable, in Lender's sole
and absolute discretion, with respect to such Distributions, to extend
the time of payment, arrange for payment in installments or otherwise
modify the terms of the Organizational Agreements with respect to the
Distributions or release the Company or any member thereof from their
respective obligations to pay any Distribution, without incurring
responsibility to, or affecting any liability of, Assignors under the
Organizational Agreements;

or be in any way responsible for the preservation, maintenance, collection of
or realizing upon the Collateral, or any portion thereof, or any of Assignors'
rights therein. The foregoing appointment is irrevocable and continuing and
any such rights, powers and privileges shall be exclusive in Lender, its
successors and assigns until this Assignment terminates as provided in
Paragraph 14, below.

(d) Notwithstanding anything herein to the contrary, Assignors
hereby authorize and direct the Company and the members thereof to pay all
Distributions from or relating to any sale, transfer, assignment, conveyance,
option or other disposition of, or any pledge, mortgage, encumbrance, financing
or refinancing of, any of the Collateral or the Mortgaged Property directly to
Lender (regardless of whether such event is permitted under the terms of the
Loan Documents), and all such Distributions received by Assignors shall be
promptly delivered to Lender in the same form as received, with the addition
only of such endorsements and assignments as may be necessary to transfer title
to Lender and, pending such delivery, all such Distributions shall be held in
trust for Lender. Lender shall apply any such payments actually received by
Lender in satisfaction of the Obligations in such order as set forth in the
Credit Agreement.

5. Warranties and Covenants. Assignors do hereby warrant and represent
to, and covenant and agree with, Lender as follows:

(a) All duties, obligations and responsibilities required to be
performed by Assignors as of the date hereof under the Organizational
Agreements have been performed, and no default or condition which with the
passage of time or the giving of notice, or both, would constitute a default
exists under the Organizational Agreements.

(b) A true, correct and complete copy of the Organizational
Agreements, together with all amendments thereto, is attached hereto as
Exhibit "A". The Organizational Agreements are in full force and effect.
Except for the Loan Documents and the Mortgage Loan Documents, neither the
Company nor either of the Assignors is a party to or is bound by any indenture,
contract or other agreement which purports to prohibit, restrict, limit, or
control the transfer or pledge of the Collateral, the exercise of voting rights
with respect to the Company or the management of the Company.

(c) Assignors are and, except in the event of a Permitted Transfer,
shall remain the sole, lawful, beneficial and record owner of the Member
Interests and the Distributions, free and clear of all liens, restrictions,
claims, pledges, encumbrances, charges, claims of third parties and rights of
set-off or recoupment whatsoever (other than those in favor of Lender
hereunder), and Assignors have the full and complete right, power and authority
to create a security interest in the Collateral in favor of Lender, in
accordance with the terms and provisions of this Assignment. The Certificates
have been duly authorized and validly issued, and is fully paid and non-
assessable. Assignors are not and will not become a party to or otherwise be
bound by any agreement, other than the Loan Documents and the Mortgage Loan
Documents, which restricts in any manner the rights of any present or future
holder of any of the Certificates with respect thereto.

(d) Assignors are the sole members of the Company, and no other
Person owns any legal, equitable or beneficial interest in the Company. The
Member Interests are not represented or otherwise evidenced by any certificate
or other document other than the Certificates.
<PAGE>

(e) Upon the delivery to Lender of the Certificates, this Assignment
creates a valid and binding first priority security interest in the Collateral
securing the payment and performance of the Obligations and the performance by
Assignors of their obligations hereunder and by the Borrower of its obligations
under the Loan Documents, and upon the filing of UCC Financing Statements with
the Secretary of State's Office of the State of New York and the Office of the
Register of the City of New York, New York County all filings and other actions
necessary to perfect and protect such security interests shall have been duly
made and taken. Neither Assignors nor the Company have performed or will
perform any acts which might prevent Lender from enforcing any of the terms and
conditions of this Agreement or which would limit Lender in any such
enforcement.

(f) All original notes and other documents or instruments
evidencing, constituting, guaranteeing or securing any of the Distributions or
any right to receive the Distributions have been endorsed to and delivered to
Lender.

(g) For the purposes of Article 9-401 of the New York Uniform
Commercial Code, the principal place of business of Holding Company Managing
Member and the residence of Stahl is located in New York County, New York. In
the event that Holding Company Managing Member has more than one (1) place of
business in the State of New York, its chief executive office is located in New
York County, New York. In order to perfect the pledge and security interests
granted herein against Assignors, U.C.C. Financing Statements must be filed
with the Secretary of State of the State of New York and the Office of the
Register of the City of New York, New York County.

(h) Each Assignor consents to the execution and delivery of this
Assignment by the other Assignor and the admission of Lender or any other
purchaser of the "Member Interests" assigned pursuant thereto upon a
foreclosure sale or conveyance in lieu thereof or subsequent conveyance thereof
as a substitute member of the Company and consents to Lender or such other
purchaser acting as the managing member of the Company, with all of the rights
and privileges of a member under the Organizational Agreements, in the event
that Lender exercises its rights under such Assignment and Lender or such other
purchaser succeeds to ownership of all or any portion of such Member Interests.
Following any such transfer, Assignors shall take such actions as may be deemed
necessary by Lender or such purchaser to reflect such assignment in the records
of the Company.

6. General Covenants. Assignors covenant and agree that, so long as
this Assignment is continuing:

(a) Except for a Permitted Transfer, Assignors shall not, without
the prior written consent of Lender, which consent may be withheld by Lender in
its sole and absolute discretion, directly, indirectly or by operation of law,
sell, transfer, assign, dispose of, pledge, convey, option, mortgage,
hypothecate or encumber any of the Collateral, nor shall there occur, directly,
indirectly or by operation of law, without the prior written consent of Lender
in each instance, which consent may be withheld by Lender in its sole and
absolute discretion, any sale, assignment, transfer, conveyance, disposition,
option, mortgage, hypothecation, pledge or other encumbrance of any interest in
Holding Company Managing Member by Guarantor.

(b) Assignors shall at all times defend the Collateral against all
claims and demands of all persons at any time claiming any interest in the
Collateral adverse to Lender's interest in the Collateral as granted hereunder.
<PAGE>

(c) So long as this Assignment remains in effect, Assignors shall
not modify, amend, cancel, release, surrender, terminate or permit the
modification, amendment, cancellation, release, surrender or termination of,
the Organizational Agreements, or dissolve, liquidate or permit the
dissolution, liquidation or expiration of the Company or the Organizational
Agreements, or seek the partition of any of the assets of the Company without
in each instance the prior written consent of Lender, which consent may be
withheld by Lender in its sole and absolute discretion; provided, however, that
Lender shall not unreasonably withhold its consent to any modification or
amendment of the Organizational Agreements which does not affect or have an
impact on the management of the Company, any voting rights, the rights to
receive Distributions, any provisions of the Organizational Agreements
concerning actions that the Company is either authorized to do or that are
ultra vires, or otherwise materially affect the Company, the Collateral or the
rights and benefits afforded to Lender pursuant to this Agreement, or that are
required by the Rating Agency pursuant to the Mortgage (provided that with
respect to any changes that are requested by the Rating Agency, Assignors shall
execute and deliver to Lender such agreements or amendments to the Loan
Documents as Lender may reasonably require) (such modifications or amendments
described in the foregoing proviso are hereinafter referred to as the "Minor
Amendments").

(d) (i) Assignors shall perform all of their respective duties,
responsibilities and obligations under the Organizational Agreements to the
extent they have authority to do so hereunder and with respect to the
Collateral, and shall diligently and in good faith protect the value of the
Collateral. Assignors shall not permit any change in the Managing Member of
the Company to occur. Except with respect to a Permitted Transfer, Assignors
shall not, without the prior written consent of Lender, which consent may be
withheld by Lender in its sole and absolute discretion, take any action which
could result in the sale, reduction, cancellation, dilution, diminution,
conversion or withdrawal of any interest of either of Assignors in the Company,
or omit to take any action necessary to prevent any such sale, reduction,
cancellation, dilution, diminution or conversion, or otherwise take any action
or omit to take any action that would or could, in the exercise of Lender's
judgment, jeopardize or diminish the security afforded to Lender by the
Collateral. Without limiting the foregoing, Assignors shall not consent to or
permit to occur the admission of any new member in the Company, the creation of
any new class of interest in the Company or the issuance, directly or
indirectly, of any other equity interest in the Company.

(ii) Assignors shall not, without the prior written consent of
Lender, which consent may be withheld by Lender in its sole and absolute
discretion, take any action which could result in the sale, reduction,
cancellation, dilution, diminution or conversion of any interest of Guarantor
in Holding Company Managing Member. Without limiting the foregoing, Assignors
shall not, without the prior written consent of Lender, which consent may be
withheld by Lender in its sole and absolute discretion, consent to or permit
to occur the admission of any new shareholder in Holding Company Managing
Member, the creation of any new class of interest in the Holding Company
Managing Member or the issuance, directly or indirectly, of any other equity
interest in Holding Company Managing Member.

(e) Assignors shall pay all taxes and other charges against the
Collateral, shall not use the Collateral illegally, and shall not suffer to
exist any loss, theft, damage or destruction of the Collateral and shall suffer
<PAGE>

to exist no levy, seizure or attachment of the Collateral.

(f) Assignors, at the request of Lender, shall take such actions as
Lender reasonably may require to enforce the terms of the Organizational
Agreements or any other contract, agreement or instrument included in, giving
rise to, creating, establishing, evidencing or relating to the Collateral or to
collect or enforce any claim for payment or other right or privilege assigned
to Lender hereunder.

(g) Assignors authorize Lender, at the expense of Assignors, to
execute and file any financing statement or statements deemed necessary by
Lender to perfect its security interest in any of the Collateral. Any such
financing statement may be signed by Lender alone. Assignors will sign and
deliver any financing statements and other documents, and perform such other
acts as Lender may deem necessary or desirable from time to time to establish
and maintain in favor of Lender, valid and perfected security interests in the
Collateral, free of all other liens, encumbrances, security interests and
claims other than as permitted by the terms of this Assignment. Assignors
shall also furnish to Lender such evidence as it reasonably may require to
confirm the value of the Collateral, and shall do anything else Lender may
reasonably require from time to time to establish a valid security interest in
and to further protect and perfect its security interest in the Collateral.

(h) Except for those items of the Collateral that are delivered to
Lender as provided herein, the Collateral, and all records of Assignors
relative to the Collateral, are and will be kept at the office of Assignors
located in New York County, New York. Assignors shall give Lender not fewer
than thirty (30) days prior written notice of any proposed change in the name
of Holding Company Managing Member or the Company and any proposed change in
the location of the Collateral or of such records, and Assignors will not,
without the prior written consent of Lender, move the Collateral or such
records to a location outside of New York County, New York or keep duplicate
records with respect to the Collateral at any address outside such county.
Nothing contained in this subparagraph shall be construed so as to prevent
Assignors from keeping material abstracted from the books and records described
herein at any of its offices as necessity or convenience dictates. Assignors
shall permit the Lender or any representative designated by the Lender, at the
Assignors' expense, to examine the books and accounts of the Assignors (and to
make copies thereof and extracts therefrom) and to discuss the affairs,
finances and accounts of the Assignors with, and to be advised as to the same
by, its members and officers, all at such reasonable times and intervals as the
Lender may reasonably request. The Lender shall use good faith efforts to
coordinate such visits and inspections so as to minimize the interference with
and disruption to Assignors' normal business operations.

(i) Without limiting any other terms of the Loan Documents
prohibiting or restricting the ability of the Company to incur Indebtedness, if
any amounts are due from the Company to Assignors and the obligations to repay
such amount is to be evidenced by a separate document or instrument, then as
evidence of such obligations, Assignors shall cause the Company to issue
Assignors, as the evidence of any obligations of the Company to pay
Distributions to Assignors in the future, a promissory note bearing the legend
attached hereto as Exhibit "B" and which note shall provide that all payments
due under such promissory note are to be paid directly to Lender as required by
and applied as provided in the Loan Documents until the Obligations are paid in
full or this Assignment is otherwise terminated as provided herein. No other
evidence of such obligations shall be executed by the Company to Assignors.
<PAGE>

(j) Assignors shall promptly deliver to Lender any note or other
document or instrument entered into after the date hereof which evidences,
constitutes, guarantees or secures any of the Distributions or any right to
receive a Distribution, which notes or other documents and instruments shall be
accompanied by such endorsements or assignments as Lender may require to
transfer title to Lender.

(k) Assignors will provide to Lender such documents and reports
respecting the Collateral in such form and detail as Lender reasonably may
request from time to time.

(l) Anything herein to the contrary notwithstanding, (i) Assignors
shall remain liable under the Organizational Agreements and all other
contracts, agreements and instruments included in, giving rise to, creating,
establishing, evidencing or relating to the Collateral to the extent set forth
therein to perform all of its duties and obligations (including, without
limitation, the making of any contributions to the capital of the Company or
the payment of any other sum to or on behalf of the Company) to the same extent
as if this Assignment had not been executed, (ii) the exercise by Lender of any
of its rights hereunder shall not release Assignors from any of their
respective duties or obligations under the Organizational Agreements or any
such contracts, agreements and instruments (other than those duties or
obligations first arising after Lender or its nominee acquires title to the
Collateral following a foreclosure), and (iii) Lender shall not have any
obligation or liability under the Organizational Agreements or any such
contract, agreement or instrument by reason of this Assignment, nor shall
Lender be obligated to perform any of the obligations or duties of Assignors
thereunder or to take any action to collect or enforce any claim for payment or
other right or privilege assigned to Lender hereunder.

(m) If Assignors shall at any time be entitled to receive or shall
receive any cash, certificate or other property, option or right, upon, in
respect of, as an addition to, or in substitution or exchange for any of the
Collateral, whether for value paid by Assignors or otherwise, the Assignors
agree that the same shall be deemed to be Collateral and shall be delivered
directly to Lender in each case, accompanied by proper instruments of
assignment duly executed by Assignors in such a form as reasonably may be
required by Lender, to be held by Lender subject to the terms hereof, as
further security for the Obligations (except as otherwise provided herein with
respect to the application of the foregoing to the Obligations). If Assignors
receive any of the foregoing directly, Assignors agree to hold such cash or
other property in trust for the benefit of Lender, and to surrender such cash
or other property to Lender immediately.

7. Covenants with Respect to Indebtedness, Operations, Fundamental
Changes of Holding Company Managing Member. Holding Company Managing Member
represents, warrants and covenants as of the date of hereof and until such time
as the Obligations are paid in full, that Holding Company Managing Member:

(a) does not own and will not own any encumbered asset other than
its interest as a member in the Company (which will only be encumbered by liens
in favor of the Agent);

(b) is not engaged and will not engage in any business other than
the ownership and operation of its interest as a member in the Company;

(c) does not and will not have any subsidiaries (whether the same
would constitute an entity that could be consolidated on Holding Company
<PAGE>

Managing Member's financial statements or a minority interest) other than the
Company;

(d) will not enter into any contract or agreement with any member,
principal or affiliate of the Holding Company Managing Member or Company or any
affiliate of any such member, principal or affiliate, except upon terms and
conditions that are intrinsically fair and substantially similar to those that
would be available on an arms-length basis with third parties other than an
affiliate;

(e) has not incurred and will not incur any Indebtedness, other than
the Obligations and other than current liabilities of Holding Company Managing
Member incurred in the ordinary course of business in connection with normal
purchases of goods and services; no other debt may be secured (senior,
subordinate or pari passu) by any right or asset of Holding Company Managing
Member;

(f) has not made and will not make any loans or advances to any
third party (including the Property Owner, the Company or any affiliate of the
Company or any member of the Company);

(g) is and will remain solvent and pay its debts and liabilities
(including, without limitation, employment and overhead expenses) from its
assets as the same shall become due;

(h) has done or caused to be done and will do all things necessary
to observe company, corporate and partnership formalities (as applicable) and
to preserve its existence, and will not, nor will any member or shareholder
thereof, amend, modify or otherwise change its Organizational Agreements in a
manner which adversely affects Holding Company Managing Member's or such
member's or shareholder's existence as a single-purpose entity;

(i) will conduct and operate its business as presently conducted and
operated;

(j) will maintain books and records and bank accounts separate from
those of its affiliates, including its members;

(k) will be, and at all times will hold itself out to the public as,
a legal entity separate and distinct from any other entity (including any
affiliate thereof, including any member or any affiliate of any member of the
Company, Holding Company Managing Member or any Guarantor) and shall maintain
and use separate stationery, invoices and checks;

(l) will file its own separate tax returns;

(m) will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;

(n) will not, nor shall any member, shareholder or affiliate, seek
the dissolution or winding up, in whole or in part, of Assignor or Holding
Company Managing Member;

(o) will not enter into any transaction of merger, consolidation or
other business combination, or acquire by purchase or otherwise all or
substantially all of the business or assets of, or any stock or beneficial
ownership of, any entity;
<PAGE>

(p) will not commingle the funds and other assets of Holding Company
Managing Member with those of any member, any affiliate or any other Person;

(q) has and will maintain its assets in such a manner that it is not
costly or difficult to segregate, ascertain or identify its individual assets
from those of any affiliate or any other Person;

(r) does not and will not hold itself out to be responsible for the
debts or obligations of any other Person;

(s) shall comply with the provisions of its Organizational
Agreements; and

(t) shall be organized and conduct its business so that, and
otherwise cause, the assumptions of fact made with respect to Borrower,
Managing Member, Holding Company Managing Member, Guarantor, the Property Owner
and 277 Park Avenue Finance Corp. in that certain opinion letter dated the date
hereof delivered by Latham & Watkins with respect to non-consolidation issues,
delivered in connection with the execution and delivery of the Loan Documents
shall be true and correct, in all material respects at all times.

8. Events of Default. An Event of Default shall exist hereunder upon
the occurrence of any of the following:

(a) Any warranty, representation or statement made by or on behalf
of Assignors in this Assignment proves untrue or misleading in any material
respect and such warranty, representation or statement is not cured within the
cure period permitted in Section 7.18 of the Credit Agreement; or

(b) Assignors shall fail to duly and fully comply with any covenant,
condition or agreement in Paragraph 6(a), 6(c), 6(d), 6(e), 6(i), 6(j), 6(m) or
7 of this Assignment; or

(c) Assignors shall fail to duly and fully comply with any other
covenant, condition or agreement of this Assignment (other than those specified
above in this Paragraph 8) and the same is not cured within thirty (30) days
following receipt of written notice of such default; or

(d) The occurrence of an Event of Default under any of the Loan
Documents.

Notwithstanding anything contained in Paragraph 8(b) above to the contrary,
(i) no Event of Default shall exist hereunder upon the failure of the Assignors
to obtain the prior consent of the Lender to a Minor Amendment pursuant to
Paragraph 6(c) unless the Assignors fail to cure such default within five (5)
days following receipt of written notice of such default, (ii) no Event of
Default shall exist hereunder upon the failure of Assignors to perform all of
their respective duties, responsibilities and obligations under the
Organizational Agreements as provided in Paragraph 6(d) unless the Assignors
fail to cure such default within five (5) days following receipt of written
notice of such default, and (iii) no Event of Default shall exist upon the
failure of Assignors to pay any taxes against the Collateral involving
individually or in the aggregate an amount not to exceed $500,000.00 unless the
Assignors fail to cure such default within five (5) days following receipt of
written notice of such default (but in any event prior to the commencement of
any proceeding to foreclose any lien that may attach as security therefor), or
in the event of any levy or attachment of any of the Collateral for a claim
<PAGE>

individually or in the aggregate of less than $500,000.00 unless Assignors fail
to cure such default within the earlier to occur of (A) five (5) days following
receipt of written notice of such default from Lender or (B) five (5) days
following the date of such levy or attachment.

9. Remedies.

(a) Upon the occurrence of any Event of Default, Lender may take any
action deemed by Lender to be necessary or appropriate to the enforcement of
the rights and remedies of Lender under this Assignment and the Loan Documents,
including, without limitation, the exercise of its rights and remedies with
respect to any or all of the Member Interests. The remedies of Lender shall
include, without limitation, all rights and remedies specified in the Loan
Documents and this Assignment, all remedies of Lender under applicable general
or statutory law, and the remedies of a secured party under the Uniform
Commercial Code as enacted in the State of New York, regardless of whether the
Uniform Commercial Code has been enacted or enacted in that form in any other
jurisdiction in which such right or remedy is asserted. Any notice required by
law, including, but not limited to, notice of the intended disposition of all
or any portion of the Collateral, shall be reasonably and properly given in the
manner prescribed for the giving of notice herein, and, in the case of any
notice of disposition, if given at least ten (10) calendar days prior to such
disposition. Lender may require Assignors to assemble the Collateral and make
it available to Lender at any place to be designated by Lender which is
reasonably convenient to both parties. It is expressly understood and agreed
that Lender shall be entitled to dispose of the Collateral at any public or
private sale, and that Lender shall be entitled to bid and purchase at any such
sale. In the event that Lender is the successful bidder at any public or
private sale of any note or other document or instrument evidencing Assignors'
right to receive a Distribution, Lender shall be entitled to credit the amount
bid by Lender against the obligations evidenced by such note, document or
instrument rather than the obligations evidenced by the Note. To the extent
the Collateral consist of marketable securities, Lender shall not be obligated
to sell such securities for the highest price obtainable, but shall sell them
at the market price available on the date of sale. Lender shall not be
obligated to make any sale of the Collateral if it shall determine not to do so
regardless of the fact that notice of sale of the Collateral may have been
given. Lender may, without notice or publication, adjourn any public sale from
time to time by announcement at the time and place fixed for sale, and such
sale may, without further notice, be made at the time and place to which the
same was so adjourned. Each such purchaser at any such sale shall hold the
Collateral sold absolutely free from claim or right on the part of Assignors.
In the event that any consent, approval or authorization of any governmental
agency or commission will be necessary to effectuate any such sale or sales,
Assignors shall execute all such applications or other instruments as Lender
may deem reasonably necessary to obtain such consent, approval or
authorization. Lender may notify any account debtor or obligor with respect to
the Collateral to make payment directly to Lender, and may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the
Collateral as Lender may determine whether or not the Obligations or the
Collateral are due, and for the purpose of realizing Lender's rights therein,
Lender may receive, open and dispose of mail addressed to Assignors and endorse
notes, checks, drafts, money orders, documents of title or other evidences of
payment, shipment or storage of any form of Collateral on behalf and in the
name of either Assignor, as its attorney-in-fact. In addition, each Assignor
hereby irrevocably designates and appoints Lender its true and lawful attorney-
in-fact either in the name of Lender or Assignors to (i) sign such Assignor's
name on any Collateral, drafts against account debtors, assignments, any proof
<PAGE>

of claim in any bankruptcy or other insolvency proceeding involving any account
debtor, any notice of lien, claim of lien or assignment or satisfaction of
lien, or on any financing statement or continuation statement under the Uniform
Commercial Code; (ii) send verifications of accounts receivable to any account
debtor; and (iii) in connection with a transfer of the Collateral as described
above, sign in such Assignor's name any documents necessary to transfer title
to the Collateral to Lender or any third party. All acts of said power of
attorney are hereby ratified and approved and Lender shall not be liable for
any mistake of law or fact made in connection therewith. This power of
attorney is coupled with an interest and shall be irrevocable so long as any
amounts remain unpaid on any of the Obligations. All remedies of Lender shall
be cumulative to the full extent provided by law, all without liability except
to account for property actually received, but the Lender shall have no duty to
exercise such rights and shall not be responsible for any failure to do so or
delay in so doing. Pursuit by Lender of certain judicial or other remedies
shall not abate nor bar other remedies with respect to the Obligations or to
other portions of the Collateral. Lender may exercise its rights to the
Collateral without resorting or regard to other collateral or sources of
security or reimbursement for the Obligations.

(b) If Assignors fail to perform any agreement or covenant contained
in this Assignment beyond any applicable period for notice and cure, Lender may
itself perform, or cause to be performed, any agreement or covenant of
Assignors contained in this Assignment which Assignors shall fail to perform,
and the cost of such performance, together with any expenses, including
reasonable attorneys' fees actually incurred (including attorneys' fees
incurred in any appeal) by Lender in connection therewith, shall be payable by
Assignors upon demand and shall constitute a part of the Obligations and shall
bear interest at the rate for overdue amounts as set forth in the Credit
Agreement.

(c) Whether or not an Event of Default has occurred and whether or
not Lender is the absolute owner of the Collateral, Lender may take such action
as Lender may deem necessary to protect the Collateral or its security interest
therein, Lender being hereby authorized to pay, purchase, contest and
compromise any encumbrance, charge or lien which in the judgment of Lender
appears to be prior or superior to its security interest, and in exercising any
such powers and authority to pay reasonably necessary expenses, employ counsel
and pay reasonable attorney's fees. Any such advances made or expenses
incurred by Lender shall be deemed advanced under the Loan Documents, shall
increase the indebtedness evidenced and secured thereby, shall be payable upon
demand and shall bear interest at the rate for overdue payments set forth in
the Credit Agreement.

(d) Any certificates or securities held by Lender as Collateral
hereunder may, at any time, and at the option of Lender, be registered in the
name of Lender or its nominee, endorsed or assigned in blank or in the name of
any nominee and Lender may deliver any or all of the Collateral to the issuer
or issuers thereof for the purpose of making denominational exchanges or
registrations or transfer or for such other purposes in furtherance of this
Agreement as Lender may deem desirable. Until the occurrence of an Event of
Default, Assignors shall retain the right to vote any of the Collateral, in a
manner not inconsistent with the terms of this Agreement and the other Loan
Documents, and Lender hereby grants to Assignors its proxy to enable Assignors
to so vote any of the Collateral (except that Assignor shall not have any
right to exercise any such power if the exercise thereof would violate or
result in a violation of any of the terms of this Agreement or any of the other
Loan Documents). At any time after the occurrence and during the continuance
<PAGE>

of any Event of Default, Lender or its nominee shall, without notice or demand,
automatically have the sole and exclusive right to give all consents, waivers
and ratifications in respect of the Collateral and exercise all voting and
other management, approval or other rights at any meeting of the members of the
Company (and the right to call such meetings) or otherwise (and to give written
consents in lieu of voting thereon), including, without limitation, exercising
the right to cause the Company to cause Co-Managing Member to be the sole
managing member of the Property Owner, and exercise any and all rights of
conversion, exchange, subscription or any of the rights, privileges or options
pertaining to the Collateral and otherwise act with respect thereto and
thereunder as if it were the absolute owner thereof (all of such rights of the
Assignors ceasing to exist and terminating upon the occurrence of an Event of
Default) including, without limitation, the right to exchange, at its
discretion, any and all of the Collateral upon the merger, consolidation,
reorganization, recapitalization or the readjustment of the issuer thereof, all
without liability except to account for property actually received and in such
manner as Lender shall determine in its sole and absolute discretion, but
Lender shall have no duty to exercise any of the aforesaid rights, privileges
or options and shall not be responsible for the failure to do so or delay in so
doing. The exercise by Lender of any of its rights and remedies under this
paragraph shall not be deemed a disposition of collateral under Article 9 of
the UCC nor an acceptance by Lender of any of the Collateral in satisfaction of
the Obligations.

10. Duties of Lender. The powers conferred on Lender hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Lender's duty with reference to the
Collateral shall be solely to use slight care in the custody and preservation
of the Collateral, which shall not include any steps necessary to preserve
rights against prior parties. Lender shall have no responsibility or liability
for the collection of any Collateral or by reason of any invalidity, lack of
value or uncollectability of any of the payments received by it.

11. Indemnification.

(a) It is specifically understood and agreed that this Assignment
shall not operate to place any responsibility or obligation whatsoever upon
Lender, or cause Lender to be, or to be deemed to be, a member in the Company
and that in accepting this Assignment, Lender neither assumes nor agrees to
perform at any time whatsoever any obligation or duty of Assignors relating to
the Collateral or under the Organizational Agreements or any other mortgage,
indenture, contract, agreement or instrument to which the Company is a party or
to which it is subject, all of which obligations and duties shall be and remain
with and upon Assignors (provided, however, that Assignors shall not be liable
for the performance of any liabilities or duties under the Organizational
Agreements which may result from written amendments thereof made by Lender
after the occurrence of an Event of Default).

(b) Assignors agree to indemnify, defend and hold Lender harmless
from and against any and all claims, expenses, losses and liabilities growing
out of or resulting from this Assignment (including, without limitation,
enforcement of this Assignment) or acts taken or omitted by Lender hereunder or
in connection herewith, except claims, expenses, losses or liabilities
resulting from Lender's gross negligence or wilful misconduct.

appeal), and of any experts and agents, which Lender may incur in connection
with (i) the administration of this Assignment, (ii) the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Lender hereunder, or (iv) the failure by
Assignors to perform or observe any of the provisions hereof beyond any
applicable period for notice and cure.

12. Security Interest Absolute. All rights of Lender, and the security
interests hereunder, and all of the obligations secured hereby, shall be
absolute and unconditional, irrespective of:

(a) Any lack of validity or enforceability of the Loan Documents or
any other agreement or instrument relating thereto;

(b) Any change in the time (including the extension of the maturity
date of the Note), manner or place of payment of, or in any other term of, all
or any of the Obligations or any other amendment or waiver of or any consent to
any departure from the Loan Documents;

(c) Any exchange, release or nonperfection of any other collateral
for the Obligations, or any release or amendment or waiver of or consent to
departure from any of the Loan Documents with respect to all or any part of the
Obligations; or

(d) Any other circumstance (other than payment of the Obligations in
full) that might otherwise constitute a defense available to, or a discharge
of, Assignors or any third party for the Obligations or any part thereof.

13. Amendments and Waivers. No amendment or waiver of any provision of
this Assignment nor consent to any departure therefrom shall in any event be
effective unless the same shall be in writing and signed by Lender, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No delay or omission of Lender to
exercise any right, power or remedy accruing upon any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be a
waiver of any such Event of Default, or acquiescence therein; and every right,
power and remedy given by this Assignment to Lender may be exercised from time
to time and as often as may be deemed expedient by Lender. Failure on the part
of Lender to complain of any act or failure to act which constitutes an Event
of Default, irrespective of how long such failure continues, shall not
constitute a waiver by Lender of Lender's rights hereunder or impair any
rights, powers or remedies consequent on any Event of Default. Assignors hereby
waive to the extent permitted by law all rights which Assignors have or may
have under and by virtue of the Uniform Commercial Code as enacted in the State
of New York, and any federal, state, county or municipal statute, regulation,
ordinance, Constitution or charter, now or hereafter existing, similar in
effect thereto, providing any right of Assignors to notice and to a judicial
hearing prior to seizure by Lender of any of the Collateral. Each Assignor
hereby waives and renounces for itself, its heirs, successors and assigns, all
rights to the benefits of any statute of limitations and any moratorium,
reinstatement, marshaling, forbearance, valuation, stay, extension, homestead,
redemption and appraisement now provided or which may hereafter be provided by
the Constitution and laws of the United States and of any state thereof, both
as to itself and in and to all of its property, real and personal, against the
enforcement of this Assignment and the collection of any of the Obligations.

14. Continuing Security Interest; Transfer of Note; Release of
Collateral. This Assignment shall create a continuing security interest in the
<PAGE>

Collateral and shall (a) remain in full force and effect until the payment in
full in immediately available funds of the Obligations, (b) be binding upon
Assignors and their permitted successors and assigns, and (c) inure, together
with the rights and remedies of Lender hereunder, to the benefit of Lender and
the Banks and their respective successors, transferees and assigns. Upon the
payment in full in immediately available funds of the Obligations, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Assignors. Upon any such termination, Lender will, at Assignors'
expense, execute and deliver to Assignors such documents as Assignors shall
reasonably request to evidence such termination.

15. Modifications, Etc. Assignors hereby consent and agree that Lender
and the Banks may at any time and from time to time, without notice to or
further consent from Assignors, either with or without consideration, surrender
any property or other security of any kind or nature whatsoever held by it or
by any person, firm or corporation on its behalf or for its account, securing
the Obligations; substitute for any Collateral so held by it, other collateral
of like kind; agree to modification of the terms of the Loan Documents; extend
or renew the Loan Documents for any period; grant releases, compromises and
indulgences with respect to the Loan Documents for any period; grant releases,
compromises and indulgences with respect to the Loan Documents to any persons
or entities now or hereafter liable thereunder or hereunder; release any
guarantor, endorser or any other Person liable with respect to the Obligations;
or take or fail to take any action of any type whatsoever; and no such action
which Lender shall take or fail to take in connection with the Loan Documents,
or any of them, or any security for the payment of the Obligations or for the
performance of any obligations or undertakings of Assignors, nor any course of
dealing with Assignors or any other person, shall release Assignors'
obligations hereunder, affect this Assignment in any way or afford Assignors
any recourse against Lender.

16. Securities Act. In view of the position of Assignors in relation to
the Collateral, or because of other current or future circumstances, a question
may arise under the Securities Act of 1933, as amended, and all rules and
regulations issued pursuant thereto or any similar federal, state or local law,
rule, regulation or order (collectively the "Applicable Law") hereafter enacted
analogous in purpose or effect (such Act and any such similar law as from time
to time in effect being called the "Federal Securities Laws") with respect to
any disposition of the Collateral permitted hereunder. Assignors understand
that compliance with the Federal Securities Laws might very strictly limit the
course of conduct of Lender if Lender were to attempt to dispose of all or any
part of the Collateral in accordance with the terms hereof, and might also
limit the extent to which or the manner in which any subsequent transferee of
any Collateral could dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Lender in any attempt to dispose of
all or part of the Collateral in accordance with the terms hereof under
applicable Blue Sky or other state securities laws or similar Applicable Law
analogous in purpose or effect. Assignors recognize that in light of the
foregoing restrictions and limitations Lender may, with respect to any sale of
the Collateral, limit the purchasers to those who will agree, among other
things, to acquire such Collateral for their own account, for investment, and
not with a view to the distribution or resale thereof. Assignors acknowledge
and agree that in light of the foregoing restrictions and limitations, the
Lender in its sole and absolute discretion may, in accordance with Applicable
Law, (a) proceed to make such a sale whether or not a registration statement
for the purpose of registering such Collateral or part thereof shall have been
filed under the Federal Securities Laws and (b) approach and negotiate with a
single potential purchaser to effect such sale. Assignors acknowledge and
<PAGE>

agree that any such sale might result in prices and other terms less favorable
to the seller if such sale were a public sale without such restrictions. In
the event of any such sale, Lender shall incur no responsibility or liability
for selling all or any part of the Collateral in accordance with the terms
hereof at a price that Lender, in its sole and absolute discretion, may in good
faith deem reasonable under the circumstances, notwithstanding the possibility
that a substantially higher price might have been realized if the sale were
deferred until after registration as aforesaid or if more than a single
purchaser were approached. The provisions of this paragraph will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Lender sells.

17. Governing Law; Terms. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK.

18. Setoff. Regardless of the adequacy of any collateral, during the
continuance of any Event of Default, any deposits (general or specific, time or
demand, provisional or final, regardless of currency, maturity, or the branch
of where such deposits are held) or other sums credited by or due from any of
the Banks to Assignors and any securities or other property of Assignors in the
possession of such Bank may be applied to or set off against the payment of
Obligations and any and all other liabilities, direct, or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, of such
Person to such Bank.

19. Notices. Each notice, demand, election or request provided for or
permitted to be given pursuant to this Assignment (hereinafter in this
Paragraph 19 referred to as "Notice"), but specifically excluding to the
maximum extent permitted by law any notices of the institution or commencement
of foreclosure proceedings, must be in writing and shall be deemed to have been
properly given or served by personal delivery or by sending same by overnight
courier or by depositing same in the United States Mail, postpaid and
registered or certified, return receipt requested as follows:

If to the Lender, at the address set forth in the Credit Agreement; and

If to the Assignors:

PAFC Management, Inc.
277 Park Avenue
47th Floor
New York, New York 10172
Attn: Richard Czaja

and to:

Stanley Stahl
Stahl Real Estate Company
277 Park Avenue
47th Floor
New York, New York 10172

Each Notice shall be effective upon being personally delivered or upon being
sent by overnight courier or upon being deposited in the United States Mail as
aforesaid. The time period in which a response to such Notice must be given or
any action taken with respect thereto (if any), however, shall commence to run
from the date of receipt if personally delivered or sent by overnight courier,
<PAGE>

or if so deposited in the United States Mail, the earlier of three (3) Business
Days following such deposit or the date of receipt as disclosed on the return
receipt. Rejection or other refusal to accept or the inability to deliver
because of changed address for which no notice was given shall be deemed to be
receipt of the Notice sent. By giving at least fifteen (15) days prior Notice
thereof, Assignors or Lender shall have the right from time to time and at any
time during the term of this Assignment to change their respective addresses
and each shall have the right to specify as its address any other address
within the United States of America.

20. No Unwritten Agreements. THE WRITTEN LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

21. Miscellaneous. Time is of the essence of this Assignment. Title or
captions of paragraphs hereof are for convenience only and neither limit nor
amplify the provisions hereof. If, for any circumstances whatsoever,
fulfillment of any provision of this Assignment shall involve transcending the
limit of validity presently prescribed by applicable law, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provision herein operates or would prospectively operate to invalidate this
Assignment, in whole or in part, then such clause or provision only shall be
held for naught, as though not herein contained, and the remainder of this
Assignment shall remain operative and in full force and effect.

22. Non-Recourse Obligations. The liability and obligations of the
Assignors and their respective officers, members, shareholders, partners or
other person or entity having an interest therein to perform and observe the
obligations contained in this Assignment shall be subject to and limited by the
terms of Section 32 of the Credit Agreement.

IN WITNESS WHEREOF, Assignors and Lender have executed this Assignment on
the date first above written.

LENDER:

THE FIRST NATIONAL BANK OF BOSTON, as Agent

By:/s/ Mark E. Basham
_______________________________________
Mark E. Basham, Managing Director

ASSIGNORS:

/s/ Stanley Stahl
__________________________________________
Stanley Stahl

PAFC MANAGEMENT, INC., a Delaware
corporation
<PAGE>

By: /s/ Stanley Stahl
__________________________________________
Title:

[CORPORATE SEAL]
<PAGE>

EXHIBIT "A"

ORGANIZATIONAL AGREEMENTS
<PAGE>

EXHIBIT "B"

PROMISSORY NOTE LEGEND

"THIS NOTE HAS BEEN PLEDGED BY [INSERT NAME OF APPLICABLE ASSIGNOR]
("ASSIGNORS") TO THE FIRST NATIONAL BANK OF BOSTON, AS AGENT ("LENDER")
PURSUANT TO AN ASSIGNMENT OF MEMBER'S INTEREST DATED AS OF APRIL 25, 1997 (THE
"ASSIGNMENT"). ALL AMOUNTS PAYABLE TO ASSIGNORS PURSUANT TO THIS NOTE SHALL BE
PAID DIRECTLY TO LENDER AS REQUIRED BY THE ASSIGNMENT."

<PAGE>

EXHIBIT 10.15

ASSIGNMENT OF MEMBER'S INTEREST

THIS ASSIGNMENT OF MEMBER'S INTEREST (this "Assignment"), made as of the
25th day of April, 1997, by PAMC CO-MANAGER INC., a Delaware corporation ("Co-
Managing Member"), and PARK AVENUE FINANCING COMPANY, LLC ("Holding Company";
Holding Company and Co-Managing Member are hereinafter referred to collectively
as "Assignors"), to THE FIRST NATIONAL BANK OF BOSTON, a national banking
association ("FNBB"), as Agent for itself and the other Banks from time to time
party to the Credit Agreement (as hereafter defined) (FNBB, in its capacity as
Agent, is hereinafter referred to as "Lender").

W I T N E S S E T H:

WHEREAS, Assignors are members of 277 Park Avenue, LLC, a limited
liability company formed under the laws of the State of Delaware (the
"Company"); and

WHEREAS, the Company is presently governed by that certain Certificate of
Formation recorded on December 9, 1996 with the Delaware Secretary of State,
and that certain Operating Agreement dated as of April 25, 1997 (collectively
the "Organizational Agreements"); and

WHEREAS, pursuant to that certain Credit Agreement dated of even date
herewith among the Assignors, FNBB, the other lenders that are a party thereto,
Lender and certain other parties (as the same may be varied, extended,
supplemented, consolidated, amended, replaced, renewed, modified or restated,
the "Credit Agreement"), the Banks have agreed to provide a loan to Assignors
of $80,000,000.00 (the "Loan"), which Loan is evidenced by those certain Notes
made by Assignors to the order of the Banks in the aggregate principal face
amount of $80,000,000.00 (such Notes, and each other note as may be issued
under the Credit Agreement, as the same may be varied, extended, supplemented,
consolidated, amended, replaced, renewed, modified or restated, is hereinafter
referred to collectively as the "Note"); and

WHEREAS, Lender has required, as a condition to the making of the Loan to
Assignors, that Assignors execute this Assignment to secure the obligations of
Assignors under the Note, the Credit Agreement and certain other agreements;

1. Definitions. Capitalized terms used herein that are not otherwise
defined herein shall have the meaning set forth in the Credit Agreement.

2. Grant of Security Interest. As security for the payment and
performance by Assignors of each and all of the duties, responsibilities and
obligations under this Assignment, the Credit Agreement, the Note and any and
all agreements evidencing, securing or otherwise relating to the obligations
evidenced by the Note and the Credit Agreement (this Assignment, the Credit
Agreement, the Note and such other agreements, together with any and all
renewals, modifications, consolidations and extensions thereof, are hereinafter
<PAGE>

referred to collectively as the "Loan Documents"; and said duties,
responsibilities and obligations of Assignors are hereinafter referred to
collectively as the "Obligations"), Assignors do hereby transfer, assign,
pledge, convey and grant to Lender, and does hereby grant a security interest
to Lender in, all of Assignor's right, title and interest in and to the
following:

(b) All right, title and interest of Assignor, if any, in and to the
Cash Collateral Agreement or any account maintained or funds held pursuant
thereto; and

(c) Any and all profits, proceeds, accounts, income, distributions,
payments upon dissolution or liquidation of the Company or the sale, financing
or refinancing of any of the property or assets of the Company, proceeds of a
casualty or condemnation, return of capital, repayment of loans, and payments
of any kind or nature whatsoever, now or hereafter distributable or payable by
the Company or any member of the Company (in such member's capacity as a
member) to Assignors, by reason of Assignors' interest in the Company or
otherwise, or now or hereafter distributable or payable to Assignors from any
other source by reason of Assignors being a member in the Company, or on
account of any interest in or claim or rights against the Company held by
Assignors, or by reason of services performed by Assignors for or on behalf of
the Company or with respect to the assets of the Company, and any and all
proceeds from any transfer, assignment or pledge of any interest of Assignors
in, or claim or right against, the Company (regardless of whether such
transfer, assignment or pledge is permitted under the terms hereof or the other
Loan Documents), and all claims, choses in action or things in action now or
hereafter arising against the Company; and

(d) All accounts, contract rights and general intangibles now or
hereafter arising from any of the foregoing; and

(e) All notes or other documents or instruments now or hereafter
evidencing or securing any of the foregoing; and

(g) All documents, writings, leases, books, files, records, computer
tapes, programs, ledger books and ledger pages arising from or used in
connection with any of the foregoing; and

(h) All renewals, extensions, additions, substitutions or
replacements of any of the foregoing; and
<PAGE>

(i) All powers, options, rights, privileges and immunities
pertaining to any of the foregoing; and

(j) All proceeds of any of the foregoing and all cash, security or
other property distributed on account of any of the foregoing.

3. Obligations Secured. This Assignment secures the payment and
performance by Assignors of the Obligations.

4. Collection of Distributions.

(i) Assignors shall have no right to receive payments made
under or with respect to the Distributions, and all such payments
shall be delivered directly by the Company to Lender pursuant to the
terms of the Cash Collateral Agreement.

(iii) Assignors hereby agree for the benefit of
the Company that all payments actually received by Lender shall be
deemed payments to Assignors by the Company. Lender shall apply any
and all such payments actually received by Lender in satisfaction of
the Obligations in such order as set forth in the Credit Agreement.
Lender shall return to Assignors that portion of any payments
actually received by Lender from the Company which Lender determines,
in the exercise of its sole and absolute discretion but in good
faith, is not needed to repay the Obligations.

option or other disposition of, or any mortgage, hypothecation, encumbrance,
financing or refinancing of any interest of Assignors in the Company, any of
the assets or properties of the Company or any assets or properties of any
other Person in which the Company directly or indirectly owns an interest
(regardless of whether such event is permitted under the terms of the Loan
Documents).

(ii) to institute one or more actions against the Company or any
member thereof in connection with the collection of the
Distributions, to prosecute to judgment, settle or dismiss any such
actions, and to make any compromise or settlement deemed desirable,
in Lender's sole and absolute discretion, with respect to such
Distributions, to extend the time of payment, arrange for payment in
installments or otherwise modify the terms of the Organizational
Agreements with respect to the Distributions or release the Company
or any member thereof from their respective obligations to pay any
Distribution, without incurring responsibility to, or affecting any
liability of, Assignors under the Organizational Agreements;

it being specifically understood and agreed, however, that Lender shall not be
obligated in any manner whatsoever to give any notices of default (except as
may be specifically required herein) or to exercise any such power or authority
or be in any way responsible for the preservation, maintenance, collection of
or realizing upon the Collateral, or any portion thereof, or any of Assignors'
rights therein. The foregoing appointment is irrevocable and continuing and
any such rights, powers and privileges shall be exclusive in Lender, its
successors and assigns until this Assignment terminates as provided in
Paragraph 13, below.

(d) Notwithstanding anything herein to the contrary, Assignors
<PAGE>

hereby authorize and direct the Company and the members thereof to pay all
Distributions from or relating to any sale, transfer, assignment, conveyance,
option or other disposition of, or any pledge, mortgage, encumbrance, financing
or refinancing of, any of the Collateral or the Mortgaged Property directly to
Lender (regardless of whether such event is permitted under the terms of the
Loan Documents), and all such Distributions received by Assignors shall be
promptly delivered to Lender in the same form as received, with the addition
only of such endorsements and assignments as may be necessary to transfer title
to Lender and, pending such delivery, all such Distributions shall be held in
trust for Lender. Lender shall apply any such payments actually received by
Lender in satisfaction of the Obligations in such order as set forth in the
Credit Agreement.

5. Warranties and Covenants. Assignors do hereby warrant and represent
to, and covenant and agree with, Lender as follows:

(d) Assignors and Managing Member are the sole members of the
Company, and no other Person owns any legal, equitable or beneficial interest
in the Company. The Member Interests are not represented or otherwise evidenced
by any certificate or other document other than the Certificates.

(e) Upon the delivery to Lender of the Certificates, this Assignment
creates a valid and binding first priority security interest in the Collateral
securing the payment and performance of the Obligations and the performance by
Assignors of their obligations hereunder and under the Loan Documents, and upon
the filing of UCC Financing Statements with the Secretary of State's Office in
the State of New York and Office of the Register of the City of New York, New
York County all filings and other actions necessary to perfect and protect such
security interests shall have been duly made and taken. Neither Assignors nor
<PAGE>

the Company have performed or will perform any acts which might prevent Lender
from enforcing any of the terms and conditions of this Agreement or which would
limit Lender in any such enforcement.

(g) For the purposes of Article 9-401 of the New York Uniform
Commercial Code, the principal place of business of Assignors is located in New
York County, New York. In the event that Assignors have more than one (1)
place of business in the State of New York, their respective chief executive
office is located in New York County, New York. In order to perfect the pledge
and security interests granted herein against Assignors, U.C.C. Financing
Statements must be filed with the Secretary of State's Office of the State of
New York and the Office of the Register of the City of New York, New York
County.

6. General Covenants. Assignors covenant and agree that, so long as
this Assignment is continuing:

(a) Except for a Permitted Transfer, Assignors shall not, without
the prior written consent of Lender, which consent may be withheld by Lender in
its sole and absolute discretion, directly, indirectly or by operation of law,
sell, transfer, assign, dispose of, pledge, convey, option, mortgage,
hypothecate or encumber any of the Collateral, nor shall there occur, directly,
indirectly or by operation of law, without the prior written consent of Lender
in each instance, which consent may be withheld by Lender in its sole and
absolute discretion, any sale, assignment, transfer, conveyance, disposition,
option, mortgage, hypothecation, pledge or other encumbrance of (i) any
interest in Co-Managing Member by Guarantor or (ii) any interest of Holding
Company Managing Member or Guarantor in Holding Company.

withheld by Lender in its sole and absolute discretion; provided, however, that
Lender shall not unreasonably withhold its consent to any modification or
amendment of the Organizational Agreements which does not affect or have an
impact on the management of the Company, any voting rights, the rights to
receive Distributions, any provisions of the Organizational Agreements
concerning actions that the Company is either authorized to do or that are
ultra vires, or otherwise materially affect the Company, the Collateral or the
rights and benefits afforded to Lender pursuant to this Agreement, or that are
required by the Rating Agency pursuant to the Mortgage (provided that with
respect to any changes that are requested by the Rating Agency, Assignors shall
execute and deliver to Lender such agreements or amendments to the Loan
Documents as Lender may reasonably require) (such modifications or amendments
described in the foregoing proviso are hereinafter referred to as the "Minor
Amendments").

(d) (i) Assignors shall perform all of their respective duties,
responsibilities and obligations under the Organizational Agreements to the
extent they have authority to do so hereunder and with respect to the
Collateral, and shall diligently and in good faith protect the value of the
Collateral. Except with respect to a Permitted Transfer, Assignors shall not,
without the prior written consent of Lender, which consent may be withheld by
Lender in its sole and absolute discretion, take any action which could result
in the sale, reduction, cancellation, dilution, diminution, conversion or
withdrawal of any interest of either of Assignors in the Company, or omit to
take any action necessary to prevent any such sale, reduction, cancellation,
dilution, diminution or conversion, or otherwise take any action or omit to
take any action that would or could, in the exercise of Lender's judgment,
jeopardize or diminish the security afforded to Lender by the Collateral.
Without limiting the foregoing, Assignors shall not consent to or permit to
occur the admission of any new member in the Company, the creation of any new
class of interest in the Company or the issuance, directly or indirectly, of
any other equity interest in the Company.

(ii) Assignors shall not, without the prior written consent of
Lender, which consent may be withheld by Lender in its sole and absolute
discretion, take any action which could result in the sale, reduction,
cancellation, dilution, diminution or conversion of any interest of Guarantor
or Holding Company Managing Member in Holding Company. Without limiting the
foregoing, Assignors shall not, without the prior written consent of Lender,
which consent may be withheld by Lender in its sole and absolute discretion,
consent to or permit to occur the admission of any new member in Holding
Company, the creation of any new class of interest in the Holding Company or
the issuance, directly or indirectly, of any other equity interest in Holding
Company.

(g) Assignors authorize Lender, at the expense of Assignors, to
<PAGE>

execute and file any financing statement or statements deemed necessary by
Lender to perfect its security interest in any of the Collateral. Any such
financing statement may be signed by Lender alone. Assignors will sign and
deliver any financing statements and other documents, and perform such other
acts as Lender may deem necessary or desirable from time to time to establish
and maintain in favor of Lender, valid and perfected security interests in the
Collateral, free of all other liens, encumbrances, security interests and
claims other than as permitted by the terms of this Assignment. Assignors
shall also furnish to Lender such evidence as it reasonably may require to
confirm the value of the Collateral, and shall do anything else Lender may
reasonably require from time to time to establish a valid security interest in
and to further protect and perfect its security interest in the Collateral.

(h) Except for those items of the Collateral that are delivered to
Lender as provided herein, the Collateral, and all records of Assignors
relative to the Collateral, are and will be kept at the office of Assignors
located in New York County, New York. Assignors shall give Lender not fewer
than thirty (30) days prior written notice of any proposed change in the name
of either of Assignors or the Company and any proposed change in the location
of the Collateral or of such records, and Assignors will not, without the prior
written consent of Lender, move the Collateral or such records to a location
outside of New York County, New York or keep duplicate records with respect to
the Collateral at any address outside such county. Nothing contained in this
subparagraph shall be construed so as to prevent Assignors from keeping
material abstracted from the books and records described herein at any of its
offices as necessity or convenience dictates. Assignors shall permit the
Lender or any representative designated by the Lender, at the Assignors'
expense, to examine the books and accounts of the Assignors (and to make copies
thereof and extracts therefrom) and to discuss the affairs, finances and
accounts of the Assignors with, and to be advised as to the same by, its
members and officers, all at such reasonable times and intervals as the Lender
may reasonably request. The Lender shall use good faith efforts to coordinate
such visits and inspections so as to minimize the interference with and
disruption to Assignors' normal business operations.

(k) Assignors will provide to Lender such documents and reports
respecting the Collateral in such form and detail as Lender reasonably may
request from time to time.
<PAGE>

(l) Anything herein to the contrary notwithstanding, (i) Assignors
shall remain liable under the Organizational Agreements and all other
contracts, agreements and instruments included in, giving rise to, creating,
establishing, evidencing or relating to the Collateral to the extent set forth
therein to perform all of its duties and obligations (including, without
limitation, the making of any contributions to the capital of the Company or
the payment of any other sum to or on behalf of the Company) to the same extent
as if this Assignment had not been executed, (ii) the exercise by Lender of
any of its rights hereunder shall not release Assignors from any of their
respective duties or obligations under the Organizational Agreements or any
such contracts, agreements and instruments (other than those duties or
obligations first arising after Lender or its nominee acquires title to the
Collateral following a foreclosure), and (iii) Lender shall not have any
obligation or liability under the Organizational Agreements or any such
contract, agreement or instrument by reason of this Assignment, nor shall
Lender be obligated to perform any of the obligations or duties of Assignors
thereunder or to take any action to collect or enforce any claim for payment or
other right or privilege assigned to Lender hereunder.

7. Events of Default. An Event of Default shall exist hereunder upon
the occurrence of any of the following:

(b) Assignors shall fail to duly and fully comply with any covenant,
condition or agreement in Paragraphs 6(a), 6(c), 6(d), 6(e), 6(i), 6(j) or 6(m)
of this Assignment; or

(c) Assignors shall fail to duly and fully comply with any other
covenant, condition or agreement of this Assignment (other than those specified
above in this Paragraph 7) and the same is not cured within thirty (30) days
following receipt of written notice of such default; or

(d) The occurrence of an Event of Default under any of the Loan
Documents.

Notwithstanding anything contained in Paragraph 7(b) above to the contrary,
(i) no Event of Default shall exist hereunder upon the failure of the Assignors
to obtain the prior consent of the Lender to a Minor Amendment pursuant to
Paragraph 6(c) unless the Assignors fail to cure such default within five (5)
<PAGE>

days following receipt of written notice of such default, (ii) no Event of
Default shall exist hereunder upon the failure of Assignors to perform all of
their respective duties, responsibilities and obligations under the
Organizational Agreements as provided in Paragraph 6(d) unless the Assignors
fail to cure such default within five (5) days following receipt of written
notice of such default, and (iii) no Event of Default shall exist upon the
failure of Assignors to pay any taxes against the Collateral involving
individually or in the aggregate an amount not to exceed $500,000.00 unless the
Assignors fail to cure such default within five (5) days following receipt of
written notice of such default (but in any event prior to the commencement of
any proceeding to foreclose any lien that may attach as security therefor), or
in the event of any levy or attachment of any of the Collateral for a claim
individually or in the aggregate of less than $500,000.00 unless Assignors fail
to cure such default within the earlier to occur of (A) five (5) days following
receipt of written notice of such default from Lender or (B) five (5) days
following the date of such levy or attachment.

8. Remedies.

authorization. Lender may notify any account debtor or obligor with respect to
the Collateral to make payment directly to Lender, and may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the
Collateral as Lender may determine whether or not the Obligations or the
Collateral are due, and for the purpose of realizing Lender's rights therein,
Lender may receive, open and dispose of mail addressed to Assignors and endorse
notes, checks, drafts, money orders, documents of title or other evidences of
payment, shipment or storage of any form of Collateral on behalf and in the
name of either Assignor, as its attorney-in-fact. In addition, each Assignor
hereby irrevocably designates and appoints Lender its true and lawful attorney-
in-fact either in the name of Lender or Assignors to (i) sign such Assignor's
name on any Collateral, drafts against account debtors, assignments, any proof
of claim in any bankruptcy or other insolvency proceeding involving any account
debtor, any notice of lien, claim of lien or assignment or satisfaction of
lien, or on any financing statement or continuation statement under the Uniform
Commercial Code; (ii) send verifications of accounts receivable to any account
debtor; and (iii) in connection with a transfer of the Collateral as described
above, sign in such Assignor's name any documents necessary to transfer title
to the Collateral to Lender or any third party. All acts of said power of
attorney are hereby ratified and approved and Lender shall not be liable for
any mistake of law or fact made in connection therewith. This power of
attorney is coupled with an interest and shall be irrevocable so long as any
amounts remain unpaid on any of the Obligations. All remedies of Lender shall
be cumulative to the full extent provided by law, all without liability except
to account for property actually received, but the Lender shall have no duty to
exercise such rights and shall not be responsible for any failure to do so or
delay in so doing. Pursuit by Lender of certain judicial or other remedies
shall not abate nor bar other remedies with respect to the Obligations or to
other portions of the Collateral. Lender may exercise its rights to the
Collateral without resorting or regard to other collateral or sources of
security or reimbursement for the Obligations.

(d) Any certificates or securities held by Lender as Collateral
hereunder may, at any time, and at the option of Lender, be registered in the
<PAGE>

name of Lender or its nominee, endorsed or assigned in blank or in the name of
any nominee and Lender may deliver any or all of the Collateral to the issuer
or issuers thereof for the purpose of making denominational exchanges or
registrations or transfer or for such other purposes in furtherance of this
Agreement as Lender may deem desirable. Until the occurrence of an Event of
Default, Assignors shall retain the right to vote any of the Collateral, in a
manner not inconsistent with the terms of this Agreement and the other Loan
Documents, and Lender hereby grants to Assignors its proxy to enable Assignors
to so vote any of the Collateral (except that Assignor shall not have any
right to exercise any such power if the exercise thereof would violate or
result in a violation of any of the terms of this Agreement or any of the other
Loan Documents). At any time after the occurrence and during the continuance
of any Event of Default, Lender or its nominee shall, without notice or demand,
automatically have the sole and exclusive right to give all consents, waivers
and ratifications in respect of the Collateral and exercise all voting and
other management, approval or other rights at any meeting of the members of the
Company (and the right to call such meetings) or otherwise (and to give written
consents in lieu of voting thereon), including, without limitation, exercising
the right to cause Co-Managing Member to be the sole managing member of the
Property Owner, and exercise any and all rights of conversion, exchange,
subscription or any of the rights, privileges or options pertaining to the
Collateral and otherwise act with respect thereto and thereunder as if it were
the absolute owner thereof (all of such rights of the Assignors ceasing to
exist and terminating upon the occurrence of an Event of Default) including,
without limitation, the right to exchange, at its discretion, any and all of
the Collateral upon the merger, consolidation, reorganization, recapitalization
or the readjustment of the issuer thereof, all without liability except to
account for property actually received and in such manner as Lender shall
determine in its sole and absolute discretion, but Lender shall have no duty to
exercise any of the aforesaid rights, privileges or options and shall not be
responsible for the failure to do so or delay in so doing. The exercise by
Lender of any of its rights and remedies under this paragraph shall not be
deemed a disposition of collateral under Article 9 of the UCC nor an acceptance
by Lender of any of the Collateral in satisfaction of the Obligations.

9. Duties of Lender. The powers conferred on Lender hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Lender's duty with reference to the
Collateral shall be solely to use slight care in the custody and preservation
of the Collateral, which shall not include any steps necessary to preserve
rights against prior parties. Lender shall have no responsibility or liability
for the collection of any Collateral or by reason of any invalidity, lack of
value or uncollectability of any of the payments received by it.

10. Indemnification.

(c) Assignors upon demand shall pay to Lender the amount of any and
all reasonable expenses, including, without limitation, the reasonable fees and
disbursements of counsel actually incurred (including those incurred in any
appeal), and of any experts and agents, which Lender may incur in connection
with (i) the administration of this Assignment, (ii) the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Lender hereunder, or (iv) the failure by
Assignors to perform or observe any of the provisions hereof beyond any
applicable period for notice and cure.

11. Security Interest Absolute. All rights of Lender, and the security
interests hereunder, and all of the obligations secured hereby, shall be
absolute and unconditional, irrespective of:

(a) Any lack of validity or enforceability of the Loan Documents or
any other agreement or instrument relating thereto;

12. Amendments and Waivers. No amendment or waiver of any provision of
this Assignment nor consent to any departure therefrom shall in any event be
effective unless the same shall be in writing and signed by Lender, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No delay or omission of Lender to
exercise any right, power or remedy accruing upon any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be a
waiver of any such Event of Default, or acquiescence therein; and every right,
power and remedy given by this Assignment to Lender may be exercised from time
to time and as often as may be deemed expedient by Lender. Failure on the part
of Lender to complain of any act or failure to act which constitutes an Event
of Default, irrespective of how long such failure continues, shall not
constitute a waiver by Lender of Lender's rights hereunder or impair any
rights, powers or remedies consequent on any Event of Default. Assignors
hereby waive to the extent permitted by law all rights which Assignors have or
may have under and by virtue of the Uniform Commercial Code as enacted in the
State of New York, and any federal, state, county or municipal statute,
regulation, ordinance, Constitution or charter, now or hereafter existing,
similar in effect thereto providing any right of Assignors to notice and to a
<PAGE>

judicial hearing prior to seizure by Lender of any of the Collateral. Each
Assignor hereby waives and renounces for itself, its heirs, successors and
assigns, all rights to the benefits of any statute of limitations and any
moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension,
homestead, redemption and appraisement now provided or which may hereafter be
provided by the Constitution and laws of the United States and of any state
thereof, both as to itself and in and to all of its property, real and
personal, against the enforcement of this Assignment and the collection of any
of the Obligations.

13. Continuing Security Interest; Transfer of Note; Release of
Collateral. This Assignment shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full in immediately available funds of the Obligations, (b) be binding upon
Assignors and their permitted successors and assigns, and (c) inure, together
with the rights and remedies of Lender hereunder, to the benefit of Lender and
the Banks and their respective successors, transferees and assigns. Upon the
payment in full in immediately available funds of the Obligations, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Assignors. Upon any such termination, Lender will, at Assignors'
expense, execute and deliver to Assignors such documents as Assignors shall
reasonably request to evidence such termination.

14. Modifications, Etc. Assignors hereby consent and agree that Lender
and the Banks may at any time and from time to time, without notice to or
further consent from Assignors, either with or without consideration, surrender
any property or other security of any kind or nature whatsoever held by it or
by any person, firm or corporation on its behalf or for its account, securing
the Obligations; substitute for any Collateral so held by it, other collateral
of like kind; agree to modification of the terms of the Loan Documents; extend
or renew the Loan Documents for any period; grant releases, compromises and
indulgences with respect to the Loan Documents for any period; grant releases,
compromises and indulgences with respect to the Loan Documents to any persons
or entities now or hereafter liable thereunder or hereunder; release any
guarantor, endorser or any other Person liable with respect to the Obligations;
or take or fail to take any action of any type whatsoever; and no such action
which Lender shall take or fail to take in connection with the Loan Documents,
or any of them, or any security for the payment of the Obligations or for the
performance of any obligations or undertakings of Assignors, nor any course of
dealing with Assignors or any other person, shall release Assignors'
obligations hereunder, affect this Assignment in any way or afford Assignors
any recourse against Lender.

15. Securities Act. In view of the position of Assignors in relation to
the Collateral, or because of other current or future circumstances, a question
may arise under the Securities Act of 1933, as amended, and all rules and
regulations issued pursuant thereto or any similar federal, state or local law,
rule, regulation or order (collectively the "Applicable Law") hereafter enacted
analogous in purpose or effect (such Act and any such similar law as from time
to time in effect being called the "Federal Securities Laws") with respect to
any disposition of the Collateral permitted hereunder. Assignors understand
that compliance with the Federal Securities Laws might very strictly limit the
course of conduct of Lender if Lender were to attempt to dispose of all or any
part of the Collateral in accordance with the terms hereof, and might also
limit the extent to which or the manner in which any subsequent transferee of
any Collateral could dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Lender in any attempt to dispose of
all or part of the Collateral in accordance with the terms hereof under
<PAGE>

applicable Blue Sky or other state securities laws or similar Applicable Law
analogous in purpose or effect. Assignors recognize that in light of the
foregoing restrictions and limitations Lender may, with respect to any sale of
the Collateral, limit the purchasers to those who will agree, among other
things, to acquire such Collateral for their own account, for investment, and
not with a view to the distribution or resale thereof. Assignors acknowledge
and agree that in light of the foregoing restrictions and limitations, the
Lender in its sole and absolute discretion may, in accordance with Applicable
Law, (a) proceed to make such a sale whether or not a registration statement
for the purpose of registering such Collateral or part thereof shall have been
filed under the Federal Securities Laws and (b) approach and negotiate with a
single potential purchaser to effect such sale. Assignors acknowledge and
agree that any such sale might result in prices and other terms less favorable
to the seller if such sale were a public sale without such restrictions. In
the event of any such sale, Lender shall incur no responsibility or liability
for selling all or any part of the Collateral in accordance with the terms
hereof at a price that Lender, in its sole and absolute discretion, may in good
faith deem reasonable under the circumstances, notwithstanding the possibility
that a substantially higher price might have been realized if the sale were
deferred until after registration as aforesaid or if more than a single
purchaser were approached. The provisions of this paragraph will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Lender sells.

16. Governing Law; Terms. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK.

17. Setoff. Regardless of the adequacy of any collateral, during the
continuance of any Event of Default, any deposits (general or specific, time or
demand, provisional or final, regardless of currency, maturity, or the branch
of where such deposits are held) or other sums credited by or due from any of
the Banks to Assignors and any securities or other property of Assignors in the
possession of such Bank may be applied to or set off against the payment of
Obligations and any and all other liabilities, direct, or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, of such
Person to such Bank.

18. Notices. Each notice, demand, election or request provided for or
permitted to be given pursuant to this Assignment shall be deemed to have been
properly given or served if given in the manner provided in the Credit
Agreement.

19. No Unwritten Agreements. THE WRITTEN LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

20. Miscellaneous. Time is of the essence of this Assignment. Title or
captions of paragraphs hereof are for convenience only and neither limit nor
amplify the provisions hereof. If, for any circumstances whatsoever,
fulfillment of any provision of this Assignment shall involve transcending the
limit of validity presently prescribed by applicable law, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provision herein operates or would prospectively operate to invalidate this
Assignment, in whole or in part, then such clause or provision only shall be
held for naught, as though not herein contained, and the remainder of this
Assignment shall remain operative and in full force and effect.
<PAGE>

21. Non-Recourse Obligations. The liability and obligations of the
Assignors and their respective officers, members, shareholders, partners or
other person or entity having an interest therein to perform and observe the
obligations contained in this Assignment shall be subject to and limited by the
terms of Section 32 of the Credit Agreement.
<PAGE>

IN WITNESS WHEREOF, Assignors and Lender have executed this Assignment
under seal on the date first above written.

LENDER:

THE FIRST NATIONAL BANK OF BOSTON,
as Agent

By:/s/ Mark E. Basham
__________________________________
Mark E. Basham, Managing Director

ASSIGNORS:

PAMC CO-MANAGER INC.,
a Delaware corporation

By:/s/ Stanley Stahl
__________________________________

Title:

[CORPORATE SEAL]

PARK AVENUE FINANCING COMPANY, LLC,
a Delaware limited liability company, by its
managing member

By: PAFC Management, Inc., a Delaware
corporation

By: /s/ Stanley Stahl
__________________________________
Title:

[CORPORATE SEAL]
<PAGE>

EXHIBIT "A"

ORGANIZATIONAL AGREEMENTS
<PAGE>

EXHIBIT "B"

PROMISSORY NOTE LEGEND

"THIS NOTE HAS BEEN PLEDGED BY [INSERT NAME OF APPLICABLE ASSIGNOR]
("ASSIGNORS") TO THE FIRST NATIONAL BANK OF BOSTON, AS AGENT ("LENDER")
PURSUANT TO AN ASSIGNMENT OF MEMBER'S INTEREST DATED AS OF APRIL ___, 1997 (THE
"ASSIGNMENT"). ALL AMOUNTS PAYABLE TO ASSIGNORS PURSUANT TO THIS NOTE SHALL BE
PAID DIRECTLY TO LENDER AS REQUIRED BY THE ASSIGNMENT."

<PAGE>

EXHIBIT 10.16

STOCK PLEDGE AGREEMENT

THIS STOCK PLEDGE AGREEMENT (this "Agreement"), made as of the 25th day of
April, 1997, by STANLEY STAHL, a resident of the State of New York
("Assignor"), to THE FIRST NATIONAL BANK OF BOSTON, a national banking
association ("FNBB"), as Agent for itself and the other Banks from time to time
party to the Credit Agreement (as hereafter defined) (FNBB, in its capacity as
Agent, is hereinafter referred to as "Lender").

W I T N E S S E T H:

WHEREAS, Assignor is the sole shareholder of Park Avenue Management
Corporation, a corporation formed under the laws of the State of Delaware (the
"Company"); and

WHEREAS, the Company is a member of 277 Park Avenue, LLC, a Delaware
limited liability company (the "Property Owner"); and

WHEREAS, pursuant to that certain Credit Agreement dated of even date
herewith among Park Avenue Financing Company, LLC and PAMC Co-Manager Inc.
(hereinafter referred to collectively as the "Borrower"), FNBB, the other
lenders that are a party thereto, Lender and certain other parties (as the same
may be varied, extended, supplemented, consolidated, amended, replaced,
renewed, modified or restated, the "Credit Agreement"), the Banks have agreed
to provide a loan to Borrower of $80,000,000.00 (the "Loan"), which Loan is
evidenced by those certain Notes made by Borrower to the order of the Banks in
the aggregate principal face amount of $80,000,000.00 (such Notes, and each
other note as may be issued under the Credit Agreement, as the same may be
varied, extended, supplemented, consolidated, amended, replaced, renewed,
modified or restated, is hereinafter referred to collectively as the "Note");
and

WHEREAS, Lender has required, as a condition to the making of the Loan to
Borrower, that Assignor execute this Agreement to secure the obligations of
Borrower under the Note, the Credit Agreement and certain other agreements; and

WHEREAS, the extension of the Loan by the Banks to the Borrower shall
inure to the direct interest and advantage of Assignor;

1. Definitions. Capitalized terms used herein that are not otherwise
defined herein shall have the meaning set forth in the Credit Agreement.

2. Grant of Security Interest. As security for the payment and
performance by Assignor of each and all of the duties, responsibilities and
obligations under this Agreement, and the duties, responsibilities and
obligations of Borrower under the Credit Agreement, the Note and any and all
agreements evidencing, securing or otherwise relating to the obligations
<PAGE>

evidenced by the Note and the Credit Agreement (this Agreement, the Credit
Agreement, the Note and such other agreements, together with any and all
renewals, modifications, consolidations and extensions thereof, are hereinafter
referred to collectively as the "Loan Documents"; and said duties,
responsibilities and obligations of Assignor and Borrower are hereinafter
referred to collectively as the "Obligations"), Assignor does hereby transfer,
assign, pledge, convey and grant to Lender, and does hereby grant a security
interest to Lender in, all right, title and interest of Assignor in and to the
following:

(a) All right, title, interest, claims or rights of Assignor in and
to 1,000 shares of the stock of the Company, represented by Certificate No. 2,
together with any and all other securities, cash, stock certificates or other
property, warrants, option or right in respect of, in addition to or
substitution or exchange for such shares, or other property at any time and
from time to time receivable or otherwise distributed in respect of or in
exchange for all or any thereof; and

(b) All right, title and interest of Assignor, if any, in and to the
Cash Collateral Agreement or any account maintained or funds held pursuant
thereto; and

(c) Any and all dividends, profits, proceeds, accounts, income,
distributions, payments upon dissolution or liquidation of the Company or the
sale, financing or refinancing of any of the property or assets of the Company,
proceeds of a casualty or condemnation, return of capital, repayment of loans,
and payments of any kind or nature whatsoever, now or hereafter distributable
or payable by the Company or any shareholder of the Company (in such
shareholder's capacity as a shareholder) to Assignor, by reason of Assignor's
interest in the Company or otherwise, or now or hereafter distributable or
payable to Assignor from any other source by reason of Assignor being a
shareholder in the Company, or an account of any interest in or claim or rights
against the Company held by Assignor, or by reason of services performed by
Assignor for or on behalf of the Company or with respect to the assets of the
Company, and any and all proceeds from any transfer, assignment or pledge of
any interest of Assignor in, or claim or right against, the Company (regardless
of whether such transfer, assignment or pledge is permitted under the terms
hereof or the other Loan Documents), and all claims, choses in action or things
in action now or hereafter arising against the Company; and

(d) All accounts, contract rights and general intangibles now or
hereafter arising from any of the foregoing; and

(e) All notes or other documents or instruments now or hereafter
evidencing or securing any of the foregoing; and

(f) All right of Assignor to collect and enforce payments
distributable or payable by the Company or any shareholder of the Company to
Assignor pursuant to the terms of the articles of incorporation and bylaws of
the Company (collectively the "Organizational Agreements"); and

(g) All documents, writings, leases, books, files, records, computer
tapes, programs, ledger books and ledger pages arising from or used in
connection with any of the foregoing; and

(h) All renewals, extensions, additions, substitutions or
replacements of any of the foregoing; and
<PAGE>

(i) All powers, options, rights, privileges and immunities
pertaining to any of the foregoing; and

(j) All proceeds of any of the foregoing and all cash, security or
other property distributed on account of any of the foregoing (including
without limitation, all stock rights, stock splits, subscription rights,
dividends, new certificates and new securities).

All of the foregoing described in this paragraph 2 are hereinafter referred to
collectively as the "Collateral". The items described in (a), above, are
sometimes hereinafter referred to as the "Stock Collateral"; and the items
described in (b) - (j), above, are sometimes hereinafter referred to
collectively as the "Distributions."

3. Obligations Secured. This Agreement secures the payment and
performance by Assignor and Borrower of the Obligations.

4. Collection of Distributions.

(a) It is acknowledged and agreed by the parties hereto that Lender
shall have sole and exclusive possession of the Distributions and that this
Agreement constitutes a present, absolute and current assignment of all the
Distributions and is effective upon the execution and delivery hereof.
Payments under or with respect to the Distributions shall be made as follows:

(i) Assignor shall have no right to receive payments made under
or with respect to the Distributions, and all such payments shall be
delivered directly by the Company to Lender.

(ii) If Assignor shall receive any payments made under or with
respect to the Distributions, Assignor shall hold all such payments
in trust for Lender, will not co-mingle such payments with other
funds of Assignor, and will immediately pay and deliver in kind, all
such payments directly to Lender for application by Lender in
satisfaction of the Obligations in such order as set forth in the
Credit Agreement.

(iii) Assignor hereby agrees for the benefit of
the Company that all payments actually received by Lender shall be
deemed payments to Assignor by the Company. Lender shall apply any
and all such payments actually received by Lender in satisfaction of
the Obligations in such order as set forth in the Credit Agreement.
Lender shall return to Assignor that portion of any payments actually
received by Lender from the Company which Lender determines, in the
exercise of its sole and absolute discretion but in good faith, is
not needed to repay the Obligations.

(iv) In furtherance of the foregoing, Assignor does hereby
notify and direct the Company and its directors, officers and
shareholders that all payments under or with respect to the
Distributions shall be made directly to Lender at the address of
Lender set forth in the Cash Collateral Agreement.

Notwithstanding anything in this Paragraph 4 to the contrary, so long as no
Event of Default has occurred, Assignor shall have a license (revocable upon
the occurrence of an Event of Default) to receive such amounts as are
distributable to Assignor from amounts distributed to Borrower pursuant to the
terms of the Cash Collateral Agreement; it being understood and agreed that
<PAGE>

such license shall not extend to other amounts payable or distributable to
Assignor, including, without limitation, any amounts arising from the sale,
transfer, assignment, conveyance, option or other disposition of, or any
mortgage, hypothecation, encumbrance, financing or refinancing of, any interest
of Assignor in the Company, any of the assets or properties of the Company or
any assets or properties of any other Person in which the Company directly or
indirectly owns an interest (regardless of whether such event is permitted
under the terms of the Loan Documents).

(b) Assignor shall cause the Company promptly to distribute all net
proceeds of the sale, transfer, conveyance, option, assignment or other
disposition of, or any mortgage, hypothecation, encumbrance, financing or
refinancing of, any of its assets or properties, and any and all other
Distributions distributable or payable by the Company or any shareholder
thereof under the terms of the Organizational Agreements.

(c) Assignor hereby irrevocably designates and appoints Lender its
true and lawful attorney-in-fact, which appointment is coupled with an
interest, either in the name of Lender, or in the name of Assignor, at
Assignor's sole cost and expense, and regardless of whether Lender becomes a
shareholder in the Company or not, to take any or all of the following actions:

(i) to ask, demand, sue for, attach, levy, settle, compromise,
collect, compound, recover, receive and give receipt and acquittances
for any and all Collateral and to take any and all actions as Lender
may deem necessary or desirable in order to realize upon the
Collateral, or any portion thereof, including, without limitation,
making any statements and doing and taking any actions on behalf of
Assignor which are otherwise required of Assignor under the terms of
any agreement as conditions precedent to the payment of the
Distributions, and the right and power to receive, endorse, assign
and deliver, in the name of Assignor, any checks, notes, drafts,
instruments or other evidences of payment received in payment of or
on account of all or any portion of the Collateral, and Assignor
hereby waives presentment, demand, protest and notice of demand,
protest and non-payment of any instrument so endorsed; and

(ii) to institute one or more actions against the
Company or any shareholder thereof in connection with the collection
of the Distributions, to prosecute to judgment, settle or dismiss any
such actions, and to make any compromise or settlement deemed
desirable, in Lender's sole and absolute discretion, with respect to
such Distributions, to extend the time of payment, arrange for
payment in installments or otherwise modify the terms of the
Organizational Agreements with respect to the Distributions or
release the Company or any shareholder thereof from their respective
obligations to pay any Distribution, without incurring responsibility
to, or affecting any liability of, Assignor under the Organizational
Agreements;

it being specifically understood and agreed, however, that Lender shall not be
obligated in any manner whatsoever to give any notices of default (except as
may be specifically required herein) or to exercise any such power or authority
or be in any way responsible for the preservation, maintenance, collection of
or realizing upon the Collateral, or any portion thereof, or any of Assignor's
rights therein. The foregoing appointment is irrevocable and continuing and
any such rights, powers and privileges shall be exclusive in Lender, its
<PAGE>

successors and assigns until this Agreement terminates as provided in Paragraph
13, below.

(d) Notwithstanding anything herein to the contrary, Assignor hereby
authorizes and directs the Company and the directors, officers and shareholders
thereof to pay all Distributions from or relating to any sale, transfer,
assignment, conveyance, option or other disposition of, or any pledge,
mortgage, encumbrance, financing or refinancing of any of the Collateral or the
Mortgaged Property directly to Lender (regardless of whether such event is
permitted under the terms of the Loan Documents), and all such Distributions
received by Assignor shall be promptly delivered to Lender, in the same form as
received, with the addition only of such endorsements and assignments as may be
necessary to transfer title to Lender, and pending such delivery, all such
Distributions shall be held in trust for Lender. Lender shall apply any such
payments actually received by Lender in satisfaction of the Obligations in such
order as set forth in the Credit Agreement.

5. Warranties and Covenants. Assignor does hereby warrant and represent
to, and covenant and agree with, Lender as follows:

(a) All duties, obligations and responsibilities required to be
performed by Assignor as of the date hereof under the Organizational Agreements
have been performed, and no default or condition which with the passage of time
or the giving of notice, or both, would constitute a default exists under the
Organizational Agreements.

(b) A true, correct and complete copy of the Organizational
Agreements, together with all amendments thereto, is attached hereto as
Exhibit "A". The Organizational Agreements are in full force and effect.
Except for the Loan Documents and the Mortgage Loan Documents, neither the
Company nor any of its directors, officers or shareholders is a party to or is
bound by any indenture, contract or other agreement which purports to prohibit,
restrict, limit or control the transfer or pledge of the Collateral, the
exercise of voting rights with respect to the Company or the management of the
Company.

(c) Assignor is and, except in the event of a Permitted Transfer,
shall remain the sole, lawful, beneficial and record owner of the Stock
Collateral and the Distributions, free and clear of all liens, restrictions,
claims, pledges, encumbrances, charges, claims of third parties and rights of
set-off or recoupment whatsoever (other than those in favor of Lender
hereunder), and Assignor has the full and complete right, power and authority
to create a security interest in the Collateral in favor of Lender, in
accordance with the terms and provisions of this Agreement. All of the Stock
Collateral has been duly authorized and validly issued, and is fully paid and
non-assessable. Assignor is not and will not become a party to or otherwise be
bound by any agreement, other than the Loan Documents and the Mortgage Loan
Documents, which restricts in any manner the rights of any present or future
holder of any of the Stock Collateral with respect thereto.

(d) Assignor owns all of the issued and outstanding shares of the
Company, there are no other classes of stock issued with respect to the
Company, and no other Person owns any legal, equitable or beneficial interest
in the Company.

Obligations and the performance by Assignor of its obligations hereunder and by
Borrower of its obligations under the Loan Documents, and upon the filing of
UCC Financing Statements with the Secretary of State's Office of the State of
New York and the Office of the Register of the City of New York, New York
County all filings and other actions necessary to perfect and protect such
security interests shall have been duly made and taken. Neither Assignor nor
the Company have performed or will perform any acts which might prevent Lender
from enforcing any of the terms and conditions of this Agreement or which would
limit Lender in any such enforcement.

(g) For the purposes of Article 9-401 of the New York Uniform
Commercial Code, the residence of Assignor is located in New York County, New
York. In order to perfect the pledge and security interests granted herein
against Assignor, U.C.C. Financing Statements must be filed with the Secretary
of State's Office of the State of New York and the Office of the Register of
the City of New York, New York County.

6. General Covenants. Assignor covenants and agrees that, so long as
this Agreement is continuing:

(a) Except for a Permitted Transfer, Assignor shall not, without the
prior written consent of Lender, which consent may be withheld by Lender in its
sole and absolute discretion, directly, indirectly or by operation of law,
sell, transfer, assign, dispose of, pledge, convey, option, mortgage,
hypothecate or encumber any of the Collateral.

(b) Assignor shall at all times defend the Collateral against all
claims and demands of all persons at any time claiming any interest in the
Collateral adverse to Lender's interest in the Collateral as granted hereunder.

(c) So long as this Agreement remains in effect, Assignor shall not
modify, amend, cancel, release, surrender, terminate or permit the
modification, amendment, cancellation, release, surrender or termination of,
the Organizational Agreements, or dissolve, liquidate or permit the
dissolution, liquidation or expiration of the Company or the Organizational
Agreements, without in each instance the prior written consent of Lender, which
consent may be withheld by Lender in its sole and absolute discretion;
provided, however, that Lender shall not unreasonably withhold its consent to
any modification or amendment of the Organizational Agreements which does not
affect or have an impact on the management of the Company, any voting rights,
the rights to receive Distributions, any provisions of the Organizational
Agreements concerning actions that the Company is either authorized to do or
that are ultra vires, or otherwise materially affect the Company, the
Collateral or the rights and benefits afforded to Lender pursuant to this
Agreement, or that are required by the Rating Agency pursuant to the Mortgage
(provided that with respect to any changes that are requested by the Rating
Agency, Assignor shall execute and deliver to Lender such agreements or
amendments to the Loan Documents as Lender may reasonably require) (such
modifications or amendments described in the foregoing proviso are hereinafter
referred to as the "Minor Amendments").

(d) Assignor shall perform all of its duties, responsibilities and
<PAGE>

obligations under the Organizational Agreements to the extent it has authority
to do so hereunder and with respect to the Collateral, and shall diligently and
in good faith protect the value of the Collateral. Except with respect to a
Permitted Transfer, Assignor shall not, without the prior written consent of
Lender, which consent may be withheld by Lender in its sole and absolute
discretion, take any action which could result in the sale, reduction,
dilution, cancellation, diminution or conversion of any interest of Assignor in
the Company, or omit to take any action necessary to prevent any such sale,
reduction, dilution, cancellation, diminution or conversion, or otherwise take
any action or omit to take any action that would or could, in the exercise of
Lender's judgment, jeopardize or diminish the security afforded to Lender by
the Collateral. Without limiting the foregoing, Assignor shall not consent to
or permit to occur the admission of any new shareholder in the Company or the
issuance of any additional shares or classes of stock or, directly or
indirectly, any other equity interest in the Company.

(e) Assignor shall pay all taxes and other charges against the
Collateral, shall not use the Collateral illegally, and shall not suffer to
exist any loss, theft, damage or destruction of the Collateral and shall suffer
to exist no levy, seizure or attachment of the Collateral.

(f) Assignor, at the request of Lender, shall take such actions as
Lender reasonably may require to enforce the terms of the Organizational
Agreements or any other contract, agreement or instrument included in, giving
rise to, creating, establishing, evidencing or relating to the Collateral or to
collect or enforce any claim for payment or other right or privilege assigned
to Lender hereunder.

(g) Assignor authorizes Lender, at the expense of Assignor, to
execute and file any financing statement or statements reasonably deemed
necessary by Lender to perfect its security interest in any of the Collateral.
Any such financing statement may be signed by Lender alone. Assignor will sign
and deliver any financing statements and other documents, and perform such
other acts as Lender reasonably may deem necessary or desirable from time to
time to establish and maintain in favor of Lender, valid and perfected security
interests in the Collateral, free of all other liens, encumbrances, security
interests and claims other than as permitted by the terms of this Agreement.
Assignor shall also furnish to Lender such evidence as it reasonably may
require to confirm the value of the Collateral, and shall do anything else
Lender may reasonably require from time to time to establish a valid security
interest in and to further protect and perfect its security interest in the
Collateral.

(h) Except for those items of the Collateral that are delivered to
Lender as provided herein, the Collateral, and all records of Assignor relative
to the Collateral, are and will be kept at the office of Assignor located in
New York County, New York. Assignor shall give Lender not fewer than thirty
(30) days prior written notice of any proposed change in the Company's name and
any proposed change in the location of the Collateral or of such records, and
Assignor will not, without the prior written consent of Lender, move the
Collateral or such records to a location outside of New York County, New York
or keep duplicate records with respect to the Collateral at any address outside
such county. Nothing contained in this subparagraph shall be construed so as
to prevent Assignor from keeping material abstracted from the books and records
described herein at any of its offices as necessity or convenience dictates.
Assignor shall permit the Lender or any representative designated by the
Lender, at Assignor's expense, to examine the books of account of Assignor (and
to make copies thereof and extracts therefrom) and to discuss the affairs,
<PAGE>

finances and accounts of Assignor, and to be advised as to the same by, its
officers and directors, all at such reasonable times and intervals as the
Lender may reasonably request. The Lender shall use good faith efforts to
coordinate such visits and inspections so as to minimize the interference with
and disruption to Assignor's normal business operations.

(i) Without limiting any other terms of the Loan Documents
prohibiting or restricting the ability of the Company to incur Indebtedness, if
any amounts are due from the Company to Assignor and the obligations to repay
such amount is to be evidenced by a separate document or instrument, then as
evidence of such obligations, Assignor shall cause the Company to issue
Assignor, as the evidence of any obligations of the Company to pay
Distributions to Assignor in the future, a promissory note bearing the legend
attached hereto as Exhibit "B" and which note shall provide that all payments
due under such promissory note are to be paid directly to Lender as required by
and applied as provided in the Loan Documents until the Obligations are paid in
full or this Agreement is otherwise terminated as provided herein. No other
evidence of such obligations shall be executed by the Company to Assignor.

(j) Assignor shall promptly deliver to Lender any note or other
document or instrument entered into after the date hereof which evidences,
constitutes, guarantees or secures any of the Distributions or any right to
receive a Distribution, which notes or other documents and instruments shall be
accompanied by such endorsements or assignments as Lender may require to
transfer title to Lender.

(k) Assignor will provide to Lender such documents and reports
respecting the Collateral in such form and detail as Lender reasonably may
request from time to time.

(l) Anything herein to the contrary notwithstanding, (i) Assignor
shall remain liable under the Organizational Agreements and all other
contracts, agreements and instruments included in, giving rise to, creating,
establishing, evidencing or relating to the Collateral to the extent set forth
therein to perform all of its duties and obligations (including, without
limitation, the making of any contributions to the capital of the Company or
the payment of any other sum to or on behalf of the Company) to the same extent
as if this Agreement had not been executed, (ii) the exercise by Lender of any
of its rights hereunder shall not release Assignor from any of its duties or
obligations under the Organizational Agreements or any such contracts,
agreements and instruments (other than those duties or obligations first
arising after Lender or its nominee acquires title to the Collateral following
a foreclosure), and (iii) Lender shall not have any obligation or liability
under the Organizational Agreements or any such contract, agreement or
instrument by reason of this Agreement, nor shall Lender be obligated to
perform any of the obligations or duties of Assignor thereunder or to take any
action to collect or enforce any claim for payment or other right or privilege
assigned to Lender hereunder.

(m) If Assignor shall at any time be entitled to receive or shall
receive any cash, stock certificate or other property, option or right, upon,
in respect of, as an addition to, or in substitution or exchange for any of the
Collateral, whether for value paid by Assignor or otherwise, Assignor agrees
that the same shall be deemed to be Collateral and shall be delivered directly
to Lender in each case accompanied by proper instruments of assignment duly
executed by Assignor in such a form as reasonably may be required by Lender, to
be held by Lender subject to the terms hereof, as further security for the
Obligations (except as otherwise provided herein with respect to the
<PAGE>

application of the foregoing to the Obligations). If Assignor receives any of
the foregoing directly, Assignor agrees to hold such cash or other property in
trust for the benefit of Lender, and to surrender such cash or other property
to Lender immediately.

(n) Contemporaneously with the execution of this Agreement, Assignor
has delivered to Lender resignation letters (the "Resignation Letters") from
each director and officer of the Company that provide that such director or
officer shall resign its position as a director or officer of the Company at
the option of the Lender upon the occurrence of an Event of Default. Assignor
shall cause each other director and officer of the Company that may be elected
after the date hereof to deliver to the Lender within ten (10) days of such
election a Resignation Letter satisfactory to the Lender.

7. Events of Default. An Event of Default shall exist hereunder upon
the occurrence of any of the following:

(a) Any warranty, representation or statement made by or on behalf
of Assignor in this Agreement proves untrue or misleading in any material
respect and such warranty, representation or statement is not cured within the
cure period permitted in Section 7.18 of the Credit Agreement; or

(b) Assignor shall fail to duly and fully comply with any covenant,
condition or agreement in Paragraph 6(a), 6(c), 6(d), 6(e), 6(i), 6(j) or 6(m)
of this Agreement; or

(c) Assignor shall fail to duly and fully comply with any other
covenant, condition or agreement of this Assignment (other than those specified
above in this Paragraph 7) and the same is not cured within thirty (30) days
following receipt of written notice of such default; or

(d) The occurrence of an Event of Default under any of the Loan
Documents.

Notwithstanding anything contained in Paragraph 7(b) above to the contrary,
(i) no Event of Default shall exist hereunder upon the failure of Assignor to
obtain the prior consent of the Lender to a Minor Amendment pursuant to
Paragraph 6(c) unless Assignor fails to cure such default within five (5) days
following receipt of written notice of such default, (ii) no Event of Default
shall exist hereunder upon the failure of Assignor to perform all of its
duties, responsibilities and obligations under the Organizational Agreements as
provided in Paragraph 6(d) unless Assignor fails to cure such default within
five (5) days following receipt of written notice of such default, and (iii) no
Event of Default shall exist upon the failure of Assignor to pay any taxes
against the Collateral involving individually or in the aggregate an amount not
to exceed $500,000.00 unless Assignor fails to cure such default within five
(5) days following receipt of written notice of such default (but in any event
prior to the commencement of any proceeding to foreclose any lien that may
attach as security therefor), or in the event of any levy or attachment of any
of the Collateral for a claim individually or in the aggregate of less than
$500,000.00 unless Assignor fails to cure such default within the earlier to
occur of (A) five (5) days following receipt of written notice of such default
from Lender or (B) five (5) days following the date of such levy or attachment.

8. Remedies.

(a) Upon the occurrence of any Event of Default, Lender may take any
action deemed by Lender to be necessary or appropriate to the enforcement of
<PAGE>

the rights and remedies of Lender under this Agreement and the Loan Documents,
including, without limitation, the exercise of its rights and remedies with
respect to any or all of the Stock Collateral. The remedies of Lender shall
include, without limitation, all rights and remedies specified in the Loan
Documents and this Agreement, all remedies of Lender under applicable general
or statutory law, and the remedies of a secured party under the Uniform
Commercial Code as enacted in the State of New York, regardless of whether the
Uniform Commercial Code has been enacted or enacted in that form in any other
jurisdiction in which such right or remedy is asserted. Any notice required by
law, including, but not limited to, notice of the intended disposition of all
or any portion of the Collateral, shall be reasonably and properly given in the
manner prescribed for the giving of notice herein, and, in the case of any
notice of disposition, if given at least ten (10) calendar days prior to such
disposition. Lender may require Assignor to assemble the Collateral and make
it available to Lender at any place to be designated by Lender which is
reasonably convenient to both parties. It is expressly understood and agreed
that Lender shall be entitled to dispose of the Collateral at any public or
private sale, and that Lender shall be entitled to bid and purchase at any such
sale. In the event that Lender is the successful bidder at any public or
private sale of any note or other document or instrument evidencing Assignor's
right to receive a Distribution, Lender shall be entitled to credit the amount
bid by Lender against the obligations evidenced by such note, document or
instrument rather than the obligations evidenced by the Note. To the extent
the Collateral consist of marketable securities, Lender shall not be obligated
to sell such securities for the highest price obtainable, but shall sell them
at the market price available on the date of sale. Lender shall not be
obligated to make any sale of the Collateral if it shall determine not to do so
regardless of the fact that notice of sale of the Collateral may have been
given. Lender may, without notice or publication, adjourn any public sale from
time to time by announcement at the time and place fixed for sale, and such
sale may, without further notice, be made at the time and place to which the
same was so adjourned. Each such purchaser at any such sale shall hold the
Collateral sold absolutely free from claim or right on the part of Assignor.
In the event that any consent, approval or authorization of any governmental
agency or commission will be necessary to effectuate any such sale or sales,
Assignor shall execute all such applications or other instruments as Lender may
deem reasonably necessary to obtain such consent, approval or authorization.
Lender may notify any account debtor or obligor with respect to the Collateral
to make payment directly to Lender, and may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose or realize upon the Collateral
as Lender may determine whether or not the Obligations or the Collateral are
due, and for the purpose of realizing Lender's rights therein, Lender may
receive, open and dispose of mail addressed to Assignor and endorse notes,
checks, drafts, money orders, documents of title or other evidences of payment,
shipment or storage of any form of Collateral on behalf and in the name of
Assignor, as its attorney-in-fact. In addition, Assignor hereby irrevocably
designates and appoints Lender its true and lawful attorney-in-fact either in
the name of Lender or Assignor to (i) sign Assignor's name on any Collateral,
drafts against account debtors, assignments, any proof of claim in any
bankruptcy or other insolvency proceeding involving any account debtor, any
notice of lien, claim of lien or assignment or satisfaction of lien, or on any
financing statement or continuation statement under the Uniform Commercial
Code; (ii) send verifications of accounts receivable to any account debtor; and
(iii) in connection with a transfer of the Collateral as described above sign
in Assignor's name any documents necessary to transfer title to the Collateral
to Lender or any third party. All acts of said power of attorney are hereby
ratified and approved and Lender shall not be liable for any mistake of law or
fact made in connection therewith. This power of attorney is coupled with an
<PAGE>

interest and shall be irrevocable so long as any amounts remain unpaid on any
of the Obligations. Upon the occurrence of an Event of Default, the Lender may
cause the Resignation Letters to be effective. All remedies of Lender shall be
cumulative to the full extent provided by law, all without liability except to
account for property actually received, but the Lender shall have no duty to
exercise such rights and shall not be responsible for any failure to do so or
delay in so doing. Pursuit by Lender of certain judicial or other remedies
shall not abate nor bar other remedies with respect to the Obligations or to
other portions of the Collateral. Lender may exercise its rights to the
Collateral without resorting or regard to other collateral or sources of
security or reimbursement for the Obligations.

(b) If Assignor fails to perform any agreement or covenant contained
in this Agreement beyond any applicable period for notice and cure, Lender may
itself perform, or cause to be performed, any agreement or covenant of Assignor
contained in this Agreement which Assignor shall fail to perform, and the cost
of such performance, together with any expenses, including reasonable
attorneys' fees actually incurred (including attorneys' fees incurred in any
appeal) by Lender in connection therewith, shall be payable by Assignor upon
demand and shall constitute a part of the Obligations and shall bear interest
at the rate for overdue amounts as set forth in the Credit Agreement.

(d) Any stock or securities held by Lender as Collateral hereunder
may, at any time, and at the option of Lender, be registered in the name of
Lender or its nominee, endorsed or assigned in blank or in the name of any
nominee and Lender may deliver any or all of the Stock Collateral to the issuer
or issuers thereof for the purpose of making denominational exchanges or
registrations or transfer or for such other purposes in furtherance of this
Agreement as Lender may deem desirable. Until the occurrence of an Event of
Default, Assignor shall retain the right to vote any of the Stock Collateral,
in a manner not inconsistent with the terms of this Agreement and the other
Loan Documents, and Lender hereby grants to Assignor its proxy to enable
Assignor to so vote any of the Stock Collateral (except that Assignor shall not
have any right to exercise any such power if the exercise thereof would violate
or result in a violation of any of the terms of this Agreement or any of the
other Loan Documents). At any time after the occurrence and during the
continuance of any Event of Default, Lender or its nominee shall, without
notice or demand, automatically have the sole and exclusive right to give all
consents, waivers and ratifications in respect of the Collateral and exercise
all voting, corporate or other rights at any meeting with the shareholders of
the issuer of the Stock Collateral (and the right to call such meetings) (and
to give written consents in lieu of voting thereon), and exercise any and all
rights of conversion, exchange, subscription or any of the rights, privileges
or options pertaining to the Stock Collateral and otherwise act with respect
thereto and thereunder as if it were the absolute owner thereof (all of such
<PAGE>

rights of the Assignor ceasing to exist and terminating upon the occurrence of
an Event of Default) including, without limitation, the right to exchange, at
its discretion, any and all of the Stock Collateral upon the merger,
consolidation, reorganization, recapitalization or the readjustment of the
issuer thereof, all without liability except to account for property actually
received and in such manner as Lender shall determine in its sole and absolute
discretion, but Lender shall have no duty to exercise any of the aforesaid
rights, privileges or options and shall not be responsible for the failure to
do so or delay in so doing. The exercise by Lender of any of its rights and
remedies under this paragraph shall not be deemed a disposition of collateral
under Article 9 of the UCC nor an acceptance by Lender of any of the Collateral
in satisfaction of the Obligations.

10. Indemnification.

(a) It is specifically understood and agreed that this Agreement
shall not operate to place any responsibility or obligation whatsoever upon
Lender, or cause Lender to be, or to be deemed to be, a shareholder in the
Company and that in accepting this Agreement, Lender neither assumes nor agrees
to perform at any time whatsoever any obligation or duty of Assignor relating
to the Collateral or under the Organizational Agreements or any other mortgage,
indenture, contract, agreement or instrument to which the Company is a party or
to which it is subject, all of which obligations and duties shall be and remain
with and upon Assignor (provided, however, that Assignor shall not be liable
for the performance of any liabilities or duties under the Organizational
Agreements which may result from written amendments thereof made by Lender
after the occurrence of an Event of Default).

(b) Assignor agrees to indemnify, defend and hold Lender harmless
from and against any and all claims, expenses, losses and liabilities growing
out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement) or acts taken or omitted by Lender hereunder or
in connection herewith, except claims, expenses, losses or liabilities
resulting from Lender's gross negligence or wilful misconduct.

(c) Assignor upon demand shall pay to Lender the amount of any and
all reasonable expenses, including, without limitation, the reasonable fees and
disbursements of counsel actually incurred (including those incurred in any
appeal), and of any experts and agents, which Lender may incur in connection
with (i) the administration of this Agreement, (ii) the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Lender hereunder, or (iv) the failure by
Assignor to perform or observe any of the provisions hereof beyond any
applicable period for notice and cure.

11. Security Interest Absolute. All rights of Lender, and the security
interests hereunder, and all of the obligations secured hereby, shall be
absolute and unconditional, irrespective of:
<PAGE>

(a) Any lack of validity or enforceability of the Loan Documents or
any other agreement or instrument relating thereto;

(d) Any other circumstance (other than payment of the Obligations in
full) that might otherwise constitute a defense available to, or a discharge
of, Assignor or any third party for the Obligations or any part thereof.

12. Amendments and Waivers. No amendment or waiver of any provision of
this Agreement nor consent to any departure therefrom shall in any event be
effective unless the same shall be in writing and signed by Lender, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No delay or omission of Lender to
exercise any right, power or remedy accruing upon any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be a
waiver of any such Event of Default, or acquiescence therein; and every right,
power and remedy given by this Agreement to Lender may be exercised from time
to time and as often as may be deemed expedient by Lender. Failure on the part
of Lender to complain of any act or failure to act which constitutes an Event
of Default, irrespective of how long such failure continues, shall not
constitute a waiver by Lender of Lender's rights hereunder or impair any
rights, powers or remedies consequent on any Event of Default. Assignor hereby
waives to the extent permitted by law all rights which Assignor has or may have
under and by virtue of the Uniform Commercial Code as enacted in the State of
New York, and any federal, state, county or municipal statute, regulation,
ordinance, Constitution or charter, now or hereafter existing, similar in
effect thereto providing any right of Assignor to notice and to a judicial
hearing prior to seizure by Lender of any of the Collateral. Assignor hereby
waives and renounces for itself, its heirs, successors and assigns, all rights
to the benefits of any statute of limitations and any moratorium,
reinstatement, marshaling, forbearance, valuation, stay, extension, homestead,
redemption and appraisement now provided or which may hereafter be provided by
the Constitution and laws of the United States and of any state thereof, both
as to itself and in and to all of its property, real and personal, against the
enforcement of this Agreement and the collection of any of the Obligations.

13. Continuing Security Interest; Transfer of Note; Release of
Collateral. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full in immediately available funds of the Obligations, (b) be binding upon
Assignor and its permitted successors and assigns, and (c) inure, together with
the rights and remedies of Lender hereunder, to the benefit of Lender and the
Banks and their respective successors, transferees and assigns. Upon the
payment in full in immediately available funds of the Obligations, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Assignor. Upon any such termination, Lender will, at Assignor's
expense, execute and deliver to Assignor such documents as Assignor shall
reasonably request to evidence such termination.
<PAGE>

14. Modifications, Etc. Assignor hereby consents and agrees that Lender
and the Banks may at any time and from time to time, without notice to or
further consent from Assignor, either with or without consideration, surrender
any property or other security of any kind or nature whatsoever held by it or
by any person, firm or corporation on its behalf or for its account, securing
the Obligations; substitute for any Collateral so held by it, other collateral
of like kind; agree to modification of the terms of the Loan Documents; extend
or renew the Loan Documents for any period; grant releases, compromises and
indulgences with respect to the Loan Documents for any period; grant releases,
compromises and indulgences with respect to the Loan Documents to any persons
or entities now or hereafter liable thereunder or hereunder; release any
guarantor, endorser or any other Person liable with respect to the Obligations;
or take or fail to take any action of any type whatsoever; and no such action
which Lender shall take or fail to take in connection with the Loan Documents,
or any of them, or any security for the payment of the Obligations or for the
performance of any obligations or undertakings of Assignor, nor any course of
dealing with Assignor or any other person, shall release Assignor's obligations
hereunder, affect this Agreement in any way or afford Assignor any recourse
against Lender.

15. Securities Act. In view of the position of Assignor in relation to
the Collateral, or because of other current or future circumstances, a question
may arise under the Securities Act of 1933, as amended, and all rules and
regulations issued pursuant thereto or any similar federal, state or local law,
rule, regulation or order (collectively the "Applicable Law") hereafter enacted
analogous in purpose or effect (such Act and any such similar law as from time
to time in effect being called the "Federal Securities Laws") with respect to
any disposition of the Collateral permitted hereunder. Assignor understands
that compliance with the Federal Securities Laws might very strictly limit the
course of conduct of Lender if Lender were to attempt to dispose of all or any
part of the Collateral in accordance with the terms hereof, and might also
limit the extent to which or the manner in which any subsequent transferee of
any Collateral could dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Lender in any attempt to dispose of
all or part of the Collateral in accordance with the terms hereof under
applicable Blue Sky or other state securities laws or similar Applicable Law
analogous in purpose or effect. Assignor recognizes that in light of the
foregoing restrictions and limitations Lender may, with respect to any sale of
the Collateral, limit the purchasers to those who will agree, among other
things, to acquire such Collateral for their own account, for investment, and
not with a view to the distribution or resale thereof. Assignor acknowledges
and agrees that in light of the foregoing restrictions and limitations, the
Lender in its sole and absolute discretion may, in accordance with Applicable
Law, (a) proceed to make such a sale whether or not a registration statement
for the purpose of registering such Collateral or part thereof shall have been
filed under the Federal Securities Laws and (b) approach and negotiate with a
single potential purchaser to effect such sale. Assignor acknowledges and
agrees that any such sale might result in prices and other terms less favorable
to the seller if such sale were a public sale without such restrictions. In
the event of any such sale, Lender shall incur no responsibility or liability
for selling all or any part of the Collateral in accordance with the terms
hereof at a price that Lender, in its sole and absolute discretion, may in good
faith deem reasonable under the circumstances, notwithstanding the possibility
that a substantially higher price might have been realized if the sale were
deferred until after registration as aforesaid or if more than a single
purchaser were approached. The provisions of this paragraph will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
<PAGE>

Lender sells.

16. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK.

17. Notices. Each notice, demand, election or request provided for or
permitted to be given pursuant to this Agreement shall be deemed to have been
properly given or served if given in the manner provided in the Guaranty.

18. No Unwritten Agreements. THE WRITTEN LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

19. Miscellaneous. Time is of the essence of this Agreement. Title or
captions of paragraphs hereof are for convenience only and neither limit nor
amplify the provisions hereof. If, for any circumstances whatsoever,
fulfillment of any provision of this Agreement shall involve transcending the
limit of validity presently prescribed by applicable law, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provision herein operates or would prospectively operate to invalidate this
Agreement, in whole or in part, then such clause or provision only shall be
held for naught, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect.

20. Non-Recourse Obligations. The liability and obligations of Assignor
to perform and observe the obligations contained in this Agreement shall be
subject to and limited by the terms of Section 32 of the Credit Agreement.

IN WITNESS WHEREOF, Assignor and Lender have executed this Agreement on
the date first above written.

LENDER:

THE FIRST NATIONAL BANK OF
BOSTON,
as Agent

By:/s/ Mark E. Basham
__________________________________________
Mark E. Basham, Managing Director

ASSIGNOR:

/s/ Stanley Stahl
__________________________________________
Stanley Stahl
<PAGE>

EXHIBIT "A"

ORGANIZATIONAL AGREEMENTS
<PAGE>

EXHIBIT "B"

PROMISSORY NOTE LEGEND

"THIS NOTE HAS BEEN PLEDGED BY STANLEY STAHL ("ASSIGNOR") TO THE FIRST NATIONAL
BANK OF BOSTON, AS AGENT ("LENDER") PURSUANT TO A STOCK PLEDGE AGREEMENT DATED
AS OF APRIL ___, 1997 (THE "AGREEMENT"). ALL AMOUNTS PAYABLE TO ASSIGNOR
PURSUANT TO THIS NOTE SHALL BE PAID DIRECTLY TO LENDER AS REQUIRED BY THE
AGREEMENT."

<PAGE>

EXHIBIT 10.17

STOCK PLEDGE AGREEMENT

W I T N E S S E T H:

WHEREAS, Assignor is the sole shareholder of PAMC Co-Manager Inc., a
corporation formed under the laws of the State of Delaware (the "Company"); and

WHEREAS, the Company is a member of 277 Park Avenue, LLC, a Delaware
limited liability company (the "Property Owner"); and

WHEREAS, the extension of the Loan by the Banks to the Borrower shall
inure to the direct interest and advantage of Assignor;

1. Definitions. Capitalized terms used herein that are not otherwise
defined herein shall have the meaning set forth in the Credit Agreement.

Agreement, the Note and such other agreements, together with any and all
renewals, modifications, consolidations and extensions thereof, are hereinafter
referred to collectively as the "Loan Documents"; and said duties,
responsibilities and obligations of Assignor and Borrower are hereinafter
referred to collectively as the "Obligations"), Assignor does hereby transfer,
assign, pledge, convey and grant to Lender, and does hereby grant a security
interest to Lender in, all right, title and interest of Assignor in and to the
following:

(b) All right, title and interest of Assignor, if any, in and to the
Cash Collateral Agreement or any account maintained or funds held pursuant
thereto; and

(d) All accounts, contract rights and general intangibles now or
hereafter arising from any of the foregoing; and

(e) All notes or other documents or instruments now or hereafter
evidencing or securing any of the foregoing; and

(g) All documents, writings, leases, books, files, records, computer
tapes, programs, ledger books and ledger pages arising from or used in
connection with any of the foregoing; and

(h) All renewals, extensions, additions, substitutions or
replacements of any of the foregoing; and

(i) All powers, options, rights, privileges and immunities
<PAGE>

pertaining to any of the foregoing; and

All of the foregoing described in this paragraph 2 are hereinafter referred to
collectively as the "Collateral". The items described in (a), above, are
sometimes hereinafter referred to as the "Stock Collateral"; and the items
described in (b) - (j), above, are sometimes hereinafter referred to
collectively as the "Distributions."

3. Obligations Secured. This Agreement secures the payment and
performance by Assignor and Borrower of the Obligations.

4. Collection of Distributions.

(i) Assignor shall have no right to receive payments made under
or with respect to the Distributions, and all such payments shall be
delivered directly by the Company to Lender.

Assignor, including, without limitation, any amounts arising from the sale,
transfer, assignment, conveyance, option or other disposition of, or any
mortgage, hypothecation, encumbrance, financing or refinancing of, any interest
of Assignor in the Company, any of the assets or properties of the Company or
any assets or properties of any other Person in which the Company directly or
indirectly owns an interest (regardless of whether such event is permitted
under the terms of the Loan Documents).

(i) to ask, demand, sue for, attach, levy, settle, compromise,
collect, compound, recover, receive and give receipt and acquittances
for any and all Collateral and to take any and all actions as Lender
may deem necessary or desirable in order to realize upon the
Collateral, or any portion thereof, including, without limitation,
making any statements and doing and taking any actions on behalf of
Assignor which are otherwise required of Assignor under the terms of
any agreement as conditions precedent to the payment of the
Distributions, and the right and power to receive, endorse, assign
and deliver, in the name of Assignor, any checks, notes, drafts,
instruments or other evidences of payment received in payment of or
on account of all or any portion of the Collateral, and Assignor
hereby waives presentment, demand, protest and notice of demand,
protest and non-payment of any instrument so endorsed; and

it being specifically understood and agreed, however, that Lender shall not be
obligated in any manner whatsoever to give any notices of default (except as
may be specifically required herein) or to exercise any such power or authority
or be in any way responsible for the preservation, maintenance, collection of
or realizing upon the Collateral, or any portion thereof, or any of Assignor's
rights therein. The foregoing appointment is irrevocable and continuing and
any such rights, powers and privileges shall be exclusive in Lender, its
successors and assigns until this Agreement terminates as provided in Paragraph
<PAGE>

13, below.

5. Warranties and Covenants. Assignor does hereby warrant and represent
to, and covenant and agree with, Lender as follows:

(b) A true, correct and complete copy of the Organizational
Agreements, together with all amendments thereto, is attached hereto as
Exhibit "A". The Organizational Agreements are in full force and effect.
Except for the Loan Documents and the Mortgage Loan Documents, neither the
Company nor any of its directors, officers or shareholders is a party to or is
bound by any indenture, contract or other agreement which purports to prohibit,
restrict, limit or control the transfer or pledge of the Collateral, the
exercise of voting rights with respect to the Company or the management of the
Company.

(e) Upon the delivery to Lender of the certificates representing the
Stock Collateral, this Agreement creates a valid and binding first priority
security interest in the Collateral securing the payment and performance of the
Obligations and the performance by Assignor of its obligations hereunder and by
<PAGE>

Borrower of its obligations under the Loan Documents, and upon the filing of
UCC Financing Statements with the Secretary of State's Office of the State of
New York and the Office of the Register of the City or New York, New York
County all filings and other actions necessary to perfect and protect such
security interests shall have been duly made and taken. Neither Assignor nor
the Company have performed or will perform any acts which might prevent Lender
from enforcing any of the terms and conditions of this Agreement or which would
limit Lender in any such enforcement.

6. General Covenants. Assignor covenants and agrees that, so long as
this Agreement is continuing:

(d) Assignor shall perform all of its duties, responsibilities and
obligations under the Organizational Agreements to the extent it has authority
<PAGE>

to do so hereunder and with respect to the Collateral, and shall diligently and
in good faith protect the value of the Collateral. Except with respect to a
Permitted Transfer, Assignor shall not, without the prior written consent of
Lender, which consent may be withheld by Lender in its sole and absolute
discretion, take any action which could result in the sale, reduction,
dilution, cancellation, diminution or conversion of any interest of Assignor in
the Company, or omit to take any action necessary to prevent any such sale,
reduction, dilution, cancellation, diminution or conversion, or otherwise take
any action or omit to take any action that would or could, in the exercise of
Lender's judgment, jeopardize or diminish the security afforded to Lender by
the Collateral. Without limiting the foregoing, Assignor shall not consent to
or permit to occur the admission of any new shareholder in the Company or the
issuance of any additional shares or classes of stock or, directly or
indirectly, any other equity interest in the Company.

officers and directors, all at such reasonable times and intervals as the
Lender may reasonably request. The Lender shall use good faith efforts to
coordinate such visits and inspections so as to minimize the interference with
and disruption to Assignor's normal business operations.

(i) Without limiting any other terms of the Loan Documents
prohibiting or restricting the ability of the Company to incur Indebtedness, if
any amounts are due from the Company to Assignor and the obligations to repay
such amount is to be evidenced by a separate document or instrument, then as
evidence of such obligations, Assignor shall cause the Company to issue
Assignor, as the evidence of any obligations of the Company to pay
Distributions to Assignor in the future, a promissory note bearing the legend
attached hereto as Exhibit "B" and which note shall provide that all payments
due under such promissory note are to be paid directly to Lender as required by
and applied as provided in the Loan Documents until the Obligations are paid in
full or this Agreement is otherwise terminated as provided herein. No other
evidence of such obligations shall be executed by the Company to Assignor.

(k) Assignor will provide to Lender such documents and reports
respecting the Collateral in such form and detail as Lender reasonably may
request from time to time.

the foregoing directly, Assignor agrees to hold such cash or other property in
trust for the benefit of Lender, and to surrender such cash or other property
to Lender immediately.

(i) Contemporaneously with the execution of this Agreement, Assignor
has delivered to Lender resignation letters (the "Resignation Letters") from
each director and officer of the Company that provide that such director or
officer shall resign its position as a director or officer of the Company at
the option of the Lender upon the occurrence of an Event of Default. Assignor
shall cause each other director or officer of the Company that may be elected
after the date hereof to deliver to the Lender within ten (10) days of such
election a Resignation Letter satisfactory to the Lender.

7. Events of Default. An Event of Default shall exist hereunder upon
the occurrence of any of the following:

(b) Assignor shall fail to duly and fully comply with any covenant,
condition or agreement in Paragraph 6(a), 6(c), 6(d), 6(e), 6(i), 6(j) or 6(m)
of this Agreement; or

(d) The occurrence of an Event of Default under any of the Loan
Documents.

8. Remedies.

including, without limitation, the exercise of its rights and remedies with
respect to any or all of the Stock Collateral. The remedies of Lender shall
include, without limitation, all rights and remedies specified in the Loan
Documents and this Agreement, all remedies of Lender under applicable general
or statutory law, and the remedies of a secured party under the Uniform
Commercial Code as enacted in the State of New York, regardless of whether the
Uniform Commercial Code has been enacted or enacted in that form in any other
jurisdiction in which such right or remedy is asserted. Any notice required by
law, including, but not limited to, notice of the intended disposition of all
or any portion of the Collateral, shall be reasonably and properly given in the
manner prescribed for the giving of notice herein, and, in the case of any
notice of disposition, if given at least ten (10) calendar days prior to such
disposition. Lender may require Assignor to assemble the Collateral and make
it available to Lender at any place to be designated by Lender which is
reasonably convenient to both parties. It is expressly understood and agreed
that Lender shall be entitled to dispose of the Collateral at any public or
private sale, and that Lender shall be entitled to bid and purchase at any such
sale. In the event that Lender is the successful bidder at any public or
private sale of any note or other document or instrument evidencing Assignor's
right to receive a Distribution, Lender shall be entitled to credit the amount
bid by Lender against the obligations evidenced by such note, document or
instrument rather than the obligations evidenced by the Note. To the extent
the Collateral consist of marketable securities, Lender shall not be obligated
to sell such securities for the highest price obtainable, but shall sell them
at the market price available on the date of sale. Lender shall not be
obligated to make any sale of the Collateral if it shall determine not to do so
regardless of the fact that notice of sale of the Collateral may have been
given. Lender may, without notice or publication, adjourn any public sale from
time to time by announcement at the time and place fixed for sale, and such
sale may, without further notice, be made at the time and place to which the
same was so adjourned. Each such purchaser at any such sale shall hold the
Collateral sold absolutely free from claim or right on the part of Assignor.
In the event that any consent, approval or authorization of any governmental
agency or commission will be necessary to effectuate any such sale or sales,
Assignor shall execute all such applications or other instruments as Lender may
deem reasonably necessary to obtain such consent, approval or authorization.
Lender may notify any account debtor or obligor with respect to the Collateral
to make payment directly to Lender, and may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose or realize upon the Collateral
as Lender may determine whether or not the Obligations or the Collateral are
due, and for the purpose of realizing Lender's rights therein, Lender may
receive, open and dispose of mail addressed to Assignor and endorse notes,
checks, drafts, money orders, documents of title or other evidences of payment,
shipment or storage of any form of Collateral on behalf and in the name of
Assignor, as its attorney-in-fact. In addition, Assignor hereby irrevocably
designates and appoints Lender its true and lawful attorney-in-fact either in
the name of Lender or Assignor to (i) sign Assignor's name on any Collateral,
drafts against account debtors, assignments, any proof of claim in any
bankruptcy or other insolvency proceeding involving any account debtor, any
notice of lien, claim of lien or assignment or satisfaction of lien, or on any
financing statement or continuation statement under the Uniform Commercial
Code; (ii) send verifications of accounts receivable to any account debtor; and
(iii) in connection with a transfer of the Collateral as described above sign
in Assignor's name any documents necessary to transfer title to the Collateral
to Lender or any third party. All acts of said power of attorney are hereby
ratified and approved and Lender shall not be liable for any mistake of law or
fact made in connection therewith. This power of attorney is coupled with an
interest and shall be irrevocable so long as any amounts remain unpaid on any
<PAGE>

of the Obligations. Upon the occurrence of an Event of Default, the Lender may
cause the Resignation Letters to be effective. All remedies of Lender shall be
cumulative to the full extent provided by law, all without liability except to
account for property actually received, but the Lender shall have no duty to
exercise such rights and shall not be responsible for any failure to do so or
delay in so doing. Pursuit by Lender of certain judicial or other remedies
shall not abate nor bar other remedies with respect to the Obligations or to
other portions of the Collateral. Lender may exercise its rights to the
Collateral without resorting or regard to other collateral or sources of
security or reimbursement for the Obligations.

(d) Any stock or securities held by Lender as Collateral hereunder
may, at any time, and at the option of Lender, be registered in the name of
Lender or its nominee, endorsed or assigned in blank or in the name of any
nominee and Lender may deliver any or all of the Stock Collateral to the issuer
or issuers thereof for the purpose of making denominational exchanges or
registrations or transfer or for such other purposes in furtherance of this
Agreement as Lender may deem desirable. Until the occurrence of an Event of
Default, Assignor shall retain the right to vote any of the Stock Collateral,
in a manner not inconsistent with the terms of this Agreement and the other
Loan Documents, and Lender hereby grants to Assignor its proxy to enable
Assignor to so vote any of the Stock Collateral (except that Assignor shall not
have any right to exercise any such power if the exercise thereof would violate
or result in a violation of any of the terms of this Agreement or any of the
other Loan Documents). At any time after the occurrence and during the
continuance of any Event of Default, Lender or its nominee shall, without
notice or demand, automatically have the sole and exclusive right to give all
consents, waivers and ratifications in respect of the Collateral and exercise
all voting, corporate or other rights at any meeting with the shareholders of
the issuer of the Stock Collateral (and the right to call such meetings) (and
to give written consents in lieu of voting thereon), including, without
limitation, exercising the right to cause the Company to be the sole managing
member of the Property Owner, and exercise any and all rights of conversion,
exchange, subscription or any of the rights, privileges or options pertaining
to the Stock Collateral and otherwise act with respect thereto and thereunder
<PAGE>

as if it were the absolute owner thereof (all of such rights of the Assignor
ceasing to exist and terminating upon the occurrence of an Event of Default)
including, without limitation, the right to exchange, at its discretion, any
and all of the Stock Collateral upon the merger, consolidation, reorganization,
recapitalization or the readjustment of the issuer thereof, all without
liability except to account for property actually received and in such manner
as Lender shall determine in its sole and absolute discretion, but Lender shall
have no duty to exercise any of the aforesaid rights, privileges or options and
shall not be responsible for the failure to do so or delay in so doing. The
exercise by Lender of any of its rights and remedies under this paragraph shall
not be deemed a disposition of collateral under Article 9 of the UCC nor an
acceptance by Lender of any of the Collateral in satisfaction of the
Obligations.

10. Indemnification.

11. Security Interest Absolute. All rights of Lender, and the security
interests hereunder, and all of the obligations secured hereby, shall be
absolute and unconditional, irrespective of:
<PAGE>

(a) Any lack of validity or enforceability of the Loan Documents or
any other agreement or instrument relating thereto;

quotations or sales prices may exceed substantially the price at which the
Lender sells.

16. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, Assignor and Lender have executed this Agreement on
the date first above written.

LENDER:

THE FIRST NATIONAL BANK OF BOSTON,
as Agent

By:/s/ Mark E. Basham
_______________________________________
Mark E. Basham, Managing Director

ASSIGNOR:

/s/ Stanley Stahl
_______________________________________
Stanley Stahl
<PAGE>

EXHIBIT "A"

ORGANIZATIONAL AGREEMENTS
<PAGE>

EXHIBIT "B"

PROMISSORY NOTE LEGEND

"THIS NOTE HAS BEEN PLEDGED BY STANLEY STAHL ("ASSIGNOR") TO THE FIRST NATIONAL
BANK OF BOSTON, AS AGENT ("LENDER") PURSUANT TO A STOCK PLEDGE AGREEMENT DATED
AS OF APRIL 25, 1997 (THE "AGREEMENT"). ALL AMOUNTS PAYABLE TO ASSIGNOR
PURSUANT TO THIS NOTE SHALL BE PAID DIRECTLY TO LENDER AS REQUIRED BY THE
AGREEMENT."

<PAGE>

EXHIBIT 10.18

STOCK PLEDGE AGREEMENT

W I T N E S S E T H:

WHEREAS, Assignor is the sole shareholder of PAFC Management, Inc., a
corporation formed under the laws of the State of Delaware (the "Company"); and

WHEREAS, the Company is a member of Park Avenue Financing Company, LLC, a
Delaware limited liability company (the "Holding Company"); and

WHEREAS, pursuant to that certain Credit Agreement dated of even date
herewith among Holding Company and PAMC Co-Manager Inc. (hereinafter referred
to collectively as the "Borrower"), FNBB, the other lenders that are a party
thereto, Lender and certain other parties (as the same may be varied, extended,
supplemented, consolidated, amended, replaced, renewed, modified or restated,
the "Credit Agreement"), the Banks have agreed to provide a loan to Borrower of
$80,000,000.00 (the "Loan"), which Loan is evidenced by those certain Notes
made by Borrower to the order of the Banks in the aggregate principal face
amount of $80,000,000.00 (such Notes, and each other note as may be issued
under the Credit Agreement, as the same may be varied, extended, supplemented,
consolidated, amended, replaced, renewed, modified or restated, is hereinafter
referred to collectively as the "Note"); and

WHEREAS, the extension of the Loan by the Banks to the Borrower shall
inure to the direct interest and advantage of Assignor;

1. Definitions. Capitalized terms used herein that are not otherwise
defined herein shall have the meaning set forth in the Credit Agreement.

renewals, modifications, consolidations and extensions thereof, are hereinafter
referred to collectively as the "Loan Documents"; and said duties,
responsibilities and obligations of Assignor and Borrower are hereinafter
referred to collectively as the "Obligations"), Assignor does hereby transfer,
assign, pledge, convey and grant to Lender, and does hereby grant a security
interest to Lender in, all right, title and interest of Assignor in and to the
following:

(b) All right, title and interest of Assignor, if any, in and to the
Cash Collateral Agreement or any account maintained or funds held pursuant
thereto; and

(d) All accounts, contract rights and general intangibles now or
hereafter arising from any of the foregoing; and

(e) All notes or other documents or instruments now or hereafter
evidencing or securing any of the foregoing; and

(g) All documents, writings, leases, books, files, records, computer
tapes, programs, ledger books and ledger pages arising from or used in
connection with any of the foregoing; and

(h) All renewals, extensions, additions, substitutions or
replacements of any of the foregoing; and

(i) All powers, options, rights, privileges and immunities
pertaining to any of the foregoing; and
<PAGE>

All of the foregoing described in this paragraph 2 are hereinafter referred to
collectively as the "Collateral". The items described in (a), above, are
sometimes hereinafter referred to as the "Stock Collateral"; and the items
described in (b) - (j), above, are sometimes hereinafter referred to
collectively as the "Distributions."

3. Obligations Secured. This Agreement secures the payment and
performance by Assignor and Borrower of the Obligations.

4. Collection of Distributions.

(i) Assignor shall have no right to receive payments made under
or with respect to the Distributions, and all such payments shall be
delivered directly by the Company to Lender.

transfer, assignment, conveyance, option or other disposition of, or any
mortgage, hypothecation, encumbrance, financing or refinancing of, any interest
of Assignor in the Company, any of the assets or properties of the Company or
any assets or properties of any other Person in which the Company directly or
indirectly owns an interest (regardless of whether such event is permitted
under the terms of the Loan Documents).

(i) to ask, demand, sue for, attach, levy, settle, compromise,
collect, compound, recover, receive and give receipt and acquittances
for any and all Collateral and to take any and all actions as Lender
may deem necessary or desirable in order to realize upon the
Collateral, or any portion thereof, including, without limitation,
making any statements and doing and taking any actions on behalf of
Assignor which are otherwise required of Assignor under the terms of
any agreement as conditions precedent to the payment of the
Distributions, and the right and power to receive, endorse, assign
and deliver, in the name of Assignor, any checks, notes, drafts,
instruments or other evidences of payment received in payment of or
on account of all or any portion of the Collateral, and Assignor
hereby waives presentment, demand, protest and notice of demand,
protest and non-payment of any instrument so endorsed; and

it being specifically understood and agreed, however, that Lender shall not be
obligated in any manner whatsoever to give any notices of default (except as
may be specifically required herein) or to exercise any such power or authority
or be in any way responsible for the preservation, maintenance, collection of
or realizing upon the Collateral, or any portion thereof, or any of Assignor's
rights therein. The foregoing appointment is irrevocable and continuing and
any such rights, powers and privileges shall be exclusive in Lender, its
successors and assigns until this Agreement terminates as provided in Paragraph
13, below.
<PAGE>

5. Warranties and Covenants. Assignor does hereby warrant and represent
to, and covenant and agree with, Lender as follows:

(b) A true, correct and complete copy of the Organizational
Agreements, together with all amendments thereto, is attached hereto as
Exhibit "A". The Organizational Agreements are in full force and effect.
Except for the Loan Documents and the Mortgage Loan Documents, neither the
Company nor any of its directors, officers or shareholders is a party to or is
bound by any indenture, contract or other agreement which purports to prohibit,
restrict, limit or control the transfer or pledge of the Collateral, the
exercise of voting rights with respect to the Company or the management of the
Company.

UCC Financing Statements with the Secretary of State's Office of the State of
New York and the Office of the Register of the City of New York, New York
County all filings and other actions necessary to perfect and protect such
security interests shall have been duly made and taken. Neither Assignor nor
the Company have performed or will perform any acts which might prevent Lender
from enforcing any of the terms and conditions of this Agreement or which would
limit Lender in any such enforcement.

6. General Covenants. Assignor covenants and agrees that, so long as
this Agreement is continuing:

(d) Assignor shall perform all of its duties, responsibilities and
obligations under the Organizational Agreements to the extent it has authority
to do so hereunder and with respect to the Collateral, and shall diligently and
<PAGE>

in good faith protect the value of the Collateral. Except with respect to a
Permitted Transfer, Assignor shall not, without the prior written consent of
Lender, which consent may be withheld by Lender in its sole and absolute
discretion, take any action which could result in the sale, reduction,
dilution, cancellation, diminution or conversion of any interest of Assignor in
the Company, or omit to take any action necessary to prevent any such sale,
reduction, dilution, cancellation, diminution or conversion, or otherwise take
any action or omit to take any action that would or could, in the exercise of
Lender's judgment, jeopardize or diminish the security afforded to Lender by
the Collateral. Without limiting the foregoing, Assignor shall not consent to
or permit to occur the admission of any new shareholder in the Company or the
issuance of any additional shares or classes of stock or, directly or
indirectly, any other equity interest in the Company.

Lender may reasonably request. The Lender shall use good faith efforts to
coordinate such visits and inspections so as to minimize the interference with
and disruption to Assignor's normal business operations.

(i) Without limiting any other terms of the Loan Documents
prohibiting or restricting the ability of the Company to incur Indebtedness, if
any amounts are due from the Company to Assignor and the obligations to repay
such amount is to be evidenced by a separate document or instrument, then as
evidence of such obligations, Assignor shall cause the Company to issue
Assignor, as the evidence of any obligations of the Company to pay
Distributions to Assignor in the future, a promissory note bearing the legend
attached hereto as Exhibit "B" and which note shall provide that all payments
due under such promissory note are to be paid directly to Lender as required by
and applied as provided in the Loan Documents until the Obligations are paid in
full or this Agreement is otherwise terminated as provided herein. No other
evidence of such obligations shall be executed by the Company to Assignor.

(k) Assignor will provide to Lender such documents and reports
respecting the Collateral in such form and detail as Lender reasonably may
request from time to time.

trust for the benefit of Lender, and to surrender such cash or other property
to Lender immediately.

7. Events of Default. An Event of Default shall exist hereunder upon
the occurrence of any of the following:

(b) Assignor shall fail to duly and fully comply with any covenant,
condition or agreement in Paragraph 6(a), 6(c), 6(d), 6(e), 6(i), 6(j) or 6(m)
of this Agreement; or

(d) The occurrence of an Event of Default under any of the Loan
Documents.

8. Remedies.

respect to any or all of the Stock Collateral. The remedies of Lender shall
include, without limitation, all rights and remedies specified in the Loan
Documents and this Agreement, all remedies of Lender under applicable general
or statutory law, and the remedies of a secured party under the Uniform
Commercial Code as enacted in the State of New York, regardless of whether the
Uniform Commercial Code has been enacted or enacted in that form in any other
jurisdiction in which such right or remedy is asserted. Any notice required by
law, including, but not limited to, notice of the intended disposition of all
or any portion of the Collateral, shall be reasonably and properly given in the
manner prescribed for the giving of notice herein, and, in the case of any
notice of disposition, if given at least ten (10) calendar days prior to such
disposition. Lender may require Assignor to assemble the Collateral and make
it available to Lender at any place to be designated by Lender which is
reasonably convenient to both parties. It is expressly understood and agreed
that Lender shall be entitled to dispose of the Collateral at any public or
private sale, and that Lender shall be entitled to bid and purchase at any such
sale. In the event that Lender is the successful bidder at any public or
private sale of any note or other document or instrument evidencing Assignor's
right to receive a Distribution, Lender shall be entitled to credit the amount
bid by Lender against the obligations evidenced by such note, document or
instrument rather than the obligations evidenced by the Note. To the extent
the Collateral consist of marketable securities, Lender shall not be obligated
to sell such securities for the highest price obtainable, but shall sell them
at the market price available on the date of sale. Lender shall not be
obligated to make any sale of the Collateral if it shall determine not to do so
regardless of the fact that notice of sale of the Collateral may have been
given. Lender may, without notice or publication, adjourn any public sale from
time to time by announcement at the time and place fixed for sale, and such
sale may, without further notice, be made at the time and place to which the
same was so adjourned. Each such purchaser at any such sale shall hold the
Collateral sold absolutely free from claim or right on the part of Assignor.
In the event that any consent, approval or authorization of any governmental
agency or commission will be necessary to effectuate any such sale or sales,
Assignor shall execute all such applications or other instruments as Lender may
deem reasonably necessary to obtain such consent, approval or authorization.
Lender may notify any account debtor or obligor with respect to the Collateral
to make payment directly to Lender, and may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose or realize upon the Collateral
as Lender may determine whether or not the Obligations or the Collateral are
due, and for the purpose of realizing Lender's rights therein, Lender may
receive, open and dispose of mail addressed to Assignor and endorse notes,
checks, drafts, money orders, documents of title or other evidences of payment,
shipment or storage of any form of Collateral on behalf and in the name of
Assignor, as its attorney-in-fact. In addition, Assignor hereby irrevocably
designates and appoints Lender its true and lawful attorney-in-fact either in
the name of Lender or Assignor to (i) sign Assignor's name on any Collateral,
drafts against account debtors, assignments, any proof of claim in any
bankruptcy or other insolvency proceeding involving any account debtor, any
notice of lien, claim of lien or assignment or satisfaction of lien, or on any
financing statement or continuation statement under the Uniform Commercial
Code; (ii) send verifications of accounts receivable to any account debtor; and
(iii) in connection with a transfer of the Collateral as described above sign
in Assignor's name any documents necessary to transfer title to the Collateral
to Lender or any third party. All acts of said power of attorney are hereby
ratified and approved and Lender shall not be liable for any mistake of law or
fact made in connection therewith. This power of attorney is coupled with an
interest and shall be irrevocable so long as any amounts remain unpaid on any
of the Obligations. Upon the occurrence of an Event of Default, the Lender may
<PAGE>

cause the Resignation Letters to be effective. All remedies of Lender shall be
cumulative to the full extent provided by law, all without liability except to
account for property actually received, but the Lender shall have no duty to
exercise such rights and shall not be responsible for any failure to do so or
delay in so doing. Pursuit by Lender of certain judicial or other remedies
shall not abate nor bar other remedies with respect to the Obligations or to
other portions of the Collateral. Lender may exercise its rights to the
Collateral without resorting or regard to other collateral or sources of
security or reimbursement for the Obligations.

(d) Any stock or securities held by Lender as Collateral hereunder
may, at any time, and at the option of Lender, be registered in the name of
Lender or its nominee, endorsed or assigned in blank or in the name of any
nominee and Lender may deliver any or all of the Stock Collateral to the issuer
or issuers thereof for the purpose of making denominational exchanges or
registrations or transfer or for such other purposes in furtherance of this
Agreement as Lender may deem desirable. Until the occurrence of an Event of
Default, Assignor shall retain the right to vote any of the Stock Collateral,
in a manner not inconsistent with the terms of this Agreement and the other
Loan Documents, and Lender hereby grants to Assignor its proxy to enable
Assignor to so vote any of the Stock Collateral (except that Assignor shall not
have any right to exercise any such power if the exercise thereof would violate
or result in a violation of any of the terms of this Agreement or any of the
other Loan Documents). At any time after the occurrence and during the
continuance of any Event of Default, Lender or its nominee shall, without
notice or demand, automatically have the sole and exclusive right to give all
consents, waivers and ratifications in respect of the Collateral and exercise
all voting, corporate or other rights at any meeting with the shareholders of
the issuer of the Stock Collateral (and the right to call such meetings) (and
to give written consents in lieu of voting thereon), including, without
limitation, exercising the right to cause Holding Company to cause PAMC Co-
Manager Inc. to be the sole managing member of the Property Owner, and exercise
any and all rights of conversion, exchange, subscription or any of the rights,
privileges or options pertaining to the Stock Collateral and otherwise act with
respect thereto and thereunder as if it were the absolute owner thereof (all of
<PAGE>

such rights of the Assignor ceasing to exist and terminating upon the
occurrence of an Event of Default) including, without limitation, the right to
exchange, at its discretion, any and all of the Stock Collateral upon the
merger, consolidation, reorganization, recapitalization or the readjustment of
the issuer thereof, all without liability except to account for property
actually received and in such manner as Lender shall determine in its sole and
absolute discretion, but Lender shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible for the
failure to do so or delay in so doing. The exercise by Lender of any of its
rights and remedies under this paragraph shall not be deemed a disposition of
collateral under Article 9 of the UCC nor an acceptance by Lender of any of the
Collateral in satisfaction of the Obligations.

10. Indemnification.

11. Security Interest Absolute. All rights of Lender, and the security
interests hereunder, and all of the obligations secured hereby, shall be
absolute and unconditional, irrespective of:
<PAGE>

(a) Any lack of validity or enforceability of the Loan Documents or
any other agreement or instrument relating thereto;

Lender sells.

16. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, Assignor and Lender have executed this Agreement on
the date first above written.

LENDER:

THE FIRST NATIONAL BANK OF BOSTON,
as Agent

By:/s/ Mark E. Basham
__________________________________________
Mark E. Basham, Managing Director

ASSIGNOR:

/s/ Stanley Stahl
__________________________________________
Stanley Stahl
<PAGE>

EXHIBIT "A"

ORGANIZATIONAL AGREEMENTS
<PAGE>

EXHIBIT "B"

PROMISSORY NOTE LEGEND

<PAGE>

EXHIBIT 10.19

CONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE

FOR AND IN CONSIDERATION OF the sum of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration paid or delivered to the undersigned
STANLEY STAHL, an individual resident of the State of New York (hereinafter
referred to as "Guarantor"), the receipt and sufficiency whereof are hereby
acknowledged by Guarantor, and for the purpose of seeking to induce THE FIRST
NATIONAL BANK OF BOSTON ("FNBB"), a national banking association, and WELLSFORD
REAL PROPERTIES, INC., a Maryland corporation ("Wellsford"; FNBB and Wellsford
are hereinafter referred to collectively as "Lender," which term shall also
include each other Lender which may now or hereafter become party to the
"Credit Agreement" (as hereinafter defined) and shall also include any party
acting as Agent for all of the Lenders), to extend credit or otherwise provide
financial accommodations to PAMC CO-MANAGER INC., a Delaware corporation
(hereinafter referred to as "Co-Manager"), and PARK AVENUE FINANCING COMPANY,
LLC, a Delaware limited liability company (hereinafter referred to as "Holding
Company"; Co-Manager and Holding Company are hereinafter referred to
collectively as "Borrower"), which extension of credit and provision of
financial accommodations will be to the direct interest, advantage and benefit
of Guarantor, Guarantor does hereby absolutely and irrevocably guarantee to
Lender, subject to the terms of Paragraph 26, below:

(a) the full and prompt payment when due, whether by acceleration or
otherwise, either before or after maturity thereof, of that certain Note
(hereinafter referred to as the "FNBB Note") of even date herewith made by
Borrower to the order of FNBB in the principal face amount of Sixty Million and
No/100 Dollars ($60,000,000.00), together with interest as provided in the FNBB
Note, together with any replacements, supplements, renewals, modifications,
consolidations, restatements and extensions thereof; and

(b) the full and prompt payment when due, whether by acceleration or
otherwise, either before or after maturity thereof, of that certain Note
(hereinafter referred to as the "Wellsford Note") of even date herewith made by
Borrower to the order of Wellsford in the principal face amount of Twenty
Million and No/100 Dollars ($20,000,000.00), together with interest as provided
in the Wellsford Note, together with any replacements, supplements, renewals,
modifications, consolidations, restatements and extensions thereof; and

(c) the full and prompt payment when due, whether by acceleration or
otherwise, either before or after maturity thereof, of each other note as may
be issued under that certain Credit Agreement dated of even date herewith
(hereinafter referred to as the "Credit Agreement") between Borrower, FNBB, for
itself and as agent, and Wellsford, together with interest as provided in each
such note, together with any replacements, supplements, renewals,
modifications, consolidations, restatements and extensions thereof (the FNBB
Note, the Wellsford Note and each of the notes described in this subparagraph
(c) is hereinafter referred to collectively as the "Note").

In addition, Guarantor agrees to fully and promptly pay and perform all
obligations of Guarantor to Lender under the terms this Guaranty, together with
any replacements, supplements, renewals, modifications, consolidations,
<PAGE>

restatements and extensions thereof.

The Note, the Security Documents, the Credit Agreement and said other
agreements, documents and instruments, are hereinafter collectively referred to
as the "Loan Documents" and individually referred to as a "Loan Document". All
terms used herein and not otherwise defined herein shall have the meanings set
forth in the Credit Agreement.

I. Agreement to Pay and Perform; Costs of Collection. Subject to the
terms of Paragraph 26, below, Guarantor does hereby agree that, subject to the
terms of Paragraph 25, below, if the Note is not paid by Borrower in accordance
with its terms, or if any and all other obligations of Borrower to Lender under
the Note are not performed by Borrower in accordance with their terms,
Guarantor will immediately make such payments and perform such obligations. In
addition, Guarantor agrees to pay and perform on demand or within any longer
period expressly permitted hereunder each and every obligation, duty or
liability of Guarantor under this Guaranty. Guarantor further agrees to pay
Lender on demand all reasonable costs and expenses (including court costs and
reasonable attorneys' fees and disbursements) paid or incurred by Lender in
endeavoring to collect the indebtedness guaranteed hereby or the obligations of
Guarantor hereunder, to enforce any of the other obligations of Borrower
guaranteed hereby or the obligations of Guarantor hereunder, or any portion
thereof, or to enforce this Guaranty, and until paid to Lender, such sums shall
bear interest at the default rate set forth in the Credit Agreement unless
collection from Guarantor of interest at such rate would be contrary to
applicable law, in which event such sums shall bear interest at the highest
rate which may be collected from Guarantor under applicable law.

II. Reinstatement of Refunded Payments. If, for any reason, any
payment to Lender of any of the obligations guaranteed hereunder is required to
be refunded by Lender to Borrower, or paid or turned over by Lender to any
other person, including, without limitation, by reason of the operation of
bankruptcy, reorganization, receivership or insolvency laws or similar laws of
general application relating to creditors' rights and remedies now or hereafter
enacted, Guarantor agrees to pay the amount so required to be refunded, paid or
turned over (the "Turnover Payment"), the obligations of Guarantor shall not be
treated as having been discharged by the original payment to Lender giving rise
to the Turnover Payment, and this Guaranty shall be treated as having remained
in full force and effect for any such Turnover Payment so made by Lender, as
well as for any amounts not theretofore paid to Lender on account of such
obligations.

III. Rights of Lender to Deal with Collateral, Borrower and Other
Persons. Guarantor hereby consents and agrees that Lender may at any time, and
from time to time, without thereby releasing Guarantor from any liability
hereunder and without notice to or further consent from Guarantor, either with
or without consideration: release or surrender any lien or other security of
any kind or nature whatsoever held by it or by any person, firm or corporation
on its behalf or for its account, securing any indebtedness or liability hereby
guaranteed; substitute for any collateral so held by it, other collateral of
like kind, or of any kind; modify the terms of the Note or the Loan Documents;
extend or renew the Note for any period; grant releases, compromises and
indulgences with respect to the Note or the Loan Documents and to any persons
or entities now or hereafter liable thereunder or hereunder; release any other
Guarantor, Additional Pledgor, surety, endorser or accommodation party of the
Note, the Security Documents or any other Loan Documents; or take or fail to
take any action of any type whatsoever. No such action which Lender shall take
or fail to take in connection with the Note or the Loan Documents, or any of
<PAGE>

them, or any security for the payment of the indebtedness of Borrower to Lender
or for the performance of any obligations or undertakings of Borrower, nor any
course of dealing with Borrower or any other person, shall release Guarantor's
obligations hereunder, affect this Guaranty in any way or afford Guarantor any
recourse against Lender. The provisions of this Guaranty shall extend and be
applicable to all replacements, supplements, renewals, amendments, extensions,
consolidations, restatements and modifications of the Note and the Loan
Documents, and any and all references herein to the Note and the Loan Documents
shall be deemed to include any such replacements, supplements, renewals,
extensions, amendments, consolidations, restatements or modifications thereof.

IV. No Contest with Lender; Subordination. So long as any obligation
hereby guaranteed remains unpaid or undischarged, Guarantor will not, by paying
any sum recoverable hereunder (whether or not demanded by Lender) or by any
means or on any other ground, claim any set-off or counterclaim against
Borrower in respect of any liability of Guarantor to Borrower or, in
proceedings under federal bankruptcy law or insolvency proceedings of any
nature, prove in competition with Lender in respect of any payment hereunder or
be entitled to have the benefit of any counterclaim or proof of claim or
dividend or payment by or on behalf of Borrower or the benefit of any other
security for any obligation hereby guaranteed which, now or hereafter, Lender
may hold or in which it may have any share. Guarantor hereby expressly waives
any right of contribution from or indemnity against Borrower, whether at law or
in equity, arising from any payments made by Guarantor pursuant to the terms of
this Guaranty, and Guarantor acknowledges that Guarantor has no right
whatsoever to proceed against Borrower for reimbursement of any such payments.
In connection with the foregoing, Guarantor expressly waives any and all rights
of subrogation to Lender against Borrower, and Guarantor hereby waives any
rights to enforce any remedy which Lender may have against Borrower and any
rights to participate in any collateral for Borrower's obligations under the
Loan Documents. Guarantor hereby subordinates any and all indebtedness of
Borrower or any Additional Pledgor now or hereafter owed to Guarantor to all
indebtedness of Borrower to Lender and all obligations of such Additional
Pledgor to Lender, and agrees with Lender that (a) Guarantor shall not demand
or accept any payment from Borrower or any Additional Pledgor on account of
such indebtedness, (b) Guarantor shall not claim any offset or other reduction
of Guarantor's obligations hereunder because of any such indebtedness, and (c)
Guarantor shall not take any action to obtain any interest in any of the
security described in and encumbered by the Loan Documents because of any such
indebtedness; provided, however, that, if Lender so requests, such indebtedness
shall be collected, enforced and received by Guarantor as trustee for Lender
and be paid over to Lender on account of the indebtedness of Borrower and the
obligations of such Additional Pledgors to Lender, but without reducing or
affecting in any manner the liability of Guarantor under the other provisions
of this Guaranty except to the extent the principal amount of such outstanding
indebtedness shall have been reduced by such payment.

V. Waiver of Defenses. Guarantor hereby agrees that its obligations
hereunder shall not be affected or impaired by, and hereby waives and agrees
not to assert or take advantage of any defense based on:

A. any statute of limitations in any action hereunder or for the
collection of the Note or for the payment or performance of any obligation
hereby guaranteed;

B. the incapacity or lack of authority of Borrower or any other
person or entity, the death or disability of Borrower or Guarantor or any other
person or entity, or the failure of Lender to file or enforce a claim against
<PAGE>

the estate (either in administration, bankruptcy or in any other proceeding) of
Borrower or Guarantor or any other person or entity;

C. the dissolution or termination of existence of Borrower or any
other Person;

D. the voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of Borrower or any other
Person;

E. the voluntary or involuntary receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
assignment, composition, or readjustment of, or any similar proceeding
affecting Borrower, Guarantor, Property Owner or any Additional Pledgor, or any
of Borrower's, Guarantor's, Property Owner's or any Additional Pledgors'
properties or assets;

F. the damage, destruction, condemnation, foreclosure or
surrender of all or any part of the Mortgaged Property, the Building or any
other Collateral;

G. the failure of Lender to give notice of the existence,
creation or incurring of any new or additional indebtedness or obligation or of
any action or nonaction on the part of any other person whomsoever in
connection with any obligation hereby guaranteed;

H. any failure or delay of Lender to commence an action against
Borrower or any other Person, to assert or enforce any remedies against
Borrower under the Note or the Loan Documents, or to realize upon any security;

I. any failure of any duty on the part of Lender to disclose to
Guarantor any facts it may now or hereafter know regarding Borrower, the
Property Owner or any other Person, or the Mortgaged Property or the property
encumbered by the Security Documents, whether such facts materially increase
the risk to Guarantor or not;

J. failure to accept or give notice of acceptance of this
Guaranty by Lender;

K. failure to make or give notice of presentment and demand for
payment of any of the indebtedness or performance of any of the obligations
hereby guaranteed;

L. failure to make or give protest and notice of dishonor or of
default to Guarantor or to any other party with respect to the indebtedness or
performance of obligations hereby guaranteed;

M. any and all other notices whatsoever to which Guarantor might
otherwise be entitled;

N. any lack of diligence by Lender in collection, protection or
realization upon any collateral securing the payment of the indebtedness or
performance of obligations hereby guaranteed;

O. the invalidity or unenforceability of the Note or any of the
Loan Documents;

P. the compromise, settlement, release or termination of any or
<PAGE>

all of the obligations of Borrower under the Note or the Loan Documents;

Q. any transfer by Borrower or any other Person of all or any
part of the security encumbered by the Loan Documents;

R. the failure of Lender to perfect any security or to extend or
renew the perfection of any security; or

S. to the fullest extent permitted by law, any other legal,
equitable or surety defenses whatsoever to which Guarantor might otherwise be
entitled, it being the intention that the obligations of Guarantor hereunder
are absolute, unconditional (subject to the terms of Paragraph 25, below) and
irrevocable.

VI. Guaranty of Payment and Performance and Not of Collection. This is
a Guaranty of payment and performance and not of collection. Subject to the
terms of Paragraph 25, below, the liability of Guarantor under this Guaranty
shall be primary, direct and immediate and not conditional or contingent upon
the pursuit of any remedies against Borrower or any other person, nor against
securities or liens available to Lender, its successors, successors in title,
endorsees or assigns. Guarantor hereby waives any right to require that an
action be brought against Borrower or any other person or to require that
resort be had to any security or to any balance of any deposit account or
credit on the books of Lender in favor of Borrower or any other person.

VII. Rights and Remedies of Lender. In the event of a default under the
Note or the Loan Documents, or any of them, Lender shall have the right to
enforce its rights, powers and remedies thereunder or hereunder or under any
other agreement, document or instrument now or hereafter evidencing, securing
or otherwise relating to the indebtedness evidenced by the Note or secured by
the Loan Documents, in any order, and all rights, powers and remedies available
to Lender in such event shall be nonexclusive and cumulative of all other
rights, powers and remedies provided thereunder or hereunder or by law or in
equity. Accordingly, Guarantor hereby authorizes and empowers Lender upon the
occurrence of any event of default under the Note or the Loan Documents, at its
sole discretion, and without notice to Guarantor, to exercise any right or
remedy which Lender may have, including, but not limited to, judicial
foreclosure, exercise of rights of power of sale, acceptance of an assignment
in lieu of foreclosure, appointment of a receiver, exercise of remedies against
personal property, or enforcement of any assignment of leases, as to any
security, whether real, personal or intangible. At any public or private sale
of any security or collateral for any indebtedness or any part thereof
guaranteed hereby, whether by foreclosure or otherwise, Lender may, in its
discretion, purchase all or any part of such security or collateral so sold or
offered for sale for its own account and may apply against the amount bid
therefor all or any part of the balance due it pursuant to the terms of the
Note or Security Documents or any other Loan Document without prejudice to
Lender's remedies hereunder against Guarantor for deficiencies. If the
indebtedness guaranteed hereby is partially paid by reason of the election of
Lender to pursue any of the remedies available to Lender, or if such
indebtedness is otherwise partially paid, this Guaranty shall nevertheless
remain in full force and effect, and Guarantor shall remain liable for the
entire balance of the indebtedness guaranteed hereby even though any rights
which Guarantor may have against Borrower may be destroyed or diminished by the
exercise of any such remedy.

VIII. Application of Payments. Guarantor hereby authorizes Lender,
without notice to Guarantor, to apply all payments and credits received from
<PAGE>

Borrower or from Guarantor or realized from any security in such manner and in
such priority as set forth in the Credit Agreement.

IX. Business Failure, Bankruptcy or Insolvency. In the event of the
business failure of Guarantor or if there shall be pending any bankruptcy or
insolvency case or proceeding with respect to Guarantor under federal
bankruptcy law or any other applicable law or in connection with the insolvency
of Guarantor, or if a liquidator, receiver, or trustee shall have been
appointed for Guarantor or Guarantor's properties or assets, Lender may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of Lender allowed in any proceedings
relative to Guarantor, or any of Guarantor's properties or assets, and,
irrespective of whether the indebtedness or other obligations of Borrower
guaranteed hereby or the obligations of Guarantor hereunder shall then be due
and payable, by declaration or otherwise, Lender shall be entitled and
empowered to file and prove a claim for the whole amount of any sums or sums
owing with respect to the indebtedness or other obligations of Borrower
guaranteed hereby or the obligations of Guarantor hereunder, and to collect and
receive any moneys or other property payable or deliverable on any such claim.
Guarantor covenants and agrees that upon the commencement of a voluntary or
involuntary bankruptcy proceeding by or against Borrower, Guarantor shall not
seek a supplemental stay or otherwise pursuant to Section 105 of the Bankruptcy
Code or any other provision of the Bankruptcy Code, or any other debtor relief
law (whether statutory, common law, case law, or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable, to
stay, interdict, condition, reduce or inhibit the ability of Lender to enforce
any rights of Lender against Guarantor by virtue of this Guaranty or otherwise.

X. Financial Statements and Other Information. Guarantor hereby
represents and warrants to Lender that all financial statements heretofore
delivered by Guarantor to Lender are true and correct in all material respects,
have been prepared in accordance with tax basis accounting principles
consistently applied, and fairly present the financial condition of Guarantor
as of the date thereof; that no material adverse change has occurred in the
assets, or financial condition of Guarantor reflected therein since the date
thereof; and that Guarantor has no liabilities or known contingent liabilities
which are not reflected in such financial statements or referred to in the
notes thereto other than Guarantor's obligations under this Guaranty.
Guarantor hereby agrees that until all indebtedness guaranteed hereby has been
completely repaid and all obligations and undertakings of Borrower under, by
reason of, or pursuant to the Note and the Loan Documents and Guarantor
hereunder have been completely performed, Guarantor will deliver to Lender:

A. as soon as practicable and in any event with 90 days after the
end of each calendar year, the balance sheet of Guarantor as at the end of such
year, prepared and certified in the same manner as the financial statement of
Guarantor delivered to Lender prior to the date hereof, by David Berdon & Co.,
LLP or by other independent certified public accountants satisfactory to Lender
as fairly presenting Guarantor's financial condition as of the end of such
year;

B. contemporaneously with the delivery of the financial
statements referred to in clause (a) above, a statement of all contingent
liabilities of Guarantor which are not reflected in such financial statements
or referred to in the notes thereto (including, without limitation, all
guarantees, endorsements and other contingent obligations in respect of
indebtedness of others, and obligations to reimburse the issuer in respect of
<PAGE>

any letters of credit), all in reasonable detail and certified by Guarantor;

C. as soon as practicable, but in any event not later than 90
days after the end of each fiscal year of Apple Bank, a New York state
chartered savings bank (hereinafter referred to as "Apple Bank"), the audited
balance sheet of Apple Bank at the end of such year, and the related audited
statements of income, changes in capital and cash flows for such year, prepared
in the same manner as the audited statements of Apple Bank delivered to Lender
prior to the date hereof, and accompanied by an auditor's report prepared
without qualification by Coopers & Lybrand or by another "Big Six" accounting
firm;

D. copies of any notices, agreements or other information which
is also publicly available, concerning any change in the status or
circumstances involving the operation of Apple Bank from or involving
regulatory authorities having jurisdiction over Apple Bank;

E. upon the reasonable request of Lender, copies of the federal
income tax returns of Guarantor;

F. promptly upon becoming aware thereof, written notice from
Guarantor of any event or condition which might have a material adverse effect
on the assets, condition (financial or otherwise) or prospects of Guarantor or
the ability of Guarantor to perform under this Guaranty (including but not
limited to, litigation commenced or threatened in writing against Guarantor,
judgments rendered against Guarantor, liens filed against any of Guarantor's
property, defaults claimed under indebtedness for borrowed money for which
Guarantor is primarily or secondarily liable, or bankruptcy, insolvency or
trustee or receivership proceedings commenced against Guarantor), such notice
to specify the nature and the period of existence of such event or condition,
the anticipated effect thereof, and what action Guarantor is taking or proposes
to take with respect thereto; and

G. with reasonable promptness, such other information respecting
the assets, liabilities and financial condition of Guarantor or Apple Bank as
Lender may from time to time reasonably request. Without limiting the
foregoing, Lender may reasonably require that Guarantor deliver to Lender
financial information concerning Apple Bank on a more frequent basis, including
without limitation the delivery of unaudited quarterly financial statements.

Guarantor will permit any officer designated by Lender, at Guarantor's expense,
to visit and inspect any of Guarantor's properties, to examine Guarantor's
records (and to make copies thereof and extracts therefrom), and to discuss the
affairs and finances of Guarantor with Guarantor, all at such reasonable times
and intervals as Lender may reasonably request. The financial statements and
other reports and information delivered by Guarantor to Lender hereunder will
be treated as confidential by each Lender, and each assignee and participant
hereunder and each potential assignee or participant hereunder, and such
parties for themselves agree not to disclose such information to any Person,
provided that such information may be disclosed to any of the following in
connection with their participation in the transactions contemplated by the
Loan Documents: directors, officers, employees, representatives, legal
counsel, accountants and prospective investors of any of such Persons, it being
understood that such Persons shall be informed of the confidential nature of
such information and shall agree to treat such information confidentially.
Notwithstanding the foregoing, such Persons shall be permitted to disclose such
information (a) to the extent required by law, (b) to the extent such
confidential information becomes publicly available other than as a result of
<PAGE>

the breach of this Agreement, (c) to the extent such information becomes
available to any of such Persons on a non-confidential basis, or (d) to the
extent necessary to enforce the Loan Documents (provided that Lender shall use
reasonable efforts to cause such reports and information to remain
confidential).

XI. Covenants of Guarantor. Guarantor hereby covenants and agrees with
Lender that until all indebtedness guaranteed hereby has been completely repaid
and all obligations and undertakings of Borrower under, by reason of, or
pursuant to the Note and the Loan Documents and Guarantor hereunder have been
completely performed:

A. Guarantor will at all times maintain a net worth of at least
$160,000,000.00 (determined in accordance with tax basis accounting principles,
except as otherwise provided herein with respect to the stock of Apple Bank,
Guarantor's interest in the Mortgaged Property and any "Replacement Assets (as
hereinafter defined)). For the purposes hereof, the issued and outstanding
shares of all classes of stock of Apple Bank owned by Guarantor shall be valued
at one hundred percent (100%) of the net book value of Apple Bank, determined
in accordance with generally accepted accounting principles. In addition, the
value of the Mortgaged Property shall be the MAI appraised value of the
Mortgaged Property, determined on a fair value basis, initially as set forth in
the appraisal of the Mortgaged Property as of July 1, 1996 prepared by Landauer
Real Estate Counselors or any subsequent appraisal obtained by Guarantor or
Agent that is performed by an independent appraiser reasonably approved by the
Agent who is not an employee of the Property Owner, the Borrower, the
Additional Pledgors, Guarantor, the Agent or a Bank and which appraisal shall
be performed in accordance with regulatory laws and policies (both regulatory
and internal) applicable to the Agent.

B. Except as otherwise provided in Paragraph 11(h), below,
Guarantor will at all times own not less than fifty-one percent (51%) of the
issued and outstanding shares of all classes of stock of Apple Bank
(hereinafter referred to as the "Protected Apple Stock"), and shall through the
ownership of the Protected Apple Stock have the right to elect a majority of
the board of directors of Apple Bank and the right, subject to regulatory
policies, to direct or cause the direction of the management and policies of
Apple Bank.

C. Except as otherwise provided in Paragraph 11(h), below,
Guarantor will not create or incur or suffer to be created or incurred or to
exist any lien, security title, encumbrance, mortgage, pledge, negative pledge
(other than pursuant to this Guaranty), charge, restriction (including, without
limitation, any restriction concerning transfers or the exercise of voting
rights) or other security interest of any kind (hereinafter referred to
collectively as a "Lien") upon the Protected Apple Stock or any dividends,
return of capital or other proceeds therefrom. For the purposes hereof, a Lien
on any of the Apple Stock shall be considered to be a Lien on the Protected
Apple Stock. Guarantor shall not enter into any agreement, instrument or
transaction which has or may have the effect of prohibiting or limiting
Guarantor's ability to pledge the Protected Apple Stock to Agent as security
for the obligations of Guarantor under this Guaranty. Guarantor shall take
such actions as are necessary to preserve the right and ability of Guarantor to
pledge the Protected Apple Stock as security for the obligations of Guarantor
hereunder without any such pledge after the date hereof causing or permitting
the acceleration (after the giving of notice or the passage of time, or
otherwise) of other indebtedness of the Guarantor. Guarantor shall, upon
demand, provide to the Agent such evidence as the Agent may reasonably require
<PAGE>

to evidence compliance with this paragraph 11(c), which evidence shall include,
without limitation, copies of any agreements or instruments which would in any
way restrict or limit the Guarantor's ability to pledge the Protected Apple
Stock as security for the obligations of Guarantor hereunder, or which provide
for the occurrence of a default (after the giving of notice or the passage of
time, or otherwise) if assets are pledged in the future as security for the
obligations of Guarantor hereunder.

D. Except as permitted herein, Guarantor will not permit any
material change to occur in the nature, composition or allocation of the assets
of Guarantor from those shown on the financial statement of Guarantor dated as
of December 31, 1995 and delivered to Lender prior to the date hereof.
Guarantor shall be permitted to transfer or encumber its assets other than the
Protected Apple Stock or the "Replacement Assets" (as hereinafter defined), as
applicable, provided that (i) Guarantor receives fair consideration in exchange
for such transfer or encumbrance, and (ii) Guarantor is and would be following
such transfer or encumbrance in compliance with the terms of this Paragraph 11;
provided further that Guarantor shall be permitted to take such actions with
respect to the Protected Apple Stock or any Replacement Assets upon compliance
by Guarantor with the terms of Paragraph 11(h), below.

E. Guarantor will not at any time permit the value of the
Protected Apple Stock to be less than $100,000,000.00; provided, however, that
in the event that the value of the Protected Apple Stock shall be less than
$100,000,000.00, Guarantor may cure such failure within thirty (30) days of the
occurrence of such failure by complying with the terms of Paragraph 11(h) below
with respect to Replacement Assets such that the sum of the value of the
Protected Apple Stock and such Replacement Assets exceeds $100,000,000.00.

F. In the event that Guarantor shall violate any of the covenants
in Paragraphs 11(a), (b), (c), (d), (e) or (h) of this Guaranty, then provided
such violation is not cured within any applicable period of notice and cure
provided in Paragraph 11(i), below, Guarantor shall execute and deliver to
Agent within ten (10) days of written demand a pledge of the Protected Apple
Stock, Replacement Assets or such other collateral proposed by Guarantor and
acceptable to the Agent in its sole discretion having a value as determined by
Agent of not less than $100,000,000.00. The form of such pledge agreement
shall be in the form of the Pledge Agreement (with such modifications as the
Agent may require thereto to reflect the nature of the assets so pledged), with
such other changes thereto as the Agent may reasonably require. In connection
therewith, Guarantor shall deliver to Agent possession of the Protected Apple
Stock together with such endorsements and stock powers as the Agent may
reasonably require, U.C.C. financing statements, legal opinions and such other
matters in connection with such pledge as the Agent may reasonably require
(consistent with those matters required to be delivered by the Borrower and the
Additional Pledgors to the Agent in connection with the initial closing of the
transactions contemplated by the Loan Documents). Pursuant to such pledge
agreement, Guarantor shall be required at all times to maintain the value (as
determined pursuant hereto) of such collateral at not less than
$100,000,000.00.

G. Guarantor will not make or permit to be made, by voluntary or
involuntary means, any transfer or encumbrance of its interest in Borrower or
any Additional Pledgor, or any dilution of its interest in Borrower or any
Additional Pledgor.

H. (i) Notwithstanding the terms of Paragraph 11(b) or 11(c),
above, in the event that Guarantor desires to take any action otherwise
<PAGE>

prohibited by such subparagraph, Guarantor shall deliver to the Agent prior
written notice thereof describing generally the actions proposed to be taken by
Guarantor, and a description of the assets that Guarantor proposes to
substitute in lieu of the Protected Apple Stock for the purposes of this
Guaranty (the "Replacement Assets"). Any Replacement Assets shall be liquid
assets with a readily ascertainable market value, shall satisfy the
requirements of Paragraph 11(c), shall represent a controlling interest as
provided in Paragraph 11(b) in the event that such assets represent a portion
of an interest in an asset or other investment in which Guarantor shall retain
an interest if prior to such designation Guarantor had a controlling interest,
and shall otherwise be reasonably acceptable to the Agent. In the event that
Guarantor desires to utilize any Replacement Assets, Guarantor shall deliver to
Agent together with such request an appraisal of such Replacement Assets
prepared by an appraiser meeting the requirements of and in the manner
described in Paragraph 11(a), provided that such appraisal shall in determining
the value of such Replacement Assets discount the value thereof as a result of
any matters adversely affecting such Replacement Assets, including, without
limitation, any restrictions thereon or any lack of control Agent might
experience in the event it was the owner of such Replacement Assets. In the
event that Guarantor complies with each of the foregoing requirements and such
Replacement Assets are approved by the Agent, as evidenced by a written notice
from Agent to Guarantor, Guarantor shall be permitted to take the proposed
action with respect to the Protected Apple Stock or the previously approved
Replacement Asset, as applicable, and the Protected Apple Stock or such
previously approved Replacement Asset shall no longer be subject to the
restrictions of this Paragraph 11.

(ii) After any such replacement pursuant to Paragraph
11(h)(i), all covenants and restrictions in this Paragraph 11 applicable to the
Protected Apple Stock shall apply to the Replacement Assets; provided that the
value of such Replacement Assets shall be determined by an annual appraisal
performed in the manner provided above or such other manner reasonably
acceptable to the Agent.

I. Notwithstanding the terms of Paragraph 11(f), Guarantor shall
be permitted the following periods of notice and cure with respect to the
following provisions of Subparagraphs 11(a), (c), (d) and (h) (ii) as follows:

1. In the event that any Lien shall be created or incurred
or suffered to be created or incurred with respect to the Apple Stock or
any dividends, return of capital or other proceeds therefrom which
individually or in the aggregate involves amounts of less than
$20,000,000.00, Guarantor shall not be required to execute the pledge
contemplated by Paragraph 11(f) in the event that such Lien is removed (by
payment or bonding) no later than the earlier to occur of (A) the date
which is one (1) year after the filing of the same or (B) in any event
prior to the date which is five (5) days after the Guarantor receives
notice of commencement of proceedings to foreclose any such Lien; and with
respect to any such Lien against any of the Apple Stock individually or in
the aggregate involves amounts equal to or greater than $20,000,000.00 but
less than $50,000,000.00, the Guarantor shall cause the same to be removed
(by payment or bonding) within five (5) days of the first to occur of
(A) receipt of written notice from the Agent, or (B) receipt of actual
notice of the filing of such Lien; and provided further that with respect
to any Lien involving individually or in the aggregate amounts in excess
of $50,000,000.00, no cure period shall be allowed.

2. With respect to the failure by the Guarantor to comply
<PAGE>

with the terms of Paragraph 11(d)(i) or 11(h)(ii), the Guarantor shall not
be required to execute the pledge contemplated by Paragraph 11(f) in the
event such failure shall be cured within five (5) days of receipt of
notice of such failure from the Agent.

XII. Security and Rights of Set-off. Guarantor hereby grants to Lender,
as security for the full and prompt payment and performance of Guarantor's
obligations hereunder, a continuing lien on and security interest in any and
all securities or other property belonging to Guarantor now or hereafter held
by Lender and in any and all deposits (general or specific, time or demand,
provisional or final, regardless of currency, maturity, or the branch of Lender
where the deposits are held) now or hereafter held by Lender and other sums
credited by or due from Lender to Guarantor or subject to withdrawal by
Guarantor; and regardless of the adequacy of any collateral or other means of
obtaining repayment of such obligations, during the continuance of any event of
default under the Note or the Loan Documents, Lender may at any time and
without notice to Guarantor set-off and apply the whole or any portion or
portions of any or all such deposits and other sums against amounts payable
under this Guaranty, whether or not any other person or persons could also
withdraw money therefrom. Any security now or hereafter held by or for
Guarantor and provided by Borrower, any Additional Pledgor or by anyone on
Borrower's behalf, in respect of liabilities of Guarantor hereunder shall be
held in trust for Lender as security for the liabilities of Guarantor
hereunder.

XIII. Changes in Writing; No Revocation. This Guaranty may not be
changed orally, and no obligation of Guarantor can be released or waived by
Lender except by a writing signed by a duly authorized officer of Lender. This
Guaranty shall be irrevocable by Guarantor until all indebtedness guaranteed
hereby, has been completely repaid and all obligations and undertakings of
Borrower under, by reason of, or pursuant to the Note and the Loan Documents
and of Guarantor under this Guaranty have been completely performed.

XIV. Notices. All notices, demands or requests provided for or
permitted to be given pursuant to this Guaranty (hereinafter in this paragraph
referred to as "Notice") must be in writing and shall be deemed to have been
properly given or served by personal delivery or by sending same by overnight
courier or by depositing the same in the United States Mail, postpaid and
registered or certified, return receipt requested, at the addresses set forth
below. Each Notice shall be effective upon being delivered personally or upon
being sent by overnight courier or upon being deposited in the United States
Mail as aforesaid. The time period in which a response to any such Notice must
be given or any action taken with respect thereto, however, shall commence to
run from the date of receipt if personally delivered or sent by overnight
courier or, if so deposited in the United States Mail, the earlier of three (3)
business days following such deposit and the date of receipt as disclosed on
the return receipt. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no Notice was given shall be deemed
to be receipt of the Notice sent. By giving at least fifteen (15) days prior
Notice thereof, Guarantor or Lender shall have the right from time to time and
at any time during the term of this Guaranty to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America. For the purposes of this
Guaranty:

The Address of Lender is:

The First National Bank of Boston
<PAGE>

100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division

with a copy to:

The First National Bank of Boston
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Mark E. Basham

The Address of Guarantor is:

Stanley Stahl
c/o Stahl Real Estate Company
277 Park Avenue
New York, New York 10172

XV. Governing Law. Guarantor acknowledges and agrees that this
Guaranty and the obligations of Guarantor hereunder shall be governed by and
interpreted and determined in accordance with the internal laws of the State of
New York (excluding the laws applicable to conflicts or choice of law).

XVI. CONSENT TO JURISDICTION; WAIVERS. GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF NEW YORK
OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY, AND (B) WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY
STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY, AND (II) TO OBJECT TO
JURISDICTION WITHIN THE STATE OF NEW YORK OR VENUE IN ANY PARTICULAR FORUM
WITHIN THE STATE OF NEW YORK. GUARANTOR AGREES THAT, IN ADDITION TO ANY
METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO GUARANTOR AT THE ADDRESS
SET FORTH IN PARAGRAPH 14 ABOVE, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5)
DAYS AFTER THE SAME SHALL BE SO MAILED. NOTHING CONTAINED HEREIN, HOWEVER,
SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING
ANY RIGHTS AGAINST ANY SECURITY AND AGAINST GUARANTOR PERSONALLY, AND AGAINST
ANY PROPERTY OF GUARANTOR, WITHIN ANY OTHER STATE. INITIATING SUCH SUIT,
ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY STATE SHALL IN NO EVENT
CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE
STATE OF NEW YORK SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF GUARANTOR AND
LENDER HEREUNDER OR OF THE SUBMISSION HEREIN MADE BY GUARANTOR TO PERSONAL
JURISDICTION WITHIN THE STATE OF NEW YORK.

XVII. Successors and Assigns. The provisions of this Guaranty shall be
binding upon Guarantor and its heirs, successors, successors in title, legal
representatives, executors, estate and assigns, and shall inure to the benefit
of Lender, its successors, successors in title, legal representatives and
assigns.

XVIII. Assignment by Lender. This Guaranty is assignable by Lender in
whole or in part in conjunction with any assignment of the Note or portions
thereof, and any assignment hereof or any transfer or assignment of the Note or
portions thereof by Lender shall operate to vest in any such assignee the
rights and powers, in whole or in part, as appropriate, herein conferred upon
and granted to Lender.
<PAGE>

XIX. Severability. If any term or provision of this Guaranty shall be
determined to be illegal or unenforceable, all other terms and provisions
hereof shall nevertheless remain effective and shall be enforced to the fullest
extent permitted by law.

XX. Disclosure. Guarantor agrees that in addition to disclosures made
in accordance with standard banking practices, any Lender may disclose
information obtained by such Lender pursuant to this Guaranty to assignees or
participants and potential assignees or participants hereunder, subject to the
terms of Paragraph 10.

XXI. No Unwritten Agreements. THIS GUARANTY REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

XXII. Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Guarantor under this Guaranty.

XXIII. Ratification. Guarantor does hereby restate, reaffirm and ratify
each and every warranty and representation regarding Guarantor set forth in the
Credit Agreement as if the same were more fully set forth herein.

XXIV. [Intentionally Omitted].

XXV. Triggering Event.

A. LENDER ACKNOWLEDGES AND AGREES THAT, NOTWITHSTANDING ANYTHING
TO THE CONTRARY CONTAINED IN THIS GUARANTY, THE PAYMENT AND PERFORMANCE BY
GUARANTOR OF ITS OBLIGATIONS UNDER THIS GUARANTY SHALL BE DUE ONLY IN THE EVENT
THAT ONE OR MORE "TRIGGERING EVENTS" (AS THAT TERM IS HEREINAFTER DEFINED)
SHALL OCCUR AND, WITH RESPECT TO THE ITEMS DESCRIBED IN CLAUSES (iv) THROUGH
(xxx), ANY OF THE EVENTS DESCRIBED THEREIN IS NOT CURED WITHIN FIVE (5) DAYS
AFTER RECEIPT BY GUARANTOR OF WRITTEN NOTICE FROM AGENT OF THE OCCURRENCE OF
ANY SUCH EVENT (PROVIDED, HOWEVER, THAT SUCH CURE BY GUARANTOR SHALL NOT BE
DEEMED A CURE OF ANY EVENT OF DEFAULT).

B. For the purposes of this Guaranty, the term "Triggering Event"
shall mean the occurrence of any one or more of the following events:

1. Any of the Guarantor, the Borrower, the Managing Member, the
Property Owner or the Additional Pledgors shall file any voluntary
petition under any Chapter of the Bankruptcy Code, or shall in any manner
seek any relief, protection, reorganization, liquidation, dissolution or
similar relief for debtors under any local, state, federal or other
insolvency laws or other laws providing for the relief of debtors, or in
equity, or directly or indirectly cause any of the other of such Persons
to file any such petition or to seek any such relief; or

2. Any of the Guarantor, the Borrower, the Managing Member, the
Property Owner or the Additional Pledgors (A) shall file, or, directly or
indirectly, cause to be filed, any involuntary petition under any Chapter
of the Bankruptcy Code against any of such Persons, whether or not any of
such Persons joins in such petition, or (B) shall, directly or indirectly,
cause any of such Persons to become the subject of any dissolution,
liquidation or insolvency proceeding or any other proceeding pursuant to
any local, state, federal or other insolvency laws or other laws providing
for the relief of debtors, or in equity;
<PAGE>

3. Any of the Guarantor, the Borrower, the Managing Member, the
Property Owner or any Additional Pledgor shall, directly or indirectly,
cause the Mortgaged Property or the Collateral, or any portion thereof or
interest therein, or any interest of such Persons in the Mortgaged
Property or the Collateral, to become the property of any bankruptcy,
dissolution, liquidation or insolvency proceeding; or

4. Guarantor, the Borrower, the Managing Member, the Property
Owner or the Additional Pledgors, or any of them, shall take any action of
any kind or nature whatsoever, either directly or indirectly, to oppose,
impede, obstruct, hinder, frustrate, enjoin or otherwise interfere with
the exercise by Lender of any of Lender's rights and remedies with respect
to the Loan or any of the Loan Documents, or at law or in equity, or
shall, either directly or indirectly, cause any other person to take any
action which, if taken by Guarantor, the Borrower, the Managing Member,
the Property Owner or any Additional Pledgor, would constitute a
Triggering Event; or

5. The Borrower shall fail to pay all of the outstanding Loans,
together with any and all accrued but unpaid interest thereon and any
prepayment fees, if at any time the outstanding principal amount of the
Mortgage Loan is prepaid in full (other than as a result of a casualty to
or condemnation of the Mortgaged Property or a default by the Property
Owner under the Mortgage Loan Documents (other than a willful default by
the Property Owner in order to permit a refinancing of the Mortgage
Loan)). For the purposes hereof, the Mortgage Loan shall be deemed to
have been prepaid in the event that (A) the Mortgage is assigned by the
holder thereof to a new holder for the purpose of facilitating a refinance
of the indebtedness secured thereby, or (B) the Property Owner defeases
the Mortgage Loan as permitted by Section 44 of the Mortgage;

6. The Borrower shall fail to pay all of the outstanding Loans,
together with any and all accrued but unpaid interest thereon and any
prepayment fees, if at any time there shall occur, whether voluntarily,
involuntary or by operation of law, a sale, transfer, assignment,
conveyance, option or other disposition of, or any mortgage,
hypothecation, encumbrance (relating to a financing or refinancing),
financing or refinancing of (A) any assets or properties of the Property
Owner, except for the Mortgage Loan, (B) any of the Collateral, (C) any
other assets or properties of the Borrower, the Managing Member or the
Holding Company Managing Member, (D) any direct or indirect interest of
either Borrower or Managing Member in the Property Owner, (E) any direct
or indirect interest of Holding Company Managing Member or Guarantor in
Holding Company, or (F) any direct or indirect interest of Guarantor in
either Borrower, Managing Member or Holding Company Managing Member,
except as expressly permitted in the Loan Documents with respect to a
Permitted Transfer; or

7. The failure of the Property Owner to use any amounts released
or disbursed to or otherwise made available to the Property Owner from any
account or sub- account maintained pursuant to the Mortgage Cash
Collateral Agreement in accordance with the terms of the Mortgage Cash
Collateral Agreement, to the full extent of any such unpaid amounts; or

8. The Mortgaged Property shall no longer be used primarily for
office use; or
<PAGE>

9. Any of the Borrower, the Managing Member or the Additional
Pledgors (other than Guarantor) shall (A) own any encumbered asset other
than, as to such Persons other than the Managing Member only, its interest
as a direct or indirect member in the Property Owner (which interest shall
only be encumbered by liens in favor of the Agent), other than equipment
leased by any of such Persons in connection with the operation of the
Mortgaged Property in the ordinary course of business, (B) incur any
Indebtedness, other than, as to the Borrower only, the Obligations and
current liabilities of such Person incurred in the ordinary course of
business in connection with normal purchases of goods and services,
(C) seek the dissolution of winding up in whole or in part, of the
Property Owner, the Borrower, the Managing Member or any such Additional
Pledgor (or any member, shareholder or affiliate thereof, shall seek any
of the foregoing), (D) except as otherwise permitted by the terms of the
Loan Documents, enter into any transaction of merger, consolidation or
other business combination, or acquire by purchase or otherwise all or
substantially all of the business or assets of, or any stock or beneficial
ownership of, any entity, or (E) except as otherwise permitted by the
terms of the Loan Documents, modify or amend any provisions of its
operating agreement, certificate of formation, articles of incorporation
or bylaws or other organizational or operating documents, as applicable
(the "Organizational Agreements"); or

10. The Property Owner shall seek or obtain additional advances
from the holder or holders of the Mortgage Loan Documents (provided that
the foregoing shall not be deemed violated in the event that the holder or
holders of the Mortgage Loan Documents shall make a protective advance or
advances for the payment of taxes, insurance premiums or to protect the
Mortgaged Property pursuant to the terms of the Mortgage), or the Property
Owner shall modify, amend, terminate, extend or seek a consent or waiver
under the Mortgage Loan Documents in any respect without the prior written
approval of the Agent (other than a waiver of an "Event of Default" under
the Mortgage or other occasional waiver of compliance with a term of any
of the Mortgage Loan Documents which waiver is not a waiver of future
compliance with such term or tantamount to an amendment of the Mortgage
Loan Documents, and which waiver does not have a material adverse affect
on Borrower, Lender, Property Owner, the Collateral or the Mortgaged
Property; or

11. Except as expressly permitted in the Loan Documents with
respect to a Permitted Transfer, any of Borrower, the Managing Member, the
Additional Pledgors or Guarantor shall, directly, indirectly or by
operation of law, sell, transfer, assign, dispose of, pledge, convey,
option, mortgage, hypothecate or encumber any of the Collateral or, as to
Managing Member, any of its interest, rights or claims in and to the
Property Owner (including without limitation any right to receive
distributions from the Property Owner) (the "Managing Member's Interest"),
or there shall occur directly, indirectly or by operation of law, except
as expressly permitted in the Loan Documents with respect to a Permitted
Transfer, any sale, assignment, transfer, conveyance, disposition, option,
mortgage, hypothecation, pledge or other encumbrance of (A) any interest
of either Borrower or Managing Member in the Property Owner, (B) any
interest of Holding Company Managing Member or Guarantor in Holding
Company, or (C) any interest of Guarantor in either Borrower, Managing
Member or Holding Company Managing Member; or

12. Except as expressly permitted by the Loan Documents, any of
Borrower, Managing Member, Property Owner or any Additional Pledgor that
<PAGE>

is not an individual shall modify, amend, cancel, release, surrender,
terminate or permit the modification, amendment, cancellation, release,
surrender or termination of its respective Organizational Agreements, or
dissolve, liquidate or permit the dissolution, liquidation or expiration
of the Property Owner, the Borrower, the Managing Member, any Additional
Pledgor that is not an individual or the respective Organizational
Agreements or seek the partition of any of the assets of any of such
Persons; provided, however, that the foregoing shall not apply to any
"Minor Modification" (as such term is defined in the respective
Assignments of Member's Interest and Pledge Agreements) for which the
consent of the Agent was not obtained; or

13. Any of the Borrower, the Managing Member or any of the
Additional Pledgors shall, except as expressly permitted by the Loan
Documents with respect to a Permitted Transfer, take any action which
results in the sale, reduction, cancellation, dilution, diminution,
conversion or withdrawal of any direct or indirect interest of such Person
in the Property Owner, the Managing Member, the Borrower or Holding
Company Managing Member, as applicable, or omit to take any action
necessary to prevent any such sale, cancellation, reduction, dilution,
diminution, conversion or withdrawal, or, without limiting the foregoing,
consent to or permit to occur the admission of any new member of the
Property Owner or Holding Company, the admission of any new shareholder of
Managing Member, Co-Managing Member or Holding Company Managing Member,
the creation of any new class of interest in the Property Owner, the
Borrower, the Managing Member or any Additional Pledgor that is not an
individual, or the issuance, directly or indirectly, of any additional
shares or classes of stock in the Managing Member, the Co- Managing Member
or Holding Company Managing Member or any other equity interest in the
Property Owner, the Borrower, the Managing Member or any Additional
Pledgor that is not an individual; or

14. Guarantor, the Borrower, the Managing Member or the Additional
Pledgors shall breach any of their respective representations, covenants
or agreements contained in Sections 8.2, 8.7, 11.2, 11.4, 11.6 or 11.7 of
the Credit Agreement (it being understood and agreed that breach of the
representations, covenants and agreements contained in Sections 11.2,
11.4, 11.6 and 11.7 shall only constitute a Triggering Event in the event
that such breach occurs after the commencement of any proceeding described
therein that is commenced involuntarily against such Person (and is not
otherwise violative of Paragraph 25(b)(ii), above), and the same is not
dismissed within 120 days following the commencement thereof), or
Paragraph 11 of the Guaranty (other than a failure to comply with the
terms of Paragraph 11(a) of this Guaranty but only in the event that
Guarantor complies with the terms of Paragraph 11(f) of this Guaranty); or

15. Guarantor, the Borrower or the Additional Pledgors shall
breach any of their respective covenants or agreements contained in
Paragraphs 6(i), 6(j) or 6(m) of the Assignments of Member's Interest
executed by the Borrower, or Paragraphs 6(i), 6(j) or 6(m) of the
Assignment of Member's Interest executed by Guarantor and Holding Company
Managing Member, or Paragraphs 6(i), 6(j) or 6(m) of the Stock Pledge
Agreements, to the full extent of any losses, damages and expenses of
Lender on account thereof; or

16. The Borrower, the Managing Member, the Guarantor or the
Additional Pledgors shall fail to pay to Lender proceeds paid to the
Property Owner, the Borrower, the Managing Member, the Guarantors or the
<PAGE>

Additional Pledgors under any insurance policies (or paid as a result of
any other claim or cause of action against any person or entity) by reason
of damage, loss or destruction to all or any portion of the Mortgaged
Property or the Collateral, which, under the terms of the Loan Documents,
should have been delivered to Lender, or the Property Owner shall fail to
use any such proceeds to repair, replace or restore the Mortgaged Property
in the manner provided in the Mortgage, to the full extent of any losses,
damages and expenses of Lender on account thereof; or

17. The Borrower, the Managing Member, the Guarantor or the other
Additional Pledgors shall fail to pay to Lender proceeds or awards paid to
the Property Owner, the Borrower, the Managing Member, the Guarantor or
the Additional Pledgors resulting from the condemnation or other taking in
lieu of condemnation of all or any portion of the Mortgaged Property or
the Collateral, which, under the terms of the Loan Documents, should have
been delivered to Lender, or the Property Owner shall fail to use such
proceeds or award to repair, replace or restore the Mortgaged Property in
the manner provided in the Mortgage, to the full extent of any losses,
damages and expenses of Lender on account thereof; or

18. The Borrower, the Guarantor or the other Additional Pledgors
shall fail to pay directly to Lender any "Distributions" (as such term is
defined in the respective Assignments of Member's Interest and the Pledge
Agreement) other than those Distributions that may be paid to such Persons
pursuant to the Cash Collateral Agreement, to the full extent of any
losses, damages and expenses of Lender on account thereof; or

19. The Borrower, the Managing Member, the Property Owner, any
Additional Pledgor or any other Person acting as property manager or the
equivalent on behalf of any of them that controls, is controlled by or
under common control with any of such Persons shall fail to deposit all
rents, issues, profits, revenues and other amounts required to be
deposited with the Mortgagee pursuant to the Mortgage Cash Collateral
Agreement, or shall take any action of any kind or nature whatsoever,
either directly or indirectly, to oppose, impede, obstruct, hinder,
frustrate, enjoin or otherwise interfere with the payment by Mortgagee of
the amounts to be paid by Mortgagee to Agent pursuant to the Mortgage Cash
Collateral Agreement, or shall, either directly or indirectly, cause any
other Person to take any such action, to the full extent of any losses,
damages and expenses of Lender on account thereof; or

20. Any damage or waste to the Mortgaged Property or any of the
Collateral shall occur as a result of the intentional misconduct of the
Guarantor, the Borrower, the Property Owner, any Additional Pledgor, or
any of their respective members, principals, officers or general partners
of any such Persons, or any of the Mortgaged Property or the Collateral
shall be removed in violation of the terms of the Loan Documents or the
Mortgage Loan Documents, to the full extent of any losses, damages and
expenses of Lender on account thereof; or

21. The failure of the Borrower, the Managing Member, the
Guarantor or any of the Additional Pledgors to pay any taxes imposed on
such Person or any of the Collateral or the Managing Member's Interest, as
applicable, before the same shall become a lien or charge upon any of the
Collateral or the Managing Member's Interest, as applicable, subject to
such Person's right to contest such taxes pursuant to Section 7.9 of the
Credit Agreement, to the full extent of the amount claimed by any such
claimant; or
<PAGE>

22. The Property Owner shall fail to pay or bond any mechanic's
lien, materialmen's lien or other attachment or other lien against any
portion of the Mortgaged Property subject to the right to contest any such
lien as provided in Section 7.9 of the Credit Agreement (provided that in
the event that such attachment, claim or lien arises from an improvement
project that was approved as a part of the Approved Budget, the failure to
pay such attachment or lien shall only constitute a Triggering Event in
the event that amounts available for the payment of such attachment or
lien under the Mortgage Cash Collateral Agreement are not applied to pay
such attachment or liens), or there shall remain any judgment against the
Property Owner or the Mortgaged Property that is undischarged, unsatisfied
or unstayed for more than sixty (60) days (whether or not consecutive)
which individually or in the aggregate with other outstanding judgments
exceeds $10,000,000.00 (provided that the foregoing shall not apply with
respect to any judgments relating to actions which are covered by existing
valid insurance policies maintained by the Property Owner and with respect
to which the Property Owner has delivered to the Lender the written
acknowledgment from such insurer of its responsibility for such claim),
provided that with respect to any lien or judgment (including, without
limitation, any judgments that individually or in the aggregate are not
greater than $10,000,000.00, but excluding any judgment covered by
insurance with respect to which the foregoing requirements have been
satisfied) the same is removed prior to the first to occur of (A) any
foreclosure, levy or other sale pursuant thereto and (B) the date that is
120 days following the filing of the same), in each case to the full
extent of any losses, damages and expenses of Lender on account thereof;
or

23. The Borrower, the Managing Member, the Additional Pledgors or
the Guarantor shall fail to pay or bond any mechanic's liens,
materialmen's liens, attachments or other liens on any portion of the
Collateral individually or in the aggregate in excess of $500,000.00
(subject to the right to contest any such lien as provided in Section 7.9
of the Credit Agreement) or there shall remain any judgment against any of
such Persons or the Collateral that is undischarged, unsatisfied or
unstayed for more than sixty (60) days (whether or not consecutive) which
individually or in the aggregate with other outstanding judgments exceed
$500,000.00 as to the Borrower, the Managing Member or any Additional
Pledgor (other than Guarantor), or $80,000,000.00 as to Guarantor
(provided that the foregoing shall not apply with respect to any judgments
relating to actions which are covered by existing valid insurance policies
maintained by the Borrower or such other Person and with respect to which
such Person has delivered to the Lender the written acknowledgment from
such insurer of its responsibility for such claim), provided that in any
event such lien or judgment (including, without limitation, any judgments
that individually or in the aggregate are not greater than the foregoing
thresholds, but excluding any judgment covered by insurance with respect
to which the foregoing requirements have been satisfied) shall be removed
prior to the first to occur of (A) any foreclosure, levy or other sale
pursuant thereto and (B) the date that is 120 days following the filing of
the same), in each case to the full extent of any losses, damages and
expenses of Lender on account thereof; or

24. Any fraud or material misrepresentation by the Borrower, the
Managing Member, the Guarantor, the Property Owner or any Additional
Pledgor or any of their respective members, principals, directors,
officers, or partners, or any agent, employee or other person authorized
<PAGE>

or apparently authorized to make statements or representations on behalf
of any such Person to the extent of statements or representations made to
FNBB and Wellsford on their tour of the Mortgaged Property on or about
February 10, 1997, or Richard F. Czaja or Gregg S. Wolpert, to the full
extent of any losses, damages and expenses of Lender on account thereof;
or

25. The failure of the Borrower to cause the Property Owner to
replace the manager and leasing agent of the Mortgaged Property as
provided in Section 10.2(b) of the Credit Agreement, provided that the
foregoing shall not be deemed to have been violated in the event that the
Property Owner is in good faith pursuing the approval of the Rating Agency
of the manager and leasing agent designated by the Agent; or

26. The failure of the Borrower or any Additional Pledgor to
designate Co-Managing Member to become the sole managing member of the
Property Owner in accordance with the applicable Organizational Agreements
of the Property Owner upon the demand of Agent following the occurrence of
an Event of Default;

27. The existence of any claims, damages, expenses, liabilities
or obligations of the Property Owner, the Managing Member, the Borrower or
any Additional Pledgor (other than the Guarantor) other than the Property
Owner's obligations under the Mortgage Loan Documents (subject to the
terms of the Loan Documents) or the Approved Budgets (except as provided
in Section 7.15 of the Credit Agreement) the Borrower's or any Additional
Pledgor's (other than Guarantor's) obligations under the Loan Documents
as a result of the intentional acts of any of such Persons, to the full
extent of any losses, damages and expenses of Lender on account thereof;
or

28. Any of the Borrower, any Additional Pledgor, Guarantor or any
other Person controlling, controlled by, controlled with or not otherwise
free from influence and control by any of the foregoing, shall own or
control more than forty-nine percent (49%) of the interests with respect
to the Mortgage Loan; or

29. Lender shall suffer or incur any loss, damage or expense by
reason of (i) fee simple title to the Building condominium units
designated in the Condominium Declaration as unit lots 1001, 1019 through
1023 and 1026 through 1049 (the "Non-IDA Units") and (ii) the leasehold
interest (pursuant to that certain Overlease Agreement dated as of August
1, 1995 between the New York City Industrial Development Agency and the
Guarantor, as amended) and reversionary interest in the Building
condominium units designated in the Condominium Declaration as unit lots
1002 through 1017 and 1018, 1024 and 1025 (the "IDA Units"), being (x)
vested other than in the Property Owner, or (y) with respect to one or
more of the Non-IDA Units, fee simple title thereto being vested other
than in Property Owner or in the New York City Industrial Development
Agency (the "IDA") (provided that concurrently therewith there is a
concurrent lease-back of such Non-IDA Unit(s) to the Property Owner and
the Property Owner obtains a reversionary interest in such Non-IDA
Unit(s)) (other than as a result of a foreclosure by Mortgagee pursuant to
the Mortgage) or (z) with respect to one or more of the IDA Units, fee
simple title vested in any other Person other than the Property Owner,
(ii) any defect in or lien or encumbrance on the title of the Property
Owner in the aforesaid real property interests as of the date hereof
(other than the Permitted Exceptions), (iii) unmarketability of the title
<PAGE>

of the Property Owner in the aforesaid real property interests as of the
date hereof, (iv) or any lack as of the date hereof of a right of access
to and from the aforesaid real property interests, or (v) any intentional
acts of Property Owner which causes such title to become unmarketable
after the date hereof other than any matters which would not constitute a
Triggering Event under Paragraph 25(b)(xxii) or (xxvii) hereof, to the
full extent of any losses, damages or expenses of Lender on account
thereof; or

30. Any failure of the Property Owner upon the demand of Agent
following the occurrence of an Event of Default to deliver to Agent all
tenant security deposits (whether in the form of cash, letter of credit or
otherwise) and other refundable deposits paid to or held by or on behalf
of the Property Owner in connection with leases of any portion of the
Mortgaged Property, to the full extent of any losses, damages and expenses
of Lender on account thereof.

C. Notwithstanding the terms of Paragraph 25(b), above, none of
the events described in Paragraph 25(b) shall be deemed a Triggering Event if
any of such events shall be caused by the Borrower, the Property Owner or any
other Additional Pledgor that is not an individual and at the time of the
occurrence of such Triggering Event, such Triggering Event shall have occurred
solely as a result of the Lender's , the Agent's or its nominee's affirmative
action after the Agent or the Lender or their nominee obtains title to the
Collateral relating to such entity.

D. Nothing in this Paragraph 25 shall be deemed to release,
diminish or otherwise impair the other obligations of Guarantor under this
Guaranty, including without limitation, Guarantor's obligations pursuant to
Paragraphs 10 and 11 of this Guaranty. No consent or approval which may be
given by the Agent or the Banks pursuant to Section 11.7 of the Credit
Agreement shall be deemed to release, diminish or otherwise impair the
obligations of Guarantor under this Guaranty or to otherwise affect the
determination of whether a Triggering Event has occurred.

E. For the purposes of this Guaranty, in order to determine any
loss, damage or expense of Lender, Lender shall not be required to have sold or
otherwise disposed of any of the Collateral, and such determination shall be
made regardless of any purported value of the Collateral.

XXVI. Limitation of Recovery. Without modifying or limiting any
provision of this Guaranty or any agreement contained herein, except as
Guarantor's liability is otherwise limited as specifically provided in
Paragraph 25, above, it is hereby agreed that the amount recoverable from
Guarantor under this Guaranty (but not the scope or extent of the liabilities
and obligations guaranteed under this Guaranty) shall be limited, except as
provided below, to (a) the principal balance of the Notes, (b) interest accrued
under the Notes (including without limitation Capitalized Interest), and
(c) all expenses (including, but not limited to, attorneys' fees) paid or
incurred by Lender in endeavoring to enforce this Guaranty. In the event of a
foreclosure sale of the Collateral, the amount recoverable against Guarantor
with respect to any of the Triggering Events, which pursuant to the terms of
any subparagraph of Paragraph 25(b) the liability of Guarantor is not
specifically limited pursuant to the terms thereof, shall be reduced by an
amount equal to the amount paid or, if Agent, the Banks or their nominee is the
successful bidder at such foreclosure sale, the fair market value of the
Collateral or portion thereof so sold at the time of such foreclosure sale
(Guarantor remaining liable at such foreclosure sale for the deficiency up to
<PAGE>

the extent of any remaining liability of Guarantor hereunder). Notwithstanding
anything in this Guaranty to the contrary, Guarantor agrees to pay to Lender
any amounts due to Lender, and shall remain fully liable both before and after
any such foreclosure sale under, each and every subparagraph of Paragraph 25(b)
which pursuant to its terms provides that Guarantor's liability is limited to
an amount specified pursuant to such subparagraph as a result of the action
described therein (collectively, the "Limited Provisions"); provided, however,
that Guarantor's liability with respect to the Limited Provisions shall expire
twelve (12) months following the date of any such foreclosure; provided,
further, that in the event Lender shall on or before the expiration of such
period deliver to Guarantor notice in writing of any claim with respect to a
Limited Provision, then Guarantor shall remain liable thereafter with respect
to such claim or claims of which Guarantor has been so notified.

IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the 25th
day of April, 1997.

/s/ Stanley Stahl
______________________________
STANLEY STAHL
<PAGE>

STATE OF ________ )
) SS.
COUNTY OF _______ )

I, the undersigned, a Notary Public in and for said County, in said State,
hereby certify that Stanley Stahl, whose name is signed to the foregoing
instrument, and who is known to me, acknowledged before me on this day that,
being informed of the contents of the instrument, he executed the same freely
and voluntarily as his personal act.

GIVEN under my hand and official seal this ______ day of April, 1997.

______________________________
Notary Public
[NOTARIAL SEAL]
My Commission Expires:______________

County of Residence:

Notary Public in and for the
State of
___________________________

<PAGE>

EXHIBIT 10.20

CASH COLLATERAL ACCOUNT
SECURITY, PLEDGE AND ASSIGNMENT AGREEMENT

THIS CASH COLLATERAL ACCOUNT SECURITY, PLEDGE AND ASSIGNMENT AGREEMENT
(this "Agreement"), dated as of April 25, 1997, by and among 277 PARK AVENUE,
LLC, a Delaware limited liability company ("Property Owner"), PARK AVENUE
MANAGEMENT CORPORATION, a Delaware corporation ("Managing Member"), PARK AVENUE
FINANCING COMPANY, LLC, a Delaware limited liability company ("Holding
Company"), PAMC CO-MANAGER INC., a Delaware corporation ("Co-Manager"; Holding
Company and Co-Manager are hereafter referred to collectively as the
"Borrowers"; the Property Owner, Managing Member and Borrowers are occasionally
collectively referred to as the "Borrower Parties" ), STANLEY STAHL, a resident
of the State of New York ("Stahl"), and THE FIRST NATIONAL BANK OF BOSTON
("FNBB"), as Agent for itself and the other Banks from time to time a party to
the Credit Agreement (as hereinafter defined) (FNBB, in its capacity as Agent,
is hereinafter referred to as "Agent").

W I T N E S S E T H:

WHEREAS, the Property Owner is the owner of the "Mortgaged Property" (as
defined in the Credit Agreement); and

WHEREAS, "Mortgagee" (as defined in the Credit Agreement), has made a
mortgage loan to the Property Owner in the original principal amount of
$345,000,000.00, which loan is evidenced by a Consolidated, Amended and
Restated Promissory Note, dated as of the date hereof (the "Mortgage Note"),
executed by the Property Owner, as maker, payable to the order of the
Mortgagee, as payee, and secured by, among other instruments, the "Mortgage"
(as defined in the Credit Agreement); and

WHEREAS, the Property Owner and the Mortgagee have further executed the
"Mortgage Cash Collateral Agreement" (as defined in the Credit Agreement); and

WHEREAS, pursuant to that certain Credit Agreement dated of even date
herewith among the Borrowers, FNBB, the other Banks that are a party thereto,
Agent and the other parties thereto (as the same may be varied, extended,
supplemented, consolidated, amended, replaced, renewed, modified or restated,
the "Credit Agreement"), the Banks have agreed to provide a loan to Borrowers
of $80,000,000.00 (the "Loan"), which Loan is evidenced by those certain Notes
made by Borrower to the order of the Banks in the aggregate principal face
amount of $80,000,000.00 (such Notes, and each other note as may be issued
under the Credit Agreement, as the same may be varied, extended, supplemented,
consolidated, amended, replaced, renewed, modified or restated, is hereinafter
referred to collectively as the "Note"); and

WHEREAS, the Banks have required, as a condition to the making of the Loan
to Borrowers, that the Borrower Parties execute this Agreement to secure the
obligations of Borrowers under the Note, the Credit Agreement and certain other
agreements;

NOW, THEREFORE, in consideration of the mutual covenants, promises, and
agreements set forth hereinbelow, and for other good and valuable
consideration, the receipt, adequacy, and sufficiency of which are hereby
<PAGE>

acknowledged, and as a material inducement to the Banks to close and fund the
Loan, the parties hereto covenant and agree as follows:

I. Defined Terms. Capitalized terms used in this Agreement, but
which are not otherwise expressly defined in this Agreement, shall have the
respective meanings given thereto in the Credit Agreement. In addition, the
following terms shall have the following meanings:

Accounts Depository Bank: The "Bank" under the Mortgage Cash
Collateral Agreement.

Accrual Interest Rate: The difference between the Aggregate
Interest Rate and the Current Interest Rate (that is, two percent (2.0%) per
annum).

Advances: See Section 7(a)(i).

Affiliate: With respect to any specified Person, (a) any other
Person which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person or any general partner or managing member of such specified Person, (b)
any other Person 10% or more of the equity interest of which is held
beneficially or of record by such specified Person or any general partner or
managing member of such specified Person, (c) any general or limited partner or
managing member of such specified Person or any general partner or managing
member of such specified Person, and (d) if such specified Person is an
individual, any parent, spouse, child, brother or sister of such specified
Person; "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities or other
beneficial interest, by contract, by family relationship, or otherwise.

Aggregate Interest Rate: The aggregate fixed, predefault interest
rate on the Notes, namely, the sum of the Current Interest Rate and the Accrual
Interest Rate (that is, twelve percent (12.0%) per annum).

Borrower's Net Excess Cash Flow Account: See Section 8(b)(iii).

Central Account: Collectively, the "Central Account" and the
"Lockbox Account" established pursuant to the Mortgage Cash Collateral
Agreement.

Closing Date: The date of this Agreement.

Collateral: As defined in Section 2, below.

Current Interest Rate: The fixed, predefault, pay rate of
interest on the Notes, namely, ten percent (10%) per annum.

Current Month: As defined in Section 7(a), below.

Default Rate: The interest rate payable on overdue amounts
pursuant to the Credit Agreement.

Eligible Account: A segregated interest-bearing account held by
and at the Agent or, with the Agent's prior written consent, an account that is
either: (a) maintained with a depository institution or trust company the long-
term unsecured debt obligations of which (or, in the case of a depository
<PAGE>

institution or trust company which is the principal subsidiary of a holding
company, the long-term unsecured debt obligations of such holding company) have
been rated by the Rating Agency in one of its two highest rating categories or
the short-term commercial paper of which is rated by the Rating Agency in its
highest rating category at the time of any deposit therein; (b) an account or
accounts maintained with a federal or state chartered depository institution or
trust company with trust powers acting in its fiduciary capacity provided that
any such state chartered institution or trust company shall be subject to
regulations regarding fiduciary funds on deposit substantially similar to
federal regulation 12 CFR Section 910(b); or (c) such other account acceptable
to the Agent. The title of each Eligible Account shall be in the name of Agent
and shall indicate that funds held therein are held in trust for the benefit of
Agent for the uses and purposes set forth herein.

Eligible Investments: Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
including those issued by the Agent, its successors or assigns, or any
Affiliate of the foregoing Persons:

(a) direct obligations of, or obligations fully guaranteed as to
payment of principal and interest by, (i) the United States of America or
any agency or instrumentality thereof, provided that such obligations are
backed by the full faith and credit of the United States of America, or
(b) FHLMC, FNMA, the Federal Farm Credit System, or the Federal Home Loan
Banks;

(b) FDIC-insured demand and time deposits in or certificates of
deposit of, or bankers' acceptances issued by, any bank or trust company,
savings and loan association, or savings bank, provided that the
commercial paper and long-term unsecured debt obligations of such
depository institution or trust company have the highest rating available
for such securities by the Rating Agency, or such lower rating as is
consented to by the Agent;

(c) repurchase obligations having a term not greater than 90 days
with respect to any security described in clause (a) above entered into
with a depository institution or trust company (acting as principal)
described in clause (b) above;

(d) general obligations of or obligations guaranteed by any State
of the United States of America or the District of Columbia receiving the
highest long-term unsecured debt rating available for such securities by
the Rating Agency, or such lower rating as is consented to in writing by
the Agent;

(e) securities bearing interest or sold at a discount which are
issued by any corporation incorporated under the laws of the United States
of America or any State thereof or the District of Columbia and are rated
by the Rating Agency in its highest long- term unsecured rating categories
at the time of such investment or contractual commitment providing for
such investment; provided, however, that securities issued by any such
corporation will not be Eligible Investments to the extent that investment
therein will cause the then outstanding principal amount of securities
issued by such corporation and held as part of the Mezzanine Account to
exceed 20% of the aggregate principal amount of the Eligible Investments
held in the Mezzanine Account;

(f) commercial or finance company paper (including both non-
<PAGE>

interest-bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year after the
date of issuance thereof) which is rated by the Rating Agency in its
highest short-term unsecured debt rating available at the time of such
investment or contractual commitment providing for such investment, and is
issued by a corporation the outstanding senior long-term debt obligations
of which are then rated by the Rating Agency in its highest short-term and
long-term unsecured debt ratings, or such lower rating as is consented to
in writing by the Agent;

(g) guaranteed reinvestment agreements acceptable to the Agent
issued by any bank, insurance company or other corporation rated in the
highest long-term unsecured rating levels available to such issuers by the
Rating Agency throughout the duration of such agreements, or such lower
rating as is consented to in writing by the Agent;

(h) units of taxable money market funds, which funds are
regulated investment companies, seek to maintain a constant net asset
value per share and invest solely in obligations backed by the full faith
and credit of the United States of America, which funds have been
designated in writing by the Rating Agency as Eligible Investments with
respect to this definition; and

(i) any other demand, money market or time deposit or any other
obligation, security or investment, that may be consented to in writing by
the Agent;

provided, however, that no instrument or security shall be an Eligible
Investment if (i) such instrument or security evidences a right to receive only
interest payments or (ii) the right to receive principal and interest payments
derived from the underlying investment provides a yield to maturity in excess
of 120% of the yield to maturity at par of such underlying investment.

Event of Default: As defined in Section 12, below.

Excess Cash Flow Commencement Date: As defined in the Mortgage
Cash Collateral Agreement.

Federal Book-Entry Regulations: The regulations governing Book-
Entry Treasury Bonds, notes and bills as set forth in 61 Fed. Reg. 43626 (Aug.
23, 1996) and similar regulations governing book-entry securities issued by the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Federal Home Loan Bank, Resolution Funding Corporation, Farm
Credit Bank, Farm Credit System Financial Assistance Corporation, Federal
Agricultural Mortgage Corporation, Student Loan Marketing Association and
Tennessee Valley Authority.

Floating Rate. The floating rate payable from time to time under
the Credit Agreement with respect to Base Rate Loans and LIBOR Rate Loans.

Indemnified Parties: As defined in Section 17(a), below.

Instruction Letter: As defined in the Mortgage Cash Collateral
Agreement.

Mezzanine Account: An Eligible Account, established and
maintained at Agent, in the name of The First National Bank of Boston, as
Agent, as Secured Party, for the benefit of the holders of the Notes. The
<PAGE>

Mezzanine Account is not a part of any account or sub-account established
pursuant to the Mortgage Cash Collateral Agreement.

Mezzanine Accounts: The Mezzanine Account and the Notes Reserve
Fund Sub-Account.

Mezzanine Debt Service Payment Shortfall: As defined in Section
8(b)(ii), below.

Net Excess Cash Flow: As defined in Section 7(a), below.

Net Excess Cash Flow Commencement Date: As defined in Section
7(a), below.

Notes Reserve Fund Sub-Account: A sub-account of the Mezzanine Account,
established and maintained pursuant to Section 5(c), below, as a reserve for
payment of interest on the Loan.

Notes Reserve Monthly Installment: For the first twelve (12)
Current Months, the amount of $66,666.67, which is to be funded in each such
Current Month to the Notes Reserve Fund Sub-Account, in addition to any other
amount to be funded to such Notes Reserve Fund Sub-Account in any Current Month
pursuant to this Agreement.

Required Mezzanine Debt Service Payment: With respect to any
Current Month, the amount of interest (including, without limitation, any
interest payable at the Accrual Interest Rate) and principal payments (upon
maturity or earlier acceleration) due and payable for such Current Month in
accordance with the terms of the Credit Agreement and the Notes.

Revised UCC: The 1994 Official Text of the Uniform Commercial
Code with conforming amendments to Article 9 of the Uniform Commercial Code.

UCC: The Uniform Commercial Code as in effect in the State in
which Mezzanine Accounts are located together with the Federal Book-Entry
Regulations to the extent applicable to the Eligible Investments and the
Revised UCC to the extent the Federal Book-Entry Regulations require
application of the Revised UCC and the same has not been adopted; provided,
however, that if and when the Revised UCC is enacted and becomes effective in
such State, then UCC shall mean the Revised UCC as enacted in such State from
time to time.

II. Security for Obligations. To secure the full and punctual payment
and performance by the Borrowers of all duties, responsibilities and
obligations under this Agreement, the Credit Agreement, the Notes and the other
Loan Documents (such duties, responsibilities and obligations are hereinafter
referred to as the "Obligations"), Borrowers hereby sell, assign, convey,
grant, pledge, hypothecate and transfer to Agent a first-in-lien-priority
continuing security interest in and to the following property of either or both
of the Borrowers, whether now owned or existing or hereafter acquired or
arising and regardless of where located (all of the same, collectively, the
"Collateral"):

A. any and all Excess Cash Flow from time to time, now or
hereafter available in the Central Account and required, by the terms of the
Mortgage Cash Collateral Agreement, to be deposited by the Mortgagee or the
Account Depository Bank into the Mezzanine Account;
<PAGE>

B. the Mezzanine Accounts, and all cash, checks, drafts,
certificates, passbooks, instruments and other amounts, if any, from time to
time deposited or held in and/or evidencing the Mezzanine Accounts, or in any
of them, including, without limitation, all wire transfers made, or in the
process of being made, and all other deposits, to the Mezzanine Accounts, or in
any of them, by the Mortgagee or the Account Depository Bank from Excess Cash
Flow now or hereafter held in the Central Account, or otherwise;

C. any and all Eligible Investments from funds in the Mezzanine
Accounts, and all cash, checks, drafts, certificates, pass-books and
instruments, if any, from time to time invested or held in and/or evidencing
the Eligible Investments, or in any of them;

D. all interest, dividends, cash, instruments and other property
from time to time received, receivable, or otherwise payable in respect of, or
in exchange for, any or all of the foregoing;

E. all accounts, contract rights, general intangibles and other
rights and interests pertaining to any of the foregoing, all documents,
instruments or passbooks now or hereafter evidencing the Mezzanine Accounts,
all replacements, substitutions, renewals or proceeds of any of the foregoing,
and all powers, options, rights, privileges and immunities pertaining thereto
(including the right to make withdrawals therefrom); and

F. to the extent not covered by clauses (a), (b), (c), (d) or
(e), above, all proceeds as defined under the UCC of any or all of the
foregoing.

Agent shall have with respect to the Collateral, in addition to the rights and
remedies herein set forth, all of the rights and remedies available to a
secured party under the UCC, as if such rights and remedies were fully set
forth herein.

III. Warranties and Covenants. Borrowers hereby warrant and represent
to, and covenant and agree with, Agent as follows:

A. Borrowers are and shall remain the sole, lawful, beneficial
and record owners of the Collateral, free and clear of all liens, restrictions,
claims, pledges, encumbrances, charges, claims of third parties and rights of
set-off or recoupment whatsoever (other than those in favor of Agent
hereunder), and Borrowers have the full and complete right, power and authority
to create a security interest in the Collateral in favor of Agent, in
accordance with the terms and provisions of this Agreement.

B. This Agreement creates a valid and binding first-in-lien
priority pledge and assignment of and security interest in the Collateral
securing the payment and performance of the Obligations, and upon the filing of
UCC Financing Statements in New York County and the New York Secretary of
State, all filings and other actions necessary to perfect and protect such
pledge and security interests shall have been duly made and taken. The
Borrowers have not performed and will not perform any acts which might prevent
Agent from enforcing any of the terms and conditions of this Agreement or which
would limit Agent in any such enforcement.

C. The taxpayer identification numbers of the Borrowers are as
follows: Holding Company: _______________; and Co Manager: _______________.

D. For the purposes of Article 9-401 of the New York Uniform
<PAGE>

Commercial Code, the principal place of business of Borrowers is in New York
County, New York. If Borrowers have more than one place of business in New
York, their chief executive offices are located in New York County, New York.
In order to perfect the pledge and security interests granted herein against
Borrowers, UCC Financing Statements must be filed only with the Secretary of
State of New York.

E. The Property Owner and the Mortgagee have executed and
delivered the Mortgage Cash Collateral Agreement and the Central Account and
the other sub-accounts described in the Mortgage Cash Collateral Agreement have
been created. There are no other accounts maintained by any of the Borrower
Parties or any manager of the Mortgaged Property for the collection of
"Operating Revenue" (as defined in the Mortgage Cash Collateral Agreement) with
respect to the ownership and operation of the Mortgaged Property and that, so
long as any of the Obligations shall be outstanding, none of the Borrower
Parties, nor any manager of the Mortgaged Property, shall open any account for
the collection of Operating Revenue with respect to the Mortgaged Property
other than those created pursuant to the Mortgage Cash Collateral Agreement.

IV. General Covenants. The Borrowers covenant and agree that, so long
as any of the Obligations are outstanding or have not been paid or performed:

A. Neither Borrower, without the prior written consent of Agent,
which consent may be withheld by Agent in its sole and absolute discretion,
shall directly, indirectly or by operation of law sell, transfer, assign,
dispose of, pledge, convey, option, mortgage, hypothecate or encumber any of
the Collateral.

B. Borrowers shall at all times defend the Collateral against
all claims and demands of all persons at any time claiming any interest in the
Collateral adverse to Agent's interest in the Collateral as granted hereunder.

C. Borrowers shall pay all taxes and other charges imposed
against the Collateral, shall not use the Collateral illegally, and shall not
suffer to exist any loss, theft, damage or destruction of the Collateral and
shall suffer to exist no levy, seizure or attachment of the Collateral.

D. Borrowers authorize Agent, at the expense of Borrowers, to
execute and file any financing statement or statements reasonably deemed
necessary by Agent to perfect its security interest in any of the Collateral.
Any such financing statement may be signed by Agent alone. Borrowers will sign
and deliver any financing statements and other documents, and perform such
other acts as Agent reasonably may deem necessary or desirable from time to
time to establish and maintain in favor of Agent, valid and perfected security
interests in the Collateral, free of all other liens, encumbrances, security
interests and claims other than as permitted by the terms of this Agreement.
Borrowers shall also furnish to Agent such evidence as it reasonably may
require to confirm the value of the Collateral, and shall do anything else
Agent may reasonably require from time to time to establish a valid security
interest in and to further protect and perfect its security interest in the
Collateral.

E. Except for those items of the Collateral that are delivered
to Agent as provided herein, all records of Assignor relative to the Collateral
are and will be kept at the office of Borrowers located in New York County, New
York. Borrowers shall give Lender not fewer than thirty (30) days prior
written notice of any proposed change in either of Borrower's name and any
proposed change in the location of such records, and Borrowers will not,
<PAGE>

without the prior written consent of Agent, move such records to a location
outside of New York County, New York or keep duplicate records with respect to
the Collateral at any address outside such county. Nothing contained in this
subparagraph shall be construed so as to prevent Borrowers from keeping
material abstracted from the books and records described herein at any of its
offices as necessity or convenience dictates.

F. The Borrowers shall cause the Property Owner to deposit all
amounts into the Central Account that are required to be deposited therein
pursuant to the Mortgage Cash Collateral Agreement and to utilize such funds in
accordance with and as and to the extent required by the Mortgage Cash
Collateral Agreement.

G. By execution hereof, the Borrowers hereby direct that the
Property Owner cause all Excess Cash Flow to be deposited into the Mezzanine
Account, and the Borrowers hereby agree for the benefit of the Property Owner
that all such payments actually received by Agent pursuant thereto shall be
deemed payments to Borrowers by the Property Owner. By execution hereof,
Property Owner acknowledges such direction and the terms of this Agreement. By
execution hereof, Managing Member acknowledges and agrees that Managing Member
has no right, title or interest in and to any amounts now or hereafter
deposited in the Mezzanine Accounts or any interest earned thereon.

H. Property Owner has executed and delivered to the Mortgagee
the Instruction Letter, dated as of the date hereof.

V. Establishment and Funding of Mezzanine Accounts.

A. Establishment of Mezzanine Account. The Borrowers warrant
and represent to, and covenant and agree with, Agent that the Borrowers have
established the Mezzanine Account at FNBB in the name of Agent, it successors
and assigns, as secured party. The Property Owner and Agent, by their execution
of the Instruction Letter and by their delivery thereof to the Mortgagee, have
irrevocably directed and authorized the Mortgagee and the Account Depository
Bank, and hereby reiterate and reaffirm such direction and authorization to the
Mortgagee and the Account Depository Bank, when and as required from time to
time by the Mortgage Cash Collateral Agreement, to transfer immediately from
the Central Account to the Mezzanine Account any and all Excess Cash Flow
remaining in the Central Account upon the occurrence of the Excess Cash Flow
Commencement Date which pursuant to the terms of the Mortgage Cash Collateral
Agreement is required to be deposited with the Agent, and any and all other
amounts which are required pursuant to the Mortgage Cash Collateral Agreement
to be deposited with the Agent as and when permitted under the terms of the
Mortgage Cash Collateral Agreement. All of the Mezzanine Accounts shall be
established and maintained as segregated interest bearing accounts. All funds
on deposit in the Mezzanine Accounts shall be held by Agent free of any liens
or claims on the part of creditors of the Borrowers other than Agent. All of
the Mezzanine Accounts shall be Eligible Accounts.

B. Distributions as Property Only of Borrowers. The Borrowers
and Managing Member further warrant and represent to, and covenant and agree
with, Agent that (i) all Excess Cash Flow, when and as same is available and
the Mortgagee or the Account Depository Bank is required under the Mortgage
Cash Collateral Agreement to transfer Excess Cash Flow into the Mezzanine
Account, is intended to be and is hereby agreed to be at that time property of
only the Borrowers, subject, however, in all events, to the security interests
granted by this Agreement to the Agent, (ii) that all Excess Cash Flow
transferred by the Mortgagee or the Account Depository Bank from the Central
<PAGE>

Account into the Mezzanine Account shall constitute a distribution from the
Property Owner to the Borrowers, and (iii) neither the Property Owner, the
Managing Member nor any other Person will have any right, title or interest in
or to any Excess Cash Flow from and after the time at which the Mortgagee or
the Account Depository Bank becomes obligated under the Mortgage Cash
Collateral Agreement to transfer such Excess Cash Flow to the Mezzanine
Account, except any rights the members of the Property Owner shall have to
allocations of such funds following the disbursement to the Borrower of any Net
Excess Cash Flow as provided in Section 8(b)(iii).

C. Mezzanine Accounts to be Controlled by Agent. Until the
entire Obligations secured hereby are repaid in full, the Mezzanine Accounts
shall be under the sole dominion and control of the Agent. The Borrowers
hereby irrevocably direct and authorize the Agent to deposit into and withdraw
funds from the Mezzanine Account, all in accordance with the terms and
conditions of this Agreement. Until the Obligations are repaid in full, none
of the Borrowers shall have any right of withdrawal with respect of the
Mezzanine Accounts. Each transfer of funds from the Mezzanine Accounts shall
be made only to the extent that funds are on deposit in the Mezzanine Accounts,
and neither the Agent, nor any of the Banks, shall have any responsibility to
make additional funds available in the event that funds on deposit in the
Mezzanine Accounts are insufficient. The Notes Reserve Fund Sub-Account is a
sub-account of the Mezzanine Account to which certain funds shall be allocated
and from which disbursements shall be made pursuant to the terms of this
Agreement.

VI. Investment of Funds in Mezzanine Accounts.

A. Investment of Funds in Mezzanine Accounts. It is the
intention of the parties hereto that the entire amount deposited in the
Mezzanine Account shall, so long as there is no then continuing Event of
Default, be invested in an interest-bearing account (which account, so long as
FNBB is the Agent, shall be a "First Rate Account") and that the entire amount
deposited in the Notes Reserve Fund Sub-Account (or so much thereof as Agent
may reasonably arrange to invest) shall, so long as there is no then continuing
Event of Default, be invested in Eligible Investments. Subject to the
limitations specified in the immediately preceding sentence, any amounts held
in the Notes Reserve Fund Sub-Account shall be invested, liquidated, and
reinvested, by Agent, at Borrowers' direction, in Eligible Investments. At any
time when there is a then continuing Event of Default, investment of funds in
the Mezzanine Account in the First Rate Account or funds in the Notes Reserve
Fund Sub-Account in Eligible Investments, as applicable shall be discretionary
with the Agent. If an Event of Default shall have occurred and is then
continuing, Agent, in its sole discretion, may, but shall not be required to,
invest funds in the Mezzanine Accounts as provided above. In either case, and
regardless of whether Borrowers or Agent shall direct any such investment, such
investment, in all events, shall be made in the name of Agent, as secured party
under this Agreement. Amounts held in the Mezzanine Accounts may be commingled
with other funds of Agent for purposes of making such investments. All funds in
the Mezzanine Accounts which are invested as provided herein are deemed to be
held in the Mezzanine Accounts for all purposes of this Agreement and all of
the other Loan Documents.

B. Eligible Investments. Upon the joint written request of
Borrowers, Agent shall invest and reinvest any balance in the Notes Reserve
Fund Sub-Account from time to time, but not more frequently than weekly, in
Eligible Investments as instructed by Borrowers, provided that (i) if Borrowers
fail to so instruct Agent, and so long as an Event of Default is not then
<PAGE>

continuing, Agent shall invest and reinvest such balance in Eligible
Investments included within clause (b) of the definition of Eligible
Investments, (ii) the maturities of the Eligible Investments on deposit in the
Notes Reserve Fund Sub-Account, and allocated to the Notes Reserve Fund Sub-
Account, shall be selected and coordinated to become due not later than the
Business Day before any disbursements from the Notes Reserve Fund Sub-Account
must be made or such longer period as may be requested in writing by the
Borrowers. If Borrowers make such an investment request and Agent invests such
monies as requested, disbursements to Borrowers, if any, from the Notes Reserve
Fund Sub-Account shall be made prior to the maturity of such Eligible
Investments only if Agent is able to liquidate such Eligible Investments prior
to maturity thereof. Borrowers and Stahl shall pay within five (5) days of
demand any loss on such investments which may be incurred by Agent in
connection with any liquidation of such investment prior to the maturity of
such investment. All such Eligible Investments shall be held in the name of
Agent, as secured party under this Agreement, and shall be under the sole
dominion and control of Agent. No Eligible Investment shall be made unless
Agent shall perfect its first priority lien in such Eligible Investment
securing the Obligations and Agent shall have sole possession and control over
each such Eligible Investment and the income thereon, and any certificate,
instrument or document, if any, evidencing any such investment shall be
delivered directly to Agent, together with any document of transfer necessary
to transfer title to such investment to Agent.

C. Earnings on Mezzanine Accounts. All interest paid or other
earnings on the investments of funds in the Mezzanine Accounts shall be
deposited into the Mezzanine Account and shall be allocated to the Mezzanine
Account established hereunder which would, but for such investment, have
contained the funds with respect to which such interest was paid or other
earnings earned. Borrowers agree that Agent shall report or cause to be
reported all such income and earnings on the Mezzanine Accounts as income of
Borrowers (and, if Borrowers are partnerships, limited liability companies,
Subchapter S corporations, or other pass-through entities, the partners,
members, shareholders, or beneficiaries of Borrowers, as the case may be),
shall report or cause to be reported all such losses on the Mezzanine Accounts
as losses of Borrowers (and, if Borrowers are partnerships, limited liability
companies, Subchapter S corporations, or other pass-through entities, the
partners, members, shareholders, or beneficiaries of Borrowers, as the case may
be), and, for federal and applicable state and local tax purposes only,
Borrowers shall be the owners of Mezzanine Accounts. Provided that there is no
then continuing Default or Event of Default or default or event of default
under the Mortgage Loan Documents, interest paid on amounts deposited in the
Mezzanine Accounts shall be disbursed to the Borrowers' Net Excess Cash Flow
Account not less frequently than quarterly, except to the extent that any
amounts are then required to be deposited to the Notes Reserve Fund Sub-Account
pursuant to this Agreement.

D. No Liability For Investments. In no event shall Agent have
any responsibility or liability for the types of investments which Borrowers
may direct Agent to make, nor shall Agent have any duty or responsibility to
confirm that the same are in fact Eligible Investments. Neither Agent, nor any
Bank, shall have any liability for any loss in investments of funds in the
Mezzanine Account which are invested in investments as provided herein whether
Borrower or Agent selected such investment in accordance herewith (whether from
early liquidation or otherwise), and no such loss shall affect Borrowers'
obligations to fund, or liability for funding, the Mezzanine Account and each
sub-account established hereunder, as the case may be.
<PAGE>

VII. Monthly Funding of Mezzanine Accounts.

A. Funding Priority. For each month after the calendar month
in which the Closing Date occurs (each, the "Current Month"), all monies
collected in the Mezzanine Account during each such Current Month shall be
allocated as set forth in this Section 7(a). In each Current Month, Agent,
except as otherwise provided in Section 7(b), below, shall allocate all funds
transferred or deposited into the Mezzanine Account between the Mezzanine
Account and the Notes Reserve Fund Sub-Account as follows and in the following
priority:

1. first, to the Mezzanine Account until an amount equal to
the sum of any amounts which may have been advanced by the Agent or the
Banks pursuant to the terms of the Loan Documents to cure any Default or
Event of Default, any "Default" or "Event of Default" under the Mortgage
Loan Documents, to protect the Collateral or otherwise, together with any
interest payable on such amounts pursuant to the Loan Documents
(collectively, the "Advances"), plus (w) the Required Mezzanine Debt
Service Payment for the next occurring Interest Payment Date, plus (x) an
amount equal to the amount of any Capitalized Interest, plus (y) an amount
equal to such payments for any prior month(s), to the extent not
previously paid, plus (z) an amount equal to the amount, if any, deducted
from the Mezzanine Account in any preceding month to pay any other amounts
due under the Loan Documents, has been reserved within the Mezzanine
Account. The Borrowers acknowledge that the Agent shall not be required
to make such allocation until such time as the Agent is able to calculate
the amount of the Required Mezzanine Debt Service Payment. On the date
hereof, the Borrowers shall fund an amount equal to $160,000.00 to the
Mezzanine Account to pay the Required Mezzanine Debt Service Payment due
on May 1, 1997.

2. second, to the Notes Reserve Fund Sub-Account, until an
amount equal to the sum of (x) the Notes Reserve Monthly Installment for
such Current Month has been allocated to the Notes Reserve Fund Sub-
Account, plus (y) an amount equal to such payments for any prior month(s),
to the extent not previously paid, plus (z) an amount equal to the amount,
if any, deducted from the Notes Reserve Fund Sub-Account in any preceding
month to pay any amounts due from the Mezzanine Account because of a
shortfall in the Mezzanine Account or to pay any other amounts due under
the Loan Documents. With respect to the first twelve (12) Current Months,
in the event that the funds remaining in the Mezzanine Account available
to be deposited to the Notes Reserve Fund Sub-Account are less than
$66,666.67, that same shall not constitute a Default pursuant to Section
10.1(b) of the Credit Agreement, provided that in any subsequent Current
Month thereafter during the first twelve (12) Current Months the amount of
any such deficiency shall be funded in later months to the extent of funds
available therefor in the Mezzanine Account, provided that in any event
the balance of the Notes Reserve Fund Sub-Account shall equal $800,000.00
on May 1, 1998. With respect to any Current Month subsequent to the
twelfth (12th) Current Month, the amount required to be deposited into the
Notes Reserve Fund Sub-Account shall be such amount, if any, as is
necessary to cause the then existing balance of the Notes Reserve Fund
Sub-Account to equal $800,000.00 to the extent that funds are available
for such purpose in the Mezzanine Account.

During each Current Month the Agent shall notify Borrowers as soon as
reasonably practicable after the amounts set forth in clauses (i) through (ii)
above, to the extent then applicable, have been transferred or deposited into
<PAGE>

the Mezzanine Account and allocated to or reserved within the Mezzanine Account
or the Notes Reserve Fund Sub-Account as aforesaid, to the extent such deposits
are fully made on or prior to the last Business Day in such Current Month. The
date such amounts have been fully funded or reserved within the Mezzanine
Account or the Notes Reserve Fund Sub-Account in any Current Month is
occasionally herein referred to as the "Net Excess Cash Flow Commencement
Date". As used herein, "Net Excess Cash Flow" means the amount available in
the Mezzanine Account in any Current Month after the allocations and
reservations under clauses (i)-(ii) above have been made.

B. Special Allocations/Reallocations of Funds in Mezzanine
Accounts. In any Current Month, Agent, in its sole discretion, may allocate
any amounts in the Mezzanine Account or the Notes Reserve Fund Sub-Account to
pay any Required Mezzanine Debt Service Payment and any other amounts due under
the Loan Documents; provided, however, that no such application shall be deemed
to have been made by operation of law or otherwise until actually made by Agent
as herein provided. If, on any Interest Payment Date, the aggregate balance in
the Mezzanine Account, to the extent such funds in the Mezzanine Account were
deposited prior to the last Business Day of the preceding calendar month, is
insufficient to make the payment of the Advances and Required Mezzanine Debt
Service Payment (excluding any amount due at the Accrual Interest Rate)
required to be made pursuant to Section 8 (b)(i), below, then such failure
shall be deemed a Default pursuant to Section 10.1(a) or (b) of the Credit
Agreement, as applicable. In the event that Agent applies the proceeds in any
of the Mezzanine Accounts other than the one allocated therefor (i) to make
such Required Mezzanine Debt Service Payment (excluding any amount due at the
Accrual Interest Rate), or (ii) to pay any other amounts due under the Loan
Documents (excluding any amounts due at the Accrual Interest Rate or
Capitalized Interest), Borrowers shall upon demand repay to Agent, in order to
replenish the applicable account up to the amount contained therein immediately
prior to such application, the amount of the funds so applied, and failure by
Borrowers to repay such amounts within five (5) days after such demand shall
constitute an additional Event of Default hereunder; provided, however, that in
the event that any funds are applied from the Notes Reserve Fund Sub- Account
to pay any amount due at the Accrual Interest Rate, the Notes Reserve Fund Sub-
Account shall be replenished as provided in Section 7(a)(ii). Agent may, at
its sole option, replenish such Mezzanine Account out of available Net Excess
Cash Flow in subsequent months which would have otherwise been transferred to
the Borrowers pursuant to Section 8(b)(iii). If Agent advances its own funds
to make any payments in respect of any other amounts due under the Loan
Documents, Agent shall be entitled to repayment of such payments, with interest
earned thereon at the Default Rate.

VIII. Transfers of Funds Out of Mezzanine Accounts.

A. Certificate Regarding Available Funds in Mezzanine Account.
Not later than two (2) Business Days before each Interest Payment Date during
the term of the Loan (provided that as of such date the Agent is able to
determine the amount payable on such Interest Payment Date), Agent shall
deliver (by facsimile or otherwise) to Borrowers a certificate, in the form
annexed hereto and made a part hereof as Exhibit A, stating whether sufficient
funds have theretofore been deposited into the Mezzanine Account to fund or
reserve within each of the Mezzanine Accounts which Borrowers are then required
to fund under the terms of this Agreement. If any such certificate states that
the funds then allocated to any Mezzanine Accounts are less than the amount of
funds which are required to be deposited therein for such Interest Payment Date
with respect to Advances, interest payable at the Current Rate, the Accrual
Interest Rate or the Floating Rate, to the extent the same are due and payable
<PAGE>

under the Credit Agreement, and with respect to the Notes Reserve Fund Sub-
Account, to the extent such amounts are required to be deposited pursuant to
this Agreement, Borrowers shall be obligated to deposit immediately available
United States funds (in addition to Excess Cash Flow) into the Mezzanine
Account, prior to the date and time such amounts are due pursuant to the Credit
Agreement, in the amount of such deficiency, and failure to make such deposit
prior to such time shall be an additional Default pursuant to Section 10.1(a)
or (b) of the Credit Agreement, as applicable. The failure by Agent to deliver
such certificate to Borrowers shall not waive any such Default hereunder.

B. Priority of Disbursements. Transfers and payments made out
of the Mezzanine Accounts shall be made in accordance with the following
provisions to the extent the same are applicable and shall be payable in the
following order:

1. Payment of Mezzanine Debt Service. On each Interest
Payment Date during the term of the Loan, Agent shall disburse from the
Mezzanine Account to the Banks pursuant to the Credit Agreement, an amount
equal to the sum of (A) the Advances, (B) the Required Mezzanine Debt
Service Payment for such Interest Payment Date, (C) any amount deposited
in the Mezzanine Account to pay Capitalized Interest, and (D) any amounts
deposited into the Mezzanine Account which are permitted voluntary
prepayments, if any, pursuant to the terms of the Notes. Notwithstanding
any provision to the contrary in this Section 8(b)(i), the disbursement
from the Mezzanine Account on each Interest Payment Date shall be made by
Agent in the following order of priority:

(1) Repayment of the Advances;

(2) Interest first due on the Notes on such Interest
Payment Date at the Current Interest Rate, together with any
theretofore accrued, unpaid interest on the Notes at the Current
Interest Rate;

(3) Interest first due on the Notes on such Interest
Payment Date at the Floating Rate, together with any theretofore
accrued, unpaid interest on the Notes at the Floating Rate;

(4) Interest first due on the Notes on such Interest
Payment Date at the Accrual Interest Rate, together with any
theretofore accrued, unpaid interest on the Notes at the Accrual
Interest Rate;

(5) Any unpaid Capitalized Interest;

(6) Any other sums (other than principal) due under
the Loan Documents; and

(7) At the Maturity Date, or on any earlier date on
which the Loan becomes due and payable (by acceleration or
otherwise) or is prepaid in accordance with the terms of the
Notes, the principal of the then outstanding Obligations.

2. Funding from Notes Reserve Fund Sub-Account. On each
Interest Payment Date during the term of the Loan, if and to the extent
that the funds then available in the Mezzanine Account are less than the
Required Mezzanine Debt Service Payment due on such Interest Payment Date
(the amount of such deficiency in any Current Month is referred to as the
<PAGE>

"Mezzanine Debt Service Payment Shortfall"), the Agent shall disburse from
the Notes Reserve Fund Sub-Account, to the extent funds are available
therein for such purpose, an amount equal to the Mezzanine Debt Service
Payment Shortfall which shall be applied, as and to the extent required
due to insufficiency of funds in the Mezzanine Account and after
disbursement of the funds in the Mezzanine Account, in the same order of
priority as set forth in Section 8(b)(i), above.

3. Transfer of Net Excess Cash Flow. Within two (2)
Business Days after the funding of or reservation of amounts within the
Mezzanine Accounts pursuant to Section 7, and provided that there is then
no continuing Default or Event of Default or default or event of default
under the Mortgage Loan Documents, Agent shall transfer from the Mezzanine
Account to the account described in Exhibit B attached hereto and made a
part hereof, or any other account as may be designated by Borrowers in a
written notice to Agent (the "Borrowers' Net Excess Cash Flow Account")
any Net Excess Cash Flow remaining in the Mezzanine Account. From and
after the transfer of such Net Excess Cash Flow to the Borrowers, Agent
shall have no further liability or responsibility with respect to the
funds so transferred or the investment thereof, such Net Excess Cash Flow
shall be the property of the Borrowers and may be further distributed by
the Borrowers in accordance with their separate agreements.

IX. Financing Statement; Further Assurances. Simultaneously herewith,
Borrowers shall execute and deliver to Agent for filing a financing statement
or statements in connection with the Collateral in the form required to
properly perfect Agent's security interest therein. Borrowers agree that at any
time, and from time to time, at the expense of Borrowers, Borrowers will
promptly execute and deliver all further instruments and documents, and take
all further action, which may be reasonably necessary or desirable, or which
Agent may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby (including, without
limitation, any security interest in and to any Eligible Investments) or to
enable Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.

X. Agent's Right to Perform Borrowers' Obligations; No Liability of
Agent or Banks. If the Borrowers fail to perform their respective covenants or
obligations under this Agreement beyond any applicable period for notice and
cure, Agent may itself perform, or cause performance of, such covenants or
obligations, and the reasonable expenses of Agent incurred in connection
therewith shall be payable by the Borrowers to Agent in accordance with Section
15 hereof. Notwithstanding the Agent's right to perform, at its sole
discretion, certain obligations of the Borrowers, Agent's exercise of any of
its rights or remedies hereunder, under any of the other Loan Documents, or
otherwise at law or in equity, Agent shall not be deemed to be a mortgagee- in-
possession, nor shall Agent or the Banks be subject to any liability with
respect to the Mortgaged Property, the Collateral, or otherwise based upon any
claim of lender liability.

XI. Reasonable Care. Beyond the exercise of reasonable care in the
custody thereof, Agent shall not have any duty as to any Collateral in its
possession or control as agent therefor or bailee thereof or any income thereon
or the preservation of rights against any Person or otherwise with respect
thereto. Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession, if the Collateral
is accorded treatment substantially equal to that which Agent accords its own
property, it being understood that Agent shall not be liable or responsible for
<PAGE>

any loss or damage to any of the Collateral, or for any diminution in value
thereof, by reason of the act or omission of Agent, or its Affiliates, agents,
employees or bailees, except to the extent that such loss or damage results
from Agent's gross negligence or willful misconduct.

XII. Events of Default. An Event of Default shall exist hereunder upon
the occurrence of any of the following:

A. Any warranty, representation or statement made by or on
behalf of the Borrowers in this Agreement proves untrue or misleading in any
material respect and the same is not cured within any period of cure permitted
by Section 7.18 of the Credit Agreement; or

B. Borrowers shall fail to duly and fully comply with any
covenant, condition or agreement in Paragraphs 3(e), 4(a) or 4(f) of this
Agreement and as to a failure to comply with paragraph 4(f) only, the same is
not cured within five (5) days following receipt of notice of such default; or

C. Borrowers shall fail to comply with any monetary obligation
under this Agreement (including without limitation the obligation to cause the
Notes Reserve Fund Sub- Account to have a balance of $800,000.00 on May 1,
1998), and the same shall not be cured within any period of notice and cure
permitted by the Credit Agreement, subject to any limitations therein on the
number or frequency of such notices; or

D. Borrower shall fail to duly and fully comply with any other
covenant, condition or agreement of this Agreement (other than those specified
above in this Paragraph 12) and the same is not cured within thirty (30) days
following receipt of written notice of such default; or

E. The occurrence of an Event of Default under any of the Loan
Documents.

XIII. Remedies.

A. Upon the occurrence of an Event of Default, Agent, without
limitation, may:

1. without notice to Borrowers, except as required by law,
and at any time or from time to time, charge, set-off, and otherwise apply all
or any part of the Collateral against the Obligations or any part thereof;

2. in its sole discretion, at any time and from time to
time, exercise any and all rights and remedies available to it under this
Agreement, and/or as a secured party under the UCC; and

3. demand, collect, take possession of, receipt for,
settle, compromise, adjust, sue for, foreclose, or otherwise realize upon the
Collateral (or any portion thereof) as Agent may determine in its sole
discretion.

B. The Borrowers hereby expressly waive, to the fullest extent
permitted by law, presentment, demand, protest or any notice of any kind in
connection with this Agreement or the Collateral except as otherwise
specifically provided herein. Agent may take any action deemed by Agent to be
necessary or appropriate to the enforcement of the rights and remedies of Agent
under this Agreement, and/or under any of the other Mezzanine Loan Documents.
The remedies of Agent shall include, without limitation, all rights and
<PAGE>

remedies specified this Agreement, all remedies of Agent under applicable
general or statutory law, and the remedies of a secured party under the UCC as
enacted in the State of New York, regardless of whether the UCC has been
enacted or enacted in that form in any other jurisdiction in which such right
or remedy is asserted. In addition to such other remedies as may exist from
time to time, whether by way of set-off, banker's lien, consensual security
interest or otherwise, upon the occurrence of an Event of Default, Agent is
authorized at any time and from time to time, without notice to or demand upon
the Borrowers (any such notice or demand being expressly waived by the
Borrowers) to charge any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by Agent to or for the credit of or the account of the Borrowers against any
and all of the Obligations, irrespective of whether or not Agent shall have
made any demand for payment and although the Obligations may be unmatured. Any
notice required by law, including, but not limited to, notice of the intended
disposition of all or any portion of the Collateral, shall be reasonable and
properly given in the manner prescribed for the giving of notice herein, and,
in the case of any notice of disposition, if given at least ten (10) days prior
to such disposition. Agent may require the Borrowers to assemble the
Collateral and make it available to Agent at any place to be designated by
Agent which is reasonably convenient to the parties hereto. It is expressly
understood and agreed that Agent shall be entitled to dispose of the Collateral
at any public or private sale, and that Agent shall be entitled to bid and
purchase at any such sale. To the extent the Collateral consists of marketable
securities, Agent shall not be obligated to sell such securities for the
highest price obtainable, but shall sell them at the market price available on
the date of sale. Agent shall not be obligated to make any sale of the
Collateral if it shall determine not to do so regardless of the fact that
notice of sale of the Collateral may have been given. Agent may, without
notice or publication, adjourn any public sale from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. Each such purchaser at any such sale shall hold the Collateral sold
absolutely free from claim or right on the part of Borrowers. In the event
that any consent, approval or authorization of any governmental agency or
commission will be necessary to effectuate any such sale or sales, Borrowers
shall execute all such applications or other instruments as Agent may deem
reasonably necessary to obtain such consent, approval or authorization. Agent
may notify any account debtor or obligor with respect to the Collateral to make
payment directly to Agent, and may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral as Agent
may determine whether or not the Obligations or the Collateral are due, and for
the purpose of realizing Agent's rights therein, Agent may receive, open and
dispose of mail addressed to any Borrowers and endorse notes, checks, drafts,
money orders, documents of title or other evidences of payment, shipment or
storage or any other form of Collateral on behalf and in the name of Borrowers,
as their attorney-in-fact. In addition, Borrowers hereby irrevocably designate
and appoint Agent their true and lawful attorney-in-fact either in the name of
Agent or Borrowers to (i) sign Borrowers' name on any Collateral, drafts
against account debtors, assignments, any proof of claim in any bankruptcy or
other insolvency proceeding involving any account debtor, any notice of lien,
claim of lien or assignment or satisfaction of lien, or on any financing
statement or continuation statement under the UCC relating to the Collateral;
(ii) send verifications of accounts receivable to any account debtor; and (iii)
in connection with a transfer of the Collateral as described above, sign in
Borrowers' name any documents necessary to transfer title to the Collateral to
Agent or any third party. All acts of said power of attorney are hereby
ratified and approved and Agent shall not be liable for any mistake of law or
<PAGE>

fact made in connection therewith. This power of attorney is coupled with an
interest and shall be irrevocable so long as any amounts remain unpaid on any
of the Obligations. All remedies of Agent shall be cumulative to the full
extent provided by law. Pursuit by Agent of certain judicial or other remedies
shall not abate nor bar other remedies with respect to the Obligations or to
other portions of the Collateral. Agent may exercise its rights to the
Collateral without resorting or regard to other collateral or sources of
security or reimbursement for the Obligations.

C. Whether or not an Event of Default has occurred and whether
or not Agent is the absolute owner of the Collateral, Agent may take such
action as Agent may deem reasonably necessary to protect the Collateral or its
security interest therein, Agent being hereby authorized to pay, purchase,
contest and compromise any encumbrance, charge or lien which in the judgment of
Agent appears to be prior or superior to its security interest, and in
exercising any such powers and authority to pay reasonably necessary expenses,
employ counsel and pay reasonable attorney's fees. Any such advances made or
expenses incurred by Agent shall be deemed advanced under the Loan Documents,
shall increase the indebtedness evidenced and secured thereby, shall be payable
upon demand and shall bear interest at the Default Rate.

XIV. No Waiver. The rights and remedies provided in this Agreement and
the other Loan Documents are cumulative and may be exercised independently or
concurrently, and are not exclusive of any other right or remedy provided at
law or in equity. No failure to exercise or delay by Agent in exercising any
right or remedy hereunder or under any of the other Loan Documents shall impair
or prohibit the exercise of any such rights or remedies in the future or be
deemed to constitute a waiver or limitation of any such right or remedy or
acquiescence therein. Every right and remedy granted to Agent under Section 13,
above, or elsewhere in this Agreement, or by any of the other Loan Documents,
or otherwise available at law or in equity, may be exercised by Agent at any
time and from time to time, and as often as Agent may deem it expedient. Any
and all of Agent's rights with respect to the lien and security interest
granted hereunder shall continue unimpaired, and the Borrowers shall be and
remain obligated in accordance with the terms hereof, notwithstanding (a) any
proceeding by or against any of the Borrowers under the Bankruptcy Code or any
bankruptcy, insolvency or reorganization laws or statutes of any state, (b) the
release or substitution of Collateral at any time, or of any rights or
interests therein or (c) any delay, extension of time, renewal, compromise or
other indulgence granted by the Agent or the Banks after an Event of Default,
with respect to the Collateral or otherwise hereunder. No delay or extension
of time by Agent in exercising any power of sale, option or other right or
remedy hereunder, and no notice or demand which may be given to or made upon
the Borrowers by Agent, shall constitute a waiver thereof, or limit, impair or
prejudice Agent's right, without notice or demand, to take any action against
the Borrowers or to exercise any other power of sale, option or any other right
or remedy.

No amendment or waiver of any provision of this Agreement nor consent to
any departure therefrom shall in any event be effective unless the same shall
be in writing and signed by Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. Failure on the part of Agent to complain of any act or failure to act
which constitutes an Event of Default, irrespective of how long such failure
continues, shall not constitute a waiver by Agent of Agent's rights hereunder
or impair any rights, powers or remedies consequent on any Event of Default.
Borrowers hereby waive to the extent permitted by law all rights which
Borrowers have or may have under and by virtue of the UCC, and any federal,
<PAGE>

state, county or municipal statute, regulation, ordinance, Constitution or
charter, now or hereafter existing, similar in effect thereto, providing any
right of Borrowers to notice except as provided herein and to a judicial
hearing prior to seizure by Agent of any of the Collateral. Borrowers hereby
waive and renounce for themselves, their respective heirs, successors and
assigns, all rights to the benefits of any statute of limitations and any
moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension,
homestead, redemption and appraisement now provided or which may hereafter be
provided by the Constitution and laws of the United States and of any state
thereof, both as to itself and in and to all of its property, real and
personal, against the enforcement of this Agreement and the collection of any
of the Obligations.

XV. Expenses. The Collateral shall secure, and Borrowers shall pay to
Agent, within five (5) days of demand, from time to time, all costs and
expenses (including, but not limited to, reasonable attorneys' fees and
disbursements, and transfer, recording and filing fees, taxes and other
charges) of, or incidental to, the creation or perfection of any lien or
security interest granted or intended to be granted hereby, the custody, care,
sale, transfer, administration, collection of, or realization on the
Collateral, or in any way relating to the enforcement, protection, or
preservation of the rights or remedies of Agent under this Agreement, the
Notes, or any of the other Loan Documents.

XVI. Agent Appointed Attorney-In-Fact. Each of the Borrowers hereby
irrevocably constitutes and appoints Agent as such Person's true and lawful
attorney-in-fact, with full power of substitution, to execute, acknowledge, and
deliver any instruments and to exercise and enforce every right, power, remedy,
option, and privilege of such Persons, or of any of them, with respect to the
Collateral, and do in the name, place and stead of such Persons, or of any of
them, all such acts, things and deeds for and on behalf of and in the name of
such Persons, or of any of them, which such Persons, or of any of them could or
might do or which Agent may deem necessary to more fully vest in Agent the
rights and remedies provided for herein and to accomplish the purposes of this
Agreement. The foregoing powers of attorney are irrevocable and coupled with
an interest. If any of the Borrowers fails to perform any of its obligations
under this Agreement, Agent may itself perform or cause performance of any such
obligation, and any reasonable expenses of Agent incurred in connection
therewith shall be paid by the Borrowers as provided in Section 15, above.

XVII. Liability of Agent.

A. Agent, in its capacity as secured party hereunder, shall be
responsible for the performance only of such duties as are specifically set
forth herein, and no duty shall be implied from any provision hereof. Agent
shall not be under any obligation or duty to perform any act which would expose
it to expense or liability or to institute or defend any suit in respect
hereof, or to advance any of its own monies. The Borrowers shall, jointly and
severally, indemnify and hold Agent and its respective officers, directors,
shareholders, employees, agents, and representatives (collectively, the
"Indemnified Parties") harmless from and against any loss, cost or damage
(including, without limitation, reasonable attorneys' fees and disbursements)
incurred by the Agent or any other Indemnified Party, in connection with the
transactions contemplated hereby, except any loss, cost or damage resulting
from Agent's gross negligence or willful misconduct.

B. Agent shall be protected in acting upon any notice,
resolution, request, consent, order, certificate, report, opinion, bond or
<PAGE>

other paper, document or signature believed by it to be genuine, and it may be
assumed that any person purporting to give any of the foregoing in connection
with the provisions hereof has been duly authorized to do so. Agent may
consult with counsel, and the opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken or
suffered by it hereunder and in good faith in accordance therewith. Agent
shall not be liable to any of the Borrowers for any act or omission done or
omitted to be done by it in reliance upon any instruction, direction, or
certification received by Agent of them without gross negligence or willful
misconduct.

XVIII. Security Interest Absolute. All rights of Agent, and the security
interest hereunder, and all of the Obligations secured hereby, shall be
absolute and unconditional, irrespective of:

A. Any lack of validity or enforceability of any of the Loan
Documents;

B. Any change in the time (including the extension of the
maturity date of the Notes), manner, or place of payment of, or in any other
term of, all or any of the Obligations or any other amendment or waiver of or
any consent to any departure from the Loan Documents;

C. Any exchange, release or nonperfection of any other
collateral for the Obligations, or any release or amendment or waiver of or
consent to departure from any of the Loan Documents with respect to all or any
part of the Obligations; or

D. Any other circumstance (other than payment of the Obligations
in full) that might otherwise constitute a defense available to, or a discharge
of, Borrowers or any third party for the Obligations or any part thereof.

XIX. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until payment in full of the Obligations. Upon payment in full of
the Obligations, this Agreement shall terminate and Borrowers shall be entitled
to the return, upon their request and at their expense, of such of the
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof and Agent shall at the Borrowers' expense execute such instruments
and documents as may be reasonably requested by Borrowers to evidence such
termination and the release of the lien hereof.

XX. Miscellaneous.

A. This Agreement constitutes the entire and final agreement
between the parties with respect to the subject matter hereof and may not be
changed, terminated or otherwise varied, except by a writing duly executed by
the parties.

B. No waiver of any term or condition of this Agreement, whether
by delay, omission, or otherwise, shall be effective unless in writing and
signed by the party sought to be charged, and then such waiver shall be
effective only in the specific instance and for the purpose for which given.

C. This Agreement shall be binding upon and inure to the benefit
of the parties hereto, their respective successors and permitted assigns.

D. Each notice, demand, election, consent, request, consent,
<PAGE>

approval and other communication required, permitted, or desired, to be given
hereunder shall be deemed to have been properly given or served if given in the
manner provided in the Credit Agreement. To the extent that the Borrowers
desire any specific notice pursuant to this Agreement to be delivered to the
attention of a person other than the person set forth in the Credit Agreement
to receive such notices, the Borrower may designate a different person by
written notice delivered to the Agent.

E. All captions in this Agreement are included herein for
convenience of reference only and shall not constitute part of this Agreement
for any other purpose.

F. This Agreement shall be governed by and construed and
enforced in all respects in accordance with the laws of the State in which the
Mezzanine Accounts are located.

G. This Agreement may be executed in any number of counterparts.

H. Time is of the essence with respect to each and every
obligation under this Agreement.
<PAGE>

IN WITNESS WHEREOF, the parties hereto, acting by and through their
respective duly authorized officers and/or other representatives, have duly
executed this Agreement, under seal, as of the day and year first above
written.

PROPERTY OWNER:

277 PARK AVENUE, LLC, a Delaware limited
liability company

By: Park Avenue Management Corporation,
a Delaware corporation, its co-
Managing Member

By: /s/ Stanley Stahl
_________________________________
Title:

[CORPORATE SEAL]

By: PAMC Co-Manager Inc., a Delaware
corporation, its co-Managing Member

By: /s/ Stanley Stahl
_________________________________
Title:

[CORPORATE SEAL]

BORROWERS:

PAMC CO-MANAGER INC., a Delaware
corporation

By: /s/ Stanley Stahl
_________________________________
Title:

[CORPORATE SEAL]

PARK AVENUE FINANCING COMPANY, LLC, a
Delaware limited liability company

By: PAFC Management, Inc., a Delaware
corporation, its Managing Member

By: /s/ Stanley Stahl
_________________________________
Title:

<PAGE>

[CORPORATE SEAL]

AS TO PARAGRAPHS 3 (e), 4(g) AND 5(b) ONLY

MANAGING MEMBER:

PARK AVENUE MANAGEMENT CORPORATION, a
Delaware corporation

By: /s/ Stanley Stahl
_________________________________
Title:

[CORPORATE SEAL]

AS TO PARAGRAPH 6(B) ONLY

/s/ Stanley Stahl
_____________________________________
STANLEY STAHL

AGENT:

THE FIRST NATIONAL BANK OF BOSTON,
a national banking association, As
Agent

By: /s/ Mark E. Basham
_________________________________
Title:

[BANK SEAL]
<PAGE>

EXHIBIT A

FORM OF CERTIFICATE RE FUNDING OF MEZZANINE ACCOUNTS
<PAGE>

EXHIBIT B

INSTRUCTIONS FOR BORROWERS' NET EXCESS CASH FLOW ACCOUNT

<PAGE>

EXHIBIT 10.21

RECOGNITION AGREEMENT

by and among

THE FIRST NATIONAL BANK OF BOSTON,
individually and as agent

WELLSFORD REAL PROPERTIES, INC.,

COLUMN FINANCIAL, INC.,

PARK AVENUE FINANCING COMPANY, LLC,

PAMC CO-MANAGER, INC.

and

277 PARK AVENUE, LLC

Dated as of April 25, 1997

277 Park Avenue
Section 5, Block 1302, Lots 1001-1049 (inclusive)
County of New York
State of New York

After recording, please return to:

Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022

ATTN: Harvey R. Uris, Esq.
<PAGE>

RECOGNITION AGREEMENT

THIS RECOGNITION AGREEMENT (this "Agreement"), made as
of April 25, 1997, by and among THE FIRST NATIONAL BANK OF
BOSTON, a national banking association ("BOB" or, in its capacity
as agent for the Holding Company Lenders under the terms of the
Credit Agreement (as such terms are hereinafter defined), or any
successor agent under the Credit Agreement approved in accordance
with the terms of this Agreement, the "Agent"), having an address
at 115 Perimeter Center Place, NE, Suite 500, Atlanta, Georgia
30346, WELLSFORD REAL PROPERTIES, INC., a Maryland corporation
("Wellsford"; BOB, Wellsford and the other entities that may
become party to the Credit Agreement (as hereinafter defined) are
hereinafter collectively referred to as the "Holding Company
Lenders"), having an address at 610 Fifth Avenue, 7th Floor, New
York, New York 10020, COLUMN FINANCIAL, INC., a Delaware corpora-
tion (together with its successors and assigns, "Mortgage Lend-
er"), having an address at 3414 Peachtree Road, N.E., Atlanta,
Georgia 30326-1113, as mortgagee under the Mortgage (as herein-
after defined), PARK AVENUE FINANCING COMPANY, LLC, a Delaware
limited liability company (the "Holding Company"), having an
address at 277 Park Avenue, New York, New York 10172, PAMC CO-
MANAGER INC., a Delaware corporation (the "Co-Manager"; the
Holding Company and the Co-Manager are, together, the "Holding
Company Borrowers"), having an address at 277 Park Avenue, New
York, New York 10172, and 277 PARK AVENUE, LLC, a Delaware
limited liability company (the "Mortgage Borrower"), having an
address at 277 Park Avenue, New York, New York 10172.

W I T N E S S E T H :

WHEREAS, the Mortgage Borrower is the owner of certain
fee, leasehold and reversionary interests in and to real property
located in the City, County and State of New York and commonly
known as 277 Park Avenue, as more particularly described in
Exhibit "A" attached hereto and made a part hereof, and all
buildings and improvements located thereon (collectively, the
"Premises");

WHEREAS, the Mortgage Lender has agreed to make a loan
(the "Mortgage Loan") to the Mortgage Borrower in the aggregate
principal amount of Three Hundred Forty-Five Million Dollars
($345,000,000) (the "Mortgage Loan Amount") evidenced by that
certain Consolidated, Amended and Restated Promissory Note, dated
as of the date hereof (the "Mortgage Note"), made payable by the
Mortgage Borrower, as maker, in favor of the Mortgage Lender, as
payee, in the original principal amount of $345,000,000, and se-
cured by, among other things, (i) that certain Consolidated,
Amended and Restated Mortgage, Security Agreement and Assignment
of Rents (the "Mortgage"), dated as of the date hereof and
intended to be recorded in the Office of the City Register, New
York County, New York (the "Recording Office") prior to the
recordation hereof, given by the Mortgage Borrower, as mortgagor,
for the benefit of the Mortgage Lender, as mortgagee, which Mort-
gage consolidates the mortgages set forth on Exhibit "B" attached
hereto and made a part hereof, (ii) that certain Cash Management
and Collateral Account Security, Pledge and Assignment Agreement
<PAGE>

(the "Cash Management Agreement"), dated as of the date hereof,
between the Mortgage Borrower and the Mortgage Lender, (iii) that
certain Assignment of Leases and Rents (the "Assignment of
Rents"), dated as of the date hereof and intended to be recorded
in the Recording Office prior to the recordation hereof, given by
the Mortgage Borrower, as assignor, for the benefit of the Mort-
gage Lender, as assignee, and (iv) other related collateral. The
Mortgage Note, the Mortgage, the Cash Management Agreement, the
Assignment of Rents and all other agreements executed and
delivered in connection with the Mortgage Loan, including,
without limitation, the Loan Documents (as defined in the Mort-
gage), the Private Placement Agency Agreement, of even date here-
with, among the Mortgage Borrower, Donaldson, Lufkin & Jenrette
Securities Corporation and 277 Park Avenue Finance Corp. (the
"Depositor") and all other agreements executed for the benefit of
the Mortgage Lender in connection with the Mortgage Loan are
sometimes herein referred to collectively as the "Mortgage Loan
Documents" and all obligations arising from or incurred in
connection with the Mortgage Loan and the offering for sale by
the Depositor of commercial mortgage pass-through certificates
relating to the Mortgage Loan (the "Securitization") as specified
in any or all of the Mortgage Loan Documents, including without
limitation, indemnification and other obligations arising under
the Mortgage Loan Documents or in connection with the Securi-
tization, are sometimes herein referred to collectively as the
"Mortgage Loan Obligations";

WHEREAS, as set forth in that certain Credit Agreement
(the "Credit Agreement"), dated as of the date hereof, by and
among the Holding Company Borrowers, the Holding Company Lenders,
Agent and certain other parties, the Holding Company Lenders have
agreed to make a loan (the "Affiliate Loan") to the Holding
Company Borrowers, as joint and several obligors, in the aggre-
gate principal amount of Eighty Million Dollars ($80,000,000)
evidenced by one (1) or more promissory notes, each dated as of
the date hereof (collectively, and together with each other
promissory note that may be issued by the Holding Company
Borrowers under the Credit Agreement, the "Affiliate Note"), made
payable by the Holding Company Borrowers, as maker, in favor of
each Holding Company Lender, as payee, in the aggregate original
principal amount of $80,000,000, and secured by, among other
things, (i) those certain Stock Pledge Agreements (the "Stock
Pledge Agreements") made by Stanley Stahl in favor of the Agent
with respect to 100% of the capital stock of each of Park Avenue
Management Corporation ("PAMC"), Co-Manager and PAFC Management,
Inc. (the "Holding Company Managing Member") and all dividends
and distributions in respect thereof, (ii) that certain Assign-
ment of Member's Interest (the "Membership Pledge Agreement No.
1") made by the Co-Manager and the Holding Company in favor of
the Agent with respect to the Co-Manager's 0.001% co-managing
membership interest in the Mortgage Borrower and all distribu-
tions in respect thereof and the Holding Company's 99.998% non-
managing membership interest in the Mortgage Borrower and all
distributions in respect thereof, (iii) that certain Assignment
of Member's Interest (the "Membership Pledge Agreement No. 2")
made by the Holding Company Managing Member and Stanley Stahl in
favor of the Agent with respect to the Holding Company Managing
Member's .001% managing member interest in the Holding Company
<PAGE>

and all dividends and distributions in respect thereof and Stan-
ley Stahl's 99.999% non-managing membership interest in the Ho-
lding Company and all dividends and distributions in respect
thereof, (iv) that certain Cash Collateral Account Security,
Pledge and Assignment Agreement (the "Affiliate Cash Management
Agreement"), by and among the Mortgage Borrower, the Holding
Company Borrowers, PAMC, Stanley Stahl and the Agent, (v) that
certain Conditional Guaranty of Payment and Performance (the
"Conditional Guaranty") made by Stanley Stahl in favor of the
Holding Company Lenders and the Agent, and (vi) that certain
Indemnity Agreement re: Hazardous Materials (the "Indemnity
Agreement") made by Stanley Stahl and the Holding Company Bor-
rowers in favor of the Holding Company Lenders and the Agent,
each dated as of the date hereof (the Affiliate Note, the Credit
Agreement, the Stock Pledge Agreements, the Membership Pledge
Agreement No. 1, the Membership Pledge Agreement No. 2, the
Affiliate Cash Management Agreement, the Conditional Guaranty,
the Indemnity Agreement and any other documents relating thereto
executed and delivered in connection therewith are sometimes col-
lectively referred to herein as the "Affiliate Loan Documents"
and all of the obligations evidenced and secured thereby, whether
now or hereafter existing, whether for principal, premium, if
any, interest, fees, expenses, indemnification obligations or
otherwise, under the Affiliate Loan Documents, are sometimes
collectively referred to herein as the "Holding Company
Obligations";

WHEREAS, the Agent and the Holding Company Lenders have
agreed to acknowledge and recognize that the Holding Company
Obligations are not in any way obligations of the Mortgage
Borrower or PAMC;

WHEREAS, Mortgage Lender has agreed to recognize
certain rights of the Agent and the Holding Company Lenders under
the Affiliate Loan Documents as provided herein; and

WHEREAS, it is a condition to the Mortgage Lender's
making of the Mortgage Loan and the Holding Company Lender's
making of the Affiliate Loan that the parties hereto make, exe-
cute and deliver this Agreement;

NOW, THEREFORE, in consideration of the premises and in
consideration of other good and valuable consideration, the re-
ceipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

1. Defined Terms. Except as otherwise noted, all
initially capitalized terms used but not otherwise defined herein
shall have the respective meanings ascribed thereto in the
Mortgage or in that certain Trust and Servicing Agreement (the
"Trust and Servicing Agreement"), dated on or about the date
hereof, among the Depositor, The Chase Manhattan Bank, as trustee
(the "Trustee"), and GE Capital Asset Management Corporation, as
servicer (the "Servicer").

2. No Liability for Affiliate Loan. The Holding
Company Lenders hereby acknowledge and agree that none of the
Mortgage Borrower, PAMC or the Depositor will ever have any lia-
<PAGE>

bility or obligation whatsoever with respect to the Affiliate
Note or otherwise in connection with the payment of the Affiliate
Loan.

3. Characterization of Affiliate Loan. The Agent and
the Holding Company Lenders acknowledge and agree, without
diminishing their rights under Section 8(a) hereof, that:

(a) the Affiliate Loan does not constitute or
impose, and shall not be deemed or construed as constituting or
imposing, a lien or encumbrance upon, or security interest in,
the Mortgaged Property or any portion thereof (other than a
pledge of certain stock and limited liability company membership
interests in the Mortgage Borrower and certain of its affiliates
as set forth in the Affiliate Loan Documents) or otherwise grant-
ing to the Agent or the Holding Company Lenders the status as a
creditor of the Mortgage Borrower, PAMC or the Depositor;

(b) neither the Agent nor the Holding Company
Lenders shall assert, claim or raise as a defense, any such lien,
encumbrance or security interest in the Mortgaged Property or any
status as a creditor of the Mortgage Borrower, PAMC or the Depos-
itor in any action or proceeding, including any insolvency or
bankruptcy proceeding commenced by or against the Mortgage
Borrower or the Holding Company Borrowers; and

(c) neither the Agent nor the Holding Company
Lenders shall assert, pursue, confirm or acquiesce in any way to
any recharacterization of the Affiliate Loan as having conferred
upon the Agent or the Holding Company any lien or encumbrance
upon, or security interest in, the Mortgaged Property or any
portion thereof or as having conferred upon the Agent or the
Holding Company Lenders the status of a creditor of the Mortgage
Borrower, PAMC or the Depositor.

4. Consent to Pledges; Receipt of Instruction Letter.

(a) The Mortgage Lender hereby consents to the
granting by Stanley Stahl, the Co-Manager, the Holding Company
and the Holding Company Managing Member to the Agent of a securi-
ty interest in certain stock and limited liability company mem-
bership interests in the Mortgage Borrower and certain of its
affiliates pursuant to the terms of the Stock Pledge Agreements,
the Membership Pledge Agreement No. 1 and the Membership Pledge
Agreement No. 2. The granting by the Mortgage Lender of such
consent shall be limited to the security interests described in
the Stock Pledge Agreements, the Membership Pledge Agreement No.
1 and the Membership Pledge Agreement No. 2 and shall not relieve
or be construed to relieve the Mortgage Borrower from the re-
quirement of obtaining the Mortgage Lender's prior express writ-
ten consent to any other or further Transfers required under the
Mortgage Loan Documents.

(b) The Mortgage Lender hereby acknowledges
receipt of a copy of an instruction letter (the "Instruction
Letter") of even date herewith from each of the Mortgage Borrower
and the Agent with respect to the disbursement of Excess Cash
Flow (as defined in the Cash Management Agreement) and other
<PAGE>

amounts pursuant to Section 3(i) of the Cash Management
Agreement, if any, to the Agent and agrees that, unless otherwise
jointly instructed in writing by the Agent and the Mortgage
Borrower, all Excess Cash Flow and all other amounts pursuant to
Section 3(i) of the Cash Management Agreement, if any, required
or permitted to be released to the Agent under the terms of the
Cash Management Agreement shall be disbursed to the Agent in
accordance with the Instruction Letter and the Cash Management
Agreement.

5. Notice and Cure Rights. The Mortgage Lender
hereby agrees with and for the benefit of the Agent and the
Holding Company Lenders that, when giving notice to the Mortgage
Borrower with respect to a default or Event of Default under the
Mortgage Loan Documents or an acceleration of the Mortgage Loan,
the Mortgage Lender will also give a copy of any such notice to
the Agent and, except in connection with the Mortgage Borrower's
failure to repay the Mortgage Loan in full on the Scheduled
Maturity Date (as defined in the Mortgage Note), the Agent and
the Holding Company Lenders shall thereafter be afforded an op-
portunity, prior to the acceleration of the Mortgage Loan by the
Mortgage Lender, but without waiving the Event of Default, within
thirty (30) days of the giving of such notice by the Mortgage
Lender to the Agent, to cure curable monetary and non-monetary
Events of Default under the Mortgage Loan Documents, subject, in
the case of any non-monetary default that is not susceptible of
being cured within such thirty (30) day period, to an extension
of such thirty (30) day period provided that the cure of such
non-monetary default is being diligently and continuously pursued
to completion by or on behalf of the Holding Company Lenders.
Throughout such thirty (30) day cure period (as the same may be
extended in accordance with the immediately preceding sentence in
the case of certain non-monetary defaults) and for so long as the
cure of the Mortgage Borrower's default is being diligently and
continuously pursued to completion by the Agent or the Holding
Company Lenders, the Mortgage Lender shall forbear from acceler-
ating the Mortgage Loan. In the event that the Agent or the
Holding Company Lenders shall cure any Event of Default under the
Mortgage Loan Documents pursuant to the cure rights granted to
such parties hereunder, then the same shall constitute a
Permitted Cure as defined in and contemplated by the Cash
Management Agreement.

6. Purchase Option. The Mortgage Lender hereby
agrees with and for the benefit of the Holding Company Lenders
that, in the case of an Event of Default under the Mortgage Loan
Documents resulting in an acceleration of the Mortgage Loan by
the Mortgage Lender, the Holding Company Lenders shall have a one
(1) time right, exercisable on written notice (an "Exercise
Notice") given by the Holding Company Lenders to the Mortgage
Lender within ten (10) Business Days after receipt by the Agent
of notice of such acceleration, without waiving or curing the
Event of Default, to purchase all right, title and interest of
the Mortgage Lender in and to the Mortgage Loan in its entirety
at a price equal to the greater of (x) the fair market value of
the Mortgage Loan and (y) the aggregate of the principal, all ac-
crued and unpaid interest (including, if applicable, interest at
the default rate), late charges, prepayment premiums and all
<PAGE>

other amounts due from the Mortgage Borrower under the Mortgage
Loan Documents as set forth by the Mortgage Lender in a notice
given to the Holding Company Lenders within five (5) Business
Days after the Mortgage Lender's receipt of the Exercise Notice,
as such notice may be updated through the closing date of the
purchase of the Mortgage Loan. The closing of the purchase of
the Mortgage Loan by the Holding Company Lenders pursuant to the
Exercise Notice shall take place within fifteen (15) Business
Days after delivery of the Exercise Notice at such place in New
York County, New York as shall be reasonably designated by the
Mortgage Lender. At any such closing the Mortgage Lender shall,
upon receipt of (i) the applicable purchase price therefor and
(ii) an Opinion of Counsel to the effect that such purchase
constitutes a "qualified liquidation" (as such term is defined in
Section 860F(a)(4) of the Code), assign and transfer to the Hold-
ing Company Lenders all right, title and interest of the Mortgage
Lender in and to the Mortgage Loan and all Mortgage Loan Docu-
ments and lender's title insurance policies then held by the
Mortgage Lender pursuant to such instruments of assignment
(which, in the case of any recorded Mortgage Loan Documents,
shall be in recordable form) as shall be reasonably acceptable to
the Mortgage Lender and the Holding Company Lenders. Any sale of
the Mortgage Loan by the Mortgage Lender to the Holding Company
Lenders pursuant to the foregoing purchase option shall be with-
out any representation by and/or recourse to the Mortgage Lender,
except for representations from the Mortgage Lender that it has
good title to the Mortgage Loan and has all requisite right and
authority to sell and assign the same to the Holding Company
Lenders. In the event that the purchase price for the Mortgage
Loan shall be based upon the fair market value thereof and the
Holding Company Lenders shall dispute the Mortgage Lender's
calculation of the fair market value of the Mortgage Loan by
written notice to the Mortgage Lender (a "Dispute Notice") within
five (5) Business Days after the delivery by the Mortgage Lender
of its fair market value determination, then the parties shall
use good faith efforts for a period of up to five (5) Business
Days after the delivery of the Dispute Notice to agree upon the
fair market value of the Mortgage Loan and, in the event no such
agreement is reached, neither party shall have any further
obligation to the other in connection with the sale and purchase
of the Mortgage Loan. The Holding Company Lenders will pay all
costs and expenses incurred by the Mortgage Lender in connection
with the Holding Company Lender's exercise of their rights under
this Section 6.

7. Status as Permitted Owner.

(a) The Mortgage Lender hereby acknowledges that,
for so long as the Agent (or its successor by merger or any
successor agent approved in accordance with the terms of this
Agreement) shall be the agent for the Holding Company Lenders
under the Credit Agreement, the Holding Company Lenders, the
Agent or their nominee shall be recognized by the Mortgage Lender
as a Permitted Owner in the event that the Agent, the Holding
Company Lenders or their nominee shall succeed to beneficial
ownership of the Mortgage Borrower by UCC foreclosure sale or
otherwise in the exercise of their rights under the Affiliate
Loan Documents and, in such event, (i) no other consent of the
<PAGE>

Mortgage Lender shall be required as a condition precedent to a
transfer of beneficial ownership of the Mortgage Borrower to the
Holding Company Lenders, the Agent or their nominee and (ii) the
Holding Company Lenders (in lieu of the Mortgage Borrower) shall
comply with the requirements of Section 12(f) of the Mortgage.
Notwithstanding the foregoing, for so long as the Mortgage Loan
shall be subject to the Securitization, the Mortgage Lender shall
not recognize as a Permitted Owner any subsequent transferee of
the Holding Company Lenders, the Agent or their nominee following
the transfer of beneficial ownership of the Mortgage Borrower to
the Holding Company Lenders, the Agent or their nominee by UCC
foreclosure sale or otherwise in the exercise of their rights
under the Affiliate Loan Documents unless the Rating Agency
shall, within twenty (20) Business Days after written request,
confirm in writing that, based upon a standard of commercial
reasonableness, no withdrawal, qualification or downgrading of
the then current rating of the Certificates shall result solely
as a result of any such transfer by the Holding Company Lenders,
the Agent or their nominee.

(b) The Mortgage Lender hereby acknowledges that
if, in connection with a prosecution by the Agent or the Holding
Company Lenders of a foreclosure action under the UCC or other
realization by the Agent or the Holding Company Lenders upon the
collateral for the Affiliate Loan following a default by the
Holding Company Borrowers or any other party under the Affiliate
Loan Documents, Donaldson, Lufkin & Jenrette, Inc. ("DLJ, Inc.")
should exercise its first offer right to purchase the Affiliate
Loan, then DLJ, Inc. shall be recognized by the Mortgage Lender
as a Permitted Owner. Notwithstanding the foregoing, for so long
as the Mortgage Loan shall be subject to the Securitization, the
Mortgage Lender shall not recognize as a Permitted Owner any
subsequent transferee of DLJ, Inc. unless the Rating Agency shall
confirm to the Mortgage Lender in writing, within ten (10)
Business Days after written request therefor, that, based on a
standard of commercial reasonableness, no withdrawal, qualifica-
tion or downgrading of the then current rating of the Certifi-
cates shall result from any such transfer by DLJ, Inc.

(c) In connection with the enforcement of the
Affiliate Loan Documents by the Agent of the Holding Company
Lenders or otherwise upon the written request of the Agent or the
Holding Company Lenders, the Mortgage Lender shall cause the Rat-
ing Agency to furnish to the Holding Company Lenders the Rating
Agency's approval or disapproval of the identity of any one (1)
or more (x) proposed transferees of the collateral for the Affil-
iate Loan, (y) Permitted Owners and/or (z) Qualifying Managers,
in each case within ten (10) Business Days after written request
therefor and submission to the Rating Agency of such information
as may reasonably be required by the Rating Agency in order to so
furnish its approval or disapproval of such transferees, which
approval, in the case of a transferee of the collateral for the
Affiliate Loan or as to a proposed Permitted Owner, shall not be
unreasonably withheld based on a standard of commercial reason-
ableness, and in any event, any such Rating Agency approval shall
be evidenced by the Rating Agency's confirmation of no with-
drawal, qualification or downgrading of the then current rating
of the Certificates solely as a result of any such transfer. The
<PAGE>

Holding Company Lenders will pay all costs and expenses incurred
by the Mortgage Lender in connection with the Holding Company
Lender's exercise of their rights under this Section 7.

8. Bankruptcy Matters.

(a) The Mortgage Lender hereby agrees that if a
voluntary or involuntary bankruptcy filing or any other insol-
vency proceeding under any local, state or federal law, shall be
commenced with respect to the Mortgage Borrower or any of its di-
rect or indirect beneficial owners (a "Bankruptcy Filing"), then
the Mortgage Lender shall not challenge or object to (A) the
standing of the Agent to be recognized in any Bankruptcy Filing
as a party-in-interest of the Mortgage Borrower through its rela-
tionship as a creditor and/or party in interest of the Holding
Company Borrowers and their direct and indirect beneficial owners
and (B) the exercise by the Agent of its right to exercise all
voting and other management or approval rights and powers of the
Mortgage Borrower and its direct and indirect beneficial owners
either in its capacity as a secured creditor of the Holding Com-
pany Borrowers or their direct or indirect beneficial owners or
as successor to such parties by UCC foreclosure.

(b) The Holding Company Lenders will not, in
their capacity as creditors of the Holding Company Borrowers,
file a petition in bankruptcy with respect to the Mortgage
Borrower or PAMC or seek to consolidate the Mortgage Borrower or
PAMC in the bankruptcy proceeding of any member or other direct
or indirect beneficial owner of the Mortgage Borrower, including
any of the Holding Company Borrowers.

(c) The Mortgage Lender will not declare an Event
of Default solely as a result of the occurrence of any of the
events described in clauses (f) or (g) of the definition of
"Event of Default" in the Mortgage with respect to any member of
the Mortgage Borrower unless such event shall cause a dissolution
of the Mortgage Borrower or a disruption of the payment of debt
service or other amounts payable under the Mortgage Note and the
other Mortgage Loan Documents.

(d) If the Holding Company Lenders, in violation
of the express provisions hereof, shall commence, prosecute or
participate in any suit, action, case or proceeding against the
Mortgage Borrower, the Mortgage Lender may intervene and inter-
pose such defense or plea as it shall elect, including that of
bad faith filing by the Agent and/or the Holding Company Lenders,
and shall, in any event, be entitled to restrain, the actions
relating to the Mortgaged Property or the Mortgage Borrower in
the same suit, action, case or proceeding or in any independent
suit, action, case or proceeding.

9. Selection of Property Manager. Following the oc-
currence of an event of default under the Affiliate Loan
Documents beyond any applicable notice and cure period, the
Holding Company Lenders or the Agent (in lieu of the Mortgage
Borrower) shall have the right to select a new Manager of the
Mortgaged Property, subject to the terms of the Mortgage with
respect thereto, including, without limitation, that such new
<PAGE>

Manager be or employ a Qualifying Manager.

10. Estoppel Certificates.

(a) The Mortgage Lender shall, from time to time
(but not more than twice in any six (6) month period), upon
twenty (20) days' prior written request by the Agent of the
Holding Company Lenders, execute, acknowledge and deliver to the
Holding Company Lenders a certification signed by an authorized
officer or officers of the Mortgage Lender setting forth (a) the
amount of accrued and unpaid interest and the outstanding prin-
cipal amount of the Mortgage Note and (b) either that, to the
actual knowledge of the signer of such certificate and based on
no independent investigation, no Event of Default exists or, if
any Event of Default shall then exist and be continuing, speci-
fying any such Event of Default of which the Mortgage Lender has
actual knowledge.

(b) The Agent shall, from time to time (but not
more than twice in any six (6) month period), upon twenty (20)
days' prior written request by the Mortgage Lender, execute, ac-
knowledge and deliver to the Mortgage Lender a certification
signed by an authorized officer or officers of the Agent setting
forth (a) the amount of accrued and unpaid interest and the out-
standing principal amount of the Affiliate Note and (b) either
that, to the actual knowledge of the signer of such certificate
and based on no independent investigation, no event of default
exists or, if any event of default shall then exist and be
continuing under the Affiliate Loan Documents, specifying any
such event of default of which the Agent has actual knowledge.

11. Substitute Agent. Except in connection with a
merger of the Agent with and into another Person, if the Mortgage
Loan is the subject of the Securitization neither the Agent nor
the Holding Company Lenders shall seek, cause, suffer or permit
the substitution for the Agent of a new agent under the Credit
Agreement unless and until the Holding Company Lenders shall have
received written confirmation from the Rating Agency that, based
on a standard of commercial reasonableness, such substitution
will not result in the withdrawal, qualification or downgrading
of the then current ratings assigned to the Certificates by the
Rating Agency. In the event that the Agent or the Holding Compa-
ny Lenders shall seek to obtain the Rating Agency's confirmation
as to any proposed substitution of a new agent in place of the
current Agent under the Credit Agreement, then, within ten (10)
Business Days after written request by the Agent and/or the
Holding Company Lenders to the Rating Agency and the submission by
the Agent and/or the Holding Company Lenders to the Mortgage
Lender and the Rating Agency of all information and materials
reasonably necessary in connection with such request, the Rating
Agency shall indicate its consent to or disapproval of such
substitution (based on a standard of commercial reasonableness),
failing which the Rating Agency shall be deemed to have disap-
proved of such proposed substitution. The granting by the Rating
Agency of any such consent shall not be construed to relieve the
Holding Company Lenders, the Agent and/or any new agent under the
Credit Agreement from the requirement of obtaining the Rating
Agency's prior express written confirmation with respect to any
<PAGE>

other or further substitution for the agent under the Credit
Agreement.

12. No Increase in Principal Indebtedness. The
Mortgage Lender and the Mortgage Borrower shall not enter into
any amendment or modification of the Mortgage Loan Documents
providing for any increase in the principal indebtedness out-
standing under the Mortgage Note in excess of the then unamor-
tized principal balance thereof; provided, however, that neither
the foregoing nor any of the other terms and conditions hereof
shall prohibit or restrict:

(a) any increase in the principal indebtedness out-
standing under the Mortgage Note (i) in connection with any
disbursement by the Mortgage Lender of such sums as the
Mortgage Lender deems reasonably necessary or appropriate to
protect the Mortgage Lender's interest in the Mortgaged
Property (including, but not limited to, disbursement of
reasonable attorneys' fees and disbursements, costs relating
to the entry upon the Mortgaged Property to make repairs or
the taking of other action to protect the security of or
enforce the terms and provisions of the Mortgage, and the
payment, purchase, contest or compromise of any encumbrance,
charge or lien which in the judgment of the Mortgage Lender
appears to be prior or superior to the Mortgage), P&I Ad-
vances and Servicing Advances (as defined in the Trust and
Servicing Agreement) (whether by the Servicer, the Trustee
or otherwise) or (ii) in connection with the capitalization
of accrued and unpaid interest under the Mortgage Note or
the re-setting of the interest rate payable thereunder fol-
lowing the occurrence of any Event of Default;

(b) the right of the Mortgage Lender, the Trustee, the
Servicer and/or the Special Servicer to extend the maturity
date of the Mortgage Note for a period of up to two (2)
years after the initially scheduled maturity date thereunder
in accordance with the terms of the Trust and Servicing
Agreement; and

(c) subject to Section 5 of this Agreement, the exer-
cise by the Mortgage Lender, the Trustee, the Servicer
and/or the Special Servicer at any time following and during
the continuance of an Event of Default of any of its or
their rights under the Mortgage Loan Documents.

13. Amendment of Cash Management Agreement. Unless
and until the Affiliate Loan shall have been paid in full, the
Mortgage Lender and the Mortgage Borrower shall not enter into
any amendment or modification of (a) the Cash Management Agree-
ment or (b) any of the transfer restrictions, provisions relating
to the approval of Managers of the Premises or monetary terms of
the Mortgage without the prior written consent of the Agent (or
the then holders of a majority in principal amount of the then
outstanding Affiliate Note); provided, however, that the monetary
terms of the Mortgage and/or any of the provisions thereof
relating to the approval of Managers of the Premises and/or any
of the terms of the Cash Management Agreement may be modified
after and during the continuance of any Event of Default in the
<PAGE>

sole discretion of the Mortgage Lender and without being required
to obtain the consent or approval of, or being required to give
any notice to, the Agent or the Holding Company Lenders.

14. Transfer Restrictions. In connection with any
prosecution by the Agent or the Holding Company Lenders of a
foreclosure action under the UCC or other realization by the
Agent or the Holding Company Lenders upon the collateral for the
Affiliate Loan, the Holding Company Lenders shall not cause any
Event of Default by failing to comply with the transfer restric-
tions set forth in the Mortgage with respect to direct and indi-
rect ownership interests in the Mortgage Borrower and the Mort-
gaged Property, shall expressly advise each bidder for and/or
proposed transferee of such collateral as to the Permitted Owner
provisions and other Transfer restrictions in the Mortgage and
shall request of any such party as may succeed to ownership of
the collateral for the Affiliate Loan that such party act under
the Affiliate Loan Documents in a manner consistent with such
provisions and restrictions.

15. Successors and Assigns. All of the covenants,
agreements and provisions contained in this Agreement shall be
binding upon all of the parties hereto and inure to the benefit
solely of (i) Mortgage Lender and its successors and assigns,
including the Trustee, the Servicer and the Special Servicer,
(ii) BOB, Wellsford and future holders of Affiliate Notes and
their respective successors and assigns, in their capacity as
Holding Company Lenders, (iii) the Agent and its successor by
merger, in its capacity as agent under the Credit Agreement, and
(iv) any successor agent to the Agent approved by the Rating
Agency in accordance with Section 11 hereof. No other person
(including, without limitation, the Mortgage Borrower or the
Holding Company Borrowers) shall have standing to require compli-
ance with such covenants, agreements and provisions or be deemed,
under any circumstances, to be a beneficiary of such covenants,
agreements and provisions.

16. Modification. This Agreement may not be changed
orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or
discharge is sought.

17. Governing Law. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the
State of New York.

18. Securitization. The rights of Mortgage Lender
under this Agreement are intended to be assigned on the date
hereof, together with the other Mortgage Loan Documents, to the
Depositor, and immediately thereafter Depositor will deposit the
Loan Documents into a trust to be held by the Trustee as an asset
in a Securitization for the benefit of the holders of the
Certificates. The Holding Company Lenders hereby consent to such
assignments in connection with the Securitization and agree that
the terms and provisions hereof shall inure to the benefit of and
be binding upon each such assignees as though each such assignee
were the named Mortgage Lender herein.
<PAGE>

19. Permitted Acts of Mortgage Lender. The Holding
Company Lenders hereby agree that the Mortgage Lender may, from
time to time, at its sole discretion and without notice to or
consent of or from the Holding Company Lenders, and without af-
fecting the obligations of the Holding Company Lenders herein,
take any or all of the following actions:

(a) retain or obtain a lien or security interest
in any property (other than the collateral described in the
Affiliate Loan Documents) to secure all or any part of the Mort-
gage Loan;

(b) consistent with the provisions of Section 12
hereof, change the maturity date, manner, place or terms of
payments or interest rates or change or extend the time of
payment of, renew or alter, all or any part of the Mortgage Loan,
any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the provisions hereof shall
apply to the Mortgage Loan as so changed, extended, renewed or
altered;

(c) sell, exchange, release, surrender, realize
upon or otherwise deal with in any manner and in any order any
property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, the Mortgage Loan (including,
without limitation, the Mortgaged Property) or any part thereof
or any other liabilities incurred directly or indirectly in
respect thereof or hereof, and/or any offset with respect
thereto;

(d) exercise, refrain from exercising or release
any of its rights and/or remedies against the Mortgage Borrower
or other Persons (including, without limitation, any guarantor of
the Mortgage Loan Obligations) or otherwise act or refrain from
acting; and

(e) settle or compromise the Mortgage Loan or
any part thereof or any security therefor, or any liability
incurred directly or indirectly in respect thereof or hereof, and
may subordinate the payment of all or any part thereof to the
payment of any liability (whether due or not) of the Mortgage
Borrower.

20. Specific Performance. The Mortgage Lender, the
Agent and the Holding Company Lenders are each hereby authorized
to demand specific performance of this Agreement and each hereby
irrevocably waive any defense based on the adequacy of a remedy
at law, which might be asserted as a bar to such remedy of
specific performance.

21. Obligations Hereunder Not Affected. All rights,
interests and obligations of the parties under this Agreement
shall remain in full force and effect irrespective of:

(i) any lack of validly or enforceability of
the Mortgage, the Mortgage Note or any of the other Mortgage
Loan Documents;
<PAGE>

(ii) any change in the time, manner or place
of payment of, or in any other term of, all or any of the
Mortgage Loan or any other amendment or waiver of or any
consent to or departure from the Mortgage, the Mortgage Note
or any of the other Mortgage Loan Documents made in
accordance with the terms hereof;

(iii) any exchange, release or non-
perfection of any collateral for all or any of the Mortgage
Loan; or

(iv) any other circumstance which might
otherwise constitute a defense available to a subordinated
creditor.

This Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment on account of the
Mortgage Loan is rescinded or must otherwise be returned by the
Mortgage Lender upon the insolvency, bankruptcy or reorganization
of the Mortgage Borrower or otherwise in any legal proceeding,
all as though such payment had not been made.

22. No Interference. The Holding Company Lenders, in
their capacity as lenders to the Holding Company Borrowers and
without diminishing their rights under Section 8(a)hereof, agree
not to contest, obstruct, hinder, challenge, question, seek to
enjoin or otherwise interfere with in any manner the Mortgage
Lender in the exercise of its rights or remedies in respect of
the Mortgage Loan, in any settlement or "work-out" discussions or
in any sale, auction or transfer of any portion of the Mortgaged
Property pursuant to such remedies or discussions.

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

24. Severability. All rights, powers and remedies
provided in this Agreement may be exercised only to the extent
that the exercise thereof does not violate any applicable law and
are intended to be limited to the extent necessary to avoid
rendering this Agreement invalid, illegal or unenforceable. In
the event that any of the terms, covenants, conditions or other
provisions of this Agreement shall be deemed invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining terms, covenants, conditions and
other provisions of this Agreement shall in no way be affected,
prejudiced or disturbed thereby.

25. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered, sent by overnight courier,
mailed postage prepaid, or transmitted by facsimile transmission,
and confirmed by a similar writing delivered by any method
aforesaid, and addressed as follows:

If to the Holding Company Lenders:
<PAGE>

The First National Bank of Boston,
individually and as Agent
115 Perimeter Center Place, NE
Suite 500
Atlanta, Georgia 30346
Attention: Mark E. Basham
Facsimile No: (404) 390-8434

-and to-

The First National Bank of Boston,
individually and as Agent
100 Federal Street
Boston, Massachusetts 02110
Attention: Real Estate Division
Facsimile No: (617) 434-7108

-and to-

Wellsford Real Properties, Inc.
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attention: Greg Hughes
Facsimile No.: (800) 531-2301

with a copy in each case to:

Long Aldridge Norman L.L.P.
5300 Suntrust Tower
303 Peachtree Street
Atlanta, Georgia 30308
Attention: William F. Timmons, Esq.
Facsimile No.: (404) 527-4198

-and to-

Robinson Silverman Pearce Aronsohn & Berman, LLP
1290 Avenue of the Americas
33rd Floor
New York, New York 10104
Attention: Alan Pearce, Esq.
Facsimile: (212) 541-4630

If to the Mortgage Lender:

The Chase Manhattan Bank, as trustee,
assignee of the Mortgage Lender
Global Trust Services
450 West 33rd Street, 10th Floor
New York, New York 10001
Attention: Mr. Ronald M. Feldman
Facsimile No.: (212) 946-8191

with a copy to:

Cadwalader, Wickersham & Taft
100 Maiden Lane
<PAGE>

New York, New York 10038
Attention: Michael S. Gambro, Esq.
Facsimile No.: (212) 504-6666

If to the Holding Company Borrowers:

Park Avenue Financing Company LLC
277 Park Avenue
New York, New York 10172
Attention: Stanley Stahl
Facsimile No.: (212) 223-4609

-and to-

PAMC CO-Manager Inc.
277 Park Avenue
New York, New York 10172
Attention: Stanley Stahl
Facsimile No.: (212) 223-4609

with a copy in each case to:

Latham & Watkins
885 Third Avenue
New York, New York 10022-4802
Attention: Richard Chadakoff, Esq.
Facsimile No.: (212) 751-4864

If to the Mortgage Borrower:

277 Park Avenue, LLC
277 Park Avenue
New York, New York 10172
Attention: Stanley Stahl
Facsimile No.: (212) 223-4609

with a copy to:

Latham & Watkins
885 Third Avenue
New York, New York 10022-4802
Attention: Richard Chadakoff, Esq.
Facsimile No.: (212) 751-4864

If to the Rating Agency:

Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
Attention: Structured Finance - Commercial Real
Estate Monitoring
Facsimile No.: (312) 263-2852

or to such other address as any of the foregoing parties or
entities may designate in writing to the other parties hereto.
Any such notice, demand or communication given hereunder by hand
or overnight courier shall be effective upon delivery, except
that if a notice is refused delivery or cannot be delivered
<PAGE>

because of a changed address of which no notice was given, such
notice shall be deemed to have been delivered on the date of such
refusal or inability to deliver, or, with respect to certified
mail, three (3) days after mailing as aforesaid and in the case
of notices sent by facsimile transmission, upon "answer back",
provided notices of default or acceleration shall only be deemed
given or served as of the date of delivery, except that if a
notice is refused delivery or cannot be delivered because of a
changed address of which no notice was given, such notice shall
be deemed to have been delivered on the date of such refusal or
inability to deliver.

26. Conflict. In the event of any inconsistency
between this Agreement, on the one hand, and the Affiliate Loan
Documents and/or the Mortgage Loan Documents, on the other hand,
then it is expressly understood and agreed that, as among the
Agent, the Holding Company Lenders, the Mortgage Lender and the
Mortgage Borrower, the terms and provisions of this Agreement
shall govern and prevail.

27. Termination. Upon repayment in full of the
indebtedness evidenced by the Mortgage Loan Documents and the
Affiliate Loan Documents, the parties hereto agree to execute,
acknowledge and deliver a termination of this Agreement in
recordable form.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

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

THE FIRST NATIONAL BANK OF BOSTON, in-
dividually and as agent

By: /s/ Mark E. Basham
-----------------------------------
Name: Mark E. Basham
Title: Managing Director

WELLSFORD REAL PROPERTIES, INC.

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

COLUMN FINANCIAL, INC.

By: /s/ Theresa Korin
-----------------------------------
Name: Theresa Korin
Title:

PARK AVENUE FINANCING COMPANY, LLC

By: PAFC Management, Inc.

By: /s/ Stanley Stahl
-----------------------------------
Name: Stanley Stahl
Title:

PAMC CO-MANAGER INC.

By: /s/ Stanley Stahl
-----------------------------------
Name: Stanley Stahl
Title:

277 PARK AVENUE, LLC

By: Park Avenue Management
Corporation
<PAGE>

By: /s/ Stanley Stahl
-----------------------------------
Name: Stanley Stahl
Title:

By: PAMC Co-Manager Inc.

By: /s/ Stanley Stahl
-----------------------------------
Name: Stanley Stahl
Title:
<PAGE>

STATE OF NEW YORK )
) : ss.
COUNTY OF NEW YORK )

On this 25th day of April, 1997 before me personally
came Mark E. Basham, to me known, who being by me duly sworn, did
depose and say that he resides at ___________________ that he is
a Managing Director of THE FIRST NATIONAL BANK OF BOSTON, the
national banking association described in and which executed the
above instrument; and that he signed his name thereto by
authority of the board of directors of said national banking
association.

_______________________________
Notary Public

STATE OF NEW YORK )
) : ss.
COUNTY OF NEW YORK )

On this 25th day of April, 1997 before me personally
came __________, to me known, who being by me duly sworn, did
depose and say that he resides at ___________________ that he
is a ________________ of WELLSFORD REAL PROPERTIES, INC., the
corporation described in and which executed the above instrument;
and that he signed [ his / her ] name thereto by authority of
the board of directors of said corporation.

_______________________________
Notary Public
<PAGE>

STATE OF NEW YORK )
) : ss.
COUNTY OF NEW YORK )

On this 25th day of April, 1997 before me personally
came __________, to me known, who being by me duly sworn, did
depose and say that he resides at ___________________ that he
is a ________________ of THE COLUMN FINANCIAL, INC., the
corporation described in and which executed the above instrument;
and that he signed [his / her ] name thereto by authority of
the board of directors of said corporation.

_______________________________
Notary Public

STATE OF NEW YORK )
) : ss.
COUNTY OF NEW YORK )

On this 25th day of April, 1997 before me personally
came __________, to me known, who being by me duly sworn, did
depose and say that he resides at ___________________ that he is
a ________________ of PAFC Management Inc., a corporation de-
scribed in and which is the managing member of PARK AVENUE
FINANCING COMPANY, LLC, the limited liability company that exe-
cuted the foregoing instrument; and that this instrument has been
duly executed by such corporation as the act and deed of PARK
AVENUE FINANCING COMPANY, LLC; and that said _________________
executed the same.

_______________________________
Notary Public
<PAGE>

STATE OF NEW YORK )
) : ss.
COUNTY OF NEW YORK )

On this 25th day of April, 1997 before me personally
came __________, to me known, who being by me duly sworn, did
depose and say that he resides at ___________________ that he
is a ________________ of THE PAMC CO-MANAGER, INC., the corpora-
tion described in and which executed the above instrument; and
that he signed [ his / her ] name thereto by authority of the
board of directors of said corporation.

_______________________________
Notary Public

STATE OF NEW YORK )
) : ss.
COUNTY OF NEW YORK )

On this 25th day of April, 1997 before me personally
came __________, to me known, who being by me duly sworn, did
depose and say that he resides at ___________________ that he is
a ________________ of Park Avenue Management Corporation and a
__________ of PAMC Co-Manager Inc., the corporations described in
and which are the managing members of 277 PARK AVENUE, LLC, the
limited liability company that executed the foregoing instrument;
and that this instrument has been duly executed by such corpora-
tions as the act and deed of 277 PARK AVENUE, LLC; and that said
_________________ executed the same.

_______________________________
Notary Public
<PAGE>

Exhibit A
(Real Property Description)
<PAGE>

Exhibit B
(Description of the Mortgage)

<PAGE>

EXHIBIT 10.22

INTERCREDITOR AGREEMENT

THIS INTERCREDITOR AGREEMENT (the "Agreement") is dated as of the 25th day
of April, 1997, by and between THE FIRST NATIONAL BANK OF BOSTON, a national
bank organized under the laws of the United States of America, its successors
and assigns, for itself ("Bank Boston") and as agent for certain other lenders
("Agent"), and WELLSFORD REAL PROPERTIES, INC. ("Wellsford"). Collectively,
Bank Boston (except when acting as the Agent), Wellsford and each other party
which may become a party to the Credit Agreement (as hereinafter defined) shall
be referred to as the "Banks," and individually as a "Bank."

Recitals

A. Pursuant to the Credit Agreement, dated as of April __, 1997 (such
agreement, as amended, modified, extended, revised or supplemented in
accordance with its terms, is hereinafter referred to as the "Credit
Agreement"), among PAMC Co-Manager Inc. and Park Avenue Financing Company LLC
(collectively the "Borrowers"), the Agent, Bank Boston, Wellsford and certain
other parties, the Banks have agreed to make available to the Borrowers a loan
of $80,000,000 upon the terms set forth in the Credit Agreement (the "Loan");

B. The Agent and Banks desire to supplement the provisions of the Credit
Agreement relating to the relationship of the Banks with respect to one another
and the Agent;

NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Banks and the Agent agree as follows:

1. Definitions.

(a) For the purposes of this Agreement, the term "Majority
Banks" shall mean the Bank or Banks whose aggregate Commitment Percentage
exceeds fifty percent (50%). Any capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Credit Agreement.

(b) For the purposes of the Credit Agreement, the "Majority
Banks" as defined in the Credit Agreement shall mean the "Majority Banks" (as
such term is defined herein), except to the extent that the approval of all of
the Banks is specifically required for such action or approval (in which case
the "Majority Banks" as used in the Credit Agreement shall mean all of the
Banks).

2. Relationship with Credit Agreement. The parties hereto
acknowledge and ratify the Credit Agreement and acknowledge that this Agreement
is meant to supplement, and not to abrogate, the terms of the Credit Agreement.
All provisions of this Agreement shall be read so as to be compatible with the
provisions of the Credit Agreement. In th event of a conflict, the terms of
the Credit Agreement shall control.

3. Representations of the Banks. Each Bank represents to and
agrees with each other Bank that (a) in the event that such Bank now or
hereafter has other loans, commitments, letters of credit or other financial
accommodations or arrangements outstanding to Borrowers, Guarantors, the
<PAGE>

Property Owner, Managing Member, any other Additional Pledgor or an affiliate
of any of such Persons, such Bank shall deal with the Loan and Loan Documents
(including without limitation any decisions to be made under Section 5(c)) as
if it were the only loan in such Bank's portfolio to such Persons; (b) such
Bank's execution and delivery of this Agreement has been duly authorized and it
has full power and authority to execute this Agreement; (c) such Bank's
decision to enter into this Agreement was based solely upon its own independent
evaluation of the Loan and the Loan Documents and the creditworthiness of the
Borrowers and the Guarantor and the value of the Collateral and without
reliance upon any warranties or representations of any other Bank or any of
their respective officers, directors, employees, agents or attorneys; (d) such
Bank acknowledges receipt of copies of all Loan Documents; and (e) such Bank
does not control, is not controlled by, is not under common control with and is
otherwise free from influence or control by, the Borrowers, the Managing
Member, the Guarantor and the Additional Pledgors. Except as set forth above
or as otherwise provided herein or in the Loan Documents, no Bank makes any
further representations or warranties, express or implied, including, without
limitation, any representation or warranty as to the collectability of the
Loan, enforceability of the Loan Documents, continued solvency of the
Borrowers, the Guarantor, the Additional Pledgors or the Property Owner or the
continued existence, sufficiency or value of any assets of the Borrower, the
Guarantors or the Additional Pledgors which may be realized upon for the
repayment of the Loan. No Bank shall be responsible in any manner to any other
Bank for the observation of or compliance with any of the terms, covenants or
conditions of the Loan Documents on the part of the Borrowers, the Guarantor or
the Additional Pledgors.

4. Set-Off Against Other Indebtedness. Notwithstanding the
provisions of Section 3(a), above, each Bank agrees that any deposits of money
or property or other indebtedness held or owing by such Bank to or for the
credit or the account of any of the Borrowers, the Guarantor or the other
Additional Pledgors which may now or hereafter be specifically pledged as
collateral under the Credit Agreement or other Loan Documents shall not be set-
off against indebtedness other than the Obligations; provided, however, that
the foregoing restriction shall not limit any Bank's right of set-off against
any Indebtedness other than the Obligations with respect to any such deposit of
money, property or other indebtedness which has not been specifically pledged
as collateral notwithstanding any general description of secured obligations
contained in any security agreement or other instrument held by such Bank;
provided further, however, that no Bank shall be permitted to exercise any
right of set-off against any Borrower, Guarantor or any other Additional
Pledgor if such exercise would jeopardize the Agent's ability to realize upon
the Collateral pursuant to the Security Documents in any jurisdiction which has
a so-called "single action rule."

5. Notice of Event of Default, Exercise of Remedies, Approvals,
etc.

(a) In the event that Agent or any Bank acquires Actual
Knowledge (as herein defined) of the occurrence of a Default or an Event of
Default, Agent or the Bank acquiring such knowledge will notify the other Banks
thereof as soon as is reasonably practical. Thereafter, the Agent shall
provide the Banks with prior written notice of any actions proposed or
recommended to be taken by Agent with respect thereto unless the giving of such
notice is impractical for reasons of safety or preservation of Collateral, in
which event Agent shall promptly notify the Banks of such action. For purposes
of this Agreement, "Actual Knowledge" shall mean actual knowledge of any
officer of Agent or any Bank having primary, day-to-day responsibility for
<PAGE>

administration of the Loan.

(b) (i) Agent shall not take any action hereunder or under the
Loan Documents following a Default or Event of Default, except as specifically
authorized herein to the contrary, unless such action is approved by the
Majority Banks and, subject to the terms of this Agreement and the other Loan
Documents, the Agent shall take such actions as are directed by the Majority
Banks following a Default or Event of Default. Following such approval, the
Agent shall, subject to the terms of this Section 5(b), take such action or
actions, assert such rights, exercise such remedies and/or waive such Default
or Event of Default or refrain from taking such actions with respect thereto
as, but only as, agreed to in writing by the Majority Banks. The Agent shall,
if so requested by the Majority Banks and the Banks have provided to the Agent
such additional indemnities and assurances in accordance with their respective
Commitment Percentages against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any legal and equitable and other rights or remedies as it
may have in respect of such Collateral or against the Borrowers, the Guarantor
or any other Additional Pledgor. Subject to the terms hereof, the Majority
Banks may direct the Agent in writing as to the method and the extent of any
such action, sale or disposition, the Banks hereby agreeing to indemnify and
hold the Agent harmless in accordance with their respective Commitment
Percentages from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Agent need not
comply with any such direction to the extent that the Agent reasonably believes
the Agent's compliance with such direction to be unlawful or commercially
unreasonable in any applicable jurisdiction. In the event that the Bank that
is also the Agent is the Majority Bank, the Agent shall give prompt notice to
the other Banks of any actions that such Bank as Agent has elected to take
under this Agreement.

(ii) Agent shall not be required to obtain the consent of
the Majority Banks to its taking any action with respect to the Loan if
immediate action is required to be taken in the best interest of the Banks to
preserve or protect the continued enforceability of the Loan Documents. Agent
shall promptly verbally notify the Banks if Agent takes such immediate action,
which notice shall be promptly confirmed in writing. Without limiting the
generality of the foregoing, if the Agent reasonably determines payment is in
the best interest of all the Banks, Agent may without the approval of the Banks
pay amounts necessary to cure defaults under the Mortgage Loan Documents,
provided that the amount that may be spent annually by the Agent for such
purpose shall not exceed $10,000,000.00 without obtaining the consent of the
Majority Banks. Each Bank shall, within thirty (30) days of request therefor,
pay to the Agent in the manner set forth in Section 8 below, its Commitment
Percentage of the costs incurred by the Agent in taking any such actions
hereunder to the extent that such costs shall not be promptly reimbursed to the
Agent by the Borrowers or the Guarantor or out of the Collateral within such
period and such costs shall be deemed an "Expense" as defined in Section 8 of
this Agreement.

(c) If consent is required for some action under this Agreement
or, except as otherwise provided herein, an approval of the Majority Banks (as
such term is used in the Credit Agreement) is required or permitted under the
Credit Agreement, each Bank agrees to give the Agent and the other Banks,
within ten (10) Business Days of receipt of the request for action together
with all reasonably requested information related thereto (or such lesser
period of time required by the terms of the Loan Documents), notice in writing
<PAGE>

of its approval or disapproval (collectively "Directions") in respect of any
action requested or proposed in writing pursuant to the terms hereof. To the
extent that any Bank does not approve any recommendation of Agent, such Bank
shall in such notice to Agent describe the actions that would be acceptable to
such Bank. If consent is required for the requested action, any Bank's failure
to respond to a request for Directions within the required time period shall be
deemed to constitute a Direction to take such requested action. In the event
that any recommendation is not approved by the requisite number of Banks and a
subsequent approval on the same subject matter is requested by Agent, then for
the purposes of this paragraph each Bank shall be required to respond to a
request for Directions within five (5) Business Days of receipt of such
request. Agent and each Bank shall be entitled to assume that any officer of
the other Banks delivering any notice, consent, certificate or other writing is
authorized to give such notice, consent, certificate or other writing unless
Agent and such other Banks have otherwise been notified in writing.

(d) For the purposes of carrying out the provisions and
exercising the rights, remedies, powers and privileges granted by or referred
to in this Agreement and the Loan Documents, each of the Banks, subject to the
other terms of this Agreement and the Loan Documents, hereby irrevocably
constitutes and appoints the Agent to hold the Collateral and enforce the Loan
Documents and to exercise such powers, rights and remedies under this Agreement
and the Loan Documents as are delegated to Agent by the terms hereof or
thereof, together with all such powers, rights and remedies as are reasonably
incidental thereto.

6. Foreclosure; Possession of Collateral.

(a) If the Agent shall take possession of any of the Collateral
after the occurrence of any Event of Default (upon institution of foreclosure
proceedings or otherwise) as and to the extent provided by the Loan Documents,
the Agent shall collect all sales proceeds, distribution, dividends or other
revenues from the Collateral and may incur expenses in connection with the
operation and management of the Collateral, which expenses shall be deemed
"Expenses" for the purposes of this Agreement and shall be payable by the Banks
as provided in this Paragraph 6(a). With the consent of the Majority Banks,
the Agent may employ an independent third party management firm whose fees
shall be negotiated on an arm's length basis; provided, however,
notwithstanding the foregoing, if the Majority Banks cannot agree as to the
employment of a management firm within ten (10) Business Days of request
therefor by Agent, Agent shall be entitled to employ such independent third
party management firm as Agent deems necessary to protect and enforce the
interests and rights of all the Banks and to pay such management fees and
expenses to such firm as Agent in its good faith business judgment deems
appropriate under the circumstances. Any manager selected by the Agent or the
Majority Banks shall be a "Qualifying Manager" pursuant to the terms of the
Mortgage. All management fees paid to an independent third party and all other
reasonable fees and expenses paid or incurred by the Agent in accordance with
the terms of this Agreement shall be deducted from distribution, dividends,
revenues and/or sales proceeds collected, or if such amounts are insufficient,
such fees and expenses shall be paid by the Banks, with each Bank paying such
Bank's Commitment Percentage thereof within ten (10) days of receipt of a
request therefor.

(b) If there shall be a foreclosure sale of all or a portion of
the Collateral, the Agent shall bid at the foreclosure sale on behalf of the
Banks to raise any bid made by others at said sale, up to the highest price
agreed upon by the Majority Banks (not to exceed the indebtedness outstanding
<PAGE>

under the Loan Documents), or if the Majority Banks are unable to agree, then
an amount determined by Agent in the exercise of its good faith business
judgment (but in no event in an amount in excess of the indebtedness
outstanding under the Loan Documents). Upon completion of a foreclosure sale
and the conveyance of said Collateral to the highest bidder, the Agent shall
render an accounting for monies received and monies expended between the date
of taking possession of such Collateral and the date of conveyance to the
highest bidder, including, without limitation, expenses of foreclosure. If the
highest bidder shall be someone other than the Agent, then, upon receipt from
the highest bidder of the amount of the bid, the Agent will remit each Bank's
Commitment Percentage of the net amount received from the foreclosure sale to
such Bank, after deducting all reasonable Expenses incurred by Agent in
accordance with the terms of this Agreement.

(c) Any decision to sell any of the Collateral acquired by the
Agent, the Banks or their nominees must be approved by the Majority Banks;
provided, however, that the consent of all of the Banks shall be required if
the sale is other than for all cash. If all of the Banks agree to take a
purchase money obligation and mortgage instrument or security interest in part
payment for the sale of any of the Collateral acquired by the Agent, the Banks
or their nominees, as the case may be, then the Agent, the Banks and their
nominees, as applicable, agree to enter into an agreement with respect to that
obligation and mortgage instrument or security interest, defining the Banks' or
their nominees' rights in the same in accordance with the Banks' or their
nominees' Commitment Percentage, which agreement shall be in all material
respects similar to this Agreement, to the extent this Agreement is appropriate
or applicable. In the absence of such an agreement, the obligation and
mortgage instrument or security interest shall be held by the mortgagee or
security interest holder for the ratable benefit of the Banks and their
nominees in accordance with their respective Commitment Percentages and shall
be subject to the terms of this Agreement to the extent applicable.

(d) If any of the Agent, the Banks or any nominee of any of
them acquires the Collateral either by foreclosure or deed in lieu of
foreclosure, then the Collateral shall be held for the pro rata benefit of the
Banks by a corporation or other entity or entities approved by the Majority
Banks, the interests in which shall be owned by the Banks or their nominees
based upon their respective Commitment Percentages. Any such corporation or
other entity shall comply with all requirements applicable to such entity set
forth in the Mortgage. This Agreement shall continue in full force and effect
during such ownership of the Collateral and this Agreement shall govern the
rights and obligations of the parties in connection with such ownership, until
such time as the written agreement described below in this Subsection 6(d)
below is executed. In the event such acquisition shall occur, the Agent and
the Banks agree to negotiate in good faith to reach agreement relating to the
ownership, operation, maintenance, management, leasing and marketing of the
Collateral, which agreement shall be consistent with the following: (i) except
as otherwise provided in this subparagraph, decisions regarding the
administration and disposition of the Collateral and all other decisions with
respect to the Collateral shall require the consent of the Majority Banks; (ii)
the Collateral will not be held as a long-term investment and will be marketed
to sell such Collateral in a time period consistent with the regulations
applicable to national banks or foreign banks for owning real estate, whichever
is shorter; (iii) certain decision making with respect to the day-to-day
operations of the Collateral may be delegated to management and leasing agents,
provided that, subject to the terms of Paragraph 6(a) above, all agreements
with such management and leasing agents will be subject to the approval of the
Majority Banks; (iv) all decisions reserved to the owner in such agreements
<PAGE>

will be subject to the approval of the Majority Banks; (v) all expenses
incurred by the Agent and the Banks in connection with the Collateral shall be
allocated among the Banks pro rata in accordance with their respective
Commitment Percentages; and (vi) each Bank shall waive its right to partition
the Collateral. The documents shall provide for customary remedies in the
event any Bank does not pay its pro rata share of such expenses. All proceeds
received from the operation, sale or other disposition of the Collateral (net
of expenses incurred in connection therewith) shall be paid to the Banks in
accordance with each Bank's Commitment Percentage.

7. Transfers; Removal of Agent.

(a) Each Bank may sell, assign, pledge or enter into
participations for all or any part of their respective interests in the Loan
and Loan Documents in compliance with the terms of the Credit Agreement.
Notwithstanding anything herein, in the Credit Agreement or elsewhere to the
contrary, any assignment, or sale of a participation in, any interest in or
part of the Loan or the Loan Documents shall be subject to the terms of this
Agreement and that certain Recognition Agreement dated as of the date hereof
among the Agent, BOB, Wellsford, the Borrowers, the Mortgagee and the Property
Owner, and as a condition to any such assignment, the assignee shall
acknowledge that it is subject to the terms of this Agreement and assume the
obligations of a Bank hereunder, such agreement to be in form and substance
satisfactory to Agent.

(b) The Majority Banks may remove the Agent from its capacity
as agent as provided in the Credit Agreement. The Commitment Percentage of the
Bank which is acting as Agent shall not be taken into account in the
calculation of Majority Banks for the purposes of removing Agent in the event
of the Agent's willful misconduct or gross negligence. After the removal of
Agent, the provisions of this Agreement and the Loan Documents shall continue
in effect for its benefit with respect to any actions taken or omitted to be
taken by it while it was acting as Agent.

8. Cost and Expense Sharing. Within ten (10) Business Days of
receipt of a request therefor from Agent (to the extent that the same have not
been paid by the Borrowers, the Guarantor or the other Additional Pledgors
within thirty (30) days of demand for payment of the same), each Bank will pay
its pro rata share (based on its Commitment Percentage) of all reasonable out-
of-pocket costs and expenses (including, without limitation, reasonable
attorneys' fees, appraisers' fees and consultants' fees) which are incurred by
the Agent (a) in connection with the administration of the Loan and the Loan
Documents or enforcement of the obligations of Borrowers, the Guarantor or the
Additional Pledgors under the Loan and the Loan Documents, (b) in connection
with the foreclosure of the Loan Documents, or (c) which, by the terms of this
Agreement, are deemed to be expenses (hereinafter collectively referred to as
the "Expenses"). The Banks shall pay their Commitment Percentage of Expenses
for attorneys, appraisers and consultants retained by Agent. In the event
Agent later receives reimbursement from the Borrowers, the Guarantor, the
Additional Pledgors or another source for such costs, expenses or other
Expenses, Agent shall promptly refund to each Bank its ratable share of such
reimbursement.

9. Payments.

(a) Except as expressly provided herein to the contrary,
nothing herein shall be deemed (i) to give any Bank any advantage over the
others with respect to reimbursement for, or other payment on account of, any
<PAGE>

of the Borrowers', Guarantor's or the Additional Pledgors' obligations under
the Loan Documents or any attorneys' fees or expenses incurred by Agent in
connection with enforcement of the obligations of such Persons under any of the
Loan Documents, or (ii) to relieve any Bank from absorbing its respective pro
rata part of any losses sustained with respect to the amount of any of
Borrowers', the Guarantor's or the Additional Pledgors' obligations under any
of the Loan Documents.

(b) If any Bank is entitled to and decides to require a payment
of any amounts described in Article 4 of the Credit Agreement, such Bank shall
(i) give written notice thereof to the Agent and the Borrowers, and (ii)
deliver to Agent such other information, certifications and documentation as is
required to be furnished to the Borrowers under the terms of Section 4.11 of
the Credit Agreement, and such amount shall be payable to such Bank in
accordance with the terms of the Credit Agreement.

10. Standard of Care. Agent shall service the Loan in accordance
with its customary practices in servicing loans entered into solely for its own
account, and as provided in this Agreement. Nothing contained in this
Agreement or the other Loan Documents is intended to create an agency or
fiduciary relationship, it being acknowledged that Agent's obligations are
primarily administrative in nature. Agent shall not be required to take any
action which violates the terms of this Agreement or any of the Loan Documents
or violates any laws, rules, court orders and decisions, ordinances,
regulations, statutes, requirements, codes and executive orders, now existing
or hereafter created.

11. Defaults by Bank.

(a) If for any reason any Bank (a "Defaulting Bank") shall fail
to abide by its obligations under this Agreement or under any Loan Document and
such failure shall continue for ten (10) Business Days after notice with
respect to monetary obligations hereunder or under any Loan Document or thirty
(30) days after notice with respect to non-monetary obligations hereunder or
under any Loan Document (provided, however, that if such non-monetary default
is of a nature that the same cannot be reasonably cured within thirty (30) days
and such Bank shall have commenced to cure such non-monetary default within
such period and shall thereafter proceed with reasonable diligence and good
faith to cure such non-monetary default, such period shall be extended for such
longer period as shall be necessary for such Bank to cure such default with all
reasonable diligence, but in no event beyond that date which is one hundred
twenty (120) days after such Bank received notice of such default), then, in
addition to the rights and remedies that may be available to the Agent at law
and in equity, such Defaulting Bank's right to participate in the
administration of the Loan Documents, including, without limitation, any rights
to consent to or direct any action or inaction of the Agent pursuant to
Sections 5 or 6 above or otherwise, or to be taken into account in the
calculation of Majority Banks, shall be suspended during the pendency of such
failure. If for any reason a Bank fails to make timely payment to the Agent of
any amount required to be paid to it hereunder (without giving effect to any
notice or cure periods), in addition to the other rights and remedies which the
Agent may have under this Section 11 or otherwise, the Agent shall be entitled
(i) to collect interest from such Bank for the period from the date on which
the payment was due at the Federal Funds Effective Rate for each day during
such period, (ii) to withhold or setoff, and to apply to the payment of the
defaulted amount and any related interest, any amounts to be paid to such Bank
under this Agreement or the Loan Documents, and (iii) to bring an action or
suit against such Bank in a court of competent jurisdiction to recover the
<PAGE>

defaulted amount and any related interest.

(b) In the event a Bank becomes a Defaulting Bank, other Banks
who are not Defaulting Banks (the "Current Banks") shall have the right, but
not the obligation, in their sole discretion, to acquire (or, if more than one
Bank exercises such right, each such Bank shall have the right to acquire, pro
rata based on their relative Commitment Percentages, or such proportion as they
may mutually agree) the Commitment of the Defaulting Bank. Upon any such
purchase of the Commitment of the Defaulting Bank, the Defaulting Bank's
interest in the Obligations and its rights hereunder and under the Loan
Documents (but not its liability with respect thereto or under the Loan
Documents or this Agreement to the extent that the same relate to the period
prior to the effective date of the purchase) shall terminate at the date of
purchase, and the Defaulting Bank shall promptly execute all documents
reasonably requested to surrender and transfer such interest. The purchase
price for the Defaulting Bank's Commitment shall equal the Defaulting Bank's
proportionate share of the principal balance of the Obligations outstanding and
owed by the Borrowers, its ratable share of which has been advanced by the
Defaulting Bank, plus any and all accrued and unpaid interest thereon and fees
in connection therewith. On or before the date of such purchase, the
Defaulting Bank shall pay to the Agent a processing fee of Two Thousand Dollars
($2,000.00).

12. Amendments. This Agreement may not be amended, modified or
terminated except by an agreement in writing signed by each Bank and Agent.

13. NOT A LOAN; NO DUTY TO PURCHASE. THIS AGREEMENT SHALL IN NO WAY
BE CONSTRUED AS PROVIDING AN EXTENSION OF CREDIT BY ANY BANK TO ANY OTHER OF
THE BANKS. NO BANK SHALL HAVE THE OBLIGATION TO PURCHASE THE PERCENTAGE
INTEREST OF ANY OTHER PARTY HERETO UPON ANY DEFAULT BY THE BORROWERS, THE
GUARANTOR OR ANY OTHER ADDITIONAL PLEDGOR UNDER ANY OF THE LOAN DOCUMENTS OR IN
ANY OTHER EVENT WHATSOEVER.

14. Withholding Taxes. If Agent shall be required by law to deduct
and withhold taxes or other charges imposed by any jurisdiction ("Taxes") from
any amounts payable to a Bank with respect to the Loan because such Bank is a
Non-Exempt Person (as hereinafter defined), Agent shall be entitled to do so
with respect to such Bank's interest in such payment (all withheld amounts
being deemed paid to such Bank). "Non-Exempt Person" is any person other than
a person who is either (i) a United States person, or (ii) has on file with
Agent for the year involved such duly executed forms or statements which may,
from time to time, be prescribed by law and which, pursuant to applicable
provisions of (a) an income tax treaty between the United States and the
country of residence of such person, (b) the United States Internal Revenue
Code of 1986, as amended and as such may hereafter be amended, or (c) any
applicable rules or regulations in effect under (i) or (ii) above, and which
permit Agent to make such payments free of any obligation or liability for
withholding. Each Bank agrees to indemnify Agent against and to hold Agent
harmless from any Taxes, interest, penalties and attorneys' fees arising from
any failure of Agent to withhold Taxes from payments made to such Bank in
reliance upon any representation or document made or provided by such Bank to
Agent, it being agreed that (x) Agent shall be absolutely and unconditionally
entitled to accept any such representation or document as being true and
correct in all respects and to fully rely thereon without any obligation or
responsibility to investigate the same, and (y) such Bank shall, upon request
of Agent and at the Bank's sole cost and expense, defend any claim relating to
the indemnification by counsel selected by such Bank reasonably satisfactory to
Agent. Each Bank represents to Agent that such Bank is not a Non-Exempt Person
<PAGE>

and that Agent is not obligated under applicable law to withhold Taxes on any
sum paid to such Bank pursuant to this Agreement. If requested by Agent,
contemporaneously with the execution of this Agreement, and, if requested by
Agent from time to time as necessary during the term of this Agreement, each
Bank shall deliver to Agent evidence reasonably satisfactory to Agent
substantiating that such Bank is not a Non-Exempt Person and that Agent is not
obligated under applicable law to withhold Taxes on sums paid to it with
respect to the Loan or otherwise. As used herein, the term "Person" means any
individual, firm, corporation, association, partnership, joint venture, trust,
other entity or tribunal, and the term "Tribunal" means any state, federal,
foreign or other court or governmental department, commission, board, bureau,
agency or instrumentality.

15. No Reliance By Others. None of the provisions of this Agreement
shall inure to the benefit of the Borrowers, the Guarantor, any other
Additional Pledgor or any person other than the Banks and Agent; consequently,
neither the Borrowers, the Guarantor nor the Additional Pledgors shall be, and
no person other than the Banks and Agent shall be, entitled to rely upon or
raise as a defense, in any manner whatsoever, the failure of either Bank or
Agent to comply with the provisions of this Agreement. Neither the Banks nor
the Agent shall incur any liability to the Borrowers, the Guarantor, the other
Additional Pledgors or any other person for any act or omission of the Banks or
Agent.

16. Legal Fees. If any legal or equitable action or proceeding is
brought by Agent or a Bank to enforce or construe a provision of this
Agreement, the unsuccessful party in such action or proceeding, whether such
action or proceeding is settled or prosecuted to final judgment, shall pay all
of the reasonable attorneys' fees and costs incurred by the prevailing party.

17. Notices. All notices and other communications hereunder shall
be in writing (unless verbal communications are expressly permitted hereunder)
and shall be personally delivered or delivered by commercial courier service or
deposited in the United States Mail (certified, return receipt requested and
postage prepaid), or transmitted by facsimile, in each case addressed to the
party to whom notice is being given at its address set forth below its
signature hereto or at such other address as may hereafter be designated in
writing by a party hereto to the Agent and the other Banks. All such notices
or communications shall be deemed given on (i) the date received if delivered
personally or when delivered by commercial courier service, (ii) the date of
receipt or refusal to accept receipt thereof if sent by certified mail, or
(iii) the first Business Day following the Business Day of transmission by
facsimile. Any verbal communications permitted hereunder shall be promptly
confirmed in writing.

18. Construction. All headings appearing in this Agreement are for
convenience only and shall be disregarded in construing this Agreement. No
waiver of any breach of the terms of this Agreement shall be implied from any
failure to take, or delay in taking, action with respect to such breach or any
previous waiver of any similar or unrelated breach. A waiver of any term of
this Agreement must be made in writing and shall be limited to the express
terms of such writing.

19. Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

20. Severability. The invalidity, illegality or unenforceability of
any provision of this Agreement, pursuant to judicial decree, shall not affect
<PAGE>

the validity or enforceability of any other provision hereof, all of which
shall remain in full force and effect.

21. Successors and Assigns. Except as otherwise provided herein,
the terms and provisions of this Agreement shall inure to the benefit of and be
binding upon and enforceable by the respective successors and assigns of the
parties hereto.

22. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.

23. Termination. Unless otherwise agreed to by the parties, this
Agreement shall terminate when the Obligations have been paid and finally
discharged in full and no portion of the Obligations has been reinstated or is
required to be repaid by the Banks or Agent to the Borrowers or any other
Person or, if the Agent, Banks or the Banks' nominees take title to the
Collateral by foreclosure or conveyance in lieu of foreclosure, when the
Collateral is thereafter sold to a third party purchaser and all purchase money
financing, if any, is paid in full. The provisions of Section 8 of this
Agreement and all provisions requiring the Banks to indemnify the Agent shall
survive repayment of the Loan and termination of this Agreement.

24. Judicial Interpretation. In the event the provisions of this
Agreement require judicial or other interpretation, it is agreed that the court
interpreting or construing same shall not apply a presumption that the terms
hereof shall be more strictly construed against one party by reason of the rule
of construction that a document is to be more strictly construed against a
party who by itself or through its agents prepared the same, it being agreed
that all parties to this Agreement participated in the preparation of this
Agreement.

25. No Joint Venture. This Agreement shall not be construed to
create a partnership or joint venture between the parties hereto nor shall
Agent have any fiduciary obligations to any of the Banks.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.

THE FIRST NATIONAL BANK OF
BOSTON
(as both Bank and Agent)

By: /s/ Mark E. Basham
_______________________________
Its:

The First National Bank of Boston
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Mark E. Basham
Facsimile: (770) 390-8434

and
<PAGE>

The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Facsimile: (617) 434-7108
<PAGE>

WELLSFORD REAL PROPERTIES, INC.

By:/s/ Edward Lowenthal
_____________________________
Title: President

Wellsford Real Properties, Inc.
610 Fifth Avenue
7th Floor
New York, New York 10020
Attn: Gregory Hughes
Facsimile: 312/333-2323

<PAGE>

EXHIBIT 10.29

WELLSFORD REAL PROPERTIES, INC.
1997 MANAGEMENT INCENTIVE PLAN

WELLSFORD REAL PROPERTIES, INC., a Maryland corporation
(the "Company"), hereby establishes and adopts the following 1997
Management Incentive Plan (the "Plan").

RECITALS

WHEREAS, the Company desires to encourage high levels
of performance by those individuals who are key to the success of
the Company, to attract new individuals who are highly motivated
and who will contribute to the success of the Company and to
encourage such individuals to remain as trustees and/or employees
of the Company and its subsidiaries by increasing their proprie-
tary interest in the Company's growth and success.

WHEREAS, to attain these ends, the Company has
formulated the Plan embodied herein to authorize the granting of
incentive awards through grants of stock options ("Options"),
grants of stock appreciation rights, grants of Stock Purchase
Awards (hereafter defined), and grants of Restricted Stock Awards
(hereafter defined) to those individuals whose judgment,
initiative and efforts are responsible for the success of the
Company.

NOW, THEREFORE, the Company hereby constitutes, estab-
lishes and adopts the following Plan and agrees to the following
provisions:

ARTICLE 1.

PURPOSE OF THE PLAN

1.1. Purpose. The purpose of the Plan is to assist
the Company in attracting and retaining selected individuals to
serve as directors, officers and employees of the Company who
will contribute to the Company's success and to achieve long-term
objectives which will inure to the benefit of all shareholders of
the Company through the additional incentive inherent in the
ownership of the Company's Common Stock (the "Shares"). Options
granted under the Plan will be either "incentive stock options,"
intended to qualify as such under the provisions of section 422
of the Internal Revenue Code of 1986, as from time to time
amended (the "Code"), or "nonqualified stock options." For
purposes of the Plan, the term "subsidiary" shall mean
"subsidiary corporation," as such term is defined in section
424(f) of the Code, and "affiliate" shall have the meaning set
forth in Rule 12b-2 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). For purposes of the Plan, the term
"Award" shall mean a grant of an Option, a Stock Purchase Award,
<PAGE>

a Restricted Stock Award, or any other award made under the terms
of the Plan.

ARTICLE 2.

SHARES SUBJECT TO AWARDS

2.1. Number of Shares. Subject to the adjustment pro-
visions of Section 9.9 hereof, the aggregate number of Shares
which may be issued under Awards under the Plan, whether pursuant
to Options, Stock Purchase Awards or Restricted Stock Awards
shall not exceed 1,750,000. No Options to purchase fractional
Shares shall be granted or issued under the Plan. For purposes
of this Section 2.1, the Shares that shall be counted toward such
limitation shall include all Shares:

(1) issued or issuable pursuant to Options that have
been or may be exercised;

(2) issued or issuable pursuant to Stock Purchase
Awards; and

(3) issued as, or subject to issuance as a Restricted
Stock Award.

2.2. Shares Subject to Terminated Awards. The Shares
covered by any unexercised portions of terminated Options granted
under Articles 4 and 6, Shares forfeited as provided in Section
8.2(a) and Shares subject to any Awards which are otherwise
surrendered by the Participant without receiving any payment or
other benefit with respect thereto may again be subject to new
Awards under the Plan. In the event the purchase price of an
Option is paid in whole or in part through the delivery of
Shares, the number of Shares issuable in connection with the
exercise of the Option shall not again be available for the grant
of Awards under the Plan. Shares subject to Options, or portions
thereof, which have been surrendered in connection with the
exercise of share appreciation rights shall not again be
available for the grant of Awards under the Plan.

2.3. Character of Shares. Shares delivered under the
Plan may be authorized and unissued Shares or Shares acquired by
the Company, or both.

2.4. Limitations on Grants to Individual Participant.
Subject to adjustments pursuant to the provisions of Section 9.9
hereof, the maximum number of Shares with respect to which
Options or stock appreciation rights may be granted hereunder to
any employee during any fiscal year shall be 500,000 Shares (the
"Limitation"). If an Option is cancelled, the cancelled Option
shall continue to be counted toward the Limitation for the year
granted. An Option (or a stock appreciation right) that is
repriced during any fiscal year is treated as the cancellation of
the Option (or stock appreciation right) and a grant of a new
Option (or stock appreciation right) for purposes of the
Limitation for that fiscal year.
<PAGE>

ARTICLE 3.

ELIGIBILITY AND ADMINISTRATION

3.1. Awards to Employees and Trustees. (a) Partici-
pants who receive Options under Articles 4 and 6 hereof
(including stock appreciation rights under Article 5)
("Optionees"), Stock Purchase Awards under Article 7 or
Restricted Stock Awards under Article 8 (in either case, a
"Participant") shall consist of such key employees and Directors
(hereinafter defined) of the Company or any of its subsidiaries
or affiliates as the Committee shall select from time to time.
The Committee's designation of an Optionee or Participant in any
year shall not require the Committee to designate such person to
receive Awards or grants in any other year. The designation of
an Optionee or Participant to receive Awards or grants under one
portion of the Plan shall not require the Committee to include
such Optionee or Participant under other portions of the Plan.

(b) No Option which is intended to qualify as an
"incentive stock option" may be granted to any employee or
Director who, at the time of such grant, owns, directly or in-
directly (within the meaning of sections 422(b)(6) and 424(d) of
the Code), shares possessing more than ten percent (10%) of the
total combined voting power of all classes of shares of the Com-
pany or any of its subsidiaries or affiliates, unless at the time
of such grant, (i) the option price is fixed at not less than
110% of the Fair Market Value (as defined below) of the Shares
subject to such Option, determined on the date of the grant, and
(ii) the exercise of such Option is prohibited by its terms after
the expiration of five (5) years from the date such Option is
granted.

3.2. Administration. (a) The Plan shall be admini-
stered by a committee (the "Committee") consisting of not fewer
than two Directors of the Company (the directors of the Company
being hereinafter referred to as the "Directors"), as designated
by the Directors. The Directors may remove from, add members to,
or fill vacancies in the Committee. Unless otherwise determined
by the Directors, each member of the Committee will be a "Non-
Employee Director" within the meaning of Rule 16b-3 of the
Exchange Act and an "outside director" within the meaning of
Section 162(m)(4)(C)(i) of the Code.

Any Award to a member of the Committee shall be on
terms consistent with Awards made to other Directors who are not
members of the Committee, except where the Award is approved or
ratified by the Compensation Committee (excluding persons who are
also members of the Committee) of the Board of Directors of the
Company.

(b) The Committee is authorized, subject to the
provisions of the Plan, to establish such rules and regulations
as it may deem appropriate for the conduct of meetings and proper
administration of the Plan. All actions of the Committee shall
be taken by majority vote of its members.
<PAGE>

(c) Subject to the provisions of the Plan, the
Committee shall have authority, in its sole discretion, to inter-
pret the provisions of the Plan and, subject to the requirements
of applicable law, including Rule 16b-3 of the Exchange Act, to
prescribe, amend, and rescind rules and regulations relating to
it as it may deem necessary or advisable. All decisions made by
the Committee pursuant to the provisions of the Plan shall be
final, conclusive and binding on all persons, including the Com-
pany, its shareholders, Directors and employees, and Plan
participants.

ARTICLE 4.

OPTIONS

4.1. Grant of Options. The Committee shall determine,
within the limitations of the Plan, the Directors and employees
of the Company and its subsidiaries and affiliates to whom
Options are to be granted under the Plan, the number of Shares
that may be purchased under each such Option and the option
price, and shall designate such Options at the time of the grant
as either "incentive stock options" or "nonqualified stock
options;" provided, however, that Options granted to employees of
an affiliate (that is not also a subsidiary) or to non-employees
of the Company may only be "nonqualified stock options."

All Options granted pursuant to this Article 4 and
Article 6 herein shall be authorized by the Committee and shall
be evidenced in writing by stock option agreements ("Stock Option
Agreements") in such form and containing such terms and condi-
tions as the Committee shall determine which are not inconsistent
with the provisions of the Plan, and, with respect to any Stock
Option Agreement granting Options which are intended to qualify
as "incentive stock options," are not inconsistent with Section
422 of the Code. Granting of an Option pursuant to the Plan
shall impose no obligation on the recipient to exercise such op-
tion. Any individual who is granted an Option pursuant to this
Article 4 and Article 6 herein may hold more than one Option
granted pursuant to such Articles at the same time and may hold
both "incentive stock options" and "nonqualified stock options"
at the same time. To the extent that any Option does not qualify
as an "incentive stock option" (whether because of its
provisions, the time or manner of its exercise or otherwise) such
Option or the portion thereof which does not so qualify shall
constitute a separate "nonqualified stock option."

4.2. Option Price.

(b) The option price per share of each Share
purchasable under any "nonqualified stock option" granted
<PAGE>

pursuant to this Article 4 shall be such amount as the Committee
shall determine at the time of the grant of such Option.

4.3. Other Provisions. Options granted pursuant to
this Article 4 shall be made in accordance with the terms and
provision of Article 9 hereof and any other applicable terms and
provisions of the Plan.

ARTICLE 5.

STOCK APPRECIATION RIGHTS

5.1. Grant and Exercise. Stock appreciation rights
may be granted in conjunction with all or part of any Option
granted under the Plan provided such rights are granted at the
time of the grant of such Option. A "stock appreciation right"
is a right to receive cash or Shares, as provided in this
Article 5, in lieu of the purchase of a Share under a related
Option. A share appreciation right or applicable portion thereof
shall terminate and no longer be exercisable upon the termination
or exercise of the related Option, and a stock appreciation right
granted with respect to less than the full number of Shares cov-
ered by a related Option shall not be reduced until, and then
only to the extent that, the exercise or termination of the
related Option exceeds the number of Shares not covered by the
share appreciation right. A stock appreciation right may be
exercised by the holder thereof (the "Holder"), in accordance
with Section 5.2 of this Article 5, by giving written notice
thereof to the Company and surrendering the applicable portion of
the related Option. Upon giving such notice and surrender, the
Holder shall be entitled to receive an amount determined in the
manner prescribed in Section 5.2 of this Article 5. Options
which have been so surrendered, in whole or in part, shall no
longer be exercisable to the extent the related share apprecia-
tion rights have been exercised.

5.2. Terms and Conditions. Stock appreciation rights
shall be subject to such terms and conditions, not inconsistent
with the provisions of the Plan, as shall be determined from time
to time by the Committee, including the following:

(a) Stock appreciation rights shall be exer-
cisable only at such time or times and to the extent that
the Options to which they relate shall be exercisable in
accordance with the provisions of the Plan.

(b) Upon the exercise of a stock appreciation
right, a Holder shall be entitled to receive up to, but no
more than, an amount in cash or whole Shares equal to the
excess of the then Fair Market Value of one Share over the
option price per Share specified in the related Option mul-
tiplied by the number of Shares in respect of which the
share appreciation right shall have been exercised. The
Holder shall specify in his written notice of exercise,
whether payment shall be made in cash or in whole Shares.
Each share appreciation right may be exercised only at the
time and so long as a related Option, if any, would be
<PAGE>

exercisable or as otherwise permitted by applicable law.

(c) Upon the exercise of a stock appreciation
right, the Option or part thereof to which such share appre-
ciation right is related shall be deemed to have been exer-
cised for the purpose of the limitation of the number of
Shares to be issued under the Plan, as set forth in Sec-
tion 2.1 of the Plan.

(d) With respect to stock appreciation rights
granted in connection with an Option that is intended to be
an "incentive stock option," the following shall apply:

(i) No stock appreciation right shall be
transferable by a Holder otherwise than by will or by
the laws of descent and distribution, and stock
appreciation rights shall be exercisable, during the
Holder's lifetime, only by the Holder.

(ii) Stock appreciation rights granted in
connection with an Option may be exercised only when
the Fair Market Value of the Shares subject to the
Option exceeds the option price at which Shares can be
acquired pursuant to the Option.

ARTICLE 6.

RELOAD OPTIONS

6.1. Authorization of Reload Options. Concurrently
with the award of any Option (such Option hereinafter referred to
as the "Underlying Option") to any participant in the Plan, the
Committee may grant one or more reload options (each, a "Reload
Option") to such participant to purchase for cash or Shares a
number of Shares as specified below. A Reload Option shall be
exercisable for an amount of Shares equal to (i) the number of
Shares delivered by the Optionee to the Company to exercise the
Underlying Option, and (ii) to the extent authorized by the Com-
mittee, the number of Shares used to satisfy any tax withholding
requirement incident to the exercise of the Underlying Option,
subject to the availability of Shares under the Plan at the time
of such exercise. Any Reload Option may provide for the grant,
when exercised, of subsequent Reload Options to the extent and
upon such terms and conditions consistent with this Article 6, as
the Committee in its sole discretion shall specify at or after
the time of grant of such Reload Option. The grant of a Reload
Option will become effective upon the exercise of an Underlying
Option or Reload Option by delivering to the Company Shares in
payment of the exercise price and/or tax withholding obligations.
Notwithstanding the fact that the Underlying Option may be an
"incentive stock option," a Reload Option is not intended to
qualify as an "incentive stock option" under Section 422 of the
Code.

6.2. Reload Option Amendment. Each Share Option
Agreement shall state whether the Committee has authorized Reload
Options with respect to the Underlying Option. Upon the exercise
<PAGE>

of an Underlying Option or other Reload Option, the Reload Option
will be evidenced by an amendment to the underlying Share Option
Agreement.

6.3. Reload Option Price. The option price per Share
deliverable upon the exercise of a Reload Option shall be the
Fair Market Value of a Share on the date the grant of the Reload
Option becomes effective.

6.4. Term and Exercise. Each Reload Option is fully
exercisable immediately upon its grant. The term of each Reload
Option shall be equal to the remaining option term of the
Underlying Option.

6.5. Termination of Employment. No additional Reload
Options shall be granted to Optionees when Options and/or Reload
Options are exercised pursuant to the terms of this Plan follow-
ing termination of the Optionee's employment unless the
Committee, in its sole discretion, shall determine otherwise.

6.6. Applicability of Other Sections. Except as
otherwise provided in this Article 6, the provisions of Article 9
applicable to Options shall apply equally to Reload Options.

ARTICLE 7.

STOCK PURCHASE AWARDS

7.1. Grant of Stock Purchase Award. The term "Stock
Purchase Award" means the right to purchase Shares of the Company
and to pay for such Shares through a loan made by the Company to
the Participant (a "Purchase Loan") as set forth in this Article
7.

7.2. Terms of Purchase Loans.

(a) Purchase Loan. Each Purchase Loan shall be
evidenced by a promissory note. The term of the Purchase Loan
shall be for a period of years, as determined by the Committee,
and the proceeds of the Purchase Loan shall be used exclusively
by the Participant for purchase of Shares from the Company at a
purchase price equal to the Fair Market Value on the date of the
Stock Purchase Award.

(b) Interest on Purchase Loan. A Purchase Loan
shall be non-interest bearing or shall bear interest at whatever
rate the Committee shall determine (but not in excess of the
maximum rate permissible under applicable law), payable in a
manner and at such times as the Committee shall determine. Those
terms and provisions as the Committee shall determine shall be
incorporated into the promissory note evidencing the Purchase
Loan.

(c) Forgiveness of Purchase Loan. Subject to
Section 7.4 hereof, the Company may forgive the repayment of up
to 100% of the principal amount of the Purchase Loan, subject to
such terms and conditions as the Committee shall determine and
<PAGE>

set forth in the promissory note evidencing the Purchase Loan. A
Participant's Purchase Loan can be prepaid at any time, and from
time to time, without penalty.

7.3. Security for Loans.

(a) Stock Power and Pledge. Purchase Loans
granted to Participants shall be secured by a pledge of the
Shares acquired pursuant to the Stock Purchase Award. Such
pledge shall be evidenced by a pledge agreement (the "Pledge
Agreement") containing such terms and conditions as the Committee
shall determine. The share certificates for the Shares purchased
by a Participant pursuant to a Stock Purchase Award shall be
issued in the Participant's name, but shall be held by the
Company as security for repayment of the Participant's Purchase
Loan together with a stock power executed in blank by the
Participant (the execution and delivery of which by the
Participant shall be a condition to the issuance of the Stock
Purchase Award). The Participant shall be entitled to exercise
all rights applicable to such Shares, including, but not limited
to, the right to vote such Shares and the right to receive
dividends and other distributions made with respect to such
Shares. When the Purchase Loan and any accrued but unpaid
interest thereon has been repaid or otherwise satisfied in full,
the Company shall deliver to the Participant the share
certificates for the Shares purchased by a Participant under the
Stock Purchase Award. Purchase Loans shall be recourse or non-
recourse with respect to a Participant, as determined by the
Committee.

(b) Release and Delivery of Stock Certificates
During the Term of the Purchase Loan. The Company shall release
and deliver to each Participant certificates for Shares purchased
by a Participant pursuant to a Stock Purchase Award, in such
amounts and on such terms and conditions as the Committee shall
determine, which shall be set forth in the Pledge Agreement.

(c) Release and Delivery of Stock Certificates
Upon Repayment of the Purchase Loan. The Company shall release
and deliver to each Participant certificates for the Shares
purchased by the Participant under the Stock Purchase Award and
then held by the Company, provided the Participant has paid or
otherwise satisfied in full the balance of the Purchase Loan and
any accrued but unpaid interest thereon. In the event the
balance of the Purchase Loan is not repaid, forgiven or otherwise
satisfied within ninety (90) days after (i) the date repayment of
the Purchase Loan is due (whether in accordance with its term, by
reason of acceleration or otherwise), or (ii) such longer time as
the Committee, in its discretion, shall provide for repayment or
satisfaction, the Company shall retain those Shares then held by
the Company in accordance with the Pledge Agreement.

(d) Recourse Purchase Loans. Notwithstanding
Sections 7.3(a), (b) and (c) above, in the case of a recourse
Purchase Loan, the Committee may make a Purchase Loan on such
terms as it determines, including without limitation, not
requiring a pledge of the acquired Shares.
<PAGE>

7.4. Termination of Employment.

(a) Termination of Employment by Death,
Disability or by the Company Without Cause; Change of Control.
In the event of a Participant's termination of employment by
reason of death, "disability" or by the Company without "cause",
or in the event of a "change of control", the Committee shall
have the right (but shall not be required) to forgive the
remaining unpaid amount (principal and interest) of the Purchase
Loan in whole or in part as of the date of such occurrence.
"Change of Control", "disability" and "cause" shall have the
respective meanings as set forth in the promissory note
evidencing the Purchase Loan.

(b) Termination of Employment. Subject to
Section 7.4(a) above, in the event of a Participant's termination
of employment for any reason, the Participant shall repay to the
Company the entire balance of the Purchase Loan and any accrued
but unpaid interest thereon, which amounts shall become
immediately due and payable, provided, however, that if the
Participant voluntarily resigns as an employee in good standing,
such amounts will become due and payable on the ninetieth (90th )
day after the effective date of such resignation.

7.5. Restrictions on Transfer. No Stock Purchase
Award or Shares purchased through such an Award and pledged to
the Company as collateral security for the Participant's Purchase
Loan (and accrued by unpaid interest thereon) may be otherwise
pledged, sold, assigned or transferred (other than by will or by
the laws of descent and distribution).

ARTICLE 8.

RESTRICTED STOCK AWARDS

8.1. Restricted Stock Awards. (a) A grant of Shares
made pursuant to this Article 8 is referred to as a "Restricted
Stock Award." The Committee may grant to any Participant an
amount of Shares in such manner, and subject to such terms and
conditions relating to vesting, forfeitability and restrictions
on delivery and transfer (whether based on performance standards,
periods of service or otherwise) as the Committee shall establish
(such Shares, "Restricted Shares"). The terms of any Restricted
Stock Award granted under this Plan shall be set forth in a
written agreement (a "Restricted Stock Agreement") which shall
contain provisions determined by the Committee and not
inconsistent with this Plan. The provisions of Restricted Stock
Awards need not be the same for each Participant receiving such
Awards.

(b) Issuance of Restricted Shares. As soon as
practicable after the date of grant of a Restricted Stock Award
by the Committee, the Company shall cause to be transferred on
the books of the Company, Shares registered in the name of the
Company, as nominee for the Participant, evidencing the
Restricted Shares covered by the Award, but subject to forfeiture
to the Company retroactive to the date of grant, if a Restricted
<PAGE>

Stock Agreement delivered to the Participant by the Company with
respect to the Restricted Shares covered by the Award is not duly
executed by the Participant and timely returned to the Company.
All Restricted Shares covered by Awards under this Article 8
shall be subject to the restrictions, terms and conditions
contained in the Plan and the Restricted Stock Agreement entered
into by and between the Company and the Participant. Until the
lapse or release of all restrictions applicable to an Award of
Restricted Shares, the share certificates representing such
Restricted Shares shall be held in custody by the Company or its
designee.

(c) Shareholder Rights. Beginning on the date of
grant of the Restricted Stock Award and subject to execution of
the Restricted Stock Agreement as provided in Sections 8.1(a) and
(b), the Participant shall become a shareholder of the Company
with respect to all Shares subject to the Restricted Stock
Agreement and shall have all of the rights of a shareholder,
including, but not limited to, the right to vote such Shares and
the right to receive distributions made with respect to such
Shares; provided, however, that any Shares distributed as a
dividend or otherwise with respect to any Restricted Shares as to
which the restrictions have not yet lapsed shall be subject to
the same restrictions as such Restricted Shares and shall be
represented by book entry and held as prescribed in Section
8.1(b).

(d) Restriction on Transferability. None of the
Restricted Shares may be assigned or transferred (other than by
will or the laws of descent and distribution), pledged or sold
prior to lapse or release of the restrictions applicable thereto.

(e) Delivery of Shares Upon Release of
Restrictions. Upon expiration or earlier termination of the
forfeiture period without a forfeiture and the satisfaction of or
release from any other conditions prescribed by the Committee,
the restrictions applicable to the Restricted Shares shall lapse.
As promptly as administratively feasible thereafter, subject to
the requirements of Section 10.1, the Company shall deliver to
the Participant or, in case of the Participant's death, to the
Participant's beneficiary, one or more stock certificates for the
appropriate number of Shares, free of all such restrictions,
except for any restrictions that may be imposed by law.

8.2. Terms of Restricted Shares.

(a) Forfeiture of Restricted Shares. Subject to
Section 8.2(b), all Restricted Shares shall be forfeited and
returned to the Company and all rights of the Participant with
respect to such Restricted Shares shall terminate unless the
Participant continues in the service of the Company as an
employee until the expiration of the forfeiture period for such
Restricted Shares and satisfies any and all other conditions set
forth in the Restricted Stock Agreement. The Committee in its
sole discretion, shall determine the forfeiture period (which
may, but need not, lapse in installments) and any other terms and
conditions applicable with respect to any Restricted Stock Award.
<PAGE>

(b) Waiver of Forfeiture Period. Notwithstanding
anything contained in this Article 8 to the contrary, the
Committee may, in its sole discretion, waive the forfeiture
period and any other conditions set forth in any Restricted Stock
Agreement under appropriate circumstances (including the death,
disability or retirement of the Participant or a material change
in circumstances arising after the date of an Award) and subject
to such terms and conditions (including forfeiture of a
proportionate number of the Restricted Shares) as the Committee
shall deem appropriate.

ARTICLE 9.

GENERALLY APPLICABLE PROVISIONS

9.1. Option Period. Subject to Section 3.1(b), the
period for which an Option is exercisable shall not exceed ten
(10) years from the date such Option is granted, provided,
however, in the case of an Option that is not intended to be an
"incentive stock option", the Committee may prescribe a period in
excess of ten years. After the Option is granted, the option
period may not be reduced.

9.2. Fair Market Value. If the Shares are listed or
admitted to trading on a securities exchange registered under the
Exchange Act, the "Fair Market Value" of a Share as of a speci-
fied date shall mean the average of the high and low price of the
shares for the day immediately preceding the date as of which
Fair Market Value is being determined (or if there was no re-
ported sale on such date, on the last preceding date on which any
reported sale occurred) reported on the principal securities
exchange on which the Shares are listed or admitted to trading.
If the Shares are not listed or admitted to trading on any such
exchange but are listed as a national market security on the
National Association of Securities Dealers, Inc. Automated Quo-
tations System ("NASDAQ"), traded in the over-the-counter market
or listed or traded on any similar system then in use, the Fair
Market Value of a Share shall be the average of the high and low
sales price for the day immediately preceding the date as of
which the Fair Market Value is being determined (or if there was
no reported sale on such date, on the last preceding date on
which any reported sale occurred) reported on such system. If
the Shares are not listed or admitted to trading on any such
exchange, are not listed as a national market security on NASDAQ
and are not traded in the over-the-counter market or listed or
traded on any similar system then in use, but are quoted on
NASDAQ or any similar system then in use, the Fair Market Value
of a Share shall be the average of the closing high bid and low
asked quotations on such system for the Shares on the date in
question. If the Shares are not publicly traded, Fair Market
Value shall be determined by the Committee in its sole discretion
using appropriate criteria. An Option shall be considered
granted on the date the Committee acts to grant the Option or
such later date as the Committee shall specify.

9.3. Exercise of Options. Options granted under the
Plan shall be exercised by the Optionee thereof (or by his or her
<PAGE>

executors, administrators, guardian or legal representative, or
by a Permitted Assignee, as provided in Sections 9.6 and 9.7
hereof) as to all or part of the Shares covered thereby, by the
giving of written notice of exercise to the Company, specifying
the number of Shares to be purchased, accompanied by payment of
the full purchase price for the Shares being purchased. Full
payment of such purchase price shall be made within five (5)
business days following the date of exercise and shall be made
(i) in cash or by certified check or bank check, (ii) with the
consent of the Committee, by delivery of a promissory note in
favor of the Company upon such terms and conditions as determined
by the Committee, (iii) with the consent of Committee, by
tendering previously acquired Shares (valued at its Fair Market
Value, as determined by the Committee as of the date of tender),
or (iv) with the consent of the Committee, any combination of
(i), (ii) and (iii). In connection with a tender of previously
acquired Shares pursuant to clause (iii) above, the Committee, in
its sole discretion, may permit the Optionee to constructively
exchange Shares already owned by the Optionee in lieu of actually
tendering such Shares to the Company, provided that adequate
documentation concerning the ownership of the Shares to be
constructively tendered is furnished in form satisfactory to the
Committee. The notice of exercise, accompanied by such payment,
shall be delivered to the Company at its principal business
office or such other office as the Committee may from time to
time direct, and shall be in such form, containing such further
provisions consistent with the provisions of the Plan, as the
Committee may from time to time prescribe. In no event may any
Option granted hereunder be exercised for a fraction of a Share.
The Company shall effect the transfer of Shares purchased
pursuant to an Option as soon as practicable, and, within a
reasonable time thereafter, such transfer shall be evidenced on
the books of the Company. No person exercising an Option shall
have any of the rights of a holder of Shares subject to an Option
until certificates for such Shares shall have been issued
following the exercise of such Option. No adjustment shall be
made for cash dividends or other rights for which the record date
is prior to the date of such issuance.

9.4. Transferability. No Option that is intended to
qualify as an "incentive stock option" under Section 422 of the
Code shall be assignable or transferable by the Optionee, other
than by will or the laws of descent and distribution, and such
Option may be exercised during the life of the Optionee only by
the Optionee or his guardian or legal representative.
"Nonqualified stock options" and any stock appreciation rights
granted in tandem therewith are transferrable (together and not
separately) by the Optionee or Holder, as the case may be, to any
one or more of the following persons (each, a "Permitted
Assignee"): (i) the spouse, parent, issue, spouse of issue, or
issue of spouse ("issue" shall include all descendants whether
natural or adopted) of such Optionee or Holder, as the case may
be; (ii) a trust for the benefit of one or more of those persons
described in clause (i) above or for the benefit of such Optionee
or Holder, as the case may be, or for the benefit of any such
persons and such Optionee or Holder, as the case may be; or (iii)
an entity in which the Optionee or Holder or any Permitted
Assignee thereof is a beneficial owner; provided, however, that
<PAGE>

such Permitted Assignee shall be bound by all of the terms and
conditions of this Plan and shall execute an agreement
satisfactory to the Company evidencing such obligation; provided
further, however that any transfer by an Optionee or Holder who
is not then a Director of the Company to any Permitted Assignee
shall be subject to the prior consent of the Committee; and
provided further, however, that such Optionee or Holder shall
remain bound by the terms and conditions of this Plan. The
Company shall cooperate with an Optionee's Permitted Assignee and
the Company's transfer agent in effectuating any transfer
permitted pursuant to this Section 9.4.

9.5. Termination of Employment. In the event of the
termination of employment of an Optionee or the separation from
service of a Director (who is an Optionee) for any reason (other
than death or disability as provided below), any Option(s) held
by such Optionee (or its Permitted Assignee) under this Plan and
not previously exercised or expired shall be deemed cancelled and
terminated on the day of such termination or separation, unless
the Committee decides, in its sole discretion, to extend the term
of the Option for a period not to exceed three months after the
date of such termination or separation, provided, however, that
in no instance may the term of the Option, as so extended, exceed
the maximum term set forth in Section 3.1(b)(ii) or 9.1 above.
Notwithstanding the foregoing, in the event of the separation
from service of a non-employee Director (who is an Optionee) by
reason of death, disability or under conditions satisfactory to
both the Director and the Company, any nonqualified stock options
held by such Director (or its Permitted Assignee) under the Plan
and not previously exercised or expired shall be exercisable for
a period not to exceed five (5) years after the date of such
separation, provided, however, that in no instance may the term
of the Option, as so extended, exceed the maximum term set forth
in Sections 3.1(b)(ii) or 9.1 above.

9.6. Death. In the event an Optionee (other than a
non-employee Director) dies while employed by the Company or any
of its subsidiaries or affiliates any Option(s) held by such
Optionee (or its Permitted Assignee) and not previously expired
or exercised shall, to the extent exercisable on the date of
death, be exercisable by the estate of such Optionee or by any
person who acquired such Option by bequest or inheritance, or by
the Permitted Assignee at any time within one year after the
death of the Optionee, unless earlier terminated pursuant to its
terms, provided, however, that if the term of such Option would
expire by its terms within six months after the Optionee's death,
the term of such Option shall be extended until six months after
the Optionee's death, provided further, however, that in no
instance may the term of the Option, as so extended, exceed the
maximum term set forth in Section 3.1(b)(ii) or 9.1 above.

9.7. Disability. In the event of the termination of
employment of an Optionee (other than a non-employee Director)
due to total disability, the Optionee, or his guardian or legal
representative, or a Permitted Assignee shall have the
unqualified right to exercise any Option(s) which have not been
previously exercised or expired and which the Optionee was eli-
gible to exercise as of the first date of total disability (as
<PAGE>

determined by the Committee), at any time within one (1) year
after such termination, unless earlier terminated pursuant to its
terms, provided, however, that if the term of such Option would
expire by its terms within six months after such termination, the
term of such Option shall be extended until six months after such
termination, provided further, however, that in no instance may
the term of the Option, as so extended, exceed the maximum term
set forth in Section 3.1(b)(ii) or 9.1 above. The term "total
disability" shall, for purposes of this Plan, be defined in the
same manner as such term is defined in Section 22(e)(3) of the
Code.

9.8. Amendment and Modification of the Plan. The
Compensation Committee of the Board of Directors of the Company
may, from time to time, alter, amend, suspend or terminate the
Plan as it shall deem advisable, subject to any requirement for
shareholder approval imposed by applicable law or any rule of any
stock exchange or quotation system on which Shares are listed or
quoted; provided that such Compensation Committee may not amend
the Plan, without the approval of the Company's shareholders, to
increase the number of Shares that may be the subject of Options
under the Plan (except for adjustments pursuant to Section 9.9
hereof). In addition, no amendments to, or termination of, the
Plan shall in any way impair the rights of an Optionee or a
Participant (or a Permitted Assignee thereof) under any Award
previously granted without such Optionee's or Participant's
consent.

9.9. Adjustments. In the event that the Committee
shall determine that any dividend or other distribution (whether
in the form of cash, Shares, other securities, or other prop-
erty), recapitalization, stock split, reverse stock split, reor-
ganization, merger, consolidation, split-up, spin-off, combina-
tion, repurchase, or exchange of Shares or other securities, the
issuance of warrants or other rights to purchase Shares or other
securities, or other similar corporate transaction or event
affects the Shares with respect to which Options have been or may
be issued under the Plan, such that an adjustment is determined
by the Committee to be appropriate in order to prevent dilution
or enlargement of the benefits or potential benefits intended to
be made available under the Plan, then the Committee shall, in
such manner as the Committee may deem equitable, adjust any or
all of (i) the number and type of Shares that thereafter may be
made the subject of Options, (ii) the number and type of Shares
subject to outstanding Options and share appreciation rights, and
(iii) the grant or exercise price with respect to any Option, or,
if deemed appropriate, make provision for a cash payment to the
holder of any outstanding Option; provided, in each case, that
with respect to "incentive stock options," no such adjustment
shall be authorized to the extent that such adjustment would
cause such options to violate Section 422(b) of the Code or any
successor provision; and provided further, that the number of
Shares subject to any Option denominated in Shares shall always
be a whole number. In the event of any reorganization, merger,
consolidation, split-up, spin-off, or other business combination
involving the Company (collectively, a "Reorganization"), the
Compensation Committee of the Board of Directors or the Board of
Directors may cause any Award outstanding as of the effective
<PAGE>

date of the Reorganization to be cancelled in consideration of a
cash payment or alternate Award made to the holder of such
cancelled Award equal in value to the fair market value of such
cancelled Award. The determination of fair market value shall be
made by the Compensation Committee of the Board of Directors or
the Board of Directors, as the case may be, in their sole
discretion.

ARTICLE 10.

MISCELLANEOUS

10.1. Tax Withholding. The Company shall notify an
Optionee or Participant (or a Permitted Assignee thereof) of any
income tax withholding requirements arising as a result of the
grant of any Award, exercise of an Option or stock appreciation
rights or any other event occurring pursuant to this Plan. The
Company shall have the right to withhold from such Optionee or
Participant (or a Permitted Assignee thereof) such withholding
taxes as may be required by law, or to otherwise require the
Optionee or Participant (or a Permitted Assignee thereof) to pay
such withholding taxes. If the Optionee or Participant (or a
Permitted Assignee thereof) shall fail to make such tax payments
as are required, the Company or its subsidiaries or affiliates
shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to such
Optionee or Participant or to take such other action as may be
necessary to satisfy such withholding obligations. In
satisfaction of the requirement to pay withholding taxes, the
Optionee (or Permitted Assignee) make a written election (the
"Tax Election"), which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the
Shares then issuable to the Optionee (or Permitted Assignee)
pursuant to the Option having an aggregate Fair Market Value
equal to the withholding taxes.

10.2. Right of Discharge Reserved. Nothing in the Plan
nor the grant of an Award hereunder shall confer upon any em-
ployee, Director or other individual the right to continue in the
employment or service of the Company or any subsidiary or affil-
iate of the Company or affect any right that the Company or any
subsidiary or affiliate of the Company may have to terminate the
employment or service of (or to demote or to exclude from future
Options under the Plan) any such employee, Director or other in-
dividual at any time for any reason. Except as specifically
provided by the Committee, the Company shall not be liable for
the loss of existing or potential profit from an Award granted in
the event of termination of an employment or other relationship
even if the termination is in violation of an obligation of the
Company or any subsidiary or affiliate of the Company to the
employee or Director.

10.3. Nature of Payments. All Awards made pursuant to
the Plan are in consideration of services performed for the Com-
pany or any subsidiary or affiliate of the Company. Any income
or gain realized pursuant to Awards under the Plan and any share
appreciation rights constitutes a special incentive payment to
<PAGE>

the Optionee, Participant or Holder and shall not be taken into
account, to the extent permissible under applicable law, as
compensation for purposes of any of the employee benefit plans of
the Company or any subsidiary or affiliate of the Company except
as may be determined by the Committee or by the Directors or
directors of the applicable subsidiary or affiliate of the
Company.

10.4. Severability. If any provision of the Plan shall
be held unlawful or otherwise invalid or unenforceable in whole
or in part, such unlawfulness, invalidity or unenforceability
shall not affect any other provision of the Plan or part thereof,
each of which remain in full force and effect. If the making of
any payment or the provision of any other benefit required under
the Plan shall be held unlawful or otherwise invalid or unen-
forceable, such unlawfulness, invalidity or unenforceability
shall not prevent any other payment or benefit from being made or
provided under the Plan, and if the making of any payment in full
or the provision of any other benefit required under the Plan in
full would be unlawful or otherwise invalid or unenforceable,
then such unlawfulness, invalidity or unenforceability shall not
prevent such payment or benefit from being made or provided in
part, to the extent that it would not be unlawful, invalid or
unenforceable, and the maximum payment or benefit that would not
be unlawful, invalid or unenforceable shall be made or provided
under the Plan.

10.5. Gender and Number. In order to shorten and to
improve the understandability of the Plan document by eliminating
the repeated usage of such phrases as "his or her" and any mas-
culine terminology herein shall also include the feminine, and
the definition of any term herein in the singular shall also in-
clude the plural except when otherwise indicated by the context.

10.6. Governing Law. The Plan and all determinations
made and actions taken thereunder, to the extent not otherwise
governed by the Code or the laws of the United States, shall be
governed by the laws of the State of New York and construed
accordingly.

10.7. Termination of Plan. The Plan shall be effective
on the date of the approval of the Plan by the holders of a
majority of the shares entitled to vote thereon, provided such
approval is obtained within 12 months after the date of adoption
of the Plan by the Board of Directors. Awards may be granted
under the Plan at any time and from time to time on or prior to
April 17, 2007, on which date the Plan will expire except as to
Awards and related share appreciation rights then outstanding
under the Plan. Such outstanding Awards and stock appreciation
rights shall remain in effect until they have been exercised or
terminated, or have expired.

10.8. Captions. The captions in this Plan are for
convenience of reference only, and are not intended to narrow,
limit or affect the substance or interpretation of the provisions
contained herein.

<PAGE>

EXHIBIT 10.30

WELLSFORD REAL PROPERTIES, INC.
ROLLOVER STOCK OPTION PLAN

WELLSFORD REAL PROPERTIES, INC., a Maryland real estate corporation
(the "Company"), hereby establishes and adopts the following Rollover Stock
Option Plan (the "Plan").

RECITALS

WHEREAS, certain key executives and directors of the Company were
previously key executives and trustees of Wellsford Residential Property
Trust (the "Trust"), a Maryland real estate investment trust and predecessor
in interest to the Company.

WHEREAS, those key executives and directors held certain stock
options and other rights granted to them by the Trust.

WHEREAS, pursuant to the terms and conditions of the Contribution
Agreement between Wellsford Residential Property Trust and Wellsford Real
Properties, Inc., to be dated on or about May 30, 1997 (the "Contribution
Agreement"), the Company will assume the Trust's obligations to such key
executives and trustees arising under certain of the Trust's share option
agreements and related documents.

WHEREAS, pursuant to the Agreement and Plan of Merger between
Equity Residential Properties Trust and Wellsford Residential Property Trust
dated as of January 16, 1997 (the "Merger Agreement") and the Contribution
Agreement, the Company will satisfy such obligations by amending certain
Wellsford share options and converting such options into options to purchase
shares of Common Stock of the Company (the "Rollover Options").

NOW, THEREFORE, for the purpose of administering the Rollover
Options, the Company hereby constitutes, establishes and adopts the following
Plan and agrees to the following provisions:

ARTICLE 1.

PURPOSE OF THE PLAN

1.1. Purpose. The purpose of the Plan is to administer the
Rollover Options. Options granted under the Plan will be either "incentive
stock options," intended to qualify as such under the provisions of section
422 of the Internal Revenue Code of 1986, as from time to time amended (the
"Code"), or "nonqualified stock options." For purposes of the Plan, the term
"subsidiary" shall mean "subsidiary corporation," as such term is defined in
section 424(f) of the Code, and "affiliate" shall have the meaning set forth
in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). For purposes of the Plan, the term "Award" shall mean a
grant of an Option or any other award made under the terms of the Plan. For
purposes of the Plan, the term "Shares" shall mean shares of the Company's
Common Stock.
<PAGE>

ARTICLE 2.

SHARES SUBJECT TO AWARDS

2.1. Number of Shares. Subject to the adjustment provisions of
Section 7.9 hereof, the aggregate number of Shares which may be issued under
Awards under the Plan shall not exceed 1,326,235. No Options to purchase
fractional Shares shall be granted or issued under the Plan.

2.2. Shares Subject to Terminated Awards. The Shares covered by
any unexercised portions of terminated Options granted under Articles 4 and
6, and Shares subject to any Awards which are otherwise surrendered by the
Participant without receiving any payment or other benefit with respect
thereto may again be subject to new Awards under the Plan. In the event the
purchase price of an Option is paid in whole or in part through the delivery
of Shares, the number of Shares issuable in connection with the exercise of
the Option shall not again be available for the grant of Awards under the
Plan. Shares subject to Options, or portions thereof, which have been
surrendered in connection with the exercise of share appreciation rights
shall not again be available for the grant of Awards under the Plan.

2.3. Character of Shares. Shares delivered under the Plan may be
authorized and unissued Shares or Shares acquired by the Company, or both.

2.4. Limitations on Grants to Individual Participant. Subject to
adjustments pursuant to the provisions of Section 7.9 hereof, the maximum
number of Shares with respect to which Options or stock appreciation rights
may be granted hereunder to any employee during any fiscal year shall be
500,000 Shares (the "Limitation"). If an Option is cancelled, the cancelled
Option shall continue to be counted toward the Limitation for the year
granted. An Option (or a stock appreciation right) that is repriced during
any fiscal year is treated as the cancellation of the Option (or stock
appreciation right) and a grant of a new Option (or stock appreciation right)
for purposes of the Limitation for that fiscal year.

ARTICLE 3.

ELIGIBILITY AND ADMINISTRATION

3.1. Awards to Employees and Directors. (a) Participants who
receive Options under Articles 4 and 6 hereof (including stock appreciation
rights under Article 5) ("Optionees" or "Participant") shall consist of such
key employees and Directors (hereinafter defined) of the Company or any of
its subsidiaries or affiliates as the Committee shall select from time to
time. The Committee's designation of an Optionee or Participant in any year
shall not require the Committee to designate such person to receive Awards or
grants in any other year. The designation of an Optionee or Participant to
receive Awards or grants under one portion of the Plan shall not require the
Committee to include such Optionee or Participant under other portions of the
Plan.

(b) No Option which is intended to qualify as an "incentive
stock option" may be granted to any employee or Director who, at the time of
such grant, owns, directly or indirectly (within the meaning of sections
422(b)(6) and 424(d) of the Code), shares possessing more than ten percent
<PAGE>

(10%) of the total combined voting power of all classes of shares of the Com-
pany or any of its subsidiaries or affiliates, unless at the time of such
grant, (i) the option price is fixed at not less than 110% of the Fair Market
Value (as defined below) of the Shares subject to such Option, determined on
the date of the grant, and (ii) the exercise of such Option is prohibited by
its terms after the expiration of five (5) years from the date such Option is
granted.

3.2. Administration. (a) The Plan shall be administered by a
committee (the "Committee") consisting of not fewer than two Directors of the
Company (the directors of the Company being hereinafter referred to as the
"Directors"), as designated by the Directors. The Directors may remove from,
add members to, or fill vacancies in the Committee. Unless otherwise
determined by the Directors, each member of the Committee will be a "Non-
Employee Director" within the meaning of Rule 16b-3 of the Exchange Act and
an "outside director" within the meaning of Section 162(m)(4)(C)(i) of the
Code.

Any Award to a member of the Committee shall be on terms
consistent with Awards made to other Directors who are not members of the
Committee, except where the Award is approved or ratified by the Compensation
Committee (excluding persons who are also members of the Committee) of the
Board of Directors of the Company.

(b) The Committee is authorized, subject to the provisions of
the Plan, to establish such rules and regulations as it may deem appropriate
for the conduct of meetings and proper administration of the Plan. All
actions of the Committee shall be taken by majority vote of its members.

(c) Subject to the provisions of the Plan, the Committee
shall have authority, in its sole discretion, to interpret the provisions of
the Plan and, subject to the requirements of applicable law, including Rule
16b-3 of the Exchange Act, to prescribe, amend, and rescind rules and regula-
tions relating to it as it may deem necessary or advisable. All decisions
made by the Committee pursuant to the provisions of the Plan shall be final,
conclusive and binding on all persons, including the Company, its
shareholders, Directors and employees, and Plan participants.

ARTICLE 4.

OPTIONS

4.1. Grant of Options. The Committee shall determine, within the
limitations of the Plan, the Directors and employees of the Company and its
subsidiaries and affiliates to whom Options are to be granted under the Plan,
the number of Shares that may be purchased under each such Option and the
option price, and shall designate such Options at the time of the grant as
either "incentive stock options" or "nonqualified stock options;" provided,
however, that Options granted to employees of an affiliate (that is not also
a subsidiary) or to non-employees of the Company may only be "nonqualified
stock options."

any Stock Option Agreement granting Options which are intended to qualify as
"incentive stock options," are not inconsistent with Section 422 of the Code.
Granting of an Option pursuant to the Plan shall impose no obligation on the
recipient to exercise such option. Any individual who is granted an Option
pursuant to this Article 4 and Article 6 herein may hold more than one Option
granted pursuant to such Articles at the same time and may hold both
"incentive stock options" and "nonqualified stock options" at the same time.
To the extent that any Option does not qualify as an "incentive stock option"
(whether because of its provisions, the time or manner of its exercise or
otherwise) such Option or the portion thereof which does not so qualify shall
constitute a separate "nonqualified stock option."

4.2. Option Price.

(a) Subject to Section 3.1(b), the option price per each
Share purchasable under any "incentive stock option" granted pursuant to this
Article 4 and any "nonqualified stock option" granted pursuant to Article 6
herein shall not be less than 100% of the Fair Market Value (as hereinafter
defined) of such Share on the date of the grant of such Option. Notwith-
standing the foregoing, in the case of an incentive stock option that meets
the requirements of Code Section 424(a) and Treasury Regulations Section
1.425-1(a), the option price may be less than 100% of the Fair Market Value.

(b) The option price per share of each Share purchasable
under any "nonqualified stock option" granted pursuant to this Article 4
shall be such amount as the Committee shall determine at the time of the
grant of such Option.

4.3. Other Provisions. Options granted pursuant to this Article 4
shall be made in accordance with the terms and provision of Article 7 hereof
and any other applicable terms and provisions of the Plan.

ARTICLE 5.

STOCK APPRECIATION RIGHTS

5.1. Grant and Exercise. Stock appreciation rights may be granted
in conjunction with all or part of any Option granted under the Plan provided
such rights are granted at the time of the grant of such Option. A "stock
appreciation right" is a right to receive cash or Shares, as provided in this
Article 5, in lieu of the purchase of a Share under a related Option. A
share appreciation right or applicable portion thereof shall terminate and no
longer be exercisable upon the termination or exercise of the related Option,
and a stock appreciation right granted with respect to less than the full
number of Shares covered by a related Option shall not be reduced until, and
then only to the extent that, the exercise or termination of the related
Option exceeds the number of Shares not covered by the share appreciation
right. A stock appreciation right may be exercised by the holder thereof
(the "Holder"), in accordance with Section 5.2 of this Article 5, by giving
written notice thereof to the Company and surrendering the applicable portion
of the related Option. Upon giving such notice and surrender, the Holder
shall be entitled to receive an amount determined in the manner prescribed in
Section 5.2 of this Article 5. Options which have been so surrendered, in
whole or in part, shall no longer be exercisable to the extent the related
share appreciation rights have been exercised.
<PAGE>

5.2. Terms and Conditions. Stock appreciation rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
the Plan, as shall be determined from time to time by the Committee,
including the following:

(a) Stock appreciation rights shall be exercisable only at
such time or times and to the extent that the Options to which they
relate shall be exercisable in accordance with the provisions of the
Plan.

(b) Upon the exercise of a stock appreciation right, a Holder
shall be entitled to receive up to, but no more than, an amount in cash
or whole Shares equal to the excess of the then Fair Market Value of one
Share over the option price per Share specified in the related Option
multiplied by the number of Shares in respect of which the share appre-
ciation right shall have been exercised. The Holder shall specify in
his written notice of exercise, whether payment shall be made in cash or
in whole Shares. Each share appreciation right may be exercised only at
the time and so long as a related Option, if any, would be exercisable
or as otherwise permitted by applicable law.

(c) Upon the exercise of a stock appreciation right, the
Option or part thereof to which such share appreciation right is related
shall be deemed to have been exercised for the purpose of the limitation
of the number of Shares to be issued under the Plan, as set forth in
Section 2.1 of the Plan.

(d) With respect to stock appreciation rights granted in
connection with an Option that is intended to be an "incentive stock
option," the following shall apply:

(i) No stock appreciation right shall be transferable by
a Holder otherwise than by will or by the laws of descent and
distribution, and stock appreciation rights shall be exercisable,
during the Holder's lifetime, only by the Holder.

(ii) Stock appreciation rights granted in connection
with an Option may be exercised only when the Fair Market Value of
the Shares subject to the Option exceeds the option price at which
Shares can be acquired pursuant to the Option.

ARTICLE 6.

RELOAD OPTIONS

conditions consistent with this Article 6, as the Committee in its sole
discretion shall specify at or after the time of grant of such Reload Option.
The grant of a Reload Option will become effective upon the exercise of an
Underlying Option or Reload Option by delivering to the Company Shares in
payment of the exercise price and/or tax withholding obligations.
Notwithstanding the fact that the Underlying Option may be an "incentive
stock option," a Reload Option is not intended to qualify as an "incentive
stock option" under Section 422 of the Code.

6.2. Reload Option Amendment. Each Share Option Agreement shall
state whether the Committee has authorized Reload Options with respect to the
Underlying Option. Upon the exercise of an Underlying Option or other Reload
Option, the Reload Option will be evidenced by an amendment to the underlying
Share Option Agreement.

6.3. Reload Option Price. The option price per Share deliverable
upon the exercise of a Reload Option shall be the Fair Market Value of a
Share on the date the grant of the Reload Option becomes effective.

6.4. Term and Exercise. Each Reload Option is fully exercisable
immediately upon its grant. The term of each Reload Option shall be equal to
the remaining option term of the Underlying Option.

6.5. Termination of Employment. No additional Reload Options
shall be granted to Optionees when Options and/or Reload Options are
exercised pursuant to the terms of this Plan following termination of the
Optionee's employment unless the Committee, in its sole discretion, shall
determine otherwise.

6.6. Applicability of Other Sections. Except as otherwise
provided in this Article 6, the provisions of Article 7 applicable to Options
shall apply equally to Reload Options.

ARTICLE 7.

GENERALLY APPLICABLE PROVISIONS

7.1. Option Period. Subject to Section 3.1(b), the period for
which an Option is exercisable shall not exceed ten (10) years from the date
such Option is granted, provided, however, in the case of an Option that is
not intended to be an "incentive stock option", the Committee may prescribe a
period in excess of ten years. After the Option is granted, the option
period may not be reduced.

7.2. Fair Market Value. If the Shares are listed or admitted to
trading on a securities exchange registered under the Exchange Act, the "Fair
Market Value" of a Share as of a specified date shall mean the average of the
high and low price of the shares for the day immediately preceding the date
as of which Fair Market Value is being determined (or if there was no re-
ported sale on such date, on the last preceding date on which any reported
sale occurred) reported on the principal securities exchange on which the
Shares are listed or admitted to trading. If the Shares are not listed or
admitted to trading on any such exchange but are listed as a national market
security on the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), traded in the over-the-counter market or listed
or traded on any similar system then in use, the Fair Market Value of a Share
shall be the average of the high and low sales price for the day immediately
<PAGE>

preceding the date as of which the Fair Market Value is being determined (or
if there was no reported sale on such date, on the last preceding date on
which any reported sale occurred) reported on such system. If the Shares are
not listed or admitted to trading on any such exchange, are not listed as a
national market security on NASDAQ and are not traded in the over-the-counter
market or listed or traded on any similar system then in use, but are quoted
on NASDAQ or any similar system then in use, the Fair Market Value of a Share
shall be the average of the closing high bid and low asked quotations on such
system for the Shares on the date in question. If the Shares are not
publicly traded, Fair Market Value shall be determined by the Committee in
its sole discretion using appropriate criteria. An Option shall be con-
sidered granted on the date the Committee acts to grant the Option or such
later date as the Committee shall specify.

7.3. Exercise of Options. Options granted under the Plan shall be
exercised by the Optionee thereof (or by his or her executors,
administrators, guardian or legal representative, or by a Permitted Assignee,
as provided in Sections 7.6 and 7.7 hereof) as to all or part of the Shares
covered thereby, by the giving of written notice of exercise to the Company,
specifying the number of Shares to be purchased, accompanied by payment of
the full purchase price for the Shares being purchased. Full payment of such
purchase price shall be made within five (5) business days following the date
of exercise and shall be made (i) in cash or by certified check or bank
check, (ii) with the consent of the Committee, by delivery of a promissory
note in favor of the Company upon such terms and conditions as determined by
the Committee, (iii) with the consent of Committee, by tendering previously
acquired Shares (valued at its Fair Market Value, as determined by the
Committee as of the date of tender), or (iv) with the consent of the
Committee, any combination of (i), (ii) and (iii). In connection with a
tender of previously acquired Shares pursuant to clause (iii) above, the
Committee, in its sole discretion, may permit the Optionee to constructively
exchange Shares already owned by the Optionee in lieu of actually tendering
such Shares to the Company, provided that adequate documentation concerning
the ownership of the Shares to be constructively tendered is furnished in
form satisfactory to the Committee. The notice of exercise, accompanied by
such payment, shall be delivered to the Company at its principal business
office or such other office as the Committee may from time to time direct,
and shall be in such form, containing such further provisions consistent with
the provisions of the Plan, as the Committee may from time to time prescribe.
In no event may any Option granted hereunder be exercised for a fraction of a
Share. The Company shall effect the transfer of Shares purchased pursuant to
an Option as soon as practicable, and, within a reasonable time thereafter,
such transfer shall be evidenced on the books of the Company. No person
exercising an Option shall have any of the rights of a holder of Shares
subject to an Option until certificates for such Shares shall have been
issued following the exercise of such Option. No adjustment shall be made
for cash dividends or other rights for which the record date is prior to the
date of such issuance.

7.4. Transferability. No Option that is intended to qualify as
an "incentive stock option" under Section 422 of the Code shall be assignable
or transferable by the Optionee, other than by will or the laws of descent
and distribution, and such Option may be exercised during the life of the
Optionee only by the Optionee or his guardian or legal representative.
"Nonqualified stock options" and any stock appreciation rights granted in
tandem therewith are transferrable (together and not separately) by the
Optionee or Holder, as the case may be, to any one or more of the following
persons (each, a "Permitted Assignee"): (i) the spouse, parent, issue,
<PAGE>

spouse of issue, or issue of spouse ("issue" shall include all descendants
whether natural or adopted) of such Optionee or Holder, as the case may be;
(ii) a trust for the benefit of one or more of those persons described in
clause (i) above or for the benefit of such Optionee or Holder, as the case
may be, or for the benefit of any such persons and such Optionee or Holder,
as the case may be; or (iii) an entity in which the Optionee or Holder or any
Permitted Assignee thereof is a beneficial owner; provided, however, that
such Permitted Assignee shall be bound by all of the terms and conditions of
this Plan and shall execute an agreement satisfactory to the Company
evidencing such obligation; provided further, however that any transfer by an
Optionee or Holder who is not then a Director of the Company to any Permitted
Assignee shall be subject to the prior consent of the Committee; and provided
further, however, that such Optionee or Holder shall remain bound by the
terms and conditions of this Plan. The Company shall cooperate with an
Optionee's Permitted Assignee and the Company's transfer agent in
effectuating any transfer permitted pursuant to this Section 7.4.

7.5. Termination of Employment. In the event of the termination
of employment of an Optionee or the separation from service of a Director
(who is an Optionee) for any reason (other than death or disability as
provided below), any Option(s) held by such Optionee (or its Permitted
Assignee) under this Plan and not previously exercised or expired shall be
deemed cancelled and terminated on the day of such termination or separation,
unless the Committee decides, in its sole discretion, to extend the term of
the Option for a period not to exceed three months after the date of such
termination or separation, provided, however, that in no instance may the
term of the Option, as so extended, exceed the maximum term set forth in
Section 3.1(b)(ii) or 7.1 above. Notwithstanding the foregoing, in the event
of the separation from service of a non-employee Director (who is an
Optionee) by reason of death, disability or under conditions satisfactory to
both the Director and the Company, any nonqualified stock options held by
such Director (or its Permitted Assignee) under the Plan and not previously
exercised or expired shall be exercisable for a period not to exceed five (5)
years after the date of such separation, provided, however, that in no
instance may the term of the Option, as so extended, exceed the maximum term
set forth in Sections 3.1(b)(ii) or 7.1 above.

7.6. Death. In the event an Optionee (other than a non-employee
Director) dies while employed by the Company or any of its subsidiaries or
affiliates any Option(s) held by such Optionee (or its Permitted Assignee)
and not previously expired or exercised shall, to the extent exercisable on
the date of death, be exercisable by the estate of such Optionee or by any
person who acquired such Option by bequest or inheritance, or by the
Permitted Assignee at any time within one year after the death of the
Optionee, unless earlier terminated pursuant to its terms, provided, however,
that if the term of such Option would expire by its terms within six months
after the Optionee's death, the term of such Option shall be extended until
six months after the Optionee's death, provided further, however, that in no
instance may the term of the Option, as so extended, exceed the maximum term
set forth in Section 3.1(b)(ii) or 7.1 above.

7.7. Disability. In the event of the termination of employment of
an Optionee (other than a non-employee Director) due to total disability, the
Optionee, or his guardian or legal representative, or a Permitted Assignee
shall have the unqualified right to exercise any Option(s) which have not
been previously exercised or expired and which the Optionee was eligible to
exercise as of the first date of total disability (as determined by the
Committee), at any time within one (1) year after such termination, unless
<PAGE>

earlier terminated pursuant to its terms, provided, however, that if the term
of such Option would expire by its terms within six months after such
termination, the term of such Option shall be extended until six months after
such termination, provided further, however, that in no instance may the term
of the Option, as so extended, exceed the maximum term set forth in Section
3.1(b)(ii) or 7.1 above. The term "total disability" shall, for purposes of
this Plan, be defined in the same manner as such term is defined in Section
22(e)(3) of the Code.

7.8. Amendment and Modification of the Plan. The Compensation
Committee of the Board of Directors of the Company may, from time to time,
alter, amend, suspend or terminate the Plan as it shall deem advisable,
subject to any requirement for shareholder approval imposed by applicable law
or any rule of any stock exchange or quotation system on which Shares are
listed or quoted; provided that such Compensation Committee may not amend the
Plan, without the approval of the Company's shareholders, to increase the
number of Shares that may be the subject of Options under the Plan (except
for adjustments pursuant to Section 7.9 hereof). In addition, no amendments
to, or termination of, the Plan shall in any way impair the rights of an
Optionee or a Participant (or a Permitted Assignee thereof) under any Award
previously granted without such Optionee's or Participant's consent.

7.9. Adjustments. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off, com-
bination, repurchase, or exchange of Shares or other securities, the issuance
of warrants or other rights to purchase Shares or other securities, or other
similar corporate transaction or event affects the Shares with respect to
which Options have been or may be issued under the Plan, such that an
adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee shall, in
such manner as the Committee may deem equitable, adjust any or all of (i) the
number and type of Shares that thereafter may be made the subject of Options,
(ii) the number and type of Shares subject to outstanding Options and share
appreciation rights, and (iii) the grant or exercise price with respect to
any Option, or, if deemed appropriate, make provision for a cash payment to
the holder of any outstanding Option; provided, in each case, that with
respect to "incentive stock options," no such adjustment shall be authorized
to the extent that such adjustment would cause such options to violate
Section 422(b) of the Code or any successor provision; and provided further,
that the number of Shares subject to any Option denominated in Shares shall
always be a whole number. In the event of any reorganization, merger,
consolidation, split-up, spin-off, or other business combination involving
the Company (collectively, a "Reorganization"), the Compensation Committee of
the Board of Directors or the Board of Directors may cause any Award
outstanding as of the effective date of the Reorganization to be cancelled in
consideration of a cash payment or alternate Award made to the holder of such
cancelled Award equal in value to the fair market value of such cancelled
Award. The determination of fair market value shall be made by the
Compensation Committee of the Board of Directors or the Board of Directors,
as the case may be, in their sole discretion.

ARTICLE 8.

MISCELLANEOUS
<PAGE>

8.1. Tax Withholding. The Company shall notify an Optionee or
Participant (or a Permitted Assignee thereof) of any income tax withholding
requirements arising as a result of the grant of any Award, exercise of an
Option or stock appreciation rights or any other event occurring pursuant to
this Plan. The Company shall have the right to withhold from such Optionee
or Participant (or a Permitted Assignee thereof) such withholding taxes as
may be required by law, or to otherwise require the Optionee or Participant
(or a Permitted Assignee thereof) to pay such withholding taxes. If the
Optionee or Participant (or a Permitted Assignee thereof) shall fail to make
such tax payments as are required, the Company or its subsidiaries or
affiliates shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to such Optionee or
Participant or to take such other action as may be necessary to satisfy such
withholding obligations. In satisfaction of the requirement to pay
withholding taxes, the Optionee (or Permitted Assignee) make a written
election (the "Tax Election"), which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the Shares then
issuable to the Optionee (or Permitted Assignee) pursuant to the Option
having an aggregate Fair Market Value equal to the withholding taxes.

8.2. Right of Discharge Reserved. Nothing in the Plan nor the
grant of an Award hereunder shall confer upon any employee, Director or other
individual the right to continue in the employment or service of the Company
or any subsidiary or affiliate of the Company or affect any right that the
Company or any subsidiary or affiliate of the Company may have to terminate
the employment or service of (or to demote or to exclude from future Options
under the Plan) any such employee, Director or other individual at any time
for any reason. Except as specifically provided by the Committee, the
Company shall not be liable for the loss of existing or potential profit from
an Award granted in the event of termination of an employment or other
relationship even if the termination is in violation of an obligation of the
Company or any subsidiary or affiliate of the Company to the employee or
Director.

8.3. Nature of Payments. All Awards made pursuant to the Plan are
in consideration of services performed for the Company or any subsidiary or
affiliate of the Company. Any income or gain realized pursuant to Awards
under the Plan and any share appreciation rights constitutes a special
incentive payment to the Optionee, Participant or Holder and shall not be
taken into account, to the extent permissible under applicable law, as
compensation for purposes of any of the employee benefit plans of the Company
or any subsidiary or affiliate of the Company except as may be determined by
the Committee or by the Directors or directors of the applicable subsidiary
or affiliate of the Company.

8.4. Severability. If any provision of the Plan shall be held
unlawful or otherwise invalid or unenforceable in whole or in part, such
unlawfulness, invalidity or unenforceability shall not affect any other
provision of the Plan or part thereof, each of which remain in full force and
effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or unen-
forceable, such unlawfulness, invalidity or unenforceability shall not
prevent any other payment or benefit from being made or provided under the
Plan, and if the making of any payment in full or the provision of any other
benefit required under the Plan in full would be unlawful or otherwise
invalid or unenforceable, then such unlawfulness, invalidity or unenforce-
ability shall not prevent such payment or benefit from being made or provided
<PAGE>

in part, to the extent that it would not be unlawful, invalid or
unenforceable, and the maximum payment or benefit that would not be unlawful,
invalid or unenforceable shall be made or provided under the Plan.

8.5. Gender and Number. In order to shorten and to improve the
understandability of the Plan document by eliminating the repeated usage of
such phrases as "his or her" and any masculine terminology herein shall also
include the feminine, and the definition of any term herein in the singular
shall also include the plural except when otherwise indicated by the context.

8.6. Governing Law. The Plan and all determinations made and
actions taken thereunder, to the extent not otherwise governed by the Code or
the laws of the United States, shall be governed by the laws of the State of
New York and construed accordingly.

8.7. Termination of Plan. The Plan shall be effective on the date
of the approval of the Plan by the holders of a majority of the shares
entitled to vote thereon, provided such approval is obtained within 12 months
after the date of adoption of the Plan by the Board of Directors. Awards may
be granted under the Plan at any time and from time to time on or prior to
April 17, 2007, on which date the Plan will expire except as to Awards and
related share appreciation rights then outstanding under the Plan. Such
outstanding Awards and stock appreciation rights shall remain in effect until
they have been exercised or terminated, or have expired.

8.8. Captions. The captions in this Plan are for convenience of
reference only, and are not intended to narrow, limit or affect the substance
or interpretation of the provisions contained herein.

<PAGE>

EXHIBIT 10.35

EQUITY RESIDENTIAL PROPERTIES TRUST

AND

WELLSFORD RESIDENTIAL PROPERTY TRUST

JOINT PROXY STATEMENT

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

EQUITY RESIDENTIAL PROPERTIES TRUST

PROSPECTUS

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

WELLSFORD REAL PROPERTIES, INC.

INFORMATION STATEMENT

This Joint Proxy Statement/Prospectus/Information Statement is being
furnished to the shareholders of Equity Residential Properties Trust, a
Maryland real estate investment trust ("EQR"), in connection with the
solicitation of proxies on behalf of the Board of Trustees of EQR ("EQR Board
of Trustees") for use at a special meeting of the holders of common shares of
beneficial interest, $.01 par value per share, of EQR ("EQR Common") to be
held on May 28, 1997 and at any adjournment or postponement thereof ("EQR
Special Meeting"). At the EQR Special Meeting, holders of EQR Common ("EQR
Common Shareholders") will be asked to approve the acquisition of the
multifamily property business of Wellsford Residential Property Trust, a
Maryland real estate investment trust ("Wellsford"), by approving the merger
of EQR and Wellsford (the "Merger") pursuant to an Agreement and Plan of
Merger dated as of January 16, 1997 by and between EQR and Wellsford (the
"Merger Agreement"). A copy of the Merger Agreement is attached hereto as
Appendix A. The surviving trust in the Merger ("Surviving Trust") will be one
of the largest publicly traded real estate investment trusts ("REIT") (based
on the aggregate market value of its outstanding equity capitalization), and
will be a self-administered and self-managed equity REIT. The Surviving Trust
intends to continue the multifamily property business objectives and
acquisition strategies of EQR. The name of the Surviving Trust will be Equity
Residential Properties Trust.

This Joint Proxy Statement/Prospectus/Information Statement also is being
furnished to the shareholders of Wellsford in connection with the solicitation
of proxies on behalf of the Board of Trustees of Wellsford ("Wellsford Board
of Trustees") for use at a special meeting ("Wellsford Special Meeting" and,
together with the EQR Special Meeting, the "Meetings of Shareholders") of the
holders of common shares of beneficial interest, $.01 par value per share, of
Wellsford ("Wellsford Common") to be held on May 28, 1997 and at any
adjournment or postponement thereof. At the Wellsford Special Meeting, holders
of Wellsford Common ("Wellsford Common Shareholders") will be asked to approve
(i) the Merger, including the adoption of an amended and restated declaration
of trust for the Surviving Trust (excluding the Additional Provisions, as
defined below), (ii) modifications to certain sections, including Sections
2.3, 6.6, 9.1, 9.2 and 9.3 of, and the addition of a new Article VII to, the
amended and restated declaration of trust of the Surviving Trust (the
"Additional Provisions") as described more fully in "Proposal Regarding
Additional Declaration of Trust Provisions" below, (iii) the issuance by
Wellsford Real Properties, Inc. ("WRP Newco"), a subsidiary of Wellsford,
shares of which are to be distributed to the Wellsford Common Shareholders,
pro rata, immediately prior to the Merger, of up to 12,000,000 additional
shares of common stock, $.01 par value per share, of WRP Newco ("WRP Newco
Common"), to satisfy the requirements of the American Stock Exchange ("ASE")
(the "Additional Share Offering"), and (iv) the adoption of WRP Newco's 1997
Management Incentive Plan.

This Joint Proxy Statement/Prospectus/Information Statement also is being
furnished to the shareholders of Wellsford to provide them with information
regarding WRP Newco. Immediately prior to the Merger, Wellsford will
contribute certain of its assets to WRP Newco, WRP Newco will assume certain
liabilities of Wellsford, and Wellsford will distribute to the Wellsford
Common Shareholders, pro rata, all of the outstanding shares of WRP Newco
Common owned by Wellsford (the "Distribution"). In addition, an affiliate of
EQR will enter into certain financial and business arrangements with WRP
Newco, as described herein.

In considering whether to approve the Merger, the shareholders of EQR and
Wellsford voting on the Merger should consider, in addition to the other
information in this Joint Proxy Statement/Prospectus/Information Statement,
the matters discussed under "Risk Factors." Such matters include:

. The surviving trust is subject to the risks normally associated with
debt or preferred equity financings, including the risk that the
surviving trust's cash flow will be insufficient to meet required
payments of principal, interest and distributions.
<PAGE>

. A substantial portion of the surviving trust's debt was issued pursuant
to indentures which restrict the amount of indebtedness (including
acquisition financing) that the surviving trust may incur.

. Immediately following consummation of the Merger, the surviving trust
will own properties and bonds collateralized by properties that are
subject to restrictive covenants or deed restrictions.

. Risks associated with (a) a potential change in the relative stock
prices of EQR Common and Wellsford Common prior to the effective time of
the Merger, and (b) a possible reduction in the market price of Survivor
Common following the Merger.

. EQR and Wellsford are large enterprises with operations in a number of
different states. There can be no assurance that costs or other factors
associated with the integration of the two companies would not adversely
affect future combined results of operations or the benefits of expected
cost savings.

. Shareholders of EQR and Wellsford do not have appraisal rights in
connection with the Merger under Maryland law.

Shareholders of Wellsford should also consider the matters discussed under
"Risk Factors" and "WRP Newco Risk Factors" in addition to the matters
discussed above. Such matters include:

. Conflicts of interest due to the fact that certain members of the Board
of Trustees and management of Wellsford have certain interests that
arise in connection with the Merger and the Contribution and
Distribution that are in addition to the interests of shareholders of
Wellsford generally.

. The obligation to pay a substantial break-up fee and/or break-up
expenses under certain circumstances may adversely affect the ability of
Wellsford to engage in another transaction in the event the Merger is
not consummated.

. Upon consummation of the Merger, holders of shares of Wellsford Common
will own approximately 17% of the Survivor Common and will not have
separate approval rights with respect to any actions or decisions of the
surviving trust.

. After the Merger, the distributions payable with respect to Survivor
Common are expected to be less than the distributions payable with
respect to Wellsford Common.

. Ownership of interests in WRP Newco may also involve significant risks.

This Joint Proxy Statement/Prospectus/Information Statement also relates to
the common shares of beneficial interest, $.01 par value per share, of the
Surviving Trust issuable upon consummation of the Merger. On April 18, 1997,
the last reported sales price of a share of EQR Common, on the NYSE was
$43.125. On April 18, 1997, the last reported sales price of a share of
Wellsford Common on the NYSE was $28.875.

This Joint Proxy Statement/Prospectus/Information Statement and the forms of
proxy are first being mailed to all of EQR Common Shareholders and Wellsford
Common Shareholders on or about April 25, 1997.

SEE "RISK FACTORS" BEGINNING ON PAGE 24 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY SHAREHOLDERS OF EQR AND WELLSFORD.

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

THE SECURITIES TO WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS/INFORMATION
STATEMENT RELATE HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS/INFORMATION STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Joint Proxy Statement/Prospectus/Information Statement is
April 25, 1997.
<PAGE>

AVAILABLE INFORMATION

EQR has filed a registration statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended ("Securities Act"),
with the Securities and Exchange Commission (the "Commission") covering the
common shares of beneficial interest and preferred shares of beneficial
interest of the Surviving Trust to be issued in connection with the Merger. As
permitted by the rules and regulations of the Commission, this Joint Proxy
Statement/Prospectus/Information Statement omits certain information, exhibits
and undertakings contained in the Registration Statement. For further
information pertaining to the securities offered hereby, reference is made to
the Registration Statement, including the exhibits filed as a part thereof.

EQR and Wellsford are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information
with the Commission. WRP Newco has filed a registration statement on Form 10
and, as of the date of the Distribution, WRP Newco will also be subject to the
informational requirements of the Exchange Act. Reports, proxy statements and
other information filed by EQR, Wellsford and WRP Newco can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; and at its Regional Offices
located at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661; and
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Web site
is: http://www.sec.gov. The EQR Common and preferred shares of beneficial
interest of EQR ("EQR Preferred" and, collectively, "EQR Shares") and the
Wellsford Common and preferred shares of beneficial interest of Wellsford
("Wellsford Preferred" and, collectively, "Wellsford Shares") are currently
listed on the NYSE and such reports, proxy statements and other information
concerning EQR and Wellsford can be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005. WRP Newco has applied for listing of
the WRP Newco Common on the ASE.

All information contained in this Joint Proxy
Statement/Prospectus/Information Statement with respect to Wellsford and WRP
Newco has been supplied by Wellsford, and all information with respect to EQR
and ERP Operating Limited Partnership, an Illinois limited partnership ("ERP
Operating Partnership"), has been supplied by EQR.

No person is authorized to give any information or to make any
representation not contained in this Joint Proxy Statement/Prospectus/
Information Statement, or incorporated in it by reference, and, if given or
made, such information or representation should not be relied upon as having
been authorized. This Joint Proxy Statement/Prospectus/Information Statement
does not constitute an offer to sell, or a solicitation of an offer to
purchase, the securities offered by this Joint Proxy
Statement/Prospectus/Information Statement, or the solicitation of a proxy, in
any jurisdiction where or from any person to whom it is unlawful to make such
offer, or solicitation of an offer, or proxy solicitation. Neither the
delivery of this Joint Proxy Statement/Prospectus/Information Statement nor
any distribution of the securities offered pursuant to this Joint Proxy
Statement/Prospectus/Information Statement shall, under any circumstances,
create an implication that there has been no change in the affairs of EQR,
Wellsford or WRP Newco since the date of this Joint Proxy
Statement/Prospectus/ Information Statement.

All documents that are incorporated by reference in this Joint Proxy
Statement/Prospectus/Information Statement but which are not delivered
herewith are available without charge (other than exhibits to such documents
which are not specifically incorporated by reference therein) upon request
from, in the case of documents relating to EQR, Two North Riverside Plaza,
Suite 400, Chicago, Illinois 60606, Attention: Cynthia McHugh, telephone (312)
474-1300, and, in the case of documents relating to Wellsford, 610 Fifth
Avenue, New York, New York 10020, Attention: Kim Ezzy, telephone (212) 333-
2300. In order to insure timely delivery of the documents, any request should
be made by May 16, 1997.

I-1
<PAGE>

INFORMATION INCORPORATED BY REFERENCE
IN THIS JOINT PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT

The following documents filed with the Commission by EQR or by Wellsford
pursuant to the Exchange Act are hereby incorporated in this Joint Proxy
Statement/Prospectus/Information Statement by reference:

1. EQR's current report on Form 8-K dated May 23, 1996, as amended.

2. EQR's current report on Form 8-K dated November 15, 1996, as amended.

3. EQR's annual report on Form 10-K for the year ended December 31, 1996,
as amended by Form 10-K/A filed on April 3, 1997.

4. EQR's current report on Form 8-K dated January 16, 1997.

5. EQR's current report on Form 8-K dated March 12, 1997.

6. EQR's current report on Form 8-K dated March 17, 1997.

7. EQR's current report on Form 8-K dated March 19, 1997.

8. EQR's current report on Form 8-K dated March 20, 1997.

9. EQR's current report on Form 8-K dated March 24, 1997.

10. The information prescribed by Items 12, 13, 14, 15 and 16 of Form S-11
contained in EQR's Registration Statement on Form S-11 (No. 33-80420)
dated July 20, 1994, as amended.

11. The description of EQR Common contained in EQR's Registration Statement
on Form 8-A, as amended, dated August 10, 1993.

12. The description of EQR's 9 3/8% Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest, par value $.01 per share,
contained in EQR's Registration Statement on Form 8-A, as amended,
dated May 17, 1995.

13. The description of Depositary Shares each representing a 1/10
fractional interest in EQR's 9 1/8% Series B Cumulative Redeemable
Preferred Shares of Beneficial Interest, par value $.01 per share,
contained in EQR's Registration Statement on Form 8-A dated October 23,
1995.

14. The description of Depositary Shares each representing a 1/10
fractional interest in EQR's 9 1/8% Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest, par value $.01 per share,
contained in EQR's Registration Statement on Form 8-A dated September
10, 1996.

15. Wellsford's annual report on Form 10-K for the year ended December 31,
1996.

16. Wellsford's current report on Form 8-K, dated January 16, 1997.

17. Wellsford's current report on Form 8-K, dated February 3, 1997.

18. The description of Wellsford Common contained in Wellsford's
Registration Statement on Form 8-A dated November 10, 1992 and the
information thereby incorporated by reference contained in Wellsford's
Registration Statement on Form S-11 (No. 33-52406), as amended by
Amendment No. 1 thereto dated November 3, 1992, under the heading
"Description of Shares of Beneficial Interest."

19. The description of Wellsford's Series A Convertible Preferred Shares of
Beneficial Interest, par value $.01 per share, contained in Wellsford's
Registration Statement on Form S-11 (No. 33-69868) dated October 1,
1993 and in Amendments Nos. 1 and 2 thereto dated October 22, 1993 and
November 4, 1993, respectively, under the heading "Description of
Series A Cumulative Convertible Preferred Shares."

20. The description of Wellsford's Series B Cumulative Redeemable Preferred
Shares of Beneficial Interest, par value $.01 per share, contained in
Wellsford's Registration Statement on Form 8-A dated September 5, 1995,
under the heading "Description of Registrant's Securities to be
Registered."

21. All documents subsequently filed by EQR or Wellsford pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the date
of the meetings of shareholders.

Any statement contained herein or in a document incorporated by reference or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Joint Proxy Statement/Prospectus/
Information Statement to the extent that a statement contained in this Joint
Proxy Statement/Prospectus/Information Statement or in any other subsequently
filed document that also is or is deemed to be incorporated by reference in
this Joint Proxy Statement/Prospectus/Information Statement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Joint Proxy Statement/Prospectus/Information Statement.

I-2
<PAGE>

JOINT PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 1
RISK FACTORS.............................................................. 24
Conflicts of Interest................................................... 24
Adverse Consequences of Debt Financing.................................. 24
Restrictions on Indebtedness of the Surviving Trust..................... 25
Other Restrictive Covenants............................................. 25
Potential Change in Relative Stock Prices............................... 25
Risks to Wellsford Common Shareholders.................................. 25
No Appraisal Rights under Maryland Law.................................. 25
Potential Adverse Effects of Combining the Companies.................... 26
General Real Estate Investment Considerations; Changes in Laws.......... 26
Potential Environmental Liability Affecting the Surviving Trust......... 26
Consequences of Failure to Qualify as a REIT............................ 27
Dependence on Key Personnel............................................. 27
Distribution Requirements Potentially Increasing Indebtedness of the
Surviving Trust........................................................ 27
9.8% Ownership Limit.................................................... 28
Limits on Changes in Control............................................ 28
Control and Influence by Significant Shareholders of EQR................ 29
Exemptions for Mr. Zell and Others from Maryland Business Combination
Law which Tend to Inhibit Takeovers.................................... 29
Tax Termination of ERP Operating Partnership............................ 29
WRP NEWCO RISK FACTORS.................................................... 30
General Risks........................................................... 30
Nature of Investments Made by WRP Newco May Involve High Risk;
Illiquidity of Real Estate Investments................................. 30
Difficulty of Locating Suitable Investments; Competition................ 30
Risks of Acquisition, Development, Construction and Renovation
Activities............................................................. 30
Vacancies at Existing Properties; Dependence on Rental Income from Real
Property............................................................... 31
Operating Risks......................................................... 31
Adverse Consequences of Debt Financing.................................. 32
Lack of Control and Other Risks of Equity Investments in and with Third
Parties................................................................ 32
Risks of Investments in Debt Instruments................................ 33
Risks of Investments in Mortgage Loans.................................. 33
Risk of Loss on Investments in Commercial Mortgage-Backed Securities.... 33
Limitations on Remedies................................................. 34
Third-Party Bankruptcy Risks............................................ 34
No Prior Operating History.............................................. 34
Risks of Uninsured Loss................................................. 34
Potential Environmental Liability Related to the Properties............. 34
Dependence on Key Personnel............................................. 35
Tax Consequences of the Distribution.................................... 35
Changes in Policies Without Stockholder Approval........................ 35
Absence of Public Market; Risk of Changes in Share Price................ 35
Costs of Compliance with the Americans with Disabilities Act and Similar
Laws................................................................... 36
Noncompliance with Other Laws........................................... 36
Effect on Common Stock Price of Shares Available for Future Sale........ 36
Hedging Policies/Risks.................................................. 36
Anti-Takeover Effect Resulting From a Staggered Board/Ability of Newco
to Issue Preferred Shares/and Certain Provisions of Maryland Law....... 36
THE MEETINGS OF SHAREHOLDERS.............................................. 38
EQR..................................................................... 38
Wellsford............................................................... 38
THE MERGER................................................................ 39
Terms of the Merger..................................................... 39
Background of the Merger................................................ 40
</TABLE>

i
<PAGE>

<TABLE>
<S> <C>
Reasons for the Merger; Recommendation of the EQR Board of Trustees...... 43
Reasons for the Merger; Recommendation of the Wellsford Board of
Trustees................................................................ 44
Opinion of Financial Advisor--EQR........................................ 46
Opinion of Financial Advisor--Wellsford.................................. 49
Effective Time of the Merger............................................. 54
Representations and Warranties; Conditions to the Merger................. 54
Appraisal Rights......................................................... 55
Regulatory Matters....................................................... 55
Termination Provisions................................................... 55
Termination Fee and Expenses............................................. 56
No Solicitation of Other Transactions.................................... 56
Conversion of Shares..................................................... 57
Appointment of Exchange Agent............................................ 57
Exchange of Certificates................................................. 58
Conduct of Business Pending the Merger................................... 58
Waiver and Amendment..................................................... 60
Stock Exchange Listing................................................... 60
Anticipated Accounting Treatment......................................... 60
Shares Available for Resale.............................................. 60
Contribution of Assets of Wellsford to ERP Operating Partnership......... 60
Federal Income Tax Consequences.......................................... 61
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND DISTRIBUTION................ 69
Benefits of Key Executives............................................... 69
Agreements with the Surviving Trust and ERP Operating Partnership........ 71
Agreements with WRP Newco................................................ 71
SURVIVING TRUST SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA....... 72
EQUITY RESIDENTIAL PROPERTIES TRUST SELECTED HISTORICAL AND COMBINED
FINANCIAL DATA............................................................ 74
WELLSFORD RESIDENTIAL PROPERTY TRUST SELECTED HISTORICAL FINANCIAL DATA.... 76
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF THE SURVIVING TRUST............ 78
POLICIES OF THE SURVIVING TRUST WITH RESPECT TO CERTAIN ACTIVITIES......... 85
Business Objectives and Operating Strategies............................. 85
Acquisition Strategies................................................... 85
Disposition Strategies................................................... 85
Investment Policies...................................................... 86
Financing Policies....................................................... 86
Lending Policies......................................................... 87
Policies with Respect to Other Activities................................ 87
MANAGEMENT AND OPERATION OF THE SURVIVING TRUST AFTER THE MERGER........... 88
Trustees and Executive Officers.......................................... 88
Committees of the Board of Trustees...................................... 90
Compensation of Trustees................................................. 90
Consulting Agreements.................................................... 90
COMPARISON OF RIGHTS OF SHAREHOLDERS....................................... 91
Authorized and Issued Shares............................................. 91
Amendment to Declaration and Bylaws...................................... 91
Special Meetings......................................................... 92
Boards of Trustees....................................................... 92
Mergers, Consolidations, and Sale of Substantially all Assets............ 92
Restrictions on the Ownership, Transfer or Issuance of Shares............ 93
PROPOSAL REGARDING ADDITIONAL DECLARATION OF TRUST PROVISIONS.............. 95
THE CONTRIBUTION AND DISTRIBUTION.......................................... 97
Background of and Reasons for the Distribution........................... 97
Manner of Effecting the Contribution and Distribution.................... 97
Listing and Trading of WRP Newco Common.................................. 97
Conditions; Termination.................................................. 98
Contribution and Distribution Agreement.................................. 98
Tax Consequences of the Distribution..................................... 99
</TABLE>

ii
<PAGE>

<TABLE>
<S> <C>
WELLSFORD REAL PROPERTIES, INC............................................. 101
General.................................................................. 101
Business Strategy........................................................ 101
Initial Capital and Financing............................................ 102
WRP Newco Line of Credit................................................. 103
Management............................................................... 103
WRP NEWCO PRO FORMA CAPITALIZATION......................................... 105
WRP NEWCO DIVIDEND POLICY.................................................. 105
WRP NEWCO'S BUSINESS AND PROPERTIES........................................ 105
Wellsford Commercial Properties.......................................... 105
Wellsford High Yield Investment Portfolio................................ 107
Wellsford Property Development........................................... 108
Cash..................................................................... 110
Legal Proceedings........................................................ 110
CERTAIN AGREEMENTS BETWEEN WRP NEWCO AND ERP OPERATING PARTNERSHIP......... 110
Common Stock and Preferred Stock Purchase Agreement...................... 110
Registration Rights Agreement............................................ 111
Agreement Regarding Palomino Park........................................ 112
Credit Enhancement Agreement............................................. 113
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES OF WRP NEWCO................... 113
Investment Policies...................................................... 113
Financing Policies....................................................... 115
Policies with Respect to Other Activities................................ 115
MANAGEMENT OF WRP NEWCO.................................................... 116
Directors and Executive Officers......................................... 116
Key Employee............................................................. 116
Compensation of Directors................................................ 116
Board Committees......................................................... 116
Executive Compensation................................................... 118
Employment Agreements.................................................... 118
Compensation Committee Interlocks and Insider Participation.............. 119
PRINCIPAL STOCKHOLDERS OF WRP NEWCO........................................ 120
WRP NEWCO'S CERTAIN TRANSACTIONS........................................... 121
MANAGEMENT'S DISCUSSION AND ANALYSIS OF WELLSFORD REAL PROPERTIES, INC.
(PREDECESSOR)............................................................. 121
REPORT OF INDEPENDENT AUDITORS............................................. 122
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED BALANCE SHEETS...... 123
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED INCOME STATEMENT.... 124
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED STATEMENTS OF CASH
FLOW...................................................................... 125
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) PRO FORMA COMBINED INCOME
STATEMENT................................................................. 129
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) PRO FORMA COMBINED BALANCE
SHEET..................................................................... 132
DESCRIPTION OF CAPITAL STOCK OF WRP NEWCO.................................. 135
General.................................................................. 135
Common Stock............................................................. 135
Preferred Stock.......................................................... 136
Classification or Reclassification of Common Stock or Preferred Stock.... 136
Power to Issue Additional Shares of Common Stock and Preferred Stock..... 136
Class A Common Stock..................................................... 136
Series A 8% Convertible Redeemable Preferred Stock....................... 137
CERTAIN PROVISIONS OF MARYLAND LAW AND OF WRP NEWCO'S CHARTER AND BYLAWS... 140
Classification of the Board of Directors................................. 140
Removal of Directors..................................................... 141
Business Combinations.................................................... 141
Amendment to the Charter and Bylaws...................................... 141
Merger, Consolidation, Sale of Assets.................................... 141
Dissolution of WRP Newco................................................. 141
Advance Notice of Director Nominations and New Business.................. 141
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
Meetings of Stockholders.................................................. 142
Limitation of Liability and Indemnification............................... 142
PROPOSAL TO APPROVE WRP NEWCO ADDITIONAL SHARE OFFERING..................... 143
PROPOSAL TO APPROVE WRP NEWCO'S 1997 MANAGEMENT INCENTIVE PLAN.............. 144
LEGAL MATTERS............................................................... 147
EXPERTS..................................................................... 147
SHAREHOLDER PROPOSALS....................................................... 148
APPENDIX A AGREEMENT AND PLAN OF MERGER..................................... A-1
APPENDIX B ARTICLES OF MERGER............................................... B-1
APPENDIX C OPINION OF J.P. MORGAN SECURITIES INC............................ C-1
APPENDIX D OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED.... D-1
</TABLE>

iv
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in the Summary and under captions "Risk Factors," "WRP
Newco Risk Factors," "The Merger--Reasons for the Merger; Recommendation of the
EQR Board of Trustees" "--Reasons for the Merger; Recommendation of the
Wellsford Board of Trustees," "--Opinion of Financial Advisor--EQR" and "--
Opinion of Financial Advisor--Wellsford" and elsewhere in this Joint Proxy
Statement/Prospectus/Information Statement constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of EQR, Wellsford or WRP Newco or industry
results to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, which will, among other things, affect demand for multifamily
properties, availability and credit worthiness of prospective tenants, lease
rents and the availability of financing; adverse changes in the real estate
markets including, among other things, competition with other companies, risks
of real estate development and acquisition; governmental actions and
initiatives; environmental/safety requirements; ability to achieve anticipated
cost savings and operating efficiencies from the Merger; and other changes and
factors referenced in this Joint Proxy Statement/Prospectus/Information
Statement and the documents incorporated herein by reference. With respect to
WRP Newco, such factors may also include: difficulty of locating suitable
investments; illiquidity of real estate investments; risks regarding the
Palomino Park development; limited control of entities in which investments are
made; risks of investments in debt instruments, including reduction in the
value of collateral and the inability to enforce remedies; risks of highly
leveraged transactions; dependence on key personnel; and lack of prior
operating history. See "Risk Factors" and "WRP Newco Risk Factors."

SUMMARY

The following is a summary of certain information contained elsewhere in this
Joint Proxy Statement/Prospectus/ Information Statement. Reference is made to,
and this summary is qualified in its entirety by, the more detailed information
and financial statements contained in this Joint Proxy
Statement/Prospectus/Information Statement, the Appendices hereto and the
documents incorporated by reference herein.

Certain capitalized terms used in this summary are defined elsewhere in this
Joint Proxy Statement/Prospectus/ Information Statement. As used in this Joint
Proxy Statement/Prospectus/Information Statement, except where the context
requires otherwise, "EQR" means Equity Residential Properties Trust, a Maryland
real estate investment trust and its subsidiaries; "ERP Operating Partnership"
means ERP Operating Limited Partnership, an Illinois limited partnership of
which EQR is the general partner, and its subsidiaries; "Wellsford" means
Wellsford Residential Property Trust, a Maryland real estate investment trust,
and its subsidiaries; and "WRP Newco" means Wellsford Real Properties, Inc., a
Maryland corporation, and its subsidiaries.

As used in this Joint Proxy Statement/Prospectus/Information Statement,
"Surviving Trust" means the surviving Maryland real estate investment trust in
the Merger. The name of the Surviving Trust will be Equity Residential
Properties Trust.

PARTIES TO THE MERGER

EQR. EQR, one of the largest publicly traded REITs (based on the aggregate
market value of its outstanding equity capitalization), is a self-administered
and self-managed equity REIT. EQR was organized in March 1993 and commenced
operations as a publicly traded company on August 18, 1993 upon the completion
of its initial public offering (the "IPO"). EQR was formed to continue the
multifamily property business objectives and acquisition strategies of certain
affiliated entities controlled by Mr. Samuel Zell, Chairman of the Board of
Trustees of EQR. These entities had been engaged in the acquisition, ownership
and operation of multifamily properties since 1969. EQR's senior executives
average over 23 years of experience in the multifamily property business.

EQR is the largest publicly traded REIT owner of multifamily properties
(based on the number of apartment units owned and total revenues earned). As of
March 31, 1997, EQR owned or had interests in a portfolio of 250 multifamily
properties containing 75,100 apartment units and managed 12,804 additional
units owned by affiliated entities. As of March 31, 1997, the 250 properties
EQR owned or had interests in had an average occupancy rate of approximately
94%. These properties are located in the following 31 states: Arizona,
Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota,
Missouri, New Hampshire, New Jersey, New Mexico, Nevada, North Carolina, Ohio,
Oklahoma, Oregon, South Carolina, Tennessee, Texas, Virginia and Washington.
<PAGE>

All of EQR's interests in its properties are held directly or indirectly by,
and substantially all of its operations relating to the properties are
conducted through, ERP Operating Partnership. EQR controls ERP Operating
Partnership as the sole general partner and, as of March 31, 1997, owned
approximately 88% of ERP Operating Partnership's outstanding partnership
interests (excluding preference units) ("OP Units"), which may be exchanged by
the holders thereof for either shares of EQR Common, on a one-for-one basis or,
at EQR's option, the cash equivalent thereof.

EQR's corporate headquarters and executive offices are located at Two North
Riverside Plaza, Suite 400, Chicago, Illinois 60606, and its telephone number
is (312) 474-1300. In addition, EQR has regional operations centers in Chicago,
Illinois; Dallas, Texas; Denver, Colorado; Seattle, Washington; Tampa, Florida
and Bethesda, Maryland, and area offices in Atlanta, Georgia; Las Vegas,
Nevada; Phoenix, Arizona; Portland, Oregon; San Antonio and Houston, Texas;
Irvine, California; Ypsilanti, Michigan; Raleigh, North Carolina; and Ft.
Lauderdale, Florida.

Wellsford. Wellsford is a publicly traded, self-administered and self-managed
equity REIT, formed in 1992, which owns and operates multifamily properties
located in the Western, Southwestern and Pacific regions of the United States.
As of December 31, 1996, Wellsford owned 72 properties containing 19,004
apartment units. Wellsford's average occupancy rate on March 24, 1997 was
approximately 95.3%. Wellsford's properties are located in the following
states: Arizona, Colorado, New Mexico, Nevada, Oklahoma, Texas, Utah and
Washington.

Wellsford's corporate headquarters and executive offices are located at 610
Fifth Avenue, New York, New York 10020, and its telephone number is (212) 333-
2300. In addition, Wellsford has operating headquarters in Denver, Colorado and
area offices in Dallas, Texas; San Antonio, Texas; Tulsa, Oklahoma; Oklahoma
City, Oklahoma; Phoenix, Arizona; and Tacoma, Washington.

TERMS OF THE MERGER

The Merger Agreement provides that, upon satisfaction or waiver of the
conditions set forth therein, EQR will be merged into Wellsford. The name of
the Surviving Trust will be Equity Residential Properties Trust. The EQR Board
of Trustees and Wellsford Board of Trustees have each approved the Merger as
set forth in the Merger Agreement. Upon consummation of the Merger (the
"Effective Time"), each outstanding share of Wellsford Common will be converted
into .625 (the "Exchange Ratio") of a common share of beneficial interest, $.01
par value per share, of the Surviving Trust ("Survivor Common"). At the
Effective Time, each outstanding share of EQR Common will be converted into one
share of Survivor Common. At the Effective Time, each outstanding share of
Wellsford Preferred and EQR Preferred will be converted into one preferred
share of the Surviving Trust ("Survivor Preferred") having the same preferences
and other terms as the preferred shares previously outstanding of the same
series; provided, however, the conversion ratio for Wellsford's Series A
Cumulative Convertible Preferred Shares of Beneficial Interest, $.01 par value
per share ("Wellsford Series A") will be adjusted in accordance with its terms.
See "The Merger--Terms of the Merger." At the Effective Time, approximately
3.2% of Survivor Common will be owned by affiliates of the Surviving Trust
(assuming that no outstanding options are exercised and no OP Units are
exchanged for shares of EQR Common).

THE DISTRIBUTION OF WRP NEWCO COMMON

Immediately prior to the Merger, Wellsford will contribute certain of its
assets, including an 80% interest in phases I and II of, and in options to
acquire and develop phases III, IV and V of, a 182-acre five-phase development
project located in Denver, Colorado ("Palomino Park"), a $17.8 million mortgage
receivable (the "Sonterra Loan"), on a 344-unit multifamily property located in
Tucson, Arizona ("Sonterra"), an option to purchase Sonterra and approximately
$18 million of cash to WRP Newco and WRP Newco will assume certain obligations
of Wellsford (the "Contribution"). Immediately after the Contribution and
immediately prior to the Merger, Wellsford will distribute to the holders of
Wellsford Common all the outstanding shares of WRP Newco Common owned by
Wellsford as a distribution subject to income tax under Section 301 of the
Internal Revenue Code of 1986, as amended (the "Code"). Pursuant to the
Distribution, the holders of Wellsford Common will receive one share of WRP
Newco Common for each four shares of Wellsford Common owned by such holder.
Cash will be paid in lieu of fractional shares. The Contribution and the
Distribution are not subject to approval by the shareholders of Wellsford.

No shares of WRP Newco Common will be distributed to EQR Common Shareholders.
EQR Common Shareholders will participate indirectly in WRP Newco through the
interests of ERP Operating Partnership in WRP Newco as described under "Certain
Agreements between WRP Newco and ERP Operating Partnership."

2
<PAGE>

Pre Merger
Chart

3
<PAGE>
Post Merger
Chart

4
<PAGE>

Map

5
<PAGE>

REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF TRUSTEES

The EQR Board of Trustees believes that the Merger, including the
consideration to be paid by EQR, is fair and in the best interests of EQR and
its shareholders. The EQR Trustees who voted on the Merger unanimously approved
the Merger and unanimously recommend that the EQR Common Shareholders vote FOR
the Merger. The EQR Board of Trustees considered certain potentially negative
factors which could arise from the Merger. These included (i) the significant
costs involved in connection with consummating the Merger, (ii) the substantial
management time and effort required to effectuate the Merger and integrate the
businesses of EQR and Wellsford, (iii) the increase in the total debt of the
Surviving Trust from the total debt of EQR, (iv) the possible adverse effects
upon the market for shares of EQR Common and upon EQR's ability to raise
capital and issue equity in both the public and private markets which might
result if the Merger were not consummated, and (v) the risk that the
anticipated benefits of the Merger might not be fully realized. The favorable
factors the EQR Board of Trustees considered in reaching the foregoing
conclusions were the beliefs that (i) the Merger would solidify EQR's
leadership position in the multifamily property industry and the Surviving
Trust will be one of the largest publicly traded REITs (based on the aggregate
market value of its outstanding equity capitalization), (ii) the Merger would
increase operating efficiencies through economies of scale, (iii) the Merger
would provide greater access to the public equity and debt markets, (iv) the
Surviving Trust would be a larger and financially stronger company, which would
make it easier to combine with other entities, (v) the combination of the
Wellsford properties with those of EQR would expand the geographic focus of
EQR's operations in the Southwest, Western and Pacific regions of the United
States, and (vi) the Merger could be effectuated through the issuance of shares
of equity to shareholders in the Merger rather than through the use of cash or
a separate public offering of equity or debt securities. The EQR Board of
Trustees also received the written opinion, dated January 16, 1997, of J.P.
Morgan Securities Inc. ("J.P. Morgan") to the effect that, as of such date and
based upon and subject to certain matters stated therein, the consideration to
be paid by EQR in connection with the Merger was fair, from a financial point
of view, to EQR. See "The Merger--Reasons for the Merger; Recommendation of the
EQR Board of Trustees" and "Opinion of Financial Advisors--EQR."

The Wellsford Board of Trustees believes that the Merger and Distribution are
fair to, and in the best interests of, Wellsford and its shareholders. By
unanimous vote, the Wellsford Board of Trustees approved the Merger, the
Distribution and the transactions contemplated thereby, and unanimously
recommend that the Wellsford Common Shareholders vote FOR the Merger. Although
Wellsford Common Shareholders are not being asked to approve the Distribution,
approval of the Merger will, in effect, constitute approval of the
Distribution. The Board of Trustees reached its decision after careful
consideration of a wide variety of factors, including certain potentially
negative factors. These negative factors consisted of the following: (i) the
risk that the anticipated benefits of the Merger might not be fully realized;
(ii) the significant costs aggregating approximately $23.6 million involved in
connection with consummating the Merger; (iii) the substantial management time
and effort required to effectuate the Merger; (iv) the possibility that
Wellsford may be required, if the Merger Agreement is terminated under certain
circumstances, to pay EQR a Break-Up Fee (as defined herein) of $14.0 million
and to reimburse EQR Break-Up Expenses (as defined herein) of up to $2.5
million; and (v) after the Merger, the distributions payable with respect to
the Survivor Common is expected to be approximately 19.5% less than the
distributions payable with respect to the Wellsford Common based upon the
current annualized distributions per share of EQR Common and Wellsford Common.

In making its determination with respect to the Merger and the Distribution,
the Wellsford Board of Trustees also considered, among other things, the
following advantages: (i) the Merger would afford shareholders a significant
participation in a much larger and more geographically diversified REIT with
greater potential for long-term appreciation and improved access to capital
markets, (ii) the Merger was the best alternative reasonably available to
Wellsford Common Shareholders, providing the greatest feasibility and potential
to maximize shareholder value, (iii) the Merger offered anticipated cost
savings and operating efficiencies to the Surviving Trust, including the
anticipated reduction of overhead expenses by approximately $4.1 million per
year, (iv) the market capitalization of the Surviving Trust is expected to be
approximately $4 billion greater than the then-current market capitalization of
Wellsford, (v) the Exchange Ratio fairly reflected the relative contributions
of both companies to the combined entity, and (vi) the Merger would be tax-
free. The Wellsford Board of Trustees received further confirmation of its
decision in the form of the written opinion of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), dated January 16, 1997, to the effect
that, as of such date and based upon certain assumptions and considerations,
the consideration to be received by Wellsford Common Shareholders pursuant to
the Merger and the Distribution was fair to such shareholders from a financial
point of view. See "The Merger--Reasons for the Merger" and "Opinion of
Financial Advisor--Wellsford."

OPINIONS OF FINANCIAL ADVISORS

EQR. At the meeting of the Board of Trustees of EQR on January 15, 1997, J.P.
Morgan rendered its oral opinion to the Board of Trustees of EQR that, as of
such date, the consideration to be paid by EQR in connection with the proposed

6
<PAGE>

Merger was fair from a financial point of view to EQR. J.P. Morgan has
confirmed its January 15, 1997 oral opinion by delivering its written opinion
to the Board of Trustees of EQR, dated January 16, 1997, that as of such date,
the consideration to be paid by EQR in connection with the proposed Merger was
fair from a financial point of view to EQR. No limitations were imposed by
EQR's Board of Trustees upon J.P. Morgan with respect to the investigations
made or procedures followed by it in rendering its opinions. See "The Merger--
Opinion of Financial Advisor--EQR."

Wellsford. At the meeting of the Board of Trustees of Wellsford on January
16, 1997, Merrill Lynch rendered its oral opinion to the Board of Trustees of
Wellsford, and subsequently on such date Merrill Lynch delivered its written
opinion, that, as of such date and based upon the assumptions made, matters
considered and limits of review, as set forth in such opinion, the proposed
consideration to be received by the holders of Wellsford Common pursuant to the
Merger and the Distribution was fair to such shareholders from a financial
point of view. No limitations were imposed by Wellsford's Board of Trustees
upon Merrill Lynch with respect to the investigations made or procedures
followed by it in rendering its opinions. See "The Merger--Opinion of Financial
Advisor--Wellsford."

RISK FACTORS

In considering whether to approve the Merger, the shareholders of EQR and
Wellsford voting on the Merger should consider, in addition to the other
information in this Joint Proxy Statement/Prospectus/Information Statement, the
matters discussed under "Risk Factors." Such matters include:

. Adverse consequences normally associated with debt or preferred equity
financing, including the risk that the Surviving Trust's cash flow will
be insufficient to meet required payments of principal and interest.

. Risks associated with the potential change in the relative share prices
of EQR Common and Wellsford Common prior to the time the Merger becomes
effective.

. Possible payment of liquidated damages and expenses: the Merger Agreement
provides for a "Break-Up Fee" of $14 million (the "Break-Up Fee") plus
"Break-Up Expenses" of up to $2.5 million (the "Break-Up Expenses")
payable by Wellsford to EQR if the Merger Agreement is terminated by
either EQR or Wellsford under certain circumstances and, within one year
thereafter, Wellsford enters into an agreement regarding an "Acquisition
Proposal," as defined herein, which is consummated. If the Merger
Agreement is terminated by either EQR or Wellsford under certain other
circumstances, either EQR or Wellsford will be required to pay the other
party's Break-Up Expenses of up to $2.5 million. See "The Merger--
Termination Provisions."

. Possible conflicts of interest due to the fact that certain members of
management of Wellsford, pursuant to existing agreements, have certain
interests that arise in connection with the Merger and the Distribution
that are in addition to the interests of shareholders of Wellsford
generally.

. Shareholders of EQR and Wellsford do not have appraisal rights in
connection with the Merger under Maryland law.

INTERESTS OF CERTAIN PERSONS

7
<PAGE>

Further, upon completion of the Merger, Messrs. Lynford and Lowenthal will
each enter into a five-year consulting agreement with ERP Operating Partnership
and will be appointed to the Board of Trustees of the Surviving Trust for a
three-year term. In addition, Donald D. MacKenzie, Executive Vice President--
Director of Operations of Wellsford, will be a Senior Vice President of the
Surviving Trust upon completion of the Merger. The Surviving Trust will
indemnify each trustee and officer of Wellsford for all actions on or prior to
the Effective Time to the same extent such individuals were indemnified by
Wellsford prior to the Effective Time.

EFFECTIVE TIME OF THE CONTRIBUTION AND THE DISTRIBUTION

As stated in "The Contribution and Distribution," the Contribution and the
Distribution will take place immediately prior to the Merger.

EFFECTIVE TIME OF THE MERGER AND CLOSING DATE

The closing ("Closing") of the Merger will take place at 10:00 a.m. on the
date to be specified by EQR and Wellsford, which will be no later than the
third business day after satisfaction or waiver of the conditions set forth in
the Merger Agreement (the "Closing Date"), at the offices of Rudnick & Wolfe,
203 North LaSalle Street, Chicago, Illinois 60601, unless another date or place
is agreed to in writing by the parties. The Merger will become effective at the
time the State Department of Assessments and Taxation of Maryland (the
"Department") accepts for record the Articles of Merger (the "Articles"), or at
such time as EQR and Wellsford will agree should be specified in the Articles
(not to exceed 30 days after the Articles are accepted for record by the
Department). It is currently anticipated that the Merger will be effective on
or about May 30, 1997.

CONDITIONS TO THE MERGER

The obligations of EQR and Wellsford to consummate the Merger are subject to
the satisfaction or waiver of certain conditions, including, among others, (i)
obtaining the requisite approval of the shareholders of EQR and shareholders of
Wellsford, (ii) the absence of any material adverse change in the financial
condition, business or operations of Wellsford or EQR, (iii) the receipt of
certain legal opinions, including opinions with respect to the tax consequences
of the Merger, (iv) the receipt of all material consents, authorizations,
orders and approvals of governmental agencies and third parties, (v) the
consummation of certain transactions by and between EQR, ERP Operating
Partnership and WRP Newco, (vi) the execution of certain agreements between
each of Wellsford and EQR and their respective affiliates, and (vii) the
consummation of the Contribution and the Distribution. EQR and Wellsford each
have the right to waive any conditions to their respective obligations to
consummate the Merger. See "The Merger--Conditions of the Merger."

APPRAISAL RIGHTS

Shareholders of Wellsford and shareholders of EQR are not entitled to
dissenting shareholders' appraisal rights under Maryland law. Maryland law does
not provide appraisal rights to shareholders of a REIT in connection with a
merger if their shares are listed on a national securities exchange, such as
the NYSE, on the record date for determining shareholders entitled to vote on
such merger. All of the shares of EQR and Wellsford outstanding on the record
date for determining the shareholders entitled to vote on the Merger were
listed on the NYSE.

FEDERAL INCOME TAX CONSEQUENCES

Tax Consequences of Merger. The Merger is intended to qualify as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For a more detailed discussion of certain U.S. Federal
income tax consequences of the Merger and certain other matters related
thereto, see "The Merger--Federal Income Tax Consequences."

Tax Consequences of Distribution. To the extent the fair market value of the
shares of WRP Newco Common distributed in the Distribution to Wellsford Common
Shareholders exceeds Wellsford's tax basis in such shares, gain will be
recognized by Wellsford. Assuming Wellsford qualifies as a REIT and has a
dividends paid deduction for distributions to its shareholders at least equal
to its REIT taxable income (as computed before taking into account the
dividends paid deduction), no REIT level tax will be incurred on account of the
Distribution.

8
<PAGE>

The distribution of shares of WRP Newco Common will, however, be taxable to
Wellsford Common Shareholders to the same extent as any other distribution made
by Wellsford to the Wellsford Common Shareholders. Thus, so long as Wellsford
qualifies for taxation as a REIT, distributions with respect to its shares,
including the Distribution, made out of current or accumulated earnings and
profits allocable thereto (and not designated as capital gain dividends) will
be includible by the Wellsford Common Shareholders as ordinary income for
Federal income tax purposes. For a more detailed discussion, see "Tax
Consequences of the Distribution."

TERMINATION

The Merger Agreement provides that it may be terminated in a number of
circumstances at any time prior to the Effective Time, whether before or after
the approval of the Merger by the shareholders of EQR and shareholders of
Wellsford. See "The Merger--Termination Provisions."

TERMINATION FEES

Depending on the reason for the Merger Agreement's termination, Wellsford may
be required to pay EQR either the Break-Up Fee and Break-Up Expenses or Break-
Up Expenses, or EQR may be required to pay Wellsford the Break-Up Expenses. See
"The Merger--Termination Fees and Expenses."

ANTICIPATED ACCOUNTING TREATMENT

The Merger will be treated as a purchase in accordance with Accounting
Principles Board Opinion No. 16.

NO SOLICITATION OF OTHER TRANSACTIONS

Wellsford has agreed that it (and its subsidiaries) will not, and will use
its best efforts to not permit its officers, trustees, employees, agents or
financial advisors to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its shareholders) with
respect to a merger, acquisition, tender offer, exchange offer, consolidation,
sale of assets or similar transactions involving all or any significant portion
of the assets or any equity securities of, it or any of its subsidiaries, other
than the transactions contemplated by the Merger Agreement. The Merger
Agreement does not, however, prohibit Wellsford from entering into discussions
with respect to an unsolicited proposal if the Board of Trustees of Wellsford
determines that such action is required by its duties to its shareholders
imposed by law.

EQR has agreed that if it enters into negotiations with another entity having
a class of equity securities registered under the Exchange Act regarding the
acquisition of such entity (whether effected through a merger, consolidation,
share exchange, tender offer or other form), then at least three business days
prior to executing any definitive agreement with such entity with respect to
such acquisition or making a tender offer for the shares or other ownership
interests of such entity, EQR will notify Wellsford of such transaction and
consult with Wellsford with respect thereto, it being understood, however, that
Wellsford will have no approval rights with respect thereto.

CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES

Each share of Wellsford Common outstanding immediately prior to the Effective
Time will be converted into .625 share of validly issued, fully paid and
nonassessable Survivor Common. Each share of EQR Common outstanding immediately
prior to the Effective Time will be converted into one share of validly issued,
fully paid and nonassessable Survivor Common. Each share of EQR Preferred and
Wellsford Preferred outstanding immediately prior to the Effective Time will
continue as one validly issued, fully paid and nonassessable share of Survivor
Preferred, with all the preferences, rights and powers that each share
previously had as shares issued by EQR or Wellsford, as the case may be, and
will rank pari passu with each other outstanding Survivor Preferred; provided,
however, that the conversion ratio relating to the Wellsford Series A will be
adjusted in accordance with its terms.

All shares of Wellsford Common, when converted pursuant to the Merger, will
no longer be outstanding and will automatically be canceled and retired and
each holder of a certificate representing Wellsford Common will cease to have
any rights with respect thereto, except the right to receive shares of Survivor
Common, and cash in lieu of any fractional shares of Survivor Common, as well
as any distributions declared with respect thereto with a record date after the
Effective Time. At the Effective Time, each certificate representing
outstanding shares of Wellsford Preferred will cease to have any

9
<PAGE>

rights with respect to such shares, except the right to receive a certificate
of the Surviving Trust representing an equal number of Survivor Preferred.
Wellsford Common Shareholders should not tender their certificates for
Wellsford Common with their proxy. As promptly as practicable after the
Effective Time, Boston EquiServe LLP, an affiliate of First National Bank of
Boston, as the exchange agent ("Exchange Agent"), will mail to the shareholders
of Wellsford transmittal materials for use in exchanging certificates
evidencing Wellsford Shares for certificates evidencing shares of the Survivor
Common or Survivor Preferred ("Survivor Shares"). See "The Merger--Exchange of
Certificates."

At the Effective Time, each certificate evidencing outstanding shares of EQR
Common and EQR Preferred will, without any action by the holders thereof,
thereafter evidence the same number of shares of Survivor Common and Survivor
Preferred, as the case may be.

MANAGEMENT OF THE SURVIVING TRUST

The Surviving Trust will initially have twelve trustees. The Board of
Trustees of the Surviving Trust will be made up of the current trustees of EQR,
Jeffrey H. Lynford, the Chairman of the Wellsford Board of Trustees, and Edward
Lowenthal, a Trustee and the President of Wellsford. The Board of Trustees of
the Surviving Trust will be divided into three equally numbered classes serving
staggered three-year terms. One class will serve as trustees until the 1997
annual meeting of shareholders, one class will serve as trustees until the 1998
annual meeting of shareholders, and one class will serve as trustees until the
1999 annual meeting of shareholders.

Senior management of the Surviving Trust will be drawn from the present
management of EQR. As a condition to the consummation of the Merger, Jeffrey H.
Lynford and Edward Lowenthal will enter into consulting agreements with ERP
Operating Partnership. In addition, Donald MacKenzie, Executive Vice
President--Director of Operations of Wellsford, will be a Senior Vice President
of the Surviving Trust upon completion of the Merger. See "The Merger--
Interests of Certain Persons in the Merger and Distribution."

After the Merger, management and control of ERP Operating Partnership will be
vested in the Surviving Trust, which will serve as its sole general partner.

The Merger Agreement also contains provisions relating to, among other
things, employee benefits and indemnification and liability coverage of former
trustees and officers of Wellsford after the Merger. See "The Merger--Interests
of Certain Persons in the Merger and Distribution."

THE MEETINGS OF SHAREHOLDERS

EQR

The EQR Special Meeting has been called to consider and vote on the approval
of the Merger. The EQR Special Meeting will be held on May 28, 1997 at 10:00
a.m., local time, at One North Franklin, Chicago, Illinois. Only holders of
record of EQR Common at the close of business on April 14, 1997 will be
entitled to vote at the EQR Special Meeting. Each holder of EQR Common is
entitled to one vote per share on the Merger as proposed in the notice of the
EQR Special Meeting. EQR had outstanding 53,713,158 shares of EQR Common as of
the close of business on April 1, 1997, of which 1,022,666 shares (or
approximately 1.9% of the outstanding shares of EQR Common) (excluding 681,534
shares where beneficial ownership is disclaimed) were owned beneficially by the
officers and trustees of EQR, and such persons have indicated their intention
to vote such shares in favor of each of the proposals. Approval of the Merger
requires the affirmative vote of two-thirds of the holders of the outstanding
shares of EQR Common.

Wellsford

The Wellsford Special Meeting has been called to consider and vote on the
approval of the Merger, including the adoption of an amended and restated
declaration of trust of the Surviving Trust, the approval of the Additional
Provisions, the approval of the Additional Share Offering and the adoption of
WRP Newco's 1997 Management Incentive Plan. See
"--Proposal Regarding Additional Declaration of Trust Provisions," "--Proposals
Regarding WRP Newco," "Proposal Regarding Additional Declaration of Trust
Provisions," "Proposal to Approve WRP Newco Additional Share Offering" and
"Proposal to Approve WRP Newco's 1997 Management Incentive Plan." The Wellsford
Special Meeting will be held on May 28, 1997, at 10:00 a.m., local time, at The
Princeton Club, 15 West 43rd Street, New York, New York. Only holders of record
of Wellsford Common at the close of business on April 14, 1997 will be entitled
to notice of and to vote at the Wellsford Special Meeting. Each holder of
Wellsford Common is entitled to one vote per share as proposed in the notice of

10
<PAGE>

the Wellsford Special Meeting. Wellsford had outstanding 17,261,897 shares of
Wellsford Common as of the close of business on April 18, 1997, of which
599,828 shares (or approximately 3.5% of the outstanding shares of Wellsford
Common) (excludes 29,727 shares where beneficial ownership is disclaimed) were
owned beneficially by the officers and trustees of Wellsford, and such persons
have indicated their intention to vote such shares in favor of the proposals.
Approval of the Merger requires the affirmative vote of the Wellsford Common
Shareholders holding a majority of the Wellsford Common Shares. Approval of the
Additional Provisions requires the affirmative vote of the holders of two-
thirds of the outstanding shares of Wellsford Common. Approval of the
Additional Share Offering and adoption of WRP Newco's 1997 Management Incentive
Plan require the affirmative vote of the holders of a majority of the
outstanding shares of Wellsford Common voting. Wellsford Common Shareholders
may revoke their proxies at any time prior to the voting thereof by giving
written notice of such revocation to Wellsford, by executing and delivering a
proxy bearing a later date, or by attending the Wellsford Special Meeting and
voting in person.

SURVIVING TRUST SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

The following tables set forth the summary unaudited pro forma combined
financial data for the Surviving Trust as a combined entity, giving effect to
the Merger as if it had occurred on the dates indicated herein, after giving
effect to the pro forma adjustments described in the notes to the unaudited pro
forma financial statements included elsewhere in the Joint Proxy
Statement/Prospectus/Information Statement.

The summary unaudited pro forma combined operating data are presented as if
the Merger had been consummated at the beginning of the period presented.

The summary unaudited pro forma combined balance sheet data is presented as
if the Merger had occurred on December 31, 1996. The Merger has been accounted
for under the purchase method of accounting in accordance with the Accounting
Principles Board Opinion No. 16. In the opinion of management, all significant
adjustments necessary to reflect the effects of the Merger have been made.

The summary pro forma financial information should be read in conjunction
with, and is qualified in its entirety by, the respective historical audited
financial statements and notes thereto of EQR and Wellsford incorporated by
reference into this Joint Proxy Statement/Prospectus/Information Statement and
the unaudited pro forma financial statements and notes thereto included
elsewhere in the Joint Proxy Statement/Prospectus/Information Statement.

The summary unaudited pro forma operating and balance sheet data are
presented for comparative purposes only and are not necessarily indicative of
what the actual combined results of EQR and Wellsford would have been for the
period and dates presented. Nor does such data purport to represent the results
of future periods.

11
<PAGE>

SURVIVING TRUST

OPERATING DATA:

<TABLE>
<CAPTION>
PRO FORMA YEAR ENDED
DECEMBER 31, 1996
----------------------
(AMOUNT IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C>
REVENUES:
Rental income........................................... $578,820
Fee and asset management................................ 6,749
Interest income-investment in mortgage notes............ 12,819
Interest and other income............................... 11,061
--------
Total revenues...................................... 609,449
--------
EXPENSES:
Property and maintenance................................ 167,526
Real estate taxes and insurance......................... 54,010
Property management..................................... 21,506
Fee and asset management................................ 3,837
Depreciation............................................ 124,211
Interest:
Expense incurred...................................... 103,538
Amortization of deferred financing costs.............. 4,242
General and administrative............................ 10,353
--------
Total Expenses...................................... 489,223
--------
Income before gain on disposition of properties and
(loss) on joint venture communities.................... 120,226
Gain on disposition of properties....................... 22,336
(Loss) on joint venture communities..................... (58)
--------
Income before extraordinary item and allocation to
Minority Interests..................................... 142,504
Extraordinary Item:
Write-off of unamortized cost on refinanced debt........ (3,512)
--------
Income before allocation to Minority Interests.......... 138,992
Income allocated to Minority Interests.................. (15,706)
--------
Net income.............................................. 123,286
Preferred distributions................................. 41,563
--------
Net income available for Common Shares.................. $ 81,723
========
Net income per weighted average Common Share
outstanding............................................ $ 1.53
========
Weighted average Common Shares outstanding.............. 53,317
========
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, 1996
-----------------
<S> <C>
BALANCE SHEET DATA:
(at end of period)
Real estate, after accumulated depreciation................... $3,708,310
==========
Total assets.................................................. $3,968,482
==========
Total debt.................................................... $1,576,869
==========
Minority Interests............................................ $ 190,793
==========
Shareholders' Equity.......................................... $2,048,133
==========
</TABLE>

12
<PAGE>

EQUITY RESIDENTIAL PROPERTIES TRUST SUMMARY HISTORICAL AND COMBINED FINANCIAL
DATA

The following tables set forth summary historical and combined financial data
for EQR. The summary historical combined financial data for each of the years
ended December 31, 1992, 1993, 1994, 1995 and 1996 are derived from the audited
financial statements of EQR as reported in its Annual Reports on Form 10-K. The
summary historical financial data should be read in conjunction with, and is
qualified in its entirety by, the historical and combined financial statements
and notes thereto of EQR incorporated by reference into this Joint Proxy
Statement/Prospectus/Information Statement.

EQUITY RESIDENTIAL PROPERTIES TRUST

CONSOLIDATED AND COMBINED HISTORICAL FINANCIAL INFORMATION

(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues
Rental income......... $ 454,412 $ 373,919 $ 220,727 $104,388 $ 86,597
Fee and asset
management........... 6,749 7,030 4,739 4,651 4,215
Interest income-
investment in
mortgage notes....... 12,819 4,862 -- -- --
Interest and other
income............... 4,405 4,573 5,568 3,031 2,161
---------- ---------- ---------- -------- ---------
Total revenues.... 478,385 390,384 231,034 112,070 92,973
---------- ---------- ---------- -------- ---------
Expenses
Property and
maintenance.......... 127,172 112,186 66,534 35,324 30,680
Real estate taxes and
insurance............ 44,128 37,002 23,028 11,403 10,274
Property management... 17,512 15,213 10,249 4,938 2,912
Property management-
non-recurring........ -- -- 879 -- --
Fee and asset
management........... 3,837 3,837 2,056 2,242 2,403
Depreciation.......... 93,253 72,410 37,273 15,384 13,442
Interest:
Expense incurred.... 81,351 78,375 37,044 26,042 31,926
Amortization of
deferred financing
costs.............. 4,242 3,444 1,930 3,322 2,702
Refinancing costs..... -- -- -- 3,284 --
General and
administrative....... 9,857 8,129 6,053 1,994 1,915
---------- ---------- ---------- -------- ---------
Total expenses.... 381,352 330,646 185,046 103,933 96,254
---------- ---------- ---------- -------- ---------
Income (loss) before
gain on disposition of
properties,
extraordinary items and
allocation to Minority
Interests.............. 97,033 59,738 45,988 8,137 (3,281)
Gain on disposition of
properties............. 22,402 21,617 -- -- --
---------- ---------- ---------- -------- ---------
Income (loss) before
extraordinary items and
allocation to Minority
Interests.............. 119,435 81,355 45,988 8,137 (3,281)
Extraordinary Items:
Write-off of unamortized
costs on refinanced
debt................... (3,512) -- -- -- --
Gain on early
extinguishment of debt. -- 2,000 -- -- --
Gain on discharge of
indebtedness........... -- -- -- 1,792 18,203
---------- ---------- ---------- -------- ---------
Income before allocation
to Minority Interests.. 115,923 83,355 45,988 9,929 14,922
Income allocated to
Minority Interests..... (14,299) (15,636) (11,570) (3,834) --
---------- ---------- ---------- -------- ---------
Net income.............. 101,624 67,719 34,418 6,095 14,922
Preferred distributions. (29,015) (10,109) -- -- --
---------- ---------- ---------- -------- ---------
Net income available for
Common Shares.......... $ 72,609 $ 57,610 $ 34,418 $ 6,095 $ 14,922
========== ========== ========== ======== =========
Net income per weighted
average Common Share
outstanding............ $ 1.70 $ 1.68 $ 1.34 $ .42 --
Weighted average Common
Shares outstanding..... 42,586 34,358 25,621 14,601 --
BALANCE SHEET DATA (at
end of period):
Real estate, before
accumulated
depreciation......... $2,983,510 $2,186,636 $1,963,476 $634,577 $ 358,212
Real estate, after
accumulated
depreciation......... $2,681,998 $1,969,453 $1,770,735 $478,210 $ 218,825
Total assets.......... $2,986,127 $2,141,260 $1,847,685 $535,914 $ 238,878
Total debt............ $1,254,274 $1,002,219 $ 994,746 $278,642 $ 343,282
Minority Interests.... $ 150,637 $ 168,963 $ 177,438 $ 83,159 $ --
Shareholders' Equity
(Net Deficit)........ $1,458,830 $ 884,517 $ 609,936 $146,485 $(122,094)
</TABLE>

13
<PAGE>

WELLSFORD RESIDENTIAL PROPERTY TRUST SUMMARY HISTORICAL FINANCIAL DATA

The following tables set forth summary historical financial data for
Wellsford. The summary historical financial data for each of the years ended
December 31, 1992, 1993, 1994, 1995 and 1996 are derived from the audited
financial statements of Wellsford as reported in its Annual Reports on Form 10-
K. The summary historical financial data should be read in conjunction with,
and is qualified in its entirety by, the historical financial statements and
notes thereto of Wellsford incorporated by reference into this Joint Proxy
Statement/Prospectus/Information Statement. Certain reclassifications have been
made to Wellsford's historical financial data to conform to EQR's presentation.

WELLSFORD RESIDENTIAL PROPERTY TRUST

SUMMARY HISTORICAL FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
HISTORICAL (000S EXCEPT PER SHARE DATA)
--------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues................... $ 131,821 $ 131,232 $ 82,794 $ 42,007 $ 26,229
Expenses................... (109,035) (113,712) (73,299) (34,816) (26,991)
Gain (loss) on sale of
investment communities.... (66) (819) -- 882 --
Loss on joint venture
communities............... (58) (279) -- -- --
--------- --------- -------- -------- --------
Income (loss) before
extraordinary item........ $ 22,662 $ 16,422 $ 9,495 $ 8,073 $ (762)
========= ========= ======== ======== ========
Net income (loss).......... $ 22,662 $ 10,869 $ 9,495 $ 8,073 $ (762)
Preferred dividends........ (12,548) (8,973) (7,000) (972) --
--------- --------- -------- -------- --------
Net income (loss) available
for common shareholders... $ 10,114 $ 1,896 $ 2,495 $ 7,101 $ (762)
========= ========= ======== ======== ========
Net income (loss) per
common share.............. $ 0.59 $ 0.11 $ 0.25 $ 0.91 $ (0.34)
========= ========= ======== ======== ========
Weighted average number of
common shares outstanding. 17,057 16,938 10,070 7,813 2,273
========= ========= ======== ======== ========
Real Estate assets before
accumulated depreciation.. $ 795,580 $ 736,399 $747,519 $301,389 $156,568
Real estate assets after
accumulated depreciation.. 711,614 677,908 712,742 282,224 143,787
Total Assets............... 756,289 729,638 745,754 322,400 165,963
Mortgages Payable.......... 82,731 77,137 208,858 24,203 17,155
Convertible note payable... -- -- -- 46,070 55,358
Unsecured credit facility.. 18,075 -- 140,000 -- --
Senior unsecured notes..... 248,496 223,307 -- -- --
Shareholders' equity....... 376,686 398,359 371,655 239,775 89,986
Cash dividends declared per
Series A preferred share.. $ 1.75 $ 1.75 $ 1.75 $ 0.24 $ --
========= ========= ======== ======== ========
Cash dividends declared per
Series B preferred share.. $ 2.41 $ 0.86 $ -- $ -- $ --
========= ========= ======== ======== ========
Cash dividends declared per
common share.............. $ 1.94 $ 1.92 $ 1.80 $ 1.68 $ 0.16
========= ========= ======== ======== ========
</TABLE>

14
<PAGE>

COMPARATIVE PER SHARE DATA

The following summary presents selected comparative unaudited per share
information for EQR and Wellsford on an historical basis and EQR and Wellsford
on a pro forma combined basis assuming the combination had been effective
throughout the periods presented. Wellsford pro forma equivalent per share
amounts are presented with respect to pro forma information. Such per share
amounts allow comparison of historical information with respect to the value of
one share of Wellsford Common to the corresponding information with respect to
the projected value of one share of Survivor Common as a result of the Merger
by multiplying the pro forma amounts by the Exchange Ratio of .625 to 1.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Net Income Per Common Share
EQR...................................................... $ 1.70
Wellsford................................................ .59
Surviving Trust pro forma combined (A)................... 1.53
Wellsford pro forma equivalent (B)....................... .96
Cash Distributions Declared Per Common Share
EQR...................................................... $ 2.40
Wellsford................................................ 1.94
Surviving Trust pro forma combined (A)................... 2.40
Wellsford pro forma equivalent (B)....................... 1.50
Shareholders' Equity Per Common Share
EQR...................................................... $28.52
Wellsford................................................ 22.03
Surviving Trust pro forma combined (A)................... 33.10
Wellsford pro forma equivalent (B)....................... 20.69
</TABLE>
- -------
(A) The pro forma combined Net Income Per Common Share and Cash Distributions
Declared Per Common Share data for the Surviving Trust has been prepared
assuming that in the Merger each share of Wellsford Common is converted
into .625 of a share of Survivor Common resulting in total weighted average
outstanding shares of Survivor Common of 53,317,000 for the year ended
December 31, 1996. For the Shareholder's Equity Per Common Share data,
total outstanding shares of Survivor Common was 61,886,000 for the year
ended December 31, 1996.
(B) The Wellsford pro forma equivalent is determined by multiplying the
Exchange Ratio (.625) by the Surviving Trust pro forma combined per share
amounts so that the per share amounts are equated to the comparative values
for each share of Wellsford Common.

COMPARATIVE SHARE PRICES

EQR

The EQR Common has been traded on the NYSE under the symbol "EQR" since
August 11, 1993. The following table sets forth the quarterly high and low
sales prices per share of EQR Common reported on the NYSE, as well as the
quarterly distributions declared per share of EQR Common, from January 1, 1995
through April 18, 1997.

<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS
------ ------ -------------
<S> <C> <C> <C>
1995
First Quarter............................... 29 1/8 25 5/8 .53
Second Quarter.............................. 29 3/4 24 7/8 .53
Third Quarter............................... 31 3/4 27 3/4 .53
Fourth Quarter.............................. 31 7/8 28 .59
1996
First Quarter............................... 33 3/4 28 1/4 .59
Second Quarter.............................. 33 1/2 30 7/8 .59
Third Quarter............................... 36 1/8 32 7/8 .59
Fourth Quarter.............................. 43 3/8 35 5/8 .625
1997
First Quarter............................... 46 39 3/4 .625(1)
Second Quarter (through April 18, 1997)..... 45 42 3/4 N/A
</TABLE>
- -------
(1) The first quarter distribution was paid on April 11, 1997 to shareholders
of record as of March 28, 1997 and represents an annual distribution rate
of $2.50 per share.

15
<PAGE>

On April 18, 1997, the last reported sale price of a share of EQR Common on
the NYSE was 43 1/8 per share. On January 16, 1997, the last full trading day
prior to the pubic announcement of the Merger, the last reported sale price of
a share of EQR Common on the NYSE was 43 3/8. As of April 18, 1997, EQR's
transfer agent reported 544 record holders of EQR Common and, as of April 1997,
The Depository Trust Company held EQR Common on behalf of approximately 19,500
beneficial owners.

Wellsford

The Wellsford Common has been traded on the NYSE under the symbol "WRP" since
November 20, 1992. The following table sets forth the quarterly high and low
sales prices per share of Wellsford Common reported on the NYSE, as well as the
quarterly distributions declared per share of Wellsford Common from January 1,
1995 through April 18, 1997.

<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS
------ ------ -------------
<S> <C> <C> <C>
1995
First Quarter............................... 21 3/4 19 1/4 $ .48
Second Quarter.............................. 22 3/4 20 .48
Third Quarter............................... 22 3/4 21 1/8 .48
Fourth Quarter.............................. 23 1/8 19 5/8 .48
1996
First Quarter............................... 24 1/4 21 3/8 .485
Second Quarter.............................. 22 7/8 20 1/2 .485
Third Quarter............................... 23 1/8 20 3/4 .485
Fourth Quarter.............................. 25 21 1/2 .485
1997
First Quarter............................... 31 3/4 24 1/8 .485
Second Quarter (through April 18, 1997)..... 30 1/2 28 1/2 N/A
</TABLE>

On April 18, 1997, the last reported sale price of a share of Wellsford
Common on the NYSE was 28 7/8 per share. On January 16, 1997, the last full
trading day prior to the pubic announcement of the Merger, the last reported
sale price of a share of Wellsford Common on the NYSE was 25 3/4. As of April
18, 1997, Wellsford's transfer agent reported 629 record holders of Wellsford
Common and, as of April 18, 1997, The Depository Trust Company held Wellsford
Common on behalf of approximately 13,500 beneficial owners.

BECAUSE THE EXCHANGE RATIO IS FIXED AND THE MARKET PRICE OF EQR COMMON IS
SUBJECT TO FLUCTUATION, THE MARKET VALUE OF THE SURVIVOR COMMON THAT HOLDERS OF
WELLSFORD COMMON WILL RECEIVE IN THE MERGER MAY INCREASE OR DECREASE PRIOR TO
AND FOLLOWING THE MERGER. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR EQR COMMON AND WELLSFORD COMMON.

PROPOSAL REGARDING ADDITIONAL DECLARATION OF TRUST PROVISIONS

Removal of Trustees. Section 2.3 of the Wellsford Declaration currently
provides for the removal of Trustees, with or without cause, by the affirmative
vote of the holders of not less than two-thirds of the Wellsford Shares then
outstanding and entitled to vote on the election of trustees. The Additional
Provisions will provide for the removal of Trustees only with cause.

16
<PAGE>

Amendment to Declaration. Section 9.1 of the Wellsford Declaration currently
provides for its amendment by the affirmative vote of the holders of not less
than a majority of the Wellsford Shares outstanding and entitled to vote
thereon, except that amendments related to the removal of trustees, the
restrictions on the ownership of Wellsford Shares, the reorganization of
Wellsford and the merger, consolidation or sale of all or substantially of
Wellsford's property must be approved by the affirmative vote of the holders of
two-thirds of the Wellsford's Shares then outstanding and entitled to vote on
the matter. The Additional Provisions will require the foregoing to be approved
by a two-thirds vote of the Survivor Shares then outstanding and entitled to
vote thereon.

Mergers, Consolidation, or Sale of Trust Property. Section 9.2 of the
Wellsford Declaration currently states that, upon the affirmative vote of the
holders of not less than two-thirds of the Wellsford Shares then outstanding
and entitled to vote thereon, the trustees of Wellsford may reorganize
Wellsford by creating a separate entity into which Wellsford will merge or sell
its assets. In addition, Section 9.3 of the Wellsford Declaration currently
provides that if Wellsford is not the surviving entity in a merger or
consolidation, or in the event of a sale of all or substantially all of
Wellsford's property, that transaction must be approved by two-thirds of the
Wellsford Shares then outstanding and entitled to vote thereon. In all other
cases, such a merger or consolidation need only be approved by a majority of
the Wellsford Shares then outstanding and entitled to vote thereon. The
Additional Provisions provide that any merger, consolidation, or sale of all or
substantially all of the Surviving Trust's property will be required to be
approved by the holders of a majority of the Survivor Shares then outstanding
and entitled to vote thereon. For a more detailed description of the Additional
Provisions, see "Proposal Regarding Additional Declaration of Trust
Provisions."

WELLSFORD REAL PROPERTIES, INC.

WRP Newco was organized to create and realize value by identifying and making
opportunistic real estate investments through the direct acquisition,
rehabilitation, development, financing and management of real properties and/or
participation in these activities through the purchase of debt or equity
securities of entities engaged in such real estate businesses. Management will
concentrate its efforts on defining and building focused operating businesses
with recurring sources of income. WRP Newco intends to maximize shareholder
value over time through growth in cash flow and net asset value per share.

WRP Newco believes that while liquidity has returned to many real estate
markets and that the supply and demand of many real estate asset classes are in
relative equilibrium, there are specific opportunities which are expected to
continue to exist because of market inefficiencies and impediments to
investment, such as transactional complexity, time-consuming regulatory
approvals, the prospect of no or limited immediate cash flow and a lack of
available property information and market information analysis. In this regard,
WRP Newco will initially focus its investments on three distinct aspects of the
real estate business which management believes currently offer such
opportunities. They are (i) acquiring underperforming office and other
commercial properties below replacement cost, renovating and/or repositioning
them, and owning, operating and/or reselling such properties, (ii) investing in
real estate-related debt instruments with the potential for high-yields or
returns more characteristic of equity ownership and (iii) engaging in selective
property development when justified by expected returns. As opportunities
emerge, WRP Newco may in the future expand its real estate-related businesses
and activities.

WRP Newco currently does not intend to qualify as a REIT under the Code.
Consequently, WRP Newco will have the flexibility to respond quickly to
opportunities without the structural limitations inherent in REITs and to
operate, when deemed advantageous by management, on a more highly leveraged
basis than most REITs. By not qualifying as a REIT under the Code (which would
require WRP Newco to distribute each year at least 95% of its net taxable
income, excluding capital gains), WRP Newco will have the ability and currently
intends to retain for reinvestment its cash flow generated from operations and
to sell properties without the substantial income tax penalties which may be
imposed on REITs in such transactions. In addition, WRP Newco will differ from
opportunity funds that are typically structured as private partnerships. In
that regard, the business of WRP Newco will be conducted without the payment of
acquisition, disposition or advisory fees to general partners which should
result in additional cash flow being available for reinvestment as well as
mitigate the potential for conflicts of interest. In addition, unlike investors
in opportunity funds, WRP Newco's shareholders are expected to have enhanced
liquidity through their ability to sell or margin their stock. WRP Newco also
hopes to attract a broader range of investors because there will be no
stipulated investment minimum. However, unlike REITs and opportunity funds, WRP
Newco will be subject to corporate level taxation.

17
<PAGE>

team with experience in real estate acquisitions, development, asset management
and financing. WRP Newco believes that the over 50 years of combined experience
of management in real estate, capital markets and public company operations,
their knowledge, credibility, and business relationships, and their
demonstrated track record of recognizing and profiting from emerging real
estate trends should help WRP Newco accomplish its business objectives. Since
the completion by Wellsford f the initial public offering of its common shares
of beneficial interest in November 1992 (the "Wellsford IPO"), Messrs. Lynford
and Lowenthal, through Wellsford Residential, acquired 69 multifamily
properties containing 16,332 units. From calendar year 1992 through calendar
year 1996, Wellsford's revenues increased from $26.5 million to $131.8 million,
representing a compounded annual growth rate of approximately 49%, and
Wellsford's earnings before interest, depreciation and amortization ("Wellsford
EBITDA") increased from $13.8 million to $72.8 million, representing a
compounded annual growth rate of approximately 52%. In analyzing potential
investments and market trends and inefficiencies, management has reviewed, and
will continue to review, current economic and market information.

To date, WRP Newco has implemented its business strategy by identifying,
negotiating and, except in one instance, consummating the following initial
investments: (i) six office buildings located in Northern New Jersey containing
an aggregate of approximately 940,400 gross square feet, five of which are
vacant, acquired below replacement cost for an aggregate of $47.6 million, or
$50 per gross square foot of building area, with respect to which WRP Newco
currently expects to spend an aggregate of approximately $13.7 million in
renovation and repositioning costs; (ii) a $20 million subordinated secured
mezzanine loan with respect to a class A office building located at 277 Park
Avenue, New York City, expected to close in April 1997, (iii) a $17.8 million
mortgage on, and option to purchase, a 344-unit class A residential apartment
complex in Tucson, Arizona and (iv) an approximate 80% interest in Phases I and
II of, and in options to acquire (at fixed prices) and develop Phases III, IV
and V of, a 1,880-unit class A multifamily development in a suburb of Denver,
Colorado. See "WRP Newco's Business and Properties".

Upon completion of the Distribution and consummation of the Merger, WRP Newco
expects to have available various sources of capital, financing and credit
support, including (i) the proceeds of $3.5 million from the acquisition by ERP
Operating Partnership of WRP Newco's Class A common stock, par value $.01 per
share ("WRP Newco Class A Common") at a price equal to the per share sales
price to any institutional purchaser of WRP Newco Common Stock on or prior to
the Effective Time or, if there is no such purchaser, at a price equal to the
book value (the "WRP Newco Book Value") per share of WRP Newco Common Stock
(which is currently estimated to be $10.43 per share) at the time of the Merger
(the "Issuance Price"), (ii) the commitment of ERP Operating Partnership to
acquire at WRP Newco's option up to $25 million of WRP Newco's Series A 8%
Convertible Redeemable Preferred Stock ("WRP Newco Series A Preferred"), each
share of WRP Newco Series A Preferred being convertible into shares of WRP
Newco Common Stock at a premium equal to 8% of the Issuance Price ("ERP
Preferred Commitment") and (iii) a $50 million two-year line of credit
(extendible for one year) from The First National Bank of Boston ("Bank of
Boston") and Morgan Guaranty Trust Company of New York ("Morgan Guaranty")
("WRP Newco Line of Credit") which will initially bear interest at an annual
rate equal to LIBOR plus 175 basis points. The ERP Preferred Commitment will be
pledged as security for the WRP Newco Line of Credit. See "Wellsford Real
Properties, Inc.--Initial Capital and Financing" and "Description of Capital
Stock of WRP Newco--Series A 8% Convertible Redeemable Preferred Stock".

WRP NEWCO RISK FACTORS

In addition to general investment and real estate risks and those factors set
forth elsewhere in this Joint Proxy Statement/Prospectus/Information Statement
under "WRP Newco Risk Factors," in connection with WRP Newco's future business
activities, Wellsford Common Shareholders should be aware of, among other
things, the following factors:

. Nature of investments may involve high risk.

. Illiquidity of WRP Newco's real estate investments.

. Competition in identifying and making investments and attracting tenants.

. Risks of excessive costs and delays associated with the acquisition,
development, construction and renovation of properties.

. Risks of vacancies at existing properties.

. Lack of control and risks associated with equity investments in and with
third parties.

. Lack of limitation on the amount of debt that may be incurred and risks
of highly leveraged investments.

18
<PAGE>

. Risks associated with debt instruments held by WRP Newco, including the
possibility that borrowers may not be able to make payments when due,
that the value of collateral may be less than amounts owed and that
interest rates charged may be less than WRP Newco's cost of funds.

. Risks associated with investments in mortgage loans and junior mortgages,
including lack of control over the collateral and any foreclosure
procedures.

. Risks associated with investments in commercial mortgage-backed
securities, resulting, in part, from the fact that the process of rating
and servicing such securities is difficult and existing credit support is
inadequate.

. WRP Newco is a newly-formed entity without any prior operating history.

. Risks of uninsured loss at WRP Newco's properties.

. Potential liability for unknown or future environmental liabilities.

. WRP Newco is dependent primarily upon the efforts of its Chairman of the
Board and President and Chief Executive Officer.

. Tax consequences of the Distribution.

. The ability of WRP Newco's Board of Directors to amend or revise WRP
Newco's investment and other policies without a vote of stockholders.

. The lack of a prior market for shares of WRP Newco Common.

. The potential antitakeover effect of certain provisions of WRP Newco's
Articles of Amendment and Restatement (the "Newco Charter") and Maryland
law.

MANAGEMENT

The management of WRP Newco will be led by substantially all of the current
senior management of Wellsford, including, as noted above, Messrs. Lynford and
Lowenthal. During the last 11 years Messrs. Lynford and Lowenthal, together
with other members of their team, succeeded in accomplishing the following:

. Researched and identified multifamily properties in the Southwestern
United States as an opportunity for above-market returns with modest
risk.

. Identified, evaluated and negotiated the acquisition of over 21,000 high-
quality multifamily units in eight states. Wellsford currently owns 72
multifamily properties containing 19,004 units. From calendar year 1992
through calendar year 1996, Wellsford's revenues increased from $26.5
million to $131.8 million, representing a compounded annual growth rate
of approximately 49%, and Wellsford EBITDA increased from $13.8 million
to $72.8 million, representing a compounded annual growth rate of
approximately 52%.

. Completed a $100 million initial public offering of Wellsford, which was
the first publicly-traded REIT dedicated exclusively to the ownership of
multifamily properties.

. Raised approximately $585 million in eight subsequent offerings of
Wellsford's common shares, convertible preferred shares, perpetual
preferred shares and senior unsecured debt.

. Obtained an investment grade rating for Wellsford's senior unsecured debt
and subsequently obtained a rating increase to BBB by Standard & Poor's
Rating Services, Inc. ("S&P") and Duff & Phelps, Inc. ("Duff & Phelps").

. Obtained a $150 million unsecured line of credit for Wellsford from a
consortium of domestic and foreign banks.

. Consummated one of the first public REIT mergers when Wellsford
Residential acquired Holly Residential Properties, Inc.

. Created an internal property management operation for Wellsford which
directly managed 84% of its properties.

. Structured the Merger with EQR in a transaction that valued Wellsford at
approximately $1 billion.

Further, assuming consummation of the Merger, investors who bought their
shares of Wellsford Common at the initial public offering in November, 1992,
would have received an average annual return of approximately 22.8% on their
investment, based upon the April 1, 1997 closing market price of a share of EQR
Common on the NYSE and assuming (i) all distributions received on such shares
of Wellsford Common were immediately reinvested in Wellsford Common and (ii) a
value for each share of WRP Newco Common distributed in the Distribution equal
to their book value (which is currently estimated to be $10.43 per share).

19
<PAGE>

BUSINESS STRATEGY

In furtherance of its business strategy, WRP Newco will initially focus its
investments on three distinct aspects of the real estate business. As
opportunities emerge, WRP Newco may in the future expand or modify its real
estate-related businesses and activities.

Commercial Properties. WRP Newco will seek to acquire office and other
commercial properties below replacement cost and operate and/or resell the
properties after renovation, redevelopment and/or repositioning. WRP Newco
believes that appropriate well-located commercial properties which are
currently underperforming can be acquired on advantageous terms and
repositioned with the expectation of achieving enhanced returns which are
greater than returns which could be achieved by acquiring a stabilized
property. WRP Newco also believes that there are opportunities available to
acquire properties that are not attractive to REITs and institutional investors
because the properties have no or limited cash flow as a result of required
rehabilitation and their not being substantially leased.

Property Development. WRP Newco will engage in selective development
activities as opportunities arise and when justified by expected returns.
Initially, WRP Newco will continue the development of Palomino Park, its five-
phase residential community begun by Wellsford, taking advantage of the fixed-
price land purchase options obtained by Wellsford two years ago. This
development may be retained for investment and operated by WRP Newco, sold, or
converted to condominium ownership. See "WRP Newco's Business and Properties -
Wellsford Property Development--Palomino Park". Certain development activities
may be conducted in joint ventures with local developers who may bear the
substantial portion of the economic risks associated with the construction,
development and initial rent-up of properties. As part of its strategy, WRP
Newco may seek to obtain bond financing from local governmental authorities
which generally bear interest at rates substantially below rates with respect
to conventional financing.

WRP Newco may in the future make equity investments in entities owned and/or
operated by unaffiliated parties and which engage in real estate-related
businesses and activities or businesses that service the real estate business.
Some of the entities in which WRP Newco may invest may be start-up companies or
companies in need of additional capital. WRP Newco may also manage and lease
properties owned by it or in which it has an equity or debt investment.

INITIAL CAPITAL AND FINANCING

Initially, WRP Newco expects to have available the following sources of
capital, financing and credit support:

. $3.5 million of proceeds from the sale to ERP Operating Partnership of
shares of WRP Newco's Class A Common at a price equal to the Issuance
Price.

. $25 million pursuant to the ERP Preferred Commitment to acquire up to
1,000,000 shares of WRP Newco Series A Preferred at the request of WRP
Newco and subject to certain limited conditions. Each share of WRP Newco
Series A Preferred is convertible into shares of WRP Newco Common at a
premium equal to 8% of the Issuance Price. The ERP Preferred Commitment
will be pledged as security for the WRP Newco Line of Credit.

. $50 million under a two-year line of credit as to which Bank of Boston
and Morgan Guaranty have issued a commitment. The WRP Newco Line of
Credit will initially bear interest at an annual rate equal to LIBOR plus
175 basis points and will be extendible for an additional one-year
period.

. Approximately $81.6 million in construction financing and credit
enhancement with respect to Palomino Park.

See "Wellsford Real Properties, Inc.--Initial Capital and Financing,"
"Description of Capital Stock of WRP Newco" and "Certain Agreements Between WRP
Newco and ERP Operating Partnership".

20
<PAGE>

INITIAL INVESTMENTS

In furtherance of its business strategy, WRP Newco has identified, negotiated
and, except in one instance, consummated the acquisition of the following
investments:

. Five properties consisting of six office buildings located in Northern
New Jersey, all of which are vacant except for Greenbrook Corporate
Center, which was approximately 85.7% occupied at April 1, 1997. WRP
Newco currently intends to invest an aggregate of approximately $13.7
million to renovate and reposition such properties. At the time of its
acquisition of these properties, WRP Newco obtained the right to develop
for no additional consideration an additional 1.1 million square feet of
commercial space at these properties.

The buildings are described as follows:

<TABLE>
<CAPTION>
PURCHASE PRICE
LOCATION & PLANNED
IN NEW GROSS AREA PURCHASE PRICE/PURCHASE PLANNED IMPR. PER SQ.
PROPERTY NAME JERSEY (SQ. FT.) PRICE PER SQ. FT.(1) IMPROVEMENTS FT.(1)
- ------------- --------- ---------- ----------------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Point View.............. Wayne 560,000 $ 15.8 million/$28 $9.1 million $44.4
Main Campus
(two buildings)
Greenbrook Corp. Ctr.... Fairfield 190,000 23.7 million/125 0.5 million 127.4
1700 Valley Road........ Wayne 70,600 1.0 million/14 0.2 million 17
Chatham Building(2)..... Chatham 65,000 5.1 million/78 3.1 million 126.2
1800 Valley Road........ Wayne 54,800 2.0 million/36 0.8 million 51.1
------- ------------------- -------------
Total/Weighted
average.............. 940,400 $47.6 million/$50.1 $13.7 million $65.2
======= =================== =============
</TABLE>
- -------
(1) Assumes no allocation of purchase price for undeveloped land.
(2) WRP Newco has entered into a ten-year lease for approximately 22,000 square
feet in the Chatham Building at an initial gross rent of $26.00 per square
foot and rising to approximately $28.00 per square foot in the sixth year.

. $20 million of an $80 million subordinated secured mezzanine loan to the
owner of the approximately 1.74 million square foot, 52-story class A
office building located in mid-town Manhattan at 277 Park Avenue, New
York City (the "277 Park Loan"), expected to close in April 1997. The 277
Park Loan will be payable in full in May, 2007 and will bear interest
payable monthly at the rate of approximately 12% per annum.

. A $17.8 million mortgage loan on, and option (the "Sonterra Option") to
purchase for approximately $20.5 million through December, 1997 and for
$21 million during 1998, a 344-unit, newly constructed class A
residential apartment project located in Tucson, Arizona known as
"Sonterra at Williams Centre". The Sonterra Loan was originated in July
1996, and is payable in full on July 1, 1999 and bears interest payable
monthly at the rate of 9% percent per annum.

. An approximate 80% interest in Phases I and II of, and in options to
acquire and develop Phases III, IV and V of, a 1,880-unit class A
multifamily development known as "Palomino Park," located on 182 acres,
of which 65 acres have been developed, in a suburb of Denver, Colorado.
Palomino Park is being constructed around a centrally located 24-acre
park and has a 29,000-square-foot recreation center. Phase I, which is to
consist of 456 units, is approximately 65% completed and is expected to
be completed in late 1997. Construction on Phase II which is to consist
of 304 units is expected to be completed in late 1998. An aggregate of
approximately $21.3 million has been invested in Palomino Park, exclusive
of amounts advanced under the existing construction loan for Phase I. ERP
Operating Partnership will have an approximate 20% interest in Palomino
Park.

CERTAIN AGREEMENTS BETWEEN WRP NEWCO AND ERP OPERATING PARTNERSHIP

. Common Stock and Preferred Stock Purchase Agreement--Provides for the
purchase by ERP Operating Partnership of (i) $3.5 million of WRP Newco
Class A Common and (ii) $25 million of WRP Newco Series A Preferred as
requested by WRP Newco over a 3-year period. ERP Operating Partnership is
entitled to elect a nominee to the WRP Newco Board of Directors for a
minimum of two years. For ten years after the Effective Time, WRP Newco
has the right to direct the voting of all shares of WRP Newco Series A
Preferred, WRP Newco Class A Common and WRP Newco Common owned by ERP
Operating Partnership or any of its affiliates on most matters. See
"Certain Agreements Between WRP Newco and ERP Operating Partnership--
Common Stock and Preferred Stock Purchase Agreement."

21
<PAGE>

. Registration Rights Agreement--Provides for registration rights at WRP
Newco's expense with respect to shares of WRP Newco Class A Common, WRP
Newco Series A Preferred and WRP Newco Common held by ERP Operating
Partnership. See "Certain Agreements Between WRP Newco and ERP Operating
Partnership--Registration Rights Agreement."

. Sonterra Option Agreement--Provides ERP Operating Partnership with a
right of first offer to acquire the Sonterra Option and a right to
acquire the Sonterra Option if WRP Newco does not exercise it. If WRP
Newco acquires Sonterra, ERP Operating Partnership will have a "Right of
First/Last Offer" for the property.

. Agreement Regarding Palomino Park--Governs the relationship between WRP
Newco and ERP Operating Partnership as 80% and 20% shareholders,
respectively, of the entity controlling Palomino Park, including certain
rights of first offer and put/call rights with respect to each other's
shares. ERP Operating Partnership has also agreed to be a stand-by
purchaser of Phase I if the construction loan thereon is not paid, and to
be similarly obligated with respect to Phase II. See "Certain Agreements
Between WRP Newco and ERP Operating Partnership--Agreement Regarding
Palomino Park."

. Credit Enhancement Agreement--Provides for ERP Operating Partnership to
make its own credit available for a period of eight years in the form of
a guaranty of WRP Newco's obligations to repay the bonds issued to
finance the park and certain infrastructure within Palomino Park. See
"Certain Agreements Between WRP Newco and ERP Operating Partnership--
Credit Enhancement Agreement."

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) SUMMARY UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA

The summary unaudited pro forma combined operating data are presented as if
the Merger, Contribution and Distribution had been consummated on January 1,
1996. In addition to the Merger, Contribution and Distribution, the pro forma
combined operating data gives effect to certain material events which occurred
between January 1, 1996 and March 31, 1997 as if they had occurred on January
1, 1996. See the notes to the unaudited Pro Forma Combined Income Statement for
the year ended December 31, 1996 included elsewhere in this Joint Proxy
Statement/Prospectus/Information Statement.

The summary unaudited pro forma combined balance sheet data are presented as
if the Merger, Contribution and Distribution had occurred on December 31, 1996.
In addition to the Merger, Contribution and Distribution, the pro forma
combined balance sheet data gives effect to certain material events which
occurred between October 1, 1996 and March 31, 1997 as if they had occurred on
December 31, 1996. See the notes to the unaudited Pro Forma Combined Balance
Sheet at December 31, 1996 included elsewhere in this Joint Proxy
Statement/Prospectus/Information Statement. In the opinion of management, all
necessary adjustments necessary to reflect the effects of the Merger,
Contribution and Distribution have been made.

The summary unaudited pro forma financial data should be read in conjunction
with, and is qualified in its entirety by, the respective historical financial
statements and notes thereto of Wellsford and Wellsford Real Properties, Inc.
(Predecessor) incorporated by reference into, and included in, this Joint Proxy
Statement/Prospectus/Information Statement, respectively.

The summary unaudited pro forma operating and balance sheet data are
presented for comparative purposes only and are not necessarily indicative of
what the actual combined results of Wellsford Real Properties, Inc.
(Predecessor) would have been for the period and as of the date presented; nor
does such data purport to represent the results of future periods.

22
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

SUMMARY UNAUDITED COMBINED FINANCIAL DATA

<TABLE>
<CAPTION>
PRO FORMA YEAR HISTORICAL YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
1996 1996
------------------- ------------------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
-----------------------------------------
<S> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental income............... $ 3,632
Other income................ 250
Interest income............. 3,952 $ 757
------------------- -----------------
7,834 757
------------------- -----------------
Expenses:
Property operating and
maintenance................ 852
Real estate taxes........... 428
Interest.................... 1,550
General and administrative.. 1,750
Depreciation................ 510
Property management......... 181
------------------- -----------------
5,271 0
------------------- -----------------
Income before income taxes.... 2,563 757
Provision for income taxes.... 1,047
Net income.................... $ 1,516 $ 757
=================== =================
Net income per common share... $ 0.31
Weighted average common shares
outstanding.................. 4,900
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA HISTORICAL HISTORICAL
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1995
------------ ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Real estate.............................. $ 68,906 $21,306 $ 7,955
Mortgage notes and interest receivable... $ 37,934 $17,934 $ 0
Total assets............................. $113,192 $44,760 $18,369
Total debt............................... $ 59,755 $14,755 $14,755
Total equity............................. $ 51,109 $30,005 $ 3,614
</TABLE>

PROPOSALS REGARDING WRP NEWCO

In order to satisfy the requirements of the ASE, Wellsford Common
Shareholders will also be asked to approve the Additional Share Offering.
Wellsford Common Shareholders will also be asked to approve the adoption of WRP
Newco's 1997 Management Incentive Plan.

The Additional Share Offering would dilute the equity of existing
stockholders if the purchase price for the Additional Shares is less than the
book value of WRP Newco Common on the date of the Distribution. On the other
hand, the Board of Trustees of Wellsford and the Board of Directors of WRP
Newco believe that the Additional Share Offering will provide more capital
available for investment, enhance WRP Newco's capital structure and increase
the liquidity of WRP Newco Common. See "Proposal to Approve WRP Newco
Additional Share Offering."

The issuance of shares of WRP Newco Common pursuant to WRP Newco's 1997
Management Incentive Plan could be dilutive to existing stockholders or could
adversely affect prevailing market prices. On the other hand, the Board of
Trustees of Wellsford and the Board of Directors of WRP Newco believe that WRP
Newco's 1997 Management Incentive Plan will enable WRP Newco to attract and
retain personnel and will align the interests of management with those of WRP
Newco's stockholders. See "Proposal to Approve WRP Newco's 1997 Management
Incentive Plan."

23
<PAGE>

RISK FACTORS

In considering whether to approve the Merger, the shareholders of EQR and
Wellsford should consider, in addition to the other information in this Proxy
Statement/Prospectus/Information Statement, the matters described in this
section.

CONFLICTS OF INTEREST

In considering whether to approve the Merger, shareholders should be aware
that certain members of the management of Wellsford and the Wellsford Board of
Trustees have certain interests that arise in connection with the Merger and
the Contribution and Distribution that are in addition to the interests of
shareholders of Wellsford generally. These interests arise under existing
agreements with, and annual compensation awards from, Wellsford, which were
approved by Wellsford's independent trustees in previous years, and proposed
agreements with WRP Newco and the Surviving Trust relating to, among other
things, (i) severance payments to be made to Messrs. Kelley, MacKenzie, Hughes
and Strong, executive officers of Wellsford, in the amounts of $1,149,563,
$764,070, $692,440 and $585,000, respectively, approximately $240,051,
$391,062, $347,583 and $260,250 of which (assuming receipt of an annual bonus
each year equal to the average annual bonus received for the prior three
fiscal years, which bonuses are not guaranteed), respectively, will be
received under existing employment agreements if the Merger does not take
place, (ii) the forgiveness of approximately $1.5 million, $1.5 million,
$281,000, $1.1 million, $1.1 million and $369,000 of loans made to Messrs.
Lynford, Lowenthal , Kelley, MacKenzie, Hughes and Strong to acquire shares of
Wellsford Common, approximately $659,000, $659,000, $125,000, $503,000,
$503,000 and $181,000 of which, respectively, will be forgiven over the
remaining terms of the loans if the Merger does not take place, (iii) the
issuance of 22,346 shares of Wellsford Common to each of Messrs. Lynford,
Lowenthal and Kelley, which will not be issued if the Merger is not approved,
(iv) the acceleration of vesting of 2,843 restricted shares issued to each of
Messrs. MacKenzie and Hughes, which will not be accelerated if the Merger is
not consummated, but would vest in subsequent years if Wellsford satisfied
certain performance criteria, (v) payments of $2.6 million, $2.4 million,
$420,000, $1.0 million, $1.1 million and $500,000 to be made on behalf of
Messrs. Lynford, Lowenthal, Kelley, MacKenzie, Hughes and Strong,
respectively, to satisfy income and excise tax obligations resulting from
certain monies and other benefits to be paid to them in connection with the
Merger, subject to adjustment to the extent the actual value of Wellsford
Common at the Effective Time is greater or less than $27.50, which amounts
will not be paid if the Merger is not consummated and (vi) the issuance of WRP
Newco stock options to certain executive officers and trustees of Wellsford in
replacement of certain existing Wellsford share options and reload options
granted in connection with the exercise of vested Wellsford share options,
which replacement options will not be issued if the Merger is not consummated.
See "Interests of Certain Persons in the Merger and Distribution--Benefits of
Key Executives." In addition, upon completion of the Merger, WRP Newco will
enter into employment agreements with Messrs. Lynford and Lowenthal for
approximately five and one-half years at annual base salaries of $275,000 and
employment agreements with Messrs. Hughes and Strong for two years at annual
base salaries of $175,000 and $125,000, respectively. WRP Newco will also
assume the existing split dollar life insurance arrangements between Wellsford
and Messrs. Lynford and Lowenthal.

Further, upon completion of the Merger, Messrs. Lynford and Lowenthal will
each enter into a five-year consulting agreement with ERP Operating
Partnership for annual compensation of $200,000. Subsequent to the Merger,
Messrs. Lynford and Lowenthal will also be appointed to the Board of Trustees
of the Surviving Trust for a three year term. In addition, Mr. MacKenzie,
Executive Vice President-Director of Operations of Wellsford, will be a Senior
Vice President of the Surviving Trust upon completion of the Merger at an
initial salary of $175,000 per annum. The Surviving Trust will indemnify each
trustee and officer of Wellsford for all actions on or prior to the Effective
Time to the same extent such individuals were indemnified by Wellsford prior
to the Effective Time. See "Interests of Certain Persons in the Merger and
Distribution."

ADVERSE CONSEQUENCES OF DEBT FINANCING AND PREFERRED SHARES

The Surviving Trust is subject to the risks normally associated with debt or
preferred equity financing, including the risk that the Surviving Trust's cash
flow will be insufficient to meet required payments of principal, interest and
distributions, the risk that existing indebtedness may not be refinanced or
that the terms of such refinancing will not be as favorable as the terms of
current indebtedness and the risk that necessary capital expenditures for such
purposes as renovations and other improvements may not be financed on
favorable terms or at all. If the Surviving Trust were unable to refinance its
indebtedness on acceptable terms, or at all, the Surviving Trust might be
forced to dispose of one or more of the properties on disadvantageous terms,
which might result in losses to the Surviving Trust and might adversely affect
the cash available for distributions to shareholders. If interest rates or
other factors at the time of the refinancing result in higher interest rates
upon refinancing, the Surviving Trust's interest expense would increase, which
would affect the Surviving Trust's ability to make distributions to its
shareholders. Furthermore, if a property is mortgaged to secure payment of
indebtedness and the Surviving Trust is unable to meet mortgage payments, the
mortgagee could foreclose upon the property, appoint a receiver

24
<PAGE>

and receive an assignment of rents and leases or pursue other remedies, all
with a consequent loss of income and asset value to the Surviving Trust.
Foreclosures could also create taxable income without accompanying cash
proceeds, thereby hindering the Surviving Trust's ability to meet the REIT
distribution requirements of the Code.

RESTRICTIONS ON INDEBTEDNESS OF THE SURVIVING TRUST

A substantial portion of the Surviving Trust's debt was issued pursuant to
five different indentures which restrict the amount of indebtedness (including
acquisition financing) the Surviving Trust may incur. Accordingly, in the
event that the Surviving Trust is unable to raise additional equity or borrow
money because of the debt restrictions in the indentures, the Surviving
Trust's ability to acquire additional properties may be limited. If the
Surviving Trust is unable to acquire additional properties, its ability to
increase the distributions with respect to Surviving Common will be limited to
management's ability to increase funds from operations, and thereby cash
available for distributions, from the existing properties in the Surviving
Trust's portfolio at such time.

OTHER RESTRICTIVE COVENANTS

Immediately following consummation of the Merger, the Surviving Trust will
own properties that are subject to restrictive covenants or deed restrictions
relating to current or previous tax-exempt bond financing and owns the bonds
collateralized by additional properties. The Surviving Trust will retain an
independent outside consultant to monitor compliance with the restrictive
covenants and deed restrictions that affect these properties. The bond
compliance requirements may have the effect of limiting the Surviving Trust's
income from certain of these properties in the event the Surviving Trust is
required to lower its rental rates to attract low or moderate income tenants,
or eligible/qualified tenants.

POTENTIAL CHANGE IN RELATIVE STOCK PRICES

In considering whether to approve the Merger, shareholders of Wellsford and
EQR should consider the risks associated with (a) a potential change in the
relative stock prices of EQR Common and Wellsford Common prior to the
Effective Time, and (b) a possible reduction in the market price of Survivor
Common following the Merger, due to future sales of shares of Survivor Common
or the availability of such shares for future sales, government regulatory
action, tax laws, interest rates and market conditions in general.

Sales of a substantial number of shares of Survivor Common or the perception
that such sales could occur, could adversely affect prevailing market prices
for shares of Survivor Common.

RISKS TO WELLSFORD COMMON SHAREHOLDERS

Termination Payments if Merger Fails to Occur. The Merger Agreement provides
for a Break-Up Fee payable by Wellsford of $14 million plus Break-Up Expenses
of up to $2.5 million if the Merger Agreement is terminated by either EQR or
Wellsford under certain circumstances and, within one year after such
termination, Wellsford enters into an agreement regarding an "Acquisition
Proposal" (as hereinafter defined), which is consummated. In addition, if the
Merger Agreement is terminated for certain reasons, EQR or Wellsford will be
required to pay the other party's Break-Up Expenses of up to $2.5 million. See
"The Merger--Termination Fee and Expenses."

The obligation to pay the Break-Up Fee and/or Break-Up Expenses may
adversely affect the ability of Wellsford to engage in another transaction in
the event the Merger is not consummated.

Reduction in Ownership and Voting. Upon consummation of the Merger,
Wellsford Common Shareholders will own approximately 17% of the Survivor
Common and will not have separate approval rights with respect to any actions
or decisions of the Surviving Trust.

Reduction in Distributions. After the Merger, the distributions payable with
respect to Survivor Common are expected to be less than the distributions
payable with respect to Wellsford Common. Based upon the current annualized
distributions per share of EQR Common and Wellsford Common, the distributions
payable with respect to the Survivor Common would be approximately 19.5% less
than the distributions payable with respect to Wellsford Common.

NO APPRAISAL RIGHTS UNDER MARYLAND LAW

25
<PAGE>

their shares are listed on a national securities exchange, such as the NYSE,
on the record date for determining shareholders entitled to vote on such
merger. All of the shares of EQR and Wellsford outstanding on the record date
for determining the shareholders entitled to vote on the Merger were listed on
the NYSE.

POTENTIAL ADVERSE EFFECTS OF COMBINING THE COMPANIES

EQR and Wellsford are large enterprises with operations in a number of
different states. There can be no assurance that costs or other factors
associated with the integration of the two companies would not adversely
affect future combined results of operations or the benefits of expected costs
savings.

GENERAL REAL ESTATE INVESTMENT CONSIDERATIONS; CHANGES IN LAWS

General. Real property investments are subject to varying degrees of risk
and are relatively illiquid. Income from real property investments and the
Surviving Trust's resulting ability to make expected distributions to
shareholders may be adversely affected by the general economic climate, local
conditions such as oversupply of apartment units or a reduction in demand for
apartment units in the area, the attractiveness of the properties owned by the
Surviving Trust to tenants, zoning or other regulatory restrictions, the
ability of the Surviving Trust to provide adequate maintenance and insurance,
and increased operating costs (including insurance premiums and real estate
taxes). The Surviving Trust's income would also be adversely affected if
tenants were unable to pay rent or the Surviving Trust were unable to rent
apartment units on favorable terms. If the Surviving Trust were unable to
promptly relet units or renew the leases for a significant number of apartment
units, or if the rental rates upon such renewal or reletting were
significantly lower than expected rates, then the Surviving Trust's funds from
operations and ability to make expected distributions to shareholders may be
adversely affected. In addition, certain expenditures associated with each
equity investment (such as real estate taxes and maintenance costs) generally
are not reduced when circumstances cause a reduction in income from the
investment. Furthermore, real estate investments are relatively illiquid and,
therefore, will tend to limit the ability of the Surviving Trust to vary its
portfolio promptly in response to changes in economic or other conditions.

Changes in Laws. Increases in real estate taxes, income taxes and service or
other taxes generally are not passed through to tenants under existing leases
and may adversely affect the Surviving Trust's funds from operations and its
ability to make distributions to shareholders. Similarly, changes in laws
increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions
may result in significant unanticipated expenditures, which would adversely
affect the Surviving Trust's funds from operations and its ability to make
distributions to shareholders.

POTENTIAL ENVIRONMENTAL LIABILITY AFFECTING THE SURVIVING TRUST

Under various Federal, state and local environmental laws, ordinances and
regulations, an owner of real estate may be liable for the costs of removal or
remediation of certain hazardous or toxic substances on such property. These
laws often impose environmental liability without regard to whether the owner
knew of, or was responsible for, the presence of such hazardous or toxic
substances. The presence of such substances, or the failure properly to
remediate such substances, may adversely affect the owner's ability to sell or
rent the property or to borrow using the property as collateral. Persons who
arrange for the disposal or treatment of hazardous or toxic substances may
also be liable for the costs of removal or remediation of such substances at a
disposal or treatment facility, whether or not such facility is owned or
operated by such person. Certain laws impose liability for release of
asbestos-containing materials ("ACMs") into the air and third parties may seek
recovery from owners or operators of real properties for personal injury
associated with ACMs. In connection with the ownership (direct or indirect),
operation, management and development of real properties, the Surviving Trust
may be considered an owner or operator of such properties or as having
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, potentially liable for removal or remediation costs, as well as for
certain other related costs, including governmental fines and injuries to
persons and property.

All of EQR's properties have been the subject of a Phase I and, in certain
cases, a supplemental environmental assessment completed by qualified
independent environmental consultant companies. All of the environmental
assessments were conducted within the last five years and were obtained prior
to the acquisition by EQR of each of the properties. These environmental
assessments have not revealed, nor is EQR aware of, any environmental
liability that EQR's management believes would have a material adverse effect
on the Surviving Trust's business, results of operations, financial condition
or liquidity.

All of Wellsford's properties have been the subject of a Phase I or similar
environmental assessment completed by qualified independent environmental
consultant companies. Of these environmental assessments, 16 were conducted
during

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the period from 1989 through 1991 and 63 were conducted during the period from
1992 through the present. These environmental assessments have not revealed,
nor is Wellsford aware of, any environmental liability that Wellsford's
management believes would have a material adverse effect on the Surviving
Trust's business, results of operations, financial condition or liquidity.

No assurance can be given that existing environmental assessments with
respect to any EQR or Wellsford properties reveal all environmental
liabilities, that any prior owner of a property did not create any material
environmental condition not known to EQR or Wellsford, or that a material
environmental condition does not otherwise exist as to any one or more
properties of EQR or Wellsford.

CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT

Taxation as a Corporation. The Surviving Trust intends to operate in a
manner so as to qualify as a REIT under the Code. However, no assurance can be
given that the Surviving Trust was organized and will be able to operate in a
manner so as to qualify or remain so qualified. Qualifications as a REIT
involves the satisfaction of numerous requirements (some on an annual and
quarterly basis) established under highly technical and complex Code
provisions for which there are only limited judicial or administrative
interpretations, and involves the determination of various factual matters and
circumstances not entirely within the Surviving Trust's control.

If the Surviving Trust were to fail to qualify as a REIT in any taxable
year, the Surviving Trust would be subject to Federal income tax (including
any applicable alternative minimum tax) on its taxable income at corporate
rates. Moreover, unless entitled to relief under certain statutory provisions,
the Surviving Trust also would be disqualified from treatment as a REIT for
the four taxable years following the year during which qualification is lost.
This treatment would reduce the net earnings of the Surviving Trust available
for investment or distribution to shareholders because of the additional tax
liability to the Surviving Trust for the years involved. In addition,
distributions to shareholders would no longer be required to be made. See
"Federal Income Tax Considerations."

Other Tax Liabilities. Even if the Surviving Trust qualifies as a REIT, it
will be subject to certain Federal, state and local taxes on its income and
property. See "The Merger--Federal Income Tax Consequences--Other Tax
Considerations--State and Local Taxes." In addition, the Surviving Trust's
management operations, which will be conducted through Equity Residential
Properties Management Limited Partnership, Equity Residential Properties
Management Limited Partnership II and Equity Residential Properties Management
Limited Partnership III (collectively, the "Management Partnerships")
generally will be subject to Federal income tax at regular corporate rates.
See "The Merger--Federal Income Tax Consequences--Qualification of Surviving
Trust as a REIT."

Consequences of Failure to Qualify as Partnerships. The Surviving Trust
intends that ERP Operating Partnership, the Management Partnerships and each
of the other partnership and limited liability company subsidiaries will be
organized as partnerships and will qualify for treatment as such under the
Code. If any of such subsidiaries fails to qualify for such treatment under
the Code, the Surviving Trust would cease to qualify as a REIT, and such
subsidiary would be subject to Federal income tax (including any alternative
minimum tax) on its income at corporate rates. See "The Merger--Federal Income
Tax Consequences--Qualification of Surviving Trust as a REIT."

Each of EQR and Wellsford believes it has operated in a manner so as to
qualify as a REIT under the Code for all taxable years ending on or before
December 31, 1996 and for the period beginning January 1, 1997 and ending on
the date hereof.

DEPENDENCE ON KEY PERSONNEL

The Surviving Trust will be dependent on the efforts of its executive
officers. While the Surviving Trust believes that it could find replacements
for these key personnel, the loss of their services may have a temporary
adverse effect on the operations of the Surviving Trust. None of these
officers has entered or will enter into employment agreements with the
Surviving Trust.

DISTRIBUTION REQUIREMENTS POTENTIALLY INCREASING INDEBTEDNESS OF THE SURVIVING
TRUST

The Surviving Trust may be required from time to time, under certain
circumstances, to accrue as income for tax purposes interest and rent earned
but not yet received. In such event, or upon the repayment by the Surviving
Trust of principal on debt, the Surviving Trust could have taxable income
without sufficient cash to enable the Surviving Trust to meet the distribution
requirements of a REIT. Accordingly, the Surviving Trust could be required to
borrow funds or

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liquidate investments on adverse terms in order to meet such distribution
requirements. See "Federal Income Tax Considerations."

9.8% OWNERSHIP LIMIT; INAPPLICABILITY TO MR. ZELL AND OTHERS

In order to maintain its qualification as a REIT under the Code, not more
than 50% of the value of the outstanding shares of beneficial interest of the
Surviving Trust may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities). Certain
beneficial owners (the "Zell Holders") affiliated with Mr. Zell and Equity
Properties Management Corp. ("EPMC") (i.e., beneficiaries of trusts
established for the benefit of Mr. Zell and his family and trusts established
for the benefit of the family of Mr. Robert Lurie, a deceased partner of Mr.
Zell (the "Lurie Family Trusts")) and certain entities controlled by Starwood
Capital Partners L.P. and its affiliates which contributed 23 of the
properties to EQR at the time of EQR's initial public offering (the "IPO")
(the "Starwood Original Owners") (through their potential ownership rights of
EQR Common) together constitute four individuals for purposes of this test
and, under the Code, will be deemed to own approximately 10% of the value of
the outstanding shares of beneficial interest of the Surviving Trust. Due to
such concentration of ownership of the Surviving Trust, ownership of more than
9.8% of the lesser of the number or value of the outstanding shares of
beneficial interest of the Surviving Trust by any single shareholder has been
restricted, with certain exceptions, for the purpose of maintaining the
Surviving Trust's qualification as a REIT under the Code. The Surviving
Trust's Board of Trustees, upon receipt of a ruling from the Internal Revenue
Service (the "Service"), an opinion of counsel or other evidence satisfactory
to the Board of Trustees and upon such other conditions as the Board of
Trustees may direct, may also exempt a proposed transferee from this
restriction. See "Comparison of Right of Shareholders--Restrictions on
Ownership, Transfer and Issuance of Shares." Additionally, the Surviving
Trust's Declaration of Trust will allow certain transfers of such Survivor
Common without the transferees being subject to the 9.8% ownership limit,
provided such transfers do not result in an increased concentration in the
ownership of the Surviving Trust. Finally, if the Additional Provisions are
approved by the Wellsford Common Shareholders, such restrictions in the
Surviving Trust's Declaration of Trust will be reduced to 5%. See "Proposal
Regarding Additional Declaration of Trust Provisions."

LIMITS ON CHANGES IN CONTROL

Ownership Limit. The 9.8% ownership limit, as well as the ability of the
Surviving Trust to issue additional Survivor Common or other shares of
beneficial interest (which may have rights and preferences senior to the
Survivor Common), may discourage a change of control of the Surviving Trust
and may also (i) deter tender offers for the Survivor Common, which offers may
be advantageous to shareholders, and (ii) limit the opportunity for
shareholders to receive a premium for their Survivor Common that might
otherwise exist if an investor were attempting to assemble a block of Survivor
Common in excess of 9.8% of the outstanding shares of beneficial interest of
the Surviving Trust or otherwise effect a change of control of the Surviving
Trust. If the Additional Provisions are approved by the Wellsford Common
Shareholders, such restrictions in the Surviving Trust's Declaration of Trust
will be reduced to 5%. See "Proposal Regarding Additional Declaration of Trust
Provisions."

Staggered Board. The Board of Trustees of the Surviving Trust will be
divided into three classes of trustees. The terms of the classes will expire
in 1997, 1998 and 1999, respectively. As the term of each class expires,
trustees for that class will be elected for a three-year term and the trustees
in the other two classes will continue in office. The staggered terms for
trustees may impede the shareholders' ability to change control of the
Surviving Trust even if a change in control were in the shareholders'
interest.

Preferred Shares. The Surviving Trust's Declaration will authorize the Board
of Trustees to issue up to 100,000,000 shares of Survivor Preferred and to
establish the preferences and rights (including the right to vote and the
right to convert into Survivor Common) of any Survivor Preferred issued. The
power to issue Survivor Preferred could have the effect of delaying or
preventing a change in control of the Surviving Trust even if a change in
control were in the shareholders' interest. There are additional limitations
on ownership regarding each outstanding series of EQR Preferred and Wellsford
Preferred.

Maryland Business Combination Law. Under the Maryland General Corporation
Law, as amended ("MGCL"), certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland real
estate investment trust and any person who beneficially owns 10% or more of
the voting power of the trust's shares of beneficial interest or an affiliate
of the trust who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
trust's shares of beneficial interest (an "Interested Shareholder"), or an
affiliate of such Interested Shareholder, are prohibited for five years after
the most recent date on which the Interested Shareholder becomes an Interested
Shareholder. Thereafter, any such business combination must be recommended by
the board of trustees of such trust and

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approved by the affirmative vote of at least (a) 80% of the votes entitled to
be cast by holders of outstanding voting shares of beneficial interest of the
trust and (b) two-thirds of the votes entitled to be cast by holders of voting
shares of beneficial interest of the trust other than shares held by the
Interested Shareholder with whom (or with whose affiliate) the business
combination is to be effected (unless, among other conditions, the holders of
the common shares of the trust receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Shareholder for its common
shares). Such provisions could have the effect of inhibiting a change in
control even if a change in control were in the shareholders' interest.

CONTROL AND INFLUENCE BY SIGNIFICANT SHAREHOLDERS OF EQR

As of December 31, 1996, the Zell Holders held certain OP Units issued at
the time of the IPO ("Original OP Units") to certain affiliates of Mr. Zell
which contributed 33 of the properties to EQR at the time of the IPO (the
"Zell Original Owners"), EPMC and other affiliates of Mr. Zell owned in the
aggregate approximately 7.92% of the shares of EQR Common (assuming that all
of the partnership interests in ERP Operating Partnership are exchanged for
EQR Common), and the Starwood Original Owners owned in the aggregate
approximately 3.47% of the shares of EQR Common (assuming that all of the
partnership interests in ERP Operating Partnership are exchanged for EQR
Common). The Starwood Original Owners, together with the Zell Original Owners,
will be referred to as the "Original Owners." As of December 31, 1996, EQR had
options outstanding to purchase approximately 2.33 million shares of EQR
Common which it has granted to certain officers, employees and trustees of EQR
and consultants to EQR, some of whom are affiliated with Mr. Zell,
representing in the aggregate approximately 3.80% of the EQR Common (assuming
that all such options are exercised for EQR Common and all of the outstanding
partnership interests in ERP Operating Partnership are exchanged for EQR
Common). Further, the consent of affiliates of Mr. Zell who are Zell Holders
and of the Starwood Original Owners is required for certain amendments to ERP
Operating Partnership's partnership agreement. Accordingly, Mr. Zell and the
Starwood Original Owners may continue to have substantial influence over the
Surviving Trust, which influence might not be consistent with the interests of
other shareholders, and on the outcome of any matters submitted to the
Surviving Trust's shareholders for approval. In addition, although there is no
current agreement, understanding or arrangement for these shareholders to act
together on any matter, these shareholders would be in a position to exercise
significant influence over the affairs of the Surviving Trust if they were to
act together in the future.

EXEMPTIONS FOR MR. ZELL AND OTHERS FROM MARYLAND BUSINESS COMBINATION LAW
WHICH TEND TO INHIBIT TAKEOVERS

As permitted by the MGCL, the Surviving Trust will exempt any business
combination involving Mr. Zell, the Zell Holders, EPMC and their respective
affiliates and associates, present or future, or any other person acting in
concert or as a group with any of the foregoing persons and, consequently, the
five-year prohibition and the super-majority vote requirements will not apply
to a business combination between any of them and the Surviving Trust. As a
result, Mr. Zell, the Zell Holders, EPMC, any present or future affiliate or
associate of theirs or any other person acting in concert or as a group with
any of the foregoing persons may be able to enter into business combinations
with the Surviving Trust, which may not be in the best interest of the
shareholders, without compliance by the Surviving Trust with the super-
majority vote requirements and other provisions of the MGCL.

TAX TERMINATION OF ERP OPERATING PARTNERSHIP

In connection with the Merger, more than 50% of the total interest in ERP
Operating Partnership's capital and profits will be exchanged. Therefore, the
Merger will result in the termination of ERP Operating Partnership for federal
income tax purposes. Under existing Treasury Regulations under the Code, this
partnership termination will cause a deemed distribution of all of the assets
of ERP Operating Partnership to the partners of ERP Operating Partnership
(including the Surviving Trust) followed by a deemed re-contribution of such
assets by such partners to a newly formed partnership. See "The Merger--
Federal Income Tax Consequences--Tax Termination of ERP Operating
Partnership." Such deemed distribution and re-contribution is not expected to
cause gain recognition to the Surviving Trust because the amount of cash
deemed distributed to the Surviving Trust as a result of the deemed
liquidation (including any deemed distribution occurring under Code Section
752 as a result of a shifting of liabilities among the partners of the ERP
Operating Partnership) is not expected to exceed the Surviving Trusts's
adjusted basis in the ERP Operating Partnership. Moreover, because the taxable
years of both the ERP Operating Partnership and the Surviving Trust end on the
same date, the closing of the ERP Operating Partnership's taxable year as a
result of the termination should have no adverse tax consequences to the
Surviving Trust. However, the termination of the ERP Operating Partnership
will cause the assets of the ERP Operating Partnership to be depreciated as if
they were newly acquired by the ERP Operating Partnership, possibly resulting
in lower annual depreciation deductions to the Surviving Trust for federal
income tax purposes. This reduction in depreciation deductions could cause a
greater proportion of the distribution to holders of Survivor Common and
Survivor Preferred to be taxable as dividends at ordinary income

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rates. See "Federal Income Tax Consequences--Taxation of Taxable Domestic
Shareholders." In addition the deemed re-contribution of the assets to the ERP
Operating Partnership could result in a reallocation of the built-in gain
attributable to the properties owned by the ERP Operating Partnership. See
"Federal Income Tax Consequences--Tax Aspects of Surviving Trust's Investment
in Partnerships--Tax Allocations With Respect to the Properties."

WRP NEWCO RISK FACTORS

Ownership of WRP Newco Common involves the following material risks:

GENERAL RISKS

If the properties of WRP Newco, of those entities in which it invests or of
those entities to which it will lend (collectively, the "WRP Newco
Properties") do not generate revenue sufficient to meet operating expenses,
including debt service and capital expenditures, the financial condition and
results of operations of WRP Newco may be adversely affected. WRP Newco's
financial condition and results of operations may be adversely affected by a
number of factors, including international and domestic general economic
climate and local real estate conditions (such as oversupply of or reduced
demand for space and changes in market rental rates); the perceptions of
prospective tenants of the safety, convenience and attractiveness of WRP Newco
Properties; the ability of the owner to provide adequate management,
maintenance and insurance; energy and supply shortages; the ability to collect
on a timely basis all rent from tenants and interest from borrowers; the
expense of periodically renovating, repairing and reletting spaces; and
increasing operating costs (including real estate taxes and utilities) which
may not be passed through to tenants. Certain significant expenditures
associated with investments in real estate (such as mortgage payments, real
estate taxes, insurance and maintenance costs) are generally not reduced when
circumstances cause a reduction in rental revenues from the investment. If a
WRP Newco Property is mortgaged to secure the payment of indebtedness and if
WRP Newco or the entity in which WRP Newco invests or to which it lends is
unable to meet its mortgage payments, a loss could be sustained as a result of
foreclosure on the property or the exercise of other remedies by the
mortgagee. In addition, real estate values and income from properties are also
affected by such factors as compliance with laws, including tax laws, interest
rate levels and the availability of financing.

NATURE OF INVESTMENTS MADE BY WRP NEWCO MAY INVOLVE HIGH RISK; ILLIQUIDITY OF
REAL ESTATE INVESTMENTS

WRP Newco may make investments in real estate-related assets and businesses
which have experienced severe financial difficulties, which difficulties may
never be overcome. Since WRP Newco may only make a limited number of
investments and since many of the investments may involve a high degree of
risk, poor performance by one of the investments could severely affect the
financial condition and results of operations of WRP Newco.

Equity and debt investments in real estate may be relatively illiquid. Such
illiquidity limits the ability of WRP Newco to modify its portfolio in
response to changes in economic or other conditions. Illiquidity may result
from the absence of an established market for the investments as well as legal
or contractual restrictions on their resale by WRP Newco.

DIFFICULTY OF LOCATING SUITABLE INVESTMENTS; COMPETITION

Identifying, completing and realizing on real estate investments has from
time to time been highly competitive, and involves a high degree of
uncertainty. WRP Newco will be competing for investments with many public and
private real estate investment vehicles, including financial institutions
(such as mortgage banks, pension funds and real estate investment trusts) and
other institutional investors, as well as individuals. There can be no
assurance that WRP Newco will be able to locate and complete investments which
satisfy WRP Newco's rate of return objective or realize upon their value or
that it will be able to fully invest its available capital.

Many of those with whom WRP Newco will compete for investments and its
services are far larger than WRP Newco, may have greater financial resources
than WRP Newco and may have management personnel with more experience than the
officers of WRP Newco.

RISKS OF ACQUISITION, DEVELOPMENT, CONSTRUCTION AND RENOVATION ACTIVITIES

Acquisition. WRP Newco intends to acquire existing properties to the extent
that they can be acquired on advantageous terms and meet WRP Newco's
investment criteria. Acquisitions of properties entail general investment
risks associated with any real estate investment, including the risk that
investments will fail to perform as expected, that estimates of the cost of
improvements to bring an acquired property up to standards established for the
intended market position may prove inaccurate and the occupancy rates and
rents achieved may be less than anticipated.

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Development, Construction and Renovation. WRP Newco also intends to pursue
the selective development, construction and renovation of commercial and
residential properties for its own account or the account of entities in which
it owns an equity interest as opportunities arise. Risks associated with WRP
Newco's development, construction and renovation activities include the risks
that: WRP Newco may abandon development opportunities after expending
resources to determine feasibility; construction and renovation costs of a
project may exceed original estimates; occupancy rates and rents at a newly
completed property may not be sufficient to make the property profitable; and
development, construction, renovation and lease-up may not be completed on
schedule (including risks beyond the control of WRP Newco, such as weather or
labor conditions or material shortages) resulting in increased debt service
expense and construction costs. Development, construction and renovation
activities are also subject to risks relating to the inability to obtain, or
delays in obtaining, all necessary zoning, land-use, building, occupancy and
other required governmental permits and authorizations. These risks could
result in substantial unanticipated delays or expenses and, under certain
circumstances, could prevent completion of development, construction and
renovation activities once undertaken, any of which could adversely affect the
financial condition and results of operations of WRP Newco. Properties under
development or acquired for development may generate little or no cash flow
from the date of acquisition through the date of completion of development and
may experience operating deficits after the date of completion. In addition,
new development and renovation activities, regardless of whether or not they
are ultimately successful, typically require a substantial portion of
management's time and attention.

WRP Newco may elect not to exercise its option to purchase the land
underlying Phases III, IV and/or V of Palomino Park, in some cases after
having expended money and time to determine the feasibility of developing such
Phase. In addition, WRP Newco may elect, after having acquired the land
underlying one or more of the Phases and paid the purchase price therefor, not
to commence construction, or to delay construction, because of local occupancy
rates or rents, excessive construction or renovation costs, lack of
satisfactory financing or for any other reason.

Any properties developed or renovated by WRP Newco will be subject to the
risks associated with the ownership and operation of real estate described
elsewhere in this section entitled "WRP Newco Risk Factors."

VACANCIES AT EXISTING PROPERTIES; DEPENDENCE ON RENTAL INCOME FROM REAL
PROPERTY

WRP Newco currently owns five office properties consisting of six buildings,
five of which buildings are vacant. The sixth office building is currently
approximately 85.7% leased. WRP Newco expects to incur significant costs,
including those relating to leasing commissions and tenant improvements, in
connection with the leasing of these properties and may be required to offer
tenant concessions, including free rental periods. The failure of WRP Newco to
lease these properties in a timely manner and on economically favorable terms
may have a material adverse effect on WRP Newco.

WRP Newco's cash flow, results of operations and value of its assets would
be adversely affected if a significant number of tenants of the WRP Newco
Properties failed to meet their lease obligations or if WRP Newco or the owner
of a WRP Newco Property were unable to lease a significant amount of space on
economically favorable terms. In the event of a default by a lessee, the owner
may experience delays in enforcing its rights as lessor and may incur
substantial costs in protecting its investment. The bankruptcy or insolvency
of a major tenant may have an adverse effect on a property. At any time, a
tenant may also seek protection under the bankruptcy laws, which could result
in rejection and termination of such tenant's lease and thereby cause a
reduction in the cash flow of the property. If a tenant rejects its lease, the
owner's claim for breach of the lease would (absent collateral securing the
claim) be treated as a general unsecured claim. Generally, the amount of the
claim would be capped at the amount owed for unpaid pre-petition lease
payments unrelated to the rejection, plus the greater of one year's lease
payments or 15% of the remaining lease payments payable under the lease (but
not to exceed the amount of three years' lease payments). No assurance can be
given that the WRP Newco Properties will not experience significant tenant
defaults in the future.

OPERATING RISKS

The WRP Newco Properties are subject to operating risks common to the
particular property type, any and all of which may adversely affect occupancy
or rental rates. Such properties are subject to increases in operating
expenses such as cleaning; electricity; heating, ventilation and air-
conditioning; elevator repair and maintenance; insurance and administrative
costs; and other general costs associated with security, landscaping, repairs
and maintenance. While commercial tenants are often obligated to pay a portion
of these escalating costs, there can be no assurance that they will agree to
pay such costs or that the portion that they agree to pay will fully cover
such costs. If operating expenses increase, the local rental market may limit
the extent to which rents may be increased to meet increased expenses without
decreasing occupancy rates. To the extent rents cannot be increased or costs
controlled, the cash flow of WRP Newco and its financial condition may be
adversely affected.

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ADVERSE CONSEQUENCES OF DEBT FINANCING

Leverage. Some of the WRP Newco real estate equity investments may utilize a
leveraged capital structure, in which case a third party lender would be
entitled to cash flow generated by such investments prior to WRP Newco
receiving a return. As a result of such leverage, WRP Newco would be subject
to the risks normally associated with debt financing, including the risk that
cash flow from operations and investments will be insufficient to meet
required payments of principal and interest, the risk that existing debt
(which in most cases will not have been fully amortized at maturity) will not
be able to be refinanced or that the terms of such refinancings will not be as
favorable to WRP Newco and the risk that necessary capital expenditures for
such purposes as renovations and other improvements will not be able to be
financed on favorable terms or at all. While such leverage may increase
returns or the funds available for investment by WRP Newco, it also will
increase the risk of loss on a leveraged investment. If WRP Newco defaults on
secured indebtedness, the lender may foreclose and WRP Newco could lose its
entire investment in the security for such loan. Because WRP Newco may engage
in portfolio financings where several investments are cross-collateralized,
multiple investments may be subject to the risk of loss. As a result, WRP
Newco could lose its interests in performing investments in the event such
investments are cross-collateralized with poorly performing or nonperforming
investments. In addition, recourse debt, which WRP Newco reserves the right to
obtain, may subject other assets of WRP Newco to risk of loss.

Existing Debt Maturities; Foreclosures. WRP Newco anticipates that only a
portion of the principal of WRP Newco's indebtedness outstanding from time to
time will be repaid prior to maturity. However, WRP Newco may not have
sufficient funds to repay such indebtedness at maturity; it may therefore be
necessary for WRP Newco to refinance debt through additional debt financing or
equity offerings. If WRP Newco is unable to refinance this indebtedness on
acceptable terms, WRP Newco may be forced to dispose of properties upon
disadvantageous terms, which could result in losses to WRP Newco and adversely
affect the amount of cash available for further investment.

Risk of Rising Interest Rates. WRP Newco may incur indebtedness in the
future that also bears interest at a variable rate or may be required to
refinance its debt at higher rates. Outstanding advances under the WRP Newco
Line of Credit will bear interest at a variable rate. Accordingly, increases
in interest rates could increase WRP Newco's interest expense and adversely
effect the financial condition and results of operations of WRP Newco.

Covenants. Various credit facilities or other debt obligations may require
WRP Newco to comply with a number of customary financial and other covenants
on an ongoing basis. Failure to comply with such covenants may limit WRP
Newco's ability to borrow funds or may cause a default under its then-existing
indebtedness.

No Limitation on Debt. The organizational documents of WRP Newco do not
contain any limitation on the amount of indebtedness WRP Newco may incur. WRP
Newco also has the ability to use a more highly leveraged business strategy
than typically used by REITs. Accordingly, WRP Newco could become highly
leveraged, resulting in an increase in debt service that could increase the
risk of default on WRP Newco's indebtedness.

LACK OF CONTROL AND OTHER RISKS OF EQUITY INVESTMENTS IN AND WITH THIRD
PARTIES

WRP Newco may invest in shares of "REITs" or other equity interests of
"REITs" or other entities that invest in real estate assets. In such cases,
WRP Newco will be relying on the assets, investments and management of the
REIT or other entity in which it is investing. Such entities and their
properties will be subject to the other risks affecting the ownership and
operation of real estate set forth in this section entitled "WRP Newco Risk
Factors."

WRP Newco may also co-invest with third parties through partnerships, joint
ventures or other entities, acquiring non-controlling interests in or sharing
responsibility for managing the affairs of a property, partnership, joint
venture or other entity and, therefore, will not be in a position to exercise
sole decision-making authority regarding the property, partnership, joint
venture or other entity.

Investments in partnerships, joint ventures, or other entities may, under
certain circumstances, involve risks not present were a third party not
involved, including the possibility that WRP Newco's partners or co-venturers
might become bankrupt or otherwise fail to fund their share of required
capital contributions, that such partners or co-venturers might at any time
have economic or other business interests or goals which are inconsistent with
the business interests or goals of WRP Newco, and that such partners or co-
venturers may be in a position to take action contrary to the instructions or
the requests of WRP Newco and contrary to WRP Newco's policies or objectives.
Such investments may also have the potential risk of impasse on decisions,
such as a sale, because neither WRP Newco nor the partner or co-venturer would
have full control over the partnership or joint venture. Consequently, actions
by such partner or co-venturer might result in subjecting properties owned by
the partnership or joint venture to additional risk. In addition, WRP Newco
may in certain circumstances be liable for the actions of its third-party
partners or co-venturers.

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RISKS OF INVESTMENTS IN DEBT INSTRUMENTS

WRP Newco intends to originate debt investments and may acquire performing
or nonperforming debt investments. In general, debt instruments carry the risk
that borrowers may not be able to make debt service payments or to pay
principal when due, the risk that the value of any collateral may be less than
the amounts owed, the risk that interest rates payable on the debt instruments
may be lower than WRP Newco's cost of funds, and the risk that the collateral
may be mismanaged or otherwise decline in value during periods in which WRP
Newco is seeking to obtain control of the underlying real estate. WRP Newco is
also dependent on the ability of the borrowers to operate successfully their
properties. Such borrowers and their properties will be subject to the other
risks affecting the ownership and operation of real estate set forth in this
section entitled "WRP Newco Risk Factors". Some of the loans may be structured
so that all or a substantial portion of the principal will not be paid until
maturity, which increases the risk of default at that time.

It is anticipated that a substantial portion of the debt in which WRP Newco
invests will not be rated by any nationally-recognized rating agency.
Generally, the value of unrated classes is more subject to fluctuation due to
economic conditions than rated classes. WRP Newco's acquisition of credit
supported classes of securitizations (which generally are expected to be first
loss classes) which are unrated at the time of acquisition and which have
lower ratings may increase the risk of nonpayment or of a significant delay in
payments on these classes. Should rated assets be downgraded, it may adversely
affect their value and may adversely affect the financial condition and
results of operations of WRP Newco.

RISKS OF INVESTMENTS IN MORTGAGE LOANS

To the extent WRP Newco invests in mortgage loans, such mortgage loans may
or may not be recourse obligations of the borrower and generally will not be
insured or guaranteed by governmental agencies or otherwise. In the event of a
default under such obligations, WRP Newco may have to foreclose its mortgage
or protect its investment by acquiring title to a property and thereafter
making substantial improvements or repairs in order to maximize the property's
investment potential. Borrowers may contest enforcement of foreclosure or
other remedies, seek bankruptcy protection against such enforcement and/or
bring claims for lender liability in response to actions to enforce mortgage
obligations. Relatively high "loan-to-value" ratios and declines in the value
of the property may prevent WRP Newco from realizing an amount equal to its
mortgage loan upon foreclosure.

WRP Newco may participate in loans originated by other financing
institutions. As a participant, WRP Newco may not have the sole authority to
declare a default under the mortgage or to control the property or any
foreclosure.

Any investments in junior mortgage loans which are subordinate to liens of
senior mortgages would involve additional risks, including the lack of control
over the collateral and any related foreclosure proceeding. In the event of a
default on a senior mortgage, WRP Newco may make payments to prevent
foreclosure on the senior mortgage without necessarily improving WRP Newco's
position with respect to the subject real property. In such event, WRP Newco
would be entitled to share in the proceeds only after satisfaction of the
amounts due to the holder of the senior mortgage.

RISK OF LOSS ON INVESTMENTS IN COMMERCIAL MORTGAGE-BACKED SECURITIES

As noted above, WRP Newco may seek to invest in real estate-related debt
instruments, which may include CMBS. Many of the risks of investing in CMBS
reflect the risks of investing directly in the real estate securing the
underlying mortgage loans. This may be especially true in the case of
commercial mortgage securities secured by, or evidencing an interest in, a
single commercial mortgage loan or a relatively small or less diverse pool of
commercial mortgage loans. See "--Risks of Investments in Mortgage Loans".

The risks of investing in commercial mortgage securities include risks that
the existing credit support will prove to be inadequate, either because of
unanticipated levels of losses or, if such credit support is provided by a
third party, because of difficulties experienced by such provider. Delays or
difficulties encountered in servicing commercial mortgage securities may cause
greater losses and, therefore, greater resort to credit support than was
originally anticipated, and may cause a rating agency to downgrade a security.

WRP Newco may acquire subordinated tranches of CMBS issuances. In general,
subordinated tranches of CMBS are entitled to receive repayment of principal
only after all principal payments have been made on more senior tranches and
also have subordinated rights as to receipt of interest distributions. In
addition, an active secondary market for such subordinated securities is not
as well developed as the market for certain other mortgage-backed securities.
Accordingly, such subordinated CMBS may have limited marketability and there
can be no assurance that a more efficient secondary market will develop.

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LIMITATIONS ON REMEDIES

Although WRP Newco will have certain contractual remedies upon the default
by borrowers under certain debt instruments, such as foreclosing on the
underlying real estate or collecting rents generated therefrom, certain legal
requirements (including the risks of lender liability) may limit the ability
of WRP Newco to effectively exercise such remedies.

The right of a mortgage lender to convert its loan position into an equity
interest may be limited or prevented by certain common law or statutory
prohibitions.

THIRD-PARTY BANKRUPTCY RISKS

Investments made in assets operating in workout modes or under Chapter 11 of
the Bankruptcy Code could be subordinated or disallowed, and WRP Newco could
be liable to third parties in such circumstances. Furthermore, distributions
made to WRP Newco in respect of such investments could be recovered if any
such distribution is found to be a fraudulent conveyance or preferential
payment. Bankruptcy laws, including the automatic stay imposed upon the filing
of a bankruptcy petition, may delay the ability of WRP Newco to realize on
collateral for loan positions held by it or may adversely affect the priority
of such loans through doctrines such as equitable subordination or may result
in a restructure of the debt through principles such as the "cramdown"
provisions of the bankruptcy laws.

NO PRIOR OPERATING HISTORY

It should be noted that WRP Newco is a newly formed entity with no prior
operating history and that its properties and assets have only been recently
acquired.

RISKS OF UNINSURED LOSS

WRP Newco will carry comprehensive liability, fire, extended coverage and
rental loss insurance with respect to all of the properties that it owns, with
policy specifications, insured limits and deductibles customarily carried for
similar properties. There are, however, certain types of losses (such as
losses arising from acts of war or relating to pollution) that are not
generally insured because they are either uninsurable or not economically
insurable. Should an uninsured loss or a loss in excess of insured limits
occur, WRP Newco could lose its capital invested in a property, as well as the
anticipated future revenue from such property and would continue to be
obligated on any mortgage indebtedness or other obligations related to the
property. Any such loss would adversely affect the financial condition and
results of operations of WRP Newco.

With respect to those properties in which WRP Newco holds an interest
through a mortgage, as well as those properties owned by entities to whom WRP
Newco makes unsecured loans, the borrowers will most likely be obligated to
maintain insurance on such properties and to arrange for WRP Newco to be
covered as a named insured on such policies. The face amount and scope of such
insurance coverage may be less comprehensive than WRP Newco would carry if it
held the fee interest in such property. Accordingly in such circumstances, or
in the event that the borrowers fail to maintain required coverage, uninsured
or underinsured losses may occur, which could have an adverse impact on WRP
Newco's cash flow or financial condition.

POTENTIAL ENVIRONMENTAL LIABILITY RELATED TO THE PROPERTIES

Under various Federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
These laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The cost of any required remediation and the owners's
liability therefor as to any property is generally not limited under such
enactments and could exceed the value of the property and/or the aggregate
assets of the owner. The presence of such substances, or the failure to
properly remediate such substances, may adversely affect the owner's ability
to sell or rent such property or to borrow using such property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at a disposal or treatment facility, whether or not such facility
is owned or operated by such person. Certain environmental laws govern the
removal, encapsulation or disturbance of ACMs when such materials are in poor
condition, or in the event of renovation or demolition. Such laws impose
liability for release of asbestos-containing materials ("ACMs") into the air
and third parties may seek recovery from owners or operators of real
properties for personal injury associated with ACMs. In this regard, it should
be noted that the main headquarters building at the Point View office complex
contains ACM's. Upon acquisition of the property, WRP Newco intends to proceed
with the removal of ACM's in such

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building. The operation and subsequent removal of certain underground storage
tanks are also regulated by federal and state laws. In connection with the
ownership (direct or indirect), operation, management and development of real
properties, WRP Newco may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances, and, therefore, potentially liable for removal or
remediation costs, as well as certain other related costs, including
governmental fines and injuries to persons and property.

The properties described in this Joint Proxy
Statement/Prospectus/Information Statement that are owned or to be acquired by
WRP Newco have had recent Phase I or similar environmental audits (which
involved general inspections without soil sampling, ground water analysis or
radon testing, and for the Properties constructed in 1978 or earlier, survey
inspections to ascertain the existence of ACMs were conducted) completed by
independent environmental consultant companies. These environmental audits
have not revealed any environmental liability that would have a material
adverse effect on WRP Newco's business.

DEPENDENCE ON KEY PERSONNEL

WRP Newco is dependent primarily on the efforts of Jeffrey H. Lynford,
Chairman of the Board, and Edward Lowenthal, President, and the loss of either
of their services could have an adverse effect on the operations of WRP Newco.
Mr. Lynford and Mr. Lowenthal will each enter into employment agreements with
WRP Newco having a term of approximately five years. WRP Newco intends to
retain the services of individuals with expertise and experience in certain
activities to be conducted by WRP Newco, and the loss of the services of any
of these individuals could also have an adverse effect on the operations of
WRP Newco.

TAX CONSEQUENCES OF THE DISTRIBUTION

To the extent the fair market value of the shares of WRP Newco Common
distributed in the Distribution to Wellsford Common Shareholders exceeds
Wellsford's tax basis in such shares, gain will be recognized by Wellsford.
Assuming Wellsford qualifies as a REIT and has a dividends paid deduction for
distributions to its shareholders at least equal to its REIT taxable income
(as computed before taking into account the dividends paid deduction), no REIT
level tax will be incurred on account of the Distribution.

The distribution of WRP Newco Common will, however, be taxable to Wellsford
Common Shareholders to the same extent as any other distribution made by
Wellsford to its shareholders. Management of Wellsford estimates that
approximately 50% of the value of the shares of WRP Newco Common received in
the Distribution will be taxable as ordinary income. Because this estimate is
based, in part, on future events, there can be no assurance as to the portion
of the value of the Distribution that will be taxable as ordinary income. The
remainder of the value of the shares of WRP Newco Common received in the
Distribution will either constitute a return of capital (reducing basis in the
shares of Wellsford Common that converted in the Merger into Survivor Common)
or capital gain. For a more detailed explanation, see "The Contribution and
Distribution--Tax Consequences of the Distribution."

CHANGES IN POLICIES WITHOUT STOCKHOLDER APPROVAL

The investment, financing, borrowing and distribution policies of WRP Newco
and its policies with respect to all other activities, growth, debt,
capitalization and operations, will be determined by the WRP Newco Board of
Directors. Although it has no present intention to do so, the Board of
Directors may amend or revise these policies at any time and from time to time
at its discretion without a vote of the stockholders of WRP Newco. A change in
these policies could adversely affect WRP Newco's financial condition, results
of operations and the market price of WRP Newco Common. See "Policies with
Respect to Certain Activities of WRP Newco."

ABSENCE OF PUBLIC MARKET; RISK OF CHANGES IN STOCK PRICE

Prior to the Distribution, there will be no public market for WRP Newco
Common, and there can be no assurance that an active trading market for WRP
Newco Common will develop following the Distribution or, if developed, that
any such market will be sustained. In the absence of a public trading market,
an investor may be unable to liquidate his investment in WRP Newco. The
initial valuation of the WRP Newco Common may not be indicative of the market
price of the WRP Newco Common after the Distribution. The prices at which WRP
Newco Common trades will be determined by the marketplace and may be
influenced by many factors, including, among others, the depth and liquidity
of the market for WRP Newco Common, investor perception of WRP Newco and its
businesses, WRP Newco's dividend policy, interest rates and general economic
and market conditions. Prices at which WRP Newco Common may trade after the
Distribution cannot be predicted.

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COSTS OF COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND SIMILAR LAWS

Under the Americans with Disabilities Act of 1980 (the "ADA"), places of
public accommodations and commercial facilities are required to meet certain
federal requirements related to access and use by disabled persons. Compliance
with ADA requirements could require both structural and non-structural changes
to the properties in which WRP Newco invests and noncompliance could result in
imposition of fines by the United States government or an award of damages to
private litigants. Although management of WRP Newco believes that its
properties are substantially in compliance with present requirements of the
ADA, WRP Newco may incur additional costs of compliance in the future. A
number of additional Federal, state and local laws exist which impose further
burdens or restrictions on owners with respect to access by disabled persons
and may require modifications to properties in which WRP Newco invests, or
restrict certain further renovations thereof, with respect to access by
disabled persons. Final regulations under the ADA have not yet been
promulgated and the ultimate amount of the cost of compliance with the ADA or
other such laws is not currently ascertainable. While such costs are not
expected to have a material effect on WRP Newco, they could be substantial. If
required changes involve greater expense than WRP Newco currently anticipates,
WRP Newco's financial condition and results of operations could be adversely
affected.

NONCOMPLIANCE WITH OTHER LAWS

Real estate properties are also subject to various Federal, state and local
regulatory requirements, such as state and local fire and life safety
requirements. Failure to comply with these requirements could result in the
imposition of fines by governmental authorities or awards of damages to
private litigants. WRP Newco believes that its properties are currently in
material compliance with all such regulatory requirements. However, there can
be no assurance that these requirements will not be changed or that new
requirements will not be imposed which would require significant unanticipated
expenditures by WRP Newco and could have an adverse effect on WRP Newco's
results of operations.

EFFECT ON COMMON STOCK PRICE OF SHARES AVAILABLE FOR FUTURE SALE

Sales of a substantial number of shares of WRP Newco Common, or the
perception that such sales could occur, could adversely affect prevailing
market prices of the WRP Newco Common. Up to 12,000,000 shares of WRP Newco
Common may be issued pursuant to the Additional Share Offering and purchasers
of the Additional Shares may be able to sell such shares in the public market
immediately after purchase. In addition, 1,750,000 shares of WRP Newco Common
have been reserved for issuance pursuant to WRP Newco's 1997 Management
Incentive Plan, and, when issued, these shares will be available for sale in
the public markets from time to time pursuant to exemptions from registration
requirements or upon registration. No prediction can be made about the effect
that future sales of WRP Newco Common will have on the market prices of WRP
Newco Common.

HEDGING POLICIES/RISKS

In connection with the financing of certain real estate investments, WRP
Newco may employ hedging techniques designed to protect WRP Newco against
adverse movements in currency and/or interest rates. While such transactions
may reduce certain risks, such transactions themselves may entail certain
other risks. Thus, while WRP Newco may benefit from the use of these hedging
mechanisms, unanticipated changes in interest rates, securities prices, or
currency exchange rates may result in a poorer overall performance for WRP
Newco than if it had not entered into such hedging transactions.

ANTI-TAKEOVER EFFECT RESULTING FROM A STAGGERED BOARD, ABILITY OF WRP NEWCO TO
ISSUE PREFERRED STOCK AND CERTAIN PROVISIONS OF MARYLAND LAW

WRP Newco's Board of Directors is divided into three classes. The initial
terms of the first, second and third classes will expire in 1998, 1999 and
2000, respectively. Beginning in 1998, directors for each class will be chosen
for a three-year term upon the expiration of their then current term, and each
year one class of directors will be elected by the stockholders. The staggered
terms for directors may limit the stockholders' ability to change control of
WRP Newco even if a change of control were in the interests of stockholders.

The Newco Charter authorizes the Board of Directors to establish one or more
series of preferred shares and to determine, with respect to any series of
preferred shares, the preferences and other terms of such series. Although the
Board of Directors has no intention at the present time, it could issue a
series of preferred shares that could, depending on the terms of such series,
impede or prevent a merger, tender offer or other transaction that some, or a
majority, of WRP Newco's shareholders might believe to be in their best
interest or in which shareholders might receive a premium for their shares
over the then current market price of such shares.

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Under the MGCL, certain "business combinations" (including certain issuances
of equity securities) between a Maryland corporation and an Interested
Stockholder are prohibited for five years after the most recent date on which
the Interested Stockholder becomes an Interested Stockholder. Thereafter,
unless exempted, any such business combination must be approved by two
supermajority stockholder votes. The directors of WRP Newco have exempted from
the Maryland statute any business combinations with Jeffrey H. Lynford or
Edward Lowenthal or any of their affiliates or any other person acting in
concert or as a group with any of such persons and, consequently, the five-
year prohibition and the supermajority vote requirements will not apply to
business combinations between such persons and WRP Newco. See "Certain
Provisions of Maryland Law and of WRP Newco's Charter and Bylaws".

The provisions of the MGCL described above and the exemptions granted may
discourage a third party from making an acquisition proposal for WRP Newco and
may inhibit a change in control under circumstances that could otherwise give
the holders of WRP Newco Common the opportunity to realize a premium over
then-prevailing market prices.

It should also be noted that for ten years after the Closing Date, WRP Newco
has the right to direct the voting of all shares of WRP Newco Series A
Preferred, WRP Newco Class A Common and WRP Newco Common owned by ERP
Operating Partnership or any of its affiliates, except as to the election of
the director to be designated by ERP Operating Partnership or any matter
relating to the rights, preferences and privileges of WRP Newco Series A
Preferred or WRP Newco Class A Common. Such voting right may hinder a change
in control.

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THE MEETINGS OF SHAREHOLDERS

EQR

The EQR Special Meeting has been called by the EQR Board of Trustees for the
purpose of approving the Merger. The EQR Special Meeting will be held on May
28, 1997, at 10:00 a.m., local time, at One North Franklin, Chicago, Illinois.
Only shareholders of record of EQR Common at the close of business on April
14, 1997 will be entitled to vote at the EQR Special Meeting. EQR had
outstanding 53,713,158 shares of EQR Common as of the close of business on
April 1, 1997, of which 1,022,666 shares (or approximately 1.9% of the
outstanding) shares of EQR Common (excludes 681,534 shares where beneficial
ownership is disclaimed) were owned beneficially by the officers and trustees
of EQR, and such persons have indicated their intention to vote such shares in
favor of the Merger. No EQR Shares other than EQR Common are entitled to vote
on the Merger. Each holder of EQR Common is entitled to one vote per share on
the Merger. If the accompanying proxy form is signed and returned, the shares
represented thereby will be voted in accordance with any direction on the
proxy form, or in the absence of a direction, they will be voted FOR the
Merger. The shareholder may revoke the proxy at any time prior to the voting
thereof by giving written notice of such revocation to EQR, by executing and
delivering a proxy bearing a later date, or by attending the EQR Special
Meeting and voting in person.

The expenses of the solicitation of EQR Common Shareholders will be paid by
EQR. In addition to the use of the mail, proxies may be solicited by trustees,
officers, or regular employees of EQR in person, by telecopy or by telephone.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of the shares of EQR Common held of record by such persons, and EQR
will reimburse such brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith.
EQR has retained MacKenzie Partners to assist in the solicitation of proxies.
The fee of such firm is estimated to be $6000, plus reimbursement for out-of-
pocket costs and expenses.

The presence at the EQR Special Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of EQR Common is necessary to
constitute a quorum under the Amended and Restated Bylaws of EQR (the "EQR
Bylaws"). Votes cast by proxy or in person at the meeting will be tabulated by
election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstentions and
"broker non-votes" (i.e., proxies of brokers who have limited authority to
vote on specified proposals) as shares that are present and entitled to vote
for purposes of determining the presence of a quorum at the meeting. Under
Maryland law and EQR's Amended and Restated Declaration of Trust (the "EQR
Declaration"), the affirmative vote of the holders of two-thirds of the
outstanding shares of EQR Common is required to approve the Merger.

EQR Common Shareholders may mark the accompanying EQR proxy to vote their
shares FOR or AGAINST, or to ABSTAIN with respect to, the Merger. Abstentions
and broker non-votes will have the effect of a vote against approval of the
Merger.

The EQR Trustees who voted on the Merger unanimously recommend that EQR
Common Shareholders vote FOR the Merger.

Pursuant to the EQR Bylaws, no business may be transacted at the EQR Special
Meeting except that referred to in the accompanying notice of the EQR Special
Meeting.

WELLSFORD

The Wellsford Special Meeting has been called by the Wellsford Board of
Trustees for the purpose of approving the Merger, including the adoption of an
amended and restated declaration of trust of the Surviving Trust, the
Additional Provisions, the Additional Share Offering by WRP Newco and the
adoption of WRP Newco's 1997 Management Incentive Plan. The Wellsford Special
Meeting will be held on May 28, 1997, at 10:00 a.m., local time, at The
Princeton Club, 15 West 43rd Street, New York, New York. Only shareholders of
record of Wellsford Common at the close of business on April 14, 1997 will be
entitled to vote at the Wellsford Special Meeting. Wellsford had outstanding
17,261,897 shares of Wellsford Common as of the close of business on April 18,
1997, of which 599,828 shares (or approximately 3.5% of the outstanding shares
of Wellsford Common (excludes 29,727 shares where beneficial ownership is
disclaimed)) were owned beneficially by the officers and trustees of
Wellsford, and such persons have indicated their intention to vote such shares
in favor of the Merger, including the adoption of an amended and restated
declaration of trust of the Surviving Trust, the Additional Provisions, the
Additional Share Offering and the adoption of WRP Newco's 1997 Management
Incentive Plan. No Wellsford Shares other than Wellsford Common are entitled
to vote on the matters set forth in the notice of the Wellsford Special
Meeting. Each holder of Wellsford Common is entitled to one vote per share on
the matters set forth in the notice of the Wellsford Special Meeting. If the
accompanying proxy form is signed and returned, the shares represented thereby
will

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<PAGE>

be voted in accordance with any direction on the proxy form, or in the absence
of a direction, they will be voted FOR the Merger, including adoption of the
amended and restated declaration of trust of the Surviving Trust, the
Additional Provisions, the Additional Share Offering by WRP Newco and the
adoption of WRP Newco's 1997 Management Incentive Plan. The shareholder may
revoke the proxy at any time prior to the voting thereof by giving written
notice of such revocation to Wellsford, by executing and delivering a proxy
bearing a later date, or by attending the Wellsford Special Meeting and voting
in person.

The expenses of the solicitation of Wellsford Common Shareholders will be
paid by Wellsford. In addition to the use of the mail, proxies may be
solicited by trustees, officers, or regular employees of Wellsford in person,
by telecopy or by telephone. Arrangements will also be made with brokerage
firms and other custodians, nominees and fiduciaries to forward solicitation
material to the beneficial owners of the shares of Wellsford Common held of
record by such persons, and Wellsford will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith. Wellsford has retained MacKenzie
Partners to assist in the solicitation of proxies. The fee of such firm is
estimated to be $7,500, plus reimbursement for out-of-pocket costs and
expenses.

The presence at the Wellsford Special Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of Wellsford Common is
necessary to constitute a quorum under Wellsford's Bylaws (the "Wellsford
Bylaws"). Votes cast by proxy or in person at the Wellsford Special Meeting
will be tabulated by election inspectors appointed for the meeting who will
determine whether or not a quorum is present. The election inspectors will
treat abstentions and "broker non-votes" (i.e., proxies of brokers who have
limited authority to vote on specified proposals) as shares that are present
and entitled to vote for purposes of determining the presence of a quorum at
the meeting. Under Maryland law and Wellsford's Amended and Restated
Declaration of Trust (the "Wellsford Declaration"), the affirmative vote of
the holders of a majority of the outstanding shares of Wellsford Common is
required to approve the Merger. The affirmative vote of the holders of two-
thirds of the outstanding shares of Wellsford Common is required to approve
the Additional Provisions. The affirmative vote of the holders of a majority
of shares of Wellsford Common voting thereon is required to approve the
Additional Share Offering and the adoption of WRP Newco's 1997 Management
Incentive Plan.

Wellsford Common Shareholders may mark the accompanying Wellsford proxy to
vote their shares FOR or AGAINST, or to ABSTAIN from voting with respect, to
the Merger, the Additional Provisions, the Additional Share Offering and WRP
Newco's 1997 Management Incentive Plan. Abstentions and broker non-votes will
be counted in determining the presence of a quorum and will have the effect of
a vote against approval of the Merger and the Additional Provisions. An
abstention and a broker non-vote will have no effect on the proposal to
approve the Additional Share Offering and adoption of WRP Newco's 1997
Management Incentive Plan.

The Wellsford Board of Trustees unanimously recommends that Wellsford Common
Shareholders vote FOR the Merger, the Additional Provisions, the Additional
Share Offering and WRP Newco's 1997 Management Incentive Plan. The WRP Newco
Board of Directors unanimously recommends that Wellsford Common Shareholders
vote FOR the Additional Share Offering and WRP Newco's 1997 Management
Incentive Plan.

The Wellsford Bylaws provide that no business will be transacted at the
Wellsford Special Meeting except that referred to in the accompanying notice
of the Wellsford Special Meeting.

THE MERGER

The description of the Merger contained in this Joint Proxy
Statement/Prospectus/Information Statement is qualified in its entirety by
reference to the Merger Agreement, the full text of which is attached as
Appendix A, and is incorporated herein by reference.

TERMS OF THE MERGER

The Merger Agreement provides that, upon satisfaction or waiver of the
conditions set forth therein, EQR will be merged into Wellsford. The name of
the Surviving Trust will be Equity Residential Properties Trust. At the
Effective Time, each outstanding share of Wellsford Common will be converted
into .625 of a share of Survivor Common. At the Effective Time, each
outstanding share of EQR Common will be converted into one share of Survivor
Common. At the Effective Time, each share of Wellsford Preferred and EQR
Preferred will be converted into one share of Survivor Preferred, having the
same preferences and other terms as the Wellsford Preferred or EQR Preferred
previously outstanding of the same series; provided, however, that the
conversion ratio for the Wellsford Series A will be adjusted in accordance
with its terms. No fractional shares of Survivor Common will be issued in
connection with the Merger. In lieu thereof, holders of Wellsford

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Common will receive a cash payment equal to the average closing price of EQR
Common on the NYSE for the five trading days immediately preceding the
Effective Time, multiplied by the fraction of the shares of Survivor Common to
which the holder would be entitled under the Merger Agreement.

BACKGROUND OF THE MERGER

Since 1993, Douglas Crocker, the President and Chief Executive Officer of
EQR and Jeffrey H. Lynford, the Chairman of the Board of Wellsford and Edward
Lowenthal, President and Chief Executive Officer of Wellsford, have had a
personal relationship arising out of their participation in the multifamily
property business. At various times during 1994 and 1995 Mr. Crocker, Mr.
Lynford and Mr. Lowenthal have discussed the general status of the multifamily
property industry. Messrs. Crocker, Lynford and Lowenthal presumed that the
multifamily property industry would be the subject of combinations of existing
companies in the future, and separately considered whether their respective
companies should explore a combination with other companies.

On September 16, 1996, a regular quarterly Wellsford board meeting was held
at which Messrs. Lynford and Lowenthal reported on their discussions with
investment banking firms and other publicly traded REITs regarding possible
strategic combinations. They indicated that these discussions related
primarily to possible transactions in which Wellsford would acquire another
entity or be the survivor in a merger. The Board of Trustees of Wellsford
authorized management to engage in discussions regarding possible strategic
business combinations.

On September 24, 1996, Messrs. Crocker, Lynford and Lowenthal met to discuss
the multifamily property industry and real estate market in general and
whether combining the property portfolios of EQR and Wellsford made sense for
both companies and their shareholders. The parties expressed a general
interest in exploring the possibility of a combination of the companies.

On October 19, 1996, Messrs. Crocker and Lynford had a meeting at which they
specifically discussed each company's interest in pursuing merger discussions.
During such meeting, Mr. Crocker and Mr. Lynford considered whether a merger
would be in the best interests of both companies and their shareholders. Among
the issues considered were whether a merger would combine the talents of their
respective companies, reduce corporate overhead by eliminating redundancies
and create a larger company which might be attractive to institutional
investors and increase access to public equity and debt markets. Mr. Crocker
and Mr. Lynford discussed various exchange ratios for Wellsford Common as well
as possible funds from operations and adjusted funds from operations ratios.
Concluding that a merger might be in the best interests of both companies and
their shareholders, Mr. Crocker and Mr. Lynford decided to pursue merger
discussions.

On October 24, 1996, Mr. Crocker and Mr. Lowenthal met at the National
Association of Real Estate Investment Trusts ("NAREIT") Convention in Dallas,
Texas. Mr. Crocker and Mr. Lowenthal discussed revised numbers with respect to
funds from operations and adjusted funds from operations in connection with
possible exchange ratios. Mr. Crocker discussed the fact that he would like to
reach agreement on these numbers in order to further pursue a merger
transaction. Mr. Crocker and Mr. Lowenthal agreed to have each company's
internal accountants discuss exchange ratios and evaluations.

On November 13, 1996, Mr. Crocker, Mr. Lowenthal, Gregory F. Hughes, Chief
Financial Officer of Wellsford, David H. Lee, Senior Vice President--Capital
Markets of EQR, Gerald A. Spector, Executive Vice President of EQR, and David
J. Neithercut, Chief Financial Officer of EQR, met. Mr. Lowenthal presented
the exchange ratio as a topic for discussion. The parties exchanged views on
relative assets and exchange values, but disagreements remained regarding the
method of valuation, the exchange ratio and other material issues.

On November 27, 1996, Mr. Crocker met with Messrs. Lynford, Lowenthal and
Hughes at Wellsford's corporate offices. The parties again discussed valuation
and determined that EQR was not willing to value the development assets of
Wellsford on a going concern basis in the same manner as the other Wellsford
assets. The parties alternatively discussed the formation of a new Wellsford
subsidiary to be spun off to the common shareholders of Wellsford funded
primarily with the Wellsford development assets. The parties agreed that Mr.
Crocker would serve as a director on the proposed subsidiary's board of
directors and Messrs. Lowenthal and Lynford would serve as trustees on the EQR
Board of Trustees. The parties also discussed estimated financial results of
EQR for year-end 1997 and various employment issues, such as possible
retention of as many Wellsford employees as possible to meet EQR's staffing
needs.

On December 9, 1996, a regular quarterly Wellsford board meeting was held at
which members of management of Wellsford and its legal counsel were present.
At such meeting, Messrs. Lynford and Lowenthal reported on the discussions
they had with other publicly traded REITs regarding possible business
combination transactions. They indicated that the only ongoing discussions at
such time were with EQR, and they reported the status and substance of these
discussions, including

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those relating to a possible spin-off of certain of Wellsford's assets, and
the nature and results of management's initial due diligence review of the
business and financial condition of EQR.

On December 12, 1996, Mr. Crocker, Mr. Lowenthal, Mr. Lynford, Mr. Hughes
and attorneys from EQR's legal staff, as well as representatives of Rudnick &
Wolfe, special counsel for EQR, and Robinson Silverman Pearce Aronsohn &
Berman LLP, special counsel for Wellsford, met to discuss the structure of a
possible merger transaction, the formation of the proposed subsidiary and the
specific assets to be transferred to the proposed subsidiary, and the possible
pricing matrix for the Wellsford Common. General terms were discussed. The
tentative Exchange Ratio was determined by establishing relative values for
the EQR Common and Wellsford Common. The value for EQR Common was based on its
then market value of $42.875 per share. No one specific valuation method was
utilized in connection with the determination of the value of the Wellsford
Common. The value for Wellsford Common was negotiated based upon, among other
things, its then market price of $25.00 per share and each party's evaluation
of the value of Wellsford's assets to be acquired in the Merger, which were
estimated at approximately $1,032.2 million, the budgeted net operating
income, earnings before interest, taxes, depreciation and amortization and
funds from operations for 1997 estimated to be generated from the assets to be
acquired by EQR in the merger which were approximately $79.4 million, $76.7
million and $37.4 million, respectively, the cost savings anticipated from the
Merger, which were estimated at $4.1 million per year and the costs associated
with the Merger, including employee severance and retention costs, which were
estimated at $23.6 million. With respect to the Wellsford Preferred, it was
determined to value such shares based upon their liquidation value because the
distribution rates on Wellsford Preferred were established as a percentage of
their respective liquidation values. It was tentatively agreed, subject to
satisfactory resolution of other material issues and completion of due
diligence, that the exchange ratio would be determined based upon a value of
$27.50 per share for the Wellsford Common and $40.00 per share for the EQR
Common, subject to adjustment in the event of a decline in the market price of
EQR Common. In addition, it was tentatively agreed, subject to the additional
study of the relevant assets and completion of due diligence, that the assets
to be contributed to the new subsidiary would have an initial book value of at
least $2.50 per share. Although discussions were still ongoing, EQR and
Wellsford requested their legal counsel to prepare a draft of a merger
agreement and other related documents so that management of the companies
could focus on the issues that required resolution.

On December 20, 1996, Mr. Crocker and Mr. Lowenthal had a telephone call to
discuss certain open issues regarding the possible merger transaction. The
costs in connection with the possible merger transaction were discussed in
detail.

On December 26, 1996, Messrs. Crocker, Lowenthal and Hughes discussed by
telephone concerns regarding the capitalization of the proposed subsidiary
upon consummation of the possible merger. Mr. Crocker suggested that EQR
purchase $3.5 million in shares of common stock of the proposed subsidiary
plus an additional 10% interest in Palomino Park.

From December 26, 1996 through January 9, 1997, the management of EQR and
Wellsford had a number of discussions regarding various business issues.

On January 9, 1997, a special EQR board meeting was held at which members of
management, representatives of EQR's financial and legal advisors were present
in person or by conference telephone call. At such meeting, the trustees were
informed of the status of discussions with Wellsford's management and the
reasons that a combination with Wellsford would be beneficial. In addition,
the trustees discussed with management and EQR's legal advisors, the current
operations of EQR and Wellsford, the form of consideration payable in the
proposed transaction, the valuation methodologies to be utilized by J.P.
Morgan for purposes of its opinion (see "The Merger--Opinion of EQR Financial
Advisor"), potential synergies expected by management to result from the
proposed transaction, certain governance, tax and due diligence matters and
the time table for completion of the transaction. The EQR Board of Trustees
also reviewed the tentative terms of the proposed merger between EQR and
Wellsford.

Mr. Crocker provided the EQR Board of Trustees with a discussion of the
background and events leading up to the meeting with respect to the proposed
merger with Wellsford. Mr. Crocker then set forth the reasons he believed a
possible business combination with Wellsford would be appropriate for EQR. The
reasons discussed were (i) the combined entity would be the second largest
publicly-traded REIT in the United States and the largest REIT focusing
primarily on multifamily properties, with 317 properties, consisting of 90,873
apartment units; (ii) the combined market capitalization, would be
approximately $5 billion and would not significantly alter EQR's existing Debt
to Total Market Capitalization Ratio; and (iii) the merger would improve
access to the public debt and equity markets to support EQR's continued
growth. Mr. Crocker also noted that Mr. Lowenthal and Mr. Lynford would be
added to the EQR Board of Trustees, assuming approval of the Merger by the
shareholders of each company.

EQR's legal counsel presented and explained the terms of the Merger
Agreement to the EQR Board of Trustees including closing conditions,
termination rights and liquidated damages and expense reimbursement
provisions, and advised the EQR Board of Trustees of their fiduciary
obligations. A discussion followed concerning the proposed merger.

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The EQR Board of Trustees discussed the advantages and disadvantages to EQR
of the Merger, including the factors raised by Mr. Crocker. The principle
negative factor that the EQR Board of Trustees considered was the significant
costs involved in connection with consummating the Merger and the substantial
management time and effort required to effectuate the Merger and integrate the
businesses of EQR and Wellsford. The EQR Board of Trustees did not believe
that this factor was sufficient to outweigh the advantages of the Merger,
particularly in light of the lower payout ratio of the Surviving Trust based
upon funds from operations, and the similar Debt to Total Market
Capitalization Ratio of the Surviving Trust, as compared with the current
ratio for EQR.

From January 12, 1997 through January 16, 1997, representatives of
management of EQR and Wellsford and their respective counsel met in Chicago to
discuss and resolve the remaining open business and legal issues.

On January 15, 1997, a special meeting of the EQR Board of Trustees was
held. Representatives of J.P. Morgan made a detailed presentation regarding
the proposed merger with Wellsford. J.P. Morgan's presentation included a
discussion of (i) the fairness from a financial point of view to EQR of the
consideration to be paid by EQR in the proposed merger; (ii) a summary of the
financial terms of the proposed merger; (iii) a valuation analysis; and (iv) a
discussion of the impact of the proposed merger on EQR. Also included in J.P.
Morgan's oral presentation of its fairness opinion were (i) an outline of J.P.
Morgan's fairness opinion process; (ii) a pro forma merger analysis; (iii) a
fully loaded share price analysis; (iv) a public trading multiples analysis;
(v) a selected transactions analysis; (vi) a share trading history analysis;
(vii) an historical exchange ratio analysis; (viii) a net asset value
analysis; and (ix) a WRP Newco analysis. See "--Opinion of Financial Advisor--
EQR."

Following such presentations, and after extensive discussion, the Board of
Trustees of EQR concluded that the advantages of the Merger outweighed the
potential risks and the EQR Trustees who voted on the Merger unanimously
approved the Merger Agreement and the related agreements contemplated thereby,
and authorized EQR management to enter into such agreements. J.P. Morgan
rendered its oral opinion to the effect that, as of that date and subject to
the assumptions made, procedures followed, matters considered and limits of
its review, the consideration to be paid by EQR in connection with the Merger
was fair, from a financial point of view, to EQR. J.P. Morgan's written
opinion confirming its oral opinion was delivered on January 16, 1997.

On January 16, 1997, a special meeting of the Board of Trustees of Wellsford
was held at which members of management, representatives of Merrill Lynch and
legal counsel were present. At such meeting, the Wellsford Board of Trustees
was updated on the status of discussions with EQR regarding the potential
merger transaction between Wellsford and EQR. Mr. Lynford reviewed with the
Board of Trustees (i) the background of the proposed merger and spin-off
transaction, (ii) the current status of Wellsford's financial and business
plans without the proposed merger, including the feasibility of improving the
profitability of Wellsford's existing property portfolio and raising
additional capital and acquiring new properties, (iii) pertinent due diligence
findings with respect to EQR, with particular emphasis on the current
operations and properties of EQR and (iv) the potential benefits as well as
the risks of the proposed merger transaction as described below under "--
Reasons for the Merger; Recommendation of the Wellsford Board of Trustees."

Wellsford's legal counsel made a presentation to the Wellsford Board of
Trustees in which it explained the material terms of the proposed merger and
spin-off transaction and agreements related thereto, briefed the Board of
Trustees on certain legal issues raised by the proposed merger transaction and
advised the Board of Trustees of its fiduciary duties in connection with such
transaction.

Merrill Lynch presented its financial analysis of the merger transaction,
which included: (i) an overview of the proposed transaction setting forth,
among other things, a summary of the key transaction terms and a description
of the Distribution, (ii) an analysis of the stock trading history of each of
Wellsford Common and EQR Common, (iii) valuation analyses of Wellsford, EQR
and WRP Newco, (iv) a comparison of each of Wellsford and EQR with selected
publicly traded companies, (v) a comparison of the proposed financial terms of
the Merger with the financial terms of other relevant mergers and acquisitions
and (vi) a pro forma merger analysis. Merrill Lynch concluded its presentation
by orally advising the Wellsford Board of Trustees that as of that date, based
upon the facts and circumstances as they existed at that time, and subject to
certain assumptions, factors and limitations, the proposed consideration to be
received by the holders of Wellsford Common, pursuant to the Merger and
Distribution, was fair to such shareholders from a financial point of view.

Following such presentations, and after extensive discussion of the
advantages and disadvantages of the proposed merger transaction as described
under "--Reasons for the Merger; Recommendations of the Wellsford Board of
Trustees," the Board of Trustees of Wellsford concluded that the advantages of
the Merger and Distribution outweighed the potential risks, and unanimously
approved the merger transaction, the spin-off, the Merger Agreement and all
transactions contemplated thereby.

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EQR and Wellsford did not believe that the Merger or the Contribution and
Distribution would have a material adverse effect on the results of
operations, liquidity or capital resources of the Surviving Trust and believed
that the advantages of such transactions outweighed the disadvantages.

The Merger Agreement was executed on January 16, 1997.

REASONS FOR THE MERGER; RECOMMENDATION OF THE EQR BOARD OF TRUSTEES

The EQR Board of Trustees believes that the Merger, including the
consideration, is fair and in the best interests of EQR and its shareholders.
Accordingly, the EQR Trustees who voted on the Merger unanimously approved the
Merger and unanimously recommend approval of the Merger by the shareholders of
EQR. In reaching this determination, the EQR Board of Trustees consulted with
EQR management, as well as its financial advisors, J.P. Morgan, legal counsel
and accountants, and considered a number of factors. The material factors that
the EQR Board of Trustees considered in approving the Merger and unanimously
recommending approval of the Merger are that:

(i) The EQR Board of Trustees believes that the Merger would solidify
EQR's leadership position in the multifamily property industry. The EQR
Board of Trustees viewed this as favorable because the combined entity
would own and operate 317 multifamily properties consisting of 90,873
apartment units; would have funds from operations on a pro forma basis for
the nine months ended September 30, 1996 of approximately $155.4 million
and would have a combined market capitalization, as of September 30, 1996,
of approximately $5.0 billion with an initial Debt to Total Market
Capitalization Ratio of approximately 31%.

(ii) The EQR Board of Trustees believes that the Merger would increase
operating efficiency through economies of scales, which the EQR Board of
Trustees viewed as favorable as the combined entity would realize
significant savings in overhead and expenses (such savings are estimated to
be approximately $3.7 million per annum).

(iii) The EQR Board of Trustees believes that the Merger would provide
greater access to the public equity and debt markets. The Debt to Total
Market Capitalization Ratio for EQR as of September 30, 1996 was
approximately 31.5%, while the ratio on a pro forma basis of the Surviving
Trust as of the same date would be approximately 31%. The EQR Board of
Trustees viewed this favorably because of management's belief, based in
part on discussions with advisors, investment banking firms and lenders,
that it would provide EQR Common Shareholders with enhanced liquidity and
make the Survivor Common a more attractive investment for institutional
investors.

(iv) The EQR Board of Trustees believes that the Surviving Trust would be
a larger and financially stronger company, which would make it easier to
combine with other public or private entities. The EQR Board of Trustees
viewed this as favorable because it would provide another efficient and
attractive means of growth.

(v) The EQR Board of Trustees believes that the combination of the
Wellsford properties (approximately 19,000 units) with those of EQR will
expand the geographic focus of EQR's ownership and operation of properties
and enhance EQR's operations in the Southwest, Western and Pacific
Northwest regions of the United States. The EQR Board of Trustees viewed
this as favorable because it would limit the impact that adverse economic
or real estate conditions in a particular region may have on EQR as a whole
and provide EQR the opportunity for additional expansion in these regions.

(vi) The Unaudited Pro Forma Combined Financial Statements for the nine
months ended September 30, 1996 on a pro forma basis illustrated the
effects of the Merger. On a pro forma basis funds from operations for the
Surviving Trust are $155.4 million for the nine months ended September 30,
1996 instead of $113.3 million for EQR on a historical basis. The EQR Board
of Trustees viewed this as favorable because it would most likely increase
the Surviving Trust's funds from operations available for distribution to
shareholders and holders of OP Units. Funds from operations available for
distribution is not the same as cash available for distribution as it does
not reflect cash required for capital expenditures and principal repayments
on debt.

(vii) The Merger could be effectuated through the issuance of new equity
valued at $464 million (based upon a market price of $43.375 per share of
EQR Common on January 16, 1997), rather than through the use of cash or a
public offering of equity or debt securities, which the EQR Board of
Trustees viewed as favorable.

(viii) J.P. Morgan delivered an oral opinion on January 15, 1997 to the
effect that, as of such date and based upon and subject to certain matters
stated therein, the consideration to be paid by EQR in connection with the
Merger was fair, from a financial point of view, to EQR. The EQR Board of
Trustees viewed such opinion as favorable not only because of the
conclusion reached by J.P. Morgan, but also because such conclusion was
consistent with the opinion of EQR's management.

(ix) The EQR Board of Trustees believes the terms of the Merger Agreement
to be fair to EQR.

(x) Under generally accepted accounting principles, the Merger will be
accounted for as a purchase, and for federal income tax purposes the Merger
will be a tax-free transaction, which the EQR Board of Trustees viewed as
favorable

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because, with certain possible exceptions, no gain or loss will be
recognized by EQR, Wellsford or a shareholder of Wellsford who receives
shares of Survivor Common for shares of Wellsford Common exchanged therefor
(except with respect to any cash received in lieu of a fractional interest
in a share of EQR Common).

The EQR Board of Trustees also considered certain potentially negative
factors which could arise from the Merger. These included, among others, the
significant costs involved in connection with consummating the Merger and the
substantial management time and effort required to effectuate the Merger and
integrate the businesses of EQR and Wellsford. The EQR Board of Trustees
considered that the Merger would increase the debt of the Surviving Trust. The
Surviving Trust will assume all of Wellsford's outstanding debt of
approximately $330 million. The EQR Board of Trustees recognized this increase
could adversely affect the ability of the Surviving Trust to obtain debt
financing for additional growth and would subject EQR to the risks of higher
leverage. Overall, however, the EQR Board of Trustees concluded that the
increase in debt would be within EQR's policies with respect to the incurrence
of debt. In addition, the EQR Board of Trustees considered the possible
adverse effects upon the market for EQR Common Shares and upon EQR's ability
to raise capital and issue equity in both the public and private markets which
might result if the Merger were not consummated. Finally, the EQR Board of
Trustees considered the risk that the anticipated benefits of the Merger might
not be fully realized. The EQR Board of Trustees did not believe that the
negative factors were sufficient, either individually or collectively, to
outweigh the advantages of the Merger.

The EQR Board of Trustees viewed as adequate the conditions to the closing
in the Merger Agreement, including the condition that no change in the
financial condition, business or operations of Wellsford will have occurred
that would have a material adverse effect, other than a change which affects
EQR and Wellsford in a substantially similar manner.

In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the EQR Board of Trustees did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weight to the specific factors considered in reaching its determination.

The EQR Board of Trustees view the indemnification provisions relating to
Wellsford trustees and officers as a continuing responsibility and approved of
the continuation of the indemnification of the Wellsford trustees and officers
as part of the negotiated transaction.

The EQR Board of Trustees believes that the proposed transaction is fair to
and in the best interests of EQR and its shareholders. The EQR Trustees who
voted on the Merger unanimously approved the Merger, and unanimously recommend
that the shareholders of EQR vote FOR the Merger.

In the event the Merger is not consummated for any reason, EQR will continue
to pursue its business objectives.

REASONS FOR THE MERGER; RECOMMENDATION OF THE WELLSFORD BOARD OF TRUSTEES

At a special meeting of the Wellsford Board of Trustees held on January 16,
1997, members of Wellsford management, representatives of Merrill Lynch and
legal counsel made presentations concerning the business and prospects of
Wellsford and EQR. As part of its deliberations, the Wellsford Board of
Trustees considered, among other factors, the age, condition and geographic
diversification of EQR's assets, the depth and experience of its management
and its credit rating and analyzed its capital structure, funds from
operations and Debt to Total Market Capitalization Ratio, as well as its
future prospects and opportunities for growth as a combined company with
Wellsford. The Wellsford Board of Trustees also reviewed the terms of the
Merger Agreement and the Contribution and Distribution Agreement with
Wellsford's management and Wellsford's financial and legal advisors. By
unanimous vote, the Wellsford Board of Trustees determined that the Merger and
the Distribution were fair to, and in the best interests of, Wellsford and its
shareholders, approved and adopted the Merger Agreement, the Contribution and
Distribution Agreement and the transactions contemplated thereby, and resolved
to recommend that Wellsford's shareholders approve the Merger. Although
Wellsford Common Shareholders are not being asked to approve the Distribution,
approval of the Merger will, in effect, constitute approval of the
Distribution.

The Wellsford Board of Trustees believes that the Merger offers Wellsford's
shareholders an opportunity to take advantage of the general trend in the real
estate industry towards consolidation, by affording shareholders a significant
participation in a much larger and more geographically diversified REIT with
greater potential for long-term appreciation and improved access to capital
markets.

In making its determination with respect to the Merger and the Distribution,
the Wellsford Board of Trustees also considered, among other things, that:

(i) the Merger represents the alternative which has the greatest
feasibility and offers the greatest potential to maximize shareholder
value. In this regard, the Board considered the discussions management
conducted with

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investment banking firms and other publicly traded REITs regarding possible
strategic combinations, as well as EQR's size, financial resources,
geographic diversification and credit rating and the expertise and
experience of EQR's management;

(ii) after management's discussions with other parties regarding possible
strategic business combinations, the Merger was the best alternative
reasonably available to Wellsford's shareholders. The Board believed that
after management's discussions with investment banking firms and other
publicly traded REITs, there were no other prospective purchasers that had
both the financial ability to complete the transaction and would be willing
to pay an aggregate consideration greater than that to be paid by EQR in
the Merger. Other possible strategic business combinations, including
potential acquisitions of other companies, were rejected for many reasons,
including the lack of management depth and experience, age and condition of
the applicable assets, lack of geographic diversification, insufficient
credit rating, insufficient cost savings and size of the other company;

(iii) the anticipated cost savings and operating efficiencies available
to the Surviving Trust from the Merger, particularly from a reduction of
general and administrative overhead expenses, the costs of capital, bulk
purchasing, advertising and property management;

(iv) the terms of the Merger Agreement, which the Wellsford Board of
Trustees viewed as favorable because it believed them to be fair to
Wellsford and its shareholders and because the terms were reached through
extensive arms-length negotiations. In this regard, the Wellsford Board of
Trustees noted that the Exchange Ratio fairly reflected the relative
contributions of both companies to the combined entity and represented an
attractive opportunity for shareholders to continue their investment and
maintain their receipt of quarterly dividends, but with significantly
expanded geographic diversification;

(v) the Surviving Trust will have significantly greater market
capitalization which could increase the liquidity of Survivor Common after
the Merger. In this regard, the Board noted that the market capitalization
of the Surviving Trust is expected to be approximately $4 billion greater
than the then current market capitalization of Wellsford and the Surviving
Trust would have approximately 60,000,000 shares of Survivor Common
outstanding after the Merger;

(vi) the Distribution will enable shareholders to participate in an
opportunity to maximize the value of the Contributed Assets (as defined
herein) because EQR did not wish to acquire the Contributed Assets for a
price that Wellsford considered to be adequate value for such assets;

(vii) the structure of the Merger, particularly the fact that the Merger,
as a "stock-for-stock" transaction, rather than a "cash-for-stock"
transaction, will provide an opportunity for Wellsford's shareholders to
participate in any future appreciation of the Surviving Trust;

(viii) the tax-free nature of the Merger; and

(ix) the opinion, analyses and presentations of Merrill Lynch, including
the opinion that the proposed consideration to be received by Wellsford
Common Shareholders pursuant to the Merger and the Distribution was fair to
such shareholders from a financial point of view, which supported the
conclusions reached by the Board after its own deliberations and analyses.

The Wellsford Board of Trustees also considered certain potentially negative
factors in its deliberations concerning the Merger, including, among others:

(i) the risk that the anticipated benefits of the Merger might not be
fully realized;

(ii) the significant costs involved in connection with consummating the
Merger;

(iii) the substantial management time and effort required to effectuate
the Merger;

(iv) the possibility that Wellsford may be required, if the Merger
Agreement is terminated under certain circumstances, to pay EQR a Break-Up
Fee of $14.0 million and to reimburse EQR Break-Up Expenses of up to $2.5
million; and

(v) that the dividend rate payable with respect to the EQR Common is less
than the dividend rate payable with respect to the Wellsford Common.

In addition to the above factors, the Board of Trustees was mindful of and
evaluated the actual and potential conflicts of interest. In view of the wide
variety of factors considered by the Wellsford Board of Trustees, the Board of
Trustees did not quantify or otherwise attempt to assign relative weights to
the specific factors considered in making its determination. However, after
due consideration of their fiduciary obligations, in the unanimous view of the
Wellsford Board of Trustees, the potential conflicts of interest and
potentially negative factors considered by it were not sufficient, either
individually or collectively, to outweigh the positive factors considered by
it in its deliberations relating to the Merger.

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OPINION OF FINANCIAL ADVISOR--EQR

At the meeting of the Board of Trustees of EQR on January 15, 1997, J.P.
Morgan rendered its oral opinion to the Board of Trustees of EQR that, as of
such date, the consideration to be paid by EQR in connection with the proposed
Merger was fair from a financial point of view to EQR. J.P. Morgan has
confirmed its January 15, 1997 oral opinion by delivering its written opinion
to the Board of Trustees of EQR, dated January 16, 1997, that, as of such
date, the consideration to be paid by EQR in connection with the proposed
Merger was fair from a financial point of view to EQR. J.P. Morgan has not
been requested to, and will not, update its opinion prior to the Closing. No
limitations were imposed by EQR's Board of Trustees upon J.P. Morgan with
respect to the investigations made or procedures followed by it in rendering
its opinions.

The full text of the written opinion of J.P. Morgan dated January 16, 1997,
which sets forth the assumptions made, matters considered and limits on the
review undertaken, is attached as Appendix C to this Joint Proxy
Statement/Prospectus/ Information Statement and is incorporated herein by
reference. EQR Common Shareholders are urged to read the opinion in its
entirety. J.P. Morgan's written opinion is addressed to the Board of Trustees
of EQR, is directed only to the consideration to be paid in connection with
the Merger and does not constitute a recommendation to any shareholder of EQR
as to how such shareholder should vote at the EQR Special Meeting. The summary
of the opinion of J.P. Morgan set forth in this Joint Proxy
Statement/Prospectus/ Information Statement is qualified in its entirety by
reference to the full text of such opinion. In the opinion of EQR, no events
or significant changes in information have occurred that would alter the
opinion of J.P. Morgan. However, if such an event or change does occur,
including, without limitation, an amendment to the Merger Agreement or
Contribution and Distribution Agreement which materially affects the financial
terms of either of such agreements, a revised fairness opinion will be
requested.

In arriving at its opinion, J.P. Morgan reviewed, among other things, the
Merger Agreement; the audited financial statements of EQR and Wellsford for
the fiscal year ended December 31, 1995, and the unaudited financial
statements of EQR and Wellsford for the nine months ended September 30, 1996;
current and historical market prices of the EQR Common and Wellsford Common;
certain publicly available information concerning the business of Wellsford
and of certain other companies engaged in businesses comparable to those of
Wellsford, and the reported market prices for certain other companies'
securities deemed comparable; publicly available terms of certain transactions
involving companies comparable to Wellsford and the consideration received for
such companies; the terms of other business combinations deemed relevant by
J.P. Morgan; certain internal financial analyses and estimates of budgeted
1997 funds from operations and net operating income prepared by EQR and
Wellsford and their respective managements; and certain agreements with
respect to outstanding indebtedness or obligations of EQR and Wellsford. J.P.
Morgan also held discussions with certain members of the management of EQR and
Wellsford with respect to certain aspects of the Merger, and the past and
current business operations of EQR and Wellsford, the financial condition and
future prospects and operations of EQR and Wellsford, and certain other
matters believed necessary or appropriate to J.P. Morgan's inquiry. In
addition, J.P. Morgan reviewed such other financial studies and analyses and
considered such other information as it deemed appropriate for the purposes of
its opinion.

J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or
that was furnished to it by EQR and Wellsford or otherwise reviewed by J.P.
Morgan, and J.P. Morgan has not assumed any responsibility or liability
therefor. J.P. Morgan has not conducted any valuation or appraisal of any
assets or liabilities, nor have any valuations or appraisals been provided to
J.P. Morgan. In relying on financial analyses and forecasts provided to J.P.
Morgan, J.P. Morgan has assumed that they have been reasonably prepared based
on assumptions reflecting the best currently available estimates and judgments
by management as to the expected future results of operations and financial
condition of EQR and Wellsford to which such analyses or forecasts relate.
J.P. Morgan has also assumed that the Merger will have the tax consequences
described in discussions with, and materials furnished to J.P. Morgan by,
representatives of EQR, and that the other transactions contemplated by the
Merger Agreement will be consummated as described in the Merger Agreement.

The projections utilized by J.P. Morgan in connection with its opinion were
derived by calculating the average of the 1997 projections for both EQR and
Wellsford, as projected by the REIT equity analyst community, of (i) total
rental revenues, (ii) net operating income, (iii) earnings before interest,
taxes, depreciation and amortization ("EBITDA"), (iv) FFO and (v) FFO per
share (as provided by First Call, an online data service available to
subscribers which compiles earnings estimates by research analysts). This
resulted in projected 1997 total rental revenues, net operating income,
EBITDA, FFO and FFO per share of approximately $554.1 million, $337.8 million,
$340.4 million, $202.5 million and $3.43 per share, respectively, for EQR, and
approximately $138.0 million, $78.8 million, $77.7 million, $38.5 million and
$2.25 per share, respectively, for Wellsford.

No representation or warranty was made by any party with respect to these
projections. Financial projections are subject to contingencies beyond
management's control and realization of the projections depends on numerous
factors, including

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among other things, the cost of integrating the companies, the completion of
pending developments, the actual cost in relation to such projects and
decisions by management to modify business plans to address changing needs and
a changing operating environment. All material events and circumstances cannot
be predicted and unanticipated events and circumstances are likely to occur.
Accordingly, there may be differences between the projected results of
operations and the actual results of operations of the respective companies,
and such differences could be material. In the event that the financial
projections prove to be materially different, the conclusions reached in the
opinion of J.P. Morgan could be materially affected.

J.P. Morgan's opinions are based on economic, market and other conditions as
in effect on, and the information made available to J.P. Morgan as of, the
date of such opinions. Subsequent developments may affect the written opinion
dated January 16, 1997, and J.P. Morgan does not have any obligation to
update, revise, or reaffirm such opinion. J.P. Morgan expressed no opinion as
to the price at which the EQR Common or Wellsford Common will trade at any
future time.

In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its opinion.

Pro Forma Merger Analysis. J.P. Morgan analyzed the effect of the Merger on,
among other things, the estimated First Call funds from operations ("FFO") per
share of EQR Common for the year ended December 31, 1997. In doing so, J.P.
Morgan combined the average of various equity analyst estimated 1997 operating
results for Wellsford and EQR and assumed certain savings in accounting and
general and administrative expenses per estimates provided by the management
of EQR. J.P. Morgan observed a total projected post-Merger incremental
accretion of 4.4% to EQR's First Call 1997 FFO estimate of $3.43 per share.
The analysis assumed the January 8, 1997 closing price of $42.50 per share for
EQR Common in calculating the purchase price for Wellsford Common.

J.P. Morgan also analyzed the effect of the Merger on EQR's 1997 pro forma
equity market capitalization, total market capitalization, leverage ratios and
dividend payout ratio. In this regard, J.P. Morgan noted that the pro forma
equity market capitalization for EQR would be approximately $2.96 billion,
assuming a share price of $42.50 (EQR's closing share price on January 8,
1997) and 69,702,788 shares of EQR Common outstanding after completion of the
Merger, and a total post-Merger pro forma market capitalization of
approximately $5.27 billion. J.P. Morgan further noted that (i) EQR's Debt to
Total Market Capitalization Ratio would increase slightly, upon completion of
the Merger, from 32.2% prior to the Merger to 33.3% after the assumption of
Wellsford's outstanding debt plus the incremental debt incurred from the
payment of certain transaction costs, and (ii) the ratio of debt plus
perpetual preferred stock to total market capitalization also increases
slightly from 41.3% to 41.9% after accounting for the assumption and re-
issuance of Wellsford Preferred by EQR.

J.P. Morgan also noted that EQR's management intends to retain its current
dividend of $2.50 per common share for the combined company.

Fully-Loaded Share Price. J.P. Morgan calculated the fully-loaded share
price being paid by EQR for Wellsford Common. The fully-loaded share price
adjusts the implied share price of $26.56 (calculated as the January 8, 1997
closing price of $42.50 per share for EQR Common multiplied by the .625
exchange ratio) for certain additional amounts being paid by EQR, including
payments to key executives of Wellsford in compensation, benefits, payments,
accelerations, share options and share appreciation rights. These additional
payments are more particularly described in the Merger Agreement. J.P. Morgan
calculated that these additional amounts create a fully-loaded price of up to
$28.05 per share of Wellsford Common. Based on the fully-loaded share price,
J.P. Morgan calculated a range of FFO multiples from a high of 13.0x
(excluding synergies and accounting) to a low of 9.6x (including synergies and
accounting).

Public Trading Multiples Analysis. Using publicly available information,
J.P. Morgan compared selected financial and stock market data of Wellsford
with similar data for selected publicly traded companies (each, a "Comparable
Company" and, collectively, the "Comparable Companies") engaged in businesses
which J.P. Morgan judged to be analogous to that of Wellsford's. The companies
selected by J.P. Morgan were Security Capital Pacific Trust, United Dominion
Realty Trust, Post Properties, Inc., Avalon Properties, Inc., Merry Land &
Investment Company, Inc., Security Capital Atlantic, Inc., Gables Residential
Trust, Camden Property Trust, Irvine Apartment Communities, Evans Withycombe
Residential, Inc., Oasis Residential, Inc. and Smith Residential Realty. These
companies were selected, among other reasons, because of their specialization
in the multifamily REIT sector.

For each Comparable Company, publicly available financial performance data
through the twelve months ended September 30, 1996 was measured. J.P. Morgan
calculated the multiples of current stock price, as of January 8, 1997, to
analysts estimates for 1997 First Call FFO for each of the Comparable
Companies to determine the 1997 FFO trading multiples. J.P. Morgan's
calculations resulted in a range of 1997 FFO multiples from 10.1x to 13.9x
(excluding the highest

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and lowest). These multiples were then applied to Wellsford's First Call 1997
FFO per share estimate (less $0.09 per share associated with the Sonterra Loan
contributed to WRP Newco), yielding a range of implied trading values for
Wellsford's common stock of approximately $21.88 to $29.98 per share. J.P.
Morgan also observed that the Comparable Companies had a range of debt to
total market capitalization of 27.7% to 44.5%.

Selected Transaction Analysis. Using publicly available information, J.P.
Morgan examined selected transactions with respect to purchase price per share
to calculate FFO transaction multiples. Specifically, J.P. Morgan reviewed the
following six transactions (collectively, the "Transaction Comparables") that
it deemed relevant: Camden Property Trust/Paragon Group (pending): (J.P.
Morgan's estimate of the transaction multiple was based upon the announced
exchange ratio multiplied by the January 8, 1997 closing price for Camden's
common stock, divided by the 1997 First Call estimate of FFO for Paragon),
United Dominion Realty Trust/South West Property Trust, Inc., BRE
Properties/California REIT, Mid-America Apartment Communities/America First
REIT, Inc., and Wellsford Residential Property Trust/Holly Residential
Properties, Inc. J.P. Morgan observed a range of transaction multiples from
8.3x to 11.2x First Call FFO of the acquired companies. This range was then
applied to Wellsford's First Call 1997 FFO per share, as adjusted for the
Sonterra Loan, resulting in a range of equity values for Wellsford's common
stock of between $17.91 and $24.17 per share. J.P. Morgan noted that this
range was below both the implied and fully-loaded prices for Wellsford Common.

J.P. Morgan concluded that the multifamily REIT Transaction Comparables were
imperfect comparisons to the Merger and therefore did not provide a fully
meaningful test of the exchange ratio or the purchase price per share for
Wellsford Common. In arriving at this conclusion J.P. Morgan reviewed the FFO
multiples for the Transaction Comparables universe and compared them to both
the average First Call FFO trading multiple for the acquired multifamily REITs
and to the average trading FFO multiple for the Comparable Companies,
corresponding to the period from July 8, 1994 to January 8, 1997 during which
the transactions took place. J.P. Morgan observed that the average FFO trading
multiple for the acquired multifamily REITs was significantly below that of
the Comparable Companies and that the four most comparable of the acquired
multifamily REITs were purchased at a discount to the average FFO trading
multiple for the Comparable Companies for the corresponding time period. Based
on this analysis, J.P. Morgan discounted the relevance of the multifamily REIT
Transaction Comparables as a measure of the multiple for Wellsford's purchase
price.

J.P. Morgan also noted that when certain other transactions from other REIT
sectors were included in the transaction analysis, the range of FFO multiples
became 8.2x to 13.4x, resulting in a range of $17.80 to $28.88 per share for
Wellsford's common stock. These additional transactions were Highwoods
Properties Inc./Crocker Realty, Simon Property Group, Inc./DeBartolo Realty
Corporation, Horizon Outlet Centers, Inc./McArthur/Glen Realty Corporation,
and Omega Healthcare Investors/Health Equity Properties, Inc.

Share Trading History Analysis. Based on publicly available information,
J.P. Morgan reviewed the history of trading prices for Wellsford Common and
EQR Common for the 52-week period ending January 8, 1997 and compared the 52-
week high/low range of $25.00 to $20.75 per share for Wellsford Common to both
the implied purchase price per share of $26.56 (calculated as the product of
the January 8, 1997 closing price for EQR Common times the exchange ratio of
.625) and the fully-loaded price per share of $28.05. J.P. Morgan noted that
the implied price for Wellsford Common was at a premium to the 52-week high.

Historical Exchange Ratio Analysis. J.P. Morgan reviewed the historical
exchange ratio of the daily closing price per share of Wellsford Common to the
daily closing price per share of EQR Common for the period from January 9,
1996 to January 8, 1997. To compensate in the value of Wellsford's share price
for the loss of income resulting from the contribution of the Sonterra Loan to
WRP Newco, J.P. Morgan calculated the First Call 1996 FFO multiple for each of
Wellsford's daily closing prices beginning August 1, 1996 (the commencement
date of the mortgage loan). Adjusting Wellsford's First Call 1996 FFO
downwards by $0.09, J.P. Morgan multiplied the above FFO multiple times the
adjusted First Call 1996 FFO to arrive at an adjusted Wellsford share price
for each closing price from August 1, 1996 to January 8, 1997. This adjusted
share price was then used in the calculation of the historical exchange
ratios. The exchange ratios of the daily closing prices of one share of
Wellsford Common, as adjusted for the Sonterra Loan, to one share of EQR
Common on January 9, 1996 and on January 8, 1997, were 0.777 and 0.575,
respectively. J.P. Morgan noted a one-year low to high range (adjusted for the
Sonterra mortgage) of between 0.569 and 0.780; an average one-year unadjusted
exchange ratio of 0.662 versus an adjusted ratio of 0.658; an average six-
month unadjusted exchange ratio of 0.626 versus an adjusted ratio of 0.623;
and an average one-month unadjusted exchange ratio of 0.583 versus an adjusted
ratio of 0.579. In addition, such analysis implied a one-year historical share
price range for Wellsford of $24.18 to $33.15, as calculated by multiplying
EQR Common's January 8, 1997 closing price of $42.50 by the 52-week low and
high values for the exchange ratios, respectively.

Net Asset Value Analysis. Using the publicly available unaudited results for
each company for the period ending September 30, 1996, J.P. Morgan calculated
the Net Asset Value ("NAV") per share for both Wellsford Common and EQR

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Common. In so doing, J.P. Morgan applied a range of capitalization rates from
8.5% to 9.5% to projections by Wellsford and EQR for the stabilized 1997 net
operating income ("NOI") of the properties, calculated as the average of the
estimated 1997 NOI for each company as projected by the REIT analyst
community, including projected acquisitions related NOI, in order to calculate
a gross real estate value, to which was added the gross value of other assets,
excluding the Wellsford assets to be contributed to WRP Newco, less each
company's respective outstanding debt and liabilities, to arrive at an equity
NAV. The equity NAV per share was then calculated by dividing the equity NAV
by the number of common shares outstanding for each company. This analysis
indicated an NAV exchange ratio range for the two companies of between 0.470
to 0.742, and an implied range for the price of Wellsford Common of $19.96 to
$31.54 per share, assuming a January 8, 1997 closing price of $42.50 per share
for EQR Common.

WRP Newco Analysis. As a part of its opinion, J.P. Morgan reviewed the terms
of EQR's investments in and commitments to WRP Newco. These include the
following items: an agreement by EQR to invest $3.5 million in WRP Newco
Common at the time of the Merger in return for receiving an approximately 7.5%
interest in WRP Newco; a commitment to purchase up to $25 million of preferred
stock with an 8.0% dividend and 8.0% conversion premium; a 20.0% interest in
the Palomino Park development (10.0% received through the purchase of
Wellsford, and an additional 10.0% purchased for $1.5 million in cash); credit
enhancement for $14.8 million in bonds outstanding on Palomino Park; and a
two-part standby purchase obligation for Palomino Park Phases I and II. J.P.
Morgan noted that EQR is to be compensated at competitive market based rates
for its investments in WRP Newco.

The summary set forth above does not purport to be a complete description of
the analyses or data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. J.P. Morgan believes that the summary set
forth above and their analyses must be considered as a whole and that
selecting portions thereof, without considering all of its analyses, could
create an incomplete view of the processes underlying its analyses and
opinion. J.P. Morgan based its analyses on assumptions that it deemed
reasonable, including assumptions concerning general business and economic
conditions and industry-specific factors. The other principal assumptions upon
which J.P. Morgan based its analyses are set forth above under the description
of each such analysis. J.P. Morgan's analyses are not necessarily indicative
of actual values or actual future results that might be achieved, which values
may be higher or lower than those indicated. Moreover, J.P. Morgan's analyses
are not and do not purport to be appraisals or otherwise reflective of the
prices at which businesses actually could be bought or sold.

As a part of its investment banking business, J.P. Morgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with Mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. J.P. Morgan was selected to deliver an opinion to EQR's
Board of Trustees with respect to the Merger on the basis of such experience
and its familiarity with EQR.

For the delivery of its opinion, J.P. Morgan received a fee of $600,000 from
EQR. In addition, EQR reimbursed J.P. Morgan for its reasonable expenses
incurred in connection with its services, including the fees and disbursements
of counsel, and agreed to indemnify J.P. Morgan against certain liabilities,
including liabilities arising under the Federal securities laws.

J.P. Morgan and its affiliates (including Morgan Guaranty Trust Company of
New York) maintain banking and other business relationships with EQR and its
affiliates pursuant to which J.P. Morgan has received an aggregate of
approximately $490,000 in fees over the past two years, and with Wellsford and
its affiliates pursuant to which J.P. Morgan has received an aggregate of
approximately $638,000 in fees over the past two years. In the ordinary course
of their businesses, affiliates of J.P. Morgan may actively trade the debt and
equity securities of EQR or Wellsford for their own accounts or for the
accounts of customers and, accordingly, they may at any time hold long or
short positions in such securities.

OPINION OF FINANCIAL ADVISOR--WELLSFORD

Wellsford. At the meeting of the Board of Trustees of Wellsford on January
16, 1997, Merrill Lynch rendered its oral opinion to the Wellsford Board of
Trustees, and subsequently on such date Merrill Lynch delivered its written
opinion (the "Merrill Lynch Opinion"), to the effect that, as of such date and
based upon the assumptions made, matters considered and limits of review, the
proposed consideration to be received by Wellsford Common Shareholders
pursuant to the Merger and the Distribution was fair to such shareholders from
a financial point of view. Merrill Lynch has not been requested to, and will
not, update its opinion prior to Closing. No limitations were imposed by
Wellsford's Board of Trustees upon Merrill Lynch with respect to the
investigations made or procedures followed by it in rendering its opinion.

A copy of the Merrill Lynch Opinion which sets forth the assumptions made,
matters considered and certain limitations on the scope of review undertaken
by Merrill Lynch, is attached hereto as Appendix D and is incorporated by
reference

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herein. The description of the written opinion set forth herein is qualified
in its entirety by reference to the full text of the written opinion.
Shareholders of Wellsford are urged to read such opinion in its entirety. In
the opinion of Wellsford, no events or significant changes in information have
occurred that would alter the opinion of Merrill Lynch. However, if such an
event or change does occur, including, without limitation, an amendment to the
Merger Agreement or Contribution and Distribution Agreement which materially
affects the financial terms of either of such agreements, a revised fairness
opinion will be requested.

THE MERRILL LYNCH OPINION IS ADDRESSED TO THE WELLSFORD BOARD OF TRUSTEES
AND ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE PROPOSED
CONSIDERATION TO BE RECEIVED BY WELLSFORD COMMON SHAREHOLDERS PURSUANT TO THE
MERGER AND THE DISTRIBUTION AND DOES NOT CONSTITUTE, NOR SHOULD IT BE
CONSTRUED AS, A RECOMMENDATION TO ANY WELLSFORD COMMON SHAREHOLDER AS TO HOW
SUCH SHAREHOLDER SHOULD VOTE AT THE WELLSFORD SPECIAL MEETING. THE PROPOSED
CONSIDERATION TO BE RECEIVED BY WELLSFORD COMMON SHAREHOLDERS PURSUANT TO THE
MERGER AND THE DISTRIBUTION WAS DETERMINED ON THE BASIS OF NEGOTIATIONS
BETWEEN WELLSFORD AND EQR AND WAS APPROVED BY THE WELLSFORD BOARD OF TRUSTEES.

In connection with the preparation of the Merrill Lynch Opinion, Merrill
Lynch, among other things: (i) reviewed Wellsford's Annual Report on Form 10-K
and related financial information for the fiscal year ended December 31, 1995
and Wellsford's Reports on Form 10-Q and the related unaudited financial
information for the quarterly periods ended March 31, 1996, June 30, 1996 and
September 30, 1996; (ii) reviewed EQR's Annual Report on Form 10-K and related
financial information for the fiscal year ended December 31, 1995 and EQR's
Reports on Form 10-Q and the related unaudited financial information for the
quarterly periods ended March 31, 1996, June 30, 1996 and September 30, 1996;
(iii) reviewed certain information, including certain financial forecasts and
assumptions, relating to the business, earnings, cash flow, assets and
prospects of (A) Wellsford and WRP Newco and (B) EQR, furnished to it by
Wellsford and EQR, respectively; (iv) reviewed estimates of prospective
synergies resulting from the Merger prepared by the managements of Wellsford
and EQR and discussed such estimates with the managements of both companies;
(v) conducted discussions with members of senior management of Wellsford and
EQR concerning the respective businesses and prospects of (A) Wellsford and
WRP Newco and (B) EQR; (vi) reviewed the historical market prices and trading
activity for Wellsford Common and EQR Common and compared them with that of
certain companies which Merrill Lynch deemed to be reasonably similar to
Wellsford and EQR, respectively; (vii) compared the results of operations of
Wellsford and EQR with that of certain companies which Merrill Lynch deemed to
be reasonably similar to Wellsford and EQR, respectively; (viii) compared the
proposed financial terms of the Merger with the financial terms of certain
other mergers and acquisitions which Merrill Lynch deemed to be relevant; (ix)
considered the pro forma effect of the Merger on the combined entity's
capitalization ratios and earnings, cash flow and book value per share; (x)
reviewed the Merger Agreement; (xi) reviewed the financial terms of the
Contribution and Distribution as set forth in the Merger Agreement and the
forms of Contribution and Distribution Agreement and Stock Purchase Agreement
attached as exhibits thereto; and (xii) reviewed such other financial studies
and analyses and performed such other investigations and took into account
such other matters as Merrill Lynch deemed necessary, including its assessment
of general economic, market and monetary conditions.

In preparing the Merrill Lynch Opinion, Merrill Lynch relied on the accuracy
and completeness of all information supplied or otherwise made available to it
by Wellsford and EQR, and did not independently verify such information or
undertake an independent appraisal or evaluation of the assets or liabilities
of Wellsford or EQR. With respect to the financial forecasts, assumptions and
estimates of prospective synergies resulting from the Merger furnished by
Wellsford and the financial forecasts, assumptions and estimates of
prospective synergies resulting from the Merger furnished by EQR, Merrill
Lynch assumed that they had been reasonably prepared and reflected the best
currently available estimates and judgment of Wellsford's or EQR's management
as to the expected future financial performance of Wellsford, WRP Newco or
EQR, as the case may be. Merrill Lynch further assumed that the Merger will
qualify as a tax-free reorganization to the holders of Wellsford Common
(except to the extent, if any, of cash received in lieu of fractional shares).
In addition, Merrill Lynch further assumed that the Distribution will be
consummated without any material modification to the terms set forth in the
forms of Contribution and Distribution Agreement and Stock Purchase Agreement
reviewed by it. As a matter of policy, Wellsford does not publicly disclose
internal management forecasts, projections or estimates of the type furnished
to Merrill Lynch in connection with its analysis of the Merger, and such
forecasts, projections and estimates were not prepared with a view towards
public disclosure. These forecasts, projections and estimates were based on
numerous variables and assumptions which are inherently uncertain and which
may not be within the control of management of Wellsford, including, without
limitation, general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in such
forecasts, projections and estimates.

In connection with rendering its opinion, Merrill Lynch was not authorized
to, and did not, solicit indications of interest from third parties to
purchase the outstanding Wellsford Common or otherwise enter into a business
combination with

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Wellsford. Merrill Lynch's opinion as to the fairness from a financial point
of view of the proposed consideration to be received by holders of Wellsford
Common addresses the ownership position in the combined entity to be received
by the holders of Wellsford Common pursuant to the Merger on the terms set
forth in the Merger Agreement based upon the relative contributions of
Wellsford and EQR to the combined entity and after giving effect to the
Contribution and Distribution. Merrill Lynch expressed no opinion as to prices
at which the Survivor Common or the WRP Newco Common will trade following the
consummation of the Contribution and Distribution and the Merger or prices
which could be obtained for the Survivor Common in a sale of the combined
entity following the consummation of the Merger. Merrill Lynch did not
consider, and its opinion does not address, the tax consequences of the
Distribution to the holders of Wellsford Common. The Merrill Lynch Opinion
does not address the relative merits of the Merger as compared with any other
business plan or opportunity that might be presented to Wellsford, including
alternative business combinations with third parties, or the effect of any
other arrangement in which Wellsford might engage.

At the meeting of the Wellsford Board of Trustees held on January 16, 1997,
Merrill Lynch presented certain financial analyses accompanied by written
materials in connection with the delivery of its fairness opinion. The
following is a summary of the material financial and comparative analyses
performed by Merrill Lynch in arriving at its opinion.

Historical Trading Performance and Current Capitalization. Merrill Lynch
reviewed certain trading information for each of Wellsford and EQR and, on the
basis thereof, calculated their respective market values, market
capitalizations and trading multiples based on stock prices as of January 14,
1997 of $24.63 for Wellsford and $42.88 for EQR. For this purpose, Merrill
Lynch defined "total market capitalization" as market value of the relevant
company's common equity (including operating partnership units), plus
preferred stock at liquidation value plus total debt less cash. Merrill Lynch
then calculated the market value of each of Wellsford and EQR as a multiple of
projected FFO (based on mean First Call estimates) and Adjusted Funds From
Operations ("AFFO") (based on estimates from Merrill Lynch Research). For
Wellsford, the FFO multiples for 1996 and 1997 were 11.7x and 11.0x,
respectively, and the AFFO multiples for 1996 and 1997 were 12.6x and 11.8x,
respectively. For EQR, the FFO multiples for 1996 and 1997 were 13.8x and
12.5x, respectively, and the AFFO multiples for 1996 and 1997 were 16.0x and
14.4x, respectively.

Merrill Lynch also reviewed the share price history for Wellsford for the
period January 7, 1996 through January 10, 1997, and for EQR for the period
January 7, 1996 through January 9, 1997 and noted certain events and public
announcements made by the respective companies during such periods.

Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information and estimates of future financial results published by
First Call and taken from Merrill Lynch Research, Merrill Lynch compared
certain financial and operating information and ratios for both Wellsford and
EQR with the corresponding financial and operating information for a group of
publicly traded companies engaged primarily in the ownership, management,
operation and acquisition of multifamily properties which Merrill Lynch deemed
to be reasonably comparable to Wellsford and EQR. For the purpose of its
analyses, the following companies were used as comparable companies to
Wellsford: Evans Withycombe Residential, Inc., Amli Residential Properties
Trust, Camden Property Trust, Oasis Residential, Inc. and Apartment Investment
& Management Co. (collectively, the "Wellsford Comparable Companies"); and the
following companies were used as comparable companies to EQR: Security Capital
Pacific Trust, United Dominion Realty Trust, Inc., Wellsford, Merry Land &
Investment Co., Inc., Security Capital Atlantic, Inc. and Apartment Investment
& Management Co. (collectively, the "EQR Comparable Companies").

Merrill Lynch's calculations resulted in the following relevant ranges for
the Wellsford Comparable Companies and for Wellsford as of January 14, 1997: a
range of debt to total market capitalization of 32.3% to 43.1%, with a mean of
40.8% (with Wellsford at 37.2%); a range of dividend yields of 6.4% to 7.5%,
with a mean of 7.1% (with Wellsford at 7.9%); a range of 1996 AFFO payout
ratios of 87.6% to 102.6%, with a mean of 95.4% calculated on the basis of
projected results for 1996 (with Wellsford at 99.0%); a range of market value
as a multiple of projected 1996 FFO of 11.1x to 11.9x, with a mean of 11.5x
(with Wellsford at 11.7x); a range of market value as a multiple of projected
1997 FFO of 10.1x to 11.3x, with a mean of 10.7x (with Wellsford at 11.0x); a
range of market value as a multiple of projected 1996 AFFO of 12.6x to 13.9x,
with a mean of 13.2x (with Wellsford at 12.6x); and a range of market value as
a multiple of projected 1997 AFFO of 11.5x to 13.1x, with a mean of 12.2x
(with Wellsford at 11.8x).

Merrill Lynch's calculations resulted in the following relevant ranges for
the EQR Comparable Companies and for EQR as of January 14, 1997: a range of
dividend yields of 5.8% to 7.9%, with a mean of 6.5% (with EQR at 5.8%); a
range of debt to total market capitalization of 11.5% to 42.9%, with a mean of
31.7% (with EQR at 27.9%); a range of 1996 AFFO payout ratios of 82.2% to
99.0%, with a mean of 90.2% calculated on the basis of projected results for
1996 (with EQR at 93.3%); a range of market value as a multiple of projected
1996 FFO of 10.9x to 15.5x, with a mean of 12.6x (with EQR at 13.8x); a range
of market value as a multiple of projected 1997 FFO of 10.1x to 14.6x, with a
mean of 11.8x (with EQR at

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12.5x); a range of market value as a multiple of projected 1996 AFFO of 12.2x
to 15.5x, with a mean of 13.7x (with EQR at 16.0x); and a range of market
value as a multiple of projected 1997 AFFO of 11.8x to 14.0x, with a mean of
13.0x (with EQR at 14.4x).

None of the companies utilized in the above analysis for comparative
purposes is, of course, identical to Wellsford or EQR. Accordingly, a complete
analysis of the results of the foregoing calculations cannot be limited to a
quantitative review of such results and involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the Wellsford Comparable Companies and the EQR Comparable Companies, and other
factors that could affect the public trading value of the Wellsford Comparable
Companies and the EQR Comparable Companies, as well as that of Wellsford or
EQR. In addition, the multiples of market value to estimated 1996 and
projected 1997 FFO and AFFO for the Wellsford Comparable Companies and the EQR
Comparable Companies are based on projections prepared by research analysts
using only publicly available information. Accordingly, such estimates may or
may not prove to be accurate.

Comparable Transactions Analysis. Merrill Lynch also compared certain
financial ratios of the Merger with those of selected other mergers and
strategic transactions involving REITs which Merrill Lynch deemed to be
reasonably comparable to the Merger. These transactions were Camden Property
Trust's proposed merger with Paragon Group, Inc., Chateau Properties, Inc.'s
merger with ROC Communities, Inc., United Dominion Realty, Inc.'s merger with
South West Property Trust Inc., Highwoods Properties Inc.'s acquisition of
Crocker Realty Trust, Inc., Simon Property Group, Inc.'s merger with DeBartolo
Realty Corporation, Bradley Real Estate Inc.'s merger with Tucker Properties
Corp., BRE Properties Inc.'s Merger with REIT of California, Horizon Outlet
Center Inc.'s merger with McArthur Glen Realty Corp., Mid America Apartment
Communities Inc.'s merger with America First REIT, Inc. and Wellsford's merger
with Holly Residential Properties, Inc.

Using publicly available information and estimates of financial results as
published by First Call, Merrill Lynch calculated the premium of the implied
offer value per share relative to the acquired company's stock price on the
day before announcement of the respective transaction and the implied offer
value per share for the acquired company, as of the day before the
announcement of the respective transaction, as a multiple of the projected FFO
per share for such company. This analysis yielded a range of
premiums/(discounts) of (0.8%) to 38.0% with a mean of 12.2% and a range of
transaction FFO multiples of 6.6x to 15.5x with a mean of 10.2x.

Merrill Lynch observed that, based on the closing price of EQR Common on the
NYSE of $42.88 per share as of January 14, 1997, the Exchange Ratio yielded an
implied offer value in the Merger of $26.80 per share of Wellsford Common.
Together with the per share valuation range for Newco Common of $2.43 to
$2.82, the implied premium range of the aggregate consideration to be received
in the Merger and the Distribution over the closing market price of Wellsford
Common on January 14, 1997 was 18.7% to 20.3% and represented a range of
implied offer values in the Merger and the Distribution for the Wellsford
Common as a multiple of Wellsford's projected 1997 FFO of 12.2x to 12.4x.

Discounted Cash Flow Analysis. Merrill Lynch performed discounted cash flow
analyses (i.e., an analysis of the present value of the projected levered cash
flows for the periods and using the discount rates indicated) of Wellsford
based upon projections provided by Wellsford's management of Wellsford's
dividends, FFO and AFFO for the years 1997 through 2001, inclusive, using
discount rates reflecting an equity cost of capital ranging from 15.0% to
17.0% and terminal value multiples of calendar year 2001 FFO ranging from
10.5x to 12.5x and terminal value multiples of calendar year 2001 AFFO ranging
from 11.5x to 13.5x. Based upon Wellsford Management's projection of FFO per
share of $2.39 in 1997 increasing gradually to $3.27 in 2001 (assuming a
compound annual growth rate of 9.1%) and AFFO per share of $2.25 in 1997
increasing gradually to $3.10 in 2001 (assuming a compound annual growth rate
of 9.2%), the range of present values per Wellsford share was $22.07 to $27.85
using the FFO and AFFO discounted dividend methods and $24.50 to $29.47 based
upon the discounted AFFO method.

Merrill Lynch also performed discounted cash flow analyses of EQR based upon
projections and assumptions provided by EQR's management of EQR's dividends,
FFO and AFFO for the years 1997 through 2001, inclusive, using discount rates
reflecting an equity cost of capital ranging from 14.0% to 16.0% and terminal
value multiples of calendar year 2001 FFO ranging from 12.5x to 14.5x and
terminal value multiples of calendar year 2001 AFFO ranging from 14.0x to
16.0x. The range of present values per EQR share was $36.63 to $44.51 using
the FFO and AFFO discounted dividend methods and $39.89 to $47.41 based upon
the discounted AFFO method.

Net Asset Valuation Analysis. Merrill Lynch performed a net asset valuation
for Wellsford based on an asset-by-asset real estate valuation of Wellsford's
properties, an estimation of the current value for Wellsford's other assets
and liabilities, and an estimation of Wellsford's debt balances as of December
31, 1996. The real estate valuation utilized property specific

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projections prepared by Wellsford's management for the year 1997. For the
operating portfolio of Wellsford, the valuation utilized the direct
capitalization method on 1997 property net operating income after capital
reserves and a range of capitalization rates of 8.50% to 9.25%. These
calculations indicated a per share net asset valuation range for Wellsford of
$25.58 to $28.27.

Merrill Lynch also performed a net asset valuation for EQR based on an
asset-by-asset real estate valuation of EQR's properties, an estimation of the
current values for EQR's other assets and liabilities, and an estimation of
EQR's debt balances as of December 31, 1996. The real estate valuation
utilized property specific projections prepared by EQR's management for the
year 1997. For the operating portfolio of EQR, the valuation utilized the
direct capitalization method on 1997 property net operating income after
capital reserves and a range of capitalization rates of 8.25% to 9.25%. These
calculations indicated a per share net asset valuation range for EQR of $32.53
to $35.95.

Merrill Lynch also performed a net asset valuation for WRP Newco based on an
asset-by-asset valuation. Merrill Lynch arrived at a range of values by
summing the following: (i) the implied value range for WRP Newco's interest in
the Sonterra Assets, (ii) the implied value range for WRP Newco's interest in
Palomino Park, net of associated liabilities, and (iii) cash and cash
equivalents less total debt. These calculations indicated a net asset
valuation range for WRP Newco Common allocable to each share of Wellsford
Common in the Distribution of $2.43 to $2.82, of which amount $1.45 was
attributable to cash and cash equivalents.

Relative Discounted Cash Flow Analysis. Merrill Lynch utilized the results
of the discounted cash flow analyses of Wellsford and EQR described above
after adjusting the projections relating to Wellsford to give effect to the
Distribution (as so adjusted, the "Post-Distribution Wellsford") to calculate
a range of implied exchange ratios based on a comparison of the relative
ranges of value for EQR and Post-Distribution Wellsford. When the low Post-
Distribution Wellsford discounted cash flow value was compared to the high EQR
discounted cash flow value and the high Post-Distribution Wellsford discounted
cash flow value was compared to the low EQR discounted cash flow value, the
analysis yielded an implied exchange ratio range of 0.442 to 0.660. The
Exchange Ratio under the Merger Agreement is set at .625, subject to
adjustment as set forth in the Merger Agreement.

Contribution Analysis. Merrill Lynch observed that Wellsford Common
Shareholders would own 15.3% of the common shares of the combined entity
outstanding after the Merger and Distribution (assuming an Exchange Ratio of
.625), after giving effect to the issuance of the Merger consideration.
Merrill Lynch reviewed certain projected operating and financial information,
including, among other things, FFO and AFFO for Post-Distribution Wellsford,
EQR and the pro forma combined entity without giving effect to potential
transaction synergies. Merrill Lynch observed that in 1997, 1998 and 1999
Post-Distribution Wellsford would contribute (without giving effect to
potential transaction synergies) 16.0%, 14.1% and 13.2% to the combined
entity's FFO, respectively, and 16.6%, 14.6% and 13.6% to the combined
entity's AFFO, respectively. Merrill Lynch also reviewed the relative
contributions to the pro forma combined net asset valuation. The analysis
indicated that Post-Distribution Wellsford would contribute 17.1% of the
combined net asset value based upon the midpoints of the net asset value
ranges.

Pro Forma Combination Analysis. Merrill Lynch analyzed the pro forma effects
resulting from the Merger, including the potential impact on EQR's projected
stand alone FFO per share and the anticipated accretion (i.e., the incremental
increase) to EQR's FFO per share resulting from the Merger. Merrill Lynch
observed that, after giving effect to Wellsford management's estimates of
potential transaction synergies, the Merger would be accretive to EQR's
projected FFO per share in each of the years 1997 through 1999, inclusive.
Merrill Lynch also observed that the indicated annual dividend per Wellsford
share pro forma for the Merger would be $1.56 per Wellsford share, or a 19.5%
implied reduction in Wellsford's current indicated dividend rate.

Capitalization. In addition, Merrill Lynch compared EQR's book
capitalization as of December 31, 1996 to (i) its book capitalization as of
December 31, 1996 pro forma for the Merger and (ii) based on projections of
Wellsford and EQR managements, EQR's book capitalization as of December 31,
1997 pro forma for the Merger. The total debt to book equity ratio was 87.1%,
79.4% and 80.5% as of December 31, 1996, pro forma December 31, 1996 and pro
forma December 31, 1997, respectively. The total debt to capitalization ratio
was 46.6%, 44.2% and 44.6% as of such respective dates. EBITDA as a multiple
of interest expense was 3.2x, 3.3x and 3.5x as of such respective dates,
EBITDA as a multiple of fixed charges was 2.4x, 2.4x and 2.5x as of such
respective dates, EBITDA less capital expenditures as a multiple of interest
expense was 3.0x, 3.1x and 3.2x as of such respective dates and EBITDA less
capital expenditures as a multiple of fixed charges was 2.2x, 2.3x and 2.3x as
of such respective dates. Additionally, based on projections of Wellsford's
management for WRP Newco, Merrill Lynch observed that the total debt to
capitalization ratio of WRP Newco as of December 31, 1997 was 25.4%.

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The summary set forth above does not purport to be a complete description of
the analyses performed by Merrill Lynch in arriving at its opinion. The
preparation of a fairness opinion is a complex process and not necessarily
susceptible to partial or summary description. Merrill Lynch believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all factors
and analyses, could create a misleading view of the processes underlying its
analyses set forth in its opinion. In its analyses, Merrill Lynch made
numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond EQR's,
Wellsford's and Merrill Lynch's control. Any estimates contained in Merrill
Lynch's analyses are not necessarily indicative of actual values, which may be
significantly more or less favorable than as set forth therein. Estimated
values do not purport to be appraisals and do not necessarily reflect the
prices at which businesses or companies may be sold in the future, and such
estimates are inherently subject to uncertainty.

The Wellsford Board of Trustees selected Merrill Lynch to render a fairness
opinion because Merrill Lynch is an internationally recognized investment
banking firm with substantial experience in transactions similar to the Merger
and because it is familiar with Wellsford and its business. Merrill Lynch has
from time to time rendered investment banking, financial advisory and other
services to Wellsford and EQR for which it has received aggregate compensation
in the amount of $6.7 million from EQR and $2.3 million from Wellsford, in
each case since January 1, 1995. Merrill Lynch is continually engaged in the
valuation of businesses and their securities in connection with Mergers and
acquisitions, leveraged buyouts, negotiated underwritings, secondary
distributions of listed and unlisted securities and private placements.

Pursuant to a letter agreement dated January 14, 1997, Wellsford has agreed
to pay Merrill Lynch fees as follows: (i) a cash fee of $500,000 payable upon
the delivery of the Merrill Lynch Opinion, and (ii) an additional cash fee of
$2 million (less the fees paid to Merrill Lynch pursuant to (i) above) to be
paid contingent upon the Closing of the Merger. WRP Newco has agreed with
Wellsford to be responsible for $250,000 of such fees. Wellsford also agreed
to reimburse Merrill Lynch for its reasonable out-of-pocket expenses incurred
in connection with its advisory work, including the reasonable fees and
disbursements of its legal counsel, subject to certain limitations, and to
indemnify Merrill Lynch and certain related persons against certain
liabilities arising out of or in conjunction with its rendering of services
under its engagement, including certain liabilities under the federal
securities laws.

In the ordinary course of its business, Merrill Lynch may actively trade in
the securities of Wellsford and EQR for its own account and the account of its
customers and, accordingly, may at any time hold a long or short position in
such securities.

EFFECTIVE TIME OF THE MERGER

If the Merger is approved by the requisite vote of shareholders of Wellsford
and shareholders of EQR, and the other conditions to the Merger are satisfied
or waived, the Merger will become effective at the time the Department accepts
the Articles for record or at a different time established in the Articles,
not to exceed 30 days after the Articles are accepted for record by the
Department. It is presently anticipated that such filing and acceptance will
be made on or about May 30, 1997, and that the Effective Time of the Merger
will occur on such date unless a different date is specified in the Articles,
as discussed above, although there can be no assurance as to whether or when
the Merger will occur. The Articles are attached hereto as Appendix B. See "--
Representation and Warranties; Conditions to the Merger."

REPRESENTATIONS AND WARRANTIES; CONDITIONS TO THE MERGER

The Merger Agreement contains representations and warranties by EQR and
Wellsford regarding, among other things, their organization and good standing,
capitalization, ownership and capitalization of their subsidiaries,
qualification to do business, authority to enter into the Merger Agreement and
related agreements, filings with the Commission, reliability of financial
statements, compliance with applicable laws and regulations, taxation and
qualification as a REIT, properties, development rights (with respect to
Wellsford only), environmental matters, contracts, debt instruments, employee
benefit plans, undisclosed liabilities and the absence of certain legal
proceedings and other events, including material adverse changes in the
parties' businesses, financial condition or results of operations. These
representations and warranties will not survive the Effective Time.

The respective obligations of EQR and Wellsford to effect the Merger are
subject to the following conditions: (i) approval of the Merger Agreement, and
the transactions contemplated therein, by the shareholders of Wellsford and
EQR, (ii) approval by the NYSE of the listing of the shares of Survivor Common
to be issued in the Merger, (iii) the Registration Statement shall not be the
subject of any stop order or proceeding by the Commission seeking a stop
order, (iv) no injunctions or restraints shall have been issued by any court
of competent jurisdiction preventing the consummation of the Merger, (v) all
state securities laws shall have been complied with, (vi) execution of the
Contribution and Distribution

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Agreement, (vii) execution of the Common and Preferred Stock Purchase
Agreement between ERP Operating Partnership and WRP Newco (the "Stock Purchase
Agreement"), (viii) execution of the Palomino Credit Enhancement Agreement
between ERP Operating Partnership and WRP Newco, (ix) execution of the
Sonterra Right of First Offer Agreement between WRP Newco and ERP Operating
Partnership, (x) execution of the Palomino Agreement between WRP Newco and ERP
Operating Partnership, (xi) execution of the Transaction and Termination Costs
Agreement among EQR, Wellsford and WRP Newco, (xii) execution of the
Consulting Agreements of Jeffrey H. Lynford and Edward Lowenthal and (xiii)
the receipt of the opinion of Ballard Spahr Andrews & Ingersoll to the effect
that the Merger Agreement and Articles are enforceable under Maryland law.

The obligations of Wellsford and EQR to effect the Merger are subject to the
following additional conditions: (i) all representations and warranties made
by the parties shall be true and correct as of the Closing Date, which shall
be deemed the case unless the breach of such representations and warranties,
in the aggregate, could reasonably be expected to have a material adverse
effect with respect to such parties, (ii) each party shall have performed its
obligations under the Merger Agreement, (iii) as of the Closing Date, neither
party, nor any of their subsidiaries, will have suffered a material adverse
change in its business, financial condition or results of operations taken as
a whole (a "Material Adverse Change"), (iv) each party shall have received an
opinion of counsel from counsel to the other party stating that commencing
with its taxable year ended December 31, 1993, its client was organized and
has operated in conformity with the requirements for qualification as a REIT
under the Code, (v) each party shall have received an opinion of counsel dated
as of the closing date, to the effect that the Merger will qualify as a
reorganization under the provisions of Section 368(a) of the Code, (vi) each
party shall have received a "comfort letter" from the other party's
accountants, (vii) each party shall have received an opinion from counsel to
the other party addressing certain issues as set out in the Merger Agreement,
and (viii) the receipt of all consents and waivers from third parties
necessary in connection with the consummation of the transactions contemplated
by the Merger Agreement.

The obligation of EQR to effect the Merger is further subject to the
following conditions: (i) unless Wellsford Holly Management, Inc. ("Wellsford
Management Inc.") is dissolved before the Closing Date, the voting shares of
Wellsford Management Inc. shall have been transferred to EQR's designees as
provided for in the Merger Agreement, (ii) certain executives of Wellsford who
have agreed to the conversion of their options to purchase Wellsford Common
into options to purchase WRP Newco Common will have executed agreements
releasing the Surviving Trust from any obligations of Wellsford to them under
options to purchase Wellsford Common which are exchanged for or converted into
options to purchase WRP Newco Common, (iii) the Articles of Incorporation of
WPHC shall have been amended to modify its equity structure as provided in the
Merger Agreement and (iv) Wellsford's ownership interest in WPHC immediately
prior to the Distribution by Wellsford of WRP Newco Common shall consist
solely of 80 voting shares of WPHC and 20 non-voting shares of WPHC.

APPRAISAL RIGHTS

Shareholders of Wellsford and shareholders of EQR are not entitled to
dissenting shareholders' appraisal rights under Maryland law. Maryland law
does not provide appraisal rights to shareholders of a real estate investment
trust in connection with a merger if their shares are listed on a national
securities exchange, such as the NYSE, on the record date for determining
shareholders entitled to vote on such merger. All of the shares of EQR and
Wellsford outstanding on the record date for determining the shareholders
entitled to vote on the Merger were listed on the NYSE.

REGULATORY MATTERS

EQR and Wellsford believe that the Merger may be consummated without
notification being given or certain information being furnished to the Federal
Trade Commission (the "FTC") or the Antitrust Division of the Department of
Justice (the "Antitrust Division") pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), and that no waiting period
requirements under the HSR Act are applicable to the Merger. However, at any
time before or after the Effective Time, either the Antitrust Division or the
FTC could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, or certain other persons could take action
under the antitrust laws, including seeking to enjoin the Merger. EQR and
Wellsford believe that consummation of the Merger would not violate any
antitrust laws. However, there can be no assurance that a challenge to the
Merger on antitrust grounds will not be made or, if a challenge is made, what
the result will be.

TERMINATION PROVISIONS

The Merger Agreement provides that it may be terminated at any time prior to
the filing of the Articles with the Department, whether before or after
approval of the Merger by the shareholders of Wellsford and EQR, by mutual
written

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consent, duly authorized by the Boards of Trustees of EQR and Wellsford. In
addition, the Merger Agreement may be terminated by EQR or Wellsford (i) if
the Merger has not been consummated by August 1, 1997 (provided the
terminating party will not have breached in any material respect its
obligations under the Merger Agreement in any manner that will have
proximately contributed to the occurrence of such failure), (ii) upon a breach
of any representation, warranty, covenant, obligation or agreement, on the
part of the non-terminating party set forth in the Merger Agreement, such that
certain conditions set forth in the Merger Agreement would be incapable of
being satisfied by August 1, 1997, (iii) if the requisite vote of the
shareholders of EQR or Wellsford will not have been obtained at the meeting of
such shareholders, or (iv) if an order, decree, ruling or other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Merger Agreement will have become final and non-
appealable.

The Merger Agreement may be terminated by Wellsford, if prior to the
Wellsford Special Meeting, the Wellsford Board of Trustees withdraws or
modifies its approval or recommendation of the Merger in connection with, or
approves or recommends, a Superior Acquisition Proposal (as defined
hereinafter). The Merger Agreement may be terminated by EQR if (i) prior to
the Wellsford Special Meeting, the Wellsford Board of Trustees withdraws or
modifies in any manner adverse to EQR its approval or recommendation of the
Merger or the Merger Agreement in connection with, or approves or recommends,
a Superior Acquisition Proposal, or (ii) Wellsford enters into a definitive
agreement with respect to any Acquisition Proposal.

The Merger Agreement defines an "Acquisition Proposal" as a merger,
acquisition, tender offer, exchange offer, consolidation, sale of assets or
similar transaction involving all or any significant portion of the assets or
any equity securities of, Wellsford or any of its subsidiaries, other than the
transactions contemplated by the Merger Agreement. The Merger Agreement
defines a "Superior Acquisition Proposal" as a bona fide acquisition proposal
by a third party which a majority of the members of the Wellsford Board of
Trustees determines in good faith to be more favorable to Wellsford's
shareholders from a financial point of view than the Merger and which the
Board of Trustees of Wellsford determines is reasonably capable of being
consummated.

TERMINATION FEE AND EXPENSES

The Merger Agreement provides for certain payments by Wellsford to EQR in
connection with the termination of the Merger Agreement. These payments are
(i) a Break-Up Fee of $14 million, plus (ii) Break-Up Expenses equal to the
out-of-pocket expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereunder, up to a maximum of $2.5 million. If
the Merger Agreement is terminated due to the Wellsford Board of Trustees
having withdrawn or modified its approval or recommendation of the Merger or
the Merger Agreement in connection with, or having approved or recommended a
Superior Acquisition Proposal, or if Wellsford will have entered into a
definitive agreement with respect to any Acquisition Proposal, Wellsford is
obligated to pay EQR the Break-Up Fee. Additionally, if the Merger Agreement
is terminated due to a breach of any representation, warranty, covenant,
obligation or agreement by Wellsford or EQR, or failure by either Wellsford or
EQR to obtain the required shareholder approval, then the breaching party, or
the party which failed to obtain such shareholder approval, shall pay to the
other party an amount equal to the Break-Up Expenses. If the Merger is not
consummated, other than due to the termination of the Merger Agreement by (i)
the mutual written consent of the respective Boards of Trustees of EQR and
Wellsford, (ii) either party, upon the failure by EQR to obtain the required
shareholder approval, or (iii) Wellsford, upon a breach of any representation,
warranty, covenant, obligation or agreement on the part of EQR resulting in a
"material adverse effect" to EQR, and either prior to the termination of the
Merger Agreement or within 12 months thereafter, Wellsford or any of its
subsidiaries enters into any written Acquisition Proposal which is
subsequently consummated, Wellsford is required to pay the Break-Up Fee to
EQR, as compensation and liquidated damages for the loss suffered by EQR as a
result of the failure of the Merger to be consummated and to avoid the
difficulty of determining damages under the circumstances. Neither party shall
have any liability to the other after payment of the Break-Up Fee.

Except as described above, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby (the
"Transaction Costs") will be allocated between EQR and the Surviving Trust. If
the portion of the Transaction Costs allocated to the Surviving Trust exceeds
an amount specified in the Merger Agreement, WRP Newco will be obligated to
reimburse the Surviving Trust for such excess amount. If WRP Newco becomes
obligated to reimburse the Surviving Trust in the manner described above, the
funds contributed to WRP Newco by Wellsford under the Contribution and
Distribution Agreement will be decreased by an amount equal to the amount
which WRP Newco is obligated to reimburse the Surviving Trust.

NO SOLICITATION OF OTHER TRANSACTIONS

Wellsford has agreed that (i) it and its subsidiaries will not, and it will
use its best efforts not to permit its officers, trustees, employees, agents
or financial advisors to initiate, solicit or encourage, directly or
indirectly, any inquiries or the

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making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders) with respect to a
merger, acquisition, tender offer, exchange offer, consolidation, sale of
assets or similar transactions involving all or any significant portion of the
assets or any equity securities of, it or any of its subsidiaries, other than
the transactions contemplated by the Merger Agreement and (ii) it will notify
EQR immediately if Wellsford receives any such inquiries or proposals, or any
requests for such information, or if any negotiations or discussions are
sought to be initiated or continued with it with respect to any of the
foregoing. The Merger Agreement does not, however, prohibit a party from
entering into discussion with respect to an unsolicited proposal if the Board
of Trustees of that party determines that such action is required by its
duties to its shareholders imposed by law.

EQR has agreed that if it enters into negotiations with another entity
having a class of equity securities registered under the Exchange Act
regarding the acquisition of such entity (whether effected through a merger,
consolidation, share exchange, tender offer or other form), then at least
three business days prior to executing any definitive agreement with such
entity with respect to such acquisition or making a tender offer for the
shares or other ownership interests of such entity, EQR shall notify Wellsford
of such transaction and consult with Wellsford with respect thereto, it being
understood, however, that Wellsford shall have no approval rights with respect
thereto.

CONVERSION OF SHARES

Each share of Wellsford Common outstanding immediately prior to the
Effective Time will be converted into .625 of a share of Survivor Common. All
such shares of Wellsford Common, when so converted, will cease to be
outstanding and will automatically be cancelled and retired and each holder of
a certificate representing any such shares will cease to have any rights with
respect thereto, except the right to receive the shares of Survivor Common and
any cash, without interest, in lieu of fractional shares to be issued or paid
in consideration therefor upon the surrender of such certificate in accordance
with the Merger Agreement, as well as dividends and distributions declared
with a record date after the Effective Time.

Each share of Wellsford Preferred, consisting of Wellsford Series A and
Wellsford's Series B Cumulative Redeemable Preferred Shares of Beneficial
Interest ("Wellsford Series B"), outstanding immediately prior to the
Effective Time will continue as a preferred share of the Surviving Trust with
its same preferences and other terms except that each share of Wellsford
Series A will be redesignated as one share of Series D Convertible Preferred
Share of Beneficial Interest in the Surviving Trust ("Survivor Series D") and
each share of Wellsford Series B will be redesignated as one share of Series E
Cumulative Redeemable Preferred Share of Beneficial Interest in the Surviving
Trust ("Survivor Series E"); provided, however, that the conversion ratio for
Survivor Series D shall be adjusted in accordance with its terms. At the
Effective Time, each certificate representing outstanding shares of Wellsford
Series A and Wellsford Series B will cease to have any rights with respect to
such shares, except the right to receive a certificate of the Surviving Trust
representing an equal number of Survivor Series D or Survivor Series E, as the
case may be.

Each share of EQR Common outstanding immediately prior to the Effective Time
will be converted into and continue as one share of Survivor Common. At the
Effective Time, each certificate representing shares of EQR Common will
thereafter represent an equal number of shares of Survivor Common.

Each share of EQR Preferred, consisting of 9 3/8% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest, $.01 par value per share
(the "Series A Preferred Shares"), 9 1/8% Series B Cumulative Redeemable
Preferred Shares of Beneficial Interest, $.01 par value per share (the "Series
B Preferred Shares"), and 9 1/8% Series C Cumulative Redeemable Preferred
Shares of Beneficial Interest, $.01 par value per share (the "Series C
Preferred Shares"), outstanding immediately prior to the Effective Time will
be converted into and continue with its same preferences as one share of the
Surviving Trust's 9 3/8% Series A Cumulative Redeemable Preferred Shares of
Beneficial Interest ("Survivor Series A"), the Surviving Trust's 9 1/8% Series
B Cumulative Redeemable Preferred Shares of Beneficial Interest ("Survivor
Series B"), and the Surviving Trust's 9 1/8% Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest ("Survivor Series C"), respectively.
At the Effective Time, each certificate evidencing outstanding shares of
Series A Preferred Shares, Series B Preferred Shares or Series C Preferred
Shares will thereafter evidence an equal number of shares of Survivor Series
A, Survivor Series B or Survivor Series C, respectively.

The issuance, terms and conditions of the Survivor Common and the Survivor
Preferred (collectively, the "Survivor Shares") will be governed by the
Surviving Trust's Declaration. For a detailed description of the provisions of
the Surviving Trust's Declaration, see "Proposal Regarding Additional
Declaration of Trust Provisions" and "Comparison of Rights of Shareholders."

APPOINTMENT OF EXCHANGE AGENT

In order to facilitate distribution of certificates representing shares of
the Surviving Trust to Wellsford shareholders, the Surviving Trust will
appoint Boston EquiServe LLP, an affiliate of First National Bank of Boston,
to act as Exchange Agent

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in connection with the Merger. The Exchange Agent will enter into an agreement
with EQR and Wellsford pursuant to which it will agree to act as agent for
purposes of distributing the certificates representing shares of the Surviving
Trust to Wellsford shareholders.

EXCHANGE OF CERTIFICATES

Wellsford shareholders should not tender their certificates representing
Wellsford shares with their proxy. Promptly after the Effective Time, the
Exchange Agent will mail to all Wellsford shareholders transmittal materials,
including a letter of transmittal (the "Letter of Transmittal") for use in
exchanging certificates evidencing Wellsford Shares for certificates
evidencing Survivor Shares. As soon as practicable after the Letter of
Transmittal is properly completed and returned, along with the certificates
evidencing Wellsford Shares, to the Exchange Agent, the person specified in
the Letter of Transmittal will receive certificates for the number of whole
shares of Survivor Shares and, to the extent applicable, any cash in lieu of
fractional shares of Survivor Common, to which such person is entitled as a
result of the Merger. The Letter of Transmittal is expected to provide
instructions for shareholders who have lost or misplaced their certificates
and wish to tender their shares.

Each Survivor Share for which Wellsford Shares are exchanged in the Merger
will be deemed to have been issued at the Effective Time. Accordingly,
Wellsford shareholders who receive Survivor Shares in the Merger will be
entitled to receive any dividends or other distributions which may be payable
to all holders of record of Survivor Shares with respect to any record date
after the Effective Time. No holder of Wellsford Shares will be entitled to
receive Survivor Shares or cash in lieu of fractional Survivor Common, and no
dividends or other distributions will be paid with respect to any Survivor
Shares, until the certificate or certificates formerly representing such
holder's Wellsford Shares have been surrendered in accordance with the
procedures described above. At the time such surrender has been accomplished,
a certificate representing the appropriate number of Survivor Shares will be
issued and accrued dividends and other distributions on such Survivor Shares
will be paid without interest. Existing shareholders of EQR are not required
to tender their certificates representing EQR Shares. Certificates for EQR
Shares will represent the same number and type of Survivor Shares.

CONDUCT OF BUSINESS PENDING THE MERGER

Except as (i) contemplated by the Merger Agreement, (ii) necessary to
accomplish the Distribution, (iii) as disclosed to EQR, or (iv) consented to
in writing by EQR, Wellsford will, and will cause each of its subsidiaries to:
(a) conduct its business only in the usual, regular and ordinary course and in
substantially the same manner as before the date of the Merger Agreement, (b)
use reasonable efforts to preserve intact its business organizations and
goodwill and keep available the services of its officers and employees, (c)
confer on a regular basis with one or more representatives of EQR to report
operational matters of materiality and, subject to certain qualifications, any
proposals to engage in material transactions, (d) promptly notify EQR of any
material emergency or other material change in the condition (financial or
otherwise), business, properties, assets, liabilities, prospects or the normal
course of its businesses or in the operation of its properties, or of any
material governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), (e) promptly
deliver to EQR true and correct copies of any report, statement or schedule
filed with the Commission subsequent to the date of the Merger Agreement, (f)
maintain its books and records in accordance with generally accepted
accounting principles ("GAAP") consistently applied and not change in any
material manner any of its methods, principles or practices of accounting in
effect at the "Financial Statement Date" (as defined in the Merger Agreement),
except as may be required by the Commission, applicable law or GAAP, (g) duly
and timely file all reports, tax returns and other documents required to be
filed with Federal, state, local and other authorities, subject to extensions
permitted by law, provided Wellsford notifies EQR that it is availing itself
of such extensions and provided such extensions do not adversely affect
Wellsford's status as a qualified REIT under the Code, (h) not make or rescind
any express or deemed election relative to taxes (unless required by law or
necessary to preserve Wellsford's status as a REIT or the status of any
Wellsford subsidiaries as a partnership for Federal income tax purposes), (i)
not acquire, enter into any option to acquire, or exercise an option or
contract to acquire, additional real property, incur additional indebtedness
except for working capital under its revolving line(s) of credit, encumber
assets or commence construction of, or enter into any agreement or commitment
to develop or construct, other real estate projects, except in the ordinary
course of business, which shall include all activities necessary to proceed
with the acquisition, ownership and construction of Phases I, II and III of
Palomino Park in accordance with the agreements in existence on the date of
the Merger Agreement and previously furnished to EQR, (j) not amend its
Declaration of Trust, Bylaws, or the articles of incorporation, bylaws,
partnership agreement, joint venture agreement or comparable charter or
organization document of any subsidiary without EQR's prior written consent;
provided that EQR will not unreasonably withhold or delay its consent to non-
material amendments to organizational documents of such subsidiaries, (k) make
no change in the number of shares of beneficial interest or capital stock,
other than pursuant to (i) the exercise of options, rights or similar
securities outstanding as of the date hereof and disclosed to EQR, (ii) the
conversion

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ratio of Wellsford Series A pursuant to the terms of the Articles
Supplementary for the Wellsford Series A, (iii) options to purchase Wellsford
Common which are issued, and (iv) the Dividend Reinvestment and Share Purchase
Plan of Wellsford, (l) grant no options or other right or commitment relating
to its shares of beneficial interest or capital stock, membership interests or
units of limited partnership interest or any security convertible into its
shares of beneficial interest or capital stock, membership interests or units
of limited partnership interest, or any security the value of which is
measured by shares of beneficial interest, or any security subordinated to the
claim of its general creditors, (m) not (i) authorize, declare, set aside or
pay any dividend or make any other distribution or payment with respect to any
shares of its beneficial interest or capital stock, except as provided in the
Merger Agreement and in connection with the use of shares of beneficial
interest to pay the exercise price or tax withholding in connection with
equity-based employee benefit plans, or (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of beneficial interest, membership
interests or units of limited partnership interest or any option, warrant or
right to acquire, or security convertible into, shares of beneficial interest,
membership interests, or units of limited partnership interest, (n) not sell,
lease, mortgage, subject to lien or otherwise dispose of any material part of
its assets, individually or in the aggregate, except in the ordinary course of
business or as disclosed to EQR, (o) not make any loans, advances or capital
contributions to, or investments in, any other person or entity, other than
(i) loans, advances and capital contributions to Wellsford subsidiaries in
existence on the date of the Merger Agreement (other than WRP Newco) and (ii)
loans to WRP Newco and WRP Newco subsidiaries bearing interest at a rate per
annum equal to the rate of interest payable under the Second Amended and
Restated Revolving Credit Agreement dated June 30, 1995 between Wellsford and
First National Bank of Boston; (p) not pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against in,
or contemplated by, the most recent consolidated financial statements (or the
notes thereto) furnished to EQR or incurred in the ordinary course of business
consistent with past practice, (q) not enter into any commitment, contractual
obligation, capital expenditure or transaction (each, a "Commitment") which
may result in total payments or liability by or to it in excess of $1 million
or aggregate Commitments in excess of $5 million, (r) not guarantee the
indebtedness of another person or entity, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person or
entity or enter into any arrangement having the economic effect of any of the
foregoing, other than guarantees of indebtedness of WRP Newco and its
subsidiaries provided, that on the Closing Date, the Surviving Trust is
released from any obligations with respect to such guarantees, or the
indebtedness so guaranteed is paid in full without payment by the Surviving
Trust or its subsidiaries, (s) not enter into any Commitment with any officer,
trustee, consultant or affiliate of Wellsford or any of the Wellsford's
subsidiaries, except as contemplated by the Merger Agreement, (t) not increase
any compensation or enter into or amend any employment agreement with any of
its officers, directors or employees earning more than $50,000 per annum,
other than waivers by employees of benefits under such agreements, (u) not
adopt any new employee benefit plan or amend any existing plans or rights,
except for changes which are required by law and changes which are not more
favorable to participants than provisions presently in effect, and (v) not
settle any shareholder derivative or class action claims arising out of or in
connection with any of the transactions contemplated by the Merger Agreement,
(w) not change the ownership of any of its subsidiaries except pursuant to the
Contribution Agreement and (x) not accept a promissory note in payment of the
exercise price payable under any option to purchase shares of Wellsford
Common. Wellsford has agreed to cause WRP Newco and its subsidiaries to repay,
on the Closing Date, all its loans made to any of them and to procure, on the
Closing Date, the release of Wellsford and its subsidiaries from any
guarantees of the obligations of WRP Newco and its subsidiaries other than the
guarantees contemplated under the Credit Enhancement Agreement and Palomino
Agreement by Wellsford. In the event WRP Newco is unable to repay such loans
to Wellsford on the Closing Date, EQR may, at its option, and in lieu of
terminating the Merger Agreement, require WRP Newco to execute and deliver to
the Surviving Trust a promissory note in the amount of such indebtedness,
payable in 12 equal consecutive monthly installments together with interest
thereon.

For purposes of this section, the Merger Agreement provides that any
contract, transaction or other event will be deemed to be material if it would
result or is expected to result in a net impact on Wellsford's consolidated
income statement in excess of $1 million, or on Wellsford's consolidated
balance sheet in excess of $1 million.

Prior to the Effective Time, WRP Newco and its subsidiaries will not be
bound by the restrictions which would otherwise be applicable under (a), (b),
(c), (d), (i), (j), (k), (l), (m)(ii), (n), (o), (p), (q), (r), (s), (t), (u),
or (w) above; provided, however, that in no event may WRP Newco: (i) issue any
of its shares to any person or entity other than Wellsford prior to the
Distribution for less than fair value; (ii) take any action or fail to take
any action which would reasonably be expected to result in the termination of
or a challenge to Wellsford's status as a REIT within the meaning of Section
856 of the Code, or result in a Material Adverse Effect to Wellsford; (iii)
enter into any contract which creates or imposes any obligation on, or
otherwise purports to bind, Wellsford or any of the other Wellsford
subsidiaries; (iv) take any action or omit to take any action which causes a
default under any loan agreement to which Wellsford is a party; (v) amend its
Articles of Incorporation or By-laws in any manner which is inconsistent with
the provisions of the WRP Newco Stock Purchase Agreement.

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Prior to the Effective Time, except as (i) contemplated by the Merger
Agreement, or (ii) consented to in writing by Wellsford, EQR will, and will
cause each of its subsidiaries to: (a) use its reasonable efforts to preserve
intact its business organizations and goodwill and keep available the services
of its officers and employees, (b) confer on a regular basis with one or more
representatives of Wellsford to report operational matters of materiality
which could have a EQR Material Adverse Effect (as defined in the Merger
Agreement), (c) promptly notify Wellsford of any material emergency or other
material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of its
businesses or in the operation of its properties, or of any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), (d) promptly deliver to
Wellsford true and correct copies of any report, statement or schedule filed
with the Commission subsequent to the date of the Merger Agreement, (e)
maintain its books and records in accordance with GAAP consistently applied,
and (f) duly and timely file all reports, tax returns and other documents
required to be filed with Federal, state, local and other authorities.

In addition, during the period beginning the day after the fifth (5th)
trading day prior to the date of this Joint Proxy Statement/Prospectus/
Information Statement and ending on (but including) the Closing Date, EQR will
not (a) issue any EQR Common or other securities convertible into EQR Common
in any single transaction or series of transactions having an aggregate
issuance price in excess of $250 million, or (b) announce any merger with or
acquisition of all or substantially all the assets of another entity which has
net assets in excess of $250 million.

WAIVER AND AMENDMENT

The Merger Agreement provides that, at any time prior to the Effective Time,
either party may, to the extent legally allowed and set forth in a written
instrument signed on behalf of such party, (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties contained in the
Merger Agreement or in any document delivered pursuant thereto and (iii) waive
compliance with any of the agreements or conditions for the benefit of such
party contained in the Merger Agreement.

The Merger Agreement provides that it may be amended by the parties by
action taken by the Boards of Trustees of EQR and Wellsford, at any time
before or after approval of the Merger Agreement by the shareholders of EQR or
Wellsford and prior to the filing of the Articles of Merger with the
Department. After any such approval by the shareholders of EQR or Wellsford,
no amendment may be made which by law requires the further approval of
shareholders or partners without obtaining such further approval.

STOCK EXCHANGE LISTING

The Surviving Trust will apply to list the Survivor Shares issuable in
connection with the Merger on the NYSE. Approval of the listing of such shares
on the NYSE, subject to official notice of issuance, is a condition to the
respective obligations of the parties to consummate the Merger.

ANTICIPATED ACCOUNTING TREATMENT

The Merger will be treated as a purchase in accordance with Accounting
Principles Board Opinion No. 16. Purchase accounting for a merger is the same
as the accounting treatment used for the acquisition of any group of assets.
The fair market value of the consideration given by the Surviving Trust in the
Merger will be used as the valuation basis of the combination. The assets
acquired and liabilities assumed of Wellsford will be recorded at their
relative fair market values as of the Effective Date. The financial statements
of the Surviving Trust will reflect the combined operations of EQR and
Wellsford from the date of the Merger.

SHARES AVAILABLE FOR RESALE

The issuance of Survivor Common upon consummation of the Merger will be
registered under the Securities Act. Such shares may be traded freely and
without restriction by those shareholders not deemed to be "affiliates" of
Wellsford as that term is defined in the rules and regulations promulgated
pursuant to the Securities Act. "Affiliates" are generally defined as persons
who control, are controlled by or are under common control with an issuer.
This Joint Proxy Statement/Prospectus /Information Statement does not cover
any resales of Survivor Common received by affiliates of Wellsford.

CONTRIBUTION OF ASSETS OF WELLSFORD TO ERP OPERATING PARTNERSHIP

Immediately after the Effective Time, the assets of Wellsford at the
Effective Time, subject to the liabilities of Wellsford, will be contributed
by the Surviving Trust to ERP Operating Partnership, in exchange for general
partner units of

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ERP Operating Partnership equal in number to the number of shares of Survivor
Common issued to the Wellsford Common Shareholders and preferred units of ERP
Operating Partnership equal in number to the number of outstanding shares of
Wellsford Preferred. In connection with the contribution of assets to ERP
Operating Partnership by the Surviving Trust, all of Wellsford's senior
unsecured indebtedness will become the obligation of ERP Operating
Partnership. ERP Operating Partnership will assume the Surviving Trust's full
and complete obligations with respect to Wellsford's senior unsecured debt
which will become an unconditional obligation of ERP Operating Partnership.
ERP Operating Partnership will execute and deliver a legally binding
assumption agreement in connection with the assumption of such Wellsford
unsecured debt.

FEDERAL INCOME TAX CONSEQUENCES

The following is a general summary of the material United States Federal
income tax consequences of the Merger to EQR, Wellsford and their respective
shareholders. The following summary is based upon current provisions of the
Code, existing, temporary and final regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change
(possibly on a retroactive basis). No attempt has been made to comment on all
United States Federal income tax consequences of the Distribution and the
Merger that may be relevant to particular holders of Wellsford Shares and EQR
Shares, including holders that are subject to special tax rules such as
dealers in securities, mutual funds, insurance companies, tax-exempt entities,
holders who do not hold their Wellsford Shares or EQR Shares as capital assets
and holders that, for United States Federal income tax purposes, are non-
resident alien individuals, foreign corporations, foreign partnerships or
foreign estates or trusts.

The tax discussion set forth below is included for general information only.
It is not intended to be, nor should it be construed to be, legal or tax
advice to any particular holder of Wellsford Shares or EQR Shares. Because of
the particular tax attributes of holders of Wellsford Shares or EQR Shares,
the Merger may have differing tax implications for such holders. Accordingly,
holders of Wellsford Shares or EQR Shares are urged to consult with their own
legal and tax advisers regarding the United States federal income tax
consequences of the Merger and any other consequences to them of the Merger
under state, local and foreign tax laws.

Tax Consequences of Merger. Rudnick & Wolfe, counsel to EQR in connection
with the Merger, has rendered an opinion to EQR that on the basis of the
facts, representations and assumptions set forth in such opinion:

(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and EQR and Wellsford will each be a party to
such reorganization within the meaning of Section 368(b) of the code;

(ii) no gain or loss will be recognized by EQR as a result of the Merger;

(iii) no gain or loss will be recognized by the shareholders of EQR upon
the exchange of their EQR Common solely for Survivor Common pursuant to the
Merger;

(iv) no gain or loss will be recognized by the shareholders of EQR upon
the exchange of their EQR Preferred solely for Survivor Preferred pursuant
to the Merger;

(v) the tax basis of the Survivor Common received or deemed to be
received by any holder of EQR Common in exchange for EQR Common pursuant to
the Merger will be the same as the tax basis of such EQR Common exchanged
therefor;

(vi) the tax basis of the Survivor Preferred received or deemed to be
received by any holder of EQR Preferred in exchange for EQR Preferred
pursuant to the Merger will be the same as the tax basis of such EQR
Preferred exchanged therefor;

(vii) the holding period for Survivor Common and Survivor Preferred
received in exchange for EQR Common and EQR Preferred, respectively,
pursuant to the Merger will include the period that such EQR Common and EQR
Preferred were held by the holder, provided that such EQR Common and EQR
Preferred were held as capital assets by such holder at the Effective Time;

(viii) subsequent to the Merger, the proposed method of operation
described in this Joint Proxy Statement/ Prospectus/Information Statement
and as represented by EQR should enable the Surviving Trust to satisfy the
requirements under the Code to qualify as a REIT for federal income tax
purposes; and

(ix) ERP Operating Partnership will be classified as a partnership for
federal income tax purposes.

Robinson Silverman Pearce Aronsohn & Berman LLP, counsel to Wellsford in
connection with the Merger, has rendered an opinion to Wellsford that on the
basis of the facts, representations and assumptions set forth in such opinion:

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(ii) no gain or loss for federal income tax purposes will be recognized
by Wellsford as a result of the Merger;

(iii) no gain or loss will be recognized by the shareholders of Wellsford
upon the exchange of their Wellsford Common solely for Survivor Common
pursuant to the Merger;

(iv) no gain or loss will be recognized by the shareholders of Wellsford
upon the exchange of their Wellsford Preferred solely for Survivor
Preferred pursuant to the Merger;

(v) the tax basis of the Survivor Common received or deemed to be
received by any holder of Wellsford Common in exchange for Wellsford Common
pursuant to the Merger will be the same as the tax basis of such Wellsford
Common exchanged therefor;

(vi) the tax basis of the Survivor Preferred received or deemed to be
received by any holder of Wellsford Preferred in exchange for Wellsford
Preferred pursuant to the Merger will be the same as the tax basis of such
Wellsford Preferred exchanged therefor;

(vii) the holding period for Survivor Common and Survivor Preferred
received in exchange for Wellsford Common and Wellsford Preferred,
respectively, pursuant to the Merger will include the period that such
shares of Wellsford Common and Wellsford Preferred, respectively, were held
by the holder, provided that such Wellsford Common and Wellsford Preferred
were held as capital assets by such holder at the Effective Time; and

(viii) a shareholder of Wellsford Common who receives cash in lieu of a
fractional share of Wellsford Common pursuant to the Merger will recognize
gain or loss equal to the difference, if any, between such shareholder's
basis in the fractional share and the amount of cash received.

Shareholders of EQR and Wellsford should be aware that such opinions of
counsel are not binding on the United States IRS, and no assurance is or will
be given that the IRS would not adopt a contrary position or that the IRS
position would not be sustained by a court.

QUALIFICATION OF SURVIVING TRUST AS A REIT

General. Wellsford elected REIT status commencing with its taxable year
ending December 31, 1992. In the opinion of Robinson Silverman Pearce Aronsohn
& Berman LLP, which has acted as counsel to Wellsford, Wellsford was organized
and has operated in conformity with the requirements for qualification and
taxation as a REIT under the Code for its taxable years ended December 31,
1992 through December 31, 1996. Rudnick & Wolfe has opined that, (i) EQR was
organized and has operated in conformity with the requirements for
qualification and taxation as a REIT under the Code for its taxable years
ended December 31, 1993 through December 31, 1996, and (ii) subsequent to the
Merger, the Surviving Trust's proposed method of operation described in this
Joint ProxyStatement/Prospectus/ Information Statement and as represented by
EQR should enable it to meet the requirements for qualification and taxation
as a REIT. It must be emphasized that this opinion is based on various
assumptions relating to the organization and operation of the Surviving Trust,
ERP Operating Partnership, the Management Partnerships, Equity Residential
Properties Management Corp., Equity Residential Properties Management Corp.
II, Equity Residential Properties Management Corp. III and Wellsford
Management Corp. (collectively, the "Management Corps."), the limited
partnerships and limited liability companies (the "Financing Partnerships")
that own the beneficial interest of certain properties encumbered by mortgage
financing, and various qualified REIT subsidiaries wholly owned by the
Surviving Trust (each a "QRS Corporation") (collectively, the Management
Partnerships, the Management Corps., the Financing partnerships and the QRS
Corporations may be referred to as the "Subsidiary Entities"), and is
conditioned upon certain representations made by EQR and ERP Operating
Partnership as to certain relevant factual matters, including matters related
to the organization, expected operation, and assets of the Surviving Trust,
ERP Operating Partnership and the Subsidiary Entities. The Surviving Trust's
qualification and taxation as a REIT depend upon the Surviving Trust's ability
to meet on a continuing basis, through actual annual operating and other
results, the various requirements under the Code and described in the
Prospectus with regard to, among other things, the sources of its gross
income, the composition of its assets, the level of its dividends to
shareholders, and the diversity of its share ownership. Neither Rudnick &
Wolfe nor Robinson Silverman Pearce Aronsohn & Berman LLP will review the
Surviving Trust's compliance with these requirements on a continuing basis. No
assurance can be given that the actual results of the operations of the
Surviving Trust, ERP Operating Partnership, and the Subsidiary Entities, the
sources of their income, the nature of their assets, the level of the
Surviving Trust's dividends to shareholders and the diversity of its share
ownership for any given taxable year will satisfy the requirements under the
Code for qualification and taxation as a REIT.

In any year in which the Surviving Trust qualifies as a REIT, generally it
will not be subject to Federal income tax on that portion of its REIT taxable
income or capital gain which is distributed to shareholders. This treatment
substantially eliminates the "double taxation" (at both the corporate and
shareholder levels) that generally results from the use of corporate
investment vehicles. The Surviving Trust may, however, be subject to tax at
normal corporate rates upon any taxable income or capital gain not
distributed.

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If the Surviving Trust should fail to satisfy either the 75% or the 95%
gross income test (as discussed below), and nonetheless maintains its
qualification as a REIT because certain other requirements are met, it will be
subject to a 100% tax on the greater of the amount by which it fails the 75%
or the 95% test, multiplied by a fraction intended to reflect its
profitability. The Surviving Trust will also be subject to a 100% tax on net
income derived from any "prohibited transaction," as described below. In
addition, if the Surviving Trust should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year, and (iii)
any undistributed taxable income from prior years, the Surviving Trust would
be subject to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed. The Surviving Trust may also be subject to
the corporate "alternative minimum tax," as well as tax in certain situations
and on certain transactions not presently contemplated. The Surviving Trust
will use the calendar year both for Federal income tax purposes and for
financial reporting purposes.

In order to qualify as a REIT, the Surviving Trust must meet, among others,
the following requirements:

Share Ownership Test. Shares of beneficial interest of the Surviving
Trust must be held by a minimum of 100 persons for at least 335 days of a
taxable year that is 12 months, or during a proportionate part of a taxable
year of less than 12 months. In addition, no more than 50% in value of the
shares of beneficial interest of the Surviving Trust may be owned, directly
or indirectly and by applying certain constructive ownership rules, by five
or fewer individuals during the last half of each taxable year. EQR and
Wellsford believe that they have each satisfied both of these tests, and
EQR believes the Surviving Trust will continue to do so. In order to help
comply with the second of these tests, the Surviving Trust has placed
certain restrictions on the transfer of the Survivor Common and Survivor
Preferred that are intended to prevent further concentration of share
ownership.

Asset Tests. At the close of each quarter of the Surviving Trust's
taxable year, the Surviving Trust must satisfy two tests relating to the
nature of its assets. First, at least 75% of the value of the Surviving
Trust's total assets must be represented by any combination of interests in
real property, interests in mortgages on real property, shares in other
REITs, cash, cash items and certain government securities. Second, although
the remaining 25% of the Surviving Trust's assets generally may be invested
without restriction, securities in this class may not exceed either (i) 5%
of the value of the Surviving Trust's total assets as to any one issuer, or
(ii) 10% of the outstanding voting securities of any one issuer. Where the
Surviving Trust invests in a partnership, it will be deemed to own a
proportionate share of the partnership's assets. The Surviving Trust's
investment in the properties of Wellsford through its interest in ERP
Operating Partnership will constitute qualified assets for purposes of the
75% asset test.

ERP Operating Partnership will own none of the voting stock of the
Management Corps. except for Wellsford Management Inc., in which ERP
Operating Partnership will own 10% of the voting stock. ERP Operating
Partnership will own 100% of the non-voting stock of each of the Management
Corps. ERP Operating Partnership will also own 100% of the Class A Common
Stock of WRP Newco and 100% of the Series A 8% Convertible Redeemable
Preferred Stock of WRP Newco. By virtue of its partnership interest in ERP
Operating Partnership, the Surviving Trust will be deemed to own its pro
rata share of the assets of ERP Operating Partnership, including the stock
of the Management Corps. and WRP Newco as described above. ERP Operating
Partnership has not and does not intend to own more than 10% of the voting
securities of the Management Corps. or WRP Newco.

In addition, based upon its analysis of the estimated value of the stock
of the Management Corps. and WRP Newco owned by ERP Operating Partnership
relative to the estimated value of the other assets owned by ERP Operating
Partnership, EQR believes that its pro rata share of the stock of WRP Newco
and each Management Corp. held by ERP Operating Partnership will not exceed
5% of the total value of the Surviving Trust's assets. No independent
appraisals, however, have been obtained to support this conclusion. This 5%
limitation must be satisfied not only on the date that the Surviving Trust
first acquires stock of WRP Newco or a Management Corp., but also at the
end of each quarter in which the Surviving Trust increases its interest in
WRP Newco or any of the Management Corps. (including as a result of
increasing its interest in ERP Operating Partnership as the holders of OP
Units exercise their exchange rights). Although the Surviving Trust plans
to take steps to ensure that it satisfies the 5% value test for any quarter
with respect to which retesting is to occur, there can be no assurance that
such steps will always be successful or will not require a reduction in ERP
Operating Partnership's overall interest in the Management Corps.

The Surviving Trust's indirect interests as a general partner in the
Financing Partnerships are held through the QRS Corporations, each of which
is organized and operated as a "qualified REIT subsidiary" within the
meaning of the Code. Qualified REIT subsidiaries are not treated as
separate entities from their parent REIT. Instead, all assets, liabilities
and items of income, deduction and credit of each QRS Corporation will be
treated as assets, liabilities and items of the Surviving Trust. Each QRS
Corporation therefore will not be subject to Federal corporate income
taxation, although it may be subject to state or local taxation. In
addition, the Surviving Trust's ownership of the voting stock of each QRS
Corporation will not violate the general restriction against ownership of
more than 10% of the voting securities of any issuer.

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Gross Income Tests. There are three separate percentage tests relating to
the sources of the Surviving Trust's gross income which must be satisfied
for each taxable year. For purposes of these tests, where the Surviving
Trust invests in a partnership, the Surviving Trust will be treated as
receiving its share of the income and loss of the partnership, and the
gross income of the partnership will retain the same character in the hands
of the Surviving Trust as it has in the hands of the partnership.

1. The 75% Test. At least 75% of the Surviving Trust's gross income for
each taxable year must be "qualifying income." Qualifying income generally
includes (i) rents from real property (except as modified below); (ii)
interest on obligations collateralized by mortgages on, or interests in,
real property; (iii) gains from the sale or other disposition of interests
in real property and real estate mortgages, other than gain from property
held primarily for sale to customers in the ordinary course of the
Surviving Trust's trade or business ("dealer property"); (iv) distributions
on shares in other REITs, as well as gain from the sale of such shares; (v)
abatements and refunds of real property taxes; (vi) income from the
operation, and gain from the sale, of property acquired at or in lieu of a
foreclosure of a mortgage collateralized by such property ("foreclosure
property"); (vii) commitment fees received for agreeing to make loans
collateralized by mortgages on real property or to purchase or lease real
property; and (viii) certain qualified temporary investment income
attributable to the investment of new capital received by the Surviving
Trust in exchange for its shares (including the Securities offered hereby)
during the one-year period following the receipt of such new capital.

Rents received from a tenant will not, however, qualify as rents from
real property in satisfying the 75% test (or the 95% gross income test
described below) if the Surviving Trust, or an owner of 10% or more of the
Surviving Trust, directly or constructively owns 10% or more of such
tenant. In addition, if rent attributable to personal property leased in
connection with a lease of real property is greater than 15% of the total
rent received under the lease, then the portion of rent attributable to
such personal property will not qualify as rents from real property.
Moreover, an amount received or accrued will not qualify as rents from real
property (or as interest income) for purposes of the 75% and 95% gross
income tests if it is based in whole or in part on the income or profits of
any person. Finally, for rents received to qualify as rents from real
property, the Surviving Trust generally must not operate or manage the
property or furnish or render services to tenants, other than through an
"independent contractor" from whom the Surviving Trust derives no revenue.
The "independent contractor" requirement, however, does not apply to the
extent that the services provided by the Surviving Trust are "usually or
customarily rendered" in connection with the rental of space for occupancy
only, and are not otherwise considered "rendered to the occupant."

The Surviving Trust, through the Management Partnerships, will provide
certain services with respect to the properties of Wellsford and any newly
acquired multifamily residential properties. The Surviving Trust believes
that the services provided by the Management Partnerships are usually or
customarily rendered in connection with the rental of space for occupancy
only, and therefore that the provision of such services has not caused, and
will not in the future cause the rents received with respect to the
Properties to fail to qualify as rents from real property for purposes of
the 75% and 95% gross income tests.

2. The 95% Test. At least 95% of the Surviving Trust's gross income for
the taxable year must be derived from the above-described qualifying
income, or from dividends, interest or gains from the sale or disposition
of stock or other securities that are not dealer property. Dividends
(including the Surviving Trust's share of dividends paid by the Management
Corps.) and interest on any obligations not collateralized by an interest
in real property and any payments made on behalf of the Surviving Trust by
a financial institution pursuant to a rate protection agreement will be
included as qualifying income for purposes of the 95% gross income test,
but not for purposes of the 75% test. For purposes of determining whether
the Surviving Trust complies with the 75% and 95% income tests, qualifying
income does not include income from prohibited transactions. A "prohibited
transaction" is a sale of dealer property, excluding certain dealer
property held by the Surviving Trust for at least four years and excluding
foreclosure property.

The Surviving Trust's investment in the Properties, through ERP Operating
Partnership, in major part will give rise to rental income qualifying under
the 75% and 95% gross income tests. Gains on sales of the Properties or of
the Surviving Trust's interest in ERP Operating Partnership will generally
qualify under the 75% and 95% gross income tests. EQR believes that the
income on its other investments, including its indirect investment in WRP
Newco and the Management Corps., will not cause the Surviving Trust to fail
the 75% or 95% gross income test for any year, and the Surviving Trust
anticipates that this will continue to be the case.

Even if the Surviving Trust fails to satisfy one or both of the 75% or
95% gross income tests for any taxable year, it may still qualify as a REIT
for such year if it is entitled to relief under certain provisions of the
Code. These relief provisions will generally be available if: (i) the
Surviving Trust's failure to comply was due to reasonable cause and not to
willful neglect; (ii) the Surviving Trust reports the nature and amount of
each item of its income included in the tests on a schedule attached to its
tax return; and (iii) any incorrect information on this schedule is not due
to fraud with intent to evade tax. If these relief provisions apply, the
Surviving Trust, however, will still be subject to a 100% tax

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based upon the greater of the amount by which it fails either the 75% or
95% gross income test for that year, less certain adjustments.

3. The 30% Test. The Surviving Trust must derive less than 30% of its
gross income for each taxable year from the sale or other disposition of
(i) real property held for less than four years (other than foreclosure
property and involuntary conversions), (ii) stock or securities held for
less than one year, and (iii) property in a prohibited transaction. EQR
does not anticipate that it will have any substantial difficulty in
complying with this test.

Annual Distribution Requirements. The Surviving Trust, in order to
qualify as a REIT, is required to make dividend distributions (other than
capital gain dividends) to its shareholders each year in an amount at least
equal to (A) the sum of (i) 95% of the Surviving Trust's REIT taxable
income (computed without regard to the dividends paid deduction and the
Surviving Trust's net capital gain) and (ii) 95% of the net income (after
tax), if any, from foreclosure property, minus (B) the sum of certain items
of non-cash income. Such distributions must be paid in the taxable year to
which they relate, or in the following taxable year if declared before the
Surviving Trust timely files its tax return for such year and if paid on or
before the first regular dividend payment after such declaration. To the
extent that the Surviving Trust does not distribute all of its net capital
gain or distributes at least 95%, but less than 100%, of its REIT taxable
income, as adjusted, it will be subject to tax on the undistributed amount
at regular capital gains or ordinary corporate tax rates, as the case may
be.

The Surviving Trust has made and intends to continue to make timely
distributions sufficient to satisfy the annual distribution requirements.
In this regard, the partnership agreement of ERP Operating Partnership
authorizes the Surviving Trust, as general partner, to take such steps as
may be necessary to cause ERP Operating Partnership to distribute to its
partners an amount sufficient to permit the Surviving Trust to meet these
distribution requirements. It is possible that the Surviving Trust may not
have sufficient cash or other liquid assets to meet the 95% dividend
requirement, due to the payment of principal on debt or to timing
differences between the actual receipt of income and actual payment of
expenses on the one hand, and the inclusion of such income and deduction of
such expenses in computing the Surviving Trust's REIT taxable income on the
other hand. To avoid any problem with the 95% distribution requirement, the
Surviving Trust will closely monitor the relationship between its REIT
taxable income and cash flow and, if necessary, will borrow funds (or cause
ERP Operating Partnership or other affiliates to borrow funds) in order to
satisfy the distribution requirement.

Failure to Qualify. If the Surviving Trust fails to qualify for taxation
as a REIT in any taxable year and the relief provisions do not apply, the
Surviving Trust will be subject to tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates.
Distributions to shareholders in any year in which the Surviving Trust
fails to qualify will not be required and, if made, will not be deductible
by the Surviving Trust. In such event, to the extent of current and
accumulated earnings and profits, all distributions to shareholders will be
taxable as ordinary income, and, subject to certain limitations in the
Code, corporate distributees may be eligible for the dividends received
deduction. Unless entitled to relief under specific statutory provisions,
the Surviving Trust also will be ineligible for qualification as a REIT for
the four taxable years following the year during which qualification was
lost.

TAX ASPECTS OF THE SURVIVING TRUST'S INVESTMENTS IN PARTNERSHIPS

General. The Surviving Trust will hold direct or indirect interests in ERP
Operating Partnership, WRP Newco, the Management Partnerships and certain
Financing Partnerships (each individually a "Partnership" and, collectively,
the "Partnerships"). The Surviving Trust believes that each of the
Partnerships qualifies as a partnership (as opposed to an association taxable
as a corporation) for Federal income tax purposes. If any of the Partnerships
were to be treated as an association, it would be taxable as a corporation and
therefore subject to an entity-level tax on its income. In such a situation,
the character of the Surviving Trust's assets and items of gross income would
change, which would preclude the Surviving Trust from satisfying the asset
tests and possibly the income tests (see "Certain Federal Income Tax
Consequences--Taxation of the Surviving Trust--Asset Tests" and "--Gross
Income Tests"), and in turn would prevent the Surviving Trust from qualifying
as a REIT.

Tax Termination of ERP Operating Partnership. Pursuant to Section
708(b)(1)(B) of the Code, if within a twelve-month period, there is a sale or
exchange of 50 percent or more of the total interest in a partnership's
capital and profits, the partnership terminates for federal income tax
purposes. Treasury Regulations under Code Section 708(b)(1)(B) (the "Section
708 Regulations") provide that if a partnership is deemed terminated by a sale
or exchange of an interest, the following is deemed to occur: (a) the
partnership distributes all of its assets subject to all of its liabilities to
the purchaser and the other remaining partners in proportion to their
respective interests in the partnership assets; and, (b) immediately
thereafter, the purchaser and the other remaining partners contribute the
assets, subject to the liabilities encumbering such assets, to a new
partnership. Under the Section 708 Regulations, the deemed termination of a
partnership will result in the closing of the

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partnership's taxable year and recognition of gain under Code Section 731 if
the amount of money deemed distributed to the partner (including any money
deemed distributed upon a shift in the liabilities of the partnership under
Code Section 752) exceeds such partner's adjusted basis in his partnership
interest. Any built-in gain or loss attributable to the assets re-contributed
to the partnership must be allocated among the partners of the new partnership
under Code Section 704(c). See "Tax Aspects of Surviving Trusts Investment in
Partnerships--Tax Allocations With Respect to the Properties." In addition,
the deemed termination requires the partnership to depreciate its assets as if
they were newly acquired by the partnership at the time of termination. As a
result, such assets must be depreciated over each asset's depreciable life
beginning as of the date of the deemed termination.

In connection with the Merger, more than 50 percent of the total interest in
ERP Operating Partnership's capital and profits will be exchanged. Therefore,
the Merger will result in the termination of ERP Operating Partnership under
Code Section 708(b)(1)(B). Accordingly, under the Section 708 Regulations, all
of the assets of ERP Operating Partnership will be deemed to be distributed to
the partners of ERP Operating Partnership (including the Surviving Trust) and
re-contributed by such partners to a newly formed partnership. Such deemed
distribution and re-contribution is not expected to cause gain recognition to
the Surviving Trust under Code Section 731(a) because the amount of cash
deemed distributed to the Surviving Trust as a result of the deemed
liquidation (including any deemed distribution occurring under Code Section
752 as a result of a shifting of liabilities among the partners of the ERP
Operating Partnership) is not expected to exceed the Surviving Trusts's
adjusted basis in the ERP Operating Partnership. Moreover, because the taxable
years of both the ERP Operating Partnership and the Surviving Trust end on the
same date, the closing of the ERP Operating Partnership's taxable year should
have no adverse tax consequences to the Surviving Trust. However, the
termination of the ERP Operating Partnership will cause the assets of the ERP
Operating Partnership to be depreciated as if they were newly acquired by the
ERP Operating Partnership, possibly resulting in lower annual depreciation
deductions to the Surviving Trust for federal income tax purposes. In
addition, the deemed re-contribution of the assets to the ERP Operating
Partnership could result in a reallocation of the built-in gain attributable
to the properties owned by the ERP Operating Partnership. See "Tax Aspects of
Surviving Trusts Investment in Partnerships--Tax Allocations With Respect to
the Properties."

Proposed Treasury Regulations recently promulgated by the Treasury
Department (the "Proposed 708 Regulations") would alter the tax consequences
of a termination under Code Section 708(b)(1)(B). Under the Proposed Section
708 Regulations, if a partnership is terminated by a sale or exchange of an
interest, the following would be deemed to occur: (a) the partnership
transfers all of its assets and liabilities to a new partnership in exchange
for an interest in the new partnership; and (b) immediately thereafter, the
terminated partnership distributes all of the interests in the new partnership
to the purchasing partner and the other remaining partners in liquidation of
the terminated partnership. The effect of the Proposed Regulations would be to
(i) eliminate any possibility of gain recognition to the partners of the ERP
Operating Partnership under Code Section 731, and (ii) eliminate any potential
reallocation of ERP Operating Partnership's basis and any Section 704(c)
built-in gain with respect to the properties currently held by the ERP
Operating Partnership. However, under the Proposed 708 Regulations, the ERP
Operating Partnership would still be required to depreciate its properties as
newly acquired assets, possibly resulting in lower depreciation deductions to
the Surviving Trust for federal income tax purposes. The Proposed Section 708
Regulation will apply to the deemed termination of ERP Operating Partnership
if the Proposed Section 708 Regulations shall have been published as final
regulations in the Federal Register as of the effective date of the Merger.

Tax Allocations with Respect to the Properties. Pursuant to Section 704(c)
of the Code, income, gain, loss and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in exchange for an
interest in the partnership (such as certain of the Properties contributed to
ERP Operating Partnership in connection with both the initial public offering
of EQR and the Merger) (the "Contributed Properties") must be allocated in a
manner such that the contributing partner is charged with, or benefits from,
respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of such unrealized gain
or unrealized loss is generally equal to the difference between the fair
market value and the adjusted tax basis of contributed property at the time of
contribution (a "Book-Tax Difference"). Such allocations are solely for
Federal income tax purposes and do not affect the book capital accounts or
other economic or legal arrangements among the partners. ERP Operating
Partnership Agreement (as well as the Financing Partnerships agreements)
require such allocations to be made in a manner consistent with Section
704(c). As a result, certain limited partners of ERP Operating Partnership
will be allocated lower amounts of depreciation deductions for tax purposes
and increased taxable income and gain on sale by the Partnerships of the
contributed assets (including certain of the Contributed Properties). These
allocations will tend to eliminate the Book-Tax Difference over the lives of
the Partnerships. However, the special allocation rules of Section 704(c) as
applied by the Surviving Trust will not always entirely rectify the Book-Tax
Difference on an annual basis or with respect to a specific taxable
transaction such as a sale. Thus, the carryover basis of the contributed
assets in the hands of the Partnerships will cause the Surviving Trust to be
allocated lower depreciation and other deductions, and possibly greater
amounts of taxable income in the event of a sale of

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such contributed assets in excess of the economic or book income allocated to
it as a result of such sale. This may cause the Surviving Trust to recognize
taxable income in excess of cash proceeds, which might adversely affect the
Surviving Trust's ability to comply with the REIT distribution requirements.
See "Qualification of the Surviving Trust as a REIT--Annual Distribution
Requirements."

Sale of the Properties. The Surviving Trust's share of any gain realized by
ERP Operating Partnership on the sale of any dealer property generally will be
treated as income from a prohibited transaction that is subject to a 100%
penalty tax. See "Qualification of the Surviving Trust as a REIT--Gross Income
Tests--The 95% Test." Under existing law, whether property is dealer property
is a question of fact that depends on all the facts and circumstances with
respect to the particular transaction. The Partnerships have held and intend
to continue to hold the Properties for investment with a view to long-term
appreciation, to engage in the business of acquiring, developing, owning and
operating the Properties and other multifamily residential properties and to
make such occasional sales of the Properties as are consistent with the
Surviving Trust's investment objectives. Based upon such investment
objectives, the Surviving Trust believes that in general the Properties should
not be considered dealer property and that the amount of income from
prohibited transactions, if any, will not be material.

Taxation of Taxable Domestic Shareholders.

General. As long as the Surviving Trust qualifies as a REIT, distributions
made to the Surviving Trust's taxable domestic shareholders, with respect to
their shares out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income and will not be eligible for the dividends received deduction
for shareholders that are corporations. For purposes of determining whether
distributions on the Securities are out of current or accumulated earnings and
profits, the earnings and profits of the Surviving Trust will be allocated
first to the Survivor Preferred Shares and second to the Survivor Common
Shares. There can be no assurance, however, that the Surviving Trust will have
sufficient earnings and profits to cover distributions on the Survivor
Preferred Shares. Dividends that are designated as capital gain dividends will
be taxed as long-term capital gains (to the extent that they do not exceed the
Surviving Trust's actual net capital gain for the taxable year) without regard
to the period for which the shareholder has held its Securities. However,
corporate shareholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income. For a discussion on the manner in which
that portion of any dividends designated by the Surviving Trust as capital
gains dividends will be allocated among the holders of Survivor Preferred
Shares and Survivor Common Shares, see "Description of Shares of Beneficial
Interest--Survivor Preferred Shares--Distributions." To the extent that the
Surviving Trust makes distributions in excess of current and accumulated
earnings and profits, these distributions are treated first as a tax-free
return of capital to the shareholder, reducing the tax basis of a
shareholder's Securities by the amount of such distribution (but not below
zero), with distributions in excess of the shareholder's tax basis taxable as
capital gains (if the Securities are held as a capital asset). In addition,
any dividend declared by the Surviving Trust in October, November or December
of any year and payable to a shareholder of record on a specific date in any
such month will be treated as both paid by the Surviving Trust and received by
the shareholder on December 31 of such year, provided that the dividend is
actually paid by the Surviving Trust during January of the following calendar
year. Shareholders may not include in their individual income tax returns any
net operating losses or capital losses of the Surviving Trust.

In general, any loss upon a sale or exchange of securities by a shareholder
who has held such securities for six months or less (after applying certain
holding period rules) will be treated as a long-term capital loss, to the
extent of distributions from the Surviving Trust received by such shareholder
are required to be treated by such shareholder as long-term capital gains.

Taxation of Tax-Exempt Shareholders.

Most tax-exempt employees' pension trusts are not subject to Federal income
tax except to the extent of their receipt of "unrelated business taxable
income" as defined in Section 512(a) of the Code ("UBTI"). Distributions by
the Surviving Trust to a shareholder that is a tax-exempt entity should not
constitute UBTI, provided that the tax-exempt entity has not financed the
acquisition of its securities with "acquisition indebtedness" within the
meaning of the Code and the securities are not otherwise used in an unrelated
trade or business of the tax-exempt entity. In addition, for taxable years
beginning on or after January 1, 1994, certain pension trusts that own more
than 10% of a "pension-held REIT" must report a portion of the distribution
that they receive from such a REIT as UBTI. The Surviving Trust has not been
and does not expect to be treated as a pension-held REIT for purposes of this
rule.

Taxation of Foreign Shareholders.

The following is a discussion of certain anticipated U.S. Federal income tax
consequences of the ownership and disposition of securities applicable to Non-
U.S. Holders of such securities. A "Non-U.S. Holder" is any person other than

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(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof, or (iii) an estate or trust whose
income is includible in gross income for U.S. Federal income tax purposes
regardless of its source. The discussion is based on current law and is for
general information only.

Distributions From the Surviving Trust.

1. Ordinary Dividends. The portion of dividends received by Non-U.S. Holders
payable out of the Surviving Trust's earnings and profits which are not
attributable to capital gains of the Surviving Trust or of ERP Operating
Partnership and which are not effectively connected with a U.S. trade or
business of the Non-U.S. Holder will be subject to U.S. withholding tax at the
rate of 30% (unless reduced by an applicable treaty). In general, Non-U.S.
Holders will not be considered engaged in a U.S. trade or business solely as a
result of their ownership of securities. In cases where the dividend income
from a Non-U.S. Holder's investment in securities is (or is treated as)
effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or
business, the Non-U.S. Holder generally will be subject to U.S. tax at
graduated rates, in the same manner as U.S. shareholders are taxed with
respect to such dividends (and may also be subject to the 30% branch profits
tax in the case of a Non-U.S. Holder that is a foreign corporation).

2. Non-Dividend Distributions. Distributions by the Surviving Trust which
are not dividends out of the earnings and profits of the Surviving Trust will
not be subject to U.S. income or withholding tax. If it cannot be determined
at the time a distribution is made whether or not such distribution will be in
excess of the Surviving Trust's current and accumulated earnings and profits,
the entire distribution will be subject to withholding at the rate applicable
to dividends. However, the Non-U.S. Holder may seek a refund of such amounts
from the Service if it is subsequently determined that such distribution was,
in fact, in excess of current and accumulated earnings and profits of the
Surviving Trust.

3. Capital Gain Dividends. Under the Foreign Investment in Real Property Tax
Act of 1980 ("FIRPTA"), a distribution made by the Surviving Trust to a Non-
U.S. Holder, to the extent attributable to gains from dispositions of United
States Real Property Interests ("USRPIs") such as the Properties beneficially
owned by the Surviving Trust will be considered effectively connected with a
U.S. trade or business of the Non-U.S. Holder and subject to U.S. income tax
at the rate applicable to U.S. individuals or corporations, without regard to
whether such distribution is designated as a capital gain dividend. In
addition, the Surviving Trust will be required to withhold tax equal to 35% of
the amount of dividends to the extent such dividends constitute gains from any
USRPI. Distributions subject to FIRPTA may also be subject to a 30% branch
profits tax in the hands of a foreign corporate shareholder that is not
entitled to treaty exemption.

Dispositions of Securities.

Unless securities constitute a USRPI, a sale of securities by a Non-U.S.
Holder generally will not be subject to U.S. taxation under FIRPTA. The
securities will not constitute a USRPI if the Surviving Trust is a
"domestically controlled REIT." A domestically controlled REIT is a REIT in
which, at all times during a specified testing period, less than 50% in value
of its securities is held directly or indirectly by Non-U.S. Holders. The
Surviving Trust believes that it has been and anticipates that it will
continue to be a domestically controlled REIT, and therefore that the sale of
securities will not be subject to taxation under FIRPTA. Because the
securities will be publicly traded, however, no assurance can be given the
Surviving Trust will continue to be a domestically controlled REIT. If the
Surviving Trust does not constitute a domestically controlled REIT, a Non-U.S.
Holder's sale of securities generally will still not be subject to tax under
FIRPTA as a sale of a USRPI provided that (i) the securities are "regularly
traded" (as defined by applicable Treasury regulations) on an established
securities market and (ii) the selling Non-U.S. Holder held 5% or less of the
Surviving Trust's outstanding securities at all times during a specified
testing period.

If gain on the sale of securities were subject to taxation under FIRPTA, the
Non-U.S. Holder would be subject to the same treatment as a U.S. shareholder
with respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals)
and the purchaser of securities could be required to withhold 10% of the
purchase price and remit such amount to the Service. Capital gains not subject
to FIRPTA will nonetheless be taxable in the United States to a Non-U.S.
Holder in two cases: (i) if the Non-U.S. Holder's investment in securities is
effectively connected with a U.S. trade or business conducted by such Non-U.S.
Holder, the Non-U.S. Holder will be subject to the same treatment as a U.S.
shareholder with respect to such gain, or (ii) if the Non-U.S. Holder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gain.

Other Tax Considerations.

WRP Newco and the Management Corps. A portion of the cash to be used by ERP
Operating Partnership to fund distributions to its partners, including the
Surviving Trust, is expected to come from WRP Newco and the Management

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Corps. through payments of dividends on the stock of WRP Newco and the
Management Corps. held by ERP Operating Partnership. The Management Corps.
will pay Federal and state income tax at the full applicable corporate rates
on their taxable income. The Management Corps. will attempt to minimize the
amount of such taxes, but there can be no assurance whether or the extent to
which measures taken to minimize taxes will be successful. To the extent that
WRP Newco and/or the Management Corps. are required to pay Federal, state or
local taxes, the cash available to WRP Newco for distribution by the Surviving
Trust, among its shareholders will be reduced accordingly.

State and Local Taxes. The Surviving Trust and its shareholders may be
subject to state or local taxation in various jurisdictions, including those
in which it or they transact business or reside. The state and local tax
treatment of the Surviving Trust and its shareholders may not conform to the
Federal income tax consequences discussed above. Consequently, prospective
shareholders should consult their own tax advisors regarding the effect of
state and local tax laws on an investment in the shares of beneficial interest
of the Surviving Trust.

INTERESTS OF CERTAIN PERSONS IN THE MERGER AND DISTRIBUTION

BENEFITS OF KEY EXECUTIVES

Each key executive of Wellsford, consisting of Messrs. Lynford, Lowenthal,
Kelley, MacKenzie, Hughes and Strong, has an existing employment agreement
with Wellsford that entitles him to certain benefits as described below. In
addition, in prior years each of the executives has earned and received
additional compensation in the form of share loans, grants of restricted
shares and share options. Members of the Board of Trustees of Wellsford have
also been granted share options over the years. Set forth below is a
discussion of the treatment of the various benefits and other compensation to
be paid in connection with the Merger to the key executives and the Trustees
by reason of these pre-existing agreements.

A. Severance Payments. Certain executive officers (but not Messrs. Lynford
and Lowenthal) will be entitled to receive severance payments under their
employment agreements as follows: $1,149,000 for Mr. Kelley, $764,070 for
Mr. MacKenzie, $692,440 for Mr. Hughes, and $585,000 for Mr. Strong.

B. Share Loans. Under the existing agreements, Wellsford's key executives
previously purchased Wellsford Common over the years at their then fair market
value, the purchase price of which was borrowed from Wellsford and evidenced
by a ten-year promissory note. Under the agreements, 5% of the principal
balance of the promissory notes is forgiven each year provided the executive
remains in the employ of Wellsford and the remaining 50% is due at the end of
the ten year term of the promissory note. Upon a change of control, such as
the Merger, the then remaining principal balance of the loans will be forgiven
for Messrs. Lynford, Lowenthal, Kelley, MacKenzie, Hughes, and Strong in the
amounts of approximately $1.5 million, $1.5 million, $281,000, $1.1 million,
$1.1 million and $369,000, respectively.

C. Change in Control Share Grants. In accordance with the terms of the
existing agreements between Wellsford and Messrs. Lynford, Lowenthal and
Kelley, immediately prior to the Merger and Distribution, Messrs. Lynford,
Lowenthal and Kelley will each be issued 22,346 shares of Wellsford Common,
which shares will participate in the Distribution and Merger on the same basis
as all other shares of Wellsford Common.

D. Restricted Share Grants. Restricted share grants have previously been
made to Messrs. Lynford, Lowenthal, MacKenzie and Hughes, portions of which
have vested and portions of which remain subject to forfeiture. All restricted
shares, whether vested or not, will participate in the Distribution and Merger
on the same basis as all other shares of Wellsford Common. Messrs. Lynford and
Lowenthal each hold restricted share grants for 11,375 shares of Wellsford
Common that will continue to remain subject to forfeiture restrictions. The
shares of Survivor Common and the shares of WRP Newco Common to be received by
Messrs. Lynford and Lowenthal on account of the 11,375 restricted shares of
Wellsford Common held by each of them will be forfeited (as to 50% on January
1, 1998 and 50% on January 1, 1999) unless the Surviving Trust achieves on a
consolidated basis a minimum 5% increase in funds from operations per share
for the twelve-month period ending on the December 31 immediately preceding
the applicable vesting date over FFO per share for the preceding twelve-month
period. The portions of the restricted share grants issued to Messrs.
MacKenzie and Hughes that remain subject to forfeiture will become fully
vested at the Effective Time. Accordingly, 2,843 shares of Wellsford Common
will vest upon the Merger for each of Messrs. MacKenzie and Hughes, which
shares will participate in the Distribution and the Merger.

69
<PAGE>

E. Tax Payments. Pursuant to the existing employment agreements with the key
executives of Wellsford, in connection with the Merger the Surviving Trust
will pay on behalf of Messrs. Lynford, Lowenthal, Kelley, MacKenzie, Hughes
and Strong approximately $2.6 million, $2.4 million, $420,000, $1.0 million,
$1.1 million and $500,000, respectively, on account of the Federal, state and
local income and excise tax liabilities to the Internal Revenue Service and
the various state and local tax authorities. These payments are based on an
estimated value of Wellsford Common at the Effective Time of $27.50 per share
and will be adjusted based upon the actual value of Wellsford Common at the
Effective Time.

F. Wellsford Options. Over the years, the key executives of Wellsford have
been granted share options in connection with services previously rendered by
them. The treatment of both the vested options and the nonvested options are
described below.

(a) Vested Options.

All vested options (both incentive share options and nonqualified options)
held by Messrs. Lynford, Lowenthal, Kelley, Hughes and Strong were exercised
prior to the Merger by tendering existing shares of Wellsford Common in
payment of the exercise price. The tendered shares of Wellsford Common were
valued at $27.50 per share for purposes of payment of the exercise price
regardless of their actual value on the date of exercise, and will be
accounted for as a cost of the Merger. Pursuant to existing agreements, each
executive officer that exercised a vested option was granted a new option to
purchase additional shares of Wellsford Common at $27.50 per share (a "Reload
Option"). These Reload Options issued to Messrs. Lynford, Lowenthal, Kelley,
Hughes and Strong will be assumed by WRP Newco and amended, thereby becoming
options to purchase WRP Newco Common, as more fully described in (c) below.

(b) Nonvested Options.

The nonvested portion of each Wellsford option held by Messrs. Lynford,
Lowenthal, Hughes and Strong will be assumed by WRP Newco and amended thereby
becoming an option to purchase WRP Newco Common, as more fully described in
(c) below.

For each of Messrs. Lynford, Lowenthal, Kelley, Hughes and Strong, WRP Newco
will assume and amend their Wellsford nonvested options (other than Mr.
Kelley) and Reload Options so that they become options to purchase WRP Newco
Common. With respect to Wellsford nonvested nonqualified options and Reload
Options, the number of WRP Newco nonqualified options will be calculated by
dividing the value of such Wellsford options by the value of the option to
purchase one share of WRP Newco Common. Reload Options will be valued using an
exercise price of $27.50 per share. The exercise price of each WRP Newco
nonqualified option will be the Issuance Price (as defined under "Certain
Agreements between WRP Newco and ERP Operating Partnership--Common Stock and
Preferred Stock Purchase Agreement") and the term of each such WRP Newco
option will be for an initial term of six years with a four year extension if
the optionee is employed by WRP Newco at the end of four years. These options
will become exercisable as follows: 25% after two years, an additional 25%
after three years, an additional 25% after four years and the remaining 25%
after five years from the date of the Merger. All options will be valued using
a mathematical option pricing formula that incorporates certain assumptions,
including an estimated value of the underlying shares, share option exercise
prices, the duration of the share options and the volatility of the underlying
shares (the "Option Pricing Formula"). Based on the foregoing, the total
number of shares of WRP Newco Common subject to options with respect to
Wellsford nonvested options (other than Mr. Kelley) and Reload Options assumed
by WRP Newco will be approximately as follows: 427,534, 427,534, 162,049,
78,410 and 24,159, for Messrs. Lynford, Lowenthal, Kelley, Hughes and Strong,
respectively. These amounts will be adjusted based upon the actual value of
Wellsford Common (and the actual value of the Wellsford options assumed by WRP
Newco) at the Effective Time.

The nonvested incentive share options held by Messrs. Lynford, Lowenthal,
Hughes and Strong will also be assumed by WRP Newco and amended to become WRP
Newco incentive stock options. These amended options will continue to be
nonvested incentive stock options just as they were before the Merger and will
maintain the same vesting schedule as the Wellsford incentive share options
assumed. These WRP Newco nonvested incentive stock options will reflect the
inherent value of, and have a term equal to the remaining term of, the
Wellsford incentive share options assumed, as required by Treasury Regulation
Section 1.425-1(a). Based on the foregoing, the total number of shares of WRP
Newco Common subject to options with respect to Wellsford nonvested incentive
share options assumed by WRP Newco will be approximately as follows: 25,171,
25,171, 24,195, and 16,467 for Messrs. Lynford, Lowenthal, Hughes and Strong,
respectively.

G. Options Held by Trustees. Outstanding options of Wellsford held by
persons whose benefits are not described above will vest at the Effective Time
and each such optionee will have the right to continue their option subject to
adjustment for

70
<PAGE>

the Exchange Rate or the right to relinquish all option rights in exchange for
a cash payment of $27.50 per share for each option relinquished less the
exercise price per share. All existing options to purchase Wellsford Common
granted to the non-employee Trustees of Wellsford (other than Mr. Du Bois)
will be assumed by WRP Newco and amended thereby becoming options to purchase
WRP Newco Common. The number of options to purchase WRP Newco Common will be
calculated by dividing the value of each Trustee's existing options to
purchase Wellsford Common by the value of the option to purchase one share of
WRP Newco Common. The options to purchase WRP Newco Common will be exercisable
immediately, and will have an initial term of six years (regardless of whether
or not the optionee remains a director of WRP Newco) with a four-year
extension if the optionee is a trustee or director of WRP Newco at the end of
four years. The exercise price of the options to purchase WRP Newco Common
shall be the Issuance Price. All options will be valued using the Option
Pricing Formula. Options to purchase 15,000 shares of Wellsford Common have
been previously granted to each of Messrs. Germain, Hoenemeyer and Sixt,
respectively. These options will be assumed by WRP Newco and amended to become
options to purchase approximately 38,515, 38,515 and 38,515 shares of WRP
Newco Common, respectively, at the Effective Time, assuming a fair market
value of Wellsford Common of $29.75 per share at the Effective Time. Options
to purchase 15,000 shares of Wellsford Common previously held by Mr. Du Bois
have been exercised by paying the exercise price.

AGREEMENTS WITH THE SURVIVING TRUST AND ERP OPERATING PARTNERSHIP

Consulting Agreements. Messrs. Lynford and Lowenthal will each execute a
consulting agreement with ERP Operating Partnership. The consulting agreements
will each be for a term of five years from the Effective Time. Pursuant to the
consulting agreements each of Messrs. Lynford and Lowenthal will serve as a
senior management consultant to ERP Operating Partnership and, in all events,
will receive compensation at the rate of $200,000 per year plus reimbursement
for reasonable out-of-pocket expenses.

Appointment to Board of Trustees of Surviving Trust. At or shortly after the
Effective Time, each of Messrs. Lynford and Lowenthal will be appointed to the
Board of Trustees of the Surviving Trust for a term ending at the annual
meeting of the Surviving Trust in the year 1997. EQR has agreed to cause
Messrs. Lynford and Lowenthal to be nominated for election as trustees at the
1997 annual meeting of the Surviving Trust for a term ending at the annual
meeting of the Surviving Trust in the year 2000.

Indemnification. The Surviving Trust will indemnify each trustee and officer
of Wellsford to the same extent after the Effective Time as such individuals
were indemnified by Wellsford prior to the Effective Time.

Severance and Retention Benefits. As of the Effective Time, the Surviving
Trust will adopt a severance and retention program (the "Retention Program")
for specified employees of Wellsford who are not officers. The aggregate
obligations of the Surviving Trust under the Retention Program will not exceed
$544,575. Pursuant to the Retention Program, any employee who stays for 6
months after the Effective Time or is terminated without cause by the
Surviving Trust will be entitled to a bonus in a specified amount. The
Retention Program will not require the Surviving Trust to continue the
employment of any employee of Wellsford after the Effective Time.

Senior Officer. Mr. MacKenzie will be a Senior Vice President of the
Surviving Trust at an initial salary of $175,000 per annum. Under his proposed
employment arrangement, on the Effective Date, Mr. MacKenzie intends to
exchange all rights under all of his existing Wellsford options for an option
to purchase 52,903 shares of Survivor Common . These options will be fully
vested on the date of issuance and will have an exercise price equal to the
fair market value of Survivor Common on the date of issuance. In addition, on
the Effective Date Mr. MacKenzie will receive an option to purchase 35,000
shares of Survivor Common. These options will vest over a period of three
years and will have an exercise price equal to the fair market value of
Survivor Common on the date of the grant. Mr. MacKenzie will also receive on
the Effective Date an option to purchase an additional number of shares of
Survivor Common which will be calculated by multiplying (i) the difference in
value, if any, between a share of EQR Common on the date of his initial
agreement to work for EQR (February 7, 1997) and a share of Survivor Common on
the date of the grant by (ii) 87,903, and then dividing the resulting number
by eight. These additional options will vest over three years and will have an
exercise price equal to the fair market value of Survivor Common on the date
of the grant.

AGREEMENTS WITH WRP NEWCO

Employment Agreements. WRP Newco will enter into employment agreements as of
the Effective Time with Messrs. Lynford and Lowenthal, which will expire on
December 31, 2002 and will provide for cash compensation to be paid to each of
them of $275,000 per annum. WRP Newco will also enter into employment
agreements as of the Effective Time with Messrs. Hughes and Strong, which will
expire two years after the Effective Time, and will provide for annual cash

71
<PAGE>

compensation to be paid to each of them of $175,000 and $125,000,
respectively. Each of Messrs. Lynford, Lowenthal, Hughes and Strong are also
entitled to incentive compensation as determined by the Compensation
Committee. In addition, Mr. Hughes is entitled to incentive compensation equal
to at least 50% of his annual base salary. See "Management of WRP Newco--
Employment Agreements."

Split Dollar Life Insurance. The existing split dollar life insurance
arrangements between Wellsford and Messrs. Lynford and Lowenthal will be
assumed by WRP Newco.

Consultant. Upon completion of the Merger, William Cockrum, a consultant to
Wellsford, will receive a consulting fee of $500,000, payable $250,000 in cash
and $250,000 by the issuance of shares of WRP Newco Common.

New Options. In addition to the stock options in WRP Newco Common referred
to in "--Benefits to Key Executives," immediately following the Distribution
and Merger, WRP Newco intends to grant new stock options to purchase shares of
WRP Newco Common to WRP Newco's non-employee directors and certain executive
officers. WRP Newco intends to grant options to purchase 42,750 shares of WRP
Newco Common to each of Messrs. Du Bois, Germain, Hoenemeyer and Sixt, options
to purchase 21,375 shares of WRP Newco Common to Mr. Crocker, and options to
purchase 85,500 shares of WRP Newco Common to each of Messrs. Lynford,
Lowenthal, Hughes and Strong.

SURVIVING TRUST

SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

The following tables set forth the selected unaudited pro forma combined
financial data for the Surviving Trust as a combined entity, giving effect to
the Merger as if it had occurred on the dates indicated herein, after giving
effect to the pro forma adjustments described in the notes to the unaudited
pro forma financial statements included elsewhere in the Joint Proxy
Statement/Prospectus/Information Statement.

The selected unaudited pro forma combined operating data are presented as if
the Merger had been consummated at the beginning of the period presented.

The selected unaudited pro forma combined balance sheet data is presented as
if the Merger had occurred on December 31, 1996. The Merger has been accounted
for under the purchase method of accounting in accordance with the Accounting
Principles Board Opinion No. 16. In the opinion of management, all significant
adjustments necessary to reflect the effects of the Merger have been made.

The selected pro forma financial information should be read in conjunction
with, and is qualified in its entirety by, the respective historical audited
financial statements and notes thereto of EQR and Wellsford incorporated by
reference into this Joint Proxy Statement/Prospectus/Information Statement and
the unaudited pro forma financial statements and notes thereto included
elsewhere in the Joint Proxy Statement/Prospectus/Information Statement.

The selected unaudited pro forma operating and balance sheet data are
presented for comparative purposes only and are not necessarily indicative of
what the actual combined results of EQR and Wellsford would have been for the
period and dates presented. Nor does such data purport to represent the
results of future periods.

72
<PAGE>

SURVIVING TRUST

OPERATING DATA:

73
<PAGE>

EQUITY RESIDENTIAL PROPERTIES TRUST

SELECTED HISTORICAL AND COMBINED FINANCIAL DATA

The following tables set forth selected historical and combined financial
data for EQR. The selected historical combined financial data for each of the
years ended December 31, 1992, 1993, 1994, 1995 and 1996 are derived from the
audited financial statements of EQR as reported in its Annual Reports on Form
10-K. The selected historical financial data should be read in conjunction
with, and is qualified in its entirety by, the historical and combined
financial statements and notes thereto of EQR incorporated by reference into
this Joint Proxy Statement/Prospectus/Information Statement.

74
<PAGE>

EQUITY RESIDENTIAL PROPERTIES TRUST

CONSOLIDATED AND COMBINED HISTORICAL FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
REVENUES
Rental income......... $ 454,412 $ 373,919 $ 220,727 $104,388 $ 86,597
Fee and asset
management........... 6,749 7,030 4,739 4,651 4,215
Interest income-
investment in
mortgage notes....... 12,819 4,862 -- -- --
Interest and other
income............... 4,405 4,573 5,568 3,031 2,161
---------- ---------- ---------- -------- ---------
Total revenues.... 478,385 390,384 231,034 112,070 92,973
---------- ---------- ---------- -------- ---------
EXPENSES
Property and
maintenance.......... 127,172 112,186 66,534 35,324 30,680
Real estate taxes and
insurance............ 44,128 37,002 23,028 11,403 10,274
Property management... 17,512 15,213 10,249 4,938 2,912
Property management--
non-recurring........ -- -- 879 -- --
Fee and asset
management........... 3,837 3,887 2,056 2,242 2,403
Depreciation.......... 93,253 72,410 37,273 15,384 13,442
Interest:
Expense incurred.... 81,351 78,375 37,044 26,042 31,926
Amortization of
deferred financing
costs.............. 4,242 3,444 1,930 3,322 2,702
Refinancing costs..... -- -- -- 3,284 --
General and
administrative....... 9,857 8,129 6,053 1,994 1,915
---------- ---------- ---------- -------- ---------
Total expenses.... 381,352 330,646 185,046 103,933 96,254
---------- ---------- ---------- -------- ---------
Income (loss) before
gain on disposition of
properties,
extraordinary items and
allocation to Minority
Interests.............. 97,033 59,738 45,988 8,137 (3,281)
Gain on disposition of
properties............. 22,402 21,617 -- -- --
---------- ---------- ---------- -------- ---------
Income (loss) before
extraordinary items and
allocation to Minority
Interests.............. 119,435 81,355 45,988 8,137 (3,281)
Extraordinary Items:
Write-off of unamortized
costs on refinanced
debt................... (3,512) -- -- -- --
Gain on early
extinguishment of debt. -- 2,000 -- -- --
Gain on discharge of
indebtedness........... -- -- -- 1,792 18,203
---------- ---------- ---------- -------- ---------
Income before allocation
to Minority Interests.. 115,923 83,355 45,988 9,929 14,922
Income allocated to
Minority Interests..... (14,299) (15,636) (11,570) (3,834) --
---------- ---------- ---------- -------- ---------
Net income.............. 101,624 67,719 34,418 6,095 14,922
Preferred distributions. (29,015) (10,109) -- -- --
---------- ---------- ---------- -------- ---------
Net income available for
Common Shares.......... $ 72,609 $ 57,610 $ 34,418 $ 6,095 $ 14,922
========== ========== ========== ======== =========
Net income per weighted
average Common Share
outstanding............ $ 1.70 $ 1.68 $ 1.34 $ .42 --
Weighted average Common
Shares outstanding..... 42,586 34,358 25,621 14,601 --
BALANCE SHEET DATA (AT
END OF PERIOD):
Real estate, after
accumulated
depreciation......... $2,983,510 $2,186,636 $1,963,476 $634,577 $ 358,212
Real estate, after
accumulated
depreciation......... $2,681,998 $1,969,453 $1,770,735 $478,210 $ 218,825
Total assets.......... $2,986,127 $2,141,260 $1,847,685 $535,914 $ 238,878
Total debt............ $1,254,274 $1,002,219 $ 994,746 $278,642 $ 343,282
Minority Interests.... $ 150,637 $ 168,963 $ 177,438 $ 83,159 $ --
Shareholders' Equity
(Net Deficit)........ $1,458,830 $ 884,517 $ 609,936 $146,485 $(122,094)
</TABLE>

75
<PAGE>

WELLSFORD RESIDENTIAL PROPERTY TRUST

SELECTED HISTORICAL FINANCIAL DATA

The following tables set forth selected historical financial data for
Wellsford. The selected historical financial data for each of the years ended
December 31, 1992, 1993, 1994, 1995 and 1996 are derived from the audited
financial statements of Wellsford as reported in its Annual Reports on Form
10-K. The selected historical financial data should be read in conjunction
with, and is qualified in its entirety by, the historical financial statements
and notes thereto of Wellsford incorporated by reference into this Joint Proxy
Statement/Prospectus/Information Statement. Certain reclassifications have
been made to Wellsford's historical financial data to conform to EQR's
presentation.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
HISTORICAL (000S EXCEPT PER SHARE DATA)
--------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues................... $ 131,821 $ 131,232 $ 82,794 $ 42,007 $ 26,229
Expenses................... (109,035) (113,712) (73,299) (34,816) (26,991)
Gain (loss) on sale of
investment communities.... (66) (819) -- 882 --
Loss on joint venture
communities............... (58) (279) -- -- --
--------- --------- -------- -------- --------
Income (loss) before
extraordinary item........ $ 22,662 $ 16,422 $ 9,495 $ 8,073 $ (762)
========= ========= ======== ======== ========
Net income (loss).......... $ 22,662 $ 10,869 $ 9,495 $ 8,073 $ (762)
Preferred dividends........ (12,548) (8,973) (7,000) (972) --
--------- --------- -------- -------- --------
Net income (loss) available
for common shareholders... $ 10,114 $ 1,896 $ 2,495 $ 7,101 $ (762)
========= ========= ======== ======== ========
Net income (loss) per
common share.............. $ 0.59 $ 0.11 $ 0.25 $ 0.91 $ (0.34)
========= ========= ======== ======== ========
Weighted average number of
common shares outstanding. 17,057 16,938 10,070 7,813 2,273
========= ========= ======== ======== ========
Real Estate assets before
accumulated depreciation.. $ 795,580 $ 736,399 $747,519 $301,389 $156,568
Real estate assets after
accumulated depreciation.. 711,614 677,908 712,742 282,224 143,787
Total Assets............... 756,289 729,638 745,754 322,400 165,963
Mortgages Payable.......... 82,731 77,137 208,858 24,203 17,155
Convertible note payable... -- -- -- 46,070 55,358
Unsecured credit facility.. 18,075 -- 140,000 -- --
Senior unsecured notes..... 248,496 223,307 -- -- --
Shareholders' equity....... 376,686 398,359 371,655 239,775 89,986
Cash dividends declared per
Series A preferred share.. $ 1.75 $ 1.75 $ 1.75 $ 0.24 $ --
========= ========= ======== ======== ========
Cash dividends declared per
Series B preferred share.. $ 2.41 $ 0.86 $ -- $ -- $ --
========= ========= ======== ======== ========
Cash dividends declared per
common share.............. $ 1.94 $ 1.92 $ 1.80 $ 1.68 $ 0.16
========= ========= ======== ======== ========
</TABLE>

76
<PAGE>

SURVIVING TRUST

BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET

AS OF DECEMBER 31, 1996

The Unaudited Pro Forma Combined Balance Sheet gives effect to the proposed
Merger of Equity Residential Properties Trust ("EQR") and Wellsford
Residential Property Trust ("Wellsford") as if the Merger had occurred on
December 31, 1996. The Unaudited Pro Forma Combined Balance Sheet gives effect
to the Merger under the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16. In the opinion of management, all
significant adjustments necessary to reflect the effects of the Merger have
been made.

The Unaudited Pro Forma Combined Balance Sheet is presented for comparative
purposes only and is not necessarily indicative of what the actual combined
financial position of EQR and Wellsford would have been at December 31, 1996,
nor does it purport to represent the future combined financial position of EQR
and Wellsford. This Unaudited Pro Forma Combined Balance Sheet should be read
in conjunction with, and is qualified in its entirety by, the respective
historical financial statements and notes thereto of EQR and Wellsford
incorporated by reference into the Joint Proxy
Statement/Prospectus/Information Statement.

77
<PAGE>

SURVIVING TRUST

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA SURVIVING TRUST
EQR WRP MERGER PRO FORMA
HISTORICAL HISTORICAL(A) ADJUSTMENTS(B) COMBINED
---------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Rental property, net.... $2,681,998 $689,403 $336,909 (C) $3,708,310
Construction in
progress............... -- 22,211 (21,306)(D) 905
Investment in mortgage
notes, net............. 86,596 17,800 (17,800)(E) 86,596
Cash and cash
equivalents............ 147,271 10,811 (67,112)(F) 90,970
Rents receivables....... 1,450 -- -- 1,450
Deposits-restricted..... 20,637 7,667 (5,520)(G) 22,784
Escrows deposits-
mortgage............... 15,434 -- -- 15,434
Deferred financing
costs, net............. 14,555 5,401 (5,401)(H) 14,555
Other assets............ 18,186 2,996 6,296 (I) 27,478
---------- -------- -------- ----------
Total assets.......... $2,986,127 $756,289 $226,066 $3,968,482
========== ======== ======== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable.. $ 755,434 $ 82,731 $ (8,632)(J) $ 829,533
Line of credit.......... -- 18,075 (18,075)(K) --
Notes, net.............. 498,840 248,496 -- 747,336
Accounts payable and
accrued expenses....... 33,117 15,617 -- 48,734
Accrued interest
payable................ 12,737 -- -- 12,737
Due to affiliates....... 628 -- -- 628
Rents received in
advance and other
liabilities............ 15,838 -- -- 15,838
Security deposits....... 14,128 3,250 -- 17,378
Distributions payable... 45,938 11,434 -- 57,372
---------- -------- -------- ----------
Total liabilities..... 1,376,660 379,603 (26,707) 1,729,556
---------- -------- -------- ----------
Commitments and
contingencies (L)
Minority Interests...... 150,637 -- 40,156 (M) 190,793 (M)
---------- -------- -------- ----------
Shareholders' equity:
Common shares......... 512 171 (64)(N) 619
Preferred shares...... 393,000 63 (63)(O) 393,000
Series D Convertible
Preferred Shares..... -- -- 99,995 (O) 99,995
Series E Preferred
Shares............... -- -- 57,500 (O) 57,500
Employee notes........ (5,255) (6,553) 6,553 (P) (5,255)
Paid in capital....... 1,146,989 461,290 (29,589)(Q) 1,578,690
Distributions in
excess of accumulated
earnings............. (76,416) (78,285) 78,285 (R) (76,416)
---------- -------- -------- ----------
Total Shareholders'
Equity............. 1,458,830 376,686 212,617 2,048,133
---------- -------- -------- ----------
Total liabilities
and shareholders'
equity............. $2,986,127 $756,289 $226,066 $3,968,482
========== ======== ======== ==========
</TABLE>

78
<PAGE>

SURVIVING TRUST

BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1996

The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1996 is presented as if the Merger had occurred on January 1,
1996. The Unaudited Pro Forma Combined Statement of Operations gives effect to
the Merger under the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16, and the combined entity qualifying
as a REIT, distributing at least 95% of its taxable income, and therefore,
incurring no federal income tax liability for the year. In the opinion of
management, all significant adjustments necessary to reflect the effects of
these transactions have been made.

The Unaudited Pro Forma Combined Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the actual
combined results of EQR and Wellsford would have been for the year ended
December 31, 1996, nor does it purport to be indicative of the results of
operations in future periods. The Unaudited Pro Forma Combined Statement of
Operations should be read in conjunction with, and are qualified in their
entirety by, the respective historical financial statements and notes thereto
of EQR and Wellsford incorporated by reference into this Joint Proxy
Statement/Prospectus/Information Statement.

79
<PAGE>

SURVIVING TRUST

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SURVIVING
TRUST
EQR WELLSFORD MERGER PRO FORMA
HISTORICAL HISTORICAL(S) ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES
Rental Income................ $454,412 $124,408 $ (757)(T) $578,820
Fee and asset management..... 6,749 -- 6,749
Interest income-investment in
mortgage notes.............. 12,819 757 12,819
Interest and other income.... 4,405 6,656 11,061
-------- -------- ------- --------
Total revenues............. 478,385 131,821 (757) 609,449
-------- -------- ------- --------
EXPENSES
Property and maintenance..... 127,172 40,354 167,526
Real estate taxes and
insurance................... 44,128 9,882 54,010
Property management.......... 17,512 4,770 (776)(U) 21,506
Fee and asset management..... 3,837 -- 3,837
Depreciation................. 93,253 25,179 5,779 (V) 124,211
Interest:
Expense incurred........... 81,351 23,599 (1,412)(W) 103,538
Amortization of deferred
financing costs........... 4,242 1,386 (1,386)(X) 4,242
General and administrative... 9,857 3,865 (3,369)(Y) 10,353
-------- -------- ------- --------
Total expenses............. 381,352 109,035 (1,164) 489,223
-------- -------- ------- --------
Income before gain on
disposition of properties,
(loss) on joint venture
communities, extraordinary
items and allocation to
Minority Interests.......... 97,033 22,786 407 120,226
Gain (loss) on disposition
of properties............. 22,402 (66) -- 22,336
(Loss) on joint venture
communities............... -- (58) -- (58)
-------- -------- ------- --------
Income before extraordinary
items....................... 119,435 22,662 407 142,504
Extraordinary item:
Write-off of unamortized
costs on refinanced debt.. (3,512) -- -- (3,512)
-------- -------- ------- --------
Income before allocation to
Minority Interests.......... 115,923 22,662 407 138,992
(Income) allocated to
Minority Interests........ (14,299) -- (1,407)(Z) (15,706)
-------- -------- ------- --------
Net income................... 101,624 22,662 (1,000) 123,286
Preferred distributions...... (29,015) (12,548) (41,563)
-------- -------- ------- --------
Net income available to
common shares............... $ 72,609 $ 10,114 $(1,000) $ 81,723
======== ======== ======= ========
Net income per weighted
average Common Shares
outstanding................. $ 1.70 $ 0.59 $ 0.16 $ 1.53
======== ======== ======= ========
Weighted average Common
Shares Outstanding.......... 42,586 17,057 (6,326)(AA) 53,317
======== ======== ======= ========
</TABLE>

80
<PAGE>

SURVIVING TRUST

NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

(A) Certain reclassifications have been made to Wellsford's historical balance
sheet to conform to EQR's balance sheet presentation.

(B) Represents adjustments to record the Merger in accordance with the
purchase method of accounting, based upon the assumed purchase price of
$1,032,226 assuming a market value of $44.00 per share of EQR's common
shares, as follows:

<TABLE>
<S> <C>
Issuance of 10,731 common shares of beneficial interest of
EQR, based on the .625 exchange rate, in exchange for 17,169
common shares of Wellsford, which includes 67 common shares
of Wellsford issued immediately prior to the merger.......... $ 472,164
Issuance of EQR Series D Preferred Shares of Beneficial
Interest..................................................... 99,995
Issuance of EQR Series E Preferred Shares of Beneficial
Interest..................................................... 57,500
Assumption of Wellsford's liabilities, net of spin-off to WRP
Newco of $6,786.............................................. 372,817
Adjustment to increase the assumed Wellsford debt to its fair
value (see Note J)........................................... 6,123
Merger costs (see calculation below).......................... 23,627
----------
$1,032,226
==========
</TABLE>

The value of the issuance of the EQR Series D Preferred Shares of Beneficial
Interest and the EQR Series E Preferred Shares of Beneficial Interest is based
upon Wellsford's outstanding shares of 3,999.8 Series A Convertible Preferred
Shares with a liquidation preference at $25 per share and Wellsford's
outstanding shares of 2,300 Series B Preferred Shares with a liquidation
preference at $25 per share, respectively.

The following is a calculation of the estimated fees and other expenses
related to the Merger:

<TABLE>
<S> <C>
Employee termination costs......................................... $10,063
Buyout of stock options............................................ 4,227
Advisory fees...................................................... 2,350
Legal and accounting fees.......................................... 2,225
Consulting contracts............................................... 2,000
Other, including printing, filing, transfer and spin-off costs..... 2,762
-------
Total............................................................ $23,627
=======
</TABLE>

(C) Represents the estimated increase in Wellsford's rental property, net
based upon EQR's purchase price and the adjustment to eliminate the basis
of Wellsford's net assets acquired:

<TABLE>
<S> <C>
Purchase Price (see Note B).................................... $1,032,226
Less: Historical basis of Wellsford's net assets acquired
Rental property, net........................................... 689,403
Construction in progress, net of spin-off to WRP Newco of
$21,306....................................................... 905
Restricted deposits, net of spin-off to WRP Newco of $5,520.... 2,147
Other assets, net of spin-off to WRP Newco of $134............. 2,862
----------
Step-up to record fair value of Wellsford rental property...... $ 336,909
==========
</TABLE>

(D) Decrease reflects the spin-off of costs related to the Palomino Park
project to WRP Newco.

(E) Decrease results from the spin-off of the Sonterra mortgage notes
receivable to WRP Newco.

(F) Decrease to Cash and Cash Equivalents reflects the following:

<TABLE>
<S> <C>
Spin-off of WRP Newco, including an investment of $2,930 for EQR's
20% interest in the Palomino Park project (see Note I)........... $21,710
The expected payment for Merger (see Note B) and registration
costs (see Note Q)............................................... 23,827
Repayment of Wellsford's line of credit........................... 18,075
EQR's purchase of WRP Newco common stock.......................... 3,500
-------
$67,112
=======
</TABLE>

81
<PAGE>

SURVIVING TRUST

NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

(G) Decrease results from the spin-off of restricted cash to WRP Newco for the
Palomino Park project.

(H) Decrease due to elimination of Wellsford deferred loan costs in connection
with the Merger.

(I) Increase to Other Assets reflects the following:

<TABLE>
<S> <C>
EQR purchase of WRP Newco common stock............................ $3,500
EQR's 20% investment in the Palomino Park project................. 2,930
Spin-off to WRP Newco of interest receivable related to the
Sonterra mortgage notes receivable............................... (134)
------
$6,296
======
</TABLE>

(J) Decrease to Mortgage Notes Payable reflects the following:

<TABLE>
<S> <C>
Spin-off of bonds on the Palomino Park project to WRP Newco...... $14,755
Premium required to adjust Wellsford's debt to its estimated fair
value........................................................... (6,123)
-------
$ 8,632
=======
</TABLE>

(K) Reflects the repayment of Wellsford's line of credit from EQR's cash
balances. It is assumed that additional Wellsford borrowings of $7,969
that would be incurred in connection with the spin-off of WRP Newco are
repaid from EQR's cash balances.

(L) ERP Operating Partnership has committed to acquire up to 1,000 shares of
WRP Newco Series A 8% Convertible Redeemable Preferred Stock; has provided
stand-by obligations with respect to a $36,800 agreement with respect to
the construction financing of Phase I of Palomino Park and $30,000
pursuant to an agreement expected to be entered into with respect to the
construction financing for Phase II of Palomino Park; and a $14,800 credit
enhancement with respect to bonds issued to finance certain public
improvements at Palomino Park.

(M) The pro forma allocation to the Minority Interests is based upon the
percentage owned by such Minority Interests as follows:

<TABLE>
<S> <C>
Total Shareholders' Equity and Minority Interests............. $2,238,926
Less: Preferred Shares, Series D Convertible and Series E
Preferred shares............................................. (550,495)
----------
1,688,431
Minority Interests percentage ownership in ERP Operating
Partnership (see Note Q)..................................... 11.3%
----------
Pro Forma Combined Minority Interests ownership in ERP
Operating Partnerships....................................... 190,793
EQR historical Minority Interests ownership in ERP Operating
Partnership.................................................. 150,637
----------
Adjustment to Minority Interests ownership in ERP Operating
Partnership.................................................. $ 40,156
==========
</TABLE>

(N) Decrease results from elimination of Wellsford common shares at $.01 par
value ($171) net of the issuance of EQR common shares at $.01 par value
$107 (see Note C).

(O) Elimination of $63 of Wellsford Preferred Shares and the issuance of
$99,995 of EQR Series D Convertible Preferred Shares and of $57,500 of EQR
Series E Preferred Shares (see Note C).

(P) Reflects the elimination of restricted stock and the forgiveness of all of
Wellsford's employee notes as a result of the Merger.

82
<PAGE>

SURVIVING TRUST

NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(Q) Decrease to paid in capital to reflect the following:

<TABLE>
<S> <C> <C>
Issuance of
10,731 EQR
common shares
at $44.00 per
share......... $ 472,164
Par value of
common shares
issued........ (107)
Registration
costs incurred
in connection
with the
Merger........ (200)
Wellsford's
historical
shareholders'
equity........ (461,290)
Adjustment to
Minority
Interests
ownership in
ERP Operating
Partnership
(see Note M).. (40,156)
---------
$ (29,589)
=========
</TABLE>

The 11.3% Minority Interests ownership in EQR, is calculated as follows:

<TABLE>
<CAPTION>
SHARES UNITS
------ ------
<S> <C> <C>
Wellsford's historical Shares outstanding.................. 17,169 --
====== ======
EQR's Shares/Units to be issued based on the .625 Merger
exchange ratio............................................ 10,731 10,731
EQR's historical Shares/Units outstanding.................. 51,155 59,013
------ ------
EQR's proforma Shares/Units outstanding.................... 61,886 69,744
====== ======
EQR ownership percentage of ERP Operating Partnership...... 88.7%
======
Minority Interests ownership percentage of ERP Operating
Partnership............................................... 11.3%
======
</TABLE>

(R) Reflects the elimination of Wellsford's distribution in excess of
accumulated earnings to paid in capital, as a result of the Merger.

83
<PAGE>

SURVIVING TRUST

NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(S) Certain reclassifications have been made to Wellsford's Historical
Statement of Operations to conform to EQR's Statement of Operations
presentation.

(T) Decrease results from the loss of interest income related to the spin-off
of the $17,800 Sonterra mortgage notes receivable to WRP Newco.

(U) Decrease results from operating efficiencies expected to occur as a
result of the Merger.

(V) Represents the net increase in depreciation of real estate owned as a
result of recording the Wellsford real estate assets at fair value versus
historical cost. Depreciation is computed on a straight-line basis over
the estimated useful lives of the related assets which have a useful life
of approximately 30 years.

The calculation of the fair value of depreciable real estate assets at
December 31, 1996 is as follows:

<TABLE>
<S> <C>
Historical basis of Wellsford's rental property.............. $ 689,403
Plus: Step up to Wellsford's rental property, net (see Note
C).......................................................... 336,909
----------
Pro forma basis of Wellsford's rental property at fair value. 1,026,312
Less: Fair value allocated to land........................... (102,631)
----------
Pro forma basis of Wellsford's depreciable rental property at
fair value.................................................. $ 923,681
==========
</TABLE>

Calculation of depreciation of rental property for the year ended December 31,
1996 is as follows:

<TABLE>
<S> <C>
Depreciation expense based upon an estimated useful life of
approximately 30 years....................................... $ 30,789
Less: historic Wellsford depreciation of rental property...... (25,010)
--------
Pro forma adjustment.......................................... $ 5,779
========
</TABLE>

(W) Decrease results from the amortization of the premium required to record
Wellsford's debt at it's estimated fair value.

(X) Decrease results from the elimination of amortization of Wellsford's
deferred financing costs, which costs would be eliminated in connection
with the Merger.

(Y) Decrease results from identified historic costs of certain items which
are anticipated to be eliminated or reduced as a result of the Merger as
follows:

<TABLE>
<S> <C>
Duplication of public company expenses............................ $ 626
Net reduction in salary, benefits and occupancy................... 1,732
Other............................................................. 1,011
------
Total........................................................... $3,369
======
</TABLE>

(Z) A portion of income was allocated to Minority Interests representing
interests in ERP Operating Partnership not owned by EQR. The pro forma
allocation to Minority Interests (represented by OP Units) is based upon
the percentage estimated to be owned by such Minority Interests as a
result of the pro forma transactions.

(AA) Decrease of Weighted Average Common Shares Outstanding based on the
conversion of Wellsford common shares to EQR common shares at a
conversion ratio of .625 Wellsford shares per EQR share and a par value
of $.01.

84
<PAGE>

POLICIES OF THE SURVIVING TRUST WITH RESPECT TO CERTAIN ACTIVITIES

The following section sets forth the policies expected to be implemented by
the Surviving Trust upon the effectiveness of the Merger with respect to
certain matters. These policies may be amended or revised from time to time at
the discretion of the Board of Trustees of the Surviving Trust without a vote
of the shareholders of the Surviving Trust.

BUSINESS OBJECTIVES AND OPERATING STRATEGIES

The Surviving Trust will seek to maximize both current income and long-term
growth in income. The Surviving Trust will focus on acquiring multifamily
properties that have strong cash flow potential with the intent to hold such
properties for long-term investment and capital appreciation.

The Surviving Trust's primary business objectives are to increase
distributions on a per share of Survivor Common basis, to increase the value
of its properties and to increase shareholders' value.

The Surviving Trust's strategies for accomplishing these objectives will be:

.maintaining and increasing property occupancy while increasing rental
rates;

. controlling expenses, providing regular preventive maintenance, making
periodic renovations and enhancing amenities;

.maintaining a Debt to Total Market Capitalization Ratio of less than 50%;
and

. pursuing acquisitions that: (i) are available at prices below estimated
replacement costs; (ii) have potential for rental rate and/or occupancy
increases; (iii) have attractive locations in their respective markets;
and (iv) provide anticipated total returns that will increase the
Surviving Trust's distributions per share of Survivor Common and the
Surviving Trust's overall market value.

The Surviving Trust will be committed to tenant satisfaction by striving to
anticipate industry trends and implementing strategies and policies consistent
with providing quality tenant services. In addition, the Surviving Trust will
continuously survey rental rates of competing properties and conduct
satisfaction surveys of residents to determine the factors they consider most
important in choosing a particular apartment unit.

ACQUISITION STRATEGIES

The Surviving Trust anticipates that future property acquisitions will be
located in the continental United States. Management will use market
information to evaluate acquisition opportunities. The Surviving Trust's
market data base will allow it to review the primary economic indicators of
the markets where the Surviving Trust currently manages properties and where
it expects to expand its operations. Acquisitions may be financed from various
sources of capital, which may include undistributed funds from operations,
issuance of additional equity securities, sales of properties and
collateralized and uncollateralized borrowings. In addition, the Surviving
Trust may acquire additional multifamily properties in transactions that
include the issuance of OP Units as consideration for the acquired properties.
Such transactions may, in certain circumstances, partially defer the sellers'
tax consequences.

When evaluating potential acquisitions, the Surviving Trust will consider:
(i) the geographic area and type of community; (ii) the location, construction
quality, condition and design of the property; (iii) the current and projected
cash flow of the property and the ability to increase cash flow; (iv) the
potential for capital appreciation of the property, (v) the terms of resident
leases, including the potential for rent increases; (vi) the potential for
economic growth and the tax and regulatory environment of the community in
which the property is located; (vii) the occupancy and demand by residents for
properties of a similar type in the vicinity (the overall market and
submarket); (viii) the prospects for liquidity through sale, financing or
refinancing of the property; and (ix) competition from existing multifamily
properties and the potential for the construction of new multifamily
properties in the area. The Surviving Trust expects to purchase multifamily
properties with physical and market characteristics similar to the properties.

DISPOSITION STRATEGIES

Management will use market information to evaluate dispositions. The
Surviving Trust intends to dispose of its properties in cities or markets
where the level of new construction is increasing or the economy is expected
to decline substantially. The Surviving Trust will also dispose of properties
in markets where it does not intend to establish long-term concentrations. The
Surviving Trust will reinvest the proceeds received from property dispositions
to fund property acquisitions. In addition, when feasible the Surviving Trust
will structure these transactions as tax deferred exchanges.

85
<PAGE>

INVESTMENT POLICIES

Investments in Real Estate or Interests in Real Estate. The Surviving
Trust's investment objectives will be to increase cash flow and the value of
the properties, and to acquire established income-producing multifamily
properties with cash flow growth potential. Additionally, where prudent and
possible, the Surviving Trust will seek to upgrade its existing properties and
any newly acquired multifamily properties. The Surviving Trust's business is
focused on multifamily properties, although such properties may include retail
and recreational facilities. The Surviving Trust's policy will be to acquire
assets primarily for current income generation and long-term value
appreciation; however, where appropriate, the Surviving Trust will sell
certain of its properties.

The Surviving Trust expects to pursue its investment objectives through the
direct and indirect ownership of properties and the ownership of interests in
other entities. The Surviving Trust will focus on properties in those markets
where the Surviving Trust currently has operations and in new markets targeted
by management. Future investments, including the activities described below,
will not be limited to any geographic area or to a specified percentage of the
Surviving Trust's assets. The Surviving Trust also may participate with other
entities in property ownership through joint ventures or other types of co-
ownership. Equity investments may be subject to existing mortgage financing
and other indebtedness or such financing or indebtedness may be incurred in
connection with acquiring investments. Any such financing or indebtedness will
have priority over the Surviving Trust's equity interest in such property.

Investments in Real Estate Mortgages. While the Surviving Trust will
emphasize equity real estate investments in multifamily properties, it may, in
its discretion, invest in mortgages and other interests related to multifamily
properties. The Surviving Trust does not intend to invest to a significant
extent in mortgages or deeds of trust, but may acquire mortgages as a strategy
for acquiring a property, subject to the investment restrictions applicable to
REITs. The mortgages in which the Surviving Trust may invest may be either
first mortgages or junior mortgages, and may or may not be insured by a
governmental agency. The Surviving Trust may also invest in mortgage-related
securities. Furthermore, the Surviving Trust may seek to issue securities
representing interest in such mortgage-related securities as a method of
raising additional funds.

Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. Subject to the gross income and asset tests for
REIT qualification, the Surviving Trust also may invest in securities of
entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities. The
Surviving Trust may acquire all or substantially all of the securities or
assets of other REITs or similar entities where such investments would be
consistent with the Surviving Trust's investment policies. In any event, the
Surviving Trust does not intend that its investments in securities will
require it to register as an "investment company" under the Investment
Surviving Trust Act of 1940, and the Surviving Trust would intend to divest
securities before any such registration would be required.

FINANCING POLICIES

The Surviving Trust intends to maintain a Debt to Total Market
Capitalization Ratio of 50% or less. The Surviving Trust, however, may from
time to time re-evaluate this policy and decrease or increase such ratio in
light of then current economic conditions, relative costs to the Surviving
Trust of debt and equity capital, market values of the properties, growth and
acquisition opportunities and other factors. There will be no limit on the
Surviving Trust's Debt to Total Market Capitalization Ratio imposed by the
Surviving Trust's Declaration of Trust or Bylaws. To the extent that the Board
of Trustees of the Surviving Trust determines to obtain additional capital,
the Surviving Trust may issue debt or equity securities, or cause ERP
Operating Partnership to issue additional OP Units, or retain earnings
(subject to provisions in the Code requiring distributions of income to
maintain REIT status), or a combination of these methods. As long as ERP
Operating Partnership is in existence, the proceeds of all equity capital
raised by the Surviving Trust will be contributed to ERP Operating Partnership
in exchange for additional interests in ERP Operating Partnership, which will
dilute the ownership interest of holders of OP Units. It is the Surviving
Trust's policy that it shall not incur indebtedness other than short-term
trade, employee compensation, dividends payable or similar indebtedness that
will be paid in the ordinary course of business, and that indebtedness shall
instead be incurred by the ERP Operating Partnership to the extent necessary
to fund the business activities conducted by the ERP Operating Partnership.

The Surviving Trust owns several properties that are subject to restrictive
covenants or deed restrictions relating to current or previous tax-exempt bond
financings and owns the bonds collateralized by several additional properties.
The Surviving Trust has retained an independent outside consultant to monitor
compliance with the restrictive covenants and deed restrictions that affect
these properties. The bond compliance requirements may have the effect of
limiting the Surviving Trust's income from these properties if the Surviving
Trust is required to lower its rental rates to attract low or moderate income
tenants, or eligible/qualified tenants.

86
<PAGE>

To the extent that the Board of Trustees determines to obtain debt financing
the Surviving Trust intends to do so generally through mortgages on its
properties and through lines of credit; however, the Surviving Trust may also
issue additional debt securities in the future. Such indebtedness may be
recourse, non-recourse or cross-collateralized and may contain cross-default
provisions. The Surviving Trust will not have a policy limiting the number or
amount of mortgages that may be placed on any particular property, but
mortgage financing instruments usually limit additional indebtedness on such
properties. In the future, the Surviving Trust may seek to extend, expand,
reduce or renew its lines of credit, or obtain new credit facilities or lines
of credit, subject to its general policy on debt capitalization, for the
purpose of making acquisitions or capital improvements or providing working
capital to the Surviving Trust or meeting the taxable income distribution
requirements for REITs under the Code if the Surviving Trust has taxable
income without receipt of cash sufficient to enable the Surviving Trust to
meet such distribution requirements.

LENDING POLICIES

Although it is not presently contemplated, the Surviving Trust may consider
offering purchase money financing in connection with the sale of multifamily
properties where the provision of such financing will increase the value
received by the Surviving Trust for the property sold.

POLICIES WITH RESPECT TO OTHER ACTIVITIES

Although it is not presently contemplated, the Surviving Trust may make
investments other than as previously described. All investments will be
related to the multifamily residential business. The Surviving Trust will have
authority to offer Survivor Common or other equity or debt securities in
exchange for property or other REITS and to repurchase or otherwise reacquire
Survivor Common or any other securities and may engage in such activities in
the future. Similarly, the Surviving Trust may offer additional OP Units or
other equity interests in ERP Operating Partnership that are exchangeable into
Survivor Common in exchange for property. The Surviving Trust may also make
loans to joint ventures in which it may participate in the future. The
Surviving Trust will not engage in trading, underwriting or the agency
distribution or sale of securities of other issuers. At all times, the
Surviving Trust intends to make investments in such a manner as to be
consistent with the requirements of the Code to qualify as a REIT unless,
because of circumstances or changes in the Code (or the regulations
promulgated thereunder), the Board of Trustees determines that it is no longer
in the best interests of the Surviving Trust to continue to have the Surviving
Trust qualify as a REIT. The Surviving Trust's policies with respect to such
activities may be reviewed and modified from time to time by the Surviving
Trust's trustees without notice to or the vote of the shareholders.

87
<PAGE>

MANAGEMENT AND OPERATION OF THE SURVIVING TRUST AFTER THE MERGER

TRUSTEES AND EXECUTIVE OFFICERS

The following table sets forth as of the consummation of the Merger the
names, positions and ages of the executive officers and trustees of the
Surviving Trust.

<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<C> <S> <C>
Chairman of the Board of Trustees (term expires
Samuel Zell............. in 1999) 55
President, Chief Executive Officer and Trustee
Douglas Crocker II...... (term expires in 1998) 56
Executive Vice President and Chief Financial
David J. Neithercut..... Officer 41
Gregory H. Smith........ Executive Vice President--Asset Management 46
Executive Vice President, Chief Operating
Gerald A. Spector....... Officer and Trustee (term expires in 1998) 50
Bruce C. Strohm......... Executive Vice President, General Counsel and
Secretary 42
Frederick C. Tuomi...... Executive Vice President--Property Management 42
Alan W. George.......... Executive Vice President--Acquisitions 39
Michael J. McHugh....... Senior Vice President, Chief Accounting Officer
and Treasurer 41
John W. Alexander....... Trustee (term expires in 1999) 50
Henry H. Goldberg....... Trustee (term expires in 1999) 58
Errol R. Halperin....... Trustee (term expires in 1999) 56
James D. Harper, Jr..... Trustee (term expires in 1998) 63
Sheli Z. Rosenberg...... Trustee (term expires in 1998) 55
Barry S. Sternlicht..... Trustee (term expires in 1997) 36
B. Joseph White......... Trustee (term expires in 1997) 49
Jeffrey H. Lynford...... Trustee (term expires in 1997)* 49
Edward Lowenthal........ Trustee (term expires in 1997)* 52
</TABLE>
- -------
* After the Effective Time, each of Messrs. Lynford and Lowenthal will be
appointed to the Board of Trustees of the Surviving Trust for a term ending
at the annual meeting of the Surviving Trust in the year 1997. EQR has
agreed to cause Messrs. Lynford and Lowenthal to be nominated for election
as trustees at the Surviving Trust's 1997 annual meeting for a term ending
at the annual meeting of the Surviving Trust in the year 2000.

The following is a biographical summary as of March 1, 1997 of the
experience of the executive officers and trustees of the Surviving Trust.

Samuel Zell has been Chairman of the Board of EQR since March 1993. Mr. Zell
is chairman of the board of directors of Equity Group Investments, Inc., an
owner, manager and financier of real estate and corporations ("EGI"), American
Classic Voyages Co., an owner and operator of cruise lines ("American
Classic"), and Anixter International Inc., a provider of integrated network
and cabling systems ("Anixter"). Mr. Zell is chairman of the board and chief
executive officer of both Capsure Holdings Corp., a holding company whose
principal subsidiaries are specialty property and casualty insurers
("Capsure"), and Manufactured Home Communities, Inc., a REIT specializing in
the ownership and management of manufactured home communities ("MHC"). He is
co-chairman of the board of directors of Revco D.S., Inc., a drugstore chain
("Revco"), and is a director of Quality Food Centers, Inc., an owner and
operator of supermarkets, Sealy Corporation, a bedding manufacturer ("Sealy"),
Ramco Energy PLC, an independent oil company based in the United Kingdom, and
TeleTech Holdings, Inc., a provider of telephone and computer based customer
care solutions.

Douglas Crocker II has been President, Chief Executive Officer and a Trustee
of EQR since March 1993. Mr. Crocker is a director of Horizon Group, Inc., an
owner, developer and operator of outlet retail properties. Mr. Crocker has
been president and chief executive officer of First Capital Financial
Corporation, a sponsor of public limited real estate partnerships ("First
Capital"), since December 1992 and a director since January 1993. He has been
an executive vice president of Equity Financial and Management Company
("EF&M"), a subsidiary of EGI, providing strategic direction and services for
EGI's real estate and corporate activities since November 1992. From September
1992 until November 1992, Mr. Crocker was a managing director of investment
banking with Prudential Securities, an investment banking firm. He was a
director and president of Republic Savings Bank, a national chartered savings
and loan association ("Republic"), from December 1988 to June 1992, at which
time the Resolution Trust Corporation took control of Republic.

David J. Neithercut has been Executive Vice President and Chief Financial
Officer of EQR since February 1995. Mr. Neithercut had been Vice President--
Financing of EQR from September 1993 until February 1995. Mr. Neithercut was a
senior vice president--finance of EGI from January 1995 until February 1995.
He was a vice president--finance of Equity Assets Management, Inc., a
subsidiary of EGI providing real estate ownership services ("EAM"), from
October 1990 until December 1994.

88
<PAGE>

Gregory H. Smith has been Executive Vice President--Asset Management of EQR
since December 1994. Mr. Smith was a senior vice president of Strategic Realty
Advisors, Inc., a real estate and advisory company, from January 1994 until
December 1994. Mr. Smith had been employed at VMS Realty Partners, a sponsor
of public and private real estate limited partnerships, from June 1989 until
December 1993, most recently serving as first vice president.

Gerald A. Spector has been a Trustee and Executive Vice President of EQR
since March 1993 and Chief Operating Officer of EQR since February 1995. Mr.
Spector was the Treasurer of EQR from March 1993 through February 1995.
Mr. Spector had been an officer of EF&M since January 1973, most recently
serving as vice president from November 1994 through January 1996. Mr. Spector
was executive vice president and chief operating officer of EF&M from
September 1990 through November 1994. Mr. Spector had been an officer of EGI
since January 1998, most recently serving as vice president from November 1994
through January 1996. Mr. Spector was executive vice president and chief
operating officer of EGI from January 1991 through January 1994.

Bruce C. Strohm has been Executive Vice President and General Counsel of EQR
since March 1995 and Secretary since November 1995. Mr. Strohm was an
Assistant Secretary since March 1995 and Vice President of EQR since its
formation. Mr. Strohm was a vice president of Rosenberg & Liebentritt, P.C., a
law firm ("R&L"), most recently serving as a member of the firm's management
committee.

Frederick C. Tuomi has been Executive Vice President--Property Management of
EQR since January 1994. Mr. Tuomi had been president of RAM Partners, Inc., a
subsidiary of Post Properties, Inc., a REIT, from March 1991 to January 1994.
Mr. Tuomi was president of Pilot Property Company, a property management
company, from July 1988 until March 1991.

Alan W. George has been Executive Vice President--Acquisitions of EQR since
February 1997, Senior Vice President--Acquisitions of EQR from December 1995
until February 1997 and Vice President--Acquisitions and asset manager of EQR
from December 1993 to December 1995. Mr. George was vice president-asset
management of EAM from June 1992 until August 1993. He was vice president-
asset management for American Real Estate Group, a real estate investment
company, from 1990 to 1992.

Michael J. McHugh has been Senior Vice President of EQR since November 1994
and Chief Accounting Officer and Treasurer of EQR since February 1995. From
May 1990 until January 1995, Mr. McHugh was senior vice president and chief
financial officer of First Capital.

John W. Alexander has been a Trustee of EQR since May 1993. Mr. Alexander
has been the president of Mallard Creek Capital Partners, Inc., primarily an
investment company with interests in real estate and development entities,
since February 1994. He is a partner of Meringoff Equities, a real estate
investment and development company, and is a director of Jacor Communications,
Inc., an owner and operator of radio stations ("Jacor").

Henry H. Goldberg has been a Trustee of EQR since January 1995. Mr. Goldberg
is chairman of the board, chief executive officer and founder of Artery
Properties, Inc. Founded in 1959, Artery Properties, Inc. is a diversified
real estate company. Mr. Goldberg was the direct or indirect general partner
(or an executive thereof) of seven partnerships owning residential apartment
communities and one commercial office building, each of which filed petitions
under the Federal bankruptcy laws during 1992 and 1993. Each of the
partnerships is now out of bankruptcy through a reorganization plan agreed to
by the project lender.

Errol R. Halperin became a Trustee of EQR in May 1993. Mr. Halperin has been
an attorney at Rudnick & Wolfe, a law firm, since 1979, serving as a senior
partner and a member of such firm's policy committee since 1981, specializing
in Federal income tax counseling and real estate and corporate transactions.

James D. Harper, Jr. became a Trustee of EQR in May 1993. Since 1982, Mr.
Harper has been president of JDH Realty Co., a real estate development and
investment company. Since 1988, he has been a co-managing partner in AH
Development, S.E. and AH HA Investments, S.E., special limited partnerships
formed to develop over 400 acres of land in Puerto Rico.

Sheli Z. Rosenberg has been a Trustee of EQR since March 1993. She is a
principal of the law firm of R&L. Ms. Rosenberg is chief executive officer,
president and a director of EGI. Ms. Rosenberg has been a director of Jacor
since 1994 and has been the chairman of its board of directors since February
1996. Ms. Rosenberg is a director of Capsure, Falcon Building Products, Inc.,
a manufacturer and supplier of building products ("Falcon"), American Classic,
MHC, Anixter, Sealy, and Revco.

Barry S. Sternlicht became a Trustee of EQR in May 1993. Mr. Sternlicht has
been chief executive officer and president of Starwood Capital Group, L.P.
since 1993 and president of Starwood Capital Partners, L.P., a privately owned
real estate

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investment firm, since its formation in 1991. Mr. Sternlicht is chairman of
the board and chief executive officer of Starwood Lodging Trust, a REIT
specializing in the ownership of hotels, and co-chairman of the board of
Westin Hotels & Resorts Company, an owner and operator of hotels. Mr.
Sternlicht is a director of Angeles Participating Mortgage Trust, a mortgage
REIT, U.S. Franchise Systems, a hotel franchise company, and Starwood Lodging
Corporation, which manages hotels owned by Starwood Lodging Trust.

B. Joseph White became a Trustee of EQR since May 1993. Mr. White has been a
professor at the University of Michigan Business School since 1987 and has
served as Dean since 1991. Mr. White is a director of Falcon, Union Pump
Company, a manufacturer of pumps, and Kelly Services, Inc., an employment
agency.

For biographical descriptions of Jeffrey H. Lynford and Edward Lowenthal see
"Management of WRP Newco-- Directors and Executive Officers."

COMMITTEES OF THE BOARD OF TRUSTEES

There will be three standing committees of the Board of Trustees of the
Surviving Trust: the Executive Committee, the Compensation Committee and the
Audit Committee, which are described further below.

Executive Committee: The Executive Committee will be comprised of Messrs.
Alexander, Crocker and Zell. The Executive Committee will have the authority
within certain parameters to acquire, dispose of and finance investments for
the Surviving Trust and execute contracts and agreements, including those
related to the borrowing of money by the Surviving Trust, and generally
exercise all other powers of the Board, except as prohibited by law.

Compensation Committee: The Compensation Committee will be comprised of
Messrs. Halperin and Harper and Ms. Rosenberg. Mr. Harper will be the
chairman. The Compensation Committee will review and make recommendations
concerning proposals by management with respect to compensation, bonuses,
employment agreements and other benefits and policies respecting such matters
for the executive officers of the Surviving Trust.

Audit Committee: The Audit Committee will be comprised of Messrs. White,
Alexander, Halperin, Sternlicht and Goldberg. Mr. White will be the chairman.
The Audit Committee will make recommendations concerning the engagement of
independent public accountants, review the plans and results of the audit
engagement with the independent public accountants, approve professional
services provided by the independent public accountants, review the
independence of the independent public accountants, consider the range of
audit and non-audit fees and review the adequacy of the Surviving Trust's
internal accounting controls.

COMPENSATION OF TRUSTEES

Trustees who are not employees of the Surviving Trust receive an annual fee
of $20,000 for serving as trustees. In addition, trustees who serve on the
Audit Committee, the Executive Committee or the Compensation Committee will
receive an additional $1,000 per annum for each committee on which they serve.
Committee chairs receive an additional $500 per annum. The Surviving Trust
will also reimburse the trustees of each committee for travel expenses
incurred in connection with their activities on behalf of the Surviving Trust.
Each trustee will also be granted options to purchase 5,000 shares of Survivor
Common at the fair market value of such shares at the close of business on the
date of the first trustees' meeting following each annual meeting of
shareholders.

CONSULTING AGREEMENTS

Messrs. Lynford and Lowenthal will each execute a consulting agreement with
ERP Operating Partnership. The consulting agreements will each be for a term
of five years from the Effective Time. Pursuant to the consulting agreements,
each of Messrs. Lynford and Lowenthal will serve as a senior management
consultant to ERP Operating Partnership and, in all events, will receive
compensation at the rate of $200,000 per year plus reimbursement for
reasonable out-of-pocket expenses.

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COMPARISON OF RIGHTS OF SHAREHOLDERS

At the Effective Time, the shareholders of Wellsford and EQR will become
shareholders of the Surviving Trust. The rights of Wellsford's shareholders
are presently governed by Title 8 of the Corporations and Associations Article
of the Annotated Code of Maryland ("Title 8"), the Wellsford Declaration, and
the Wellsford Bylaws. The rights of EQR's shareholders are presently governed
by Title 8, the EQR Declaration and EQR Bylaws. The rights of the shareholders
of the Surviving Trust will be governed by Title 8, the Surviving Trust's
Declaration and the Surviving Trust's Bylaws. Upon approval of the Merger by
the Wellsford Common Shareholders and at the Effective Time, the Wellsford
Declaration will be amended and restated to substantially conform the
Wellsford Declaration to the terms of the EQR Declaration (except for the
Additional Provisions that require approval by a two-thirds vote of the
Wellsford Common Shareholders, which are being voted upon separately). The
Wellsford Declaration, as amended and restated (including, if so approved, the
Additional Provisions) will serve as the Surviving Trust's Declaration.

The following discussion summarizes certain significant differences between
the rights of shareholders of EQR, Wellsford and the Surviving Trust as a
result of certain of these amendments. This summary does not purport to be
complete and is subject to and qualified in its entirety by reference to the
EQR Declaration and Bylaws, the Wellsford Declaration and Bylaws and the
Surviving Trust's Declaration and Bylaws. In addition, upon the separate
approval by an affirmative vote of the holders of not less than two-thirds of
the outstanding shares of Wellsford Common, the Declaration of the Surviving
Trust will be modified to include the Additional Provisions. See "Proposal
Regarding Additional Declaration of Trust Provisions." This summary does not
take into account the modifications contemplated by the Additional Provisions,
which are discussed in "Proposal Regarding Additional Declaration of Trust
Provisions." Rights of the shareholders of EQR and Wellsford which are and
will remain the same after the Merger are not discussed.

AUTHORIZED AND ISSUED SHARES

The Wellsford Declaration authorizes the issuance of 100,000,000 shares of
beneficial interest, which consists of shares of Wellsford Common and such
other types or classes as the Wellsford Board of Trustees may create and
authorize from time to time and designate as representing a beneficial
interest in Wellsford. The designation and number of outstanding shares of
beneficial interest of Wellsford as of April 21, 1997, was as follows: (i)
17,261,897 of Wellsford Common; (ii) 3,999,800 shares of Wellsford Series A;
and (iii) 2,300,000 shares of Wellsford Series B.

The EQR Declaration authorizes the issuance of 110,000,000 shares of
beneficial interest, of which 100,000,000 are EQR Common and 10,000,000 are
Preferred Shares which may be issued from time to time, in one or more series.
The designation and number of outstanding shares of beneficial interest in EQR
as of April 1, 1997, was as follows: (i) 53,713,158 of EQR Common; (ii)
6,120,000 shares of EQR Series A; (iii) 500,000 shares of EQR Series B
represented by 5,000,000 depository shares; (iv) 460,000 shares of EQR Series
C represented by 4,600,000 depository shares; and (v) no excess shares of
beneficial interest.

The Declaration of the Surviving Trust will authorize the issuance of
300,000,000 shares of beneficial interest, of which 200,000,000 will be shares
of Survivor Common and 100,000,000 will be preferred shares of beneficial
interest of the Surviving Trust, of which (a) 6,900,000 shares have been
designated as 9 3/8% Series A Cumulative Redeemable Preferred Shares of
Beneficial Interest, (b) 575,000 shares have been designated as 9 1/8% Series
B Cumulative Redeemable Shares of Beneficial Interest, (c) 460,000 shares have
been designated as 9 1/8% Series C Cumulative Redeemable Preferred Shares of
Beneficial Interest, (d) 4,600,000 shares have been designated as Series D
Cumulative Convertible Preferred Shares of Beneficial Interest and (e)
2,300,000 shares have been designated as Series E Cumulative Redeemable
Preferred Shares of Beneficial Interest. Shares of beneficial interest may be
issued from time to time, as authorized by the Board of Trustees of the
Surviving Trust. As of the Effective Date, the designation and number of the
outstanding shares of beneficial interest in the Surviving Trust, based upon
the shares outstanding as of April 1, 1997, will be as follows: (i) 64,483,878
of Survivor Common; (ii) 6,120,000 of Survivor Series A; (iii) 500,000 of
Survivor Series B represented by 5,000,000 depository shares; (iv) 460,000 of
Survivor Series C represented by 4,600,000 depository shares; (v) 3,999,800 of
Survivor Series D; and (vi) 2,300,000 of Survivor Series E.

AMENDMENT TO DECLARATION AND BYLAWS

As permitted by Title 8, the Wellsford Declaration provides that the
Wellsford Board of Trustees may, by a two-thirds vote, amend the Wellsford
Declaration from time to time in order to enable Wellsford to qualify and
remain qualified as a REIT under the Code and Title 8. Except as set forth in
the preceding sentence and in the Articles Supplementary that set forth the
rights and preferences of the holders of Wellsford Preferred, the Wellsford
Declaration may be amended only by the affirmative vote of the holders of not
less than a majority of the shares of beneficial interest then outstanding and
entitled

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to vote thereon, and in certain cases may be amended only by the affirmative
vote of the holders of not less than two-thirds of such shares. Amendments to
the provisions of the Wellsford Declaration relating to the removal of
trustees, the restrictions on ownership of its shares of beneficial interest,
the reorganization of Wellsford and mergers, consolidations and sales of all
or substantially all of Wellsford's property must be approved by the
affirmative vote of holders of not less than two-thirds of the shares of
beneficial interest then outstanding and entitled to vote on the matter.

As permitted by Title 8, the EQR Declaration provides that the EQR Board of
Trustees may, by a two-thirds vote, amend the EQR Declaration from time to
time in order to enable EQR to qualify and remain qualified as REIT under the
Code and under Title 8. Except as set forth in the previous sentence and in
the terms of preferred shares of beneficial interest, the EQR Declaration may
be amended only by the affirmative vote of the holders of not less than two-
thirds of the shares of beneficial interest then outstanding and entitled to
vote thereon.

The Declaration of the Surviving Trust will provide for its amendment in the
same manner as the Wellsford Declaration. The amendment provisions of the
Declaration of the Surviving Trust will also be affected by the Additional
Provisions, if approved. See "Proposal Regarding Additional Declaration of
Trust Provisions."

SPECIAL MEETINGS

The Wellsford Bylaws provide that the chairman, the president or one-third
of the trustees of Wellsford may call a special meeting of Wellsford's
shareholders. A special meeting shall also be called by the secretary of
Wellsford upon the written request of holders of shares entitled to cast not
less than a majority of all the votes entitled to be cast at such meeting.

The EQR Bylaws provide that the chairman, the president or one-third of the
trustees of EQR may call a special meeting of EQR's shareholders. A special
meeting shall be called by the secretary of EQR upon the written request of
EQR Shareholders entitled to cast not less than 25% of all the votes entitled
to be cast at such meeting.

The Bylaws of the Surviving Trust will provide for special meetings in the
same manner as the EQR Bylaws.

BOARDS OF TRUSTEES

The Wellsford Declaration states that the trustees of Wellsford shall be
divided into three classes as nearly equal in number as possible, with the
term of each class of trustees expiring at the annual meeting of shareholders
in the third year following the year of their election. This classified Board
of Trustees could have the effect of making the removal of incumbents more
time consuming and difficult, which could delay, defer or prevent a third
party from making a timely offer or otherwise attempting to obtain control,
even though such an attempt might be beneficial to the company and its
shareholders. Thus, the classified board could increase the likelihood that
incumbents will retain their positions.

The Wellsford Declaration provides that a trustee may be removed, with or
without cause, by the affirmative vote of the holders of not less than two-
thirds of the shares of beneficial interest then outstanding and entitled to
vote in the election of trustees. Amendments to this section of the Wellsford
Declaration must be approved by the holders of not less than two-thirds of the
shares of beneficial interest outstanding and entitled to vote on the matter.

The EQR Declaration contains substantially similar provisions regarding the
classification of trustees as the Wellsford Declaration; however, the EQR
Declaration provides that a trustee may be removed only with cause, by the
vote of the holders of not less than two-thirds of the shares of beneficial
interest then outstanding and entitled to vote in the election of trustees.
The EQR Declaration defines cause as (i) material theft, fraud or embezzlement
or active and deliberate dishonesty by a trustee, (ii) habitual neglect of
duty by a trustee having a material and adverse significance to the trust, or
(iii) the conviction of a trustee for a felony or of any crime involving moral
turpitude.

The Declaration of the Surviving Trust will contain provisions paralleling
those of the Wellsford Declaration relating to the classification and removal
of trustees. The method of removing trustees under the Declaration of the
Surviving Trust will also be affected by the Additional Provisions, if
approved. See "Proposal Regarding Additional Declaration of Trust Provisions."

MERGERS, CONSOLIDATIONS, AND SALE OF SUBSTANTIALLY ALL ASSETS

Declaration Provisions. Under the Wellsford Declaration, any merger or
consolidation involving Wellsford or any sale or other disposition of all or
substantially all of Wellsford's property must be approved by its trustees and
submitted to its shareholders for approval, such approval to be obtained by
the affirmative vote of (i) holders of not less than two-thirds of all the
shares of beneficial interest then outstanding and entitled to vote thereon,
if Wellsford is not the surviving entity in

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any merger or consolidation or in the event of a proposed sale or disposition
of all or substantially all of Wellsford's property, or (ii) holders of not
less than a majority of all the shares of beneficial interest then outstanding
and entitled to vote thereon, in all other cases. Amending this section of the
Wellsford Declaration requires the affirmative vote of the holders of two-
thirds of the shares of beneficial interest outstanding and entitled to vote
on the matter.

The EQR Declaration does not address the vote required for a merger or
consolidation involving EQR or EQR's property. Under Title 8, a merger must be
approved by the affirmative vote of two-thirds of all the shareholders
entitled to vote on the matter unless otherwise provided in the declaration of
trust.

The Declaration of the Surviving Trust will contain provisions paralleling
those of the Wellsford Declaration relating to shareholder approval of
mergers, consolidations and sales of assets. The Declaration of the Surviving
Trust will provide that the Surviving Trust may sell or otherwise dispose of
all or substantially all of its property only upon the affirmative vote of the
holders of not less than two-thirds of all the shares then outstanding and
entitled to vote on the matter. These shareholder approval requirements for
mergers, consolidations and sales of assets under the Declaration of the
Surviving Trust will also be affected by the Additional Provisions, if
approved. See "Proposal Regarding Additional Declaration of Trust Provisions."

Statutory Restrictions. Under the MGCL, certain "business combinations"
(including a merger, consolidation, share exchange or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland REIT and (i) any person who beneficially owns
10% or more of the voting power of the REIT's shares or an affiliate of the
REIT who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
then outstanding voting shares of beneficial interest of the REIT (an
"Interested Shareholder") or (ii) an affiliate of an Interested Shareholder
are prohibited for five years after the most recent date on which the
Interested Shareholder becomes an Interested Shareholder. Thereafter, any such
business combination must be recommended by the Board of Trustees of such REIT
and approved by the affirmative vote of at least (a) 80% of the votes entitled
to be cast by holders of outstanding shares of the REIT and (b) two-thirds of
the votes entitled to be cast by holders of voting shares of the REIT other
than shares held by the Interested Shareholder with whom (or with whose
affiliate) the business combination is to be effected, unless, among other
conditions, the REIT's common shareholders receive a minimum price (as defined
in the MGCL) for their shares and the consideration is received in cash or in
the same form previously paid by the Interested Shareholder for its shares.
These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of trustees of the
REIT prior to the time that the Interested Shareholder becomes an Interested
Shareholder. The Surviving Trust will exempt any business combination
involving Mr. Zell, the Zell Holders, EPMC and their respective affiliates and
associates, present or future, or any other person acting in concert or as a
group with any of the foregoing persons and, consequently, the five-year
prohibition and the super-majority vote requirements will not apply to a
business combination between any of them and the Surviving Trust.

In addition to the restrictions on certain business combinations, the MGCL
also provides that "control shares" of a Maryland REIT acquired in a "control
share acquisition" have no voting rights except to the extent approved by a
vote of two-thirds of the votes entitled to be cast on the matter, excluding
shares owned by the acquiror, by officers or by directors who are employees of
the REIT. "Control Shares" are voting shares which, if aggregated with all
other such shares previously acquired by the acquiror, or in respect of which
the acquiror is able to exercise or direct the exercise of voting power
(except solely by virtue of a revocable proxy), would entitle the acquiror to
exercise voting power in electing trustees within one of the following ranges
of voting power: (i) one-fifth or more but less than one-third, (ii) one-third
or more but less than a majority, or (iii) a majority or more of all voting
power. A "control share acquisition" means the acquisition of control shares,
subject to certain exceptions. Despite these restrictions on Control Share
acquisitions, the MGCL provides that a REIT may effectively exempt itself from
such restrictions by a provision contained in its Declaration or Bylaws. The
Wellsford Bylaws and EQR Bylaws both contain provisions stating that the
restrictions regarding Control Shares will not apply to any acquisition of its
shares by any person, and the Bylaws of the Surviving Trust will contain a
similar provision.

RESTRICTIONS ON THE OWNERSHIP, TRANSFER OR ISSUANCE OF SHARES

The Wellsford Declaration, subject to certain exceptions, provides that no
holder (other than (i) Edward Lowenthal and Jeffrey H. Lynford, and (ii) any
other person approved by the trustees) may own more than 9.8% (the "WRP
Ownership Limit") of the lesser of the number or value (in either case as
determined in good faith by the trustees) of the total outstanding shares of
beneficial interest. The Wellsford Declaration provides that the trustees may
waive the WRP Ownership Limit if evidence satisfactory to the trustees and to
Wellsford's tax counsel is presented that such ownership will not then or in
the future jeopardize Wellsford's status as a REIT. As a condition of such
waiver, the intended transferee must give written notice to Wellsford of the
proposed transfer and must furnish such opinions of counsel, affidavits,
undertakings, agreements and information as may be required by the trustees no
later than the 15th day prior to any transfer which, if consummated, would
result in the intended transferee owning shares in excess of the WRP Ownership
Limit. The

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foregoing restrictions on transferability and ownership will not apply if the
Wellsford Board of Trustees determines that it is no longer in the best
interests of Wellsford to attempt to qualify, or to continue to qualify, as a
REIT. Any transfer of shares of beneficial interest that would (i) create a
direct or indirect ownership of shares of beneficial interest in excess of the
WRP Ownership Limit, (ii) result in the shares of beneficial interest being
owned by fewer than 100 persons, or (iii) result in Wellsford being "closely
held" within the meaning of Section 856(h) of the Code, will be null and void,
and the intended transferee will acquire no rights to such shares of
beneficial interest. The Wellsford Declaration provides that Wellsford, by
notice to the holder thereof, may purchase any or all shares of beneficial
interest of Wellsford (the "Excess Shares") that are proposed to be
transferred pursuant to a transfer which, if consummated, would result in the
intended transferee owning shares of beneficial ownership in excess of the WRP
Ownership Limit or would otherwise jeopardize Wellsford's REIT status. The
purchase price of any Excess Shares will be equal to the fair market value of
such excess Shares as reflected in the closing sales price for the shares of
beneficial interest, if then listed on a national securities exchange. From
and after the date fixed for purchase by the trustees, the holder of such
shares of beneficial interest to be purchased by Wellsford will cease to be
entitled to dividends, distributions, voting rights and other benefits with
respect to such shares except the right to payment of the purchase price for
the shares. Any dividend or distribution paid to a proposed transferee on
Excess Shares prior to the discovery by Wellsford that such shares of
beneficial interest have been transferred in violation of the provisions of
the Wellsford Declaration shall be repaid to Wellsford upon demand. If the
foregoing transfer restrictions are determined to be void or invalid by virtue
of any legal decision, statute, rule or regulation, then the intended
transferee of any Excess Shares may be deemed, at Wellsford's option, to have
acted as an agent on behalf of Wellsford in acquiring such Excess Shares and
to hold such Excess Shares on behalf of Wellsford.

The Wellsford Declaration requires that all persons who own, directly or
indirectly, more than 5% in number or value of the total outstanding shares of
beneficial interest of Wellsford must give a written notice to Wellsford
containing the information specified in the Wellsford Declaration by January
31 of each year. In addition, each shareholder irrespective of such
shareholder's ownership shall upon demand be required to disclose to Wellsford
in writing such information with respect to the direct, indirect and
constructive ownership of beneficial interests as the trustees deem necessary
to comply with the provisions of the Code applicable to a REIT, to comply with
the requirements of any taxing authority or governmental agency or to
determine any such compliance.

The EQR Declaration, subject to certain exceptions, provides that no holder
may own, or be deemed to own by virtue of the attribution provisions of the
Code, more than 5% (the "EQR Ownership Limit") of the lesser of the number of
shares or value of the issued and outstanding shares of beneficial interest of
EQR. The EQR Board of Trustees, upon receipt of a ruling from the Service, an
opinion of counsel or other evidence satisfactory to the EQR Board of Trustees
and upon such other conditions as the EQR Board of Trustees may direct, may
also exempt a proposed transferee from the EQR Ownership Limit. As a condition
of such exemption, the intended transferee must give written notice to EQR of
the proposed transfer no later than the fifteenth day prior to any transfer
which, if consummated, would result in the intended transferee owning shares
in excess of the EQR Ownership Limit. Any transfer of EQR Common or EQR
Preferred that would (i) create a direct or indirect ownership of shares of
beneficial interest in excess of the EQR Ownership Limit, (ii) result in the
shares of beneficial interest being owned by fewer than 100 persons, or (iii)
result in EQR being "closely held" within the meaning of Section 856(h) of the
Code, will be void ab initio, and the intended transferee will acquire no
rights to the shares of beneficial interest. The foregoing restrictions on
transferability and ownership will not apply if the EQR Board of Trustees
determines that it is no longer in the best interests of EQR to attempt to
qualify, or to continue to qualify, as a REIT.

EQR's Declaration exempts from the Ownership Limit certain persons and
entities who would exceed the Ownership Limit as a result of the exchange of
the OP Units for EQR Common, which OP Units were received by them at the time
of the formation of EQR. These persons may also acquire additional EQR Shares
through EQR's Second Amended and Restated 1993 Share Option and Share Award
Plan (the "Option and Award Plan"), but in no event will such persons be
entitled to acquire additional shares of beneficial interest such that the
five largest beneficial owners of EQR's shares of beneficial interest hold
more than 50% in number or value of the total outstanding EQR Shares.

Any EQR Shares the transfer of which would result in a person owning shares
of beneficial interest in excess of the Ownership Limit or cause EQR to become
"closely held" under Section 856(h) of the Code that is not otherwise
permitted as provided above will constitute excess shares ("Excess Shares"),
which will be transferred by operation of law to EQR as trustee for the
exclusive benefit of the person or persons to whom the Excess Shares are
ultimately transferred, until such time as the intended transferee retransfers
the Excess Shares. While these Excess Shares are held in trust, they will not
be entitled to vote or to share in any distributions (except upon
liquidation). Subject to the Ownership Limit, the Excess Shares may be
retransferred by the intended transferee to any person (if the Excess Shares
would not be Excess Shares in the hands of such person) at a price not to
exceed the price paid by the intended transferee or, if the intended
transferee did not give value for such Excess Shares (e.g., a transfer by gift
or devise), the fair market value (as described below) at the time of the
purported transfer that resulted in the Excess Shares, at which point the
Excess Shares will automatically be exchanged for

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the shares of beneficial interest to which the Excess Shares are attributable.
In addition, such Excess Shares held in trust are subject to purchase by EQR
at a purchase price equal to the lesser of the price paid for the Excess
Shares in the transaction that created such Excess Shares (or, in the case of
a devise or gift, the fair market value at the time of such devise or gift)
and the fair market value of the EQR Preferred or EQR Common to which such
Excess Shares relate on the date EQR exercises its right to purchase. Fair
market value will be the last sales price of such shares of beneficial
interest reported on the NYSE on the trading day immediately preceding the
relevant date, or if not then traded on the NYSE, the last reported sales
price of such shares of beneficial interest on the trading day immediately
preceding the relevant date as reported on any exchange or quotation system
over which such shares of beneficial interest may be traded, or if not then
traded over any exchange or quotation system, then the fair market value of
such shares of beneficial interest on the relevant date as determined in good
faith by the EQR Board of Trustees. EQR's right to purchase shall be for a
period of 90 days after the later of the date of the purported transfer which
resulted in the Excess Shares and the date the EQR Board of Trustees
determines in good faith that such a transfer has occurred. From and after the
intended transfer to the intended transferee of the Excess Shares, the
intended transferee will cease to be entitled to distributions (except upon
liquidation), voting rights and other benefits with respect to such shares
except the right to payment of the purchase price for the shares or the
retransfer of shares as provided above. Any distribution paid to a proposed
transferee on Excess Shares prior to the discovery by EQR that such shares of
beneficial interest have been transferred in violation of the provisions of
EQR's Declaration will be repaid to EQR upon demand. If the foregoing transfer
restrictions are determined to be void or invalid by virtue of any legal
decision, statute, rule or regulation, then the intended transferee of any
Excess Shares may be deemed, at the option of EQR, to have acted as an agent
on behalf of EQR in acquiring such Excess Shares and to hold such Excess
Shares on behalf of EQR.

All certificates representing shares of beneficial interest of EQR shall
bear a legend referring to the restrictions described above.

All persons who own, directly or by virtue of the attribution provisions of
the Code, more than 5% (or such other percentage between 1/2 of 1% and 5% as
provided in the rules and regulations promulgated under the Code) of the
lesser of the number or value of the outstanding shares of beneficial interest
of EQR must give a written notice to EQR by January 31 of each year. In
addition, each shareholder will upon demand be required to disclose to EQR in
writing such information with respect to the direct, indirect and constructive
ownership of EQR Shares as the EQR Board of Trustees deems reasonably
necessary to comply with the provisions of the Code applicable to a REIT, to
comply with the requirements of any taxing authority or governmental agency or
to determine any such compliance.

The Declaration of the Surviving Trust will contain restrictions on the
ownership, transfer and issuance of Survivor Shares generally similar to those
restrictions contained in the EQR Declaration. The provisions relating to
restrictions on the ownership, transfer or issuance of shares contained in the
Surviving Trust will also be affected by the Additional Provisions, if
approved. See "Proposal Regarding Additional Declaration of Trust Provisions."

PROPOSAL REGARDING ADDITIONAL DECLARATION OF TRUST PROVISIONS

The Wellsford Common Shareholders are being asked to separately approve the
Additional Provisions to the Surviving Trust Declaration (defined herein) to
further conform the Surviving Trust Declaration to the terms of the EQR
Declaration and to update the Surviving Trust Declaration to reflect the
current approaches in the REIT industry regarding share ownership restrictions
necessary to maintain REIT status. The Wellsford Declaration, as amended and
restated to include or exclude the Additional Provisions depending on the
requisite approval of the Wellsford Common Shareholders ("Surviving Trust
Declaration"), will constitute the declaration of the Surviving Trust. As
described in the following summary of the Additional Provisions, the Board of
Trustees of each of Wellsford and EQR believe that the Additional Provisions
would be in the best interests of the shareholders of the Surviving Trust. The
Wellsford Common Shareholders are therefore being asked to separately approve
modifications to certain sections, including Sections 2.3, 6.6, 9.1, 9.2 and
9.3 of, and the addition of Article VII to, the Surviving Trust Declaration.

The following is a summary of the Additional Provisions as to which the
approval of the Wellsford Common Shareholders is being requested.

Removal of Trustees. Section 2.3 of the Wellsford Declaration currently
provides for the removal of trustees, with or without cause, by the
affirmative vote of the holders of not less than two-thirds of the shares of
Wellsford Common then outstanding and entitled to vote on the election of
trustees. Upon approval of the Additional Provisions, the Surviving Trust
Declaration will provide for the removal of trustees only with cause by the
same vote previously required. "Cause" will be defined as (a) material theft,
fraud or embezzlement or active and deliberate dishonesty by a trustee; (b)
habitual neglect of

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duty by a trustee having a material and adverse significance to the Surviving
Trust; or (c) the conviction of a trustee for a felony or for any crime
involving mortal turpitude. The Board of Trustees of each of Wellsford and EQR
believe that the increased stability of management that would result from this
amendment is in the best interest of the shareholders of the Surviving Trust.

Restrictions on Transfer and Ownership of Shares. In order to maintain its
status as a REIT under the Code and Title 8, Section 6.6 of the Wellsford
Declaration currently imposes a number of restrictions on the transfer and
ownership of Wellsford Shares. See "Comparison of Rights of Shareholders--
Restrictions on the Ownership, Transfer or Issuance of Shares." Since the
adoption of the Wellsford Declaration in 1992, the comparable section of the
declarations of other REITs has evolved into a more detailed provision
relating to the applicable ownership limits and compliance with the Code. Upon
approval of the Additional Provisions, these provisions will be modified to
reflect the effects of the Merger and the Surviving Trust's relationship with
ERP Operating Partnership. Among the specific amendments to be made will be
the inclusion of provisions exempting the exchange of OP Units into Survivor
Shares from the definition of "transfer." In addition, certain persons and
entities who would otherwise exceed the ownership limits placed on Survivor
Shares will be exempted from such ownership restrictions in order to avoid
their forced divestment of such shares or OP Units. Upon approval of the
Additional Provisions, any transfer of shares resulting in a person owning
shares in excess of the ownership limits placed on the Survivor Shares shall
be automatically transferred to a charitable trust for the benefit of a
charitable beneficiary. For the reasons stated above, the Board of Trustees of
each of Wellsford and EQR believe that the Additional Provisions affecting the
ownership and transfer of Survivor Shares are in the best interest of the
shareholders of the Surviving Trust.

Amendment to Declaration. Section 9.1 of the Wellsford Declaration currently
provides for its amendment by the affirmative vote of the holders of not less
than a majority of the Wellsford Shares outstanding and entitled to vote
thereon, except that amendments related to the removal of trustees, the
restrictions on the ownership of Wellsford Shares, the reorganization of
Wellsford and the merger, consolidation or sale of all or substantially of
Wellsford's property must be approved by the affirmative vote of the holders
of two-thirds of the Wellsford's Shares then outstanding and entitled to vote
on the matter. In addition, the Wellsford Board of Trustees may, by a two-
thirds vote, amend the Wellsford Declaration in order to enable Wellsford to
qualify and remain qualified as a REIT under the Code and Title 8.

Upon approval of the Additional Provisions, Section 9.2 of the Surviving
Trust Declaration will provide that it may be amended by the Board of Trustees
of the Surviving Trust, by a two-thirds vote, to enable the Surviving Trust to
qualify as a REIT. The Surviving Trust Declaration as modified will also
provide for amendment of all its provisions by the affirmative vote of the
holders of not less than two-thirds of the Survivor Shares then outstanding
and entitled to vote thereon. The Board of Trustees of each of Wellsford and
EQR believe that this consistent requirement of approval by not less than two-
thirds of the Survivor Shares to amend all provisions of the Surviving Trust
Declaration is in the best interest of the shareholders of the Surviving
Trust.

Mergers, Consolidation, or Sale of Trust Property. Section 9.2 of the
Wellsford Declaration currently states that, upon the affirmative vote of the
holders of not less than two-thirds of the Wellsford Shares then outstanding
and entitled to vote thereon, the trustees of Wellsford may reorganize
Wellsford by creating a separate entity into which Wellsford will merge or
sell its assets. In addition, Section 9.3 of the Wellsford Declaration
currently provides that if Wellsford is not the surviving entity in a merger
or consolidation, or in the event of a sale of all or substantially all of
Wellsford's property, that transaction must be approved by two-thirds of the
Wellsford Shares then outstanding and entitled to vote thereon. In all other
cases, such a merger or consolidation need only be approved by a majority of
the Wellsford Shares then outstanding and entitled to vote thereon. Upon
approval of the Additional Provisions, any merger, consolidation, or sale of
all or substantially all of the Surviving Trust's property will be required to
be approved by the holders of a majority of the Survivor Shares then
outstanding and entitled to vote thereon. The Board of Trustees of each of
Wellsford and EQR believe that this threshold of shareholder approval, which
would facilitate the merger, consolidation or sale of all or substantially all
of the Surviving Trust's property, would be in the best interest of the
shareholders of the Surviving Trust.

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THE CONTRIBUTION AND DISTRIBUTION

The following describes certain aspects of the Contribution and the
Distribution. To the extent that they relate to the Contribution and
Distribution Agreement, the following descriptions do not purport to be
complete and are qualified in their entirety by reference to the Contribution
and Distribution Agreement, which is filed as an exhibit to the registration
statement of which this Joint Proxy Statement/Prospectus/Information Statement
is a part.

BACKGROUND OF AND REASONS FOR THE DISTRIBUTION

EQR is in the business of acquiring, owning and operating multifamily
properties. It does not currently engage in any development activities and
generally does not hold debt instruments for investment. In the course of
discussions with respect to the Merger it became clear that EQR did not wish
to acquire all of Wellsford's interest in its development project near Denver,
Colorado, known as Palomino Park or its interests in the Sonterra Assets. If
EQR were to acquire such assets, Wellsford would not be able to receive what
it considered to be adequate value for such assets. Wellsford's management
believes that it can maximize the value of those assets for its shareholders
by not conveying them in the Merger or pursuant to an asset sale to a third
party and by retaining such assets and their long-term value for Wellsford
Common Shareholders by contributing them to WRP Newco and distributing all of
the shares of WRP Newco owned by Wellsford to the Wellsford Common
Shareholders pro rata. It has also been agreed that to provide initial working
capital for WRP Newco, Wellsford would contribute approximately $18 million in
cash to WRP Newco. Pursuant to the Merger, EQR will acquire the remaining
assets of Wellsford, subject to certain liabilities. See "--Contribution and
Distribution Agreement."

Although the Contribution and Distribution will not be effected unless the
Merger is approved and all conditions thereto have been satisfied or waived,
Wellsford Common Shareholders are not being asked to approve the Contribution
and Distribution, which are not subject to shareholder approval under Maryland
law because they do not constitute a sale of all or substantially all of the
assets of Wellsford.

MANNER OF EFFECTING THE CONTRIBUTION AND DISTRIBUTION

The Contribution was approved and the Distribution was declared by the Board
of Trustees of Wellsford on January 16, 1997, the date on which it also
approved the Merger. The Contribution will be made immediately prior to the
Distribution, and both the Contribution and the Distribution will occur on the
same date as the Effective Date (the "Distribution Date") and immediately
prior to the Merger. The Distribution will be made to Wellsford Common
Shareholders of record as of the close of business on the Distribution Date.
On or prior to the Distribution Date, a share certificate evidencing all the
shares of WRP Newco Common owned by Wellsford will be delivered to the United
States Trust Company of New York, as Distribution Agent. Commencing on the
Distribution Date, the Distribution Agent will begin mailing to Wellsford
Common Shareholders as of the close of business on the Distribution Date one
share of WRP Newco Common for every four shares of Wellsford Common held on
the Distribution Date. See "Description of Capital Stock of WRP Newco--Common
Stock." Wellsford Common Shareholders who would be entitled to receive
fractional shares of WRP Newco Common will receive cash in the Distribution in
lieu of such fractional shares. To accomplish this, the Distribution Agent
will determine the number of whole and fractional shares of WRP Newco Common
to which each Wellsford Common Shareholder as of the Distribution Date is
entitled. Next, the Distribution Agent will aggregate these fractional share
interests and sell them on the open market at then-prevailing prices. The
Distribution Agent will distribute to each Wellsford Common Shareholder its
ratable share of such proceeds after deducting appropriate amounts for federal
income tax withholding purposes and any applicable transfer taxes.

No holder of Wellsford Common Shareholder will be required to pay any cash
or other consideration for the shares of WRP Newco Common to be received in
the Distribution or to surrender or exchange shares of Wellsford Common or to
take any other action in order to receive WRP Newco Common.

LISTING AND TRADING OF WRP NEWCO COMMON

WRP Newco has applied for listing of the WRP Newco Common on the ASE.
Initially, WRP Newco will have approximately 629 stockholders of record and
the outstanding shares of WRP Newco Common will be held on behalf of
approximately 13,500 beneficial owners, based on the number of record holders
and beneficial owners of Wellsford Common as of April 18, 1997.

There is currently no trading market for the WRP Newco Common. Prices at
which WRP Newco Common may trade after the Distribution cannot be predicted.
Until the WRP Newco Common is fully distributed and an orderly market
develops, the prices at which trading in such stock occurs may fluctuate
significantly. The prices at which WRP Newco Common trades will be determined
by the marketplace and may be influenced by many factors, including, among
others, the

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depth and liquidity of the market for WRP Newco Common, investor perception of
WRP Newco and its businesses, WRP Newco's dividend policy, interest rates and
general economic and market conditions.

Shares of WRP Newco Common distributed to Wellsford Common Shareholders in
the Distribution will be freely transferable, except for shares received by
persons who may be deemed to be "affiliates" of WRP Newco under the Securities
Act. Persons who may be deemed to be affiliates of WRP Newco after the
Distribution generally include individuals or entities that control, are
controlled by, or are under common control with, WRP Newco, and may include
certain officers and directors of WRP Newco as well as certain principal
stockholders of WRP Newco, if any. Persons who are affiliates of WRP Newco
will be permitted to sell their shares of WRP Newco Common only pursuant to an
effective registration statement under the Securities Act or an exemption from
the registration requirements of the Securities Act.

CONDITIONS; TERMINATION

The Contribution and Distribution are subject to certain conditions as set
forth in the Contribution and Distribution Agreement including, but not
limited to, each condition to the closing of the Merger set forth in the
Merger Agreement shall have been satisfied or waived. The Contribution and
Distribution may be abandoned at any time prior to their occurrence by and in
the sole discretion of the Board of Trustees of Wellsford without the approval
of WRP Newco or the Wellsford Common Shareholders.

CONTRIBUTION AND DISTRIBUTION AGREEMENT

Wellsford and WRP Newco have entered into a Contribution and Distribution
Agreement providing for, among other things, the principal corporate
transactions required to effect the contribution by Wellsford of certain of
its assets to WRP Newco.

Wellsford will transfer, without representation or warranty, all of its
right, title and interest in and to the following assets, among others (the
"Contributed Assets"):

(a) the Sonterra Assets. See "WRP Newco's Business and Properties";

(b) 80% of the outstanding shares of Wellsford Park Highlands Corp.
("WPHC"), which represents an approximate 80% interest in Palomino Park,
together with certain additional ownership and financing agreements relating
to Palomino Park. See "WRP Newco's Business and Properties";

(c) cash in the amount of approximately $18 million, subject to adjustment
as described in the Merger Agreement and the Transaction and Termination Costs
Agreement attached as an exhibit thereto;

(d) the lease of the premises currently occupied by Wellsford in New York
City, together with the furniture, fixtures, equipment and personalty located
at such premises; and

(e) the name "Wellsford."

Simultaneously with the Contribution, WRP Newco will assume, among others,
the following liabilities:

(i) All liabilities of Wellsford with respect to the Contributed Assets;

(ii) the obligations to executive officers and trustees of Wellsford
arising under certain Wellsford share option certificates, which will be
satisfied by (A) amending the option certificates, as described in
"Interests of Certain Persons in the Merger and Distribution--Benefits of
Key Executives--Wellsford Options" (as amended, the "Amended WRP Newco
Options") and (B) issuing shares of WRP Newco Common pursuant to the
Amended WRP Newco Options; and

(iii) any other obligation of Wellsford under any agreement relating to
the Sonterra Assets, the bonds relating to Palomino Park, or Palomino Park
except the obligations of ERP Operating Partnership under the Credit
Enhancement Agreement and the Palomino Agreement, each between ERP
Operating Partnership and WRP Newco.

Mutual Indemnities. Pursuant to the Contribution and Distribution Agreement,
Wellsford and WRP Newco will each be responsible for all claims and
liabilities relating to its own business (whether or not such claims and
liabilities arise from activities occurring prior to the Distribution) and
will each indemnify the other against such claims and liabilities, subject to
certain limited exceptions relating to the Credit Enhancement Agreement,
Palomino Agreement and Transaction and Termination Costs Agreement.

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TAX CONSEQUENCES OF THE DISTRIBUTION

The following discussion concerns the material United States Federal income
tax consequences of the receipt of shares of WRP Newco Common by Wellsford
Common Shareholders in the Distribution. The discussion is based on current
law, which is subject to change retroactively or prospectively, and is for
general information only. Robinson Silverman Pearce Aronsohn & Berman LLP has
reviewed the discussion set forth herein under the caption "Tax Consequences
of the Distribution" and believes that such discussion, as it pertains to
matters of law, is correct in all material respects. The discussion does not
address all aspects of Federal income taxation and does not address any
aspects of state, local or non-U.S. tax laws, except as set forth below. The
discussion does not consider any specific facts or circumstances that may
apply to a particular Wellsford shareholder. Accordingly, Wellsford Common
Shareholders are urged to consult their tax advisors regarding the United
States Federal, state, local and non-U.S. income and other tax consequences of
the Distribution and of holding and disposing of shares of WRP Newco Common.

General. To the extent the fair market value of the shares of WRP Newco
Common distributed in the Distribution to Wellsford Common Shareholders
exceeds Wellsford's tax basis in such shares, gain will be recognized by
Wellsford. Assuming Wellsford qualifies as a REIT and has a dividends paid
deduction for distributions to its shareholders at least equal to its REIT
taxable income (as computed before taking into account the dividends paid
deduction), no REIT level tax will be incurred on account of the Distribution.

The distribution of WRP Newco Common will, however, be taxable to Wellsford
Common Shareholders to the same extent as any other distribution made by
Wellsford to its shareholders. Thus, so long as Wellsford qualifies for
taxation as a REIT, distributions with respect to its shares, including the
Distribution, made out of current earnings and profits (computed as of the
close of its taxable year without taking into account any distributions made
during such year) or accumulated earnings and profits allocable thereto (and
not designated as capital gain dividends) will be includible by the
shareholders as ordinary income for Federal income tax purposes. For this
purpose, the current and accumulated earnings and profits of Wellsford will be
allocated first to distributions with respect to shares of Wellsford Preferred
and then to distributions with respect to Common Shares. None of these
distributions will be eligible for the dividends received deduction for
corporate shareholders. Distributions that are designated as capital gain
dividends will be taxed as long-term capital gains (to the extent they do not
exceed Wellsford's actual net capital gain for the taxable year) without
regard to the period for which the shareholder has held his share. Corporate
shareholders, however, may be required to treat up to 20% of certain capital
gain dividends as ordinary income.

Distributions in excess of current or accumulated earnings and profits will
not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's shares. Shareholders will be required to
reduce the tax basis of their shares by the amount of such distributions until
such basis has been reduced to zero, after which such distributions will be
taxable as capital gain (ordinary income in the case of a shareholder who
holds his shares as a dealer). The tax basis as so reduced will be used in
computing the capital gain or loss, if any, realized upon sale of the shares
of Wellsford Common (or shares of Survivor Common received in exchange
therefor in the Merger). Any loss upon a sale or exchange of shares of
Wellsford Common (or shares of Survivor Common received in exchange therefor
in the Merger) by a shareholder who held such shares of Wellsford Common (or
shares of Survivor Common received in exchange therefor in the Merger) for six
months or less (after applying certain holding period rules) will generally be
treated as a long-term capital loss to the extent such shareholder previously
received capital gain distributions with respect to such shares of Wellsford
Common (or shares of Survivor Common received in exchange therefor in the
Merger).

The current earnings and profits of the Surviving Trust will include all
pre-Merger earnings and profits of Wellsford, all pre-Merger undistributed
earnings and profits of EQR and all post-Merger earnings and profits of the
Surviving Trust. The total earnings and profits at the close of the Surviving
Trust's taxable year will be allocated among pre-Merger Wellsford
distributions, including the Distribution, and all post-Merger distributions
of the Surviving Trust. Management estimates that approximately 50% of the
value of the shares of WRP Newco Common received in the Distribution will be
taxable as ordinary income. Because this estimate is based, in part, on future
events, there can be no assurance as to the portion of the value of the
Distribution that will be taxable as ordinary income. The remainder of the
value of the shares of WRP Newco Common received in the Distribution will
either constitute a return of capital (reducing basis in the shares of
Wellsford Common that converted in the Merger into Survivor Common) or capital
gain. A Wellsford shareholder's tax basis in the WRP Newco Common received in
the Distribution will equal their fair market value on the date of
Distribution. The holding period of the WRP Newco Common received in the
Distribution will begin on the day following the date of the Distribution.

Upon the sale or exchange of WRP Newco Common to or with a person other than
WRP Newco, a holder will recognize capital gain or loss equal to the
difference between the amount realized on such sale or exchange and the
holder's adjusted tax basis in such shares. Any capital gain or loss
recognized will generally be treated as long-term capital gain or loss if the
holder held such shares for more than one year.

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Backup Withholding and Information Reporting

A noncorporate holder of WRP Newco Common who is not otherwise exempt from
backup withholding may be subject to backup withholding at the rate of 31%
with respect to distributions paid on, or the proceeds of a sale, exchange or
redemption of, the WRP Newco Common. Generally, backup withholding applies
only when the taxpayer (i) fails to furnish or certify his correct taxpayer
identification number to the payor in the manner requested, (ii) is notified
by the United States Internal Revenue Service ("IRS") that he has failed to
report payments of interest or dividends properly, or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that
he is subject to backup withholding for failure to report interest or dividend
payments. Any amounts withheld under the backup withholding rules from a
payment to a holder will be allowed as a credit against the holder's Federal
income tax liability or as a refund, provided that the required information is
furnished to the IRS. Holders of WRP Newco Common should consult their own tax
advisors regarding their qualification for exemption from backup withholding
and the procedure for obtaining any applicable exemption.

State, Local and Foreign Taxation

WRP Newco and its shareholders may be subject to state, local or foreign
taxation in various state, local or foreign jurisdictions, including those in
which it or they transact business or reside. Such state, local or foreign
taxation may differ from the Federal income tax treatment described above.
Consequently, prospective holders of WRP Newco Common should consult their own
tax advisors regarding the effect of state, local and foreign tax laws on the
ownership of WRP Newco Common.

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WELLSFORD REAL PROPERTIES, INC.

GENERAL

WRP Newco was organized to create and realize value by identifying and
making opportunistic real estate investments through the direct acquisition,
rehabilitation, development, financing and management of real properties
and/or participation in these activities through the purchase of debt or
equity securities of entities engaged in such real estate businesses.
Management will concentrate its efforts on defining and building focused
operating businesses with recurring sources of income. WRP Newco intends to
maximize shareholder value over time through growth in cash flow and net asset
value per share.

WRP Newco believes that while liquidity has returned to many real estate
markets and that the supply and demand of many real estate asset classes are
in relative equilibrium, there are specific opportunities which are expected
to continue to exist because of market inefficiencies and impediments to
investment, such as transactional complexity, time-consuming regulatory
approvals, the prospect of no or limited immediate cash flow and a lack of
available property information and market information analysis. In this
regard, WRP Newco will initially focus its investments on three distinct
aspects of the real estate business which management believes currently offer
such opportunities. They are (i) acquiring underperforming office and other
commercial properties below replacement cost, renovating and/or repositioning
them, and owning, operating and/or reselling such properties, (ii) investing
in real estate-related debt instruments with the potential for high-yields or
returns more characteristic of equity ownership and (iii) engaging in
selective property development when justified by expected returns. As
opportunities emerge, WRP Newco may in the future expand its real estate-
related businesses and activities.

WRP Newco currently does not intend to qualify as a REIT under the Code.
Consequently, WRP Newco will have the flexibility to respond quickly to
opportunities without the structural limitations inherent in REITs and to
operate, when deemed advantageous by management, on a more highly leveraged
basis than most REITs. By not qualifying as a REIT under the Code (which would
require WRP Newco to distribute each year at least 95% of its net taxable
income, excluding capital gains), WRP Newco will have the ability and
currently intends to retain for reinvestment its cash flow generated from
operations and to sell properties without the substantial income tax penalties
which may be imposed on REITs in such transactions. In addition, WRP Newco
will differ from opportunity funds that are typically structured as private
partnerships. In that regard, the business of WRP Newco will be conducted
without the payment of acquisition, disposition or advisory fees to general
partners which should result in additional cash flow being available for
reinvestment as well as mitigate the potential for conflicts of interest. In
addition, unlike investors in opportunity funds, WRP Newco's shareholders are
expected to have enhanced liquidity through their ability to sell or margin
their stock. WRP Newco also hopes to attract a broader range of investors
because there will be no stipulated investment minimum. However, unlike REITs
and opportunity funds, WRP Newco will be subject to corporate level taxation.

WRP Newco's management will include Jeffrey H. Lynford, Chairman, and Edward
Lowenthal, President and Chief Executive Officer, who were co-founders of, and
served in the same capacities at, Wellsford supported by a management team
with experience in real estate acquisitions, development, asset management and
financing. WRP Newco believes that the over 50 years of combined experience of
management in real estate, capital markets and public company operations,
their knowledge, credibility, and business relationships, and their
demonstrated track record of recognizing and profiting from emerging real
estate trends should help WRP Newco accomplish its business objectives. Since
the Wellsford IPO in November 1992, Messrs. Lynford and Lowenthal, through
Wellsford, acquired 69 multifamily properties containing 16,332 units. From
calendar year 1992 through calendar year 1996, Wellsford's revenues increased
from $26 million to $131.8 million, representing a compounded annual growth
rate of approximately 49%, and Wellsford EBITDA increased from $13.8 million
to $72.8 million, representing a compounded annual growth rate of
approximately 52%. In analyzing potential investments and market trends and
inefficiencies, management has reviewed, and will continue to review, current
economic and market information.

WRP Newco is a Maryland corporation which was incorporated in January 1997.
WRP Newco's executive offices are located at 610 Fifth Avenue, New York, New
York 10020 and its telephone number is (212) 333-2300.

BUSINESS STRATEGY

In furtherance of its business strategy, WRP Newco will initially focus on
investments in three distinct aspects of the real estate business. As
opportunities emerge and in response to changes in market, real estate and
general economic conditions, WRP Newco may in the future expand, retract from
or discontinue its real estate related business and activities.

Commercial Properties. WRP Newco will seek to acquire office and other
commercial properties below replacement cost and operate and/or resell such
properties after renovation, redevelopment and/or repositioning. WRP Newco
believes

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that appropriate well-located commercial properties which are currently
underperforming can be acquired on advantageous terms and repositioned with
the expectation of achieving enhanced returns which are greater than returns
which could be achieved by acquiring a stabilized property. WRP Newco also
believes that there are opportunities available to acquire properties that are
not attractive to REITs and institutional investors because the properties
have no or limited cash flow as a result of required rehabilitation and their
not being substantially leased. WRP Newco's acquisitions to date demonstrate
that WRP Newco is able to take advantage of existing opportunities in this
area. WRP Newco has hired Richard R. Previdi, a former partner at Trammell
Crow Co. with significant leasing and redevelopment experience in major
metropolitan areas from Washington, D.C. to New York, to seek out such
opportunities. Initially, WRP Newco will seek to apply its business strategy
to suburban office properties. In this regard, WRP Newco has acquired five
suburban office properties, consisting of six buildings, all of which are
located in Northern New Jersey. As opportunities arise, WRP Newco may seek to
acquire other types of commercial properties, including industrial properties.
See "Business and Properties".

High Yield Debt Investments. WRP Newco will make loans that constitute, or
will invest in real estate-related senior, junior or otherwise subordinated
debt instruments, which may be unsecured or secured by liens on real estate or
the economic benefits thereof. WRP Newco will focus on investments of this
type which have the potential for high yields or returns more characteristic
of equity ownership. These investments may contain options to acquire, or be
convertible into the right to acquire, all or a portion of the underlying real
estate, or contain the right to participate in the cash flow and economic
return which may be derived from the real estate. These investments may
include debt that is acquired at a discount, mezzanine financing, commercial
mortgage-backed securities, secured and unsecured lines of credit, distressed
loans, and loans previously made by foreign and other financial institutions.
In some cases WRP Newco may only acquire a participating interest in the debt
instrument. WRP Newco believes that there are opportunities to acquire real
estate debt, especially in the low or below investment grade tranches, at
significant returns as a result of inefficiencies in pricing. WRP Newco will
initially focus on opportunities arising in the following areas, among others.
First, where traditional CMBS buyers cannot or will not invest, such as the
purchase of subordinated real estate debt secured not by a mortgage but by
other indicia of ownership of an asset. Second, where WRP Newco believes that
the market has mispriced an outstanding tranche of debt because of
insufficient asset specific information. WRP Newco's investment in the
Sonterra Loan and its expected investment in the 277 Park Loan in April 1997
demonstrate its ability to take advantage of opportunities in this area. See
"Business and Properties".

Property Development. WRP Newco will engage in selective development
activities as opportunities arise and when justified by expected returns. WRP
Newco believes that by pursuing selective development activities it can
achieve returns which are greater than returns which could be achieved by
acquiring a stabilized property. Initially, WRP Newco will continue the
development of Palomino Park, its five-phase residential community begun by
Wellsford, taking advantage of the fixed-price purchase options for the land
underlying such residential community obtained by Wellsford two years ago.
This development may be retained for investment and operated by WRP Newco,
sold, or converted to condominium ownership. WRP Newco may also acquire land
for speculation, future development or subdivision. Certain development
activities may be conducted in joint ventures with local developers who may
bear the substantial portion of the economic risks associated with the
construction, development and initial rent-up of properties. As part of its
strategy, WRP Newco may seek to obtain bond financing from local governmental
authorities which generally bear interest at rates substantially below rates
with respect to conventional financing. See "Business and Properties".

WRP Newco may in the future make equity investments in entities owned by
third parties and which engage in real estate-related businesses and
activities or businesses that service the real estate business. Some of the
entities in which WRP Newco may invest may be start-up companies or companies
in need of additional capital. WRP Newco may also in the future invest in
retail, residential, hotel and other types of properties and may also manage
and lease properties owned by it or in which it has an equity or debt
investment.

In analyzing potential investments and market trends and inefficiencies,
management has reviewed, and will continue to review, current economic and
market information. Much of this information has been, and will continue to
be, provided by REIS Reports, Inc., a nationally recognized real estate market
database firm.

INITIAL CAPITAL AND FINANCING

Upon completion of the Distribution and consummation of the Merger and
certain of the other transactions described in this Joint Proxy
Statement/Prospectus/Information Statement, WRP Newco expects to have
available the following sources of capital, financing and credit support:

. $3.5 million of proceeds from the sale to ERP Operating Partnership of
shares of the WRP Newco Class A Common at a price equal to the Issuance
Price.

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. $25 million pursuant to the ERP Preferred Commitment to acquire up to
1,000,000 shares of the WRP Newco Series A Preferred at the request of
WRP Newco and subject to certain limited conditions. Each share of WRP
Newco Series A Preferred is convertible into shares of WRP Newco Common
Stock at a premium equal to 8% of the Issuance Price. The ERP Preferred
Commitment will be pledged as security for the WRP Newco Line of Credit.

. $50 million under a two-year WRP Newco Line of Credit as to which Bank
of Boston and Morgan Guaranty have issued a commitment. The WRP Newco
Line of Credit will bear interest at an annual rate equal to LIBOR plus
175 basis points and will be extendible for an additional one-year
period.

. $36.8 million, pursuant to an agreement with respect to the construction
financing for Phase I of Palomino Park, and approximately $30 million,
pursuant to an agreement expected to be entered into with respect to the
construction financing for Phase II of Palomino Park, in each case
guaranteed by a third-party developer and supported by the credit of ERP
Operating Partnership pursuant to its stand-by obligations.

. Approximately $14.8 million of credit enhancement from ERP Operating
Partnership with respect to the bonds issued to finance certain public
facilities at Palomino Park.

See "Description of Capital Stock of WRP Newco" and "Certain Agreements
Between WRP Newco and ERP Operating Partnership".

In addition to the foregoing, WRP Newco will receive from Wellsford at the
time of the Contribution approximately $18 million of cash (subject to
adjustment as provided in the Merger Agreement), substantially all of which
will be applied to the repayment of loans made by Wellsford to WRP Newco to
acquire certain office properties and make its expected investment in the 277
Park Loan.

WRP Newco's other sources of capital to finance its acquisition, investment,
development and other activities, may include retained earnings, funds derived
from the issuance of debt and equity securities, sales of investments and bank
borrowings. See "Policies with Respect to Certain Activities of WRP Newco".

WRP NEWCO LINE OF CREDIT

WRP Newco has received a commitment for a revolving line of credit in the
amount of up to $50 million from Bank of Boston and Morgan Guaranty as to
which each has agreed to lend up to $25 million. The WRP Newco Line of Credit
will be secured inter alia by WRP Newco's interest in the Sonterra Loan, the
277 Park Loan and the ERP Preferred Commitment. Under the WRP Newco Line of
Credit, WRP Newco will pay interest only, monthly, at an annual rate equal to,
at WRP Newco's option, either (i) LIBOR plus 175 basis points or (ii) the base
rate of Bank of Boston. The WRP Newco Line of Credit will be for a term of two
years and be extendible by WRP Newco with the consent of Bank of Boston and
Morgan Guaranty for one additional year. It will include customary covenants,
including, among others, (i) maintaining a ratio of liabilities to assets of
not in excess of .60 to 1.0, (ii) maintaining a debt service coverage ratio of
not less than 1.3 to 1.0, until the earlier to occur of (A) 12 months from
consummation of the line of credit, (B) WRP Newco raises at least $50 million
of equity, or (C) certain lease up tests are met with respect to certain of
WRP Newco's properties, at which time the required ratio will be not less that
1.5 to 1, (iii) a prohibition on the payment of dividends during the first
year of the WRP Newco Line of Credit and (iv) a prohibition of ground-up
development (other than Palomino Park).

MANAGEMENT

The management of WRP Newco will be led by substantially all of the current
senior management of Wellsford, including Jeffrey H. Lynford, Chairman, and
Edward Lowenthal, President and Chief Executive Officer, of WRP Newco, who
held the same offices at Wellsford. Joining them are Gregory F. Hughes and
David Strong, who are Chief Financial Officer and Vice President-Development,
respectively, of Wellsford, and Richard R. Previdi, who was previously a
managing director of Emmes & Company, a real estate investment company and a
managing director of Trammell Crow N.E., Inc. and Chief Executive Officer of
that company's Northern Virginia Commercial Division.

At the time of the Wellsford IPO in November 1992, Wellsford was the only
REIT dedicated exclusively to the ownership of multifamily properties.
Wellsford has sought to maximize long term profitability for its shareholders
by acquiring, developing, and operating multifamily properties in target
markets, applying sophisticated management and operating techniques, and
maintaining a conservative capital structure.

Wellsford Acquisitions

Messrs. Lynford and Lowenthal formed Wellsford Group, Inc. ("WGI") with an
initial capitalization of $1 million provided primarily by William E. Simon,
Raymond Chambers and Frank Walsh, former principals of Wesray, a private

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leveraged buy-out firm, and by principals of Eastdil Realty, Inc., a private
real estate investment banking firm. During the period from 1986 through
November 1992, WGI and its affiliates acquired 19 multifamily properties
consisting of 5,255 units. After WGI and its affiliates transferred their
properties to Wellsford in 1992, Wellsford commenced an aggressive acquisition
strategy by purchasing 69 properties containing 16,332 multifamily units which
increased the historical cost of its total assets from $147 million at the
time of the Wellsford IPO, to $756 million at December 31, 1996. These
acquisitions included 14 properties containing 5,100 units in Oklahoma
purchased for $133 million in May 1994, and the $250 million acquisition by
merger in December 1994 of Holly Residential Properties, Inc., a real estate
investment trust publicly traded on the New York Stock Exchange which
developed, owned and operated 34 properties containing over 5,000 multifamily
units in the Seattle/Tacoma area.

Wellsford Management and Development of Properties

During 1995 and 1996 Wellsford focused its efforts on its core portfolio and
the development of new properties. Property management, which had previously
been contracted to third parties, was substantially internalized. Wellsford
currently provides direct management for 84% of its properties. In addition,
Wellsford developed three new properties consisting of 548 multifamily units
during this period, helping to reduce the average age of its portfolio.
Wellsford also commenced development of Palomino Park, a 182-acre master
planned class A multifamily residential community in Highlands Ranch, a suburb
of Denver, Colorado. See "WRP Newco's Business and Properties--Palomino Park".

Wellsford Equity and Debt Financings

Wellsford funded its acquisition and development activities with various
sources of capital including public and private debt and equity. In November
1992, Wellsford raised $100 million in the Wellsford IPO. Wellsford was one of
the first REITs to obtain a corporate credit rating, when it received an
implied senior rating of BBB- from S&P and Duff & Phelps in September 1993.
This rating facilitated the issuance by Wellsford in November 1993 of $100
million of convertible preferred shares. In January 1995 Wellsford became one
of the first REITs to access the unsecured debt markets with a $100 million
issuance. In August 1995 Wellsford's senior credit rating was upgraded to BBB
by S&P and Duff & Phelps, which helped facilitate the issuance of $125 million
of unsecured notes and $57.5 million of perpetual preferred shares.
Wellsford's commitment to a conservative corporate capital structure,
including a 35% debt to total market capitalization ratio, resulted in the
investment grade rating and a gradual reduction of its costs of capital, as
reflected by the borrowing costs on its line of credit. At the time of the
Wellsford IPO, Wellsford's line of credit was secured and bore an annual
interest rate of LIBOR plus 3.75%. Wellsford's line of credit in the amount of
$150 million is now unsecured with an annual interest rate of LIBOR plus
1.50%. Most recently, Wellsford issued 3-year medium term notes at an annual
interest rate of LIBOR plus .32%.

Wellsford Return to Shareholders

As a result of the above accomplishments, Wellsford has raised its dividend
15% since the Wellsford IPO. Assuming the consummation of the Merger investors
who bought their shares of Wellsford Common in the Wellsford IPO would have
received an average annual return of approximately 22.8% on their initial
investment, based upon the April 1, 1997 closing market price of a common
share of beneficial interest of EQR on the New York Stock Exchange, and
assuming (i) all distributions received on such shares of Wellsford Common
were immediately reinvested in Wellsford Common and (ii) a value for each
share of WRP Newco Common Stock distributed in the Distribution equal to the
book value (which is currently estimated to be $10.43 per share).

There can be no assurance that WRP Newco's future performance or average
rate of return achieved by its investors will be similar to Wellsford's past
accomplishments or the average rate of return achieved by its shareholders.
WRP Newco's business strategy differs substantially from that of Wellsford's,
which operated as a REIT and invested only in multifamily properties.

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WRP NEWCO PRO FORMA CAPITALIZATION

The following table sets forth the pro forma capitalization of WRP Newco as
of December 31, 1996 on an historical basis and as adjusted to give effect to
the Merger and Distribution, the sale of shares of WRP Newco Class A Common to
ERP Partnership for an aggregate purchase price of $3.5 million and the
application of the net proceeds therefrom, and the funding of a portion of WRP
Newco's $50 million credit facility with Bank of Boston and Morgan Guaranty
for the purchase of five commercial office properties and the origination of a
loan. The information set forth in the table should be read in conjunction
with the WRP Newco financial statements and notes thereto, the WRP Newco pro
forma financial information and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" of WRP Newco included elsewhere in this Joint Proxy
Statement/Prospectus/ Information Statement.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Tax exempt mortgage note payable........................ $14,755 $ 14,755
Credit facility......................................... 45,000
------- --------
Total debt.......................................... $14,755 $ 59,755
======= ========
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value per share; 200,000,000
shares
authorized--4,899,965 shares issued and outstanding, as
adjusted............................................... $ -- $ 49
Capital in excess of par value.......................... 51,060
------- --------
Total stockholders' equity.......................... 30,005 51,109
------- --------
Total capitalization................................ $44,760 $110,864
======= ========
</TABLE>

WRP NEWCO DIVIDEND POLICY

WRP Newco does not currently contemplate paying dividends on WRP Newco
Common. Earnings from the investments of WRP Newco are currently expected to
be used by WRP Newco to finance future acquisitions and investments. The Board
of Directors of WRP Newco may determine in its discretion to pay dividends on
WRP Newco Common in the future, and any such determination will be dependent
upon WRP Newco's results of operations, financial condition, contractual
restrictions and other factors deemed relevant at that time by the WRP Newco
Board of Directors.

WRP NEWCO'S BUSINESS AND PROPERTIES

WRP Newco's initial assets will consist primarily of five office properties
consisting of six buildings; the 277 Park Loan; the Sonterra Loan and the
Sonterra Option; and an approximately 80% interest in Phases I and II of, and
in options to acquire and develop Phases III, IV and V of, Palomino Park. Set
forth below is a brief description of these assets and WRP Newco's plans with
respect thereto.

In the opinion of WRP Newco's management, all of the properties described
below are adequately covered by insurance.

WELLSFORD COMMERCIAL PROPERTIES

WRP Newco recently completed the acquisition of four commercial properties
and expects to acquire a fifth commercial property in April 1997 pursuant to
an existing contract. All the properties are located in suburban areas of
Northern New Jersey. These properties contain in the aggregate six office
buildings with approximately 940,400 gross square feet (or approximately
913,000 net rentable square feet) located on approximately 260 acres. The
aggregate purchase price for these properties is approximately $47.6 million
or approximately $50 per gross square foot of building area. None of the
properties is encumbered by mortgage liens. It is currently anticipated that
WRP Newco will invest approximately $13.7 million (approximately $15 per gross
square foot of building) for renovation and repositioning of the properties,
and will pay approximately $18.5 million (approximately $20 per gross square
foot of building) for tenant improvements and leasing costs, for a total cost
to WRP Newco of approximately $80 million. These acquisitions represent
opportunities which WRP Newco believes are impractical for REITs because they
provide little or no immediate cash return.

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Point View Office Complex

WRP Newco acquired the Point View office complex ("Point View") located in
Wayne, N.J. in February 1997. Point View, formerly the international
headquarters for American Cyanamid Company, consists of (i) a main campus
consisting primarily of two office buildings (the "Main Campus"); and (ii) two
smaller office buildings, located at 1700 and 1800 Valley Road. All the
buildings are currently vacant. It is expected that renovations to each of
these buildings will be completed by the end of 1997.

The Main Campus

The Main Campus consists of two parcels: (i) one parcel of approximately 194
acres on which two buildings consisting of an aggregate of approximately
560,000 gross square feet (approximately 530,000 net rentable square feet) are
situated and (ii) an approximately 10 acre site directly across from the
entrance to the two buildings which is zoned for approximately 7-8 single
family houses and has no existing structures. The 194-acre parcel is zoned for
the development of an additional 1 million square feet of office or research
space. The larger of the two buildings on the Main Campus (the "Serpentine
Building") was constructed in 1962, is of class B+ quality, four stories high
and contains approximately 400,000 gross square feet. The Serpentine Building
contains a fully functional cafeteria area seating 800, separate executive
officer tower, separate executive dining area and overlooks a large reservoir
and the heliport for the complex. The smaller building (the "West Building")
was constructed in 1976, is of class A quality, six stories high and contains
approximately 160,000 gross square feet. The West Building is connected to the
Serpentine Building by an underground passageway and has a (primarily)
moveable wall interior partitioning system, a fitness center and an
auditorium. There are 1,720 parking spaces currently serving both buildings.

On a pro forma basis, the Main Campus had a federal tax basis equal to its
purchase price of $15.8 million at December 31, 1996, and will be depreciated
straight-line over a 40-year estimated life. The current annual real estate
taxes on the Main Campus are $1.2 million, subject to pending negotiations
with the municipality of Wayne to reduce such taxes.

WRP Newco currently contemplates a number of renovations to the Serpentine
Building and the West Building to, among other things, refurbish the exterior,
add new elevators, and renovate the lobby and other common areas. Other
renovations will (i) enable the buildings to comply with current life safety
and ADA requirements and become more energy efficient; and (ii) eliminate
potentially hazardous materials (such as spray-on asbestos fireproofing in the
Serpentine Building's structure). Removal of the spray-on asbestos fire
proofing will cost approximately $3.5 million, and the estimated total cost of
all planned renovations will be approximately $9.1 million. WRP Newco will
finance the renovations from its working capital and its WRP Newco Line of
Credit.

The purchase price for the Main Campus was $15.8 million, or $28.00 per
gross square foot of building area, and together with the cost of planned
renovations, is expected to be $44.00 per gross square foot.

1700 Valley Road

The 1700 Valley Road building consists of 70,600 gross square feet
(approximately 67,000 net rentable square feet), is of class B+ quality, is
two stories high and is situated on a wooded nine acre site. The building was
constructed in two stages, during 1972 and 1979, and the interior was
completely refurbished in 1993. The building contains a full service dining
area and 294 parking spaces. WRP Newco contemplates renovation of the
building's facade, upgrading of the HVAC system and various cosmetic
improvements. The estimated cost of planned renovations is $200,000, and WRP
Newco will finance such renovations from its working capital and its WRP Newco
Line of Credit. The property is zoned for the development of an additional
50,000 square feet of office space.

The purchase price for 1700 Valley Road was $1.0 million, or $14.00 per
gross square foot of building area, and together with the cost of planned
renovations, is expected to be $17.00 per gross square foot.

1800 Valley Road

The 1800 Valley Road building consists of 54,800 gross square feet
(approximately 53,000 net rentable square feet), is of class B+ quality, is
two stories high and is situated on a wooded 14 acre site. The building was
constructed in 1980, contains a full service dining area and has 260 parking
spaces. WRP Newco contemplates replacing the roof and upgrading the HVAC
system, and other renovations to comply with existing life safety and ADA
codes. The estimated cost of planned renovations is $800,000, and WRP Newco
will finance such renovations from its working capital and its WRP Newco Line
of Credit. WRP Newco currently contemplates marketing this building primarily
for sale.

The purchase price for 1800 Valley Road was $2.0 million, or $36.00 per
gross square foot of building area, and together with the cost of planned
renovations, is expected to be $51.00 per gross square foot.

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Greenbrook Corporate Center

WRP Newco acquired The Greenbrook Corporate Center ("Greenbrook") in
Fairfield, N.J. in April 1997. Greenbrook consists of (i) a class A suburban
three-story office building with approximately 190,000 gross square feet
situated on approximately 20 acres and (ii) a contiguous undeveloped
approximately seven acre parcel zoned for development of an additional 50,000
square feet of office and light industrial use. The entrance to the building
is a 35-foot atrium lobby and the second and third floors have terraces
overlooking a park and country club which border the rear of the site. WRP
Newco intends to spend approximately $500,000 to renovate the building, and
WRP Newco will finance such renovations from its working capital and its WRP
Newco Line of Credit. The renovations are expected to be completed by October
1997.

Greenbrook, as WRP Newco's only occupied commercial property, accounted for
50% of WRP Newco's pro forma revenues during the year ended December 31, 1996.
The occupancy rate for Greenbrook as of April 1, 1997 was approximately 85.7%,
and the average annual gross rent per square foot as of such date was
approximately $20. The current asking gross rental rate per square foot is
approximately $23. On a pro forma basis, Greenbrook had a federal tax basis
equal to its purchase price of $23.7 million at December 31, 1996, and will be
depreciated straight-line over a 40-year estimated life. The current annual
real estate taxes on Greenbrook are approximately $428,000.

Greenbrook's two largest tenants are Information Resources, Inc. ("IRI"), a
market research firm, and S.B. Thomas Division of CPC International, whose
principal business is producing baked foods. IRI occupies 64,676 rentable
square feet, with an annual rent of approximately $1.3 million (or
approximately $20 per rentable square foot), under a lease that expires
December 2003. The annual rent to be paid by IRI increases over the term of
the lease to approximately $1.5 million (or approximately $23.5 per rentable
square foot) by its expiration in December 2003. S.B. Thomas occupies 49,384
rentable square feet with an annual rent of approximately $.9 million (or $19
per rentable square foot), under a lease that expires in 2005. S.B. Thomas has
the right to renew for two successive periods of five years each, at 95% of
the fair market value rent as of October 1st of the last lease year prior to
commencement of each renewal term. Greenbrook has nine additional tenants,
with aggregate annual rents of approximately $1.2 million.

The purchase price for this property was $23.7 million payable in cash, or
$125.00 per gross square foot of building area, and together with the cost of
planned renovations, is expected to be $127.00 per gross square foot.

Chatham, New Jersey

In January 1997, WRP Newco acquired a class A three-story suburban office
building consisting of approximately 65,000 gross square feet (approximately
63,300 net rentable square feet) located on approximately five acres in
Chatham, New Jersey.

WRP Newco currently intends to spend approximately $3.1 million to make
various renovations to upgrade the building's status including, among other
things, to add a first class lobby and improve other common areas, renovate
the facade and replace the HVAC system and provide landscaping. WRP Newco will
finance such renovations from its working capital and the WRP Newco Line of
Credit, and the renovations are expected to be completed by the end of the
third quarter of 1997. WRP Newco is currently marketing the building for
rental.

WRP Newco has entered into a lease with Quadrant HealthCom Inc., a publisher
of medical specialty magazines, for approximately 22,000 gross square feet in
the building which is approximately 33% of the gross leasable area of the
building. The lease is for a term of ten years (terminable after seven years
upon payment of six months' rent) at $26.00 per gross square foot for years 1-
5 and at approximately $28.00 per gross square foot for years 6-10.

The purchase price for the property was $5.1 million, or $78.00 per gross
square foot of building area, and together with the cost of planned
renovations, is expected to be $126.00 per gross square foot.

WELLSFORD HIGH YIELD INVESTMENT PORTFOLIO

277 Park Loan

WRP Newco and Bank of Boston are expected to enter into an $80 million loan
transaction (the "277 Park Loan") in April 1997 with entities which own
substantially all of the equity interests (the "Equity Interests") in the
entity which owns a 52-story, approximately 1.75 million square foot gross
leasable area, class A office building located in New York City in mid-town
Manhattan at 277 Park Avenue (the "277 Park Property"). WRP Newco and Bank of
Boston will lend $20 million and $60 million, respectively, pursuant to the
277 Park Loan. The 277 Park Loan will be secured primarily by a pledge of the
Equity Interests owned by the borrowers. There will also be a limited
guarantee from the individual who indirectly owns all the Equity Interests.
The 277 Park Loan will be subordinated to a 10-year $345 million first
mortgage loan (the "REMIC

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Loan") on the 277 Park Property, the proceeds for which will be obtained by
the sale of investment grade rated commercial mortgage pass-through
certificates in a real estate mortgage investment conduit. The notes
representing the REMIC Loan will bear interest at different rates which are
expected to equate to a weighted average interest rate of approximately 7 3/4%
per annum. The 277 Park Loan will bear interest at the rate of approximately
12% per annum for the first nine years of its term and at a floating annual
rate during the tenth year equal to LIBOR plus 5.15% or Bank of Boston base
rate plus 5.15%, as elected by the borrowers. Interest on the 277 Park Loan
will be payable monthly to the extent of available cash after payment of
interest on the REMIC Loan and the funding of various reserve accounts under
the REMIC Loan and provided there is no event of default under the REMIC Loan.
To the extent funds are not available to pay interest at a rate in excess of
10% per annum, such excess interest will accrue and be added to the principal
amount of the 277 Park Loan. The principal amount of the 277 Park Loan and all
accrued interest will be payable on May 1, 2007 which is also the due date of
the REMIC Loan. The 277 Park Loan will be prepayable only in full and then
only after the fifth year of the loan and must be repaid if the REMIC Loan is
repaid or the 277 Park Property is sold. Any prepayment during the sixth
through ninth years of the loan must be accompanied by a yield maintenance
payment.

The 277 Park Property is currently 100% leased to 33 tenants, including
Donaldson, Lufkin & Jenrette, Inc. which has leased approximately 47% of the
gross leasable area pursuant to a lease expiring in 2016. The 277 Park
Property was appraised for $555 million as of July 1, 1996 by an independent
nationally recognized appraiser. The appraisal was not prepared on behalf of
WRP Newco. An appraisal is an opinion of value made by experts, subject to the
assumptions and limiting conditions contained therein (including assumptions
relating to the discounted cash flow analysis contained therein).

Sonterra Assets

Sonterra Loan

WRP Newco will hold a $17.8 million mortgage loan made to the owner of
Sonterra, a 344-unit class A multifamily apartment complex located in Tucson,
Arizona, construction of which was completed in June, 1996. The Sonterra Loan
was originated in July, 1996 and the principal amount thereof is due on July
1, 1999. Until the maturity date, the borrower is to pay interest only,
monthly, at the rate of 9% percent per annum. The loan is non-recourse and
repayment of the loan is secured by a first mortgage on Sonterra and by a
personal guaranty of an individual affiliated with the owner. Under certain
circumstances, prepayment of the loan is subject to a prepayment premium equal
to 5% percent of the principal amount of the loan.

Sonterra Option Agreement

WRP Newco will also own an option to acquire Sonterra free and clear of all
mortgages and other material liens for approximately $20.5 million through
December 31, 1997 and for approximately $21 million if the sale is consummated
during 1998. ERP Operating Partnership will have a right of first offer to
acquire the Sonterra Option and a right to acquire the option if WRP Newco
does not exercise it. If WRP Newco acquires Sonterra, then WRP Newco and ERP
Operating Partnership will enter into a "Right of First/Last Offer Agreement"
in substantially the same form as the Right of First/Last Offer Agreement
entered into pursuant to the Agreement Regarding Palomino Park. See "Certain
Agreements Between WRP Newco and ERP Operating Partnership--Agreement
Regarding Palomino Park".

WELLSFORD PROPERTY DEVELOPMENT

Palomino Park

Palomino Park is a master planned five-phase multifamily development project
comprising approximately 182 acres, of which 65 acres have been developed, in
suburban South East Denver, Colorado, about 14 miles from Denver's central
business district. It is situated within Highlands Ranch, a 22,000 acre master
planned community. Palomino Park is intended to be developed as an integrated
project comprising an 1,880-unit, class A multifamily apartment community
constructed around a centrally located 24 acre park which will feature tennis
courts, athletic fields, a putting green and an amphitheater. There is also a
29,000 square foot recreation center which has been completed and which
includes a full-size gymnasium, fitness center, indoor golf range, racquet
ball courts, and a baby-sitting facility and has an adjacent swimming pool.
Palomino Park will also have a perimeter wall with a guard at the entry gate.

Wellsford Park Highlands Corp. ("WPHC"), a wholly-owned subsidiary of
Wellsford, acquired fixed-price options in 1995 to purchase the land
underlying each of the phases (hereinafter referred to collectively as
"Phases" or individually as a "Phase" or specifically as "Phase I," "Phase
II," "Phase III," "Phase IV" or "Phase V") of Palomino Park. The land
underlying Phases I and II has been acquired, and WRP Newco intends to acquire
the land underlying Phase III, which is subject to an option which expires in
May, 1997. The land underlying Phases IV and V is subject to options which
expire in May, 1998 and May, 1999, respectively. There can be no assurance
that Phase III, Phase IV or Phase V will be commenced

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or if commenced, that it will be completed. See "WRP Newco Risk Factors--Risks
of Acquisition, Development, Construction and Renovation Activities". The
purchase price for land acquired with respect to any Phase is $73,500 per
acre, subject to an increase of the purchase price by 6% per annum from and
after November 30, 1994. The land options should reduce WRP Newco's exposure
to market cycles in Denver while enabling WRP Newco to develop a signature
residential community in one of the fastest growing counties in the country.

Upon completion of any or all of the Phases, WRP Newco will either operate
and rent apartment units or convert all or a portion of them to condominium
ownership which a REIT also could not do because of the adverse tax
consequences thereof.

The development of Palomino Park calls for construction of the 1,880 units
over a period of five years at a total estimated cost of $194 million. WRP
Newco currently has invested $21.3 million in the development of Palomino
Park.

Phase I, referred to as Blue Ridge, will consist of 456 units of which 192
are constructed, 175 are leased and 143 are occupied. Rents range from $760
per month for a one bedroom, one bathroom to $1,375 per month for a three
bedroom, two bathroom unit. Garages are available and washer and dryer hook-
ups exist in all the apartments. Completion of construction of this Phase is
expected in late 1997. The total estimated cost of Blue Ridge is approximately
$42.5 million.

Phase II, referred to as Red Canyon, is expected to consist of 304 units.
The total estimated cost of Red Canyon is approximately $33.6 million. Site
preparation for construction of Phase II has recently begun and construction
of Phase II is expected to be completed in late 1998.

Blue Ridge is owned by Park at Highlands LLC ("Phase I LLC"), a limited
liability company, the members of which are WPHC (99%) and Al Feld ("Feld")
(1%). Red Canyon is owned by Red Canyon at Palomino Park LLC ("Phase II LLC"),
a limited liability company, the members of which are WPHC (99%) and Feld
(1%). Al Feld is a Denver-based developer specializing in the construction of
luxury residential properties. He has constructed over 3,000 units since 1984.

Various development, construction and property management and guarantee
fees, as well as certain other fees designed to provide cost savings
incentives in connection with property construction and stabilization, are
paid to Feld and his affiliates. These amounts are included in the cost
estimates for Phase I and Phase II described above. Feld has unconditionally
guaranteed completion of Phase I within 30 months and Phase II within 24
months, in each case after closing of the construction loan, and has agreed to
a one-year guarantee of such Phases against construction defects. In addition,
in the case of both Blue Ridge and Red Canyon, Feld has agreed, subject to
certain conditions, to fund deficits in development and operating costs. To
secure his obligations to make deficit payments and perform all of his other
obligations under the operating agreements, Feld has pledged his interests in
Phase I LLC and Phase II LLC to WPHC.

The operating agreements provide that neither member may transfer, pledge or
assign its interest in the Phase I LLC or Phase II LLC without the consent of
the other member, except that (i) WPHC may transfer a portion of its interest
provided it retains at least a 21% interest in Phase I LLC or Phase II LLC, as
the case may be, and (ii) WPHC has an option to acquire Feld's 1% interest for
fair market value at any time after completion of the Phase, and Feld has an
option to compel WPHC to buy his 1% interest for fair market value upon
completion of the Phase.

The construction loan on Blue Ridge is for approximately $36.8 million,
matures on December 31, 1998, and bears interest at the prime rate, except
that the Phase I LLC may elect to cause a portion of the previously advanced
principal to bear interest at LIBOR plus 175 basis points. Feld has guaranteed
repayment of this loan. Phase II LLC expects to obtain a construction loan for
approximately $30 million to finance construction of Red Canyon.

Wellsford has agreed with the Phase I construction lender (the "Tri-Party
Agreement") to purchase the loan when due, assuming completion of
construction, if it is not paid off by the Phase I LLC or by Feld pursuant to
his guaranty, for the lesser of the loan balance or the final agreed upon
budget. Concurrently with the Merger, ERP Operating Partnership has agreed to
substitute itself for Wellsford under the Tri-Party Agreement, with the
consent of the Phase I construction lender. ERP Operating Partnership has
agreed to provide substantially similar credit support for the Phase II
construction loan as it has agreed to provide for the Phase I construction
loan. See "Certain Agreements Between WRP Newco and ERP Operating
Partnership--Agreement Regarding Palomino Park".

Palomino Park Public Improvements Corporation ("PPPIC"), a Colorado non-
profit corporation, has issued $14.8 million of tax exempt bonds due on
December 1, 2035 (the "Bonds") to finance the development of the park and
certain parts of the infrastructure within Palomino Park, which have a total
cost of approximately $18.3 million. The Bonds bear interest at a floating
rate, which is currently approximately 4% per annum, but may be converted to a
term rate or a fixed rate. Subject to certain restrictions, revenue assessment
liens are imposed against the Phases to secure the obligation of the Phase
owners to repay the portion of the Bonds' debt service attributed by PPPIC to
their respective Phases.

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If it is determined to proceed with Phases III, IV and/or V, the ownership
and transaction structure of each such Phase is expected to be similar to that
of Phases I and II, although neither Wellsford nor Feld has any obligation to
continue the relationship for future Phases.

CASH

Approximately $18 million of cash will be contributed by Wellsford to WRP
Newco, a substantial portion of which will be applied to repay indebtedness
incurred to acquire WRP Newco's commercial properties.

LEGAL PROCEEDINGS

Neither WRP Newco nor the Properties are presently subject to any material
litigation nor, to WRP Newco's knowledge, is any material litigation
threatened against WRP Newco or the Properties, other than routine litigation
arising in the ordinary course of business and which is expected to be covered
by liability insurance.

CERTAIN AGREEMENTS BETWEEN
WRP NEWCO AND ERP OPERATING PARTNERSHIP

The following describes certain aspects of the agreements to be entered into
by WRP Newco and ERP Operating Partnership on the Effective Date. The
following descriptions do not purport to be complete and are qualified in
their entirety by reference to the full text of the agreements, which are
filed as exhibits to the registration statement on Form 10 filed by WRP Newco.

COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT

Following the Distribution and upon consummation of the Merger, WRP Newco
will enter into the Stock Purchase Agreement with ERP Operating Partnership,
providing for the sale of WRP Newco Class A Common and WRP Newco Series A
Preferred to ERP Operating Partnership on the terms described below.

WRP Newco Class A Common Stock

Pursuant to the terms of the Stock Purchase Agreement, ERP Operating
Partnership will purchase from WRP Newco upon the Closing Date shares of WRP
Newco Class A Common for an aggregate purchase price of $3.5 million at a
price per share equal to the Issuance Price. The "Issuance Price" is defined
in the Stock Purchase Agreement as (a) the average gross purchase price of WRP
Newco Common Stock sold to institutional purchasers on or prior to the Closing
Date or subject to written commitments to purchase WRP Newco Common Stock from
institutional purchasers received on or prior to the Closing Date
(collectively "Institutional Sales") or (b) if there are no Institutional
Sales, the net book value per share of WRP Newco Common Stock on the Closing
Date.

For a description of the WRP Newco Class A Common, see "Description of
Capital Stock of WRP Newco--Class A Common Stock".

WRP Newco Series A Preferred Stock.

Pursuant to the terms of the Stock Purchase Agreement, ERP Operating
Partnership will agree to purchase from WRP Newco up to 1,000,000 shares of
WRP Newco Series A Preferred at $25.00 per share as requested by WRP Newco
over the three-year period (the "Commitment Period") commencing on the Closing
Date. Purchases of Class A Preferred are to be in minimum aggregate amounts of
$1 million and in multiples of $500,000 in excess thereof. The obligations of
ERP Operating Partnership to acquire WRP Newco Series A Preferred are subject
to, among other matters, certain representations and warranties being true and
correct in all material respects and there being no event of default existing
under the Stock Purchase Agreement.

For a description of the WRP Newco Series A Preferred, see "Description of
Capital Stock of WRP Newco--Series A 8% Convertible Redeemable Preferred
Stock".

WRP Newco Board Member Elected by ERP Operating Partnership.

On the Closing Date, ERP Operating Partnership, as the holder of WRP Newco
Class A Common, is entitled to elect Douglas Crocker II, President of EQR, to
the WRP Newco Board of Directors. In the event Mr. Crocker (or other person
subsequently elected by ERP Operating Partnership to the WRP Newco Board of
Directors) is unable or unwilling to serve

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as a director or is no longer employed by ERP Operating Partnership, ERP
Operating Partnership and WRP Newco will agree to the election of another
member of senior management of ERP Operating Partnership to the WRP Newco
Board of Directors (Crocker or such other individual elected by WRP Newco
Class A Common shareholders, called the "Purchaser Director").

Voting of WRP Newco Class A Common and WRP Newco Series A Preferred.

For ten years after the Closing Date, WRP Newco has the right to direct the
voting of all shares of WRP Newco Series A Preferred, WRP Newco Class A Common
and WRP Newco Common owned by ERP Operating Partnership or any of its
affiliates, except as to the election of the Purchaser Director or any matter
relating to the rights, preferences and privileges of the WRP Newco Series A
Preferred or the WRP Newco Class A Common.

Sale of Stock.

For ten years after the Closing Date, ERP Operating Partnership shall first
offer, in writing (a "Notice of Proposed Sale"), to sell any shares of WRP
Newco Common, WRP Newco Class A Common, WRP Newco Series A Preferred or
warrants to purchase WRP Newco Common owned by it to WRP Newco prior to
selling such shares to any other entity. If WRP Newco has not agreed to
purchase such shares within 20 days of receipt of such notice, ERP Operating
Partnership shall have the right to sell such shares to any other entity for a
period of 90 days provided any sale is made on terms and conditions no more
favorable to such entity than specified in the Notice of Proposed Sale.

Events of Default.

An event of default occurs under the Stock Purchase Agreement upon the
occurrence of any of the following events, among others: (i) a judgment for
the payment of money in an aggregate amount in excess of $250,000 is rendered
against WRP Newco and such judgement remains undischarged for 30 days; (ii) a
change in control of WRP Newco (as defined in the Stock Purchase Agreement);
(iii) WRP Newco fails to pay the dividend on the WRP Newco Series A Preferred
on three separate instances; or (iv) a change resulting in or that could
reasonably be expected to result in a material adverse effect on WRP Newco.

Remedies.

Upon the occurrence of an event of default, all obligations of ERP Operating
Partnership to purchase shares of WRP Newco Series A Preferred automatically
terminate unless WRP Newco delivers a notice to ERP Operating Partnership
requesting the purchase by ERP Operating Partnership of WRP Newco Series A
Preferred, and the proceeds of such sale would cure such event of default. In
addition, in the event of the bankruptcy of WRP Newco or if WRP Newco fails to
pay the dividend on the WRP Newco Series A Preferred on three separate
instances, ERP Operating Partnership has the right to cause WRP Newco to
purchase the WRP Newco Series A Preferred then held by ERP Operating
Partnership.

REGISTRATION RIGHTS AGREEMENT

Upon issuance of the WRP Newco Class A Common, WRP Newco and ERP Operating
Partnership will enter into a Registration Rights Agreement providing for
registration rights at WRP Newco's expense with respect to shares of WRP Newco
Class A Common, WRP Newco Series A Preferred and WRP Newco Common.

Demand Registration.

After the Effective Date, upon request (a "Demand Notice") of ERP Operating
Partnership, WRP Newco has agreed to file a registration statement providing
for the resale by ERP Operating Partnership of Registrable Securities and will
use its best efforts to cause any such registration statement to be declared
effective by the Commission. "Registrable Securities" means any of: (i) WRP
Newco Series A Preferred issuable or issued; (ii) WRP Newco Common issuable or
issued upon conversion of shares of WRP Newco Series A Preferred or WRP Newco
Class A Common, or (iii) WRP Newco Common issuable or issued upon the exercise
of warrants issued pursuant to the Articles Supplementary. WRP Newco is
entitled to postpone for a reasonable period of time (but not in excess of 60
days) the filing of any registration statement, if the Board of Directors of
WRP Newco determines that such registration and offering would materially
interfere with any proposed material transaction involving WRP Newco.

ERP Operating Partnership has the right to deliver one Demand Notice during
any calendar year, but not more than four Demand Notices during the period
ending five years from the Effective Date.

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Incidental Registration.

If WRP Newco proposes to register any WRP Newco Common for public sale
pursuant to an underwritten offering it will give prompt written notice (a
"Registration Notice") to ERP Operating Partnership and upon request from ERP
Operating Partnership, WRP Newco will include Registrable Securities in the
registration statement. WRP Newco will not be required to effect any
registration if WRP Newco is advised by a nationally recognized independent
investment banking firm selected by WRP Newco to act as lead underwriter, that
a registration at that time of additional securities would materially and
adversely affect the offering.

ERP Operating Partnership has the right to deliver one Registration Notice
during any calendar year, but not more than four Registration Notices during
the period ending five years from the Effective Date.

Limit in Aggregate Amount.

WRP Newco need not register Registrable Securities pursuant to a Demand
Notice or Registration Notice unless the Registrable Securities being
registered have an aggregate fair market value of (i) $5,000,000 during the
period ending three years from the Effective Date ("Initial Period"), or (ii)
$7,500,000 at any time after the Initial Period.

Lockup.

In the event WRP Newco proposes to effect the distribution of its securities
through an underwritten public offering, beginning seven days prior to the
pricing of such offering and ending thirty days after such pricing, ERP
Operating Partnership, in the event it beneficially owns in excess of 100,000
shares, will cease any sale or other disposition of any of the Registrable
Securities, if requested by WRP Newco; provided, however, that ERP Operating
Partnership will not be subject to more than one lockup period during any 12
month period.

AGREEMENT REGARDING PALOMINO PARK

General.

Upon consummation of the Merger, WRP Newco and ERP Operating Partnership
will become the shareholders in WPHC. Pursuant to the Contribution and
Distribution Agreement, Wellsford will contribute to WRP Newco 80% of its
shares of WPHC, consisting of voting Class A Shares (the "Class A Shares").
The remaining 20% of Wellsford's shares in WPHC, consisting of non-voting
Class B Shares (the "Class B Shares"), will be retained by Wellsford and,
following the Merger, will be owned by ERP Operating Partnership. WPHC,
together with Feld, are the two members of the limited liability companies--
Park at Highlands LLC and Red Canyon at Palomino Park LLC--which own Phase I
and Phase II, respectively. WRP Newco and ERP Operating Partnership will enter
into an agreement (the "Palomino Agreement") regarding their rights and
obligations as shareholders of WPHC and certain aspects of the development of
Palomino Park, including Phases I (Blue Ridge) and II (Red Canyon). Certain of
the terms are summarized below.

Capital Contributions.

WPHC is obligated to make capital contributions to the Phase I LLC and Phase
II LLC for certain acquisition costs, and to fund the deficit between
construction costs and construction loan proceeds, respectively. These
subsequent capital contribution obligations ("Phase Contributions") are
limited to the deficits as projected in the budgets originally adopted for
each Phase. Wellsford has guaranteed the Phase Contributions, which
guarantees, following the Merger and with the consent of Feld, will be assumed
by WRP Newco.

ERP Operating Partnership has no obligation to contribute capital to WPHC.

Issuance of Additional WPHC Shares to WRP Newco; Anti-Dilution Provisions.

If additional shares of WPHC are issued to WRP Newco or to one of its
subsidiaries, ERP Operating Partnership will have the right to purchase a
sufficient number of such shares to retain a 20% interest in WPHC. Any Class A
Shares acquired by ERP Operating Partnership will be converted into Class B
Shares.

Offers to Purchase Class A Shares or Class B Shares; Rights of First Refusal;
WRP Newco's Drag Along Right.

ERP Operating Partnership may transfer all, but not part, of its Class B
Shares, except in a Tag Along transaction (described below).

WRP Newco may transfer all or part of its Class A Shares after the
expiration of the lock-up period (i.e., the period during which ERP Operating
Partnership is liable to the construction lender under a Tri-Party Agreement,
as described below).

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If WRP Newco receives an offer to purchase all of the Class A Shares, WRP
Newco has the right ("Drag Along Right") to compel ERP Operating Partnership
to sell all of its Class B Shares as part of that transaction to enable WRP
Newco to effectuate a total sale of WPHC to a third party.

If ERP Operating Partnership or WRP Newco shall receive an offer from a bona
fide third party to purchase all (or in the case of WRP Newco any part) of
their shares in WPHC, then the selling shareholder shall be obligated to offer
to sell its shares to the other shareholder (i.e. the non-selling shareholder)
who shall have a preemptive right ("Right of First Refusal") to purchase the
offered shares on the same terms.

ERP Operating Partnership may exercise its Right of First Refusal as to the
Class A Shares, notwithstanding that WRP Newco may have exercised its Drag
Along Right. In such event and for such purpose, WRP Newco's Class A Shares
shall be valued as if all of the shares of WPHC had been sold, and not only
the Class A Shares alone.

ERP Operating Partnership's Tag Along Right.

ERP Operating Partnership has a right ("Tag Along Right") to compel WRP
Newco to include ERP Operating Partnership's Class B Shares in a sale of the
Class A Shares, in such amount as will preserve the 80%-20% ratio between the
Class A Shares held by WRP Newco and Class B Shares held by ERP Operating
Partnership.

The Put/Call Feature of One-Half of the Class B Shares.

One-half of ERP Operating Partnership's Class B Shares (the "Put/Call
Shares") are subject to a Put/Call agreement in favor of either ERP Operating
Partnership (the Put feature) or WRP Newco (the Call feature) at the Put/Call
Price.

Pursuant to its Put right, ERP Operating Partnership may compel WRP Newco to
purchase from ERP Operating Partnership the Put/Call Shares at any time after
the fifth year for the Put/Call Price.

Pursuant to its Call right, WRP Newco may compel ERP Operating Partnership
to sell to WRP Newco the Put/Call Shares at any time for the Put/Call Price.

The Put/Call Price equals $1.9 million (adjusted, in the case of the Call,
for inflation after the fifth year), less any amounts previously received by
ERP Operating Partnership from sale and refinancing proceeds.

Consistent with the foregoing, one-half of the Class B Shares in any sale
transaction effected by means of either the Drag Along Right or the Tag Along
Right is deemed Put/Call Stock and entitled to receive the greater of the
purchase price in such transaction or a pro-rated portion of the Put/Call
Price.

Future Acquisitions of the Remaining Overall Property.

Any future Phase acquired by WPHC will be acquired in a Colorado limited
liability company substantially similar to the Phase II LLC.

ERP Operating Partnership's Right of First Offer if WPHC Elects to Assign its
Interest in the Land Contract.

If WRP Newco, through WPHC, decides not to acquire a future Phase and
instead to assign the land contract to a third party for such future Phase,
then ERP Operating Partnership, subject to the similar interests of Feld, has
a preemptive right of first offer with respect to such proposed assignment.

ERP Operating Partnership's Right of First/Last Offer for Sale of Blue Ridge
and Red Canyon.

With the exception of sales pursuant to a condominium or townhome plan, ERP
Operating Partnership is accorded certain rights of first and last offer with
respect to a sale of either WPHC's interest in the Phase I LLC or the Phase II
LLC, or the sale of fee title to Phase I or Phase II by either of said
entities.

WRP Newco and WHPC Loss of Control.

WRP Newco has agreed not to lose its controlling interest in WPHC nor to
permit WPHC to lose its controlling interest in Phase I LLC, Phase II LLC or
any future entity formed with respect to another phase of Palomino Park
without first releasing ERP Operating Partnership from its obligations with
respect to the Credit Enhancement Agreement and ERP Guaranty (as defined
below).

Tri-Party Agreements and Standby Agreements.

Phase I Tri-Party Agreement. With respect to the development of Phase I,
NationsBank, N.A. ("NationsBank") has provided a construction loan of
approximately $36.7 million. Wellsford, PPPIC and NationsBank have entered
into an

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agreement ("Phase I Tri-Party Agreement") under which Wellsford has agreed,
assuming completion of construction, if the loan is not paid when due, to pay
NationsBank the lesser of the loan balance or the final agreed upon budget.
Upon consummation of the Merger, ERP Operating Partnership will, with the
consent of NationsBank, assume Wellsford's obligations under the Phase I Tri-
Party Agreement.

Phase II Tri-Party Agreement. With respect to the development of Phase II, a
construction loan has not yet been obtained. ERP Operating Partnership has
agreed to provide substantially similar credit support for the Phase II
construction loan ("Phase II Tri-Party Agreement") as it has agreed to provide
pursuant to the Phase I Tri-Party Agreement. ERP Operating Partnership will
receive a fee of (i) 1% of the committed construction loan amount for each of
the first two years and (ii) 1 1/2% of such amount for the third year. The
parties anticipate a construction loan of approximately $30 million.

The Standby Agreements. If ERP Operating Partnership does, in fact, pay off
the construction loan pursuant to its obligations under the Phase I Tri-Party
Agreement or Phase II Tri-Party Agreement, ERP Operating Partnership shall be
entitled to acquire fee title to the corresponding Phase for $100.

Events of Default. Upon an event of default (as described below), ERP
Operating Partnership may exercise all remedies available to it and shall have
no obligation to enter into the Phase II Tri-Party Agreement; provided,
however, ERP Operating Partnership may not disaffirm its obligations under the
Phase I Tri-Party Agreement or, if entered into prior to the event of default,
the Phase II Tri-Party Agreement. An event of default includes, among other
things, a material misrepresentation by WRP Newco, failure to make payments
after a material default by WRP Newco under the Palomino Agreement or any
document entered into pursuant to the Palomino Agreement, an undischarged
judgment against WRP Newco in excess of $250,000 and a change in control of
WRP Newco.

CREDIT ENHANCEMENT AGREEMENT

At the time of the Contribution and Distribution, with the consent of
Dresdner Bank, AG, NY Branch ("Dresdner"), WRP Newco will assume Wellsford's
obligations under a certain agreement (the "Bank Reimbursement Agreement")
entered into between PPPIC, Wellsford and Dresdner pursuant to which (i)
Dresdner has issued its letter of credit ("Dresdner Letter of Credit") to
insure the repayment of the Bonds and (ii) Wellsford has undertaken to
reimburse Dresdner if the Dresdner Letter of Credit is drawn upon.

ERP Operating Partnership has agreed to enter into a Credit Enhancement
Agreement with WRP Newco (the "Credit Enhancement Agreement") under which,
assuming the satisfaction of certain conditions, ERP Operating Partnership
will make its own credit available to Dresdner in the form of a guaranty to
Dresdner of WRP Newco's obligations under the Bank Reimbursement Agreement for
a period of eight years from the consummation of the Merger (the "ERP
Guaranty").

The ERP Guaranty will be revised and made available with respect to any
similar letter of credit or credit facility issued in lieu or replacement of
the Dresdner Letter of Credit.

WRP Newco has agreed to pay ERP Operating Partnership for the ERP Guaranty
an annual credit enhancement fee, payable quarterly, equal to .5% of the face
amount of the Dresdner Letter of Credit (or the face amount of any alternate
credit arrangement). Following an event of default by WRP Newco, ERP Operating
Partnership will have the right, among other remedies, to select an alternate
interest rate on the Bonds and to direct the actions of PPPIC under the Credit
Enhancement Agreement. In addition, pursuant to the Credit Enhancement
Agreement there are certain restrictions on the ability to convert the rate
mode of the Bonds. WRP Newco has agreed to reimburse ERP Operating Partnership
for any amounts it pays under the ERP Guaranty or any revision thereof,
together with interest on such amount.

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES OF WRP NEWCO

The following is a discussion of WRP Newco's investment policies, financing
policies and policies with respect to certain other activities. WRP Newco's
policies with respect to these activities have been determined by the
directors of WRP Newco and may be amended or revised from time to time at the
discretion of the directors without a vote of the stockholders of WRP Newco.

INVESTMENT POLICIES

WRP Newco intends to invest in real estate directly or indirectly through
entities that engage in real estate-related activities. These investments may
be in the form of debt or equity.

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Debt investments may include the purchasing of mortgage loans, other
financial instruments collateralized by real estate or real estate interests,
or participations therein, real property tax liens or tax-exempt bonds
collateralized by real estate or tax-increment finance districts. These debt
instruments may be senior, junior or otherwise subordinated to the interests
of others. Further, WRP Newco may provide credit enhancement or guarantees of
the obligations of others involved in real estate-related activities. WRP
Newco may also invest in participating or convertible mortgages if WRP Newco
concludes that it may benefit from the cash flow and/or any appreciation in
the value of the property. Such mortgages may be similar to equity
participations. WRP Newco may also make mortgage loans or participate in such
loans and contemporaneously or otherwise obtain related property purchase
options.

Equity investments may include development projects directly or through
joint ventures, as well as the purchase of general or limited partnership
interests in limited partnerships, shares in publicly-traded or privately-held
corporations or interests in other entities that own real estate, make real
estate-related loans or invest in real estate-related debt instruments or
provide services or products to the real estate industry. WRP Newco intends to
engage in active real estate businesses, which may include land subdivisions,
condominium conversions, property sales, and other businesses considered
ineligible or impractical investments for REITs. WRP Newco may also hold real
estate or interests therein for investment. WRP Newco may purchase
substantially leased, mostly unleased or vacant properties of any type or
geographic location. WRP Newco intends to renovate and re-lease the mostly
unleased or vacant properties.

The activities described above often do not generate immediate cash flow,
and cash flow generated may be non-recurring. These investments may be subject
to existing debt financing and any such financing will have a priority over
the equity interests of WRP Newco.

WRP Newco may offer to exchange its securities for properties and securities
of other entities. Further, it may, from time to time, repurchase its shares.
WRP Newco will seek investments generally with a duration of one to five
years.

FINANCING POLICIES

WRP Newco will seek to finance its investments through both public and
private secured and unsecured debt financings, as well as public and private
placements of its equity securities. The equity securities will include both
common and preferred equity issuances. WRP Newco does not have a policy
limiting the number or amount of mortgages that may be placed on any
particular property, but mortgage financing instruments usually limit
additional indebtedness on such properties. There are currently no
restrictions on the amount of debt that WRP Newco may incur.

Also, WRP Newco does not plan to distribute dividends for the foreseeable
future, which will permit it to accumulate for reinvestment cash flow from
investments, disposition of investments and other business activities.

WRP Newco has obtained a written commitment from Bank of Boston and Morgan
Guaranty for a $50 million two-year line of credit. This facility is subject
to certain financial and other covenants. In the future, WRP Newco may seek to
extend, expand, reduce or renew such facility, or obtain an additional or a
replacement facility. See "Wellsford Real Properties, Inc.--Initial Capital
and Financing".

POLICIES WITH RESPECT TO OTHER ACTIVITIES

WRP Newco does not intend to qualify as a REIT, but it may, from time to
time, invest in REITs, sell properties or entities to REITs for cash and/or
securities. Further, it may spin-off to its common stockholders, shares of its
subsidiaries or shares of other entities it has acquired through the sale of
its properties, investments or otherwise. These spin-offs may be taxable or
non-taxable, depending upon the facts and circumstances. WRP Newco's policies
with respect to its activities may be reviewed and modified from time to time
by WRP Newco's directors without notice to or vote of its stockholders.

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MANAGEMENT OF WRP NEWCO

DIRECTORS AND EXECUTIVE OFFICERS

The executive officers and directors of WRP Newco, their ages and their
positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION HELD
---- --- -------------
<S> <C> <C>
Jeffrey H. Lynford................ 49 Chairman of the Board, Secretary
and Director**
President, Chief Executive Officer and
Edward Lowenthal.................. 52 Director*
Gregory F. Hughes................. 33 Chief Financial Officer
David Strong...................... 38 Vice President for Development
Rodney F. Du Bois................. 60 Director*
Mark S. Germain................... 46 Director**
Frank J. Hoenemeyer............... 77 Director***
Frank J. Sixt..................... 45 Director***
Douglas J. Crocker II(1).......... 56 Proposed Director**
</TABLE>
- -------
*Term expires 1998
**Term expires 1999
***Term expires 2000
(1) Mr. Crocker will become a director upon consummation of the Distribution
and Merger and the purchase by ERP Operating Partnership of WRP Newco
Class A Common. Mr. Crocker will remain a director for a minimum of two
years, and thereafter so long as certain conditions are met. See
"Description of Capital Stock of WRP Newco--Class A Common Stock".

Jeffrey H. Lynford has been the Chairman of the Board, Secretary and
Director of WRP Newco since its formation in January 1997 and has been the
Chairman of the Board and Secretary of Wellsford since its formation in July
1992 and was the Chief Financial Officer of Wellsford from July 1992 until
December 1994. Mr. Lynford was the Chairman of the Board of WGI since its
formation in 1986. Mr. Lynford currently serves as a trustee emeritus of the
National Trust for Historic Preservation and as a director of four mutual
funds: Cohen & Steers Total Return Realty Fund, Inc., Cohen & Steers Realty
Shares, Inc., Cohen & Steers Realty Income Fund, Inc. and Cohen & Steers
Special Equity Fund, Inc. He is also a member of the New York bar. Prior to
founding WGI, Mr. Lynford gained real estate and investment banking experience
as a partner of Bear Stearns & Co. and a managing director of A.G. Becker
Paribas, Inc.

Edward Lowenthal has been the President, Chief Executive Officer and
Director of WRP Newco since its formation in January 1997 and has been the
President and Chief Executive Officer and a trustee of Wellsford since its
formation in July 1992 and was President of WGI since its formation in 1986.
Mr. Lowenthal currently serves as a director of United American Energy
Corporation, a developer, owner and operator of hydroelectric and other
alternative energy facilities, a director of Corporate Renaissance Group,
Inc., a mutual fund, a director of Omega Healthcare, Inc., a REIT, a director
of Great Lakes REIT, Inc., a REIT that owns and operates office buildings, and
a trustee of Corporate Realty Income Trust, a REIT. He is also a member of the
executive committee and The Board of Governors of the NAREIT. Prior to
founding WGI, Mr. Lowenthal gained real estate and investment banking
experience as a partner of Bear Stearns & Co., a managing director of A.G.
Becker Paribas, Inc., and a partner in the law firm of Robinson Silverman
Pearce Aronsohn & Berman.

Gregory F. Hughes has been the Chief Financial Officer of WRP Newco since
its formation in January 1997 and has been a Vice President--Chief Financial
Officer of Wellsford since December 1994. From March 1993 until December 1994
he was a Vice President and Chief Accounting Officer of Wellsford. During
1992, Mr. Hughes was a controller with Jones Lang Wootton Realty Advisors, a
firm that provides real estate asset management and investment consultation
services. From 1985 to 1991, Mr. Hughes was a manager with Kenneth Leventhal &
Company, a public accounting firm specializing in real estate and financial
services. Mr. Hughes is a certified public accountant.

David M. Strong has been a Vice President for Development of WRP Newco since
its formation in January 1997 and has been a Vice President of Wellsford since
July 1995. From July 1994 until July 1995 he was Acquisitions and Development
Associate of Wellsford. From 1991 to 1994, Mr. Strong was President and owner
of LPI Management, Inc., a commercial real estate company providing management
and consulting services. From 1984 to 1991, he was a senior executive with the
London Pacific Investment Group, a real estate development, investment and
management firm active in Southern California and Western Canada. From 1979 to
1984, Mr. Strong was a manager with Arthur Young, a public accounting firm.
Mr. Strong is a member of the Canadian Institute of Chartered Accountants.

116
<PAGE>

Rodney F. Du Bois will become a director of WRP Newco upon consummation of
the Distribution and has been a trustee of Wellsford since November 1992. Mr.
Du Bois also has been President and co-owner of Goshawk Corporation, which
provides finance and general corporate services, since 1982. Mr. Du Bois was a
founder of Mountain Cable Company, a cable TV multiple system operator, and
its Chairman from 1985 until the company's sale in 1988. Previously Mr. Du
Bois served as Executive Vice President and a director of C. Brewer and Co.,
Chairman of Alexander and Baldwin Agribusiness, Inc., a managing director of
Warburg, Paribas, Becker, Inc. and a Professor of Real Estate at the Amos Tuck
School of Business Administration at Dartmouth College.

Mark S. Germain will become a director of WRP Newco upon consummation of the
Distribution and has been a trustee of Wellsford since November 1992.
Currently he is employed by Olmstead Group L.L.C., which is a consultant to
biotechnology and other high technology companies. Mr. Germain also serves as
a board member of several privately held biotechnology companies. Previously,
from 1990 to 1994, Mr. Germain was employed by D. Blech & Company,
Incorporated, a merchant bank. From 1986 to 1989, he was President and Chief
Operating Officer of The Vista Organization, Ltd., and from 1989 to 1990, its
President and Chief Executive Officer. Mr. Germain was a partner in a New York
law firm prior to 1986.

Frank J. Hoenemeyer will become a director of WRP Newco upon consummation of
the Distribution and has been a trustee of Wellsford since November 1992. Mr.
Hoenemeyer also currently serves as a director of American International
Group, Inc., Mitsui Trust Bank (U.S.A.), W.P. Carey Advisors, Inc. and Carey
Fiduciary Advisors, Inc. (subsidiaries of W.P. Carey & Co., Inc.) and ARIAD
Pharmaceuticals, Inc. and as Vice Chairman of the Investment Committee of W.P.
Carey & Co., Inc. From 1947 to 1984, he was employed by The Prudential
Insurance Company of America where he served as Vice Chairman and Chief
Investment Officer prior to his retirement.

Frank J. Sixt will become a director of WRP Newco upon consummation of the
Distribution and has been a trustee of Wellsford since November 1992. Mr. Sixt
also currently serves as an executive director of Cheung Kong (Holdings)
Limited, Cheung Kong Infrastructure Holdings Limited and Hutchinson Whampoa
Limited Group of Companies. He also serves as a director of Husky Oil Limited,
Concord Property and Financial Company Limited and World Financial Properties
Limited. He is also a director of and Chairman of the Executive Committee of
the Board of Directors of Gordon Capital Corporation. Previously, from 1987 to
1990, Mr. Sixt was a partner in the law firm of Stikeman Elliot.

For a biographical description of Douglas J. Crocker II, see "Management and
Operation of the Surviving Trust After the Merger--Trustees and Executive
Officers."

KEY EMPLOYEE

Richard R. Previdi has been active in seeking to acquire commercial
properties on behalf of WRP Newco and its predecessor since September, 1996.
From May 1994 until June 1996, he was a managing director of Emmes & Company,
a real estate investment company. From April 1990 until May 1994, Mr. Previdi
was a managing director of Trammell Crow N.E., Inc., and Chief Executive
Officer of that company's Northern Virginia Commercial Division. Previously,
from October 1985 until April 1990, he was first a marketing principal, and
later a partner, of Trammell Crow Company. From October 1982 until October
1985, Mr. Previdi was a manager with Arthur Young and Company, a public
accounting firm.

COMPENSATION OF DIRECTORS

WRP Newco will pay to each of its directors who are not employees of WRP
Newco (i) an annual fee of $16,000, payable quarterly in shares of WRP Newco
Common, and (ii) a fee of $2,250 payable in cash for each regular quarterly
Board of Directors meeting at which such director is present in person or by
telephone. Messrs. Du Bois, Germain, Hoenemeyer and Sixt will also each
receive options to purchase 42,750 shares of WRP Newco Common and Mr. Crocker
will receive options to purchase 21,375 shares of WRP Newco Common, all under
WRP Newco's 1997 Management Incentive Plan and each will be eligible along
with other present and future directors to receive additional share options.
Directors who are employees of WRP Newco will not be paid any directors' fees.
In addition, WRP Newco will reimburse the directors for travel expenses
incurred in connection with their activities on behalf of WRP Newco.

WRP Newco also intends to grant options to purchase 85,500 shares of WRP
Newco Common under the 1997 Management Investment Plan to each of Messrs.
Lynford, Lowenthal, Hughes and Strong.

BOARD COMMITTEES

The Board of Directors of WRP Newco will establish, following consummation
of the Distribution, an Audit Committee, a Compensation Committee and an
Executive Committee. The Board will not have a nominating committee or a
committee performing the functions of a nominating committee; the entire Board
will perform the usual functions of such committee.

117
<PAGE>

Executive Committee. The Executive Committee will consist of Messrs.
Lynford, Lowenthal and Hoenemeyer. The Executive Committee has the authority
to acquire, dispose of and finance investments for WRP Newco and execute
contracts and agreements, including those related to the borrowing of money by
WRP Newco, and generally to exercise all other powers of the directors except
for those which require action by all directors or the independent directors
under the Articles of Incorporation or Bylaws of WRP Newco or under applicable
law.

Compensation Committee. The Compensation Committee will consist of Messrs.
Du Bois, Germain, Hoenemeyer and Sixt, none of whom are employees of WRP
Newco. The Compensation Committee will review WRP Newco's compensation and
employee benefit plans, programs and policies, approve employment agreements
and monitor the performance and compensation of the Executive Officers and
other employees.

Audit Committee. The Audit Committee will consist of Messrs. Du Bois,
Germain, Hoenemeyer and Sixt and will make recommendations concerning the
engagement of independent public accountants, review with the independent
public accountants the plans and results of the audit engagement, approve the
professional services provided by the independent public accountants, review
the independence of the independent public accountants, consider the range of
audit and non-audit fees, review the adequacy of WRP Newco's internal
accounting controls and review related party transactions.

EXECUTIVE COMPENSATION

WRP Newco was organized as a Maryland corporation in January, 1997. Its
executive officers will not be entitled to receive any separate salary or
other cash compensation from WRP Newco for any period prior to the
Distribution. Prior to the Distribution, WRP Newco's executive officers will
only receive compensation from Wellsford for services rendered by them to
Wellsford.

The following table sets forth certain information with respect to the Chief
Executive Officer and each of the other executive officers of WRP Newco
(collectively, the "Executive Officers") whose cash compensation from WRP
Newco is expected to exceed $100,000 on an annualized basis during the fiscal
year ending December 31, 1997, and all executive officers as a group.

<TABLE>
<CAPTION>
CASH
NAME OF INDIVIDUAL OR NUMBER IN GROUP CAPACITIES IN WHICH SERVE COMPENSATION
------------------------------------- ------------------------- ------------
<S> <C> <C>
Jeffrey H. Lynford............................ Chairman of the Board and Secretary $275,000
Edward Lowenthal.............................. President and Chief Executive Officer $275,000
Gregory F. Hughes............................. Chief Financial Officer $175,000
David M. Strong............................... Vice President for Development $125,000
All executive officers as a group (consisting
of the four persons named above)............. $850,000
</TABLE>

For information regarding options to purchase shares of WRP Newco Common to
be granted to executive officers and directors, see "--Compensation of
Directors".

EMPLOYMENT AGREEMENTS

WRP Newco will enter into employment agreements with Messrs. Lynford and
Lowenthal (the "Senior Executives"), pursuant to which Mr. Lynford will serve
as the Chairman of the Board of WRP Newco and Mr. Lowenthal will serve as its
President and Chief Executive Officer. WRP Newco will also enter into
employment agreements with Messrs. Hughes and Strong. The employment
agreements with Messrs. Lynford and Lowenthal will expire on December 31,
2002, and the employment agreements with Messrs. Hughes and Strong will expire
two years from the Effective Time.

Each of the employment agreements is automatically extended for additional
one-year periods unless either the Executive Officer or WRP Newco gives prior
notice not to extend the employment agreement, as specified in the agreement.

Pursuant to the employment agreements, each of the Executive Officers is
also entitled to incentive compensation to be determined by the Compensation
Committee. Mr. Hughes is entitled to incentive compensation equal to at least
50% of his annual base salary.

In the event that either of the Senior Executives dies during the term of
his employment agreement, or if WRP Newco elects to terminate his employment
agreement as a result of the Senior Executive's total disability, WRP Newco is
required to pay additional compensation for the longer of 36 months after such
termination or for the remaining term of his agreement at the rate of his then
annual base salary.

118
<PAGE>

Following a "change in control of the Company" (as defined in the
agreements), if a Senior Executive's employment agreement is terminated (a) by
WRP Newco, other than for "proper cause" (as defined in the agreements) or
death or disability or (b) by the Senior Executive, then in either case the
Senior Executive shall be entitled to receive a lump sum cash payment
generally equal to the sum of (i) the amount of compensation that he would
have been entitled to had the agreement not been so terminated and (ii) 299%
of his average annual compensation of every type and form includible in gross
income received during the three year period preceding the calendar year in
which employment is terminated. The Senior Executives are also entitled to
reimbursement of income taxes on certain non-cash taxable income resulting
from a change in control of WRP Newco, including taxable income resulting from
accelerated loan forgiveness or vesting of restricted shares or options. In
addition, each Senior Executive is entitled to receive an additional sum to
cover certain resulting income and excise tax liabilities that may be incurred
on all of the foregoing.

The employment agreements with the Senior Executives will indemnify and hold
harmless the Senior Executives for any income and excise tax liabilities that
arise from any benefits described in this Joint Proxy
Statement/Prospectus/Information Statement and are not otherwise provided for
in the payments to be made to them by the Surviving Trust on the date of the
Merger.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee will consist of five independent directors of WRP
Newco: Rodney F. Du Bois, Mark S. Germain, Frank J. Hoenemeyer and Frank J.
Sixt, none of whom is, or has been, an officer or employee of WRP Newco.

119
<PAGE>

PRINCIPAL STOCKHOLDERS OF WRP NEWCO

The following table sets forth information regarding the beneficial
ownership of WRP Newco Common by each person anticipated by WRP Newco to be
the beneficial owner of more than 5% of WRP Newco Common, by each director or
proposed director of WRP Newco, by certain executive officers of WRP Newco and
by all directors, proposed directors and executive officers of WRP Newco as a
group after giving effect to the Distribution, the Merger and certain other
transactions described herein (excluding the Additional Share Offering). Each
person named in the table has sole voting and investment power with respect to
all WRP Newco Common shown as beneficially owned by such person.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE OF
OWNER(1) BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------------------ -------------------- ----------------
<S> <C> <C>
Jeffrey H. Lynford(2)................. 622,529 11.50%
Edward Lowenthal(2)................... 626,605 11.58%
Gregory F. Hughes(3).................. 202,074 3.99%
David Strong(4)....................... 130,487 2.61%
Rodney F. Du Bois(5).................. 44,500 *
32 Rip Road
Hanover, New Hampshire 03755
Mark S. Germain(6).................... 110,858 2.24%
Olmsted Road
Scarsdale, New York 10583
Frank J. Hoenemeyer(5)................ 43,683 *
7 Harwood Drive
Madison, New Jersey 07940
Frank J. Sixt(6)...................... 81,265 1.64%
c/o Cheung Kung (Holdings), Ltd.
Ching Building, 18-22 Floors
29 Queen's Road Central
Hong Kong
Douglas J. Crocker II(7).............. 21,375 *
c/o Equity Residential Properties
Trust
Two North Riverside Plaza
Chicago, Illinois 60606
ERP Operating Limited Partnership..... 334,062(8) 7.22%
Two North Riverside Plaza
Chicago, Illinois 60606
All directors, proposed directors
and executive officers as a group (9
persons)............................. 1,883,376 28.82%
</TABLE>
- -------
* Less than 1.0%

(1) Unless otherwise indicated, the address of each person is c/o Wellsford
Real Properties, Inc., 610 Fifth Avenue, New York, New York 10020.

(2) Includes 538,205 shares of WRP Newco Common issuable upon the exercise of
options, all of which will be either issued or amended as of the Effective
Time, and none of which will be exercisable as of the Effective Time.
Options to purchase 452,705 of these shares represent replacement options
for Wellsford share options having exercise prices ranging from $18.94 to
$26.375.

(3) Includes 188,105 shares of WRP Newco Common issuable upon the exercise of
options, all of which will either be issued or amended as of the Effective
Time, and none of which will be exercisable as of the Effective Time.
Options to purchase 102,605 of these shares represent replacement options
for Wellsford share options having exercise prices ranging from $18.94 to
$29.375.

(4) Includes 126,126 shares of WRP Newco Common issuable upon the exercise of
options, all of which will either be issued or amended as of the Effective
Time, and none of which will be exercisable as of the Effective Time.
Options to purchase 40,626 of these shares represent replacement options
for Wellsford share options having exercise prices ranging from $18.94 to
$22.50.

(5) Includes 42,750 shares of WRP Newco Common issuable upon the exercise of
options, all of which will either be issued or amended as of the Effective
Time and will then be immediately exercisable.

(6) Includes 81,265 shares of WRP Newco Common issuable upon the exercise of
options, all of which will either be issued or amended as of the Effective
Time and will then be immediately exercisable.

(7) Includes 21,375 shares of WRP Newco Common issuable upon exercise of
options, all of which will be issued as of the Effective Time and will
then be immediately exercisable. Excludes 334,062 shares of WRP Newco
Common (estimated) to be issued to ERP Operating Partnership pursuant to
the Stock Purchase Agreement. Mr. Crocker is President and Chief Executive
Officer of EQR, the general partner of ERP Operating Partnership, and
disclaims beneficial ownership of such shares.

(8) Estimated number of shares of WRP Newco Common to be issued to ERP
Operating Partnership pursuant to the Stock Purchase Agreement.

120
<PAGE>

WRP NEWCO'S CERTAIN TRANSACTIONS

The contracts to purchase Chatham, the Point View office complex and
Greenbrook were transferred to WRP Newco by an entity ("Wellsford Commercial")
of which Messrs. Lynford and Lowenthal, the wife of Mark Germain who will be a
director of WRP Newco, and three unaffiliated parties are owners, for shares
of WRP Newco Common having an aggregate value of approximately $2.25 million
and WRP Newco's agreement to repay a $1.0 million advance used for the down
payment on the Point View office complex. The number of shares of WRP Newco
Common issued to Wellsford Commercial was approximately 225,000, subject to
adjustment based upon the Issuance Price. Upon liquidation of Wellsford
Commercial, Mr. Lynford, Mr. Lowenthal and the wife of Mark Germain will each
receive approximately 16.4%, 16.4% and 13.8%, respectively, of the shares of
WRP Newco Common to be issued to Wellsford Commercial, and the other three
unaffiliated owners will receive the remainder of the shares. The aggregate
purchase price for these commercial properties paid by WRP Newco is
approximately $47.6 million, including the approximately $2.25 million
referred to above. The above transfers to WRP Newco, along with the
Contribution and the purchase of stock by ERP Operating Partnership under the
Stock Purchase Agreement, are being made as part of a single plan intended to
qualify as a tax-free transaction.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

OVERVIEW

The following discussion should be read in conjunction with the Wellsford
Real Properties Inc. (Predecessor) (the "Company") financial statements
contained herein.

RESULTS OF OPERATIONS

The Company's operations during the year ended December 31, 1996 consisted
of owning a mortgage note receivable, upon which the Company earned $757,000
of interest income, and developing two multifamily communities located in a
suburb of Denver, Colorado with a total of 760 units under development.

LIQUIDITY AND CAPITAL RESOURCES

The Company expects to meet its short-term liquidity requirements generally
through its working capital and cash flow provided by operations. The Company
considers its ability to generate cash to be adequate and expects it to
continue to be adequate to meet operating requirements both in the short and
long terms.

In December 1995, the Company marketed and sold $14.8 million of tax-exempt
bonds to fund construction at Palomino Park. The bonds have a variable rate of
interest and a term of 40 years. At December 31, 1996, $5.5 million of the
bond proceeds were being held in escrow pending their use for the funding of
development.

121
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Trustees of
Wellsford Residential Property Trust and Subsidiaries

We have audited the accompanying combined balance sheets of the Predecessor
to Wellsford Real Properties, Inc. (the "Company") as of December 31, 1996 and
1995, and the related combined statements of income and equity for the year
ended December 31, 1996, and cash flows for the year ended December 31, 1996
and for the period from March 22, 1995 (the date the assets were acquired and
liabilities incurred) to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

As described in Note 1, no operating revenues or expenses were incurred in
the period from March 22, 1995 through December 31, 1995. Accordingly, the
statement of income for the period ended December 31, 1995 has been omitted.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Company at December 31, 1996 and 1995, and the combined results of its
operations for the year ended December 31, 1996 and its cash flows for the
year ended December 31, 1996 and for the period from March 22, 1995 to
December 31, 1995, in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP
-----------------------------------------
Ernst & Young LLP

New York, New York
February 28, 1997

122
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

COMBINED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Construction in process............................... $21,306 $ 7,955
Restricted cash....................................... 5,520 10,414
Mortgage note and interest receivable................. 17,934 0
------- -------
Total Assets........................................ $44,760 $18,369
======= =======
<CAPTION>
LIABILITIES AND EQUITY
<S> <C> <C>
Tax exempt mortgage note payable...................... $14,755 $14,755
------- -------
Total Liabilities................................... 14,755 14,755
------- -------
Commitments and contingencies......................... -- --
Equity................................................ 30,005 3,614
------- -------
Total Equity........................................ 30,005 3,614
------- -------
Total Liabilities and Equity........................ $44,760 $18,369
======= =======
</TABLE>

See accompanying notes.

123
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

COMBINED STATEMENT OF INCOME AND EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Interest income.................................................... $ 757
-------
Net income......................................................... 757
-------
Equity, January 1, 1996............................................ 3,614
Contributions...................................................... 25,634
-------
Equity, December 31, 1996.......................................... $30,005
=======
</TABLE>

See accompanying notes.

124
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MARCH 22 TO
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.......................................... $ 757 $ 0
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease (increase) in assets:
Debt service reserve............................ 4,894 4,341
Interest receivable............................. (134) 0
-------- --------
Net cash provided by operating activities......... 5,517 4,341
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate assets................... (13,351) (7,955)
Investment in mortgage note receivable.............. (17,800) 0
-------- --------
Net cash (used) in investing activities........... (31,151) (7,955)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from tax exempt mortgage note payable...... 0 14,755
Funding of restricted cash accounts................. 0 (14,755)
Equity contributions................................ 25,634 3,614
-------- --------
Net cash provided by financing activities......... 25,634 3,614
-------- --------
Net increase (decrease) in cash and cash
equivalents........................................ 0 0
Cash and cash equivalents, beginning of period...... 0 0
-------- --------
Cash and cash equivalents, end of period............ $ 0 $ 0
======== ========
Cash paid during the period for interest............ $ 663 $ 335
</TABLE>

See accompanying notes.

125
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

NOTES TO COMBINED FINANCIAL STATEMENTS

(1) ORGANIZATION AND BASIS OF PRESENTATION

Wellsford Real Properties, Inc. ("WRP Newco"), a C corporation formed on
January 8, 1997, is a wholly owned subsidiary of Wellsford Residential
Property Trust ("Wellsford"). On January 16, 1997 Wellsford announced its
intention to merge with Equity Residential Properties Trust ("EQR").
Immediately prior to the Merger, Wellsford intends to contribute certain of
its assets to WRP Newco and have WRP Newco assume certain liabilities of
Wellsford. Immediately after the contribution of assets to WRP Newco and
immediately prior to the Merger, Wellsford intends to distribute to its common
shareholders all the outstanding shares of WRP Newco owned by Wellsford. The
common shareholders of Wellsford will receive one common share of WRP Newco
for each four common shares of Wellsford owned.

The accompanying combined financial statements of the predecessor to WRP
Newco (the "Company") include the assets and liabilities to be contributed and
assumed by WRP Newco from the time the assets and liabilities were acquired or
incurred, respectively, by Wellsford or the majority owned or controlled
subsidiary of Wellsford. Such financial statements have been prepared using
the historical basis of the assets and liabilities and historical results of
operations related to the Company's assets.

For the purpose of the Company, the assets were acquired and liabilities
incurred beginning on March 22, 1995. During the period from March 22, 1995
through December 31, 1996 the Company was principally involved in the initial
phase of construction development activities with no operating revenues or
expenses incurred. Accordingly, the income statement for the period ended
December 31, 1995 has been omitted. The Company has earned interest income on
the Sonterra Mortgage (see Note 4) during the year ended December 31, 1996.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Combination. All significant intercompany transactions between
Wellsford and the majority owned or controlled subsidiaries relating to the
assets and liabilities that are to be contributed or assumed by WRP Newco have
been eliminated in combination.

Income Recognition. Residential communities are leased under operating
leases with terms generally one year or less; rental revenue is recognized
monthly as it is earned.

Commercial properties are leased under operating leases; rental revenue is
recognized on a straight-line basis over the terms of the leases.

Cash and Cash Equivalents. The Company considers all demand and money market
accounts and short term investments in government funds with an original
maturity of three months or less to be cash and cash equivalents.

Real Estate and Depreciation. Costs directly related to the acquisition and
improvement of real estate are capitalized, including interest expense
incurred during and related to construction and including all improvements
identified during the underwriting of a property acquisition.

The Company has adopted Statement of Financial Accounting Standard ("SFAS")
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of" which requires that long-lived assets to be held and
used be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable and that
long-lived assets to be disposed of be measured at the lower of carrying
amount or net realizable value. The adoption of SFAS 121 has not had an impact
on the Company's combined financial position or results of operations.

Mortgage Note Receivable Impairment. The Company considers a note impaired
if, based on current information and events, it is probable that all amounts
due under the note agreement are not collectable. Impairment is measured based
upon the fair value of the underlying collateral. No impairment has been
recorded through December 31, 1996.

Financing Costs. Financing and refinancing costs are capitalized and
amortized over the term of the related loan under the interest method. Credit
facility fees are capitalized and amortized over the term of the commitment on
a straight-line basis.

126
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(3) RESTRICTED CASH

Restricted cash primarily consists of the remaining proceeds from the
Palomino Park tax-exempt mortgage note (Note 5) which are restricted in their
use to construction costs and capitalized interest related to the Palomino
Park development project (Note 4).

(4) MULTIFAMILY COMMUNITIES AND MORTGAGE NOTE RECEIVABLE

The Company holds a $17.8 million mortgage on a 344 unit, newly constructed
community in Tucson, Arizona known as Sonterra at Williams Centre (the
"Sonterra Mortgage"). The Sonterra Mortgage was originated in July 1996, bears
interest at 9% per annum and matures in July 1999. The Company also has the
exclusive option to purchase the community for $20.5 million through December
1997 and $21 million during 1998. Interest receivable of $0.1 million is
included in the December 31, 1996 balance. The fair market value of the
Company's mortgage note receivable, estimated by using a discounted cash flow
analysis, approximates the carrying amount. In connection with the Sonterra
Mortgage, a $0.2 million origination fee was paid to Wellsford by the
borrower.

The Company currently has two multifamily projects under development in a
suburb of Denver, Colorado, totaling 760 apartment units (collectively, the
"Development Communities"). The Development Communities are the first of five
communities at Palomino Park, a 1,880 unit master-planned, security controlled
apartment/townhome community. The Company has the option to develop phases
three through five, but is not obligated to do so. The 181.8 acre master site
surrounds an amenity-filled, 24 acre park and an approximately 29,000 square
foot recreational center to be shared by all phases. The Development
Communities are being constructed pursuant to fixed-price contracts, with a
local developer, and are estimated to cost approximately $76.1 million in
total, including certain development and incentive fees payable to the
developer. The Company is committed to purchase 100% of the Development
Communities upon completion and the achievement of certain occupancy levels.
At December 31, 1996 the Company had invested $21 million related to the land
for the Development Communities, the recreation center and general
infrastructure work. A portion of such infrastructure will become the property
of certain local governmental entities at the date of completion and
retirement of the tax-exempt mortgage note payable described in Note 5. In
addition, approximately $21.8 million was outstanding at December 31, 1996 on
a construction loan to the developer, which the Company would repay upon
purchase assuming completion and achievement of certain occupancy levels.
During the periods ended December 31, 1996, and December 31, 1995,
respectively, the Company capitalized $0.7 million and $0.3 million of
interest to the Development Communities. The Company expects to fund the
construction of its Development Communities from its working capital and with
proceeds from a credit facility and a $14.8 million tax-exempt mortgage note
(Note 5).

Subsequent to December 31, 1996, the Company entered into contracts on five
commercial office properties for $47.6 million in aggregate, and has closed on
four of the properties. The purchase prices for these commercial properties
include approximately $2.25 million in value of shares of WRP Newco Common to
be issued to an entity in consideration for the assignment of the purchase
contracts entered into by such entity. Upon liquidation of such entity, each
of the Chairman of the Board and President of Wellsford, Messrs. Lynford and
Lowenthal, will receive approximately 16.4% of such shares, and the wife of
Mark Germain, a trustee of Wellsford, will receive approximately 13.8% of such
shares. Each are owners of such entity.

Greenbrook Corporate Center ($23.7 million) is a Class A, three-story office
building with a 35 foot atrium, located in Fairfield, NJ, and comprising
approximately 190,000 rentable square feet. It is situated on a 20 acre
developed site with 7 acres of additional, contiguous undeveloped land.

Point View ($15.8 million) consists of 194 acres containing two office
buildings, totaling approximately 560,000 square feet, an adjacent 10-acre
undeveloped site, and a central utility plant located in Wayne, NJ. The site
is currently undergoing a major renovation. The purchase of this building was
closed in February 1997.

1700 Valley Road ($1.0 million) is a Class B+, two-story vacant office
building located in Wayne, NJ and comprising approximately 70,600 square feet.
It is situated on a nine acre site. The purchase price of this building was
closed in February 1997.

127
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

1800 Valley Road ($2.0 million) is a Class B+, two-story vacant office
building located in Wayne, NJ and comprising approximately 54,800 square feet.
It is situated on a 14 acre site. The purchase of this building was closed in
February 1997.

The Chatham Building ($5.1 million) is a three-story office building located
in Chatham, NJ and comprising approximately 65,000 square feet. The site is
currently undergoing a major renovation. The purchase of this building was
closed in January 1997.

(5) TAX EXEMPT MORTGAGE NOTES PAYABLE

At December 31, 1996 and 1995, the Company had $14.8 million of tax exempt
mortgage notes payable outstanding. The Company's tax exempt mortgage note
payable is secured by certain infrastructure at the Company's Palomino Park
development and bears interest-only payments at a variable rate (which
approximates the Standard & Poor's/J.J. Kenney index for short-term high grade
tax-exempt bonds, currently 3.65%) until it matures in December 2035.

The tax-exempt mortgage note payable is security for tax-exempt bonds which
are backed by a letter of credit from a AAA rated financial institution.
Wellsford has guaranteed the reimbursement of the financial institution in the
event that the letter of credit is drawn upon. It is anticipated that as a
result of the Merger, this guaranty will be replaced by the guarantees of WRP
Newco and EQR. These bonds require the Company to obtain the approval of both
the trustee, as defined in the bond documents, and the above mentioned
financial institution for transactions such as those anticipated in connection
with the Merger and Distribution. The Company expects to receive such
approvals.

The fair market value of the variable rate tax exempt mortgage note is
considered to be the carrying amount.

(6) COMMITMENTS AND CONTINGENCIES

WRP Newco will enter into employment agreements with certain of its
officers. Such agreements will be for terms which expire between 1999 and
2002, and will provide for aggregate annual base salaries of $0.8 million,
$0.8 million and $0.6 million in 1997, 1998 and 1999 through 2002,
respectively. The Company is obligated under an operating lease covering its
corporate headquarters for $0.2 million in 1997, $0.2 million in 1998, and
$0.2 million in 1999, plus certain operating expense escalations.

As a commercial real estate owner, the Company is subject to potential
environmental costs. The Company's Point View site contains asbestos
containing materials ("ACMs"); upon acquisition of the property, the Company
intends to proceed with the removal of all ACMs in such property which is
anticipated to cost $3.5 million. At this point in time, management of the
Company is not aware of any environmental concerns that would have a material
adverse effect on the Company's financial position or future results of
operations except as just described.

In 1997 WRP Newco will adopt a defined contribution savings plan pursuant to
Section 401 of the Internal Revenue Code. Under such a plan there are no prior
service costs. All employees will be eligible to participate in the plan after
one year of service. Employer contributions will be made based on a
discretionary amount determined by WRP Newco's management. Employer
contributions, if any, will be based upon the amount contributed by an
employee.

The Company will lend $20 million of an $80 million subordinated mezzanine
loan to entities which own the equity interests (the "Equity Interests") in
the owner of a 52-story approximately 1.74 million sq. ft. Class A office
building located at 277 Park Avenue, New York City (the "277 Park Loan"). The
loan will be secured primarily by the pledge of the Equity Interests. The 277
Park Loan will be due in April 2007 and will bear interest at the rate of
approximately 11.75% per annum.

128
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

PRO FORMA COMBINED INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)

During the period from January 1, 1996 to March 31, 1997, Wellsford Real
Properties, Inc. (Predecessor) (the "Company") acquired a mortgage note
receivable, committed to originate a mortgage receivable, purchased four
commercial office properties, and contracted to purchase one additional
commercial office property. One of the commercial office properties, the
Greenbrook Corporate Center, is currently occupied.

This unaudited Pro Forma Combined Income Statement is presented as if the
Company's transactions, each as referred to above, and the Merger and
Distribution had been consummated on January 1, 1996, as if the mortgage
receivable upon which the Company has committed to originate had been
originated on January 1, 1996, and as if the commercial office properties
under contract were actually purchased as of January 1, 1996. All of the pro
forma adjustments shown are solely attributed to the transactions described.
In the opinion of the Company's management, all adjustments necessary to
reflect the effects of these transactions have been made.

This unaudited Pro Forma Combined Income Statement is presented for
comparative purposes only, and is not necessarily indicative of what the
actual results of operations of the Company would have been for the period
presented; nor does it purport to represent the results for future periods.
This unaudited Pro Forma Combined Income Statement should be read in
conjunction with, and is qualified in its entirety by, the respective
historical financial statements and notes thereto of Wellsford and the
Company, incorporated by reference into, and included in, this Joint Proxy
Statement/Prospectus/ Information Statement, respectively.

129
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

PRO FORMA COMBINED INCOME STATEMENT

YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
REVENUE
Rental income.............................. $3,632(A) $3,632
Other income............................... 250(A) 250
Interest income............................ $757 3,195(B) 3,952
---- ------ ------
Total Revenue............................ 757 7,077 7,834
---- ------ ------
EXPENSES
Property operating and maintenance......... 852(A) 852
Real estate taxes.......................... 428(A) 428
Interest................................... 1,550(C) 1,550
General and administrative................. 1,750(D) 1,750
Depreciation............................... 510(E) 510
Property management........................ 181(A) 181
---- ------ ------
Total Expenses........................... 0 5,271 5,271
---- ------ ------
Income before income taxes................... $757 $1,806 2,563
==== ======
Provision for income taxes................... 1,047(F)
------
Net income................................... $1,516
======
Net income per common share.................. $ 0.31(G)
======
Weighted average common shares outstanding... 4,900(G)
======
</TABLE>

130
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

NOTES TO UNAUDITED PRO FORMA COMBINED INCOME STATEMENT

DECEMBER 31, 1996

(A) Represents historical operating revenues and expenses of Greenbrook
Corporate Center, which was acquired in January 1997, for the year ended
December 31, 1996. The Company's other four commercial properties are
currently vacant.

(B) Represents interest income from the Sonterra Loan for the period from
January 1, 1996 to the date of origination (July 10, 1996), plus interest
on the 277 Park Loan for one year ($20 million at approximately 11.75%).

(D) Represents the estimated general and administrative costs of WRP Newco for
one year.

(E) Represents depreciation on Greenbrook Corporate Center for the year ended
December 31, 1996 utilizing a 40 year estimated useful life.

(F) Represents provision for federal and state income taxes at rates of 35%
and 9%, respectively.

(G) Represents the aggregate of the shares of WRP Newco Common issued in
connection with the Distribution (one share for every four shares of
Wellsford Common), the 225,000 shares to be issued in connection with the
acquisition of the commercial properties, and 350,000 shares (estimated)
of WRP Newco Class A Common to be purchased by ERP Operating Partnership
for $3.5 million.

131
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

PRO FORMA COMBINED BALANCE SHEET

DECEMBER 31, 1996
(IN THOUSANDS)
(UNAUDITED)

This unaudited Pro Forma Combined Balance Sheet is presented as if the
Merger, Contribution and Distribution and the proposed credit facility
agreement with Bank of Boston and Morgan Guaranty had been consummated on
December 31, 1996, the mortgage receivable to be originated had been
originated on December 31, 1996 and the commercial office properties purchased
by, or under contract with, Wellsford Real Properties, Inc. (Predecessor) (the
"Company") had been purchased on December 31, 1996, utilizing proceeds from
the Merger and Contribution and a draw from the credit facility. All of the
assets and liabilities of the Company which are being transferred to the
Company in connection with the Merger, Contribution and Distribution are
recorded at their respective historical costs.

This unaudited Pro Forma Combined Balance Sheet is presented for comparative
purposes only, and is not necessarily indicative of what the actual financial
position of the Company would have been at December 31, 1996; nor does it
purport to represent the future financial position of the Company. This
unaudited Pro Forma Combined Balance Sheet should be read in conjunction with,
and is qualified in its entirety by, the respective historical financial
statements and notes thereto of Wellsford and the Company, incorporated by
reference into, and included in, this Joint Proxy Statement/Prospectus/
Information Statement, respectively.

132
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

PRO FORMA COMBINED BALANCE SHEET

DECEMBER 31, 1996
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Real estate assets, at cost:
Land....................................... $ 0 $ 6,720 $ 6,720
Buildings and improvements................. 38,080 38,080
------- -------- --------
0 44,800 44,800
Construction in process.................... 21,306 21,306
------- -------- --------
21,306 44,800 66,106
Property held for sale..................... 2,800 2,800
------- -------- --------
21,306 47,600(A) 68,906
Cash and cash equivalents.................... 832(B) 832
Restricted cash.............................. 5,520 5,520
Mortgage notes and interest receivable....... 17,934 20,000(C) 37,934
------- -------- --------
Total Assets............................... $44,760 $ 68,432 $113,192
======= ======== ========
LIABILITIES AND EQUITY
Liabilities:
Tax exempt mortgage note payable........... $14,755 $ 14,755
Credit facility............................ $ 45,000(D) 45,000
------- -------- --------
Total Liabilities.......................... 14,755 45,000 59,755
------- -------- --------
Commitments and contingencies................ -- -- --
Minority Interest............................ 2,328(E) 2,328
Equity:
Equity..................................... 30,005 (30,005) 0
Common stock, $.01 par value per share,
4,899,965 shares issued and outstanding as
adjusted.................................. 49 49
Paid in capital in excess of par value..... 51,060 51,060
------- -------- --------
Total Equity............................... 30,005 21,104(F) 51,109
------- -------- --------
Total Liabilities and Equity............... $44,760 $ 68,432 $113,192
======= ======== ========
</TABLE>

133
<PAGE>

WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)

NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET

DECEMBER 31, 1996

(A) Reflects the acquisition of five commercial office properties, previously
acquired or currently under contract for $47.6 million summarized as
follows:

<TABLE>
<CAPTION>
PURCHASE
PURCHASE PRICE &
PRICE PLANNED
SQUARE PURCHASE PER PLANNED IMPR. ACTUAL/SCHEDULED
NAME LOCATION FOOTAGE PRICE SQ. FT. IMPROVEMENTS PER SQ. FT. CLOSING DATE
---- -------- ------- -------- -------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Point View.............. Wayne, NJ 560,000 $15.8 million $ 28 $ 9.1 million $ 44 February 1997
Chatham Building........ Chatham, NJ 65,000 5.1 million 78 3.1 million 126 January 1997
Greenbrook Corp. Ctr.... Fairfield, NJ 190,000 23.7 million 125 0.5 million 127 April 1997
1700 Valley Road........ Wayne, NJ 70,600 1.0 million 14 0.2 million 17 February 1997
1800 Valley Road........ Wayne, NJ 54,800 2.0 million 36 0.8 million 51 February 1997
------- ------------- -------------
940,400 47.6 million $13.7 million
</TABLE>

Greenbrook Corporate Center is currently in operation. The Company's other
four commercial properties are currently vacant. The purchase price of
$47.6 million is being funded with $20.4 million of cash-on-hand, $25.0
million of proceeds from the credit facility, and the balance from the
issuance of approximately 225,000 shares of WRP Newco Common, each of which
is described below.

(B) Reflects the net cash effect of the following transactions (in thousands):

<TABLE>
<S> <C>
.Cash contribution to WRP Newco at Contribution.................... $ 17,732
.ERP Operating Partnership's purchase of WRP Newco Common.......... 3,500
.Acquisition of properties......................................... (20,400)
--------
$ 832
========
</TABLE>

(C) Represents the 277 Park Loan, a $20 million portion of an $80 million
subordinated mezzanine loan bearing interest at approximately 11.75% per
annum.

(D) Represents draws on the credit facility to fund acquisitions and the 277
Park Loan.

(E) Represents ERP Operating Partnership's 20% minority interest in Palomino
Park, which has been combined in the Company's Pro Forma Combined Balance
Sheet.

(F) Represents the aggregate of the shares of WRP Newco Common issued in
connection with the Distribution (one share for every four shares of
Wellsford Common), the approximately 225,000 shares to be issued in
connection with the acquisition of the commercial properties, and the
350,000 shares (estimated) of WRP Newco Class A Common to be purchased by
ERP Operating Partnership for $3.5 million.

134
<PAGE>

DESCRIPTION OF CAPITAL STOCK OF WRP NEWCO

The following summary of the terms of WRP Newco's stock does not purport to
be complete and is subject to and qualified in its entirety by reference to
Maryland law, WRP Newco's Charter and Bylaws, copies of which are exhibits to
the registration statement on Form 10 filed by WRP Newco. See "Additional
Information."

GENERAL

The Charter of WRP Newco (the "Newco Charter") authorizes up to 200,000,000
shares of Common Stock, par value $.01 per share. The Board of Directors may
reclassify any unissued shares of stock in one or more classes or series of
stock. Upon completion of the Distribution and the other transactions to be
entered into upon consummation of the Merger, there will be 4,899,965 shares
of WRP Newco Common issued and outstanding (excluding the Additional Share
Offering) and 350,000 shares (estimated) of WRP Newco Class A Common issued
and outstanding. The Board of Directors has also authorized the issuance of up
to 2,000,000 shares of WRP Newco Series A Preferred of which 1,000,000 shares
are subject to issuance pursuant to the Stock Purchase Agreement and 1,000,000
shares are subject to issuance pursuant to WRP Newco's right to pay dividends
on the WRP Newco Series A Preferred by the issuance of additional shares of
WRP Newco Series A Preferred. In addition, up to 1,750,000 shares of WRP Newco
Common have been reserved for issuance under WRP Newco's 1997 Management
Incentive Plan, subject to approval of the Wellsford Common Shareholders. See
"Approval of WRP Newco's 1997 Management Incentive Plan."

WRP Newco also intends to issue up to approximately 10,000,000 shares of WRP
Newco Common, excluding any over-allotment option, if any, in connection with
WRP Newco's Additional Share Offering upon which the shareholders of Wellsford
are being asked to vote. See "Approval of WRP Newco Additional Share
Offering."

At present, there is no established trading market for the WRP Newco Common.
WRP Newco has applied for listing of the WRP Newco Common on the ASE under the
symbol "WRP." The United States Trust Company of New York will act as transfer
agent and registrar of the WRP Newco Common.

Under Maryland law, stockholders generally are not liable for the
corporation's debts and obligations.

WRP Newco intends to furnish to its stockholders an annual report containing
audited consolidated financial statements and an opinion thereon expressed by
an independent public accounting firm.

COMMON STOCK

All shares of WRP Newco Common to be issued in connection with the
Distribution and the other transactions to be entered into upon consummation
of the Merger have been duly authorized, and will be fully paid, validly
issued and nonassessable. Subject to the preferential rights of any other
class or series of stock, holders of shares of WRP Newco Common are entitled
to receive dividends on such stock if, as and when authorized and declared by
the Board of Directors of WRP Newco out of assets legally available therefor
and to share ratably in the assets of WRP Newco legally available for
distribution to its stockholders in the event of its liquidation, dissolution
or winding up after payment of or adequate provision for all known debts and
liabilities of WRP Newco and payment of liquidation preferences to holders of
preferred stock.

Each outstanding share of WRP Newco Common entitles the holder to one vote
on all matters submitted to a vote of stockholders, including the election of
directors, and, except as provided with respect to any other class or series
of stock, the holders of such shares will possess exclusive voting power.
There is no cumulative voting in the election of directors, which means that,
except with respect to the director elected by the holders of the WRP Newco
Class A Common, the holders of a majority of the outstanding shares of WRP
Newco Common can elect all of the directors then standing for election and the
holders of the remaining shares will not be able to elect any directors. See
"--Class A Common Stock."

Holders of shares of WRP Newco Common have no preference, conversion,
exchange, sinking fund, redemption or appraisal rights and have no preemptive
rights to subscribe for any securities of WRP Newco. Except for the rights of
WRP Newco Class A Common described below, shares of WRP Newco Common will have
equal dividend, liquidation and other rights.

Under the MGCL, a Maryland corporation generally may not dissolve, amend its
charter, merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be
cast on the matter) is set forth in the corporation's charter. The Newco
Charter provides for approval of consolidations, share exchanges, mergers in
which WRP

135
<PAGE>

Newco is the successor, and amendments to the charter (except amendments to
the provisions relating to the classification and removal of directors or any
amendment reducing supermajority voting requirements) by the affirmative vote
of holders of shares entitled to cast a majority of the votes entitled to be
cast on the matter.

PREFERRED STOCK

The Newco Charter authorizes the Board of Directors to issue preferred stock
in one or more series. Thus, the Board of Directors could authorize the
issuance of shares of preferred stock with terms and conditions which could
have the effect of delaying, deferring or preventing a transaction or a change
in control of WRP Newco that might involve a premium price for holders of WRP
Newco Common or otherwise be in their best interest.

CLASSIFICATION OR RECLASSIFICATION OF COMMON STOCK OR PREFERRED STOCK

The Newco Charter authorizes the Board of Directors to classify or
reclassify any unissued stock by setting or changing the numbers,
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions, qualifications or terms or
conditions of redemption of any of such shares.

POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK

WRP Newco believes that the power of the Board of Directors to issue
additional authorized but unissued shares of WRP Newco Common and to
reclassify any unissued shares of WRP Newco Common and thereafter to cause WRP
Newco to issue such reclassified shares of stock will provide WRP Newco with
increased flexibility in structuring possible future financings and
acquisitions and in meeting other needs which might arise. The additional
classes or series, as well as the WRP Newco Common, will be available for
issuance without further action by WRP Newco's stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which WRP Newco's securities may be listed or
traded. Although the Board of Directors has no intention at the present time
of doing so, it could authorize WRP Newco to issue a class or series that
could, depending on the terms of such class or series, delay, defer or prevent
a transaction or a change of control of WRP Newco that might involve a premium
price for holders of common stock or otherwise be in their best interest.

CLASS A COMMON STOCK

Rights Generally.

Each share of WRP Newco Class A Common entitles its holder to all the rights
of a share of WRP Newco Common in addition to the rights described below.
Holders of WRP Newco Class A Common will not have any preemptive rights to
acquire other securities of WRP Newco.

Voting Rights.

Holders of WRP Newco Class A Common, as a class, may elect one director to
the WRP Newco Board of Directors (the "Class A Director") until the longer of
two years from the Closing Date or so long as (i) ERP Operating Partnership is
obligated to purchase preferred stock in WRP Newco pursuant to the Stock
Purchase Agreement; (ii) ERP Operating Partnership has obligations pursuant to
the Agreement Regarding Palomino Park or pursuant to the Credit Enhancement
Agreement; or (iii) the aggregate liquidation value of the shares of WRP Newco
Series A Preferred owned by ERP Operating Partnership is greater than $10
million. The WRP Newco Class A Director may be removed without cause, only by
the affirmative vote of a majority of the WRP Newco Class A Common electing
such director.

For ten years after the Effective Time, WRP Newco has the right to direct
the voting of all shares of WRP Newco Class A Common owned by ERP Operating
Partnership or any of its affiliates, except as to the election of the Class A
Director or any matter relating to the rights, preferences and privileges of
the WRP Newco Class A Common.

Optional and Automatic Conversion.

Holders of WRP Newco Class A Common have the right, exercisable at any time
and from time to time, to convert all or any of such WRP Newco Class A Common
into WRP Newco Common at a conversion rate of one share of WRP Newco Common
for each share of WRP Newco Class A Common so converted, subject to
adjustment. Any outstanding shares of WRP Newco Class A Common will
automatically convert, at the conversion rate, into shares of WRP Newco Common
upon the sale, transfer, pledge or other disposition ("Transfer") of such
shares of WRP Newco Class A Common to any entity other than an affiliate of
EQR or ERP Operating Partnership.

136
<PAGE>

Adjustment of Conversion Rate.

The conversion rate in effect at any time for the WRP Newco Class A Common
is subject to adjustment from time to time as follows:

In case WRP Newco (a) reclassifies the outstanding WRP Newco Common into
shares of some other class or series of shares, (b) subdivides the outstanding
WRP Newco Common into a greater number of shares of WRP Newco Common or (c)
combines the outstanding WRP Newco Common into a smaller number of shares of
WRP Newco Common, the conversion rate immediately prior to such action shall
be adjusted so that the holder of any shares of WRP Newco Class A Common
thereafter surrendered for conversion shall be entitled to receive the number
of shares of WRP Newco Common which he would have owned immediately following
such action had such WRP Newco Class A Common been converted immediately prior
thereto.

Purchase of Shares of Voting Stock in Excess of REIT Ownership Limit.

If, an event which is undertaken or caused by WRP Newco occurs resulting in
ERP Operating Partnership, EQR or any of their affiliates owning shares of WRP
Newco Class A Common in excess of the REIT ownership limits (initially 9.9% of
the value of the voting stock of WRP Newco), then WRP Newco will purchase such
shares of WRP Newco Class A Common in excess of the REIT ownership limit at
the market price thereof.

SERIES A 8% CONVERTIBLE REDEEMABLE PREFERRED STOCK

General.

The Board of Directors of WRP Newco has established a series of preferred
stock designated Series A 8% Convertible Redeemable Preferred Stock, par value
$25.00 per share. The maximum number of authorized shares of WRP Newco
Series A Preferred is 2,000,000.

Seniority.

With respect to the right to receive dividends and to participate in
distributions or payments in the event of any liquidation, dissolution or
winding up of WRP Newco, the WRP Newco Series A Preferred will rank on a
parity with any other preferred stock of WRP Newco, and will rank senior to
the WRP Newco Common and any other class or series of shares of stock of WRP
Newco ranking, as to dividends and upon liquidation, junior to the WRP Newco
Series A Preferred (collectively the "Junior Shares"). Notwithstanding the
foregoing, WRP Newco may make distributions or pay dividends in WRP Newco
Common or in any other shares of WRP Newco ranking junior to the WRP Newco
Series A Preferred as to distribution rights and liquidation preference at any
time.

Dividends.

The holders of WRP Newco Series A Preferred are entitled to receive, when
and as declared by the WRP Newco Board of Directors out of any funds legally
available therefor, dividends at the rate of $2.00 per share per year, payable
in cash, except as provided below, in equal amounts quarterly on the fifteenth
(or, if not a business day, the next succeeding business day) of January,
April, July and October each year (each such day being called a "Quarterly
Dividend Date" and each period ending on a Quarterly Dividend Date being
called a "Dividend Period"). The amount of any dividend payable for the
initial Dividend Period and for any Dividend Period, shorter than a full
Dividend Period shall be prorated.

Notwithstanding the foregoing, for any 12 Dividend Periods, WRP Newco has
the right to pay the dividend in additional shares of WRP Newco Series A
Preferred determined by dividing the total amount of the dividend to be paid
in shares by $25.00.

In the event WRP Newco fails to pay any dividend on the WRP Newco Series A
Preferred on any Quarterly Dividend Date, WRP Newco shall not pay any
dividends on any other class of stock of WRP Newco other than (i) pro rata
with other securities of WRP Newco ranking pari passu with the WRP Newco
Series A Preferred or (ii) with Junior Shares, until such dividend on the WRP
Newco Series A Preferred has been paid.

Distributions Upon Liquidation, Dissolution or Winding Up.

Upon the voluntary or involuntary dissolution, liquidation or winding up of
WRP Newco, the holders of the WRP Newco Series A Preferred will be entitled to
receive and to be paid out of the assets of WRP Newco available for
distribution to its shareholders, before any payment or distribution is made
on any Junior Shares, the amount of $25.00 per share of

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WRP Newco Series A Preferred ("Liquidation Value"), plus any accrued and
unpaid dividends thereon. If, upon any dissolution, liquidation, or winding up
of WRP Newco, the amounts payable with respect to the preference value of the
WRP Newco Series A Preferred and any other shares of stock of WRP Newco
ranking as to any such distribution on a parity with the WRP Newco Series A
Preferred are not paid in full, the holders of the WRP Newco Series A
Preferred and of such other shares will share ratably in such distribution of
assets of WRP Newco in proportion to the full respective preference amounts to
which they are entitled.

Redemption

Optional Redemption. On and after the fifth anniversary of the Closing Date,
WRP Newco may, at its option, redeem at any time all or any part of the
outstanding WRP Newco Series A Preferred at a price per share (the "Redemption
Price") equal to $25.00 per share of WRP Newco Series A Preferred, together
with all accrued and unpaid dividends to and including the date fixed for
redemption (the "Redemption Date"); provided, however, that no partial
redemption of the WRP Newco Series A Preferred may be effected if after giving
effect thereto the aggregate Liquidation Value of the WRP Newco Series A
Preferred outstanding is less than $10,000,000. The Redemption Price and all
accrued and unpaid dividends will be paid in cash; provided, however, that if
(a) a holder of WRP Newco Series A Preferred desires to convert any of its WRP
Newco Series A Preferred called for redemption but such conversion would cause
any direct or indirect holder which is classified as a REIT under Section 856
of the Code, to own, directly or indirectly, more than 9.9% of the outstanding
voting stock of WRP Newco or would otherwise cause any direct or indirect
holder of such outstanding voting stock to lose its status as a REIT under the
Code, and (b) such holder has so notified WRP Newco in writing prior to the
Redemption Date, stating the number of shares of WRP Newco Series A Preferred
which have been called for redemption which such holder is unable to convert
for such reason (such shares being referred to as the "Unconvertible Shares"),
then WRP Newco shall pay, in cash, the Redemption Price plus all accrued and
unpaid dividends for each Unconvertible Share and shall issue to such holder a
warrant to purchase the number of shares of WRP Newco Common equal to (i) the
fair market value of a share of WRP Newco Common on the Redemption Date
(calculated pursuant to the terms of the Articles Supplementary) over the
Redemption Price, multiplied by (ii) the number of shares of WRP Newco Common
into which the Unconvertible Shares redeemed from such holder were convertible
immediately prior to such redemption, and divided by (iii) the fair market
value of a share of WRP Newco Common on the Redemption Date. Such warrant
shall be exercisable without cost to the holder thereof at any time and from
time to time for a period of 10 years from the date of issuance of such
warrant. The warrant shall be on such terms and conditions as are customarily
contained in like warrants, including provisions to protect the holder of the
warrant from dilution. WRP Newco shall have the right, at any time, to redeem
such warrant at a price equal to the fair market value of such warrant on the
date of any such redemption.

Required Redemption. Upon the (A) (i) non-payment by WRP Newco of any
dividend on the Quarterly Dividend Date applicable to such dividend for three
Dividend Periods which need not be consecutive or (ii) failure by WRP Newco to
comply with any term or obligations under the Articles Supplementary (the
occurrences in (i) and (ii) each called an "Event of Default") or (B) on and
after the fifteenth anniversary of the Closing Date, whichever comes first,
the holder of any shares of WRP Newco Series A Preferred may, at its option,
cause WRP Newco to redeem at any time all of the WRP Newco Series A Preferred
held by such holder at $25.00 per share, payable in cash, together with all
accrued and unpaid dividends to and including the Redemption Date.
Notwithstanding the provisions of the previous sentence, provided an Event of
Default has not occurred, WRP Newco has the right to extend the date during
which a required redemption is not permitted for three separate additional
five year periods if the dividend rate on the WRP Newco Series A Preferred is
changed to the then market rate of comparable preferred stock (the "Market
Rate") on the first day of each such additional five year period; provided,
however, in no event shall the dividend be reduced to less than $2.00 per
share of WRP Newco Series A Preferred. The Market Rate shall be determined by
mutual agreement of the holders of WRP Newco Series A Preferred Stock and WRP
Newco or, if they cannot agree, by an investment banking firm under the
procedure set forth in the Articles Supplementary.

Voting Rights

The holders of WRP Newco Series A Preferred are not entitled to vote on any
matter except as provided below; provided, however, the holders of WRP Newco
Series A Preferred are not to have any voting rights to the extent such rights
will cause any holder of WRP Newco Series A Preferred to own more than 9.9% of
the outstanding voting stock of WRP Newco or otherwise cause any holder of WRP
Newco Series A Preferred that is classified as a REIT under Section 856 of the
Code to lose its status as a REIT under the Code.

So long as any shares of WRP Newco Series A Preferred remain outstanding,
WRP Newco will not, without the affirmative vote of the holders of at least
two-thirds of the shares of WRP Newco Series A Preferred outstanding at the
time, (i) authorize, create or issue, or increase the authorized or issued
amount of, any class or series of shares of capital stock

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ranking prior to the WRP Newco Series A Preferred with respect to the payment
of dividends or the distribution of assets upon liquidation, dissolution or
winding up or reclassify any authorized shares of stock of WRP Newco into such
shares, or create, authorize or issue any obligation or security convertible
into or evidencing the right to purchase any such shares; or (ii) amend, alter
or repeal the provisions of the WRP Newco Charter or the Articles
Supplementary classifying the WRP Newco Series A Preferred, whether by merger,
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of the WRP Newco
Series A Preferred or the holders thereof; provided, however, with respect to
the occurrence of any of the Events set forth in (ii) above, so long as the
shares of WRP Newco Series A Preferred remain outstanding with the terms
thereof materially unchanged, taking into account that upon the occurrence of
an Event, WRP Newco may not be the surviving entity, the occurrence of any
such Event will not be deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of WRP Newco Series A
Preferred and provided further that (x) any increase in the amount of the
authorized or issued shares of preferred stock of WRP Newco or the creation or
issuance of any other preferred stock of WRP Newco, or (y) any increase in the
amount of authorized or issued shares of WRP Newco Series A Preferred or any
other preferred stock of WRP Newco, in each case ranking on a parity with or
junior to the WRP Newco Series A Preferred with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.

Rights of Conversion.

Holders of WRP Newco Series A Preferred shall have the right, exercisable at
any time and from time to time, except in the case of WRP Newco Series A
Preferred called for redemption, to convert all or any of such WRP Newco
Series A Preferred into WRP Newco Common at a conversion price per share of
WRP Newco Common equal to (a) (i) the net book value per share of WRP Newco
Common on the Closing Date or (ii) in the event any sales of WRP Newco Common
to any institutional purchasers have taken place on or prior to the Closing
Date or are subject to a commitment to purchase from an institutional
purchaser made on or prior to the Closing Date, the average per share sale
price of WRP Newco Common sold to institutional purchasers on or prior to the
Closing Date and subject to written commitments to purchase from institutional
purchasers received on or prior to the Closing Date, multiplied by (b) 1.08
(the "Conversion Price"). In the case of WRP Newco Series A Preferred called
for redemption, conversion rights will expire at the close of business on the
last business day preceding the Redemption Date.

Adjustments of Conversion Rate.

The conversion rate in effect at any time for the WRP Newco Series A
Preferred is subject to adjustment from time to time to protect against
certain dilutive events.

In case WRP Newco (1) pays or makes a distribution in shares of WRP Newco
Common to holders of the WRP Newco Common, (2) reclassifies the outstanding
WRP Newco Common into shares of some other class or series of shares,
(3) subdivides the outstanding WRP Newco Common into a greater number of
shares of WRP Newco Common or (4) combines the outstanding WRP Newco Common
into a smaller number of shares of WRP Newco Common, the conversion rate
immediately prior to such action shall be adjusted so that the holder of any
shares of WRP Newco Series A Preferred thereafter surrendered for conversion
will be entitled to receive the number of shares of WRP Newco Common which he
would have owned immediately following such action had such WRP Newco Series A
Preferred been converted immediately prior to such event.

In case WRP Newco issues rights, options or warrants to all holders of the
WRP Newco Common entitling them to subscribe for or purchase WRP Newco Common
(or securities convertible into WRP Newco Common) at a price per share less
than the current market price (as determined pursuant to the Articles
Supplementary) of the WRP Newco Common on such record date, the number of
shares of WRP Newco Common into which each share of WRP Newco Series A
Preferred is convertible will be adjusted so that the same shall be equal to
the number determined by multiplying the number of shares of WRP Newco Common
into which such share of WRP Newco Series A Preferred was convertible
immediately prior to such record date by a fraction of which the numerator
shall be the number of shares of WRP Newco Common outstanding on such record
date plus the number of additional shares of WRP Newco Common offered (or into
which the convertible securities so offered are convertible), and of which the
denominator shall be the number of shares of WRP Newco Common outstanding on
such record date, plus the number of shares of WRP Newco Common which the
aggregate offering price of the additional shares of WRP Newco Common offered
(or into which the convertible securities so offered are convertible) would
purchase at such current market price.

In case WRP Newco distributes to all holders of WRP Newco Common any class
of shares of capital stock other than WRP Newco Common, evidences of
indebtedness or assets of WRP Newco (other than cash distributions out of
current or

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retained earnings), or distributes to all holders of WRP Newco Common rights
or warrants to subscribe for securities other than those referred to in the
immediately preceding paragraph, then in each case the number of shares of WRP
Newco Common into which each share of WRP Newco Series A Preferred will be
convertible will be adjusted so that the same shall equal the number
determined by multiplying the number of shares of WRP Newco Common into which
such share of WRP Newco Series A Preferred was convertible immediately prior
to the date of such distribution by a fraction of which the numerator shall be
the current market price of the WRP Newco Common on the record date mentioned
below, and of which the denominator shall be such current market price of the
WRP Newco Common, less the then fair market value (as determined by the Board
of Directors) of the portion of the securities or assets so distributed or of
such subscription rights or warrants applicable to one share of WRP Newco
Common. Notwithstanding the foregoing, in the event that WRP Newco distributes
rights or warrants (other than those referred to in the immediately preceding
paragraph) ("Rights") pro rata to holders of the WRP Newco Common, WRP Newco
may, in lieu of making any adjustment pursuant to this paragraph make proper
provision so that each holder of a share of WRP Newco Series A Preferred who
converts such share 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 WRP Newco Common issuable upon such
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 shares of WRP Newco Common 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 shares of WRP Newco Common into which a share of WRP
Newco Series A Preferred 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.

Options.

So long as any WRP Newco Series A Preferred is outstanding, WRP Newco may
not issue any options to purchase shares of WRP Newco ("Employee Stock
Options") to officers, directors or employees of or consultants to, WRP Newco,
whether pursuant to employee stock option or purchase plans of WRP Newco or
employment or consulting agreements or otherwise for an exercise price which
is less than the fair market value of such shares on the date of grant. In the
event the number of shares of WRP Newco Common subject to Employee Stock
Options (excluding any Employee Stock Options granted in exchange for
Wellsford share options existing at the Effective Time) at any time exceeds,
in the aggregate, 10% of the WRP Newco Common outstanding at such time, all
Employee Stock Options outstanding at such time in excess of such 10%, shall
be deemed for certain anti-dilution purposes to have an exercise price per
share equal to 20% of the average fair market value of a share of WRP Newco
Common on the date of grant of those shares subject to Employee Stock Options
most recently granted in excess of such 10%.

CERTAIN PROVISIONS OF MARYLAND LAW AND OF
WRP NEWCO'S CHARTER AND BYLAWS

The following is a summary of certain provisions of Maryland law and WRP
Newco's Charter and Bylaws and is qualified in its entirety by reference to
the Newco Charter and Bylaws, copies of which are attached as exhibits to the
registration statement on Form 10 filed by WRP Newco. See "Additional
Information."

CLASSIFICATION OF THE BOARD OF DIRECTORS

The Bylaws provide that the number of directors of WRP Newco may be
established by the Board of Directors but may not be fewer than the minimum
number required by Maryland law, which is three, nor more than 15. Any vacancy
will be filled, at any regular meeting or at any special meeting called for
that purpose, by a majority of the remaining directors. A vacancy resulting
from an increase in the number of directors must be filled by a majority of
the entire Board of Directors.

Pursuant to the Newco Charter, the Board of Directors is divided into three
classes of directors. The initial terms of the first, second and third classes
will expire at the annual meetings of stockholders to be held in 1998, 1999
and 2000, respectively. Beginning in 1998, directors of each class will be
chosen for three-year terms upon the expiration of their current terms and
each year one class of directors will be elected by the stockholders. The
members of each such class will hold office until their successors are duly
elected and qualified. WRP Newco believes that classification of the Board of
Directors will help to assure the continuity and stability of WRP Newco's
business strategies and policies as determined by the Board of Directors.
Holders of shares of WRP Newco Common have no right to cumulative voting in
the election of directors. Consequently, at each annual meeting of
stockholders, the holders of a majority of the shares of WRP Newco Common are
able to elect all of the successors of the class of directors whose terms
expire at that meeting.

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Classification of the Board of Directors could have the effect of making the
removal of incumbent directors more time-consuming and difficult, which could
discourage a third party from making a tender offer or otherwise attempting to
obtain control of WRP Newco, even though such an attempt might be beneficial
to WRP Newco and its stockholders. At least two annual meetings of
stockholders, instead of one, will generally be required to effect a change in
a majority of the Board of Directors. Thus, the classified board provision
could increase the likelihood that incumbent directors will retain their
positions.

REMOVAL OF DIRECTORS

The Newco Charter provides that, except as provided in the next sentence, a
director may be removed only for cause and by the affirmative vote of at least
two-thirds of the votes entitled to be cast for the election of directors
(i.e., the votes attributable to all outstanding shares of WRP Newco Common).
The Class A Director may be removed, without cause, only by the affirmative
vote of at least a majority of the WRP Newco Class A Common electing such
Class A Director.

BUSINESS COMBINATIONS

Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and (i) any person who beneficially owns 10% or more of the voting
power of the corporation's shares or (ii) an Interested Stockholder or (iii)
an affiliate of an Interested Stockholder are prohibited for five years after
the most recent date on which the Interested Stockholder becomes an Interested
Stockholder. Thereafter, any such business combination must be recommended by
the board of directors of such corporation and approved by the affirmative
vote of at least (a) 80% of the votes entitled to be cast by holders of
outstanding shares of voting stock of the corporation and (b) two-thirds of
the votes entitled to be cast by holders of voting stock of the corporation
other than shares held by the Interested Stockholder with whom (or with whose
affiliate) the business combination is to be effected, unless, among other
conditions, the corporation's common stockholders receive a minimum price (as
defined in the MGCL) for their shares and the consideration is received in
cash or in the same form previously paid by the Interested Stockholder for its
shares. These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. The directors of WRP Newco have exempted from the
Maryland statute any business combinations with Jeffrey H. Lynford or Edward
Lowenthal or any of their affiliates or any other person acting in concert or
as a group with any of such persons.

AMENDMENT TO THE CHARTER AND BYLAWS

The Newco Charter may be amended only by the affirmative vote of a majority
of all of the votes entitled to be cast on the matter, except that any
amendment to the sections of the charter that address the number,
classification or removal of directors, or any amendment providing that the
stockholders may approve an action by a lesser percentage of votes than that
required by law will be valid only if approved by the affirmative vote of two-
thirds of all of the votes entitled to be cast on the matter. The Board of
Directors of WRP Newco has the exclusive power to adopt, alter or repeal any
provision of the Bylaws and to make new Bylaws.

MERGER, CONSOLIDATION, SALE OF ASSETS

A sale of all or substantially all of the assets of WRP Newco or a merger in
which WRP Newco is not the successor must be approved by the affirmative vote
of two-thirds of all of the votes entitled to be cast on the matter. A
consolidation or share exchange or a merger in which WRP Newco is the
successor need be approved only by the affirmative vote of holders of shares
entitled to cast a majority of all votes entitled to be cast on the matter.

DISSOLUTION OF WRP NEWCO

The dissolution of WRP Newco must be approved by the affirmative vote of the
holders of not less than two-thirds of all the votes entitled to be cast on
the matter.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

The Bylaws of WRP Newco provide that (a) with respect to an annual meeting
of stockholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by stockholders may be made only
(i) pursuant to WRP Newco's notice of the meeting, (ii) by or at the direction
of the Board of Directors or (iii) by a stockholder who is entitled to vote at
the meeting and has complied with the advance notice procedures set forth in
the Bylaws and (b) with respect to special meetings of stockholders, only the
business specified in WRP Newco's notice of

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meeting may be brought before the meeting of stockholders and nominations of
persons for election to the Board of Directors may be made only (i) pursuant
to WRP Newco's notice of the meeting, (ii) by or at the direction of the Board
of Directors, or (iii) provided that the Board of Directors has determined
that directors shall be elected at such meeting, by a stockholder who is
entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the Bylaws.

MEETINGS OF STOCKHOLDERS

WRP Newco's Bylaws provide that annual meetings of stockholders shall be
held on a date and at the time set by the Board of Directors during the month
of May each year (commencing in May 1998). Special meetings of the
stockholders may be called by (i) the Chairman of the Board of WRP Newco, (ii)
the President of WRP Newco, (iii) the Chief Executive Officer of WRP Newco or
(iv) the Board of Directors. As permitted by the MGCL, the Bylaws provide that
special meetings must be called by the Secretary of WRP Newco upon the written
request of the holders of shares entitled also to cast not less than a
majority of all of the votes entitled to be cast at the meeting.

WRP Newco's Bylaws provide that any stockholder of record wishing to
nominate a director or have a stockholder proposal considered at an annual
meeting (except for stockholder proposals included in WRP Newco proxy
materials pursuant to Rule 14a-8 under the securities Exchange Act of 1934, as
amended) must provide written notice and certain supporting documentation to
WRP Newco relating to the nomination or proposal not later than 60 days nor
earlier than 90 days prior to the anniversary date of the prior year's annual
meeting or special meeting in lieu thereof (the "Anniversary Date"). In the
event that the annual meeting is advanced by more than 30 calendar days before
or delayed more than 60 days from the Anniversary Date, stockholders generally
must provide written notice no earlier than 90 days prior to such annual
meeting nor later than the later of 60 days prior to such annual meeting or 10
days following the date on which notice of the meeting is mailed to
stockholders.

The purpose of requiring stockholders to give WRP Newco advance notice of
nominations and other business is to afford the Board of Directors a
meaningful opportunity to consider the qualifications of the proposed nominees
or the advisability of the other proposed business and, to the extent deemed
necessary or desirable by the Board of Directors, to inform stockholders and
make recommendations about the qualifications or business, as well as to
provide a more orderly procedure for conducting meetings of stockholders.
Although WRP Newco's Bylaws do not give the Board of Directors any power to
disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election
of directors or the consideration of stockholder proposals if the proper
procedures are not followed, and of discouraging or deterring a third party
from conducting a solicitation of proxies to elect its own slate of directors
or to approve its own proposal, without regard to whether consideration of the
nominees or proposals might be harmful or beneficial to WRP Newco and its
stockholders.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Newco Charter
contains such a provision which eliminates such liability to the maximum
extent permitted by Maryland law.

The Newco Charter authorizes WRP Newco, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer or (b) any individual who, while a
director of WRP Newco, and at the request of WRP Newco, serves or has served
another corporation, partnership, joint venture, trust, employee benefit plan,
limited liability company or any other enterprise as a director, officer,
partner, trustee, manager or member of such corporation, partnership, joint
venture, trust, employee benefit plan, limited liability company or other
enterprise. The Bylaws of WRP Newco obligate it, to the maximum extent
permitted by Maryland law, to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer who is made a party to the proceeding by reason of
his service in that capacity or (b) any individual who, while a director of
WRP Newco and at the request of WRP Newco, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan, limited
liability company or any other enterprise as a director, officer, partner,
trustee, manager or member of such corporation, partnership, joint venture,
trust, employee benefit plan, limited liability company or other enterprise
and who is made a party to the proceeding by reason of his service in that
capacity. The Newco Charter and Bylaws also permit WRP Newco to indemnify and
advance expenses to any person who served a predecessor of WRP Newco in any of
the capacities described above and to any employee or agent of WRP Newco or a
predecessor of WRP Newco.

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The MGCL requires a corporation (unless its charter provides otherwise,
which the Newco Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding
to which he is made a party by reason of his service in that capacity. The
MGCL permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any
proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (a) the act or
omission of the director or officer was material to the matter giving rise to
the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. In addition, the MGCL requires WRP Newco, as a
condition to advancing expenses, to obtain (a) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by WRP Newco as authorized by the Bylaws
and (b) a written statement by or on his behalf to repay the amount paid or
reimbursed by WRP Newco if it shall ultimately be determined that the standard
of conduct was not met.

PROPOSAL TO
APPROVE WRP NEWCO ADDITIONAL SHARE OFFERING

The Board of Trustees of Wellsford and the Board of Directors of WRP Newco
have approved the issuance by WRP Newco of up to 12,000,000 shares of WRP
Newco Common (the "Additional Shares"), subject to further approval by the
Wellsford Common Shareholders solely to satisfy the requirements of the ASE.
Such approval would not constitute approval of any other related transactions
by Wellsford, WRP Newco or any of their affiliates. The purchase price for the
Additional Shares will be determined by the Board of Directors of WRP Newco
based upon prevailing market conditions. WRP Newco anticipates that the
offering of the Additional Shares will be made to a limited number of
investors in a private placement or in a registered offering to be filed with
the Commission under the Securities Act.

The Board of Trustees of Wellsford and the Board of Directors of WRP Newco
believe that the WRP Newco Additional Share Offering will provide more capital
available for investment, enhance WRP Newco's capital structure and increase
the liquidity of WRP Newco Common. However, the equity of existing
stockholders would be diluted if the purchase price for the Additional Shares
is less than the book value of WRP Newco Common on the date of the
Distribution.

In addition, if all of the Additional Shares are issued and no other shares
have been issued after the Distribution and prior to the WRP Newco Additional
Share Offering, the owners of the Additional Shares will own approximately 70%
of the then outstanding shares of WRP Newco Common. The nature and
concentration of ownership of such Additional Shares could result in a change
of control of the Company.

The proceeds of this offering, after payment of underwriters' commissions
and other offering expenses, will be used to repay loans of up to $50 million
to be made to WRP Newco, and interest thereon, and for investments, other
business activities and working capital. The loans are expected to be made
under the WRP Newco Line of Credit. As of the date hereof, WRP Newco does not
have any agreements, understandings or commitments to make any specific
investments with such proceeds. In the normal course of business, however, WRP
Newco is continually evaluating a number of potential investments and entering
into non-binding letters of intent. In accordance with the Newco Charter, WRP
Newco may make additional investments without the consent of its stockholders.

WRP Newco anticipates that purchasers of Additional Shares will be able to
sell such shares in the public market immediately or shortly after purchase.
The existence of the Additional Shares in the public market could adversely
affect the market price for shares of WRP Newco Common.

The Additional Shares will have the same terms as all other shares of WRP
Newco Common with respect to dividends, voting, ownership and any other
right(s) and limitation(s) pertaining to shares of WRP Newco Common generally.
However, as would be the case with respect to any issuance of equity voting
securities, the Additional Shares, if issued, will dilute the relative voting
power of the issued and outstanding shares of WRP Newco Common.

THE BOARD OF TRUSTEES OF WELLSFORD AND THE BOARD OF DIRECTORS OF WRP NEWCO
RECOMMEND THAT YOU VOTE FOR THE PROPOSAL TO APPROVE THE WRP NEWCO ADDITIONAL
SHARE OFFERING.

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PROPOSAL TO
APPROVE WRP NEWCO'S 1997 MANAGEMENT INCENTIVE PLAN

General. The Board of Directors of WRP Newco has approved, subject to the
approval of the shareholders, the 1997 Management Incentive Plan (the
"Management Incentive Plan"). The purpose of the Management Incentive Plan is
to align the interests of WRP Newco's directors, executive officers and
employees with those of the stockholders and to enable WRP Newco to attract,
compensate and retain directors, executive officers and employees and provide
them with appropriate incentives and rewards for their performance. The
existence of the Management Incentive Plan should enable the Company to
compete more effectively for the services of such individuals. The officers,
directors and employees of WRP Newco who receive awards under the Management
Incentive Plan may receive a greater economic benefit to the extent the fair
market value of WRP Newco Common increases. However, the equity of existing
stockholders would be diluted if shares of WRP Newco Common were issued
pursuant to the Management Incentive Plan at prices less than their then
current fair market value. In addition, the issuance of a substantial number
of shares of WRP Newco Common under the Management Incentive Plan or their
sale in the public market might adversely affect prevailing market prices for
such shares.

Awards to directors, executive officers and other employees under the
Management Incentive Plan may take the form of share options ("Options"),
including corresponding share appreciation rights ("SARs") and reload options,
restricted share awards and share purchase awards. The maximum number of
shares of WRP Newco Common that may be the subject of awards under the
Management Incentive Plan is 1,750,000 shares.

Share Authorization. Shares of WRP Newco Common covered by any unexercised
portions of terminated Options, shares of WRP Newco Common forfeited by
participants and shares of WRP Newco Common subject to any awards that are
otherwise surrendered by a participant without receiving any payment or other
benefit with respect thereto may again be subject to new awards under the
Management Incentive Plan. In the event the purchase price of an Option is
paid in whole or in part through the delivery of shares of WRP Newco Common,
the number of shares of WRP Newco Common issuable in connection with the
exercise of the Option shall not again be available for the grant of awards
under the Management Incentive Plan. Shares of WRP Newco Common subject to
Options, or portions thereof, with respect to which SARs are exercised, are
not again available for the grant of awards under the Management Incentive
Plan. The shares of WRP Newco Common to be issued or delivered under the
Management Incentive Plan are authorized and unissued shares, or issued shares
of WRP Newco Common that have been reacquired by WRP Newco.

Management Incentive Plan Administration. The Management Incentive Plan will
be administered by a committee of two or more non-employee directors (the
"Committee"), which will initially consist of Messrs. Du Bois and Germain. The
Committee will determine the directors, executive officers and other employees
who will be eligible for and granted awards, determine the amount and type of
awards, establish rules and guidelines relating to the Management Incentive
Plan, establish, modify and terminate the terms and conditions of awards and
take such other action as may be necessary for the proper administration of
the Management Incentive Plan. All employees and non-employee directors are
currently eligible to participate in the Management Incentive Plan.

Options. "Incentive Options" meeting the requirements of Section 422 of the
Code, and "Nonqualified Options" that do not meet such requirements are both
available for grant under the Management Incentive Plan. The term of each
Option will be determined by the Committee, but no Incentive Option will be
exercisable more than ten years after the date of grant. Options may also be
subject to restrictions on exercise, such as exercise in periodic
installments, as determined by the Committee. The exercise price for Incentive
Options must be at least equal to 100% of the fair market value of the shares
of WRP Newco Common on the date of grant and the exercise price for
Nonqualified Options will be determined by the Committee at the time of grant.
The exercise price can be paid in cash, or if approved by the Committee, by
tendering shares (actually or constructively) of WRP Newco Common owned by a
participant.

Incentive Options are not transferable except by will or the laws of descent
and distribution and may be exercised only by the participant (or his guardian
or legal representative) during his or her lifetime, except as provided below.
Nonqualified Options may be transferable to family members and entities for
the benefit of the participant or his family members. If a participant's
employment with WRP Newco or service as a director terminates for any reason
(other than death or disability), any unexercised or unexpired Options held by
the participant (or its permitted transferee) will be deemed cancelled and
terminated on the date of such termination, unless the Committee decides to
extend the term of such Options for a period not exceeding three months. In
the case of a non-employee director, however, if such participant's service as
a director terminates by reason of death, disability, or under mutually
satisfactory conditions, any unexercised or unexpired Nonqualified Options
held by the participant (or its permitted transferee) will be exercisable for
a period of five years from the date of such termination or until the
expiration of the Option, whichever is shorter. If a participant dies while
employed by WRP Newco, including an employee who is also a director, any
unexercised or unexpired Options will, to the extent

144
<PAGE>

exercisable on the date of death, be exercisable by the holder or by the
participant's estate or by any person who acquired such Options by bequest or
inheritance, at any time generally within one year after such death. If a
participant becomes totally disabled and his employment terminates as a result
of such disability, including an employee who is also a director, the holder
or the participant (or his guardian or legal representative) will have the
unqualified right to exercise any unexercised and unexpired Options held by
the participant (or its permitted transferee) generally for one year after
such termination.

Share Appreciation Rights. The Management Incentive Plan provides that SARs
may be granted in connection with a grant of Options. Each SAR must be
associated with a specific Option and must be granted at the time of grant of
such Option. A SAR is exercisable only to the extent the related Option is
exercisable. Upon the exercise of a SAR, the recipient is entitled to receive
from WRP Newco, without the payment of any cash (except for any applicable
withholding taxes), up to, but no more than, an amount in cash or shares of
WRP Newco Common equal to the excess of (A) the fair market value of one
Common Share on the date of such exercise over (B) the exercise price of any
related Option, times the number of shares of WRP Newco Common in respect of
which such SAR shall have been exercised. Upon the exercise of a SAR, the
related share Option, or the portion thereof in respect of which such SAR is
exercised, will terminate. Upon the exercise of an Option granted in tandem
with a SAR, such tandem SAR will terminate.

Reload Options. The Committee may grant, concurrently with the award of any
Option (each an "Underlying Option") to such participants, one or more reload
options (each a "Reload Option") to purchase for cash or, if permissible under
the Underlying Option, shares of WRP Newco Common, a number of shares of WRP
Newco Common equal to the number of shares of WRP Newco Common delivered (or
deemed delivered) by the participant to WRP Newco to exercise the Underlying
Option. Although an Underlying Option may be an Incentive Option, a Reload
Option is not intended to qualify as an Incentive Option. A Reload Option may
be granted in connection with the exercise of an Option that is itself a
Reload Option. Each Reload Option will have the same expiration date as the
Underlying Option and an exercise price equal to the fair market value of the
shares of WRP Newco Common on the date of grant of the Reload Option. A Reload
Option is exercisable immediately.

Reload Options permit a participant to retain, through the term of the
original Option, his or her economic interest in the sum of the shares of WRP
Newco Common covered by such Options as well as the already-owned shares of
WRP Newco Common that could be used to exercise such Option, by granting
options on the number of shares of WRP Newco Common used to pay the exercise
price of the original Option and subsequent Reload Options. In this way,
Reload Options provide a participant with the opportunity to build up
ownership of shares of WRP Newco Common covered by an original Option earlier
during the Option term rather than through a single exercise at or near the
end of the Option term.

Restricted Shares. WRP Newco may award restricted shares of WRP Newco Common
to a participant. Such a grant gives a participant the right to receive shares
of WRP Newco Common subject to a risk of forfeiture based upon certain
conditions. The forfeiture restrictions on the shares of WRP Newco Common may
be based upon performance standards, length of service or other criteria as
the Committee may determine. Until all restrictions are satisfied, lapsed or
waived, WRP Newco will maintain custody over the restricted shares of WRP
Newco Common but the participant will be able to vote the shares of WRP Newco
Common and will be entitled to an amount equal to all distributions, if any,
paid with respect to the shares of WRP Newco Common, as provided by the
Committee. During such restrictive period, the restricted shares of WRP Newco
Common may not be sold, assigned, transferred, pledged or otherwise
encumbered. Upon termination of employment, the participant generally forfeits
the right to the shares of WRP Newco Common to the extent the applicable
performance standards, length of service requirements, or other measurement
criteria have not been met.

Share Purchase Awards. The Management Incentive Plan also permits the grant
of share purchase awards to participants. Participants who are granted a share
purchase award are provided with a share purchase loan to enable them to pay
the purchase price for the shares of WRP Newco Common acquired pursuant to the
award. The terms of each share purchase loan will be determined by the
Committee. The purchase price of shares of WRP Newco Common acquired with a
share purchase loan is the fair market value on the date of the award. The
Management Incentive Plan provides that some or all of a share purchase loan
can be forgiven under terms determined by the Committee. At the end of the
loan term, the remainder of the share purchase loan will be due and payable.
The interest rate, if any, on a share purchase loan will be determined by the
Committee. Share purchase loans may be recourse or nonrecourse under terms
determined by the Committee.

If a participant's employment with WRP Newco is terminated for any reason
other than death, disability or termination without "cause," the balance of
the share purchase loans to such participant will be immediately due and
payable. If a participant's employment terminates by reason of death,
disability or termination without "cause," the balance of such participant's
share purchase loans may be forgiven in full at the discretion of the
Committee.

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<PAGE>

Antidilution Provisions. The number of shares of WRP Newco Common authorized
to be issued under the Management Incentive Plan and subject to outstanding
awards (and the grant or exercise price thereof) may be adjusted to prevent
dilution or enlargement of rights in the event of any dividend or other
distribution, recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of shares of WRP Newco Common or other securities, or
other similar capitalization change.

Certain Federal Income Tax Consequences of the Management Incentive
Plan. The following is a brief summary of the principal federal income tax
consequences of awards under the Management Incentive Plan. The summary is
based upon current federal income tax laws and interpretations thereof, all of
which are subject to change at any time, possibly with retroactive effect. The
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign tax consequences.

In general, a participant is not subject to federal income tax either at the
time of grant or at the time of exercise of an Incentive Option. However, upon
exercise, the difference between the fair market value of the shares of WRP
Newco Common and the exercise price is a tax preference item subject to the
possible application of the alternative minimum tax. If a participant does not
dispose of shares of WRP Newco Common acquired through the exercise of an
Incentive Option in a "disqualifying disposition" (i.e., no disposition occurs
within two years from the date of grant of the share option nor within one
year of the transfer of the shares of WRP Newco Common to the participant),
then the participant will be taxed only upon the gain, if any, from the sale
of such shares of WRP Newco Common, and such gain will be taxable as gain from
the sale of a capital asset.

WRP Newco will not receive any tax deduction on the exercise of an Incentive
Option or, if the above holding period requirements are met, on the sale of
the underlying shares of WRP Newco Common. If there is a disqualifying
disposition (i.e., one of the holding period requirements is not met), the
participant will be treated as receiving compensation subject to ordinary
income tax in the year of the disqualifying disposition and WRP Newco will be
entitled to a deduction for compensation expense in an amount equal to the
amount included in income by the participant. The participant generally will
be required to include in income an amount equal to the difference between the
fair market value of the shares of WRP Newco Common at the time of exercise
and the exercise price. Any appreciation in value after the time of exercise
will be taxed as capital gain and will not result in any deduction by WRP
Newco.

If Nonqualified Options are granted to a participant, there are no federal
income tax consequences at the time of grant. Upon exercise of the Option, the
participant must report as ordinary income an amount equal to the difference
between the exercise price and the fair market value of the shares of WRP
Newco Common on the date of exercise. WRP Newco will receive a tax deduction
in like amount. Any appreciation in value after the time of exercise will be
taxed as capital gain and will not result in any deduction by WRP Newco.

No income will be realized by a participant in connection with the grant of
any SAR. The participant must include in ordinary income the amount of cash
received and the fair market value on the exercise date of any shares of WRP
Newco Common received upon the exercise of a SAR. WRP Newco will be entitled
to a deduction equal to the amount included in such participant's income by
reason of the exercise of any SAR.

The receipt of a Reload Option by a holder of an Incentive Option or a
Nonqualified Option (including a Reload Option) who pays the exercise price in
full or in part with previously acquired shares of WRP Newco Common should not
affect the tax treatment of the exercise of such Incentive or Nonqualified
Option (including the amount of ordinary income, if any, recognized upon
exercise). A participant will not be subject to tax at the time a Reload
Option is granted (except for any income recognized upon the exercise of a
Nonqualified Option at the time of grant of the Reload Option). A Reload
Option will constitute a Nonqualified Option for federal income tax purposes
and will be taxed as such in the manner set forth above.

A grant of restricted shares of WRP Newco Common does not constitute a
taxable event for either a participant or WRP Newco. However, the participant
will be subject to tax, at ordinary income rates, when the shares of WRP Newco
Common are no longer subject to a substantial risk of forfeiture or they
become transferable. WRP Newco will be entitled to take a commensurate
deduction at that time.

A participant may elect to recognize taxable ordinary income at the time
restricted shares of WRP Newco Common are awarded in an amount equal to the
fair market value of the shares of WRP Newco Common at the time of grant,
determined without regard to any forfeiture restrictions. If such an election
is made, WRP Newco will be entitled to a deduction at that time in the same
amount. Future appreciation on the shares of WRP Newco Common will be taxed at
the capital gains rate when the shares of WRP Newco Common are sold. However,
if, after making such an election, the shares of WRP Newco Common are
forfeited, the participant will be unable to claim a deduction.

146
<PAGE>

In general, a participant who receives a share purchase award incurs no tax
liability and WRP Newco does not receive any deduction at the time shares of
WRP Newco Common are acquired through a share purchase award. However, as the
share purchase loan is forgiven, the participant will be required to recognize
income in an amount equal to the forgiven portion of the loan. WRP Newco will
be entitled to take a commensurate deduction at such time.

Applicable withholding taxes may be withheld in connection with any award
under the Management Incentive Plan. In that regard, the Committee has the
discretion to allow a participant to satisfy its withholding tax obligations
with shares of WRP Newco Common.

Change in Control. Depending on the terms of a particular award as
determined by the Committee, upon the occurrence of a change in control of WRP
Newco, all options and related SARs may become immediately exercisable, the
restricted shares of WRP Newco Common may fully vest and share purchase loans
may be forgiven in full.

Termination, Amendment and ERISA Status. The Management Incentive Plan will
terminate by its terms and without any action by the Board on the tenth
anniversary of the date of its effectiveness. No awards may be made after that
date. Awards outstanding on such date will remain valid in accordance with
their terms.

The Committee may amend or alter the terms of awards under the Management
Incentive Plan, including to provide for the forgiveness in whole or in part
of share purchase loans, the release of the shares of WRP Newco Common
securing such loans or the termination or modification of the vesting or
performance provisions of the grants of restricted shares of WRP Newco Common
but no such action shall in any way impair the rights of a participant under
any award without such participant's consent.

The Committee may amend or terminate the Management Incentive Plan. No such
amendments or termination of the Management Incentive Plan shall in any way
impair the rights of a participant under any award previously granted without
such participant's consent. In addition, any amendment or termination will be
subject to shareholder approval if approval is required by Federal or state
law or regulation or rule of any stock exchange or quotation system on which
the shares of WRP Newco Common are listed or quoted.

The Management Incentive Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1976, as amended.

THE BOARD OF TRUSTEES OF WELLSFORD AND THE BOARD OF DIRECTORS OF WRP NEWCO
RECOMMEND THAT YOU VOTE FOR THE PROPOSAL TO APPROVE WRP NEWCO'S 1997
MANAGEMENT INCENTIVE PLAN.

LEGAL MATTERS

Certain legal matters in connection with the Merger will be passed upon for
EQR by Rudnick & Wolfe, Chicago, Illinois and Rosenberg & Liebentritt, P.C.,
Chicago, Illinois. Errol R. Halperin, a partner of Rudnick & Wolfe, is a
trustee of EQR. Attorneys of Rudnick & Wolfe beneficially own less than 1% of
the outstanding EQR Common, either directly or upon the exercise of options.
Sheli Z. Rosenberg, a principal of Rosenberg & Liebentritt, P.C., is a trustee
of EQR. Attorneys of Rosenberg & Liebentritt, P.C. beneficially own less than
1% of the outstanding EQR Common, either directly or upon the exercise of
options. Certain legal matters in connection with the Merger will be passed
upon for Wellsford by Robinson Silverman Pearce Aronsohn & Berman LLP, New
York, New York. Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland, will
pass upon certain matters of Maryland law relating to the Merger Agreement and
Articles under Maryland law.

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<PAGE>

SHAREHOLDER PROPOSALS

Any proposal which a shareholder of EQR intends to present at the 1997
Annual Meeting of Shareholders of EQR, if the Merger has not been consummated
prior to the date such meeting is to be held, must have been received by the
Secretary of EQR no later than November 29, 1996 to have been eligible for
inclusion in EQR's proxy statement and proxy form relating to such meeting.

Any proposal which a shareholder of Wellsford intends to present at the 1997
Annual Meeting of Shareholders of Wellsford, if the Merger has not been
consummated prior to the date such meeting is to be held, must have been
received by Wellsford at its principal executive offices on or before November
29, 1996 to have been eligible for inclusion in Wellsford's proxy statement
and proxy form relating to such meeting.

148

<PAGE>

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

Name of Subidiary* State of Incorporation
- ------------------ ----------------------

Wellsford Greenbrook Corp. New Jersey

Wellsford Wayne Corp. New Jersey

Wellsford Chatham Corp. New Jersey

___________________________

* Each subsidiary does business under the name indicated below.

<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income and equity and
is qualified in its entirety by reference to such financial statements.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 3,198
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,198
<PP&E> 47,806
<DEPRECIATION> 0
<TOTAL-ASSETS> 68,938
<CURRENT-LIABILITIES> 0
<BONDS> 14,755
0
0
<COMMON> 0
<OTHER-SE> 54,183
<TOTAL-LIABILITY-AND-EQUITY> 68,938
<SALES> 0
<TOTAL-REVENUES> 401
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 401
<INCOME-TAX> 0
<INCOME-CONTINUING> 401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 401
<EPS-PRIMARY> .00
<EPS-DILUTED> .00

</TABLE>