FIRST SUPPLEMENTAL INDENTURE (this "First Supplemental Indenture"),

dated as of July 31, 1998, by and among FIRST UNION REAL ESTATE EQUITY AND

MORTGAGE INVESTMENTS, as Issuer, and CHASE MANHATTAN TRUST COMPANY, NATIONAL

ASSOCIATION as Trustee (the "Trustee").





                                   WITNESSETH:



         WHEREAS, the Issuer and Society National Bank entered into an Indenture

dated as of October 1, 1993 (the "Indenture"), pursuant to which Indenture the

Issuer has issued certain 8 7/8% Senior Notes due 2003 (the "Securities"); and



         WHEREAS, the Trustee is the successor in interest to Mellon Bank,

F.S.B., successor to KeyBank National Association, successor to Society National

Bank under the Indenture; and



         WHEREAS, the Issuer desires to execute and deliver this First

Supplemental Indenture in accordance with the provisions of the Indenture for

purposes of eliminating certain covenants of the Issuer, modifying the provision

restricting mergers and asset transfers by the Issuer, modifying the provision

regarding remedies and making certain conforming and other changes; and



         WHEREAS, the execution and delivery of this First Supplemental

Indenture by the Issuer have been duly authorized by the Issuer; and



         WHEREAS, the execution and delivery of this First Supplemental

Indenture by the Issuer and the Trustee have been consented to by the Holders of

a majority in principal amount of the Securities in accordance with Article 9 of

the Indenture; and



         WHEREAS, all the conditions and requirements necessary to make this

First Supplemental Indenture, when duly executed and delivered, a valid and

binding agreement of the Issuer in accordance with its terms and for the

purposes herein expressed, have been performed and fulfilled.



         NOW, THEREFORE, for and in consideration of the premises and the mutual

covenants contained herein and in the Indenture and for other good and valuable

consideration, the receipt and sufficiency of which are hereby acknowledged, the

Issuer and the Trustee hereby agree as follows:





{PAGE}   3





ARTICLE ONE

-----------

DEFINITIONS AND EFFECT

SECTION 1.01 INCORPORATION OF PREVIOUS DOCUMENTS. Unless otherwise expressly

provided, the provisions of the Indenture are incorporated herein by reference.



SECTION 1.02 DEFINITIONS. Capitalized terms which are used but not defined

herein shall have the meanings ascribed to such terms in the Indenture.



SECTION 1.03 EFFECT OF FIRST SUPPLEMENTAL INDENTURE. From and after the

execution and delivery of this First Supplemental Indenture, the Indenture shall

be deemed to be modified as herein provided, but except as modified hereby, the

Indenture shall continue in full force and effect. The Indenture as modified

hereby shall be read, taken and construed as one and the same instrument.



ARTICLE TWO

-----------

AMENDMENTS TO THE INDENTURE

SECTION 2.01 EFFECTIVENESS. This First Supplemental Indenture shall take effect

immediately upon its execution and delivery by the Trustee and the Issuer in

accordance with the provisions of Article 9 of the Indenture; provided, however,

that the provisions of Sections 2.02, 2.03, 2.04 and 2.05 of this First

Supplemental Indenture shall not become effective unless and until: (a) the

Issuer delivers an Officer's Certificate to the Trustee substantially in the

form attached hereto as Exhibit A and (b) the acceptance for payment by the

Issuer, or its assignee, of all Securities that have been properly tendered and

not withdrawn pursuant to the Offer to Purchase and Consent Solicitation

Statement, dated July 10, 1998 (the "Conditions"). Simultaneously with

satisfaction of the Conditions, without any further action whatsoever, the

provisions of Sections 2.02, 2.03, 2.04 and 2.05 of this First Supplemental

Indenture shall become effective for all purposes.



SECTION 2.02 AMENDMENTS TO ARTICLE 1 OF THE INDENTURE. Article 1 of the

Indenture is amended by deleting the following definitions in their entirety and

replacing such definitions with the following:



                  "Asset Sale.



                  [intentionally omitted]";



                  "Average Life.



                  [intentionally omitted]";



                  "Bank Credit Facilities.





{PAGE}   4



                  [intentionally omitted]";



                  "Change of Control Triggering Event.



                  [intentionally omitted]";



                  "Combined EBIDA.



                  [intentionally omitted]";



                  "Combined Interest Coverage Ratio.



                  [intentionally omitted]";



                  "Combined Interest Expense.



                  [intentionally omitted]";



                  "Combined Net Income.



                  [intentionally omitted]";



                  "Combined Tangible Net Worth.



                  [intentionally omitted]";

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