<PAGE>

                                                                   Exhibit 10.74

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                             SFHI, LLC, as Grantor
                                  (Borrower)

                                      to

                       Russell R. Reno, Jr., as trustee
                                   (Trustee)

                              for the benefit of


   LEHMAN BROTHERS HOLDINGS INC., D/B/A LEHMAN CAPITAL, A DIVISION OF LEHMAN
                    BROTHERS HOLDINGS INC., as beneficiary
                                   (Lender)

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

                     DEED OF TRUST AND SECURITY AGREEMENT

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


                       Dated:    February 28, 2001
                       Location: Gaithersburg, Maryland

                       Section:  _________
                       Block:    _________
                       Lot:      _________
                       County:   Montgomery

UPON RECORDATION RETURN TO:
  Stroock & Stroock & Lavan LLP
  180 Maiden Lane
  New York, New York 10038-4982
  Attention: Oumar Diop

The undersigned, an attorney admitted to practice before the Court of Appeals
(State of Maryland), hereby certifies that the within instrument was prepared by
me or under my supervision.

By:_____________________________'
     Russell R. Reno, Jr., Esq.
     Trustee

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

<PAGE>

                               TABLE OF CONTENTS
                               -----------------


1 - Grants of Security

  1.1   Property Granted
  1.2   Assignment of Rents
  1.3   Security Agreement
  1.4   Pledge of Monies Held

2 - Debt and Obligations Secured

  2.1   Debt and Obligations Secured

3 - Borrower Covenants

  3.1   Payment of Debt
  3.2   Insurance
  3.3   Payment of Taxes, etc.
  3.4   Reserves
  3.5   Condemnation
  3.6   Leases and Rents
  3.7   Maintenance of Property
  3.8   Waste
  3.9   Compliance with Laws
  3.10  Books and Records
  3.11  Payment for Labor and Materials
  3.12  Management
  3.13  Performance of Other Agreements
  3.14  Change of Name, Identity or Structure
  3.15  Existence

4 - Special Covenants

  4.1   Single Purpose Entity
  4.2   Restoration

5 - Representations and Warranties

  5.1   Warranty of Title
  5.2   Authority
  5.3   Legal Status and Authority
  5.4   Validity of Documents
  5.5   Litigation
  5.6   Status of Property
  5.7   No Foreign Person
  5.8   Separate Tax Lot
  5.9   Erisa Compliance
  5.10  Leases
  5.11  Financial Condition
  5.12  Business Purposes
  5.13  Taxes
  5.14  Mailing Address
  5.15  No Change in Facts or Circumstances
  5.16  Disclosure
  5.17  Third Party Representations
  5.18  Illegal Activity
<PAGE>

6 - Obligations and Reliances

  6.1   Relationship of Borrower and Lender
  6.2   No Lender Obligations

7 - Further Assurances

  7.1   Recording of Security Instrument, etc.
  7.2   Further Acts, etc.
  7.3   Changes in Tax, Debt, Credit and Documentary Stamp Laws
  7.4   Estoppel Certificates
  7.5   Replacement Documents

8 - Due on Sale/Encumbrance

  8.1   Lender Reliance
  8.2   No Sale/Encumbrance
  8.3   Sale/Encumbrance Defined
  8.4   Lender's Rights

9 - Default

  9.1   Events of Default

10 - Rights and Remedies

  10.1  Remedies
  10.2  Application of Proceeds
  10.3  Right to Cure Defaults
  10.4  Actions and Proceedings
  10.5  Recovery of Sums Required to be Paid
  10.6  Examination of Books and Records
  10.7  Other Rights, etc.
  10.8  Right to Release any Portion of the Property
  10.9  Violation of Law
  10.10 Recourse and Choice of Remedies
  10.11 Right of Entry
  10.12 Default Interest and Late Charges

11 - Indemnification

  11.1  General Indemnification
  11.2  Mortgage and/or Intangible Tax
  11.3  Erisa Indemnification
  11.4  Duty to Defend; Attorneys' Fees and Other Fees and Expenses

12 - Waivers

  12.1  Waiver of Counterclaim
  12.2  Marshalling and Other Matters
  12.3  Waiver of Notice
  12.4  Sole Discretion of Lender
  12.5  Survival
  12.6  Waiver of Trial by Jury

13 - Exculpation

  13.1  Exculpation
  13.2  Reservation of Certain Rights
  13.3  Exceptions to Exculpation
  13.4  Recourse
<PAGE>

  13.5  Bankruptcy Claims

14 - Notices

  14.1  Notices

15 - Applicable Law

  15.1  Choice of Law
  15.2  Usury Laws
  15.3  Provisions Subject to Applicable Law

16 - Secondary Market

  16.1  Transfer of Loan

17 - Costs

  17.1  Performance at Borrower's Expense
  17.2  Attorney's Fees for Enforcement

18 - Definitions

  18.1  General Definitions

19 - Miscellaneous Provisions

  19.1  No Oral Change
  19.2  Liability
  19.3  Inapplicable Provisions
  19.4  Headings, etc.
  19.5  Duplicate Originals; Counterparts
  19.6  Number and Gender
  19.7  Subrogation
  19.8  Entire Agreement

20 - State Specific Provisions
<PAGE>

          THIS DEED OF TRUST AND SECURITY AGREEMENT (this "Security Instrument")
is made as of the ____ day of February, 2001, by SFHI, LLC, a Delaware limited
liability company, having its principal place of business at 4336 Losee Road,
#9, North Las Vegas, Nevada 89030, as trustor ("Borrower") to RUSSELL R. RENO,
JR., having an office at 1800 Mercantile Bank & Trust Building, 2 Hopkins Plaza,
Baltimore, Maryland 21201-2978, as trustee ("Trustee") for the benefit of LEHMAN
BROTHERS HOLDINGS INC., D/B/A LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS
HOLDINGS INC., a Delaware corporation, having an address at Three World
Financial Center, 200 Vesey Street, New York, New York 10285, as beneficiary
("Lender").

                                   RECITALS:

          Borrower by its promissory note of even date herewith given to Lender
is indebted to Lender in the principal sum of FIFTY-FIVE MILLION FOUR HUNDRED
THIRTY FOUR THOUSAND SIX AND 00/100 ($55,434,006.00) DOLLARS in lawful money of
the United States of America (the note together with all extensions, renewals,
modifications, substitutions and amendments thereof shall collectively be
referred to as the "Note"), with interest from the date thereof at the rates set
forth in the Note, principal and interest to be payable in accordance with the
terms and conditions provided in the Note.

          Borrower desires to secure the payment and performance of the
Obligations (as defined in Section 2.1 hereof).

                            1 - GRANTS OF SECURITY

          1.1   PROPERTY GRANTED. Borrower, for and in consideration of the sum
               -----------------
of Ten ($10.00) Dollars and other valuable consideration in hand paid, the
receipt of which hereby is acknowledged, and the further consideration, uses,
purposes and trusts herein set forth and declared, has granted, bargained,
transferred, assigned, set-over and conveyed and by these presents does grant,
bargain, transfer, assign, set over and convey unto Trustee, and unto his or its
successors in the trust hereby created and his or its assigns, forever, all of
the Borrower's right, title and interest in and to the following (collectively,
the "Property"): (a) the real property described in Exhibit A attached hereto
and made a part hereof (the "Land"); (b) all additional lands, estates and
development rights hereafter acquired by Borrower for use in connection with the
Land and the development of the Land and all additional lands and estates
therein which may, from time to time, by supplemental mortgage or otherwise be
expressly made subject to the lien of this Security Instrument; (c) the
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and improvements now or hereafter erected
or located on the Land (the "Improvements"); (d) all easements, rights-of-way or
use, rights, strips and gores of land, streets, ways, alleys, passages, sewer
rights, water, water courses, water rights and powers, air rights and
development rights, and all estates, rights, titles, interests, privileges,
liberties, servitudes, tenements, hereditaments and appurtenances of any nature
whatsoever, in any way now or hereafter belonging, relating or pertaining to the
Land and the Improvements and the reversion and reversions, remainder and
remainders, and all land lying in the bed of any street, road or avenue, opened
or proposed, in front of or adjoining the Land, to the center line thereof and
all the estates, rights, titles, interests, dower and rights of dower, curtesy
and rights of curtesy, property, possession, claim and demand whatsoever, both
at law and in equity, of Borrower of, in and to the Land and the Improvements
and every part and parcel thereof, with the appurtenances thereto; (e) all
furnishings, machinery, equipment, fixtures (including, but not limited to, all
heating, air conditioning, plumbing, lighting, communications and elevator
fixtures) and other property of every kind and nature whatsoever owned by
Borrower or in which Borrower has or shall have an interest, now or hereafter
located upon the Land and the Improvements, or appurtenant thereto, and usable
in connection with the present or future operation and occupancy of the Land and
the Improvements and all building equipment, materials and supplies of any
nature whatsoever owned by Borrower, or in which Borrower has or shall have an
interest, now or hereafter located upon the Land and the Improvements, or
appurtenant thereto, or usable in connection with the present or future
operation and occupancy of the Land and the Improvements (collectively, the
"Personal Property"), and the right, title and interest of Borrower in and to
any of the Personal Property which may be subject to any security interests, as
defined in the Uniform Commercial Code, as adopted and enacted by the state or
states where any of the Property is located (the "Uniform Commercial Code"),
superior in lien to the lien of this Security Instrument and all proceeds and
products of the above; (f) all leases and other agreements heretofore or
hereafter entered into affecting the use, enjoyment or occupancy of the Land and
the Improvements including, without
<PAGE>

limitation, that certain lease (the "Net Lease") dated as of January 29, 1999,
between REII -- Gaithersburg, Maryland, L.L.C. as landlord, and GE Information
Services, Inc. as tenant (the "Net Lease Tenant"), whether before or after the
filing by or against Borrower of any petition for relief under 11 U.S.C. (S) 101
et seq., as the same may be amended from time to time (the "Bankruptcy Code")
(the "Leases") and all right, title and interest of Borrower, its successors and
assigns therein and thereunder, including, without limitation, cash or
securities deposited thereunder to secure the performance by the lessees of
their obligations thereunder and all rents, additional rents, revenues
(including, but not limited to, any payment made by or on behalf of any tenant
under the Leases in connection with the termination of any Lease), issues and
profits (including all oil and gas or other mineral royalties and bonuses) from
the Land and the Improvements whether paid or accruing before or after the
filing by or against Borrower of any petition for relief under the Bankruptcy
Code (the "Rents") and all proceeds from the sale or other disposition of the
Leases and the right to receive and apply the Rents to the payment of the Debt
(as hereinafter defined); (g) any and all lease guaranties (including, without
limitation, that certain Guaranty of General Electric Company (the "Net Lease
Guarantor") dated as of January 29, 1999 with respect to the Net Lease (the "Net
Lease Guaranty"), letters of credit and any other credit support (individually,
a "Lease Guaranty" and collectively, the "Lease Guaranties") given by any
guarantor in connection with any of the Leases (individually, a "Lease
Guarantor" and collectively, the "Lease Guarantors"); (h) all rights, powers,
privileges, options and other benefits of Borrower as lessor under the Leases
and beneficiary under the Lease Guaranties including without limitation the
immediate and continuing right to make claim for, receive, collect and receipt
for all Rents payable or receivable under the Leases and all sums payable under
the Lease Guaranties or pursuant thereto (and to apply the same to the payment
of the Debt (as hereinafter defined)), and to do all other things which Borrower
or any lessor is or may become entitled to do under the Leases or the Lease
Guaranties; (i) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Property, whether from the
exercise of the right of eminent domain (including but not limited to any
transfer made in lieu of or in anticipation of the exercise of the right), or
for a change of grade, or for any other injury to or decrease in the value of
the Property; (j) all proceeds of and any unearned premiums on any insurance
policies covering the Property, including, without limitation, the right to
receive and apply the proceeds of any insurance, judgments, or settlements made
in lieu thereof, for damage to the Property; (k) all of Borrower's claims and
rights to the payment of damages arising from any rejection by a lessee of any
lease or cancellation by a Lease Guarantor of its Lease Guaranty under the
Bankruptcy Code; (l) all refunds, rebates or credits in connection with a
reduction in real estate taxes and assessments charged against the Property as a
result of tax certiorari or any applications or proceedings for reduction; (m)
all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing including, without limitation, proceeds of insurance and condemnation
awards, into cash or liquidation claims; (n) the right, in the name and on
behalf of Borrower, to appear in and defend any action or proceeding brought
with respect to the Property and to commence any action or proceeding to protect
the interest of Lender in the Property; (o) all agreements, contracts,
certificates, instruments, franchises, permits, licenses, plans, specifications
and other documents, now or hereafter entered into, and all rights therein and
thereto, respecting or pertaining to the use, occupation, construction,
management or operation of the Land and any part thereof and any Improvements or
respecting any business or activity conducted on the Land and any part thereof
and all right, title and interest of Borrower therein and thereunder, including,
without limitation, the right, upon the happening of any default hereunder, to
receive and collect any sums payable to Borrower thereunder; (p) all tradenames,
trademarks, servicemarks, logos, copyrights, goodwill, books and records and all
other general intangibles relating to or used in connection with the operation
of the Property; and (q) any and all other rights of Borrower in and to the
items set forth in Subsections (a) through (p) above.

                              CONDITIONS TO GRANT

          TO HAVE AND TO HOLD the above granted and described Property unto
Trustee, as trustee for the benefit of Lender, to its successors in the trust
created by this Security Instrument and to its or their respective assigns,
forever, in trust, upon the terms and conditions set forth herein;

          IN TRUST, WITH THE POWER OF SALE, to secure payment to Lender of the
Debt at the time and in the manner provided for its payment in the Note and in
this Security Instrument;

          PROVIDED, HOWEVER, these presents are upon the express condition that,
if Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument, shall well and truly
perform the Other Obligations (as defined in Section 2.1 hereof) as set forth in
this Security Instrument and shall well and truly abide by and comply with

                                       2
<PAGE>

each and every covenant and condition set forth herein and in the Note, these
presents and the estate hereby granted shall cease, terminate and be void.

          1.2  ASSIGNMENT OF RENTS. (a) Borrower hereby absolutely and
               -------------------
unconditionally assigns to Lender Borrower's right, title and interest in and to
all current and future Leases and Rents thereunder; it being intended by
Borrower that this assignment constitutes a present, absolute assignment and not
an assignment for additional security only.

          (b)  Without limitation to Section 1.2(a), Borrower hereby absolutely
and unconditionally assigns to Lender (i) Borrower's right, title and interest
in and Borrower's right pursuant to the Net Lease to accept or reject any offers
to purchase the Property and receive the purchase proceeds of any such sale, and
(ii) Borrower's right, title and interest in and Borrower's right to accept or
reject any offers to terminate the Net Lease or to receive any termination
payments payable with respect to the Net Lease (if any), for which purposes
Borrower hereby irrevocably makes, constitutes and appoints Lender its attorney-
in-fact with full power to appoint substitutes or a trustee to accomplish such
purpose (which power of attorney for so long as any part of Debt (as hereinafter
defined) is outstanding, shall be deemed to be coupled with an interest, shall
survive the voluntary or involuntary dissolution of Borrower and shall not be
affected by any disability or incapacity suffered by Borrower subsequent to the
date hereof). Borrower hereby acknowledges and agrees that any and all such
payments shall be paid directly to Lender, and Lender may apply any such sums to
the payment of the Debt (including, but not limited to, any prepayment
consideration payable under the Note as a result of such payment) in such order
of priority as Lender shall in its sole discretion determine. In connection with
the purchase of the Property by the tenant under the Net Lease pursuant to an
offer made by the tenant under the Net Lease pursuant to Article 17 of the Net
Lease which offer has not been rejected by Lender, Lender shall release the lien
of this Security Instrument and the other Loan Documents, provided no Event of
Default (as hereinafter defined) exists and Lender has received an amount
sufficient to pay the outstanding principal balance under the Note together with
all accrued interest thereon and all interest which would have accrued on the
principal balance of the Note to and including the last day of the then existing
Accrual Period (as defined in the Note).

          1.3  SECURITY AGREEMENT. This Security Instrument is both a real
               ------------------
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Borrower in the Property. By executing and delivering this Security Instrument,
Borrower hereby grants to Lender, as security for the Obligations, a security
interest in the Property to the full extent that the Property may be subject to
the Uniform Commercial Code.

          1.4  PLEDGE OF MONIES HELD. Borrower hereby pledges to Lender any and
               ---------------------
all monies now or hereafter held by Lender, including, without limitation, any
sums deposited in the Escrow Fund (as defined in Section 3.4), the Deferred
Maintenance Deposit (as defined on Exhibit B attached hereto and made a part
hereof), the Reserve (as defined on Exhibit B), Net Proceeds (as defined in
Section 4.2) and condemnation awards or payments described in Section 3.5
(collectively, "Deposits"), as additional security for the Obligations until
expended or applied as provided in this Security Instrument.

                       2 - DEBT AND OBLIGATIONS SECURED

          2.1  DEBT AND OBLIGATIONS SECURED. This Security Instrument and the
               ----------------------------
grants, assignments and transfers made in Article 1 are given for the purpose of
securing the payment of the Debt and the performance of the Other Obligations,
in such order of priority as Lender may determine in its sole discretion. For
purposes hereof, the term "Debt" shall mean the aggregate of the indebtedness
evidenced by the Note in lawful money of the United States of America, interest,
default interest, late charges, prepayment premiums and other sums, as provided
in the Note, this Security Instrument or the other Loan Documents (defined
below), all other moneys agreed or provided to be paid by Borrower in the Note,
this Security Instrument or the other Loan Documents and all sums advanced
pursuant to this Security Instrument to protect and preserve the Property and
the lien and the security interest created hereby. For purposes hereof, the term
"Other Obligations" shall mean the obligations of Borrower (other than the
obligation to repay the Debt) contained in this Security Instrument, the Note
and the other Loan Documents (as hereinafter defined). For purposes hereof, the
term "Loan Documents" shall mean the Note, this Security Instrument and any
other documents or instruments which now or shall hereafter wholly or partially
secure or guarantee payment of the Note or which have otherwise been executed or
are hereafter executed by Borrower and/or any other person or entity in
connection with the loan (the "Loan") evidenced by the Note and any renewal,
extension, amendment, modification, consolidation, change of, or substitution or
replacement for, all or any part thereof. Borrower's obligations for the

                                       3
<PAGE>

payment of the Debt and the performance of the Other Obligations shall be
referred to collectively below as the "Obligations." All the covenants,
conditions and agreements contained in the Note and the other Loan Documents are
hereby made a part of this Security Instrument to the same extent and with the
same force as if fully set forth herein.

                             3 - BORROWER COVENANTS

          Borrower covenants and agrees that:

          3.1  PAYMENT OF DEBT.  Borrower will pay the Debt at the time and in
               ---------------
the manner provided in the Note, this Security Instrument and the other Loan
Documents.

          3.2  INSURANCE.
               ---------

          (a)  Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and the Property providing at least the coverages set
forth herein:

          (i)    comprehensive all risk insurance on the Improvements and the
     Personal Property, in each case (A) in an amount equal to 100% of the "Full
     Replacement Cost," which for purposes of this Security Instrument shall
     mean actual replacement value (exclusive of costs of excavations,
     foundations, underground utilities and footings) with a waiver of
     depreciation; (B) containing either an agreed amount endorsement or a
     waiver of all co-insurance provisions; (C) providing for a deductible of
     not greater than $10,000; and (D) if any of the Improvements or the use of
     the Property shall at any time constitute a legal non-conforming structure
     or use, Borrower shall obtain an "Ordinance or Law Coverage" or
     "Enforcement" endorsement, which shall include sufficient coverage for (1)
     costs to comply with building and zoning codes and ordinances, (2)
     demolition costs, and (3) increased costs of construction.  If any portion
     of the Improvements is currently or at any time in the future located in a
     federally designated "special flood hazard area", Borrower shall obtain
     flood hazard insurance in such an amount as Lender shall require, but in no
     event less than the maximum amount of such insurance available under the
     National Flood Insurance Act of 1968, the Flood Disaster Protection Act of
     1973 or the National Flood Insurance Reform Act of 1994, as each may be
     amended.  In addition, in the event the Property is located in an area with
     a high degree of seismic activity, Borrower shall obtain earthquake
     insurance in amounts and in form and substance satisfactory to Lender;

          (ii)   commercial general liability insurance against claims for
     personal injury, bodily injury, death or property damage occurring upon, in
     or about the Property, such insurance (A) to be on the "occurrence" form
     with a combined single limit (including "umbrella" coverage in place) of
     not less than $3,000,000 or, if any of the Improvements contain elevators,
     $5,000,000; (B) to continue at not less than the aforesaid limit until
     required to be changed by Lender in writing by reason of changed economic
     conditions making such protection inadequate; and (C) to cover at least the
     following hazards: (1) premises and operations; (2) products and completed
     operations on an "if any" basis; (3) independent contractors; and (4)
     blanket contractual liability for all written and oral contracts, including
     this Security Instrument and all other Loan Documents, to the extent the
     same is available;

          (iii)  intentionally deleted;

          (iv)   (A) at all times during which structural construction, material
     repairs or alterations are being made with respect to the Improvements,
     owner's contingent or protective liability insurance covering claims not
     covered by or under the terms or provisions of the above mentioned
     commercial general liability insurance policy; and (B) during new
     construction, the insurance provided for in Subsection 3.2(a)(i) written in
     a so-called builder's risk completed value form on a non-reporting basis;

          (v)    if Borrower has employees, workers' compensation, subject to
     the statutory limits of the state in which the Property is located, and
     employer's liability insurance with a limit of at least $1,000,000 per
     accident and per disease per employee, and $1,000,000 aggregate coverage
     for disease in respect of any work or operations on or about the Property,
     or in connection with the Property or its operation;

                                       4

<PAGE>

          (vi)   if the Property contains HVAC or other equipment not covered by
     the comprehensive all risk insurance, comprehensive boiler and machinery
     insurance, in amounts as shall be reasonably required by Lender;

          (vii)  any insurance required by Lender with respect to the rights of
     the tenant under the Net Lease to terminate the Net Lease or abate Rents as
     a result of any casualty or condemnation affecting the Property;

          (viii) without limitation to the foregoing, any insurance which
     Borrower is required to provide and maintain pursuant to the terms and
     conditions of the Net Lease;

          (ix)   at all times, maintain in full force and effect residual value
     insurance acceptable to Lender in all respects; and

          (x)    such other insurance and in such amounts as Lender from time to
     time may reasonably request against such other insurable hazards which at
     the time are commonly insured against for property similar to the Property
     or subject to leases similar to the Net Lease located in or around the
     region in which the Property is located.

          (b)    All insurance provided for in Subsection 3.2(a) hereof shall be
obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be subject to the approval of Lender as to
insurance companies, amounts, forms, deductibles, loss payees and insureds. The
insurance companies must be approved, authorized or licensed to provide
insurance in the state in which the Property is located and have a rating of "A"
or better for claims paying ability assigned by Moody's Investors Service, Inc.
and Standard & Poor's Rating Group or a general policy rating of "A-" or better
and a financial class of VIII or better assigned by A.M. Best Company, Inc.
Each such insurer shall be referred to herein as a "Qualified Insurer".

          (c)    Borrower shall not obtain (i) any umbrella or blanket liability
or casualty Policy unless, in each case, such Policy is approved in advance in
writing by Lender and Lender's interest is included therein as provided in this
Security Instrument and such Policy is issued by a Qualified Insurer, or (ii)
separate insurance concurrent in form or contributing in the event of loss with
that required in Subsection 3.2(a) to be furnished by, or which may be
reasonably required to be furnished by, Borrower. In the event Borrower obtains
separate insurance or an umbrella or a blanket Policy, Borrower shall notify
Lender of the same and shall cause certified copies of each Policy to be
delivered as required in Subsection 3.2(e). Any blanket insurance Policy shall
specifically allocate to the Property the amount of coverage from time to time
required hereunder and shall otherwise provide the same protection as would a
separate Policy insuring only the Property in compliance with the provisions of
Subsection 3.2(a). For purposes of Subsections 3.2(a) through (c) above (other
than 3.2(b)(ix)), Borrower shall be deemed to be in compliance with respect to
its obligation to carry any particular Policy under said Subsections to the
extent the tenant under the Net Lease is in compliance with the insurance
provisions contained in the Net Lease.

          (d)    All Policies of insurance provided for or contemplated by
Subsection 3.2(a), except for the Policy referenced in Subsection 3.2(a)(v),
shall name Lender and Borrower as the insured or additional insured, as their
respective interests may appear, and in the case of property damage, boiler and
machinery, flood and earthquake insurance, shall contain a so-called New York
standard non-contributing mortgagee clause in favor of Lender providing, among
other things, that Lender shall receive notification of any termination or
cancellation of insurance and that the loss thereunder shall be payable to
Lender.

          (e)    If not previously delivered to Lender, Borrower shall deliver
to Lender no later than thirty (30) days after the date hereof certified copies
of the existing Policies providing the insurance coverage required under Section
3.2(a) marked "premium paid" or accompanied by evidence satisfactory to Lender
of payment of the premiums due thereunder (the "Insurance Premiums") annually in
advance. In addition, no later than thirty (30) days prior to the expiration
dates of the Policies which Borrower is now or hereafter required to maintain
hereunder, Borrower shall deliver to Lender certified copies of new or renewal
Policies (also marked "premium paid" or accompanied by evidence satisfactory to
Lender of payment of the Insurance Premiums due thereunder annually in advance),
together with certificates of insurance therefor, setting forth, among other
things, the amounts of insurance maintained, the risks covered by such insurance
and the insurance company or companies which carry such insurance. If

                                       5
<PAGE>

requested by Lender, Borrower shall furnish verification of the adequacy of such
insurance by an independent insurance broker or appraiser acceptable to Lender.
Under no circumstances shall Borrower be permitted to finance the payment of any
portion of the Insurance Premiums.

          (f)  If at any time Lender is not in receipt of written evidence that
all insurance required hereunder is in full force and effect, Lender shall have
the right, without notice to Borrower to take such action as Lender deems
necessary to protect its interest in the Property, including, without
limitation, the obtaining of such insurance coverage as Lender in its sole
discretion deems appropriate, and all expenses incurred by Lender in connection
with such action or in obtaining such insurance and keeping it in effect shall
be paid by Borrower to Lender upon demand and until paid shall be secured by
this Security Instrument and shall bear interest in accordance with Section 10.3
hereof.

          (g)  If the Property shall be damaged or destroyed, in whole or in
part, by fire or other casualty, Borrower shall give prompt notice of such
damage to Lender and shall, or shall cause the tenant under the Net Lease to,
promptly commence and diligently prosecute the completion of the repair and
restoration of the Property as nearly as possible to the condition the Property
was in immediately prior to such fire or other casualty, with such alterations
as may be approved by Lender, or to such other condition as may be permitted
under the Net Lease (the "Restoration"), and otherwise in accordance with
Section 4.2 of this Security Instrument, except in instances where Lender has
failed or elected not to disburse Net Proceeds to Borrower under such Section
4.2 (provided that such exception shall not apply if the failure to disburse is
attributable to Borrower's failure to comply with the conditions set forth in
Clauses (A) or (C) of Subsection 4.2(b)(i) or in Subsection 4.2(b)(ii) or any
other conditions set forth in Section 4.2 which Borrower has the practical
ability to satisfy).  Lender may, but shall not be obligated to make proof of
loss if not made promptly by Borrower.

          (h)  In the event of foreclosure of this Security Instrument, or other
transfer of title to the Property in extinguishment in whole or in part of the
Debt all right, title and interest of Borrower in and to such policies then in
force concerning the Property and all proceeds payable thereunder shall
thereupon vest in the purchaser at such foreclosure or Lender or other
transferee in the event of such other transfer of title.

          3.3  PAYMENT OF TAXES, ETC.  Borrower shall promptly  pay or cause the
               ---------------------
tenant under the Net Lease to pay all taxes, assessments, water rates, sewer
rents, governmental impositions, and other charges, including without limitation
vault charges and license fees for the use of vaults, chutes and similar areas
adjoining the Land,  now or hereafter levied or assessed or imposed against the
Property or any part thereof (the "Taxes"), all ground rents, maintenance
charges and similar charges, now or hereafter levied or assessed or imposed
against the Property or any part thereof (the "Other Charges"), and all charges
for utility services provided to the Property prior to the time same become
delinquent.  Borrower will deliver to Lender, promptly upon Lender's request,
evidence satisfactory to Lender that the Taxes, Other Charges and utility
service charges have been so paid or are not then delinquent.  Borrower shall
not suffer and shall promptly cause to be paid and discharged any lien or charge
whatsoever which may be or become a lien or charge against the Property.  Except
to the extent sums sufficient to pay all Taxes and Other Charges have been
deposited with Lender in accordance with the terms of this Security Instrument,
Borrower shall furnish to Lender paid receipts for the payment of the Taxes and
Other Charges prior to the date the same shall become delinquent.

          3.4  RESERVES.  (a) Borrower shall pay to Lender on each date that a
               --------
regularly scheduled payment of principal or interest is due under the Note (i)
one-twelfth of an amount which would be sufficient to pay the Taxes payable, or
estimated by Lender to be payable, during the next ensuing twelve (12) months
and (ii) one-twelfth of an amount which would be sufficient to pay the Insurance
Premiums due for the renewal of the coverage afforded by the Policies upon the
expiration thereof (the amounts in (i) and (ii) above shall be called the
"Escrow Fund").  Borrower agrees to notify Lender immediately of any changes to
the amounts, schedules and instructions for payment of any Taxes and Insurance
Premiums of which it has obtained knowledge and authorizes Lender or its agent
to obtain the bills for Taxes and Other Charges directly from the appropriate
taxing authority.  The Escrow Fund and the payments of interest or principal or
both, payable pursuant to the Note shall be added together and shall be paid as
an aggregate sum by Borrower to Lender.  Lender will apply the Escrow Fund to
payments of Taxes and Insurance Premiums required to be made by Borrower
pursuant to Sections 3.2 and 3.3 hereof.  If the amount of the Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to Sections 3.2
and 3.3 hereof, Lender shall, in its discretion, return any excess to Borrower
or credit such excess against future payments to be made to the Escrow Fund.
In allocating

                                       6
<PAGE>

such excess, Lender may deal with the person shown on the records of Lender to
be the owner of the Property. If the Escrow Fund is not sufficient to pay the
items set forth in (i) and (ii) above, Borrower shall promptly pay to Lender,
upon demand, an amount which Lender shall estimate as sufficient to make up the
deficiency. The Escrow Fund shall not constitute a trust fund and may be
commingled with other monies held by Lender. No earnings or interest on the
Escrow Fund shall be payable to Borrower. The Escrow Fund is to be held by
Lender solely for the protection of Lender and entails no responsibility on
Lender's part beyond the allowing of due credit for the sums actually received.
Notwithstanding anything to the contrary herein, provided no Event of Default
exists, Borrower shall not be required to make payments to the Escrow Fund to
the extent, and only to the extent, that the tenant under the Net Lease is
responsible for payment of Taxes and Insurance Premiums directly to the relevant
taxing authorities and insurers.

          (b)  Borrower shall comply with the Reserve Requirements set forth on
Exhibit "B" attached hereto and made a part hereof.

          3.5  CONDEMNATION.  Borrower shall promptly give Lender notice of the
               ------------
actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings.  Lender may participate in any such
proceedings, and Borrower shall from time to time deliver to Lender all
instruments requested by it to permit such participation.  Borrower shall, at
its expense, diligently prosecute any such proceedings, and shall consult with
Lender, its attorneys and experts and the attorneys and experts of the tenant
under the Net Lease, and cooperate with them in the carrying on or defense of
any such proceedings. Notwithstanding any taking by any public or quasi-public
authority through eminent domain or otherwise (including but not limited to any
transfer made in lieu of or in anticipation of the exercise of such taking),
Borrower shall continue to pay the Debt at the time and in the manner provided
for its payment in the Note and in this Security Instrument and the Debt shall
not be reduced until any award or payment therefor shall have been actually
received and applied by Lender, after the deduction of expenses of collection,
to the reduction or discharge of the Debt.  Lender shall not be limited to the
interest paid on the award by the condemning authority but shall be entitled to
receive out of the award interest at the rate or rates provided herein or in the
Note.  If the Property or any portion thereof is taken by a condemning
authority, Borrower shall promptly commence and diligently prosecute the
Restoration of the Property and otherwise comply with the provisions of Section
4.2 of this Security Instrument, except in instances where Lender has failed or
elected not to disburse Net Proceeds to Borrower under such Section 4.2
(provided that such exception shall not apply if the failure to disburse is
attributable to Borrower's failure to comply with the conditions set forth in
Clauses (A) or (C) of Subsection 4.2(b)(i) or in Subsection 4.2(b)(ii) or any
other conditions set forth in Section 4.2 which Borrower has the practical
ability to satisfy).  If the Property is sold, through foreclosure or otherwise,
prior to the receipt by Lender of the award or payment, Lender shall have the
right, whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to receive the award or payment, or a portion thereof
sufficient to pay the Debt.

          3.6  LEASES AND RENTS  (a)  Borrower shall promptly and fully keep,
               ----------------
observe and perform, or cause to be kept, observed or performed, all of the
terms, covenants, provisions and agreements imposed upon or assumed by Borrower
under the Net Lease, and any leases, subleases, licenses, concessions and
occupancy agreements in connection therewith or substitution therefor and any
amendments, modifications or supplements thereof, and Borrower shall not do or
fail to do, or permit or fail to permit to be done any act or thing, the doing
or omission of which (i) will give the tenant under the Net Lease a right to
terminate the Net Lease or to abate the rental or other material payment due
thereunder, (ii) release any party from liability under or with respect to the
Net Lease or (iii) will otherwise impair the Net Lease as security for the
Obligations.  Borrower shall not under any circumstances modify, cancel, amend
or terminate the Net Lease or any Lease Guaranty without Lender's prior written
consent, and any attempted modification, cancellation, amendment or termination
of the Net Lease or any Lease Guaranty without such consent shall be void and of
no force or effect whatsoever.

          (b)  Borrower shall enforce all of the terms, covenants and conditions
contained in the Net Lease and any Lease Guaranty upon the part of the tenant
under the Net Lease or any Lease Guarantor, as the case may be thereunder to be
observed or performed, short of termination thereof, provided, that,
notwithstanding anything contained herein to the contrary, Borrower shall not
pursue any remedies which could affect any payment due from the tenant under the
Net Lease or affect the obligations of any Lease Guarantor under any Lease
Guaranty, or which could otherwise adversely affect

                                       7
<PAGE>

(A) the rights or claims of Borrower or Lender under the Net Lease or any Lease
Guaranty, (B) the value of the Property, or (C) the rights or interests of
Lender under the Loan Documents. Borrower shall not offer the Property for sale
such that the tenant under the Net Lease shall have any rights under Section 36
of the Net Lease without Lender's prior written consent.

          (c)  Borrower shall promptly deliver to Lender a copy of any notice
relating to defaults received from or given to the tenant under the Net Lease or
any other person or entity liable for the performance of the tenant's
obligations under the Net Lease.  Borrower agrees to promptly notify Lender of
any request for consent or approval made of Borrower by the tenant under the Net
Lease or any other person or entity liable for the performance of the
obligations of the tenant under the Net Lease.  To the extent that the granting
or withholding of any such consent or approval may adversely affect  (A) the
rights or claims of Borrower or Lender under the Net Lease or any Lease
Guaranty, or (B) the value of the Property or (C) the rights or interests of
Lender under the Loan Documents, Borrower hereby absolutely and unconditionally
assigns to Lender the right to consent or approve, at Lender's sole discretion,
such request.  Lender shall have no duty to consent to or approve any matter
submitted to it in accordance with the foregoing, and Borrower hereby waives and
releases Lender from any claims associated with the exercise or failure to
exercise of such right, provided, however, that Lender shall not unreasonably
withhold or delay its consent or approval in circumstances where Borrower has
notified Lender at the time such consent or approval is required, that Borrower
may not unreasonably withhold or delay its consent or approval under the terms
of the Net Lease.  Nothing contained herein shall affect or impair any separate
right Lender may have under the Net Lease or otherwise to approve or consent to
any item or thing.

          (d)  If Borrower shall, in any manner, (i) fail to enforce all of the
terms, covenants and conditions contained in the Net Lease and any Lease
Guaranty upon the part of the tenant under the Net Lease or any Lease Guarantor,
as the case may be, to be observed or performed, or (ii) fail to keep, observe
or perform its obligations under Section 3.6(a) above, Lender may take any
action that Lender deems necessary or desirable to perform or cause to be kept,
observed or performed any such terms, covenants, provisions or agreements
(including, but not limited to, enter upon the Property and take all action
thereon as Lender may deem necessary for such purposes).  Borrower hereby
irrevocably makes, constitutes and appoints Lender its agent and attorney-in-
fact with full power to appoint substitutes or a trustee to accomplish such
purposes (which appointment for so long as any of the Debt is outstanding, shall
be deemed to be coupled with an interest, shall survive the voluntary or
involuntary dissolution of Borrower and shall not be affected by any disability
or incapacity suffered by Borrower subsequent to the date hereof) to act on
behalf of Borrower and to take any and all actions consistent with the
foregoing.  Lender may expend such sums of money as are reasonable and necessary
for any such purposes, and Borrower hereby covenants and agrees to pay to
Lender, immediately upon demand, all sums so expended by Lender, together with
interest thereon from the date of such payment at the Default Rate (as defined
in the Note), and until so paid by Borrower, all sums so expended by Lender and
the interest thereon shall be added to the Debt secured by the lien and legal
operation and effect of this Security Instrument.  Lender may rely on any notice
of default received from the tenant under the Net Lease.

          (e)  Borrower shall not enter into any Lease for all or any portion of
the Property, other than the Net Lease, without Lender's prior written consent.
The provisions of that certain Assignment of Leases and Rents of even date
herewith made by Borrower, as assignor, to Lender, as assignee, and this Section
3.6 shall apply to any such Lease as if such Lease were the Net Lease designated
hereunder.

          3.7  MAINTENANCE OF PROPERTY.  Borrower shall cause the Property to be
               -----------------------
maintained in a good and safe condition and repair; provided, that while the Net
Lease is in effect, Borrower's obligations under this sentence shall be limited
to the enforcement of the obligations of the tenant under the Net Lease to
maintain and repair the Property.  Except to the extent the tenant under the Net
Lease has a right to do so without Borrower's consent, the Improvements and the
Personal Property shall not be removed, demolished or materially altered (except
for normal replacement of the Personal Property and tenant improvements made in
connection with a Lease which has been entered into by Borrower in accordance
with the terms hereof) without the consent of Lender.  Subject to the provisions
of  Subsection 3.2(g) and Section 3.5, and subject to the terms of the Net
Lease, Borrower shall, or shall cause the tenant under the Net Lease to,
promptly repair, replace or rebuild any part of the Property which may be
destroyed by any casualty, or become damaged, worn or dilapidated or which may
be affected by any proceeding of the character referred to in Section 3.5 hereof
and shall complete and pay

                                       8
<PAGE>

for any structure at any time in the process of construction or repair on the
Land. Borrower shall not initiate, join in, acquiesce in, or consent to any
change in any private restrictive covenant, zoning law or other public or
private restriction, limiting or defining the uses which may be made of the
Property or any part thereof which would materially adversely effect the use,
operation or value of the Property. If under applicable zoning provisions the
use of all or any portion of the Property is or shall become a nonconforming
use, Borrower will not cause or permit the nonconforming use to be discontinued
or abandoned without the express written consent of Lender.

          3.8   WASTE.  Borrower shall not commit or suffer any waste of the
                -----
Property or, subject to the terms of the Net Lease, make any change in the use
of the Property which will in any way materially increase the risk of fire or
other hazard arising out of the operation of the Property, or take any action
that might invalidate or give cause for cancellation of any Policy, or do or
permit to be done thereon anything that may in any way materially impair the
value of the Property or the security of this Security Instrument.

          3.9   COMPLIANCE WITH LAWS.  Borrower shall, and subject to the terms
                --------------------
of the Net Lease, shall cause the tenant under the Net Lease to, (i) promptly
comply with all existing and future federal, state and local laws, orders,
ordinances, governmental rules and regulations or court orders affecting the
Property, or the use thereof including, but not limited to, the Americans with
Disabilities Act ("ADA") (collectively, the "Applicable Laws"), (ii) from time
to time, upon Lender's request, provide Lender with evidence satisfactory to
Lender that the Property complies with all Applicable Laws in all materials
respects or is exempt from compliance with Applicable Laws, (iii) give prompt
notice to Lender of the receipt by Borrower of any notice related to a violation
of any Applicable Laws and of the commencement of any proceedings or
investigations which relate to compliance with Applicable Laws, and (iv) take
appropriate measures to prevent and will not engage in or knowingly permit any
illegal activities at the Property.

          3.10  BOOKS AND RECORDS.  (a)  Borrower shall keep adequate books and
                -----------------
records of account in accordance with methods of accounting reasonably
acceptable to Lender and furnish to Lender:

          (i)    to the extent provided to Borrower pursuant to the Net Lease,
     quarterly operating statements of the Property, prepared and certified by
     the tenant under the Net Lease, detailing the revenues received, the
     expenses incurred and major capital improvements for that quarter and
     containing appropriate year to date information, within thirty (30) days
     after the end of each fiscal quarter and each fiscal year, respectively;

          (ii)   an annual balance sheet and profit and loss statement of
     Borrower in the form required by Lender, prepared and certified by the
     Borrower within one hundred five (105) days after the close of each fiscal
     year of Borrower, and, if available, any financial statement prepared by an
     independent certified public accountant with respect to Borrower within
     thirty (30) days of the date the same are made available to Borrower;

          (iii)  copies of Borrower's federal income tax returns within fifteen
     (15) days of the date such returns are filed; and

          (iv)   all other written financial information provided to Borrower
     with respect to the Property, the tenant under the Net Lease or any person
     or entity liable for the performance of the tenant's obligations under the
     Net Lease, within fifteen (15) days of Borrower's receipt thereof.

          (b)    Upon Lender's request, Borrower shall cause each Guarantor (as
hereinafter defined) and each Indemnitor other than Borrower (an "Indemnitor")
under the Environmental Indemnity (as hereinafter defined) to furnish to Lender
no later than ninety (90) days after the end of the fiscal year for the
applicable Guarantor or Indemnitor a financial statement for said fiscal year
certified to Lender and prepared on a form reasonably acceptable to Lender.

          (c)    Borrower, its affiliates, any Guarantor and any Indemnitor
shall furnish Lender with such other additional financial or management
information as may, from time to time, be reasonably required by Lender in form
and substance reasonably satisfactory to Lender.

                                       9
<PAGE>

          (d)   Lender may, at any time following an Event of Default and
otherwise upon Lender's reasonable belief of the necessity therefor, commission
new or updated appraisals, phase I and phase II environmental reports, property
condition surveys and (if the Property is located in an area with a high degree
of seismic activity) seismic risk assessments of the Property to be prepared by
third parties (each a "Third Party") designated by Lender after the date hereof
(each, a "Third Party Report"). Borrower shall cooperate with each Third Party
and Lender in the preparation of the Third Party Reports and shall reimburse
Lender within ten (10) days of Lender's demand for all costs incurred by Lender
in connection with such Third Party Reports, provided that Borrower shall not be
obligated to reimburse Lender for more than the cost of one appraisal, one phase
I environmental report, one phase II environmental report, one property
condition survey and one seismic risk assessment in any consecutive eighteen
(18) month period following the date hereof.

          3.11  PAYMENT FOR LABOR AND MATERIALS.  Except to the extent the
                -------------------------------
tenant under Net Lease is obligated to pay the same, Borrower will promptly pay
when due all bills and costs for labor, materials, and specifically fabricated
materials incurred in connection with the Property and never permit to be
created or exist in respect of the Property or any part thereof any other or
additional lien or security interest other than the liens or security interests
hereof, except for the Permitted Exceptions (defined below).

          3.12  MANAGEMENT.  If Borrower has entered into any management
                ----------
agreement in respect of the Property, then in the event of default hereunder or
under any such management agreement, which default is not cured within any
applicable grace or cure period, Lender shall have the right to terminate, or to
direct Borrower to terminate, such management agreement upon thirty (30) days'
notice and to retain, or to direct Borrower to retain, a new management agent
approved by Lender.

          3.13  PERFORMANCE OF OTHER AGREEMENTS.  Except to the extent the
                -------------------------------
tenant under the Net Lease is obligated to perform the same, Borrower shall
observe and perform each and every term to be observed or performed by Borrower
pursuant to the terms of any agreement or recorded instrument affecting or
pertaining to the Property, or given by Borrower to Lender for the purpose of
further securing an obligation secured hereby and any amendments, modifications
or changes thereto.

          3.14  CHANGE OF NAME, IDENTITY OR STRUCTURE.  Borrower will not change
                -------------------------------------
Borrower's name, identity (including its trade name or names) or, if not an
individual, Borrower's corporate, limited liability company, partnership or
other structure without notifying Lender of such change in writing at least
thirty (30) days prior to the effective date of such change and, in the case of
a change in Borrower's structure, without first obtaining the prior written
consent of Lender which consent shall not be unreasonably withheld or delayed
(it being acknowledged and agreed that it shall be reasonable for Lender to
withhold such consent if (1) Lender determines that such change does not meet
rating agency standards for "single purpose entities" or would have the effect
of permitting a transfer or change of control of Borrower or its affiliates
which would otherwise be prohibited hereunder or (2) following the sale of the
Note and this Security Instrument in a securitization transaction, Lender does
not receive a letter from each Rating Agency (hereinafter defined) that such
change will not result in a qualification, withdrawal or downgrade of any rating
then assigned by such Rating Agency to any class of Securities).  Borrower will
execute and deliver to Lender, prior to or contemporaneously with the effective
date of any such change, any financing statement or financing statement change
required by Lender to establish or maintain the validity, perfection and
priority of the security interest granted herein. At the request of Lender,
Borrower shall execute a certificate in form satisfactory to Lender listing the
trade names under which Borrower intends to operate the Property, and
representing and warranting that Borrower does business under no other trade
name with respect to the Property.

          3.15  EXISTENCE.  Borrower will continuously maintain its existence
                ---------
and its rights to do business in the state where the Property is located
together with its franchises and trade names.

                             4 - SPECIAL COVENANTS

          Borrower covenants and agrees that:

          4.1   SINGLE PURPOSE ENTITY.  It has not and shall not: (a) engage in
                ---------------------
any business or activity other than the ownership, operation and maintenance of
the Property, and activities incidental thereto; (b) acquire or own any material
assets other than (i) the Property, and (ii) such incidental Personal Property
as may be necessary for the operation of the Property; (c) merge into or

                                      10
<PAGE>

consolidate with any person or entity or dissolve, terminate or liquidate in
whole or in part, transfer or otherwise dispose of all or substantially all of
its assets or change its legal structure, without in each case Lender's consent;
(d) fail to preserve its existence as an entity duly organized, validly existing
and in good standing (if applicable) under the laws of the jurisdiction of its
organization or formation, or without the prior written consent of Lender,
amend, modify, terminate or fail to comply with the provisions of Borrower's
partnership agreement, articles or certificate of incorporation , articles of
organization, operating agreement, or similar organizational documents, as the
case may be, as same may be further amended or supplemented, if such amendment,
modification, termination or failure to comply would adversely affect the
ability of Borrower to perform its obligations hereunder, under the Note or
under the other Loan Documents; (e) own any subsidiary or make any investment
in, any person or entity without the consent of Lender; (f) commingle its assets
with the assets of any of its general partners, managing members, shareholders,
affiliates, principals or of any other person or entity; (g) incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than the Debt, except with respect to trade payables in the
ordinary course of its business of owning and operating the Property, provided
that such debt is paid when due; (h) fail to maintain its records, books of
account and bank accounts separate and apart from those of the general partners,
managing members, shareholders, principals and affiliates of Borrower, the
affiliates of a general partner or managing member of Borrower, and any other
person or entity; (i) enter into any contract or agreement with any general
partner, managing member, shareholder, principal or affiliate of Borrower,
Guarantor or Indemnitor, or any general partner, managing member, shareholder,
principal or affiliate thereof, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arm's-length basis with third parties other than any general partner,
managing member, shareholder, principal or affiliate of Borrower, Guarantor or
Indemnitor, or any general partner, managing member, shareholder, principal or
affiliate thereof; (j) seek the dissolution or winding up in whole, or in part,
of Borrower; (k) maintain its assets in such a manner that it will be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any general partner, managing member, shareholder, principal or affiliate of
Borrower, or any general partner, managing member, shareholder, principal or
affiliate thereof or any other person; (l) hold itself out to be responsible for
the debts of another person; (m) make any loans to any third party; (n) fail
either to hold itself out to the public as a legal entity separate and distinct
from any other entity or person or to conduct its business solely in its own
name in order not (i) to mislead others as to the identity with which such other
party is transacting business, or (ii) to suggest that Borrower is responsible
for the debts of any third party (including any general partner, managing
member, shareholder, principal or affiliate of Borrower, or any general partner,
managing member, shareholder, principal or affiliate thereof); (o) fail to
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; (p) file or consent to the filing of any petition, either voluntary
or involuntary, to take advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment for the benefit of
creditors; (q) fail to file its own tax returns, if any, as may be required
under applicable law, to the extent Borrower is (1) not part of a consolidated
group filing a consolidated return or returns or (2) not treated as a division
solely for tax purposes of another taxpayer, and pay any taxes so required to be
paid under applicable law; (r) fail to have at least two (2) duly appointed
members of the board of directors (each an "Independent Director") of Borrower
reasonably satisfactory to Lender who is not at the time of initial appointment
and has not been at any time during the preceding five (5) years: (i) a
stockholder, director (other than as an Independent Director of Borrower),
officer, employee, partner, attorney or counsel of Borrower or any Affiliate of
either Borrower; (ii) a customer, supplier or other Person who derives more than
10% of its purchases or revenues from its activities with Borrower or any
affiliate of Borrower; (iii) a Person controlling or under common control with
any such stockholder, partner, customer, supplier or other Person; or (iv) a
member of the immediate family of any such stockholder, director, officer,
employee, partner, customer, supplier or other Person (for the purposes of this
Section 4.1, the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of management, policies or activities
of a Person, whether through ownership of voting securities, by contract or
otherwise.); (s) cause or permit the board of directors to take any action
which, under the terms of  the limited liability company agreement requires the
vote of any Independent Director unless at the time of such action there shall
be at least two (2) Independent Directors; (t) fail to allocate fairly and
reasonably any material overhead expenses that are shared with an Affiliate,
including paying for office space and services performed by any employee of an
Affiliate; (u) fail to maintain a sufficient number of employees, if any, in
light of its contemplated business operations and pay the salaries of its own
employees from its own funds; or (v) fail to conduct its business so that the
assumptions made with respect to Borrower in the non-consolidation opinion
delivered to Lender in connection with Borrower's

                                      11
<PAGE>

delivery of this Security Instrument, the Note and the other Loan Documents
shall be true and correct in all respects.

          Without limitation to the foregoing provisions of this Section 4.1,
Borrower will not amend and will not permit any other person or entity to amend
the provisions of Sections 5(c), 7, 9(j), 10, 24 and Schedule A of Borrower's
limited liability company agreement.

          4.2  RESTORATION.  The following provisions shall apply in connection
               -----------
with the Restoration of the Property:

          (a)  Except to the extent Insurance Proceeds (hereinafter defined) or
Condemnation Proceeds (hereinafter defined) are required to be paid directly by
the insurer or the condemning authority to the tenant under the Net Lease solely
for the purposes of paying Restoration costs, all Insurance Proceeds and
Condemnation Proceeds shall be paid directly to Lender and shall be held and
disbursed by Lender in accordance with this Section 4.2.  As used herein, (i)
the term "Insurance Proceeds" means the amount of insurance or self-insurance
proceeds payable in connection with the damage or destruction of the Property
(including, but not limited to, the insurance required by Subsections 3.2(a)(i),
(iv), (vi), (viii) and (ix), but not the insurance required pursuant to
Subsection 3.2(a)(vii), the proceeds of which shall belong to Lender), and (ii)
the term "Condemnation Proceeds" means the amount of all awards payable in
connection with a taking referred in Section 3.5.

          (b)  Lender shall make all Net Proceeds in its possession available
for the Restoration in accordance with the provisions of this Subsection 4.2(b).
As used herein, the term "Net Proceeds" means the net amount of Insurance
Proceeds or Condemnation Proceeds, after deduction of Lender's reasonable costs
and expenses (including, but not limited to, reasonable counsel's fees and
expenses), if any, in collecting same.

          (i)    The Net Proceeds shall be applied to the Restoration to the
     extent required under the applicable provisions of the Net Lease provided
     that each of the following conditions are met: (A) no Event of Default
     shall exist; (B) the Net Lease shall remain in full force and effect during
     and after the completion of the Restoration; (C) the tenant under the Net
     Lease shall have commenced the Restoration as soon as required under the
     Net Lease and shall thereafter diligently pursue the same to satisfactory
     completion to the extent required under the Net Lease; and (D) Lender shall
     be reasonably satisfied that the Restoration will be completed on or before
     the date the tenant under the Net Lease shall have any right to terminate
     the Net Lease as a result of the related casualty or taking.

          (ii)   The Net Proceeds shall be held by Lender and, until disbursed
     in accordance with the provisions of this Subsection 4.2(b), shall
     constitute additional security for the Obligations subject to the rights,
     if any, of the tenant under the Net Lease. The Net Proceeds shall be
     disbursed by Lender to Borrower (or if required under the Net Lease or
     otherwise deemed necessary or convenient by Lender, to the tenant under the
     Net Lease or its designee) from time to time during the course of the
     Restoration, upon receipt of evidence satisfactory to Lender that (A) all
     materials installed and work and labor performed (except to the extent that
     they are to be paid for out of the requested disbursement) in connection
     with the Restoration have been paid for in full, and (B) there exist no
     notices of pendency, stop orders, mechanic's or materialman's liens or
     notices of intention to file same, or any other liens or encumbrances of
     any nature whatsoever on the Property arising out of the Restoration which
     have not either been fully bonded to the satisfaction of Lender and
     discharged of record or in the alternative fully insured to the
     satisfaction of Lender by the title company insuring the lien of this
     Security Instrument.

          (iii)  All plans and specifications required in connection with the
     Restoration shall be subject to prior review and approval in all respects
     by Lender and by an independent consulting engineer selected by Lender (the
     "Casualty Consultant"), which approval shall not be unreasonably withheld
     or delayed.  Lender shall have the use of the plans and specifications and
     all permits, licenses and approvals required or obtained in connection with
     the Restoration.  Notwithstanding the foregoing, while the Net Lease is in
     effect, Lender's right to review and approve and to have the Casualty
     Consultant review and approve the plans and specifications required in
     connection with the Restoration shall be limited to those circumstances in
     which Borrower or Lender, under the terms of the Net Lease or any
     subordination and non-disturbance

                                      12
<PAGE>

     agreement with the tenant under the Net Lease, is not precluded from
     approving such plans and specifications. Subject to the terms of the Net
     Lease, the identity of the contractors, subcontractors and materialmen
     engaged in the Restoration, as well as the contracts under which they have
     been engaged, shall be subject to prior review and acceptance by Lender and
     the Casualty Consultant, which approval shall not be unreasonably withheld
     or delayed. All costs and expenses incurred by Lender in connection with
     making the Net Proceeds available for the Restoration including, without
     limitation, reasonable counsel fees and disbursements and the Casualty
     Consultant's fees, shall be paid by Borrower.

          (iv)   Unless required to do so by the terms of the Net Lease, in no
     event shall Lender be obligated to make disbursements of the Net Proceeds
     in excess of an amount equal to (A) the costs actually incurred from time
     to time for work in place as part of the Restoration, as certified by the
     Casualty Consultant, minus (B) the Casualty Retainage.  The term "Casualty
                          -----
     Retainage" as used in this Subsection 4.2(b) shall mean an amount equal to
     ten (10%) of the costs actually incurred for work in place as part of the
     Restoration, as certified by the Casualty Consultant, until the Restoration
     has been completed.  The Casualty Retainage shall in no event, and
     notwithstanding anything to the contrary set forth above in this Subsection
     4.2(b), be less than the amount actually held back by Borrower from
     contractors, subcontractors and materialmen engaged in the Restoration.
     The Casualty Retainage shall not be released until the Casualty Consultant
     certifies to Lender that the Restoration has been completed in accordance
     with the provisions of this Subsection 4.2(b) and that all approvals
     necessary for the re-occupancy and use of the Property have been obtained
     from all appropriate governmental and quasi-governmental authorities, and
     Lender receives evidence reasonably satisfactory to Lender that the costs
     of the Restoration have been paid in full or will be paid in full out of
     the Casualty Retainage, provided, however, that Lender will release the
     portion of the Casualty Retainage being held with respect to any
     contractor, subcontractor or materialman engaged in the Restoration as of
     the date upon which the Casualty Consultant certifies to Lender that the
     contractor, subcontractor or materialman has satisfactorily completed all
     work and has supplied all materials in accordance with the provisions of
     the contractor's, subcontractor's or materialman's contract, and the
     contractor, subcontractor or materialman delivers the lien waivers and
     evidence of payment in full of all sums due to the contractor,
     subcontractor or materialman as may be reasonably requested by Lender or by
     the title company insuring the lien of this Security Instrument.  If
     required by Lender, the release of any such portion of the Casualty
     Retainage shall be approved by the surety company, if any, which has issued
     a payment or performance bond with respect to the contractor, subcontractor
     or materialman.

          (v)    Unless required by the Net Lease, Lender shall not be obligated
     to make disbursements of the Net Proceeds more frequently than once every
     calendar month. Lender shall have the right to waive any condition
     hereunder or under the Net Lease to a disbursement of Net Proceeds.

          (vi)   If at any time the Net Proceeds or the undisbursed balance
     thereof shall not, in the reasonable opinion of Lender, be sufficient to
     pay in full the balance of the costs which are estimated by the Casualty
     Consultant to be incurred in connection with the completion of the
     Restoration, Borrower shall deposit the deficiency (the "Net Proceeds
     Deficiency") with Lender before any further disbursement of the Net
     Proceeds shall be made, provided, that while the Net Lease is in effect,
     Borrower shall not be obligated to deposit any Net Proceeds Deficiency to
     the extent that (1) the tenant under the Net Lease is responsible for the
     costs of Restoration notwithstanding any such insufficiency in the Net
     Proceeds or the undisbursed balance thereof and (2) tenant under the Net
     Lease has no similar obligation to Borrower.  The Net Proceeds Deficiency
     deposited with Lender shall be held by Lender and shall be disbursed for
     costs actually incurred in connection with the Restoration on the same
     conditions applicable to the disbursement of the Net Proceeds, and until so
     disbursed pursuant to this Subsection 4.2(b) shall constitute additional
     security for the Obligations.  With respect to Restorations following a
     casualty in which the Improvements are restored to substantially the same
     condition as they existed prior to the casualty, the excess, if any, of the
     Net Proceeds and the remaining balance, if any, of the Net Proceeds
     Deficiency deposited with Lender after the Casualty Consultant certifies to
     Lender that the Restoration has been completed in accordance with the
     provisions of this Subsection 4.2(b), and the receipt by Lender of evidence
     reasonably satisfactory to Lender that all costs incurred in connection
     with the Restoration have been paid in full, shall be remitted by Lender to
     Borrower (or if required under the Net Lease, to the tenant under the Net
     Lease),

                                      13
<PAGE>

     provided no Event of Default shall have occurred and shall be continuing
     under the Note, this Security Instrument or any of the other Loan
     Documents.

          (c)  All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower or the tenant under the Net Lease
as excess Net Proceeds pursuant to Subsection 4.2(b)(vi) may be (1) retained by
Lender as additional security for the payment and performance of the
Obligations, (2) retained and applied by Lender toward the payment of the Debt
whether or not then due and payable in such order, priority and proportions as
Lender in its discretion shall deem proper, or (3) paid, either in whole or in
part, to Borrower or to the tenant under the Net Lease for such purposes as
Lender shall designate, in its discretion.  Provided no Event of Default exists
under the Note, this Security Instrument or the other Loan Documents, Borrower
shall not be obligated to pay any prepayment premium or other prepayment
consideration in connection with a prepayment resulting from the application of
Net Proceeds to the Debt pursuant to the preceding sentence. Following the
application of Net Proceeds from any condemnation to the repayment of a portion
of the principal amount of the Note, Lender may reduce the Monthly Payment (as
defined in the Note) by an amount to be determined by Lender in its sole
discretion.  If Lender shall receive and retain Net Proceeds, the lien of this
Security Instrument shall be reduced only by the amount thereof received and
retained by Lender and actually applied by Lender in reduction of the Debt.

                       5 - REPRESENTATIONS AND WARRANTIES

          Borrower represents and warrants to Lender that:

          5.1  WARRANTY OF TITLE.  Borrower has paid for and has good title to
               -----------------
the Property and has the right to mortgage, grant, bargain, sell, pledge,
assign, warrant, set over, transfer and convey the same and that Borrower
possesses an unencumbered fee simple absolute estate in the Land and the
Improvements and that it owns the Property free and clear of all liens,
encumbrances and charges whatsoever except for those exceptions shown in the
title insurance policy insuring the lien of this Security Instrument (the
"Permitted Exceptions").  Borrower shall forever warrant, defend and preserve
the title and the validity and priority of the lien of this Security Instrument
and shall forever warrant and defend the same to Lender against the claims of
all persons whomsoever.

          5.2  AUTHORITY.  Borrower (and the undersigned representative of
               ---------
Borrower, if any) has full power, authority and legal right to execute this
Security Instrument, and to mortgage, grant, bargain, sell, pledge, assign,
warrant, set-over, transfer and convey the Property pursuant to the terms hereof
and to keep and observe all of the terms of this Security Instrument on
Borrower's part to be performed.

          5.3  LEGAL STATUS AND AUTHORITY.  Borrower (a) is duly organized,
               --------------------------
validly existing and in good standing under the laws of its state of
organization or incorporation; (b) is duly qualified to transact business and is
in good standing in the State where the Property is located; and (c) has all
necessary approvals, governmental and otherwise, and full power and authority to
own the Property and carry on its business as now conducted and proposed to be
conducted.  Borrower now has and shall continue to have the full right, power
and authority to operate and lease the Property, to encumber the Property as
provided herein and to perform all of the other obligations to be performed by
Borrower under the Note, this Security Instrument and the other Loan Documents.

          5.4  VALIDITY OF DOCUMENTS.  (a)  The execution, delivery and
               ---------------------
performance of the Note, this Security Instrument and the other Loan Documents
and the borrowing evidenced by the Note (i) are within the corporate,
partnership, trust or limited liability company (as the case may be) power of
Borrower; (ii) have been authorized by all requisite corporate, partnership,
trust or limited liability company (as the case may be) action; (iii) have
received all necessary approvals and consents, corporate, governmental or
otherwise; (iv) will not violate, conflict with, result in a breach of or
constitute (with notice or lapse of time, or both) a default under any provision
of law, any order or judgment of any court or governmental authority, the
articles of incorporation, by-laws, partnership, trust, operating agreement or
other governing instrument of Borrower, or any indenture, agreement or other
instrument to which Borrower is a party or by which it or any of its assets or
the Property is or may be bound or affected; (v) will not result in the creation
or imposition of any lien, charge or encumbrance whatsoever upon any of its
assets, except the lien and security interest created hereby; and (vi) will not
require any authorization or license from, or any filing with, any governmental
or other body (except for

                                      14
<PAGE>

the recordation of this instrument in appropriate land records in the State
where the Property is located and except for Uniform Commercial Code filings
relating to the security interest created hereby); and (b) the Note, this
Security Instrument and the other Loan Documents constitute the legal, valid and
binding obligations of Borrower.

          5.5   LITIGATION.  There is no action, suit or proceeding, judicial,
                ----------
administrative or otherwise (including any condemnation or similar proceeding),
pending or, to the best of Borrower's knowledge, threatened or contemplated
against, or affecting, Borrower, a Guarantor, if any, an Indemnitor, if any, or
the Property that has not been disclosed to Lender or is not adequately covered
by insurance, as determined by Lender in its sole and absolute discretion.

          5.6   STATUS OF PROPERTY. (a) No portion of the Improvements is
                ------------------
located in an area identified by the Secretary of Housing and Urban Development
or any successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, as amended, or any successor law, or, if located within any such area,
Borrower has obtained and will maintain the insurance prescribed in Section 3.2
hereof; (b) to the best of Borrower's knowledge, after due inquiry, Borrower has
obtained all necessary certificates, licenses and other approvals, governmental
and otherwise, necessary for the operation of the Property and the conduct of
its business and all required zoning, building code, land use, environmental and
other similar permits or approvals, all of which are in full force and effect as
of the date hereof and not subject to revocation, suspension, forfeiture or
modification; (c) to the best of Borrower's knowledge after due inquiry, the
Property and the present and contemplated use and occupancy thereof are in full
compliance with all Applicable Laws, including, without limitation, zoning
ordinances, building codes, land use and environmental laws, laws relating to
the disabled (including, but not limited to, the ADA) and other similar laws;
(d) to the best of Borrower's knowledge, after due inquiry, the Property is
served by all utilities (including, but not limited to, public water and sewer
systems) required for the current or contemplated use thereof; (e) to the best
of Borrower's knowledge, after due inquiry, all utility service is provided by
public utilities and the Property has accepted or is equipped to accept such
utility service; (f) to the best of Borrower's knowledge, after due inquiry, all
public roads and streets necessary for service of and access to the Property for
the current or contemplated use thereof have been completed, are serviceable and
all-weather and are physically and legally open for use by the public; (g) the
Property is, to the best of Borrower's knowledge, free from damage caused by
fire or other casualty; (h) to the best of Borrower's knowledge, after due
inquiry, all costs and expenses of any and all labor, materials, supplies and
equipment used in the construction of the Improvements have been paid in full;
(i) to the best of Borrower's knowledge, after due inquiry, all liquid and solid
waste disposal, septic and sewer systems located on the Property are in a good
and safe condition and repair and in compliance with all Applicable Laws; and
(j) to the best of Borrower's knowledge, after due inquiry, all Improvements lie
within the boundary of the Land.

          5.7   NO FOREIGN PERSON. Borrower is not a "foreign person" within the
                -----------------
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended
and the related Treasury Department regulations, including temporary
regulations.

          5.8   SEPARATE TAX LOT.  The Property is assessed for real estate tax
                ----------------
purposes as one or more wholly independent tax lot or lots, separate from any
adjoining land or improvements not constituting a part of such lot or lots, and
no other land or improvements are assessed and taxed together with the Property
or any portion thereof.

          5.9   ERISA COMPLIANCE. As of the date hereof and throughout the term
                ----------------
of this Security Instrument, (i) Borrower is not and will not be an "employee
benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I
of ERISA; (ii) the assets of Borrower do not and will not constitute "plan
assets" of one or more such plans for purposes of Title I of ERISA; (iii)
Borrower is not and will not be a "governmental plan" within the meaning of
Section 3(32) of ERISA; and (iv) transactions by or with Borrower are not and
will not be subject to state statutes applicable to Borrower regulating
investments of and fiduciary obligations with respect to governmental plans.
Borrower shall deliver to Lender such certifications or other evidence as
requested by Lender from time to time of Borrower's compliance with the
foregoing representations and covenants.

          5.10  LEASES. (a) Borrower is the sole owner of the entire lessor's
                ------
interest in the Net Lease; (b) the Net Lease is valid and enforceable; (c) the
terms of all alterations, modifications and amendments to the Net Lease are
reflected in the definition of Net Lease contained herein; (d) none of

                                      15
<PAGE>

the Rents reserved in the Net Lease have been assigned or otherwise pledged or
hypothecated; (e) none of the Rents have been collected for more than one (1)
month in advance; (f) the premises demised under the Net Lease have been
completed and the tenant under the Net Lease has accepted the same and has taken
possession of the same on a rent-paying basis; (g) there exist no offsets or
defenses to the payment of any portion of the Rents; (h) except for the
obligation to convey the Building Systems and Furniture pursuant to Section 13.2
of the Net Lease, the obligation of the tenant under the Net Lease to make an
offer to purchase the Property after a condemnation as set forth in Section 17
of the Net Lease and the right of first offer set forth in Section 36 of the Net
Lease, the Net Lease does not contain an option to purchase, right of first
refusal to purchase, or any other similar provision; (i) no person or entity has
any possessory interest in, or right to occupy, the Property except under and
pursuant to the Net Lease; (j) no default exists, or with the passing of time or
the giving of notice or both would exist under the Net Lease which could have a
material adverse effect on the Borrower or the Property; (k) Borrower is the
sole beneficiary of the Net Lease Guaranty; (l) the Net Lease Guaranty is valid
and enforceable; (m) the terms of all alterations, modifications and amendments
to the Net Lease Guaranty are reflected in the definition of Net Lease Guaranty
contained herein; and (n) the Net Lease Guaranty is fully and freely assignable
to Lender.

          5.11  FINANCIAL CONDITION.  (a)  Borrower is solvent, and no
                -------------------
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Borrower has been initiated, and (b) it has received
reasonably equivalent value for the granting of this Security Instrument.

          5.12  BUSINESS PURPOSES.  The Loan is solely for the business purpose
                -----------------
of Borrower, and is not for personal, family, household, or agricultural
purposes.

          5.13  TAXES.  Borrower has filed all federal, state, county,
                -----
municipal, and city income and other tax returns required to have been filed by
it and have paid all taxes and related liabilities which have become due
pursuant to such returns or pursuant to any assessments received by it.
Borrower knows of no basis for any additional assessment in respect of any such
taxes and related liabilities for prior years.

          5.14  MAILING ADDRESS.  Borrower's mailing address, as set forth in
                ---------------
the opening paragraph hereof or as changed in accordance with the provisions
hereof, is true and correct.

          5.15  NO CHANGE IN FACTS OR CIRCUMSTANCES.  All information submitted
                -----------------------------------
in connection with Borrower's application for the loan and Lender's issuance of
a commitment for the Loan (collectively, the "Loan Application") and the
satisfaction of the conditions thereof, including, but not limited to, all
financial statements, rent rolls, reports, certificates and other documents, are
accurate, complete and correct in all respects.  There has been no adverse
change in any condition, fact, circumstance or event that would make any such
information inaccurate, incomplete or otherwise misleading.

          5.16  DISCLOSURE.  To Borrower's best knowledge, Borrower has
                ----------
disclosed to Lender all material facts and has not failed to disclose any
material fact that could cause any representation or warranty made herein to be
materially misleading.

          5.17  THIRD PARTY REPRESENTATIONS.  Each of the representations and
                ---------------------------
the warranties made by each Guarantor and Indemnitor herein or in any other Loan
Document(s) is true and correct in all material respects.

          5.18  ILLEGAL ACTIVITY.  No portion of the Property has been or will
                ----------------
be purchased with proceeds of any illegal activity.

Borrower acknowledges that in accepting the Note, this Security Instrument and
the other Loan Documents, Lender is expressly and primarily relying on the truth
and accuracy of the warranties and representations set forth above
notwithstanding any investigation of the Property by Lender; that such reliance
existed on the part of Lender prior to the date hereof; that the warranties and
representations are a material inducement to Lender in making the Loan and that
Lender would not make the Loan in the absence of  such warranties.

                                      16
<PAGE>

                         6 - OBLIGATIONS AND RELIANCES

          6.1  RELATIONSHIP OF BORROWER AND LENDER.  The relationship between
               -----------------------------------
Borrower and Lender is solely that of debtor and creditor, and Lender has no
fiduciary or other special relationship with Borrower and no term or condition
of any of the Note, this Security Instrument and the other Loan Documents shall
be construed so as to deem the relationship between Borrower and Lender to be
other than that of debtor and creditor.  Borrower is not relying on Lender's
expertise business acumen or advice in connection with the Property.

          6.2  NO LENDER OBLIGATIONS.  (a)  Notwithstanding the provisions of
               ---------------------
Subsections 1.1(f) and (l) or Section 1.2, Lender is not undertaking the
performance of (i) any obligations under the Leases; or (ii) any obligations
with respect to such agreements, contracts, certificates, instruments,
franchises, permits, trademarks, licenses and other documents.

          (b)  By accepting or approving anything required to be observed,
performed or fulfilled or to be given to Lender pursuant to this Security
Instrument, the Note or the other Loan Documents, Lender shall not be deemed to
have warranted, consented to, or affirmed the sufficiency, the legality or
effectiveness of same, and such acceptance or approval thereof shall not
constitute any warranty or affirmation with respect thereto by Lender.

                             7 - FURTHER ASSURANCES

          7.1  RECORDING OF SECURITY INSTRUMENT, ETC.  Borrower forthwith upon
               -------------------------------------
the execution and delivery of this Security Instrument and thereafter, from time
to time, will cause this Security Instrument and any of the other Loan Documents
creating a lien or security interest or evidencing the lien hereof upon the
Property to be filed, registered or recorded in such manner and in such places
as may be required by any present or future law in order to publish notice of
and fully to protect and perfect the lien or security interest hereof upon, and
the interest of Lender in, the Property.  Except where prohibited by law,
Borrower will pay all taxes, duties, imposts, assessments, filing, registration
and recording fees, and any and all expenses incident to the preparation,
execution, acknowledgment and/or recording of the Loan Documents and any
amendment or supplement thereto.

          7.2  FURTHER ACTS, ETC.  Borrower will, at the cost of Borrower, and
               -----------------
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers, deeds to secure debt and assurances as Lender shall,
from time to time, reasonably require, for the better assuring, conveying,
assigning, transferring, and confirming unto Lender the property and rights
hereby mortgaged, granted, bargained, sold, conveyed, confirmed, pledged,
assigned, warranted and transferred or intended now or hereafter so to be, or
which Borrower may be or may hereafter become bound to convey or assign to
Lender, or for carrying out the intention or facilitating the performance of the
terms of this Security Instrument or for filing, registering or recording this
Security Instrument, or for complying with all Applicable Laws.  Borrower, on
demand, will execute and deliver and hereby authorizes Lender to execute in the
name of Borrower or without the signature of Borrower to the extent Lender may
lawfully do so, one or more financing statements, chattel mortgages or other
instruments, to evidence more effectively the security interest of Lender in the
Property.  Borrower grants to Lender an irrevocable power of attorney coupled
with an interest for the purpose of exercising and perfecting any and all rights
and remedies available to Lender at law and in equity, including without
limitation such rights and remedies available to Lender pursuant to this Section
7.2.

          7.3  CHANGES IN TAX, DEBT, CREDIT AND DOCUMENTARY STAMP LAWS.  (a)  If
               -------------------------------------------------------
any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the purpose
of taxation or which imposes a tax, either directly or indirectly, on the Debt
or Lender's interest in the Property, Borrower will pay the tax, with interest
and penalties thereon, if any.  If Lender is advised by counsel chosen by it
that the payment of tax by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury, then Lender shall
have the option by written notice of not less than ninety (90) days to declare
the Debt immediately due and payable.

          (b)  Borrower will not claim or demand or be entitled to any credit or
credits against the Debt for any part of the Taxes or Other Charges assessed
against the Property, or any part thereof, and no deduction shall otherwise be
made or claimed from the assessed value of the Property, or any part

                                      17
<PAGE>

thereof, for real estate tax purposes by reason of this Security Instrument or
the Debt. If such claim, credit or deduction shall be required by law, Lender
shall have the option, by written notice of not less than ninety (90) days, to
declare the Debt immediately due and payable.

          (c)  If at any time the United States of America, any State thereof or
any subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, this Security Instrument, or any of the other Loan
Documents or impose any other tax or charge on the same, Borrower will pay for
the same, with interest and penalties thereon, if any.

          7.4  ESTOPPEL CERTIFICATES.  (a)  After request by Lender, Borrower,
               ---------------------
within ten (10) days, shall furnish Lender or any proposed assignee an estoppel
certificate in form and content as may be requested by Lender with respect to
the status of the Loan and/or the Loan Documents.

          (b)  Borrower shall use its best efforts to deliver to Lender,
promptly upon request, duly executed estoppel certificates from any one or more
lessees as required by Lender attesting to such facts regarding the Lease as
Lender may reasonably require, provided that Borrower shall not be required to
                               -------------
honor more than two requests made by Lender in any twelve month period.

          7.5  REPLACEMENT DOCUMENTS.  Upon receipt of an affidavit of an
               ---------------------
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any other Loan Document which is not of public record, and, in the case of
any such mutilation, upon surrender and cancellation of such Note or other Loan
Document, Borrower will issue, in lieu thereof, a replacement Note or other Loan
Document, dated the date of such lost, stolen, destroyed or mutilated Note or
other Loan Document in the same principal amount thereof and otherwise of like
tenor.

                          8 - DUE  ON SALE/ENCUMBRANCE

          8.1  LENDER RELIANCE.  Borrower acknowledges that Lender has examined
               ---------------
and relied on the experience of Borrower and its general partners, managing
members, principals and (if Borrower is a trust) beneficial owners in owning and
operating properties such as the Property in agreeing to make the Loan, and will
continue to rely on Borrower's ownership of the Property as a means of
maintaining the value of the Property as security for payment and performance of
the Obligations.  Borrower acknowledges that Lender has a valid interest in
maintaining the value of the Property so as to ensure that, should Borrower
default in the payment or the performance of the Obligations, Lender can recover
the Debt by a sale of the Property.

          8.2  NO SALE/ENCUMBRANCE.  (a)  Borrower agrees that Borrower shall
               -------------------
not, without the prior written consent of Lender, sell, convey, mortgage, grant,
bargain, encumber, pledge, assign, or otherwise transfer the Property or any
part thereof or permit the Property or any part thereof to be sold, conveyed,
mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise
transferred.

          (b)    Notwithstanding the prohibition on transfers described in
Subsection 8.2(a) above, Borrower shall have the right, from time to time, to
obtain the release from the lien of this Security Instrument (to be evidenced by
a partial release of mortgage in form approved by Lender) for all or any part of
those portions of the Property described in Exhibit C attached hereto (the
"Release Parcels") in connection with the transfer of the Release Parcels to a
third party, subject to satisfaction of the following terms and conditions:

          (i)    Borrower shall have provided to Lender at least sixty (60) days
    prior notice of the date on which such release and transfer is to occur;

          (ii)   no Event of Default or any event which, with the passage of
    time or the giving of notice, would constitute an Event of Default hereunder
    shall exist at the time of the release or will result from such release and
    transfer;

          (iii)  the Release Parcel shall be transferred or conveyed to a party
    other than Borrower and such transfer or conveyance shall not result in a
    violation of the provisions of Section 4.1 of this Security Instrument;

                                      18
<PAGE>

          (iv)   Borrower shall have delivered to Lender such title endorsements
    to Lender's policy of title insurance as Lender shall reasonably determine
    to be necessary to confirm that the existing title insurance coverage for
    the Property will remain effective (without the imposition of any additional
    title exception) as to the portion of Property remaining after the release
    of the Release Parcel (the "Remaining Property"), all at Borrower's sole
    cost and expense;

          (v)    Borrower shall have paid all actual out-of-pocket costs and
    expenses incurred by Lender in connection with such release, including,
    without limitation, all trustee fees, recording fees, reconveyance fees,
    title insurance premiums and reasonable attorneys' costs and fees; Borrower
    shall, within five (5) days of Lender's request, deposit such sums as Lender
    may require to pay any or all costs and expenses which Lender estimates it
    shall incur pursuant to this Subsection 8.2(b);

          (vi)   Borrower shall cause to be created, and insured under Lender's
    policy of title insurance, such reciprocal easements for ingress, egress,
    parking and utilities over the Release Parcels as Lender shall reasonably
    require, which easements shall be prior to any lien on the Release Parcels;
    upon request, Lender shall allow the lien of this Security Instrument to be
    subordinated to similar easements across the Remaining Property, provided
    such subordination is effected by an instrument acceptable to Lender in all
    respects and Lender determines that such easements will not adversely affect
    the value of the Remaining Property or the lien created hereunder;

          (vii)  Borrower shall have recorded, in the appropriate land records
    office, a reciprocal easement agreement (the "REA") between Borrower, the
    Net Lease Tenant and the owner of the Release Parcels which REA shall
    contain restrictive covenants against the use of the Release Parcels as
    required by Section 12.2 of the Net Lease, together with an acknowledgment
    from the Net Lease Tenant that Borrower shall have no further obligations or
    liability with respect to the terms and conditions of Section 12.2 and the
    Net Lease Tenant shall have no rights or remedies against Borrower, its
    successors and assigns under Section 12.2;

          (viii) Borrower shall deliver to Lender, at Borrower's sole cost and
    expense, an ALTA/ASCM survey of the Remaining Property and the Release
    Parcel, which survey shall conform to the requirements of Lender for the
    survey of the Property provided to Lender in connection with the funding of
    the Loan; and

          (ix)   at the time of such release, the Remaining Property shall
     constitute lawfully subdivided parcel(s), consisting of separate and
     distinct tax lot(s) and shall conform to all applicable zoning by-laws and
     ordinances.

          Lender shall not be entitled to receive any portion of the proceeds
    realized by Borrower upon the transfer or conveyance of the Release Parcel.

          8.3    SALE/ENCUMBRANCE DEFINED.  A sale, conveyance, mortgage, grant,
                 ------------------------
bargain, encumbrance, pledge, assignment, or transfer within the meaning of this
Article 8 shall be deemed to include, but not be limited to, (a) an installment
sales agreement wherein Borrower agrees to sell the Property or any part thereof
for a price to be paid in installments; (b) an agreement by Borrower leasing all
or a substantial part of the Property for other than actual occupancy by a space
tenant thereunder or a sale, assignment or other transfer of, or the grant of a
security interest in, Borrower's right, title and interest in and to any Leases
or any Rents; (c) if Borrower, any Guarantor, any Indemnitor, or any general
partner or managing member of Borrower, Guarantor or Indemnitor is a
corporation, the voluntary or involuntary sale, conveyance, transfer or pledge
of such corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock by which an aggregate of more than twenty-five
percent (25%) of such corporation's stock shall be vested in a party or parties
who are not now stockholders; (d) if Borrower, any Guarantor or Indemnitor or
any general partner or managing member of Borrower, any Guarantor or Indemnitor
is a limited or general partnership or joint venture, the change, removal or
resignation of a general partner or managing partner, or the transfer or pledge
of the partnership interest of any general partner or managing partner of such
partnership or any profits or proceeds relating to such partnership interest or
the transfer or pledge of more than 49% in the aggregate of any limited
partnership interests in such partnership or any profits or proceeds related to
such interests whether in one transfer or pledge or a series of transfers or
pledges; (e) if Borrower, any Guarantor or

                                      19
<PAGE>

Indemnitor or any general partner or managing member of Borrower, any Guarantor
or Indemnitor is a limited liability company, the change, removal or resignation
of the managing member of such company, or the transfer or pledge of the
membership interest of the managing member of such company or any profits or
proceeds relating to such membership interest or the transfer or pledge of more
than 49% in the aggregate of any membership interests in such company or any
profits or proceeds related to such interests whether in one transfer or pledge
or a series of transfers or pledges; and (f) without limitation to the
foregoing, any voluntary or involuntary sale, transfer, conveyance or pledge by
any person or entity which directly or indirectly controls Borrower (by
operation of law or otherwise) (a "Principal") of its direct or indirect
controlling interest in Borrower. Notwithstanding the foregoing, the following
transfers shall not be deemed to be a sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment or transfer within the meaning of this
Article 8: (A) transfer by devise or descent or by operation of law upon the
death of a partner, member or stockholder of Borrower or any general partner
thereof, (B) a sale, transfer or hypothecation of a partnership, shareholder or
membership interest in Borrower, whichever the case may be, by the current
partner(s), shareholder(s) or member(s), as applicable, to an immediate family
member (i.e., parents, spouses, siblings, children or grandchildren) of such
partner, shareholder or member or to a Principal (or a trust for the benefit of
any such persons) and (C) transfers of stock in Santa Fe Gaming Corporation over
any nationally recognized stock exchange.

          8.4  LENDER'S RIGHTS.  Lender reserves the right to condition the
               ---------------
consent required hereunder upon a modification of the terms hereof and on
assumption of the Note, this Security Instrument and the other Loan Documents as
so modified by the proposed transferee, except with respect to a release under
Section 8.2(b) above, payment of a transfer fee of not less than one percent
(1%) of the principal balance of the Note and all of Lender's expenses incurred
in connection with such transfer, the approval by Lender of the proposed
transferee, the proposed transferee's continued compliance with the
representations, warranties and covenants set forth in Sections 4.1 and 5.9
hereof, or such other conditions as Lender shall determine in its sole
discretion to be in the interest of Lender.  Lender shall not be required to
demonstrate any actual impairment of its security or any increased risk of
default hereunder in order to declare the Debt immediately due and payable upon
Borrower's sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property without Lender's consent.  This
provision shall apply to every sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer of the Property regardless of
whether voluntary or not, or whether or not Lender has consented to any previous
sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Property.  Notwithstanding anything to the contrary contained
herein, provided no Event of Default, or event which, with the passage of time,
the provision of notice or both, shall constitute an Event of Default, exists
the Building Systems and Furniture (as such terms are defined in the Net Lease)
shall automatically be released from the lien of this Security Instrument and
the other Loan Documents on the date the same become the property of the tenant
under the Net Lease pursuant to Section 13.2 of the Net Lease without the
necessity of any further instrument evidencing such release.  Notwithstanding
the foregoing, at Borrower's sole cost and expense, Lender shall execute any
necessary instruments requested by Borrower in order to evidence the foregoing
release.

                                  9 - DEFAULT

          9.1  EVENTS OF DEFAULT.  The occurrence of any one or more of the
               -----------------
following events shall constitute an "Event of Default": (a) if any portion of
the Debt is not paid on the date the same is due or if the entire Debt is not
paid on or before the Maturity Date; (b) if any of the Taxes or Other Charges is
not paid prior to the date the same becomes delinquent except to the extent sums
sufficient to pay such Taxes and Other Charges have been deposited with Lender
in accordance with the terms of this Security Instrument; (c) if (1) the
Policies are not kept in full force and effect, or (2) the Policies or a copy
thereof which has been certified by the insurance company to be a true and
correct copy is not delivered to Lender within fifteen (15) days of Lender's
request, or (3) Borrower has not delivered evidence of the renewal of the
Policies (which may be in the form of a certificate of insurance thirty (30)
days prior to their expiration as provided in Section 3.2(e); (d) if Borrower
violates or does not comply with any of the provisions of Sections 3.6 or 4.1 or
Articles 8 or 11; (e) if any representation or warranty of Borrower, Indemnitor
or any person guaranteeing payment or performance of the Obligations or any
portion thereof (a "Guarantor"), or any general partner, principal or beneficial
owner of any of the foregoing, made herein or in the Environmental Indemnity
(defined below) or any guaranty, or in any certificate, report, financial
statement or other instrument or document furnished to Lender shall have been
false or misleading in any material respect when made; (f) if (i) Borrower, any
general partner or managing member of Borrower or the Net Lease Tenant or the
Net Lease Guarantor shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or foreign,

                                      20
<PAGE>

relating to bankruptcy, insolvency or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, adjustment, liquidation,
dissolution or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its assets, or Borrower, any general
partner or managing member of Borrower or the Net Lease Tenant or the Net Lease
Guarantor shall make a general assignment for the benefit of its creditors; or
(ii) there shall be commenced against Borrower, any general partner or managing
member of Borrower or the Net Lease Tenant or the Net Lease Guarantor any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed or undischarged for a period of sixty
(60) days; or (iii) there shall be commenced against Borrower, any general
partner or managing member of Borrower or the Net Lease Tenant or the Net Lease
Guarantor any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of any order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within sixty (60) days from the entry thereof; or (iv) Borrower,
any general partner or managing member of Borrower or the Net Lease Tenant or
the Net Lease Guarantor shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) Borrower, any general partner or
managing member of Borrower or the Net Lease Tenant or the Net Lease Guarantor
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; (g) if Borrower shall be in
default beyond any applicable notice or cure period under any other mortgage,
deed of trust, deed to secure debt or other security agreement covering any part
of the Property whether it be superior or junior in lien to this Security
Instrument, (h) intentionally deleted; (i) if any federal tax lien is filed
against the Property and same is not discharged of record within forty-five (45)
days after Borrower has first received notice thereof; (j) if within ten (10)
days of Lender's demand therefor Borrower fails to provide Lender with the
written certification and evidence referred to in Section 5.9 hereof; (k) if
Borrower or any other Indemnitor shall fail to perform any of its obligations
under that certain environmental indemnity agreement of even date herewith (the
"Environmental Indemnity") after the expiration of applicable notice and grace
periods, if any; (l) if any default beyond any applicable notice or cure period
occurs under any guaranty or indemnity executed in connection herewith and such
default continues after the expiration of applicable grace periods, if any; (m)
if for more than ten (10) days after notice from Lender, Borrower shall continue
to be in default under any other term, covenant or condition of the Note, this
Security Instrument or the other Loan Documents in the case of any default which
can be cured by the payment of a sum of money or for thirty (30) days after
notice from Lender in the case of any other default, provided that if such
default cannot reasonably be cured within such thirty (30) day period and
Borrower shall have commenced to cure such default within such thirty (30) day
period and thereafter diligently and expeditiously proceeds to cure the same,
such thirty (30) day period shall be extended for so long as it shall require
Borrower in the exercise of due diligence to cure such default, it being agreed
that no such extension shall be for a period in excess of ninety (90) days ; (n)
if a default by either the Borrower or the tenant or the Net Lease Guarantor
under the Net Lease or the Net Lease Guaranty or any other Loan Documents occurs
beyond any applicable grace or cure period therein provided; or (o) the Net
Lease is terminated. Notwithstanding anything contained herein to the contrary,
no Event of Default shall occur due to any failure to pay any Monthly Payment
(as defined in the Note) resulting solely from the failure by Lender to receive
the monthly rent payment under the Net Lease intended to be applied to the
payment of such Monthly Payment, until the date which is five (5) days from the
date of Lender's notice to Borrower of Lender's failure to receive such monthly
rent payment on the first day of a calendar month.  For the purposes of the
preceding sentence, the rent payable under the Net Lease in any particular month
shall be deemed to be intended to be applied to the Monthly Payment due in that
month (for example, the monthly rent payment due under the Net Lease in April,
2001 is deemed to be intended to be applied to the Monthly Payment due on April
11, 2001).


                           10 - RIGHTS AND REMEDIES

          10.1  REMEDIES. Upon the occurrence of any Event of Default, Borrower
                --------
agrees that Trustee or Lender may take such action, without notice or demand, as
it deems advisable to protect and enforce its rights against Borrower and in and
to the Property, including, but not limited to, the following actions, each of
which may be pursued concurrently or otherwise, at such time and in such order
as Trustee or Lender may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Trustee or Lender: (a)
declare the entire unpaid Debt to be immediately due and payable; (b) with or
without entry, institute proceedings, judicial or otherwise, for the complete or

                                      21
<PAGE>

partial foreclosure of this Security Instrument under any applicable provision
of law in which case the Property or any interest therein may be sold for cash
or upon credit in one or more parcels or in several interests or portions and in
any order or manner, any partial foreclosure to be subject to the continuing
lien and security interest of this Security Instrument for the balance of the
Debt not then due, unimpaired and without loss of priority; (c) sell for cash or
upon credit the Property or any part thereof and all estate, claim, demand,
right, title and interest of Borrower therein and rights of redemption thereof,
pursuant to judicial decree, power of sale or otherwise, at one or more sales,
as an entirety or in one or more parcels; (d) institute an action, suit or
proceeding in equity for the specific performance of any covenant, condition or
agreement contained herein, in the Note or in the other Loan Documents; (e)
recover judgment on the Note either before, during or after any proceedings for
the enforcement of this Security Instrument or the other Loan Documents; (f)
apply for the appointment of a receiver, trustee, liquidator or conservator of
the Property, without notice and without regard for the adequacy of the security
for the Debt and without regard for the solvency of Borrower, any Guarantor,
Indemnitor or of any person, firm or other entity liable for the payment of the
Debt; (g) enter into or upon the Property, either personally or by its agents,
nominees or attorneys and dispossess Borrower and its agents and servants
therefrom, without liability for trespass, damages or otherwise and exclude
Borrower and its agents or servants wholly therefrom, and take possession of all
books, records and accounts relating thereto and Borrower agrees to surrender
possession of the Property and of such books, records and accounts to Lender
upon demand, and thereupon Lender may exercise all rights and powers of Borrower
with respect to the Property including, without limitation, (1) the right to
use, operate, manage, control, insure, maintain, repair, restore and otherwise
deal with all and every part of the Property and conduct the business thereat
including without limitation the right to perform the landlord's obligations
under the Net Lease with or without entry; (2) the right to make or complete any
construction, alterations, additions, renewals, replacements and improvements to
or on the Property as Lender deems advisable; (3) the right to make, cancel,
enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect
and receive all Rents of the Property and every part thereof; (h) require
Borrower to pay monthly in advance to Lender, or any receiver appointed to
collect the Rents, the fair and reasonable rental value for the use and
occupation of such part of the Property as may be occupied by Borrower; (i)
require Borrower to vacate and surrender possession of the Property to Lender or
to such receiver and, in default thereof, Borrower may be evicted by summary
proceedings or otherwise; (j) apply the receipts from the Property, any Deposits
and interest thereon and/or any unearned Insurance Premiums paid to Lender upon
the surrender of any Policies maintained pursuant to Article 3 hereof (it being
agreed that Lender shall have the right to surrender such Policies upon the
occurrence of an Event of Default), to the payment of the Obligations, in such
order, priority and proportions as Lender shall deem appropriate in its sole
discretion; or (k) exercise any and all rights and remedies granted to a secured
party upon default under the Uniform Commercial Code, including, without
limiting the generality of the foregoing: the right to (1) take possession of
the Personal Property or any part thereof, and to take such other measures as
Lender may deem necessary for the care, protection and preservation of the
Personal Property, and (2) request Borrower at its expense to assemble the
Personal Property and make it available to Lender at a convenient place
acceptable to Lender.  Any notice of sale, disposition or other intended action
by Lender with respect to the Personal Property sent to Borrower in accordance
with the provisions hereof at least five (5) days prior to such action, shall
constitute commercially reasonable notice to Borrower.  Upon any foreclosure or
other sale of the Property pursuant to the terms hereof, Lender may bid for and
purchase the Property and shall be entitled to apply all or any part of the
secured indebtedness as a credit against the purchase price.

          In the event of a sale, by foreclosure, power of sale, or otherwise,
of less than all of the Property, this Security Instrument shall continue as a
lien and security interest on the remaining portion of the Property unimpaired
and without loss of priority.  Notwithstanding the provisions of this Section
10.1 to the contrary, if any Event of Default as described in clause (i) or (ii)
of Subsection 9.1(f) shall occur, the entire unpaid Debt shall be automatically
due and payable, without any further notice, demand or other action by Lender.

          10.2  APPLICATION OF PROCEEDS.  The purchase money, proceeds and
                -----------------------
avails of any disposition of the Property, or any part thereof, or any other
sums collected by Lender pursuant to the Note, this Security Instrument or the
other Loan Documents, may be applied by Lender to the payment of the Debt in
such priority and proportions as Lender in its discretion shall deem proper.

          10.3  RIGHT TO CURE DEFAULTS.  Upon the occurrence of any Event of
                ----------------------
Default, Lender may, but without any obligation to do so and without notice to
or demand on Borrower and without releasing Borrower from any obligation
hereunder or curing or being deemed to have cured any

                                      22
<PAGE>

default hereunder, make or do the same in such manner and to such extent as
Lender may deem necessary to protect the security hereof. Lender is authorized
to enter upon the Property for such purposes, or appear in, defend, or bring any
action or proceeding to protect its interest in the Property or to foreclose
this Security Instrument or collect the Debt, or to enforce the terms and
conditions of the Net Lease, and the cost and expense thereof (including
reasonable attorneys' fees to the extent permitted by law), with interest as
provided in this Section 10.3, shall constitute a portion of the Debt and shall
be due and payable to Lender upon demand. All such costs and expenses incurred
by Lender in remedying such Event of Default or such failed payment or act or in
appearing in, defending, or bringing any such action or proceeding shall bear
interest at the Default Rate (as defined in the Note), for the period after
notice from Lender that such cost or expense was incurred to the date of payment
to Lender. All such costs and expenses incurred by Lender together with interest
thereon calculated at the Default Rate shall be deemed to constitute a portion
of the Debt and be secured by this Security Instrument and the other Loan
Documents and shall be immediately due and payable upon demand by Lender
therefor.

          10.4  ACTIONS AND PROCEEDINGS.  Subject to the terms of the Net
                -----------------------
Lease, Lender has the right to appear in and defend any action or proceeding
brought with respect to the Property and to bring any action or proceeding, in
the name and on behalf of Borrower, which Lender, in its discretion, decides
should be brought to protect its interest in the Property.

          10.5  RECOVERY OF SUMS REQUIRED TO BE PAID.  Lender shall have the
                ------------------------------------
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.

          10.6  EXAMINATION OF BOOKS AND RECORDS.  Lender, its agents,
                --------------------------------
accountants and attorneys shall have the right to examine the records, books,
management and other papers of Borrower and its affiliates or of any Guarantor
or Indemnitor which reflect upon their financial condition, at the Property or
at any office regularly maintained by Borrower, its affiliates or any Guarantor
or Indemnitor where the books and records are located.  Lender and its agents
shall have the right to make copies and extracts from the foregoing records and
other papers.  In addition, Lender, its agents, accountants and attorneys shall
have the right to examine and audit the books and records of Borrower and its
affiliates or of any Guarantor or Indemnitor pertaining to the income, expenses
and operation of the Property during reasonable business hours at any office of
Borrower, its affiliates or any Guarantor or Indemnitor where the books and
records are located.  This Section 10.6 shall apply throughout the term of the
Note and without regard to whether an Event of Default has occurred or is
continuing.

          10.7  OTHER RIGHTS, ETC.  (a)  The failure of Lender to insist upon
                ------------------
strict performance of any term hereof shall not be deemed to be a waiver of any
term of this Security Instrument.  Borrower shall not be relieved of Borrower's
obligations hereunder by reason of (i) the failure of Lender to comply with any
request of Borrower, any Guarantor or any Indemnitor to take any action to
foreclose this Security Instrument or otherwise enforce any of the provisions
hereof or of the Note or the other Loan Documents, (ii) the release, regardless
of consideration, of the whole or any part of the Property, or of any person
liable for the Debt or any portion thereof, or (iii) any agreement or
stipulation by Lender extending the time of payment or otherwise modifying or
supplementing the terms of the Note, this Security Instrument or the other Loan
Documents.

          (b)   It is agreed that the risk of loss or damage to the Property is
on Borrower, and Lender shall have no liability whatsoever for decline in value
of the Property, for failure to maintain the Policies, or for failure to
determine whether insurance in force is adequate as to the amount of risks
insured.  Possession by Lender shall not be deemed an election of judicial
relief, if any such possession is requested or obtained, with respect to any
Property or collateral not in Lender's possession.

          (c)   Trustee or Lender may resort for the payment of the Debt to any
other security held by Trustee or Lender in such order and manner as Trustee or
Lender, in its discretion, may elect.  Lender may take action to recover the
Debt, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Trustee or Lender thereafter to foreclose this
Security Instrument.  The rights of Lender and Trustee under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others.  No act of Trustee or Lender shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision.  Lender and

                                      23
<PAGE>

Trustee shall not be limited exclusively to the rights and remedies herein
stated but shall be entitled to every right and remedy now or hereafter afforded
at law or in equity.

          10.8   RIGHT TO RELEASE ANY PORTION OF THE PROPERTY.  Lender may
                 --------------------------------------------
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument, or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder.  The
provisions of this Section 10.8 are not intended to affect or impair the
provisions of Section 8.2 of this Security Instrument.  This Security Instrument
shall continue as a lien and security interest in the remaining portion of the
Property.

          10.9   VIOLATION OF LAWS.  If the Property is not in compliance with
                 -----------------
Applicable Laws, Lender may impose additional requirements upon Borrower in
connection herewith including, without limitation, monetary reserves or
financial equivalents.

          10.10  RECOURSE AND CHOICE OF REMEDIES.  Notwithstanding any other
                 -------------------------------
provision of this Security Instrument, including but not limited to Article 13
hereof, Lender and other Indemnified Parties (defined in Section 11.1 below) are
entitled to enforce the obligations of Borrower, Guarantor and Indemnitor
contained in Sections 11.2 and 11.3 without first resorting to or exhausting any
security or collateral and without first having recourse to the Note or any of
the Property, through foreclosure or acceptance of a deed in lieu of foreclosure
or otherwise, and in the event Lender commences a foreclosure action against the
Property, Lender is entitled to pursue a deficiency judgment with respect to
such obligations against Borrower, Guarantor and Indemnitor.  The provisions of
Sections 11.2 and 11.3 are exceptions to any non-recourse or exculpation
provisions in the Note, this Security Instrument or the other Loan Documents,
and Borrower, Guarantor and Indemnitor are fully and personally liable for the
obligations pursuant to Sections 11.2 and 11.3.  The liability of Borrower,
Guarantor and Indemnitor are not limited to the original principal amount of the
Note.  Notwithstanding the foregoing, nothing herein shall inhibit or prevent
Lender from foreclosing pursuant to this Security Instrument or exercising any
other rights and remedies pursuant to the Note, this Security Instrument and the
other Loan Documents, whether simultaneously with foreclosure proceedings or in
any other sequence.  A separate action or actions may be brought and prosecuted
against Borrower, whether or not action is brought against any other person or
entity or whether or not any other person or entity is joined in the action or
actions.

          10.11  RIGHT OF ENTRY.  Lender and its agents shall have the right to
                 --------------
enter and inspect the Property at all reasonable times, subject to the rights of
the tenant under the Net Lease.

          10.12  DEFAULT INTEREST AND LATE CHARGES.  Borrower acknowledges that,
                 ---------------------------------
without limitation to any of Lender's rights or remedies set forth in this
Security Instrument, Lender has the right following an Event of Default to
demand interest on the principal amount of the Note at the Default Rate and late
payment charges in accordance with the terms of the Note.

                              11 - INDEMNIFICATION

          11.1   GENERAL INDEMNIFICATION.  Borrower shall, at its sole cost and
                 -----------------------
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement, punitive
damages, foreseeable and unforeseeable consequential damages, of whatever kind
or nature (including but not limited to attorneys' fees and other costs of
defense) (the "Losses") imposed upon or incurred by or asserted against any of
the Indemnified Parties and directly or indirectly arising out of or in any way
relating to any one or more of the following, except to the extent the following
(as to any Indemnified Party) relate solely to such Indemnified Party's gross
negligence or willful misconduct:  (a) any Event of Default; (b) any and all
lawful action that may be taken by Lender in connection with the enforcement of
the provisions of this Security Instrument or the Note or any of the other Loan
Documents, whether or not suit is filed in connection with same, or in
connection with Borrower, any Guarantor or Indemnitor and/or any partner, joint
venturer or shareholder thereof becoming a party to a voluntary or involuntary
federal or state

                                      24
<PAGE>

bankruptcy, insolvency or similar proceeding; (c) any accident, injury to or
death of persons or loss of or damage to property occurring in, on or about the
Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (d) any use, nonuse or
condition in, on or about the Property or any part thereof; (e) any failure on
the part of Borrower to perform or be in compliance with any of the terms of
this Security Instrument; (f) the failure of any person to file timely with the
Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of
Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be
required in connection with the Security Instrument, or to supply a copy thereof
in a timely fashion to the recipient of the proceeds of the transaction in
connection with which this Security Instrument is made; (g) any failure of the
Property to be in compliance with any Applicable Laws; (h) the enforcement by
any Indemnified Party of the provisions of this Article 11; (i) the payment of
any commission, charge or brokerage fee to anyone which may be payable in
connection with the funding of the Loan; (j) any misrepresentation made by
Borrower in this Security Instrument or any other Loan Document; or (k) any
other transaction arising out of or in any way connected with the Property or
the Loan. Any amounts payable to Lender by reason of the application of this
Section 11.1 shall become immediately due and payable and shall bear interest at
the Default Rate from the date loss or damage is sustained by Lender until paid.
For purposes of this Article 11, the term "Indemnified Parties" means Lender or
Trustee and any person or entity who is or will have been involved in the
origination of the Loan, any person or entity who is or will have been involved
in the servicing of the Loan, any person or entity in whose name the encumbrance
created by this Security Instrument is or will have been recorded and persons
and entities who may hold or acquire or will have held a full or partial
interest in the Loan, including, but not limited to, custodians, trustees and
other fiduciaries who hold or have held a full or partial interest in the Loan.

          11.2  MORTGAGE AND/OR INTANGIBLE TAX.  Borrower shall, at its sole
                ------------------------------
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any tax on the making and/or recording
of this Security Instrument, the Note or any of the other Loan Documents.

          11.3  ERISA INDEMNIFICATION.  Borrower shall, at its sole cost and
                ---------------------
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses (including, without limitation,
attorneys' fees and costs incurred in the investigation, defense, and settlement
of Losses incurred in correcting any prohibited transaction or in the sale of a
prohibited loan, and in obtaining any individual prohibited transaction
exemption under ERISA that may be required, in Lender's sole discretion) that
Lender may incur, directly or indirectly, as a result of a default under Section
5.9.

          11.4  DUTY TO DEFEND; ATTORNEYS' FEES AND OTHER FEES AND EXPENSES.
                -----------------------------------------------------------
Upon written request by any Indemnified Party, Borrower shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties.  Notwithstanding the foregoing, any Indemnified Parties
may, in their sole and absolute discretion, engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties, their attorneys shall control the resolution of claim or proceeding.
Upon demand, Borrower shall pay or, in the sole and absolute discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.

                                  12 - WAIVERS

          12.1  WAIVER OF COUNTERCLAIM.  Borrower hereby waives the right to
                ----------------------
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Lender arising out of or in any way
connected with this Security Instrument, the Note, any of the other Loan
Documents, or the Obligations.  Any assignee of Lender's interest in this
Security Instrument and the other Loan Documents shall take the same free and
clear of all offsets, counterclaims (other than a mandatory or compulsory
counterclaim), or defenses which are unrelated to such documents which Borrower
may otherwise have against any assignor of such documents, and no such unrelated
counterclaim or defense shall be interposed or asserted by Borrower in any
action or proceeding brought by any such assignee upon such documents, and any
such rights to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by Borrower.

                                      25
<PAGE>

          12.2  MARSHALLING AND OTHER MATTERS.  Borrower hereby waives, to the
                -----------------------------
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein.  Further, Borrower hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of Borrower, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all persons
to the extent permitted by applicable law.

          12.3  WAIVER OF NOTICE.  Borrower shall not be entitled to any notices
                ----------------
of any nature whatsoever from Trustee or Lender except with respect to matters
for which this Security Instrument specifically and expressly provides for the
giving of notice by Lender to Borrower and except with respect to matters for
which Trustee or Lender is required by applicable law to give notice, and
Borrower hereby expressly waives the right to receive any notice from Trustee or
Lender with respect to any matter for which this Security Instrument does not
specifically and expressly provide for the giving of notice by Trustee or Lender
to Borrower.

          12.4  SOLE DISCRETION OF LENDER.  Wherever pursuant to this Security
                -------------------------
Instrument (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove, all decisions that arrangements or terms are satisfactory
or not satisfactory and all other decisions and determinations made by Lender,
shall be in the sole and absolute discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.

          12.5  SURVIVAL.  The indemnifications made pursuant to Article 11
                --------
shall continue indefinitely in full force and effect and shall survive and shall
in no way be impaired by: any satisfaction or other termination of this Security
Instrument, any assignment or other transfer of all or any portion of this
Security Instrument or Lender's interest in the Property (but, in such case,
shall benefit both Indemnified Parties and any assignee or transferee), any
exercise of Lender's rights and remedies pursuant hereto including but not
limited to foreclosure or acceptance of a deed in lieu of foreclosure, any
exercise of any rights and remedies pursuant to the Note or any of the other
Loan Documents, any transfer of all or any portion of the Property (whether by
Borrower or by Lender following foreclosure or acceptance of a deed in lieu of
foreclosure or at any other time), any amendment to this Security Instrument,
the Note or the other Loan Documents, and any act or omission that might
otherwise be construed as a release or discharge of Borrower from the
obligations pursuant hereto.

          12.6  WAIVER OF TRIAL BY JURY.  BORROWER HEREBY WAIVES, TO THE FULLEST
                -----------------------
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THE LOAN, THE APPLICATION FOR THE LOAN, THE NOTE, THIS SECURITY
INSTRUMENT OR THE OTHER LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.

                                13 - EXCULPATION

          13.1  EXCULPATION.  Except as otherwise in this Article 13, in the
                -----------
Note or in the other Loan Documents, Lender shall not enforce the liability and
obligation of Borrower to perform and observe the obligations contained in the
Note or this Security Instrument by any action or proceeding wherein a money
judgment shall be sought against Borrower, except that Lender may sell the
Property under any power of sale or right of non-judicial foreclosure or bring a
foreclosure action, confirmation action, action for specific performance or
other appropriate action or proceeding to enable Lender to enforce and realize
upon the Note, this Security Instrument, the other Loan Documents, and the
interest in the Property, the Rents and any other collateral given to Lender
created by the Note, this Security Instrument and the other Loan Documents;
provided, however, that any judgment in any such action or proceeding shall be
enforceable against Borrower only to the extent of Borrower's interest in the
Property, in the Rents and in any other collateral given to Lender.  Lender, by
accepting the Note and this Security Instrument, agrees that it shall not,
except as otherwise provided in Section 10.10, sue for, seek

                                      26
<PAGE>

or demand any deficiency judgment against Borrower in any such action or
proceeding, under or by reason of or under or in connection with the Note, the
other Loan Documents or this Security Instrument.

          13.2  RESERVATION OF CERTAIN RIGHTS.  The provisions of Section 13.1
                -----------------------------
shall not, however, (a) constitute a waiver, release or impairment of any
obligation evidenced or secured by the Note, the other Loan Documents or this
Security Instrument; (b) intentionally deleted; (c) impair the right of Lender
to name Borrower as a party defendant in any action or suit for judicial
foreclosure and sale under this Security Instrument; (d) affect the validity or
enforceability of any indemnity, guaranty, master lease or similar instrument
made in connection with the Note, this Security Instrument, or the other Loan
Documents; (e) impair the right of Lender to obtain the appointment of a
receiver; (f) impair the enforcement of the Assignment of Leases and Rents
executed in connection herewith; (g) impair the right of Lender to obtain a
deficiency judgment or judgment on the Note against Borrower if necessary to
obtain any insurance proceeds or condemnation awards to which Lender would
otherwise be entitled under this Security Instrument, provided, however, Lender
shall only enforce such judgment against the insurance proceeds and/or
condemnation awards; or (h) impair the right of Lender to enforce the provisions
of Sections 10.10, 11.2 and 11.3 of this Security Instrument.

          13.3  EXCEPTIONS TO EXCULPATION.  Notwithstanding the provisions of
                -------------------------
this Article to the contrary, Borrower shall be personally liable to Lender for
the Losses it incurs due to: (i) fraud or intentional misrepresentation by
Borrower, its agents or principals in connection with the execution and the
delivery of the Note, this Security Instrument or the other Loan Documents; (ii)
Borrower's misapplication or misappropriation of (A) Rents received by Borrower,
(B) tenant security deposits or Rents collected in advance, or (C) insurance
proceeds or condemnation awards; (iii) Borrower's failure to pay Taxes,
Insurance Premiums, Other Charges (except to the extent that sums sufficient to
pay such amounts have been deposited in escrow with Lender pursuant to the terms
of this Security Instrument), charges for labor or materials or other charges
that can create liens on the Property, provided that Borrower's liability under
this clause (iii) shall not exceed an amount equal to the net operating income
of the Property for the twelve (12) month period preceding the related failure
to pay, less the amount of all Monthly Payments (as defined in the Note) and
required reserve payments made by Borrower in accordance with the Note, this
Security Instrument and the other Loan Documents during such twelve (12) month
period; (iv) Borrower's failure to comply with the provisions of Sections 3.6,
3.10 or 5.9 of this Security Instrument; or (v) Borrower's or any other
Indemnitor's failure to comply with the provisions of the Environmental
Indemnity.

          13.4  RECOURSE.  Notwithstanding the foregoing, the agreement of
                --------
Lender not to pursue recourse liability as set forth in Section 13.1 above SHALL
BECOME NULL AND VOID and shall be of no further force and effect (i) in the
event of Borrower's default under Sections 4.1 or 8.2 of this Security
Instrument; or (ii) if the Property or any part thereof shall become an asset in
(1) a voluntary bankruptcy or insolvency proceeding, or (2) an involuntary
bankruptcy or insolvency proceeding (A) which is commenced by any party
controlling, controlled by or under common control with Borrower (which shall
include, but not be limited to any creditor or claimant acting in concert with
Borrower or any the foregoing parties) (the "Borrowing Group") or (B) in which
any member of the Borrowing Group objects to a motion by Lender for relief from
any stay or injunction from the foreclosure of this Security Instrument or any
other remedial action permitted hereunder or under the Note or the other Loan
Documents or (iii) if a court competent jurisdiction holds that the granting,
execution or delivery of the Security Instrument or any other Loan Document is
or constitutes a fraudulent conveyance under any bankruptcy, insolvency or
fraudulent conveyance law or is otherwise voidable under any such laws.

          13.5  BANKRUPTCY CLAIMS.  Nothing herein shall be deemed to be a
                -----------------
waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b)
or any other provisions of the Bankruptcy Code to file a claim for the full
amount of the Debt or to require that all collateral shall continue to secure
all of the Debt owing to Lender in accordance with the Note, this Security
Instrument and the other Loan Documents.

                                  14 - NOTICES

          14.1  NOTICES.  All notices or other written communications hereunder
                -------
shall be deemed to have been properly given (i) upon delivery, if delivered in
person, (ii) one (1) Business Day (defined below) after having been deposited
for overnight delivery with any reputable overnight courier service, or (iii)
three (3) Business Days after having been deposited in any post office or mail
depository

                                      27
<PAGE>

regularly maintained by the U.S. Postal Service and sent by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:

If to Borrower:          SFHI, LLC
                         4336 Losee Road, #9
                         North Las Vegas, Nevada 89030
                         Attention:  Chief Financial Officer

With a copy to:          Schreeder, Wheeler & Flint, LLP
                         127 Peachtree Street, N.E.
                         Atlanta, Georgia 30303-1845
                         Attention:  Leo Rose, Esq.

If to Trustee:           Russell R. Reno, Jr.
                         1800 Mercantile Bank & Trust Building
                         2 Hopkins Plaza
                         Baltimore, Maryland 21201-2978

If to Lender:            Lehman Brothers Holdings Inc., d/b/a Lehman Capital,
                         a division of Lehman Brothers Holdings Inc.
                         Three World Financial Center, 200 Vesey Street
                         New York, New York 10285
                         Attention:  Kenneth Cohen

With a copy to:          Stroock & Stroock & Lavan LLP
                         180 Maiden Lane
                         New York, New York 10038-4982
                         Attention:  William Campbell, Esq.

or addressed as such party may from time to time designate by written notice to
the other parties.

          Either party by notice to the other may designate additional or
different addresses for subsequent notices or communications.

          For purposes of this Subsection, "Business Day" shall mean a day on
which commercial banks are not authorized or required by law to close in New
York, New York.

                                      28
<PAGE>

                              15 - APPLICABLE LAW

          15.1  CHOICE OF LAW. This Security Instrument shall be governed,
                -------------
construed, applied and enforced in accordance with the laws of the state in
which the Property is located and the applicable laws of the United States of
America.

          15.2  USURY LAWS. This Security Instrument and the Note are subject to
                ----------
the express condition that at no time shall Borrower be obligated or required to
pay interest on the Debt at a rate which could subject the holder of the Note to
either civil or criminal liability as a result of being in excess of the maximum
interest rate which Borrower is permitted by applicable law to contract or agree
to pay. If by the terms of this Security Instrument or the Note, Borrower is at
any time required or obligated to pay interest on the Debt at a rate in excess
of such maximum rate, the rate of interest under the Security Instrument and the
Note shall be deemed to be immediately reduced to such maximum rate and the
interest payable shall be computed at such maximum rate and all prior interest
payments in excess of such maximum rate shall be applied and shall be deemed to
have been payments in reduction of the principal balance of the Note. All sums
paid or agreed to be paid to Lender for the use, forbearance, or detention of
the Debt shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term of the Note
until payment in full so that the rate or amount of interest on account of the
Debt does not exceed the maximum lawful rate of interest from time to time in
effect and applicable to the Debt for so long as the Debt is outstanding.

          15.3  PROVISIONS SUBJECT TO APPLICABLE LAW. All rights, powers and
                ------------------------------------
remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any applicable law. If any
term of this Security Instrument or any application thereof shall be invalid or
unenforceable, the remainder of this Security Instrument and any other
application of the term shall not be affected thereby.

                             16 - SECONDARY MARKET

          16.1  TRANSFER OF LOAN. Lender may, at any time, sell, transfer or
                ----------------
assign the Note, this Security Instrument and the other Loan Documents, and any
or all servicing rights with respect thereto, or grant participations therein or
issue mortgage pass-through certificates or other securities evidencing a
beneficial interest in a rated or unrated public offering or private placement
(the "Securities"). Lender may forward to each purchaser, transferee, assignee,
servicer, participant, investor in such Securities or any rating agency (a
"Rating Agency") rating such Securities (all of the foregoing entities
collectively referred to as the "Investor") and each prospective Investor, all
documents and information which Lender now has or may hereafter acquire relating
to the Debt and to Borrower, any Guarantor, any Indemnitor and the Property,
whether furnished by Borrower, any Guarantor, any Indemnitor or otherwise, as
Lender determines necessary or desirable. Borrower, any Guarantor and any
Indemnitor agree to cooperate with Lender in connection with any transfer made
or any Securities created pursuant to this Section, provided such cooperation
does not require Borrower to incur any material cost or expense. Borrower shall
also furnish and Borrower, any Guarantor and any Indemnitor consent to Lender
furnishing to such Investors or such prospective Investors or Rating Agency any
and all available information concerning the Property, the Leases, the financial
condition of Borrower, any Guarantor and any Indemnitor as may be requested by
Lender, any Investor or any prospective Investor or Rating Agency in connection
with any sale, transfer or participation interest. In addition to any other
obligations Borrower may have under this Section 16.1, Borrower shall (a)
execute such amendments to the Loan Documents and Borrower's organizational
documents as may be requested by the holder of the Note or any Investor to
effect the assignment of the Note and the other Loan Documents and/or issuance
of Securities including (i) bifurcating the Note into two or more notes and/or
splitting this Security Instrument into two or more mortgages, deeds of trust or
deeds to secure debt (as the case may be) of the same or different priorities or
otherwise as determined by and acceptable to Lender or (ii) dividing the Note
into multiple components corresponding to tranches of certificates to be issued
in a Securitization each having a notional balance and an interest rate
determined by Lender; provided, however, that Borrower shall not be required to
modify or amend any Loan Document if the overall effect of such modification or
amendment would (y) change the interest rate, the maturity or the amortization
of principal set forth in the Note, or (z) modify or amend any other material
economic term of the Note or the other Loan Documents and (b) at Borrower's
expense, cause counsel to render opinions which may be relied upon by the holder
of the Note and the Rating Agency as to non-consolidation or any other opinion
customary in securitization transactions or which otherwise may be reasonably
requested by any Rating

                                      29
<PAGE>

Agency with respect to the Property or Borrower and its affiliates, which
counsel and opinions shall be reasonably satisfactory to the Investor.

                                  17 - COSTS

          17.1  PERFORMANCE AT BORROWER'S EXPENSE. Borrower acknowledges and
                ---------------------------------
confirms that Lender shall be entitled to impose certain reasonable
administrative processing and/or commitment fees in connection with: (a)
extensions, renewals, modifications, amendments and terminations of the Loan
Documents requested by Borrower, and (b) the release or substitution of
collateral for the Loan requested by Borrower, and that Lender shall be entitled
to reimbursement for its reasonable out-of-pocket costs and expenses associated
with its provision of consents, waivers and approvals under the Loan Documents
(the occurrence of any of the above shall be called an "Event"). Borrower
further acknowledges and confirms that it shall be responsible for the payment
of all costs of reappraisal of the Property or any part thereof, which are
required by law, regulation or any governmental or quasi-governmental authority.
Borrower hereby acknowledges and agrees to pay, immediately, upon demand, all
such reasonable fees, costs and expenses.

          17.2  ATTORNEY'S FEES FOR ENFORCEMENT. (a) Borrower shall pay all
                -------------------------------
reasonable legal fees incurred by Lender in connection with the preparation of
the Note, this Security Instrument and the other Loan Documents, and (b)
Borrower shall pay to Lender on demand any and all expenses, including legal
expenses and attorneys' fees, incurred or paid by Lender in protecting its
interest in the Property or in collecting any amount payable hereunder or in
enforcing its rights hereunder with respect to the Property, whether or not any
legal proceeding is commenced hereunder or thereunder and whether or not any
default or Event of Default shall have occurred and is continuing, together with
interest thereon at the Default Rate from the date paid or incurred by Lender
until such expenses are paid by Borrower.

                               18 - DEFINITIONS

          18.1  GENERAL DEFINITIONS. Unless the context clearly indicates a
                -------------------
contrary intent or unless otherwise specifically provided herein, words used in
this Security Instrument may be used interchangeably in singular or plural form
and the word "Borrower" shall mean "each Borrower and any subsequent owner or
owners of the Property or any part thereof or any interest therein," the word
"Lender" shall mean "Lender, its servicer and any subsequent holder of the
Note," the word "Note" shall mean "the Note and any other evidence of
indebtedness secured by this Security Instrument," the word "person" shall
include an individual, corporation, partnership, limited liability company,
trust, unincorporated association, government, governmental authority, and any
other entity, the word "Property" shall include any portion of the Property and
any interest therein, and the phrases "attorneys' fees", "legal fees" and
"counsel fees" shall include any and all reasonable attorneys', paralegal and
law clerk fees and disbursements, including, but not limited to, fees and
disbursements at the pre-trial, trial and appellate levels incurred or paid by
Lender in protecting its interest in the Property, the Leases and the Rents and
enforcing its rights hereunder. The terms "include(s)" and "including" shall
mean "include(s), without limitation" and "including, without limitation",
respectively.

                         19 - MISCELLANEOUS PROVISIONS

          19.1  NO ORAL CHANGE. This Security Instrument, and any provisions
                --------------
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.

          19.2  LIABILITY. If Borrower consists of more than one person, the
                ---------
obligations and liabilities of each such person hereunder shall be joint and
several. This Security Instrument shall be binding upon and inure to the benefit
of Borrower and Lender and their respective successors and assigns forever.

          19.3  INAPPLICABLE PROVISIONS. If any term, covenant or condition of
                -----------------------
the Note or this Security Instrument is held to be invalid, illegal or
unenforceable in any respect, the Note and this Security Instrument shall be
construed without such provision.

                                      30
<PAGE>

          19.4  HEADINGS, ETC. The headings and captions of various Sections of
                --------------
this Security Instrument are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

          19.5  DUPLICATE ORIGINALS; COUNTERPARTS. This Security Instrument may
                ---------------------------------
be executed in any number of duplicate originals and each duplicate original
shall be deemed to be an original. This Security Instrument may be executed in
several counterparts, each of which counterparts shall be deemed an original
instrument and all of which together shall constitute a single Security
Instrument. The failure of any party hereto to execute this Security Instrument,
or any counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.

          19.6  NUMBER AND GENDER. Whenever the context may require, any
                -----------------
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.

          19.7  SUBROGATION. If any or all of the proceeds of the Note have been
                -----------
used to extinguish, extend or renew any indebtedness heretofore existing against
the Property, then, to the extent of the funds so used, Lender shall be
subrogated to all of the rights, claims, liens, titles, and interests existing
against the Property heretofore held by, or in favor of, the holder of such
indebtedness and such former rights, claims, liens, titles, and interests, if
any, are not waived but rather are continued in full force and effect in favor
of Lender and are merged with the lien and security interest created herein as
cumulative security for the payment and performance of the Obligations.

          19.8  ENTIRE AGREEMENT. The Note, this Security Instrument and the
                ----------------
other Loan Documents constitute the entire understanding and agreement between
Borrower and Lender with respect to the transactions arising in connection with
the Debt and supersede all prior written or oral understandings and agreements
between Borrower and Lender with respect thereto. Borrower hereby acknowledges
that, except as incorporated in writing in the Note, this Security Instrument
and the other Loan Documents, there are not, and were not, and no persons are or
were authorized by Lender to make, any representations, understandings,
stipulations, agreements or promises, oral or written, with respect to the
transaction which is the subject of the Note, this Security Instrument and the
other Loan Documents.

          19.9  CONTEST OF CERTAIN CLAIMS. Notwithstanding anything to the
                -------------------------
contrary herein, Borrower shall not be in default for failure to pay or
discharge Taxes, Other Charges or mechanic's or materialman's lien asserted
against the Property if, and so long as, (a) Borrower shall have notified Lender
of same within ten (10) days of obtaining knowledge thereof; (b) Borrower shall
diligently and in good faith contest the same by appropriate legal proceedings
which shall operate to prevent the enforcement or collection of the same and the
sale of the Property or any party thereof, to satisfy the same; (c) Borrower
shall have furnished to Lender a cash deposit, or an indemnity bond satisfactory
to Lender with a surety satisfactory to Lender, in the amount of the Taxes,
Other Charges or mechanic's or materialman's lien claim, plus a reasonable
additional sum to pay all costs, interest and penalties that may be imposed or
incurred in connection therewith, to assure payment of the matters under contest
and to prevent any sale or forfeiture of the Property or any part thereof;
provided, however, that if a cash deposit or indemnity bond must be deposited
with a governmental authority or a court of competent jurisdiction to accomplish
the purposes of clause (b) above with respect to mechanic's or materialmen liens
(but not with respect to Taxes and Other Charges), Borrower shall not be
required to make such deposit or deliver such bond to Lender if Borrower has
made such deposit or delivered such bond to the appropriate governmental
authority or court; (d) Borrower shall promptly upon final determination thereof
pay the amount of any such Taxes, Other Charges or claim so determined, together
with all costs, interest and penalties which may be payable in connection
therewith; (e) the failure to pay the Taxes, Other Charges or mechanic's or
materialman's lien claim does not constitute a default under any other deed of
trust, mortgage or security interest covering or affecting any part of the
Property; and (f) notwithstanding the foregoing, Borrower shall immediately upon
request of Lender pay (and if Borrower shall fail so to do, Lender may, but
shall not be required to, pay or cause to be discharged or bonded against) any
such Taxes, Other Charges or claim notwithstanding such contest, if in the
opinion of Lender, the Property or any part thereof or interest therein may be
in danger of being sold, forfeited, foreclosed, terminated, canceled or lost.
Lender may pay over any such cash deposit or part hereof to the claimant
entitled thereto at any time when, in the judgment of Lender, the entitlement of
such claimant is established.

                                      31
<PAGE>

          19.10  SUBSTITUTION OF TRUSTEE. Lender shall have, and is hereby
                 -----------------------
granted by Borrower with warranty of further assurances, the irrevocable power
to appoint one or more persons or entities as a substitute Trustee hereunder, to
be exercised at any time hereafter without specifying any reason therefor, by
filing for record in the office where this Security Instrument is recorded a
deed of appointment. Said power of appointment of one or more successor Trustees
may be exercised as often and whenever Lender deems it advisable. The exercise
of said power of appointment, no matter how often, shall not be an exhaustion
thereof. Upon the recordation of such deed of appointment, the Trustee so
appointed shall thereupon, without any further act or deed of conveyance, become
fully vested with identically the same title and estate in and to the Property
and with all the rights, powers, trusts and duties of their, his, hers or its
predecessor in the trust hereunder with like effect as if originally named as
Trustee. Whenever in this Security Instrument reference is made to Trustee, it
shall be construed to mean each person or entity appointed as Trustee for the
time being, whether original or successors or successor in trust. All title,
estate, rights, powers, trusts and duties hereunder given or appertaining to or
devolving upon Trustee shall be in each of the persons or entities appointed as
Trustee so that any action hereunder or purporting to be hereunder of any one of
the persons or entities appointed as Trustee shall for all purposes be
considered to be, and as effective as, the action of Trustee.

          19.11  THE TRUSTEES FEES. Borrower shall pay all reasonable costs,
                 -----------------
fees and expenses incurred by the Trustee and the Trustees agents and counsel in
connection with the performance by the Trustee of the Trustees duties hereunder
and all costs, fees and expenses shall be secured by this Security Instrument.

          19.12  CERTAIN RIGHTS. With the approval of Lender, the Trustee shall
                 --------------
have the right to take any and all of the following actions: (i) to select,
employ, and advise with counsel (who may be, but need not be, counsel for
Lender) upon any matters arising hereunder, including the interpretation of the
Note, this Security Instrument or the other Loan Documents, and shall be fully
protected in relying as to legal matters on the advice of counsel, (ii) to
execute any of the trusts and powers hereof and to perform any duty hereunder
either directly or through his agents or attorneys, (iii) to select and employ,
in and about the execution of his duties hereunder, suitable accountants,
engineers and other experts, agents and attorneys-in-fact, either corporate or
individual, not regularly in the employ of the Trustee, and the Trustee shall
not be answerable for any act, default, negligence, or misconduct of any such
accountant, engineer or other expert, agent or attorney-in-fact, if selected
with reasonable care, or for any error of judgment or act done by the Trustee in
good faith, or be otherwise responsible or accountable under any circumstances
whatsoever, except for the Trustees gross negligence or bad faith, and (iv) any
and all other lawful action as Lender may instruct the Trustee to take to
protect or enforce Lender's rights hereunder. The Trustee shall not be
personally liable in case of entry by the Trustee, or anyone entering by virtue
of the powers herein granted to the Trustee, upon the Property for debts
contracted for or liability or damages incurred in the management or operation
of the Property. The Trustee shall have the right to rely on any instrument,
document, or signature authorizing or supporting an action taken or proposed to
be taken by the Trustee hereunder, believed by the Trustee in good faith to be
genuine. The Trustee shall be entitled to reimbursement for actual expenses
incurred by the Trustee in the performance of the Trustees duties hereunder and
to reasonable compensation for such of the Trustees services hereunder as shall
be rendered.

          19.13  RETENTION OF MONEY. All moneys received by the Trustee shall,
                 ------------------
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated in any manner from any
other moneys (except to the extent required by applicable law) and the Trustee
shall be under no liability for interest on any moneys received by the Trustee
hereunder.

          19.14  PERFECTION OF APPOINTMENT. Should any deed, conveyance, or
                 -------------------------
instrument of any nature be required from Borrower by any Trustee or substitute
trustee to more fully and certainly vest in and confirm to the Trustee or
substitute trustee such estates rights, powers, and duties, then, upon request
by the Trustee or substitute trustee, any and all such deeds, conveyances and
instruments shall be made, executed, acknowledged, and delivered and shall be
caused to be recorded and/or filed by Borrower.

          19.15  SUCCESSION INSTRUMENTS. Any substitute trustee appointed
                 ----------------------
pursuant to any of the provisions hereof shall, without any further act, deed,
or conveyance, become vested with all the estates, properties, rights, powers,
and trusts of its or his predecessor in the rights hereunder with like effect as
if originally named as the Trustee herein; but nevertheless, upon the written
request of Lender or of the substitute trustee, the Trustee ceasing to act shall
execute and deliver any instrument transferring to such substitute trustee, upon
the trusts herein expressed, all the estates, properties, rights, powers, and
trusts of

                                      32
<PAGE>

the Trustee so ceasing to act, and shall duly assign, transfer and deliver any
of the property and moneys held by such Trustee to the substitute trustee so
appointed in the Trustees place.

          19.16  RELIANCE OF TRUSTEE. As to all matters concerning the existence
                 -------------------
of defaults hereunder and the amount of indebtedness subject to the Note and
secured hereby, as well as similar or related matters, the Trustee is hereby
authorized by Borrower to rely conclusively upon, without further inquiry, the
affidavit of any officer of Lender.

                        20 - STATE SPECIFIC PROVISIONS

          20.1   MARYLAND PROVISIONS Notwithstanding anything to the contrary
                 -------------------
elsewhere in this Security Instrument: (a) Borrower in accordance with the
applicable laws of the State of Maryland and applicable provisions of the
Maryland Rules of Procedure, or of any other general or local law or rules or
regulations of the State of Maryland relating to deeds of trust does hereby
declare and assent following the occurrences to the passage of an order to sell
the Property by the court having jurisdiction for the sale thereof and the
Trustee appointed by such order of court shall have, subject to the terms of the
court order, the same authority and power to sell on the terms and conditions
herein set forth. This assent shall not be exhausted in the event the proceeding
is dismissed before the indebtedness secured hereby is paid in full; (b) The
proceeds of any sale made under or by virtue of this Security Instrument,
together with any other sums which may then be held by Lender and/or the Trustee
under this Security Instrument as part of the Property or the proceeds thereof
(whether under the provisions of Article 10 or otherwise), shall be applied, to
the extent permitted by law as follows: (i) to the payment of all reasonable
expenses incident to the sale of the Property, including reasonable attorneys'
fees and expenses and the payment of a reasonable and customary commission to
the party making said sale, to be allowed out of the proceeds of sale as the
court having jurisdiction may deem proper; and (ii) to the extent not covered by
clause (i), in accordance with the provisions of Section 10.2 hereof. In the
event any portion of the Property is advertised for sale and is not sold, the
Trustee shall be entitled to a commission equal to 1/2 of the commission
provided for in a foreclosure sale, to be calculated on the amount of the Debt
then outstanding. The Trustee making the sale shall not be required to accept
payment of the Debt unless accompanied by all reasonable expenses incident to
the sale including the 1/2 commission; (c) Lender shall have, and is hereby
granted by Borrower with warranty of further assurances, the irrevocable power
to appoint one or more individuals as a substitute Trustee hereunder, to be
exercised at any time hereafter without notice and without specifying any reason
therefor, by filing for record in the office where this Security Instrument is
recorded a Deed of Appointment, and said power of appointment of one or more
individuals as successor Trustee may be exercised as often and whenever Lender
deems it advisable. The exercise of said power of appointment, no matter how
often, shall not be an exhaustion thereof. Upon the recordation of such Deed or
Deeds of Appointment, the individual Trustee so appointed shall thereupon,
without any further act or deed of conveyance, become fully vested with
identically the same title and estate in and to the Property and with all the
rights, powers, trusts and duties of their, his, hers or its predecessor in the
trust hereunder with like effect as if originally named as Trustee. Whenever in
this Security Instrument reference is made to Trustee, it shall be construed to
mean each individual appointed as Trustee for the time being, whether original
or successors or successor in trust. All title, estate, rights, powers, trusts
and duties hereunder given or appertaining to or developing upon Trustee shall
be in each of the individuals appointed as Trustee so that any action hereunder
or purporting to be hereunder of any one of the individuals appointed as Trustee
shall for all purposes be considered to be, and as effective as, the action of
Trustee; (d) Borrower agrees to pay all reasonable fees, costs and expenses of
the Trustee; and (e) the rights and remedies provided to lender and Trustee
under this Article shall be in addition to any other rights and remedies of
Lender and Trustee under this Security Instruments or the other Loan Documents
provided that, in the event of a conflict between the terms and provisions of
this Article and the provision of the other Loan Documents, the terms and
provisions of this Article shall govern.

          20.2   CONFLICTING PROVISIONS. The provisions of this Article are
                 ----------------------
intended to supplement, and not limit, the other provisions of this Security
Instrument; provided, however, that in the event the provisions of this Article
            -----------------
contradict any other provision of this Security Instrument, the provisions of
this Article shall govern.

                          (Intentionally Left Blank)

                                      33
<PAGE>

          IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by
Borrower as of the day and year first above written.


                                        BORROWER:

                                        SFHI, LLC,
                                        a Delaware limited liability company

                                        By:  Santa Fe Hotel Inc.,
                                             its manager



                                        By: Paul W. Lowden
                                            --------------
                                        Name:  Paul W. Lowden
                                        Title:  Chairman of the Board

                                      34
<PAGE>

                                ACKNOWLEDGMENT


STATE OF MARYLAND

COUNTY OF MONTGOMERY

     I hereby certify on this ___ day of ______________, 2001 before me, the
undersigned, a notary public in and for the State and County aforesaid,
personally appeared __________________, the ____________ of Sante Fe Hotel Inc.,
the managing member of SFHI, LLC, the party who executed the foregoing
instrument, and acknowledged that he executed the same, on behalf of SFHI, LLC,
for the purposes contained therein.

     Witness my hand and official seal.

     ___________________________
     NOTARY PUBLIC

     My commission expires:

                                      35
<PAGE>

                                   EXHIBIT A
                                   ---------

                             PROPERTY DESCRIPTION

     Lot 1, Block B, GE TECHNOLOGY PARK, a Resubdivision of Parcel B, Quince
     Orchard National Geographic Society Property, as shown on plat recorded
     among the land records of Montgomery County, Maryland, in Plat Book 193,
     plats 21041.

     Saving and excepting that part of Lot 1, Block B, containing 7133 square
     feet of land that was conveyed to the Sate of Maryland by deed dated April
     8, 1999 and recorded among the aforesaid land records in Liber 17015, folio
     624

                                      36
<PAGE>

                                   EXHIBIT B

                             RESERVE REQUIREMENTS"

     1.   Defined Terms.
          -------------

          All capitalized terms used herein and not defined in this Security
Instrument shall have the meanings set forth in Section 7 of this Exhibit B.  To
the extent any Reserve Deposit or the term "Landlord Obligations" is assigned
the meaning "none" in the Reserve Letter, the provisions set forth in this
Exhibit B specifically relating to the making or application of such Reserve
Deposits or the term "Landlord Obligations" shall be disregarded.

     2.   Reserve Deposits.
          ----------------

          (a) Concurrently with the execution of this Security Instrument,
Borrower shall deposit with Lender the Deferred Maintenance Deposit.  The
Deferred Maintenance Deposit shall be applied as provided in Section 4.1 of this
Exhibit B.

          (b) Commencing on the first date that a regularly scheduled payment of
principal or interest is due under the Note, and continuing on the first day of
each consecutive month thereafter, Borrower shall be required to make a Monthly
Deposit.

          (c) Lender shall deposit each Monthly Deposit, as received, in an
escrow account (the "Reserve").

          (d) Lender shall maintain a record of all deposits into and
withdrawals from the Reserve.

          (e) No interest shall be paid on the Deferred Maintenance Deposit.
Provided Borrower pays the account fees set forth below, the Reserve shall be
held in an interest bearing account. Lender shall have no responsibility or
liability for the amount of interest earned on the Reserve.  All interest earned
on funds in the Reserve shall be added to and become part of the Reserve subject
to Lender's rights pursuant to the terms of this Security Instrument.  In order
for the Reserve to bear interest, Borrower shall be required to pay the
following fees: a one-time set-up fee on the date hereof of $50 and an
additional fee of $100 on January 2 of each calendar year after the date hereof.

     3.   Disbursements.
          -------------

          (a) Provided no Event of Default exists, Lender shall make
disbursements of funds available in the Reserve to reimburse Borrower for
Replacements and Landlord Obligations.

          (b) Lender shall, upon written request from Borrower and satisfaction
of the requirements set forth in this Section 3, disburse to Borrower amounts
from the Reserve necessary to reimburse Borrower for the actual costs of (i) any
work relating to Replacements ("Work") or (ii) any costs incurred with respect
to Landlord Obligations.

          (c) Each request for disbursement from the Reserve shall be in a form
specified or approved by Lender, and shall be accompanied by evidence of the
satisfactory completion of the Work or performance of the Landlord Obligations,
as the case may be, and such bills, invoices and other evidence of the
incurrence of the related costs and expenses as Lender may reasonably request.

          (d) Borrower shall not make a request for disbursement from the
Reserve more frequently than twice in any calendar quarter.  The first four (4)
disbursements made from the Reserve in any calendar year shall be made at no
cost or expense to Borrower.  Any disbursements in excess of four in any
calendar year shall be made at the cost of $150 per disbursement, payable in
advance of Borrower.

          (e) Borrower shall not make a request for disbursement from the
Reserve in an amount less than the lesser of (i) $5,000, and (ii) the total cost
of the Replacement or Landlord Obligations, as the case may be for which the
disbursement is requested.

                                      36
<PAGE>

     4.   Performance of Replacements.
          ---------------------------

          4.1.  Deferred Maintenance.  Notwithstanding anything contained herein
                --------------------
to the contrary, Borrower agrees to perform all of the Scheduled Repairs within
sixty (60) days after the date hereof or such other period of time, if any, set
forth in the Reserve Letter.  The Deferred Maintenance Deposit shall be used
solely for the payment of the actual costs of the Scheduled Repairs.  Upon
completion of the Scheduled Repairs in accordance with the requirements hereof,
the portion of the Deferred Maintenance Deposit remaining undisbursed, if any,
shall be disbursed to Borrower.  All conditions, covenants and agreements set
forth herein with respect to a disbursement from the Replacement Account shall
apply to the disbursements from the Deferred Maintenance Deposit.

          4.2.  Entry Onto Property: Inspections.  Lender may inspect the
                --------------------------------
Property in connection with any Work prior to disbursing funds from the Reserve
with respect thereto.  In connection with any Work that is (i) a structural
repair or improvement, (ii) a replacement or repair of a major component or
element of any part of the Property or (iii) Scheduled Repairs, Lender may
require, at Borrower's expense, one or more inspections and/or certificates of
completion by an appropriate independent, qualified professional (e.g.,
architect, engineer, consultant) approved by Lender.  In addition to Lender's
costs and expenses in connection with any such inspection, Borrower shall pay
Lender an inspection fee in the amount of $500, provided, however, that Lender
shall not require Borrower to pay an inspection fee for any Work performed at an
actual cost of $10,000 or less.

     5.   Borrower's Records. Borrower shall furnish such financial statements,
          ------------------
invoices, records, papers and documents relating to the Property as Lender may
reasonably require from time to time to make the determinations permitted or
required to be made by Lender with respect to disbursements of the Deferred
Maintenance Deposit and/or the Reserve.

     6.   Temporary Deferral of Monthly Deposits. Lender may approve a temporary
          --------------------------------------
deferral or a reduction in the amount of the Monthly Deposit; provided, however,
that if Lender approves either a temporary deferral or reduction in the amount
of the Monthly Deposit, such action by Lender shall not prevent Lender from
requiring Borrower to resume payment of the Monthly Deposits on any date that
Lender may deem appropriate.

     7.   Certain Defined Terms.  The following terms shall have the meanings
          ---------------------
assigned to them below:

          (a)  "Deferred Maintenance Deposit" means the Deferred Maintenance
               Deposit set forth in the Reserve Letter, if any.

          (b)  "Landlord Obligations" means those obligations of the landlord
               under the Net Lease specified in the Reserve Letter, if any.

          (c)  "Monthly Deposit" means the Monthly Deposit set forth in the
               Reserve Letter.

          (d)  "Replacements" means the costs of any repairs, improvements,
               equipment, alterations, additions, changes, replacements and
               other items which are required to be performed by Borrower under
               the Net Lease.

          (e)  "Reserve Deposits" shall mean the Deferred Maintenance Deposit
               and the Monthly Deposit.

          (f)  "Reserve Letter" means a letter from Borrower to Lender of even
               date herewith confirming the amount of the Monthly Deposit, the
               Scheduled Repairs, if any, and the Specified Landlord
               Obligations, if any.

          (g)  "Scheduled Repairs" means the Scheduled Repairs described in the
               Reserve Letter, if any.

                                      38