Exhibit 10.9

AMENDMENT TO CONVERTIBLE PROMISSORY NOTES

**        AGREEMENT,** dated as of May11, 2005, between and among MinradInternational, Inc., a Delaware corporation (the "Borrower"), Laird Cagan ("Cagan"),and the Morrie Tobin Family Trust (the "Trust"), (Cagan and the Trust being,collectively, the "Lenders").

Background Statement

        The predecessor to the Borrower, Minrad International, Inc., a Nevadacorporation (the "Predecessor"), executed and delivered to the Lenders certainConvertible Promissory Notes, one dated February 8, 2005 in the face amount of$1,500,000 made payable to the Trust, and one dated February 15, 2005 in theface amount of $1,000,000 made payable to Cagan, (collectively, the Notes). Byoperation of law, the Borrower has succeeded to the obligations of thePredecessor, including the obligations under the Notes. The Borrower and theLenders would now like to modify certain of the terms of the Notes as providedin this Agreement. The Notes were issued in connection with certain other LoanDocuments, dated February 2005, by and among the parties hereto and referencedin the Notes, including a Mortgage and Security Agreement, the GuaranteeAgreement, the Registration Rights Agreements, the Warrant Agreements, the NoteSubscription Agreements, and other loan and collateral documents evidencing orsecuring the obligation (collectively, the "Loan Documents').

AGREEMENT

        NOW, THEREFORE, in consideration of the premises and the covenants andagreements contained in this Agreement, the parties agree as follows:

        1. Section 1 of the Note is amended by adding the following definition:

"BANK BORROWING" means the outstanding indebtedness owed by any Companies    to one or more banks."

        2. The first sentence under "Section 2.(d) OPTIONAL PREPAYMENT." ofthe Note is deleted in its entirety and replaced by the following sentence:

"In the event that the aggregate Bank Borrowing of any Companies (on a    consolidated basis) exceeds $5 Million Dollars ($5,000,000), then commencing    seven (7) business days thereafter the Borrower shall have the right, but    not the obligation, to elect to prepay the outstanding principal balance of,    and accrued interest on, this Note."

        3. The first sentence under "Section 2.(e) OPTIONAL ACCELERATION." isdeleted in its entirety and replaced by the following sentence:

"In the event that the aggregate Bank Borrowing of any Companies (on a    consolidated basis) exceeds Five Million Dollars ($5,000,000), then    commencing seven (7) business days thereafter the Lender shall have the    right, but not the obligation, at its sole discretion, to elect to    accelerate the Maturity Date of this Note, and make this Note payable on    demand, including the outstanding principal balance of, and accrued interest    on, this Note, in whole or in part."

        4. The first two sentences under "Section 8. **CONVERSION RIGHTS.**(a) CONVERSION PRIVILEGE." are deleted in their entirety and replaced with thefollowing:

"If, subsequent to the date of this Note, the aggregate Bank Borrowing of    any Company (on a consolidated basis) exceeds Five Million Dollars    ($5,000,000), then commencing on such date and continuing until the payment    in full of this Note, Lender, at its option, may convert all or any portion    of the outstanding principal balance of, and all accrued interest on, this    Note into the number of shares of Common Stock obtained by dividing (i) the    unpaid principal balance of, and interest through the date of conversion on,    this Note to be converted, by (ii) the Conversion Price."

        7. Except as specifically amended by this Agreement, each of the Notes andthe other Loan Documents shall continue in full force and effect. This Agreementshall be governed by and construed in accordance with New York law. ThisAgreement, and the Loan Documents, represent the entire agreement of the partieswith respect to the subject matter, and any amendment or modification to thisAgreement or the other Loan Documents must be in writing and signed by theparties.

        8. The Borrower further acknowledges that as of the date hereof, it has notcomplied with its closing obligations under Section 1(d) of the NoteSubscription Agreement, and the Borrower hereby covenants that within ten (10)business days following the execution of this Agreement, the Borrower willdeliver a second mortgage on the Borrower's facility located at 3950 ScheldenCircle, Bethlehem, Pennsylvania 18017, and a security interest in all personalproperty at that location, in a form substantially similar to the Mortgage andSecurity Agreement, attached hereto as Exhibit A, that will secure thenotes subscribed for, as described in the Notes, as amended, and the referencedtherein. A breach of this obligation shall be considered an "Event of Default"under the Notes.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be dulyexecuted, all as of date first above written.
 MINRAD INTERNATIONAL, INC. a Delaware corporation   By:_/S/ William H. Burns, Jr._________ Willam H. Burns, Jr., President and CEO   __/S/ Laird Q. Cagan________________ Laird Q. Cagan

 
 TOBIN FAMILY TRUST   By:_/S/ Morrie Tobin_____ Morrie Tobin, Trustee

Exhibit A to Amendment to Convertible Promissory Notes

          **THIS MORTGAGE AND SECURITY AGREEMENT** (the "SecurityInstrument") is made as of October ___, 2001, by Minrad, Inc., a Delawarecorporation, whose address is 847 Main Street, Buffalo, New York 14202, asmortgagor ("Borrower") to InterBay Funding, LLC, a Delaware limited liabilitycompany, whose address is 2601 South Bayshore Drive, Ste. 400, Miami, Florida33133, as mortgagee ("Lender").
**R E C I T A L S:**
Borrower by its Promissory Note of even date herewith given to Lender isindebted to Lender in the principal sum of Eight Hundred Seventy-Five Thousandand No/100 Dollars ($875,000.00) in lawful money of the United States of America(the Note together with all extensions, renewals, modifications, substitutionsand amendments thereof shall collectively be referred to as the "Note"), withinterest from the date thereof at the rates set forth in the Note, principal andinterest to be payable in accordance with the terms and conditions provided inthe Note and with a maturity date of November 1, 2016.

By its execution hereof, Borrower desires to secure the payment of the Debt(hereinafter defined) and the performance of all of its obligations under theNote and the Other Obligations (hereinafter defined) and any and all otherindebtedness now or hereafter owing by Borrower to Lender.

ARTICLE 1. - GRANTS OF SECURITY

Section 1.1.     PROPERTY MORTGAGED.     Borrowerdoes hereby irrevocably mortgage, grant, bargain, sell, pledge, assign, warrant,transfer and convey to Lender with mortgage covenants upon the StatutoryCondition and, as provided and/or authorized by applicable law, with theSTATUTORY POWER OF SALE, and grant a security interest to Lender in, thefollowing property, rights, interests and estates now owned, or hereafteracquired by Borrower to the fullest extent permitted by applicable law(collectively, the "Property"):

                        (a)     Land.     The real property describedin *Exhibit "A"* attached hereto and made a part hereof (the "Land");

                        (b)     Additional Land.     All additionallands, estates and development rights hereafter acquired by Borrower for use inconnection with the Land and the development of the Land and all additionallands and estates therein which may, from time to time, by supplemental mortgageor otherwise be expressly made subject to the lien of this Security Instrument;

                        (c)     Improvements.     The buildings,structures, fixtures, additions, enlargements, extensions, modifications,repairs, replacements and improvements now or hereafter erected or located onthe Land (the "Improvements");

                        (d)     Easements.     All easements,servitudes rights-of-way or use, rights, strips and gores of land, streets,ways, alleys, passages, sewer rights, water, water courses, water rights andpowers, air rights and development rights, and all estates, rights, titles,interests, privileges, liberties, servitudes, tenements, hereditaments andappurtenances of any nature whatsoever, in 

any way now or hereafter belonging, relating or pertaining to the Land andthe Improvements and the reversion and reversions, remainder and remainders, andall land lying in the bed of any street, road or avenue, opened or proposed, infront of or adjoining the Land, to the center line thereof and all the estates,rights, titles, interests, dower and rights of dower, courtesy and rights ofcourtesy, property, possession, claim and demand whatsoever, both at law and inequity, of Borrower of, in and to the Land and the Improvements and every partand parcel thereof, with the appurtenances thereto;

                        (e)     Fixtures and Personal Property.     Allmachinery, equipment, fixtures (including, but not limited to, all heating, airconditioning, plumbing, lighting, communications and elevator fixtures) tradefixtures and other property of every kind and nature whatsoever owned byBorrower, or in which Borrower has or shall have an interest, including withoutlimitation, letter of credit rights, deposit accounts, payment intangibles,investment property, electronic chattel paper, timber to be cut and farm animalsand, now or hereafter located upon the Land and the Improvements, or appurtenantthereto, and usable in connection with the present or future operation andoccupancy of the Land and the Improvements and all building equipment, materialsand supplies of any nature whatsoever owned by Borrower, or in which Borrowerhas or shall have an interest, now or hereafter located upon the Land and theImprovements, or appurtenant thereto, or usable in connection with the presentor future operation and occupancy of the Land and the Improvements(collectively, the "Personal Property"), and the right, title and interest ofBorrower in and to any of the Personal Property which may be subject to anysecurity interests, as defined in the Uniform Commercial Code, as adopted andenacted by the state or states where any of the Property is located (the"Uniform Commercial Code"), superior in lien to the lien of this SecurityInstrument, and all proceeds and products of all of the above;

                        (f)     Leases and Rents.     All leases,subleases and other agreements affecting the use, enjoyment or occupancy of theLand and/or the Improvements heretofore or hereafter entered into and allextensions, amendments and modifications thereto, whether before or after thefiling by or against Borrower of any petition for relief under Creditors RightsLaws (hereinafter defined) (the "Leases") and all right, title and interest ofBorrower, its successors and assigns therein and thereunder, including, withoutlimitation, any guaranties of the lessees' obligations thereunder, cash orsecurities deposited thereunder to secure the performance by the lessees oftheir obligations thereunder and all rents, additional rents, revenues, roomrevenues, accounts, accounts receivable, issues and profits (including all oiland gas or other mineral royalties and bonuses) from the Land and theImprovements whether paid or accruing before or after the filing by or againstBorrower of any petition for relief under the Creditors Rights Laws (the"Rents") and all proceeds from the sale or other disposition of the Leases andthe right to receive and apply the Rents to the payment of the Debt;

                        (g)     Insurance Proceeds.     All proceedsof and any unearned premiums on any insurance policies covering the Property,including, without limitation, the right to receive and apply the proceeds ofany insurance, judgments, or settlements made in lieu thereof, for damage to theProperty;

                        (h)     Condemnation Awards.     All awards orpayments, including interest thereon, which may heretofore and hereafter be madewith respect to the Property, whether from 

2

the exercise of the right of eminent domain (including, but not limited toany 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 ofthe Property;

                        (i)     Tax Certiorari.     All refunds,rebates or credits in connection with a reduction in real estate taxes andassessments charged against the Property as a result of tax certiorari or anyapplications or proceedings for reduction;

                        (j)     Conversion.     All proceeds of theconversion, voluntary or involuntary, of any of the foregoing including, withoutlimitation, proceeds of insurance and condemnation awards, into cash orliquidation claims;

                        (k)     Rights.     The right, in the name andon behalf of Borrower, to appear in and defend any action or proceeding broughtwith respect to the Property and to commence any action or proceeding to protectthe interest of Lender in the Property;

                        (l)     Agreements.     All agreements,contracts, certificates, instruments, franchises, permits, licenses, plans,specifications and other documents, now or hereafter entered into, and allrights therein and thereto, respecting or pertaining to the use, occupation,construction, management or operation of the Land and any part thereof and anyImprovements or respecting any business or activity conducted on the Land andany part thereof and all right, title and interest of Borrower therein andthereunder, including, without limitation, the right, upon the occurrence andduring the continuance of an Event of Default (hereinafter defined), to receiveand collect any sums payable to Borrower thereunder;

                        (m)     Intangibles.     All trade names,trademarks, servicemarks, logos, copyrights, goodwill, books and records and allother intellectual property rights and general intangibles relating to or usedin connection with the operation of the Property; and

                        (n)     Other Rights.     Any and all otherrights of Borrower in and to the items set forth in Subsections (a) through (m)above.

Section 1.2.     ASSIGNMENT OF LEASES AND RENTS.     Borrowerhereby absolutely and unconditionally assigns to Lender Borrower's right, titleand interest in and to all current and future Leases and Rents; it beingintended by Borrower that this assignment constitutes a present, absoluteassignment and not an assignment for additional security only. Notwithstandingthe foregoing, Lender grants to Borrower a revocable license to collect andreceive the Rents. Borrower shall hold a portion of the Rents sufficient todischarge all current sums due on the Debt, for use in the payment of such sums.

Section 1.3     SECURITY AGREEMENT.     ThisSecurity Instrument is both a real property mortgage and a "security agreement"within the meaning of the Uniform Commercial Code. The Property includes bothreal and personal property and all other rights and interests, whether tangibleor intangible in nature, of Borrower in the Property. By executing anddelivering this Security Instrument, Borrower hereby grants to Lender, assecurity or the Obligations (hereinafter defined), a security interest in thePersonal Property as well as all other property and 

3

interests set forth in Section 1.1 herein to the full extent that the samemay be subject to the Uniform Commercial Code. If required by Lender, Borrowershall execute UCC-1 Financing Statements covering said property for filing withthe appropriate county and/or state filing offices. In any event, Lender ispermitted to unilaterally file a UCC-1 Financing Statement covering all of theProperty.

Section 1.4     PLEDGE OF MONIES HELD.     Borrowerhereby pledges to and grants a continuing security interest in favor of Lenderany and all monies now or hereafter held by Lender, including, withoutlimitation, any sums deposited in the Escrow Fund (hereinafter defined), NetProceeds (hereinafter defined) and condemnation awards or payments (hereinafterdescribed) as additional security for the Obligations until expended as providedin this Security Instrument.

CONDITIONS TO GRANT

TO HAVE AND TO HOLD the above granted and described Property to the use andbenefit of Lender, and the successors and assigns of Lender, forever;

PROVIDED, HOWEVER, these presents are upon the express condition that, ifBorrower shall well and truly pay to Lender the Debt at the time and in themanner provided in the Note and this Security Instrument, shall perform theOther Obligations as set forth in this Security Instrument and shall abide byand comply with each and every covenant and condition set forth herein and inthe Note, these presents and the estate hereby granted shall cease, terminateand be void, except to the extent any provision herein provides that it shallsurvive the repayment of the obligations.

ARTICLE 2. - DEBT AND OBLIGATIONS SECURED

Section 2.1.     DEBT.     This SecurityInstrument and the grants, assignments and transfers made pursuant tot the termshereafter are given for the purpose of securing the payment of the following, insuch order of priority as Lender may determine in its sole discretion (the"Debt"):

                        (a)     the indebtedness evidenced by the Note inlawful money of the United States of America;

                        (b)     interest, default interest, late charges andother sums, as provided in the Note, this Security Instrument or the OtherSecurity Documents (hereinafter defined);

                        (c)     the Prepayment Consideration (defined in theNote), if any;

                        (d)     all other monies agreed or provided to bepaid by Borrower in the Note, this Security Instrument or the Other SecurityDocuments (hereinafter defined);

                        (e)     all sums advanced pursuant to this SecurityInstrument to protect and preserve the Property and the lien and the securityinterest created hereby; and

4

                        (f)     all sums advanced and costs and expensesincurred by Lender in connection with the Debt or any part thereof, and renewal,extension, or change of or substitution for the Debt or any pert thereof, or theacquisition or perfection of the security therefor, whether made or incurred atthe request of Borrower or Lender; and

                        (g)     any and all additional advances made byLender to complete Improvements or to preserve or protect the Property, or fortaxes, assessments or insurance premiums, or for the performance of anyBorrower's obligations hereunder or under the Other Security Documents(hereinafter defined).

Section 2.2.     OTHER OBLIGATIONS.     ThisSecurity Instrument and the grants, assignments and transfers made pursuant tothe terms hereof are also given for the purpose of securing the performance ofthe following (the "Other Obligations"):

                        (a)     all other obligations of Borrower containedherein;

                        (b)     each obligation of Borrower contained in theNote and in the Other Security Documents; and

                        (c)     each obligation of Borrower contained in anyrenewal, extension, amendment, modification, consolidation, change of, orsubstitution or replacement for, all or any part of the Note, this SecurityInstrument or the Other Security Documents.

                        (d)     any and all other indebtedness now orhereafter owing by Borrower to Lender.

Section 2.3.     DEBT AND OTHER OBLIGATIONS.     Borrower'sobligations for the payment of the Debt and the performance of the OtherObligations shall be referred to collectively as the "Obligations."

Section 2.4.     PAYMENTS.     Unless paymentsare made in the required amount in immediately available funds at the placewhere the Note is payable, remittances in payment of all or any part of the Debtshall not, regardless of any receipt or credit issued therefor, constitutepayment until the required amount is actually received by Lender in fundsimmediately available at the place where the Note is payable (or any other placeas Lender, in Lender's sole discretion, may have established by delivery ofwritten notice thereof to Borrower) and shall be made and accepted subject tothe condition that any check or draft may be handled for collection inaccordance with the practice of the collecting bank or banks; provided, however,Lender shall not be required to accept payment for any Obligation in cash.Acceptance by Lender of any payment in an amount less than the amount then dueshall be deemed an acceptance on account only, and the failure to pay the entireamount then due shall be and continue to be an Event of Default.

5

ARTICLE 3. - BORROWER COVENANTS

Borrower covenants and agrees that:

Section 3.1.     PAYMENT OF DEBT AND PERFORMANCE OFOBLIGATIONS.     Borrower will pay the Debt at the time and in themanner provided in the Note and in this Security Instrument; without relief fromvaluation or appraisement laws, and shall promptly and fully perform all of theObligations in this Security Agreement and the Other Security Documents(hereinafter defined).

Section 3.2.     INCORPORATION BY REFERENCE.     Allthe covenants, conditions and agreements contained in (a) the Note and (b) alland any of the documents other than the Note or this Security Instrument now orhereafter executed by Borrower and/or others and by or in favor of Lender, whichwholly or partially secure or guaranty payment of the Note or are otherwiseexecuted and delivered in connection with the Loan (the "Other SecurityDocuments") are hereby made a part of this Security Instrument to the sameextent and with the same force as if fully set forth herein.

Section 3.3     INSURANCE.
                        (a)     Borrower shall obtain and maintain, or causeto be maintained, insurance for Borrower and the Property providing at least thefollowing coverages:

                                  (i)     Property Insurance.     Insurancewith respect to the Improvements and Personal Property insuring against anyperil now or hereafter included within the classification "Special Perils" or"All Risk" in amounts at all times sufficient to prevent Borrower from becominga co-insurer within the terms of the applicable policies on an agreed amountbasis and under applicable insurance law, but in any event such insurance shallbe maintained in an amount which, after application of deductible, shall beequal to the full insurable value of the Improvements and Personal Property, theterm "full insurable value" to mean the actual replacement cost of theImprovements and Personal Property (without taking into account anydepreciation, and exclusive of excavations, footings and foundations,landscaping and paving) determined annually by an insurer, a recognizedindependent insurance broker or an independent appraiser selected and paid byBorrower and in no event less than the coverage required pursuant to the termsof any Lease;

                                  (ii)     Liability Insurance.     Commercialgeneral liability insurance on the so-called "occurrence" form, including bodilyinjury, death and property damage liability, insurance against any and allclaims, including all legal liability to the extent insurable and imposed uponLender and all court costs and attorneys' fees and expenses, arising out of orconnected with the possession, use, leasing, operation, maintenance or conditionof the Property in such amounts as are generally available at commerciallyreasonable premiums and are generally required by institutional lenders forproperties comparable to the Property but in any event for a limit peroccurrence of at least $1,000,000 and an annual aggregate of at least$3,000,000;

6

                                  (iii)     Workers' CompensationInsurance.     Statutory workers' compensation insurance with respect to anywork on or about the Property;

                                  (iv)     Business Interruption.     Businessinterruption and/or loss of "rental income" insurance in an amount sufficient toavoid any co-insurance penalty and to provide proceeds which will cover a periodof not less than twelve (12) months from the date of casualty or loss, the term"rental income" to mean the sum of (A) the total then ascertainable Rentspayable under the Leases and (B) the total ascertainable amount of all otheramounts to be received by Borrower from third parties which are the legalobligation of the tenants, reduced to the extent such amounts would not bereceived because of operating expenses not incurred during a period ofnon-occupancy of that portion of the Property then not being occupied;

                                  (v)     Boiler and Machinery Insurance.     Broadform boiler and machinery insurance (without exclusion for explosion) coveringall boilers or other pressure vessels, machinery, and equipment located in, onor about the Property and insurance against loss of occupancy or use arisingfrom any breakdown in such amounts as are generally required by institutionallenders for properties comparable to the Property;

                                  (vi)     Flood Insurance.     Ifrequired pursuant to the terms hereof, flood insurance in an amount at leastequal to the lesser of (a) the principal balance of the Note, or (b) the maximumlimit of coverage available for the Property under the National Flood InsuranceAct of 1968. The Flood Disaster Protection Act of 1973 and the National FloodInsurance Reform Act of 1994, as each may be amended (the "Flood InsuranceActs");

                                  (vii)     Builder's Risk Insurance.     Atall times during which structural construction, repairs or alterations are beingmade with respect to the Improvements (A) owner's contingent or protectiveliability insurance covering claims not covered by or under the terms orprovisions of the above mentioned commercial general liability insurance policy;and (B) the insurance provided for in Subsection 3.3(a)(i) written in aso-called builder's risk completed value form (1) on a non-reporting basis, (2)against all risks insured against pursuant to Subsection 3.3(a)(i), (3)including permission to occupy the Property, and (4) with an greed amountendorsement waiving co-insurance provisions; and

                                  (viii)     Other Insurance.     Suchother insurance with respect to the Property against loss or damage of the kindsfrom time to time customarily insured against and in such amounts as required byinstitutional lenders for properties comparable to the Property.

                        (b)     All insurance provided for herein shall beobtained under valid and enforceable policies (the "Policies" or in thesingular, the "Policy"), and shall be issued by either the insurers who insurethe Improvements on the date of this Security Instrument or one or more otherdomestic primary insurer(s) having a general policy rating of A or better and afinancial class of VIII or better by A.M. Best Company, Inc. (or if a rating ofA.M. Best Company Inc. is no longer available, a similar rating from a similaror successor service) (each such insurer shall be referred to below as a"Qualified Insurer"). All insurers providing insurance required by this SecurityInstrument shall be authorized and admitted to issue insurance in the state inwhich the Property is located. The Policy referred to in Subsection 3.3(a)(ii)above shall name Lender as 

7

an additional insured and the Policies referred to in Subsection 3.3(a)(i),(iv), (v), (vi) and (vii), and as applicable (viii), above shall provide thatall proceeds be payable to Lender. The Policies referred to in Subsections3.3(a)(i), (v), (vi) and (vii) shall also contain: (i) a standard"non-contributory mortgagee" endorsement or its equivalent relating, *interalia*. to recovery by Lender notwithstanding the negligent or willfulacts or omissions of Borrower; (ii) a waiver of subrogation endorsement as toLender; and (iii) an endorsement providing for a deductible per loss of anamount not more than that which is customarily maintained by prudent owners ofsimilar properties in the general vicinity of the Property, but in no event inexcess of $5,000. The Policy referred to in Subsection 3.3(a)(i) above shallprovide coverage for contingent liability from Operation of Building Laws,Demolition Costs and Increased Cost of Construction Endorsements, together withan "Ordinance or Law Coverage" or "Enforcement" endorsement to the extentavailable in the jurisdiction in which the Property is located. All Policiesshall contain (i) a provision that such Policies shall not be denied renewal,materially changed (other than to increase the coverage provided), canceled orterminated, nor shall they expire, without at least thirty (30) days' priorwritten notice to Lender in each instance; and (ii) include effective waivers bythe insurer of all claims for applicable premiums ("Insurance Premiums") againstany mortgagee, loss payees, additional insureds and named insureds (other thanBorrower). Certificates of insurance with respect to all renewal and replacementPolicies shall be delivered to Lender not less than twenty (20) days prior tothe expiration date of any of the Policies required to be maintained hereunderwhich certificates shall bear notations evidencing payment of InsurancePremiums. Originals or certificates of such replacement Policies shall bedelivered to Lender promptly after Borrower's receipt thereof but in any casewithin thirty (30) days after the effective date thereof. If Borrower fails tomaintain and deliver to Lender the original Policies or certificates ofinsurance required by this Security Instrument, upon ten (10) days' prior noticeto Borrower, Lender may procure such insurance at Borrower's sole cost andexpense.

                        (c)     Borrower shall comply with all insurancerequirements and shall not bring or keep or permit to be brought or kept anyarticle upon any of the Property or cause or permit any condition to existthereon which would be prohibited by an insurance requirement, or wouldinvalidate the insurance coverage required hereunder to be maintained byBorrower on or with respect to any part of the Property.

                        (d)     In the event of a foreclosure of the SecurityInstrument or other transfer of title to the Property in extinguishment in wholeor in part of the Debt, all right, title and interest of Borrower in and to thePolicies then in force concerning the Property and all proceeds payablethereunder shall thereupon vest in Lender or the purchaser at such foreclosureor other transferee in the event of such other transfer of title.

Section 3.4.     PAYMENT OF TAXES, ETC.
                        (a)     Borrower shall promptly pay by the date sameare initially payable all taxes, assessments, impact fees, levies, inspectionand license fees, water rates, sewer rents and other governmental impositions,including, without limitation, vault and meter charges and license fees for theuse of vaults, chutes and similar areas adjoining the Land, now or hereafterlevied or assessed or imposed against the Property or any part thereof (the"Taxes") not paid from the 

8

Escrow Fund (hereinafter defined), all ground rents, maintenance charges andsimilar charges, now or hereafter levied or assessed or imposed against theProperty or any part thereof (the "Other Charges"), and all charges for utilityservices provided to the Property as same become due and payable. Borrower willdeliver to Lender, receipts or other, evidence satisfactory to Lender that theTaxes, Other Charges and utility service charges have been so paid or are notthen delinquent. Borrower shall not suffer and shall promptly cause to be paidand discharged any lien or charge whatsoever, which may be or become a lien orcharge against the Property, except to the extent sums sufficient to pay allTaxes and Other Charges have been deposited with Lender in accordance with theterms of this Security Instrument.

                        (b)     After prior written notice to Lender,Borrower, at its own expense, may contest by appropriate legal proceeding,promptly initiated and conducted in good faith and with due diligence, theamount or validity or application in whole or in part of any of the Taxes,provided that (i) no Event of Default has occurred and is continuing under theNote, this Security Instrument or any of the Other Security Documents, (ii)Borrower is permitted to do so under the provisions of any other mortgage, deedof trust or deed to secure debt affecting the Property, (iii) such proceedingshall suspend the collection of the Taxes from Borrower and from the Property orBorrower shall have paid all of the Taxes under protest, (iv) such proceedingshall be permitted under and be conducted in accordance with the provisions ofany other instrument to which Borrower is subject and shall not constitute adefault thereunder, (v) neither the Property nor any part thereof or interesttherein will be in danger of being sold, forfeited, terminated, canceled or lostand (vi) Borrower shall have deposited with Lender adequate reserves (determinedby Lender in its sole discretion) for the payment of the Taxes, together withall interest and penalties thereon, unless Borrower has paid all of the Taxesunder protest, and Borrower shall have furnished such other security as may berequired in the proceeding, or as may be reasonably requested by Lender toinsure the payment of any contested Taxes, together with all interest andpenalties thereon, taking into consideration the amount in the Escrow Fundavailable for payment of Taxes.

Section 3.5     ESCROW FUND.     In addition tothe initial deposits with respect to Taxes and Insurance Premiums made byBorrower to Lender on the date hereof to be held by Lender in escrow, Borrowershall pay to Lender on the first day of each calendar month (a) one-twelfth ofan amount which would be sufficient to cover the payment of the Taxes payable,or estimated by Lender to be payable, during the next ensuing twelve (12) monthsand (b) one-twelfth of an amount which would be sufficient to pay the InsurancePremiums due for the renewal of the coverage afforded by the Policies upon theexpiration thereof (the amounts in (a) and (b) above shall be called the "EscrowFund"). Borrower agrees to notify Lender immediately of any changes to theamounts, schedules and instructions for payment of any Taxes and InsurancePremiums of which it has or obtains knowledge and authorizes Lender or its agentto obtain the bills for Taxes directly from the appropriate taxing authority.The Escrow Fund and the payments of interest or principal or both, payablepursuant to the Note shall be added together and shall be paid as an aggregatesum by Borrower to Lender. Provided there are sufficient amounts in the Escrowfund and no Event of Default exists, Lender shall be obligated to pay the Taxesand Insurance Premiums as they become due on their respective due dates onbehalf of Borrower by applying the Escrow Fund to the payments of such Taxes andInsurance Premiums required to be made by Borrower. If the amount of the EscrowFund shall exceed the amounts 

9

reasonably necessary for the payment of Taxes and Insurance Premiums, Lendershall, in its discretion, return any excess to Borrower or credit such excessagainst future payments to be made to the Escrow Fund. In allocating suchexcess, Lender may deal with the person shown on the records of Lender to be theowner of the Property. If the Escrow Fund is not sufficient to pay the items setforth in (a) and (b) above as and when they are due, Borrower shall promptly payto Lender, upon demand, an amount which Lender shall reasonably estimate assufficient to make up the deficiency. Unless otherwise required by applicablestate or federal law, the Escrow Fund shall not constitute a trust fund and maybe commingled with other monies held by Lender. Unless otherwise required byapplicable state or federal law, no earnings or interest on the Escrow Fundshall be payable to Borrower. Upon payment in full of the Debt, and fullperformance of the Obligations, the funds remaining in the Escrow Fund, if any,shall be paid to the record owner of the Land encumbered by the lien of thisSecurity Instrument within a reasonable time following the date of such fullpayment and performance.

Section 3.6.     CONDEMNATION.     Borrowershall promptly give Lender notice of the actual or threatened commencement ofany condemnation or eminent domain proceeding and shall deliver to Lender copiesof any and all papers, documents, surveys and correspondence served or receivedin connection with such proceedings. Notwithstanding any taking by any public orquasi-public authority through eminent domain or otherwise (including, but notlimited to any transfer made in lieu of or in anticipation of the exercise ofsuch taking), Borrower shall continue to pay the Debt at the time and in themanner provided for its payment in the Note and in this Security Instrument andthe Debt shall not be reduced until any award or payment therefor shall havebeen actually received and applied by Lender, after the deduction of expenses ofcollection, to the reduction or discharge of the Debt. Lender shall not belimited to the interest paid on the award by the condemning authority but shallbe entitled to receive out of the award interest at the rate or rates providedin the Note. Borrower hereby assigns and shall cause all awards and paymentsmade in any condemnation or eminent domain proceeding, to be paid directly toLender. Lender may apply any award or payment to the reduction or discharge ofthe Debt whether or not then due and payable. If the Property is sold, throughforeclosure or otherwise, prior to the receipt by Lender of the award orpayment, Lender shall have the right, whether or not a deficiency judgment onthe Note shall have been sought, recovered or denied, to receive the award orpayment, or a portion thereof sufficient to pay the Debt. In addition, Borrowerauthorizes Lender, at Lender's option but without any obligation, asattorney-in-fact for Borrower to commence, appear in and prosecute, inBorrower's or Lender's name, any action or proceeding relating to anycondemnation (which term for purposes hereunder shall mean any action regardingdamage or taking by any governmental authority, quasi-governmental authority,any party having power of condemnation, or any transfer by private sale in lieuthereof) or other taking of the Property and to settle or compromise any claimin connection with such condemnation or other taking. Notwithstanding anyapplication of condemnation proceeds by Lender to the Debt, Borrower shallrepair, restore and rebuild the Property affected by the condemnation to acondition as close to that existing prior to such condemnation as is reasonablepracticable, and otherwise sufficient for the use and enjoyment thereof asdetermined by Lender.

Section 3.7     CASUALTY.

10

                        (a)     If all or any part of the Property shall bedamaged or destroyed by a casualty covered by insurance, Lender is authorizedand empowered (but not obligated or required) to make proof of loss, damage ordestruction under any policies of insurance required under this Mortgage. Allproceeds of insurance shall be paid to Lender and shall be applied first to thepayment of all costs and expenses (including without limitation reasonableattorneys' fees and expenses) incurred by Lender in obtaining such proceeds, andsecond, at the option of Lender, either to the payment of the Debt, whether ornot due, in such order as Lender may elect, or to the restoration, repair orreplacement of the Property. If Lender elects, in its sole discretion, to applythe insurance proceeds to the restoration, repair or replacement of theProperty, such proceeds shall be disbursed to or for Borrower's account as workprogresses pursuant to a construction and disbursing agreement in form andcontent satisfactory to Lender in its sole discretion. The election by Lender toapply the insurance proceeds to the restoration, repair or replacement of theProperty shall not affect the lien of this Security Instrument or affect orreduce the sums secured hereby (including but not limited to the continuingaccrual of interest under the Note); and this Security Instrument shall remainin full force and effect, and Borrower shall not be excused in the payment orperformance thereof.

                        (b)     If all or any part of the Property shall bedamaged or destroyed by a casualty (whether or not covered by insurance),Borrower shall immediately give written notice thereof to Lender and theappropriate insurer, if any, and Borrower shall promptly and diligently, atBorrower's sole cost and expense and regardless of whether the insuranceproceeds, if any, shall be sufficient or available for the purpose, restore,repair and rebuild the Property to the equivalent of its condition immediatelyprior to the casualty.

                        (c)     If any work required to be performed underthis Section shall involve an estimated expenditure of more than Ten Thousandand No/100 Dollars ($10,000.00), no such work shall be undertaken until plansand specifications thereof, prepared by an architect satisfactory to Lender,have been submitted to and approved in writing by Lender.

Section 3.8.     LEASES AND RENTS.

                        (a)     Borrower may from time to time enter intoproposed Leases (including the renewals or extensions of existing Leases ("aRenewal Lease") without the prior written consent of Lender, so long as (A)there is no Event of Default (or other default, but for the passing of anyapplicable grace period or cure period would be an Event of Default) and (B)such proposed Lease or Renewal Lease (i) provides for rental rates and termscomparable to existing local market rates and terms (taking into account thetype and quality of the tenant) as of the date such Lease is executed byBorrower (unless, in the case of a Renewal Lease, the rent payable during suchrenewal, or a formula or other method to compute such rent, is provided for inthe original Lease), (ii) is an arms-length transaction with a bona fide,independent third party tenant, (iii) does not have a materially adverse effecton the value of the Property taken as a whole, (iv) is subject and subordinateto the Security Instrument and the lessee thereunder agrees to subordinate theLease or Renewal Lease to the lien of this Security Instrument, and (v) ifrequired by Lender, is written on the standard form of lease approved by Lender.All proposed Leases which do not satisfy the requirements set forth in thisparagraph shall be subject to the prior approval of Lender and its counsel, atBorrower's expense. Borrower shall promptly 

11

deliver to Lender copies of all Leases which are entered into pursuant tothis Subsection together with Borrower's certification that it has satisfied allof the conditions of this Subsection.

                        (b)     Borrower (i) shall observe and perform allthe obligations imposed upon the lessor under the Leases and shall not do orpermit to be done anything to impair the value of any of the Leases as securityfor the Debt; (ii) upon request, shall promptly send copies to Lender of allnotices of default which Borrower shall send or receive thereunder; (iii) shallenforce all of the material terms, covenants and conditions contained in theLeases upon the part of the tenant thereunder to be observed or performed; (iv)shall not collect any of the Rents more than one (1) month in advance (securitydeposits shall not be deemed Rents collected in advance); (v) shall not executeany other assignment of the lessor's interest in any of the Leases or the Rents;and (vi) shall not consent to any assignment of or subletting under any Leasesnot in accordance with their terms, without the prior written consent of Lender.

                        (c)     Borrower may, without the consent of Lender,amend, modify or waive any provisions of any Lease or terminate, reduce rentsunder, accept a surrender of space under, or shorten the term of, any Lease(including any guaranty, letter of credit or other credit support with respectthereto) provided that such action (taking into account, in the case of atermination, reduction in rent, surrender of space or shortening of term, theplanned alternative use of the affected space) does not have a materiallyadverse effect on the value of the Property taken as a whole, and provided thatsuch Lease, as amended, modified or waived, is otherwise in compliance with therequirements of this Security Instrument and any subordination agreement bindingupon Lender with respect to such Lease. A termination of a Lease with a tenantwho is in default beyond applicable notice and grace periods shall not beconsidered an action which has a materially adverse effect on the value of theProperty taken as a whole. Any amendment, modification, waiver, termination,rent reduction, space surrender or term shortening which does not satisfy therequirements set forth in this Subsection shall be subject to the prior approvalof Lender and its counsel, at Borrower's expense. Borrower shall promptlydeliver to Lender copies of amendments, modifications and waivers which areentered into pursuant to this Subsection together with Borrower's certificationthat it has satisfied all of the conditions of this Subsection.

                        (d)     Notwithstanding anything contained herein tothe contrary, Borrower shall not, without the prior written consent of Lender,enter into, renew, extend, amend, modify, waive any provisions of, terminate,reduce rents under, accept a surrender of space under, or shorten the term of,any Major Lease. The term "Major Lease" shall mean any Lease under which thebase rents will contribute in excess of twenty percent (20%) of the gross cashflow of the Property, together with any instrument guaranteeing or providingcredit support therefor.

Section 3.9.     MAINTENANCE AND USE OF PROPERTY.     Borrower shallcause the Property to be maintained in a good and safe condition and repair. TheImprovements and the Personal Property shall not be removed, demolished ormaterially altered (except for normal replacement of the Personal Property withreplacement property of equal or greater value) without the consent of Lender.Borrower shall promptly repair, replace or rebuild any part of the Propertywhich may be destroyed by any casualty, or become damaged, worn or dilapidatedor which may be affected by any condemnation or taking proceeding and shallcomplete and pay 

12

for any structure at any time in the process of construction or repair on theLand. Borrower shall not initiate, join in , acquiesce in , or consent to anychange in any private restrictive covenant, zoning law or other public orprivate restriction, limiting, defining or changing the uses which may be madeof the Property or any part thereof. If under applicable zoning provisions theuse of all or any portion of the Property is or shall become a nonconforminguse, Borrower will not cause or permit the nonconforming use to be discontinuedor the nonconforming Improvement to be abandoned without the express writtenconsent of Lender, and Borrower shall take such other steps as Lender mayrequire to establish the legality of such non-conforming use. 

Section 3.10.     WASTE.     Borrower shall not commit or suffer anywaste of the Property or make any change in the use of the Property which willin any way materially increase the risk of fire or other hazard arising out ofthe operation of the Property, or take any action that might invalidate or givecause for cancellation of any Policy, or substantially increase the ratesthereunder, or do or permit to be done thereon anything that may in any wayimpair the value of the Property or the security of this Security Instrument.Borrower will not, without the prior written consent of Lender, permit anydrilling or exploration for or extraction, removal, or production of anyminerals from the surface or the subsurface of the Land, regardless of the depththereof or the method of mining or extraction thereof.

Section 3.11.     COMPLIANCE WITH LAWS. 

                        (a)     Borrower shall promptly comply with allexisting and future federal, state and local laws, orders, ordinances,governmental rules and regulations or court orders affecting the Property, andthe use thereof, including any Environmental Law (hereinafter defined)("Applicable Laws").

                        (b)     Borrower shall from time to time, uponLender's request, provide Lender with evidence reasonably satisfactory to Lenderthat the Property complies with all Applicable Laws or is exempt from compliancewith Applicable Laws.

                        (c)     Notwithstanding any provisions set forthherein or in any document regarding Lender's approval of alterations of theProperty, Borrower shall not alter the Property in any manner which wouldmaterially increase Borrower's responsibilities for compliance with ApplicableLaws without the prior written approval of Lender. Lender's approval of theplans, specifications, or working drawings for alterations of the Property shallcreate no responsibility or liability on behalf of Lender for theircompleteness, design, sufficiency or their compliance with Applicable Laws. Theforegoing shall apply to tenant improvements constructed by Borrower or by anyof its tenants. Lender may condition any such approval upon receipt of acertificate of compliance with Applicable Laws from an independent architect,engineer, or other person acceptable to Lender.

                        (d)     Borrower shall give prompt notice to Lenderof the receipt by Borrower of any notice related to a violation or threatenedviolation of any Applicable Laws and of the commencement or threatenedcommencement of any proceedings or investigations which relate to compliancewith Applicable Laws.

13

                        (e)     After prior written notice to Lender,Borrower, at its own expense, may contest by appropriate legal proceedings,promptly initiated and conducted in good faith and with due diligence, theApplicable Laws affecting the Property, provided that (i) no Event of Defaulthas occurred and is continuing under the Note, this Security Instrument or anyof the Other Security Documents; (ii) Borrower is permitted to do so under theprovisions of any other mortgage, deed of trust or deed to secure debt affectingthe Property; (iii) such proceeding shall be permitted under and be conducted inaccordance with the provisions of any other instrument to which Borrower or theProperty is subject and shall not constitute a default thereunder; (iv) neitherthe Property, any part thereof or interest therein, any of the tenants oroccupants thereof, Borrower, nor Lender shall be affected in any materialadverse way as a result of such proceeding; (v) non-compliance with theApplicable Laws shall not impose civil or criminal liability on Borrower orLender; and (vi) Borrower shall have furnished to Lender all other itemsreasonably requested by Lender.

Section 3.12.     BOOKS AND RECORDS. 

                        (a)     Borrower and any Guarantors (hereinafterdefined) and Indemnitor(s) (hereinafter defined), if any, shall keep adequatebooks and records of account in accordance with generally accepted accountingprinciples ("GAAP"), or in accordance with other methods acceptable to Lender inits sole discretion, consistently applied and furnish to Lender:

                                  (i)     monthly (or if the Loan (definedbelow) has been securitized or sold as a whole loan by Lender, quarterly) andannual certified rent rolls signed and dated by Borrower, detailing the names ofall tenants of the Improvements, the portion of Improvements occupied by eachtenant, the base rent and any other charges payable under each Lease and theterm of each Lease, including the expiration date, the extent to which anytenant is in default under any Lease, and any other information as is reasonablyrequired by Lender, within twenty (20) days after the end of each calendarmonth, thirty (30) days after the end of each fiscal quarter or sixty (60) daysafter the close of each fiscal year of Borrower, as applicable;

                                  (ii)     quarterly and annual operatingstatements of the Property, prepared and certified by Borrower in the formrequired by Lender, detailing the revenues received, the expenses incurred andthe net operating income before and after debt service (principal and interest)and major capital improvements for each month and containing appropriate year todate information, within twenty (20) days after the end of each calendar month,thirty (30) days after the end of each fiscal quarter or sixty (60) days afterthe close of each fiscal year of Borrower, as applicable;

                                  (iii)     an annual operating statement ofthe Property detailing the total revenues received, total expenses incurred,total cost of all capital improvements, total debt service and total cash flow,to be prepared and certified by Borrower in the form required by Lender, or ifrequired by Lender, an audited annual operating statement prepared and certifiedby an independent certified public accountant acceptable to Lender, within sixty(60) days after the close of each fiscal year of Borrower; and

14

                                  (iv)     quarterly and annual balance sheetand profit and loss statements of Borrower, any Guarantors and any Indemnitor(s)in the form required by Lender, prepared and certified by the respectiveBorrower, Guarantors and/or Indemnitor(s), or if required by Lender, auditedfinancial statements prepared by an independent certified public accountantacceptable to Lender, within thirty (30) days after the end of each fiscalquarter or sixty (60) days after the close of each fiscal year of Borrower,Guarantors and Indemnitor(s), as the case may be; and 

                                  (v)     within sixty (60) days after theclose of each fiscal year, copies of each Borrower's, Guarantor's andIndemnitor's state and federal income tax returns, as same had been filed, andcertified by such party as true and complete.

                        (b)     Upon request from Lender, Borrower, anyGuarantor and any Indemnitor shall furnish in a timely manner to Lender:

                                  (i)     a property management report forthe Property, any information reasonably requested by Lender, in reasonabledetail and certified by Borrower (or an officer, general partner, member orprincipal of Borrower if Borrower is not an individual) to be true and complete,but no more frequently than quarterly; and

                                  (ii)     an accounting of all securitydeposits held in connection with any Lease of any part of the Property,including the name and identification number of the accounts in which suchsecurity deposits are held, the name and address of the financial institutionsin which such security deposits are held and the name of the person to contactat such financial institution, along with any authority or release necessary forLender to obtain information regarding such accounts directly from suchfinancial institutions.

                        (c)     Borrower, any Guarantor and any Indemnitorshall furnish Lender with such other additional financial or managementinformation (including State and Federal tax returns) as may, from time to time,be reasonably required by Lender in form and substance satisfactory to Lender.

                        (d)     Borrower, any Guarantor and any Indemnitorshall furnish to Lender and its agents convenient facilities for theexamination, copying and audit of any such books and records.

Section 3.13.     PAYMENT FOR LABOR AND MATERIALS.     Borrower willpromptly pay when due all bills and costs for labor, materials, and specificallyfabricated materials incurred in connection with the Property and never permitto exist in respect of the Property or any part thereof any lien or securityinterest, even though inferior to the liens and the security interests hereof,and in any event never permit to be created or exist in respect of the Propertyor any part thereof any other or additional lien or security interest other thanthe liens or security interests hereof, except for the Permitted Exceptions(defined below).

Section 3.14.     PERFORMANCE OF OTHER AGREEMENTS.     Borrower shallobserve and perform each and every term to be observed or performed by Borrowerpursuant to the terms of any agreement or recorded instrument affecting orpertaining to the Property, or given by 

15

Borrower to Lender for the purpose of further securing an Obligation and anyamendments, modifications or changes thereto.

Section 3.15.     CHANGE OF NAME, IDENTITY OR STRUCTURE.     Borrowershall not change Borrower's name, identity (including its trade name or names)or, if not an individual, Borrower's corporate, partnership or other structurewithout notifying the Lender of such change in writing at least thirty (30) daysprior to the effective date of such change and, in the case of a change inBorrower's structure, without first obtaining the prior written consent of theLender.

Section 3.16.     EXISTENCE.     Borrower will continuously maintain(a) its existence and shall not dissolve or permit its dissolution, (b) itsrights to do business in the state where the Property is located and (c) itsfranchises and trade names.

Section 3.17.     MANAGEMENT.     The Property shall be managed byeither: (a) Borrower or an entity affiliated with Borrower and approved byLender for so long as Borrower or said affiliated entity is managing theProperty in a first class manner; or (b) a professional property managementcompany approved by Lender. Management by an affiliated entity or a professionalproperty management company shall be pursuant to a written agreement approved byLender which shall be in all respects subordinate to this Security Instrument.In no event shall any manager be removed or replaced or the terms of anymanagement agreement modified or amended without the prior written consent ofLender. In the event (x) of default hereunder or under any management contractthen in effect, which default is not cured within any applicable grace or cureperiod or (y) of the bankruptcy or insolvency of the manager, Lender shall havethe right to immediately terminate, or to direct Borrower to immediatelyterminate, such management contract and to retain, or to direct Borrower toretain, a new management agent approved by Lender. All Rents generated by orderived from the Property shall first be utilized solely for current expensesdirectly attributable to the ownership and operation of the Property, including,without limitation, current expenses relating to Borrower's liabilities andobligations with respect to the Note, this Security Instrument and the OtherSecurity Documents, and none of the Rents generated by or derived from theProperty shall be diverted by Borrower and utilized for any other purpose unlessall such current expenses attributable to the ownership and operation of theProperty have been fully paid and satisfied.

Section 3.18.     PRINCIPAL PLACE OF BUSINESS.     Borrower shall notchange the principal place of business or chief executive office, or, in theevent Borrower is one or more natural persons, the location of its permanentresidence, all as set forth herein without the consent of Lender, which consentshall not be unreasonably withheld. Lender's consent shall be conditioned upon,among other things, the execution and delivery of additional financingstatements, security agreements and other instruments which may be necessary toeffectively evidence or perfect Lender's security interest in the Property as aresult of such change of principal place of business.

ARTICLE 4. - REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants to Lender that:

16

Section 4.1.     WARRANTY OF TITLE.     Borrower has good andmarketable title to the Property and has the right to mortgage, grant, bargain,sell, pledge, assign, warrant, transfer and convey the same and that Borrowerpossesses an unencumbered fee simple absolute estate in the Land and theImprovements and that it owns the Property free and clear of all liens,encumbrances and charges whatsoever except for those exceptions shown in thetitle insurance policy insuring the lien of this Security Instrument (the"Permitted Exceptions"). Borrower shall forever warrant, defend and preserve thetitle and the validity and priority of the lien of this Security Instrument andshall forever warrant and defend the same to Lender against the claims of allpersons whomsoever, and shall make such further assurances to perfect fee simpletitle to the Property as Lender may reasonably require.

Section 4.2.     LEGAL STATUS AND AUTHORITY.     Borrower (a) is dulyorganized, validly existing and in good standing under the laws of its state oforganization or incorporation; (b) is duly qualified to transact business and isin good standing in the state where the Property is located; and (c) has allnecessary approvals, governmental and otherwise, and full power and authority toown, operate and lease the Property. Borrower (and the undersignedrepresentative of Borrower, if any) has full power, authority and legal right toexecute this Security Instrument, and to mortgage, grant, bargain, sell, pledge,assign, warrant, transfer and convey the Property pursuant to the terms hereofand to keep and observe all of the terms of this Security Instrument onBorrower's part to be performed.

Section 4.3.     VALIDITY OF DOCUMENTS.     (a) The execution,delivery and performance of the Note, this Security Instrument and the OtherSecurity Documents and the borrowing evidenced by the Note (i) are within thepower and authority of Borrower; (ii) have been authorized by all requisiteorganizational 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) adefault under any provision of law, any order or judgment of any court orgovernmental authority, the articles of incorporation, by-laws, partnership ortrust agreement, articles of organization, operating agreement, or othergoverning instrument of Borrower, or any indenture, agreement or otherinstrument to which Borrower is a party or by which it or any of its assets orthe Property is or may be bound or affected; (v) will not result in the creationor imposition of any lien, charge or encumbrance whatsoever upon any of itsassets, except the lien and security interest created hereby; and (vi) will notrequire any authorization or license from, or any filing with, any governmentalor other body (except for the recordation of this Security Instrument inappropriate land records in the State where the Property is located and exceptfor Uniform Commercial Code filings relating to the security interest createdhereby), and (b) the Note, this Security Instrument and the Other SecurityDocuments constitute the legal, valid and binding obligations of Borrower,enforceable in accordance with their terms.

Section 4.4.     LITIGATION.     There is no action, suit orproceeding, judicial, administrative or otherwise (including any condemnation orsimilar proceeding), pending or, to the best of Borrower's knowledge, threatenedor contemplated against Borrower, a Guarantor, if any, an Indemnitor, if any, oragainst or affecting the Property that has not been disclosed to Lender byBorrower in writing.

17

Section 4.5.     STATUS OF PROPERTY. 

                        (a)     Borrower has obtained all necessarycertificates, licenses and other approvals, governmental and otherwise,necessary for the operation of the Property and the conduct of its business andall required zoning, building code, land use, environmental and other similarpermits or approvals, all of which are in full force and effect as of the datehereof and not subject to revocation, suspension, forfeiture or modification.

                        (b)     The Property and the present and contemplateduse and occupancy thereof are in full compliance with all applicable zoningordinances, building codes, land use laws, Environmental Laws and other similarlaws.

                        (c)     The Property is served by all utilitiesrequired for the current or contemplated use thereof. All utility service isprovided by public utilities and the Property has accepted or is equipped toaccept such utility service.

                        (d)     All public roads and streets necessary forservice of and access to the Property for the current or contemplated usethereof have been completed, are serviceable and all-weather and are physicallyand legally open for use by the public, and have been dedicated to and acceptedfor public maintenance by the applicable municipal or county authorities.

                        (e)     The Property is served by public water andsewer systems.

                        (f)     The Property is free from damage caused byfire or other casualty.

                        (g)     All costs and expenses of any and all labor,materials, supplies and equipment used in the construction of the Improvementshave been paid in full.

                        (h)     Borrower has paid in full for, and is theowner of, all furnishings, fixtures and equipment (other than tenants' property)used in connection with the operation of the Property, free and clear of any andall security interests, liens or encumbrances, except the lien and securityinterest created hereby.

                        (i)     All liquid and solid waste disposal, septicand sewer systems located on the Property are in a good and safe condition andrepair and in compliance with all Applicable Laws.

                        (j)     No portion of the Improvements is located inan area identified by the Federal Emergency Management Agency or any successorthereto as an area having special flood hazards pursuant to the Flood InsuranceActs or, if any portion of the Improvements is located within such area,Borrower has obtained and will maintain the insurance required pursuant to theterms hereof.

                        (k)     All the Improvements lie within theboundaries of the Land.

18

Section 4.6.     NO FOREIGN PERSON.     Borrower is not a "foreignperson" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of1986, as amended and the related Treasury Department regulations.

Section 4.7.     SEPARATE TAX LOT.     The Property is assessed forreal 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 suchlot or lots, and no other land or improvements is assessed and taxed togetherwith the Property or any portion thereof.

Section 4.8.     LEASES.     Except as disclosed in the rent roll forthe Property delivered to and approved by Lender, (a) Borrower is the sole ownerof the entire lessor's interest in the Leases; (b) the Leases are valid andenforceable and in full force and effect; (c) all of the Leases are arms-lengthagreements with bona fide, independent third parties; (d) no party under anyLease is in default; (e) all Rents due have been paid in full; (f) the terms ofall alterations, modifications and amendments to the Leases are reflected in thecertified occupancy statement delivered to and approved by Lender; (g) none ofthe Rents reserved in the Leases have been assigned or otherwise pledged orhypothecated; (h) none of the Rents have been collected for more than one (1)month in advance (except a security deposit shall not be deemed rent collectedin advance); (i) the premises demised under the Leases have been completed inaccordance with the Leases, and the tenants under the Leases have accepted thesame and have taken possession of the same on a rent-paying basis; (j) thereexist no offsets or defenses to the payment of any portion of the Rents andBorrower has no monetary obligation to any tenant under any Lease; (k) Borrowerhas received no notice from any tenant challenging the validity orenforceability of any Lease; (l) there are no agreements with the tenants underthe Leases other than expressly set forth in each Lease; (m) the Leases arevalid and enforceable against Borrower and the tenants set forth therein; (n) noLease contains an option to purchase, right of first refusal to purchase, rightof first refusal to relet, or any other similar provision; (o) no person orentity has any possessory interest in, or right to occupy, the Property exceptunder and pursuant to a Lease; (p) each Lease is subordinate to this SecurityInstrument, either pursuant to its terms or a recordable subordinationagreement; (q) no Lease has the benefit of a non-disturbance agreement thatwould be considered unacceptable to prudent institutional lenders; (r) allsecurity deposits relating to the Leases reflected on the certified rent rolldelivered to Lender have been collected by Borrower; and (s) no brokeragecommissions or finders fees are due and payable regarding any Lease.

Section 4.9.     FINANCIAL CONDITION. 

                        (a)     (i) Borrower is solvent and no proceedingunder Creditors Rights Laws (hereinafter defined) with respect to Borrower hasbeen initiated, and (ii) Borrower has received reasonably equivalent value forthe granting of this Security Instrument.

                        (b)     No petition in bankruptcy has been filed byor against Borrower, any Guarantor, any Indemnitor or any related entity, or anyprincipal, general partner or member thereof, in the last seven (7) years, andneither Borrower, any Guarantor, any Indemnitor nor any related entity, or anyprincipal, general partner or member thereof, in the last seven (7) years has

19

ever made any assignment for the benefit of creditors or taken advantage ofany Creditors Rights Laws.

Section 4.10.     BUSINESS PURPOSES.     The loan evidenced by theNote secured by the Security Instrument and the Other Security Documents (the"Loan") is solely for the business purpose of Borrower, and is not for personal,family, household, or agricultural purposes.

Section 4.11.     TAXES.     Borrower, any Guarantor and anyIndemnitor have filed all federal, state, county, municipal, and city income,personal property and other tax returns required to have been filed by them andhave paid all taxes and related liabilities which have become due pursuant tosuch returns or pursuant to any assessments received by them. Neither Borrower,any Guarantor nor any Indemnitor knows of any basis for any additionalassessment in respect of any such taxes and related liabilities for prior years.

Section 4.12.     MAILING ADDRESS.     Borrower's mailing address, asset forth in the opening paragraph hereof or as changed in accordance with theprovisions hereof, is true and correct.

Section 4.13.     NO CHANGE IN FACTS OR CIRCUMSTANCES.     Allinformation in the application for the Loan submitted to Lender and in allfinancial statements, rent rolls, reports, certificates and other documentssubmitted in connection with the application or in satisfaction of the termsthereof, are accurate, complete and correct in all respects. There has been noadverse change in any condition, fact, circumstance or event that would make anysuch information inaccurate, incomplete or otherwise misleading.

Section 4.14.     DISCLOSURE.     Borrower has disclosed to Lender allmaterial facts and has not failed to disclose any material fact that could causeany representation or warranty made herein to be materially misleading.

Section 4.15.     THIRD PARTY REPRESENTATIONS.     Each of therepresentations and the warranties made by each Guarantor and Indemnitor in anyOther Security Document(s) is true and correct in all material respects.

Section 4.16.     ILLEGAL ACTIVITY.     No portion of the Property hasbeen or will be purchased, improved, equipped or furnished with proceeds of anyillegal activity and to the best of Borrowers' knowledge, there are no illegalactivities or activities relating to controlled substances at the Property.

Section 4.17.     PERMITTED EXCEPTIONS.     None of the PermittedExceptions, individually or in the aggregate, materially interfere with thebenefits of the security intended to be provided by the Security Instrument, theNote, and the Other Security Documents, materially and adversely affect thevalue of the Property, impair the use or the operation of the Property or impairBorrower's ability to pay its obligations in a timely manner.

Section 4.18.     PRINCIPAL PLACE OF BUSINESS.     Borrower'sprincipal place of business is as set forth in the opening paragraph to thisSecurity Instrument.

20

Section 4.19.     ERISA.

                        (a)     As of the date hereof and throughout the termof this Security Instrument, (i) Borrower is not and will not be an "employeebenefit plan" as defined in Section 3(3) of ERISA, which is subject to Title Iof ERISA, and (ii) the assets of Borrower do not and will not constitute "planassets" of one or more such plans for purposes of Title I of ERISA; and

                        (b)     As of the date hereof and throughout the termof this Security Instrument (i) Borrower is not and will not be a "governmentalplan" within the meaning of Section 3(32) of ERISA and (ii) transactions by orwith Borrower are not and will not be subject to state statutes applicable toBorrower regulating investments of and fiduciary obligations with respect togovernmental plans.

Section 4.20.     PROPERTY USE.     The Property shall continue to beused in accordance with its present use, and for no other use without the priorwritten consent of Lender.

ARTICLE 5. - OBLIGATIONS AND RELIANCE

Section 5.1.     RELATIONSHIP OF BORROWER AND LENDER.     Therelationship between Borrower and Lender is solely that of debtor and creditor,and Lender has no fiduciary or other special relationship with Borrower, and noterm or condition of any of the Note, this Security Instrument and the OtherSecurity Documents shall be construed so as to deem the relationship betweenBorrower and Lender to be other than that of debtor and creditor.

Section 5.2.     NO RELIANCE.     The members, general partners,principals and (if Borrower is a trust) beneficial owners of Borrower areexperienced in the ownership and operation of properties similar to theProperty, and Borrower and Lender are relying solely upon such expertise inconnection with the ownership and operation of the Property. Borrower is notrelying on Lender's expertise, business acumen or advice in connection with theProperty.

Section 5.3.     NO LENDER OBLIGATIONS.     Notwithstanding anythingto the contrary contained herein, Lender is not undertaking the performance of(a) any obligations under the Leases; or (b) any obligations with respect tosuch agreements, contracts, certificates, instruments, franchises, permits,trademarks, licenses and other documents. By accepting or approving anythingrequired to be observed, performed or fulfilled or to be given to Lenderpursuant to this Security Instrument, the Note or the Other Security Documents,including without limitation, any officer's certificate, balance sheet,statement of profit and loss or other financial statement, survey, appraisal, orinsurance policy, Lender shall not be deemed to have warranted, consented to, oraffirmed the sufficiency, the legality or effectiveness of same, and suchacceptance or approval thereof shall not constitute any warranty or affirmationwith respect thereto by Lender.

Section 5.4.     RELIANCE.     Borrower recognizes and acknowledgesthat in accepting the Note, this Security Instrument and the Other SecurityDocuments, Lender is expressly and primarily relying on the truth and accuracyof the warranties and representations set forth herein 

21

without any obligation to investigate the Property and notwithstanding anyinvestigation of the Property by Lender, that such reliance existed on the partof Lender prior to the date hereof; that the warranties and representations area material inducement to Lender in accepting the Note, this Security Instrumentand the other Security Documents; and that Lender would not be willing to makethe Loan and accept this Security Instrument in the absence of the warrantiesand representations as set forth herein.

ARTICLE 6. - FURTHER ASSURANCES

Section 6.1.     RECORDING OF SECURITY INSTRUMENT, ETC.     Borrowerforthwith upon the execution and delivery of this Security Instrument andthereafter, from time to time, will cause this Security Instrument and any ofthe Other Security Documents creating a lien or security interest or evidencingthe lien hereof upon the Property and each instrument of further assurance to befiled, registered or recorded in such manner and in such places as may berequired by any present or future law in order to publish notice of and fully toprotect and perfect the lien or security interest hereof upon, and the interestof Lender in, the Property. Borrower will pay all taxes, filing, registration orrecording fees, and all expenses incident to the preparation, execution,acknowledgment and/or recording of the Note, this Security Instrument, the OtherSecurity Documents, any note or mortgage supplemental hereto, any securityinstrument with respect to the Property and any instrument of further assurance,and any modification or amendment of the foregoing documents, and all federal,state, county and municipal taxes, duties, imposts, assessments and chargesarising out of or in connection with the execution and delivery of this SecurityInstrument, any mortgage supplemental hereto, any security instrument withrespect to the Property or any instrument of further assurance, and anymodification or amendment of the foregoing documents, except where prohibited bylaw so to do.

Section 6.2.     FURTHER ACTS, ETC.     Borrower will, at the cost ofBorrower, and without expense to Lender, do, execute, acknowledge and deliverall and every such further acts, deeds, conveyances, mortgages, assignments,notices of assignments, transfers and assurances as Lender shall, from time totime, reasonably require, for the better assuring, conveying, assigning,transferring, and confirming unto Lender the Property and rights herebymortgaged, granted, bargained, sold, conveyed, confirmed, pledged, assigned,warranted and transferred or intended now or hereafter so to be, or whichBorrower may be or may hereafter become bound to convey or assign to Lender, orfor carrying out the intention or facilitating the performance of the terms ofthis Security Instrument or for filing, registering or recording this SecurityInstrument, or for complying with all applicable state or federal law. Borrower,on demand, will execute and delivery and hereby authorizes Lender, following 10days' notice to Borrower, to execute in the name of Borrower or without thesignature of Borrower to the extent Lender may lawfully do so, one or morefinancing statements, chattel mortgages or other instruments, to evidence orperfect more effectively the security interest of Lender in the Property.Borrower grants to Lender an irrevocable power of attorney coupled with aninterest for the purpose of exercising and perfecting any and all rights andremedies available to Lender hereunder.

Section 6.3.     CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY STAMP LAWS.

22

                        (a)     If any law is enacted or adopted or amendedafter the date of this Security Instrument which deducts the Debt from the valueof the Property for the purpose of taxation or which imposes a tax, eitherdirectly or indirectly, on the Debt or Lender's interest in the Property,Borrower will pay the tax, with interest and penalties thereon, if any. IfLender is advised by counsel chosen by it that the payment of tax by Borrowerwould be unlawful or taxable to Lender or unenforceable or provide the basis fora defense of usury, then Lender shall have the option, exercisable by writtennotice of not less than ninety (90) days, to declare the Debt immediately dueand payable.

                        (b)     Borrower will not claim or demand or beentitled to any credit or credits on account of the Debt for any part of theTaxes or Other Charges assessed against the Property, or any part thereof.

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

Section 6.4.     ESTOPPEL CERTIFICATES.

                        (a)     After request by Lender, Borrower, within ten(10) days, shall furnish Lender or any proposed assignee with a statement, dulyacknowledged and certified, setting forth (i) the original principal amount ofthe Note, (ii) the unpaid principal amount of the Note, (iii) the rate ofinterest of the Note, (iv) the terms of payment and maturity date of the Note,(v) the date installments of interest and/or principal were last paid, (vi)that, except as provided in such statement, there are no defaults or eventswhich with the passage of time or the giving of notice or both, would constitutean event of default under the Note or the Security Instrument, (vii) that theNote and this Security Instrument are valid, legal and binding obligations andhave not been modified or if modified, giving particulars of such modification,(viii) whether any offsets or defenses exist against the obligations securedhereby and, if any are alleged to exist, a detailed description thereof, (ix)that all Leases are in full force and effect and (provided the Property is not aresidential multifamily property) have not been modified (or if modified,setting forth all modifications), (x) the date to which the Rents thereunderhave been paid pursuant to the Leases, (xi) whether or not, to the bestknowledge of Borrower, any of the lessees under the Leases are in default underthe Leases, and, if any of the lessees are in default, setting forth thespecific nature of all such defaults, (xii) the amount of security deposits heldby Borrower under each Lease and that such amounts are consistent with theamounts required under each Lease, and (xiii) as to any other matters reasonablyrequested by Lender and reasonably related to the Leases, the obligationssecured hereby, the Property or this Security Instrument.

                        (b)     Borrower shall use its best efforts todeliver to Lender, promptly upon request, duly executed estoppel certificatesfrom any one or more lessees as required by Lender attesting to such factsregarding the Lease as Lender may require, including, but not limited toattestations that each Lease covered thereby is in full force and effect with nodefaults thereunder on the part of any party, that none of the Rents have beenpaid more than one month in advance, 

23

except as security, and that the lessee claims no defense or offset againstthe full and timely performance of its obligations under the Lease.

                        (c)     Upon any transfer or proposed transfer of theProperty at Lender's request, Borrower, any Guarantors and any Indemnitor(s)shall provide an estoppel certificate in such form, substance and detail asLender may require.

Section 6.5.     FLOOD INSURANCE.     After Lender's request, Borrowershall deliver evidence satisfactory to Lender that no portion of theImprovements is situated in a federally designated "special flood hazard area"or, if it is, that Borrower has obtained insurance meeting the requirementshereof.

Section 6.6.     REPLACEMENT DOCUMENTS.     Upon receipt of anaffidavit of an officer of Lender as to the loss, theft, destruction ormutilation of the Note or any Other Security Document which is not of publicrecord, and, in the case of any such mutilation, upon surrender and cancellationof such Note or Other Security Document, Borrower will issue, in lieu thereof, areplacement Note or Other Security Document, dated the date of such lost,stolen, destroyed or mutilated Note or Other Security Document in the sameprincipal amount thereof and otherwise of like tenor.

ARTICLE 7. - DUE ON SALE/ENCUMBRANCE

Section 7.1.     TRANSFER DEFINITIONS.     For purposes of thisArticle, an "Affiliated Manager" shall mean any managing agent in whichBorrower, any Guarantor or Indemnitor has, directly or indirectly, any legal,beneficial or economic interest; a "Restricted Party" shall mean Borrower, anyGuarantor, any Indemnitor, or any Affiliated Manager or any shareholder,partner, member or non-member manager, or any direct or indirect legal orbeneficial owner of Borrower, any Guarantor, any Indemnitor, any AffiliatedManager or any non-member manager; and a "Sale" shall mean a voluntary orinvoluntary sale, conveyance, transfer or pledge of a legal or beneficialinterest. 

Section 7.2.     NO SALE/ENCUMBRANCE.

                        (a)     Borrower shall not sell, convey, mortgage,grant, bargain, encumber, pledge, assign, grant options with respect to, orotherwise transfer or dispose of (directly or indirectly, voluntarily orinvoluntarily, by operation of law or otherwise, and whether or not forconsideration or of record) the Property or any part thereof or any legal orbeneficial interest therein (collectively a "Transfer"), other than pursuant toLeases of space in the Improvements to tenants in accordance with the provisionshereof without the prior written consent of Lender.

                        (b)     A Transfer shall include, but not be limitedto, (i) an installment sales agreement wherein Borrower agrees to sell theProperty or any part thereof for a price to be paid in installments; (ii) anagreement by Borrower leasing all or a substantial part of the Property forother than actual occupancy by a space tenant thereunder or a sale, assignmentor 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; (iii) if a RestrictedParty is a corporation, any merger, consolidation or Sale or Pledge 

24

of such corporation's stock or the creation or issuance of new stock in oneor a series of transactions, by which such corporation's stock shall be vestedin a party or parties who are not now shareholders; (iv) if a Restricted Partyis a limited or general partnership or joint venture, any merger orconsolidation or the change, removal, resignation or addition of a generalpartner or the Sale or Pledge of the partnership interest of any general partneror any profits or proceeds relating to such partnership interest, or the Sale orPledge of limited partnership interests or the creation or issuance of newlimited partnership interests in one or a series of transactions, by which suchlimited partnership interests shall be vested in a party or parties who are notnow limited partners; (v) if a Restricted Party is a limited liability company,any merger or consolidation or the change, removal, resignation or addition of amanaging member or non-member manager (or if no managing member, any member) orthe Sale or Pledge of the membership interest of a managing member (or if nomanaging member, any member) or any profits or proceeds relating to suchmembership interest, or the Sale or Pledge of non-managing membership interestsor the creation or issuance of new non-managing membership interests in one or aseries of transaction, by which such non-managing membership interests shall bevested in a party or parties who are not now non-managing members; (vi) if aRestricted Party is a trust or nominee trust, any merger, consolidation or theSale or Pledge of the legal or beneficial interest in a Restricted Party or thecreation or issuance of new legal or beneficial interests in one or a series oftransactions, by which such beneficial or legal interests shall be vested in aparty or parties who are not now legal or beneficial owners; or (vii) theremoval or the resignation of the managing agent (including, without limitation,an Affiliated Manager) other than in accordance herewith.

Section 7.3.     PERMITTED TRANSFERS.     Notwithstanding anything tothe contrary contained herein, the following transfers shall not be deemed to bea Transfer: (a) a transfer by devise or descent or by operation of law upon thedeath of a member, partner or shareholder of a Restricted Party; and (b) theSale or Pledge of stock or limited partnership or non-managing membershipinterests in a Restricted Party by which, in one or a series of transactions, inthe aggregate, not more than forty-nine percent (49%) of the stock, limitedpartnership interests or non-managing membership interests (as the case may be)in a Restricted Party, shall be vested in parties not now having an ownershipinterest; provided, however, no such transfer shall result in the change ofvoting control in the Restricted Party, and as a condition to each suchtransfer, Lender shall receive not less than ten (10) days prior written noticeof such proposed transfer.

ARTICLE 8. - DEFAULT

Section 8.1.     EVENTS OF DEFAULT.     The occurrence of any one ormore of the following events shall constitute an "Event of Default":

                        (a)     if any portion of the Debt is not paid on orprior to the date the same is due or if the entire Debt is not paid on or beforethe Maturity Date;

                        (b)     if Borrower fails to repay any sum paid oradvanced by Lender under the terms of this Security Instrument or any Other LoanDocument;

25

                        (c)     if Borrower fails to repay any sum paid,advanced or loaned by Lender to Borrower under the terms of any other SecurityInstrument, promissory note or other loan document in connection with any otherloan;

                        (d)     if any of the Taxes or Other Charges is notpaid when the same is due and payable except to the extent sums sufficient topay such Taxes and Other Charges have been deposited with Lender in accordancewith the terms of this Security Instrument;

                        (e)     if the Policies are not kept in full forceand effect, or if the Policies are not delivered to Lender as provided herein;

                        (f)     if Borrower violates or does not comply withany of the provisions of this Security Instrument or any Other Loan Document;

                        (g)     if any representation or warranty ofBorrower, any Indemnitor or any person guaranteeing payment of the Debt or anyportion thereof or performance by Borrower of any of the terms of this SecurityInstrument (a "Guarantor"), or any member, general partner, principal orbeneficial owner of any of the foregoing, made herein or in any guaranty, or inany certificate, report, financial statement or other instrument or documentfurnished to Lender shall have been false or misleading in any material respectwhen made;

                        (h)     if (i) Borrower or any managing member orgeneral partner of Borrower, or any Guarantor or Indemnitor shall commence anycase, proceeding or other action (A) under any existing or future law of anyjurisdiction, domestic or foreign, relating to bankruptcy, insolvency,reorganization, conservatorship, arrangement, adjustment, winding-up,liquidation, dissolution, composition or other relief with respect to its debtsor debtors ("Creditors Rights Laws"), seeking to have an order for reliefentered with respect to it, or seeking to adjudicate it a bankrupt or insolvent,or seeking reorganization, or (B) seeking appointment of a receiver, trustee,custodian, conservator or other similar official for it or for all or anysubstantial part of its assets, or the Borrower or any managing member orgeneral partner of Borrower, or any Guarantor or Indemnitor shall make a generalassignment for the benefit of its creditors; or (ii) there shall be commencedagainst Borrower or any managing member or general partner of Borrower or anyGuarantor or Indemnitor any case, proceeding or other action of a naturereferred to in clause (i) above which (A) results in the entry of an order forrelief or any such adjudication or appointment or (B) remains undismissed,undischarged or unbonded for a period of sixty (60) days; or (iii) there shallbe commenced against the Borrower or any managing member or general partner ofBorrower, or any Guarantor or Indemnitor any case, proceeding or other actionseeking issuance of a warrant of attachment, execution, distraint or similarprocess against all or any substantial part of its assets which results in theentry 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 theentry thereof; or (iv) the Borrower or any managing member or general partner ofBorrower or any Guarantor or Indemnitor shall take any action in furtherance of,or indicating its consent to, approval of, or acquiescence in, any of the actsset forth in clause (i), (ii), or (iii) above; or (v) the Borrower or anymanaging member or general partner of Borrower, or any Guarantor or Indemnitorshall generally not, or shall be unable to, or shall admit in writing itsinability to, pay its debts as they become due;

26

                        (i)     if Borrower shall be in default beyondapplicable notice and grace periods under any other mortgage, deed of trust,deed to secure debt or other security agreement covering any part of theProperty whether it be superior or junior in lien to this Security Instrument;

                        (j)     if the Property becomes subject to anymechanic's, materialman's or other lien other than a lien for any Taxes not thendue and payable and the lien shall remain undischarged of record (by payment,bonding or otherwise) for a period of thirty (30) days;

                        (k)     if any federal tax lien is filed againstBorrower, any member or general partner of Borrower, any Guarantor, anyIndemnitor or the Property and same is not discharged or record within thirty(30) days after same is filed;

                        (l)     if any default occurs under any guaranty orindemnity executed in connection herewith, and such default continues after theexpiration of applicable grace periods, if any; or

                        (m)     if Borrower files of record, without theprior written consent of Lender which Lender may grant or withhold for anyreason in its sole and absolute discretion, any notice limiting the maximumprincipal amount that may be secured hereunder; or 

                        (n)     if Borrower sells, transfers (whethervoluntary or by operation of law), pledges, hypothecates or further encumbersall or any part of the Property or any interest therein or any interest in theBorrower except as otherwise expressly provided herein), or additionally assignsall or any part of the rents, income or profits arising therefrom, in eithercase without the prior written consent of Lender, which may be withheld for anyreason in Lender's sole and absolute discretion; or

                        (o)     if Borrower or any Guarantor or Indemnitor isdissolved, merges into another entity, or otherwise terminates its existence(other than as specifically allowed pursuant to the terms hereof) or if theperson(s) controlling such entity shall take any action authorizing or leadingto the same; or

                        (p)     if for more than ten (10) days after noticefrom Lender, Borrower shall continue to be in default under any other term,covenant or condition of the Note, this Security Instrument or the OtherSecurity Documents in the case of any default which can be cured by the paymentof a sum of money or for thirty (30) days after notice from Lender in the caseof any other default, provided that if such default cannot reasonably be curedwithin such thirty (30) day period and Borrower shall have commenced to curesuch default within such thirty (30) day period and thereafter diligently andexpeditiously proceeds to cure the same, such thirty (30) day period shall beextended for so long as it shall require Borrower in the exercise of duediligence to cure such default, it being agreed that no such extension shall befor a period in excess of sixty (60) days.

ARTICLE 9. - RIGHTS AND REMEDIES

27

Section 9.1     REMEDIES.     Upon the occurrence of any Event ofDefault, to the extent permitted by applicable law, Borrower agrees that Lendermay take action available at law, in equity, and as otherwise provided in thisSecurity Instrument, without notice or demand, as it deems advisable to protectand enforce its rights against Borrower in and to the Property, including, butnot limited to the following actions, each of which may be pursued concurrentlyor otherwise, at such time and in such order as Lender may determine, in itssole discretion, without impairing or otherwise affecting the other rights andremedies of Lender:

                        (a)     declare the entire unpaid Debt to beimmediately due and payable;

                        (b)     institute proceedings, judicial or otherwise,for the complete foreclosure of this Security Instrument under any applicablestate or federal law in which case the Property or any interest therein may besold for case or upon credit in one or more parcels or in several interests orportions and in any order or manner;

                        (c)     with or without entry, to the extentpermitted and pursuant to the procedures provided by applicable state or federallaw, institute proceedings for the partial foreclosure of this SecurityInstrument for the portion of the Debt then due and payable, subject to thecontinuing lien and security interest of this Security Instrument for thebalance of the Debt not then due, inimpaired and without loss of priority;

                        (d)     sell for cash or upon credit the Property orany part thereof and all estate, claim, demand, right, title and interest ofBorrower therein and rights of redemption thereof, pursuant to power of sale orotherwise, at one or more sales, in one or more parcels, at such time and place,upon such terms and after such notice thereof as may be required or permitted bylaw;

                        (e)     institute an action, suit or proceeding inequity for the specific performance of any covenant, condition or agreementcontained herein, in the Note or in the Other Security Documents;

                        (f)     recover judgment on the Note either before,during or after any proceedings for the enforcement of this Security Instrumentor the Other Security Documents;

                        (g)     apply for the appointment of a receiver,trustee, liquidator or conservator of the Property, without notice and withoutregard for the adequacy of the security for the Debt and without regard for thesolvency of Borrower, any Guarantor, Indemnitor or of any person, firm or otherentity liable for the payment of the Debt;

                        (h)     subject to any applicable state or federallaw, the license granted to Borrower to collect and receive rents hereundershall automatically be revoked and Lender may enter into or upon the Property,either personally or by its agents, nominees or attorneys and dispossessBorrower and its agents and servants therefrom, without liability for trespass,damages or otherwise and exclude Borrower and its agents or servant whollytherefrom, and take possession of all rent rolls, leases (including the formlease) and amendments and exhibits, subleases (including the form sublease) andamendments and exhibits and rental and license agreements with the tenants,subtenants and licensees in possession of the Property or any part or 

28

parts thereof; tenants', subtenants' and licensees' money deposits or otherproperty (including, without limitation, any letter of credit) given to securetenants', subtenants' and licensees' obligations under leases, subleases orlicenses, together with a list of the foregoing; all lists pertaining to currentrent and license fee arrears; any and all architects' plans and specifications,licenses and permits, documents, books, records, accounts, surveys and propertywhich relate to the management, leasing, operation, occupancy, ownership,insurance, maintenance, or service of or construction upon the Property andBorrower agrees to surrender possession thereof and of the Property to Lenderupon demand, and thereupon Lender may (i) use, operate, manage, control, insure,maintain, repair, restore and otherwise deal with all and every part of theProperty and conduct the business thereat; (ii) complete any construction on theProperty in such manner and form as Lender deems advisable; (iii) makealterations; additions, renewals, 

replacements and improvements to or on the Property; (iv) exercise all rightsand powers of Borrower with respect to the Property, whether in the name ofBorrower or otherwise, including without limitation, the right to make, cancel,enforce or modify Leases, obtain and evict tenants, and demand, sue for, collectand receive all Rents of the Property and every part thereof; (v) either requireBorrower (A) to pay monthly in advance to Lender, or any receiver appointed tocollect the Rents, the fair and reasonable rental value for the use andoccupation of such part of the Property as may be occupied by Borrower, or (B)to vacate and surrender possession of the Property to Lender or to such receiverand, in default thereof, Borrower may be evicted by summary proceedings orotherwise; and (vi) apply the receipts from the Property to the payment of theDebt, in such order, priority and proportions as Lender shall deem appropriatein its sole discretion after deducting therefrom all expenses (includingreasonable attorneys' fees) incurred in connection with the aforesaid operationsand all amounts necessary to pay the Taxes, Other Charges, Insurance Premiumsand other expenses in connection with the Property, as well as just andreasonable compensation for the services of Lender, its counsel, agents andemployees;

                        (i)     exercise any and all rights and remediesgranted to a secured party upon default under the Uniform Commercial Code,including, without limiting the generality of the foregoing: (i) the right totake possession of the Personal Property or any part thereof, and to take suchother measures as Lender may deem necessary for the care, protection andpreservation of the Personal Property, and (ii) request Borrower at its expenseto assemble the Personal Property and make it available to Lender at aconvenient place acceptable to Lender. Any notice of sale, disposition or otherintended action by Lender with respect to the Personal Property sent to Borrowerin accordance with the provisions hereof at least five (5) days prior to suchaction, shall constitute commercially reasonable notice to Borrower;

                        (j)     apply any sums then deposited in the EscrowFund and any other sums held in escrow or otherwise by Lender in accordance withthe terms of this Security Instrument or any Other Security Document to thepayment of the following items in any order in its sole discretion: (i) Taxesand Other Charges; (ii) Insurance Premiums; (iii) interest on the unpaidprincipal balance of the Note; (iv) amortization of the unpaid principal balanceof the Note; and (v) all other sums payable pursuant to the Note, this SecurityInstrument and the Other Security Documents, including, without limitation,advances made by Lender pursuant to the terms of this Security Instrument;

29

                        (k)     surrender the Policies maintained pursuanthereto, collect the unearned Insurance Premiums and apply such sums as a crediton the Debt in such priority and proportion as Lender in its discretion shalldeem proper, and in connection therewith, Borrower hereby appoints Lender asagent and attorney-in-fact (which is coupled with an interest and is thereforeirrevocable) for Borrower to collect such unearned Insurance Premiums;

                        (l)     apply the undisbursed balance of any netproceeds deficiency deposit, together with interest thereon, to the payment ofthe Debt in such order, priority and proportions as Lender shall deem to beappropriate in its discretion; or 

                        (m)     pursue such other remedies as Lender may haveunder applicable state or federal law.

In the event of a sale, by foreclosure, to the extent permitted by applicablelaw, power of sale, or otherwise, of less than all of the Property, thisSecurity Instrument shall continue as a lien and security interest on theremaining portion of the Property unimpaired and without loss of priority.Notwithstanding the provisions of this Section to the contrary, if any Event ofDefault shall occur, and the Lender elects to declare the entire unpaid Debt tobe automatically due and payable, such remedy may be pursued without any furthernotice, demand or other action by Lender.

Section 9.2.      APPLICATION OF PROCEEDS.     Thepurchase money, proceeds and avails of any disposition of the Property, or anypart thereof, or any other sums collected by Lender pursuant to the Note, thisSecurity Instrument or the Other Security Documents, may be applied by Lender tothe payment of the Debt in such priority and proportions as Lender in itsdiscretion shall deem proper and which are in accordance with applicable law oras shall be required by a court of competent jurisdiction.

Section 9.3.      RIGHT TO CURE DEFAULTS.     Uponthe occurrence of any Event of Default or if Borrower fails to make any paymentor to do any act as herein provided, Lender may, but without any obligation todo so and without notice to or demand on Borrower and without releasing Borrowerfrom any obligation hereunder, make or do the same in such manner and to suchextent as Lender may deem necessary to protect the security hereof. Lender isauthorized 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 toforeclose this Security Instrument or collect the Debt. The cost and expense ofany cure hereunder (including reasonable attorneys' fees to the extent permittedby law), with interest at the Default Rate (defined in the Note), shallconstitute a portion of the Debt and shall be due and payable to Lender upondemand. All costs and expenses incurred by Lender in remedying any Event ofDefault or failed payment or act or in appearing in, defending, or bringing anysuch action or proceeding shall bear interest at the Default Rate defined in theNote, for the period after notice from Lender that such cost or expense wasincurred to the date of payment to Lender. All such costs and expenses incurredby Lender together with interest thereon calculated at the Default Rate shall bedeemed to constitute a portion of the Debt and be secured by this SecurityInstrument and the Other Security Documents and shall be immediately due andpayable upon demand by Lender therefor.

30

Section 9.4      ACTIONS AND PROCEEDINGS.     Atany time, Lender has the right to appear in and defend, compromise or settle anyaction or proceeding brought with respect to the Property, and after theoccurrence and during the continuance of an Event of Default, to bring anyaction or proceeding, in the name and on behalf of Borrower, which Lender, inits discretion, decides should be brought to protect its interest in theProperty.

Section 9.5      RECOVERY OF SUMS REQUIRED TO BE PAID.     Lendershall have the right from time to time to take action to recover any sum or sumswhich constitute a part of the Debt as the same become due, without regard towhether or not the balance of the Debt shall be due, and without prejudice tothe right of Lender thereafter to bring an action of foreclosure, or any otheraction, for a default or defaults by Borrower existing at the time such earlieraction was commenced.

Section 9.6.      EXAMINATION OF BOOKS AND RECORDS.     Lender,its agents, accountants and attorneys shall have the right upon prior writtennotice to Borrower (unless an Event of Default exists, in which case no noticeshall be required), to examine and audit, during reasonable business hours, therecords, books, management and other papers of Borrower and its affiliates or ofany Guarantor or Indemnitor which pertain to their financial condition orthe income, expenses and operation of the Property, at the Property or at anyoffice regularly maintained by Borrower, its affiliates or any Guarantor orIndemnitor where the books and records are located. Lender and its agents shallhave the right upon notice to make copies and extracts from the foregoingrecords and other papers at no cost to Lender.

Section 9.7.      OTHER RIGHTS, ETC.
                        (a)     The failure of Lender to insist upon strictperformance of any term hereof shall not be deemed to be a waiver of any term ofthis Security Instrument. Borrower shall not be relieved of Borrower'sobligations hereunder by reason of (i) the failure of Lender to comply with anyrequest of Borrower, any Guarantor or any Indemnitor to take any action toforeclose this Security Instrument or otherwise enforce any of the provisionshereof or of the Note or the Other Security Documents, (ii) the release,regardless of consideration, of the whole or any part of the Property, or of anyperson liable for the Debt or any portion thereof, or (iii) any agreement orstipulation by Lender extending the time of payment, changing the rate ofinterest, or otherwise modifying or supplementing the terms of the Note, thisSecurity Instruments or the Other Security Documents.

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

                        (c)     Lender may resort for the payment of the Debtto any other security held by or guaranties given to Lender in such order andmanner as Lender, in its discretion, may elect. Lender may take action torecover the Debt, or any portion thereof, or to enforce any covenant 

31

hereof without prejudice to the right of Lender thereafter to foreclose thisSecurity Instrument. The rights of Lender under this Security Instrument shallbe separate, distinct and cumulative and none shall be given effect to theexclusion of the others. No act of Lender shall be construed as an election toproceed under any one provision herein to the exclusion of any other provision.Lender shall not be limited exclusively to the rights and remedies herein statedbut shall be entitled to every right and remedy now or hereafter afforded at lawor in equity.

Section 9.8.      RIGHT TO RELEASE ANY PORTION OF THEPROPERTY.     Lender may release any portion of the Property for suchconsideration as Lender may require without, as to the remainder of theProperty, in any way impairing or affecting the lien or priority of thisSecurity Instrument, or improving the position of any subordinate lienholderwith respect thereto, except to the extent that the obligations hereunder shallhave been reduced by the actual monetary consideration, if any, received byLender for such release, and may accept by assignment, pledge or otherwise anyother property in place thereof as Lender may require without being accountablefor so doing to any other lienholder. This Security Instrument shall continue asa lien and security interest in the remaining portion of the Property.

Section 9.9.      VIOLATION OF LAWS.     If theProperty is not in compliance with Applicable Laws, Lender may impose additionalrequirements upon Borrower in connection herewith including, without limitation,monetary reserves or financial equivalents.

Section 9.10.      RIGHT OF ENTRY.     Lenderand its agents shall have the right to enter and inspect the Property at allreasonable times. 

Section 9.11.      SUBROGATION.     If any orall of the proceeds of the Note have been used to extinguish, extend or renewany indebtedness heretofore existing against the Property, then, to the extentof 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 infull force and effect in favor of Lender and are merged with the lien andsecurity interest created herein as cumulative security for the repayment of theDebt, the performance and discharge of Borrower's obligations hereunder, underthe Note and the Other Security Documents and the performance and discharge ofthe Other Obligations.

ARTICLE 10 - ENVIRONMENTAL HAZARDS

Section 10.1.     ENVIRONMENTAL DEFINITIONS.     Forthe purpose of this Section, "Environmental Law" means any present and futurefederal, state and local laws, statutes, ordinances, rules, regulations,standards, policies and other government directives or requirements, as well ascommon law, including but not limited to the Comprehensive EnvironmentalResponse, Compensation and Liability Act and the Resource Conservation andRecovery Act, that apply to Borrower or the Property and relate to HazardousMaterials. ''Environmental Liens" means all Liens and other encumbrances imposedpursuant to any Environmental Law, whether due to any act or omission ofBorrower or any other person or entity. ''Environmental Report" means thewritten reports resulting from the environmental site assessments of theProperty delivered to Lender. "Hazardous Materials" shall mean petroleum 

32

and petroleum products and compounds containing them, including gasoline,diesel fuel and oil; explosives, flammable materials; radioactive materials;polychlorinated biphenyls ("PCBs") and compounds containing them; lead andlead-based paint; asbestos or asbestos-containing materials in any form that isor could become friable; underground or above-ground storage tanks, whetherempty or containing any substance; any substance the presence of which on theProperty is prohibited by any federal, state or local authority; any substancethat requires special handling; and any other material or substance now or inthe future defined as a "hazardous substance," "hazardous material," "hazardouswaste," "toxic substance," "toxic pollutant," "contaminant," or ''Pollutant''within the meaning of any Environmental Law. "Release" of any HazardousMaterials includes but is not limited to any release, deposit, discharge,emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring,emptying, escaping, dumping, disposing or other movement of Hazardous Materials.

Section 10.2.     ENVIRONMENTAL REPRESENTATIONS ANDWARRANTIES. Borrower represents and warrants that: (a) there are noHazardous Materials or underground storage tanks in, on, or under the Property,except those that are both (i) in compliance with Environmental Laws and withpermits issued pursuant thereto (if such permits are required), if any, and (ii)either (A) in amounts not in excess of that necessary to operate the Property or(B) fully disclosed to and approved by Lender in writing pursuant to anEnvironmental Report; (b) there are no past, present or threatened (definedbelow) Release of Hazardous Materials in violation of any Environmental Law andwhich would require remediation by a governmental authority in, on, under orfrom the Property except as described in the Environmental Report; (c) there isno threat of any Release of Hazardous Materials migrating to the Property exceptas described in the Environmental Report; (d) there is no past or presentnon-compliance with Environmental Laws, or with permits issued pursuant thereto,in connection with the Property except as described in the Environmental Report;(e) Borrower does not know of, and has not received, any written or oral noticeor other communication from any person or entity (including but not limited to agovernmental entity) relating to Hazardous Materials in, on, under or from theProperty; and (f) Borrower has truthfully and fully provided to Lender, inwriting, any and all information relating to environmental conditions in, on,under or from the Property known to Borrower or contained in Borrower's filesand records, including but not limited to any reports relating to HazardousMaterials in, on, under or migrating to or from the Property and/or to theenvironmental condition of the Property.

Section 10.3.     ENVIRONMENTAL COVENANTS.     Borrowercovenants and agrees that so long as Borrower owns, manages, is in possessionof, or otherwise controls the operation of the Property: (a) all uses andoperations on or of the Property, whether by Borrower or any other person orentity, shall be in compliance with all Environmental Laws and permits issuedpursuant thereto; (b) there shall be no Releases of Hazardous Materials in, on,under or from the Property; (c) there shall be no Hazardous Materials in, on, orunder the Property, except those that are both (i) in compliance with allEnvironmental Laws and with permits issued pursuant thereto, if and to theextent required, and (ii) (A) in amounts not in excess of that necessary tooperate the Property or (B) fully disclosed to and approved by Lender inwriting; (d) Borrower shall keep the Property free and clear of allEnvironmental Liens; (e) Borrower shall, at its sale cost and expense, fully andexpeditiously cooperate in all activities pursuant to this Section, includingbut not limited to providing all relevant information and making knowledgeable

33

 persons available for interviews; (f) Borrower shall, at its sole costand expense, perform any environmental site assessment or other investigation ofenvironmental conditions in connection with the Property, pursuant to anyreasonable written request of Lender, upon Lender's reasonable belief that theProperty is not in full compliance with all Environmental Laws, and share withLender the reports and other results thereof, and Lender and other IndemnifiedParties (hereinafter defined) shall be entitled to rely on such reports andother results thereof; (g) Borrower shall, at its sole cost and expense, complywith all reasonable written requests of Lender to (i) reasonably effectuateremediation of any Hazardous Materials in, on, under or from the Property; and(ii) comply with any Environmental Law; (h) Borrower shall not allow any tenantor other user of the Property to violate any Environmental Law; and (i) Borrowershall immediately notify Lender in writing after it bas become aware of (A) anypresence or Release or threatened Releases of Hazardous Materials in, on, under,from or migrating towards the Property; (B) any non-compliance with anyEnvironmental Laws related in any way to the Property; (C) any actual orpotential Environmental Lien; (D) any required or proposed remediation ofenvironmental conditions relating to the Property; or (E) any written or oralnotice or other communication of which Borrower becomes aware from any sourcewhatsoever (including but not limited to a governmental entity) relating in anyway to Hazardous Materials. Any failure of Borrower to perform its obligationspursuant to this Section 10.3 shall constitute bad faith waste with respect tothe Property.

Section 10.4.     LENDER'S RIGHTS.     Lenderand any other person or entity designated by Lender, including but not limitedto any representative of a governmental entity, and any environmentalconsultant, and any receiver appointed by any court of competent jurisdiction,shall have the right, but not the obligation, to enter upon the Property at allreasonable times to assess any and all aspects of the environmental condition ofthe Property and its use, including but not limited to conducting anyenvironmental assessment or audit at Borrower's expense (the scope of whichshall be determined in Lender's sole discretion) and taking samples of soil,groundwater or other water, air, or building materials, and conducting otherinvasive testing. Borrower shall cooperate with and provide access to Lender andany such person or entity designated by Lender.

Section 10.5.     OPERATIONS AND MAINTENANCE PROGRAMS.     Ifrecommended by the Environmental Report or any other environmental assessment oraudit of the Property, Borrower shall establish and comply with an operationsand maintenance program with respect to the Property, in form and substancereasonably acceptable to Lender, prepared by an environmental consultantreasonably acceptable to Lender, which program shall address any asbestoscontaining material or lead based paint that may now or in the future bedetected at or on the Property. Without limiting the generality of the precedingsentence, Lender may require (a) periodic notices or reports to Lender in form,substance and at such intervals as Lender may specify, (b) an amendment to suchoperations and maintenance program to address changing circumstances, laws orother matters, (c) at Borrower's sole expense, supplemental examination of theProperty by consultants specified by Lender, (d) access to the Property byLender, its agents or servicer, to review and assess the environmental conditionof the Property and Borrower's compliance with any operations and maintenanceprogram, and (e) variation of the operations and maintenance program in responseto the reports provided by any such consultants.

34

ARTICLE 11 - INDEMNIFICATION

Section 11.1.     GENERAL INDEMNIFICATION.     Borrowershall, at its sole cost and expense, protect, defend, indemnify, release andhold harmless the Indemnified Parties (defined below) from and against any andall Losses (defined below) imposed upon or incurred by or asserted against anyIndemnified Parties and directly or indirectly arising out of or in any wayrelating to any one or more of the following (a) any accident, injury to ordeath of persons or loss of or damage to property occurring in on or about theProperty or any part thereof or on the adjoining sidewalks, curbs, adjacentproperty or adjacent parking areas, streets or ways; (b) any use, nonuse orcondition in, on or about the Property or any part thereof or on the adjoiningsidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;(c) performance of any labor or services or the furnishing of any materials orother property in respect of the Property or any part thereof; (d) any failureof the Property to be in compliance with any Applicable Laws; (e) any and allclaims and demands whatsoever which may be asserted against Lender by reason ofany alleged obligations or undertakings on its part to perform or discharge anyof the terms, covenants, or agreements contained in any Lease; (f) Borrower'sbreach of any term, covenant, condition, representation or warranty containedherein; or (g) the payment of any commission, charge or brokerage fee to anyonewhich may be payable in connection with the funding of the Loan evidenced by theNote and secured by this Security Instrument. Any amounts payable to Lender byreason of the application of this Section shall become immediately due andpayable and shall bear interest at the Default Rate from the date loss or damageis sustained by Lender until paid. The term "Losses" shall mean any and allclaims, suits, liabilities (including, without limitation, strict liabilities),actions, proceedings, obligations, debts, damages, losses, costs, expenses,fines, penalties, charges, fees, judgments, awards, amounts paid in settlementof whatever kind or nature (including but not limited to attorneys' fees andother costs of defense). The term "Indemnified Parties" shall mean (a) Lender,(b) any prior owner or holder of the Note, (c) any servicer or prior servicer ofthe Loan, (d) any Investor (defined below) or any prior Investor in anyParticipations (defined below), (e) any trustees, custodians or otherfiduciaries who hold or who have held a full or partial interest in the Loan forthe benefit of any Investor or other third party, (f) any receiver or otherfiduciary appointed in a foreclosure of other Creditors Rights Laws proceeding,(g) any officers, directors, shareholders, partners, members, employees, agents,servants, representatives, contractors; subcontractors, affiliates orsubsidiaries of any and all of the foregoing, and (h) the heirs, legalrepresentatives, successors and assigns of any and all of the foregoing(including, without limitation, any successors by merger, consolidation oracquisition of all or a substantial portion of the Indemnified Parties' assetsand business), in all cases whether during the term of the Loan or as part of orfollowing a foreclosure of the Loan.

Section 11.2.     MORTGAGE, DOCUMENTARY STAMPS AND/ORINTANGIBLE TAX. Borrower shall at its sole cost and expense, protect,defend, indemnify, release and hold harmless the Indemnified Parties from andagainst any and all Losses imposed upon or incurred by or asserted against anyIndemnified Parties and directly or indirectly arising out of or in any wayrelating to any tax or fee on the making and/or recording of this SecurityInstrument, the Note or any of the Other Security Documents.

35

Section 11.3.     DUTY TO DEFEND; ATTORNEYS' FEES AND OTHERFEES AND EXPENSES. Upon written request by any Indemnified Party,Borrower shall defend such Indemnified Party (if requested by any IndemnifiedParty, in the name of the Indemnified Party) by attorneys and otherprofessionals approved by the Indemnified Parties. Notwithstanding theforegoing, any Indemnified Parties may, in their sole discretion, engage theirown attorneys and other professionals to defend or assist them, and, at theoption of Indemnified Parties, their attorneys shall control the resolution ofany claim or proceeding. Upon demand, Borrower shall pay or, in the solediscretion of the Indemnified Parties, reimburse, the Indemnified Parties forthe payment of reasonable fees and disbursements of attorneys, engineers,environmental consultants, laboratories, surveyors, title searches and otherprofessionals in connection therewith, which any Indemnified Parties may engageas a result of any Losses.

Section 11.4.     ENVIRONMENTAL INDEMNITY.     Asbetween Borrower and Lender, all risk of loss associated with non-compliancewith Environmental Laws, or with the presence of any Hazardous Material at,upon, within, contiguous to or otherwise affecting the Property, shall liesolely with Borrower. Accordingly, Borrower shall bear all risks and costsassociated with any loss (including any loss in value attributable to HazardousMaterials), damage or liability therefrom, including all costs of removal ofHazardous Materials or other remediation required by Lender or by law. Borrowershall indemnify, defend and hold Lender harmless from and against all loss,liabilities, damages, claims, costs and expenses (including reasonable costs ofdefense) arising out of or associated, in any way, with the non-compliance withEnvironmental Laws, or the existence of Hazardous Materials in, on, or about theProperty, or a breach of any representation, warranty or covenant contained inArticle 10 hereof, whether based in contract, tort, implied or express warranty,strict liability, criminal or civil statute or common law, including thosearising from the joint, concurrent, or comparative negligence of Lender;however, Borrower shall not be liable under such indemnification to the extentsuch loss, liability, damage, claim, cost or expense results solely fromLender's gross negligence or willful misconduct. Borrower's obligationshereunder shall arise upon the discovery of the presence of any HazardousMaterial, whether or not any governmental authority has taken or threatened anyaction in connection with the presence of any Hazardous Material and whether ornot the existence of any such Hazardous Material or potential liability onaccount thereof is disclosed in any site assessment arid shall continuenotwithstanding the repayment of the Note or any transfer or sale of any right,title and interest in the Property (by foreclosure, deed in lieu of foreclosureor otherwise). Of even date herewith, Borrower and other persons or entities(collectively, Borrower and such other parties, the "Indemnitors") may ascircumstances require execute and deliver a certain environmental indemnityagreement in favor of the Lender incorporating the environmental indemnities setforth herein as well as additional provisions and requirements with respect toenvironmental matters (the "Environmental Indemnity"). In the event anEnvironmental Indemnity is executed, it shall be included in the definition of"Other Security Documents".

ARTICLE 12 - WAIVERS

Section 12.1.     WAIVER OF COUNTERCLAIM.     Borrowerhereby waives the right to assert a counterclaim, other than a mandatory orcompulsory counterclaim, in any action or proceeding 

36

brought against it by Lender arising out of or in any way connected with thisSecurity Instrument, the Note, any of the Other Security Documents, or theObligations.

Section 12.2.     MARSHALLING AND OTHER MATTERS.     Borrowerhereby waives, to the extent permitted by law, the benefit of all appraisement,valuation, stay, extension, reinstatement and redemption laws now or hereafterin force and all rights of marshalling in the event of any sale hereunder of theProperty or any part thereof or any interest therein. Further, Borrower herebyexpressly waives any and all rights of redemption from sale under any order ordecree of foreclosure of this Security Instrument on behalf of Borrower, and onbehalf of each and every person acquiring any interest in or title to theProperty subsequent to the date of this Security Instrument and on behalf of allpersons to the extent permitted by applicable state or federal law.

Section 12.3.     WAIVER OF NOTICE.     Borrowershall not be entitled to any notices of any nature whatsoever from Lender except(a) with respect to matters for which this Security Instrument specifically andexpressly provides for the giving of notice by Lender to Borrower and (b) withrespect to matters for which Lender is required by applicable state or federallaw to give notice, and Borrower hereby expressly waives the right to receiveany notice from Lender with respect to any matter for which this SecurityInstrument does not specifically and expressly provide for the giving of noticeby Lender to Borrower.

Section 12.4.     WAIVER OF STATUTE OF LIMITATIONS.     Borrowerhereby expressly waives and releases to the fullest extent permitted by law, thepleading of any statute of limitations as a defense to payment of the Debt orperformance of its Other Obligations.

Section 12.5     SOLE DISCRETION OF LENDER.     Whereverpursuant to this Security Instrument (a) Lender exercises any right given to itto approve or disapprove, (b) any arrangement or term is to be satisfactory toLender, or (c) any other decision or determination is to be made by Lender, thedecision to approve or disapprove all decisions that arrangements or terms aresatisfactory or not satisfactory, and all other decisions and determinationsmade by Lender, shall be in the sole discretion of Lender, except as may beotherwise expressly and specifically provided herein.

Section 12.6.     WAIVE OF FORECLOSURE DEFENSE.     Borrowerhereby waives any defense Borrower might assert or have by reason of Lender'sfailure to make any tenant or lessee of the Property a party defendant in anyforeclosure proceeding or action instituted by Lender.

ARTICLE 13 - NOTICES

Section 13.1.     NOTICES.     All notices orother written communications hereunder shall be deemed to have been properlygiven (a) upon delivery, if delivered in person with receipt acknowledged by therecipient thereof, (b) one (1) Business Day (defined below) after having beendeposited for overnight delivery with any reputable overnight courier service,or (c) three (3) Business Days after having been deposited in any post office ormail depository regularly maintained by the U.S. Postal Service and sent byregistered or certified mail, postage prepaid, return receipt requested,addressed to Borrower or Lender, as the case may be, at the addresses 

37

set forth on the first page of this Security Instrument or addressed as suchparty may from time to time designate by written notice to the other parties.

Either party by notice to the other may designate additional or differentaddresses for subsequent notices or communications. For purposes of thisSubsection, "Business Day" shall mean a day on which commercial banks are notauthorized or required by law to close in New York, New York.

ARTICLE 14 - CHOICE OF LAW

Section 14.1.     CHOICE OF LAW.     ThisSecurity Instrument and any determination of deficiency judgments shall begoverned, construed, applied and enforced in accordance with the laws of thestate in which the Property is located and applicable federal law.

Section 14.2.     PROVISIONS SUBJECT TO LAW.     Allrights, powers and remedies provided in this Security Instrument may beexercised only to the extent that the exercise thereof does not violate anyapplicable state or federal law and are intended to be limited to the extentnecessary so that they will not render this Security Instrument invalid,unenforceable or not entitled to be recorded, registered or filed under anyapplicable state or federal law.

ARTICLE 15 - SECONDARY MARKET

Section 15.1.     TRANSFER OF LOAN.     Lendermay, at any time, sell, transfer or assign the . Note, this Security Instrumentand the Other Security Documents, and any or all servicing rights with respectthereto, or grant participations therein (the "Participations") or issuemortgage passthrough certificates or other securities evidencing a beneficialinterest in a rated or unrated public offering or private placement (the"Securities"). Lender may forward to each purchaser, transferee, assignee,servicer, participant, or investor in such Participations or Securities(collectively, the "Investor") or any Rating Agency rating such Securities, eachprospective Investor, and any organization maintaining databases on theunderwriting and performance of commercial mortgage loans, all documents andinformation which Lender now has or may hereafter acquire relating to the Debtand to Borrower, any Guarantor, any Indemnitor(s) and the Property, whetherfurnished by Borrower, any Guarantor, any Indemnitor(s) or otherwise, as Lenderdetermines necessary or desirable. Borrower irrevocably waives any and allrights it may have under applicable state or federal law to prohibit suchdisclosure, including but not limited to any right of privacy.

Section 15.2.     COOPERATION.     Borrower, anyGuarantor and any Indemnitor agree to cooperate with Lender in connection withany transfer made pursuant to this Section, including, without limitation, thedelivery of an estoppel certificate required pursuant to the terms hereof andsuch other documents as may be reasonably requested by Lender. Borrower shallalso furnish and Borrower, any Guarantor and any Indemnitor consent to Lenderfurnishing to such Investors or such prospective Investors or such Rating Agencyany and all information concerning the Property, the Leases, the financialcondition of Borrower, any Guarantor and any Indemnitor as may be requested byLender, any Investor or any prospective Investor or any Rating Agency inconnection with any sale, transfer or Participations or Securities.

38

ARTICLE 16 - COSTS

Section 16.1.     PERFORMANCE AT BORROWER'S EXPENSE.     Borroweracknowledges and confirms that Lender shall impose certain administrativeprocessing and/or commitment fees in connection with (a) the extension, renewal,modification, amendment and termination of the Loan, (b) the release orsubstitution of collateral therefor, (c) obtaining certain consents, waivers andapprovals with respect to the Property, or (d) the review of any Lease orproposed Lease or the preparation or review of any subordination,non-disturbance agreement (the occurrence of any of the above shall be called an"Event"). Borrower further acknowledges and confirms that it shall beresponsible for the payment of all costs of reappraisal of the Property or anypart thereof, whether required by law, regulation, Lender or any governmental orquasi-governmental authority. Borrower hereby acknowledges and agrees to pay,immediately, with or without demand, all such fees (as the same may be increasedor decreased from time to time), and any additional fees of a similar type ornature which may be imposed by Lender from time to time, upon the occurrence ofany Event or otherwise. Wherever it is provided for herein that Borrower pay anycosts and expenses, such costs and expenses shall include, but not be limitedto, all reasonable counsel fees of Lender.

Section 16.2.     COUNSEL FEES FOR ENFORCEMENT.     (a)Borrower shall pay all reasonable counsel fees incurred by Lender in connectionwith (i) the preparation of the Note, this Security Instrument and the OtherSecurity Documents; and (ii) the items set forth in this Article, and (b)Borrower shall pay to Lender on demand any and all expenses, including legalfees incurred or paid by Lender in protecting its interest in the Property or incollecting any amount payable under the Note, this Security Instrument or theOther Security Documents, or in enforcing its rights hereunder with respect tothe Property, whether or not any legal proceeding is commenced hereunder orthereunder; together with interest thereon at the Default Rate from the datepaid or incurred by Lender until such expenses are paid by Borrower.

ARTICLE 17 - DEFINITIONS

Section 17.1.     GENERAL DEFINITIONS.     Unlessthe context clearly indicates a contrary intent or unless otherwise specificallyprovided herein, words used in this Security Instrument may be usedinterchangeably in singular or plural form and the word "Borrower" shall mean"each Borrower and any subsequent owner or owners of the Property or any partthereof or any interest therein," the word "Lender" shall mean "Lender and anysubsequent holder of the Note," the word "Note" shall mean "the Note and anyother evidence of indebtedness secured by this Security Instrument," the word"person" shall include an individual, corporation, limited liability company,partnership, trust, unincorporated association, government, governmentalauthority, and any other entity, the word "Property" shall include any portionof the Property and any interest therein, and the phrases "counsel fees" shallinclude any and all attorneys', paralegal and law clerk fees and disbursements,including, but not limited to fees and disbursements at the pretrial, trial andappellate levels incurred or paid by Lender in protecting its interest in theProperty, the Leases and the Rents and enforcing its rights hereunder, whetherwith respect to retained firms, the reimbursement for the expenses of in-housestaff or otherwise.

39

Section 17.2.     HEADINGS, ETC.     Theheadings and captions of various Articles and Sections of this SecurityInstrument are for convenience of reference only and are not to be construed asdefining or limiting, in any way, the scope or intent of the provisions hereof.

ARTICLE 18 - MISCELLANEOUS PROVISIONS

Section 18.1.     NO ORAL CHANGE.     ThisSecurity Instrument, and any provisions hereof, may not be modified, amended,waived, extended, changed, discharged or terminated orally or by any act orfailure to act on the part of Borrower or Lender, but only by an agreement inwriting signed by the party against whom enforcement of any modification,amendment, waiver, extension, change, discharge or termination is sought.

Section 18.2.     LIABILITY.     If Borrowerconsists of more than one person, the obligations and liabilities of each suchperson hereunder shall be joint and several. This Security Instrument shall bebinding upon and inure to the benefit of Borrower and Lender and theirrespective successors and assigns forever.

Section 18.3.     INAPPLICABLE PROVISIONS.     Ifany term, covenant or condition of the Note or this Security Instrument is heldto be invalid, illegal or unenforceable in any respect, the Note and thisSecurity Instrument shall be construed without such provision.

Section 18.4.     DUPLICATE ORIGINALS; COUNTERPARTS.     ThisSecurity Instrument may be executed in any number of duplicate originals andeach duplicate original shall be deemed to be an original. This SecurityInstrument may be executed in several counterparts, each of which counterpartsshall be deemed an original instrument and all of which together shallconstitute a single Security Instrument. The failure of any party hereto toexecute this Security Instrument, or any counterpart hereof, shall not relievethe other signatories from their obligations hereunder.

Section 18.5.     NUMBER AND GENDER.     Wheneverthe context may require, any pronouns used herein shall include thecorresponding masculine, feminine or neuter forms, and the singular form ofnouns and pronouns shall include the plural and vice versa.

Section 18.6.     LEGAL DESCRIPTION.     Borrowerrepresents to lender that it has reviewed and delivered to Lender a copy of thelegal description set forth in Exhibit "A"; that such legal description is theaccurate and proper legal description of the Land; and Borrower furtheracknowledges that neither Lender nor Lender's counsel prepared or reviewed suchlegal description. Borrower shall indemnify, defend and hold Lender harmlessfrom and against any and all losses, liabilities, claims, damages, expenses,obligations, penalties, actions, judgments, suits, costs or disbursements of anykind or nature whatsoever, including the reasonable fees and actual expenses ofLender's counsel, in connection with any claim that title to the Property isimpaired due to or based upon an inaccurate or improper legal description setforth herein.

Section 18.7.     INCONSISTENCIES.     In theevent of any inconsistencies between the terms and conditions of this Articleand the other provisions of this Security Instrument, the terms and conditionsof this Article shall control and be binding.

40

Section 18.8.     WAIVER OF TRIAL BY JURY.     BORROWERBY ACCEPTANCE OF THIS SECURITY INSTRUMENT, HEREBY WANES TO THE FULLEST EXTENTPERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING ORCOUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY ORINDIRECTLY TO THE LOAN, THE APPLICATION FOR THE LOAN, THE NOTE, THIS SECURITYINSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER ORBORROWER.

[NO FURTHER TEXT-SIGNATURES APPEAR ON NEXT PAGE]

THIS INSTRUMENT INCLUDES A RIDER, THE TERMS OF WHICH AREATTACHED HERETO AND BY THIS REFERENCE MADE A PART HEREOF

41

     IN WITNESS WHEREOF, this Security Instrument has been executed byborrower the day and year first above written.
Signed, sealed and delivered    in the presence of:    Borrower:     Minrad, Inc. a Delaware corporation   */s/ Ronald J. Reybitz* By:*/s/    Peter Fujimoto*Print Name: Ronald J. Reybitz Name:Peter Fujimoto  Title:VP & CFO    */s/ Marsha K. Kernick*   Print Name: Marsha K. Kernick      Minrad Inc., a Delaware corporation        By:*/s/    Ross C. Terrell*   Name:Ross C. Terrell   Title:VP Research   
This Instrument Prepared by and Brian E. Bomstein, Esq.
Upon Recording Return to: Bayview Financial Trading Group, L.P.  2665 South Bayshore Drive, Suite 301  Miami, Florida 33133  Attention: Legal Department
42

 

ACKNOWLEDGMENT
COMMONWEALTH OF PENNSYLVANIA) ss.COUNTY OF LEHIGH)
     The foregoing instrument was acknowledged before me on October 16, 2001by Peter Fujimoto and Ross Terrell the V.P. and 2nd V.P. of Minrad,Inc., a Delaware corporation, on behalf of the said entity.

     He/she is personally known to me or produced a drivers license asidentification, and did/did not take an oath.
 */s/ Kimberly Arzberger* Print Name:     Kimberly Arzberger, Notary Public Notary Public, Commonwealth of    Pennsylvania My Commission Expires: November 20,    2003 [Official Notary Seal]
43

**EXHIBIT "A"**
LEGAL DESCRIPTION

(To be attached)

 

44

Minrad, Inc., a Delaware      corporation
Loan No. 200006916
 
**EXHIBIT "A"

FINANCING STATEMENT**
 

Attached to that certain UCC-1 Financing Statement executedby:

Minrad, Inc., a Delaware corporation

("Debtor")

LOCATION OF PERSONAL PROPERTY COLLATERAL
**LEGAL DESCRIPTION OF PROPERTY(TO BE ATTACHED)**
PROPERTY ADDRESS:

3950 SCHELDEN CIRCLE, BETHLEHEM, Pennsylvania 18017-936

45

Minrad, Inc., a Delaware      corporation
Loan No. 200006916
 
**EXHIBIT "B"

FINANCING STATEMENT**
     All of Debtor's interest in the property, buildings, improvements,appurtenances, tangible property, rents, contract rights, other intangibles andsecondary financing in any way belonging, relating or appertaining to a parcelof land described and set forth in ***Exhibit "A"*** attached hereto andmade a part hereof (the "Land"), to wit:

                        (a)     Additional Land.     All additionallands, estates and development rights hereafter acquired by Debtor for use inconnection with the Land and the development of the Land;

                        (b)     Improvements.      The buildings,structures, fixtures, additions, enlargements, extensions, modifications,repairs, replacements and improvements now or hereafter erected or located onthe Land (the "Improvements");

                        (c)     Easements.     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, airrights and development rights, and all estates, rights, titles, interests,privileges, liberties, servitudes, tenements, hereditaments and appurtenances ofany nature whatsoever, in any way now or hereafter belonging, relating orpertaining 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 oravenue, opened or proposed, in front of or adjoining the Land, to the centerline thereof and all the estates, rights, titles, interests, dower and rights ofdower, courtesy and rights of courtesy, property, possession, claim and demandwhatsoever, both at law and in equity, of Debtor of, in and to the Land and theImprovements and every part and parcel thereof, with the appurtenances thereto;

                        (d)     Fixtures and Personal Property.    All machinery, equipment, fixtures (including, but not limited to, all heating,air conditioning, plumbing, lighting, communications and elevator fixtures)trade fixtures and other property of every kind and nature whatsoever owned byBorrower, or in which Borrower has or shall have an interest, including withoutlimitation, letter of credit rights, deposit accounts, payment intangibles,investment property, electronic chattel paper, timber to be cut and farm animalsand, now or hereafter located upon the Land and the Improvements, or appurtenantthereto, and usable in connection with the present or future operation andoccupancy of the Land and the Improvements and all building equipment, materialsand supplies of any nature whatsoever owned by Borrower, or in which Borrowerhas or shall have an interest, now or hereafter located upon the Land and theImprovements, or appurtenant thereto, or usable in connection with the presentor future operation and occupancy of the Land and the Improvements(collectively, the "Personal Property"), and the right, title and interest ofBorrower in and to any of the Personal Property which may be subject to anysecurity interests, as defined in the Uniform Commercial Code, as adopted andenacted by the state or 

46

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 andproducts of all of the above;

                        (e)     Leases and Rents.     All leases,subleases and other agreements affecting the

use, enjoyment or occupancy of the Land and/or the Improvements heretofore orhereafter entered into and all extensions, amendments and modifications thereto,whether before or after the filing by or against Debtor of any petition forrelief under creditors rights laws (the "Leases") and all right, title andinterest of Debtor, its successors and assigns therein and thereunder,including, without limitation, any guaranties of the lessees' obligationsthereunder, cash or securities deposited thereunder to secure the performance bythe lessees of their obligations thereunder and all rents, additional rents,revenues, room revenues, accounts, accounts receivable, issues and profits(including all oil and gas or other mineral royalties and bonuses) from the Landand the Improvements whether paid or accruing before or after the filing by oragainst Debtor of any petition for relief under the creditors rights laws (the''Rents'') and all proceeds from the sale or other disposition of the Leases andthe right to receive and apply the Rents;

                        (f)     Insurance Proceeds.     All proceedsof and any unearned premiums on any insurance policies covering the Land,Improvements and/or Personal Property, including, without limitation, the rightto receive and apply the proceeds of any insurance, judgments, or settlementsmade in lieu thereof, for damage thereto;

                        (g)     Condemnation Awards.     All awards orpayments, including interest thereon, which may heretofore and hereafter be madewith respect to the Land or Improvements, whether from the exercise of the rightof eminent domain (including, but not limited to any transfer made in lieu of orin anticipation of the exercise of the right), or for a change of grade, or forany other injury to or decrease in the value of the Land or Improvements;

                        (h)     Tax Certiorari.     All refunds,rebates or credits in connection with a reduction in real estate taxes andassessments charged against the Land or Improvements as a result of taxcertiorari or any applications or proceedings for reduction;

                        (i)     Conversion.    All proceeds of the conversion, voluntary or involuntary, of any of theforegoing including, without limitation, proceeds of insurance and condemnationawards, into cash or liquidation claims;

                        (j)     Rights.     The right, in the name andon behalf of Debtor, to appear in and defend any action or proceeding broughtwith respect to the Land, Improvements, Personal Property, Leases or Rents andto commence any action or proceeding to protect the interest of Secured Partytherein;

                        (k)     Agreements.     All agreements,contracts, certificates, instruments, franchises, permits, licenses, plans,specifications and other documents, now or hereafter entered into, and allrights therein and thereto, respecting or pertaining to the use, occupation,construction, management or operation of the Land and any part thereof and anyImprovements 

47

or respecting any business or activity conducted on the Land and any partthereof and all rights, title and interest of Debtor therein and thereunder;

                        (l)     Intangibles.     All trade names,trademarks, servicemarks, logos, copyrights, goodwill, books and records and allother general intangibles relating to or used in connection with the operationof the Land and Improvements; and

                        (m)     Other Rights.     Any and all otherrights of Debtor in and to the items set forth in Subsections (a) through (m)above.

48

Minrad, Inc., a Delaware      corporation
Loan No. 200006916
 
**EXHIBIT "C"

FINANCING STATEMENT**
 

Attached to that certain UCC-1 Financing Statement executedby:

Minrad, Inc., a Delaware corporation("Debtor")

COUNTERPARTS: This instrument may be executed in multiple counterparts, andthe separate signature pages may then be combined into a single originaldocument.

 

SIGNATURE OF DEBTOR:

Minrad, Inc., a Delaware corporation

 
By:*/s/    Peter Fujimoto*Print Name:Peter FujimotoTitle:VP & CFO    Minrad Inc., a Delaware corporation  By:*/s/    Ross C. Terell*Name:Ross C. TerrellTitle:V.P. Research
49