Exhibit 10.9




Exhibit 10.9



AMENDMENT TO CONVERTIBLE PROMISSORY NOTES





        AGREEMENT, dated as of May
11, 2005, between and among Minrad
International, 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 Nevada
corporation (the "Predecessor"), executed and delivered to the Lenders certain
Convertible 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 the
face amount of $1,000,000 made payable to Cagan, (collectively, the Notes). By
operation of law, the Borrower has succeeded to the obligations of the
Predecessor, including the obligations under the Notes. The Borrower and the
Lenders would now like to modify certain of the terms of the Notes as provided
in this Agreement. The Notes were issued in connection with certain other Loan
Documents, dated February 2005, by and among the parties hereto and referenced
in the Notes, including a Mortgage and Security Agreement, the Guarantee
Agreement, the Registration Rights Agreements, the Warrant Agreements, the Note
Subscription Agreements, and other loan and collateral documents evidencing or
securing the obligation (collectively, the "Loan Documents').




AGREEMENT



        NOW, THEREFORE, in consideration of the premises and the covenants and
agreements 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." of
the 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." 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 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 the
following:

"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 and
the other Loan Documents shall continue in full force and effect. This Agreement
shall be governed by and construed in accordance with New York law. This
Agreement, and the Loan Documents, represent the entire agreement of the parties
with respect to the subject matter, and any amendment or modification to this
Agreement or the other Loan Documents must be in writing and signed by the
parties.

        8. The Borrower further acknowledges that as of the date hereof, it has not
complied with its closing obligations under Section 1(d) of the Note
Subscription Agreement, and the Borrower hereby covenants that within ten (10)
business days following the execution of this Agreement, the Borrower will
deliver a second mortgage on the Borrower's facility located at 3950 Schelden
Circle, Bethlehem, Pennsylvania 18017, and a security interest in all personal
property at that location, in a form substantially similar to the Mortgage and
Security Agreement, attached hereto as Exhibit A, that will secure the
notes subscribed for, as described in the Notes, as amended, and the referenced
therein. 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 duly
executed, 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 "Security
Instrument") is made as of October ___, 2001, by Minrad, Inc., a Delaware
corporation, whose address is 847 Main Street, Buffalo, New York 14202, as
mortgagor ("Borrower") to InterBay Funding, LLC, a Delaware limited liability
company, whose address is 2601 South Bayshore Drive, Ste. 400, Miami, Florida
33133, as mortgagee ("Lender").




R E C I T A L S:


Borrower by its Promissory Note of even date herewith given to Lender is
indebted to Lender in the principal sum of Eight Hundred Seventy-Five Thousand
and No/100 Dollars ($875,000.00) in lawful money of the United States of America
(the Note together with all extensions, renewals, modifications, substitutions
and amendments thereof shall collectively be referred to as the "Note"), with
interest from the date thereof at the rates set forth in the Note, principal and
interest to be payable in accordance with the terms and conditions provided in
the Note 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 the
Note and the Other Obligations (hereinafter defined) and any and all other
indebtedness now or hereafter owing by Borrower to Lender.

ARTICLE 1. - GRANTS OF SECURITY

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

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

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

                        (c)     Improvements.     The buildings,
structures, fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and improvements now or hereafter erected or located on
the 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 and
powers, air rights and development rights, and all estates, rights, titles,
interests, privileges, liberties, servitudes, tenements, hereditaments and
appurtenances of any nature whatsoever, in 



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

                        (e)     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 by
Borrower, or in which Borrower has or shall have an interest, including without
limitation, letter of credit rights, deposit accounts, payment intangibles,
investment property, electronic chattel paper, timber to be cut and farm animals
and, now or hereafter located upon the Land and the Improvements, or appurtenant
thereto, and usable in connection with the present or future operation and
occupancy of the Land and the Improvements and all building equipment, materials
and supplies of any nature whatsoever owned by Borrower, or in which Borrower
has or shall have an interest, now or hereafter located upon the Land and the
Improvements, or appurtenant thereto, or usable in connection with the present
or future operation and occupancy of the Land and the Improvements
(collectively, the "Personal Property"), and the right, title and interest of
Borrower in and to any of the Personal Property which may be subject to any
security interests, as defined in the Uniform Commercial Code, as adopted and
enacted by the state or states where any of the Property is located (the
"Uniform Commercial Code"), superior in lien to the lien of this Security
Instrument, and all proceeds and products of all of the above;

                        (f)     Leases and Rents.     All leases,
subleases and other agreements affecting the use, enjoyment or occupancy of the
Land and/or the Improvements heretofore or hereafter entered into and all
extensions, amendments and modifications thereto, whether before or after the
filing by or against Borrower of any petition for relief under Creditors Rights
Laws (hereinafter defined) (the "Leases") and all right, title and interest of
Borrower, its successors and assigns therein and thereunder, including, without
limitation, any guaranties of the lessees' obligations thereunder, cash or
securities deposited thereunder to secure the performance by the 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 Land and the
Improvements whether paid or accruing before or after the filing by or against
Borrower of any petition for relief under the Creditors Rights Laws (the
"Rents") and all proceeds from the sale or other disposition of the Leases and
the right to receive and apply the Rents to the payment of the Debt;

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

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

2



the exercise of the right of eminent domain (including, but not limited to
any transfer made in lieu of or in anticipation of the exercise of the right),
or for a change of grade, or for any other injury to or decrease in the value of
the Property;

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

                        (j)     Conversion.     All proceeds of the
conversion, voluntary or involuntary, of any of the foregoing including, without
limitation, proceeds of insurance and condemnation awards, into cash or
liquidation claims;

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

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

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

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

Section 1.2.     ASSIGNMENT OF LEASES AND RENTS.     Borrower
hereby absolutely and unconditionally assigns to Lender Borrower's right, title
and interest in and to all current and future Leases and Rents; it being
intended by Borrower that this assignment constitutes a present, absolute
assignment and not an assignment for additional security only. Notwithstanding
the foregoing, Lender grants to Borrower a revocable license to collect and
receive the Rents. Borrower shall hold a portion of the Rents sufficient to
discharge all current sums due on the Debt, for use in the payment of such sums.

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

3



interests set forth in Section 1.1 herein to the full extent that the same
may be subject to the Uniform Commercial Code. If required by Lender, Borrower
shall execute UCC-1 Financing Statements covering said property for filing with
the appropriate county and/or state filing offices. In any event, Lender is
permitted to unilaterally file a UCC-1 Financing Statement covering all of the
Property.

Section 1.4     PLEDGE OF MONIES HELD.     Borrower
hereby pledges to and grants a continuing security interest in favor of Lender
any and all monies now or hereafter held by Lender, including, without
limitation, any sums deposited in the Escrow Fund (hereinafter defined), Net
Proceeds (hereinafter defined) and condemnation awards or payments (hereinafter
described) as additional security for the Obligations until expended as provided
in this Security Instrument.

CONDITIONS TO GRANT



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

PROVIDED, HOWEVER, these presents are upon the express condition that, if
Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument, shall perform the
Other Obligations as set forth in this Security Instrument and shall abide by
and comply with each and every covenant and condition set forth herein and in
the Note, these presents and the estate hereby granted shall cease, terminate
and be void, except to the extent any provision herein provides that it shall
survive the repayment of the obligations.

ARTICLE 2. - DEBT AND OBLIGATIONS SECURED

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

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

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

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

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

                        (e)     all sums advanced pursuant to this Security
Instrument to protect and preserve the Property and the lien and the security
interest created hereby; and

4



                        (f)     all sums advanced and costs and expenses
incurred 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 the
acquisition or perfection of the security therefor, whether made or incurred at
the request of Borrower or Lender; and

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

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

                        (a)     all other obligations of Borrower contained
herein;

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

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

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

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

Section 2.4.     PAYMENTS.     Unless payments
are made in the required amount in immediately available funds at the place
where the Note is payable, remittances in payment of all or any part of the Debt
shall not, regardless of any receipt or credit issued therefor, constitute
payment until the required amount is actually received by Lender in funds
immediately available at the place where the Note is payable (or any other place
as Lender, in Lender's sole discretion, may have established by delivery of
written notice thereof to Borrower) and shall be made and accepted subject to
the condition that any check or draft may be handled for collection in
accordance 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 due
shall be deemed an acceptance on account only, and the failure to pay the entire
amount 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 OF
OBLIGATIONS.     Borrower will pay the Debt at the time and in the
manner provided in the Note and in this Security Instrument; without relief from
valuation or appraisement laws, and shall promptly and fully perform all of the
Obligations in this Security Agreement and the Other Security Documents
(hereinafter defined).

Section 3.2.     INCORPORATION BY REFERENCE.     All
the covenants, conditions and agreements contained in (a) the Note and (b) all
and any of the documents other than the Note or this Security Instrument now or
hereafter executed by Borrower and/or others and by or in favor of Lender, which
wholly or partially secure or guaranty payment of the Note or are otherwise
executed and delivered in connection with the Loan (the "Other Security
Documents") are hereby made a part of this Security Instrument to the same
extent and with the same force as if fully set forth herein.

Section 3.3     INSURANCE.


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

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

                                  (ii)     Liability Insurance.     Commercial
general liability insurance on the so-called "occurrence" form, including bodily
injury, death and property damage liability, insurance against any and all
claims, including all legal liability to the extent insurable and imposed upon
Lender and all court costs and attorneys' fees and expenses, arising out of or
connected with the possession, use, leasing, operation, maintenance or condition
of the Property in such amounts as are generally available at commercially
reasonable premiums and are generally required by institutional lenders for
properties comparable to the Property but in any event for a limit per
occurrence of at least $1,000,000 and an annual aggregate of at least
$3,000,000;

6



                                  (iii)     Workers' Compensation
Insurance.     Statutory workers' compensation insurance with respect to any
work on or about the Property;

                                  (iv)     Business Interruption.     Business
interruption and/or loss of "rental income" insurance in an amount sufficient to
avoid any co-insurance penalty and to provide proceeds which will cover a period
of 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 Rents
payable under the Leases and (B) the total ascertainable amount of all other
amounts to be received by Borrower from third parties which are the legal
obligation of the tenants, reduced to the extent such amounts would not be
received because of operating expenses not incurred during a period of
non-occupancy of that portion of the Property then not being occupied;

                                  (v)     Boiler and Machinery Insurance.     Broad
form boiler and machinery insurance (without exclusion for explosion) covering
all boilers or other pressure vessels, machinery, and equipment located in, on
or about the Property and insurance against loss of occupancy or use arising
from any breakdown in such amounts as are generally required by institutional
lenders for properties comparable to the Property;

                                  (vi)     Flood Insurance.     If
required pursuant to the terms hereof, flood insurance in an amount at least
equal to the lesser of (a) the principal balance of the Note, or (b) the maximum
limit of coverage available for the Property under the National Flood Insurance
Act of 1968. The Flood Disaster Protection Act of 1973 and the National Flood
Insurance Reform Act of 1994, as each may be amended (the "Flood Insurance
Acts");

                                  (vii)     Builder's Risk Insurance.     At
all times during which structural construction, repairs or alterations are being
made with respect to the Improvements (A) owner's contingent or protective
liability insurance covering claims not covered by or under the terms or
provisions of the above mentioned commercial general liability insurance policy;
and (B) the insurance provided for in Subsection 3.3(a)(i) written in a
so-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 amount
endorsement waiving co-insurance provisions; and

                                  (viii)     Other Insurance.     Such
other insurance with respect to the Property against loss or damage of the kinds
from time to time customarily insured against and in such amounts as required by
institutional lenders for properties comparable to the Property.

                        (b)     All insurance provided for herein shall be
obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be issued by either the insurers who insure
the Improvements on the date of this Security Instrument or one or more other
domestic primary insurer(s) having a general policy rating of A or better and a
financial class of VIII or better by A.M. Best Company, Inc. (or if a rating of
A.M. Best Company Inc. is no longer available, a similar rating from a similar
or successor service) (each such insurer shall be referred to below as a
"Qualified Insurer"). All insurers providing insurance required by this Security
Instrument shall be authorized and admitted to issue insurance in the state in
which 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 that
all proceeds be payable to Lender. The Policies referred to in Subsections
3.3(a)(i), (v), (vi) and (vii) shall also contain: (i) a standard
"non-contributory mortgagee" endorsement or its equivalent relating, inter
alia. to recovery by Lender notwithstanding the negligent or willful
acts or omissions of Borrower; (ii) a waiver of subrogation endorsement as to
Lender; and (iii) an endorsement providing for a deductible per loss of an
amount not more than that which is customarily maintained by prudent owners of
similar properties in the general vicinity of the Property, but in no event in
excess of $5,000. The Policy referred to in Subsection 3.3(a)(i) above shall
provide coverage for contingent liability from Operation of Building Laws,
Demolition Costs and Increased Cost of Construction Endorsements, together with
an "Ordinance or Law Coverage" or "Enforcement" endorsement to the extent
available in the jurisdiction in which the Property is located. All Policies
shall contain (i) a provision that such Policies shall not be denied renewal,
materially changed (other than to increase the coverage provided), canceled or
terminated, nor shall they expire, without at least thirty (30) days' prior
written notice to Lender in each instance; and (ii) include effective waivers by
the insurer of all claims for applicable premiums ("Insurance Premiums") against
any mortgagee, loss payees, additional insureds and named insureds (other than
Borrower). Certificates of insurance with respect to all renewal and replacement
Policies shall be delivered to Lender not less than twenty (20) days prior to
the expiration date of any of the Policies required to be maintained hereunder
which certificates shall bear notations evidencing payment of Insurance
Premiums. Originals or certificates of such replacement Policies shall be
delivered to Lender promptly after Borrower's receipt thereof but in any case
within thirty (30) days after the effective date thereof. If Borrower fails to
maintain and deliver to Lender the original Policies or certificates of
insurance required by this Security Instrument, upon ten (10) days' prior notice
to Borrower, Lender may procure such insurance at Borrower's sole cost and
expense.

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

                        (d)     In the event of a foreclosure of the Security
Instrument or other transfer of title to the Property in extinguishment in whole
or in part of the Debt, all right, title and interest of Borrower in and to the
Policies then in force concerning the Property and all proceeds payable
thereunder shall thereupon vest in Lender or the purchaser at such foreclosure
or 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 same
are initially payable all taxes, assessments, impact fees, levies, inspection
and license fees, water rates, sewer rents and other governmental impositions,
including, without limitation, vault and meter charges and license fees for the
use of vaults, chutes and similar areas adjoining the Land, now or hereafter
levied or assessed or imposed against the Property or any part thereof (the
"Taxes") not paid from the 

8



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

                        (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, the
amount 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 the
Note, this Security Instrument or any of the Other Security Documents, (ii)
Borrower is permitted to do so under the provisions of any other mortgage, deed
of trust or deed to secure debt affecting the Property, (iii) such proceeding
shall suspend the collection of the Taxes from Borrower and from the Property or
Borrower shall have paid all of the Taxes under protest, (iv) such proceeding
shall be permitted under and be conducted in accordance with the provisions of
any other instrument to which Borrower is subject and shall not constitute a
default thereunder, (v) neither the Property nor any part thereof or interest
therein will be in danger of being sold, forfeited, terminated, canceled or lost
and (vi) Borrower shall have deposited with Lender adequate reserves (determined
by Lender in its sole discretion) for the payment of the Taxes, together with
all interest and penalties thereon, unless Borrower has paid all of the Taxes
under protest, and Borrower shall have furnished such other security as may be
required in the proceeding, or as may be reasonably requested by Lender to
insure the payment of any contested Taxes, together with all interest and
penalties thereon, taking into consideration the amount in the Escrow Fund
available for payment of Taxes.

Section 3.5     ESCROW FUND.     In addition to
the initial deposits with respect to Taxes and Insurance Premiums made by
Borrower to Lender on the date hereof to be held by Lender in escrow, Borrower
shall pay to Lender on the first day of each calendar month (a) one-twelfth of
an 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) months
and (b) one-twelfth of an amount which would be sufficient to pay the Insurance
Premiums due for the renewal of the coverage afforded by the Policies upon the
expiration thereof (the amounts in (a) and (b) above shall be called the "Escrow
Fund"). Borrower agrees to notify Lender immediately of any changes to the
amounts, schedules and instructions for payment of any Taxes and Insurance
Premiums of which it has or obtains knowledge and authorizes Lender or its agent
to obtain the bills for Taxes directly from the appropriate taxing authority.
The Escrow Fund and the payments of interest or principal or both, payable
pursuant to the Note shall be added together and shall be paid as an aggregate
sum by Borrower to Lender. Provided there are sufficient amounts in the Escrow
fund and no Event of Default exists, Lender shall be obligated to pay the Taxes
and Insurance Premiums as they become due on their respective due dates on
behalf of Borrower by applying the Escrow Fund to the payments of such Taxes and
Insurance Premiums required to be made by Borrower. If the amount of the Escrow
Fund shall exceed the amounts 

9



reasonably necessary for the payment of Taxes and Insurance Premiums, Lender
shall, in its discretion, return any excess to Borrower or credit such excess
against future payments to be made to the Escrow Fund. In allocating such
excess, Lender may deal with the person shown on the records of Lender to be the
owner of the Property. If the Escrow Fund is not sufficient to pay the items set
forth in (a) and (b) above as and when they are due, Borrower shall promptly pay
to Lender, upon demand, an amount which Lender shall reasonably estimate as
sufficient to make up the deficiency. Unless otherwise required by applicable
state or federal law, the Escrow Fund shall not constitute a trust fund and may
be commingled with other monies held by Lender. Unless otherwise required by
applicable state or federal law, no earnings or interest on the Escrow Fund
shall be payable to Borrower. Upon payment in full of the Debt, and full
performance 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 this
Security Instrument within a reasonable time following the date of such full
payment and performance.

Section 3.6.     CONDEMNATION.     Borrower
shall promptly give Lender notice of the actual or threatened commencement of
any condemnation or eminent domain proceeding and shall deliver to Lender copies
of any and all papers, documents, surveys and correspondence served or received
in connection with such proceedings. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including, but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Security Instrument and
the Debt shall not be reduced until any award or payment therefor shall have
been actually received and applied by Lender, after the deduction of expenses of
collection, to the reduction or discharge of the Debt. Lender shall not be
limited to the interest paid on the award by the condemning authority but shall
be entitled to receive out of the award interest at the rate or rates provided
in the Note. Borrower hereby assigns and shall cause all awards and payments
made in any condemnation or eminent domain proceeding, to be paid directly to
Lender. Lender may apply any award or payment to the reduction or discharge of
the Debt whether or not then due and payable. If the Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of the award or
payment, Lender shall have the right, whether or not a deficiency judgment on
the Note shall have been sought, recovered or denied, to receive the award or
payment, or a portion thereof sufficient to pay the Debt. In addition, Borrower
authorizes Lender, at Lender's option but without any obligation, as
attorney-in-fact for Borrower to commence, appear in and prosecute, in
Borrower's or Lender's name, any action or proceeding relating to any
condemnation (which term for purposes hereunder shall mean any action regarding
damage or taking by any governmental authority, quasi-governmental authority,
any party having power of condemnation, or any transfer by private sale in lieu
thereof) or other taking of the Property and to settle or compromise any claim
in connection with such condemnation or other taking. Notwithstanding any
application of condemnation proceeds by Lender to the Debt, Borrower shall
repair, restore and rebuild the Property affected by the condemnation to a
condition as close to that existing prior to such condemnation as is reasonable
practicable, and otherwise sufficient for the use and enjoyment thereof as
determined by Lender.

Section 3.7     CASUALTY.

10



                        (a)     If all or any part of the Property shall be
damaged or destroyed by a casualty covered by insurance, Lender is authorized
and empowered (but not obligated or required) to make proof of loss, damage or
destruction under any policies of insurance required under this Mortgage. All
proceeds of insurance shall be paid to Lender and shall be applied first to the
payment of all costs and expenses (including without limitation reasonable
attorneys' fees and expenses) incurred by Lender in obtaining such proceeds, and
second, at the option of Lender, either to the payment of the Debt, whether or
not due, in such order as Lender may elect, or to the restoration, repair or
replacement of the Property. If Lender elects, in its sole discretion, to apply
the insurance proceeds to the restoration, repair or replacement of the
Property, such proceeds shall be disbursed to or for Borrower's account as work
progresses pursuant to a construction and disbursing agreement in form and
content satisfactory to Lender in its sole discretion. The election by Lender to
apply the insurance proceeds to the restoration, repair or replacement of the
Property shall not affect the lien of this Security Instrument or affect or
reduce the sums secured hereby (including but not limited to the continuing
accrual of interest under the Note); and this Security Instrument shall remain
in full force and effect, and Borrower shall not be excused in the payment or
performance thereof.

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

                        (c)     If any work required to be performed under
this Section shall involve an estimated expenditure of more than Ten Thousand
and No/100 Dollars ($10,000.00), no such work shall be undertaken until plans
and 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 into
proposed Leases (including the renewals or extensions of existing Leases ("a
Renewal 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 any
applicable 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 terms
comparable to existing local market rates and terms (taking into account the
type and quality of the tenant) as of the date such Lease is executed by
Borrower (unless, in the case of a Renewal Lease, the rent payable during such
renewal, or a formula or other method to compute such rent, is provided for in
the original Lease), (ii) is an arms-length transaction with a bona fide,
independent third party tenant, (iii) does not have a materially adverse effect
on the value of the Property taken as a whole, (iv) is subject and subordinate
to the Security Instrument and the lessee thereunder agrees to subordinate the
Lease or Renewal Lease to the lien of this Security Instrument, and (v) if
required 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 this
paragraph shall be subject to the prior approval of Lender and its counsel, at
Borrower's expense. Borrower shall promptly 

11



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

                        (b)     Borrower (i) shall observe and perform all
the obligations imposed upon the lessor under the Leases and shall not do or
permit to be done anything to impair the value of any of the Leases as security
for the Debt; (ii) upon request, shall promptly send copies to Lender of all
notices of default which Borrower shall send or receive thereunder; (iii) shall
enforce all of the material terms, covenants and conditions contained in the
Leases 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 (security
deposits shall not be deemed Rents collected in advance); (v) shall not execute
any 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 Leases
not 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 rents
under, accept a surrender of space under, or shorten the term of, any Lease
(including any guaranty, letter of credit or other credit support with respect
thereto) provided that such action (taking into account, in the case of a
termination, reduction in rent, surrender of space or shortening of term, the
planned alternative use of the affected space) does not have a materially
adverse effect on the value of the Property taken as a whole, and provided that
such Lease, as amended, modified or waived, is otherwise in compliance with the
requirements of this Security Instrument and any subordination agreement binding
upon Lender with respect to such Lease. A termination of a Lease with a tenant
who is in default beyond applicable notice and grace periods shall not be
considered an action which has a materially adverse effect on the value of the
Property taken as a whole. Any amendment, modification, waiver, termination,
rent reduction, space surrender or term shortening which does not satisfy the
requirements set forth in this Subsection shall be subject to the prior approval
of Lender and its counsel, at Borrower's expense. Borrower shall promptly
deliver to Lender copies of amendments, modifications and waivers which are
entered into pursuant to this Subsection together with Borrower's certification
that it has satisfied all of the conditions of this Subsection.

                        (d)     Notwithstanding anything contained herein to
the 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 the
base rents will contribute in excess of twenty percent (20%) of the gross cash
flow of the Property, together with any instrument guaranteeing or providing
credit support therefor.

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

12



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

Section 3.10.     WASTE.     Borrower shall not commit or suffer any
waste of the Property or make any change in the use of the Property which will
in any way materially increase the risk of fire or other hazard arising out of
the operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or substantially increase the rates
thereunder, or do or permit to be done thereon anything that may in any way
impair the value of the Property or the security of this Security Instrument.
Borrower will not, without the prior written consent of Lender, permit any
drilling or exploration for or extraction, removal, or production of any
minerals from the surface or the subsurface of the Land, regardless of the depth
thereof or the method of mining or extraction thereof.

Section 3.11.     COMPLIANCE WITH LAWS. 

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

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

                        (c)     Notwithstanding any provisions set forth
herein or in any document regarding Lender's approval of alterations of the
Property, Borrower shall not alter the Property in any manner which would
materially increase Borrower's responsibilities for compliance with Applicable
Laws without the prior written approval of Lender. Lender's approval of the
plans, specifications, or working drawings for alterations of the Property shall
create no responsibility or liability on behalf of Lender for their
completeness, design, sufficiency or their compliance with Applicable Laws. The
foregoing shall apply to tenant improvements constructed by Borrower or by any
of its tenants. Lender may condition any such approval upon receipt of a
certificate of compliance with Applicable Laws from an independent architect,
engineer, or other person acceptable to Lender.

                        (d)     Borrower shall give prompt notice to Lender
of the receipt by Borrower of any notice related to a violation or threatened
violation of any Applicable Laws and of the commencement or threatened
commencement of any proceedings or investigations which relate to compliance
with 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, the
Applicable Laws affecting the Property, provided that (i) no Event of Default
has occurred and is continuing under the Note, this Security Instrument or any
of the Other Security Documents; (ii) Borrower is permitted to do so under the
provisions of any other mortgage, deed of trust or deed to secure debt affecting
the Property; (iii) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Borrower or the
Property is subject and shall not constitute a default thereunder; (iv) neither
the Property, any part thereof or interest therein, any of the tenants or
occupants thereof, Borrower, nor Lender shall be affected in any material
adverse way as a result of such proceeding; (v) non-compliance with the
Applicable Laws shall not impose civil or criminal liability on Borrower or
Lender; and (vi) Borrower shall have furnished to Lender all other items
reasonably requested by Lender.

Section 3.12.     BOOKS AND RECORDS. 

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

                                  (i)     monthly (or if the Loan (defined
below) has been securitized or sold as a whole loan by Lender, quarterly) and
annual certified rent rolls signed and dated by Borrower, detailing the names of
all tenants of the Improvements, the portion of Improvements occupied by each
tenant, the base rent and any other charges payable under each Lease and the
term of each Lease, including the expiration date, the extent to which any
tenant is in default under any Lease, and any other information as is reasonably
required by Lender, 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
after the close of each fiscal year of Borrower, as applicable;

                                  (ii)     quarterly and annual operating
statements of the Property, prepared and certified by Borrower in the form
required by Lender, detailing the revenues received, the expenses incurred and
the net operating income before and after debt service (principal and interest)
and major capital improvements for each month and containing appropriate year to
date 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 after
the close of each fiscal year of Borrower, as applicable;

                                  (iii)     an annual operating statement of
the 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 if
required by Lender, an audited annual operating statement prepared and certified
by 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 sheet
and profit and loss statements of Borrower, any Guarantors and any Indemnitor(s)
in the form required by Lender, prepared and certified by the respective
Borrower, Guarantors and/or Indemnitor(s), or if required by Lender, audited
financial statements prepared by an independent certified public accountant
acceptable to Lender, within thirty (30) days after the end of each fiscal
quarter 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 the
close of each fiscal year, copies of each Borrower's, Guarantor's and
Indemnitor's state and federal income tax returns, as same had been filed, and
certified by such party as true and complete.

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

                                  (i)     a property management report for
the Property, any information reasonably requested by Lender, in reasonable
detail and certified by Borrower (or an officer, general partner, member or
principal 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 security
deposits held in connection with any Lease of any part of the Property,
including the name and identification number of the accounts in which such
security deposits are held, the name and address of the financial institutions
in which such security deposits are held and the name of the person to contact
at such financial institution, along with any authority or release necessary for
Lender to obtain information regarding such accounts directly from such
financial institutions.

                        (c)     Borrower, any Guarantor and any Indemnitor
shall furnish Lender with such other additional financial or management
information (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 Indemnitor
shall furnish to Lender and its agents convenient facilities for the
examination, copying and audit of any such books and records.

Section 3.13.     PAYMENT FOR LABOR AND MATERIALS.     Borrower will
promptly pay when due all bills and costs for labor, materials, and specifically
fabricated materials incurred in connection with the Property and never permit
to exist in respect of the Property or any part thereof any lien or security
interest, 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 Property
or any part thereof any other or additional lien or security interest other than
the liens or security interests hereof, except for the Permitted Exceptions
(defined below).

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

15



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

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

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

Section 3.17.     MANAGEMENT.     The Property shall be managed by
either: (a) Borrower or an entity affiliated with Borrower and approved by
Lender for so long as Borrower or said affiliated entity is managing the
Property in a first class manner; or (b) a professional property management
company approved by Lender. Management by an affiliated entity or a professional
property management company shall be pursuant to a written agreement approved by
Lender 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 any
management agreement modified or amended without the prior written consent of
Lender. In the event (x) of default hereunder or under any management contract
then in effect, which default is not cured within any applicable grace or cure
period or (y) of the bankruptcy or insolvency of the manager, Lender shall have
the right to immediately terminate, or to direct Borrower to immediately
terminate, such management contract and to retain, or to direct Borrower to
retain, a new management agent approved by Lender. All Rents generated by or
derived from the Property shall first be utilized solely for current expenses
directly attributable to the ownership and operation of the Property, including,
without limitation, current expenses relating to Borrower's liabilities and
obligations with respect to the Note, this Security Instrument and the Other
Security Documents, and none of the Rents generated by or derived from the
Property shall be diverted by Borrower and utilized for any other purpose unless
all such current expenses attributable to the ownership and operation of the
Property have been fully paid and satisfied.

Section 3.18.     PRINCIPAL PLACE OF BUSINESS.     Borrower shall not
change the principal place of business or chief executive office, or, in the
event Borrower is one or more natural persons, the location of its permanent
residence, all as set forth herein without the consent of Lender, which consent
shall not be unreasonably withheld. Lender's consent shall be conditioned upon,
among other things, the execution and delivery of additional financing
statements, security agreements and other instruments which may be necessary to
effectively evidence or perfect Lender's security interest in the Property as a
result 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 and
marketable title to the Property and has the right to mortgage, grant, bargain,
sell, pledge, assign, warrant, transfer and convey the same and that Borrower
possesses an unencumbered fee simple absolute estate in the Land and the
Improvements and that it owns the Property free and clear of all liens,
encumbrances and charges whatsoever except for those exceptions shown in the
title insurance policy insuring the lien of this Security Instrument (the
"Permitted Exceptions"). Borrower shall forever warrant, defend and preserve the
title and the validity and priority of the lien of this Security Instrument and
shall forever warrant and defend the same to Lender against the claims of all
persons whomsoever, and shall make such further assurances to perfect fee simple
title to the Property as Lender may reasonably require.

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

Section 4.3.     VALIDITY OF DOCUMENTS.     (a) The execution,
delivery and performance of the Note, this Security Instrument and the Other
Security Documents and the borrowing evidenced by the Note (i) are within the
power and authority of Borrower; (ii) have been authorized by all requisite
organizational action; (iii) have received all necessary approvals and consents,
corporate, governmental or otherwise; (iv) will not violate, conflict with,
result in a breach of or constitute (with notice or lapse of time, or both) a
default under any provision of law, any order or judgment of any court or
governmental authority, the articles of incorporation, by-laws, partnership or
trust agreement, articles of organization, operating agreement, or other
governing instrument of Borrower, or any indenture, agreement or other
instrument to which Borrower is a party or by which it or any of its assets or
the Property is or may be bound or affected; (v) will not result in the creation
or imposition of any lien, charge or encumbrance whatsoever upon any of its
assets, except the lien and security interest created hereby; and (vi) will not
require any authorization or license from, or any filing with, any governmental
or other body (except for the recordation of this Security Instrument in
appropriate land records in the State where the Property is located and except
for Uniform Commercial Code filings relating to the security interest created
hereby), and (b) the Note, this Security Instrument and the Other Security
Documents constitute the legal, valid and binding obligations of Borrower,
enforceable in accordance with their terms.

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

17



Section 4.5.     STATUS OF PROPERTY. 

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

                        (b)     The Property and the present and contemplated
use and occupancy thereof are in full compliance with all applicable zoning
ordinances, building codes, land use laws, Environmental Laws and other similar
laws.

                        (c)     The Property is served by all utilities
required for the current or contemplated use thereof. All utility service is
provided by public utilities and the Property has accepted or is equipped to
accept such utility service.

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

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

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

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

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

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

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

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

18



Section 4.6.     NO FOREIGN PERSON.     Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of
1986, as amended and the related Treasury Department regulations.

Section 4.7.     SEPARATE TAX LOT.     The Property is assessed for
real estate tax purposes as one or more wholly independent tax lot or lots,
separate from any adjoining land or improvements not constituting a part of such
lot or lots, and no other land or improvements is assessed and taxed together
with the Property or any portion thereof.

Section 4.8.     LEASES.     Except as disclosed in the rent roll for
the Property delivered to and approved by Lender, (a) Borrower is the sole owner
of the entire lessor's interest in the Leases; (b) the Leases are valid and
enforceable and in full force and effect; (c) all of the Leases are arms-length
agreements with bona fide, independent third parties; (d) no party under any
Lease is in default; (e) all Rents due have been paid in full; (f) the terms of
all alterations, modifications and amendments to the Leases are reflected in the
certified occupancy statement delivered to and approved by Lender; (g) none of
the Rents reserved in the Leases have been assigned or otherwise pledged or
hypothecated; (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 collected
in advance); (i) the premises demised under the Leases have been completed in
accordance with the Leases, and the tenants under the Leases have accepted the
same and have taken possession of the same on a rent-paying basis; (j) there
exist no offsets or defenses to the payment of any portion of the Rents and
Borrower has no monetary obligation to any tenant under any Lease; (k) Borrower
has received no notice from any tenant challenging the validity or
enforceability of any Lease; (l) there are no agreements with the tenants under
the Leases other than expressly set forth in each Lease; (m) the Leases are
valid and enforceable against Borrower and the tenants set forth therein; (n) no
Lease contains an option to purchase, right of first refusal to purchase, right
of first refusal to relet, or any other similar provision; (o) no person or
entity has any possessory interest in, or right to occupy, the Property except
under and pursuant to a Lease; (p) each Lease is subordinate to this Security
Instrument, either pursuant to its terms or a recordable subordination
agreement; (q) no Lease has the benefit of a non-disturbance agreement that
would be considered unacceptable to prudent institutional lenders; (r) all
security deposits relating to the Leases reflected on the certified rent roll
delivered to Lender have been collected by Borrower; and (s) no brokerage
commissions or finders fees are due and payable regarding any Lease.

Section 4.9.     FINANCIAL CONDITION. 

                        (a)     (i) Borrower is solvent and no proceeding
under Creditors Rights Laws (hereinafter defined) with respect to Borrower has
been initiated, and (ii) Borrower has received reasonably equivalent value for
the granting of this Security Instrument.

                        (b)     No petition in bankruptcy has been filed by
or against Borrower, any Guarantor, any Indemnitor or any related entity, or any
principal, general partner or member thereof, in the last seven (7) years, and
neither Borrower, any Guarantor, any Indemnitor nor any related entity, or any
principal, 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 of
any Creditors Rights Laws.

Section 4.10.     BUSINESS PURPOSES.     The loan evidenced by the
Note 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 any
Indemnitor have filed all federal, state, county, municipal, and city income,
personal property and other tax returns required to have been filed by them and
have paid all taxes and related liabilities which have become due pursuant to
such returns or pursuant to any assessments received by them. Neither Borrower,
any Guarantor nor any Indemnitor knows of any basis for any additional
assessment in respect of any such taxes and related liabilities for prior years.

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

Section 4.13.     NO CHANGE IN FACTS OR CIRCUMSTANCES.     All
information in the application for the Loan submitted to Lender and in all
financial statements, rent rolls, reports, certificates and other documents
submitted in connection with the application or in satisfaction of the terms
thereof, are accurate, complete and correct in all respects. There has been no
adverse change in any condition, fact, circumstance or event that would make any
such information inaccurate, incomplete or otherwise misleading.

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

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

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

Section 4.17.     PERMITTED EXCEPTIONS.     None of the Permitted
Exceptions, individually or in the aggregate, materially interfere with the
benefits of the security intended to be provided by the Security Instrument, the
Note, and the Other Security Documents, materially and adversely affect the
value of the Property, impair the use or the operation of the Property or impair
Borrower's ability to pay its obligations in a timely manner.

Section 4.18.     PRINCIPAL PLACE OF BUSINESS.     Borrower's
principal place of business is as set forth in the opening paragraph to this
Security Instrument.

20



Section 4.19.     ERISA.

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

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

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

ARTICLE 5. - OBLIGATIONS AND RELIANCE

Section 5.1.     RELATIONSHIP OF BORROWER AND LENDER.     The
relationship between Borrower and Lender is solely that of debtor and creditor,
and Lender has no fiduciary or other special relationship with Borrower, and no
term or condition of any of the Note, this Security Instrument and the Other
Security Documents shall be construed so as to deem the relationship between
Borrower 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 are
experienced in the ownership and operation of properties similar to the
Property, and Borrower and Lender are relying solely upon such expertise in
connection with the ownership and operation of the Property. Borrower is not
relying on Lender's expertise, business acumen or advice in connection with the
Property.

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

Section 5.4.     RELIANCE.     Borrower recognizes and acknowledges
that in accepting the Note, this Security Instrument and the Other Security
Documents, Lender is expressly and primarily relying on the truth and accuracy
of the warranties and representations set forth herein 

21



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

ARTICLE 6. - FURTHER ASSURANCES

Section 6.1.     RECORDING OF SECURITY INSTRUMENT, ETC.     Borrower
forthwith upon the execution and delivery of this Security Instrument and
thereafter, from time to time, will cause this Security Instrument and any of
the Other Security Documents creating a lien or security interest or evidencing
the lien hereof upon the Property and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect and perfect the lien or security interest hereof upon, and the interest
of Lender in, the Property. Borrower will pay all taxes, filing, registration or
recording fees, and all expenses incident to the preparation, execution,
acknowledgment and/or recording of the Note, this Security Instrument, the Other
Security Documents, any note or mortgage supplemental hereto, any security
instrument 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 charges
arising out of or in connection with the execution and delivery of this Security
Instrument, any mortgage supplemental hereto, any security instrument with
respect to the Property or any instrument of further assurance, and any
modification or amendment of the foregoing documents, except where prohibited by
law so to do.

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

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

22



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

                        (b)     Borrower will not claim or demand or be
entitled to any credit or credits on account of the Debt for any part of the
Taxes 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 or
other stamps to be affixed to the Note, this Security Instrument, or any of the
Other Security Documents or impose any other tax or charge on the same, Borrower
will 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, duly
acknowledged and certified, setting forth (i) the original principal amount of
the Note, (ii) the unpaid principal amount of the Note, (iii) the rate of
interest 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 events
which with the passage of time or the giving of notice or both, would constitute
an event of default under the Note or the Security Instrument, (vii) that the
Note and this Security Instrument are valid, legal and binding obligations and
have not been modified or if modified, giving particulars of such modification,
(viii) whether any offsets or defenses exist against the obligations secured
hereby 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 a
residential multifamily property) have not been modified (or if modified,
setting forth all modifications), (x) the date to which the Rents thereunder
have been paid pursuant to the Leases, (xi) whether or not, to the best
knowledge of Borrower, any of the lessees under the Leases are in default under
the Leases, and, if any of the lessees are in default, setting forth the
specific nature of all such defaults, (xii) the amount of security deposits held
by Borrower under each Lease and that such amounts are consistent with the
amounts required under each Lease, and (xiii) as to any other matters reasonably
requested by Lender and reasonably related to the Leases, the obligations
secured hereby, the Property or this Security Instrument.

                        (b)     Borrower shall use its best efforts to
deliver to Lender, promptly upon request, duly executed estoppel certificates
from any one or more lessees as required by Lender attesting to such facts
regarding the Lease as Lender may require, including, but not limited to
attestations that each Lease covered thereby is in full force and effect with no
defaults thereunder on the part of any party, that none of the Rents have been
paid more than one month in advance, 

23



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

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

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

Section 6.6.     REPLACEMENT DOCUMENTS.     Upon receipt of an
affidavit of an officer of Lender as to the loss, theft, destruction or
mutilation of the Note or any Other Security Document which is not of public
record, and, in the case of any such mutilation, upon surrender and cancellation
of such Note or Other Security Document, Borrower will issue, in lieu thereof, a
replacement Note or Other Security Document, dated the date of such lost,
stolen, destroyed or mutilated Note or Other Security Document in the same
principal amount thereof and otherwise of like tenor.

ARTICLE 7. - DUE ON SALE/ENCUMBRANCE

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

Section 7.2.     NO SALE/ENCUMBRANCE.

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

                        (b)     A Transfer shall include, but not be limited
to, (i) an installment sales agreement wherein Borrower agrees to sell the
Property or any part thereof for a price to be paid in installments; (ii) an
agreement by Borrower leasing all or a substantial part of the Property for
other than actual occupancy by a space tenant thereunder or a sale, assignment
or other transfer of, or the grant of a security interest in, Borrower's right,
title and interest in and to any Leases or any Rents; (iii) if a Restricted
Party 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 one
or a series of transactions, by which such corporation's stock shall be vested
in a party or parties who are not now shareholders; (iv) if a Restricted Party
is a limited or general partnership or joint venture, any merger or
consolidation or the change, removal, resignation or addition of a general
partner or the Sale or Pledge of the partnership interest of any general partner
or any profits or proceeds relating to such partnership interest, or the Sale or
Pledge of limited partnership interests or the creation or issuance of new
limited partnership interests in one or a series of transactions, by which such
limited partnership interests shall be vested in a party or parties who are not
now limited partners; (v) if a Restricted Party is a limited liability company,
any merger or consolidation or the change, removal, resignation or addition of a
managing member or non-member manager (or if no managing member, any member) or
the Sale or Pledge of the membership interest of a managing member (or if no
managing member, any member) or any profits or proceeds relating to such
membership interest, or the Sale or Pledge of non-managing membership interests
or the creation or issuance of new non-managing membership interests in one or a
series of transaction, by which such non-managing membership interests shall be
vested in a party or parties who are not now non-managing members; (vi) if a
Restricted Party is a trust or nominee trust, any merger, consolidation or the
Sale or Pledge of the legal or beneficial interest in a Restricted Party or the
creation or issuance of new legal or beneficial interests in one or a series of
transactions, by which such beneficial or legal interests shall be vested in a
party or parties who are not now legal or beneficial owners; or (vii) the
removal 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 to
the contrary contained herein, the following transfers shall not be deemed to be
a Transfer: (a) a transfer by devise or descent or by operation of law upon the
death of a member, partner or shareholder of a Restricted Party; and (b) the
Sale or Pledge of stock or limited partnership or non-managing membership
interests in a Restricted Party by which, in one or a series of transactions, in
the aggregate, not more than forty-nine percent (49%) of the stock, limited
partnership interests or non-managing membership interests (as the case may be)
in a Restricted Party, shall be vested in parties not now having an ownership
interest; provided, however, no such transfer shall result in the change of
voting control in the Restricted Party, and as a condition to each such
transfer, Lender shall receive not less than ten (10) days prior written notice
of such proposed transfer.

ARTICLE 8. - DEFAULT



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

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

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

25



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

                        (d)     if any of the Taxes or Other Charges is not
paid when the same is due and payable except to the extent sums sufficient to
pay such Taxes and Other Charges have been deposited with Lender in accordance
with the terms of this Security Instrument;

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

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

                        (g)     if any representation or warranty of
Borrower, any Indemnitor or any person guaranteeing payment of the Debt or any
portion thereof or performance by Borrower of any of the terms of this Security
Instrument (a "Guarantor"), or any member, general partner, principal or
beneficial owner of any of the foregoing, made herein or in any guaranty, or in
any certificate, report, financial statement or other instrument or document
furnished to Lender shall have been false or misleading in any material respect
when made;

                        (h)     if (i) Borrower or any managing member or
general partner of Borrower, or any Guarantor or Indemnitor shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to its debts
or debtors ("Creditors Rights Laws"), seeking to have an order for relief
entered 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 any
substantial part of its assets, or the Borrower or any managing member or
general partner of Borrower, or any Guarantor or Indemnitor shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against Borrower or any managing member or general partner of Borrower or any
Guarantor or Indemnitor any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of sixty (60) days; or (iii) there shall
be commenced against the Borrower or any managing member or general partner of
Borrower, or any Guarantor or Indemnitor any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of any order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days from the
entry thereof; or (iv) the Borrower or any managing member or general partner of
Borrower 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 acts
set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
managing member or general partner of Borrower, or any Guarantor or Indemnitor
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due;

26



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

                        (j)     if the Property becomes subject to any
mechanic's, materialman's or other lien other than a lien for any Taxes not then
due 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 against
Borrower, any member or general partner of Borrower, any Guarantor, any
Indemnitor 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 or
indemnity executed in connection herewith, and such default continues after the
expiration of applicable grace periods, if any; or

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

                        (n)     if Borrower sells, transfers (whether
voluntary or by operation of law), pledges, hypothecates or further encumbers
all or any part of the Property or any interest therein or any interest in the
Borrower except as otherwise expressly provided herein), or additionally assigns
all or any part of the rents, income or profits arising therefrom, in either
case without the prior written consent of Lender, which may be withheld for any
reason in Lender's sole and absolute discretion; or

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

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

ARTICLE 9. - RIGHTS AND REMEDIES

27





Section 9.1     REMEDIES.     Upon the occurrence of any Event of
Default, to the extent permitted by applicable law, Borrower agrees that Lender
may take action available at law, in equity, and as otherwise provided in this
Security Instrument, without notice or demand, as it deems advisable to protect
and enforce its rights against Borrower in and to the Property, including, but
not limited to the following actions, each of which may be pursued concurrently
or otherwise, at such time and in such order as Lender may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Lender:

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

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

                        (c)     with or without entry, to the extent
permitted and pursuant to the procedures provided by applicable state or federal
law, institute proceedings for the partial foreclosure of this Security
Instrument for the portion of the Debt then due and payable, subject to the
continuing lien and security interest of this Security Instrument for the
balance of the Debt not then due, inimpaired and without loss of priority;

                        (d)     sell for cash or upon credit the Property or
any part thereof and all estate, claim, demand, right, title and interest of
Borrower therein and rights of redemption thereof, pursuant to power of sale or
otherwise, 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 by
law;

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

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

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

                        (h)     subject to any applicable state or federal
law, the license granted to Borrower to collect and receive rents hereunder
shall automatically be revoked and Lender may enter into or upon the Property,
either personally or by its agents, nominees or attorneys and dispossess
Borrower and its agents and servants therefrom, without liability for trespass,
damages or otherwise and exclude Borrower and its agents or servant wholly
therefrom, and take possession of all rent rolls, leases (including the form
lease) and amendments and exhibits, subleases (including the form sublease) and
amendments 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 other
property (including, without limitation, any letter of credit) given to secure
tenants', subtenants' and licensees' obligations under leases, subleases or
licenses, together with a list of the foregoing; all lists pertaining to current
rent and license fee arrears; any and all architects' plans and specifications,
licenses and permits, documents, books, records, accounts, surveys and property
which relate to the management, leasing, operation, occupancy, ownership,
insurance, maintenance, or service of or construction upon the Property and
Borrower agrees to surrender possession thereof and of the Property to Lender
upon demand, and thereupon Lender may (i) use, operate, manage, control, insure,
maintain, repair, restore and otherwise deal with all and every part of the
Property and conduct the business thereat; (ii) complete any construction on the
Property in such manner and form as Lender deems advisable; (iii) make
alterations; additions, renewals, 

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

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

                        (j)     apply any sums then deposited in the Escrow
Fund and any other sums held in escrow or otherwise by Lender in accordance with
the terms of this Security Instrument or any Other Security Document to the
payment of the following items in any order in its sole discretion: (i) Taxes
and Other Charges; (ii) Insurance Premiums; (iii) interest on the unpaid
principal balance of the Note; (iv) amortization of the unpaid principal balance
of the Note; and (v) all other sums payable pursuant to the Note, this Security
Instrument 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 pursuant
hereto, collect the unearned Insurance Premiums and apply such sums as a credit
on the Debt in such priority and proportion as Lender in its discretion shall
deem proper, and in connection therewith, Borrower hereby appoints Lender as
agent and attorney-in-fact (which is coupled with an interest and is therefore
irrevocable) for Borrower to collect such unearned Insurance Premiums;

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

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

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

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

Section 9.3.      RIGHT TO CURE DEFAULTS.     Upon
the occurrence of any Event of Default or if Borrower fails to make any payment
or to do any act as herein provided, Lender may, but without any obligation to
do so and without notice to or demand on Borrower and without releasing Borrower
from any obligation hereunder, make or do the same in such manner and to such
extent as Lender may deem necessary to protect the security hereof. Lender is
authorized to enter upon the Property for such purposes, or appear in, defend,
or bring any action or proceeding to protect its interest in the Property or to
foreclose this Security Instrument or collect the Debt. The cost and expense of
any cure hereunder (including reasonable attorneys' fees to the extent permitted
by law), with interest at the Default Rate (defined in the Note), shall
constitute a portion of the Debt and shall be due and payable to Lender upon
demand. All costs and expenses incurred by Lender in remedying any Event of
Default or failed payment or act or in appearing in, defending, or bringing any
such action or proceeding shall bear interest at the Default Rate defined in the
Note, for the period after notice from Lender that such cost or expense was
incurred to the date of payment to Lender. All such costs and expenses incurred
by Lender together with interest thereon calculated at the Default Rate shall be
deemed to constitute a portion of the Debt and be secured by this Security
Instrument and the Other Security Documents and shall be immediately due and
payable upon demand by Lender therefor.

30



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

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

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

Section 9.7.      OTHER RIGHTS, ETC.


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

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

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

31



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

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

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

Section 9.10.      RIGHT OF ENTRY.     Lender
and its agents shall have the right to enter and inspect the Property at all
reasonable times. 

Section 9.11.      SUBROGATION.     If any or
all of the proceeds of the Note have been used to extinguish, extend or renew
any indebtedness heretofore existing against the Property, then, to the extent
of the funds so used, Lender shall be subrogated to all of the rights, claims,
liens, titles, and interests existing against the Property heretofore held by,
or in favor of, the holder of such indebtedness and such former rights, claims,
liens, titles, and interests, if any, are not waived but rather are continued in
full force and effect in favor of Lender and are merged with the lien and
security interest created herein as cumulative security for the repayment of the
Debt, the performance and discharge of Borrower's obligations hereunder, under
the Note and the Other Security Documents and the performance and discharge of
the Other Obligations.

ARTICLE 10 - ENVIRONMENTAL HAZARDS

Section 10.1.     ENVIRONMENTAL DEFINITIONS.     For
the purpose of this Section, "Environmental Law" means any present and future
federal, state and local laws, statutes, ordinances, rules, regulations,
standards, policies and other government directives or requirements, as well as
common law, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act and the Resource Conservation and
Recovery Act, that apply to Borrower or the Property and relate to Hazardous
Materials. ''Environmental Liens" means all Liens and other encumbrances imposed
pursuant to any Environmental Law, whether due to any act or omission of
Borrower or any other person or entity. ''Environmental Report" means the
written reports resulting from the environmental site assessments of the
Property 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 and
lead-based paint; asbestos or asbestos-containing materials in any form that is
or could become friable; underground or above-ground storage tanks, whether
empty or containing any substance; any substance the presence of which on the
Property is prohibited by any federal, state or local authority; any substance
that requires special handling; and any other material or substance now or in
the future defined as a "hazardous substance," "hazardous material," "hazardous
waste," "toxic substance," "toxic pollutant," "contaminant," or ''Pollutant''
within the meaning of any Environmental Law. "Release" of any Hazardous
Materials 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 AND
WARRANTIES. Borrower represents and warrants that: (a) there are no
Hazardous Materials or underground storage tanks in, on, or under the Property,
except those that are both (i) in compliance with Environmental Laws and with
permits 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 an
Environmental Report; (b) there are no past, present or threatened (defined
below) Release of Hazardous Materials in violation of any Environmental Law and
which would require remediation by a governmental authority in, on, under or
from the Property except as described in the Environmental Report; (c) there is
no threat of any Release of Hazardous Materials migrating to the Property except
as described in the Environmental Report; (d) there is no past or present
non-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 notice
or other communication from any person or entity (including but not limited to a
governmental entity) relating to Hazardous Materials in, on, under or from the
Property; and (f) Borrower has truthfully and fully provided to Lender, in
writing, any and all information relating to environmental conditions in, on,
under or from the Property known to Borrower or contained in Borrower's files
and records, including but not limited to any reports relating to Hazardous
Materials in, on, under or migrating to or from the Property and/or to the
environmental condition of the Property.

Section 10.3.     ENVIRONMENTAL COVENANTS.     Borrower
covenants and agrees that so long as Borrower owns, manages, is in possession
of, or otherwise controls the operation of the Property: (a) all uses and
operations on or of the Property, whether by Borrower or any other person or
entity, shall be in compliance with all Environmental Laws and permits issued
pursuant 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, or
under the Property, except those that are both (i) in compliance with all
Environmental Laws and with permits issued pursuant thereto, if and to the
extent required, and (ii) (A) in amounts not in excess of that necessary to
operate the Property or (B) fully disclosed to and approved by Lender in
writing; (d) Borrower shall keep the Property free and clear of all
Environmental Liens; (e) Borrower shall, at its sale cost and expense, fully and
expeditiously cooperate in all activities pursuant to this Section, including
but not limited to providing all relevant information and making knowledgeable

33



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

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

Section 10.5.     OPERATIONS AND MAINTENANCE PROGRAMS.     If
recommended by the Environmental Report or any other environmental assessment or
audit of the Property, Borrower shall establish and comply with an operations
and maintenance program with respect to the Property, in form and substance
reasonably acceptable to Lender, prepared by an environmental consultant
reasonably acceptable to Lender, which program shall address any asbestos
containing material or lead based paint that may now or in the future be
detected at or on the Property. Without limiting the generality of the preceding
sentence, 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 such
operations and maintenance program to address changing circumstances, laws or
other matters, (c) at Borrower's sole expense, supplemental examination of the
Property by consultants specified by Lender, (d) access to the Property by
Lender, its agents or servicer, to review and assess the environmental condition
of the Property and Borrower's compliance with any operations and maintenance
program, and (e) variation of the operations and maintenance program in response
to the reports provided by any such consultants.

34



ARTICLE 11 - INDEMNIFICATION



Section 11.1.     GENERAL INDEMNIFICATION.     Borrower
shall, at its sole cost and expense, protect, defend, indemnify, release and
hold harmless the Indemnified Parties (defined below) from and against any and
all Losses (defined below) imposed upon or incurred by or asserted against any
Indemnified Parties and directly or indirectly arising out of or in any way
relating to any one or more of the following (a) any accident, injury to or
death of persons or loss of or damage to property occurring in on or about the
Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (b) any use, nonuse or
condition in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(c) performance of any labor or services or the furnishing of any materials or
other property in respect of the Property or any part thereof; (d) any failure
of the Property to be in compliance with any Applicable Laws; (e) any and all
claims and demands whatsoever which may be asserted against Lender by reason of
any alleged obligations or undertakings on its part to perform or discharge any
of the terms, covenants, or agreements contained in any Lease; (f) Borrower's
breach of any term, covenant, condition, representation or warranty contained
herein; or (g) the payment of any commission, charge or brokerage fee to anyone
which may be payable in connection with the funding of the Loan evidenced by the
Note and secured by this Security Instrument. Any amounts payable to Lender by
reason of the application of this Section shall become immediately due and
payable and shall bear interest at the Default Rate from the date loss or damage
is sustained by Lender until paid. The term "Losses" shall mean any and all
claims, suits, liabilities (including, without limitation, strict liabilities),
actions, proceedings, obligations, debts, damages, losses, costs, expenses,
fines, penalties, charges, fees, judgments, awards, amounts paid in settlement
of whatever kind or nature (including but not limited to attorneys' fees and
other 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 of
the Loan, (d) any Investor (defined below) or any prior Investor in any
Participations (defined below), (e) any trustees, custodians or other
fiduciaries who hold or who have held a full or partial interest in the Loan for
the benefit of any Investor or other third party, (f) any receiver or other
fiduciary appointed in a foreclosure of other Creditors Rights Laws proceeding,
(g) any officers, directors, shareholders, partners, members, employees, agents,
servants, representatives, contractors; subcontractors, affiliates or
subsidiaries of any and all of the foregoing, and (h) the heirs, legal
representatives, successors and assigns of any and all of the foregoing
(including, without limitation, any successors by merger, consolidation or
acquisition of all or a substantial portion of the Indemnified Parties' assets
and business), in all cases whether during the term of the Loan or as part of or
following a foreclosure of the Loan.

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

35



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

Section 11.4.     ENVIRONMENTAL INDEMNITY.     As
between Borrower and Lender, all risk of loss associated with non-compliance
with Environmental Laws, or with the presence of any Hazardous Material at,
upon, within, contiguous to or otherwise affecting the Property, shall lie
solely with Borrower. Accordingly, Borrower shall bear all risks and costs
associated with any loss (including any loss in value attributable to Hazardous
Materials), damage or liability therefrom, including all costs of removal of
Hazardous Materials or other remediation required by Lender or by law. Borrower
shall indemnify, defend and hold Lender harmless from and against all loss,
liabilities, damages, claims, costs and expenses (including reasonable costs of
defense) arising out of or associated, in any way, with the non-compliance with
Environmental Laws, or the existence of Hazardous Materials in, on, or about the
Property, or a breach of any representation, warranty or covenant contained in
Article 10 hereof, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law, including those
arising from the joint, concurrent, or comparative negligence of Lender;
however, Borrower shall not be liable under such indemnification to the extent
such loss, liability, damage, claim, cost or expense results solely from
Lender's gross negligence or willful misconduct. Borrower's obligations
hereunder shall arise upon the discovery of the presence of any Hazardous
Material, whether or not any governmental authority has taken or threatened any
action in connection with the presence of any Hazardous Material and whether or
not the existence of any such Hazardous Material or potential liability on
account thereof is disclosed in any site assessment arid shall continue
notwithstanding 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 foreclosure
or otherwise). Of even date herewith, Borrower and other persons or entities
(collectively, Borrower and such other parties, the "Indemnitors") may as
circumstances require execute and deliver a certain environmental indemnity
agreement in favor of the Lender incorporating the environmental indemnities set
forth herein as well as additional provisions and requirements with respect to
environmental matters (the "Environmental Indemnity"). In the event an
Environmental Indemnity is executed, it shall be included in the definition of
"Other Security Documents".

ARTICLE 12 - WAIVERS

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

36



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

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

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

Section 12.4.     WAIVER OF STATUTE OF LIMITATIONS.     Borrower
hereby expressly waives and releases to the fullest extent permitted by law, the
pleading of any statute of limitations as a defense to payment of the Debt or
performance of its Other Obligations.

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

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

ARTICLE 13 - NOTICES

Section 13.1.     NOTICES.     All notices or
other written communications hereunder shall be deemed to have been properly
given (a) upon delivery, if delivered in person with receipt acknowledged by the
recipient thereof, (b) one (1) Business Day (defined below) after having been
deposited for overnight delivery with any reputable overnight courier service,
or (c) three (3) Business Days after having been deposited in any post office or
mail depository regularly maintained by the U.S. Postal Service and sent by
registered 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 such
party may from time to time designate by written notice to the other parties.

Either party by notice to the other may designate additional or different
addresses for subsequent notices or communications. For purposes of this
Subsection, "Business Day" shall mean a day on which commercial banks are not
authorized or required by law to close in New York, New York.

ARTICLE 14 - CHOICE OF LAW

Section 14.1.     CHOICE OF LAW.     This
Security Instrument and any determination of deficiency judgments shall be
governed, construed, applied and enforced in accordance with the laws of the
state in which the Property is located and applicable federal law.

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

ARTICLE 15 - SECONDARY MARKET

Section 15.1.     TRANSFER OF LOAN.     Lender
may, at any time, sell, transfer or assign the . Note, this Security Instrument
and the Other Security Documents, and any or all servicing rights with respect
thereto, or grant participations therein (the "Participations") or issue
mortgage passthrough certificates or other securities evidencing a beneficial
interest in a rated or unrated public offering or private placement (the
"Securities"). Lender may forward to each purchaser, transferee, assignee,
servicer, participant, or investor in such Participations or Securities
(collectively, the "Investor") or any Rating Agency rating such Securities, each
prospective Investor, and any organization maintaining databases on the
underwriting and performance of commercial mortgage loans, all documents and
information which Lender now has or may hereafter acquire relating to the Debt
and to Borrower, any Guarantor, any Indemnitor(s) and the Property, whether
furnished by Borrower, any Guarantor, any Indemnitor(s) or otherwise, as Lender
determines necessary or desirable. Borrower irrevocably waives any and all
rights it may have under applicable state or federal law to prohibit such
disclosure, including but not limited to any right of privacy.

Section 15.2.     COOPERATION.     Borrower, any
Guarantor and any Indemnitor agree to cooperate with Lender in connection with
any transfer made pursuant to this Section, including, without limitation, the
delivery of an estoppel certificate required pursuant to the terms hereof and
such other documents as may be reasonably requested by Lender. Borrower shall
also furnish and Borrower, any Guarantor and any Indemnitor consent to Lender
furnishing to such Investors or such prospective Investors or such Rating Agency
any and all information concerning the Property, the Leases, the financial
condition of Borrower, any Guarantor and any Indemnitor as may be requested by
Lender, any Investor or any prospective Investor or any Rating Agency in
connection with any sale, transfer or Participations or Securities.

38



ARTICLE 16 - COSTS

Section 16.1.     PERFORMANCE AT BORROWER'S EXPENSE.     Borrower
acknowledges and confirms that Lender shall impose certain administrative
processing and/or commitment fees in connection with (a) the extension, renewal,
modification, amendment and termination of the Loan, (b) the release or
substitution of collateral therefor, (c) obtaining certain consents, waivers and
approvals with respect to the Property, or (d) the review of any Lease or
proposed 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 be
responsible for the payment of all costs of reappraisal of the Property or any
part thereof, whether required by law, regulation, Lender or any governmental or
quasi-governmental authority. Borrower hereby acknowledges and agrees to pay,
immediately, with or without demand, all such fees (as the same may be increased
or decreased from time to time), and any additional fees of a similar type or
nature which may be imposed by Lender from time to time, upon the occurrence of
any Event or otherwise. Wherever it is provided for herein that Borrower pay any
costs and expenses, such costs and expenses shall include, but not be limited
to, 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 connection
with (i) the preparation of the Note, this Security Instrument and the Other
Security Documents; and (ii) the items set forth in this Article, and (b)
Borrower shall pay to Lender on demand any and all expenses, including legal
fees incurred or paid by Lender in protecting its interest in the Property or in
collecting any amount payable under the Note, this Security Instrument or the
Other Security Documents, or in enforcing its rights hereunder with respect to
the Property, whether or not any legal proceeding is commenced hereunder or
thereunder; together with interest thereon at the Default Rate from the date
paid or incurred by Lender until such expenses are paid by Borrower.

ARTICLE 17 - DEFINITIONS

Section 17.1.     GENERAL DEFINITIONS.     Unless
the context clearly indicates a contrary intent or unless otherwise specifically
provided herein, words used in this Security Instrument may be used
interchangeably in singular or plural form and the word "Borrower" shall mean
"each Borrower and any subsequent owner or owners of the Property or any part
thereof or any interest therein," the word "Lender" shall mean "Lender and any
subsequent holder of the Note," the word "Note" shall mean "the Note and any
other evidence of indebtedness secured by this Security Instrument," the word
"person" shall include an individual, corporation, limited liability company,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, the word "Property" shall include any portion
of the Property and any interest therein, and the phrases "counsel fees" shall
include any and all attorneys', paralegal and law clerk fees and disbursements,
including, but not limited to fees and disbursements at the pretrial, trial and
appellate levels incurred or paid by Lender in protecting its interest in the
Property, the Leases and the Rents and enforcing its rights hereunder, whether
with respect to retained firms, the reimbursement for the expenses of in-house
staff or otherwise.

39



Section 17.2.     HEADINGS, ETC.     The
headings and captions of various Articles and Sections of this Security
Instrument are for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.

ARTICLE 18 - MISCELLANEOUS PROVISIONS

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

Section 18.2.     LIABILITY.     If Borrower
consists of more than one person, the obligations and liabilities of each such
person hereunder shall be joint and several. This Security Instrument shall be
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns forever.

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

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

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

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

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

40



Section 18.8.     WAIVER OF TRIAL BY JURY.     BORROWER
BY ACCEPTANCE OF THIS SECURITY INSTRUMENT, HEREBY WANES TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THE LOAN, THE APPLICATION FOR THE LOAN, THE NOTE, THIS SECURITY
INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER OR
BORROWER.

[NO FURTHER TEXT-SIGNATURES APPEAR ON NEXT PAGE]

THIS INSTRUMENT INCLUDES A RIDER, THE TERMS OF WHICH ARE

ATTACHED HERETO AND BY THIS REFERENCE MADE A PART HEREOF

41



     IN WITNESS WHEREOF, this Security Instrument has been executed by
borrower 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, 2001
by 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 as
identification, 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 executed
by:



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 and
secondary financing in any way belonging, relating or appertaining to a parcel
of land described and set forth in Exhibit "A" attached hereto and
made a part hereof (the "Land"), to wit:

                        (a)     Additional Land.     All additional
lands, estates and development rights hereafter acquired by Debtor for use in
connection 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 on
the 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, air
rights and development rights, and all estates, rights, titles, interests,
privileges, liberties, servitudes, tenements, hereditaments and appurtenances of
any nature whatsoever, in any way now or hereafter belonging, relating or
pertaining to the Land and the Improvements and the reversion and reversions,
remainder and remainders, and all land lying in the bed of any street, road or
avenue, opened or proposed, in front of or adjoining the Land, to the center
line thereof and all the estates, rights, titles, interests, dower and rights of
dower, courtesy and rights of courtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of Debtor of, in and to the Land and the
Improvements 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 by
Borrower, or in which Borrower has or shall have an interest, including without
limitation, letter of credit rights, deposit accounts, payment intangibles,
investment property, electronic chattel paper, timber to be cut and farm animals
and, now or hereafter located upon the Land and the Improvements, or appurtenant
thereto, and usable in connection with the present or future operation and
occupancy of the Land and the Improvements and all building equipment, materials
and supplies of any nature whatsoever owned by Borrower, or in which Borrower
has or shall have an interest, now or hereafter located upon the Land and the
Improvements, or appurtenant thereto, or usable in connection with the present
or future operation and occupancy of the Land and the Improvements
(collectively, the "Personal Property"), and the right, title and interest of
Borrower in and to any of the Personal Property which may be subject to any
security interests, as defined in the Uniform Commercial Code, as adopted and
enacted by the state or 

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 and
products 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 or
hereafter entered into and all extensions, amendments and modifications thereto,
whether before or after the filing by or against Debtor of any petition for
relief under creditors rights laws (the "Leases") and all right, title and
interest of Debtor, its successors and assigns therein and thereunder,
including, without limitation, any guaranties of the lessees' obligations
thereunder, cash or securities deposited thereunder to secure the performance by
the 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 Land
and the Improvements whether paid or accruing before or after the filing by or
against 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 and
the right to receive and apply the Rents;

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

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

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

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

                        (j)     Rights.     The right, in the name and
on behalf of Debtor, to appear in and defend any action or proceeding brought
with respect to the Land, Improvements, Personal Property, Leases or Rents and
to commence any action or proceeding to protect the interest of Secured Party
therein;

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

47



or respecting any business or activity conducted on the Land and any part
thereof 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 all
other general intangibles relating to or used in connection with the operation
of the Land and Improvements; and

                        (m)     Other Rights.     Any and all other
rights 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 executed
by:

Minrad, Inc., a Delaware corporation

("Debtor")

COUNTERPARTS: This instrument may be executed in multiple counterparts, and
the separate signature pages may then be combined into a single original
document.

 

SIGNATURE OF DEBTOR:

Minrad, Inc., a Delaware corporation

 

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


49