<PAGE>COVER


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                              AMENDED AND RESTATED
                                 LOAN AGREEMENT




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

                             PAYLESS CASHWAYS, INC.
                                   as Borrower

                                       and

                           UBS MORTGAGE FINANCE, INC.
                                    as Lender



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

                                  $100,809,000



                             As of December 2, 1997


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

<PAGE>1



                       AMENDED AND RESTATED LOAN AGREEMENT


     AMENDED AND RESTATED  LOAN  AGREEMENT  dated as of the 2nd day of December,
1997, by and between PAYLESS  CASHWAYS,  INC., an Delaware  corporation  (herein
called "Borrower"), and UBS MORTGAGE FINANCE, INC., (herein called "Lender").

     WHEREAS, Borrower previously entered into a loan agreement dated as of June
20, 1989, with The Prudential Insurance Company of America  ("Prudential") under
which Borrower executed and delivered to Prudential  certain promissory notes in
the original  aggregate  principal  amount of  $230,242,500  (the "Prior Notes")
evidencing  the amount of the loan (the "Loan") made by  Prudential to Borrower,
which loan  agreement  has been  modified  and amended by that certain (a) First
Modification Agreement dated October 18, 1991, (b) Second Modification Agreement
dated December 17, 1991, (c) Third  Modification  Agreement dated as of December
31, 1991, (d) Fourth Modification Agreement dated as of March 8, 1993, (e) Fifth
Modification  Agreement  dated as of May 25,  1995,  and (f) Sixth  Modification
Agreement  dated as of November 22, 1995, (the loan agreement and all subsequent
modifications  thereto being  hereafter  referred to  collectively as the "Prior
Loan Agreement");

     WHEREAS,  Borrower  filed on July 21, 1997, a voluntary  petition  with the
United  States  Bankruptcy  Court for the Western  District of Missouri  and has
continued in the  possession of its assets and in the management of its business
pursuant to Sections 1107 and 1108 of the Bankruptcy Code; 

     WHEREAS,  UBS  Mortgage  Finance,   Inc.  has  purchased  all  interest  of
Prudential under the Prior Loan Agreement and the Prior Notes;

     WHEREAS, Borrower has now requested certain additional modifications to the
Prior Loan  Agreement to, among other things,  (1)  consolidate  the Prior Notes
into a single note;  (2) modify the rate of interest on the Loan; and (3) extend
the maturity and change the amortization of the Loan; and

     WHEREAS,  Lender has agreed to Borrower's request pursuant to the terms and
conditions  of this  Amended  and  Restated  Loan  Agreement,  which  amends and
restates the Prior Loan Agreement in its entirety.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements,
covenants and  conditions  hereinafter  set forth,  Borrower and Lender agree as
follows:



<PAGE>2


                                   ARTICLE I
                           Definitions and References
     Section 1.1 Defined Terms. As used in this Agreement, each of the following
terms  has the  meaning  given it in this  Section  1.1 or in the  sections  and
subsections referred to below:

     "ACM" means asbestos-containing materials.

     "Affiliate"  means,  as to any Person,  each other Person that  directly or
indirectly  (through  one or more  intermediaries  or  otherwise)  controls,  is
controlled by or is under common control with, such Person.

     "Agreement" means this Amended and Restated Loan Agreement.

     "Allocated Loan Amount" means with respect to each Individual  Property the
amount designated as such on Exhibit C hereto. Each payment of principal that is
not made in connection with the release of an Individual  Property from the Lien
of the  Mortgage  shall  reduce the  Allocated  Loan  Amount of each  Individual
Property  on a  proportionate  basis,  by an amount  equal to the amount of such
principal  payment  multiplied  by a  fraction,  the  numerator  of which is the
Allocated Loan Amount of the Individual Property and the denominator of which is
the total Allocated Loan Amounts for the Property.  The Allocated Loan Amount of
a  Substitution  Property  shall be the Allocated  Loan Amount of the Individual
Property for which it was substituted.

     "Applicable  Environmental  Laws" has the  meaning  given it in  subsection
4.1(k).

     "Applicable Laws" has the meaning given it in subsection 4.1(j).

     "Authorized Officer" means, with respect to any act to be performed or duty
to be  discharged  by or on behalf of any Person who is not an  individual,  any
officer,  agent  or  representative  thereof  who is at  the  time  in  question
authorized to perform such act or discharge such duty on behalf of such Person.

     "Bank  Debt"  means  the  Secured  Obligations  as  defined  in the  Credit
Agreement.

     "Bankruptcy  Code" means The Bankruptcy  Reform Act of 1978, as amended and
codified as 11 U.S.C. Section 101 et seq.

     Bankruptcy  Court" means the United States Bankruptcy Court for the Western
District of Missouri or any other court having  jurisdiction over the Chapter 11
case of Borrower.

     "Borrower" means Payless Cashways, Inc., a Delaware corporation.



<PAGE>3


     "Business  Day"  means  any  day on  which  (a)  commercial  banks  are not
authorized or required to close in New York, New York and (b) dealings in Dollar
deposits are carried out in the London  interbank  market and banks are open for
business in London.

     "CERCLA" has the meaning given it in subsection 4.1(k).

     "Collateral" has the meaning given it in the Mortgage.

     "Consolidated"  refers to the  consolidation  of any Person,  in accordance
with GAAP, with its properly consolidated  subsidiaries.  References herein to a
Person's  Consolidated  financial  statements,   financial  position,  financial
condition,  liabilities,  or other financial  matters refer to the  consolidated
financial statements,  financial position, financial condition,  liabilities, or
other   financial   matters  of  such  Person  and  its  properly   consolidated
subsidiaries.

     "Credit  Agreement" means the Amended and Restated Credit Agreement,  dated
as of December 1, 1997, among Payless Cashways,  Inc., Canadian Imperial Bank of
Commerce,  as coordinating and collateral agent, the underwriters,  the fronting
banks and the other  secured  parties  party  thereto,  as amended,  amended and
restated, extended, supplemented or otherwise modified from time to time.

     "Debt"  means,  as  to  any  Person,  all  indebtedness,   liabilities  and
obligations of such Person,  whether  primary or secondary,  direct or indirect,
absolute or contingent.

     "Default"  means any Event of Default and any  default,  event or condition
which  would,  with the giving of any  requisite  notices and the passage of any
requisite periods of time, constitute an Event of Default.

     "Default  Rate" means at any  particular  time the annual rate equal to the
LIBOR Interest Rate then in effect plus 2%.

     "Depository" has the meaning given it in subsection 5.1(g).

     "Disclosure Schedule" means Schedule 1 attached hereto.

     "Domestic  Business Day" is any day except a Saturday,  Sunday or other day
on which  commercial banks are required or permitted by law to close in New York
City.

     "Effective Date" shall mean the first Business Day after which the Order of
the Bankruptcy  Court  confirming the Plan of  Reorganization  shall have become
final and on which  each of the  conditions  set forth in  Sections  3.1 and 3.2
shall have been satisfied or waived in accordance with the terms hereof.



<PAGE>4


     "Environmental  Costs"  means  incurred  and  potential  damages,   losses,
liabilities,  costs and expenses of remediation  work, and any other incurred or
potential  obligations,  penalties,  fines,  impositions,  fees,  levies,  lien,
removal  or  bonding  costs,  claims,  litigation,  demands,  causes of  action,
liabilities,  losses (including,  without limitation, any reduction in the value
of the  Property),  damage,  defenses,  judgments,  suits,  proceedings,  costs,
disbursements  or  expenses  (including,  without  limitation,   attorneys'  and
experts' or other  consultants'  reasonable fees and  disbursements) of any kind
and nature whatsoever, including interest thereon.

     "Environmental  Laws" means CERCLA; The Resource  Conservation and Recovery
Act, 42 U.S.C. ss. 1601, et seq.; The Hazardous  Substances  Transportation Act,
49 U.S.C.  ss. 1801, et seq.; The Emergency  Planning & Community  Right-to-Know
Act of 1986, 42 U.S.C. ss. 11001, et seq.; The Toxic Substances  Control Act, 15
U.S.C.  ss.  2601 et seq.;  The Clean Air Act, 42 U.S.C.  ss. 7401 et seq.,  The
Clean Water Act, 33 U.S.C.  ss. 1251 et seq.;  The Safe  Drinking  Water Act, 42
U.S.C.  ss. 300 et seq.;  as any of the  foregoing  may be amended  form time to
time;  and any  other  federal  state  and  local  laws or  regulations,  codes,
statutes, orders, decrees, guidance documents,  judgments or injunctions, now or
hereafter  issued,  promulgated,  approved  or entered  thereunder,  relating to
pollution,  contamination or protection of the environment,  including,  without
limitation,  laws  relating to  emissions,  discharges,  releases or  threatened
releases  of  pollutants,   contaminants,  chemicals  or  industrial,  toxic  or
hazardous  substances  or  wastes  into  the  environment  (including,   without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata,  buildings  or  facilities)  or otherwise  relating to the  manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling  of  pollutants,   contaminants,  chemicals  or  industrial,  toxic  or
hazardous substances or wastes.

     "Environmental  Matter"  means any matter  arising out of,  relating to, or
resulting  from  pollution,  contamination  or  protection  of  the  environment
(including natural resources), and any matters relating to emission,  discharge,
release or threatened release, of Hazardous  Substances into the air (indoor and
outdoor),  surface  water,  groundwater,   soil,  land  surface  or  subsurface,
buildings or facilities or otherwise  arising out of,  relating to, or resulting
from  the  manufacture,   processing  distribution,   use,  treatment,  storage,
disposal,  transport,  handling,  release or  threatened  release  of  Hazardous
Substances.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time,  together with all rules and regulations  promulgated
with  respect  thereto,   including  without  limitation,  all  such  rules  and
regulations promulgated by the Department of Labor, the Pension Benefit Guaranty
Corporation and the Internal Revenue Service.

     "ERISA  Plan" means any pension  benefit  plan subject to Title IV of ERISA
maintained by Borrower or any Affiliate thereof to which Borrower is required to
contribute or with respect to which Borrower has any liability.

     "Eurodollar  Business Day" is any Domestic Business Day on which commercial
banks  are  open  for  international  business  (including  dealings  in  dollar
deposits) in London, England.


<PAGE>5


     "Event of Default" has the meaning given it in section 7.1.

     "Federal Funds Rate" means for any period, a fluctuating  interest rate per
annum  equal for each day during such period to the  overnight  "Federal  Funds"
rate reported in the Wall Street  Journal on such day (or the most recent day so
reported) or if not published,  such rate (or its  equivalent) as reported in an
alternate publication selected by Lender.

     "FIFRA" has the meaning given to it in Section 4.1(k).

     "Funded Debt" means Debt for borrowed money.

     "Funding  Losses"  shall have the meaning  ascribed to such term in Section
2.4(a) hereof.

     "GAAP" means those generally accepted  accounting  principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally  recognized  successor)  and which,  in the case of  Borrower  and its
Consolidated Subsidiaries, (i) are applied for all periods after the date hereof
in a manner  consistent  with the manner in which such  principles and practices
were  applied to the most  recent  audited  financial  statements,  and (ii) are
consistently  applied  for all  periods  after the date hereof so as to properly
reflect the financial  condition,  and the results of operations  and changes in
financial position, of Borrower and its Consolidated Subsidiaries. If any change
in any accounting  principle or practice is required by the Financial Accounting
Standards  Board (or any such successor) in order for such principle or practice
to  continue as a generally  accepted  accounting  principle  or  practice,  all
reports and financial  statements required hereunder with respect to Borrower or
with respect to Borrower and its  Consolidated  Subsidiaries  may be prepared in
accordance with such change.

     "Governmental  Authority"  means the United  States,  any State in which an
Individual  Property  is located  and any  political  subdivision  of any of the
foregoing,  and any agency,  department,  commission,  board,  court,  bureau or
instrumentality of any of them.

     "Grace Period" has the meaning given it in Section 7.2.

     "Hazardous  Substances" means Asbestos,  ACM, PCBs,  urea-formaldehyde  and
unreaformaldehyde foam insulation, nuclear fuel or waste, petroleum products and
any hazardous waste, toxic substance, related components,  related constituents,
pollutant or contaminant, including without limitation, any substance defined or
treated as a "hazardous  substance",  "extremely  hazardous substance" or "toxic
substance" (or  comparable  term) in any  applicable  Environmental  Law and any
other material, which may give rise to Environmental Costs.

     "Individual  Property" means an individual  tract included in the Property,
each such individual  tract being identified by a separate Store or Distribution
Center number on Exhibit C hereto.


<PAGE>6


     "Interest Accrual Period" means (i) initially, the period commencing on the
Effective Date and ending one month thereafter, and (ii) thereafter, each period
commencing on the last day of the next  preceding  Interest  Accrual  Period and
ending one month thereafter; provided, that:

          (a) any Interest  Accrual  Period which would  otherwise  end on a day
     which is not a  Business  Day  shall  be  extended  to the next  succeeding
     Business Day unless such Business Day falls in another  calendar  month, in
     which case such  Interest  Accrual  Period shall end on the next  preceding
     Business Day;

          (b) any Interest  Accrual Period which begins on the last Business Day
     of a  calendar  month  (or  on a day  for  which  there  is no  numerically
     corresponding day in the calendar month at the end of such Interest Accrual
     Period) shall, subject to clause (c) below, end on the last Business Day of
     a calendar month;

          (c) if any Interest  Accrual Period would otherwise  include a date on
     which a scheduled  payment of  principal of any of the Loans as provided in
     Section 2.5 is required to be made under this Agreement but does not end on
     such date,  then,  subject to Section 2.5, (i) the Interest  Accrual Period
     for the principal amount (if any) of the Loan required to be repaid on such
     date shall end on such date and (ii) the  remainder  (if any) shall have an
     Interest Accrual Period  determined in accordance with the other provisions
     of this definition; and

          (d) any Interest Accrual Period that would otherwise extend beyond the
     Maturity Date shall end on the Maturity Date.

     "Interest  Determination Date" means the date that is the first day of each
Interest Accrual Period.

     "Lender" means UBS Mortgage Finance, Inc., its successors and assigns.

     "LIBOR" means the rate of interest per annum determined as follows:

          (i) On each Interest  Determination  Date, LIBOR will be determined on
     the basis of the offered rate for deposits of not less than U.S. $1,000,000
     for a period of one month,  commencing on such Interest Determination Date,
     as the opening quote on Bloomberg under the ticker  "US0001M<INDEX>" on the
     Marquet  Quote ("Q") Page (or such other page as may replace the  Bloomberg
     Page on that service for the purposes of  displaying  the London  interbank
     offered  rates of major  banks).  If no such opening  offered rate appears,
     LIBOR  with  respect  to the  relevant  Interest  Accrual  Period  will  be
     determined as described in (ii) below.


<PAGE>7


          (ii) With respect to an Interest  Determination  Date on which no such
     opening offered rate appears on Bloomberg as described in (i) above,  LIBOR
     shall be determined as the opening  offered rate appearing on Telerate Page
     3750 on such date.

          (iii) If, on any Interest  Determination  Date, Lender is required but
     unable to determine LIBOR in the manner provided in paragraphs (i) and (ii)
     above,  LIBOR  for the  next  Interest  Accrual  Period  shall  be LIBOR as
     determined on the previous Interest Determination Date.

     "LIBOR  Interest  Rate"  shall have the  meaning  ascribed  to such term in
Section 2.3 hereof.

     "Lien" means, with respect to any property or assets, any right or interest
therein of a creditor  to secure Debt owed to it or any other  arrangement  with
such creditor  which  provides for the payment of such Debt out of such property
or assets or which allows such creditor to have such Debt  satisfied out of such
property  or  assets  prior  to the  general  creditors  of any  owner  thereof,
including without  limitation any lien,  mortgage,  security  interest,  pledge,
deposit,  production  payment,  rights of a vendor under any title  retention or
conditional sale agreement or lease  substantially  equivalent  thereto,  or any
other charge or encumbrance  for security  purposes,  whether  arising by law or
agreement or otherwise,  but excluding any right of offset which arises  without
agreement in the ordinary course of business.

     "Loan" has the meaning given it in the first paragraph of the preamble.

     "Loan  Documents" means this Agreement,  the Note, the Security  Documents,
and all other agreements,  certificates,  affidavits or other documents executed
by Borrower or any officer of Borrower and delivered pursuant to Section 3.1.

     "Loan Interest" has the meaning given to it in Section 4.2.

     "Loan Pool" has the meaning given to it in Section 4.2.

     "Materially  Adverse  Effect"  means  (i)  with  respect  to an  Individual
Property,  any matter which would  materially and adversely  affect the value of
such Individual Property,  (ii) with respect to Borrower, any materially adverse
change in the business,  operations,  condition (financial or otherwise), assets
or prospects of Borrower,  or (iii) any fact or  circumstance as to which singly
or in the aggregate, based upon which, Borrower has reason to believe there is a
reasonable  possibility  of the  occurrence of (a) a materially  adverse  change
described in clause (i) or (ii), or (b) the inability of Borrower to perform its
material obligations hereunder or under any other Loan Document.

     "Maturity Date" means the date seven years after the Effective Date.


<PAGE>8

     "Mortgage"  means  collectively,  all of the  mortgages  and deeds of trust
included in the Security Documents and executed by Borrower.

     "Mortgaged Property" has the meaning given it in the Mortgage.

     "Net Cash Proceeds" shall mean with respect to any sale,  transfer or other
disposition of property or other assets:  (a) the cash proceeds  received by the
Borrower  (including,  without limitation,  all cash proceeds received by way of
(i) deferred payment of principal  pursuant to a note or installment  receivable
or  otherwise,  but only as and when  received  and (ii)  receivables  and other
assets retained by the Borrower as part of the sales  consideration),  minus (b)
reasonable  and  customary  brokerage   commissions  and  other  reasonable  and
customary fees and expenses  actually paid  (including  reasonable and customary
fees  and  expenses  of  counsel)  related  to  such  sale,  transfer  or  other
disposition.

     "Note" has the meaning given it in Section 2.2.

     "Payment Date" means the last day of any Interest Accrual Period.

     "PCBs" means polychlorinated biphenyls.

     "Person" means an individual, corporation,  partnership, association, joint
stock  company,   trust  or  trustee  thereof,   estate  or  executor   thereof,
unincorporated  organization or joint venture, court or governmental unit or any
agency or subdivision thereof, or any other legally recognizable entity.

     "Permitted Encumbrances" has the meaning given it in subsection 4.1(g).

     "Permitted Second Lien" has the meaning given it in Section 2.10.

     "Plan of  Reorganization"  shall mean that  certain  First  Amended Plan of
Reorganization, filed by the Debtor in the Case on September 5, 1997, as amended
on  October 9,  1997,  as the same may be  amended,  supplemented  or  otherwise
modified from time to time in accordance  with the terms thereof as in effect on
the date hereof.

     "Prepayment Premium" has the meaning given it in Section 2.6.

     "Prime  Rate"  means for any period,  an interest  rate per annum equal for
each day during  such  period to the "Prime  Rate"  reported  in The Wall Street
Journal on such day (or the most recent day so reported).

     "Prior  Notes"  has the  meaning  given it in the  first  paragraph  of the
preamble.



<PAGE>9


     "Prohibited  Transaction"  is a prohibited  transaction as described  under
Section 406 of ERISA or Section 4975 of the  Internal  Revenue Code which is not
the  subject  of a  statutory  exemption  under  Section  408(b)  of ERISA or an
administrative exemption granted pursuant to Section 408(a) of ERISA.

     "Property" has the meaning given it in the Mortgage.

     "RCRA" has the meaning given it in subsection 4.1(k).

     "Release Date" has the meaning given it in Section 2.7.

     "Release Fee" has the meaning given it in Section 2.7.

     "Release Notice" has the meaning given it in Section 2.7.

     "Secured   Indebtedness"  means  collectively  any  principal  and  accrued
interest  which  is  outstanding  under,  and all  other  amounts  which  may be
otherwise  payable under the Note and the other Loan  Documents and described in
the Mortgage as being secured thereby.

     "Securitization" has the meaning given to it in Section 4.2.

     "Security  Documents" means the instruments listed in the Security Schedule
attached as Schedule 2 hereto and all other security agreements, deeds of trust,
mortgages,  chattel  mortgages,   pledges,  guaranties,   financing  statements,
continuation   statements,   extension   agreements  and  other   agreements  or
instruments  now,  heretofore,  or hereafter  delivered by Borrower to Lender in
connection with this Agreement or any transaction  contemplated hereby to secure
or  guarantee  the  payment  of any  part  of the  Secured  Indebtedness  or the
performance of Borrower's other duties and obligations under the Loan Documents.

     "Store"  means an  Individual  Property  designated as a store on Exhibit C
hereto.

     "Subsidiary"   means,   with  respect  to  any  Person,   any  corporation,
association,  partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly  (through one or more
intermediaries)  controlled  by or  owned  fifty  percent  (50%) or more by such
Person.

     "Substitution Date" has the meaning given it in Section 2.7.

     "Substitution Notice" has the meaning given it in Section 2.7.

     "Substitution Property" has the meaning given it in Section 2.7.


<PAGE>10


     "Termination  Event"  means with  respect to Borrower or any  Affiliate  of
Borrower (a) the  occurrence  with respect to any ERISA Plan of (i) a reportable
event  described  in  Sections  4043(b)(5)  or (6) of ERISA  or (ii)  any  other
reportable  event  described in Section 4043(b) of ERISA other than a reportable
event not subject to the  provision  for 30-day  notice to the  Pension  Benefit
Guaranty  Corporation  pursuant to a waiver by such  corporation  under  Section
4043(a) of ERISA,  or (b) the  withdrawal  of  Borrower or of any  Affiliate  of
Borrower  from an ERISA Plan  during a plan year in which it was a  "substantial
employer"  as  defined in Section  4001(a)(2)  of ERISA,  or (c) the filing of a
notice of intent to terminate  any ERISA Plan or the treatment of any ERISA Plan
amendment as a termination  under Section 4041 of ERISA,  or (d) the institution
of  proceedings  to  terminate  any ERISA Plan by the Pension  Benefit  Guaranty
Corporation  under  Section  4042 of ERISA,  or (e) any other event or condition
which might  constitute  grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any ERISA Plan.

     "Trustee" means any trustee named under a Security Document.

     "U.S. Person" is any person that is (i) a citizen or resident of the United
States,  (ii) a  corporation,  partnership  or other entity created or organized
under the laws of the United  States or any State thereof or (iii) any estate or
trust that is subject to U.S.  federal income taxation  regardless of the source
of its income.

     Section 1.2 Exhibits and Schedules.  All Exhibits and Schedules attached to
this Agreement are a part hereof for all purposes.

     Section 1.3 Amendment of Defined Instruments.  Unless the context otherwise
requires or unless otherwise provided herein the terms defined in this Agreement
which refer to a particular agreement,  instrument or document also refer to and
include all renewals, extensions, modifications, amendments, and restatements of
such agreement,  instrument or document, provided that nothing contained in this
section  shall  be  construed  to  authorize   any  such   renewal,   extension,
modification, amendment or restatement.

     Section 1.4  References  and Titles.  All  references in this  Agreement to
Exhibits,  Schedules,  articles,  sections,  subsections and other  subdivisions
refer to the Exhibits,  Schedules,  articles,  sections,  subsections  and other
subdivisions  of this Agreement  unless  expressly  provided  otherwise.  Titles
appearing at the beginning of any  subdivisions  are for convenience only and do
not  constitute  any  part of such  subdivisions  and  shall be  disregarded  in
construing  the  language  contained  in  such  subdivisions.  The  words  "this
Agreement", "this instrument",  "herein",  "hereof",  "hereby",  "hereunder" and
words of  similar  import  refer  to this  Agreement  as a whole  and not to any
particular  subdivision unless expressly so limited.  The phrases "this section"
and  "this  subsection"  and  similar  phrases  refer  only to the  sections  or
subsections hereof in which such phrases occur. Pronouns in masculine,  feminine
and neuter genders shall be construed to include any other gender,  and words in
the  singular  form shall be  construed  to include  the plural and vice  versa,
unless the context otherwise requires.



<PAGE>11


     Section 1.5 Calculations  and  Determinations.  Unless otherwise  expressly
provided herein or unless Lender otherwise  consents,  all financial  statements
and reports  furnished to Lender  hereunder  shall be prepared and all financial
computations and determinations pursuant hereto shall be made in accordance with
GAAP.

                                   ARTICLE II
                                    The Loan

     Section 2.1 Acknowledgment of Existing Obligations.  It is hereby expressly
understood  and agreed by the  parties  hereto that the Note  amends,  restates,
supplements,  supersedes and replaces the Prior Notes in their entirety and that
the  indebtedness  outstanding  under and evidenced by the Prior Notes as of the
date hereof has not been repaid,  satisfied or discharged,  but for all purposes
has  been  replaced,   substituted  and  restructured  as  provided  herein  and
constitutes the indebtedness outstanding under the Note.

     Section  2.2  Exchange  of  Notes.  The  Lender  agrees  on the  terms  and
conditions set forth in this Agreement to restructure the Loan to Borrower as of
the Effective  Date.  Borrower  acknowledges  that the current unpaid  principal
amount of the Prior Notes is $97,359,451.26. The Loan, as restructured, shall be
evidenced  by  one  or  more  promissory   notes   (collectively,   the  "Note")
substantially in the form of Exhibit A. Upon the Effective Date,  Borrower shall
deliver the duly executed Note to Lender and Lender shall mark each of the Prior
Notes  held by it to  indicate  that  the  Prior  Note  has  been  replaced  and
superseded by the Note. The Note shall be delivered in replacement  for, but not
in payment of, such superseded Prior Notes.

     Section 2.3  Interest.  (a) Prior to the  Effective  Date,  interest on the
Prior Notes shall accrue and be added to the principal  amount of the Loan. Such
interest shall be calculated at the rates of interest  stated in the Prior Notes
without  regard to the late  payment rate and any other  penalties  provided for
therein and in the Prior Loan  Agreement.  If the Effective  Date shall not have
occurred prior to January 1, 1998,  then Borrower shall commence making payments
of interest at the rates  stated in the Prior Notes on the sum of the  principal
amount of the Prior Notes and all accrued  interest thereon through December 31,
1997, beginning on the first scheduled payment date thereafter.

          (b) The principal amount outstanding  hereunder shall bear interest at
a rate per annum (the  "LIBOR  Interest  Rate")  equal to four  percent  (4%) in
excess of LIBOR for the relevant Interest Accrual Period.


          (c) On and after the  Effective  Date,  prior to the Maturity Date (or
the  date the  unpaid  principal  balance  otherwise  becomes  due,  whether  by
acceleration  or  otherwise),  interest  accruing  during each Interest  Accrual
Period shall be payable monthly in arrears on each Payment


<PAGE>12


Date. The entire unpaid principal balance of the Secured  Indebtedness  together
with all accrued and unpaid  interest,  if not sooner paid,  shall be payable in
full on the Maturity Date.

          (d) All interest  payable  shall be computed on the basis of a 360-day
year for the actual  number of days  elapsed.  In  computing  the number of days
during which  interest  accrues,  the day on which funds are initially  advanced
shall be included  regardless  of the time of day such advance is made,  and the
day on which funds are repaid shall, subject to Section 2.8 below, be excluded.

     Section 2.4  Funding Losses; Change in Law, Etc.

          (a) Borrower  hereby  agrees to pay to Lender any amount  necessary to
     compensate Lender for any losses or costs (including,  without  limitation,
     the costs of  breaking  any "LIBOR"  contract,  if  applicable,  or funding
     losses  determined  on the  basis  of  Lender's  reinvestment  rate and the
     interest rate hereon) (Collectively, "Funding Losses") sustained by Lender:
     (i) if  this  Note,  or any  portion  hereof,  is  repaid  for  any  reason
     whatsoever  on any date  other  than a  Payment  Date  (including,  without
     limitation,  from  condemnation  or  insurance  proceeds),  (ii)  upon  the
     conversion of the interest rate on the Loan to the Prime Rate in accordance
     with  subsection  (b) below,  (iii) as a  consequence  of (x) any increased
     costs that Lender may sustain in maintaining the borrowing evidenced hereby
     or (y) the reduction of any amounts  received or receivable  from Borrower,
     in either  case,  due to the  introduction  of, or any  change  in,  law or
     applicable   regulation  or  treaty   (including  the   administration   or
     interpretation thereof),  whether or not having the force of law, or due to
     the compliance by Lender,  as the case may be, with any directive,  whether
     or not  having  the  force of law,  or  request  from any  central  bank or
     domestic  or  foreign  governmental  authority,  agency or  instrumentality
     having  jurisdiction  and/or  (iv)  any  other  set  of  circumstances  not
     attributable to Lender's acts. Payment of Funding Losses hereunder shall be
     in addition to any obligation to pay a Prepayment  Premium in circumstances
     where such Prepayment Premium would be due and owing.

          b) If Lender determines (which  determination  shall be conclusive and
     binding upon Borrower,  absent  manifest error( (i) that Dollar deposits in
     an  amount   approximately  equal  to  the  principal  balance  outstanding
     hereunder are not generally  available at such time in the London Interbank
     Market  for  deposits  in  Eurodollars,  (ii)  that the rate at which  such
     deposits are being offered will not  adequately and fairly reflect the cost
     to Lender of  maintaining  a LIBOR  Interest Rate on the Loan or of funding
     the  same  in  such  market  for  such  Interest   Accrual  period  due  to
     circumstances  affecting the London Interbank Market generally,  (iii) that
     reasonable means do not exist for ascertaining  LIBOR, or (iv) that a LIBOR
     Interest  Rate  would be in  excess  of the  maximum  interest  rate  which
     Borrower may by law pay,  then,  in any such event,  Lender shall so notify
     Borrower and as of the date of such  notification  with respect to an event
     described  in clause (ii) or (iv)  above,  or as of the  expiration  of the
     applicable  Interest  Accrual Period with respect to an event


<PAGE>13



     described in clause (i) or (iii) above,  interest  shall accrue at the
     Prime Rate until such time as the situations  described above are no longer
     in effect  or as  otherwise  provided  in  Section  7.1  hereof;  provided,
     however,  if the  situation  described  in clause  (ii) above  occurs,  (x)
     Borrower  shall have the  option,  to be  exercised  by  written  notice to
     Lender,  to pay Lender (in the manner  reasonably  required  by Lender) for
     such  increased  cost of  maintaining a LIBOR  Interest Rate and (y) if the
     same only affects a portion of the Loan,  then only such portion shall have
     interest  accrue at the Prime Rate  (provided the  remaining  portion is at
     least  $1,000,000)  and interest  shall continue to accrue on the remaining
     portion at the LIBOR Interest Rate.

          (c) If the introduction  of, or any change in, any law,  regulation or
     treaty,  or in the  interpretation  thereof by any  governmental  authority
     charged with the  administration or interpretation  thereof,  shall make it
     unlawful for Lender to maintain the LIBOR Interest Rate with respect to the
     Loan, or any portion thereof,  or to fund the Loan, or any portion thereof,
     in  Eurodollars  in the  London  Interbank  Market,  then the Loan (or such
     portion  of the Loan)  shall  thereafter  bear  interest  at the Prime Rate
     (unless the Default Rate shall be  applicable)  and  Borrower  shall pay to
     Lender the amount of Funding  Losses (if any) incurred in  connection  with
     such  conversion.  The accrual of interest at the Prime Rate shall continue
     until  such  Payment  Date,  if any,  as the  situation  described  in this
     subsection (c) is no longer in effect.

          (d) If Lender shall have determined that the applicability of any law,
     rule,  regulation  or guideline  adopted  pursuant to or arising out of the
     July  1988  report  of the  Basle  Committee  on  Banking  Regulations  and
     Supervisory  Practices  entitled  "International   Convergence  of  Capital
     Measurement and Capital Standards", or the adoption of any other law, rule,
     regulation  or guideline  (including  but not limited to any United  States
     law, rule,  regulation or guideline)  regarding  capital  adequacy,  or any
     change becoming  effective in any of the foregoing or in the enforcement or
     interpretation  or  administration  of any of the foregoing by any court or
     any domestic or foreign governmental authority,  central bank or comparable
     agency charged with the  enforcement or  interpretation  or  administration
     thereof,  or compliance by Lender or its holding  company,  as the case may
     be, with any request or directive  regarding  capital adequacy  (whether or
     not  having  the  force  of law) of any  such  authority,  central  bank or
     comparable  agency,  has or would have the effect of  reducing  the rate of
     return on the capital of Lender or its holding company, as the case may be,
     to a level below that which Lender or its holding company,  as the case may
     be, could have  achieved but for such  applicability,  adoption,  change or
     compliance (taking into consideration Lender's or its holding company's, as
     the case may be, policies with respect to capital  adequacy) (the foregoing
     being  hereinafter  referred to as "Capital Adequacy  Events"),  then, upon
     demand by Lender,  Borrower shall,  pay to Lender,  from time to time, such
     additional  amount  or  amounts  as will  compensate  Lender  for any  such
     reduction suffered.


<PAGE>14


          (e) Any amount payable by Borrower under  subsection (a) or subsection
     (d) of this  Section  2.4 shall be paid to Lender  within  five (5) days of
     receipt by Borrower of a certificate signed by an officer of Lender setting
     forth the amount due and the basis for the  determination  of such  amount,
     which  statement  shall be  conclusive  and binding upon  Borrower,  absent
     manifest  error.  Failure  on the part of  Lender to  demand  payment  from
     Borrower for any such amount  attributable  to any particular  period shall
     not  constitute a waiver of Lender's right to demand payment of such amount
     for any subsequent or prior period.  Lender shall use reasonable efforts to
     deliver to Borrower  prompt notice of any event described in subsection (a)
     or (d)  above and of the  amount to be paid  under  this  Section  2.4 as a
     result  thereof;  provided,  however,  any  failure  by Lender to so notify
     Borrower shall not affect Borrower's  obligation to make the payments to be
     made under this  Section 2.4 as a result  thereof.  All  amounts  which may
     become due and payable by Borrower in  accordance  with the  provisions  of
     this Section 2.4 shall constitute  additional  interest hereunder and shall
     be secured by the Mortgage and the other Loan Documents.

          (f) If  Lender  requests  compensation  for any  losses or costs to be
     reimbursed  pursuant to any one or more of the  provisions  of  subsections
     (a)(iii)  or (iv) or  subsection(d)  of this  Section  2.4, of if any event
     occurs as described in  subsections  (b) or (c) above which would cause the
     Note no longer to bear  interest  at the LIBOR  Interest  Rate  then,  upon
     request  of  Borrower,  Lender  shall use  reasonable  efforts  in a manner
     consistent with such  institution's  practice in connection with loans like
     the Loan to designate a different lending office for funding or booking the
     Secured Indebtedness or assign its rights and obligations under the Note to
     another of its  offices,  branches or  affiliates  if such  designation  or
     assignment  in Lender's sole but good faith  judgment (i) would  eliminate,
     mitigate or reduce amounts  payable by Borrower in connection  with Funding
     Losses or Capital Adequacy Events or, with respect to an event described in
     subsection  (b) or (c)  above  would  allow  the Note to  continue  to bear
     interest at the LIBOR Interest Rate without  additional  cost to Lender and
     (ii) would not be otherwise prejudicial to Lender; Borrower hereby agreeing
     to pay all  reasonably  incurred  costs and expenses  incurred by Lender in
     connection with any such designation or assignment.

     Section 2.5   Mandatory Payments.

          (a)  Borrower  shall make annual  repayments  of principal on the Loan
     (without  premium) in installments of $4,000,000 on each anniversary of the
     Effective Date, beginning in 1998. Any prepayments of principal made by the
     Borrower  pursuant to Section 2.7 and  subsections  5.1(g) and (h) shall be
     credited  against  Borrower's  obligation  under this Section 2.5, with the
     amount of any such  prepayment  to be  applied to the  scheduled  mandatory
     repayments  in the  order of their  maturity  without  Prepayment  Premium.
     Borrower shall not be entitled to release one or more Individual Properties
     in connection with any payment made pursuant to this Section 2.5.


<PAGE>15


          (b)  Notwithstanding  any  other  provisions  of this  Agreement,  the
     outstanding unpaid principal amount of the Note,  together with all accrued
     interest thereon, shall become due and payable on the Maturity Date.

     Section 2.6   Optional Prepayment.

          (a)  Borrower  shall  have no right to  prepay  all or any part of the
     principal of or interest on the Loan except as  expressly  provided in this
     Agreement.  Subject to the terms and  conditions of the Loan  Documents and
     payment  of  the  prepayment  premium  set  forth  below  (the  "Prepayment
     Premium")  and all  accrued  interest  thereon and other sums due under the
     Loan,  if any,  Borrower  shall have the right to prepay all or any part of
     the outstanding  principal balance of the Loan for the periods beginning on
     the second anniversary of the Effective Date as shown below. The Prepayment
     Premium for each such period shall be as follows:

                                               Prepayment Premium (as a
                                                percentage of principal
          Year                                       being prepaid)

          Beginning the 2nd anniversary of the 
          Effective Date                                  3%

          Beginning the 3rd anniversary of the
          Effective Date                                  2%

          Beginning the 4th anniversary of the 
          Effective Date

          Beginning the 5th anniversary of the 
          Effective Date and thereafter                   0%
  
Prepayments  may be made on a  Payment  Date  upon the  giving  of not less than
twenty (20) days prior written  notice to Lender.  Lender shall not be obligated
to  accept  any  prepayment  unless  accompanied  by the  applicable  Prepayment
Premium,  if any. Except as expressly set forth therein,  no Prepayment  Premium
shall be required with respect to  prepayments  of the Loan made pursuant to any
other  provisions  of this  Agreement  provided  however  that  Lender  shall be
entitled to receive the applicable  Prepayment  Premium (if any) set forth above
upon  acceleration of the Loan upon an Event of Default pursuant to Section 7.2.
Borrower shall not be entitled to release one or more  Individual  Properties in
connection  with any optional  partial  prepayment  of the Loan pursuant to this
section.

          (b) At any time after the date hereof until the Maturity  Date,  prior
     to seeking any financing  and any  commitment  for  financing  from a third
     party relating to the refinancing of the Loan,  Borrower shall first notify
     Lender in writing of its intention to

<PAGE>16


     obtain  such  financing,  and offer to Lender the  opportunity  to consider
     whether or not Lender will  provide  the  financing.  As and when  Borrower
     determines that it will seek to obtain  financing,  Borrower shall promptly
     send to Lender  such  notice  thereof.  If Lender is  willing  to  consider
     providing  the  financing,  Lender  shall,  prior to the  expiration of the
     period  ending  fifteen  (15) days after  Lender's  receipt of the  notice,
     deliver to Borrower an initial term sheet  describing  the  proposed  basic
     business terms and conditions regarding the financing,  it being understood
     that such  initial term sheet shall not be binding upon Lender and shall in
     no event be deemed a  commitment  by Lender to lend.  After the  receipt by
     Borrower of the initial term sheet,  Borrower and Lender shall have fifteen
     (15) days within which to agree in writing on the terms and conditions of a
     final term  sheet,  describing  the basic terms and  conditions  upon which
     Lender is prepared to seek internal  approvals to extend the financing,  it
     being  understood  that such  final term  sheet  shall not be binding  upon
     Lender  and  shall in no event be  deemed a  commitment  by Lender to lend.
     Borrower  agrees to cooperate with Lender and negotiate in good faith in an
     effort to arrive at a final term sheet, without,  however,  being obligated
     to reach such an agreement.
     
     Section 2.7 Partial Releases.

          (a) Partial Releases of Individual Properties.  In connection with its
     proposed sale, upon Borrower's  written request,  Lender shall release that
     portion of an  Individual  Property not  required for the  operation of the
     Store or other  facility  located  thereon  from the Lien of the  Mortgage,
     provided each and every one of the following  terms and  conditions of this
     subsection 2.7(a) is satisfied, in Lender's sole opinion:

               (i)  Borrower  shall give notice  (hereinafter  called a "Release
          Notice")  to Lender of its intent to have a portion  of an  Individual
          Property  released  from the Lien of the Mortgage at least thirty (30)
          days  prior to the  date  set  forth  in the  Release  Notice  for the
          granting of such release  (hereinafter  called the "Release Date") and
          describing the terms of the proposed sale.

               (ii) At the time of the Release  Notice and on the Release  Date,
          there shall not have occurred and be continuing  under any of the Loan
          Documents  either (A) a Default  that is capable of being cured by the
          payment of money or (B) an Event of Default.

               (iii) Borrower shall furnish Lender with evidence satisfactory to
          Lender that the Mortgage  remains a valid first Lien on the  remaining
          Property  covered by the Mortgage or deed of trust that  included such
          released  Individual  Property and not so released,  including without
          limitation an  endorsement  to existing  title  insurance  policies or
          equivalent  assurance in form,  of substance  and within policy limits
          satisfactory  to Lender.  All costs of the foregoing  shall be paid by
          Borrower.


<PAGE>17

               (iv) In order to obtain the partial  release,  Borrower shall pay
          the following amounts:

                    (A)  an amount equal to the Net Cash  Proceeds  arising from
                         the sale of the Property  being  released to be applied
                         to the outstanding principal amount of the Loan;

                    (B)  other  amounts,  if any,  advanced by Lender  under the
                         Loan Documents and relating to the Individual  Property
                         to be released; and

                    (C)  all costs  incurred by Lender  relating to the proposed
                         partial   release,   including   but  not   limited  to
                         reasonable  legal fees and expenses of outside counsel,
                         appraisal costs, survey costs, and title costs.

          (b) Partial  Releases  upon Closure of Store.  When a Store is closed,
     Borrower  must give Lender  written  notice of closure at least thirty (30)
     days prior to closure,  other than the Stores  listed on  Schedule  2.7(b),
     which stores were closed prior to the Effective Date. At any time after the
     date of such Store closure,  in connection  with a proposed sale,  Borrower
     may obtain a partial  release of the lien of the  Mortgage  with respect to
     the  Individual  Property  on which  such  closed  Store is  located on the
     following terms and conditions:

               (i)  Borrower   shall  give  the  notice   described  in  Section
                    2.7(a)(i).

               (ii) At the time of the Release  Notice and on the Release  Date,
                    there shall not have occurred and be continuing under any of
                    the Loan  Documents  either (A) a Default that is capable of
                    being  cured  by the  payment  of  money  or (B) an Event of
                    Default.

               (iii) Borrower shall pay to Lender the following amounts:

                    (A)  an amount equal to the Net Cash  Proceeds  arising from
                         the sale of the Property  being  released to be applied
                         to the outstanding principal amount of the Loan;

                    (B)  other  amounts,  if any,  advanced by Lender  under the
                         Loan Documents and relating to the Individual  Property
                         to be released ; and


<PAGE>18


                    (C)  all costs  incurred by Lender  relating to the proposed
                         partial   release,   including   but  not   limited  to
                         reasonable legal fees and expenses of outside counsel.

          (c) Partial Release Upon Substitution of an Individual Property. Upon
     Borrower's written request, Lender shall permit the release of the Lien on,
     and substitution for, certain Individual Properties provided the following
     terms and conditions are satisfied, in Lender's sole opinion:

               (i)   Borrower   shall  give  notice   (hereinafter   called  the
          "Substitution  Notice")  to  Lender  of  its  intent  to  release  and
          substitute Individual Properties at least sixty (60) days prior to the
          date set  forth  in the  Substitution  Notice  for  such  release  and
          substitution   (hereinafter  called  the  "Substitution   Date").  The
          Substitution  Notice  shall  describe  the  Individual  Property to be
          released  and  the  property  to  be  substituted  (the  "Substitution
          Property").

               (ii)  At  the  time  of  the  Substitution   Notice  and  on  the
          Substitution  Date,  there shall not have  occurred and be  continuing
          under any of the Loan  Documents  either (A) a Default that is capable
          of being cured by the payment of money or (B) an Event of Default.
 
               (iii)  Each  Substitution  Property  shall  be  similar  by type,
          remaining  economic life, land value, and desirability of location and
          shall have a value equal to or greater,  as determined by Lender, than
          the  value  of  the  Individual  Property  being  released;  provided,
          however,  in all  events  the  Substitution  Property  must  be  fully
          operational   and  operating.   Notwithstanding   the   preceding,   a
          Substitution  Property  may  only  be  substituted  for an  Individual
          Property on a one-for-one basis, and the Substitution Property must be
          acceptable  to  Lender  in  all  respects,  including  title,  zoning,
          appraisal, engineering and environmental respects.

               (iv) Borrower shall pay all costs incurred by Lender  relating to
          the proposed  partial release and  substitution,  even if the proposed
          transaction is not completed,  including but not limited to reasonable
          legal fees and  expenses of outside  counsel,  title  costs and,  with
          respect  to  the  Substitution   Property,   appraisal,   engineering,
          environmental, and survey costs.

               (v) Borrower shall furnish Lender with evidence  satisfactory  to
          Lender that (a) the Lender has a valid first Lien on the  Substitution
          Property.   Lender  recognizes  that  if  an  Individual  Property  is
          substituted,  the Substitution Property will also be encumbered by the
          Permitted  Second  Lien,  but only to the extent  permitted by Section
          2.10 and (b) the Mortgage  remains a valid first lien on any remaining
          Property  covered by the  mortgage or deed of trust that  included the
          released  Individual  Property and not so released,  including without
          limitation an


<PAGE>19


          endorsement to existing title policies or equivalent assurance in
          form,  substance and within policy limits  reasonably  satisfactory to
          Lender.

               (vi) only properties to which the Borrower holds fee simple title
          may be  Substitution  Properties.  No  Individual  Properties in which
          Borrower  holds only a  leasehold  estate may be used as a  substitute
          either for another ground-leased property or for a fee-owned property.

               (vii) No more than ten (10) Individual Properties may be released
          during the term of the Loan pursuant to this subsection 2.7(c).

          (d) Sales at Arm's  Length.  Lender  shall not be obligated to release
     any  Individual  Property  pursuant to  subsection  2.7(a) or 2.7(b)  above
     unless the sale (i) has been  negotiated on an arm's length basis,  (ii) is
     to a bona fide third party purchaser, (iii) is for cash consideration only,
     and  (iv) is at a price  in  conformity  with  market  values  for  similar
     properties in the area in which the Individual Property is located.

     Section 2.8 Payments to Lender.  Borrower  will make each payment  which it
owes under the Loan Documents not later than 12:00 p.m.,  Eastern  Standard Time
or Eastern  Daylight  Time,  whichever is  applicable,  on the date such payment
becomes due and payable,  in lawful money of the United States of America and by
wire transfer of immediately  available  funds to such bank or place, or in such
other manner, as Lender may from time to time designate.  Payments shall be made
without  any setoff,  deduction  or  counterclaim  whatsoever.  Until  otherwise
designated in writing by Lender, payments shall be made by wire transfer to [UBS
Mortgage Finance,  c/o Chase Manhattan Bank, New York, New York, ABA #021 000021
Account  #140-0-91821].  Any payment  received by Lender after such time will be
deemed to have been made on the next  following  Business  Day.  Should any such
payment  become due and payable on a day other than a Business Day, the maturity
of such payment  shall be extended to the next  succeeding  Business  Day.  Each
payment  under a Loan  Document  shall be due and payable at the place  provided
therein  and,  if no  specific  place of payment is  provided,  shall be due and
payable at the place of payment of the Note. If on any date on which payments of
principal and interest are due or past due on the Note,  Borrower pays less than
the full amount due  thereunder,  Lender may, in addition to any other rights or
remedies  provided  herein,  apply  such  money  as it  elects  to  the  Secured
Indebtedness  then due and  payable.  In the event any payment of  principal  or
interest  under this  Agreement or the other Loan  Documents is made directly by
the holder of the  Permitted  Second  Lien on behalf of  Borrower  (pursuant  to
Section 7.2 hereof) and not by way of an advance by the holder of the  Permitted
Second Lien under the Credit Agreement, evidence detailing such payment shall be
simultaneously  delivered by the holder of the  Permitted  Second Lien to Lender
with each payment.

     Section 2.9  Limitation on Liability.  Lender shall not seek or enforce any
money judgment or deficiency judgment, or otherwise assert personal liability or
responsibility, against Borrower with respect to any and all obligations secured
by the Mortgage or other obligations



<PAGE>20


arising  out of the  Loan  Documents  in  excess  of the  amount  realized  upon
foreclosure against (or sale, pursuant to power of sale, of) all or, at Lender's
option,  a portion of the security  therefor,  it being  agreed that,  except as
hereinafter provided,  the sole remedy of Lender shall be to proceed against the
security for the Loan under the Loan Documents;  provided, however, that nothing
contained  herein or in any other Loan Document shall (a) limit Lender's  rights
and  remedies  (other  than its  right to seek a money  judgment  or  deficiency
judgment which is limited as provided  above) against the Borrower  hereunder or
under any  other  Loan  Document,  either at law or in  equity,  or (b)  relieve
Borrower from personal liability and responsibility:

          (a) for  damages  suffered  by  Lender by  reason  of a  violation  of
     subsections  4.1(k) and (q) and 5.1(p) and (aa)  hereof and for any amounts
     required to be paid by Borrower under Sections 5.2 and 7.4 hereof;

          (b) for waste  resulting in a material  diminution  in value to any of
     the  Property  committed  or  permitted  by  Borrower  with  respect to the
     Property,  including without limitation any waste resulting from Borrower's
     failure to restore the Property after removal of trade fixtures as required
     by this  Agreement,  to the extent and only to the extent that the Property
     affected thereby has suffered a diminution in value as a result thereof;

          (c) for insurance  proceeds and condemnation  awards in respect of the
     Property  received  by  Borrower  and not turned  over to Lender or used by
     Borrower with Lender's consent for restoration or repair of the Property as
     provided in the Mortgage;

          (d) for unpaid real estate taxes and assessments or other governmental
     or other impositions  (including  without  limitation utility charges) that
     create a Lien on any of the Property  that would not be  extinguished  by a
     foreclosure of the Mortgage, prorated to date of foreclosure,  with respect
     to the Property;

          (e) regarding leases affecting the Property, (a) for any sums expended
     by Lender in  fulfilling  the  obligations  of Borrower for which Lender is
     personally  liable,  including  without  limitation  the return of security
     deposits to tenants if not  delivered  to Lender upon  foreclosure  or sale
     pursuant to power of sale, or (b) for any rents or other income from leases
     either (i) after the occurrence of an Event of Default,  not applied to the
     fixed and operating expenses of the Property, including without limitation,
     payments  on the Loan or (ii) under  future  leases that do not comply with
     the  requirement of the Mortgage that such leases be designated as superior
     or subordinate to the Mortgage at Lender's option;

          (f)  for  the  Net  Cash  Proceeds   attributable  to  any  Individual
     Properties  sold in violation  of the  provisions  contained in  subsection
     7.1(d) hereof;



<PAGE>21


          (g) for the  Allocated  Loan  Amount  attributable  to any  Individual
     Property  covered by the Lien of the  Mortgage  with  respect to which such
     Lien ceases to be  enforceable by reason of avoidance  under  bankruptcy or
     other fraudulent transfer laws;

          (h) for any  damages  incurred  by  Lender  by  reason of any fraud or
     material misrepresentation with intent to deceive by Borrower in connection
     with the Property, the Loan Documents,  the application for the Loan or any
     other aspect of the Loan;

          (i) for costs and  expenses  incurred  by Lender  with  respect to the
     Property at any time after six (6) months  after the date on which the Loan
     becomes due and payable in full, by acceleration or otherwise, or after any
     event described in subsection 7.1(f); and

          (j) for  interest  accruing  on the Loan from the date six (6)  months
     after  the date on which  the Loan  becomes  due and  payable  in full,  by
     acceleration  or  otherwise,  or after any event  described  in  subsection
     7.1(f) until title to all of the Property passes from the Borrower pursuant
     to enforcement of the Mortgage.

Nothing  contained  herein shall impair Lender's rights under  Applicable  Laws,
including  without  limitation  applicable  bankruptcy  law; nor shall  anything
contained  herein  impair  Lender's  status  and  rights  as a holder  of senior
indebtedness  pursuant to any  instrument  under which  Lender  would be granted
senior status or a derivative recourse claim.

     Section  2.10  Permitted  Second  Lien.  Borrower  shall  have the right to
encumber  the Property  with a second Lien  (hereinafter  called the  "Permitted
Second Lien") which Permitted  Second Lien shall be substantially in the form of
Exhibit B hereto.  The Permitted Second Lien shall secure only the Bank Debt and
any  refinancing  thereof.  The Permitted  Second Lien documents  shall provide,
among other things,  that the Permitted Second Lien is not  forecloseable  until
Lender accelerates the maturity of the Note. The Permitted Second Lien documents
shall further  provide that in the event Lender  accelerates the maturity of the
Note, the sole remedy of the holder of the Permitted Second Lien is to cooperate
and join Lender in the simultaneous foreclosure of both Liens in accordance with
Lender's  schedule for  foreclosure,  time being of the essence.  The  Permitted
Second  Lien  documents  shall  contain  such  additional  provisions  as may be
required by state and local law to accomplish the foregoing  objectives.  During
the term of any such  Permitted  Second Lien,  Borrower  shall  provide  Lender,
without  cost to Lender,  with annual  estoppel  certificates,  stating the then
correct  balance of Bank Debt,  the current  interest rate on the Bank Debt, and
the remaining amortization schedule for the Bank Debt of the then current year.



                                  ARTICLE III
                              Conditions Precedent


<PAGE>22


     Section 3.1 Documents to be Delivered.  As a condition to the effectiveness
of this Agreement,  Lender shall have received all of the following, at Lender's
office in New York, New York, duly executed and delivered and in form, substance
and date satisfactory to Lender:

          (a) The Note.

          (b) A certificate of the chief  financial  officer of Borrower in form
     and substance satisfactory to Lender.

          (c) Favorable opinion(s) of counsel to Borrower,  substantially in the
     form set forth in Exhibit D.

          (d) Each Security Document listed in the Security  Schedule,  together
     with appropriate UCC Financing Statements.

          (e) Each additional closing item described in Schedule 3.

     Section 3.2  Additional  Conditions  Precedent.  In addition the  following
conditions precedent have been satisfied:

          (a) All  representations  and warranties  made by Borrower in any Loan
     Document shall be true on and as of the date made and on the Effective Date
     (except where such representations expressly relate to an earlier date).

          (b) Borrower shall have performed and complied with all agreements and
     conditions  required in the Loan Documents to be performed or complied with
     by it on or prior to the date of the Loan.

          (c) Borrower shall have obtained  confirmation by the Bankruptcy Court
     of its Plan of Reorganization.

          (d) No Default under this Agreement shall exist and be continuing.

          (e) Each additional condition described in Schedule 4.


                                   ARTICLE IV
                         Representations and Warranties

     Section 4.1 Borrower's  Representations and Warranties. To induce Lender to
enter into this Agreement and to restructure  the Loan, the Borrower  represents
and warrants to Lender that:



<PAGE>23


          (a) No Default.  Borrower is not in Default in the  performance of any
     of the covenants and agreements contained herein. No event has occurred and
     is continuing which constitutes a Default.

          (b)  Organization  and Good Standing.  Borrower is a corporation  duly
     organized,  validly  existing  and in good  standing  under the laws of its
     state of organization, having all corporate powers required to carry on its
     business and enter into and carry out the transactions contemplated hereby.
     Borrower  has all  requisite  power and all  governmental  certificates  of
     authority,  licenses, permits,  qualifications,  and other documentation to
     own,  lease and operate its  properties and to carry on its business as now
     conducted  and as  contemplated  to be conducted  except  where  failure to
     obtain any such  governmental  certificate of authority,  license,  permit,
     qualification or other  documentation  would not have a Materially  Adverse
     Effect.  Borrower is duly qualified, in good standing, and authorized to do
     business in all other  jurisdictions  within the United States  wherein the
     character  of the  properties  owned  or  held by it or the  nature  of the
     business transacted by it makes such qualification necessary.

          (c)  Authorization.  Borrower  has duly  taken  all  corporate  action
     necessary  to  authorize  the  execution  and  delivery  by it of the  Loan
     Documents to which it is a party and to authorize the  consummation  of the
     transactions  contemplated  thereby and the  performance of its obligations
     thereunder.

          (d) No  Conflicts  or Consents.  The  execution  and delivery the Loan
     Documents to which Borrower is a party,  the performance by Borrower of its
     obligations  under  such  Loan  Documents,  and  the  consummation  of  the
     transactions  contemplated by the various Loan  Documents,  do not and will
     not (i)  conflict  with any  provision  of (A) any  applicable  domestic or
     foreign law, statute,  decree, rule or regulation,  except where failure to
     comply  therewith  would  not  have a  Materially  Adverse  Effect  (B) the
     certificate of incorporation or bylaws,  of Borrower,  or (C) any judgment,
     license,  order or permit  applicable  to or binding  upon  Borrower,  (ii)
     result in the  acceleration  of any Debt of  Borrower,  (iii)  result in or
     require the creation of any Lien upon any assets or  properties of Borrower
     except as expressly contemplated in the Loan Documents, or (iv) contravene,
     result in a breach of or constitute a default  under any mortgage,  deed of
     trust, lease, promissory note, loan agreement or other material contract or
     material  agreement entered into as of the Effective Date to which Borrower
     is a party or any of its  properties  may  currently  be bound or affected.
     Except  as  expressly  contemplated  in the  Loan  Documents,  no  consent,
     approval,  authorization  or order of, and no notice to or filing with, any
     court or  governmental  authority or third party is required in  connection
     with  the  execution,  delivery  or  performance  by  Borrower  of any Loan
     Document  or to  consummate  any  transactions  contemplated  by  the  Loan
     Documents.

          (e)  Enforceable  Obligations.  This  Agreement is, and the other Loan
     Documents  are or, when duly  executed  and  delivered,  will be, legal and
     binding


<PAGE>24


     obligations  of Borrower  enforceable in accordance  with their  respective
     terms,  except as  limited by  bankruptcy,  insolvency  or similar  laws of
     general application relating to the enforcement of creditors' rights.

          (f) Title and  Authority.  Borrower  is the  lawful  owner of good and
     marketable title to the Property and has good right and authority to grant,
     bargain, sell, transfer,  assign and mortgage the Mortgaged Property and to
     grant a security interest in the Collateral.  Borrower does not do business
     with respect to the  Property  under any trade name other than as set forth
     on the Disclosure Schedule attached hereto as Schedule 1.

          (g)  Permitted  Encumbrances.  The Property is free and clear from all
     Liens,  security  interests and  encumbrances  except the Lien and security
     interest evidenced by the Security Documents and the encumbrances set forth
     in the Security  Documents,  including  without  limitation  the  Permitted
     Second Lien, and the mechanic's or materialmen's  Liens,  lienable bills or
     other claims constituting or that may constitute a Lien on the Property, or
     any part thereof that are set forth on the Disclosure Schedule (hereinafter
     called the "Permitted Encumbrances").

          (h) No Financing  Statement.  There is no financing statement covering
     all or any  part of the  Property  or its  proceeds  on file in any  public
     office except with respect to the Permitted  Second Lien or as described in
     the Disclosure Schedule

          (i) Location of Collateral.  All tangible Collateral is located on the
     Property.

          (j)  Compliance  with  Covenants and Laws. To the best of knowledge of
     Borrower, the Property and the intended use thereof by Borrower comply with
     all applicable restrictive covenants, zoning ordinances and building codes,
     flood  disaster  laws,   applicable  health  and  environmental   laws  and
     regulations and all other applicable  laws,  statutes,  ordinances,  rules,
     regulations,  orders,  determinations  and  court  decisions  (all  of  the
     foregoing  hereinafter  sometimes  collectively  called "Applicable Laws"),
     except  where  failure  to comply  therewith  would  not have a  Materially
     Adverse  Effect,  which  compliance  is,  except  with  respect to parking,
     without reliance on adjacent or other properties not covered by the Lien of
     the  Mortgage.   Borrower  has  obtained  all  requisite  zoning,  utility,
     building,  health and operating permits from each governmental authority or
     municipality  having jurisdiction over the Property except where failure to
     obtain any such permit would not have a Materially Adverse Effect. Borrower
     has not been  notified by any  Governmental  Authority  of or is  otherwise
     aware of any  material  violation  of parking or zoning  requirements  that
     Borrower  believes  cannot be  corrected by  providing  additional  surface
     parking on portions of the Property suitable for parking purposes except as
     previously  disclosed  to Lender.  The  existing  parking  provided on each
     Individual  Property is adequate to meet the business  requirements  of the
     operations conducted thereon.



<PAGE>25


          (k)  Environmental.  To the best of  Borrower's  knowledge  after  due
     inquiry,  except  as set  forth  on  Schedule  1,  Borrower  covenants  and
     represents to Lender that, (i) no Hazardous Substances are now or have ever
     been located, produced, used, stored, treated,  transported,  incorporated,
     discharged,  emitted,  released,  deposited or disposed of in, upon, under,
     over or from the  Property  in a manner that may give rise to any actual or
     potential  liability  to pay  response  costs or other  damages,  losses or
     expenses or otherwise violate any Environmental Laws which could reasonably
     be expected to result in a  Materially  Adverse  Effect;  (ii) no Hazardous
     Substances are currently located,  stored, or used at the Property,  except
     with  respect  to such  Hazardous  Substances  which  are  (x)  customarily
     located,  stored or used in retail  stores  similar to the  Property or (y)
     unique and  necessary to a  Borrower's  business  located at the  Property,
     provided that such Hazardous  Substances described in (x) or (y) are at all
     times stored,  located and used in compliance with all Environmental  Laws;
     (iii) no Hazardous  Substances have been  discharged,  released or emitted,
     upon or from the Property  into the  environment  and no threat exists of a
     discharge,  release or emission of a Hazardous  Substance  upon or from the
     Property into the  environment,  which discharge,  release or emission,  in
     either  case,  would  subject  the owner of the  Property  to any  damages,
     penalties or  liabilities  under any  applicable  Environmental  Laws which
     could reasonably be expected to result in a Materially Adverse Effect; (iv)
     the Property has not ever been used as or for a mine, a landfill, a dump or
     other disposal  facility or a gasoline service station;  (v) no underground
     storage tank is now located on or at the Property or if previously  located
     therein  has been  removed  therefrom  in  compliance  with all  applicable
     Environmental  Laws and any clean-up of the surrounding  soil in connection
     therewith  has been  completed or is such that,  in each case, it could not
     reasonably result in a Materially  Adverse Effect;  (vi) no asbestos,  ACM,
     materials  containing  urea-formaldehyde,   or  transformers,   capacitors,
     ballasts or other  equipment  that  contain PCBs are located on at or under
     the Property  which could  reasonably be expected to result in a Materially
     Adverse  Effect;  (vii) the Property has never been used by Borrower or any
     Affiliate  or,  to the  best  of  Borrower's  knowledge,  after  reasonable
     investigation, any other person or entity (including any prior owner of the
     Property) as a permanent or temporary  treatment,  storage or disposal site
     for any Hazardous  Substance;  (viii) no violation of any Environmental Law
     now exists or has ever existed in, upon,  under, over or from the Property,
     no notice of any such violation or any alleged  violation  thereof has been
     issued or given by any governmental  entity or agency, and there is not now
     nor has there ever been any  investigation or report involving the Property
     by any governmental  entity or agency which in any way relates to Hazardous
     Substances  which could  reasonably  be expected to result in a  Materially
     Adverse  Effect;  (ix) no Person  has given any notice of or  asserted  any
     claim,   cause  of  action,   penalty,   cost  or  demand  for  payment  or
     compensation,  whether or not involving any injury or threatened  injury to
     human health, the environment or natural resources,  resulting or allegedly
     resulting from any activity or event described in clauses  (i)-(viii) above
     and to the  knowledge of Borrower,  no basis for such a claim exists which,
     in each case,  could be expected to result in a Materially  Adverse Effect;
     (x) there are not now, nor to  Borrower's  best  knowledge  have there ever
     been, any actions, suits, proceedings or


<PAGE>26


     damage settlements relating in any way to Hazardous  Substances,  in, upon,
     under,  over or from the  Property  which could  reasonably  be expected to
     result in a Materially Adverse Effect; (xi) no oral or written notification
     of a Release  (as such term is defined in 42 U.S.C.  ss.  9601(22))  of any
     Hazardous  Substances  has been filed by or on behalf of  Borrower  through
     authorized  employees  or agents  and the  Property  are not  listed in the
     United States  Environmental  Protection  Agency's List of Hazardous  Waste
     Sites or any other list of  Hazardous  Substance  sites  maintained  by any
     federal,  state or local  governmental  agency  which could  reasonably  be
     expected  to result in a  Materially  Adverse  Effect;  (xii)  there are no
     environmental  liens  on the  Property,  and,  to  the  best  knowledge  of
     Borrower,  no governmental  actions have been taken or are in process which
     could  subject  the  Property to such liens;  and (xiii)  Borrower  has not
     transported or arranged for the transportation of any Hazardous  Substances
     to any location  which is listed or proposed for listing under CERCLA or on
     any similar  state list or which is the  subject of federal,  sate or local
     enforcement actions or other investigations.

          (l) No Suits. There are no judicial or administrative  actions, suits,
     judgments or any other proceedings  pending or, to the best of knowledge of
     Borrower,  threatened  against  or  affecting  Borrower,  any other  person
     liable,  directly  or  indirectly,  for the  Secured  Indebtedness,  or the
     Property,  which do or may have a Materially  Adverse Effect on Borrower or
     on the Property,  or involving the validity,  enforceability or priority of
     any of the Loan Documents except as set forth in the Disclosure Schedule.

          (m) Financial  Statements.  The financial statements identified in the
     Disclosure  Schedule  fairly  present  Borrower's   Consolidated  financial
     position at the respective  dates thereof and the  Consolidated  results of
     Borrower's operations and the changes in Borrower's  Consolidated financial
     position for the respective periods thereof.  Except as noted therein,  the
     financial statements were prepared in accordance with GAAP.

          (n) Names  and  Places  of  Business.  Borrower  has not,  during  the
     preceding  five  years,  been known by or used or had any other  corporate,
     trade, or fictitious name, except as disclosed in the Disclosure  Schedule.
     Except  as  otherwise  indicated  in the  Disclosure  Schedule,  the  chief
     executive  office and principal  place of business of the Borrower are (and
     for the  preceding  five years have been) located at the address set out in
     Section 8.3.

          (o)  Condition of  Property.  To the best of knowledge of Borrower and
     except in the Disclosures  Schedule (a) the Property is served by electric,
     gas,  storm and sanitary  sewers or septic sewer  systems,  sanitary  water
     supply,  telephone and other  utilities  required for the use thereof at or
     within the boundary  lines of the  Property;  (b) all  streets,  alleys and
     easements  necessary to serve the Property for the use  represented  by the
     Borrower have been completed and are serviceable and such streets have been
     dedicated  and  accepted  by  applicable  governmental  entities;  (c)  the
     Property is in good condition and repair, and is free from damage caused by
     fire or other casualty except as set forth in the Disclosure Schedule;  (d)
     there is no latent  or patent  structural  or other  significant  defect


<PAGE>27


     or deficiency in the  Property;  (e) Design and as-built  conditions of the
     Property  are such that no  drainage  or surface or other  water will drain
     across or rest upon  either the  Property or land of others so as to have a
     Materially Adverse Effect; (f) none of the Property is within a flood plain
     except as indicated on the surveys of the Property delivered to Lender; (g)
     none of the  improvements  on the  Property  create an  encroachment  over,
     across  or  upon  any of the  Property  boundary  lines,  rights  of way or
     easements,  and no buildings or other improvements on adjoining land create
     such an  encroachment  except as  indicated  on the surveys of the Property
     delivered to Lender.

          (p) Not a Foreign  Person.  Borrower is not a "foreign  person" within
     the meaning of the Internal  Revenue Code of 1986, as amended  (hereinafter
     called the "Code"),  Sections 1445 and 7701 (i.e.,  no Related  Person is a
     non-resident alien, foreign corporation, foreign partnership, foreign trust
     or foreign  estate as those terms are  defined in the Code and  regulations
     promulgated thereunder).

          (q) ERISA.  As of the date hereof and throughout the term of the Loan,
     (i) Borrower is not an "employee  benefit  plan" as defined in Section 3(3)
     of ERISA,  which is  subject  to Title I of ERISA,  (ii) the  assets of the
     Borrower do not  constitute  "plan assets" of one or more such plans within
     the  meaning  of  29  C.F.R.  ss.  2510.3-101,  (iii)  Borrower  is  not  a
     "governmental  plan" within the meaning of Section 3(32) of ERISA, and (iv)
     Borrower  is not  subject  to state  statutes  regulating  investments  and
     fiduciary  obligations  with  respect  to  governmental  plans.  Except  as
     disclosed in the Disclosure  Schedule,  no  Termination  Event has occurred
     with respect to any ERISA Plan.

          (r)  Investment  Company Act, etc.  Borrower is not (i) an "investment
     company" or a company  "controlled"  by an "investment  company" within the
     meaning of the Investment Company Act of 1940, as amended,  or (ii) subject
     to regulation under the Public Utility Holding Company Act of 1935.

     Section 4.2  Placement of Loan.

          (a)  Borrower  acknowledges  that  Lender  or  its  assignee  (each  a
     "Placement Party") may elect to place the Loan, in a pool of loans,  and/or
     notes  secured by or  dependent on the cash flow of mortgage  loans,  which
     will  constitute  security for a rated  securities  offering  (such pool is
     called a "Loan Pool"; such rated securities offering, a "Securitization").

          (b) At the request of Lender, Borrower will, at Lender's sole cost and
     expense,  use its best  efforts  to assist  Lender to  satisfy  the  market
     standards to which Lender  customarily  adheres or which may be required in
     the  marketplace  or by the rating  agencies in order to enable a Placement
     Party to place the Loan in a Loan Pool, including,  without limitation,  to
     cooperate with Lender's  preparation of a private  placement  memorandum or
     registration  statement and amendments and supplements thereto to privately
     place or


<PAGE>28


     publicly distribute the Note or the Loan or securities issued in connection
     therewith in a manner that satisfies the requirements of the Securities Act
     of 1933,  as  amended  and  applicable  state  law  requirements,  provided
     Borrower shall not be required to disclose  individual store sales or other
     nonpublic information which would, in Borrower's judgment, adversely affect
     its  business  prospects  or  competitive  position.   Notwithstanding  the
     foregoing proviso, Borrower shall disclose individual store sales to Lender
     to provide to rating  agencies  and will  provide  Lender  with total sales
     information  for the Property on an aggregate  basis,  for fiscal year 1996
     and annually thereafter.

          (c) Lender  shall be permitted  to share any  information  provided by
     Borrower pursuant to this Section 4.2 in connection with the placement of a
     Loan  Interest in a Loan Pool with the  investment  banking  firms,  rating
     agencies,  accounting firms, law firms and other third-party advisory firms
     involved  with  any  transfer  of  the  Loan,  the  Loan  Documents  or the
     applicable  Securitization.  It is understood that the information provided
     by Borrower to Lender may  ultimately  be  incorporated  into the  offering
     documents for the  Securitization  and thus various  investors may also see
     some or all of the information.

          (d)  Borrower  acknowledges  that  any  transfer  of the  Loan  or the
     placement of the Loan  Interest in a Loan Pool may occur at any time during
     the term of this  Agreement and the provisions of this Section 4.2 shall be
     applicable throughout the term of the Loan.


                                   ARTICLE V
                              Covenants of Borrower

     Section 5.1 Covenants.  Borrower warrants, covenants and agrees that, until
the full and final payment of the Secured  Indebtedness  and the  termination of
this Agreement (unless Lender has previously agreed otherwise):

          (a) Payment and  Performance.  Borrower will pay all amounts due under
     the Loan  Documents in accordance  with the terms thereof and will observe,
     perform and comply with every  covenant,  term and  condition  expressed or
     implied in the Loan Documents.

          (b) Existence.  Borrower will continuously  maintain its existence and
     its right to do business in each state in which it owns  Property  together
     with its  franchises  and trade names to the extent  required by Applicable
     Laws.

          (c)  Operation  of Property.  Borrower  will operate the Property in a
     good and  workmanlike  manner and in accordance  with all  Applicable  Laws
     except where failure to comply therewith will not have a Materially Adverse
     Effect  and  will  pay  all  fees or  charges  of any  kind  in  connection
     therewith. Borrower will keep the Property occupied so as not to impair the
     insurance carried thereon except where an Individual  Property is



<PAGE>29


     closed if appropriate  insurance is maintained  thereon.  Borrower will not
     use or occupy, or allow the use or occupancy of, the Property in any manner
     which (i)  violates  any  Applicable  Laws except  where  failure to comply
     therewith will not have a Materially  Adverse Effect or (ii)  constitutes a
     public or private nuisance or (iii) makes void, voidable or cancelable, any
     insurance  then in force with respect  thereto.  Borrower will not initiate
     any zoning  reclassification  of the  Property or seek any  variance  under
     existing  zoning  ordinances  applicable  to the Property or use or, to the
     extent  controllable by Borrower,  permit the use of any Property in such a
     manner which would result in such use  becoming a  nonconforming  use under
     applicable  zoning  ordinances or other Applicable Laws.  Borrower will not
     impose any restrictive  covenants or encumbrances  upon the Property (other
     than  Permitted  Encumbrances),   execute  or  file  any  subdivision  plat
     affecting the Property or consent to the  annexation of the Property to any
     municipality,  without the prior written consent of Lender.  Borrower shall
     not cause or, to the extent  controllable by Borrower,  permit any drilling
     or exploration for, or extraction,  removal or production of, minerals from
     the surface or subsurface  of the Property.  Borrower will not knowingly do
     or suffer to be done any act whereby the value of any part of the  Property
     will be  lessened.  Borrower  will not operate or permit the Property to be
     operated as a cooperative or condominium building or buildings in which the
     tenants or occupants participate in the ownership, control or management of
     the Property or any part  thereof,  as tenant  stockholders  or  otherwise.
     Borrower will allow Lender or its  authorized  representative  to enter the
     Property at any  reasonable  time to inspect the  Property  and  Borrower's
     books and records  pertaining  thereto and Borrower  will assist  Lender or
     said  representative  in whatever  reasonable  way  necessary  to make such
     inspection.  If Borrower receives a notice of claim from any federal, state
     or other governmental entity pertaining to the Property, regarding a matter
     which could have a Materially  Adverse Effect or a notice that the Property
     is not in  compliance  with any  Applicable  Laws except  where  failure to
     comply therewith would not have a Materially Adverse Effect,  Borrower will
     promptly furnish a copy of such notice or claim to Lender.

          (d)  Debts  for  Construction.  Borrower  will  cause  all  debts  and
     liabilities  relating to  utilities  servicing  the Property to be promptly
     paid.  Borrower  will  cause all debts and  liabilities  of any  character,
     including without limitation all debts and liabilities for labor, material,
     fixtures  and  equipment  which  are  subject  to the  Security  Documents,
     incurred in the construction, maintenance, operation and development of the
     Property to be promptly  paid except  where  failure to make such  payments
     would not  result  in a  Materially  Adverse  Effect.  Notwithstanding  the
     foregoing, Borrower may in good faith, by appropriate proceedings,  contest
     the validity,  applicability or amount of any debt or liability and pending
     such contest Borrower shall not be deemed in default  hereunder if Borrower
     provide  Lender  with  security  satisfactory  to Lender in its  reasonable
     discretion  and if the  Borrower  promptly  causes  to be paid  any  amount
     adjudged by a court of competent jurisdiction to be due, with all costs and
     interest  thereon,  promptly after such judgment  becomes final;  provided,
     however,  that in any event each such contest  shall be  concluded  and any
     debt,  liability,  lien, interest and costs shall be paid, bonded around or
     

<PAGE>30


     otherwise removed prior to the date any writ or order is issued under which
     the Property may be sold.

          (e) Ad  Valorem  Taxes.  The  Borrower  will cause to be paid prior to
     delinquency  all taxes and  assessments  heretofore or hereafter  levied or
     assessed against the Property,  or any part thereof, or against the Trustee
     or Lender for or on account of the Note or the other  Secured  Indebtedness
     or the interest created by the Security Documents; except that Borrower may
     in  good  faith,   by  appropriate   proceedings,   contest  the  validity,
     applicability,  or amount of any asserted tax or assessment,  provided that
     appropriate  reserves  consistent  with GAAP are established at the time of
     any such contest and Borrower  provides Lender with  satisfactory  evidence
     thereof.

          (f)  Repair  and  Maintenance.  Borrower  will keep and  maintain  the
     Property,  including  the parking,  recreational  and  landscaped  portions
     thereof, in good order, repair, operating condition and appearance, causing
     all   necessary   structural   and   non-structural   repairs,    renewals,
     replacements,  additions and improvements to be promptly made, and will not
     allow  any  of  the  property  to  be  misused,  abused  or  wasted  or  to
     deteriorate.  Borrower  shall  provide  Lender with  written  notice of any
     material  damage to or destruction  of the Property or any portion  thereof
     within five (5) Business  Days of such  occurrence.  Borrower will promptly
     replace all worn-out or obsolete  fixtures or personal  property covered by
     the Security Documents with fixtures or personal property comparable to the
     replaced  fixtures  or personal  property  when new,  and will  repaint the
     Property  when needed.  Notwithstanding  the  foregoing,  Borrower will not
     without the prior written  consent of Lender,  (i) remove from the Property
     any fixtures or personal property covered by the Security  Documents except
     (A) such as is replaced by Borrower by an article of equal  suitability and
     value owned by  Borrower,  free and clear of any Lien or security  interest
     (except  that created by the Security  Documents  or the  Permitted  Second
     Lien) or (B) such fixtures or personal property (other than heating and air
     conditioning  equipment) having a value of less than $100,000,  the removal
     of which  would not have a  Materially  Adverse  Effect  on the  Individual
     Property to which it relates, or (ii) make any structural alterations which
     diminish the value of the  improvements  on the  Property,  or (iii) expend
     more than  $150,000 in the  aggregate in any twelve (12)  calendar  monthly
     period on structural  alterations on any Individual Property, or (iv) erect
     any new  buildings,  structures,  or building  additions on any  Individual
     Property (except such new buildings,  structures or building additions that
     do not  diminish  the  value of such  Individual  Property  and the cost of
     construction  of which is not in excess of $200,000 in the aggregate in any
     twelve (12) calendar month period). Notwithstanding the above, Borrower may
     repair or replace the roof and/or the asphalt parking lot at any Individual
     Property  provided such repairs or  replacement  shall meet all  applicable
     building codes and requirements and shall result in the roof and/or parking
     lot being of equal or grater  quality as the roofs  and/or  parking lots of
     comparable retail establishments.

          (g) Insurance and Casualty.


<PAGE>31

               (i)  Application  of  Proceeds.  Borrower  will keep the Property
          insured against loss or damage by fire,  explosion,  windstorm,  hail,
          flood (if the  Property  shall at any time be located in the  100-year
          flood plain in which flood insurance has been made available  pursuant
          to the Flood Disaster protection Act of 1973),  tornado and such other
          hazards as may be  reasonably  required by Lender by policies of fire,
          extended coverage and other insurance in such company or companies, in
          such  amounts as are  sufficient  to prevent  the  application  of any
          co-insurance  contributions  on  loss  and  not  less  than  the  full
          replacement cost of the  improvements  located on the Property and all
          personal  property  included  in the  Collateral,  upon such terms and
          provisions,  in such forms,  and with such loss  payees,  insureds and
          endorsements  (including  without  limitation the  "replacement  cost"
          endorsement with a waiver of  depreciation),  all as may be acceptable
          to  Lender.   Such  insurance   shall  include  boiler  and  machinery
          insurance,  if  applicable,  covering  boilers and other high pressure
          vessels,  the  air  conditioning  system  and  high  pressure  piping,
          machinery and equipment.  Such insurance shall also include earthquake
          insurance for that portion of the Property located outside California,
          New Mexico and Nevada to the extent and in the amounts  maintained  by
          the Borrower as of the date of this  Agreement and in the amount of at
          least  $15,000,000  for that  portion of the Property  located  within
          California, New Mexico and Nevada, to the extent that such coverage is
          available  at  commercially  reasonable  rates  and,  in the event the
          Property is leased at aggregate  annual rentals in excess of $250,000,
          rental loss  insurance in at least the aggregate  annual amount of all
          rent and  additional  rents  payable  by tenants  under  leases of the
          Property.  The  Borrower  will also  provide  such other  insurance as
          Lender may from time to time  reasonably  require,  in such companies,
          upon  such  terms  and  provisions,  in such  amounts,  and with  such
          endorsements,  all as are approved by Lender. Borrower will deliver to
          Lender  certified  copies of the  original  policies  evidencing  such
          insurance and any additional  insurance  which shall be taken out upon
          any part of the Property and  receipts  evidencing  the payment of all
          premiums,  and will deliver  certificates  evidencing  renewals of all
          such policies of insurance to Lender at least fifteen (15) days before
          any such insurance  shall expire.  Without  limiting the discretion of
          Lender with respect to required  endorsements  to insurance  policies,
          Borrower  further  agrees that all such  policies  shall  provide that
          proceeds  thereunder  will be  payable to Lender as its  interest  may
          appear   pursuant   and   subject  to  a  mortgage   clause   (without
          contribution) of standard form attached to or otherwise made a part of
          the  applicable  policy.  In the event of  foreclosure of any Security
          Document, or other transfer of title to the Property in extinguishment
          in whole or in part of the Secured Indebtedness,  all right, title and
          interest of Borrower in and to such policies then in force  concerning
          the  Property  covered  by such  Security  Document  and all  proceeds
          payable  thereunder  shall  thereupon  vest in the  purchaser  at such
          foreclosure  or Lender or other  transferee in the event of such other
          transfer of title.  In the event any of the  Property  covered by such
          


<PAGE>32


          insurance is destroyed or damaged by fire, explosion,  windstorm, hail
          or by any other  casualty  against  which  insurance  shall  have been
          required  hereunder,  (A) Lender may, but shall not be  obligated  to,
          make  proof  of  loss if not  made  promptly  by  Borrower,  (B)  each
          insurance  company concerned is hereby authorized and directed to make
          payment for such loss  directly to Lender  instead of to Borrower  and
          (C) Lender shall apply the insurance proceeds as follows:

                    (A)  first, to reimburse Lender or the Trustee for all costs
                         and expenses,  including  reasonable  attorney's  fees,
                         incurred  in  connection  with the  collection  of such
                         proceeds; and

                    (B)  second,  if (a) the  amount  of the  loss is more  than
                         $250,000,  (b) there is then existing a Default that is
                         capable  of being  cured by the  payment of money or an
                         Event of Default, (c) in Lender's judgment, restoration
                         cannot be  completed  within  twelve (12) months  after
                         such  destruction,  or (d) the insurer denies liability
                         to any  named  insured,  then in any  such  event,  the
                         remainder  of said  proceeds  shall be  applied  to the
                         Secured Indebtedness (without premium or penalty); and

                    (C)  third,  if none of the facts  described  in (a) through
                         (d) of subsection (B) above exists (or if Lender waives
                         the matters described in subsection (B)), the remainder
                         of  such  proceeds  shall  be  applied  to the  repair,
                         restoration or  replacement of the Individual  Property
                         so destroyed or damaged to as good or better  condition
                         as  existed  prior to such  destruction  or  damage  in
                         accordance  with plans and  specifications  approved in
                         writing by Lender in its reasonable  discretion and any
                         amounts not so applied shall,  at Lender's  option,  be
                         applied to the payment  (without premium or penalty) of
                         the Secured Indebtedness.

          Notwithstanding  the foregoing,  Lender shall have the option to apply
          any such  insurance  proceeds,  in whole  or in part,  to the  repair,
          restoration or  replacement of the Property  rather than applying such
          proceeds to the payment of the Secured Indebtedness, without regard to
          the extent of the damage to the Property or the existence of a Default
          hereunder. If Lender elects or is required to apply insurance proceeds
          to restoration, (i) the proceeds may, at Lender's election, be held in
          a mutually  acceptable  interest  bearing  account to be  disbursed in
          installments by Lender or by a disbursing  agent  (hereinafter  called
          the "Depository")  selected by Lender at Borrower's  expense and whose
          fees and expenses shall be paid by Borrower, (ii) Borrower shall, upon
          demand  by  Lender,  from  time to time,  deposit



<PAGE>33


          with Lender or the Depository in an interest  bearing account selected
          by Lender in its sole  discretion,  the amount of any deductible under
          such insurance coverage and such amounts in excess of the amount, from
          time  to  time,  on  deposit  as may be  necessary  to  complete  such
          restoration  and (iii) the  insurance  proceeds and such other amounts
          deposited  pursuant to (ii) above shall be disbursed from time to time
          as  restoration  progresses   satisfactorily  in  Lender's  reasonable
          judgment,  based  upon  receipt  of  appropriate  lien  waivers  and a
          certificate  of the  architect or engineer in charge of the work,  the
          form and content of such certificate to be reasonably  satisfactory to
          Lender,   and  title  insurance   protection  against  mechanic's  and
          materialmen's  liens.  If an Event of Default occurs and is continuing
          prior to full disbursement of the insurance proceeds,  any undisbursed
          portion  may,  at  Lender's  option,  be applied to the payment of the
          Secured  Indebtedness,  whether  or not then  due and in any  order of
          priority,  and such application  shall be deemed to be a prepayment of
          the outstanding  principal balance of the Loan and shall be subject to
          a Prepayment  Premium  computed in accordance  with Section 2.6 hereof
          and subject to the limitations thereunder.

               (ii)  Partial  Release.  If  Lender  elects  to  apply  insurance
          proceeds to the Secured  Indebtedness  and the insurance  proceeds are
          greater  than or equal to the sum of the then current  Allocated  Loan
          Amount of the  Individual  Property  to which  such  proceeds  relate,
          together with accrued  interest  thereon,  other  amounts  advanced by
          Lender  with  respect  thereto  and all costs  incurred by Lender with
          respect  thereto,  then  Lender  shall  release  from  the Lien of the
          Mortgage such Individual Property. If Lender elects to apply insurance
          proceeds to the Secured  Indebtedness  and the insurance  proceeds are
          less than the then  current  Allocated  Loan Amount of the  Individual
          Property to which such proceeds relate plus accrued interest  thereon,
          other  amounts  advanced by Lender with respect  thereto and all costs
          incurred  by  Lender  relating  to  the  proposed  release,   then  at
          Borrower's  option,  upon thirty (30) days'  prior  written  notice to
          Lender, Borrower may obtain a release of such Individual Property from
          the Lien of the  Mortgage  upon payment to Lender of such amount as is
          necessary,  when  added to such  insurance  proceeds,  to pay the then
          current  Allocated Loan Amount plus accrued  interest  thereon,  other
          amounts advanced by Lender with respect thereto and all costs incurred
          by Lender relating to the proposed release.

               (iii) Notice and Restoration. In any event, the unpaid portion of
          the Secured Indebtedness shall remain in full force and effect and the
          Borrower  shall not be excused in the payment  thereof.  If any act or
          occurrence  of any kind or nature  (including  any  casualty  on which
          insurance was not obtained or obtainable) shall result in damage to or
          loss  or  destruction  of any of the  Property,  Borrower  shall  give
          immediate notice thereof to Lender and, unless otherwise so instructed
          by Lender or in the event Lender has applied the insurance proceeds to
          the Note,  shall  promptly,  at  Borrower's  sole cost and expense and
          regardless  of  whether  the


<PAGE>34


          insurance  proceeds,  if any,  shall be  sufficient  for the  purpose,
          diligently  restore,   repair,  replace  and  rebuild  the  Individual
          Property so damaged or  destroyed  as nearly as possible to its value,
          condition  and  character  immediately  prior to such damage,  loss or
          destruction in accordance with plans and  specifications  submitted to
          and approved by Lender in writing.

          (h)  Condemnation.

               (i) Application of Proceeds. Immediately upon obtaining knowledge
          of the institution or threat of institution of any proceedings for the
          condemnation  of the  Property  or any portion  thereof,  or any other
          proceedings  arising out of injury or damage to the  Property,  or any
          portion  thereof,  Borrower will notify Lender of the pendency of such
          proceedings.  Lender  may  participate  in any such  proceedings,  and
          Borrower  shall from time to time  deliver  to Lender all  instruments
          requested by it to permit such  participation.  Borrower shall, at its
          expense, diligently prosecute any such proceedings,  and shall consult
          with Lender, its attorneys and experts, and cooperate with them in the
          carrying  on or  defense  of any such  proceedings.  All  proceeds  of
          condemnation  awards or proceeds of sale in lieu of condemnation  with
          respect to the  Property  and all  judgments,  decrees  and awards for
          injury or damage to the Property  shall be paid to Lender and shall be
          applied as follows:

                    (A)  first, to reimburse Lender or the Trustee for all costs
                         and expenses,  including  reasonable  attorney's  fees,
                         incurred  in   connection   with   collection  of  such
                         proceeds; and

                    (B)  second,  if (i) if the cost of the repair,  restoration
                         or  replacement  is more than $250,000 or (ii) there is
                         then  existing a Default that is capable of being cured
                         by the  payment  of money or an  Event of  Default,  or
                         (iii) in  Lender's  judgment,  restoration,  repair  or
                         replacement  cannot be  completed  within  twelve  (12)
                         months after such taking occurs or (iv) the  Individual
                         Property  that is the  subject of such  proceedings  is
                         partially  taken or  diminished  in value  and,  in the
                         reasonable  judgment of Borrower,  need not be rebuilt,
                         restored or  repaired in any manner,  or (v) all of the
                         Property is taken pursuant to such proceedings, then in
                         any such event, the remainder of said proceeds shall be
                         applied to the payment of the Note; and

                    (C)  third,  if none of the facts  described  in (i) through
                         (v) of subsection (B) above exists (or if Lender waives
                         the matters  described in (ii) of subsection  (B)), the
                         remainder  of such


<PAGE>35


                         proceeds shall be applied to the repair, restoration or
                         replacement  of the  Individual  Property  that  is the
                         subject of such  proceeding  and any  amounts  not thus
                         paid over shall be applied to the Note; provided,  that
                         any such  proceeds  held by Lender to be applied to the
                         repair,  restoration  or replacement of the Property as
                         provided  above shall be held and disbursed in the same
                         manner as provided in  subsection  (g) of this  Section
                         5.1.

     Notwithstanding  the  foregoing,  Lender shall have the option to apply any
     proceeds of condemnation awards or proceeds of sale in lieu of condemnation
     with  respect to the  Property  or any  judgments,  decrees  and awards for
     injury or  damage  to the  Property,  in whole or in part,  to the  repair,
     restoration  or  replacement  of the  Property  rather than  applying  such
     proceeds to the payment of the Secured Indebtedness,  without regard to the
     extent of the taking or the damage to the  Property or the  existence  of a
     Default hereunder.

               (ii)  Partial  Release.  If Lender  elects to apply  condemnation
          proceeds to the Secured Indebtedness and the condemnation proceeds are
          greater  than or equal to the sum of the then current  Allocated  Loan
          Amount of the Individual  Property to which such proceeds  relate plus
          accrued  interest  thereon,  other  amounts  advanced  by Lender  with
          respect  thereto  and all costs  incurred  by Lender  relating  to the
          proposed  release  then  Lender  shall  release  from  the Lien of the
          Mortgage  such  Individual   Property.   If  Lender  elects  to  apply
          condemnation proceeds to the Secured Indebtedness and the condemnation
          proceeds are less than the then current  Allocated  Loan Amount of the
          Individual  Property to which such proceeds relate, then at Borrower's
          option upon thirty (30) days' prior written notice to Lender, Borrower
          may obtain a release of such Individual  Property from the Lien of the
          Mortgage  upon payment to Lender of such amount as is  necessary  when
          added to such condemnation  proceeds to pay the then current Allocated
          Loan Amount plus accrued interest thereon, other amounts advanced with
          respect to such Individual Property,  and all costs incurred by Lender
          relating  to the  proposed  release.  Notwithstanding  the  foregoing,
          Lender  shall have the option to apply any  proceeds  of  condemnation
          awards or proceeds of sale in lieu of condemnation with respect to the
          Property or any judgments,  decrees and awards for injury or damage to
          the  Property,  in whole or in part,  to the  repair,  restoration  or
          replacement of the Property  rather than applying such proceeds to the
          payment of the Secured  Indebtedness,  without regard to the extent of
          the taking or the damage to the Property or the existence of a Default
          hereunder.

               (iii) Notice and Restoration.  In any event the unpaid portion of
          the  Secured  Indebtedness  shall  remain in full force and effect and
          shall not be excused in the payment  thereof.  In the event any of the
          foregoing   proceeds  are  applied  to  the  repair,   restoration  or
          replacement of the Property,  the Borrower shall promptly


<PAGE>36


          commence and complete such repair,  restoration  or replacement of the
          Property as nearly as possible to its value,  condition  and character
          immediately  prior to such damage or taking in  accordance  with plans
          and specification submitted to and approved by the Lender.

               (iv) Assignment to Lender.  Borrower hereby assigns and transfers
          all such proceeds,  judgments, decrees and awards to Lender and agrees
          to execute such further  assignments of all such proceeds,  judgments,
          decrees and awards as Lender may request. Lender is hereby authorized,
          in the name of Borrower, to execute and deliver valid aquittances for,
          and to appeal from, any such judgment,  decree or award.  Lender shall
          not be,  in any event or  circumstances,  liable  or  responsible  for
          failure to collect,  or exercise  diligence in the  collection of, any
          such proceeds, judgments, decrees and/or awards.

          (i) Protection and Defense of Lien. If the validity or priority of any
     Security  Document or of any rights,  titles,  Liens or security  interests
     created  or  evidenced  hereby  with  respect to the  Property  or any part
     thereof shall be endangered or questioned or shall be attacked  directly or
     indirectly or if any legal proceedings are instituted against Borrower with
     respect thereto, Borrower will give prompt written notice thereof to Lender
     and at Borrower's own cost and expense will diligently endeavor to cure any
     defect that may be developed or claimed,  and will take all  necessary  and
     proper steps for the defense of such legal  proceedings,  including but not
     limited  to the  employment  of  counsel,  the  prosecution  or  defense of
     litigation  and the release or  discharge  of all adverse  claims,  and the
     Trustee and Lender,  or either of them  (whether or not named as parties to
     legal proceedings with respect thereto) are hereby authorized and empowered
     to take such  additional  steps as in its or their  judgment and discretion
     may be necessary or proper for the defense of any such legal proceedings or
     the  protection  of the validity or priority of the Security  Documents and
     the rights,  titles,  Liens and  security  interests  created or  evidenced
     hereby and shall be  reimbursed  for any  expenses so incurred  pursuant to
     subsection (r).

          (j) No Other  Liens.  Borrower  will not,  without  the prior  written
     consent of  Lender,  create,  place or permit to be  created or placed,  or
     through any act or failure to act, acquiesce in the placing of, or allow to
     remain, any deed of trust, mortgage, voluntary or involuntary Lien, whether
     statutory,  constitutional or contractual  (except for the Permitted Second
     Lien and the Lien  for ad  valorem  taxes  on the  Property  which  are not
     delinquent),  security interest (except for the security interests included
     in the Permitted Second Lien),  encumbrance or charge,  or conditional sale
     or other title retention document, against or covering the Property, or any
     part thereof, other than the Permitted Encumbrances,  regardless of whether
     the same are  expressly  or otherwise  subordinate  to the Lien or security
     interest created in the Security Documents, and should any of the foregoing
     become attached hereafter in any manner to any part of the Property without
     the prior  written  consent of Lender,  Borrower  will cause the same to be
     promptly  discharged


<PAGE>37


     and  released.  Borrower  will own all parts of the  Property  and will not
     acquire any  fixtures,  equipment or other  property  forming a part of the
     Property  pursuant to a lease,  license or similar  agreement,  without the
     prior written consent of Lender.

          (k) Books and Records.  Borrower will keep accurate  books and records
     in accordance  with GAAP in which full,  true and correct  entries shall be
     promptly made as to all  operations  on the  Property,  and will permit all
     such  books  and  records  (including  without  limitation  all  contracts,
     statements,  invoices,  bills and claims for labor,  materials and services
     supplied for the construction  and operation of the improvements  forming a
     part of the  Property)  to be  inspected  and copied by Lender and its duly
     accredited representatives at all times during reasonable business hours.

          (l) Financial Information.

               (i) Annual Consolidated Financial Statements.  Within ninety (90)
          days  after the close of each  fiscal  year,  Borrower  shall  furnish
          Lender  with  audited  Consolidated  financial  statements,  including
          balance sheets, income statements and statements of cash flows for the
          Borrower,  prepared in accordance  with GAAP and such other  available
          information as the Lender shall request.

               (ii) Annual  Reports  Regarding  Stores.  Within ninety (90) days
          after the close of each fiscal year,  Borrower  shall  furnish  Lender
          with a report  providing  an analysis  for each Store  included in the
          Property of operating  income and  expenses.  Lender  agrees that such
          information  is  confidential  and shall not be disclosed to any third
          party (except as required by law  following  prior notice to Borrower)
          without Borrower's written consent.

               (iii) Other Financial  Information.  Promptly upon their becoming
          available,  copies of all financial  statements,  and proxy statements
          sent by Borrower to its stockholders and all registration  statements,
          periodic reports,  press releases,  monthly sales reports (if publicly
          released),  and other  statements and schedules filed by Borrower with
          any securities exchange, the Securities and Exchange Commission or any
          similar governmental authority, including without limitation copies of
          all reports on Forms 10-K, 10-Q and 8-K (or their  equivalents)  which
          Borrower shall have filed with the Securities and Exchange Commission.

          (m) Liability  Insurance.  Borrower shall maintain  commercial general
     public  liability  insurance  against claims for bodily injury or death and
     property  damage  occurring in or upon or resulting  from the Property,  in
     standard  form and with  such  insurance  company  or  companies  as may be
     acceptable to Lender, such insurance to afford immediate protection, to the
     limit of not  less  than  $5,000,000  in  respect  of any one  accident  or
     occurrence,  and to the  limit of not less  than  $5,000,000  for  property
     damage,  with not more than $500,000  deductible.  Such Commercial  General
     Public  Liability


<PAGE>38


     insurance  shall  include  Blanket  Contractual  Liability  coverage  which
     insures contractual  liability under the indemnifications of Lender and the
     Trustee by Borrower set forth in this  Agreement  (but such coverage or the
     amount thereof shall in no way limit such indemnifications). Borrower shall
     maintain  with  respect  to  each  policy  or  agreement   evidencing  such
     Commercial  General Public Liability  insurance such endorsements as may be
     required by Lender and shall at all times  deliver and maintain with Lender
     a  certificate  with  respect to such  insurance  in form  satisfactory  to
     Lender.  Not less than  fifteen (15) days prior to the  expiration  date of
     each policy of  insurance  required of  Borrower  pursuant to this  Section
     5.1(m),  Borrower shall deliver to Lender certificates or other evidence of
     payment  satisfactory  to  Lender.  In the  event of a  foreclosure  of any
     Security  Document,  the  purchaser of the Property  covered  thereby shall
     succeed  to all the rights of  Borrower,  including  any right to  unearned
     premiums,  in and to all  policies of  insurance  assigned  pursuant to the
     provisions of this  subsection,  and Borrower  hereby  authorize  Lender to
     notify any or all insurance carriers of this assignment.

          (n)  Proceeds  of   Collateral.   Borrower  shall  account  fully  and
     faithfully for and, if Lender so elects, shall promptly pay or turn over to
     Lender the  proceeds in whatever  form  received  from  disposition  in any
     manner  of  any  of  the  Collateral,   except  as  otherwise  specifically
     authorized  herein. In the event Lender so elects and the proceeds from the
     disposition of such Collateral are paid over to Lender,  Lender shall apply
     such  proceeds  to the Secured  Indebtedness  without  prepayment  penalty.
     Borrower shall at all times keep the  Collateral and its proceeds  separate
     and distinct  from other  property of Borrower and shall keep  accurate and
     complete records of the Collateral and its proceeds.

          (o) Permitted Encumbrances. Borrower will comply with and will perform
     all of the covenants,  agreements and obligations  imposed upon them or the
     Property in the Permitted  Encumbrances in accordance with their respective
     terms and provisions. Borrower will not modify or agree to any modification
     of any Permitted Encumbrance, which modification would adversely affect the
     interest of Lender in the Property,  without the prior  written  consent of
     Lender which consent may be withheld by Lender in its sole discretion.

          (p) Environmental.

               (A)  Borrower  shall not (and it shall  not  permit  any  tenant,
          subtenant,  contractor,  agent or manager  to) locate,  produce,  use,
          store,  treat,  transport,  incorporate,   discharge,  emit,  release,
          deposit or dispose of any  Hazardous  Substance in, upon,  under,  at,
          over  or  from  the  Property   except  that  Borrower  (its  tenants,
          subtenants,  manager, contractors or agents) may store, locate and use
          on the Property Hazardous Substances which are (1) customarily located
          or stored in retail or operations buildings similar to the Property or
          used in  connection  with  Borrower's  operations,  or (2) unique to a
          tenant's  business  located  at  the  Property,   provided  that  such
          Hazardous  Substances described in clauses (1) or (2) above are


<PAGE>39


          at  all  times  stored,  located  and  used  in  compliance  with  all
          Environmental  Laws other than any  noncompliance  which  Borrower  or
          tenant takes reasonably  prompt action to address.  Borrower shall not
          permit any Hazardous Substances to be located, produced, used, stored,
          treated,  transported,  incorporated,  discharged,  emitted, released,
          deposited,  disposed of or to escape therein,  thereupon,  thereunder,
          thereover or therefrom  in  violation  of any  Environmental  Law, and
          shall comply with all  Environmental  Laws which are applicable to the
          Property in each case, other than any violation or noncompliance which
          Borrower or tenant takes reasonably prompt action to address. Borrower
          shall not engage in any conduct in  connection  with the Property that
          may subject  Borrower to  Environmental  Costs,  or  contribute  to or
          aggravate  a release of  Hazardous  Substances  where  such  action or
          failure to act could  reasonably be expected to result in a Materially
          Adverse Effect.  In addition to the foregoing  restrictions,  Borrower
          agrees that no asbestos, ACM, materials containing  urea-formaldehyde,
          or transformers,  capacitors, ballasts or other equipment that contain
          PCBs are,  or will at any time be,  located  about the  Property  in a
          manner that could  reasonably  be expected to result in a violation of
          applicable Environmental Laws.

               (B)  Borrower  shall  promptly   within  the  time  permitted  by
          Environmental Laws, initiate and diligently pursue to completion,  any
          and  all  remedial   action   required   pursuant  to  any  applicable
          Environmental  Laws  in  response  to the  presence  of any  Hazardous
          Substances at, on, under or affecting, or emanating from, the Property
          and shall take such  remedial  action as is required  to minimize  any
          impairment  of  Lender's  Lien  on,  and  security  interest  in,  the
          Property.  If Borrower  undertakes any remedial action with respect to
          any Hazardous Substance affecting the Property, Borrower shall conduct
          and complete such remedial  action in compliance  with all  applicable
          Environmental Laws. If any Hazardous Substance is removed or caused to
          be  removed  from the  Property  by  Borrower,  the  generator  number
          assigned  by the  Environmental  Protection  Agency to such  Hazardous
          Substance shall not be in the name of Lender and Borrower shall assume
          any and all liability for such removed Hazardous Substance.

               (C) The  representations  and  warranties  contained  in  Section
          4.1(k) and the  covenants  contained in this  Section  5.1(p) shall be
          deemed  continuing  covenants  for  the  benefit  of  Lender,  and any
          successors  and  assigns of Lender  including  but not  limited to any
          purchasers  at a  foreclosure  sale,  any  transferee  of the title of
          Lender and any  subsequent  owner of the  Property,  shall survive the
          termination of this Agreement,  or the  satisfaction or release of the
          Mortgage,  any  foreclosure of the Mortgage  and/or any acquisition of
          title to the  Property  or any  part  thereof  by  Lender,  or  anyone
          claiming by,  through or under Lender,  by deed in lieu of foreclosure
          or otherwise.  The rights and remedies of Lender under this  Agreement
          shall not inure to the benefit of (i) any purchaser of the Property at
          a  foreclosure  sale,  (ii) any Person taking title to the Property by
          deed in lieu of  foreclosure  or


<PAGE>40


          (iii) any  successor or assign of any Person  described in clauses (i)
          and (ii) above, except that Lender's rights shall inure to the benefit
          of the parties in clauses  (i),  (ii) and (iii) hereof if such parties
          are Lender  (including,  for these purposes,  Lender's  successors and
          assigns as holder of the Loan  Documents),  any  beneficiaries  of any
          Loan Pool, any  Participant  of any of Lender's (or such  successors',
          assigns', beneficiaries' or Participant's) Affiliates or nominees.

               (D) Borrower shall give prompt written notice to Lender of:

                    (i) any  proceeding  or  inquiry  known to  Borrower  by any
               Governmental  Authority  with  respect  to  the  presence  of any
               Hazardous Substance on the Property or the migration thereof from
               or to other property;

                    (ii)  all  claims  made or  threatened  by any  third  party
               against  Borrower or the  Property in each case known to Borrower
               relating  to any loss or  injury  resulting  from  any  Hazardous
               Substance;

                    (iii)  the  storage,   production,   release,  discharge  or
               disposal of any Hazardous  Substances on the Property  other than
               in accordance with all applicable Environmental Laws; and

                    (iv) Borrower's  discovery of any occurrence or condition on
               any real  property  adjoining  or in the vicinity of the Property
               which could  reasonably  be expected to cause the Property or any
               part thereof to be subject to any  restrictions on the ownership,
               occupancy,  transferability  or  use of the  Property  under  any
               Environmental  Law or to be otherwise subject to any restrictions
               on  the  ownership,  occupancy,  transferability  or  use  of the
               Property under any Environmental Law.

               (E) Borrower shall keep Lender apprised of the status of, and any
          material developments in, any governmental  investigation  relating to
          Environmental   Matters  at  or  about  the  Property,   any  and  all
          enforcement,  clean-up,  removal or other  governmental  or regulatory
          actions   instituted,   completed  or   threatened   pursuant  to  any
          Environmental  Law with respect to the Property and any other  claims,
          actions or  proceedings  with  respect  to the  Property  relating  to
          Environmental  Matters.  Borrower  shall provide Lender with copies of
          such  communications  with all  Governmental  Authorities  relating to
          Hazardous  Substances  Claims as Lender may request.  Without Lender's
          prior written  consent,  Borrower  shall not enter into any settlement
          agreement, consent decree or other compromise with respect to any such
          governmental  investigation  or  action,  or other  claim,  action  or
          proceeding  relating to Hazardous  Substances  which


<PAGE>41


          Borrower  does not  have  the  funds  available  to pay or  which  may
          materially  adversely  effect  Lender's  lien on, or the value of, the
          Property.

               (F) The foregoing  rights and remedies in this Section 5.1(p) are
          cumulative  with,  and in addition to, any rights and remedies  Lender
          may have  against  Borrower or any  Significant  Party under the other
          terms and provisions of this Agreement,  under any other Loan Document
          or under any Environmental Law, including, without limitation, CERCLA.

          (q) Notice of  Material  Events and Change of Address.  Borrower  will
     promptly  notify  Lender (i) of any Material  Adverse  Change in Borrower's
     financial condition or Borrower's Consolidated financial condition, (ii) of
     the occurrence of any Default, (iii) of the acceleration of the maturity of
     any  Debt  owed  by  Borrower  or of any  default  by  Borrower  under  any
     indenture, mortgage, agreement, contract or other instrument to which it is
     a party or by which it or its properties is bound, if such  acceleration or
     default might have a Material  Adverse Effect upon Borrower's  Consolidated
     financial  condition,  (iv) of any claim  asserted  which could result in a
     decline of $500,000 or more in the value of any Individual Property, (v) of
     the occurrence of any Termination Event, and (vi) of the filing of any suit
     or proceeding  against  Borrower in which there is a reasonable  likelihood
     that an adverse  decision would be rendered and if so rendered would have a
     Material Adverse Effect upon Borrower's  financial  condition,  business or
     operations.

          (r) Payment of Expenses.  Borrower will  promptly upon written  demand
     pay all  expenses  and  reimburse  Lender for any  expenditures,  including
     reasonable  attorneys'  fees,  legal  expenses,  incurred  or  expended  in
     connection with (i) the negotiation, preparation, execution and delivery of
     the Loan Documents, and any and all other documents or instruments relating
     thereto, including without limitation, fees and expenses incurred after the
     date  of  this  Agreement,  (ii)  the  filing,   recording,   refiling  and
     re-recording  of any Loan Documents and any other  documents or instruments
     or  further  assurances  required  to be filed or  recorded  or  refiled or
     re-recorded by the terms of any Loan Document, (iii) the breach by Borrower
     of any covenant in the Loan Documents, (iv) Lender's exercise of any of its
     rights and remedies under the Loan Documents or Lender's  protection of the
     Property and its Lien on and security interest therein,  (v) any amendments
     to the  Mortgage,  the  Note  or any  other  Loan  Document  or any  matter
     requested by Borrower or any approval  required  under the Loan  Documents,
     and (vi) any matter  which  requires  the  waiver,  consent or  approval of
     Lender.

          (s) Interest.  Borrower  hereby  promises to pay interest to Lender at
     the Default  Rate on all Secured  Indebtedness  which  Borrower has in this
     Agreement promised to pay (including without limitation  obligations to pay
     fees or to reimburse or indemnify Lender) and which is not paid when due.


<PAGE>42


          (t) Taxes on Note and Other  Taxes.  Borrower  will  promptly  pay all
     franchise,  and other taxes owing by it if failure to pay would result in a
     Materially  Adverse Effect and any stamp or other  documentary  taxes which
     may be required to be paid by it with respect to the Note or any other Loan
     Document.

          (u)  Further  Assurances.  Borrower  will,  on request of Lender,  (i)
     promptly  correct any defect,  error or omission which may be discovered in
     the execution or  acknowledgment  of this Agreement or any Loan Document or
     any other instrument now or hereafter executed in connection herewith; (ii)
     execute,  acknowledge,  deliver and record or file such further instruments
     (including without limitation further deeds of trust,  security agreements,
     financing statements,  continuation  statements and assignments of rents or
     leases) and do such further acts as may be  necessary,  desirable or proper
     to carry out more effectively the purposes and intentions of the parties to
     this Agreement,  the Security  Documents and such other  instruments and to
     subject to the Liens and security  interests of the Security  Documents and
     thereof any property intended by the terms hereof and thereof to be covered
     hereby and thereby  including  specifically,  but without  limitation,  any
     renewals, additions,  substitutions,  replacements, or appurtenances to the
     Property; (iii) execute,  acknowledge,  deliver, procure and record or file
     any document or instrument (including specifically any financing statement)
     deemed  advisable  by Lender to protect the Lien or the  security  interest
     hereunder  against  the  rights or  interests  of third  persons;  and (iv)
     provide such certificates,  documents, reports, information, affidavits and
     other  instruments and do such further acts as may be necessary,  desirable
     or proper in the  reasonable  determination  of Lender to enable  Lender to
     comply with the requirements or requests of any agency having  jurisdiction
     over Lender or any  examiners of such  agencies with respect to the Secured
     Indebtedness, Borrower or the Property; and the Borrower will pay all costs
     connected with any of the foregoing except such matters  provided  pursuant
     to (iv) hereof which shall be at the cost of Lender.

          (v)  Fees  and  Expenses;  Indemnification.   Borrower  will  pay  all
     appraisal fees, Mortgage filing and recording fees, inspection fees, survey
     fees,  taxes,  brokerage fees and commissions,  abstract fees, title policy
     fees,  uniform  commercial  code  search  fees,  escrow  fees,   reasonable
     attorney's  fees,  and all other  costs  and  expenses  of every  character
     incurred by the Borrower or Lender in connection  with the Loan,  either at
     the closing  thereof or otherwise  required by this  Agreement or any other
     Loan Document,  and will  reimburse  Lender for all such costs and expenses
     incurred by it.  Borrower  shall pay all expenses and reimburse  Lender for
     any expenditures,  including reasonable attorney's fees and legal expenses,
     incurred or expended in  connection  with (i) the breach by Borrower of any
     covenant  herein or in any other Loan Document,  (ii) Lender's  exercise of
     any of its rights  and  remedies  hereunder  or under the Note or any other
     Loan  Document  or Lender's  protection  of the  Property  and its Lien and
     security interest therein,  or (iii) any amendments to this Agreement,  the
     Note or any other Loan Document or any matter  requested by Borrower or any
     approval required hereunder.  Borrower will indemnify and hold harmless the
     Trustee and Lender (for purposes of this paragraph, the terms "the


<PAGE>43


     Trustee" and "Lender"  shall  include the  directors,  officers,  partners,
     employees  and agents of the  Trustee  and  Lender,  respectively,  and any
     persons or entities owned or controlled by, owning or controlling, or under
     common  control or  affiliated  with the Trustee and Lender,  respectively)
     from and against, and reimburse them for, all claims, demands, liabilities,
     losses, damages, causes of action, judgments, penalties, costs and expenses
     (including,  without limitation,  reasonable  attorney's fees) which may be
     imposed upon, asserted against or incurred or paid by them by reason of, on
     account of or in  connection  with any bodily  injury or death or  property
     damage  occurring in or upon or in the vicinity of the Property through any
     cause  whatsoever or asserted  against them on account of any act performed
     or  omitted to be  performed  hereunder  or on  account of any  transaction
     arising  out of or in any way  connected  with the  Property  or with  this
     Agreement, the Note or any other Loan Document.  Without limitation,  it is
     the   intention  of  Borrower  and  Borrower   agrees  that  the  foregoing
     indemnities  shall apply to each indemnified  party with respect to claims,
     demands,  liabilities,   losses,  damages,  causes  of  action,  judgments,
     penalties,  costs and expenses  (including without  limitation,  reasonable
     attorneys' fees and disbursements)  which in whole or in part are caused by
     or arise out of the  negligence  of such  (and/or  any  other)  indemnified
     party.  However,  such indemnities shall not apply to any indemnified party
     to the extent the subject of the indemnification is caused by or arises out
     of the gross negligence or willful  misconduct of such  indemnified  party.
     The foregoing indemnities shall not terminate upon release,  foreclosure or
     other termination of the Security Documents but will survive foreclosure of
     the  Security  Documents  or  conveyance  in  lieu of  foreclosure  and the
     repayment of the Secured  Indebtedness and the discharge and release of the
     Security  Documents and the other documents  evidencing and/or securing the
     Secured Indebtedness. Any amount to be paid hereunder by Borrower to Lender
     and/or the Trustee shall be a demand obligation owing by Borrower to Lender
     and/or the Trustee and shall be subject to and  governed by the  provisions
     of Section 6.2 hereof.

          (w) Tax on Lien. In the event of the enactment  after this date of any
     law of  any  state  in  which  the  Property  is  located  or of any  other
     governmental entity deducting from the value of property for the purpose of
     taxation any Lien or security interest thereon, or imposing upon Lender the
     payment of the whole or any part of the taxes or  assessments or charges or
     Liens herein  required to be paid by  Borrower,  or changing in any way the
     laws  relating to the  taxation of deeds of trust or  mortgages or security
     agreements  or debts  secured by deeds of trust or  mortgages  or  security
     agreements  or the  interest  of the  mortgagee  or  secured  party  in the
     property covered thereby,  or the manner of collection of such taxes, so as
     to affect the  Security  Documents or the Secured  Indebtedness  or Lender,
     then,  and in any such event,  Borrower,  upon demand by Lender,  shall pay
     such taxes,  assessments,  charges or Liens, or reimburse  Lender therefor;
     provided,  however,  that if in the  opinion of  counsel  for Lender (i) it
     might be  unlawful  to require  Borrower  to make such  payment or (ii) the
     making of such payment might result in the  imposition  of interest  beyond
     the maximum  amount  permitted by law,  then and in such event,  Lender may
     elect,  by notice in  writing  given to  Borrower,  to  declare  all of the
     Secured


<PAGE>44


     Indebtedness  to be and  become  due and  payable  sixty (60) days from the
     giving of such notice without prepayment penalty.

          (x) Change of Name,  Identity or  Structure.  Borrower will not change
     its  name,  identity  (including  its trade  name or  names)  or, if not an
     individual, its corporate, partnership or other structure without notifying
     Lender of such  change in  writing at least  thirty  (30) days prior to the
     effective date of such change. Borrower will execute and deliver to Lender,
     prior to or contemporaneously with the effective date of any such change by
     it, any  financing  statement or  financing  statement  change  required by
     Lender to establish or maintain the  validity,  perfection  and priority of
     the security interest granted in the Security Documents.  At the request of
     Lender, Borrower shall execute a certificate in form satisfactory to Lender
     listing  the trade names  under  which the  Borrower  intend to operate the
     Property,  and  representing  and warranting  that the Borrower do business
     under no other trade name with respect to the Property.

          (y) Location and Use of Collateral.  All tangible  Collateral  will be
     used in the business of Borrower and shall remain in Borrower's  possession
     or control at all times at Borrower's  risk of loss and shall be located on
     the  real  property  described  in  the  Security  Document  covering  such
     Collateral save and except offsite repairs.

          (z) Estoppel Certificate.  Borrower shall at any time and from time to
     time at its sole cost and expense furnish promptly upon request by Lender a
     written  statement  in such form as may be required by Lender  stating that
     the Note and the other Loan Documents are valid and binding  obligations of
     Borrower,  enforceable against Borrower in accordance with their terms; the
     unpaid  principal  balance of the Note;  the date to which  interest on the
     Note is paid;  that the Note and the  other  Loan  Documents  have not been
     released,  subordinated  or  modified;  and that  there are no  offsets  or
     defenses against the enforcement of the Note or any other Loan Document, or
     if any of the  foregoing  statements  are  untrue,  specifying  the reasons
     therefor.

          (aa)  Compliance  with  ERISA.  Borrower  will  deliver to Lender such
     certifications  or other evidence from time to time  throughout the term of
     the Loan, as requested by Lender in its sole discretion,  that (a) Borrower
     is not an "employee benefit plan" or a "governmental plan" under ERISA; (b)
     it is not subject to state statutes  regulating  investments  and fiduciary
     obligations with respect to governmental  plans; and (c) one or more of the
     following circumstances is true:

               (i) Equity interests in Borrower are publicly offered securities,
          within the meaning of 29 C.F.R.ss.2510.3-101(b)(2); or

               (ii) Less than twenty-five  percent (25%) of all equity interests
          in Borrower are held by "benefit plan investors" within the meaning of
          29 C.F.R.ss.2510.3-101(f)(2); or


<PAGE>45


               (iii)  Borrower  qualifies as an  "operating  Company" or a "real
          estate    operating    company"    within    the    meaning    of   29
          C.F.R.ss.2510.3-101(c) or (e).

     Borrower agrees to indemnify, defend and hold Lender free and harmless from
     and against any and all loss, costs (including  reasonable  attorney's fees
     and expenses) taxes, penalties, damages and expenses that Lender may suffer
     by reason of the investigation, defense and settlement of claims based upon
     a breach of the foregoing provisions.  The foregoing  indemnification shall
     survive repayment of the Note.

          (bb)  Amendment of  Contracts.  Borrower  will not amend or permit any
     amendment to any contract assigned to Lender which materially and adversely
     affects the rights and benefits of Lender under or acquired pursuant to any
     Security Documents.

     Section 5.2 Indemnification  Regarding Environmental Matters, Etc. Borrower
will  defend,  indemnify  and hold  harmless  Lender and the  Trustee  and their
respective  employees,  agents,  officers  and  directors  from and  against any
claims, demands, penalties, fines, liabilities,  settlements, damages, costs and
expenses of whatever  kind or nature known or unknown,  contingent or otherwise,
arising  out  of,  or in any  way  relating  to the  presence  of any  Hazardous
Materials  in,  on at,  under or  affecting  the  Property,  the  violation  of,
noncompliance  with or  liability  under any  Environmental  Law relating to the
operations of Borrower or the Property,  or any orders,  requirements or demands
of any federal,  state,  local or other  governmental  or  administrative  body,
department or agency related thereto, including, without limitation,  reasonable
attorneys and consultants  fees,  investigations  and laboratory fees,  response
costs, court costs and litigation expenses, except to the extent that any of the
foregoing arise out of the gross  negligence or willful  misconduct of the party
seeking  indemnification  therefor.  This indemnity shall continue in full force
and effect regardless of the termination of this Agreement.


                                   ARTICLE VI
                                    Security


     Section  6.1  Security.  The  Secured  Indebtedness  will be secured by the
Security  Documents listed in the Security Schedule and any additional  Security
Documents hereafter delivered by Borrower and accepted by Lender.

     Section 6.2 Right of Lender to Perform.  Borrower  agrees that, if Borrower
fails to  perform  any act or to take any action  which  hereunder  Borrower  is
required  to perform or take,  or to pay any money which  hereunder  Borrower is
required to pay, or take any action  prohibited  hereby,  Lender,  in Borrower's
name or in its own name, may, but shall not be obligated to, perform or cause to
be performed such act or take such action or pay such money or remedy any action
so taken,  and any expenses so incurred by Lender,  and any money paid by Lender
in


<PAGE>46


connection  therewith,  shall be a demand obligation owing by Borrower to Lender
and Lender,  upon making such payment,  shall be subrogated to all of the rights
of the person,  corporation or body politic receiving such payment.  Any amounts
due and owing by  Borrower  to Lender  pursuant  to this  Agreement  shall  bear
interest  from the date such amount  becomes due until paid at the Default  Rate
and shall be a part of the  Secured  Indebtedness  and shall be  secured  by the
Mortgage and by any other Security Document.


                                  ARTICLE VII
                         Events of Default and Remedies

     Section 7.1 Events of Default.  Each of the following events constitutes an
Event of Default under this Agreement:

          (a) Borrower  fails to pay any  principal,  interest or premium on the
     Loan when due and  payable.  whether  at a date for the  payment of a fixed
     installment  or  contingent  or other  payment  to Lender or as a result of
     acceleration or otherwise.

          (b)  Borrower  fails to pay any Secured  Indebtedness  (other than the
     payment obligations described in paragraph (a) of this Section) or Borrower
     fails to  observe  any  covenant  set forth  herein  and does not cure such
     failure within the applicable Grace Period provided,  or any representation
     or warranty  previously,  presently or  hereafter  made in writing by or on
     behalf of Borrower in connection with any Loan Document shall prove to have
     been false or  incorrect  in any  material  respect on any date on or as of
     which made,  and the  represented  or  warranted  state of affairs does not
     become true within the  applicable  Grace  Period  provided,  however,  any
     representation  or warranty  previously  or presently or hereafter  made in
     writing  on behalf of  Borrower  shall be an Event of  Default  under  this
     subsection 7.1(b) to the extent and only to the extent such  representation
     or  warranty  was based on  information  provided by Borrower or made by an
     officer of Borrower in writing.

          (c) If  Borrower  shall fail to pay any Funded  Debt  (other  than the
     payment  obligations  described in paragraphs  (a) and (b) of this Section)
     when due (whether by scheduled maturity, required prepayment, acceleration,
     demand, or otherwise) after the expiration of any applicable grace period.

          (d)  Without  the prior  written  consent of Lender,  Borrower  sells,
     leases, exchanges, assigns, transfers, conveys or otherwise disposes of all
     or any part of the Property or any interest therein or shall be divested of
     its title or any interest therein in any manner or way,  whether  voluntary
     or involuntary (except for the disposition of worn-out or obsolete personal
     property or fixtures or other disposition permitted under the circumstances
     described in subsection 5.1(f) hereof),  or legal or equitable title to the
     Property,  or any interest  therein,  is vested in any other party,  in any
     manner whatsoever, by operation of law or otherwise.


<PAGE>47


          (e) Any "default" or "event of default" occurs under any Loan Document
     which  defines  either such term,  and the same is not remedied  within the
     applicable  period  of  grace  (if any)  provided  in such  Loan  Document,
     provided that the foregoing  shall not impair the Grace Period provided for
     in Section 7.2 hereof and provided further,  that all applicable periods of
     grace (if any) and the Grace  Period  provided in Section 7.2 hereof  shall
     run concurrently,  it being specifically acknowledged by the parties hereto
     that,  notwithstanding  anything to the contrary contained herein or in any
     Loan  Document,  no provision or provisions  shall be construed to permit a
     tacking,  doubling up or consecutive running of any Grace Period or periods
     of grace (if any).

          (f) Borrower:

               (i) suffers the entry  against it of a judgment,  decree or order
          for  relief by a court of  competent  jurisdiction  in an  involuntary
          proceeding  commenced under any applicable  bankruptcy,  insolvency or
          other  similar law of any  jurisdiction  now or  hereafter  in effect,
          including the Federal  Bankruptcy  Code, as from time to time amended,
          or  has  any  such  proceeding  commenced  against  it  which  remains
          undismissed for a period of ninety (90) days; or

               (ii) suffers the appointment of a receiver, liquidator, assignee,
          custodian, trustee, sequestrator or similar official for a substantial
          part of its  assets  or for any  material  part of the  Property  in a
          proceeding brought against or initiated by it, and such appointment is
          neither made ineffective nor discharged  within ninety (90) days after
          the making thereof, or such appointment is consented to, requested by,
          or acquiesced to by it; or

               (iii) commences a voluntary case under any applicable bankruptcy,
          insolvency  or similar law now or hereafter in effect,  including  the
          Federal Bankruptcy Code, as from time to time amended;  or applies for
          or consents to the entry of an order for relief in an involuntary case
          under any such law or to the appointment of or taking  possession by a
          receiver,  liquidator,  assignee,  custodian, trustee, sequestrator or
          other similar  official of any  substantial  part of its assets or any
          material part of the Property;  or makes a general  assignment for the
          benefit of creditors;  or fails generally to pay (or admits in writing
          its  inability  to pay) its debts as such debts become due; or makes a
          transfer in fraud of creditors;  or takes corporate or other action in
          furtherance of any of the foregoing.

     Section  7.2  Acceleration.  Upon the  occurrence  of an  Event of  Default
described in subsection (f)(i),  (f)(ii) or (f)(iii) of Section 7.1 with respect
to  Borrower  which shall  result in the entry of an order for relief  under the
Federal  Bankruptcy  Code, all of the Secured  Indebtedness  shall  thereupon be
immediately due and payable,  without presentment,  demand,  protest,  notice of
protest,  declaration or notice of acceleration  or intention to accelerate,  or
any other notice or declaration  of any kind, all of which are hereby  expressly
waived by Borrower. Upon the


<PAGE>48


occurrence  of any other Event of  Default,  Lender at any time and from time to
time  may  without  notice  to  Borrower  declare  any or  all  of  the  Secured
Indebtedness  immediately  due and payable,  and all such  Secured  Indebtedness
shall thereupon be immediately  due and payable,  without  presentment,  demand,
protest,   notice  of  protest,  notice  of  acceleration  or  of  intention  to
accelerate,  or any other notice or  declaration  of any kind,  all of which are
hereby  expressly  waived by Borrower.  The term "Grace Period",  as used herein
with respect to an Event of Default  under  subsection  (b) of Section 7.1 or an
Event of Default for which a Grace Period is expressly  provided  under  Section
7.1,  means the period  beginning on the date of the related  Default and ending
twenty  (20)  days  after  written  notice  to  Borrower  and the  holder of the
Permitted  Second  Lien  of  such  Default  and  demand  by the  Lender  for the
performance of such covenant, agreement, warranty or condition, provided that in
the event the Default in question is capable of cure but not reasonably  capable
of cure within said twenty (20) day period, Borrower shall not have committed an
Event of Default  hereunder  if Borrower or the holder of the  Permitted  Second
Lien  commences  such cure within  said  twenty  (20) day period and  diligently
prosecute  such cure to  completion  thereafter,  provided that no more than one
such notice to Borrower and to the holder of the Permitted  Second Lien shall be
required for any particular  event or occurrence  which results in a Default and
provided  further that in any event  Borrower  shall have  committed an Event of
Default hereunder if such failure is not cured on or before six (6) months after
notice to  Borrower  and the holder of the  Permitted  Second  Lien of the above
described  written  demand  for  performance.  Notwithstanding  anything  to the
contrary stated herein or in any Loan Document,  it is the intent of the parties
hereto that all  periods of grace (if any) and any Grace  Periods  provided  for
herein or in any Loan Document shall be deemed to run concurrently, it being the
intent of the parties hereto that no tacking, doubling up or consecutive running
of any periods of grace (if any) and any Grace Periods  shall be  permitted.  If
Borrower or the holder of the  Permitted  Second Lien  diligently  prosecute the
cure of a Default pursuant to the foregoing  provision (and are not otherwise in
default  under the Loan  Documents)  but are unable to complete such cure within
the time periods specified above, Borrower or the holder of the Permitted Second
Lien,  as the case may be, shall have the right at any time within ten (10) days
prior to the  expiration  of such six (6) months to elect  (subject  to Lender's
right to waive such Default as hereinafter provided) to obtain a partial release
of  the  Lien  of the  Mortgage  with  respect  to the  Individual  Property  or
Properties  that are the subject of such Default by  delivering to Lender at any
time within such ten (10) day period a written  notice of their intent to obtain
such  partial  release  accompanied  by the then current  Allocated  Loan Amount
allocable  to such  Individual  Property or  Properties  together  with  accrued
interest thereon through the date of payment and the Prepayment Premium thereon,
plus the other costs  incurred by Lender or advances made by Lender with respect
to such Individual  Property or Properties.  Unless Lender notifies Borrower and
the holder of the  Permitted  Second Lien in writing  within ten (10) days after
such notice is received  that it has waived the Default in question  and returns
to  Borrower  therewith  the amounts so paid,  Lender  shall then  release  such
Individual Property or Properties from the Lien of the Mortgage.  Borrower shall
pay all costs incurred by Lender in connection  with such release,  even if same
is not  completed,  including  without  limitation,  legal fees and  expenses of
outside counsel and title costs.



<PAGE>49


     Section  7.4  Remedies.  If  any  Event  of  Default  shall  occur  and be
continuing,  Lender shall have the right but not the  obligation  to protect and
enforce its rights  under the Loan  Documents  by any  appropriate  proceedings,
including,  without  limitation,  proceedings  for specific  performance  of any
covenant  or  agreement  contained  in any Loan  Document  for which  Lender has
recourse,  pursuant  to Section  2.9,  and Lender may enforce the payment of any
Secured  Indebtedness  due or enforce any other legal or  equitable  right.  All
rights, remedies and powers conferred upon Lender under the Loan Documents shall
be deemed  cumulative and not exclusive of any other rights,  remedies or powers
available under the Loan Documents or at law or in equity.

     Section 7.4  Indemnity.  Subject to the  provisions  of Section 2.9 hereof,
Borrower promises to indemnify Lender, upon demand, from and against any and all
liabilities,   obligations,   claims,  losses,  damages,   penalties,   actions,
judgments,  suits,  costs,  expenses  or  disbursements  of any  kind or  nature
whatsoever  which may be imposed on,  incurred  by, or asserted  against  Lender
(whether or not caused by Lender's  negligence) growing out of or resulting from
the Loan  Documents  and the  transactions  and  events  at any time  associated
therewith  (including  without  limitation the enforcement of the Loan Documents
and the defense of Lender's  actions and inactions in connection with the Loan),
except to the limited  extent such  liabilities,  obligations,  claims,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
are proximately  caused by Lender's gross negligence or willful  misconduct.  If
any Person (including without limitation Borrower or any of its Affiliates) ever
alleges  such  gross   negligence   or  willful   misconduct   by  Lender,   the
indemnification  provided for in this  section  shall  nonetheless  be paid upon
demand, subject to later adjustment or reimbursement, until such time as a court
of competent jurisdiction enters a final judgment as to the extent and effect of
the alleged gross negligence or willful misconduct.


                                  ARTICLE VIII
                                  Miscellaneous


     Section  8.1  Waiver  and  Amendment.  No  failure  or delay by  Lender  in
exercising  any right,  power or remedy  which  Lender may have under any of the
Loan Documents shall operate as a waiver thereof or of any other right, power or
remedy,  nor shall any single or partial  exercise  by Lender of any such right,
power or remedy preclude any other or further  exercise  thereof or of any other
right,  power or remedy.  No waiver of any provision of any Loan Document and no
consent  to any  departure  therefrom  shall ever be  effective  unless it is in
writing and signed by Lender, and then such waiver or consent shall be effective
only in the specific  instances  and for the purposes for which given and to the
extent  specified in such writing.  No notice to or demand on Borrower  shall in
any case of itself entitle  Borrower to any other or further notice or demand in
similar or other circumstances.  This Agreement and the other Loan Documents set
forth the entire  understanding  and agreement of the parties hereto and thereto
with  respect  to the  transactions  contemplated  herein  and  therein,  and no
modification  amendment  of or  supplement


<PAGE>50


to this Agreement or the other Loan Documents shall be valid or effective unless
the same is in writing and signed by the party  against  whom it is sought to be
enforced.

     Section 8.2 Survival of Agreements:  Cumulative  Nature.  All of Borrower's
various  representations,  warranties,  covenants  and  agreements  in the  Loan
Documents  shall survive the  execution  and delivery of this  Agreement and the
other Loan Documents and the performance  hereof and thereof,  including without
limitation  the making or granting of the Loan and the  delivery of the Note and
the other Loan  Documents,  and shall  further  survive until all of the Secured
Indebtedness  are paid in full to  Lender  and all of  Lender's  obligations  to
Borrower are terminated. The representations,  warranties, and covenants made by
Borrower in the Loan Documents,  and the rights,  powers, and privileges granted
to Lender in the Loan Documents,  are cumulative,  and no Loan Document shall be
construed  in the  context  of  another  to  implicitly  diminish,  nullify,  or
otherwise  reduce the  benefit to Lender of any such  representation,  warranty,
covenant,  right, power or privilege.  In particular and without limitation,  no
exception set out in this Agreement to any representation,  warranty or covenant
herein   contained   shall  be  deemed  to  apply   implicitly  to  any  similar
representation,  warranty or covenant contained in any other Loan Document,  and
each such similar representation,  warranty or covenant shall be subject only to
those  exceptions  which are expressly made applicable to it by the terms of the
various Loan Documents.

     Section 8.3 Notices.  All notices,  requests,  consents,  demands and other
communications required or permitted under any Loan Document shall be in writing
and,  unless  otherwise  specifically  provided in such Loan Document,  shall be
deemed  sufficiently  given or furnished if delivered by personal  delivery,  by
telegram,  telex or  telecopy  (provided  such  telegram,  telex or  telecopy is
confirmed within 48 hours thereafter by expedited delivery service in the manner
herein described),  by expedited delivery service with proof of delivery,  or by
registered or certified United States mail,  postage  prepaid,  at the addresses
specified  below  (unless  changed  by similar  notice in  writing  given by the
particular  Person  whose  address  is  to  be  changed).  Any  such  notice  or
communication  shall be deemed to have been given either at the time of personal
delivery  or, in the case of delivery  service or mail,  as of the date of first
attempted  delivery at the address and in the manner provided herein, or, in the
case of telegram, telex or telecopy, upon receipt:

Borrower's address:

Payless Cashways, Inc.
2300 Main, Suite 300
Kansas City, Missouri  64108
Attention:  Stephen A. Lightstone
Telecopy Number:  (816) 234-6077

with a copy to:



<PAGE>51


Blackwell Sanders Matheny Weary
  & Lombardi LLP
2300 Main Street, Suite 1100
Kansas City, Missouri  64108
Attention:  John K. Brungardt
Telecopy Number:  (816) 983-8080

Lender's address:

UBS Mortgage Finance, Inc.
299 Park Avenue
New York, New York  10017
Attention:  John Ashley
Telecopy Number: (212) 821-5566

with a copy to:

Fried Frank Harris Shriver &
  Jacobson
One New York Plaza
New York, New York  10014
Attention:  Robert J. Sorin, Esq.
Telecopy Number:  (212) 859-8582

Permitted Second Lien Holder's address:

Canadian Imperial Bank of Commerce
  as Coordinating and Collateral Agent
425 Lexington Avenue
New York, New York 10017
Attention: Robert N. Greer
Telecopy Number:  (212) 856-3763

with a copy to:

Zalkin Rodin & Goodman LLP
750 Third Avenue
New York, New York  10017-2771
Attention: Margot Schonholtz, Esq.
Telecopy Number:  (212) 682-6331


     Section 8.4 GOVERNING LAW. THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND
INSTRUMENTS  MADE UNDER THE LAWS OF THE STATE OF NEW


<PAGE>52


YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE  WITH AND GOVERNED BY THE
LAWS OF THE  STATE OF NEW YORK AND THE LAWS OF THE  UNITED  STATES  OF  AMERICA,
EXCEPT  (A) TO THE  EXTENT  THAT THE LAW OF ANOTHER  JURISDICTION  IS  EXPRESSLY
ELECTED IN A LOAN  DOCUMENT,  AND (B) WITH  RESPECT TO  SPECIFIC  LIENS,  OR THE
PERFECTION  THEREOF,  EVIDENCED BY SECURITY  DOCUMENTS COVERING REAL OR PERSONAL
PROPERTY WHICH BY THE LAWS APPLICABLE THERETO ARE REQUIRED TO BE CONSTRUED UNDER
THE LAWS OF ANOTHER  JURISDICTION.  EACH RELATED PERSON HEREBY SUBMITS ITSELF TO
THE  NON-EXCLUSIVE  JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF
NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT AND
THE RELATED  PERSONS IN ANY LEGAL  PROCEEDING  RELATING TO THE LOAN DOCUMENTS OR
THE OBLIGATIONS BY ANY MEANS ALLOWED UNDER NEW YORK OR FEDERAL LAW.

     Section 8.5  Severability.  If any term or provision  of any Loan  Document
shall  be  determined  to be  illegal  or  unenforceable  all  other  terms  and
provisions of the Loan Documents shall  nevertheless  remain effective and shall
be enforced to the fullest extent permitted by Applicable Laws.

     Section 8.6 Counterparts.  This Agreement may be separately executed in any
number  of   counterparts   and  by  .different   parties   hereto  in  separate
counterparts,  each of which when so executed  shall be deemed to constitute one
and the same Agreement.

     Section 8.7 NO ORAL AGREEMENTS. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
CONSTITUTE  THE COMPLETE  AND FINAL  EXPRESSION  OF AGREEMENT  AMONG THE PARTIES
HERETO  RELATING TO THE LOAN. THE TERMS AND PROVISIONS  HEREOF HAVE NOT BEEN NOR
MAY THEY BE MODIFIED BY ANY ORAL  AGREEMENT  AMONG THE  PARTIES,  BUT ONLY BY AN
INSTRUMENT  IN WRITING  EXECUTED BY BOTH  BORROWER AND LENDER AND,  ACCORDINGLY,
SAID TERMS AND  PROVISIONS MAY NOT BE  CONTRADICTED  BY EVIDENCE OF ANY PRIOR OR
CONTEMPORANEOUS ORAL.

     Section  8.8  Effect  of  Amendment  and  Restatement  of  the  Prior  Loan
Agreement;  Confirmation of Security Documents. On the Effective Date, the Prior
Loan  Agreement  shall be amended  and  restated  to read as set forth . herein.
Borrower  acknowledges  and  agrees  that (i) the liens and  security  interests
securing  payment of the Prior Notes are in all respects  continuing and in full
force and effect and  secure the  payment of the Prior  Notes and that the Prior
Notes  are  replaced  by the Note  issued  hereunder,  and  (ii) the term  "Loan
Agreement"  as  used  in  the  Security  Documents  shall  hereafter  mean  this
Agreement.

     Section  8.9  Usury.  In the event that  Lender,  in  enforcing  its rights
hereunder,  determines  that charges and fees  incurred in  connection  with the
Secured  Indebtedness  may, under the applicable  usury laws, cause the interest
rate herein to exceed the maximum  allowed by law,


<PAGE>53


then  such  interest  shall be  recalculated  and any  excess  over the  maximum
interest  permitted  by said  laws  shall  be  credited  to the  then  principal
outstanding  balance to reduce said balance by that amount.  It is the intent of
the parties  hereto that Borrower  under no  circumstances  shall be required to
pay, nor shall Lender be entitled to collect, any interest which is in excess of
the maximum legal rate permitted under the applicable usury laws.

         IN WITNESS  WHEREOF,  the parties have caused this Agreement to be duly
executed as of the day and year first above written.


                              PAYLESS CASHWAYS, INC.


                              By:  /s/ Stephen A. Lightstone
                                 ----------------------------------------
                              Name: Stephen A. Lightstone
                              Title: Senior Vice-President-Finance




                              UBS MORTGAGE FINANCE, INC.


                              By:  /s/ Jonathan Ashley
                                 ---------------------------------------- 
                              Name: Jonathan Ashley 
                              Title: Vice President


                              By:  /s/ Randy Nardone
                                 -----------------------------------------
                              Name: Randy Nardone
                              Title: Managing Director




<PAGE>i


                                TABLE OF CONTENTS

ARTICLE I     Definitions and References...... ................................2
              Section 1.1  Defined Terms. .....................................2
              Section 1.2  Exhibits and Schedules. ...........................10
              Section 1.3  Amendment of Defined Instruments. .................10
              Section 1.4  References and Titles. ............................10
              Section 1.5  Calculations and Determinations. ..................11

ARTICLE II    The Loan........................................................11
              Section 2.1  Acknowledgment of Existing Obligations.............11
              Section 2.2  Exchange of Notes.  ...............................11
              Section 2.3  Interest.  ........................................11
              Section 2.4  Funding Losses; Change in Law, Etc.................12
              Section 2.5  Mandatory Payments.................................14
              Section 2.6  Optional Prepayment................................15
              Section 2.7  Partial Releases...................................15
              Section 2.8  Payments to Lender.  ..............................18
              Section 2.9  Limitation on Liability.  .........................19
              Section 2.10 Permitted Second Lien.  ...........................20

ARTICLE III   Conditions Precedent............................................21
              Section 3.1  Documents to be Delivered..........................21
              Section 3.2  Additional Conditions Precedent....................21

ARTICLE IV    Representations and Warranties..................................22
              Section 4.1  Borrower's Representations and Warranties..........22
              Section 4.2  Placement of Loan..................................26

ARTICLE V     Covenants of Borrower...........................................27
              Section 5.1  Covenants..........................................27
              Section 5.2  Indemnification Regarding 
                             Environmental Matters, Etc.......................44

ARTICLE VI    Security........................................................44
              Section 6.1  Security.  ........................................44
              Section 6.2  Right of Lender to Perform.........................44

ARTICLE VII   Events of Default and Remedies..................................45
              Section 7.1  Events of Default..................................45
              Section 7.2  Acceleration.......................................46
              Section 7.3  Remedies.  ........................................48
              Section 7.4  Indemnity.  .......................................48


<PAGE>ii


ARTICLE VIII  Miscellaneous...................................................48
              Section 8.1  Waiver and Amendment...............................48
              Section 8.2  Survival of Agreements; Cumulative Nature..........49
              Section 8.3  Notices............................................49
              Section 8.4  GOVERNING LAW......................................51
              Section 8.5  Severability.......................................51
              Section 8.6  Counterparts.......................................51
              Section 8.7  NO ORAL AGREEMENTS.................................51
              Section 8.8  Effect of Amendment and Restatement of the
                             Prior Loan Agreement; Confirmation of
                             Security Documents...............................51
              Section 8.9  Usury..............................................52


                         LIST OF EXHIBITS AND SCHEDULES


Schedule 1 --  Disclosure Schedule
Schedule 2 --  Security Schedule
Schedule 3 --  Closing Item Schedule
Schedule 4 --  Closing Condition Schedule

Exhibit A  --  Form of Promissory Note
Exhibit B  --  Form of Permitted Second Lien
Exhibit C  --  Individual Properties and Allocated Amounts
Exhibit D  --  Opinions