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                                                                   EXHIBIT 10.19

                                                            MS Loan No. 04-17356

                         RESERVE AND SECURITY AGREEMENT

            THIS RESERVE AND SECURITY AGREEMENT ("Agreement") is made as of
January 27, 2005, by PYRAMID GILMAN STREET PROPERTY, LLC, a Delaware limited
liability company, having its principal place of business at Pyramid Breweries,
Inc., Attention: Chief Financial Officer, 91 S. Royal Brougham Way, Seattle,
Washington 98134 ("Borrower"), in favor of MORGAN STANLEY MORTGAGE CAPITAL INC.,
a New York corporation, having an address at c/o ARCap Servicing, Inc., 5605
North MacArthur Boulevard, Suite 950, Irving, Texas 75038 ("Lender").

            All capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Security Instrument (defined below).

                                    RECITALS:

            Borrower by its promissory note of even date herewith given to
Lender (the note together with all extensions, renewals, modifications,
substitutions and amendments thereof shall collectively be referred to as the
"Note") is indebted to Lender in the principal sum of $7,850,000.00 in lawful
money of the United States of America, with interest from the date thereof at
the rates set forth in the Note (the indebtedness evidenced by the Note,
together with such interest accrued thereon, shall collectively be referred to
as the "Loan"), principal and interest to be payable in accordance with the
terms and conditions provided in the Note.

            The Loan is secured by, among other things, a Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing (the
"Security Instrument"), dated as of the date hereof, which grants Lender a first
lien on the property encumbered thereby (the "Property"). All and any of the
documents other than the Note, the Security Instrument and this Agreement now or
hereafter executed by Borrower and/or others and by or in favor of Lender, which
wholly or partially secure or guarantee payment of the Note are referred to as
the "Other Security Documents."

            Lender requires as a condition to the making of the Loan that
Borrower enter into this Agreement and make certain deposits with Lender as
provided in this Agreement as additional security for all of Borrower's
obligations under the Note, the Security Instrument and the Other Security
Documents.

                                   AGREEMENT:

            For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

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                             I. BORROWER OBLIGATIONS

            SECTION 1.1 REPLACEMENTS AND REPAIRS.

            (a) Based on the results outlined in certain engineering and
building condition reports delivered to Lender in connection with the making of
the Loan, Lender hereby requires and Borrower hereby agrees, that Borrower shall
perform, or cause to be performed, each of the following in accordance with the
terms of this Agreement:

                  (i) capital repairs, replacements and improvements necessary
to keep the Property in good order and repair and in a good marketable condition
or prevent deterioration of the Property, including but not limited to the
performance of work to the roofs, chimneys, gutters, downspouts, paving, curbs,
ramps, driveways, balconies, porches, patios, exterior walls, exterior doors and
door ways, windows, elevators and mechanical and HVAC equipment (such items are
referred to collectively as the "Replacements"); and

                  (ii) those repairs and improvements to the Property described
on Exhibit A attached to this Agreement and made a part hereof (the "Repairs").

            (b) If at any time during the term of the Loan, Lender determines
that repairs and improvements not listed on Exhibit A and not intended to be
covered by the Replacement Reserve (defined below) (the "Additional Repairs") or
additional Replacements not intended to be covered by the Completion/Repair
Reserve (defined below) (the "Additional Replacements") are advisable to keep
the Property in good order and repair and in a good marketable condition, or
prevent deterioration of the Property, or if any major building systems or
components (for example, roof, HVAC system) will reach the end of its useful
life within two (2) years of the date of any inspection by Lender, Lender may
send Borrower written notice of the need for making such Additional Repairs or
Additional Replacements. Borrower shall commence making such Additional Repairs
or Additional Replacements in accordance with all the requirements of this
Agreement within thirty (30) days after written request by Lender, except that
Borrower understands that reimbursement from the Completion/Repair Reserve or
the Replacement Reserve, as applicable, shall not be made unless Lender has
agreed to such reimbursement pursuant to the terms of this Agreement. Except for
this Section 1.1(b), all references in this Agreement to "Repairs" and
"Replacements" shall include the "Additional Repairs" and the "Additional
Replacements", respectively.

            SECTION 1.2 TENANT IMPROVEMENTS AND LEASING COMMISSIONS. Lender
hereby requires, and Borrower hereby agrees, (a) to perform, or cause to be
performed, tenant improvements required under any new Lease or modification,
renewal or extension of any existing Lease which is entered into after the date
hereof and which is approved by Lender or, if Lender's approval is not required,
is entered into in accordance with the provisions of Section 3.8 of the Security
Instrument (collectively, the "Tenant Improvements"). and (b) pay the costs of
leasing commissions incurred by Borrower in connection with the leasing of the
Property or a portion thereof, provided that (x) such leasing commissions are
reasonable and customary for properties similar to the Property and the portion
of the Property leased for which such leasing commission is due, and (y) the
amounts of such leasing commissions are determined pursuant to arm's length
transactions between Borrower and any leasing agent to which a leasing

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commission is due, and excluding any leasing commissions which shall be due any
member, general partner or shareholder of Borrower or any affiliate of Borrower
(collectively, "Leasing Commissions").

            SECTION 1.3 TIMELY AND DILIGENT PERFORMANCE. Borrower shall (a)
commence each Repair immediately following the execution of this Agreement (or
as soon thereafter as weather reasonably shall permit) and complete each Repair
prior to the date which is six (6) months from the date of this Agreement, or
such other date set forth on Exhibit A (the "Completion Date"), (b) make each
Replacement when required in order to keep the Property in good order and repair
and in a good marketable condition, and (c) make each Tenant Improvement when
required under the terms of the applicable Lease. Borrower shall diligently
pursue all Repairs, Replacements and Tenant Improvements (collectively, the
"Required Work") to completion.

            SECTION 1.4 PAYMENT OF REQUIRED WORK. Borrower shall pay all costs
necessary for completion of the Required Work without regard to the sufficiency
of the funds in Replacement Reserve, the Completion/Repair Reserve or the Tenant
Improvements and Leasing Commissions Reserve (each as defined below, and each a
"Reserve" and collectively, the "Reserves"). The insufficiency of any balance in
any Reserve shall not relieve Borrower from fulfilling all preservation and
maintenance covenants in the Security Instrument, any covenants or agreements
with any tenants under any Leases or any agreements with any leasing
agents.

            SECTION 1.5 WORKMANLIKE COMPLETION. Borrower shall complete all
Required Work in a good and workmanlike manner as soon as practicable following
the commencement of such Required Work.

            SECTION 1.6 CONTRACT APPROVALS. Lender shall have the right to
approve all contracts or work orders with materialmen, mechanics, suppliers,
subcontractors, contractors or other parties providing labor or materials in
connection with any Repair, Replacement or Tenant Improvement. Upon Lender's
request, Borrower shall assign any such contract or subcontract to Lender.

            SECTION 1.7 LIEN-FREE COMPLETION. Borrower covenants and agrees that
each of the Repairs, Replacements and Tenant Improvements, and all materials,
equipment, fixtures, or any other item comprising a part of any Repair,
Replacement or Tenant Improvement shall be constructed, installed or completed,
as applicable, free and clear of all mechanic's, materialman's or other liens,
and prior to each disbursement from any of the Completion/Repair Escrow Account,
the Replacement Reserve Escrow Account or the Tenant Improvements and Leasing
Commissions Reserve Escrow Account (each as defined below, and collectively, the
"Reserve Escrow Accounts"). For any Repair, Replacement or Tenant Improvement
the cost of which exceeds $5,000, Lender may require Borrower to provide Lender
with a search of title for the Property evidencing the same prior to
disbursement from any of the Reserve Escrow Accounts.

            SECTION 1.8 COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS.

            (a) All Required Work shall comply with all applicable laws,
ordinances, rules and regulations of all governmental authorities having
jurisdiction over the Property and

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applicable insurance requirements including, without limitation, applicable
building codes, special use permits, environmental regulations, and requirements
of insurance underwriters.

            (b) Borrower represents and warrants that to the best of its
knowledge, no permits or approvals from any agency or authority, other than
those previously obtained and furnished to Lender, are necessary for the
commencement and completion of the Required Work. Borrower shall pay all
applicable fees and charges of such authorities.

            SECTION 1.9 NO OBLIGATION OF LENDER. Nothing in this Agreement shall
be construed in such a way as to (a) make Lender responsible for making or
completing any of the Required Work, (b) require Lender to expend funds to make
or complete any of the Required Work, (c) obligate Lender to proceed with any of
the Required Work or (d) obligate Lender to demand from Borrower additional sums
to make or complete any of the Required Work.

            SECTION 1.10 BORROWER'S OTHER OBLIGATIONS. Nothing contained in this
Agreement shall in any manner whatsoever alter, impair or affect the obligations
of Borrower, or relieve Borrower of any of its obligations to make payments and
perform all of its other obligations required, under the Note, the Security
Instrument or any of the Other Security Documents.

            SECTION 1.11 ADDITIONAL DOCUMENTS. Upon completion of all or any
portion of the Required Work and upon Lender's request, Borrower shall execute
and deliver to Lender an amendment to the security agreement provisions of the
Security Instrument and the original financing statement or similar
instrument(s) necessary or desirable to perfect Lender's lien upon any property
for which funds from the Reserve Escrow Accounts were expended.

                              II. DEPOSITS TO THE RESERVES

            SECTION 2.1 REPLACEMENT RESERVE.

            (a)   (i) On each date upon which a regularly scheduled payment of
interest and/or principal is due under the Loan (each, a "Payment Date"),
Borrower shall deposit with Lender the sum of $1,729.17 (the "Replacement
Reserve Monthly Deposit"). The amount of the Replacement Reserve Monthly Deposit
may be increased by Lender in accordance with Section 2.1(c).

                  (ii) Lender shall deposit each Replacement Reserve Monthly
Deposit, as received, in an interest-bearing escrow account for the benefit of
Borrower (the "Replacement Reserve Escrow Account"; the Replacement Reserve
Monthly Deposits and all other funds in the Replacement Reserve Escrow Account
are referred to collectively as the "Replacement Reserve").

                  (iii) Notwithstanding any other provision of this Section 2.1,
Borrower shall not be required to make the Replacement Reserve Monthly Deposit
if the balance in the Replacement Reserve Escrow Account is at least $62,250.00
on the applicable Payment Date.

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            (b) Except as otherwise provided in this Agreement, Lender shall
make disbursements from the Replacement Reserve to reimburse Borrower for the
costs of the Replacements in accordance with the terms of this Agreement.

            (c) In the event that the balance of the Replacement Reserve is less
than the current estimated cost to make the Replacements required by Lender,
Borrower shall deposit the shortage within ten (10) days of request by Lender.
In the event Lender determines from time to time based on Lender's inspections
that the amount of the Replacement Reserve Monthly Deposit is insufficient to
fund the cost of likely Replacements and related contingencies that may arise
during the remaining term of the Loan, Lender may require an increase in the
amount of the Replacement Reserve Monthly Deposit upon thirty (30) days prior
written notice to Borrower.

            SECTION 2.2 COMPLETION/REPAIR RESERVE.

            (a)   (i) Concurrently with the execution of this Agreement,
Borrower shall deposit with Lender the sum of $0 (the "Completion/Repair
Deposit"). The Completion/Repair Deposit represents 125% of the estimated cost
to complete the Repairs.

                  (ii) Lender shall deposit the Completion/Repair Deposit in an
interest-bearing escrow account for the benefit of Borrower (the
"Completion/Repair Escrow Account"; the Completion/Repair Deposit, and all other
funds from time to time in the Completion/Repair Escrow Account are collectively
referred to as the "Completion/Repair Reserve").

            (b) Except as otherwise provided in this Agreement, Lender shall
make disbursements from the Completion/Repair Escrow Account to reimburse
Borrower for the costs of the Repairs in accordance with the terms of this
Agreement.

            SECTION 2.3 TENANT IMPROVEMENTS AND LEASING COMMISSIONS RESERVE.

            (a)   (i) Concurrently with the execution of this Agreement,
Borrower shall deposit with Lender the sum of $500,000.00 out of the proceeds of
the Loan (the "TI & LC Reserve Initial Deposit").

                  (ii) On each Payment Date, Borrower shall deposit with Lender
the sum of $10,000.00 (the "TI & LC Reserve Monthly Deposit").

                  (iii) Notwithstanding any other provision of this Section 2.3,
Borrower shall not be required to make the TI & LC Reserve Monthly Deposit if
the balance in the Tenant Improvements and Leasing Commissions Reserve Escrow
Account (as defined below) is at least $750,000.00 on the applicable Payment
Date.

            (b) Lender shall deposit the TI & LC Reserve Initial Deposit and
each TI & LC Reserve Monthly Deposit, as received, in an interest-bearing escrow
account for the benefit of Borrower (the "Tenant Improvements and Leasing
Commissions Reserve Escrow Account"; the TI & LC Reserve Initial Deposit, the TI
& LC Reserve Monthly Deposits and all other funds in the Tenant Improvements and
Leasing Commissions Reserve Escrow Account are referred to collectively as the
"Tenant Improvements and Leasing Commissions Reserve").

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            (c) Except as otherwise provided in this Agreement, Lender shall
make disbursements from the Tenant Improvements and Leasing Commissions Reserve
Escrow Account to reimburse Borrower for the costs of Tenant Improvements and
Leasing Commissions in accordance with the terms of this Agreement.

                  III. SECURITY INTEREST AND INDEMNIFICATION

            SECTION 3.1 GRANT OF SECURITY INTEREST. Borrower hereby pledges,
assigns and grants a security interest to Lender, as security for payment of the
Debt and the performance of all other terms, conditions and covenants of the
Note, the Security Instrument, this Agreement and the Other Security Documents
on Borrower's part to be paid and performed, in all of Borrower's right, title
and interest in and to each of the Reserve Escrow Accounts and each of the
Reserves. The funds contained in each of the Reserves shall be under the sole
dominion and control of Lender. The Reserve Escrow Accounts and the funds
therein shall not constitute a trust fund and may be commingled with other
monies held by Lender. Lender or a designated representative of Lender shall
have the sole right to make withdrawals from such accounts.

            SECTION 3.2 PROHIBITION AGAINST FURTHER ENCUMBRANCE. Borrower shall
not, without the prior consent of Lender, further pledge, assign or grant any
security interest in the Reserves or funds contained in any of the Reserve
Escrow Accounts or permit any lien or encumbrance to attach thereto, or any levy
to be made thereon, or any UCC-1 Financing Statements, except those naming
Lender as the secured party, to be filed with respect thereto.

            SECTION 3.3 INDEMNIFICATION. Borrower agrees to indemnify Lender and
to hold Lender harmless from and against any and all actions, suits, claims,
demands, liabilities, losses, damages, obligations and costs and expenses
(including litigation costs and reasonable attorneys' fees and expenses) arising
from or in any way connected with (a) the performance of any of the Required
Work or (b) the payment of any Leasing Commissions. Borrower assigns to Lender
all rights and claims Borrower may have against all persons or entities
supplying labor or materials in connection with any of the Required Work
provided, however, that Lender may not pursue any such right or claim unless an
Event of Default has occurred under this Agreement, the Note, the Security
Instrument or any of the Other Security Documents.

            SECTION 3.4 ASSIGNMENT OF THE RESERVES. Borrower understands and
agrees that, in connection with any sale of the Loan pursuant to Section 18.1 of
the Security Instrument, all of Lender's interest in the Reserves and the
Reserve Escrow Accounts will be assigned to the transferee of the Loan.

                           IV. RESERVE DISBURSEMENTS

            SECTION 4.1 DISBURSEMENTS FROM RESERVES. Upon written request from
Borrower and satisfaction of the requirements set forth in this Agreement,
Lender shall promptly disburse to Borrower amounts from (a) the
Completion/Repair Escrow Account necessary to reimburse Borrower for the actual
costs of each Repair (but not exceeding 125 % of the original estimated cost of
such Repair as set forth on Exhibit A, unless Lender has agreed to reimburse
Borrower for such excess cost pursuant to Section 4.2), (b) the Replacement
Reserve Escrow Account necessary to reimburse Borrower for the actual costs of
any approved Replacements, or

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(c) the Tenant Improvements and Leasing Commissions Reserve Escrow Account to
reimburse Borrower for the actual costs of Tenant Improvements and Leasing
Commissions. Notwithstanding the preceding, in no event shall Lender be required
to (i) disburse any amounts which would cause the amount of funds remaining in
the Completion/Repair Escrow Account after any disbursement (other than with
respect to the final disbursement) to be less than 125% of the then current
estimated cost of completing all remaining Repairs for the Property, (ii)
disburse funds from any of the Reserve Escrow Accounts if an Event of Default
exists under this Agreement or under the Note, the Security Instrument or any of
the Other Security Documents, or (iii) disburse funds from the Replacement
Reserve Escrow Account to reimburse Borrower for the costs of routine
maintenance to the Property or for costs which are to be reimbursed from funds
held in the Completion/Repair Reserve.

            SECTION 4.2 ADDITIONAL COST ITEMS. In the event Borrower requests a
disbursement from the Completion/Repair Reserve to reimburse Borrower for the
actual cost of labor or materials used in connection with repairs or
improvements other than the Repairs specified on Exhibit A, or for a Repair to
the extent the cost of such Repair exceeds 125% of the estimated cost of such
Repair as set forth on Exhibit A (in either case, an "Additional Cost Item"),
Borrower shall disclose in writing to Lender why funds in the Completion/Repair
Reserve should be used to pay for such Additional Cost Item. If Lender
determines that (a) such Additional Cost Item is of the type intended to be
covered by the Completion/Repair Reserve, (b) such Additional Cost Item is not
covered or is not of the type intended to be covered by the Replacement Reserve,
(c) costs for such Additional Cost Item are reasonable, (d) the funds in the
Completion/Repair Reserve are sufficient to pay for such Additional Cost Item
and all other Repairs for the Property specified on Exhibit A, and (e) all other
conditions for disbursement under this Agreement have been met, Lender may
disburse funds from the Completion/Repair Reserve.

            SECTION 4.3 REQUEST FOR DISBURSEMENTS. Each request for disbursement
from any of the Reserve Escrow Accounts shall be on a form provided or approved
by Lender. Each request for reimbursement shall include (a) copies of invoices
for all items or materials purchased and all labor or services provided, (b) if
such request for disbursement is in connection with Tenant Improvements, a
certificate from the tenant(s) for which the Tenant Improvements have been
performed stating that such Tenant Improvements have been completed in a manner
satisfactory and acceptable to such tenant(s) and (unless disbursement is
requested pursuant to Section 4.7) such tenant(s) has accepted the premises
demised under the applicable Lease(s) and containing such other information as
Lender may require, in form and substance reasonably satisfactory to Lender,
and/or (c) if such request for disbursement is in connection with Leasing
Commissions, a certificate from the leasing agent that no further sums are due
to it in connection with the applicable Leasing Commission.

            SECTION 4.4 FREQUENCY OF REQUESTS FOR DISBURSEMENT; AMOUNTS OF
DISBURSEMENTS.

            (a) Borrower shall not make a request for disbursement from any of
the Reserve Escrow Accounts more frequently than once in any calendar month.

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            (b) Borrower shall not make a request for disbursement from any of
the Reserve Escrow Accounts in an amount less than the lesser of (i) $5,000.00
or (ii) the total cost of the Repair, Replacement, Tenant Improvement or Leasing
Commission, as applicable, for which the disbursement is requested.

            SECTION 4.5 DISBURSEMENT CONDITIONS.

            (a) Unless Lender has agreed to issue joint checks in connection
with a particular Repair, Replacement or Tenant Improvement pursuant to Section
4.7 below, Borrower shall pay all invoices for items or materials supplied or
purchased and all contracted labor or services performed in connection with the
Repairs, Replacements and Tenant Improvements prior to submitting such request
for disbursement from the Completion/Repair Escrow Account, the Replacement
Reserve Escrow Account or the Tenant Improvements and Leasing Commissions
Reserve Escrow Account, as the case may be.

            (b) Each request for disbursement shall be made only after
completion of the Repair, Replacement or Tenant Improvement (or the portion
thereof completed in accordance with Section 4.7 below), or the full performance
by the leasing agent of its obligations (in the case of Leasing Commissions), as
applicable, for which disbursement is requested. Borrower shall provide Lender
evidence satisfactory to Lender in its reasonable judgment of such completion or
performance.

            SECTION 4.6 INSPECTIONS.

            (a) Borrower shall permit Lender or Lender's representatives
(including an independent person such as an engineer, architect, or consultant)
or third parties making Repairs, Replacements or Tenant Improvements pursuant to
Section 7.2 of this Agreement to enter onto the Property during normal business
hours (subject to the rights of tenants under their Leases) to inspect the
condition of the Property, to inspect the progress of any Repair, Replacement or
Tenant Improvement and all materials being used in connection with such Repair,
Replacement or Tenant Improvement, to examine all plans and shop drawings
relating to such Repair, Replacement or Tenant Improvement which are or may be
kept at the Property and to inspect all books and records of Borrower with
respect to the Property. Borrower agrees to cause all contractors and
subcontractors to cooperate with Lender, Lender's representatives, and such
other persons described above in connection with inspections and Repairs,
Replacements or Tenant Improvements made pursuant to this Section 4.6 and
Section 7.2.

            (b) Lender may inspect the Property in connection with any Repair,
Replacement or Tenant Improvement prior to disbursing funds from any of the
Reserve Escrow Accounts for such Repair, Replacement or Tenant Improvement. In
addition to Lender's costs and expenses, Borrower shall pay Lender a reasonable
inspection fee not exceeding $500 for each such inspection by Lender. Prior to
disbursing any amounts from any of the Reserve Escrow Accounts for a Repair,
Replacement or Tenant Improvement, Lender may require an inspection and/or
certificate of completion by an appropriate independent qualified professional
(such as an architect, engineer, or consultant, depending on the nature of the
Repair, Replacement or Tenant Improvement) selected by Lender. Borrower shall
pay all reasonable

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fees and expenses charged by such engineer, architect, consultant or other
person inspecting the Property, and all other reasonable fees, costs and
expenses relating to such inspections.

            SECTION 4.7 PARTIAL COMPLETION. If (a) the time required to complete
a Repair, Replacement or Tenant Improvement, as applicable, exceeds one month,
(b) the contractor performing a Repair, Replacement or Tenant Improvement, as
applicable, requires periodic payments pursuant to terms of a written contract,
and (c) Lender has approved in writing in advance such periodic payments, a
request for disbursement from the Completion/Repair Escrow Account, the
Replacement Reserve Escrow Account or the Tenant Improvements and Leasing
Commissions Reserve Escrow Account, as applicable, may be made after completion
of a portion of the work under such contract, provided (i) the contract requires
payment upon completion of such portion of the work, (ii) all other conditions
for disbursement under this Agreement have been met, (iii) the materials for
which the request for disbursement has been made are on site at the Property and
are properly secured or have been installed in the Property, (iv) the funds
remaining in the Completion/Repair Escrow Account, the Replacement Reserve
Escrow Account or the Tenant Improvements and Leasing Commissions Reserve Escrow
Account, as applicable, designated for such Repair, Replacement or Tenant
Improvement, as the case may be, are in Lender's judgment sufficient to complete
that Repair, Replacement or Tenant Improvement, (v) the cost of the portion of
the work completed under such contract exceeds $10,000.00, and (vi) each
contractor or subcontractor receiving payments under such contract provides a
waiver of liens with respect to amounts which have been previously paid to that
contractor or subcontractor. Upon satisfaction of the foregoing, Lender may, at
its option, issue joint checks payable to Borrower and the supplier,
materialman, mechanic, subcontractor or other party to whom payment is due.

            SECTION 4.8 FEES AND EXPENSES. In addition to any other fees payable
by Borrower to Lender in connection with the Loan and this Agreement (including,
but not limited to, the inspection fee set forth in Section 4.6(b)), Borrower
shall reimburse Lender within ten (10) days after demand all reasonable fees,
charges, costs and expenses incurred by Lender in connection with disbursing
funds from the Reserve Escrow Accounts pursuant to this Agreement.

            SECTION 4.9 NO WARRANTY BY LENDER. Lender's disbursement of funds
contained in the Reserves or other acknowledgment of completion of any Repair,
Replacement or Tenant Improvement in a manner satisfactory to Lender shall not
be deemed a certification or warranty by Lender to any person that the Repair,
Replacement or Tenant Improvement, as the case may be, has been completed in
accordance with applicable building, zoning or other codes, ordinances,
statutes, laws, regulations or requirements of any governmental agency.

                               V. TERM OF RESERVES

            SECTION 5.1 TERMINATION OF THE RESERVES. Upon the earlier of (a)
Borrower's completion of all Repairs to the satisfaction of Lender (provided
Borrower has supplied Lender with evidence satisfactory to Lender of payment of
all Repairs and, if required under this Agreement, waivers of liens and/or a
title search of the Property) or (b) payment in full of all sums evidenced by
the Note, Lender shall disburse to Borrower all remaining funds in the
Completion/Repair Reserve. Upon payment in full of all sums evidenced by the
Note,

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Lender shall disburse to Borrower all remaining funds in the Replacement Reserve
and the Tenant Improvements and Leasing Commissions Reserve.

                                  VI. DEFAULTS

            SECTION 6.1 EVENT OF DEFAULT. Each of the following events shall
constitute an "Event of Default" hereunder:

            (a) with respect to any term, covenant or provision set forth herein
which specifically contains a notice requirement or grace period, if Borrower
shall be in default under such term, covenant or condition after the giving of
such notice or the expiration of such grace period;

            (b) if Borrower shall continue to be in default under any of the
other terms, covenants or conditions of this Agreement not specified in
subsection (a) above, for ten (10) days after notice to Borrower from Lender, in
the case of any default which can be cured by the payment of a sum of money, or
for thirty (30) days after notice from Lender in the case of any other default;
provided, however, that if such non-monetary default is susceptible of cure but
cannot reasonably be cured within such 30-day period and provided further that
Borrower shall have commenced to cure such default within such 30-day period and
thereafter diligently and expeditiously proceed to cure the same, such 30-day
period shall be extended for such time as is reasonably necessary for Borrower
in the exercise of due diligence to cure such default, such additional period
not to exceed sixty (60) days; or

            (c) if there shall be a default under the Note, the Security
Instrument or any of the Other Security Documents beyond any applicable cure
periods contained in such documents, whether as to Borrower or the Property, or
if any other such event shall occur or condition shall exist, if the effect of
such event or condition is to accelerate the maturity of any portion of the Debt
or to permit Lender to accelerate the maturity of all or any portion of the
Debt.

            SECTION 6.2 LOSS OF RIGHTS TO DISBURSEMENTS. If an Event of Default
exists, then Borrower shall immediately lose all of its rights to receive
disbursements from each of the Reserves unless and until the Debt has been paid
in full and the lien of the Security Instrument has been released or assigned by
Lender.

                                  VII. REMEDIES

            SECTION 7.1 APPLICATION OF RESERVE FUNDS.

            (a) Upon the occurrence of any Event of Default, Lender, in its sole
discretion, may use the funds remaining in each of the Reserves (or any portion
thereof) for any purpose, including but not limited to (i) repayment of any
portion of the Debt; provided, however, that such application of funds shall not
cure or be deemed to cure any Event of Default; (ii) reimbursement of Lender for
any losses or expenses (including, without limitation, legal fees) suffered or
incurred by Lender as a result of such Event of Default; (iii) making or
completing the Repairs, Replacements or Tenant Improvements as provided in
Section 7.2; or (iv) applying the funds in connection with exercising any and
all rights and remedies available to

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Lender at law or in equity or under this Agreement or pursuant to the Note, the
Security Instrument or any of the Other Security Documents.

            (b) Nothing in this Agreement or the Security Instrument shall
obligate Lender to apply all or any portion of the Reserves on account of any
Event of Default by Borrower or to repayment of the indebtedness evidenced by
the Note or in any specific order of priority.

            SECTION 7.2 LENDER'S RIGHT TO COMPLETE. In the event Lender
determines in its sole discretion that (a) a Repair is not completed by the
Completion Date, (b) a Repair, Replacement or Tenant Improvement is not being
performed in a workmanlike or timely manner or has not been completed in a
workmanlike or timely manner, or (c) Borrower has failed to commence any
Additional Repairs or Additional Replacements within thirty (30) days after
written request by Lender, Lender shall have the option to withhold
disbursements for such unsatisfactory Repair, Replacement or Tenant Improvement,
as the case may, proceed under existing contracts or contract with third parties
to complete such Repair, Replacement or Tenant Improvement, as the case may be,
and apply the funds remaining in the Completion/Repair Escrow Account, the
Replacement Reserve Escrow Account or the Tenant Improvements and Leasing
Commissions Reserve Escrow Account, as applicable, toward the labor and
materials necessary to make or complete such Repair, Replacement or Tenant
Improvement, as the case may be, in each case without providing any prior notice
to Borrower, and to exercise any and all other remedies available to Lender upon
an Event of Default pursuant to this Article 7.

            SECTION 7.3 ENTRY ONTO PROPERTY. In order to facilitate Lender's
completion or making of the Repairs, Replacements or Tenant Improvements
pursuant to Section 7.2 above, Lender shall have the right, but not the
obligation, to enter onto the Property and perform any and all work and labor
necessary to complete or make the Repairs, Replacements or Tenant Improvements
and/or employ watchmen to protect the Property from damage. All sums so expended
by Lender shall be deemed to have been advanced under the Loan to Borrower and
shall be secured by the Security Instrument. Borrower hereby constitutes and
appoints Lender its true and lawful attorney-in-fact with full power of
substitution to complete or undertake the Repairs, Replacements and Tenant
Improvements in the name of Borrower. It is further understood and agreed that
this power of attorney, which shall be deemed to be a power coupled with an
interest, cannot be revoked. Borrower specifically agrees that all power granted
to Lender under this Agreement may be assigned by Lender to Lender's successors
or assigns as holder of the Note.

            SECTION 7.4 REMEDIES CUMULATIVE; No WAIVER.

            (a) Upon the occurrence of an Event of Default, all or any one or
more of the rights, powers, privileges and other remedies available to Lender
against Borrower under the Note, the Security Instrument, this Agreement or any
of the Other Security Documents executed and delivered by, or applicable to,
Borrower may be exercised by Lender at any time and from time to time, whether
or not all or any of the Debt shall be declared due and payable, and whether or
not Lender shall have commenced any foreclosure proceeding or other action for
the enforcement of its rights and remedies under the Note, the Security
Instrument, this Agreement or any of the Other Security Documents with respect
to the Property. Any such actions taken by

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Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its sole discretion, to the fullest extent permitted by
law, without impairing or otherwise affecting the other rights and remedies of
Lender permitted by law, equity or contract or as set forth herein or in the
Note, Security Instrument or any of the Other Security Documents. Without
limiting the generality of the foregoing, Borrower agrees that if an Event of
Default is continuing (i) Lender is not subject to any "one action" or "election
of remedies" law or rule, and (ii) all liens and other rights, remedies or
privileges provided to Lender shall remain in full force and effect until Lender
has exhausted all of its remedies against the Property and the Security
Instrument has been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Debt or the Debt has been paid in full.

            (b) Neither any failure nor any delay on the part of Lender in
insisting upon strict performance of any term, condition, covenant or agreement,
or exercising any right, power, remedy or privilege hereunder, or under the
Note, the Security Instrument or under any of the Other Security Documents, or
any other instrument given as security therefor, shall operate as or constitute
a waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege.

                               VIII. MISCELLANEOUS

            SECTION 8.1 GOVERNING LAW. This Agreement shall be governed,
construed, applied and enforced in accordance with the laws of the state in
which the Property is located,

            SECTION 8.2 NOTICES. All notices, consents, approvals and requests
required or permitted hereunder shall be given in writing and shall be effective
for all purposes if delivered or sent in accordance with the requirements set
forth in the Security Instrument.

            SECTION 8.3 SUCCESSORS AND ASSIGNS. All covenants, promises and
agreements in this Agreement, by or on behalf of Borrower and Lender, shall
inure to the benefit of the legal representatives, successors and assigns of
Borrower and Lender.

            SECTION 8.4 LENDER'S DISCRETION. Whenever pursuant to this
Agreement, Lender exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Lender, the decision of Lender
to approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of Lender and shall be final and
conclusive.

            SECTION 8.5 MODIFICATION, WAIVER IN WRITING. All notices, demands,
waivers, consents or other communications required or permitted hereunder shall
be in writing. No modification, amendment, extension, discharge, termination or
waiver of any provision of this Agreement, or of the Note, the Security
Instrument or of any of the Other Security Documents, nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in a writing signed by the party against whom enforcement is sought,
and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to, or

                                       12
<PAGE>

demand on, Borrower shall entitle Borrower to any other or future notice or
demand in the same, similar or other circumstances.

            SECTION 8.6 CONFLICT. In the event of any conflict between the
provisions of this Agreement and any of the Note, the Security Instrument or the
Other Security Documents, the provisions of this Agreement shall control.

            SECTION 8.7 INCORPORATION BY REFERENCE. All the covenants, terms,
conditions, agreements and remedies contained in the Note, the Security
Instrument and any of the Other Security Documents now or hereafter executed by
Borrower and/or others and by or in favor of Lender, which wholly or partially
secure or guaranty payment of the Note, are hereby made a part of this Agreement
to the same extent and with the same force as if fully set forth herein.

            SECTION 8.8 PRINCIPLES OF CONSTRUCTION. All references to sections
and schedules are to sections and schedules in or to this Agreement unless
otherwise specified. Unless otherwise specified, the words "hereof," "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all meanings attributed to defined terms
herein shall be equally applicable to both the singular and plural forms of the
terms so defined. If Borrower consists of more than one person or party, the
obligations and liabilities of each person or party shall be joint and several.

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            IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly
executed by its duly authorized representative, all as of the day and year first
above written.

                                     BORROWER:

                                     PYRAMID GILMAN STREET PROPERTY, LLC,
                                     a Delaware limited liability company

                                     By: Pyramid Breweries, Inc.,
                                         a Washington corporation
                                         Its Sole Member

                                     By : /s/ James K. Hilger
                                          -------------------------------------
                                     Name : James K. Hilger
                                     Title: CFO VP Finance

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                                    EXHIBIT A

                                     REPAIRS

                                      None

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