EXHIBIT 10.14
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                                 LOAN AGREEMENT

                          Dated as of October 21, 1998

                                     Between

                           TWO CENTURY CENTRE, L.L.C.,

                                   as Borrower

                                       AND

                       THE CAPITAL COMPANY OF AMERICA LLC,

                                    as Lender





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<PAGE>
                                TABLE OF CONTENTS
                                -----------------

                                                            Page
                                                            ----
    Section 10.24...........................           Interpretation        73
                                                       --------------

                                    SCHEDULES
                                    ---------

Schedule 1    -    Matters Regarding Representations
Schedule 2    -    Rent Roll
Schedule 3    -    Required Repairs

                                    EXHIBITS
                                    --------

Exhibit A     -    Form of Note
Exhibit B     -    Form of Management Agreement



























































                                      -2-
<PAGE>
                                 LOAN AGREEMENT

     LOAN AGREEMENT dated as of October 21, 1998 (the "Agreement")  between TWO
CENTURY CENTRE,  L.L.C., a limited  liability company duly organized and validly
existing  under the laws of the State of Delaware  ("Borrower")  and THE CAPITAL
COMPANY OF AMERICA LLC, a limited  liability company organized under the laws of
the State of Delaware  (together  with its  permitted  successors  and  assigns,
"Lender").

     All  capitalized  terms used herein shall have the respective  meanings set
forth in Section 1 hereof.

                              W I T N E S S E T H :
                              ---------------------

     WHEREAS, Borrower desires to obtain the Loan from Lender;

     WHEREAS, Lender is willing to make the Loan to Borrower,  subject to and in
accordance with the terms of this Agreement and the other Loan Documents;

     NOW,  THEREFORE,  in  consideration of the making of the Loan by Lender and
the  covenants,  agreements,  representations  and  warranties set forth in this
Agreement,  the parties hereto hereby covenant,  agree, represent and warrant as
follows:

I.   DEFINITIONS; PRINCIPLES OF CONSTRUCTION
     ---------------------------------------

     Section 1.1  DEFINITIONS.  For all  purposes of this  Agreement,  except as
otherwise  expressly required or unless the context clearly indicates a contrary
intent:

     "ACCRUED INTEREST" shall have the meaning set forth in Section 2.2.2.

     "AFFILIATE" shall mean, as to any Person,  any other Person that,  directly
or  indirectly,  is in control of, is controlled  by or is under common  control
with such Person or is a director  or officer of such Person or of an  Affiliate
of such Person.

     "ALTA"  shall  mean  American  Land  Title  Association,  or any  successor
thereto.

     "ANNUAL BUDGET" shall have the meaning set forth in Section 5.1(r).

     "APPROVED  CAPITAL  EXPENSES"  shall  mean  Capital  Expenses  incurred  by
Borrower  with  respect to the  Property  which (i) are  included in the Capital
Budget for the  Current  Month for the  Property,  (ii) are not  included in the
Capital Budget for the Current  Month,  but do not cause either (A) the relevant
line item for the entire year covered by the Capital  Budget for the Property to
be  exceeded  by more than  five  percent  (5%) or (B) the total of the  Capital
Budget for the  Property for the Current  Month and all prior months  covered by
such  Capital  Budget  (i.e.,  year to date) to be  exceeded  or (iii) have been
approved by the Lender.

     "APPROVED  LEASING  EXPENSES" shall mean those expenses incurred in leasing
space at the Property  pursuant to Leases  entered into in  accordance  with the
provisions  of Section  5.1(u) and the  applicable  provisions  of the Mortgage,
including  brokerage  commissions,  tenant  improvements and other  inducements,
which  expenses  are (A) approved by Lender in  connection  with  approving  the
applicable Lease or (B) otherwise  approved by Lender,  which approval shall not
be unreasonably withheld or delayed.

     "APPROVED  OPERATING  EXPENSES" shall mean Operating  Expenses  incurred by
Borrower  with  respect to the  Property  which (i) are included in the approved
Operating  Budget for the Property for the Current Month,  (ii) are not included
in the approved  Operating Budget for the Property for the Current Month, but do
not cause (A) the relevant  line item for the Current Month or the total of such
approved Operating Budget for the Current Month to be exceeded by more than five
percent (5%) or (B) the total of the  Operating  Budget for the Property for the
Current Month and all prior months covered by such Operating Budget (i.e.,  year
to date) to be exceeded, (iii) are for electric, gas, oil, water, sewer or other
utility  service to the Property or (iv) have been approved by the Lender or are
in the nature of an emergency repair.

     "ASSIGNMENT OF AGREEMENTS"  shall mean, with respect to the Property,  that
certain first priority Assignment of Agreements, Licenses, Permits and Contracts
dated as of the date hereof, from Borrower, as assignor, to Lender, as assignee,

                                      -3-
<PAGE>
assigning to Lender as security  for the Loan,  to the extent  assignable  under
law, all of Borrower's interest in and to the Management Agreement and all other
licenses,  permits and  contracts  necessary  for the use and  operation  of the
Property,  as the same  may be  amended,  restated,  replaced,  supplemented  or
otherwise modified from time to time.

     "ASSIGNMENT  OF LEASES"  shall mean,  with  respect to the  Property,  that
certain  first  priority  Assignment  of Leases  and Rents  dated as of the date
hereof, from Borrower, as assignor, to Lender, as assignee,  assigning to Lender
as security for the Loan, to the extent  assignable under law, all of Borrower's
interest  in and to the Rents and  Leases for the  Property,  as the same may be
amended,  restated,  replaced,  supplemented or otherwise  modified from time to
time.

     "AWARD" shall have the meaning set forth in Section 7.1.3.

     "BORROWER"  shall  mean  Two  Century  Centre,  L.L.C.,  together  with its
permitted successors and assigns.

     "BUSINESS  DAY"  shall mean any day other  than a  Saturday,  Sunday or any
other  day on which  national  banks in New  York or  Illinois  are not open for
business.

     "CAPITAL BUDGET" shall have the meaning set forth in Section 5.1(r).

     "CAPITAL  EXPENSES"  shall  mean  capital  expenditures  as  determined  in
accordance with GAAP.

     "CAPITAL RESERVE FUND" shall have the meaning set forth in Section 7.4.1.

     "CASH  COLLATERAL   ACCOUNT"  shall  mean  that  account   established  and
maintained pursuant to the Cash Collateral Account Agreement.

     "CASH COLLATERAL ACCOUNT AGREEMENT" shall mean that certain Cash Collateral
Account  Agreement dated as of the date hereof among Borrower,  Lender,  Manager
and  Cash  Collateral  Account  Bank,  as the  same  may be  amended,  restated,
replaced, supplemented or otherwise modified from time to time.

     "CASH  COLLATERAL  ACCOUNT BANK" shall mean LaSalle  National  Bank, or any
successor chosen by Lender.

     "CASH TRAP EVENT" shall have the meaning set forth in Section 2.6(a).

     "CASUALTY/CONDEMNATION  PREPAYMENTS"  shall have the  meaning  set forth in
Section 2.3.2.

     "CCA" shall mean The  Capital  Company of America  LLC, a Delaware  limited
liability company.

     "COLLECTION  ACCOUNT"  shall mean the account  established  and  maintained
pursuant to the Collection Account Agreement.

     "COLLECTION  ACCOUNT  AGREEMENT" shall mean that certain Collection Account
Agreement  dated as of the date hereof  among  Borrower,  Lender and  Collection
Account Bank into which Rents from the Property are  deposited,  as the same may
be amended, restated, replaced, supplemented, or otherwise modified from time to
time.

     "COLLECTION  ACCOUNT  BANK"  shall  have the  meaning  set forth in Section
2.6(a).

     "CLOSING DATE" shall mean the date of the funding of the Loan.

     "CODE" shall mean the Internal Revenue Code of 1986, as amended,  and as it
may be further amended from time to time, any successor  statutes  thereto,  and
applicable U.S.  Department of Treasury  regulations  issued pursuant thereto in
temporary or final form.

     "CONDEMNATION" shall have the meaning set forth in Section 7.1.3.

     "CONDEMNATION  RESTORATION"  shall  have the  meaning  set forth in Section
7.1.3.

     "CONSENT AND  SUBORDINATION OF MANAGER" shall mean that certain Consent and
Subordination  of Manager dated the date hereof between  Manager and Lender,  as
the same may be amended, restated, replaced,  supplemented or otherwise modified
from time to time.

                                      -4-
<PAGE>
     "CONTROL"  shall  mean with  respect to any  Person  either  (i)  ownership
directly or through other  entities,  of more than 50% of all beneficial  equity
interest  in such Person or (ii) the power to direct the  management,  operation
and business of such Person.

     "CURRENT  MONTH"  shall  mean,  as of the date of  determination,  the then
current calendar month.

     "DEBT"  shall  mean the  outstanding  principal  amount  set forth in,  and
evidenced by, the Note,  together with all interest  accrued and unpaid  thereon
and all other  sums due to Lender in respect  of the Loan,  including  the Yield
Maintenance  Premium  and any sums due  under  the  Note,  this  Agreement,  the
Mortgage or in any other Loan Document.

     "DEBT SERVICE" shall mean,  with respect to any particular  period of time,
scheduled principal and interest payments under the Note.

     "DEBT SERVICE  COVERAGE RATIO" shall mean, as of any date, a ratio in which
(a)  the  numerator  is  the  Net  Operating  Income  for  the  12-month  period
immediately  preceding such date and (b) the denominator is the aggregate amount
of  principal  and  interest  actually  due and  payable on the Note (other than
principal  and interest  under any Defeased  Notes and  principal  payable under
Section 2.2.3(e)) for such period.

     "DEEMED APPROVED LEASE" shall have the meaning set forth in Section 5.1(u).

     "DEFAULT"  shall mean the  occurrence  of any event  hereunder or under any
other Loan Document  which,  but for the giving of notice or passage of time, or
both, would be an Event of Default.

     "DEFAULT RATE" shall mean, with respect to the Loan, a rate per annum equal
to the lesser of (a) the maximum rate  permitted by  applicable  law or (b) five
percent (5%) above the Interest Rate.

     "DEFEASANCE" shall have the meaning set forth in Section 2.3.3.

     "DEFEASANCE DATE" shall have the meaning set forth in Section 2.3.3.

     "DEFEASANCE DEPOSIT" shall mean an amount equal to the sum of (i) an amount
that will be sufficient to purchase U.S. Obligations  providing payments to meet
the Scheduled Defeasance Payments, (ii) any costs and expenses incurred or to be
incurred in the purchase of U.S.  Obligations  necessary  to meet the  Scheduled
Defeasance Payments and (iii) any revenue, documentary stamp or intangible taxes
or any other tax or charge due in connection  with the transfer of the Note, the
creation of the  Defeased  Note and the  Undefeased  Note,  if  applicable,  any
transfer of the Defeased Note or otherwise required to accomplish the agreements
of Sections 2.3 and 2.4.

     "DEFEASED NOTE" shall have the meaning set forth in Section 2.3.3.

     "DISCLOSURE DOCUMENT" shall have the meaning set forth in Section 9.2(a).

     "ENVIRONMENTAL   INDEMNITY"  shall  mean  that  certain  Environmental  and
Hazardous Substance Indemnification Agreement executed by Borrower in connection
with the Loan for the benefit of Lender,  as the same may be amended,  restated,
replaced, supplemented, or otherwise modified from time to time.

     "EQUIPMENT" shall have the meaning set forth in the Mortgage.

     "EVENT OF DEFAULT" shall have the meaning set forth in Section 8.1.

     "EXCHANGE ACT" shall have the meaning set forth in Section 9.2(a).

     "FISCAL  YEAR" shall mean each twelve month period  commencing on January 1
and ending on December 31 during each year of the term of the Loan.

     "GAAP" shall mean generally  accepted  accounting  principles in the United
States of America as of the date of the applicable financial report.

     "GOVERNMENTAL  AUTHORITY" shall mean any court, board, agency,  commission,
office or authority of any nature whatsoever for any governmental unit (federal,
state, county, district,  municipal, city or otherwise) whether now or hereafter
in existence having jurisdiction over Borrower or the Property.

     "GUARANTOR" shall have the meaning set forth in Section 4.1(dd)(iii).

     "IMPROVEMENTS" shall have the meaning set forth in the Mortgage.

                                      -5-
<PAGE>
     "including" shall mean "including, without limitation".

     "INDEMNIFIED  LIABILITIES"  shall  have the  meaning  set forth in  Section
10.13(b).

     "INDEPENDENT DIRECTOR" shall have the meaning set forth in Section 4.1(dd).

     "INSURANCE PREMIUMS" shall have the meaning set forth in Section 7.1.1.

     "INSURANCE  PROCEEDS" means the proceeds of any insurance  policies carried
pursuant to the Loan Documents or otherwise with respect to the Property.

     "INSURED CASUALTY" shall have the meaning specified in Section 7.1.1(d).

     "INTEREST RATE" shall mean a rate of interest equal to 7.375% per annum.

     "LEASE" shall mean any lease,  or, to the extent of the interest therein of
Borrower, any sublease or sub-sublease,  letting,  license,  concession or other
agreement  (whether  written or oral and  whether  now or  hereafter  in effect)
pursuant to which any Person is granted a  possessory  interest  in, or right to
use or  occupy  all or any  portion  of any  space in the  Property,  and  every
modification,  amendment or other  agreement  relating to such lease,  sublease,
sub-sublease,  or other  agreement  entered into in connection  with such lease,
sublease,   sub-sublease,   or  other  agreement  and  every  guarantee  of  the
performance  and  observance of the  covenants,  conditions and agreements to be
performed and observed by the other party thereto.

     "LEGAL REQUIREMENTS" shall mean, with respect to the Property, all federal,
state, county,  municipal and other governmental statutes,  laws, rules, orders,
regulations,  ordinances,  judgments,  decrees and  injunctions of  Governmental
Authorities affecting the Property or any part thereof or the construction, use,
alteration or operation thereof,  or any part thereof,  whether now or hereafter
enacted  and  in  force,  and  all  permits,  licenses  and  authorizations  and
regulations  relating thereto, and all covenants,  agreements,  restrictions and
encumbrances  contained  in any  instruments,  either  of  record  or  known  to
Borrower,  at any time in force  affecting  the  Property  or any part  thereof,
including any which may (i) require repairs,  modifications or alterations in or
to the  Property  or any  part  thereof  or (ii) in any  way  limit  the use and
enjoyment thereof.

     "LENDER" shall mean The Capital  Company of America LLC,  together with its
successors and assigns.

     "LIABILITIES" shall have the meaning set forth in Section 9.2(b).

     "LICENSES" shall have the meaning set forth in Section 4.1(w).

     "LIEN" shall mean,  with respect to the  Property,  any  mortgage,  deed of
trust, lien, pledge, hypothecation,  assignment, security interest, or any other
encumbrance,  charge or transfer of, on or affecting the Property or any portion
thereof or Borrower,  including any  conditional  sale or other title  retention
agreement,  any financing lease having substantially the same economic effect as
any of the foregoing,  the filing of any financing  statement,  and  mechanic's,
materialmen's and other similar liens and encumbrances.

     "LOAN"  shall mean the loan made to Borrower by Lender  pursuant  hereto in
the original  principal amount of  $20,500,000.00  and evidenced by the Note and
secured by the Mortgage and the other Loan Documents.

     "LOAN DOCUMENTS" shall mean,  collectively,  this Agreement,  the Note, the
Mortgage,   the  Assignment  of  Leases,  the  Assignment  of  Agreements,   the
Environmental   Indemnity,   the  Consent  and  Subordination  of  Manager,  the
Collection  Account  Agreement,  the Cash Collateral  Account  Agreement and all
other documents, agreements and instruments evidencing, securing or delivered to
Lender in connection with the Loan.

     "MANAGEMENT  AGREEMENT"  shall  mean,  with  respect  to  the  Property,  a
management  agreement in the form  attached  hereto as Exhibit B entered into by
and  between  Borrower  and the  Manager,  pursuant  to which the  Manager is to
provide management and other services with respect to the Property,  as the same
may be amended,  restated,  replaced,  supplemented,  or otherwise modified from
time to time.

     "MANAGEMENT  FEE" shall mean the fee  payable  to Manager  pursuant  to the
Management Agreement.

     "MANAGER"  shall  mean  Prime  Group  Realty,   L.P.,  a  Delaware  limited
partnership.
                                      -6-
<PAGE>
     "MATURITY DATE" shall mean the date on which the final payment of principal
of the Note (or the Defeased  Note,  if  applicable)  becomes due and payable as
therein  provided,  whether at the Stated  Maturity Date (November 11, 2024), by
declaration of acceleration, or otherwise.

     "MONTHLY DEBT SERVICE  PAYMENT  AMOUNT" shall have the meaning set forth in
Section 2.2.1.

     "MORTGAGE" shall mean that certain first priority  Mortgage,  Assignment of
Leases and Rents,  Security  Agreement  and  Financing  Statement  executed  and
delivered by Borrower as security for the Loan and encumbering the Property,  as
the same may be  amended,  restated,  replaced,  supplemented,  consolidated  or
otherwise modified from time to time.

     "NET OPERATING INCOME" shall mean, for any period,  the difference  between
all Operating  Income during such period,  minus all Operating  Expenses  during
such period.  In  determining  Net  Operating  Income for purposes  hereof,  all
adjustments  to Operating  Income and Operating  Expenses shall be determined by
Lender in its sole  discretion  consistent  with its due diligence  findings and
prevailing market conditions. Net Operating Income shall be audited, or shall be
determined in accordance with agreed-upon procedures determined by Lender.

     "NOTE" shall mean that certain Note of even date herewith, made by Borrower
in favor of Lender,  substantially  in the form of Exhibit A annexed hereto,  as
the same may be  amended,  restated,  replaced,  supplemented,  consolidated  or
otherwise  modified from time to time,  including any  Undefeased  Note that may
exist from time to time.

     "OFFICERS'  CERTIFICATE"  shall mean a  certificate  delivered to Lender by
Borrower which is signed by a senior executive officer of Borrower.

     "OPERATING BUDGET" shall have the meaning set forth in Section 5.1(r).

     "OPERATING  EXPENSES" shall mean, as to any period,  all operating expenses
relating to the Property during such period, including the following items:

     (i) all expenses for the  operation  of the Property  including  management
fees in  respect  thereof  (in no event  less  than four  percent  (4%) of gross
revenues), all insurance premiums and expenses, accounting expenses, advertising
expenses,  expenses for architectural services,  bank charges,  utility charges,
expenses  for  extermination,  cleaning  and trash  removal  services,  expenses
relating to window washing,  landscaping and security  services,  reasonable and
necessary  legal  expenses  incurred in  connection  with the  operation  of the
Property, tenant improvements and marketing costs;

     (ii)  impositions,  water  charges,  property and real estate taxes,  sewer
rents,  other than fines,  penalties,  interest on such impositions (or portions
thereof) that are payable by reason of  Borrower's  failure to pay an imposition
timely; and

     (iii) the cost of routine  interior and exterior  maintenance,  repairs and
minor alterations, the cost of which can be expensed under GAAP.

Operating  Expenses  shall  be  subject  to  adjustment  to  provide  for  (a) a
normalized  allowance for lease rollovers  including costs for downtime,  tenant
improvements and leasing commissions, (b) a reserve for capital expenditures and
capital  replacements  equal to at least $0.27 per square foot per annum for all
rentable space (or such greater amount as shall be indicated in the  independent
engineering  reports)  and (c) any  other  matters  that may have an  impact  on
Operating  Expenses.  Operating Expenses will not include debt service,  capital
expenses,   non-cash  items  such  as  depreciation  and  amortization  and  any
extraordinary  one-time  expenditures  not considered  operating  expenses under
GAAP.

     "OPERATING  INCOME"  shall  mean,  as to any  period,  all income  actually
received by Borrower  from the  Property  during such period,  including  actual
rental  income and other  income,  base  rents,  percentage  rents,  common area
maintenance  charges,  property tax recoveries,  operating  expense  recoveries,
insurance   recoveries,   Consumer  Price  Index  rent   adjustments  and  other
miscellaneous  income items.  Operating Income shall be based on Leases in place
with tenants  occupying their space (either directly or through  subtenants) and
actually  paying  rent;  provided,  that rental  income from signed  Leases with
tenants  rated  "BBB" or better  will be  counted  whether  or not the tenant is
occupying the space. For purposes of calculating Operating Income, reimbursement
and other income will be included in Operating Income to the extent that Lender,
in its reasonable  discretion,  determines  that it is stabilized and recurring,


                                      -7-
<PAGE>
and any income from temporary or month-to-month  tenants will not be included in
Operating  Income.  Operating  Income shall be subject to  adjustment  (i) for a
vacancy  allowance  at the market  vacancy  rate (but not less than ten  percent
[10%]) if actual vacancy is less than market or ten percent (10%),  (ii) for any
tenants operating under bankruptcy protection,  (iii) if necessary,  to mark any
Leases to market  rent,  (iv) to address any rent  adjustments  or  cancellation
options  contained  in the Leases,  and (v) any other  matters  that may have an
impact on  Operating  Income.  Operating  Income  will not  include  income from
non-recurring  income sources,  advance payments,  deposits,  escrows, a sale or
other  capital  item  transaction  or  payments  received  in  respect  of  U.S.
Obligations purchased in connection with a Defeasance.

     "OPTIONAL PREPAYMENT DATE" shall mean November 11, 2008.

     "OTHER  CHARGES"  shall  mean  all  ground  rents,   maintenance   charges,
impositions other than Taxes, and any other charges, including vault charges and
license  fees for the use of vaults,  chutes and  similar  areas  adjoining  the
Property, now or hereafter levied or assessed or imposed against the Property or
any part thereof.

     "PAYMENT  DATE" shall mean the eleventh  (11th) day of each calendar  month
or, if in any month the  eleventh  (11th)  day is not a Business  Day,  than the
Payment Date for such month shall be the first Business Day thereafter.

     "PERMITTED   ENCUMBRANCES"  shall  mean,  with  respect  to  the  Property,
collectively,  (i)  the  Liens  and  security  interests  created  by  the  Loan
Documents, (ii) all Liens, encumbrances and other matters disclosed in the Title
Insurance  Policy relating to the Property or any part thereof,  (iii) Liens, if
any, for Taxes or Other Charges not yet payable or delinquent or which are being
protested in accordance with the provisions of Section  5.1(b),  (iv) such other
title and survey  exceptions as Lender has approved or may approve in writing in
Lender's  sole  discretion,  or are hereafter  created in  accordance  with this
Agreement  or the Mortgage  and (v) Liens which  attach in  accordance  with the
provisions of Section 6.1(b).

     "PERMITTED  INDEBTEDNESS" shall mean (i) the Debt, and (ii) unsecured trade
debt customarily payable within thirty (30) days.

     "PERMITTED  INVESTMENTS"  shall  have  the  meaning  set  forth in the Cash
Collateral Account Agreement.

     "PERSON"  shall  mean  any  individual,  corporation,   partnership,  joint
venture, estate, trust, unincorporated  association,  any federal, state, county
or municipal  government  or any bureau,  department  or agency  thereof and any
fiduciary acting in such capacity on behalf of any of the foregoing.

     "POLICIES" shall have the meaning specified in Section 7.1.1(c).

     "POOLING  AND  SERVICING  AGREEMENT"  shall  mean the  Servicing  Agreement
entered  into with the Servicer in  connection  with any  Securitization  of the
Loan.

     "PREMISES" shall have the meaning set forth in the Granting
Clause of the Mortgage encumbering the Property.

     "PROPERTY" shall mean that certain parcel of real property and improvements
thereon  owned by Borrower and  encumbered  by the  Mortgage,  together with all
rights  pertaining  to such  property  and  improvements,  as more  particularly
described in the Granting Clauses of the Mortgage and referred to therein as the
"Property"  or the  "Mortgaged  Property",  as the case may be, and known as Two
Century Centre, 1700 East Golf Road, Schaumburg, Illinois.

     "PROVIDED INFORMATION" shall have the meaning set forth in Section 9.1.

     "QUALIFIED  SURVEY"  shall mean a current  title  survey,  certified to the
title company and Lender and their  successors and assigns,  that (A) is in form
and content reasonably satisfactory to Lender, (B) is prepared by a professional
and properly  licensed land surveyor  satisfactory  to Lender in accordance with
the 1997 Minimum Standard Detail  Requirements for ALTA/ACSM Land Title Surveys,
(C) meets the  classification  of an "Urban  Survey" and includes the  following
additional  items  from  the  list  of  "Optional  Survey  Responsibilities  and
Specifications"  (Table  A): 1, 2, 3, 4, 5, 6,  7a-b,  8, 9, 10, 11 and 13,  (D)
reflects  the same legal  description  contained in the Title  Insurance  Policy
relating to the Property, and (E) contains a certification in form and substance
reasonably acceptable to Lender.



                                      -8-
<PAGE>

     "QUALIFIED  TITLE  INSURANCE  POLICY" shall mean a Title  Insurance  Policy
issued  by  Commonwealth  Title  Insurance  Company  or  another  title  company
acceptable to Lender,  with reinsurance and direct access agreements  acceptable
to Lender, which Title Insurance Policy shall (A) provide coverage in the amount
of the Loan,  (B) insure  Lender that the  Mortgage  creates a valid lien on the
Property  encumbered  thereby of the requisite  priority,  free and clear of all
exceptions  from  coverage  other  than  Permitted   Encumbrances  and  standard
exceptions  and  exclusions  from  coverage  (as  modified  by the  terms of any
endorsements), (C) contain such endorsements and affirmative coverages as Lender
may reasonably request, (D) name Lender as the insured and (E) be assignable.

     "RATING  AGENCY"  shall mean each of  Standard & Poor's  Ratings  Group,  a
division of McGraw-Hill,  Inc., Moody's Investors  Service,  Inc., Duff & Phelps
Credit   Rating   Co.  and  Fitch   Investors   Service,   Inc.   or  any  other
nationally-recognized  statistical  rating  agency  which has been  approved  by
Lender.

     "REGISTRATION  STATEMENT"  shall  have the  meaning  set  forth in  Section
9.2(b).

     "RELEASE  DATE"  shall mean the  earlier  of (a) three (3) years  after the
Closing Date and (b) two (2) years from the  "start-up  day" (within the meaning
of Section 860G(a)(9) of the Code) of the REMIC Trust.

     "REMIC" shall mean a "real estate mortgage  investment  conduit" within the
meaning of Section 860D of the Code.

     "REMIC TRUST" shall mean a REMIC which holds the Note.

     "RENTS"  shall  mean,  with  respect  to  the  Property,  all  rents,  rent
equivalents,  moneys payable as damages or in lieu of rent or rent  equivalents,
royalties  (including  all oil and gas or other mineral  royalties and bonuses),
income, receivables,  receipts,  revenues, deposits (including security, utility
and other  deposits),  accounts,  cash,  issues,  profits,  charges for services
rendered, and other consideration of whatever form or nature received by or paid
to or for the account of or benefit of Borrower or its agents or employees  from
any and all sources arising from or attributable to the Property,  including all
receivables,  customer  obligations,  installment  payment obligations and other
obligations now existing or hereafter arising or created out of the sale, lease,
sublease,  license,  concession  or  other  grant  of the  right  of the use and
occupancy of the Property and proceeds,  if any, from business  interruption  or
other loss of income insurance.

     "RENT ROLL" shall have the meaning set forth in Section 4.1(aa).

     "REQUIRED RECORDS" shall have the meaning set forth in Section 5.1(k).

     "REQUIRED  REPAIR  ACCOUNT"  shall  have the  meaning  set forth in Section
7.2.1.

     "REQUIRED REPAIR FUND" shall have the meaning set forth in Section 7.2.1.

     "REQUIRED REPAIRS" shall have the meaning set forth in Section 7.2.1.

     "RESTORATION" shall have the meaning set forth in Section 7.1.2(b).

     "REVISED  INTEREST RATE" shall mean the per annum rate of interest which is
the greater of (i) the Interest  Rate plus 5% and (ii) the Treasury  Rate on the
Optional Prepayment Date plus 7.215%.

     "SPE MEMBER" shall have the meaning set forth in Section 4.1(dd).

     "SCHEDULED DEFEASANCE PAYMENTS" shall have the meaning set forth in Section
2.3.3.

     "SECONDARY MARKET  TRANSACTION"  shall mean any transaction in which Lender
(i)  sells  the  Loan,  the Note and the  other  Loan  Documents  to one or more
investors as a whole loan, (ii)  participates the Loan to one or more investors,
(iii) deposits the Loan, the Mortgage,  the Note and other Loan Documents with a
trust,  which trust may sell  certificates to investors  evidencing an ownership
interest  in the trust  assets or (iv)  otherwise  sells the Loan or an interest
therein to investors.

     "SECURITIES" shall have the meaning set forth in Section 9.1.

     "SECURITIES ACT" shall have the meaning set forth in Section 9.2(a).

                                      -9-
<PAGE>
     "SECURITIZATION" shall have the meaning set forth in Section 9.1.

     "SECURITY   AGREEMENT"   shall  have  the  meaning  set  forth  in  Section
2.3.3(vii).

     "SERVICER" shall mean the entity appointed by Lender to service the Loan or
its successor in interest, or if any successor servicer is appointed pursuant to
the Pooling and Servicing Agreement, such successor servicer.

     "SPECIAL  TRANSFER"  shall mean the sale by the  original  Borrower  of the
Property to a purchaser pursuant to which such purchaser shall assume in writing
all of the  obligations of Borrower  under the Loan,  provided that Lender shall
have received  evidence in writing from the  applicable  Rating  Agencies to the
effect that such a sale and  assumption of the Loan by such  purchaser  will not
result in a  qualification,  withdrawal or  downgrading of the ratings in effect
immediately  prior to such sale for the Securities issued in connection with the
Securitization which are then outstanding.

     "STATE" shall mean the State of Illinois.

     "STATED MATURITY DATE" shall mean November 11, 2024.

     "SUCCESSOR BORROWER" shall have the meaning set forth in Section 2.3.3(c).

     "SURVEY"  shall mean a survey of the  Property  in  question  prepared by a
surveyor  licensed  in the State and  satisfactory  to Lender and the company or
companies issuing the Title Insurance  Policies,  and containing a certification
of such surveyor satisfactory to Lender.

     "TAX AND INSURANCE ESCROW FUND" shall have the meaning set forth in Section
7.3.1.

     "TAXES"   shall  mean  all  real  estate  and  personal   property   taxes,
assessments,  water rates or sewer rents, now or hereafter levied or assessed or
imposed against the Property or part thereof.

     "TERM"  shall mean the entire term of this  Agreement,  which shall  expire
upon  repayment  in full of the  Debt  and full  performance  of each and  every
obligation to be performed by Borrower pursuant to the Loan Documents.

     "TITLE INSURANCE POLICY" shall mean, with respect to the Property, the ALTA
mortgagee title insurance  policy in the form (acceptable to Lender) issued with
respect to the Property and  insuring the lien of the Mortgage  encumbering  the
Property.

     "TRANSFER" shall have the meaning set forth in Section 6.1(j).

     "TREASURY RATE" shall mean, as of the Optional  Prepayment Date, the linear
interpolation  of the bond  equivalent  yields,  as reported in Federal  Reserve
Statistical  Release  H.15-Selected  Interest  Rates  under  the  heading  "U.S.
Government Securities/Treasury Constant Maturities" for the week ending prior to
the Optional Prepayment Date, of U.S. Treasury constant maturities with maturity
dates (one longer and one shorter) most nearly  approximating the remaining term
of the Note as of the Optional Prepayment Date.

     "UCC" or "UNIFORM  COMMERCIAL CODE" shall mean the Uniform  Commercial Code
as in effect in the State.

     "UNDEFEASED NOTE" shall have the meaning set forth in Section 2.3.3 hereof.

     "UNDERWRITER GROUP" shall have the meaning set forth in Section 9.2(b).

     "U.S. OBLIGATION" shall mean direct non-callable  obligations of the United
States of America.

     "YIELD  MAINTENANCE  PREMIUM"  shall mean the amount (if any)  which,  when
added to the remaining  principal  amount of the Note or the principal amount of
Defeased  Note, as applicable,  will be sufficient to purchase U.S.  Obligations
providing the required Scheduled Defeasance Payments.

     Section  1.2  PRINCIPLES  OF  CONSTRUCTION.  All  references  to  sections,
schedules  and exhibits are to  sections,  schedules  and exhibits 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


                                      -10-
<PAGE>
to defined  terms  herein shall be equally  applicable  to both the singular and
plural  forms of the terms so defined.  All  accounting  terms not  specifically
defined herein shall be construed in accordance with GAAP, as modified herein.

II.  GENERAL
     -------

     Section 2.1 THE LOAN.

     2.1.1  COMMITMENT.  Subject to and upon the terms and  conditions set forth
herein,  including the  conditions  precedent  set forth in Section 3.1,  Lender
hereby agrees to make the Loan to Borrower on the Closing Date, in the aggregate
original  principal  amount set forth in the Note and which Loan shall mature on
the  Stated  Maturity  Date.  Borrower  hereby  agrees to accept the Loan on the
Closing Date, subject to and upon the terms and conditions set forth herein.

     2.1.2  DISBURSEMENT TO BORROWER.  Borrower may request and receive only one
borrowing hereunder in respect of the Loan. Borrower shall receive the Loan upon
the Closing, subject to the direction given by Borrower as to the application of
Loan proceeds for the uses set forth in Section 2.1.4.  Any amount  borrowed and
repaid hereunder in respect of the Loan may not be reborrowed.

     2.1.3 THE NOTE.  The Loan shall be evidenced by the Note,  in the aggregate
original  principal amount of the Loan. The Note shall bear interest as provided
therein.  The Note shall be subject to  repayment  as provided  in Section  2.3,
shall be entitled to the benefits of this  Agreement and shall be secured by the
Mortgage and the other Loan Documents.

     2.1.4 USE OF PROCEEDS OF LOAN.  Borrower shall use the proceeds of the Loan
(i) to finance the Property and to pay costs and expenses incurred in connection
with the Closing of the Loan, as approved by Lender and (ii) with respect to the
remainder, if any, as Borrower directs.

     Section 2.2 INTEREST; MONTHLY PAYMENTS.

     2.2.1 GENERALLY.

     (a) From the date hereof through but not including the Optional  Prepayment
Date,  Borrower shall pay interest on the outstanding  principal  balance of the
Loan at the Interest Rate.

     (b) On the date hereof, Borrower shall pay interest at the Interest Rate on
the  outstanding  principal  balance of the Loan from the Closing  Date  through
November 10, 1998.  Commencing with the Payment Date on December 11, 1998 and on
each and every Payment Date thereafter  through and including the Maturity Date,
the principal amount of the Loan and interest thereon at the Interest Rate shall
be payable in equal  monthly  installments  of  $147,847.15  (the  "Monthly Debt
Service Payment  Amount");  such Monthly Debt Service Payment Amount being based
on the Interest  Rate and a 360-month  amortization  schedule.  The Monthly Debt
Service  Payment  Amount due on any  Payment  Date shall first be applied to the
payment of interest  accrued from the eleventh (11th) day of the month preceding
the Payment  Date through the tenth (10th) day of the month in which the Payment
Date  occurs,  notwithstanding  that the  Payment  Date may have  been  deferred
because  the  eleventh  (11th)  day of such  month is not a  Business  Day.  The
remainder of such Monthly  Debt Service  Payment  Amount shall be applied to the
reduction of the outstanding principal balance of the Note.

     (c) From and after the Optional Prepayment Date, interest on the Loan shall
accrue at the Revised Interest Rate and shall be payable as provided in Sections
2.2.2 and 2.2.3.

     2.2.2 ACCRUED  INTEREST.  From and after the Optional  Prepayment Date, all
interest  accruing  in  respect  of the  Note in  excess  of the  Interest  Rate
("Accrued Interest") shall be deferred,  be added to the Debt and, to the extent
permitted by  applicable  law,  accrue  interest at the Revised  Interest  Rate,
compounded monthly.  All Accrued Interest and interest on Accrued Interest shall
be due and payable on the Maturity Date.

     2.2.3 PROPERTY CASH FLOW  ALLOCATION  AFTER THE OPTIONAL  PREPAYMENT  DATE.
Commencing on the Optional  Prepayment  Date and continuing on each Payment Date
thereafter until the entire Debt has been paid in full, any Rents deposited into
the Cash  Collateral  Account (or  otherwise  received by  Borrower)  during the
immediately  preceding  calendar  month  shall  be  applied  as  follows  in the
following order of priority unless an Event of Default exists:

     (a)  First, to make required payments to the Tax and Insurance Escrow Fund;


                                      -11-
<PAGE>
     (b)  Second,  to Lender to pay the  Monthly  Debt  Service  Payment  Amount
          (plus, if applicable, interest at the Default Rate);

     (c)  Third, payments for Approved Operating Expenses;

     (d) Fourth, to make required payments to the Capital Reserve Fund;

     (g) Fifth, to make required payments to the Rollover Reserve Fund;

     (f)  Sixth,  payments to Lender to prepay the outstanding principal balance
          under the Note until paid in full;

     (g)  Seventh, payments to Lender to be applied against Accrued Interest and
          interest accrued thereon; and

     (h)  Lastly, payments to Borrower of any excess amounts.

Notwithstanding anything herein to the contrary, the failure of Borrower to make
all of the payments  required under clauses (a) through (d) above in full on the
Optional  Prepayment Date and on each Payment Date thereafter shall constitute a
Default under this Agreement.  However, the failure of Borrower to pay principal
amounts  due under  clause (e) and any  Accrued  Interest or interest on Accrued
Interest on a Payment  Date as a result of  insufficient  Rents for such payment
shall not constitute a Default  hereunder.  All Accrued  Interest or interest on
Accrued Interest shall nonetheless be due and payable on the Maturity Date.

     2.2.4 DEFAULT RATE.  After the occurrence and during the  continuance of an
Event of Default,  the entire  outstanding  principal  balance of the Loan shall
bear interest at the Default Rate, and shall be payable upon demand from time to
time, to the extent  permitted by applicable  law.  Payment or acceptance of the
increased rates provided for in this  subsection is not a permitted  alternative
to timely  payment and shall not  constitute a waiver of any Default or Event of
Default or an amendment to this  Agreement or any other Loan  Document and shall
not otherwise prejudice or limit any rights or remedies of Lender.

     Section 2.3 LOAN REPAYMENT AND DEFEASANCE.

     2.3.1   REPAYMENT.   Borrower   shall  repay  any   outstanding   principal
indebtedness of the Loan in full on the Maturity Date of the Loan, together with
interest  thereon to (but  excluding)  the date of repayment.  Other than as set
forth in Section 2.3.2 below,  Borrower shall have no right to prepay all or any
portion of Loan  during the period  commencing  on the  Closing  Date to but not
including the Optional  Prepayment Date. From and after the Optional  Prepayment
Date,  the Loan may be prepaid in whole or in part  without  penalty or premium,
including without limitation the Yield Maintenance Premium.

     2.3.2 MANDATORY  PREPAYMENTS.  The Loan is subject to mandatory prepayment,
without  premium or penalty  except as  provided  in Section  7.1.2,  in certain
instances of Insured  Casualty or  Condemnation  (each a  "Casualty/Condemnation
Prepayment"),  in the manner and to the extent set forth in  Sections  7.1.2 and
Section 7.1.3 hereof. Each  Casualty/Condemnation  Prepayment shall be made on a
Payment Date and include all accrued and unpaid  interest on the amount  prepaid
up to but not  including  such Payment  Date or, if not paid on a Payment  Date,
include  interest  that  would have  accrued  on the  amount  prepaid to but not
including the next Payment Date.

     2.3.3 VOLUNTARY DEFEASANCE OF THE NOTE.

     (a) Subject to the terms and  conditions  set forth in this Section  2.3.3,
Borrower  may  defease  all or any  portion  of the Loan  evidenced  by the Note
(hereinafter, a "Defeasance"); provided, that no such Defeasance may occur prior
to the Release  Date.  Each  Defeasance  shall be subject,  in each case, to the
satisfaction of the following conditions precedent:

     (i)  Borrower  shall  provide not less than thirty (30) days prior  written
          notice to Lender specifying a Payment Date (the "Defeasance  Date") on
          which the  Defeasance  is to occur.  Such notice  shall  indicate  the
          principal amount of the Note to be defeased.

     (ii) Borrower  shall pay to Lender all accrued  and unpaid  interest on the
          principal  balance  of the Note to but not  including  the  Defeasance
          Date.  If for any reason the  Defeasance  Date is not a Payment  Date,
          Borrower  shall also pay interest  that would have accrued on the Note
          to but not including the next Payment Date.

     (iii)Borrower shall pay to Lender all other sums,  not including  scheduled
          interest  or  principal  payments,  then  due  under  the  Note,  this
          Agreement, the Mortgage and the other Loan Documents.
                                      -12-
<PAGE>
     (iv) No Event of Default shall exist.

     (v)  Borrower shall pay to Lender the required  Defeasance  Deposit for the
          Defeasance.

     (vi) In the event only a portion of the Loan  evidenced  by the Note is the
          subject of the  Defeasance,  Borrower  shall  execute  and deliver all
          necessary  documents  to amend  and  restate  the Note and  issue  two
          substitute notes: one having a principal balance equal to the defeased
          portion of the original Note (the "Defeased Note") and one note having
          a principal  balance equal to the  undefeased  portion of the original
          Note (the  "Undefeased  Note").  The Defeased Note and Undefeased Note
          shall  have  identical  terms as the Note,  except  for the  principal
          balance.  A  Defeased  Note  cannot  be the  subject  of  any  further
          Defeasance.

     (vii)Borrower shall execute and deliver a security  agreement,  in form and
          substance  satisfactory  to Lender,  creating a first priority lien on
          the  Defeasance  Deposit and the U.S.  Obligations  purchased with the
          Defeasance  Deposit in accordance  with this provision of this Section
          2.3.3 (the "Security Agreement").

     (viii) Borrower  shall  deliver an opinion of counsel for  Borrower in form
          reasonably  satisfactory to Lender stating,  among other things,  that
          (A) Lender has a perfected  first  priority  security  interest in the
          Defeasance Deposit and the U.S. Obligations  delivered by Borrower and
          (B) said U.S.  Obligations  have been  validly  assigned  to the REMIC
          Trust.

     (ix) Lender shall receive  evidence in writing from the  applicable  Rating
          Agencies  to the  effect  that such  Defeasance  will not  result in a
          reduction,  withdrawal  or  requalification  of the  ratings in effect
          immediately  prior to such  Defeasance  for the  Securities  issued in
          connection with the Securitization which are then outstanding.

     (x)  If required by the  applicable  Rating  Agencies,  Borrower shall also
          deliver or cause to be  delivered  a  non-consolidation  opinion  with
          respect to the Successor  Borrower in form and substance  satisfactory
          to Lender and the applicable Rating Agencies.

     (xi) Borrower shall deliver an Officer's  Certificate  certifying  that the
          requirements set forth in this Section 2.3.3(a) have been satisfied.

     (xii)Borrower   shall  deliver  such  other   certificates,   documents  or
          instruments as Lender may reasonably request.

     (xiii)  Borrower  shall pay all  reasonable  costs and  expenses  of Lender
          incurred  in  the   Defeasance,   including  any  costs  and  expenses
          associated  with a release of Lien as  provided  in Section 2.4 hereof
          and reasonable attorney's fees and expenses.

     (b) In connection  with each  Defeasance of all or any portion of the Note,
Borrower  hereby  appoints  Lender  as its agent  and  attorney-in-fact  for the
purpose of using the  Defeasance  Deposit to purchase  U.S.  Obligations  (which
purchases, if made by Lender, shall be made by Lender on an arms-length basis at
then  prevailing  market  rates) which  provide  payments on or prior to, but as
close as possible to, all successive Payment Dates after the Defeasance Date, in
the case of a Defeasance  for the entire  outstanding  principal  balance of the
Note, or the Defeased  Note,  in the case of a Defeasance  for only a portion of
the outstanding principal balance of the Loan, as applicable (including,  on the
Optional  Prepayment Date, the outstanding  principal balance of either the Note
or the Defeased  Note),  and in amounts equal to the  scheduled  payments due on
such dates under the Note or the Defeased  Note, as applicable  (the  "Scheduled
Defeasance  Payments").  Borrower,  pursuant to the Security  Agreement or other
appropriate  document,  shall irrevocably authorize and direct that the payments
received from the U.S. Obligations may be made directly to Lender and applied to
satisfy the  obligations  of Borrower  under the Note or the Defeased  Note,  as
applicable.  Any  portion  of the  Defeasance  Deposit  in excess of the  amount
necessary to purchase the U.S.  Obligations  required by this Section 2.3(a) and
satisfy  Borrower's  obligations  under  Sections  2.3 or 2.4 shall be  remitted
promptly to Borrower. Any amounts received in respect of the U.S. Obligations in
excess of the amounts necessary to make monthly payments pursuant to Section 2.2
shall be remitted promptly to Borrower.  Semi-annual payments in respect of U.S.
Obligations shall be applied to payments under the Note or the Defeased Note, as
applicable, as the same become due thereunder.



                                      -13-
<PAGE>
     (c) CCA shall  establish  or designate a successor  entity (the  "Successor
Borrower") and Borrower shall  transfer and assign all  obligations,  rights and
duties under and to the Note or the Defeased Note, as applicable,  together with
the pledged U.S.  Obligations to such Successor Borrower.  The obligation of CCA
to  establish  or  designate  a  Successor  Borrower  shall be  retained  by CCA
notwithstanding the sale or transfer of this Agreement unless such obligation is
specifically assumed by the transferee. Such Successor Borrower shall assume the
obligations under the Note or the Defeased Note, as applicable, and the Security
Agreement  and  Borrower  shall  be  relieved  of  its  obligations  thereunder,
hereunder  and  under the  other  Loan  Documents  (except  for those  which are
expressly  stated to survive).  Borrower  shall pay $1,000 to any such Successor
Borrower as  consideration  for assuming the  obligations  under the Note or the
Defeased  Note,  as  applicable,  and the  Security  Agreement.  Notwithstanding
anything in this  Agreement to the contrary,  no other  assumption  fee shall be
payable upon a transfer of the Note or the Defeased Note in accordance with this
Section 2.3.3, but Borrower shall pay all costs and expenses incurred by Lender,
including  Lender's  reasonable  attorneys'  fees  and  expenses,   incurred  in
connection therewith.

     Section 2.4 RELEASE OF  PROPERTY.  Except as set forth in this Section 2.4,
no  repayment,  prepayment or defeasance of all or any portion of the Note shall
cause,  give rise to a right to require,  or otherwise result in, the release of
the Lien of the Mortgage on the Property.

     2.4.1 RELEASE OF THE PROPERTY.

     (a) If Borrower  has elected to defease the Note in its  entirety,  and the
requirements of Section 2.3 have been satisfied,  the Property shall be released
from  the  Lien of the  Mortgage  and the  other  Loan  Documents  and the  U.S.
Obligations,  pledged  pursuant  to the  Security  Agreement,  shall be the sole
source of collateral securing the Note.

     (b) In connection  with the release of the Lien,  Borrower  shall submit to
Lender,  not less than twenty (20) days prior to the Defeasance  Date, a release
of Lien (and related Loan  Documents) for the Property (for execution by Lender)
in a form  appropriate in the State  reasonably  satisfactory  to Lender and all
other  documentation  Lender  requires to be delivered by Borrower in connection
with such release,  together with an Officer's Certificate  certifying that such
documentation  (i) is in compliance with all Legal  Requirements,  and (ii) will
effect such release in accordance with the terms of this Agreement.

     2.4.2 RELEASE ON PAYMENT IN FULL.  Lender shall,  upon the written  request
and at the  expense  of  Borrower,  upon  payment in full of all  principal  and
interest  on the Loan and all  other  amounts  due and  payable  under  the Loan
Documents in accordance with the terms thereof, release the Lien of the Mortgage
and the other Loan Documents if not theretofore released.

     Section 2.5 PAYMENTS AND COMPUTATIONS.

     2.5.1 MAKING OF PAYMENTS.  Each payment by Borrower  hereunder or under the
Note  shall  be made in  funds  settled  through  the New  York  Clearing  House
Interbank  Payments  System or other funds  immediately  available  to Lender by
11:00 a.m.,  New York City time,  on the date such  payment is due, to Lender by
deposit to such account as Lender may  designate by written  notice to Borrower.
Whenever any payment  hereunder or under the Note shall be stated to be due on a
day  which is not a  Business  Day,  such  payment  shall  be made on the  first
Business Day thereafter.

     2.5.2  COMPUTATIONS.  Interest  payable  hereunder  or  under  the  Note by
Borrower  shall be computed on the basis of the actual number of days elapsed in
a 360-day year.

     2.5.3 LATE PAYMENT CHARGE. If any principal, interest or any other sums due
under the Loan Documents is not paid by Borrower on the date on which it is due,
Borrower  shall pay to Lender upon demand an amount  equal to the lesser of five
percent (5%) of such unpaid sum or the maximum  amount  permitted by  applicable
law in order to defray the expense incurred by Lender in handling and processing
such delinquent payment and to compensate Lender for the loss of the use of such
delinquent  payment.  Any such amount  shall be secured by the  Mortgage and the
other Loan Documents.

     Section 2.6 CASH MANAGEMENT ARRANGEMENTS.

     (a) All Rents (other than security  deposits) will be transmitted  directly
into an  account  maintained  by  Borrower  but  controlled  by Lender at a bank
selected by Borrower (the "Collection Account Bank").  Borrower will establish a


                                      -14-
<PAGE>
separate "A" account  (the "A"  Account) and "B" Account (the "B" Account)  with
the Collection Account Bank.  Borrower shall cause all Rents to be sent directly
to the Collection  Account Bank by tenants (where  practicable) for deposit into
the "A" Account.  All other income or revenue received by Borrower or Manager in
connection  with the Property will be deposited into the "A" Account on the date
of receipt.  Until the earlier to occur of (i) the Optional  Prepayment  Date or
(ii) an Event of Default  (either such  occurrence,  a "Cash Trap  Event"),  the
Collection Account Bank will transfer deposits that are cleared on a daily basis
from the "A" Account to the "B" Account which shall be an account not subject to
any restrictions and under the sole control of Borrower.  Upon the occurrence of
a Cash Trap Event, the Collection  Account Bank will transfer  property receipts
that  are  cleared  on a daily  basis to the Cash  Collateral  Account  Bank for
deposit into the Cash Collateral  Account.  The duties of the Collection Account
Bank and the  application  and  disbursement  of all  funds  deposited  with the
Collection Account Bank shall be governed by the terms of this Agreement and the
Collection Account Agreement.  Any amounts so deposited into the Cash Collateral
Account  shall be  applied  and  disbursed  in  accordance  with the  terms  and
provisions of this Agreement and the Cash Collateral Account Agreement.

     (b) Lender  shall have a senior  security  interest  in the  aforementioned
accounts  and  all  subaccounts  established  thereunder  (other  than  the  "B"
Account).  The upfront and ongoing  expenses of  maintaining  such  accounts and
subaccounts, and any other accounts and reserves maintained pursuant to the Loan
Documents,  shall be the responsibility of Borrower. Funds in each account shall
be invested for the benefit of Borrower in Permitted Investments.

     (c) Anything  hereinabove in this Section to the contrary  notwithstanding,
from and after the occurrence and during the continuance of an Event of Default,
100% of all Rents and other sums deposited  into the  Collection  Account in any
month  which  remain in the Cash  Collateral  Account  shall be  applied  to the
payment of Debt Service on the Loan (including,  if applicable,  interest at the
Default Rate),  required reserves and Approved  Operating Expenses and/or to the
payment  of the  principal  amount of the Note,  in such  order as Lender  shall
determine in its sole discretion.

     Section 2.7 INTENTIONALLY DELETED.

III.  CONDITIONS PRECEDENT
      --------------------

     Section 3.1  CONDITIONS  PRECEDENT TO THE LOAN. The obligation of Lender to
make the Loan  hereunder is subject to the  fulfillment by Borrower or waiver by
Lender of the following conditions precedent no later than the Closing Date:

     (a)  Representation  and  Warranties;   Compliance  with  Conditions.   The
representations  and warranties of Borrower  contained in this Agreement and the
other Loan Documents  shall be true and correct in all material  respects on and
as of the  Closing  Date with the same effect as if made on and as of such date,
and no Default or Event of Default  shall have occurred and be  continuing;  and
Borrower  shall be in  compliance  in all material  respects  with all terms and
conditions  set forth in this  Agreement  and in each other Loan Document on its
part to be observed or performed.

     (b) Loan  Agreement  and Note.  Lender  shall have  received a copy of this
Agreement and the Note,  in each case,  duly executed and delivered on behalf of
Borrower.

     (c) Delivery of Loan Documents; Title Insurance; Reports; Leases.

          (i) Mortgage,  Assignments of  Agreements.  Lender shall have received
from Borrower  fully  executed and  acknowledged  counterparts  of the Mortgage,
Assignment of Leases, the Assignment of Agreements and Consent and Subordination
of Manager  relating to the  Property  and  evidence  that  counterparts  of the
Mortgage  have  been  delivered  to the  title  company  for  recording,  in the
reasonable  judgment of Lender, so as to effectively  create upon such recording
valid and enforceable  Liens upon the Property,  of the requisite  priority,  in
favor of Lender (or such other trustee as may be required or desired under local
law),  subject only to the  Permitted  Encumbrances  and such other Liens as are
permitted  pursuant to the Loan Documents.  Lender shall have also received from
Borrower fully executed counterparts of the Environmental Indemnity.

          (ii) Title  Insurance.  Lender shall have  received a Qualified  Title
Insurance  Policy for the Property  and evidence  that the premium in respect of
such Title Insurance Policy has been paid.

          (iii) Survey.  Lender shall have  received a Qualified  Survey for the
Property.

                                      -15-
<PAGE>
          (iv)  Insurance.  Lender shall have  received  valid  certificates  of
insurance  for the policies of insurance  required  hereunder,  satisfactory  to
Lender in its reasonable discretion, and evidence of the payment of all premiums
payable for the existing  policy  period which period shall not be less than one
year in advance.

          (v) Environmental Reports. Lender shall have received an environmental
report in respect of the Property reasonably satisfactory to Lender.

          (vi) Zoning. With respect to the Property, Lender shall have received,
at Lender's  option,  (i) letters or other evidence with respect to the Property
from  the  appropriate  municipal  authorities  (or  other  Persons)  concerning
applicable zoning and building laws, (ii) an ALTA 3.1 zoning endorsement for the
Title  Insurance  Policy,  or  (iii)  a  zoning  opinion  letter,  in  substance
reasonably satisfactory to Lender.

     (d) Related Documents. Each additional document not specifically referenced
herein, but relating to the transactions  contemplated  herein,  shall have been
duly authorized,  executed and delivered by all parties thereto and Lender shall
have received and approved certified copies thereof.

     (e) Delivery of  Organizational  Documents.  On or before the Closing Date,
Borrower  shall deliver or cause to be delivered to Lender (i) copies  certified
by Borrower of all organizational  documentation  related to Borrower and/or the
formation,  structure,  existence,  good  standing  and/or  qualification  to do
business,   as  Lender  may   reasonably   request,   including   good  standing
certificates,  qualifications  to do business in the appropriate  jurisdictions,
resolutions   authorizing   the  entering  into  of  the  Loan  and   incumbency
certificates as may be requested by Lender.

     (f) Opinions of Borrower's Counsel.  Lender shall have received opinions of
Borrower's  counsel  (i) with  respect to  non-consolidation,  true sale or true
contribution,  and  fraudulent  transfer  issues  and (ii) with  respect  to due
execution,  authority,  enforceability  of the Loan  Documents  and  such  other
matters as Lender may reasonably  require,  all such opinions in form, scope and
substance reasonably satisfactory to Lender and Lender's counsel.

     (g) Intentionally Omitted.

     (h) Basic  Carrying  Costs.  Borrower  shall have paid or deposited into an
applicable  reserve  fund all (i) accrued but unpaid  Insurance  Premiums,  (ii)
currently  due Taxes  (including  any in arrears) and (iii)  currently due Other
Charges, which amounts shall be funded with proceeds of the Loan.

     (i) Completion of Proceedings. All corporate and other proceedings taken or
to be taken in connection with the  transactions  contemplated by this Agreement
and  other  Loan  Documents  and  all  documents  incidental  thereto  shall  be
satisfactory in form and substance to Lender, and Lender shall have received all
such  counterpart  originals or certified copies of such documents as Lender may
reasonably request.

     (j) Financial  Statements.  Lender shall have received financial statements
prepared in  accordance  with agreed upon  procedures  for the Property for such
periods as Lender may request.

     (k)  Leases,  Rent Roll and  Estoppel  Certificates.  Borrower  shall  have
provided Lender with original executed or certified copies of each of the Leases
in effect as of the date  hereof,  a current rent roll,  and  original  executed
copies of estoppel certificates and subordination  non-disturbance agreements in
the form  previously  approved  by  Lender,  from  those  tenants  as Lender may
request.

     (l) Debt Service  Coverage Ratio.  The Debt Service Coverage Ratio shall be
at least 1.20 to 1.

     (m)  Appraisals.  Lender shall have  received an appraisal for the Property
satisfactory to Lender.

     (n)   Engineering   Reports.   Lender  shall  have  received  a  structural
engineering report,  reasonably acceptable to Lender,  identifying,  among other
things, (i) deferred  maintenance for the Property and the cost thereof and (ii)
a ten (10) year schedule of anticipated  capital  expenditures and the per annum
cost thereof.

     (o)  Utility  Service and Tax  Assessment.  Borrower  shall have  delivered
evidence that all utility  services  required for the Property are available and
that the Property is subject to separate tax assessment.

                                      -16-
<PAGE>
     (p) Absence of Adverse  Changes.  Lender shall have  determined  that there
have been no material  developments  prior to the Closing Date which  could,  in
Lender's  sole  judgment,  adversely  affect the  ownership  or operation of the
Property or the ability of Borrower to repay the Loan or the ability of Borrower
to perform any of its covenants and  agreements  set forth in this Agreement and
the other Loan Documents.

     (q) Fee. Lender shall have received a structuring fee equal to $236,500.00.

IV.  REPRESENTATIONS AND WARRANTIES
     ------------------------------

     Section 4.1 BORROWER  REPRESENTATIONS.  Borrower represents and warrants as
of the date hereof and as of the Closing Date that:

     (a) Organization.  Borrower has been duly organized and is validly existing
and in  good  standing  with  requisite  limited  liability  company  power  and
authority to own its  properties  and to transact the  businesses in which it is
now engaged.  Borrower is duly  qualified to do business and is in good standing
in each jurisdiction  where it is required to be so qualified in connection with
its  properties,  businesses  and  operations.  Borrower  possesses  all rights,
licenses,  permits and authorizations,  governmental or otherwise,  necessary to
entitle it to own its  properties  and to transact the businesses in which it is
now engaged  (other than those which the failure to have would not reasonably be
expected to have a material adverse effect on the Borrower,  the Property or the
Loan),  and the sole  business  of  Borrower is the  ownership,  management  and
operation of the Property.

     (b)  Proceedings.  Borrower has taken all necessary action to authorize the
execution,  delivery  and  performance  of this  Agreement  and the  other  Loan
Documents.  This Agreement and such other Loan Documents have been duly executed
and  delivered  by or on behalf of  Borrower  and  constitute  legal,  valid and
binding obligations of Borrower  enforceable against Borrower in accordance with
their respective terms, subject to applicable bankruptcy, insolvency and similar
laws affecting rights of creditors generally, and subject, as to enforceability,
to general principles of equity (regardless of whether  enforcement is sought in
a proceeding in equity or at law).

     (c) No Conflicts. The execution, delivery and performance of this Agreement
and the other Loan  Documents by Borrower  will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default  under,  or
result in the creation or imposition of any lien,  charge or encumbrance  (other
than  pursuant  to the Loan  Documents)  upon any of the  property  or assets of
Borrower pursuant to the terms of any indenture,  mortgage,  deed of trust, loan
agreement,  partnership  agreement  or other  agreement or  instrument  to which
Borrower is a party or by which  Borrower's  property or assets is subject,  nor
will such action result in any violation of the provisions of any statute or any
order,  rule or  regulation of any court or  governmental  agency or body having
jurisdiction  over Borrower or any of its  properties or assets (other than such
actions  described  herein  which  would not  reasonably  be  expected to have a
material  adverse effect on the Borrower,  the Property,  or the Loan),  and any
consent,  approval,  authorization,  order,  registration or qualification of or
with any court or any such regulatory  authority or other governmental agency or
body required for the  execution,  delivery and  performance  by any Borrower of
this  Agreement  or any other Loan  Documents  has been  obtained and is in full
force and effect.

     (d)  Litigation.  There are no actions,  suits or  proceedings at law or in
equity by or before any  Governmental  Authority  or other agency now pending or
threatened against or affecting Borrower or the Property,  which actions,  suits
or proceedings, if determined against Borrower or the Property, might materially
adversely affect the condition  (financial or otherwise) or business of Borrower
or the condition or ownership of the Property.

     (e)  Agreements.  Borrower is not a party to any agreement or instrument or
subject to any  restriction  which would  reasonably  be expected to  materially
adversely affect Borrower or the Property, or Borrower's business, properties or
assets,  operations  or condition,  financial or  otherwise.  Borrower is not in
default in any material respect in the performance, observance or fulfillment of
any of the  obligations,  covenants or  conditions  contained  in any  Permitted
Encumbrance  or any other  agreement or  instrument to which it is a party or by
which it or the Property is bound.

     (f)  Title.  Borrower  has  good  and  insurable  title  in fee to the real
property  comprising part of the Property,  and good title to the balance of the
Property,   free  and  clear  of  all  Liens  whatsoever  except  the  Permitted

                                      -17-

<PAGE>
Encumbrances,  such other Liens as are permitted  pursuant to the Loan Documents
and the Liens created by the Loan Documents. The Mortgage when properly recorded
in the appropriate records,  together with any Uniform Commercial Code financing
statements  required  to be filed in  connection  therewith,  will  create (i) a
valid, perfected first priority lien on the Property,  subject only to Permitted
Encumbrances  and the Liens  created by the Loan  Documents  and (ii)  perfected
security  interests  in and to, and  perfected  collateral  assignments  of, all
personalty  (including the Leases), all in accordance with the terms thereof, in
each case  subject only to any  applicable  Permitted  Encumbrances,  such other
Liens as are permitted  pursuant to the Loan  Documents and the Liens created or
permitted by the Loan  Documents.  The Permitted  Encumbrances do not materially
adversely  affect the value or use of the  Property,  or  Borrower's  ability to
repay the Loan.  There are no claims for  payment for work,  labor or  materials
affecting  the  Property  which are or may  become a lien  prior to, or of equal
priority with, the Liens created by the Loan Documents.

     (g) No Bankruptcy Filing.  Borrower is not contemplating  either the filing
of a petition by it under any state or federal  bankruptcy or insolvency laws or
the  liquidation  of all or a major  portion  of its  assets  or  property,  and
Borrower  has no knowledge  of any Person  contemplating  the filing of any such
petition against it.

     (h) Full and Accurate Disclosure.  No statement of fact made by Borrower in
this  Agreement  or in any of the  other  Loan  Documents  contains  any  untrue
statement of a material  fact or omits to state any material  fact  necessary to
make statements contained herein or therein not misleading. There is no material
fact  presently  known to Borrower  which has not been disclosed to Lender which
adversely affects,  nor as far as Borrower can foresee,  might adversely affect,
the Property or the business,  operations or condition  (financial or otherwise)
of Borrower.

     (i) No Plan Assets.  Borrower is not an "employee benefit plan," as defined
in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of
Borrower  constitutes or will constitute "plan assets" of one or more such plans
within the meaning of 29 C.F.R. Section 2510.3-101.

     (j)  Compliance.  To the best of  Borrower's  knowledge,  Borrower  and the
Property and the use thereof comply in all material respects with all applicable
Legal Requirements, including building and zoning ordinances and codes. Borrower
has not  received  notice  of any  default  or  violation  of any  order,  writ,
injunction,  decree or demand of any  Governmental  Authority,  the violation of
which is likely to  materially  adversely  affect the  condition  (financial  or
otherwise)  or  business  of  Borrower.  There has not been and  shall  never be
committed by Borrower or, to Borrower's  actual  knowledge,  any other person in
occupancy  of or involved  with the  operation or use of the Property any act or
omission  affording the federal  government or any state or local government the
right of  forfeiture  as against the  Property or any part thereof or any monies
paid in performance of Borrower's  obligations  under any of the Loan Documents.
Borrower hereby covenants and agrees not to commit or permit,  and shall use its
commercially  reasonable  efforts to  prevent  any other  person or entity  from
committing, any act or omission affording such right of forfeiture.

     (k)  Contracts.  Except as set forth on  Schedule  1, there are no material
contracts  affecting the Property which are not terminable on one month's notice
or less without cause and without  penalty or premium.  All contracts  affecting
the Property  (except for the  Management  Agreement)  have been entered into at
arms-length  in the ordinary  course of  Borrower's  business and all  contracts
affecting the Property  (including  the  Management  Agreement)  provide for the
payment of fees in amounts and upon terms comparable to existing market rates.

     (l) Financial Information.  All financial data, including the statements of
cash flow and income and operating  expense,  that have been delivered to Lender
by Borrower in respect of the Property (i) are true, complete and correct in all
material  respects,  (ii)  accurately  represent the financial  condition of the
Property as of the date of such  reports and (iii) to the extent  prepared by an
independent  certified public  accounting firm, have been prepared in accordance
with  GAAP  consistently  applied  throughout  the  periods  covered,  except as
disclosed  therein.  Borrower has no  contingent  liabilities,  liabilities  for
taxes,  unusual  forward or long-term  commitments  or unrealized or anticipated
losses  from  any  unfavorable  commitments  that  are  known  to  Borrower  and
reasonably  likely to have a  materially  adverse  effect on the Property or the
operation  thereof,  except  as  referred  to or  reflected  in  said  financial
statements.  Since  the date of such  financial  statements,  there  has been no
materially adverse change in the financial condition,  operations or business of
Borrower from that set forth in said financial statements.



                                      -18-
<PAGE>
     (m)  Condemnation.  No Condemnation or other  proceeding has been commenced
or, to Borrower's  best knowledge,  is  contemplated  with respect to all or any
portion of the Property or for the  relocation of roadways  providing  access to
the Property.

     (n) Federal Reserve  Regulations.  No part of the proceeds of the Loan will
be used for the purpose of purchasing or acquiring any "margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal  Reserve System
or for any other purpose which would be  inconsistent  with such Regulation U or
any other Regulations of such Board of Governors, or for any purposes prohibited
by Legal  Requirements  or by the terms and  conditions of this Agreement or the
other Loan Documents.

     (o)  Utilities  and Public  Access.  The  Property  has rights of access to
public  ways and is served  by  water,  sewer,  sanitary  sewer and storm  drain
facilities  adequate to service the Property for its  respective  intended uses.
All public utilities necessary to the full use and enjoyment of the Property are
located in the public right-of-way  abutting the Property.  To Borrower's actual
knowledge,  all roads  necessary  for the use of the Property for their  current
respective purposes have been completed and dedicated to public use and accepted
by all Governmental Authorities.

     (p) Not a Foreign  Person.  Borrower is not a "foreign  person"  within the
meaning ofss.1445(f)(3) of the Code.

     (q)  Separate  Lots.  The  Property is comprised of one (1) or more parcels
which  constitutes  a separate tax lot and does not  constitute a portion of any
other tax lot not a part of the Property.

     (r) Assessments.  To the best of Borrower's knowledge, there are no pending
or proposed  special or other  assessments for public  improvements or otherwise
affecting  the  Property,  nor are there any  contemplated  improvements  to the
Property that may result in such special or other assessments.

     (s)  Enforceability.  The Loan  Documents  are not  subject to any right of
rescission,  set-off, counterclaim or defense by Borrower, including the defense
of usury,  nor would the exercise of any of the terms of the Loan Documents,  or
the exercise of any right thereunder,  render the Loan Documents  unenforceable,
and Borrower has not asserted any right of rescission,  set-off, counterclaim or
defense with respect thereto.

     (t) No Prior  Assignment.  There are no  assignments  of the  Leases or any
portion  of the Rents due and  payable or to become  due and  payable  which are
presently outstanding.

     (u) Insurance.  Borrower has obtained and has delivered to Lender insurance
certificates reflecting the insurance coverages,  amounts and other requirements
set forth in this Agreement.

     (v) Use of Property. The Property is used exclusively as an office building
and other appurtenant and related uses.

     (w)  Certificate  of  Occupancy;  Licenses.  All  material  certifications,
permits,  licenses and  approvals,  including  certificates  of  completion  and
occupancy permits and any applicable liquor licenses required for the legal use,
occupancy and operation of the Property  (collectively,  the  "Licenses"),  have
been obtained and are in full force and effect. Borrower shall keep and maintain
all licenses necessary for the operation of the Property.  The use being made of
the Property is in conformity with the  certificate of occupancy  issued for the
Property.

     (x) Flood Zone. To Borrower's actual knowledge, none of the Improvements on
the  Property  are  located  in an  area  identified  by the  Federal  Emergency
Management Agency as an area having special flood hazards.

     (y) Physical  Condition.  To  Borrower's  actual  knowledge,  the Property,
including all buildings,  improvements,  parking  facilities,  sidewalks,  storm
drainage  systems,  roofs,  plumbing  systems,  HVAC  systems,  fire  protection
systems, electrical systems, equipment,  elevators,  exterior sidings and doors,
landscaping,  irrigation  systems  and all  structural  components,  are in good
condition,  order  and  repair in all  material  respects;  and  there  exist no
structural or other material defects or damages in the Property,  whether latent
or otherwise.  Borrower has not received  notice from any  insurance  company or
bonding  company of any defects or  inadequacies  in the  Property,  or any part
thereof,  which would adversely affect the insurability of the same or cause the
imposition of extraordinary premiums or charges thereon or of any termination or
threatened termination of any policy of insurance or bond.

                                      -19-
<PAGE>
     (z)  Appraised  Value.  To  Borrower's   actual   knowledge,   all  of  the
improvements  which were  included in  determining  the  appraised  value of the
Property lie wholly within the boundaries and building  restriction lines of the
Property,  and  no  improvements  on  adjoining  properties  encroach  upon  the
Property, and no easements or other encumbrances upon the Property encroach upon
any of the  improvements,  so as to  affect  the value or  marketability  of the
Property except those which are insured against by title insurance.

     (aa) Leases. Attached hereto as Schedule 2 is a rent roll (the "Rent Roll")
for the  Property.  The Rent Roll is true,  correct and complete in all material
respects with respect to the subject matter thereof.  The only Leases  affecting
the  Property  are those  reflected in the Rent Roll.  To  Borrower's  knowledge
following inquiry as a duly diligent property purchaser,  except as set forth in
Schedule  1: (i) each Lease is in full force and  effect;  (ii) except for those
Leases with terms that have not yet commenced, the tenants under the Leases have
accepted  possession of and are in occupancy of all of their respective  demised
premises  (unless  such  demised  premises  or  portions   thereof,   have  been
subleased),  have  commenced the payment of rent under such Leases and there are
no offsets,  claims or defenses to the enforcement thereof;  (iii) all rents due
and payable under the Leases have been paid and no portion thereof has been paid
for any period  more than thirty  (30) days in  advance;  (iv) the rent  payable
under  each Lease is the amount set forth in the Rent Roll and there is no claim
or basis for a claim by the tenant thereunder for an adjustment to the rent; (v)
no tenant has made any claim against the landlord under the Leases which remains
outstanding  and there are no  defaults  on the part of the  landlord  under any
Lease and no event has occurred  which,  with the giving of notice or passage of
time,  or both,  would  constitute  such  default;  and (vi) there is no present
material default by any tenant under any Lease.  None of the Leases contains any
option to purchase or right of first  refusal to  purchase  the  Property or any
part thereof. The Leases have not been assigned or pledged except to Lender, and
no  other  person  whatsoever  has  any  interest  therein  except  the  tenants
thereunder.

     (bb) Survey. To Borrower's  actual  knowledge,  the survey for the Property
delivered to Lender in connection  with this  Agreement does not fail to reflect
any material matter affecting the Property or the title thereto.

     (cc)  Filing  and  Recording  Taxes.  All  transfer  taxes,   deed  stamps,
intangible taxes or other amounts in the nature of transfer taxes required to be
paid by any Person under  applicable Legal  Requirements  currently in effect in
connection  with the  transfer of the Property to Borrower  have been paid.  All
mortgage, mortgage recording, stamp, intangible or other similar tax required to
be paid by any Person under applicable Legal Requirements currently in effect in
connection  with the execution,  delivery,  recordation,  filing,  registration,
perfection or enforcement of any of the Loan Documents,  including the Mortgage,
have  been  paid  and,  under  current  Legal  Requirements,   the  Mortgage  is
enforceable  against  Borrower in accordance with its respective terms by Lender
(or any subsequent holder thereof), except as such enforceability may be limited
by  insolvency,  bankruptcy,  moratorium  or  other  laws  affecting  creditor's
remedies in general and principles of equity.

     (dd)  Single-Purpose.  Borrower  hereby  represents  and  warrants  to, and
covenants  with,  Lender that,  as of the date hereof and until such time as the
Debt shall be paid in full:

     (i)  Borrower  does not and will not own any asset or  property  other than
          (A) the Property and (B) incidental  personal  property  necessary for
          the ownership or operation of the Property.

     (ii) Borrower  will not engage in any  business  other than the  ownership,
          management  and  operation  of the  Property  and will in all material
          respects  conduct and operate its business as presently  conducted and
          operated.

     (iii)Borrower  will not enter into any  contract or  agreement  with any of
          its affiliates or constituent  parties,  any guarantor (a "Guarantor")
          of the Debt or any part thereof or any  affiliate  of any  constituent
          party  or  Guarantor,  except  upon  terms  and  conditions  that  are
          intrinsically  fair and  substantially  similar to those that would be
          available on an  arms-length  basis with third  parties other than any
          such party.

     (iv) Borrower  has  not  incurred,   and  Borrower  will  not  incur,   any
          indebtedness,  secured or unsecured,  direct or indirect,  absolute or
          contingent  (including  guaranteeing any  obligation),  other than the
          Permitted  Indebtedness.  Except  as  set  forth  in  the  immediately
          preceding sentence, no indebtedness other than the Debt may be secured
          (subordinate or pari passu) by the Property.
                                      -20-
<PAGE>
     (v)  Borrower  has not made and will not make any loans or  advances to any
          third  party  (including  any  affiliate  or  constituent  party,  any
          Guarantor or any  affiliate of any  constituent  party or  Guarantor),
          other than  immaterial  advances for tenant  improvements  pursuant to
          Leases executed in accordance with this Agreement.

     (vi) Borrower  is and  will  remain  solvent  and will  pay its  debts  and
          liabilities  (including  employment  and overhead  expenses)  from its
          assets as the same shall become due.

     (vii)Borrower  has  done or  caused  to be  done  and  will  do all  things
          necessary  to observe  corporate,  partnership,  or limited  liability
          company formalities, as the case may be, and preserve its existence.

     (viii) Borrower  will not permit any  constituent  party or  Guarantor  to,
          amend,  modify  or  otherwise  change  the  partnership   certificate,
          partnership  agreement,  articles of incorporation and bylaws,  trust,
          operating agreement or other  organizational  documents of Borrower or
          such constituent  party or Guarantor in a manner which would adversely
          affect Borrower's existence as a single purpose entity.

     (ix) Borrower  will maintain  books and records and bank accounts  separate
          from those of its  affiliates and any  constituent  party and Borrower
          will file its own tax returns.

     (x)  Borrower  will be, and at all times will hold itself out to the public
          as,  a legal  entity  separate  and  distinct  from any  other  entity
          (including any affiliate,  any constituent party, any Guarantor or any
          affiliate  of any  constituent  party  or  Guarantor),  shall  conduct
          business  in its own name and  shall  maintain  and  utilize  separate
          stationery, invoices and checks.

     (xi) Borrower will  maintain  adequate  capital for the normal  obligations
          reasonably  foreseeable in a business of its size and character and in
          light of its contemplated business operations.

     (xii)Neither  Borrower nor any constituent  party will seek the dissolution
          or winding up, in whole or in part, of Borrower.

     (xiii) Borrower will not commingle its funds and other assets with those of
          any affiliate or constituent party, any Guarantor, or any affiliate of
          any constituent party or Guarantor, or any other person.

     (xiv)Borrower  has and will  maintain  its assets in such a manner  that it
          will not be costly or  difficult to  segregate,  ascertain or identify
          its  individual  assets  from those of any  affiliate  or  constituent
          party,  any Guarantor,  or any affiliate of any  constituent  party or
          Guarantor, or any other person.

     (xv) Borrower does not and will not hold itself out to be  responsible  for
          the debts or obligations of any other person.

     (xvi)Borrower  shall at all times have one member (the "SPE Member") who is
          a "single  purpose  entity" and shall at all times comply with each of
          the  representations,  warranties,  and  covenants  contained  in this
          Section 4.1 as if such  representation,  warranty or covenant was made
          directly by such SPE Member.

     (xvii) The  charter of the SPE Member  shall at all times have at least one
          duly  appointed  member of its  board of  directors  (an  "Independent
          Director")  reasonably  satisfactory to Lender who shall not have been
          at the time of such individual's appointment, and may not have been at
          any time  during the  preceding  five (5) years (i) a member of, or an
          officer or employee of,  Borrower or any of its members,  subsidiaries
          or  Affiliates  (except  as an  Independent  Director  on any of their
          boards of  directors),  (ii) a customer or supplier  who derives  more
          than  ten  percent  (10%)  of  its  purchases  or  revenues  from  its
          activities  with  Borrower  or  any of its  members,  subsidiaries  or
          Affiliates  (except as an Independent  Director on any of their boards
          of  directors),  (iii) a person or other entity  controlling  any such
          member,  supplier or customer or (iv) a member of the immediate family
          of any such member, officer, employee,  supplier or customer or of any
          other director of the SPE Member.  As used herein,  the term "control"
          means the possession,  directly or indirectly,  of the power to direct
          or cause the direction of the  management  and policies of a person or
          entity, whether through ownership of voting securities, by contract or
          otherwise.

                                      -21-
<PAGE>
     (xviii) The board of  directors of the SPE Member shall not take any action
          which, under the terms of any certificate of incorporation,  bylaws or
          any voting trust agreement with respect to any common stock,  requires
          the vote of the board of  directors  of the SPE  Member  unless at the
          time of such  action  there  shall be at least  one  member  who is an
          Independent Director.

     (xix)Borrower shall conduct its business so that the assumptions  made with
          respect to Borrower in that  certain  opinion  letter  dated as of the
          Closing Date  delivered by Borrower's  counsel in connection  with the
          Loan shall be true and correct in all respects.

     (ee) Investment Company Act. 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;  (ii) a "holding  company"  or a
"subsidiary  company"  of a  "holding  company"  or an  "affiliate"  of either a
"holding  company" or a  "subsidiary  company"  within the meaning of the Public
Utility Holding  Company Act of 1935, as amended;  or (iii) subject to any other
federal or state law or  regulation  which  purports to restrict or regulate its
ability to borrow money.

     (ff)  Fraudulent  Transfer.  Borrower  has not entered into the Loan or any
Loan Document with the actual intent to hinder,  delay, or defraud any creditor,
and  Borrower  has  received  reasonably  equivalent  value in exchange  for its
obligations  under  the  Loan  Documents.  Giving  effect  to  the  transactions
contemplated by the Loan Documents, the fair saleable value of Borrower's assets
exceeds and will,  immediately  following the execution and delivery of the Loan
Documents,   exceed  Borrower's  total  liabilities,   including   subordinated,
unliquidated,  disputed or contingent  liabilities.  The fair saleable  value of
Borrower's assets is and will,  immediately following the execution and delivery
of  the  Loan  Documents,  be  greater  than  Borrower's  probable  liabilities,
including the maximum amount of its contingent  liabilities or its debts as such
debts become  absolute and matured.  Borrower's  assets do not and,  immediately
following the execution and delivery of the Loan Documents will not,  constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. Borrower does not intend to, and does not believe that it will,
incur  debts  and  liabilities   (including  contingent  liabilities  and  other
commitments)  beyond its ability to pay such debts as they mature  (taking  into
account the timing and amounts to be payable on or in respect of  obligations of
Borrower).

     (gg) Management  Agreement.  The Management  Agreement is in full force and
effect and there is no default,  breach or violation existing  thereunder by any
party  thereto and no event has  occurred  (other than  payments due but not yet
delinquent)  that,  with the  passage of time or the giving of notice,  or both,
would constitute a default, breach or violation by any party thereunder. Neither
the  execution  and  delivery  of the  Loan  Documents,  Borrower's  performance
thereunder, the recordation of the Mortgage, nor the exercise of any remedies by
Lender, will adversely affect Borrower's rights under the Management Agreement.

     Section 4.2 SURVIVAL OF  REPRESENTATIONS.  Borrower  agrees that all of the
representations  and  warranties  of  Borrower  set  forth  in  Section  4.1 and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as any amount  remains  owing to Lender under this  Agreement or any of the
other Loan Documents by Borrower. All representations, warranties, covenants and
agreements  made in this  Agreement  or in the other Loan  Documents by Borrower
shall  be  deemed  to have  been  relied  upon  by  Lender  notwithstanding  any
investigation heretofore or hereafter made by Lender or on its behalf.

V.   AFFIRMATIVE COVENANTS
     ---------------------

     Section 5.1 BORROWER COVENANTS.  From the date hereof and until payment and
performance  in full of all  obligations of Borrower under the Loan Documents or
the earlier release of the Lien of the Mortgage (and all related obligations) in
accordance  with the  terms of this  Agreement  and the  other  Loan  Documents,
Borrower hereby covenants and agrees with Lender that:

     (a) Existence;  Compliance  with Legal  Requirements;  Insurance.  Borrower
shall do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its existence,  rights,  licenses,  permits and franchises
and  comply  with all  Legal  Requirements  applicable  to it and the  Property.
Borrower  shall at all times  maintain,  preserve and protect all franchises and
trade names and preserve all the remainder of its property used or useful in the
conduct of its business  and shall keep the  Property in good working  order and
repair,  and  from  time to time  make,  or cause  to be  made,  all  reasonably
necessary repairs, renewals, replacements, betterments and improvements thereto,
all as more fully provided in the Mortgage.
                                      -22-
<PAGE>
     (b) Taxes and Other Charges. Borrower shall pay all Taxes and Other Charges
now or hereafter  levied or assessed or imposed against the Property or any part
thereof  as the same  become  due and  payable,  other  than  those  which it is
protesting  in good  faith by  appropriate  proceedings  diligently  pursued  in
accordance  with this  Section.  Borrower  will  deliver to Lender  receipts for
payment  or other  evidence  satisfactory  to  Lender  that the  Taxes and Other
Charges have been so paid or are not then  delinquent  no later than thirty (30)
days prior to the date on which the Taxes and/or Other Charges  would  otherwise
be delinquent if not paid (provided,  however,  that Borrower is not required to
furnish  such  receipts for payment of Taxes in the event that such Taxes are to
be paid by Lender pursuant to Section 7.3 hereof if Borrower furnishes a request
by such date for a disbursement from the Tax and Insurance Escrow Fund and there
are sufficient funds therein to make the payment). Borrower shall not suffer and
when due shall  cause to be paid and  discharged  any lien or charge  whatsoever
which may be or become a lien or charge  against the Property  (other than those
liens or charges  which  Borrower  is  protesting  in good faith by  appropriate
proceedings,  diligently  pursued),  and  when  due  shall  pay for all  utility
services  provided  to the  Property.  After  prior  written  notice to  Lender,
Borrower,  at its own  expense,  may contest by  appropriate  legal  proceeding,
promptly  initiated  and  conducted  in good faith and with due  diligence,  the
amount  or  validity  or  application  in whole or in part of any Taxes or Other
Charges,  provided  that (i) no  Default or Event of Default  has  occurred  and
remains uncured,  (ii) such proceeding shall suspend the collection of the Taxes
or Other Charges from the  Property,  (iii) such  proceeding  shall be permitted
under and be conducted in accordance with the provisions of any other instrument
to which Borrower is subject and shall not constitute a default thereunder, (iv)
neither the Property nor any part thereof or interest  therein will be in danger
of being sold, forfeited,  terminated, canceled or lost, (v) Borrower shall have
furnished  such  security  as may be required  in the  proceeding,  or as may be
reasonably requested by Lender, to insure the payment of any such Taxes or Other
Charges,  together  with all interest and  penalties  thereon and (vi)  Borrower
shall promptly upon final determination thereof pay the amount of any such Taxes
or Other Charges,  together with all costs,  interest and penalties which may be
payable in  connection  therewith  subject to payment  pursuant to Section  7.3.
Lender may,  following prior written notice to Borrower,  pay over any such cash
deposit or part thereof held by Lender to the claimant  entitled  thereto at any
time when,  in the  judgment  of Lender,  the  entitlement  of such  claimant is
established.

     (c) Litigation.  Borrower shall give prompt written notice to Lender of any
litigation or governmental  proceedings  pending or threatened  against Borrower
which might  materially  adversely  affect  Borrower's  condition  (financial or
otherwise) or business or the Property.

     (d) Premises.  Borrower shall permit agents,  representatives and employees
of Lender to inspect the Property or any part thereof at  reasonable  hours upon
reasonable advance notice.

     (e)  Notice  of  Default.  Borrower  shall  promptly  advise  Lender of any
material adverse change in Borrower's condition,  financial or otherwise,  or of
the  occurrence  of any  Default  or Event of  Default  of  which  Borrower  has
knowledge.

     (f) Cooperate in Legal  Proceedings.  Borrower shall  cooperate  fully with
Lender  with  respect  to any  proceedings  before  any  court,  board  or other
Governmental  Authority  which may in any way  materially  adversely  affect the
rights of Lender  hereunder  or any rights  obtained by Lender  under any of the
other Loan  Documents  and,  in  connection  therewith,  permit  Lender,  at its
election, to participate in any such proceedings.

     (g) Perform Loan Documents. Borrower shall observe, perform and satisfy all
the terms,  provisions,  covenants and conditions of, and shall pay when due all
costs,  fees and  expenses  to the  extent  required  under  the Loan  Documents
executed and delivered by Borrower.

     (h) Insurance  Benefits.  Borrower shall cooperate with Lender in obtaining
for Lender the benefits of any Insurance  Proceeds lawfully or equitably payable
in  accordance  with Section 7.1 hereof in  connection  with the  Property,  and
Lender shall be reimbursed  for any expenses  incurred in  connection  therewith
(including attorneys' fees and disbursements, and the expense of an appraisal on
behalf of Lender in case of a fire or other  casualty  affecting the Property or
any part thereof) out of such Insurance Proceeds.

     (i)  Further  Assurances.  Borrower  shall,  at  Borrower's  sole  cost and
expense:



                                      -23-
<PAGE>
          (A) furnish to Lender all instruments,  documents,  boundary  surveys,
footing  or  foundation   surveys,   certificates,   plans  and  specifications,
appraisals, title and other insurance reports and agreements, and each and every
other document,  certificate,  agreement and instrument required to be furnished
by it pursuant to the terms of the Loan  Documents  or  reasonably  requested by
Lender in connection therewith;

          (B)  execute  and  deliver  to  Lender  such  documents,  instruments,
certificates,  assignments and other writings,  and do such other acts necessary
or desirable,  to evidence,  preserve  and/or protect the collateral at any time
securing or  intended to secure its  obligations  under the Loan  Documents,  as
Lender may reasonably require, so long as Borrower's liability is not materially
increased thereby; and

          (C) do and execute all and such further  lawful and  reasonable  acts,
conveyances and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Loan  Documents,  as Lender
shall reasonably  require from time to time, so long as Borrower's  liability is
not materially increased thereby.

     (j)  Supplemental  Mortgage  Affidavits.  If at any time Lender  reasonably
determines,  based on  applicable  law,  that Lender is not being  afforded  the
maximum  amount of security  available from the Property as a direct or indirect
result of  applicable  taxes not having been paid with respect to the  Property,
Borrower  agrees that Borrower will execute,  acknowledge and deliver to Lender,
immediately upon Lender's request, supplemental affidavits increasing the amount
of the Debt  attributable to the Property to the amount of the Debt and Borrower
shall, on demand, pay any additional taxes.

     (k) Financial Reporting.

          (i)  Borrower  will  keep and  maintain  or will  cause to be kept and
maintained on a Fiscal Year basis,  in accordance with GAAP or another method of
preparation approved by Lender,  proper and accurate books, records and accounts
reflecting all of the financial  affairs of Borrower and all items of income and
expense in connection  with the operation of the Property and in connection with
any services, equipment or furnishings provided in connection with the operation
of the  Property,  whether  such income or expense be realized by Borrower or by
any other Person  whatsoever,  excepting  lessees  unrelated to and unaffiliated
with  Borrower  who have leased from  Borrower  portions of the Property for the
purpose of occupying the same.  Lender shall have the right from time to time at
all times during normal  business hours upon  reasonable  notice to examine such
books,  records  and  accounts  at  the  office  of  Borrower  or  other  Person
maintaining such books, records and accounts and to make such copies or extracts
thereof as Lender shall desire.  After the occurrence and during the continuance
of an Event of Default,  Borrower  shall pay any costs and expenses  incurred by
Lender to examine Borrower's accounting records with respect to the Property, as
Lender  shall  determine to be necessary or  appropriate  in the  protection  of
Lender's interest.

          (ii) Borrower will furnish to Lender  annually,  (A) within forty (40)
days  following  the end of each Fiscal Year of  Borrower,  unaudited  financial
statements  of Borrower,  and (B) within  ninety (90) days  following the end of
each  Fiscal  Year  of  Borrower,   (y)  a  complete  copy  of  the  unqualified
consolidated annual financial statements of Prime Group Realty Trust, audited by
a "big six" accounting firm (as such accounting firm may have been  consolidated
with another "big six" accounting firm) or another independent  certified public
accountant  reasonably acceptable to Lender in accordance with GAAP covering the
Property  for  such  Fiscal  Year  and (z)  financial  statements  of  Borrower,
unaudited but certified by an independent certified public accountant reasonably
acceptable to Lender,  containing  balance  sheets and  statements of profit and
loss for  Borrower  and the  Property  in such  detail as Lender may  reasonably
request.  Such statements shall set forth the financial condition and the income
and  expenses  for the  Property for the  immediately  preceding  calendar  year
including statements of annual net operating income. Borrower's annual financial
statements  (unaudited  and  audited)  shall  be  accompanied  by  an  Officer's
Certificate certifying that, to the best of such officer's knowledge,  each such
annual  financial  statement  presents  fairly the  financial  condition  of the
Property and has been prepared in accordance with GAAP. Together with Borrower's
annual  financial  statements,  Borrower  shall  furnish to Lender an  Officer's
Certificate  certifying  as of the  date  thereof  whether,  to the  best of its
knowledge,  there exists an event or circumstance which constitutes a Default or
Event of Default  under the Loan  Documents  executed and delivered by Borrower,
and if such Default or Event of Default exists,  the nature thereof,  the period
of time it has existed and the action then being taken to remedy the same.



                                      -24-
<PAGE>
          (iii) Borrower will furnish, or cause to be furnished, to Lender on or
before  thirty  (30) days  after the end of each  calendar  month the  following
items, in a format reasonably acceptable to Lender,  accompanied by an Officer's
Certificate certifying that, to the best of such officer's knowledge, such items
are true,  correct,  accurate,  and  complete and fairly  present the  financial
condition  and  results  of the  operations  of  Borrower  and the  Property  in
accordance  with GAAP or a method of preparation  approved by Lender (subject to
normal  year  end  adjustments)  as  applicable:  (A)  monthly  and year to date
operating  statements  prepared for each  calendar  month,  noting net operating
income and other  information  necessary and sufficient to fairly  represent the
results of operation of the Property  during such  calendar  month,  all in form
reasonably  satisfactory to Lender; (B) a balance sheet for each such month; (C)
a  comparison  of the budgeted  income and  expenses  and the actual  income and
expenses  for  each  month  and year to date for the  Property  together  with a
detailed  explanation  of any  variances  of ten percent  (10%) or more  between
budgeted and actual amounts for such period and year to date; (D) a statement of
the actual capital expenditures made by Borrower during each calendar quarter as
of the last day of such  calendar  quarter;  (E) a  calculation  reflecting  the
annual Debt Service  Coverage  Ratio as of the last day of each calendar  month;
and (F) a statement  that the  representations  and  warranties  of Borrower set
forth  in  Section  4.l(dd)(iv)  are  true  and  correct  as of the date of such
certificate.

          (iv)  Borrower will  furnish,  or cause to be furnished,  to Lender as
soon as available  and in any event on or before  thirty (30) days after the end
of each calendar  month  occupancy  rates,  rent rolls  (identifying  the leased
premises,  names of all  tenants,  units  leased,  monthly  rental and all other
charges  payable under each lease,  date to which paid,  term of lease,  date of
occupancy,  date  of  expiration,  any and  every  material  special  provision,
concession or inducement granted to tenants during such month) and a delinquency
report for the Property and such other relevant  information with respect to the
Property as requested by the Lender,  in each case  accompanied  by an Officer's
Certificate  certifying  that  such  items  are  true,  correct,  accurate,  and
complete.

          (v) Borrower  shall  furnish to Lender,  within ten (10) Business Days
after request,  such further detailed  information with respect to the operation
of the  Property  and the  financial  affairs of Borrower  as may be  reasonably
requested  by Lender or any  applicable  Rating  Agency.  If  Borrower  fails to
provide to Lender or its designee any of the financial statements, certificates,
reports or information (the "Required  Records") required by this Section 5.1(k)
within thirty (30) days after the date upon which such  Required  Record is due,
Borrower shall pay to Lender, at Lender's option and in its sole discretion,  an
amount equal to $5,000 for each Required Record that is not delivered;  provided
that,  Lender  has given at least  fifteen  (15) days  prior  written  notice to
Borrower of such failure by Borrower to timely  submit the  applicable  Required
Record.

     (l)  Business  and  Operations.  Borrower  will  continue  to engage in the
businesses presently conducted by it as and to the extent the same are necessary
for the  ownership,  maintenance,  management  and  operation  of the  Property.
Borrower will qualify to do business and will remain in good standing  under the
laws of each  jurisdiction  as and to the extent the same are  required  for the
ownership, maintenance, management and operation of the Property.

     (m) Title to the  Property.  Borrower will warrant and defend (i) the title
to the Property and every part thereof,  subject only to Liens  permitted  under
the Loan Documents (including Permitted  Encumbrances) and (ii) the validity and
priority of the Lien of the Mortgage,  subject only to Liens permitted under the
Loan  Documents  (including  Permitted  Encumbrances),  in each case against the
claims of all  Persons  whomsoever.  Borrower  shall  reimburse  Lender  for any
losses,  costs,  damages or expenses (including  reasonable  attorneys' fees and
court costs)  incurred by Lender if an interest in the  Property,  other than as
permitted hereunder, is claimed by another Person.

     (n) Costs of Enforcement.  In the event (i) that the Mortgage is foreclosed
in  whole or in part or is put into the  hands of an  attorney  for  collection,
suit, action or foreclosure, (ii) of the foreclosure of any mortgage prior to or
subsequent to the Mortgage  encumbering the Property in which proceeding  Lender
is made a party or (iii) of the bankruptcy, insolvency,  rehabilitation or other
similar  proceeding  in respect of Borrower or an assignment by Borrower for the
benefit  of its  creditors,  Borrower,  its  successors  or  assigns,  shall  be
chargeable with and agrees to pay all costs of collection and defense, including
reasonable  attorneys'  fees in connection  therewith and in connection with any
appellate  proceeding or post-judgment  action involved therein,  which shall be
due and payable together with all required service or use taxes.

     (o) Estoppel Statement.
                                      -25-
<PAGE>
          (i) After  request  by  Lender,  Borrower  shall  within ten (10) days
furnish Lender with a statement, duly acknowledged and certified,  setting forth
(A) the unpaid  principal amount of the Note, (B) the Interest Rate of the Note,
(C) the date  installments of interest and/or  principal were last paid, (D) any
offsets or defenses  to the  payment of the Debt,  if any and (E) that the Note,
this Agreement,  the Mortgage and the other Loan Documents are valid,  legal and
binding  obligations  and  have  not  been  modified  or  if  modified,   giving
particulars of such modification.

          (ii) After request by Lender (but no more  frequently than once in any
year),  Borrower  shall within ten (10) days furnish  Lender with a  certificate
reaffirming all  representations and warranties of Borrower set forth herein and
in the other Loan Documents as of the date requested by Lender or, to the extent
of any  changes to any such  representations  and  warranties,  so stating  such
changes.

          (iii) Borrower shall deliver to Lender upon request,  tenant  estoppel
certificates  from each tenant at the Property in form and substance  reasonably
satisfactory  to Lender  provided that Borrower shall not be required to deliver
such certificates more frequently than one (1) time in any calendar year.

     (p) Loan Proceeds.  Borrower shall use the proceeds of the Loan received by
it on the Closing Date only for the purposes set forth in Section 2.1.4.

     (q)  Performance by Borrower.  Borrower  shall in a timely manner  observe,
perform and fulfill  each and every  covenant,  term and  provision of each Loan
Document  executed  and  delivered  by  Borrower,  and shall  not enter  into or
otherwise  suffer or permit any amendment,  waiver,  supplement,  termination or
other  modification  of any Loan  Document  executed  and  delivered by Borrower
without the prior written consent of Lender.

     (r) Annual  Budget.  Borrower  shall  prepare  and  submit (or shall  cause
Manager to prepare  and  submit) to Lender by December 1 of each year during the
Term, a proposed pro forma  budget for the  Property for the  succeeding  fiscal
year  commencing  January 1 and ending  December 31 (the "Annual  Budget")  and,
promptly after  preparation  thereof,  any  subsequent  revisions to such Annual
Budget.  After the  occurrence of a Cash Trap Event,  the Annual Budget shall be
subject to Lender's  approval which approval shall not be unreasonably  withheld
or  delayed.  Lender's  failure  to  approve or  disapprove  any  Annual  Budget
requiring  Lender's  approval  within  thirty (30) days after  Lender's  receipt
thereof  shall be deemed to constitute  Lender's  approval  thereof.  The Annual
Budget shall consist of (i) an operating expense budget (the "Operating Budget")
showing, on a month-by-month  basis, in reasonable detail, each line item of the
Borrower's anticipated income and Operating Expenses (on a cash modified basis),
including amounts required to establish, maintain and/or increase reserves, (ii)
a Capital Expense Budget (the "Capital  Budget")  showing,  on a  month-by-month
basis, in reasonable detail, each line item of anticipated  Capital Expenses.  A
copy of the Budget for the period  commencing  on the date  hereof and ending on
December  31,  1998  shall  be  delivered  to  Lender  for its  approval  within
forty-five (45) days after the date hereof.

     (s) Confirmation of  Representations.  In addition to and not in limitation
of the covenants and agreements of Borrower  contained in Section 9.1,  Borrower
shall  deliver,  in  connection  with  any  Secondary  Market  Transaction,  (i)
Officer's Certificates certifying as to the accuracy of all representations made
by Borrower in the Loan Documents (with changes made to such  representations as
necessary  to render them  factually  accurate) as of the date of the closing of
such  Secondary  Market  Transaction  and  (ii)  certificates  of  the  relevant
Governmental  Authorities  in all  relevant  jurisdictions  indicating  the good
standing and  qualification  of Borrower as of the date of the Secondary  Market
Transaction.

     (t) No Joint Assessment.  Borrower shall not suffer, permit or initiate the
joint assessment of the Property (i) with any other real property constituting a
tax lot  separate  from the  Property  and (ii) with any portion of the Property
which may be deemed to  constitute  personal  property,  or any other  procedure
whereby the lien of any taxes which may be levied against such personal property
shall be assessed or levied or charged to the Property.

     (u) Leasing  Matters.  Borrower shall not,  without  Lender's prior written
consent,  enter  into,  modify,  amend or renew any Lease (x) for 10,000 or more
square feet while an Event of Default is not occurring or (y) for any size while
an Event of Default is  continuing.  Any Lease for less than 10,000  square feet
that is entered into, modified,  amended or renewed during a period of time when
no Event of Default  exists shall be deemed  approved by Lender  (such Lease,  a
"Deemed  Approved  Lease").  If Lender  does not approve or  disapprove  a Lease


                                      -26-
<PAGE>
(other than a Deemed  Approved  Lease) within ten (10) Business Days of Lender's
receipt of such Lease and all information  relating thereto reasonably requested
by Lender,  such Lease shall be deemed  approved.  Upon request,  Borrower shall
furnish  Lender with executed  copies of all Leases.  All renewals of Leases and
all proposed  Leases shall  provide for rental rates that are at or greater than
existing local market rates for space at properties similar to the Property. All
proposed Leases shall be on commercially  reasonable terms and shall not contain
any terms which would materially adversely affect Lender's rights under the Loan
Documents.  All Leases shall provide that they are  subordinate  to the Mortgage
encumbering  the Property  and that the lessee  agrees to attorn to Lender if it
succeeds to the interest of Borrower in the Property. Borrower (i) shall observe
and perform the obligations imposed upon the lessor under the Leases, other than
immaterial  obligations  the failure of which to perform is not likely to have a
material adverse effect on the Property or the applicable Lease(s);  (ii) shall,
in the exercise of its prudent business judgment,  enforce the terms,  covenants
and conditions contained in the Leases upon the part of the lessee thereunder to
be observed or performed; (iii) shall not collect any of the rents more than one
(1) month in advance (other than security deposits);  (iv) shall not execute any
other  assignment  of lessor's  interest  in the Leases or the Rents  (except as
contemplated by the Loan Documents);  (v) shall not alter,  modify or change the
terms of the Leases in a manner  inconsistent  within the provisions of the Loan
Documents;  and (vi) shall execute and deliver at the request of Lender all such
further assurances,  confirmations and assignments in connection with the Leases
as Lender shall from time to time reasonably require.

     (v) Principal  Place of Business.  Borrower  shall not change its principal
place of business set forth on the first page of this  Agreement  without  first
giving Lender thirty (30) days prior written notice.

     (w) Management Agreement.  Borrower shall cause the Property to be operated
pursuant the Management Agreement. Borrower shall:

          (i)  promptly   perform  and/or  observe  all  of  the  covenants  and
agreements  required to be  performed  and  observed by it under the  Management
Agreement  and do all things  necessary to preserve and to keep  unimpaired  its
material rights thereunder;

          (ii)  promptly  notify  Lender of any  default  under  the  Management
Agreement of which it is aware;

          (iii)  promptly,  upon Lender's  request,  deliver to Lender a copy of
each financial  statement,  business plan, capital  expenditures plan,  property
improvement plan and any other notice,  report and estimate received by it under
the Management Agreement; and

          (iv) promptly  enforce the  performance  and  observance of all of the
covenants and agreements required to be performed and/or observed by the Manager
under the Management Agreement.

VI.      NEGATIVE COVENANTS
        ------------------

     Section 6.1  BORROWER'S  NEGATIVE  COVENANTS.  From the date  hereof  until
payment and  performance  in full of all  obligations of Borrower under the Loan
Documents or the earlier  release of the Lien of the Mortgage in accordance with
the terms of this Agreement and the other Loan Documents, Borrower covenants and
agrees  with  Lender that it will not do,  directly  or  indirectly,  any of the
following:

     (a)  Operation of Property.  Borrower  shall not,  without  Lender's  prior
consent:  (i)  surrender,  terminate  or  cancel  the  Management  Agreement  or
otherwise replace the Manager of the Property or enter into any other management
agreements with respect to the Property  (except  pursuant to Section 9.5); (ii)
reduce or  consent to the  reduction  of the term of the  Management  Agreement;
(iii) increase or consent to the increase of the amount of any charges under the
Management Agreement;  or (iv) otherwise modify,  change,  supplement,  alter or
amend,  or waive or release any of its rights and remedies  under the Management
Agreement in any material respect.

     (b) Liens. Borrower shall not, without the prior written consent of Lender,
create, incur, assume or suffer to exist any Lien on any portion of the Property
or permit any such action to be taken, except (i) Permitted  Encumbrances,  (ii)
Liens created by or permitted pursuant to the Loan Documents and (iii) Liens for
Taxes or Other Charges not yet due.

     (c) Dissolution.  Borrower shall not dissolve, terminate,  liquidate, merge
with or consolidate into another Person.

                                      -27-
<PAGE>
     (d) Change In Business.  Borrower shall not enter into any line of business
other than the ownership  and  operation of the  Property,  or make any material
change  in  the  scope  or  nature  of  its  business  objectives,  purposes  or
operations, or undertake or participate in activities other than the continuance
of its present business.

     (e) Debt  Cancellation.  Borrower shall not cancel or otherwise  forgive or
release any claim or debt owed to Borrower  by any Person,  except for  adequate
consideration  and  in  the  ordinary  course  of  Borrower's  business  in  its
reasonable judgment.

     (f) Affiliate  Transactions.  Borrower  shall not enter into, or be a party
to, any  transaction  with an  Affiliate  of  Borrower  or any of the members of
Borrower  except in the ordinary course of business and on terms which are fully
disclosed  to Lender in advance  and are no less  favorable  to Borrower or such
Affiliate than would be obtained in a comparable arms-length transaction with an
unrelated third party.

     (g)  Zoning.   Borrower  shall  not  initiate  or  consent  to  any  zoning
reclassification  of any  portion of any of the  Property  or seek any  variance
under any existing  zoning  ordinance or use or permit the use of any portion of
any of the  Property  in any  manner  that could  result in such use  becoming a
non-conforming  use under any zoning  ordinance or any other applicable land use
law, rule or regulation, without the prior consent of Lender.

     (h) Assets.  Borrower shall not purchase or own any real  properties  other
than the Property.

     (i) Debt.  Borrower shall not create,  incur or assume any debt  (including
subordinate debt) other than the Debt and other than Permitted Indebtedness.  In
addition,  no Person owning any interest in Borrower  shall pledge,  transfer or
otherwise  dispose of its interest in Borrower to secure any  financing  for the
benefit of such Person, Borrower or the Property.

     (j)  Transfers.  Borrower shall not,  without the prior written  consent of
Lender,  suffer  or permit  the  sale,  assignment  or  transfer  (collectively,
"Transfer")  of (i) all or any  part of the  Property  (except  pursuant  to any
Lease)  other  than in  connection  with a  Special  Transfer,  (ii) any  direct
interest in  Borrower or (iii) any direct or indirect  interest in any member of
Borrower  other than (A) the  issuance or transfer of  beneficial  interests  in
Prime Group Realty Trust, a Maryland real estate  investment  trust,  so long as
such  issuance or transfer does not result in a change in Control of Prime Group
Realty  Trust and so long as such  issuance  or  transfer  does not  affect  the
non-consolidation  opinion  delivered  by  Borrower,  and  (B) the  issuance  or
transfer of limited  partner  interests  in Prime Group  Realty L.P., a Delaware
limited  partnership,  or a  conversion  of a one  percent  general  partnership
interest owned  beneficially  by The Nardi Group,  L.L.C.  in Prime Group Realty
L.P. into a limited partnership  interest in Prime Group Realty L.P., so long as
such  issuance or transfer does not result in a change in Control of Prime Group
Realty  L.P.  and so long as such  issuance  or  transfer  does not  affect  the
non-consolidation  opinion  delivered  by  Borrower;   provided,  however,  that
Borrower may grant the easements  and other rights in the Property  specifically
permitted under Section 8(f) of the Mortgage. No Transfer consented to by Lender
pursuant to clause (ii) or (iii) above shall be  permitted  unless  Lender shall
have received (a) evidence in writing from the applicable Rating Agencies to the
effect that such a Transfer  will not result in a  qualification,  withdrawal or
downgrading of the ratings in effect  immediately prior to such Transfer for the
Securities  issued  in  connection  with  the  Securitization   which  are  then
outstanding and (b) a non-consolidation  opinion satisfactory to Lender from the
transferee's  counsel.  On or  before  the  completion  of  any  such  permitted
Transfer,  Borrower  will pay all  reasonable  expenses  of Lender  incurred  in
connection therewith. Notwithstanding anything to the contrary contained in this
clause (j),  holders of  interests  in Borrower  (or holders of interests in any
entity  directly or  indirectly  holding an interest in Borrower) as of the date
hereof (the "Interest  Holders") shall have the right to transfer their interest
in  Borrower  (or any entity  directly  or  indirectly  holding an  interest  in
Borrower) to another  Person who is not an Interest  Holder,  including  without
limitation  immediate  family  members  for estate  planning  purposes,  without
Lender's consent; provided, however, that:

          (i) after  taking into  account any prior  transfers  pursuant to this
sentence,  whether to the proposed transferee or otherwise, no such transfer (or
series of transfers) shall result in (A) the proposed transferee,  together with
all members of his/her immediate family or any affiliates thereof, owning in the
aggregate (directly,  indirectly or beneficially) more than 20% of the interests
in  Borrower  (or any entity  directly  or  indirectly  holding an  interest  in
Borrower) or (B) a transfer in the  aggregate of more than 20% of the  interests
in Borrower as of the date hereof;
                                      -28-
<PAGE>
          (ii) no such transfer of interest  shall result in a change of control
of Borrower or the day-to-day operations of the Property;

          (iii) Borrower shall give Lender notice of such transfer together with
copies of all  instruments  effecting  such transfer not less than ten (10) days
prior to the date of such transfer;

          (iv) no Event of Default has occurred and remains uncured; and

          (v) the legal and financial  structure of Borrower after such transfer
and its members  and the single  purpose  nature and  bankruptcy  remoteness  of
Borrower  and its  shareholders,  partners or members  satisfies  Lender's  then
current  applicable  underwriting  criteria and requirements,  including without
limitation  the  requirement  at  the  request  of  Lender  to  deliver  written
confirmations from the Rating Agencies that such transfer or series of transfers
will  not  result  in a  qualification,  downgrade  or  withdrawal  of the  then
applicable ratings.

For  purposes of this clause (j),  (A) a change of control of Borrower  shall be
deemed to have occurred if there is any change in the identity of the individual
or entities or group of individuals or entities who have the right, by virtue of
any  partnership  agreement,  articles  of  incorporation,  bylaws,  articles of
organization, operating agreement or any other agreement, with or without taking
any  formative  action,  to cause  Borrower  to take some  action or to prevent,
restrict or impede  Borrower  from taking some  action  which,  in either  case,
Borrower  could take or could  refrain from taking were it not for the rights of
such individuals;  and (B) an "immediate family member" shall mean a spouse or a
child of any Interest Holder.

VII. CASUALTY; CONDEMNATION; ESCROWS
     -------------------------------

     Section 7.1 INSURANCE; CASUALTY AND CONDEMNATION.

     7.1.1 INSURANCE.

     (a)  Borrower,  at its sole cost and  expense,  for the  mutual  benefit of
Borrower  and Lender,  shall keep the  Property  insured and obtain and maintain
during  the Term  policies  of  insurance  insuring  against  loss or  damage by
standard,  "all-risk" perils.  Such insurance (i) shall be in an amount equal to
the  greatest  of (A) the then full  replacement  cost of the  Property  without
deduction for physical  depreciation,  (B) the outstanding  principal balance of
the  Loan  and (C) such  amount  that the  insurer  would  not deem  Borrower  a
co-insurer  under said policies and (ii) and shall have  deductibles  no greater
than  five  percent  (5%) of the  full  replacement  cost of the  Property.  The
premiums  for such  policies  of  insurance  carried  in  accordance  with  this
paragraph  shall be paid  annually in advance and shall  contain a  "Replacement
Cost Endorsement" with a waiver of depreciation.

     (b)  Borrower,  at its sole cost and  expense,  for the  mutual  benefit of
Borrower  and  Lender,  shall  also  obtain  and  maintain  during  the Term the
following policies of insurance:

          (i) Flood  insurance if any part of the Property is located in an area
identified by the Federal Emergency  Management Agency as an area having special
flood  hazards and in which flood  insurance has been made  available  under the
National Flood Insurance  Program in an amount at least equal to the Debt or the
maximum  limit of coverage  available  with respect to the  Property  under said
program, whichever is less.

          (ii)  Commercial  general  liability  insurance,  including broad form
property  damage,  blanket  contractual and personal  injuries  (including death
resulting  therefrom)  coverages and containing minimum limits per occurrence of
$1,000,000 and $2,000,000 in the aggregate for any policy year. In addition,  at
least $10,000,000 excess and/or umbrella  liability  insurance shall be obtained
and maintained  for any and all claims,  including all legal  liability  imposed
upon  Borrower and all court costs and  attorneys'  fees  incurred in connection
with the ownership, operation and maintenance of the Property.

          (iii) Rental loss and/or business interruption  insurance in an amount
equal to the greater of (A) the estimated  gross revenues from the operations of
the  Property  for the next  succeeding  eighteen  (18) month  period or (B) the
projected  operating  expenses  (including Debt Service) for the maintenance and
operation of the Property for the next  succeeding  eighteen  (18) month period.
The amount of such  insurance  shall be  increased  from time to time during the
Term as and when the Rents  increase or the  estimate  of (or the actual)  gross
revenue, as may be applicable, increases.

                                      -29-
<PAGE>
          (iv)  Insurance  against  loss or damage from (A) leakage of sprinkler
systems and (B) explosion of steam boilers,  air  conditioning  equipment,  high
pressure piping, machinery and equipment,  pressure vessels or similar apparatus
now or hereafter  installed in any of the  Improvements  (without  exclusion for
explosions), in an amount at least equal to $2,000,000 for the Property.

          (v) Worker's  compensation  insurance with respect to any employees of
Borrower, as required by any governmental authority or legal requirement.

          (vi) During any period of repair or restoration,  builder's "all risk"
insurance  in an amount equal to not less than the full  insurable  value of the
Property against such risks  (including fire and extended  coverage and collapse
of the  Improvements  to agreed  limits)  as  Lender  may  request,  in form and
substance acceptable to Lender.

          (vii)  Coverage  to  compensate  for the  cost of  demolition  and the
increased cost of  construction  for the Property in an amount  satisfactory  to
Lender.

          (viii)  Such other  insurance  as may from time to time be  reasonably
required by Lender in order to protect its interests.

     (c) All policies of insurance (the "Policies") required pursuant to Section
7.1.1(b) shall be issued by companies reasonably approved by Lender and licensed
to do  business  in the State,  with a claims  paying  ability  rating of "A" or
better by  Standard & Poor's  Ratings  Group;  (ii)  shall  name  Lender and its
successors  and/or assigns as their interest may appear as the mortgagee;  (iii)
shall  contain a  Non-Contributory  Standard  Lender  Clause and a Lender's Loss
Payable Endorsement, or their equivalents,  naming Lender as the person to which
all payments made by such insurance  company shall be paid; (iv) shall contain a
waiver of subrogation  against  Lender;  (v) shall be maintained  throughout the
Term without cost to Lender; (vi) shall be assigned and the certificates thereof
delivered to Lender; and (vii) shall contain endorsements providing that neither
Borrower,  Lender nor any other party shall be a co-insurer  under said Policies
and that Lender shall receive at least thirty (30) days prior written  notice of
any modification,  reduction or cancellation of any of the Policies;  and (viii)
shall be  satisfactory  in form and substance to Lender and shall be approved by
Lender  as to  amounts,  form,  risk  coverage,  deductibles,  loss  payees  and
insureds.  Borrower  shall pay the premiums for such  Policies  (the  "Insurance
Premiums")  as the same  become  due and  payable  and shall  furnish  to Lender
evidence of the renewal of each of the Policies with receipts for the payment of
the Insurance Premiums or other evidence of such payment reasonably satisfactory
to Lender  (provided,  however,  that  Borrower is not  required to furnish such
evidence  of  payment  to Lender if such  Insurance  Premiums  have been paid by
Lender  pursuant  to Section 7.3  hereof).  If  Borrower  does not furnish  such
evidence  and  receipts  at least ten (10) days prior to the  expiration  of any
expiring Policy, then Lender may procure, but shall not be obligated to procure,
such insurance and pay the Insurance Premiums  therefor,  and Borrower agrees to
reimburse  Lender for the cost of such  Insurance  Premiums  promptly on demand.
Within  thirty (30) days after  request by Lender,  Borrower  shall  obtain such
increases in the amounts of coverage  required  hereunder  as may be  reasonably
requested  by Lender,  taking into  consideration  changes in the value of money
over time,  changes in  liability  laws,  and  changes  in prudent  customs  and
practices.

     (d) If any Property is damaged or  destroyed,  in whole or in part, by fire
or other  casualty (an "Insured  Casualty"),  Borrower  shall give prompt notice
thereof to Lender.  Following the occurrence of an Insured Casualty,  unless the
Loan is repaid in full,  Borrower  shall  promptly  proceed to restore,  repair,
replace  or  rebuild  the  Property  to  be of  at  least  equal  value  and  of
substantially the same character as prior to such damage or destruction,  all to
be effected in  accordance  with Legal  Requirements.  The expenses  incurred by
Lender in the adjustment and collection of insurance  proceeds shall become part
of the Debt and be secured  hereby and shall be reimbursed by Borrower to Lender
upon demand.

     7.1.2 CASUALTY AND APPLICATION OF PROCEEDS.

     (a) In  case  of  loss  or  damages  covered  by any of the  Policies,  the
following provisions shall apply:

          (i) If an Insured  Casualty  does not exceed  $200,000,  Borrower  may
settle and adjust any claim  without the consent of Lender;  provided  that such
adjustment  is  carried  out in a  competent  and timely  manner.  In such case,
Borrower is hereby  authorized  to collect  and  receipt for any such  insurance
proceeds.


                                      -30-
<PAGE>
          (ii) If an Insured Casualty shall equal or exceed $200,000, Lender may
settle and adjust any claim  without the consent of Borrower  and agree with the
insurance  company or  companies  on the amount to be paid on the loss,  and the
proceeds of any such policy  shall be due and payable  solely to Lender and held
in escrow by Lender in accordance with the terms hereof.

     (b) In the event of an Insured  Casualty  where the loss is in an aggregate
amount less than $2,000,000,  and if, in the reasonable  judgment of Lender, the
Property  can be  restored  within  six (6)  months  and  prior to the  Optional
Prepayment  Date to an economic  unit not less valuable and not less useful than
the same was prior to the  Insured  Casualty,  and after such  restoration  will
adequately  secure the Debt,  then, if no Default or Event of Default shall have
occurred and be then continuing,  the proceeds of insurance (after reimbursement
of any expenses  incurred by Lender) shall be applied to reimburse  Borrower for
the cost of restoring,  repairing,  replacing or rebuilding the Property or part
thereof subject to the Insured Casualty (the  "Restoration"),  in the manner set
forth herein.  Borrower  hereby  covenants and agrees to commence and diligently
prosecute such Restoration;  provided that (i) Borrower shall pay all costs (and
if required by Lender,  Borrower  shall deposit the total thereof with Lender in
advance) of such  Restoration  in excess of the net proceeds of  insurance  made
available  pursuant to the terms hereof;  (ii) the Restoration  shall be done in
compliance  with all Legal  Requirements;  and (iii) Lender shall have  received
evidence  reasonably   satisfactory  to  it  that,  during  the  period  of  the
Restoration,  the sum of (A) income  derived from the  Property,  as  reasonably
determined  by Lender,  plus (B)  proceeds  of rent loss  insurance  or business
interruption  insurance,  if any, to be paid will equal or exceed the sum of (I)
expenses in  connection  with the  operation  of the  Property and (II) the Debt
Service under the Loan.

     (c) Except as provided above, the proceeds of insurance  collected upon any
Insured  Casualty  shall,  at the  option of Lender in its sole  discretion,  be
applied to the payment of the Debt or applied to reimburse Borrower for the cost
of any  Restoration,  in the manner set forth below. Any such application to the
Debt shall be without any  prepayment  consideration  except that if an Event of
Default has occurred and is continuing  at the time the  insurance  proceeds are
received,  then Borrower  shall pay to Lender an additional  amount equal to the
Yield  Maintenance  Premium,  if any, that would be required under Section 2.3.3
hereof if a Defeasance Deposit was to be made by Borrower.  Any such application
to the Debt shall be applied to those  payments of principal  and interest  last
due under  the Note but shall not  postpone  or reduce  any  payments  otherwise
required pursuant to the Note other than such last due payments.

     (d) If Borrower is entitled to reimbursement out of insurance proceeds held
by   Lender,   such   proceeds   shall  be   deposited   by   Lender   into  the
Casualty/Condemnation Subaccount (as described in the Cash Collateral Agreement)
and disbursed from time to time from the  Casualty/Condemnation  Subaccount upon
Lender being  furnished  with (i) evidence  satisfactory  to it of the estimated
cost of  completion  of the  Restoration,  (ii)  funds or, at  Lender's  option,
assurances  satisfactory to Lender that such funds are available,  sufficient in
addition to the proceeds of  insurance  to complete  the  proposed  Restoration,
(iii)  such  architect's  certificates,  waivers  of  lien,  contractor's  sworn
statements, title insurance endorsements,  bonds, plats of survey and such other
evidences of cost,  payment and performance as Lender may reasonably require and
approve and (iv) all plans and specifications  for such Restoration,  such plans
and  specifications  to be approved by Lender prior to commencement of any work.
In addition,  no payment made prior to the final  completion of the  Restoration
shall exceed ninety  percent (90%) of the value of the work  performed from time
to time;  funds other than  proceeds of insurance  shall be  disbursed  prior to
disbursement of such proceeds; and at all times, the undisbursed balance of such
proceeds  remaining in the hands of Lender,  together  with funds  deposited for
that purpose or  irrevocably  committed to the  satisfaction  of Lender by or on
behalf  of  Borrower  for that  purpose,  shall be at  least  sufficient  in the
reasonable  judgment  of  Lender  to pay  for  the  cost  of  completion  of the
Restoration,  free and clear of all liens or claims for lien.  Any surplus which
may remain out of insurance  proceeds held by Lender after payment of such costs
of Restoration shall be paid to Borrower.

     7.1.3 Condemnation.

     (a) Borrower  shall  promptly give Lender  written  notice of the actual or
threatened  commencement  of  any  condemnation  or  eminent  domain  proceeding
affecting the Property (a "Condemnation")  and shall deliver to Lender copies of
any and all papers served in connection  with such  Condemnation.  Following the
occurrence  of a  Condemnation,  Borrower,  regardless  of  whether  an Award is
available,  shall promptly  proceed to restore,  repair,  replace or rebuild the
Property  to  the  extent  practicable  to be of at  least  equal  value  and of
substantially  the  same  character  as prior  to such  Condemnation,  all to be
effected in accordance with Legal Requirements.
                                      -31-
<PAGE>
     (b) Lender is hereby irrevocably appointed as Borrower's  attorney-in-fact,
coupled with an interest,  with exclusive  power to collect,  receive and retain
any award or payment in respect of a  Condemnation  (an "Award") and to make any
compromise or settlement in connection  with such  Condemnation,  subject to the
provisions of this Section.  Notwithstanding  any  Condemnation by any public or
quasi-public   authority   (including  any  transfer  made  in  lieu  of  or  in
anticipation of such a Condemnation), Borrower shall continue to pay the Debt at
the time and in the manner  provided for in the Note, in this  Agreement and the
other Loan  Documents  and the Debt  shall not be  reduced  unless and until any
Award  shall have been  actually  received  and applied by Lender to expenses of
collecting  the Award and to discharge of the Debt.  Lender shall not be limited
to the  interest  paid on the  Award by the  condemning  authority  but shall be
entitled to receive out of the Award  interest at the rate or rates  provided in
the Note.  Borrower shall cause any Award that is payable to Borrower to be paid
directly to Lender.

     (c) In the event of any  Condemnation  where  the Award is in an  aggregate
amount less than $2,000,000,  and if, in the reasonable  judgment of Lender, the
Property  can be  restored  within  six (6)  months  and  prior to the  Optional
Prepayment  Date to an economic  unit not less valuable and not less useful than
the  same  was  prior to the  Condemnation,  and  after  such  restoration  will
adequately  secure the Debt,  then, if no Default or Event of Default shall have
occurred and be then continuing,  the proceeds of the Award (after reimbursement
of any expenses  incurred by Lender) shall be applied to reimburse  Borrower for
the cost of restoring,  repairing,  replacing or rebuilding the Property or part
thereof subject to Condemnation (the  "Condemnation  Restoration") in the manner
set forth below. Borrower hereby covenants and agrees to commence and diligently
to prosecute such Condemnation Restoration; provided that (i) Borrower shall pay
all costs (and if required by Lender,  Borrower  shall deposit the total thereof
with Lender in advance) of such Condemnation  Restoration in excess of the Award
made available pursuant to the terms hereof;  (ii) the Condemnation  Restoration
shall be done in compliance with all Legal Requirements;  and (iii) Lender shall
have received evidence reasonably  satisfactory to it that, during the period of
the Condemnation  Restoration,  the sum of (A) income derived from the Property,
as reasonably  determined by Lender, plus (B) proceeds of rent loss insurance or
business interruption insurance, if any, to be paid will equal or exceed the sum
of (I) expenses in  connection  with the  operation of the Property and (II) the
Debt Service under the Loan.

     (d) Except as provided  above,  the Award  collected upon any  Condemnation
shall, at the option of Lender in its sole discretion, be applied to the payment
of the Debt or applied to reimburse  Borrower  for the cost of the  Condemnation
Restoration  in the manner set forth  below.  Any such  application  to the Debt
shall be without any prepayment consideration except that if an Event of Default
has occurred and is continuing at the time the Award is received,  then Borrower
shall pay to Lender an additional amount equal to the Yield Maintenance Premium,
if any,  that would be  required  under  Section  2.3.3  hereof if a  Defeasance
Deposit was to be made by Borrower.  Any such  application  to the Debt shall be
applied to those  payments of principal and interest last due under the Note but
shall not postpone or reduce any  payments  otherwise  required  pursuant to the
Note  other  than such  last due  payments.  If the  Property  is sold,  through
foreclosure or otherwise,  prior to the receipt by Lender of such Award,  Lender
shall have the right,  whether or not a deficiency judgment on the Note shall be
recoverable or shall have been sought,  recovered or denied, to receive all or a
portion of said Award sufficient to pay the Debt.

     (e) In the event  Borrower is entitled  to  reimbursement  out of the Award
received by Lender,  such  proceeds  shall be  disbursed  from time to time upon
Lender being  furnished  with (i) evidence  satisfactory  to it of the estimated
cost of completion of the Condemnation  Restoration,  (ii) funds or, at Lender's
option,  assurances  satisfactory  to  Lender  that such  funds  are  available,
sufficient in addition to the proceeds of the Award to complete the Condemnation
Restoration, (iii) such architect's certificates,  waivers of lien, contractor's
sworn statements, title insurance endorsements,  bonds, plats of survey and such
other  evidences  of costs,  payment and  performance  as Lender may  reasonably
require and approve; and (iv) all plans and specifications for such Condemnation
Restoration,  such plans and  specifications  to be approved by Lender  prior to
commencement of work. In addition, no payment made prior to the final completion
of the  restoration,  repair,  replacement  and  rebuilding  shall exceed ninety
percent (90%) of the value of the work  performed  from time to time;  (y) funds
other than  proceeds of the Award shall be disbursed  prior to  disbursement  of
such proceeds;  and (z) at all times,  the undisbursed  balance of such proceeds
remaining in the hands of Lender, together with funds deposited for that purpose
or  irrevocably  committed  to the  satisfaction  of  Lender  by or on behalf of
Borrower  for  that  purpose,  shall be at least  sufficient  in the  reasonable
judgment  of  Lender  to pay for the  costs of  completion  of the  Condemnation


                                      -32-
<PAGE>
Restoration  free and clear of all liens or claims for lien.  Any surplus  which
may remain out of the Award  received by Lender  after  payment of such costs of
restoration,  repair,  replacement or rebuilding shall, in the sole and absolute
discretion of Lender, be retained by Lender and applied to payment of the Debt.

     Section 7.2 REQUIRED REPAIR; REQUIRED REPAIR FUNDS.

     7.2.1 REQUIRED REPAIRS: DEPOSITS. Borrower shall perform the repairs at the
Property  set forth on  Schedule  3 annexed  hereto  (the  "Required  Repairs").
Borrower shall  complete each of the Required  Repairs on or before the deadline
for same set forth on Schedule 3. On the Closing  Date,  Borrower  shall deposit
with Lender the amount set forth on  Schedule 3 hereto to perform  the  Required
Repairs for the Property. Amounts so deposited with Lender (the "Required Repair
Fund") shall be held by Lender in an account (the "Required  Repair Account") in
Lender's  name  at a  financial  institution  selected  by  Lender  in its  sole
discretion and shall be invested in Permitted Investments.

     7.2.2 GRANT OF SECURITY  INTEREST.  Borrower  hereby  pledges,  assigns and
grants a security interest to Lender, as security for payment of all sums due in
respect  of the Loan and the  performance  of all other  terms,  conditions  and
covenants of the Loan Documents and this Agreement on Borrower's part to be paid
and  performed,  all of  Borrower's  right,  title  and  interest  in and to the
Required  Repair  Fund and the  Required  Repair  Account.  Borrower  shall not,
without obtaining the prior written consent of Lender, further pledge, assign or
grant any security  interest in the Required  Repair Fund or the Required Repair
Account or permit any lien or encumbrance to attach  thereto,  or any levy to be
made thereon, or any UCC-l Financing  Statements,  except those naming Lender as
the secured party, to be filed with respect thereto.

     7.2.3 RELEASE OF REQUIRED  REPAIR FUNDS.  Lender shall disburse to Borrower
all Required  Repair Funds in the Required  Repair Account upon  satisfaction by
Borrower  of each of the  following  conditions:  (a)  Borrower  shall  submit a
written  request  for  payment to Lender at least  thirty (30) days prior to the
date on which  Borrower  requests such payment be made (except in the case of an
emergency repair which requires immediate attention, in which event Borrower may
submit such payment request within ten (10) days),  (b) on the date such request
is  received by Lender and on the date such  payment is to be made,  no Event of
Default  shall  exist and remain  uncured,  (c) Lender  shall have  received  an
Officer's  Certificate from Borrower certifying that all Required Repairs at the
Property for which  disbursement has been requested have been completed (i) in a
good and  workmanlike  manner and (ii) in accordance  with all applicable  Legal
Requirements,  such  certificate  to be  accompanied  by a copy of each license,
permit or other approval  required by any Governmental  Authority for the use or
occupancy  of  the  Property,  (d)  Lender  shall  have  received  an  Officer's
Certificate from Borrower (i) identifying each Person that supplied materials or
labor in connection with the Required  Repairs for which  disbursement  has been
requested  (ii)  stating  that each such Person has been paid in full or will be
paid in full with the funds  disbursed,  such certificate to be accompanied by a
copy of appropriate  lien waivers or other evidence of payment  satisfactory  to
Lender, (e) at Lender's option, a title search for the Property  indicating that
the  Property  is free  from  all  liens,  claims  and  other  encumbrances  not
previously  approved  by Lender and (f) Lender  shall have  received  such other
evidence as Lender shall  reasonably  request  that the Required  Repairs at the
Property have been  completed and paid for or will be paid for with the proceeds
of such  disbursement.  Lender  shall be required to make only one  disbursement
from the Required Repair Account during a month and such  disbursement  shall be
made only upon  satisfaction of each condition  contained in this Section 7.2.3.
Upon  completion of all Required  Repairs in  accordance  with the terms hereof,
Lender shall  disburse to Borrower  any amounts  then  remaining in the Required
Repair Account.

     7.2.4 FAILURE TO PERFORM REQUIRED REPAIRS. It shall be a Default under this
Agreement if (a) Borrower does not complete the Required Repairs at the Property
by the  required  deadline  for each  repair as set forth on  Schedule  3 or (b)
Borrower does not satisfy each condition contained in Section 7.2.3 hereof. Upon
the occurrence of an Event of Default,  Lender, at its option,  may withdraw all
Required Repair Funds from the Required Repair Account and Lender may apply such
funds either to  completion  of the  Required  Repairs at the Property or toward
payment  of the Debt in such  order,  proportion  and  priority  as  Lender  may
determine in its sole discretion.  Lender's right to withdraw and apply Required
Repair Funds shall be in addition to all other  rights and remedies  provided to
Lender under this Agreement and the other Loan Documents.

     Section 7.3 TAX AND INSURANCE ESCROW FUND.




                                      -33-
<PAGE>
     7.3.1 TAX AND INSURANCE  ESCROW FUND.  Borrower  shall pay to Lender (a) on
each Payment Date, (i)  one-twelfth  (1/12) of the Taxes that Lender  reasonably
estimates will be payable during the next ensuing twelve (12) months in order to
accumulate  with Lender  sufficient  funds to pay all such Taxes at least thirty
(30) days prior to their respective due dates and (ii) one-twelfth (1/12) of the
Insurance  Premiums that Lender estimates will be payable for the renewal of the
coverage  afforded  by the  Policies  upon the  expiration  thereof  in order to
accumulate with Lender  sufficient  funds to pay all such Insurance  Premiums at
least  thirty (30) days prior to the  expiration  of the Policies and (b) on the
Closing Date, an amount which, when combined with the monthly deposits described
in (a) above,  shall be sufficient to pay the next  installment of Taxes and the
next  required  payment of  Insurance  Premiums on the due date  therefor  (said
amounts in (a) and (b) above  hereinafter  called the "Tax and Insurance  Escrow
Fund").  The Tax and  Insurance  Escrow  Fund,  and the  payments of interest or
principal or both,  payable  pursuant to the Note,  shall be added  together and
shall be paid as an aggregate  sum by Borrower to Lender.  Lender will apply the
Tax and  Insurance  Escrow  Fund to  payments  of Taxes and  Insurance  Premiums
required  to be made by  Borrower  pursuant  to Section 5.1 hereof and under the
Mortgage,  or to  reimburse  Borrower  for such  amounts  upon  presentation  of
evidence  of  payment  and  an  Officer's  Certificate  in  form  and  substance
satisfactory to Lender;  subject,  however, to Borrower's right to contest Taxes
in accordance with Section 5.1(b) hereof.  In making any payment relating to the
Tax and Insurance Escrow Fund, Lender may do so according to any bill, statement
or estimate procured from the appropriate  public office (with respect to Taxes)
or insurer or agent (with respect to Insurance  Premiums),  without inquiry into
the  accuracy of such bill,  statement  or estimate or into the  validity of any
tax, assessment,  sale,  forfeiture,  tax lien or title or claim thereof. If the
amount of the Tax and  Insurance  Escrow  Fund shall  exceed the amounts due for
Taxes and Insurance Premiums pursuant to Section 5.1 hereof, Lender shall return
any excess to Borrower or credit such excess against future  payments to be made
to the Tax and Insurance Escrow Fund. In allocating such excess, Lender may deal
with the Person shown on the records of Lender to be the owner of the  Property.
If at any time Lender  determines that the Tax and Insurance  Escrow Fund is not
or will not be  sufficient  to pay the  items  set  forth in (a) and (b)  above,
Lender shall notify Borrower of such  determination  and Borrower shall increase
its monthly payments to Lender by the amount that Lender reasonably estimates is
sufficient  to make up the  deficiency  at  least  thirty  (30)  days  prior  to
delinquency of the Taxes and/or expiration of the Policies, as the case may be.

     7.3.2 GRANT OF SECURITY  INTEREST.  Borrower  hereby  pledges,  assigns and
grants a security  interest to Lender,  as security  for payment of all sums due
under the Loan and the performance of all other terms, conditions and provisions
of the Loan  Documents  and this  Agreement  on  Borrower's  part to be paid and
performed,  of all  Borrower's  right,  title and interest in and to the Tax and
Insurance Escrow Fund.  Borrower shall not, without  obtaining the prior written
consent of Lender,  further pledge, assign or grant any security interest in the
Tax and  Insurance  Escrow  Fund,  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.

     7.3.3 APPLICATION OF TAX AND INSURANCE ESCROW FUND. Upon the occurrence and
during the  continuance  of an Event of Default,  Lender may apply any sums then
present in the Tax and  Insurance  Escrow Fund to the  payment of the  following
items in any order in its sole  discretion:  (a) Taxes  and Other  Charges;  (b)
Insurance  Premiums;  (c) interest on the unpaid principal  balance of the Note;
(d) amortization of the unpaid  principal  balance of the Note; or (e) all other
sums payable  pursuant to this Agreement and the other Loan  Documents.  The Tax
and  Insurance  Escrow  Fund  shall  not  constitute  a  trust  fund  and may be
commingled  with  other  monies  held by Lender.  Sums in the Tax and  Insurance
Escrow  Fund  shall  be held by  Lender  in an  account  in  Lender's  name at a
financial  institution  selected by Lender in its sole  discretion  and shall be
invested in Permitted  Investments.  Earnings or interest, if any, thereon shall
be retained as part of such funds and applied in  accordance  with this  Section
7.3.  Lender shall not be liable for any loss sustained on the investment of any
funds constituting the Tax and Insurance Escrow Fund.

     Section 7.4 CAPITAL RESERVE FUND.

     7.4.1 CAPITAL  RESERVE FUND.  Borrower  shall pay to Lender on each Payment
Date an  amount  equal  to  one-twelfth  (1/12th)  of the  product  obtained  by
multiplying  $0.27 by the aggregate  amount of square feet of rentable  space in
the Property  (said  amounts  hereinafter  called the "Capital  Reserve  Fund").
Lender  will apply the  Capital  Reserve  Fund to payment  of  Approved  Capital
Expenses pursuant to the terms hereof; provided, however, if the Loan shall have
been  accelerated or if there is an Event of Default which is  continuing,  then


                                      -34-
<PAGE>
Lender may credit such Capital  Reserve  Fund against the Debt in such  priority
and proportions as Lender in its sole and absolute discretion shall deem proper.
If the amount of the  Capital  Reserve  Fund shall  exceed the  amounts  due for
Approved  Capital  Expenses  pursuant to the terms hereof,  Lender shall, in its
discretion,  return any excess to Borrower  or, if future  Capital  Reserve Fund
payments are then  required,  credit such excess  against such future  payments;
provided,  however,  if the Loan shall have been  accelerated  or if there is an
Event of Default which is continuing, then Lender may credit such excess against
the Debt in such  priority  and  proportions  as Lender in its sole and absolute
discretion shall deem proper.

     7.4.2 GRANT OF SECURITY  INTEREST.  Borrower  hereby pledges and assigns to
Lender,  and grants to Lender a security interest in all Borrower's right, title
and interest in and to the Capital  Reserve Fund, as security for payment of all
sums due under the Loan and the  performance of all other terms,  conditions and
provisions  of the Loan  Documents and this  Agreement on Borrower's  part to be
paid and  performed.  Borrower  shall not,  without  obtaining the prior written
consent of Lender,  further pledge, assign or grant any security interest in the
Capital  Reserve Fund, 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.  This
Agreement  is,  among  other  things,  intended  by the parties to be a security
agreement for purposes of the Illinois Uniform Commercial Code.

     7.4.3  APPLICATION OF CAPITAL  RESERVE FUND. Upon the occurrence and during
the  continuance of an Event of Default,  Lender may apply any sums then present
in the Capital  Reserve Fund to the payment of the following  items in any order
in its sole  discretion:  (a)  Capital  Expenses;  (b)  interest  on the  unpaid
principal  balance of the Note; (c) amortization of the unpaid principal balance
of the Note;  or (d) all other sums payable  pursuant to this  Agreement and the
other Loan Documents. The Capital Reserve Fund shall not constitute a trust fund
and may be  commingled  with other  monies  held by Lender.  Sums in the Capital
Reserve  Fund  shall be held by  Lender  in an  account  in  Lender's  name at a
financial  institution  selected by Lender in its sole  discretion  and shall be
invested in Permitted  Investments.  Earnings or interest, if any, thereon shall
be retained as part of such funds and applied in  accordance  with this  Section
7.4.  Lender shall not be liable for any loss sustained on the investment of any
funds constituting the Capital Reserve Fund.

     7.4.4 PAYMENT OF CAPITAL  EXPENSES.  Funds held in the Capital Reserve Fund
may be used for Approved Capital Expenses.  From time to time, Borrower may send
a request for  disbursement  of funds in the Capital  Reserve Fund, but not more
than one (1) time per  month  and,  to the  extent  there are  sufficient  funds
available  in the Capital  Reserve  Fund,  such  disbursements  shall be made by
Lender so long as (a) no Event of Default shall have occurred and be continuing;
(b) such expenditure is for an Approved Capital Expense; and (c) the request for
disbursement is accompanied by (i) an Officer's  Certificate  certifying (A) the
amount  of  funds  to be  disbursed,  (B) that  such  funds  will be used to pay
Approved Capital Expenses and a description  thereof,  (C) that the same has not
been the  subject of a previous  disbursement,  (D) that all  outstanding  trade
payables  (other than those to be paid from the requested  disbursement or those
otherwise  permitted to be  outstanding  under Section  6.1(i) hereof) have been
paid in full and (E) that all previous  disbursements  have been used to pay the
previously  identified  Approved Capital  Expenses and (ii) reasonably  detailed
documentation as to the amount, necessity and purpose therefor.

     Section 7.5 ROLLOVER RESERVE FUND.

     7.5.1 ROLLOVER RESERVE FUND.

     (a) Borrower shall pay to Lender on each Payment Date commencing January 1,
2000, and continuing through December 31, 2000, the sum of $35,817.00 (each such
payment a  "Rollover  Payment"  and such  Rollover  Payments  cumulatively,  the
"Rollover  Reserve  Fund"),  to be applied in accordance  with the terms of this
Section 7.5; provided, however, that

                  (i) if the unsecured  debt rating of Prime Group Realty Trust,
         Inc.  is BBB- or better as  determined  by  Standard  & Poor's  Ratings
         Services as of January 1, 2000,  then  Borrower  may, in lieu of making
         Rollover  Payments,  deliver to Lender on or before January 1, 2000 the
         Prime Group Guaranty (as defined below);

                  (ii)  Borrower  shall  not be  required  to make any  Rollover
         Payments if, as determined by Lender as of January 1, 2000,  the Leases
         that expire  during a single  calendar year at no time  represent  more
         than fifteen  percent (15%) of the gross leasable area of the Property;
         and

                                      -35-
<PAGE>
                  (iii)  Borrower  shall not be  required  to make any  Rollover
         Payments if Borrower  delivers to Lender, on or before January 1, 2000,
         an irrevocable  letter of credit in the amount of $429,799.00 in a form
         and issued by a bank reasonably  acceptable to Lender, and Lender shall
         have the right to draw upon and apply the proceeds  from such letter of
         credit at the times and in the manner  provided in this Section 7.5 for
         application of funds deposited in the Rollover Reserve Fund.

                  For purposes of this  Section 7.5, the "Prime Group  Guaranty"
         shall mean a guaranty in form and substance reasonably  satisfactory to
         Lender from Prime  Group  Realty,  L.P.,  pursuant to which Prime Group
         Realty,  L.P.  unconditionally  guarantees the payment of all costs and
         expenses, up to a maximum amount of $429,799.00, incurred in connection
         with Approved Leasing Expenses.  Lender shall have the right to enforce
         the Prime Group  Guaranty and apply the  proceeds  from the Prime Group
         Guaranty at the times and in the manner  provided  in this  Section 7.5
         for application of funds deposited in the Rollover Reserve Fund.

     (b) Lender will apply the Rollover  Reserve Fund to the payment of Approved
Leasing Expenses pursuant to the terms of this Section 7.5;  provided,  however,
if there is an Event of Default which is continuing, then Lender may credit such
Rollover  Reserve Fund  against the Debt in such  priority  and  proportions  as
Lender in its sole and absolute  discretion shall deem proper.  If the amount of
the Rollover  Reserve  Fund shall  exceed the amounts due for  Approved  Leasing
Expenses  pursuant  to  the  terms  hereof,  Lender  shall,  in  its  reasonable
discretion,  return any excess to Borrower;  provided,  however,  if there is an
Event of Default which is continuing, then Lender may credit such excess against
the Debt in such  priority  and  proportions  as Lender in its sole and absolute
discretion shall deem proper.

     7.5.2 GRANT OF SECURITY  INTEREST.  Borrower  hereby pledges and assigns to
Lender,  and grants to Lender a security  interest in, all of Borrower's  right,
title and interest in and to the Rollover  Reserve Fund, as security for payment
of all  sums  due  under  the  Loan  and the  performance  of all  other  terms,
conditions and provisions of the Loan Documents and this Agreement on Borrower's
part to be paid and performed.  Borrower shall not, without  obtaining the prior
written consent of Lender, further pledge, assign or grant any security interest
in the  Rollover  Reserve  Fund,  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. This Agreement is, among other things,  intended by the parties to be a
security agreement for purposes of the Illinois Uniform Commercial Code.

     7.5.3  APPLICATION OF ROLLOVER RESERVE FUND. Upon the occurrence and during
the  continuance of an Event of Default,  Lender may apply any sums then present
in the Rollover  Reserve Fund to the payment of the following items in any order
in its sole  discretion:  (a)  Approved  Leasing  Expenses;  (b) interest on the
unpaid  principal  balance of the Note; (c) amortization of the unpaid principal
balance of the Note;  or (d) all other sums payable  pursuant to this  Agreement
and the other Loan Documents.  The Rollover  Reserve Fund shall not constitute a
trust fund and may be commingled  with other monies held by Lender.  Sums in the
Rollover  Reserve  Fund  shall be held by Lender or  Servicer  in an  account in
Lender's or Servicer's name at a financial institution selected by Lender in its
sole  discretion  and shall be invested in  Permitted  Investments.  Earnings or
interest, if any, thereon shall be retained as part of such funds and applied in
accordance  with this  Section  7.5.  Lender  shall  not be liable  for any loss
sustained on the investment of any funds constituting the Rollover Reserve Fund.

     7.5.4  PAYMENT OF APPROVED  LEASING  EXPENSES.  Funds held in the  Rollover
Reserve  Fund may be used for  Approved  Leasing  Expenses.  From  time to time,
Borrower may send a request for  disbursement  of funds in the Rollover  Reserve
Fund,  but not more than one (1) time per month  and,  to the  extent  there are
sufficient  funds  available in the Rollover  Reserve Fund,  such  disbursements
shall be made by Lender within five (5) Business Days of such request so long as
(a) no  Event  of  Default  shall  have  occurred  and be  continuing;  (b) such
expenditure  is for an  Approved  Leasing  Expense;  and  (c)  the  request  for
disbursement is accompanied by (i) an Officer's  Certificate  certifying (A) the
amount  of  funds  to be  disbursed,  (B) that  such  funds  will be used to pay
Approved  Leasing Expenses and a description  thereof,  (C) that all outstanding
trade payables  (other than those to be paid from the requested  disbursement or
those  otherwise  permitted to be outstanding  under Section 6.1(i) hereof) have
been  paid in full,  (D) that the same has not been the  subject  of a  previous
disbursement,  and (E) that all previous disbursements have been used to pay the
previously identified Approved Leasing Expenses and (ii) if requested by Lender,
reasonably  detailed  supporting  documentation as to the amount,  necessity and
purpose  therefor.  Should Borrower  deliver to Lender an irrevocable  letter of
credit in  accordance  with the terms of Section  7.5.1(a)(iii),  above,  to the

                                      -36-
<PAGE>
extent that Borrower is entitled to request funds and receive disbursements from
the  Rollover  Reserve  Fund  pursuant to this  Section  7.5.4,  Lender shall be
entitled to make partial draw  requests on said letter of credit for the amounts
so requested by Borrower and shall disburse such amounts in accordance  with the
terms of this Section; provided,  however, that if partial draw requests are not
permitted under said letter of credit then,  upon  Borrower's  first request for
disbursement of Rollover Reserve Fund sums, Lender shall make a draw request for
the full  amount  of the  letter  of credit  and  shall  hold such  funds in the
Rollover  Reserve Fund and disburse such funds in  accordance  with this Section
7.5.

     Section  7.6  PAYMENT OF  APPROVED  OPERATING  EXPENSES.  After a Cash Trap
Event,  Funds  held in the Cash  Collateral  Account  may be used  for  Approved
Operating Expenses, provided that such use shall be in Lender's discretion if an
Event of Default has occurred and remains uncured.  Provided an Event of Default
has not occurred, Borrower may from time to time send a request for disbursement
of funds in the Cash  Collateral  Account  for  payment  of  Approved  Operating
Expenses,  but not more than one (1) time per  month.  To the  extent  there are
funds available in the Cash Collateral Account in excess of the amounts required
to fund the Tax and Insurance  Escrow Fund, the Capital  Reserve Fund and to pay
the Monthly Debt Service  Payment  Amount due in respect of the Loan on the next
Payment Date, such  disbursements for Approved  Operating Expenses shall be made
by the Lender so long as (a) no Event of  Default  shall  have  occurred  and be
continuing;  (b) such expenditure is for an Approved Operating Expense;  and (c)
the request for  disbursement  is  accompanied  by (i) an Officer's  Certificate
certifying (A) the amount of funds to be disbursed,  (B) that such funds will be
used to pay Approved Operating Expenses and a description  thereof, (C) that all
outstanding  trade  payables  (other  than  those to be paid from the  requested
disbursement or those otherwise permitted to be outstanding under Section 6.1(i)
hereof) have been paid in full,  (D) that the same has not been the subject of a
previous disbursement and (E) that all previous  disbursements have been or will
be used to pay the previously  identified Approved Operating Expenses,  and (ii)
reasonably  detailed  documentation  as to the  amount,  necessity  and  purpose
therefor.  Subject to  satisfaction of the preceding  conditions,  if the Lender
receives  from the Borrower a valid  request for a  disbursement  for payment of
Approved  Operating  Expenses  for the then  Current  Month  at  least  five (5)
Business Days prior to the Payment Date  occurring in such Current  Month,  then
the disbursement in respect of such Approved Operating Expenses shall be made to
Borrower on such Payment Date. If the Borrower  shall fail to validly  request a
disbursement  for payment of Approved  Operating  Expenses  for the then Current
Month at least five (5) Business  Days prior to the Payment Date in such Current
Month,  then the Lender shall  retain in the Deposit  Account an amount equal to
the  anticipated  Operating  Expenses for the then Current Month as set forth in
the approved  Operating Budget for such month, and the Lender shall,  subject to
satisfaction of the preceding conditions, disburse same to the Borrower five (5)
Business  Days  after the  Lender  receives a valid  request  therefor.  Amounts
disbursed to the  Borrower  under this Section 7.6 shall be used by the Borrower
to pay  current  Approved  Operating  Expenses  and for no  other  purpose.  The
Borrower  shall furnish the Lender with copies of bills,  statements,  invoices,
receipts or other  evidence as the Lender may  reasonably  request in connection
with a request for disbursement.

VIII. DEFAULTS
      --------

     Section 8.1 EVENT OF DEFAULT.

     (a) Each of the  following  events  shall  constitute  an event of  default
hereunder (each, an "Event of Default"):

          (i) if any portion of the Debt is not paid when due;

          (ii) if any of the Taxes or Other  Charges  are not paid when the same
are due and  payable,  subject to  Borrower's  right to contest  Taxes and Other
Charges in accordance with Section 5.1(b) hereof, provided that such event shall
not have been cured within five (5) days;

          (iii) if the Policies are not kept in full force and effect, or if the
certificates are not delivered to Lender within five (5) Business Days following
request;

          (iv)  if,  without  Lender's  prior  written  consent,   (A)  Borrower
transfers or encumbers  all or any portion of the Property  other than as may be
permitted  hereunder  or (B) any direct or  indirect  interest  in  Borrower  is
transferred  or assigned  except as expressly  permitted  under  Section  6.1(j)
hereof;


                                      -37-
<PAGE>
          (v) if any  representation  or warranty made by Borrower  herein or in
any other Loan Document, or in any report,  certificate,  financial statement or
other instrument, agreement or document furnished by Borrower in connection with
this Agreement or any other Loan  Document,  shall be false or misleading in any
material respect as of the date the representation or warranty was made;

          (vi)  if  Borrower  shall  make  an  assignment  for  the  benefit  of
creditors, or if Borrower shall generally not be paying its debts as they become
due;

          (vii) if a receiver,  liquidator  or trustee  shall be  appointed  for
Borrower or if Borrower shall be adjudicated a bankrupt or insolvent,  or if any
petition  for  bankruptcy,  reorganization  or  arrangement  pursuant to federal
bankruptcy  law,  or any  similar  federal  or state  law,  shall be filed by or
against,  consented to, or acquiesced in by, Borrower,  or if any proceeding for
the  dissolution or  liquidation  of Borrower  shall be instituted;  and if such
appointment,  adjudication,  petition  or  proceeding  was  involuntary  and not
consented to by Borrower, the same is not discharged, stayed or dismissed within
sixty (60) days;

         (viii) if Borrower  attempts to assign its respective rights under this
Agreement  in  contravention  of the Loan  Documents  or any of the  other  Loan
Documents or any interest herein or therein;

          (ix) if Borrower defaults in any of its negative  covenants  contained
in Section 6.1 or any covenant contained in Section 4.1(dd) hereof;

          (x) if an Event of Default as defined or described in any of the other
Loan Documents occurs,  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;

          (xi) if  Borrower  shall  be in  default  of its  obligations  to make
deposits into the Required  Repair Fund or the Tax and Insurance  Escrow Fund or
the Capital  Reserve  Fund,  provided  that such event shall not have been cured
within five (5) days;

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

          (xiii) if Borrower  shall  continue to be in Default  under any of the
other  terms,  covenants  or  conditions  of this  Agreement  not  specified  in
subsections  (i) to (xii) above,  for fifteen (15) 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  proceeds to cure
the same, such 30-day period shall be extended for an additional  period of 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.

     (b) Upon the  occurrence  of an Event of  Default  (other  than an Event of
Default  described  in  clauses  (vi),  (vii) or (viii)  above)  and at any time
thereafter Lender may, in addition to any other rights or remedies  available to
it  pursuant  to this  Agreement  and the other Loan  Documents  or at law or in
equity, take such action,  without notice or demand, that Lender deems advisable
to protect and enforce its rights  against  Borrower and in and to the Property,
including  declaring the Debt to be immediately due and payable,  and Lender may
enforce or avail  itself of any or all rights or  remedies  provided in the Loan
Documents  against  Borrower and the Property,  including all rights or remedies
available  at law or in  equity;  and upon any  Event of  Default  described  in
clauses  (vi),  (vii) or (viii)  above,  the Debt and all other  obligations  of
Borrower  hereunder and under the other Loan  Documents  shall  immediately  and
automatically  become due and payable,  without  notice or demand,  and Borrower
hereby expressly waives any such notice or demand,  anything contained herein or
in any other Loan Document to the contrary notwithstanding.

     Section 8.2 REMEDIES.

     (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 this  Agreement or any of the other Loan  Documents  executed and

                                      -38-
<PAGE>
delivered  by Borrower or at law or in equity 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 any of the Loan Documents with respect to the Property.  Any such
actions taken by 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  other  Loan  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 Mortgage has been foreclosed, sold and/or otherwise
realized upon in satisfaction of the Debt or the Debt has been paid in full.

     (b) Lender  shall have the right from time to time to  partially  foreclose
the Mortgage in any manner and for any amounts  secured by the Mortgage then due
and payable as determined by Lender in its sole  discretion  including,  without
limitation,  the following circumstances:  (i) in the event Borrower defaults in
the payment of one or more scheduled payments of principal and interest,  Lender
may  foreclose the Mortgage to recover such  delinquent  payments or (ii) in the
event Lender elects to  accelerate  less than the entire  outstanding  principal
balance of the Loan, Lender may foreclose the Mortgage to recover so much of the
principal balance of the Loan as Lender may accelerate.  Notwithstanding  one or
more partial foreclosures,  the Property shall remain subject to the Mortgage to
secure payment of sums secured by the Mortgage and not previously recovered.

     (c) Lender shall have the right from time to time to sever the Note and the
other  Loan  Documents  into one or more  separate  notes,  mortgages  and other
security  documents in such  denominations as Lender shall determine in its sole
discretion  for purposes of  evidencing  and  enforcing  its rights and remedies
provided  hereunder.  Borrower  shall execute and deliver to Lender from time to
time, promptly after the request of Lender, a severance agreement and such other
documents as Lender shall request in order to effect the severance  described in
the preceding  sentence,  all in form and substance  reasonably  satisfactory to
Lender.  Borrower hereby absolutely and irrevocably  appoints Lender as its true
and lawful attorney, coupled with an interest, in its name and stead to make and
execute all documents necessary or desirable to effect the aforesaid  severance,
Borrower ratifying all that its said attorney shall do by virtue thereof.

     Section 8.3 REMEDIES CUMULATIVE.  The rights, powers and remedies of Lender
under this  Agreement  shall be cumulative and not exclusive of any other right,
power  or  remedy  which  Lender  may have  against  Borrower  pursuant  to this
Agreement  or the  other  Loan  Documents,  or  existing  at law or in equity or
otherwise.   Lender's  rights,  powers  and  remedies  may  be  pursued  singly,
concurrently  or  otherwise,  at such  time  and in such  order  as  Lender  may
determine  in Lender's  sole  discretion.  No delay or omission to exercise  any
remedy,  right or power  accruing upon an Event of Default shall impair any such
remedy,  right or power or shall be construed as a waiver thereof,  but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed  expedient.  A waiver of one Default or Event of Default  with respect to
Borrower  shall not be  construed  to be a waiver of any  subsequent  Default or
Event of Default by Borrower or to impair any remedy,  right or power consequent
thereon.

IX.  SPECIAL PROVISIONS
     ------------------

     Section 9.1 SALE OF NOTE AND SECONDARY MARKET TRANSACTION.

     9.1.1 COOPERATION.  At Lender's request (to the extent not already required
to be provided by Borrower under this Agreement),  Borrower shall use reasonable
efforts to satisfy the market standards to which Lender  customarily  adheres or
which may be reasonably required in the marketplace or by the Rating Agencies in
connection  with one or more sales or assignments of the Note or  participations
therein  or  securitizations  of rated  single  or  multiclass  securities  (the
"Securities")  secured by or evidencing  ownership interests in the Note and the
Mortgage (each such sale,  assignment,  participation and/or  securitization,  a
"Secondary  Market  Transaction").   Without  limiting  the  generality  of  the
foregoing,  Borrower  shall,  at the  request of Lender in  connection  with any
Secondary Market Transaction, and so long as the Loan is still outstanding:




                                      -39-
<PAGE>
     (a) (i) provide such  financial and other  information  with respect to the
Property, Borrower and its Affiliates,  Manager and any tenants of the Property,
(ii)  provide  business  plans and budgets  relating to the  Property  and (iii)
perform or permit or cause to be performed or  permitted  such site  inspection,
appraisals,  surveys,  market studies,  environmental reviews and reports (Phase
I's and,  if  appropriate,  Phase  II's),  engineering  reports  and  other  due
diligence  investigations of the Property,  as may be reasonably  requested from
time to  time  by  Lender  or the  Rating  Agencies  or as may be  necessary  or
appropriate in connection  with a Secondary  Market  Transaction or Exchange Act
requirements  (the items provided to Lender pursuant to this paragraph (a) being
called the "Provided  Information"),  together,  if customary,  with appropriate
verification of and/or consents to the Provided  Information  through letters of
auditors or opinions of counsel of  independent  attorneys  acceptable to Lender
and the Rating Agencies;

     (b)  at  Borrower's  expense,  cause  counsel  to  render  opinions  as  to
non-consolidation,  fraudulent  conveyance,  true sale and true contribution and
any other opinion customary in  securitization  transactions with respect to the
Property,  Borrower and its  Affiliates,  which  counsel and  opinions  shall be
reasonably satisfactory to Lender and the Rating Agencies;

     (c) make such  representations and warranties as of the closing date of any
Secondary Market Transaction with respect to the Property, Borrower and the Loan
Documents  as  are  customarily  provided  in  such  transactions  and as may be
reasonably  requested by Lender or the Rating  Agencies and consistent  with the
facts covered by such  representations  and warranties as they exist on the date
thereof,   including  the  representations  and  warranties  made  in  the  Loan
Documents;

     (d) provide current  certificates of good standing and  qualification  with
respect to Borrower from appropriate Governmental Authorities; and

     (e)  execute  such   amendments  to  the  Loan   Documents  and  Borrower's
organizational  documents,  enter into a lock-box  or similar  arrangement  with
respect  to the  Rents and  establish  and fund such  reserve  funds  (including
reserve  funds for  deferred  maintenance  and capital  improvements)  as may be
requested  by Lender or the Rating  Agencies or  otherwise to effect a Secondary
Market Transaction, provided that nothing contained in this subsection (e) shall
result in a material economic change in the transaction.

Borrower  shall pay all  reasonable  third party costs and expenses  incurred by
Lender in connection with a Secondary Market Transaction

     9.1.2 USE OF INFORMATION.  Borrower  understands that all or any portion of
the Provided  Information and the Required Records may be included in disclosure
documents  in  connection  with a  Secondary  Market  Transaction,  including  a
prospectus or private placement  memorandum (each, a "Disclosure  Document") and
may also be included in filings  with the  Securities  and  Exchange  Commission
pursuant to the Securities Act of 1933, as amended (the  "Securities  Act"),  or
the  Securities and Exchange Act of 1934, as amended (the  "Exchange  Act"),  or
provided  or  made  available  to  investors  or  prospective  investors  in the
Securities, the Rating Agencies, and service providers or other parties relating
to the Secondary Market  Transaction.  In the event that the Disclosure Document
is required to be revised,  Borrower shall cooperate with Lender in updating the
Provided  Information  or  Required  Records  for  inclusion  or  summary in the
Disclosure  Document or for other use reasonably  required in connection  with a
Secondary Market Transaction by providing all current information  pertaining to
Borrower,  Manager and the Property  necessary to keep the  Disclosure  Document
accurate  and complete in all material  respects  with respect to such  matters.
Such  disclosure  may  include  the  opinion or  judgment  of Lender or Servicer
concerning  the Provided  Information  or other matters  disclosed,  and despite
reasonable good faith efforts by Lender and/or  Servicer,  the disclosure may be
erroneous  or  incomplete.   Borrower  hereby  consents  to  any  and  all  such
disclosures of such information.

     9.1.3 BORROWER OBLIGATIONS  REGARDING DISCLOSURE  DOCUMENTS.  In connection
with a Disclosure Document, Borrower shall:

     (a) if requested by Lender,  certify in writing that Borrower has carefully
examined those portions of such Disclosure Document, pertaining to Borrower, the
Property,  the  Manager  and the  Loan,  including  applicable  portions  of the
sections  entitled  "Special  Considerations",  "Description  of the Mortgages",
"Description of the Mortgage Loans and Mortgaged Property",  "The Manager", "The
Borrower" and "Certain  Legal Aspects of the Mortgage  Loan",  and such portions
(and  portions of any other  sections  reasonably  requested  and  pertaining to
Borrower,  the  Property,  the  Manager or the Loan) do not  contain  any untrue


                                      -40-
<PAGE>
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances  under which they
were made, not misleading;

     (b)  indemnify (i) any  underwriter,  syndicate  member or placement  agent
(collectively,  the  "Underwriters")  retained by Lender or its issuing  company
affiliate (the "Issuer") in connection with a Secondary Market Transaction, (ii)
Lender  and  (iii)  the  Issuer  that is named  in the  Disclosure  Document  or
registration   statement   relating  to  a  Secondary  Market  Transaction  (the
"Registration  Statement"),  and  each of the  Issuer's  directors,  each of its
officers who have signed the  Registration  Statement  and each person or entity
who  controls  the Issuer or the Lender  within the meaning of Section 15 of the
Securities Act or Section 30 of the Exchange Act (collectively within (iii), the
"CCA Group"), and each of its directors and each person who controls each of the
Underwriters, within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act (collectively,  the "Underwriter  Group") for any losses,
claims,  damages or liabilities  (the  "Liabilities")  to which Lender,  the CCA
Group or the Underwriter Group may become subject (including  reimbursing all of
them for any  legal or other  expenses  actually  incurred  in  connection  with
investigating or defending the Liabilities) insofar as the Liabilities arise out
of or are based upon any untrue  statement  or alleged  untrue  statement of any
material  fact  contained  in  any  of  the  Required  Records  or in any of the
applicable  portions of such sections of the Disclosure  Document  applicable to
Borrower,  Manager,  the Property or the Loan, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated in the applicable portions of such sections or necessary in order to make
the  statements  in the  applicable  portions  of such  sections in light of the
circumstances  under which they were made, not  misleading,  provided,  however,
that  Borrower  shall not be required to  indemnify  Lender for any  Liabilities
relating to untrue  statements or omissions which Borrower  identified to Lender
in writing at the time of Borrower's  examination of such  Disclosure  Document;
and

     (c) reimburse  any member of the CCA Group for any legal or other  expenses
reasonably incurred by such member in connection with investigating or defending
the  Liabilities.  Borrower's  Liability  under clause (a) or (b) above shall be
limited to Liabilities arising out of or based upon any such untrue statement or
omission  made  therein in  reliance  upon and in  conformity  with  information
furnished  to  Lender  by or on  behalf  of  Borrower  in  connection  with  the
preparation of those portions of the Disclosure Document pertaining to Borrower,
Manager,  the Property or the Loan or in connection with the underwriting of the
debt, including financial  statements of Borrower,  operating  statements,  rent
rolls and other Required  Records,  environmental  site  assessment  reports and
property condition reports with respect to the Property. The foregoing indemnity
will be in addition to any liability which Borrower may otherwise have.

     9.1.4 BORROWER  INDEMNITY  REGARDING  FILINGS.  In connection  with filings
under the Exchange Act, Borrower shall (i) indemnify  Lender,  the CCA Group and
the Underwriter Group for any Liabilities to which Lender,  the CCA Group or the
Underwriter  Group may become subject insofar as the Liabilities arise out of or
are  based  upon the  omission  or  alleged  omission  to state in the  Provided
Information  or Required  Records a material  fact  required to be stated in the
Provided  Information or Required Records in order to make the statements in the
Provided  Information or Required Records,  in light of the circumstances  under
which they were made not misleading and (ii) reimburse Lender,  the CCA Group or
the  Underwriter  Group for any legal or other  expenses  actually  incurred  by
Lender,  CCA Group or the  Underwriter  Group in  connection  with  defending or
investigating the Liabilities.

     9.1.5 INDEMNIFICATION  PROCEDURE.  Promptly after receipt by an indemnified
party under Section 9.1.3 or 9.1.4 of notice of the  commencement  of any action
for which a claim  for  indemnification  is to be made  against  Borrower,  such
indemnified party shall notify Borrower in writing of such commencement, but the
omission to so notify the Borrower will not relieve  Borrower from any liability
that it may have to any indemnified  party  hereunder  except to the extent that
failure to notify causes prejudice to Borrower.  In the event that any action is
brought  against  any  indemnified  party,  and  it  notifies  Borrower  of  the
commencement  thereof,  Borrower  will  be  entitled,  jointly  with  any  other
indemnifying  party, to participate therein and, to the extent that it (or they)
may elect by written notice  delivered to the  indemnified  party promptly after
receiving the aforesaid  notice of  commencement,  to assume the defense thereof
with counsel  satisfactory to such  indemnified  party in its discretion.  After
notice  from  Borrower  to such  indemnified  party  under this  Section  9.1.5,
Borrower shall not be responsible  for any legal or other expenses  subsequently
incurred by such indemnified  party in connection with the defense thereof other
than reasonable costs of investigation;  provided, however, if the defendants in


                                      -41-
<PAGE>
any  such  action  include  both  Borrower  and an  indemnified  party,  and any
indemnified  party  shall  have  reasonably  concluded  that there are any legal
defenses  available to it and/or other  indemnified  parties that are  different
from or additional to those available to Borrower, then the indemnified party or
parties  shall have the right to select  separate  counsel to assert  such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Borrower shall not be liable for the expenses
of more than one separate  counsel unless there are legal defenses  available to
it  that  are  different  from or  additional  to  those  available  to  another
indemnified party.

     9.1.6 CONTRIBUTION. In order to provide for just and equitable contribution
in circumstances in which the indemnity  agreement provided for in Section 9.1.3
or 9.1.4 is for any reason held to be unenforceable  by an indemnified  party in
respect of any  Liabilities (or action in respect  thereof)  referred to therein
which would otherwise be  indemnifiable  under Section 9.1.3 or 9.1.4,  Borrower
shall  contribute  to the amount paid or payable by the  indemnified  party as a
result of such Liabilities (or action in respect  thereof);  provided,  however,
that no Person  guilty of  fraudulent  misrepresentation  (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution  from any
Person not  guilty of such  fraudulent  misrepresentation.  In  determining  the
amount of  contribution  to which  the  respective  parties  are  entitled,  the
following  factors  shall be  considered:  (i) the CCA  Group's  and  Borrower's
relative knowledge and access to information  concerning the matter with respect
to which the claim was asserted; (ii) the opportunity to correct and prevent any
statement or omission; and (iii) any other equitable considerations  appropriate
in the  circumstances.  Lender  and  Borrower  hereby  agree  that it may not be
equitable if the amount of such  contribution were determined by pro rata or per
capita allocation.

     9.1.7  RATING  SURVEILLANCE.  Lender  will  retain the Rating  Agencies  to
provide rating  surveillance  services on  Securities.  The pro rata expenses of
such  surveillance  will  be  paid  for by  Borrower  based  on  the  applicable
percentage  of  such  expenses  determined  by  dividing  the  then  outstanding
Principal by the then  aggregate  outstanding  amount of the pool created in the
Secondary Market Transaction which includes the Loan.

     Section 9.2 RESERVED

     Section 9.3 RESERVED.

     Section 9.4 EXCULPATION.  Subject to the qualifications below, Lender shall
not enforce the liability and  obligation of Borrower to perform and observe the
obligations  contained in the Note,  this  Agreement,  the Mortgage or the other
Loan  Documents by any action or proceeding  wherein a money  judgment  shall be
sought against Borrower,  except that Lender may bring a foreclosure  action, an
action for specific performance or any other appropriate action or proceeding to
enable  Lender to enforce and realize  upon its  interest  under the Note,  this
Agreement,  the Mortgage and the other Loan Documents,  or in the Property,  the
Rents, or any other  collateral  given to Lender pursuant to the Loan Documents;
provided, however, that, except as specifically provided herein, any judgment in
any such action or proceeding shall be enforceable  against Borrower only to the
extent of  Borrower's  interest in the  Property,  in the Rents and in any other
collateral given to Lender,  and Lender,  by accepting the Note, this Agreement,
the  Mortgage  and the other Loan  Documents,  agrees that it shall not sue for,
seek or demand any deficiency  judgment  against  Borrower in any such action or
proceeding  under or by reason of or under or in connection  with the Note, this
Agreement,  the Mortgage or the other Loan  Documents.  The  provisions  of this
section shall not,  however,  (a) constitute a waiver,  release or impairment of
any obligation evidenced or secured by any of the Loan Documents; (b) impair the
right of Lender to name Borrower as a party  defendant in any action or suit for
foreclosure   and  sale  under  the   Mortgage;   (c)  affect  the  validity  or
enforceability of or any guaranty made in connection with the Loan or any of the
rights  and  remedies  of Lender  thereunder;  (d) impair the right of Lender to
obtain the  appointment of a receiver;  (e) impair the enforcement of any of the
Assignments of Leases;  (f) constitute a prohibition  against Lender  commencing
any other appropriate  action or proceeding in order for Lender to fully realize
the security  granted by the  Mortgage or to exercise  its remedies  against the
Property;  or (g)  constitute  a waiver of the right of  Lender to  enforce  the
liability and  obligation of Borrower,  by money  judgment or otherwise,  to the
extent of any loss, damage, cost, expense,  liability, claim or other obligation
incurred by Lender  (including  attorneys' fees and costs  reasonably  incurred)
arising out of or in connection with the following:

     (i) fraud or intentional  misrepresentation by Borrower or any guarantor in
connection with the Loan;

     (ii) the gross negligence or willful misconduct of Borrower;
                                      -42-
<PAGE>
     (iii)  the  breach  of any  provision  in that  certain  Environmental  and
Hazardous  Substance  Indemnification  Agreement of even date herewith  given by
Borrower to Lender or in the Mortgage concerning  environmental laws,  hazardous
substances and asbestos and any  indemnification  of Lender with respect thereto
in either document;

     (iv)  physical  waste of the  Property,  or the  removal or disposal of any
portion of the Property;

     (v) the  misapplication  or  conversion  by Borrower  of (A) any  insurance
proceeds paid by reason of any loss, damage or destruction to the Property,  (B)
any awards or other amounts  received in connection with the condemnation of all
or a portion of the Property, or (C) any Rents following an Event of Default;

     (vi) failure to pay charges for labor or  materials  or other  charges that
can create  liens on any portion of the  Property  unless  such  charges are the
subject of a bona fide  dispute in which  Borrower is  contesting  the amount or
validity thereof;

     (vii) any security  deposits  collected  with respect to the Property which
are not delivered to Lender upon a foreclosure of the Property or action in lieu
thereof,  except to the  extent  any such  security  deposits  were  applied  in
accordance  with the  terms and  conditions  of any of the  Leases  prior to the
occurrence of the Event of Default that gave rise to such  foreclosure or action
in lieu thereof; and

     (viii) Borrower's indemnification of Lender set forth in Section 9.2.

Notwithstanding  anything to the  contrary in this  Agreement or any of the Loan
Documents,  (x) Lender shall not be deemed to have waived any right which Lender
may have under Sections 506(a),  506(b),  1111(b) or any other provisions of the
U.S.  Bankruptcy Code to file a claim for the full amount of the Debt secured by
the Mortgage or to require that all  collateral  shall continue to secure all of
the Debt owing to Lender in accordance with the Loan Documents, and (y) the Debt
shall be fully  recourse  to  Borrower  in the event  that:  (aa) the first full
monthly  payment of principal and interest  under the Note is not paid when due;
(bb) Borrower  fails to permit  on-site  inspections  of the Property,  fails to
provide financial information,  fails to maintain its status as a single purpose
entity or fails to appoint a new  property  manager  upon the  request of Lender
after an Event of Default, each as required by, and in accordance with the terms
and  provisions  of, this Loan Agreement and the Mortgage (cc) Borrower fails to
obtain  Lender's  prior written  consent to any  subordinate  financing or other
voluntary lien encumbering the Property other than a Permitted  Encumbrance;  or
(dd) Borrower fails to obtain  Lender's prior written consent to any assignment,
transfer,  or conveyance of the Property or any interest  therein as required by
the Mortgage.

     Section 9.5  TERMINATION OF MANAGER.  If an Event of Default is continuing,
Borrower shall, at the request of Lender, terminate the Management Agreement and
replace the Manager  with a manager  approved by Lender on terms and  conditions
satisfactory  to  Lender.  In  the  event  that  Borrower  does  not  propose  a
replacement manager to Lender for its approval within fifteen (15) business days
after the Lender's  request that  Borrower do so, Lender may propose two or more
such property managers for Borrower's  consideration.  If Borrower then fails to
select and retain one of such  property  managers  within  fifteen (15) business
days  thereafter,  Lender shall have the right to select a property  manager for
the Property,  and to enter into a management agreement with such manager in the
name of Borrower.  Borrower hereby appoints Lender its  attorney-in-fact,  which
appointment  is coupled with an interest,  for the purpose of entering into such
management agreement. The management agreement entered into between Borrower and
any Manager shall be in form and substance reasonably acceptable to Lender.

     Section 9.6 RETENTION OF SERVICER.  Lender reserves the right to retain the
Servicer  to act as its agent  hereunder  with such  powers as are  specifically
delegated  to the  Servicer  by Lender,  whether  pursuant  to the terms of this
Agreement,  the Pooling and Servicing  Agreement or the Cash Collateral  Account
Agreement  or  otherwise,  together  with such  other  powers as are  reasonably
incidental  thereto.  Borrower shall pay any reasonable fees and expenses of the
Servicer in  connection  with a  Defeasance  of the Note,  release of  Property,
assumption or modification of the Loan or enforcement of the Loan Documents.

X.   MISCELLANEOUS
     -------------

     Section  10.1  SURVIVAL.  This  Agreement  and all  covenants,  agreements,
representations  and warranties  made herein and in the  certificates  delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution

                                      -43-
<PAGE>
and delivery to Lender of the Note,  and shall continue in full force and effect
so long as all or any of the Debt is  outstanding  and unpaid (but the  accuracy
thereof shall be determined as of the Closing Date).  Whenever in this Agreement
any of the parties  hereto is referred  to,  such  reference  shall be deemed to
include the legal  representatives,  successors  and assigns of such party.  All
covenants,  promises and agreements in this  Agreement  made by Borrower,  shall
inure to the benefit of the  respective  legal  representatives,  successors and
assigns of Lender.

     Section 10.2  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 10.3 GOVERNING LAW.

     (a) THIS  AGREEMENT WAS  NEGOTIATED  IN THE STATE OF ILLINOIS,  AND MADE BY
LENDER AND  ACCEPTED BY BORROWER IN THE STATE OF  ILLINOIS,  AND THE PROCEEDS OF
THE NOTE  DELIVERED  PURSUANT  HERETO WERE DISBURSED FROM THE STATE OF ILLINOIS,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL  RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING  TRANSACTION  EMBODIED HEREBY, AND IN ALL RESPECTS,  INCLUDING
MATTERS OF  CONSTRUCTION,  VALIDITY  AND  PERFORMANCE,  THIS  AGREEMENT  AND THE
OBLIGATIONS  ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH,  THE LAWS OF THE  STATE  OF  ILLINOIS  APPLICABLE  TO  CONTRACTS  MADE AND
PERFORMED IN SUCH STATE AND ANY  APPLICABLE LAW OF THE UNITED STATES OF AMERICA,
EXCEPT  THAT AT ALL TIMES  THE  PROVISIONS  FOR THE  CREATION,  PERFECTION,  AND
ENFORCEMENT  OF THE LIENS AND SECURITY  INTERESTS  CREATED  PURSUANT  HERETO AND
PURSUANT  TO THE  OTHER  LOAN  DOCUMENTS  SHALL  BE  GOVERNED  BY AND  CONSTRUED
ACCORDING  TO THE LAW OF THE STATE IN WHICH THE  PROPERTY IS  LOCATED,  IT BEING
UNDERSTOOD  THAT, TO THE FULLEST EXTENT  PERMITTED BY THE LAW OF SUCH STATE, THE
LAW OF THE STATE OF ILLINOIS SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF
ALL LOAN DOCUMENTS AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS  ARISING HEREUNDER
OR  THEREUNDER.  TO  THE  FULLEST  EXTENT  PERMITTED  BY  LAW,  BORROWER  HEREBY
UNCONDITIONALLY  AND IRREVOCABLY  WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE.

     (b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING
OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN CHICAGO,  ILLINOIS,  AND BORROWER AND LENDER WAIVE ANY OBJECTION  WHICH
THEY MAY NOW OR HEREAFTER  HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT,  ACTION
OR  PROCEEDING,  AND  BORROWER  AND  LENDER  HEREBY  IRREVOCABLY  SUBMIT  TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.  BORROWER DOES
HEREBY  DESIGNATE AND APPOINT CT CORPORATION,  AS ITS AUTHORIZED AGENT TO ACCEPT
AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED
IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN CHICAGO,
ILLINOIS, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND
WRITTEN  NOTICE OF SAID  SERVICE OF BORROWER  MAILED OR DELIVERED TO BORROWER IN
THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON  BORROWER,  IN ANY SUCH SUIT,  ACTION OR PROCEEDING IN THE STATE OF
ILLINOIS. BORROWER (i) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS
OF ITS AUTHORIZED  AGENT  HEREUNDER,  (ii) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A  SUBSTITUTE  AUTHORIZED  AGENT WITH AN OFFICE IN  CHICAGO,  ILLINOIS
(WHICH  OFFICE  SHALL BE  DESIGNATED  AS THE ADDRESS FOR SERVICE OF PROCESS) AND
(iii) SHALL PROMPTLY  DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES
TO HAVE AN  OFFICE  IN  CHICAGO,  ILLINOIS  OR IS  DISSOLVED  WITHOUT  LEAVING A
SUCCESSOR.

     Section 10.4 MODIFICATION,  WAIVER IN WRITING. No modification,  amendment,
extension, discharge,  termination or waiver of any provision of this Agreement,
or of the Note, or of any other Loan  Document,  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 demand on Borrower,  shall entitle Borrower to any other or future
notice or demand in the same, similar or other circumstances.
     Section  10.5 DELAY NOT A WAIVER.  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 or under any other  Loan  Document,  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



                                      -44-
<PAGE>
future exercise, or the exercise of any other right, power, remedy or privilege.
In particular,  and not by way of limitation, by accepting payment after the due
date of any  amount  payable  under this  Agreement,  the Note or any other Loan
Document,  Lender shall not be deemed to have waived any right either to require
prompt payment when due of all other amounts due under this Agreement,  the Note
or the other  Loan  Documents,  or to  declare a default  for  failure to effect
prompt payment of any such other amount.

     Section  10.6  NOTICES.  All  notices,  consents,  approvals  and  requests
required or permitted  hereunder or under any other Loan Document shall be given
in writing and shall be effective for all purposes if hand  delivered or sent by
(a) certified or registered United States mail, postage prepaid or (b) expedited
prepaid  delivery  service,  either  commercial or United States Postal Service,
with  proof  of  attempted  delivery,   and  by  telecopier  (with  answer  back
acknowledged),  addressed  as follows  (or at such other  address  and person as
shall be designated  from time to time by any party hereto,  as the case may be,
in a written  notice to the other parties  hereto in the manner  provided for in
this Section):

                  If to Lender:

                           The Capital Company of America
                           c/o The Capital Company of America
                           Client Services, LLC
                           600 East Colinas Blvd., Suite 1300
                           Irving, Texas  75639
                           Attention:  Legal Department
                           Telecopier: 972-401-8554

                  with copies to:

                           The Capital Company of America
                           311 S. Wacker Drive, Suite 5400
                           Chicago, Illinois  60606
                           Attention:  David Murdoch, Jr.
                           Telecopier:  312-692-2400

                           Sonnenschein Nath & Rosenthal
                           8000 Sears Tower
                           Chicago, Illinois  60606
                           Attention:  Steven R. Davidson
                           Telecopier: 312-876-7934

                  If to Borrower:

                           c/o Prime Group Realty Trust
                           77 West Wacker Drive, Suite 3900
                           Chicago, Illinois 60601
                           Attention: Louis Conforti
                           Telecopier:  312-917-0460

                  with copies to:

                           Prime Group Realty Trust
                           77 West Wacker Drive, Suite 3900
                           Chicago, Illinois 60601
                           Attention:  James F. Hoffman, Esq.
                           Telecopier:  312-917-0460

                           Winston & Strawn
                           35 W. Wacker Drive
                           Chicago, Illinois 60601
                           Attention:  Wayne D. Boberg
                           Telecopier: 312-558-5700

A notice shall be deemed to have been given:  in the case of hand  delivery,  at
the  time of  delivery;  in the  case of  registered  or  certified  mail,  when
delivered or the first  attempted  delivery on a Business Day; or in the case of
expedited prepaid delivery and telecopy,  upon the first attempted delivery on a
Business Day.

     Section 10.7 WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER HEREBY AGREE NOT
TO ELECT A TRIAL BY JURY OF ANY ISSUE  TRIABLE  OF RIGHT BY JURY,  AND WAIVE ANY
RIGHT TO TRIAL BY JURY  FULLY TO THE  EXTENT  THAT ANY SUCH  RIGHT  SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION  THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY


                                      -45-
<PAGE>
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER,  AND IS INTENDED
TO ENCOMPASS  INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO
A TRIAL BY JURY WOULD  OTHERWISE  ACCRUE.  LENDER AND  BORROWER  ARE EACH HEREBY
AUTHORIZED  TO FILE A COPY OF THIS  PARAGRAPH IN ANY  PROCEEDING  AS  CONCLUSIVE
EVIDENCE OF THIS WAIVER.

     Section 10.8 HEADINGS. The Article and/or Section headings and the Table of
Contents in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.

     Section  10.9  SEVERABILITY.  Wherever  possible,  each  provision  of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under  applicable law, such provision shall be ineffective to the extent
of such  prohibition or invalidity,  without  invalidating the remainder of such
provision or the remaining provisions of this Agreement.

     Section 10.10  PREFERENCES.  Lender shall have the continuing and exclusive
right to apply or reverse and  reapply  any and all  payments by Borrower to any
portion of the obligations of Borrower hereunder. To the extent Borrower makes a
payment or payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated,  declared to be fraudulent or preferential,  set aside
or  required  to be repaid to a trustee,  receiver  or any other party under any
bankruptcy  law, state or federal law, common law or equitable  cause,  then, to
the extent of such payment or proceeds  received,  the obligations  hereunder or
part  thereof  intended to be  satisfied  shall be revived and  continue in full
force and  effect,  as if such  payment or  proceeds  had not been  received  by
Lender.

     Section  10.11  WAIVER OF NOTICE.  Borrower  shall not be  entitled  to any
notices of any nature  whatsoever from Lender except with respect to matters for
which this  Agreement or the other Loan  Documents  specifically  and  expressly
provide for the giving of notice by Lender to Borrower  and except with  respect
to matters for which Borrower is not, pursuant to applicable Legal Requirements,
permitted  to waive the  giving  of  notice.  To the  extent  permitted  by law,
Borrower  hereby  expressly  waives the right to receive  any notice from Lender
with respect to any matter for which this  Agreement or the other Loan Documents
do not specifically and expressly  provide for the giving of notice by Lender to
Borrower.

     Section  10.12  REMEDIES  OF  BORROWER.  In  the  event  that  a  claim  or
adjudication is made that Lender or its agents,  including Servicer,  have acted
unreasonably  or  unreasonably  delayed acting in any case where by law or under
this Agreement or the other Loan  Documents,  Lender or such agent,  as the case
may be, has an obligation to act  reasonably or promptly,  Borrower  agrees that
neither  Lender  nor its  agents,  including  Servicer,  shall be liable for any
monetary damages, and Borrower's sole remedies shall be limited to commencing an
action seeking  injunctive  relief or declaratory  judgment.  The parties hereto
agree  that any  action or  proceeding  to  determine  whether  Lender has acted
reasonably shall be determined by an action seeking declaratory judgment.

     Section 10.13 EXPENSES; INDEMNITY.

     (a) Borrower covenants and agrees to reimburse Lender (or the holder of the
Loan,  as  applicable)  upon receipt of written  notice from such holder for all
reasonable  costs  and  expenses  (including   reasonable  attorneys'  fees  and
disbursements)  incurred  by  Lender  in  connection  with (i) the  preparation,
negotiation,  execution  and  delivery  of this  Agreement  and the  other  Loan
Documents  and the  consummation  of the  transactions  contemplated  hereby and
thereby and all the costs of  furnishing  all  opinions by counsel for  Borrower
(including  any  opinions  requested by Lender as to any legal  matters  arising
under this  Agreement or the other Loan Documents with respect to the Property);
(ii) Borrower's ongoing performance of and compliance with Borrower's respective
agreements  and  covenants  contained  in  this  Agreement  and the  other  Loan
Documents on its part to be performed or complied  with after the Closing  Date,
including confirming  compliance with environmental and insurance  requirements;
(iii)  Lender's  ongoing  performance  and  compliance  with all  agreements and
conditions  contained in this Agreement and the other Loan Documents on its part
to be performed or complied with after the Closing Date;  (iv) the  negotiation,
preparation, execution, delivery and administration of any consents, amendments,
waivers or other  modifications  to this  Agreement and the other Loan Documents
and any other documents or matters requested by Lender;  (v) Borrower  complying
with  any  requests  made  pursuant  to  Section  9.1  hereof  (subject  to  the
limitations  contained in such section);  (vi) the filing and recording fees and
expenses,  title  insurance  and  reasonable  fees and  expenses  of counsel for
providing to Lender all required  legal  opinions,  and other  similar  expenses


                                      -46-
<PAGE>
incurred in creating  and  perfecting  the Liens in favor of Lender  pursuant to
this Agreement and the other Loan  Documents;  (vii) enforcing or preserving any
rights, in response to third party claims or the prosecuting or defending of any
action  or  proceeding  or other  litigation,  in each  case  against,  under or
affecting Borrower, this Agreement,  the other Loan Documents,  the Property, or
any other security given for the Loan; and (viii)  enforcing any  obligations of
or collecting  any payments due from Borrower  under this  Agreement,  the other
Loan  Documents  or with  respect  to the  Property  or in  connection  with any
refinancing  or  restructuring  of the credit  arrangements  provided under this
Agreement  in the nature of a  "work-out"  or of any  insolvency  or  bankruptcy
proceedings;  provided,  however,  that  Borrower  shall not be  liable  for the
payment of any such costs and expenses to the extent the same arise by reason of
the gross negligence,  illegal acts, fraud or willful  misconduct of Lender. Any
costs and  expenses  due and payable to Lender  hereunder  which are not paid by
Borrower  within ten (10) days after  demand may be paid from any amounts in the
Cash Collateral Account, with notice thereof to Borrower.

     (b) Borrower shall  indemnify and hold harmless Lender from and against any
and all other liabilities,  obligations,  losses, damages,  penalties,  actions,
judgments,  suits,  claims,  costs,  expenses and  disbursements  of any kind or
nature  whatsoever  (including the reasonable fees and  disbursements of counsel
for Lender in  connection  with any  investigative,  administrative  or judicial
proceeding commenced or threatened,  whether or not Lender shall be designated a
party thereto),  that may be imposed on, incurred by, or asserted against Lender
in any manner  relating  to or arising  out of (i) any breach by Borrower of its
obligations  under, or any material  misrepresentation  by Borrower contained in
this Agreement or the other Loan Documents,  (ii) the use or intended use of the
proceeds of the Loan or (iii) any information provided by Borrower, or contained
in any  documentation  approved  by  Borrower  and in any  way  relating  to the
issuance,  offering and sale of the Securities  (collectively,  the "Indemnified
Liabilities"); provided, however, that Borrower shall not have any obligation to
Lender hereunder to the extent that such Indemnified  Liabilities arise from the
gross  negligence,  illegal acts, fraud or willful  misconduct of Lender. To the
extent that the  undertaking  to  indemnify  and hold  harmless set forth in the
preceding  sentence may be  unenforceable  because it violates any law or public
policy,  Borrower shall  contribute the maximum  portion that it is permitted to
pay and satisfy  under  applicable  law to the payment and  satisfaction  of all
Indemnified Liabilities incurred by Lender.

     Section 10.14 EXHIBITS INCORPORATED. The Exhibits annexed hereto are hereby
incorporated  herein as a part of this  Agreement with the same effect as if set
forth in the body hereof.

     Section 10.15 OFFSETS, COUNTERCLAIMS AND DEFENSES. Any assignee of Lender's
interest in and to this  Agreement,  the Note and the other Loan Documents shall
take the same free and clear of all offsets, counterclaims or defenses which are
unrelated  to such  documents  which  Borrower  may  otherwise  have against any
assignor of such documents,  and no such unrelated counterclaim or defense shall
be interposed or asserted by Borrower in any action or proceeding brought by any
such assignee upon such  documents and any such right to interpose or assert any
such unrelated offset,  counterclaim or defense in any such action or proceeding
is hereby expressly waived by Borrower.

     Section 10.16 NO JOINT VENTURE OR  PARTNERSHIP.  Borrower and Lender intend
that the  relationships  created hereunder and under the other Loan Documents be
solely that of borrower  and  lender.  Nothing  herein or therein is intended to
create  a  joint  venture,  partnership,  tenancy-in-common,  or  joint  tenancy
relationship between Borrower and Lender nor to grant Lender any interest in the
Property other than that of mortgagee or lender.

     Section 10.17  PUBLICITY.  All news  releases,  publicity or advertising by
Borrower or their  Affiliates  through  any media  intended to reach the general
public which refers to the Loan Documents or the financing evidenced by the Loan
Documents, to Lender, CCA Group, the Loan purchaser, the Servicer or the trustee
in a Securitization shall be subject to the prior written approval of Lender.

                  Section 10.18 WAIVER OF MARSHALLING OF ASSETS.  To the fullest
extent  Borrower may legally do so,  Borrower waives all rights to a marshalling
of the  assets  of  Borrower,  Borrower's  partners,  if any,  and  others  with
interests in Borrower,  and of  Borrower's  properties,  or to a sale in inverse
order of alienation in the event of foreclosure of the interests hereby created,
and agrees not to assert any right under any laws  pertaining to the marshalling
of assets,  the sale in inverse order of alienation,  homestead  exemption,  the
administration  of estates of  decedents,  or any other  matters  whatsoever  to
defeat,  reduce or affect the right of Lender under the Loan Documents to a sale
of the Property for the collection of the related indebtedness without any prior


                                      -47-
<PAGE>
or different resort for collection,  of the right of Lender or any deed of trust
trustee to the payment of the related  indebtedness  out of the net  proceeds of
the Property in preference to every other claimant whatsoever.

     Section 10.19 WAIVER OF  COUNTERCLAIM.  Borrower hereby waives the right to
assert a counterclaim,  other than a compulsory  counterclaim,  in any action or
proceeding brought against it by Lender or its agents, including Servicer.

     Section 10.20  CONFLICT;  CONSTRUCTION  OF  DOCUMENTS.  In the event of any
conflict  between the  provisions  of this  Agreement  and any of the other Loan
Documents,  the provisions of this Agreement  shall control.  The parties hereto
acknowledge  that  they were  represented  by  counsel  in  connection  with the
negotiation  and  drafting of the Loan  Documents  and that such Loan  Documents
shall not be subject to the  principle of construing  their meaning  against the
party which drafted same.

     Section 10.21 BROKERS AND FINANCIAL  ADVISORS.  Borrower hereby  represents
that it has dealt with no financial advisors, brokers,  underwriters,  placement
agents,  agents or finders in connection with the  transactions  contemplated by
this Agreement. Borrower and Lender hereby agree to indemnify and hold the other
harmless from and against any and all claims, liabilities, costs and expenses of
any kind in any way  relating to or arising from a claim by any Person that such
Person  acted  on  behalf  of the  indemnifying  party  in  connection  with the
transactions  contemplated  herein.  The  provisions of this Section 10.21 shall
survive the  expiration  and  termination of this Agreement and the repayment of
the Debt.

     Section 10.22 NO THIRD PARTY  BENEFICIARIES.  This  Agreement and the other
Loan  Documents  are solely for the benefit of Lender and  Borrower  and nothing
contained  in this  Agreement  or the other  Loan  Documents  shall be deemed to
confer upon anyone other than Lender and Borrower any right to insist upon or to
enforce the performance or observance of any of the obligations contained herein
or  therein.  All  conditions  to the  obligations  of  Lender  to make the Loan
hereunder are imposed  solely and  exclusively  for the benefit of Lender and no
other Person shall have standing to require  satisfaction  of such conditions in
accordance  with their terms or be entitled to assume that Lender will refuse to
make the Loan in the absence of strict compliance with any or all thereof and no
other Person shall under any circumstances be deemed to be a beneficiary of such
conditions,  any or all of which  may be  freely  waived  in whole or in part by
Lender if, in Lender's sole  discretion,  Lender deems it advisable or desirable
to do so.

     Section 10.23 PRIOR AGREEMENTS. This Agreement and the other Loan Documents
contain the entire agreement of the parties hereto and thereto in respect of the
transactions  contemplated hereby and thereby, and all prior agreements among or
between such parties,  whether oral or written,  are  superseded by the terms of
this Agreement and the other Loan Documents.

     Section 10.24 INTERPRETATION.  Notwithstanding  anything to the contrary in
this  Agreement  or the  other  Loan  Documents,  all  references  in this  Loan
Agreement  and the  other  Loan  Documents  to "the  continuance  of an Event of
Default  until  cured" or  analogous  language  shall  specifically  require the
acceptance  by Lender,  in its sole  discretion,  of such cure for such Event of
Default to be deemed cured.
























                                      -48-
<PAGE>
     IN WITNESS  WHEREOF,  the parties hereto have caused this Loan Agreement to
be duly executed by their duly authorized representatives, all as of the day and
year first above written.

                   BORROWER:  TWO CENTURY CENTRE, L.L.C.
                   --------

                              By:  Prime Group Realty, L.P., a Delaware limited
                                   partnership, as Administrative Member

                                   By:  Prime Group Realty Trust, a Maryland
                                        real estate investment trust, as
                                        managing general partner

    By: /s/ Louis Conforti
       -------------------
                                             Name:  Louis Conforti
                                             Title: Senior Vice President

                  LENDER:           THE CAPITAL COMPANY OF AMERICA LLC,
                  ------                    a Delaware limited liability company

                                            By: /s/ John Burke
                                               --------------------------------
                                                Name:  John Burke
                                                Title: Director




















































                                      -49-
<PAGE>
                                   SCHEDULE 1
                                   ----------

                        Matters Regarding Representations
                        ---------------------------------

1.   Burlington  Northern  Santa  Fe owes  approximately  $37,650  in  1997  CAM
     adjustments.

2.   Contracts not cancelable on 30 days notice:

     (a)  Copier  Lease with  Modern  Business  Systems  for $135 per month rent
expires August 24, 1999.

     (b) Video Equipment Lease with N.T.C. Electronics for $225 per quarter rent
expires December 31, 1999.






























































                                      -50-
<PAGE>
                                   SCHEDULE 2
                                   ----------

                                    Rent Roll
                                    ---------

                               [Exhibit Omitted]







































































                                      -51-
<PAGE>
                                   SCHEDULE 3
                                   ----------

                                Required Repairs
                                ----------------

     Borrower shall complete the repairs described on the pages attached to this
Schedule 3 within one (1) year after the date of  execution  of this  Agreement.
Borrower  shall deposit or cause to be deposited  with Lender on or prior to the
Closing Date $62,375.00,  which sum represents one hundred  twenty-five  percent
(125%) of the cost of completing said repairs.

                                    EXHIBIT A
                                    ---------

                                  Form of Note
                                  ------------

                               [Exhibit Omitted]



























































                                      -52-
<PAGE>
                                    EXHIBIT B
                                    ---------

                          Form of Management Agreement
                          ----------------------------





                               [Exhibit Omitted]































































                                      -53-