Document:

EXHIBIT 4.1

                          SUPPLEMENTAL INDENTURE NO. 5

                                 by and between

                          HOSPITALITY PROPERTIES TRUST

                                       and

                       STATE STREET BANK AND TRUST COMPANY

                               as of July 28, 2000

           SUPPLEMENTAL TO THE INDENTURE DATED AS OF FEBRUARY 25, 1998

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

                          HOSPITALITY PROPERTIES TRUST

                          9.125% Senior Notes due 2010

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         This SUPPLEMENTAL INDENTURE NO. 5 (this "Supplemental  Indenture") made
and entered into as of July 28, 2000 between  HOSPITALITY  PROPERTIES  TRUST,  a
Maryland real estate investment trust (the "Company"), and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company, as Trustee (the "Trustee").

                                WITNESSETH THAT:

         WHEREAS,  the Company and the Trustee have  executed  and  delivered an
Indenture,  dated as of  February  25, 1998 (the  "Indenture"),  relating to the
Company's issuance, from time to time, of various series of debt securities; and

         WHEREAS,  the Company has previously  issued  $35,000,000 of its 9.125%
Senior  Notes due 2010 under  Supplemental  Indenture No 4, dated as of July 14,
2000, between the Company and the Trustee ( "Supplemental Indenture No. 4" ) and
the Indenture; and

         WHEREAS,  under the previous of said Supplemental  Indenture No. 4, the
Company is permitted to reopen the series of Notes established  thereunder,  and
the Company has determined so to reopen said series,  and to issue an additional
$15,000,000 of its 9.125% Series Notes due 2010;

         WHEREAS,  the Indenture  provides that certain terms and conditions for
each series of debt securities issued by the Company thereunder may be set forth
in an indenture supplemental to the Indenture;

         NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

                                    ARTICLE 1

                                  DEFINED TERMS

         Section 1.1 The following  definitions  supplement,  and, to the extent
inconsistent with, replace the definitions in Section 101 of the Indenture:

         "Acquired  Debt"  means Debt of a Person (i)  existing at the time such
Person becomes a Subsidiary or (ii) assumed in connection  with the  acquisition
of assets from such Person, in each case, other than Debt incurred in connection
with,  or in  contemplation  of,  such  Person  becoming  a  Subsidiary  or such
acquisition.  Acquired  Debt shall be deemed to be  incurred  on the date of the
related  acquisition  of assets from any Person or the date the acquired  Person
becomes a Subsidiary.

         "Annual Debt Service" as of any date means the maximum  amount which is
expensed  in any  12-month  period for  interest  on Debt of the Company and its
Subsidiaries.

         "Business  Day" means any day other than a Saturday  or Sunday or a day
on which  banking  institutions  in the City of New York or in the city in which
the Corporate Trust Office of the Trustee is located, are required or authorized
to close.
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         "Capital  Stock" means,  with respect to any Person,  any capital stock
(including preferred stock), shares, interests, participation or other ownership
interests  (however  designated)  of such Person and any rights (other than debt
securities  convertible  into or exchangeable  for capital  stock),  warrants or
options to purchase any thereof.

         "Consolidated  Income  Available for Debt Service" for any period means
Earnings from Operations of the Company and its Subsidiaries  plus amounts which
have been deducted,  and minus amounts which have been added,  for the following
(without duplication): (i) interest on Debt of the Company and its Subsidiaries,
(ii) cash  reserves  made by lessees as  required  by the  Company's  leases for
periodic  replacement and refurbishment of the Company's assets, (iii) provision
for taxes of the Company and its Subsidiaries based on income, (iv) amortization
of debt discount and deferred  financing  costs,  (v)  provisions  for gains and
losses on properties and property depreciation and amortization, (vi) the effect
of any  noncash  charge  resulting  from a change in  accounting  principles  in
determining  Earnings from Operations for such period and (vii)  amortization of
deferred charges.

         "Debt" of the Company or any Subsidiary means, without duplication, any
indebtedness  of the Company or any Subsidiary,  whether or not  contingent,  in
respect of (i)  borrowed  money or  evidenced  by bonds,  notes,  debentures  or
similar  instruments,  (ii)  indebtedness  for  borrowed  money  secured  by any
Encumbrance existing on property owned by the Company or any Subsidiary,  to the
extent of the lesser of (x) the amount of  indebtedness  so secured  and (y) the
fair  market  value of the  property  subject  to such  Encumbrance,  (iii)  the
reimbursement  obligations,  contingent  or otherwise,  in  connection  with any
letters of credit  actually  issued  (other  than  letters  of credit  issued to
provide credit  enhancement or support with respect to other indebtedness of the
Company or any  Subsidiary  otherwise  reflected as Debt  hereunder)  or amounts
representing  the  balance  deferred  and  unpaid of the  purchase  price of any
property  or  services,  except any such  balance  that  constitutes  an accrued
expense or trade payable,  or all  conditional  sale  obligations or obligations
under  any  title  retention  agreement,   (iv)  the  principal  amount  of  all
obligations  of the  Company  or any  Subsidiary  with  respect  to  redemption,
repayment or other  repurchase of any  Disqualified  Stock,  or (v) any lease of
property by the Company or any  Subsidiary  as lessee  which is reflected on the
Company's  consolidated  balance sheet as a capitalized lease in accordance with
GAAP,  to the  extent,  in the case of items of  indebtedness  under (i) through
(iii) above,  that any such items (other than letters of credit) would appear as
a liability on the Company's consolidated balance sheet in accordance with GAAP,
and also includes,  to the extent not otherwise included,  any obligation by the
Company or any Subsidiary to be liable for, or to pay, as obligor,  guarantor or
otherwise  (other than for  purposes of  collection  in the  ordinary  course of
business), Debt of another Person (other than the Company or any Subsidiary) (it
being  understood that Debt shall be deemed to be incurred by the Company or any
Subsidiary  whenever  the  Company  or such  Subsidiary  shall  create,  assume,
guarantee or otherwise become liable in respect thereof).

         "Disqualified  Stock"  means,  with respect to any Person,  any Capital
Stock of such Person which by the terms of such  Capital  Stock (or by the terms
of any security into which it is convertible or for which it is  exchangeable or
exercisable),  upon the  happening of any event or  otherwise  (i) matures or is
mandatorily  redeemable,  pursuant to a sinking  fund  obligation  or

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otherwise  (other than Capital Stock which is redeemable  solely in exchange for
common stock or shares), (ii) is convertible into or exchangeable or exercisable
for Debt or  Disqualified  Stock,  or (iii) is  redeemable  at the option of the
holder  thereof,  in  whole  or in part  (other  than  Capital  Stock  which  is
redeemable  solely in exchange for common  stock or shares),  in each case on or
prior to the stated maturity of the Notes.

         "Earnings from Operations" for any period means net earnings  excluding
gains  and  losses on sales of  investments,  extraordinary  items and  property
valuation  losses,  as reflected in the financial  statements of the Company and
its  Subsidiaries  for  such  period,  determined  on a  consolidated  basis  in
accordance with GAAP.

         "Encumbrance"  means any  mortgage,  lien,  charge,  pledge or security
interest of any kind.

         "Make-Whole  Amount" means, in connection with any optional  redemption
or accelerated  payment of any Notes,  the excess,  if any, of (i) the aggregate
present value as of the date of such  redemption or accelerated  payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such  redemption  or  accelerated
payment had not been made,  determined by  discounting,  on a semiannual  basis,
such principal and interest at the  Reinvestment  Rate  (determined on the third
Business  Day  preceding  the  date  such  notice  of  redemption  is  given  or
declaration of  acceleration  is made) from the  respective  dates on which such
principal and interest would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate principal amount of the Notes
being  redeemed or paid.  For purposes of this  Supplemental  Indenture  and the
Notes, references in the Indenture to the payment of the principal (and premium,
if any) and  interest on the Notes shall be deemed to include the payment of the
Make-Whole  Amount,  if any, due upon redemption with respect to the Notes.  The
Make-Whole  Amount  shall  be  calculated  by the  Company  and set  forth in an
Officer's  Certificate  delivered  to the  Trustee,  and the  Trustee  shall  be
entitled to rely on said Officer's Certificate.

         "Notes" means the Company's 9.125% Senior Notes due 2010,  issued under
this Supplemental  Indenture or Supplemental  Indenture No. 4 and the Indenture,
as amended or supplemented from time to time.

         "Reinvestment  Rate"  means a rate per annum  equal to the sum of 0.50%
(fifty  one-hundredths of one percent) plus the yield on treasury  securities at
constant  maturity under the heading "Week Ending"  published in the Statistical
Release  under the  caption  "Treasury  Constant  Maturities"  for the  maturity
(rounded to the nearest month)  corresponding to the remaining life to maturity,
as of the payment date of the principal  being  redeemed or paid. If no maturity
exactly  corresponds to such maturity,  yields for the two published  maturities
most closely  corresponding to such maturity shall be calculated pursuant to the
immediately  preceding  sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line  basis,  rounding in each of
such relevant  periods to the nearest  month.  For purposes of  calculating  the
Reinvestment  Rate, the most recent  Statistical  Release published prior to the
date of determination of the Make-Whole Amount shall be used.

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         "Secured Debt" means Debt secured by any mortgage, lien, charge, pledge
or security interest of any kind.

         "Statistical   Release"  means  the  statistical   release   designated
"H.15(519)"  or any  successor  publication  which is  published  weekly  by the
Federal  Reserve System and which  establishes  yields on actively traded United
States  government  securities  adjusted  to  constant  maturities  or,  if such
statistical release is not published at the time of any determination under this
Supplemental  Indenture,  then any publicly  available  source of similar market
data which shall be designated by the Company.

         "Subsidiary"  means any corporation or other entity of which a majority
of (i) the voting power of the voting equity  securities or (ii) the outstanding
equity interests of which are owned,  directly or indirectly,  by the Company or
one or  more  other  Subsidiaries  of the  Company.  For  the  purposes  of this
definition,  "voting equity  securities"  means equity  securities having voting
power for the election of directors,  whether at all times or only so long as no
senior class of security has such voting power by reason of any contingency.

         "Total  Assets" as of any date  means the sum of (i) the  Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined  in  accordance  with GAAP (but  excluding  accounts  receivable  and
intangibles).

         "Total  Unencumbered  Assets" means the sum of (i) those  Undepreciated
Real Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Company and its  Subsidiaries  not subject to an Encumbrance
for borrowed money  determined in accordance  with GAAP (but excluding  accounts
receivable and intangibles).

         "Undepreciated  Real  Estate  Assets"  as of any  date  means  the cost
(original cost plus capital  improvements)  of real estate assets of the Company
and  its  Subsidiaries  on  such  date,  before  depreciation  and  amortization
determined on a consolidated basis in accordance with GAAP.

         "Unsecured  Debt"  means  Debt  which  is  not  secured  by  any of the
properties of the Company or any Subsidiary.

                                    ARTICLE 2

                               TERMS OF THE NOTES

         Section 2.1 Pursuant to Section 301 of the  Indenture,  the Notes shall
have the following terms and conditions:

         (a) Title; Limitation on Aggregate Principal Amount; Form of Notes. The
Notes shall be Registered  Securities under the Indenture,  shall be of the same
series as those issued under  Supplemental  Indenture No. 4 and shall,  together
with those previously issued Notes under Supplemental  Indenture No. 4, be known
as the Company's "9.125% Senior Notes due 2010." The aggregate  principal amount
of Notes  which may be  authenticated  and  delivered  under  this

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Supplemental  Indenture  shall not, except as permitted by the provisions of the
Indenture,  exceed  $15,000,000,  provided  that the  Company  may,  without the
consent of the holders of the Notes,  reopen  this  series and issue  additional
Notes under the  Indenture  and this  Supplemental  Indenture in addition to the
$50,000,000 of Notes authorized as of the date hereof.  The Notes (together with
the Trustee's  certificate of authentication) shall be substantially in the form
of Exhibit A hereto or in the form of Exhibit A to Supplemental Indenture No. 4,
each  which  is  hereby  incorporated  in and  made a part of this  Supplemental
Indenture. Supplemental Indenture No. 4 is hereby modified to provide that Notes
issued thereunder  (together with the Trustee's  certificate of  authentication)
shall be substantially in the form of Exhibit A hereto or in the form of Exhibit
A to Supplemental Indenture No. 4, each which is hereby incorporated in and made
a part of Supplemental Indenture No. 4.

         The Notes will be issued in the form of one or more  registered  global
security  without coupons  ("Global  Notes") which will be deposited with, or on
behalf of, The Depository Trust Company  ("DTC"),  and registered in the name of
DTC's nominee,  Cede & Co. Except under the  circumstance  described  below, the
Notes will not be issuable in definitive form.  Unless and until it is exchanged
in whole or in part for the individual notes represented  thereby, a Global Note
may not be  transferred  except  as a whole by DTC to a  nominee  of DTC or by a
nominee of DTC to DTC or another  nominee of DTC or by DTC or any nominee of DTC
to a successor depositary or any nominee of such successor.

         So long as DTC or its nominee is the registered owner of a Global Note,
DTC or such nominee,  as the case may be, will be  considered  the sole owner or
holder of the Notes  represented by such Global Note for all purposes under this
Supplemental Indenture. Except as described below, owners of beneficial interest
in Notes  evidenced  by a Global  Note will not be  entitled  to have any of the
individual Notes represented by such Global Note registered in their names, will
not  receive or be entitled  to receive  physical  delivery of any such Notes in
definitive  form and will not be considered the owners or holders  thereof under
the Indenture or this Supplemental Indenture.

         If DTC is at any time  unwilling,  unable or  ineligible to continue as
depositary and a successor  depositary is not appointed by the Company within 90
days, the Company will issue individual Notes in exchange for the Global Note or
Global Notes  representing such Notes. In addition,  the Company may at any time
and in its sole  discretion,  subject  to certain  limitations  set forth in the
Indenture,  determine not to have any of such Notes  represented  by one or more
Global Notes and, in such event, will issue individual Notes in exchange for the
Global Note or Global Notes  representing the Notes.  Individual Notes so issued
will be issued in denominations of $1,000 and integral multiples thereof.

         (b) Interest and Interest  Rate. The Notes will bear interest at a rate
of 9.125% per annum,  from July 14,  2000  (except as  otherwise  provided in an
applicable  supplemental  indenture) or from the immediately  preceding Interest
Payment  Date to which  interest  has been paid or duly  provided  for,  payable
semi-annually  in arrears  on  January  15 and July 15 of each year,  commencing
January 15, 2001 (each of which shall be an  "Interest  Payment  Date"),  to the
Persons in whose names the Notes are registered in the Security  Register at the
close of  business

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on the date 14 calendar  days  immediately  preceding  the  applicable  interest
payment  date  (whether or not a Business  Day),  as the case may be,  (each,  a
"Regular Record Date").

         (c) Principal Repayment;  Currency. The stated maturity of the Notes is
July 15,  2010,  provided,  however,  the Notes may be earlier  redeemed  at the
option of the Company as provided in paragraph (d) below.  The principal of each
Note  payable  on its  maturity  date  shall be paid  against  presentation  and
surrender  thereof  at  the  Corporate  Trust  Office  of the  Trustee,  located
initially at Two Avenue de Lafayette,  Boston, Massachusetts 02111, in such coin
or currency  of the United  States of America as at the time of payment is legal
tender for the  payment of public or private  debts.  The  Company  will not pay
Additional Amounts (as defined in the Indenture) on the Notes.

         (d)  Redemption at the Option of the Company;  Acceleration.  The Notes
will be subject to redemption at any time at the option of the Company, in whole
or in part,  upon not less than 30 nor more than 60 days'  notice to each Holder
of Notes to be redeemed at its address appearing in the Security Register,  at a
price equal to the sum of (i) the principal  amount of the Notes being redeemed,
plus accrued and unpaid interest to but excluding the applicable Redemption Date
and (ii) the Make-Whole Amount. Upon the acceleration of the Notes in accordance
with  Section 502 of the  Indenture,  the  principal  amount of the Notes,  plus
accrued and unpaid interest thereon and the Make-Whole Amount,  shall become due
and payable immediately.

         (e) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or  transmitted by
any standard form of telecommunication. Notices to the Company shall be directed
to it at 400 Centre Street, Newton,  Massachusetts 02458, Attention:  President;
notices to the  Trustee  shall be  directed  to it at Two  Avenue de  Lafayette,
Boston,   Massachusetts  02111,  Attention:   Corporate  Trust  Department,  Re:
Hospitality  Properties  Trust  9.125%  Senior  Notes due 2010,  or as to either
party,  at such other  address as shall be designated by such party in a written
notice to the other party.

         (f) Global  Note  Legend.  Each  Global  Note shall bear the  following
legend on the face thereof:

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"),  TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC),  ANY TRANSFER,  PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  INASMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

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         (g)  Applicability  of Discharge,  Defeasance  and Covenant  Defeasance
Provisions.  The  Discharge,  Defeasance and Covenant  Defeasance  provisions in
Article Fourteen of the Indenture will apply to the Notes.

                                    ARTICLE 3

                              ADDITIONAL COVENANTS

         Section 3.1 In addition  to the  covenants  of the Company set forth in
Article Ten of the Indenture, for the benefit of the holders of the Notes:

         (a)  Limitations on Incurrence of Debt.

         (i) The Company will not, and will not permit any  Subsidiary to, incur
any  Debt  if,  immediately  after  giving  effect  to the  incurrence  of  such
additional  Debt and the  application  of the proceeds  thereof,  the  aggregate
principal  amount of all outstanding Debt of the Company and its Subsidiaries on
a consolidated  basis  determined in accordance with GAAP is greater than 60% of
the sum ("Adjusted Total Assets") of (without  duplication) (i) the Total Assets
of the  Company  and  its  Subsidiaries  as of the end of the  calendar  quarter
covered in the Company's  Annual Report on Form 10-K, or the Quarterly Report on
Form 10-Q,  as the case may be,  most  recently  filed with the  Securities  and
Exchange  Commission  (or, if such filing is not permitted  under the Securities
Exchange Act of 1934, as amended (the "Exchange  Act"),  with the Trustee) prior
to the  incurrence of such  additional  Debt and (ii) the purchase  price of any
real  estate  assets or  mortgages  receivable  acquired,  and the amount of any
securities offering proceeds received (to the extent that such proceeds were not
used to acquire  real estate  assets or mortgages  receivable  or used to reduce
Debt), by the Company or any Subsidiary since the end of such calendar  quarter,
including  those  proceeds  obtained in connection  with the  incurrence of such
additional Debt.

         (ii) In addition to the  foregoing  limitations  on the  incurrence  of
Debt,  the Company  will not, and will not permit any  Subsidiary  to, incur any
Secured Debt if,  immediately  after  giving  effect to the  incurrence  of such
additional  Secured  Debt  and the  application  of the  proceeds  thereof,  the
aggregate  principal  amount of all outstanding  Secured Debt of the Company and
its  Subsidiaries on a consolidated  basis is greater than 40% of Adjusted Total
Assets.

         (iii) In addition to the  foregoing  limitations  on the  incurrence of
Debt,  the Company  will not, and will not permit any  Subsidiary  to, incur any
Debt if the ratio of  Consolidated  Income  Available  for Debt  Service  to the
Annual Debt Service for the four consecutive fiscal quarters most recently ended
prior to the date on which such  additional  Debt is to be  incurred  shall have
been less than 1.5x, on a pro forma basis after giving effect thereto and to the
application of the proceeds therefrom, and calculated on the assumption that (i)
such Debt and any other Debt incurred by the Company and its Subsidiaries  since
the first day of such  four-quarter  period and the  application of the proceeds
therefrom,  including to refinance  other Debt, had occurred at the beginning of
such period;  (ii) the  repayment or retirement of any other Debt by the Company
and its Subsidiaries  since the first date of such four-quarter  period had been
repaid or retired at the  beginning of such period  (except that, in making such
computation,  the amount of Debt under

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any revolving  credit  facility  shall be computed  based upon the average daily
balance of such Debt during such period);  (iii) in the case of Acquired Debt or
Debt incurred in  connection  with any  acquisition  since the first day of such
four-quarter period, the related acquisition had occurred as of the first day of
such period with appropriate  adjustments with respect to such acquisition being
included in such pro forma calculation;  and (iv) in the case of any acquisition
or  disposition  by the  Company  or its  Subsidiaries  of any asset or group of
assets since the first day of such four-quarter period, whether by merger, stock
purchase or sale, or asset purchase or sale, such  acquisition or disposition or
any related  repayment  of Debt had  occurred as of the first day of such period
with the appropriate adjustments with respect to such acquisition or disposition
being  included  in such pro forma  calculation.  If the Debt giving rise to the
need to make the  foregoing  calculation  or any other Debt  incurred  after the
first day of the relevant  four-quarter period bears interest at a floating rate
then, for purposes of calculating the Annual Debt Service,  the interest rate on
such Debt shall be computed on a pro forma basis as if the average interest rate
which would have been in effect during the entire such  four-quarter  period had
been the applicable rate for the entire such period.

         (b)  Maintenance  of Total  Unencumbered  Assets.  The  Company and its
Subsidiaries  will maintain at all times Total  Unencumbered  Assets of not less
than 200% of the aggregate outstanding principal amount of the Unsecured Debt of
the Company and its Subsidiaries on a consolidated basis.

                                    ARTICLE 4

                          ADDITIONAL EVENTS OF DEFAULT

         Section 4.1 For purposes of this Supplemental  Indenture and the Notes,
in addition to the Events of Default set forth in Section 501 of the  Indenture,
it shall also  constitute  an "Event of  Default"  if a default  under any bond,
debenture,  note or other evidence of indebtedness  of the Company  (including a
default with respect to any other series of securities),  or under any mortgage,
indenture or other  instrument of the Company under which there may be issued or
by which there may be secured or evidenced any  indebtedness  for money borrowed
by the Company (or by any  Subsidiary,  the  repayment  of which the Company has
guaranteed or for which the Company is directly responsible or liable as obligor
or  guarantor)  having an aggregate  principal  amount  outstanding  of at least
$20,000,000, whether such indebtedness now exists or shall hereafter be incurred
or created,  which default shall have resulted in such indebtedness  becoming or
being  declared  due and payable  prior to the date on which it would  otherwise
have become due and payable, without such indebtedness having been discharged or
such acceleration  having been rescinded or annulled within a period of ten days
after there shall have been given,  by  registered  or  certified  mail,  to the
Company by the  Trustee or to the  Company  and the Trustee by the Holders of at
least  25% in  principal  amount of the  outstanding  Notes,  a  written  notice
specifying such default and requiring the Company to cause such  indebtedness to
be discharged or cause such acceleration to be rescinded or annulled and stating
that such notice is a "Notice of Default" hereunder.

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         Section  4.2  Notwithstanding  any  provisions  to the  contrary in the
Indenture,  upon  any  acceleration  of  the  Notes  under  Section  502  of the
Indenture,  the amount immediately due and payable in respect of the Notes shall
equal the Outstanding principal amount thereof, plus accrued interest,  plus the
Make-Whole Amount.

                                    ARTICLE 5

                                  EFFECTIVENESS

         This  Supplemental  Indenture shall be effective for all purposes as of
the date and time this Supplemental Indenture has been executed and delivered by
the Company and the Trustee in accordance with Article Nine of the Indenture. As
supplemented  hereby,  the Indenture is hereby  confirmed as being in full force
and effect.

                                    ARTICLE 6

                                  MISCELLANEOUS

         Section 6.1 In the event any provision of this  Supplemental  Indenture
shall be held invalid or unenforceable  by any court of competent  jurisdiction,
such holding shall not invalidate or render  unenforceable  any other  provision
hereof or any provision of the Indenture.

         Section 6.2 To the extent that any terms of this Supplemental Indenture
or the Notes are inconsistent with the terms of the Indenture, the terms of this
Supplemental Indenture or the Notes shall govern and supersede such inconsistent
terms.

         Section  6.3  This  Supplemental  Indenture  shall be  governed  by and
construed in accordance with the laws of The Commonwealth of Massachusetts.

         Section  6.4 This  Supplemental  Indenture  may be  executed in several
counterparts,  each  of  which  shall  be an  original  and all of  which  shall
constitute but one and the same instrument.

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         IN WITNESS  WHEREOF,  the  Company  and the  Trustee  have  caused this
Supplemental  Indenture  to be  executed  as an  instrument  under seal in their
respective corporate names as of the date first above written.

                                        HOSPITALITY PROPERTIES TRUST

                                        By:______________________________
                                            Name:  John G. Murray
                                           Title:    President

                                        STATE STREET BANK AND TRUST
                                           COMPANY, as Trustee

                                        By:______________________________
                                            Name:
                                            Title:

                                       10
<PAGE>

                                    EXHIBIT A

                                 (Face of Note)

                          9.125% Senior Notes due 2010

No.                                                        $__________

                          HOSPITALITY PROPERTIES TRUST

promises  to  pay  to   _______________________________________   or  registered
assigns, the principal sum of  _____________________________________  Dollars on
July 15, 2010.

                  Interest Payment Dates:  January 15 and July 15.
                  Record Dates:  January 1 and July 1.

CUSIP No:  _____________

                                              HOSPITALITY PROPERTIES TRUST

                                              By:______________________________
                                                    Name:
                                                    Title:

Dated:

This is one of the Notes referred to in the within-mentioned Indenture:

STATE STREET BANK AND TRUST COMPANY, as Trustee

By:______________________________
    Authorized Officer

                                      A-1
<PAGE>
             [THE FOLLOWING CONSTITUTES THE REVERSE OF THE SECURITY]

                          HOSPITALITY PROPERTIES TRUST

                          9.125% Senior Notes due 2010

         Capitalized terms used herein have the meanings assigned to them in the
Indenture (as defined below) unless otherwise indicated.

         1.  Interest.  Hospitality  Properties  Trust,  a Maryland  real estate
investment  trust (the  "Company"),  promises to pay  interest on the  principal
amount of this Note at the rate and in the manner specified below.

         The Company shall pay in cash interest on the principal  amount of this
Note  at  the  rate  per  annum  of  9.125%.   The  Company  will  pay  interest
semi-annually  in arrears on January 15 and July 15 of each year,  commencing on
January  15,  2001 or if any such day is not a Business  Day (as  defined in the
Indenture),  on the next  succeeding  Business  Day (each an  "Interest  Payment
Date"), to Holders of record on the immediately preceding January 1 and July 1.

         Interest will be computed on the basis of a 360-day year  consisting of
twelve 30-day  months.  Interest shall accrue from the most recent date to which
interest  has been paid or, if no interest  has been paid,  from the date of the
original issuance of the Notes.

         2.  Method of  Payment.  The  Company  will pay  interest  on the Notes
(except defaulted  interest) to the Persons who are registered  Holders of Notes
at the close of business on the record date next preceding the Interest  Payment
Date,  even if such Notes are  canceled  after such record date and on or before
such Interest Payment Date. The Company will pay principal and interest in money
of the United  States that at the time of payment is legal tender for payment of
public and private debts. The Company,  however, may pay principal,  premium, if
any, and interest by check payable in such money.  It may mail an interest check
to a Holder's registered address.

         3. Indenture. The Company issued the Notes as a part of a series issued
under an Indenture dated as of February 25, 1998, a Supplemental Indenture No. 4
dated as of July 14, 2000 and a  Supplemental  Indenture  No. 5 dated as of July
28, 2000  (collectively,  the "Indenture")  between the Company and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the  Indenture by reference to the Trust  Indenture Act of 1939 (15 U.S. Code
ss.ss.  77aaa-77bbbb)  as in effect on the date of the Indenture.  The Notes are
subject  to all such  terms,  and  Holders  of the  Notes  are  referred  to the
Indenture and such Act for a statement of such terms. The terms of the Indenture
shall govern any inconsistencies  between the Indenture and the Notes. The Notes
are unsecured  general  obligations of the Company.  The Notes initially  issued
pursuant to said  Supplemental  Indenture No. 4 or Supplemental  Indenture No. 5
are in an aggregate principal amount of $50,000,000.

         4. Optional Redemption.  The Notes will be subject to redemption at any
time at the option of the  Company,  in whole or in part,  upon not less than 30
nor more than 60 days' notice, at a redemption price equal to the sum of (i) the
principal  amount of the Notes being redeemed,

                                      A-2
<PAGE>

plus accrued and unpaid interest to but excluding the applicable Redemption Date
and (ii) the Make-Whole Amount.

         As used herein the term  "Make-Whole  Amount" means, in connection with
any optional redemption or accelerated payment of any Notes, the excess, if any,
of (i)  the  aggregate  present  value  as of the  date of  such  redemption  or
accelerated  payment of each dollar of principal  being redeemed or paid and the
amount of interest  (exclusive of interest  accrued to the date of redemption or
accelerated  payment)  that would have been payable in respect of such dollar if
such  redemption  or  accelerated  payment  had not  been  made,  determined  by
discounting,  on  a  semiannual  basis,  such  principal  and  interest  at  the
Reinvestment  Rate (as defined  herein)  (determined  on the third  Business Day
preceding  the date  such  notice  of  redemption  is given  or  declaration  of
acceleration  is made) from the  respective  dates on which such  principal  and
interest would have been payable if such  redemption or accelerated  payment had
not been  made,  over (ii) the  aggregate  principal  amount of the Notes  being
redeemed or paid.

         As used  herein  the term  "Reinvestment  Rate"  means a rate per annum
equal to the sum of 0.50% (fifty  one-hundredths  of one percent) plus the yield
on treasury  securities  at constant  maturity  under the heading  "Week Ending"
published  in the  Statistical  Release  (as defined  herein)  under the caption
"Treasury  Constant  Maturities" for the maturity (rounded to the nearest month)
corresponding  to the remaining life to maturity,  as of the payment date of the
principal  being  redeemed or paid. If no maturity  exactly  corresponds to such
maturity,  yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a  straight-line  basis,  rounding  in each of such  relevant  periods to the
nearest  month.  For purposes of  calculating  the  Reinvestment  Rate, the most
recent  Statistical  Release published prior to the date of determination of the
Make-Whole Amount shall be used.

         As used herein the term  "Statistical  Release"  means the  statistical
release designated  "H.15(519)" or any successor  publication which is published
weekly by the Federal  Reserve System and which  establishes  yields on actively
traded United States government  securities  adjusted to constant maturities or,
if such  statistical  release is not published at the time of any  determination
under the Supplemental Indenture,  then any publicly available source of similar
market data which shall be designated by the Company.

         5.  Mandatory  Redemption.  The  Company  shall not be required to make
sinking fund or redemption payments with respect to the Notes.

         6. Notice of Redemption.  Notice of redemption shall be mailed at least
30 days but not more than 60 days before the  Redemption  Date to each Holder of
Notes to be redeemed at its  registered  address.  Notes may be redeemed in part
but only in whole multiples of $1,000,  unless all of the Notes held by a Holder
are to be redeemed.  On and after the redemption date, interest ceases to accrue
on Notes or portions of them called for redemption.

         7. Denominations,  Transfer, Exchange. The Notes are in registered form
without coupons in denominations  of $1,000 and integral  multiples of $1,000 in
excess  thereof.  The

                                      A-3
<PAGE>

transfer of Notes may be  registered  and Notes may be  exchanged as provided in
the  Indenture.  The  Security  Registrar  and the Trustee may require a Holder,
among other things, to furnish  appropriate  endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Security  Registrar  need not  exchange or register  the transfer of any Note or
portion  of a Note  selected  for  redemption.  Also,  it need not  exchange  or
register the transfer of any Notes for a period of 15 days before the mailing of
a notice of redemption of Notes,  or during the period between a record date and
the corresponding Interest Payment Date.

         8.  Defaults and  Remedies.  In case an Event of Default (as defined in
the Indenture)  with respect to the Notes shall have occurred and be continuing,
the principal hereof may be declared,  and upon such  declaration  shall become,
due and payable,  in the manner,  with the effect and subject to the  provisions
provided in the Indenture.

         9. Actions of Holders. The Indenture contains provisions permitting the
holders of not less than a majority  of the  aggregate  principal  amount of the
outstanding  Notes,  subject to certain exceptions as provided in the Indenture,
on behalf of the holders of all such Notes at a meeting  duly called and held as
provided  in  the  Indenture,  to  make,  give  or  take  any  request,  demand,
authorization,  direction,  notice,  consent, waiver or other action provided in
the Indenture to be made, given or taken by the holders of the Notes,  including
without  limitation,   waiving  (a)  compliance  by  the  Company  with  certain
provisions of the  Indenture,  and (b) certain past defaults under the Indenture
and their  consequences.  Any resolution passed or decision taken at any meeting
of the holders of the Notes in accordance  with the  provisions of the Indenture
shall be conclusive and binding upon such holders and upon all future holders of
this Note and other Notes issued upon the  registration of transfer hereof or in
exchange heretofore or in lieu hereof

         10. Persons Deemed Owners. The Company,  the Trustee,  and any agent of
the Company or the Trustee may deem and treat the Person in whose name this Note
is registered on the Security Register as its absolute owner for all purposes.

         11. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.

         12.   Governing   Law.  THE  INTERNAL  LAW  OF  THE   COMMONWEALTH   OF
MASSACHUSETTS SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THE NOTES.

         13. No Personal  Liability.  THE  DECLARATION  OF TRUST OF THE COMPANY,
AMENDED AND  RESTATED ON AUGUST 21,  1995,  A COPY OF WHICH,  TOGETHER  WITH ALL
AMENDMENTS  THERETO  (THE  "DECLARATION"),  IS DULY  FILED IN THE  OFFICE OF THE
DEPARTMENT OF ASSESSMENTS  AND TAXATION OF THE STATE OF MARYLAND,  PROVIDES THAT
THE NAME  "HOSPITALITY  PROPERTIES  TRUST"  REFERS  TO THE  TRUSTEES  UNDER  THE
DECLARATION  COLLECTIVELY AS TRUSTEES,  BUT NOT INDIVIDUALLY OR PERSONALLY,  AND
THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE
HELD TO ANY PERSONAL LIABILITY,  JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR
CLAIM AGAINST,  THE COMPANY.  ALL PERSONS DEALING

                                      A-4
<PAGE>

WITH THE COMPANY,  IN ANY WAY,  SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

         The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:

                          Hospitality Properties Trust
                          400 Centre Street
                          Newton, MA 02458
                          Telecopier No.:  (617) 969-5730
                          Attention: President

                                      A-5
<PAGE>

                                 ASSIGNMENT FORM

To assign  this Note,  fill in the form below:  (I) or (we) assign and  transfer
this Note to

                  (Insert assignee's soc. sec. or tax I.D. no.)

              (Print or type assignee's name, address and zip code)

and irrevocably  appoint to transfer this Note on the books of the Company.  The
agent may substitute another to act for him.

Date:

                                      Your Signature:

                                      (Sign exactly as your name appears on the
                                       face of this Note)

Signature Guarantee:<PAGE>

===============================================================================

                                 PRICE OWNER LLC

                                                 (Borrower)

                                       and

                      GMAC COMMERCIAL MORTGAGE CORPORATION
                                                 (Lender)

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

                                 LOAN AGREEMENT

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

                           Dated: As of June 28, 2000

===============================================================================

<PAGE>

                  THIS LOAN AGREEMENT (the "Agreement") is made as of the 28th
day of June, 2000 between PRICE OWNER LLC, a Delaware limited liability
company, having its principal place of business at 17140 Bernardo Center
Drive, Suite 300, San Diego, California 92128, ("Borrower") and GMAC
COMMERCIAL MORTGAGE CORPORATION, a California corporation, having an address
at 200 Witmer, Horsham, Pennsylvania 19044-8015 ("Lender").

                              W I T N E S S E T H :

                  WHEREAS, at the request of Borrower, Lender has agreed to
fund to Borrower a loan in the principal amount of $121,375,000.00 (the
"Loan");

                  WHEREAS, the Loan is evidenced by that certain note of even
date herewith made by Borrower to Lender in the original principal amount of
$121,375,000.00 (as the same may be amended, modified, restated, split or
severed, the "Note") and secured by five (5) certain mortgages, deeds of trust
and other real estate security instruments, as the case may be, each of even
date herewith, made by Borrower to Lender (collectively, as the same may be
amended, modified, restated, split or severed, the "Security Instruments"),
covering five (5) parcels of land more fully described in EXHIBIT A attached
hereto and made a part hereof (collectively, the "Parcels");

                  NOW, THEREFORE, in consideration of ten dollars ($10) and
other good and valuable consideration, the receipt of which is hereby
acknowledged, Lender and Borrower hereby covenant and agree as follows:

         1.       THE NOTE AND THE SECURITY INSTRUMENTS. The indebtedness of
Borrower shall be: (i) evidenced by the Note, and (ii) secured by, among other
things, (a) the Security Instruments made by Borrower covering the fee estate
or leasehold estate of Borrower, as applicable, in each Parcel, Borrower's
interest in the Improvements (as defined in the Security Instruments) located
on each Parcel and other property, rights and interests of Borrower in the
same (individually, a "Property" and collectively, the "Properties"), and (b)
assignments of leases and rents given by Borrower to Lender dated the date
hereof and covering the Properties (collectively, the "Assignments of Rents").

         2.       LOAN DOCUMENTS. The term "Loan Documents" as used in this
Agreement shall collectively mean the Note, the Security Instruments, this
Agreement, the Assignments of Rents, the Guaranty of Recourse Obligations, the
Assignments of Licenses, Permits and Contracts, the Environmental Indemnity
Agreement, the Assignment of Management Agreement and Subordination of
Management Fees, the UCC Financing Statements, the Replacement Reserve and
Security Agreement, if any, the Required Repair Reserve, if any, the Tenant
Improvement and Leasing Commission Reserve Agreement, if any, each dated the
date hereof and all other documents and instruments of any nature whatsoever
executed or delivered in connection with the Loan.

         3.       PROPERTY RELEASES. Subject to the terms and conditions set
forth herein, at any time after the Lockout Date (as defined in the Note),
Borrower shall have the right, from time to time, on any Payment Date (as
defined in the Note), or on any Business Day provided that a payment of the
Interest Shortfall (as defined in the Note) is made, to obtain a release (a
"Property Release") of a Property from the lien of the related Security
Instruments (i) provided that no default under this

<PAGE>

Agreement, the Note, the Security Instruments or any other Loan Documents has
occurred and is continuing, (ii) subject to compliance with the provisions set
forth below in this Section 3 of this Agreement; and (iii) provided that
legal, record, economic and beneficial ownership of the Property for which a
Property Release is being requested (the "Release Premises") is simultaneously
with the granting of the Property Release transferred (a "Release Premises
Transfer") to and shall be owned immediately after such Property Release by a
person(s), party(ies) or entity(ies) other than Borrower or any managing
member or general partner of Borrower ("Release Premises Transferee"). In the
event that the Borrower seeks to release a Property from the lien of the
related Security Instrument, Lender shall release such Property from the lien
of the related Security Instrument and the Loan Documents, but only upon
receipt by Lender of the following:

                  (a) At least thirty (30) days but no more than ninety (90)
        days prior written notice of its request to obtain a release of the
        Release Premises;

                  (b) A certificate of Borrower certifying the requirements set
        forth in Paragraph 3(f) of this Agreement shall be true after giving
        effect to such transfer;

                  (c) A wire transfer of immediately available federal funds in
        an amount equal to 115% of the Allocated Loan Amount for the Release
        Premises as set forth on Exhibit B attached hereto and made a part
        hereof (the "Release Amount"), together with (i) all accrued and unpaid
        interest on the amount of principal being prepaid, (ii) if such payment
        is not made on a Payment Date, the Interest Shortfall with respect to
        the amount prepaid, and (iii) all other sums due under the Note, the
        applicable Security Instrument and the applicable other Loan Documents
        in connection with a partial prepayment;

                  (d) All proposed documents related to the Release Premises
        Transferee and such documents, certificates and assurances that Lender
        shall reasonably request to evidence and confirm that the Release
        Premises is simultaneously with the Property Release being transferred
        to a Release Premises Transferee;

                  (e) Payment of all Lender's reasonable costs and expenses,
        including due diligence review costs and reasonable counsel fees and
        disbursements incurred in connection with the release of the Property
        from the lien of the related Security Instruments and the review and
        approval of the documents and information required to be delivered in
        connection therewith ("Property Release Expenses");

                  (f) Evidence reasonably satisfactory to Lender that the
        Aggregate Debt Service Coverage Ratio (hereinafter defined) for the
        twelve (12) month period immediately preceding the Property Release
        with respect to the Properties remaining encumbered by the liens of the
        Security Instruments after giving effect to the Property Release shall
        be equal to or greater than the greater of (i) 1.80 to 1.00 (the
        "Origination DSCR") and (ii) the Aggregate Debt Service Coverage Ratio
        with respect to the Properties then encumbered by the liens of the
        Security Instruments immediately prior to such release, for the twelve
        (12) months immediately preceding the second calendar month prior to
        the date of the proposed Property Release (the "Current DSCR");

                                      -2-

<PAGE>

                  (g) If any Securities (as defined in the Security
        Instruments) have been issued, the written confirmation of the Rating
        Agencies (as defined in the Security Instruments) that the Property
        Release shall not result in a downgrade, withdrawal or qualification of
        the then current ratings by the applicable Rating Agencies of the
        Securities and otherwise in form and substance reasonably satisfactory
        to Lender and its counsel (a "No Downgrade Letter").

         4.       SUBSTITUTION OF PROPERTIES. Subject to the terms and
conditions set forth in this Paragraph 4, Borrower may obtain a release of the
lien of a Security Instrument (and the related Loan Documents) encumbering an
individual Property (a "Substituted Property") by substituting therefor
another retail property owned by Borrower (individually, a "Substitute
Property" and collectively, the "Substitute Properties"), provided that (a)
the Property located in Westbury, New York may not be a Substituted Property
and (b) no more than two (2) Substituted Properties shall be permitted during
the term of the Loan. In addition, any such substitution shall be subject, in
each case, to the satisfaction of the following conditions precedent:

                  (a) Lender shall have received a copy of a deed conveying all
        of Borrower's right, title and interest in and to the Substituted
        Property to an entity other than Borrower (or any general partner of
        managing member of Borrower) and a letter from Borrower countersigned
        by a title insurance company acknowledging receipt of such deed and
        agreeing to record such deed in the real estate records for the county
        in which the Substituted Property is located;

                  (b) Lender shall have received an appraisal of the Substitute
        Property dated no more than sixty (60) days prior to the substitution
        by an licensed appraiser, indicating an appraised value of the
        Substitute Property that is equal to or greater than the value of the
        Substituted Property as of the date hereof;

                  (c) Receipt of evidence that the Aggregate Debt Service
        Coverage, after giving effect to the substitution, shall be equal to or
        greater than the greater of (i) the Origination DSCR and (ii) the
        Current DSCR;

                  (d) The NOI (hereinafter defined) for the Substitute Property
        does not show a downward trend over the three (3) years immediately
        prior to the date of substitution;

                  (e) The NOI and Debt Service Coverage Ratio (hereinafter
        defined), for the twelve (12) month period immediately preceding the
        substitution, for the Substitute Property is greater than one hundred
        fifteen percent (115%) of the NOI and Debt Service Coverage Ratio, for
        the twelve (12) month period immediately preceding the substitution,
        for the related Substituted Property. For purposes of this clause (e),
        the Debt Service Coverage Ratio with respect to a Substitute Property
        or a Substituted Property shall be calculated using the NOI with
        respect to such Substitute Property or the Substituted Property, as
        applicable, and the principal and interest due and payable on the Note
        with respect to the related Allocated Loan Amount;

                  (f)      Receipt of a No Downgrade Letter;

                  (g)      No Event of Default shall have occurred and be
        continuing;

                                      -3-

<PAGE>

                  (h) Borrower shall have executed, acknowledged and delivered
        to Lender (A) a Security Instrument, an Assignment of Leases and UCC
        Financing Statements with respect to the Substitute Property, together
        with a letter from Borrower countersigned by a title insurance company
        acknowledging receipt of such Security Instrument, Assignment of Leases
        and UCC Financing Statements and agreeing to record or file, as
        applicable, such Security Instrument, Assignment of Leases and Rents
        and one of the UCC Financing Statements in the real estate records for
        the county in which the Substitute Property is located and to file one
        of the UCC Financing Statement in the office of the Secretary of State
        of the state in which the Substitute Property is located, so as to
        effectively create upon such recording and filing valid and enforceable
        liens upon the Substitute Property, of the requisite priority, in favor
        of Lender (or such other trustee as may be desired under local law) and
        (B) such other Loan Documents as required by Lender, including, without
        limitation, an Environmental Indemnity, with respect to the Substitute
        Property. The Security Instrument, Assignment of Leases, UCC Financing
        Statements, Environmental Indemnity and other Loan Documents shall be
        the same in form and substance as the counterparts of such documents
        executed and delivered with respect to the related Substituted Property
        subject to modifications reflecting the Substitute Property as the
        individual Property that is the subject of such documents and such
        modifications reflecting the laws of the state in which the Substitute
        Property is located as shall be recommended by the counsel admitted to
        practice in such state and delivering the opinion as to the
        enforceability of such documents required pursuant to clause (n) below.
        The Security Instrument encumbering the Substitute Property shall
        secure, at Lender's option, (i) all amounts evidenced by the Note or
        (ii) one hundred twenty five percent (125%) of the applicable allocated
        loan amount, as determined by Lender. The amount of the Loan allocated
        to the Substitute Property (such amount being hereinafter referred to
        as the "Substitute Allocated Loan Amount") shall equal the Allocated
        Loan Amount of the related Substituted Property;

                  (i) Lender shall have received (A) to the extent available, a
        "tie-in" or similar endorsement to each title insurance policy issued
        in connection with the closing of the Loan (the "Title Insurance
        Policy") insuring the lien of an existing Security Instruments as of
        the date of the substitution with respect to the title insurance policy
        insuring the lien of the Security Instrument with respect to the
        Substitute Property and (B) a title insurance policy (or a marked,
        signed and redated commitment to issue such title insurance policy)
        insuring the lien of the Security Instrument encumbering the Substitute
        Property, issued by the title company that issued the Title Insurance
        Policy and dated as of the date of the substitution, with reinsurance
        and direct access agreements that replace such agreements issued in
        connection with the Title Insurance Policy insuring the lien of the
        Security Instrument encumbering the Substituted Property. The title
        insurance policy issued with respect to the Substitute Property shall
        (1) provide coverage in the amount of the Substitute Allocated Loan
        Amount if the "tie-in" or similar endorsement described above is
        available or, if such endorsement is not available, in an amount equal
        to one hundred twenty-five percent (125%) of the Substitute Allocated
        Loan Amount, (2) insure Lender that the relevant Security Instrument
        creates a valid first lien on the Substitute Property encumbered
        thereby, free and clear of all exceptions from coverage other than
        standard exceptions and exclusions from coverage (as modified by the
        terms of any endorsements), (3) contain such endorsements and
        affirmative coverages as are contained in the Title Insurance Policy
        insuring the liens of the

                                      -4-

<PAGE>

        existing Security Instruments, to the extent reasonably available in
        the state where the Substitute Property is located and (4) name Lender
        as the insured. Lender also shall have received copies of paid receipts
        showing that all premiums in respect of such endorsements and title
        insurance policies have been paid;

                  (j) Lender shall have received a current title survey for
        each Substitute Property, certified to the title company and Lender and
        their successors and assigns, in the same form and having the same
        content as the certification of the Survey of the Substituted Property
        prepared by a professional land surveyor licensed in the state in which
        the Substitute Property is located in accordance with the 1999 Minimum
        Standard Detail Requirements for ALTA/ACSM Land Title Surveys. Such
        survey shall reflect the same legal description contained in the title
        insurance policy relating to such Substitute Property and shall
        include, among other things, a metes and bounds description of the real
        property comprising part of such Substitute Property. The surveyor's
        seal shall be affixed to each survey and each survey shall certify, if
        appropriate, that the surveyed property is not located in a
        "one-hundred-year flood hazard area";

                  (k) Lender shall have received valid certificates of insurance
        indicating that the requirements for the policies of insurance required
        for an individual Property pursuant to the Loan Documents have been
        satisfied with respect to the Substitute Property and evidence of the
        payment of all premiums payable for the existing policy period;

                  (l) Lender shall have received an acceptable Phase I
        environmental report and, if recommended under the Phase I
        environmental report, a Phase II environmental report, which conclude
        that the Substitute Property does not contain any Hazardous Substance
        (as defined in the Security Instrument) in violation of any
        Environmental Law (as defined in the Security Instruments) and is not
        subject to any risk of contamination from any off-site Hazardous
        Substance;

                  (m) Borrower shall deliver or cause to be delivered to Lender
        (A) updates certified by Borrower of all organizational documentation
        related to Borrower and/or the formation, structure, existence, good
        standing and/or qualification to do business delivered to Lender; (B)
        good standing certificates, certificates of qualification to do
        business in the jurisdiction in which the Substitute Property is
        located (if required in such jurisdiction) and (C) resolutions of the
        general partner or managing member, as applicable, of Borrower
        authorizing the substitution and any actions taken in connection with
        such substitution;

                  (n) Lender shall have received the following opinions of
        Borrower's counsel: (A) an opinion or opinions of counsel admitted to
        practice under the laws of the state in which the Substitute Property
        is located stating that the Loan Documents delivered with respect to
        the Substitute Property pursuant to clause (h) above are valid and
        enforceable in accordance with their terms, subject to the laws
        applicable to creditors' rights and equitable principles, and subject
        to other reasonable and customary qualifications and assumptions, and
        that Borrower is qualified to do business and in good standing under
        the laws of the jurisdiction where the Substitute Property is located
        or that Borrower is not required by applicable law to qualify to do
        business in such jurisdiction; (B) an opinion of counsel stating that
        the Loan Documents

                                      -5-

<PAGE>

        delivered with respect to the Substitute Property pursuant to clause
        (h) above were duly authorized, executed and delivered by Borrower and
        that, to the counsel's knowledge, the execution and delivery of such
        Loan Documents and the performance by Borrower of its obligations
        thereunder will not cause a breach of, or a default under, any
        agreement, document or instrument to which Borrower is a party or to
        which it or its properties are bound; (C) an opinion of counsel stating
        that subjecting the Substitute Property to the lien of the related
        Security Instrument and the execution and delivery of the related Loan
        Documents does not and will not affect or impair the ability of Lender
        to enforce its remedies under all of the Loan Documents or to realize
        the benefits of the cross-collateralization provided for thereunder;
        (D) an update of the Non-Consolidation Opinion indicating that the
        substitution does not affect the opinions set forth therein and (E) an
        opinion of counsel that the substitution does not constitute a
        "significant modification" of the Loan under Section 1001 of the Code
        or otherwise cause a tax to be imposed on a "prohibited transaction" by
        any "real estate mortgage investment conduit" within the meaning of
        Section 860D of the Code that holds the Note;

                  (o) Borrower shall have paid or deposited with Lender all
        costs associated with the Substitute Property, including without
        limitation, (i) accrued but unpaid Insurance Premiums (as defined in
        the Security Instruments), (ii) currently due Taxes (as defined in the
        Security Instruments) (including any in arrears) and (iii) currently
        due Other Charges (as defined in the Security Instruments);

                  (p) Borrower shall have paid or reimbursed Lender for all
        costs and expenses incurred by Lender (including, without limitation,
        reasonable attorneys fees and disbursements) in connection with the
        substitution and Borrower shall have paid all recording charges, filing
        fees, taxes or other out-of-pocket expenses (including, without
        limitation, mortgage and intangibles taxes and documentary stamp taxes)
        payable in connection with the substitution. Borrower shall have paid
        all costs and expenses of the Rating Agencies incurred in connection
        with the substitution;

                  (q) Lender shall have received annual operating statements
        and occupancy statements for the Substitute Property for the most
        current completed fiscal year and a current operating statement for the
        Substituted Property, each certified to Lender as being true and
        correct and a certificate from Borrower certifying that there has been
        no adverse change in the financial condition of the Substitute Property
        since the date of such operating statement;

                  (r) Borrower shall have delivered to Lender estoppel
        certificates from tenants at the Substitute Property which (1) occupy,
        in the aggregate, at least eighty percent (80%) of the gross leasable
        space at the Substitute Property and (2) provide, in the aggregate, at
        least eighty (80%) of the gross rental income at the Substitute
        Property, which estoppel certificates shall be in substantially the
        same form as the estoppel certificates delivered to Lender prior to the
        closing of the Loan;

                  (s) Lender shall have received copies of all tenant leases
        and any ground leases affecting the Substitute Property certified by
        Borrower as being true and correct. Lender

                                      -6-

<PAGE>

        shall have received a current rent roll of the Substitute Property
        certified by Borrower as being true and correct;

                  (t) Lender shall have received subordination, nondisturbance
        and attornment agreements (an "SNDA") in substantially the same form as
        the SNDAs delivered to Lender prior to the closing of the Loan with
        respect to Leases affecting the Substitute Property which are not
        subordinate by their terms;

                  (u) Lender shall have received (A) an endorsement to the
        title insurance policy insuring the lien of the Security Instrument
        encumbering the Substitute Property insuring that the Substitute
        Property constitutes a separate tax lot or, if such an endorsement is
        not available in the state in which the Substitute Property is located,
        a letter from the title insurance company issuing such title insurance
        policy stating that the Substitute Policy constitutes a separate tax
        lot or (B) a letter from the appropriate taxing authority stating that
        the Substitute Property constitutes a separate tax lot;

                  (v) Lender shall have received a property conditions report
        acceptable to Lender in its reasonable discretion with respect to the
        Substitute Property stating that the Substitute Property and its use
        comply in all material respects with all applicable laws, rules,
        regulations and orders (including, without limitation, zoning,
        subdivision and building laws),

                  (w) Lender shall have received a certified copy of an
        amendment to the Management Agreement (as defined in the Security
        Instruments) reflecting the deletion of the Substituted Property and
        the addition of the Substitute Property as a property managed pursuant
        thereto and Manager shall have executed and delivered to Lender an
        amendment to the Assignment of Management Agreement and Subordination
        of Management Fees reflecting such amendment to the Management
        Agreement;

                  (x) Lender shall have received such other and further
        approvals, opinions, documents and information in connection with the
        substitution as Lender may reasonably require;

                  (y) Lender shall have received copies of all material
        contracts and agreements relating to the leasing and operation of the
        Substitute Property together with a certification of Borrower attached
        to each such contract or agreement certifying that the attached copy is
        a true and correct copy of such contract or agreement and all
        amendments thereto;

                  (z) Borrower shall submit to Lender, not less than twenty (20)
        days prior to the date of such substitution, a certificate certifying
        that the requirements set forth in this Paragraph 4 have been
        satisfied.

         Upon the satisfaction of the foregoing conditions precedent, Lender
will release its lien from the Substituted Property to be released and the
Substitute Property shall be deemed to be an encumbered Property for purposes
of this Agreement and one hundred fifteen percent (115%) of the Substitute
Allocated Loan Amount with respect to such Substitute Property shall be deemed
to be the Release Amount with respect to such Substitute Property for all
purposes hereunder.

                                      -7-

<PAGE>

         5.       DEFINITIONS. The following capitalized terms shall have the
meanings set forth below. Capitalized terms not defined herein shall have the
meaning set forth in the Security Instruments.

                  "AGGREGATE DEBT SERVICE COVERAGE RATIO" shall mean the ratio
of (a) the sum of NOI derived from the operation of each of the Properties
encumbered by a Security Instrument (other than the Release Premises, if
applicable) during the applicable period, to (b) the total Debt Service that
would be payable under the Note for the applicable period. For purposes of
this calculation, "Debt Service" shall mean, for any given month during the
term of the Loan, the amount of interest that would be due and payable on each
Payment Date for the immediately preceding month on the outstanding principal
balance of the Note, calculated at an interest rate equal to the greater of
(i) the Applicable Interest Rate (as defined in the Note) and (ii) 7.66438%
per annum.

                  "DEBT SERVICE COVERAGE RATIO" shall mean the ratio of (a)
the NOI derived from the operation of a Property during the applicable period
to (b) the Debt Service that would be due under the Note with respect to the
Allocated Loan Amount applicable to the Property as set forth on Exhibit B for
the twelve (12) calendar month period immediately following the calculation.

                  "EXPENSES" shall mean, with respect to a Property, for any
given period (and shall include the pro rata portion for such period of all
such expenses attributable to, but not paid during, such period), all expenses
to be paid or payable, as determined in accordance with generally accepted
accounting principles ("GAAP"), by Borrower during that period in connection
with the operation of such Property for which it is to be determined,
including without limitation:

         (i)      expenses for cleaning, repair, maintenance, decoration and
painting of the Property (including, without limitation, parking lots and
roadways), net of any insurance proceeds in respect of any of the foregoing;

         (ii)     wages (including overtime payments), benefits, payroll taxes
and all other related expenses for Borrower's on-site personnel, up to and
including (but not above) the level of the property manager (the "Property
Manager"), engaged in the repair, operation and maintenance of the Property
and service to tenants and on-site personnel engaged in audit and accounting
functions performed by Trustor;

         (iii)    management fees approved by Borrower and equal to the
greater of (A) three percent (3%) of the gross income derived from the
operation of the Property or (B) the actual management fees incurred by
Borrower. Such fees shall include all fees for management services whether
such services are performed at such Property or off-site;

         (iv)     the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, utility or similar item
and the cost of building and cleaning supplies;

         (v)      Insurance Premiums;

         (vi)     legal, accounting and other professional fees and expenses;

                                      -8-

<PAGE>

         (vii)    the cost of all equipment to be used in the ordinary course
of business, which is not capitalized in accordance with GAAP;

         (viii)   Taxes, Other Charges and Ground Rents, if any;

         (ix)     advertising and other marketing costs and expenses;

         (x)      casualty losses to the extent not reimbursed by a third
party; and

         (xi)     other expenses approved by Borrower as set forth in the
budget delivered to Lender as provided for herein.

         Notwithstanding the foregoing, Expenses shall not include (A)
depreciation or amortization or any other non-cash item of expense unless
approved by Lender; (B) interest, principal, fees, costs and expense
reimbursements of Lender in administering the Loan but not in exercising any
of its rights under this Agreement, the Security Instrument or any of the
other Loan Documents; or (C) any expenditure which is properly treatable as a
capital item under GAAP.

                  "NOI" shall mean, with respect to any Property, the gross
income derived from the operation of such Property, less Expenses attributable
to such Property. NOI shall include only Rents actually received and earned
and such other income, including any rent loss or business interruption
insurance proceeds, laundry, parking, vending or concession income, late fees,
forfeited security deposits and other miscellaneous tenant charges and
Expenses actually paid or payable on an accrual basis attributable to such
Property on an annualized basis during the applicable period ending on the
last day of the month that is two calendar months prior to the month during
which the NOI is being calculated, as set forth on operating statements
reasonably satisfactory to Lender. NOI shall be calculated in accordance with
customary accounting principles applicable to real estate.

         Notwithstanding the foregoing, NOI shall not include (a) condemnation
or insurance proceeds (excluding rent or business interruption insurance
proceeds); (b) any proceeds from the sale, exchange, transfer, financing or
refinancing of all or any portion of a Property; (c) amounts received from
tenants as security deposits; or (d) any other type of income otherwise
includable in NOI but paid directly by any tenant to a person or entity other
than Borrower.

         6.       EVENTS OF DEFAULT. The term "Event of Default" as used in
this Agreement shall have the meaning ascribed to such term in the Security
Instruments.

         Upon the occurrence of an Event of Default under this Agreement,
Lender (i) may, at its option and in its sole discretion, declare the Debt
immediately due and payable, and (ii) may pursue any and all remedies provided
for in the Loan Documents, or otherwise available.

         7.       INCORPORATION OF PROVISIONS. The Note, the Security
Instruments and the other Loan Documents are subject to the conditions,
stipulations, agreements and covenants contained herein to the same extent and
effect as if fully set forth therein until this Agreement is terminated by the
payment in full of the Debt.

                                      -9-

<PAGE>

         8.       FURTHER ASSURANCES. Borrower shall on demand of Lender do
any act or execute any additional documents required by Lender to confirm the
lien of the Security Instruments.

         9.       CONSTRUCTION OF AGREEMENT. The titles and headings of the
paragraphs of this Agreement have been inserted for convenience of reference
only and are not intended to summarize or otherwise describe the subject
matter of such paragraphs and shall not be given any consideration in the
construction of this Agreement.

         10.      PARTIES BOUND, ETC. The provisions of this Agreement shall
be binding upon and inure to the benefit of Borrower, Lender and their
respective heirs, executors, legal representatives, successors and assigns
(except as otherwise prohibited by this Agreement).

         11.      WAIVERS. Lender may at any time and from time to time waive
any one or more of the conditions contained herein, but any such waiver shall
be deemed to be made in pursuance hereof and not in modification thereof, and
any such waiver in any instance or under any particular circumstance shall not
be considered a waiver of such condition in any other instance or any other
circumstance.

         12.      GOVERNING LAW. This Agreement shall be deemed to be a
contract entered into pursuant to the laws of the State of New York and shall
in all respects be governed, construed, applied and enforced in accordance
with the laws of the State of New York.

         13.      SEVERABILITY. If any term, covenant or provision of this
Agreement shall be held to be invalid, illegal or unenforceable in any
respect, this Agreement shall be construed without such term, covenant or
provision.

         14.      NOTICES. All notices required to be given under the terms of
this Agreement shall be given in accordance with and to the addresses set
forth in the Note.

         15.      MODIFICATION. This Agreement may not be modified, amended or
terminated, except by an agreement in writing executed by the parties hereto.

         16.      RECOURSE. The obligations of Borrower hereunder shall be
limited to the same extent as provided for in Article 15 of the Security
Instruments.

                         [NO FURTHER TEXT ON THIS PAGE]

                                      -10-

<PAGE>

                  IN WITNESS WHEREOF, Borrower and Lender have duly executed
this Agreement the day and year first above written.

                            PRICE OWNER LLC, a Delaware limited liability
                            company

                            By:      Price Owner Corp., a Delaware corporation,
                                     its managing member

                                     By:      /s/ James Y. Nakagawa
                                              Name: James Y. Nakagawa
                                              Title: C.F.O

                            GMAC COMMERCIAL MORTGAGE
                            CORPORATION, a California corporation

                            By:      /s/ Barry Gersten
                                     Name: Barry Gersten
                                     Attorney-in-Fact

<PAGE>

                                    EXHIBIT A

                              (Legal Descriptions)

<PAGE>

                                    EXHIBIT B

<TABLE>
<CAPTION>

================================================================================
                                                               ALLOCATED
                                                                 LOAN
                  SITE                                          AMOUNT
                                                                ("ALA")
--------------------------------------------------------------------------------
<S>                                                         <C>
Price Club Plaza                                            $47,000,000.00
Westbury, New York

--------------------------------------------------------------------------------
The Willowbrook                                             $26,500,000.00
Wayne, New Jersey

--------------------------------------------------------------------------------
The Home Depot Plaza                                        $16,400,000.00
Bensalem, Pennsylvania

--------------------------------------------------------------------------------
Signal Hill Towne Center                                    $17,375,000.00
Signal Hill, California

--------------------------------------------------------------------------------
Stanford Ranch Crossing                                     $14,100,000.00
Roseville, California

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

</TABLE>

<PAGE>

                             FORM OF PROMISSORY NOTE

$121,375,000.00                                             As of June 28, 2000

                  FOR VALUE RECEIVED, and upon the terms and conditions set
forth herein, PRICE OWNER LLC, a Delaware limited liability company, having
its principal place of business at 17140 Bernardo Center Drive, Suite 300, San
Diego, California 92128 ("Borrower"), promises to pay to the order of GMAC
COMMERCIAL MORTGAGE CORPORATION, a California corporation ("Lender"), at
Lender's office located at 200 Witmer Road, P.O. Box 809, Horsham,
Pennsylvania 19044-0809, Attn: Servicing Accounting Manager, or at such other
place as Lender may designate to Borrower in writing from time to time, the
principal sum of ONE HUNDRED TWENTY-ONE MILLION THREE HUNDRED SEVENTY-FIVE
THOUSAND AND 00/100 DOLLARS ($121,375,000.00), or so much thereof as is
outstanding and unpaid, together with interest thereon at the Applicable
Interest Rate (hereinafter defined), in lawful money of the United States of
America which, at the time of payment, shall be legal tender in payment of all
debts and dues, public and private.

         1.       COMPUTATION OF INTEREST.

         1.01     COMPUTATION OF INTEREST. Interest under this Note shall be
paid in arrears and shall be calculated based on a 360 day year and paid for
the actual number of days elapsed for any whole or partial month in which
interest is being calculated.

         1.02     INITIAL APPLICABLE INTEREST RATE AND RATE ADJUSTMENT DATE.
Interest shall accrue on outstanding principal under this Note at the rate
("Applicable Interest Rate") which is the LIBOR Rate (defined below) plus
(.98%) ninety-eight one hundredths percent ("Margin"), which combined figure
shall be rounded upwards to the nearest one-eighth percent (.125%).
Adjustments to the Applicable Interest Rate in connection with changes in the
LIBOR Rate shall be made on the first (1 ) st day of each calendar month
("Rate Adjustment Date"), except that the initial LIBOR Rate shall be
determined by Lender as of the date of this Note.

         1.03     LIBOR RATE. The London Interbank Offered Rate ("LIBOR Rate")
shall mean the average of London Interbank Offered Rates (in U.S. dollar
deposits) for a term of one month determined solely by Lender as of each Rate
Adjustment Date. On each Rate Adjustment Date, Lender will obtain the LIBOR
Rate from the appropriate Bloomberg display page available as of the close of
business announced on the last business day of the month immediately preceding
the Rate Adjustment Date. If Bloomberg ceases publication or ceases to publish
the LIBOR Rate, Lender shall select a comparable publication to determine the
LIBOR Rate and provide notice thereof to Borrower. The LIBOR Rate may or may
not be the lowest rate based upon the market for U.S. dollar deposits in the
London Interbank Eurodollar Market at which Lender prices loans on the date on
which the LIBOR Rate is determined by Lender as set forth above.

<PAGE>

         1.04     LIBOR UNASCERTAINABLE. (a) If (i) on any date on which the
LIBOR Rate would otherwise be set, Lender shall have determined in good faith
(which determination shall be conclusive absent manifest error) that (A)
adequate and reasonable means do not exist for ascertaining the LIBOR Rate or
(B) a contingency has occurred which materially and adversely affects the
London Interbank Eurodollar Market at which Lender prices loans on the date on
which the LIBOR Rate is determined by Lender hereunder, or (ii) at any time
Lender shall have determined in good faith (which determination shall be
conclusive absent manifest error) that the making, maintenance or funding of
any part of the loan evidenced by this Note has been made impracticable or
unlawful by Lender's compliance in good faith with any law or guideline or
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof or with any request or
directive of any such governmental authority (whether or not having the force
of law); then, and in any such event, Lender may notify Borrower of such
determination. Upon the date specified by Lender in such notice (which shall
not be earlier than the date such notice is given), Lender's obligation to
charge interest to Borrower at the LIBOR Rate shall be suspended until Lender
shall notify Borrower of Lender's determination in good faith (which
determination shall be conclusive in the absence of manifest error) that the
circumstances giving rise to such previous determination no longer exists.

         (b)      If Lender notifies Borrower of a determination under
subsection (a) above, the LIBOR Rate shall automatically be converted to the
"Index" of the weekly average yield on United States Treasury Securities
adjusted to a constant maturity of one year, as made available by the Federal
Reserve Board forty-five (45) days prior to each Rate Adjustment Date.

         1.05     ADJUSTMENT DUE TO CALCULATIONS. If Lender at any time
determines, in its sole but reasonable discretion, that it has miscalculated
the amount of the Applicable Interest Rate (whether because of a
miscalculation of the LIBOR Rate or otherwise), then Lender shall notify
Borrower of the corrected amount of the monthly payment and Applicable
Interest Rate, and (a) if the corrected Applicable Interest Rate represents an
increase in the applicable monthly payment, Borrower shall, within ten (10)
days thereafter, pay to Lender any sums that Borrower would have otherwise
been obligated under this Note to pay to Lender had the amount of the
Applicable Interest Rate not been miscalculated, or (b) if the corrected
amount of the Applicable Interest Rate results in an overpayment by Borrower
to Lender, and no Event of Default (as hereafter defined) has then occurred
and is continuing, Lender shall thereafter pay to Borrower the sums that
Borrower would not have otherwise been obligated to pay to Lender had the
amount of the Applicable Interest Rate not been miscalculated or, at Lender's
option, Lender may credit such amounts against Borrower's outstanding or next
ensuing payment obligations hereunder.

         1.06     INCREASED COSTS. (a) Borrower shall, from time to time upon
demand by Lender, pay to Lender as additional interest all amounts necessary
to reimburse Lender for any increase in the cost to Lender of agreeing to make
or making the indebtedness evidenced by this Note which may arise from (i) any
change (including, without limitation, any change by way of imposition or
increase of reserve requirements) in or in the interpretation of any law or
regulation or (ii) Lender's compliance with any guideline or request from any
governmental authority (whether or not having the force of law). Lender shall
notify Borrower in writing of the amount of any such increased costs, which
Lender shall calculate in good faith, and such calculation shall be conclusive
and binding on Borrower in the absence of manifest error.

                                       2

<PAGE>

         (b)      If (i) any law, or guideline, interpretation or application
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance with any request or directive of any
governmental authority (whether or not having the force of law) now existing
or hereafter adopted (A) subjects Lender to any tax or changes the basis of
taxation with respect to this Note or payments by Borrower of principal,
interest or other amounts due from Borrower hereunder or under the other Loan
Documents (as hereafter defined) (except for taxes on the overall net income
or overall gross receipts of Lender imposed as a result of a present or former
connection between the jurisdiction of the government or taxing authority
imposing such tax and Lender; provided, that this exclusion shall not apply to
a connection arising solely from Lender having executed, delivered, performed
its obligations under or received a payment under, or enforced this Note or
any of the other Loan Documents), or (B) imposes upon Lender any other
condition or expense with respect to this Note, or the making, maintenance or
funding of any part of the indebtedness evidenced hereby or any security
therefor, and (ii) the result of any occurrence of the foregoing is to
increase the cost to, reduce the income receivable by, or impose any expense
(including, without limitation, loss of margin) upon Lender with respect to
this Note, or the making, maintenance or funding of any part of the
indebtedness evidenced hereby or any security therefor, by an amount which
Lender deems in good faith to be material, Lender may from time to time notify
Borrower of the amount determined in good faith (using any averaging and
attribution methods) by Lender (which determination shall be conclusive in the
absence of manifest error) to be necessary to compensate Lender for such
imposition,

         (c)      If Borrower is by law prohibited from paying any amount due
to Lender under subsections (a) or (b) above, Lender may elect to declare the
unpaid balance hereof and all interest accrued thereon due and payable within
five (5) days after written notice to Borrower.

         2.       PAYMENTS OF PRINCIPAL AND INTEREST.

         2.01     PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall pay
principal and interest under this Note as follows:

         (a)      Commencing on the first day of August, 2000 ("First Payment
Date"), and continuing on the first day of each and every successive month
thereafter (each a "Payment Date") through and including the Payment Date
immediately prior to the Maturity Date (defined below), monthly payments of
accrued interest based on the Applicable Interest Rate (determined as of the
immediately preceding Rate Adjustment Date); and

         (b)      On the first day of July, 2004 ("Maturity Date"), the entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon and any other amounts due under the Note, the Security
Instruments or the Other Security Documents (hereafter defined) shall be due
and payable in full.

         2.02     PAYMENT OF SHORT INTEREST. If this Note is executed on a
date other than the first day of a calendar month, Borrower shall pay to
Lender, contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days from and including the date
of this Note to and including the last day of such month (b) by a daily rate
based on the Applicable Interest Rate calculated for a 360 day year (the
"Interest Shortfall").

                                       3

<PAGE>

         2.03     METHOD OF PAYMENT. Each payment due hereunder shall not be
deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day for all
purposes. "Business Day" for purposes of this Note shall mean all days other
than Saturday or Sunday and legal holidays on which Federal banks within the
State of New York are closed. In the event a Payment Date is not a Business
Day, said Payment Date shall be extended to the next immediately succeeding
Business Day.

         2.04     APPLICATION OF PAYMENTS. Payments under this Note shall be
applied first to the payment of late fees and other costs and charges due in
connection with this Note, as Lender determines in its sole, but reasonable,
discretion, then to the payment of accrued but unpaid interest, and then to
reduction of the outstanding principal balance (in inverse order of maturity
whether or not then due), but such application shall not reduce the amount of
the fixed monthly installments required to be paid hereunder. No principal
amount repaid may be reborrowed. All amounts due under this Note shall be
payable without setoff, counterclaim or any other deduction whatsoever.

         2.05     PREPAYMENT. (a) The principal balance of this Note may not
prepaid, in whole or in part, prior to July 1, 2002 (the "Lockout Date").

         (b)      On or after the Lockout Date, but only on a Payment Date,
the principal balance of this Note may be prepaid in whole or in part (as
hereinafter provided), provided (i) Borrower so notifies Lender in writing no
more than sixty (60) days and not less than thirty (30) days prior to the
intended date of such prepayment, and (ii) such prepayment is accompanied by
all accrued interest and all other outstanding amounts then due hereunder and
under the Loan Documents. Partial prepayments of this Note are permitted only
in minimum amounts of at least $100,000.00.

         (c)      If any prepayment is made hereunder without the prior notice
required by subsection (i) above, then, Borrower shall pay an amount equal to
the lesser of (i) thirty (30) days unearned interest computed on the
outstanding principal balance of this Note so prepaid, or (ii) unearned
interest computed on the outstanding principal balance of this Note so prepaid
for the period from, and including, the date of prepayment through the
Maturity Date.

         (d)      Notwithstanding any provision of this Note to the contrary,
Borrower's notice of prepayment in accordance with subsection (b) above shall
be irrevocable, and the principal balance to be prepaid shall be absolutely
and unconditionally due and payable on the date specified in such notice,
provided, however, Borrower may revoke its notice of prepayment in the event
(x) Borrower sends Lender a written notice of revocation at least ten (10)
Business Days prior to the date of intended prepayment and (y) Borrower pays
to Lender all of Lender's out-of-pocket costs and expenses incurred in
anticipation of said prepayment.

         2.06     INTENTIONALLY DELETED.

         3.       SECURITY; LOAN DOCUMENTS. The indebtedness evidenced by this
Note and the obligations created hereby (including without limitation the
amounts authorized by Section 4 to be collected by Lender when due hereunder)
are secured by, among other things, a first mortgage,

                                       4

<PAGE>

security interest and lien on certain real and personal property collateral of
Borrower, tangible and intangible, as described more particulary in those
certain deeds of trust or mortgages (individually, as applicable, a "Security
Instrument" and collectively the "Security Instruments") from Borrower to
Lender, dated as of date hereof. All other documents to or of which Lender is
a party or a beneficiary now or hereafter evidencing, securing, guarantying,
modifying or otherwise relating to the indebtedness evidenced hereby, and all
extensions, renewals and modifications thereof, are collectively referred to
herein as the "Other Security Documents". The Security Instruments together
with this Note and the Other Security Documents are collectively referred to
herein as the "Loan Documents".

         4.       DEFAULT.

         4.01     EVENT OF DEFAULT. The occurrence of any of the following
shall constitute an event of default ("Event of Default") under this Note: (a)
if any payment of principal and interest or any other payment required under
this Note is not received by Lender on or before five (5) days after the date
such payment is due (except that no grace period is provided for the payment
of principal and interest due on the Maturity Date or upon acceleration of
indebtedness following the occurrence of an Event of Default); or (b) if any
default should occur under any Security Instrument or any of the Other
Security Documents which is not fully cured following applicable notice or
prior to the expiration of any applicable grace or cure period contained
herein, in the Security Instruments or in the Other Security Documents. Upon
the occurrence of an Event of Default, at Lender's option, the outstanding
principal balance of this Note, together with all unpaid interest accrued
thereon and all other sums due hereunder or under the Security Instruments or
any Other Security Documents, shall, without notice or prior demand,
immediately become due and payable.

         4.02     LATE CHARGES. If any payment is not received by Lender on or
before the date on which such payment originally was due (as such due date may
be extended by applicable grace period, if any), then, in addition to any
default interest payments due hereunder, Borrower also shall pay to Lender a
late charge in an amount equal to five percent (5.0%) of the amount of such
overdue payment to defray the expenses incurred by Lender in handling and
processing such delinquent payment and to compensate Lender for the loss of
the use of the delinquent payment. Such late charge shall be immediately due
and payable, without notice or demand therefor.

         4.03     DEFAULT RATE. If this Note is not paid in full on or before
the Maturity Date or the date on which the due date of the indebtedness has
been accelerated pursuant to the provisions hereof, the unpaid principal and
accrued interest and other amounts then due shall bear interest at a rate per
annum ("Default Rate") equal to the lesser of (a) five percent (5.0%) in
excess of the Applicable Interest Rate or (b) the maximum rate of interest, if
any, which may be charged or collected from Borrower under applicable law. In
addition, Lender shall have the right, without acceleration of the
indebtedness, to collect interest at the Default Rate on any payment due
hereunder (including without limitation late charges and fees for legal
counsel) which is not received by Lender on or before the date on which such
payment originally was due (as such due date may be extended by applicable
grace period, if any). Interest at the Default Rate shall be immediately due
and payable from the date specified herein and shall accrue until all Events
of Default have been fully cured or full payment is received, as applicable.

                                       5

<PAGE>

         4.04     INTEREST ON JUDGMENTS. Interest shall accrue on any judgment
obtained by Lender in connection with the enforcement or collection of this
Note until such judgment amount is paid in full at a rate equal to the greater
of (a) the Default Rate or (b) the legal rate applicable to judgments within
such jurisdiction; provided, however, that interest shall not accrue at a rate
in excess of the maximum rate of interest, if any, which may be charged or
collected from Borrower under applicable law.

         4.05     CUMULATIVE REMEDIES; ATTORNEY FEES. The remedies of Lender
in this Note, the Security Instruments and in the Other Security Documents, or
at law or in equity, shall be cumulative and concurrent, and may be pursued
singly, successively or together in Lender's sole discretion and as often as
occasion therefor shall arise. If Borrower's obligations under this Note, the
Security Instruments or any of the Other Security Documents are enforced by
Lender through an attorney-at-law, or any payment due under this Note, the
Security Instruments or the Other Security Documents is collected by or
through an attorney-at-law or collection agency, Borrower agrees to pay all
out-of-pocket costs incurred by Lender in connection therewith, including, but
not limited to, reasonable fees and disbursements of legal counsel (whether
with respect to a retained firm or Lender's in-house staff) and collection
agency costs, whether or not suit be brought. No provision of this Section 4
shall be construed as an agreement or privilege to extend the date on which
any required payment is due (subject to the applicable grace period, if any),
nor as a waiver of any other right or remedy accruing to Lender by reason of
the occurrence of an Event of Default. The payments required under this
Section 4 shall be in addition to, and shall in no way limit, any other rights
and remedies provided for in this Note, the Security Instruments or any of the
Other Security Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured
by the Security Instruments and Other Security Documents.

         5.       LIMITATIONS ON RECOURSE. Notwithstanding anything to the
contrary contained in this Note, the liability of Borrower and of any general
partner, principal or member of Borrower to pay the indebtedness evidenced by
this Note and for the performance of the other agreements, covenants and
obligations contained herein and in the other Loan Documents shall be limited
as set forth in Article 15 of the Security Instruments.

         6.       NO USURY. This Note is subject to the express condition that
at no time shall Borrower be required or obligated to pay interest (or any
other amount agreed to be paid hereunder which shall be deemed to be interest)
at a rate which would subject Lender to either civil or criminal liability as
a result of being in excess of the maximum interest rate which Borrower is
permitted by applicable law to pay. If, from any circumstance whatsoever,
Borrower is at any time required or obligated to pay interest (or any other
amount agreed to be paid hereunder shall be deemed to be interest) at a rate
in excess of such maximum rate, then the amount to be paid immediately shall
be reduced to such maximum rate, and, as required by applicable law, all
previous payments in excess of such maximum shall be deemed to have been
payments in reduction of the principal balance owing under this Note in the
inverse order of maturity (whether or not then due) or, at the option of
Lender, be paid over to Borrower and not to the payment of interest. All sums
paid or agreed to be paid to Lender for the use, forbearance or detention of
the indebtedness evidenced hereby shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full stated
term of this Note until payment in full so that the rate or amount of interest
on account of said indebtedness does not exceed the maximum lawful rate of
interest from time to time in effect and

                                       6

<PAGE>

applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with
this Note.

         7.       GENERAL CONDITIONS.

         7.01     NO WAIVER BY LENDER. No failure to accelerate the debt
evidenced hereby nor failure or delay in exercising any other right or remedy
upon the occurrence of an Event of Default hereunder, or any acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (i) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby, (ii) as a waiver or impairment of Lender's
right of acceleration or any other right or remedy available to Lender upon
the occurrence and during the continuance of an Event of Default, or (iii) as
a waiver of Lender's right thereafter to insist upon strict compliance with
the terms of this Note, the Security Instruments or any of the Other Security
Documents; and Borrower hereby expressly waives the benefit of any statute or
rule of law or equity now provided, or which may hereafter be provided, which
would produce a result contrary to or in conflict with the foregoing. No
extension of the time for payment of any amount due under this Note, the
Security Instruments or any of the Other Security Documents made by Lender's
agreement with any person now or hereafter liable for the payment thereof
shall operate to release, discharge, modify, change or affect the original
liability of Borrower under this Note or any such other person, either in
whole or in part unless Lender agrees otherwise in writing.

         7.02     BORROWER'S WAIVERS. Borrower, for itself and all others who
may become liable for payment of all or any part of the indebtedness evidenced
by this Note, hereby waives presentment for payment, demand, protest, and
notice of dishonor, protest, nonpayment, demand, intent to accelerate, and
acceleration. Borrower, for itself and all others who may become liable for
payment of all or any part of the indebtedness evidenced by this Note, hereby
further waives and renounces, to the fullest extent permitted by law, all
rights to the benefits of any moratorium, reinstatement, marshalling,
forbearance, valuation, stay, extension, redemption, appraisement, exemption
and homestead now or hereafter provided by the Constitution and laws of the
United States of America and of each state thereof, both as to party and
property (real and personal), against the enforcement and collection of the
obligations evidenced by this Note, the Security Instruments or the Other
Security Documents.

         7.03     UNCONDITIONAL PAYMENT. If any payment received by Lender
hereunder shall be deemed by a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under any bankruptcy, insolvency
or other debtor relief law, then the obligation to make such payment shall
survive any cancellation or satisfaction of this Note or return thereof to
Borrower and shall not be discharged or satisfied with any prior payment
thereof or cancellation of this Note, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof, and
such payment shall be immediately due and payable upon demand. No release of
any security for this Note or any party liable for payment of this Note shall
release or affect the liability of Borrower or any other party who may become
liable for payment of all or any part of the indebtedness evidenced by this
Note. Lender may release any guarantor, surety or indemnitor of this Note from
liability, in every instance without the consent of Borrower hereunder and
without waiving any rights which Lender may have hereunder or under any of the
other Loan Documents or under applicable law or in equity against any party
not so released.

                                       7

<PAGE>

         7.04     AUTHORITY. Borrower represents that Borrower has full power,
authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, that the execution, delivery and performance of this
Note has been duly authorized, that the person executing this Note on
Borrower's behalf has authority to do so, and that this Note, once executed by
Borrower, constitutes the valid and binding obligation of Borrower,
enforceable in accordance with its terms.

         7.05     NEGOTIABLE INSTRUMENT. Borrower agrees that this Note shall
be deemed a negotiable instrument, even though this Note, absent this
paragraph, may not otherwise qualify as a negotiable instrument under
applicable law.

         7.06     SALE OF LOAN BY LENDER: Lender shall have the right to
transfer, sell or assign this Note, the Security Instruments and the Other
Security Documents, and the Obligations hereunder.

         8.       MISCELLANEOUS.

         8.01     NOTICES. All notices and other communications under this
Note, the Security Instruments or the Other Security Documents are to be in
writing, addressed to the respective party as set forth in this section, and
shall be deemed to have been duly given (a) upon delivery, if delivered in
person with receipt acknowledged by the recipient thereof, (b) one (1)
business day after having been deposited for overnight delivery, fee prepaid,
with any reputable overnight courier service, or (c) three (3) business days
after having been deposited in any post office or mail depository regularly
maintained by the U.S. Postal Service and sent by registered or certified
mail, postage prepaid, return receipt requested. Initial addresses for each
party are as follows:

                  Borrower:

                           c/o Price Enterprises, Inc.
                           17140 Bernardo Center Drive, Suite 300
                           San Diego, California 92128
                           Attention: Chief Financial Officer
                           Facsimile No.: (858) 675-9405

                  with a copy to:

                           Latham & Watkins
                           701 B Street, Suite 2100
                           San Diego, California 92101-8197
                           Attention: Jon Demorest, Esq.
                           Facsimile No.: (619) 696-7419

                                    and

                           Latham & Watkins
                           885 Third Avenue
                           New York, New York 10022

                                       8

<PAGE>

                           Attention: Elissa Benudis, Esq.
                           Facsimile No.: (212) 751-4864

                  Lender:

                           GMAC Commercial Mortgage Corporation
                           200 Witmer Road
                           P.O. Box 1015
                           Horsham, Pennsylvania 19044-8015
                           Attention: Servicing - Executive Vice President
                           Facsimile No.: (215) 328-3478

                                    and

                           Commercial Capital Initiatives, Inc.
                           Wall Street Plaza
                           88 Pine Street
                           New York, New York 10005
                           Attention: Manager - Loan Administration
                           Facsimile: (212) 269-5286

                  with a copy to:

                           Thacher Proffitt & Wood
                           Two World Trade Center
                           New York, New York 10048
                           Attention: Mitchell G. Williams, Esq.
                           Facsimile No.: (212) 912-7751

Each party may establish a new address from time to time by written notice to
the other given in accordance with this section; provided, however, that no
such change of address will be effective until written notice thereof is
actually received by the party to whom such change of address is sent. Notice
to additional parties now or hereafter designated by a party entitled to
notice are for convenience only and are not required for notice to a party to
be effective in accordance with this section.

         8.02     ENTIRE AGREEMENT; TIME OF ESSENCE. This Note, together with
the other Loan Documents and Lender's commitment letter to Borrower, contain
the entire agreements between Borrower and Lender relating to the subject
matter hereof and thereof, and supercede all prior discussions and agreements
(oral or written) relative hereto and thereto which are not contained herein
or therein. Borrower represents and warrants that it is not relying on any
promises, covenants, representations or agreements in connection with this
Note, the Security Instruments or the Other Security Documents, other than as
expressly set forth herein or therein. In the event of any conflict between
the terms of the Loan Documents, the following order of priority shall be used
to resolve such conflict: The Note shall control over the Security Instruments
and the Security Instruments shall

                                       9

<PAGE>

control over all Other Security Documents. Time is of the essence with respect
to all provisions of this Note.

         8.03     MODIFICATION. Neither this Note nor any of the other Loan
Documents may be changed, waived, supplemented, discharged or terminated
orally or by any act or failure to act on the part of Borrower or Lender, but
only by an agreement in writing signed by the party against whom enforcement
thereof is sought and then only to the extent expressly set forth in such
writing. No person other than a duly authorized officer or agent of Lender
shall be deemed an agent of Lender nor have any authority to waive, modify,
supplement or terminate in any manner whatsoever any of the terms of this Note.

         8.04     BINDING EFFECT; JOINT AND SEVERAL OBLIGATIONS. The terms and
provisions of this Note, the Security Instruments and the Other Security
Documents shall be binding upon and inure to the benefit of Borrower and
Lender and their respective heirs, executors, legal representatives,
successors, successors and assigns, whether by voluntary action of the parties
or by operation of law. The foregoing shall not be construed, however, to
alter any limitations or restrictions applicable to Borrower under the Loan
Documents. If Borrower consists of more than one person or entity, each shall
be jointly and severally liable to perform the obligations of Borrower under
this Note, the Security Instruments and the Other Security Documents.

         8.05     UNENFORCEABLE PROVISIONS. Any provision of this Note, the
Security Instruments or the Other Security Documents which may be determined
by competent authority to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.

         8.06     AMBIGUITY AND CONSTRUCTION OF CERTAIN TERMS. Neither this
Note nor any uncertainty or ambiguity herein shall be construed or resolved
against Lender by virtue of the fact that such document has originated with
Lender as drafter. Borrower acknowledges that it has reviewed this Note and
has had the opportunity to consult with counsel on same. This Note, therefore,
shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of the
parties hereto. All personal pronouns used herein, whether used in the
masculine, feminine or neuter gender, shall be deemed to include all other
genders; the singular shall include the plural and vice versa. Titles of
articles and sections are for convenience only and in no way define, limit,
amplify or describe the scope or intent of any provisions hereof. "Herein,"
"hereof" and "hereunder" and other words of similar import refer to this Note
as a whole and not to any particular section, paragraph or other subdivision;
"Section" refers to the entire section and not to any particular subsection,
paragraph of other subdivision. Reference to days for performance shall mean
calendar days unless Business Days are expressly indicated.

         8.07     GOVERNING LAW. This Note shall be interpreted, construed and
enforced according to the laws of the State of New York.

         8.08     CONSENT TO JURISDICTION. Borrower and Lender, by its
acceptance of this Note, agree and consent to the exclusive jurisdiction and
venue of any state or federal court sitting in the county

                                       10

<PAGE>

and state where the real property encumbered by the Security Instruments is
located with respect to any legal action, proceeding, or controversy between
them and hereby expressly waive any and all rights under applicable law or in
equity to object to the jurisdiction and venue of said courts. Borrower
further irrevocably consents to service of process by certified mail, return
receipt requested, to Borrower at the address for Borrower last provided to
Lender in accordance with the notice provision of this Note and agrees that
such service shall be effective ten (10) days after mailing. Nothing herein
shall, however, preclude or prevent Lender from bringing any one or more
actions against Borrower in any other jurisdiction as may be necessary to
enforce or realize upon the Security or other collateral provided for this
Note.

         8.09     WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN ANY
LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY
THIS NOTE; THE APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE;
THE INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS
NOTE, THE SECURITY INSTRUMENTS OR ANY OF THE OTHER SECURITY DOCUMENTS; OR ANY
ACTS OR OMISSION OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN
CONNECTION WITH ANY OF THE FOREGOING.

         8.10     TAX IDENTIFICATION NUMBER. Borrower represents and warrants
that its current tax identification number is: 33-0912723.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       11

<PAGE>

                  IN WITNESS WHEREOF, Borrower has executed this Note under
seal as of the date first above written.

                            PRICE OWNER LLC, a Delaware limited liability
                            company

                            By:      Price Owner Corp., a Delaware corporation,
                                     its managing member

                                     By:
                                              ---------------------------------
                                              Name:
                                              Title:

PAY TO THE ORDER OF _________________________________________________,
WITHOUT RECOURSE.

                            GMAC COMMERCIAL MORTGAGE
                            CORPORATION, a California corporation

                            By:
                                     ------------------------------------------
                                     Name:
Date:                                Title: Attorney-in-Fact
     -----------------

<PAGE>

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

                           PRICE OWNER LLC, as mortgagor
                                                 (Borrower)

                                         to

                 GMAC COMMERCIAL MORTGAGE CORPORATION, as mortgagee
                                                 (Lender)

                        ___________________________________

                                FORM OF MORTGAGE AND
                                 SECURITY AGREEMENT
                        ___________________________________

                              Dated: June 28, 2000

                              Location:

                              Parcel Identification No. ________

                              Commonly known as

                              PREPARED BY AND UPON
                              RECORDATION RETURN TO:

                              Thacher Proffitt & Wood
                              Two World Trade Center
                              New York, New York 10048
                              Attention: David S. Hall, Esq.

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

<PAGE>

              MORTGAGE AND SECURITY AGREEMENT (the "Security Instrument") is
made as of the ______ day of __________, 2000 by PRICE OWNER LLC, a Delaware
limited liability company, having its principal place of business at 17140
Bernardo Center Drive, Suite 300, San Diego, California 92128, as mortgagor
("Borrower") to GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation, having an address at 200 Witmer Road, Horsham, Pennsylvania
19044-8015, as mortgagee ("Lender").

                                     RECITALS:

              Borrower by its promissory note of even date herewith given to
Lender is indebted to Lender in the principal sum of $126,375,000.00 in lawful
money of the United States of America (the note together with all extensions,
renewals, modifications, consolidations, substitutions, replacements,
restatements and increases thereof shall collectively be referred to as the
"Note"), with interest from the date thereof at the rates set forth in the
Note, principal and interest to be payable in accordance with the terms and
conditions provided in the Note.

              Borrower desires to secure the payment of the Debt (as defined
in Article 2) and the performance of all of its obligations under the Note and
the Other Obligations (as defined in Article 2).

                                     ARTICLE I

                                 GRANTS OF SECURITY

              Section 1.1. PROPERTY MORTGAGED. Borrower does hereby
irrevocably (i) mortgage, grant, bargain, sell, pledge, assign, warrant,
transfer and convey to Lender and to its successors and assigns with power of
sale in accordance with the terms and conditions hereof, for the use and
benefit of Lender, and (ii) grant a security interest to Lender and to its
successors and assigns with power of sale, in accordance with the terms and
conditions hereof, for the use and benefit of Lender, in, the following
property, rights, interests and estates now owned, or hereafter acquired by
Borrower (collectively, the "Property"):

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

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

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

              (d)    EASEMENTS. All easements, rights-of-way or use, rights,
strips and gores of

<PAGE>

land, streets, ways, alleys, passages, sewer rights, water, water courses,
water rights and powers, air rights and development rights, and all estates,
rights, titles, interests, privileges, liberties, servitudes, tenements,
hereditaments and appurtenances of any nature whatsoever, in any way now or
hereafter belonging, relating or pertaining to the Land and the Improvements
and the reversion and reversions, remainder and remainders, and all land lying
in the bed of any street, road or avenue, opened or proposed, in front of or
adjoining the Land, to the center line thereof and all the estates, rights,
titles, interests, dower and rights of dower, curtesy and rights of curtesy,
property, possession, claim and demand whatsoever, both at law and in equity,
of Borrower of, in and to the Land and the Improvements and every part and
parcel thereof, with the appurtenances thereto;

              (e)    FIXTURES AND PERSONAL PROPERTY. All machinery, equipment,
fixtures (including, but not limited to all heating, air conditioning,
plumbing, lighting, communications and elevator fixtures) and other property
of every kind and nature whatsoever owned by Borrower, or in which Borrower
has or shall have an interest, now or hereafter located upon the Land or the
Improvements, or appurtenant thereto, and used in connection with the present
or future operation and occupancy of the Land and the Improvements and all
building equipment, materials and supplies of any nature whatsoever owned by
Borrower, or in which Borrower has or shall have an interest, now or hereafter
located upon the Land and the Improvements, or appurtenant thereto, or used in
connection with the present or future operation and occupancy of the Land and
the Improvements (collectively, the "Personal Property"), and the right, title
and interest of Borrower in and to any of the Personal Property which may be
subject to any security interests, as defined in the Uniform Commercial Code,
as adopted and enacted by the state or states where any of the Property is
located (the "Uniform Commercial Code"), superior in lien to the lien of this
Security Instrument and all proceeds and products of the above;

              (f)    LEASES AND RENTS. All leases and other agreements
affecting the use, enjoyment or occupancy of all or any part of the Land or
the Improvements heretofore or hereafter entered into whether before or after
the filing by or against Borrower of any petition for relief under 11 U.S.C.
Section 101 et seq. (the "Bankruptcy Code"), as the same may be amended from
time to time (the "Leases") and all right, title and interest of Borrower, its
successors and assigns therein and thereunder, including, without limitation,
all guarantees, letters of credit and any other credit support given by any
guarantor in connection therewith, cash or securities deposited under the
Leases to secure the performance by the lessees of their obligations
thereunder and all rents, additional rents, revenues, issues and profits
(including all oil and gas or other mineral royalties and bonuses) from the
Land and the Improvements whether paid or accruing before or after the filing
by or against Borrower of any petition for relief under the Bankruptcy Code
(the "Rents") and all proceeds from the sale or other disposition of the
Leases and the right to receive and apply the Rents to the payment of the Debt;

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

              (h)    INSURANCE PROCEEDS. All proceeds of and any unearned
premiums on any

                                      -2-

<PAGE>

insurance policies covering the Property, including, without limitation, the
right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Property;

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

              (j)    RIGHTS. The right, in the name and on behalf of Borrower,
to commence any action or proceeding to protect the interest of Lender in the
Property and while an Event of Default (defined in Section 10.1) remains
uncured, to appear in and defend any action or proceeding brought with respect
to the Property;

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

              (l)    INTANGIBLES. All accounts, escrows, chattel paper,
claims, deposits, trade names, trademarks, servicemarks, logos, copyrights,
goodwill, books and records and all other general intangibles specific to or
used in connection with the operation of the Property, if any;

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

              (n)    Accounts. All reserves, escrows and deposit accounts
maintained by Borrower with respect to the Property including, without
limitation, any lockbox account and cash management account, and all complete
securities, investments, property and financial assets held therein from time
to time and all proceeds, products, distributions or dividends or
substitutions thereon and thereof; and

              (o)    OTHER RIGHTS. Any and all other rights of Borrower in and
to the items set forth in Subsections (a) through (n) above.

              Section 1.2. ASSIGNMENT OF LEASES AND RENTS. Borrower hereby
absolutely and unconditionally assigns to Lender Borrower's right, title and
interest in and to all current and future Leases and Rents; it being intended
by Borrower that this assignment constitutes a present, absolute assignment
and not an assignment for additional security only. Nevertheless, subject to
the terms of this Section 1.2, Section 3.7 and the provisions of that certain
Lockbox Agreement dated the date hereof by and among Wells Fargo Bank,
National Association, Lender and Borrower, Lender grants to Borrower a
revocable license to collect and receive the Rents. Borrower shall hold the
Rents, or a portion thereof, sufficient to discharge all current sums due on
the Debt, for use in the payment of such sums.

                                      -3-

<PAGE>

              Section 1.3. SECURITY AGREEMENT. This Security Instrument is
both a real property mortgage and a "security agreement" within the meaning of
the Uniform Commercial Code. The Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Borrower in the Property. By executing and delivering this Security
Instrument, Borrower hereby grants to Lender, as security for the Obligations
(defined in Section 2.3), a security interest in the Property to the full
extent that the Property may be subject to the Uniform Commercial Code (said
portion of the Property so subject to the Uniform Commercial Code, the
"Collateral").

              Section 1.4. PLEDGE OF MONIES HELD. Borrower hereby pledges to
Lender, and grants to Lender a security interest in, any and all monies now or
hereafter held by Lender, including, without limitation, any sums deposited in
the Escrow Fund (defined in Section 3.5) and the Net Proceeds (defined in
Section 4.4), as additional security for the Obligations until expended or
applied as provided in this Security Instrument.

                                CONDITIONS TO GRANT

              TO HAVE AND TO HOLD the above granted and described Property
unto the Lender and its successors and assigns, with power of sale in
accordance with the terms and conditions hereof, for the use and benefit of
Lender, and the successors and assigns of Lender, forever;

              PROVIDED, HOWEVER, these presents are upon the express condition
that, if Borrower shall pay to Lender the Debt at the time and in the manner
provided in the Note and this Security Instrument, shall perform the Other
Obligations as set forth in this Security Instrument and shall abide by and
comply with each and every covenant and condition set forth herein and in the
Note, these presents and the estate hereby granted shall cease, terminate and
be void. Notwithstanding the foregoing, upon payment in full of the Debt,
Lender shall promptly deliver a satisfaction of this Security Instrument to
Borrower.

                                     ARTICLE II

                            DEBT AND OBLIGATIONS SECURED

              Section 2.1. DEBT. This Security Instrument and the grants,
assignments and transfers made in Article 1 are given for the purpose of
securing the following, in such order of priority as Lender may determine in
its sole discretion (the "Debt"):

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

              (b)    the payment of interest, default interest, late charges
and other sums, as provided in the Note, this Security Instrument or the Other
Security Documents (defined in Section 3.2);

                                      -4-

<PAGE>

              (c)    Intentionally Omitted;

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

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

              (f)    the payment of all sums advanced and actual out-of-pocket
costs and expenses incurred by Lender in connection with the Debt or any part
thereof, any renewal, extension, modification, consolidation, change,
substitution, replacement, restatement or increase of the Debt or any part
thereof, or the acquisition or perfection of the security therefor, whether
made or incurred at the request of Borrower or Lender.

              Section 2.2. OTHER OBLIGATIONS. This Security Instrument and the
grants, assignments and transfers made in Article 1 are also given for the
purpose of securing the following (the "Other Obligations"):

              (a)    the performance of all other obligations of Borrower
contained herein;

              (b)    the performance of each obligation of Borrower contained
in the Note in addition to the payment of the Debt and of Borrower and of any
Guarantor (defined in Section 5.5) contained in the Other Security Documents;
and

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

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

              Section 2.4. PAYMENTS. Unless payments are made in the required
amount in immediately available funds at the place where the Note is payable,
remittances in payment of all or any part of the Debt shall not, regardless of
any receipt or credit issued therefor, constitute payment until the required
amount is actually received by Lender in funds immediately available at the
place where the Note is payable (or any other place as Lender, in Lender's
sole discretion, may have established by delivery of written notice thereof to
Borrower) and shall be made and accepted subject to the condition that any
check or draft may be handled for collection in accordance with the practice
of the collecting bank or banks. Acceptance by Lender of any payment in an
amount less than the amount then due shall be deemed an acceptance on account
only, and the failure to pay the entire amount then due (after the expiration
of any applicable notice and grace periods) shall be and continue to be an
Event of Default.

                                      -5-

<PAGE>

                                    ARTICLE III

                                 BORROWER COVENANTS

              Borrower covenants and agrees with Lender that:

              Section 3.1. PAYMENT OF DEBT. Borrower will pay the Debt at the
time and in the manner provided in the Note and in this Security Instrument.

              Section 3.2. INCORPORATION BY REFERENCE. All the covenants,
conditions and agreements contained in (a) the Note and (b) all and any of the
documents other than the Note or this Security Instrument now or hereafter
executed by Borrower and/or others and by or in favor of Lender, which wholly
or partially secure or guaranty payment of the Note or the other Obligations,
including, without limitation, that certain Loan Agreement (the "Loan
Agreement") dated the date hereof between Borrower and Lender (the "Other
Security Documents"), are hereby made a part of this Security Instrument to
the same extent and with the same force as if fully set forth herein.

              Section 3.3. INSURANCE.

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

                     (i)      PROPERTY INSURANCE. Insurance with respect to
the Improvements and building equipment insuring against any peril included
within the classification "All Risks of Physical Loss" in amounts at all times
sufficient to prevent Lender from becoming a co-insurer within the terms of
the applicable policies and under applicable law, but in any event such
insurance shall be maintained in an amount equal to the full insurable value
of the Improvements and building equipment, the term "full insurable value" to
mean the actual replacement cost of the Improvements and building equipment
owned or leased by Borrower or its affiliates (without taking into account any
depreciation, and exclusive of excavations, footings and foundations,
landscaping and paving) determined annually by an insurer, a recognized
independent insurance broker or an independent appraiser selected and paid by
Borrower and in no event less than the coverage required pursuant to the terms
of any Lease. Absent such annual adjustment, each policy shall contain
inflation guard coverage insuring that the policy limit will be increased over
time to reflect the effect of inflation. Borrower shall also maintain
insurance against loss or damage to such furniture, furnishings, fixtures,
equipment and other items (whether personalty or fixtures) included in the
Property and owned by Borrower from time to time, to the extent applicable, in
the amount of the cost of replacing the same, in each case, with inflation
guard coverage to reflect the effect of inflation, or annual valuation. Each
policy or policies shall contain a replacement cost endorsement and either an
agreed amount endorsement (to avoid the operation of any co-insurance
provisions) or a waiver of any co-insurance provisions, all subject to
Lender's approval. The maximum deductible shall be $10,000.00;

                     (ii)     LIABILITY INSURANCE. Comprehensive general
liability insurance, including personal injury, bodily injury, death and
property damage liability, insurance against any and all claims, including all
legal liability to the extent insurable and imposed upon Lender and all court
costs and attorneys' fees and expenses, arising out of or connected with the
possession, use, leasing,

                                      -6-

<PAGE>

operation, maintenance or condition of the Property in such amounts as are
generally available at commercially reasonable premiums and are generally
required by institutional lenders for properties comparable to the Property
but in no event less than $2,000,000.00 per occurrence and $1,000,000.00
general aggregate. During any construction of the Property, Borrower's general
contractor for such construction shall also provide the insurance required in
this Subsection b. Lender hereby retains the right to periodically review the
amount of said liability insurance being maintained by Borrower and to require
an increase in the amount of said liability insurance should Lender deem an
increase to be reasonably prudent under then existing circumstances;

                     (iii)    WORKERS' COMPENSATION INSURANCE. Statutory
workers' compensation insurance with respect to any work on or about the
Property covering all persons subject to the workers' compensation laws of the
state in which the Property is located;

                     (iv)     BUSINESS INTERRUPTION. Business interruption
and/or loss of "rental income" insurance in an amount sufficient to avoid any
co-insurance penalty and to provide proceeds which will cover a period of not
less than eighteen (18) months from the date of casualty or loss, the term
"rental income" to mean the sum of (A) the total then ascertainable Rents
payable under the Leases and (B) the total ascertainable amount of all other
amounts to be received by Borrower from third parties which are the legal
obligation of the tenants, reduced to the extent such amounts would not be
received because of operating expenses not incurred during a period of
non-occupancy of that portion of the Property then not being occupied. The
amount of coverage shall be adjusted annually to reflect the rents payable
during the succeeding twelve (12) month period.

                     (v)      BOILER AND MACHINERY INSURANCE. Broad form
boiler and machinery insurance (without exclusion for explosion) covering all
boilers or other pressure vessels, machinery, and equipment located in, on or
about the Property and insurance against loss of occupancy or use arising from
any breakdown in such amount per accident equal to the replacement value of
the improvements housing the machinery or $2,000,000 or such other amount
reasonably determined by Lender. If one or more large HVAC units is in
operation at the Property, "System Breakdowns" coverage shall be required, as
determined by Lender. Minimum liability coverage per accident must equal the
value of such unit(s);

                     (vi)     FLOOD INSURANCE. If required by Subsection
5.6(a) hereof, flood insurance in an amount at least equal to the lesser of
(A) the minimum amount required, under the terms of coverage, to compensate
for any damage or loss on a replacement basis (or the unpaid balance of the
indebtedness secured hereby if replacement cost coverage is not available for
the type of building insured); or (B) the maximum insurance available under
the appropriate National Flood Insurance Administration program. The
deductible may not exceed $25,000.

                     (vii)    During the period of any construction,
renovation or alteration of the Improvements which exceeds the lesser of 10%
of the principal amount of the Note or $500,000, at Lender's request, a
completed value, "All Risk" Builder's Risk form, or "Course of Construction"
insurance policy in non-reporting form for any Improvements under
construction, renovation or alteration in an amount approved by Lender may be
required. During the period of any construction of any addition to the
existing Improvements, a completed value, "All Risk" Builder's Risk form or
"Course of Construction" insurance policy in non-reporting form, in an amount
approved by Lender,

                                      -7-

<PAGE>

shall be required.

                     (viii)   OTHER INSURANCE. Such other insurance with
respect to the Property or on any replacements or substitutions thereof or
additions thereto as may from time to time be required by Lender against other
insurable hazards or casualties which at the time are commonly insured against
in the case of property similarly used and situated, including, without
limitation, sinkhole, mine subsidence, reasonable earthquake and environmental
insurance, due regard being given to the height and type of buildings, their
construction, location, use and occupancy.

              (b)    All insurance provided for in Subsection 3.3(a) hereof
shall be obtained under valid and enforceable policies (the "Policies" or in
the singular, the "Policy"), and shall be issued by one or more domestic
primary insurer(s) having an investment grade rating of "AA" or better, or a
comparable claims paying ability assigned by Standard & Poor's Ratings Group,
a division of the McGraw-Hill Companies, Inc. or equivalent one or more credit
rating agency approved by Lender (a "Rating Agency"), (each such insurer shall
be referred to below as a "Qualified Insurer"). All insurers providing
insurance required by this Security Instrument shall be authorized to issue
insurance in the state in which the Property is located. The Policy referred
to in Subsection 3.3(a)(ii) above shall name Lender as an additional named
insured and the Policy referred to in Subsection 3.3(a)(i), (iv), (v) and (vi)
above shall provide, subject to Section 4.4(a) hereof, that all proceeds be
payable to Lender as set forth in Section 4.4 hereof. The Policies referred to
in Subsections 3.3(a)(i), (v) and (vi) shall also contain: (i) a standard
"non-contributory mortgagee" endorsement or its equivalent relating, INTER
ALIA, to recovery by Lender notwithstanding the negligent or willful acts or
omission of Lender; and (ii) to the extent available at commercially
reasonable rates, a waiver of subrogation endorsement as to Lender. All
Policies described in Subsection 3.3(a) above shall contain (i) a provision
that such Policies shall not be cancelled or terminated, nor shall they
expire, without at least thirty (30) days' prior written notice to Lender in
each instance; and (ii) include effective waivers by the insurer of all claims
for Insurance Premiums (defined below) against any mortgagees, loss payees,
additional insureds and named insureds (other than Borrower). In the event
that the Property or the Improvements constitutes a legal non-conforming use
under applicable building, zoning or land use laws or ordinances, the policy
shall include an ordinance or law coverage endorsement which will contain
Coverage A: "Loss Due to Operation of Law" (with a minimum liability limit
equal to Replacement Cost With Agreed Value Endorsement), Coverage B:
"Demolition Cost" and Coverage C: "Increased Cost of Construction" coverages.
Certificates of insurance with respect to all renewal and replacement Policies
shall be delivered to Lender not less than thirty (30) days prior to the
expiration date of any of the Policies required to be maintained hereunder
which certificates shall bear notations evidencing payment of applicable
premiums (the "Insurance Premiums"). Originals or certificates of such
replacement Policies shall be delivered to Lender promptly after Borrower's
receipt thereof but in any case within twenty (20) days after the effective
date thereof. If Borrower fails to maintain and deliver to Lender the original
Policies or certificates of insurance required by this Security Instrument,
upon ten (10) days' prior notice to Borrower, Lender may procure such
insurance at Borrower's sole cost and expense.

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

                                      -8-

<PAGE>

respect to any part of the Property pursuant to this Section 3.3.

              (d)    If the Property shall be damaged or destroyed, in whole
or in part, by fire or other casualty, Borrower shall give prompt notice of
such damage to Lender and provided that Borrower shall have received the Net
Proceeds, Borrower shall promptly commence and diligently prosecute the
completion of the repair and restoration of the Property as nearly as possible
to the condition the Property was in immediately prior to such fire or other
casualty, with such alterations as may be approved by Lender, which approval
shall not be unreasonably withheld, delayed or conditioned (the "Restoration")
and otherwise in accordance with Section 4.4 of this Security Instrument.

              (e)    The insurance coverage required under Section 3.3(a) may
be effected under a blanket policy or policies covering the Property and other
properties and assets not constituting a part of the security hereunder;
provided that any such blanket policy shall specify, except in the case of
public liability insurance, the portion of the total coverage of such policy
that is allocated to the Property, and any sublimit in such blanket policy
applicable to the Property, and shall in any case comply in all other respects
with the requirements of this Section 3.3.

              (f)    The insurance coverage required under Subsection
3.3(a)(ii) may be satisfied by a layering of Commercial General Liability,
Umbrella and Excess Liability Policies, but in no event will the Commercial
General Liability policy be written for an amount less than $1,000,000 per
occurrence and $2,000,000 aggregate for bodily injury and property damage
liability with a minimum umbrella coverage of $25,000,000.00 per occurrence
and $25,000,000.00 in the aggregate.

              (g)    The delivery to Lender of the insurance policies or the
certificates of insurance as provided above shall constitute an assignment of
all proceeds payable under such insurance as relating to the Property by
Borrower to Lender as further security for the indebtedness secured hereby. In
the event of foreclosure of this Security Instrument, or other transfer of
title to the Property in extinguishment in whole or in part of the secured
indebtedness, all right, title and interest of Borrower in and to all proceeds
payable under such policies then in force concerning the Property shall
thereupon vest in the purchaser at such foreclosure, or in Lender or other
transferee in the event of such other transfer of title. Approval of any
insurance by Lender shall not be a representation of the solvency of any
insurer or the sufficiency of any amount of insurance.

              (h)    Lender shall not be responsible for nor incur any
liability for the insolvency of the insurer or other failure of the insurer to
perform, even though Lender has caused the insurance to be placed with the
insurer after failure of Borrower to furnish such insurance. Borrower shall
not obtain insurance for the Property in addition to that required by Lender
without the prior written consent of Lender, which consent will not be
unreasonably withheld provided that (i) Lender is named insured on such
insurance, (ii) Lender receives complete copies of all policies evidencing
such insurance, and (iii) such insurance complies with all of the applicable
requirements set forth herein.

              Section 3.4. PAYMENT OF TAXES, ETC. (a) Subject to the
provisions of Section 3.4(b) and 3.5 hereof, Borrower shall pay by their due
date all taxes, assessments, water rates, sewer rents, governmental
impositions, and other charges, including, without limitation, vault charges
and license fees for the use of vaults, chutes and similar areas adjoining the
Land, now or hereafter levied or

                                      -9-

<PAGE>

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

              (b)    After prior written notice to Lender, Borrower, at its
own expense, may contest by appropriate legal proceeding, promptly initiated
and conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any of the Taxes, provided that (i) no
Event of Default has occurred and is continuing under the Note, this Security
Instrument or any of the Other Security Documents, (ii) Borrower is permitted
to do so under the provisions of any other mortgage, deed of trust or deed to
secure debt affecting the Property, (iii) such proceeding shall suspend the
collection of the Taxes from Borrower and from the Property or Borrower shall
have paid all of the Taxes under protest, (iv) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any
other instrument to which Borrower is subject and shall not constitute a
default thereunder, (v) neither the Property nor any part thereof or interest
therein will be in imminent danger of being sold, forfeited, terminated,
cancelled or lost, (vi) Borrower shall have set aside adequate reserves for
the payment of the Taxes, together with all interest and penalties thereon,
unless Borrower has paid all of the Taxes under protest, and (vii) Borrower
shall have furnished the security as may be required in the proceeding, or as
may be reasonably requested by Lender to insure the payment of any contested
Taxes, together with all interest and penalties thereon, taking into
consideration the amount in the Escrow Fund available for payment of Taxes.

              Section 3.5. ESCROW FUND. (a) At the option of Lender, Lender
may require Borrower to establish an Escrow Fund (defined below) sufficient to
discharge its obligations for the payment of Insurance Premiums and Taxes
pursuant to Sections 3.3 and 3.4 hereof. Initial deposits of Taxes and
Insurance Premiums shall be made by Borrower to Lender in amounts reasonably
determined by Lender in its discretion on the date hereof to be held by Lender
in escrow. Additionally, Borrower shall pay to Lender on the payment date as
set forth in the Note on each calendar month (a) one-twelfth of an amount
which would be sufficient to pay the Taxes payable, or estimated by Lender to
be payable, upon the due dates established by the appropriate taxing authority
during the next ensuing twelve (12) months and (b) one-twelfth of an amount
which would be sufficient to pay the Insurance Premiums due for the renewal of
the coverage afforded by the Policies upon the expiration thereof (the initial
deposits together with the amounts in (a) and (b) above shall be called the
"Escrow Fund"). Borrower agrees to promptly notify Lender of any changes to
the amounts, schedules and instructions for payment of any Taxes and Insurance
Premiums of which it has obtained knowledge and authorizes Lender or its agent
to obtain the bills for Taxes and Other Charges directly from the appropriate
tax authority. The Escrow Fund and the payments of interest or principal or
both, payable pursuant to the Note shall be added together and shall be paid
as an aggregate sum by Borrower to Lender. Provided there are sufficient
amounts in the Escrow Fund

                                     -10-

<PAGE>

and no Event of Default exists, Lender shall be obligated to pay the Taxes and
Insurance Premiums as they become due on their respective due dates on behalf
of Borrower by applying the Escrow Fund to the payments of such Taxes and
Insurance Premiums required to be made by Borrower pursuant to Sections 3.3
and 3.4 hereof. If the amount of the Escrow Fund shall exceed the amounts due
for Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4 hereof,
Lender shall, in its discretion, return any excess to Borrower or credit such
excess against future payments to be made to the Escrow Fund. In allocating
such excess, Lender may deal with the person shown on the records of Lender to
be the owner of the Property. If the Escrow Fund is not sufficient to pay the
items set forth in (a) and (b) above, Borrower shall promptly pay to Lender,
upon demand, an amount which Lender shall reasonably estimate as sufficient to
make up the deficiency. The Escrow Fund shall not constitute a trust fund and
may be commingled with other monies held by Lender. The Escrow Fund shall be
held by Lender in an escrow account bearing interest at the bank monitor rate,
with interest accruing to the benefit of Borrower.

              (b)    Notwithstanding the foregoing, provided no Event of
Default has occurred and is continuing under the Note, this Security
Instrument or the Other Security Documents, Lender shall not require an escrow
for the Taxes relating to any space at the Property currently occupied by a
tenant who maintains a credit rating of BBB or greater from Standard & Poor's
Ratings Group, a division of The McGraw Hill Companies, Inc., and Baa3 or
greater from Moody's Investor's Service, Inc. or such comparable rating from
such comparable Rating Agency selected by Lender in its sole discretion (an
"Investment Grade Tenant"), provided (i) there is no default (which is
continuing beyond all applicable notice and grace periods, if any) under the
terms of the Lease with the Investment Grade Tenant, (ii) the Investment Grade
Tenant is directly liable for the payment of said Taxes to the appropriate
taxing authority under the terms of its Lease, (iii) Borrower notifies Lender
in writing as to the amount of the Taxes to be paid by the Investment Grade
Tenant as soon as the information becomes available to Borrower, but in no
event less than thirty (30) days prior to the date said Taxes are due unless
the space occupied by the Investment Grade Tenant is assessed for real estate
tax purposes as a wholly independent tax lot, separate from any other portion
of the Property, in which case Borrower shall notify Lender as soon as the
information becomes available to Borrower and (iv) Borrower and/or the
Investment Grade Tenant delivers to Lender, no later than thirty (30) days
after the date the Taxes relating to the space occupied by the Investment
Grade Tenant become delinquent (unless said Taxes are being contested by the
Investment Grade Tenant in accordance with the provisions of Section 3.4(b)
hereof), evidence reasonably satisfactory to Lender in all respects that said
Taxes have been paid in full, provided, however, in no event shall the Taxes
be paid after such date that would cause interest or penalties to accrue or
become payable.

              Section 3.6. CONDEMNATION. Borrower shall promptly give Lender
notice of the actual or threatened commencement of any condemnation or eminent
domain proceeding and shall deliver to Lender copies of any and all papers
served in connection with such proceedings. Lender may participate in any such
proceedings to the extent permitted by law. Upon an Event of Default, Borrower
shall deliver to Lender all instruments requested by it to permit such
participation. Borrower shall, at its expense, diligently prosecute any such
proceedings, and shall consult with Lender, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings.
Borrower shall not make any agreement in lieu of condemnation of the Property
or any portion thereof without the prior written consent of Lender in each
instance, which consent shall not be unreasonably withheld or delayed in the
case of a taking of an insubstantial portion of the Property.

                                     -11-
<PAGE>

Notwithstanding any taking by any public or quasi-public authority through
eminent domain or otherwise (including, but not limited to any transfer made
in lieu of or in anticipation of the exercise of such taking), Borrower shall
continue to pay the Debt at the time and in the manner provided for its
payment in the Note and in this Security Instrument and the Debt shall not be
reduced until any award or payment therefor shall have been actually received
and applied by Lender, after the deduction of expenses of collection, to the
reduction or discharge of the Debt. Lender shall not be limited to the
interest paid on the award by the condemning authority but shall be entitled
to receive out of the award interest at the rate or rates provided herein or
in the Note. Subject to the provisions of Section 4.4(a) hereof, Borrower
shall cause the award or payment in any condemnation or eminent domain
proceeding, which is payable to Borrower, to be paid directly to Lender. If
the Property or any portion thereof is taken by the power of eminent domain,
provided the Net Proceeds have been made available to Borrower for
Restoration, Borrower shall promptly commence and diligently prosecute the
Restoration of the Property and otherwise comply with the provisions of in
accordance with Section 4.4 of this Security Instrument. If the Property is
sold, through foreclosure or otherwise, prior to the receipt by Lender of the
award or payment, Lender shall have the right, whether or not a deficiency
judgment on the Note shall have been sought, recovered or denied, to receive
the award or payment, or a portion thereof sufficient to pay the Debt,
provided, however, provided no Event of Default has occurred and is
continuing hereunder, under the Note or any of the Other Security Documents,
in the event Lender receives an award or payment from any condemnation or
eminent domain proceeding relating the Property which is in excess of the
Release Amount (as defined in the Loan Agreement) applicable to the Property,
Lender shall disburse said excess to Borrower (an "Excess Condemnation
Disbursement") in the event Borrower has delivered evidence reasonably
satisfactory to Lender that the Aggregate Debt Service Coverage Ratio (as
defined in the Loan Agreement) for the twelve (12) month period immediately
preceding the condemnation or eminent domain proceeding with respect to the
Properties remaining encumbered by the liens of the Security Instrument, as
of the date of the Excess Condemnation Disbursement, shall be equal to 1.80
to 1.00.

              Section 3.7. LEASES AND RENTS. Except as otherwise consented to
by Lender, all Leases shall be written on a standard form of lease which
shall have been approved by Lender. Upon request, Borrower shall furnish
Lender with executed copies of all Leases. No material changes may be made to
the Lender-approved standard lease without the prior written consent of
Lender, which consent shall not be unreasonably withheld or delayed. All
proposed leases shall be subject to the prior approval of Lender except that
all proposed leases which (A)(i) are on the same form of lease which has been
approved by Lender, (ii) are the result of an armslength transaction, (iii)
which provide for rental rates comparable to existing market rates, (iv)
where space to be leased does not exceed twenty-five thousand (25,000) square
feet, (v) where the proposed tenant is an independent third party not
affiliated with the Borrower, (vi) provide for a lease term of less than ten
(10) years including options to renew and (vii) do not contain any terms
which would materially adversely affect Lender's rights under this Security
Instrument, the Note or the Other Security Documents, or (B)(i) are the
result of an armslength transaction, (ii) which provide for rental rates
comparable to existing market rates, (iii) where space to be leased does not
exceed fifteen thousand (15,000) square feet, (iv) where the proposed tenant
is an independent third party not affiliated with the Borrower, (v) provide
for a lease term of less than ten (10) years including options to renew and
(vi) do not contain any terms which would materially adversely affect
Lender's rights under this Security Instrument, the Note or the Other
Security Documents, shall not, in the case of (A) and (B) above, be subject
to the

                                     -12-
<PAGE>

prior approval of Lender. Borrower (i) shall observe and perform all the
obligations imposed upon the lessor under the Leases if the failure to
perform or observe the same would materially and adversely affect the value
of the Property taken as a whole and shall not do or permit to be done
anything to impair, in any material respect, the value of the Leases as
security for the Debt; (ii) shall promptly send copies to Lender of all
notices of default which Borrower shall send or receive thereunder with
respect to any Lease for space in excess of ten thousand (10,000) square feet
of space at the Property; (iii) shall enforce in a commercially reasonable
manner all of the terms, covenants and conditions contained in the Leases
upon the part of the lessee thereunder to be observed or performed; (iv)
shall not collect any of the Rents more than one (1) month in advance
(provided that a security deposit shall not be deemed rent collected in
advance); (v) shall not execute any other assignment of the lessor's interest
in the Leases or the Rents (other than the assignment to Lender); (vi) shall
not (A) materially alter, modify or change the terms of the Leases without
the prior written consent of Lender, which consent shall not be unreasonably
withheld or delayed if the alteration, modification or change does not
materially and adversely affect the value of the Properties taken as a whole
and provided further that such Lease, as altered, modified or changed, is
otherwise in compliance with the requirements of this Security Instrument, or
(B) without Lender's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned, cancel or terminate any Lease
(except for defaults thereunder or pursuant to the terms of Leases approved
by Lender) of more than ten (10%) percent of the rentable space of the
Property or accept a surrender thereof or convey or transfer or suffer or
permit a conveyance or transfer of the Land or of any interest therein so as
to effect a merger of the estates and rights of, or a termination or
diminution of the obligations of, lessees thereunder; (vii) shall not alter,
modify or change the terms of any guaranty, letter of credit or other credit
support with respect to the Leases (the "Lease Guaranty") or cancel or
terminate such Lease Guaranty without the prior written consent of Lender;
and (viii) shall not consent to any assignment of or subletting under the
Leases not in accordance with their terms, without the prior written consent
of Lender, which consent shall not be unreasonably withheld, delayed or
conditioned. Notwithstanding the foregoing, Lender agrees to execute all
reasonably requested subordination, non-disturbance and attornment agreements
provided Lender has previously approved the Lease (provided Lender's approval
is required pursuant to the terms hereof) and said agreement is on Lender's
approved form ("Lender's Form"), provided, however, Lender may, in its sole
discretion, agree to execute a subordination, non-disturbance and attornment
agreement on a form other than Lender's Form.

       Notwithstanding the foregoing, to the extent Lender's prior written
approval is required pursuant to the terms of this Section 3.7, Lender shall
have seven (7) Business Days from receipt of such written request and any and
all reasonably required information and documentation relating thereto in
which to approve or disapprove such request, provided, such request to Lender
is marked in bold lettering with the following language: "LENDER'S RESPONSE
IS REQUIRED WITHIN SEVEN (7) BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT
TO THE TERMS OF A MORTGAGE BETWEEN THE UNDERSIGNED AND LENDER" and the
envelope containing the request must be marked "PRIORITY". In the event
Lender fails to respond to the request within such time, Lender's approval
shall be deemed given. Borrower shall be required to provide Lender with such
information and documentation as may be reasonably and in good faith required
by Lender, including without limitation, lease comparables and other market
information.

              Section 3.8. MAINTENANCE OF PROPERTY. Borrower shall cause the
Property to be

                                     -13-
<PAGE>

maintained in a good and safe condition and repair. The Improvements and the
Personal Property shall not be removed, demolished or materially altered
(except for (i) normal replacement of the Personal Property, (ii) tenant
improvements pursuant to Leases entered into in accordance with the
provisions of Section 3.7 hereof or (iii) the next immediately succeeding
sentence) without the consent of Lender. Subject to the provisions of Section
4.4 hereof, Borrower shall promptly repair, replace or rebuild any part of
the Property which may be destroyed by any casualty, or become damaged, worn
or dilapidated or which may be affected by any proceeding of the character
referred to in Section 3.6 hereof and shall complete and pay for any
structure at any time in the process of construction or repair on the Land.
Borrower shall not initiate, join in, acquiesce in, or consent to any change
in any private restrictive covenant, zoning law or other public or private
restriction, limiting or defining the uses which may be made of the Property
or any part thereof. If under applicable zoning provisions the use of all or
any portion of the Property is or shall become a nonconforming use, Borrower
will not cause or permit the nonconforming use or Improvement to be
discontinued or abandoned without the express written consent of Lender.

              Section 3.9. WASTE. Borrower shall not commit or suffer any
waste of the Property or make any change in the use of the Property which
will in any way materially increase the risk of fire or other hazard arising
out of the operation of the Property, or take any action that might
invalidate or give cause for cancellation of any Policy, or do or permit to
be done thereon anything that may in any way impair the value of the Property
or the security of this Security Instrument. Borrower will not, without the
prior written consent of Lender, permit any drilling or exploration for or
extraction, removal, or production of any minerals from the surface or the
subsurface of the Land, regardless of the depth thereof or the method of
mining or extraction thereof.

              Section 3.10. COMPLIANCE WITH LAWS. (a) Borrower shall promptly
comply with all existing and future federal, state and local laws, orders,
ordinances, governmental rules and regulations or court orders affecting the
Property, or the use thereof including, but not limited to, the Americans
with Disabilities Act ("ADA") (collectively, "Applicable Law").

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

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

              (d)    Borrower shall give prompt notice to Lender of the receipt
by Borrower of any notice related to a violation of any Applicable Laws and of
the commencement of any
                                     -14-
<PAGE>

proceedings or investigations which relate to compliance with Applicable Laws.

              (e)    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 Applicable Laws
affecting the Property, provided that (i) no Event of Default has occurred
and is continuing under the Note, this Security Instrument or any of the
Other Security Documents; (ii) Borrower is permitted to do so under the
provisions of any other mortgage, deed of trust or deed to secure debt
affecting the Property; (iii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which
Borrower is subject and shall not constitute a default thereunder; (iv)
neither the Property nor any part thereof or interest therein nor any of the
tenants or occupants thereof shall be affected in any material adverse way as
a result of such proceeding; and (v) Borrower shall have furnished to Lender
all other items reasonably requested by Lender.

              Section 3.11. BOOKS AND RECORDS. (a) Borrower and any
Guarantors and Indemnitors shall keep adequate books and records of account
in accordance with methods acceptable to Lender in its sole discretion,
consistently applied and furnish to Lender:

                     (i)      quarterly certified rent rolls signed and dated by
Borrower, detailing the names of all tenants of the Improvements, the portion of
Improvements occupied by each tenant, the base rent and any other charges
payable under each Lease and the term of each Lease, including the expiration
date, and any other information as is reasonably required by Lender, within
forty-five (45) days after the end of each fiscal quarter;

                     (ii)     a quarterly operating statement of the Property
detailing the total revenues received, total expenses incurred, total cost of
all capital improvements, total debt service and total cash flow, together with
a balance sheet for such quarter, to be prepared and certified by Borrower in
the form required by Lender, and if available, any quarterly operating statement
and/or balance sheet prepared by an independent certified public accountant
within forty-five (45) days after the close of each fiscal quarter.

                     (iii)    an annual audited balance sheet and profit and
loss statement of Borrower, any Guarantors and any Indemnitors, in the form
required by Lender, prepared by an independent certified public accountant
reasonably acceptable to Lender, within ninety (90) days after the close of each
fiscal year;

                     (iv)     an annual certified rent roll presented on a
quarterly basis consistent with the quarterly certified rent rolls described
above within ninety (90) days after the close of each fiscal year;

                     (v)      an annual operating budget presented on a monthly
basis consistent with the annual operating statement described above for the
Property and all proposed capital replacements and improvements at least thirty
(30) days prior to the start of each calendar year; and

                     (vi)     such other financial statements, including monthly
operating statements and rent rolls, as Lender may reasonably request.

                                     -15-
<PAGE>

       Notwithstanding the provisions of this Section 3.11 to the contrary,
Lender hereby acknowledges that, unless Lender notifies Borrower to the
contrary, (i) Price Waterhouse Coopers, KPMG Peat Marwick, Arthur Andersen,
Ernst & Young and Delloitte & Touche are acceptable certified public
accountants and (ii) the form of rent roll, operating statement, balance
sheet and budget currently used by Borrower are acceptable for the purposes
of Subsection 3.11(a).

              (b)    Upon reasonable request from Lender, Borrower and its
affiliates shall furnish to Lender:

                     (i)      Intentionally Omitted; and

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

              (c)    Borrower and its affiliates and any Guarantor and
Indemnitor shall furnish Lender with such other additional financial or
management information as may, from time to time, be reasonably required by
Lender in form and substance reasonably satisfactory to Lender.

              Section 3.12. PAYMENT  FOR LABOR AND MATERIALS. (a) Borrower
will promptly pay when due all bills and costs for labor, materials, and
specifically fabricated materials incurred in connection with the Property
("Labor and Material Costs") and never permit to exist beyond the due date
thereof in respect of the Property or any part thereof any lien or security
interest, even though inferior to the liens and the security interests
hereof, and in any event never permit to be created or exist in respect of
the Property or any part thereof any other or additional lien or security
interest other than the liens or security interests hereof, except for the
Permitted Exceptions (defined in Section 5.1).

              (b)    After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the Labor and Material Costs,
provided that (i) no Event of Default has occurred and is continuing; (ii)
Borrower is permitted to do so under the provisions of any other mortgage, deed
of trust or deed to secure debt affecting the Property; (iii) such proceeding
shall be permitted under and be conducted in accordance with the provisions of
any other instrument to which Borrower is subject and shall not constitute a
default thereunder; (iv) neither the Property, any part thereof or interest
therein, any of the tenants or occupants thereof, nor Borrower shall be affected
in any material adverse way as a result of such proceeding; and (v) the lien of
the Labor and Material Costs has been discharged of record (by payment, bonding
or otherwise).

              Section 3.13. PERFORMANCE OF OTHER AGREEMENTS. Borrower shall
observe and perform each and every term to be observed or performed by
Borrower pursuant to the terms of any agreement or recorded instrument
affecting or pertaining to the Property, unless such non-observance

                                     -16-
<PAGE>

or non-performance of such agreement or instrument would not have a material
adverse effect on the value of the Property or the ability of Borrower to
manage or operate the Property.

              Section 3.14. CHANGE OF NAME, IDENTITY OR STRUCTURE. Borrower
will not change Borrower's name, identity (including its trade name or names)
or, if not an individual, Borrower's corporate, partnership or other
structure without notifying the Lender of such change in writing at least
thirty (30) days prior to the effective date of such change and, in the case
of a change in Borrower's structure, without first obtaining the prior
written consent of the Lender.

              Section 3.15. EXISTENCE. Borrower will continuously maintain
(a) its existence and shall not dissolve or permit its dissolution, (b) its
rights to do business in the state where the Property is located and (c) its
franchises and trade names.

              Section 3.16. NON-CONSOLIDATION OPINION. Borrower has complied
and will comply with each of the assumptions made with respect to it in that
certain substantive non-consolidation opinion letter, dated the date hereof,
delivered by Borrower's counsel in connection with the Loan (hereinafter
defined) and any subsequent non-consolidation opinion delivered in accordance
with the terms and conditions of this Security Instrument or the Cooperation
Letter (hereinafter defined) (the "Non-Consolidation Opinion"), including,
but not limited to, any exhibits attached thereto. Each entity other than the
Borrower with respect to which an assumption is made in the Non-Consolidation
Opinion, including, but not limited to, any exhibits attached thereto, has
complied and will comply with each of the assumptions made with respect to it
in the Non-Consolidation Opinion, including, but not limited to, any exhibits
attached thereto.

              Section 3.17. MANAGEMENT. The Property shall be managed by
either: (a) Borrower or an entity affiliated with Borrower approved by Lender
for so long as Borrower or said affiliated entity is managing the Property in
a first class manner; or (b) a Qualified Manager (herein defined). Management
by an affiliated entity or a professional property management company shall
be pursuant to a written agreement reasonably approved by Lender. Except as
otherwise expressly permitted herein, in no event shall any manager be
removed or replaced or the terms of any management agreement materially
modified or amended without the prior written consent of Lender. All Rents
generated by or derived from the Property shall first be utilized for current
expenses directly attributable to the ownership and operation of the
Property, including, without limitation, current expenses relating to
Borrower's liabilities and obligations with respect to the Note, this
Security Instrument and the Other Security Documents, and none of the Rents
generated by or derived from the Property shall be diverted by Borrower and
utilized for any other purpose unless all such current expenses attributable
to the ownership and operation of the Property have been fully paid and
satisfied. The term "Qualified Manager" shall mean a reputable and
experienced professional management organization (a) which manages, together
with its affiliates, at least ten (10) retail community centers or "power
centers" totaling at least 3,500,000 square feet of gross leasable area
(including all anchor space) in each case exclusive of the Property. Lender
hereby acknowledges that, unless Lender notifies Borrower to the contrary,
Excel Legacy Corporation is an approved property manager.

       Notwithstanding anything contained herein, in the Note or in the Other
Security Documents to the contrary, Borrower may terminate the existing
management agreement without Lender's

                                     -17-
<PAGE>

consent and replace the property manager with a new property manager (the
"New Manager"), provided (i) the replacement management agreement complies
with all the provisions of the Note, this Security Instrument and the Other
Security Documents, including, without limitation, Section 3.17 hereof, (ii)
the New Manager executes and delivers to Lender an Assignment of Management
Agreement and Subordination of Management Fees in substantially the same form
as delivered by the existing property manager to Lender on the date hereof,
(iii) the New Manager is either a Qualified Manager or Price Enterprises,
Inc. ("PEI")and (iv) except in the event the New Manager is PEI, Lender has
received a Rating Agency Confirmation (hereinafter defined).

                                     ARTICLE IV

                                 SPECIAL COVENANTS

              Borrower covenants and agrees with Lender that:

              Section 4.1. PROPERTY USE. The Property shall be used only for
a retail community center [WITH SOME OFFICE SPACE - PA ONLY]
[WITH SOME SELF-STORAGE SPACE - NJ ONLY] and for no other use without the
prior written consent of Lender, which consent may be withheld in Lender's
discretion.

              Section 4.2. ERISA. (a) It shall not engage in any transaction
which would cause any obligation, or action taken or to be taken, hereunder
(or the exercise by Lender of any of its rights under the Note, this Security
Instrument and the Other Security Documents) to be a non-exempt (under a
statutory or administrative class exemption) prohibited transaction under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").

              (b)    Borrower further covenants and agrees to deliver to
Lender such certifications or other evidence from time to time throughout the
term of this Security Instrument, as requested by Lender in its sole
discretion, that (i) Borrower is not an "employee benefit plan" as defined in
Section 3(32) of ERISA, which is subject to Title I of ERISA, or a
"governmental plan" within the meaning of Section 3(32) of ERISA; (ii)
Borrower is not subject to state statutes regulating investments and
fiduciary obligations with respect to governmental plans; and (iii) one or
more of the following circumstances is true:

                     (i)      One hundred percent (100%) of the equity interests
in Borrower, directly or indirectly, are owned by PEI and equity interests in
PEI are publicly offered securities, within the meaning of 29 C.F.R. Section
2510.3-101(b)(2);

                     (ii)     Less than 25 percent of each outstanding class of
equity interests in Borrower are held by "benefit plan investors" within the
meaning of 29 C.F.R. Section 2510.3-101(f)(2); or

                     (iii)    Borrower qualifies as an "operating company" or
a "real estate operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c) or (e) or an investment company registered under The Investment
Company Act of 1940.

              Section 4.3. SINGLE PURPOSE ENTITY. (a) It has not and shall not:

                                     -18-
<PAGE>

                     (i)      engage in any business or activity other than the
ownership, operation and maintenance of the Property, and activities incidental
thereto;

                     (ii)     acquire or own any material assets other than (A)
the Property, and (B) such incidental Personal Property as may be necessary for
the operation of the Property;

                     (iii)    merge into or consolidate with any person or
entity or dissolve, terminate or liquidate in whole or in part, transfer or
otherwise dispose of all or substantially all of its assets or change its legal
structure, without in each case Lender's consent;

                     (iv)     fail to preserve its existence as an entity duly
organized, validly existing and in good standing (if applicable) under the laws
of the jurisdiction of its organization or formation, or without the prior
written consent of Lender, amend, modify, terminate or fail to comply with the
provisions of Borrower's Partnership Agreement, Articles or Certificate of
Incorporation, Operating Agreement or similar organizational documents, as the
case may be;

                     (v)      own any subsidiary or make any investment in, any
person or entity without the consent of Lender;

                     (vi)     commingle its assets with the assets of any of its
general partners, members, shareholders, affiliates, principals or of any other
person or entity;

                     (vii)    incur any debt, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other than the Debt and
trade payables incurred in the ordinary course of business, provided that such
debt is not evidenced by a note and is paid within sixty (60) days of the date
when such payment is due and at no time exceeds four percent (4%) of the then
outstanding principal balance of the Note;

                     (viii)   fail to maintain its records, books of account and
bank accounts separate and apart from those of the general partners, members,
shareholders, principals and affiliates of Borrower, the affiliates of a general
partner or member, or shareholder of Borrower, and any other person or entity;

                     (ix)     enter into any contract or agreement with any
general partner, member, shareholder, principal or affiliate of Borrower,
Guarantor or Indemnitor, or any general partner, member, principal or affiliate
thereof, 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 general partner, member, shareholder,
principal or affiliate of Borrower, Guarantor or Indemnitor, or any general
partner, member, principal or affiliate thereof;

                     (x)      seek the dissolution or winding up in whole, or in
part, of Borrower;

                     (xi)     maintain its assets in such a manner that it will
be costly or difficult to segregate, ascertain or identify its individual assets
from those of any general partner, member, shareholder, principal or affiliate
of Borrower, or any general partner, member, shareholder, principal or affiliate
thereof or any other person;

                                     -19-
<PAGE>

                     (xii)    hold itself out to be responsible for the debts of
another person;

                     (xiii)   make any loans or advances to any third party,
including any general partner, member, shareholder, principal or affiliate of
Borrower, or any general partner, principal or affiliate thereof;

                     (xiv)    fail to file its own tax returns;

                     (xv)     agree to, enter into or consummate any transaction
which would render Borrower unable to furnish the certification or other
evidence referred to in Section 4.2(b) hereof;

                     (xvi)    fail either to hold itself out to the public as a
legal entity separate and distinct from any other entity or person or to conduct
its business solely in its own name in order not (A) to mislead others as to the
identity with which such other party is transacting business, or (B) to suggest
that Borrower is responsible for the debts of any third party (including any
general partner, principal or affiliate of Borrower, or any general partner,
principal or affiliate thereof);

                     (xvii)   fail to 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;

                     (xviii)  file or consent to the filing of any petition,
either voluntary or involuntary, to take advantage of any applicable insolvency,
bankruptcy, liquidation or reorganization statute, or make an assignment for the
benefit of creditors.

                     (xix)    fail to provide in its (i) articles of
organization, certificate of formation and/or operating agreement, as
applicable, if Borrower is a limited liability company, (ii) limited partnership
agreement if Borrower is a limited partnership or (iii) its certificate of
incorporation, if Borrower is a corporation, that for so long as the Loan is
outstanding pursuant to the Note and this Security Instrument, Borrower shall
not file or consent to the filing of any petition, either voluntary or
involuntary, to take advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment for the benefit of
creditors without the affirmative vote of the Independent Director (defined
below) and of all other directors of the Borrower ;or

                     (xx)     fail to conduct its business so that the
assumptions made with respect to Borrower in that certain opinion letter
pertaining to substantive consolidation delivered by Latham & Watkins in
connection with the Loan shall be true and correct in all respects.

              (b)    If Borrower is a limited partnership or a limited liability
company, each general partner or at least one member (the "SPE Member") of
Borrower, as applicable, is a corporation whose sole asset is its interest in
Borrower and each general partner or the SPE Member of Borrower, as applicable,
will at all times comply, and will cause Borrower to comply, with each of the
covenants, terms and provisions contained in Section 4.3(a) as if such
representation, warranty or covenant was made directly by such general partner
or SPE Member. Only the SPE Member may be designated as a manager under the law
where the Borrower is organized.

                                     -20-
<PAGE>

              (c)    Borrower shall at all times cause there to be at least
two duly appointed members of the board of directors (collectively, the
"Independent Director") of each general partner of Borrower (or of the SPE
Member of Borrower) reasonably satisfactory to Lender who shall not have been
at the time of such individual's initial appointment, and may not have been
at any time during the preceding five years, and shall not be at any time
while serving as a director of the general partner (or SPE Member) either (i)
a shareholder of, or an officer, director, partner or employee of, Borrower
or any of its shareholders, partners, members, subsidiaries or affiliates,
(ii) a customer of, or supplier to, Borrower or any of its shareholders,
partners, members, subsidiaries or affiliates, (iii) a person or other entity
controlling or under common control with any such shareholder, officer,
director, partner, member, employee, supplier or customer, or (iv) a member
of the immediate family of any such shareholder, officer, director, partner,
member, employee, supplier or customer. As used herein, (i) the term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policy of a person or
entity, whether through ownership of voting securities, by contract or
otherwise and (ii) the term "affiliate" means any person or entity, other
than the SPE Member, which (x) owns, directly or indirectly, any interest in
Borrower or the SPE Member or (y) controls or is under control with Borrower
or the SPE Member, whether through ownership of voting securities, by
contract or otherwise.

              (d)    Borrower shall not cause or permit the board of
directors of the general partner of Borrower (or of the SPE Member of
Borrower) to 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 a vote of the board of directors of the general
partner of Borrower (or the SPE Member of Borrower) unless at the time of
such action there shall be at least one member of the board of directors who
is an Independent Director.

              Section 4.4. RESTORATION AFTER CASUALTY/CONDEMNATION. In the
event of a casualty or a taking by eminent domain, the following provisions
shall apply in connection with the Restoration of the Property:

              (a)    If (i) the Net Proceeds (defined below) do not exceed
$1,000,000 ("Casualty Amount"); (ii) the costs of completing the Restoration
as reasonably estimated by Borrower shall be less than or equal to the
Casualty Amount; (iii) no Event of Default shall have occurred and be
continuing under the Note, this Security Instrument or any of the Other
Security Documents; (iv) the Property and the use thereof after the
Restoration will be in compliance with, and permitted under, all applicable
zoning laws, ordinances, rules and regulations (including, without
limitation, all applicable Environmental Laws (defined in Section 12.1); and
(v) such fire or other casualty or taking, as applicable, does not materially
impair access to the Property or the Improvements, then the Net Proceeds will
be disbursed directly to Borrower and Borrower shall commence and diligently
prosecute to completion, subject to Force Majeure (defined herein), the
Restoration of the Property to as nearly as possible the condition it was in
immediately prior to such fire or other casualty or to such taking. Except
upon the occurrence and continuance of an Event of Default, Borrower shall
settle any insurance claims with respect to the Net Proceeds which in the
aggregate are less than or equal to the Casualty Amount. Lender shall have
the right to participate in and reasonably approve any settlement for
insurance claims with respect to the Net Proceeds which in the aggregate are
equal to or greater than the Casualty Amount. If an Event of Default shall
have occurred and be continuing, Borrower hereby irrevocably empowers Lender,
in the name of Borrower as its true and

                                     -21-
<PAGE>

lawful attorney-in-fact, to file and prosecute such claim and to collect and
to make receipt for any such payment. If the Net Proceeds are received by
Borrower, such Net Proceeds shall, until the completion of the related work,
be held in trust for Lender and shall be segregated from other funds of
Borrower to be used to pay for the cost of the Restoration in accordance with
the terms hereof.

              (b)    If the Net Proceeds are greater than the Casualty
Amount, such Net Proceeds shall, subject to the provisions of the Leases that
are superior to the lien of this Security Instrument or with respect to which
subordination, non-disturbance agreements binding upon Lender have entered
into concerning the deposits of Net Proceeds, be forthwith paid to Lender to
be held by Lender in a segregated account to be made available to Borrower
for the Restoration in accordance with the provisions of this Subsection
4.4(b). Provided the Net Proceeds are made available to Borrower for
Restoration, Borrower shall commence and diligently prosecute to completion,
subject to Force Majeure (defined below), the Restoration (in the case of a
taking, to the extent the Property is capable of being restored). The term
"Net Proceeds" for purposes of Section 3.3, Section 3.6 and this Section 4.4
shall mean: (i) the net amount of all insurance proceeds received by Lender
or Borrower, as the case may be, under the Policies carried pursuant to
Subsections 3.3(a)(i), (iv), (v), (vi) and (vii) of this Security Instrument
as a result of such damage or destruction, after deduction of its reasonable
costs and expenses (including, but not limited to reasonable counsel fees),
if any, in collecting the same, or (ii) the net amount of all awards and
payments received by Lender or Borrower, as the case may be, with respect to
a taking referenced in Section 3.6 of this Security Instrument, after
deduction of its reasonable costs and expenses (including, but not limited to
reasonable counsel fees), if any, in collecting the same, whichever the case
may be. The term "Force Majeure" for the purpose of this Section 4.4 shall
have the following meaning: Borrower shall be excused for the period of any
delay in the performance of any obligations hereunder when prevented from so
doing by cause or causes beyond Borrower's reasonable control such as,
without limitation, all labor disputes, civil commotion, war, war-like
operations, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or controls, fire or other casualty,
inability toobtain any materials or services, and acts of God.

                     (i)      The Net Proceeds shall be promptly made
available to Borrower for payment of, or reimbursement of Borrower's expenses
in connection with, the Restoration, subject to the following conditions:

                              (A)  no Event of Default shall have occurred
and be continuing under the Note, this Security Instrument or any of the
Other Security Documents;

                              (B)  Lender shall, within a reasonable period
of time prior to request for initial disbursement, be furnished with an
estimate of the cost of the Restoration accompanied by an independent
architect's certification as to such costs and appropriate plans and
specifications for the Restoration;

                              (C)  the Net Proceeds, together with any cash
or cash equivalent deposited by Borrower with Lender, are sufficient to cover
the cost of the Restoration as such costs are certified by the independent
architect;

                              (D)  (1) in the event that the Net Proceeds are
insurance proceeds,

                                     -22-
<PAGE>

less than fifty percent (50%) of the total floor area of the Improvements has
been damaged or destroyed, or rendered unusable as a result of such fire or
other casualty; or (2) in the event that the Net Proceeds are condemnation
awards, less than fifty percent (50%) of the Land constituting the Property
is taken, such Land that is taken is located along the perimeter or periphery
of the Property and no portion of the Improvements is located in such Lands;

                              (E)  Lender shall be reasonably satisfied that
any operating deficits, including all scheduled payments of principal and
interest under the Note which will be incurred with respect to the Property
as a result of the occurrence of any such fire or other casualty or taking,
whichever the case may be, will be covered out of (1) the Net Proceeds, or
(2) other funds of Borrower;

                              (F)  Lender shall be satisfied that, upon the
completion of the Restoration and related lease-up, if applicable, the net
cash flow of the Property will be restored to a level sufficient to cover all
carrying costs and operating expenses of the Property, including, without
limitation, debt service on the Note at a coverage ratio (on a "normalized"
basis, i.e., after deducting replacement reserve requirements and reserves
for tenant improvements and leasing commissions from net operating income,
whether or not such sums are escrowed with Lender) of at least 1.80 : 1.0,
which coverage ratio shall be equal to or greater than the coverage ratio
existing as of the date of this Security Instrument or, if lower, the
coverage ratio which existed as of the date immediately preceding such
casualty or taking as the case may be;

                              (G) the Restoration can reasonably be completed
on or before the earliest to occur of (1) six (6) months prior to the
Maturity Date (as defined in the Note), (2) the earliest date required for
such completion under the terms of any Lease and (3) such time as may be
required under applicable zoning law, ordinance, rule or regulation in order
to repair and restore the Property to as nearly as possible the condition it
was in immediately prior to such fire or other casualty or to such taking, as
applicable;

                              (H)  the Property and the use thereof after the
Restoration will be in compliance with, and permitted under, all applicable
zoning laws, ordinances, rules and regulations (including, without
limitation, all applicable Environmental Laws (defined in Section 12.1); and

                              (I)  such fire or other casualty or taking, as
applicable, does not materially impair access to the Property or the
Improvements.

                     (ii)     The Net Proceeds shall be held by Lender in an
account bearing interest at the bank monitor rate and, until disbursed in
accordance with the provisions of this Subsection 4.4(b), shall constitute
additional security for the Obligations. The Net Proceeds other than the Net
Proceeds paid under the Policy described in Subsection 3.3(a)(iv) shall be
disbursed by Lender to, or as directed by, Borrower from time to time during
the course of the Restoration, upon receipt of evidence reasonably
satisfactory to Lender that (A) all materials installed and work and labor
performed (except to the extent that they are to be paid for out of the
requested disbursement) in connection with the Restoration have been paid for
in full, and (B) there exist no notices of pendency, stop orders, mechanic's
or materialman's liens or notices of intention to file same, or any other
liens or encumbrances of any nature whatsoever on the Property arising out of
the Restoration which have
                                     -23-
<PAGE>

not either been fully bonded and discharged of record or in the alternative
fully insured to the satisfaction of Lender by the title company insuring the
lien of this Security Instrument.

                     (iii)    Lender shall have the use of the plans and
specifications and all permits, licenses and approvals required or obtained
in connection with the Restoration. The identity of the contractors,
subcontractors and materialmen engaged in the Restoration to provide goods
and/or services, the cost of which shall exceed $50,000, as well as the
contracts under which they have been engaged, shall be subject to prior
review and acceptance by Lender and an independent consulting engineer
selected by Lender (the "Casualty Consultant"), such acceptance not to be
unreasonably withheld or delayed. All costs and expenses incurred by Lender
in connection with making the Net Proceeds available for the Restoration
including, without limitation, reasonable counsel fees and disbursements and
the Casualty Consultant's fees, shall be paid by Borrower.

                     (iv)     In no event shall Lender be obligated to make
disbursements of the Net Proceeds in excess of an amount equal to the costs
actually incurred from time to time for work in place as part of the
Restoration, as certified by the Casualty Consultant, minus the Casualty
Retainage. The term "Casualty Retainage" as used in this Subsection 4.4(b)
shall mean an amount equal to 10% of the costs actually incurred for work in
place as part of the Restoration, as certified by the Casualty Consultant,
until such time as the Casualty Consultant certifies to Lender that 50% of
the required Restoration has been completed. There shall be no Casualty
Retainage with respect to costs actually incurred by Borrower for work in
place in completing the last 50% of the required Restoration. The Casualty
Retainage shall in no event, and notwithstanding anything to the contrary set
forth above in this Subsection 4.4(b), be less than the amount actually held
back by Borrower from contractors, subcontractors and materialmen engaged in
the Restoration. The Casualty Retainage shall not be released until the
Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection 4.4(b) and
that all approvals necessary for the re-occupancy and use of the Property
have been obtained from all appropriate governmental and quasi-governmental
authorities, and Lender receives evidence reasonably satisfactory to Lender
that the costs of the Restoration have been paid in full or will be paid in
full out of the Casualty Retainage, provided, however, that Lender will
release the portion of the Casualty Retainage being held with respect to any
contractor, subcontractor or materialman engaged in the Restoration as of the
date upon which the Casualty Consultant certifies to Lender that the
contractor, subcontractor or materialman has satisfactorily completed all
work and has supplied all materials in accordance with the provisions of the
contractor's, subcontractor's or materialman's contract, and the contractor,
subcontractor or materialman delivers the lien waivers and evidence of
payment in full of all sums due to the contractor, subcontractor or
materialman as may be reasonably requested by Lender or by the title company
insuring the lien of this Security Instrument. If required by Lender, the
release of any such portion of the Casualty Retainage shall be approved by
the surety company, if any, which has issued a payment or performance bond
with respect to the contractor, subcontractor or materialman.

                     (v)      Lender shall not be obligated to make
disbursements of the Net Proceeds more frequently than once every calendar
month.

                     (vi)     If at any time the Net Proceeds or the
undisbursed balance thereof shall not, in the opinion of Lender, be
sufficient to pay in full the balance of the costs which are estimated

                                     -24-
<PAGE>

by the Casualty Consultant to be incurred in connection with the completion
of the Restoration, Borrower shall deposit the deficiency (the "Net Proceeds
Deficiency") with Lender (which deposit may be in the form of cash or a
letter of credit, provided said letter of credit is in form, substance and
from any issuing bank reasonably acceptable to Lender) before any further
disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency
deposited with Lender shall be held by Lender and shall be disbursed for
costs actually incurred in connection with the Restoration on the same
conditions applicable to the disbursement of the Net Proceeds, and until so
disbursed pursuant to this Subsection 4.4(b) shall constitute additional
security for the Obligations.

              (vii)  The excess, if any, of the Net Proceeds and the
remaining balance, including any accrued interest thereon, if any, of the Net
Proceeds Deficiency deposited with Lender after the Casualty Consultant
certifies to Lender that the Restoration has been completed in accordance
with the provisions of this Subsection 4.4(b), and the receipt by Lender of
evidence reasonably satisfactory to Lender that all costs incurred in
connection with the Restoration have been paid in full, shall be remitted by
Lender to Borrower, provided no Event of Default shall have occurred and
shall be continuing under the Note, this Security Instrument or any of the
Other Security Documents.

              (viii) All Net Proceeds not required (i) to be made available
for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds
pursuant to Subsection 4.4(b)(vii) shall be retained and applied by Lender
toward the payment of the Debt whether or not then due and payable in such
order, priority and proportions as Lender in its discretion shall deem proper
or, at the discretion of Lender, the same shall be paid, either in whole or
in part, to Borrower. If Lender shall receive and retain Net Proceeds, the
lien of this Security Instrument shall be reduced only by the amount received
and retained by Lender and actually applied by Lender in reduction of the
Debt.

                                     ARTICLE V

                           REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants to Lender that:

              Section 5.1. WARRANTY OF TITLE. Borrower has good and
indefeasible title to the Property and has the right to mortgage, grant,
bargain, sell, pledge, assign, warrant, transfer and convey the same and that
Borrower possesses an unencumbered fee simple absolute estate in the Land and
the Improvements and that it owns the Property free and clear of all liens,
encumbrances and charges whatsoever except for those exceptions shown in the
title insurance policy insuring the lien of this Security Instrument (the
"Permitted Exceptions"). The Permitted Exceptions do not materially,
adversely interfere with the security intended to be provided by this
Security Instrument or the use and operations of the Property. Borrower shall
forever warrant, defend and preserve the title and the validity and priority
of the lien of this Security Instrument and shall forever warrant and defend
the same to Lender against the claims of all persons whomsoever, subject to
the Permitted Exceptions. Upon the recordation of this Security Instrument
and the filing of a UCC Financing Statement in the office of the Secretary of
State for the state where the Property is located, the Lender will have a
first priority perfected security interest in all personal property owned by

                                     -25-
<PAGE>

Borrower.

              Section 5.2. AUTHORITY. Borrower (and the undersigned
representative of Borrower, if any) has full power, authority and legal right
to execute this Security Instrument, and to mortgage, grant, bargain, sell,
pledge, assign, warrant, transfer and convey the Property pursuant to the
terms hereof and to keep and observe all of the terms of this Security
Instrument on Borrower's part to be performed.

              Section 5.3. LEGAL STATUS AND AUTHORITY. Borrower (a) is duly
organized, validly existing and in good standing under the laws of its state
of organization or incorporation; (b) is duly qualified to transact business
and is in good standing in the State where the Property is located; and (c)
has all necessary approvals, governmental and otherwise, and full power and
authority to own the Property and carry on its business as now conducted and
proposed to be conducted. Borrower now has and shall continue to have the
full right, power and authority to operate and lease the Property, to
encumber the Property as provided herein and to perform all of the other
obligations to be performed by Borrower under the Note, this Security
Instrument and the Other Security Documents.

              Section 5.4. VALIDITY OF DOCUMENTS. (a) The execution, delivery
and performance of the Note, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Note (i) are within the power
and authority of Borrower; (ii) have been authorized by all requisite
organizational action; (iii) have received all necessary approvals and
consents, corporate, governmental or otherwise; (iv) will not violate,
conflict with, result in a breach of or constitute (with notice or lapse of
time, or both) a default under any provision of law (including, without
limitation, any usury laws), any order or judgment of any court or
governmental authority, the articles of incorporation, by-laws, partnership
or operating agreement, or other governing instrument of Borrower, or any
indenture, agreement or other instrument to which Borrower is a party or by
which it or any of its assets or the Property is or may be bound or affected;
(v) will not result in the creation or imposition of any lien, charge or
encumbrance whatsoever upon any of its assets, except the lien and security
interest created hereby; and (vi) will not require any authorization or
license from, or any filing with, any governmental or other body (except for
the recordation of this instrument in appropriate land records in the State
where the Property is located and except for Uniform Commercial Code filings
relating to the security interest created hereby), and (b) the Note, this
Security Instrument and the Other Security Documents constitute the legal,
valid and binding obligations of Borrower.

              Section 5.5. LITIGATION. There is no action, suit or
proceeding, judicial, administrative or otherwise (including any condemnation
or similar proceeding), pending or, to the best of Borrower's knowledge,
threatened or contemplated against Borrower, any person guaranteeing the
payment of the Debt or any portion thereof or performance by Borrower of any
terms of this Security Instrument (a "Guarantor"), if any, an Indemnitor
(defined in Subsection 10.1(c)), if any, or against or affecting the Property
that (a) has not been disclosed to Lender, and has a material, adverse effect
on the Property or Borrower's, any Guarantor's or any Indemnitor's ability to
perform its obligations under the Note, this Security Instrument or the Other
Security Documents, and (b) is not adequately covered by insurance, each as
determined by Lender in its reasonable discretion.

              Section 5.6. STATUS OF PROPERTY. (a) No portion of the
Improvements is located in an

                                     -26-
<PAGE>

area identified by the Secretary of Housing and Urban Development or any
successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, or the National Flood Insurance Reform Act of 1994, as each may be
amended, or any successor law, or, if any portion of the Improvements is now
or at any time in the future located within any such area, Borrower has
obtained and will maintain the insurance prescribed in Section 3.3 hereof.

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

              (c) The Property and the present and contemplated use and
occupancy thereof are in full compliance with all Applicable Laws, including,
without limitation, zoning ordinances, building codes, land use and
Environmental Laws, laws relating to the disabled (including but not limited
to, the ADA) and other similar laws, unless such failure does not have a
material adverse effect on the value of the Property.

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

              (e) All public roads and streets necessary for service of and
access to the Property for the current or contemplated use thereof have been
completed, are serviceable and are physically and legally open for use by the
public.

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

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

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

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

              (j) Except as disclosed in the property condition report prepared
in connection with the origination of the Loan, all liquid and solid waste
disposal, septic and sewer systems located on the Property are in a good and
safe condition and repair and in compliance with all Applicable Laws.

              (k) All security deposits relating to the Leases reflected on the
certified rent roll.

                                     -27-
<PAGE>

delivered to Lender have been collected by Borrower except as noted on the
certified rent roll.

              (l) Borrower has received no notice of an actual or threatened
condemnation or eminent domain proceeding by any public or quasi-public
authority.

              (m) All the Improvements lie within the boundaries of the
Property, except for encroachments which are Permitted Exceptions.

              Section 5.7. NO FOREIGN PERSON. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code
of 1986, as amended and the related Treasury Department regulations,
including temporary regulations.

              Section 5.8. SEPARATE TAX LOT. The Property is assessed for
real estate tax purposes as one or more wholly independent tax lot or lots,
separate from any adjoining land or improvements not constituting a part of
such lot or lots, and no other land or improvements is assessed and taxed
together with the Property or any portion thereof.

              Section 5.9. ERISA COMPLIANCE. (a) As of the date hereof and
throughout the term of this Security Instrument, (i) Borrower is not and will
not be an "employee benefit plan" as defined in Section 3(32) of ERISA, which
is subject to Title I of ERISA, and (ii) the assets of Borrower do not and
will not constitute "plan assets" of one or more such plans for purposes of
Title I of ERISA; and

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

              Section 5.10. LEASES. Except as disclosed in the certified rent
roll for the Property delivered to and approved by Lender, (a) Borrower is
the sole owner of the entire lessor's interest in the Leases; (b) the Leases
are valid and enforceable; (c) the economic and other material terms of all
alterations, modifications and amendments to the Leases are reflected in the
certified rent roll delivered to and approved by Lender; (d) none of the
Rents reserved in the Leases have been assigned or otherwise pledged or
hypothecated (except to Lender); (e) none of the Rents have been collected
for more than one (1) month in advance (provided that a security deposit
shall not be deemed rent collected in advance); (f) the premises demised
under the Leases have been completed and the tenants under the Leases have
accepted the same and have taken possession of the same on a rent-paying
basis; (g) to the best of Borrower's knowledge, there exist no offsets or
defenses to the payment of any portion of the Rents; (h) Borrower has
received no notice from any tenant challenging the validity or enforceability
of any Lease; (i) all payments due under the Leases are current and are
consistent with the certified rent roll for the Property delivered to and
approved by Lender; (j) no tenant under any Lease is in default thereunder
beyond any applicable notice and grace periods contained in the Lease, or is
a debtor in any bankruptcy, reorganization, insolvency or similar proceeding,
or has demonstrated a history of payment problems which suggest financial
difficulty; (k) there are no agreements with the tenants under the Leases
other than expressly set forth in each Lease; (l) the

                                     -28-
<PAGE>

Leases are valid and enforceable against Borrower and, to the best of
Borrower's knowledge, the tenants set forth therein; (m) no Lease contains an
option to purchase, right of first refusal to purchase, or any other similar
provision; (n) no person or entity has any possessory interest in, or right
to occupy, the Property except under and pursuant to a Lease; (o) each Lease
is subordinate to this Security Instrument, either pursuant to its terms or a
recorded subordination agreement; and (p) no brokerage commissions or finders
fees are due and payable regarding any Lease, except for those not yet
delinquent and which will be paid in the ordinary course of Borrower's
business.

              Section 5.11. SOLVENCY. Borrower (a) has not entered into the
transaction or executed the Note, this Security Instrument or any Other
Security Document with the actual intent to hinder, delay or defraud any
creditor and (b) received reasonably equivalent value in exchange for its
obligations under such documents. Giving effect to the Loan, the fair
saleable value of Borrower's assets exceeds and will, immediately following
the making of the Loan, exceed Borrower's total liabilities, including,
without limitation, subordinated, unliquidated, disputed and contingent
liabilities. The fair saleable value of Borrower's assets is and will,
immediately following the making of the Loan, be greater than Borrower's
probable liabilities, including the maximum amount of its contingent
liabilities on its debts as such debts become absolute and matured.
Borrower's assets do not and, immediately following the making of the Loan
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 debt and liabilities (including
contingent liabilities and other commitments) beyond its ability to pay such
debt and liabilities as they mature (taking into account the timing and
amounts of cash to be received by Borrower and the amounts to be payable on
or in respect of obligations of Borrower). Except as expressly disclosed to
Lender in writing, no petition in bankruptcy has been filed against Borrower,
any Indemnitor, any Guarantor, any principal or any related entity thereof,
or any principal, general partner or member thereof, in the last seven (7)
years, and neither Borrower, any Indemnitor, any Guarantor, any principal nor
any related entity thereof, nor any principal, general partner or member
thereof, in the last seven (7) years has ever made an assignment for the
benefit of creditors or taken advantage of any insolvency act for the benefit
of debtors.

              Section 5.12. BUSINESS PURPOSES. The loan evidenced by the Note
is solely for the business purpose of Borrower, and is not for personal,
family, household, or agricultural purposes.

              Section 5.13. TAXES. Borrower, any Guarantor and any Indemnitor
have filed all federal, state, county, municipal, and city income and other
tax returns required to have been filed by them and have paid all taxes and
related liabilities which have become due pursuant to such returns or
pursuant to any assessments received by them. Neither Borrower, any Guarantor
nor any Indemnitor knows of any basis for any additional assessment in
respect of any such taxes and related liabilities for prior years.

              Section 5.14. MAILING ADDRESS. Borrower's mailing address, as
set forth in the opening paragraph hereof or as changed in accordance with
Article 16, is true and correct.

              Section 5.15. NO CHANGE IN FACTS OR CIRCUMSTANCES. All
information in the application (the "Loan Application") for the loan (the
"Loan") submitted to Lender and in all financing statements, rent rolls,
reports, certificates and other documents submitted in connection

                                     -29-
<PAGE>

with the Loan Application or in satisfaction of the terms thereof, are
accurate, complete and correct in all material respects. There has been no
adverse change in any condition, fact, circumstance or event that would make
any such information inaccurate, incomplete or otherwise misleading in any
material respect.

              Section 5.16. DISCLOSURE. Borrower has disclosed to Lender all
material facts and has not failed to disclose any material fact that could
cause any representation or warranty made herein to be materially misleading,
the effect of which would have a material adverse effect on the value of the
Properties taken as a whole.

              Section 5.17. THIRD PARTY REPRESENTATIONS. Each of the
representations and the warranties made by each Guarantor and Indemnitor
herein or in any Other Security Document(s) is true and correct in all
material respects.

              Section 5.18. ILLEGAL ACTIVITY. No portion of the Property has
been or will be purchased, improved, fixtured, equipped or furnished with
proceeds of any criminal or other illegal activity and to the best of
Borrower's knowledge, there are no illegal activities or activities relating
to controlled substance at the Property.

              Section 5.19. NON-CONSOLIDATION OPINION ASSUMPTIONS. All of the
assumptions made in the Non-Consolidation Opinion, including, but not limited
to, any exhibits attached thereto, are true and correct.

              Section 5.20. 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 Security Instrument, the Note or the Other
Security Documents.

              Section 5.21. INVESTMENT COMPANY ACT. Borrower is not (a) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (b) 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
(c) subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.

              Section 5.22. FORFEITURE. There has not been committed by Borrower
or, to the best of Borrower's 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 the Note, this Security Instrument or the Other
Security Documents. Borrower hereby covenants and agrees not to commit, permit
or suffer to exist any act or omission affording such right of forfeiture.

                                     -30-
<PAGE>

                                     ARTICLE VI

                            DEBTOR/CREDITOR RELATIONSHIP

              Section 6.1. RELATIONSHIP OF BORROWER AND LENDER. The relationship
between Borrower and Lender is solely that of debtor and creditor, and Lender
has no fiduciary or other special relationship with Borrower, and no term or
condition of any of the Note, this Security Instrument and the Other Security
Documents shall be construed so as to deem the relationship between Borrower and
Lender to be other than that of debtor and creditor.

              Section 6.2. SERVICING OF THE LOAN. At the option of Lender, the
loan secured hereby may be serviced by a servicer/trustee (the "Servicer")
selected by Lender and Lender may delegate all or any portion of its
responsibilities under the Note, this Security Instrument, and the Other
Security Documents to the Servicer.

                                    ARTICLE VII

                                 FURTHER ASSURANCES

              Section 7.1. RECORDING OF SECURITY INSTRUMENT, ETC. Borrower
forthwith upon the execution and delivery of this Security Instrument and
thereafter, from time to time, will cause this Security Instrument and any of
the Other Security Documents creating a lien or security interest or evidencing
the lien hereof upon the Property and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect and perfect the lien or security interest hereof upon, and the interest
of Lender in, the Property. Borrower will pay all taxes, filing, registration or
recording fees, and all expenses incident to the preparation, execution,
acknowledgment and/or recording of the Note, this Security Instrument, the Other
Security Documents, any note or mortgage supplemental hereto, any security
instrument with respect to the Property and any instrument of further assurance,
and any modification or amendment of the foregoing documents, and all federal,
state, county and municipal taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery of this Security
Instrument, any mortgage supplemental hereto, any security instrument with
respect to the Property or any instrument of further assurance, and any
modification or amendment of the foregoing documents, except where prohibited by
law so to do.

              Section 7.2. FURTHER ACTS, ETC. Borrower will, at the cost of
Borrower, and without expense to Lender, do, execute, acknowledge and deliver
all and every such further acts, deeds, conveyances, mortgages, assignments,
notices of assignments, transfers and assurances as Lender shall, from time to
time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Lender, the property and rights hereby
mortgaged, granted, bargained, sold, conveyed, confirmed, pledged, assigned,
warranted and transferred or intended now or hereafter so to be, or which
Borrower may be or may hereafter become bound to convey or assign to Lender, or
for carrying out the intention or facilitating the performance of the terms of
this Security Instrument or for filing, registering or recording this Security
Instrument, or for complying with all Applicable

                                    -31-
<PAGE>

Laws. Borrower, within ten (10) calendar days of Lender's demand, will execute
and deliver and, upon Borrower's failure to do so, hereby authorizes Lender to
execute in the name of Borrower or without the signature of Borrower to the
extent Lender may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence or perfect more effectively the
security interest of Lender in the Property. Borrower grants to Lender an
irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to Lender
pursuant to this Section 7.2, provided, however, Lender agrees to exercise such
power of attorney only upon the occurrence and during the continuance of an
Event of Default.

              Section 7.3. CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY STAMP
LAWS. (a) If any law is enacted or adopted or amended after the date of this
Security Instrument which deducts the Debt from the value of the Property for
the purpose of taxation or which imposes a tax, either directly or indirectly,
on the Debt or Lender's interest in the Property, Borrower will pay the tax,
with interest and penalties thereon, if any. If Lender is advised by counsel
chosen by it that the payment of tax by Borrower would be unlawful or taxable to
Lender or unenforceable or provide the basis for a defense of usury, then Lender
shall have the option by written notice of not less than one hundred twenty
(120) days to declare the Debt immediately due and payable.

              (b)    Borrower will not claim or demand or be entitled to any
credit or credits on account of the Debt for any part of the Taxes or Other
Charges assessed against the Property, or any part thereof, and no deduction
shall otherwise be made or claimed from the assessed value of the Property, or
any part thereof, for real estate tax purposes by reason of this Security
Instrument or the Debt. If such claim, credit or deduction shall be required by
law, Lender shall have the option, by written notice of not less than ninety
(90) days, to declare the Debt immediately due and payable.

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

              Section 7.4. ESTOPPEL CERTIFICATES. (a) After request by Lender,
Borrower, within ten (10) Business Days, shall furnish Lender or any proposed
assignee with a statement, duly acknowledged and certified, setting forth (i)
the amount of the original principal amount of the Note, (ii) the unpaid
principal amount of the Note, (iii) the rate of interest of the Note, (iv) the
terms of payment and maturity date of the Note, (v) the date installments of
interest and/or principal were last paid, (vi) that, except as provided in such
statement, there are no defaults or events which with the passage of time or the
giving of notice or both, would constitute an event of default under the Note or
the Security Instrument, (vii) that the Note and this Security Instrument are
valid, legal and binding obligations and have not been modified or if modified,
giving particulars of such modification, (viii) whether any offsets or defenses
exist against the obligations secured hereby and, if any are alleged to exist, a
detailed description thereof, (ix) that all Leases are in full force and effect
and have not been modified (or if modified, setting forth all modifications),
(x) the date to which the Rents thereunder have been paid pursuant to the
Leases, (xi) whether or not, to the best knowledge of Borrower, any of the
lessees under the Leases are in default under the Leases, and, if any of the
lessees are in default, setting forth the specific nature of all such defaults,
(xii) the amount of security

                                    -32-
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deposits held by Borrower under each Lease and that such amounts are consistent
with the amounts required under each Lease, and (xiii) as to any other matters
reasonably requested by Lender and reasonably related to the Leases, the
obligations secured hereby, the Property or this Security Instrument.

              (b)    Borrower shall use reasonable effects to deliver to Lender,
promptly upon request, duly executed estoppel certificates from any one or more
lessees as required by Lender attesting to such facts regarding the Lease as
Lender may reasonably require or as provided in the applicable Lease, including,
but not limited to attestations that each Lease covered thereby is in full force
and effect with no defaults thereunder on the part of any party, that none of
the Rents have been paid more than one month in advance, except as security, and
that the lessee claims no defense or offset against the full and timely
performance of its obligations under the Lease. Notwithstanding the foregoing,
Borrower shall only be obligated to request the estoppel certificates described
under this Section 7.4(b) not more often than otherwise provided in the
applicable Leases.

              (c)    Upon any transfer or proposed transfer contemplated by
Section 18.1 hereof, at Lender's request, Borrower, any Guarantors and any
Indemnitors shall provide an estoppel certificate to the Investor (defined in
Section 18.1) or any prospective Investor confirming the accuracy of information
provided by such person to Lender under or in respect of this Security
Instrument.

              (d)    After written request by Borrower not more than twice
annually, Lender shall furnish Borrower a statement setting forth (i) the amount
of the original principal amount of the Note, (ii) the unpaid principal amount
of the Note, (iii) the rate of interest of the Note, and (iv) the balance of the
sums in the Escrow Fund, if any, and any reserve accounts.

              (e)    Flood Insurance. After Lender's request, Borrower shall
deliver evidence satisfactory to Lender that no portion of the Improvements is
situated in a federally designated "special flood hazard area" or, if it is,
that Borrower has obtained insurance meeting the requirements of Section
3.3(a)(vi).

              Section 7.5. SPLITTING OF SECURITY INSTRUMENT. This Security
Instrument and the Note may, at any time until the same shall be fully paid and
satisfied, at the sole election of Lender, be split or divided into two or more
notes and two or more security instruments, each of which shall cover all or a
portion of the Property to be more particularly described therein. To that end,
Borrower, upon written request of Lender, shall execute, acknowledge and deliver
to Lender and/or its designee or designees substitute notes and security
instruments in such principal amounts, aggregating not more than the then unpaid
principal amount secured by this Security Instrument, and containing terms,
provisions and clauses no less favorable to Borrower than those contained herein
and in the Note, and such other documents and instruments as may be required by
Lender to effect the splitting of the Note and this Security Instrument.

              Section 7.6. REPLACEMENT DOCUMENTS. Upon receipt of an affidavit
of an officer of Lender as to the loss, theft, destruction or mutilation of the
Note or any Other Security Document which is not of public record, and, in the
case of any such mutilation, upon surrender and cancellation of such Note or
Other Security Document, Borrower will issue, in lieu thereof, a replacement
Note

                                    -33-
<PAGE>

or Other Security Document, dated the date of such lost, stolen, destroyed or
mutilated Note or Other Security Document in the same principal amount thereof
and otherwise of like tenor.

              Section 7.7. AMENDED FINANCING STATEMENTS. Borrower will execute
and deliver to the Lender, prior to or contemporaneously with the effective date
of any such change, any financing statement or financing statement change
required by the Lender to establish or maintain the validity, perfection and
priority of the security interest granted herein. At the request of the Lender,
Borrower shall execute a certificate in form satisfactory to the Lender listing
the trade names under which Borrower intends to operate the Property, and
representing and warranting that Borrower does business under no other trade
name with respect to the Property.

                                    ARTICLE VIII

                              DUE ON SALE/ENCUMBRANCE

              Section 8.1. NO SALE/ENCUMBRANCE. Borrower agrees that, except as
expressly provided herein or in the Other Security Documents, Borrower shall
not, without the prior written consent of Lender, sell, convey, mortgage, grant,
bargain, encumber, pledge, assign, or otherwise transfer the Property or any
part thereof or permit the Property or any part thereof to be sold, conveyed,
mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise
transferred. Notwithstanding the foregoing, the Property may be transferred with
the prior written consent of Lender which consent shall not be unreasonably
withheld in the case of a proposed transferee whose entity status,
creditworthiness and management ability meet standards consistently applied by
Lender for approval of borrowers for similar properties under mortgage loans
secured by similar properties, PROVIDED THAT (i) only one such transfer shall be
permitted during the term of the Note, (ii) prior to the effective date of the
transfer, the transferee shall execute and deliver to Lender a written
assumption agreement in form and substance acceptable to Lender in its sole
discretion, (iii) a transfer fee equal to one percent (1%) of the Debt shall be
paid by Borrower to Lender upon notice being given to Borrower of approval of
the proposed transfer, (iv) no transfer shall be permitted hereunder if an Event
of Default, or an event which with the giving of notice or lapse of time or both
could become an Event of Default, has occurred and is continuing, (v) such
transferee shall be a single purpose bankruptcy remote entity and Borrower shall
cause to be delivered to Lender a non-consolidation opinion or an update of the
same, in form and substance reasonably acceptable to Lender, upon Lender's
request to do so and (vi) Borrower has caused to be delivered to Lender
confirmation in writing from the Rating Agencies (a "Rating Agency
Confirmation")to the effect that such transfer will not result in a
qualification, reduction or withdrawal of any rating initially assigned or to be
assigned in a Secondary Market Transaction (defined below). Borrower agrees that
Borrower shall not incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the Debt and trade payables
incurred in the ordinary course of business in connection with the operation of
the Property, provided same are paid when due.

              Section 8.2. SALE/ENCUMBRANCE DEFINED. A sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within
the meaning of this Article 8 shall be deemed to include, but not be limited to
(a) an installment sales agreement wherein Borrower agrees to sell the Property
or any part thereof for a price to be paid in installments; (b) an agreement by

                                    -34-
<PAGE>

Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (c) if Borrower, any Guarantor, any
Indemnitor, or any managing agent affiliated with any of the foregoing (the
"Affiliated Manager"), or any general partner or managing member (or if no
managing member, any member) of Borrower, Guarantor, Indemnitor or Affiliated
Manager is a corporation, the voluntary or involuntary sale, conveyance,
transfer or pledge of such corporation's stock (or the stock of any corporation
directly or indirectly controlling such corporation by operation of law or
otherwise) or the creation or issuance of new stock by which an aggregate of
more than 49% of such corporation's stock shall be vested in a party or parties
who are not now owners of more than 49% of such corporation's stock; (d) if
Borrower, any Guarantor, Indemnitor or Affiliated Manager or any general partner
or managing member (or if no managing member, any member) of Borrower, any
Guarantor, Indemnitor or Affiliated Manager is a limited or general partnership
or joint venture, the change, removal or resignation of a general partner or the
transfer or pledge of the partnership interest of any general partner or any
profits or proceeds relating to such partnership interest or the transfer or
pledge of any partnership interest of any limited partner or any profits or
proceeds relating to any such partnership interest, which, whether singly or in
the aggregate, result in more than 49% of the beneficial interests in Borrower,
or the profits or proceeds relating thereto, having been transferred or pledged;
(e) if Borrower, any Guarantor, any Indemnitor or Affiliated Manager or any
general partner or member of Borrower, any Guarantor or any Indemnitor or
Affiliated Manager is a limited liability company, the change, removal or
resignation of a managing member or the transfer of the membership interest of a
managing member or any profits or proceeds relating to such membership interest
or the transfer or pledge of any membership interest of any other member or any
profits or proceeds relating to any such membership interest, which, whether
singly or in the aggregate, result in more than 49% of the beneficial interests
in Borrower, or the profits or proceeds relaing thereto, having been transferred
or pledged; and (f) the removal or resignation of the managing agent (including,
without limitation, the Affiliated Manager) other than in accordance with the
terms of Section 3.17 hereof or that certain Assignment of Management Agreement
and Subordination of Management Fees dated the date hereof between Borrower, the
other signatories thereto, Affiliated Manager and Lender.

              Notwithstanding the foregoing, the following transfers shall not
be deemed to be a sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment or transfer within the meaning of this Article 8: (a)
transfer by devise or descent or by operation of law upon the death of a member,
general partner or stockholder of Borrower, any Guarantor or Indemnitor or any
member or general partner thereof, and (b) a sale, transfer or hypothecation of
a membership, partnership or shareholder interest in Borrower, whichever the
case may be, by a current member, general partner or shareholder, as applicable,
to an immediate family member (I.E., parents, spouses, siblings, children or
grandchildren) of such member, general partner or shareholder, or to a trust for
the benefit of an immediate family member of such member, general partner or
shareholder, PROVIDED THAT, as to each of clauses (a) and (b) of this sentence,
with respect to any such sale, transfer or hypothecation, Borrower shall deliver
a non-consolidation opinion or an update of the same, in form and substance
reasonably satisfactory to Lender and Rating Agencies, upon Lender's request to
do so. Notwithstanding anything to the contrary contained in this Article 8, in
the event any transfer results in any entity or party owning in excess of
forty-nine percent (49%) of the ownership interest in Borrower, Guarantor,
Indemnitor, Affiliated Manager, or any shareholder, partner, member or any

                                    -35-
<PAGE>

direct or indirect legal or economic ownership interest in Borrower, Guarantor,
Indemnitor, or Affiliated Manager, Borrower shall, prior to such transfer,
deliver a substantive non-consolidation opinion to Lender, which opinion shall
be in form, scope and substance acceptable in all respects to Lender and the
Rating Agencies.

              Section 8.3. LENDER'S RIGHTS. Lender reserves the right to
condition the consent required hereunder upon a modification of the terms hereof
and on assumption of the Note, this Security Instrument and the Other Security
Documents as so modified by the proposed transferee, payment of a transfer fee
and all of Lender's expenses incurred in connection with such transfer, or such
other conditions as Lender shall determine in its sole discretion to be in the
interest of Lender. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property regardless of whether voluntary or not,
or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property.

                                     ARTICLE IX

                                     PREPAYMENT

              Section 9.1. PREPAYMENT ONLY IN ACCORDANCE WITH NOTE. The Debt may
be prepaid only in strict accordance with the express terms and conditions of
the Note.

                                     ARTICLE X

                                      DEFAULT

              Section 10.1. Events of Default. The occurrence of any one or more
of the following events shall constitute an "Event of Default":

              (a)    if any Event of Default (as defined in the Note, for
purposes of this Section 10.1(a) only) occurs under the Note;

              (b)    if Borrower violates or does not comply with any of the
provisions of Sections 3.7, 4.3 or 8.1 or if any general partner or the SPE
Member of Borrower violates or does not comply with any of the provisions of
Section 4.3;

              (c)    if any representation or warranty of Borrower, Indemnitor
(as defined in that certain Environmental Indemnity Agreement dated as of the
date hereof (the "Environmental Indemnity")) or any Guarantor, or any member,
general partner, principal or beneficial owner of any of the foregoing, made
herein or in the Environmental Indemnity or in any guaranty, or in any
certificate, report, financial statement or other instrument or document
furnished to Lender shall have been false or misleading in any material respect
when made;

                                    -36-
<PAGE>

              (d)    if any default occurs under any guaranty or indemnity
executed in connection herewith and such default continues after the expiration
of applicable grace periods, if any;

              (e)    except for the specific defaults set forth in this Section
10.1, any other default hereunder or any of the Other Security Documents by
Borrower, which default is not cured (i) in the case of any default which can be
cured by the payment of a sum of money, within five (5) days after written
notice from Lender to Borrower, or (ii) in the case of any other default, within
thirty (30) days after written notice from Lender to Borrower; provided that if
such default cannot reasonably be cured within such thirty (30) day period and
Borrower shall have commenced to cure such default within such thirty (30) day
period and thereafter diligently and expeditiously proceeds to cure the same,
such thirty (30) day period shall be extended for so long as it shall require
Borrower in the exercise of due diligence to cure such default, it being agreed
that no such extension shall be for a period in excess of one hundred twenty
(120) days, unless, only in the case of cures that require construction or
remedial work, such cure cannot with diligence be completed within such one
hundred twenty (120) day period, in which case such period shall be extended for
an additional one hundred twenty (120) days;

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

              (g)    if the Policies are not kept in full force and effect, or
Borrower has not delivered evidence of the renewal of the Policies within ten
(10) days of Lender's written request therefor;

              (h)    if (i) Borrower or any Guarantor or Indemnitor shall
commence any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, conservatorship or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any Guarantor or Indemnitor
shall make a general assignment for the benefit of its creditors'; or (ii) there
shall be commenced against Borrower or any Guarantor or Indemnitor any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
ninety (90) days; or (iii) there shall be commenced against the Borrower or any
Guarantor or Indemnitor any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of any order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within ninety (90) days from the entry thereof; or (iv)
the Borrower or any Guarantor or Indemnitor shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
Guarantor or Indemnitor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due;

                                    -37-
<PAGE>

              (i)    if any of the assumptions contained in the
Non-Consolidation Opinion, including, but not limited to, any exhibits
attached thereto, were not true and correct in all material respects as of
the date of such Non-Consolidation Opinion or thereafter became untrue or
incorrect in any material respect; or

              (j)    any default occurs under any other Security Instrument,
which default is not cured within all applicable notice and grace periods, if
any.

                                     ARTICLE XI

                                RIGHTS AND REMEDIES

              Section 11.1. REMEDIES. (a) Upon the occurrence of any Event of
Default, Borrower agrees that Lender, may take such action, without notice or
demand, as it deems advisable to protect and enforce the rights of Lender
against Borrower and in and to the Property, including, but not limited to the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Lender may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and remedies of
Lender:

                     (i)      declare the entire unpaid Debt or any portion
thereof to be immediately due and payable;

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

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

                     (iv)     sell for cash or upon credit the Property or any
part thereof and all estate, claim, demand, right, title and interest of
Borrower therein and rights of redemption thereof, pursuant to power of sale or
otherwise, at one or more sales, as an entity or in parcels, at such time and
place, upon such terms and after such notice thereof as may be required or
permitted by law;

                     (v)      subject to the provisions of Article 15, institute
an action, suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained herein, in the Note or in the Other
Security Documents;

                     (vi)     subject to the provisions of Article 15, recover
judgment on the Note either before, during or after any proceedings for the
enforcement of this Security Instrument or the Other Security Documents;

                                    -38-
<PAGE>

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

                     (viii)   subject to any applicable law, the license granted
to Borrower under Section 1.2 shall automatically be revoked and Lender may
enter into or upon the Property, either personally or by its agents, nominees or
attorneys and dispossess Borrower and its agents and servants therefrom, without
liability for trespass, damages or otherwise (except to the extent caused by
Lender's gross negligence, willful misconduct, illegal acts or fraud) and
exclude Borrower and its agents or servants wholly therefrom, and take
possession of all books, records and accounts relating thereto and Borrower
agrees to surrender possession of the Property and of such books, records and
accounts to Lender upon demand, and thereupon Lender may (A) use, operate,
manage, control, insure, maintain, repair, restore and otherwise deal with all
and every part of the Property and conduct the business thereat; (B) complete
any construction on the Property in such manner and form as Lender deems
advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Property; (D) exercise all rights and powers of
Borrower with respect to the Property, whether in the name of Borrower or
otherwise, including, without limitation, the right to make, cancel, enforce or
modify Leases, obtain and evict tenants, and demand, sue for, collect and
receive all Rents of the Property and every part thereof; (E) require Borrower
to pay monthly in advance to Lender, or any receiver appointed to collect the
Rents, the fair and reasonable rental value for the use and occupation of such
part of the Property as may be occupied by Borrower; (F) require Borrower to
vacate and surrender possession of the Property to Lender or to such receiver
and, in default thereof, Borrower may be evicted by summary proceedings or
otherwise; and (G) apply the receipts from the Property to the payment of the
Debt, in such order, priority and proportions as Lender shall deem appropriate
in its sole discretion after deducting therefrom all expenses (including
reasonable attorneys' fees) incurred in connection with the aforesaid operations
and all amounts necessary to pay the Taxes, Other Charges, insurance and other
expenses in connection with the Property, as well as just and reasonable
compensation for the services of Lender, its counsel, agents and employees;

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

              (x)    apply any sums then deposited in the Escrow Fund and any
other sums held in escrow or otherwise by Lender in accordance with the terms of
this Security Instrument or any Other Security Document to the payment of the
following items in any order in its sole and absolute discretion:

                                    -39-
<PAGE>

                              (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; and all other sums payable pursuant to the Note, this Security
Instrument and the Other Security Documents, including, without limitation,
advances made by Lender pursuant to the terms of this Security Instrument;

                     (xi)     surrender the Policies maintained pursuant to
Article 3 hereof, collect the unearned Insurance Premiums and apply such sums as
a credit on the Debt in such priority and proportion as Lender in its discretion
shall deem proper, and in connection therewith, Borrower hereby appoints Lender
as agent and attorney-in-fact (which is coupled with an interest and is
therefore irrevocable) for Borrower to collect such Insurance Premiums;

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

                     (xiii)   prohibit Borrower and anyone claiming on behalf of
or through Borrower from making use of or withdrawing any sums from any lockbox
or similar account, if any;

                     (xiv)    pursue such other remedies as Lender may have
under applicable law.

              (b)    In the event of a sale, by foreclosure, power of sale, or
otherwise, of less than all of the Property, this Security Instrument shall
continue as a lien and security interest on the remaining portion of the
Property unimpaired and without loss of priority. Notwithstanding the provisions
of this Section 11.1 to the contrary, if any Event of Default as described in
Subsection 10.1 (h)(i) or (ii) shall occur, the entire unpaid Debt shall be
automatically due and payable, without any further notice, demand or other
action by Lender.

              (c)    Lender may adjourn from time to time any sale by it to be
made under or by virtue of this Security Instrument by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, Lender, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.

              (d)    Upon any sale made under or by virtue of this Section 11.1,
whether made under a power of sale or under or by virtue of judicial proceedings
or of a judgment or decree of foreclosure and sale, Lender may bid for and
acquire the Property or any part thereof and in lieu of paying cash therefor may
make settlement for the purchase price by crediting upon the Debt the net sales
price after deducting therefrom the expenses of the sale and costs of the action
and any other sums which Lender is authorized to deduct under this Security
Instrument.

                                    -40-
<PAGE>

              Section 11.2. APPLICATION OF PROCEEDS. The purchase money,
proceeds and avails of any disposition of the Property, or any part thereof, or
any other sums collected by Lender pursuant to the Note, this Security
Instrument or the Other Security Documents, may be applied by Lender to the
payment of the Debt in such priority and proportions as Lender in its discretion
shall deem proper.

              Section 11.3. RIGHT TO CURE DEFAULTS. Upon the occurrence of any
Event of Default, Lender may, but without any obligation to do so and without
notice to or demand on Borrower and without releasing Borrower from any
obligation hereunder, cure the same in such manner and to such extent as Lender
may deem necessary to protect the security hereof. Lender is authorized to enter
upon the Property for such purposes, or appear in, defend, or bring any action
or proceeding to protect its interest in the Property or to foreclose this
Security Instrument or collect the Debt, and the cost and expense thereof
(including reasonable attorneys' fees to the extent permitted by law), with
interest as provided in this Section 11.3, shall constitute a portion of the
Debt and shall be due and payable to Lender upon demand. All such costs and
expenses incurred by Lender in remedying such Event of Default or in appearing
in, defending, or bringing any such action or proceeding shall bear interest at
the Default Rate (as defined in the Note), for the period after notice from
Lender that such cost or expense was incurred to the date of payment to Lender.
All such costs and expenses incurred by Lender together with interest thereon
calculated at the Default Rate shall be deemed to constitute a portion of the
Debt and be secured by this Security Instrument and the Other Security Documents
and shall be immediately due and payable upon demand by Lender therefor.

              Section 11.4. ACTIONS AND PROCEEDINGS. Lender has the right to
appear in and defend any action or proceeding brought with respect to the
Property, and after the occurrence and during the continuance of an Event of
Default, to bring any action or proceeding, in the name and on behalf of
Borrower, which Lender, in its discretion, decides should be brought to protect
its interest in the Property.

              Section 11.5. RECOVERY OF SUMS REQUIRED TO BE PAID. Lender shall
have the right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.

              Section 11.6. EXAMINATION OF BOOKS AND RECORDS. Lender, its
agents, accountants and attorneys shall have the right upon prior written notice
to examine the records, books, management and other papers of Borrower, Price
Owner Corp. or of any Guarantor or Indemnitor which reflect upon their financial
condition, at the Property or at any office regularly maintained by Borrower,
its affiliates or any Guarantor or Indemnitor where the books and records are
located. Lender and its agents shall have the right upon notice to make copies
and extracts from the foregoing records and other papers. In addition, Lender,
its agents, accountants and attorneys shall have the right to examine and audit
the books and records of Borrower and its affiliates or of any Guarantor or
Indemnitor pertaining to the income, expenses and operation of the Property
during reasonable business hours and upon reasonable notice to Borrower at any
office of Borrower, its affiliates or any Guarantor or Indemnitor where the
books and records are located.

              Section 11.7. OTHER RIGHTS, ETC. (a) The failure of Lender to
insist upon strict

                                    -41-
<PAGE>

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

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

              (c)    Lender may resort for the payment of the Debt to any other
security held by Lender in such order and manner as Lender, in its discretion,
may elect. Lender may take action to recover the Debt, or any portion thereof,
or to enforce any covenant hereof without prejudice to the right of Lender
thereafter to foreclose this Security Instrument. The rights of Lender under
this Security Instrument shall be separate, distinct and cumulative and none
shall be given effect to the exclusion of the others. No act of Lender shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Lender shall not be limited exclusively to the
rights and remedies herein stated but shall be entitled to every right and
remedy now or hereafter afforded at law or in equity.

              Section 11.8. RIGHT TO RELEASE ANY PORTION OF THE PROPERTY. Lender
may release any portion of the Property for such consideration as Lender may
require without, as to the remainder of the Property, in any way impairing or
affecting the lien or priority of this Security Instrument, or improving the
position of any subordinate lienholder with respect thereto, except to the
extent that the obligations hereunder shall have been reduced by the actual
monetary consideration, if any, received by Lender for such release, and may
accept by assignment, pledge or otherwise any other property in place thereof as
Lender may require without being accountable for so doing to any other
lienholder. This Security Instrument shall continue as a lien and security
interest in the remaining portion of the Property.

              Section 11.9. VIOLATION OF LAWS. If the Property is not in
compliance with Applicable Laws and such non-compliance has a material adverse
effect on the value of the Properties taken as a whole, Lender may impose
additional requirements upon Borrower in connection herewith including, without
limitation, monetary reserves or financial equivalents.

              Section 11.10. RIGHT OF ENTRY. Lender and its agents shall have
the right upon prior written notice to enter and inspect the Property at all
reasonable times upon not less than five (5) business days' notice (except in
the case of emergencies when no notice shall be required) to Borrower.

                                    -42-
<PAGE>

                                    ARTICLE XII
                               ENVIRONMENTAL HAZARDS

              Section 12.1. ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants, based upon an environmental Phase I site
assessment of the Property and information that Borrower knows, that: (a) there
are no Hazardous Substances (defined below) or underground storage tanks in, on,
or under the Property, except those that are both (i) in compliance with
Environmental Laws (defined below) and with permits issued pursuant thereto, if
any, and (ii) fully disclosed to Lender in writing pursuant to (1) the written
reports resulting from the environmental assessments of the Property delivered
to Lender (the "Environmental Report") or (2) other written documents delivered
to Lender; (b) there are no past or present Releases (defined below) of
Hazardous Substances in violation of any Environmental Law or which would
require Remediation (defined below) by a Governmental Authority in, on, under or
from the Property except as described in the Environmental Report; (c) there is
no past or present non-compliance with Environmental Laws, or with permits
issued pursuant thereto, in connection with the Property except as described in
the Environmental Report; (d) Borrower does not know of, and has not received,
any written or oral notice or other communication from any person or entity
(including, but not limited to a governmental entity) relating to Hazardous
Substances or Remediation thereof, of possible liability of any person or entity
pursuant to any Environmental Law, other environmental conditions in connection
with the Property, or any actual administrative or judicial proceedings in
connection with any of the foregoing; and (e) Borrower has truthfully and fully
provided to Lender, in writing, any and all information relating to
environmental conditions in, on, under or from the Property that is known to
Borrower and that is contained in Borrower's files and records, including, but
not limited to any reports relating to Hazardous Substances in, on, under or
from the Property and/or to the environmental condition of the Property.
"Environmental Law" means any present, and for the purposes of Sections 12.2.
12.3 and 13.4 only, future, federal, state and local laws, statutes, ordinances,
rules, regulations and the like, as well as common law, relating to protection
of human health or the environment, relating to Hazardous Substances, relating
to liability for or costs of Remediation or prevention of Releases of Hazardous
Substances or relating to liability for or costs of other actual or threatened
danger to human health or the environment. "Environmental Law" includes, but is
not limited to, the following statutes, as amended, any successor thereto, and
any regulations promulgated pursuant thereto, and any state or local statutes,
ordinances, rules, regulations and the like addressing similar issues: the
Comprehensive Environmental Response, Compensation and Liability Act; the
Emergency Planning and Community Right-to-Know Act; the Hazardous Substances
Transportation Act; the Resource Conservation and Recovery Act (including, but
not limited to Subtitle I relating to underground storage tanks); the Solid
Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances
Control Act; the Safe Drinking Water Act; the Occupational Safety and Health
Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide
and Rodenticide Act; the Endangered Species Act; the National Environmental
Policy Act; and the River and Harbors Appropriation Act. "Environmental Law"
also includes, but is not limited to, any present, and for the purposes of
Sections 12.2, 12.3 and 13.4 only, future, federal, state and local laws,
statutes, ordinances, rules, regulations and the like, as well as common law
either (i) conditioning transfer of property upon a negative declaration or
other approval of a governmental authority of the environmental condition of the
property or (ii) requiring notification or disclosure of Releases of Hazardous
Substances or other environmental condition of the Property to any governmental
authority or other person or entity, whether or not in connection with transfer
of title to or interest in property. "Hazardous Substances" include but are not
limited to any and all

                                    -43-
<PAGE>

substances (whether solid, liquid or gas) (i) defined, listed, or otherwise
classified as pollutants, hazardous wastes, hazardous substances, hazardous
materials, extremely hazardous wastes, or words of similar meaning or regulatory
effect under any present, or for the purposes of Sections 12.2. 12.3 and 13.4
only, future, Environmental Laws or (ii) that may have a negative impact on
human health or the environment, including, but not limited to petroleum and
petroleum products, asbestos and asbestos-containing materials, polychlorinated
biphenyls, lead, radon, radioactive materials, flammables and explosives.
"Release" of any Hazardous Substance means any release, deposit, discharge,
emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring,
emptying, escaping, dumping, disposing or other movement of Hazardous
Substances. "Remediation" means any response, remedial removal, or corrective
action, any activity to cleanup, detoxify, decontaminate, contain or otherwise
remediate any Hazardous Substance, any actions to prevent, cure or mitigate any
Release of any Hazardous Substance, any action to comply with any Environmental
Laws or with any permits issued pursuant thereto, any inspection, investigation,
study, monitoring, assessment, audit, sampling and testing, laboratory or other
analysis, or evaluation relating to any Hazardous Substances or to anything
referred to in this Article 12.

              Section 12.2. ENVIRONMENTAL COVENANTS. Borrower covenants and
agrees that so long as the Borrower owns, manages, is in possession of, or
otherwise controls the operation of the Property: (a) all uses and operations on
or of the Property, whether by Borrower or any other person or entity, shall be
in compliance with all Environmental Laws and permits issued pursuant thereto;
(b) there shall be no Releases of Hazardous Substances by Borrower, and Borrower
shall use its commercially reasonable efforts to insure that there shall be no
Releases of Hazardous Substances by any other person or entity, in, on, under or
from the Property, except those that are in compliance with all Environmental
Laws and with permits issued pursuant thereto; (c) there shall be no Hazardous
Substances in, on, or under the Property caused by Borrower, and Borrower shall
use its commercially reasonable efforts to insure that there shall be no
Hazardous Substances caused by any other person or entity, in, on, or under the
Property, except those that are in compliance with all Environmental Laws and
with permits issued pursuant thereto; (d) Borrower shall keep the Property free
and clear of all liens and other encumbrances imposed pursuant to any
Environmental Law, whether due to any act or omission of Borrower or any other
person or entity (other than Lender and its agents and employees or any other
Indemnified Party) (the "Environmental Liens"); (e) Borrower shall, at its sole
cost and expense, fully and expeditiously cooperate in all activities pursuant
to Section 12.3 below, including, but not limited to providing all relevant
information and making knowledgeable persons available for interviews; (f)
Borrower shall, at its sole cost and expense, perform any environmental site
assessment or other investigation of environmental conditions in connection with
the Property, pursuant to any reasonable written request of Lender after Lender
has reason to believe this Section 12.2 has been violated (including, but not
limited to sampling, testing nd analysis of soil, water, air, building materials
and other materials and substances whether solid, liquid or gas), and share with
Lender the reports and other results thereof, and Lender and other Indemnified
Parties (defined in Section 13.1) shall be entitled to rely on such reports and
other results thereof; (g) Borrower shall, at its sole cost and expense, comply
with all reasonable written requests of Lender to (i) reasonably effectuate
Remediation of any condition (including, but not limited to a Release of a
Hazardous Substance) in, on, under or from the Property, (ii) comply with any
Environmental Law, (iii) comply with any directive from any governmental
authority, and (iv) take any other reasonable action necessary or appropriate
for protection of human health or the environment; (h) Borrower shall not do or
allow any tenant or other user of the Property to do any

                                    -44-
<PAGE>

act that materially increases the dangers to human health or the environment,
poses an unreasonable risk of harm to any person or entity (whether on or off
the Property), impairs or may impair the value of the Property, is contrary to
any requirement of any insurer, constitutes a public or private nuisance,
constitutes waste, or violates any covenant, condition, agreement or easement
applicable to the Property; and (i) Borrower shall immediately notify Lender in
writing promptly after it has become aware of (A) any presence or Releases or
threatened Releases of Hazardous Substances in, on, under, from or migrating
towards the Property which is required to be reported to a governmental
authority under any Environmental Law, (B) any actual Environmental Lien
affecting the Property, (C) any required Remediation of environmental conditions
relating to the Property, and (D) any written or oral notice or other
communication of which Borrower becomes aware from any source whatsoever
(including, but not limited to a governmental entity) relating in any way to
Hazardous Substances in violation of any Environmental Law, in, on, or under the
Property or Remediation thereof, possible liability of any person or entity
pursuant to any Environmental Law, other environmental conditions in connection
with the Property, or any actual or threatened administrative or judicial
proceedings in connection with anything referred to in this Article 12.

              Section 12.3. LENDER'S RIGHTS. Lender, its environmental
consultant, and/or other designated representatives, including, but not limited
to any receiver, shall have the right, but not the obligation, at intervals of
not less than one year, or more frequently if the Lender reasonably believes
that a Hazardous Substance or other environmental condition violates or
threatens to violate any Environmental Law, after notice to Borrower, to enter
upon the Property at all reasonable times to assess any and all aspects of the
environmental condition of the Property and its use, including, but not limited
to conducting any environmental assessment or audit of the Property or portions
thereof to confirm Borrower's compliance with the provisions of this Article 12,
and Borrower shall cooperate in all reasonable ways with Lender in connection
with any such audit. Such audit shall be performed in a manner so as to minimize
interference with the conduct of business at the Property to the maximum extent
reasonably feasible. If (i) Borrower has not provided a reasonably acceptable
written audit report prepared by an environmental consultant reasonably
acceptable to Lender within a reasonable time after receipt of a request from
Lender therefor and (ii) such audit discloses that a violation of or a liability
under any Environmental Law exists or if such audit was required or prescribed
by law, regulation or governmental or quasi-governmental authority, Borrower
shall pay all costs and expenses incurred in connection with such audit;
otherwise, the costs and expenses of such audit shall, notwithstanding anything
to the contrary set forth in this Section, be paid by Lender.

                                    ARTICLE XIII

                                  INDEMNIFICATION

              Section 13.1. GENERAL INDEMNIFICATION. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all claims, suits, liabilities
(including, without limitation, strict liabilities), actions, proceedings,
obligations, debts, damages, losses, costs, expenses, diminutions in value,
fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, or punitive damages, of whatever kind or nature (including, but not
limited to attorneys' fees and other costs of defense) (the "Losses") imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly

                                    -45-
<PAGE>

arising out of or in any way relating to any one or more of the following (but
excluding Losses to the extent arising out of Lender's gross negligence, fraud,
illegal acts or willful misconduct): (a) ownership of this Security Instrument,
the Property or any interest therein or receipt of any Rents prior to a
foreclosure or deed-in lieu thereof ; (b) any amendment to, or restructuring of,
the Debt, and the Note, this Security Instrument, or any Other Security
Documents (other than economic consequences relating to the restructuring of the
Debt); (c) any and all lawful action that may be taken by Lender in connection
with the enforcement of the provisions of this Security Instrument or the Note
or any of the Other Security Documents, whether or not suit is filed in
connection with same, or in connection with Borrower, any Guarantor or
Indemnitor and/or any member, partner, joint venturer or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (f) any failure on
the part of Borrower to perform or be in compliance with any of the terms of
this Security Instrument or the Other Security Documents; (g) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (h) the failure of any person to
file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with the Security Instrument,
or to supply a copy thereof in a timely fashion to the recipient of the proceeds
of the transaction in connection with which this Security Instrument is made;
(i) any failure of the Property to be in compliance with any Applicable Laws,
provided such failure has a material adverse effect on the Property; (j) the
enforcement by any Indemnified Party of the provisions of this Article 13; (k)
any and all claims and demands whatsoever which may be asserted against Lender
by reason of any alleged obligations or undertakings on its part to perform or
discharge any of the terms, covenants, or agreements contained in any Lease; (l)
the payment of any commission, charge or brokerage fee to anyone which may be
payable in connection with the funding of the loan evidenced by the Note and
secured by this Security Instrument; or (m) any material misrepresentation made
by Borrower in this Security Instrument, the Other Security Documents, or any
documents or information provided pursuant to Section 18.1 hereof. Any amounts
payable to Lender by reason of the application of this Section 13.1 shall become
immediately due and payable and shall bear interest at the Default Rate from the
date loss or damage is sustained by Lender until paid. For purposes of this
Article 13, the term "Indemnified Parties" means Lender and any person or entity
who is or will have been involved in the origination of this loan, any person or
entity who is or will have been involved in the servicing of this loan, any
person or entity, in whose name the encumbrance created by this Security
Instrument is or will have been recorded, persons and entities who may hold or
acquire or will have held a full or partial interest in this loan (including,
but not limited to Investors or prospective Investors in the Securities, as well
as custodians, trustees and other fiduciaries who hold or have held a ful or
partial interest in this loan for the benefit of third parties) as well as the
respective directors, officers, shareholders, members, partners, employees,
agents, affiliates involved with the Loan, subsidiaries involved with the Loan,
participants, successors and assigns of any and all of the foregoing (including,
but not limited to any other person or entity who holds or acquires or will have
held a participation or other full or partial interest in this loan or the
Property, whether during the term of this loan or as a part of or following a
foreclosure of this loan and including, but not limited to any successors by
merger, consolidation or acquisition of all or

                                    -46-
<PAGE>

a substantial portion of Lender's assets and business). Notwithstanding anything
to the contrary contained in this Section 13.1, after the date Lender or its
nominee acquires title to the Property, whether by foreclosure, exercise of
power of sale or otherwise, Borrower's liability under this Section 13.1 shall
be limited to its acts or omissions prior to said date.

              Section 13.2. MORTGAGE AND/OR INTANGIBLE TAX. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any tax on the making and/or
recording of this Security Instrument, the Note or any of the Other Security
Documents or in connection with a transfer of all or a portion of the Property
pursuant to a foreclosure, deed in lieu of foreclosure or otherwise.

              Section 13.3. ERISA INDEMNIFICATION. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses (including, without
limitation, reasonable attorneys' fees and costs incurred in the investigation,
defense, and settlement of Losses incurred in correcting any prohibited
transaction or in the sale of a prohibited loan, and in obtaining any individual
prohibited transaction exemption under ERISA that may be required, in Lender's
sole discretion) that Lender may incur, directly or indirectly, as a result of a
default under Sections 4.2 or 5.9.

              Section 13.4. ENVIRONMENTAL INDEMNIFICATION. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all actual Losses and costs of
Remediation (whether or not performed voluntarily), engineers' fees,
environmental consultants' fees, and costs of investigation (including, but not
limited to sampling, testing and analysis of soil, water, air, building
materials and other materials and substances whether solid, liquid or gas)
imposed upon or incurred by or asserted against any Indemnified Parties, and
arising out of or in any way relating to any one or more of the following,
unless caused by the gross negligence, fraud, illegal acts or willful misconduct
of any Indemnified Party: (a) any presence of any Hazardous Substances in, on,
above or under the Property; (b) any past, present or threatened Release of
Hazardous Substances in, on, above, under or from the Property; (c) any activity
by Borrower, any person or entity affiliated with Borrower or tenant or other
users of the Property in connection with any actual, proposed or threatened use,
treatment, storage, holding, existence, disposition or other Release,
generation, production, manufacturing, processing, refining, control,
management, abatement, removal, handling, transfer or transportation to or from
the Property of any Hazardous Substances at any time located in, under, on or
above the Property; (d) any activity by Borrower, any person or entity
affiliated with Borrower or tenant or other users of the Property in connection
with any actual or proposed Remediation of any Hazardous Substances at any time
located in, under, on or above the Property, whether or not such Remediation is
voluntary or pursuant to court or administrative order, including, but not
limited to any removal, remedial or corrective action; (e) any past, present or
threatened violations of any Environmental Laws (or permits issued pursuant to
any Environmental Law) in connection with the Property o operations thereon,
including, but not limited to any failure by Borrower, any person or entity
affiliated with Borrower or tenant or other users of the Property to comply with
any order of any governmental authority in connection with Environmental Laws;
(f) the imposition, recording or filing of any Environmental Lien encumbering
the Property; (g) any administrative processes or proceedings

                                    -47-
<PAGE>

or judicial proceedings in any way connected with any matter addressed in
Article 12 and this Section 13.4; (h) any past, present or threatened injury to,
destruction of or loss of natural resources in any way connected with the
Property, including, but not limited to costs to investigate and assess such
injury, destruction or loss; (i) any acts of Borrower or other users of the
Property (except if said user was employed by, or under the control of, Lender)
in arranging for disposal or treatment, or arranging with a transporter for
transport for disposal or treatment, of Hazardous Substances owned or possessed
by such Borrower or other users, at any facility or incineration vessel owned or
operated by another person or entity and containing such or similar Hazardous
Substance; (j) any acts of Borrower or other users of the Property (except if
said user was employed by, or under the control of, Lender), in accepting any
Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage caused by Hazardous Substances in, on, or
under the Property arising under any statutory or common law or tort law theory,
including, but not limited to damages assessed for the maintenance of a private
or public nuisance or for the conducting of an abnormally dangerous activity on
or near the Property; and (l) any intentional misrepresentation in any
representation or warranty or material breach or failure to perform any
covenants or other obligations pursuant to Article 12.

              Notwithstanding the provisions of Section 13.4(a) to the contrary,
the liabilities and obligations of Borrower hereunder shall not apply to the
extent that Borrower can prove that such liabilities and obligations arose
solely from Hazardous Substances that: (1) were not Released on any Property
prior to the date that Lender or its nominee acquired title to the Property,
whether by foreclosure, exercise of power of sale or otherwise and (2) were not
Released as the result of any act or negligence of Borrower or any of Borrower's
affiliates, agents or contractors. An environmental audit prepared by an
environmental consultant reasonably acceptable to Lender dated the date of
Lender's acquisition of title to the Property whether by foreclosure, exercise
of power of sale or otherwise shall be acceptable evidence for the purpose of
the immediately preceding sentence.

              Section 13.5. DUTY TO DEFEND; ATTORNEYS' FEES AND OTHER FEES AND
EXPENSES. Upon written request by any Indemnified Party, Borrower shall defend
such Indemnified Party (if requested by any Indemnified Party, in the name of
the Indemnified Party) by attorneys and other professionals chosen by Borrower
and reasonably approved by the Indemnified Parties. Notwithstanding the
foregoing, any Indemnified Parties may, in their sole and absolute discretion,
engage their own attorneys and other professionals to defend or assist them,
and, at the option of Indemnified Parties, their attorneys shall act as
co-counsel in connection with the resolution of any claim or proceeding,
provided, however, that upon (i) an Event of Default or (ii) Indemnified
Parties reasonable belief that the attorneys and/or other professionals
engaged by Indemnitor are not adequately pursuing the resolution of such
claim or proceeding, the attorneys of Indemnified Parties shall control the
resolution of any claim or proceeding. Upon demand, Borrower shall pay or, in
the sole and absolute discretion of the Indemnified Parties, reimburse, the
Indemnified Parties for the payment of reasonable fees and disbursements of
attorneys, engineers, environmental consultants, laboratories and other
professionals in connection therewith.

                                    -48-
<PAGE>

                                    ARTICLE XIV

                                      WAIVERS

              Section 14.1. WAIVER OF COUNTERCLAIM. Borrower hereby waives the
right to assert a counterclaim, other than a mandatory or compulsory
counterclaim, in any action or proceeding brought against it by Lender arising
out of or in any way connected with this Security Instrument, the Note, any of
the Other Security Documents, or the Obligations.

              Section 14.2. MARSHALLING AND OTHER MATTERS. Borrower hereby
waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement and redemption laws now or hereafter
in force and all rights of marshalling in the event of any sale hereunder of the
Property or any part thereof or any interest therein. Further, Borrower hereby
expressly waives any and all rights of redemption from sale under any order or
decree of foreclosure of this Security Instrument on behalf of Borrower, and on
behalf of each and every person acquiring any interest in or title to the
Property subsequent to the date of this Security Instrument and on behalf of all
persons to the extent permitted by Applicable Law.

              Section 14.3. WAIVER OF NOTICE. To the extent permitted by
Applicable Law, Borrower shall not be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this Security
Instrument specifically and expressly provides for the giving of notice by
Lender to Borrower and except with respect to matters for which Lender is
required by Applicable Law to give notice, and Borrower hereby expressly waives
the right to receive any notice from Lender with respect to any matter for which
this Security Instrument does not specifically and expressly provide for the
giving of notice by Lender to Borrower.

              Section 14.4. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby
expressly waives and releases to the fullest extent permitted by law, the
pleading of any statute of limitations as a defense to payment of the Debt or
performance of its Other Obligations.

              Section 14.5. SOLE DISCRETION OF LENDER. Wherever pursuant to this
Security Instrument (a) Lender exercises any right given to it to approve or
disapprove, (b) any arrangement or term is to be satisfactory to Lender, or (c)
any other decision or determination is to be made by Lender, the decision of
Lender to approve or disapprove all decisions that arrangements or terms are
satisfactory or not satisfactory, and all other decisions and determinations
made by Lender, shall be in the sole and absolute discretion of Lender and shall
be final and conclusive, except as may be otherwise expressly and specifically
provided herein.

              Section 14.6. SURVIVAL. Except as hereinafter specifically set
forth below, the representations and warranties, covenants, and other
obligations arising under Article 12 shall in no way be impaired by: any
satisfaction or other termination of this Security Instrument, any assignment or
other transfer of all or any portion of this Security Instrument or Lender's
interest in the Property (but, in such case, shall benefit both Indemnified
Parties and any assignee or transferee), any exercise of Lender's rights and
remedies pursuant hereto including, but not limited to foreclosure or acceptance
of a deed in lieu of foreclosure, any exercise of any rights and remedies
pursuant to the Note or any of the Other Security Documents, any transfer of all
or any portion of the Property

                                    -49-
<PAGE>

(whether by Borrower, or by Lender, following foreclosure or acceptance of a
deed in lieu of foreclosure or at any other time), any amendment to this
Security Instrument, the Note or the Other Security Documents, and any act or
omission that might otherwise be construed as a release or discharge of Borrower
from the obligations pursuant hereto. All obligations and liabilities of
Borrower under Article 12 shall cease and terminate on the first (1st)
anniversary of the date of payment to Lender in cash of the entire Debt,
PROVIDED that contemporaneously with or subsequent to such payment, Borrower, at
its sole cost and expense, delivers to Lender an environmental audit of the
Property in form and substance, and prepared by a qualified environmental
consultant, reasonably satisfactory in all respects to Lender and indicating the
Property is in full compliance with all applicable Environmental Laws.

              Section 14.7. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER HEREBY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE
APPLICATION FOR THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY
INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER,
ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS, OR BORROWER, IN CONNECTION
THEREWITH.

                                     ARTICLE XV

                                    EXCULPATION

              Section 15.1. EXCULPATION. Notwithstanding anything to the
contrary contained in this Security Instrument or in any Other Security Document
(but subject to the provisions of Sections 15.2, 15.3, 15.4 and 15.5), Lender
shall not enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Note or this Security Instrument by any
action or proceeding to collect damages or wherein a money judgment or any
deficiency judgment or order or any judgment establishing any personal
obligation or liability shall be sought against Borrower or any principal
director, officer, employee, beneficiary, shareholder, partner, member, trustee,
agent or affiliate of Borrower or any person owning, directly or indirectly, any
legal or beneficial interest in Borrower or any member of Borrower, or any
successors, assigns, heirs or personal representatives of any of the foregoing
(collectively, the "Exculpated Parties"). Lender may bring a foreclosure action,
action for specific performance or other appropriate action or proceeding to
enable Lender to enforce and realize upon this Security Instrument, the Other
Security Documents, and the interest in the Property, the Rents and any other
collateral given to Lender created by this Security Instrument and the Other
Security Documents; PROVIDED, HOWEVER, subject to the provisions of Sections
15.2, 15.3, 15.4 and 15.5, that any judgment in any 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 in connection
with the Note. Lender, by accepting the Note and this Security Instrument,
agrees that it shall not, except as otherwise provided below, sue for or demand
any deficiency judgment against Borrower or any of the Exculpated Parties in any
action or proceeding, under or by reason of or under or in connection with the
Note, the Other Security Documents or this Security Instrument.

                                    -50-
<PAGE>

              Section 15.2. RESERVATION OF CERTAIN RIGHTS. The provisions of
Section 15.1 shall not (a) constitute a waiver, release or impairment of the
Obligations; (b) impair the right of Lender to name Borrower as a party
defendant in any action or suit for judicial foreclosure and sale under this
Security Instrument; (c) affect the validity or enforceability of any
indemnity, guaranty, master lease or similar instrument made in connection
with the Note, this Security Instrument, or the Other Security Documents,
including, without limitation, the Environmental Indemnity and that certain
Guaranty of Recourse Obligations dated the date hereof given by PEI; (d)
impair the right of Lender to obtain the appointment of a receiver; or (e)
impair the enforcement of the Assignment of Leases and Rents executed in
connection herewith.

              Section 15.3. EXCEPTIONS TO EXCULPATION. Notwithstanding the
provisions of Article 15.1 to the contrary, Borrower and Guarantor shall be
personally liable to Lender on a joint and several basis for the Losses
Lender incurs due to: (a) fraud or intentional misrepresentation by Borrower
or any other person or entity in connection with the execution and the
delivery of the Note, this Security Instrument or the Other Security
Documents; (b) Borrower's material misapplication or material
misappropriation of Rents received by Borrower after the occurrence and
during the continuance of an Event of Default; (c) Borrower's material
misapplication or material misappropriation of tenant security deposits or
Rents collected in advance; (d) the material misapplication or material
misappropriation of insurance proceeds or condemnation awards after the
occurrence and during the continuance of an Event of Default; (e) unless
otherwise approved by Lender, any fees or commissions paid by Borrower after
the occurrence and during the continuance of an Event of Default to any
principal, affiliate or general partner of Borrower, Indemnitor or Guarantor
in violation of the terms of the Note, this Security Instrument or the Other
Security Documents; (f) gross negligence, or criminal acts perpetrated by it
resulting in forfeiture, seizure or loss of any portion of the Property; (g)
any failure by Borrower or Indemnitor to comply with the terms and provisions
of Section 13.4 hereof or of the Environmental Indemnity; (h) any failure by
Borrower or any general partner or the SPE Member of Borrower to comply with
the terms and provisions of Section 4.3 hereof; (i) all fees and expenses of
Lender pursuant to Section 19.2 hereof; or (j) any sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment or transfer of the
Property or any part thereof, within the meaning of Article 8 hereof, without
the prior written consent of Lender, unless expressly permitted pursuant to
the terms of this Security Instrument, the Note or any of te Other Security
Documents.

              Section 15.4. RECOURSE. Notwithstanding the foregoing, the
agreement of Lender not to pursue recourse liability as set forth in Section
15.1 above SHALL BECOME NULL AND VOID and shall be of no further force and
effect in the event (i) the Property or any part thereof shall become an
asset in (A) a voluntary bankruptcy or insolvency proceeding caused by
Guarantor, provided, however, for the purpose of this Section 15.4(i)(A),
upon any such voluntary bankruptcy or insolvency proceeding, it shall
automatically be presumed that said voluntary bankruptcy or insolvency
proceeding was caused by Guarantor, which presumption can only be rebutted
with clear and convincing evidence to the contrary, or (B) an involuntary
bankruptcy or insolvency proceeding commenced by any person (other than
Lender) and Borrower fails to use its commercially reasonable efforts to
obtain a dismissal of such proceedings, or (ii) Borrower or any Guarantor or
Indemnitor fails to comply with the terms and provisions of Section 3.11
hereof within thirty (30) days after written notice from Lender to Borrower
(which notice shall be a second notice given after the expiration of any
notice given pursuant to Section 10.1(e)).

                                       -51-

<PAGE>

              Section 15.5. BANKRUPTCY CLAIMS. Nothing herein shall be deemed
to be a waiver of 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 this Security Instrument or
to require that all collateral shall continue to secure all of the Debt owing
to Lender in accordance with the Note, this Security Instrument and the Other
Security Documents.

                                    ARTICLE XVI

                                      NOTICES

              Section 16.1. NOTICES. All notices required or permitted
hereunder shall be given and deemed effective in accordance with the terms of
the Note.

                                    ARTICLE XVII

                                   APPLICABLE LAW

              Section 17.1. CHOICE OF LAW. THIS SECURITY INSTRUMENT SHALL BE
DEEMED TO BE A CONTRACT ENTERED INTO PURSUANT TO THE LAWS OF THE STATE OF NEW
YORK AND SHALL IN ALL RESPECTS BE GOVERNED, CONSTRUED, APPLIED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, PROVIDED HOWEVER, THAT
WITH RESPECT TO THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF THE
LIEN OF THIS SECURITY INSTRUMENT, AND THE DETERMINATION OF DEFICIENCY
JUDGMENTS, THE LAWS OF THE STATE WHERE THE PROPERTY IS LOCATED SHALL APPLY.

              Section 17.2. USURY LAWS. This Security Instrument and the Note
are subject to the express condition that at no time shall Borrower be
obligated or required to pay interest on the Debt at a rate which could
subject the holder of the Note to either civil or criminal liability as a
result of being in excess of the maximum interest rate which Borrower is
permitted by applicable law to contract or agree to pay. If by the terms of
this Security Instrument or the Note, Borrower is at any time required or
obligated to pay interest on the Debt at a rate in excess of such maximum
rate, the rate of interest under this Security Instrument and the Note shall
be deemed to be immediately reduced to such maximum rate and the interest
payable shall be computed at such maximum rate and all prior interest
payments in excess of such maximum rate shall be applied and shall be deemed
to have been payments in reduction of the principal balance of the Note. All
sums paid or agreed to be paid to Lender for the use, forbearance, or
detention of the Debt shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Note until payment in full so that the rate or amount of interest on
account of the Debt does not exceed the maximum lawful rate of interest from
time to time in effect and applicable to the Debt for so long as the Debt is
outstanding.

              Section 17.3. PROVISIONS SUBJECT TO APPLICABLE LAW. All rights,
powers and remedies

                                       -52-

<PAGE>

provided in this Security Instrument may be exercised only to the extent that
the exercise thereof does not violate any applicable provisions of law and
are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any Applicable Law.

              Section 17.4. INAPPLICABLE PROVISION. If any term of this
Security Instrument or any application thereof shall be invalid or
unenforceable, the remainder of this Security Instrument and any other
application of the term shall not be affected thereby.

                                   ARTICLE XVIII

                                  SECONDARY MARKET

              Section 18.1. DISSEMINATION OF INFORMATION. If Lender
determines at any time to sell, transfer or assign the Note, this Security
Instrument and the Other Security Documents, and any or all servicing rights
with respect thereto, or to grant participations therein (the
"Participations") or issue mortgage pass-through certificates or other
securities (such sale and/or issuance, the "Securitization") evidencing a
beneficial interest in a rated or unrated public offering or private
placement (the "Securities") (any such transaction described in the foregoing
clause shall be referred to as a "Secondary Market Transaction"), Lender may
forward to each purchaser, transferee, assignee, servicer, participant,
investor, or their respective successors in such Participations and/or
Securities (collectively, the "Investor") or any Rating Agency rating such
Securities and each prospective Investor, all documents and information which
Lender now has or may hereafter acquire relating to the Debt and to Borrower,
any Guarantor, any Indemnitors and the Property (including, without
limitation, all financial statements), which shall have been furnished by
Borrower, any Guarantor or any Indemnitors, as Lender reasonably determines
necessary or desirable for the purposes of a Secondary Market Transaction.
Subject to the terms of the Cooperation Letter, Borrower, any Guarantor and
any Indemnitor agree to cooperate with Lender in connection with any transfer
made or any Securities created pursuant to this Section, including, without
limitation, the delivery of an estoppel certificate required in accordance
with Subsection 7.4(c) hereof and such other documents as may be reasonably
requested by Lender and, upon Lender's reasonable request, meeting with any
Rating Agency for due diligence purposes. Borrower shall also furnish and
Borrower, any Guarantor and any Indemnitor consent to Lender furnishing to
such Investors or such prospective Investors or any Rating Agency any and all
information concerning the Property, the Leases, the financial condition of
Borrower, any Guarantor and any Indemnitor as may be reasonably requested by
Lender or requested by any Investor or any prospective Investor or Rating
Agency in connection with any sale, transfer or Participation. If required by
Lender, Borrower shall deliver on the date hereof, at Borrower's sole cost
and expense, a nonconsolidation opinion, and within ten (10) days after
demand of Lender, either an update of same (which update Borrower will not be
required to provide more than once) or if Borrower is not required to deliver
a nonconsolidation opinion on the date hereof, Borrower shall deliver
same, each in form and substance and delivered by counsel reasonably
acceptable to Lender and acceptable to the Rating Agency rating or proposed
to rate the Securities, as may be required by Lender and/or such Rating
Agency. Borrower's failure to deliver the opinions required hereby shall
constitute an Event of Default hereunder.

                                       -53-

<PAGE>

              Section 18.2. COOPERATION. Borrower, any Guarantor and any
Indemnitor agree to cooperate with Lender in connection with any Secondary
Market Transaction, including, without limitation, complying with all of the
terms and conditions of that certain letter, dated the date hereof, from
Lender to Borrower and PEI (the "Cooperation Letter").

                                    ARTICLE XIX

                                       COSTS

              Section 19.1. PERFORMANCE AT BORROWER'S EXPENSE. Borrower
acknowledges and confirms that Lender shall impose certain administrative
processing and/or commitment fees in connection with (a) the extension,
renewal, modification, amendment and termination of its loans, (b) the
release or substitution of collateral therefor, (c) obtaining certain
consents, waivers and approvals with respect to the Property, or (d) the
review of any Lease or proposed Lease or the preparation or review of any
subordination, non-disturbance agreement (the occurrence of any of the above
shall be called an "Event"). Borrower further acknowledges and confirms that
it shall be responsible for the payment of all costs of reappraisal of the
Property or any part thereof, whether required by law, regulation, Lender or
any governmental or quasi-governmental authority. Borrower hereby
acknowledges and agrees to pay, immediately, with or without demand, all such
fees (as the same may be increased or decreased from time to time), and any
additional fees of a similar type or nature which may be imposed by Lender
from time to time, upon the occurrence of any Event. Wherever it is provided
for herein that Borrower pay any costs and expenses, such costs and expenses
shall include, but not be limited to, all reasonable legal fees and
disbursements of Lender (whether of retained firms, the reimbursement for the
expenses of in-house staff or otherwise).

              Section 19.2. ATTORNEY'S FEES FOR ENFORCEMENT. (a) Borrower
shall pay all reasonable legal fees incurred by Lender in connection with (i)
the preparation of the Note, this Security Instrument and the Other Security
Documents; and (ii) the items set forth in Section 19.1 above, and (b)
Borrower shall pay to Lender on demand any and all expenses, including
reasonable legal expenses and reasonable attorneys' fees, incurred or paid by
Lender in protecting its interest in the Property or the Collateral or in
collecting any amount payable hereunder or in enforcing its rights hereunder
with respect to the Property or the Collateral, whether or not any legal
proceeding is commenced hereunder or thereunder and whether or not any
default or Event of Default shall have occurred and is continuing, together
with interest thereon at the Default Rate from the date paid or incurred by
Lender until such expenses are paid by Borrower.

                                     ARTICLE XX

                                    DEFINITIONS

              Section 20.1. GENERAL DEFINITIONS. Unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein,
words used in this Security Instrument may be used interchangeably in
singular or plural form and the word "Borrower" shall mean "each Borrower and
any subsequent owner or owners of the Property or any part thereof or any
interest

                                       -54-

<PAGE>

therein," the word "Lender" shall mean "Lender and any subsequent holder of
the Note," the word "Note" shall mean "the Note and any other evidence of
indebtedness secured by this Security Instrument," the word "person" shall
include an individual, corporation, limited liability company, partnership,
trust, unincorporated association, government, governmental authority, and
any other entity, the word "Property" shall include any portion of the
Property and any interest therein , and the phrases "attorneys' fees" and
"counsel fees" shall include any and all attorneys', paralegal and law clerk
fees and disbursements, including, but not limited to fees and disbursements
at the pre-trial, trial and appellate levels incurred or paid by Lender in
protecting its interest in the Property, the Leases and the Rents and
enforcing its rights under this Security Instrument.

              Section 20.2. HEADINGS, ETC. The headings and captions of
various Sections of this Security Instrument are for convenience of reference
only and are not to be construed as defining or limiting, in any way, the
scope or intent of the provisions hereof.

                                    ARTICLE XXI

                              MISCELLANEOUS PROVISIONS

              Section 21.1. NO ORAL CHANGE. This Security Instrument, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part
of Borrower or Lender, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.

              Section 21.2. LIABILITY. If Borrower consists of more than one
person, the obligations and liabilities of each such person hereunder shall
be joint and several. This Security Instrument shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors
and assigns forever.

              Section 21.3. DUPLICATE ORIGINALS; COUNTERPARTS. This Security
Instrument may be executed in any number of duplicate originals and each
duplicate original shall be deemed to be an original. This Security
Instrument may be executed in several counterparts, each of which
counterparts shall be deemed an original instrument and all of which together
shall constitute a single Security Instrument. The failure of any party
hereto to execute this Security Instrument, or any counterpart hereof, shall
not relieve the other signatories from their obligations hereunder.

              Section 21.4. NUMBER AND GENDER. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.

              Section 21.5. SUBROGATION. If any or all of the proceeds of the
Note have been used to extinguish, extend or renew any indebtedness
heretofore existing against the Property, then, to the extent of the funds so
used, Lender shall be subrogated to all of the rights, claims, liens, titles,
and interests existing against the Property heretofore held by, or in favor
of, the holder of such indebtedness and such former rights, claims, liens,
titles, and interests, if any, are not waived but

                                       -55-

<PAGE>

rather are continued in full force and effect in favor of Lender and are
merged with the lien and security interest created herein as cumulative
security for the repayment of the Debt, the performance and discharge of
Borrower's obligations hereunder, under the Note and the Other Security
Documents and the performance and discharge of the Other Obligations.

              Section 21.6. ENTIRE AGREEMENT. The Note, this Security
Instrument and the Other Security Documents constitute the entire
understanding and agreement between Borrower and Lender with respect to the
transactions arising in connection with the Debt and supersede all prior
written or oral understandings and agreements between Borrower and Lender
with respect thereto. Borrower hereby acknowledges that, except as
incorporated in writing in the Note, this Security Instrument and the Other
Security Documents, there are not, and were not, and no persons are or were
authorized by Lender to make, any representations, understandings,
stipulations, agreements or promises, oral or written, with respect to the
transaction which is the subject of the Note, this Security Instrument and
the Other Security Documents.

                                    ARTICLE XXII

                              CROSS COLLATERALIZATION

              Section 22.1. CROSS COLLATERALIZATION. Borrower acknowledges
that the Debt is secured by this Security Instrument together with additional
mortgages, deeds of trust or similar security instruments, as the case may be
(together with their respective assignments of leases and rents and other
documents securing or evidencing the Debt, the "Additional Security
Instruments") and encumbering the properties referenced therein (the
"Additional Properties"; together with the Property, collectively, the
"Properties"). Upon the occurrence of an Event of Default, Lender shall have
the right to institute a proceeding or proceedings for the total or partial
foreclosure of this Security Instrument and any or all of the Additional
Security Instruments whether by court action, power of sale or otherwise,
under any applicable provision of law, for all of the Debt, or the portion of
the Debt and the lien and the security interest created by the Additional
Security Instruments shall continue in full force and effect without loss of
priority as a lien and security interest securing the payment of that portion
of the Debt then due and payable but still outstanding. Borrower acknowledges
and agrees that the Property and the Additional Properties are located in one
or more States and counties, and therefore Lender shall be permitted to
enforce payment of the Debt and the performance of any term, covenant or
condition of the Note, this Security Instrument, the Other Security Documents
or the Additional Security Instruments and exercise any and all rights and
remedies under the Note, this Security Instrument, the Other Security
Documents or the Additional Security Instruments, or as provided by law or at
equity, by one or more proceedings, whether contemporaneous, consecutive or
both, to be determined by Lender, in its sole discretion, in any one or more
of the States or counties in which the Property or any Additional Property is
located. Neither the acceptance of this Security Instrument, the Note, the
Other Security Documents or the Additional Security Instruments nor the
enforcement thereof in any one State or county, whether by court action,
foreclosure, power of sale or otherwise, shall prejudice or in any way limit
or preclude enforcement by court action, foreclosure, power of sale or
otherwise, of the Note, this Security Instrument, the Other Security
Documents, or any Additional Security Instruments through one or

                                       -56-

<PAGE>

more additional proceedings in that State or county or in any other State or
county. Any and all sums received by Lender under the Note, this Security
Instrument, the Other Security Documents and the Additional Security
Instruments shall be applied to the Debt in such order and priority as Lender
shall determine, in its sole discretion, without regard to the Allocated Loan
Amount (as defined in that certain Loan Agreement dated the date hereof) for
the Property or any Additional Property or the appraised value of the
Property or any Additional Property.

                                   ARTICLE XXIII

                                LOCAL LAW PROVISIONS

              The provisions set forth on Exhibit B annexed hereto are
incorporated herein by reference as if fully set forth herein.

                                       -57-

<PAGE>

              IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed
by Borrower as of the date first above written.

                                   PRICE OWNER LLC, a Delaware limited liability
                                   company

                                   By:    Price Owner Corp., a Delaware
                                          corporation, its managing member

                                          By: _____________________________
                                                 Name:
                                                 Title:

<PAGE>

                              FORM OF ACKNOWLEDGEMENTS

<PAGE>

                                     EXHIBIT A

                               (DESCRIPTION OF LAND)

<PAGE>

                                     EXHIBIT B

                               (LOCAL LAW PROVISIONS)

<PAGE>

This instrument was prepared by, and the
recorded original should be returned to:

Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attn: Mitchell G. Williams, Esq.

                     FORM OF ASSIGNMENT OF LEASES AND RENTS

                  THIS ASSIGNMENT OF LEASES AND RENTS (THIS "ASSIGNMENT") made
as of the 28th day of June, 2000, by PRICE OWNER LLC, a Delaware limited
liability company, having its principal place of business at 17140 Bernardo
Center Drive, Suite 300, San Diego, California 92128 ("Assignor"), to GMAC
COMMERCIAL MORTGAGE CORPORATION, a California corporation, having its principal
place of business at 200 Witmer Road, Horsham, Pennsylvania 19044-8015
("Assignee").

                                   WITNESSETH:

                  THAT Assignor for good and valuable consideration, receipt
whereof is hereby acknowledged, hereby grants, transfers and assigns to Assignee
the entire lessor's interest in and to all leases and other agreements affecting
the use, enjoyment, or occupancy of all or any part of that certain lot or piece
of land, more particularly described in EXHIBIT "A" annexed hereto and made a
part hereof, together with the buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter located thereon (hereinafter collectively referred to as the
"Property").

                  TOGETHER WITH all other leases and other agreements affecting
the use, enjoyment or occupancy of the Property now or hereafter made affecting
the Property or any portion thereof, together with any extension, renewal,
replacement or modification of the same, this Assignment of other present and
future leases and present and future agreements being effective without further
or supplemental assignment; The leases and other agreements described above
together with all other present and future leases and present and future
agreements and any extension, renewal, replacement or modification of the same
are hereinafter collectively referred to as the "Leases";

                  TOGETHER WITH:

                  (a) all deposits (whether for security or otherwise), rents,
income, issues and

<PAGE>

profits arising from the Leases and renewals thereof and together with all
rents, revenues, income, issues and profits (including all oil and gas or other
mineral royalties and bonuses) from the use, enjoyment and occupancy of the
Property whether paid or accruing before or after the filing by or against
Assignor of any petition for relief under the Bankruptcy Code (hereinafter
defined) (hereinafter collectively referred to as the "Rents").

                  (b) all of Assignor's claims and rights (the "Bankruptcy
Claims") to (i) the payment of damages arising from any rejection by a lessee of
any Lease under the Bankruptcy Code, 11 U.S.C. ss.101 et seq., as the same may
be amended (the "Bankruptcy Code") and (ii) any award or other payment which
Assignor may hereafter become entitled to receive with respect to any Lease as a
result of or pursuant to any bankruptcy, insolvency or reorganization or similar
proceedings involving the lessee under such Lease.

                  (c) all of Assignor's right, title and interest in and claims
under any and all lease guaranties, letters of credit and any other credit
support given by any guarantor in connection with any of the Leases
(individually, a "Lease Guarantor", collectively, the "Lease Guarantors") to
Assignor (individually, a "Lease Guaranty", collectively, the "Lease
Guaranties").

                  (d) all proceeds from the sale or other disposition of the
Leases, the Rents, the Lease Guaranties and the Bankruptcy Claims.

                  THIS ASSIGNMENT is made in consideration of that certain
mortgage loan made by Assignee to Assignor evidenced by that certain note made
by Assignor to Assignee, dated the date hereof, in the principal sum of
$__________ (the "Note"), and secured by those five (5) certain mortgages or
deeds of trust given by Assignor to Assignee, dated the date hereof, covering
the Property and the other property encumbered thereby and intended to be duly
recorded (collectively, the "Security Instrument"). The principal sum, interest
and all other sums due and payable under the Note, the Security Instrument and
the Other Security Documents (hereinafter defined) are collectively referred to
as the "Debt". The documents other than this Assignment, the Note or the
Security Instrument now or hereafter executed by Assignor and/or others and by
or in favor of Assignee which wholly or partially secure or guarantee payment of
the Debt are hereinafter referred to as the "Other Security Documents."

                  ASSIGNOR WARRANTS that except as disclosed in the certified
rent roll for the Property delivered to and approved by Assignee, (a) Assignor
is the sole owner of the entire lessor's [SUBLESSOR'S - PA ONLY] interest in the
Leases; (b) the Leases are valid and enforceable; (c) the economic and other
material terms of all alterations, modifications and amendments to the Leases
are reflected in the certified rent roll delivered to and approved by Assignee;
(d) none of the Rents reserved in the Leases have been assigned or otherwise
pledged or hypothecated (except to Assignee); (e) none of the Rents have been
collected for more than one (1) month in advance (provided that a security
deposit shall not be deemed rent collected in advance); (f) the premises demised
under the Leases have been completed and the tenants under the Leases have
accepted the same and have taken possession of the same on a rent paying basis;
(g) to the best of Assignor's knowledge, there exist no offsets or defenses to
the payment of any portion of the Rents; (h) Assignor has received no notice
from any tenant challenging the validity or enforceability of any Lease; (i) all
payments due under the Leases are current and are consistent with the certified
rent roll for the

                                       2
<PAGE>

Property delivered to and approved by Assignee; (j) no tenant under any Lease is
in default thereunder beyond any applicable notice and grace periods contained
in the Lease, or is a debtor in any bankruptcy, reorganization, insolvency or
similar proceeding, or has demonstrated a history of payment problems which
suggest financial difficulty; (k) there are no agreements with the tenants under
the Leases other than expressly set forth in each Lease; (l) the Leases are
valid and enforceable against Assignor and, to the best of Assignor's knowledge,
the tenants set forth therein; (m) no Lease contains an option to purchase,
right of first refusal to purchase, or any other similar provision; (n) no
person or entity has any possessory interest in, or right to occupy, the
Property except under and pursuant to a Lease; (o) each Lease is subordinate to
the Security Instrument, either pursuant to its terms or a recorded
subordination agreement; and (p) no brokerage commissions or finders fees are
due and payable regarding any Lease, except for those not yet delinquent and
which will be paid in the ordinary course of Assignor's business.

                  ASSIGNOR COVENANTS with Assignee that Assignor (a) shall
observe and perform all the obligations imposed upon the lessor under the Leases
if the failure to perform or observe the same would materially and adversely
affect the value of the Property taken as a whole and shall not do or permit to
be done anything to impair, in any material respect, the value of the Leases as
security for the Debt; (b) shall promptly send copies to Assignee of all notices
of default which Assignor shall send or receive thereunder; (c) shall enforce in
a commercially reasonable manner all of the material terms, covenants and
conditions contained in the Leases upon the part of the lessee thereunder to be
observed or performed; (d) shall not collect any of the Rents more than one (1)
month in advance, (provided that a security deposit shall not be deemed rent
collected in advance); (e) shall not execute any other assignment of the
lessor's interest in the Leases or the Rents (other than this Assignment to
Assignee); (f) shall not (i) materially alter, modify or change the terms of the
Leases without the prior written consent of Assignee, which consent shall not be
unreasonably withheld or delayed if the alteration, modification or change does
not materially and adversely affect the value of the Property taken as a whole
and provided further that such Lease, as altered, modified or changed, is
otherwise in compliance with the requirements of the Security Instrument, or
(ii) without Assignee's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned, cancel or terminate any Lease
(except for defaults thereunder or pursuant to the terms of Leases approved by
Assignee) of more than ten (10%) percent of the rentable space of the Property
or accept a surrender thereof or convey or transfer or suffer or permit a
conveyance or transfer of the Land or of any interest therein so as to effect a
merger of the estates and rights of, or a termination or diminution of the
obligations of, lessees thereunder; (g) shall not alter, modify or change the
terms of any Lease Guaranty or cancel or terminate such Lease Guaranty without
the prior written consent of Assignee; and (h) shall not consent to any
assignment of or subletting under the Leases not in accordance with their terms,
without the prior written consent of Assignee, which consent shall not be
unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing,
Assignee agrees to execute all reasonably requested subordination,
non-disturbance and attornment agreements provided Assignee has previously
approved the Lease (provided Assignee's approval is required pursuant to the
terms hereof) and said agreement is on Assignee's approved form.

                  ASSIGNOR FURTHER COVENANTS with Assignee that (a) except as
otherwise consented to by Assignee, all Leases shall be written on the standard
form of lease which shall have been approved by Assignee; (b) upon request,
Assignor shall furnish Assignee with executed copies of all Leases; (c) no
material changes may be made to the Assignee approved standard lease without

                                       3
<PAGE>

the prior written consent of Assignee, which consent shall not be unreasonably
withheld or delayed (a "Standard Lease Change"); (d) all proposed Leases and
renewals of existing Leases shall be subject to the prior approval of Assignee,
except as otherwise provided in the Security Instrument.

         Notwithstanding the foregoing, with respect to a Standard Lease Change
only, Assignee shall have seven (7) Business Days from receipt of written
request for such a Standard Lease Change and any and all reasonably required
information and documentation relating thereto in which to approve or disapprove
such request, provided, such request to Assignee is marked in bold lettering
with the following language: "ASSIGNEE'S RESPONSE IS REQUIRED WITHIN SEVEN (7)
BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF AN ASSIGNMENT
OF LEASES AND RENTS BETWEEN THE UNDERSIGNED AND ASSIGNEE" and the envelope
containing the request must be marked "PRIORITY". In the event Assignee fails to
respond to the request within such time, Assignee's approval shall be deemed
given. Assignor shall be required to provide Assignee with such information and
documentation as may be reasonably and in good faith required by Assignee,
including without limitation, lease comparables and other market information.

                  THIS ASSIGNMENT is made on the following terms, covenants and
conditions:

                                     PART 1

                               GENERAL PROVISIONS

                  1. PRESENT ASSIGNMENT. Assignor does hereby absolutely and
unconditionally assign to Assignee Assignor's right, title and interest in all
current and future Leases and Rents, Lease Guaranties, and Bankruptcy Claims, it
being intended by Assignor that this assignment constitutes a present, absolute
assignment and not an assignment for additional security only. Such assignment
to Assignee shall not be construed to bind Assignee to the performance of any of
the covenants, conditions or provisions contained in any such Lease or otherwise
impose any obligation upon Assignee. Assignor agrees to execute and deliver to
Assignee such additional instruments, in form and substance reasonably
satisfactory to Assignee, as may hereafter be reasonably requested by Assignee
to further evidence and confirm such assignment. Nevertheless, subject to the
terms of this paragraph 1, Assignee grants to Assignor a revocable license to
operate and manage the Property and to collect the Rents and other sums due
under the Lease Guaranties and Bankruptcy Claims. Assignor shall hold the Rents
and all sums received pursuant to any Lease Guaranty and Bankruptcy Claims, or a
portion thereof sufficient to discharge all current sums due on the Debt, in
trust for the benefit of Assignee for use in the payment of such sums. Upon an
Event of Default, as defined in the Note and the Security Instrument, the
license granted to Assignor herein shall automatically be revoked without notice
to Assignor, and Assignee shall immediately be entitled to possession of all
Rents and all sums received pursuant to any Lease Guaranty and Bankruptcy
Claims, whether or not Assignee enters upon or takes control of the Property.
Assignee is hereby granted and assigned by Assignor the right, at its option,
upon revocation of the license granted herein, to enter upon the Property in
person, by agent or by courtappointed receiver to collect the Rents and all sums
received pursuant to any Lease Guaranty and Bankruptcy Claims. Any Rents and all
sums received pursuant to any Lease Guaranty and Bankruptcy Claims collected
after the revocation of the license may be applied toward payment of the Debt in
such priority and proportions

                                       4
<PAGE>

as Assignee in its discretion shall deem proper.

                  2. REMEDIES OF ASSIGNEE. (a) Upon or at any time after an
Event of Default, Assignee may, at its option, without waiving such Event of
Default, without notice and without regard to the adequacy of the security for
the Debt, either in person or by agent, with or without bringing any action or
proceeding, or by a receiver appointed by a court, take possession of the
Property and have, hold, manage, lease and operate the Property on such terms
and for such period of time as Assignee may deem proper and either with or
without taking possession of the Property in its own name, demand, sue for or
otherwise collect and receive all Rents and all sums received pursuant to any
Lease Guaranty and Bankruptcy Claims, including those past due and unpaid with
full power to make from time to time all alterations, renovations, repairs or
replacements thereto or thereof as may seem proper to Assignee and may apply the
Rents and all sums received pursuant to any Lease Guaranty and Bankruptcy Claims
to the payment of the following in such order and proportion as Assignee in its
sole discretion may determine, any law, custom or use to the contrary
notwithstanding: (i) all expenses of managing and securing the Property,
including, without being limited thereto, the salaries, fees and wages of a
managing agent and such other employees or agents as Assignee may deem necessary
or desirable and all expenses of operating and maintaining the Property,
including, without being limited thereto, all taxes, charges, claims,
assessments, water charges, sewer rents and any other liens, and premiums for
all insurance which Assignee may deem necessary or desirable, and the cost of
all alterations, renovations, repairs or replacements, and all expenses incident
to taking and retaining possession of the Property; and (ii) the Debt, together
with all costs and attorneys' fees. In addition to the rights which Assignee may
have herein, upon the occurrence of an Event of Default, Assignee, at its
option, may either require Assignor to pay monthly in advance to Assignee, or
any receiver appointed to collect the Rents and all sums received pursuant to
any Lease Guaranty and Bankruptcy Claims, the fair and reasonable rental value
for the use and occupation of such part of the Property as may be in possession
of Assignor or may require Assignor to vacate and surrender possession of the
Property to Assignee or to such receiver and, in default thereof, Assignor may
be evicted by summary proceedings or otherwise. For purposes of this paragraph
2, Assignor grants to Assignee its irrevocable power of attorney, coupled with
an interest, to take any and all of the aforementioned actions and any or all
other actions designated by Assignee for the proper management and preservation
of the Property. The exercise by Assignee of the option granted it in this
paragraph 2 and the collection of the Rents and all sums received pursuant to
any Lease Guaranty and Bankruptcy Claims and the application thereof as herein
provided shall not be considered a waiver of any default by Assignor under the
Note, the Security Instrument, the Leases, this Assignment or the Other Security
Documents.

         (b) Upon or at any time after the occurrence of an Event of Default,
Assignee shall have the right in its own name or in the name of Assignor in
respect of any claim, suit, action or proceeding relating to the rejection of
any Lease, including, without limitation, the right to file and prosecute, to
the exclusion of Assignor, any proofs of claim, complaints, motions,
applications, notices and other documents, in any case in respect of the lessee
under such Lease under the Bankruptcy Code.

         (c) If there shall be filed by or against Assignor a petition under the
Bankruptcy Code, and Assignor, as lessor under any Lease, shall determine to
reject such Lease pursuant to Section 365(a) of the Bankruptcy Code, then
Assignor shall give Assignee not less than ten (10) days' prior notice of the
date on which Assignor shall apply to the bankruptcy court for authority to
reject the

                                       5
<PAGE>

Lease. Assignee shall have the right, but not the obligation, to serve upon
Assignor within such ten-day period a notice stating that (i) Assignee demands
that Assignor assume and assign the Lease to Assignee pursuant to Section 365 of
the Bankruptcy Code and (ii) Assignee covenants to cure or provide adequate
assurance of future performance under the Lease. If Assignee serves upon
Assignor the notice described in the preceding sentence, Assignor shall not seek
to reject the Lease and shall comply with the demand provided for in clause (i)
of the preceding sentence within thirty (30) days after the notice shall have
been given, subject to the performance by Assignee of the covenant provided for
in clause (ii) of the preceding sentence.

                  3. NO LIABILITY OF ASSIGNEE. Assignee shall not be liable for
any loss sustained by Assignor resulting from Assignee's failure to let the
Property after an Event of Default or from any other act or omission of Assignee
in managing the Property after default unless such loss is caused by the gross
negligence, illegal acts, fraud, bad faith or willful misconduct of Assignee.
Assignee shall not be obligated to perform or discharge any obligation, duty or
liability under the Leases or under or by reason of this Assignment and Assignor
shall, and hereby agrees, to indemnify Assignee for, and to hold Assignee
harmless from, any and all liability, loss or damage which may or might be
incurred under the Leases or under or by reason of this Assignment and from any
and all claims and demands whatsoever, including the defense of any such claims
or demands which may be asserted against Assignee by reason of any alleged
obligations and undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in the Leases, except to the extent
such liability, loss or damage is the result of Assignee's gross negligence,
illegal acts, fraud, bad faith or willful misconduct. Should Assignee incur any
such liability, the amount thereof, including costs, expenses and reasonable
attorneys' fees, together with interest thereon at the Default Rate (as defined
in the Note) shall be secured hereby and by the Security Instrument and the
Other Security Documents and Assignor shall reimburse Assignee therefor
immediately upon demand and upon the failure of Assignor so to do Assignee may,
at its option, declare all sums secured hereby and the Security Instrument and
the Other Security Documents immediately due and payable. This Assignment shall
not operate to place any obligation or liability for the control, care,
management or repair of the Property upon Assignee, nor for the carrying out of
any of the terms and conditions of the Leases; nor shall it operate to make
Assignee responsible or liable for any waste committed on the Property by the
tenants or any other parties (other than Assignee, its employees, agents,
representatives, contractors, subcontractors or affiliates), or for any
dangerous or defective condition of the Property, including, without limitation,
the presence of any Hazardous Substances (as defined in the Security
Instrument), or for any negligence in the management, upkeep, repair or control
of the Property resulting in loss or injury or death to any tenant, licensee,
employee or stranger, except to the extent caused by Assignee's gross
negligence, wilful misconduct, illegal acts, fraud or bad faith.

                  4. NOTICE TO LESSEES. Assignor hereby authorizes and directs
the lessees named in the Leases or any other or future lessees or occupants of
the Property upon receipt from Assignee of written notice to the effect that
Assignee is then the holder of the Security Instrument and that an Event of
Default exists thereunder or under this Assignment, the Note or the Other
Security Documents to pay over to Assignee all Rents and all sums under any
Lease Guaranty and to continue so to do until otherwise notified by Assignee.
Assignor hereby agrees that each such lessee and any other or future lessee and
occupant may rely upon such written notice from Assignee to so pay the Rents and
other sums without any inquiry into whether there exists a default hereunder or
under the Security Instrument, the Note or the Other Security Documents or
whether Assignee

                                       6
<PAGE>

is otherwise entitled to the Rents and other sums. Assignor hereby waives any
right, claim or demand which Assignor may now or hereafter have against any
present or future lessee or occupant by reason of such payment of Rents and
other sums to Assignee, and any such payment shall discharge such lessee's or
occupant's obligation to make such payment to Assignor.

                  5. OTHER SECURITY. Assignee may take or release other security
for the payment of the Debt, may release any party primarily or secondarily
liable therefor, may grant extensions, renewals or indulgences with respect
thereto and may apply any other security held by it to the reduction or
satisfaction of the Debt without prejudice to any of its rights under this
Assignment.

                  6. OTHER REMEDIES. Nothing contained in this Assignment and no
act done or omitted by Assignee pursuant to the power and rights granted to
Assignee hereunder shall be deemed to be a waiver by Assignee of its rights and
remedies under the Note, the Security Instrument, or the Other Security
Documents and this Assignment is made and accepted without prejudice to any of
the rights and remedies possessed by Assignee under the terms thereof. The right
of Assignee to collect the Debt and to enforce any other security therefor held
by it may be exercised by Assignee either prior to, simultaneously with, or
subsequent to any action taken by it hereunder.

                  7. NO MORTGAGEE IN POSSESSION. Nothing herein contained shall
be construed as constituting Assignee a "mortgagee in possession" in the absence
of the taking of actual possession of the Property by Assignee. In the exercise
of the powers herein granted Assignee, no liability shall be asserted or
enforced against Assignee, all such liability being expressly waived and
released by Assignor and Assignee shall be obligated to account only for such
Rents as are actually collected or received by Assignee.

                  8. CONFLICT OF TERMS. In case of any conflict between the
terms of this Assignment and the terms of the Security Instrument, the terms of
the Security Instrument shall prevail.

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

                  10. CERTAIN DEFINITIONS. Unless the context clearly indicates
a contrary intent or unless otherwise specifically provided herein, words used
in this Assignment may be used interchangeably in singular or plural form and
the word "Assignor" shall mean "each Assignor and any subsequent owner or owners
of the Property or any part thereof or interest therein," the word "Assignee"
shall mean "Assignee and any subsequent holder of the Note," the word "Note"
shall mean "the Note and any other evidence of indebtedness secured by the
Security Instrument," the word "person" shall include an individual,
corporation, partnership, trust, unincorporated association, government,
governmental authority, and any other entity, the words "Property" shall include
any portion of the Property and any interest therein, and the word "Debt" shall
mean the principal balance of the Note with interest thereon as provided in the
Note and the Security Instrument and all other

                                       7
<PAGE>

sums due pursuant to the Note, the Security Instrument, this Assignment and the
Other Security Documents; whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and vice versa.

                  11. NON-WAIVER. The failure of Assignee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Assignment. Assignor shall not be relieved of Assignor's obligations
hereunder by reason of (i) failure of Assignee to comply with any request of
Assignor or any other party to take any action to enforce any of the provisions
hereof or of the Security Instrument, the Note or the Other Security Documents,
(ii) the release regardless of consideration, of the whole or any part of the
Property, or (iii) any agreement or stipulation by Assignee extending the time
of payment or otherwise modifying or supplementing the terms of this Assignment,
the Note, the Security Instrument or the Other Security Documents. Assignee may
resort for the payment of the Debt to any other security held by Assignee in
such order and manner as Assignee, in its discretion, may elect. Assignee may
take any action to recover the Debt, or any portion thereof, or to enforce any
covenant hereof without prejudice to the right of Assignee thereafter to enforce
its rights under this Assignment. The rights of Assignee under this Assignment
shall be separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Assignee shall be construed as an election to
proceed under any one provision herein to the exclusion of any other provision.

                  12. INAPPLICABLE PROVISIONS. If any term, covenant or
condition of this Assignment is held to be invalid, illegal or unenforceable in
any respect, this Assignment shall be construed without such provision.

                  13. DUPLICATE ORIGINALS. This Assignment may be executed in
any number of duplicate originals and each such duplicate original shall be
deemed to be an original.

                  14. GOVERNING LAW. This Assignment shall be governed and
construed in accordance with the laws of the state in which the Property is
located.

                  15. TERMINATION OF ASSIGNMENT. Upon payment in full of the
Debt and the delivery and recording of a satisfaction or discharge of the
Security Instrument duly executed by Assignee (which satisfaction or discharge
Assignee agrees to promptly delivery to Assignor), this Assignment shall become
and be void and of no effect.

                  16. TRANSFER BY ASSIGNEE. No consent by Assignor shall be
required for any assignment or reassignment of the rights of Assignee under this
Assignment. All references to "Assignee" hereunder shall be deemed to include
the assigns of Assignee.

                  17. EXCULPATION. Notwithstanding anything to the contrary
contained in this Assignment, the liability of Assignor, and of any general
partner or member of Assignor to pay the Debt and for the performance of the
other agreements, covenants and obligations contained herein and in the Note,
the Security Instrument and the Other Security Documents shall be limited as set
forth in Article 15 of the Security Instrument.

                                       8
<PAGE>

                  18. NOTICES. All notices or other written communications
hereunder shall be given and become effective as provided in the Note.

                  THIS ASSIGNMENT, together with the covenants and warranties
therein contained, shall inure to the benefit of Assignee and any subsequent
holder of the Security Instrument and shall be binding upon Assignor, his heirs,
executors, administrators, successors and assigns and any subsequent owner of
the Property.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       9
<PAGE>

                  IN WITNESS WHEREOF, Assignor has executed this Assignment the
date first above written.

                                 PRICE OWNER LLC, a Delaware limited liability
                                 company

                                 By:  Price Owner Corp., a Delaware corporation,
                                      its managing member

                                      By:
                                         ---------------------------------------
                                         Name:
                                         Title:

<PAGE>

                             FORM OF ACKNOWLEDGEMENT

<PAGE>

                                   EXHIBIT "A"

                             [PROPERTY DESCRIPTION]

<PAGE>

              FORM OF GUARANTY OF RECOURSE OBLIGATIONS OF BORROWER

                  FOR VALUE RECEIVED, and to induce GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, having its principal place of business at
200 Witmer Road, Horsham, Pennsylvania 19044-8015 ("Lender"), to lend to PRICE
OWNER LLC, a Delaware limited liability company, having its principal place of
business at 17140 Bernardo Center Drive, Suite 300, San Diego, California 92128
("Borrower"), the principal sum of __________ DOLLARS ($__________) (the
"Loan"), evidenced by a certain note (the "Note") and secured by those certain
mortgages and deeds of trust (collectively, the "Security Instruments"), as
described in Exhibit A attached hereto and made a part hereof, and by other
documents executed in connection therewith (the "Other Security Documents").

                  1. The undersigned, PRICE ENTERPRISES, INC. having an address
at 17140 Bernardo Center Drive, Suite 300, San Diego, California 92128
(hereinafter referred to as "Guarantor"), hereby absolutely and unconditionally
guarantees to Lender the prompt and unconditional payment of the Guaranteed
Recourse Obligations of Borrower (hereinafter defined).

                  2. It is expressly understood and agreed that this is a
continuing guaranty and that the obligations of Guarantor hereunder are and
shall be absolute under any and all circumstances, without regard to the
validity, regularity or enforceability of the Note, the Security Instruments, or
the Other Security Documents, a true copy of each of said documents Guarantor
hereby acknowledges having received and reviewed.

                  3. The term "Debt" as used in this Guaranty of Recourse
Obligations of Borrower (the "Guaranty") shall mean the principal sum evidenced
by the Note and secured by the Security Instruments, or so much thereof as may
be outstanding from time to time, together with interest thereon at the rate of
interest specified in the Note and all other sums other than principal or
interest which may or shall become due and payable pursuant to the provisions of
the Note, the Security Instruments or the Other Security Documents.

                  4. The term "Guaranteed Recourse Obligations of Borrower" as
used in this Guaranty shall mean all obligations and liabilities of Borrower for
which Borrower shall be personally liable pursuant to the Note, the Security
Instruments or the Other Security Documents.

                  5. Any indebtedness of Borrower to Guarantor now or hereafter
existing (including, but not limited to, any rights to subrogation Guarantor may
have as a result of any payment by Guarantor under this Guaranty), together with
any interest thereon, shall be, and such indebtedness is, hereby deferred,
postponed and subordinated to the prior payment in full of the Debt. Until
payment in full of the Debt (and including interest accruing on the Note after
the commencement of a proceeding by or against Borrower under the Bankruptcy
Reform Act of 1978, as amended, 11 U.S.C. Sections 101 ET SEQ., and the
regulations adopted and promulgated pursuant thereto (collectively, the
"Bankruptcy Code") which interest the parties agree shall remain a claim that is
prior and superior to any claim of Guarantor notwithstanding any contrary
practice, custom or ruling in cases under the Bankruptcy Code generally),
Guarantor agrees not to accept any payment or satisfaction of any kind of
indebtedness of Borrower to Guarantor and hereby assigns such

<PAGE>

indebtedness to Lender, including the right to file proof of claim and to vote
thereon in connection with any such proceeding under the Bankruptcy Code,
including the right to vote on any plan of reorganization. Further, if Guarantor
shall comprise more than one person, firm or corporation, Guarantor agrees that
until such payment in full of the Debt, (a) no one of them shall accept payment
from the others by way of contribution on account of any payment made hereunder
by such party to Lender, (b) no one of them will take any action to exercise or
enforce any rights to such contribution, and (c) if any of Guarantor should
receive any payment, satisfaction or security for any indebtedness of Borrower
to any of Guarantor or for any contribution by the others of Guarantor for
payment made hereunder by the recipient to Lender, the same shall be delivered
to Lender in the form received, endorsed or assigned as may be appropriate for
application on account of, or as security for, the Debt and until so delivered,
shall be held in trust for Lender as security for the Debt.

                  6. Guarantor agrees that, with or without notice or demand,
Guarantor will reimburse Lender, to the extent that such reimbursement is not
made by Borrower, for all out-of-pocket expenses (including reasonable counsel
fees) incurred by Lender in connection with the collection of the Guaranteed
Recourse Obligations of Borrower or any portion thereof or with the enforcement
of this Guaranty.

                  7. All moneys available to Lender for application in payment
or reduction of the Debt may be applied by Lender in such manner and in such
amounts and at such time or times and in such order and priority as Lender may
see fit to the payment or reduction of such portion of the Debt as Lender may
elect.

                  8. Guarantor hereby waives notice of the acceptance hereof,
presentment, demand for payment, protest, notice of protest, or any and all
notice of non-payment, non-performance or non-observance, or other proof, or
notice or demand, whereby to charge Guarantor therefor.

                  9. Guarantor further agrees that the validity of this Guaranty
and the obligations of Guarantor hereunder shall in no way be terminated,
affected or impaired (a) by reason of the assertion by Lender of any rights or
remedies which it may have under or with respect to either the Note, the
Security Instruments, or the Other Security Documents, against any person
obligated thereunder or against the owner of the properties encumbered by the
Security Instruments (collectively, the "Properties"), or (b) by reason of any
failure to file or record any of such instruments or to take or perfect any
security intended to be provided thereby, or (c) by reason of the release or
exchange of any property covered by the Security Instruments or other collateral
for the Loan, or (d) by reason of Lender's failure to exercise, or delay in
exercising, any such right or remedy or any right or remedy Lender may have
hereunder or in respect to this Guaranty, or (e) by reason of the commencement
of a case under the Bankruptcy Code by or against any person obligated under the
Note, the Security Instruments or the Other Security Documents, or the death of
any Guarantor, or (f) by reason of any payment made on the Debt or any other
indebtedness arising under the Note, the Security Instruments or the Other
Security Documents, whether made by Borrower or Guarantor or any other person,
which is required to be refunded pursuant to any bankruptcy or insolvency law;
it being understood that no payment so refunded shall be considered as a payment
of any portion of the Debt, nor shall it have the effect of reducing the
liability of Guarantor hereunder. It is further understood, that if Borrower
shall have taken advantage of, or be subject to the protection of, any

                                       2
<PAGE>

provision in the Bankruptcy Code, the effect of which is to prevent or delay
Lender from taking any remedial action against Borrower, including the exercise
of any option Lender has to declare the Debt due and payable on the happening of
any default or event by which under the terms of the Note, the Security
Instruments or the Other Security Documents, the Debt shall become due and
payable, Lender may, as against Guarantor, nevertheless, declare the Debt due
and payable and enforce any or all of its rights and remedies against Guarantor
provided for herein.

                  10. Guarantor further covenants that this Guaranty shall
remain and continue in full force and effect as to any modification, extension
or renewal of the Note, the Security Instruments, or any of the Other Security
Documents, that Lender shall not be under a duty to protect, secure or insure
any security or lien provided by the Security Instruments or other such
collateral, and that other indulgences or forbearance may be granted under any
or all of such documents, all of which may be made, done or suffered without
notice to, or further consent of, Guarantor.

                  11. As a further inducement to Lender to make the Loan and in
consideration thereof, Guarantor further covenants and agrees (a) that in any
action or proceeding brought by Lender against Guarantor on this Guaranty,
Guarantor shall and does hereby waive trial by jury, (b) Guarantor will maintain
a place of business or an agent for service of process in San Diego, California
and give prompt notice to Lender of the address of such place of business and of
the name and address of any new agent appointed by it, as appropriate, (c) the
failure of Guarantor's agent for service of process to give it notice of any
service of process will not impair or affect the validity of such service or of
any judgment based thereon, (d) if, despite the foregoing, there is for any
reason no agent for service of process of Guarantor available to be served, and
if Guarantor at that time has no place of business in San Diego, California then
Guarantor irrevocably consents to service of process by registered or certified
mail, postage prepaid, to it at its address given in or pursuant to the first
paragraph hereof, Guarantor hereby waiving personal service thereof, (e) that
within thirty days after such mailing, Guarantor so served shall appear or
answer to any summons and complaint or other process and should Guarantor so
served fail to appear or answer within said thirty-day period, said Guarantor
shall be deemed in default and judgment may be entered by Lender against the
said party for the amount as demanded in any summons and complaint or other
process so served, (f) Guarantor initially and irrevocably designates Latham &
Watkins, with offices on the date hereof at 701 B Street, Suite 2100, San Diego,
California 92101, Attention: Jon D. Demorest, Esq., to receive for and on behalf
of Guarantor service of process in San Diego, California with respect to this
Guaranty, (g) with respect to any claim or action arising hereunder, Guarantor
(i) irrevocably submits to the nonexclusive jurisdiction of the courts of the
states where the Properties are located and the United States District Court
located in the county in which the Properties are located, and appellate courts
from any thereof, and (ii) irrevocably waives any objection which it may have at
any time to the laying on venue of any suit, action or proceeding arising out of
or relating to this Guaranty brought in any such court, irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum, and (h) nothing in this Guaranty will be
deemed to preclude Lender from bringing an action or proceeding with respect
hereto in any other jurisdiction.

                  12. This is a guaranty of payment and not of collection and
upon any default of Borrower under the Note, the Security Instruments or the
Other Security Documents, Lender may,

                                       3
<PAGE>

at its option, proceed directly and at once, without notice, against Guarantor
to collect and recover the full amount of the liability hereunder or any portion
thereof, without proceeding against Borrower or any other person, or foreclosing
upon, selling, or otherwise disposing of or collecting or applying against any
of the mortgaged property or other collateral for the Loan. Guarantor hereby
waives the pleading of any statute of limitations as a defense to the obligation
hereunder.

                  13. Each reference herein to Lender shall be deemed to include
its successors and assigns, to whose favor the provisions of this Guaranty shall
also inure. Each reference herein to Guarantor shall be deemed to include the
heirs, executors, administrators, legal representatives, successors and assigns
of Guarantor, all of whom shall be bound by the provisions of this Guaranty.

                  14. If any party hereto shall be a partnership, the agreements
and obligations on the part of Guarantor herein contained shall remain in force
and application notwithstanding any changes in the individuals composing the
partnership and the term "Guarantor" shall include any altered or successive
partnerships but the predecessor partnerships and their partners shall not
thereby be released from any obligations or liability hereunder.

                  15. Guarantor (and its representative, executing below, if
any) has full power, authority and legal right to execute this Guaranty and to
perform all its obligations under this Guaranty.

                  16. All understandings, representations and agreements
heretofore had with respect to this Guaranty are merged into this Guaranty which
alone fully and completely expresses the agreement of Guarantor and Lender.

                  17. This Guaranty may be executed in one or more counterparts
by some or all of the parties hereto, each of which counterparts shall be an
original and all of which together shall constitute a single agreement of
Guaranty. The failure of any party hereto to execute this Guaranty, or any
counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.

                  18. This Guaranty may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act or failure to
act on the part of Lender or Borrower, but only by an agreement in writing
signed by the party against whom enforcement of any modification, amendment,
waiver, extension, change, discharge or termination is sought.

                  19. This Guaranty shall be deemed to be a contract entered
into pursuant to the laws of the State of New York and shall in all respects be
governed, construed, applied and enforced in accordance with applicable federal
law and the laws of the State of New York, without reference or giving effect to
any choice of law doctrine.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

                                       4
<PAGE>

                  IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty
as of the ___ day of ___________, 2000.

                                   PRICE ENTERPRISES, INC., a Maryland
                                   corporation

                                   By:
                                      -------------------------------------
                                       Name:
                                       Title:

<PAGE>

                                    EXHIBIT A

                 (DESCRIPTION OF NOTE AND SECURITY INSTRUMENTS)

1.       Promissory Note (the "Note") dated as of the date hereof by Borrower in
         favor of Lender in the original principal amount of the Loan.
2.       Mortgage and Security Agreement given by Borrower to Lender encumbering
         Westbury Retail, Westbury, New York
3.       Mortgage and Security Agreement given by Borrower to Lender encumbering
         Wayne Retail Center, Wayne, New Jersey
4.       Deed of Trust, Security Agreement, Assignment of Rents and Fixture
         Filing given by Borrower to Lender encumbering Signal Hill, Signal
         Hill, California
5.       Deed of Trust, Security Agreement, Assignment of Rents and Fixture
         Filing given by Borrower to Lender encumbering Roseville Retail Center,
         Roseville, California
6.       Open-End Mortgage and Security Agreement given by Borrower and Price
         Enterprises, Inc. to Lender encumbering Philadelphia Retail Center,
         Bensalem, Pennsylvania.

<PAGE>

                    FORM OF ENVIRONMENTAL INDEMNITY AGREEMENT

                  ENVIRONMENTAL INDEMNITY AGREEMENT made as of the 28th day
of June, 2000, by PRICE OWNER LLC, a Delaware limited liability company,
having its principal place of business at 17140 Bernardo Center Drive, Suite
300, San Diego, California 92128 ("Borrower") and PRICE ENTERPRISES, INC.
having an address at 17140 Bernardo Center Drive, Suite 300, San Diego,
California 92128 ("PEI") (Borrower and PEI hereinafter referred to
individually and collectively, as "Indemnitor"), in favor of GMAC COMMERCIAL
MORTGAGE CORPORATION, a California corporation, and its successors,
transferees and assigns ("Indemnitee") and other Indemnified Parties (as
defined below).

                              PRELIMINARY STATEMENT

                  WHEREAS, Borrower is the fee and/or leasehold owner of
those certain parcels of real property more particularly described in EXHIBIT
"A" attached hereto (said real property, together with any real property
hereafter encumbered by the lien of the Security Instruments (as hereinafter
defined), being herein collectively referred to as the "Land"; the Land,
together with all structures, buildings and improvements now or hereafter
located on the Land, being collectively referred to as the "Properties"); and

                  WHEREAS, Indemnitee is prepared to make a loan (the "Loan")
in the principal amount of $________________ to be evidenced by a certain
promissory note in the principal amount of $_________________ given by
Borrower to Indemnitee (the "Note") and secured by, among other things,
certain mortgages and/or deeds of trust and security agreements made by
Borrower to Indemnitee (the "Security Instruments") which will encumber the
Properties; and

                  WHEREAS, as a condition to making the Loan to Borrower,
Indemnitee requires Indemnitor to provide certain indemnities concerning
Hazardous Substances (as hereinafter defined); and

                  WHEREAS, to induce Indemnitee to consummate the above
described transaction, Indemnitor has agreed to enter into this Agreement;

                  NOW THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Indemnitor hereby represents, warrants and covenants to
Indemnitee as follows:

                  1. Indemnitor represents and warrants, based upon
environmental Phase I site assessments of the Properties and information that
Indemnitor knows, that: (a) there are no Hazardous Substances or underground
storage tanks in, on, or under the Properties, except those that are both (i)
in compliance with Environmental Laws (defined below) and with permits issued
pursuant thereto, if any, and (ii) fully disclosed to Indemnitee in writing
pursuant to (1) the written reports resulting from the environmental
assessments of the Properties delivered to Indemnitee (the

<PAGE>

"Environmental Reports") or (2) other written documents delivered to
Indemnitee; (b) there are no past or present Releases (defined below) of
Hazardous Substances in violation of any Environmental Law or which would
require Remediation (defined below) by a Governmental Authority in, on, under
or from the Properties except as described in the Environmental Reports; (c)
there is no past or present non-compliance with Environmental Laws, or with
permits issued pursuant thereto, in connection with the Properties except as
described in the Environmental Reports; (d) Indemnitor does not know of, and
has not received, any written or oral notice or other communication from any
person or entity (including, but not limited to a governmental entity)
relating to the presence of Hazardous Substances in, on, or under the
Properties or Remediation thereof, of possible liability of any person or
entity pursuant to any Environmental Law arising out of the environmental
condition of the Properties, or any actual administrative or judicial
proceedings in connection with any of the foregoing; and (e) Indemnitor has
truthfully and fully provided to Indemnitee, in writing, any and all
information relating to environmental conditions in, on, under or from the
Properties that is known to Indemnitor and that is contained in Indemnitor's
files and records, including, but not limited to any reports relating to
Hazardous Substances in, on, under or from the Properties and/or to the
environmental condition of the Properties.

                  2. (a) Indemnitor covenants and agrees that: (a) all uses
and operations on or of the Properties, by Indemnitor shall, and Indemnitor
shall use commercially reasonable efforts to cause all uses and operations on
or of the Properties by any other person or entity to be, in compliance with
all Environmental Laws and permits issued pursuant thereto; (b) there shall
be no Releases of Hazardous Substances by Indemnitor, and Indemnitor shall
use its commercially reasonable efforts to insure that there shall be no
Releases of Hazardous Substances by any other person or entity, in, on, under
or from the Properties, except those that are in compliance with all
Environmental Laws and with permits issued pursuant thereto; (c) there shall
be no Hazardous Substances in, on, or under the Properties caused by
Indemnitor, and Indemnitor shall use its commercially reasonable efforts to
insure that there shall be no Hazardous Substances caused by any other person
or entity, in, on, or under the Properties in, on, or under the Properties,
except those that are in compliance with all Environmental Laws and with
permits issued pursuant thereto; (d) Indemnitor shall keep the Properties
free and clear of all liens and other encumbrances imposed pursuant to any
Environmental Law, whether due to any act or omission of any Indemnitor or
any other person or entity (other than Indemnitee and its agents and
employees or any other Indemnified Party) (the "Environmental Liens"); (e)
Indemnitor shall, at its sole cost and expense, fully and expeditiously
cooperate in all activities pursuant to Section 3 below, including, but not
limited to providing all relevant information and making knowledgeable
persons available for interviews; (f) Indemnitor shall, at its sole cost and
expense, perform any environmental site assessment or other investigation of
environmental conditions in connection with the Properties, pursuant to any
reasonable written request of Indemnitee after Indemnitee has reason to
believe this Agreement has been violated (including, but not limited to
sampling, testing and analysis of soil, water, air, building materials and
other materials and substances whether solid, liquid or gas), and share with
Indemnitee the reports and other results thereof, and Indemnitee and other
Indemnified Parties (defined below) shall be entitled to rely on such reports
and other results thereof; (g) Indemnitor shall, at its sole cost and
expense, comply with all reasonable written requests of Indemnitee to (i)
reasonably effectuate Remediation of any condition (including, but not
limited to a Release of a Hazardous Substance) in, on, under or from the
Properties, (ii) comply with any Environmental Law, (iii) comply with any
directive from any governmental authority, and (iv) take any other reasonable
action necessary or

                                       2

<PAGE>

appropriate for protection of human health or the environment; (h) Indemnitor
shall not do or allow any tenant or other user of the Properties to do any
act that materially increases the dangers to human health or the environment,
poses an unreasonable risk of harm to any person or entity (whether on or off
the Properties), impairs or may impair the value of the Properties, is
contrary to any requirement of any insurer, constitutes a public or private
nuisance, constitutes waste, or violates any covenant, condition, agreement
or easement applicable to the Properties; and (i) Indemnitor shall
immediately notify Indemnitee in writing promptly after any Indemnitor has
become aware of (A) any presence or Releases or threatened Releases of
Hazardous Substances in, on, under, from or migrating towards any Property
which is required to be reported to a governmental authority under any
Environmental Law, (B) any actual Environmental Lien affecting any Property,
(C) any required Remediation of environmental conditions relating to the
Properties, and (D) any written or oral notice or other communication of
which any Indemnitor becomes aware from any source whatsoever (including, but
not limited to a governmental entity) relating in any way to the presence of
Hazardous Substances in violation of any Environmental Law, in, on, or under
any Property or Remediation thereof, possible liability of any person or
entity pursuant to any Environmental Law arising out of the environmental
condition of any Property, or any actual or threatened administrative or
judicial proceedings in connection with anything referred to in this
Agreement.

                  (b) Indemnitor covenants and agrees, if requested by
Indemnitee, to (i) reasonably promptly institute after such request, an
operating and maintenance program (the "Maintenance Program") with respect to
asbestos-containing materials ("ACMs"), PCBs ("PCBs") and/or lead based paint
("LBP"), consistent with the "Guidelines for Controlling Asbestos-Containing
Materials in Buildings" (USEPA, 1985) and other relevant guidelines, and such
Maintenance Program will hereafter continuously remain in effect until the
indebtedness secured by the Note is repaid in full or until such earlier time
as Indemnitee shall agree in writing to the termination of such Maintenance
Program and (ii) execute an Operations and Maintenance Agreement prepared by
an environmental consultant selected by Indemnitor and reasonably approved by
Indemnitee relating to such Maintenance Program in form and substance
reasonably satisfactory to Indemnitee. In furtherance of the foregoing,
Indemnitor shall inspect and maintain all ACMs, PCBs and LBP on a regular
basis to ensure that all ACMs, PCBs, and LBP shall be maintained in a
condition required by all applicable Environmental Laws. Without limiting the
generality of the preceding sentence, Indemnitee may reasonably require (i)
periodic notices or reports to Indemnitee in form, substance and at such
intervals as Indemnitee may specify, and (ii) an amendment to such
Maintenance Program to address changing circumstances, laws or other matters.

                  3. Indemnitee, its environmental consultant, and/or other
designated representatives, including, but not limited to any receiver shall
have the right, but not the obligation, at intervals of not less than one
year, or more frequently if the Indemnitee reasonably believes that a
Hazardous Substance or other environmental condition violates or threatens to
violate any Environmental Law, after notice to Indemnitor, to enter upon any
Property at all reasonable times to assess any and all aspects of the
environmental condition of such Property and its use, including, but not
limited to conducting any environmental assessment or audit of such Property
or portions thereof to confirm Indemnitor's compliance with this Agreement,
and Indemnitor shall cooperate in all reasonable ways with Indemnitee in
connection with any such audit. Such audit shall be performed in a manner so
as to minimize interference with the conduct of business at such Property to
the maximum extent reasonably feasible. If (i) Indemnitor has not provided a
reasonably acceptable

                                       3

<PAGE>

written audit report prepared by an environmental consultant reasonably
acceptable to Indemnitee within a reasonable time after receipt of a request
from Indemnitee therefor and (ii) such audit discloses that a violation of or
a liability under any Environmental Law exists or if such audit was required
or prescribed by law, regulation or governmental or quasi-governmental
authority, Indemnitor shall pay all costs and expenses incurred in connection
with such audit; otherwise, the costs and expenses of such audit shall,
notwithstanding anything to the contrary set forth in this Agreement, be paid
by Indemnitee.

                  4. (a) Indemnitor shall, at Indemnitor's sole cost and
expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or
incurred by or asserted against any Indemnified Parties, and arising out of
or in any way relating to any one or more of the following, unless caused by
the gross negligence, fraud, illegal acts or willful misconduct of any
Indemnified Party: (i) any presence of any Hazardous Substances in, on, above
or under any Property; (ii) any past, present or threatened Release of
Hazardous Substances in, on, above, under or from any Property; (iii) any
activity by Indemnitor, any person or entity affiliated with Indemnitor or
tenant or other users of any Property in connection with any actual, proposed
or threatened use, treatment, storage, holding, existence, disposition or
other Release, generation, production, manufacturing, processing, refining,
control, management, abatement, removal, handling, transfer or transportation
to or from the any Property of any Hazardous Substances at any time located
in, under, on or above the such Property; (iv) any activity by Indemnitor,
any person or entity affiliated with Indemnitor or tenant or other users of
any Property in connection with any actual or proposed Remediation of any
Hazardous Substances at any time located in, under, on or above such
Property, whether or not such Remediation is voluntary or pursuant to court
or administrative order, including, but not limited to any removal, remedial
or corrective action; (v) any past, present or threatened violations of any
Environmental Laws (or permits issued pursuant to any Environmental Law) in
connection with any Property or operations thereon, including, but not
limited to any failure by Indemnitor, any person or entity affiliated with
Indemnitor or tenant or other users of such Property to comply with any order
of any governmental authority in connection with Environmental Laws; (vi) the
imposition, recording or filing of any Environmental Lien encumbering any
Property; (vii) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in this Agreement;
(viii) any past, present or threatened injury to, destruction of or loss of
natural resources in any way connected with any Property, including, but not
limited to costs to investigate and assess such injury, destruction or loss;
(ix) any acts of Indemnitor or other users of any Property (except if said
user was employed by, or under the control of, Indemnitee) in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Indemnitor or other users, at any facility or incineration vessel owned or
operated by another person or entity and containing such or similar Hazardous
Substance; (x) any acts of Indemnitor or other users of any Property (except
if said user was employed by, or under the control of, Indemnitee), in
accepting any Hazardous Substances for transport to disposal or treatment
facilities, incineration vessels or sites selected by Indemnitor or such
other users, from which there is a Release, or a threatened Release of any
Hazardous Substance which causes the incurrence of costs for Remediation;
(xi) any personal injury, wrongful death, or property damage caused by the
presence of Hazardous Substances in, on, or under the Properties arising
under any statutory or common law or tort law theory, including, but not
limited to damages assessed for the maintenance of a private or public
nuisance or for the conducting of an abnormally dangerous activity on or near
any Property;

                                       4

<PAGE>

and (xii) any intentional misrepresentation in any representation or warranty
or material breach or failure to perform any covenants or other obligations
pursuant to this Agreement. Notwithstanding the provisions of this Agreement
to the contrary, the liabilities and obligations of Indemnitor hereunder
shall not apply to the extent that Indemnitor can prove that such liabilities
and obligations arose solely from Hazardous Substances that: (1) were not
Released on any Property prior to the date that Indemnitee or its nominee
acquired title to such Property, whether by foreclosure, exercise of power of
sale or otherwise and (2) were not Released as the result of any act or
negligence of Indemnitor or any of Indemnitor's affiliates, agents or
contractors. An environmental audit prepared by an environmental consultant
reasonably acceptable to Indemnitee dated the date of Indemnitee's
acquisition of title to a Property whether by foreclosure, exercise of power
of sale or otherwise shall be acceptable evidence for the purpose of the
immediately preceding sentence.

                  (b) Upon written request by any Indemnified Party,
Indemnitor shall defend such Indemnified Party (if requested by any
Indemnified Party, in the name of the Indemnified Party) by attorneys and
other professionals reasonably acceptable to the Indemnified Parties.
Notwithstanding the foregoing, any Indemnified Parties may, in their sole and
absolute discretion, engage their own attorneys and other professionals to
defend or assist them, and, at the option of Indemnified Parties, their
attorneys shall act as co-counsel in connection with the resolution of any
claim or proceeding, provided, however, that upon (1) an Event of Default or
(2) Indemnified Parties reasonable belief that the attorneys and/or other
professionals engaged by Indemnitor are not adequately pursuing the
resolution of such claim or proceeding, the attorneys of Indemnified Parties
shall control the resolution of any claim or proceeding. Upon demand,
Indemnitor shall pay or, in the sole and absolute discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.

                  5. The term "Hazardous Substances" shall mean any and all
substances (whether solid, liquid or gas) (i) defined, listed, or otherwise
classified as pollutants, hazardous wastes, hazardous substances, hazardous
materials, extremely hazardous wastes, or words of similar meaning or
regulatory effect under any present or future, Environmental Laws or (ii)
that may have a negative impact on human health or the environment,
including, but not limited to petroleum and petroleum products, asbestos and
asbestos-containing materials, polychlorinated biphenyls, lead, radon,
radioactive materials, flammables and explosives.

                  6. The term "Environmental Law" shall mean the following
statutes, as amended, any successor thereto, and any regulations promulgated
pursuant thereto, and any state or local statutes, ordinances, rules,
regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency
Planning and Community Right-to-Know Act; the Hazardous Substances
Transportation Act; the Resource Conservation and Recovery Act (including,
but not limited to Subtitle I relating to underground storage tanks); the
Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic
Substances Control Act; the Safe Drinking Water Act; the Occupational Safety
and Health Act; the Federal Water Pollution Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the
National Environmental Policy Act; and the River and Harbors Appropriation
Act. "Environmental Law" also includes, but is not limited to, any present or
future, federal, state and local laws, statutes, ordinances, rules,
regulations and the like, as well as common law either (i)

                                       5

<PAGE>

conditioning transfer of property upon a negative declaration or other
approval of a governmental authority of the environmental condition of the
property or (ii) requiring notification or disclosure of Releases of
Hazardous Substances or other environmental condition of any Property to any
governmental authority or other person or entity, whether or not in
connection with transfer of title to or interest in property.

                  7. The term "Release" of any Hazardous Substance means any
release, deposit, discharge, emission, leaking, spilling, seeping, migrating,
injecting, pumping, pouring, emptying, escaping, dumping, disposing or other
movement of Hazardous Substances.

                  8. The term "Remediation" means any response, remedial
removal, or corrective action, any activity to cleanup, detoxify,
decontaminate, contain or otherwise remediate any Hazardous Substance, any
actions to prevent, cure or mitigate any Release of any Hazardous Substance,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring,
assessment, audit, sampling and testing, laboratory or other analysis, or
evaluation relating to any Hazardous Substances or to anything referred to in
this Agreement.

                  9. The term "Indemnified Parties" means Indemnitee and any
person or entity who is or will have been involved in the origination of the
Loan, any person or entity who is or will have been involved in the servicing
of the Loan, any person or entity in whose name the encumbrances created by
the Security Instruments are or will have been recorded, persons and entities
who may hold or acquire or will have held a full or partial interest in the
Loan (including, but not limited to Investors (as defined in the Security
Instruments) or prospective Investors in the Securities (as defined in the
Security Instruments), as well as custodians, trustees and other fiduciaries
who hold or have held a full or partial interest in the Loan for the benefit
of third parties) as well as the respective directors, officers,
shareholders, members, partners, employees, agents, affiliates having an
involvement with the Loan, subsidiaries having an involvement with the Loan,
participants, successors and assigns of any and all of the foregoing
(including, but not limited to any other person or entity who holds or
acquires or will have held a participation or other full or partial interest
in the Loan or any Property, whether during the term of the Loan or as a part
of or following a foreclosure of the Loan and including, but not limited to
any successors by merger, consolidation or acquisition of all or a
substantial portion of Indemnitee's assets and business).

                  10. The term "Losses" includes any and all claims, suits,
liabilities (including, without limitation, strict liabilities), actions,
proceedings, obligations, debts, damages, losses, costs, expenses,
diminutions in value, fines, penalties, charges, fees, expenses, judgments,
awards, amounts paid in settlement, costs of Remediation (whether or not
performed voluntarily), engineers' fees, environmental consultants' fees, and
costs of investigation (including, but not limited to sampling, testing and
analysis of soil, water, air, building materials and other materials and
substances whether solid, liquid or gas) or punitive damages, of whatever
kind or nature (including, but not limited to attorneys' fees and other costs
of defense).

                  11. This Agreement, the payment of all sums due hereunder
and the performance and discharge of each and every obligation, covenant and
agreement of Indemnitor contained herein, are, and shall be deemed to be,
secured by the Security Instrument.

                                       6

<PAGE>

                  12. The liability of Indemnitor under this Agreement shall
in no way be limited or impaired by, and Indemnitor hereby consents to and
agrees to be bound by, any amendment or modification of the provisions of the
Note, the Security Instruments or any other document which evidences, secures
or guarantees all or any portion of the Loan (the "Other Security Documents")
to or with Indemnitee or Indemnitor or any person who succeeds any Indemnitor
or Borrower as owner of any Property. In addition, the liability of
Indemnitor under this Agreement shall in no way be limited or impaired by (a)
any extensions of time for performance required by the Note, the Security
Instruments or any of the Other Security Documents, (b) subject to the last
sentence of Section 4(a) hereof, any sale or transfer of all or part of any
Property, (c) except as provided herein, any exculpatory provision in the
Note, the Security Instruments, or any of the Other Security Documents
limiting Indemnitee's recourse to property encumbered by the Security
Instruments or to any other security, or limiting Indemnitee's rights to a
deficiency judgment against Indemnitor or Borrower, (d) the accuracy or
inaccuracy of the representations and warranties made by Indemnitor or
Borrower under the Note, the Security Instruments or any of the Other
Security Documents or herein, (e) the release of any Indemnitor or Borrower
or any other person from performance or observance of any of the agreements,
covenants, terms or conditions contained in any of the Other Security
Documents by operation of law, Indemnitee's voluntary act, or otherwise, (f)
subject to the last sentence of Section 4(a) hereof the release or
substitution in whole or in part of any security for the Note, or (g)
Indemnitee's failure to record any Security Instrument or file any UCC
financing statements (or Indemnitee's improper recording or filing of any
thereof) or to otherwise perfect, protect, secure or insure any security
interest or lien given as security for the Note; and, in any such case,
whether with or without notice to Indemnitor and with or without
consideration.

                  13. Indemnitee may enforce the obligations of Indemnitor
without first resorting to or exhausting any security or collateral or
without first having recourse to the Note, the Security Instruments, or any
Other Security Documents or any of the Properties, through foreclosure
proceedings or otherwise, provided, however, that nothing herein shall
inhibit or prevent Indemnitee from suing on the Note, foreclosing, or
exercising any power of sale under, any Security Instrument, or exercising
any other rights and remedies thereunder. This Agreement is not collateral or
security for the debt of Borrower pursuant to the Loan, unless Indemnitee
expressly elects in writing to make this Agreement additional collateral or
security for the debt of Borrower pursuant to the Loan, which Indemnitee is
entitled to do in its sole and absolute discretion. It is not necessary for
an Event of Default to have occurred pursuant to and as defined in the
Security Instruments for Indemnified Parties to exercise their rights
pursuant to this Agreement. Notwithstanding any provision of the Security
Instruments, the obligations pursuant to this Agreement are exceptions to any
non-recourse or exculpation provision of the Security Instruments;
Indemnitors are fully and personally liable for such obligations, and their
liability is not limited to the original or amortized principal balance of
the Loan or the value of the Properties.

                  14. The obligations and liabilities of Indemnitor under
this Indemnity shall survive any termination, satisfaction, assignment, entry
of a judgment of foreclosure, exercise of any power of sale, or delivery of a
deed in lieu of foreclosure of any Security Instrument, provided, however,
all obligations and liabilities of Indemntior under this Agreement 12 shall
cease and terminate on the first (1st) anniversary of the date of payment to
Indemnitee in cash of the entire Debt, provided that contemporaneously with
or subsequent to such payment, Indemnitor, at its sole cost and expense,

                                       7

<PAGE>

delivers to Indemnitee an environmental audit of each Property in form and
substance, and prepared by a qualified environmental consultant, reasonably
satisfactory in all respects to Indemnitee and indicating that all of the
Properties are in material compliance with all applicable Environmental Laws

                  15. Any amounts payable to Indemnitee under this Agreement
shall become immediately due and payable and, if not paid within five (5)
days of written demand therefor, shall bear interest at the rate equal to the
lesser of (a) the Default Rate (as defined in the Note), or (b) the maximum
interest rate which Borrower or any other Indemnitor may by law pay or
Indemnified Parties may charge and collect, from the date payment was due.

                  16. Indemnitor hereby waives (a) any right or claim of
right to cause a marshaling of Indemnitor's assets or to cause Indemnitee or
other Indemnitee to proceed against any of the security for the Loan before
proceeding under this Agreement against Indemnitor; (b) and relinquishes all
rights and remedies accorded by applicable law to indemnitors or guarantors,
except any rights of subrogation which Indemnitor may have, provided that the
indemnity provided for hereunder shall neither be contingent upon the
existence of any such rights of subrogation nor subject to any claims or
defenses whatsoever which may be asserted in connection with the enforcement
or attempted enforcement of such subrogation rights including, without
limitation, any claim that such subrogation rights were abrogated by any acts
of Indemnitee or other Indemnitee; (c) the right to assert a counterclaim,
other than a mandatory or compulsory counterclaim, in any action or
proceeding brought against or by Indemnitee or other Indemnitee; (d) trial by
jury in any action or proceeding brought by Indemnitor or Indemnitee or other
Indemnitee or in any counterclaim asserted by Indemnitee or other Indemnitee
against Indemnitor or in any matter whatsoever arising out of or in any way
connected with this Agreement; (e) notice of acceptance hereof and of any
action taken or omitted in reliance hereon; (f) presentment for payment,
demand of payment, protest or notice of nonpayment or failure to perform or
observe, or other proof, or notice or demand under this Agreement; and (g)
all homestead exemption rights against the obligations hereunder and the
benefits of any statutes of limitations or repose. Notwithstanding anything
to the contrary contained herein, Indemnitor hereby agrees to postpone the
exercise of any rights of subrogation with respect to any collateral securing
the Loan until the Loan shall have been paid in full.

                  17. Indemnitor shall take any and all reasonable actions,
including institution of legal action against third-parties, necessary or
appropriate to obtain reimbursement, payment or compensation from such
persons responsible for the presence of any Hazardous Substances at, in, on,
under or near the Properties or otherwise obligated by law to bear the cost.
Indemnitee shall be and hereby is subrogated to all of Indemnitor's rights
now or hereafter in such claims.

                  18. Indemnitor shall cooperate with Indemnitee, and provide
reasonable access (with minimal interference to the maximum extent reasonably
feasible) to Indemnitee and any professionals engaged by Indemnitee, upon
Indemnitee's request, to conduct, contract for, evaluate or interpret any
environmental assessments, audits, investigations, testing, sampling,
analysis and similar procedures on any Property.

                  19. Each Indemnitor represents and warrants that:

                                       8

<PAGE>

                      (a) if Indemnitor is a corporation, partnership or
limited liability company, it has the full corporate/partnership/company
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder; the execution, delivery and performance of this
Agreement by Indemnitor has been duly and validly authorized; and all
requisite corporate/partnership/company action has been taken by Indemnitor
to make this Agreement valid and binding upon Indemnitor, enforceable in
accordance with its terms;

                      (b) if Indemnitor is an individual, he/she is acting in
an individual capacity and has full power and authority to make this
Agreement valid and binding upon Indemnitor, enforceable in accordance with
its terms;

                      (c) if Indemnitor is a corporation, a partnership or a
limited liability company, its execution of, and compliance with, this
Agreement is in the ordinary course of business of that Indemnitor and will
not result in the breach of any term or provision of the charter, by-laws,
partnership or trust agreement, articles of organization, operating agreement
or other governing instrument of that Indemnitor or result in the breach of
any term or provision of, or conflict with or constitute a default under or
result in the acceleration of any obligation under any agreement, indenture
or loan or credit agreement or other instrument to which the Indemnitor or
the Properties is subject, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Indemnitor or any Property
is subject;

                      (d) if Indemnitor is an individual, his/her execution
of, and compliance with, this Agreement will not result in the breach of any
term or provision of, or conflict with or constitute a default under or
result in the acceleration of any obligation under any agreement, indenture
or loan or credit agreement or other instrument to which Indemnitor any
Property is subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Indemnitor or any Property is subject;

                      (e) there is no action, suit, proceeding or
investigation pending or threatened against it which, either in any one
instance or in the aggregate, may result in any material adverse change in
the business, operations, financial condition, properties or assets of
Indemnitor, or in any material impairment of the right or ability of
Indemnitor to carry on its business substantially as now conducted, or in any
material liability on the part of Indemnitor, or which would draw into
question the validity of this Agreement or of any action taken or to be taken
in connection with the obligations of Indemnitor contemplated herein, or
which would be likely to impair materially the ability of Indemnitor to
perform under the terms of this Agreement;

                      (f) it does not believe, nor does it have any reason or
cause to believe, that it cannot perform each and every covenant contained in
this Agreement;

                      (g) no approval, authorization, order, license or
consent of, or registration or filing with, any governmental authority or
other person, and no approval, authorization or consent of any other party is
required in connection with this Agreement; and

                                       9

<PAGE>

                      (h) this Agreement constitutes a valid, legal and
binding obligation of Indemnitor, enforceable against it in accordance with
the terms hereof.

                  20. No delay on Indemnitee's part in exercising any right,
power or privilege under this Agreement shall operate as a waiver of any such
privilege, power or right.

                  21. Each party hereto shall, within five (5) business days
of receipt thereof, give written notice to the other party hereto of (a) any
notice or advice from any governmental agency or any source whatsoever with
respect to Hazardous Substances on, from or affecting any Property, and (b)
any claim, suit or proceeding, whether administrative or judicial in nature
("Legal Action"), brought against such party or instituted with respect to
any Property, with respect to which Indemnitor may have liability under this
Agreement. Such notice shall comply with the provisions of paragraph 24
hereof.

                  22. Indemnitee shall, at all times, be free to
independently establish to its satisfaction and in its absolute discretion
the compliance with the terms of this Agreement, including random inspections
on a reasonable basis.

                  23. Each Indemnitor has filed all federal, state, county,
municipal, and city income and other tax returns required to have been filed
by it and has paid all taxes and related liabilities which have become due
pursuant to such returns or pursuant to any assessments received by it. No
Indemnitor knows of any basis for any additional assessment in respect of any
such taxes and related liabilities for prior years.

                  24. All notices given under this Agreement shall be given
and become effective as provided in the Note, except that notices to the
Indemnitor shall be sent to Borrower as provided in the Security Instrument
and to the other Indemnitor parties at the addresses set forth below (subject
to change as provided in the Note).

                  25. With respect to any claim or action arising hereunder,
Indemnitor (a) irrevocably submits to the nonexclusive jurisdiction of the
courts of the states in which the Properties are located and any appellate
courts thereof, and (b) irrevocably waives any objection which Indemnitor may
have at any time to the laying on venue of any suit, action or proceeding
arising out of or relating to this Agreement brought in any such court,
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.

                  26. The terms of this Agreement are for the sole and
exclusive protection and use of Indemnitee. No party shall be a third-party
beneficiary hereunder, and no provision hereof shall operate or inure to the
use and benefit of any such third party. It is agreed that those persons and
entities included in the definition of "Indemnified Parties" are not such
excluded third-party beneficiaries.

                  27. Capitalized terms used herein and not specifically
defined herein shall have the respective meanings ascribed to such terms in
the Security Instruments.

                                       10

<PAGE>

                  28. This Agreement may be executed in several counterparts,
each of which counterparts shall be deemed an original instrument and all of
which together shall constitute a single Agreement. The failure of any party
hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.

                  29. This Agreement may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act or failure
to act on the part of Indemnitee, but only by an agreement in writing signed
by the party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.

                  30. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require. Without limiting
the effect of specific references in any provision of this Agreement, the
term "Indemnitor" shall be deemed to refer to Indemnitor and each person or
entity comprising Indemnitor from time to time, as the sense of a particular
provision may require, and to include the heirs, executors, administrators,
legal representatives, successors and assigns of Indemnitor, all of whom
shall be bound by the provisions of this Agreement. Each reference herein to
Indemnitee shall be deemed to include its successors and assigns, to whose
favor the provisions of this Agreement shall also inure.

                  31. If Indemnitor consists of more than one person or
entity, the obligations and liabilities of each such person or entity
hereunder shall be joint and several.

                  32. Any one or more parties liable upon or in respect of
this Agreement may be released without affecting the liability of any party
not so released.

                  33. The rights and remedies herein provided are cumulative
and not exclusive of any rights or remedies which Indemnitee has under the
Note, the Security Instruments, or the Other Security Documents or would
otherwise have at law or in equity.

                  34. If any term, condition or covenant of this Agreement
shall be held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be construed without such provision.

                  35. This Agreement shall be governed and construed in
accordance with the laws of the state of New York and the applicable laws of
the United States of America.

                  36. (a) Wherever pursuant to this Agreement: (i) Indemnitee
exercises any right given to it to approve or disapprove, (ii) any
arrangement or term is to be satisfactory to Indemnitee, or (iii) any other
decision or determination is to be made by Indemnitee, the decision of
Indemnitee to approve or disapprove, all decisions that arrangements or terms
are satisfactory or not satisfactory, and all other decisions and
determinations made by Indemnitee, shall be in the sole and absolute
discretion of Indemnitee and shall be final and conclusive, except as may be
otherwise expressly and specifically provided herein.

                  (b) Wherever pursuant to this Agreement it is provided that
Indemnitor pay any costs and expenses, such costs and expenses shall include,
but not be limited to, legal fees and

                                       11

<PAGE>

disbursements of Indemnitee, whether retained firms, the reimbursement for
the expenses of the in-house staff or otherwise.

                  (c) Any reference to attorneys' fees payable by Indemnitor
shall be deemed to mean attorneys' fees actually incurred.

                                       12

<PAGE>

                  IN WITNESS WHEREOF, this Agreement has been executed by
Indemnitor as of the date first above written.

                           PRICE OWNER LLC, a Delaware limited liability
                           company

                           By:      Price Owner Corp., a Delaware corporation,
                                    its managing member

                                    By:      ___________________________
                                             Name:
                                             Title:

                           PRICE ENTERPRISES, INC., a Maryland
                           corporation

                           By:      _________________________
                                    Name:
                                    Title:

<PAGE>

                                   EXHIBIT "A"

                        LEGAL DESCRIPTION OF REAL ESTATE
                                (to be attached)

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