Document:

General Electric Capital Business                                  Exhibit 10.33
Asset Funding Corporation
Loan No. 001-0010771-001

                            BALLOON PROMISSORY NOTE

         (1920 Acacia Avenue, Compton, Los Angeles County, California)
$2,000,000.00                                                 December 27 , 2002

     FOR VALUE RECEIVED, APPLIANCE RECYCLING CENTERS OF AMERICA, INC., a
Minnesota corporation ("Borrower"), promises to pay to the order of GENERAL
ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION ("Payee"; Payee and any
subsequent holder of this Note being referred to herein as "Holder") at Payee's
office at 10900 NE 4th Street, Suite 500, Bellevue, Washington 98004, attention:
Real Estate Department, or at such other address as Holder may from time to time
designate in writing, the principal sum of Two Million and no hundredths Dollars
($2,000,000.00) together with interest from the date the proceeds of the loan
(the "LOAN") evidenced by this Promissory Note (this "NOTE") are initially
disbursed (including, without limitation, disbursement into an escrow for the
benefit of Borrower) until maturity on the principal balance from time to time
remaining unpaid hereon at the rate of six and eighty-five hundredths percent
(6.85%) per annum (computed on the basis of a 360-day year of twelve (12)
consecutive thirty (30)-day months) in installments as follows: (i) interest
only in advance at the rate of $380.56 per day shall be due and payable on the
date the proceeds of the Loan are initially disbursed to or for the benefit of
Borrower (including, without limitation, disbursement into an escrow for the
benefit of Borrower) for the period beginning on the date of such disbursement
and ending on the last day of the month during which such disbursement occurs;
and (ii) 119 installments of principal and interest in the amount of $15,326.42
each shall be payable commencing on the first day of the second month following
the month in which the proceeds of the loan evidenced by this Note are initially
disbursed and continuing on the first day of each and every succeeding month
until January 1, 2013 ("Maturity"), at which time all then unpaid principal and
interest hereon shall be due and payable. A substantial payment will be due at
Maturity, as the monthly payment of principal and interest set forth herein
represents an amount which would amortize the principal face amount of this Note
in full at the interest rate set forth herein over a period of 240 months.

     If any payment shall not be received by Holder within ten (10) days after
its due date, Borrower shall pay an additional charge equal to five percent
(5.00%) of the delinquent payment or the highest additional charge permitted by
law, whichever is less.

     Upon not less than fifteen (15) days' advance written notice to Holder and
upon payment of a prepayment premium as set forth below (the "Prepayment
Premium"), Borrower shall have the right to prepay all, but not less than all,
of the outstanding balance of this Note on any regularly scheduled principal and
interest payment date. The "Prepayment Premium" shall be equal to the sum of the
Base Premium (defined below) and the Variable Premium (defined below).

<PAGE>

     The "Base Premium" shall be determined by multiplying the following
described applicable base premium factor (the "Base Premium Factor") by the
principal balance to be prepaid. The "Variable Premium" shall be determined by
(i) calculating the decrease (expressed in basis points) in the current weekly
average yield of Ten (10)-Year U.S. Dollar Interest Rate Swaps (as published in
Federal Reserve Statistical Release H.15 [519]) (the "Index") from Friday,
November 15, 2002, to the Friday immediately preceding the week in which the
prepayment is made, (ii) dividing the decrease by 100, (iii) multiplying the
result by the following described applicable variable premium factor (the
"Variable Premium Factor"), and (iv) multiplying the product by the principal
balance to be prepaid. If the Index is unchanged or has increased from Friday,
November 15, 2002, to the Friday immediately preceding the prepayment date, the
Variable Premium Factor shall be equal to Zero Dollars ($0.00). The Base Premium
Factor and the Variable Premium Factor shall be the amounts shown on the
following chart for the month in which prepayment occurs:

 No. Mos.              Years            Base           Variable
Remaining            Remaining      Premium Factor  Premium Factor
---------            ---------      --------------  --------------

120 - 109               10              .05             .070

 108 - 97                9              .04             .065

  96 - 85                8              .03             .060

  84 - 73                7              .02             .054

  72 - 61                6              .01             .048

  60 - 49                5               0              .042

  48 - 37                4               0              .036

  36 - 25                3               0              .029

  24 - 13                2               0              .022

   12 - 1                1               0              .013

If the Federal Reserve Board ceases to publish Statistical Release H.15 [519],
then the decrease in the weekly average yield of Ten (10)-Year U.S. Dollar
Interest Rate Swaps will be determined from another source designated by Holder.

     If Holder at any time accelerates this Note after an Event of Default
(defined below), then Borrower shall be obligated to pay the Prepayment Premium
in accordance with the foregoing schedule. The Prepayment Premium shall not be
payable in the case of an assumption of the Loan (if permitted by Holder
pursuant to the terms of the Security Instrument (as hereinafter defined)), nor
with respect to condemnation awards or insurance proceeds from fire or other
casualty which Holder applies to prepayment, nor with respect to Borrower's
prepayment of the Note in full during the last three (3) months of the term of
this Note unless an Event of Default has occurred and is continuing. Borrower
expressly acknowledges that such Prepayment Premium is not a penalty but is
intended solely to compensate Holder for the loss of its bargain and the
reimbursement of internal expenses and administrative fees and expenses incurred
by Holder.

     Holder shall have full recourse against Borrower for all sums due under
this Note and for all the representations, warranties, indemnities and covenants
in the Commercial Deed of Trust,

                                       2
<PAGE>

Financing Statement, Security Agreement, Assignment of Leases and Rents and
Fixture Filing ("Security Instrument") covering the property (the "Property")
securing this Note and all other documents executed or delivered in connection
herewith (the "Loan Documents").

     Each of the following shall constitute an Event of Default ("Event of
Default") hereunder and under the Security Instrument:

          (a) Failure of Holder to receive any payment of principal, interest,
     or Prepayment Premium upon this Note when due, and such failure shall
     continue for ten (10) days after written notice is given by Holder to
     Borrower of the same; or

          (b) Failure of Borrower to observe or perform any other obligation
     under any Loan Document (other than this Note) when such observance or
     performance is due, and such failure shall continue beyond the applicable
     cure period set forth in such Loan Document, or if the default cannot be
     cured within such applicable cure period, Borrower fails within such time
     to commence and pursue curative action with reasonable diligence or fails
     at any time after expiration of such applicable cure period to continue
     with reasonable diligence all necessary curative actions.

     Upon the occurrence of any Event of Default, Holder shall have the option
to declare the entire amount of principal and interest due under this Note
immediately due and payable without notice or demand, and Holder may exercise
any of its rights under this Note and any document executed or delivered
herewith. After acceleration or maturity, Borrower shall pay interest on the
outstanding principal balance of this Note at the rate of five percent (5.00%)
per annum above the prime interest rate as quoted in the Wall Street Journal
("WSJ") in effect from time to time, or fifteen percent (15.00%) per annum,
whichever is higher, provided that such interest rate shall not exceed the
maximum interest rate permitted by law (the "Default Rate"). If the WSJ Rate is
unavailable or no longer quoted, Lender may select such replacement index as
Lender in its sole discretion determines most closely approximates the rate
quoted in the WSJ.

     All payments of the principal and interest on this Note shall be made in
coin or currency of the United States of America which at the time shall be the
legal tender for the payment of public and private debts.

     If this Note is placed in the hands of an attorney for collection, Borrower
shall pay reasonable attorneys' fees and costs incurred by Holder in connection
therewith, and in the event suit or action is instituted to enforce or interpret
this Note (including without limitation efforts to modify or vacate any
automatic stay or injunction), the prevailing party shall be entitled to recover
all expenses reasonably incurred at, before or after trial and on appeal,
whether or not taxable as costs, or in any bankruptcy proceeding, or in
connection with post-judgment collection efforts, including, without limitation,
reasonable attorneys' fees, witness fees (expert and otherwise), deposition
costs, copying charges and other expenses.

     This Note shall be governed and construed in accordance with the laws of
the State of California applicable to contracts made and to be performed therein
(excluding choice-of-law principles). Borrower hereby irrevocably submits to the
jurisdiction of any state or federal court

                                       3
<PAGE>

sitting in California in any action or proceeding brought to enforce or
otherwise arising out of or relating to this Note, and hereby waives any
objection to venue in any such court and any claim that such forum is an
inconvenient forum.

     This Note is given in a commercial transaction for business purposes.

     This Note may be declared due prior to its expressed maturity date, all in
the events, on the terms, and in the manner provided for in the Security
Instrument.

     Borrower and all sureties, endorsers, guarantors and other parties now or
hereafter liable for the payment of this Note, in whole or in part, hereby
severally (i) waive demand, notice of demand, presentment for payment, notice of
nonpayment, notice of default, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices except those for which
the Loan Documents expressly provide, and further waive diligence in collecting
this Note or in enforcing any of the security for this Note; (ii) agree to any
substitution, subordination, exchange or release of any security for this Note
or the release of any party primarily or secondarily liable for the payment of
this Note; (iii) agree that Holder shall not be required to first institute suit
or exhaust its remedies hereon against Borrower or others liable or to become
liable for the payment of this Note or to enforce its rights against any
security for the payment of this Note; and (iv) consent to any extension of time
for the payment of this Note, or any installment hereof, made by agreement by
Holder with any person now or hereafter liable for the payment of this Note,
even if Borrower is not a party to such agreement.

     Borrower authorizes Holder or its agent to insert in the spaces provided
herein the appropriate interest rate and the payment amounts as of the date of
the initial advance hereunder.

     All agreements between Borrower and Holder, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand or acceleration of the final maturity
of this Note or otherwise, shall the interest contracted for, charged, received,
paid or agreed to be paid to Holder exceed the maximum amount permissible under
the applicable law. If, from any circumstance whatsoever, interest would
otherwise be payable to Holder in excess of the maximum amount permissible under
applicable law, the interest payable to Holder shall be reduced to the maximum
amount permissible under applicable law; and if from any circumstance Holder
shall ever receive anything of value deemed interest by applicable law in excess
of the maximum amount permissible under applicable law, an amount equal to the
excessive interest shall be applied to the outstanding principal balance hereof,
or if such excessive amount of interest exceeds the unpaid balance of principal
hereof, such excess shall be refunded to Borrower. All interest paid or agreed
to be paid to Holder shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full period (including
any renewal or extension) until payment in full of the principal so that the
interest hereon for such full period shall not exceed the maximum amount
permissible under applicable law. Holder expressly disavows any intent to
contract for, charge or receive interest in an amount which exceeds the maximum
amount permissible under applicable law. This paragraph shall control all
agreements between Borrower and Holder.

                                       4
<PAGE>

     WAIVER OF JURY TRIAL. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTELLIGENTLY WAIVES ANY AND ALL RIGHTS THAT EACH PARTY TO THIS NOTE MAY NOW OR
HEREAFTER HAVE UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR THE STATE OF
CALIFORNIA, TO A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING DIRECTLY OR
INDIRECTLY IN ANY ACTION OR PROCEEDING RELATING TO THIS NOTE, THE LOAN DOCUMENTS
OR ANY TRANSACTIONS CONTEMPLATED THEREBY OR RELATED THERETO. IT IS INTENDED THAT
THIS WAIVER SHALL APPLY TO ANY AND ALL DEFENSES, RIGHTS, CLAIMS AND/OR
COUNTERCLAIMS IN ANY SUCH ACTION OR PROCEEDING.

     BORROWER UNDERSTANDS THAT THIS WAIVER IS A WAIVER OF A CONSTITUTIONAL
SAFEGUARD, AND EACH PARTY INDIVIDUALLY BELIEVES THAT THERE ARE SUFFICIENT
ALTERNATE PROCEDURAL AND SUBSTANTIVE SAFEGUARDS, INCLUDING, A TRIAL BY AN
IMPARTIAL JUDGE, THAT ADEQUATELY OFFSET THE WAIVER CONTAINED HEREIN.

                    [REMAINDER OF PAGE INTENTIONALLY BLANK;
                            EXECUTION PAGE FOLLOWS]

                                       5
<PAGE>

     IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.

                         TIME IS OF THE ESSENCE HEREOF.

BORROWER HEREBY EXPRESSLY (1) WAIVES ANY RIGHTS IT MAY HAVE UNDER CALIFORNIA
CIVIL CODE SECTION 2954.10 TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT
PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND (2) AGREES
THAT IF, FOR ANY REASON, A PREPAYMENT OF ANY OR ALL OF THIS NOTE IS MADE,
WHETHER VOLUNTARY OR UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF
THIS NOTE BY HOLDER ON ACCOUNT OF ANY DEFAULT BY BORROWER UNDER THIS NOTE, THE
DEED OF TRUST OR ANY OTHER DOCUMENT EVIDENCING OR SECURING THE LOAN, INCLUDING,
BUT NOT LIMITED TO, ANY TRANSFER OR DISPOSITION AS PROHIBITED OR RESTRICTED BY
THE PROVISIONS OF THE DEED OF TRUST, THEN BORROWER SHALL BE OBLIGATED TO PAY,
CONCURRENTLY THEREWITH, THE PREPAYMENT PREMIUM. BY SIGNING THIS PROVISION IN THE
SPACE PROVIDED BELOW, BORROWER AGREES THAT HOLDER'S AGREEMENT TO MAKE THE LOAN
EVIDENCED BY THIS NOTE AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS
NOTE CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER FOR
THIS WAIVER AND AGREEMENT.

                                   BORROWER: / s / E d w a r d R . C a m e r o n

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

                                        BORROWER:

                                        APPLIANCE RECYCLING CENTERS OF
                                        AMERICA, INC., a Minnesota corporation

                                        By: /s/Edward R. Cameron
                                        Print: Edward R. Cameron
                                        Its: President

                      [EXECUTION PAGE OF PROMISSORY NOTE]

                                       6
<PAGE>

THIS SECURITY INSTRUMENT WAS
PREPARED BY, AND UPON RECORDING
SHOULD BE RETURNED TO:

Beth M. Ascher, Esq.
Kutak Rock LLP
1650 Farnam St.
Omaha, NE 68102-2186

Index this document as
(1) deed of trust and
(2) fixture filing
ASSESSOR'S PARCEL NO. 7318-013-033

--------------------------------------------------------------------------------
                     (SPACE ABOVE LINE FOR RECORDER'S USE)

                           COMMERCIAL DEED OF TRUST,
                    FINANCING STATEMENT, SECURITY AGREEMENT,
                         ASSIGNMENT OF LEASES AND RENTS
                               AND FIXTURE FILING

                 APPLIANCE RECYCLING CENTERS OF AMERICA, INC.,
                            a Minnesota corporation

                                   (Grantor)

                                       to

                            COMMONWEALTH LAND TITLE

                                   (Trustee)

                                  in favor of

          GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION,
                             a Delaware corporation

                                 (Beneficiary)

                            Dated: December 27, 2002

         (1920 Acacia Avenue, Compton, Los Angeles County, California)

<PAGE>

NOTICE: DO NOT DESTROY THIS DEED OF TRUST OR THE NOTE (IF IT IS IN YOUR
POSSESSION) WHICH IT SECURES AS THESE MUST BE PRESENTED TO THE TRUSTEE FOR
CANCELLATION IN ORDER TO OBTAIN A RECONVEYANCE. THE RECONVEYANCE MUST BE
RECORDED IN THE OFFICE OF THE COUNTY RECORDER.

     THIS DEED OF TRUST (herein "INSTRUMENT") is made as of December 2 7, 2002,
among the Grantor, APPLIANCE RECYCLING CENTERS OF AMERICA, INC., a Minnesota
corporation, whose address is 7400 Excelsior Boulevard, St. Louis Park,
Minnesota 55426 (herein "BORROWER"), in favor of COMMONWEALTH LAND TITLE, whose
address is 655 North Central Avenue Suite 2200, Glendale, California 91203
(herein "TRUSTEE"), for the benefit of the Beneficiary, GENERAL ELECTRIC CAPITAL
BUSINESS ASSET FUNDING CORPORATION, a Delaware corporation, whose address is
Real Estate Department, 10900 NE 4th Street, Suite 500, Bellevue, Washington,
98004 (herein "GE CAPITAL").

     THIS INSTRUMENT COVERS REAL PROPERTY AND PERSONAL PROPERTY AND GOODS WHICH
ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE
FILED FOR RECORD IN THE RECORDS WHERE DEEDS OF TRUST ON REAL ESTATE ARE
RECORDED. IN ADDITION, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED NOT ONLY
AS A DEED OF TRUST, BUT ALSO AS A FINANCING STATEMENT COVERING PERSONAL PROPERTY
AND GOODS THAT ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE
MAILING ADDRESS OF THE GRANTOR (DEBTOR) AND BENEFICIARY (SECURED PARTY) ARE SET
FORTH IN THIS INSTRUMENT.

     Borrower, in consideration of the indebtedness herein recited and the trust
herein created, irrevocably grants, conveys and assigns to Trustee, in trust,
WITH POWER OF SALE, all of Borrower's estate, right, title and interest, now
owned or hereafter acquired, including any reversion or remainder interest, in
the real property located in the City of Compton, County of Los Angeles, State
of California, commonly known as 1920 Acacia Avenue and more particularly
described on Exhibit A attached hereto and incorporated herein including all
heretofore or hereafter vacated alleys and streets abutting the property, and
all easements, rights, appurtenances, tenements, hereditaments, rents,
royalties, mineral, oil and gas rights and profits, water, water rights, and
water stock appurtenant to the property (collectively "PREMISES");

     TOGETHER with all of Borrower's estate, right, title and interest, now
owned or hereafter acquired, in:

          (a) all buildings, structures, improvements, parking areas,
     landscaping, equipment, fixtures and articles of property now or hereafter
     erected on, attached to, or used or adapted for use in the operation of the
     Premises; including but without being limited to, all heating, air
     conditioning and incinerating apparatus and equipment; all

                                       2
<PAGE>

     boilers, engines, motors, dynamos, generating equipment, piping and
     plumbing fixtures, water heaters, ranges, cooking apparatus and mechanical
     kitchen equipment, refrigerators, freezers, cooling, ventilating,
     sprinkling and vacuum cleaning systems, fire extinguishing apparatus, gas
     and electric fixtures, carpeting, floor coverings, underpadding, elevators,
     escalators, partitions, mantels, built-in mirrors, window shades, blinds,
     draperies, screens, storm sash, awnings, signs, furnishings of public
     spaces, halls and lobbies, and shrubbery and plants, and including also all
     interest of any owner of the Premises in any of such items hereafter at any
     time acquired under conditional sale contract, chattel mortgage or other
     title retaining or security instrument, all of which property mentioned in
     this clause (a) shall be deemed part of the realty covered by this
     Instrument and not severable wholly or in part without material injury to
     the freehold of the Premises (all of the foregoing together with
     replacements and additions thereto are referred to herein as
     "IMPROVEMENTS");

          (b) all compensation, awards, damages, rights of action and proceeds,
     including interest thereon and/or the proceeds of any policies of insurance
     therefor, arising out of or relating to a (i) taking or damaging of the
     Premises or Improvements thereon by reason of any public or private
     improvement, condemnation proceeding (including change of grade), sale or
     transfer in lieu of condemnation, or fire, earthquake or other casualty, or
     (ii) any injury to or decrease in the value of the Premises or the
     Improvements for any reason whatsoever;

          (c) return premiums or other payments upon any insurance any time
     provided with respect to the Premises, Improvements, and other collateral
     described herein for the benefit of or naming GE Capital, and refunds or
     rebates of taxes or assessments on the Premises;

          (d) all written and oral leases and rental agreements (including
     extensions, renewals and subleases; all of the foregoing shall be referred
     to collectively herein as the "LEASES") now or hereafter affecting the
     Premises including, without limitation, all rents, issues, income, profits
     and other revenues and income therefrom and from the renting, leasing or
     bailment of Improvements and equipment ("RENTS"), all guaranties of
     tenants' performance under the Leases, and all rights and claims of any
     kind that Borrower may have against any tenant under the Leases or in
     connection with the termination or rejection of the Leases in a bankruptcy
     or insolvency proceeding;

          (e) plans, specifications, contracts and agreements relating to the
     design or construction of the Improvements; Borrower's rights under any
     payment, performance, or other bond in connection with the design or
     construction of the Improvements; all landscaping and construction
     materials, supplies, and equipment used or to be used or consumed in
     connection with construction of the Improvements, whether stored on the
     Premises or at some other location; and contracts, agreements, and purchase
     orders with contractors, subcontractors, suppliers, and materialmen
     incidental to the design or construction of the Improvements;

                                       3
<PAGE>

          (f) all contracts, accounts, rights, claims or causes of action
     pertaining to or affecting the Premises or the Improvements, including,
     without limitation, all options or contracts to acquire other property for
     use in connection with operation or development of the Premises or
     Improvements, management contracts, service or supply contracts, deposits,
     bank accounts, general intangibles (including without limitation
     trademarks, trade names and symbols), permits, licenses, franchises and
     certificates, and all commitments or agreements, now or hereafter in
     existence, intended by the obligor thereof to provide Borrower with
     proceeds to satisfy the loan evidenced hereby or improve the Premises or
     Improvements, and the right to receive all proceeds due under such
     commitments or agreements including refundable deposits and fees;

          (g) all books, records, surveys, reports and other documents related
     to the Premises, the Improvements, the Leases, or other items of collateral
     described herein; and

          (h) all additions, accessions, replacements, substitutions, proceeds
     and products of the real and personal property, tangible and intangible,
     described herein. All of the foregoing described collateral is exclusive of
     any equipment, inventory, furniture, furnishings or trade fixtures owned
     and supplied by tenants of the Premises. The Premises, the Improvements,
     the Leases and all of the rest of the foregoing property are herein
     referred to as the "PROPERTY." TO HAVE AND TO HOLD the Property and all
     parts, rights, members and appurtenances thereof to the use, benefit and
     behoof of GE Capital and its successors and assigns in fee simple forever.

     TO SECURE TO GE Capital (a) the repayment of the indebtedness evidenced by
Borrower's Balloon Promissory Note dated of even date herewith in the principal
sum of Two Million and no hundredths Dollars ($2,000,000.00), with interest
thereon as set forth therein, and having a final scheduled maturity date of
January 1, 2013, and all renewals, extensions and modifications thereof (herein
"NOTE"); (b) the repayment of any future advances, with interest thereon, made
by GE Capital to Borrower pursuant to Section 30 hereof (herein "FUTURE
ADVANCES"); (c) the payment of all other sums, with interest thereon, advanced
in accordance herewith to protect the security of this Instrument or to fulfill
any of Borrower's obligations hereunder or under the other Loan Documents (as
defined below); (d) the performance of the covenants and agreements of Borrower
contained herein or in the other Loan Documents; and (e) the repayment of all
sums now or hereafter owing to GE Capital by Borrower pursuant to any instrument
which recites that it is secured hereby. The indebtedness and obligations
described in clauses (a)-(e) above are collectively referred to herein as the
"INDEBTEDNESS". The Note, this Instrument, and all other documents evidencing,
securing or guaranteeing the Indebtedness, including, without limitation that
certain Environmental Indemnity Agreement being executed as of the date hereof,
as the same may be modified or amended from time to time, are referred to herein
as the "LOAN DOCUMENTS". The terms of the Note secured hereby may provide that
the interest rate or payment terms or balance due may be indexed, adjusted,
renewed, or renegotiated from time to time, and this Instrument shall continue
to secure the Note notwithstanding any such indexing, adjustment, renewal or
renegotiation.

                                       4
<PAGE>

     PROVIDED, ALWAYS, that if Borrower shall pay unto GE Capital the
Indebtedness and if Borrower shall duly, promptly and fully perform, discharge,
execute, effect, complete and comply with and abide by each and every of the
stipulations, agreements, conditions and covenants of the Note and this
Instrument, then this Instrument and all assignments contained herein and liens
created hereby shall cease and be null and void; otherwise to remain in full
force and effect.

     Borrower represents and warrants that Borrower has good, marketable and
insurable title to, and has the right to grant, convey and assign an
indefeasible fee simple estate in, the Premises, Improvements, Rents and Leases,
and the right to convey the other Property, that the Property is unencumbered
except as disclosed in writing to and approved by GE Capital prior to the date
hereof, and that Borrower will warrant and forever defend unto Trustee the title
to the Property against all claims and demands, subject only to the permitted
exceptions set forth in Schedule 1 attached hereto.

     Borrower represents, warrants, covenants and agrees for the benefit of GE
Capital as follows:

     SECTION 1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay
when due the principal of and interest on the Indebtedness, any prepayment and
other charges provided in the Loan Documents and all other sums secured by this
Instrument.

     SECTION 2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Except as is
hereinafter provided with respect to the impounding of such payments by GE
Capital following the occurrence of an Event of Default, Borrower shall pay or
cause to be paid when due, prior to delinquency, all annual real estate taxes,
insurance premiums, assessments, water and sewer rates, ground rents and other
charges (herein "IMPOSITIONS") payable with respect to the Property. Upon the
occurrence of an Event of Default (hereinafter defined), and at GE Capital's
sole option at any time thereafter, Borrower shall pay in addition to each
monthly payment on the Note, one-twelfth of the annual Impositions (as estimated
by GE Capital in its sole discretion), to be held by GE Capital without interest
to Borrower, for the payment of such Impositions.

     If the amount of such additional payments held by GE Capital ("FUNDS") at
the time of the annual accounting thereof shall exceed the amount deemed
necessary by GE Capital to provide for the payment of Impositions as they fall
due, such excess shall be at Borrower's option, either repaid to Borrower or
credited to Borrower on the next monthly installment or installments of Funds
due. If at any time the amount of the Funds held by GE Capital shall be less
than the amount deemed necessary by GE Capital to pay Impositions as they fall
due, Borrower shall pay to GE Capital any amount necessary to make up the
deficiency within thirty (30) days after notice from GE Capital to Borrower
requesting payment thereof.

     GE Capital may apply, in any amount and in any order as GE Capital shall
determine in GE Capital's sole discretion, any Funds held by GE Capital at the
time of application (i) to pay Impositions which are now or will hereafter
become due, or (ii) as a credit against sums secured

                                       5
<PAGE>

by this Instrument. Upon payment in full of all sums secured by this Instrument,
GE Capital shall refund to Borrower any Funds held by GE Capital.

     SECTION 3. APPLICATION OF PAYMENTS. Unless applicable law provides
otherwise, each complete installment payment received by GE Capital from
Borrower under the Note or this Instrument shall be applied by GE Capital first
in payment of amounts payable to GE Capital by Borrower under Section 2 hereof,
then to interest payable on the Note, then to principal of the Note, then to
interest and principal on any Future Advances in such order as GE Capital, at GE
Capital's sole discretion, shall determine. Upon the occurrence of an Event of
Default, GE Capital may apply, in any amount and in any order as GE Capital
shall determine in GE Capital's sole discretion, any payments received by GE
Capital under the Note or this Instrument. Any partial payment received by GE
Capital shall, at GE Capital's option, be held in a non-interest bearing account
until GE Capital receives funds sufficient to equal a complete installment
payment. If requested by GE Capital, Borrower shall promptly furnish to GE
Capital all notices of Impositions which become due under this Section 4, and in
the event Borrower shall make payment directly, Borrower shall promptly furnish
to GE Capital receipts evidencing such payments.

     SECTION 4. CHARGES, LIENS. Borrower shall promptly discharge or bond off
any lien which has, or may have, priority over or equality with, the lien of
this Instrument, and Borrower shall pay, when due, the claims of all persons
supplying labor or materials to or in connection with the Property. Without GE
Capital's prior written permission, Borrower shall not allow any lien inferior
to this Instrument to be perfected against the Property. If any lien inferior to
this Instrument is filed against the Property without GE Capital's prior written
permission and without the consent of Borrower, Borrower shall, within thirty
(30) days after receiving notice of the filing of such lien, cause such lien to
be released of record or bonded off and deliver evidence of such release or
bonding to GE Capital. Borrower may contest any such lien by appropriate
proceedings in good faith, timely filed, provided that enforcement of the lien
is stayed pending such contest. Mortgage may require that Borrower post security
for payment of such lien.

     SECTION 5. INSURANCE. Borrower shall obtain and maintain the following
types of insurance upon and relating to the Property:

          (a) "All Risk" property and fire insurance (with extended coverage
     endorsement including malicious mischief and vandalism) in an amount not
     less than the full replacement value of the Property (with a deductible not
     to exceed $10,000), naming GE Capital under a lender's loss payable
     endorsement (form 438BFU or equivalent) naming GE Capital as mortgagee and
     loss payee and including agreed amount, inflation guard, replacement cost
     and waiver of subrogation endorsements;

          (b) Commercial general liability insurance in an amount not less than
     $2,000,000 per occurrence and on an occurrence basis, insuring against
     personal injury, death and property damage and naming GE Capital as
     additional insured;

                                       6
<PAGE>

          (c) Business interruption insurance or rent-loss insurance, as
     applicable, covering loss of rental or other income (including all expenses
     payable by tenants) for up to twelve (12) months;

          (d) Boiler and machinery coverage for mechanical and electrical
     failure;

          (e) Flood hazard insurance if the Property is located in an area
     designated by the Federal Emergency Management Act if and to the extent
     that the Property is located within an area that has been or is hereafter
     designated or identified as an area having special flood hazards by the
     Department of Housing and Urban Development or such other official as shall
     from time to time be authorized by federal or state law to make such
     designation pursuant to any national or state program of flood insurance,
     Borrower shall carry flood insurance with respect to the Property in
     amounts not less than the maximum limit of coverage then available with
     respect to the Property or the amount of the Indebtedness, whichever is
     less; and

          (f) Such other types of insurance or endorsements to existing
     insurance as may be required from time to time by GE Capital in accordance
     with its standard commercial lending practices.

     Upon the request of GE Capital, Borrower shall increase the coverages under
any of the insurance policies required to be maintained hereunder or otherwise
modify such policies in accordance with GE Capital's standard commercial lending
practices. All of the insurance policies required hereunder shall be issued by
corporate insurers licensed to do business in the state in which the Property is
located and rated A:VIII or better by A.M. Best Company, and shall be in form
acceptable to GE Capital. Certificates of all insurance required to be
maintained hereunder shall be delivered to GE Capital, along with evidence of
payment in full of all premiums required thereunder, contemporaneously with
Borrower's execution of this Instrument. All such certificates shall be in form
acceptable to GE Capital and shall require the insurance company to give to GE
Capital at least thirty (30) days' prior written notice before canceling the
policy for any reason or materially amending it. Certificates evidencing all
renewal and substitute policies of insurance shall be delivered to GE Capital,
along with evidence of the payment in full of all premiums required thereunder,
at least fifteen (15) days before termination of the policies being renewed or
substituted. If any loss shall occur at any time when Borrower shall be in
default hereunder, GE Capital shall be entitled to the benefit of all insurance
policies held or maintained by Borrower, to the same extent as if same had been
made payable to GE Capital, and upon foreclosure hereunder, GE Capital shall
become the owner thereof. GE Capital shall have the right, but not the
obligation, to make premium payments, at Borrower's expense, to prevent any
cancellation, endorsement, alteration or reissuance of any policy of insurance
maintained by Borrower, and such payments shall be accepted by the insurer to
prevent same.

     If any act or occurrence of any kind or nature (including any casualty for
which insurance was not obtained or obtainable) shall result in damage to or
destruction of the Property (such event being called a "LOSS"), Borrower will
give prompt written notice thereof to GE Capital. If the insurance proceeds paid
or payable in connection with any Loss are reasonably expected to

                                       7
<PAGE>

exceed $10,000 and if an Event of Default has not occurred hereunder and is not
continuing, GE Capital shall apply all such insurance proceeds to the
restoration, replacement and rebuilding of the damaged portion of the Property,
and such restoration, replacement and rebuilding shall be accomplished, upon
satisfaction of each and all of the following conditions: (i) except as provided
in (ii)below, GE Capital shall be satisfied that by the expenditure of such
insurance proceeds the Property will be fully restored within a reasonable
period of time to its value immediately preceding the loss or damage, free and
clear of all liens, except the lien of this Instrument, the permitted exceptions
set forth in Schedule 1 attached hereto, and such other liens as are
specifically approved by GE Capital in writing under this Instrument; (ii) in
the event such proceeds shall be insufficient to restore or rebuild the
Property, Borrower shall deposit promptly with GE Capital funds which, together
with the insurance proceeds, shall be sufficient in GE Capital's judgment to
restore and rebuild the Property; (iii) Borrower shall make reasonable efforts
to obtain a waiver of the right of subrogation from any insurer under such
policies of insurance who, at that time, claims that no liability exists as to
Borrower or the then owner or the assured under such policies; (iv) the excess
of such insurance proceeds above the amount necessary to complete such
restoration and compensate Borrower for all other insured losses shall be
applied on account of the Indebtedness (first to interest, then to expenses
reimbursable to GE Capital and then to principal amounts falling due under the
Note without prepayment premium); (v) GE Capital reviews and approves in writing
the plans and specifications for the restoration work and GE Capital receives
written evidence satisfactory to GE Capital that the same have been approved by
all governmental authorities having jurisdiction; (vi) Borrower shall have
furnished to GE Capital, for GE Capital's approval, a detailed budget and cost
breakdown for said restoration work signed by Borrower and describing the nature
and type of expenses and amounts thereof estimated by Borrower for said
restoration work including, but not limited to, the cost of material and
supplies, architect and designer fees, general contractor's fees, and the
anticipated monthly disbursement schedule, and GE Capital shall have given to
Borrower written approval of such budget and cost breakdown (if Borrower
determines at any time that its actual expenses differ or will differ from its
estimated budget, it will so advise GE Capital promptly); (vii) Borrower has
delivered to GE Capital evidence satisfactory to GE Capital that all Leases
existing at the time of the Loss will remain in full force and effect subject
only to abatement of rent in accordance with the terms of the Leases until
completion of such repair and restoration; and (viii) in GE Capital's reasonable
judgment, such restoration work can be completed at least six (6) months prior
to the maturity of the Note.

     In the event any of such conditions are not or cannot be satisfied, then
all of the insurance proceeds payable with respect to such Loss will be applied
to the payment of the Indebtedness in such order as GE Capital may elect.

     Under no circumstances shall GE Capital become obligated to take any action
to restore the Property; all proceeds released or applied by GE Capital to the
restoration of the Property pursuant to the provisions of this Section 5 shall
be released and/or applied to the cost of restoration (including within the term
"RESTORATION" any repair, reconstruction or alteration) as such restoration
progresses, in amounts which shall equal ninety percent (90%) of the amounts
from time to time certified by an architect approved by GE Capital to have been
incurred in such restoration of any and all of the Property (i.e., 90% of the
total amount expended by the contractor for the project under a contract
approved by GE Capital and billed by the contractor to

                                       8
<PAGE>

Borrower) and performed by a contractor reasonably satisfactory to GE Capital
and who shall furnish such corporate surety bond, if any, as may be reasonably
required by GE Capital in accordance with the plans and specifications therefor
approved by GE Capital and the remaining ten percent (10%) upon completion of
such restoration and delivery to GE Capital of evidence reasonably satisfactory
to GE Capital that no mechanics' lien exists with respect to the work of such
restoration; that the restoration work has been completed and fully paid for in
accordance with plans and specifications for said work approved by GE Capital;
and that all Leases existing at the time the Loss occurred are in full force and
effect with all tenants in possession and paying full Lease rental; and that all
governmental approvals required for the completion of said restoration work and
occupancy of the Property have been obtained and the same are in form and
substance satisfactory to GE Capital.

     If within a reasonable period of time after the occurrence of any Loss,
Borrower shall not have submitted to GE Capital and received GE Capital's
approval of plans and specifications for the repair, restoration or rebuilding
of such Loss or shall not have obtained approval of such plans and
specifications from all governmental authorities whose approval is required, or
if, after such plans and specifications are approved by GE Capital and by all
such governmental authorities, Borrower shall fail to commence promptly such
repair, restoration or rebuilding, or if thereafter Borrower fails to carry out
diligently such repair, restoration or rebuilding or is delinquent in the
payment to mechanics, materialmen or others of the costs incurred in connection
with such work, or if any other condition of this Section 5 is not satisfied
within a reasonable period of time after the occurrence of any such Loss, then
GE Capital may, in addition to all other rights herein set forth, at GE
Capital's option, (A) declare that an Event of Default has occurred and/or apply
all of the insurance proceeds payable with respect to such Loss to the payment
of the Indebtedness in such order as GE Capital may elect, and/or (B) GE
Capital, or any lawfully appointed receiver of the Property may at their
respective options, perform or cause to be performed such repair, restoration or
rebuilding, and may take such other steps as they deem advisable to carry out
such repair, restoration or rebuilding, and may enter upon the Property for any
of the foregoing purposes, and Borrower hereby waives, for itself and all others
holding under it, any claim against GE Capital and such receiver (other than a
claim based upon the alleged gross negligence or intentional misconduct of GE
Capital or any such receiver) arising out of anything done by them or any of
them pursuant to this Section 5 and GE Capital may in its discretion apply any
proceeds held by it to reimburse itself and/or such receiver for all amounts
expended or incurred by it in connection with the performance of such work,
including attorneys' fees, and any excess costs shall be paid by Borrower to GE
Capital and Borrower's obligation to pay such excess costs shall be secured by
the lien of this Instrument and shall bear interest at the default rate set
forth in the Note, until paid.

     Nothing herein, and no authority given to Borrower to repair, rebuild or
restore the Property or any portion thereof, shall be deemed to constitute
Borrower the agent of GE Capital for any purpose, or to create, either expressly
or by implication, any liens or claims or rights on behalf of laborers,
mechanics, materialmen or other lien holders which could in any way be superior
to the lien or claim of GE Capital, or which could be construed as creating any
third party rights of any kind or nature to the insurance funds. At reasonable
times during the work of restoration, and upon reasonable notice, GE Capital,
either personally or by duly authorized agents, shall have the right to enter
upon the Property for inspection of the work. Borrower

                                       9
<PAGE>

expressly assumes all risk of loss, including a decrease in the use, enjoyment
or value of the Property from any casualty whatsoever, whether or not insurable
or insured against.

     SECTION 6. PRESERVATION AND MAINTENANCE OF PROPERTY; LEASEHOLDS. Borrower
(a) shall not commit waste or permit impairment or deterioration of the
Property, (b) shall not abandon the Property, (c) shall restore or repair
promptly and in a good and workmanlike manner all or any part of the Property to
the equivalent of its original condition, or such other condition as GE Capital
may approve in writing, in the event of any damage, injury or loss thereto,
whether or not insurance proceeds are available to cover in whole or in part the
costs of such restoration or repair, (d) shall keep the Property, including all
Improvements thereon, in good repair and shall replace fixtures, equipment,
machinery and appliances on the Property when necessary to keep such items in
good repair, (e) shall comply with all laws, ordinances, regulations and
requirements of any governmental body applicable to the Property, (f) if all or
part of the Property is for rent or lease, then GE Capital, at its option after
the occurrence of an Event of Default, may require Borrower to provide for
professional management of the Property by a property manager satisfactory to GE
Capital pursuant to a contract approved by GE Capital in writing, unless such
requirement shall be waived by GE Capital in writing, (g) shall give notice in
writing to GE Capital of and, unless otherwise directed in writing by GE
Capital, appear in and defend any action or proceeding purporting to affect the
Property, the security of this Instrument or the rights or powers of GE Capital
hereunder. Neither Borrower nor any tenant or other person, without the written
approval of GE Capital, shall remove, demolish or alter any Improvement now
existing or hereafter erected on the Premises or any Property except when
incident to the replacement of fixtures, equipment, machinery and appliances
with items of like kind.

     Borrower represents, warrants and covenants that the Property is and shall
be in substantial compliance with the Americans with Disabilities Act of 1990
and all of the regulations promulgated thereunder, as the same may be amended
from time to time.

     SECTION 7. USE OF PROPERTY. Unless required by applicable law or unless GE
Capital has otherwise agreed in writing, Borrower shall not allow changes in the
use for which all or any part of the Property was intended at the time this
Instrument was executed. Borrower shall not, without GE Capital's prior written
consent, (i) initiate or acquiesce in a change in the zoning classification
(including any variance under any existing zoning ordinance applicable to the
Property), (ii) permit the use of the Property to become a non-conforming use
under applicable zoning ordinances, (iii) file any subdivision or parcel map
affecting the Property, or (iv) amend, modify or consent to any easement or
covenants, conditions and restrictions pertaining to the Property.

     SECTION 8. PROTECTION OF GE CAPITAL'S SECURITY. If Borrower fails to
perform any of the covenants and agreements contained in this Instrument, or if
any action or proceeding is commenced which affects the Property or title
thereto or the interest of GE Capital therein, including, but not limited to,
eminent domain, insolvency, code enforcement, or arrangements or proceedings
involving a bankrupt or decedent, then GE Capital at GE Capital's option may
make such appearances, disburse such sums and take such action as GE Capital
deems necessary, in its sole discretion, to protect GE Capital's interest,
including, but not limited to, (i) disbursement of

                                       10
<PAGE>

attorneys' fees, (ii) entry upon the Property to make repairs, (iii) procurement
of satisfactory insurance as provided in Section 5 hereof, and (iv) if this
Instrument is on a leasehold, exercise of any option to renew or extend the
Ground Lease on behalf of Borrower and the curing of any default of Borrower in
the terms and conditions of the Ground Lease.

     Any amounts disbursed by GE Capital pursuant to this Section 8, with
interest thereon, shall become additional Indebtedness of Borrower secured by
this Instrument. Unless Borrower and GE Capital agree to other terms of payment,
such amounts shall be immediately due and payable and shall bear interest from
the date of disbursement at the Default Rate (as defined in the Note). Borrower
hereby covenants and agrees that GE Capital shall be subrogated to the lien of
any mortgage or other lien discharged, in whole or in part, by the Indebtedness.
Nothing contained in this Section 8 shall require GE Capital to incur any
expense or take any action hereunder.

     SECTION 9. INSPECTION. GE Capital may make or cause to be made reasonable
entries upon the Property to inspect the interior and exterior thereof. Except
in case of emergency, such inspection shall be with reasonable prior notice and
shall in any case be with due regard to rights of tenants.

     SECTION 10. FINANCIAL DATA. Borrower will furnish to GE Capital and will
cause any guarantor of the Indebtedness to furnish GE Capital on request, within
ninety (90) days after the close of its fiscal year (i) annual balance sheet and
profit and loss statements prepared in accordance with generally accepted
accounting principles and practices consistently applied and, if GE Capital so
requires, accompanied by the annual audit report of an independent certified
public accountant reasonably acceptable to GE Capital, (ii) an annual operating
statement, together with a complete rent roll and other supporting data
reflecting all material information with respect to the operation of the
Property and Improvements, and (iii) all other financial information and reports
that GE Capital may from time to time reasonably request, including, if GE
Capital so requires, income tax returns of Borrower and any guarantor of any
portion of the Indebtedness, and financial statements of any tenants designated
by GE Capital.

     SECTION 11. CONDEMNATION. If the Property, or any part thereof, shall be
condemned for any reason, including without limitation fire or earthquake
damage, or otherwise taken for public or quasi-public use under the power of
eminent domain, or be transferred in lieu thereof, (such event being called a
"TAKING") and if the damages or other amounts awarded for the Taking are
reasonably expected to exceed $10,000 and if an Event of Default has not
occurred hereunder and is not continuing, GE Capital shall apply all such
proceeds to the restoration, replacement and rebuilding of the Property, and
such restoration, replacement and rebuilding shall be accomplished, upon
satisfaction of each and all of the following conditions: (i) except as provided
in (ii) below, GE Capital shall be satisfied that by the expenditure of such
proceeds the Property will be fully restored within a reasonable period of time
to its value immediately preceding the Taking, free and clear of all liens,
except the lien of this Instrument, the permitted exceptions set forth in
Schedule 1 attached hereto, and such other liens as are specifically approved by
GE Capital in writing under this Instrument; (ii) in the event such proceeds
shall be insufficient to restore or rebuild the Property, Borrower shall deposit
promptly with GE Capital funds which, together with the proceeds, shall be
sufficient in GE Capital's judgment to restore

                                       11
<PAGE>

and rebuild the Property; (iii) the excess of such proceeds above the amount
necessary to complete such restoration and compensate Borrower for all other
losses shall be applied on account of the Indebtedness (first to interest, then
to expenses reimbursable to GE Capital and then to principal amounts falling due
under the Note without prepayment premium); (iv) GE Capital reviews and approves
in writing the plans and specifications for the restoration work and GE Capital
receives written evidence satisfactory to GE Capital that the same have been
approved by all governmental authorities having jurisdiction; (v) Borrower shall
have furnished to GE Capital, for GE Capital's approval, a detailed budget and
cost breakdown for said restoration work signed by Borrower and describing the
nature and type of expenses and amounts thereof estimated by Borrower for said
restoration work including, but not limited to, the cost of material and
supplies, architect and designer fees, general contractor's fees, and the
anticipated monthly disbursement schedule, and GE Capital shall have given to
Borrower written approval of such budget and cost breakdown (if Borrower
determines at any time that its actual expenses differ or will differ from its
estimated budget, it will so advise GE Capital promptly); (vi) Borrower has
delivered to GE Capital evidence satisfactory to GE Capital that all Leases
existing at the time of the Taking will remain in full force and effect subject
only to abatement of rent in accordance with the terms of the Leases until
completion of such repair and restoration; and (vii) in GE Capital's reasonable
judgment, such restoration work can be completed at least six (6) months prior
to the maturity of the Note.

     In the event any of such conditions are not or cannot be satisfied, then
all of the proceeds payable with respect to such Taking will be applied to the
payment of the Indebtedness in such order as GE Capital may elect.

     Under no circumstances shall GE Capital become obligated to take any action
to restore the Property; all proceeds released or applied by GE Capital to the
restoration of the Property pursuant to the provisions of this Section 11 shall
be released and/or applied on the cost of restoration (including within the term
"RESTORATION" any repair, reconstruction or alteration) as such restoration
progresses, in amounts which shall equal ninety percent (90%) of the amounts
from time to time certified by an architect approved by GE Capital to have been
incurred in such restoration of any and all of the Property (i.e., 90% of the
total amount expended by the contractor for the project under a contract
approved by GE Capital and billed by the contractor to Borrower) and performed
by a contractor reasonably satisfactory to GE Capital and who shall furnish such
corporate surety bond, if any, as may be reasonably required by GE Capital in
accordance with the plans and specifications therefor approved by GE Capital and
the remaining ten percent (10%) upon completion of such restoration and delivery
to GE Capital of evidence reasonably satisfactory to GE Capital that no
mechanics' lien exists with respect to the work of such restoration; that the
restoration work has been completed and fully paid for in accordance with plans
and specifications for said work approved by GE Capital; and that all Leases
existing at the time the Taking occurred are in full force and effect with all
tenants in possession and paying full Lease rental; and that all governmental
approvals required for the completion of said restoration work and occupancy of
the Property have been obtained and the same are in form and substance
satisfactory to GE Capital.

     If within a reasonable period of time after the occurrence of any Taking,
Borrower shall not have submitted to GE Capital and received GE Capital's
approval of plans and specifications

                                       12
<PAGE>

for the repair, restoration or rebuilding of the Property or shall not have
obtained approval of such plans and specifications from all governmental
authorities whose approval is required, or if, after such plans and
specifications are approved by GE Capital and by all such governmental
authorities, Borrower shall fail to commence promptly such repair, restoration
or rebuilding, or if thereafter Borrower fails to carry out diligently such
repair, restoration or rebuilding or is delinquent in the payment to mechanics,
materialmen or others of the costs incurred in connection with such work, or if
any other condition of this Section 11 is not satisfied within a reasonable
period of time after the occurrence of any such Taking, then GE Capital may, in
addition to all other rights herein set forth, at GE Capital's option, (A)
declare that an Event of Default has occurred and/or apply all of the proceeds
of the Taking to the payment of the Indebtedness in such order as GE Capital may
elect, and/or (B) GE Capital, or any lawfully appointed receiver of the Property
may at their respective options, perform or cause to be performed such repair,
restoration or rebuilding, and may take such other steps as they deem advisable
to carry out such repair, restoration or rebuilding, and may enter upon the
Property for any of the foregoing purposes, and Borrower hereby waives, for
itself and all others holding under it, any claim against GE Capital and such
receiver (other than a claim based upon the alleged gross negligence or
intentional misconduct of GE Capital or any such receiver) arising out of
anything done by them or any of them pursuant to this Section 11 and GE Capital
may in its discretion apply any proceeds held by it to reimburse itself and/or
such receiver for all amounts expended or incurred by it in connection with the
performance of such work, including attorneys' fees, and any excess costs shall
be paid by Borrower to GE Capital and Borrower's obligation to pay such excess
costs shall be secured by the lien of this Instrument and shall bear interest at
the default rate set forth in the Note, until paid.

     Nothing herein, and no authority given to Borrower to repair, rebuild or
restore the Property or any portion thereof, shall be deemed to constitute
Borrower the agent of GE Capital for any purpose, or to create, either expressly
or by implication, any liens or claims or rights on behalf of laborers,
mechanics, materialmen or other lien holders which could in any way be superior
to the lien or claim of GE Capital, or which could be construed as creating any
third party rights of any kind or nature to the proceeds. At reasonable times
during the work of restoration, and upon reasonable notice, GE Capital, either
personally or by duly authorized agents, shall have the right to enter upon the
Property for inspection of the work. Borrower expressly assumes all risk of
loss, including a decrease in the use, enjoyment or value of the Property from
any casualty whatsoever, whether or not insurable or insured against.

     SECTION 12. BORROWER AND LIEN NOT RELEASED. From time to time, GE Capital
may, at GE Capital's option, without giving notice to or obtaining the consent
of Borrower, Borrower's successors or assigns or of any junior lienholder or
guarantors, without liability on GE Capital's part and notwithstanding the
occurrence of an Event of Default, extend the time for payment of the
Indebtedness or any part thereof, reduce the payments thereon, release anyone
liable on any of the Indebtedness, accept an extension or modification or
renewal note or notes therefor, modify the terms and time of payment of the
Indebtedness, release from the lien of this Instrument any part of the Property,
take or release other or additional security, reconvey any part of the Property,
consent to any map or plan of the Property, consent to the granting of any
easement, join in any extension or subordination agreement, and agree in writing
with Borrower to modify the rate of interest or period of amortization of the
Note or change the amount of the

                                       13
<PAGE>

monthly installments payable thereunder. Any actions taken by GE Capital
pursuant to the terms of this Section 12 shall not affect the obligation of
Borrower or Borrower's successors or assigns to pay the sums secured by this
Instrument and to observe the covenants of Borrower contained herein, shall not
affect the guaranty of any person, corporation, partnership or other entity for
payment of the Indebtedness, and shall not affect the lien or priority of the
lien hereof on the Property. Borrower shall pay GE Capital a service charge,
together with such title insurance premiums and attorneys' fees as may be
incurred at GE Capital's option, for any such action if taken at Borrower's
request.

     SECTION 13. FORBEARANCE BY GE CAPITAL NOT A WAIVER. Any forbearance by GE
Capital in exercising any right or remedy hereunder, or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of any other
right or remedy. The acceptance by GE Capital of payment of any sum secured by
this Instrument after the due date of such payment shall not be a waiver of GE
Capital's right to either require prompt payment when due of all other sums so
secured or to declare a default for failure to make prompt payment. The
procurement of insurance or the payment of taxes or other liens or charges by GE
Capital shall not be a waiver of GE Capital's right to accelerate the maturity
of the Indebtedness secured by this Instrument, nor shall GE Capital's receipt
of any awards, proceeds or damages under Sections 5 and 11 hereof operate to
cure or waive Borrower's default in payment of sums secured by this Instrument.

     SECTION 14. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is
intended to be a security agreement pursuant to the California Uniform
Commercial Code for any of the items specified above as part of the Property
which, under applicable law, may be subject to a security interest pursuant to
the California Uniform Commercial Code, and Borrower hereby grants and conveys
to GE Capital a first and prior security interest in all of the Property that
constitutes personalty, ("Collateral", for purposes of this Section 14), whether
now owned or hereafter acquired. Borrower agrees that GE Capital may file this
Instrument, or a reproduction thereof, in the real estate records or other
appropriate index, as a financing statement for any of the items specified above
as part of the Collateral. Any reproduction of this Instrument or of any other
security agreement or financing statement shall be sufficient as a financing
statement. Borrower hereby authorizes GE Capital to file this Instrument, or a
reproduction thereof, as a financing statement for any of the items specified
above as part of the collateral, and any financing statements, extensions,
renewals, amendments and other records in connection therewith, in the real
estate records and/or other appropriate index. Borrower hereby waives any and
all rights Borrower may have to file in the real estate records and any other
index any financing statement, amendment, termination statement and other record
pertaining to the collateral and/or GE Capital's interest therein. Borrower
shall execute and deliver to GE Capital, upon GE Capital's request, any
financing statements, extensions, renewals, amendments and other records, and
reproductions of this Instrument, in such form as GE Capital may require to
perfect a security interest with respect to the foregoing items. Borrower shall
pay all costs of filing such financing statements and any extensions, renewals,
amendments and releases thereof, and shall pay all costs and expenses of any
record searches for financing statements GE Capital may require. Without the
prior written consent of GE Capital, Borrower shall not create or suffer to be
created pursuant to the Uniform Commercial Code any other security interest in
said items, including replacements and additions thereto. Upon Borrower's breach
of any covenant or

                                       14
<PAGE>

agreement of Borrower contained in this Instrument, including the covenants to
pay when due all sums secured by this Instrument, GE Capital shall have the
remedies of a secured party under the Uniform Commercial Code, and GE Capital
may also invoke the remedies provided in Section 25 of this Instrument as to
such items. In exercising any of said remedies GE Capital may proceed against
the items of real property and any items of personal property specified above
separately or together and in any order whatsoever, without in any way affecting
the availability of GE Capital's remedies under the Uniform Commercial Code or
of the remedies provided in Section 25 of this Instrument. Within ten (10) days
following any request therefor by GE Capital, Borrower shall prepare and deliver
to GE Capital a written inventory specifically listing all of the personal
property covered by the security interest herein granted, which inventory shall
be certified by Borrower as being true, correct, and complete.

     SECTION 15. LEASES OF THE PROPERTY. Borrower shall comply with and observe
Borrower's obligations as landlord under all Leases of the Property or any part
thereof. All Leases now or hereafter entered into will be in form and substance
subject to the approval of GE Capital. Borrower shall pay all attorneys' fees
incurred by GE Capital in reviewing any Lease or proposed Lease. All Leases of
the Property shall specifically provide that such Leases are subordinate to this
Instrument; that the tenant attorns to GE Capital, such attornment to be
effective upon either GE Capital's or any other party's acquisition of the
Property, or any portion thereof, either by foreclosure or deed-in-lieu thereof;
that the tenant agrees to execute such further evidences of attornment as GE
Capital may from time to time request; and that the attornment of the tenant
shall not be terminated by foreclosure or a deed-in-lieu thereof; and that GE
Capital may, at GE Capital's option, accept or reject such attornments (except
as to third- party credit tenants unrelated to Borrower, as to which GE Capital
shall grant a non-disturbance provision). Borrower shall not, without GE
Capital's written consent, request or consent to the subordination of any Lease
of all or any part of the Property to any lien subordinate to this Instrument.
If Borrower becomes aware that any tenant proposes to do, or is doing, any act
or thing which may give rise to any right of set-off against rent, Borrower
shall (i) take such steps as shall be reasonably calculated to prevent the
accrual of any right to a set-off against rent, (ii) immediately notify GE
Capital thereof in writing and of the amount of said set-offs, and (iii) within
ten (10) days after such accrual, reimburse the tenant who shall have acquired
such right to set-off or take such other steps as shall effectively discharge
such setoff and as shall assure that Rents thereafter due shall continue to be
payable without set-off or deduction. Upon GE Capital's receipt of notice of the
occurrence of any default or violation by Borrower of any of its obligations
under the Leases, GE Capital shall have the immediate right, but not the duty or
obligation, without prior written notice to Borrower or to any third party, to
enter upon the Property and to take such actions as GE Capital may deem
necessary to cure the default or violation by Borrower under the Leases. The
costs incurred by GE Capital in taking any such actions pursuant to this
paragraph shall become part of the Indebtedness, shall bear interest at the rate
provided in the Note, and shall be payable by Borrower to GE Capital on demand.
GE Capital shall have no liability to Borrower or to any third party for any
actions taken by GE Capital or not taken pursuant to this paragraph.

     SECTION 16. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is
distinct and cumulative to all other rights or remedies under this Instrument or
afforded by law or equity, and may be exercised concurrently, independently, or
successively, in any order whatsoever.

                                       15
<PAGE>

     SECTION 17. TRANSFERS OF THE PROPERTY OR BENEFICIAL INTERESTS IN BORROWER;
SUBORDINATE FINANCING PROHIBITED; ASSUMPTION. GE Capital may, at its option,
declare all sums secured by this Instrument to be immediately due and payable,
and GE Capital may invoke any remedies permitted by Section 25 of this
Instrument, if title to the Property is changed without the prior written
consent of GE Capital, which consent shall be at GE Capital's sole discretion.
Any transfer of any interest in the Property or in the income therefrom, by
sale, lease (except for Leases to tenants in the ordinary course of managing
income property which are approved by GE Capital pursuant to Section 15 of this
Instrument), contract, mortgage, deed of trust, further encumbrance or otherwise
(including any such transfers as security for additional financing of the
Property). Leasehold mortgages and collateral assignments of any Lease of the
Property given by tenants of the Property are prohibited without the prior
written consent of GE Capital, which consent may be withheld in GE Capital's
sole discretion. Notwithstanding the foregoing, additional but subordinate deeds
of trust may be granted to GE Capital and, subject to the prior written consent
of GE Capital, which consent may be withheld in GE Capital's sole discretion,
may be granted to entities owned by or under common control with GE Capital.

     GE Capital shall have the right to condition its consent to any proposed
sale or transfer described in this Section 17 upon, among other things, GE
Capital's approval of the transferee's creditworthiness and management ability
and the transferee's execution, prior to the sale or transfer, of a written
assumption agreement containing such terms as GE Capital may require, including,
if required by GE Capital, the imposition of an assumption fee of one percent
(1%) of the then outstanding balance of the Indebtedness. Consent by GE Capital
to one transfer of the Property shall not constitute consent to subsequent
transfers or waiver of the provisions of this Section 17. No transfer by
Borrower shall relieve Borrower of liability for payment of the Indebtedness,
unless GE Capital shall otherwise agree in writing at the time of such transfer.
Borrower shall pay any recording tax, recording cost, title insurance premium,
attorneys' fees, or other third-party expenses incurred by GE Capital in
connection with any transfer, whether or not consent is required.

     The transfer to and assumption by an approved transferee of the Borrower's
obligations under the Loan shall not constitute a "prepayment" of the Loan
requiring payment of a "Prepayment Premium" (as defined in the Note).

     SECTION 18. NOTICE. Except for any notice required under applicable law to
be given in another manner, any and all notices, elections, demands, or requests
permitted or required to be made under this Instrument or under the Note shall
be in writing, signed by the party giving such notice, election, demand or
request, and shall be delivered personally, or sent by registered, certified, or
Express United States mail, postage prepaid, or by Federal Express or similar
service requiring a receipt, to the other party at the address stated above, or
to such other party and at such other address within the United States of
America as any party may designate in writing as provided herein. The date of
receipt of such notice, election, demand or request shall be the earliest of (i)
the date of actual receipt, (ii) three (3) business days after the date of
mailing by registered or certified mail, (iii) one (1) business day after the
date of mailing by Express Mail or the delivery (for redelivery) to Federal
Express or another similar service requiring a receipt, or (iv) the date of
personal delivery (or refusal upon presentation for delivery).

                                       16
<PAGE>

17

     SECTION 19. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY;
AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind, and
the rights hereunder shall inure to, the respective heirs, successors and
assigns of GE Capital and Borrower, subject to the provisions of Section 17
hereof. If Borrower is comprised of more than one person or entity, whether as
individuals, partners, partnerships, limited liability companies or
corporations, each such person or entity shall be jointly and severally liable
for Borrower's obligations hereunder. In exercising any rights hereunder or
taking any actions provided for herein, GE Capital may act through its
employees, agents or independent contractors as authorized by GE Capital. The
captions and headings of the sections of this Instrument are for convenience
only and are not to be used to interpret or define the provisions hereof.

     SECTION 20. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the
right to assert any statute of limitations as a bar to the enforcement of the
lien of this Instrument or to any action brought to enforce the Note or any
other obligation secured by this Instrument.

     SECTION 21. WAIVER OF MARSHALING. Notwithstanding the existence of any
other security interests in the Property held by GE Capital or by any other
party, GE Capital shall have the right to determine the order in which any or
all of the Property shall be subjected to the remedies provided herein. GE
Capital shall have the right to determine the order in which any or all portions
of the Indebtedness secured hereby are satisfied from the proceeds realized upon
the exercise of the remedies provided herein. Borrower, any party who consents
to this Instrument and any party who now or hereafter acquires a security
interest in the Property and who has actual or constructive notice hereof hereby
waives any and all right to require the marshaling of assets in connection with
the exercise of any of the remedies permitted by applicable law or provided
herein.

     SECTION 22. ADVANCES, COSTS AND EXPENSES. Borrower shall pay within ten
(10) days after written demand from GE Capital all sums advanced by GE Capital
and all costs and expenses incurred by GE Capital in taking any actions pursuant
to the Loan Documents including attorneys' fees and disbursements, accountants'
fees, appraisal and inspection fees and the costs for title reports and
guaranties, together with interest thereon at the rate applicable under the Note
after an Event of Default from the date such costs were advanced or incurred.
All such costs and expenses incurred by GE Capital, and advances made, shall
constitute advances under this Instrument to protect the Property and shall be
secured by and have the same priority as the lien of this Instrument. If
Borrower fails to pay any such advances, costs and expenses and interest
thereon, GE Capital may apply any undisbursed loan proceeds to pay the same,
and, without foreclosing the lien of this Instrument, may at its option commence
an independent action against Borrower for the recovery of the costs, expenses
and/or advances, with interest, together with costs of suit, costs of title
reports and guaranty of title, disbursements of counsel and reasonable
attorneys' fees incurred therein or in any appeal therefrom.

     SECTION 23. ASSIGNMENT OF LEASES AND RENTS. Borrower, for good and valuable
consideration, the receipt of which is hereby acknowledged, to secure the
Indebtedness, does hereby absolutely and unconditionally grant, bargain, sell,
transfer, assign, convey, set over and deliver unto GE Capital all right, title
and interest of Borrower in, to and under the Leases of the

                                       17
<PAGE>

Property, whether now in existence or hereafter entered into, and all
guaranties, amendments, extensions and renewals of said Leases and any of them,
and all Rents which may now or hereafter be or become due or owing under the
Leases, and any of them, or on account of the use of the Property.

     Borrower represents, warrants, covenants and agrees with GE Capital as
follows:

          (a) The sole ownership of the entire lessor's interest in the Leases
     is vested in Borrower, and Borrower has not, and shall not, perform any
     acts or execute any other instruments which might prevent GE Capital from
     fully exercising its rights with respect to the Leases under any of the
     terms, covenants and conditions of this Instrument.

          (b) The Leases are and shall be valid and enforceable in accordance
     with their terms and have not been and shall not be altered, modified,
     amended, terminated, canceled, renewed or surrendered except as approved in
     writing by GE Capital, which approval shall not be unreasonably withheld..
     The terms and conditions of the Leases have not been and shall not be
     waived in any manner whatsoever except as approved in writing by GE
     Capital, which approval shall not be unreasonably withheld.

          (c) Borrower shall not decrease the term or the amount of rent payable
     under any Lease without prior written notice to GE Capital and GE Capital's
     consent.

          (d) There are no defaults now existing under any of the Leases and, to
     the best of Borrower's knowledge, there exists no state of facts which,
     with the giving of notice or lapse of time or both, would constitute a
     default under any of the Leases.

          (e) Borrower shall give prompt written notice to GE Capital of any
     notice received by Borrower claiming that a default has occurred under any
     of the Leases on the part of Borrower, together with a complete copy of any
     such notice.

          (f) Each of the Leases shall remain in full force and effect
     irrespective of any merger of the interest of lessor and any lessee under
     any of the Leases.

          (g) Borrower will not permit any Lease to become subordinate to any
     lien other than the lien of this Instrument.

          (h) Borrower shall not permit or consent to the assignment by any
     tenant of its rights under its Lease without the prior written consent of
     GE Capital. Without limitation of the foregoing, Borrower shall not permit
     or consent to the filing of any encumbrance against the tenant's interest
     under any Lease including, without limitation, any leasehold mortgage.

     The assignment made hereunder is an absolute, present assignment from
Borrower to GE Capital, effective immediately, and is not merely an assignment
for security purposes but is irrevocable by Borrower so long as the Indebtedness
remains outstanding. Notwithstanding the foregoing, until a notice is sent to
the Borrower in writing that an Event of Default (as defined

                                       18
<PAGE>

below) has occurred under the terms and conditions of the Note or any instrument
constituting security for the Note (which notice is hereafter called a
"Notice"), Borrower is granted a license to receive, collect and enjoy the Rents
accruing from the Property.

     If an Event of Default shall occur , GE Capital may, at its option, after
service of a Notice, receive and collect all such Rents as they become due, from
the Property. GE Capital shall thereafter continue to receive and collect all
such Rents, until GE Capital shall otherwise agree in writing. All sums received
by Borrower after service of such Notice shall be deemed received in trust and
shall be immediately turned over to GE Capital.

     Borrower hereby irrevocably appoints GE Capital its true and lawful
attorney-in-fact with power of substitution and with full power for GE Capital
in its own name and capacity or in the name and capacity of Borrower, from and
after service of Notice, to demand, collect, receive and give complete
acquittances for any and all Rents accruing from the Property, either in its own
name or in the name of Borrower or otherwise, which GE Capital may deem
necessary or desirable in order to collect and enforce the payment of the Rents
and to demand, correct, receive, endorse, and deposit all checks, drafts, money
orders or notes given in payment of such Rents. Such appointment is coupled with
an interest and is irrevocable. GE Capital shall not be liable for or prejudiced
by any loss of any note, checks, drafts, etc., unless such loss shall have been
found by a court of competent jurisdiction to have been due to the gross
negligence or willful misconduct of GE Capital.

     GE Capital shall apply the Rents received from Borrower's lessees, to
accrued interest and principal under the Note. If no Event of Default remains
uncured, amounts received in excess of the aggregate monthly payment due under
the Note shall be remitted to Borrower in a timely manner. Nothing contained
herein shall be construed to constitute GE Capital as a mortgagee-in-possession
in absence of its physically taking possession of the Property.

     Borrower also hereby irrevocably appoints GE Capital as its true and lawful
attorney-in- fact to appear in any state or federal bankruptcy, insolvency, or
reorganization proceeding in any state or federal court involving any of the
tenants of the Leases. Lessees of the Property are hereby expressly authorized
and directed, from and after service of a Notice to pay any and all amounts due
Borrower pursuant to the Leases to GE Capital or such nominee as GE Capital may
designate in writing delivered to and received by such lessees who are expressly
relieved of any and all duty, liability or obligation to Borrower in respect of
all payments so made.

     If an Event of Default shall occur, GE Capital is hereby vested with full
power from and after service of a Notice to use all measures, legal and
equitable, deemed by it necessary or proper to enforce the assignment granted
hereunder and to collect the Rents assigned hereunder, including the right of GE
Capital or its designee, to enter upon the Property, or any part thereof, and
take possession of all or any part of the Property together with all personal
property, fixtures, documents, books, records, papers and accounts of Borrower
relating thereto, and may exclude the Borrower, its agents and servants, wholly
therefrom. Borrower hereby grants full power and authority to GE Capital to
exercise all rights, privileges and powers herein granted at any and all times
after service of a Notice, with full power to use and apply all of the Rents and
other income herein assigned to the payment of the costs of managing and
operating the Property and of any

                                       19
<PAGE>

indebtedness or liability of Borrower to GE Capital, including but not limited
to the payment of taxes, special assessments, insurance premiums, damage claims,
the costs of maintaining, repairing, rebuilding and restoring the Improvements
on the Premises or of making the same rentable, reasonable attorneys' fees
incurred in connection with the enforcement of the assignment granted hereunder,
and of principal and interest payments due from Borrower to GE Capital on the
Note and this Instrument, all in such order as GE Capital may determine. GE
Capital shall be under no obligation to exercise or prosecute any of the rights
or claims assigned to it hereunder or to perform or carry out any of the
obligations of the lessor under any of the Leases and does not assume any of the
liabilities in connection with or arising or growing out of the covenants and
agreements of Borrower in the leases. It is further understood that the
assignment granted hereunder shall not operate to place responsibility for the
control, care, management or repair of the Property, or parts thereof, upon GE
Capital, nor shall it operate to make GE Capital liable for the performance of
any of the terms and conditions of any of the Leases, or for any waste of the
Property by any lessee under any of the Leases or any other person, or for any
dangerous or defective condition of the Property or for any negligence in the
management, upkeep, repair or control of the Property resulting in loss or
injury or death to any lessee, licensee, employee or stranger, unless the same
shall have been found by a court of competent jurisdiction to have been due to
the gross negligence or willful misconduct of GE Capital.

     SECTION 24. DEFAULT. The following shall each constitute an event of
default ("EVENT OF DEFAULT"):

          (a) The occurrence of an "Event of Default" under the Note;

          (b) Failure of Borrower within the time required by this Instrument to
     make any payment for taxes, insurance or for reserves for such payments, or
     any other payment necessary to prevent filing of or discharge of any lien,
     and such failure shall continue for a period of ten (10) days after written
     notice is given to Borrower by GE Capital specifying such failure;

          (c) Failure by Borrower to observe or perform any obligations of
     Borrower to GE Capital on or with respect to any transactions, debts,
     undertakings or agreements other than the transaction evidenced by the
     Note, following the giving of any notice required thereunder and/or the
     expiration of any applicable period of grace provided thereby;

          (d) Failure of Borrower to make any payment or perform any obligation
     under any superior liens or encumbrances on the Property, within the time
     required thereunder, or commencement of any suit or other action to
     foreclose any superior liens or encumbrances;

          (e) Failure by Borrower to observe or perform any of its obligations
     under any of the Leases, following the giving of any notice required
     thereunder and/or the expiration of any applicable period of grace provided
     thereby;

                                       20
<PAGE>

          (f) The Property is transferred or any agreement to transfer any part
     or interest in the Property in any manner whatsoever is made or entered
     into without the prior written consent of GE Capital, except as
     specifically allowed under this Instrument, including without limitation
     creating or allowing any liens on the Property or leasing any portion of
     the Property;

          (g) Filing by Borrower of a voluntary petition in bankruptcy or filing
     by Borrower of any petition or answer seeking or acquiescing in any
     reorganization, arrangement, composition, readjustment, liquidation, or
     similar relief for itself under any present or future federal, state or
     other statute, law or regulation relating to bankruptcy, insolvency or
     other relief for debtors, or the seeking, consenting to, or acquiescing by
     Borrower in the appointment of any trustee, receiver, custodian,
     conservator or liquidator for Borrower, any part of the Property, or any of
     the income or rents of the Property, or the making by Borrower of any
     general assignment for the benefit of creditors, or the inability of or
     failure by Borrower to pay its debts generally as they become due, or the
     insolvency on a balance sheet basis or business failure of Borrower, or the
     making or suffering of a preference within the meaning of federal
     bankruptcy law or the making of a fraudulent transfer under applicable
     federal or state law, or concealment by Borrower of any of its property in
     fraud of creditors, or the imposition of a lien upon any of the property of
     Borrower which is not discharged in the manner permitted by Section 4 of
     this Instrument, or the giving of notice by Borrower to any governmental
     body of insolvency or suspension of operations; or

          (h) Filing of a petition against Borrower seeking any reorganization,
     arrangement, composition, readjustment, liquidation, or similar relief
     under any present or future federal, state or other law or regulation
     relating to bankruptcy, insolvency or other relief for debts, or the
     appointment of any trustee, receiver, custodian, conservator or liquidator
     of Borrower, of any part of the Property or of any of the income or rents
     of the Property, unless such petition shall be dismissed within sixty (60)
     days after such filing, but in any event prior to the entry of an order,
     judgment or decree approving such petition;

          (i) The institution of any proceeding for the dissolution or
     termination of Borrower voluntarily, involuntarily, or by operation of law,
     unless such proceeding shall be dismissed within sixty (60) days after such
     filing, but in any event prior to the entry of an order, judgment or decree
     for relief, or the death or incompetence of Borrower;

          (j) A material adverse change occurs in the assets, liabilities or net
     worth of Borrower from the assets, liabilities or net worth of Borrower or
     any of the guarantors of the indebtedness evidenced by the Note previously
     disclosed to GE Capital;

          (k) Any warranty, representation or statement furnished to GE Capital
     by or on behalf of Borrower under the Note, this Instrument or any of the
     other Loan Documents shall prove to have been false or misleading in any
     material respect;

                                       21
<PAGE>

          (l) Failure of Borrower to observe or perform any other covenant or
     condition contained herein and such default shall continue for thirty (30)
     days after notice is given to Borrower specifying the nature of the
     failure, or if the default cannot be cured within such applicable cure
     period, Borrower fails within such time to commence and pursue curative
     action with reasonable diligence or fails at any time after expiration of
     such applicable cure period to continue with reasonable diligence all
     necessary curative actions; provided, however, that no notice of default
     and no opportunity to cure shall be required if during the prior twelve
     (12) months GE Capital has already sent a notice to Borrower concerning
     default in performance of the same obligation;

          (m) Failure of Borrower to observe or perform any other obligation
     under this Instrument or any other Loan Document when such observance or
     performance is due, and such failure shall continue beyond the applicable
     cure period set forth in such Loan Document, or if the default cannot be
     cured within such applicable cure period, Borrower fails within such time
     to commence and pursue curative action with reasonable diligence or fails
     at any time after expiration of such applicable cure period to continue
     with reasonable diligence all necessary curative actions. No notice of
     default and no opportunity to cure shall be required if during the prior
     twelve (12) months GE Capital has already sent a notice to Borrower
     concerning default in performance of the same obligation;

          (n) Borrower's abandonment of the Property;

          (o) Any Event of Default under GE Capital Loan No. 050-0009840-001; or

          (p) Any of the events specified in (g) - (j) above shall occur with
     respect to any tenant of the Property, with respect to any guarantor of any
     of Borrower's obligations in connection with the Indebtedness or with
     respect to any guarantor of any tenant's obligations relating to the
     Property, or such guarantor dies or becomes incompetent.

     SECTION 25. RIGHTS AND REMEDIES ON DEFAULT.

          (a) REMEDIES. Upon the occurrence of any one or more Events of
     Default, Trustee and/or GE Capital may (but shall not be obligated), in
     addition to any rights or remedies available to them hereunder or under the
     other Loan Documents, take such action personally or by their agents or
     attorneys, with or without entry, and without notice, demand, presentment
     or protest (each and all of which are hereby waived to the extent permitted
     by law) as they deem necessary or advisable to protect and enforce GE
     Capital's rights and remedies against Borrower and in and to the Property,
     including the following actions, each of which may be pursued concurrently
     or otherwise, at such time and in such order as Trustee and/or GE Capital
     may determine, in their sole discretion, without impairing or otherwise
     affecting its or their other rights or remedies:

               (i) GE Capital may declare all sums secured by this Instrument
          immediately due and payable, including any prepayment premium which
          Borrower would be required to pay.

                                       22
<PAGE>

               (ii) Trustee and GE Capital shall have the right to cause any or
          all of the Property to be sold under the power of sale granted herein
          or any of the other documents executed or delivered in connection
          herewith in any manner permitted by applicable law, or GE Capital
          shall have the right to foreclose by judicial foreclosure, in either
          case in accordance with applicable law. For any sale under the power
          of sale granted by this Instrument, Trustee or GE Capital must record
          and give all notices required by law and then, upon the expiration of
          such time as is required by law, may sell the Property, and all
          estate, right, title, interest, claim and demand of Borrower therein,
          and all rights of redemption thereof, at one or more sales, as an
          entirety or in parcels, with such elements of real and/or personal
          property (and, to the extent permitted by applicable law, may elect to
          deem all of the Property to be real property for purposes thereof),
          and at such time or place and upon such terms as Trustee and GE
          Capital may determine and shall execute and deliver to the purchaser
          or purchasers thereof a deed or deeds conveying the property sold, but
          without any covenant or warranty, express or implied, and the recitals
          in the deed or deeds of any facts affecting the regularity or validity
          of the sale will be conclusive against all persons. In the event of a
          sale, by foreclosure or otherwise, of less than all of the Property,
          this Instrument shall continue as a lien and security interest on the
          remaining portion of the Property.

               (iii) Trustee and GE Capital may institute a proceeding or
          proceedings for the partial foreclosure of this Instrument under any
          applicable provision of law for the portion of the Indebtedness then
          due and payable, subject to the lien of this Instrument continuing
          unimpaired and without loss of priority so as to secure the balance of
          the Indebtedness not then due and payable.

               (iv) If this Instrument is foreclosed by judicial procedure, GE
          Capital will be entitled to a judgment which will provide that if the
          foreclosure sale proceeds are insufficient to satisfy the judgment,
          execution may issue for any amount by which the unpaid balance of the
          obligations secured by this Instrument exceeds the net sale proceeds
          payable to GE Capital.

               (v) With respect to all or any part of the Property that
          constitutes personalty, GE Capital shall have all rights and remedies
          of secured party under the California Uniform Commercial Code.

               (vi) GE Capital may apply (whether by noticed motion or by ex
          parte application) to a court of competent jurisdiction for the
          appointment of a receiver designated by GE Capital of and for the
          Property (including, without limitation, all rents, issues, profits,
          revenues, earnings and income arising therefrom) in accordance with
          the provisions below and to which appointment GE Capital shall be
          entitled as a matter of right, without bond, and without regard to or
          the necessity to disprove the adequacy of the security for the
          Indebtedness or the solvency of Borrower or any other person liable
          for the payment or performance of the Indebtedness; and Borrower, each
          other person claiming any interest in the

                                       23
<PAGE>

          Property, or any portion thereof, by or through Borrower and every
          other person liable for the payment or performance of the Indebtedness
          hereby waives and consents to, or shall be conclusively deemed to have
          waived and consented to such appointment, whether such application be
          made by noticed motion or by an ex parte application.

     In every instance when a receiver is appointed with respect to all or any
portion of the Property, the receiver may be authorized, among such other duties
and powers as may be ordered or granted by the court, to take possession of the
Property; to manage, control and protect the Property; to collect the rents,
issues, profits, revenues, earnings and income arising therefrom, and to apply
the same toward the payment of expenses, including management and operating
expenses, taxes, assessments, utilities, mortgage payments and insurance
premiums of or in connection with the Property; to maintain the Property in a
reasonable state of repair so that there will be no excessive depreciation or
devaluation thereof arising from lack of prudent management; to enter into such
lease agreements or rental agreements with new tenants for the Property as such
receiver deems reasonable and prudent; to amend, extend or renew existing Leases
upon such terms as such receiver deems reasonable and prudent; to, if necessary,
retain a property management firm to assist in such duties upon such terms as
such receiver deems reasonable and appropriate; and to take such other action as
is necessary in order to provide services to the tenants under any existing or
future Leases or as is necessary to accomplish any of the foregoing. GE Capital
shall also have all rights described in Section 22 above with respect to the
Property.

               (vii) In the event Borrower remains in possession of the Property
          after the Property is sold as provided above or GE Capital otherwise
          becomes entitled to possession of the Property upon default of
          Borrower, Borrower shall become a tenant at will of GE Capital or the
          purchaser of the Property and shall pay a reasonable rental for use of
          the Property while in Borrower's possession.

               (viii) Trustee and GE Capital shall have any other right or
          remedy provided in this Instrument, the Note, or any other Loan
          Document or instrument delivered by Borrower in connection therewith,
          or available at law, in equity or otherwise.

               (ix) GE Capital may institute an action, suit or proceeding in
          equity for the specific performance of any of the provisions contained
          in the Loan Documents.

               (x) GE Capital may release any portion of the Property for such
          consideration as GE Capital may require without, as to the remainder
          of the Property, in any way impairing or affecting the lien or
          priority of this Instrument, or improving the position of any
          subordinate lienholder with respect thereto, except to the extent that
          the Indebtedness shall have been reduced by the actual monetary
          consideration, if any, received by Trustee and/or GE Capital for such
          release, and may accept by assignment, pledge or otherwise any other
          property in

                                       24
<PAGE>

          place thereof as Trustee and/or GE Capital may require without being
          accountable for so doing to any other lienholder.

               (xi) GE Capital shall have all the rights and remedies set forth
          in Sections 22 and 23.

     In the event that Trustee and/or GE Capital shall exercise any of the
rights or remedies set forth in this Section 25 neither Trustee nor GE Capital
shall be deemed to have entered upon or taken possession of the Property except
upon the exercise of its option to do so, evidenced by its demand and overt act
for such purpose, nor shall it be deemed a beneficiary or mortgagee in
possession by reason of such entry or taking possession, unless applicable law
requires that it be deemed to be a beneficiary or mortgagee in possession.
Neither Trustee nor GE Capital shall be liable to account for any action taken
pursuant to any such exercise other than for rents actually received by such
party, nor liable for any loss sustained by Borrower resulting from any failure
to let the Property, or from any other act or omission of Trustee and/or GE
Capital, except to the extent such loss is caused by the willful misconduct or
bad faith of such party or such liability may not be waived under applicable
law. Borrower hereby consents to, ratifies and confirms the exercise by Trustee
and/or GE Capital of said rights and remedies.

          (b) RIGHTS PERTAINING TO SALES. Subject to the provisions or other
     requirements of law, the following provisions shall apply to any sale or
     sales of the Property under or by virtue of this Section 25, whether made
     under the power of sale herein granted or by virtue of judicial proceedings
     or of a judgment or decree of foreclosure and sale:

               (i) Trustee, at the request of GE Capital, may conduct any number
          of sales from time to time. The power of sale set forth in this
          Section 25 hereof shall not be exhausted by any one or more such sales
          as to any part of the Property which shall not have been sold, nor by
          any sale which is not completed or is defective in Trustee's or GE
          Capital's opinion, until the Indebtedness shall have been paid in
          full.

               (ii) Any sale may be postponed or adjourned by public
          announcement at the time and place appointed for such sale or for such
          postponed or adjourned sale without further notice.

               (iii) After each sale, Trustee, or an officer of any court
          empowered to do so, shall execute and deliver to the purchaser or
          purchasers at such sale a good and sufficient instrument or
          instruments granting, conveying, assigning and transferring all right,
          title and interest of Borrower in and to the property and rights sold
          and shall receive the proceeds of said sale or sales and apply the
          same as herein provided. Trustee is hereby appointed the true and
          lawful attorney-in-fact of Borrower, which appointment is irrevocable
          and shall be deemed to be coupled with an interest, in Borrower's name
          and stead, to make all necessary conveyances, assignments, transfers
          and deliveries of the property and rights so sold, and for that
          purpose Trustee may execute all necessary instruments of conveyance,
          assignment, transfer and delivery, and may substitute one or more

                                       25
<PAGE>

          persons with like power, Borrower hereby ratifying and confirming all
          that said attorney or such substitute or substitutes shall lawfully do
          by virtue thereof. Nevertheless, Borrower, if requested by Trustee or
          GE Capital, shall ratify and confirm any such sale or sales by
          executing and delivering to Trustee or such purchaser or purchasers
          all such instruments as may be advisable, in Trustee's or GE Capital's
          judgment, for the purposes as may be designated in such request.

               (iv) Any and all statements of fact or other recitals made in any
          of the instruments referred to in this Section 25 given by Trustee
          and/or GE Capital as to nonpayment of the Indebtedness, or as to the
          occurrence of any Event of Default, or as to GE Capital having
          declared all or any of the Indebtedness to be due and payable, or as
          to the request to sell, or as to notice of time, place and terms of
          sale and of the property or rights to be sold having been duly given,
          or as to the refusal, failure or inability to act of Trustee, or as to
          the appointment of any substitute or successor Trustee, or as to any
          other act or thing having been duly done by Borrower, GE Capital, or
          by such Trustee, shall be taken as conclusive and binding against all
          persons as to evidence of the truth of the facts so stated and
          recited. Trustee and/or GE Capital may appoint or delegate any one or
          more persons as agent to perform any act or acts necessary or incident
          to any sale so held, including the posting of notices and the conduct
          of sale, but in the name and behalf of Trustee or GE Capital, as
          applicable.

               (v) The receipt of Trustee for the purchase money paid at any
          such sale, or the receipt of any other person authorized to receive
          the same, shall be sufficient discharge therefor to any purchaser of
          any property or rights sold as aforesaid, and no such purchaser, or
          its representatives, grantees or assigns, after paying such purchase
          price and receiving such receipt, shall be bound to see to the
          application of such purchase price of any part thereof upon or for any
          trust or purpose of this Instrument or, in any manner whatsoever, be
          answerable for any loss, misapplication or non-application of any such
          purchase money, or part thereof, or be bound to inquire as to the
          authorization, necessity, expediency or regularity of any such sale.

               (vi) Any such sale or sales shall operate to divest all of the
          estate, right, title, interest, claim and demand whatsoever, whether
          at law or in equity, of Borrower in and to the properties and rights
          so sold, and shall be a perpetual bar both at law and in equity
          against Borrower and any and all persons claiming or who may claim the
          same, or any part thereof or any interest therein, by, through or
          under Borrower to the fullest extent permitted by applicable law.

               (vii) Upon any such sale or sales, GE Capital may bid for and
          acquire the Property and, in lieu of paying cash therefor, may make
          settlement for the purchase price by crediting against the
          Indebtedness the amount of the bid made therefor, after deducting
          therefrom the expenses of the sale, the cost of any enforcement
          proceeding hereunder and any other sums which Trustee or GE

                                       26
<PAGE>

          Capital is authorized to deduct under the terms hereof, to the extent
          necessary to satisfy such bid.

               (viii) In the event that Borrower, or any person claiming by,
          through or under Borrower, shall transfer or refuse or fail to
          surrender possession of the Property after any sale thereof, then
          Borrower, or such person shall be deemed a tenant at sufferance of the
          purchaser at such sale, subject to eviction by means of forcible entry
          and detainer proceedings, or subject to any other right or remedy
          available hereunder or under applicable law.

               (ix) Upon any such sale, it shall not be necessary for Trustee,
          GE Capital or any public officer acting under execution or order of
          court to have present or constructively in its possession any of the
          Property.

               (x) In the event of any sale referred to in this Section 25, the
          entire Indebtedness, if not previously due and payable, immediately
          thereupon shall, notwithstanding anything to the contrary herein or in
          the other Loan Documents, become due and payable.

               (xi) In the event a foreclosure hereunder shall be commenced by
          Trustee at the request of GE Capital, Trustee or GE Capital may at any
          time before the sale of the Property abandon the sale, and may
          institute suit for the collection of the Indebtedness and for the
          foreclosure of this Instrument, or in the event that Trustee or GE
          Capital should institute a suit for collection of the Indebtedness,
          and for the foreclosure of this Instrument, GE Capital may at any time
          before the entry of final judgment in said suit dismiss the same and
          sell or require Trustee to sell the Property in accordance with the
          provisions of this Instrument.

               (c) APPLICATION OF PROCEEDS. The purchase money, proceeds or
     avails of any sale referred to in this Section 25(c), together with any
     other sums which may be held by Trustee or GE Capital hereunder, whether
     under the provisions of this Section 25 or otherwise, shall except as
     herein expressly provided to the contrary, be applied as follows:

               (i) FIRST: To the payment of the costs and expenses of any such
          sale, including compensation to Trustee and/or GE Capital, their
          agents and counsel, and of any judicial proceeding wherein the same
          may be made, and of all expenses, liabilities and advances made or
          incurred by Trustee and/or GE Capital hereunder, together with
          interest thereon as provided herein, and all taxes, assessments and
          other charges, except any taxes, assessments or other charges subject
          to which the Property shall have been sold.

               (ii) SECOND: To the payment in full of the Indebtedness
          (including principal, interest, premium and fees) in such order as GE
          Capital may elect.

                                       27
<PAGE>

               (iii) THIRD: To the payment of any other sums secured hereunder
          or required to be paid by Borrower pursuant to any provisions of the
          Loan Documents.

               (iv) FOURTH: To the payment of the surplus, if any, to whomsoever
          may be lawfully entitled to receive the same.

               (d) NOTICE OF SALE. GE Capital shall give Borrower reasonable
     notice of the time and place of any public sale of any personal property or
     of the time after which any private sale or other intended disposition of
     the personal property is to be made. Reasonable notice shall mean notice
     given in accordance with applicable law, including notices given in the
     manner and at the times required for notices in a nonjudicial foreclosure.

               (e) ADDITIONAL PROVISIONS AS TO REMEDIES.

               (i) No right or remedy herein conferred upon or reserved to
          Trustee or GE Capital is intended to be exclusive of any other right
          or remedy, and each and every such right or remedy shall be cumulative
          and continuing, shall be in addition to every other right or remedy
          given hereunder, or under the other Loan Documents or now or hereafter
          existing at law or in equity, and may be exercised from time to time
          and as often as may be deemed expedient by Trustee or GE Capital.

               (ii) No delay or omission by Trustee or GE Capital to exercise
          any right or remedy hereunder upon any Event of Default shall impair
          such exercise, or be construed to be a waiver of any such Event of
          Default or an acquiescence therein.

               (iii) The failure, refusal or waiver by Trustee or GE Capital of
          its right to assert any right or remedy hereunder upon any Event of
          Default or other occurrence shall not be construed as waiving such
          right or remedy upon any other or subsequent Event of Default or other
          occurrence.

               (iv) Neither Trustee nor GE Capital shall have any obligation to
          pursue any rights or remedies they may have under any other agreement
          prior to pursuing their rights or remedies hereunder or under the
          other Loan Documents.

               (v) No recovery of any judgment by Trustee or GE Capital and no
          levy of an execution upon the Property or any other property of
          Borrower shall affect, in any manner or to any extent, the lien of
          this Instrument upon the Property, or any liens, rights, powers or
          remedies of Trustee or GE Capital hereunder, and such liens, rights,
          powers and remedies shall continue unimpaired as before.

               (vi) GE Capital may resort or cause Trustee to resort to any
          security given by this Instrument or any other security now given or
          hereafter existing to

                                       28
<PAGE>

          secure the Indebtedness, in whole or in part, in such portions and in
          such order as GE Capital may deem advisable, and no such action shall
          be construed as a waiver of any of the liens, rights or benefits
          granted hereunder.

               (vii) Acceptance of any payment after the occurrence of any Event
          of Default shall not be deemed a waiver or a cure of such Event of
          Default, and acceptance of any payment less than any amount then due
          shall be deemed an acceptance on account only.

               (viii) In the event that Trustee or GE Capital shall have
          proceeded to enforce any right or remedy hereunder by foreclosure,
          sale, entry or otherwise, and such proceeding shall be discontinued,
          abandoned or determined adversely for any reason, then Borrower,
          Trustee and GE Capital shall be restored to their former positions and
          rights hereunder with respect to the Property, subject to the lien
          hereof.

               (f) WAIVER OF RIGHTS AND DEFENSES. To the full extent Borrower
     may do so, Borrower agrees with GE Capital as follows:

               (i) Borrower will not at any time, insist on, plead, claim or
          take the benefit or advantage of any statute or rule of law now or
          hereafter in force providing for any appraisement, valuation, stay,
          extension, moratorium or redemption, or of any statute of limitations,
          and Borrower, for itself and its heirs, devises, representatives,
          successors and assigns, and for any and all persons ever claiming an
          interest in the Property (other than GE Capital) hereby, to the extent
          permitted by applicable law, waives and releases all rights of
          redemption, valuation, appraisement, notice of intention to mature or
          declare due the whole of the Indebtedness, and all rights to a
          marshaling of the assets of Borrower, including the Property, or to a
          sale in inverse order of alienation, in the event of foreclosure of
          the liens and security interests created hereunder.

               (ii) Borrower shall not have or assert any right under any
          statute or rule of law pertaining to any of the matters set forth in
          this Section 25, to the administration of estates of decedents or to
          any other matters whatsoever to defeat, reduce or affect any of the
          rights or remedies of Trustee and GE Capital hereunder, including the
          rights of Trustee and/or GE Capital hereunder to a sale of the
          Property for the collection of the Indebtedness without any prior or
          different resort for collection, or to the payment of the Indebtedness
          out of the proceeds of sale of the Property in preference to any other
          person.

               (iii) If any statute or rule of law referred to in this Section
          25(f) and now in force, of which Borrower or any of its
          representatives, successors or assigns and such other persons claiming
          any interest in the Property might take advantage despite this Section
          25(f), shall hereafter be repealed or cease to be in force, such
          statute or rule of law shall not thereafter be deemed to preclude the
          application of this Section 25(f).

                                       29
<PAGE>

               (iv) Borrower shall not be relieved of its obligation to pay the
          Indebtedness at the time and in the manner provided herein and in the
          other Loan Documents, nor shall the lien or priority of this
          Instrument or any other Loan Documents be impaired by any of the
          following actions, non-actions or indulgences by Trustee or GE
          Capital:

                    (A) any failure or refusal by Trustee or GE Capital to
               comply with any request by Borrower (X) to consent to any action
               by Borrower or (Y) to take any action to foreclose this
               Instrument or otherwise enforce any of the provisions hereof or
               of the other Loan Documents;

                    (B) any release, regardless of consideration, of the whole
               or any part of the Property or any other security for the
               Indebtedness or any person liable for payment of the
               Indebtedness;

                    (C) any waiver by GE Capital of compliance by Borrower with
               any provision of this Instrument or the other Loan Documents, or
               consent by GE Capital to the performance by Borrower of any
               action which would otherwise be prohibited thereunder, or to the
               failure by Borrower to take any action which would otherwise be
               required hereunder or thereunder; and

                    (D) any agreement or stipulation between Trustee or GE
               Capital and Borrower, or, with or without Borrower's consent,
               between Trustee or GE Capital and any subsequent owner or owners
               of the Property or any other security for the Indebtedness,
               renewing, extending or modifying the time of payment or the terms
               of this Instrument or any of the other Loan Documents (including
               a modification of any interest rate), and in any such event
               Borrower shall continue to be obligated to pay the Indebtedness
               at the time and in the manner provided herein and in the other
               Loan Documents, as so renewed, extended or modified, unless
               expressly released and discharged by GE Capital.

               (v) Regardless of consideration, and without the necessity for
          any notice to or consent by the holder of any subordinate lien,
          encumbrance, right, title or interest in or to the Property, GE
          Capital may release any person at any time liable for the payment of
          the Indebtedness or any portion thereof or any part of the security
          held for the Indebtedness and may extend the time of payment or
          otherwise modify the terms of this Instrument or of any of the Loan
          Documents, including a modification of the interest rate payable on
          the principal balance of the Note, without in any manner impairing or
          affecting this Instrument, as so extended and modified, as security
          for the Indebtedness under any such subordinate lien, encumbrance,
          right, title or interest. GE Capital may resort for the payment of the
          Indebtedness to any other security held by GE Capital (or any trustee
          for the benefit of GE Capital) in such order and manner as GE Capital
          in its discretion, may elect. GE Capital may take or cause to be taken
          action to recover the Indebtedness, or

                                       30
<PAGE>

          any portion thereof, or to enforce any provision hereof or of the
          other Loan Documents without prejudice to the right of GE Capital
          thereafter to foreclose or cause to be foreclosed this Instrument. GE
          Capital shall not be limited exclusively to the right and remedies
          herein stated but shall be entitled to every additional right and
          remedy now or hereafter afforded by law or equity. The rights of
          Trustee and GE Capital under this Instrument shall be separate,
          distinct and cumulative and none shall be given effect to the
          exclusion of the others. No act of Trustee and/or GE Capital shall be
          construed as an election to proceed under any one provision herein to
          the exclusion of any other provision.

               (g) EXERCISE BY TRUSTEE. Notwithstanding anything herein to the
          contrary, Trustee (a) shall not exercise, or waive the exercise of,
          any of its rights or remedies under this Section 25 (other than its
          right to reimbursement) except upon the request of GE Capital, and (b)
          shall exercise, or waive the exercise of, any or all of such rights or
          remedies upon the request of GE Capital and at the direction of GE
          Capital as to the manner of such exercise or waiver, provided that
          Trustee shall have the right to decline to follow any of such request
          or direction if Trustee shall be advised by counsel that the action or
          proceeding, or manner thereof, so directed may not lawfully be taken
          or waived.

               (h) EXPENSES. If any action is commenced to foreclose this
          Instrument or to enforce any other remedy of Trustee and/or GE Capital
          under any of the Loan Documents, whether such action is judicial or
          pursuant to the power of sale contained herein or otherwise, there
          shall be added to the Indebtedness secured by this Instrument all
          costs and expenses, including attorney's fees, plus interest thereon
          at the default rate as set forth in the Note until paid, in the
          commencement and prosecution of such action, whether or not such
          action results in a foreclosure sale, foreclosure or other judicial
          decree or judgment.

     SECTION 26. ENVIRONMENTAL DEFAULT AND REMEDIES. In the event that any
portion of the Property is determined to be "environmentally impaired" (as
"environmentally impaired" is defined in California Code of Civil Procedure
Section 726.5(e)(3)) or to be an "affected parcel" (as "affected parcel" is
defined in California Code of Civil Procedure Section 726.5(e)(1)), then,
without otherwise limiting or in any way affecting GE Capital's or Trustee's
rights and remedies under this Deed of Trust, GE Capital may elect to exercise
its right under California Code of Civil Procedure Section 726.5(a) to (1) waive
its lien on such environmentally impaired or affected parcel portion of the
Property and (2) exercise (i) the rights and remedies of an unsecured creditor,
including reduction of its claim against Borrower to judgment, and (ii) any
other rights and remedies permitted by law. For purposes of determining GE
Capital's right to proceed as an unsecured creditor under California Code of
Civil Procedure Section 726.5(a), Borrower shall be deemed to have willfully
permitted or acquiesced in a release or threatened release of hazardous
materials, within the meaning of California Code of Civil Procedure Section
726.5(d)(1), if the release or threatened release of hazardous materials was
knowingly or negligently caused or contributed to by any lessee, occupant or
user of any portion of the Property and Borrower knew or should have known of
the activity by such lessee, occupant or user which caused or contributed to the
release or threatened release. All costs and expenses,

                                       31
<PAGE>

including, but not limited to, attorneys' and paralegals' fees and costs and
court costs incurred by GE Capital in connection with any action commenced under
this Section 26, including any action required by California Code of Civil
Procedure Section 726.5(b) to determine the degree to which the Property is
environmentally impaired, plus interest thereon at the rate of five percent (5%)
per annum above the prime interest rate as quoted in the Wall Street Journal in
effect from time to time, or fifteen percent (15%) per annum, whichever is
higher, provided that such interest rate shall not exceed the maximum interest
rate permitted by law, until paid, shall be added to the Indebtedness secured by
this Deed of Trust and shall be due and payable to GE Capital upon its demand
made at any time following the conclusion of such action.

     SECTION 27. RECONVEYANCE. Upon payment of all sums secured by this
Instrument, GE Capital shall request Trustee to reconvey the Property and shall
surrender this Instrument and all notes evidencing Indebtedness secured by this
Instrument to Trustee. Trustee shall reconvey the Property without warranty to
the person or persons legally entitled thereto. Such person or persons shall pay
Trustee's costs incurred in so reconveying the Property.

     SECTION 28. SUBSTITUTE TRUSTEE. In accordance with applicable law, GE
Capital may from time to time appoint a successor trustee to any Trustee
appointed hereunder. Without conveyance of the Property, the successor trustee
shall succeed to all the title, power and duties conferred upon the Trustee
herein and by applicable law.

     SECTION 29. USE OF PROPERTY. The Property is not currently used for
agricultural, farming, timber or grazing purposes. Borrower warrants that this
Instrument is and will at all times constitute a commercial trust deed, as
defined under appropriate state law.

     SECTION 30. FUTURE ADVANCES. Upon request of Borrower, GE Capital, at GE
Capital's option so long as this Instrument secures Indebtedness held by GE
Capital, may make Future Advances to Borrower. Such Future Advances, with
interest thereon, shall be secured by this Instrument when evidenced by
promissory notes stating that said notes are secured hereby.

     SECTION 31. IMPOSITION OF TAX BY STATE.

          (a) STATE TAXES COVERED. The following constitute state taxes to which
     this Section applies:

               (i) A specific tax upon trust deeds or upon all or any part of
          the indebtedness secured by a trust deed.

               (ii) A specific tax on a grantor which the taxpayer is authorized
          or required to deduct from payments on the indebtedness secured by a
          trust deed.

               (iii) A tax on a trust deed chargeable against the beneficiary or
          the holder of the note secured.

               (iv) A specific tax on all or any portion of the indebtedness or
          on payments of principal and interest made by a grantor.

                                       32
<PAGE>

          (b) REMEDIES. If any state tax to which this Section applies is
     enacted subsequent to the date of this Instrument, this shall have the same
     effect as an Event of Default, and GE Capital may exercise any or all of
     the remedies available to it unless the following conditions are met:

               (i) Borrower may lawfully pay the tax or charge imposed by state
          tax, and

               (ii) Borrower pays the tax or charge within thirty (30) days
          after notice from GE Capital that the tax has been levied.

     SECTION 32. ATTORNEYS' FEES. In the event suit or action is instituted to
enforce or interpret any of the terms of this Instrument (including without
limitation efforts to modify or vacate any automatic stay or injunction), the
prevailing party shall be entitled to recover all expenses reasonably incurred
at, before and after trial and on appeal whether or not taxable as costs, or in
any bankruptcy proceeding including, without limitation, attorneys' fees,
witness fees (expert and otherwise), deposition costs, copying charges and other
expenses. Whether or not any court action is involved, all reasonable expenses,
including but not limited to the costs of searching records, obtaining title
reports, surveyor reports, title insurance, trustee fees, and other attorney
fees, incurred by GE Capital that are necessary at any time in GE Capital's
opinion for the protection of its interest or enforcement of its rights shall
become a part of the Indebtedness payable on demand and shall bear interest from
the date of expenditure until repaid at the interest rate as provided in the
Note. The term "ATTORNEYS' FEES" as used in the Loan Documents shall be deemed
to mean such fees as are reasonable and are actually incurred.

     SECTION 33. GOVERNING LAW; SEVERABILITY. This Instrument shall be governed
by the law of the State of California applicable to contracts made and to be
performed therein (excluding choice-of-law principles). In the event that any
provision or clause of this Instrument or the Note conflicts with applicable
law, such conflict shall not affect other provisions of this Instrument or the
Note which can be given effect without the conflicting provision, and to this
end the provisions of this Instrument and the Note are declared to be severable.

     SECTION 34. TIME OF ESSENCE. Time is of the essence of this Instrument.

     SECTION 35. CHANGES IN WRITING. This Instrument and any of its terms may
only be changed, waived, discharged or terminated by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought. Any agreement subsequently made by Borrower or GE
Capital relating to this Instrument shall be superior to the rights of the
holder of any intervening lien or encumbrance.

     SECTION 36. NO OFFSET. Borrower's obligation to make payments and perform
all obligations, covenants and warranties under this Instrument and under the
Note shall be absolute and unconditional and shall not be affected by any
circumstance, including without limitation any setoff, counterclaim, abatement,
suspension, recoupment, deduction, defense or other right that Borrower or any
guarantor may have or claim against GE Capital or any entity participating

                                       33
<PAGE>

in making the loan secured hereby. The foregoing provisions of this Section,
however, do not constitute a waiver of any claim or demand which Borrower or any
guarantor may have in damages or otherwise against GE Capital or any other
person, or preclude Borrower from maintaining a separate action thereon;
provided, however, that Borrower waives any right it may have at law or in
equity to consolidate such separate action with any action or proceeding brought
by GE Capital.

     SECTION 37. PROVISIONS REGARDING TRUSTEE. Trustee shall not be liable for
any error of judgment or act done by Trustee, or be otherwise responsible or
accountable under any circumstances whatsoever. Trustee shall not be personally
liable in case of entry by it or anyone acting by virtue of the powers herein
granted it upon the Property for debts contracted or liability or damages
incurred in the management or operation of the Property. All monies received by
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated in any
manner from any other monies (except to the extent required by law) and Trustee
shall be under no liability for interest on any monies received by it hereunder.

     Trustee may resign by giving of notice of such resignation in writing to GE
Capital. If Trustee shall die, resign or become disqualified from acting, or
shall fail or refuse to exercise its powers hereunder when requested by GE
Capital so to do, or if for any reason and without cause GE Capital shall prefer
to appoint a substitute trustee to act instead of the original Trustee named
herein, or any prior successor or substitute trustee, GE Capital shall have full
power to appoint a substitute trustee and, if preferred, several substitute
trustees in succession who shall succeed to all the estate, rights, powers and
duties of the forenamed Trustee. Upon appointment by GE Capital, any new Trustee
appointed pursuant to any of the provisions hereof shall, without any further
act, deed or conveyance, become vested with all the estates, properties, rights,
powers and trusts of its predecessor in the rights hereunder with the same
effect as if originally named as Trustee herein.

     SECTION 38. WAIVER OF JURY TRIAL. BORROWER HEREBY KNOWINGLY, VOLUNTARILY
AND INTELLIGENTLY WAIVES ANY AND ALL RIGHTS THAT EACH PARTY TO THIS INSTRUMENT
MAY NOW OR HEREAFTER HAVE UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR THE
STATE OF CALIFORNIA, TO A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING DIRECTLY
OR INDIRECTLY IN ANY ACTION OR PROCEEDING RELATING TO THIS INSTRUMENT, THE LOAN
DOCUMENTS OR ANY TRANSACTIONS CONTEMPLATED THEREBY OR RELATED THERETO. IT IS
INTENDED THAT THIS WAIVER SHALL APPLY TO ANY AND ALL DEFENSES, RIGHTS, CLAIMS
AND/OR COUNTERCLAIMS IN ANY SUCH ACTION OR PROCEEDING.

     BORROWER UNDERSTANDS THAT THIS WAIVER IS A WAIVER OF A CONSTITUTIONAL
SAFEGUARD, AND EACH PARTY INDIVIDUALLY BELIEVES THAT THERE ARE SUFFICIENT
ALTERNATE PROCEDURAL AND SUBSTANTIVE SAFEGUARDS, INCLUDING, A TRIAL BY AN
IMPARTIAL JUDGE, THAT ADEQUATELY OFFSET THE WAIVER CONTAINED HEREIN.

                                       34
<PAGE>

     SECTION 39. MAXIMUM INTEREST CHARGES. Notwithstanding anything contained
herein or in any of the Loan Documents to the contrary, in no event shall GE
Capital be entitled to receive interest on the loan secured by this Instrument
(the "LOAN") in amounts which, when added to all of the other interest charged,
paid to or received by GE Capital on the Loan, causes the rate of interest on
the Loan to exceed the highest lawful rate. Borrower and GE Capital intend to
comply with the applicable law governing the highest lawful rate and the maximum
amount of interest payable on or in connection with the Loan. If the applicable
law is ever judicially interpreted so as to render usurious any amount called
for under the Loan Documents, or contracted for, charged, taken, reserved or
received with respect to the Loan, or if acceleration of the final maturity date
of the Loan or if any prepayment by Borrower results in Borrower having paid or
demand having been made on Borrower to pay, any interest in excess of the amount
permitted by applicable law, then all excess amounts theretofore collected by GE
Capital shall be credited on the principal balance of the Note (or, if the Note
has been or would thereby be paid in full, such excess amounts shall be refunded
to Borrower), and the provisions of the Note, this Instrument and any demand on
Borrower shall immediately be deemed reformed and the amounts thereafter
collectible thereunder and hereunder shall be reduced, without the necessity of
the execution of any new document, so as to comply with the applicable law, but
so as to permit the recovery of the fullest amount otherwise called for
thereunder and hereunder. The right to accelerate the final maturity date of the
Loan does not include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and GE Capital does not
intend to collect any unearned interest in the event of acceleration. All sums
paid or agreed to be paid to GE Capital for the use, forbearance or detention of
the Loan shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread through the full term of the Loan until payment
in full so that the rate or amount of interest on account of the Loan does not
exceed the applicable usury ceiling. By execution of this Instrument, Borrower
acknowledges that it believes the Loan to be nonusurious and agrees that if, at
any time, Borrower should have reason to believe that the Loan is in fact
usurious, it will give GE Capital written notice of its belief and the reasons
why Borrower believes the Loan to be usurious, and Borrower agrees that GE
Capital shall have ninety (90) days following its receipt of such written notice
in which to make appropriate refund or other adjustment in order to correct such
condition if it in fact exists.

     SECTION 40. REQUEST FOR NOTICE. Pursuant to California Government Code
Section 27321.5(b), Borrower hereby requests that a copy of any notice of
default and a copy of any notice of sale given pursuant to this Instrument be
mailed to Borrower at the address set forth herein above.

                                       35
<PAGE>

     SECTION 41. FIXTURE FILING. Portions of the Property are goods which are or
are to become fixtures relating to the Property, and Borrower covenants and
agrees that the filing of this Instrument in the real estate records of the
county where the Property is located shall also operate from the time of filing
as a fixture filing in accordance with Section 9313 of the California Uniform
Commercial code.

     SECTION 42. LOCAL LAW PROVISIONS. In the event of any conflict between the
terms and provisions of any other section of this Instrument, the terms and
provisions of this section shall govern and continue.

     (a)     With or without notice, and without releasing Borrower from any
obligation hereunder, to cure any default of Borrower and, in connection
therewith, GE Capital or its agents, acting by themselves or through a court
appointed receiver, may enter upon the Premises or any part thereof and perform
such acts and things as GE Capital deems necessary or desirable to inspect,
investigate, assess, and protect the security hereof, including without
limitation of any of its other rights:

               (i) to obtain a court order to enforce GE Capital's right to
          enter and inspect the Premises under Section 2929.5 of the California
          Civil Code, to which the decision of GE Capital as to whether there
          exists a release or threatened release of Hazardous Materials in or
          onto the Premises shall be deemed reasonable and conclusive as between
          the parties hereto; and

               (ii) to have a receiver appointed under Section 564 of the
          California Code of Civil Procedure to enforce GE Capital's right to
          enter and inspect the Premises for Hazardous Materials. All costs and
          expenses reasonably incurred by Lender with respect to the audits,
          tests, inspections, and examinations which Lender or its agents or
          employees may conduct, including the fees of the engineers,
          laboratories, contractor, consultants, and attorneys, shall be paid by
          Borrower. All reimbursement costs and expenses incurred by Trustee and
          GE Capital pursuant to this subparagraph (including, without
          limitation, court costs, consultant fees and attorneys' fees, whether
          incurred in litigation or not and whether before or after judgment)
          shall be added to the Loan Obligations and shall bear interest at the
          Default Rate from the date they are incurred until said sums have been
          paid if not paid within 10 days after demand.

          (b)     GE Capital may seek a judgment that Borrower has breached its
     covenants, representations and/or warranties with respect to the
     environmental matters set forth in the Indemnity or herein, by commencing
     and maintaining an action or actions in any court of competent jurisdiction
     for breach of contract pursuant to Section 736 of the California Code of
     Civil Procedure, whether commenced prior to foreclosure of the Premises,
     and to seek the recovery of any and all costs, damages, expenses, fees,
     penalties, fines, judgments, indemnification payments to third parties, and
     other out-of-pocket costs or expenses actually incurred by GE Capital
     (collectively, the "ENVIRONMENTAL COSTS") incurred or advanced by GE
     Capital relating to the cleanup, remediation or other response action,
     required by applicable law or to which Lender believes necessary to protect
     the Premises, it being conclusively presumed between GE Capital and
     Borrower that all such Environmental Costs incurred or advanced by GE
     Capital relating to the cleanup, remediation, or other response action of
     or to the Premises were made by GE Capital in good faith. All Environmental
     Costs incurred by GE Capital under this subparagraph (including, without
     limitation, court costs, consultant fees and attorneys' fees,

                                       36
<PAGE>

whether incurred in litigation or not and whether before or after judgment)
shall bear interest at the Default Rate from the date of expenditure until said
sums have been paid if not paid within 10 days after demand. GE Capital shall be
entitled to bid, at the sale of the Premises, the amount of said costs, expenses
and interest in addition to the amount of the other obligations hereby secured
as a credit bid, the equivalent of cash.

          (c)    Borrower acknowledges and agrees that notwithstanding any term
     or provision contained herein or elsewhere, the Environmental Costs shall
     be exceptions to any limited recourse or exculpatory provision, and
     Borrower shall be fully and personally liable for the Environmental Costs
     hereunder, and such liability shall not be limited to the original
     principal amount of the obligations secured by this Instrument, and
     Borrower's Premises or this Instrument. For the purposes of any action
     brought under this subparagraph, Borrower hereby waives the defense of
     laches and any applicable statute of limitations.

          (d)    GE Capital may waive its lien against the Premises or any
     portion thereof, whether fixtures or personal property, to the extent such
     property is found to be environmentally impaired in accordance with Section
     726.5 of the California Code of Civil Procedure and to exercise any and all
     rights and remedies of an unsecured creditor against Borrower and all of
     Borrower's assets and property for the recovery of any deficiency and
     Environmental Costs, including, but not limited to, seeking an attachment
     order under Section 483.010 of the California Code of Civil Procedure. As
     between GE Capital and Borrower, for purposes of Section 726.5 of the
     California Code of Civil Procedure, Borrower shall have the burden of
     proving that Borrower or any related party (or any affiliate or agent of
     Borrower or any related party) was not in any way negligent in permitting
     the release or threatened release of Hazardous Substances. Borrower
     acknowledges and agrees that notwithstanding any term or provision
     contained herein or pursuant to this subsection elsewhere in the Loan
     Documents, all judgments and awards entered against Borrower shall be
     exceptions to any nonrecourse or exculpatory provision, and Borrower shall
     be fully and personally liable for all judgments and awards entered against
     Borrower hereunder and such liability shall not be limited to the original
     principal amount of the obligations secured by this Instrument and
     Borrower's obligations shall survive the foreclosure, deed in lieu of
     foreclosure, release, reconveyance, or any other transfer of the Premises
     or this Instrument. For the purposes of any action brought under this
     subparagraph, Borrower hereby waives the defense of laches and any
     applicable statute of limitations.

          Trustor hereby waives all other rights it may now or hereafter have,
     whether or not similar to any of the foregoing, by reason of laws of the
     State of California pertaining to sureties, including without limitation
     all rights and defenses that are or may become available to Trustor by
     reason of Sections 2787 to 2855, inclusive, 2899, and 3433 of the
     California Civil Code.

                    [REMAINDER OF PAGE INTENTIONALLY BLANK;
                            EXECUTION PAGE FOLLOWS]

                                       37
<PAGE>

     IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.

     IN WITNESS WHEREOF, Borrower has executed this Instrument or has caused the
same to be executed by its representatives thereunto duly authorized.

                                        BORROWER:

                                        APPLIANCE RECYCLING CENTERS OF
                                        AMERICA, INC., a Minnesota corporation

                                        By: /s/Edward R. Cameron
                                        Print: Edward R. Cameron
                                        Its: President
STATE OF MINNESOTA      )
                        )  ss.
COUNTY OF R a m s e y   )

On     12/23/02   , before me,         Sara Dammann, Notary Public,
   ---------------             --------------------------------------------
        Date                            Name and Title of Officer
                                     (e.g. "Jane Doe, Notary Public")

personally appeared         Edward R. Cameron
                    ---------------------------------
                         Name of Signer(s)

X personally known to me - OR - [ ]     proved to me on the basis of
                                        satisfactory evidence to be the
                                        person(s) whose name(s) is/are
                                        subscribed to the within instrument and
                                        acknowledged to me that he/she/they
                                        executed the same in his/her/their
                                        authorized capacity(ies), and that by
                                        his/her/their signature(s) on the
                                        instrument the person(s), or the entity
                                        upon behalf of which the person(s)
                                        acted, executed the instrument.

                                        WITNESS my hand and official seal.

                                        ________________________________________
                                        /s/ Sara L. Dammann, Signature of Notary
                                        Public

     [EXECUTION AND ACKNOWLEDGE PAGE OF COMMERCIAL DEED OF TRUST, FINANCING
       STATEMENT, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND
                                FIXTURE FILING]

<PAGE>

General Electric Capital Business
Asset Funding Corporation
Loan No.: 001-0010771-001

                                   EXHIBIT A
                                   ---------

         (1920 Acacia Avenue, Compton, Los Angeles County, California)

Legal Description:
------------------

Parcels 1 and 2 of Parcel Map No. 21013, in the City of Compton, County of Los
Angeles, State of California, as per map recorded in Book 233 Pages 7 and 8 of
Parcel Maps, in the office of the County Recorder of said County.

EXCEPT therefrom that portion of said Parcel 2 lying Southerly of the following
described line:

Commencing at the Northwest corner of said Parcel 1, said point also lying on
the Easterly line of Acacia Avenue, as shown on said Parcel Map No. 21013;
thence along the Westerly lines of said Parcels 1 and 2, South 2 04' 39" East a
distance of 341.09 feet to the point of beginning; thence North 87 55' 21" East
299.26 feet, more or less, to the Easterly line of said Parcel 2.

EXCEPT therefrom all oil, gas, minerals, and other hydrocarbon substances lying
below the surface of said land, but with no right of surface entry as provided
in deeds of record.

<PAGE>

General Electric Capital Business
Asset Funding Corporation
Loan No.: 001-0010771-001

                                   SCHEDULE 1
                                   ----------

         (1920 Acacia Avenue, Compton, Los Angeles County, California)

Permitted Exceptions:
---------------------

1.        An easement for the purpose show below and right incidental thereto as
          set forth in a document:

          Purpose:  pipe lines

          Recorded: December 8, 1953 as Instrument No. 394 in Book 43333, Page
                    81 Official Records

          Affects:  Portion of Parcel 1

2.        Covenants, conditions and restrictions as set forth in the document:

          Recorded: August 23, 1968 as Instrument No. 3626 in Book M2963, Page
                    52 Official Records

Modification of said covenants, conditions and restrictions

          Recorded: January 14, 1970 as Instrument No. 3300 in Book M3389, Page
                    928 Official Records

          Affects: Parcels 1 and 2

3.        An easement for the purpose shown below and rights incidental thereto
          as set forth in a document

          Purpose:  storm drains and appurtenances

          Recorded: September 13, 1971 as Instrument No. 3040 in Book D5189 Page
                    338, Official Records

          Affects:  Parcel 1

4.        An easement for the purpose shown below and rights incidental thereto
          as set forth in a document

          Purpose:  overhead and underground electrical supply systems and
                    communications systems, consisting of poles, guys and
                    anchors, crossarms, wires, underground conduits, cables,
                    vaults, manholes,

<PAGE>

                    handholes, and including above ground enclosures, markers
                    and concrete pads and other appurtenant fixtures.

          Recorded: September 14, 1971 as Instrument No. 3026 in Book D5192 Page
                    228 Official Records

          Affects:  portions of Parcels 1 and 2

5.        An easements for the purpose shown below and rights incidental thereto
          as set forth in a document

          Purpose:  public utilities and appurtenances

          Recorded: June 9, 1972 as Instrument No. 3586 in Book D5489 Page 63,
                    Official Records

          Affects:  portion of Parcel 1

6.        An easement for the purpose shown below and rights incidental thereto
          as set forth in a document

          Purpose:  wires, underground conduits, cables, vaults, manholes and
                    handholes

          Recorded: February 6, 1978 as Instrument No. 78-139103 Official
                    Records

          Affects:  portions of Parcels 1 and 2

7.        A covenant and agreement

          Executed by: not shown

          In favor of: not shown

          Recorded: September 27, 1993 as Instrument/File No. 93-1881160,
                    Official Records

          Reference is made to said document for full particulars.

8.        An easement for the purpose shown below and rights incidental thereto
          as set forth in a document

          Purpose:  surface drainage

          Recorded: October 29, 1993 as Instrument No. 93-2117784 Official
                    Records

          Affects:  10.00 foot wide strip

<PAGE>

9.        The effect of Acceptance Form

          Dated:    not shown

          Executed by: not shown

          In favor of: not shown

          Recorded: November 15, 1993 as Instrument/File No. 93-2242434 Official
                    RecordsTHIRTEENTH AMENDMENT TO
                      GENERAL CREDIT AND SECURITY AGREEMENT

         THIS AGREEMENT, dated and effective as of January 23, 2003, between
SPECTRUM Commercial Services Company, a Minnesota Corporation, having its
mailing address and principal place of business at Two Appletree Square, Suite
415, Bloomington, Minnesota 55425 (herein called "Lender" or "SCS"), and
Appliance Recycling Centers of America, Inc., a Minnesota corporation, having
the mailing address and principal place of business at 7400 Excelsior Boulevard,
Minneapolis, MN 55426, (herein called "Borrower"), amends that certain General
Credit and Security Agreement dated August 30, 1996, ("Credit Agreement") as
amended. Where the provisions of this Agreement conflict with the Credit
Agreement, the intent of this Agreement shall control.

1. The definition of "Borrowing Base" appearing in Paragraph 2 is amended in its
entirety to read as follows:

                  "Borrowing Base" shall mean the sum of (i) Eighty percent
                  (80%) of the net amount of Eligible Receivables or such
                  greater or lesser percentage as Lender, in its sole
                  discretion, shall deem appropriate, plus (ii) the lesser of
                  (x) Two Hundred Fifty Thousand and No/100ths Dollars
                  ($250,000) or (y) Twenty Five percent (25%) of the net amount
                  of Eligible Inventory (excluding Eligible Whirlpool Inventory
                  and Eligible Scratch and Dent Inventory), or such greater or
                  lesser dollars and/or percentage as Lender, in its sole
                  discretion, shall deem appropriate, plus (iii) the lesser of
                  (x) Three Million and No/100ths Dollars ($3,000,000) or (y)
                  Fifty percent (50%) of the net amount of Eligible Scratch and
                  Dent Inventory, or such greater or lesser dollars and/or
                  percentage as Lender, in its sole discretion, shall deem
                  appropriate, plus (iv) the lesser of (x) Four Million and
                  No/100ths Dollars ($4,000,000) or (y) Eighty percent (80%) of
                  the net amount of Eligible Whirlpool Inventory, or such
                  greater or lesser dollars and/or percentage as Lender, in its
                  sole discretion, shall deem appropriate, provided however,
                  that notwithstanding the dollar limits contained in
                  subsections (ii) - (iv) above, that the total aggregate amount
                  available under subsections (ii) - (iv) shall in no event
                  exceed Six Million and No/100ths Dollars ($6,000,000), or such
                  greater or lesser dollars as Lender, in its sole discretion,
                  shall deem appropriate.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

SPECTRUM COMMERCIAL SERVICES                APPLIANCE RECYCLING CENTERS
COMPANY                                     OF AMERICA, INC.

By /s/Steven I. Lowenthal                   By /s/Edward R. Cameron
  ----------------------------                 ---------------------------------
Steven I. Lowenthal, Principal
                                               Its President
                                               ---------------------------------

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