Document:

EXHIBIT 10.3
                                                                    ------------
WHEN RECORDED, RETURN TO:

Brian S. Short, Esq.
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas  75270
                                            ------------------------------------

                        COVERSHEET RECORDING INFORMATION:

                                 LOAN NO. 323705

                              TO BE RECORDED IN THE
                            DEED OF TRUST RECORDS OF
                           SPOKANE COUNTY, WASHINGTON

DOCUMENT               Deed of Trust, Assignment of Leases and Rents, Security
TITLE:                 Agreement and Fixture Filing

Recording numbers of related documents on following page numbers:

GRANTOR:               WHC804, LLC, a Delaware limited liability company
(Last name first)

GRANTEE:               COLUMN FINANCIAL, INC., a Delaware corporation
(Beneficiary)

GRANTEE:               FIRST AMERICAN TITLE INSURANCE COMPANY
(Trustee)

ABBREVIATED            PORTION OF E 1/2, 18-25N-43E
LEGAL                  (Abbreviated legal description is comprised of
DESCRIPTION:           section/township/range quarter/quarter section.)
                       The complete legal description is on Exhibit A.
<PAGE>

ASSESSOR'S
PROPERTY TAX
PARCEL ACCOUNT
NUMBERS:               35185.0074, 35185.0028

         THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT
AND FIXTURE FILING (this "Deed of Trust"), executed on August __, 2001, but to
be effective as of August 16, 2001, is entered into by WHC804, LLC, a Delaware
limited liability company, as Grantor ("Grantor"), whose address is 303 West
North River Drive, Spokane, Washington 99201, Attention: Hotel Executive
Offices, to FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee ("Trustee"),
whose address is 2101 Fourth Avenue, Suite 712, Seattle, Washington 98121-2318,
for the benefit of COLUMN FINANCIAL, INC., a Delaware corporation, as
Beneficiary ("Beneficiary"), whose address is Eleven Madison Avenue, New York,
New York 10010, Attention: Edmund Taylor.

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

         FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein
recited and the trust herein created, the receipt and sufficiency of which are
hereby acknowledged, Grantor hereby irrevocably grants, transfers, conveys and
assigns to Trustee, IN TRUST WITH POWER OF SALE, for the benefit and security of
Beneficiary, under and subject to the terms and conditions hereinafter set
forth, all of the following described property, whether now owned or hereafter
acquired (collectively, the "Property"):

         (A) All that certain real property situated in the County of Spokane,
State of Washington, more particularly described on Exhibit A attached hereto
and incorporated herein by this reference (the "Land"), together with all of the
easements, rights, privileges, franchises, tenements, hereditaments and
appurtenances now or hereafter thereunto belonging or in any way appertaining
thereto, and all of the estate, right, title, interest, claim and demand
whatsoever of Grantor therein or thereto, either at law or in equity, in
possession or in expectancy, now owned or hereafter acquired;

         (B) All structures, buildings and improvements of every kind and
description now or at any time hereafter located or placed on the Land (the
"Improvements");

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<PAGE>
         (C) All easements, rights-of-way, strips and gores of land, vaults,
streets, ways, alleys, passages, sewer rights, and other emblements now or
hereafter located on the Land or under or above the same or any part or parcel
thereof, and all estates, rights, titles, interests, tenements, hereditaments
and appurtenances, reversions and remainders whatsoever, in any way belonging,
relating or appertaining to the Property or any part thereof, or which hereafter
shall in any way belong, relate or be appurtenant thereto, whether now owned or
hereafter acquired by Grantor;

         (D) All furniture, furnishings, fixtures, goods, equipment, inventory
or personal property owned by Grantor and now or hereafter located on, attached
to or used in or about the Improvements, including, but not limited to, all
items of personal property located within or adjacent to the Improvements and
included within the definition of "Property and Equipment" and "Inventories"
under the Uniform System of Accounts for Hotels as published by the American
Hotel Association of the United States and Canada (the "Uniform System of
Accounts"), and further including, without limitation, all linen, china,
glassware, tableware, uniforms, all machines, engines, boilers, dynamos,
elevators, stokers, tanks, cabinets, awnings, screens, shades, blinds, carpets,
draperies, lawn mowers, and all appliances, plumbing, heating, air conditioning,
lighting, ventilating, refrigerating, disposals and incinerating equipment,
guest ledgers, telephone systems, televisions and television systems, computer
systems and all fixtures and appurtenances thereto, and such other goods and
chattels and personal property owned by Grantor as are now or hereafter used or
furnished in operating the Improvements, or the activities conducted therein,
and all building materials and equipment hereafter situated on or about the Land
or Improvements, and all warranties and guaranties relating thereto, and all
additions thereto and substitutions and replacements therefor (exclusive of any
of the foregoing owned or leased by tenants of space in the Improvements);

         (E) All water, water courses, ditches, wells, reservoirs and drains and
all water, ditch, well, reservoir and drainage rights and powers which are
appurtenant to, located on, under or above or used in connection with the Land
or the Improvements, or any part thereof, together (i) with all utilities,
utility lines, utility commitments, utility capacity, capital recovery charges,
impact fees and other fees paid in connection with same, (ii) reimbursements or
other rights pertaining to utility or utility services provided to the Land
and/or Improvements and (iii) the present or future use or availability of waste
water capacity, or other utility facilities to the extent same pertain to or
benefit the Land and/or Improvements, including, without limitation, all
reservations of or commitments or letters covering any such use in the future,
whether now existing or hereafter created or acquired;

         (F) All minerals, crops, timber, trees, shrubs, flowers and landscaping
features now or hereafter located on, under or above the Land;

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<PAGE>
         (G) All cash funds, deposit accounts and other rights and evidence of
rights to cash, now or hereafter created which are held by Beneficiary pursuant
to this Deed of Trust, the Cash Management Agreement of even date herewith
between Grantor and Beneficiary (hereinafter, the "Cash Management Agreement")
or any other of the Loan Documents (as hereinafter defined), including, without
limitation, all funds now or hereafter on deposit in the Rent Account, the
Central Account and any other Accounts or Sub-Accounts (as all such terms are
identified in the Cash Management Agreement);

         (H) All leases, licenses, tenancies, concessions and occupancy
agreements of the Land or the Improvements now or hereafter entered into by
Grantor and all rents, royalties, issues, profits, bonus money, revenue, income,
rights and other benefits, room rentals, and revenues of any kind derived from
all sources (collectively, the "Rents" or "Rents and Profits") of the Land or
the Improvements, or the fixtures or equipment, now or hereafter arising from
the use or enjoyment of all or any portion thereof or from any present or future
lease (including, without limitation, oil, gas and mineral leases), license,
tenancy, concession, occupancy agreement or other agreement pertaining thereto
or arising from any of the Contracts (as hereinafter defined) or any of the
General Intangibles (as hereinafter defined) and all cash or securities held by
Grantor (the "Security Deposits") that secure performance by the tenants,
lessees, licensees or guests, as applicable, of their obligations under any such
leases, licenses, concessions or occupancy agreements, whether said cash or
securities are to be held until the expiration of the terms of said leases,
licenses, concessions or occupancy agreements or applied to one or more of the
installments of rent coming due prior to the expiration of said terms, subject,
however, to the provisions contained in Section 1.11 hereinbelow;

         (I) All contracts and agreements now or hereafter entered into by
Grantor covering any part of the Land or the Improvements (collectively, the
"Contracts") and all revenue, income and other benefits thereof, including,
without limitation, management agreements, franchise agreements, service
contracts, maintenance contracts, equipment leases, personal property leases and
so called "patronage" agreements, agreements relating to the collection of
receivables or use of customer lists, all bookings and reservations for space
within the Improvements or other information, and any contracts or documents
relating to construction on any part of the Land or the Improvements (including
plans, specifications, studies, drawings, surveys, tests, operating and other
reports, bonds and governmental approvals) or to the management or operation of
any part of the Land or the Improvements;

         (J) All present and future monetary deposits given to any public or
private utility with respect to utility services furnished to any part of the
Land or the Improvements;

         (K) All present and future funds, accounts, instruments, accounts
receivable, documents, causes of action, claims, general intangibles (including,
without limitation,

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trademarks, trade names, service marks and symbols now or hereafter used by
Grantor in connection with or related to any part of the Land or the
Improvements, specifically excluding, however, the mark "WestCoast", all names
by which the Land or the Improvements may be operated or known, all rights to
carry on business under such names, all telephone numbers or listings, and all
rights, interest and privileges which Grantor has or may have as developer or
declarant under any covenants, restrictions or declarations now or hereafter
relating to the Land or the Improvements) and all notes or chattel paper now or
hereafter owned by Grantor and arising from or by virtue of Grantor's operations
related to the Land or the Improvements and all customer lists, other lists and
business information relating in any way to the Land, the Improvements or the
use thereof (collectively, the "General Intangibles");

         (L) All water taps, sewer taps, certificates of occupancy, permits,
special permits, uses, licenses, franchises, certificates, consents, approvals
and other rights and privileges now or hereafter obtained in connection with the
Land or the Improvements and all present and future warranties and guaranties
relating to the Improvements or to any equipment, fixtures, furniture,
furnishings, personal property or components of any of the foregoing now or
hereafter located or installed on the Land or the Improvements;

         (M) All building materials, supplies and equipment now or hereafter
placed on the Land or in the Improvements and all architectural renderings,
models, drawings, plans, specifications, studies and data now or hereafter
relating to the Land or the Improvements;

         (N) All right, title and interest of Grantor in any insurance policies
or binders now or hereafter relating to the Property (whether or not such
insurance was requested or required by Beneficiary), including any unearned
premiums thereon;

         (O) All proceeds, products, substitutions and accessions (including
claims and demands therefor) of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance (whether or not such insurance was requested or required
by Beneficiary) and condemnation awards; and

         (P) All other or greater rights and interests of every nature in the
Land or the Improvements and in the possession or use thereof and income
therefrom, whether now owned or hereafter acquired by Grantor.

         FOR THE PURPOSE OF SECURING:

         (1) The repayment of the debt evidenced by those two (2) certain
Promissory Notes as hereinafter described (such Promissory Notes, together with
any and all renewals, modifications, amendments, restatements, consolidations,
substitutions, replacements and extensions thereof, are hereinafter collectively
referred to as the "Note"):
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                  (a) that certain Promissory Note of even date herewith and
         having a maturity date of SEPTEMBER 11, 2011, made by Grantor, as
         borrower, and payable to the order of Beneficiary, as lender, in the
         original principal amount of FOURTEEN MILLION AND NO/100 DOLLARS
         ($14,000,000.00) (the "Grand Loan" or the "Grand Loan Amount"),
         together with interest and any fees as therein provided; and

                  (b) that certain Promissory Note of even date herewith having
         a maturity date of SEPTEMBER 11, 2011, made by WHC821, LLC, a Delaware
         limited liability company, as borrower, and payable to the order of
         Beneficiary, as lender, in the original principal amount of SIX MILLION
         EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($6,800,000.00) (the "Olympia
         Loan" or the "Olympia Loan Amount"), together with interest and any
         fees as therein provided (the Olympia Loan and the Grand Loan shall be
         collectively referred to herein as the "Loan" and the Olympia Loan
         Amount and the Grand Loan Amount shall be collectively referred to
         herein as the "Loan Amount");

         (2) The full and prompt payment and performance of all of the
provisions, agreements, covenants and obligations herein contained and contained
in any other agreements, documents or instruments now or hereafter evidencing,
securing or otherwise relating to the indebtedness evidenced by the Note (the
Note, this Deed of Trust, the Olympia Deed of Trust (as hereinafter defined),
the Cash Management Agreement, the Assignment (as hereinafter defined) and such
other agreements, documents and instruments related thereto, together with any
and all renewals, modifications, amendments, restatements, consolidations,
substitutions, replacements, and extensions and modifications thereof, are
hereinafter collectively referred to as the "Loan Documents"; provided, however,
the term Loan Documents shall specifically exclude (i) the Indemnity and
Guaranty Agreement of even date made by WestCoast Hospitality (as hereinafter
defined) with respect to the Grand Loan, and (ii) the Hazardous Substance
Indemnity Agreement of even date made by WestCoast Hospitality and Grantor
(collectively the "Excluded Agreements") and the obligations set forth therein;

         (3) Any and all future or additional advances (whether or not
obligatory) made by Beneficiary to protect or preserve the Property or the lien
or security interest created hereby on the Property, or for taxes, assessments,
operating expenses or insurance premiums as hereinafter provided or for
performance of any of Grantor's obligations hereunder or under the other Loan
Documents or for any other purpose provided herein or in the other Loan
Documents (whether or not the original Grantor remains the owner of the Property
at the time of such advances) together with interest thereon at the Default
Interest Rate; and

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         (4) Any and all other indebtedness now owing or which may hereafter be
owing by Grantor to Beneficiary and which is evidenced by a promissory note or
other agreement which specifically states that it is intended to be secured by
this Deed of Trust, and all renewals, modifications, amendments, restatements,
consolidations, substitutions, replacements and extensions thereof.

(All of the sums referred to in Subsections (1) through (4) above are herein
sometimes referred to as the "secured indebtedness" or the "indebtedness secured
hereby").

         PROVIDED, HOWEVER, that if the principal and interest and all other
sums due or to become due under the Note, including, without limitation, any
prepayment fees required pursuant to the terms of the Note, shall have been paid
at the time and in the manner stipulated therein and all other sums payable
hereunder and all other indebtedness secured hereby shall have been paid and all
other covenants contained in the Loan Documents shall have been performed, then,
upon written request of Beneficiary stating that all indebtedness secured hereby
have been paid, and upon surrender of this Deed of Trust and the Note to Trustee
for cancellation and retention and upon payment by Grantor of Trustee's fees,
Trustee shall reconvey to Grantor, or the person or persons legally entitled
thereto, without warranty, any portion of the Property then held hereunder. The
recitals in such reconveyance of any matters or facts shall be conclusive proof
of the truthfulness thereof. The grantee in any reconveyance may be described as
"the person or persons legally entitled thereto."

                                    ARTICLE I
                              COVENANTS OF GRANTOR
                              --------------------

         For the purpose of further securing the indebtedness secured hereby and
for the protection of the security of this Deed of Trust, for so long as the
indebtedness secured hereby or any part thereof remains unpaid, Grantor
represents, covenants and agrees as follows:

          I.1 Warranties of Grantor. Grantor, for itself and its successors and
assigns, does hereby represent, warrant and covenant to and with Beneficiary,
its successors and assigns, that as of the date hereof:

                  (a) Grantor has good and marketable fee simple title to the
Property, subject only to those matters expressly set forth on Exhibit B
attached hereto and by this reference incorporated herein (the "Permitted
Exceptions"), and has full power and lawful authority to grant, bargain, sell,
convey, assign, transfer and encumber its interest in the Property in the manner
and form hereby done or intended. Grantor will preserve its interest in and
title to the Property and will forever warrant and defend the same to Trustee
and Beneficiary against any

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<PAGE>
and all claims whatsoever and will forever warrant and defend the validity and
priority of the lien and security interest created herein against the claims of
all persons and parties whomsoever, subject to the Permitted Exceptions and such
matters as may be approved in writing by Beneficiary pursuant to this Deed of
Trust. The foregoing warranty of title shall survive the foreclosure, exercise
of any power of sale or other enforcement of this Deed of Trust (whether by
power of sale or otherwise) and shall inure to the benefit of and be enforceable
by Beneficiary in the event Beneficiary acquires title to the Property pursuant
to any foreclosure, exercise of any power of sale or otherwise;

                  (b) No bankruptcy or insolvency proceedings are pending or
contemplated by Grantor or, to the best knowledge of Grantor, against Grantor or
by or against any endorser, cosigner or guarantor of the Note;

                  (c) To Grantor's best knowledge, all reports, certificates,
affidavits, statements and other data furnished by Grantor to Beneficiary in
connection with the Loan are true and correct in all material respects and do
not omit to state any fact or circumstance necessary to make the statements
contained therein not misleading;

                  (d) The execution, delivery and performance of this Deed of
Trust, the Note and all of the other Loan Documents have been duly authorized by
all necessary action to be taken, and are, binding and enforceable against
Grantor in accordance with the respective terms thereof and do not contravene,
result in a breach of or constitute (upon the giving of notice or the passage of
time or both) a default under the partnership agreement, certificate or articles
of incorporation or other organizational documents of Grantor or any contract or
agreement of any nature to which Grantor is a party or by which Grantor or any
of its property may be bound and to the best of Grantor's knowledge do not
violate or contravene any law, order, decree, rule or regulation to which
Grantor is subject;

                  (e) To Grantor's best knowledge, Grantor is not required to
obtain any consent, approval or authorization from or to file any declaration or
statement with, any governmental authority or the agency in connection with or
as a condition to the execution, delivery or performance of this Deed of Trust,
the Note or the other Loan Documents which has not been so obtained or filed;

                  (f) To Grantor's best knowledge, Grantor has obtained or made
all necessary (i) consents, approvals and authorizations and registrations and
filings of or with all governmental authorities or agencies and (ii) consents,
approvals, waivers and notifications of partners, stockholders, members,
creditors, lessors and other non-governmental persons and/or entities, in each
case, which are required to be obtained or made by Grantor in connection with

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<PAGE>
the execution and delivery of, and the performance by Grantor of its obligations
under, the Loan Documents;

                  (g) Grantor is not an "investment company," or a company
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended;

                  (h) No part of the proceeds of the indebtedness secured hereby
will be used by Grantor for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulations T, U or X of the Board of Governors of
the Federal Reserve System or for any other purpose which would be inconsistent
with such Regulations T, U or X or any other Regulations of such Board of
Governors, or for any purpose prohibited by legal requirements or by the terms
and conditions of the Loan Documents;

                  (i) Grantor and, if Grantor is a partnership, any general
partner of Grantor, has filed all federal, state and local tax returns required
to be filed and has paid or made adequate provision for the payment of all
federal, state and local taxes, charges and assessments, including sales and
payroll taxes, payable by Grantor and its general partners, if any. Grantor and
its general partners, if any, believe that their respective tax returns properly
reflect the income and taxes of Grantor and said general partners, if any, for
the periods covered thereby, subject only to reasonable adjustments required by
the Internal Revenue Service or other applicable tax authority upon audit;

                  (j) Grantor is not an "employee benefit plan," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to Title I of ERISA and the assets of Grantor do not
constitute "plan assets" of one or more such plans within the meaning of 29
C.F.R. Section 2510.3-101;

                  (k) To Grantor's best knowledge, the Land and the Improvements
and the intended use thereof by Grantor comply with all applicable restrictive
covenants, zoning ordinances, subdivision and building codes, flood disaster
laws, applicable health and environmental laws and regulations and all other
ordinances, orders or requirements issued by any state, federal or municipal
authorities having or claiming jurisdiction over the Property. To Grantor's best
knowledge, the Land and Improvements constitute a separate tax parcel for
purposes of ad valorem taxation. To Grantor's best knowledge, the Land and
Improvements do not require any rights over, or restrictions against, other
property in order to comply with any of the aforesaid governmental ordinances,
orders or requirements except for such rights and restrictions which are
described in the Title Insurance Policy (as hereinafter defined);

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<PAGE>
                  (l) All utility services necessary and sufficient for the full
use, occupancy, operation and disposition of the Land and the Improvements for
their intended purposes are available to the Property, including water, storm
sewer, sanitary sewer, gas, electric, cable and telephone facilities, through
public rights-of-way or perpetual private easements reflected in the title
insurance policy insuring the lien of this Deed of Trust and approved by
Beneficiary (the "Title Insurance Policy");

                  (m) All streets, roads, highways, bridges and waterways
necessary for access to and full use, occupancy, operation and disposition of
the Land and the Improvements have been completed, have been dedicated to and
accepted by the appropriate municipal authority and are open and available to
the Land and the Improvements without further condition or cost to Grantor;

                  (n) All curb cuts, driveways and traffic signals shown on the
survey delivered to Beneficiary prior to the execution and delivery of this Deed
of Trust are existing and to Grantor's best knowledge have been fully approved
by the appropriate governmental authority;

                  (o) To Grantor's best knowledge, there are no judicial,
administrative, mediation or arbitration actions, suits or proceedings pending
or threatened against or affecting Grantor (and any member of Grantor) or the
Property which, if adversely determined, would have a material adverse effect on
(a) the Property, (b) the business, prospects, profits, operations or condition
(financial or otherwise) of Grantor, (c) the enforceability, validity,
perfection or priority of the lien of any Loan Document, or (d) the ability of
Grantor to perform any obligations under any Loan Document (collectively, a
"Material Adverse Effect");

                  (p) As of the date of this Deed of Trust (i) the Property is
free from delinquent water charges, sewer rents, taxes and assessments, and from
unrepaired damage caused by fire, flood, accident or other casualty, and (ii) no
part of the Land or the Improvements has been taken in condemnation, eminent
domain or like proceeding nor is any such proceeding pending or to Grantor's
knowledge and belief, threatened or contemplated;

                  (q) Grantor possesses all franchises, patents, copyrights,
trademarks, trade names, licenses (including, without limitation, liquor
licenses), and permits (collectively, the "Permits") adequate for the conduct of
its business substantially as now conducted or, with respect to liquor licenses,
has the right to use the same in the operation of the Property pursuant to
legal, valid and enforceable agreements, all fees due and payable in connection
with the Permits have been paid and the Property and the conduct of Grantor's
business thereof materially complies with the Permits;

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<PAGE>
                  (r) Except as set forth in the Title Insurance Policy insuring
the lien of this Deed of Trust and to Grantor's best knowledge no improvements
on adjoining properties encroach upon the Property. To Grantor's best knowledge,
the Improvements are structurally sound, in good repair and free of defects in
materials and workmanship and have been constructed and installed in substantial
compliance with the plans and specifications relating thereto. All major
building systems located within the Improvements, including, without limitation,
the heating and air conditioning systems and the electrical and plumbing
systems, are in good working order and condition, all of the guest rooms in the
Improvements are in good condition and available for regular occupancy and the
lobby, restaurant and lounge facilities, meeting rooms, "back-of-the-house"
areas, parking facilities and other public areas are in good condition and
available for regular use. The Improvements and Grantor's operations of its
business materially comply with the requirements of the Franchise Agreement (as
hereinafter defined);

                  (s) Except as disclosed in writing by Grantor to Beneficiary
prior to the date hereof, there are no security agreements or financing
statements affecting any of the Property other than the security agreements and
financing statements created in favor of Beneficiary;

                  (t) Except as previously disclosed in Grantor's Certification
Regarding Project Documents and Financial Information dated of even date
herewith and delivered to Beneficiary or otherwise in writing by Grantor to
Beneficiary, and other than certain incentive compensation systems designed to
promote increased customer use of the Property, there is no collective
bargaining agreement and other labor agreement to which Grantor or the Property,
or any portion thereof, is a party or by which either is or may be bound. To
Grantor's best knowledge, Grantor is not in violation of, in any material
respect, any applicable laws, rules and regulations relating to the employment
of labor, including those relating to wages, hours, collective bargaining and
the payment and withholding of taxes and other sums as required by appropriate
governmental authorities;

                  (u) The Property is free and clear of any mechanics' or
materialmen's liens or liens in the nature thereof, and no rights are
outstanding that under law would give rise to any such liens, any of which liens
are or may be prior to, or equal with, the lien of this Deed of Trust, except
those which are insured against by the Title Insurance Policy;

                  (v) Except as disclosed in the Title Insurance Policy, no
Lease or Contract or easement, right of way, permit or declaration
(collectively, "Property Agreements") provides any party with the right to
obtain a lien or encumbrance upon the Property superior to the lien of this Deed
of Trust;

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<PAGE>
                  (w) Grantor has delivered to Beneficiary true, correct and
complete copies of all Property Agreements and no default exists or would exist,
with the passing of time, or the giving of notice, or both, under any Property
Agreement which would, in the aggregate, have a Material Adverse Effect;

                  (x) To the best knowledge of Grantor, no offset or any right
of offset exists respecting continued contributions to be made by any party to
any Property Agreement except as expressly set forth herein. Except as
previously disclosed to Beneficiary in writing, no material exclusions or
restrictions on the utilization, leasing or improvement of the Property
(including non-compete agreements) exists in any Property Agreement;

                  (y) All work, if any, to be performed by Grantor under each of
the Property Agreements has been substantially performed, all contributions to
be made by Grantor to any party to such Property Agreements have been made, and
all other conditions to such party's obligations thereunder have been satisfied;

                  (z) The Land is taxed separately without regard to any other
real estate and constitutes a legally subdivided lot under all applicable legal
requirements (or, if not subdivided, no subdivision or platting of the Property
is required under applicable legal requirements), and for all purposes may be
mortgaged, conveyed, pledged, hypothecated, assigned or otherwise dealt with as
an independent parcel;

                  (aa) The Land forms no part of any property owned, used or
claimed by Grantor as a residence or business homestead and is not exempt from
forced sale under the laws of the State in which the Property is located.
Grantor hereby disclaims and renounces each and every claim to all or any
portion of the Property as a homestead and the Loan evidenced by the Loan
Documents is made and transacted solely for business, investment, commercial or
other similar purposes. No part of the Property is or will be used for
agricultural or farming purposes;

                  (bb) There are no outstanding options or rights of first offer
or refusal to purchase all or any portion of the Property or Grantor's interest
therein or ownership thereof made by Grantor and to Grantor's best knowledge
made by any other party;

                  (cc) There are no actions, suits, proceedings or orders of
record or of which Grantor has notice, and, to the best of Grantor's knowledge,
there are no inquiries or investigations, pending or threatened, in any such
case against, involving or affecting the Property, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
alleging the violation of any federal, state or local law, statute, ordinance,
rule or

                                       12
<PAGE>
regulation relating to Environmental Laws. Furthermore, Grantor has not received
any written claim, notice or opinion that the ownership or operation of the
Property violates any federal, state or local law, statute, ordinance, rule,
regulation, decree, order, and/or permit relating to Environmental Laws, and, to
the best of Grantor's knowledge, no valid basis for any proceeding, action or
claim of such nature exists;

                  (dd) The representations and warranties contained in this Deed
of Trust, or the review and inquiry made on behalf of the Grantor therefor, have
all been made by persons having the requisite expertise and knowledge to provide
such representations and warranties. No statement or fact made by or on behalf
of Grantor in this Deed of Trust or in any certificate, document or schedule
furnished to Beneficiary pursuant hereto, contains any untrue statement of a
material fact or omits to state any material fact necessary to make statements
contained therein or herein not misleading (which may be to Grantor's best
knowledge where so provided herein). There is no fact presently known to Grantor
which has not been disclosed to Beneficiary which would have a Material Adverse
Effect; and

                  (ee) Any lease, license or occupancy agreement now in effect
permits the application of insurance and condemnation proceeds as provided
herein.

          I.2 Defense of Title. If, while this Deed of Trust is in force, the
title to the Property or the interest of Beneficiary or Trustee therein shall be
the subject, directly or indirectly, of any action at law or in equity, or be
attached directly or indirectly, or endangered, clouded or adversely affected in
any manner, Grantor, at Grantor's expense, shall take all necessary and proper
steps for the defense of said title or interest, including the employment of
counsel reasonably approved by Beneficiary, the prosecution or defense of
litigation, and the compromise or discharge of claims made against said title or
interest.

          I.3 Performance of Obligations. Grantor shall pay when due the
principal of and the interest on the indebtedness secured hereby including all
charges, fees and other sums required to be paid by Grantor as provided in the
Loan Documents, and shall observe, perform and discharge all obligations and
conditions, and comply with all prohibitions, covenants and agreements to be
observed, performed or discharged by Grantor set forth in the Loan Documents in
accordance with their terms. In the event that Grantor is in default under its
obligations under this Deed of Trust or under any of the other Loan Documents
and the same is continuing after any applicable cure period, Beneficiary may,
without limiting or waiving any other rights or remedies of Beneficiary
hereunder, perform such obligations of Grantor and any and all costs and
expenses reasonably incurred by Beneficiary in connection therewith, together
with interest thereon at the Default Interest Rate from the date incurred by
Beneficiary until actually paid by Grantor, shall be immediately paid by Grantor
on demand and shall be

                                       13
<PAGE>
secured by this Deed of Trust and by all of the other Loan Documents securing
all or any part of the indebtedness evidenced by the Note.

          I.4 Insurance. Grantor shall, at Grantor's expense, maintain in force
and effect on the Property at all times while this Deed of Trust continues in
effect the following insurance:

                  (a) "All-risk" coverage insurance against loss or damage to
the Property from all-risk perils. The amount of such insurance shall be not
less than one hundred percent (100%) of the full replacement cost of the
Improvements, furniture, furnishings, fixtures, equipment and other items
(whether personalty or fixtures) included in the Property and owned by Grantor
from time to time, without reduction for depreciation. The determination of the
replacement cost amount shall be adjusted annually to comply with the
requirements of the insurer issuing such coverage or, at Beneficiary's election,
by reference to such indexes, appraisals or information as Beneficiary
determines in its reasonable discretion. Full replacement cost, as used herein,
means, with respect to the Improvements, the cost of replacing the Improvements
without regard to deduction for depreciation, exclusive of the cost of
excavations, foundations and footings below the lowest basement floor, and
means, with respect to such furniture, furnishings, fixtures, equipment and
other items, the cost of replacing the same. Each policy or policies shall
contain a replacement cost endorsement and either an agreed amount endorsement
(to avoid the operation of any co-insurance provisions) or a waiver of any
co-insurance provisions, all subject to Beneficiary's approval.

                  (b) Commercial general liability insurance for personal
injury, bodily injury, death and property damage liability in amounts not less
than $5,000,000.00 per occurrence, $6,000,000.00 aggregate (inclusive of
umbrella coverage) or such lesser amount as Beneficiary in Beneficiary's sole
discretion may accept, for bodily injury, personal injury and property damage.
Beneficiary hereby retains the right to periodically review the amount of said
liability insurance being maintained by Grantor and to require an increase in
the amount of said liability insurance should Beneficiary deem an increase to be
reasonably prudent under then existing circumstances.

                  (c) Insurance covering the major components of the central
heating, air conditioning and ventilating systems, boilers, other pressure
vessels, high pressure piping and machinery, elevators and escalators, if any,
and other similar equipment installed in the Improvements, in an amount equal to
one hundred percent (100%) of the full replacement cost of the Improvements
which policies shall insure against physical damage to and loss of occupancy and
use of the Improvements arising out of an accident or breakdown covered
thereunder.

                                       14
<PAGE>

                  (d) If the Land or any part thereof is identified by the
Secretary of Housing and Urban Development as being situated in an area now or
subsequently designated as having special flood hazards (including, without
limitation, those areas designated as Zone A or Zone V), flood insurance in an
amount equal to one hundred percent (100%) of the replacement cost of the
Improvements or the maximum amount of flood insurance available, whichever is
the lesser.

                  (e) During the period of any construction on the Land or
renovation or alteration of the Improvements, a so-called "Builder's All-Risk
Completed Value" or "Course of Construction" insurance policy in non-reporting
form for any Improvements under construction, renovation or alteration in an
amount approved by Beneficiary and Worker's Compensation Insurance covering all
persons engaged in such construction, renovation or alteration.

                  (f) Business interruption insurance in amounts sufficient to
compensate Grantor for all Rents and Profits during a period of not less than
one (1) year in which the Property may be damaged or destroyed.

                  (g) Law and ordinance coverage in an amount satisfactory to
Beneficiary if the Property, or any part thereof, shall constitute a
nonconforming use or structure under applicable zoning ordinances, sub-division
and building codes or other laws, ordinances, orders and requirements.

                  (h) Such other insurance on the Property or on any
replacements or substitutions thereof or additions thereto as may from time to
time be required by Beneficiary against other insurable hazards or casualties,
including, without limitation, innkeeper's liability and liquor liability, which
at the time are commonly insured against in the case of property similarly
situated, due regard being given to the height and type of buildings, their
construction, location, use and occupancy.

         All such insurance shall (i) be issued by companies approved by
Beneficiary and authorized and licensed to do business in the state within which
the Land is located, with a claims paying ability rating of "A+" or better, from
Standard & Poor's Rating Services, a division of the McGraw Hill Companies,
Inc., (ii) contain the complete address of the Land (or a complete legal
description), (iii) be for a term of at least one (1) year, (iv) contain
deductibles no greater than $12,500.00 or as otherwise required by Beneficiary,
and (v) be subject to the approval of Beneficiary as to insurance companies,
amounts, content, forms of policies, method by which premiums are paid and
expiration dates.

                                       15
<PAGE>
         Grantor shall as of the date hereof deliver to Beneficiary evidence
that said insurance policies have been paid current as of the date hereof and
original certificates of insurance signed by an authorized agent evidencing such
insurance satisfactory to Beneficiary. Grantor shall renew all such insurance
and deliver to Beneficiary certificates evidencing such renewals at least thirty
(30) days before any such insurance shall expire. Without limiting the required
endorsements to insurance policies, Grantor further agrees that all such
policies and any other policies covering the Property or any portion thereof,
whether or not required or requested by Beneficiary, shall provide that proceeds
thereunder shall be payable to Beneficiary, its successors and assigns, pursuant
and subject to a mortgagee clause (without contribution) of standard form
attached to, or otherwise made a part of, the applicable policy and that
Beneficiary, its successors and assigns, shall be named as an additional insured
under all liability insurance policies. Grantor further agrees that all such
insurance policies and any other policies covering the Property or any portion
thereof, whether or not required or requested by Beneficiary: (i) shall provide
for at least thirty (30) days' prior written notice to Beneficiary prior to any
cancellation or termination thereof and prior to any modification thereof which
affects the interest of Beneficiary; (ii) shall contain an endorsement or
agreement by the insurer that any loss shall be payable to Beneficiary in
accordance with the terms of such policy notwithstanding any act or negligence
of Grantor which might otherwise result in forfeiture of such insurance; and
(iii) shall either name Beneficiary as an additional insured or waive all rights
of subrogation against Beneficiary. The delivery to Beneficiary of the insurance
policies or the certificates of insurance as provided above shall constitute an
assignment of all proceeds payable under such insurance policies by Grantor to
Beneficiary as further security for the indebtedness secured hereby. In the
event of foreclosure of this Deed of Trust, or other transfer of title to the
Property in extinguishment in whole or in part of the secured indebtedness, all
right, title and interest of Grantor in and to all proceeds payable under such
policies then in force concerning the Property shall thereupon vest in the
purchaser at such foreclosure, or in Beneficiary or other transferee in the
event of such other transfer of title. Approval of any insurance by Beneficiary
shall not be a representation of the solvency of any insurer or the sufficiency
of any amount of insurance. In the event Grantor fails to provide, maintain,
keep in force or deliver and furnish to Beneficiary the policies of insurance
required by this Deed of Trust or evidence of their renewal as required herein,
Beneficiary may, but shall not be obligated to, procure such insurance and
Grantor shall pay all amounts advanced by Beneficiary, together with interest
thereon at the Default Interest Rate from and after the date advanced by
Beneficiary until actually repaid by Grantor, promptly upon demand by
Beneficiary. Any amounts so advanced by Beneficiary, together with interest
thereon, shall be secured by this Deed of Trust and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note.
Beneficiary shall not be responsible for nor incur any liability for the
insolvency of the insurer or other failure of the insurer to perform, even
though Beneficiary has caused the insurance to be placed with the insurer after
failure of Grantor to furnish such insurance.

                                       16
<PAGE>
          I.5 Payment of Taxes. Grantor shall pay or cause to be paid, except to
the extent provision is actually made therefor pursuant to Section 1.6 of this
Deed of Trust, all taxes and assessments which are or may become a lien on the
Property or which are assessed against or imposed upon the Property. Grantor
shall furnish Beneficiary with receipts (or if receipts are not immediately
available, with copies of canceled checks evidencing payment with receipts to
follow promptly after they become available) showing payment of such taxes and
assessments at least fifteen (15) days prior to the applicable delinquency date
therefor. Notwithstanding the foregoing, Grantor may in good faith, by
appropriate proceedings and upon notice to Beneficiary, contest the validity,
applicability or amount of any asserted tax or assessment so long as (a) such
contest is diligently pursued, (b) such contest suspends the obligation to pay
the tax or assessment and that nonpayment of such tax or assessment will not
result in the sale, loss, forfeiture or diminution of the Property or any part
thereof or any interest of Beneficiary therein, and (c) prior to the earlier of
the commencement of such contest or the delinquency date of the asserted tax or
assessment, Grantor deposits in the Impound Account (as hereinafter defined) an
amount determined by Beneficiary to be adequate to cover the payment of such tax
or assessment and a reasonable additional sum to cover possible interest, costs
and penalties; provided, however, that Grantor shall promptly cause to be paid
any amount adjudged by a court of competent jurisdiction to be due, with all
interest, costs and penalties thereon, promptly after such judgment becomes
final; and provided further that in any event each such contest shall be
concluded and the taxes, assessments, interest, costs and penalties shall be
paid prior to the date any writ or order is issued under which the Property may
be sold, lost or forfeited.

          I.6 Tax and Insurance Impound Account. Grantor shall establish and
maintain at all times while this Deed of Trust continues in effect an impound
account (the "Impound Account") with Beneficiary for payment of real estate
taxes, ad valorem taxes, personal property taxes, assessments and insurance on
the Property and as additional security for the indebtedness secured hereby.
Grantor shall deposit in the Impound Account an amount determined by Beneficiary
to be sufficient (when added to the monthly deposits described herein) to pay
the next due annual installment of real estate taxes, ad valorem taxes, personal
property taxes and assessments on the Property at least one (1) month prior to
the delinquency date thereof (if paid in one installment) and the next due
annual insurance premiums with respect to the Property at least one (1) month
prior to the due date thereof (if paid in one installment). Commencing on the
first monthly payment date under the Note and continuing thereafter on each
monthly payment date under the Note, Grantor shall pay to Beneficiary (by
distribution from the Rent Account to the Impound Account in accordance with the
Cash Management Agreement), concurrently with the monthly payment due under the
Note, an amount equal to one-twelfth (1/12) of the amount of the annual real
estate taxes, ad valorem taxes, personal property taxes and assessments that
will next become due and payable on the

                                       17
<PAGE>
Property, plus one-twelfth (1/12) of the amount of the annual premiums that will
next become due and payable on insurance policies which Grantor is required to
maintain hereunder, each as reasonably estimated and determined by Beneficiary.
So long as no default hereunder or under the other Loan Documents has occurred
and is continuing, all sums in the Impound Account shall be held by Beneficiary
in the Impound Account to pay said taxes, assessments and insurance premiums in
one installment before the same become delinquent. Grantor shall be responsible
for ensuring the receipt by Beneficiary, at least thirty (30) days prior to the
respective due date for payment thereof, of all bills, invoices and statements
for all taxes, assessments and insurance premiums to be paid from the Impound
Account, and so long as no default hereunder or under the other Loan Documents
has occurred and is continuing, Beneficiary shall pay the governmental authority
or other party entitled thereto directly to the extent funds are available for
such purpose in the Impound Account. In making any payment from the Impound
Account, Beneficiary shall be entitled to rely on any bill, statement or
estimate procured from the appropriate public office or insurance company or
agent without any inquiry into the accuracy of such bill, statement or estimate
and without any inquiry into the accuracy, validity, enforceability or
contestability of any tax, assessment, valuation, sale, forfeiture, tax lien or
title or claim thereof. No interest on funds contained in the Impound Account
shall be paid by Beneficiary to Grantor and any interest or other earnings on
funds deposited in the Impound Account shall be solely for the account of
Beneficiary. If the total funds in the Impound Account shall exceed the amount
of payments actually applied by Beneficiary for the purposes of the Impound
Account, such excess may be credited by Beneficiary on subsequent payments to be
made hereunder or, at the option of Beneficiary, refunded to Grantor within ten
(10) business days after payment thereof. If, however, the Impound Account shall
not contain sufficient funds to pay the sums required when the same shall become
due and payable, Grantor shall, within ten (10) days after receipt of written
notice thereof, deposit with Beneficiary the full amount of any such deficiency.
The Impound Account shall at all times be maintained consistent with and subject
to the terms of the Cash Management Agreement.

          I.7  FF&E Reserve. As additional security for the indebtedness secured
hereby, Grantor shall establish and maintain at all times while this Deed of
Trust continues in effect a reserve (the "FF&E Reserve") with Beneficiary for
the payment of costs and expenses incurred by Grantor in connection with capital
improvements, repairs and replacements, including the performance of work to the
roofs, chimneys, gutters, downspouts, paving, curbs, ramps, driveways,
balconies, porches, patios, exterior walls, exterior doors and doorways,
windows, carpets, appliances, fixtures, elevators, and mechanical and HVAC
equipment and the replacement of furnishings, fixtures and equipment in the
guest rooms, hallways, lobbies, restaurants, lounges, meeting and banquet rooms,
parking facilities and other public areas accessible by the public for regular
use, including, without limitation, the items more particularly described and
identified on Exhibit D attached hereto and by this reference made a

                                       18
<PAGE>
part hereof, and such other items as Beneficiary may approve from time to time
in its reasonable discretion (collectively the "Repairs"). Commencing on the
first monthly payment date under the Note, and continuing thereafter on each
monthly payment date under the Note, Grantor shall pay to Beneficiary (by
distribution from the Rent Account in accordance with the Cash Management
Agreement), concurrently with and in addition to the monthly payment due under
the Note, and until the Note and all other indebtedness secured hereby is fully
paid and performed, a deposit to the FF&E Reserve in an amount equal to FOUR
PERCENT (4%) of the annual "gross revenues", as hereinafter defined, from the
Property for the prior calendar year, divided by twelve (12). As used herein,
"gross revenues" shall mean all Rents and Profits derived by Grantor from room
sales, telephone sales, net fax sales, net vending sales, net catering sales,
net guest laundry sales, and any other miscellaneous sales not including
interest income, dividend income, gains on the sale of stock, bonds or other
securities, or from the sale of used furniture, fixtures and equipment, or from
any other passive income source. So long as no default hereunder or under the
other Loan Documents has occurred and is continuing, (i) all sums in the FF&E
Reserve shall be held by Beneficiary in the FF&E Reserve to pay and/or reimburse
Grantor for the costs and expenses of Repairs, and (ii) Beneficiary shall,
subject to the terms of the Cash Management Agreement and so long as no default
hereunder or under the other Loan Documents has occurred and is continuing, and
to the extent funds are available for such purpose in the FF&E Reserve, disburse
to Grantor the amount paid or incurred by Grantor in performing such Repairs
within ten (10) days following: (a) the receipt by Beneficiary of a written
request from Grantor for disbursement from the FF&E Reserve and a certification
by Grantor to Beneficiary that the applicable item of Repair has been completed;
(b) the delivery to Beneficiary of invoices, receipts or other evidence
verifying the cost of performing the Repairs; and (c) for disbursement requests
(i) in excess of $20,000.00 with respect to any single Repair, or (ii) for any
single Repair that is structural in nature, delivery to Beneficiary of the
following documents, if applicable, (1) affidavits, lien waivers or other
evidence reasonably satisfactory to Beneficiary showing that all materialmen,
laborers, subcontractors and any other parties who might or could claim
statutory or common law liens and are furnishing or have furnished material or
labor to the Property have been paid all amounts due for labor and materials
furnished to the Property; (2) a certification from an inspecting architect or
other third party acceptable to Beneficiary describing the completed Repairs and
verifying the completion of the Repairs and the value of the completed Repairs;
and (3) a new (or amended) certificate of occupancy for the portion of the
Improvements covered by such Repairs, if said new certificate of occupancy is
required by law, or a certification by Grantor that no new certificate of
occupancy is required by law. Beneficiary shall not be required to make advances
from the FF&E Reserve more frequently than once in any thirty (30) day period.
In making any payment from the FF&E Reserve, Beneficiary shall be entitled to
rely on such request from Grantor, and on any bill, statement, or estimate from
any third party, without any inquiry into the accuracy, validity or
contestability of any such amount. Beneficiary may, at Grantor's expense (not to
exceed $2,500.00 annually), make or

                                       19
<PAGE>
cause to be made during the term of this Deed of Trust an annual inspection of
the Property to determine the need, as determined by Beneficiary in its
reasonable judgment, for further Repairs of the Property. In the event that such
inspection reveals that further Repairs of the Property are required,
Beneficiary shall provide Grantor with a written description of the required
Repairs and Grantor shall complete such Repairs to the reasonable satisfaction
of Beneficiary within ninety (90) days after the receipt of such description
from Beneficiary, or such later date as may be approved by Beneficiary in its
sole discretion. Interest or other earnings on the funds contained in the FF&E
Reserve shall be credited to Grantor as provided in Section 5.28 hereof. In the
event that the amounts on deposit or available in the FF&E Reserve are
inadequate to pay the cost of the Repairs, Grantor shall pay the amount of such
deficiency. The FF&E Reserve shall at all times otherwise be maintained
consistent with and subject to the terms of the Cash Management Agreement.

          I.8     Security Interest in Reserves.

                  (a) As additional security for the payment and performance by
Grantor of all duties, responsibilities and obligations under the Note and the
other Loan Documents, Grantor hereby unconditionally and irrevocably assigns,
conveys, pledges, mortgages, transfers, delivers, deposits, sets over and
confirms unto Beneficiary, and hereby grants to Beneficiary a security interest
in all sums on deposit or due under this Deed of Trust and the other Loan
Documents including, without limitation, (i) the Rent Account, Central Account,
the Impound Account, the FF&E Reserve, the Curtailment Reserve and any other
reserve, if any, set forth on Exhibit C attached hereto and made a part hereof
and all other Accounts and Sub-Accounts described or defined in the Cash
Management Agreement (collectively, the "Reserves"), (ii) the accounts into
which the Reserves have been deposited, (iii) all insurance on said accounts,
(iv) all accounts, contract rights and general intangibles or other rights and
interests pertaining thereto, (v) all sums now or hereafter therein or
represented thereby, (vi) all replacements, substitutions or proceeds thereof,
(vii) all instruments and documents now or hereafter evidencing the Reserves or
such accounts, (viii) all powers, options, rights, privileges and immunities
pertaining to the Reserves (including the right to make withdrawals therefrom),
and (ix) all proceeds of the foregoing. Grantor hereby authorizes and consents,
subject to the terms of the Cash Management Agreement, to the account into which
the Reserves have been deposited being held in Beneficiary's name or the name of
any entity servicing the Note for Beneficiary and hereby acknowledges and agrees
that Beneficiary, or at Beneficiary's election, such servicing agent, shall have
exclusive control over said account. Notice of the assignment and security
interest granted to Beneficiary herein may be delivered by Beneficiary at any
time to the financial institution wherein the Reserves have been established,
and Beneficiary, or such servicing entity, shall have possession of all
passbooks or other evidences of such accounts. Grantor hereby holds Beneficiary
harmless with respect to all risk of loss regarding amounts on deposit in the
Reserves, except to the extent that any such

                                       20
<PAGE>
loss is caused by the gross negligence or intentional misconduct of Beneficiary.
Grantor hereby knowingly, voluntarily and intentionally stipulates, acknowledges
and agrees that the advancement of the funds from the Reserves as set forth
herein or in the Cash Management Agreement is at Grantor's direction and is not
the exercise by Beneficiary of any right of set-off or other remedy upon a
default. If a default shall occur hereunder or under any other of the Loan
Documents which is not cured within any applicable grace or cure period, then
Beneficiary may, without notice or demand on Grantor, at its option: (A)
withdraw any or all of the funds (including, without limitation, interest) then
remaining in the Reserves and apply the same, after deducting all costs and
expenses of safekeeping, collection and delivery (including, but not limited to,
attorneys' fees, costs and expenses) to the indebtedness evidenced by the Note
or any other obligations of Grantor under the other Loan Documents in such
manner as Beneficiary shall deem appropriate in its sole discretion, and the
excess, if any, shall be paid to Grantor, (B) exercise any and all rights and
remedies of a secured party under any applicable Uniform Commercial Code, or (C)
exercise any other remedies available at law or in equity. No such use or
application of the funds contained in the Reserves shall be deemed to cure any
default hereunder or under the other Loan Documents.

                  (b) The Reserves are solely for the protection of Beneficiary
and entail no responsibility on Beneficiary's part beyond the payment of the
respective costs and expenses in accordance with the terms thereof and beyond
the allowing of due credit for the sums actually received. Upon assignment of
this Deed of Trust by Beneficiary, any funds in the Reserves shall be turned
over to the assignee and any responsibility of Beneficiary, as assignor, with
respect thereto shall terminate. The Reserves shall not, unless otherwise
explicitly required by applicable law, be or be deemed to be escrow or trust
funds, but, at Beneficiary's option and in Beneficiary's discretion, may either
be held in a separate account or be commingled by Beneficiary with the general
funds of Beneficiary. Upon full payment of the indebtedness secured hereby in
accordance with its terms (or if earlier, the completion of the applicable
conditions to release of each Reserve to Beneficiary's satisfaction) or at such
earlier time as Beneficiary may elect, the balance in the Reserves then in
Beneficiary's possession shall be paid over to Grantor and no other party shall
have any right or claim thereto.

                  (c) Any amounts received by Beneficiary from Grantor may be
invested by Beneficiary (or its servicer) for its benefit, and Beneficiary shall
not be obligated to pay, or credit, any interest earned thereon to Grantor
except as may be otherwise specifically provided in this Deed of Trust.

          I.9 Casualty and Condemnation. Grantor shall give Beneficiary prompt
written notice of the occurrence of any casualty affecting greater than
$25,000.00 of the value of the Property, or the institution of any proceedings
for eminent domain or for the condemnation of, the Property or any portion
thereof (collectively, an "Insured Event"). All insurance proceeds

                                       21
<PAGE>
on the Property (whether or not such insurance was requested or required by
Beneficiary), and all causes of action, claims, compensation, awards and
recoveries for any damage, condemnation or taking of all or any part of the
Property or for any damage or injury to it for any loss or diminution in value
of the Property, are hereby assigned to and shall be paid to Beneficiary.
Beneficiary may participate in any suits or proceedings relating to any such
proceeds, causes of action, claims, compensation, awards or recoveries, and
Beneficiary is hereby authorized, in its own name or in Grantor's name, to
adjust any loss covered by any insurance (whether or not such insurance was
requested or required by Beneficiary) or any condemnation claim or cause of
action, and to settle or compromise any claim or cause of action in connection
therewith, and Grantor shall from time to time deliver to Beneficiary any
instruments required to permit such participation; provided, however, that
Beneficiary shall not have the right to participate in the adjustment of any
loss which is not in excess of the lesser of (i) ten percent (10%) of the then
outstanding principal balance of the Note, and (ii) $350,000.00. Provided no
default is then continuing hereunder or under any of the other Loan Documents
and no event has occurred which, with the giving of notice or the passage of
time or both, would constitute a default hereunder or under any of the other
Loan Documents, Beneficiary shall apply any sums received by it under this
Section first to the payment of all of its costs and expenses (including, but
not limited to, reasonable legal fees and disbursements) incurred in obtaining
those sums, and then, as follows:

                  (a) In the event that Beneficiary receives insurance proceeds
or condemnation awards upon the occurrence of an Insured Event in an amount not
in excess of the lesser of (i) ten percent (10%) of the then outstanding
principal balance of the Note, and (ii) $350,000.00, (collectively, the
"Threshold Amount"), Beneficiary shall, to the extent such insurance proceeds or
condemnation awards are available for such purpose, advance such funds to
Grantor in accordance with, and satisfaction of, the terms and conditions for
disbursement set forth in Section 1.7 of this Deed of Trust.

                  (b) In the event any proceeds or awards from an Insured Event
exceed the Threshold Amount but less than fifty percent (50%) of the
Improvements located on the Land have been taken or destroyed, then if:

                           (1) the Property can, in Beneficiary's reasonable
         judgment, with diligent restoration or repair, be returned to a
         condition at least equal to the condition thereof that existed prior to
         the casualty or partial taking causing the loss or damage within the
         earlier to occur of (i) twelve (12) months after the receipt of
         insurance proceeds or condemnation awards by either Grantor or
         Beneficiary, and (ii) the stated maturity date of the Note, and

                                       22
<PAGE>
                           (2) all necessary governmental approvals can be
         obtained to allow the rebuilding and reoccupancy of the Property as
         described in Section 1.9(b)(1) above, and

                           (3) there are sufficient sums available (through
         insurance proceeds or condemnation awards and contributions by Grantor,
         the full amount of which additional contributions shall at
         Beneficiary's option have been deposited with Beneficiary) for such
         restoration or repair (including, without limitation, for any
         reasonable costs and expenses of Beneficiary to be incurred in
         administering said restoration or repair) and for payment of principal
         and interest to become due and payable under the Note during such
         restoration or repair, and

                           (4) the economic feasibility of the Improvements
         after such restoration or repair will be such that income from their
         operation is reasonably anticipated to be sufficient to pay operating
         expenses of the Property and debt service on the indebtedness secured
         hereby in full with a 1.40:1 debt service coverage ratio, and

                           (5) Grantor shall have delivered to Beneficiary, at
         Grantor's sole cost and expense, an appraisal report from an appraiser,
         in form and substance satisfactory to Beneficiary appraising the value
         of the Property as proposed to be restored or repaired to be not less
         than the appraised value necessary to support the loan to value ratio
         which was initially required Beneficiary in its determination to make
         the Loan (i.e., 1.40 to 1.0), and

                           (6) Such damage or destruction shall not allow the
         termination of any franchise agreement covering the Property, or if
         such termination is allowed, Grantor has obtained and delivered to
         Beneficiary evidence satisfactory to Beneficiary that such right to
         terminate has been waived by the franchisor, and

                           (7) Grantor so elects by written notice delivered to
         Beneficiary within ten (10) days after settlement of the aforesaid
         insurance or condemnation claim,

then, Beneficiary shall, solely for the purposes of such restoration or repair,
advance so much of the remainder of such sums as may be required to facilitate
such restoration or repair, and any funds deposited by Grantor therefor, to
Grantor in the manner and upon such terms and conditions as would be required by
a prudent interim construction lender, including, but not limited to, the prior
approval by Beneficiary of plans and specifications, contractors and the form of
construction contracts and the furnishing to Beneficiary of permits, bonds, lien
waivers, invoices, receipts and affidavits from contractors and subcontractors,
in form and

                                       23
<PAGE>
substance reasonably satisfactory to Beneficiary. Any remaining proceeds shall
be (a)(i) applied for payment of the Grand Loan, and then (ii) applied for
payment of the other indebtedness secured hereby or (b) released to Grantor, in
Beneficiary's absolute discretion.

                  Any disbursement pursuant to this Section 1.9(b) of sums by
Beneficiary shall, subject to Grantor's satisfaction of the provisions hereof,
be in a manner to promptly facilitate the restoration or repair of the Property.
In the event Grantor fails to meet the requirements of this Section 1.9(b), then
Beneficiary may elect, in its absolute discretion and without regard to the
adequacy of Beneficiary's security, to apply any remaining insurance or
condemnation proceeds (a) (i) for payment of the Grand Loan, then (ii) payment
of the other indebtedness secured hereby, or (b) released to Grantor, in
Beneficiary's absolute discretion.

                  (c) In all other cases, namely, in the event that fifty
percent (50%) or more of the Improvements located on the Land have been taken or
destroyed Beneficiary may elect, in Beneficiary's absolute discretion and
without regard to the adequacy of Beneficiary's security, to (i) require Grantor
to obtain the release of the Property in accordance with Section 1.39 hereof,
including, without limitation, requiring the payment in full of the accrued
interest and outstanding principal balance of the Grand Loan, and/or (ii) make
insurance or condemnation proceeds available to Grantor for repair or
restoration if Grantor establishes to the satisfaction of Beneficiary, in its
sole discretion, that Grantor otherwise satisfies the requirements of Section
1.9(b) above.

                  (d) Any reduction in the indebtedness secured hereby resulting
from Beneficiary's application of any sums received by it hereunder shall take
effect only when Beneficiary actually receives such sums and elects to apply
such sums to the indebtedness secured hereby and, in any event, the unpaid
portion of the indebtedness secured hereby shall remain in full force and effect
and Grantor shall not be excused in the payment thereof. Partial payments
received by Beneficiary, as described in the preceding sentence, shall be
applied against the Note consistent with the prepayment provisions described
therein for casualty or condemnation proceeds. If Grantor undertakes to restore
or repair the Property after the occurrence of a casualty or partial taking of
the Property as provided above, Grantor shall promptly and diligently, at
Grantor's sole cost and expense and regardless of whether the insurance proceeds
or condemnation award, as appropriate, shall be sufficient for the purpose,
restore, repair, replace and rebuild the Property as nearly as possible to its
value, condition and character immediately prior to such casualty or partial
taking in accordance with the foregoing provisions and Grantor shall pay to
Beneficiary all costs and expenses of Beneficiary incurred in administering said
rebuilding, restoration or repair, provided that Beneficiary makes such proceeds
or award available for such purpose. Grantor agrees to execute and deliver from
time to time such further instruments as may be requested by Beneficiary to
confirm the foregoing assignment to Beneficiary of any award, damage, insurance
proceeds, payment or other

                                       24
<PAGE>
compensation. Grantor hereby irrevocably constitutes and appoints Beneficiary as
the attorney-in-fact of Grantor (which power of attorney shall be irrevocable so
long as any indebtedness secured hereby is outstanding, shall be deemed coupled
with an interest, shall survive the voluntary or involuntary dissolution of
Grantor and shall not be affected by any disability or incapacity suffered by
Grantor subsequent to the date hereof), with full power of substitution, subject
to the terms of this Section, to settle for, collect and receive any such
awards, damages, insurance proceeds, payments or other compensation from the
parties or authorities making the same, to appear in and prosecute any
proceedings therefor and to give receipts and acquittance therefor.

          I.10 Mechanics' Liens. Grantor shall pay when due all claims and
demands of mechanics, materialmen, laborers and others for any work performed or
materials delivered for the Land or the Improvements which are performed or
delivered at the direction of Grantor; provided, however, that, Grantor shall
have the right to contest in good faith any such claim or demand, so long as it
does so diligently, by appropriate proceedings and without prejudice to
Beneficiary and provided that neither the Property nor any interest therein
would be in any danger of sale, loss or forfeiture during the pendency of such
proceeding or contest. In the event Grantor shall contest any such claim or
demand, Grantor shall promptly notify Beneficiary of such contest and thereafter
shall, upon Beneficiary's request, promptly provide a bond, cash deposit or
other security satisfactory to Beneficiary to protect Beneficiary's interest and
security should the contest be unsuccessful. If Grantor shall fail to
immediately discharge or provide security against any such claim or demand as
aforesaid, Beneficiary may do so and any and all expenses incurred by
Beneficiary, together with interest thereon at the Default Interest Rate from
the date incurred by Beneficiary until actually paid by Grantor, shall be
immediately paid by Grantor on demand and shall be secured by this Deed of Trust
and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note.

          I.11 Assignment of Leases and Rents. Grantor acknowledges and confirms
that, as additional collateral security for the payment of the indebtedness
secured hereby, and cumulative of any and all rights and remedies herein
provided, it has executed and delivered to Beneficiary an Assignment of Leases
and Rents of even date herewith (the "Assignment"), intending such Assignment to
create a present, absolute assignment to Beneficiary of the Leases and Rents.
Upon the occurrence of a default under this Deed of Trust which has not been
cured within any applicable grace or cure period, Beneficiary shall be entitled
to exercise any or all of the remedies provided in this Deed of Trust and in the
Assignment, including, without limitation, the appointment of a receiver. The
Assignment shall continue in full force and effect during any period of
foreclosure or redemption with respect to the Property.

          I.12    Leases and Licenses.

                                       25
<PAGE>
                  (a) All leases entered into by Grantor after the date hereof
(excluding, however, any standard, commercially reasonable registration card for
overnight guests and any standard, commercially reasonable agreements for the
use of banquet facilities or meeting rooms entered into in the ordinary course
of business), shall be written on the standard form lease (without any material
changes) which Beneficiary has approved or shall approve prior to the use
thereof and shall be on arm's length terms consistent with the terms for similar
leases in the market area of the Land or otherwise approved in writing by
Beneficiary, shall provide for free rent only if the same is consistent with
prevailing market conditions and shall provide for market rents then prevailing
in the market area of the Land. Such leases shall also provide for Security
Deposits in reasonable amounts. Grantor shall also submit to Beneficiary for
Beneficiary's approval, which approval shall not be unreasonably withheld, prior
to the execution thereof, any proposed lease, license or occupancy agreement of
the Improvements or any portion thereof that differs materially and adversely
from the aforementioned form lease. Grantor shall not execute any lease, license
or occupancy agreement for all or a substantial portion of the Property, except
for an actual occupancy by the tenant, lessee or licensee thereunder, and shall
at all times promptly and faithfully perform, or cause to be performed, all of
the covenants, conditions and agreements contained in all leases, licenses and
occupancy agreements with respect to the Property, now or hereafter existing, on
the part of the landlord, lessor or licensor thereunder to be kept and
performed. Upon the request of Beneficiary, Grantor shall deliver to Beneficiary
a copy of each such lease, license and occupancy agreement. Grantor shall not do
or suffer to be done any act that might result in a default by the landlord,
lessor or licensor under any such lease, license or occupancy agreement or allow
the tenant, lessee or licensee thereunder to withhold payment or rent and,
except as otherwise expressly permitted by the terms of Section 1.13 hereof,
shall not further assign any such lease, license or occupancy agreement or any
such rents. Grantor, at no cost or expense to Beneficiary, shall enforce, short
of termination, the performance and observance of each and every condition and
covenant of each of the parties under such leases. Grantor shall not, without
the prior written consent of Beneficiary, modify any of the leases, terminate or
accept the surrender of any leases, waive or release any other party from the
performance or observance of any obligation or condition under such leases
except in the normal course of business in a manner which is consistent with
sound and customary leasing and management practices for similar properties in
the community in which the Property is located. Grantor shall not permit the
prepayment of any rents under any of the leases for more than one (1) month
prior to the due date thereof.

                  (b) Grantor shall be entitled to enter into such discount
programs or other patronage agreements without Beneficiary's prior approval so
long as such programs and agreements are in accordance with industry customs and
standards and otherwise reflect sound business practices.

                                       26
<PAGE>
          I.13    Alienation and Further Encumbrances.

                  (a) Grantor acknowledges that Beneficiary has relied upon the
principals of Grantor and their experience in owning and operating properties
similar to the Property in connection with the closing of the Loan. Accordingly,
except as specifically allowed hereinbelow in this Section and notwithstanding
anything to the contrary contained in Section 5.5 hereof, in the event that the
Property or any part thereof or interest therein shall be sold (including any
installment sales agreement), conveyed, disposed of, alienated, hypothecated,
leased (except to tenants of space or overnight guests and users of banquet or
meeting facilities in the Improvements in accordance with the provisions of
Section 1.12 hereof), assigned, pledged, mortgaged, further encumbered or
otherwise transferred or Grantor shall be divested of its title to the Property
or any interest therein, in any manner or way, whether voluntarily or
involuntarily, without the prior written consent of Beneficiary being first
obtained, which consent may be withheld in Beneficiary's sole discretion, then
the same shall constitute a default hereunder and Beneficiary shall have the
right, at its option, to declare any or all of the indebtedness secured hereby,
irrespective of the maturity date specified in the Note, immediately due and
payable and to otherwise exercise any of its other rights and remedies contained
in Article III hereof. If such acceleration is during any period when a
prepayment fee is payable pursuant to the provisions set forth in the Note,
then, in addition to all of the foregoing, such prepayment fee shall also then
be immediately due and payable to the same end as though Grantor were prepaying
the entire indebtedness secured hereby on the date of such acceleration. For the
purposes of this Section, the sale, conveyance, transfer, disposition,
alienation, hypothecation, pledge or encumbering (whether voluntarily or
involuntarily) of all or any portion of the ownership interest in (or, through
constituent parties, any of the ultimate beneficial ownership interest in)
Grantor shall be deemed to be a transfer of an interest in the Property.
Notwithstanding the foregoing, however, transfers or assignments of ownership
interests in Grantor (or its constituent parties) may be undertaken without the
consent of Beneficiary in the following circumstances:

                           (1) In the case of a Grantor which is a limited
         partnership, up to 49% of the limited partnership interests in Grantor
         shall be freely transferable. Up to 49% of the general partnership
         interests in Grantor (or the ownership interests in any such general
         partner) may be transferred without the consent of Beneficiary so long
         as those persons responsible for the management and control of Grantor
         and the Property remain unchanged following such transfer.

                           (2) In the case of a Grantor which constitutes a
         limited liability company, up to 49% of the non-managing membership
         interests in Grantor shall be freely transferable. Up to 49% of any

                                       27
<PAGE>
         manager's interest or managing membership interest in such a Grantor
         may be transferred without the consent of Beneficiary so long as those
         persons responsible for the management and control of Grantor and the
         Property remain unchanged following such transfer.

                           (3) In the case of a Grantor which constitutes a
         corporation, up to 49% of the aggregate of the issued and outstanding
         capital stock of Grantor may be sold or assigned, taking into account
         (i) any prior sales or assignments, and (ii) the effective change in
         ownership resulting from any issuance of new shares of capital stock in
         Grantor or its constituent party.

                           (4) Involuntary assignments or transfers caused by
         the death, incompetence or dissolution of Grantor, one of its
         constituent parties or the owner of one of its constituent parties are
         permitted if: (i) Grantor is reconstituted, if required, following such
         death, incompetence or dissolution, and (ii) those persons responsible
         for the management and control of Grantor and the Property remain
         unchanged as a result of such death, incompetence or dissolution or any
         replacement management is approved by Beneficiary.

                           (5) Gifts for estate planning purposes of any
         individual's interests in Grantor or in any of Grantor's general
         partners, members or joint venturers to the spouse or any lineal
         descendant of such individual, or to a trust for the benefit of any one
         or more of such individual, spouse or lineal descendant, shall not be a
         default under this Deed of Trust so long as Grantor is reconstituted,
         if required, following such gift and so long as those persons
         responsible for the management of the Property and Grantor remain
         unchanged following such gift or any replacement management is approved
         by Beneficiary.

In all cases where assignment of ownership interests is allowed without the
consent of Beneficiary pursuant to this Section 1.13(a), the proportionate
ownership which is proposed to be transferred shall be calculated so as to take
into account prior transfers or assignments. Furthermore, the sale, conveyance,
transfer, disposition, alienation, hypothecation, pledge or encumbering (whether
voluntarily or involuntarily) of all or any portion of the ownership interest in
(or, through constituent parties, any of the ultimate beneficial ownership
interest in) any guarantor of Grantor's obligation hereunder or under any of the
other Loan Documents shall constitute a default hereunder and Beneficiary shall
have the right to exercise its various remedies described hereinabove; provided,
however, ownership interests in any such guarantor may be transferred in a
manner consistent with the allowable transfers of ownership interests in Grantor
described hereinabove.

                                       28
<PAGE>
Notwithstanding the foregoing, for so long as WestCoast Hospitality Corporation
("WHC"), a Washington corporation and the general partner of WestCoast
Hospitality, Limited Partnership ("WestCoast Hospitality") (i.e., a guarantor of
Grantor's obligation hereunder) remains a publicly-traded company the stock of
such corporation shall be freely transferrable without the consent of
Beneficiary. At any time that WHC ceases to be a publicly-traded company, WHC
shall be subject to the limitations set forth in this Section 1.13. Furthermore,
limited partnership interests in WestCoast Hospitality shall be freely
transferrable without the consent of Beneficiary so long as WHC remains the sole
general partner, majority owner in WestCoast Hospitality and remains responsible
for the management and control of WestCoast Hospitality. The merger of WHC and
WestCoast Hospitality or the transfer of assets from WestCoast Hospitality to
WHC shall not require the consent of Beneficiary and shall not constitute a
default under this Section 1.13 so long as prior written notice thereof is
provided to Beneficiary.

                  (b) Notwithstanding the foregoing provisions of this Section
1.13, Beneficiary shall consent to a sale, conveyance or transfer of the
Property in its entirety, including sale, conveyance or transfer of all of the
ownership interest in Grantor (hereinafter, a "Sale") to any person or entity
provided that each of the following terms and conditions are satisfied:

                           (1) No default is then continuing hereunder or under
         any of the other Loan Documents;

                           (2) Grantor gives Beneficiary written notice of the
         terms of such prospective Sale not less than thirty (30) days before
         the date on which such Sale is scheduled to close and, concurrently
         therewith, gives Beneficiary all reasonable information concerning the
         proposed transferee of the Property (hereinafter, a "Buyer") or any
         replacement guarantor as Beneficiary would require in evaluating an
         initial extension of credit to a borrower and pays to Beneficiary a
         non-refundable application fee in the amount of $5,000.00 (the
         "Application Fee"). Beneficiary shall have the right, in its reasonable
         discretion, to approve or disapprove the proposed Buyer and the
         substitution of the replacement guarantor. In determining whether to
         give or withhold its approval of the proposed Buyer and replacement
         guarantor, Beneficiary shall consider, among other things, the Buyer's
         experience and track record in owning and operating facilities similar
         to the Property or the same of the professional management company
         proposed by Buyer, the Buyer's entity structure, the Buyer's financial
         strength, the Buyer's general business standing, the Buyer's or the
         proposed manager's relationships and experience with contractors,
         vendors, tenants, lenders and other business entities, and the proposed
         guarantor's financial ability to perform the obligations of the
         indemnity and guaranty;

                                       29
<PAGE>
                           (3) Grantor pays Beneficiary, concurrently with the
         closing of such Sale, a non-refundable assumption fee (the "Assumption
         Fee") in an amount equal to one-half of one percent (0.5%) of the then
         outstanding principal balance of the Note evidencing the Grand Loan.
         The Application Fee shall be used to pay Beneficiary's reasonable and
         customary out-of-pocket costs and expenses, including, without
         limitation, reasonable attorneys' fees, incurred by Beneficiary in
         connection with the Sale. Grantor's obligation to pay such
         out-of-pocket costs and expenses and attorneys' fees of Beneficiary in
         connection with such Sale shall not exceed the Application Fee;

                           (4) The Buyer assumes and agrees to pay the
         indebtedness secured hereby subject to the provisions of Section 5.23
         hereof and to perform the covenants of Grantor under the Loan
         Documents, and, prior to or concurrently with the closing of such Sale,
         the Buyer executes, without any cost or expense to Beneficiary, such
         documents and agreements as Beneficiary shall reasonably require to
         evidence and effectuate said assumption and delivers such legal
         opinions as Beneficiary may require;

                           (5) Grantor and the Buyer execute, without any cost
         or expense to Beneficiary, new financing statements or financing
         statement amendments and any additional documents reasonably requested
         by Beneficiary in order to perfect Beneficiary's security interest in
         the Property;

                           (6) Grantor delivers to Beneficiary, without any cost
         or expense to Beneficiary, such endorsements to Beneficiary's title
         insurance policy, hazard insurance endorsements or certificates and
         other similar materials as Beneficiary may deem necessary at the time
         of the Sale, all in form and substance satisfactory to Beneficiary,
         including, without limitation, an endorsement or endorsements to
         Beneficiary's title insurance policy insuring the lien of this Deed of
         Trust, extending the effective date of such policy to the date of
         execution and delivery (or, if later, of recording) of the assumption
         agreement referenced above in subsection (4) of this Section 1.13(b),
         with no additional exceptions added to such policy except such
         encumbrances previously approved in writing by Beneficiary, and
         insuring that fee simple title to the Property is vested in the Buyer;

                           (7) Grantor executes and delivers to Beneficiary,
         without any cost or expense to Beneficiary, a release of Beneficiary,
         its officers, directors, employees and agents, from all claims and
         liability relating to the transactions evidenced by the Loan Documents,
         through and including the date of the closing of the Sale, which
         agreement shall be in form and substance satisfactory to Beneficiary
         and shall be binding upon the Buyer;

                                       30
<PAGE>
                           (8) Subject to the provisions of Section 5.23 hereof,
         such Sale is not construed so as to relieve Grantor of any personal
         liability under the Note or any of the other Loan Documents for any
         acts or events occurring or obligations arising prior to or
         simultaneously with the closing of such Sale, and Grantor executes,
         without any cost or expense to Beneficiary, such documents and
         agreements as Beneficiary shall reasonably require to evidence and
         effectuate the ratification of said personal liability;

                           (9) Such Sale is not construed so as to relieve any
         current guarantor or indemnitor of its obligations under any guaranty
         or indemnity agreement executed in connection with the Loan and each
         such current guarantor and indemnitor executes, without any cost or
         expense to Beneficiary, such documents and agreements as Beneficiary
         shall reasonably require to evidence and effectuate the ratification of
         each such guaranty and indemnity agreement, provided that if the Buyer
         or a party associated with the Buyer approved by Beneficiary in its
         reasonable discretion assumes the obligations of the current guarantor
         or indemnitor under its guaranty or indemnity agreement and the Buyer
         or such party associated with the Buyer, as applicable, executes,
         without any cost or expense to Beneficiary, a new guaranty or indemnity
         agreement which is in the same form and substance as the then existing
         guaranty and indemnity agreement or otherwise satisfactory to
         Beneficiary, then Beneficiary shall release the current guarantor or
         indemnitor from all obligations arising under its guaranty or indemnity
         agreement after the closing of such Sale;

                           (10) The Buyer shall furnish, if the Buyer is a
         corporation, partnership, or other entity, all documents evidencing the
         Buyer's capacity and good standing, and the qualification of the
         signers to execute the assumption of the indebtedness secured hereby,
         which documents shall include, but not in any way be limited to,
         certified copies of all documents relating to the organization and
         formation of the Buyer and of the entities, if any, which are partners
         or members of the Buyer. The Buyer and such constituent partners,
         members or shareholders of Buyer (as the case may be), as Beneficiary
         may require, shall be single purpose, single-asset "bankruptcy remote"
         entities, whose formation documents shall be approved by counsel to
         Beneficiary; provided, however, the Buyer shall not be required to be
         "bankruptcy remote" from any affiliated entity of Buyer which purchases
         the Olympia Property as required by subsection (15) herein. An
         individual recommended by the Buyer and approved by Beneficiary shall
         serve as an Independent Director (as defined in Section 1.32(s) of this
         Deed of Trust) of the Buyer (if the Buyer is a corporation or a limited
         liability company) or the Buyer's corporate or limited liability
         company general partner or an independent member or, in Beneficiary's
         discretion, manager, of Buyer if the Buyer is a limited liability
         company. Unanimous consent of the board of directors (including the
         Independent Director) shall be required for, among other things, any

                                       31
<PAGE>
         merger, consolidation, dissolution, bankruptcy or insolvency of any
         such constituent partner, member or shareholder of the Buyer (as the
         case may be) or of the Buyer;

                           (11) The Buyer, if required by Beneficiary, shall
         furnish an opinion of counsel satisfactory to Beneficiary and its
         counsel (i) that the Buyer's formation documents provide for the
         matters described in Section 1.13(b)(10) hereof, (ii) that the
         assumption of the indebtedness evidenced hereby has been duly
         authorized, executed and delivered, and that the Loan Documents are
         valid, binding and enforceable against the Buyer in accordance with
         their terms, (iii) that the Buyer and any entity which is a controlling
         stockholder, member or general partner of Buyer, have been duly
         organized, and are in existence and in good standing, (iv) that the
         assets of the Buyer will not be consolidated with the assets of any
         other entity (including the Buyer's general partner or managing member,
         if any) having an interest in, or affiliation with, the Buyer, in the
         event of bankruptcy or insolvency of any such entity or such general
         partner or managing member, and (v) with respect to such other matters,
         as Beneficiary may reasonably request; and

                           (12) If required under the operative documents with
         respect to a Secondary Market Transaction (as hereinafter defined),
         Beneficiary shall have received evidence in writing from the Rating
         Agency to the effect that the Sale will not result in a
         re-qualification, reduction, downgrade or withdrawal of any rating
         initially assigned or to be assigned in a Secondary Market Transaction
         (hereinafter defined) or, if no such rating has been issued, in
         Beneficiary's good faith judgment, such Sale shall not have an adverse
         effect on the level of rating obtainable in connection with the Loan;
         and

                           (13) Grantor's obligations under the contract of sale
         pursuant to which such Sale, conveyance or transfer is proposed to
         occur shall expressly be subject to the satisfaction of the terms and
         conditions of this Section 1.13(b).

                           (14) The Buyer shall obtain the written consent of
         the Franchisor (hereinafter defined) to the transfer of the Property
         and the Franchise Agreement in favor of Franchisor to Buyer as well as
         a comfort letter from Franchisor substantially in the form of the
         comfort letter obtained in connection with the initial funding of the
         Note and otherwise in form and substance satisfactory to Beneficiary.

                           (15) The Olympia Property (hereinafter defined) shall
         be subject to a simultaneous Sale to the identical Buyer in accordance
         with the terms of the Olympia Deed of Trust.

                                       32
<PAGE>
          I.14 Payment of Utilities, Assessments, Charges, Etc. Grantor shall
pay when due all utility charges which are incurred by Grantor or which may
become a charge or lien against any portion of the Property for gas,
electricity, water and sewer services furnished to the Land and/or the
Improvements and all other assessments or charges of a similar nature, or
assessments payable pursuant to any restrictive covenants, whether public or
private, affecting the Land and/or the Improvements or any portion thereof,
whether or not such assessments or charges are or may become liens thereon.

          I.15 Access Privileges and Inspections. Beneficiary and the agents,
representatives and employees of Beneficiary shall, subject to the rights of
tenants, have full and free access to the Land and the Improvements and any
other location where books and records concerning the Property are kept at all
reasonable times for the purposes of inspecting the Property and of examining,
copying and making extracts from the books and records of Grantor relating to
the Property. Grantor shall lend assistance to all such agents, representatives
and employees of Beneficiary.

          I.16 Waste; Alteration of the Property. Grantor shall not commit,
suffer or permit any waste on the Property nor take any actions that might
invalidate any insurance carried on the Property. Grantor shall maintain the
Property in good condition and repair but in any event, not less than the
standard prevailing for hotels of similar age, size, construction and franchise
affiliation in the metropolitan area where the Property is located. No part of
the Improvements may be removed, demolished or materially altered, without the
prior written consent of Beneficiary, except that Grantor may remove worn-out or
obsolete items of furnishings, equipment or personal property without
Beneficiary's consent provided such items are replaced with items of comparable
value and utility. Without the prior written consent of Beneficiary, Grantor
shall not commence construction of any improvements on the Land other than
improvements required for the maintenance or repair of the Property.

          I.17 Zoning/Use. Without the prior written consent of Beneficiary,
Grantor shall not seek, make, suffer, consent to or acquiesce in any change in
the zoning or conditions of use of the Land or the Improvements. Grantor shall
comply with and make all payments required under the provisions of any
covenants, conditions or restrictions affecting the Land or the Improvements.
Grantor shall comply with all existing and future requirements of all
governmental authorities having jurisdiction over the Property. Grantor shall
keep all licenses, permits, franchises, certificates of occupancy, consents, and
other approvals necessary for the operation of the Property in full force and
effect. Grantor shall operate the Property as a hotel complex for so long as the
indebtedness secured hereby is outstanding. If, under applicable zoning
provisions, the use of all or any part of the Land or the Improvements is or
becomes a nonconforming use, Grantor shall not cause or permit such use to be
discontinued or abandoned without the prior written consent of Beneficiary.
Further, without Beneficiary's

                                       33
<PAGE>
prior written consent, Grantor shall not file or subject any part of the Land or
the Improvements to any declaration of condominium or cooperative or convert any
part of the Land or the Improvements to a condominium, cooperative or other form
of multiple ownership and governance.

          I.18    Financial Statements and Books and Records.

                  (a) Grantor will keep and maintain or will cause to be kept
and maintained on a fiscal year basis, in accordance with the Uniform System of
Accounts as revised from time to time and sufficient to permit the preparation
therefrom of financial statements in accordance with generally accepted
accounting principles in the United States of America ("GAAP") (or such other
accounting basis reasonably acceptable to Beneficiary) consistently applied,
proper and accurate books, records and accounts reflecting (i) all of the
financial affairs of Grantor and (ii) all items of income and expense in
connection with the operation of the Property or in connection with any
services, equipment or furnishings provided in connection with the operation
thereof, whether such income or expense may be realized by Grantor or by any
other person whatsoever, excepting lessees unrelated to and unaffiliated with
Grantor who have leased from Grantor portions of the Property for the purpose of
occupying the same. Beneficiary shall have the right from time to time at all
times during normal business hours upon reasonable notice to examine such books,
records and accounts at the office of Grantor or other person maintaining such
books, records and accounts and to make such copies or extract thereof as
Beneficiary shall desire. After the occurrence of an Event of Default, Grantor
shall pay any costs and expenses incurred by Beneficiary to examine Grantor's
accounting records with respect to the Property, as Beneficiary shall determine
to be necessary or appropriate in the protection of Grantor's interest.

                  (b) Grantor will furnish Beneficiary annually, within ninety
(90) days following the end of each fiscal year annual balance sheets for the
Property, and annual financial statements for Grantor, each principal or general
partner in Grantor, and each indemnitor and guarantor under any indemnity and
guaranty executed in connection with the Loan, annualized and audited by an
independent certified public accountant that is acceptable to Beneficiary in
accordance with GAAP (or such other accounting basis reasonably acceptable to
Beneficiary) consistently applied. Together with such annual statement, Grantor
shall furnish to Beneficiary an Officer's Certificate (as such term is defined
in the Cash Management Agreement) certifying as of the date thereof (i) that
such statement accurately represents the results of operations all in accordance
with GAAP consistently applied and (ii) whether there exists an event or
circumstance which constitutes, or which upon notice or lapse of time or both
would constitute, a Default under the Note or any other Loan Document executed
and delivered by Grantor, and if such event or circumstances exists, the nature

                                       34
<PAGE>
thereof, the period of time it has existed and the action then being taken to
remedy such event or circumstance.

                  (c) Grantor will furnish Beneficiary monthly, within thirty
(30) days following the end of each month, with a true, complete and correct
cash flow statement (unaudited) and approved by Beneficiary with respect to the
Property, together with a certification of the Manager stating that such cash
flow statement is true, complete and correct.

                  (d) Grantor will furnish Beneficiary monthly, within twenty
(20) days following the end of each month, with a certification of the Manager
stating that all Operating Expenses (as such term is defined in the Cash
Management Agreement) with respect to the Property which had accrued as of the
last day of the month preceding the delivery of the cash flow statement referred
to in clause (c) above have been fully paid or otherwise reserved or provided
for by the Manager (such certification or any certification furnished by a
Manager pursuant to clause (c) above, a "Manager Certification").

                  (e) Grantor shall furnish to Beneficiary, within thirty (30)
days after Beneficiary's request therefor, with such further detailed
information with respect to the operation of the Property and the financial
affairs of Grantor as may be reasonably requested by Beneficiary.

                  (f) Grantor shall furnish to Beneficiary copies of all tax
returns filed by Grantor, within thirty (30) days after the date of the filing.

If any of the aforementioned materials are not furnished to Beneficiary within
the applicable time periods, Grantor shall pay to Beneficiary a late fee of
$250.00. Further, if any of the aforementioned materials are not furnished to
Beneficiary within the applicable time periods, or there is evidence of an Event
of Default hereunder or under any of the other Loan Documents and Beneficiary is
reasonably dissatisfied with the contents of any of the foregoing, in addition
to any other rights and remedies of Beneficiary contained herein, Beneficiary
shall have the right, but not the obligation, to obtain the same by means of an
audit by an independent certified public accountant selected by Beneficiary, in
which event Grantor agrees to pay, or to reimburse Beneficiary for, any expense
of such audit and further agrees to provide all necessary information to said
accountant and to otherwise cooperate in the making of such audit. Grantor
agrees that any and all materials furnished hereunder are the property of
Beneficiary (and Beneficiary's servicer) and may be released and made available
to such parties as Beneficiary or its servicer deems appropriate in connection
with the servicing the Grand Loan, including any Rating Agency responsible for
rating securities issued in any Secondary Market Transaction. For purposes
hereof, a "Secondary Market Transaction" shall be (a) any sale or assignment of
this Deed of Trust, Note and other Loan Documents to one or more investors as a
whole loan, (b) a participation of the Loan to one or more investors,

                                       35
<PAGE>
(c) any deposit of this Deed of Trust, Note and the other Loan Documents with a
trust or other entity which may sell certificates or other instruments to
investors evidencing an ownership interest in the assets of such trust or other
entity, or (d) any other sale, assignment or transfer of the Loan or any
interest therein to one or more investors. If at any time during which the Loan
is an asset of a securitization or is otherwise an asset of any rated
transaction, "Rating Agency" shall mean the rating agency or rating agencies
that from time to time rate the securities, certificates or other instruments
issued in connection with such securitization or other transaction.

          I.19 Further Documentation. Grantor shall, on the request of
Beneficiary in Beneficiary's reasonable discretion and at the expense of
Grantor, promptly correct any defect, error or omission which may be discovered
in the contents of this Deed of Trust or in any of the other Loan Documents and
promptly execute, acknowledge, deliver and record or file such further
instruments and do such further acts as may be necessary, desirable or proper to
carry out more effectively the purposes of this Deed of Trust and the other Loan
Documents or as may be deemed advisable by Beneficiary to protect, continue or
preserve the liens and security interests hereunder, including, without
limitation, security instruments, financing statements and continuation
statements.

          I.20    Payment of Costs.

                  (a) Payment. Grantor shall pay all reasonable costs and
expenses of every character incurred in connection with the closing of the Loan
or otherwise attributable or chargeable to Grantor as the owner of the Property,
including, without limitation, appraisal fees, recording fees, documentary,
stamp, mortgage or intangible taxes, brokerage fees and commissions, title
policy premiums and title search fees, uniform commercial code/tax
lien/litigation search fees, escrow fees and reasonable attorneys' fees.

                  (b) Advances to Protect Property. Without limiting or waiving
any other rights and remedies of Beneficiary hereunder, if Beneficiary
determines that Grantor has failed to perform any of its obligations, covenants
or agreements contained in this Deed of Trust or in any of the other Loan
Documents and such failure is not cured within any applicable grace or cure
period, or if any action or proceeding of any kind (including, but not limited
to, any bankruptcy, insolvency, arrangement, reorganization or other debtor
relief proceeding) is commenced which would affect Beneficiary's interest in the
Property or Beneficiary's right to enforce its security therein, then
Beneficiary may, at its option, with or without notice to Grantor, make any
appearances, disburse or advance any sums and take any actions as may be
necessary or desirable to protect or enforce the security of this Deed of Trust
or to remedy the failure of Grantor to perform its covenants and agreements
(without, however, waiving any default of Grantor); provided, however,
Beneficiary may not for a period of thirty (30) days

                                       36
<PAGE>
take the foregoing action if Grantor is contesting such action or proceeding
(unless, in Beneficiary's judgment, any delay would potentially further damage
the Property or Beneficiary's interest therein). Grantor agrees to pay on demand
all expenses of Beneficiary reasonably incurred with respect to the foregoing
(including, but not limited to, fees and disbursements of counsel), together
with interest thereon at the Default Interest Rate from and after the date on
which Beneficiary incurs such expenses until reimbursement thereof by Grantor.
Any such expenses so incurred by Beneficiary, together with interest thereon as
provided above, shall be additional indebtedness of Grantor secured by this Deed
of Trust and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note. The necessity for any such actions and of
the amounts to be paid shall be determined by Beneficiary in its sole and
absolute discretion. Beneficiary is hereby empowered to enter and to authorize
others to enter upon the Property or any part thereof for the purpose of
performing or observing any such defaulted term, covenant or condition without
thereby becoming liable to Grantor or any person in possession holding under
Grantor. Grantor hereby acknowledges and agrees that the remedies set forth in
this Section 1.20(b) shall be exercisable by Beneficiary, and any and all
payments made or costs or expenses incurred by Beneficiary in connection
therewith shall be secured hereby and shall be, without demand, immediately
repaid by Grantor with interest thereon at the Default Interest Rate,
notwithstanding the fact that such remedies were exercised and such payments
made and costs incurred by Beneficiary after the filing by Grantor of a
voluntary case or the filing against Grantor of an involuntary case pursuant to
or within the meaning of the Bankruptcy Reform Act of 1978, as amended (the
"Act"), Title 11 U.S.C., or after any similar action pursuant to any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable to Grantor, Beneficiary, any guarantor or indemnitor, the secured
indebtedness or any of the Loan Documents. This indemnity shall survive payment
in full of the indebtedness secured hereby. This Section 1.20(b) shall not be
construed to require Beneficiary to incur any expenses, make any appearances or
take any actions.

          I.21 Security Interest. This Deed of Trust is also intended to
encumber and create a security interest in, and Grantor hereby grants to
Beneficiary a security interest in all Reserves (as hereinabove defined),
fixtures, chattels, accounts, equipment, inventory, contract rights, general
intangibles and other personal property included within the Property, all
renewals, replacements of any of the aforementioned items, or articles in
substitution therefor or in addition thereto or the proceeds thereof (said
property is hereinafter referred to collectively as the "Collateral"), whether
or not the same shall be attached to the Land or the Improvements in any manner.
It is hereby agreed that to the extent permitted by law, all of the foregoing
property is to be deemed and held to be a part of and affixed to the Land and
the Improvements. The foregoing security interest shall also cover Grantor's
leasehold interest in any of the foregoing property which is leased by Grantor.
Notwithstanding the foregoing, all

                                       37
<PAGE>
of the foregoing property shall be owned by Grantor and no leasing or
installment sales or other financing or title retention agreement in connection
therewith shall be permitted without the prior written approval of Beneficiary.
Grantor shall promptly replace all of the Collateral subject to the lien or
security interest of this Deed of Trust when worn out or obsolete with
Collateral comparable to the worn out or obsolete Collateral when new and will
not, without the prior written consent of Beneficiary, remove from the Land or
the Improvements any of the Collateral subject to the lien or security interest
of this Deed of Trust except such as is replaced by an article of equal
suitability and value as above provided, owned by Grantor free and clear of any
lien or security interest except that created by this Deed of Trust and the
other Loan Documents and except as otherwise expressly permitted by the terms of
Section 1.13 of this Deed of Trust. All of the Collateral shall be kept at the
location of the Land except as otherwise required by the terms of the Loan
Documents. Grantor shall not use any of the Collateral in violation of any
applicable statute, ordinance or insurance policy.

          I.22 Security Agreement. This Deed of Trust constitutes both a real
property deed of trust and a "security agreement" between Grantor and
Beneficiary with respect to the Collateral in which Beneficiary is granted a
security interest hereunder, and, cumulative of all other rights and remedies of
Beneficiary hereunder, Beneficiary shall have all of the rights and remedies of
a secured party under any applicable Uniform Commercial Code. Grantor hereby
agrees to execute and deliver on demand such security agreements, financing
statements, continuation statements or other instruments as Beneficiary may
request or require in order to impose, perfect or continue the perfection of the
lien or security interest created hereby. Grantor agrees to furnish Beneficiary
with notice of any change in the name, identity, corporate structure, residence,
or principal place of business or mailing address of Grantor within ten (10)
days of the effective date of any such change.

The name and address of Grantor (as Debtor under any applicable Uniform
Commercial Code) are:

                                WHC804, LLC
                                303 West North River Drive
                                Spokane, Washington  99201
                                Attention:  Hotel Executive Offices

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<PAGE>
The name and address of Beneficiary (as Secured Party under any applicable
Uniform Commercial Code) are:

                                Column Financial, Inc.
                                Eleven Madison Avenue
                                New York, New York 10010
                                Attention:  Edmund Taylor

          I.23 Easements and Rights-of-Way. Grantor shall not grant any easement
or right-of-way with respect to all or any portion of the Land or the
Improvements without the prior written consent of Beneficiary. The purchaser at
any foreclosure sale hereunder may, at its discretion, disaffirm any easement or
right-of-way granted in violation of any of the provisions of this Deed of Trust
and may take immediate possession of the Property free from, and despite the
terms of, such grant of easement or right-of-way. If Beneficiary consents to the
grant of an easement or right-of-way, Beneficiary agrees to grant such consent
without charge to Grantor other than reasonable expenses, including, without
limitation, reasonable attorneys' fees, incurred by Beneficiary in the review of
Grantor's request and, if applicable, in the preparation of documents relating
to the subordination of this Deed of Trust to such easement or right-of-way.

          I.24 Compliance with Laws.

                  (a) Grantor shall at all times comply with all statutes,
ordinances, regulations and other governmental or quasi-governmental
requirements and private covenants now or hereafter relating to the ownership,
construction, use or operation of the Property, including, but not limited to,
those concerning employment and compensation of persons engaged in operation and
maintenance of the Property and any environmental or ecological requirements,
even if such compliance shall require structural changes to the Property;
provided, however, that, Grantor may, upon providing Beneficiary with security
satisfactory to Beneficiary, proceed diligently and in good faith to contest the
validity or applicability of any such statute, ordinance, regulation or
requirement so long as during such contest the Property shall not be subject to
any lien, charge, fine or other liability and shall not be in danger of being
forfeited, lost or closed during the pendency of such contest. Grantor shall not
use or occupy, or allow the use or occupancy of, the Property in any manner
which violates any lease of or any other agreement applicable to the Property or
any applicable law, rule, regulation or order or which constitutes a public or
private nuisance or which makes void, voidable or cancelable, or materially
increases the premium of, any insurance then in force with respect thereto.

                                       39
<PAGE>
                  (b) Grantor agrees that the Property shall at all times comply
to the extent applicable with the requirements of the Americans with
Disabilities Act of 1990, the Fair Housing Amendments Act of 1988 and all other
state and local laws and ordinances related to handicapped access and all rules,
regulations, and orders issued pursuant thereto including, without limitation,
the Americans with Disabilities Act Accessibility Guidelines for Buildings and
Facilities ("Access Laws"). Grantor agrees to give prompt notice to Beneficiary
of the receipt by Grantor of any complaints related to violations of any Access
Laws and of the commencement of any proceedings or investigations which relate
to compliance with applicable Access Laws.

          I.25 Additional Taxes. In the event of the enactment after this date
of any law of the state where the Property is located or of any other
governmental entity deducting from the value of the Property for the purpose of
taxation any lien or security interest thereon, or imposing upon Beneficiary the
payment of the whole or any part of the taxes or assessments or charges or liens
herein required to be paid by Grantor, or changing in any way the laws relating
to the taxation of deeds of trust, mortgages or security agreements or debts
secured by deeds of trust, mortgages or security agreements or the interest of
the beneficiary, mortgagee or secured party in the property covered thereby, or
the manner of collection of such taxes, so as to adversely affect this Deed of
Trust or the indebtedness secured hereby or Beneficiary, then, and in any such
event, Grantor, upon demand by Beneficiary, shall pay such taxes, assessments,
charges or liens, or reimburse Beneficiary therefor; provided, however, that if
in the opinion of counsel for Beneficiary (a) it might be unlawful to require
Grantor to make such payment, or (b) the making of such payment might result in
the imposition of interest beyond the maximum amount permitted by law, then and
in either such event, Beneficiary may elect, by notice in writing given to
Grantor, to declare all of the indebtedness secured hereby to be and become due
and payable in full, sixty (60) days from the giving of such notice.

          I.26 Grantor's Waivers. To the full extent permitted by law, Grantor
agrees that Grantor shall not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, moratorium or extension, or any law now or
hereafter in force providing for the reinstatement of the indebtedness secured
hereby prior to any sale of the Property to be made pursuant to any provisions
contained herein or prior to the entering of any decree, judgment or order of
any court of competent jurisdiction, or any right under any statute to redeem
all or any part of the Property so sold. To the full extent permitted by law,
Grantor shall not have or assert any right under any statute or rule of law
pertaining to the exemption of homestead or other exemption under any federal,
state or local law now or hereafter in effect, the administration of estates of
decedents or any other matters whatsoever to defeat, reduce or affect the right
of Beneficiary

                                       40
<PAGE>
under the terms of this Deed of Trust to a sale of the Property, for the
collection of the secured indebtedness without any prior or different resort for
collection, or the right of Beneficiary under the terms of this Deed of Trust to
the payment of the indebtedness secured hereby out of the proceeds of sale of
the Property in preference to every other claimant whatever. Grantor, for
Grantor and Grantor's successors and assigns, and for any and all persons ever
claiming any interest in the Property, to the full extent permitted by law,
hereby knowingly, intentionally and voluntarily with and upon the advice of
competent counsel waives, releases, relinquishes and forever forgoes: (a) all
rights of valuation, appraisement, stay of execution, reinstatement and notice
of election or intention to mature or declare due the secured indebtedness
(except such notices as are specifically provided for herein); (b) all right to
a marshalling of the assets of Grantor, including the Property, to a sale in the
inverse order of alienation, or to direct the order in which any of the Property
shall be sold in the event of foreclosure of the liens and security interests
hereby created and agrees that any court having jurisdiction to foreclose such
liens and security interests may order the Property sold as an entirety; (c) all
rights and periods of redemption provided under applicable law; and (d) all
present and future statutes of limitations as a defense to any action to enforce
the provisions of this Deed of Trust or to collect any of the indebtedness
secured hereby to the fullest extent permitted by law and agrees that it shall
not solicit or aid the solicitation of the filing of any Petition (as
hereinafter defined) against the Grantor, whether acting on its own behalf or on
behalf of any other party. Without limiting the generality of the foregoing,
Grantor shall not (i) provide information regarding the identity of creditors or
the nature of creditors' claims to any third party unless compelled to do so by
order of a court of competent jurisdiction or by regulation promulgated by a
governmental agency; or (ii) pay the legal fees or expenses of any creditor of
or interest holder in Grantor with respect to any matter whatsoever.

          I.27    SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

                  (A) GRANTOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, (I) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF WASHINGTON OVER
ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THE
NOTE, THIS DEED OF TRUST OR ANY OTHER OF THE LOAN DOCUMENTS, (II) AGREES THAT
ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT
OF COMPETENT JURISDICTION PRESIDING OVER SPOKANE COUNTY, WASHINGTON, (III)
SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (IV) AGREES THAT IT WILL NOT
BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN
SHALL AFFECT THE RIGHT OF BENEFICIARY OR TRUSTEE TO BRING ANY ACTION, SUIT OR
PROCEEDING IN ANY OTHER FORUM). TO THE FULL EXTENT PERMITTED BY LAW, GRANTOR
FURTHER CONSENTS AND AGREES TO SERVICE OF ANY

                                       41
<PAGE>
SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING
BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE GRANTOR AT THE
ADDRESS FOR NOTICES DESCRIBED IN SECTION 5.4 HEREOF, AND CONSENTS AND AGREES
THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE
(BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED
IN ANY OTHER MANNER PERMITTED BY LAW).

                  (B) GRANTOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING
TO THE INDEBTEDNESS SECURED HEREBY OR ANY CONDUCT, ACT OR OMISSION OF
BENEFICIARY OR GRANTOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MANAGERS,
MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH
BENEFICIARY OR GRANTOR, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE.

          I.28 Contractual Statute of Limitations. Grantor hereby agrees that
any claim or cause of action by Grantor against Beneficiary, or any of
Beneficiary's directors, officers, employees, agents, accountants or attorneys,
based upon, arising from or relating to the indebtedness secured hereby, or any
other matter, cause or thing whatsoever, whether or not relating thereto,
occurred, done, omitted or suffered to be done by Beneficiary or by
Beneficiary's directors, officers, employees, agents, accountants or attorneys,
whether sounding in contract or in tort or otherwise, shall be barred unless
asserted by Grantor by the commencement of an action or proceeding in a court of
competent jurisdiction by the filing of a complaint within three (3) years after
Grantor first acquires or reasonably should have acquired knowledge of the first
act, occurrence or omission upon which such claim or cause of action, or any
part thereof, is based and service of a summons and complaint on an officer of
Beneficiary or any other person authorized to accept service of process on
behalf of Beneficiary, within thirty (30) days thereafter. Grantor agrees that
such three (3) year period of time is reasonable and sufficient time for a
borrower to investigate and act upon any such claim or cause of action. The one
three (3) year period provided herein shall not be waived, tolled or extended
except by the specific written agreement of Beneficiary. This provision shall
survive any termination of this Deed of Trust or any of the other Loan
Documents.

                                       42
<PAGE>

          I.29 Management. The management of the Property shall be by either:
(a) Grantor or an entity affiliated with Grantor approved by Beneficiary for so
long as Grantor or said affiliated entity is managing the Property in a first
class manner, or (b) a professional property management company approved by
Beneficiary (any such person or entity which manages the Property, other than
Grantor, is hereinafter referred to as the "Manager"). Any such management by an
affiliated entity or a professional property management company shall be
pursuant to a written agreement approved by Beneficiary. In no event shall any
Manager be removed or replaced or the terms of any management agreement modified
or amended without the prior written consent of Beneficiary. In the event (x) of
default hereunder or under any management contract then in effect, which default
is not cured within any applicable grace or cure period, or (y) of a change in
control (fifty percent or more) of the ownership of Manager or if Manager
provides cause for termination, including, without limitation, gross negligence,
willful misconduct or fraud, Beneficiary shall have the right to terminate, or
direct Grantor to terminate, such management contract at any time and, in any
such event of termination of the management contract, to retain, or to direct
Grantor to retain, a new management agent approved by Beneficiary. Any such
successor manager shall be a reputable management company having a senior
executive with at least seven (7) years' experience in the management of
hotel/hospitality properties in the state where the Property is located, shall
be the manager of at least five (5) projects comparable to the Property and
shall be reasonably acceptable to Beneficiary. Grantor further covenants and
agrees that Grantor shall require the Manager (or any successor managers) to
maintain at all times during the term of this Deed of Trust worker's
compensation insurance as required by applicable governmental authorities or
legal requirements.

          I.30    Hazardous Materials and Environmental Concerns.

                  (a) Grantor hereby represents and warrants to Beneficiary
that, as of the date hereof: (i) to the best of Grantor's knowledge, information
and belief, the Property is not and has not been, in direct or indirect
violation of any Environmental Law (as defined below); (ii) to the best of
Grantor's knowledge, information and belief, no Hazardous Substances (as defined
below) are located on or have been handled, manufactured, generated, stored,
processed, transported to or from, or disposed of on or Released or discharged
from the Property (including underground contamination) except for those
substances used by Grantor in the ordinary course of its business and in
compliance with all Environmental Laws; (iii) the Property is not subject to any
private or governmental lien or judicial, administrative or other notice or
action relating to Hazardous Substances or noncompliance with Environmental
Laws, nor is Grantor aware of any basis for such lien, notice or action; (iv)
except as previously disclosed to Beneficiary, to the best of Grantor's
knowledge, information and belief, there are no underground storage tanks or
other underground storage receptacles for Hazardous Substances on the Property;
(v) Grantor has received no notice of, and to the best of Grantor's

                                       43
<PAGE>
knowledge and belief, there does not exist any, investigation, action,
proceeding or claim by any agency, authority or unit of government or by any
third party which could result in any liability, penalty, sanction or judgment
under any Environmental Laws with respect to any condition, use or operation of
the Property, nor does Grantor know of any basis for such investigation, action,
proceeding or claim; (vi) Grantor has received no notice that, and, to the best
of Grantor's knowledge and belief, there has been no claim by any party that,
any use, operation or condition of the Property has caused any nuisance,
trespass or any other liability or adverse condition on any other property, nor
does Grantor know of any basis for such notice or claim; and (vii) to Grantor's
best knowledge, information and belief, there are no present environmental
conditions or events or past environmental conditions or events, on or near the
Property that could be reasonably anticipated to materially adversely affect the
value of the Property.

                  (b) Grantor shall keep or cause the Property to be kept free
from Hazardous Substances (except those substances used by Grantor in the
ordinary course of its business and in compliance with all Environmental Laws)
and in compliance with all Environmental Laws, shall not install or use any
underground storage tanks, shall expressly prohibit the use, generation,
handling, storage, production, processing and disposal of Hazardous Substances
by all tenants (except those substances used by tenants in the ordinary course
of their activities and in compliance with all Environmental Laws), invitees and
trespassers, and, without limiting the generality of the foregoing, during the
term of this Deed of Trust, shall not install in the Improvements or permit to
be installed in the Improvements asbestos or any substance containing asbestos.
If required by Beneficiary in its reasonable discretion or under any
Environmental Law, Grantor shall maintain an Operation and Maintenance Program
("O&M Program") for the management of asbestos, lead-based paint, radon or any
other Hazardous Substances at the Property.

                  (c) Grantor shall promptly notify Beneficiary if Grantor shall
become aware of (i) any Hazardous Substances at, on, under or affecting or
threatening to affect the Property (except those substances used by Grantor or
tenants in the ordinary course of their business or activities, respectively,
and in compliance with all Environmental Laws), (ii) any lien, action or notice
affecting or threatening to affect the Property or Grantor resulting from any
violation or alleged violation of Environmental Law, (iii) any investigation,
inquiry or proceeding concerning Grantor or the Property pursuant to any
Environmental Law or otherwise relating to Hazardous Substances, or (iv) any
occurrence, condition or state of facts which would render any representation or
warranty in this Section incorrect in any respect if made at the time of such
discovery. Further, Grantor shall timely deliver to Beneficiary copies of any
and all orders, notices, permits, applications, reports, and other
communications, documents and instruments pertaining to the actual, alleged or
potential non-compliance with any

                                       44
<PAGE>
Environmental Laws in connection with the Property or presence or existence of
any Hazardous Substances at, on, about, under, within, near or in connection
with the Property (except those substances used in the ordinary course of its
business and in compliance with all Environmental Laws). Grantor shall, promptly
and when and as required, at Grantor's sole cost and expense, take all actions
as shall be necessary or advisable for compliance with the terms of this Section
1.30 or for the remediation, of any and all portions of the Property or other
affected property, including, without limitation, all investigative, monitoring,
removal, containment, remedial and response actions in accordance with all
applicable Environmental Laws and shall further pay or cause to be paid, at no
expense to Beneficiary, all remediation, response, administrative and
enforcement costs of applicable governmental agencies which may be asserted
against the Property. In the event Grantor fails to do so within thirty (30)
days after Grantor's receipt of written notice thereof (1) Beneficiary may, but
shall not be obligated to, undertake remediation at the Property or other
affected property necessary to bring the Property into conformance with the
terms of Environmental Laws, and (2) Grantor hereby grants to Beneficiary and
its agents and employees access to the Property and a license to do all things
Beneficiary shall deem necessary to bring the Property into conformance with
Environmental Laws. Any and all costs and expenses reasonably incurred by
Beneficiary in connection therewith, together with interest thereon at the
Default Interest Rate from the date incurred by Beneficiary until actually paid
by Grantor, shall be immediately paid by Grantor on demand and shall be secured
by this Deed of Trust and by all of the other Loan Documents securing all or any
part of the indebtedness evidenced by the Note. GRANTOR COVENANTS AND AGREES, AT
GRANTOR'S SOLE COST AND EXPENSE, TO INDEMNIFY, DEFEND (AT TRIAL AND APPELLATE
LEVELS, AND WITH ATTORNEYS, CONSULTANTS AND EXPERTS ACCEPTABLE TO BENEFICIARY),
AND HOLD BENEFICIARY HARMLESS FROM AND AGAINST ANY AND ALL LIENS, DAMAGES,
LOSSES, LIABILITIES, OBLIGATIONS, SETTLEMENT PAYMENTS, PENALTIES, ASSESSMENTS,
CITATIONS, DIRECTIVES, CLAIMS, LITIGATION, DEMANDS, DEFENSES, JUDGMENTS, SUITS,
PROCEEDINGS, COSTS, DISBURSEMENTS OR EXPENSES OF ANY KIND OR OF ANY NATURE
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS', CONSULTANTS'
AND EXPERTS' FEES AND DISBURSEMENTS ACTUALLY INCURRED IN INVESTIGATING,
DEFENDING, SETTLING OR PROSECUTING ANY CLAIM, LITIGATION OR PROCEEDING) WHICH
MAY AT ANY TIME BE IMPOSED UPON, INCURRED BY OR ASSERTED OR AWARDED AGAINST
BENEFICIARY OR THE PROPERTY, AND ARISING DIRECTLY OR INDIRECTLY FROM OR OUT OF:
(A) THE PRESENCE, RELEASE OR THREAT OF RELEASE OF ANY HAZARDOUS SUBSTANCES ON,
IN, UNDER, AFFECTING OR THREATENING TO AFFECT ALL OR ANY PORTION OF THE PROPERTY
OR ANY SURROUNDING AREAS, REGARDLESS OF WHETHER OR NOT CAUSED BY OR WITHIN THE
CONTROL OF GRANTOR;

                                       45
<PAGE>

(B) THE VIOLATION OF ANY ENVIRONMENTAL LAWS RELATING TO, AFFECTING OR
THREATENING TO AFFECT THE PROPERTY, WHETHER OR NOT CAUSED BY OR WITHIN THE
CONTROL OF GRANTOR; (C) THE FAILURE BY GRANTOR TO COMPLY FULLY WITH THE TERMS
AND CONDITIONS OF THIS SECTION 1.30; (D) THE BREACH OF ANY REPRESENTATION OR
WARRANTY CONTAINED IN THIS SECTION 1.30; OR (E) THE ENFORCEMENT OF THIS SECTION
1.30, INCLUDING, WITHOUT LIMITATION, THE COST OF ASSESSMENT, CONTAINMENT AND/OR
REMOVAL OF ANY AND ALL HAZARDOUS SUBSTANCES ON AND/OR FROM ALL OR ANY PORTION OF
THE PROPERTY OR ANY SURROUNDING AREAS, THE COST OF ANY ACTIONS TAKEN IN RESPONSE
TO THE PRESENCE, RELEASE OR THREAT OF RELEASE OF ANY HAZARDOUS SUBSTANCES ON,
IN, UNDER OR AFFECTING ANY PORTION OF THE PROPERTY OR ANY SURROUNDING AREAS TO
PREVENT OR MINIMIZE SUCH RELEASE OR THREAT OF RELEASE SO THAT IT DOES NOT
MIGRATE OR OTHERWISE CAUSE OR THREATEN DANGER TO PRESENT OR FUTURE PUBLIC
HEALTH, SAFETY, WELFARE OR THE ENVIRONMENT, AND COSTS INCURRED TO COMPLY WITH
THE ENVIRONMENTAL LAWS IN CONNECTION WITH ALL OR ANY PORTION OF THE PROPERTY.
THE INDEMNITY SET FORTH IN THIS SECTION 1.30(C) SHALL ALSO INCLUDE ANY
DIMINUTION IN THE VALUE OF THE SECURITY AFFORDED BY THE PROPERTY OR ANY FUTURE
REDUCTION IN THE SALES PRICE OF THE PROPERTY BY REASON OF ANY MATTER SET FORTH
IN THIS SECTION 1.30(C). BENEFICIARY'S RIGHTS UNDER THIS SECTION SHALL SURVIVE
PAYMENT IN FULL OF THE INDEBTEDNESS SECURED HEREBY AND SHALL BE IN ADDITION TO
ALL OTHER RIGHTS OF BENEFICIARY UNDER THIS DEED OF TRUST, THE NOTE AND THE OTHER
LOAN DOCUMENTS.

                  (d) Upon Beneficiary's request, at any time after the
occurrence of a default of this Section 1.30 or at such other time as
Beneficiary has reasonable grounds to believe that Hazardous Substances are or
have been handled, generated, stored, processed, transported to or from, or
released or discharged from or disposed of on or around the Property (other than
in the normal course of Grantor's or the tenants' business or activities,
respectively, and in compliance with all Environmental Laws) or that the
Grantor, any tenant or the Property may be in violation of Environmental Laws,
Grantor shall provide, at Grantor's sole cost and expense, an inspection or
audit of the Property prepared by a hydrogeologist or environmental engineer or
other appropriate consultant approved by Beneficiary indicating the presence or
absence of Hazardous Substances on the Property or any surrounding areas
(including asbestos containing material or lead-based paint). If Grantor fails
to provide such inspection or audit within sixty (60) days after such request,
Beneficiary may order the same, and Grantor hereby grants to Beneficiary and its
employees and agents access to the Property and a license to

                                       46
<PAGE>
undertake such inspection or audit. The cost of such inspection or audit,
together with interest thereon at the Default Interest Rate from the date
incurred by Beneficiary until actually paid by Grantor, shall be immediately
paid by Grantor on demand and shall be secured by this Deed of Trust and by all
of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note.

                  (e) Without limiting the foregoing, Beneficiary and its
authorized representatives may, during normal business hours and at its own
expense, inspect the Property and Grantor's records related thereto for the
purpose of determining compliance with Environmental Laws and the terms and
conditions of this Section 1.30.

                  (f) As used herein, the term "Release(d)" shall include,
without limitation, any intentional or unintentional placing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing, discarding or abandoning of any Hazardous
Substance, other than in the normal course of business or activities of Grantor
or its tenants, and in compliance with all Environmental Laws.

                  (g) For purposes of this Section 1.30, the term "best
knowledge, information and belief" of Grantor shall mean the conscious awareness
of the directors, officers and employees of Grantor who are involved in the
consummation of the Loan or the management of the Property.

                  (h) As used herein, the term "Environmental Laws" shall mean
local, state or federal law, rule or regulation pertaining to environmental
regulation, contamination, remediation, human health or clean-up, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C.ss.9601 et seq. and 40 CFRss.302.1 et seq.), the
Resource Conservation and Recovery Act of 1976 (42 U.S.C.ss.6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C.ss.1251 et seq. and 40 CFRss.116.1
et seq.), the Hazardous Materials Transportation Act (49 U.S.C.ss.1801 et seq.),
and the regulations promulgated pursuant to said laws, all as amended.

                  (i) As used herein, the term "Hazardous Substances" shall mean
hazardous, toxic or harmful substances, wastes, materials, pollutants or
contaminants, including, without limitation, asbestos, polychlorinated
biphenyls, petroleum products, radon, lead-based paints, flammable explosives,
radioactive materials, infectious substances or raw materials which include
hazardous constituents or any other substances or materials which are included
under or regulated by Environmental Laws.

Notwithstanding anything contained herein to the contrary, specifically
including, but not limited to this Section 1.30 and Section 1.24, this Deed of
Trust does not secure any guaranty

                                       47
<PAGE>
or indemnification of Grantor or any third party to the extent the instrument
evidencing the same states that such obligations are not so secured. Any
obligations that are secured by this Deed of Trust that are the substantial
equivalent of Grantor's indemnities in the Hazardous Substances Indemnity
Agreement shall be limited to the actual and consequential damages incurred by
Beneficiary, including all advances or payments paid or agreed to be paid by
Beneficiary pursuant to its rights to require environmental assessments, join or
participate in any proceedings, cure Grantor's default or enforce its remedies
(a) prior to and after any judicial foreclosure of this Deed of Trust or the
date a deed is delivered and accepted in lieu thereof, or (b) prior to any
nonjudicial foreclosure of this Deed of Trust or the date a deed is delivered
and accepted in lieu thereof. The obligations of Grantor under this Section
shall be mutually exclusive of any liabilities arising after a nonjudicial
foreclosure of this Deed of Trust or the delivery and acceptance of a deed in
lieu of such nonjudicial foreclosure which are evidenced by the Hazardous
Substances Indemnity Agreement.

          I.31    Indemnification; Subrogation.

                  (A) GRANTOR SHALL INDEMNIFY, DEFEND AND HOLD BENEFICIARY
HARMLESS AGAINST: (I) ANY AND ALL CLAIMS FOR BROKERAGE, LEASING, FINDER'S OR
SIMILAR FEES WHICH MAY BE MADE RELATING TO THE PROPERTY OR THE SECURED
INDEBTEDNESS, (II) ANY AND ALL LIABILITY, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, CLAIMS, ACTIONS, SUITS, LIENS, CHARGES, ENCUMBRANCES, COSTS AND
EXPENSES (INCLUDING BENEFICIARY'S ATTORNEYS' FEES, TOGETHER WITH REASONABLE
APPELLATE COUNSEL FEES, IF ANY) OF WHATEVER KIND OR NATURE WHICH MAY BE ASSERTED
AGAINST, IMPOSED ON OR INCURRED BY BENEFICIARY UNDER ANY LEASE OR OCCUPANCY
AGREEMENT, FOR ANY LOSS ARISING FROM A FAILURE OR INABILITY TO COLLECT RENTS AND
PROFITS OR IN CONNECTION WITH THE SECURED INDEBTEDNESS, THIS DEED OF TRUST, THE
PROPERTY, OR ANY PART THEREOF, OR THE EXERCISE BY BENEFICIARY OF ANY RIGHTS OR
REMEDIES GRANTED TO IT UNDER THIS DEED OF TRUST, AND ANY DEFAULT UNDER THIS DEED
OF TRUST, (III) ANY LIENS (WHETHER JUDGMENTS, MECHANICS', MATERIALMEN'S OR
OTHERWISE), CHARGES AND ENCUMBRANCES FILED AGAINST THE PROPERTY, AND (IV) ANY
CLAIMS AND DEMANDS FOR DAMAGES OR INJURY, INCLUDING CLAIMS FOR PROPERTY DAMAGE,
PERSONAL INJURY OR WRONGFUL DEATH, ARISING OUT OF OR IN CONNECTION WITH ANY
ACCIDENT OR FIRE OR OTHER CASUALTY ON THE REAL ESTATE OR THE IMPROVEMENTS OR ANY
NUISANCE OR TRESPASS MADE OR SUFFERED THEREON, INCLUDING, IN ANY CASE,
ATTORNEYS' FEES, COSTS AND EXPENSES AS AFORESAID,

                                       48
<PAGE>
WHETHER AT PRETRIAL, TRIAL OR APPELLATE LEVEL FOR ANY CIVIL, CRIMINAL OR
ADMINISTRATIVE PROCEEDINGS. SHOULD BENEFICIARY INCUR ANY LIABILITY UNDER THIS
DEED OF TRUST OR ANY OF THE OTHER LOAN DOCUMENTS, THE AMOUNT THEREOF, INCLUDING,
WITHOUT LIMITATION, COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, TOGETHER
WITH INTEREST THEREON AT THE DEFAULT INTEREST RATE FROM THE DATE INCURRED BY
BENEFICIARY UNTIL ACTUALLY PAID BY GRANTOR, SHALL BE IMMEDIATELY DUE AND PAYABLE
TO BENEFICIARY BY GRANTOR ON DEMAND AND SHALL BE SECURED HEREBY AND BY ALL OF
THE OTHER LOAN DOCUMENTS SECURING ALL OR ANY PART OF THE INDEBTEDNESS EVIDENCED
BY THE NOTE. HOWEVER, NOTHING HEREIN SHALL BE CONSTRUED TO OBLIGATE GRANTOR TO
INDEMNIFY, DEFEND AND HOLD HARMLESS BENEFICIARY FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS, SUITS,
COSTS AND EXPENSES ENACTED AGAINST, IMPOSED ON OR INCURRED BY BENEFICIARY BY
REASON OF BENEFICIARY'S WILLFUL MISCONDUCT OR GROSS NEGLIGENCE. THIS INDEMNITY
SHALL SURVIVE PAYMENT IN FULL OF THE INDEBTEDNESS SECURED HEREBY.

                  (b) Beneficiary may engage the services of attorneys to
enforce the terms of this Deed of Trust or to protect its rights hereunder, and
in the event of any such engagement, Grantor shall pay Beneficiary's attorneys'
fees (together with reasonable appellate counsel fees, if any), consultants'
fees, experts' fees and expenses reasonably incurred by Beneficiary, whether or
not an action is actually commenced against Grantor. All references to
"attorneys" in this Subsection and elsewhere in this Deed of Trust shall include
without limitation any attorney or law firm engaged by Beneficiary and
Beneficiary's in-house counsel, and all references to "fees and expenses" in
this Subsection and elsewhere in this Deed of Trust shall include without
limitation any fees of such attorney or law firm and any allocation charges and
allocation costs of Beneficiary's in-house counsel.

                  (c) A waiver of subrogation shall be obtained by Grantor from
its insurance carrier and, consequently, Grantor waives any and all right to
claim or recover against Beneficiary, its officers, employees, agents and
representatives, for loss of or damage to Grantor, the Property, Grantor's
property or the property of others under Grantor's control from any cause
insured against or required to be insured against by the provisions of this Deed
of Trust to the extent covered by such insurance.

          I.32 Covenants with Respect to Indebtedness, Operations and
Fundamental Changes of Grantor. Grantor represents, warrants and covenants as of
the date hereof and until such time as the loan evidenced by the Note is paid in
full, that Grantor:

                                       49
<PAGE>

                  (a) does not own and will not own any encumbered asset other
than (i) the Property, and (ii) incidental personal property necessary for the
operation of the Property;

                  (b) is not engaged and will not engage in any business other
than the ownership, management and operation of the Property;

                  (c) will not enter into any contract or agreement with any
member, manager, general partner, principal or affiliate of Grantor or any
affiliate thereof, except upon terms and conditions that are intrinsically fair
and substantially similar to those that would be available on an arm's length
basis with third parties other than an affiliate;

                  (d) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (i) the indebtedness secured hereby, and (ii) unsecured trade and
operational debt incurred in the ordinary course of business not outstanding for
more than sixty (60) days with trade creditors and in amounts as are normal and
reasonable under the circumstances, but, in no event, to exceed in the aggregate
four percent (4%) of the original principal balance of the Grand Loan and the
Olympia Loan (including the costs described in item (iii) below); (iii) debt
related to costs of furniture, fixtures and equipment, including equipment
leases, not to exceed $250,000 in the aggregate; and (iv) such subordinate
financing for purposes of renovating the Property, provided no such subordinate
financing shall be permitted without the prior written approval of Beneficiary.

                  (e) has not made and will not make any loans or advances to
any third party (including any member, manager, general partner, principal or
affiliate of Grantor, or any guarantor);

                  (f) is and will be solvent and pay its debts from its assets
as the same shall become due;

                  (g) has done or caused to be done and will do all things
necessary to preserve its existence and corporate, limited liability company and
partnership formalities (as applicable), and will not, nor will any partner,
limited or general, shareholder or member thereof, amend, modify or otherwise
change its partnership certificate, partnership agreement, certificate, articles
of incorporation, by-laws, articles of organization, operating agreement or
regulations in a manner which adversely affects Grantor's, or any such
partner's, member's or shareholder's existence as a single-purpose, single-asset
"bankruptcy remote" entity;

                  (h) will conduct and operate its business as presently
conducted and operated;

                                       50
<PAGE>
                  (i) will maintain books and records and bank accounts separate
from those of its affiliates, including its general partners, principals and
members;

                  (j) will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other entity (including
any general partner, principal, member or affiliate thereof);

                  (k) will file its own tax returns except to the extent
applicable law permits Grantor to file a consolidated return with its owners in
which event Grantor shall be shown as a separate member of such group and such
consolidated returns shall be maintained in a manner so as to account separately
for Grantor's taxes, such that Grantor's separate information may be readily
accessible;

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

                  (m) will not, nor will any member, manager, shareholder,
partner, principal or affiliate, seek the dissolution or winding up, in whole or
in part, of Grantor;

                  (n) will not enter into any transaction of merger or
consolidation, or acquire by purchase or otherwise all or substantially all of
the business or assets of, or any stock or beneficial ownership of, any entity;

                  (o) will not commingle the funds and other assets of Grantor
with those of any member, manager, general partner, principal or affiliate or
any other person;

                  (p) has and will maintain its assets in such a manner that it
is not costly or difficult to segregate, ascertain or identify its individual
assets from those of any affiliate or any other person;

                  (q) has, and any general partner or managing member of Grantor
has, at all times since their respective formation, observed all legal and
customary formalities regarding their respective formation and will continue to
observe all legal and customary formalities;

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

                  (s) GRANTOR SHALL AT ALL TIMES CAUSE THERE TO BE AT LEAST ONE
DULY APPOINTED MEMBER OF THE BOARD OF DIRECTORS (AN "INDEPENDENT DIRECTOR") OF
THE GRANTOR

                                       51
<PAGE>
REASONABLY SATISFACTORY TO BENEFICIARY WHO SHALL NOT HAVE BEEN AT THE TIME OF
SUCH INDIVIDUAL'S APPOINTMENT, AND MAY NOT HAVE BEEN AT ANY TIME DURING THE
PRECEDING FIVE YEARS (I) A SHAREHOLDER OF, OR AN OFFICER, DIRECTOR, ATTORNEY,
COUNSEL, PARTNER OR EMPLOYEE OF, GRANTOR OR ANY OF ITS SHAREHOLDERS,
SUBSIDIARIES OR AFFILIATES, (II) A CUSTOMER OF, OR SUPPLIER TO, GRANTOR OR ANY
OF ITS SHAREHOLDERS, SUBSIDIARIES OR AFFILIATES, (III) A PERSON OR OTHER ENTITY
CONTROLLING OR UNDER COMMON CONTROL WITH ANY SUCH SHAREHOLDER, PARTNER, SUPPLIER
OR CUSTOMER, OR (IV) A MEMBER OF THE IMMEDIATE FAMILY OF ANY SUCH SHAREHOLDER,
OFFICER, DIRECTOR, PARTNER, EMPLOYEE, SUPPLIER OR CUSTOMER OF ANY OTHER DIRECTOR
OF GRANTOR. AS USED HEREIN, THE TERM "CONTROL" MEANS THE POSSESSION, DIRECTLY OR
INDIRECTLY, OF THE POWER TO DIRECT OR CAUSE THE DIRECTION OF THE MANAGEMENT AND
POLICIES OF A PERSON OR ENTITY, WHETHER THROUGH OWNERSHIP OF VOTING SECURITIES,
BY CONTRACT OR OTHERWISE;

                  (t) has not caused and shall not cause, as applicable, the
board of directors of Grantor, the members or managers of Grantor, or the board
of directors, members or managers of any general partner of Grantor to take any
action which, under the terms of the organizational documents for Grantor and
its general partner or manager, as applicable, requires the unanimous
affirmative vote of one hundred percent (100%) of the members of the board of
directors, members or manager, [unless at the time of such action there shall be
at least one director, member or manager, as applicable, who is an Independent
Director;

                  (u) shall conduct its business so that the assumptions of fact
made with respect to Grantor in that certain opinion letter dated the date
hereof delivered by Riddell & Williams P.S. (the "Nonconsolidation Opinion")
with respect to non-consolidation issues, delivered in connection with the
execution and delivery of the Loan Documents shall be true and correct, in all
material respects at all times; and

                  (v) upon the commencement of a voluntary or involuntary
bankruptcy proceeding by or against Grantor, Grantor shall not seek a
supplemental stay or otherwise pursuant to 11 U.S.C. 105 or any other provision
of the Act, or any other debtor relief law (whether statutory, common law, case
law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect,
which may be or become applicable, to stay, interdict, condition, reduce or
inhibit the ability of Beneficiary to enforce any rights of Beneficiary against
any guarantor or indemnitor of the secured obligations or any other party liable
with respect thereto by virtue of any indemnity, guaranty or otherwise.

          I.33 Litigation. Grantor will give prompt written notice to
Beneficiary of any litigation or governmental proceedings pending or threatened
(in writing) against Grantor which might have a Material Adverse Effect.

          I.34 ERISA.

                                       52
<PAGE>
                  (a) Grantor shall not engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Beneficiary of any of its rights under the Note, this Deed of Trust or any of
the other Loan Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under ERISA.

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

                           (1) Equity interests in Grantor are publicly offered
          securities within the meaning of 29 C.F.R. Section 2510.3-101(b)(2);

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

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

                  (c) GRANTOR SHALL INDEMNIFY BENEFICIARY AND DEFEND AND HOLD
BENEFICIARY HARMLESS FROM AND AGAINST ALL CIVIL PENALTIES, EXCISE TAXES, OR
OTHER LOSS, COST, DAMAGE AND EXPENSE (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEYS' FEES AND DISBURSEMENTS AND COSTS INCURRED IN THE INVESTIGATION,
DEFENSE AND SETTLEMENT OF CLAIMS AND LOSSES INCURRED IN CORRECTING ANY
PROHIBITED TRANSACTION OR IN THE SALE OF A PROHIBITED LOAN, AND IN OBTAINING ANY
INDIVIDUAL PROHIBITED TRANSACTION EXEMPTION UNDER ERISA THAT MAY BE REQUIRED, IN
BENEFICIARY'S SOLE DISCRETION) THAT BENEFICIARY MAY INCUR, DIRECTLY OR
INDIRECTLY, AS A RESULT OF A DEFAULT UNDER THIS SECTION 1.34. THIS INDEMNITY
SHALL SURVIVE ANY TERMINATION, SATISFACTION OR FORECLOSURE OF THIS DEED OF
TRUST.

                                       53
<PAGE>
          I.35    Defeasance.

                  (a) Notwithstanding anything to the contrary contained in the
Note, this Deed of Trust or the other Loan Documents, at any time after the
second (2nd) anniversary of the date that is the "startup day," within the
meaning of Section 860G(a)(9) of the Internal Revenue Code of 1986, as amended
from time to time or any successor statute (the "Code"), of a "real estate
mortgage investment conduit" ("REMIC") within the meaning of Section 860D of the
Code, that holds the Note and this Deed of Trust and provided (unless
Beneficiary shall otherwise consent, in its sole discretion) no default or Event
of Default has occurred and is continuing hereunder or under any of the other
Loan Documents, Grantor shall have the right to obtain the release of the
Property from the lien of this Deed of Trust and the other Loan Documents (the
"Defeasance") upon the satisfaction of each of the following conditions
precedent:

                           (1) not less than thirty (30) days' prior written
         notice to the Beneficiary specifying a regular Payment Date under the
         Note (the "Defeasance Election Date") on which the Defeasance Deposit
         (hereinafter defined) is to be made;

                           (2) the remittance to the Beneficiary on the related
         Defeasance Election Date of interest accrued and unpaid on the
         outstanding principal amount of the Note to and including the
         Defeasance Election Date and the scheduled amortization payment due on
         such Defeasance Election Date, together with all other amounts then due
         and payable under the Note, this Deed of Trust and the other Loan
         Documents;

                           (3) the irrevocable deposit with the Beneficiary of
         an amount (the "Defeasance Deposit") of U.S. Government Securities
         (hereinafter defined), which through the scheduled payment of principal
         and interest in respect thereof in accordance with their terms will
         provide, not later than the due date of any payment, cash in an amount
         sufficient, without reinvestment, in the opinion of a nationally
         recognized firm of independent certified public accountants expressed
         in a written certification thereof delivered to the Beneficiary, to pay
         and discharge the Scheduled Defeasance Payments (hereinafter defined);

                           (4) the delivery on or prior to the Defeasance
         Election Date to the Beneficiary of:

                                    (A) a security agreement, in form and
                  substance satisfactory to the Beneficiary, creating a first
                  priority lien on the Defeasance Deposit (the "Defeasance
                  Security Agreement"), which Defeasance Security Agreement

                                       54
<PAGE>
                  shall be included within the definition of "Deed of Trust" for
                  purposes of each Loan Document from and after the date of its
                  execution;

                                    (B) a release of the Property from this Deed
                  of Trust, the Assignment and any UCC Financing Statements
                  relating thereto (for execution by the Beneficiary) in a form
                  appropriate for cancellation of such documents in the
                  jurisdiction in which the Property is located and termination
                  of the Cash Management Agreement;

                                    (C) certificate of an authorized
                  representative of Grantor certifying that the requirements set
                  forth in this subparagraph (a) have been satisfied;

                                    (D) an opinion of counsel for Grantor in
                  form and substance satisfactory to the Beneficiary to the
                  effect that the Beneficiary has a perfected first priority
                  security interest in the Defeasance Deposit;

                                    (E) an opinion of counsel for Beneficiary,
                  prepared and delivered by the servicer at Grantor's reasonable
                  expense, stating that any trust formed as a REMIC in
                  connection with any Secondary Market Transaction will not fail
                  to maintain its status as a REMIC as a result of such
                  Defeasance;

                                    (F) evidence in writing from the applicable
                  Rating Agencies to the effect that the collateral substitution
                  will not result in a downgrading, withdrawal or qualification
                  of the respective ratings in effect immediately prior to such
                  Defeasance for any securities issued in connection with the
                  Secondary Market Transaction which are then outstanding; and

                                    (G) such other certificates, documents or
                  instruments as Beneficiary may reasonably request;

                           (5) the payment by Grantor to Beneficiary of all
         reasonable out-of-pocket costs and expenses (including, without
         limitation, reasonable attorneys' fees and disbursements) incurred or
         anticipated to be incurred by Beneficiary in connection with the
         release of the Property from the lien of this Deed of Trust and the
         other Loan Documents pursuant to this Section 1.35 including, without
         limitation, Beneficiary's determination of whether Grantor has
         satisfied all of the related conditions and requirements set forth in
         this Section 1.35.

                                       55
<PAGE>
                           (6) contemporaneous Defeasance election being
         undertaken and completed relative to the Olympia Property and pursuant
         to the terms of the Olympia Deed of Trust.

                  (b) Upon compliance with the requirements of subparagraph (a)
above, the Property shall be released from the lien of this Deed of Trust, the
Assignment and any UCC Financing Statements related thereto, the obligations
hereunder and under the other Loan Documents with respect to the Property shall
no longer be applicable and the Defeasance Deposit shall be the sole source of
collateral securing the Note. Beneficiary shall apply the Defeasance Deposit and
the payments received therefrom to the payment of all scheduled principal and
interest payments (the "Scheduled Defeasance Payments") due on all successive
Payment Dates under the Note after the Defeasance Election Date including the
payment due on the Maturity Date (as defined in the Note). Grantor, pursuant to
the Defeasance Security Agreement or other appropriate document, shall direct
that the payments received from the Defeasance Deposit shall be made directly to
Beneficiary and applied to satisfy the obligations of Grantor under the Note. In
connection with such release, if Grantor shall continue to own any assets other
than the Defeasance Deposit, Grantor shall establish or designate a
single-purpose, bankruptcy-remote successor entity acceptable to Beneficiary
(the "Successor Trustor"), with respect to which a nonconsolidation opinion
satisfactory in form and substance to Beneficiary has been delivered to
Beneficiary (if such nonconsolidation opinion was required of Grantor in
connection with the origination of the indebtedness secured hereby) in which
case Grantor shall transfer and assign to the Successor Trustor all obligations,
rights and duties under the Note and the Defeasance Security Agreement, together
with the pledged Defeasance Deposit. The Successor Trustor shall assume the
obligations of Grantor under the Note and the Defeasance Security Agreement, and
Grantor shall be relieved of its obligations hereunder and thereunder. Grantor
shall pay One Thousand and No/100 Dollars ($1,000.00) to the Successor Trustor
as consideration for assuming such Grantor obligations.

                  (c) As used herein, the term "U.S. Government Securities"
shall mean securities that are direct obligations of the United States of
America for the full and timely payment of which its full faith and credit is
pledged.

                  (d) Notwithstanding the provisions of clauses (a)-(c) above,
if at any time following the third (3rd) anniversary of the First P&I Date (as
defined in the Note) Grantor delivers to Beneficiary a written notice pursuant
to Section 1.35(a)(i) above specifying a Defeasance Election Date, and, if as a
result of delays by Beneficiary in including the Loan in a Secondary Market
Transaction, Grantor is unable due to REMIC restrictions to exercise its right
to Defeasance on the specified Defeasance Election Date, then Grantor may prepay
the Note on the specified Defeasance Election Date, in accordance with Section
1.2(e) of the Note.

                                       56
<PAGE>
Any such permitted prepayment made on or prior to the Lockout Expiration Date
(as defined in the Note) shall be accompanied with payment of Required Yield
Maintenance.

          I.36 Intentionally deleted.

          I.37 Franchise Agreement. Grantor shall comply with all terms and
provisions of that certain Franchise Agreement ("Franchise Agreement"), dated
June 15, 2001, between Grantor and WestCoast Hotels, Inc. (the "Franchisor")
relating to the Property, a copy of which has been delivered to Beneficiary, and
shall keep the Franchise Agreement in full force and effect so long as any
portion of the secured indebtedness remains outstanding. Grantor shall promptly
provide Beneficiary with full and complete copies of all notices of default and
other correspondence received by Grantor pursuant to such Franchise Agreement
which relates to the performance of Grantor under such Franchise Agreement,
including, without limitation, all franchise inspections (quality assurance
reports). Notwithstanding anything in this Section to the contrary, Grantor
shall have the right to replace the Franchisor by executing a new franchise
agreement with another franchisor, which agreement and franchisor must be
reasonably acceptable to Beneficiary.

          I.38 Personal Property Leases. Grantor has leased certain personal
property pursuant to leases (the "Personal Property Leases"), copies of which
Grantor has delivered or shall immediately deliver to Beneficiary. Grantor shall
comply with all terms and provisions of the Personal Property Leases and shall
keep the Personal Property Leases in full force and effect (except for worn out
or obsolete items replaced by Grantor) so long as any portion of the secured
indebtedness remains outstanding.

          I.39 Partial Release. If fifty percent (50%) or more of the
Improvements located on the Property is taken or destroyed as described in
Section 1.9(c) hereinabove, Beneficiary may require a prepayment of the Olympia
Note pursuant to such Section 1.9(c) whether or not the proceeds from such
taking or destruction are adequate to fund such prepayment. The amount of such
partial prepayment (the "Casualty Release Payment") shall equal the greater of
(i) the casualty or condemnation proceeds, or (ii) the Minimum Release Payment
(hereinafter defined). Upon payment of the Casualty Release Payment, Beneficiary
shall give written consent to Grantor to a release (a "Casualty Release") of the
Property upon the satisfaction (in the determination of Beneficiary) of the
following conditions precedent (singularly and collectively referred to as a
"Casualty Release Condition"):

                  (a) Any and all sums then due and payable to Beneficiary under
the Loan Documents shall be fully paid (including, without limitation, principal
and interest under the Grand Note) and no Event of Default (as described in
Article II herein) shall exist and be continuing, nor shall Beneficiary have
given Grantor notice of any event or condition which,

                                       57
<PAGE>
with the passage of time or the giving of notice (or both), could result in an
Event of Default if not cured by Grantor.

                  (b) Grantor shall have established a good record in the
payment of sums when due under the Loan Documents.

                  (c) Grantor shall submit a prepared release instrument (the
"Casualty Release Instrument") in form and substance satisfactory to Beneficiary
and any information necessary for Beneficiary to process the Casualty Release
Instrument, including a lot and block or metes and bounds description of the
Property, the name and address of the title insurance company to whose attention
the Casualty Release Instrument should be directed, numbers that reference the
Casualty Release Instrument (i.e., tax parcel numbers, title company order
numbers, release numbers, etc.), the date when the Casualty Release is to become
effective, the name and address of the prospective purchaser of the Property,
the intended use thereof, and such other documents and information as
Beneficiary may reasonably request. The Casualty Release Instrument shall be
delivered, in escrow, by Beneficiary to the title company so designated, to be
held, released, delivered and recorded in accordance with Beneficiary's escrow
instructions, which shall require delivery of the Casualty Release Payment to
Beneficiary prior to delivery and recordation of the Casualty Release Instrument
and the satisfaction of all Casualty Release Conditions. In no event shall the
execution and delivery of a Casualty Release Instrument effect any of
Beneficiary's obligations under this Mortgage or the other Loan Documents.

                  (d) All reasonable costs and expenses incurred by Beneficiary
(and any servicer of the Grand Loan) in connection with the review, approval and
execution of any Casualty Release shall be paid by Grantor prior to and as a
condition of the execution of any Casualty Release Instrument, including (but
not limited to) the Administration Fee (hereafter described), reasonable
attorneys' fees, all costs and expenses of Beneficiary (and any servicer of the
Grand Loan) incurred in connection with obtaining any engineering reports,
opinions and consents, and the endorsement to the Title Policy. All recording
fees and taxes are to be paid by Grantor.

                  (e) Payment to Beneficiary of an administrative fee (the
"Administration Fee") in the amount of $500.00.

                  (f) The satisfaction of such other conditions precedent as
Beneficiary may reasonably require.

         As used herein, the term "Minimum Release Payment" shall mean the sum
of the indebtedness outstanding as evidenced by the Olympia Note. Beneficiary
shall (upon written

                                       58
<PAGE>
notice to Grantor) apply the required prepayment in the following order and
priority: first, to the accrued interest and outstanding principal balance of
the Grand Loan, next to the to the accrued interest and principal balance of the
Olympia Loan in an amount and in the manner deemed appropriate by Beneficiary in
its sole discretion.

         In any instance herein where the approval, consent or the exercise of
judgment of Beneficiary is required, the granting or denial of such approval or
consent and the exercise of such judgment shall be (a) within the sole
discretion of Beneficiary; (b) deemed to have been given only by a specific
writing intended for the purpose and executed by Beneficiary; and (c) free from
any limitation or requirement of reasonableness, unless otherwise expressly
provided. Each provision for consent, approval, inspection, review or
verification by Beneficiary is only for Beneficiary's own purposes and benefit.

          I.40 Loan and Olympia Loan. Notwithstanding any conflicting provision
of this Deed of Trust or any other of the Loan Documents, the lien created by
this Deed of Trust shall no longer secure the obligations of Grantor with
respect to the Olympia Loan or any of the Loan Documents related to the Olympia
Loan, upon the satisfaction of the following conditions precedent:

                  (a) Beneficiary's receipt of MAI appraisals of the Property
and the property located in Thurston County, Washington, which is covered under
the Olympia Deed of Trust (collectively the "Olympia Property") indicating (i)
the unpaid principal balances of the Grand Loan is equal to sixty percent (60%)
or less of the fair market value of the Property, and (ii) the unpaid principal
balances of the Olympia Loan is equal to sixty percent (60%) or less of the fair
market value of the Olympia Property;

                  (b) The total revenue from the operation of the Property for
the most recent twelve month period ("Property Revenue") shall have sustained a
debt service coverage ratio for the Grand Loan of not less than 1.55:1 based on
the greater of the actual interest rate under the Olympia Loan or eight percent
(8%) per annum, provided that total expenses of the Property (including
reserves) for such period is not less than seventy five percent (75%) of
Property Revenue;

                  (c) The total revenue from the operation of the Olympia
Property for the most recent twelve month period ("Olympia Property Revenue")
shall have sustained a debt service coverage ratio for the Olympia Loan of not
less than 1.55:1 based on the greater of the actual interest rate under the
Olympia Loan or eight percent (8%) per annum, provided that total expenses of
the Olympia Property (including reserves) for such period is not less than
seventy five percent (75%) of Olympia Property Revenue; and

                                       59
<PAGE>
                  (d) If requested by Beneficiary, Grantor shall execute an
amendment to this Deed of Trust (or a new Deed of Trust) and the other Loan
Documents, all of which documents shall be in form and substance reasonably
satisfactory to Beneficiary in all respects.

                                   ARTICLE II
                                EVENTS OF DEFAULT
                                -----------------

          II.1 Events of Default. The occurrence of any of the following events
shall be a default hereunder:

                  (a) Grantor fails to make (i) any payment under the Note when
due, or (ii) any regularly scheduled monthly deposit into a Reserve under this
Deed of Trust or any of the other Loan Documents when due.

                  (b) Grantor fails to punctually perform any covenant,
agreement, obligation, term or condition hereof which requires payment of any
money to Beneficiary and such failure continues for five (5) days after written
notice is provided to Grantor thereof; provided, however, no such notice,
opportunity to cure or grace period shall be applicable with respect to the sums
described in this Section 2.1(a).

                  (c) Grantor fails to provide insurance as required by Section
1.4 hereof or fails to perform any covenant, agreement, obligation, term or
condition set forth in Section 1.16 or Section 1.30, provided, however, the
cancellation of any such insurance due to Beneficiary's failure to pay the
premium thereof in accordance with Section 1.6 hereof shall not be an event of
default hereunder.

                  (d) Grantor fails to perform any other covenant, agreement,
obligation, term or condition set forth herein, other than those otherwise
described in this Section 2.1, and, to the extent such failure or default is
susceptible of being cured, the continuance of such failure or default for
thirty (30) days after written notice thereof from Beneficiary to Grantor;
provided, however, that if such default is susceptible of cure but such cure
cannot be accomplished with reasonable diligence within said period of time, and
if Grantor commences to cure such default promptly after receipt of notice
thereof from Beneficiary, and thereafter prosecutes the curing of such default
with reasonable diligence, such period of time shall be extended for such period
of time as may be necessary to cure such default with reasonable diligence, but
not to exceed an additional ninety (90) days.

                  (e) Any representation or warranty made herein, in or in
connection with any application or commitment relating to the Loan, or in any of
the other Loan Documents to

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<PAGE>
Beneficiary by Grantor, by any principal, managing member or general partner in
Grantor or by any indemnitor or guarantor under any indemnity or guaranty
executed in connection with the Loan is determined by Beneficiary to have been
false or misleading in any material respect at the time made and, to the extent
such default is susceptible of being cured, the continuance of such default for
thirty (30) days after written notice thereof from Beneficiary to Grantor.

                  (f) There shall be a sale, conveyance, disposition,
alienation, hypothecation, leasing, assignment, pledge, mortgage, granting of a
security interest in or other transfer or further encumbrancing of the Property,
Grantor or its owners, or any portion thereof or any interest therein, in
violation of Section 1.13 hereof.

                  (g) A default occurs under any of the other Loan Documents
which has not been cured within any applicable grace or cure period therein
provided.

                  (h) Grantor, any principal, general partner or managing member
in Grantor or any indemnitor or guarantor under any indemnity or guaranty
executed in connection with the Loan becomes insolvent, or shall make a transfer
in fraud of Beneficiary or other creditors, or shall make an assignment for the
benefit of creditors other than Beneficiary, shall file a petition in
bankruptcy, shall voluntarily be adjudicated insolvent or bankrupt or shall
admit in writing the inability to pay debts as they mature, shall petition or
apply to any tribunal for or shall consent to or shall not contest the
appointment of a receiver, trustee, custodian or similar officer for Grantor,
for any such principal, general partner or managing member of Grantor or for any
such indemnitor or guarantor or for a substantial part of the assets of Grantor,
of any such principal, general partner or managing member of Grantor or of any
such indemnitor or guarantor, or shall commence any case, proceeding or other
action under any bankruptcy, reorganization, arrangement, readjustment or debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect.

                  (i) A petition ("Petition") is filed or any case, proceeding
or other action is commenced against Grantor, against any principal, general
partner or managing member of Grantor or against any indemnitor or guarantor
under any indemnity or guaranty executed in connection with the Loan seeking to
have an order for relief entered against it as debtor or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or its
debts or other relief under any law relating to bankruptcy, insolvency,
arrangement, reorganization, receivership or other debtor relief under any law
or statute of any jurisdiction, whether now or hereafter in effect, or a court
of competent jurisdiction enters an order for relief against Grantor, against
any principal, general partner or managing member of Grantor or against any
indemnitor or guarantor under any indemnity or guaranty executed in connection
with the Loan, as debtor, or an order, judgment or decree is entered appointing,
with or without the consent of Grantor, of any such principal, general partner
or managing

                                       61
<PAGE>
member of Grantor or of any such indemnitor or guarantor, a receiver, trustee,
custodian or similar officer for Grantor, for any such principal, general
partner or managing member of Grantor or for any such indemnitor or guarantor,
or for any substantial part of any of the properties of Grantor, of any such
principal, general partner or managing member of Grantor or of any such
indemnitor or guarantor, and if any such event shall occur, such petition, case,
proceeding, action, order, judgment or decree shall not be dismissed within
sixty (60) days after being commenced.

                  (j) Grantor solicits or aids the solicitation of the filing of
any Petition against Grantor including, without limitation: (i) providing
information regarding the identity of creditors or the nature of creditors'
claims to any third party in connection with the filing of a Petition unless
compelled to do so by order of a court of competent jurisdiction or by
regulation promulgated by a governmental agency, or (ii) paying the legal fees
or expenses of any creditor of or interest holder in Grantor in connection with
the filing of a Petition.

                  (k) The Property or any material part thereof shall be taken
on execution or other process of law in any action against Grantor and, to the
extent such default is susceptible of being cured, the continuance of such
default for thirty (30) days after written notice thereof from Beneficiary to
Grantor.

                  (l) Grantor abandons all or a material portion of the
Property.

                  (m) The holder of any lien or security interest on the
Property (without implying the consent of Beneficiary to the existence or
creation of any such lien or security interest), whether superior or subordinate
to this Deed of Trust or any of the other Loan Documents, declares a default and
such default is not cured within any applicable grace or cure period set forth
in the applicable document or such holder institutes foreclosure or other
proceedings for the enforcement of its remedies thereunder and, to the extent
such default is susceptible of being cured, the continuance of such default for
thirty (30) days after written notice thereof from Beneficiary to Grantor.

                  (n) The Property, or any part thereof, is subjected to actual
or threatened waste or to removal, demolition or material alteration so that the
value of the Property is materially diminished thereby and Beneficiary
reasonably determines that it is not adequately protected from any loss, damage
or risk associated therewith and, to the extent such default is susceptible of
being cured, the continuance of such default for thirty (30) days after written
notice thereof from Beneficiary to Grantor.

                  (o) Any dissolution, termination, partial or complete
liquidation, merger or consolidation of Grantor, its managing members or WHC.

                                       62
<PAGE>
                  (p) Any franchise agreement or management agreement affecting
the Property is terminated and is not replaced with a franchise agreement or
management agreement, as applicable, reasonably acceptable to Beneficiary within
sixty (60) days of such termination.

                  (q) Any liquor license relating to the Property, if any,
ceases to be in full force and effect, and such liquor license is not restored
within sixty (60) days thereof, except with Beneficiary's prior written consent.

                  (r) If any of the facts forming the basis of the assumptions
set forth in the Nonconsolidation Opinion, shall no longer be true and correct
in all material respects and, to the extent such default is susceptible of being
cured, the continuance of such default for thirty (30) days after written notice
thereof from Beneficiary to Grantor.

                  (s) The occurrence of a default (and expiration of any
expressly provided grace or cure period relative thereto) pursuant to the Deed
of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
(the "Olympia Deed of Trust") dated of even date herewith executed by WHC804,
LLC, a Delaware limited liability company, to a trustee for the benefit of
Beneficiary relative to the Olympia Property.

                                   ARTICLE III
                                    REMEDIES
                                    --------

          III.1 Remedies Available. If there shall occur a default under this
Deed of Trust, and such default has not been cured within any applicable grace
or cure period or later accepted by Lender, then this Deed of Trust is subject
to foreclosure as provided by law and Beneficiary may, at its option and by or
through a trustee, nominee, assignee or otherwise, to the fullest extent
permitted by law, exercise any or all of the following rights, remedies and
recourses, either successively or concurrently:

                  (a) Acceleration. Accelerate the maturity date of the Note and
declare any or all of the indebtedness secured hereby to be immediately due and
payable without any presentment, demand, protest, notice or action of any kind
whatever (each of which is hereby expressly waived by Grantor), whereupon the
same shall become immediately due and payable. Upon any such acceleration,
payment of such accelerated amount shall constitute a prepayment of the
principal balance of the Note and any applicable prepayment fee provided for in
the Note shall then be immediately due and payable.

                                       63
<PAGE>

                  (b) Entry on the Property. Without in any way curing or
waiving any default of Grantor, either in person or by agent or by
court-appointed receiver, with or without bringing any action or proceeding, or
by a receiver appointed by a court and without regard to the adequacy of its
security, enter upon and take possession of the Property, or any part thereof,
in its own name or in the name of the Trustee, without force or with such force
as is permitted by law and without notice or process or with such notice or
process as is required by law, unless such notice and process is waivable, in
which case Grantor hereby waives such notice and process, and do any and all
acts and perform any and all work which may be desirable or necessary in
Beneficiary's judgment to complete any unfinished construction on the Land, to
preserve and/or enhance the value, marketability or rentability of the Property,
to increase the income therefrom, to manage and operate the Property or to
protect the security hereof, and all sums expended by Beneficiary therefor,
together with interest thereon at the Default Interest Rate, shall be
immediately due and payable to Beneficiary by Grantor on demand and shall be
secured hereby and by all of the other Loan Documents securing all or any part
of the indebtedness evidenced by the Note.

                  (c) Collect Rents and Profits. With or without taking
possession of the Property, sue for or otherwise collect the Rents and Profits,
including those past due and unpaid, and apply the same, less costs and expenses
of operation and collection, including reasonable attorneys' fees, upon any
indebtedness secured hereby, all in such order as Beneficiary in its discretion
may determine.

                  (d) Appointment of Receiver. Upon, or at any time prior or
after, initiating the exercise of any power of sale, instituting any judicial
foreclosure or instituting any other foreclosure of the liens and security
interests provided for herein or any other legal proceedings hereunder, make
application, ex-parte, to a court of competent jurisdiction for appointment of a
receiver for all or any part of the Property, as a matter of strict right and
without notice to Grantor and without regard to the adequacy of the Property for
the repayment of the indebtedness secured hereby or the solvency of Grantor or
any person or persons liable for the payment of the indebtedness secured hereby,
and Grantor hereby irrevocably consents to such appointment, waives any and all
notices of and defenses to such appointment and agrees not to oppose any
application therefor by Beneficiary, but nothing herein is to be construed to
deprive Beneficiary of any other right, remedy or privilege Beneficiary may now
have under the law to have a receiver appointed, provided, however, that the
appointment of such receiver, trustee or other appointee by virtue of any court
order, statute or regulation shall not impair or in any manner prejudice the
rights of Beneficiary to receive payment of the Rents and Profits pursuant to
other terms and provisions of this Deed of Trust or the Assignment. Any such
receiver shall have all of the usual powers and duties of receivers in similar
cases, including, without limitation, the full power to hold, develop, rent,
lease, manage, maintain, operate and otherwise use or permit the use of the
Property upon such terms and conditions as

                                       64
<PAGE>

said receiver may deem to be prudent and reasonable under the circumstances as
more fully set forth in Section 3.3 below. Such receivership shall, at the
option of Beneficiary, continue until full payment of all of the indebtedness
secured hereby or until title to the Property shall have passed by foreclosure
sale under this Deed of Trust or deed in lieu of foreclosure.

                  (e) Foreclosure. Immediately commence an action to foreclose
this Deed of Trust or to specifically enforce its provisions or any of the
indebtedness secured hereby, pursuant to the applicable Washington state law,
and sell the Property or cause the Property to be sold in accordance with the
requirements and procedures provided by applicable Washington state law in a
single parcel or in several parcels at the option of Beneficiary.

                           (1) In the event foreclosure proceedings are filed by
         Beneficiary, all expenses incident to such proceedings, including, but
         not limited to, attorneys' fees and costs, shall be paid by Grantor and
         secured by this Deed of Trust and by all of the other Loan Documents
         securing all or any part of the indebtedness evidenced by the Note. The
         secured indebtedness and all other obligations secured by this Deed of
         Trust, including, without limitation, interest at the Default Interest
         Rate, any prepayment charge, fee or premium required to be paid under
         the Note in order to prepay principal (to the extent permitted by
         applicable law), reasonable attorneys' fees and any other amounts due
         and unpaid to Beneficiary under the Loan Documents, may be bid by
         Beneficiary in the event of a foreclosure sale hereunder. In the event
         of a judicial sale pursuant to a foreclosure decree, it is understood
         and agreed that Beneficiary or its assigns may become the purchaser of
         the Property or any part thereof.

                           (2) Beneficiary may, by following the procedures and
         satisfying the requirements prescribed by applicable law, foreclose on
         all or only a portion of the Property and, in such event, said
         foreclosure shall not affect the lien of this Deed of Trust on the
         remaining portion of the Property.

                  (f) Trustee's Sale. Cause the Trustee to sell the Property at
a trustee's sale in accordance with the nonjudicial foreclosure procedures
required by Washington law.

                  (g) Judicial Remedies. Proceed by suit or suits, at law or in
equity, instituted by Beneficiary, or Trustee, upon written request of
Beneficiary, to enforce the payment of the indebtedness secured hereby or the
other obligations of Grantor hereunder or pursuant to the Loan Documents, to
foreclose the liens and security interests of this Deed of Trust as against all
or any part of the Property, and to have all or any part of the Property sold
under the judgment or decree of a court of competent jurisdiction. In the event
of a judicial sale pursuant to a foreclosure decree, it is understood and agreed
that Beneficiary or its assigns may become the purchaser of the Property. This
remedy shall be cumulative of any other

                                       65
<PAGE>

non-judicial remedies available to the Beneficiary with respect to the Loan
Documents. Proceeding with the request or receiving a judgment for legal relief
shall not be or be deemed to be an election of remedies or bar any available
non-judicial remedy of the Beneficiary.

                  (h) Security Agreement Remedies. Expenses of retaking,
holding, preparing for sale, selling or the like (including, without limitation,
Beneficiary's reasonable attorneys' fees and legal expenses), together with
interest thereon at the Default Interest Rate from the date incurred by
Beneficiary until actually paid by Grantor, shall be paid by Grantor on demand
and shall be secured by this Deed of Trust and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note. If
notice is required by law, Beneficiary shall give Grantor at least ten (10)
days' prior written notice of the time and place of any public sale of such
property or of the time of or after which any private sale or any other intended
disposition thereof is to be made, and if such notice is sent to Grantor, as the
same is provided for the mailing of notices herein, it is hereby deemed that
such notice shall be and is reasonable notice to Grantor. No such notice is
necessary for any such property which is perishable, threatens to decline
speedily in value or is of a type customarily sold on a recognized market. Any
sale made pursuant to the provisions of this Section 1.22 shall be deemed to
have been a public sale conducted in a commercially reasonable manner if held
contemporaneously with the foreclosure sale as provided in Section 3.1(e) hereof
upon giving the same notice with respect to the sale of the Property hereunder
as is required under said Section 3.1(e). Furthermore, to the extent permitted
by law, in conjunction with, in addition to or in substitution for the rights
and remedies available to Beneficiary pursuant to any applicable Uniform
Commercial Code:

                  (1) In the event of a foreclosure sale, the Property may, at
         the option of Beneficiary, be sold as a whole; and

                  (2) It shall not be necessary that Beneficiary take possession
         of the aforementioned Collateral (as defined in Section 1.21 herein),
         or any part thereof, prior to the time that any sale pursuant to the
         provisions of this Section is conducted and it shall not be necessary
         that said Collateral, or any part thereof, be present at the location
         of such sale; and

                  (3) Beneficiary may appoint or delegate any one or more
         persons as agent to perform any act or acts necessary or incident to
         any sale held by Beneficiary, including the sending of notices and the
         conduct of the sale, but in the name and on behalf of Beneficiary.

                  (i) Other. Exercise any other right or remedy available
hereunder, under any of the other Loan Documents or at law or in equity.

                                       66
<PAGE>

          III.2 Application of Proceeds. To the fullest extent permitted by law,
the proceeds of any sale under this Deed of Trust shall be applied, to the
extent funds are so available, to the following items in such order as
Beneficiary in its discretion may determine:

                  (a) To payment of the costs, expenses and fees of taking
possession of the Property, and of holding, operating, maintaining, using,
leasing, repairing, improving, marketing and selling the same and of otherwise
enforcing Beneficiary's right and remedies hereunder and under the other Loan
Documents, including, but not limited to, a reasonable fee to the Trustee,
receivers' fees, court costs, attorneys', accountants', appraisers',
auctioneers', managers' and other professional fees, title charges and transfer
taxes and payment of all expenses, liabilities and advances of Trustee.

                  (b) To payment of all sums expended by Beneficiary under the
terms of any of the Loan Documents and not yet repaid, together with interest on
such sums at the Default Interest Rate.

                  (c) To payment of the secured indebtedness and all other
obligations secured by this Deed of Trust, including, without limitation,
interest at the Default Interest Rate for any applicable period and, to the
extent permitted by applicable law, any prepayment fee, charge or premium
required to be paid under the Note in order to prepay principal, in any order
that Beneficiary chooses in its sole discretion.

                  (d) The remainder, if any, of such funds shall be disbursed to
Grantor or to the person or persons legally entitled thereto.

          III.3 Right and Authority of Receiver or Beneficiary in the Event of
Default; Power of Attorney. Upon the occurrence of a default hereunder, which
default is not cured within any applicable grace or cure period, and entry upon
the Property pursuant to Section 3.1(b) hereof or appointment of a receiver
pursuant to Section 3.1(d) hereof, and under such terms and conditions as may be
prudent and reasonable under the circumstances in Beneficiary's or the
receiver's sole discretion, all at Grantor's expense, Beneficiary or said
receiver, or such other persons or entities as they shall hire, direct or
engage, as the case may be, may do or permit one or more of the following,
successively or concurrently: (a) enter upon and take possession and control of
any and all of the Property; (b) take and maintain possession of all documents,
books, records, papers and accounts relating to the Property; (c) manage and
operate the Property; (d) preserve and maintain the Property; (e) make repairs
and alterations to the Property; (f) complete any construction or repair of the
Improvements, with such changes, additions or modifications of the plans and
specifications or intended disposition and use of the Improvements as
Beneficiary may in its sole discretion deem appropriate or desirable to

                                       67
<PAGE>

place the Property in such condition as will, in Beneficiary's sole discretion,
make it or any part thereof readily marketable or rentable; (g) conduct a
marketing or leasing program with respect to the Property, or employ a marketing
or leasing agent or agents to do so, directed to the leasing or sale of the
Property under such terms and conditions as Beneficiary may in its sole
discretion deem appropriate or desirable; (h) employ such contractors,
subcontractors, materialmen, architects, engineers, consultants, managers,
brokers, marketing agents, or other employees, agents, independent contractors
or professionals, as Beneficiary may in its sole discretion deem appropriate or
desirable to implement and effectuate the rights and powers herein granted; (i)
execute and deliver, in the name of Beneficiary as attorney-in-fact and agent of
Grantor or in its own name as Beneficiary, such documents and instruments as are
necessary or appropriate to consummate authorized transactions; (j) enter into
such leases, whether of real or personal property, or tenancy agreements, under
such terms and conditions as Beneficiary may in its sole discretion deem
appropriate or desirable; (k) collect and receive the Rents and Profits from the
Property; (l) eject tenants or repossess personal property, as provided by law,
for breaches of the conditions of their leases or other agreements; (m) sue for
unpaid Rents and Profits, payments, income or proceeds in the name of Grantor or
Beneficiary; (n) maintain actions in forcible entry and detainer, ejectment for
possession and actions in distress for rent; (o) compromise or give acquittance
for Rents and Profits, payments, income or proceeds that may become due; (p)
delegate or assign any and all rights and powers given to Beneficiary by this
Deed of Trust; and (q) do any acts which are necessary to protect the security
hereof and use such measures, legal or equitable, reasonably necessary to
implement and effectuate the provisions of this Deed of Trust. This Deed of
Trust shall constitute a direction to and full authority to any lessee, or other
third party who has heretofore dealt or contracted or may hereafter deal or
contract with Grantor or Beneficiary, at the request of Beneficiary, to pay all
amounts owing under any lease, contract, concession, license or other agreement
to Beneficiary without proof of the default relied upon. Any such lessee or
third party is hereby irrevocably authorized to rely upon and comply with (and
shall be fully protected by Grantor in so doing) any request, notice or demand
by Beneficiary for the payment to Beneficiary of any Rents and Profits or other
sums which may be or thereafter become due under its lease, contract,
concession, license or other agreement, or for the performance of any
undertakings under any such lease, contract, concession, license or other
agreement, and shall have no right or duty to inquire whether any default under
this Deed of Trust or under any of the other Loan Documents has actually
occurred or is then existing. Grantor hereby constitutes and appoints
Beneficiary, its assignees, successors, transferees and nominees, as Grantor's
true and lawful attorney-in-fact and agent, with full power of substitution in
the Property, in Grantor's name, place and stead, to do or permit any one or
more of the foregoing described rights, remedies, powers and authorities,
successively or concurrently, and said power of attorney shall be deemed a power
coupled with an interest and irrevocable so long as any indebtedness secured
hereby is outstanding. Any money advanced by Beneficiary in connection with any
action taken under this Section 3.3, together with

                                       68
<PAGE>
interest thereon at the Default Interest Rate from the date of making such
advancement by Beneficiary until actually paid by Grantor, shall be a demand
obligation owing by Grantor to Beneficiary and shall be secured by this Deed of
Trust and by every other instrument securing the secured indebtedness.

          III.4 Occupancy After Foreclosure. In the event there is a foreclosure
sale hereunder and at the time of such sale, Grantor or Grantor's
representatives, successors or assigns, or any other persons claiming any
interest in the Property by, through or under Grantor (except tenants of space
in the Improvements subject to leases entered into prior to the date hereof),
are occupying or using the Property, or any part thereof, then, to the extent
not prohibited by applicable law, each and all shall, at the option of
Beneficiary or the purchaser at such sale, as the case may be, immediately
become the tenant of the purchaser at such sale, which tenancy shall be a
tenancy from day-to-day, terminable at the will of either landlord or tenant, at
a reasonable rental per day based upon the value of the Property occupied or
used, such rental to be due daily to the purchaser. Further, to the extent
permitted by applicable law, in the event Grantor fails to surrender possession
of the Property upon the termination of such tenancy, the purchaser shall be
entitled to institute and maintain an action for unlawful detainer of the
Property in the appropriate court of the county in which the Land is located.

          III.5 Notice to Account Debtors. Beneficiary may, at any time after a
default hereunder, which default is not cured within any applicable grace or
cure period, notify the account debtors and obligors of any accounts, chattel
paper, negotiable instruments or other evidences of indebtedness to Grantor
included in the Property to pay Beneficiary directly. Grantor shall at any time
or from time to time upon the request of Beneficiary provide to Beneficiary a
current list of all such account debtors and obligors and their addresses.

          III.6 Cumulative Remedies. All remedies contained in this Deed of
Trust are cumulative and Beneficiary shall also have all other remedies provided
at law and in equity or in any other Loan Documents. Such remedies may be
pursued separately, successively or concurrently at the sole subjective
direction of Beneficiary and may be exercised in any order and as often as
occasion therefor shall arise. No act of Beneficiary shall be construed as an
election to proceed under any particular provisions of this Deed of Trust to the
exclusion of any other provision of this Deed of Trust or as an election of
remedies to the exclusion of any other remedy which may then or thereafter be
available to Beneficiary. No delay or failure by Beneficiary to exercise any
right or remedy under this Deed of Trust shall be construed to be a waiver of
that right or remedy or of any default hereunder. Beneficiary may exercise any
one or more of its rights and remedies at its option without regard to the
adequacy of its security.

          III.7 Payment of Expenses. Grantor shall pay on demand all of
Beneficiary's expenses reasonably incurred in any efforts to enforce any terms
of this Deed of Trust, whether

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or not any lawsuit is filed and whether or not foreclosure is commenced but not
completed, including, but not limited to, reasonable legal fees and
disbursements, including those incurred at trial, on appeal and on petition for
review, in arbitration and mediation proceedings and in connection with
negotiation, compromise or settlement of the secured or unsecured obligations
and any proceedings for relief in bankruptcy, foreclosure costs and the costs of
searching records, obtaining title reports, surveyors' reports, engineering and
environmental reports, attorneys' opinions, title insurance policies,
appraisals, expert witness fees and fees for the trustee under the deed of
trust, together with interest thereon from and after the date incurred by
Beneficiary until actually paid by Grantor at the Default Interest Rate, and the
same shall be secured by this Deed of Trust and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note.

                                   ARTICLE IV
                             CONCERNING THE TRUSTEE
                             ----------------------

          IV.1 No Required Action. Trustee shall not be required to take any
action toward the execution and enforcement of the trust hereby created or to
institute, appear in, or defend any action, suit, or other proceeding in
connection therewith where, in his opinion, such action would be likely to
involve him in expense or liability, unless requested so to do by a written
instrument signed by Beneficiary and, if Trustee so requests, unless Trustee is
tendered security and indemnity satisfactory to Trustee against any and all
cost, expense, and liability arising therefrom. Trustee shall not be responsible
for the execution, acknowledgment, or validity of the Loan Documents, or for the
proper authorization thereof, or for the sufficiency of the lien and security
interest purported to be created hereby, and Trustee makes no representation in
respect thereof or in respect of the rights, remedies, and recourses of
Beneficiary.

          IV.2 Certain Rights. With the approval of Beneficiary, Trustee shall
have the right to take any and all of the following actions: (i) to select,
employ, and consult with counsel (who may be, but need not be, counsel for
Beneficiary) upon any matters arising hereunder, including the preparation,
execution, and interpretation of the Loan Documents, and shall be fully
protected in relying as to legal matters on the advice of counsel, (ii) to
execute any of the trusts and powers hereof and to perform any duty hereunder
either directly or through his agents or attorneys, (iii) to select and employ,
in and about the execution of his duties hereunder, suitable accountants,
engineers and other experts, agents and attorneys-in-fact, either corporate or
individual, not regularly in the employ of Trustee (and Trustee shall not be
answerable for any act, default, negligence, or misconduct of any such
accountant, engineer or other expert, agent or attorney-in-fact, if selected
with reasonable care, or for any error of judgment or act done by Trustee in
good faith, or be otherwise responsible or accountable

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<PAGE>

under any circumstances whatsoever, except for Trustee's gross negligence or bad
faith), and (iv) any and all other lawful action that Beneficiary may instruct
Trustee to take to protect or enforce Beneficiary's rights hereunder. Trustee
shall not be personally liable in case of entry by Trustee, or anyone entering
by virtue of the powers herein granted to Trustee, upon the Property for debts
contracted for or liability or damages incurred in the management or operation
of the Property. Trustee shall have the right to rely on any instrument,
document, or signature authorizing or supporting any action taken or proposed to
be taken by Trustee hereunder, believed by Trustee in good faith to be genuine.
Trustee shall be entitled to reimbursement for expenses incurred by Trustee in
the performance of Trustee's duties hereunder and to reasonable compensation for
such of Trustee's services hereunder as shall be rendered. Grantor will, from
time to time, pay the compensation due to Trustee hereunder and reimburse
Trustee for, and save Trustee harmless against, any and all liability and
expenses which may be incurred by Trustee in the performance of Trustee's duties
except for liabilities arising from Trustee's gross negligence of willful
misconduct.

          IV.3 Retention of Money. All moneys 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
moneys (except to the extent required by applicable law), and Trustee shall be
under no liability for interest on any moneys received by Trustee hereunder.

          IV.4 Successor Trustees. Trustee may resign by the giving of notice of
such resignation in writing or verbally to Beneficiary. If Trustee shall die,
resign, or become disqualified from acting in the execution of this trust, or
if, for any reason, Beneficiary shall prefer to appoint a substitute trustee or
multiple substitute trustees, or successive substitute trustees or successive
multiple substitute trustees, to act instead of the aforenamed Trustee,
Beneficiary shall have full power to appoint a substitute trustee (or, if
preferred, multiple substitute trustees) in succession who shall succeed (and if
multiple substitute trustees are appointed, each of such multiple substitute
trustees shall succeed) to all the estates, rights, powers, and duties of the
aforenamed Trustee. Such appointment may be executed by any authorized agent of
Beneficiary, and if such Beneficiary be a corporation and such appointment be
executed in its behalf by any officer of such corporation, such appointment
shall be conclusively presumed to be executed with authority and shall be valid
and sufficient without proof of any action by the board of directors or any
superior officer of the corporation. Grantor hereby ratifies and confirms any
and all acts which the aforenamed Trustee, or his successor or successors in
this trust, shall do lawfully by virtue hereof. If multiple substitute Trustees
are appointed, each of such multiple substitute Trustees shall be empowered and
authorized to act alone without the necessity of the joinder of the other
multiple substitute trustees, whenever any action or undertaking of such
substitute trustees is requested or required under or pursuant to this Deed of
Trust or applicable law.

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<PAGE>

          IV.5 Perfection of Appointment. Should any deed, conveyance, or
instrument of any nature be required from Grantor by any Trustee or substitute
Trustee to more fully and certainly vest in and confirm to the Trustee or
substitute Trustee such estates, rights, powers, and duties, then, upon request
by the Trustee or substitute Trustee, any and all such deeds, conveyances and
instruments shall be made, executed, acknowledged, and delivered and shall be
caused to be recorded and/or filed by Grantor.

          IV.6 Succession Instruments. Any substitute 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 or his predecessor in the rights hereunder with like effect as if
originally named as Trustee herein; but nevertheless, upon the written request
of Beneficiary or of the substitute Trustee, the Trustee ceasing to act shall
execute and deliver any instrument transferring to such substitute Trustee, upon
the trusts herein expressed, all the estates, properties, rights, powers, and
trusts of the Trustee so ceasing to act, and shall duly assign, transfer and
deliver any of the property and moneys held by such Trustee to the substitute
Trustee so appointed in the Trustee's place.

          IV.7 No Representation by Trustee. By accepting or approving anything
required to be observed, performed, or fulfilled or to be given to Trustee (on
its own behalf or on behalf of Beneficiary) pursuant to the Loan Documents,
including, without limitation, any officer's certificate, balance sheet,
statement of profit and loss or other financial statement, survey, appraisal, or
insurance policy, neither Trustee nor Beneficiary shall be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness,
or legal effect of the same, or of any term, provision, or condition thereof,
and such acceptance or approval thereof shall not be or constitute any warranty
or affirmation with respect thereto by Trustee, either on its own behalf or on
behalf of Beneficiary.

                                    ARTICLE V
                       MISCELLANEOUS TERMS AND CONDITIONS
                       ----------------------------------

          V.1 Time of Essence. Time is of the essence with respect to all
provisions of this Deed of Trust.

          V.2 Reconveyance by Trustee. Upon written request of Beneficiary
stating that all sums and obligations secured hereby have been paid and
satisfied, and upon surrender of this Deed of Trust and the Note to Trustee for
cancellation and retention and upon payment by Grantor of Trustee's fees,
Trustee shall reconvey to Grantor, or the person or persons legally entitled
thereto, without warranty, any portion of the Property then held hereunder. The

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<PAGE>

recitals in such reconveyance of any matters or facts shall be conclusive proof
of the truthfulness thereof. The grantee in any reconveyance may be described as
"the person or persons legally entitled thereto."

          V.3 Certain Rights of Beneficiary. Without affecting Grantor's
liability for the payment of any of the indebtedness secured hereby, Beneficiary
may from time to time and without notice to Grantor: (a) release any person
liable for the payment of the indebtedness secured hereby; (b) extend or modify
the terms of payment of the indebtedness secured hereby; (c) accept additional
real or personal property of any kind as security or alter, substitute or
release any property securing the indebtedness secured hereby; (d) recover any
part of the Property; (e) consent in writing to the making of any subdivision
map or plat thereof; (f) join in granting any easement therein; or (g) join in
any extension agreement of this Deed of Trust or any agreement subordinating the
lien hereof.

          V.4 Notices. Any notice, report, demand or other instrument authorized
or required to be given or furnished hereunder or as required by law ("Notices")
shall be in writing and shall be given as follows: (a) by hand delivery; (b) by
deposit in the United States mail as first class certified mail, return receipt
requested, postage paid; (c) by overnight nationwide commercial courier service;
or (d) by telecopy transmission (other than for notices of default) with a
confirmation copy to be delivered by duplicate notice in accordance with any of
clauses (a)-(c) above, in each case, addressed to the party intended to receive
the same at the following address(es):

               Beneficiary:     Column Financial, Inc.
                                Eleven Madison Avenue
                                New York, New York 10010
                                Attention:  Edmund Taylor
                                Telecopier:  (212) 325-8106
                                Re: WestCoast Grand Hotel at the Park,
                                    Spokane, Washington
                                    Loan Amount:  $14,0000,000.00

               with copies to:  Credit Suisse First Boston Mortgage Capital LLC
                                Legal & Compliance Department
                                One Madison Avenue
                                New York, New York  10010
                                Attention: Pamela McCormack, Esq.
                                Telecopier: (917) 326-7805
                                Re: WestCoast Grand Hotel at the Park,
                                    Spokane, Washington
                                    Loan Amount:  $14,0000,000.00

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<PAGE>

Servicer:      ORIX Real Estate Capital Markets, LLC
               1717 Main Street
               12th Floor
               Dallas, Texas 75201
               Attention: Wesley Wolf
               Telecopier: (214) 237-2046
               or any successor servicer of the Loan.
               Re:  WestCoast Grand Hotel at the Park,
                    Spokane, Washington
                    Loan Amount: $14,0000,000.00

Grantor:       WHC804, LLC
               303 West North River Drive
               Spokane, Washington  99201
               Attention:  Hotel Executive Offices

With a copy to: WestCoast Hospitality Corporation
               WHC Building
               201 West North River Drive
               Suite 100
               Spokane, WA  99201
               Attention:  Chief Financial Officer
               Telecopier:  (509) 325-7324

with a copy to:  Riddell Williams P.S.
               1001 4th Avenue Plaza
               Suite 4500
               Seattle, Washington  98154
               Attention: Bruce Bjerke, Esq.
               Telecopier: (206) 389-1708

         Any party may change the address to which any such Notice is to be
delivered to any other address within the United States of America, by
furnishing ten (10) days written notice of such change to the other parties in
accordance with the provisions of this Section 5.4. All notices, demands and
requests shall be effective upon personal delivery, or one (1) business day
after being deposited with the private courier service, or two (2) business days
after being deposited in the United States mail as required above. The inability
to deliver Notices because of a changed address of which no Notice was given, or
rejection or refusal to accept any Notice

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<PAGE>

offered for delivery shall be deemed to be receipt of the Notice as of the date
of such inability to deliver or rejection or refusal to accept delivery. Notice
for either party may be given by its respective counsel. Additionally, notice
from Beneficiary may also be given by the Servicer.

          V.5 Successors and Assigns. The terms, provisions, indemnities,
covenants and conditions hereof shall be binding upon Grantor and the successors
and assigns of Grantor, including all successors in interest in and to all or
any part of the Property, and shall inure to the benefit of Beneficiary and its
successors and assigns and shall constitute covenants running with the land. If
Grantor consists of more than one person or entity, each will be jointly and
severally liable to perform the obligations of Grantor.

          V.6 Severability. A determination that any provision of this Deed of
Trust is unenforceable or invalid shall not affect the enforceability or
validity of any other provision.

          V.7 Gender. Within this Deed of Trust, words of any gender shall be
held and construed to include any other gender, and words in the singular shall
be held and construed to include the plural, and vice versa, unless the context
otherwise requires.

          V.8 Waiver; Discontinuance of Proceedings. Beneficiary may waive any
single default by Grantor hereunder without waiving any other prior or
subsequent default, and may remedy any default by Grantor hereunder without
waiving the default remedied. Neither the failure or delay by Beneficiary in
exercising, any right, power or remedy upon any default by Grantor hereunder
shall be construed as a waiver of such default or as a waiver of the right to
exercise any such right, power or remedy at a later date. No single or partial
exercise by Beneficiary of any right, power or remedy hereunder shall exhaust
the same or shall preclude any other or further exercise thereof, and every such
right, power or remedy hereunder may be exercised at any time and from time to
time. No modification or waiver of any provision hereof nor consent to any
departure by Grantor therefrom shall in any event be effective unless the same
shall be in writing and signed by Beneficiary, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
given. No notice to nor demand on Grantor in any case shall of itself entitle
Grantor to any other or further notice or demand in similar or other
circumstances. Acceptance by Beneficiary of any payment in an amount less than
the amount then due on any of the secured indebtedness shall be deemed an
acceptance on account only and shall not in any way affect the existence of a
default hereunder.

          V.9 Section Headings. The headings of the sections and paragraphs of
this Deed of Trust are for convenience of reference only, are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.

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<PAGE>

          V.10 GOVERNING LAW. THIS DEED OF TRUST WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON, PROVIDED THAT
TO THE EXTENT THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL
LAW, IN WHICH CASE SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING; AND
PROVIDED FURTHER THAT THE LAWS OF THE STATE IN WHICH THE LAND IS LOCATED SHALL
GOVERN AS TO THE CREATION, PRIORITY AND ENFORCEMENT OF LIENS AND SECURITY
INTERESTS IN PROPERTY LOCATED IN SUCH STATE.

          V.11 Counting of Days. The term "days" when used herein shall mean
calendar days. If any time period ends on a Saturday, Sunday or holiday
officially recognized by the state within which the Land is located, the period
shall be deemed to end on the next succeeding business day. The term "business
day" or "Business Day" when used herein shall mean a weekday, Monday through
Friday, except a legal holiday or a day on which banking institutions in New
York, New York are authorized by law to be closed.

          V.12 Intentionally omitted.

          V.13 Unsecured Portion of Indebtedness. If any part of the secured
indebtedness cannot be lawfully secured by this Deed of Trust or if any part of
the Property cannot be lawfully subject to the lien and security interest hereof
to the full extent of such indebtedness, then all payments made shall be applied
on said indebtedness first in discharge of that portion thereof which is
unsecured by this Deed of Trust.

          V.14 Cross Default. A default hereunder which has not been cured
within any applicable grace or cure period shall be a default under each of the
other Loan Documents.

          V.15 Interest After Sale. In the event the Property or any part
thereof shall be sold upon foreclosure as provided hereunder, to the extent
permitted by law, the sum for which the same shall have been sold shall, for
purposes of redemption (if applicable pursuant to the laws of the state in which
the Property is located), bear interest at the Default Interest Rate.

          V.16 Construction of this Document. This document may be construed as
a mortgage, security deed, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, pledge, financing statement, hypothecation or
contract, or any one or more of the foregoing, in order to fully effectuate the
liens and security interests created hereby and the purposes and agreements
herein set forth.

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<PAGE>

          V.17 No Merger. It is the desire and intention of the parties hereto
that this Deed of Trust and the lien hereof do not merge in fee simple title to
the Property.

          V.18 Rights With Respect to Junior Encumbrances. Any person or entity
purporting to have or to take a junior deed of trust or mortgage or other lien
upon the Property or any interest therein shall be subject to the rights of
Beneficiary to amend, modify, increase, vary, alter or supplement this Deed of
Trust, the Note or any of the other Loan Documents, to extend the maturity date
of the indebtedness secured hereby, to increase the amount of the indebtedness
secured hereby, to waive or forebear the exercise of any of its rights and
remedies hereunder or under any of the other Loan Documents and to release any
collateral or security for the indebtedness secured hereby, in each and every
case without obtaining the consent of the holder of such junior lien and without
the lien or security interest of this Deed of Trust losing its priority over the
rights of any such junior lien.

          V.19 Beneficiary May File Proofs of Claim. In the case of any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition or other proceedings affecting Grantor or the principals, members or
general partners in Grantor, or their respective creditors or property,
Beneficiary, to the extent permitted by law, shall be entitled to file such
proofs of claim and other documents as may be necessary or advisable in order to
have the claims of Beneficiary allowed in such proceedings for the entire
secured indebtedness at the date of the institution of such proceedings and for
any additional amount which may become due and payable by Grantor hereunder
after such date.

          V.20 After-Acquired Property. All property acquired by Grantor after
the date of this Deed of Trust which by the terms of this Deed of Trust shall be
subject to the lien and the security interest created hereby, shall immediately
upon the acquisition thereof by Grantor and without further deed, grant,
encumbrance, conveyance or assignment become subject to the lien and security
interest created by this Deed of Trust.

          V.21 No Representation. By accepting delivery of any item required to
be observed, performed or fulfilled or to be given to Beneficiary pursuant to
the Loan Documents, including, but not limited to, any officer's certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal or insurance policy, Beneficiary shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness or
legal effect of the same, or of any term, provision or condition thereof, and
such acceptance of delivery thereof shall not be or constitute any warranty,
consent or affirmation with respect thereto by Beneficiary.

          V.22 Counterparts. This Deed of Trust may be executed in any number of
counterparts, each of which shall be effective only upon delivery and thereafter
shall be

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<PAGE>

deemed an original, and all of which shall be taken to be one and the same
instrument, for the same effect as if all parties hereto had signed the same
signature page.

          V.23 Personal Liability. Notwithstanding anything to the contrary
contained in this Deed of Trust, the liability of Grantor and its members or
general partners for the indebtedness secured hereby and for the performance of
the other agreements, covenants and obligations contained herein and in the Loan
Documents shall be limited as set forth in Section 1.5 of the Note; provided,
however, that nothing herein shall be deemed to be a waiver of any right which
Beneficiary or Trustee may have under Sections 506(a), 506(b), 1111(b) or any
other provisions of the U.S. Bankruptcy Code to file a claim for the full amount
of the indebtedness secured hereby or to require that all collateral shall
continue to secure all indebtedness owing to Beneficiary in accordance with the
Note, this Deed of Trust and the other Loan Documents.

          V.24 Recording and Filing. Grantor will cause the Loan Documents and
all amendments and supplements thereto and substitutions therefor to be
recorded, filed, re-recorded and re-filed in such manner and in such places as
Beneficiary shall reasonably request, and will pay on demand all such recording,
filing, re-recording and re-filing taxes, fees and other charges. Grantor shall
reimburse Beneficiary, or its servicing agent, for the costs incurred in
obtaining a tax service company to verify the status of payment of taxes and
assessments on the Property.

          V.25 Entire Agreement and Modifications. This Deed of Trust and the
other Loan Documents contain the entire agreements between the parties and
supersede any prior agreements (oral or written), and may not be amended,
revised, waived, discharged, released or terminated orally but only by a written
instrument or instruments executed by the party against which enforcement of the
amendment, revision, waiver, discharge, release or termination is asserted.

          V.26 Maximum Interest. The provisions of this Deed of Trust and of all
agreements between Grantor and Beneficiary, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of the Note or otherwise, shall the amount paid, or agreed to be
paid ("Interest") to Beneficiary for the use, forbearance or detention of the
money loaned under the Note exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, performance or fulfillment
of any provision hereof or of any agreement between Grantor and Beneficiary
shall, at the time performance or fulfillment of such provision shall be due,
exceed the limit for Interest prescribed by law or otherwise transcend the limit
of validity prescribed by applicable law, then ipso facto the obligation to be
performed or fulfilled shall be reduced to such limit, and if, from any
circumstance whatsoever, Beneficiary shall ever receive anything of value deemed

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<PAGE>

Interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive Interest shall be applied to the reduction of the
principal balance owing under the Note in the inverse order of its maturity
(whether or not then due) or at the option of Beneficiary be paid over to
Grantor, and not to the payment of Interest. All Interest (including any amounts
or payments judicially or otherwise under law deemed to be Interest) contracted
for, charged, taken, reserved, paid or agreed to be paid to Beneficiary shall,
to the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Note, including any extensions and
renewals thereof until payment in full of the principal balance of the Note so
that the Interest thereon for such full term will not exceed at any time the
maximum amount permitted by applicable law. This Section will control all
agreements between Grantor and Beneficiary.

          V.27 Application of Default Interest Rate Not a Waiver. Application of
the Default Interest Rate shall not be deemed to constitute a waiver of any
default or any rights or remedies of Beneficiary under this Deed of Trust, any
other Loan Document or applicable legal requirements, or a consent to any
extension of time for the payment or performance of any obligation with respect
to which the Default Interest Rate may be invoked.

          V.28 Interest Payable by Beneficiary. Beneficiary shall cause funds in
the Curtailment Reserve and the FF&E Reserve (the "Funds") to be deposited into
interest bearing accounts of the type customarily maintained by Beneficiary or
its servicing agent for the investment of similar reserves, which accounts may
not yield the highest interest rate then available. The Funds shall be held in
an account in Beneficiary's name (or such other account name as Beneficiary may
elect) at a financial institution or other depository selected by Beneficiary
(or its servicer) in its sole discretion (collectively, the "Depository
Institution"). Grantor shall earn no more than an amount of interest on the
Funds equal to an amount determined by applying to the average monthly balance
of such Funds the quoted interest rate for the Depository Institution's money
market savings account, as such rate is determined from time to time (such
allocated amount being referred to as "Grantor's Interest"). Beneficiary or its
Depository Institution shall be entitled to report under Grantor's Federal tax
identification number, the Grantor's Interest on the Funds. If the Depository
Institution does not have an established money market savings account (or if an
interest rate for such account cannot otherwise be determined in connection with
the deposit of such Funds), a comparable interest rate quoted by the Depository
Institution and acceptable to Beneficiary (or its servicer) in its reasonable
discretion shall be used. The amount of Grantor's Interest allocated to Funds
shall be added to the balance in the Curtailment Reserve and the FF&E Reserve
and shall be disbursed for payment of the items for which other Funds in the
Curtailment Reserve and the FF&E Reserve are to be disbursed.

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<PAGE>

          V.29 Further Stipulations. The additional covenants, agreements and
provisions set forth in Exhibit C attached hereto, if any, shall be a part of
this Deed of Trust and shall, in the event of any conflict between such further
stipulations and any of the other provisions of this Deed of Trust, be deemed to
control.

          V.30 Relationship of the Parties. The relationship between Grantor and
Beneficiary is that of a borrower and a lender only and neither of those parties
is, nor shall it hold itself out to be, the agent, employee, joint venturer or
partner of the other party.

          V.31 Fixture Filing. This Deed of Trust shall be effective from the
date of its recording as a financing statement filed as a fixture filing with
respect to all goods constituting part of the Property which are or are to
become fixtures. The mailing address of Grantor and the address of Beneficiary
from which information concerning the security interests may be obtained are set
forth in Section 1.22 above.

          V.32 Sale of Notes and Securitization. At the request of the holder of
the Note and, to the extent not already required to be provided by Grantor under
this Deed of Trust, Grantor shall use reasonable efforts to satisfy the market
standards to which the holder of the Note customarily adheres or which may be
reasonably required in the marketplace or by the Rating Agencies in connection
with any Secondary Market Transaction of rated single or multi-class securities
(the "Securities") secured by or evidencing ownership interests in the Note and
this Deed of Trust, including, without limitation, to:

                  (a)(i)  provide such financial and other information with
respect to the Property, the Grantor and the Manager, (ii) provide budgets
relating to the Property; (iii) perform or permit or cause to be performed or
permitted such site inspection, appraisals, market studies, environmental
reviews and reports (Phase I's and, if appropriate, Phase II's), engineering
reports and other due diligence investigations of the Property, as may be
reasonably requested by the holder of the Note or the Rating Agencies or as may
be necessary or appropriate in connection with the Secondary Market Transaction;
and (iv) make such representations and warranties as of the closing date of the
Secondary Market Transaction with respect to the Property, Grantor and the Loan
Documents as are customarily provided in securitization transactions and as may
be reasonably requested by the holder of the Note or the Rating Agencies and
consistent with the facts covered by such representations and warranties as they
exist on the date thereof, including the representations and warranties made in
the Loan Documents (collectively, the "Provided Information"), together, if
customary, with appropriate verification and/or consents of the Provided
Information through letters of auditors or opinions of counsel of independent
attorneys acceptable to the Beneficiary and the Rating Agencies;

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<PAGE>

                  (b) at Beneficiary's expense, cause its counsel to render
opinions, which may be relied upon by the holder of the Note, the Rating
Agencies and their respective counsel, agents and representatives, as to
non-consolidation, fraudulent conveyance, and true sale or any other opinion
customary in securitization transactions with respect to the Property and
Grantor and its affiliates, which counsel and opinions shall be reasonably
satisfactory to the holder of the Note and the Rating Agencies; and

                  (c) execute such amendments to the Loan Documents and
organizational documents, enter into a lockbox or similar arrangement with
respect to the Rents and establish and fund such reserve funds (including,
without limitation, reserve funds for deferred maintenance and capital
improvements) as may be requested by the holder of the Note or the Rating
Agencies or otherwise to effect the Secondary Market Transaction; provided,
however, that the Grantor shall not be required to modify or amend any Loan
Document if such modification or amendment would (i) change the interest rate,
the stated maturity or the amortization of principal set forth in the Note, or
(ii) modify or amend any other material economic term of the Loan.

                  All reasonable third party costs and expenses incurred by
Beneficiary in connection with Grantor's complying with requests made under this
Section shall be paid by Beneficiary.

                  In the event that the provisions of this Deed of Trust or any
of the other Loan Documents require the receipt of written confirmation from
each Rating Agency with respect to the ratings on the Securities, or, in
accordance with the terms of the transaction documents relating to a Secondary
Market Transaction, such a rating confirmation is required in order for the
consent of the Beneficiary to be given, Beneficiary shall pay all of the costs
and expenses of the Beneficiary, Servicer and each Rating Agency in connection
therewith, and, if applicable, shall pay any fees imposed by any Rating Agency
as a condition to the delivery of such confirmation.

         ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
         FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
         WASHINGTON LAW.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       81
<PAGE>

         IN WITNESS WHEREOF, Grantor, intending to be legally bound hereby, has
duly executed this Deed of Trust to be effective as of the date set forth in the
first paragraph hereof.

                                         GRANTOR:
                                         --------

                                         WHC804, LLC,
                                         a Delaware limited liability company

                                         By:
                                             --------------------------------
                                             Name:  Richard L. Barbieri
                                             Title: Senior Vice President

<PAGE>

STATE OF WASHINGTON      ss.
                         ss.
COUNTY OF SPOKANE        ss.

         On this _____ day of August, 2001, before me, the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn,
personally appeared Richard L. Barbieri, to me known to be the Senior Vice
President of WHC804, LLC, a Delaware limited liability company, the limited
liability company that executed the foregoing instrument, and acknowledged the
said instrument to be the free and voluntary act and deed of said limited
liability company, for the uses and purposes therein mentioned, and on oath
stated that he is authorized to execute the said instrument and that the seal
affixed is the corporate seal of said limited liability company.

         Witness my hand and official seal hereto affixed the day and year first
above written.

[S E A L]
                                    --------------------------------------------
                                    Notary Public, State of Washington
My Commission Expires:
                                    --------------------------------------------
----------------------              Printed Name of Notary Public

EXHIBIT LIST
------------

Exhibit A - Legal Description
Exhibit B - Permitted Exceptions
Exhibit C - Additional Stipulations

<PAGE>

                                    EXHIBIT A
                                    ---------

                                Legal Description
                                -----------------

<PAGE>

                                    EXHIBIT B
                                    ---------

                              Permitted Exceptions
                              --------------------

<PAGE>

                                    EXHIBIT C
                                    ---------

                             Additional Stipulations
                             -----------------------

C-1   Additional Washington Provisions.

      (a)   This Deed of Trust shall constitute a Financing Statement filed as a
            fixture filing pursuant to Article 9 of the Uniform Commercial Code
            (RCW 62A.9-402(6)). Parts of the Property are or are to become
            fixtures or Improvements (defined above).

      (b)   Grantor hereby represents, warrants and covenants that none of the
            Property is used principally or at all for agricultural or farming
            purposes. The Property does not constitute the homestead of Grantor.

      (c)   At Beneficiary's option, any written notice or default given to
            Grantor under this Deed of Trust may be given in the form of a
            statutory notice of default under the Washington Deed of Trust Act
            or any other form as Beneficiary may elect.

      (d)   ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT OR
            TO FORBEAR ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
            WASHINGTON LAW.

C-2   Extensions. At the request of Grantor, which request must be made at least
      one hundred eighty (180) days prior to the stated maturity date of the
      Note, Beneficiary shall have the option, in its sole discretion, to extend
      the maturity date of the Note to the date which is one hundred eighty
      (180) days after such maturity date prior to such extension; provided,
      however, in no event shall the maturity date of the Note be extended
      beyond the date which is the second (2nd) anniversary of the original
      stated maturity date of the Note. In the event that a Curtailment Period
      (as defined in the Cash Management Agreement) shall be in effect, Grantor
      shall automatically be deemed to have made a request for extension
      pursuant to this Section by the applicable deadline for such request.

C-3   Cash Management Stipulations. Grantor has executed and delivered to
      Beneficiary the Cash Management Agreement which, among other things,
      provides for the disposition of Rents and Profits from the Property. The
      Reserves shall be subject to both this Deed of Trust, the Cash Management
      Agreement and the other Loan Documents. All references in this Deed of
      Trust to the Impound Account and to the other Reserves shall be deemed to
      refer to the Sub-Account of the Central Account (as defined in the Cash
      Management Agreement) into which the proceeds of each such Reserve have
      been deposited pursuant to the Cash Management Agreement. All payments
      from Grantor to Beneficiary with respect to Reserves shall be made by
      disbursement from the Rent Account or as otherwise provided in the Cash
      Management Agreement.EXHIBIT 10.3
                                                                    ------------

     THIS AGREEMENT (the "Lease"), made the day of , 2001, by and between
KENNEDY MONTROSE, L.L.C., a New Jersey Limited Liability Company, c/o Adler
Development, LLC, 160 Raritan Center Parkway, Unit 20, Edison, New Jersey 08837,
hereinafter called "Landlord"; and ABLE LABORATORIES, a Delaware Corporation,
about to have an office at 3601 Kennedy Road, South Plainfield, New Jersey
07080, hereinafter called "Tenant".

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

     WHEREAS, Landlord owns certain lands and premises in the Borough of South
Plainfield, County of Middlesex and State of New Jersey, which said lands and
premises are commonly known as 3601 Kennedy Road, South Plainfield (the
"Property"), all as more particularly referred to and described by metes and
bounds on Schedule "A" annexed hereto and made a part hereof; and

     WHEREAS, Landlord has erected a one-story industrial-type building
containing approximately 59,740 square feet (hereinafter called the "Building")
on the lands and premises aforementioned, of which Building Tenant shall occupy
approximately 21,980 square feet, outside outside dimensions to center line of
common wall (hereinafter called the "Leased Premises"), all in accordance with
the terms and conditions hereinafter mentioned and the considerations herein
expressed; and

     WHEREAS, the Property and the Building are part of a larger complex (the
"Complex") which is owned by Landlord, it being understood that Tenant shall be
responsible for Tenant's pro rata portion of common maintenance items allocated
to the Property and the Building,

     NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that for the rents
reserved, the mutual considerations herein and the parties mutually intending to
be legally bound hereby, Landlord does demise, lease and let unto Tenant and
Tenant does rent and take from Landlord the Leased Premises as described in
Paragraph #1, and Landlord and Tenant do hereby mutually covenant and agree as
follows:

     1.   LEASED PREMISES
          ---------------
          1.1 The Leased Premises shall consist of approximately 21,980 square
feet of the Building, based on outside outside dimensions to center line of
common wall, as said Building is located on the lands described on Schedule "A",
together with
<PAGE>
all improvements therein which have been constructed by Landlord for the use of
Tenant, and together with all easements, improvements, tenements, appurtenances,
hereditaments, fixtures and rights and privileges appurtenant thereto including,
without limitation, the non-exclusive right to use the parking areas, walkways
and driveways located on the Property. The Leased Premises are shown on the
floor plan annexed hereto and made a part hereof as Schedule "B".

          1.2 It is understood and agreed between Landlord and Tenant that:

          (a) access to public streets is provided by a common access easement
          along the southerly boundary of the Property;

          (b) there is a common grassed mall area to be shared by the occupants
          of the Building and the buildings to the south and east of the
          Building; and

          (c) there are common utility lines.

The Lease shall be together with and subject to the easements for the same,
which shall be non-exclusive and which shall be shared by other tenants located
in the Complex, which common use shall not interfere with Tenant's reasonable
use and occupancy of the Leased Premises. Any one or more of the aforesaid
easements may be recorded and amended of record to effectuate the purposes for
which they are created as long as they do not interfere with Tenant's use and
enjoyment of the Leased Premises. Tenant expressly covenants and agrees that it
shall have no right to erect any fence or barrier between any of the easements
or affecting the same as hereinabove referred to.

          1.3 Tenant's Percentage, for all Lease purposes, is hereby deemed to
be 36.8%.

     2.   TERM OF LEASE
          -------------
          2.1 Landlord leases unto Tenant and Tenant hires the Leased Premises
for the term of three (3) years (the "Term"), to commence on October 1, 2001
(the "Commencement Date"), subject to the provisions of Article 2.2 hereof.

                                        2
<PAGE>
          2.2 The Commencement Date shall be October 1, 2001, whether or not the
work to be performed by Landlord in accordance with Article 4.1 has been
completed. Notwithstanding the above, the Base Rent and Additional Rent payable
hereunder shall abate in the event that Landlord shall not paint and recarpet
(provided that Landlord shall have the right to substitute for carpeting which
has been chosen by Tenant carpeting of equal quality and standard, provided in
the event that the carpeting chosen by Tenant is not in stock) the Leased
Premises within ten (10) business days following the date of execution of this
Lease, until such work is completed. In any event, Tenant shall have the right
to use and occupy the warehouse area of the Leased Premises as of October 1,
2001. The last day of the Term shall be called the "Expiration Date".

          2.3 Tenant agrees that it will execute, within ten (10) days of
Landlord's request therefor, an estoppel letter as may be required by Landlord's
mortgagee from time to time, certifying among other things the Commencement Date
and Expiration Date of the Lease, status of current rent payments by Tenant, and
any other pertinent information as may be reasonably required by such mortgagee.

     3.   RENT
          ----
          3.1 The Tenant covenants and agrees to pay the annual rent
(hereinafter called "Base Rent") as follows:

          (a) During the first (1st) year of the lease term, Tenant shall pay
Base Rent at the rate of ONE HUNDRED NINE THOUSAND NINE HUNDRED AND 00/100
($109,900.00) DOLLARS per annum, payable in equal installments in the sum of
NINE THOUSAND ONE HUNDRED FIFTY EIGHT AND 33/100 ($9,158.33) DOLLARS per month.

          (b) During the second (2nd) year of the lease term, Tenant shall pay
Base Rent at the rate of ONE HUNDRED EIGHTEEN THOUSAND SIX HUNDRED NINETY TWO
AND 00/100 ($118,692.00) DOLLARS per annum, payable in equal installments in the
sum of NINE THOUSAND EIGHT HUNDRED NINETY ONE AND 00/100 ($9,891.00) DOLLARS per
month.

          (c) During the third (3rd) year of the lease term, Tenant shall pay
Base Rent at the rate of ONE HUNDRED TWENTY SEVEN THOUSAND FOUR HUNDRED EIGHTY
FOUR AND 00/100 ($127,484.00) DOLLARS per annum, payable in equal installments
in the sum of TEN THOUSAND SIX HUNDRED TWENTY THREE AND 67/100 ($10,623.67)
DOLLARS per month.

                                        3
<PAGE>
          (d) The Base Rent shall be payable on the first day of each and every
month during the Term (except that the first installment of Base Rent payable
hereunder shall be paid on the execution of the Lease).

          3.2   (i) All sums payable by Tenant pursuant to the Lease, except for
Base Rent, shall be Additional Rent. Tenant shall reimburse Landlord for
Tenant's Percentage of Landlord's total expense incurred in operating, managing,
maintaining, repairing and replacing the Property including, but not limited to,
the following items:

          (a)   real estate taxes (Article 8);
          (b)   the cost of maintenance, repair and replacement
                services, including management fees (Article 6);
          (c)   utility charges (Article 7); and
          (d)   insurance carried by Landlord (Article 9).

All Additional Rent payments by Tenant shall be received by Landlord within
thirty (30) days of receipt by Tenant of Landlord's invoice therefore, except
for real estate taxes, which shall be paid with the Base Rent, as set forth in
Article 8. All invoices delivered to Tenant shall contain a breakdown of the
required charges and backup invoices or documentation.

                (ii) Landlord shall make a reasonable estimate of the Additional
Rent which will be required during the period from September 1 through the
following August 31 (an "Operating Year"), for each Operating Year occurring
during the Term. Landlord shall furnish such estimate to Tenant and Tenant shall
pay to Landlord one-twelfth (1/12) of the estimated Additional Rent for such
Operating Year during each month of said Operating Year, as Additional Rent. At
the expiration of the first Operating Year, Landlord shall furnish to Tenant a
breakdown, certified by Landlord, as to the total cost of required Additional
Rent for such Operating Year. In the event that the estimated Additional Rent
payments made by Tenant shall be less than the actual Additional Rent required
for such Operating Year, Tenant shall pay to Landlord, in one (1) lump sum, any
difference in such obligation, said sum to be paid within thirty (30) days after
demand. In the event the actual Additional Rent applicable to such Operating
Year shall be less than the estimated Additional Rent payments made by Tenant,
any such overage shall be applied to the monthly Base Rent

                                        4
<PAGE>
and Additional Rent charges prospectively due under the lease. This procedure
shall be followed during each Operating Year of the Term, and at the Expiration
Date, any overage or underage shall be credited or paid after computation by
Landlord, which obligation of Landlord and Tenant shall survive the expiration
of the Term. In the event that any item of Additional Rent has not been included
in Landlord's estimate, Landlord shall have the right to bill Tenant for any
such cost, and Tenant shall pay to Landlord the invoiced amount within thirty
(30) days after demand.

In addition to the aforementioned items, Additional Rent shall also include any
payments required of Tenant pursuant to Articles 3.3, 11.2, 13.4, and 40.4, as
well as all other items required to be paid by Tenant by the Lease.

          3.3   Any installment of Base Rent accruing hereunder which is not
received by Landlord prior to the fifth (5th) day of any month (including
Saturdays, Sundays and Holidays), or any Additional Rent which is not received
by Landlord within thirty (30) days of Tenant's receipt of Landlord's invoice
therefor (Base Rent and Additional Rent being sometimes collectively referred to
herein as "rent"), shall bear a late charge of ten (10%) per cent of such
amount, which amount shall be payable as Additional Rent hereunder, and the
failure to pay such charge shall be a default by Tenant hereunder. It is
expressly understood and agreed that the foregoing late charge is not a penalty,
but agreed upon compensation to Landlord for administrative costs incurred by
Landlord in connection with any such late payment. In addition, any payment of
Base Rent or Additional Rent which is not paid within thirty (30) days of the
date upon which it is due shall require the payment of interest at the rate of
one and one-half (1 1/2%) percent per month, calculated from the date that such
payment was due through the date that any such payment is actually made.

          3.4   If the term of this Lease shall begin or end on a day other than
the first or last day of a calendar month, as applicable, the rent for such
partial month shall be prorated.

          3.5   It is expressly understood and agreed that upon execution of the
within Lease Tenant shall pay the first (1st) monthly installment of Base Rent
and real estate taxes payable hereunder, together with the security deposit
which is hereinafter referred to.

     4.   CONDITION OF LEASED PREMISES
          ----------------------------

                                        5
<PAGE>
          4.1   Tenant shall take the Leased Premises and improvements as of the
Commencement Date of this Lease in an "as is" condition, except that Landlord
shall recarpet and repaint the office area of the Leased Premises, using
building standard materials. Landlord, at Tenant's sole expense, will install
air conditioning in the warehouse pursuant to Tenant's specifications,
subsequent to the Commencement Date.

          4.2   It is expressly understood and agreed that Tenant shall be
responsible to obtain a Certificate of Occupancy permitting Tenant's use and
occupancy of the Leased Premises in accordance with Article 5 hereof.

     5.   USE
          ---
          5.1  Tenant covenants and agrees to use and occupy the Leased Premises
for office and warehouse purposes only, which use by Tenant, however, is and
shall be expressly subject to all applicable zoning ordinances, rules and
regulations of any governmental boards or bureaus having jurisdiction thereof.

          5.2  The Leased Premises shall not be used for the storage of
flammable, hazardous or toxic materials and that Tenant is expressly prohibited
from using the Leased Premises for manufacturing purposes.

     6.   REPAIRS AND MAINTENANCE
          -----------------------
          6.1   Landlord, shall, with due diligence, at its own cost and expense
(without reimbursement from Tenant), make all structural repairs to the exterior
walls, structural steel, foundation and roof of the Building, provided that any
damage to the foregoing is not caused by the negligence of Tenant, its servants,
employees, invitees or agents, in which case said damage shall be repaired at
the sole cost and expense of Tenant, except to the extent covered by any
insurance maintained for the Building and/or Leased Premises. Landlord shall,
subject to reimbursement as described in the following sentence, undertake the
maintenance of the roof and the maintenance, repair and replacement of the roof
leaders, flashings, metal gravel stops, gutters and drains; Tenant shall
reimburse Landlord within fifteen (15) days after written demand for Tenant's
Percentage of any cost attributable to the foregoing. Landlord shall be
responsible, at its sole cost and expense, for the repair and replacement of the
roof if the same shall become necessary at any time during the Term of the
Lease.

                                        6
<PAGE>
          6.2   Tenant shall, except as provided in Articles 6.1 and 6.3, take
good care of the Leased Premises and, at its cost and expense, keep and maintain
in good repair the interior and exterior of the Leased Premises, including, but
not limited to the floor, loading docks, windows and doors, the air-conditioning
and heating plant, the plumbing, pipes and fixtures belonging thereto; and shall
replace all mechanical systems and working parts used in connection with the
air-conditioning, electrical, heating and plumbing plants, fixtures and systems
exclusively serving the Leased Premises, including ballasts and fluorescent
fixtures; and shall keep the water and sewer pipes and connections free from ice
and other obstructions, and shall generally maintain and repair the interior and
exterior of the Leased Premises and shall, at the end of the expiration of the
term, deliver up the Leased Premises in good order and condition, damages by the
elements, ordinary wear and tear, damage by fire and other casualty and taking
by eminent domain excepted. Tenant expressly agrees that it shall enter into a
periodic maintenance agreement with a reputable heating, ventilating and
air-conditioning contractor, which contract shall provide for a minimum of four
(4) inspections per year. A copy of said contract shall be forwarded to Landlord
when received and thereafter on an annual basis, and a copy of each inspection
report shall be delivered to Landlord within ten (10) days of receipt thereof by
Tenant. Tenant covenants and agrees that it shall not cause or permit any waste
(other than reasonable wear and tear), damage or disfigurement to the Leased
Premises, or any overloading of the floors of the Building.

          6.3   Tenant shall reimburse Landlord for Tenant's Percentage of
Landlord's total expense in maintaining, repairing and replacing the lawns,
shrubbery, driveways and parking areas (including snow removal from the parking
area) of the entire Property; which said sum shall be paid by Tenant to Landlord
within fifteen (15) days from the date of billing and Landlord shall supply to
Tenant a complete breakdown of the cost items. In addition to the above, Tenant
shall pay Landlord a management fee in the amount of three (3%) percent of
Tenant's Base Rent payments. Tenant shall, at its sole cost and expense, keep
the sidewalks and steps adjacent to the Leased Premises free and clear of ice,
snow and debris.

          6.4   Tenant expressly understands that the cost of maintaining the
landscaping, driveways and parking areas, utility lines and storm sewer systems
serving the Complex shall be allocated to the Building and the other buildings
located on the

                                        7
<PAGE>
Complex based upon the benefits that each of the buildings enjoys, and that
Tenant's pro rata obligation as hereinabove set forth in Article 6.3 shall be
based upon such an allocation.

          6.5   Tenant acknowledges that Landlord has installed a lawn sprinkler
system serving the Property. Tenant agrees to pay to Landlord Tenant's
Percentage of Landlord's cost of maintaining and operating said water sprinkler
system, which cost shall be paid in the same manner as hereinafter provided in
Article 7.

     7.   UTILITIES
          ---------
          Tenant shall, at its own cost and expense, pay all utility meter and
service charges (which are separately metered), including gas and electric
charges, janitorial and garbage disposal service. Tenant shall pay to Landlord,
as Additional Rent, Tenant's Percentage of Landlord's cost and expense for
sewer, ordinary water usage, parking lot lighting and lawn sprinkler charges, as
well as 13.3% of the standby sprinkler charges applicable to the Complex (which
standby sprinkler charges are currently EIGHT HUNDRED SEVENTY FIVE AND 88/100
($875.88) DOLLARS per quarter, as set forth on Schedule "C"), within fifteen
(15) days from the date of billing, and Landlord shall supply to Tenant at its
request a complete breakdown of such cost items.

     8.   TAXES
          -----
          8.1  Tenant shall, during the term of the Lease, promptly pay monthly,
as Additional Rent, one-twelfth (1/12th) of Tenant's Percentage of all real
estate and personal property taxes assessed against the Property for land,
Building and improvements, including such added assessment or omitted assessment
which may be levied against the Property for the year 2001, et seq., by the
applicable governmental taxing authority, said obligation to be prorated as of
the Commencement Date and as of the Expiration Date hereof, as applicable. In
addition, Tenant shall, during the term of this Lease, pay at its cost and
expense Tenant's Percentage of any levy for the installation of local
improvements affecting the Property as may be assessed by any governmental
boards or bureaus having jurisdiction thereof. Any assessment or imposition for
capital or public improvements which shall be payable by law at the option of
the taxpayer in installments, may be so paid by Tenant in installments, as to
its pro rata portion thereof, together with any required interest. The real
estate tax obligation of Tenant hereinabove set forth shall include Tenant's
Percentage, if levied, of any tax or imposition which may be levied by any
governmental authority, agency or subdivision thereof having jurisdiction

                                        8
<PAGE>
applicable to parking lot usage. Landlord shall furnish to Tenant the annual
real estate tax bill and a breakdown of Tenant's Percentage thereof. In the
event of any change in real estate taxes which shall require an adjustment of
increase or decrease in Tenant's annual tax obligation, such difference shall be
adjusted by Landlord and Tenant annually during the month of August of each
Lease year, or as soon thereafter as is reasonably practicable.

          8.2  In the event Landlord wishes to contest any assessment or levy of
taxes on the Property, it is understood and agreed that said contest may include
other real property owned by Landlord. In the event of any reduction or rebate
of taxes which is paid to Landlord, Tenant shall be credited with its pro rata
portion thereof, after deducting the costs and expenses incurred by Landlord in
contesting or litigating said assessment, provided that Tenant has previously
paid a portion of the taxes being rebated. Tenant shall have no right to file
any tax appeal affecting the Property. Landlord hereby agrees that it shall make
a bona fide determination, on an annual basis, as to the advisability of filing
a tax appeal.

          8.3  If at any time during the term of this Lease the method or scope
of taxation prevailing at the commencement of the Lease term shall be altered,
modified or enlarged so as to cause the method of taxation to be changed, in
whole or in part, so that in substitution for the real estate taxes now assessed
there may be, in whole or in part, a capital levy or other imposition based on
the value of the Property, or the rents received therefrom, or some other form
of assessment based in whole or in part on some other valuation of the Property,
then and in such event, such substituted tax or imposition shall be payable and
discharged by Tenant pro rata in the manner required pursuant to such law
promulgated, which shall authorize such change in the scope of taxation, and as
required by the terms and conditions of the within Lease.

          8.4  Nothing in this Lease contained shall require Tenant to pay any
franchise, estate, inheritance, succession, capital levy or transfer tax of
Landlord, or Federal Income Tax, State Income Tax, or excess profits or revenue
tax, unless such taxes are in substitution for real property taxes as a result
of such change in the manner and scope of taxation as hereinbefore provided in
Article 8.3.

     9.   INSURANCE
          ---------

                                        9
<PAGE>
          9.1   Landlord will, subject to the reimbursement as described below,
obtain for the benefit of Landlord, wherein Landlord shall be the named insured,
fire insurance on an "all risk" basis, including flood and earthquake insurance
(if obtainable) in an amount and value equivalent to the full replacement value
of all the insurable improvements located on the Property, which policy of
insurance shall include broad form boiler and machinery coverage (inclusive of
air-conditioning system, if requested by Tenant in writing) together with
insurance coverage against sprinkler damage to the Building and its
improvements. Said insurance, in any event, shall not be less than the amount of
any first mortgage which may be placed on the Property by Landlord and shall be
in such form as any such bona fide mortgagee may reasonably require. Landlord
shall have the right from time to time to determine the full replacement value
as may be required to comply with full replacement insurance requirements. The
insurance to be obtained by Landlord shall include casualty rent insurance
payable to and insuring the interest of Landlord as to the value of the rental
obligation hereunder to the extent of one (1) year's Rent, (inclusive of real
estate taxes and applicable insurance premiums). Landlord and Tenant agree that
the fire and casualty insurance policy to be obtained by Landlord shall contain
a deductible provision in the amount of TWO THOUSAND FIVE HUNDRED AND 00/100
($2,500.00) DOLLARS, or such higher amount as may be imposed by Landlord's
insurance carrier. In the event of fire or casualty as contemplated by Article
14 hereof, Tenant expressly agrees that it shall pay to Landlord a sum equal to
an amount up to Tenant's pro rata portion of said deductible amount, within
thirty (30) days after demand, to cover such loss or damage, based upon that
portion of the Leased Premises which is damaged as compared to all of the
premises in the Building which are damaged, or the full deductible amount if the
loss is limited to all or a portion of the Leased Premises.

          9.2   Tenant covenants and agrees that it will, at its sole cost and
expense, carry general public liability insurance in the minimum amount of FIVE
MILLION AND 00/100 ($5,000,000.00) DOLLARS, combined single limit for personal
injury and property damage. Tenant's liability insurance policy shall (i) name
as additional insureds Landlord and Landlord's mortgagees of whom Landlord shall
have given Tenant written notice, provided that Landlord and Landlord's
mortgagees shall only be insured as their interests may appear under this Lease,
and (ii) be written on a form reasonably satisfactory to Landlord by a good and
solvent insurance company of recognized standing, admitted to do business

                                       10
<PAGE>
in the State of New Jersey having an A-7 rating or better by AM Best. Tenant
shall furnish to Landlord a certificate of said liability insurance on the
Commencement Date hereunder and shall provide update certificates of said
insurance upon the renewal of any such policy.

          9.3   Landlord shall obtain liability insurance applicable to the
Property, which policy shall have the same coverage as hereinabove provided in
Article 9.2.

          9.4   It is expressly understood and agreed that all policies of
insurance shall contain a clause that the same shall not be canceled except on
thirty (30) days' written notice to any and all parties in interest.

          9.5   Each party, in connection with insurance policies required to be
furnished in accordance with the terms and conditions of this Lease, or in
connection with insurance policies which they obtain insuring such insurable
interest as Landlord or Tenant may have in its own properties, whether personal
or real, shall expressly waive any right of subrogation on the part of the
insurer against Landlord or Tenant as the same may be applicable, which right to
the extent not prohibited or violative of any such policy is hereby expressly
waived, and Landlord and Tenant each mutually waive all right of recovery
against each other, their agents, or employees for any loss, damage or injury of
any nature whatsoever to property or person for which either party is required
by this Lease to carry insurance.

          9.6   Tenant shall pay to Landlord Tenant's Percentage of the cost of
all insurance to be carried by Landlord hereunder, except Tenant shall pay the
full premium for casualty rent insurance attributable to Tenant's Leased
Premises, which payment shall be made by Tenant to Landlord within fifteen (15)
days after written demand, said demand to include a copy of the insurance
premium bill and Certificate of Insurance, together with a computation of
Tenant's monetary obligations in connection therewith.

          9.7  In the event the use by Tenant of the Leased Premises shall cause
an increase in insurance premiums solely due to the use and conduct of Tenant's
business and occupancy of the Leased Premises, then and in that event, Tenant
shall pay at its cost and expense, within fifteen (15) days after written
demand, such excess premium costs. Landlord shall furnish to Tenant such

                                       11
<PAGE>
collaborating data as may be required to establish the basis for such additional
premium charge.

     10.  SIGNS
          -----
          Tenant, at its sole cost and expense, shall have the right and
privilege of erecting at the Leased Premises such signs as are necessary or
desirable for the purpose of identifying Tenant, subject to the prior written
approval thereof by Landlord, which approval shall not be unreasonably withheld.
Landlord further agrees that it shall install a directory sign near the street,
at Tenant's sole cost and expense, subject to municipal approval. The said signs
shall comply with the applicable rules and regulations of the applicable
governmental boards and bureaus having jurisdiction thereof. The erection of
such sign shall not cause any structural damage to the Building. It is expressly
understood and agreed that Tenant shall not erect roof signs. Tenant hereby
agrees that it shall remove all of its signage upon the expiration or earlier
termination of this Lease, and Tenant shall restore any portion of the Leased
Premises, the Building or the Property which is damaged by the removal of any
such sign.

     11.  FIXTURES
          --------
          11.1  Tenant is given the right and privilege of installing and
removing property, equipment and fixtures in the Leased Premises during the term
of the Lease. However, if Tenant is in default and moves out, or is
dispossessed, and fails to remove any property, equipment and fixtures or other
property prior to any such dispossession or removal, then and in that event, the
said property, equipment and fixtures or other property shall be deemed at the
option of Landlord to be abandoned; or in lieu thereof, at Landlord's option,
Landlord may remove such property and charge the reasonable cost and expense of
removal and storage or disposal of the same to Tenant.

          11.2  Anything to the contrary contained herein notwithstanding, it is
expressly understood and agreed that Tenant may install, connect and operate
equipment as may be deemed necessary by Tenant for its business, subject to
compliance with applicable rules and regulations of governmental boards and
bureaus having jurisdiction thereof. Subject to the terms and conditions of this
Lease, the machinery, fixtures and equipment belonging to Tenant shall at all
times be considered and intended to be personal property of Tenant, and not part
of the realty, and subject to removal by Tenant, provided at the time of such
removal, that Tenant is not in default pursuant to the terms and conditions of

                                       12
<PAGE>
this Lease, and that Tenant, at its own cost and expense, pays for any damage to
the Leased Premises and the Building caused by such removal.

     12.  GLASS
          -----
          Tenant expressly covenants and agrees to replace any broken glass in
the windows or other apertures of the Leased Premises which may become damaged
or destroyed, at Tenant's sole cost and expense.

     13.  ASSIGNMENT AND SUBLETTING
          -------------------------
          13.1  Tenant shall neither assign this Lease nor sublet all or any
portion of the Leased Premises without Landlord's prior written consent, which
consent shall not be unreasonably withheld, subject to Landlord's rights
hereinafter provided in Article 13.4. Landlord may withhold such consent if, in
the reasonable exercise of its judgment, it determines that any of the following
enumerated conditions are applicable:

          (a) the proposed assignee's or subtenant's financial condition is not
     sufficient to meet its obligations undertaken in such assignment or
     sublease;

          (b) the proposed use of the Leased Premises is not appropriate for the
     Building or in keeping with the character of its existing tenancies;

          (c) such assignee's or subtenant's occupancy will cause an excessive
     density of traffic or make excessive demands on the Building's services,
     maintenance or facilities;

          (d) such assignee or subtenant is a tenant of and is vacating premises
     in the Building or the Complex;

          (e) the rental obligation of such assignee or subtenant would be less
     than that which Landlord is then offering to other tenants or potential
     tenants of the Complex;

          (f) Landlord wishes to accept the offer as provided in Article 13.4.

          13.2 Any request by Tenant for Landlord's consent to an assignment of
the Lease shall state the proposed assignee's address and be accompanied by a
profit and loss and balance statements of the proposed assignee for the prior
three (3) years,

                                       13
<PAGE>
as well as duplicate original of the instrument of assignment (wherein the
assignee assumes, jointly and severally with Tenant, the performance of Tenant's
obligations hereunder).

          13.3  Any request by Tenant for Landlord's consent to a sublease shall
state the proposed subtenant's address and be accompanied by profit and loss and
balance statements of the proposed subtenant for the prior three (3) years, as
well as a duplicate original of the instrument of sublease (wherein Tenant and
the proposed subtenant agree that such sublease is subject to the Lease and such
subtenant agrees that, if the Lease is terminated because of Tenant's default,
such subtenant shall, at Landlord's option, attorn to Landlord).

          13.4  Any request by Tenant for Landlord's consent to an assignment of
the Lease or a sublease of all or substantially all of the Leased Premises shall
clearly set forth the proposed terms of such proposed assignment or sublease and
shall constitute Tenant's offer to cancel the Lease. Landlord may accept such
offer by notice to Tenant within thirty (30) days after Landlord's receipt
thereof, in which event, the Lease shall terminate as of the end of the month
following the month in which such notice is sent (with the same effect as if
such date were the date fixed herein for the natural expiration of the term),
Base Rent and Additional Rent shall be apportioned to such date, Tenant shall
surrender the Leased Premises on such date as herein provided, and subject to
payment of required Lease adjustments, the parties shall thereafter have no
further liability one to the other. If Landlord fails to send such notice,
Tenant, within twenty (20) days after the expiration of such thirty (30) day
period, may assign the Lease or sublet all or substantially all of the Leased
Premises to the proposed assignee or subtenant and upon the terms specified in
such request, subject, however, to Landlord's rights under Article 13.1(a)
through (e). In any event, Tenant shall pay to Landlord, as Additional Rent, all
amounts received by Tenant from the assignee or subtenant in excess of the Base
Rent and Additional Rent payable by Tenant hereunder, after first deducting
therefrom the reasonable advertising costs, real estate brokerage commissions
and legal fees incurred by Tenant in connection with such assignment or
subletting.

          13.5 In the event of a permitted assignment, Landlord may collect Base
Rent and Additional Rent directly from the assignee. In the event of a permitted
sublease, Landlord may, if Tenant defaults hereunder, collect Base Rent and
Additional Rent

                                       14
<PAGE>
directly from the subtenant. In either such event, Landlord may apply any
amounts so collected to the Base Rent and Additional Rent hereunder without
thereby waiving any provisions hereof or releasing Tenant from liability for the
performance of its obligations hereunder.

          13.6  Landlord's consent to any assignment or sublease hereunder shall
not be deemed a consent to any further proposed assignment or sublease by Tenant
or any one claiming under or through Tenant, except in accordance with this
Article 13.

          13.7  It is expressly understood and agreed that Tenant's Option to
Renew, as hereinafter set forth in Article 49, shall be personal to Tenant only,
and may not be exercised by any permitted assignee or subtenant hereunder.

          13.8  As an express inducement to Landlord to enter into the within
Lease, it is understood and agreed that in no event shall the Lease be assigned
or the Leased Premises be sublet for any use other than that permitted to
Tenant, or for any use including the storage of flammable liquids, or hazardous
or toxic substances, without Landlord's prior written approval, which approval
Landlord may withhold in its sole and absolute discretion.

          13.9  Notwithstanding the foregoing, Landlord's consent shall not be
required for any assignment or subletting to an entity controlling, controlled
by, for in common control with Tenant, nor to any entity that succeeds to
Tenant's interest in this Lease by reason of merger, sale/acquisition (whether
by reason of the sale/acquisition of all or substantially all of the stock or
assets of Tenant), consolidation or reorganization; provided, however, with
respect to an assignment or a sublease of all or substantially all of the Leased
Premises, such successor entity shall have a net worth comparable to Tenant as
of the date of such assignment and/or sublease or as of the date of execution of
this Lease, whichever is greater.

     14.  FIRE AND CASUALTY
          -----------------
          14.1  In case of any damage to or destruction of the Building or the
Leased Premises by fire or other casualty occurring during the term of this
Lease which is not covered by the insurance required to be carried by Article
9.1, or which cannot be repaired within two hundred ten (210) days from the
happening of such casualty, or in the event that less than three (3) months will
remain in the Term (inclusive of any exercised renewal options)

                                       15
<PAGE>
upon completion of such repair, then, in such event, the term hereby created
shall, at the option of either party, upon written notice to the other by
certified mail, return receipt requested, within thirty (30) days of such fire
or casualty, cease and become null and void from the date of such destruction or
damage. Landlord shall notify Tenant within thirty (30) days from the happening
of such fire or casualty as to whether or not the Leased Premises can be
restored within the aforementioned two hundred ten (210) day period. However, if
neither party shall elect to cancel this Lease within the thirty (30) day period
hereinabove provided, Landlord shall thereupon repair and restore the Leased
Premises with reasonable speed and dispatch, and the rent shall not be accrued
after said damage or while the repairs and restorations are being made, but
shall recommence immediately after said Leased Premises are restored. Anything
in this Article 14 to the contrary notwithstanding, it is expressly understood
and agreed that Landlord shall be obligated to restore the Leased Premises only
to the extent of such cost as will be equivalent to the proceeds received by
Landlord pursuant to the fire insurance coverage to be provided to Landlord as
in Article 9 provided. If the insurance proceeds are not sufficient to restore
the Leased Premises to substantially the same condition which they were in prior
to the casualty, then Landlord shall have a period of thirty (30) days within
which to determine whether to terminate the term hereby created unless Landlord
and Tenant shall mutually agree to the funding of any such excess construction
costs. In the event of cancellation in accordance with this Article, Tenant
shall immediately surrender the Leased Premises and Tenant's interest in said
Lease to Landlord, and Tenant shall only pay rent to the time of such
destruction or damage, in which event, Landlord may re-enter and repossess the
Leased Premises thus discharged from this Lease and may remove all parties
therefrom.

          14.2  In the event of any other insured casualty, which shall be
repairable within two hundred ten (210) days from the happening of such damage
or casualty, Landlord shall repair and restore the Leased Premises with
reasonable speed and dispatch, and the rent shall abate and be equitably
apportioned as the case may be as to any portion of the Leased Premises which
shall be unfit for occupancy by Tenant, or which cannot be used by Tenant so as
to conduct its business. The payment of rent, however, shall recommence
immediately upon restoration of the Leased Premises.

          14.3  Nothing hereinabove contained with respect to Tenant's right to
abate rent under proper conditions shall be

                                       16
<PAGE>
construed to limit or affect Landlord's right to payment under any claim for
damages covered by the rent insurance policy pursuant to the contract therefor
required to be provided pursuant to Article 9 of this Lease.

          14.4  For the purposes of this Article 14, in determining what
constitutes reasonable speed and dispatch, consideration shall be given for
delays which would be excuses for non-performance as in Article 27 hereinafter
provided (Force Majeure).

          14.5  In the event of such fire or casualty as above provided, wherein
Landlord shall rebuild, Tenant agrees, at its cost and expense, to forthwith
remove any and all of its equipment, fixtures, stock and personal property as
the same may be required to permit Landlord to expedite rebuilding and/or
repair. In any event, Tenant shall assume at its sole risk the responsibility
for damage or security with respect to such property in the event the Building
area where the same may be located has been damaged, until the Building shall be
restored and made secure.

          14.6  Anything in this Article 14 to the contrary notwithstanding, it
is expressly understood and agreed that wherever reconstruction shall be
undertaken, in the event of damage or casualty as in this Article 14 provided,
Landlord shall prosecute such reconstruction with reasonable speed and dispatch.
In the event, however, such reconstruction or repair shall not be completed
within seven (7) months from the date of such damage or casualty, then, in that
event, Tenant shall have the option at the expiration of the seven (7) month
period to terminate the Lease by notice in writing by Tenant to Landlord by
certified mail, return receipt requested. In the event of such termination,
neither party shall thereafter have any further liability, one to the other, in
accordance with the terms and conditions of the Lease.

     15.  COMPLIANCE WITH LAWS, RULES AND REGULATIONS
          -------------------------------------------
          15.1  (i) Tenant covenants and agrees that upon acceptance and
occupancy of the Leased Premises, it will, during the Lease term, promptly, at
Tenant's cost and expense, execute and comply with all statutes, ordinances,
rules, orders, regulations and requirements of the Federal, State and City
Government and of any and all their departments and bureaus, applicable to the
Leased Premises, as the same may require correction, prevention and abatement of
nuisances, violations or other grievances, in, upon or

                                       17
<PAGE>
connected with the Leased Premises, arising from the operations of Tenant
therein.

                (ii) Tenant covenants and agrees, at its own cost and expense,
to comply with such regulations or requests as may be required by the fire or
liability insurance carriers providing insurance for the Leased Premises, and
will further comply with such other requirements that may be promulgated by the
Board of Fire Underwriters, in connection with the use and occupancy by Tenant
of the Leased Premises in the conduct of its business.

                (iii) Tenant covenants and agrees that it will not commit any
nuisance, nor permit the emission of any objectionable sound, noise or odors
which would be violative of any applicable governmental rule or regulation or
would per se create a nuisance. Tenant further covenants and agrees that it will
handle and dispose of all rubbish, garbage and waste in connection with Tenant's
operations in the Leased Premises in accordance with reasonable regulations
established by Landlord from time to time in order to keep the Leased Premises
in an orderly condition and in order to avoid unreasonable emission of dirt,
fumes, odors or debris which may constitute a nuisance or induce pests or
vermin.

                (iv) Notwithstanding anything hereinabove contained in this
Article 15.1, Landlord shall be responsible for compliance with all laws, rules
and regulations which are applicable to the Building as a matter of general
application as an office/warehouse type building. Tenant shall be responsible
for any such compliance which is required due to the specific manner of Tenant's
use and occupancy of the Leased Premises.

          15.2 In case Tenant shall fail or neglect to comply with the aforesaid
statutes, ordinances, rules, orders, regulations and requirements or any of
them, or in case Tenant shall neglect or fail to make any necessary repairs,
then Landlord or Landlord's agents may after ten (10) days' notice (except for
emergency repairs, which may be made immediately) enter said Leased Premises and
make said repairs and comply with any and all of the said statutes, ordinances,
rules, orders, regulations or requirements, at the cost and expense of Tenant
and in case of Tenant's failure to pay therefor, the said cost and expense shall
be added to the next month's rent and be due and payable as such, or Landlord
may deduct the same from the balance of any sum remaining in Landlord's hands.
This provision is in addition to the right of Landlord to

                                       18
<PAGE>
terminate this Lease pursuant to Article 17 hereof by reason of any default on
the part of Tenant, subject to the rights of Tenant as hereinabove mentioned in
the manner as in this Lease otherwise provided.

          15.3  Without limiting anything hereinabove contained in this Article
15, Tenant expressly covenants and agrees to fully comply with the provisions of
the New Jersey Industrial Site Recovery Act (N.J.S.A. 13:1K-6, et seq.)
hereinafter referred to as "ISRA", and all regulations promulgated thereto (or
under its predecessor statute, the New Jersey Environmental Cleanup
Responsibility Act) prior to the expiration or earlier termination of the within
Lease, or at any time that any action of Tenant triggers the applicability of
ISRA. In particular, Tenant agrees that it shall comply with the provisions of
ISRA in the event of any "closing, terminating or transferring" of Tenant's
operations, as defined by and in accordance with the regulations which have been
promulgated pursuant to ISRA. In the event evidence of such compliance is not
delivered to Landlord prior to surrender of the Leased Premises by Tenant to
Landlord, it is understood and agreed that Tenant shall be liable to pay to
Landlord an amount equal to two times the Base Rent then in effect, prorated on
a monthly basis, together with all applicable Additional Rent from the date of
such surrender until such time as evidence of compliance with ISRA has been
delivered to Landlord, and together with any costs and expenses incurred by
Landlord in enforcing Tenant's obligations under this Article 15.3. Evidence of
compliance, as used herein, shall mean a "letter of non-applicability" issued by
the New Jersey Department of Environmental Protection, hereinafter referred to
as "NJDEP", or an approved "no further action letter" or a "remediation action
workplan" which has been fully implemented and approved by NJDEP. Evidence of
compliance shall be delivered to Landlord, together with copies of all
submissions made to, and received from, the NJDEP, including all environmental
reports, test results and other supporting documentation. In addition to the
above, Tenant hereby agrees that it shall cooperate with Landlord in the event
of the termination or expiration of any other lease affecting the Property, or a
transfer of any portion of the property indicated on Schedule "A", or any
interest therein, which triggers the provisions of ISRA. In such case, Tenant
agrees that it shall fully cooperate with Landlord in connection with any
information or documentation which may be requested by the NJDEP. In the event
that any remediation of the Property is required in connection with the conduct
by Tenant of its business in the Leased Premises, Tenant expressly covenants and
agrees that it shall be

                                       19
<PAGE>
responsible for that portion of said remediation which is attributable to
Tenant's use and occupancy thereof. Tenant hereby represents and warrants that
its Standard Industrial Classification No. is 2834, and that Tenant shall not
generate, manufacture, refine, transport, treat, store, handle or dispose of
"hazardous substances" as the same are defined under ISRA and the regulations
promulgated pursuant thereto. Tenant hereby agrees that it shall promptly inform
Landlord of any change in its SIC number or the nature of the business to be
conducted in the Leased Premises. The within covenants shall survive the
expiration or earlier termination of the Lease term.

     16.  INSPECTION BY LANDLORD
          ----------------------
          Tenant agrees that Landlord's agents, and other representatives, shall
have the right, upon reasonable piror oral notice to Tenant, during normal
business hours, to enter into and upon the Leased Premises, or any part thereof,
at all reasonable hours for the purpose of examining the same, or for exhibiting
the same to prospective tenants [during the last twelve (12) months of the term
of this Lease, or at any time that Tenant is in default hereunder] and
purchasers (at all times) in the presence of a representative of Tenant (except
in the event of emergency) or making such repairs or alterations therein as may
be necessary for the safety and preservation thereof, without unduly or
unreasonably disturbing the operations of Tenant (except in the event of
emergency).

     17.  DEFAULT BY TENANT
          -----------------
          17.1  Each of the following shall be deemed a default by Tenant and
breach of this Lease:

          (1)   (i) filing of a petition by Tenant for adjudication as a
     bankrupt, or for reorganization, or for an arrangement under any federal or
     state statute;

                (ii) dissolution or liquidation of Tenant;

                (iii) appointment of a temporary or permanent receiver or a
     temporary or permanent trustee of all or substantially all the property of
     Tenant;

                (iv) taking possession of the agency pursuant to statutory
     authority for dissolution, rehabilitation, reorganization or liquidation of
     Tenant;

                                       20
<PAGE>
                (v) making by Tenant of an assignment for the benefit of
     creditors; or

                (vi) abandonment, desertion or vacation of the Leased Premises
     by Tenant.

          If any event mentioned in this subdivision (1) shall occur, Landlord
     may thereupon or at any time thereafter elect to cancel this Lease by ten
     (10) days' notice to Tenant, and this Lease shall terminate on the day in
     such notice specified with the same force and effect as if that date were
     the date herein fixed for the expiration of the term of the Lease.

          (2)   (i) Default in the payment of the Base Rent or Additional Rent
     herein reserved or any part thereof for a period of seven (7) days after
     the same is due and payable as in this Lease required.

                (ii) A default in the performance of any other covenant or
     condition of this Lease on the part of Tenant to be performed for a period
     of thirty (30) days after written notice. For purposes of this subdivision
     (2) (ii) hereof, no default on the part of Tenant in performance of work
     required to be performed or acts to be done or conditions to be modified
     shall be deemed to exist if steps shall have been commenced by Tenant
     diligently after notice to rectify the same and shall be prosecuted to
     completion with reasonable diligence, subject, however, to unavoidable
     delays.

          17.2 In case of any such default under Article 17.1(2) and at any time
thereafter following the expiration of the respective grace periods above
mentioned, Landlord may serve a notice upon Tenant electing to terminate this
Lease upon a specified date not less than five (5) days after the date of
serving such notice and this Lease shall then expire on the date so specified as
if that date has been originally fixed as the expiration date of the term herein
granted; however, a default under Article 17.1(2) hereof shall be deemed waived
if such default is made good before the date specified for termination in the
notice of termination served on Tenant.

          17.3 In case this Lease shall be terminated as hereinbefore provided,
or by summary proceedings or otherwise, Landlord or its agents may, immediately
or any time thereafter, re-enter and resume possession of the Leased Premises or
such part

                                       21
<PAGE>
thereof, and remove all persons and property therefrom, either by summary
proceedings or by a suitable action or proceeding at law without being liable
for any damages, provided any entry pursuant to the foregoing shall be in
accordance with law. No re-entry by Landlord shall be deemed an acceptance of a
surrender of this Lease.

          17.4  In case this Lease shall be terminated as hereinafter provided,
or by summary proceedings or otherwise, Landlord may, in its own name and in its
own behalf, relet the whole or any portion of the Leased Premises, for any
period equal to or greater or less than the remainder of the then current term,
for any sum which it may deem reasonable, to any tenant which it may deem
suitable and satisfactory, and for any use and purpose which it may deem
appropriate, and in connection with any such Lease Landlord may make such
changes in the character of the improvements on the Leased Premises as Landlord
may determine to be appropriate or helpful in effecting such lease, and Landlord
may grant concessions or free rent. Landlord agrees that it will take reasonable
steps to mitigate Tenant's damages. It is specifically understood and agreed
that Landlord, by listing the Leased Premises for lease with a recognized real
estate broker doing business in the Middlesex County, New Jersey, shall be
conclusive proof of Landlord's reasonable efforts to mitigate Tenant's damages.
Landlord shall not in any event be required to pay Tenant any surplus of any
sums received by Landlord on a reletting of the Leased Premises in excess of the
rent reserved in this Lease.

          17.5  (1) Whether or not this Lease be terminated by summary
proceedings, or otherwise, as provided in this Article 17, and whether or not
the Leased Premises be relet, Landlord shall be entitled to recover from Tenant,
the following:

                (i) a sum equal to all expenses, if any, including reasonable
     counsel fees, incurred by Landlord in recovering possession of the Leased
     Premises, the costs of reletting the Leased Premises, and all reasonable
     costs and charges for the care of the Leased Premises while vacant, which
     damages shall be due and payable by Tenant to Landlord at such time or
     times as such expenses shall have been incurred by Landlord; and

                (ii) a sum equal to all damages set forth in this Article 17 and
     in Article 18 hereinafter referred to.

                                       22
<PAGE>
                (2) Without any previous notice or demand, separate actions may
be maintained by Landlord against Tenant from time to time to recover any
damages which, at the commencement of any such action, have then or theretofore
become due and payable to Landlord under this Article 17 and subsections hereof
without waiting until the end of the then current term.

                (3) All sums which Tenant has agreed to pay by way of taxes,
sewer charges, water rents or water meter charges, insurance premiums and other
similar items becoming due from time to time under the terms of this Lease,
shall be deemed Additional Rent reserved in this Lease within the meaning of
this Article 17 and subsections hereof. Notwithstanding anything in this Lease
to the contrary, all amounts payable by Tenant to or on behalf of Landlord under
this Lease, whether or not expressly denominated as rent, shall constitute rent
for the purposes of section 502(b)(6)of the Bankruptcy Code, 11 U.S.C. Section
502(b)(6), or any successor statute.

                (4) LANDLORD AND TENANT EXPRESSLY WAIVE THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION BROUGHT TO ENFORCE OR INTERPRET THE TERMS AND CONDITIONS OF
THIS LEASE.

     18.  LIABILITY OF TENANT FOR DEFICIENCY
          ----------------------------------
          In the event that the relation of Landlord and Tenant may cease or
terminate by reason of the default by Tenant and the re-entry of Landlord as
permitted by the terms and conditions contained in this Lease or by the
ejectment of Tenant by summary proceedings or other judicial proceedings, or
after the abandonment of the Leased Premises by Tenant, it is hereby agreed that
Tenant shall remain liable to pay in monthly payments the rent which shall
accrue subsequent to the re-entry by Landlord, and Tenant expressly agrees to
pay as damages for the breach of the covenants herein contained the difference
between the rent reserved and the rent collected and received, if any, by
Landlord, during the remainder of the unexpired term, as the amount of such
difference or deficiency shall from time to time be ascertained. Anything herein
contained to the contrary notwithstanding, the rent referred to shall include
the stated reserved Base Rent together with all Additional Rent and charges
required to be paid by Tenant under the Lease including but not limited to taxes
and insurance costs, and the costs of re-renting.

                                       23
<PAGE>
     19.  NOTICES
          -------
          All notices required or permitted to be given to Landlord shall be
given by certified mail, return receipt requested, or by overnight courier, at
the address hereinbefore set forth on the first page of this Lease, and/or such
other place as Landlord may designate in writing, with a copy thereof being
delivered by regular mail to EPSTEIN, FITZSIMMONS, BROWN, RINGLE, GIOIA & JACOBS
P.C., Attention: ROBERT K. BROWN, ESQ., 245 Green Village Road, P.O. Box 901,
Chatham Township, New Jersey 07928.

          All notices required or permitted to be given to Tenant shall be given
by certified mail, return receipt requested, or by overnight courier at the
address hereinbefore set forth on the first page of this Lease, and/or such
other place as Tenant shall designate in writing.

     20.  NON-WAIVER BY LANDLORD
          ----------------------
          The failure of Landlord to insist upon strict performance of any of
the covenants or conditions of this Lease, or to exercise any option of Landlord
herein conferred in any one or more instances, shall not be construed as a
waiver by Landlord of any of its rights or remedies in this Lease, and shall not
be construed as a waiver, relinquishment or failure of any such covenants,
conditions, or options, but the same shall be and remain in full force and
effect.

     21.  RIGHT OF TENANT TO MAKE ALTERATIONS AND IMPROVEMENTS
          ----------------------------------------------------
          21.1  Tenant may make alterations, additions or improvements to the
Leased Premises only with the prior written consent of Landlord, which consent
shall not be unreasonably withheld, provided such alterations, additions or
improvements do not require structural changes in the Leased Premises, or do not
lessen the value of the Leased Premises or the Building. Any consent which
Landlord may give shall be conditioned upon Tenant furnishing to Landlord,
detailed plans and specifications with respect to any such changes, to be
approved by Landlord in writing. As a condition of such consent, Landlord
reserves the right to require Tenant to remove, at Tenant's sole cost and
expense, any such alterations or additions prior to the expiration of the Lease
term, which election shall be made by landlord at the time it gives its consent
to any such alteration or addition. If Landlord does not require such removal,
any such alterations or additions shall be deemed to be part of the realty upon
installation. All such alterations, additions or improvements shall be only in
conformity

                                       24
<PAGE>
with applicable governmental and insurance company requirements and regulations
applicable to the Leased Premises. Landlord reserves the right to require Tenant
to use Landlord's designated contractors in the event of any changes to the
mechanical, electrical, or fire safety systems serving the Leased Premises.
Tenant shall hold and save Landlord harmless and indemnify Landlord against any
claim for damage or injury in connection with any of the foregoing work which
Tenant may make as hereinabove provided.

          21.2 Nothing herein contained shall be construed as a consent on the
part of Landlord to subject the estate of Landlord to liability under the
Construction Lien Law of the State of New Jersey, it being expressly understood
that Landlord's estate shall not be subject to such liability.

     22.  NON-LIABILITY OF LANDLORD
          -------------------------
          22.1  It is expressly understood and agreed by and between the parties
to this agreement that Tenant shall assume all risk of damage to its property,
equipment and fixtures occurring in or about the Leased Premises, whatever the
cause of such damage or casualty.

          22.2 It is expressly understood and agreed that in any event, Landlord
shall not be liable for any damage or injury to property or person caused by or
resulting from steam, electricity, gas, water, rain, ice or snow, or any leak or
flow from or into any part of the Building, or from any damage or injury
resulting or arising from any other cause or happening whatsoever.

     23.  WARRANTY OF TITLE
          -----------------
          Landlord represents that it has title to the lands and premises which
are the subject of this Lease and that it has the full right, capacity and
authority to enter into the within Lease Agreement.

     24.  RESERVATION OF EASEMENT
          -----------------------
          Landlord reserves the right, easement and privilege to enter on the
Leased Premises, Building and Property in order to install, at its own cost and
expense, any storm drains and sewers and/or utility lines in connection
therewith as may be required by Landlord. It is understood and agreed that if
such work as may be required by Landlord requires an installation which may
displace any paving, lawn, seeded area or shrubs, Landlord, shall, at its own
cost and expense, restore said paving, lawn, seeded area or shrubs. Landlord
covenants that the foregoing work shall not

                                       25
<PAGE>
unreasonably interfere with the normal operation of Tenant's business, and
Landlord shall indemnify and save Tenant harmless in connection with such
installations.

     25.  AIR, GROUND AND WATER POLLUTION
          -------------------------------
          Tenant expressly covenants and agrees to indemnify, defend, and save
Landlord harmless against any claim, damage, liability, costs, penalties, or
fines which Landlord may suffer as a result of air, ground or water pollution
caused by Tenant in its use of the Leased Premises. Tenant covenants and agrees
to notify Landlord immediately of any claim or notice served upon it with
respect to any such claim Tenant is causing water, ground or air pollution; and
Tenant, in any event, will take immediate steps to halt, remedy or cure any
pollution of air, ground or water caused by Tenant by its use of the Leased
Premises. Landlord hereby agrees that it shall indemnify, defend and save
harmless Tenant from and against any and all claims or liabilities incurred in
connection with the environmental condition of the Leased Premises existing as
of the Commencement Date hereunder. The foregoing covenants shall survive the
expiration or earlier termination of this Lease.

     26.  FINANCIAL INFORMATION
          ---------------------
          Tenant hereby agrees to deliver, upon Landlord's written request,
sufficient financial information to any proposed mortgagee of Landlord in order
that said proposed mortgagee may properly evaluate the financial condition of
Tenant in connection with any proposed mortgage loan affecting the Building. All
such information shall be kept confidential by Landlord and its proposed
mortgagees, and upon request of Tenant, Landlord and any such proposed mortgagee
shall execute to Tenant a non-disclosure agreement in form reasonably acceptable
to Landlord and such proposed mortgagee.

     27.  FORCE MAJEURE
          -------------
          Except for the obligation of Tenant to pay rent and other charges as
in this Lease provided, the period of time during which Landlord or Tenant is
prevented from performing any act required to be performed under this Lease by
reason of fire, catastrophe, strikes, lockouts, civil commotion, acts of God or
the public enemy, government prohibitions or preemptions, embargoes, inability
to obtain material or labor by reason of governmental regulations or
prohibitions, the act or default of the other party, or other events beyond the
reasonable control of Landlord or Tenant, as the case may be, shall be added to
the time for

                                       26
<PAGE>
performance of such act. This provision shall not, however, be construed to
extend the Lease term under any circumstances.

     28.  STATEMENTS BY LANDLORD AND TENANT; LANDLORD'S CONSENT
          -----------------------------------------------------
          28.1  Landlord and Tenant agree at any time and from time to time upon
not less than ten (10) days' prior notice from the other to execute, acknowledge
and deliver to the party requesting same, a statement in writing, certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), that it is not in default (or if claimed to be in
default, stating the amount and nature of the default), specifying the dates to
which the Base Rent and other charges have been paid in advance, if any, and
setting forth the Commencement Date and the date of expiration hereunder; it
being intended that any such statement delivered pursuant to this paragraph may
be relied upon as to the facts contained therein.

          28.2  Upon Tenant's request, Landlord further agrees to execute a
Landlord's Consent and Waiver in connection with any current or future financing
transaction of Tenant relating to its property, equipment and fixtures, waiving
any Landlord's lien which Landlord may possess against said property equipment
and fixtures. Any such Landlord's Consent and Waiver shall be in a form which is
reasonably acceptable to Landlord.

     29.  CONDEMNATION
          ------------
          29.1  If due to condemnation or taking or seizure by any authority
having the right of eminent domain, (i) more than fifteen (15%) per cent of the
Leased Premises is taken, or (ii) in the event that more than twenty-five (25%)
per cent of the Property is taken (including the parking areas, but exclusive of
front, side and rear set back areas), or (iii) if access to the Leased Premises
be denied, which taking in the manner hereinabove referred to and in excess of
the foregoing percentage amounts shall unreasonably or unduly interfere with the
use of the Building or parking area, or deny access to the Leased Premises, then
and in any of such events as hereinabove provided, the Lease term created shall,
at the option of Tenant, terminate, cease and become null and void from the date
when the authority exercising the power of eminent domain takes or interferes
with the use of the Leased Premises, its use of the ground area, parking area,
or area of access to the Leased Premises. Tenant shall only be responsible for
the payment of rent until the time of surrender. In any event, no part of
Landlord's

                                       27
<PAGE>
condemnation award shall belong to or be claimed by Tenant. Without diminishing
Landlord's award, Tenant shall have the right to make a claim against the
condemning authority for such independent claim which it may have and as may be
allowed by law, for costs and damages due to relocating, moving and other
similar costs and charges directly incurred by Tenant and resulting from such
condemnation.

          29.2  In the event of any partial taking which would not be cause for
termination of the within Lease or in the event of any partial taking in excess
of the percentages provided in Article 29.1, and in which event Tenant shall
elect to retain the balance of the Leased Premises remaining after such taking,
then and in either event, the rent shall abate in an amount mutually to be
agreed upon between Landlord and Tenant based on the relationship that the
character of the property taken bears to the property which shall remain after
such condemnation. In any event, no part of Landlord's condemnation award shall
belong to or be claimed by Tenant. However, Landlord shall, to the extent
permitted by applicable law and as the same may be practicable on the site of
the Leased Premises, at Landlord's sole cost and expense, promptly make such
repairs and alterations in order to restore the Building, Property and/or
improvements to the extent of the condemnation award.

     30.  QUIET ENJOYMENT
          ---------------
          Landlord further covenants that Tenant, on paying the rental and
performing the covenants and conditions contained in this Lease, shall and may
peaceably and quietly have, hold and enjoy the Leased Premises for the term
aforesaid.

     31.  SURRENDER OF PREMISES
          ---------------------
          On the last day, or earlier permitted termination of the Lease term,
Tenant shall quit and surrender the Leased Premises in good and orderly
condition and repair (reasonable wear and tear, and damage by fire or other
casualty excepted) and shall deliver and surrender the Leased Premises to
Landlord peaceably, together with all alterations, additions and improvements
in, to or on the Leased Premises made by Tenant as permitted under the Lease.
Landlord reserves the right, however, to require Tenant at its cost and expense
to remove any alterations or improvements installed by Tenant and not permitted
or consented to by Landlord pursuant to the terms and conditions of the Lease,
so as to restore the Leased Premises to the condition found at the inception of
the Lease term, which covenant by Tenant shall survive the surrender and the

                                       28
<PAGE>
delivery of the Leased Premises as provided hereunder. Tenant expressly
covenants and agrees that the Leased Premises shall be surrendered to Landlord
in "broom clean" condition. Prior to the expiration of the Lease term Tenant
shall remove all of its property, fixtures, equipment and trade fixtures from
the Leased Premises. All property not removed by Tenant shall be deemed
abandoned by Tenant, and Landlord reserves the right to charge the reasonable
cost of removal, storage and disposal of the same to Tenant, which obligation
shall survive the Lease termination and surrender hereinabove provided. If the
Leased Premises are not surrendered to the end of the Lease term, Tenant shall
indemnify Landlord against loss or liability resulting from delay by Tenant in
surrendering the Leased Premises, including, without limitation, any claims made
by any succeeding tenant founded on the delay.

     32.  INDEMNITY
          ---------
          Anything in this Lease to the contrary notwithstanding, and without
limiting Tenant's obligation to provide insurance pursuant to Article 9
hereunder, Tenant covenants and agrees that it will indemnify, defend and save
harmless Landlord against and from all liabilities, obligations, damages,
penalties, claims, costs, charges and expenses, including without limitation
reasonable attorneys' fees, which may be imposed upon or incurred by Landlord by
reason of any of the following occurring during the term of this Lease:

          (i)   Any matter, cause or thing arising out of use, occupancy,
     control or management of the Leased Premises and any part thereof;

          (ii)  Any negligence on the part of Tenant or any of its agents,
     contractors, servants, employees, licensees or invitees;

          (iii) Any accident, injury, damage to any person or property occurring
     in, or about the Leased Premises;

          (iv)  Any failure on the part of Tenant to perform or comply with any
     of the covenants, agreements, terms or conditions contained in this Lease
     on its part to be performed or complied with.

          (v)   Subject to the exception set forth in Article 22.1, the
     foregoing shall not require indemnity by Tenant in the event of damage or
     injury occasioned by the negligence or

                                       29
<PAGE>
     acts of commission or omission of Landlord, its agents, servants or
     employees.

          Landlord shall promptly notify Tenant of any such claim asserted
against it and shall promptly send to Tenant copies of all papers or legal
process served upon it in connection with any action or proceeding brought
against Landlord by reason of any such claim.

     33.  SHORT FORM LEASE
          ----------------
          It is understood between the parties hereto that this Lease will not
be recorded, but that a short form lease, describing the property leased hereby,
giving the term of this Lease, and making particular mention of any special
clauses as herein contained, may be recorded by Landlord in accordance with the
laws governing and regulating the recording of such documents in the State of
New Jersey.

     34.  LEASE CONSTRUCTION
          ------------------
          This Lease shall be construed pursuant to the laws of the State of New
Jersey.

     35.  BIND AND INURE CLAUSE
          ---------------------
          The terms, covenants and conditions of the within Lease shall be
binding upon and inure to the benefit of each of the parties hereto, their
respective executors, administrators, heirs, successors and assigns, as the case
may be.

     36.  DEFINITIONS
          -----------
          The neuter gender, when used herein and in the acknowledgment
hereafter set forth, shall include all persons and corporations, and words used
in the singular shall include words in the plural where the text of the
instrument so requires.

     37.  NET RENT
          --------
          It is the purpose and intent of Landlord and Tenant that the rent
shall be absolutely net to Landlord, so that this Lease shall yield, net, to
Landlord, the rent specified in Article 3 hereof in each month during the term
of the Lease, and that all costs, expenses and obligations of every kind and
nature whatsoever relating to the Leased Premises which may arise or become due
during or out of the term of this Lease, shall be paid by Tenant, except for
such obligations and charges as have otherwise expressly been assumed by
Landlord in accordance with the terms and conditions of this Lease. Nothing
herein shall require Tenant to

                                       30
<PAGE>
undertake obligations in connection with the sale or mortgaging of the Leased
Premises, unless otherwise expressly provided in accordance with the terms and
conditions of this Lease.

     38.  DEFINITION OF TERM OF "LANDLORD"
          --------------------------------
          When the term "Landlord" is used in this Lease it shall be construed
to mean and include only the owner of the fee title of the Property. Upon the
transfer by Landlord of the fee title hereunder, Landlord shall advise Tenant in
writing by certified mail, return receipt requested of the name of Landlord's
transferee. In such event, the then Landlord shall be automatically freed and
relieved from and after the date of such transfer of title of all personal
liability with respect to the performance of any of the covenants and
obligations on the part of Landlord herein contained to be performed, provided
any such transfer and conveyance by Landlord is expressly subject to the
assumption by the grantee or transferee of the obligations of Landlord to be
performed pursuant to the terms and conditions of the within Lease.

     39.  COVENANTS OF FURTHER ASSURANCES
          -------------------------------
          If, in connection with obtaining financing for the Building, the
Mortgage Lender shall request reasonable modifications to this Lease as a
condition to such financing, Tenant will not unreasonably withhold, delay or
refuse its consent thereto, provided that such modifications do not in Tenant's
reasonable judgment increase the obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created or Tenant's use and
enjoyment of the Leased Premises.

     40.  LANDLORD'S REMEDIES
          -------------------
          40.1  The rights and remedies given to Landlord in this Lease are
distinct, separate and cumulative remedies, and no one of them, whether or not
exercised by Landlord, shall be deemed to be in exclusion of any of the others.

          40.2  In addition to any other legal remedies for violation or breach
by or on the part of Tenant or by any undertenant or by anyone holding or
claiming under Tenant or any one of them, of the restrictions, agreements or
covenants of this Lease on the part of Tenant to be performed or fulfilled, such
violation or breach shall be restrainable by injunction at the suit of Landlord.

                                       31
<PAGE>
          40.3  No receipt of money by Landlord from any receiver, trustee or
custodian, debtor in possession, or any permitted subtenant, shall reinstate,
continue or extend the term of this Lease or affect any notice theretofore given
to Tenant, or to any such receiver, trustee or custodian, debtor in possession,
or any permitted subtenant, or operate as a waiver or estoppel of the right of
Landlord to recover possession of the Leased Premises for any of the causes
therein enumerated by any lawful remedy; and the failure of Landlord to enforce
any covenant or condition by reason of its breach by Tenant shall not be deemed
to void or affect the right of Landlord to enforce the same covenant or
condition on the occasion of any subsequent default or breach.

          40.4  Tenant agrees that it shall reimburse Landlord for Landlord's
reasonable attorney's fees incurred in enforcing the terms and conditions of
this Lease on the part of Tenant to be performed. Tenant further agrees to
reimburse Landlord for Landlord's attorney's fees incurred in connection with
the review by Landlord of any Landlord's waiver, assignment or sublet agreement
or any other documentation reviewed by Landlord at Tenant's request.

     41.  COVENANT AGAINST LIENS
          ----------------------
          Tenant agrees that it shall not knowingly encumber, or suffer or
permit to be encumbered, the Leased Premises or the fee thereof by any lien,
charge or encumbrance, and Tenant shall have no authority to mortgage or
hypothecate this Lease in any way whatsoever. The violations of this Article
shall be considered a breach of this Lease.

     42.  BROKERAGE
          ---------
          The parties mutually represent to each other that SHELDON GROSS REALTY
INC. and RESOURCE REALTY OF CENTRAL NJ are the sole brokers who negotiated and
consummated the within transaction, and that neither party dealt with any other
broker in connection with the within agreement, it being understood and agreed
that the Landlord shall be responsible, at its sole cost and expense, to pay the
real estate brokerage commission in connection with this transaction. Landlord
agrees to indemnify, defend and save harmless Tenant in connection with the
claims of any other real estate broker claiming commissions in connection with
the within transaction and claiming authority from Landlord. Tenant agrees to
indemnify, defend and save harmless Landlord in connection with the claims of
any other real estate broker claiming commissions in

                                       32
<PAGE>
connection with the within transaction and claiming authority from Tenant.

     43.  SUBORDINATION OF LEASE
          ----------------------
          This Lease shall be subject and subordinate at all times to the lien
of any mortgages or ground rents or other encumbrances now or hereafter placed
on the Complex, Building and Leased Premises without the necessity of any
further instrument or act on the part of Tenant to effectuate such
subordination, but Tenant covenants and agrees to execute and deliver upon
demand such further instrument or instruments evidencing such subordination of
the Lease to the lien of any such mortgage or ground rent or other encumbrances
as shall be desired by a mortgagee or proposed mortgagee or by any person.
Landlord shall use reasonable efforts to obtain from its current mortgagee, and
Landlord shall obtain from all future mortagees of the Leased Premises, a
Subordination, Non-Disturbance and Attornment Agreement for the benefit of
Tenant; any such Subordination, Non-Disturbance and Attornment Agreement shall
be written on the applicable mortgagee's customary form.

     44.  MUTUAL PARKING
          --------------
          It is expressly understood and agreed between the Landlord and Tenant
that the entire parking area and access driveways will be for the mutual use and
benefit of the Landlord and Tenant hereunder, and/or the Landlord's other
tenants in the building. Tenant shall be entitled to utilize, at no additional
cost, twenty eight (28) parking spaces in the parking area; at least ten (10) of
said spaces shall be used by Tenant in the parking area to the rear of the
Leased Premises. The parties agree that they will not permit the access
driveways to be blocked so as to unreasonably interfere with the use of said
access driveways and parking area.

     45.  SECURITY
          --------
          Upon execution of this Lease, the Tenant shall deposit with the
Landlord the sum of THIRTY TWO THOUSAND NINE HUNDRED SEVENTY AND 00/100
($32,970.00) DOLLARS as security for the full and faithful performance of this
Lease upon the part of the Tenant to be performed. After the first (1st)
anniversary of the Commencement Date of this Lease, and providing the Tenant is
not in default hereunder and has performed all of the conditions of this Lease,
the Landlord shall return the said sum of TEN THOUSAND NINE HUNDRED NINETY AND
00/100 ($10,990.00) DOLLARS to the Tenant. Upon termination of this Lease, and
providing the Tenant has not been in default hereunder and has performed all of
the conditions of this

                                       33
<PAGE>
Lease, the Landlord shall return the balance of the security deposit then
remaining in Landlord's hands to the Tenant. Anything herein contained to the
contrary notwithstanding, it is expressly understood and agreed that the said
security deposit shall not bear interest. Tenant covenants and agrees that it
will not assign, pledge, hypothecate, mortgage or otherwise encumber the
aforementioned security during the term of this Lease. It is expressly
understood and agreed that the Landlord shall have the right to co-mingle the
security funds with its general funds and said security shall not be required to
be segregated.

     46.  LIMIT OF LANDLORD'S LIABILITY
          -----------------------------
          Tenant shall look solely to Landlord's estate in the Property for the
enforcement of any judgment or decree requiring the payment of money to Tenant
by reason of any default or breach by Landlord under this Lease. In no event
shall there be any personal liability on the part of Landlord (or its individual
partners) beyond its interest in the Property and no other assets of Landlord
(or its individual partners) shall be subject to levy, execution, attachment or
any other legal process.

     47.  ADJUSTMENT OF TENANT'S PERCENTAGE
          ---------------------------------
          In the event that the Building (or Complex) is modified, enlarged or
expanded so that the total square footage of said Building (or Complex) is more
or less than 59,740 square feet (or in the event the total square footage of the
Complex is more or less than 165,740 square feet), Tenant's Percentage for all
Lease purposes shall be adjusted accordingly.

     48.  SURVIVAL OF OBLIGATION
          ----------------------
          It is expressly understood and agreed that in the event there are any
obligations of Tenant with respect to payment or performance as required under
the terms and conditions of this Lease that shall have not been performed prior
to the expiration or termination of the Lease in accordance with its terms, such
obligation, including the obligation to make rent adjustments and other Lease
adjustments, shall survive the expiration or termination of the Lease term and
surrender of the Leased Premises by Tenant to Landlord.

     49.  OPTION TO RENEW
          ---------------
          Provided Tenant is not in default pursuant to the terms and conditions
of this Lease, Tenant is hereby given the right and privilege to renew the
within Lease, for one (l) three (3) year renewal period, to commence at the end
of the initial term

                                       34
<PAGE>
of this Lease, which renewal shall be upon the same terms and conditions as in
this Lease contained, except as follows:

          (l)   During the three (3) year renewal term, there shall be paid
annually Base Rent in the amount of ONE HUNDRED THIRTY SIX THOUSAND TWO HUNDRED
SEVENTY SIX AND 00/100 ($136,276.00) DOLLARS per annum payable in equal
installments of ELEVEN THOUSAND THREE HUNDRED FIFTY SIX AND 33/100 ($11,356.33)
DOLLARS per month. Tenant shall continue to pay all Additional Rent and other
charges required by the terms and conditions of this Lease during said three (3)
year renewal term.

          (2)   The right, option, and privilege of Tenant to renew this Lease
as hereinabove set forth is expressly conditioned upon Tenant delivering to
Landlord, in writing, by certified mail, return receipt requested, twelve (12)
months's prior notice of its intention to renew, which notice shall be given to
Landlord by Tenant no later than twelve (12) months prior to the date fixed for
termination of the original term of this Lease.

     50.  EXECUTION AND DELIVERY
          ----------------------
          The submission of the within Lease by Landlord to Tenant for review
and approval shall not be deemed an option to lease, an offer to lease, or a
reservation of the Leased Premises in favor of Tenant, it being intended that no
rights or obligations shall be created by Landlord or Tenant until the execution
and delivery of the within Lease by Landlord and Tenant, one to the other.

          IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals or caused these presents to be signed by its proper corporate officers and
caused its proper corporate seal to be hereunto affixed, the day and year first
above written.

WITNESS:                                   KENNEDY MONTROSE, L.L.C.

                                           By:                        (L.S.)
------------------------                      ------------------------------
                                              Joshua Adler, Manager

ATTEST:                                    ABLE LABORATORIES

                                           By:
------------------------                      ------------------------------

                                       35
<PAGE>

STATE OF NEW JERSEY )
                    ) SS.:
COUNTY OF           )

          BE IT REMEMBERED, that on this       day of              ,
2001, before me the subscriber, personally appeared JOSHUA ADLER, who, I am
satisfied, is a Manager of KENNEDY MONTROSE, L.L.C., a New Jersey Limited
Liability Company, the Landlord mentioned in the within Instrument, and
thereupon he acknowledged that he signed, sealed and delivered the same as his
act and deed, for the uses and purposes therein expressed.

                                                  ______________________________

STATE OF            )
                    ) SS.
COUNTY OF           )

          BE IT REMEMBERED, that on this     day of
2001, before me, the subscriber,                                      personally
appeared                                          ,  who, I am satisfied, is the
person who signed the within Instrument as                                    of
ABLE LABORATORIES, a Delaware Corporation, the Tenant named therein, and he
thereupon acknowledged that the said instrument made by the corporation and
sealed with its corporate seal, was signed, sealed with the corporate seal and
delivered by him as such officer and is the voluntary act and deed of the
corporation, made by virtue of authority from its Board of Directors.

                                                  ______________________________

<PAGE>

                          L E A S E   A G R E E M E N T
                          - - - - -   - - - - - - - - -

BY AND BETWEEN:

KENNEDY MONTROSE, L.L.C.,
a New Jersey Limited Liability Company,

                     "Landlord"

         -and-

ABLE LABORATORIES
a Delaware Corporation,

                     "Tenant"

PREMISES: 3601 Kennedy Road
          South Plainfield, New Jersey 07080

PREPARED BY:  ROBERT K. BROWN, ESQ.

DATED:
<PAGE>

                          L E A S E   A G R E E M E N T
                          - - - - -   - - - - - - - - -

BY AND BETWEEN

KENNEDY MONTROSE, L.L.C.,
a New Jersey Limited Liability Company,

                     "Landlord"

         -and-

ABLE LABORATORIES
a Delaware Corporation,

                     "Tenant"

-------------------------------------------
DATED:
-------------------------------------------

                                   LAW OFFICES

                           EPSTEIN, FITZSIMMONS, BROWN
                             RINGLE, GIOIA & JACOBS
                           A Professional Corporation
                             245 Green Village Road
                                  P.O. Box 901
                         Chatham Township, NJ 07928-0901
                                 (973) 593-4900
                               Fax (973) 593-4966

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

1.       LEASED PREMISES......................................................1
         ---------------

2.       TERM OF LEASE........................................................2
         -------------

3.       RENT.................................................................2
         ----

4.       CONDITION OF LEASED PREMISES.........................................4
         ----------------------------

5.       USE..................................................................5
         ---

6.       REPAIRS AND MAINTENANCE..............................................5
         -----------------------

7.       UTILITIES............................................................6
         ---------

8.       TAXES................................................................6
         -----

9.       INSURANCE............................................................7
         ---------

10.      SIGNS................................................................9
         -----

11.      FIXTURES.............................................................9
         --------

12.      GLASS...............................................................10
         -----

13.      ASSIGNMENT AND SUBLETTING...........................................10
         -------------------------

14.      FIRE AND CASUALTY...................................................12
         -----------------

15.      COMPLIANCE WITH LAWS, RULES AND REGULATIONS.........................13
         -------------------------------------------

16.      INSPECTION BY LANDLORD..............................................15
         ----------------------

17.      DEFAULT BY TENANT...................................................15
         -----------------

18.      LIABILITY OF TENANT FOR DEFICIENCY..................................18
         ----------------------------------

19.      NOTICES.............................................................18
         -------

20.      NON-WAIVER BY LANDLORD..............................................18
         ----------------------

21.      RIGHT OF TENANT TO MAKE ALTERATIONS AND IMPROVEMENTS................18
         ----------------------------------------------------
<PAGE>
22.      NON-LIABILITY OF LANDLORD...........................................19
         -------------------------

23.      WARRANTY OF TITLE...................................................19
         -----------------

24.      RESERVATION OF EASEMENT.............................................19
         -----------------------

25.      AIR, GROUND AND WATER POLLUTION.....................................20
         -------------------------------

26.      FINANCIAL INFORMATION...............................................20
         ---------------------

27.      FORCE MAJEURE.......................................................20
         -------------

28.      STATEMENTS BY LANDLORD AND TENANT; LANDLORD'S CONSENT...............20
         -----------------------------------------------------

29.      CONDEMNATION........................................................21
         ------------

30.      QUIET ENJOYMENT.....................................................21
         ---------------

31.      SURRENDER OF PREMISES...............................................22
         ---------------------

32.      INDEMNITY...........................................................22
         ---------

33.      SHORT FORM LEASE....................................................23
         ----------------

34.      LEASE CONSTRUCTION..................................................23
         ------------------

35.      BIND AND INURE CLAUSE...............................................23
         ---------------------

36.      DEFINITIONS.........................................................23
         -----------

37.      NET RENT............................................................23
         --------

38.      DEFINITION OF TERM OF "LANDLORD"....................................23
         --------------------------------

39.      COVENANTS OF FURTHER ASSURANCES.....................................24
         -------------------------------

40.      LANDLORD'S REMEDIES.................................................24
         -------------------

41.      COVENANT AGAINST LIENS..............................................24
         ----------------------

42.      BROKERAGE...........................................................25
         ---------

43.      SUBORDINATION OF LEASE..............................................25
         ----------------------
<PAGE>
44.      MUTUAL PARKING......................................................25
         --------------

45.      SECURITY............................................................25
         --------

46.      LIMIT OF LANDLORD'S LIABILITY.......................................26
         -----------------------------

47.      ADJUSTMENT OF TENANT'S PERCENTAGE...................................26
         ---------------------------------

48.      SURVIVAL OF OBLIGATION..............................................26
         ----------------------

49.      OPTION TO RENEW.....................................................26
         ---------------

50.      EXECUTION AND DELIVERY..............................................27
         ----------------------

         SCHEDULE "A"   -     METES AND BOUNDS DESCRIPTION

         SCHEDULE "B"   -     PLAN

         SCHEDULE "C"   -     UTILITY CHARGES
<PAGE>

                                 REFERENCE DATA
                                 --------------

The following definitions shall be applicable for all purposes of this Lease,
wherever the same are initially capitalized:

Base Rent:  See Article 3.1.

Additional Rent: See Article 3.2.

Building: 3601 Kennedy Road, South Plainfield, New Jersey, containing
approximately 59,740 gross rentable square feet.

Commencement Date: October 1, 2001, subject to the provisions of Article 2.2.

Expiration Date: September 30, 2004, subject to the provisions of Article 2.2.

Leased Premises: The premises shown on the building plan annexed to this Lease
as Schedule "B", which Leased Premises are deemed to have a gross rentable area
of 21,980 square feet, together with all fixtures and equipment now or hereafter
attached thereto.

Property:  The Property described by metes and bounds on Schedule "A" of the
Lease.

Rent:  All Base Rent and Additional Rent payable by Tenant under this Lease.

Tenant's Percentage: 36.8%, subject to the provisions of Article 47.

Term: Three (3) years.

                                            KENNEDY MONTROSE, L.L.C.

                                            By:
                                               ------------------------------
                                               Joshua Adler, Managing Member

                                            ABLE LABORATORIES

                                            By:
                                               ------------------------------

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