Document:

EXHIBIT 10.4

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                                 EXECUTION COPY

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                  $75,000,000 SENIOR UNSECURED CREDIT AGREEMENT

                                      AMONG

                        ARDEN REALTY LIMITED PARTNERSHIP,
                         A MARYLAND LIMITED PARTNERSHIP,
                                  AS BORROWER,

                                       AND

                            THE SEVERAL LENDERS FROM
                          TIME TO TIME PARTIES HERETO,

                            LEHMAN BROTHERS INC., AS
                               SOLE LEAD ARRANGER
                                AND BOOK RUNNING
                                     MANAGER

                                       AND

                          LEHMAN COMMERCIAL PAPER INC.
                  AS SYNDICATION AGENT AND ADMINISTRATIVE AGENT

                            Dated as of July 27, 2000

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                                                  TABLE OF CONTENTS
                                                  -----------------

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                                                                                                               Page
                                                                                                               ----

<S>                                                                                                            <C>
ARTICLE 1 - DEFINITIONS...........................................................................................1

                           1.1  Certain Defined Terms.............................................................1
                           1.2  Computation of Time Periods......................................................19
                           1.3  Terms............................................................................19

ARTICLE 2 - ADVANCES.............................................................................................19

                           2.1  Loan Advances and Repayment......................................................19
                           2.2  Authorization to Obtain Advances.................................................21
                           2.3  Lenders' Accounting..............................................................21
                           2.4  Interest on the Advances.........................................................21
                           2.5  Fees.............................................................................24
                           2.6  Payments.........................................................................25
                           2.7  Notice of Increased Costs........................................................26
                           2.8  Voluntary Termination or Reduction of Commitment.................................25

ARTICLE 3 - CONDITIONS TO ADVANCES...............................................................................26

                           3.1  Conditions to Initial Advances...................................................26
                           3.2  Conditions Precedent to All Advances.............................................27

ARTICLE 4 - REPRESENTATIONS AND WARRANTIES.......................................................................28

                           4.1  Representations and Warranties as to Borrower, Etc...............................28
                           4.2  Representations and Warranties as to the REIT....................................31

ARTICLE 5 - REPORTING COVENANTS..................................................................................33

                           5.1  Financial Statements and Other Financial and Operating
                                    Information..................................................................33
                           5.2  Environmental Notices............................................................37
                           5.3  Confidentiality..................................................................37
                           5.4  Annual Evidence of Insurance.....................................................37

ARTICLE 6 - AFFIRMATIVE COVENANTS................................................................................37

                           6.1  With Respect to Borrower.........................................................37
                           6.2  With Respect to the REIT.........................................................39

ARTICLE 7 - NEGATIVE COVENANTS...................................................................................40

                           7.1  With Respect to all Parties......................................................40
                           7.2  Amendment of Constituent Documents...............................................41
                           7.3  REIT Directors...................................................................41
                           7.4  Management.......................................................................41
                           7.5  Margin Regulations...............................................................41
                           7.6  Organization of Borrower, Etc....................................................42
                           7.7  With Respect to the REIT.........................................................42

ARTICLE 8 - FINANCIAL COVENANTS..................................................................................42

                           8.1  Tangible Net Worth...............................................................42
                           8.2  Maximum Total Liabilities to Gross Asset Value...................................42
                           8.3  Minimum Interest Coverage Ratio..................................................42
                           8.4  Minimum Fixed Charge Coverage Ratio..............................................42
                           8.5  Minimum Unencumbered Pool........................................................42
                           8.6  Minimum Unsecured Interest Expense Coverage......................................42
                           8.7  Distributions....................................................................43
                           8.8  Investments; Asset Mix...........................................................43
                           8.9  Secured Debt.....................................................................43

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                                      -i-

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<TABLE>
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<S>                                                                                                            <C>
ARTICLE 9 - EVENTS OF DEFAULT; RIGHTS AND REMEDIES...............................................................44

                           9.1  Events of Default................................................................44
                           9.2  Rights and Remedies..............................................................45
                           9.3  Rescission.......................................................................46

ARTICLE 10 - AGENCY PROVISIONS...................................................................................47

                           10.1  Appointment.....................................................................47
                           10.2  Nature of Duties................................................................47
                           10.3  Disbursements of Advances.......................................................47
                           10.4  Distribution and Apportionment of Payments......................................48
                           10.5  Rights, Exculpation, Etc........................................................49
                           10.6  Reliance........................................................................49
                           10.7  Indemnification.................................................................49
                           10.8  Administrative Agent Individually...............................................49
                           10.9  Successor Administrative Agent; Resignation of
                                    Administrative Agent; Removal of Administrative Agent........................49
                           10.10  Consent and Approvals..........................................................50
                           10.11  Certain Agency Provisions Relating to Enforcement..............................51
                           10.12  Ratable Sharing................................................................51
                           10.13  Delivery of Documents..........................................................52
                           10.14  Notice of Events of Default....................................................52
                           10.15  Syndication Agent..............................................................52

ARTICLE 11 - MISCELLANEOUS.......................................................................................52

                           11.1  Expenses........................................................................52
                           11.2  Indemnity.......................................................................53
                           11.3  Change in Accounting Principles and "Funds from
                                    Operations" Definition.......................................................53
                           11.4  Amendments and Waivers..........................................................53
                           11.5  Independence of Covenants.......................................................54
                           11.6  Notices and Delivery............................................................55
                           11.7  Survival of Warranties, Indemnities and Agreements..............................55
                           11.8  Failure or Indulgence Not Waiver; Remedies Cumulative...........................55
                           11.9  Payments Set Aside..............................................................55
                           11.10  Severability...................................................................55
                           11.11  Headings.......................................................................55
                           11.12  Governing Law; Waiver..........................................................55
                           11.13  Limitation of Liability........................................................55
                           11.14  Successors and Assigns.........................................................56
                           11.15  Consent to Jurisdiction and Service of Process;
                                    Waiver of Jury Trial.........................................................56
                           11.16  Counterparts; Effectiveness; Inconsistencies...................................56
                           11.17  Performance of Obligations.....................................................56
                           11.18  Construction...................................................................56
                           11.19  Entire Agreement...............................................................56
                           11.20  Assignments and Participations.................................................57

</TABLE>

                                      -ii-

<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES

Exhibits:

A        -          Form of Assignment and Assumption Agreement
B        -          [Reserved].
C        -          Form of Compliance Certificate
D        -          Form of Fixed Rate Notice
E        -          Form of Guaranty
F        -          Form of Note
G        -          Form of Notice of Borrowing
H-1      -          Form of REIT Solvency Certificate
H-2      -          Form of Borrower Solvency Certificate

Schedules:

1.1      -          Pro Rata Shares of Lenders
2.2      -          Employees Authorized to Sign Notices of Borrowing
4.1(c)   -          Ownership of Borrower
4.1(j)   -          List of Litigation
4.1(s)   -          Environmental Matters
4.1(v)   -          Management Agreements
4.2(l)   -          Benefit Plans
8.5      -          List of Unencumbered Assets

                                     -iii-

<PAGE>

                                CREDIT AGREEMENT
                                ----------------

                  THIS CREDIT AGREEMENT,  dated as of July 27, 2000 (as amended,
supplemented  or  modified  from time to time,  this  "Agreement"),  is made and
entered into by and among ARDEN REALTY LIMITED  PARTNERSHIP,  a Maryland limited
partnership  ("Borrower"),the  several banks and other financial institutions or
entities from time to time parties to this  Agreement  (the  "Lenders"),  LEHMAN
BROTHERS  INC.,  as Sole Lead  Arranger  and Book  Running  Manager,  and LEHMAN
COMMERCIAL PAPER INC. ("LCPI"), as Syndication Agent and Administrative Agent.

                  The parties hereto hereby agree as follows:

                                    ARTICLE 1
                                    ---------

                                   DEFINITIONS
                                   -----------

                  1.1 Certain  Defined Terms.  The following  terms used in this
Agreement  shall have the following  meanings  (such  meanings to be applicable,
except to the extent  otherwise  indicated in a definition of a particular term,
both to the singular and the plural forms of the terms defined):

                  "Accountants" means any (i) "big five" accounting firm or (ii)
another firm of certified  public  accountants of recognized  national  standing
selected by Borrower and acceptable to Administrative Agent.

                  "Acquisition  Price" means the aggregate purchase price for an
asset,  including bona fide purchase money financing  provided by the seller and
all other Indebtedness encumbering such asset at the time of acquisition.

                  "Administrative  Agent" means Lehman Commercial Paper Inc., in
its capacity as administrative  agent for the Lenders under this Agreement,  and
any successor administrative agent appointed pursuant hereto.

                  "Advance"  means any  advance  made or to be made to  Borrower
pursuant  to  Article  2, and  includes  each Base Rate  Advance  and each LIBOR
Advance.

                  "Affiliates" as applied to any Person,  means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that  Person.  For  purposes  of this  definition,  "control"  (including,  with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means (a) the possession,  directly or
indirectly,  of the power to vote ten  percent  (10%) or more of the  Securities
having voting power for the election of directors of such Person or otherwise to
direct or cause the  direction  of the  management  and policies of that Person,
whether through the ownership of voting  Securities or by contract or otherwise,
or (b) the  ownership of ten percent  (10%) or more of the  outstanding  general
partnership or other ownership interests of such Person.

                  "Applicable LIBOR Rate Margin" means, for each Pricing Period,
the interest  rate margin set forth below  (expressed in basis points per annum)
opposite the Applicable Pricing Level for that Pricing Period:

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

        Applicable Pricing Level                         Margin
  --------------------------------------- ------------------------------------
  --------------------------------------- ------------------------------------

                   I                                     105.00
  --------------------------------------- ------------------------------------
  --------------------------------------- ------------------------------------

                   II                                    115.00
  --------------------------------------- ------------------------------------
  --------------------------------------- ------------------------------------

                   III                                   130.00
  --------------------------------------- ------------------------------------
  --------------------------------------- ------------------------------------

                   IV                                    170.00
  --------------------------------------- ------------------------------------

; provided  that, if the Maturity Date is extended  pursuant to Section  2.1(e),
the Applicable  LIBOR Rate Margin during the extension  period shall be adjusted
to a  market  rate  as  determined  by the  Administrative  Agent  in  its  sole
discretion and accepted by the Borrower in accordance with Section 2.1(e).

<PAGE>

                  "Applicable  Pricing  Level"  means (a) for the First  Pricing
Period,  Pricing  Level  III and (b) for each  Pricing  Period  thereafter,  the
pricing  level set forth below,  as  applicable,  either (i) if Borrower did not
deliver a Rating Notice to  Administrative  Agent as required by Section 6.1(k),
below,  Level IV, or (ii) if  Administrative  Agent did receive a Rating Notice,
the Pricing Level opposite Borrower's  Long-Term Unsecured Senior Debt Rating as
of the  date  of  Administrative  Agent's  receipt  of  such  Rating  Notice  as
determined by Administrative Agent:

                                           Borrower's Long-Term
        Pricing Level                      Unsecured Senior Debt Rating
        -------------                      ----------------------------

                 I                         Equal to or higher than BBB+/Baa1
                 II                        BBB/Baa2
                 III                       BBB-/Baa3
                 IV                        Lower than BBB-/Baa3
                                           or No Rating

                  "Assignment and Assumption" means an Assignment and Assumption
Agreement in the form of Exhibit A hereto (with blanks  appropriately filled in)
delivered  to  Administrative  Agent in  connection  with each  assignment  of a
Lender's interest under this Agreement pursuant to Section 11.20.

<PAGE>

                  "Base Rate"  means,  on any day, the higher of (a) the rate of
interest  per annum  established  from time to time by Deutsche  Bank,  New York
Office at its principal office in New York City, New York, and designated as its
prime rate as in effect on such day and (b) the Federal  Funds Rate in effect on
such day plus one-half of one percent (0.5%) per annum.

                  "Base Rate Advance" means an Advance  bearing  interest at the
Base Rate.

                  "Benefit  Plan" means any  employee  pension  benefit  plan as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of
which a Person or an ERISA  Affiliate  is, or within the  immediately  preceding
five (5) years was, an "employer" as defined in Section 3(5) of ERISA.

                  "Borrower" means Arden Realty Limited Partnership,  a Maryland
limited partnership.

                  "Borrower's  Long-Term Unsecured Senior Debt Rating" means the
lower of such rating as set by Standard & Poor's and Moody's Investors  Service,
Inc.

                  "Business Day" means (a) with respect to any Advance,  payment
or rate determination of LIBOR Advances, a day, other than a Saturday or Sunday,
on which  Administrative  Agent is open for business in New York City,  New York
and on which dealings in Dollars are carried on in the London interbank  market,
and (b) for all other  purposes any day excluding  Saturday,  Sunday and any day
which is a legal holiday under the laws of the State of New York, or is a day on
which banking institutions located in New York are required or authorized by law
or other governmental action to close.

                  "Capital Lease" means, as applied to any Person,  any lease of
any property  (whether real,  personal or mixed) by that Person as lessee which,
in conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.

                  "Capital Lease Obligations" means all monetary  obligations of
a Person under any Capital Lease.

                  "Capitalized  Loan Fees"  means,  with respect to the REIT and
any  Consolidated  Entity,  and with  respect to any period,  (a) any  up-front,
closing or similar fees paid by such Person in connection  with the incurring or
refinancing of Indebtedness  during such period and (b) all other costs incurred
in connection  with the incurring or  refinancing  of  Indebtedness  during such
period, including, without limitation, appraisal fees paid to lenders, costs and
expenses  incurred in connection  with Swap  Agreements,  phase 1  environmental
report  review  fees paid to lenders and legal  fees,  in each of the  foregoing
cases,  that are  capitalized  on the balance sheet of such Person and amortized
over the term of such Indebtedness.

                                      -2-
<PAGE>

                  "Capital  Stock"  means,  with respect to any Person,  all (i)
shares, interests, participations or other equivalents (howsoever designated) of
capital stock or partnership  or other equity  interests of such Person and (ii)
rights  (other than debt  securities  convertible  into  capital  stock or other
equity  interests),  warrants  or options to acquire any such  capital  stock or
partnership or other equity  interests of such Person.  The term "Capital Stock"
includes the Partnership Units of Borrower.

                  "Cash"  means,  when used in connection  with any Person,  all
monetary and nonmonetary  items owned by that Person that are treated as cash in
accordance  with GAAP,  consistently  applied.  "Cash" shall not include  tenant
deposits.

                  "Cash  Equivalents"  means (a) marketable  direct  obligations
issued or  unconditionally  guaranteed by the United States Government or issued
by an agency  thereof  and  backed by the full  faith and  credit of the  United
States,  in each case maturing within one (1) year after the date of acquisition
thereof;  (b) marketable  direct  obligations  issued by any state of the United
States of America or any political  subdivision  of any such state or any public
instrumentality  thereof  maturing  within  ninety  (90) days  after the date of
acquisition  thereof  and,  at the time of  acquisition,  having  one of the two
highest ratings obtainable from any two of Standard & Poor's,  Moody's Investors
Service,  Inc., Duff and Phelps, or Fitch Investors Service, Inc. (or, if at any
time no two of the foregoing  shall be rating such  obligations,  then from such
other   nationally   recognized   rating   services  as  may  be  acceptable  to
Administrative  Agent) and not listed for  possible  down-grade  in Credit Watch
published by Standard & Poor's;  (c)  commercial  paper,  other than  commercial
paper issued by Borrower or any of its Affiliates,  maturing no more than ninety
(90) days after the date of creation  thereof  and, at the time of  acquisition,
having a rating of at least A-1 or P-1 from either Standard & Poor's, or Moody's
Investors  Service,  Inc.  or, if at any time  neither  Standard  & Poor's,  nor
Moody's  Investors  Service,  Inc.  shall be rating such  obligations,  then the
highest rating from such other nationally  recognized  rating services as may be
acceptable  to   Administrative   Agent);   and  (d)  domestic  and   Eurodollar
certificates of deposit or time deposits or bankers' acceptances maturing within
ninety (90) days after the date of  acquisition  thereof,  overnight  securities
repurchase  agreements,  or reverse repurchase  agreements secured by any of the
foregoing types of securities or debt instruments  issued,  in each case, by any
commercial  bank organized under the laws of the United States of America or any
state  thereof  or the  District  of  Columbia  or  Canada  which at the time of
acquisition  (A) has (or,  in the case of a bank  which  is a  subsidiary,  such
bank's parent has) a rating of its senior unsecured debt obligations of not less
than Baa-2 by Moody's Investors Service, Inc. or a comparable rating by a rating
agency acceptable to Administrative  Agent and (B) has total assets in excess of
Ten Billion Dollars ($10,000,000,000).

                  "City National Bank Loan" means  revolving  loans made by City
National Bank to Borrower in an aggregate committed principal amount which shall
not exceed  $10,000,000  pursuant to the terms of that  certain  Loan  Agreement
dated March 12, 1997 between Borrower and City National Bank, as amended through
the date of this Agreement.

                  "Closing   Date"  means  the  date  on  which  the  applicable
conditions  contained  in Sections 3.1 and 3.2 are  satisfied or waived.  Within
five (5) Business Days of the  occurrence  thereof,  Administrative  Agent shall
deliver written notice to Borrower and the Lenders  confirming the date on which
the Closing Date occurred.

                  "CMBS  Entities"  means,  collectively,  Arden Realty Finance,
Inc., a California  corporation,  which is a wholly-owned subsidiary corporation
of the REIT,  Arden Realty  Finance  Partnership,  L.P.,  a  California  limited
partnership,  with respect to which limited  partnership  Arden Realty  Finance,
Inc.,  is the sole  general  partner and  Borrower is a limited  partner,  Arden
Realty  Finance  II,  Inc.,  a  Maryland  corporation,  which is a  wholly-owned
subsidiary  corporation  of the REIT,  Arden Realty  Finance III LLC, a Delaware
limited  liability  company,  which is wholly  owned by  Borrower,  Arden Realty
Finance IV LLC, a Delaware limited liability  company,  which is wholly owned by
Borrower,  Activity  Business  Center Limited  Partnership,  a Delaware  limited
partnership,  with respect to which limited partnership Arden Realty Finance II,
Inc. is the sole general partner and Borrower is the sole limited  partner,  145
South Fairfax,  LLC, a California  limited  liability  company,  which is wholly
owned by Borrower,  Arden  Realty  Finance V LLC, a Delaware  limited  liability
company, which is wholly owned by Borrower, Westwood Center Limited Partnership,
a California  limited  partnership,  with respect to which  limited  partnership
Borrower  is the sole  general  partner,  and Arden  Realty  Finance  VI LLC,  a
Delaware limited liability company, which is wholly owned by Borrower.

                                      -3-

<PAGE>

                  "Code"  means the Internal  Revenue  Code of 1986,  as amended
from time to time.

                  "Commission" means the Securities and Exchange Commission.

                  "Commitment"   means,   subject  to  Sections   2.7  and  2.8,
$75,000,000.  As of the  Closing  Date,  the  respective  Pro Rata Shares of the
Lenders with respect to the Commitment are set forth in Schedule 1.1.

                  "Compliance  Certificate"  means a certificate  in the form of
Exhibit C hereto  delivered  to  Administrative  Agent by  Borrower  pursuant to
Section 5.1(d) or other provision of this Agreement and covering compliance with
the covenants contained in Section 7.3 and Article 8.

                  "Consolidated  Entity" means,  collectively,  (i) Borrower and
(ii) any other Person the accounts of which are  consolidated  with those of the
REIT in the  consolidated  financial  statements of the REIT in accordance  with
GAAP.

                  "Construction  in Progress"  means land on which  Borrower has
commenced,  and is diligently  proceeding  with, the  construction  of an Office
Property.  If,  after  Borrower  has  commenced  the  construction  of an Office
Property,  such  construction  ceases for 45 or more consecutive days, such land
shall cease to be  Construction in Progress and shall become Land until Borrower
starts construction of the Office Property again.

                  "Contaminant"  means any pollutant (as that term is defined in
42 U.S.C.  9601(33))  or toxic  pollutant  (as that term is defined in 33 U.S.C.
1362(13)),  hazardous substance (as that term is defined in 42 U.S.C. 9601(14)),
hazardous  chemical  (as that term is defined by 29 CFR  Section  1910.1200(c)),
toxic substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)),
radioactive  material,  special  waste,  petroleum  (including  crude oil or any
petroleum-derived  substance,  waste,  or  breakdown  or  decomposition  product
thereof),  any  constituent of any such substance or waste,  including,  but not
limited to,  polychlorinated  biphenyls and asbestos,  or any other substance or
waste  deleterious to the  environment  the release,  disposal or remediation of
which  is  now  or  at  any  time  becomes  subject  to  regulation   under  any
Environmental Law.

                  "Contractual  Obligation" as applied to any Person,  means any
provision of any Securities  issued by that Person or any  indenture,  mortgage,
deed of trust,  lease,  contract,  undertaking,  document or instrument to which
that Person is a party or by which it or any of its  properties is bound,  or to
which it or any of its properties is subject (including, without limitation, any
restrictive covenant affecting such Person or any of its properties).

                  "Contribution  Agreement" means (i) that certain  Contribution
Agreement  made as of  October  9,  1996,  by and among  Richard  S.  Ziman,  an
individual,   Montour  Realty  Associates,  a  California  general  partnership,
Metropolitan  Falls  Partners,  a  California  general  partnership,   Intercity
Building  Associates,  a California general  partnership,  Victor J. Coleman, an
individual,  Coleman Enterprises,  Inc., a California corporation,  Ziman Realty
Partners,  a California general  partnership,  Broad Base Investments II, LLC, a
Nevada limited liability company,  Michele Byer,  individually and as trustee of
the Michele Byer Trust, a revocable  inter vivos trust dated September 20, 1996,
Anaheim Properties LLC, a California  limited liability  company,  Arden Century
Associates,  a California  general  partnership,  Arden Sawtelle  Associates,  a
California  general  partnership,  the REIT  and  Borrower  and  (ii) any  other
agreement  between  Borrower and a CMBS Entity  providing  for  contribution  by
Borrower of certain  contributions  it receives  from its limited  partners with
respect to Debt of the CMBS  Entity and on  substantially  similar  terms as the
Contribution  Agreement  described in the foregoing  clause (i).  Borrower shall
deliver to Administrative  Agent a copy of each  Contribution  Agreement entered
into after the date of this Agreement.

                  "Court Order" means any judgment,  writ,  injunction,  decree,
rule or  regulation  of any court or  Governmental  Authority  binding  upon the
Person in question.

                  "Debt" means, with respect to any Person, without duplication,
the  principal  amount  of (a)  its  liabilities  for  borrowed  money,  (b) its
liabilities for the deferred  purchase price of property acquired by such Person
(excluding  accounts payable in the ordinary course of business,  but including,
without  limitation,  all  liabilities  created or arising under any conditional
sale or other title retention  agreement with respect to any property),  (c) its
Capitalized Lease Obligations, (d) any liabilities for borrowed money secured by
a Lien with respect to any property  owned by such Person  (whether or not it is
assumed  by such  Person  or such  Person  otherwise  becomes  liable  for  such
liabilities),  (e) all  liabilities  with respect to any  unreimbursed  draws on
letters of credit and (f) any guaranty of such Person with respect to any of the
foregoing.

                                      -4-

<PAGE>

                  "Debt Service"  means,  for any period,  Interest  Expense for
such period plus  scheduled  principal  amortization  (excluding  any balloon or
bullet  payment due at maturity) for such period on all Debt of the REIT and the
Consolidated  Entities and on the REIT's and each Consolidated Entity's pro rata
share of all Debt of each  Unconsolidated  Joint  Venture.  For  purposes of the
foregoing  definition,  the REIT's and such Consolidated Entity's pro rata share
of such  Debt  shall be  deemed  to be equal to the  product  of (i) such  Debt,
multiplied by (ii) the percentage of the total outstanding Capital Stock of such
Unconsolidated  Joint  Venture  held by the  REIT or such  Consolidated  Entity,
expressed  as a  decimal.  For  purposes  of the  preceding  sentence,  the term
"Capital Stock" shall not include the interests  described in clause (ii) of the
definition of "Capital Stock".

                  "Defaulting Lender" means any Lender which fails or refuses to
perform its obligations  under this Agreement  within the time period  specified
for  performance of such  obligation or, if no time frame is specified,  if such
failure or refusal continues for a period of five (5) Business Days after notice
from Administrative Agent.

                  "Depreciation   and   Amortization   Expense"  means  (without
duplication),  for any period, the sum for such period of (i) total depreciation
and  amortization  expense,  whether  paid  or  accrued,  of the  REIT  and  the
Consolidated  Entities,  plus (ii) the REIT's and each Consolidated Entity's pro
rata share of depreciation and  amortization  expenses of  Unconsolidated  Joint
Ventures.  For  purposes of this  definition,  the REIT's and such  Consolidated
Entity's  pro  rata  share  of  depreciation  and  amortization  expense  of any
Unconsolidated  Joint  Venture  shall be deemed  equal to the product of (i) the
depreciation  and  amortization  expense of such  Unconsolidated  Joint Venture,
multiplied by (ii) the percentage of the total outstanding Capital Stock of such
Unconsolidated  Joint  Venture  held by the  REIT or such  Consolidated  Entity,
expressed  as a  decimal.  For  purposes  of the  preceding  sentence,  the term
"Capital Stock" shall not include the interests  described in clause (ii) of the
definition of "Capital Stock".

                  "Designated  Market" means, with respect to any LIBOR Advance,
the London interbank LIBOR market or such other interbank LIBOR market as may be
designated in writing from time to time by the Requisite Lenders.

                  "Disqualified  Stock"  means  any  capital  stock,   warrants,
options  or other  rights to  acquire  capital  stock  (but  excluding  any debt
security which is convertible,  or exchangeable,  for capital stock),  which, by
its terms (or by the terms of any security into which it is  convertible  or for
which it is  exchangeable),  or upon the  happening of any event,  matures or is
mandatorily  redeemable  prior to the Maturity Date,  pursuant to a sinking fund
obligation or otherwise,  or is or may be redeemable at the option of the holder
thereof, in whole or in part, prior to the Maturity Date. Borrower's Partnership
Units shall not be considered Disqualified Stock.

                  "DOL"  means the  United  States  Department  of Labor and any
successor department or agency.

                  "Dollars"  and "$" means the lawful money of the United States
of America.

                  "EBITDA"  means,  for any period,  Net Income,  plus  (without
duplication)  (a)  Interest  Expense,  (b) Tax  Expense,  (c)  Depreciation  and
Amortization Expense and (d) cash dividends and distributions  actually received
by the REIT or any Consolidated Entity from any Unconsolidated Joint Venture, in
each case for such period.

                  "Environmental  Laws" has the  meaning  set  forth in  Section
4.1(s).

                  "Environmental Lien" means a Lien in favor of any Governmental
Authority for (a) any liability under Environmental Laws, or (b) damages arising
from, or costs incurred by such Governmental Authority in response to, a Release
or threatened Release of a Contaminant into the environment.

                  "ERISA" means the Employee  Retirement  Income Security Act of
1974, as amended from time to time, and any successor statute.

                  "ERISA Affiliate"  means, with respect to any Person,  any (a)
corporation  which  is,  becomes,  or is  deemed  to be a  member  of  the  same
controlled  group of  corporations  (within the meaning of Section 414(b) of the
Code) as such  Person,  (b)  partnership,  trade  or  business  (whether  or not
incorporated)  which is, becomes or is deemed to be under common control (within
the  meaning of Section  414(c) of the Code)  with such  Person,  (c) solely for
purposes of potential  liability  under Section  302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created  under  Section  302(f) of ERISA and
Section 412(n) of the Code, Person which is, becomes or is deemed to be a member
of the same  "affiliated  service  group" (as  defined in Section  414(m) of the
Code) as such Person,  or (d) solely for purposes of potential  liability  under
Section  302(c)(11)  of ERISA and  Section  412(c)(11)  of the Code and the lien
created  under  Section  302(f) of ERISA and Section  412(n) of the Code,  other

                                      -5-

<PAGE>

organization  or  arrangement  described in Section 414(o) of the Code which is,
becomes or is deemed to be required  to be  aggregated  pursuant to  regulations
issued  under  Section  414(o) of the Code with such Person  pursuant to Section
414(o) of the Code.

                  "Event of Default" means any of the  occurrences so defined in
Article 9.

                  "Extension  Option  Exercise Date" means the date on which the
extension of the Maturity Date becomes effective pursuant to Section 2.1(e).

                  "FDIC" means the Federal Deposit Insurance  Corporation or any
successor thereto.

                  "Federal Funds Rate" means,  as of any date of  determination,
the rate set forth in the weekly statistical release designated as H.15(519), or
any successor  publication,  published by the Federal  Reserve Board of New York
(including any such successor,  "H.15(519)")  for such date opposite the caption
"Federal Funds  (Effective)".  If on any relevant date the appropriate  rate for
such date is not yet published in H.15(519),  the rate for such date will be the
arithmetic mean of the rates for the last transaction in overnight Federal funds
arranged  prior to 9:00 a.m.  (New York City time) on that date by each of three
leading  brokers of Federal  Funds  transactions  in New York City  selected  by
Administrative  Agent.  For purposes of this  Agreement,  any change in the Base
Rate due to a change in the  Federal  Funds  Rate shall be  effective  as of the
opening of business on the effective date of such change.

                  "Federal  Reserve  Board"  means the Board of Governors of the
Federal  Reserve  System  or  any  governmental   authority  succeeding  to  its
functions.

                  "FIRREA" means the Financial Institutions Recovery, Reform and
Enforcement Act of 1989, as amended from time to time.

                  "First  Pricing  Period"  means the period  commencing  on the
Closing Date and ending on (and including) the date occurring three (3) Business
Days after Administrative Agent receives the first Rating Notice from Borrower.

                  "Fiscal Quarter" means each three-month period ending on March
31, June 30, September 30 and December 31.

                  "Fiscal Year" means the fiscal year of Borrower which shall be
the twelve (12) month period ending on the last day of December in each year.

                  "Fixed Charge Coverage Ratio" means, at any time, the ratio of
(i) EBITDA for the Fiscal Quarter then most recently  ended,  to (ii) the sum of
(a) Fixed Charges for such period and (b) preferred  dividend  payments for such
period.

                  "Fixed Charges" means, for any period,  the sum of the amounts
for such period of (i)  scheduled  payments of principal of Debt of the REIT and
the  Consolidated  Entities (other than any payment of the entire unpaid balance
of any such Debt at its final maturity or balloon payment, referred to herein as
a "bullet  payment"),  (ii) the REIT's and each  Consolidated  Entity's pro rata
share  of  scheduled  payments  of  principal  of Debt of  Unconsolidated  Joint
Ventures (other than bullet payments) that does not otherwise constitute Debt of
and is not otherwise  recourse to the REIT or such Consolidated  Entity or their
assets,  (iii)  Interest  Expense,  (iv) an amount equal to $0.3125 per quarter,
multiplied by the weighted average gross leasable area,  measured in square feet
and weighted by acquisition date, of all Real Properties held by the REIT or any
of the Consolidated  Entities, (v) the REIT's and each Consolidated Entity's pro
rata share of an amount  equal to the  product  (the  "Clause (v)  Product")  of
$0.3125 per quarter,  multiplied by the weighted  average gross  leasable  area,
measured in square feet and weighted by acquisition date, of all Real Properties
held by Unconsolidated Joint Ventures and (vi) Tax Expense, in each case, at the
end  of  such  period.  For  purposes  of  clause  (ii),  the  REIT's  and  such
Consolidated  Entity's  pro rata share of payments by any  Unconsolidated  Joint
Venture  shall be deemed equal to the product of (a) the  payments  made by such
Unconsolidated  Joint  Venture,  multiplied  by (b) the  percentage of the total
outstanding Capital Stock of such Unconsolidated  Joint Venture held by the REIT
or such Consolidated Entity, expressed as a decimal. For purposes of clause (v),
the  REIT's  and such  Consolidated  Entity's  pro rata  share of the Clause (v)

                                     -6-

<PAGE>

Product  shall be deemed  equal to the  product of (a) the  Clause (v)  Product,
multiplied by (b) the percentage of the total outstanding  Capital Stock of such
Unconsolidated  Joint  Ventures  held by the REIT or such  Consolidated  Entity,
expressed  as a  decimal.  For the  purposes  of the two  immediately  preceding
sentences, the term "Capital Stock" shall not include the interests described in
clause (ii) of the definition of "Capital Stock".

                  "Fixed Rate Notice"  means,  with  respect to a LIBOR  Advance
pursuant to Section 2.1(b), a notice substantially in the form of Exhibit D.

                  "Fixed Rate Price  Adjustment"  has the meaning  given to such
term in Section 2.4(j)(iii).

                  "Funding Date" means, with respect to any Advance, the date of
the funding of such Advance.

                  "Funds from Operations" shall be interpreted consistently with
the NAREIT  Definition and, subject to Section 11.3, shall mean, for any period,
net income for such period  excluding gains (or losses) from debt  restructuring
and sales of Real Property,  plus the portion of Depreciation  and  Amortization
Expenses during such period which is  attributable  to Real Property,  and after
adjustments for Unconsolidated  Joint Ventures.  (Adjustments for Unconsolidated
Joint Ventures shall be calculated to reflect funds from  operations on the same
basis.)

                  "GAAP" means  generally  accepted  accounting  principles  set
forth in the opinions and pronouncements of the Accounting  Principles Board and
the American  Institute of  Certified  Public  Accountants  and  statements  and
pronouncements  of the Financial  Accounting  Standards  Board, or in such other
statements by such other entity as may be in general use by significant segments
of the accounting  profession,  which are applicable to the  circumstances as of
the date of determination.

                  "Governmental  Authority" means any nation or government,  any
federal,  state, local,  municipal or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

                  "Gross Asset Value"  means,  as of the date of  determination,
the sum of (without duplication):

                  (i) (x) the product of EBITDA of the REIT and the Consolidated
Entities for the fiscal period  consisting  of the Fiscal  Quarter most recently
ended (less EBITDA  attributable  to Real Property  acquired  during such Fiscal
Quarter from persons other than Borrower or Affiliates of Borrower),  multiplied
by 4, divided by (y) 9.75%;

                  (ii)  Cash  and  Cash  Equivalents  held by the  REIT  and the
Consolidated  Entities  on the  last  day of such  most  recently  ended  Fiscal
Quarter; and

                  (iii) one hundred percent (100%) of the Acquisition  Price for
Real Property  acquired by the REIT and the Consolidated  Entities (from persons
other than Borrower or Affiliates of Borrower) during such Fiscal Quarter.

                  "Guaranty"  means a guaranty of payment in the form of Exhibit
E.

                  "Guaranty  Obligation"  means,  as  to  any  Person,  any  (a)
guarantee by that Person of Indebtedness of, or other obligation performable by,
any other  Person or (b)  assurance  given by that  Person to an  obligee of any
other  Person  with  respect  to the  performance  of an  obligation  by, or the
financial  condition  of,  such  other  Person,  whether  direct,   indirect  or
contingent,  including  any  purchase  or  repurchase  agreement  covering  such
obligation or any collateral  security therefor,  any agreement to provide funds
(by means of loans,  capital  contributions  or otherwise) to such other Person,
any agreement to support the solvency or level of any balance sheet item of such
other Person or any  "keep-well" or other  arrangement of whatever  nature given
for the purpose of assuring or holding  harmless such obligee  against loss with
respect to any obligation of such other Person; provided, however, that the term
Guaranty Obligation shall not include endorsements of instruments for deposit or
collection  in the  ordinary  course of  business.  The  amount of any  Guaranty
Obligation in respect of  Indebtedness  shall be deemed to be an amount equal to
the  stated or  determinable  amount of the  related  Indebtedness  (unless  the
Guaranty Obligation is limited by its terms to a lesser amount, in which case to
the  extent of such  amount)  or, if not  stated or  determinable,  the  maximum
reasonably  anticipated liability in respect thereof as determined by the Person
in good faith. The amount of any other Guaranty Obligation shall be deemed to be
zero  unless  and until  the  amount  thereof  has been (or in  accordance  with

                                      -7-

<PAGE>

Financial  Accounting  Standards Board Statement No. 5 should be) quantified and
reflected  or  disclosed  in the  consolidated  financial  statements  (or notes
thereto) of such Person.

                  "Indebtedness" means, as to any Person (without  duplication),
(a) all  indebtedness,  obligations  or other  liabilities  of such  Person  for
borrowed money, whether or not subordinated and whether with or without recourse
beyond any  collateral  security,  (b) all  indebtedness,  obligations  or other
liabilities of such Person evidenced by Securities or other similar instruments,
(c) all  reimbursement  obligations  and other  liabilities  of such Person with
respect to letters of credit or banker's  acceptances  issued for such  Person's
account,  (d) all obligations of such Person to pay the deferred  purchase price
of Property or services,  (e) the principal portion of Capital Lease Obligations
of such Person set forth in the  financial  statements  of such Person and, with
respect to each operating  lease,  including all ground leases to the extent not
treated as Capital Leases, the present value of all rental payments due over the
remaining term of such lease (using a discount rate of 10%), provided,  however,
that, to the extent any ground lease  payment has been  deducted in  determining
Net Income,  then such  present  value shall not be counted as  Indebtedness  in
calculating the ratio set forth in Section 8.2, (f) all Guaranty  Obligations of
such  Person,   (g)  all  Contractual   Obligations  of  such  Person,  (h)  all
indebtedness,  obligations or other liabilities of such Person or others secured
by a Lien on any  asset  of  such  Person,  whether  or not  such  indebtedness,
obligations or liabilities are assumed by, or are a personal  liability of, such
Person (including, without limitation, the principal amount of any assessment or
similar   indebtedness   encumbering  any  property),   (i)  all   indebtedness,
obligations  or other  liabilities  (other than interest  expense  liability) in
respect of foreign currency exchange agreements, (j) ERISA obligations currently
due and payable, (k) as applied to the REIT and the Consolidated  Entities,  all
indebtedness,  obligations or other liabilities of Unconsolidated Joint Ventures
which are recourse to the REIT and/or any of the Consolidated  Entities, (l) the
REIT's  and  Consolidated  Entities'  pro  rata  share  of  Nonrecourse  Debt of
Unconsolidated Joint Ventures, (m) the amount which would be owed by such Person
to any  counterparty  under  any  Swap  Agreement(s)  in  the  event  such  Swap
Agreement(s)  were terminated as of any date of  determination  of Indebtedness,
(n) improvement and assessment  district taxes (including,  without  limitation,
taxes  under the  Mello-Roos  Community  Facilities  Act of 1982,)  assessed  or
otherwise  due with  respect to any  Property  of such  Person,  and (o) without
duplication or limitation, all liabilities and other obligations included in the
financial statements (or notes thereto) of such Person as prepared in accordance
with GAAP. For purposes of clause (l), the REIT's and the Consolidated Entities'
pro rata share of Nonrecourse Debt of any Unconsolidated  Joint Venture shall be
deemed  to be  equal  to the  product  of  (i)  the  Nonrecourse  Debt  of  such
Unconsolidated  Joint  Venture,  multiplied by (ii) the  percentage of the total
outstanding  Capital  Stock  of  such  Joint  Venture  held  by the  REIT or any
Consolidated  Entity,  expressed  as a decimal.  For  purposes of the  preceding
sentence,  the term "Capital Stock" shall not include the interests described in
clause (ii) of the definition of "Capital Stock".  With respect to any agreement
entered into by such Person to purchase Real Property,  "Indebtedness" shall not
include  any  amount in excess  of the  amount  (if any)  which  such  Person is
obligated to pay as liquidated  damages  under such  agreement in the event such
Person breaches its obligation to purchase such Real Property.

                  "Intangible   Assets"   means   assets  that  are   considered
intangible  assets under GAAP,  including  customer  lists,  goodwill,  computer
software, copyrights, trade names, trademarks, patents and Capitalized Loan Fees
(other than capitalized interest with respect to Construction in Progress).

                  "Interest Coverage Ratio" means, at any time, the ratio of (i)
EBITDA for the Fiscal Quarter then most recently ended (or, if shorter,  for the
period  from  the  Closing  Date to the end of such  period),  to (ii)  Interest
Expense for such period.

                  "Interest  Expense"  means,  for any period,  the sum (without
duplication)  for such period of (i) total  interest  expense,  whether  paid or
accrued,  of the REIT  and the  Consolidated  Entities  and the  portion  of any
Capitalized Lease Obligations  allocable to interest expense during such period,
including the REIT's and each  Consolidated  Entity's share of interest expenses
in Unconsolidated Joint Ventures but excluding  amortization or writeoff of debt
discount  and  expense  (except as provided  in clause  (ii)  below),  (ii) with
respect to the REIT and the Consolidated Entities, amortization of costs related
to Swap  Agreements,  (iii)  with  respect  to the  REIT  and  the  Consolidated
Entities,  capitalized interest, (iv) amortization of Capitalized Loan Fees, (v)
to the extent not included in clauses (i), (ii),  (iii) and (iv), the REIT's and
each Consolidated  Entity's pro rata share of interest expense and other amounts
of the type referred to in such clauses of the  Unconsolidated  Joint  Ventures,
and (vi) interest  incurred on any liability or  obligation  that  constitutes a
Guaranty  Obligation  of the REIT or any  Consolidated  Entity.  For purposes of
clause (v), the REIT's and such Consolidated Entity's pro rata share of interest
expense or other  amount of any  Unconsolidated  Joint  Venture  shall be deemed
equal to the product of (a) the  interest  expense or other  relevant  amount of
such Unconsolidated Joint Venture, multiplied by (b) the percentage of the total
outstanding Capital Stock of such Unconsolidated  Joint Venture held by the REIT
or such  Consolidated  Entity,  expressed  as a  decimal.  For  purposes  of the

                                      -8-

<PAGE>

preceding  sentence,  the term  "Capital  Stock" shall not include the interests
described in clause (ii) of the definition of "Capital Stock".

                  "Interest Period" means, with respect to each LIBOR Advance, a
period  commencing  on a Business Day and ending one (1), two (2),  three (3) or
six (6) months thereafter,  as specified by Borrower pursuant to Section 2.1(b),
provided  that any such period that would  otherwise  end on a day that is not a
Business Day shall be extended to the next  succeeding  Business Day unless such
Business Day falls in another  calendar  month,  in which case such period shall
end on the immediately preceding Business Day.

                  "Investment" means, with respect to any Person, (i) any direct
or indirect purchase or other acquisition by that Person of stock or securities,
or any beneficial  interest in stock or other  securities,  of any other Person,
any partnership  interest  (whether general or limited) in any other Person,  or
all or any substantial part of the business or assets of any other Person,  (ii)
any direct or indirect loan,  advance or capital  contribution by that Person to
any other Person,  including all indebtedness and accounts  receivable from that
other  Person  that are not  current  assets or did not arise from sales to that
other Person in the ordinary  course of business.  The amount of any  Investment
shall be the original  cost of such  Investment,  plus the cost of all additions
thereto,  without any  adjustments  for  increases  or  decreases  in value,  or
write-ups, write-downs or write-offs with respect to such Investment.

                  "Investment  Mortgages"  mean  mortgages  or  deeds  of  trust
securing indebtedness owned by Borrower.

                  "IRS"  means  the  Internal  Revenue  Service  and any  Person
succeeding to the functions thereof.

                  "Joint  Venture" means a joint venture,  partnership,  limited
liability company, business trust or similar arrangement,  whether in corporate,
partnership or other legal form;  provided  that, as to any such  arrangement in
corporate  form,  such  corporation  shall  not,  as to any Person of which such
corporation  is a Subsidiary,  be considered to be a Joint Venture to which such
Person is a party.

                  "Land" means unimproved  (except as otherwise  provided in the
definition  of  "Construction  in  Progress")  land.  "Land"  does  not  include
Construction in Progress.

                  "Lease  Buyout  Proceeds"  means all  proceeds  received by or
otherwise  payable  to any  Person in  connection  with the  agreement  (whether
contained  in a lease or  otherwise)  by that Person to  terminate  or otherwise
cancel or shorten the term of any lease with respect to which such Person is the
lessor or landlord.

                  "Lender  Taxes" has the meaning  given to such term in Section
2.4(i)(A).

                  "Lenders" means LCPI (for so long as it holds an interest in a
Note)  and any  other  bank,  finance  company,  insurance  or  other  financial
institution  which is or becomes a party to this  Agreement  by  execution  of a
counterpart signature page hereto or an Assignment and Assumption,  as assignee.
At all times that there are no Lenders other than LCPI,  the terms  "Lender" and
"Lenders"  means  LCPI  (for so long as it holds an  interest  in a Note) in its
individual  capacity.  With  respect  to  matters  requiring  the  consent to or
approval of all Lenders at any given time, all then existing  Defaulting Lenders
will be disregarded  and excluded,  and, for voting purposes only, "all Lenders"
shall be deemed to mean "all Lenders other than Defaulting Lenders".

                  "Liabilities   and  Costs"   means  all   claims,   judgments,
liabilities,  obligations,  responsibilities,  losses,  damages  (including lost
profits),   punitive  or  treble  damages,  costs,  disbursements  and  expenses
(including, without limitation,  reasonable attorneys',  experts' and consulting
fees and costs of investigation and feasibility studies),  fines,  penalties and
monetary sanctions,  interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future.

                  "LIBOR Advance" means an Advance  bearing  interest at a fixed
rate of interest determined by reference to the LIBOR Rate.

                  "LIBOR Base Rate" means the rate per annum  determined  on the
basis of the rate for  deposits in Dollars for a period  equal to such  Interest
Period  commencing  on the first day of such Interest  Period  appearing on Page
3750 of the Telerate  screen as of 11:00 A.M.,  London time,  two Business  Days
prior to the beginning of such Interest Period. In the event that such rate does
not appear on Page 3750 of the Telerate  screen (or  otherwise on such  screen),

                                      -9-

<PAGE>

the "LIBOR Base Rate" for purposes of this  definition  shall be  determined  by
reference to such other  comparable  publicly  available  service for displaying
eurodollar rates as may be selected by the Administrative Agent.

                  "LIBOR  Office" means,  relative to any Lender,  the office of
such Lender designated as such on the counterpart signature pages hereto or such
other  office of a Lender as  designated  from time to time by notice  from such
Lender to Administrative  Agent, whether or not outside the United States, which
shall be making or maintaining LIBOR Advances of such Lender.

                  "LIBOR  Rate"  means,  with  respect to each day  during  each
Interest Period, a rate per annum determined for such day in accordance with the
following formula (rounded upward to the nearest 1/100th of 1%):

                                 LIBOR Base Rate
                        --------------------------------
                        1.00 - LIBOR Reserve Requirement

                  "LIBOR  Reserve   Requirement"  for  any  day,  the  aggregate
(without  duplication) of the maximum rates (expressed as a decimal fraction) of
reserve  requirements  in effect  on such day  (including,  without  limitation,
basic,  supplemental,  marginal and emergency reserves) under any regulations of
the Federal Reserve Board or other  Governmental  Authority having  jurisdiction
with  respect   thereto  dealing  with  reserve   requirements   prescribed  for
eurocurrency  funding  (currently  referred to as "Eurocurrency  Liabilities" in
Regulation D of the Federal  Reserve  Board)  maintained by a member bank of the
Federal Reserve System.

                  "Lien" means any  mortgage,  deed of trust,  pledge,  negative
pledge,  hypothecation,  collateral  assignment,  deposit arrangement,  security
interest, encumbrance (including, but not limited to, easements,  rights-of-way,
zoning  restrictions  and the like),  lien  (statutory  or  other),  preference,
priority or other security agreement or preferential  arrangement of any kind or
nature  whatsoever,  including without  limitation any conditional sale or other
title retention  agreement,  the interest of a lessor under a Capital Lease, any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing,  and the filing of any financing statement or document having similar
effect (other than a financing  statement  filed by a "true" lessor  pursuant to
9408 of the Uniform Commercial Code) naming the owner of the asset to which such
Lien relates as debtor,  under the Uniform  Commercial Code or other  comparable
law of any jurisdiction.

                  "Loan  Account" has the meaning  given to such term in Section
2.3.

                  "Loan Documents" means this Agreement, the Notes, the Guaranty
and all other  agreements,  instruments and documents  (together with amendments
and supplements  thereto and replacements  thereof) now or hereafter executed by
the REIT or Borrower which  evidence,  guarantee or secure the  Obligations,  in
each case either as originally  executed or as the same may from time to time be
supplemented, modified, amended, renewed, extended or supplanted.

                  "Major  Agreements"  means,  with respect to any Real Property
included within the Unencumbered  Pool or which Borrower  proposes for inclusion
within the Unencumbered  Pool, (a) a lease of such Real Property with respect to
25,000  square feet or more of gross  leasable  area,  and (b) each ground lease
affecting such Real Property.

                  "Material  Adverse Effect" means,  with respect to a Person, a
material adverse effect upon the condition (financial or otherwise), operations,
performance  or  properties of such Person.  The phrase "has a Material  Adverse
Effect" or "will  result in a Material  Adverse  Effect" or words  substantially
similar thereto shall in all cases be intended to mean "has resulted, or will or
could reasonably be anticipated to result,  in a Material  Adverse Effect",  and
the phrase  "has no (or does not have a) Material  Adverse  Effect" or "will not
result in a Material  Adverse  Effect" or words  substantially  similar  thereto
shall in all  cases  be  intended  to mean  "does  not or will not or could  not
reasonably be anticipated to result in a Material Adverse Effect".

                  "Maturity  Date" has the meaning given to such term in Section
2.1(d).

                  "Minority   Interests"   means  that   portion  of   "minority
interests" as set forth in the REIT's financial statements which is attributable
to the ownership interest in Borrower of Persons other than the REIT.

                                      -10-

<PAGE>

                  "Multiemployer Plan" means an employee benefit plan defined in
Section  4001(a)(3) of ERISA which is, or within the  immediately  preceding six
(6) years was, contributed to by a Person or an ERISA Affiliate.

                  "NAREIT  Definition"  has the  meaning  given to such  term in
Section 11.3.

                  "Net Income" means, for any period, total net income (or loss)
of the REIT and the Consolidated  Entities for such period,  provided that there
shall be excluded  therefrom  (i) any charge  attributable  to, or  otherwise on
account of, the  Minority  Interests,  (ii) any income or loss  attributable  to
extraordinary  items  (including,   without  limitation,   any  income  or  loss
attributable  to  restructuring  of  Indebtedness),  (iii) gains and losses from
sales of assets,  (iv)  Borrower's pro rata share of the income (or loss) of any
Unconsolidated  Joint  Venture  for such  period,  and (v)  except to the extent
otherwise included  hereunder,  the income (or loss) of any Person accrued prior
to the date it becomes a  Consolidated  Entity or is merged with the REIT or any
Consolidated  Entity or such  Person's  assets are  acquired  by the REIT or any
Consolidated Entity. For purposes of this definition,  Borrower's pro rata share
of income (or loss) of any Unconsolidated Joint Venture shall be deemed equal to
the product of (i) the income (or loss) of such  Unconsolidated  Joint  Venture,
multiplied by (ii) the percentage of the total outstanding Capital Stock of such
Person held by Borrower,  expressed as a decimal.  For purposes of the preceding
sentence,  the term "Capital Stock" shall not include the interests described in
clause (ii) of the definition of "Capital Stock".

                  "Net Offering  Proceeds" means (a) all cash proceeds  received
by the REIT as a result of the sale of  common,  preferred  or other  classes of
stock of the REIT (if and only to the extent reflected in  stockholders'  equity
on the consolidated  balance sheet of the REIT prepared in accordance with GAAP)
less customary  costs,  expenses and discounts of issuance paid by the REIT (all
of which proceeds shall be  concurrently  contributed by the REIT to Borrower as
additional capital as provided in Section 6.2(h),  below), plus (b) all cash and
the fair  market  value  of the net  equity  of all  properties  contributed  to
Borrower by one or more Persons in exchange for limited partnership interests in
Borrower.

                  "Non-Pro Rata Advance"  means an Advance with respect to which
fewer than all the Lenders have funded their  respective Pro Rata Shares of such
Advance  and the  failure  of the  non-funding  Lender or Lenders to fund its or
their  respective  Pro Rata Shares of such Advance  constitutes a breach of this
Agreement.

                  "Nonrecourse  Debt"  means  any  Debt:  (a) under the terms of
which the  payee's  remedies  upon the  occurrence  of a default  are limited to
specific, identified assets of the payor which secure such Debt; and (b) for the
repayment of which the payor has no personal  liability  beyond the loss of such
specified assets, except for liability for fraud, material misrepresentations or
misuse or misapplication of insurance  proceeds,  condemnation  awards or rents,
existence  of  hazardous  waste or other  customary  exceptions  to  nonrecourse
provisions.

                  "Note" means the promissory note, which shall be substantially
in the form of Exhibit F, made by Borrower to a Lender  evidencing  the Advances
under that  Lender's  Pro Rata  Share of the  Commitment,  either as  originally
executed  or as the  same  may  from  time to time  be  supplemented,  modified,
amended, renewed, extended or supplanted.

                  "Notice  of  Borrowing"  means,  with  respect  to a  proposed
Advance  pursuant  to  Section  2.1(b),  a notice  substantially  in the form of
Exhibit G.

                  "Obligations"  means all  present and future  obligations  and
liabilities  of the Borrower of every type and  description  arising under or in
connection with this Agreement, the Notes and the other Loan Documents due or to
become due to the Lenders or any Person entitled to  indemnification,  or any of
their  respective  successors,  transferees  or assigns,  whether for principal,
interest,  fees,  expenses,  indemnities or other amounts (including  attorneys'
fees and expenses) and whether due or not due, direct or indirect,  joint and/or
several,  absolute  or  contingent,  voluntary  or  involuntary,  liquidated  or
unliquidated, determined or undetermined, and whether now or hereafter existing,
renewed  or  restructured,  whether  or not  from  time  to  time  decreased  or
extinguished  and later increased,  created or incurred,  whether or not arising
after the  commencement  of a proceeding  under the Bankruptcy  Code  (including
post-petition  interest)  and whether or not allowed or  allowable as a claim in
any such  proceeding,  and  whether or not  recovery of any such  obligation  or
liability  may be barred by a  statute  of  limitations  or such  obligation  or
liability may otherwise be unenforceable.

                  "Office  Property"  means any Real  Property that is an office
building and any related parking facility.

                                      -11-

<PAGE>

                   "Officer's  Certificate"  means  a  certificate  signed  by a
specified officer of a Person certifying as to the matters set forth therein.

                  "Partnership  Units" has the meaning established for that term
in the  Partnership  Agreement  of Borrower.  "PBGC"  means the Pension  Benefit
Guaranty Corporation or any Person succeeding to the functions thereof.

                  "Permit" means any permit, approval,  authorization,  license,
variance  or  permission  required  from  a  Governmental   Authority  under  an
applicable Requirement of Law.

                  "Permitted Liens" mean:

                  (a) Liens (other than Environmental Liens and any Lien imposed
         under  ERISA) for  taxes,  assessments  or charges of any  Governmental
         Authority  or  claims  not yet due and  any  such  taxes,  assessments,
         charges or claims which are due if they are being contested by Borrower
         in accordance with Section 6.1(d);

                  (b) Liens (other than any Lien imposed  under ERISA)  incurred
         or deposits made in the ordinary course of business  (including without
         limitation  surety bonds and appeal bonds) in connection  with workers'
         compensation, unemployment insurance and other types of social security
         benefits  or to  secure  the  performance  of  tenders,  bids,  leases,
         contracts (other than for the repayment of Indebtedness), and statutory
         obligations;

                  (c) Liens imposed by laws, such as mechanics'  liens and other
         similar liens arising in the ordinary  course of business  which secure
         payment of  obligations  not more than thirty (30) days past due or are
         being contested as permitted under this Agreement;

                  (d) any Liens which are approved by Requisite Lenders; and

                  (e) rights of lessees  under  leases and the rights of lessors
         under Capital Leases.

                  "Person"  means  any  natural  person,  corporation,   limited
partnership,   general  partnership,  joint  stock  company,  limited  liability
company,  limited liability partnership,  joint venture,  association,  company,
trust, bank, trust company,  land trust,  business trust or other  organization,
whether  or not a legal  entity,  or any other  nongovernmental  entity,  or any
Governmental Authority.

                  "Plan" means an employee  benefit plan defined in Section 3(3)
of ERISA (other than a  Multiemployer  Plan) in respect of which  Borrower or an
ERISA Affiliate,  as applicable,  is an "employer" as defined in Section 3(5) of
ERISA.

                  "Price  Adjustment Date" has the meaning given to such term in
Section 2.4(j)(iii).

                  "Pricing Period" means (i) the First Pricing Period,  (ii) the
period commencing on the first day after the end of the First Pricing Period and
ending on (and  including)  the date  occurring  three (3)  Business  Days after
Administrative  Agent receives a Rating Notice and (iii) each period  thereafter
commencing on the first day after the end of the immediately  preceding  Pricing
Period and ending on (and  including) the date occurring three (3) Business Days
after Administrative Agent receives a Rating Notice.

                  "Pro Rata  Share"  means,  with  respect to each  Lender,  the
percentage  of the  Commitment  set forth  opposite  the name of that  Lender on
Schedule 1.1, as such  percentage  may be increased or decreased  pursuant to an
Assignment and Assumption executed in accordance with Section 11.20.

                  "Proceedings"  means,  collectively,  all  actions,  suits and
proceedings before, and investigations commenced or threatened by or before, any
court or Governmental Authority with respect to a Person.

                  "Property"  means,  as to any  Person,  any  real or  personal
property, building, facility, structure, equipment or unit, or other asset owned
and operated by such Person in the ordinary course of its business.

                                      -12-

<PAGE>

                  "Property  Expenses"  means,  for  any  Office  Property,  all
operating  expenses  relating to such Office  Property,  including the following
items (provided, however, that Property Expenses shall not include Debt Service,
tenant   improvement   costs,   leasing   commissions,   capital   improvements,
Depreciation  and  Amortization   Expenses  and  any  extraordinary   items  not
considered operating expenses under GAAP):

                  (i) all  expenses for the  operation of such Office  Property,
including any management fees payable under  management  contracts,  landscaping
costs,  janitorial  costs,  costs for trash  pickup and  security  costs and all
insurance expenses, but not including any expenses incurred in connection with a
sale or other capital or interim capital transaction;

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

                  (iii)  the cost of  routine  maintenance,  repairs  and  minor
alterations, to the extent they can be expensed under GAAP; and

                  (iv) if  Borrower's  interest  in such  Office  Property  is a
ground  leasehold  interest,  rents paid by Borrower  under the ground lease for
such Office Property.

                  "Property  Income" means, for any Office  Property,  all gross
revenue  from the  ownership  and/or  operation  of such  Office  Property  (but
excluding  (i) income from a sale or other  capital  item  transaction  and (ii)
Lease  Buyout   Proceeds),   service  fees  and  charges,   all  tenant  expense
reimbursement  income payable with respect to such Office Property (but not such
reimbursement for expenditures not deducted as a Property Expense), and proceeds
of  business  interruption  insurance  specifically  allocable  to  such  Office
Property.

                  "Property  Information"  means the following  information  and
other  items  with  respect  to each Real  Property  which  Borrower  intends to
designate as an Unencumbered Asset to be added to the Unencumbered Pool:

                  (i) A physical  description  of such Real  Property,  the date
upon which such Real  Property  was  acquired  or is  proposed to be acquired by
Borrower,  the Acquisition Price of such Real Property,  if the building located
on such Real Property or the use of such building does not conform to applicable
zoning ordinances and laws, a description of such nonconformity and whether such
building or use is a legal nonconforming use, a copy of any reports delivered to
Borrower with respect to the  structural  integrity of  improvements  located on
such Real Property and Borrower's  preliminary  budget for nonrevenue  enhancing
capital  expenditures  for such Real Property for the next succeeding  eight (8)
Fiscal Quarters;

                  (ii) A current  operating  statement  for such Real  Property,
audited or  certified  by  Borrower  as being true and  correct in all  material
respects  and  prepared  in  accordance  with GAAP,  and  comparative  operating
statements  for the current  interim  fiscal period and for the previous two (2)
Fiscal  Years  (or  such  lesser  period  as it has been  operating);  provided,
however, that, if Borrower shall have owned such Real Property for less than the
period to be covered by such  operating  statements  and  comparative  operating
statements,  then the audit and certification  requirements shall extend only to
the  period  of   ownership  by  Borrower,   and  Borrower   shall   provide  to
Administrative  Agent complete  copies of any operating  statements  prepared by
former  owner(s) of such Real  Property  with  respect to the  remainder  of the
periods required hereunder, if the same are available to Borrower;

                  (iii) A current Rent Roll for such Real Property, certified by
Borrower as being true and correct (or if Borrower  does not  presently  own the
Property, a copy of the Rent Roll prepared by the seller thereof);

                  (iv)  A  "Phase  I"  environmental  assessment  of  such  Real
Property  not more than twelve (12)  months  old,  prepared by an  environmental
engineering firm reasonably acceptable to Administrative Agent;

                  (v)  Copies  of  all  Major  Agreements  affecting  such  Real
Property;

                  (vi) A copy of  Borrower's  most recent  Owner's or  Leasehold
Policy of Title  Insurance,  if any,  covering  such Real  Property or, for Real
Property to be acquired, a preliminary title report; and

                                      -13-

<PAGE>

                  (vii) If Borrower's interest in such Real Property is a ground
leasehold interest, a copy of the ground lease pursuant to which Borrower leases
such Real Property and all amendments thereto and memoranda thereof.

                  "Property NOI" means,  for any Office Property for any period,
(i) all Property  Income for such period,  minus (ii) all Property  Expenses for
such period.

                  "Rating   Notice"  means  written   notice  from  Borrower  to
Administrative  Agent  delivered  within three (3) Business Days after  Borrower
receives notice of each change in the rating of Borrower's  long-term  unsecured
senior Debt by any rating agency that has rated Borrower's  long-term  unsecured
senior Debt and  certifying  that,  as of the date of such written  notice,  (i)
Borrower's  long-term  unsecured  senior Debt was rated by Standard & Poor's and
Moody's  Investors  Service,  Inc. (and setting forth such rating and certifying
thereto) and (ii) the lower of such ratings (if there are two different  ratings
of Borrower's  long-term  unsecured senior Debt) was BBB- (which is a Standard &
Poor's rating or its equivalent by Moody's Investors Service, Inc.) or higher.

                  "Real Property" means each lot or parcel (or portions thereof)
of real property,  improvements and fixtures thereon and  appurtenances  thereto
now or hereafter owned or leased by Borrower or any other Consolidated Entity.
                  "Regulations T, U and X" mean such  Regulations of the Federal
Reserve Board as in effect from time to time.

                  "REIT" means Arden Realty, Inc., a Maryland corporation.

                  "Release"  means  the  release,   spill,  emission,   leaking,
pumping,  injection,  deposit,  disposal,  discharge,   dispersal,  leaching  or
migration into the indoor or outdoor environment or into or out of any Property,
including  the movement of  Contaminants  through or in the air,  soil,  surface
water, groundwater or property.

                  "Remedial  Action"  means any action  required  by  applicable
Environmental  Laws to (a) clean up,  remove,  treat or in any other way address
Contaminants  in the indoor or outdoor  environment;  (b) prevent the Release or
threat of Release or minimize the further Release of Contaminants so they do not
migrate or endanger or  threaten  to  endanger  public  health or welfare or the
indoor  or  outdoor  environment;   or  (c)  perform  pre-remedial  studies  and
investigations and post-remedial monitoring and care.

                  "Rent Roll" means,  with respect to any Real Property,  a rent
roll for such Real Property  stating for each tenancy  within such Real Property
the identity of the lessee, the suite designation of the space leased, the gross
leasable area included within such space,  the date of commencement and the date
of  termination  of such  tenancy,  the  periods  of any  options  to  extend or
terminate such tenancy,  the base rent and any escalations or operating  expense
reimbursement  payable in respect of such  tenancy and the type of lease  (i.e.,
gross or degree to which net of expenses, taxes and other items).

                  "Reportable  Event"  means  any of  the  events  described  in
Section  4043(c) of ERISA,  other  than an event for which the  thirty  (30) day
notice requirement is waived by regulations.

                  "Requirements of Law" means, as to any Person, the charter and
by-laws, partnership agreement or other organizational or governing documents of
such Person,  and any law, rule or regulation,  Permit,  or  determination of an
arbitrator or a court or other Governmental  Authority,  in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject,  including  without  limitation,  the Securities
Act,  the  Securities  Exchange  Act,  Regulations  T, U and X,  FIRREA  and any
certificate of occupancy, zoning ordinance, building,  environmental or land use
requirement or Permit or occupational safety or health law, rule or regulation.

                  "Requisite Lenders" means: (a) as of any date of determination
if the  Commitments  are then in effect,  Lenders whose Pro Rata Shares,  in the
aggregate,  are at least sixty-six and two-thirds percent (66_%),  provided that
in determining  such percentage at any given time, all then existing  Defaulting
Lenders will be disregarded  and excluded and the Pro Rata Shares of the Lenders
shall be redetermined,  for voting purposes only, to exclude the Pro Rata Shares
of such  Defaulting  Lenders;  and (b) as of any  date of  determination  if the
Commitments  have  then  been  suspended  or  terminated  and there are then any
outstanding Advances, Lenders holding sixty-six and two thirds percent (66_%) of
all such outstanding Advances.

                                      -14-

<PAGE>

                  "Responsible Official" means (a) when used with reference to a
Person other than an individual,  any corporate officer of such Person,  general
partner of such Person, corporate officer of a corporate general partner of such
Person,  or corporate  officer of a corporate  general  partner of a partnership
that is a general  partner of such  Person,  or any other  responsible  official
thereof acting on behalf  thereof,  and (b) when used with reference to a Person
who is an individual, such Person.

                  "S-11" means the Form S-11  Registration  Statement  under the
Securities  Act  filed by the REIT  with the  Commission  on July 16,  1996,  as
amended.

                  "Second  Amended  and  Restated  Credit  Agreement"  means the
Second Amended and Restated Revolving Credit Agreement,  dated as of May 2, 2000
(as amended,  supplemented,  amended and restated,  and otherwise  modified from
time to time) among Borrower, as borrower thereunder, the lenders named therein,
Lehman  Commercial  Paper Inc., as Syndication  Agent,  Lehman Brothers Inc., as
Co-Lead Arranger,  Bank One, N.A., as Documentation Agent, and Wells Fargo Bank,
National Association, as Administrative Agent and Co-Lead Arranger.

                  "Securities"   means   any   stock,   shares,   voting   trust
certificates,  bonds,  debentures,  notes or other  evidences  of  indebtedness,
secured or unsecured, convertible,  subordinated or otherwise, or in general any
instruments  commonly  known as  "securities",  or any  certificate of interest,
shares, or participations in temporary or interim  certificates for the purchase
or acquisition  of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations,  provided that
Securities shall not include Cash  Equivalents,  Investment  Mortgages or equity
investments in Unconsolidated Joint Ventures.

                  "Securities  Act" means the Securities Act of 1933, as amended
to the date hereof and from time to time hereafter, and any successor statute.

                  "Securities Exchange Act" means the Securities Exchange Act of
1934,  as amended to the date  hereof and from time to time  hereafter,  and any
successor statute.

                  "Senior  Loans" has the meaning  given to such term in Section
10.4(b).

                  "Solvency  Certificate"  means,  in the  case of the  REIT,  a
certificate  in the  form  of  Exhibit  H-1  and  in the  case  of  Borrower,  a
certificate in the form of Exhibit H-2.

                  "Solvent" means as to any Person at the time of determination,
that such Person (a) owns  Property  the value of which (both at fair  valuation
and at present fair saleable  value) is greater than the amount  required to pay
all of such Person's  liabilities  (including the probable  amount of contingent
liabilities and debts); (b) is able to pay all of its debts as such debts mature
(including  through  refinancing on commercially  reasonable terms); and (c) has
capital  sufficient to carry on its business and  transactions  and all business
and transactions in which it is about to engage.

                  "Standard & Poor's" means Standard & Poor's Ratings  Services,
a division of The McGraw-Hill Companies.

                  "Stockholders' Equity" means, as of any date of determination,
the consolidated  Stockholders' Equity of the REIT as of that date determined in
accordance  with GAAP and shown in the financial  statements of the REIT and the
Consolidated Entities;  provided that there shall be excluded from Stockholders'
Equity any amount attributable to Disqualified Stock.

                  "Subsidiary"  means, as of any date of determination  and with
respect to any Person, any corporation, limited liability company or partnership
(whether or not, in either case, characterized as such or as a "joint venture"),
whether now  existing or hereafter  organized or acquired:  (a) in the case of a
corporation or limited liability company,  of which a majority of the Securities
having  ordinary  voting power for the election of directors or other  governing
body (other than Securities having such power only by reason of the happening of
a contingency) are at the time  beneficially  owned by such Person and/or one or
more Subsidiaries of such Person, or (b) in the case of a partnership,  of which
a majority  of the  partnership  or other  ownership  interests  are at the time
beneficially owned by such Person and/or one or more of its Subsidiaries.

                                      -15-

<PAGE>

                  "Swap  Agreement" means a written  agreement  between Borrower
and one or more financial  institutions  providing for "swap", "cap",  "collar",
"floor,"  "buy  down" or other  interest  rate  protection  with  respect to any
Indebtedness, in form and substance acceptable to Administrative Agent.

                  "Syndication Agent" means Lehman Commercial Paper Inc. or such
other Lender as is hereafter  designated in writing by the Administrative  Agent
to serve as  Syndication  Agent  hereunder  (subject to Section  10.15  hereof).

                  "Tangible Net Worth"  means,  at any time,  the  Stockholders'
Equity, plus Minority  Interests,  plus cumulative net additions of Depreciation
and Amortization  Expense deducted in determining income for all Fiscal Quarters
ending after the date of Borrower's formation minus Intangible Assets.

                  "Tax Expense"  means  (without  duplication),  for any period,
total tax expense (if any)  attributable  to income and franchise taxes based on
or measured by income, whether paid or accrued, of the REIT and the Consolidated
Entities,  including the REIT's and each Consolidated Entity's pro rata share of
tax  expenses  in  each  Unconsolidated  Joint  Venture.  For  purposes  of this
definition, the REIT's and such Consolidated Entity's pro rata share of any such
tax expense of such  Unconsolidated  Joint  Venture shall be deemed equal to the
product of (i) such tax expense of such Unconsolidated Joint Venture, multiplied
by  (ii)  the  percentage  of  the  total  outstanding  Capital  Stock  of  such
Unconsolidated  Joint  Venture  held by the  REIT or such  Consolidated  Entity,
expressed  as a  decimal.  For  purposes  of the  preceding  sentence,  the term
"Capital Stock" shall not include the interests  described in clause (ii) of the
definition of "Capital Stock".

                  "Termination  Event" means (a) any Reportable  Event,  (b) the
withdrawal of a Person or an ERISA  Affiliate of such Person from a Benefit Plan
during a plan  year in which  it was a  "substantial  employer"  as  defined  in
Section  4001(a)(2) of ERISA, (c) the occurrence of an obligation  arising under
Section  4041 of ERISA  of a Person  or an ERISA  Affiliate  of such  Person  to
provide  affected  parties  with a written  notice of an intent to  terminate  a
Benefit Plan in a distress  termination  described in Section  4041(c) of ERISA,
(d) the  institution  by the PBGC of  proceedings  to terminate any Benefit Plan
under  Section  4042 of ERISA,  (e) any  event or  condition  which  constitutes
grounds  under  Section  4042 of  ERISA  for the  appointment  of a  trustee  to
administer a Benefit Plan, (f) the partial or complete withdrawal of such Person
or any ERISA  Affiliate  of such Person from a  Multiemployer  Plan,  or (g) the
adoption of an amendment by any Person or any ERISA  Affiliate of such Person to
terminate any Benefit Plan.

                  "Total Liabilities"  means, at any time, without  duplication,
the aggregate amount of (i) all  Indebtedness and other  liabilities of the REIT
and the Consolidated  Entities reflected in the financial statements of the REIT
or disclosed in the financial  notes thereto,  plus (ii) all  liabilities of all
Unconsolidated  Joint Ventures that are recourse to the REIT or any Consolidated
Entity or any of its assets or that  otherwise  constitute  Indebtedness  of the
REIT or any  Consolidated  Entity,  plus (iii) the REIT's and each  Consolidated
Entity's  pro rata  share  of all  Indebtedness  and  other  liabilities  of any
Unconsolidated Joint Venture not otherwise constituting Indebtedness of the REIT
or such Consolidated  Entity, plus (iv) all Guaranty Obligations of the REIT and
the  Consolidated  Entities.  For purposes of clause (iii),  the REIT's and such
Consolidated  Entity's pro rata share of all Indebtedness and other  liabilities
of any Unconsolidated  Joint Venture shall be deemed equal to the product of (a)
such Indebtedness or other liabilities,  multiplied by (b) the percentage of the
total  outstanding  Capital  Stock  of  such  Person  held  by the  REIT or such
Consolidated  Entity,  expressed  as a decimal.  For  purposes of the  preceding
sentence,  the term "Capital Stock" shall not include the interests described in
clause (ii) of the definition of "Capital Stock".  Total  Liabilities  shall not
include Minority Interests.

                  "to  the  best   knowledge   of"  means,   when   modifying  a
representation,  warranty or other  statement  of any  Person,  that the fact or
situation  described therein is known by the Person (or, in the case of a person
other than a natural  person,  known by a  Responsible  Official of that Person)
making the representation,  warranty or other statement, or with the exercise of
reasonable  due  diligence  under  the  circumstances  (in  accordance  with the
standard of what a reasonable Person in similar  circumstances  would have done)
would have been known by the Person  (or,  in the case of a Person  other than a
natural Person, would have been known by a Responsible Official of that Person).

                  "Unconsolidated  Joint Venture" means any Joint Venture of the
REIT or any Consolidated  Entity in which the REIT or such  Consolidated  Entity
holds any Capital  Stock but which  would not be  combined  with the REIT in the
consolidated financial statements of the REIT in accordance with GAAP.

                                      -16-

<PAGE>

                  "Unencumbered  Asset" means any Real  Property  designated  by
Borrower that satisfies all of the following conditions:

                    (i) is a completed Office Property;  provided, however, that
with  respect  to  Unencumbered  Assets  referred  to in  clause  (iii)  of  the
definition of "Unencumbered  Asset Value",  "completed Office Property" means an
Office Property with respect to which the appropriate Governmental Authority has
issued a temporary  certificate  of occupancy and the architect who prepared the
plans  and   specifications   for  such  Office   Property   has   delivered  to
Administrative  Agent a written  certificate,  in form and substance  reasonably
acceptable  to  Administrative   Agent,   certifying  that,  other  than  tenant
improvements,  such Office Property has been completed in substantial compliance
with such plans and specifications;

                   (ii) is free and clear of any Lien, other than (a) easements,
covenants,  and  other  restrictions,   charges  or  encumbrances  not  securing
Indebtedness  that do not interfere  materially with the ordinary  operations of
such Real  Property  and do not  materially  detract from the value of such Real
Property; (b) building restrictions,  zoning laws and other Requirements of Law;
and (c) leases and  subleases of such Real  Property in the  ordinary  course of
business; provided, however, if such Real Property is subject to a ground lease,
it, together with all other Real Properties in the Unencumbered  Pool subject to
ground  leases,  shall  not  represent  more  than the  lesser of (a) 25% of the
aggregate Unencumbered Asset Value of all assets in the Unencumbered Pool or (b)
25% of the total square footage of all assets in the Unencumbered  Pool; and (d)
Permitted Liens;

                  (iii)  is Wholly-Owned;

                   (iv)  such  Real  Property  is  not  less  than  70%  leased;
provided,  however,  if such Real Property is not more than 350,000  square feet
and is greater than 25% leased,  it may constitute an Unencumbered  Asset for up
to three Fiscal  Quarters;  provided  further,  however,  (a) such Real Property
qualifying  as an  Unencumbered  Asset  pursuant  to the  immediately  preceding
proviso,  together with all other Real  Properties  qualifying  as  Unencumbered
Assets pursuant to the immediately  preceding  proviso  (collectively,  together
with this proviso,  the "Less Than 70% Leased  Provisos")  and together with all
Unencumbered Assets the Unencumbered Asset Value of which is determined pursuant
to clause (iii) of the  definition  of  "Unencumbered  Asset  Value",  shall not
represent  more than the lesser of (1) 10% of the aggregate  Unencumbered  Asset
Value of all  assets in the  Unencumbered  Pool or (2) 10% of the  total  square
footage of all assets in the  Unencumbered  Pool, and (b) the value of such Real
Property  qualifying  as an  Unencumbered  Asset  pursuant  to  the  immediately
preceding  proviso  shall be either (A) if such Real  Property  was  acquired by
Borrower  as a  completed  Office  Property,  its  Acquisition  Price  or (B) if
Borrower developed such Real Property,  the sum of its Acquisition Price plus an
amount (as  reasonably  approved  by  Administrative  Agent)  equal to the costs
incurred by Borrower to develop such Real  Property,  and, in either such event,
such Real Property shall not be valued in accordance  with clause (i) or (ii) of
the definition of "Unencumbered Asset Value"; and

                    (v) after  adding  such Real  Property  to the  Unencumbered
Pool, the Real  Properties in the  Unencumbered  Pool shall not be less than 85%
leased.

                  Any Real  Property  (a)  which  does not  satisfy  each of the
foregoing conditions,  (b) which satisfies each of the foregoing conditions, but
is  subject  to a  ground  lease,  (c)  which  satisfies  each of the  foregoing
conditions, but with respect to which Borrower is relying on compliance with the
Less Than 70% Leased  Provisos to satisfy the foregoing  condition  (iv), or (d)
which  satisfies  each of the  foregoing  conditions,  but  not  the  Additional
Conditions  (defined below),  may constitute an Unencumbered  Asset only if such
Real Property has been expressly approved by the Requisite Lenders in writing as
an  Unencumbered  Asset.  Any Real  Property  (A)  which  satisfies  each of the
foregoing  conditions  (provided that, with respect to condition (ii), such Real
Property is not subject to any ground lease, and with respect to condition (iv),
Borrower is not relying on compliance  with the Less Than 70% Leased Provisos to
satisfy  condition  (iv),  that is,  such  Real  Property  is not less  than 70%
leased),  (B) has been  expressly  approved  by  Administrative  Agent  alone in
writing as an  Unencumbered  Asset and (C) satisfies  the  following  additional
conditions  (the  "Additional  Conditions")  and  Borrower  has so  certified to
Administrative Agent, shall be an Unencumbered Asset:

                  (1)  such  Real  Property  is  located  in one  of  Borrower's
         existing  markets and is in conformance with current applicable  zoning
         laws; and

                                      -17-

<PAGE>

                  (2) with respect to such Real Property,  Borrower has received
         a "Phase I" environmental  assessment and a structural/physical  report
         and has  certified to  Administrative  Agent that no  environmental  or
         structural issues have been identified in those reports.

                  As of the date hereof all Unencumbered Assets are described on
Schedule 8.5,  provided that if any  Unencumbered  Asset  (including  any of the
properties listed on Schedule 8.5) no longer satisfies any of the conditions set
forth in the foregoing clauses (i) through (v), inclusive, the Requisite Lenders
shall  have the  right,  at any time and from time to time,  to notify  Borrower
that,  effective  upon the giving of such notice,  such asset shall no longer be
considered  an  Unencumbered  Asset.  If  Borrower  intends to  designate a Real
Property as an Unencumbered Asset to be added to the Unencumbered Pool from time
to time, it will notify the Administrative Agent of such intention, which notice
will include, with respect to such Real Property,  the Property Information with
respect to such Real Property,  and such other  information  and items as may be
reasonably requested by Administrative Agent with respect to such Real Property.
If  Borrower  at any  time  intends  to  withdraw  any  Real  Property  from the
Unencumbered  Pool,  it  shall  (A)  notify  the  Administrative  Agent  of  its
intention,  and (B) deliver to the  Administrative  Agent a  certificate  of its
chief  financial  officer,  chief executive  officer or chief operating  officer
setting forth the calculations  establishing that Borrower will be in compliance
with  Section  8.5 with giving  effect to such  withdrawal  (and any  concurrent
addition of Real Properties to the Unencumbered  Pool), which calculations shall
be in such detail,  and otherwise in such form and substance,  as Administrative
Agent reasonably requires.  Effective  automatically upon receipt of such notice
and certificate by  Administrative  Agent (or upon any later date stated in such
notice),  such Real Property shall no longer  constitute an Unencumbered  Asset.
The  following  two Real  Properties  are set  forth in  Schedule  8.5 under the
heading  "Real  Properties   Conditionally  Approved  as  Unencumbered  Assets":
Centrelake  Plaza and  Havengate  Center.  Each such Real Property is, as of the
date of this  Agreement,  less than 70%  leased and has thus not  satisfied  the
condition  set forth in clause (iv)  above.  However,  all of the Lenders  agree
that,  with respect to each such Real  Property (1) all of the other  conditions
set forth  have been  satisfied  and (2) at such time as  Borrower  delivers  to
Administrative Agent written evidence reasonable  satisfactory to Administrative
Agent ("Borrower's Unencumbered Asset Notice") that such Real Property is 70% or
more leased and provided that, as reasonably determined by Administrative Agent,
the  conditions  set forth in clauses (i), (ii) and (v) above remain  satisfied,
such Real Property shall become an Unencumbered Asset without any further action
by the Lenders as of the date on which Administrative  Agent, in response to its
receipt of the Borrower's  Unencumbered  Asset Notice,  gives  Borrower  written
confirmation  that such Real Property is an Unencumbered  Asset.  Administrative
Agent shall deliver copies of each such notice to all Lenders.  No  Unencumbered
Asset shall be Construction in Progress.

                  "Unencumbered Asset Value" means, at any time, with respect to
a  specified  Unencumbered  Asset  (except  as  provided  in the  definition  of
"Unencumbered  Asset"),  (i) for Unencumbered Assets that have been Wholly-Owned
by  Borrower  for at least one full  Fiscal  Quarter  at such time and which are
seventy  percent  (70%) or more leased,  the product of the Property NOI of such
Unencumbered  Assets  during the period of the full  Fiscal  Quarter  ended most
recently multiplied by 4, divided by 9.75% (expressed as a decimal), or (ii) for
Unencumbered  Assets that have been  Wholly-Owned  by Borrower for less than one
full Fiscal Quarter at such time, an amount equal to the  Acquisition  Price for
such  Unencumbered  Assets,  or (iii)  for  Unencumbered  Assets  that have been
Wholly-Owned  by Borrower for at least one full Fiscal  Quarter at such time and
which  are each  more  than 25%  leased  but less  than 70%  occupied  (and such
Unencumbered  Assets have never been 70% or more  occupied)  an amount  equal to
either (A) if the Real Property which  constitutes any such  Unencumbered  Asset
was acquired by Borrower as a completed Office Property,  its Acquisition  Price
or (B) if Borrower  developed  such Real  Property,  the sum of its  Acquisition
Price plus an amount (as reasonably  approved by Administrative  Agent) equal to
the costs incurred by Borrower to develop such Real Property; provided, however,
that any Unencumbered  Asset the Unencumbered Asset Value of which is determined
pursuant to the foregoing clause (iii) shall contain no more than 350,000 square
feet and shall  constitute an Unencumbered  Asset under this clause (iii) for no
more than  three  Fiscal  Quarters;  and  provided  further,  however,  that the
Unencumbered  Asset Value of any Unencumbered Asset which was valued pursuant to
the foregoing  clause (iii) shall be  determined  pursuant to clause (i) of this
definition only if the Real Property which constitutes such  Unencumbered  Asset
achieves 70% or more occupancy.

                  "Unencumbered Pool" means the pool of Unencumbered Assets.

                  "Unencumbered  Pool  Statements" has the meaning given to such
term in Section 5.1(f).

                  "Unmatured  Event Of Default"  means an event which,  with the
giving of notice or the lapse of time,  or both,  would  constitute  an Event of
Default.

                                      -18-

<PAGE>

                  "Unsecured Funded Indebtedness" means Debt that is not secured
by any Lien and includes, without limitation, outstanding Advances.

                  "Unsecured Interest Expense Coverage Ratio" means, at the time
of determination,  the ratio of (i) Property NOI of all Unencumbered  Assets for
the Fiscal Quarter then most recently ended (or, if shorter, for the period from
the Closing Date to the end of such  period),  to (ii)  Interest  Expense on all
Unsecured Funded Indebtedness for such period.

                  "Unused  Facility  Fee" has the  meaning  set forth in Section
2.5(b).

                  "Wholly-Owned" means, with respect to any Real Property,  that
title to such Real Property is held in fee directly by Borrower or that Borrower
is the lessee under a ground lease approved by the Administrative Agent.

                  1.2  Computation of Time Periods.  In this  Agreement,  in the
computation of periods of time from a specified date to a later  specified date,
the word "from" means "from and  including"  and the words "to" and "until" each
mean to and  including".  Periods of days referred to in this Agreement shall be
counted in calendar days unless Business Days are expressly prescribed.

                  1.3 Terms.

                  (a) Any accounting  terms used in this Agreement which are not
specifically  defined shall be construed in conformity  with,  and all financial
data required to be submitted by this Agreement  shall be prepared in conformity
with, GAAP, except as otherwise specifically prescribed in this Agreement.

                  (b)  In  each  case   where  the   consent  or   approval   of
Administrative  Agent, all the Lenders and/or the Requisite Lenders is required,
or their non-obligatory action is requested by Borrower, such consent,  approval
or action shall be in the sole and absolute  discretion of Administrative  Agent
and, as applicable, each Lender, unless otherwise specifically indicated.

                  (c) Any time the word "or" is used herein,  unless the context
otherwise  clearly  requires,  it has the inclusive  meaning  represented by the
phrase "and/or". The words "hereof", "herein", "hereby", "hereunder" and similar
terms refer to this Agreement as a whole and not to any particular  provision of
this  Agreement.  Article,  section,  subsection,  clause,  exhibit and schedule
references are to this Agreement  unless otherwise  specified.  Any reference in
this Agreement to this Agreement or to any other Loan Document  includes any and
all amendments, modifications,  supplements, renewals or restatements thereto or
thereof, as applicable.

                                    ARTICLE 2
                                    ---------

                                    ADVANCES
                                    --------

                  2.1      Loan Advances and Repayment.

                  (a) Loan Availability. Subject to the terms and conditions set
forth in this  Agreement,  the Lenders hereby agree to make Advances to Borrower
from time to time during the period from the Closing  Date to the  Business  Day
next preceding the Maturity Date, subject to the following:

                  (x)  subject to Section  2.7 and Section  2.8,  the  aggregate
         principal  amount  of all  outstanding  Advances  shall not at any time
         exceed Seventy-Five Million Dollars ($75,000,000); and

                  (y) the aggregate principal amount of all outstanding Advances
         shall not  at any time exceed  the lesser of (1) the  Commitment or (2)
         the amount which,  when  combined  with all components of the unsecured
         Total  Liabilities of the REIT and the date Consolidated Entities other
         than  outstanding  Advances  as  of  the of determination, is equal to
         57.1429% of the aggregate Unencumbered Asset Value of the Unencumbered
         Pool as of such date.

All Advances  under this Agreement  shall be made by the Lenders  simultaneously
and proportionately to their respective Pro Rata Shares.  Borrower  acknowledges
and  agrees  that  neither  the  Administrative  Agent nor any  Lender  shall be

                                      -19-

<PAGE>

responsible  for any failure by any other  Lender to perform its  obligation  to
make an Advance  hereunder and that the Pro Rata Share of the  Commitment of any
Lender  shall not be  increased  or  decreased as a result of the failure by any
other  Lender to perform  its  obligation  to make an Advance.  Advances  may be
voluntarily prepaid pursuant to Section 2.6(a) and, subject to the provisions of
this  Agreement,  any amounts so prepaid may be  reborrowed  under this  Section
2.1(a). Interest shall accrue and be payable on outstanding Advances as provided
in Section 2.4. The principal  balance of the Advances  shall be payable in full
on the  Maturity  Date.  The  obligation  of Borrower to repay  Advances  may be
evidenced by the Notes.

                  (b) Notice of  Borrowing.  (i)  Whenever  Borrower  desires to
borrow under this Section  2.1,  Borrower  shall  giveAdministrative  Agent,  at
Lehman  Brothers Inc., 101 Hudson  Street,  30th Floor,  Jersey City, New Jersey
07302 (telephone:  (201) 524-4603;  telecopier: (201) 524-4439), with a copy to:
Lehman Brothers Inc., 3 World Financial  Center,  12th Floor, New York, New York
10285-1200 (telephone:  (212) 526-6970;  telecopier: (212) 526-0035), or at such
other  addresses  as  Administrative  Agent  shall  designate,  an  original  or
facsimile Notice of Borrowing no later than 12:00 Noon (New York City time), not
less than three (3) nor more than five (5)  Business  Days prior to the proposed
Funding Date of each  Advance.  Each Notice of Borrowing  shall  specify (A) the
Funding Date (which shall be a Business  Day) of the proposed  Advance,  (B) the
amount of the  proposed  Advance,  provided  that the  aggregate  amount of such
proposed  Advance shall equal  Twenty-Five  Million Dollars  ($25,000,000),  (C)
whether the Advance to be made thereunder will be a Base Rate Advance or a LIBOR
Advance and, if a LIBOR Advance,  the Interest Period,  and (D) the proposed use
of such Advance.  Any Notice of Borrowing  pursuant to this Section 2.1(b) shall
be irrevocable.

                           (ii) Borrower may elect (A) to convert LIBOR Advances
         or any portion thereof into Base Rate Advances,  or (B) to convert Base
         Rate  Advances  or any  portion  thereof to LIBOR  Advances,  or (C) to
         convert LIBOR Advances or any portion  thereof into new LIBOR Advances,
         provided,  however,  that the  aggregate  amount of the Advances  being
         converted into or continued as LIBOR Advances  shall, in the aggregate,
         equal Twenty-Five  Million Dollars  ($25,000,000).  The conversion of a
         LIBOR  Advance to a Base Rate Advance or to a new LIBOR  Advance  shall
         only occur on the last Business Day of the Interest  Period relating to
         such LIBOR Advance.  Each election under clause (B) above shall be made
         by Borrower giving Administrative Agent an original or facsimile Notice
         of  Borrowing  no later than 12:00 Noon (New York City time),  not less
         than three (3) nor more than five (5)  Business  Days prior to the date
         of proposed  conversion to a LIBOR Advance.  Each election under clause
         (C) above  shall be made by  Borrower  giving  Administrative  Agent an
         original or facsimile Notice of Borrowing no later than 12:00 Noon (New
         York  City  time),  not less  than  three  (3) nor more  than  five (5)
         Business  Days  prior to the last day of the  Interest  Period  for the
         LIBOR Advance in question.  Each Notice of Borrowing delivered pursuant
         to this  Section  2.1(b)(ii)  shall  specify  (1) the amount of the new
         LIBOR  Advance  or Base  Rate  Advance,  as the case  may be,  (2) with
         respect to a new LIBOR Advance,  the Interest Period therefor,  and (3)
         the date of the  effectiveness  of the LIBOR Rate or Base Rate,  as the
         case may be (which date shall be a Business Day).

                           (iii) Upon receipt of a Notice of Borrowing in proper
         form requesting  LIBOR Advances under  subparagraph  (i) or (ii) above,
         Administrative  Agent shall  deliver a copy thereof (by  facsimile)  to
         each  Lender  by 2:00  P.M.  (New  York  City  time) on the same day of
         Administrative  Agent's  receipt  thereof and shall determine the LIBOR
         Rate  applicable to the Interest  Period for such LIBOR  Advances,  and
         shall,  two (2) Business  Days prior to the  beginning of such Interest
         Period,  give (by facsimile) a Fixed Rate Notice in respect  thereof to
         Borrower and the Lenders; provided,  however, that failure to give such
         notice to Borrower  shall not affect the  validity  of such rate.  Each
         determination  by  Administrative  Agent  of the  LIBOR  Rate  shall be
         conclusive  and  binding  upon the  parties  hereto in the  absence  of
         manifest error.

                           (iv) If Borrower  does not make a timely  election to
         convert all or a portion of a LIBOR Advance into a new LIBOR Advance in
         accordance  with  Section  2.1(b)(ii),  such  LIBOR  Advance  shall  be
         automatically  converted to a Base Rate Advance upon  expiration of the
         Interest Period applicable to such LIBOR Advance.

                  (c)  Making  of  Advances.  Subject  to  Section  10.3  or  as
otherwise provided herein,  Administrative  Agent shall transfer the proceeds of
each new Advance to Borrower's  account number 001-223275 at City National Bank,
400 North Roxbury Drive, Suite 800, Beverly Hills, CA 90210, ABA#1220-16066.

                  (d) Term.  The  outstanding  balance of the Advances  shall be
payable in full on the earliest to occur of, (i) July 27, 2002 (as such date may
be extended  pursuant to Section 2.1(e)),  (ii) the acceleration of the Advances

                                      -20-

<PAGE>

pursuant to Section 9.2(a), or (iii Borrower's  written notice to Administrative
Agent  (pursuant  to Section 2.8) of  Borrower's  election to prepay all accrued
Obligations and terminate the Commitment  (said earliest date referred to herein
as the "Maturity Date").

                  (e)  Extension  of  the  Maturity  Date.   During  the  period
commencing  not more than  ninety  (90) days  prior to, and ending not less than
thirty  (30) days prior to,  the second  anniversary  of the  Closing  Date (the
"Initial  Maturity  Date"),  Borrower  may request a one-year  extension  of the
Maturity Date by  delivering  written  notice of such request to  Administrative
Agent.  Within five (5) Business Days after  Administrative  Agent's  receipt of
such written request,  Administrative Agent shall deliver a copy of such written
request  to  each  Lender.  No  later  than  fifteen  Business  Days  after  the
Administrative  Agent has received such written  notice from the  Borrower,  the
Administrative  Agent shall deliver to the Borrower written  notification of the
interest rates and Applicable LIBOR Rate Margin which will be applicable for the
extension  period,  which  shall  be  the  rates  reasonably  determined  by the
Administrative  Agent to be then  applicable in the market for senior  unsecured
loans to borrowers of similar credit standing as Borrower.  Notwithstanding  the
foregoing,  in no event  shall the  Administrative  Agent be required to deliver
such  notification  earlier than the date which is forty-five (45) days prior to
the  Initial   Maturity   Date.  If  Borrower   executes  and  delivers  to  the
Administrative  Agent an  acceptance  of the quoted  market  rates no later than
three Business Days prior to the original  Maturity  Date,  the extension  shall
become effective,  the Maturity Date shall be extended to July 27, 2003, and the
Applicable  LIBOR  Rate  Margin  shall be the rates  accepted  by  Borrower.  If
Borrower  does not accept the quoted market  rates,  the original  Maturity Date
shall not be extended.

                  2.2 Authorization to Obtain Advances.  Schedule 2.2 sets forth
the names of those employees of Borrower  authorized by Borrower to sign Notices
of Borrowing,  and Administrative Agent and Lenders shall be entitled to rely on
such  Schedule  until  notified in writing by Borrower of any  change(s)  of the
persons so  authorized.  Administrative  Agent  shall be  entitled to act on the
instructions  of anyone  identifying  himself or  herself as one of the  Persons
authorized to execute a Notice of Borrowing, and Borrower shall be bound thereby
in the same  manner as if such  Person were  actually  so  authorized.  Borrower
agrees to indemnify,  defend and hold Lenders and Administrative  Agent harmless
from and against any and all Liabilities and Costs which may arise or be created
by the acceptance of instructions  in any Notice of Borrowing,  unless caused by
the gross negligence or willful misconduct of the Person to be indemnified.

                  2.3 Lenders' Accounting. Administrative Agent shall maintain a
loan  account  (the "Loan  Account") on its books in which shall be recorded (a)
the names and addresses and the Pro Rata Shares of the Commitment of each of the
Lenders,  and the principal amount of Advances owing to each Lender from time to
time,  and (b) all Advances and  repayments of principal and payments of accrued
interest,  as well as  payments  of fees  required  to be paid  pursuant to this
Agreement.  All entries in the Loan  Account  shall be made in  accordance  with
Administrative  Agent's customary accounting practices as in effect from time to
time.  Monthly or at such other  interval as is  customary  with  Administrative
Agent's  practice,  Administrative  Agent will  render a  statement  of the Loan
Account to Borrower and will  deliver a copy  thereof to each Lender.  Each such
statement  shall be deemed final,  binding and  conclusive  upon Borrower in all
respects as to all matters reflected therein (absent manifest error).

                  2.4 Interest on the Advances.

                  (a) Base Rate Advances.  Subject to Section  2.4(f),  all Base
Rate Advances shall bear interest on the daily unpaid  principal  amount thereof
from the date made until paid in full at a  fluctuating  rate per annum equal to
the Base Rate.

                  (b) LIBOR  Advances.  Subject to  Sections  2.4(f) and 2.4(j),
LIBOR Advances shall bear interest on the unpaid principal amount thereof during
the Interest Period  applicable  thereto at a rate per annum equal to the sum of
the LIBOR Rate for such Interest  Period plus the Applicable  LIBOR Rate Margin.
No more  than six (6)  LIBOR  Advances  shall be  outstanding  at any one  time.
Notwithstanding  anything to the  contrary  contained  herein and subject to the
default interest provisions  contained in Section 2.4(f), if an Event of Default
occurs and as a result thereof the Commitment is terminated,  all LIBOR Advances
will  convert  to Base  Rate  Advances  upon the  expiration  of the  applicable
Interest Periods therefor or the date all Advances become due,  whichever occurs
first.

                  (c)      [Reserved].

                  (d)      [Reserved].

                                      -21-

<PAGE>

                  (e) Interest  Payments.  Subject to Section  2.4(f),  interest
accrued on all Advances shall be payable by Borrower,  in the manner provided in
Section 2.6(b), in arrears on the first Business Day of the first calendar month
following the Closing Date, the first Business Day of each  succeeding  calendar
month thereafter, and on the Maturity Date.

                  (f) Default  Interest.  Notwithstanding  the rates of interest
specified  in Sections  2.4(a) and 2.4(b) and the  payment  dates  specified  in
Section  2.4(e),  effective at the option of  Requisite  Lenders  following  the
occurrence  and during the  continuance  of any Event of Default,  the principal
balance  of all  Advances  then  outstanding  and,  to the extent  permitted  by
applicable  law, any interest  payments not paid when due,  shall bear interest,
payable upon demand, at a rate which is five percent (5%) per annum in excess of
the  rate(s)  of  interest  otherwise  payable  from  time  to time  under  this
Agreement.  Notwithstanding  anything  to the  contrary in any of the other Loan
Documents,  all other amounts due  Administrative  Agent or the Lenders (whether
directly or for  reimbursement)  under this  Agreement  or any of the other Loan
Documents if not paid when due, or if no time period is  expressed,  if not paid
within ten (10) days after demand,  shall bear interest from and after demand at
the rate set forth in this Section 2.4(f).

                  (g) Late  Fee.  Borrower  acknowledges  that late  payment  to
Administrative  Agent will cause  Administrative  Agent and the Lenders to incur
costs  not  contemplated  by  this  Agreement.   Such  costs  include,   without
limitation,  processing and  accounting  charges.  Therefore,  if Borrower fails
timely to pay any sum due and  payable  hereunder  through  the  Maturity  Date,
unless  waived by  Administrative  Agent  pursuant to the last  sentence of this
Section 2.4(g) or by the Requisite  Lenders,  a late charge of four cents ($.04)
for each dollar of any such principal payment, interest or other charge which is
due hereon and which is not paid within  fifteen (15) days after such payment is
due, shall be charged by  Administrative  Agent (for the benefit of Lenders) and
paid by Borrower for the purpose of defraying  the expense  incident to handling
such delinquent payment.  Borrower,  the Lenders and Administrative  Agent agree
that this  late  charge  represents  a  reasonable  sum  considering  all of the
circumstances  existing on the date hereof and  represents a fair and reasonable
estimate of the costs that  Administrative  Agent and the Lenders  will incur by
reason of late payment.  Borrower,  the Lenders and Administrative Agent further
agree that proof of actual damages would be costly and inconvenient.  Acceptance
of any late charge shall not  constitute a waiver of the default with respect to
the  overdue  installment,  and  shall not  prevent  Administrative  Agent  from
exercising any of the other rights  available  hereunder or under any other Loan
Document.  Such late charge shall be paid without  prejudice to any other rights
or  remedies of  Administrative  Agent or any  Lender.  The Lenders  agree that,
notwithstanding  the  foregoing,  no  such  late  charge  shall  be  charged  by
Administrative  Agent or any Lender if the outstanding Advances are then bearing
interest  at  the  default  rate  of  interest  set  forth  in  Section  2.4(f).
Administrative Agent is hereby authorized on behalf of all the Lenders,  without
the necessity of any notice to, or further  consent from,  any Lender,  to waive
the  imposition  of the late fees  provided for in this  Section  2.4(g) up to a
maximum of three (3) times per calendar year.

                  (h) Computation of Interest. Interest shall be computed on the
basis of the actual number of days elapsed in the period  during which  interest
or fees  accrue and a year of three  hundred  sixty  (360)  days.  In  computing
interest on any Advance,  subject to Section  2.6(b),  the date of the making of
the  Advance  shall be  included  and the  date of  payment  shall be  excluded;
provided,  however,  that if an Advance is repaid on the same day on which it is
made, one (1) day's interest shall be paid on that Advance.  Notwithstanding any
provision  in this  Section  2.4,  interest in respect of any Advance  shall not
exceed the maximum rate permitted by applicable law.

                  (i) Changes; Legal Restrictions.  In the event that, after the
Closing  Date,  (i the  adoption  of or any  change  in any law,  treaty,  rule,
regulation,  guideline or determination of a court or Governmental  Authority or
any  change  in  the  interpretation  or  application  thereof  by  a  court  or
Governmental Authority, or (ii) compliance by Administrative Agent or any Lender
with any request or directive  made or issued after the Closing Date (whether or
not having the force of law and whether or not the  failure to comply  therewith
would be  unlawful)  from any central  bank or other  Governmental  Authority or
quasi-governmental authority:

                  (A65535  subjects  Administrative  Agent or any  Lender to any
         tax,  duty or other charge of any kind with respect to the  Commitment,
         this Agreement or any of the other Loan Documents,  including the Notes
         or the  Advances,  or changes  the basis of  taxation  of  payments  to
         Administrative Agent or such Lender of principal, fees, interest or any
         other amount payable hereunder,  except for net income, gross receipts,
         gross profits or franchise  taxes imposed by any  jurisdiction  and not
         specifically based upon loan transactions (all such non-excepted taxes,
         duties  and other  charges  being  hereinafter  referred  to as "Lender
         Taxes");

                                      -22-

<PAGE>

                  (B65535  imposes,   modifies  or  holds  applicable,   in  the
         determination  of  Administrative  Agent or any  Lender,  any  reserve,
         special deposit, compulsory loan, FDIC insurance, capital allocation or
         similar  requirement  against  assets  held by,  or  deposits  or other
         liabilities  in or for the account  of,  advances or loans by, or other
         credit   extended   by,   or  any  other   acquisition   of  funds  by,
         Administrative  Agent or such Lender or any  applicable  lending office
         (except to the extent that the reserve and FDIC insurance  requirements
         are reflected in the "Base Rate" or in determining the LIBOR Rate); or

                  (C65535  imposes  on  Administrative  Agent or any  Lender any
         other  condition  materially  more  burdensome  in  nature,  extent  or
         consequence than those in existence as of the Closing Date,

and the result of any of the foregoing is to increase the cost to Administrative
Agent or any Lender of making,  renewing,  maintaining or  participating  in the
Advances or to reduce any amount receivable thereunder;  then, in any such case,
Borrower  shall  promptly  pay  to  Administrative  Agent  or  such  Lender,  as
applicable,  within seven (7) days after  Borrower's  receipt of written demand,
such  amount  or  amounts  (based  upon  a  reasonable   allocation  thereof  by
Administrative Agent or such Lender to the financing  transactions  contemplated
by this  Agreement  and affected by this Section  2.4(i)) as may be necessary to
compensate  Administrative  Agent or such  Lender for any such  additional  cost
incurred or reduced amounts received.  Administrative Agent or such Lender shall
deliver to Borrower  and in the case of a delivery by such  Lender,  such Lender
shall also deliver to  Administrative  Agent, a written statement of the claimed
additional  costs incurred or reduced amounts received and the basis therefor as
soon as reasonably  practicable after such Lender obtains knowledge thereof.  If
Administrative  Agent or any Lender  subsequently  recovers any amount of Lender
Taxes  previously  paid by Borrower  pursuant to this  Section  2.4(i),  whether
before or after termination of this Agreement,  then, upon receipt of good funds
with respect to such recovery,  Administrative  Agent or such Lender will refund
such  amount to Borrower  if no Event of Default or  Unmatured  Event of Default
then  exists  or, if an Event of  Default or  Unmatured  Event of  Default  then
exists, such amount will be credited to the Obligations in the manner determined
by Administrative Agent or such Lender.

                  (j)      Certain Provisions Regarding LIBOR Advances.

                           (i)  LIBOR  Lending  Unlawful.  If any  Lender  shall
         determine (which  determination  shall, upon notice thereof to Borrower
         and  Administrative  Agent,  be  conclusive  and binding on the parties
         hereto) that after the Closing Date the  introduction  of or any change
         in or in the  interpretation  of any  law  makes  it  unlawful,  or any
         central  bank  or  other  Governmental  Authority  asserts  that  it is
         unlawful,  for such Lender to make or  maintain  any Advance as a LIBOR
         Advance,  (A) the  obligations  of such Lender to make or maintain  any
         Advances as LIBOR Advances shall, upon such determination, forthwith be
         suspended until such Lender shall notify  Administrative Agent that the
         circumstances  causing such suspension no longer exist (and such Lender
         shall give notice if such  circumstances  no longer exist),  and (B) if
         required by such law or assertion,  the existing LIBOR Advances of such
         Lender shall automatically convert into Base Rate Advances.

                           (ii) Deposits  Unavailable.  If Administrative  Agent
         shall have  determined in good faith that  adequate  means do not exist
         for  ascertaining  the  interest  rate  applicable  hereunder  to LIBOR
         Advances,  then, upon notice from Administrative  Agent to Borrower the
         obligations  of all the Lenders to make or  maintain  Advances as LIBOR
         Advances shall forthwith be suspended until  Administrative Agent shall
         notify  Borrower  that the  circumstances  causing such  suspension  no
         longer  exist.  Administrative  Agent  will  give such  notice  when it
         determines,  in good faith,  that such  circumstances  no longer exist;
         provided,  however,  that neither  Administrative  Agent nor any Lender
         shall have any  liability  to any Person  with  respect to any delay in
         giving such notice.

                           (iii)   Fixed   Rate   Price   Adjustment.   Borrower
         acknowledges  that prepayment or acceleration of a LIBOR Advance during
         an Interest  Period  shall result in the Lenders  incurring  additional
         costs,  expenses and/or liabilities and that it is extremely  difficult
         and impractical to ascertain the extent of such costs,  expenses and/or
         liabilities.  (For all purposes of this subparagraph (iii), any Advance
         not being  made as a LIBOR  Advance  in  accordance  with the Notice of
         Borrowing  therefor,  as a result of Borrower's  cancellation  thereof,
         shall be treated as if such LIBOR Advance had been prepaid.) Therefore,
         on the date a LIBOR  Advance is  prepaid  or the date all sums  payable
         hereunder become due and payable,  by acceleration or otherwise ("Price
         Adjustment Date"),  Borrower shall pay to Administrative Agent, for the
         account of each  Lender,  in addition to all other sums then owing,  an
         amount ("Fixed Rate Price  Adjustment") equal to the then present value
         of (A) the amount of  interest  that  would  have  accrued on the LIBOR
         Advance for the remainder of the Interest Period at the rate applicable
         to such  LIBOR  Advance,  less (B) the  amount of  interest  that would
         accrue on the same LIBOR  Advance for the same period if the LIBOR Rate

                                      -23-

<PAGE>

         were set on the Price  Adjustment  Date.  The  present  value  shall be
         calculated  by using as a discount  rate the LIBOR  Rate  quoted on the
         Price Adjustment Date.  Within seven (7) days after Borrower's  receipt
         of written notice from Administrative Agent, Borrower shall immediately
         pay to Administrative  Agent, for the account of the Lenders, the Fixed
         Rate Price  Adjustment  as  calculated by  Administrative  Agent.  Such
         written notice (which shall include  calculations in reasonable detail)
         shall,  in the absence of manifest  error, be conclusive and binding on
         the parties hereto.

                           (iv) Borrower  understands,  agrees and  acknowledges
         the following:  (A65535 no Lender has any obligation to purchase,  sell
         and/or  match funds in  connection  with the use of the LIBOR Rate as a
         basis for calculating the rate of interest on a LIBOR Rate Advance or a
         Fixed Rate  Price  Adjustment;  (B) the LIBOR Rate is used  merely as a
         reference in determining such rate and/or Fixed Rate Price  Adjustment;
         and (C) Borrower  has accepted the LIBOR Rate as a reasonable  and fair
         basis for  calculating  such rate and a Fixed  Rate  Price  Adjustment.
         Borrower  further  agrees to pay the Fixed  Rate Price  Adjustment  and
         Lender Taxes, if any, whether or not a Lender elects to purchase,  sell
         and/or match funds.

                  (k) Withholding Tax Exemption. At least five (5) Business Days
prior to the first day on which  interest or fees are payable  hereunder for the
account of any Lender,  each Lender that is not  incorporated  under the laws of
the United States of America, or a state thereof, agrees that it will deliver to
Administrative Agent and Borrower two (2) duly completed copies of United States
Internal  Revenue  Service  Form W-8BEN or Form W-8ECI (and any  necessary  Form
W-8IMY),  certifying  in either  case that such  Lender is  entitled  to receive
payments  under this  Agreement  without  deduction or withholding of any United
States federal income taxes and a valid and duly completed and executed Internal
Revenue  Service Form W-8 or W-9. Each Lender which so delivers a Form W-8BEN or
Form W-8ECI further  undertakes to deliver to Administrative  Agent and Borrower
two (2) additional copies of such form (or any applicable  successor form) on or
before  the date  that  such  form  expires  or  becomes  obsolete  or after the
occurrence of any event requiring a change in the most recent forms so delivered
by it, and such amendments  thereto or extensions or renewals  thereof as may be
reasonably  requested  by  Administrative  Agent  or  Borrower,   in  each  case
certifying that such Lender is entitled to receive payments under this Agreement
without  deduction or  withholding  of any United States  federal  income taxes,
unless an event  (including  without  limitation  any change in  treaty,  law or
regulation)  has  occurred  prior to the date on which any such  delivery  would
otherwise be required which renders all such forms  inapplicable  or which would
prevent  such  Lender from duly  completing  and  delivering  any such form with
respect  to it and  such  Lender  advises  Administrative  Agent  that it is not
capable of receiving  payments  without any deduction or  withholding  of United
States  federal  income  taxes.  If any Lender  cannot  deliver such form,  then
Borrower may  withhold  from such  payments  such amounts as are required by the
Code.

                  2.5      Fees.

                  (a)      [Reserved].

                  (b) Unused  Facility  Fee. From and after the Closing Date and
until the earlier of the date on which (x) the  Commitment  has been fully drawn
by  Borrower  or (y) the  Obligations  are paid in full and  this  Agreement  is
terminated  or, if sooner,  the date the Commitment  terminates,  and subject to
Section 10.4(b),  Borrower shall pay to Administrative Agent, for the account of
each Lender,  a fee (the "Unused  Facility Fee") accruing at a rate of 0.25% per
annum  upon an  amount  equal  to (i)  $75,000,000  less all  reductions  in the
Commitment  pursuant to Section 2.7 or Section 2.8 minus (ii) the average  daily
principal  balance of all  outstanding  Advances as  determined  for each Fiscal
Quarter.

                  The  Unused  Facility  Fee  shall be  payable,  in the  manner
provided in Section 2.5(e),  in arrears on the first Business Day of each Fiscal
Quarter,  beginning  with the first Fiscal  Quarter after the Closing Date,  and
shall be payable on the Maturity  Date,  or, if sooner,  the date the Commitment
terminates  or on the date of  payment  in full of all  Obligations.  The Unused
Facility  Fee  shall be  prorated  for any  period  of less  than a full  Fiscal
Quarter.

                  (c)      [Reserved].

                  (d) Extension  Fee. If the Maturity Date is extended  pursuant
to Section 2.1(e),  Borrower shall pay to Administrative Agent, for distribution
to each Lender  which holds a Pro Rata Share of the  Commitment  following  such
extension  pursuant to Section 2.1(e), a fee in an amount equal to 0.375% of the
Commitment  payable to each such  Lender.  Such fee shall be due and  payable by

                                      -24-

<PAGE>

Borrower to Administrative Agent for the benefit of the Lenders within three (3)
Business Days after the extension becomes effective pursuant to Section 2.1(e).

                  (e) Payment of Fees.  The fees  described  in this Section 2.5
represent  compensation  for services  rendered and to be rendered  separate and
apart from the lending of money or the provision of credit and do not constitute
compensation for the use,  detention or forbearance of money, and the obligation
of Borrower to pay the fees described herein shall be in addition to, and not in
lieu of, the  obligation  of Borrower to pay  interest,  other fees and expenses
otherwise  described  in this  Agreement.  All fees shall be payable when due in
immediately  available funds and shall be  nonrefundable  when paid. If Borrower
fails to make any payment of fees or expenses  specified  or referred to in this
Agreement  due  to  Administrative  Agent  or  the  Lenders,  including  without
limitation  those referred to in this Section 2.5, in Section 11.1, or otherwise
under  this  Agreement  or any  separate  fee  agreement  between  Borrower  and
Administrative  Agent or any Lender  relating to this  Agreement,  when due, the
amount  due shall bear  interest  until paid at the Base Rate and after ten (10)
days at the rate specified in Section 2.4(f) (but not to exceed the maximum rate
permitted by applicable law), and shall constitute part of the Obligations.  The
Unused  Facility Fee shall be  calculated on the basis of a 360-day year and the
actual number of days elapsed.

                  2.6      Payments.

                  (a)  Voluntary  Prepayments.  Borrower may, upon not less than
three (3) Business Days prior written notice to  Administrative  Agent not later
than 1:00 P.M. (New York City time) on the date given, at any time and from time
to time, prepay any Advances in whole or in part. Any notice of prepayment given
to  Administrative  Agent under this Section  2.6(a)  shall  specify the date of
prepayment and the aggregate principal amount of the prepayment. In the event of
a  prepayment  of LIBOR  Advances,  Borrower  shall  pay any  Fixed  Rate  Price
Adjustment  payable  in respect  thereof  in  accordance  with  Section  2.4(j).
Administrative  Agent  shall  provide to each Lender a  confirming  copy of such
notice on the same Business Day such notice is received.

                  (b) Manner and Time of Payment.  All  payments  of  principal,
interest and fees hereunder payable to Administrative Agent or the Lenders shall
be made  without  condition  or  reservation  of right  and free of  set-off  or
counterclaim,  in  Dollars  and by wire  transfer  (pursuant  to  Administrative
Agent's written wire transfer  instructions) of immediately  available funds, to
Administrative  Agent, for the account of each Lender entitled thereto not later
than 1:00  P.M.  (New York City  time) on the date due;  and funds  received  by
Administrative  Agent after that time and date shall be deemed to have been paid
on the next succeeding Business Day.

                  (c) Payments on Non-Business Days.  Whenever any payment to be
made by  Borrower  hereunder  shall be  stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such  extension of time shall be included in the  computation  of the payment of
interest  hereunder and of any of the fees specified in Section 2.5, as the case
may be.

                  2.7 Notice of Increased  Costs.  Each Lender  agrees that,  as
promptly as reasonably  practicable  after it becomes aware of the occurrence of
an event or the existence of a condition  which would cause it to be affected by
any of the events or  conditions  described  in Section  2.4(i) or (j),  it will
notify Borrower,  and provide a copy of such notice to Administrative  Agent, of
such  event and the  possible  effects  thereof,  provided  that the  failure to
provide  such notice  shall not affect  such  Lender's  rights to  reimbursement
provided for herein.  Provided no Event of Default or Unmatured Event of Default
has  occurred  and is  continuing,  Borrower  shall have the right (the  "Payoff
Right") to pay to such Lender all principal, accrued and unpaid interest and any
other  amounts  (collectively,  the "Payoff  Amount") due such Lender under this
Agreement and the other Loan Documents  (including amounts due such Lender under
Section  2.4(i)).  Borrower may  exercise  the Payoff  Right only by  delivering
written notice of Borrower's  exercise of such Payoff Right to such Lender,  the
Administrative  Agent and the other  Lenders  within  15 days  after  Borrower's
receipt of written  notice from such Lender that  Borrower  owes  amounts  under
Section 2.4(i) and thereafter paying, in immediately available funds, the Payoff
Amount to such Lender within such 15-day period.  Upon such Lender's  receipt of
the Payoff  Amount,  such  Lender's  Pro Rata Share of the  Commitment  shall be
terminated,  the Commitment shall be reduced by an amount equal to such Lender's
Pro Rata Share of the  Commitment  and the Pro Rata Shares of the  Commitment of
the remaining Lenders shall be adjusted and the Administrative  Agent shall give
written notice to each of the Lenders of the adjusted Pro Rata Shares.

                  2.8 Voluntary  Termination or Reduction of Commitment.  At any
time prior to the Maturity  Date,  Borrower  may,  upon not less than 5 Business

                                      -25-

<PAGE>

Days' prior written notice to the Administrative Agent, terminate the Commitment
in effect or permanently reduce the Commitment in effect by an aggregate minimum
amount of  Twenty-Five  Million  Dollars  ($25,000,000)  or any multiple of Five
Million Dollars ($5,000,000) in excess thereof; provided,  however, that no such
termination or reduction  shall be permitted if, after giving effect thereto and
to any prepayment of Advances made on the effective date of such  termination or
reduction,  as the case may be,  the then  outstanding  principal  amount of the
Advances would exceed the Commitment in effect;  and provided further,  however,
that once  terminated  or reduced  in  accordance  with this  Section  2.8,  the
Commitment in effect may not thereafter be reinstated or increased.  All accrued
and  unpaid  fees due under  Section  2.5 with  respect  to the  portion  of the
Commitment  in  effect  being  terminated  or  reduced  shall  be  paid  to  the
Administrative Agent on the funding date of such termination or reduction.

                                    ARTICLE 3
                                    ---------

                             CONDITIONS TO ADVANCES
                             ----------------------

                  3.1  Conditions  to Initial  Advances.  The  obligation of the
Lenders to make the initial  Advances  shall be subject to the  satisfaction  or
waiver by the Requisite Lenders of each of the following conditions precedent on
or before July 27, 2000:

                  (a) Borrower Loan Documents.  Borrower shall have executed and
delivered to Administrative  Agent each of the following,  in form and substance
acceptable to Administrative Agent and each other Lender:

                           (i)      this Agreement;

                           (ii)     the Notes; and

                           (iii) all other documents which  Administrative Agent
         reasonably requires to be executed by or on behalf of Borrower.

                           (b) REIT Loan Documents. The REIT shall have executed
         and delivered to  Administrative  Agent each of the following,  in form
         and substance acceptable to Administrative Agent and each other Lender:

                           (i)      the Guaranty; and

                           (ii)      all other documents which Administrative
         Agent reasonably requires to be executed by or on behalf of the REIT.

                  (c) Corporate and Partnership Documents.  Administrative Agent
shall have received the corporate and partnership  formation and other governing
documents of the Borrower and the REIT,  and a certificate of each such entity's
Secretary  or an officer  comparable  thereto  with  respect  to  authorization,
incumbency and all organizational documents.

                  (d) Solvency.  Each of the REIT and Borrower  shall be Solvent
and shall have delivered to Administrative  Agent a Solvency Certificate to that
effect.

                  (e)  Fees  and  Expenses.   Administrative  Agent  shall  have
received all fees then due to Administrative  Agent and to the Lenders and shall
have  received  reimbursement  for all costs and expenses for which  Borrower is
obligated  pursuant  to Section  11.1 and for which  Borrower  has  received  an
invoice,  and Borrower shall have performed all of its other  obligations as set
forth in the Loan  Documents  to make  payments  to  Administrative  Agent on or
before the Closing Date and all expenses of Administrative  Agent incurred prior
to such Closing Date and for which  Borrower has received an invoice  shall have
been paid by Borrower.

                  (f)  Opinion  of  Counsel.  Administrative  Agent  shall  have
received, on behalf of Administrative Agent and the Lenders,  favorable opinions
of counsel for Borrower and the REIT dated as of the Closing  Date,  in form and
substance reasonably satisfactory to Administrative Agent, the Lenders and their
respective counsel.

                                      -26-

<PAGE>

                  (g) Consents and Approvals.  All material  licenses,  permits,
consents,  regulatory approvals and corporate action necessary to enter into the
financing  transactions  contemplated by this Agreement shall have been obtained
by Borrower and the REIT.

                  (h) City National Bank Loan.  Administrative  Agent shall have
received  copies of all of the documents  evidencing the City National Bank Loan
and shall have approved (which approval shall not be unreasonably withheld) such
documents.

                  3.2  Conditions  Precedent to All Advances.  The obligation of
each Lender to make any Advance  (including the initial Advance) requested to be
made by it,  on any  date,  is  subject  to the  satisfaction  or  waiver by the
Requisite Lenders of the following conditions precedent as of such date:

                  (a) Notice of  Borrowing.  With  respect  to a request  for an
Advance, Administrative Agent shall have received, on or before the Funding Date
and in accordance  with the provisions of Section  2.1(b),  an original and duly
executed Notice of Borrowing.

                  (b) Additional Matters. As of the Funding Date for any Advance
and after giving effect to the Advance being requested:

                           (i) No Default.  After giving effect to the requested
         Advance,  no Event of Default or Unmatured  Event of Default shall have
         occurred  and be  continuing  or would  result  from the  making of the
         requested  Advance (it being  intended  that the Lenders  shall have no
         obligation  to fund any Advance  during the period  allowed  under this
         Agreement for cure of any event or condition which, if not cured during
         such  period,  would  become  an  Event  of  Default),  and  all of the
         covenants  contained  in Sections  7.3 and 7.4,  and Article 8 shall be
         satisfied;

                           (ii)  Representations  and  Warranties.  All  of  the
         representations  and warranties  contained in this Agreement and in any
         other Loan Document  (other than those  representations  and warranties
         which expressly provide that they speak as of a certain date (e.g., "as
         of the  Closing  Date"))  shall be true  and  correct  in all  material
         respects on and as of such  Funding  Date,  as though made on and as of
         such date, and Borrower shall so certify;

                         (iii) No Material  Adverse Change  (Borrower and REIT).
         No change shall have occurred which  shall  have a  Material  Adverse
         Effect on Borrower or the REIT, as determined by Administrative Agent;

                           (iv) Material Adverse Change (Unencumbered Asset). If
         a change shall have occurred which shall have a Material Adverse Effect
         on any  Unencumbered  Asset or the operating  performance  thereof,  as
         determined by  Administrative  Agent, the  Unencumbered  Asset Value of
         such  Unencumbered  Asset  shall  not  be  included  in  the  aggregate
         Unencumbered  Asset  Value of the  Unencumbered  Pool for  purposes  of
         Section 2.1(a)(y);

                           (v) Litigation Proceedings. There shall not have been
         instituted or threatened,  any litigation or proceeding in any court or
         before any  Governmental  Authority  affecting or threatening to affect
         Borrower  or the REIT  which,  if  adversely  determined,  would have a
         Material  Adverse  Effect  on  Borrower  or  the  REIT,  as  reasonably
         determined by Administrative Agent; and

                          (vi) Compliance with Section 8.5.  Borrower shall be
         in compliance with Section 8.5 after such Advance is made.

Each  submission  by Borrower to  Administrative  Agent of a Notice of Borrowing
with  respect to an Advance and the  acceptance  by Borrower of the  proceeds of
each such Advance made hereunder shall constitute a representation  and warranty
by  Borrower  as of the  Funding  Date in respect of such  Advance  that all the
conditions contained in this Section 3.2 have been satisfied.

                                      -27-

<PAGE>

                                    ARTICLE 4
                                    ---------

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

                  4.1  Representations  and  Warranties as to Borrower,  Etc. In
order to induce the Lenders to make the Advances, Borrower hereby represents and
warrants to Administrative Agent and the Lenders as follows:

                  (a)  Organization;  Partnership  Powers.  Borrower  (i)  is  a
limited partnership duly organized,  validly existing and in good standing under
the laws of Maryland, (ii) is duly qualified to do business as a foreign limited
partnership  and in good standing  under the laws of  California  and each other
jurisdiction  in which it owns or leases real property or in which the nature of
its  business  requires it to be so  qualified,  except for those  jurisdictions
where  failure to so qualify and be in good  standing  would not have a Material
Adverse Effect on Borrower,  and (iii) has all requisite  partnership  power and
authority  to own,  operate and  encumber its Property and assets and to conduct
its  business  as  presently  conducted  and  as  proposed  to be  conducted  in
connection with and following the consummation of the transactions  contemplated
by the Loan Documents.

                  (b) Authority.  Borrower has the requisite  partnership  power
and  authority  to execute,  deliver and perform  each of the Loan  Documents to
which it is or will be a party. The execution, delivery and performance thereof,
and the consummation of the transactions  contemplated  thereby,  have been duly
authorized  by all  necessary  actions.  Each of the  Loan  Documents  to  which
Borrower is a party has been duly and validly executed and delivered by Borrower
and constitutes its legal, valid and binding obligation,  enforceable against it
in accordance with its terms,  subject to bankruptcy,  insolvency and other laws
affecting creditors' rights generally and general equitable principles.

                  (c)  Ownership of Borrower.  All of the  Partnership  Units of
Borrower are validly  issued and  non-assessable  and as of the Closing Date are
owned of  record  in the  percentage  amounts  and by the  Persons  set forth on
Schedule 4.1(c),  as amended from time to time. As of the Closing Date, the REIT
owns 63,273,871 Partnership Units of Borrower, free and clear of any Liens. Such
Partnership  Units were offered and sold in compliance in all material  respects
with all Requirements of Law (including,  without limitation,  federal and state
securities  laws).  Except  as  set  forth  in  Schedule  4.1(c),  there  are no
outstanding securities convertible into or exchangeable for Partnership Units of
Borrower, or options, warrants or rights to purchase any such Partnership Units,
or commitments of any kind for the issuance of additional  Partnership  Units or
any such convertible or exchangeable  securities or options,  warrants or rights
to purchase  such  Partnership  Units.  The REIT is the sole general  partner of
Borrower.

                  (d) No Conflict.  The execution,  delivery and  performance by
Borrower of the Loan  Documents  to which it is or will be a party,  and each of
the transactions  contemplated thereby, do not and will not (i) conflict with or
violate  Borrower's  limited  partnership  agreement or  certificate  of limited
partnership  or other  organizational  documents,  as the  case may be,  or (ii)
conflict  with,  result in a breach of or constitute  (with or without notice or
lapse of time or both) a  default  under  any  Requirement  of Law,  Contractual
Obligation  or Court  Order of or  binding  upon  Borrower,  which  would have a
Material  Adverse  Effect  on  Borrower  or  (iii)  require  termination  of any
Contractual  Obligation,  which termination would have a Material Adverse Effect
on Borrower or (iv) result in or require the creation or  imposition of any Lien
whatsoever  upon  any of the  Properties  or  assets  of  Borrower  (other  than
Permitted Liens).

                  (e)  Consents  and  Authorizations.  Borrower has obtained all
consents and  authorizations  required  pursuant to its Contractual  Obligations
with any other Person,  and shall have obtained all consents and  authorizations
of, and effected all notices to and filings with, any Governmental Authority, as
may be necessary to allow Borrower to lawfully execute,  deliver and perform its
obligations under the Loan Documents to which Borrower is a party, except to the
extent that  failure to obtain any such  consent or  authorization  or to effect
such notice or filing would not have a Material Adverse Effect on Borrower.

                  (f) Governmental Regulation.  Neither Borrower nor the REIT is
subject to regulation  under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate  Commerce Act, the  Investment  Company Act of
1940 or any other federal or state  statute or regulation  such that its ability
to incur  indebtedness is limited or its ability to consummate the  transactions
contemplated by the Loan Documents is materially impaired.

                  (g) Financial Statements;  Projections and Forecasts.  Each of
the financial  statements to be delivered to  Administrative  Agent  pursuant to
Sections  5.1(b) and (c) (i) has been,  or will be, as  applicable,  prepared in
accordance with the books and records of the REIT and the Consolidated  Entities
on a  consolidated  basis,  and  (ii)  either  fairly  present  in all  material
respects,  or will fairly present in all material respects,  as applicable,  the
financial condition of the REIT and the Consolidated  Entities on a consolidated
basis,  at the dates  thereof (and, if  applicable,  subject to normal  year-end
adjustments) and the results of its operations and cash flows, on a consolidated
basis,  for  the  period  then  ended.  Each  of the  projections  delivered  to
Administrative  Agent  prior  to the  date  hereof  and  each  of the  projected
consolidated  cash flows to be delivered  to  Administrative  Agent  pursuant to
Section 5.1(e), (A) has been, or will be, as applicable, prepared by the REIT in
light of the past business and  performance of the REIT or its  predecessors  in
interest on a consolidated basis and (B) represent, or will represent, as of the
date  thereof,  the  reasonable  good faith  estimates  of the REIT's  financial
personnel as of their respective dates.

                  (h)  Prior  Operating   Statements.   Each  of  the  operating
statements  pertaining to each of the  Unencumbered  Assets in the  Unencumbered
Pool  prepared by Borrower and  delivered to  Administrative  Agent prior to the
date hereof under the Second Amended and Restated Credit  Agreement was prepared
in accordance  with GAAP in effect on the date such operating  statement of each
such  Unencumbered  Asset was  prepared  and  fairly  presents  the  results  of
operations  of such  Unencumbered  Asset for the period  then  ended;  provided,
however,  that no representation is made with respect to any period prior to the
ownership of such Unencumbered Asset by Borrower.

                  (i) Unencumbered Pool Statements and Projections.  Each of the
Unencumbered Pool Statements to be delivered to Administrative Agent pursuant to
Section  5.1(f) (i) has been or will be, as  applicable,  prepared in accordance
with the books and records of the applicable  Unencumbered Asset and (ii) fairly
presents or will fairly present in all material  respects,  as  applicable,  the
results of  operations  of such  Unencumbered  Asset for the period  then ended;
provided,  however,  that no  representation  is made with respect to any period
prior to the ownership of such Unencumbered Asset by Borrower.

                  (j)  Litigation;  Adverse  Effects.  (i)  Except as  otherwise
disclosed on Schedule 4.1(j), there is no action, suit, proceeding, governmental
investigation  or  arbitration,  at  law  or in  equity,  or  before  or by  any
Governmental  Authority,  pending  or,  to the  best  of  Borrower's  knowledge,
threatened  against  Borrower or any  Property of Borrower  which,  if adversely
determined, would result in a Material Adverse Effect on Borrower.

                           (ii)   Borrower  is  not  (A)  in  violation  of  any
         applicable  law,  which  violation  has a  Material  Adverse  Effect on
         Borrower,  or (B)  subject to or in default  with  respect to any Court
         Order which has a Material  Adverse  Effect on  Borrower.  There are no
         material  Proceedings pending or, to the best of Borrower's  knowledge,
         threatened  against  Borrower  or  any  Unencumbered  Asset  which,  if
         adversely decided, would have a Material Adverse Effect on Borrower.

                  (k) No Material  Adverse Change.  Since December 31, 1998, (i)
there has occurred no event which has a Material Adverse Effect on Borrower, and
(ii) no material adverse change in Borrower's ability to perform its obligations
under the Loan Documents to which it is a party or the transactions contemplated
thereby has occurred.

                  (l) Payment of Taxes.  All tax returns and reports to be filed
by Borrower have been timely filed, and all taxes,  assessments,  fees and other
governmental charges shown on such returns or otherwise payable by Borrower have
been paid when due and payable  (other than real  property  taxes,  which may be
paid  prior to  delinquency  so long as no  penalty  or  interest  shall  attach
thereto),  except such taxes, if any, as are reserved against in accordance with
GAAP and are being  contested in good faith by  appropriate  proceedings or such
taxes,  the failure to make payment of which when due and payable will not have,
in the  aggregate,  a  Material  Adverse  Effect on  Borrower.  Borrower  has no
knowledge of any  proposed  tax  assessment  against  Borrower  that will have a
Material  Adverse Effect on Borrower,  which is not being actively  contested in
good faith by Borrower.

                  (m) Material Adverse Agreements. Borrower is not a party to or
subject to any  Contractual  Obligation  or other  restriction  contained in its
limited  partnership  agreement,  certificate of limited  partnership or similar
governing documents which has a Material Adverse Effect on Borrower.

                  (n)   Performance.   Borrower   is  not  in   default  in  the
performance,  observance or fulfillment of any of the obligations,  covenants or
conditions  contained in any  Contractual  Obligation  applicable  to it, and no
condition exists which,  with the giving of notice or the lapse of time or both,
would constitute a default under such Contractual  Obligation,  except where the

                                      -29-

<PAGE>

consequences,  direct or indirect, of such default or defaults, if any, will not
have a Material Adverse Effect on Borrower.

                  (o) Federal  Reserve  Regulations.  No part of the proceeds of
the Advances  hereunder will be used to purchase or carry any "margin  security"
as defined in  Regulation  U or for the  purpose of  reducing  or  retiring  any
indebtedness  which was  originally  incurred  to  purchase  or carry any margin
security or for any other  purpose  which might  constitute  this  transaction a
"purpose  credit" within the meaning of said Regulation U. Neither  Borrower nor
the REIT is  engaged  primarily  in the  business  of  extending  credit for the
purpose  of  purchasing  or  carrying  out any  "margin  stock"  as  defined  in
Regulation U. No part of the proceeds of the Advances hereunder will be used for
any purpose that  violates,  or which is  inconsistent  with,  the provisions of
Regulation X or any other regulation of the Federal Reserve Board.

                  (p) Disclosure. The representations and warranties of Borrower
contained in the Loan Documents and all certificates,  financial  statements and
other documents delivered to Administrative  Agent in connection  therewith,  do
not contain any untrue  statement of a material fact or omit to state a material
fact necessary,  in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading;  provided
no representation is made as to any information in the financial reports for any
Real Property prior to its ownership by Borrower. The factual information in any
document,  certificate or written statement (including,  without limitation, the
S-11) furnished to the  Administrative  Agent by or on behalf of the REIT or any
other  Consolidated  Entity with  respect to the  business,  assets,  prospects,
results of operations or financial  condition of the REIT, Borrower or any other
Consolidated  Entity,  including operating statements and Rent Rolls for periods
when the Real  Property  covered  by such  statements  or Rent Rolls is owned by
Borrower,  for use in  connection  with the  transactions  contemplated  by this
Agreement,  was true and correct in all material  respects as of the  applicable
date. There is no fact known to the REIT,  Borrower or any  Consolidated  Entity
that has a  Material  Adverse  Effect  on  Borrower,  the REIT  and/or  any such
Consolidated  Entity or could  reasonably be expected to have a Material Adverse
Effect on Borrower,  the REIT and/or any such Consolidated Entity, which has not
been disclosed herein or in such other  documents,  certificates and statements.
Borrower has given to Administrative  Agent true, correct and complete copies of
all Major Agreements, organizational documents, financial statements of the REIT
and the  Consolidated  Entities,  Unencumbered  Pool  Statements  and all  other
documents  and  instruments  referred  to in the Loan  Documents  as having been
delivered to Administrative  Agent. The  Administrative  Agent acknowledges that
certain of such documents and instruments were delivered  pursuant to the Second
Amended and Restated Credit Agreement.  Borrower has not intentionally  withheld
any material  fact from  Administrative  Agent in regard to any matter raised in
the Loan Documents  which would cause its  representations  and warranties to be
misleading.  Notwithstanding  the  foregoing,  with  respect to  projections  of
Borrower's future  performance such  representations  and warranties are made in
good faith and to the best judgment of Borrower as of the date thereof.

                  (q)  Requirements  of  Law.  The  REIT  and  the  Consolidated
Entities are in  compliance  with all  Requirements  of Law  (including  without
limitation  the  Securities  Act  and  the  Securities  Exchange  Act,  and  the
applicable rules and regulations thereunder, state securities law and "Blue Sky"
laws)  applicable to it and its respective  businesses,  in each case, where the
failure to so comply will have a Material Adverse Effect on any such Person. The
REIT has made all filings  with and  obtained  all  consents  of the  Commission
required under the Securities Act and the Securities  Exchange Act in connection
with the execution, delivery and performance by the REIT of the Loan Documents.

                  (r)  Patents,  Trademarks,  Permits,  etc.  The  REIT  and the
Consolidated  Entities  own, are licensed or otherwise  have the lawful right to
use, or have, all permits and other governmental approvals, patents, trademarks,
trade names, copyrights, technology, know-how and processes used in or necessary
for the conduct of each such  Person's  business  as  currently  conducted,  the
absence of which would have a Material Adverse Effect upon such Person.  The use
of such permits and other governmental  approvals,  patents,  trademarks,  trade
names, copyrights,  technology,  know-how and processes by each such Person does
not  infringe  on  the  rights  of  any  Person,  subject  to  such  claims  and
infringements  as do not, in the  aggregate,  give rise to any  liability on the
part of any such Person which would have a Material  Adverse  Effect on any such
Person.

                  (s)  Environmental  Matters.  Except as set forth on  Schedule
4.1(s)  or  in  any  phase  I  environmental  or  other  reports   delivered  to
Administrative  Agent,  to the best  knowledge of Borrower (i) the operations of
the REIT and  Borrower  comply in all  material  respects  with all  applicable,
local, state and federal  environmental,  health and safety  Requirements of Law
("Environmental  Laws");  (ii) none of the  Unencumbered  Assets  or  operations
thereon  are  subject  to any  Remedial  Action or other  Liabilities  and Costs
arising  from the  Release  or  threatened  Release  of a  Contaminant  into the
environment in violation of any  Environmental  Laws,  which Remedial  Action or

                                      -30-

<PAGE>

other  Liabilities  and Costs would have a Material  Adverse  Effect on Borrower
and/or the REIT;  (iii) neither the REIT nor Borrower has filed any notice under
applicable  Environmental  Laws  reporting a Release of a  Contaminant  into the
environment in violation of any Environmental  Laws, except as the same may have
been heretofore remedied; (iv) there is not now on or in any Unencumbered Assets
(except in compliance in all material respects with all applicable Environmental
Laws): (A) any underground storage tanks, (B) any asbestos-containing  material,
or (C) any polychlorinated  biphenyls (PCB's) used in hydraulic oils, electrical
transformers or other  equipment owned by such Person;  and (v) neither the REIT
nor Borrower has received any notice or claim to the effect that it is or may be
liable to any  Person as a result of the  Release  or  threatened  Release  of a
Contaminant  into the environment  which would have a Material Adverse Effect on
the REIT or any of the Consolidated Entities.

                  (t)  Solvency.  Borrower is and will be Solvent  after  giving
effect to the  disbursements  of the Advances and the payment and accrual of all
fees then payable.

                  (u)  Title to  Assets.  Borrower  has good,  indefeasible  and
merchantable  title  to  all  Properties,  including,  without  limitation,  all
Unencumbered Assets, owned or leased by it.

                  (v)  Management  Agreements.  Except as  disclosed on Schedule
4.1(v) (as amended from time to time), Borrower is not a party or subject to any
management or "ground"  leasing  agreement with respect to any of the Properties
included within the Unencumbered Pool.

                  (w)  Intercompany  Indebtedness.  Borrower  does  not have any
Indebtedness owed to the REIT.

                  4.2 Representations and Warranties as to the REIT. In order to
induce Lenders to make the Advances,  Borrower hereby represents and warrants to
Administrative Agent and the Lenders as follows:

                  (a)  Organization;   Corporate  Powers.  The  REIT  (i)  is  a
corporation duly organized, validly existing and in good standing under the laws
of Maryland,  (ii) is duly qualified to do business as a foreign corporation and
in good standing under the laws of each  jurisdiction in which it owns or leases
real  property  or in which the  nature  of its  business  requires  it to be so
qualified,  except for those jurisdictions where failure to so qualify and be in
good standing will not have a Material Adverse Effect on the REIT, and (iii) has
all requisite  corporate  power and  authority to own,  operate and encumber its
property and assets and to conduct its business as  presently  conducted  and as
proposed to be conducted in connection  with and following the  consummation  of
the transactions contemplated by the Loan Documents.

                  (b) Authority.  The REIT has the requisite corporate power and
authority to execute, deliver and perform each of the Loan Documents to which it
is or will be a party. The execution,  delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly authorized
by the Board of Directors of the REIT, and no other corporate proceedings on the
part of the REIT are necessary to consummate such transactions. Each of the Loan
Documents to which the REIT is a party has been duly  executed and  delivered by
the REIT and constitutes its legal,  valid and binding  obligation,  enforceable
against it in accordance with its terms,  subject to bankruptcy,  insolvency and
other  laws  affecting   creditors'   rights  generally  and  general  equitable
principles.

                  (c) No Conflict.  The execution,  delivery and  performance by
the  REIT  of  the  Loan  Documents  to  which  it is  party,  and  each  of the
transactions  contemplated  thereby,  do not and will not (i)  conflict  with or
violate  its  articles  of  incorporation,   by-laws  or  other   organizational
documents,  (ii) conflict  with,  result in a breach of or  constitute  (with or
without notice or lapse of time or both) a default under any Requirement of Law,
Contractual  Obligation or Court Order of or binding upon the REIT,  which would
have a Material  Adverse  Effect on the REIT,  (iii) require  termination of any
Contractual  Obligation,  which termination would have a Material Adverse Effect
on the REIT,  (iv) result in or require the creation or  imposition  of any Lien
whatsoever  upon any of the Properties or assets of the REIT, or (v) require any
approval of the stockholders of the REIT.

                  (d)  Consents  and  Authorizations.  The REIT has obtained all
consents and  authorizations  required  pursuant to its Contractual  Obligations
with any other Person,  and, prior to the Closing Date,  shall have obtained all
consents and  authorizations  of, and effected all notices to and filings  with,
any  Governmental  Authority,  as may be necessary to allow the REIT to lawfully
execute,  deliver and perform its obligations  under the Loan Documents to which
the REIT is a party.

                                      -31-

<PAGE>

                  (e)  Capitalization.  All of the capital stock of the REIT has
been  issued  in  compliance  in  all  material  respects  with  all  applicable
Requirements of Law.

                  (f) Litigation; Adverse Effects. (i) There is no action, suit,
proceeding,  governmental investigation or arbitration,  at law or in equity, by
or  before  any  Governmental  Authority,  pending  or,  to best  of  Borrower's
knowledge,  threatened  against the REIT or any Property of the REIT, which will
(A)  result  in a  Material  Adverse  Effect  on the REIT,  (B)  materially  and
adversely  affect  the  ability  of any  party to any of the Loan  Documents  to
perform its obligations  thereunder,  or (C) materially and adversely affect the
ability of the REIT to  perform  its  obligations  as  contemplated  in the Loan
Documents.

                           (ii)  The  REIT  is  not  (A)  in  violation  of  any
         applicable  law, which  violation has a Material  Adverse Effect on the
         REIT,  or (B) subject to or in default  with respect to any Court Order
         which  has a  Material  Adverse  Effect  on  the  REIT.  There  are  no
         Proceedings pending or, to the best of Borrower's knowledge, threatened
         against the REIT,  which, if adversely  decided,  would have a Material
         Adverse Effect on the REIT or Borrower.

                  (g) No Material  Adverse Change.  Since December 31, 1998, (i)
there has occurred no event which has a Material Adverse Effect on the REIT, and
(ii) no material  adverse  change has occurred in the REIT's  ability to perform
its  obligations  under  the  Loan  Documents  to  which  it is a  party  or the
transactions contemplated thereby.

                  (h) Payment of Taxes.  All tax returns and reports to be filed
by the REIT have been timely filed, and all taxes,  assessments,  fees and other
governmental  charges shown on such returns have been paid when due and payable,
except such taxes,  if any, as are reserved  against in accordance with GAAP and
are being contested in good faith by appropriate  proceedings or such taxes, the
failure to make  payment of which when due and  payable  would not have,  in the
aggregate,  a Material  Adverse Effect on the REIT. The REIT has no knowledge of
any proposed tax assessment  against the REIT that would have a Material Adverse
Effect on the REIT,  which is not being actively  contested in good faith by the
REIT.

                  (i) Material Adverse Agreements. The REIT is not a party to or
subject to any  Contractual  Obligation  or other  restriction  contained in its
charter,  by-laws or similar  governing  documents which has a Material  Adverse
Effect on the REIT or the ability of the REIT to perform its  obligations  under
the Loan Documents to which it is a party.

                  (j)   Performance.   The  REIT  is  not  in   default  in  the
performance,  observance or fulfillment of any of the obligations,  covenants or
conditions  contained in any  Contractual  Obligation  applicable  to it, and no
condition exists which,  with the giving of notice or the lapse of time or both,
would constitute a default under such Contractual  Obligation,  except where the
consequences, direct or indirect, of such default or defaults, if any, would not
have a Material Adverse Effect on the REIT.

                  (k) Disclosure. The representations and warranties of the REIT
contained in the Loan Documents, and all certificates,  financial statements and
other documents delivered to Administrative  Agent in connection  therewith,  do
not contain any untrue  statement of a material fact or omit to state a material
fact necessary,  in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading.  The REIT
has not intentionally  withheld any material fact from  Administrative  Agent in
regard  to any  matter  raised  in the Loan  Documents  which  would  cause  its
representations and warranties to be misleading.  Notwithstanding the foregoing,
with   respect  to   projections   of  the  REIT's   future   performance   such
representations  and  warranties are made in good faith and to the best judgment
of the management of the REIT as of the date thereof.

                  (l) ERISA.  Neither the REIT nor any ERISA  Affiliate  thereof
(including,  for all purposes under this Section 4.2(1),  Borrower and the other
Consolidated  Entities) has in the past five (5) years maintained or contributed
to or  currently  maintains  or  contributes  to any Benefit Plan other than the
Benefit  Plans  identified  on Schedule  4.2(1) (as such Schedule may be amended
from time to time).  Neither the REIT nor any ERISA Affiliate thereof has during
the past five (5) years  maintained or contributed to or currently  maintains or
contributes to any employee  welfare  benefit plan within the meaning of Section
3(1) of ERISA which provides  benefits to retirees other than benefits  required
to be provided  under  Section 4980B of the Code and Sections 601 through 608 of
ERISA (or any successor provisions thereto) or applicable state law. Neither the
REIT  nor  any  ERISA  Affiliate  thereof  is now  contributing  nor has it ever
contributed  to or been  obligated to contribute to any  Multiemployer  Plan, no

                                      -32-

<PAGE>

employees or former  employees of the REIT, or such ERISA  Affiliate,  have been
covered by any  Multiemployer  Plan in respect of their  employment by the REIT,
and no ERISA  Affiliate  of the REIT has or is likely  to incur  any  withdrawal
liability  with  respect to any  Multiemployer  Plan which would have a Material
Adverse Effect on the REIT.

                  (m)  Solvency.  The REIT is and will be Solvent  after  giving
effect to the  disbursements  of the Advances and the payment and accrual of all
fees then payable.

                  (n) Status as a REIT. The REIT (i) has, since the beginning of
its first  taxable year,  qualified  and  maintained,  and shall  maintain,  its
classification  as a real estate  investment  trust as defined in Section 856 of
the Code,  (ii) has not engaged in any "prohibited  transactions"  as defined in
Section 856(b)(6)(iii) of the Code, (iii) for its current "tax year" (as defined
in the Code) is, and for all  subsequent  taxable  years  shall be entitled to a
dividends paid deduction which meets the requirements of Section 857 of the Code
and  (iv)  its  ownership  and  method  of  operation  enable  it  to  meet  the
requirements for taxation as a real estate investment trust under the Code.

                  (o)  Ownership.  As of the Closing Date, the REIT does not own
or have any direct interest in any other Person, other than its ownership of the
general  partnership  interests  in  Borrower  and its  ownership  of all of the
ownership  interests in Arden Realty Finance,  Inc. and Arden Realty Finance II,
Inc.

                  (p) NYSE  Listing.  The  common  stock of the REIT is,  and is
reasonably  expected to be,  listed for trading and traded on the New York Stock
Exchange.

                                    ARTICLE 5
                                    ---------

                               REPORTING COVENANTS
                               -------------------

                  Borrower  covenants  and  agrees  that,  on and after the date
hereof,  until payment in full of all of the Obligations,  the expiration of the
Commitment and termination of this Agreement:

                  5.1  Financial  Statements  and Other  Financial and Operating
Information.  Borrower  shall  maintain  or cause to be  maintained  a system of
accounting  established  and  administered  in  accordance  with sound  business
practices and consistent  with past practice to permit  preparation of quarterly
and  annual  financial  statements  in  conformity  with  GAAP,  and each of the
financial  statements  described below shall be prepared on a consolidated basis
for the REIT and the other  Consolidated  Entities from such system and records.
Borrower  shall deliver or cause to be delivered to  Administrative  Agent (with
copies of bound materials sufficient for each Lender):

                  (a) Commission  Filings.  Promptly following their filing with
the  Commission,  copies of all  required  reports  and  filings  filed with the
Commission,  including,  without limitation, the Annual Report on Form 10-K, the
Quarterly Reports on Form 10-Q,  registration  statements,  proxy statements and
the  annual  reports   delivered  to  the  shareholders  of  the  REIT  and  the
Consolidated Entities.

                  (b) Annual Financial Statements. Within ninety (90) days after
the close of each  Fiscal  Year,  consolidated  balance  sheets,  statements  of
operations,   stockholders'   equity  and  cash  flows  for  the  REIT  and  the
Consolidated Entities (in the form provided to the Commission on the REIT's Form
10-K),  audited and  certified  without  qualification  by the  Accountants  and
accompanied  by a statement  that,  in the course of their audit  (conducted  in
accordance with GAAP),  the  Accountants  obtained no knowledge that an Event of
Default or Unmatured  Event of Default  occurred.  To the extent  Administrative
Agent  desires  additional  details or  supporting  information  with respect to
Unconsolidated  Joint  Ventures  or  individual  Real  Properties  which are not
Unencumbered   Assets  within  the  Unencumbered  Pool  and  which  details  and
information  are not contained in the REIT's Form 10-K,  Borrower  shall provide
Administrative   Agent  with  such   details  or   supporting   information   as
Administrative Agent requests which is reasonably available to Borrower. Without
limiting the foregoing,  at Administrative  Agent's request,  within ninety (90)
days after the end of each Fiscal Year, Borrower,  with respect to Real Property
which  is  not  included  within  the   Unencumbered   Pool,  shall  provide  to
Administrative  Agent  operating  statements  and a schedule  setting  forth the
percentage  of leasable  area  leased to tenants in  occupancy,  with  footnotes
indicating  which leases are in default in rent payments by more than forty-five
(45) days (other than  technical,  nonmaterial  disputes  concerning  percentage
rentals due) and any other material  provisions in respect to which Borrower has
issued a notice of default, for such Real Property.

                                      -33-

<PAGE>

                  (c) Quarterly Financial Statements  Certified by Officers.  As
soon as practicable,  and in any event within forty-five (45) days after the end
of each Fiscal Quarter,  consolidated balance sheets,  statements of operations,
stockholders'  equity  and  statements  of  cash  flow  for  the  REIT  and  the
Consolidated Entities,  prepared in accordance with GAAP, which may, in the case
of the first three Fiscal Quarters, be in the form provided to the Commission on
the REIT's Form 10-Q, and certified by the REIT's chief executive officer, chief
operating officer, chief financial officer or chief accounting officer.

                  (d)  Officer's  Certificate  of Borrower.  Together  with each
delivery of any financial  statement  pursuant to subsection  (c) above,  (i) an
Officer's Certificate of the REIT, stating that the executive officer who is the
signatory thereto (which officer shall be the chief executive officer, the chief
operating  officer,  the chief financial officer or the chief accounting officer
of the  REIT)  has  reviewed,  or  caused  under  his or her  supervision  to be
reviewed,  the terms of this Agreement and the other  principal Loan  Documents,
and has made,  or caused to be made  under his or her  supervision,  a review in
reasonable  detail  of the  transactions  and  condition  of the  REIT  and  the
Consolidated  Entities  during the  accounting  period covered by such financial
statements of the REIT and the Consolidated  Entities,  and that such review has
not disclosed the existence at the end of such accounting  period,  and that the
signers do not have  knowledge of the  existence as of the date of the Officer's
Certificate,  of any condition or event which constitutes an Event of Default or
Unmatured  Event  of  Default,  or,  if any  such  condition  or  event  exists,
specifying  the nature and period of existence  thereof and what action has been
taken, is being taken and is proposed to be taken with respect thereto; and (ii)
a Compliance Certificate  demonstrating in reasonable detail (which detail shall
include actual  calculations and such supporting  information as  Administrative
Agent may reasonably  require)  compliance at the end of such accounting periods
with the covenants contained in Section 7.3 and Article 8.

                  (e) Cash Flow Projections. As soon as practicable,  and in any
event,  within one hundred  twenty (120) days after the end of each Fiscal Year,
projected consolidated cash flows for the REIT and the Consolidated Entities for
the  following  Fiscal  Year.   Borrower  shall  also  provide  such  additional
supporting details as Administrative Agent may reasonably request.

                  (f)  Unencumbered  Pool Statements and Operating  Results.  As
soon as practicable,  and in any event within forty-five (45) days after the end
of each Fiscal Quarter,  quarterly  operating  statements for each  Unencumbered
Asset in the  Unencumbered  Pool,  in a form approved by  Administrative  Agent,
which  operating  statements  shall include  actual  quarterly and  year-to-date
operating income results,  and Rent Rolls for each Unencumbered Asset within the
Unencumbered  Pool  dated  as of  the  last  day of  such  Fiscal  Quarter  (the
"Quarterly Unencumbered Pool Statements"), in form and substance satisfactory to
Administrative  Agent,  certified  as being  true and  correct  in all  material
respects by the REIT's chief financial officer,  chief accounting officer, chief
executive  officer  or  chief  operating  officer.  In  addition,   as  soon  as
practicable,  and in any event within  forty-five (45) days after the end of the
fourth  Fiscal  Quarter,  a year-end  operating  statement,  in form approved by
Administrative  Agent, which operating statement shall include  year-to-date net
operating  income and net cash flow results for each  Unencumbered  Asset within
the  Unencumbered  Pool  dated  as of  the  last  day  of  such  Fiscal  Quarter
(collectively,   with  the   Quarterly   Unencumbered   Pool   Statements,   the
"Unencumbered Pool Statements").  Administrative Agent shall also have the right
to request (i) monthly operating  statements for each Unencumbered  Asset in the
Unencumbered  Pool in form and  substance  similar  to the  quarterly  operating
statements required above and (ii) the foregoing information with respect to any
Real Property owned by the REIT or any Consolidated Entity.

                  (g) Budgets for Unencumbered Pool. Not later than fifteen (15)
days prior to the  beginning  of each  Fiscal  Year,  annual  operating  budgets
(including,  without  limitation,  overhead items and capital  expenditures) for
each Unencumbered Asset in the Unencumbered Pool for such Fiscal Year,  prepared
on an annual basis, in a form approved by  Administrative  Agent,  together with
all  supporting  details  reasonably  requested  by  Administrative  Agent,  and
certified  by the  chief  executive  officer,  chief  operating  officer,  chief
financial  officer or chief  accounting  officer of the REIT as being based upon
the REIT's  reasonable good faith estimates,  information and assumptions at the
time.

                  (h) Knowledge of Event of Default. Promptly upon a Responsible
Official of Borrower or the REIT  obtaining  knowledge  (i) of any  condition or
event which  constitutes an Event of Default or Unmatured  Event of Default,  or
becoming  aware that any Lender has given  notice or taken any other action with
respect to a claimed  Event of Default or Unmatured  Event of Default or (ii) of
any  condition or event which has a Material  Adverse  Effect on Borrower or the
REIT, an Officer's Certificate  specifying the nature and period of existence of
any such  condition or event,  or specifying the notice given or action taken by
such Lender and the nature of such claimed Event of Default,  Unmatured Event of
Default, event or condition, and what action Borrower and/or the REIT has taken,
is taking and proposes to take with respect thereto.

                                      -34-

<PAGE>

                  (i)  Litigation,   Arbitration  or  Government  Investigation.
Promptly upon a Responsible Official of Borrower or the REIT obtaining knowledge
of (i) the institution of, or threat of, any material action, suit,  proceeding,
governmental  investigation or arbitration  against or affecting Borrower or the
REIT not  previously  disclosed in writing by Borrower to  Administrative  Agent
pursuant to this Section 5.1(i) or (ii) any material  development in any action,
suit, proceeding,  governmental  investigation or arbitration already disclosed,
which, in either case, has, or if adversely  determined is reasonably  likely to
have, a Material  Adverse  Effect on Borrower or the REIT,  a notice  thereof to
Administrative  Agent and such other information as may be reasonably  available
to it to enable  Administrative Agent, the Lenders and their counsel to evaluate
such matters.

                  (j) ERISA Termination  Event. As soon as possible,  and in any
event within  thirty (30) days after a  Responsible  Official of Borrower or the
REIT knows that a  Termination  Event has occurred,  a written  statement of the
chief financial  officer of the REIT describing such  Termination  Event and the
action,  if any, which Borrower,  the REIT or any ERISA Affiliate of any of them
has taken, is taking or proposes to take, with respect thereto, and, when known,
any action  taken or  threatened  by the IRS,  the DOL or the PBGC with  respect
thereto.

                  (k) Prohibited ERISA Transaction.  As soon as possible, and in
any event within thirty (30) days, after a Responsible Official of Borrower, the
REIT or any ERISA  Affiliate of any of them knows that a prohibited  transaction
(defined in Section  406 of ERISA and Section  4975 of the Code and which is not
subject to a statutory or prohibited  transaction class exemption) has occurred,
a  statement  of the  chief  financial  officer  of  the  REIT  describing  such
transaction.

                  (l) Benefit Plan Annual Report.  On request of  Administrative
Agent, within thirty (30) days after the filing thereof with the DOL, the IRS or
the PBGC, copies of each annual report, including Schedule B thereto, filed with
respect to each Benefit Plan of Borrower, the REIT or any ERISA Affiliate of any
of them.

                  (m) Benefit Plan Funding  Waiver  Request.  Within thirty (30)
days  after the  filing  thereof  with the IRS,  a copy of each  funding  waiver
request  filed with  respect to any Benefit  Plan of  Borrower,  the REIT or any
ERISA Affiliate of any of them and all communications  received by Borrower, the
REIT or any ERISA Affiliate of any of them with respect to such request.

                  (n)   Establishment   of   Benefit   Plan  and   Increase   in
Contributions  to the  Benefit  Plan.  Not less than ten (10) days  prior to the
effective date thereof, a notice to Administrative Agent of the establishment of
a  Benefit  Plan  (or  the  incurrence  of any  obligation  to  contribute  to a
Multiemployer Plan) by Borrower, the REIT or any ERISA Affiliate of any of them.
Within  thirty  (30) days after the first to occur of an  amendment  of any then
existing  Benefit  Plan of Borrower,  the REIT or any ERISA  Affiliate of any of
them which will result in an increase in the benefits under such Benefit Plan or
a notification  of any such increase,  or the  establishment  of any new Benefit
Plan  by  Borrower,  the  REIT  or any  ERISA  Affiliate  of any of  them or the
commencement of contributions to any Benefit Plan to which Borrower, the REIT or
any ERISA  Affiliate of any of them was not previously  contributing,  a copy of
said amendment, notification or Benefit Plan.

                  (o)  Qualification  of ERISA Plan.  Promptly  upon, and in any
event within thirty (30) days after, receipt by Borrower,  the REIT or any ERISA
Affiliate  of any of them of an  unfavorable  determination  letter from the IRS
regarding  the  qualification  of a Plan under  Section  401(a) of the  Internal
Revenue  Code, a copy of said  determination  letter,  if such  disqualification
would have a Material Adverse Effect on Borrower or the REIT.

                  (p) Multiemployer  Plan Withdrawal  Liability.  Promptly upon,
and in any event within thirty (30) days after receipt by Borrower,  the REIT or
any  ERISA  Affiliate  of any of  them of a  notice  from a  Multiemployer  Plan
regarding  the  imposition  of  material  withdrawal  liability,  a copy of said
notice.

                  (q) Failure to Make Section 412 Payment. Promptly upon, and in
any  event  within  thirty  (30)  days  after,  Borrower,  the REIT or any ERISA
Affiliate of any of them fails to make a required  installment  under subsection
(m) of Section 412 of the Internal  Revenue Code or any other  payment  required
under  Section 412 of the  Internal  Revenue  Code on or before the due date for
such  installment or payment,  a notification  of such failure,  if such failure
could  result in either  the  imposition  of a Lien under  said  Section  412 or
otherwise have or could  reasonably be  anticipated  to have a Material  Adverse
Effect on Borrower or the REIT.

                  (r) Failure of the REIT to Qualify as Real  Estate  Investment
Trust.  Promptly  upon, and in any event within  forty-eight  (48) hours after a
Responsible  Official of  Borrower  first has actual  knowledge  of (i) the REIT
failing to continue to qualify as a real estate  investment  trust as defined in
Section 856 of the Internal Revenue Code (or any successor  provision  thereof),

                                      -35-

<PAGE>

(ii) any act by the  REIT  causing  its  election  to be taxed as a real  estate
investment trust to be terminated,  (iii) any act causing the REIT to be subject
to the taxes imposed by Section  857(b)(6) of the Internal  Revenue Code (or any
successor  provision  thereto),  or (iv) the REIT  failing to be  entitled  to a
dividends  paid  deduction  which meets the  requirements  of Section 857 of the
Internal Revenue Code, a notice of any such occurrence or circumstance.

                  (s) Asset Acquisitions and Dispositions, Indebtedness, Merger,
Etc.  Without  limiting,  modifying  or  waiving  any  restriction  in the  Loan
Documents,  concurrently with notice to Borrower's  priority mailing list and in
all events not later than any public disclosure,  written notice of any material
investments  (other  than in Cash  Equivalents),  material  acquisitions,  asset
purchases,   dispositions,   disposals,  divestitures  or  similar  transactions
involving  Property,  the  raising  of  additional  equity or the  incurring  or
repayment of material Debt, or any material  merger,  by or with Borrower or the
REIT, and, if requested by  Administrative  Agent after the consummation of such
transaction,  a  Compliance  Certificate  within 7 days  after  the date of such
request, in form and substance  reasonably  acceptable to Administrative  Agent,
demonstrating   in  reasonable   detail  (which  detail  shall  include   actual
calculations  and  such  supporting  information  as  Administrative  Agent  may
reasonably   require)   compliance,   after  giving   effect  to  such  proposed
transaction(s),  with the covenants  contained in Section 7.3 and Article 8. For
purposes of this Section 5.1(s),  any investment,  acquisition,  asset purchase,
disposition,  disposal,  divestiture,  merger or  similar  transaction  shall be
considered  "material"  if it involves  assets  exceeding  five  percent (5%) of
Borrower's assets (as existing prior to giving effect to such transaction) or if
it involves the acquisition or disposition of Real Property.  Borrower's written
notice  of each  Real  Property  acquisition  or  disposition  shall  contain  a
description  of all  improvements  which are a part of such Real  Property,  the
square footage of such  improvements,  the acquisition or disposition  price and
such  other   information   with  respect   thereto   reasonably   requested  by
Administrative Agent.

                  (t)  Other  Information.  Such  other  information,   reports,
contracts,  schedules,  lists,  documents,  agreements  and  instruments  in the
possession of the REIT or Borrower with respect to (i) the  Unencumbered  Assets
or any other  assets of the REIT or  Borrower or any other  Consolidated  Entity
(either on an individual or an aggregate basis), (ii) any material change in the
REIT's  investment,   finance  or  operating  policies,  or  (iii)  the  REIT's,
Borrower's or any other Consolidated Entity's business,  condition (financial or
otherwise), operations,  performance,  properties or prospects as Administrative
Agent may from time to time reasonably request,  including,  without limitation,
annual  information with respect to cash flow  projections,  budgets,  operating
statements  (current year and immediately  preceding  year),  Rent Rolls,  lease
expiration reports, leasing status reports, note payable summaries,  bullet note
summaries, equity funding requirements,  contingent liability summaries, line of
credit  summaries,  line  of  credit  collateral  summaries,  wrap  note or note
receivable summaries,  schedules of outstanding letters of credit,  summaries of
Cash and Cash  Equivalents,  projections  of leasing fees and overhead  budgets.
Provided that Administrative Agent gives Borrower reasonable prior notice and an
opportunity to participate,  Borrower hereby authorizes  Administrative Agent to
communicate  with the  Accountants and authorizes the Accountants to disclose to
Administrative  Agent any and all financial  statements and other information of
any kind, including copies of any management letter or the substance of any oral
information,  that such  accountants  may have with respect to the  Unencumbered
Assets  or  the  REIT's,  Borrower's  or  any  Consolidated  Entity's  condition
(financial or otherwise),  operations,  properties,  performance  and prospects.
Concurrently  therewith,  Administrative  Agent will notify Borrower of any such
communication and, at Administrative  Agent's request,  Borrower shall deliver a
letter   addressed  to  the  Accountants   instructing  them  to  disclose  such
information in compliance with this Section 5.1(t).

                  (u) Press  Releases;  SEC  Filings and  Financial  Statements.
Telephonic or telecopy notice to Administrative Agent concurrently with or prior
to issuance of any material  press release  concerning the REIT or Borrower and,
as soon as  practicable  after  filing  with the  Commission,  all  reports  and
notices, proxy statements, registration statements and prospectuses of the REIT.
All materials sent or made available generally by the REIT to the holders of its
publicly-held  Securities or filed with the  Commission,  including all periodic
reports required to be filed with the Commission, shall be delivered by Borrower
or the REIT to Administrative Agent as soon as available.

                  (v) Accountant Reports.  Copies of all reports prepared by the
Accountants  and  submitted  to  Borrower  or the REIT in  connection  with each
annual,  interim  or  special  audit or review of the  financial  statements  or
practices of Borrower or the REIT, including the comment letter submitted by the
Accountants in connection with their annual audit.

                                      -36-

<PAGE>

                  (w) CMBS Entities Debt.  Concurrently with the delivery of the
financial  statements referred to in Section 5.1(c), a report in such reasonable
detail as  Administrative  Agent may  require  and  certified  as being true and
correct by the REIT's chief financial officer,  chief accounting officer,  chief
executive  officer or chief  operating  officer,  setting forth the Debt of each
CMBS Entity.

                  5.2    Environmental    Notices.    Borrower    shall   notify
Administrative  Agent,  in  writing,  as soon as  practicable,  and in any event
within ten (10) days after a  Responsible  Official of  Borrower's or the REIT's
learning  thereof,  of any:  (a) written  notice or claim to the effect that the
REIT, Borrower or any Consolidated Entity is or may be liable to any Person as a
result of any material Release or threatened Release of any Contaminant into the
environment;  (b)  written  notice that the REIT,  Borrower or any  Consolidated
Entity is subject to  investigation  by any  Governmental  Authority  evaluating
whether any  Remedial  Action is needed to respond to the Release or  threatened
Release of any  Contaminant  into the  environment;  (c) written notice that any
Property  of the REIT,  Borrower  or any  Consolidated  Entity is  subject to an
Environmental Lien; (d) written notice of violation of any Environmental Laws to
the REIT,  Borrower or any Consolidated Entity or awareness of a condition which
might reasonably  result in a notice of violation of any  Environmental  Laws by
the REIT,  Borrower or any  Consolidated  Entity;  (e)  commencement  or written
threat of any judicial or administrative  proceeding alleging a violation of any
Environmental  Laws;  (f) written  notice from a  Governmental  Authority of any
changes to any  existing  Environmental  Laws that will have a Material  Adverse
Effect on the operations of the REIT,  Borrower or any Consolidated  Entity;  or
(g) any  proposed  acquisition  of stock,  assets,  real  estate or  leasing  of
property,  or any  other  action by  Borrower  that,  to the best of  Borrower's
knowledge,  could  subject  the REIT,  Borrower  or any  Consolidated  Entity to
environmental,  health or safety Liabilities and Costs that will have a Material
Adverse Effect on the REIT, Borrower or any Consolidated  Entity. With regard to
the matters  referred to in clauses (a) through (e) above,  the same shall apply
in respect of each  Unencumbered  Asset only if the matter  will have a Material
Adverse  Effect  on such  Unencumbered  Asset  and,  in the case of  other  Real
Property of the REIT,  Borrower or any Consolidated  Entity,  only if the matter
will have a Material Adverse Effect on the REIT,  Borrower or such  Consolidated
Entity.

                  5.3  Confidentiality.  Confidential  information  obtained  by
Administrative  Agent or the Lenders pursuant to this Agreement or in connection
with the  Advances  shall not be  disseminated  by  Administrative  Agent or the
Lenders and shall not be disclosed to third  parties  except (a) to  regulators,
taxing authorities and other Governmental  Authorities having  jurisdiction over
Administrative  Agent or such Lender or otherwise in response to Requirements of
Law, (b) to their  respective  auditors and legal counsel and in connection with
regulatory,  administrative  and judicial  proceedings as necessary or relevant,
including enforcement proceedings relating to the Loan Documents, and (c) to any
prospective  assignee  of or  participant  in a  Lender's  interest  under  this
Agreement or any prospective  purchaser of the assets or a controlling  interest
in any Lender, provided that such prospective assignee, participant or purchaser
first agrees to be bound by the  provisions  of this Section 5.3. In  connection
with   disclosures  of   confidential   information   to  any   non-governmental
third-party,  Lender(s)  from  whom the same has been  requested  shall,  to the
extent  feasible and  permitted,  give prior notice of such request to Borrower;
however,  neither  Administrative  Agent  nor any such  Lender  shall  incur any
liability to Borrower for failure to do so. For purposes  hereof,  "confidential
information"  shall mean all nonpublic  information  obtained by  Administrative
Agent or the Lenders,  unless and until such information becomes publicly known,
other than as a result of unauthorized disclosure by Administrative Agent or the
Lenders of such information.

                  5.4 Annual  Evidence  of  Insurance.  Borrower  shall  provide
Administrative Agent with evidence,  in form and substance reasonably acceptable
to Administrative Agent, of Borrower's  maintenance of the insurance required by
Section 6.1(e) no later than June 15 of each year of the term of this Agreement.

                                   ARTICLE 6
                                   ---------

                             AFFIRMATIVE COVENANTS
                             ---------------------

                  Borrower  covenants  and  agrees  that,  on and after the date
hereof,  until payment in full of all of the Obligations,  the expiration of the
Commitment and termination of this Agreement:

6.1      With Respect to Borrower:

                  (a)  Existence.  Borrower  shall  at all  times  maintain  its
existence  as a limited  partnership  and  preserve  and keep in full  force and
effect its rights and franchises  unless the failure to maintain such rights and
franchises does not have a Material Adverse Effect on Borrower.

                                      -37-

<PAGE>

                  (b)  Qualification,  Name.  Borrower  shall qualify and remain
qualified  to do  business  in each  jurisdiction  in which  the  nature  of its
business  requires it to be so qualified  except for those  jurisdictions  where
failure  to so  qualify  does not have a Material  Adverse  Effect on  Borrower.
Borrower will transact business solely in its own name.

                  (c) Compliance with Laws, Etc.  Borrower shall (i) comply with
all Requirements of Law, and all restrictive covenants affecting Borrower or the
Properties,  performance,  prospects, assets or operations of Borrower, and (ii)
obtain as needed all Permits  necessary for its  operations and maintain such in
good standing,  except in each of the foregoing cases where the failure to do so
will not have a Material Adverse Effect on Borrower.

                  (d)  Payment of Taxes and Claims.  Borrower  shall pay (i) all
taxes,  assessments and other governmental  charges imposed upon it or on any of
its  properties  or assets or in  respect  of any of its  franchises,  business,
income or Property before any penalty or interest accrues  thereon,  the failure
to make payment of which will have a Material  Adverse  Effect on Borrower,  and
(ii) all claims  (including,  without  limitation,  claims for labor,  services,
materials and supplies) for sums,  material in the aggregate to Borrower,  which
have  become  due and  payable  and which by law have or may become a Lien other
than a judgment lien upon any of Borrower's  Properties or assets,  prior to the
time  when  any  penalty  or  fine  shall  be  incurred  with  respect  thereto.
Notwithstanding  the  foregoing,  Borrower  may  contest  by  appropriate  legal
proceedings conducted in good faith and with due diligence, the amount, validity
or  application,  in  whole  or  in  part,  of  any  taxes,  assessments,  other
governmental  charges or claims  described  above,  provided that Borrower shall
provide such security as may be reasonably  required by Administrative  Agent to
insure ultimate payment of the same and to prevent any sale or forfeiture of any
of Borrower's  Property (or any portion thereof or interest  therein),  provided
however,  that the  provisions of this Section  6.1(d) shall not be construed to
permit  Borrower  to contest the  payment of any  Obligations  or any other sums
payable by Borrower to  Administrative  Agent or the Lenders  hereunder or under
any other Loan Document.  Notwithstanding  any of the foregoing,  Borrower shall
indemnify,  defend and save  Administrative  Agent and the Lenders harmless from
and  against any  liability,  cost or expense of any kind that may be imposed on
Administrative  Agent or the Lenders in connection with any such contest and any
loss resulting therefrom.

                  (e)  Maintenance  of  Properties;  Insurance.  Borrower  shall
maintain in good repair,  working order and condition,  excepting  ordinary wear
and tear, all of its Property and will make or cause to be made all  appropriate
repairs,   renewals  and  replacements  thereof.  Borrower  shall  maintain  (i)
insurance with  responsible  companies in such amounts and against such risks as
is usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which Borrower operates,  (ii) insurance
required by any Governmental  Authority having  jurisdiction over Borrower,  and
(iii) all other insurance  reasonably required by Administrative Agent from time
to time.  Neither  Borrower  nor any other  Consolidated  Entity shall assign or
otherwise  transfer,  or grant a security  interest in, any  casualty  insurance
carried  by it or in the  proceeds  of  such  insurance  in a  manner  which  is
disproportionate to the value of all of the Real Property insured by Borrower or
such Consolidated Entity.

                  (f)  Inspection  of Property;  Books and Records;  Discussion.
Borrower  shall  permit,  and shall  cause the REIT to  permit,  any  authorized
representatives  designated  by any  Lender  to  visit  and  inspect  any of its
Properties  (subject to rights of tenants),  including all Unencumbered  Assets,
upon reasonable prior notice,  to inspect  financial and accounting  records and
leases, and to make copies and take extracts therefrom, all at such times during
normal  business  hours  and as  often as any  Lender  may  reasonably  request;
provided  that all such  visits and  inspections  shall be  coordinated  through
Administrative   Agent  and  provided  that  Administrative   Agent  shall  give
reasonable  prior  notice to  Borrower of all such  visits and  inspections.  In
connection therewith,  Borrower shall pay all expenses required by Section 11.1.
Borrower  will keep  proper  books of record and  account in which  entries,  in
conformity with GAAP and as otherwise  required by this Agreement and applicable
Requirements of Law, shall be made of all dealings and  transactions in relation
to its businesses and activities and as otherwise required under Section 5.1.

                  (g)  Maintenance  of Permits,  Etc.  Borrower will maintain in
full force and effect all Permits, franchises, patents, trademarks, trade names,
copyrights,  authorizations  or other rights  necessary for the operation of its
business, except where the failure to obtain any of the foregoing would not have
a  Material  Adverse  Effect on  Borrower;  and notify  Administrative  Agent in
writing,  promptly  after learning  thereof,  of the  suspension,  cancellation,
revocation  or  discontinuance  of, or of any  pending or  threatened  action or
proceeding  seeking to suspend,  cancel,  revoke or  discontinue,  any  material
Permit,  patent,  trademark,  trade  name,  copyright,   governmental  approval,
franchise authorization or right.

                                      -38-

<PAGE>

                  (h)  Conduct of  Business.  Except for  Investments  expressly
permitted  pursuant to Section 8.8 and investments in Cash and Cash Equivalents,
Borrower  shall engage only in the business of  acquiring,  developing,  owning,
operating and managing income producing Office Properties within the continental
United States and any business activities and investments of Borrower incidental
thereto.

                  (i) Use of  Proceeds.  Borrower  shall use the proceeds of the
Advances only for pre-developments costs,  development costs, acquisition costs,
capital improvements,  working capital,  equity investments,  repayment of other
Indebtedness, including required interest and/or principal payments thereon, and
for any other general  corporate  purposes,  including  distributions  permitted
hereunder.

                  (j)  Ratings.  Borrower  shall obtain and maintain a rating of
its  long-term  senior  unsecured  Debt by each of Standard & Poor's and Moody's
Investors Service, Inc.

                  (k) Delivery of Rating Notices and Notices of Lowering or Loss
of Rating. Borrower shall deliver a Rating Notice to Administrative Agent within
three (3) Business  Days after  Borrower  receives  notice of each change in the
rating of  Borrower's  long-term  unsecured  senior Debt by Standard & Poor's or
Moody's  Investors  Service,  Inc. to a rating of not lower than BBB-.  Borrower
also shall deliver notice to Administrative Agent within three (3) Business Days
after  Borrower  receives  notice  that  either (i) the rating of its  long-term
unsecured  senior Debt has been lowered to less than BBB- or (ii) its  long-term
unsecured  senior  Debt no longer  will be rated by Standard & Poor's or Moody's
Investors Service, Inc.

                  (l)  Delivery  of  Contribution  Agreements.   Borrower  shall
deliver any  Contribution  Agreements  executed after the date of this Agreement
within  fifteen (15)  Business Days after such  Contribution  Agreement has been
fully executed by each party thereto.

                  6.2 With Respect to the REIT:

                  (a) Corporate Existence.  The REIT shall at all times maintain
its  corporate  existence  and  preserve  and keep in full  force and effect its
rights and franchises  unless the failure to maintain such rights and franchises
will not have a Material Adverse Effect on the REIT.

                  (b)  Qualification,  Name.  The REIT shall  qualify and remain
qualified  to do  business  in each  jurisdiction  in which  the  nature  of its
business  requires it to be so qualified  except for those  jurisdictions  where
failure to so qualify does not have a Material  Adverse  Effect on the REIT. The
REIT will transact business solely in its own name.

                  (c)  Securities Law  Compliance.  The REIT shall comply in all
material  respects with all rules and regulations of the Commission and file all
reports  required  by  the  Commission  relating  to  the  REIT's  publicly-held
Securities.

                  (d) Continued Status as a REIT; Prohibited  Transactions.  The
REIT (i) will  continue  to be a real  estate  investment  trust as  defined  in
Section  856 of the Code (or any  successor  provision  thereto),  (ii) will not
revoke its election to be a real estate investment trust,  (iii) will not engage
in any "prohibited  transactions"  as defined in Section  857(b)(6)(iii)  of the
Code (or any successor provision thereto), and (iv) will continue to be entitled
to a dividend  paid  deduction  meeting the  requirements  of Section 857 of the
Code.

                  (e) NYSE Listed Company. The common stock of the REIT shall at
all times be listed for trading on the New York Stock Exchange.

                  (f) Compliance  with Laws, Etc. The REIT shall (i) comply with
all  Requirements of Law and restrictive  covenants  affecting the REIT and (ii)
obtain as needed all Permits  necessary for its  operations and maintain such in
good standing,  except in each of the foregoing cases where the failure to do so
will not have a Material Adverse Effect on the REIT.

                  (g)  Payment of Taxes and  Claims.  The REIT shall pay (i) all
taxes,  assessments and other governmental  charges imposed upon it or on any of
its  properties  or assets or in  respect  of any of its  franchises,  business,
income or Property before any penalty or interest accrues  thereon,  the failure
to make payment of which will have a Material  Adverse  Effect on the REIT,  and

                                      -39-

<PAGE>

(ii) all claims  (including,  without  limitation,  claims for labor,  services,
materials and supplies) for sums,  material in the aggregate to the REIT,  which
have  become  due and  payable  and which by law have or may become a Lien other
than a judgment lien upon any of the REIT's  Properties or assets,  prior to the
time  when  any  penalty  or  fine  shall  be  incurred  with  respect  thereto.
Notwithstanding  the  foregoing,  the  REIT may  contest  by  appropriate  legal
proceedings conducted in good faith and with due diligence, the amount, validity
or  application,  in  whole  or  in  part,  of  any  taxes,  assessments,  other
governmental  charges or claims  described  above,  provided that the REIT shall
provide  such  security  as may be required  by  Administrative  Agent to insure
ultimate payment of the same and to prevent any sale or forfeiture of any of the
REIT's Property (or any portion thereof or interest therein), provided, however,
that the  provisions of this Section 6.2(g) shall not be construed to permit the
REIT to contest the payment of any obligations owed to  Administrative  Agent or
the Lenders or any other sums payable by the REIT to Administrative Agent or the
Lenders hereunder or under any other Loan Document.  Notwithstanding  any of the
foregoing,  the REIT shall indemnify,  defend and save Administrative  Agent and
the Lenders harmless from and against any liability, cost or expense of any kind
that may be imposed on  Administrative  Agent or the Lenders in connection  with
any such contest and any loss resulting therefrom.

                  (h) Net Offering Proceeds.  Unless otherwise agreed in writing
by Requisite  Lenders,  the REIT shall  immediately  contribute any Net Offering
Proceeds to Borrower.

                                    ARTICLE 7
                                    ---------

                               NEGATIVE COVENANTS
                               ------------------

                  Borrower  covenants  and  agrees  that,  on and after the date
hereof,  until payment in full of all of the Obligations,  the expiration of the
Commitment and termination of this Agreement:

                  7.1 With Respect to all Parties. Neither Borrower nor the REIT
shall:

                  (a) Restrictions on Fundamental  Changes. (i) The REIT and the
Consolidated  Entities  shall  not  enter  into  any  merger,  consolidation  or
reorganization or any sale of all or a substantial  portion of the assets of the
REIT and the Consolidated Entities,  taken as a whole, or liquidate,  wind up or
dissolve, except that (1) any Person engaged in the development and operation of
class A suburban  Office  Properties may merge or consolidate  with and into the
REIT,  Borrower  or any  other  Consolidated  Entity,  provided  (A) no Event of
Default  or event  which,  with the  giving of notice or the  passage of time or
both, could become an Event of Default,  then exists or would result  therefrom,
(B) the REIT,  Borrower or such Consolidated  Entity, as the case may be, is the
surviving  entity,  (C) the Requisite  Lenders  reasonably  determine  that such
merger or  consolidation  will not have a Material Adverse Effect on Borrower or
the REIT and (D) Borrower delivers to Administrative  Agent,  prior to the REIT,
Borrower  or such  Consolidated  Entity  becoming  obligated  (conditionally  or
otherwise)  to  proceed  with  such  transaction,  a  certificate,  in form  and
substance and in such detail as Administrative  Agent may reasonably require, of
the REIT's chief financial  officer,  chief executive officer or chief operating
officer demonstrating  compliance with this Agreement on a proforma basis giving
effect to such transaction,  and (2) Borrower and the REIT may acquire interests
in the CMBS Entities and Borrower may contribute assets to such CMBS Entities;

                           (ii)   Change its Fiscal Year; or

                           (iii)  Engage in any line of  business  other than as
         expressly permitted under Section 6.1(h).

                  (b)  ERISA.  Permit  any  ERISA  Affiliates  to do  any of the
following  to the extent  that such act or  failure  to act would  result in the
aggregate, after taking into account any other such acts or failure to act, in a
Material Adverse Effect on Borrower or the REIT:

                           (i) Engage, or knowingly permit an ERISA Affiliate to
         engage, in any prohibited transaction described in Section 406 of ERISA
         or Section  4975 of the Code which is not exempt  under  Section 407 or
         408 of ERISA or Section 4975(d) of the Code for which a class exemption
         is not  available  or a  private  exemption  has  not  been  previously
         obtained from the DOL;

                           (ii)  Permit  to  exist  any   accumulated   funding
         deficiency (as  defined in Section  302 of ERISA and Section 412 of the
         Code), whether or not waived;

                                      -40-

<PAGE>

                           (iii) Fail, or permit an ERISA  Affiliate to fail, to
         pay  timely  required  contributions  or annual  installments  due with
         respect to any waived  funding  deficiency  to any Plan if such failure
         could  result in the  imposition  of a Lien or  otherwise  would have a
         Material Adverse Effect on Borrower or the REIT;

                           (iv)  Terminate,  or  permit  an ERISA  Affiliate  to
         terminate,  any Benefit  Plan which would  result in any  liability  of
         Borrower or an ERISA Affiliate under Title IV of ERISA or the REIT; or

                           (v) Fail,  or permit any ERISA  Affiliate to fail, to
         pay any required  installment  under  section (m) of Section 412 of the
         Code or any other payment  required under Section 412 of the Code on or
         before  the due date for such  installment  or other  payment,  if such
         failure  could result in the  imposition  of a Lien or otherwise  would
         have a Material Adverse Effect on Borrower or the REIT.

                  (c) Debt and Guaranty Obligations. Create, incur or assume any
Debt or Guaranty Obligations except:

                           (i)      subject to Section 8.9, below, Debt which is
                                    secured by Real Property;

                           (ii)     the City National Bank Loan;

                           (iii)    Debt and Guaranty Obligations under the
         Second Amended and Restated Credit Agreement and the documents entered
         into in connection therewith;

                           (iv)     Guaranty  Obligations which  do not, in  the
         aggregate, exceed Five Hundred Thousand Dollars ($500,000);

                           (v)      publicly-issued Indebtedness or privately-
         placed unsecured fixed rate term Debt;

                           (vi)     the Contribution Agreement;

                           (vii)    the demand promissory note of the REIT to
         Arden Realty Finance, Inc., in the principal amount $28,709,393; or

                           (viii)   Debt of the REIT permitted under Section
         7.7(b).

                  7.2 Amendment of  Constituent  Documents.  Borrower  shall not
materially amend its partnership agreement or certificate of limited partnership
without the prior  written  consent of the Requisite  Lenders,  except as may be
required by applicable law or to comply with Section 6.2(d).  The REIT shall not
materially  amend its  articles of  incorporation  or by-laws  without the prior
written consent of the Requisite  Lenders,  except (i) as required by applicable
law or (ii) as may be required to comply with Section 6.2(d).

                  7.3 REIT Directors.  In no event during any twelve consecutive
month period during the term of this Agreement  shall the  individuals  who were
directors  of the REIT at the  beginning  of such period  cease to  constitute a
majority of the board of directors of the REIT unless the individuals  replacing
such original directors were nominated by the board of directors of the REIT.

                  7.4 Management.  Richard Ziman shall not cease to be active on
a full-time, continuing basis in the senior management of Borrower and the REIT;
provided, however, that, if due to death or incapacity,  Richard Ziman is unable
to act in such  capacity,  Borrower  shall have one hundred twenty (120) days to
obtain the approval of the Requisite Lenders with respect to the new management.
In the event  Borrower  shall fail to obtain  approval of the Requisite  Lenders
within such 120-day  period,  then Borrower  shall, at the election and upon the
demand  of the  Requisite  Lenders  pay in full all  Obligations  under the Loan
Documents  not later than sixty (60) days after the end of such 120-day  period,
whereupon  this Agreement and the  Commitment  shall be  terminated.  No further
Advances shall be permitted  until Borrower shall have obtained  approval of the
Requisite Lenders under this Section 7.4.

                  7.5 Margin  Regulations.  No portion  of the  proceeds  of any
Advances  shall be used in any manner which might cause the  extension of credit
or the application of such proceeds to violate Regulation T, U or X or any other
regulation of the Federal  Reserve Board or to violate the  Securities  Exchange
Act or the Securities  Act, in each case as in effect on the applicable  Funding
Date.

                                      -41-

<PAGE>

                  7.6  Organization  of Borrower,  Etc.  Borrower shall remain a
Maryland limited  partnership  with the REIT as its sole general partner.  At no
time shall Borrower be taxed as an association under the Internal Revenue Code.

                  7.7 With Respect to the REIT:

                  (a) The REIT  shall not own any  material  assets or engage in
any line of  business  other than the  ownership  of the  partnership  interests
described in Section 4.2(o) and as otherwise  permitted under Section 7.1(a) and
Section 8.8.

                  (b) The REIT shall not directly or indirectly  create,  incur,
assume or otherwise become or remain directly or indirectly  liable with respect
to,  any Debt,  except  the  obligations  and other  Indebtedness  of  Borrower,
Indebtedness   constituting   obligations  of  its   Consolidated   Entities  or
Unconsolidated Joint Ventures, and obligations under the Guaranty.

                  (c) The REIT shall not directly or indirectly  create,  incur,
assume or permit to exist any Lien on or with  respect to any of its Property or
assets except Liens in favor of Administrative Agent securing the Obligations.

                  (d) The REIT will not  directly or  indirectly  convey,  sell,
transfer,  assign,  pledge  or  otherwise  encumber  or  dispose  of  any of its
partnership  interests in Borrower held as of the Closing Date, except to secure
the Obligations.
                                    ARTICLE 8
                                    ---------

                               FINANCIAL COVENANTS
                               -------------------

                  Borrower  covenants  and agrees that, on and after the date of
this Agreement and until payment in full of all the Obligations,  the expiration
of the Commitment and the termination of this Agreement:

                  8.1 Tangible Net Worth. The Tangible Net Worth of the REIT and
the Consolidated  Entities, as of the last day of each Fiscal Quarter, shall not
be less than the sum of (i)  $294,988,000,  plus (ii) 90% of the  cumulative net
cash  proceeds  received  from and the  value  of  assets  acquired  (net of the
Indebtedness  incurred or assumed in connection  therewith) through the issuance
of Capital  Stock of the REIT and  Partnership  Units of the Borrower  after the
"Closing Date" (as defined in the 1996 Credit  Agreement) other than issuance of
Capital Stock in exchange for Partnership  Units, minus (iii) the aggregate cost
to the REIT of repurchasing its publicly traded common stock; provided, however,
that, after any such repurchase, in no event shall the Tangible Net Worth of the
REIT and the Consolidated Entities be less than $1,500,000,000. For the purposes
of clause (ii),  "net" means net of  underwriters'  discounts,  commissions  and
other reasonable  out-of-pocket expenses of the transaction actually paid to any
Person (other than Borrower or any Affiliate of Borrower).

                  8.2 Maximum Total  Liabilities to Gross Asset Value. The ratio
of Total Liabilities to Gross Asset Value shall not exceed 55% at any time.

                  8.3 Minimum Interest Coverage Ratio. As of the last day of any
Fiscal Quarter, the Interest Coverage Ratio shall not be less than 2.00:1.

                  8.4 Minimum Fixed Charge Coverage Ratio. As of the last day of
any Fiscal  Quarter,  the Fixed  Charge  Coverage  Ratio  shall not be less than
1.75:1.

                  8.5 Minimum  Unencumbered  Pool.  The  aggregate  Unencumbered
Asset Value of the  Unencumbered  Pool shall not, at any time, be less than 175%
of the unsecured Total Liabilities of the REIT and the Consolidated Entities.

                  8.6 Minimum  Unsecured  Interest Expense  Coverage.  As of the
last day of any Fiscal Quarter, the Unsecured Interest Expense Coverage Ratio of
the REIT and the Consolidated Entities shall not be less than 1.80:1.

                                      -42-

<PAGE>

                  8.7  Distributions.  (a)  Subject  to  subsection  (b)  below,
aggregate distributions to shareholders of the REIT and all partners of Borrower
shall not exceed,  for any four (4)  consecutive  Fiscal  Quarters,  ninety-five
percent  (95%) of Funds from  Operations.  For purposes of this Section 8.7, the
term  "distributions"  shall mean all dividends and other  distributions to, and
the repurchase of stock or limited partnership interests from, the holder of any
equity  interests in Borrower or the REIT (other than the  redemption of limited
partnership interests in Borrower in exchange for REIT stock).

                  (b)  Aggregate  distributions  during the  continuance  of any
Event of  Default  shall  not  exceed  the  lesser of (i) the  aggregate  amount
permitted to be made during the continuance  thereof under subsection (a) above,
and (ii) the minimum amount that the REIT must distribute to its shareholders in
order to avoid federal tax  liability  and to remain  qualified as a real estate
investment trust as defined in Section 856 of the Code.

                  8.8 Investments; Asset Mix. (a) The REIT shall not at any time
make or own any  Investment in any Person,  or purchase,  lease or own any other
asset or property, except (i) any Investment in Borrower, (ii) any Investment in
the CMBS Entities,  (iii) any Capital Stock in the Consolidated  Entities (other
than Borrower), and (iv) any cash or other property that is being distributed to
the  shareholders of the REIT  substantially  contemporaneously  with the REIT's
receipt of such cash or other property.

                  (b) Except as permitted under Section  7.1(a),  Borrower shall
not at any time make or own any Investment in any Person, or purchase,  lease or
own any Real Property or other asset,  except that Borrower may own or lease the
following, subject to the limitations set forth below:

<TABLE>
<CAPTION>
                                                              Limitation on Value
                                                              for Each Asset Type
                         Asset Type                           at the Time of Determination
                         ----------                           ----------------------------
<S>      <C>                                                  <C>

1.  Wholly-Owned Office Property and related Property          Unlimited

2.  Wholly-Owned Land                                          5% of Gross Asset Value

3.  Wholly-Owned Real Property (other than Office              10% of Gross Asset Value
    Properties or Land referred to in clause 2)

4.  Wholly-owned Capital Stock of corporations                 10% of Gross Asset Value

5.  Investment Mortgages                                       15% of Gross Asset Value

6.  Wholly-owned Capital Stock of Joint Ventures               15% of Gross Asset Value
    (other than corporations)

7.  Construction in Progress (exclusive of tenant              12.5% of all Office Properties
    improvements)                                              (based on the total gross leasable area,
                                                               measured in square feet)(provided that
                                                               this category shall not, with respect
                                                               to any construction in progress(for any
                                                               Office Property)which is not at least
                                                               70% pre-leased and with all Major
                                                               Agreements previously approved by
                                                               Administrative Agent, exceed 7% of the
                                                               total gross leasable area, measured in
                                                               square feet, of all Office Properties)
</TABLE>

                  Notwithstanding the foregoing, Investments and other assets in
the foregoing  categories 2 through 6 may not, in the aggregate  exceed,  at any
time, 25% of Gross Asset Value. All values of Investments and other assets shall
be the  original  cost of such  Investments  and  assets,  except  as  otherwise
expressly provided.

                  8.9 Secured Debt. The aggregate amount of all Debt of the REIT
and the  Consolidated  Entities secured by Real Property shall not, at any time,
exceed 35% of Gross Asset Value.

                                      -43-

<PAGE>

                                    ARTICLE 9
                                    ---------

                     EVENTS OF DEFAULT; RIGHTS AND REMEDIES
                     --------------------------------------

                  9.1 Events of Default. Each of the following occurrences shall
constitute an Event of Default under this Agreement:

                  (a) Failure to Make Payments When Due.  Borrower shall fail to
pay (i) any amount due on the Maturity  Date,  (ii) any  principal  when due, or
(iii) any interest on any Advance,  or any fee or other amount payable under any
Loan Documents, within three (3) days after the same becomes due.

                  (b)  Distributions.  Borrower  or the REIT  shall  breach  any
covenant set forth in Section 6.2(d) or 8.7.

                  (c) Breach of Financial Covenants.  Borrower shall (i) fail to
satisfy any  financial  covenant set forth in Article 8 other than the financial
covenants  set  forth in  Sections  8.3,  8.4 and 8.6,  and such  failure  shall
continue  for thirty  (30) days,  or (ii) fail to satisfy  any of the  financial
covenants  set forth in Sections  8.3, 8.4 or 8.6 (as to which there shall be no
cure period).

                  (d) Other  Defaults.  The REIT or Borrower shall fail duly and
punctually to perform or observe any agreement,  covenant or obligation  binding
on  Borrower  or the REIT  under this  Agreement  or under any of the other Loan
Documents  (other than as described in any other provision of this Section 9.1),
and such failure shall  continue for thirty (30) days after Borrower or the REIT
knew of such failure (or such lesser period of time as is mandated by applicable
Requirements of Law).

                  (e) Breach of Representation or Warranty.  Any  representation
or warranty made or deemed made by Borrower or the REIT to Administrative  Agent
or any Lender herein or in any of the other Loan  Documents or in any statement,
certificate  or financial  statements at any time given by Borrower  pursuant to
any of the Loan Documents  shall be false or misleading in any material  respect
on the date as of which made.

                  (f)  Default  as to Other  Debt.  Borrower  or the REIT or any
other  Consolidated  Entity shall have defaulted  (beyond any  applicable  grace
period)  under  any  Debt of such  party  (other  than the  Obligations)  if the
aggregate amount of such other Debt is One Million Dollars  ($1,000,000) or more
and such default shall not have been cured or waived;  provided,  however,  that
the foregoing  $1,000,000  limitation  shall be increased to Ten Million Dollars
($10,000,000) in the case of Nonrecourse Debt.

                  (g) Involuntary Bankruptcy;  Appointment of Receiver, etc. (i)
An involuntary case shall be commenced against the REIT or Borrower or any other
Consolidated  Entity and the petition  shall not be dismissed  within sixty (60)
days after commencement of the case, or a court having  jurisdiction shall enter
a decree or order for  relief in respect  of any such  Person in an  involuntary
case,  under any applicable  bankruptcy,  insolvency or other similar law now or
hereafter in effect;  or any other  similar  relief  shall be granted  under any
applicable federal, state or foreign law; or

                           (ii) A decree or order of a court having jurisdiction
         for the appointment of a receiver, liquidator,  sequestrator,  trustee,
         custodian  or other  officer  having  similar  powers  over the REIT or
         Borrower or any other Consolidated Entity, or over all or a substantial
         part of the  property  of any  such  Person,  shall be  entered;  or an
         interim  receiver,  trustee or other custodian of any such Person or of
         all or a  substantial  part of the property of any such Person shall be
         appointed;  or a warrant of  attachment,  execution or similar  process
         against any  substantial  part of the property of any such Person shall
         be issued; and any such event shall not be stayed, vacated,  dismissed,
         bonded or discharged  within sixty (60) days of entry,  appointment  or
         issuance.

                  (h) Voluntary  Bankruptcy;  Appointment of Receiver,  Etc. The
REIT or Borrower or any other Consolidated Entity shall have an order for relief
entered with respect to it, or commence a voluntary  case under,  any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an  involuntary  case,  or to the

                                      -44-

<PAGE>

conversion of an involuntary  case to a voluntary  case,  under any such law, or
shall  consent to the  appointment  of or taking of  possession  by a  receiver,
trustee or other  custodian for all or a substantial  part of its property;  any
such Person shall make any  assignment  for the benefit of creditors or shall be
unable or fail,  or admit in  writing  its  inability,  to pay its debts as such
debts become due; or the general  partner of Borrower or any other  Consolidated
Entity or the REIT's Board of Directors  (or any committee  thereof)  adopts any
resolution or otherwise authorizes any action to approve any of the foregoing.

                  (i) Judgments and  Attachments.  (i) Any money judgment (other
than a money judgment  covered by insurance but only if the insurer has admitted
liability with respect to such money  judgment),  writ or warrant of attachment,
or  similar  process  involving  in any case an amount in excess of One  Million
Dollars ($1,000,000) shall be entered or filed against the REIT,  Borrower,  any
other   Consolidated   Entity  or  their  respective  assets  and  shall  remain
undischarged,  unvacated, unbonded or unstayed for a period of thirty (30) days,
or (ii) any  judgment or order of any court or  administrative  agency  awarding
material  damages  shall be entered  against any such Person in any action under
the Federal  securities  laws seeking  rescission of the purchase or sale of, or
for damages arising from the purchase or sale of, any Securities,  such judgment
or order shall have become final after  exhaustion  of all  available  appellate
remedies and, in Administrative  Agent's judgment,  the payment of such judgment
or order would have a Material Adverse Effect on such Person.

                  (j)  Dissolution.  Any  order,  judgment  or  decree  shall be
entered against the REIT,  Borrower or any other  Consolidated  Entity decreeing
its involuntary dissolution or split up and such order shall remain undischarged
and unstayed for a period in excess of thirty (30) days;  or the REIT,  Borrower
or any other Consolidated Entity shall otherwise dissolve or cease to exist.

                  (k) Loan Documents.  If for any reason any Loan Document shall
cease to be in full force and effect and such  condition or event shall continue
for  fifteen  (15) days after  Borrower  or the REIT knew of such  condition  or
event.

                  (l) ERISA Liabilities. Any Termination Event occurs which will
or is reasonably  likely to subject  Borrower or the REIT or any ERISA Affiliate
of any of them to a liability which Administrative  Agent reasonably  determines
will have a  Material  Adverse  Effect  on  Borrower  or the  REIT,  or the plan
administrator  of any Benefit Plan applies for approval  under Section 412(d) of
the  Internal  Revenue  Code for a waiver of the minimum  funding  standards  of
Section 412(a) of the Internal Revenue Code and Administrative  Agent reasonably
determines  that the business  hardship upon which the Section 412(d) waiver was
based will or would reasonably be anticipated to subject Borrower or the REIT to
a liability which  Administrative  Agent determines will have a Material Adverse
Effect on Borrower or the REIT.

                  (m)  Environmental  Liabilities.  Borrower or the REIT becomes
subject to any Liabilities and Costs which Administrative Agent reasonably deems
to have a Material  Adverse  Effect on such Person  arising out of or related to
(i) the Release or threatened  Release at any Property of any  Contaminant  into
the  environment,  or any  Remedial  Action  in  response  thereto,  or (ii) any
violation of any Environmental Laws.

                  (n) Solvency. Borrower or the REIT shall cease to be Solvent.

                  (o)  Breach  of  Guaranty.  The  REIT  shall  fail to duly and
punctually  perform or observe any agreement,  covenant or obligation  under its
Guaranty.

                  (p) Sole General Partner.  The REIT shall cease to be the sole
general partner of Borrower or cease to own 51%

or more of the Partnership Units of Borrower.

                  (q) CMBS Entities  Debt.  Any CMBS Entity  creates,  incurs or
assumes any Debt in excess of the principal amount of such CMBS Entity's Debt as
of the Closing Date.

                  An Event of Default shall be deemed  "continuing"  until cured
or waived in writing in accordance with Section 11.4.

                  9.2 Rights and Remedies.

                  (a)  Acceleration,  Etc.  Upon the  occurrence of any Event of
Default  described in the foregoing Section 9.1(g) or 9.1(h) with respect to the
REIT  or  Borrower  or any  other  Consolidated  Entity,  the  Commitment  shall
automatically  and immediately  terminate and the unpaid principal amount of and
any and all accrued  interest on the Advances  and all of the other  Obligations

                                      -45-

<PAGE>

shall  automatically  become  immediately  due and payable,  with all additional
interest,  fees,  costs and expenses  from time to time accrued  thereon  and/or
payable  hereunder,  and  without  presentment,   demand  or  protest  or  other
requirements  of  any  kind  (including,   without  limitation,   valuation  and
appraisement,  diligence,  presentment, notice of intent to demand or accelerate
or  notice  of  acceleration),  all of which  are  hereby  expressly  waived  by
Borrower,  and the  obligations  of the Lenders to make any  Advances  hereunder
shall thereupon terminate; and upon the occurrence and during the continuance of
any other Event of Default,  Administrative Agent shall, at the request, or may,
with the  consent of  Requisite  Lenders,  by written  notice to  Borrower,  (i)
declare that the  Commitment is  terminated,  whereupon the  Commitment  and the
obligation  of the  Lenders  to make any  Advance  hereunder  shall  immediately
terminate,  and/or  (ii)  declare  the unpaid  principal  amount of, any and all
accrued and unpaid interest on the Advances and all of the other  Obligations to
be,  and the same shall  thereupon  be,  immediately  due and  payable  with all
additional  interest from time to time accrued thereon and without  presentment,
demand,  or  protest  or  other  requirements  of any  kind  (including  without
limitation, valuation and appraisement, diligence, presentment, notice of intent
to demand or accelerate and of acceleration),  all of which are hereby expressly
waived by Borrower. Without limiting Administrative Agent's authority hereunder,
on or after the Maturity Date,  Administrative  Agent shall, at the request,  or
may,  with the  consent,  of  Requisite  Lenders  exercise any or all rights and
remedies under the Loan Documents or applicable law or in equity.

                  (b) Access to Information. If an Event of Default then exists,
Administrative  Agent shall have,  in addition to and not by way of a limitation
on any other  rights and remedies  contained  in this  Agreement or in the other
Loan Documents, the right within forty-eight (48) hours after notice to Borrower
to obtain access to Borrower's  and the REIT's records  (including  computerized
information, files and supporting software) relating to the Unencumbered Assets,
and its accounting  information  relating to the Unencumbered Assets, and to use
all of the  foregoing  and  the  information  contained  therein  in any  manner
Administrative Agent deems appropriate which is related to the collection of the
Obligations. Borrower hereby irrevocably authorizes any accountant or management
agent   employed  by  Borrower  to  deliver  such  items  and   information   to
Administrative Agent.  Notwithstanding anything to the contrary contained in the
Loan Documents, upon the occurrence of and during the continuance of an Event of
Default,  Administrative  Agent shall be entitled to request and receive,  by or
through  Borrower  or  appropriate  legal  process,   any  and  all  information
concerning  the REIT,  Borrower,  or any  Property  of either of them,  which is
reasonably  available to or obtainable by Borrower.  Administrative  Agent shall
deliver to each Lender copies of any  information  which it obtains  pursuant to
this Section 9.2(b).

                  (c) Waiver of Demand. Demand, presentment,  protest and notice
of nonpayment are hereby waived by Borrower. Borrower also waives, to the extent
permitted by law, the benefit of all valuation, appraisal and exemption laws.

                  (d) Waivers,  Amendments and Remedies. No delay or omission of
Administrative  Agent or the  Lenders  to  exercise  any  right  under  any Loan
Document  shall impair such right or be construed to be a waiver of any Event of
Default or an acquiescence  therein,  and any single or partial  exercise of any
such right shall not preclude other or further  exercise thereof or the exercise
of any other right,  and no waiver,  amendment or other  variation of the terms,
conditions or provisions of the Loan Documents  whatsoever shall be valid unless
in a writing signed by  Administrative  Agent after obtaining  written  approval
thereof or the  signature  thereon of those  Lenders  required  to approve  such
waiver,  amendment  or other  variation,  and then  only to the  extent  in such
writing  specifically set forth. All remedies contained in the Loan Documents or
by law afforded shall be cumulative and all shall be available to Administrative
Agent  and the  Lenders  until  the  Obligations  have  been  paid in full,  the
Commitment has expired or terminated and this Agreement has been terminated.

                  9.3  Rescission.  If, at any time  after  acceleration  of the
maturity of the  Advances,  Borrower  shall pay all arrears of interest  and all
payments on account of  principal  of the  Advances  which shall have become due
otherwise  than by  acceleration  (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Unmatured Events of Default (other than nonpayment
of principal of and accrued  interest on the Advances due and payable  solely by
virtue of  acceleration)  shall be remedied or waived  pursuant to Section 11.4,
then by written notice to Borrower,  the Requisite  Lenders may elect,  in their
sole discretion, to rescind and annul the acceleration and its consequences; but
such action shall not affect any subsequent  Event of Default or Unmatured Event
of Default or impair any right or remedy consequent  thereon.  The provisions of
the  preceding  sentence are  intended  merely to bind the Lenders to a decision
which  may be  made at the  election  of the  Requisite  Lenders;  they  are not
intended to benefit  Borrower and do not give  Borrower the right to require the
Lenders to rescind or annul any acceleration  hereunder,  even if the conditions

                                      -46-

<PAGE>

set forth herein are met.  Borrower  shall have no right to enforce this Section
9.3, or to make any claim hereunder,  directly, or as a third party beneficiary,
or otherwise.

                                   ARTICLE 10
                                   ----------

                                AGENCY PROVISIONS
                                -----------------

                  10.1  Appointment.  (a) Each Lender hereby (i)  designates and
appoints LCPI as  Administrative  Agent of such Lender under this  Agreement and
the other Loan Documents,  (ii) authorizes and directs  Administrative  Agent to
enter into the Loan  Documents  other than this Agreement for the benefit of the
Lenders,  and (iii) authorizes  Administrative  Agent to take such action on its
behalf under the  provisions of this  Agreement and the other Loan Documents and
to exercise  such powers as are set forth herein or therein,  together with such
other powers as are reasonably  incidental  thereto,  subject to the limitations
referred to in Sections  10.10(a) and 10.10(b) and the other  provisions of this
Agreement  requiring  consent or approval  of all the  Lenders or the  Requisite
Lenders.  Administrative  Agent agrees to act as such on the express  conditions
contained in this Article 10.

                  (b) The  provisions  of this  Article  10 are  solely  for the
benefit of Administrative Agent and the Lenders, and Borrower shall not have any
right to rely on or enforce any of the provisions hereof (provided that Borrower
may rely on the  provisions  of Section  10.4(b)  and Section  10.9);  provided,
however,  the foregoing shall in no way limit Borrower's  obligations under this
Article  10. In  performing  its  functions  and duties  under  this  Agreement,
Administrative Agent shall act solely as Administrative Agent of the Lenders and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower or any other Person.

                  10.2 Nature of Duties. Administrative Agent shall not have any
duties or responsibilities except those expressly set forth in this Agreement or
in the other  Loan  Documents.  The  duties  of  Administrative  Agent  shall be
administrative  in nature.  Subject to the provisions of Sections 10.5 and 10.7,
Administrative  Agent  shall  administer  the  Advances in the same manner as it
administers  its  own  loans.  Promptly  following  the  effectiveness  of  this
Agreement,  Administrative  Agent  shall  send to  each  Lender  its  originally
executed Note and the executed original, to the extent the same are available in
sufficient numbers, of each other Loan Document other than the Notes in favor of
the other Lenders and filed or recorded security documents or instruments,  with
the latter to be held and  retained by  Administrative  Agent for the benefit of
all the Lenders. Administrative Agent shall not have by reason of this Agreement
a fiduciary  relationship in respect of any Lender. Nothing in this Agreement or
any of the other Loan Documents,  expressed or implied,  is intended or shall be
construed to impose upon Administrative  Agent any obligation in respect of this
Agreement  or any of the other  Loan  Documents  except as  expressly  set forth
herein or therein.  Each Lender shall make its own independent  investigation of
the financial  condition and affairs of the REIT and Borrower in connection with
the making and the continuance of the Advances  hereunder and shall make its own
appraisal  of the  creditworthiness  of the REIT and  Borrower,  and,  except as
specifically  provided herein,  Administrative  Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other  information with respect thereto,  whether coming into
its possession before the Closing Date or at any time or times thereafter.

                  10.3 Disbursements of Advances. (a) Promptly, but in any event
not later than 5:00 p.m.  (New York City time) on the same Business Day on which
Administrative Agent receives a Notice of Borrowing,  Administrative Agent shall
send a copy thereof by facsimile to each other Lender and shall otherwise notify
each Lender of the proposed Advance and the Funding Date. Each Lender shall make
available to  Administrative  Agent (or the funding bank or entity designated by
Administrative  Agent),  the  amount  of such  Lender's  Pro Rata  Share of such
Advance in immediately  available  funds not later than the times  designated in
Section  10.3(b).  Unless  Administrative  Agent shall have been notified by any
Lender not later than the close of business (New York City time) on the Business
Day  immediately  preceding the Funding Date in respect of any Advance that such
Lender does not intend to make available to  Administrative  Agent such Lender's
Pro Rata Share of such Advance, Administrative Agent may assume that such Lender
shall make such amount available to Administrative Agent. If any Lender does not
notify  Administrative Agent of its intention not to make available its Pro Rata
Share of such  Advance as  described  above,  but does not for any  reason  make

                                      -47-

<PAGE>

available to Administrative  Agent such Lender's Pro Rata Share of such Advance,
such Lender shall pay to  Administrative  Agent forthwith on demand such amount,
together  with  interest  thereon at the Federal Funds Rate. In any case where a
Lender  does not for any reason  make  available  to  Administrative  Agent such
Lender's  Pro Rata  Share of such  Advance,  Administrative  Agent,  in its sole
discretion,  may, but shall not be obligated  to, fund to Borrower such Lender's
Pro Rata Share of such Advance.  If Administrative  Agent funds to Borrower such
Lender's Pro Rata Share of such Advance and if such Lender  subsequently pays to
Administrative  Agent  such  corresponding  amount,  such  amount so paid  shall
constitute such Lender's Pro Rata Share of such Advance. Nothing in this Section
10.3(a)  shall  alter the  respective  rights  and  obligations  of the  parties
hereunder in respect of a Defaulting Lender or a Non-Pro Rata Advance. 10.1

                  (b)  Requests  by  Administrative  Agent  for  funding  by the
Lenders of Advances will be made by telecopy.  Each Lender shall make the amount
of its Advance available to  Administrative  Agent in Dollars and in immediately
available  funds,  to such  bank  and  account,  in New York  City,  New York as
Administrative  Agent may  designate,  not later  than 9:00 A.M.  (New York City
time) on the Funding Date  designated in the Notice of Borrowing with respect to
such Advance,  but in no event earlier than two (2) Business Days following such
Lender's receipt of the applicable Notice of Borrowing.

                  (c)  Nothing in this  Section  10.3 shall be deemed to relieve
any Lender of its obligation hereunder to make its Pro Rata Share of any Advance
on the  applicable  Funding Date,  nor shall any Lender be  responsible  for the
failure  of any other  Lender to perform  its  obligations  to make any  Advance
hereunder,  and the Pro Rata  Share of any  Lender  shall  not be  increased  or
decreased  as a result  of the  failure  by any  other  Lender  to  perform  its
obligation to make an Advance.

                  10.4 Distribution and  Apportionment of Payments.  (a) Subject
to Section 10.4(b),  payments actually received by Administrative  Agent for the
account of the Lenders shall be paid to them promptly  after receipt  thereof by
Administrative  Agent,  but in any event within one (1) Business  Day,  provided
that  Administrative  Agent shall pay to the Lenders  interest  thereon,  at the
Federal  Funds Rate,  from the Business Day  following  receipt of such funds by
Administrative Agent until such funds are paid in immediately available funds to
the Lenders.  Subject to Section 10.4(b), all payments of principal and interest
in respect of outstanding  Advances,  all payments of the fees described in this
Agreement,  and all  payments  in  respect  of any  other  Obligations  shall be
allocated  among such Lenders as are entitled  thereto,  in  proportion to their
respective Pro Rata Shares or otherwise as provided herein. Administrative Agent
shall promptly distribute, but in any event within one (1) Business Day after it
receives  the same,  to each  Lender  at its  primary  address  set forth on the
appropriate  signature page hereof or on the Assignment  and  Assumption,  or at
such other  address as a Lender may request in writing,  such funds as it may be
entitled to receive;  provided that Administrative  Agent shall in any event not
be bound to inquire into or  determine  the  validity,  scope or priority of any
interest or  entitlement  of any Lender and may suspend  all  payments  and seek
appropriate relief (including,  without limitation,  instructions from Requisite
Lenders  or all the  Lenders,  as  applicable,  or an  action  in the  nature of
interpleader)  in the event of any doubt or dispute as to any  apportionment  or
distribution  contemplated  hereby.  The order of  priority  herein is set forth
solely to determine the rights and priorities of the Lenders as among themselves
and may at any time or from time to time be changed  by the  Lenders as they may
elect, in writing in accordance with Section 11.4,  without  necessity of notice
to or consent of or approval by Borrower or any other  Person.  All  payments or
other sums  received  by  Administrative  Agent for the  account of the  Lenders
(including,  without  limitation,  principal  and interest  payments)  shall not
constitute  property or assets of the Administrative  Agent and shall be held by
Administrative  Agent, solely in its capacity as Administrative Agent for itself
and the other Lenders, subject to the Loan Documents.

                  (b)  Notwithstanding  any  provision  hereof to the  contrary,
until  such time as a  Defaulting  Lender  has  funded its Pro Rata Share of any
Advance which was  previously a Non-Pro Rata  Advance,  or all the other Lenders
have  received  payment in full  (whether by  repayment  or  prepayment)  of the
principal and interest due in respect of such Non-Pro Rata  Advance,  all of the
Obligations  owing to such Defaulting  Lender hereunder shall be subordinated in
right of payment, as provided in the following sentence, to the prior payment in
full of all principal, interest and fees in respect of all Non-Pro Rata Advances
in  which  the  Defaulting  Lender  has not  funded  its Pro  Rata  Share  (such
principal,  interest and fees being referred to as "Senior Loans").  All amounts
paid by Borrower and otherwise due to be applied to the Obligations owing to the
Defaulting  Lender  pursuant  to  the  terms  hereof  shall  be  distributed  by
Administrative  Agent to the other Lenders in accordance  with their  respective
Pro Rata Shares  (recalculated  for  purposes  hereof to exclude the  Defaulting
Lender's  Pro Rata Share of the  Commitment),  until all Senior  Loans have been
paid in full. This provision governs only the relationship among  Administrative
Agent,  each Defaulting  Lender and the other Lenders;  nothing  hereunder shall
limit the  obligation of Borrower to repay all Advances in  accordance  with the
terms of this Agreement, nor create an Event of Default if payments are not made
to a  Defaulting  Lender.  The  provisions  of this  Section  shall apply and be
effective  regardless  of  whether  an  Event  of  Default  occurs  and is  then
continuing, and notwithstanding (i) any other provision of this Agreement to the
contrary,  (ii) any  instruction  of Borrower as to its desired  application  of
payments or (iii) the  suspension of such  Defaulting  Lender's right to vote on

                                      -48-
<PAGE>

matters which are subject to the consent or approval of the Requisite Lenders or
all the Lenders.  No Unused Facility Fee shall accrue in favor of, or be payable
to, such  Defaulting  Lender  from the date of any  failure to fund  Advances or
reimburse  Administrative Agent for any Liabilities and Costs as herein provided
until such failure has been cured, and Administrative Agent shall be entitled to
(A) withhold or setoff,  and to apply to the payment of the defaulted amount and
any related  interest,  any amounts to be paid to such  Defaulting  Lender under
this Agreement,  and (B) bring an action or suit against such Defaulting  Lender
in a court of competent  jurisdiction  to recover the  defaulted  amount and any
related interest. In addition, the Defaulting Lender shall indemnify, defend and
hold  Administrative  Agent  and each of the  other  Lenders  harmless  from and
against any and all Liabilities and Costs,  plus interest thereon at the Default
Rate, which they may sustain or incur by reason of or as a direct consequence of
the Defaulting  Lender's  failure or refusal to abide by its  obligations  under
this Agreement.

                  10.5 Rights,  Exculpation,  Etc. Neither Administrative Agent,
any Affiliate of  Administrative  Agent, nor any of their  respective  officers,
directors,  employees, agents, attorneys or consultants,  shall be liable to any
Lender for any action taken or omitted by them under this Agreement or under any
of the other Loan Documents, or in connection herewith or therewith, except that
Administrative  Agent  shall be  liable  for its  gross  negligence  or  willful
misconduct.  Administrative Agent shall not be responsible to any Lender for any
recitals, statements, representations or warranties herein or for the execution,
effectiveness,   genuineness,   validity,   enforceability,   collectability  or
sufficiency of this Agreement, or any of the other Loan Documents, or any of the
transactions  contemplated hereby and thereby; or for the financial condition of
the REIT, Borrower or any of their Affiliates. Administrative Agent shall not be
required to make any inquiry  concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any of the other
Loan Documents or the financial  condition of the REIT, Borrower or any of their
Affiliates,  or the existence or possible  existence of any  Unmatured  Event of
Default or Event of Default.

                  10.6 Reliance.  Administrative Agent shall be entitled to rely
upon any written notices, statements,  certificates,  orders or other documents,
telecopies or any telephone  message  believed by it in good faith to be genuine
and correct and to have been signed, sent or made by the proper Person, and with
respect to all matters  pertaining  to this  Agreement  or any of the other Loan
Documents and its duties  hereunder or thereunder,  upon advice of legal counsel
(including  counsel for  Borrower),  independent  public  accountants  and other
experts selected by it.

                  10.7 Indemnification.  To the extent that Administrative Agent
is not  reimbursed  and  indemnified  by Borrower,  the Lenders will  reimburse,
within ten (10)  Business  Days after  notice  from  Administrative  Agent,  and
indemnify  and  defend  Administrative  Agent  from  and  against  any  and  all
Liabilities and Costs which may be imposed on, incurred by, or asserted  against
it in any way  relating  to or arising out of its role as  Administrative  Agent
under this Agreement,  or any of the other Loan Documents or any action taken or
omitted by Administrative  Agent under this Agreement,  or any of the other Loan
Documents,  in  proportion  to each  Lender's Pro Rata Share;  provided  that no
Lender shall be liable for any portion of such  Liabilities  and Costs resulting
from  Administrative  Agent's  gross  negligence  or  willful  misconduct.   The
obligations  of the Lenders under this Section 10.7 shall survive the payment in
full of all Obligations and the termination of this Agreement. In the event that
after  payment and  distribution  of any amount by  Administrative  Agent to the
Lenders, any Lender or third party, including Borrower, any creditor of Borrower
or a trustee in bankruptcy,  recovers from Administrative Agent any amount found
to  have  been  wrongfully  paid  to   Administrative   Agent  or  disbursed  by
Administrative  Agent to the Lenders,  then the Lenders,  in proportion to their
respective Pro Rata Shares,  shall reimburse  Administrative  Agent for all such
amounts.  Notwithstanding  the  foregoing,  Administrative  Agent  shall  not be
obligated to advance  Liabilities  and Costs and may require the deposit by each
Lender of its Pro Rata Share of any material  Liabilities  and Costs  reasonably
anticipated by Administrative Agent before they are incurred, made or payable.

                  10.8 Administrative  Agent  Individually.  With respect to its
Pro Rata Share of the  Commitment  and the Advances  made by it,  Administrative
Agent shall have and may  exercise the same rights and powers  hereunder  and is
subject to the same  obligations  and liabilities as and to the extent set forth
herein  for any  other  Lender.  Administrative  Agent  and any  Lender  and its
Affiliates may accept deposits from, lend money to, and generally  engage in any
kind of banking, trust or other business with the REIT, Borrower or any of their
respective  Affiliates  as if it were not  acting as  Administrative  Agent or a
Lender pursuant hereto.

                  10.9   Successor    Administrative   Agent;   Resignation   of
Administrative  Agent; Removal of Administrative Agent. (a) Administrative Agent
may resign from the performance of all its functions and duties hereunder at any
time by giving at least thirty (30) Business  Days' prior written  notice to the
Lenders and Borrower,  and shall automatically cease to be Administrative  Agent
hereunder  in the event a petition  in  bankruptcy  shall be filed by or against

                                      -49-

<PAGE>

Administrative  Agent or the Federal Deposit Insurance  Corporation or any other
Governmental   Authority  shall  assume  control  of  Administrative   Agent  or
Administrative  Agent's  interests  under  this  Agreement  and the  other  Loan
Documents.  Further, the Requisite Lenders (other than Administrative Agent) may
remove Administrative Agent at any time for good cause by giving at least thirty
(30) Business Days' prior written notice to Administrative  Agent,  Borrower and
all other  Lenders.  Such  resignation  or removal  shall take  effect  upon the
acceptance by a successor Administrative Agent of appointment pursuant to clause
(b) or (c).

                  (b) Upon any such  notice  of  resignation  by or  removal  of
Administrative   Agent,   the  Requisite   Lenders  shall  appoint  a  successor
Administrative  Agent which appointment  shall be subject to Borrower's  consent
(other  than upon the  occurrence  and  during the  continuance  of any Event of
Default),  which shall not be  unreasonably  withheld or delayed.  Any successor
Administrative  Agent must be a Lender (i) the senior debt  obligations of which
(or such Lender's parent's senior unsecured debt obligations) are rated not less
than Baa-2 by Moody's Investors Service, Inc. or a comparable rating by a rating
agency  acceptable to the  Requisite  Lenders and (ii) which has total assets in
excess of Ten Billion Dollars  ($10,000,000,000).  Such successor Administrative
Agent shall  separately  confirm in writing with  Borrower the fee to be paid to
such Administrative Agent pursuant to Section 2.5(c).

                  (c) If a successor Administrative Agent shall not have been so
appointed  within said thirty (30) Business Day period,  the retiring or removed
Administrative  Agent,  with  the  consent  of  Borrower  (other  than  upon the
occurrence and during the continuance of any Event of Default)(which  may not be
unreasonably withheld or delayed), shall then appoint a successor Administrative
Agent who shall meet the requirements  described in subsection (b) above and who
shall serve as  Administrative  Agent until such time,  if any, as the Requisite
Lenders, with the consent of Borrower (other than upon the occurrence and during
the  continuance  of any Event of Default),  appoint a successor  Administrative
Agent as provided above.

                  10.10 Consent and Approvals. (a) In addition to any other term
or provision  of this  Agreement  which  requires the consent or approval of, or
other action by, the  Requisite  Lenders,  each  consent,  approval,  amendment,
modification or waiver  specifically  enumerated in this Section  10.10(a) shall
require the consent of the Requisite Lenders:

                    (i)  Approval of any material  amendment  of  organizational
               documents (Section 7.2); -----------

                    (ii)  Approval of certain  changes in the senior  management
               (Section 7.4); -----------

                    (iii)  Acceleration  following an Event of Default  (Section
               9.2(a))  or  rescission  of  such   acceleration   --------------
               (Section 9.3);

                    (iv)  Approval of the exercise of rights and remedies  under
               the  Loan  Documents  following  an  Event  of  Default  (Section
               9.2(a)); --------------

                    (v) Approval of a change in the method of calculation of any
               financial  covenants,  standards or terms as a result of a change
               in GAAP (Section 11.3); and ------------

                    (vi) Except as referred to in subsection (b) below, approval
               of any amendment,  modification or termination of this Agreement,
               or waiver of any provision herein.

                  (b) Each consent, approval, amendment,  modification or waiver
specifically  enumerated  in Section  11.4 shall  require the consent of all the
Lenders.

                  (c) In addition to the required consents or approvals referred
to in  subsection  (a)  above,  Administrative  Agent  may at any  time  request
instructions  from  Requisite  Lenders  with respect to any actions or approvals
which,  by the  terms  of  this  Agreement  or of any  of  the  Loan  Documents,
Administrative  Agent is  permitted  or  required  to take or to  grant  without
instructions  from  Lenders and if such  instructions  are  promptly  requested,
Administrative  Agent shall be  absolutely  entitled to refrain  from taking any
action  or to  withhold  any  approval  and  shall  not be under  any  liability
whatsoever to any Person for  refraining  from taking any action or  withholding
any approval under any of the Loan  Documents  until it shall have received such
instructions  from the Requisite  Lenders.  Without  limiting the foregoing,  no
Lender shall have any right of action whatsoever against Administrative Agent as
a result of  Administrative  Agent acting or  refraining  from acting under this
Agreement,   or  any  of  the  other  Loan  Documents  in  accordance  with  the
instructions  of the Requisite  Lenders or, where  applicable,  all the Lenders.

                                      -50-

<PAGE>

Administrative  Agent  shall  promptly  notify  each Lender at any time that the
Requisite  Lenders have instructed  Administrative  Agent to act or refrain from
acting pursuant hereto.

                  (d) Each Lender agrees that any action taken by Administrative
Agent  at the  direction  or  with  the  consent  of the  Requisite  Lenders  in
accordance  with the provisions of this Agreement or any Loan Document,  and the
exercise by  Administrative  Agent at the  direction  or with the consent of the
Requisite Lenders of the powers set forth herein or therein,  together with such
other powers as are  reasonably  incidental  thereto,  shall be  authorized  and
binding  upon all the Lenders,  except for actions  specifically  requiring  the
approval of all the Lenders. All communications from Administrative Agent to the
Lenders requesting Lenders' determination,  consent, approval or disapproval (i)
shall be given in the form of a written  notice to each  Lender,  (ii)  shall be
accompanied  by  a  description  of  the  matter  or  thing  as  to  which  such
determination,  approval,  consent or disapproval is requested,  or shall advise
each Lender  where such  matter or thing may be  inspected,  or shall  otherwise
describe the matter or issue to be resolved,  (iii) shall include, if reasonably
requested by a Lender and to the extent not previously  provided to such Lender,
written   materials  and  a  summary  of  all  oral   information   provided  to
Administrative  Agent  by  Borrower  in  respect  of the  matter  or issue to be
resolved,  and (iv) shall include  Administrative  Agent's recommended course of
action or determination  in respect  thereof.  Each Lender shall reply promptly,
but in any event  within ten (10)  Business  Days (the "Lender  Reply  Period").
Unless a Lender  shall  give  written  notice to  Administrative  Agent  that it
objects to the recommendation or determination of Administrative Agent (together
with a written  explanation  of the reasons  behind such  objection)  within the
Lender  Reply  Period,  such  Lender  shall be  deemed  to have  approved  of or
consented to such  recommendation  or determination  and Borrower and each other
Lender  may  rely on such  approval  as if  given.  With  respect  to  decisions
requiring   the  approval  of  the   Requisite   Lenders  or  all  the  Lenders,
Administrative  Agent  shall  submit its  recommendation  or  determination  for
approval  of or  consent  to such  recommendation  or  determination  to all the
Lenders and upon  receiving  the required  approval or consent  shall follow the
course of action or determination  recommended to the Lenders by  Administrative
Agent or such other course of action recommended by the Requisite  Lenders,  and
each  non-responding  Lender  shall  be  deemed  to  have  concurred  with  such
recommended course of action.

                  10.11  Certain  Agency  Provisions  Relating  to  Enforcement.
Should   Administrative   Agent  (i)   employ   counsel   for  advice  or  other
representation (whether or not any suit has been or shall be filed) with respect
to any of the Loan Documents, or (ii) commence any proceeding or in any way seek
to enforce its rights or remedies under the Loan  Documents,  each Lender,  upon
demand therefor from time to time,  shall contribute its share (based on its Pro
Rata Share) of the reasonable  costs and/or expenses of any such advice or other
representation or enforcement, including, but not limited to, court costs, title
company  charges,  filing  and  recording  fees,  appraisers'  fees and fees and
expenses  of  attorneys  to the extent not  otherwise  reimbursed  by  Borrower;
provided that Administrative Agent shall not be entitled to reimbursement of its
attorneys'  fees and expenses  incurred in  connection  with the  resolution  of
disputes between  Administrative  Agent and other Lenders unless  Administrative
Agent shall be the prevailing  party in any such dispute.  Any loss of principal
and/or  interest  resulting  from any  Event of  Default  shall be shared by the
Lenders in accordance  with their  respective Pro Rata Shares.  It is understood
and agreed that in the event  Administrative Agent determines it is necessary to
engage  counsel for the  Lenders  from and after the  occurrence  of an Event of
Default, said counsel shall be selected by Administrative Agent.

                  10.12 Ratable Sharing.  Subject to Sections 10.3 and 10.4, the
Lenders agree among  themselves that (i) with respect to all amounts received by
them which are applied to the payment of the Obligations,  equitable  adjustment
will be made so that,  in effect,  all such  amounts  will be shared  among them
ratably in accordance with their Pro Rata Shares,  whether received by voluntary
payment,  by counterclaim or cross action or by the enforcement of any or all of
the  Obligations,  (ii) if any of them  shall  by  voluntary  payment  or by the
exercise  of any  right of  counterclaim  or  otherwise,  receive  payment  of a
proportion  of the  aggregate  amount  of the  Obligations  held by it  which is
greater than its Pro Rata Share of the  payments on account of the  Obligations,
the one  receiving  such excess  payment  shall  purchase,  without  recourse or
warranty,  an undivided interest and participation  (which it shall be deemed to
have done  simultaneously  upon the receipt of such payment) in such Obligations
owed to the others so that all such recoveries with respect to such  Obligations
shall be applied  ratably in  accordance  with their Pro Rata Shares;  provided,
that if all or part of such excess payment  received by the purchasing  party is
thereafter  recovered  from  it,  those  purchases  shall be  rescinded  and the
purchase prices paid for such participations  shall be returned to that party to
the extent necessary to adjust for such recovery, but without interest except to
the extent the purchasing  party is required to pay interest in connection  with
such  recovery.  Borrower  agrees that any Lender so purchasing a  participation
from another  Lender  pursuant to this Section 10.12 may, to the fullest  extent
permitted  by law,  exercise  all its  rights of  payment  with  respect to such
participation as fully as if such Lender were the direct creditor of Borrower in

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<PAGE>

the amount of such participation.  No Lender shall exercise any setoff, banker's
lien or other  similar  right in respect to any  Obligations  without  the prior
written approval by Administrative Agent.

                  10.13 Delivery of Documents.  Administrative  Agent shall,  as
soon as reasonably practicable, distribute to each Lender at its primary address
set forth on the appropriate counterpart signature page hereof, or at such other
address as a Lender may request in writing, (i) copies of all documents to which
such  Lender  is a party or of which  such  Lender  is a  beneficiary,  (ii) all
documents of which  Administrative  Agent receives copies from Borrower pursuant
to  Sections  5.1 and 11.6,  (iii)  all other  documents  or  information  which
Administrative Agent is required to send to the Lenders pursuant to the terms of
this   Agreement,   (iv)  all  other   information  or  documents   received  by
Administrative  Agent at the request of any Lender, and (v) all notices received
by  Administrative  Agent  pursuant to Section 5.2. In addition,  within fifteen
(15)  Business  Days after  receipt  of a request  in writing  from a Lender for
written  information or documents provided by or prepared by Borrower,  the REIT
or any  Consolidated  Entity,  Administrative  Agent shall  deliver such written
information or documents to such requesting Lender if  Administrative  Agent has
possession  of  such  written  information  or  documents  in  its  capacity  as
Administrative Agent or as a Lender.

                  10.14 Notice of Events of Default.  Administrative Agent shall
not be deemed to have  knowledge or notice of the  occurrence  of any  Unmatured
Event of Default or Event of Default  (other than  nonpayment of principal of or
interest on the Advances)  unless  Administrative  Agent has received  notice in
writing  from a Lender  or  Borrower  describing  such  event or  condition  and
expressly  stating that such notice is a notice of an Unmatured Event of Default
or Event of Default.  Should  Administrative  Agent  receive  such notice of the
occurrence  of an  Unmatured  Event of  Default or Event of  Default,  or should
Administrative  Agent send  Borrower a notice of  Unmatured  Event of Default or
Event of Default,  Administrative  Agent shall  promptly give notice  thereof to
each Lender.  If any individual  employed by any Lender who is  responsible  for
managing,  or otherwise  involved in, the  relationship  between such Lender and
Borrower in  connection  with this  Agreement or such Lender and  Administrative
Agent in connection with this Agreement,  has or acquires actual knowledge of an
Unmatured Event of Default or Event of Default,  such Lender shall promptly give
written notice thereof to Administrative Agent.

                  10.15 Syndication  Agent.  Notwithstanding  anything contained
herein which may be construed to the contrary,  the Syndication  Agent shall not
exercise  any  of  the  rights  or  have  any  of  the  responsibilities  of the
Administrative  Agent hereunder,  or any other rights or responsibilities  other
than its rights and responsibilities as Lender hereunder.

                                   ARTICLE 11
                                   ----------

                                  MISCELLANEOUS
                                  -------------

                  11.1     Expenses.

                  (a)   Generally.   Borrower   agrees  to  pay,  or   reimburse
Administrative Agent for, within seven (7) days after receipt of written demand,
all of Administrative  Agent's external audit, legal,  appraisal,  valuation and
investigation  expenses and for all other reasonable costs and expenses of every
type and nature (including,  without limitation, the fees and charges of outside
appraisers and reasonable fees,  expenses and  disbursements  of  Administrative
Agent's internal appraisers,  environmental  advisors or legal counsel) incurred
by  Administrative  Agent at any time (whether prior to, on or after the date of
this  Agreement)  in  connection  with (i) its own  audit and  investigation  of
Borrower and the REIT; (ii) the  negotiation,  preparation and execution of this
Agreement  (including,   without  limitation,   the  satisfaction  or  attempted
satisfaction  of any of the  conditions  set forth in Article  3), and the other
Loan Documents and the making of the Advances; (iii) review and investigation of
Real Property which is proposed for inclusion within the  Unencumbered  Pool and
Unencumbered  Assets within the Unencumbered  Pool; (iv)  administration of this
Agreement,  the  other  Loan  Documents  and the  Advances,  including,  without
limitation, consultation with attorneys in connection therewith; (v) syndication
of,  assignments  of and  participations  in this  Agreement  and the other Loan
Documents;  and (vi) the  protection,  collection or  enforcement  of any of the
Obligations.

                  (b) After Event of Default. Borrower further agrees to pay, or
reimburse Administrative Agent and the Lenders, for all reasonable out-of-pocket
costs and expenses,  including,  without limitation,  the reasonable  attorneys'
fees and disbursements of one law firm incurred by  Administrative  Agent or the
Lenders after the occurrence  and during the  continuance of an Event of Default
(i) in enforcing  any  Obligation  or exercising or enforcing any other right or
remedy available by reason of such Event of Default; (ii) in connection with any

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<PAGE>

refinancing  or  restructuring  of the credit  arrangements  provided under this
Agreement  in the nature of a  "work-out"  or in any  insolvency  or  bankruptcy
proceeding;  (iii) in commencing,  defending or intervening in any litigation or
in filing a petition,  complaint, answer, motion or other pleadings in any legal
proceeding relating to Borrower or the REIT and related to or arising out of the
transactions  contemplated hereby; or (iv) in taking any other action in or with
respect to any suit or proceeding (whether in bankruptcy or otherwise).

                  11.2 Indemnity.  Borrower  further agrees to defend,  protect,
indemnify and hold harmless  Administrative  Agent, each and all of the Lenders,
each  of  their  respective  Affiliates  and  each of the  respective  officers,
directors,  employees,  agents,  attorneys and consultants  (including,  without
limitation,  those  retained in connection  with the  satisfaction  or attempted
satisfaction  of any of the  conditions  set forth in  Article 3) of each of the
foregoing  (collectively  called the "Indemnitees") from and against any and all
Liabilities  and Costs  imposed  on,  incurred  by,  or  asserted  against  such
Indemnitees  (whether  based on any  federal  or state  laws or other  statutory
regulations,  including, without limitation,  securities and commercial laws and
regulations,  under  common  law  or in  equity,  and  based  upon  contract  or
otherwise,  including  any  liability  and  costs  arising  as  a  result  of  a
"prohibited transaction" under ERISA to the extent arising from or in connection
with the past,  present or future  operations  of the REIT or  Borrower or their
respective predecessors in interest) in any manner relating to or arising out of
this  Agreement or the other Loan  Documents,  or any act,  event or transaction
related or attendant  thereto,  the making of and  participation in the Advances
and the  management of the Advances,  or the use or intended use of the proceeds
of the Advances (collectively,  the "Indemnified Matters");  provided,  however,
that Borrower  shall have no obligation to an Indemnitee  hereunder with respect
to (a) matters for which such Indemnitee has been compensated pursuant to or for
which an exemption is provided in Section 2.4(g) or any other  provision of this
Agreement, and (b) Indemnified Matters to the extent caused by or resulting from
the willful misconduct or gross negligence of that Indemnitee,  as determined by
a court  of  competent  jurisdiction.  To the  extent  that the  undertaking  to
indemnify,  pay and hold  harmless  set forth in the  preceding  sentence may be
unenforceable  because it is  violative  of any law or public  policy,  Borrower
shall  contribute  the maximum  portion which it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified  Matters
incurred by the Indemnitees.

                  11.3  Change  in   Accounting   Principles   and  "Funds  from
Operations"  Definition.  Except as otherwise provided herein, if any changes in
accounting  principles  from those used in the  preparation  of the most  recent
financial  statements  delivered to  Administrative  Agent pursuant to the terms
hereof  are  hereafter   required  or  permitted  by  the  rules,   regulations,
pronouncements and opinions of the Financial  Accounting  Standards Board or the
American  Institute of Certified  Public  Accountants (or successors  thereto or
agencies  with similar  functions)  and are adopted by the REIT or Borrower with
the  agreement of its  Accountants  and such  changes  result in a change in the
method of  calculation  of any of the  financial  covenants,  standards or terms
found herein,  the parties hereto agree to enter into  negotiations  in order to
amend such  provisions so as to equitably  reflect such changes with the desired
result that the criteria for evaluating the financial  condition of the REIT and
the  Consolidated  Entities  shall be the same  after  such  changes  as if such
changes had not been made; provided,  however, that no change in GAAP that would
affect the method of calculation of any of the financial covenants, standards or
terms  shall be given  effect in such  calculations  until such  provisions  are
amended,  in a manner  satisfactory to the Requisite Lenders, to so reflect such
change in accounting  principles.  The definition of "Funds from Operations" set
forth in  Article 1 is based  upon the  definition  of "Funds  From  Operations"
promulgated  by the National  Association of Real Estate  Investment  Trusts and
effective  as of  January  1,  2000 (the  "NAREIT  Definition").  If the  NAREIT
Definition  is modified  after the date of this  Agreement,  the parties  hereto
agree to enter into  negotiations if any party so requests in order to amend the
definition  of "Funds from  Operations"  set forth in this  Agreement to make it
consistent  with the modified  NAREIT  Definition;  provided,  however,  that no
change in such definition of "Funds from Operations" shall be given effect until
such definition is amended, in a manner satisfactory to Requisite Lenders, to so
reflect such  modification in the NAREIT  Definition of "Funds From Operations";
and  provided  further,  however,  that  if the  effect  of such  change  in the
definition of "Funds from Operations" is to restrict the amount of distributions
permitted  under  this  Agreement  to  amounts  less than what are  required  to
maintain  the REIT's  status as a real estate  investment  trust under the Code,
then Borrower shall be permitted to make the minimum  distribution  necessary to
maintain the REIT's status as a real estate  investment  trust under the Code so
long as such  distribution  would  have been  permitted  under the  "Funds  from
Operations" definition in effect as of the Closing Date.

                  11.4 Amendments and Waivers.  (a) No amendment or modification
of any  provision  of this  Agreement  shall be  effective  without  the written
agreement of Requisite  Lenders  (after  notice to all the Lenders) and Borrower
(except for  amendments  to Section  10.4(a) which do not require the consent of
Borrower);  provided  that any  amendment or waiver to any covenant set forth in
Articles 6, 7 and 8 of the Second Amended and Restated  Credit  Agreement  shall
automatically  amend or waive the related covenant herein and shall be effective
as of the effective  date of such  amendment to the Second  Amended and Restated

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<PAGE>

Credit Agreement without the consent of the Lenders or the Borrower,  and (b) no
termination  or waiver of any  provision  of this  Agreement,  or consent to any
departure by Borrower  therefrom (except as expressly provided in Section 2.4(e)
with respect to waivers of late fees),  shall in any event be effective  without
the  written  concurrence  of the  Requisite  Lenders  (after  notice to all the
Lenders),  which the Requisite Lenders shall have the right to grant or withhold
at  their  sole   discretion,   except  that  (A)  the   following   amendments,
modifications  or waivers shall require the consent of Requisite  Lenders (which
Requisite Lenders must include LCPI, as a Lender):

                           (i) changing the definitions of "Total  Liabilities,"
         "Gross Asset Value,"  "Unencumbered Asset Value,"  "Unencumbered Pool,"
         or "Debt",  or the  definition  of any defined  term used in any of the
         foregoing definitions; and

(B) the following amendments, modifications or waivers shall require the consent
of all the Lenders:

                    (i) increasing  the Commitment  and/or any Lender's Pro Rata
               Share of the Commitment;

                    (ii) changing the principal  amount or final maturity of the
               Advances or  otherwise  changing  the  Maturity  Date,  except as
               otherwise  provided  in, and subject to the terms and  conditions
               of, Section 2.1(e);

                    (iii)  reducing  the  interest   rates   applicable  to  the
               Advances;

                    (iv)  reducing  the  rates on which  fees  payable  pursuant
               hereto are determined;

                    (v)  forgiving or delaying any amount  payable or receivable
               under Article 2 (other than late fees in accordance  with Section
               2.4(e));

                    (vi) changing the definition of "Requisite  Lenders" or "Pro
               Rata Shares";

                    (vii) changing any provision contained in this Section 11.4;

                    (viii) releasing any obligor under any Loan Document, unless
               such release is  otherwise  required or permitted by the terms of
               this Agreement;

                    (ix) amending or otherwise modifying the Guaranty; or

                    (x)  consenting  to  assignment  by  Borrower  of all of its
               duties and Obligations hereunder pursuant to Section 11.14.

No amendment, modification, termination or waiver of any provision of Article 10
or any other  provision  referring  to  Administrative  Agent shall be effective
without  the  written  concurrence  of  Administrative  Agent,  but only if such
amendment, modification,  termination or waiver alters the obligations or rights
of  Administrative  Agent.  Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. No notice
to or demand on Borrower in any case shall entitle Borrower to any other further
notice or demand in similar or other circumstances. Any amendment, modification,
termination,  waiver or consent  effected in  accordance  with this Section 11.4
shall be binding on each  assignee,  transferee  or recipient of  Administrative
Agent's or any Lender's Pro Rata Share of the Commitment under this Agreement or
the Advances at the time outstanding.  Borrower shall be entitled to rely on any
amendment  or  waiver  executed  by the  Administrative  Agent on  behalf of the
Lenders   provided  that   Administrative   Agent  certifies  to  Borrower  that
Administrative  Agent  obtained the  approvals or consents  required  under this
Agreement of the Requisite Lender or all the Lenders, as the case may be.

                  11.5 Independence of Covenants.  All covenants hereunder shall
be given  independent  effect so that if a particular action or condition is not
permitted  by any of such  covenants,  the fact that it would be permitted by an
exception to, or be otherwise  within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default or Unmatured Event of Default if
such  action  is  taken or  condition  exists,  and if a  particular  action  or
condition is expressly permitted under any covenant, unless expressly limited to
such  covenant,  the fact  that it would  not be  permitted  under  the  general
provisions  of  another  covenant  shall not  constitute  an Event of Default or
Unmatured Event of Default if such action is taken or condition exists.

                                      -54-

<PAGE>

                  11.6  Notices  and  Delivery  Unless  otherwise   specifically
provided herein, any consent,  notice or other communication  herein required or
permitted  to be  given  shall  be in  writing  and  may be  personally  served,
telecopied or sent by courier  service or United States mail and shall be deemed
to have been given when delivered in person or by courier service,  upon receipt
of a telecopy  (or on the next  Business  Day if such  telecopy is received on a
non-Business Day or after 5:00 p.m. on a Business Day) or four (4) Business Days
after deposit in the United States mail  (registered or certified,  with postage
prepaid and properly  addressed).  Notices to  Administrative  Agent pursuant to
Article 2 shall not be effective until received by Administrative Agent. For the
purposes  hereof,  the addresses of the parties hereto (until notice of a change
thereof is  delivered  as provided in this  Section  11.6) shall be as set forth
below each party's name on the signature pages hereof,  or, as to each party, at
such other address as may be designated by such party in a written notice to all
of the other  parties.  All  deliveries to be made to  Administrative  Agent for
distribution to the Lenders shall be made to Administrative Agent at the address
specified for notice on the signature page hereto and in addition,  a sufficient
number of copies of each such  delivery  shall be  delivered  to  Administrative
Agent for delivery to each Lender at the address specified for deliveries on the
signature   page  hereto  or  such  other   address  as  may  be  designated  by
Administrative Agent in a written notice.

                  11.7 Survival of Warranties,  Indemnities and Agreements.  All
agreements,  representations,  warranties and  indemnities  made or given herein
shall survive the  execution  and delivery of this  Agreement and the other Loan
Documents  and the making  and  repayment  of the  Advances  hereunder  and such
indemnities shall survive termination hereof.

                  11.8 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure  or delay  on the part of  Administrative  Agent  or any  Lender  in the
exercise of any power,  right or privilege under any of the Loan Documents shall
impair such power,  right or  privilege  or be  construed  to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power,  right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.  All rights and remedies existing under the
Loan  Documents  are  cumulative  to and not exclusive of any rights or remedies
otherwise available.

                  11.9 Payments Set Aside.  To the extent that Borrower  makes a
payment or payments to  Administrative  Agent or the Lenders,  or Administrative
Agent or the  Lenders  exercise  their  rights of  setoff,  and such  payment or
payments or the  proceeds of such  setoff or any part  thereof are  subsequently
invalidated,  declared  to be  fraudulent  or  preferential,  set  aside  and/or
required  to be repaid to a  trustee,  receiver  or any  other  party  under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery,  the Obligation or part thereof originally  intended to
be  satisfied,  and all  rights and  remedies  therefor,  shall be  revived  and
continued  in full force and effect as if such payment had not been made or such
setoff had not occurred.

                  11.10  Severability.  In case any  provision in or  obligation
under this  Agreement or the other Loan Documents  shall be invalid,  illegal or
unenforceable in any jurisdiction,  the validity, legality and enforceability of
the remaining  provisions or obligations,  or of such provision or obligation in
any other  jurisdiction,  shall not in any way be affected or impaired  thereby,
provided,  however,  that if the rates of interest or any other  amount  payable
hereunder,  or the collectability thereof, are declared to be or become invalid,
illegal or unenforceable, the Lenders' obligations to make Advances shall not be
enforceable.

                  11.11  Headings.   Section  headings  in  this  Agreement  are
included  herein for  convenience  of reference  only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.

                  11.12 Governing Law; Waiver.  THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND  INTERPRETED IN ACCORDANCE  WITH, THE LAWS OF THE
STATE OF NEW YORK.

                  11.13  Limitation  of  Liability.  To the extent  permitted by
applicable law, no claim may be made by Borrower, any Lender or any other Person
against  Administrative  Agent  or any  Lender,  or the  affiliates,  directors,
officers,  employees,  attorneys  or  agents  of any of them,  for any  special,
indirect,  consequential  or punitive damages in respect of any claim for breach
of contract or any other  theory of  liability  arising out of or related to the
transactions  contemplated  by this  Agreement,  or any act,  omission  or event
occurring in  connection  therewith;  and Borrower and each Lender hereby waive,
release and agree not to sue upon any claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.

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<PAGE>

                  11.14  Successors  and Assigns.  This  Agreement and the other
Loan  Documents  shall be binding upon the parties  hereto and their  respective
successors  and assigns and shall inure to the benefit of the parties hereto and
the successors and permitted  assigns of  Administrative  Agent and the Lenders.
The terms and  provisions  of this  Agreement  shall inure to the benefit of any
permitted  assignee or transferee of the Advances and the Pro Rata Shares of the
Commitment  of the  Lenders  under  this  Agreement,  and in the  event  of such
transfer  or  assignment,  the  rights  and  privileges  herein  conferred  upon
Administrative Agent and the Lenders shall automatically extend to and be vested
in such transferee or assignee,  all subject to the terms and conditions hereof.
Borrower's  rights and interests  hereunder and under the other Loan  Documents,
and  Borrower's  duties  and  Obligations  hereunder  and under  the other  Loan
Documents, shall not be assigned or otherwise transferred without the consent of
all the Lenders.

                  11.15 Consent to Jurisdiction  and Service of Process;  Waiver
of Jury Trial. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER WITH RESPECT TO
THIS  AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE, AND ALL JUDICIAL  PROCEEDINGS
BROUGHT BY BORROWER  WITH RESPECT TO THIS  AGREEMENT OR ANY OTHER LOAN  DOCUMENT
SHALL BE, BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION HAVING
SITUS  WITHIN THE  BOUNDARIES  OF THE FEDERAL  COURT  DISTRICT  OF THE  SOUTHERN
DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,  BORROWER
ACCEPTS,  FOR  ITSELF  AND IN  CONNECTION  WITH ITS  PROPERTIES,  GENERALLY  AND
UNCONDITIONALLY,  THE  JURISDICTION  OF THE AFORESAID  COURTS,  AND  IRREVOCABLY
AGREES TO BE BOUND BY ANY FINAL JUDGMENT  RENDERED  THEREBY FROM WHICH NO APPEAL
HAS BEEN TAKEN OR IS AVAILABLE.  BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED  COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,  POSTAGE PREPAID,
TO ITS  NOTICE  ADDRESS  SPECIFIED  ON THE  SIGNATURE  PAGES  HEREOF.  BORROWER,
ADMINISTRATIVE  AGENT AND THE LENDERS IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY
ACTION OR PROCEEDING  WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
AND (B) ANY OBJECTION (INCLUDING WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING
OF VENUE OR BASED ON THE  GROUNDS OF FORUM NON  CONVENIENS)  WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING  WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY  JURISDICTION  SET FORTH ABOVE.
NOTHING  HEREIN  SHALL  AFFECT THE RIGHT TO SERVE  PROCESS  IN ANY OTHER  MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ADMINISTRATIVE  AGENT OR ANY LENDER
TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.

                  11.16  Counterparts;   Effectiveness;   Inconsistencies.  This
Agreement and any  amendments,  waivers,  consents or supplements  hereto may be
executed in counterparts,  each of which when so executed and delivered shall be
deemed an original,  but all of which, taken together,  shall constitute but one
and the same  instrument.  This Agreement shall become  effective when Borrower,
the initial  Lenders and  Administrative  Agent have duly executed and delivered
signature  pages of this  Agreement  to each other  (delivery by Borrower to the
Lenders and by any Lender to Borrower  and any other Lender being deemed to have
been made by delivery to Administrative Agent).  Administrative Agent shall send
written  confirmation  of the  Closing  Date to Borrower  and each other  Lender
promptly following the occurrence thereof.  This Agreement and each of the other
Loan Documents shall be construed to the extent  reasonable to be consistent one
with  the  other,  but to the  extent  that the  terms  and  conditions  of this
Agreement are actually and directly  inconsistent  with the terms and conditions
of any other Loan Document, this Agreement shall govern.

                  11.17   Performance  of  Obligations.   Borrower  agrees  that
Administrative  Agent may, but shall have no obligation  to, make any payment or
perform any act required of Borrower  under any Loan Document which Borrower has
failed to make or do.

                  11.18 Construction.  The parties to this Agreement acknowledge
that each party and its counsel have  reviewed and revised  this  Agreement  and
that the normal rule of  construction  to the effect that any ambiguities are to
be  resolved   against  the  drafting   party  shall  not  be  employed  in  the
interpretation of this Agreement or any amendments or exhibits hereto.

                  11.19 Entire  Agreement.  This Agreement,  taken together with
all of the  other  Loan  Documents  and all  certificates  and  other  documents
delivered by Borrower to Administrative Agent, embodies the entire agreement and
supersede all prior agreements, written and oral, relating to the subject matter
hereof.

                                      -56-

<PAGE>

                  11.20   Assignments  and   Participations.   (a)  After  first
obtaining the approval of Administrative  Agent and Borrower  (provided that the
approval of Borrower  shall not be required upon the  occurrence  and during the
continuance of any Event of Default),  which approval shall not be  unreasonably
withheld  or delayed,  each Lender may assign to one or more banks or  financial
institutions,  all or a  portion  of  its  rights  and  obligations  under  this
Agreement (including, without limitation, all or a portion of its Pro Rata Share
of the Commitment  and the Advances  owing to it) and the other Loan  Documents;
provided, however, that (i) each such assignment shall be of a constant, and not
a varying,  percentage of the assigning  Lender's rights and  obligations  under
this  Agreement  and the  other  Loan  Documents,  and  such  percentage  of the
assigning  Lender's  rights and  obligations  shall be the same  percentage with
respect to both such  Lender's Pro Rata Share of the  Commitment  and  Advances,
(ii) the  aggregate  amount  of the Pro  Rata  Share  of the  Commitment  of the
assigning Lender being assigned pursuant to each such assignment  (determined as
of the date of the Assignment and  Assumption  with respect to such  assignment)
shall in no event be less than Ten Million Dollars ($10,000,000) and shall be an
integral multiple of One Million Dollars ($1,000,000), (iii) the parties to each
such  assignment  shall  execute and deliver to  Administrative  Agent,  for its
approval and acceptance, an Assignment and Assumption, (iv) Administrative Agent
shall  receive  from the  assignor a processing  fee of Three  Thousand  Dollars
($3,000)  and (v) if such  assignment  is less than all of the Pro Rata Share of
the Commitment of the assigning Lender,  after giving effect to such assignment,
the  aggregate  amount of the Pro Rata Share of the  Commitment of the assigning
Lender shall in no event be less than  Fifteen  Million  Dollars  ($15,000,000).
Unless  Administrative  Agent or Borrower  gives written notice to the assigning
Lender  that it  objects to the  proposed  assignment  (together  with a written
explanation of the reasons behind such objection)  within ten (10) Business Days
following receipt of the assigning  Lender's written request for approval of the
proposed assignment, Administrative Agent or Borrower, as the case may be, shall
be deemed to have  approved  such  assignment.  Upon such  execution,  delivery,
approval and acceptance, and upon the effective date specified in the applicable
Assignment and Assumption,  (X) the assignee  thereunder shall be a party hereto
and, to the extent that rights and  obligations  hereunder have been assigned to
it pursuant to such Assignment and  Assumption,  have the rights and obligations
of a Lender  hereunder,  and (Y) the assigning Lender  thereunder  shall, to the
extent that rights and  obligations  hereunder have been assigned by it pursuant
to such  Assignment and  Assumption,  relinquish its rights and be released from
its obligations under this Agreement.

                  (b) By executing and delivering an Assignment and  Assumption,
the assigning Lender thereunder and the assignee thereunder confirm to and agree
with each  other and the other  parties  hereto as  follows:  (i) other  than as
provided in such  Assignment  and  Assumption,  such  assigning  Lender makes no
representation  or warranty  and assumes no  responsibility  with respect to any
statements,  warranties or  representations  made in or in connection  with this
Agreement  or any other Loan  Document  or the  execution,  legality,  validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document or any other  instrument or document  furnished  pursuant  hereto;
(ii) such assigning  Lender makes no  representation  or warranty and assumes no
responsibility  with respect to the financial  condition of the REIT or Borrower
or the  performance  or  observance  by the  REIT or  Borrower  of any of  their
respective  obligations  under  any Loan  Document  or any other  instrument  or
document  furnished  pursuant hereto;  (iii) such assignee  confirms that it has
received  a copy  of this  Agreement,  together  with  copies  of the  financial
statements  referred to in Article 4 or  delivered  pursuant to Article 5 to the
date of such  assignment and such other Loan  Documents and other  documents and
information  as it has deemed  appropriate  to make its own credit  analysis and
decision to enter into such Assignment and Assumption;  (iv) such assignee will,
independently  and without reliance upon  Administrative  Agent,  such assigning
Lender or any other Lender and based on such  documents  and  information  as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee appoints and
authorizes  Administrative  Agent to take such action as Administrative Agent on
its behalf and to exercise  such powers under this  Agreement and the other Loan
Documents  as are  delegated  to  Administrative  Agent by the terms  hereof and
thereof,  together with such powers as are reasonably  incidental  thereto;  and
(vi) such assignee  agrees that it will perform in  accordance  with their terms
all of the  obligations  which by the terms of this Agreement are required to be
performed by it as a Lender.

                  (c)  Administrative  Agent  shall  maintain,  at  its  address
referred to on the counterpart signature pages hereof, a copy of each Assignment
and  Assumption  delivered  to and  accepted by it and shall  record in the Loan
Account  the names and  addresses  of each  Lender and the Pro Rata Share of the
Commitment  of, and principal  amount of the Advances owing to, such Lender from
time to time.  Borrower,  Administrative  Agent and the  Lenders  may treat each
Person whose name is recorded in the Loan Account as a Lender  hereunder for all
purposes of this Agreement.

                  (d) Upon its receipt of an Assignment and Assumption  executed
by an  assigning  Lender and an assignee  approved by  Administrative  Agent and

                                      -57-

<PAGE>

Borrower as provided in Section  11.20(a),  Administrative  Agent shall, if such
Assignment and Assumption  has been properly  completed and is in  substantially
the form of Exhibit A, (i) accept such  Assignment and  Assumption,  (ii) record
the  information  contained  therein in the Loan Account,  and (iii) give prompt
notice thereof to Borrower.  Upon request,  Borrower will execute and deliver to
Administrative Agent an appropriate  replacement  promissory note or replacement
promissory  notes in favor of each assignee (and  assignor,  if such assignor is
retaining  a  portion  of its Pro Rata  Share of the  Commitment  and  Advances)
reflecting such  assignee's  (and  assignor's) Pro Rata Share of the Commitment.
Upon execution and delivery of such replacement  promissory note(s) the original
promissory  note or notes  evidencing  all or a portion of the Pro Rata Share of
the  Commitment  and Advances  being  assigned shall be canceled and returned to
Borrower.

                  (e) Each Lender may sell  participations  to one or more banks
or other entities in or to all or a portion of its rights and obligations  under
this  Agreement  without  the  consent  of any  other  party  to this  Agreement
(including,  without  limitation,  all or a portion of its Pro Rata Share of the
Commitment and the Advances owing to it) and the other Loan Documents; provided,
however,  that (i) such Lender's  obligations  under this Agreement  (including,
without limitation,  its obligation to fund its Pro Rata Share of the Commitment
to Borrower  hereunder)  shall remain  unchanged,  (ii) such Lender shall remain
solely  responsible  to the other  parties  hereto for the  performance  of such
obligations, (iii) the participating banks or other financial institutions shall
not be a Lender hereunder for any purpose,  (iv) Borrower,  Administrative Agent
and the other  Lenders  shall  continue  to deal solely and  directly  with such
Lender in  connection  with such  Lender's  rights  and  obligations  under this
Agreement  and  with  regard  to any and all  payments  to be  made  under  this
Agreement,  (v) the participation interest shall be expressed as a percentage of
the  granting  Lender's Pro Rata Share of the  Commitment  as it then exists and
shall not restrict an increase in the  Commitment,  or in the granting  Lender's
Pro Rata Share of the  Commitment,  so long as the  amount of the  participation
interest  is not  affected  thereby  and (vi) the  consent of the holder of such
participation  interest  shall not be  required  for  amendments  or  waivers of
provisions of the Loan Documents and the holder of any such participation  shall
not be entitled to voting rights under their participation  agreement except for
voting  rights with  respect to (A)  extensions  of the  Maturity  Date;  or (B)
decreases in the interest rates or fees described in this Agreement.

                  (f) Borrower  will use  reasonable  efforts to cooperate  with
Administrative  Agent and the  Lenders  in  connection  with the  assignment  of
interests under this Agreement or the sale of participations herein.

                  (g) For  avoidance  of doubt,  the  parties to this  Agreement
acknowledge  that the  provisions  of this  Section  concerning  assignments  of
Advances and Notes relate only to absolute  assignments and that such provisions
do not prohibit  assignments  creating security  interests,  including,  without
limitation,  any pledge or  assignment by a Lender of any Advance or Note to any
Federal Reserve Bank in accordance  with  applicable law;  provided that no such
pledge or assignment shall release such Lender from its obligations  thereunder.
To facilitate any such pledge or assignment,  Administrative Agent shall, at the
request of such Lender,  enter into a letter  agreement with the Federal Reserve
Bank in  substantially  the form of the  exhibit to  Appendix  C to the  Federal
Reserve Bank of New York Operating Circular No. 12.

                  (h)    Anything   in   this    Agreement   to   the   contrary
notwithstanding,  any Lender  may  assign  all or any  portion of its rights and
obligations  under this  Agreement to another branch or Affiliate of such Lender
without  first  obtaining  the approval of  Administrative  Agent and  Borrower,
provided that (i) at the time of such assignment such Lender is not a Defaulting
Lender,  (ii) such  Lender  gives  Administrative  Agent and  Borrower  at least
fifteen  (15)  days'  prior  written  notice of any such  assignment,  (iii) the
parties to each such assignment  execute and deliver to Administrative  Agent an
Assignment and Assumption,  and (iv) Administrative Agent receives from assignor
a processing fee of Three Thousand Dollars ($3,000).

                  (i) No Lender  shall be permitted to assign or sell all or any
portion of its rights and  obligations  under this  Agreement to Borrower or any
Affiliate of Borrower.

                  (j) The  dissemination  or  disclosure  by any  Lender  to any
prospective assignee or participant of any confidential  information obtained by
Administrative  Agent or the Lenders pursuant to this Agreement or in connection
with the Advances is subject to the terms of Section 5.3.

                                      -58-

<PAGE>

                  IN WITNESS  WHEREOF,  this Agreement has been duly executed as
of the date set forth above.

BORROWER:                  ARDEN REALTY LIMITED
                           PARTNERSHIP, a Maryland limited partnership

                           By:  ARDEN REALTY, INC.,
                                      a Maryland corporation,
                                      Its sole general partner

                                      By ______________________
                                           Victor Coleman
                                           President and Chief Operating Officer

                           ADDRESS FOR NOTICE AND DELIVERY:

                           Arden Realty Limited Partnership
                           11601 Wilshire Boulevard, 4th Floor
                           Los Angeles, CA 90025-1740
                           Attention: Mr. Victor Coleman

                           Tel: (310) 966-2600
                           Fax: (310) 966-2699

<PAGE>

ADMINISTRATIVE AGENT                    LEHMAN COMMERCIAL PAPER INC., as
AND LENDER:                             Administrative Agent and Lender

                                        By:  _____________________________
                                               Name:
                                             Title:

                                        ADDRESS FOR NOTICE AND DELIVERY:

                                        Lehman Brothers Inc.
                                        3 World Financial Center
                                        200 Vesey Street, 12th Floor
                                        New York, NY  10285
                                        Attention:  Mr. Francis X. Gilhool

                                        Tel:  (212) 526-6970
                                        Fax:  (212) 526-0035

                                        DELIVERY OF DOCUMENTS UNDER
                                        SECTIONS 5.2 AND 11.6:
                                        ---------------------

                                        Hatfield Phillips
                                        Marquis Two Tower, Suite 2300
                                        285 Peachtree Center Ave
                                        Atlanta, Georgia 30303
                                        Attention: Mr. Beau Durham
                                        Ms. Jennifer Bean

                                        Tel:  (404) 420-5600
                                        Fax: (404) 480-5610

                                             with a copy to:

                                        Lehman Brothers Inc.
                                        3 World Financial Center
                                        200 Vesey Street, 12th Floor
                                        New York, NY  10285
                                        Attention: Mr. Tom Buffa

                                        Tel:  (212) 526-5153
                                        Fax:  (212) 526-0037

<PAGE>

                                  Schedule 1.1
                                  ------------

                         Pro Rata Shares of the Lenders

       Lender                    Pro Rata Share                 Amount
       ------                    --------------                 ------

       LCPI                                                     $75,000,000

       ALL LENDERS               100.00%                        $75,000,000

<PAGE>

                                  Schedule 2.2
                                  ------------

                Employees Authorized to Sign Notices of Borrowing
                -------------------------------------------------

Richard S. Ziman            Chairman and Chief Executive Officer

Victor J. Coleman           President and Chief Operating Officer

Daniel Bothe                Senior Vice President -- Finance

Richard Davis               Senior Vice President -- Chief Accounting Officer

<PAGE>

                                 Schedule 4.1(c)
                                 ---------------

                              Ownership of Borrower
                              ---------------------

<TABLE>
<CAPTION>

                                                                                                            Total Number of
Account Name                                                                                                Units @ 3/31/00
------------                                                                                                ---------------
<S>                                                                                                                  <C>

Hugh A. Coleman.......................................................................................................2,262
Victor J. Coleman ACF Alex S. Coleman U/CA/UTMA.......................................................................2,262
Jonathan M. Glaser....................................................................................................4,876
Highridge-Apollo Grand Plaza, L.P....................................................................................10,412
Jensen Trust.........................................................................................................17,598
David & Tina Thomas Trust............................................................................................21,329
Anaheim Properties LLC...............................................................................................28,000
Steve Layton.........................................................................................................29,296
Phil Beling..........................................................................................................35,750
Intercity Building Assoc.............................................................................................39,801
Allan Ziman TTEE FBO Todd Support Trust..............................................................................44,481
Allan Ziman TTEE FBO Jenna Support Trust.............................................................................44,481
The Michele Byer Trust...............................................................................................51,032
Hapsmith-Praxis Partners.............................................................................................55,805
Metropolitan Falls Partners..........................................................................................68,918
91 Freeway Partners..................................................................................................86,423
First Rexford Associates (Richard Ziman).............................................................................88,000
Coleman Enterprises..................................................................................................99,458
David and Susan Wilstein Family Trust-1989..........................................................................131,210
Leonard & Joyce Wilstein Revocable Trust of 1986....................................................................131,210
Ziman Realty Group Inc..............................................................................................136,674
Richard Ziman.......................................................................................................226,342
Montour Realty Associates...........................................................................................244,493
Arthur Gilbert & Rosaline Gilbert Trust.............................................................................266,869
Victor J. Coleman.................................................................................................  283,388
                                                                                                                  ---------

         TOTAL....................................................................................................2,150,370
                                                                                                                  =========
</TABLE>

<PAGE>

                                 Schedule 4.1(j)
                                 ---------------

                                   Litigation
                                   ----------

                                      None.

<PAGE>

                                 Schedule 4.1(s)
                                 ---------------

                              Environmental Matters
                              ---------------------

                                      None.

<PAGE>

                                 Schedule 4.1(v)
                                 ---------------

                              Management Agreements
                              ---------------------

                                      None.

<PAGE>

                                 Schedule 4.2(l)
                                 ---------------

                                  Benefit Plans
                                  -------------

Arden Realty 401(k) Plan and Trust,  pursuant to Agreement  dated  December 30,
1996, by and between Arden Realty Limited Partnership and Victor J. Coleman, as
Trustee

<PAGE>

<TABLE>
<CAPTION>
                                                        Schedule 8.5

                                                     Unencumbered Assets

Property                                         Address                                         City
--------                                         -------                                         ----
<S>                                              <C>                                              <C>
4811 Airport Plaza (Bldg. D)                     4811 Airport Plaza                              Long Beach
4900/10 Airport Plaza (F&G)                      4900/10 Airport Plaza                           Long Beach
Century Park Center                              9911 W Pico Blvd                                Los Angeles
Center Promenade                                 6477 Telephone Rd.                              Ventura
Sumitomo Bank Building                           15250 Ventura Blvd                              Sherman Oaks
4900 California (CA Twin Center)                 4900 California Ave                             Bakersfield
6800 Owensmouth                                  6800 Owensmouth Ave                             Canoga Park
10780 Santa Monica                               10780 Santa Monica Blvd                         Los Angeles
5000 Spring                                      5000 E. Spring Street                           Long Beach
9665 Wilshire                                    9665 Wilshire                                   Beverly Hills
Imperial Bank Tower                              701 B. Street                                   San Diego
Westwood Terrace                                 1640 Sepulveda Blvd                             Los Angeles
8383 Wilshire                                    8383 Wilshire Blvd                              Beverly Hills
Harbor Corporate Center                          19300 Hamilton Ave                              Gardena
Foremost Professional Plaza                      12396 World Trade Drive                         San Diego
Crown Cabot Financial                            28202 Cabot Road                                Laguna Niguel
1000 Town Center                                 1000 Town Center                                Oxnard
South Bay Tech.                                  680 & 690 Knox Avenue                           Torrance
Northpointe                                      6601 Center Drive West                          Los Angeles
Pennsfield Plaza                                 516 North Pennsfield Place                      Thousand Oaks
Rancho Plaza                                     60 & 100 Rancho Rd.                             Thousand Oaks
Thousand Oaks Plaza                              1655 East Thousand Oaks Blvd                    Thousand Oaks
Bernardo Regency                                 11545 West Bernardo Court                       Rancho Bernardo
Glendale Corporate Center                        425 East Colorado Street                        Glendale
City Center                                      17330, 17360, 17390 Brookhurst Str              Fountain Valley
World Savings                                    11601 Wilshire Boulevard                        West Los Angeles
Renaissance Court                                31416 W. Agoura Road                            Westlake
Wilshire Pacific Plaza                           12301 Wilshire Boulevard                        Brentwood
3901 Via Oro                                     3901 Via Oro                                    Long Beach
Tower Plaza I                                    27555 Ynez Rd                                   Temecula
HDS Plaza                                        268 West Hospitality                            San Bernardino
Calabasas Tech Center                            26528 Agoura Rd                                 Calabasas
Oceangate Tower                                  100 Oceangate                                   Long Beach
Lyons Plaza                                      23502/04 Lyons Ave                              Santa Clarita
Solar Drive Business Center                          Oxnard
91 Freeway Center                                    Artesia
5200 West Century                                5200 West Century Blvd                          Los Angeles
535 Brand                                        535 N. Brand Blvd                               Glendale
Whittier Financial                               15111 and 15141 E. Whittier Blvd                Whittier
299 N. Euclid                                    299 Euclid                                      Pasadena
1821 Dyer                                        1821 Dyer                                       Irvine
Beverly Sunset Medical                           9201 Sunset Boulevard                           West Hollywood
Westlake Gardens I                               2535 Townsgate Road                             Thousand Oaks
1501 Hughes Way                                  1501 Hughes Way                                 Long Beach
One Venture                                      1 Venture                                       Irvine
Lambert Office Plaza                             1800 E. Lambert Rd                              Brea
Skypark Office Plaza                             9325/9275 Skypark Ct                            San Diego
Sorrento Valley Science                          5510/50/90 Morehouse Dr                         San Diego
Waples Tech Center                               9591/9565 Waples St.                            San Diego
Chicago Ave Business Park                        3100/90 Chicago Ave                             Riverside
Ontario Airport Commerce Ctr. - Ind.             1910/20 South Archibald                         Ontario
Highlands I - Industrial                         40880 B County Center                           Temecula
Highlands II - Industrial                        40935 B County Center                           Temecula
Hunter Business - Industrial                     1110 1130 Palmyrita Ave                         Riverside
11075 Santa Monica                               11075 Santa Monica                              Santa Monica
Hillside Corporate Center                        555 Saint Charles Drive                         Thousand Oaks
Westlake Gardens II                              2555 Townsgate Road                             Westlake Village
6701 Center Drive                                6701 Center Drive                               Los Angeles
2001 Wilshire                                    2001 Wilshire Blvd                              Santa Monica

Subject To Satisfaction of Leasing Hurdles
------------------------------------------
Havengate Center                                 10350 Commerce Center                           Rancho Cucamonga
Centerlake Plaza                                 3401 Centerlake Dr.                             Ontario

</TABLE>SETTLEMENT AGREEMENT

         SETTLEMENT AGREEMENT ("Settlement  Agreement") among Horizon Healthcare
of  New  Jersey,   Inc.   ("Horizon")  f/k/a  Medigroup  of  New  Jersey,   Inc.
("Medigroup");  Allied Specialty Care Services,  Inc.  ("Allied"),  successor in
interest to Allied  Health  Group,  Inc.  ("AHG") now d/b/a  Magellan  Specialty
Health ("MSH"); and CareAdvantage,  Inc.  ("CareAdvantage").  Horizon,  MSH, and
CareAdvantage collectively shall be referred to as the "Parties."

                              W I T N E S S E T H :

         WHEREAS,   Horizon  has  operated  a  health  maintenance  organization
(commonly  referred to as an "HMO") in New Jersey,  which  arranged  for medical
services for its enrollees  through  contracts with family and general  practice
physicians, hospitals and other providers;

         WHEREAS, on or about January 2, 1997, Horizon's predecessor, Medigroup,
and AHG entered into an Administrative Services Agreement, pursuant to which AHG
agreed,  inter alia, to provide Horizon with certain utilization  management and
administrative services in connection with the review, processing and payment of
claims for services rendered submitted by certain specialist  physicians for the
enrollees in the HMO and point of service ("POS") plans operated or administered
by Medigroup;

         WHEREAS, the foregoing Administrative Service Agreement was modified by
a  Letter   Agreement   dated  March  1,  1997  between   Medigroup,   AHG,  and
CareAdvantage;

<PAGE>

         WHEREAS,  on or about October 16, 1997, AHG assigned  substantially all
of its right,  title and  interest in and to its  agreement  with  Medigroup  to
Allied, and Allied assumed substantially all of AHG's obligations thereunder;

         WHEREAS,  Horizon  instituted  suit against Allied in the United States
District Court for the District of New Jersey,  entitled  Horizon  Healthcare of
New Jersey,  Inc. vs. Allied Specialty Care Services,  Inc., Civil Action No. 99
Civ.  2819 (AJL),  to which action Allied joined  CareAdvantage  as  Third-Party
Defendant;

         WHEREAS,  the Parties have asserted claims between and among themselves
with respect to alleged breaches of the Administrative Service Agreement;

         WHEREAS,  the Parties now seek to resolve the claims  among and between
them as more fully set forth in the form of Release attached hereto as Exhibit A
and in this Settlement Agreement; and

         WHEREAS,  the  parties  further  recognize  the  commercial  advantages
accruing to the parties from the  continuing  relationship  between  Horizon and
MHS,  and seek to resolve the claims  among and  between  them in the context of
continuing contractual relations;

         NOW,  THEREFORE,  in consideration of the mutual promises and covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:

         1. Settlement Payments.  MSH and CareAdvantage agree, severally and not
jointly, as follows:

            (a)  MSH agrees to pay the sum of $722,611.28 to Horizon pursuant to
                 the  payment   schedule   annexed  hereto  as  Exhibit  C;

            (b)  CareAdvantage (i) upon execution of this Settlement  Agreement,
                 shall  execute and deliver to Horizon a promissory  note in the
                 amount  of  $419,500,  payable  to the  order  of  Horizon  and
                 otherwise  in the form  annexed  hereto as  Exhibit D (the "CAI
                 Note"),  and (ii) agrees to pay to Horizon,  in addition to any
                 amounts due under the CAI Note, the sum of $419,500  within six
                 months following execution of this Settlement Agreement;

                                       2
<PAGE>

            (c)  MSH agrees to pay an  additional  sum to Horizon  not to exceed
                 $425,000, following implementation of services under agreements
                 between  Horizon,  or any of its  affiliates,  and  MSH,  which
                 agreements  shall  include  and be  subject  to  the  following
                 provisions:

                 o The  services  shall  include  any  combination  of  provider
                   profiling, patient profiling, call center, disease management
                   and DXM;

                 o The services shall be provided at market rates;

                 o The  agreements  for the provision of such services shall not
                   be subject to termination  without cause during the first two
                   years of contract term;

         (d)      The additional sum set forth in  subparagraph  "c" above shall
                  be calculated on the basis of:

                 o $1 for each $2 of projected annualized revenue;  with respect
                   to the first $250,000 of such revenues; and

                 o $1 for each $3 of projected annualized revenue,  with respect
                   to the next $900,000 of such revenues calculated in each case
                   according to the terms of the executed agreement(s).

                                       3

<PAGE>

         2. Releases. In the form attached hereto as Exhibit A, Horizon,  Allied
and CareAdvantage  will execute Releases which will be effective upon receipt of
a fully executed version of this Settlement Agreement.

         3. Dismissal of the Settled  Claims.  Promptly after  execution of this
Settlement Agreement by all Parties, and the Releases by Horizon,  CareAdvantage
and Allied,  Horizon  shall file in the  federal  court  action a Consent  Order
dismissing with prejudice the Settled  Claims.  The Consent Order is attached as
Exhibit B.

         4. No  Admission of  Liability.  The Parties  recognize  that this is a
commercial  settlement  of disputed  matters and that this  settlement  does not
constitute  (and shall not be argued to  constitute)  an admission by any of the
Parties, or evidence of any kind concerning any of the positions taken by any of
the Parties or the relationships between or among the Parties.

         5. Representation by Counsel; Construction of Settlement Agreement. The
Parties  represent and warrant that they have been  represented by legal counsel
with respect to the negotiation of this Settlement Agreement; that each has been
advised  by legal  counsel as to its  respective  rights  and  obligations  with
respect to this  Settlement  Agreement;  and that each has  participated  in the
review and drafting of this  Settlement  Agreement such that no  construction of
the terms or effect of this Settlement Agreement shall be made against any Party
as principal drafter of this Settlement Agreement.

         6. Press Release. Horizon and MSH shall jointly develop a press release
or other public announcement regarding the new business between them.

                                       4
<PAGE>

         7. Confidentiality.

         A. Other  than  the  press  release  referenced  in  Paragraph  6, this
Settlement Agreement,  all matters relating to the terms and negotiation of this
Settlement  Agreement,  and  the  implementation  of any  and  all of its  terms
(collectively  referred to in this Paragraph as the  "Agreement")  are and shall
remain  confidential;  provided however,  the fact that the Parties have entered
into a settlement, without disclosing any of the other details of the Agreement,
may be disclosed  by the  Parties.  Notwithstanding  the  foregoing,  (i) MSH or
Horizon may disclose the Agreement to related or affiliated  corporate entities,
and  its  attorneys,   general  counsel,  corporate  counsel,   accountants  and
actuaries,   auditors,  lending  institutions,   and  investment  bankers;  (ii)
CareAdvantage may disclose the Agreement to (x) related or affiliated  corporate
entities, and its attorneys, general counsel, corporate counsel, accountants and
actuaries,  auditors,  lending institutions,  and investment bankers and (y) any
state,  federal,  or  governmental  authority,  including  but  not  limited  to
disclosures in SEC filed documents  and/or their state or local  equivalent,  to
which CareAdvantage upon advice of counsel reasonably believes it has a legal or
contractual obligation to report or disclose its terms.

         B. In the event any  Party  believes  disclosure  of the  Agreement  is
required  by  operation  of law  (other  than,  in the  case  of  CareAdvantage,
disclosure  permitted  pursuant to subparagraph  (A)(ii) above),  or that MSH or
Horizon  believes   disclosure  of  the  Agreement  is  permitted   pursuant  to
subparagraph (A)(i) above,

                                       5
<PAGE>

            (i) the Party  receiving  any such request or demand for  disclosure
shall give the other Parties  written  notice at least twenty (20) days prior to
disclosing  the  information,  unless the receiving  Party is required by law or
court order to disclose such  information  at an earlier date, in which case the
receiving Party shall give the other Parties as much notice as is possible under
the  circumstances.  Such notice shall set forth all information which the Party
intends to disclose,  the identity of each person to whom the  information is to
be disclosed,  the statute or other legal  authority  purportedly  requiring the
disclosure, and the circumstances pursuant to which disclosure is proposed to be
made, and

            (ii) the Parties each agree to assert  objections to such disclosure
based on  confidentiality,  Rule 408 of the New Jersey  and/or  Federal Rules of
Evidence and similar state and foreign  jurisdiction legal provisions  regarding
settlements.  In the event  disclosure  is required  by  operation  of law,  the
receiving Party shall request the court  requiring  disclosure to order that any
such disclosure be made in camera and sealed from the public record.

            8. Notice  Provision.  All notices to be given hereunder shall be in
writing and given by hand delivery, telecopy,  facsimile transmission,  telegram
or registered or certified mail,  postage prepaid,  return receipt  requested to
the respective Parties as follows:

                If to Horizon:

                           Thomas J. Calvocoressi
                           Vice President, General Counsel and Secretary
                           Horizon Blue Cross Blue Shield of New Jersey
                           3 Penn Plaza, East, PP-16F
                           Newark, New Jersey  07105

                cc:        None

                                       6
<PAGE>

                If to MHS:

                           Megan M. Arthur, Esq.
                           Executive Vice President & General Counsel
                           6950 Columbia Gateway Dr.
                           Suite 400
                           Columbia, MD. 21046
                           Fax: 410-953-4715

                cc:        Thomas F. Quinn, Esq.
                           Wilson Elser Moskowitz Edelman & Dicker LLP
                           Gateway Two
                           Newark, NJ 07102

                If  to CareAdvantage:

                           Richard Freeman, M.D.
                           President & Chief Operating Officer
                           CareAdvantage, Inc.
                           485-C Route One South

                cc:        George Neidich, Esq.
                           General Counsel
                           9301 Morison Lane
                           Great Falls, VA 22066
                           Fax: 703-757-0274

Any notice given in accordance  with this Paragraph 8, shall be deemed given and
received  within  three (3) days after  mailing  (in the case of notice  sent by
registered  or  certified  mail) or upon receipt (in the case of notice given by
hand delivery, telecopy, facsimile transmission, or telegram).

         9. Waiver of  Compliance.  The failure  of any Party to comply with any
obligation,  covenant,  agreement or condition herein may be expressly waived in
writing by the other  Parties,  but such waiver or failure to insist upon strict
compliance  with such  obligation,  covenant,  agreement or condition  shall not
operate as a waiver of, or estoppel  with  respect to, any  subsequent  or other
failure.

                                       7
<PAGE>

         10. Binding Nature of Terms and Representations of the Parties. Each of
the terms of this  Settlement  Agreement is binding upon each of the signatories
hereto,  their respective  successors,  transferees,  assigns,  representatives,
principals, agents, officers, directors and employees; provided however, that no
Party may assign its rights under this Settlement  Agreement without the consent
of the other Parties, which consent shall not be unreasonably withheld.

         11. Representations  of  Parties.  Each  of the Parties  hereto  hereby
represents and warrants to the other to the extent applicable that:

             A.  Such  party  has  all  power  and  authority,  and  all  or any
                 necessary  regulatory  consents,  to  enter  and  perform  this
                 Agreement;

             B.  Such party has taken all  necessary  actions to  authorize  the
                 execution of this Agreement in accordance with its terms; and

             C.  Such party,  without further  consideration,  shall execute and
                 deliver such other  documents and take such other action as may
                 be necessary to give full force and effect to this Agreement.

         12. Headings.  The headings contained in this Settlement  Agreement are
merely for convenience of reference and shall not under any circumstances affect
the meaning or interpretation of this Settlement Agreement.

         13.  Counterparts.  This  Settlement  Agreement  may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same  instrument.  Signatures may
be delivered via telecopy.

                                       8
<PAGE>

         14.  Governing Law. This Settlement  Agreement shall be governed by the
laws of the State of New Jersey,  without  giving effect to New Jersey choice of
law principles.

                                       9
<PAGE>

         IN WITNESS  WHEREOF,  the  parties to this  Agreement  have caused this
Agreement to be executed by their authorized  representatives as of the date and
year set forth below:

                         HORIZON HEALTHCARE OF NEW JERSEY, INC.

                         By:  /s/ Donna M. Celestini

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

                         Dated:  August 9, 2000

                         ALLIED SPECIALTY CARE SERVICES, INC.
                         d/b/a MAGELLAN SPECIALTY HEALTH

                         By:  /s/
                            ----------------------------------

                         Dated:  August 9, 2000

                         CAREADVANTAGE, INC.

                         By:  /s/ R. Christopher Minor

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

                         Dated:  August 9, 2000

                                       10
<PAGE>

                                     RELEASE

         This Release  dated August 9, 2000, is given and exchanged by and among
Horizon  Healthcare  of New  Jersey,  Inc.("Horizon"),  f/k/a  Medigroup  of New
Jersey, Inc.  ("Medigroup");  Allied Specialty Care Services,  Inc.  ("Allied"),
successor in interest to Allied Health Group, Inc.  ("AHG"),  now d/b/a Magellan
Specialty Health ("MSH"); and CareAdvantage,  Inc., ("CareAdvantage") and all of
their successors,  predecessors and affiliate companies; as Releasors, to and in
favor of each  other,  as  Releasees,  each  party  hereby  releasing  the other
parties,  pursuant to the terms of this Release.

         Each party hereby  irrevocably  releases and forever discharges each of
the other parties from the following claims:

         A. All claims for, or relating, to the Administrative Service Agreement
dated  January  2,  1997,  by and  between  Medigroup  and AHG,  and the  Letter
Agreement dated March 1, 1997 by and among Medigroup, AHG and CareAdvantage; and

         These  include,  but are not  limited  to, all claims for breach of the
foregoing agreements by any party thereto, or by their successors or assigns.

         B. All  claims  which  have  been or  which  could  have  been  made in
connection  with either of the  foregoing  agreements in either of the following
proceedings:

         (1) The action  entitled  Horizon  HealthCare  of New  Jersey,  Inc. v.
         Allied  Specialty Care Services,  Inc.,  Civil Action No. 99-CIV.  2819
         (AJL),  pending in the United States District Court for the District of
         New Jersey;
<PAGE>

         The  consideration  for the  Release  exchanged  is as set forth in the
Settlement  Agreement,  and further includes the mutual release and discharge of
the parties' respective claims for breach of the foregoing agreements.

         IN WITNESS WHEREOF, the parties have caused this Release to be executed
by their authorized representatives as of the date and year set forth below:

                         HORIZON HEALTHCARE OF NEW JERSEY, INC.

                         By:/s/ Donna M. Celestini

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

                         Dated:  August 9, 2000

                         ALLIED SPECIALTY CARE SERVICES, INC.
                         d/b/a MAGELLAN SPECIALTY HEALTH

                         By:/s/

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

                         Dated:  August 9, 2000

                         CAREADVANTAGE, INC.

                         By:/s/ R. Christopher Minor

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

                         Dated:  August 9, 2000

                                       2
<PAGE>

WILSON, ELSER MOSKOWITZ, EDELMAN & DICKER LLP
TFQ-3063
33 Washington Street
Newark, New Jersey 07102
Tel: (973) 624-0800 Fax: (973) 624-0808
Attorneys for Defendant Counterclaimant/Third-Party Plaintiff
Allied Specialty Care Services, Inc..
--------------------------------------------------

HORIZON HEALTHCARE OF NEW         UNITED STATES DISTRICT COURT FOR THE DISTRICT
JERSEY, INC.,                     THE DISTRICT
                                  OF NEW JERSEY

            Plaintiff,
                                  Civil No.  99-W2819 (AJL)
v.

ALLIED SPECIALTY CARE SERVICES, INC.,

            Defendant Counter-
            claimant/Third-Party  CONSENT ORDER OF
            Plaintiff,            DISMISSAL
v.

CAREADVANTAGE, INC.,

            Third-Party Defendant.

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

         This matter  having been opened to the Court by Horizon  Healthcare  of
New Jersey,  Inc. and Allied  Specialty Care Services,  Inc., now d/b/a Magellan
Specialty  Health;  and this Court having  considered  the matter,  and for good
cause shown:

         It is on this ____ day of November, 2000;

<PAGE>

        ORDERED,  that this action be and hereby is  dismissed  in its entirety
with prejudice and without costs; and it is;

         ORDERED  that a copy of this  Order be served on all  counsel of record
within 7 days.

                         ---------------------------------
                         ALFRED J. LECHNER, JR., U.S.D.J.

CONSENTED TO:
Horizon Health Care of New Jersey, Inc.

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

Allied Specialty Care Services, Inc.
d/b/a Magellan Specialty Health

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

CAREADVANTAGE, INC.

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

                                       2
<PAGE>

The following is the payment  schedule  from MSH to Horizon of the  $722,611.28,
payable quarterly, over two(2) years:

Due Date                                                      Amount
--------                                                      ------
8/1/00                                                        $90,326.41
11/1/00                                                       $90,326.41
2/1/01                                                        $90,326.41
5/1/01                                                        $90,326.41
8/1/01                                                        $90,326.41
11/1/01                                                       $90,326.41
2/01/02                                                       $90,326.41
5/1/02                                                        $90,326.41

<PAGE>

          THIS NOTE HAS NOT BEEN REGISTERED  UNDER THE SECURITIES
          ACT OF 1933, AS AMENDED,  OR THE SECURITIES LAWS OF ANY
          STATE  AND MAY NOT BE SOLD  OR  OTHERWISE  DISPOSED  OF
          EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION STATEMENT
          UNDER SUCH ACT AND APPLICABLE  STATE SECURITIES LAWS OR
          AN   APPLICABLE    EXEMPTION   TO   THE    REGISTRATION
          REQUIREMENTS OF SUCH ACT OF SUCH LAWS.

                               CAREADVANTAGE, INC.
                                 PROMISSORY NOTE

$419,500.00                                                   Newark, New Jersey
                                                                  August 9, 2000

FOR VALUE RECEIVED, the undersigned, CAREADVANTAGE, INC., a Delaware corporation
with its principal place of business at 485-C Route 1 South,  Iselin, New Jersey
08830 (the "Payor"),  promises to pay to the order of HORIZON  HEALTHCARE OF NEW
JERSEY,  INC., a New Jersey  corporation with its principal place of business at
Three Penn Plaza East, Newark, New Jersey 07105 (the "Payee"),  by wire transfer
or in same day funds at its above-stated  address, as the Payee shall direct the
Payor in writing,  the principal  sum of FOUR HUNDRED  NINETEEN  THOUSAND,  FIVE
HUNDRED  DOLLARS  ($419,500.00),  together with all interest on the  outstanding
principal balance and other expenses, payable as set forth below in lawful money
of the United States of America.

         This  Promissory Note (this  "Promissory  Note") is the promissory note
referred to in Section 1(b) of the  Settlement  Agreement  dated as of August 9,
2000 (the  "Agreement") by and among the Payor,  the Payee and Allied  Specialty
Care  Services,  Inc.,  successor in interest to Allied Health Group,  Inc. (now
d/b/a Magellan Specialty Health), a Delaware corporation.

The  outstanding  principal  amount of this  Promissory Note shall bear interest
daily from August 9, 2000 until  payment in full of all of amounts due and owing
hereunder at the rate of six and sixteen  hundredths  percent (6.16%) per annum;
provided,  however, that the rate shall be adjusted on each November 1, February
1, May 1 and August 1 as of which any principal  hereof  remains  outstanding so
that,  following  each such  adjustment,  the interest rate is equal to the rate
most  recently  then  reported in The Wall Street  Journal  for  five-year  U.S.
Treasury notes.

Subject to the right of the Payee to accelerate the maturity of this  Promissory
Note as hereinafter  provided,  the entire  principal  amount of and interest on
this Promissory Note shall be November 1, 2000 (the "Maturity Date").

An "Event of Default" shall occur if:

         (a) the Payor  defaults in the payment of principal or interest of this
Promissory Note when the same becomes due and payable;

<PAGE>

         (b) the  Payor  fails  to  comply  with  any  other  provision  of this
Promissory  Note  and  such  failure  continues  for a  period  of five (5) days
following notice to the Payor of such failure;

         (c) the Payor pursuant to or within the meaning of any bankruptcy law:

             (i)   commences a voluntary case;

             (ii)  consents to the entry of an order for relief against it in an
                   involuntary case;

             (iii) consents  to  the  appointment  of  a  receiver,  liquidator,
                   assignee,  custodian,  trustee, sequestrator or other similar
                   official (a  "Custodian")  of it or for all or  substantially
                   all of its property; or

             (iv)  makes a general  assignment for the benefit of its creditors;
                   or

         (d) a court of competent  jurisdiction  enters an order or decree under
any bankruptcy law that:

             (i)   is for relief against the Payor in an involuntary case;

             (ii)  appoints a Custodian of the Payor or for all or substantially
                   all of its property; or

             (iii) orders  the  winding up or  liquidation  of the Payor and the
                   order or decree remains unstayed and in effect for sixty (60)
                   days.

If an Event of Default occurs as described above,  then the principal of and the
accrued   interest  on  this  Promissory  Note  shall  become  due  and  payable
immediately,  whether or not  notice of such  Event of  Default  shall have been
given by any holder of this Promissory  Note. The holder of this Promissory Note
may rescind an  acceleration  and its  consequences  if all  existing  Events of
Default  (other than  nonpayment  of principal  or interest  that has become due
solely  because  of the  acceleration)  have  been  cured or  waived  and if the
rescission would not conflict with any judgment or decree.

If an Event of Default occurs and is continuing,  the holder of this  Promissory
Note may  pursue  any  available  remedy  by  proceeding  at law or in equity to
collect the payment of  principal of or interest on this  Promissory  Note or to
enforce the performance of any provision of this Promissory Note.

Except as  otherwise  provided by law, a delay or omission by the holder of this
Promissory  Note in  exercising  any right or remedy  accruing  upon an Event of
Default  shall not  impair  the right or  remedy  or  constitute  a waiver of or
acquiescence in the Event of Default.  No waiver of any right shall be effective
unless in  writing  and  signed by the  Payee,  and no waiver on one (1) or more
occasions  shall be  conclusive  as a bar to or waiver of any right on any other
occasion. No remedy is exclusive of any other remedy. All available remedies are
cumulative.

                                       2
<PAGE>

The principal amount of this Promissory Note may be prepaid at the option of the
Payor upon five (5) days'  prior  written  notice to the  Payee,  in whole or in
part,  at any time or from time to time  without  premium or penalty;  provided,
however,  that any such prepayment  shall be accompanied by accrued  interest on
the principal amount so prepaid.

The Payor  represents  that it has  taken all  corporate  actions  necessary  to
authorize  it to issue  this  Promissory  Note and to  perform  its  obligations
hereunder.

The Payor waives diligence,  protest, presentment of any instrument,  demand for
payment, notice of nonpayment and acceleration and any and all other notices and
demands  whatsoever in connection  with the delivery,  acceptance,  performance,
default or enforcement of this Promissory Note.

All notices and other communications  hereunder shall be in writing and shall be
made in accordance with Section 8 of the Agreement.

The  obligations of the Payor under this  Promissory Note may not be transferred
or assigned by the Payor  without the prior written  consent of the Payee.  This
Promissory  Note shall be binding upon the permitted  assigns and  successors of
the Payor and shall inure to the benefit of and be enforceable by the Payee, its
successors and assigns.

The Payor agrees to pay all costs and expenses,  including,  without limitation,
reasonable  attorneys'  fees and  expenses,  incurred by the Payee in connection
with the collection and/or enforcement of this Promissory Note.

This  Promissory  Note shall be governed by and construed in accordance with the
internal laws of the State of New Jersey.

IN WITNESS  WHEREOF,  the undersigned has caused this Promissory Note to be duly
executed as of the date first above written.

                         CAREADVANTAGE, INC.

                         By:/s/ R. Christopher Minor

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

                                       3
<PAGE>

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