Document:

<PAGE>

                                                                  EXHIBIT 10.30

PREPARED BY AND UPON
RECORDATION RETURN TO:

Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention:  Joseph Vidulich, Esq.

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

                                                        MSDWMC Loan No. 01-09970

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

                 DEED OF TRUST, ASSIGNMENT OF LEASES AND RESNTS,
                      SECURITY AGREEMENT AND FIXTURE FILING

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

                         GOLDFISH (DE) LP, as trustor
                                  (Borrower)

                                       to

                ____________________________________, as trustee
                                    (Trustee)

                                       and

                       MORGAN STANLEY BANK, as beneficiary
                                    (Lender)

                         Dated:  November 28, 2001

                         Location: Westlake Village, California

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

THIS DOCUMENT SECURES A PROMISSORY NOTE WHICH CONTAINS PROVISIONS FOR
ADJUSTMENTS IN THE INTEREST RATE AND/OR PAYMENT AMOUNTS AND/OR A BALLOON
PAYMENT. THIS INSTRUMENT CONSTITUTES A SECURITY AGREEMENT AS THAT TERM IS
DEFINED IN THE CALIFORNIA UNIFORM COMMERCIAL CODE. PORTIONS OF THE COLLATERAL
ARE GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE LAND DESCRIBED IN EXHIBIT A
HERETO. THIS INSTRUMENT IS INTENDED TO SERVE AS A FIXTURE FILING AND IS TO BE
RECORDED IN THE REAL ESTATE RECORDS OF EACH COUNTY IN WHICH SAID LAND OR ANY
PORTION THEREOF IS LOCATED AND INDEXED AS A FEE DEED OF TRUST AND A FIXTURE
FILING. BORROWER IS THE OWNER OF THE FEE INTEREST IN EXHIBIT A HERETO.
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                                TABLE OF CONTENTS

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                                   ARTICLE I

                              GRANTS OF SECURITY

Section 1.1     Property Mortgaged.....................................................   1
Section 1.2     Assignment of Leases and Rents.........................................   3
Section 1.3     Security Agreement.....................................................   3
Section 1.4     Pledge of Monies Held..................................................   4
Section 1.5     Conditions to Grant....................................................   4

                                  ARTICLE II

                        DEBT AND OBLIGATIONS SECURED

Section 2.1     Debt...................................................................   4
Section 2.2     Other Obligations......................................................   5
Section 2.3     Debt and Other Obligations.............................................   5
Section 2.4     Payments...............................................................   5

                                 ARTICLE III

                             BORROWER COVENANTS

Section 3.1     Payment of Debt........................................................   5
Section 3.2     Incorporation by Reference.............................................   5
Section 3.3     Insurance..............................................................   6
Section 3.4     Payment of Taxes, etc..................................................   8
Section 3.5     Escrow Fund............................................................   9
Section 3.6     Condemnation...........................................................  10
Section 3.7     Restoration After Casualty/Condemnation................................  10
Section 3.8     Leases and Rents.......................................................  14
Section 3.9     Maintenance and Use of Property........................................  16
Section 3.10    Waste..................................................................  16
Section 3.11    Compliance With Laws...................................................  17
Section 3.12    Books and Records......................................................  17
Section 3.13    Payment For Labor and Materials........................................  20
Section 3.14    Performance of Other Agreements........................................  20
Section 3.15    Change of Name, Identity or Structure..................................  20
Section 3.16    Existence..............................................................  20
Section 3.17    Management.............................................................  20
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                                 ARTICLE IV

                              SPECIAL COVENANTS

Section 4.1     Property Use...........................................................  21
Section 4.2     Single Purpose Entity..................................................  21

                                  ARTICLE V

                       REPRESENTATIONS AND WARRANTIES

Section 5.1     Warranty of Title......................................................  24
Section 5.2     Legal Status and Authority.............................................  24
Section 5.3     Validity of Documents..................................................  25
Section 5.4     Litigation.............................................................  25
Section 5.5     Status of Property.....................................................  25
Section 5.6     No Foreign Person......................................................  27
Section 5.7     Separate Tax Lot.......................................................  27
Section 5.8     Leases.................................................................  27
Section 5.9     Financial Condition....................................................  28
Section 5.10    Business Purposes......................................................  28
Section 5.11    Taxes..................................................................  28
Section 5.12    Mailing Address........................................................  28
Section 5.13    No Change in Facts or Circumstances....................................  28
Section 5.14    Disclosure.............................................................  29
Section 5.15    Third Party Representations............................................  29
Section 5.16    Illegal Activity.......................................................  29
Section 5.17    Regulations T, U and X.................................................  29
Section 5.18    Non-Consolidation......................................................  29

                                 ARTICLE VI

                          OBLIGATIONS AND RELIANCE

Section 6.1     Relationship of Borrower and Lender....................................  29
Section 6.2     No Reliance on Lender..................................................  29
Section 6.3     No Lender Obligations..................................................  30
Section 6.4     Reliance...............................................................  30

                                 ARTICLE VII

                             FURTHER ASSURANCES

Section 7.1     Recording of Security Instrument, etc..................................  30
Section 7.2     Further Acts, etc......................................................  31
Section 7.3     Changes in Tax, Debt Credit and Documentary Stamp Laws.................  31
Section 7.4     Estoppel Certificates..................................................  32
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Section 7.5     Flood Insurance........................................................  32
Section 7.6     Replacement Documents..................................................  32

                                ARTICLE VIII

                           DUE ON SALE/ENCUMBRANCE

Section 8.1     No Sale/Encumbrance....................................................  33
Section 8.2     Sale/Encumbrance Defined...............................................  33
Section 8.3     Lender's Rights........................................................  34
Section 8.4     Permitted Transfers....................................................  34

                                 ARTICLE IX

                                 PREPAYMENT

Section 9.1     Prepayment.............................................................  37

                                  ARTICLE X

                                   DEFAULT

Section 10.1    Events of Default......................................................  37

                                 ARTICLE XI

                             RIGHTS AND REMEDIES

Section 11.1    Remedies...............................................................  39
Section 11.2    Application of Proceeds................................................  42
Section 11.3    Right to Cure Defaults.................................................  42
Section 11.4    Actions and Proceedings................................................  42
Section 11.5    Recovery of Sums Required to be Paid...................................  42
Section 11.6    Examination of Books and Records.......................................  43
Section 11.7    Other Rights, etc......................................................  43
Section 11.8    Right to Release Any Portion of the Property...........................  43
Section 11.9    Violation of Laws......................................................  44
Section 11.10   Right of Entry.........................................................  44
Section 11.11   Subrogation............................................................  44

                                 ARTICLE XII

                            ENVIRONMENTAL MATTERS

Section 12.1    Environmental Representations and Warranties...........................  44
Section 12.2    Environmental Covenants................................................  45
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Section 12.3    Lender's Rights........................................................  46
Section 12.4    Operations and Maintenance Programs....................................  46

                                ARTICLE XIII

                              INDEMNIFICATIONS

Section 13.1    General Indemnification................................................  46
Section 13.2    Mortgage and/or Intangible Tax.........................................  47
Section 13.3    Duty to Defend; Attorneys' Fees and Other Fees and Expenses............  47
Section 13.4    Environmental Indemnity................................................  47

                                 ARTICLE XIV

                                   WAIVERS

Section 14.1    Waiver of Counterclaim.................................................  47
Section 14.2    Marshalling and Other Matters..........................................  48
Section 14.3    Waiver of Notice.......................................................  48
Section 14.4    Waiver of Statute of Limitations.......................................  48
Section 14.5    Sole Discretion of Lender..............................................  48
Section 14.6    WAIVER OF TRIAL BY JURY................................................  48

                                 ARTICLE XV

                                 EXCULPATION

Section 15.1    Exculpation............................................................  49

                                 ARTICLE XVI

                                   NOTICES

Section 16.1    Notices................................................................  49

                                ARTICLE XVII

                               APPLICABLE LAW

Section 17.1    Choice of Law..........................................................  49
Section 17.2    Provisions Subject to Applicable Law...................................  51
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<S>             <C>                                                                      <C>
                                ARTICLE XVIII

                              SECONDARY MARKET

Section 18.1    Transfer of Loan.......................................................  51
Section 18.2    Cooperation............................................................  51

                                 ARTICLE XIX

                                    COSTS

Section 19.1    Performance at Borrower's Expense......................................  52
Section 19.2    Legal Fees for Enforcement.............................................  52

                                 ARTICLE XX

                                 DEFINITIONS

Section 20.1    General Definitions....................................................  53
Section 20.2    Headings, etc..........................................................  53

                                 ARTICLE XXI

                          MISCELLANEOUS PROVISIONS

Section 21.1    No Oral Change.........................................................  53
Section 21.2    Liability..............................................................  53
Section 21.3    Inapplicable Provisions................................................  53
Section 21.4    Duplicate Originals; Counterparts......................................  53
Section 21.5    Number and Gender......................................................  54
Section 21.6    Cross Default..........................................................  54

                                ARTICLE XXII

                     SPECIAL [NAME OF STATE] PROVISIONS

Section 22.1    Principles of Construction.............................................  54
Section 22.2    [State]................................................................  54

                                ARTICLE XXIII

                          DEED OF TRUST PROVISIONS

Section 23.1    Concerning The Trustee.................................................  57
Section 23.2    Trustee's Fees.........................................................  57
Section 23.3    Certain Rights.........................................................  58
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Section 23.4    Retention of Money.....................................................  58
Section 23.5    Perfection of Appointment..............................................  58
Section 23.6    Succession Instruments.................................................  58
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                                      -vi-
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                  THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING (the "Security Instrument") is made as of the __
day of November, 2001, by GOLDFISH (DE) LP, a Delaware limited partnership,
having its principal place of business at c/o W.P. Carey & Co. LLC, 50
Rockefeller Plaza, 2nd Floor, New York, New York 10020, as trustor ("Borrower")
to _____________________, as trustee ("Trustee") for the benefit of MORGAN
STANLEY BANK, a Utah industrial loan company, having an address at 2500 Lake
Park Boulevard, West Valley City, Utah 84120, as beneficiary ("Lender").

                                    RECITALS:

                  Borrower by its promissory note of even date herewith given to
Lender is indebted to Lender in the principal sum of TWENTY-NINE MILLION EIGHT
HUNDRED SEVENTY FIVE THOUSAND AND NO/100 DOLLARS ($29,875,000.00) (the "Loan
Amount") in lawful money of the United States of America (the note together with
all extensions, renewals, modifications, substitutions and amendments thereof
shall collectively be referred to as the "Note"), with interest from the date
thereof at the rates set forth in the Note, principal and interest to be payable
in accordance with the terms and conditions provided in the Note.

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

                                   ARTICLE I

                               GRANTS OF SECURITY

                  Section 1.1  Property Mortgaged. Borrower does hereby
irrevocably grant, bargain, sell, pledge, assign, warrant, transfer and convey
to Trustee, its successors and assigns, in trust, with power of sale and right
of entry and possession, for the benefit of Lender, and grant a security
interest to Lender and Trustee in, the following property, rights, interests and
estates now owned, or hereafter acquired by Borrower (collectively, the
"Property"):

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

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

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

                                      -1-
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                  (d)      Easements. All easements, rights-of-way or use,
rights, strips and gores of land, streets, ways, alleys, passages, sewer rights,
water, water courses, water rights and powers, air rights and development
rights, and all estates, rights, titles, interests, privileges, liberties,
servitudes, tenements, hereditaments and appurtenances of any nature whatsoever,
in any way now or hereafter belonging, relating or pertaining to the Land and
the Improvements and the reversion and reversions, remainder and remainders, and
all land lying in the bed of any street, road or avenue, opened or proposed, in
front of or adjoining the Land, to the center line thereof and all the estates,
rights, titles, interests, dower and rights of dower, curtesy and rights of
curtesy, property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Land and the Improvements and every part
and parcel thereof, with the appurtenances thereto;

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

                  (f)      Leases and Rents. All leases, subleases and other
agreements affecting the use, enjoyment or occupancy of the Land and/or the
Improvements heretofore or hereafter entered into and all extensions, amendments
and modifications thereto, whether before or after the filing by or against
Borrower of any petition for relief under 11 U.S.C. Section101 et seq., as the
same may be amended from time to time (the "Bankruptcy Code") (the "Leases") and
all right, title and interest of Borrower, its successors and assigns therein
and thereunder, including, without limitation, any guaranties of the tenants'
obligations thereunder, cash or securities deposited thereunder to secure the
performance by the tenants of their obligations thereunder and all rents,
additional rents, revenues, issues and profits (including all oil and gas or
other mineral royalties and bonuses) from the Land and the Improvements, whether
paid or accruing before or after the filing by or against Borrower of any
petition for relief under the Bankruptcy Code (the "Rents") and all proceeds
from the sale or other disposition of the Leases and the right to receive and
apply the Rents to the payment of the Debt;

                  (g)      Insurance Proceeds. All proceeds of and any unearned
premiums on any insurance policies covering the Property, including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Property;

                                      -2-
<PAGE>
                  (h)      Condemnation Awards. All awards or payments,
including interest thereon, which may heretofore and hereafter be made with
respect to the Property, whether from the exercise of the right of eminent
domain (including but not limited to any transfer made in lieu of or in
anticipation of the exercise of the right), or for a change of grade, or for any
other injury to or decrease in the value of the Property;

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

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

                  (k)      Rights. The right, in the name and on behalf of
Borrower, to appear in and defend any action or proceeding brought with respect
to the Property and to commence any action or proceeding to protect the interest
of Lender in the Property;

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

                  (m)      Intangibles. All trade names, trademarks,
servicemarks, logos, copyrights, goodwill, books and records and all other
general intangibles relating to or used in connection with the operation of the
Property; and

                  (n)      Other Rights. Any and all other rights of Borrower
in and to the items set forth in Subsections (a) through (m) above.

                  Section 1.2       Assignment of Leases and Rents. Borrower
hereby absolutely and unconditionally assigns to Lender and Trustee Borrower's
right, title and interest in and to all current and future Leases and Rents; it
being intended by Borrower that this assignment constitutes a present, absolute
assignment and not an assignment for additional security only. Nevertheless,
subject to the terms of this Section 1.2 and Section 3.8, Lender grants to
Borrower a revocable license to collect and receive the Rents. Borrower shall
hold a portion of the Rents sufficient to discharge all current sums due on the
Debt for use in the payment of such sums.

                  Section 1.3       Security Agreement. This Security Instrument
is both a real property mortgage and a "security agreement" within the meaning
of the Uniform Commercial Code. The Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Borrower in the Property. By executing and delivering this Security
Instrument, Borrower hereby grants to Lender and Trustee, as security

                                      -3-
<PAGE>
for the Obligations (defined in Section 2.3), a security interest in the
Personal Property to the full extent that the Personal Property may be subject
to the Uniform Commercial Code.

                  Section 1.4       Pledge of Monies Held. Borrower hereby
pledges to Lender any and all monies now or hereafter held by Lender, including,
without limitation, any sums deposited in the Escrow Fund (as defined in Section
3.5), Net Proceeds (as defined in Section 3.7) and condemnation awards or
payments described in Section 3.6, as additional security for the Obligations
until expended or applied as provided in this Security Instrument.

                  Section 1.5       Conditions to Grant. TO HAVE AND TO HOLD the
above granted and described Property unto and to the use and benefit of Lender
and of Trustee, and for their successors and assigns, forever; IN TRUST, WITH
POWER OF SALE, to secure payment to Lender of the Debt at the time and in the
manner provided for its payment in the Note and in this Security Instrument;
PROVIDED, HOWEVER, these presents are upon the express condition that, if
Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument, shall well and truly
perform the Other Obligations as set forth in this Security Instrument and shall
well and truly abide by and comply with each and every covenant and condition
set forth herein and in the Note, these presents and the estate hereby granted
shall cease, terminate and be void.

                                   ARTICLE II

                          DEBT AND OBLIGATIONS SECURED

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

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

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

                  (c)      the Default Consideration (as defined in the Note),
if any;

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

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

                  (f)      all sums advanced and costs and expenses incurred by
Lender in connection with the Debt or any part thereof, any renewal, extension,
or change of or substitution for the Debt or any part thereof, or the
acquisition or perfection of the security therefor, whether made or incurred at
the request of Borrower or Lender.

                                      -4-
<PAGE>
                  Section 2.2       Other Obligations. This Security Instrument
and the grants, assignments and transfers made in Article 1 are also given for
the purpose of securing the performance of the following (the "Other
Obligations"):

                  (a)      all other obligations of Borrower contained herein;

                  (b)      each obligation of Borrower contained in the Note and
in the Other Security Documents; and

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

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

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

                                   ARTICLE III

                               BORROWER COVENANTS

                  Borrower covenants and agrees that:

                  Section 3.1       Payment of Debt. Borrower will pay the Debt
at the time and in the manner provided in the Note and in this Security
Instrument.

                  Section 3.2       Incorporation by Reference. All the
covenants, conditions and agreements contained in (a) the Note and (b) all and
any of the documents other than the Note or this Security Instrument now or
hereafter executed by Borrower and/or others and by or in favor of Lender, which
wholly or partially secure or guaranty payment of the Note (the "Other Security
Documents"), are hereby made a part of this Security Instrument to the same
extent and with the same force as if fully set forth herein.

                                      -5-
<PAGE>
                  Section 3.3       Insurance.

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

                  (i)      Property Insurance. Insurance with respect to the
         Improvements and building equipment insuring against any peril now or
         hereafter included within the classification "All Risks of Physical
         Loss" in amounts at all times sufficient to prevent Lender from
         becoming a co-insurer within the terms of the applicable policies and
         under applicable law, but in any event such insurance shall be
         maintained in an amount which, after application of deductible, shall
         be equal to the full insurable value of the Improvements and building
         equipment, the term "full insurable value" to mean the actual
         replacement cost of the Improvements and building equipment (without
         taking into account any depreciation, and exclusive of excavations,
         footings and foundations, landscaping and paving) determined annually
         by an insurer, a recognized independent insurance broker or an
         independent appraiser selected and paid by Borrower and in no event
         less than the coverage required pursuant to the terms of any Lease;

                  (ii)     Liability Insurance. Comprehensive general liability
         insurance, including bodily injury, death and property damage
         liability, insurance against any and all claims, including all legal
         liability to the extent insurable and imposed upon Lender and all court
         costs and attorneys' fees and expenses, arising out of or connected
         with the possession, use, leasing, operation, maintenance or condition
         of the Property in such amounts as are generally available at
         commercially reasonable premiums and are generally required by
         institutional lenders for properties comparable to the Property but in
         any event for a combined single limit of at least $5,000,000;

                  (iii)    Workers' Compensation Insurance. Statutory workers'
         compensation insurance with respect to any work on or about the
         Property;

                  (iv)     Business Interruption Insurance. Business
         interruption and/or loss of "rental income" insurance in an amount
         sufficient to avoid any co-insurance penalty and to provide proceeds
         which will cover a period of not less than twenty-four (24) months,
         from the date of casualty or loss, the term "rental income" to mean the
         sum of (A) the total then ascertainable Rents payable under the Leases
         and (B) the total ascertainable amount of all other amounts to be
         received by Borrower from third parties which are the legal obligation
         of the tenants, reduced to the extent such amounts would not be
         received because of operating expenses not incurred during a period of
         non-occupancy of that portion of the Property then not being occupied;

                  (v)      Boiler and Machinery Insurance. Broad form boiler and
         machinery insurance (without exclusion for explosion) covering all
         boilers or other pressure vessels, machinery, and equipment located in,
         on or about the Property and insurance against loss of occupancy or use
         arising from any breakdown in such amounts as are generally required by
         institutional lenders for properties comparable to the Property;

                                      -6-
<PAGE>
                  (vi)     Flood Insurance. If required by Subsection 5.5(j)
         hereof, flood insurance in an amount at least equal to the lesser of
         (A) the principal balance of the Note, or (B) the maximum limit of
         coverage available for the Property under the National Flood Insurance
         Act of 1968, The Flood Disaster Protection Act of 1973 or the National
         Flood Insurance Reform Act of 1994, as each may be amended;

                  (vii)    Builder's Risk Insurance. At all times during which
         structural construction, repairs or alterations are being made with
         respect to the Improvements (A) owner's contingent or protective
         liability insurance covering claims not covered by or under the terms
         or provisions of the above mentioned commercial general liability
         insurance policy; and (B) the insurance provided for in Subsection
         3.3(a)(i) written in a so-called builder's risk completed value form
         (1) on a non-reporting basis, (2) against all risks insured against
         pursuant to Subsection 3.3(a)(i), (3) including permission to occupy
         the Property, and (4) with an agreed amount endorsement waiving
         co-insurance provisions; and

                  (viii)   Other Insurance. Such other insurance with respect to
         the Property against loss or damage of the kinds from time to time
         customarily insured against and in such amounts as are required by
         institutional lenders for properties comparable to the Property.

                  (b)      All insurance provided for in Subsection 3.3(a)
hereof shall be obtained under valid and enforceable policies (the "Policies" or
in the singular, the "Policy"), and shall be issued by one or more domestic
primary insurer(s) having (i) a general policy rating of A or better and a
financial class of VI or better by A.M. Best Company, Inc. (or if a rating of
A.M. Best Company Inc. is no longer available, a similar rating from a similar
or successor service) and (ii) a claims paying ability rating by a credit rating
agency approved by Lender (a "Rating Agency") of not less than AA by Standard &
Poor's Corp. or such comparable rating by such other Rating Agency. All insurers
providing insurance required by this Security Instrument shall be authorized to
issue insurance in the state in which the Property is located. The Policy
referred to in Subsection 3.3(a)(ii) above shall name Lender as an additional
named insured and the Policies referred to in Subsection 3.3(a)(i), (iv), (v),
(vi) and (vii), and as applicable (viii), above shall provide that all proceeds
be payable to Lender as set forth in Section 3.7 hereof. The Policies referred
to in Subsections 3.3(a)(i), (v), (vi) and (vii) shall also contain: (i) a
standard "non-contributory mortgagee" endorsement or its equivalent relating,
inter alia, to recovery by Lender notwithstanding the negligent or willful acts
or omission of Lender; (ii) to the extent available at commercially reasonable
rates, a waiver of subrogation endorsement as to Lender; and (iii) an
endorsement providing for a deductible per loss of an amount not more than that
which is customarily maintained by prudent owners of similar properties in the
general vicinity of the Property, but in no event in excess of $25,000. The
Policy referred to in Subsection 3.3(a)(i) above shall provide coverage for
contingent liability from Operation of Building Laws, Demolition Costs and
Increased Cost of Construction Endorsements together with an "Ordinance or Law
Coverage" or "Enforcement" endorsement if any of the Improvements or the use of
the Property shall at any time constitute legal non-conforming structures or
uses. All Policies shall contain (i) a provision that such Policies shall not be
cancelled or terminated, nor shall they expire, without at least thirty (30)
days' prior written notice to Lender in each instance; and (ii) include
effective waivers by the insurer of all claims for Insurance Premiums (defined
below) against any loss payees, additional insureds and named

                                      -7-
<PAGE>
insureds (other than Borrower). Certificates of insurance with respect to all
renewal and replacement Policies shall be delivered to Lender not less than
twenty (20) days prior to the expiration date of any of the Policies required to
be maintained hereunder, which certificates shall bear notations evidencing
payment of applicable premiums (the "Insurance Premiums"). Originals or
certificates of such replacement Policies shall be delivered to Lender promptly
after Borrower's receipt thereof but in any case within thirty (30) days after
the effective date thereof. If Borrower fails to maintain and deliver to Lender
the original Policies or certificates of insurance required by this Security
Instrument, upon ten (10) days' prior notice to Borrower, Lender may procure
such insurance at Borrower's sole cost and expense. Notwithstanding the
foregoing, so long as (i) the lease between Borrower, as landlord, and PetsMART,
Inc., a Delaware corporation ("PetsMART"), as the sole tenant at the Property,
dated November __, 2001, as such may be amended with Lender's consent except as
otherwise specifically permitted pursuant to Section 3.8 hereof, (collectively,
the "PetsMART Lease") or a replacement "triple net" lease for the entire
Property acceptable to Lender in its sole discretion (an "Acceptable Replacement
Lease") with another single-user tenant acceptable to lender in its sole
discretion) an "Acceptable Replacement Tenant") remains in full force and effect
with PetsMART or its assignee as the tenant thereunder, or an Acceptable
Replacement Tenant, (ii) PetsMART or an Acceptable Replacement Tenant is not in
default under the PetsMART Lease or an Acceptable Replacement Lease, as
applicable, beyond any applicable notice and cure periods set forth in the
PetsMART Lease, and (iii) Borrower provides Lender with original Policies or
certificates of insurance evidencing that PetsMART or an Acceptable Replacement
Tenant is carrying all insurance required under the PetsMART Lease, then the
requirements of Section 3.3(a) and (b) shall be deemed satisfied.

                  (c)      Borrower shall comply with all insurance requirements
and shall not bring or keep or permit to be brought or kept any article upon any
of the Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by Borrower on or with respect to
any part of the Property pursuant to this Section 3.3.

                  Section 3.4       Payment of Taxes, etc.

                  (a)      Borrower shall pay or cause to be paid all taxes,
assessments, water rates, sewer rents, governmental impositions, and other
charges, including without limitation vault charges and license fees for the use
of vaults, chutes and similar areas adjoining the Land, now or hereafter levied
or assessed or imposed against the Property or any part thereof (the "Taxes"),
all ground rents, maintenance charges and similar charges, now or hereafter
levied or assessed or imposed against the Property or any part thereof (the
"Other Charges"), and all charges for utility services provided to the Property
prior to the date on which interest or delinquency charges begins to accrue
thereon or any non-payment thereof would result in the application of any
penalties, provided, however, that taxes may be paid in installments to the
extent permitted by the taxing authority. Borrower will deliver to Lender,
promptly upon Lender's request, evidence satisfactory to Lender that the Taxes,
Other Charges and utility service charges have been so paid or are not then
delinquent. Borrower shall not suffer and shall promptly cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or charge
against the Property. Except to the extent sums sufficient to pay all Taxes and
Other Charges have been deposited with Lender in accordance with the terms of
this Security Instrument, Borrower shall

                                      -8-
<PAGE>
furnish to Lender paid receipts for the payment of the Taxes and Other Charges
prior to the date the same shall become delinquent.

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

                  Section 3.5       Escrow Fund. In addition to the initial
deposits with respect to Taxes and Insurance Premiums made by Borrower to Lender
on the date hereof to be held by Lender in escrow, Borrower shall pay to Lender
on the first day of each calendar month (a) one-twelfth of an amount which would
be sufficient to pay the Taxes payable, or estimated by Lender to be payable,
during the next ensuing twelve (12) months and (b) one-twelfth of an amount
which would be sufficient to pay the Insurance Premiums due for the renewal of
the coverage afforded by the Policies upon the expiration thereof (the amounts
in (a) and (b) above shall be called the "Escrow Fund"). Borrower agrees to
notify Lender immediately of any changes to the amounts, schedules and
instructions for payment of any Taxes and Insurance Premiums of which it has or
obtains knowledge and authorizes Lender or its agent to obtain the bills for
Taxes directly from the appropriate taxing authority. The Escrow Fund and the
payments of interest or principal or both, payable pursuant to the Note shall be
added together and shall be paid as an aggregate sum by Borrower to Lender.
Provided there are sufficient amounts in the Escrow Fund and no Event of Default
exists, Lender shall be obligated to pay the Taxes and Insurance Premiums as
they become due on their respective due dates on behalf of Borrower by applying
the Escrow Fund to the payments of such Taxes and Insurance Premiums required to
be made by Borrower pursuant to Sections 3.3 and 3.4 hereof. If the amount of
the Escrow Fund shall exceed the amounts due for Taxes and Insurance Premiums
pursuant to Sections 3.3 and 3.4 hereof, Lender shall, in its discretion, return
any excess to Borrower or credit such excess against future payments to be made
to the Escrow Fund. In allocating such excess, Lender may deal with the person
shown on the records of Lender to be the owner of the Property. If the Escrow
Fund is not sufficient to pay the items set forth in (a) and (b) above, Borrower
shall promptly pay to Lender, upon demand, an amount which Lender shall
reasonably estimate as sufficient to

                                      -9-
<PAGE>
make up the deficiency. The Escrow Fund shall not constitute a trust fund and
may be commingled with other monies held by Lender. Unless otherwise required by
Applicable Laws (defined in Section 3.11), no earnings or interest on the Escrow
Fund shall be payable to Borrower. Notwithstanding the foregoing, so long as (i)
no Event of Default has occurred and is continuing, (ii) PetsMART or an
Acceptable Replacement Tenant, as the sole tenant of the Property, is not in
default under the terms of the PetsMART or an Acceptable Replacement Lease
beyond any applicable notice and cure periods set forth therein, and (iii)
PetsMART or an Acceptable Replacement Tenant is paying the Taxes pursuant to the
terms of Section 3.4 hereof and Insurance Premiums in accordance with the terms
of the last sentence of Section 3.3(b) hereof, directly pursuant to the terms
hereof, and such Taxes are current, then Borrower shall not be required to make
monthly payments into the Escrow Fund.

                  Section 3.6       Condemnation. Borrower shall promptly give
Lender notice of the actual or threatened commencement of any condemnation or
eminent domain proceeding and shall deliver to Lender copies of any and all
papers served in connection with such proceedings. Notwithstanding any taking by
any public or quasi-public authority through eminent domain or otherwise
(including but not limited to any transfer made in lieu of or in anticipation of
the exercise of such taking), Borrower shall continue to pay the Debt at the
time and in the manner provided for its payment in the Note and in this Security
Instrument and the Debt shall not be reduced until any award or payment therefor
shall have been actually received and applied by Lender, after the deduction of
expenses of collection, to the reduction or discharge of the Debt. Borrower
shall cause the award or payment made in any condemnation or eminent domain
proceeding, which is payable to Borrower, to be paid directly to Lender. Lender
shall not be limited to the interest paid on the award by the condemning
authority but shall be entitled to receive out of the award interest at the rate
or rates provided herein or in the Note. Lender may apply any award or payment
to the reduction or discharge of the Debt whether or not then due and payable.
If the Property is sold, through foreclosure or otherwise, prior to the receipt
by Lender of the award or payment, Lender shall have the right, whether or not a
deficiency judgment on the Note (to the extent permitted in the Note or herein)
shall have been sought, recovered or denied, to receive the award or payment, or
a portion thereof sufficient to pay the Debt.

                  Section 3.7       Restoration After Casualty/Condemnation. In
the event of a casualty or a taking by eminent domain, the following provisions
shall apply in connection with the Restoration (defined below) of the Property:

                  (a)      If the Property shall be damaged or destroyed, in
whole or in part, by fire or other casualty, or if the Property or any portion
thereof is taken by the power of eminent domain Borrower shall give prompt
notice of such damage or taking to Lender and, subject to the terms of Paragraph
18 of the PetsMART Lease, shall promptly commence or cause to be commenced and
diligently prosecute or cause to be prosecuted the completion of the repair and
restoration of the Property as nearly as possible to the condition the Property
was in immediately prior to such fire or other casualty or taking, with such
alterations as may be approved by Lender (the "Restoration"). Use of the Net
Proceeds to pay down the Debt as may be required by Lender herein will not cause
Borrower to incur either a premium or penalty.

                                      -10-
<PAGE>
                  (b)      The term "Net Proceeds" for purposes of this Section
3.7 shall mean: (i) the net amount of all insurance proceeds under the Policies
carried pursuant to Subsections 3.3(a)(i), (iv), (v), (vi), (vii) and (viii) of
this Security Instrument as a result of such damage or destruction, after
deduction of Lender's reasonable costs and expenses (including, but not limited
to reasonable counsel fees), if any, in collecting the same, or (ii) the net
amount of all awards and payments received by Lender with respect to a taking
referenced in Section 3.6 of this Security Instrument, after deduction of
Lender's reasonable costs and expenses (including, but not limited to reasonable
counsel fees), if any, in collecting the same, whichever the case may be. If (i)
the Net Proceeds do not exceed $250,000 (the "Net Proceeds Availability
Threshold"); (ii) the costs of completing the Restoration as reasonably
estimated by Borrower shall be less than or equal to the Net Proceeds; (iii) no
Event of Default shall have occurred and be continuing under the Note, this
Security Instrument or any of the Other Security Documents; (iv) the Property
and the use thereof after the Restoration will be in compliance with, and
permitted under, all applicable zoning laws, ordinances, rules and regulations
(including, without limitation, all applicable Environmental Laws (defined in
Section 12.1); (v) (A) in the event that the Net Proceeds are insurance
proceeds, less than twenty-five percent (25%) of the total floor area of the
Improvements has been damaged or destroyed, or rendered unusable as a result of
such fire or other casualty; or (B) in the event that the Net Proceeds are
condemnation awards, less than 25% of the Land constituting the Property is
taken, such Land that is taken is located along the perimeter or periphery of
the Property, no portion of the Improvements is located in such Lands, and such
taking does not materially impair access to the Property; and (vi) Lender shall
be satisfied that any operating deficits, including all scheduled payments of
principal and interest under the Note which will be incurred with respect to the
Property as a result of the occurrence of any such fire or other casualty or
taking, whichever the case may be, will be covered out of (1) the Net Proceeds,
or (2) other funds of Borrower, then the Net Proceeds will be disbursed directly
to Borrower. Notwithstanding anything to the contrary contained in this Section
3.7(b), so long as (i) the PetsMART Lease remains in full force and effect and
(ii) PetsMART is not in default under the PetsMART Lease beyond any applicable
notice and cure periods set forth in the PetsMART Lease, then subsections (iv)
and (v) of Section 3.7(b) shall be deemed not applicable.

                  (c)      If the Net Proceeds are greater than the Net Proceeds
Availability Threshold or Borrower is not otherwise entitled to have the Net
Proceeds disbursed directly to Borrower pursuant to Subsection 3.7(b), such Net
Proceeds shall be forthwith paid to Lender to be held by Lender in a segregated
account to be made available to Borrower for the Restoration in accordance with
the provisions of this Subsection 3.7(c).

                  The Net Proceeds held by Lender pursuant to this Subsection
3.7(c) shall be made available to Borrower for payment or reimbursement of
Borrower's expenses in connection with the Restoration, subject to the following
conditions:

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

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

                                      -11-
<PAGE>
         specifications for the Restoration, such plans and specifications and
         cost estimates to be subject to Lender's approval, not to be
         unreasonably withheld or delayed;

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

                  (iv)     Net Proceeds are less than the then outstanding
         principal balance of the Note;

                  (v)      (A) in the event that the Net Proceeds are insurance
         proceeds, less than twenty-five percent (25%) of the total floor area
         of the Improvements has been damaged or destroyed, or rendered unusable
         as a result of such fire or other casualty; or (B) in the event that
         the Net Proceeds are condemnation awards, less than 25% of the Land
         constituting the Property is taken, such Land that is taken is located
         along the perimeter or periphery of the Property, no portion of the
         Improvements is located in such Lands and such taking does not
         materially impair access to the Property, provided, however, that the
         terms of this Section 3.7(c)(v) shall not apply so long as PetsMART is
         obligated to perform the Restoration pursuant to the terms of the
         PetsMART Lease;

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

                  (vii)    Lender shall be satisfied that, upon the completion
         of the Restoration, the net cash flow of the Property will be restored
         to a level sufficient to cover all carrying costs and operating
         expenses of the Property, including, without limitation, debt service
         on the Note and all required replacement reserves, reserves for tenant
         improvements and leasing commissions;

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

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

                  (x)      each Major Lease (defined in Section 3.8) in effect
         as of the date of the occurrence of such fire or other casualty shall
         remain in full force and effect during and

                                      -12-
<PAGE>
         after the completion of the Restoration without abatement of rent
         beyond the time required for Restoration.

                  (d)      The Net Proceeds held by Lender until disbursed in
accordance with the provisions of this Section 3.7 shall constitute additional
security for the Obligations. The Net Proceeds other than the Net Proceeds paid
under the Policy described in Subsection 3.3(a)(iv) shall be disbursed by Lender
to, or as directed by, Borrower, in an amount equal to the costs actually
incurred from time to time for work in place as part of the Restoration less
customary retainage from time to time during the course of the Restoration, not
more frequently than once per month, upon receipt of evidence satisfactory to
Lender that (A) all materials installed and work and labor performed (except to
the extent that they are to be paid for out of the requested disbursement) in
connection with the Restoration have been paid for in full, and (B) there exist
no notices of pendency, stop orders, mechanic's or materialman's liens or
notices of intention to file same, or any other liens or encumbrances of any
nature whatsoever on the Property arising out of the Restoration which have not
either been fully bonded and discharged of record or in the alternative fully
insured to the satisfaction of Lender by the title company insuring the lien of
this Security Instrument. The Net Proceeds paid under the Policy described in
Subsection 3.3(a)(iv) shall be disbursed by Lender to pay for debt service under
the loan evidenced by the Note, to pay other expenses incurred by Borrower in
connection with the ownership and operation of the Property, and the remainder
thereof, to, or as directed by, Borrower to pay for the cost of the Restoration
in accordance with this Section 3.7(d). Final payment shall be made after
submission to Lender of all licenses, permits, certificates of occupancy and
other required approvals of governmental authorization having jurisdiction and
Casualty Consultant's (as defined below) certification that the Restoration has
been fully completed.

                  (e)      Subject to the rights of PetsMART under the PetsMART
Lease so long as the PetsMART Lease remains in full force and effect, Lender
shall have the use of the plans and specifications and all permits, licenses and
approvals required or obtained in connection with the Restoration. The identity
of the contractors, subcontractors and materialmen engaged in the Restoration,
as well as the contracts under which they have been engaged, shall be subject to
prior review and acceptance by Lender and an independent consulting engineer
selected by Lender (the "Casualty Consultant"), such acceptance not to be
unreasonably withheld or delayed. All costs and expenses incurred by Lender in
connection with making the Net Proceeds available for the Restoration including,
without limitation, reasonable counsel fees and disbursements and the Casualty
Consultant's fees, shall be paid by Borrower.

                  (f)      If at any time the Net Proceeds or the undisbursed
balance thereof shall not, in the reasonable opinion of Lender, be sufficient to
pay in full the balance of the costs which are estimated by the Casualty
Consultant to be incurred in connection with the completion of the Restoration,
Borrower shall deposit or cause to be deposited the deficiency (the "Net
Proceeds Deficiency") with Lender before any further disbursement of the Net
Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall
be held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this
Section 3.7 shall constitute additional security for the Obligations.

                                      -13-
<PAGE>
                  (g)      Except upon the occurrence and continuance of an
Event of Default, Borrower shall settle any insurance claims with respect to the
Net Proceeds which in the aggregate are less than the Net Proceeds Availability
Threshold. Lender shall have the right to participate in and reasonably approve
any settlement for insurance claims with respect to the Net Proceeds which in
the aggregate are greater than the Net Proceeds Availability Threshold. If an
Event of Default shall have occurred and be continuing, Borrower hereby
irrevocably empowers Lender, in the name of Borrower as its true and lawful
attorney-in-fact, to file and prosecute such claim and to collect and to make
receipt for any such payment. If the Net Proceeds are received by Borrower, such
Net Proceeds shall, until the completion of the related work, be held in trust
for Lender and shall be segregated from other funds of Borrower to be used to
pay for the cost of the Restoration in accordance with the terms hereof.

                  (h)      The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds Deficiency deposited with Lender
after (i) the Casualty Consultant certifies to Lender that the Restoration has
been completed in accordance with the provisions of this Section 3.7, and (ii)
the receipt by Lender of evidence satisfactory to Lender that all costs incurred
in connection with the Restoration have been paid in full and all required
permits, licenses, certificates of occupancy and other required approvals of
governmental authorities having jurisdiction have been issued, shall be remitted
by Lender to Borrower, provided no Event of Default shall have occurred and
shall be continuing under the Note, this Security Instrument or any of the Other
Security Documents.

                  (i)      All Net Proceeds not required (i) to be made
available for the Restoration or (ii) to be returned to Borrower as excess Net
Proceeds pursuant to Subsection 3.7(h) shall be retained and applied by Lender
toward the payment of the Debt without penalty or prepayment premium whether or
not then due and payable in such order, priority and proportions as Lender in
its discretion shall deem proper or, at the discretion of Lender, the same shall
be paid, either in whole or in part, to Borrower. If Lender shall receive and
retain Net Proceeds, the lien of this Security Instrument shall be reduced only
by the amount received and retained by Lender and actually applied by Lender in
reduction of the Debt.

                  Section 3.8       Leases and Rents.

                  (a)      Borrower may enter into a proposed Lease (including
the renewal or extension of an existing Lease (a "Renewal Lease")) without the
prior written consent of Lender, provided such proposed Lease or Renewal Lease
(i) provides for rental rates and terms comparable to existing local market
rates and terms (taking into account the type and quality of the tenant) as of
the date such Lease is executed by Borrower (unless, in the case of a Renewal
Lease, the rent payable during such renewal, or a formula or other method to
compute such rent, is provided for in the original Lease), (ii) is an
arms-length transaction with a bona fide, independent third party tenant, (iii)
does not have a materially adverse effect on the value of the Property taken as
a whole, (iv) is subject and subordinate to the Security Instrument and the
tenant thereunder agrees to attorn to Lender, and (v) is written on the standard
form of lease approved by Lender. All proposed Leases which do not satisfy the
requirements set forth in this Subsection 3.8(a) shall be subject to the prior
approval of Lender and its counsel, at Borrower's expense. Borrower shall
promptly deliver to Lender copies of all Leases which are entered into

                                      -14-
<PAGE>
pursuant to this Subsection together with Borrower's certification that it has
satisfied all of the conditions of this Subsection.

                  (b)      Borrower (i) shall observe and perform all the
obligations imposed upon the lessor under the Leases and shall not do or permit
to be done anything to impair the value of any of the Leases as security for the
Debt; (ii) upon request, shall promptly send copies to Lender of all notices of
default which Borrower shall send or receive thereunder; (iii) shall enforce all
of the material terms, covenants and conditions contained in the Leases upon the
part of the tenant thereunder to be observed or performed, (iv) shall not
collect any of the Rents more than one (1) month in advance (except security
deposits shall not be deemed Rents collected in advance); (v) shall not execute
any other assignment of the lessor's interest in any of the Leases or the Rents;
and (vi) shall not consent to any assignment of or subletting under any Leases
not in accordance with their terms, without the prior written consent of Lender.

                  (c)      Borrower may, without the consent of Lender, amend,
modify or waive the provisions of any Lease or terminate, reduce rents under,
accept a surrender of space under, or shorten the term of, any Lease (including
any guaranty, letter of credit or other credit support with respect thereto)
provided that such action (taking into account, in the case of a termination,
reduction in rent, surrender of space or shortening of term, the planned
alternative use of the affected space) does not have a materially adverse effect
on the value of the Property taken as a whole, and provided that such Lease, as
amended, modified or waived, is otherwise in compliance with the requirements of
this Security Instrument and any subordinate agreement binding upon Lender with
respect to such Lease. A termination of a Lease with a tenant who is in default
beyond applicable notice and grace periods shall not be considered an action
which has a materially adverse effect on the value of the Property taken as a
whole. Any amendment, modification, waiver, termination, rent reduction, space
surrender or term shortening which does not satisfy the requirements set forth
in this Subsection shall be subject to the prior approval of Lender and its
counsel, which approval shall not be unreasonably withheld or delayed, at
Borrower's expense. Borrower shall promptly deliver to Lender copies of
amendments, modifications and waivers which are entered into pursuant to this
Subsection together with Borrower's certification that it has satisfied all of
the conditions of this Subsection.

                  (d)      Notwithstanding anything contained herein to the
contrary, Borrower shall not, without the prior written consent of Lender, enter
into, renew, extend, amend, modify, waive any provisions of, terminate, reduce
rents under, accept a surrender of space under, or shorten the term of, any
Major Lease. The term "Major Lease" shall mean any Lease between Borrower as
landlord and a third party as tenant demising in the aggregate more than the
lesser of (i) 15,000 rentable square feet or (ii) fifteen percent (15%) of the
total rentable square feet at the Property.

                  (e)      Provided no Event of Default has occurred and is
continuing, Borrower shall have the right, upon notice to, but without the
consent of, Lender, to accept or reject any offer by PetsMART to terminate the
PetsMART Lease with respect to the Property in connection with a casualty or
condemnation to the Property pursuant to and in accordance with the terms and
provisions of Paragraph 17 of the PetsMART Lease so long as the amount payable
by PetsMART to Borrower pursuant to the PetsMART Lease in connection with such
termination and/or the amount of insurance proceeds or condemnation award, as
applicable, which Borrower is entitled to retain pursuant to the PetsMART Lease
in connection therewith is not less than

                                      -15-
<PAGE>
(i) the Allocated Loan Amount (as defined in the Note) for the Property, in the
event Borrower is prepaying a portion of the Debt in connection with such
casualty or condemnation pursuant to Article VI of the Note or (ii) an amount
sufficient to purchase the Partial Defeasance Collateral (as defined in the
Note) for the Property, in the event Borrower is defeasing a portion of the Debt
in connection with such casualty or condemnation pursuant to Article VI of the
Note, and provided, further, that such prepayment or defeasance is made in
accordance with the terms of the Note, this Security Instrument and the Other
Security Documents.

                  (f)      Borrower hereby covenants and agrees that (A) prior
to the Release Date (as defined in the Note) Borrower shall not, without the
prior written consent of Lender, (i) require Tenant to repurchase the Property
and pay to Borrower the Termination Amount (as defined in the PetsMART Lease)
pursuant to Paragraph 36(b) or 36(c) of the PetsMART Lease or (ii) declare the
entire Basic Rent (as defined in the PetsMART Lease) to be immediately due and
payable pursuant to Paragraph 23(b) of the PetsMART Lease and (B) that in the
event Borrower elects to exercise either such right from and after the Release
Date, Borrower shall simultaneously defease the portion of the Loan allocable to
the Premises or the entire Loan, as applicable, pursuant to and in accordance
with the terms and provisions of Article VI of the Note. Any breach by Borrower
of the foregoing covenant and agreement shall constitute an Event of Default.

                  Section 3.9       Maintenance and Use of Property. Borrower
shall cause the Property to be maintained in a good and safe condition and
repair. The Improvements and the Personal Property shall not be removed,
demolished or materially altered (except for normal replacement of the Personal
Property or as permitted in the PetsMART Lease) without the consent of Lender.
Except as provided in Section 3.8(f) hereof, Borrower shall promptly repair,
replace or rebuild or cause to be repaired, replaced or rebuilt, any part of the
Property which may be destroyed by any casualty, or become damaged, worn or
dilapidated or which may be affected by any proceeding of the character referred
to in Section 3.6 hereof and shall complete and pay for any structure at any
time in the process of construction or repair on the Land. Borrower shall not
initiate, join in, acquiesce in, or consent to any change in any private
restrictive covenant, zoning law or other public or private restriction,
limiting or defining the uses which may be made of the Property or any part
thereof, provided, that Borrower shall be permitted to enter into easement
agreements or grant rights of way so long as such agreements or grants do not
reduce the value of the Property or impair its use, and so long as Borrower has
delivered to Lender a title endorsement satisfactory to Lender with respect to
such agreements and/or rights of way. If under applicable zoning provisions the
use of all or any portion of the Property is or shall become a nonconforming
use, Borrower will not cause or permit the nonconforming use to be discontinued
or the nonconforming Improvement to be abandoned without the express written
consent of Lender.

                  Section 3.10      Waste. Borrower shall not commit or suffer
any waste of the Property or make any change in the use of the Property which
will in any way materially increase the risk of fire or other hazard arising out
of the operation of the Property, or take any action that might invalidate or
give cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way impair the value of the Property or the security of
this Security Instrument. Borrower will not, without the prior written consent
of Lender, permit any drilling or exploration for or extraction, removal, or
production of any minerals from the

                                      -16-
<PAGE>
surface or the subsurface of the Land, regardless of the depth thereof or the
method of mining or extraction thereof.

                  Section 3.11      Compliance With Laws.

                  (a)      Borrower shall promptly comply or cause compliance
with all existing and future federal, state and local laws, orders, ordinances,
governmental rules and regulations or court orders affecting the Property, or
the use thereof ("Applicable Laws").

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

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

                  (d)      Borrower shall give prompt notice to Lender of the
receipt by Borrower of any notice related to a violation of any Applicable Laws
and of the commencement of any proceedings or investigations which relate to
compliance with Applicable Laws.

                  (e)      After prior written notice to Lender, Borrower, at
its own expense, may contest by appropriate legal proceeding, promptly initiated
and conducted in good faith and with due diligence, the Applicable Laws
affecting the Property, provided that (i) no Event of Default has occurred and
is continuing under the Note, this Security Instrument or any of the Other
Security Documents; (ii) Borrower is permitted to do so under the provisions of
any other mortgage, deed of trust or deed to secure debt affecting the Property;
(iii) such proceeding shall be permitted under and be conducted in accordance
with the provisions of any other instrument to which Borrower or the Property is
subject and shall not constitute a default thereunder; (iv) neither the
Property, any part thereof or interest therein, any of the tenants or occupants
thereof, nor Borrower shall be affected in any material adverse way as a result
of such proceeding; (v) non-compliance with the Applicable Laws shall not impose
civil or criminal liability on Borrower or Lender; and (vi) Borrower shall have
furnished to Lender all other items reasonably requested by Lender.

                  Section 3.12      Books and Records.

                  (a)      Borrower and any Guarantors (defined in Subsection
10.1(e)) and Indemnitor(s) (defined in Section 13.4), if any, shall keep
adequate books and records of account

                                      -17-
<PAGE>
in accordance with generally accepted accounting principles ("GAAP"), or in
accordance with other methods acceptable to Lender in its sole discretion,
consistently applied and furnish to Lender:

                  (i)      monthly, or if the Loan (defined below) has been
         securitized or sold as a whole loan by Lender, quarterly and annual
         certified rent rolls in the form attached hereto as Exhibit B signed
         and dated by Borrower, detailing the names of all tenants of the
         Improvements, the portion of Improvements occupied by each tenant, the
         base rent and any other charges payable under each Lease and the term
         of each Lease, including the expiration date, the extent to which any
         tenant is in default under any Lease, and any other information as is
         reasonably required by Lender, within twenty (20) days after the end of
         each calendar month, thirty (30) days after the end of each fiscal
         quarter or sixty (60) days after the close of each fiscal year of
         Borrower, as applicable;

                  (ii)     on a monthly basis, operating statements of the
         Property in the form attached as Exhibit C for the immediately
         preceding month (and for previous periods if required by Lender), or if
         the Loan has been securitized or sold as a whole loan by Lender,
         quarterly and annual operating statements of the Property in the form
         attached hereto as Exhibit D and Exhibit E, all of which shall be
         prepared and certified by Borrower in the form required by Lender,
         detailing the revenues received, the expenses incurred and the net
         operating income before and after debt service (principal and interest)
         and major capital improvements completed by Borrower for each month and
         containing appropriate year to date information, within twenty (20)
         days after the end of each calendar month, thirty (30) days after the
         end of each fiscal quarter or sixty (60) days after the close of each
         fiscal year of Borrower, as applicable;

                  (iii)    an annual operating statement of the Property in the
         form attached hereto as Exhibit E detailing the total revenues
         received, total expenses incurred, total cost of all capital
         improvements, total debt service and total cash flow, to be prepared
         and certified by Borrower in the form required by Lender, within sixty
         (60) days after the close of each fiscal year of Borrower;

                  (iv)     quarterly and annual balance sheet in the form
         attached hereto as Exhibit F and profit and loss statements of
         Borrower, any Guarantors and any Indemnitor(s) in the form required by
         Lender, prepared and certified by the respective Borrower, Guarantors
         and/or Indemnitor(s), within thirty (30) days after the end of each
         fiscal quarter and within sixty (60) days after the end of each fiscal
         year, with respect to Borrower, and within sixty (60) days (or, at any
         time after the Loan is securitized, ninety (90) days) after the end of
         each fiscal quarter with respect to any Guarantors and Indemnitor(s);
         and audited financial statements prepared by an independent certified
         public accountant acceptable to Lender, within one hundred twenty (120)
         days after the close of each fiscal year, with respect to any Guarantor
         and Indemnitor; and

                  (v)      an annual operating budget in the form attached
         hereto as Exhibit G presented on a monthly basis consistent with the
         annual operating statement described above for the Property, including
         cash flow projections for the upcoming year, and all

                                      -18-
<PAGE>
         proposed capital replacements and improvements at least fifteen (15)
         days prior to the start of each fiscal year.

                  (b)      Upon request from Lender, Borrower, any Guarantor and
any Indemnitor shall furnish in a timely manner to Lender:

                  (i)      at any time the PetsMART Lease is no longer in effect
         or if PetsMART has otherwise vacated the Property, a property
         management report for the Property, showing the number of inquiries
         made and/or rental applications received from tenants or prospective
         tenants and deposits received from tenants and any other information
         requested by Lender, in reasonable detail and certified by Borrower (or
         an officer, general partner, member or principal of Borrower if
         Borrower is not an individual) under penalty of perjury to be true and
         complete, but no more frequently than quarterly; and

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

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

                  (d)      Borrower acknowledges the importance to Lender of the
timely delivery of each of the items required by this Section 3.12 (each, a
"Required Financial Item" and collectively, the "Required Financial Items"). In
the event Borrower fails to deliver to Lender any of the Required Financial
Items within the time frame specified herein and such failure is not cured
within ten (10) business days after notice from Lender (each such event, a
"Reporting Failure"), without limiting Lender's other rights and remedies with
respect to the occurrence of such an Event of Default, Borrower shall pay to
Lender the sum of $1,000.00 per occurrence for each Reporting Failure. It shall
constitute a further Event of Default hereunder if any such payment is not
received by Lender within thirty (30) days of the date on which such payment is
due, and Lender shall be entitled to the exercise of all of its rights and
remedies provided hereunder.

                  (e)      In the event that two (2) Reporting Failures occur
during any twelve (12) month period during the term of the Loan, Borrower agrees
to establish a lockbox and lockbox account pursuant to Lender's requirements,
each in the name of Lender, and to execute Lender's standard form Cash
Management Agreement, together with any documentation ancillary thereto as
required by Lender, including, without limitation, a lockbox agreement with a
bank acceptable to Lender, signature cards and letters to tenants, credit card
companies and other account receivable counterparties directing them to pay all
rents, receivables and other sums directly to the lockbox account.

                                      -19-
<PAGE>
                  Section 3.13      Payment For Labor and Materials. (a)
Borrower will promptly pay or cause to be paid when due all bills and costs for
labor, materials, and specifically fabricated materials incurred in connection
with the Property and never permit to exist in respect of the Property or any
part thereof any lien or security interest, even though inferior to the liens
and the security interests hereof, and in any event never permit to be created
or exist in respect of the Property or any part thereof any other or additional
lien or security interest other than the liens or security interests hereof,
except for the Permitted Exceptions (defined below).

                  (b)      After prior written notice to Lender, Borrower or, if
the PetsMART Lease or an Acceptable Replacement Lease is in full force and
effect, as applicable, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in party of any of
such lien, provided that (i) no Event of Default has occurred and is continuing
under the Note, this Security instrument or any of the Other Security Documents,
(ii) such proceeding shall suspend the collection of the such lien from Borrower
and from the Property or Borrower shall have paid such lien under protest, (iii)
neither the Property nor any part thereof or interest therein will be in danger
of being sold, forfeited, terminated, cancelled or lost, and (iv) Borrower shall
have deposited with Lender adequate reserves, a bond, or other reasonable
security for the payment of the lien, together with all interest and penalties
thereon, unless Borrower has paid all of the lien under protest, or Borrower or
PetsMART or an Acceptable Replacement Tenant shall have furnished the security
as may be required in the proceeding, or as may be reasonably requested by
Lender to insure the payment of any contested lien together with all interest
and penalties thereon.

                  Section 3.14      Performance of Other Agreements. Borrower
shall observe and perform or cause to be observed and performed each and every
term to be observed or performed by Borrower pursuant to the terms of any
agreement or recorded instrument affecting or pertaining to the Property, or
given by Borrower to Lender for the purpose of further securing an Obligation
secured hereby and any amendments, modifications or changes thereto.

                  Section 3.15      Change of Name, Identity or Structure.
Except as may be permitted under Article 8 hereof, Borrower will not change
Borrower's name, identity (including its trade name or names) or, if not an
individual, Borrower's corporate, partnership or other structure without
notifying the Lender of such change in writing at least thirty (30) days
prior to the effective date of such change and, in the case of a change in
Borrower's structure, without first obtaining the prior written consent of
the Lender.

                  Section 3.16      Existence. Borrower will continuously
maintain (a) its existence and shall not dissolve or permit its dissolution, (b)
its rights to do business in the state where the Property is located and (c) its
franchises and trade names, if any.

                  Section 3.17      Management. The management of the Property
shall be by either: (a) Borrower or an entity affiliated with Borrower approved
by Lender for so long as Borrower or said affiliated entity is managing the
Property in a first class manner; (b) a professional property management company
approved by Lender; or (c) by PetsMART or an Acceptable Replacement Tenant, so
long as the PetsMART Lease or an Acceptable Replacement Lease is in full force
and effect and provided there is no uncured default under the PetsMART Lease or
the

                                      -20-
<PAGE>
Acceptable Replacement Lease. Such management by an affiliated entity or a
professional property management company shall be pursuant to a written
agreement approved by Lender. In no event shall any manager be removed or
replaced or the terms of any management agreement modified or amended without
the prior written consent of Lender. In the event of default hereunder or under
any management contract then in effect, which default is not cured within any
applicable grace or cure period, Lender shall have the right to immediately
terminate, or to direct Borrower to immediately terminate, such management
contract and to retain, or to direct Borrower to retain, a new management agent
approved by Lender. All Rents generated by or derived from the Property shall
first be utilized solely for current expenses directly attributable to the
ownership and operation of the Property, including, without limitation, current
expenses relating to Borrower's liabilities and obligations with respect to the
Note, this Security Instrument and the Other Security Documents, and none of the
Rents generated by or derived from the Property shall be diverted by Borrower
and utilized for any other purpose unless all such current expenses attributable
to the ownership and operation of the Property have been fully paid and
satisfied.

                                   ARTICLE IV

                                SPECIAL COVENANTS

                  Borrower covenants and agrees that:

                  Section 4.1       Property Use. The Property shall be used
only as a retail facility and uses ancillary thereto, and, except for any
permitted use by PetsMART or an Acceptable Replacement Tenant as set forth in
the PetsMART Lease or an Acceptable Replacement Lease, for no other use, without
the prior written consent of Lender.

                  Section 4.2       Single Purpose Entity. It has not and shall
not and agrees that its general partner(s), if Borrower is a partnership, or its
managing member(s), if Borrower is a limited liability company (in each case,
"Principal"), has not and shall not:

                  (a)      with respect to any Principal, fail to be organized
as a corporation;

                  (b)      with respect to Borrower, fail to be organized solely
for the purpose of (i) acquiring, developing, owning, managing or operating the
Property, (ii) entering into this Security Instrument and the documents related
hereto, and (iii) engaging in any activity that is incidental, necessary or
appropriate to accomplish the foregoing and, with respect to a Principal, be
organized for any purpose other than (I) owning at least a 0.5% interest in
Borrower, (II) serving as a manager of Borrower and (III) engaging in any
activity that is incidental, necessary or appropriate to owning an interest in
Borrower and serving as a manager of Borrower;

                  (c)      with respect to Borrower, engage in any business or
activity other than the ownership, operation and maintenance of the Property,
and activities incidental thereto and with respect to Principal, engage in any
business or activity other than the ownership of its interest in Borrower, and
activities incidental thereto including the management of the Property;

                                      -21-
<PAGE>
                  (d)      with respect to Borrower, acquire or own any material
assets other than (i) the Property, and (ii) such incidental Personal Property
as may be necessary for the operation of the Property and with respect to
Principal, acquire or own any material asset other than (i) its interest in
Borrower, and (ii) such incidental Personal Property as may be necessary to
effectuate its purpose;

                  (e)      merge into or consolidate with any person or entity
or dissolve, terminate or liquidate in whole or in part, transfer or otherwise
dispose of all or substantially all of its assets or change its legal structure;

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

                  (g)      own, form or acquire any subsidiary or make any
investment in, any person or entity, other than Principal's investment in
Borrower;

                  (h)      commingle its assets with the assets of any of its
members, general partners, affiliates, principals or of any other person or
entity nor fail to hold all of its assets in its own name;

                  (i)      with respect to Borrower, incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than the Debt, except for trade payables in the ordinary course of its business
of owning and operating the Property, provided that such debt is not evidenced
by a note and is paid when due and, with respect to Principal, incur any debt
secured or unsecured, direct or contingent (including guaranteeing any
obligations), except for trade payables in the ordinary course of its business
of owning an interest in Borrower and serving as a manager of Borrower, provided
that such debt is not evidenced by a note and is paid when due;

                  (j)      become insolvent or fail to pay its debts and
liabilities from its assets as the same shall become due;

                  (k)      fail to maintain its records and books of account
separate and apart from those of the members, general partners, principals and
affiliates of Borrower or of Principal, as the case may be, the affiliates of a
member, general partner or principal of Borrower or Principal, as the case may
be, and any other person or entity or fail to maintain such books and records in
the ordinary course of its business;

                  (l)      enter into any contract or agreement with any member,
general partner, principal or affiliate of Borrower or of Principal, as the case
may be, Guarantor or Indemnitor, or any member, general partner, principal or
affiliate thereof, except upon terms and conditions that are intrinsically fair,
commercially reasonable and substantially similar to those that would be

                                      -22-
<PAGE>
available on an arms-length basis with third parties other than any member,
general partner, principal or affiliate of Borrower or of Principal, as the case
may be, Guarantor or Indemnitor, or any member, general partner, principal or
affiliate thereof;

                  (m)      seek the dissolution or winding up in whole, or in
part, of Borrower or of Principal, as the case may be;

                  (n)      fail to correct any known misunderstandings regarding
the separate identity of Borrower, or of Principal, as the case may be, from any
member, general partner, principal or affiliate thereof or any other person;

                  (o)      guaranty or become obligated for the debts of any
other person or entity or hold out its credit as being able to satisfy the debts
of another person or entity, except if a Principal is a general partner of
Borrower, such an entity may be under state law liable for the debts of Borrower
in its capacity as a "general partner";

                  (p)      make any loans or advances to any third party,
including any member, general partner, principal or affiliate of Borrower, or of
Principal, as the case may be, or any member, general partner, principal or
affiliate thereof, nor buy or hold evidence of indebtedness issued by any other
person or entity (other than cash or investment grade securities);

                  (q)      fail to hold itself out to the public as a legal
entity separate and distinct from any other entity or person, fail to conduct
its business solely in its own name, mislead others as to the identity with
which such other party is transacting business, or suggest that Borrower or
Principal, as the case may be, is responsible for the debts of any third party
(including any member, general partner, principal or affiliate of Borrower, or
of Principal, as the case may be, or any member, general partner, principal or
affiliate thereof);

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

                  (s)      share any common logo with or hold itself out as or
be considered as a department or division of (i) any general partner, principal,
member or affiliate of Borrower or of Principal, as the case may be, (ii) any
affiliate of a general partner, principal or member of Borrower or of Principal,
as the case may be, or (iii) any other person or entity;

                  (t)      fail to maintain separate financial statements
showing its assets and liabilities separate and apart from those of any other
person or entity, provided that Lender acknowledges that Borrower may file
consolidated tax returns with Corporate Property Associates 14 Incorporated, a
Maryland corporation;

                  (u)      fail to observe all applicable organizational
formalities;

                  (v)      pledge its assets for the benefit of any other person
or entity, other than in the case of Borrower, in connection with the loan
secured hereby;

                                      -23-
<PAGE>
                  (w)      with respect to Principal, fail at any time to have
at least one independent director (an "Independent Director") who is not at the
time of initial appointment, or at any time while serving as a director of
Principal, and who has not been at any time during the preceding five (5) years:
(a) a stockholder, director (with the exception of serving as the independent
director of Principal), officer, employee, partner, attorney or counsel of
Principal, Borrower or any affiliate of either of them; (b) a customer, supplier
or other person who derives any of its purchases or revenues from its activities
with Principal, Borrower or any affiliate of either of them; (c) a person or
other entity controlling or under common control with any such stockholder,
partner, customer, supplier or other person; or (d) a member of the immediate
family of any such stockholder, director, officer, employee, partner, customer,
supplier or other person. (As used herein, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of management, policies or activities of a person or entity, whether
through ownership of voting securities by contract or otherwise);

                  (x)      allow or cause Principal to take any action requiring
the unanimous vote of its Board of Directors unless an Independent Director
shall participate in such vote; or

                  (y)      take for itself or cause any other entity to take any
of the following actions without the unanimous consent of its partners or
members, as applicable, and the unanimous affirmative vote of the Board of
Directors of Principal (including the Independent Director): (i) file or consent
to the filing of any bankruptcy, insolvency or reorganization case or
proceeding; institute any proceedings under any applicable insolvency law or
otherwise seek any relief under any laws relating to the relief from debts or
the protection of debtors generally, (ii) seek or consent to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator, custodian or any
similar official for itself or any other entity, (iii) make an assignment of its
assets for the benefit of its creditors or an assignment of the assets of
another entity for the benefit of such entity's creditors, or (iv) take any
action in furtherance of the foregoing.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

                  Borrower represents and warrants to Lender that:

                  Section 5.1       Warranty of Title. Borrower has good title
to the Property and has the right to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the same and that Borrower possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
that it owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of this Security Instrument (the "Permitted Exceptions").
Borrower shall forever warrant, defend and preserve the title and the validity
and priority of the lien of this Security Instrument and shall forever warrant
and defend the same to Lender and/or Trustee against the claims of all persons
whomsoever.

                  Section 5.2       Legal Status and Authority. Borrower (a) is
duly organized, validly existing and in good standing under the laws of its
state of organization or incorporation; (b) is duly qualified to transact
business and is in good standing in the state where the Property is

                                      -24-
<PAGE>
located; and (c) has all necessary approvals, governmental and otherwise, and
full power and authority to own, operate and lease the Property. Borrower (and
the undersigned representative of Borrower, if any) has full power, authority
and legal right to execute this Security Instrument, and to mortgage, grant,
bargain, sell, pledge, assign, warrant, transfer and convey the Property
pursuant to the terms hereof and to keep and observe all of the terms of this
Security Instrument on Borrower's part to be performed.

                  Section 5.3       Validity of Documents. (a) The execution,
delivery and performance of the Note, this Security Instrument and the Other
Security Documents and the borrowing evidenced by the Note (i) are within the
power and authority of Borrower; (ii) have been authorized by all requisite
organizational action; (iii) have received all necessary approvals and consents,
corporate, governmental or otherwise; (iv) will not violate, conflict with,
result in a breach of or constitute (with notice or lapse of time, or both) a
material default under any provision of law, any order or judgment of any court
or governmental authority, the articles of incorporation, by-laws, partnership
or trust agreement, articles of organization, operating agreement, or other
governing instrument of Borrower, or any indenture, agreement or other
instrument to which Borrower is a party or by which it or any of its assets or
the Property is or may be bound or affected; (v) will not result in the creation
or imposition of any lien, charge or encumbrance whatsoever upon any of its
assets, except the lien and security interest created hereby; and (vi) will not
require any authorization or license from, or any filing with, any governmental
or other body (except for the recordation of this Security Instrument in
appropriate land records in the State where the Property is located and except
for Uniform Commercial Code filings relating to the security interest created
hereby); and (b) to the best knowledge of Borrower, the Note, this Security
Instrument and the Other Security Documents constitute the legal, valid and
binding obligations of Borrower.

                  Section 5.4       Litigation. There is no action, suit or
proceeding, judicial, administrative or otherwise (including any condemnation or
similar proceeding), pending or, to the best of Borrower's knowledge, threatened
or contemplated against Borrower, a Guarantor, if any, an Indemnitor, if any, or
against or affecting the Property that (a) has not been disclosed to Lender by
Borrower in writing, and has a material adverse affect on the Property or
Borrower's, any Guarantor's or any Indemnitor's ability to perform its
obligations under the Note, this Security Instrument or the Other Security
Documents, or (b) is not adequately covered by insurance, each as determined by
Lender in its sole discretion.

                  Section 5.5       Status of Property.

                  (a)      Borrower has obtained or caused to be obtained all
necessary certificates, licenses and other approvals, governmental and
otherwise, necessary for the operation of the Property and the conduct of its
business and all required zoning, building code, land use, environmental and
other similar permits or approvals, all of which are in full force and effect as
of the date hereof and not subject to revocation, suspension, forfeiture or
modification.

                  (b)      The Property and the present use and occupancy
thereof are in full compliance with all applicable zoning ordinances, building
codes, land use laws, Environmental Laws and other similar laws.

                                      -25-
<PAGE>
                  (c)      The Property is served by all utilities required for
the current or contemplated use thereof. All utility service is provided by
public utilities and the Property has accepted or, to the best of Borrower's
knowledge, is equipped to accept such utility service.

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

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

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

                  (g)      To the best of Borrower's knowledge, all costs and
expenses of any and all labor, materials, supplies and equipment used in the
construction of the Improvements and for which Borrower is or may be responsible
or which may otherwise become a lien upon the Property have been paid in full.

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

                  (i)      To the best of Borrower's knowledge, liquid and solid
waste disposal, septic and sewer systems located on the Property are in a good
and safe condition and repair and in compliance with all Applicable Laws.

                  (j)      No portion of the Improvements is located in an area
identified by the Secretary of Housing and Urban Development or any successor
thereto as an area having special flood hazards pursuant to the Flood Insurance
Acts or, if any portion of the Improvements is located within such area,
Borrower has obtained and will maintain the insurance prescribed in Section 3.3
hereof.

                  (k)      All the Improvements lie within the boundaries of the
Land.

                  (l)      As to any declarations of covenants, conditions and
restrictions or similar agreements that run with the Land (the "Declarations")
to which Tenant is a party or by which Tenant or any Property or any portion
thereof may be bound, and which are listed on Exhibit "C" hereto, except as may
be specifically set forth in Exhibit "C":

                  (i)      All of the Declarations are in full force and effect
         in accordance with their respective terms, and none of the Declarations
         has been modified or amended;

                  (ii)     All work required under the Declarations to be
         performed by Tenant as of the closing date and all work required under
         the Declarations to be performed by any third party for the benefit of
         Tenant or any Property, as of the closing date, has been performed.

                                      -26-
<PAGE>
                  (iii)    There are no written or oral promises, agreements,
         understandings or commitments between Tenant and any party to any of
         the Declarations other than those contained in the Declarations and the
         other instruments listed on said Exhibit "C"; and

                  (iv)     There is written claim of default under any of the
         Declarations by any party thereto which has not been cured; and to
         Tenant's knowledge there exists no event which alone, or with notice or
         the lapse of time or both, would constitute a default under any of the
         Declarations by any party thereto. Neither Tenant, the current owner of
         any Property nor any Property is in default under any of the
         Declarations or in violation of any provision of any Declaration. All
         sums due and payable by Tenant or the current owner of any Property
         under the Declarations as of the closing date have been paid in full
         prior to the closing date. There are no rights of first refusal or
         options to purchase any Property (or any part thereof) contained in the
         Declarations or in any other agreement affecting any Property (or any
         part thereof).

                  Section 5.6      No Foreign Person. Borrower is not a
"foreign person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code of 1986, as amended and the related Treasury Department
regulations.

                  Section 5.7       Separate Tax Lot. The Property is assessed
for real estate tax purposes as one or more wholly independent tax lot or lots,
separate from any adjoining land or improvements not constituting a part of such
lot or lots, and no other land or improvements is assessed and taxed together
with the Property or any portion thereof.

                  Section 5.8       Leases. (a) Except as disclosed in the rent
roll for the Property delivered to and approved by Lender in writing prior to
the date hereof, (i) Borrower is the sole owner of the entire lessor's interest
in the Leases; (ii) the Leases are valid and enforceable and in full force and
effect; (iii) all of the Leases are arms-length agreements with bona fide,
independent third parties; (iv) no party under any Lease is in default; (v) all
Rents due have been paid in full; (vi) the terms of all alterations,
modifications and amendments to the Leases are reflected in the certified
occupancy statement delivered to and approved by Lender; (vii) none of the Rents
reserved in the Leases have been assigned or otherwise pledged or hypothecated;
(viii) none of the Rents have been collected for more than one (1) month in
advance (except a security deposit shall not be deemed rent collected in
advance); (ix) the premises demised under the Leases have been completed and the
tenants under the Leases have accepted the same and have taken possession of the
same on a rent-paying basis; (x) there exist no offsets or defenses to the
payment of any portion of the Rents and Borrower has no monetary obligation to
any tenant under any Lease; (xi) Borrower has received no notice from any tenant
challenging the validity or enforceability of any Lease; (xii) there are no
agreements with the tenants under the Leases other than expressly set forth in
each Lease; (xiii) the Leases are valid and enforceable against Borrower and the
tenants set forth therein; (xiv) no Lease contains an option to purchase, right
of first refusal to purchase, or any other similar provision; (xv) no person or
entity has any possessory interest in, or right to occupy, the Property except
under and pursuant to a Lease; (xvi) each Lease is subordinate to this Security
Instrument, either pursuant to its terms or a recordable subordination
agreement; (xvii) no Lease has the benefit of a non-disturbance agreement that
would be considered unacceptable to prudent institutional lenders, (xviii) all
security deposits relating to the Leases reflected on the certified rent roll
delivered to Lender

                                      -27-
<PAGE>
have been collected by Borrower; and (xix) no brokerage commissions or finders
fees are due and payable regarding any Lease.

                  (b)      Notwithstanding anything contained herein to the
contrary, Borrower shall not willfully withhold from Lender any information
regarding renewal, extension, amendment, modification, waiver of provisions of,
termination, rental reduction of, surrender of space of, or shortening of the
term of, any Lease during the term of the Loan. Borrower further covenants and
agrees that, to the best of Borrower's knowledge, one of the entities comprising
PetsMART, as of the date hereof, is in physical occupancy of each of the
premises demised under the PetsMART Lease and is paying full rent under the
PetsMART Lease.

                  Section 5.9       Financial Condition. (a) (i) Borrower is
solvent, and no bankruptcy, reorganization, insolvency or similar proceeding
under any state or federal law with respect to Borrower has been initiated, and
(ii) Borrower has received reasonably equivalent value for the granting of this
Security Instrument.

                  (b)      No petition in bankruptcy has ever been filed by or
against Borrower, any Guarantor, any Indemnitor or any related entity, or any
principal, general partner or member thereof, in the last seven (7) years, and
neither Borrower, any Guarantor, any Indemnitor nor any related entity, or any
principal, general partner or member thereof, in the last seven (7) years has
ever made any assignment for the benefit of creditors or taken advantage of any
insolvency act or any act for the benefit of debtors, provided, however, that
this representation specifically excludes any shareholder in Guarantor.

                  Section 5.10      Business Purposes. The loan evidenced by the
Note secured by the Security Instrument and the Other Security Documents (the
"Loan") is solely for the business purpose of Borrower, and is not for personal,
family, household, or agricultural purposes.

                  Section 5.11      Taxes. Borrower, any Guarantor and any
Indemnitor have filed all federal, state, county, municipal, and city income and
other tax returns required to have been filed by them and have paid all taxes
and related liabilities which have become due pursuant to such returns or
pursuant to any assessments received by them. Neither Borrower, any Guarantor
nor any Indemnitor knows of any basis for any additional assessment in respect
of any such taxes and related liabilities for prior years. Borrower confirms
that its federal tax identification number is: 52-2346850.

                  Section 5.12      Mailing Address. Borrower's mailing address,
as set forth in the opening paragraph hereof or as changed in accordance with
the provisions hereof, is true and correct.

                  Section 5.13      No Change in Facts or Circumstances. All
information in the application for the Loan submitted to Lender (the "Loan
Application") and in all financing statements, rent rolls, reports, certificates
and other documents submitted in connection with the Loan Application or in
satisfaction of the terms thereof, are accurate, complete and correct in all
respects. There has been no adverse change in any condition, fact, circumstance
or event that would make any such information inaccurate, incomplete or
otherwise misleading.

                                      -28-
<PAGE>
                  Section 5.14      Disclosure. Borrower has disclosed to Lender
all material facts and has not failed to disclose any material fact that could
cause any representation or warranty made herein to be materially misleading.

                  Section 5.15      Third Party Representations. Each of the
representations and the warranties made by each Guarantor and Indemnitor herein
or in any Other Security Document(s) is true and correct in all material
respects.

                  Section 5.16      Illegal Activity. No portion of the Property
has been or will be purchased, improved, equipped or furnished with proceeds of
any illegal activity and to the best of Borrower's knowledge, there are no
illegal activities or activities relating to controlled substance at the
Property.

                  Section 5.17      Regulations T, U and X. Borrower does not
own any "margin stock" as such term is defined in Regulation U of the Board of
Governors of the Federal Reserve System (12 CFR Part 221), as amended. Borrower
will not use any part of the proceeds from the loan to be made under this
Security Instrument (a) directly or indirectly, to purchase or carry any such
stock or to reduce or retire any Obligations originally incurred to purchase any
such stock within the meaning of such Regulation, (b) so as to involve Borrower
in a violation of Regulation T, U or X of such Board (12 CFR Parts 220, 221 and
224), as amended, or (c) for any other purpose not permitted by Section 7 of the
Securities Exchange Act of 1934, as amended, or any of the rules and regulations
respecting the extension of credit promulgated thereunder.

                  Section 5.18      Non-Consolidation. All of the assumptions
made in that certain substantive non-consolidation opinion letter of even date
herewith delivered by Borrower's counsel in connection herewith and any
subsequent non-consolidation opinion delivered in accordance with the terms and
conditions of this Mortgage and/or the Note, including, but not limited to, any
exhibits attached thereto (the "Non-Consolidation Opinion"), are true and
correct in all respects. Borrower has complied and will comply with all of the
assumptions made with respect to it in the Non-Consolidation Opinion. Each
entity other than Borrower with respect to which an assumption is made in the
Non-Consolidation Opinion has complied and will comply with all of the
assumptions made with respect to it in the Non-Consolidation Opinion.

                                   ARTICLE VI

                            OBLIGATIONS AND RELIANCE

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

                  Section 6.2       No Reliance on Lender. The members, general
partners, principals and (if Borrower is a trust) beneficial owners of Borrower
are experienced in the ownership and operation of properties similar to the
Property, and Borrower and Lender are relying solely upon such expertise and
business plan in connection with the ownership and operation of the Property.

                                      -29-
<PAGE>
Borrower is not relying on Lender's expertise, business acumen or advice in
connection with the Property.

                  Section 6.3       No Lender Obligations. Notwithstanding the
provisions of Subsections 1.1(f) and (l) or Section 1.2, Lender is not
undertaking the performance of (i) any obligations under the Leases; or (ii) any
obligations with respect to such agreements, contracts, certificates,
instruments, franchises, permits, trademarks, licenses and other documents. By
accepting or approving anything required to be observed, performed or fulfilled
or to be given to Lender pursuant to this Security Instrument, the Note or the
Other Security Documents, including without limitation, any officer's
certificate, balance sheet, statement of profit and loss or other financial
statement, survey, appraisal, or insurance policy, Lender shall not be deemed to
have warranted, consented to, or affirmed the sufficiency, the legality or
effectiveness of same, and such acceptance or approval thereof shall not
constitute any warranty or affirmation with respect thereto by Lender.

                  Section 6.4       Reliance. Borrower recognizes and
acknowledges that in accepting the Note, this Security Instrument and the Other
Security Documents, Lender is expressly and primarily relying on the truth and
accuracy of the warranties and representations set forth in Article 5 and
Article 12 without any obligation to investigate the Property and
notwithstanding any investigation of the Property by Lender; that such reliance
existed on the part of Lender prior to the date hereof; that the warranties and
representations are a material inducement to Lender in accepting the Note, this
Security Instrument and the Other Security Documents; and that Lender would not
be willing to make the Loan and accept this Security Instrument in the absence
of the warranties and representations as set forth in Article 5 and Article 12.

                                  ARTICLE VII

                               FURTHER ASSURANCES

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

                                      -30-
<PAGE>
                  Section 7.2       Further Acts, etc. Borrower will, at the
cost of Borrower, and without expense to Lender, do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, deeds of trust,
mortgages, assignments, notices of assignments, transfers and assurances as
Lender shall, from time to time, require, for the better assuring, conveying,
assigning, transferring, and confirming unto Lender and Trustee the Property and
rights hereby deeded, mortgaged, granted, bargained, sold, conveyed, confirmed,
pledged, assigned, warranted and transferred or intended now or hereafter so to
be, or which Borrower may be or may hereafter become bound to convey or assign
to Lender, or for carrying out the intention or facilitating the performance of
the terms of this Security Instrument or for filing, registering or recording
this Security Instrument, or for complying with all Applicable Laws. Borrower,
on demand, will execute and deliver and hereby authorizes Lender, following 10
days' notice to Borrower, to execute in the name of Borrower or without the
signature of Borrower to the extent Lender may lawfully do so, (i) one or more
financing statements, chattel mortgages or other instruments, to evidence more
effectively the security interest of Lender in the Property and (ii) any
amendments or modifications to the Note, this Security Instrument and/or the
Other Security Documents in order to correct any scrivener's errors contained
herein or therein, including, without limitation, any errors with respect to the
spelling of Borrower's name, the address of the Property, the legal description
of the Property and/or the date of execution of the Note, this Security
Instrument and/or the Other Security Documents. Borrower grants to Lender an
irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to Lender
pursuant to this Section 7.2.

                  Section 7.3       Changes in Tax, Debt Credit and Documentary
Stamp Laws.

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

                  (b)      Borrower will not claim or demand or be entitled to
any credit or credits on account of the Debt for any part of the Taxes or Other
Charges assessed against the Property, or any part thereof, and no deduction
shall otherwise be made or claimed from the assessed value of the Property, or
any part thereof, for real estate tax purposes by reason of this Security
Instrument or the Debt. If such claim, credit or deduction shall be required by
law, Lender shall have the option, exercisable by written notice of not less
than one hundred twenty (120) days, to declare the Debt immediately due and
payable.

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

                                      -31-
<PAGE>
                  Section 7.4       Estoppel Certificates.

                  (a)      After request by Lender, Borrower, within fifteen
(15) days, shall furnish Lender or any proposed assignee with a statement, duly
acknowledged and certified, setting forth (i) the original principal amount of
the Note, (ii) the unpaid principal amount of the Note, (iii) the rate of
interest of the Note, (iv) the terms of payment and maturity date of the Note,
(v) the date installments of interest and/or principal were last paid, (vi)
that, except as provided in such statement, there are no defaults or events
which with the passage of time or the giving of notice or both, would constitute
an event of default under the Note or the Security Instrument, (vii) that the
Note and this Security Instrument are valid, legal and binding obligations and
have not been modified or if modified, giving particulars of such modification,
(viii) whether any offsets or defenses exist against the obligations secured
hereby and, if any are alleged to exist, a detailed description thereof, (ix)
that all Leases are in full force and effect and (provided the Property is not a
residential multifamily property) have not been modified (or if modified,
setting forth all modifications), (x) the date to which the Rents thereunder
have been paid pursuant to the Leases, (xi) whether or not, to the best
knowledge of Borrower, any of the tenants under the Leases are in default under
the Leases, and, if any of the tenants are in default, setting forth the
specific nature of all such defaults, (xii) the amount of security deposits held
by Borrower under each Lease and that such amounts are consistent with the
amounts required under each Lease, and (xiii) as to any other matters reasonably
requested by Lender and reasonably related to the Leases, the obligations
secured hereby, the Property or this Security Instrument.

                  (b)      Borrower shall use its best efforts to deliver to
Lender, promptly upon request, duly executed estoppel certificates from any one
or more tenants as required by Lender attesting to such facts regarding the
Lease as Lender reasonably may require, including but not limited to
attestations that each Lease covered thereby is in full force and effect with no
defaults thereunder on the part of any party, that none of the Rents have been
paid more than one month in advance, and that the tenant claims no defense or
offset against the full and timely performance of its obligations under the
Lease.

                  (c)      Upon any transfer or proposed transfer contemplated
by Section 18.1 hereof, at Lender's request, Borrower, any Guarantors and any
Indemnitor(s) shall provide an estoppel certificate to the Investor (defined in
Section 18.1) or any prospective Investor in such form, substance and detail as
Lender, such Investor or prospective Investor may require.

                  (d)      After written request by Borrower not more than once
annually, and at Borrower's sole cost and expense, Lender shall furnish to
Borrower a statement setting forth (i) the unpaid principal amount of the Note,
and (ii) the balance of the sums held in escrow pursuant to the Reserve and
Security Agreement.

                  Section 7.5        Flood Insurance. After Lender's request,
Borrower shall deliver evidence satisfactory to Lender that no portion of the
Improvements is situated in a federally designated "special flood hazard area"
or if it is, that Borrower has obtained or caused to be obtained insurance
meeting the requirements of Section 3.3(a)(vi).

                  Section 7.6       Replacement Documents. Upon receipt of an
affidavit of an officer of Lender as to the loss, theft, destruction or
mutilation of the Note or any Other Security

                                      -32-
<PAGE>
Document which is not of public record, and, in the case of any such mutilation,
upon surrender and cancellation of such Note or Other Security Document,
Borrower will issue, in lieu thereof, a replacement Note or Other Security
Document, dated the date of such lost, stolen, destroyed or mutilated Note or
Other Security Document in the same principal amount thereof and otherwise of
like tenor.

                                  ARTICLE VIII

                             DUE ON SALE/ENCUMBRANCE

                  Section 8.1       No Sale/Encumbrance. Borrower agrees that
Borrower shall not, without the prior written consent of Lender, sell, convey,
mortgage, grant, bargain, encumber, pledge, assign, or otherwise transfer the
Property or any part thereof or any interest therein or any direct or indirect
interest in Borrower or permit the Property or any part thereof or any interest
therein or any direct or indirect interest in Borrower to be sold, conveyed,
mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise
transferred, other than pursuant to Leases of space in the Improvements to
tenants in accordance with the provisions of Section 3.8.

                  Section 8.2       Sale/Encumbrance Defined. A sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer within the meaning of this Article 8 shall be deemed to include, but
not be limited to, (a) an installment sales agreement wherein Borrower agrees to
sell the Property or any part thereof for a price to be paid in installments;
(b) an agreement by Borrower leasing all or a substantial part of the Property
for other than actual occupancy by a space tenant thereunder or a sale,
assignment or other transfer of, or the grant of a security interest in,
Borrower's right, title and interest in and to any Leases or any Rents; (c) if
Borrower, any Guarantor, any Indemnitor, or any general or limited partner or
member of Borrower, any Guarantor or any Indemnitor is a corporation, any
merger, consolidation or voluntary or involuntary sale, conveyance, transfer or
pledge of such corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock in one or a series of transactions by which an
aggregate of more than 10% of such corporation's stock shall be vested in a
party or parties who are not now stockholders; (d) if Borrower, any Guarantor or
any Indemnitor or any general or limited partner or member of Borrower, any
Guarantor or any Indemnitor is a limited or general partnership or joint
venture, the change, removal or resignation of a general partner or the transfer
or pledge of the partnership interest of any general partner or any profits or
proceeds relating to such partnership interest or the voluntary or involuntary
sale, conveyance, transfer or pledge of limited partnership interests (or the
limited partnership interests of any limited partnership directly or indirectly
controlling such limited partnership by operation of law or otherwise); and (e)
if Borrower, any Guarantor, any Indemnitor or any general or limited partner or
member of Borrower, any Guarantor or any Indemnitor is a limited liability
company, the change, removal or resignation of a managing member (or if no
managing member, any member or non-member manager) or the transfer of the
membership interest of a managing member (or if no managing member, any member)
or any profits or proceeds relating to such membership interest or the voluntary
or involuntary sale, conveyance, transfer or pledge of membership interests (or
the membership interests of any limited liability company directly or indirectly

                                      -33-
<PAGE>
controlling such limited liability company by operation of law or otherwise).
Notwithstanding the foregoing, so long as the Guarantor and/or Indemnitor is
Corporate Property Associates 14 Incorporated or an Affiliate (as defined in
Section 8.4(b) hereof) (the "Guarantor"), the provisions of clauses (c), (d) and
(e) above shall not apply to the Guarantor, any Indemnitor or any interest
holder therein.

                  Section 8.3       Lender's Rights. Lender reserves the right
to condition the consent required hereunder upon a modification of the terms
hereof and on assumption of the Note, this Security Instrument and the Other
Security Documents as so modified by the proposed transferee, payment of a
transfer fee equal to one percent (1%) of the then outstanding principal balance
of the Note, and all of Lender's expenses incurred in connection with such
transfer, the approval by a Rating Agency of the proposed transferee, the
proposed transferee's continued compliance with the covenants set forth in this
Security Instrument, including, without limitation, the covenants in Section 4.2
hereof, or such other conditions as Lender shall determine in its sole
discretion to be in the interest of Lender. All of Lender's expenses incurred
shall be payable by Borrower whether or not Lender consents to the transfer.
Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default hereunder in order to declare the Debt
immediately due and payable upon Borrower's sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment, or transfer of the Property without
Lender's consent. This provision shall apply to every sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property regardless of whether voluntary or not, or whether or not Lender has
consented to any previous sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer of the Property.

                  Section 8.4       Permitted Transfers. (a) Notwithstanding the
foregoing provisions of this Section, Lender shall not unreasonably withhold
consent to the simultaneous sale, conveyance or transfer of all of the
Individual Properties (as defined in the Note) in their entirety on a single
occasion (a "Sale") after the first anniversary of the first day of the first
calendar month after the date hereof (or the date hereof if dated the first day
of a calendar month) and with respect to such Sale, Lender shall not require a
modification of the material economic terms hereof (other than a corresponding
increase in Borrower's deposits into the Escrow Fund with respect to Taxes in
the event such Sale results in an increase in the real property tax assessment
by the applicable taxing authority), to any person or entity provided that each
of the following terms and conditions are satisfied:

                  (i)      no default after the expiration of notice or grace
         periods is then continuing hereunder, under the Note, or any of the
         Other Security Documents;

                  (ii)     Borrower gives Lender written notice of the terms of
         such prospective Sale not less than thirty (30) days before the date on
         which such Sale is scheduled to close and, concurrently therewith,
         gives Lender all such information concerning the proposed transferee of
         the Property (hereinafter, "Buyer") as Lender would reasonably require
         in evaluating an initial extension of credit to a borrower and pays to
         Lender a non-refundable application fee in the amount of $2,500.00.
         Lender shall have the right to approve or disapprove the proposed
         Buyer, such approval not to be unreasonably withheld or delayed. In
         determining whether to give or withhold its approval of the

                                      -34-
<PAGE>
         proposed Buyer, Lender shall consider the Buyer's experience and track
         record in owning and operating facilities similar to the Property, the
         Buyer's financial strength, the Buyer's general business standing and
         the Buyer's relationships and experience with contractors, vendors,
         tenants, lenders and other business entities; provided, however, that,
         notwithstanding Lender's agreement to consider the foregoing factors in
         determining whether to give or withhold such approval, such approval
         shall be given or withheld based on what Lender determines to be
         commercially reasonable and, if given, may be given subject to such
         conditions as Lender may deem reasonably appropriate;

                  (iii)    Borrower pays Lender, concurrently with the closing
         of such Sale, a non-refundable assumption fee in an amount equal to all
         out-of-pocket costs and expenses, including, without limitation,
         reasonable attorneys' fees, incurred by Lender in connection with the
         Sale plus an amount equal to one percent (1.0%) of the then outstanding
         principal balance of the Note. Borrower also pays, concurrently with
         the closing of such Sale, all costs and expenses of all third parties
         and Rating Agencies in connection with the Sale;

                  (iv)     Buyer (a) assumes and agrees to pay all indebtedness
         secured hereby as and when due subject to the provisions of Article 11
         of the Note and, (b) prior to or concurrently with the closing of such
         Sale, the Buyer executes, without any cost or expense to Lender, such
         documents and agreements as Lender shall reasonably require to evidence
         and effectuate said assumption;

                  (v)      Borrower and the Buyer execute, without any cost or
         expense to Lender, new financing statements or financing statement
         amendments and any additional documents reasonably requested by Lender;

                  (vi)     Borrower delivers to Lender, without any cost or
         expense to Lender, such endorsements to Lender's title insurance
         policy, hazard insurance endorsements or certificates and other similar
         materials as Lender may deem necessary at the time of the Sale, all in
         form and substance satisfactory to Lender, including, without
         limitation, an endorsement or endorsements to Lender's title insurance
         policy insuring the lien of this Security Instrument insuring that fee
         simple title to the Property is vested in the Buyer;

                  (vii)    Buyer shall furnish, if the Buyer is a corporation,
         partnership or other entity, all appropriate papers evidencing the
         Buyer's capacity and good standing, and the qualification of the
         signers to execute the assumption of the indebtedness secured hereby,
         which papers shall include certified copies of all documents relating
         to the organization and formation of the Buyer and of the entities, if
         any, which are partners or members of the Buyer. The Buyer and such
         constituent partners, members or shareholders of Buyer (as the case may
         be), as Lender shall require, shall be single purpose, "bankruptcy
         remote" entities which satisfy the requirements of Article IV hereof
         and the requirements of the Rating Agencies, and whose formation
         documents shall be approved by counsel to Lender. An individual
         recommended by the Buyer and approved by Lender shall serve as an
         independent director of the Buyer (if the Buyer is a corporation) or
         the Buyer's corporate general partner or an independent member or, in
         Lender's discretion, manager, of Buyer if the Buyer is a limited
         liability company. The consent of such independent

                                      -35-
<PAGE>
         party shall be required for, among other things, any merger,
         consolidation, dissolution, bankruptcy or insolvency of such
         independent party or of the Buyer;

                  (viii)   Buyer shall assume the obligations of Borrower under
         any management agreements pertaining to the Property or assign to
         Lender as additional security any new management agreement entered into
         in connection with such Sale;

                  (ix)     Buyer shall furnish an opinion of counsel
         satisfactory to Lender and its counsel (A) that the Buyer's formation
         documents provide for the matters described in subparagraph (vii)
         above, (B) that the assumption of the indebtedness evidenced hereby has
         been duly authorized, executed and delivered, and that the Note, this
         Security Instrument, the assumption agreement and the Other Security
         Documents are valid, binding and enforceable against the Buyer in
         accordance with their terms, (C) that the Buyer and any entity which is
         a controlling stockholder, member or general partner of Buyer, have
         been duly organized, and are in existence and good standing, (D) if
         required by Lender, that the assets of the Buyer will not be
         consolidated with the assets of any other entity having an interest in,
         or affiliation with, the Buyer, in the event of bankruptcy or
         insolvency of any such entity, and (E) with respect to such other
         matters as Lender may reasonably request;

                  (x)      Lender shall have received confirmation in writing
         from the Rating Agencies that rate the Securities or Participations (as
         defined in Section 18.1) to the effect that the Sale will not result in
         a qualification, downgrade or withdrawal of any rating initially
         assigned or then currently assigned or to be assigned to the Securities
         or Participations, as applicable;

                  (xi)     An affiliate of Buyer with a net worth (as determined
         by Lender) of not less than Twenty-Five Million Dollars ($25,000,000)
         shall have assumed, from and after the date of such Sale, all of the
         obligations of Guarantor under the Environmental Indemnity and the
         Guaranty of Recourse Obligations of Borrower of even date herewith (the
         "Guaranty") pursuant to such documents and agreements as Lender shall
         reasonably require to evidence and effectuate such assumption and
         thereafter Guarantor shall be released from all liabilities and
         obligations under the Environmental Indemnity and the Guaranty arising
         from matters first occurring from and after the date of such Sale; and

                  (xii)    Borrower's obligations under the contract of sale
         pursuant to which the Sale is proposed to occur shall expressly be
         subject to the satisfaction of the terms and conditions of this Section
         8.4;

                  (b)      Notwithstanding the foregoing provision of this
Section and provided Borrower has not exercised its right to sell, convey or
transfer all of the Individual Properties pursuant to Section 8.4(a) above,
Borrower shall be permitted, after the first anniversary of the first day of the
first calendar month after the date hereof (or the date hereof if dated the
first day of a calendar month), to transfer or convey all of its interests in
all of the Individual Properties to any Affiliate (hereinafter defined) whose
key principal's (the "Key Principal") net worth as determined by Lender shall be
not less than Twenty-Five Million Dollars ($25,000,000) without Lender's
approval or consent and without payment of the one percent (1%) transfer fee
(but with

                                      -36-
<PAGE>
payment of all out-of-pocket expenses, including without limitation,
reasonable attorney's fees, incurred by Lender in connection with the transfer
and all costs and expenses of all third parties and Rating Agencies in
connection with the Sale) so long as the terms and conditions set forth in
Sections 8.4(a)(i), (iv), (v), (vi), (vii), (viii), (ix) and (x) are satisfied.
Borrower shall, not less than thirty (30) days before any such transfer, deliver
to Lender written notice of such transfer which notice shall (i) describe the
proposed transfer in reasonable detail, (ii) include evidence reasonably
satisfactory to Lender that the proposed transferee is an Affiliate of Borrower
and that such Key Principal has a net worth of not less than Twenty-Five Million
Dollars ($25,000,000), and (c) include evidence reasonably satisfactory to
Lender that the applicable provisions of Section 8.4 hereof have been satisfied.
In connection with any such transfer to an Affiliate, Key Principal shall
assume, from and after the date of such transfer, all of the obligations of
Guarantor under the Environmental Indemnity and the Guaranty pursuant to such
documents and agreements as Lender shall reasonably require to evidence and
effectuate such assumption and thereafter Guarantor shall be released from all
liabilities and obligations under the Environmental Indemnity and the Guaranty
arising from matters first occurring from and after the date of such transfer.
As used herein, the term "Affiliate" shall mean an entity which controls, is
controlled by or is under common control with Borrower, Corporate Property
Associates 10 Incorporated, Corporate Property Associates 14 Incorporated,
Corporate Property Associates 15 Incorporated, Carey Institutional Properties
Incorporated or W.P. Carey Co. LLC; and

                  (c)      Notwithstanding the foregoing provision of this
Section, Corporate Property Associates 15 Incorporated shall be permitted to
acquire up to a thirty percent (30%) interest in the Borrower, without Lender's
approval or consent and without payment of the one percent (1%) transfer fee
provided that no Event of Default shall have occurred and be continuing, such
transfer does not affect the single purpose bankruptcy remote structure of the
Borrower and Borrower pays all out-of-pocket expenses, if any, including without
limitation, reasonable attorney's fees, incurred by Lender in connection with
the transfer and all costs and expenses of all third parties and Rating Agencies
in connection with such transfer).

                                   ARTICLE IX

                                   PREPAYMENT

                  Section 9.1       Prepayment. The Debt may not be prepaid in
whole or in part except in strict accordance with the express terms and
conditions of the Note.

                                   ARTICLE X

                                     DEFAULT

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

                  (a)      if any portion of the Debt is not paid prior to the
fifth (5th) day after the same is due or if the entire Debt is not paid on or
before the Maturity Date (as defined in the Note);

                                      -37-
<PAGE>
                  (b)      if any of the Taxes or Other Charges is not paid
prior to delinquency, penalty or interest except to the extent sums sufficient
to pay such Taxes and Other Charges have been deposited with Lender in
accordance with the terms of this Security Instrument or such items are being
contested in accordance with the terms of the Security Instrument;

                  (c)      if the Policies are not kept in full force and
effect, or if the Policies are not delivered to Lender upon request;

                  (d)      if Borrower violates or does not comply with any of
the provisions of Section 4.2 or Article 8;

                  (e)      if any representation or warranty of Borrower, any
Indemnitor or any person guaranteeing payment of the Debt or any portion thereof
or performance by Borrower of any of the terms of this Security Instrument (a
"Guarantor"), or any member, general partner, principal or beneficial owner of
any of the foregoing, made herein other than an unintentional representation or
warranty under Section 5.5(a), (b) or (l) or in the Environmental Indemnity
(defined below) or in any guaranty, or in any certificate, report, financial
statement or other instrument or document furnished to Lender shall have been
false or misleading in any material respect when made;

                  (f)      if (i) Borrower or any managing member or general
partner of Borrower, or any Guarantor or Indemnitor shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Borrower or any managing member or general partner of Borrower,
or any Guarantor or Indemnitor shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against Borrower or any
managing member or general partner of Borrower, or any Guarantor or Indemnitor
any case, proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged or unbonded for a period
of sixty (60) days; or (iii) there shall be commenced against the Borrower or
any managing member or general partner of Borrower, or any Guarantor or
Indemnitor any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of any order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within sixty (60) days from the entry thereof; or (iv) the
Borrower or any managing member or general partner of Borrower, or any Guarantor
or Indemnitor shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) the Borrower or any managing member or general
partner of Borrower, or any Guarantor or Indemnitor shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts as
they become due;

                                      -38-
<PAGE>
                  (g)      if Borrower shall be in default beyond applicable
notice and grace periods under any other mortgage, deed of trust, deed to secure
debt or other security agreement covering any part of the Property whether it be
superior or junior in lien to this Security Instrument;

                  (h)      if the Property becomes subject to any mechanic's,
materialman's or other lien other than a lien for local real estate taxes and
assessments not then due and payable and the lien shall remain undischarged of
record (by payment, bonding or otherwise) for a period of thirty (30) days;

                  (i)      if any federal tax lien is filed against Borrower,
any member or general partner of Borrower, any Guarantor, any Indemnitor or the
interest of Borrower in the Property and same is not discharged of record within
thirty (30) days after same is filed;

                  (j)      if any default occurs under any guaranty or indemnity
executed in connection herewith (including the Environmental Indemnity, defined
in Section 13.4) and such default continues after the expiration of applicable
grace periods, if any;

                  (k)      if Borrower shall fail to deliver to Lender, within
fifteen (15) days after receipt of written request from Lender, the estoppel
certificates required pursuant to Section 7.4(a);

                  (l)      if for more than ten (10) days after notice from
Lender, Borrower shall continue to be in default under any other term, covenant
or condition of the Note, this Security Instrument or the Other Security
Documents in the case of any default which can be cured by the payment of a sum
of money or for thirty (30) days after notice from Lender in the case of any
other default including, without limitation an unintentional under Section
5.5(a), (b) or (l), provided that if such default cannot reasonably be cured
within such thirty (30) day period and Borrower shall have commenced to cure
such default within such thirty (30) day period and thereafter diligently and
expeditiously proceeds to cure the same, such thirty (30) day period shall be
extended for so long as it shall require Borrower in the exercise of due
diligence to cure such default, it being agreed that no such extension shall be
for a period in excess of ninety (90) days or

                  (m)      if any of the assumptions contained in the
Non-Consolidation Opinion were not true and correct as of the date of such
opinion.

                                   ARTICLE XI

                               RIGHTS AND REMEDIES

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

                                      -39-
<PAGE>
                  (a)      declare the entire unpaid Debt to be immediately due
and payable;

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

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

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

                  (e)      subject to the provisions of Article 11 of the Note,
institute an action, suit or proceeding in equity for the specific performance
of any covenant, condition or agreement contained herein, in the Note or in the
Other Security Documents;

                  (f)      subject to the provisions of Article 11 of the Note,
recover judgment on the Note either before, during or after any proceedings for
the enforcement of this Security Instrument or the Other Security Documents;

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

                  (h)      subject to any applicable law, the license granted to
Borrower under Section 1.2 shall automatically be revoked and Lender may enter
into or upon the Property, either personally or by its agents, nominees or
attorneys and dispossess Borrower and its agents and servants therefrom, without
liability for trespass, damages or otherwise and exclude Borrower and its agents
or servants wholly therefrom, and take possession of all books, records and
accounts relating thereto and Borrower agrees to surrender possession of the
Property and of such books, records and accounts to Lender upon demand, and
thereupon Lender may (i) use, operate, manage, control, insure, maintain,
repair, restore and otherwise deal with all and every part of the Property and
conduct the business thereat; (ii) complete any construction on the Property in
such manner and form as Lender deems advisable; (iii) make alterations,
additions, renewals, replacements and improvements to or on the Property; (iv)
exercise all rights and powers of Borrower with respect to the Property, whether
in the name of Borrower or otherwise, including, without limitation, the right
to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand,
sue for, collect and receive all Rents of the Property and every part thereof;
(v) require Borrower to pay monthly in advance to Lender, or any receiver
appointed to collect the Rents, the fair and reasonable rental value for the use
and occupation of such part of

                                      -40-
<PAGE>
the Property as may be occupied by Borrower; (vi) require Borrower to vacate and
surrender possession of the Property to Lender or to such receiver and, in
default thereof, Borrower may be evicted by summary proceedings or otherwise;
and (vii) apply the receipts from the Property to the payment of the Debt, in
such order, priority and proportions as Lender shall deem appropriate in its
sole discretion after deducting therefrom all expenses (including reasonable
attorneys' fees) incurred in connection with the aforesaid operations and all
amounts necessary to pay the Taxes, Other Charges, insurance and other expenses
in connection with the Property, as well as just and reasonable compensation for
the services of Lender, its counsel, agents and employees;

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

                  (j)      apply any sums then deposited in the Escrow Fund and
any other sums held in escrow or otherwise by Lender in accordance with the
terms of this Security Instrument or any Other Security Document to the payment
of the following items in any order in its sole discretion: (i) Taxes and Other
Charges; (ii) Insurance Premiums; (iii) interest on the unpaid principal balance
of the Note; (iv) amortization of the unpaid principal balance of the Note; (v)
all other sums payable pursuant to the Note, this Security Instrument and the
Other Security Documents, including without limitation advances made by Lender
pursuant to the terms of this Security Instrument;

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

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

                  (m)      proceed under this Security Instrument against all or
any part of the Individual Properties and/or all or any Property covered by this
Security Instrument or the other Security Documents in one or more parcels and
in such manner and order as Lender shall elect. Borrower hereby irrevocably
waives and releases, to the extent permitted by law, and whether or not
hereafter enforced, any right to have all or any part of the Individual Property
covered by the other Security Documents and/or all or any part of the Property
covered by this Security Instrument marshaled upon any foreclosure of this
Security Instrument and/or and one or more of the Other Security Documents or
upon any other sale of all or any part of the Individual Properties and/or the
Property covered by this Security Instrument; or

                                      -41-
<PAGE>
                  (n)      pursue such other remedies as Lender may have under
applicable law.

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

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

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

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

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

                                      -42-
<PAGE>
                  Section 11.6      Examination of Books and Records. Lender,
its agents, accountants and attorneys shall have the right, upon prior written
notice to Borrower if no Event of Default exists, to examine and audit, during
reasonable business hours, the records, books, management and other papers of
Borrower and its affiliates or of any Guarantor or Indemnitor which pertain to
their financial condition or the income, expenses and operation of the Property,
at the Property, if Borrower or Guarantor maintain such records at the Property,
or at any office regularly maintained by Borrower, its affiliates or any
Guarantor or Indemnitor where the books and records are located. Lender and its
agents shall have the right to make copies and extracts from the foregoing
records and other papers.

                  Section 11.7      Other Rights, etc. (a) The failure of Lender
or Trustee to insist upon strict performance of any term hereof shall not be
deemed to be a waiver of any term of this Security Instrument. Borrower shall
not be relieved of Borrower's obligations hereunder by reason of (i) the failure
of Lender or Trustee to comply with any request of Borrower, any Guarantor or
any Indemnitor to take any action to foreclose this Security Instrument or
otherwise enforce any of the provisions hereof or of the Note or the Other
Security Documents, (ii) the release, regardless of consideration, of the whole
or any part of the Property, or of any person liable for the Debt or any portion
thereof, or (iii) any agreement or stipulation by Lender extending the time of
payment or otherwise modifying or supplementing the terms of the Note, this
Security Instrument or the Other Security Documents.

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

                  (c)      Lender may resort for the payment of the Debt to any
other security held by Lender in such order and manner as Lender, in its
discretion, may elect. Lender or Trustee may take action to recover the Debt, or
any portion thereof, or to enforce any covenant hereof without prejudice to the
right of Lender or Trustee thereafter to foreclose this Security Instrument. The
rights of Lender or Trustee under this Security Instrument shall be separate,
distinct and cumulative and none shall be given effect to the exclusion of the
others. No act of Lender or Trustee shall be construed as an election to proceed
under any one provision herein to the exclusion of any other provision. Neither
Lender nor Trustee shall be limited exclusively to the rights and remedies
herein stated but shall be entitled to every right and remedy now or hereafter
afforded at law or in equity.

                  Section 11.8      Right to Release Any Portion of the
Property. Lender may release any portion of the Property for such consideration
as Lender may require without, as to the remainder of the Property, in any way
impairing or affecting the lien or priority of this Security Instrument, or
improving the position of any subordinate lienholder with respect thereto,
except to the extent that the obligations hereunder shall have been reduced by
the actual monetary consideration, if any, received by Lender for such release,
and may accept by assignment, pledge or otherwise any other property in place
thereof as Lender may require without being

                                      -43-
<PAGE>
accountable for so doing to any other lienholder. This Security Instrument shall
continue as a lien and security interest in the remaining portion of the
Property.

                  Section 11.9      Violation of Laws. If the Property is not in
compliance with Applicable Laws, Lender may impose additional requirements upon
Borrower in connection herewith including, without limitation, monetary reserves
or financial equivalents.

                  Section 11.10     Right of Entry. Lender and its agents shall
have the right to enter and inspect the Property at all reasonable times.

                  Section 11.11     Subrogation. If any or all of the proceeds
of the Note have been used to extinguish, extend or renew any indebtedness
heretofore existing against the Property, then, to the extent of the funds so
used, Lender shall be subrogated to all of the rights, claims, liens, titles,
and interests existing against the Property heretofore held by, or in favor of,
the holder of such indebtedness and such former rights, claims, liens, titles,
and interests, if any, are not waived but rather are continued in full force and
effect in favor of Lender and are merged with the lien and security interest
created herein as cumulative security for the repayment of the Debt, the
performance and discharge of Borrower's obligations hereunder, under the Note
and the Other Security Documents and the performance and discharge of the Other
Obligations.

                                  ARTICLE XII

                              ENVIRONMENTAL MATTERS

                  Section 12.1      Environmental Representations and
Warranties. Borrower represents and warrants, based upon an environmental site
assessment of the Property and information that Borrower knows or should
reasonably have known, that: (a) there are no Hazardous Materials (defined
below) or underground storage tanks in, on, or under the Property, except those
that are both (i) in compliance with Environmental Laws (defined below) and with
permits issued pursuant thereto (if such permits are required), if any, and (ii)
either (A) in amounts not in excess of that necessary to operate the Property or
(B) fully disclosed to and approved by Lender in writing pursuant to the written
reports resulting from the environmental site assessments of the Property
delivered to Lender (the "Environmental Report"); (b) there are no past, present
or threatened Releases (defined below) of Hazardous Materials in violation of
any Environmental Law and which would require remediation by a governmental
authority in, on, under or from the Property except as described in the
Environmental Report; (c) there is no threat of any Release of Hazardous
Materials migrating to the Property except as described in the Environmental
Report; (d) there is no past or present non-compliance with Environmental Laws,
or with permits issued pursuant thereto, in connection with the Property except
as described in the Environmental Report; (e) Borrower does not know of, and has
not received, any written or oral notice or other communication from any person
or entity (including but not limited to a governmental entity) relating to
Hazardous Materials in, on, under or from the Property; and (f) Borrower has
truthfully and fully provided to Lender, in writing, any and all information
relating to environmental conditions in, on, under or from the Property known to
Borrower or contained in Borrower's files and records, including but not limited
to any reports relating to Hazardous Materials in, on, under or migrating to or
from the Property and/or to the environmental condition of the Property.
"Environmental Law" means any present and future

                                      -44-
<PAGE>
federal, state and local laws, statutes, ordinances, rules, regulations,
standards, policies and other government directives or requirements, as well as
common law, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act and the Resource Conservation and
Recovery Act, that apply to Borrower or the Property and relate to Hazardous
Materials. "Hazardous Materials" shall mean petroleum and petroleum products and
compounds containing them, including gasoline, diesel fuel and oil; explosives,
flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs")
and compounds containing them; lead and lead-based paint; asbestos or
asbestos-containing materials in any form that is or could become friable;
underground or above-ground storage tanks, whether empty or containing any
substance; any substance the presence of which on the Property is prohibited by
any federal, state or local authority; any substance that requires special
handling; and any other material or substance now or in the future defined as a
"hazardous substance," "hazardous material," hazardous waste," toxic substance,"
"toxic pollutant," "contaminant," or "pollutant" within the meaning of any
Environmental Law. "Release" of any Hazardous Materials includes but is not
limited to any release, deposit, discharge, emission, leaking, spilling,
seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping,
disposing or other movement of Hazardous Materials.

                  Section 12.2      Environmental Covenants. Borrower covenants
and agrees that so long as Borrower owns, manages, is in possession of, or
otherwise controls the operation of the Property: (a) all uses and operations on
or of the Property, whether by Borrower or any other person or entity, shall be
in compliance with all Environmental Laws and permits issued pursuant thereto;
(b) there shall be no Releases of Hazardous Materials in, on, under or from the
Property, except in compliance with Environmental Laws; (c) there shall be no
Hazardous Materials in, on, or under the Property, except those that are both
(i) in compliance with all Environmental Laws and with permits issued pursuant
thereto, if and to the extent required, and (ii) (A) in amounts not in excess of
that necessary to operate the Property or (B) fully disclosed to and approved by
Lender in writing; (d) Borrower shall keep the Property free and clear of all
liens and other encumbrances imposed pursuant to any Environmental Law, whether
due to any act or omission of Borrower or any other person or entity (the
"Environmental Liens"); (e) Borrower shall, at its sole cost and expense, fully
and expeditiously cooperate in all activities pursuant to Section 12.3 below,
including but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) Borrower shall, at its sole
cost and expense, perform any environmental site assessment or other
investigation of environmental conditions in connection with the Property,
pursuant to any reasonable written request of Lender, upon Lender's reasonable
belief that the Property is not in full compliance with all Environmental Laws,
and share with Lender the reports and other results thereof, and Lender and
other Indemnified Parties shall be entitled to rely on such reports and other
results thereof; (g) Borrower shall, at its sole cost and expense, comply with
all reasonable written requests of Lender to (i) reasonably effectuate
remediation of any Hazardous Materials in, on, under or from the Property in
violation of Environmental Law; and (ii) comply with any Environmental Law; (h)
Borrower shall not allow any tenant or other user of the Property to violate any
Environmental Law; and (i) Borrower shall immediately notify Lender in writing
after it has become aware of (A) any presence or Release or threatened Releases
of Hazardous Materials in, on, under, from or migrating towards the Property;
(B) any non-compliance with any Environmental Laws related in any way to the
Property; (C) any actual or potential Environmental Lien; (D) any required or
proposed remediation of environmental conditions

                                      -45-
<PAGE>
relating to the Property; and (E) any written or oral notice or other
communication of which Borrower becomes aware from any source whatsoever
(including but not limited to a governmental entity) relating in any way to
Hazardous Materials. Any failure of Borrower to perform its obligations pursuant
to this Section 12.2 shall constitute bad faith waste with respect to the
Property.

                  Section 12.3      Lender's Rights. Lender and any other person
or entity designated by Lender, including but not limited to any representative
of a governmental entity, and any environmental consultant, and any receiver
appointed by any court of competent jurisdiction, shall have the right, but not
the obligation, to enter upon the Property at all reasonable times to assess any
and all aspects of the environmental condition of the Property and its use,
including but not limited to conducting any environmental assessment or audit
(the scope of which shall be determined in Lender's sole discretion) and taking
samples of soil, groundwater or other water, air, or building materials, and
conducting other invasive testing. Borrower shall cooperate with and provide
access to Lender and any such person or entity designated by Lender.

                  Section 12.4      Operations and Maintenance Programs. Where
recommended by the Environmental Report or as a result of any other
environmental assessment or audit of the Property, Borrower shall establish and
comply with an operations and maintenance program with respect to the Property,
in form and substance reasonably acceptable to Lender, prepared by an
environmental consultant reasonably acceptable to Lender, which program shall
address any asbestos containing material or lead based paint that may now or in
the future be detected at or on the Property. Without limiting the generality of
the preceding sentence, Lender may require (a) periodic notices or reports to
Lender in form, substance and at such intervals as Lender may specify, (b) an
amendment to such operations and maintenance program to address changing
circumstances, laws or other matters, (c) at Borrower's sole expense,
supplemental examination of the Property by consultants specified by Lender, (d)
access to the Property by Lender, its agents or servicer, to review and assess
the environmental condition of the Property and Borrower's compliance with any
operations and maintenance program, and (e) variation of the operations and
maintenance program in response to the reports provided by any such consultants.

                                  ARTICLE XIII

                                INDEMNIFICATIONS

                  Section 13.1      General Indemnification. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties (defined below) from and against any and all Losses
(defined below) imposed upon or incurred by or asserted against any Indemnified
Parties and directly or indirectly arising out of or in any way relating to any
one or more of the following: (a) any accident, injury to or death of persons or
loss of or damage to property occurring in, on or about the Property or any part
thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (b) any use, nonuse or condition in, on or about
the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (c) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (d) any failure of the Property to
be in compliance with any Applicable Laws; (e) any and all claims and demands
whatsoever which may be asserted against

                                      -46-
<PAGE>
Lender by reason of any alleged obligations or undertakings on its part to
perform or discharge any of the terms, covenants, or agreements contained in any
Lease; or (f) the payment of any commission, charge or brokerage fee to anyone
which may be payable in connection with the funding of the Loan evidenced by the
Note and secured by this Security Instrument, except in each of the above cases,
to the extent arising out of the gross negligence or willful misconduct of the
Indemnified Parties. Any amounts payable to Lender by reason of the application
of this Section 13.1 shall become immediately due and payable and shall bear
interest at the Default Rate from the date loss or damage is sustained by Lender
until paid.

                  The term "Losses" shall mean any and all claims, suits,
liabilities (including, without limitation, strict liabilities), actions,
proceedings, obligations, debts, damages, losses, costs, expenses, fines,
penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement of whatever kind or nature (including but not limited to attorneys'
fees and other costs of defense). The term "Indemnified Parties" shall mean (a)
Lender, (b) any prior owner or holder of the Note, (c) any servicer or prior
servicer of the Loan, (d) the officers, directors, shareholders, partners,
members, employees and trustees of any of the foregoing, and (e) the heirs,
legal representatives, successors and assigns of each of the foregoing.

                  Section 13.2      Mortgage and/or Intangible Tax. Borrower
shall, at its sole cost and expense, protect, defend, indemnify, release and
hold harmless the Indemnified Parties from and against any and all Losses
imposed upon or incurred by or asserted against any Indemnified Parties and
directly or indirectly arising out of or in any way relating to any tax on the
making and/or recording of this Security Instrument, the Note or any of the
Other Security Documents.

                  Section 13.3     Duty to Defend; Attorneys' Fees and Other
Fees and Expenses. Upon written request by any Indemnified Party, Borrower shall
defend such Indemnified Party (if requested by any Indemnified Party, in the
name of the Indemnified Party) by attorneys and other professionals approved by
the Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties
may, in their sole discretion, engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties, their attorneys shall control the resolution of any claim or
proceeding. Upon demand, Borrower shall pay or, in the sole discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.

                  Section 13.4      Environmental Indemnity. Simultaneously with
this Security Instrument, Borrower and any other person(s) or entity(ies)
identified therein (collectively, the "Indemnitors") have executed and delivered
that certain environmental indemnity agreement dated the date hereof to Lender
(the "Environmental Indemnity").

                                  ARTICLE XIV

                                    WAIVERS

                  Section 14.1      Waiver of Counterclaim. Borrower hereby
waives the right to assert a counterclaim, other than a mandatory or compulsory
counterclaim, in any action or

                                      -47-
<PAGE>
proceeding brought against it by Lender arising out of or in any way connected
with this Security Instrument, the Note, any of the Other Security Documents, or
the Obligations.

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

                  Section 14.3      Waiver of Notice. Borrower shall not be
entitled to any notices of any nature whatsoever from Lender or Trustee except
(a) with respect to matters for which this Security Instrument specifically and
expressly provides for the giving of notice by Lender or Trustee to Borrower and
(b) with respect to matters for which Lender or Trustee is required by
Applicable Laws to give notice, and Borrower hereby expressly waives the right
to receive any notice from Lender or Trustee with respect to any matter for
which this Security Instrument does not specifically and expressly provide for
the giving of notice by Lender or Trustee to Borrower.

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

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

                  SECTION 14.6      WAIVER OF TRIAL BY JURY. BORROWER HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE
APPLICATION FOR THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY
INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER,
ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.

                                      -48-
<PAGE>
                                   ARTICLE XV

                                   EXCULPATION

                  Section 15.1      Exculpation. The provisions of Article 11 of
the Note are hereby incorporated by reference to the fullest extent as if the
text of such Article were set forth in its entirety herein.

                                  ARTICLE XVI

                                    NOTICES

                  Section 16.1      Notices. All notices or other written
communications hereunder shall be deemed to have been properly given (i) upon
delivery, if delivered in person or by facsimile transmission with receipt
acknowledged by the recipient thereof and confirmed by telephone by sender, (ii)
one (1) Business Day (defined below) after having been deposited for overnight
delivery with any reputable overnight courier service, or (iii) three (3)
Business Days after having been deposited in any post office or mail depository
regularly maintained by the U.S. Postal Service and sent by registered or
certified mail, postage prepaid, return receipt requested, addressed to Borrower
or Lender, as the case may be, at the addresses set forth on the first page of
this Security Instrument or addressed as such party may from time to time
designate by written notice to the other parties.

                  Notices to Borrower shall be addressed to the attention of
Director, Asset Management, with a copy to Reed Smith LLP, 2500 One Liberty
Place, 1650 Market Street, Philadelphia, Pennsylvania 19103-7301, Attention:
Managing Partner, Real Estate. Borrower's telephone number is (212) 492-1100 and
facsimile number is (212) 492-8922.

                  Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications.

                  For purposes of this Subsection, "Business Day" shall mean a
day on which commercial banks are not authorized or required by law to close in
New York, New York.

                                  ARTICLE XVII

                                 APPLICABLE LAW

                  Section 17.1      Choice of Law. (A) THIS SECURITY INSTRUMENT
WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY BORROWER AND ACCEPTED BY
LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE SECURED HEREBY
WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A
SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION
EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
SECURITY INSTRUMENT AND THE

                                      -49-
<PAGE>
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY
APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE
PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND
SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER SECURITY
DOCUMENTS WITH RESPECT TO THE PROPERTY SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT BEING
UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE
LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND
ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING
HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS SECURITY INSTRUMENT OR THE OTHER LOAN DOCUMENTS,
AND THIS SECURITY INSTRUMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

                  (B)      ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER
OR BORROWER ARISING OUT OF OR RELATING TO THIS SECURITY INSTRUMENT MAY AT
LENDER'S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW
YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR
HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES
HEREBY DESIGNATE AND APPOINT

                  GOLDFISH (DE) LP
                  C/O W.P. CAREY & CO. LLC
                  50 ROCKEFELLER PLAZA
                  SECOND FLOOR
                  NEW YORK, NY 10020

                  WITH A COPY TO:

                  REED SMITH LLP
                  2500 ONE LIBERTY PLACE
                  PHILADELPHIA, PA 19103
                  ATTENTION:  CHAIRMAN, REAL ESTATE DEPARTMENT

                                      -50-
<PAGE>
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SUCH AGENT AT SUCH ADDRESS AND WRITTEN NOTICE OF SUCH SERVICE
MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT
NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II)
MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT
WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

                  Section 17.2      Provisions Subject to Applicable Law. All
rights, powers and remedies provided in this Security Instrument may be
exercised only to the extent that the exercise thereof does not violate any
applicable provisions of law and are intended to be limited to the extent
necessary so that they will not render this Security Instrument invalid,
unenforceable or not entitled to be recorded, registered or filed under the
provisions of any Applicable Laws.

                                 ARTICLE XVIII

                                SECONDARY MARKET

                  Section 18.1      Transfer of Loan. Lender may, at any time,
sell, transfer or assign the Note, this Security Instrument and the Other
Security Documents, and any or all servicing rights with respect thereto, or
grant participations therein (the "Participations") or issue mortgage pass-
through certificates or other securities evidencing a beneficial interest in a
rated or unrated public offering or private placement (the "Securities"). Lender
may forward to each purchaser, transferee, assignee, servicer, participant, or
investor in such Participations or Securities (collectively, the "Investor") or
any Rating Agency rating such Securities, each prospective Investor, and any
organization maintaining databases on the underwriting and performance of
commercial mortgage loans, all documents and information which Lender now has or
may hereafter acquire relating to the Debt and to Borrower, any Guarantor, any
Indemnitor(s) and the Property, whether furnished by Borrower, any Guarantor,
any Indemnitor(s) or otherwise, as Lender determines necessary or desirable.
Borrower irrevocably waives any and all rights it may have under Applicable Laws
to prohibit such disclosure, including but not limited to any right of privacy.

                  Section 18.2      Cooperation. Borrower, any Guarantor and any
Indemnitor agree to cooperate with Lender in connection with any transfer made
or any Securities created pursuant to this Article XVIII, including, without
limitation, the taking, or refraining from taking, of such

                                      -51-
<PAGE>
action as may be necessary to satisfy all of the conditions of any Investor, the
delivery of an estoppel certificate required in accordance with Subsection
7.4(c) hereof and such other documents as may be reasonably requested by Lender
and the execution of amendments to the Note, this Security Instrument and Other
Security Documents and Borrower's organizational documents as reasonably
requested by Lender. Borrower shall also furnish and Borrower, any Guarantor and
any Indemnitor consent to Lender furnishing to such Investors or such
prospective Investors or such Rating Agency any and all information concerning
the Property, the Leases, the financial condition of Borrower, any Guarantor and
any Indemnitor as may be requested by Lender, any Investor, any prospective
Investor or any Rating Agency in connection with any sale, transfer or
Participations or Securities.

                                  ARTICLE XIX

                                     COSTS

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

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

                                      -52-
<PAGE>
                                   ARTICLE XX

                                   DEFINITIONS

                  Section 20.1      General Definitions. Unless the context
clearly indicates a contrary intent or unless otherwise specifically provided
herein, words used in this Security Instrument may be used interchangeably in
singular or plural form and the word "Borrower" shall mean "each Borrower and
any subsequent owner or owners of the Property or any part thereof or any
interest therein," the word "Lender" shall mean "Lender and any subsequent
holder of the Note," the word "Trustee" shall mean "Trustee and any substitute
Trustee of the estates, properties, powers, trusts and rights conferred upon
Trustee pursuant to this Security Instrument," the word "Note" shall mean "the
Note and any other evidence of indebtedness secured by this Security
Instrument," the word "person" shall include an individual, corporation,
partnership, limited liability company, trust, unincorporated association,
government, governmental authority, and any other entity, the word "Property"
shall include any portion of the Property and any interest therein, and the
phrases "attorneys' fees" and "counsel fees" shall include any and all
attorneys', paralegal and law clerk fees and disbursements, including, but not
limited to, fees and disbursements at the pre-trial, trial and appellate levels
incurred or paid by Lender in protecting its interest in the Property, the
Leases and the Rents and enforcing its rights hereunder.

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

                                  ARTICLE XXI

                            MISCELLANEOUS PROVISIONS

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

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

                  Section 21.3      Inapplicable Provisions. If any term,
covenant or condition of the Note or this Security Instrument is held to be
invalid, illegal or unenforceable in any respect, the Note and this Security
Instrument shall be construed without such provision.

                  Section 21.4      Duplicate Originals; Counterparts. This
Security Instrument may be executed in any number of duplicate originals and
each duplicate original shall be deemed to be an original. This Security
Instrument may be executed in several counterparts, each of which

                                      -53-
<PAGE>
counterparts shall be deemed an original instrument and all of which together
shall constitute a single Security Instrument. The failure of any party hereto
to execute this Security Instrument, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.

                  Section 21.5      Number and Gender. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.

                  Section 21.6      Cross Default. An Event of Default under
this Security Instrument shall constitute an Event of Default under the Note and
each of the Other Security Documents and an Event of Default under the Note
and/or any of the Other Security Documents shall constitute an Event of Default
under this Security Instrument.

                                  ARTICLE XXII

                          SPECIAL CALIFORNIA PROVISIONS

                  Section 22.1      Principles of Construction. In the event of
any inconsistencies between the terms and provisions of this Section 22 and the
terms and provision of the other Sections of this Security Instrument, the terms
and provisions of this Section 22 shall govern and control.

                  Section 22.2      FORECLOSURE BY POWER OF SALE. The Borrower
hereby agrees that should the Lender elect to foreclose by exercise of the power
of sale herein contained, the Lender shall notify the Trustee and request that
the Trustee commence such proceedings.

                  (a)      Upon receipt of such notice from the Lender, the
Trustee shall cause to be recorded, published and delivered to the Borrower such
notice of Event of Default and election to sell as shall then be required by law
and by this Security Instrument. The Trustee shall, without demand on the
Borrower, after lapse of such time as may then be required by law and after
recordation of such notice of Event of Default and after notice of sale having
been given as required by law, sell the Property at the time and place of sale
fixed by the Trustee in said notice of sale, either as a whole, or in separate
lots or parcels or items as the Trustee shall deem expedient, and in such order
as it may determine, at public auction to the highest bidder for cash in lawful
money of the United States payable at the time of sale. The Trustee shall
deliver to such purchaser or purchasers thereof its good and sufficient deed or
deeds conveying the Property so sold, but without any covenant or warranty,
express or implied. The recitals in such deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including, without
limitation, the Borrower, the Trustee or the Lender, may purchase at such sale
and the Borrower hereby covenants to warrant and defend the title of such
purchaser or purchasers. In addition, the Lender may credit bid at any such sale
an amount up to and including the full amount of the indebtedness under the Loan
Documents and hereunder, including, without limitation, accrued and unpaid
interest, principal, charges, advances made hereunder and the Trustee's fees and
expenses.

                                      -54-
<PAGE>
                  (b)      After deducting all costs, fees and expenses of the
Trustee and of this Security Instrument, including costs of evidence of title in
connection with sale, the Trustee shall apply the proceeds of sale in accordance
with the provisions of the Loan Documents.

                  (c)      Subject to California Civil Code Section 2924g or any
successor provision thereto, the Trustee may postpone sale of all or any portion
of the Property by public announcement at such time and place of sale, and from
time to time thereafter may postpone such sale by public announcement or
subsequently noticed sale, and without further notice make such sale at the time
fixed by the last postponement, or may, in its discretion, give a new notice of
sale.

                  Section 22.3      PERSONAL PROPERTY.

                  (a)      Upon the occurrence of an Event of Default, the
Lender may proceed in any sequence to exercise its rights hereunder with respect
to all or any portion of the Property and all or any portion of the Personal
Property in accordance with the provisions of Section 9604of the California
Commercial Code.

                  (b)      Should the Lender elect to cause any of the Property
which is subject to the California Uniform Commercial Code to be disposed of, it
may dispose of any part thereof in any manner now or hereafter permitted by the
California Uniform Commercial Code, or in accordance with any other remedy
provided by applicable law. Any such disposition may be conducted by an employee
or agent of the Lender or the Trustee. Any person, including both the Borrower
and the Lender, shall be eligible to purchase any part or all of such Personal
Property at such disposition. Any such disposition may be either public or
private sale as the Lender may elect, subject to the provisions of applicable
law. The Lender shall also have the rights and remedies of a secured party under
the California Uniform Commercial Code, or otherwise available at law or in
equity. In furtherance of the foregoing, it is agreed that the expenses of
retaking, holding, preparing for sale, selling or the like shall be borne by the
Borrower and shall include the Lender's and the Trustee's attorneys' fees and
legal expenses. The Borrower, upon demand of the Lender, shall assemble such
Personal Property and make it available to the Lender at the Property, a place
which is hereby deemed to be reasonably convenient to the Lender and the
Borrower. The Lender shall give the Borrower at least five (5) days' prior
written notice of the time and place of any public sale or other disposition of
such Personal Property or of the time of or after which any private sale or
other intended disposition is to be made, and if such notice is sent to the
Borrower, in the same manner as provided for the mailing of notices herein, it
is hereby deemed that such notice shall be and is reasonable notice to the
Borrower.

                  (c)      This Security Instrument constitutes a financing
statement filed as a fixture filing pursuant to the provisions of Division 9 of
the California Commercial Code, with respect to those portions of the Property
consisting of goods which are or are to become fixtures relating to the
Property. The Borrower grants to the Lender a security interest in all existing
and future goods which are now or in the future become fixtures relating to the
Property and proceeds thereof. The Borrower covenants and agrees that the filing
of this Security Instrument in the real estate records of the county where the
Property are located shall also operate from the date of such filing as a
fixture filing in accordance with Section 9502 of the California Commercial
Code. Without the prior written consent of the Lender, the Borrower shall not

                                      -55-
<PAGE>
create or suffer to be created pursuant to the California Commercial Code, any
other security interest in such items, including replacements and additions
thereto, other than as permitted pursuant to the terms of this Security
Instrument or the Other Security Documents.

                  Section 22.4      BORROWER'S WAIVER OF RIGHTS. The Borrower
waives to the extent permitted by law, (i) the benefit of all laws now existing
or that may hereafter be enacted providing for any appraisal before sale of any
portion of the Property, and (ii) all rights of redemption, valuation,
appraisal, stay of execution, notice of election to mature or declare due the
whole of the secured indebtedness and marshaling in the event of foreclosure of
the liens hereby created, and (iii) all rights and remedies which the Borrower
may have or be able to assert by reason of the laws of the State of California
pertaining to the rights and remedies of sureties; provided, however, nothing
contained herein shall be deemed to be a waiver of the Borrower's rights under
Section 2924c of the California Civil Code.

                  Section 22.5      NON-FOREIGN ENTITY. Section 1445 of the
Internal Revenue Code of 1986, as amended (the "INTERNAL REVENUE CODE"), and
Section 18805 of the California Revenue and Taxation Code, provide that a
transferee of a U.S. real property interest must withhold tax if the transferor
is a foreign person. To inform the Lender that the withholding of tax will not
be required in the event of the disposition of the Property pursuant to the
terms of this Security Instrument, the Borrower hereby certifies, under penalty
of perjury, that:

                  (a)      The Borrower is not a foreign corporation, foreign
partnership, foreign trust or foreign estate, as those terms are defined in the
Internal Revenue Code and the regulations promulgated thereunder;

                  (b)      The Borrower's U.S. employer identification number is
52-2353140; and

                  (c)      The Borrower's principal place of business is c/o
W.P. Carey & Co. LLC, 50 Rockefeller Plaza, 2nd Floor, New York, New York 10020.

                  It is understood that the Lender may disclose the contents of
         this certification to the Internal Revenue Service and the California
         Franchise Tax Board and that any false statement contained herein could
         be punished by fine, imprisonment or both. The Borrower covenants and
         agrees to execute such further certificates, which shall be signed
         under penalty of perjury, as the Lender shall reasonably require. The
         covenant set forth herein shall survive the foreclosure of the lien of
         this Security Instrument or acceptance of a deed in lieu thereof.

                  Section 22.6      ENVIRONMENTAL DEFAULTS AND REMEDIES. In the
event that any portion of the Property is determined to be "environmentally
impaired" (as "environmentally impaired" is defined in California Code of Civil
Procedure Section 726.5(e)(3)) or to be an "affected parcel" (as "affected
parcel" is defined in California Code of Civil Procedure Section 726.5(e)(1)),
then, without otherwise limiting or in any way affecting the Lender's or the
Trustee's rights and remedies under this Security Instrument, the Lender may
elect to exercise its right under California Code of Civil Procedure Section
726.5(a) to (1) waive its lien on such environmentally impaired or affected
parcel or portion of the Property and (2) exercise (i) the

                                      -56-
<PAGE>
rights and remedies of an unsecured creditor, including reduction of its claim
against the Borrower to judgment, and (ii) any other rights and remedies
permitted by law. For purposes of determining the Lender's right to proceed as
an unsecured creditor under California Code of Civil Procedure Section 726.5(a),
the Borrower shall be deemed to have willfully permitted or acquiesced in a
release or threatened release of hazardous materials, within the meaning of
California Code of Civil Procedure Section 726.5(d)(1), if the release or
threatened release of hazardous materials was knowingly or negligently caused or
contributed to by any tenant, occupant or user of any portion of the Property
and the Borrower knew or should have known of the activity by such tenant,
occupant or user which caused or contributed to the release or threatened
release. All costs and expenses, including, but not limited to, attorneys' fees,
incurred by the Lender in connection with any action commenced under this
Section, including any action required by California Code of Civil Procedure
Section 726.5(b) to determine the degree to which the Property is
environmentally impaired, plus interest thereon at the default rate of interest
set forth in the Note until paid, shall be added to the obligations secured by
this Security Instrument and shall be due and payable to the Lender upon its
demand made at any time following the conclusion of such action.

                  Section 22.7      REQUEST FOR NOTICE. The Borrower requests a
copy of any statutory notice of default and a copy of any statutory notice of
sale hereunder be mailed to the Borrower at the address specified in Article 16
of this Security Instrument.

                                 ARTICLE XXIII

                            DEED OF TRUST PROVISIONS

                  Section 23.1      Concerning The Trustee. Trustee shall be
under no duty to take any action hereunder except as expressly required
hereunder or by law, or to perform any act which would involve Trustee in any
expense or liability or to institute or defend any suit in respect hereof,
unless properly indemnified to Trustee's reasonable satisfaction. Trustee, by
acceptance of this Security Instrument, covenants to perform and fulfill the
trusts herein created, being liable, however, only for gross negligence or
willful misconduct, and hereby waives any statutory fee and agrees to accept
reasonable compensation, in lieu thereof, for any services rendered by Trustee
in accordance with the terms hereof. Trustee may resign at any time upon giving
thirty (30) days' notice to Borrower and to Lender. Lender may remove Trustee at
any time or from time to time and select a successor trustee. In the event of
the death, removal, resignation, refusal to act, or inability to act of Trustee,
or in its sole discretion for any reason whatsoever Lender may, without notice
and without specifying any reason therefor and without applying to any court,
select and appoint a successor trustee, by an instrument recorded wherever this
Security Instrument is recorded and all powers, rights, duties and authority of
Trustee, as aforesaid, shall thereupon become vested in such successor. Such
substitute trustee shall not be required to give bond for the faithful
performance of the duties of Trustee hereunder unless required by Lender. The
procedure provided for in this paragraph for substitution of Trustee shall be in
addition to and not in exclusion of any other provisions for substitution, by
law or otherwise.

                  Section 23.2      Trustee's Fees. Borrower shall pay all
reasonable costs, fees and expenses incurred by Trustee and Trustee's agents and
counsel in connection with the

                                      -57-
<PAGE>
performance by Trustee of Trustee's duties hereunder and all such costs, fees
and expenses shall be secured by this Security Instrument.

                  Section 23.3      Certain Rights. With the approval of Lender,
Trustee shall have the right to take any and all of the following actions: (i)
to select, employ, and advise with counsel (who may be, but need not be, counsel
for Lender) upon any matters arising hereunder, including the preparation,
execution, and interpretation of the Note, this Security Instrument or the Other
Security Documents, and shall be fully protected in relying as to legal matters
on the advice of counsel, (ii) to execute any of the trusts and powers hereof
and to perform any duty hereunder either directly or through his/her agents or
attorneys, (iii) to select and employ, in and about the execution of his/her
duties hereunder, suitable accountants, engineers and other experts, agents and
attorneys-in-fact, either corporate or individual, not regularly in the employ
of Trustee, and Trustee shall not be answerable for any act, default,
negligence, or misconduct of any such accountant, engineer or other expert,
agent or attorney-in-fact, if selected with reasonable care, or for any error of
judgment or act done by Trustee in good faith, or be otherwise responsible or
accountable under any circumstances whatsoever, except for Trustee's gross
negligence or bad faith, and (iv) any and all other lawful action as Lender may
instruct Trustee to take to protect or enforce Lender's rights hereunder.
Trustee shall not be personally liable in case of entry by Trustee, or anyone
entering by virtue of the powers herein granted to Trustee, upon the Property
for debts contracted for or liability or damages incurred in the management or
operation of the Property. Trustee shall have the right to rely on any
instrument, document, or signature authorizing or supporting an action taken or
proposed to be taken by Trustee hereunder, believed by Trustee in good faith to
be genuine. Trustee shall be entitled to reimbursement for actual expenses
incurred by Trustee in the performance of Trustee's duties hereunder and to
reasonable compensation for such of Trustee's services hereunder as shall be
rendered.

                  Section 23.4      Retention of Money. All moneys received by
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated in any
manner from any other moneys (except to the extent required by applicable law)
and Trustee shall be under no liability for interest on any moneys received by
Trustee hereunder.

                  Section 23.5      Perfection of Appointment. Should any deed,
conveyance, or instrument of any nature be required from Borrower by any Trustee
or substitute trustee to more fully and certainly vest in and confirm to the
Trustee or substitute trustee such estates rights, powers, and duties, then,
upon request by the Trustee or substitute trustee, any and all such deeds,
conveyances and instruments shall be made, executed, acknowledged, and delivered
and shall be caused to be recorded and/or filed by Borrower.

                  Section 23.6      Succession Instruments. Any substitute
trustee appointed pursuant to any of the provisions hereof shall, without any
further act, deed, or conveyance, become vested with all the estates,
properties, rights, powers, and trusts of its or his/her predecessor in the
rights hereunder with like effect as if originally named as Trustee herein; but
nevertheless, upon the written request of Lender or of the substitute trustee,
the Trustee ceasing to act shall execute and deliver any instrument transferring
to such substitute trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers, and trusts of the Trustee so ceasing to act,

                                      -58-
<PAGE>
and shall duly assign, transfer and deliver any of the property and moneys held
by such Trustee to the substitute trustee so appointed in the Trustee's place.

                         [NO FURTHER TEXT ON THIS PAGE]

                                      -59-
<PAGE>
                  IN WITNESS WHEREOF, Borrower has executed this Security
Instrument under seal as of the day and year first above written.

                                       BORROWER:

                                       GOLDFISH (DE) LP,
                                       a Delaware limited partnership

                                       By:   Catfish (DE) QRS 14-79, Inc.
                                             a Delaware corporation,
                                             its general partner

                                             By:  _______________________
                                                  Name:
                                                  Title:
<PAGE>
STATE OF _____________)
                      )  ss.:
COUNTY OF_____________)

On  __________________, 200_, before me,  ________________________________,
Notary Public, personally appeared _________________________________,

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

                                               WITNESS my hand and official
                                               seal.

                                               ____________________________
                                               signature
<PAGE>
                                    EXHIBIT A

                     [Attach Legal Description of Property]

                                       A-1
<PAGE>
                                    EXHIBIT B

                              W.P. Carey & Co. LLC
                                GOLDFISH (DE) LP
                                  [__________]
                               ___________________
                               ___________________
                             MSMC Loan No. 01-09970
                             GMAC Loan No. ________

                             RENT ROLL CERTIFICATION

<TABLE>
<CAPTION>
                                                        CURRENT
                            SQUARE       LEASE        MONTHLY RENT      CURRENT       CURRENT ANNUAL    CURRENT ANNUAL
TENANT                       FEET      EXPIRATION         PSF         MONTHLY RENT         PSF               RENT
<S>                         <C>        <C>            <C>             <C>             <C>               <C>
[PetsMART]                                                 $               $                $                 $

TOTAL FOR PROPERTY                                         $               $                $                 $
</TABLE>

                                      B-1
<PAGE>
                                    EXHIBIT C

                              W.P. Carey & Co. LLC
                                GOLDFISH (DE) LP
                                   [PetsMART]
                               ___________________
                               ___________________
                             MSMC Loan No. 01-09970
                             GMAC Loan No. ________

                    MONTHLY OPERATING STATEMENT CERTIFICATION

<TABLE>
<S>                                                                       <C>
INCOME
Current Base Rent for Period                                                $
Reimbursements                                                              $
Other                                                                       $

Total Income

OPERATING EXPENSES
(None-NNN bond-type lease. Tenant is responsible)                           $
Total Operating Expenses                                                    $

Net Operating Income                                                      $
                                                                          =====
</TABLE>

                                      C-1
<PAGE>
                                    EXHIBIT D

                              W.P. Carey & Co. LLC
                                GOLDFISH (DE) LP
                                   [PetsMART]
                               ___________________
                               ___________________
                             MSMC Loan No. 01-09970
                             GMAC Loan No. ________

                   QUARTERLY OPERATING STATEMENT CERTIFICATION

<TABLE>
<S>                                                                       <C>
INCOME
Current Base Rent for Period                                                $
Reimbursements                                                              $
Other                                                                       $

Total Income

OPERATING EXPENSES
(None-NNN bond-type lease. Tenant is responsible)                           $
Total Operating Expenses                                                    $

Net Operating Income                                                      $
                                                                          =====
</TABLE>

                                      D-1
<PAGE>
                                    EXHIBIT E

                              W.P. Carey & Co. LLC
                                GOLDFISH (DE) LP
                                   [PetsMART]
                               ___________________
                               ___________________
                             MSMC Loan No. 01-09724
                             GMAC Loan No. _________

                    ANNUAL OPERATING STATEMENT CERTIFICATION

<TABLE>
<S>                                                                       <C>
INCOME
Current Base Rent for Period                                              $
Reimbursements                                                            $
Other                                                                     $

Total Income

OPERATING EXPENSES
(None-NNN bond-type lease. Tenant is responsible)                         $
Total Operating Expenses                                                  $

Net Operating Income                                                      $
                                                                          =====
</TABLE>

                                      E-1
<PAGE>
                                    EXHIBIT F

                              W.P. Carey & Co. LLC
                                GOLDFISH (DE) LP
                                   [PetsMART]
                               ___________________
                               ___________________
                             MSMC Loan No. 01-09970
                             GMAC Loan No. _________

                           BALANCE SHEET CERTIFICATION

<TABLE>
<S>                                                                                    <C>         <C>
ASSETS

CURRENT ASSETS:
         Cash                                                                          $
         Restricted Deposits (TI/LC Reserve Account)                                   $
         Tenant Receivables                                                            $
         Prepaid Expenses                                                              $
         Other                                                                         $

Total Current Assets                                                                                 $

FIXED ASSETS:
         Building & Improvements (at total acquisition cost)                           $
         Furniture & Equipment                                                         $
         Other                                                                         $
Total Fixed Assets                                                                                   $

TOTAL ASSETS                                                                                       $
                                                                                                   =====

LIABILITIES

CURRENT LIABILITIES:
         Restricted Deposits (TI/LC Reserve Account)                                   $
         Other Current Liabilities                                                     $

Total Current Liabilities                                                                            $

LONG-TERM LIABILITIES:
         Outstanding Loan Balance                                                     $
         Other                                                                        $

TOTAL LONG-TERM LIABILITIES                                                                        $
                                                                                                   =====

NET WORTH                                                                                          $
                                                                                                   =====
</TABLE>

                                      F-1
<PAGE>
                                    EXHIBIT G

                    (ATTACH FORM OF ANNUAL OPERATING BUDGET)

                                      G-1<PAGE>
                                                                   Exhibit 10.31

                                 LEASE AGREEMENT

                                 by and between

                         BOLT (DE) LIMITED PARTNERSHIP,
                         a Delaware limited partnership

                                   as LANDLORD

                                       and

                               TRUSERV CORPORATION

                             a Delaware corporation,

                                    as TENANT

                             Premises:  1.  Kingman, Arizona
                                        2.  Springfield, Oregon
                                        3.  Fogelsville, Pennsylvania

                         Dated as of: December 26, 2002
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>                                                                                      <C>
1.   Demise of Premises...............................................................     1

2.   Certain Definitions..............................................................     1

3.   Title and Condition; Single Lease Transaction....................................    10

4.   Use of Leased Premises; Quiet Enjoyment..........................................    12

5.   Term.............................................................................    13

6.   Basic Rent.......................................................................    15

7.   Additional Rent..................................................................    15

8.   Net Lease: Non-Terminability.....................................................    16

9.   Payment of Impositions...........................................................    17

10.  Compliance with Laws and Easement Agreements; Environmental Matters..............    18

11.  Liens; Recording.................................................................    20

12.  Maintenance and Repair...........................................................    21

13.  Alterations and Improvements.....................................................    21

14.  Permitted Contests...............................................................    23

15.  Indemnification..................................................................    23

16.  Insurance........................................................................    25

17.  Casualty and Condemnation........................................................    28

18.  Termination Events...............................................................    30

19.  Restoration......................................................................    31

20.  Intentionally Omitted............................................................    32

21.  Assignment and Subletting: Prohibition against Leasehold Financing...............    32

22.  Events of Default................................................................    35

23.  Remedies and Damages Upon Default................................................    37

24.  Notices..........................................................................    42

25.  Estoppel Certificate.............................................................    42

26.  Surrender........................................................................    42

27.  No Merger of Title...............................................................    43

28.  Books and Records................................................................    43

29.  Intentionally Omitted............................................................    44

30.  Non-Recourse as to Landlord......................................................    44

31.  Financing........................................................................    44

32.  Subordination, Non-Disturbance and Attornment....................................    44
</TABLE>

                                      -i-
<PAGE>
<TABLE>
<S>                                                                                      <C>
33.  Tax Treatment; Reporting.........................................................    45

34.  Miscellaneous....................................................................    46
</TABLE>

EXHIBITS

         Exhibit "A"   - Land
         Exhibit "B"   - Fixtures
         Exhibit "C"   - Schedule of Permitted Encumbrances
         Exhibit "D"   - Rent Schedule
         Exhibit "E"   - Form of Subordination, Non-disturbance and Attornment
                         Agreement
         Exhibit "F"   - Premises Percentage Allocation of Basic Rent
         Exhibit "G"   - Patriot's Act Certification
         Exhibit "H"   - Post-closing Obligations

                                      -ii-
<PAGE>
      LEASE AGREEMENT, made as of this 26th day of December, 2002, between BOLT
(DE) LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), with an
address c/o W. P. Carey & Co. LLC, 50 Rockefeller Plaza, 2nd Floor, New York,
New York 10020, and TRUSERV CORPORATION, a Delaware corporation ("Tenant") with
an address at 8600 West Bryn Mawr Avenue, Chicago, Illinois 60631.

      In consideration of the rents and provisions herein stipulated to be paid
and performed, Landlord and Tenant hereby covenant and agree, with the intent to
be legally bound, as follows:

            1. Demise of Premises. Landlord hereby demises and lets to Tenant,
and Tenant hereby takes and leases from Landlord, for the term and upon the
provisions hereinafter specified, the following described property (hereinafter
referred to collectively as the "Leased Premises" and individually as the
"Arizona Premises", "Oregon Premises", "Pennsylvania Premises": (a) the land
described in Exhibit "A" attached hereto, together with the Appurtenances
(collectively, the "Land"); (b) the buildings containing approximately 1,459,793
square feet in the aggregate, structures and other improvements now or hereafter
constructed on the Land (collectively, the "Improvements"); and (c) the
fixtures, machinery, equipment and other property described in Exhibit "B"
hereto (collectively, the "Fixtures").

            2. Certain Definitions.

                  "Additional Rent" shall mean Additional Rent as defined in
Paragraph 7.

                  "Adjoining Property" shall mean all sidewalks, driveways,
curbs, gores and vault spaces adjoining any of the Leased Premises that Landlord
is required to maintain, replace and/or repair pursuant to any Legal Requirement
or Permitted Encumbrance.

                  "Affected Premises" shall mean the Affected Premises as
defined in Paragraph 18.

                  "Affiliate Leases" shall mean that certain lease agreement by
and between Wrench (DE) Limited Partnership and Tenant with respect to property
situate in Corsicana, Texas and Woodland, California dated as of the date of
this Lease and that certain lease agreement by and between Hammer (DE) Limited
Partnership and Tenant with respect to property situate in Jonesboro, Georgia
and Kansas City, Missouri also dated as of the date of this Lease each as
amended from time to time.

                  "Alterations" shall mean all changes, additions, improvements
or repairs to, all alterations or removals of and all substitutions or
replacements for any of the Improvements or Fixtures, both interior and
exterior, structural and non-structural, and ordinary and extraordinary.

                  "Appurtenances" shall mean all tenements, hereditaments,
easements, rights-of-way, rights, privileges in and to the Land, including (a)
easements over other lands granted by any Easement Agreement, (b) any streets,
ways, alleys, vaults, gores or strips of land adjoining the Land, and (c) all
water, irrigation and drainage rights (whether riparian, appropriative or
otherwise) and all electrical users' rights, in or relating to or used in
connection
<PAGE>
with the Land; all shares of stock evidencing any such rights; and all fixtures
and equipment used for production or distribution of water or electricity in
connection with any use of the Land.

                  "Assignment" shall mean any first priority assignment of rents
and leases from Landlord to a Lender which (a) encumbers any of the Leased
Premises and (b) secures Landlord's obligation to repay a Loan, as the same may
be amended, supplemented or modified from time to time.

                  "Basic Rent" shall mean Basic Rent as defined in Paragraph 6.

                  "Basic Rent Payment Dates" shall mean the Basic Rent Payment
Dates as defined in Paragraph 6.

                  "Bifurcated Lease" shall mean Bifurcated Lease as defined in
Paragraph 21(a)(i).

                  "Bifurcated Premises" shall mean Bifurcated Premises as
defined in Paragraph 21(a)(i).

                  "Business Day" shall mean any weekday, except for a national
holiday or a day on which national banks are closed in either Illinois or New
York.

                  "Casualty" shall mean any damage to or destruction of or which
affects the Leased Premises or Adjoining Property.

                  "Closing Agreement" shall mean that certain Closing Agreement
by and between Tenant and Landlord dated as of the date hereof.

                  "Commencement Date" shall mean Commencement Date as defined in
Paragraph 5.

                  "Competitor" shall mean any Person whose primary business is
and who receives at least 10% of its revenues from the operation of a hardware
cooperative or the wholesale or retail sale or distribution of home improvement
and/or hardware products.

                  "Complete Assignment" shall mean Complete Assignment as
defined in Paragraph 21(a)(i).

                  "Condemnation" shall mean a Taking.

                  "Condemnation Notice" shall mean notice or knowledge of the
institution of or intention to institute any proceeding for Condemnation.

                  "Control Event" shall mean the failure by Tenant to perform
and observe, or a violation or breach of, Paragraphs 4(a), 4(c), 8(d), 10
(except with respect to an Environmental Violation caused by any subtenant or
Person who is not controlled by or in control of or under common control with
Tenant or any Environmental Violation that Tenant is diligently endeavoring to
cure but fails to cure within the cure period specified in Paragraph

                                       2
<PAGE>
22(b)), 11, 12, 13, 14, 15, 16 (except for insurance required under Paragraph
16(a) that cannot be obtained from any insurance carrier at any cost despite
Tenant's best efforts), 17, 19, 21, 24, 25, 26, 28, 31, 32, 34(l).

                  "Costs" of a Person or associated with a specified transaction
shall mean all reasonable costs and expenses incurred by such Person or
associated with such transaction, including without limitation, reasonable
attorneys' fees and expenses, court costs, brokerage fees, escrow fees, title
insurance premiums, mortgage commitment fees, mortgage points, recording fees
and transfer taxes, as the circumstances require.

                  "Default Rate" shall mean the Default Rate as defined in
Paragraph 7(a)(iv).

                  "Easement Agreement" shall mean any conditions, covenants,
restrictions, easements, declarations, licenses and other agreements listed as
Permitted Encumbrances or as may hereafter affect any Related Premises.

                  "Environmental Law" shall mean (i) whether in effect as of the
Commencement Date or thereafter enacted or promulgated, any applicable federal,
state, foreign and local law, statute, ordinance, rule, regulation, license,
permit, authorization, approval, consent, court order, judgment, decree,
injunction, code, requirement or agreement with any governmental entity, (x)
relating to pollution (or the cleanup thereof), or the protection of air, water
vapor, surface water, groundwater, drinking water supply, land (including land
surface or subsurface), plant, aquatic and animal life from injury caused by a
Hazardous Substance or (y) concerning exposure to, or the use, containment,
storage, recycling, reclamation, reuse, treatment, generation, discharge,
transportation, processing, handling, labeling, production, disposal or
remediation of any Hazardous Substance, Hazardous Condition or Hazardous
Activity, in each case as amended and as now or hereafter in effect, and (ii)
any common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations or injuries or damages due
to or threatened as a result of the presence of, exposure to, or ingestion of,
any Hazardous Substance. The term Environmental Law includes, without
limitation, the federal Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the
federal Water Pollution Control Act, the federal Clean Air Act, the federal
Clean Water Act, the federal Resources Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments to RCRA), the federal Solid
Waste Disposal Act, the federal Toxic Substance Control Act, the federal
Insecticide, Fungicide and Rodenticide Act, the federal Occupational Safety and
Health Act of 1970, the federal National Environmental Policy Act and the
federal Hazardous Materials Transportation Act, each as amended and as now or
hereafter in effect and any similar state or local Law.

                  "Environmental Violation" shall mean (a) any direct or
indirect discharge, disposal, spillage, emission, escape, pumping, pouring,
injection, leaching, release, seepage, filtration or transporting of any
Hazardous Substance at, upon, under, onto or within the Leased Premises, or from
the Leased Premises to the environment, in violation of any Environmental Law or
which could reasonably be anticipated to result in any liability to Landlord,
Tenant or

                                       3
<PAGE>
Lender, any Federal, state or local government or any other Person for the costs
of any removal or remedial action or natural resources damage or for bodily
injury or property damage, (b) any deposit, storage, dumping, placement or use
of any Hazardous Substance at, upon, under, within or migrating from the Leased
Premises in violation of any Environmental Law which could reasonably be
anticipated to result in any liability to any Federal, state or local government
or to any other Person for the costs of any removal or remedial action or
natural resources damage or for bodily injury or property damage, (c) the
abandonment or discarding of any barrels, containers or other receptacles
containing any Hazardous Substances in violation of any Environmental Laws, (d)
any activity, occurrence or condition which could result in any liability, cost
or expense to Landlord or Lender or any other owner or occupier of the Leased
Premises, or which could reasonably be anticipated to result in a creation of a
lien on any Related Premises as a result of any violation of any Environmental
Law or (e) any violation of or noncompliance with any Environmental Law.

                  "Escrow Charges" shall mean Escrow Charges as defined in
Paragraph 9.

                  "Escrow Payment" shall mean Escrow Payment as defined in
Paragraph 9.

                  "Fitch" shall mean Fitch, Inc.

                  "Fixtures" shall mean the Fixtures as defined in Paragraph 1.

                  "Environmental Violation Extension Term" shall mean
Environmental Violation Extension Term as defined in Paragraph 10(e).

                  "Estoppel Certificate" shall mean Estoppel Certificate as
defined in Paragraph 25.

                  "Event of Default" shall mean an Event of Default as defined
in Paragraph 22(a).

                  "Expiration Date" shall mean Expiration Date as defined in
Paragraph 5.

                  "Fair Market Rent" shall mean Fair Market Rent as defined in
Paragraph 5(b).

                  "Federal Funds" shall mean federal or other immediately
available funds which at the time of payment are legal tender for the payment of
public and private debts in the United States of America.

                  "Fixtures" shall mean the Fixtures as defined in Paragraph 1.

                  "GAAP" shall mean GAAP as defined in Paragraph 28.

                  "Hazardous Activity" means any activity, process, procedure or
undertaking which directly or indirectly (i) procures, generates or creates any
Hazardous Substance; (ii) causes or results in (or threatens to cause or result
in) the release, seepage, spill, leak, flow, discharge or emission of any
Hazardous Substance into the environment (including

                                       4
<PAGE>
the air, ground water, watercourses or water systems), (iii) involves the
containment or storage of any Hazardous Substance; or (iv) would cause any of
the Leased Premises or any portion thereof to become a hazardous waste
treatment, recycling, reclamation, processing, storage or disposal facility
within the meaning of any Environmental Law.

                  "Hazardous Condition" means any condition which would support
any claim or liability under any Environmental Law, including the presence of
underground storage tanks.

                  "Hazardous Substance" means (i) any substance, material,
product, petroleum, petroleum product, derivative, compound or mixture, mineral
(including asbestos), chemical, gas, medical waste, or other pollutant, in each
case whether naturally occurring, man-made or the by-product of any process,
that is toxic, harmful or hazardous or acutely hazardous to the environment or
public health or safety or (ii) any substance supporting a claim under any
Environmental Law, whether or not defined as hazardous as such under any
Environmental Law. Hazardous Substances include, without limitation, any toxic
or hazardous waste, pollutant, contaminant, industrial waste, petroleum or
petroleum-derived substances or waste, radon, radioactive materials, asbestos,
asbestos containing materials, urea formaldehyde foam insulation, lead,
polychlorinated biphenyls.

                  "Impositions" shall mean the Impositions as defined in
Paragraph 9(a).

                  "Improvements" shall mean the Improvements as defined in
Paragraph 1.

                  "Insurance Requirements" shall mean the requirements of all
insurance policies maintained in accordance with this Lease.

                  "Investment Grade Rating" means any of the following: (a) an
unsecured senior debt rating of Baa2 or better from Moody's, (b) an unsecured
senior debt rating of BBB or better by S&P or Fitch, or (c) if none of the
Rating Agencies furnish such ratings, then a comparable rating by any rating
agency reasonably acceptable to Landlord and Lender.

                  "Land" shall mean the Land as defined in Paragraph 1.

                  "Late Charge" shall mean Late Charge as defined in Paragraph
7(a)(ii).

                  "Law" shall mean any constitution, statute, rule of law, code,
ordinance, order, judgment, decree, injunction, rule, regulation, policy,
requirement or administrative or judicial determination, even if unforeseen or
extraordinary, of every duly constituted governmental authority, court or
agency, now or hereafter enacted or in effect.

                  "Lease" shall mean this Lease Agreement.

                  "Lease Bifurcation" shall mean Lease Bifurcation as defined in
Paragraph 21(a)(i).

                  "Lease Year" shall mean, with respect to the first Lease Year,
the period commencing on the Commencement Date and ending at midnight on the
last day of the twelfth

                                       5
<PAGE>
(12th) consecutive calendar month following the month in which the Commencement
Date occurred, and each succeeding twelve (12) month period during the Term,
except that for the purposes of calculating Basic Rent in the thirtieth (30th)
Lease Year the thirtieth (30th) Lease Year shall be eleven (11) months.

                  "Leased Premises" shall mean the Leased Premises as defined in
Paragraph 1, except for Affected Premises and Bifurcated Premises after
termination of this Lease with respect thereto.

                  "Legal Requirements" shall mean the requirements of all
present and future Laws (including but not limited to Environmental Laws and
Laws related to accessibility to, usability by, and discrimination against,
disabled individuals) and all covenants, restrictions and conditions now or
hereafter of record which may be applicable to any of the Leased Premises or
Related Premises, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or restoration of any of the Leased
Premises or Related Premises, even if compliance therewith necessitates
structural changes or improvements or results in interference with the use or
enjoyment of any of the Leased Premises or Related Premises or requires Tenant
to carry insurance other than as required by this Lease.

                  "Lender" shall mean any person or entity (and its respective
successors and assigns) which may, on or after the date hereof, make a Loan to
Landlord or be the holder of a Note secured by a Mortgage, or, if more than one
Note is secured by a Mortgage, then Lender shall mean the agent or trustee for
such Note holders, provided that, in each case, Landlord has identified such
Lender in a written notice to Tenant together with contact information for such
Lender.

                  "Limited Remedy Default" shall mean an Event of Default
specified in the following clauses of Paragraph 22(a): clause (ii) unless such
default is a Control Event, clause (iii) if the misrepresentation is with
respect to the last sentence of Paragraph A.2 of the Closing Agreement, the
first sentence of Paragraph A.3 or the first sentence of Paragraph A.7 of the
Closing Agreement, clause (iv), clause (v), clause (viii) or clause (xiv) unless
such default is not a Limited Remedy Default under either of the Affiliated
Leases.

                  "Loan" shall mean any loan made by one or more Lenders to
Landlord, which loan is secured by a Mortgage and an Assignment and evidenced by
a Note.

                  "Major Alteration" means any structural, or series of related
Alterations, other than a Major Replacement, which will cost more than $750,000.

                  "Major Replacement" means any structural repair or structural
replacement which will cost more than $750,000.

                  "Monetary Obligations" shall mean Rent and all other sums
payable by Tenant under this Lease to Landlord or to any third party on behalf
of Landlord.

                  "Moody's" shall mean Moody's Investors Services, Inc.

                                       6
<PAGE>
                  "Mortgage" shall mean any first priority mortgage or deed of
trust from Landlord to a Lender which (a) encumbers any of the Leased Premises
and (b) secures Landlord's obligation to repay a Loan, as the same may be
amended, supplemented or modified.

                  "Net Award" shall mean (a) the entire award payable to
Landlord or Lender by reason of a Condemnation whether pursuant to a judgment or
by agreement or otherwise, or (b) the entire proceeds of any insurance required
under clauses (i), (ii) (to the extent payable to Landlord or Lender), (iv), (v)
or (vi) of Paragraph 16(a), as the case may be, less any expenses incurred by
Landlord and Lender in collecting such award or proceeds.

                  "Non-Preapproved Assignee" shall mean Non-Preapproved Assignee
as defined in Paragraph 21(a)(ii).

                  "Non-Preapproved Assignment" shall mean Non-Preapproved
Assignment as defined in Paragraph 21(a)(ii).

                  "Note" shall mean any promissory note evidencing Landlord's
obligation to repay a Loan, as the same may be amended, supplemented or
modified.

                  "Partial Assignment" shall mean Partial Assignment as defined
in Paragraph 21(a)(i).

                  "Partial Casualty" shall mean any Casualty which does not
constitute a Termination Event.

                  "Partial Condemnation" shall mean any Condemnation which does
not constitute a Termination Event.

                  "Permitted Encumbrances" shall mean those covenants,
restrictions, reservations, liens, conditions and easements and other
encumbrances, other than any Mortgage or Assignment, listed on Exhibit "C"
hereto (but such listing shall not be deemed to revive any such encumbrances
that have expired or terminated or are otherwise invalid or unenforceable).

                  "Permitted Violations" shall mean Permitted Violations as
defined in Paragraph 14.

                  "Person" shall mean an individual, partnership, association,
corporation, limited liability company, governmental entity or other entity.

                  "Pre-Approved Alteration" means (a) any non-structural
Alteration, (b) regardless of cost, the installation, removal or alteration of
non-loadbearing interior partition walls, exterior fences or loading docks or
the installation or alteration (but not the sealing) of dock doors, and (c) any
other structural Alteration which will cost $750,000 or less provided that
TruServ Corporation or a Preapproved Assignee is the Tenant of the Related
Premises which is the subject of the Alteration.

                  "Preapproved Assignee" shall mean Preapproved Assignee as
defined in Paragraph 21(a)(i).

                                       7
<PAGE>
                  "Preapproved Assignment" shall mean Preapproved Assignment as
defined in Paragraph 21(a)(i).

                  "Preapproved Sublet" shall mean Preapproved Sublet as defined
in Paragraph 21(b).

                  "Premises Percentage Allocation" shall mean the percentage
allocated to each Related Premises in Exhibit "F" to this Lease as the same may
be adjusted in accordance with the formula specified in Exhibit "F".

                  "Present Value" of any amount shall mean such amount
discounted by seven (7%) percent per annum.

                  "Prime Rate" shall mean the interest rate per annum as
published, from time to time, in The Wall Street Journal as the "Prime Rate" in
its column entitled "Money Rate". The Prime Rate may not be the lowest rate of
interest charged by any "large U.S. money center commercial banks" and Landlord
makes no representations or warranties to that effect. In the event The Wall
Street Journal ceases publication or ceases to publish the "Prime Rate" as
described above, the Prime Rate shall be the average per annum discount rate
(the "Discount Rate") on ninety-one (91) day bills ("Treasury Bills") issued
from time to time by the United States Treasury at its most recent auction, plus
three hundred (300) basis points. If no such 91-day Treasury Bills are then
being issued, the Discount Rate shall be the discount rate on Treasury Bills
then being issued for the period of time closest to ninety-one (91) days.

                  "Protected Sublease" shall mean Protected Sublease as defined
in Paragraph 21(b)(ii).

                  "Protected Subtenant" shall mean Protected Subtenant as
defined in Paragraph 21(b).

                  "Rating Agency" shall mean Moody's, S&P or Fitch.

                  "Related Premises" shall mean any one of the Arizona Premises,
Oregon Premises, and Pennsylvania Premises.

                  "Remaining Obligations" shall mean Remaining Obligations as
defined in Paragraph 18(c).

                  "Remaining Premises" shall mean the Related Premises which are
not Affected Premises under Paragraph 18 or Bifurcated Premises under Paragraph
21.

                  "Renewal Date" shall mean Renewal Date as defined in Paragraph
5.

                  "Renewal Term" shall mean Renewal Term as defined in Paragraph
5.

                  "Rent" shall mean, collectively, Basic Rent and Additional
Rent.

                                       8
<PAGE>
                  "Requesting Party" shall mean Requesting Party as defined in
Paragraph 25.

                  "Responding Party" shall mean Responding Party as defined in
Paragraph 25.

                  "Restoration Fund" shall mean Restoration Fund as defined in
Paragraph 19(a).

                  "Review Criteria" shall mean Review Criteria as defined in
Paragraph 21(a)(ii).

                  "S&P" shall mean Standard & Poor's Corporation.

                  "Set-Off" shall mean Set-Off as defined in Paragraph 5.

                  "Site Assessment" shall mean a Site Assessment as defined in
Paragraph 10(c).

                  "Surviving Obligations" shall mean any obligations of Tenant
under this Lease, actual or contingent, which arise on or prior to the
expiration or prior termination of this Lease or which survive such expiration
or termination by their own terms.

                  "Taking" shall mean (a) any taking or damaging of all or a
portion of any of the Leased Premises (i) in or by condemnation or other eminent
domain proceedings pursuant to any Law, general or special, or (ii) by reason of
any agreement with any condemnor in settlement of or under threat of any such
condemnation or other eminent domain proceeding, or (iii) by any other means, or
(b) any de facto condemnation. The Taking shall be considered to have taken
place as of the later of the date actual physical possession is taken by the
condemnor.

                  "Term" shall mean Term as defined in Paragraph 5.

                  "Termination Date" shall mean Termination Date as defined in
Paragraph 18.

                  "Termination Event" shall mean Termination Event as defined in
Paragraph 18.

                  "Termination Notice" shall mean Termination Notice as defined
in Paragraph 18(a).

                  "Third Party Purchaser" shall mean Third Party Purchaser as
defined in Paragraph 21 (g).

                  "Threshold Amount" shall mean (i) $500,000 if TruServ
Corporation or a Preapproved Assignee is the Tenant and, (ii) in all other
instances, $100,000.

                  "Warranties" shall mean Warranties as defined in Paragraph
3(d).

                                       9
<PAGE>
                  "Work" shall mean Work as defined in Paragraph 13(b).

            3. Title and Condition; Single Lease Transaction.

                  (a) The Leased Premises are demised and let subject to (i) the
Mortgage and Assignment presently in effect, (ii) the rights of any Persons in
possession of the Leased Premises, (iii) the existing state of title of any of
the Leased Premises, including any Permitted Encumbrances, (iv) any state of
facts which an accurate survey or physical inspection of the Leased Premises
might show, (v) all Legal Requirements, including any existing violation of any
thereof, and (vi) the condition of the Leased Premises as of the commencement of
the Term, without representation or warranty by Landlord.

                  (b) Tenant acknowledges that the Leased Premises are in good
condition and repair at the inception of this Lease. LANDLORD LEASES AND WILL
LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES AS IS WHERE IS AND WITH
ALL FAULTS. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD
HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL
LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES, INCLUDING ANY WARRANTY OR
REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE
OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE
EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv) LANDLORD'S TITLE THERETO, (v)
VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix)
CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii)
DURABILITY (xiv) OPERATION, (xv) THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, OR
(xvi) COMPLIANCE OF THE LEASED PREMISES WITH ANY LAW OR LEGAL REQUIREMENT; AND
ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES THAT
THE LEASED PREMISES ARE OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE
LEASED PREMISES HAVE BEEN INSPECTED BY TENANT AND ARE SATISFACTORY TO IT. IN THE
EVENT OF ANY DEFECT OR DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY NATURE,
WHETHER LATENT OR PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS PARAGRAPH 3(b) HAVE
BEEN NEGOTIATED, AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY
WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED
PREMISES, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW
OR HEREAFTER IN EFFECT OR ARISING OTHERWISE.

                  (c) Tenant represents to Landlord that Tenant has examined the
title to the Leased Premises prior to the execution and delivery of this Lease
and has found the same to be satisfactory for the purposes contemplated hereby.
Tenant acknowledges that (i) Tenant has only a leasehold estate in the Leased
Premises, as provided herein, and (ii) to the best of Tenant's

                                       10
<PAGE>
knowledge, (A) except as set forth in the property condition reports,
environmental reports, zoning reports or any other reports delivered to
Landlord, the Improvements conform to all material Legal Requirements and all
Insurance Requirements, (B) all easements necessary or appropriate for the use
or operation of the Leased Premises have been obtained, (C) all contractors and
subcontractors who have performed work on or supplied materials to the Leased
Premises have been fully paid, and all materials and supplies have been fully
paid for, (D) the Improvements have been completed in all material respects in a
workmanlike manner of quality consistent with industry standards, and (E) all
Fixtures necessary or appropriate for the use or operation of the Leased
Premises have been installed and are presently operative in all material
respects.

                  (d) Landlord hereby assigns to Tenant, without recourse or
warranty whatsoever, all assignable warranties, guaranties, indemnities and
similar rights (collectively "Warranties") which Landlord may have against any
manufacturer, seller (other than Tenant), engineer, contractor or builder in
respect of any of the Leased Premises. Such assignment shall remain in effect
until the expiration or earlier termination of this Lease, whereupon such
assignment shall cease and all of the Warranties shall automatically revert to
Landlord. In confirmation of such reversion Tenant shall execute and deliver
promptly any certificate or other document reasonably required by Landlord.
Landlord shall also retain the right to enforce any guaranties upon the
occurrence of an Event of Default. Tenant shall enforce all Warranties in
accordance with their respective terms.

                  (e) TENANT EXPRESSLY ACKNOWLEDGES AND AGREES THAT IT IS THE
EXPRESS INTENT OF LANDLORD AND TENANT TO CREATE, AND THAT THIS LEASE CONSTITUTES
A SINGLE LEASE WITH RESPECT TO EACH AND EVERY PARCEL OF LAND, IMPROVEMENTS AND
FIXTURES INCLUDED IN EACH AND ALL OF THE RELATED PREMISES (WHEREVER LOCATED)
AND, EXCEPT AS EXPRESSLY SET FORTH HEREIN, THIS LEASE SHALL NOT BE (OR BE DEEMED
TO BE) DIVISIBLE OR SEVERABLE INTO SEPARATE LEASES FOR ANY PURPOSE WHATSOEVER,
AND TENANT, ON BEHALF OF ITSELF AND ANY TRUSTEE OR LEGAL REPRESENTATIVE UNDER
THE FEDERAL BANKRUPTCY CODE OR ANY SIMILAR STATE INSOLVENCY PROCEEDING HEREBY,
WAIVES ANY RIGHT TO CLAIM OR ASSERT A CONTRARY POSITION IN ANY ACTION OR
PROCEEDING; IT BEING FURTHER UNDERSTOOD AND AGREED BY TENANT THAT THE PERCENTAGE
ALLOCATION OF BASIC RENT AS SET FORTH ON EXHIBIT "F" HEREOF IS INCLUDED TO
PROVIDE A FORMULA FOR RENT ADJUSTMENT, AND TO FACILITATE THE RIGHTS OF TENANT,
EACH PREAPPROVED ASSIGNEE AND EACH PROTECTED SUBTENANT IN THE CASES OF
ASSIGNMENT AND SUBLETTING, PARTIAL RENEWAL, CASUALTY, CONDEMNATION OR OTHER
PROVISIONS WITH RESPECT TO AFFECTED PREMISES, BIFURCATED PREMISES, PROTECTED
SUBLEASES AND LEASE TERMINATION UNDER CERTAIN CIRCUMSTANCES. ANY EVENT OF
DEFAULT SHALL BE DEEMED TO BE AN EVENT OF DEFAULT WITH RESPECT TO THE ENTIRE
LEASED PREMISES (WHEREVER LOCATED). THE FOREGOING AGREEMENTS AND WAIVERS BY
TENANT IN THIS PARAGRAPH 3(E) ARE MADE AS A MATERIAL INDUCEMENT TO LANDLORD TO
ENTER INTO THE TRANSACTION CONTEMPLATED BY THIS LEASE AND THAT, BUT FOR THE

                                       11
<PAGE>
FOREGOING AGREEMENTS AND WAIVERS BY TENANT, LANDLORD WOULD NOT CONSUMMATE THIS
LEASE TRANSACTION.

            4. Use of Leased Premises; Quiet Enjoyment.

                  (a) The Leased Premises may be used and occupied for any
lawful purpose subject to the terms and conditions of this Paragraph 4. No
Related Premises shall be used or occupied, nor shall Tenant or any assignee or
subtenant do or permit anything to be done in or on any Related Premises leased
by such Person in a manner which would (i) violate any Law, Legal Requirement or
Permitted Encumbrance, the violation of which could reasonably be anticipated to
adversely affect the ability to use, maintain or occupy the applicable Related
Premises, (ii) take any action that would invalidate any insurance policy
required under Paragraph 16, (iii) constitute waste of any Related Premises or
in any way materially increases the risk of fire or other hazard arising out of
the operation of any Related Premises relative to the risks arising from the use
of the applicable Related Premises as the date hereof or impair the value of any
Related Premises in any material respect, (iv) materially increase the risk of
environmental damage, an Environmental Violation or danger to human health or
the environment relative to the risk arising from the use of the applicable
Leased Premises as of the date hereof, or (v) materially increase the wear and
tear to the applicable Related Leased Premises relative to the wear and tear
arising from the use of the applicable Related Premises as of the date hereof.

                  (b) Subject to the provisions hereof, so long as no Event of
Default has occurred and is continuing, Tenant shall quietly hold, occupy and
enjoy the Leased Premises throughout the Term, without any hindrance, ejection
or molestation by Landlord with respect to matters that arise after the date
hereof, provided that Landlord or its agents may after reasonable notice to
Tenant, and, except as provided in Paragraph 10, at Landlord's sole expense
unless an Event of Default exists, but in any event not less than (2) Business
Days notice (except in the case of any emergency, in which event only advance
telephonic notice shall be required) enter upon and examine any of the Leased
Premises at such reasonable times during normal business hours as Landlord may
request (but not more often than twice each Lease Year or at any time during the
existence of an Event of Default) for the purpose of inspecting the Leased
Premises, verifying compliance or non-compliance by Tenant with its obligations
hereunder and the existence or non-existence of an Event of Default or event
which with the passage of time and/or notice would constitute an Event of
Default, subject to such reasonable restrictions as Tenant may impose, showing
the Leased Premises (or the applicable Related Premises) to prospective Lenders
and purchasers and taking such other action with respect to the Leased Premises
as is permitted by any provision hereof.

                  (c) In no event shall any portion of the Leased Premises be
used or occupied or permitted to be used or occupied for any of the following
purposes: (i) any dumping, disposing, incineration or reduction of garbage
(exclusive of appropriately screened dumpsters and/or recycling bins located in
the rear of any building and garbage disposal in the ordinary course of
business); (ii) any retail gas station; (iii) any central laundry or dry
cleaning plant or laundromat; or (iv) any vehicle repair, other than truck or
trailer repair in conjunction with the use of any Related Premises as a
distribution facility.

                                       12
<PAGE>
            5. Term.

                  (a) Subject to the provisions hereof, Tenant shall have and
hold the Leased Premises for an initial term (such term, as extended or renewed
in accordance with the provisions hereof, being called the "Term") commencing on
the date hereof (the "Commencement Date") and ending on December 31, 2022 (the
"Expiration Date").

                  (b) Tenant shall have the option to extend the initial twenty
(20) year Term as to the entire Leased Premises or as to one or more of the
Related Premises for up to two periods of, a first renewal term of nine years
and eleven months and a second renewal term of ten (10) years (each, a "Renewal
Term") beginning, respectively, on the day after the Expiration Date and the day
after the date that is nine years and eleven months after the Expiration Date
(each, a "Renewal Date"). Tenant shall notify Landlord in writing of its
election to exercise the applicable option as to one or more of the Related
Premises no later than twelve (12) months prior to the applicable Renewal Date,
provided that the time within which Tenant is obligated to give notice of the
exercise of its option with respect to the second Renewal Term for any
applicable Related Premises shall be extended to the date which is 10 days after
Fair Market Rent is determined for such Related Premises unless the delay in the
determination thereof was caused by Tenant. The annual Basic Rent for the first
six Lease Years of the first Renewal Term shall be the amount set forth on
Exhibit "D" (adjusted to reflect any Related Premises no longer included in the
Leased Premises during the first Renewal Term). The annual Basic Rent for the
last four Lease Years of the first Renewal Term shall be the greater of (i) the
amount set forth on Exhibit "D" (adjusted to reflect any Related Premises no
longer included in the Leased Premises during the first Renewal Term) and (ii)
the sum of the Fair Market Rent for each applicable Related Premises. The annual
Basic Rent for the second Renewal Term shall be the sum of the annual Fair
Market Rent for each applicable Related Premises during the second Renewal Term.
In the event that the Fair Market Rent has not been determined in accordance
with the terms of this Paragraph 5 prior to the commencement of the seventh
Lease Year of the first Renewal Term, Tenant shall pay as Basic Rent the
applicable amount set forth on Exhibit "D" until the Fair Market Rent is
determined and upon such determination, any overpayment or underpayment, as the
case may be, shall be promptly refunded to Landlord or Tenant, as the case may
be. Six months prior to the commencement of the seventh Lease Year, Landlord and
Tenant shall commence the procedure described below for the determination of
Fair Market Rent. All of the provisions of this Lease, as the same may be
amended, supplemented or modified shall apply during each Renewal Term (except
that Tenant shall not have the right to any additional Renewal Terms). "Fair
Market Rent" as used herein shall mean an amount of annual rent for the Related
Premises for the last four Lease Years of the first Renewal Term and the second
Renewal Term equivalent to the then-current fair market rate of annual effective
net rentals received in the general market area in which the applicable Related
Premises is located pursuant to an absolute net lease, for a similar lease term
with respect to real property having comparable characteristics, including, but
not limited to, age, location, condition and classification of the Improvements,
existing parking facilities and for tenants with a financial condition similar
to the then current financial condition of Tenant. The rental rate or other
terms of any then existing sublease or subleases of the applicable Related
Premises shall not be considered in establishing Fair Market Rent. In order to
exercise its option to extend the Term for the second Renewal Term, Tenant shall
first give Landlord written notice of Tenant's interest in doing so and
requesting the determination of the Fair Market Rent for each applicable Related
Premises for the second

                                       13
<PAGE>
Renewal Term ("Tenant's Interest Notice"). Tenant's Interest Notice shall be
given not earlier than eighteen (18) months prior to the Renewal Date for the
second Renewal Term, and not later than fifteen (15) months prior to the Renewal
Date for the second Renewal Term. The latest date upon which Tenant may give the
Tenant's Interest Notice is referred to as the "Interest Deadline Date." The
Fair Market Rent for each applicable Related Premises for the last four years of
the first Renewal Term and for the entire second Renewal Term shall be
separately determined in accordance with the following procedure. The parties
shall first attempt to agree on the Fair Market Rent for the last four Lease
Years of the first Renewal Term or entire second Renewal Term, as the case may
be. If the parties do not agree on the Fair Market Rent within fifteen (15) days
following the receipt by Landlord of Tenant's Interest Notice or within fifteen
(15) days of either party determining that the parties are unable to agree on
Fair Market Rent with respect to the last four Lease Years of the first Renewal
Term, as applicable, then, within ten (10) days after the expiration of such
fifteen (15)-day period, the parties shall attempt to agree upon an appraiser.
If the parties agree upon an appraiser, the appraiser so selected shall
determine the Fair Market Rent within thirty (30) days after selection. If the
parties fail to so agree upon the selection of one such appraiser within such
ten (10)-day period, then Tenant and Landlord shall each designate in a written
notice to the other, within fifteen (15) Business Days from the end of such ten
(10)-day period, one appraiser to determine the Fair Market Rent. In the event
either party fails to so select its own appraiser, the appraiser selected by the
other party shall determine Fair Market Rent. If two appraisers are so selected,
each appraiser shall independently determine the Fair Market Rent for such
Related Premises and complete and forward to Landlord and Tenant its separate
appraisal report within thirty (30) days after the expiration of such fifteen
(15)-business day period. Any appraisal report not so forwarded within such time
period shall be excluded. If only one such report is timely forwarded, then the
appraisal set forth therein shall be the Fair Market Rent. In the event the two
reports are both timely forwarded and the lower appraisal is at least ninety
percent (90%) of the higher appraisal, then the arithmetic mean of the two
appraisals shall be the Fair Market Rent. In the event the lower appraisal is
less than ninety percent (90%) of the higher appraisal then, within fifteen (15)
business days after the end of such thirty (30)-day period, the two appraisers
shall meet and select a third appraiser. In the event the two appraisers fail to
so select a third appraiser, either party may obtain court appointment of such
third appraiser. The third appraiser shall select one of the appraisals for each
applicable Related Premises as most accurately determining Fair Market Rent for
such Related Premises and promptly complete and forward its report to Landlord
and Tenant. The Fair Market Rent determined in such selected appraisal shall be
the Fair Market Rent for such Related Premises. All appraisers shall be members
in good standing of the American Institute of Real Estate Appraisers or any
organization succeeding thereto and shall have had not less than ten (10) years
experience with commercial real estate of the type of such Related Premises in
the location where such Related Premises is located. Tenant shall pay the fees
of all appraisers.

                  (c) If Tenant does not exercise its option pursuant to
Paragraph 5(b) to have the Term extended with respect to a Related Premises, or
if an Event of Default occurs, then Landlord shall have the right during the
remainder of the Term then in effect and, in any event, Landlord shall have the
right during the last year of the Term, to (i) advertise the availability of any
of the Leased Premises, or in the event that the Term is not extended with
respect to such Related Premises, for sale or reletting and to erect upon any of
the Leased Premises signs (in size and content and in locations reasonably
acceptable to Tenant) indicating such availability and (ii) show any of the
Leased Premises, or the applicable Related Premises in

                                       14
<PAGE>
the event that the Term is not extended with respect to such Related
Premises, to prospective purchasers or tenants or their agents at such
reasonable times as Landlord may select.

            6. Basic Rent. Tenant shall pay to Landlord, as annual rent for the
Leased Premises during the Term, the amounts determined in accordance with
Exhibit "D" hereto ("Basic Rent"), commencing on the twentieth (20th) day of
January, 2003, and continuing on the twentieth (20th) day of each April, July,
October, and January thereafter during the Term, provided that if the twentieth
(20th) day of such month is not a Business Day, the applicable Basic Rent
payment shall be due on the first Business Day following the twentieth (20th)
day of such month (each such day being a "Basic Rent Payment Date"). Tenant
shall pay Basic Rent for the period from the Commencement Date through January
19, 2003 on the Commencement Date. Each such rental payment shall be made in
Federal Funds to Landlord, pursuant to wire transfer instructions delivered to
Tenant from time to time or to such other Person, pursuant to wire transfer
instructions delivered to Tenant from time to time as Landlord may direct by not
less than fifteen (15) days' prior written notice to Tenant (in which event
Tenant shall give Landlord notice of each such payment promptly upon the making
thereof).

            7. Additional Rent.

               (a) Tenant shall pay and discharge, as additional rent
               (collectively, "Additional Rent"):

                        (i) except as otherwise specifically provided herein,
all reasonable costs and expenses of Tenant and Landlord which are incurred in
connection or associated with (A) the ownership, use, non-use, occupancy,
monitoring, possession, operation, condition, design, construction, maintenance,
alteration, repair or restoration of any of the Leased Premises, except for
Landlord's general overhead, (B) the performance of any of Tenant's obligations
under this Lease, (C) any Condemnation proceedings, (D) the adjustment,
settlement or compromise of any insurance claims involving or arising from any
of the Leased Premises, (E) the prosecution, defense or settlement of any
litigation involving or arising from any of the Leased Premises (unless caused
by the gross negligence or willful misconduct of Landlord or its agents), this
Lease, or the sale of the Leased Premises to Landlord provided, however, that in
the event of any litigation involving only Landlord and Tenant, Tenant shall be
responsible for such costs and expenses only if and to the extent that Tenant is
not the prevailing party in such litigation, (F) the exercise or successful
enforcement by Landlord, its successors and assigns, of any of its rights under
this Lease, (G) any amendment to or modification or termination of this Lease
made at the request of Tenant, (H) Costs of Landlord's counsel and reasonable
out-of-pocket Costs of Landlord incurred in connection with the preparation,
negotiation and execution of this Lease, or incurred in connection with any act
undertaken by Landlord (or its counsel) at the request of Tenant, or incurred in
connection with any act of Landlord performed on behalf of Tenant to the extent
authorized by this Lease (I) the reasonable out-of-pocket Costs of Landlord
incurred in connection with any act undertaken by Landlord at the request of
Tenant or Tenant's failure to act promptly in an emergency situation, (J) all
costs and fees associated with the wire transfers of Rent payments, and (K) any
other items specifically required to be paid by Tenant under this Lease;

                                       15
<PAGE>
                        (ii) after the date all or any portion of any
installment of Basic Rent is due and not paid by the applicable Basic Rent
Payment Date, an amount (the "Late Charge") equal to five percent (5%) of the
amount of such unpaid installment or portion thereof provided, however, that
with respect to the first late payment of all or any portion of any installment
of Basic Rent in any Lease Year, the Late Charge shall not be due and payable
unless the Basic Rent has not been paid within five (5) days' following the due
date thereof;

                        (iii) interest at the rate (the "Default Rate") of four
percent (4%) over the Prime Rate per annum on the following sums until paid in
full: (A) all overdue installments of Basic Rent from five (5) days' following
its due date unless such overdue installments are paid in full within such five
(5) day period, (B) all overdue amounts of Additional Rent relating to
obligations which Landlord shall have paid on behalf of Tenant, from the date of
payment thereof by Landlord, and (C) all other overdue amounts of Additional
Rent, from the date when any such amount becomes overdue;

                  (b) If Landlord does not provide written notice to Tenant of
the sums owing pursuant to Paragraphs 7(a)(ii) and (iii) within ninety (90) days
after the date that the applicable Late Charge or default interest becomes due
and owing, Tenant shall not be liable for such amounts.

                  (c) Tenant shall pay and discharge (i) any Additional Rent
referred to in Paragraph 7(a)(i) when the same shall become due, provided that
amounts which are billed to Landlord or any third party, but not to Tenant,
shall be paid within ten (10) Business Days after Landlord's demand for payment
thereof, and (ii) any other Additional Rent, within ten (10) Business Days after
Landlord's demand for payment thereof.

                  (d) In no event shall amounts payable under Paragraph 7(a)(ii)
and (iii) exceed the maximum amount permitted by applicable Law.

            8. Net Lease: Non-Terminability.

                  (a) This is a net lease and all Monetary Obligations shall be
paid without notice or demand (except as herein required) and without set-off,
counterclaim, recoupment, abatement, suspension, deferment, diminution,
deduction, reduction or defense (collectively, a "Set-Off").

                  (b) Except as specifically provided herein, this Lease and the
rights of Landlord and the obligations of Tenant hereunder shall not be affected
by any event or for any reason or cause whatsoever foreseen or unforeseen.

                  (c) The obligations of Tenant hereunder shall be separate and
independent covenants and agreements, all Monetary Obligations shall continue to
be payable in all events (or, in lieu thereof, Tenant shall pay amounts equal
thereto), and the obligations of Tenant hereunder shall continue unaffected
unless the requirement to pay or perform the same shall have been terminated
pursuant to an express provision of this Lease. The obligation to pay Rent or
amounts equal thereto shall not be affected by any collection of rents by any
governmental body pursuant to a tax lien arising out of the act or omission of
Tenant, even though such obligation results in a double payment of Rent. All
Rent payable by Tenant

                                       16
<PAGE>
hereunder shall constitute "rent" for all purposes (including Section 502(b)(6)
of the Federal Bankruptcy Code).

                  (d) Except as otherwise expressly provided herein, Tenant
shall have no right and hereby waives all rights which it may have under any Law
(i) to quit, terminate or surrender this Lease or any of the Leased Premises, or
(ii) to any Set-Off of any Monetary Obligations.

            9. Payment of Impositions.

                  (a) Tenant shall, before interest or penalties are due
thereon, pay and discharge all taxes (including real and personal property,
franchise, sales, use, gross receipts and rent taxes, transaction privilege,
education or other excise taxes), all charges for any easement or agreement
maintained for the benefit of any of the Leased Premises, all assessments and
levies, all permit, inspection and license fees, all rents and charges for
water, sewer, utility and communication services relating to any of the Leased
Premises, all ground rents and all other public charges whether of a like or
different nature, even if unforeseen or extraordinary, imposed upon or assessed
against (i) Tenant, (ii) Tenant's possessory interest in the Leased Premises,
(iii) any of the Leased Premises, (iv) Landlord as a result of or arising in
respect of the acquisition, ownership, occupancy, leasing, use, possession or
sale to Landlord of any of the Leased Premises, any activity conducted on any of
the Leased Premises, or the Rent, or (v) any Lender by reason of any Note,
Mortgage, Assignment or other document evidencing or securing a Loan and which
(as to this clause (v)) Landlord has agreed to pay (collectively, the
"Impositions"); provided, that nothing herein shall obligate Tenant to pay (A)
income, excess profits or other taxes of Landlord (or Lender) which are
determined on the basis of Landlord's (or Lender's) net income or net worth
(unless such taxes are in lieu of or a substitute for any other tax, assessment
or other charge upon or with respect to the Leased Premises which, if it were in
effect, would be payable by Tenant under the provisions hereof or by the terms
of such tax, assessment or other charge), (B) any estate, inheritance,
succession, gift or similar tax imposed on Landlord or (C) any capital gains tax
or real property transfer or intangibles tax imposed on Landlord in connection
with the sale of the Leased Premises to any Person. If any Imposition may be
paid in installments without interest or penalty, Tenant shall have the option
to pay such Imposition in installments; in such event, Tenant shall be liable
only for those installments which accrue or become due and payable during the
Term. Tenant shall prepare and file all tax reports required by governmental
authorities which relate to the Impositions. Tenant shall deliver to Landlord
(1) copies of all settlements and notices pertaining to the Impositions which
may be issued by any governmental authority within ten (10) days after Tenant's
receipt thereof, (2) receipts for payment of all taxes required to be paid by
Tenant hereunder within thirty (30) days after the due date thereof and (3)
receipts for payment of all other Impositions within ten (10) days after
Landlord's request therefor.

                  (b) Following the occurrence of an Event of Default, Tenant
shall pay to Landlord such amounts (each an "Escrow Payment") monthly or
quarterly, at the option of Landlord (but not more often than monthly), so that
there shall be in an escrow account an amount sufficient to pay the Escrow
Charges (as hereinafter defined) as they become due provided, however, that each
Escrow Payment shall not be greater than one twelfth (in the case of monthly
payments) or one quarter (in the case of quarterly payments) of the annual
amount of

                                       17
<PAGE>
the annual Escrow Charges as estimated by Landlord. As used herein, "Escrow
Charges" shall mean real estate taxes and assessments on or with respect to the
Leased Premises or payments in lieu thereof and premiums on any insurance
required by this Lease. Landlord shall reasonably determine the amount of the
Escrow Charges (it being agreed that if required by a Lender, such amount shall
equal any corresponding escrow installments required to be paid by Landlord) and
the amount of each Escrow Payment, taking into account any balance remaining in
escrow at the beginning of each Lease Year. The Escrow Payments may not be
commingled with other funds of Landlord or other Persons. Landlord shall apply
the Escrow Payments to the payment of the Escrow Charges in such order or
priority as they become due or as required by law. If at any time the Escrow
Payments theretofore paid to Landlord shall be insufficient for the payment of
the Escrow Charges, Tenant, within ten (10) Business Days after Landlord's
demand therefor, shall pay the amount of the deficiency to Landlord. At the end
of the Term any Escrow Payments held by Landlord or Lender which are applicable
to any period after the expiration of the Term or the termination of this Lease
shall be promptly refunded to Tenant. Notwithstanding anything to the contrary
in this Paragraph 9(b), payment of Escrow Charges shall be required only for six
(6) months following the date on which the Event of Default which gave rise to
the requirement to make Escrow Payments is cured, provided, however, that if a
third Event of Default occurs, Landlord shall have the right to require Tenant
to pay and Tenant shall pay such Escrow Charges for the balance of the Term.

            10. Compliance with Laws and Easement Agreements; Environmental
Matters.

                  (a) Tenant shall, at its expense, cause the Leased Premises
and any other Person occupying any part of the Leased Premises to comply with
and conform to, all Insurance Requirements and Legal Requirements (including all
applicable Environmental Laws). Tenant shall not at any time (i) cause, permit
or suffer to occur any Environmental Violation, (ii) permit any sublessee,
assignee or other Person occupying the Leased Premises under or through Tenant
to cause, permit or suffer to occur any Environmental Violation and, at the
request of Landlord or Lender, Tenant shall promptly remediate or undertake any
other appropriate response action to correct any existing Environmental
Violation, and (iii) without the prior written consent of Landlord and Lender,
permit any drilling or exploration for or extraction, removal, or production of
any minerals from the surface or the subsurface of the Land, regardless of the
depth thereof or the method of mining or extraction thereof except with respect
to rights of Persons other than Tenant or any subtenant (pursuant to its rights
as a subtenant) set forth in the instrument in favor of SF Pacific Properties,
Inc. recorded May 24, 1991, Reception No. 9124177, Reel 1697 in the Official
Records of Lane County, Oregon with respect to the Oregon Premises and the
patent in favor of the United States recorded in Book 34, page 303 of the
Official Records of Mohave County, Arizona, with respect to the Arizona
Premises. Any and all reports prepared for or by Landlord with respect to the
Leased Premises shall be for the sole benefit of Landlord and Lender and no
other Person shall have the right to rely on any such reports.

                  (b) Tenant, at its sole cost and expense, will at all times
promptly and faithfully abide by, discharge and perform all of the covenants,
conditions and agreements contained in any Easement

                                       18
<PAGE>
Agreement on the part of Landlord or the occupier to be kept and performed
thereunder. Tenant will not alter, modify, amend or terminate any Easement
Agreement, give any consent or approval thereunder, or enter into any new
Easement Agreement unless (i) Landlord gives its written consent, (ii) such
alteration, modification, amendment or termination does not reduce the value of
the applicable Related Premises or impair its use, and (iii) Tenant delivers to
Landlord and Lender, at Tenant's sole expense, a title endorsements satisfactory
to Landlord and Lender with respect thereto. Notwithstanding the foregoing,
Landlord's consent shall be deemed given if Landlord fails to object in writing
(stating its reasons for objecting) to such amendment or termination within
thirty (30) days after Landlord's receipt of written request for consent so long
as Tenant's request for consent is conspicuously marked in all capitals on both
the outside of the package and within such correspondence with the notation
"THIS REQUEST FOR CONSENT SHALL BE DEEMED GRANTED UNLESS RESPONDED TO WITHIN
THIRTY (30) DAYS OF RECEIPT".

                  (c) Upon prior written notice from Landlord, Tenant shall
permit such persons as Landlord may designate ("Site Reviewers") to visit the
Leased Premises and perform, as agents of Tenant, environmental site
investigations and assessments ("Site Assessments") on the Leased Premises (i)
in connection with any sale, financing or refinancing of the Leased Premises,
(ii) within the six month period prior to the expiration of the Term with
respect to a Related Premises, (iii) if required by Lender or the terms of any
credit facility to which Landlord is bound, (iv) if an Event of Default exists,
or (v) at any other time that, in the opinion of Landlord or Lender, a
reasonable basis exists to believe that an Environmental Violation or any
condition that could reasonably be expected to result in any Environmental
Violation exists. Such Site Assessments shall not include any invasive testing
(i.e. testing requiring boring, digging, demolition or similar activities)
unless Landlord has a reasonable belief that an Environmental Violation exists.
Tenant shall supply to the Site Reviewers such historical and operational
information regarding the Leased Premises as may be reasonably requested by the
Site Reviewers to facilitate the Site Assessments, and shall make available for
meetings with the Site Reviewers appropriate personnel having knowledge of such
matters. The cost of performing and reporting Site Assessments shall be paid by
Tenant if an Environmental Violation is disclosed by such Site Assessment. In
all other events, the cost of performing and reporting such Site Assessments
shall be paid for by Landlord.

                  (d) If Tenant fails to promptly commence to comply with, and
thereafter diligently pursue compliance with, any requirement of any
Environmental Law in connection with any Environmental Violation which occurs or
is found to exist, Landlord shall have the right (but no obligation) to take any
and all actions as Landlord shall deem necessary or advisable in order to cure
such Environmental Violation provided that, except in the case of an emergency,
Landlord shall provide Tenant at least ten (10) days written notice prior to the
commencement of any such remediation by Landlord.

                  (e) Tenant shall notify Landlord promptly after becoming aware
of any Environmental Violation (or alleged Environmental Violation) or
noncompliance with any of the covenants contained in this Paragraph 10 and shall
forward to Landlord promptly upon receipt thereof copies of all orders, reports,
notices, permits, applications or other communications relating to any such
violation or noncompliance.

                                       19
<PAGE>
                  (f) All future leases, subleases or concession agreements
relating to the Leased Premises entered into by Tenant shall contain covenants
of the other party thereto which are identical to the covenants contained in
Paragraph 10(a).

            11. Liens; Recording.

                  (a) Subject to Paragraph 14 hereof, Tenant shall not, directly
or indirectly, create or permit to be created or to remain and shall promptly
discharge or remove any lien, levy or encumbrance on any of the Leased Premises
or on any Rent or any other sums payable by Tenant under this Lease, other than
any Mortgage or Assignment, the Permitted Encumbrances and any mortgage, lien,
encumbrance or other charge created by or resulting solely from any act or
omission of Landlord. NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE
FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR
TO ANYONE HOLDING OR OCCUPYING ANY OF THE LEASED PREMISES THROUGH OR UNDER
TENANT, AND THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO ANY OF
THE LEASED PREMISES. TO THE EXTENT REQUIRED BY LAW, LANDLORD MAY AT ANY TIME
POST ANY NOTICES ON THE LEASED PREMISES REGARDING SUCH NON-LIABILITY OF
LANDLORD.

                  (b) Tenant shall execute, deliver and record, file or register
(collectively, "record") all such instruments as may be required by any present
or future Law in order to evidence the respective interests of Landlord and
Tenant in any of the Leased Premises, and shall cause a memorandum of this Lease
(or, if such a memorandum cannot be recorded, this Lease), and any supplement
hereto or thereto, to be recorded in such manner and in such places as may be
required by any present or future Law in order to protect the validity and
priority of this Lease.

            12. Maintenance and Repair.

                  (a) Tenant shall at all times maintain each Related Premises
and the Adjoining Property in as good repair and appearance as each is in on the
date hereof and fit to be used for their intended use in accordance with the
better of the practices generally recognized as then acceptable by other
companies in its industry or observed by Tenant with respect to the other real
properties owned or operated by it, and, in the case of the Fixtures, in as good
mechanical condition as it was on the later of the date hereof or the date of
its installation, except for ordinary wear and tear and, subject to Paragraph
17, damage by Casualty or Condemnation. Tenant shall take every other action
necessary or appropriate for the preservation and safety of each Related
Premises. Tenant shall promptly make all Alterations of every kind and nature,
whether foreseen or unforeseen, which may be required to comply with the
foregoing requirements of this Paragraph 12(a). Landlord shall not be required
to make any Alteration, whether foreseen or unforeseen, or to maintain any of
the Related Premises or Adjoining Property in any way, and Tenant hereby
expressly waives any right which may be provided for in any Law now or hereafter
in effect to make Alterations at the expense of Landlord or to require Landlord
to make Alterations. Any Alteration made by Tenant pursuant to this Paragraph 12
shall be made in conformity with the provisions of Paragraph 13.

                                       20
<PAGE>
                  (b) If any Improvement hereafter constructed shall (i)
encroach upon any setback or any property, street or right-of-way adjoining any
of the Leased Premises, (ii) violate the provisions of any restrictive covenant
affecting any of the Leased Premises, (iii) hinder or obstruct any easement or
right-of-way to which any of the Leased Premises is subject or (iv) impair the
rights of others in, to or under any of the foregoing, Tenant shall, promptly
after receiving notice or otherwise acquiring knowledge thereof, either (A)
obtain from all necessary parties waivers or settlements of all claims,
liabilities and damages resulting from each such encroachment, violation,
hindrance, obstruction or impairment, whether the same shall affect Landlord,
Tenant or both, or (B) take such action as shall be necessary to remove all such
encroachments, hindrances or obstructions and to end all such violations or
impairments, including, if necessary, making Alterations.

            13. Alterations and Improvements.

                  (a) Subject in each case to the requirements of Paragraph
13(b), Tenant shall have the right, without having obtained the prior written
consent of Landlord or Lender and provided that no Event of Default then exists,
(i) to make Pre-Approved Alterations and (ii) to install or replace Fixtures or
accessions to the Fixtures. If Tenant desires to make any Major Alteration to
any Related Premises the prior written approval of Landlord and Lender shall be
required. Withholding of such approval shall be deemed reasonable only if the
proposed Major Alteration will, in the judgment of Landlord or Lender, as
applicable, in each case exercised reasonably and in good faith, fail to meet
the requirements of Paragraph 13(b). Any such withholding of approval shall be
evidenced by notice to Tenant, given within thirty (30) days after Tenant has
submitted to Landlord design drawings prepared by a licensed architect or
engineer if a building permit is required, or, if no building permit is
required, such other reasonably detailed description of the proposed Major
Alteration, which shall be sufficient to permit Landlord and Lender to make the
determination required hereby, setting forth the reason(s) for such withholding
of approval. Tenant shall promptly furnish Landlord with such other information
as Landlord may reasonably request during such thirty (30) day period regarding
such proposed Major Alteration. In the absence of such notice by Landlord or
Lender, Landlord and Lender's approval of the proposed Major Alteration shall be
deemed given so long as Tenant's request for approval is conspicuously marked in
all capitals on both the outside of the package and within such correspondence
with the notation "THIS REQUEST FOR APPROVAL SHALL BE DEEMED GRANTED UNLESS
RESPONDED TO WITHIN THIRTY (30) DAYS OF RECEIPT". Upon not less than thirty (30)
days prior notice (which notice shall include design drawings or other
description sufficient to permit Landlord and Lender to make the determination
required hereby), Tenant shall have the right to make Major Replacements unless,
within said thirty (30) day period, Landlord furnishes Tenant with a notice
objecting to the Major Replacement, which Landlord notice shall be accompanied
by the certification of an independent architect or, if applicable, engineer
that the proposed Major Replacement constitutes a material modification of the
structure it is replacing (and, therefore, constitutes a Major Alteration) or
such Major Replacement, if completed in the manner proposed, will be of such
lesser quality or utility as to be below any reasonable standards for comparable
buildings in the applicable locale. Tenant shall not construct upon the Land any
additional buildings (other than storage sheds or garages not requiring
foundations) or install any underground storage tanks without having first
obtained the prior written consent of Landlord and Lender which as to
underground storage tanks may be withheld by Landlord or Lender in

                                       21
<PAGE>
their sole and absolute discretion. Upon the expiration or termination of the
Term with respect to a Related Premises, Landlord shall have the right to
require Tenant to remove any Alterations except for Pre-Approved Alterations
which complied with Paragraph 13(b), Major Replacements, Alterations required by
Law and Alterations which Landlord approved in writing, unless such approval was
specifically conditioned upon removal of such Alteration.

                  (b) If Tenant makes any Alterations pursuant to this Paragraph
13 or as required by Paragraph 12 or 17 (such Alterations and actions being
hereinafter collectively referred to as "Work"), then (i) the market value and
utility of the applicable Related of Premises shall not be lessened by any such
Work, (ii) all such Work shall be performed by Tenant in a good and workmanlike
manner, (iii) all such Work shall be expeditiously completed in compliance with
all Legal Requirements, (iv) all such Work shall comply with the requirements of
all insurance policies required to be maintained by Tenant hereunder, (v) if any
such Work involves the replacement of Fixtures or parts thereto, all replacement
Fixtures or parts shall have a value and useful life equal to (A) if the
Fixtures are being replaced because they are obsolete or worn out, the value and
useful life on the date hereof of the Fixtures being replaced or (B) if the
Fixtures are being replaced because of damage or the occurrence of a Casualty,
the value and useful life of the Fixtures being replaced immediately prior to
the occurrence of the event which required its replacement (assuming such
replaced Fixtures were then in the condition required by this Lease), (vi)
subject to Paragraph 14, Tenant shall promptly discharge or remove all liens
filed against any of the Leased Premises arising out of such Work, (vii) Tenant
shall procure and pay for all permits and licenses required in connection with
any such Work, (viii) all such Work shall be the property of Landlord and shall
be subject to this Lease, and Tenant shall execute and deliver to Landlord any
document requested by Landlord evidencing the assignment to Landlord of all
estate, right, title and interest (other than the leasehold estate created
hereby) of Tenant or any other Person thereto or therein, (ix) if any such
Alterations are Major Alterations or Major Replacements, Tenant shall provide to
Landlord reasonable financial assurances of the availability of funds necessary
to complete such Alterations and (x) Tenant shall comply, to the extent
requested by Landlord or required by this Lease, with the provisions of
Paragraphs 12(a) and 19(a), whether or not such Work involves restoration of the
Leased Premises.

            14. Permitted Contests. Notwithstanding any other provision of this
Lease, Tenant shall not be required to (a) pay any Imposition, (b) discharge or
remove any lien referred to in Paragraph 11 or 13 or (c) take any action with
respect to any encroachment, violation, hindrance, obstruction or impairment
referred to in Paragraph 12(b) (such non-compliance with the terms hereof being
hereinafter referred to collectively as "Permitted Violations") and may dispute
or contest the same, so long as at the time of such non-compliance no Event of
Default with respect to the Related Premises to which the Permitted Violation
pertains, exists and so long as Tenant shall contest, in good faith, the
existence, amount or validity thereof, the amount of the damages caused thereby,
or the extent of its or Landlord's liability therefor by appropriate proceedings
which shall operate during the pendency thereof to prevent or stay (i) the
collection of, or other realization upon, the Permitted Violation so contested,
(ii) the sale, forfeiture or loss of any of the applicable Related Premises or
any Rent to satisfy or to pay any damages caused by any Permitted Violation,
(iii) any interference with the use or occupancy of any of the applicable
Related Premises, (iv) any interference with the payment of any Rent, or (v) the
cancellation or increase in the rate of any insurance policy or a statement by
the carrier that coverage will be denied. Tenant shall provide Landlord security
which is satisfactory, in Landlord's reasonable

                                       22
<PAGE>
judgment, to assure that such Permitted Violation is corrected, including all
Costs, interest and penalties that may be incurred or become due in connection
therewith. While any proceedings which comply with the requirements of this
Paragraph 14 are pending and the required security is held by Landlord, Landlord
shall not have the right to correct any Permitted Violation thereby being
contested unless Landlord is required by Law to correct such Permitted Violation
and Tenant's contest does not prevent or stay such requirement as to Landlord.
Each such contest shall be promptly and diligently prosecuted by Tenant to a
final conclusion, except that Tenant, so long as the conditions of this
Paragraph 14 are at all times complied with, has the right to attempt to settle
or compromise such contest through negotiations. Tenant shall pay any and all
losses, judgments, decrees and Costs in connection with any such contest and
shall, promptly after the final determination of such contest, fully pay and
discharge the amounts which shall be levied, assessed, charged or imposed or be
determined to be payable therein or in connection therewith, together with all
penalties, fines, interest and Costs thereof or in connection therewith, and
perform all acts the performance of which shall be ordered or decreed as a
result thereof. No such contest shall subject Landlord to the risk of any civil
or criminal liability.

            15. Indemnification.

                  (a) Tenant shall pay, protect, indemnify, defend, save and
hold harmless Landlord from and against any and all liabilities, losses, damages
(including punitive damages), penalties, Costs (including reasonable attorneys'
fees and costs), causes of action, suits, claims, demands or judgments of any
nature whatsoever, howsoever caused, without regard to the form of action and
whether based on strict liability, negligence or any other theory of recovery at
law or in equity (except for gross negligence or willful misconduct in
connection with any act or omission by the Landlord seeking indemnification),
arising from (i) any matter pertaining to the acquisition (except for any
acquisition fees or similar payments to W.P. Carey & Co. LLC or any of its
affiliates), ownership, leasing, use, non-use, occupancy, operation, management,
condition, design, construction, maintenance, repair or restoration of any of
the Leased Premises or the condition, use, repair or restoration of the
Adjoining Property, (ii) any casualty in any manner arising from any of the
Leased Premises or of the Adjoining Property, whether or not Landlord has or
should have knowledge or notice of any defect or condition causing or
contributing to said casualty, (iii) any violation by Tenant of any provision of
this Lease, any contract or agreement to which Tenant is a party, any Legal
Requirement or any Permitted Encumbrance or any encumbrance Tenant consented to
or the Mortgage or Assignment or (iv) any alleged, threatened or actual
Environmental Violation first occurring prior to the later of the termination of
this Lease with respect to, or Tenant's vacation of, the applicable Related
Premises, including (A) liability for response costs and for costs of removal
and remedial action incurred by the United States Government, any state or local
governmental unit or any other Person, or damages from injury to or destruction
or loss of natural resources, including the reasonable costs of assessing such
injury, destruction or loss, incurred pursuant to Section 107 of CERCLA, or any
successor section or act or provision of any similar state or local Law, (B)
liability for costs and expenses of abatement, correction or clean-up, fines,
damages, response costs or penalties which arise from the provisions of any of
the other Environmental Laws and (C) liability for personal injury or property
damage arising under any statutory or common-law tort theory, including damages
assessed for the maintenance of a public or private nuisance or for carrying on
of a dangerous activity.

                                       23
<PAGE>
                  (b) Landlord shall pay, protect, indemnify, defend, save and
hold harmless Tenant from and against any and all liabilities, losses, damages
(including punitive damages), penalties, Costs (including attorneys' fees and
costs reasonably and actually incurred), causes of action, suits, claims,
demands or judgments arising from the gross negligence or intentional misconduct
of Landlord.

                  (c) In case any action or proceeding is brought against Tenant
or Landlord by reason of any such claim, (i) Landlord or Tenant, as the case may
be, may, except in the event of a conflict of interest or a dispute between
Tenant and any Landlord or during the continuance of an Event of Default, retain
its own counsel and defend such action (it being understood that Landlord or
Tenant, as the case may be, may employ counsel of its choice to monitor the
defense of any such action, the cost of which shall be paid by the indemnifying
party) and (ii) such Landlord or Tenant shall notify Landlord or Tenant, as the
case may be, to resist or defend such action or proceeding by retaining counsel
reasonably satisfactory to such Landlord or Tenant, as the case may be, and such
Landlord or Tenant, as the case may be, will cooperate and assist in the defense
of such action or proceeding if reasonably requested to do so by Tenant or
Landlord, as the case may be. In the event of a conflict of interest or dispute
or during the continuance of an Event of Default, Landlord shall have the right
to select counsel, and the reasonable and actual cost of such counsel shall be
paid by Tenant.

                  (d) The obligations of Tenant and Landlord under this
Paragraph 15 shall survive any termination, expiration or rejection in
bankruptcy of this Lease.

THE INDEMNITY SET FORTH IN THIS SECTION 15 SHALL NOT BE IMPAIRED OR AFFECTED BY
NEGLIGENCE ON THE PART OF LANDLORD OR ANYONE ACTING BEHALF OF LANDLORD.

            16. Insurance.

                  (a) Tenant shall maintain the following insurance on or in
connection with the Leased Premises:

                        (i) Insurance against risk of physical loss or damage to
the Improvements and Fixtures as provided under "All Risk" coverage, and
including customarily excluded perils of hail, windstorm, flood coverage (if the
Leased Premises is in a flood zone), earthquake and, to the extent required by
Lender, terrorism insurance in amounts not less than the actual replacement cost
of the Improvements and Fixtures; provided that, if Tenant's insurance company
is unable or unwilling to include any of all of such excluded perils, Tenant
shall have the option of purchasing coverage against such perils from another
insurer on a "Difference in Conditions" form or through a stand-alone policy.
Such policies shall contain Replacement Cost and Agreed Amount Endorsements and
shall contain deductibles not more than $250,000 per occurrence (except
terrorism insurance at any Related Premises, which shall have a deductible of
not more than two (2%) of the actual replacement value of the Improvements and
Fixtures at the applicable Related Premises). If any of the Improvements
constitute a legal non-conforming structure under applicable building, zoning or
land use laws, such policies shall also include an ordinance or law coverage
endorsement which will contain Coverage A: "Loss Due to Operation of Law" (with
a minimum liability limit equal to Replacement Cost with a waiver of any
co-insurance provisions or an Agreed Value

                                       24
<PAGE>
Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of
Construction" coverages. Notwithstanding the foregoing, terrorism insurance
coverage shall not be required if it is not available at commercially reasonable
rates (as determined by Landlord and Lender in their sole discretion); provided
however, if a rating agency in connection with a securitization of a Loan or in
connection with its rating surveillance of the certificates issued pursuant to a
securitization of a Loan would not provide or maintain a rating for any portion
of such Loan or such certificates which would otherwise be available but for the
failure to maintain such terrorism insurance, Tenant will so maintain such
terrorism insurance if obtainable from any insurer or any governmental authority
with the deductibles set forth above.

                        (ii) Commercial General Liability Insurance and Business
Automobile Liability Insurance (including Non-Owned and Hired Automobile
Liability) against claims for personal and bodily injury, death or property
damage occurring on, in or as a result of the use of the Leased Premises, in an
amount not less than $15,000,000 per occurrence/annual aggregate and all other
coverage extensions that are usual and customary for properties of this size and
type provided, however, that the Landlord shall have the right to require such
higher limits as may be reasonable and customary for properties of this size and
type.

                        (iii) Worker's compensation insurance covering all
persons employed by Tenant in connection with any work done on or about any of
the Leased Premises for which claims for death, disease or bodily injury may be
asserted against Landlord, Tenant or any of the Leased Premises or, in lieu of
such Workers' Compensation Insurance, a program of self-insurance complying with
the rules, regulations and requirements of the appropriate agency of the State
or States in which the Leased Premises are located.

                        (iv) Comprehensive Boiler and Machinery Insurance on any
of the Fixtures or any other equipment on or in the Leased Premises in an amount
not less than $5,000,000 per accident for damage to property. Either such Boiler
and Machinery policy or the All-Risk policy required in (i) above shall include
Off-Premises Service Interruption with limits of $1,500,000 per occurrence for
property damage, $1,500,000 per occurrence for time element; $750,000 per
occurrence for expediting expense; $275,000 per occurrence for ammonia
contamination; and $375,000 per occurrence for hazardous materials clean-up and
with a deductible not to exceed $250,000.

                        (v) Business Interruption Insurance at limits to cover
100% of losses and/or expenses incurred over the period of indemnity not less
than twelve (12) months from time of loss. Such insurance shall name Landlord as
loss payee solely with respect to Rent payable to or for the benefit of the
Landlord under this Lease.

                        (vi) During any period in which substantial Alterations
at any Related Premises are being undertaken, Tenant shall cause each contractor
to obtain builder's risk insurance covering in the aggregate the total completed
value including any "soft costs" with respect to the Improvements being altered
or repaired (on a completed value, non-reporting basis), replacement cost of
work performed and equipment, supplies and materials furnished in connection
with such construction or repair of Improvements or Fixtures, together with such
"soft cost" endorsements and such other endorsements as Landlord may reasonably
require and

                                       25
<PAGE>
general liability, workers' compensation and automobile liability insurance with
respect to the Improvements being constructed, altered or repaired.

                        (vii) Such other insurance (or other terms with respect
to any insurance required pursuant to this Paragraph 16, including without
limitation amounts of coverage, deductibles, form of mortgagee clause) on or in
connection with any of the Leased Premises as Landlord or Lender may reasonably
require for properties of similar location, size, type, value and use

                  (b) The insurance required by Paragraph 16(a) shall be written
by companies which (i) have a Best's rating of A:X or above and a claims paying
ability rating of AA or better by S&P or equivalent rating agency approved by
Landlord and Lender in their sole discretion and (ii) are approved to write
insurance policies by, the State Insurance Department for the states in which
the Leased Premises are located. Notwithstanding clause "(i)" of the preceding
sentence, provided that each of the following insurance carriers meet the
requirements of clause "(ii)" of the preceding sentence, then, (A) the insurance
required pursuant to Paragraph 16(a)(i) may be on policies written by (1)
Continental Casualty Co. so long as it maintains an S&P claims paying ability
rating of A- or better, (2) American Guaranty Ins. Co. so long is it maintains
an S&P claims paying ability rating of A+ or better, and (3) Liberty Mutual
Insurance Co. so long as it maintains an S&P claims paying ability rating of A+
or better, and (B) the insurance required pursuant to Paragraph 16(a)(iv) may be
on policies written by Commonwealth Insurance Co. so long as it maintains an S&P
claims paying ability rating of BBB or better, provided, however, that in the
event that any of the preceding insurance carriers fails to maintain its
corresponding rating set forth above, then such insurance carrier shall be
replaced with an insurance carrier meeting the requirements set forth in the
first sentence of this Paragraph 16(b). The insurance policies shall be in
amounts sufficient at all times to satisfy any coinsurance requirements thereof.
The insurance referred to in Paragraphs 16(a)(i), 16(a)(iv), 16(a)(v) and
16(a)(vi) shall name Landlord and Lender as loss payees and Tenant as its
interest may appear. The insurance referred to in Paragraph 16(a)(ii) shall name
Landlord and Lender as additional insureds. If said insurance or any part
thereof shall expire, be withdrawn, become void, voidable, unreliable or unsafe
for any reason, including a breach of any condition thereof by Tenant or the
failure or impairment of the capital of any insurer, Tenant shall immediately
obtain new or additional insurance satisfying the requirements of this Paragraph
16. If the availability of the types and amounts of insurance coverages required
under Paragraph 16(a) shall change in the commercial insurance marketplace for
properties that are of a similar size, scope, location and usage as any
applicable Related Premises, at Tenant's request Landlord shall review such
coverages available at the time and, if Landlord deems appropriate (in its sole
and absolute discretion), adjust the types and amounts of insurance required.

                  (c) Each insurance policy referred to in clauses (i), (iv),
(v) and (vi) of Paragraph 16(a) shall contain standard non-contributory
mortgagee clauses in favor of and acceptable to Lender. Each policy required by
any provision of Paragraph 16(a), except clause (iii) thereof, shall provide
that it may not be cancelled substantially modified or allowed to lapse on any
renewal date except after thirty (30) days' prior notice to Landlord and Lender.
Each such policy shall also provide that any loss otherwise payable thereunder
shall be payable notwithstanding (i) any act or omission of Landlord or Tenant
which might, absent such provision, result in a forfeiture of all or a part of
such insurance payment, (ii) the occupation or

                                       26
<PAGE>
use of any of the Leased Premises for purposes more hazardous than those
permitted by the provisions of such policy, (iii) any foreclosure or other
action or proceeding taken by Lender pursuant to any provision of the Mortgage,
Note, Assignment or other document evidencing or securing the Loan upon the
happening of an event of default therein or (iv) any change in title to or
ownership of any of the Leased Premises.

                  (d) Tenant shall pay as they become due all premiums for the
insurance required by Paragraph 16(a), shall renew or replace each policy and
deliver to Landlord evidence of the payment of the full premium therefor or
installment then due prior to the expiration date of such policy, and shall
promptly deliver to Landlord all original certificates of insurance at least
fifteen (15) days prior to the expiration date thereof, which certificates shall
bear notations evidencing payment of applicable premiums and, if required by
Lender, certified policies as soon as available.

                  (e) Anything in this Paragraph 16 to the contrary
notwithstanding, any insurance which Tenant is required to obtain pursuant to
Paragraph 16(a) may be carried under a "blanket" or umbrella policy or policies
covering other properties or liabilities of Tenant, provided that such "blanket"
or umbrella policy or policies otherwise comply with the provisions of this
Paragraph 16 and provided further that Tenant shall provide to Landlord a
Statement of Values which shall be reviewed annually and amended as necessary
based on Replacement Cost Valuations. The original or a certified copy of each
such "blanket" or umbrella policy shall promptly be delivered to Landlord.

                  (f) Tenant shall promptly comply with and conform to (i) all
provisions of each insurance policy required by this Paragraph 16 and (ii) all
requirements of the insurers thereunder applicable to Landlord, Tenant or any of
the Leased Premises or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration or repair of any of the Leased Premises, even
if such compliance necessitates Alterations or results in interference with the
use or enjoyment of any of the Leased Premises.

                  (g) Tenant shall not carry separate insurance concurrent in
form or contributing in the event of a Casualty with that required in this
Paragraph 16 unless (i) Landlord and Lender are included therein as named
insureds, with loss payable as provided herein, and (ii) such separate insurance
complies with the other provisions of this Paragraph 16. Tenant shall
immediately notify Landlord of such separate insurance and shall deliver to
Landlord the original policies or certified copies thereof.

                  (h) All policies shall contain effective waivers by the
carrier against all claims for insurance premiums against Landlord and shall
contain full waivers of subrogation against the Landlord.

                  (i) All proceeds of any insurance required under Paragraph
16(a) shall be payable as follows:

                        (i) Proceeds payable under clauses (ii), (iii) and (iv)
of Paragraph 16(a) and proceeds attributable to the general liability coverage
of Builder's Risk

                                       27
<PAGE>
insurance under clause (vi) of Paragraph 16(a) shall be payable to the Person
entitled to receive such proceeds.

                        (ii) Proceeds of insurance required under clause (i) of
Paragraph 16(a) and proceeds attributable to Builder's Risk insurance (other
than its general liability coverage provisions) under clause (vi) of Paragraph
16(a) shall be payable to Landlord or Lender and applied as set forth in
Paragraph 17 or, if applicable, Paragraph 18. Tenant shall apply the Net Award
to restoration of the Leased Premises in accordance with the applicable
provisions of this Lease unless a Termination Event shall have occurred and
Tenant has given a Termination Notice in which event the Net Award shall be
retained by Landlord.

            17. Casualty and Condemnation.

                  (a) If any Casualty to any of the Related Premises occurs the
insurance proceeds for which are reasonably estimated by Tenant to be equal to
or in excess of the Threshold Amount, Tenant shall give Landlord and Lender
immediate notice thereof. So long as (i) no Event of Default, exists, and (ii)
Tenant does not give a Termination Notice to Landlord, Tenant is hereby
authorized to adjust, collect and compromise all claims under any of the
insurance policies required by Paragraph 16(a) (except public liability
insurance claims payable to a Person other than Tenant, Landlord or Lender) and
to execute and deliver on behalf of Landlord all necessary proofs of loss,
receipts, vouchers and releases required by the insurers and Landlord shall have
the right to join with Tenant therein. Any final adjustment, settlement or
compromise of any such claim shall be subject to the prior written approval of
Landlord and Lender, and Landlord and Lender shall have the right to prosecute
or contest, or to require Tenant to prosecute or contest, any such claim,
adjustment, settlement or compromise. If an Event of Default exists, Tenant
shall not be entitled to adjust, collect or compromise any such claim or to
participate with Landlord in any adjustment, collection and compromise of the
Net Award payable in connection with a Casualty and, in such event, agrees to
sign, upon the request of Landlord, all such accurate proofs of loss, receipts,
vouchers and releases. Each insurer is hereby authorized and directed to make
payment under said policies, if required by the Mortgage, to Lender instead of
to Landlord and Tenant jointly. The rights of Landlord under this Paragraph
17(a) shall be extended to Lender if and to the extent that any Mortgage so
provides.

                  (b) Tenant, promptly upon receiving a Condemnation Notice,
shall notify Landlord and Lender thereof. So long as (i) no Event of Default,
exists and (ii) Tenant does not give a Termination Notice to Landlord, Tenant is
authorized to collect, settle and compromise the amount of any Net Award and
Landlord shall have the right to join with Tenant herein. If an Event of Default
exists, Landlord shall be authorized to collect, settle and compromise the
amount of any Net Award and Tenant shall not be entitled to participate with
Landlord in any Condemnation proceeding or negotiations under threat thereof or
to contest the Condemnation or the amount of the Net Award therefor. No
agreement with any condemnor in settlement or under threat of any Condemnation
shall be made by Tenant without the written consent of Landlord. Subject to the
provisions of this Paragraph 17(b), Tenant hereby irrevocably assigns to
Landlord any award or payment to which Tenant is or may be entitled by reason of
any Condemnation, whether the same shall be paid or payable for Tenant's
leasehold interest hereunder or otherwise; but nothing in this Lease shall
impair Tenant's right to any award or payment on account of Tenant's trade
fixtures, equipment or other tangible property which is

                                       28
<PAGE>
not part of the Fixtures, moving expenses or loss of business, if available, to
the extent that and so long as (i) Tenant shall have the right to make, and does
make, a separate claim therefor against the condemnor and (ii) such claim does
not in any way reduce either the amount of the award otherwise payable to
Landlord for the Condemnation of Landlord's fee interest in the applicable
Related Premises or the amount of the award (if any) otherwise payable for the
Condemnation of Tenant's leasehold interest hereunder. The rights of Landlord
under this Paragraph 17(b) shall also be extended to Lender if and to the extent
that any Mortgage so provides.

                  (c) If any Partial Casualty (whether or not insured against)
or Partial Condemnation shall occur to any Related Premises, this Lease shall
continue, notwithstanding such event, and there shall be no abatement or
reduction of any Monetary Obligations. Promptly after such Partial Casualty or
Partial Condemnation, Tenant, as required in Paragraph 12(a), shall commence and
diligently continue to restore the applicable Related Premises as nearly as
possible to its value, condition and character immediately prior to such event
(assuming such Related Premises to have been in the condition required by this
Lease). So long as no Event of Default exists, any Net Award up to and including
the Threshold Amount shall, unless such Casualty or Condemnation resulting in
the Net Award is a Termination Event, be paid by Landlord to Tenant and Tenant
shall restore the applicable Related Premises in accordance with the
requirements of Paragraph 13(b) of this Lease. Any Net Award in excess of the
Threshold Amount shall (unless such Casualty or Condemnation resulting in the
Net Award is a Termination Event) be made available by Landlord (or Lender if
the terms of the Mortgage so require) to Tenant for the restoration of any of
the applicable Related Premises pursuant to and in accordance with and subject
to the provisions of Paragraph 19 hereof. If any Casualty or Condemnation which
is not a Partial Casualty or Partial Condemnation shall occur, Tenant shall
comply with the terms and conditions of Paragraph 18.

            18. Termination Events.

                  (a) If either (i) all of any Related Premises shall be taken
by a Taking, or (ii) any substantial portion of any Related Premises shall be
taken by a Taking or (iii) all or any substantial portion of any Related
Premises shall be damaged or destroyed by a Casualty during the last twelve (12)
months of the Term and at the time of such Casualty no Event of Default exists
(any one or all of the Related Premises described in the above clauses (i) and
(ii) above being hereinafter referred to as the "Affected Premises" and each of
the events described in the above clauses (i), (ii) and (iii) shall hereinafter
be referred to as a "Termination Event"), then (x) in the case of (i) above,
Tenant shall be obligated, within thirty (30) days after Tenant receives a
Condemnation Notice and (y) in the case of (ii)or (iii) above, Tenant shall have
the option, within thirty (30) days after Tenant receives a Condemnation Notice
or thirty (30) days after the Casualty, as the case may be, to give to Landlord
written notice (a "Termination Notice") in the form described in Paragraph 18(b)
of the Tenant's election to terminate this Lease as to the Affected Premises. If
Tenant elects under clause (y) above not to give Landlord a Termination Notice,
then Tenant shall rebuild or repair the Leased Premises in accordance with
Paragraphs 17 and 19.

                  (b) A Termination Notice shall contain notice of Tenant's
intention to terminate this Lease as to the Affected Premises thirty (30) days
after delivery of the

                                       29
<PAGE>
Termination Notice (the "Termination Date") and any amounts prepaid by Tenant
and attributable to the Affected Premises for any period after the Termination
Date shall be refunded to Tenant.

                  (c) This Lease shall terminate as to the Affected Premises on
the Termination Date or, in the case of a Casualty at such later date on which,
(A) Tenant has paid all insurance deductibles associated with the Net Award and
(B) Landlord has received confirmation that the insurance proceeds payable
pursuant to Paragraph 16(a)(i) shall be paid to Landlord in full without offset
and deduction. If Tenant has not satisfied all Monetary Obligations and all
other non-contingent obligations and liabilities under this Lease which have
arisen as to the Affected Premises (collectively, "Remaining Obligations") on or
prior to the Termination Date, then Landlord may, at its option, extend the
Termination Date as to the Affected Premises to a date which is no later than
thirty (30) days after the date on which Tenant has satisfied all Remaining
Obligations. Upon such termination (i) all obligations of Tenant hereunder as to
the Affected Premises shall terminate except for any Surviving Obligations, (ii)
Tenant shall immediately vacate and shall have no further right, title or
interest in or to the Affected Premises and (iii) the Net Award shall be
retained by Landlord and (iv) any amounts prepaid by Tenant and attributed to
the Affected Premises for any period after the Termination Date shall be
refunded to Tenant.

                  (d) In the event of the termination of this Lease as to the
Affected Premises as hereinabove provided, this Lease shall remain in full force
and effect as to the Remaining Premises; provided, that the Basic Rent for the
Remaining Premises to be paid after such termination shall be the Basic Rent
otherwise payable hereunder with respect to the Leased Premises multiplied by a
percentage equal to the sum of the percentages set forth on Exhibit "F" for the
Remaining Premises.

            19. Restoration.

                  (a) If any Net Award is in excess of the Threshold Amount,
Landlord (or Lender if required by any Mortgage) shall hold the Net Award in a
fund (the "Restoration Fund") and disburse amounts from the Restoration Fund
only in accordance with the following conditions:

                        (i) prior to commencement of restoration, (A) the
architects, contracts, contractors, plans and specifications and a budget, which
budget may include a redevelopment fee payable to Tenant or its designee, for
the restoration shall have been approved by Landlord, (B) Landlord and Lender
shall be provided with mechanics' lien insurance (if available) and performance
and payment bonds in customary form and amounts issued by a surety reasonably
acceptable to Landlord, and name Landlord and Lender as additional dual
obligees, and (C) if the Related Premises being restored is the Pennsylvania
Premises, appropriate waivers of mechanics' and materialmen's liens shall have
been filed;

                        (ii) at the time of any disbursement, no Event of
Default, shall exist and no mechanics' or materialmen's liens (other than those
being contested in compliance with Paragraph 14) shall have been filed against
the applicable Related Premises and remain undischarged;

                                       30
<PAGE>
                        (iii) disbursements shall be made from time to time in
an amount not exceeding the cost of the work completed since the last
disbursement, upon receipt of (A) satisfactory evidence, including architects'
certificates, of the stage of completion, the estimated total cost of completion
and performance of the work to date in a good and workmanlike manner in
accordance with the contracts, plans and specifications, (B) waivers of liens,
(C) contractors' and subcontractors' sworn statements as to completed work and
the cost thereof for which payment is requested, (D) a satisfactory bringdown of
title insurance and (E) other reasonable evidence of cost and payment so that
Landlord and Lender can verify that the amounts disbursed from time to time are
represented by work that is completed, in place and free and clear of mechanics'
and materialmen's lien claims;

                        (iv) each request for disbursement shall be accompanied
by a certificate of Tenant, signed by the president or a vice president of
Tenant, describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also stating
that, to the best knowledge of such person, the work has been fully completed
and complies with the applicable requirements of this Lease;

                        (v) Landlord may retain ten percent (10%) of the
Restoration Fund until the restoration is fully completed;

                        (vi) the Restoration Fund shall not be commingled with
Landlord's other funds and shall bear interest at a rate agreed to by Landlord
and Tenant; and

                        (vii) such other reasonable and customary conditions as
Landlord or Lender may impose.

                  (b) Prior to commencement of restoration and at any time
during restoration, if the estimated cost of completing the restoration work
free and clear of all liens, as reasonably determined by Landlord, exceeds the
amount of the Net Award available for such restoration, the amount of such
excess shall, upon demand by Landlord, be paid by Tenant to Landlord to be added
to the Restoration Fund. Any sum so added by Tenant which remains in the
Restoration Fund upon completion of restoration shall be refunded to Tenant. For
purposes of determining the source of funds with respect to the disposition of
funds remaining after the completion of restoration, the Net Award shall be
deemed to be disbursed prior to any amount added by Tenant.

                  (c) If any sum remains in the Restoration Fund after
completion of the restoration and any refund to Tenant pursuant to Paragraph
19(b), such sum shall be retained by Landlord or, if required by a Note or
Mortgage, paid by Landlord to a Lender.

            20. Intentionally Omitted.

            21. Assignment and Subletting: Prohibition against Leasehold
Financing.

                  (a) (i) Except as specifically provided in this Paragraph 21
and subject to the terms hereof, Tenant shall not assign this Lease, voluntarily
or involuntarily, whether by operation of law or otherwise. Tenant shall have
the right, upon thirty (30) days

                                       31
<PAGE>
prior written notice to Landlord and Lender, with no consent of Landlord or
Lender being required or necessary ("Preapproved Assignment") (A) to assign this
Lease either in its entirety ("Complete Assignment") or (B) from time to time to
cause Landlord to bifurcate this Lease into two leases ("Lease Bifurcation"),
one lease for one or more Related Premises (the "Bifurcated Premises") to be
leased to a Preapproved Assignee (as hereinafter defined) upon the terms and
conditions set forth in this Lease (but shall specifically provide that it is
not cross-defaulted this Lease), and one lease for each remaining Related
Premises which will continue to be subject to this Lease, as amended (each, a
"Bifurcated Lease"), provided that (1) the Basic Rent under each such Bifurcated
Lease shall be allocated among each of the Related Premises as provided in
Exhibit "F", (2) Tenant assigns its interest in this Lease with respect to the
Bifurcated Premises (each such Lease Bifurcation, a "Partial Assignment") in
accordance with the terms and conditions of this Paragraph 21, and (3) any such
Complete Assignment or each Partial Assignment is to a Person (a "Preapproved
Assignee") which meets the following applicable criteria: (x) in the case of a
Complete Assignment which, as a matter of Law, results from a merger, the
successor Tenant shall have, after giving effect to such merger, a net worth at
least equal to Tenant's net worth immediately prior to such merger, (y) in the
case of the sale of all or substantially all of the assets of Tenant, (i) the
sale shall result in a Complete Assignment, and (ii) immediately after giving
effect to such purchase, the assignee shall have a net worth at least equal to
Tenant's net worth immediately prior to such purchase, and (z) in all other
cases, immediately following such assignment the assignee will have an
Investment Grade Rating. All determinations of net worth in this Paragraph
21(a)(i) shall be made in accordance with GAAP.

                        (ii) If Tenant desires to assign this Lease, whether by
operation of law, through a Complete Assignment or a Partial Assignment, or
otherwise, to a Person (a "Non-Preapproved Assignee") who would not be a
Preapproved Assignee (a "Non-Preapproved Assignment") then Tenant shall, not
less than ninety (90) days prior to the date on which it desires to make a
Non-Preapproved Assignment submit to Landlord and Lender information regarding
the following with respect to the Non-Preapproved Assignee (collectively, the
"Review Criteria"): (A) credit, (B) capital structure, (C) management, (D)
operating history, (E) proposed use of the Leased Premises and (F) risk factors
associated with the proposed use of the Leased Premises by the Non-Preapproved
Assignee, taking into account factors such as environmental concerns, product
liability and the like. Landlord and Lender shall review such information and
shall approve or disapprove the Non-Preapproved Assignee no later than the
thirtieth (30th) day following receipt of all such information, and Landlord and
Lender shall be deemed to have acted reasonably in granting or withholding
consent if such grant or disapproval is based on their review of the Review
Criteria applying prudent business judgment. If a response is not received by
Tenant from Landlord and Lender by the expiration of such thirty (30) day period
such Non-Preapproved Assignee shall be deemed disapproved.

                        (iii) If Tenant assigns its rights and interest under
this Lease except as expressly set forth below, the assignee under such
assignment shall expressly assume all the obligations of Tenant hereunder,
actual or contingent, including the obligations of Tenant which may have arisen
on or prior to the date of such assignment, by a written instrument delivered to
Landlord at the time of such assignment. With respect to each assignment, the
assignee shall not be required to assume the obligations of Tenant which may
have arisen on or prior to the date of such assignment with respect to the
Leased Premises or the Bifurcated Premises, as applicable, if Tenant provides
Landlord evidence satisfactory to Landlord in its

                                       32
<PAGE>
reasonable discretion that (1) the Leased Premises or the Bifurcated Premises,
as applicable, is in the physical condition required by this Lease as evidenced
by report issued by an independent thirty party engineering firm reasonably
acceptable to Landlord, (2) no Environmental Violation exists as evidenced by a
report issued by an environmental consulting firm reasonably acceptable to
Landlord, and (3) all applicable Impositions have been properly adjusted between
Tenant and the assignee as of the assignment date. Upon a Complete Assignment to
a Preapproved Assignee which has an Investment Grade Rating in accordance with
the terms and conditions of this Paragraph 21, Tenant shall be relieved of all
of its obligations under this Lease arising after such Complete Assignment. Upon
a Complete Assignment where the assignee is a Preapproved Assignee solely on the
basis of clause "(y)" of Paragraph 21(a)(i), Tenant shall be relieved of all of
its obligations under this Lease, whether arising before or after such Complete
Assignment, provided that such Preapproved Assignee assumes all of Tenant's
obligations under the Lease, actual or contingent, including the obligations of
Tenant which may have arisen on or prior to the date of such Complete
Assignment, by a written instrument delivered to Landlord at the time of such
assignment. Upon a Partial Assignment of this Lease to a Preapproved Assignee
which has an Investment Grade Rating in accordance with the terms and conditions
of this Paragraph 21, Tenant shall be relieved of all of its obligations under
this Lease with respect to the Bifurcated Premises arising after such
assignment. No assignment shall impose any additional obligations on Landlord
under this Lease, and, except as expressly set forth above, no assignment shall
affect or reduce any of the obligations of Tenant (including but not limited to
Tenant's liability with respect to Surviving Obligations), which shall remain in
full force and effect as obligations of a principal and not as obligations of a
guarantor, as if no assignment had been made.

                  (b) (i) Tenant shall not have the right to sublet all or any
portion of any Related Premises without having obtained the approval of Landlord
which consent shall not be unreasonably withheld or delayed. Landlord agrees
that it shall not have the right to withhold or delay its consent to any
proposed subletting so long as Tenant agrees in writing at the time consent to
such subletting is requested to assign to Landlord the subrents collected
thereunder in accordance with the terms and provisions of Paragraph 21(e) (a
"Preapproved Sublet").

                        (ii) With respect to any sublease of an entire Related
Premises for a term of at least five (5) years or, if less, the balance of the
Term minus one day which sublease requires the subtenant to pay Rent at least
equal to Basic Rent and Additional Rent allocable to such Related Premises and
comply with all other terms and conditions of this Lease to the extent
applicable to the Related Premises (such sublease being referred to as a
"Protected Sublease") and such subtenant either (A) meets the criteria of a
Preapproved Assignee pursuant to Paragraph 21(a)(i) or (B) has been approved by
Landlord and Lender in accordance with the procedure set forth in clause (ii) of
Paragraph 21(a), (each such subtenant, a "Protected Subtenant"), so that if this
Lease is terminated by reason of the occurrence of an Event of Default, Landlord
will recognize such Protected Sublease as a direct lease of the Related
Premises. Such recognition and agreement by Landlord to treat such sublease as a
Protected Sublease, shall not be effective unless such Protected Subtenant
executes and delivers to Landlord a subordination, non-disturbance and
attornment agreement in the form attached hereto as Exhibit "E" (modified as
appropriate to govern the Landlord and such subtenant as the parties and the
sublease as the protected leasehold). With respect to a proposed Protected
Subtenant pursuant to clause "(B)" above, Landlord shall provide its approval or
disapproval in

                                       33
<PAGE>
writing within thirty (30) days of Tenant's written request and submission of
all required information and any disapproval by Landlord shall state the reasons
for such disapproval.

                        (iii) Each sublease of any of the Related Premises shall
(A) subject to the provisions of Paragraphs 21(b) and 32, be expressly subject
and subordinate to this Lease and any Mortgage encumbering the Leased Premises;
(B) not extend beyond the then current Term minus one day; (C) subject to the
provisions of Paragraphs 21(b) and 32, terminate upon any termination of this
Lease, unless Landlord elects in writing, to cause the sublessee to attorn to
and recognize Landlord as the lessor under such sublease, whereupon such
sublease shall continue as a direct lease between the sublessee and Landlord
upon all the terms and conditions of such sublease; and (D) bind the sublessee
to all covenants contained in Paragraphs 4(a), 10 and 12 with respect to
subleased premises to the same extent as if the sublessee were the Tenant. No
sublease shall affect or reduce any of the obligations of Tenant hereunder or,
except as provided in Paragraph 21(b)(ii), impose any additional obligations on
Landlord under this Lease.

                  (c) Concurrently with Tenant's execution of any assignment or
sublease, Tenant shall provide to Landlord a completed certification
substantially in the form attached hereto as Exhibit "G", executed by the
proposed assignee/sublessee and, in connection with a Preapproved Assignment or
Protected Sublease, such other information reasonably required by Landlord to
establish that any proposed Preapproved Assignment or Protected Sublease
satisfies the criteria set forth above.

                  (d) Tenant shall, within ten (10) Business Days after the
execution and delivery of any assignment or sublease, deliver a duplicate
original copy thereof to Landlord which, in the event of an assignment, shall be
in recordable form.

                  (e) The provisions of this Paragraph 21(e) shall be applicable
in the event of a request by Tenant for consent to a Preapproved Sublet pursuant
to Paragraph 21(b) or with respect to any Protected Sublease. Tenant shall
grant, convey and assign to Landlord all right, title and interest of Tenant in
and to such sublease any and all extensions, modifications and renewals thereof
and all rents, issues and profits therefrom which assignment shall not be
subject to any assignment from Tenant to any other Person. Landlord shall grant
to Tenant a license to collect and enjoy all rents and other sums of money
payable under such sublease, provided, however, that during the continuance of
an Event of Default, Landlord shall have the absolute right at any time upon
notice to Tenant and any subtenants to revoke said license and to collect such
rents and sums of money and to apply the same to Rent next due and owing. Tenant
shall not consent to, cause or allow any modification or alteration of any of
the terms, conditions or covenants of any Protected Subleases or the termination
thereof, without the prior written approval of Landlord which consent shall not
be unreasonably withheld nor shall Tenant accept any rents more than thirty (30)
days in advance of the accrual thereof.

                  (f) Tenant shall not have the power to mortgage, pledge or
otherwise encumber its interest under this Lease or any sublease of any of the
Related Premises, and any such mortgage, pledge or encumbrance made in violation
of this Paragraph 21 shall be void and of no force and effect.

                                       34
<PAGE>
                  (g) Landlord may sell or transfer its interest in the Leased
Premises at any time without Tenant's consent to any third party (each a "Third
Party Purchaser"), provided, however, Landlord shall not, without Tenant's prior
written consent which consent shall not be unreasonably withheld, delayed or
conditioned, sell the Leased Premises or assign its interest in this Lease to
(i) to a Competitor of Tenant or (ii) a Person with which Tenant would be
required to consolidate its financial statements under GAAP. In the event of any
such transfer not in violation of this Paragraph 21(g), Tenant shall attorn to
any Third Party Purchaser as Landlord so long as such Third Party Purchaser and
Landlord notify Tenant in writing of such transfer. At the request of Landlord,
Tenant will execute such documents confirming the agreement referred to above
and such other agreements as Landlord may reasonably request, provided that such
agreements do not increase the liabilities and obligations of Tenant hereunder.

            22. Events of Default.

                  (a) The occurrence of any one or more of the following (after
expiration of any applicable cure period as provided in Paragraph 22(b)) shall,
at the sole option of Landlord, constitute an "Event of Default" under this
Lease.

                        (i) a failure by Tenant to make any payment of any
Monetary Obligation on or prior to its due date, regardless of the reason for
such failure;

                        (ii) a failure by Tenant duly to perform and observe, or
a violation or breach of, any other provision hereof not otherwise specifically
mentioned in this Paragraph 22(a);

                        (iii) any representation or warranty made by Tenant
herein or in any certificate, demand or request made pursuant hereto proves to
be incorrect in any material adverse respect and the circumstances giving rise
to such misrepresentation or breach of warranty are continuing and would
reasonably be anticipated to have a material adverse effect upon Tenant's
ability to perform its obligations under this Lease or upon any Related
Premises, in each case with Landlord applying commercially reasonable standards;

                        (iv) Tenant shall (A) voluntarily be adjudicated a
bankrupt or insolvent, (B) seek or consent to the appointment of a receiver or
trustee for itself or for any of the Related Premises, (C) file a petition
seeking relief under the bankruptcy or other similar laws of the United States,
any state or any jurisdiction, or (D) make a general assignment for the benefit
of creditors;

                        (v) a court shall enter an order, judgment or decree
appointing, without the consent of Tenant, a receiver or trustee for it or for
any of the Related Premises or approving a petition filed against Tenant which
seeks relief under the bankruptcy or other similar laws of the United States,
any state or any jurisdiction, and such order, judgment or decree shall remain
undischarged or unstayed ninety (90) days after it is entered;

                        (vi) any Related Premises (A) shall have been vacated
other than (1) due to a Casualty to or Condemnation of such Related Premises so
long as Tenant is diligently negotiating an insurance settlement or endeavoring
to restore the Related Premises or (2) as a result of Tenant having decided to
cease its business operations at such location so long

                                       35
<PAGE>
as Tenant is diligently seeking an assignment or sublet (which diligence shall
be deemed evidenced by a listing of such Related Premises with a real estate
broker or agent at market terms), or (B) shall have been abandoned;

                        (vii) Tenant shall voluntarily liquidate or dissolve or
shall begin proceedings towards its liquidation or dissolution except by filing
bankruptcy proceedings;

                        (viii) the estate or interest of Tenant in any of the
Related Premises shall be levied upon or attached in any proceeding and such
estate or interest is about to be sold or transferred or such process shall not
be vacated or discharged within sixty (60) days after it is made;

                        (ix) a failure by Tenant to perform or observe, or a
violation or breach of, or a misrepresentation by Tenant under any document
between Tenant and Lender or from Tenant to Lender, if such failure, violation,
breach or misrepresentation gives rise to a default beyond any applicable cure
period with respect to any Loan;

                        (x) a failure by Tenant to maintain in effect any
material license or permit necessary for the use, occupancy or operation of any
of the Related Premises, in each case with Landlord applying commercially
reasonable standards;

                        (xi) Tenant shall in a single transaction or series of
related transactions sell, convey, transfer or lease all or substantially all of
its assets unless concurrently with such sale the interest of Tenant in this
Lease is assigned to the purchaser, lessee or transferee of such assets who
complies with the requirements of Paragraph 21 of this Lease and who shall
assume in writing all of the obligations of Tenant hereunder;

                        (xii) Tenant shall fail to deliver the Estoppel
Certificate described in Paragraph 25 within the time period specified therein
provided that such request for an Estoppel Certificate clearly states that the
failure to provide said Estoppel Certificate will be an Event of Default under
this Lease if not delivered within said time period;

                        (xiii) Tenant shall fail to execute and deliver the
subordination, non-disturbance and attornment agreement in accordance with the
requirements of Paragraph 32 within fifteen (15) Business Days of written
request by Landlord provided that such request clearly states that the failure
to execute and deliver such agreement will be an Event of Default under this
Lease if not delivered within said time period;

                        (xiv) An Event of Default (as that term is defined in
each of the Affiliate Leases) under either of the Affiliate Leases shall occur;
or

                        (xv) Tenant shall fail to comply with the terms of
Paragraph 2(c)(i) of Exhibit "H".

                  (b) No notice or cure period shall be required in any one or
more of the following events: (A) the occurrence of an Event of Default under
clause (i) (except as otherwise set forth below), (iii), (iv), (v), (vi), (vii),
(viii), (ix), (x), (xi), (xii), (xiii), (xiv) or (xv) of Paragraph 22(a); (B) a
failure to provide any insurance required by Paragraph 16 or an

                                       36
<PAGE>
assignment or sublease entered into in violation of Paragraph 21; or (C) the
default is such that any delay in the exercise of a remedy by Landlord could
reasonably be expected to cause irreparable harm to Landlord. If the default
consists of the failure to pay any Monetary Obligation under clause (i) of
Paragraph 22(a), the applicable cure period shall be five (5) Business Days from
the date on which notice is given, but if the default consists of the failure to
pay Basic Rent, Landlord shall not be obligated to give notice of such default
in more than one (1) time within any Lease Year. If the default consists of a
default under clause (ii) of Paragraph 22(a), other than the events specified in
clauses (B) and (C) of the first sentence of this Paragraph 22(b), the
applicable cure period shall be thirty (30) days from the date on which notice
is given provided Tenant has commenced to cure such default with such thirty
(30) day period and thereafter diligently and expeditiously proceeds to cure the
same or, if the default cannot be cured within such thirty (30) day period and
Tenant, in the reasonable opinion of Landlord and Lender, thereafter diligently
and expeditiously proceeds to cure same (and delay in the exercise of a remedy
would not, in Landlord's reasonable judgment, cause any material adverse harm to
Landlord or any of the Leased Premises) the cure period shall be extended for so
long as it shall require Tenant in the exercise of due diligence to cure such
default, it being agreed that no such extension shall be for a period in excess
of one hundred and five (105) days unless (x) Landlord determines in its
reasonable discretion that Tenant is diligently and expeditiously curing the
applicable default and (y) the applicable default does not relate to an
Environmental Violation (except for an Environmental Violation that cannot be
cured within such one hundred and five (105) day period due solely to the
failure of a governmental agency to approve a remediation plan or provide any
permit required for Tenant to remediate in which case the one hundred and five
(105) day period shall be extended, so long as Tenant is diligently and
expeditiously curing the applicable default, by the number of days elapsed
between the date Tenant submits a remediation plan or applies for a permit to
the appropriate governmental authority and the date such plan is approved or
permit is issued by the appropriate governmental authority, but in no event
shall such extension exceed one year from the date notice was originally given
by Landlord to Tenant of such default).

            23. Remedies and Damages Upon Default.

                  (a) If an Event of Default shall have occurred and is
continuing, Landlord shall have the right, at its sole option, then or at any
time thereafter, to exercise its remedies and to collect damages from Tenant in
accordance with this Paragraph 23, subject in all events to applicable Law,
without further demand upon or notice to Tenant except as otherwise provided in
Paragraph 22(b) and this Paragraph 23.

                        (i) Landlord may give Tenant notice of Landlord's
intention to terminate this Lease on a date specified in such notice. Upon such
date, this Lease, the estate hereby granted and all rights of Tenant hereunder
shall expire and terminate. Upon such termination, Tenant shall immediately
surrender and deliver possession of the Leased Premises to Landlord in
accordance with Paragraph 26. If Tenant does not so surrender and deliver
possession of all of the Leased Premises, Landlord may re-enter and repossess
any of the Leased Premises not surrendered, with or without legal process, by
peaceably entering any of the Leased Premises and changing locks or by summary
proceedings, ejectment or any other lawful means or procedure (including but not
limited to the procedure set forth in ORS 105.105-168 with respect to the Oregon
Premises).

                                       37
<PAGE>
                        (ii) Landlord may repossess the Leased Premises without
terminating the Lease after obtaining an appropriate order from a court of
competent jurisdiction, and thereafter peacefully enter the Leased Premises and
changing locks or by other summary judicial proceedings.

                        (iii) Upon or at any time after taking possession of any
of the Leased Premises pursuant to Paragraph 23(a)(i) or 23(a)(ii), Landlord
may, by peaceable means or legal process, remove any Persons or property
therefrom. Landlord shall be under no liability for or by reason of any such
entry, repossession or removal. Notwithstanding such entry or repossession,
Landlord may collect the damages set forth in Paragraph 23(b)(i) and 23(b)(ii).

                        (iv) After repossession of any of the Leased Premises
pursuant to clause (i) or (ii) above, Landlord shall have the right to relet any
of the Leased Premises to such tenant or tenants, for such term or terms, for
such rent, on such conditions and for such uses as Landlord in its sole
discretion may determine, and collect and receive any rents payable by reason of
such reletting. Landlord may make such Alterations in connection with such
reletting as it may deem advisable in its sole discretion. Notwithstanding any
such reletting, Landlord may collect the damages set forth in Paragraph
23(b)(ii). Landlord shall consider any tenants or subtenants reasonably proposed
by Tenant and prepared to lease or sublet the Leased Premises or any Related
Premises on reasonable terms so as to mitigate Tenant's damages, but Landlord
shall be under no obligation to accept such proposed tenants or subtenants.

                        (v) Landlord may declare by notice to Tenant the entire
Basic Rent (in the amount of Basic Rent then in effect) for the remainder of the
then current Term to be immediately due and payable. Tenant shall immediately
pay to Landlord all such Basic Rent discounted to its Present Value, all accrued
Rent then due and unpaid, all other Monetary Obligations which are then due and
unpaid and all Monetary Obligations which arise or become due by reason of such
Event of Default (including any Costs of Landlord). Upon receipt by Landlord of
all such accelerated Basic Rent and Monetary Obligations, this Lease shall
remain in full force and effect and Tenant shall have the right to possession of
the Leased Premises from the date of such receipt by Landlord to the end of the
Term, and subject to all the provisions of this Lease, including the obligation
to pay all increases in Basic Rent and all Monetary Obligations that
subsequently become due, except that (A) no Basic Rent which has been prepaid
hereunder shall be due thereafter during the said Term, and (B) Tenant shall
have no option to extend or renew the Term.

                  (b) The following constitute damages to which Landlord shall
be entitled if Landlord exercises its remedies under Paragraph 23(a)(i), (ii)
and (iii):

                        (i) If Landlord exercises its remedy under Paragraphs
23(a)(i) or (ii) but not its remedy under Paragraph 23(a)(iv) (or attempts to
exercise such remedy and is unsuccessful in reletting the Leased Premises) then,
upon written demand from Landlord, Tenant shall pay to Landlord, as liquidated
and agreed final damages for Tenant's default and in lieu of all current damages
beyond the date of such demand (it being agreed that it would be impracticable
or extremely difficult to fix the actual damages), an amount equal to the
Present Value of the excess, if any, of (A) all Basic Rent allocated for each
Related Premises based on Exhibit "F" from the date of such demand to the date
on which the Term is scheduled to expire

                                       38
<PAGE>
hereunder in the absence of any earlier termination, re-entry or repossession
over (B) the then fair market rental value of each Related Premises for the same
period. Tenant shall also pay to Landlord all of Landlord's Costs in connection
with the repossession of the Leased Premises and any attempted reletting
thereof, including all brokerage commissions, legal expenses, reasonable
attorneys' fees, employees' expenses, costs of Alterations and expenses and
preparation for reletting.

                        (ii) If Landlord exercises its remedy or remedies under
Paragraphs 23(a)(i), (ii), (iii) or (iv), then Tenant shall, until the end of
what would have been the Term in the absence of the termination of the Lease,
and whether or not any of the Leased Premises shall have been relet, be liable
to Landlord for, and shall pay to Landlord, as liquidated and agreed current
damages all Monetary Obligations which would be payable under this Lease by
Tenant in the absence of such termination less the net proceeds, if any, of any
reletting pursuant to Paragraph 23(a)(iv), after deducting from such proceeds
all of Landlord's Costs (including the items listed in the last sentence of
Paragraph 23(b)(i) hereof) incurred in connection with such repossessing and
reletting; provided, that if Landlord has not relet the Leased Premises, such
Costs of Landlord shall be considered to be Monetary Obligations payable by
Tenant. Tenant shall be and remain liable for all sums aforesaid, and Landlord
may recover such damages from Tenant and institute and maintain successive
actions or legal proceedings against Tenant for the recovery of such damages.
Nothing herein contained shall be deemed to require Landlord to wait to begin
such action or other legal proceedings until the date when the Term would have
expired by its own terms had there been no such Event of Default.

                  (c) Intentionally Omitted.

                  (d) Notwithstanding anything to the contrary herein contained,
in lieu of or in addition to any of the foregoing remedies and damages, Landlord
may exercise any remedies and collect any damages available to it at law or in
equity; provided, however, with respect to a Limited Remedy Default, the
aggregate amount Tenant shall be required to pay to Landlord (pursuant to
paragraph 23(a)(v) or otherwise) from and after the date of the occurrence of
such Limited Remedy Default (the "Occurrence Date") with respect to Basic Rent,
Additional Rent and indemnification obligations under Paragraph 15(a) shall be
limited to the sum of (i) the present value as of the Occurrence Date,
discounted at the annual rate of eleven and 15/100 percent (11.15%), of all
Basic Rent reserved hereunder for the unexpired portion after the Occurrence
Date) of the Term devised herein as if this Lease had not expired or been
terminated, (ii) any amounts of Additional Rent which are due and payable or
have accrued under this Lease through the Occurrence Date, and (iii) any amounts
of Additional Rent which are due and payable or have accrued under this Lease
after the Occurrence Date while the Tenant remains in possession of the Leased
Premises or the applicable Related Premises, as applicable, after any Limited
Remedy Default that relates to Impositions, insurance, utilities, repairs,
maintenance, environmental maintenance, remediation and compliance and other
routine and customary costs and expenses of operating and maintaining the Leased
Premises or the applicable Related Premises, as applicable. Notwithstanding the
foregoing, if Tenant remains in possession of the Leased Premises or the
applicable Related Premises, as applicable, and assumes, ratifies or affirms
this Lease during any pending bankruptcy or other event described in 22(a)(iv)
or (v), then Tenant shall be obligated to pay all Basic Rent and Additional Rent
which become due and payable under this Lease without limitation by this
paragraph 23(d). Nothing contained in this

                                       39
<PAGE>
paragraph 23(d) shall limit any amounts payable by Tenant with respect to Basic
Rent or Additional Rent if any Event of Default that is not a Limited Remedy
Default has occurred.

                  (e) Except as specifically provided in Paragraphs 23(a)(iv),
Landlord shall not be required to mitigate any of its damages hereunder unless
required to by applicable Law. If any Law shall validly limit the amount of any
damages provided for herein to an amount which is less than the amount agreed to
herein, Landlord shall be entitled to the maximum amount available under such
Law.

                  (f) No termination of this Lease, repossession or reletting of
any of the Leased Premises, exercise of any remedy or collection of any damages
pursuant to this Paragraph 23 shall relieve Tenant of any Surviving Obligations.

                  (g) WITH RESPECT TO ANY REMEDY OR PROCEEDING OF LANDLORD OR
TENANT HEREUNDER, LANDLORD AND TENANT HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY.

                  (h) Intentionally Omitted.

                  (i) Upon the occurrence of any Event of Default, Landlord
shall have the right (but no obligation) to perform any act required of Tenant
hereunder and, if performance of such act requires that Landlord enter the
Leased Premises, Landlord may enter the Leased Premises for such purpose

                  (j) No failure of Landlord (i) to insist at any time upon the
strict performance of any provision of this Lease or (ii) to exercise any
option, right, power or remedy contained in this Lease shall be construed as a
waiver, modification or relinquishment thereof. A receipt by Landlord of any sum
in satisfaction of any Monetary Obligation with knowledge of the breach of any
provision hereof shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision hereof shall be deemed to have been made unless
expressed in a writing signed by Landlord.

                  (k) Tenant hereby waives and surrenders, for itself and all
those claiming under it, including creditors of all kinds, (i) any right and
privilege which it or any of them may have under any present or future Law to
redeem any of the Leased Premises or to have a continuance of this Lease after
termination of this Lease or of Tenant's right of occupancy or possession
pursuant to any court order or any provision hereof, and (ii) the benefits of
any present or future Law which exempts property from liability for debt or for
distress for rent.

                  (l) Except as otherwise provided herein, all remedies are
cumulative and concurrent and no remedy is exclusive of any other remedy. Each
remedy may be exercised at any time an Event of Default has occurred and is
continuing and may be exercised from time to time. No remedy shall be exhausted
by any exercise thereof.

            24. Notices. All notices, demands, requests, consents, approvals,
offers, statements and other instruments or communications required or permitted
to be given pursuant to the provisions of this Lease shall be in writing and
shall be deemed to have been given and received for all purposes when delivered
in person or by Federal Express or other reliable 24-

                                       40
<PAGE>
hour delivery service or five (5) business days after being deposited in the
United States mail, by registered or certified mail, return receipt requested,
postage prepaid, addressed to the other party at its address stated on page one
of this Lease or when delivery is refused. Notices sent to Landlord shall be to
the attention of Director, Asset Management, and notices sent to Tenant shall be
to the attention of Chief Financial Officer. A copy of any notice given by
Tenant to Landlord shall simultaneously be given by Tenant to Reed Smith LLP,
One Liberty Place, Philadelphia, PA 19103, Attention: Chairman, Real Estate
Department. A copy of any notice by Landlord to Tenant shall simultaneously be
given by Landlord to Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd., 55
East Monroe Street, Suite 3700, Chicago, Illinois 60603. For the purposes of
this Paragraph, any party may substitute another address stated above (or
substituted by a previous notice) for its address by giving fifteen (15) days'
notice of the new address to the other party, in the manner provided above.

            25. Estoppel Certificate. At any time upon not less than fifteen
(15) Business Days' prior written request by either Landlord or Tenant (the
"Requesting Party") to the other party (the "Responding Party"), on not more
than three (3) occasions during any Lease Year, the Responding Party shall
deliver to the Requesting Party a statement in writing (the "Estoppel
Certificate"), executed by an authorized officer of the Responding Party,
certifying (a) that, except as otherwise specified, this Lease is unmodified and
in full force and effect, (b) the dates to which Basic Rent, Additional Rent and
all other Monetary Obligations have been paid, (c) that, to the knowledge of the
signer of such certificate and except as otherwise specified, no default by
either Landlord or Tenant exists hereunder, and (d) such other matters as the
Requesting Party may reasonably request. Any such statements by the Responding
Party may be relied upon for estoppel purposes only by the Requesting Party, any
Person whom the Requesting Party notifies the Responding Party in its request
for the Estoppel Certificate is an intended recipient or beneficiary of the
Estoppel Certificate, any Lender or their assignees and by any prospective
purchaser or mortgagee of any of the Leased Premises. Any Estoppel Certificate
required under this Paragraph 25 and delivered by Tenant shall state that, in
the opinion of each person signing the same, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as to
the subject matter of such Estoppel Certificate, and shall briefly state the
nature of such examination or investigation.

            26. Surrender. Upon the expiration or earlier termination of this
Lease, Tenant shall peaceably leave and surrender the Leased Premises or
Affected Premises, is applicable, to Landlord in the same condition in which the
Leased Premises or Affected Premises, if applicable, was at the commencement of
this Lease, except as repaired, rebuilt, restored, altered, replaced or added to
as permitted or required by any provision of this Lease, and except for ordinary
wear and tear. Upon such surrender, Tenant shall (a) remove from the Leased
Premises or Affected Premises, if applicable, all property which is owned by
Tenant or third parties other than Landlord and (b) repair any damage caused by
such removal. Property not so removed shall become the property of Landlord, and
Landlord may, after five (5) Business Days' prior notice to Tenant, thereafter
cause such property to be removed from the Leased Premises or Affected Premises,
if applicable. The cost of removing and disposing of such property and repairing
any damage to any of the Leased Premises or Affected Premises, if applicable,
caused by such removal shall be paid by Tenant to Landlord upon demand. Landlord
shall not in any manner or to any extent be obligated to reimburse Tenant for
any such property which becomes the property of Landlord pursuant to this
Paragraph 26.

                                       41
<PAGE>
            27. No Merger of Title. There shall be no merger of the leasehold
estate created by this Lease with the fee estate in any of the Leased Premises
by reason of the fact that the same Person may acquire or hold or own, directly
or indirectly, (a) the leasehold estate created hereby or any part thereof or
interest therein and (b) the fee estate in any of the Leased Premises or any
part thereof or interest therein, unless and until all Persons having any
interest in the interests described in (a) and (b) above which are sought to be
merged shall join in a written instrument effecting such merger and shall duly
record the same.

            28. Books and Records.

                  (a) Tenant shall keep adequate records and books of account
with respect to the finances and business of Tenant generally, and with respect
to the Leased Premises, which records and books with respect to the finances and
business of Tenant shall be kept in accordance with generally accepted
accounting principles ("GAAP") consistently applied, and shall permit Landlord
and Lender by their respective agents, accountants and attorneys, upon
reasonable notice to Tenant, to visit and inspect the Leased Premises and
examine (and make copies of at the inspecting party's expense) the records and
books of account and to discuss the finances and business with the officers of
Tenant, at such reasonable times during normal business hours as may be
requested by Landlord and at Landlord's expense, provided, however, that
Landlord and Lender shall be limited to one personal visit per Lease Year to
discuss the finances and business of Tenant with the officers of Tenant. Upon
the request of Lender or Landlord (either telephonically or in writing), Tenant
shall provide the requesting party with copies of any information to which such
party would be entitled in the course of a personal visit.

                  (b) Tenant shall deliver to Landlord and to Lender within one
hundred twenty (120) days of the close of each fiscal year, annual audited
financial statements of Tenant prepared by nationally recognized independent
certified public accountants. Tenant shall also furnish to Landlord within sixty
(60) days after the end of each of the three remaining quarters unaudited
financial statements and all other quarterly reports of Tenant, certified by
Tenant's chief financial officer, and all filings, if any, of Form 10-K, Form
10-Q and other required filings with the Securities and Exchange Commission
pursuant to the provisions of the Securities Exchange Act of 1934, as amended,
or any other Law. All financial statements of Tenant shall be prepared in
accordance with GAAP consistently applied. All annual financial statements shall
be accompanied (i) by an opinion of said accountants (A) stating that such
financial statements present fairly the financial position for the periods
indicated, in conformity with GAAP applied on a consistent basis with prior
years and (B) which shall not be qualified or limited because of a restricted or
limited examination by the accountants of any material portion of Tenant's
records and (ii) by a certificate of the president or a vice president of
Tenant, dated within five (5) days of the delivery of such statement, stating
that such officer knows of no Event of Default, or event which, upon notice or
the passage of time or both, would become an Event of Default which has occurred
and is continuing hereunder or, if any such event has occurred and is
continuing, specifying the nature and period of existence thereof and what
action Tenant has taken or proposes to take with respect thereto.

            29. Intentionally Omitted.

                                       42
<PAGE>
            30. Non-Recourse as to Landlord. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be limited to actual damages and shall be
enforced only against Landlord's interest in the Leased Premises and not against
any other assets, properties or funds of (a) Landlord, (b) any director, member,
officer, general partner, limited partner, employee or agent of Landlord, or any
general partner of Landlord, any of its general partners or shareholders (or any
legal representative, heir, estate, successor or assign of any thereof), (c) any
predecessor or successor partnership or corporation (or other entity) of
Landlord, or any of its general partners, either directly or through Landlord or
its general partners or any predecessor or successor partnership or corporation
or their shareholders, officers, directors, employees or agents (or other
entity), or (d) any other Person (including Carey Property Advisors, Carey
Fiduciary Advisors, Inc., W. P. Carey & Co., LLC, Carey Management LLC, and any
Person affiliated with any of the foregoing, or any director, officer, employee
or agent of any thereof).

            31. Financing.

                  (a) Tenant agrees to pay all costs and expenses incurred by
Landlord in connection with Landlord's purchase, leasing and initial financing
of the Leased Premises including, without limitation, the cost of appraisals,
environmental reports, structural reports, title insurance, surveys, legal fees
and expenses, and Lender's points and commitment fee. Tenant shall not be
responsible for any acquisition or similar fee payable to W.P. Carey & Co. LLC
or its affiliates or any costs or expenses incurred by Landlord in connection
with any financing of the Leased Premises subsequent to the initial financing.

                  (b) If Landlord desires to obtain or refinance any Loan,
Tenant shall negotiate in good faith with Landlord concerning any request made
by any Lender or proposed Lender for changes or modifications in this Lease. In
particular, Tenant shall agree, upon request of Landlord, to supply any such
Lender with such notices and information as Tenant is required to give to
Landlord hereunder and to extend the rights of Landlord hereunder to any such
Lender and to consent to such financing if such consent is requested by such
Lender.

            32. Subordination, Non-Disturbance and Attornment. This Lease and
Tenant's interest hereunder shall be superior to any Mortgage, other security
instrument or lien hereafter placed upon the Leased Premises by Landlord, and to
any and all advances made or to be made thereunder, to the interest thereon, or
any ground lease entered into by Landlord and all renewals, replacements and
extensions thereof, provided that Tenant hereby agrees to subordinate this Lease
to any Mortgage, ground lease or other security instrument so long as such
mortgagee, holder of a security interest or ground lessor enters into an
agreement with Tenant in substantially in the form of Exhibit "E", subject to
any modifications reasonably required by any Lender or ground lessor, with
respect to each Related Premises which do not materially affect Tenant's rights
hereunder.

            33. Tax Treatment; Reporting. Landlord and Tenant each acknowledge
that each shall treat this transaction as a true lease for state law purposes
and shall report this transaction as a Lease for Federal income tax purposes.
For Federal income tax purposes each shall report this Lease as a true lease
with Landlord as the owner of the Leased Premises and Fixtures and Tenant as the
lessee of such Leased Premises and Fixtures including: (i) treating

                                       43
<PAGE>
Landlord as the owner of the property eligible to claim depreciation deductions
under Section 167 or 168 of the Internal Revenue Code of 1986 (the "Code") with
respect to the Leased Premises and Fixtures, (ii) Tenant reporting its Rent
payments as rent expense under Section 162 of the Code, and (iii) Landlord
reporting the Rent payments as rental income.

            34. Miscellaneous.

                  (a) The paragraph headings in this Lease are used only for
convenience in finding the subject matters and are not part of this Lease or to
be used in determining the intent of the parties or otherwise interpreting this
Lease.

                  (b) As used in this Lease, the singular shall include the
plural and any gender shall include all genders as the context requires and the
following words and phrases shall have the following meanings: (i) "including"
shall mean "including without limitation"; (ii) "provisions" shall mean
"provisions, terms, agreements, covenants and/or conditions"; (iii) "lien" shall
mean "lien, charge, encumbrance, title retention agreement, pledge, security
interest, mortgage and/or deed of trust"; (iv) "obligation" shall mean
"obligation, duty, agreement, liability, covenant and/or condition"; (v) "any of
the Leased Premises" shall mean "the Leased Premises or any part thereof or
interest therein"; (vi) "any of the Land" shall mean "the Land or any part
thereof or interest therein"; (vii) "any of the Improvements" shall mean "the
Improvements or any part thereof or interest therein"; (viii) "any of the
Fixtures" shall mean "the Fixtures or any part thereof or interest therein";
(ix) "any of the Adjoining Property" shall mean "the Adjoining Property or any
part thereof"; and (x) "best of knowledge of Tenant" (or words of similar
effect) shall mean to the actual knowledge of Tenant's then-current Chief
Financial Officer, Treasurer, General Counsel, Associate General Counsel for
Real Estate or, as to matters pertaining to any Related Premises, the
Distribution Center Manager for such Related Premises.

                  (c) Any act which Landlord is permitted to perform under this
Lease may be performed at any time and from time to time by Landlord, Lender or
any person or entity designated by Landlord. Except as otherwise specifically
permitted herein to the contrary, Landlord and Lender shall not unreasonably
withhold, condition or delay their respective consent or approval whenever such
consent or approval is required under this Lease, except as otherwise provided
herein. Time is of the essence with respect to the performance by Tenant and
Landlord of their respective obligations under this Lease.

                  (d) Landlord shall in no event be construed for any purpose to
be a partner, joint venturer or associate of Tenant or of any subtenant,
operator, concessionaire or licensee of Tenant with respect to any of the Leased
Premises or otherwise in the conduct of their respective businesses.

                  (e) This Lease and any documents which may be executed by
Tenant on or about the effective date hereof at Landlord's request constitute
the entire agreement between the parties and supersede all prior understandings
and agreements, whether written or oral, between the parties hereto relating to
the Leased Premises and the transactions provided for herein. Landlord and
Tenant are business entities having substantial experience with the subject
matter of this Lease and have each fully participated in the negotiation and
drafting of this Lease.

                                       44
<PAGE>
Accordingly, this Lease shall be construed without regard to the rule that
ambiguities in a document are to be construed against the drafter.

                  (f) This Lease may be modified, amended, discharged or waived
only by an agreement in writing signed by the party against whom enforcement of
any such modification, amendment, discharge or waiver is sought.

                  (g) If the date for performance of any obligation of Landlord
or Tenant under this Lease is not a Business Day, the date for performance of
such obligation shall be the first Business Day following the date for
performance of such obligation.

                  (h) The covenants of this Lease shall run with the land and
bind Tenant, Landlord, and their respective its successors and permitted assigns
and all present and subsequent encumbrancers and subtenants of any of the Leased
Premises, and shall inure to the benefit of Landlord, Tenant, and their
respective successors and permitted assigns.

                  (i) Notwithstanding any provision in this Lease to the
contrary, all Surviving Obligations of Tenant shall survive the expiration or
termination of this Lease with respect to any Related Premises for a period of
ten (10) years.

                  (j) If any one or more of the provisions contained in this
Lease shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.

                  (k) All exhibits attached hereto are incorporated herein as if
fully set forth.

                  (l) Each of Landlord and Tenant hereby agree that the State of
New York has a substantial relationship to the parties and to the underlying
transaction embodied hereby, and in all respects (including, without limiting
the generality of the foregoing, matters of construction, validity and
performance) this Lease and the obligations arising hereunder shall be governed
by, and construed in accordance with, the laws of the State of New York
applicable to contracts made and performed therein and all applicable law of the
United States of America; except that, at all times, the provisions for the
creation of the leasehold estate, enforcement of Landlord's rights and remedies
with respect to right of re-entry and repossession, surrender, delivery,
ejectment, dispossession, eviction or other in-rem proceeding or action
regarding any Related Premises pursuant to Paragraph 23 hereof shall be governed
by and construed according to the Laws of the State in which the applicable
Related Premises is located, it being understood that, to the fullest extent
permitted by law of such State, the law of the State of New York shall govern
the validity and the enforceability of the Lease, and the obligations arising
hereunder. To the fullest extent permitted by law, Tenant hereby unconditionally
and irrevocably waives any claim to assert that the law of any other
jurisdiction governs this Lease. Any legal suit, action or proceeding against
Tenant arising out of or relating to this Lease may be instituted in any federal
or state court sitting in the County of New York, State of New York, and Tenant
waives any objection which it may now or hereafter have to the laying of venue
of any such suit, action or

                                       45
<PAGE>
proceeding in such County and State, and Tenant hereby expressly and irrevocably
submits to the jurisdiction of any such court in any suit, action or proceeding.
Notwithstanding the foregoing, nothing herein shall prevent or prohibit Landlord
from instituting any suit, action or proceeding in any other proper venue or
jurisdiction in which Tenant is located or where service of process can be
effectuated.

                  (m) Landlord covenants and agrees to comply with all
requirements of GAAP in effect as of the Commencement Date to the extent
necessary to prevent Tenant from being required to be consolidated with Landlord
for GAAP financial reporting purposes and to consider any proposed modification
to this Lease (which Landlord may approve or disapprove in its sole and absolute
discretion) and which is necessary to preserve such status and the treatment of
the Lease as an operating lease under GAAP. From time to time, Landlord will
furnish Tenant with such information regarding Landlord as Tenant may reasonably
request to permit Tenant and Tenant's accountants to determine the treatment of
the Lease for financial reporting purposes.

                  (n) This Lease may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same Lease.

                                       46
<PAGE>
      IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly
executed under seal as of the day and year first above written.

                                         LANDLORD:

                                         BOLT (DE) LIMITED PARTNERSHIP,
                                         a Delaware limited partnership,

                                                 By:  BOLT (DE) QRS 15-26, INC.,
                                                 its general partner

                                                 By:
                                                    -----------------------
                                                 Title:  First Vice President

ATTEST:                                  TENANT:

                                         TRUSERV CORPORATION,
                                         a Delaware corporation

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

[Corporate Seal]

                                       47

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