Document:

EXHIBIT 10.1
                                                                    ------------

WHEN RECORDED, RETURN TO:

Fennemore Craig
Suite 2600
3003 North Central Avenue
Phoenix, Arizona  85012
Attention:  William L. Kurtz

                                                  IDS LIFE LOAN NO. 694-001-637

                          AMENDMENT AND RESTATEMENT OF
                      DEED OF TRUST AND SECURITY AGREEMENT
                         AND FIXTURE FINANCING STATEMENT
                       WITH ASSIGNMENT OF LEASES AND RENTS
                       -----------------------------------

Grantor:
                     WESTCOAST HOSPITALITY, LIMITED PARTNERSHIP, A DELAWARE
                     LIMITED PARTNERSHIP WHICH ACQUIRED TITLE AS Cavanaughs
                     Hospitality Limited partnership

Grantee:
                     IDS Life Insurance Company, a Minnesota corporation

Legal Description:
                     1.        ALL OF LOTS 1, 2, 3 AND THE EAST 39 FEET OF LOT 4
                               IN BLOCK 13 OF RESURVEY AND ADDITION TO SPOKANE
                               FALLS, As PER PLAT THEREOF RECORDED IN VOLUME "A"
                               OF PLATS, PAGE 1;

                     2.        Complete legal description is on Exhibit A to
                               this document

REFERENCE NO.:
                     recorded May 13, 1996, Recording No. 9605130001, in the
                     office of the Spokane County Recorder

Assessor's Property Tax Parcel Account Number:
                     35183.0401

                                  MAY 21, 2001

<PAGE>

                 AMENDMENT AND RESTATEMENT OF DEED OF TRUST AND
                 ----------------------------------------------
             SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT WITH
             -------------------------------------------------------
                         ASSIGNMENT OF LEASES AND RENTS
                         ------------------------------

                     This AMENDMENT AND RESTATEMENT OF DEED OF TRUST AND
SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT WITH ASSIGNMENT OF LEASES AND
RENTS, made this 21st day of May, 2001, between WESTCOAST HOSPITALITY, LIMITED
PARTNERSHIP, a Delaware limited partnership which acquired title as Cavanaughs
Hospitality Limited Partnership ("Grantor"), whose post office address is c/o
WestCoast Hospitality Corporation, 201 West North River Drive, Suite 100,
Spokane, Washington 99201, and IDS LIFE INSURANCE COMPANY, a Minnesota
corporation ("Beneficiary"), whose address is c/o American Express Financial
Corporation, 25540 AXP Financial Center, Minneapolis, Minnesota 55474.

                              PRELIMINARY RECITALS:

                     A. WEST 201 NORTH RIVER DRIVE L.P., a Washington limited
partnership ("Original Grantor"), has executed and delivered that certain
Promissory Note dated May 7, 1996 (the "Initial Note"), made by Original
Grantor, as Borrower, to the order of Beneficiary, as Lender, in the face amount
of ELEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($11,500,000), which Initial
Note has been amended by that certain Amendment to Promissory Note dated
February 24, 1998 (the "Note Amendment"), by and between Original Grantor, as
Borrower, and Beneficiary, as Lender, (the Initial Note, as amended by the Note
Amendment, is herein referred to as the "Original Note").

                     B. The Original Note was secured by that certain Deed of
Trust and Security Agreement and Fixture Financing Statement with Assignment of
Leases and Rents dated May 7, 1996 (the "Initial Deed of Trust"), by Original
Grantor, as Grantor, to TRANSNATION TITLE INSURANCE COMPANY, an Arizona
corporation, as Trustee, for the use and benefit of Beneficiary, as Beneficiary,
recorded May 13, 1996, in Recording No. 9605130001, in the office of the Spokane
County Recorder (all recording information contained herein refers to recordings
in the office of the Spokane County Recorder), which Initial Deed of Trust was
modified by that certain Assumption and Modification Agreement dated February
24, 1998 (the "Assumption and Modification"), by and between Beneficiary, as
Lender, Original Grantor, as Borrower, and Grantor, as Transferee, recorded
February 24, 1998, in Recording No. 4190343, (the Initial Deed of Trust, as
modified by the Assumption and Modification, is herein referred to as the
"Original Deed of Trust"), on certain property located in Spokane County,
Washington and legally described in the Assumption and Modification (the
"Premises").

                     C. The Original Note was further secured by that certain
Assignment of Leases and Rents dated May 7, 1996 (the "Initial Assignment of
Leases"), by Original Grantor, as Assignor, to Beneficiary, as Lender, recorded
May 13, 1996, in Recording

                                      -a-
<PAGE>

No. 9605130005, which Initial Assignment of Leases was modified by the
Assumption and Modification, (the Initial Assignment of Leases, as modified by
the Assumption and Modification, is herein referred to as the "Original
Assignment of Leases").

                     D. The Premises were transferred from Original Grantor to
Grantor and Grantor assumed all obligations of Original Grantor under the terms
of the Original Note, the Original Deed of Trust, and the Original Assignment of
Leases pursuant to the Assumption and Modification accruing from and after
February 24, 1998.

                     E. The terms of the Original Note and the Original
Assignment of Leases, respectively, have been modified by an Amendment and
Restatement of Promissory Note, and by an Amendment and Restatement of
Assignment of Leases and Rents, each dated of even date herewith between Grantor
and Beneficiary.

                     F. The parties hereto desire to amend and fully restate the
terms of the Original Deed of Trust in its entirety.

                     NOW, THEREFORE, in consideration of the above recitals and
other good and valuable consideration, the receipt of which is hereby
acknowledged, Grantor and Beneficiary do hereby amend and fully restate the
terms of the Original Deed of Trust in its entirety as follows:

                                      -b-
<PAGE>

                      DEED OF TRUST AND SECURITY AGREEMENT
                         AND FIXTURE FINANCING STATEMENT
                       WITH ASSIGNMENT OF LEASES AND RENTS
                       -----------------------------------

             WESTCOAST HOSPITALITY, LIMITED PARTNERSHIP, A DELAWARE
                   LIMITED PARTNERSHIP WHICH ACQUIRED TITLE AS
              Cavanaughs Hospitality Limited partnership, GRANTOR,

                      TRANSNATION TITLE INSURANCE COMPANY,
                        AN ARIZONA CORPORATION, TRUSTEE,

                                       AND

                           IDS LIFE INSURANCE COMPANY,
                      A MINNESOTA CORPORATION, BENEFICIARY

                                  MAY 21, 2001

<PAGE>

                      Deed of Trust and Security Agreement
                         and Fixture Financing Statement
                       with Assignment of Leases and Rents

                                Table of Contents

Section                        Heading                                     Page
-------                        -------                                     ----

Parties and Recitals.........................................................1
Granting Clauses.............................................................1

Article 1                      General Representations and Warranties........4
---------                      --------------------------------------
1.1                            Representations and Warranties................4
1.2                            Continuing Obligation.........................7

Article 2                      Covenants and Agreements......................7
---------                      ------------------------
2.1                            Payment of Indebtedness;
                                  Observance of Covenants....................7
2.2                            Maintenance and Repairs.......................8
2.3                            Payment of Operating Costs;
                                  Liens; and Other Indebtedness..............8
2.4                            Payment of Impositions........................8
2.5                            Contest of Liens and Impositions..............9
2.6                            Protection of Security........................9
2.7                            Annual Statements.............................9
2.8                            Additional Assurances........................10
2.9                            Due on Sale or Mortgaging, Etc...............11
2.10                           Transfer Permitted...........................12

Article 3                      Insurance and Escrows........................14
---------                      ---------------------
3.1                            Insurance....................................14
3.2                            Escrows......................................16

Article 4                      Uniform Commercial Code......................17
---------                      -----------------------
4.1                            Security Agreement...........................17
4.2                            Fixture Filing...............................17
4.3                            Representations and Agreements...............17
4.4                            Maintenance of Property......................18

Article 5                      Application of Insurance and Awards..........19
---------                      -----------------------------------
5.1                            Damage or Destruction of the Premises........19
5.2                            Condemnation.................................19

                                      -i-
<PAGE>

5.3                            Disbursement of Insurance and
                                  Condemnation Proceeds.....................20

Article 6                      Leases and Rents.............................22
---------                      ----------------
6.1                            Grantor to Comply with Leases................22
6.2                            Beneficiary's Right to Perform
                                  under Leases..............................23
6.3                            Assignment of Leases and Rents...............23

Article 7                      Rights of Beneficiary........................25
---------                      ---------------------
7.1                            Right to Cure Event of Default...............25
7.2                            No Claim Against Beneficiary.................25
7.3                            Inspection...................................25
7.4                            Waivers; Releases; Resort to
                                  Other Security; Etc.......................25
7.5                            Rights Cumulative............................26
7.6                            Subsequent Agreements........................26
7.7                            Waiver of Appraisement, Homestead,
                                  Marshaling................................26
7.8                            Business Loan Representation.................26
7.9                            Dishonored Checks............................26

Article 8                      Events of Default and Remedies...............27
---------                      ------------------------------
8.1                            Events of Default............................27
8.2                            Beneficiary's Right to Accelerate............28
8.3                            Remedies of Beneficiary and Right
                                  to Foreclose..............................29
8.4                            Receiver.....................................29
8.5                            Rights Under Uniform Commercial
                                  Code......................................29
8.6                            Right to Discontinue Proceedings.............30
8.7                            Waivers......................................30

Article 9                      Hazardous Materials..........................30
---------                      -------------------
9.1                            Definitions .................................30
9.2                            Representations by Grantor...................30
9.3                            Covenants by Grantor.........................31
9.4                            Events of Default and Remedies...............31
9.5                            Indemnification..............................32
9.6                            Loss of Value ...............................32

Article 10                     Miscellaneous................................32
----------                     -------------
10.1                           Release of Deed of Trust.....................32
10.2                           Choice of Law................................33
10.3                           Successors and Assigns.......................33
10.4                           Partial Invalidity...........................33

                                      -ii-
<PAGE>

10.5                           Captions and Headings........................33
10.6                           Notices......................................33
10.7                           Building Use.................................34
10.8                           Management of the Premises...................34
10.9                           Amendment/Modification.......................34
10.10                          Substitution of the Trustee..................34
10.11                          Representations of Grantor...................34
10.12                          Beneficiary's Expense........................34
10.13                          Beneficiary's Right to Counsel...............35
10.14                          Other Representations and
                                  Warranties................................35
10.15                          Limitation of Interest.......................36
10.16                          Time of the Essence..........................36
10.17                          Survival of Representations,
                                  Warranties and Covenants..................36
10.18                          Waiver of Jury Trial.........................36
10.19                          Minimum Requirement..........................37
10.20                          Interest Rate Adjustment ....................37
10.21                          Oral Agreements or Commitments ..............37
10.22                          Powers of Trustee............................37
10.23                          Partial Non-Recourse to Trustor
                                 and the Partners of Trustor................38
10.24                          Annex Property and Declaration...............38
10.25                          Counterparts.................................38
10.26                          Dating of this Deed of Trust.................38

                                List of Exhibits
                                ----------------

A                              Legal Description

                                     -iii-
<PAGE>

                      DEED OF TRUST AND SECURITY AGREEMENT
                         AND FIXTURE FINANCING STATEMENT
                       WITH ASSIGNMENT OF LEASES AND RENTS
                       -----------------------------------

                     THIS DEED OF TRUST AND SECURITY AGREEMENT AND FIXTURE
FINANCING STATEMENT WITH ASSIGNMENT OF LEASES AND RENTS ("Deed of Trust") is
made and delivered as of the 21st day of May, 2001, by WESTCOAST HOSPITALITY,
LIMITED PARTNERSHIP, a Delaware limited partnership which acquired title as
Cavanaughs Hospitality Limited Partnership ("Grantor"), whose mailing address is
c/o WestCoast Hospitality Corporation, 201 West North River Drive, Suite 100,
Spokane, Washington 99201, to TRANSNATION TITLE INSURANCE COMPANY, an Arizona
corporation ("Trustee"), having a mailing address of 720 North Argonne Road,
Spokane, Washington 99212, for the use and benefit of IDS LIFE INSURANCE
COMPANY, a Minnesota corporation ("Beneficiary"), having a mailing address of
c/o American Express Financial Corporation, 25540 AXP Financial Center,
Minneapolis, Minnesota 55474.

                     WITNESSETH, that, in consideration of the "Indebtedness"
(as hereinafter defined) and the sums advanced to Grantor in hand paid by
Beneficiary, receipt whereof is hereby acknowledged, and other good and valuable
consideration, GRANTOR DOES HEREBY IRREVOCABLY MORTGAGE, GRANT, BARGAIN, SELL
AND CONVEY UNTO TRUSTEE, ITS SUCCESSORS AND ASSIGNS, IN TRUST FOREVER, WITH
POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, AND GRANTS TO BENEFICIARY A
SECURITY INTEREST IN all of Grantor's right, title and interest now owned or
hereafter acquired in and to the following properties (all of the following
being hereafter collectively referred to as the "Premises") to secure (a)
payment of the "Note" (as hereinafter defined); (b) due, prompt and complete
observance and performance of each and every obligation, covenant and agreement
of Grantor contained in the Note, this Deed of Trust and any other "Loan
Documents" (as hereinafter defined); and (c) all other sums of money secured
hereby as hereinafter provided:

                                GRANTING CLAUSE A
                                -----------------
                                  REAL PROPERTY
                                  -------------

                     All the tracts or parcels of real property lying and being
in the County of Spokane, State of Washington, all as more fully described in
Exhibit A attached hereto and made a part hereof, together with all the estates
and rights in and to the real property, water, mineral or oil rights and in and
to lands lying in streets, alleys and roads or gores of land adjoining the real
property and all buildings, structures, improvements, fixtures and annexations,
access rights, easements, rights of way or use, servitudes, licenses, tenements,
hereditaments and appurtenances now or hereafter belonging or pertaining to the
real property and all proceeds and products derived therefrom whether now owned
or hereafter acquired.

<PAGE>

                                GRANTING CLAUSE B
                                -----------------

                      IMPROVEMENTS, FIXTURES, EQUIPMENT AND
                      -------------------------------------
                                PERSONAL PROPERTY
                                -----------------

                     All buildings, equipment (including Grantor's interest in
any lease of such equipment), fixtures, improvements, building supplies and
materials and personal property now or hereafter attached to, located in, placed
in or necessary to the use, operation or maintenance of the improvements on the
Premises including, but without being limited to, all machinery, fittings,
fixtures, apparatus, equipment or articles used to supply heating, gas,
electricity, air conditioning, water, light, waste disposal, power,
refrigeration, ventilation, and fire and sprinkler protection, as well as all
elevators, escalators, overhead cranes, hoists and assists, and the like, and
all furnishings, supplies, draperies, maintenance and repair equipment, window
and structural cleaning rigs and equipment, floor coverings, appliances,
screens, storm windows, blinds, awnings, shrubbery and plants (it being
understood that the enumeration of specific articles of property shall in no way
be held to exclude items of property not specifically enumerated), as well as
renewals, replacements, proceeds, additions, accessories, increases, parts,
fittings, insurance payments, awards and substitutes thereof, together with all
interest of Grantor in any such items hereafter acquired, and all personal
property which by the terms of any lease shall become the property of Grantor at
the termination of such lease, all of which personal property mentioned herein
shall be deemed fixtures and accessory to the freehold and a part of the realty
and not severable in whole or in part without material injury to the Premises,
but excluding therefrom the removable personal property owned by tenants in the
Premises.

                                GRANTING CLAUSE C
                                -----------------

                            RENTS, LEASES AND PROFITS
                            -------------------------

                     All rents, issues, income, revenue, receipts, fees, and
profits now due or which may hereafter become due under or by virtue of and
together with all right, title and interest of Grantor in and to any lease,
license, sublease, contract or other kind of occupancy agreement, whether
written or verbal, for the use or occupancy of the Premises or any part thereof
together with all security therefor and all monies payable thereunder,
including, without limitation, tenant security deposits, and all books and
records which contain information pertaining to payments made thereunder and
security therefor, subject, however, to the conditional permission herein given
to Grantor to collect the rents, income and other normal income benefits arising
under any agreements. Beneficiary shall have the right, not as a limitation or
condition hereof but as a personal covenant available only to Beneficiary, at
any time and from time to time, to notify any lessee of the rights of
Beneficiary hereunder.

                     Together with all right, title and interest of Grantor in
and to any and all contracts for sale and purchase of all or any part of the
property described in Granting

                                      -2-
<PAGE>

Clauses (A), (B) and (C) hereof, and any down payments, earnest money deposits
or other sums paid or deposited in connection therewith.

                                GRANTING CLAUSE D
                                -----------------

                         JUDGMENTS, CONDEMNATION AWARDS,
                         -------------------------------
                               INSURANCE PROCEEDS,
                               -------------------
                                AND OTHER RIGHTS
                                ----------------

                     All awards, compensation or settlement proceeds made by any
governmental or other lawful authorities for the threatened or actual taking or
damaging by eminent domain of the whole or any part of the Premises, including
any awards for a temporary taking, change of grade of streets or taking of
access, together with all insurance proceeds resulting from a casualty to any
portion of the Premises; all rights and interests of Grantor against others,
including adjoining property owners, arising out of damage to the property
including damage due to environmental injury or release of hazardous substances.

                                GRANTING CLAUSE E
                                -----------------

                       LICENSES, PERMITS, EQUIPMENT LEASES
                       -----------------------------------
                             AND SERVICE AGREEMENTS
                             ----------------------

                     All right, title and interest of Grantor in and to any
licenses, permits, regulatory approvals, government authorizations, franchise
agreements and equipment or chattel leases, service contracts or agreements and
all proceeds therefrom, arising from, issued in connection with or in any way
related to the use, occupancy, operation, maintenance or security of the
Premises, together with all replacements, additions, substitutions and renewals
thereof, which may be assigned pursuant to agreement or law.

                                GRANTING CLAUSE F
                                -----------------

                                    PROCEEDS
                                    --------

                     All sale proceeds, refinancing proceeds or other proceeds,
including deposits and down payments derived from
or relating to the property described in Granting Clauses A through E above.

                     AND Grantor for Grantor, Grantor's heirs, administrators,
personal representatives, successors and assigns, covenants with Beneficiary,

its successors and assigns, that Grantor is lawfully seized of the Premises and
has good right to sell and convey the same; that the Premises are free from all
encumbrances except as may be set forth in the ALTA Loan Policy (the "Title
Policy") to be issued to Beneficiary and insuring the first lien position of
this Deed of Trust (the "Permitted Encumbrances"); that Beneficiary, its
successors and assigns, shall quietly enjoy and possess the Premises;

                                      -3-
<PAGE>

and that Grantor will WARRANT AND DEFEND the title to the same against all
lawful claims not specifically excepted in this Deed of Trust.

                     Grantor makes the foregoing grant to Trustee to hold the
Premises in trust for the benefit of Beneficiary and for the purposes and upon
the terms and conditions hereinafter set forth.

                     TO HAVE AND TO HOLD THE SAME, together with the possession
and right of possession of the Premises, unto
Beneficiary, its successors and assigns, forever.

                     PROVIDED NEVERTHELESS, that if Grantor, Grantor's heirs,
administrators, personal representatives, successors or assigns, shall pay to
Beneficiary, its successors or assigns, the sum of ELEVEN MILLION FIVE HUNDRED
THOUSAND DOLLARS ($11,500,000), according to the terms of that certain Amendment
and Restatement of Promissory Note in said principal amount (the "Note") of even
date herewith, executed by Grantor, as Borrower, and payable to Beneficiary, as
Lender, the terms and conditions of which are incorporated herein by reference
and made a part hereof, together with any extensions, modifications,
substitutions, replacements, consolidations or renewals thereof, due and payable
with interest thereon as provided therein, the balance of said principal sum
together with interest thereon being due and payable in any event on June 1,
2011, and shall repay to Beneficiary, its successors or assigns, at the times
demanded and with interest thereon at the same rate specified in the Note, all
sums advanced in protecting the lien of this Deed of Trust, in payment of taxes
on the Premises, in payment of insurance premiums covering improvements thereon,
in payment of principal and interest on prior liens, in payment of expenses and
attorneys' fees herein provided for and all sums advanced for any other purpose
authorized herein (the Note and all such sums, together with interest thereon,
being hereinafter collectively referred to as the "Indebtedness"), and shall
keep and perform all of the covenants and agreements herein contained, then this
Deed of Trust shall become null and void, and shall be released by Beneficiary,
at no out-of-pocket expense to Beneficiary, executing such documents as are
necessary to release this Deed of Trust, which documents shall be procured at
Grantor's expense.

                     AND IT IS FURTHER COVENANTED AND AGREED AS FOLLOWS:

                                    ARTICLE 1
                                    ---------

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

                     SECTION 1.1 REPRESENTATIONS AND WARRANTIES. Grantor
represents and warrants to Beneficiary, its successors and assigns, that, as of
the date hereof:

                               (a) Grantor is a limited partnership duly
                     organized, validly existing and in good standing under the
                     laws of the State of Delaware,

                                      -4-
<PAGE>

                     duly registered to transact business as a foreign limited
                     partnership in, and in good standing under the laws of, the
                     State of Washington, and has all requisite power and
                     authority to own and operate the Premises, to enter into
                     the Note, this Deed of Trust, that certain Amendment and
                     Restatement of Assignment of Leases and Rents of even date
                     herewith (the "Assignment of Leases"), by Grantor, as
                     Assignor, to Beneficiary, as Lender, and any other document
                     securing the Note, to execute all other documents relating
                     to the loan (the "Loan") evidenced by the Note, and to make
                     all representations and covenants contained in such
                     documentation. The Note, this Deed of Trust, the Assignment
                     of Leases, all UCC Financing Statements and all other
                     documents, instruments and agreements relating to any of
                     them or evidencing or securing the Loan are hereinafter
                     referred to as the "Loan Documents". Grantor has the power
                     and authority to borrow the monies and otherwise assume and
                     perform as contemplated hereunder and under all documents
                     relating to or executed in connection with the
                     Indebtedness, and is in compliance with all laws,
                     regulations, ordinances and orders of public authorities
                     applicable to it.

                               (b) Neither the borrowing of the monies nor the
                     execution and delivery of the Note, this Deed of Trust, the
                     Assignment of Leases or any other Loan Document nor the
                     performance of the provisions of the agreements therein
                     contained on the part of Grantor will contravene, violate
                     or constitute a default under the partnership agreement of
                     Grantor, or any agreement with the partners of Grantor or
                     any creditors of Grantor, or any law, ordinance,
                     governmental regulation, agreement or indenture to which
                     Grantor is a party or by which Grantor or Grantor's
                     properties are bound.

                               (c) There are no (i) bankruptcy proceedings
                     involving Grantor or any partner of Grantor and none is
                     contemplated; (ii) dissolution proceedings involving
                     Grantor or any partner of Grantor and none is contemplated;
                     (iii) unsatisfied judgments of record against Grantor or
                     any partner of Grantor; or (iv) tax liens filed against
                     Grantor or any partner of Grantor.

                               (d) The Note, this Deed of Trust, the Assignment
                     of Leases and the other Loan Documents have been duly
                     executed and delivered by Grantor and constitute the legal,
                     valid and binding obligations of Grantor, enforceable in
                     accordance with their terms.

                               (e) There are no judgments, suits, actions or
                     proceedings at law or in equity or by or before any
                     governmental instrumentality or agency now pending against
                     or, to the best of Grantor's knowledge, threatened against
                     Grantor or its properties, or both, nor has any judgment,
                     decree or order been issued against Grantor or its
                     properties, or both, which would

                                      -5-
<PAGE>

                     have a material adverse effect on the Premises or the
                     financial condition of Grantor or Grantor's properties.

                               (f) No consent or approval of any regulatory
                     authority having jurisdiction over Grantor is necessary or
                     required by law as a prerequisite to the execution,
                     delivery and performance of the terms of the Note, this
                     Deed of Trust, the Assignment of Leases or any other Loan
                     Document.

                               (g) Grantor is not, as of the date hereof, in
                     default in the payment or performance of any of Grantor's
                     obligations in connection with borrowed money or any other
                     major obligation.

                               (h) The Premises is free from any mechanics' or
                     materialmen's liens or claims. There has been no labor or
                     materials furnished to the Premises that has not been paid
                     for in full.

                               (i) Grantor has no notice, information or
                     knowledge of any change contemplated in any applicable law,
                     ordinance, regulation, or restriction, or any judicial,
                     administrative, governmental or quasi-governmental action,
                     or any action by adjacent land owners, or natural or
                     artificial condition existing upon the Premises which would
                     limit, restrict, or prevent the contemplated or intended
                     use and purpose of the Premises.

                               (j) There is no pending condemnation or similar
                     proceeding affecting the Premises, or any portion thereof,
                     nor, to the best knowledge of Grantor, is any such action
                     being presently contemplated.

                               (k) No part of the Premises is being used or will
                     be used principally, or at all, for agricultural purposes
                     or being used for a personal residence by Grantor or any
                     partner of Grantor.

                               (l) The Premises is undamaged by fire, windstorm,
                     or other casualty.

                               (m) The Premises complies with all zoning
                     ordinances, energy and environmental codes, building and
                     use restrictions and codes, and any requirements with
                     respect to licenses, permits and agreements necessary for
                     the lawful use and operation of the Premises.

                               (n) The heating, electrical, sanitary sewer
                     plumbing, storm sewer plumbing, potable water plumbing and
                     other building equipment, fixtures and fittings in the
                     existing improvements on the Premises are in good condition
                     and working order, are adequate in quantity and quality for
                     normal and usual use, and are fit for the purposes intended
                     and the use contemplated.

                                      -6-
<PAGE>

                               (o) The Premises is covered by one or more tax
                     parcels which pertain to the Premises only and not to any
                     property which is not subject to this Deed of Trust.

                               (p) The Premises is improved with an office
                     retail building and has frontage on and direct access for
                     ingress and egress to Main Avenue and Wall Street.

                               (q) Grantor has good and clear record and
                     marketable title in fee to such of the Premises as is real
                     property subject to no liens, encumbrances or restrictions
                     other than the Permitted Encumbrances.

                               (r) That certain Declaration of Easements dated
                     February 24, 1998 (the "Declaration"), by Grantor, as
                     Owner, recorded February 24, 1998, in Recording No.
                     4190344, in the office of the Spokane County Recorder, has
                     not been modified or amended and remains in full force and
                     effect as of the date hereof.

                     SECTION 1.2 CONTINUING OBLIGATION. Grantor further warrants
and represents that all statements made hereunder are true and correct and that
all financial statements, data and other information provided to Beneficiary by
Grantor relating to or provided in connection with this transaction has not and
does not contain any statement which, at the time and in the light of the
circumstances under which it was made, would be false or misleading with respect
to any material fact, or would omit any material fact necessary in order to make
any such statement contained therein not false or misleading in any material
respect, and since such statement, data or information was provided there has
been no material change thereto or to the condition of Grantor. Should Grantor
subsequently obtain knowledge that such representation was or is untrue, Grantor
shall immediately notify Beneficiary as to the untrue nature of said
representation and agrees, to the extent possible, to take action as may be
necessary to cause such representation to become true.

                                    ARTICLE 2
                                    ---------

                            COVENANTS AND AGREEMENTS
                            ------------------------

                     Grantor covenants and agrees for the benefit of
Beneficiary, its successors and assigns, as follows:

                     SECTION 2.1 PAYMENT OF INDEBTEDNESS; OBSERVANCE OF
COVENANTS. Grantor will duly and punctually pay each and every installment of
principal, premium (if any) and interest on the Note, all deposits required
herein, and all other Indebtedness secured hereby, as and when the same shall
become due, and shall duly and punctually perform and observe all of the
covenants, agreements and provisions contained herein, in the Note and any other
instrument given as security for

                                      -7-
<PAGE>

the payment of the Note as such instrument may be amended, modified, restated
and in effect from time to time.

                     SECTION 2.2 MAINTENANCE AND REPAIRS. Grantor agrees that it
will keep and maintain the Premises in good, first class condition, repair and
operating condition, free from any waste or misuse, and will comply with all
requirements of law, municipal ordinances and regulations, restrictions and
covenants affecting the Premises and their use, and will promptly repair or
restore any buildings, improvements or structures now or hereafter on the
Premises, which may become damaged or destroyed, to their condition prior to any
such damage or destruction. Grantor further agrees that without the prior
written consent of Beneficiary, it will not remove or expand any improvements on
the Premises, erect any new improvements or make any material alterations in any
improvements which will alter the basic structure, adversely affect the market
value or change the existing architectural character of the Premises, and agrees
that any other buildings, structures and improvements now or hereafter
constructed on or in the Premises or repairs made to the Premises shall be
completed in a good and workmanlike manner, in accordance with all applicable
governmental laws, regulations, requirements and permits and in accordance with
plans and specifications previously delivered to, and approved in advance and in
writing by, Beneficiary. Grantor agrees not to acquiesce in any rezoning
classification, modification or restriction affecting the Premises without the
prior written consent of Beneficiary. Grantor agrees that it will not abandon or
vacate the Premises. Grantor agrees that it will provide, improve, grade,
surface and thereafter maintain, clean, repair and adequately light all parking
areas within the Premises, together with any sidewalks, aisles, streets,
driveways and curb cuts and sufficient paved areas for ingress and right of way
to and from the adjacent public thoroughfare necessary or desirable for the use
thereof and maintain all landscaping thereon. Grantor shall obtain and at all
times keep in full force and effect such governmental approvals as may be
necessary to comply with all governmental requirements relating to Grantor and
the Premises.

                     SECTION 2.3 PAYMENT OF OPERATING COSTS; LIENS; AND OTHER
INDEBTEDNESS. Grantor agrees that it will pay all operating costs and expenses
of the Premises; keep the Premises free from mechanics' liens, materialmen's
liens, judgment liens and other liens, executions, attachments or levies
(hereinafter collectively referred to as "Liens"); and will pay when due all
permitted indebtedness which may be secured by a deed of trust, mortgage, lien
or charge on the Premises, whether prior to, subordinate to or of equal priority
with the lien hereof, and upon request will exhibit to Beneficiary satisfactory
evidence of such payment and discharge.

                     SECTION 2.4 PAYMENT OF IMPOSITIONS. Grantor will pay when
due and before any penalty or interest attaches because of delinquency in
payment, all taxes, installments of assessments, water charges, sewer charges,
and other fees, taxes, charges and assessments of every kind and nature
whatsoever assessed or charged against or constituting a lien on the Premises or
any interest therein or the Indebtedness (hereinafter collectively referred to
as the "Impositions"); and will upon demand furnish to Beneficiary proof of the
payment of any such Impositions. In the

                                      -8-
<PAGE>

event of a court decree or an enactment after the date hereof by any legislative
authority of any law imposing upon a beneficiary under a deed of trust the
payment of the whole or any part of the Impositions herein required to be paid
by Grantor, or changing in any way the laws relating to the taxation of deeds of
trust or debts secured by deeds of trust or a beneficiary's interest in
mortgaged premises, so as to impose such Imposition on Beneficiary or on the
interest of Beneficiary in the Premises, then, in any such event, Grantor shall
bear and pay the full amount of such Imposition, provided that if for any reason
payment by Grantor of any such Imposition would be unlawful, or if the payment
thereof would constitute usury or render the Indebtedness wholly or partially
usurious, Beneficiary, at its option, may declare the whole sum secured by this
Deed of Trust with interest thereon to be immediately due and payable, without
prepayment fee, or Beneficiary, at its option, may pay that amount or portion of
such Imposition as renders the Indebtedness unlawful or usurious, in which event
Grantor shall concurrently therewith pay the remaining lawful and non-usurious
portion or balance of said Imposition.

                     SECTION 2.5 CONTEST OF LIENS AND IMPOSITIONS. Grantor shall
not be required to pay, discharge or remove any Liens or Impositions so long as
Grantor shall in good faith contest the same or the validity thereof by
appropriate legal proceedings which shall operate to prevent the collection of
the Liens or Impositions so contested and the sale of the Premises, or any part
thereof, to satisfy the same, provided that Grantor shall, prior to any such
contest, have given such security as may be demanded by Beneficiary to ensure
such payments and prevent any sale or forfeiture of the Premises by reason of
such nonpayment. Any such contest shall be prosecuted in accordance with the
laws and rules pertaining to such contests and in all events with due diligence
and Grantor shall promptly after final determination thereof pay the amount of
any such Liens or Impositions so determined, together with all interest and
penalties, which may be payable in connection therewith. Notwithstanding the
provisions of this Section, Grantor shall (and if Grantor shall fail so to do,
Beneficiary, may but shall not be required to) pay any such Liens or Impositions
notwithstanding such contest if in the sole opinion of Beneficiary, the Premises
shall be in jeopardy or in danger of being forfeited or foreclosed.

                     SECTION 2.6 PROTECTION OF SECURITY. Grantor agrees to
promptly notify Beneficiary of and appear in and defend any suit, action or
proceeding that affects the value of the Premises, the Indebtedness or the
rights or interest of Trustee or Beneficiary hereunder. Beneficiary may elect to
appear in or defend any such action or proceeding and Grantor shall, and does
hereby agree to, indemnify and reimburse Beneficiary from any and all loss,
damage, expense or cost arising out of or incurred in connection with any such
suit, action or proceeding, including without limitation, costs of evidence of
title and attorneys' fees and paralegals' fees.

                     SECTION 2.7 ANNUAL STATEMENTS. Within ninety (90) days
after the end of each of its fiscal years during the term of this Deed of Trust,
Grantor, and any successor to the interest of Grantor in the Premises, will
furnish to Beneficiary annual financial statements of Grantor or such successor
and of any guarantor of the Loan and

                                      -9-
<PAGE>

annual certified operating statements of the Premises, which shall include all
relevant financial information showing at a minimum, but shall not be limited
to, gross income (itemized as to source), operating expenses (itemized),
depreciation charges, and net income before and after federal income taxes, and
such additional information as Beneficiary may from time to time request. The
financial statements of Grantor and the operating statements shall be certified
by the general partner of Grantor. The financial statements of any guarantor
shall be certified by each guarantor or by an independent public accountant in
good standing, and shall include a balance sheet and income statement. Both the
financial and operating statements shall be prepared at the expense of Grantor.
All of the above required statements shall be prepared in reasonable detail,
conform to generally accepted accounting principles, and be satisfactory in form
and content to Beneficiary. Grantor or any successor Grantor, if the Premises
are conveyed pursuant to a transfer permitted by Beneficiary, shall provide (a)
as to a corporate entity, such entity shall submit annual audited financial
statements of the corporation and any supplemental schedules provided
stockholders or officers; (b) as to an individual(s), such individual(s) shall
submit annual statements certified by each individual or by an independent
certified public accountant in good standing and shall include a balance sheet
and a profit and loss statement; and (c) as to a partnership, trust entity or
limited liability company, the partnership, trust or limited liability company
shall submit annual reports certified by an authorized partner, trustee or
member. Grantor covenants that it shall keep true and accurate records of the
operation of the Premises. In the event Grantor fails to furnish any of the
above statements or upon an "Event of Default" (as hereinafter defined),
Beneficiary may cause an audit to be made of the respective books and records at
the sole cost and expense of Grantor. Beneficiary also shall have the right to
examine at their place of safekeeping all books, accounts and records relating
to the operation of the Premises, to make copies or abstracts therefrom and to
discuss the affairs, finances or accounts with the partners of Grantor and
Grantor's accountants. Said examination shall be at Beneficiary's expense unless
an Event of Default has occurred or Grantor's statements are found to contain
significant discrepancies, in which case the examination shall be at Grantor's
expense. Grantor shall also furnish a rent roll in form acceptable to
Beneficiary of all tenants having leases on the Premises on an annual basis
along with the operating statements provided for above or at such other times as
requested by Beneficiary from time to time.

                     SECTION 2.8 ADDITIONAL ASSURANCES. Grantor agrees upon
request by Beneficiary to execute and deliver further instruments, financing
statements and/or continuation statements under the Uniform Commercial Code and
assurances and will do such further acts as may be necessary or proper to carry
out more effectively the purposes of this Deed of Trust and without limiting the
foregoing, to make subject to the lien hereof any property agreed to be
subjected hereto or covered by the granting clauses hereof, or intended so to
be. Grantor agrees to pay any recording fees, filing fees, stamp taxes or other
charges arising out of or incident to the filing, the issuance and delivery of
the Note, the recording of this Deed of Trust and the Assignment of Leases or
the delivery of such further assurances and instruments as may be required
pursuant to the terms of this Section.

                                      -10-
<PAGE>

                     SECTION 2.9 DUE ON SALE OR MORTGAGING, ETC. In the event
that without the written consent of Beneficiary being first obtained: (a)
Grantor, or any successor, sells, conveys, transfers, further mortgages, changes
the form of ownership, or encumbers or disposes of the Premises, or any part
thereof, or any interest therein, or agrees so to do; or (b) any shares of
privately-held corporate stock or ownership interest in Grantor, or any
successor, are sold, conveyed, transferred, pledged or encumbered or there is an
agreement so to do; or (c) any partnership, trust, member or privately-held
corporate ownership interest in Grantor is sold, transferred, conveyed, pledged
or encumbered or there is an agreement so to do; or (d) any partnership, member
or privately-held corporate ownership interest in any general partner of Grantor
is sold, conveyed, transferred, pledged or encumbered or there is an agreement
so to do; whether any such event described in (a), (b), (c) or (d) above is
voluntary, involuntary or by operation of law, then at Beneficiary's sole
option, Beneficiary may declare the Indebtedness immediately due and payable in
full and call for payment of the same at once, together with the prepayment fee
then in effect under the terms of the Note. In the event Grantor shall request
the consent of Beneficiary in accordance with this Section 2.9, Grantor shall
deliver a written request to Beneficiary together with (i) a review fee of Five
Hundred and No/100 Dollars ($500.00), and (ii) complete information regarding
such conveyance or encumbrance (including complete information concerning the
person or entity to acquire the interest to be conveyed). Beneficiary shall be
allowed thirty (30) days after receipt of all requested information for
evaluation of such request. In the event that such request is not approved
within such thirty (30) day period, it shall be deemed not approved. If such a
conveyance or encumbrance is approved, Grantor shall pay to Beneficiary a
processing fee in the amount of Three Thousand and No/100 Dollars ($3,000.00) to
compensate Beneficiary for processing the request. Approval may be conditioned
upon payment of a one percent (1%) transfer fee and such modifications of the
Loan terms, interest rate and maturity date as determined by Beneficiary in its
sole discretion. Consent as to any one transaction shall not be deemed to be a
waiver of the right to require consent to future or successive transactions.

                     Death of Grantor, or if Grantor is not an individual, (i)
the dissolution of Grantor, or (ii) the death of an individual general partner,
member, beneficiary or stockholder of Grantor shall constitute a transfer of
such interest. In the event of death of any individual Grantor, or if Grantor is
not an individual, (y) the dissolution of Grantor, or (z) the death of an
individual general partner, member, beneficiary or stockholder of Grantor,
Beneficiary shall be provided with written notice thereof within thirty (30)
days of the occurrence thereof and Grantor shall within ninety (90) days of the
occurrence thereof provide (A) a replacement Grantor, if Grantor is an
individual, or (B) if Grantor is not an individual, (1) a replacement Grantor in
the event of the dissolution of Grantor, or (2) a replacement general partner,
member, beneficiary or stockholder of Grantor in the event of the death of any
such person, such replacement to be in any event acceptable to Beneficiary. If
such replacement is acceptable to Beneficiary, such transfer shall be permitted
without a transfer fee or change in the Loan terms.

                                      -11-
<PAGE>

                     Notwithstanding the above restrictions, and provided no
Event of Default has occurred and remains uncured, Beneficiary's consent will
not be required, and there will be no transfer fee required or change in the
Loan terms, for (a) the dissolution of Grantor if WESTCOAST HOSPITALITY
CORPORATION, a Washington corporation formerly known as CAVANAUGHS HOSPITALITY
CORPORATION ("Guarantor"), which is the sole general partner of Grantor, becomes
the owner of the Premises following such dissolution; or (b) the transfer of any
partnership interest in Grantor to Guarantor; provided that (1) Beneficiary is
provided with written notice of any such occurrence specified in (a) or (b)
above and copies of the documentation with respect to any such occurrence, (2)
if title to the Premises becomes vested in Guarantor, (y) Beneficiary shall be
entitled to receive the review fee and the processing fee specified above, and
(z) the Title Policy shall be endorsed, at Grantor's expense, to reflect such
vesting of title, and (3) Beneficiary is put to no expense with respect thereto.

                     Beneficiary acknowledges that Guarantor is a publicly
traded company and its shares are freely transferable without Beneficiary's
consent so long as it remains a publicly traded company. In the event Guarantor
should cease to be a publicly traded company, Beneficiary's consent will be
required for the transfer, after taking into account any prior transfers
pursuant to this sentence, of more than forty-nine percent (49%) of the
ownership interest in Guarantor to anyone other than existing controlling
owners.

                     SECTION 2.10 TRANSFER PERMITTED. Notwithstanding the above
restrictions in Section 2.9 hereof, and provided no Event of Default, nor event
which with the passage of time or giving of notice or both would become an Event
of Default, exists, upon written request, Beneficiary will approve one and only
one transfer of the Premises at any time and will not require modification of
the interest rate or maturity date stated in the Note, provided:

                     (a) The transfer shall be to a transferee determined by
           Beneficiary, in its sole judgment and discretion, to be a reputable
           and competent entity that:

                               (i) has experience in the business of owning
                     commercial real estate of similar type, size and quality to
                     the Premises and has a favorable reputation with respect to
                     such business; and

                               (ii) has experience or has retained management
                     with experience in the management of similar properties;
                     and

                               (iii) has the necessary financial ability to
                     perform and will assume all of Grantor's obligations under
                     the Loan Documents, including, without limitation, that
                     certain Hazardous Materials Indemnity Agreement of even
                     date herewith, from Grantor and Guarantor, as Indemnitors,
                     to Beneficiary, as Lender.

                     (b) For the twelve (12) month period immediately preceding
           the date of the proposed transfer, the annualized "Net Income" (as
           hereinafter defined) prior

                                      -12-
<PAGE>

           to the payment of debt service is at least one hundred fifteen
           percent (115%) of the annual debt service on the Note and on all
           subordinate financing secured by the Premises, or any part thereof.

                     (c) The proposed purchaser must assume and agree to perform
           all obligations under the Loan Documents pursuant to an assumption
           agreement acceptable to Beneficiary. Grantor and all existing
           guarantors shall remain liable for payment of the Note and
           performance of the other terms and conditions of the Loan Documents,
           including any separate guarantees or indemnity agreements made in
           favor of Beneficiary, if required by Beneficiary.

                     (d) In addition to the processing fee and/or review fee,
           Beneficiary shall receive a transfer fee equal to one percent (1%) of
           the outstanding principal balance of the Note. If the request is
           approved, the Five Hundred Dollar ($500) review fee shall be credited
           to the processing fee.

                     (e) The purchaser must acknowledge that future transfers
           and encumbrances will be subject to Beneficiary's approval, which
           may, at Beneficiary's sole discretion, be withheld or be conditioned
           upon payment of a fee and/or modification of the terms of the Note
           and/or other Loan Documents.

                     (f) Notice of such transfer together with such
           documentation regarding the transfer and the assuming person or
           entity as Beneficiary shall request shall be given to Beneficiary at
           least thirty (30) days prior to such transfer.

                     (g) Transfer of the Premises may only be as a whole and not
           in part.

                     (h) Beneficiary shall receive an appraisal of the Premises
           (exclusive of chattels), satisfactory to Beneficiary, which shows
           sufficient value so that the total of all loans secured by the
           Premises does not exceed seventy-five percent (75%) of such appraised
           value. If the appraisal shows that the total of all liens against the
           Premises exceeds seventy-five percent (75%) of the value of the
           Premises, Beneficiary may require, at Beneficiary's option, payment
           on the Note or payment of other liens on the Premises so that such
           total will not exceed seventy-five percent (75%).

                     (i) Grantor shall pay all costs and expenses in connection
           with such transfer, including Beneficiary's attorneys' fees, in
           reviewing and processing such consent to assumption and/or transfer,
           and the fees of any broker.

                     (j) Grantor shall execute, deliver and record (when
           necessary) such amendments, supplements, corrections and replacements
           in regard to the Loan Documents and shall deliver endorsements to the
           Title Policy as Beneficiary may require, including an endorsement to
           the Title Policy insuring the first lien position of this Deed of
           Trust, such endorsement to insure that transferee is the owner of

                                      -13-
<PAGE>

           the Premises, subject to no liens or encumbrances other than those
           shown in the Title Policy and current taxes not yet due and payable.

                     For the purposes of this Deed of Trust, the term "Net
Income" for any period shall mean the aggregate rent,
receipts and other revenues which shall have accrued to the benefit of the owner
of the Premises during such period from bona fide arms-length tenants in actual
possession of space in the Premises (based upon the then current certified rent
roll), less the sum of all operating expenses, maintenance costs, management
fees, insurance premiums, real estate taxes and assessments, and other costs,
expenses and expenditures (including required capital expenditures) attributable
to ownership of the Premises (other than payments of principal and interest on
the Indebtedness or on any secondary financing on the Premises, depreciation or
other non-cash charges and income taxes) accrued during such period. Beneficiary
shall have the right to require delivery of evidence it deems necessary to
establish operating income from the Premises.

                                    ARTICLE 3
                                    ---------

                              INSURANCE AND ESCROWS
                              ---------------------

                     SECTION 3.1 INSURANCE. During the term of this Deed of
Trust, Grantor shall obtain and keep in full force and effect at its sole cost
and expense the following insurance:

                               (a) Insurance against loss by fire, lightning and
                     risk customarily covered by standard extended coverage
                     endorsement, including the cost of debris removal, together
                     with a vandalism and malicious mischief endorsement,
                     sprinkler leakage endorsement, such perils endorsements as
                     determined by Beneficiary, all in the amount of not less
                     than full replacement cost without deduction for
                     depreciation of the improvements (as shown in the appraisal
                     submitted to and approved by Beneficiary), on the Premises,
                     and together with an agreed-amount endorsement, a
                     replacement cost endorsement and a waiver of subrogation
                     endorsement;

                               (b) Broad Form Boiler and Machinery Insurance on
                     all equipment and pressure fired vehicles or apparatus
                     located on the Premises, and providing for full repair and
                     replacement cost coverage;

                               (c) Flood Insurance in the maximum amount
                     available at any time during the term of this Deed of Trust
                     that the Premises are designated as lying within a flood
                     plain as defined by the Federal Insurance Administration;

                               (d) Loss of Rents and/or Business Interruption
                     Insurance covering risk of loss due to the occurrence of
                     hazards insured against under the policies required in
                     subsections (a), (b) and (c) hereof in an

                                      -14-
<PAGE>

                     amount equal to: (i) rental for a twelve (12) month period,
                     plus (ii) real estate taxes and assessments, insurance
                     premiums and other expenses required to be paid by the
                     tenants under each lease of the Premises for such twelve
                     (12) month period;

                               (e) Comprehensive General Public Liability
                     Insurance covering the legal liability of Grantor against
                     claims for bodily injury, death or property damage
                     occurring on, in or about the Premises in such minimal
                     amounts and with such minimal limits as Beneficiary may
                     reasonably require;

                               (f) Builder's Risk Insurance and Workers'
                     Compensation Insurance during the making of any alterations
                     or improvements to the Premises; and

                               (g) Such other forms of insurance as Beneficiary
                     may require or as may be required by law.

In addition, Beneficiary is to be furnished with such engineering data as it may
require regarding the risk of earthquake or sinkhole damage to the Premises. If
Beneficiary shall determine in its sole opinion that there is a material
earthquake or sinkhole risk, or if insurance against earthquake or sinkhole is
required by law, Grantor will provide such earthquake or sinkhole insurance.
Such insurance policies shall be written on forms and with insurance companies
which are satisfactory to Beneficiary, shall name as the insured parties Grantor
and Beneficiary, as their interests may appear, shall be in amounts sufficient
to prevent Grantor from becoming a co-insurer of any loss thereunder, and shall
bear a satisfactory mortgagee clause in favor of Beneficiary with loss proceeds
under any such policies to be made payable to Beneficiary. All required policies
of insurance together with evidence of the payment of current premiums therefor
shall be delivered to Beneficiary and shall provide that Beneficiary shall
receive at least thirty (30) days' advance written notice prior to cancellation,
amendment or termination of any such policy of insurance. Grantor shall, within
ten (10) days prior to the expiration of any such policy, deliver original
policies evidencing the renewal of such insurance together with evidence of the
payment of current premiums therefor. Grantor shall at its expense furnish on
renewal of insurance policies or upon request of Beneficiary evidence of the
replacement value of the improvements on the Premises in form satisfactory to
Beneficiary. Insurance coverage must at all times be maintained in proper
relationship to such replacement value and must always provide for agreed amount
coverage. If the Premises are included within a blanket policy, Beneficiary will
accept a certified or conformed copy of the blanket policy together with an
original certificate naming Beneficiary as mortgagee.

In the event of foreclosure of this Deed of Trust or acquisition of the Premises
by Beneficiary, all such policies and any proceeds payable therefrom, whether
payable before or after a foreclosure sale, or during the period of redemption,
if any, shall become the absolute property of Beneficiary to be utilized at its
discretion. In the event

                                      -15-
<PAGE>

of foreclosure or the failure to obtain and keep any required insurance, Grantor
empowers Beneficiary to effect insurance upon the Premises at Grantor's expense
and for the benefit of Beneficiary in the amounts and types aforesaid for a
period of time covering the time lapse of insurance including lapse during
redemption from foreclosure sale, and if necessary, to cancel any or all
existing insurance policies. Grantor agrees to furnish Beneficiary copies of all
inspection reports and insurance recommendations received by Grantor from any
insurer. Beneficiary makes no representations that the above insurance
requirements are adequate protection for a prudent owner.

                     SECTION 3.2 ESCROWS. Grantor shall deposit with
Beneficiary, or at Beneficiary's request, with its servicing agent, on the first
day of each and every month, commencing with the date the first payment of
interest and/or principal and interest shall become due on the Note, a deposit
to pay the Impositions and insurance premiums (hereinafter collectively referred
to as the "Charges") in an amount equal to:

                               (a) One-twelfth (1/12th) of the annual
                     Impositions next to become due upon the Premises; provided
                     that, with the first such deposit, there shall be deposited
                     in addition an amount as estimated by Beneficiary which,
                     when added to monthly deposits to be made thereafter as
                     provided for herein, shall assure to Beneficiary's
                     satisfaction that there will be sufficient funds on deposit
                     to pay the Impositions as they come due; plus

                               (b) One-twelfth (1/12th) of the annual premiums
                     on each policy of insurance required to be maintained
                     hereunder; provided that with the first such deposit there
                     shall be deposited, in addition, an amount equal to
                     one-twelfth (1/12th) of such annual insurance premiums
                     multiplied by the number of months elapsed between the date
                     premiums on each policy were last paid to and including the
                     date of deposit;

provided that the amount of such deposits shall be based upon Beneficiary's
estimate as to the amount of Impositions and premiums of insurance next to be
payable and may require that the full amount of such payment will be available
to Beneficiary at least one month in advance of the due date. Beneficiary will,
upon timely presentation to Beneficiary by Grantor of the bills therefor, pay
the Charges from such deposits. Grantor agrees to cooperate and assist in
obtaining of tax bills when requested by Beneficiary. In the event the deposits
on hand shall not be sufficient to pay all of the estimated Charges when the
same shall become due from time to time, or the prior deposits shall be less
than the currently estimated monthly amounts, then Grantor shall immediately pay
to Beneficiary on demand any amount necessary to make up the deficiency. The
excess of any such deposits shall be credited towards subsequent Charges.

                     If an Event of Default shall occur under the terms of this
Deed of rust, Beneficiary may, at its option, without being required so to do,
apply any deposits on hand to the payment of Charges whether then due or not or
to the Indebtedness, in such order and manner as Beneficiary may elect. When the
Indebtedness has been

                                      -16-
<PAGE>

fully paid, any remaining deposits shall be returned to Grantor as its interest
may appear. All deposits are hereby pledged as additional security for the
Indebtedness, shall be held for the purposes for which made as herein provided,
may be held by Beneficiary or its servicing agent and may be commingled with
other funds of Beneficiary or its servicing agent, shall be held without any
allowance of interest thereon and without fiduciary responsibility on the part
of Beneficiary or its agents and shall not be subject to the direction or
control of Grantor. Neither Beneficiary nor its servicing agent shall be liable
for any act or omission made or taken in good faith. In making any payments,
Beneficiary or its servicing agent may rely on any statement, bill or estimate
procured from or issued by the payee without inquiry into the validity or
accuracy of the same. If the taxes shown in the tax statement shall be levied on
property more extensive than the Premises, Beneficiary shall be under no duty to
seek a tax division or apportionment of the tax bill, any payment of taxes based
on a larger parcel shall be paid by Grantor, the deposits to be made hereunder
shall be based on the larger tax parcel and Grantor shall expeditiously cause a
tax subdivision to be made.

                                    ARTICLE 4
                                    ---------

                             UNIFORM COMMERCIAL CODE
                             -----------------------

                     SECTION 4.1 SECURITY AGREEMENT. This Deed of Trust shall
constitute a security agreement as defined in the Uniform Commercial Code in
effect in the State of Washington, as amended from time to time (hereinafter
referred to as the "Code"), and Grantor hereby grants to Beneficiary a security
interest within the meaning of the Code in favor of Beneficiary on the
Improvements, Fixtures, Equipment and Personal Property, the Rents, Leases and
Profits, the Judgments, Condemnation Awards and Insurance Proceeds and other
rights, the Licenses, Permits, Equipment Leases and Service Agreements, and the
Proceeds described in Granting Clauses B, C, D, E and F of this Deed of Trust
(hereinafter referred to as the "Collateral").

                     SECTION 4.2 FIXTURE FILING. As to those items of Collateral
described in this Deed of Trust that are, or are to become fixtures related to
the real estate mortgaged herein, it is intended as to those items that THIS
DEED OF TRUST SHALL BE EFFECTIVE AS A FINANCING STATEMENT FILED AS A FIXTURE
FILING from the date of its filing in the real estate records of the County
where the Premises are situated. The name of the record owner of said real
estate is Grantor and the address of Grantor is set forth in page one of this
Deed of Trust. Information concerning the security interest created by this
document may be obtained from Beneficiary, as secured party, at its address as
set forth in page one of this Deed of Trust. The address of Grantor, as debtor,
is as set forth in page one to this Deed of Trust. This document covers goods
which are or are to become fixtures.

                     SECTION 4.3 REPRESENTATIONS AND AGREEMENTS. Grantor
represents and agrees: (a) Grantor is and will be the true and lawful owner of
the Collateral, subject to no liens, charges, security interests and
encumbrances other than the lien hereof and the Permitted Encumbrances; (b) the
Collateral is to be used by

                                      -17-
<PAGE>

Grantor solely for business purposes, being installed upon the Premises for
Grantor's own use or as the equipment and furnishing leased or furnished by
Grantor, as landlord, to tenants of the Premises; (c) the Collateral will not be
removed from the Premises without the consent of Beneficiary except in
accordance with Section 4.4 hereof; (d) unless stated otherwise in this Deed of
Trust, the only persons having any interest in the Collateral are Grantor and
Beneficiary and no financing statement covering any such property and any
proceeds thereof is on file in any public office except pursuant hereto; (e) the
remedies of Beneficiary hereunder are cumulative and separate, and the exercise
of any one or more of the remedies provided for herein or under the Code shall
not be construed as a waiver of any of the other rights of Beneficiary including
having such Collateral deemed part of the realty upon any foreclosure thereof;
(f) if notice to any party of the intended disposition of the Collateral is
required by law in a particular instance, such notice shall be deemed
commercially reasonable if given at least ten (10) days prior to such intended
disposition and may be given by advertisement in a newspaper accepted for legal
publications either separately or as part of a notice given to foreclose the
real property or may be given by private notice if such parties are known to
Beneficiary; (g) Grantor will from time to time provide Beneficiary on request
with itemizations of all Collateral; (h) the filing of a financing statement
pursuant to the Code shall never impair the stated intention of this Deed of
Trust that all Improvements, Fixtures, Equipment and Personal Property described
in Granting Clause B hereof are, and at all times and for all purposes and in
all proceedings both legal or equitable shall be regarded as, part of the real
property mortgaged hereunder irrespective of whether such item is physically
attached to the real property or any such item is referred to or reflected in a
financing statement; (i) Grantor will on demand deliver all financing statements
and/or continuations that may from time to time be required by Beneficiary to
establish and perfect the priority of Beneficiary's security interest in such
Collateral and all costs, including recording and filing fees, shall be paid by
Grantor; (j) Grantor shall give advance written notice of any proposed change in
Grantor's name, address, identity or structure and will execute and deliver to
Beneficiary prior to or concurrently with such change all additional financing
statements that Beneficiary may require to establish and perfect the priority of
Beneficiary's security interest; and (k) Grantor shall renew and pay all
expenses of renewing the financing statement covering the Collateral in the
event the security interest in such Collateral will expire by reason of
statutory law prior to the end of the term of this Deed of Trust.

                     SECTION 4.4 MAINTENANCE OF PROPERTY. Subject to the
provisions of this Section, in any instance where Grantor in its discretion
determines that any item subject to a security interest under this Deed of Trust
has become inadequate, obsolete, worn out, unsuitable, undesirable or
unnecessary for the operation of the Premises, Grantor may, at its expense,
remove and dispose of it and substitute and install other items not necessarily
having the same function, provided, that such removal and substitution shall not
impair the operating utility and unity of the Premises. All substituted items
shall become a part of the Premises and subject to the lien of this Deed of
Trust. Any amounts received or allowed Grantor upon the sale or other
disposition of the removed items of property shall be applied only against the
cost of acquisition and installation of the substituted items. Nothing herein
contained shall

                                      -18-
<PAGE>

be construed to prevent any tenant or subtenant from removing from the Premises
trade fixtures, furniture and equipment installed by it and removable by such
tenant under the terms of its lease, on the condition, however, that all damages
to the Premises resulting from or caused by the removal thereof be repaired at
the sole cost of Grantor if such tenant shall fail to so repair.

                                    ARTICLE 5
                                    ---------

                       APPLICATION OF INSURANCE AND AWARDS
                       -----------------------------------

                     SECTION 5.1 DAMAGE OR DESTRUCTION OF THE PREMISES. Grantor
will give Beneficiary prompt notice of damage to or destruction of the Premises,
and in case of loss covered by policies of insurance, Beneficiary (whether
before or after foreclosure sale) is hereby authorized at its option to settle
and adjust any claim arising out of such policies and collect and receipt for
the proceeds payable therefrom; provided, if Grantor is not in default
hereunder, Grantor may itself adjust and collect for any losses arising out of a
single occurrence aggregating not in excess of One Hundred Thousand and No/100
Dollars ($100,000.00). Any expense incurred by Beneficiary in the adjustment and
collection of insurance proceeds (including the cost of any independent
appraisal of the loss or damage on behalf of Beneficiary) shall be reimbursed to
Beneficiary first out of any such insurance proceeds. The insurance proceeds or
any part thereof shall be applied to reduction of the Indebtedness, whether due
or not, or to the restoration or repair of the Premises, the choice of
application to be solely at the discretion of Beneficiary. In the event
Beneficiary does not make insurance proceeds available for restoration and
applies the insurance proceeds to payment of the Indebtedness, no prepayment fee
shall be due on the insurance proceeds so applied and the monthly installment
payments of principal and interest set forth in the Note shall be adjusted to an
amount sufficient to reamortize the then unpaid principal balance of the Note
together with interest in equal monthly installment payments over the then
remaining portion of the original amortization period. In the event Beneficiary
does not make insurance proceeds available for reconstruction of the Premises,
Grantor shall have the right to prepay the Loan in full without a prepayment fee
in accordance with the provisions of the Note.

                     SECTION 5.2 CONDEMNATION. Grantor will give Beneficiary
prompt notice of any action, actual or threatened, in condemnation or eminent
domain, and hereby assigns, transfers, and sets over to Beneficiary the entire
proceeds of any award or claim for damages for all or any part of the Premises
taken or damaged under the power of eminent domain or condemnation (herein
referred to as "Condemnation"), Beneficiary being hereby authorized to intervene
in any such action and to collect and receive from the condemning authorities
and give proper receipts and acquittances for such proceeds. Grantor will not
enter into any agreements with the condemning authority permitting or consenting
to the taking of the Premises unless prior written consent of Beneficiary is
obtained. Any expenses incurred by Beneficiary in intervening in such action or
collecting such Condemnation proceeds (including the cost of any independent
appraisal) shall be reimbursed to Beneficiary first out of Condemnation

                                      -19-
<PAGE>

proceeds prior to any other payments or disbursements. Grantor shall deliver all
Condemnation proceeds to Beneficiary within five (5) days of receipt thereof and
shall at Beneficiary's request direct the condemning authority to deliver the
Condemnation proceeds to Beneficiary. Condemnation proceeds or any part thereof
shall be applied upon or in reduction of the Indebtedness, whether due or not,
or to the restoration or repair of the Premises, the choice of application to be
solely at the discretion of Beneficiary. In the event Beneficiary does not make
Condemnation proceeds available for restoration and applies Condemnation
proceeds to payment of debt, no prepayment fee shall be due on Condemnation
proceeds so applied and the monthly installment payments of principal and
interest set forth in the Note shall be adjusted to an amount sufficient to
reamortize the then unpaid principal balance of the Note together with interest
in equal monthly installment payments over the then remaining portion of the
original amortization period.

                     SECTION 5.3 DISBURSEMENT OF INSURANCE AND CONDEMNATION
PROCEEDS. Should any insurance or Condemnation proceeds be applied to the
restoration or repair of the Premises in accordance with this Article 5, the
restoration or repair shall be done under the supervision of an architect
acceptable to Beneficiary (or, at Beneficiary's discretion, an engineer
acceptable to Beneficiary) and pursuant to site and building plans and
specifications approved by Beneficiary. The proceeds from insurance or
condemnation, after payment of costs and expenses of collection ("Net
Proceeds"), shall be held by Beneficiary for such purposes and will from time to
time be disbursed by Beneficiary to defray the costs of such restoration or
repair under such safeguards and controls as Beneficiary may require and in
accordance with standard construction loan procedures. Net Proceeds may at the
option of Beneficiary be disbursed through a title insurance company selected by
Beneficiary and at the sole cost of Grantor. Prior to making Net Proceeds
available for the payment of costs of repair or restoration of the improvements
upon the Premises, Beneficiary shall be entitled to receive the following:

                               (a) Evidence that no Event of Default exists
                     under any of the terms, covenants and conditions of this
                     Deed of Trust, the Note, or any other Loan Documents.

                               (b) Evidence that all leasing requirements for
                     the Premises as established by Beneficiary have been met.

                               (c) Satisfactory proof that all improvements have
                     been fully restored, or that the expenditure of Net
                     Proceeds will be sufficient to pay the cost of repair,
                     restoration or rebuilding of the improvements located on
                     the Premises, free and clear of all liens, except the lien
                     of this Deed of Trust. In the event Net Proceeds shall be
                     insufficient to pay the cost for such repair, restoration
                     or rebuilding, Grantor shall deposit with Beneficiary funds
                     equaling such deficiency, which, together with the Net
                     Proceeds, shall be sufficient to pay for such repair,
                     restoration and rebuilding of the Premises.

                                      -20-
<PAGE>

                               (d) A statement of Grantor's architect,
                     certifying the extent of the repair and restoration
                     completed to the date thereof, and that such repair,
                     restoration and rebuilding have been performed to date in
                     conformity with the plans and specifications that have been
                     approved by Beneficiary, together with evidence
                     satisfactory to Beneficiary of payment for labor and
                     materials furnished to the Premises, and total or partial
                     lien waivers substantiating such payments.

                               (e) A waiver of subrogation from any insurer to
                     the effect that such insurer has no liability against
                     Grantor or the then owner or other insured under the policy
                     of insurance in question.

                               (f) Evidence that zoning, building and other
                     necessary permits and approvals have been obtained.

                               (g) An opinion of Grantor's counsel in form and
                     content acceptable to Beneficiary that such repair and
                     reconstruction will not violate any authority or agreement
                     to which Grantor may be subject.

                               (h) Satisfactory evidence is delivered to
                     Beneficiary that the improvements can be rebuilt to
                     substantially to the same condition as when originally
                     financed and can with restoration and repair continue to be
                     operated for the purposes utilized prior to such damage.

                               (i) Evidence that the then current loan balance
                     shall not exceed seventy-five percent (75%) of the
                     appraised value of the Premises after such restoration or
                     repair.

                               (j) Tenants of the Premises as designated by
                     Beneficiary shall certify to Beneficiary their intention to
                     continue to occupy the Premises without any abatement or
                     adjustment of rental payments (other than temporary
                     abatements during the period of restoration and repair).

                               (k) Such performance and payment bonds, and such
                     insurance, in such amounts, issued by such company or
                     companies and in such forms and substance, as may be
                     required by Beneficiary.

                               (l) Evidence of fulfillment of all other
                     requirements which Beneficiary may make in connection with
                     repair of the improvements on the Premises.

                               (m) Evidence that the appraised value of the
                     Premises after such restoration or repair shall not be less
                     than its appraised value as of the date hereof.

                                      -21-
<PAGE>

In the event Grantor shall fail to restore, repair or rebuild the improvements
upon the Premises within a reasonable time, then such failure shall constitute
an Event of Default hereunder and Beneficiary, at its option and upon not less
than thirty (30) days written notice to Grantor, may in addition to its remedies
contained in Article VII hereof, (i) restore, repair or rebuild the improvements
for or on behalf of Grantor, and for such purpose, may perform all necessary or
appropriate acts to accomplish such restoration, repair or rebuilding, or (ii)
apply all or any part of the Net Proceeds on account of the Indebtedness whether
then due or not, without application of a prepayment premium. In the event
insurance proceeds or an eminent domain award shall exceed the amount necessary
to complete the repair, restoration or the rebuilding of the improvements upon
the Premises, such excess may, at Beneficiary's option, (y) be applied on
account of the Indebtedness, in which event no prepayment fee shall be due on
the proceeds so applied and the monthly installment payments of principal and
interest set forth in the Note shall be adjusted to an amount sufficient to
reamortize the then unpaid principal balance of the Note together with interest
in equal monthly installment payments over the then remaining portion of the
original amortization period, or (z) be returned to Grantor.

                                    ARTICLE 6
                                    ---------

                                LEASES AND RENTS
                                ----------------

                     SECTION 6.1 GRANTOR TO COMPLY WITH LEASES. Grantor will, at
its own cost and expense, perform, comply with and discharge all of the
obligations of Grantor under leases of all or any part of the Premises and use
its best efforts to enforce or secure the performance of each obligation and
undertaking of the respective tenants under any such leases and will appear in
and defend, at its own cost and expense, any action or proceeding arising out of
or in any manner connected with Grantor's interest in any leases pertaining to
the Premises. Grantor shall not (a) execute any other assignment of any rentals
due under the leases; (b) execute any future leases of any portion of the
Premises, without the prior written consent of Beneficiary, provided, however,
that so long as no Event of Default then exists, Grantor may, in the ordinary
course of business in the exercise of sound business judgment, execute future
leases without the prior written consent of Beneficiary if such lease (i) is for
a tenant which occupies not more than five thousand (5,000) square feet of space
[any tenant occupying more than five thousand (5,000) square feet of space is
herein referred to as a "Major Tenant"], (ii) is for a primary term of not more
than five (5) years (including renewal options), (iii) provides for an annual
rental rate of not less than Fifteen Dollars ($15.00) per square foot, and (iv)
is on the standard form of lease attached as Exhibit D to that certain
Borrower's Closing Certificate of even date herewith, from Grantor, as Borrower,
to Beneficiary, as Lender; (c) terminate or consent to the cancellation or
surrender of any lease or tenancy of the Premises or of any part thereof, now
existing or hereafter to be made; (d) modify, alter, amend, renew or extend the
terms of any lease or tenancy, including without limitation, shortening the
unexpired term thereof or decreasing the amount of any rentals payable
thereunder; (e) accept prepayments of any installments of rents to become due
and payable under any lease

                                      -22-
<PAGE>

or tenancy for more than each current month in advance; (f) consent to an
assignment or subletting, in whole or in part, without the prior written consent
of Beneficiary; (g) consent to a release of any lessee obligation under any
lease; (h) incur any indebtedness to any lessee; (i) agree to the settlement of
any obligations of the lessee under a lease, without the prior written consent
of Beneficiary; or (j) in any other manner materially impair the value of the
Premises or the security of Beneficiary for the payment of the Note.
Notwithstanding the foregoing, with respect to a lease with a tenant which is
not a Major Tenant, Grantor may, without the prior written consent of
Beneficiary, take any of the actions specified in subparagraphs (c), (d), (f),
(g) and (i) above, provided that no Event of Default then exists and such action
is taken in the ordinary course of business in the exercise of sound business
judgment.

                     SECTION 6.2 BENEFICIARY'S RIGHT TO PERFORM UNDER LEASES.
Should Grantor fail to perform, comply with or discharge any obligations of
Grantor under any lease of all or any part of the Premises or should Beneficiary
become aware of or be notified by any tenant under any such lease of a failure
on the part of Grantor to so perform, comply with or discharge its obligations
under said lease, Beneficiary may, but shall not be obligated to, and without
further demand upon Grantor, and without waiving or releasing Grantor from any
obligation contained in this Deed of Trust, remedy such failure, and Grantor
agrees to repay upon demand all sums incurred by Beneficiary in remedying any
such failure including, without limitation, Beneficiary's attorneys' fees,
together with interest at the "Default Rate" (as defined in the Note). All such
sums, together with interest as aforesaid, shall become so much additional
Indebtedness, but no such advance shall be deemed to relieve Grantor from any
default hereunder.

                     SECTION 6.3 ASSIGNMENT OF LEASES AND RENTS. Grantor does
hereby unconditionally and absolutely sell, assign and transfer unto Beneficiary
all of the leases, rents, issues, income and profits now due and which may
hereafter become due under or by virtue of any lease, whether written or verbal,
or any agreement or license for the use or occupancy of the Premises, whether
now existing or entered into at any time during the term of this Deed of Trust,
all guaranties of any lessee's obligations under any such lease and all security
deposits, it being the intention of this Deed of Trust to establish an absolute
transfer and assignment of all such leases and agreements and all of the rents,
issues, income and profits from the Premises and/or Grantor's operation or
ownership thereof unto Beneficiary, and Grantor does hereby appoint irrevocably
Beneficiary as Grantor's true and lawful attorney in Grantor's name and stead,
which appointment is coupled with an interest and shall not be revocable, to
collect all of said rents, issues, income and profits; provided, Grantor shall
have a license to collect and retain such rents, issues, income and profits
unless and until an Event of Default exists under this Deed of Trust. Grantor
assigns to Beneficiary all guarantees of lessee's obligations under leases and
all proceeds from settlements relating to terminations of leases and all claims
for damages arising from rejection of any lease under the bankruptcy laws. Upon
the occurrence of an Event of Default and whether before or after the
institution of legal proceedings to foreclose the lien hereof or before or after
sale hereunder or during any period of redemption existing by law,

                                      -23-
<PAGE>

forthwith, upon demand of Beneficiary, Grantor shall surrender to Beneficiary
and Beneficiary shall be entitled to enter upon and take and maintain possession
of the Premises and any leases thereunder and collect and retain any rents,
issues, income and profits from the Premises and hold, operate, manage and
control the Premises and any such leases and to do such things in its discretion
as may be deemed proper or necessary to enforce the payment or security of the
rents, issues, income and profits of the Premises and the performance of the
tenants' obligations under any leases of the Premises, with full power to cancel
or terminate any lease for any cause or on any grounds which would entitle
Grantor to cancel the same and to elect to disaffirm any lease made subsequent
to this Deed of Trust or subordinated to the lien hereof. All rents and payments
received by Grantor after Beneficiary has exercised any of its rights under this
assignment or under the Assignment of Leases shall be held by Grantor in trust
for Beneficiary and shall be delivered to Beneficiary immediately without
demand.

Beneficiary shall not be obligated to perform or discharge any obligation or
liability of the landlord under any of said leases and Grantor shall, and does
hereby agree to, indemnify and hold Beneficiary harmless of and from any and all
expenses, liability, loss or damage which it might incur under said leases or
under or by reason of this Deed of Trust. Any amounts incurred by Beneficiary in
connection with its rights hereunder, including costs, expenses and attorneys'
fees, shall bear interest thereon at the Default Rate, shall be additional
Indebtedness and Grantor shall reimburse Beneficiary therefor immediately upon
demand. Beneficiary may apply any of said rents, issues, income and profits
received to the costs and expenses of collection, including attorneys' fees, to
the payment of taxes, assessments and insurance premiums and expenditures for
the upkeep of the Premises, to the performance of the landlord's obligations
under the leases, to the performance of any of Grantor's covenants hereunder,
and to any Indebtedness in such order as Beneficiary may determine. The entering
upon and taking possession of the Premises, the collection of such rents,
issues, income and profits and the application thereof as aforesaid shall not
cure or waive any Event of Default under this Deed of Trust nor in any way
operate to prevent Beneficiary from pursuing any other remedy which it may now
or hereafter have under the terms of this Deed of Trust nor shall it in any way
be deemed to constitute Beneficiary a mortgagee-in-possession. The rights
hereunder shall in no way be dependent upon and shall apply without regard to
whether the Premises are in danger of being lost, materially injured or damaged
or whether the Premises are adequate to discharge the Indebtedness. Grantor
represents and agrees that no rent has been or will be paid by any person in
possession of any portion of the Premises for more than one installment in
advance and that the payment of none of the rents to accrue for any portion of
the Premises has been or will be waived, released, reduced, discounted, or
otherwise discharged or compromised by Grantor, except as permitted in this
Article 6. Grantor waives any right of set-off against any person in possession
of any portion of the Premises. Grantor further agrees that Grantor will not
execute or agree to any subsequent assignment of any of the rents, issues,
income or profits from the Premises without the prior written consent of
Beneficiary. The rights contained herein are in addition to and shall be
cumulative with the rights given in the Assignment of Leases. To the extent
inconsistent with the terms of this Article 6, the terms of the Assignment of
Leases shall control.

                                      -24-
<PAGE>

                                    ARTICLE 7
                                    ---------

                              RIGHTS OF BENEFICIARY
                              ---------------------

                     SECTION 7.1 RIGHT TO CURE EVENT OF DEFAULT. If Grantor
shall fail to comply with any of the covenants or obligations of this Deed of
Trust, Beneficiary may, but shall not be obligated to, without demand upon
Grantor, and without waiving or releasing Grantor from any obligation in this
Deed of Trust contained, remedy such failure, and Grantor agrees to repay upon
demand all sums incurred by Beneficiary in remedying any such failure together
with interest at the Default Rate. All such sums, together with interest as
aforesaid shall become Indebtedness. No such advance shall be deemed to relieve
Grantor from any failure hereunder.

                     SECTION 7.2 NO CLAIM AGAINST BENEFICIARY. Nothing contained
in this Deed of Trust shall constitute any consent or request by Beneficiary,
express or implied, for the performance of any labor or services or for the
furnishing of any materials or other property in respect of the Premises or any
part thereof, nor as giving Grantor or any party in interest with Grantor any
right, power or authority to contract for or permit the performance of any labor
or services or the furnishing of any materials or other property in such fashion
as would create any personal liability against Beneficiary in respect thereof or
would permit the making of any claim that any lien based on the performance of
such labor or services or the furnishing of any such materials or other property
is prior to the lien of this Deed of Trust.

                     SECTION 7.3 INSPECTION. Grantor will permit Beneficiary or
its authorized representatives to enter the Premises at all times during normal
business hours for the purpose of inspecting the same; provided Beneficiary
shall have no duty to make such inspections and shall not incur any liability or
obligation for making or not making any such inspections.

                     SECTION 7.4 WAIVERS; RELEASES; RESORT TO OTHER SECURITY;
ETC. Without affecting the liability of any party liable for payment of any
Indebtedness or performance of any obligation contained herein, and without
affecting the rights of Beneficiary with respect to any security not expressly
released in writing, Beneficiary may, at any time, and without notice to or the
consent of Grantor or any party in interest with the Premises or the Note: (a)
release any person liable for payment of all or any part of the Indebtedness or
for performance of any obligation herein; (b) make any agreement extending the
time or otherwise altering the terms of payment of all or any part of the
Indebtedness or modifying or waiving any obligation, or subordinating, modifying
or otherwise dealing with the lien or charge hereof; (c) accept any additional
security; (d) release or otherwise deal with any property, real or personal,
including any or all of the Premises, including making partial releases of the
Premises; or (e) resort to any security agreements, pledges, contracts of
guarantee, assignments of rents and leases or other securities, and exhaust any
one or more of said securities and the

                                      -25-
<PAGE>

security hereunder, either concurrently or independently and in such order as it
may determine.

                     SECTION 7.5 RIGHTS CUMULATIVE. Each right, power or remedy
herein conferred upon Beneficiary is cumulative and in addition to every other
right, power or remedy, express or implied, now or hereafter arising, available
to Beneficiary, at law or in equity, or under the Code, or under any other
agreement, and each and every right, power and remedy of Beneficiary herein set
forth or otherwise so existing shall be cumulative to the maximum extent
permitted by law and may be exercised from time to time as often and in such
order as may be deemed expedient by Beneficiary and any such exercise shall not
be a waiver of the right to exercise at any time thereafter any other right,
power or remedy. No delay or omission by Beneficiary in the exercise of any
right, power or remedy arising hereunder or arising otherwise shall impair any
such right, power or remedy or the right of Beneficiary to resort thereto at a
later date or be construed to be a waiver of any Event of Default under this
Deed of Trust or the Note.

                     SECTION 7.6 SUBSEQUENT AGREEMENTS. Any agreement hereafter
made by Grantor and Beneficiary pursuant to this Deed of Trust shall be superior
to the rights of the holder of any intervening lien or encumbrance.

                     SECTION 7.7 WAIVER OF APPRAISEMENT, HOMESTEAD, MARSHALING.
Grantor hereby waives to the full extent lawfully allowed the benefit of any
homestead, appraisement, evaluation, stay and extension laws now or hereafter in
force. Grantor hereby waives any rights available with respect to marshaling of
assets so as to require the separate sales of any portion of the Premises, or as
to require Beneficiary to exhaust its remedies against a specific portion of the
Premises before proceeding against the other and does hereby expressly consent
to and authorize the sale of the Premises or any part thereof as a single unit
or parcel. Grantor also hereby waives any and all rights of reinstatement and
redemption from sale under any order or decree of foreclosure pursuant to rights
herein granted, on behalf of Grantor, and each and every person acquiring any
interest in, or title to the Premises described herein subsequent to the date of
this Deed of Trust, and on behalf of all other persons to the extent permitted
by applicable law.

                     SECTION 7.8 BUSINESS LOAN REPRESENTATION. Grantor
represents and warrants to Beneficiary that the Loan evidenced by the Note is a
business loan transacted solely for the purpose of carrying on the business of
Grantor and not a consumer transaction and that the Premises does not constitute
the homestead of Grantor.

                     SECTION 7.9 DISHONORED CHECKS. In the event Grantor shall
send to Beneficiary two (2) or more checks in any twelve (12) month period which
are not honored by the bank, for any reason, Beneficiary shall have the right to
require that all future payments be made by certified check, or other good
funds, at Beneficiary's option.

                                      -26-
<PAGE>

                                    ARTICLE 8
                                    ---------

                         EVENTS OF DEFAULT AND REMEDIES
                         ------------------------------

                     SECTION 8.1 EVENTS OF DEFAULT. In addition to the
occurrence of any event designated as an Event of Default hereunder or under any
other Loan Document, the occurrence of any of the following shall be deemed an
event of default under this Deed of Trust (hereinafter referred to as an "Event
of Default"):

                               (a) Grantor or any co-maker, guarantor or surety
                     shall fail to pay any principal, premium, if any, or
                     interest on the Note when and as the same becomes due
                     (whether at the stated maturity or at a date fixed for any
                     installment payment or any accelerated payment date or
                     otherwise); or

                               (b) Grantor shall fail to deposit the Charges
                     with Beneficiary or to pay when due any other Indebtedness;
                     or

                               (c) Grantor shall breach or fail to comply with
                     or perform any other term, condition or covenant of the
                     Note, this Deed of Trust, the Assignment of Leases or any
                     other Loan Document, and, unless a different cure period is
                     provided for (in which case such different cure period
                     shall apply), the continuance of such breach or failure for
                     a period of more than thirty (30) days after the giving of
                     written notice of such breach or failure from Beneficiary
                     to Grantor, provided, however, that if such breach or
                     failure is of such a nature that it cannot be cured within
                     the initial thirty (30) day period, Grantor shall have such
                     additional time [not to exceed an additional thirty (30)
                     days] within which to cure such breach or failure provided
                     that Grantor commences to cure such breach or failure
                     within the initial (30) day period, and thereafter
                     diligently prosecutes such curing to completion.
                     Notwithstanding anything to the contrary contained herein,
                     Grantor shall not be entitled to receive any written notice
                     or have the benefit of any grace period if such breach
                     involves the breach of the provisions of Section 2.9
                     hereof; or

                               (d) Grantor or any co-maker, guarantor or surety
                     of the Note shall make an assignment for the benefit of its
                     creditors, or shall admit in writing its inability to pay
                     its debts as they become due, or shall file a petition in
                     bankruptcy, or shall be adjudicated a bankrupt or
                     insolvent, or shall file a petition seeking any
                     reorganization, dissolution, liquidation, arrangement,
                     composition, readjustment or similar relief under any
                     present or future bankruptcy or insolvency statute, law or
                     regulation or shall file an answer admitting to or not
                     contesting the material allegations of a petition filed
                     against it in such proceedings, or shall not within sixty
                     (60) days after the filing of such a petition have the same
                     dismissed or vacated, or shall

                                      -27-
<PAGE>

                     seek or consent to or acquiesce in the appointment of any
                     trustee, receiver or liquidator of a material part of its
                     properties, or shall not within sixty (60) days after the
                     appointment without the consent or acquiescence of it of a
                     trustee, receiver or liquidator of any material part of its
                     properties have such appointment vacated; or

                               (e) Any certification, representation or warranty
                     made by Grantor herein, in the Note or in any other
                     instrument or certificate now or hereafter given as
                     security for the Note or made in connection with the
                     application for the Loan or given as an inducement to
                     Beneficiary to make the Loan shall be false, breached or
                     dishonored in any material respect, and, provided that such
                     certification, representation or warranty is of such a
                     nature that it can be corrected so as to make it not false,
                     breached or dishonored, and the continuance of such
                     falsity, breach or dishonor for a period of more than
                     thirty (30) days after the giving of written notice thereof
                     from Beneficiary to Grantor, provided, however, that if
                     such falsity, breach or dishonor is of such a nature that
                     it cannot be cured within the initial thirty (30) day
                     period, Grantor shall have such additional time [not to
                     exceed an additional thirty (30) days] within which to cure
                     such falsity, breach or dishonor provided that Grantor
                     commences to cure such falsity, breach or dishonor within
                     the initial (30) day period, and thereafter diligently
                     prosecutes such curing to completion; or

                               (f) The Premises shall be transferred in any
                     manner other than that allowed herein; or

                               (g) Grantor or Guarantor shall be dissolved,
                     liquidated or go out of existence, except as permitted in
                     Section 2.9 hereof; or

                               (h) The occurrence of any event set forth in
                     Sections 9.4 or 10.8 hereof; or

                               (i) The institution of foreclosure or other
                     proceedings to enforce against the Premises or Grantor any
                     junior deed of trust or junior security interest or other
                     lien or encumbrance of any kind upon the Premises or any
                     portion thereof, except when contested to the extent
                     permitted in Section 2.5 hereof.

                     SECTION 8.2 BENEFICIARY'S RIGHT TO ACCELERATE. If an Event
of Default shall occur, Beneficiary may immediately and without notice to
Grantor declare the entire unpaid principal balance of the Note together with
all other Indebtedness to be immediately due and payable, and thereupon all such
unpaid principal balance of the Note together with all accrued interest thereon,
any prepayment premium under the terms of the Note and all other Indebtedness
shall be and become immediately due and payable.

                                      -28-
<PAGE>

                     SECTION 8.3 REMEDIES OF BENEFICIARY AND RIGHT TO FORECLOSE.
Upon the occurrence of an Event of Default, Grantor hereby authorizes and fully
empowers Beneficiary to foreclose this Deed of Trust, judicially or
non-judicially, or by such other statutory procedures available in the state in
which the Premises are located, at the option of Beneficiary, with full
authority to sell the Premises at public auction and convey the same to the
purchaser in fee simple, all in accordance with and in the manner prescribed by
law, and out of the proceeds arising from sale and foreclosure to retain the
principal and interest due on the Note and all other indebtedness together with
all sums of money as Beneficiary shall have expended or advanced pursuant to
this Deed of Trust or pursuant to statute together with interest thereon as
herein provided and all costs and expenses of such foreclosure, including lawful
attorneys' fees, with the balance, if any, to be paid to the persons entitled
thereto by law.

                     SECTION 8.4 RECEIVER. Upon the occurrence of an Event of
Default, Beneficiary shall be entitled as a matter of right without notice and
without regard to the solvency or insolvency of Grantor, or the existence of
waste of the Premises or the value or adequacy of the security of the Premises,
and without giving bond apply for the appointment of a receiver in accordance
with the statutes and law made and provided for, who shall collect the rents,
issues, profits and all other income of any kind; manage the Premises so to
prevent waste; execute leases within or beyond the period of receivership, pay
all expenses for normal maintenance of the Premises and perform the terms of
this Deed of Trust and apply the rents, issues, income and profits to the costs
and expenses of the receivership, including attorneys' fees, to the repayment of
the Indebtedness and to the operation, maintenance and upkeep and repair of the
Premises, including payment of taxes on the Premises and payments of premiums of
insurance on the Premises and any other rights permitted by law. To the extent
permitted by law, Grantor does hereby irrevocably consent to such appointment.
The receiver may, to the extent permitted under applicable law, without notice,
enter upon and take possession of the Premises, or any part thereof, by force,
summary proceedings, ejectment or otherwise, and remove Grantor or any other
person or entity and any personal property therefrom, and may hold, operate and
manage the same, receive all rents, earnings, incomes, issues and proceeds and
do the things the receiver finds necessary to preserve and protect the Premises,
whether during pendency of foreclosure, during a redemption period, if any, or
otherwise.

                     SECTION 8.5 RIGHTS UNDER UNIFORM COMMERCIAL CODE. In
addition to the rights available to a beneficiary of a deed of trust on, or to a
mortgagee of, real property, Beneficiary shall also have all the rights,
remedies and recourse available to a secured party under the Code including the
right to proceed under the provisions of the Code governing default as to any
Collateral as defined in this Deed of Trust which may be included on the
Premises or which may be deemed non-realty in a foreclosure of this Deed of
Trust or to proceed as to such Collateral in accordance with the procedures and
remedies available pursuant to a foreclosure of real estate.

                                      -29-
<PAGE>

                     SECTION 8.6 RIGHT TO DISCONTINUE PROCEEDINGS. In the event
Beneficiary shall have proceeded to invoke any right, remedy or recourse
permitted under this Deed of Trust and shall thereafter elect to discontinue or
abandon the same for any reason, Beneficiary shall have the unqualified right to
do so and in such event Grantor and Beneficiary shall be restored to their
former positions with respect to the Indebtedness, in which case this Deed of
Trust and all rights, remedies and recourse of Beneficiary shall continue as if
such action or exercise of a right had not been invoked.

                     SECTION 8.7 WAIVERS. Grantor also waives the benefit of all
laws now existing or that may hereafter be enacted providing for (i) any
appraisal before sale of any portion of the Premises, and (ii) in any way
extending the time for the enforcement and collection of the Note or this Deed
of Trust or creating or extending a period of redemption from any sale made in
collecting said debt. To the full extent Grantor may do so, Grantor agrees that
Grantor will not at any time insist upon, plead, claim or take the benefit or
advantage of any law now or hereafter enforced providing for any appraisal,
evaluation, stay, extension or redemption and Grantor, to the extent permitted
by law, waives and releases all rights of redemption, valuation, appraisal, stay
of execution, notice of election to mature or declare due the whole of the
Indebtedness and marshaling in the event of foreclosure of the liens hereby
created.

                                    ARTICLE 9
                                    ---------

                               HAZARDOUS MATERIALS
                               -------------------

                     SECTION 9.1 DEFINITIONS. The term "Hazardous Materials or
Wastes" shall mean any hazardous or toxic materials, pollutants, chemicals, or
contaminants, including without limitation, asbestos, polychlorinated biphenyls
(PCBs) and petroleum products as defined, determined or identified as such in
any "Laws" (as hereinafter defined). The term "Laws" means any federal, state or
local laws, rules or regulations (whether now existing or hereinafter enacted or
promulgated) including, without limitation, the Clean Water Act, 33
U.S.C.ss.1251 et seq. (1972); the Clean Air Act, 42 U.S.C.ss.7401 et seq.
(1970); the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, 42 U.S.C. Subsection 1802 et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. Subsection 6901 et seq.; the Hazardous
Materials Transportation Act, as amended, 42 U.S.C.ss.1801 et seq.; any similar
state laws, as well as any judicial or administrative interpretation thereof,
including any judicial or administrative orders or judgments.

                     SECTION 9.2 REPRESENTATIONS BY GRANTOR. Grantor hereby
represents to Beneficiary that, to the best of Grantor's knowledge after due
inquiry, and except as may be set forth in environmental report dated April 21,
1996, prepared by Northwest Envirocon Inc. with respect to the Premises, (a) the
Premises has never been used either by previous owners or occupants or by
Grantor or current occupants to generate, manufacture, refine, transport, treat,
store, handle or dispose of asbestos or any Hazardous Materials or Wastes and no
such asbestos or Hazardous Materials or Wastes exist on the Premises or in its
soil or groundwater; (b) no portion of the

                                      -30-
<PAGE>

improvements on the Premises has been constructed with asbestos, asbestos-
containing materials, urea formaldehyde insulation or any other chemical or
substance which has been determined to be a hazard to health and/or the
environment; (c) there are not now nor have there been electrical transformers
or other equipment which have dielectric fluid-containing polychlorinated
biphenyls (PCBs) located in, on or under the Premises; and (d) the Premises has
never contained any underground storage tanks. Grantor has not received nor does
it have any knowledge of any summons, citation, directive, letter or other
communication, written or oral, from any local, state or federal governmental
agency concerning (i) the existence of Hazardous Materials or Wastes on the
Premises or in the immediate vicinity or (ii) the releasing, spilling, leaking,
pumping, pouring, emitting, emptying, or dumping of Hazardous Materials or
Wastes onto the Premises or into waters or other lands.

                     SECTION 9.3 COVENANTS BY GRANTOR. Grantor hereby covenants
to Beneficiary that, until such time as title to the Premises has passed to
Beneficiary by foreclosure or otherwise, or Beneficiary or a receiver appointed
at the request of Beneficiary has taken control of the Premises: (a) Grantor
shall (i) comply and shall cause all occupants of the Premises to comply with
all federal, state and local laws, rules, regulations and orders with respect to
the discharge, generation, removal, transportation, storage and handling of
Hazardous Materials or Wastes, (ii) remove any Hazardous Materials or Wastes
immediately upon discovery of same, in accordance with applicable laws,
ordinances and orders of governmental authorities having jurisdiction thereof,
(iii) pay or cause to be paid all costs associated with such removal, and (iv)
indemnify Beneficiary from and against all losses, claims and costs arising out
of the migration of Hazardous Materials or Wastes from or through the Premises
onto or under other properties; (b) Grantor shall keep the Premises free of any
lien imposed pursuant to any state or federal law, rule, regulation or order in
connection with the existence of Hazardous Materials or Wastes on the Premises;
(c) Grantor shall not install or permit to be installed or to exist in or on the
Premises any asbestos, asbestos-containing materials, urea formaldehyde
insulation or any other chemical or substance which has been determined to be a
hazard to health and environment; (d) Grantor shall not cause or permit to
exist, as a result of an intentional or unintentional act or omission on the
part of Grantor or any occupant of the Premises, a releasing, spilling, leaking,
pumping, emitting, pouring, emptying or dumping of any Hazardous Materials or
Wastes onto the Premises or into waters or other lands; and (e) Grantor shall
give all notifications and prepare all reports required by Laws or any other law
with respect to Hazardous Materials or Wastes existing on, released from or
emitted from the Premises.

                     SECTION 9.4 EVENTS OF DEFAULT AND REMEDIES. It shall
constitute an Event of Default hereunder and Beneficiary shall be entitled to
exercise all remedies available to it hereunder if: (a) any of Grantor's
representations contained in Section 9.2 hereof prove to be false, inaccurate or
misleading; (b) Grantor shall fail to comply with the covenants contained in
Section 9.3 hereof; (c) any Hazardous Materials or Wastes are hereafter found to
exist on the Premises or in its soil or groundwater; or (d) any summons,
citation, directive, letter or other communication, written or oral, shall

                                      -31-
<PAGE>

be issued by any local, state or federal governmental agency concerning the
matters described in Section 9.2(d)(i) and (ii) above. Grantor hereby grants
Beneficiary and its employees and agents an irrevocable and non-exclusive
license to enter the Premises, subject to rights of tenants, in order to
inspect, conduct testing and remove Hazardous Materials or Wastes. All costs of
such inspection, testing and removal shall immediately become due and payable to
Beneficiary, shall bear interest at the Default Rate, shall be secured by this
Deed of Trust and shall constitute additional Indebtedness.

                     SECTION 9.5 INDEMNIFICATION. Grantor shall, and hereby
agrees to, defend, indemnify and hold harmless Beneficiary, its directors,
officers, employees, agents, contractors, subcontractors, licensees, invitees,
successors and assigns (the "Indemnified Parties") from and against any and all
claims, losses, damages, liabilities, judgments, costs and expenses (including,
without limitation, attorneys' fees and costs incurred in the investigation,
defense and settlement of claims or remediation of contamination) incurred by
the Indemnified Parties as a result of or in connection with the presence or
removal of Hazardous Materials or Wastes or as a result of or in connection with
activities prohibited under this Article. Grantor shall bear, pay and discharge,
as and when the same become due and payable, any and all such judgments or
claims for damages, penalties or otherwise, against the Indemnified Parties,
shall hold the Indemnified Parties harmless against all claims, losses, damages,
liabilities, costs and expenses, and shall assume the burden and expense of
defending all suits, administrative proceedings, and negotiations of any
description with any and all persons, political subdivisions or government
agencies arising out of any of the occurrences set forth in this Article. This
indemnification shall remain in full force and effect and shall survive the
repayment of the Indebtedness and the satisfaction of the documents securing the
same, as well as the exercise of any remedy by Beneficiary hereunder or under
the other documents securing this Deed of Trust or the acceptance of a deed in
lieu of foreclosure. This indemnification shall not apply to any matter which
Grantor proves occurred after title to the Premises has passed to Beneficiary by
foreclosure or otherwise, or Beneficiary or a receiver appointed at the request
of Beneficiary has taken control of the Premises.

                     SECTION 9.6 LOSS OF VALUE. Grantor hereby assures
Beneficiary that Beneficiary will not suffer loss due to diminution of value of
the Premises, whether during the term hereof or thereafter, due to Hazardous
Material or Wastes upon the Premises, except for those Grantor proves were
introduced onto the Premises after title has passed to Beneficiary by
foreclosure or otherwise, or Beneficiary or a receiver appointed at the request
of Beneficiary has taken control of the Premises, and will, upon demand,
reimburse Beneficiary for any such loss of value.

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

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

                     SECTION 10.1 RELEASE OF DEED OF TRUST. When all
Indebtedness has been paid, this Deed of Trust and all assignments herein
contained shall, except as

                                      -32-
<PAGE>

otherwise provided herein, terminate and shall be released by Beneficiary, at no
out-of-pocket expense to Beneficiary, executing such documents as are necessary
to release this Deed of Trust, which documents shall be procured at Grantor's
expense.

                     SECTION 10.2 CHOICE OF LAW. This Deed of Trust is made and
executed under the laws of the State of Washington and is intended to be
governed by and construed in accordance with the laws of said State.

                     SECTION 10.3 SUCCESSORS AND ASSIGNS. This Deed of Trust and
each and every covenant, agreement and other provision hereof shall be binding
upon Grantor and its successors and assigns, including without limitation, each
and every person or entity that may, from time to time, be record owner of the
Premises or any person or entity, other than Beneficiary, having an interest
therein, shall run with the land and shall inure to the benefit of Beneficiary
and its successors and assigns. As used herein, the words "successors and
assigns" shall also be deemed to include the heirs, representatives,
administrators and executors of any natural person who is a party to this Deed
of Trust. Nothing in this Section shall be construed to constitute consent by
Beneficiary to assignment by Grantor.

                     SECTION 10.4 PARTIAL INVALIDITY. All rights, powers and
remedies provided herein are intended to be limited to the extent necessary so
that they will not render this Deed of Trust invalid, unenforceable or not
entitled to be recorded, registered or filed under any applicable law. If any
term of this Deed of Trust shall be held to be invalid, illegal or
unenforceable, the validity and enforceability of the other terms of this Deed
of Trust shall in no way be affected thereby.

                     SECTION 10.5 CAPTIONS AND HEADINGS. The captions and
headings of the various articles and sections of this Deed of Trust are for
convenience only and are not to be construed as confining or limiting in any way
the scope or intent of the provisions hereof. Whenever the context requires or
permits, the singular shall include the plural, the plural shall include the
singular and the masculine, feminine and neuter shall be freely interchangeable.

                     SECTION 10.6 NOTICES. Any notice which any party hereto may
desire or may be required to give to any other party shall be in writing and
either (a) mailed by certified mail, return receipt requested, or (b) sent by an
overnight carrier which provides for a return receipt, or (c) sent by facsimile
followed up by mailing of such notice by either of the methods set forth in (a)
or (b) above on the day of sending such facsimile or the next succeeding
business day. Any such notice shall be sent to the respective party's address as
set forth on Page 1 of this Deed of Trust or to such other address as such party
may, by notice in writing given in compliance with this Section 10.6, designate
as its address. Any such notice shall constitute service of notice hereunder
three (3) days after the mailing thereof by certified mail, one (1) day after
the sending thereof by overnight carrier, and on the same day as the sending of
a facsimile pursuant to the terms hereof.

                                      -33-
<PAGE>

                     SECTION 10.7 BUILDING USE. During the entire term of the
Note and this Deed of Trust, Grantor agrees not to convert the Premises to a
condominium of any kind or to any use other than as a retail office building. In
that connection, Grantor covenants that the sale of units and/or recording of
condominium documents on the Premises or any part thereof shall constitute an
Event of Default hereunder.

                     SECTION 10.8 MANAGEMENT OF THE PREMISES. Grantor
acknowledges that the successful management of the Premises is of critical
importance to Beneficiary and a primary inducement in the making of the Loan. In
the event management becomes unsatisfactory, Beneficiary shall notify Grantor of
the same and Grantor shall, within thirty (30) days of such notice, correct any
management deficiencies. Failure to so correct shall constitute an Event of
Default hereunder. Present management of the Premises by Guarantor is acceptable
to Beneficiary at the time of execution of this Deed of Trust.

                     SECTION 10.9 AMENDMENT/MODIFICATION. Amendment to, waiver
of or modification of any provision of this Deed of Trust must be made in
writing. No oral waiver, amendment, or modification may be implied.

                     SECTION 10.10 SUBSTITUTION OF THE TRUSTEE. Beneficiary may
remove the Trustee at any time or from time to time, with or without cause, and
appoint a successor trustee, and upon such appointment, all powers, rights,
duties and authority of the Trustee, as aforesaid, shall thereupon become vested
in such successor. Such substitute trustee shall be appointed by written
instrument duly recorded in the county or counties where the real property
covered hereby is located, which appointment may be executed by any authorized
agent of Beneficiary or in any other manner permitted by applicable law.

                     SECTION 10.11 REPRESENTATIONS OF GRANTOR. Grantor
affirmatively represents and warrants that the written terms of the Note, this
Deed of Trust, the Assignment of Leases, the financing statements and other
documents executed in connection with the Loan, and each of them, accurately
reflect the understanding of Grantor, as to all matters addressed therein, and
Grantor further represents and warrants that there are no other agreements or
understandings, written or oral, which exist between Grantor and Beneficiary
relating to the matters addressed in said documents. Grantor hereby waives any
claims against Beneficiary that Grantor may now have or may hereafter acquire to
the effect that the actual understanding of Grantor and Beneficiary may not be
accurately set forth in such documents.

                     SECTION 10.12 BENEFICIARY'S EXPENSE. Should Beneficiary
make any payments hereunder or under the Note or under any of the other
documents securing the Note or incur any liability, loss or damage under or by
reason of this Deed of Trust, the Note or any other Loan Documents, or in the
defense of any claims or demands, the amount thereof, and all costs and
expenses, including all filing, recording, and title fees and any other expenses
relating to the Loan, including without limitation, filing fees for UCC
continuation statements and any expense involving modification

                                      -34-
<PAGE>

thereto, attorneys' fees, and any and all costs and expenses incurred in
connection with making, performing, or collecting the Indebtedness or exercising
any of Beneficiary's rights under the Note, this Deed of Trust or any other Loan
Documents, including reasonable attorneys' fees, the cost of appraisals and the
cost of any environmental inspections in connection therewith, and all claims
for brokerage and finder's fees which may be made in connection with the making
of the Loan, together with interest thereon, at the Default Rate, shall become
part of the Indebtedness and shall be secured by this Deed of Trust and the
other Loan Documents and Grantor hereby agrees to reimburse Beneficiary therefor
immediately upon demand. Such sums, costs and expenses shall be, until so paid,
part of the Indebtedness and Beneficiary shall be entitled, to the extent
permitted by law, to receive and retain the full amount of the Indebtedness in
any action for redemption by Grantor, for an accounting for the proceeds of a
foreclosure sale or of insurance proceeds or for apportionment of an eminent
domain damage award.

                     SECTION 10.13 BENEFICIARY'S RIGHT TO COUNSEL. If
Beneficiary retains attorneys to enforce any of the terms hereof or of the Note
or of any of the other Loan Documents or because of the breach by Grantor of any
of the terms hereof or of the Note or of any of the Loan Documents, or for the
recovery of any sum secured hereby or by any of the other Loan Documents,
Grantor shall pay to Beneficiary attorneys' fees and all costs and expenses,
whether or not an action is actually commenced, and the right to such attorneys'
fees and all costs and expenses shall be deemed to have accrued on the date such
attorneys are retained, shall include fees and costs in connection with
litigation (including at trial), arbitration, mediation and/or administrative
proceedings, and shall be enforceable whether or not such action is prosecuted
to judgment and shall include all appeals. Attorneys' fees and expenses shall
for purposes of this Deed of Trust include all paralegal, electronic research,
legal specialists and all other costs in connection with the performance of
Beneficiary's attorneys.

                     If Beneficiary is, by reason of being the holder of this
Deed of Trust, made a party defendant in any litigation or other proceedings
concerning this Deed of Trust or the Premises or any part thereof or therein, or
the construction, maintenance, operation or the occupancy or use thereof by
Grantor, then Grantor shall, and does hereby agree to, indemnify, defend and
hold Beneficiary harmless from and against all liability by reason of said
litigation or other proceedings, including reasonable attorneys' fees and all
costs and expenses incurred by Beneficiary in any such litigation or other
proceedings, whether or not any such litigation or other proceedings is
prosecuted to judgment or other determination.

                     SECTION 10.14 OTHER REPRESENTATIONS AND WARRANTIES. All
statements contained in any loan application, certificate or other instrument
delivered by or on behalf of Grantor to Beneficiary or Beneficiary's
representatives in connection with the Loan, including without limitation, those
certain representations and warranties made by Grantor in that certain
Borrower's Closing Certificate of even date herewith from Grantor to
Beneficiary, shall constitute representations and warranties made by Grantor
hereunder. Such representations and warranties made hereunder and

                                      -35-
<PAGE>

thereunder shall survive the delivery of this Deed of Trust, and any
misrepresentations thereunder shall be deemed as misrepresentations hereunder.

                     SECTION 10.15 LIMITATION OF INTEREST. It is the intent of
Grantor and Beneficiary in the execution of this Deed of Trust and the Note and
all other Loan Documents to contract in strict compliance with the usury laws of
the State of Washington governing the Note. In furtherance thereof, Beneficiary
and Grantor stipulate and agree that none of the terms and provisions contained
herein or in the Note or in any Loan Document shall ever be construed to create
a contract for the use, forbearance or detention of money requiring payment of
interest at a rate in excess of the maximum interest rate permitted to be
charged by the laws of the State of Washington. Grantor, or any guarantor,
endorser or other party now or hereafter becoming liable for the payment of the
Note shall never be required to pay interest on the Note at a rate in excess of
the maximum interest that may be lawfully charged under the laws of the State of
Washington and the provisions of this Section shall control over all other
provisions of the Note and any other instrument executed in connection herewith
which may be in apparent conflict herewith. If, from any circumstances
whatsoever fulfillment of any provision of the Note, this Deed of Trust or any
Loan Document, at the time performance of such provision shall be due, shall
involve transcending the limit on interest presently prescribed by any
applicable usury statute or any other applicable law, with regard to obligations
of like character and amount, then Beneficiary may, at its option (a) reduce the
obligations to be fulfilled to such limit on interest, or (b) apply the amount
that would exceed such limit on interest to the reduction of the outstanding
principal balance of the Note, and not to the payment of interest, with the same
force and effect as though Grantor had specifically designated such sums to be
so applied to principal and Beneficiary had agreed to accept such extra
payment(s) as a prepayment without a fee, so that in no event shall any exaction
be possible under the Note that is in excess of the applicable limit on
interest. If a surplus remains after full payment of principal and lawful
interest, the surplus shall be remitted to Grantor by Beneficiary, and Grantor
hereby agrees to accept such remittance.

                     SECTION 10.16 TIME OF THE ESSENCE. Grantor agrees that time
is of the essence with respect to all of the covenants, agreements and
representations under this Deed of Trust.

                     SECTION 10.17 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. All representations, warranties and covenants contained herein or in
any other Loan Document executed by Grantor in connection herewith shall survive
the delivery of the Note, this Deed of Trust and all other Loan Documents
executed in connection herewith and the provisions hereof shall continue to
inure to the benefit of Beneficiary, its successors and assigns.

                     SECTION 10.18 WAIVER OF JURY TRIAL. NO PARTY TO THIS DEED
OF TRUST OR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF A PARTY
SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER
LITIGATION PROCEEDINGS

                                      -36-
<PAGE>

BASED UPON OR ARISING OUT OF THIS DEED OF TRUST, ANY RELATED AGREEMENT OR
INSTRUMENT, ANY OTHER COLLATERAL FOR THE INDEBTEDNESS OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG THE PARTIES, OR ANY OF THEM. NO PARTY WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THE PROVISIONS
OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED
WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL
NOT BE FULLY ENFORCED IN ALL INSTANCES.

                     SECTION 10.19 MINIMUM REQUIREMENT. Grantor recognizes that
the requirements imposed upon Grantor hereunder, including, without limitation,
insurance requirements, are minimum requirements as determined by Beneficiary
and do not constitute a representation that the requirements are complete or
adequate. Grantor understands that it is Grantor's duty and responsibility to
act prudently and responsibly at all times for Grantor's protection and for the
protection of the Premises.

                     SECTION 10.20 INTEREST RATE ADJUSTMENT. Pursuant to the
terms of the Note, Beneficiary shall adjust the rate of interest on the Note at
the end of the fifth (5th) Loan Year, all as more fully provided for in the
Note, the terms of which are hereby incorporated herein by this reference.

                     SECTION 10.21 ORAL AGREEMENTS OR COMMITMENTS. ORAL
AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

                     SECTION 10.22 POWERS OF TRUSTEE. From time to time upon
written request of Beneficiary and presentation of this Deed of Trust for
endorsement, and without affecting the personal liability of any person for
payment of any indebtedness or performance of the obligation secured hereby,
Trustee may, without liability therefor and without notice (a) reconvey all or
any part of the Premises; (b) consent to the making of any map or plat thereof;
(c) join in granting any easement thereon; (d) join in any declaration of
covenants and restrictions; or (e) join in any extension agreement or any
agreement subordinating the lien or charge hereof. Trustee or Beneficiary may
from time to time apply to any court of competent jurisdiction for aid and
direction in the execution of the trusts hereunder and the enforcement of the
rights and remedies available hereunder, and Trustee or Beneficiary may obtain
orders or decrees directing or confirming or approving acts in the execution of
said trusts and the enforcement of said remedies. Trustee has no obligation to
notify any party of any pending sale or any action or proceeding unless held or
commenced and maintained by Trustee under this Deed of Trust. Trustor shall pay
to Trustee reasonable compensation and reimbursement for services and expenses
in the administration of the trusts created hereunder, including reasonable
attorneys' fees. Trustor hereby agrees to indemnify Trustee against all

                                      -37-
<PAGE>

losses, claims, demands and liability which it may incur, suffer or sustain in
the execution of the trust or trusts created hereunder or in the performance of
any act required or permitted hereunder or by law.

                     SECTION 10.23 PARTIAL NON-RECOURSE TO TRUSTOR AND THE
PARTNERS OF TRUSTOR. The Note contains provisions with respect to limitation of
the liability of Trustor and the partners of Trustor with respect to the Loan,
which provisions are incorporated herein by this reference.

                     SECTION 10.24 ANNEX PROPERTY AND DECLARATION. Grantor is
the owner of certain real property (the "Annex Property") located in Spokane
County, Washington, which Annex Property is contiguous to the Premises and which
shares the use of certain common facilities with the Premises. The Declaration
contains reciprocal easements for the respective benefit of the Premises and the
Annex Property. Grantor shall comply with all terms and provisions of the
Declaration, and shall pay all fees or charges of any kind in connection
therewith. Grantor further covenants that it (a) shall not join in the
termination or amendment of the Declaration without the prior written consent of
Beneficiary; and (b) shall use its best efforts to give Beneficiary telephonic
notice within one (1) day, and shall give Beneficiary written notice (which
shall include a copy of any notice received by Grantor) within three (3) days,
of Grantor's receipt of any notice received by or on behalf of Grantor with
respect to Grantor's non-compliance with any of the provisions of the
Declaration. If Grantor fails to correct the conditions specified in the notice
to it, Beneficiary may do so, at the sole cost and expense of Grantor, and
Grantor shall reimburse Beneficiary for such cost and expense upon demand. Any
amount so expended by Beneficiary shall bear interest at the "Default Rate" (as
defined in the Note) from the date of expenditure, until repaid to Beneficiary,
and shall be secured by the Deed of Trust.

                     SECTION 10.25 COUNTERPARTS. This Deed of Trust may be
executed in any number of counterparts, all of which shall constitute but one
and the same document.

                     SECTION 10.26 DATING OF THIS DEED OF TRUST. The parties
hereto hereby authorize and instruct TRANSNATION TITLE INSURANCE COMPANY, an
Arizona corporation ("Transnation Title"), to fill in the date of this Deed of
Trust with the date on which the "Loan Increase Advance" (as defined in the
Note) is disbursed by Beneficiary by a wire transfer to the account of
Transnation Title pursuant to the instructions of Grantor, notwithstanding the
fact that such funds may not have been actually received by Transnation Title on
the date of disbursement by Beneficiary, all as more fully provided in the Note.

                                      -38-
<PAGE>

                     IN WITNESS WHEREOF, Grantor and Beneficiary have executed
this Amendment and Restatement of Deed of Trust and Security Agreement and
Fixture Financing Statement with Assignment of Leases and Rents to be effective
(although not necessarily signed) as of the date first above written.

                          WESTCOAST HOSPITALITY, LIMITED PARTNERSHIP, a Delaware
                          limited partnership

                          By:        WESTCOAST HOSPITALITY CORPORATION,
                                     a Washington corporation
                                     General Partner

                                     By
                                        ------------------------------------
                                          Donald K. Barbieri
                                          Its President

                          IDS LIFE INSURANCE COMPANY, a  Minnesota corporation

                          By
                             -----------------------------------------------

                          Its
                             -----------------------------------------------

                          By
                             -----------------------------------------------

                          Its
                             -----------------------------------------------

                                      -39-
<PAGE>

STATE OF WASHINGTON)
                   ) ss.
County of Spokane  )

           I certify that I know or have satisfactory evidence that DONALD K.
BARBIERI the person who appeared before me, and said person acknowledged that he
signed this instrument, on oath stated that he was authorized to execute the
instrument and acknowledged it as the President of WESTCOasT Hospitality
CORPORATION, a Washington corporation, in its capacity as the General Partner of
WESTCOAST Hospitality, Limited Partnership, a Delaware limited partnership, to
be the free and voluntary act of such party for the uses and purposes mentioned
in the instrument.

                     DATED:    May __, 2001.

                                                -------------------------------
                                                (Signature)

(Seal or Stamp)
                                                My Appointment Expires:

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

STATE OF MINNESOTA)
                  )  ss.
County of Hennepin)

                     The foregoing instrument was acknowledged before me this
___ day of May, 2001, by ______________________ and ___________________________,
the ________________________ and _____________________, respectively, of IDS
LIFE INSURANCE COMPANY, a Minnesota corporation, on behalf of the corporation.

                                                     --------------------------
                                                     Notary Public

My Commission Expires:

                                      -40-EXHIBIT 10.2
                                                                    ------------

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

                                                                Loan No. V_17415

                             WHC809, LLC, as grantor
                                   (Borrower)

                                       to

                 TRANSNATION TITLE INSURANCE COMPANY, as trustee

                                    (Trustee)

                               for the benefit of

            MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as beneficiary
                                    (Lender)

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

                                DEED OF TRUST AND

                               SECURITY AGREEMENT

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

                          Dated: As of June  14, 2001

                          PREPARED BY AND UPON
                          RECORDATION RETURN TO:

                          Dechert
                          30 Rockefeller Plaza
                          New York, New York 10112-2200

                          Attention:  Paul A. Keenan, Esq.

================================================================================
<PAGE>

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

<S>                                                                                        <C>
ARTICLE 1 - GRANTS OF SECURITY..............................................................1
         Section 1.1.      PROPERTY CONVEYED................................................1
         Section 1.2.      ASSIGNMENT OF RENTS..............................................4
         Section 1.3.      DEFINITION OF PERSONAL PROPERTY..................................4
         Section 1.4.      PLEDGE OF MONIES HELD............................................4

ARTICLE 2 - DEBT AND OBLIGATIONS SECURED....................................................4
         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 3 - BORROWER COVENANTS..............................................................6
         Section 3.1.      INCORPORATION BY REFERENCE.......................................6
         Section 3.2.      INSURANCE........................................................6
         Section 3.3.      PAYMENT OF TAXES, ETC...........................................12
         Section 3.4.      CONDEMNATION....................................................13
         Section 3.5.      USE AND MAINTENANCE OF PROPERTY.................................13
         Section 3.6.      WASTE...........................................................14
         Section 3.7.      COMPLIANCE WITH LAWS; ALTERATIONS...............................14
         Section 3.8.      BOOKS AND RECORDS...............................................14
         Section 3.9.      PAYMENT FOR LABOR AND MATERIALS.................................16
         Section 3.10.     PERFORMANCE OF OTHER AGREEMENTS.................................16

ARTICLE 4 - SPECIAL COVENANTS..............................................................16
         Section 4.1.      PROPERTY USE....................................................16
         Section 4.2.      ERISA...........................................................16
         Section 4.3.      SINGLE PURPOSE ENTITY...........................................17

ARTICLE 5 - REPRESENTATIONS AND WARRANTIES.................................................20
         Section 5.1.      BORROWER'S REPRESENTATIONS......................................20
         Section 5.2.      WARRANTY OF TITLE...............................................20
         Section 5.3.      STATUS OF PROPERTY..............................................21
         Section 5.4.      NO FOREIGN PERSON...............................................22
         Section 5.5.      SEPARATE TAX LOT................................................22

ARTICLE 6 - OBLIGATIONS AND RELIANCES......................................................22
         Section 6.1.      RELATIONSHIP OF BORROWER AND LENDER.............................22
         Section 6.2.      NO RELIANCE ON LENDER...........................................22
         Section 6.3.      NO LENDER OBLIGATIONS...........................................22

                                       i
<PAGE>

         Section 6.4.      RELIANCE........................................................22

ARTICLE 7 - FURTHER ASSURANCES.............................................................23
         Section 7.1.      RECORDING FEES..................................................23
         Section 7.2.      FURTHER ACTS....................................................23
         Section 7.3.      CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY STAMP LAWS..........23
         Section 7.4.      CONFIRMATION STATEMENT..........................................24
         Section 7.5.      SPLITTING OF SECURITY INSTRUMENT................................24
         Section 7.6.      REPLACEMENT DOCUMENTS...........................................25

ARTICLE 8 - DUE ON SALE/ENCUMBRANCE........................................................25
         Section 8.1.      LENDER RELIANCE.................................................25
         Section 8.2.      NO SALE/ENCUMBRANCE.............................................25
         Section 8.3.      EXCLUDED AND PERMITTED TRANSFERS................................26
         Section 8.4.      NO IMPLIED FUTURE CONSENT.......................................28
         Section 8.5.      COSTS OF CONSENT................................................28
         Section 8.6.      CONTINUING SEPARATENESS REQUIREMENTS............................28

ARTICLE 9 - DEFAULT........................................................................28
         Section 9.1.      EVENTS OFDEFAULT................................................28
         Section 9.2.      DEFAULT INTEREST................................................30

ARTICLE 10 - RIGHTS AND REMEDIES...........................................................31
         Section 10.1.     REMEDIES........................................................31
         Section 10.2.     RIGHT OF ENTRY..................................................36

ARTICLE 11 - INDEMNIFICATION; SUBROGATION..................................................36
         Section 11.1.     GENERAL INDEMNIFICATION.........................................36
         Section 11.2.     ENVIRONMENTAL INDEMNIFICATION...................................38
         Section 11.3.     DUTY TO DEFEND AND ATTORNEYS AND OTHER FEES AND EXPENSES........40
         Section 11.4.     SURVIVAL OF INDEMNITIES.........................................40

ARTICLE 12 - SECURITY AGREEMENT............................................................40
         Section 12.1.     SECURITY AGREEMENT..............................................40

ARTICLE 13 - WAIVERS.......................................................................41
         Section 13.1.     MARSHALLING AND OTHER MATTERS...................................41
         Section 13.2.     WAIVER OF NOTICE................................................42
         Section 13.3.     SOLE DISCRETION OF LENDER.......................................42
         Section 13.4.     SURVIVAL........................................................42
         Section 13.5.     WAIVER OF TRIAL BY JURY.........................................42
         Section 13.6.     WAIVER OF AUTOMATIC OR SUPPLEMENTAL STAY........................43

                                       ii
<PAGE>

ARTICLE 14 - NOTICES.......................................................................43
         Section 14.1.     NOTICES.........................................................43

ARTICLE 15 - APPLICABLE LAW................................................................44
         Section 15.1.     GOVERNING LAW; JURISDICTION.....................................44
         Section 15.2.     USURY LAWS......................................................44
         Section 15.3.     PROVISIONS SUBJECT TO APPLICABLE LAW............................45

ARTICLE 16 - SECONDARY MARKET..............................................................45
         Section 16.1.     TRANSFER OF LOAN................................................45

ARTICLE 17 - COSTS.........................................................................45
         Section 17.1.     PERFORMANCE AT BORROWER'S EXPENSE...............................45
         Section 17.2.     ATTORNEY'S FEES FOR ENFORCEMENT.................................45

ARTICLE 18 - DEFINITIONS...................................................................46
         Section 18.1.     GENERAL DEFINITIONS.............................................46

ARTICLE 19 - MISCELLANEOUS PROVISIONS......................................................46
         Section 19.1.     NO ORAL CHANGE..................................................46
         Section 19.2.     LIABILITY.......................................................46
         Section 19.3.     INAPPLICABLE PROVISIONS.........................................46
         Section 19.4.     HEADINGS, ETC...................................................46
         Section 19.5.     DUPLICATE ORIGINALS; COUNTERPARTS...............................46
         Section 19.6.     NUMBER AND GENDER...............................................47
         Section 19.7.     SUBROGATION.....................................................47
         Section 19.8.     ENTIRE AGREEMENT................................................47

ARTICLE 20 - TRUSTEE.......................................................................47

ARTICLE 21 - SPECIAL STATE OF WASHINGTON PROVISIONS........................................48

                                      iii
<PAGE>

                             Index of Defined Terms

ADA........................................................................................14
APPLICABLE LAWS............................................................................14
ATTORNEYS..................................................................................37
ATTORNEYS' FEES............................................................................46
BANKRUPTCY CODE.............................................................................2
BORROWER................................................................................1, 46
BUSINESS DAY...............................................................................44
COLLATERAL.................................................................................41
COUNSEL FEES...............................................................................46
DEBT........................................................................................4
DEFAULT RATE...............................................................................30
ENVIRONMENTAL INDEMNITY.....................................................................6
ENVIRONMENTAL LAW......................................................................38, 39
ENVIRONMENTAL LIEN.........................................................................39
ERISA......................................................................................16
ESCROW AGREEMENT............................................................................3
EVENT......................................................................................45
EVENT OF DEFAULT...........................................................................28
EXCULPATED PORTION.........................................................................36
FEES AND EXPENSES..........................................................................37
GUARANTOR..................................................................................18
HAZARDOUS SUBSTANCES.......................................................................39
IMPROVEMENTS................................................................................1
INDEMNIFIED PARTIES........................................................................39
INSURANCE PREMIUMS..........................................................................8
INSURED CASUALTY...........................................................................10
INTANGIBLES.................................................................................3
INVESTOR...................................................................................45
LAND........................................................................................1
LEASE.......................................................................................2
LEASES......................................................................................2
LEGAL FEES.................................................................................46
LENDER..................................................................................1, 46
LOAN.......................................................................................27
LOAN DOCUMENTS..............................................................................6
LOSSES.....................................................................................39
NOTE....................................................................................1, 46
OBLIGATIONS.................................................................................5
OTHER CHARGES..............................................................................12

                                   Index - 1

<PAGE>

OTHER LOAN DOCUMENTS........................................................................6
OTHER OBLIGATIONS...........................................................................5
PERMITTED EXCEPTIONS.......................................................................20
PERSON.....................................................................................46
PERSONAL PROPERTY...........................................................................4
POLICIES....................................................................................8
POLICY......................................................................................8
PROPERTY................................................................................1, 46
QUALIFIED INSURER...........................................................................8
RATING AGENCY..............................................................................45
RELEASE....................................................................................40
REMEDIATION................................................................................40
RENTS.......................................................................................2
SECURITIES.................................................................................45
SECURITY INSTRUMENT.........................................................................1
TAXES......................................................................................12
TRUSTEE.....................................................................................1
UNIFORM COMMERCIAL CODE.....................................................................2

</TABLE>

                                   Index - 2
<PAGE>

         THIS DEED OF TRUST AND SECURITY AGREEMENT (this "SECURITY INSTRUMENT")
is made as of the ____ day of June, 2001, by WHC809, LLC, a Delaware limited
liability company, having its principal place of business at /o West Coast Grand
Hotel, 1415 Fifth Avenue, Seattle, Washington 98101 ("BORROWER"), to TRANSNATION
TITLE INSURANCE COMPANY, an Arizona corporation ("TRUSTEE"), having its
principal place of business at 4450 NE 29th Place, #200, Bellevue, Washington
98007-9926, for the benefit of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New
York banking corporation, having its principal place of business at 60 Wall
Street, New York, New York 10260-0060, as beneficiary ("LENDER").

                                    RECITALS:

         Borrower by its Fixed Rate Note of even date herewith given to Lender
is indebted to Lender in the principal sum of $36,050,000 in lawful money of the
United States of America (such Fixed Rate 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, and with a final
maturity date of July 1, 2011.

         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 1 - GRANTS OF SECURITY

         Section 1.1 PROPERTY CONVEYED. Borrower does hereby irrevocably,
unconditionally and absolutely, grant, bargain, sell, pledge, enfeoff, assign,
warrant, transfer and convey to Trustee IN TRUST, WITH POWER OF SALE, for the
purposes herein set forth, 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 (collectively, the "LAND"), together with
         additional lands, estates and development rights hereafter acquired by
         Borrower for use in connection with the development, ownership or
         occupancy of such real property, and all additional lands and estates
         therein which may, from time to time, by supplemental deed of trust or
         otherwise be expressly made subject to the lien of this Security
         Instrument;

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

               (c) 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,
<PAGE>

         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;

               (d) Fixtures and Personal Property. All machinery, equipment,
         goods, inventory, consumer goods, furnishings, fixtures (including but
         not limited to all heating, air conditioning, plumbing, inventory,
         lighting, communications and elevator fixtures) and other personal
         property of every kind and nature, whether tangible or intangible,
         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 use, maintenance, enjoyment, operation and occupancy of the Land
         and the Improvements, including without limitation, beds, bureaus,
         chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables,
         rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds,
         screens, paintings, hangings, pictures, divans, couches, luggage carts,
         luggage racks, stools, sofas, chinaware, linens, pillows, blankets,
         glassware, foodcarts, cookware, dry cleaning facilities, dining room
         wagons, keys or other entry systems, bars, bar fixtures, mini-bars,
         liquor and other drink dispensers, icemakers, kitchen equipment,
         radios, television sets, cable t.v. equipment, intercom and paging
         equipment, electric and electronic equipment, dictating equipment,
         private telephone systems, reservation systems and related computer
         software, medical equipment, potted plants, heating, lighting and
         plumbing fixtures, fire prevention and extinguishing apparatus,
         fittings, plants, apparatus, stoves, ranges, refrigerators, cutlery and
         dishes, laundry machines, tools, machinery, engineers, dynamos, motors,
         boilers, incinerators, washers and dryers, other customary hotel
         equipment, 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, enjoyment and occupancy of the Land and
         the Improvements and the right, title and interest of Borrower in and
         to any of the Personal Property (as hereinafter defined) which may be
         subject to any security interests, as defined in the Uniform Commercial
         Code, as adopted and enacted by the state or states where any of the
         Property is located (the "UNIFORM COMMERCIAL CODE") superior in lien to
         the lien of this Security Instrument and all proceeds and products of
         the above;

               (e) Leases and Rents. All leases, subleases and other agreements
         affecting the use, enjoyment or occupancy of the Land and the
         Improvements heretofore or hereafter entered into (including, without
         limitation, any and all security interests, contractual liens and
         security deposits) whether before or after the filing by or against
         Borrower of any petition for relief under 11 U.S.C.ss.101 et seq. as
         the same may be amended from time to

                                       2
<PAGE>

         time (the "BANKRUPTCY CODE") (individually, a "LEASE", collectively,
         the "LEASES") and all income, rents (including, without limitation,
         room rents, revenues, accounts and receivables derived from the use or
         occupancy of all or any portion of the Improvements), issues, profits
         and revenues (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, including, without limitation, all
         revenues and credit card receipts collected from guest rooms,
         restaurants, bars, meeting rooms, banquet rooms and recreational
         facilities, all receivables, customer obligations, installment payment
         obligations and other obligations now existing or hereafter arising or
         created out of the sale, lease, sublease, license, concession or other
         grant of the right of the use and occupancy of property or rendering of
         services by Borrower or any operator or manager of the hotel or the
         commercial space located in the Improvements or acquired from others
         (including, without limitation, from the rental of any office space,
         retail space, guest rooms or other space, halls, stores, and offices,
         and deposits securing reservations of such space), license, lease,
         sublease and concession fees and rentals, health club membership fees,
         food and beverage wholesale and retail sales (including mini-bar
         revenues), service charges, vending machine sales and proceeds, if any,
         from business interruption or other loss of income insurance
         (collectively, 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;

               (f) 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;

               (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;

               (h) 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;

               (i) 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;

               (j) 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 Trustee and/or Lender in the Property;

                                       3
<PAGE>

               (k) Agreements. All agreements, contracts (including purchase,
         sale, option, right of first refusal and other contracts pertaining to
         the Property), franchise agreements, certificates, instruments,
         franchises, permits, licenses, approvals, consents, 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 Property
         (including 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 happening of any default hereunder, to
         receive and collect any sums payable to Borrower thereunder;

               (l) Trademarks. All tradenames, 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, subject to any rights therein which may be held by third
         parties;

               (m) Accounts. All accounts, accounts receivable, escrows
         (including, without limitation, all escrows, deposits, reserves and
         impounds established pursuant to that certain Escrow Agreement for
         Reserves and Impounds of even date herewith between Borrower and
         Lender; hereinafter the "ESCROW AGREEMENT"), documents, instruments,
         chattel paper, claims, reserves (including deposits) representations,
         warranties and general intangibles, as one or more of the foregoing
         terms may be defined in the Uniform Commercial Code, and all contract
         rights, franchises, books, records, plans, specifications, permits,
         licenses (to extent assignable), approvals, actions, choses, claims,
         suits, proofs of claims in bankruptcy and causes of action which now or
         hereafter relate to, are derived from or are used in connection with
         the Property, including, without limitation, all revenues and credit
         card receipts collected from guest rooms, restaurants, bars, meeting
         rooms, banquet rooms, and recreational facilities, all receivables,
         customer obligations, installment payment obligations and other
         obligations now existing or hereafter arising or created out of the
         sale, lease, sublease, license, concession or other grant of the right
         of the use and occupancy of property or rendering of services by Debtor
         or any operator or manager of the hotel or the commercial space located
         in the Improvements or acquired from others (including, without
         limitation, from the rental of any office space, retail space, guest
         rooms or other space, halls, stores, and offices, and deposits securing
         reservations of such space), license, lease, sublease and concession
         fees and rentals, health club membership fees, food and beverage
         wholesale and retail sales, service charges, vending machine sales and
         proceeds, if any, from business interruption or other loss of income
         insurance, or arising from the sale of any Property or the rendition of
         services in the ordinary course of business or otherwise (whether or
         not earned by performance), together with any Property returned by or
         reclaimed from customers wherever such Property is located, or the use,
         operation, maintenance, occupancy or enjoyment thereof or the conduct
         of any business activities thereon (collectively called the
         "INTANGIBLES");

                                        4
<PAGE>

               (n) Liquor License. All licenses, permits, approvals and consents
         which are required for the sale and service of alcoholic beverages on
         the Property heretofore or hereafter obtained by Borrower from
         applicable state and local authorities, provided, however, the
         aforesaid licenses, permits, approvals and consents shall not be
         considered to be a part of the Property if applicable law prohibits the
         pledge, mortgage, transfer, assignment, sale or conveyance of the same;
         and

               (o) Other Rights. Any and all other rights of Borrower in and to
         the Property and any accessions, renewals, replacements and
         substitutions of all or any portion of the Property and all proceeds
         derived from the sale, transfer, assignment or financing of the
         Property or any portion thereof.

         Section 1.2 ASSIGNMENT OF RENTS. Borrower hereby absolutely and
unconditionally assigns to Lender Borrower's right, title and interest in and to
all current and future Leases and Rents; it being intended by Borrower that this
assignment constitutes a present, absolute and unconditional assignment and not
an assignment for additional security only. Nevertheless, subject to the terms
of this Section 1.2 and the terms and conditions of that certain Assignment of
Rents and Leases, of even date herewith between Borrower and Lender, Lender
grants to Borrower a revocable license to collect and receive the Rents, which
license shall be automatically revoked upon the occurrence and during the
continuation of an Event of Default. Borrower shall hold the Rents, or a portion
thereof sufficient to discharge all current sums due on the Debt, for use in the
payment of such sums.

         Section 1.3 DEFINITION OF PERSONAL PROPERTY. For purposes of this
Security Instrument, the Property identified in Subsections 1.1(d) through
1.1(o), inclusive, shall be collectively referred to herein as the "PERSONAL
PROPERTY."

         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 Funds (as defined in the Escrow
Agreement), all insurance proceeds described in Section 3.2 and condemnation
awards or payments described in Section 3.4, as additional security for the
Obligations until expended or applied as provided in this Security Instrument.

                               CONDITIONS TO GRANT

         TO HAVE AND TO HOLD the above granted and described Property unto and
to the use and benefit of Trustee, and the successors and assigns of Trustee,
forever;

         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; provided however, that Borrower's obligation

                                       5
<PAGE>

to indemnify and hold harmless Lender pursuant to the provisions hereof with
respect to matters relating to any period of time during which this Security
Instrument was in effect shall survive any such payment or release.

                   ARTICLE 2. - DEBT AND OBLIGATIONS SECURED

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

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

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

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

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

               (e) the payment of 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.

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

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

               (b) the performance of each obligation of Borrower contained in
         any other agreement given by Borrower to Lender which is for the
         purpose of further securing the obligations secured hereby, and any
         amendments, modifications and changes thereto; and

               (c) the performance of 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 Loan Documents.

                                       6
<PAGE>

         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 herein 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 (as hereinafter defined) until such time that Lender has accepted
payment of the entire amount then due.

                         ARTICLE 3 - BORROWER COVENANTS

         Borrower covenants and agrees that:

         Section 3.1 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 in connection with the
creation of the Obligations, the payment of any other sums owed by Borrower to
Lender or the performance of any Obligations (collectively the "OTHER LOAN
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. The term "LOAN
DOCUMENTS" as used herein shall individually and collectively refer to the Note,
this Security Instrument and the Other Loan Documents; provided, however, that
notwithstanding any provision of this Security Instrument to the contrary, the
Obligations of the Borrower under that certain Environmental Indemnity Agreement
of even date herewith executed by Borrower in favor of Lender (the
"ENVIRONMENTAL INDEMNITY") shall not be deemed or construed to be secured by
this Security Instrument or otherwise restricted or affected by the foreclosure
of the lien hereof or any other exercise by Lender of its remedies hereunder or
under any other Loan Document, such Environmental Indemnity being intended by
the signatories thereto to be its (or their) unsecured obligation.

         Section 3.2 INSURANCE.

               (a) Borrower shall obtain and maintain (or cause to be obtained
         and maintained), and shall pay all premiums in accordance with
         Subsection 3.2(b) below for, insurance for Borrower and the Property
         providing at least the following coverages:

                                       7
<PAGE>

                   (i) comprehensive all risk insurance (including, without
               limitation, riot and civil commotion, vandalism, malicious
               mischief, water, fire, burglary and theft) on the Improvements
               and the Personal Property and in each case (A) in an amount equal
               to 100% of the "Full Replacement Cost", which for purposes of
               this Security Instrument shall mean actual replacement value
               (exclusive of costs of excavations, foundations, underground
               utilities and footings) with a waiver of depreciation; (B)
               containing an agreed amount endorsement with respect to the
               Improvements and Personal Property waiving all co-insurance
               provisions; (C) providing that the deductible shall not exceed
               the lesser of $12,500.00 or one percent (1%) of the face value of
               the policy; and (D) containing Demolition Costs, Increased Cost
               of Construction and "Ordinance or Law Coverage" or "Enforcement"
               endorsements in amounts satisfactory to Lender if any of the
               Improvements or the use of the Property shall at any time
               constitute legal non-conforming structures or uses or the ability
               to rebuild the Improvements is restricted or prohibited. The Full
               Replacement Cost may be redetermined from time to time by an
               appraiser or contractor designated and paid by Lender or by an
               engineer or appraiser in the regular employ of the insurer. No
               omission on the part of Lender to request any such appraisals
               shall relieve Borrower of any of its obligations under this
               Subsection;

                   (ii) comprehensive general liability insurance against claims
               for personal injury, bodily injury, death or property damage
               occurring upon, in or about the Property, such insurance (A) to
               be on the so-called "occurrence" form with a combined single
               limit of not less than $1,000,000.00 and not less than
               $3,000,000.00 if the Property has one or more elevators, as well
               as liquor liability insurance in a minimum amount of
               $2,000,000.00 if any part of the Property is covered by a liquor
               license and an aggregate coverage limit acceptable to Lender; (B)
               to continue at not less than the aforesaid limit until required
               to be changed by Lender in writing by reason of changed economic
               conditions making such protection inadequate; (C) to cover at
               least the following hazards: (1) premises and operations; (2)
               products and completed operations on an "if any" basis; (3)
               independent contractors; (4) blanket contractual liability for
               all written and oral contracts; (5) contractual liability
               covering the indemnities contained in Article 11 ----------
               hereof to the extent the same is available; and (D) to be without
               deductible;

                   (iii) business income insurance (A) with loss payable to
               Lender; (B) covering losses of income and Rents derived from the
               Property and any non-insured property on or adjacent to the
               Property resulting from any risk or casualty whatsoever; (C)
               containing an extended period of indemnity endorsement which
               provides that after the physical loss to the Improvements and
               Personal Property has been repaired, the continued loss of income
               will be insured until such income either returns to the same
               level it was at prior to the loss, or the expiration of eighteen
               (18) months from the date of the loss, whichever first occurs,
               and notwithstanding that the policy may expire prior to the end
               of such period; and

                                       8
<PAGE>

               (D) in an amount equal to 100% of the all unavoidable expenses
               from the Property (including debt service on the Loan) from the
               operation of the Property for a period of eighteen (18) months.
               The amount of such business income insurance shall be determined
               by Lender prior to the date hereof and at least once each year
               thereafter based on Borrower's reasonable estimate of the gross
               income from the Property for the succeeding eighteen (18) month
               period. All insurance proceeds payable to Lender pursuant to this
               Subsection 3.2(a) shall be held by Lender and shall be applied to
               the obligations secured hereunder from time to time due and
               payable hereunder and under the Note and, provided that no Event
               of Default then exists and Lender determines in its sole
               discretion that sufficient funds will remain available for the
               payment amounts payable hereunder and under the Note, for the
               payment of operating expenses approved by Lender; provided,
               however, that nothing herein contained shall be deemed to relieve
               Borrower of its obligations to pay the obligations secured
               hereunder on the respective dates of payment provided for in the
               Note except to the extent such amounts are actually paid out of
               the proceeds of such business income insurance;

                   (iv) 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 3.2(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 3.2(a)(i), (3)
               including permission to occupy the Property, and (4) with an
               agreed amount endorsement waiving co-insurance provisions;

                   (v) workers' compensation, subject to the statutory limits of
               the state in which the Property is located, and employer's
               liability insurance with a limit of at least $1,000,000.00 per
               accident and per disease per employee, and $1,000,000.00 for
               disease aggregate in respect of any work or operations on or
               about the Property, or in connection with the Property or its
               operation (if applicable);

                   (vi) comprehensive boiler and machinery insurance (without
               exclusion for explosion), if applicable, in amounts as shall be
               reasonably required by Lender and covering all boilers or other
               pressure vessels, machinery and equipment located at or about the
               Property (including, without limitation, electrical equipment,
               sprinkler systems, heating and air conditioning equipment,
               refrigeration equipment and piping);

                   (vii) flood hazard insurance if any portion of the
               Improvements is currently or at any time in the future located in
               a federally designated "special flood hazard area," flood hazard
               insurance in an amount equal to the lesser of (a)

                                       9
<PAGE>

               the outstanding principal balance of the Note, (b) the Full
               Replacement Cost, or (c) the maximum amount of such insurance
               available 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; and

                   (viii) such other insurance and in such amounts as Lender
               from time to time may reasonably request against such other
               insurable hazards which at the time are commonly insured against
               for property similar to the Property located in or around the
               region in which the Property is located, including, without
               limitation, earthquake insurance (in the event the Property is
               located in an area with a high degree of seismic activity),
               sinkhole insurance, mine subsidence insurance and environmental
               insurance.

               (b) All insurance provided for in Subsection 3.2(a) hereof shall
         be obtained under valid and enforceable policies (the "POLICIES" or in
         the singular, the "POLICY"), in such forms and, from time to time after
         the date hereof, in such amounts as may from time to time be
         satisfactory to Lender, issued by financially sound and responsible
         insurance companies authorized to do business in the state in which the
         Property is located as admitted or unadmitted carriers which, in either
         case, have been approved by Lender and which have a claims paying
         ability rating of AA or better issued by Standard & Poor's Ratings
         Group or with a claims paying ability rating otherwise acceptable to
         Lender (each such insurer shall be referred to below as a "QUALIFIED
         INSURER"). Such Policies shall not be subject to invalidation due to
         the use or occupancy of the Property for purposes more hazardous than
         the use of the Property at the time such Policies were issued. Not less
         than thirty (30) days prior to the expiration dates of the Policies
         theretofore furnished to Lender pursuant to Subsection 3.2(a),
         certified copies of the Policies marked "premium paid" or accompanied
         by evidence satisfactory to Lender of payment of the premiums due
         thereunder (the "INSURANCE PREMIUMS"), shall be delivered by Borrower
         to Lender; provided, however, that in the case of renewal Policies,
         Borrower may furnish Lender with binders therefor to be followed by the
         original Policies when issued.

               (c) Borrower shall not obtain (i) separate insurance concurrent
         in form or contributing in the event of loss with that required in
         Subsection 3.2(a) to be furnished by, or which may be reasonably
         required to be furnished by, Borrower, or (ii) any umbrella or blanket
         liability or casualty Policy unless, in each case, Lender's interest is
         included therein as provided in this Security Instrument and such
         Policy is issued by a Qualified Insurer. If Borrower obtains separate
         insurance or an umbrella or a blanket Policy, Borrower shall notify
         Lender of the same and shall cause certified copies of each Policy to
         be delivered as required in Subsection 3.2(a). Any blanket insurance
         Policy shall specifically allocate to the Property the amount of
         coverage from time to time required hereunder and shall otherwise
         provide the same protection as would a separate Policy insuring only
         the Property in compliance with the provisions of Subsection 3.2(a).
         Subject to the foregoing requirements, Borrower may obtain umbrella or
         blanket

                                       10
<PAGE>

         insurance policies which are maintained by the manager under the
         Management Agreement and cover other facilities which are owned, leased
         or managed by said manager.

               (d) All Policies of insurance provided for or contemplated by
         Subsection 3.2(a) shall name Lender, its successors and assigns,
         including any servicers, trustees or other designees of Lender, and
         Borrower as the insured or additional insured, as their respective
         interests may appear, and in the case of property damage, boiler and
         machinery, and flood insurance, shall contain a so-called New York
         standard non-contributing Lender clause in favor of Lender providing
         that the loss thereunder shall be payable to Lender.

               (e) All Policies of insurance provided for in Subsection 3.2(a)
         shall contain clauses or endorsements to the effect that:

                   (i) no act or negligence of Borrower, or anyone acting for
               Borrower, or of any tenant under any Lease or other occupant, or
               failure to comply with the provisions of any Policy which might
               otherwise result in a forfeiture of the insurance or any part
               thereof, shall in any way affect the validity or enforceability
               of the insurance insofar as Lender is concerned;

                   (ii) the Policy shall not be materially changed (other than
               to increase the coverage provided on the Property thereby) or
               canceled without at least thirty (30) days' prior written notice
               to Lender and any other party named therein as an insured;

                   (iii) each Policy shall provide that the issuers thereof
               shall give written notice to Lender if the Policy has not been
               renewed thirty (30) days prior to its expiration; and

                   (iv) Lender shall not be liable for any Insurance Premiums
               thereon or subject to any assessments thereunder.

               (f) Borrower shall furnish to Lender within ten (10) calendar
         days after Lender's request therefor, a statement certified by Borrower
         or a duly authorized officer of Borrower of the amounts of insurance
         maintained in compliance herewith, of the risks covered by such
         insurance and of the insurance company or companies which carry such
         insurance and, if requested by Lender, verification of the adequacy of
         such insurance by an independent insurance broker or appraiser
         acceptable to Lender.

               (g) If Borrower fails to timely provide Lender written evidence
         that all insurance required hereunder is in full force and effect,
         Lender shall have the right but not the obligation, without notice to
         Borrower, to take such action as Lender deems necessary to protect its
         interest in the Property, including, without limitation, the obtaining
         of such insurance coverage as Lender in its sole discretion deems
         appropriate,

                                       11
<PAGE>

         and all expenses incurred by Lender in connection with
         such action or in obtaining such insurance and keeping it in effect
         shall be paid by Borrower to Lender upon demand and until paid shall be
         secured by this Security Instrument and shall bear interest at the
         Default Rate (as hereinafter defined).

               (h) If the Property shall be damaged or destroyed, in whole or in
         part, by fire or other casualty, Borrower shall give prompt notice
         thereof to Lender.

                   (i) In case of loss covered by Policies, Lender may either
               (1) settle and adjust any claim without the consent of Borrower,
               or (2) allow Borrower to agree with the insurance company or
               companies on the amount to be paid upon the loss; provided, that
               Borrower may adjust losses aggregating not in excess of
               $250,000.00 if such adjustment is carried out in a competent and
               timely manner, and provided that in any case Lender shall and is
               hereby authorized to collect and receive any such insurance
               proceeds; and the expenses incurred by Lender in the adjustment
               and collection of insurance proceeds shall become part of the
               Debt and be secured hereby and shall be reimbursed by Borrower to
               Lender upon demand (unless deducted by and reimbursed to Lender
               from such proceeds).

                   (ii) In the event of any insured damage to or destruction of
               the Property or any part thereof (herein called an "INSURED
               CASUALTY"), if (A) less than 50% of the total floor area of the
               Improvements has been damaged, destroyed or rendered unusable as
               a result of such Insured Casualty and in the reasonable judgment
               of Lender, the Property can be restored within twelve (12) months
               after insurance proceeds are made available and at least six (6)
               months prior to the Maturity Date (as defined in the Note) to an
               economic unit not less valuable (including an assessment by
               Lender of the impact of the termination of any Leases due to such
               Insured Casualty) and not less useful than the same was prior to
               the Insured Casualty, and after such restoration will adequately
               secure the outstanding balance of the Debt, and (B) no Event of
               Default (hereinafter defined) shall have occurred and be then
               continuing, then the proceeds of insurance shall be applied to
               pay for or reimburse Borrower for the cost of restoring,
               repairing, replacing or rebuilding the Property or part thereof
               which constitute the Insured Casualty, as provided below; and
               Borrower hereby covenants and agrees forthwith to commence and
               diligently to prosecute such restoring, repairing, replacing or
               rebuilding; provided, however, in any event Borrower shall pay
               all costs (and if required by Lender, Borrower shall deposit the
               total thereof with Lender in advance) of such restoring,
               repairing, replacing or rebuilding in excess of the net proceeds
               of insurance made available pursuant to the terms hereof.

                   (iii) Except as provided above, the proceeds of insurance
               collected upon any Insured Casualty shall, at the option of
               Lender in its sole discretion, be applied to the payment of the
               Debt or applied to pay for the cost of restoring, repairing,
               replacing or rebuilding the Property or part thereof subject to
               the

                                       12
<PAGE>

               Insured Casualty, in the manner set forth below. Any such
               application to the Debt shall not be considered a voluntary
               prepayment requiring payment of the prepayment consideration
               provided in the Note, and shall not reduce or postpone any
               payments otherwise required pursuant to the Note, other than the
               final payment on the Note.

                   (iv) If proceeds of insurance, if any, are made available to
               Borrower for the restoring, repairing, replacing or rebuilding of
               the Property, Borrower hereby covenants to restore, repair,
               replace or rebuild the same to be of at least equal value and of
               substantially the same character as prior to such damage or
               destruction, all to be effected in accordance with applicable law
               and plans and specifications approved in advance by Lender.

                   (v) If such insurance proceeds are to pay for the costs of
               restoring, repairing, replacing and rebuilding of the Property,
               Lender shall disburse such amounts from time to time upon Lender
               being furnished with (1) evidence satisfactory to it (which
               evidence may include inspection[s] of the work performed) that
               portion of the restoration, repair, replacement and rebuilding
               covered by the disbursement has been completed in accordance with
               plans and specifications approved by Lender, (2) evidence
               satisfactory to it of the estimated cost of completion of the
               restoration, repair, replacement and rebuilding, (3) funds, or,
               at Lender's option, assurances satisfactory to Lender that such
               funds are available, sufficient in addition to the proceeds of
               insurance to complete the proposed restoration, repair,
               replacement and rebuilding, and (4) such architect's
               certificates, waivers of lien, contractor's sworn statements,
               title insurance endorsements, bonds, plats of survey and such
               other evidences of cost, payment and performance as Lender may
               reasonably require and approve in connection with such
               disbursement; and Lender may, in any event, require that all
               plans and specifications for such restoration, repair,
               replacement and rebuilding be submitted to and approved by Lender
               prior to commencement of work. With respect to disbursements to
               be made by Lender: (A) no payment made prior to the final
               completion of the restoration, repair, replacement and rebuilding
               shall exceed ninety percent (90%) of the value of the work
               performed from time to time; (B) funds other than proceeds of
               insurance shall be disbursed prior to disbursement of such
               proceeds; and (C) at all times, the undisbursed balance of such
               proceeds remaining in the hands of Lender, together with funds
               deposited for that purpose or irrevocably committed to the
               satisfaction of Lender by or on behalf of Borrower for that
               purpose, shall be at least sufficient in the reasonable judgment
               of Lender to pay for the cost of completion of the restoration,
               repair, replacement or rebuilding, free and clear of all liens or
               claims for lien and the costs described in Subsection 3.2(h)(vi)
               below. Any surplus which may remain out of insurance proceeds
               held by Lender after payment of such costs of restoration,
               repair, replacement or rebuilding shall be paid to any party
               entitled thereto. In no event shall Lender assume any duty or
               obligation for the adequacy,

                                       13
<PAGE>

               form or content of any such plans and specifications, nor for the
               performance, quality or workmanship of any restoration, repair,
               replacement and rebuilding.

                   (vi) Notwithstanding anything to the contrary contained
               herein, the proceeds of insurance reimbursed to Borrower in
               accordance with the terms and provisions of this Security
               Instrument shall be reduced by the reasonable costs (if any)
               incurred by Lender in the adjustment and collection thereof and
               in the reasonable costs incurred by Lender of paying out such
               proceeds (including, without limitation, reasonable attorneys'
               fees and costs paid to third parties for inspecting the
               restoration, repair, replacement and rebuilding and reviewing the
               plans and specifications therefor).

               (i) Notwithstanding anything to the contrary contained herein,
         Borrower shall not be deemed to be in breach of its obligations under
         Subsection 3.2(a) if Lender fails to pay the premiums for the insurance
         required thereunder in accordance with the terms of the Escrow
         Agreement and funds sufficient to pay the same have been deposited by
         Borrower.

Section 3.3 PAYMENT OF TAXES, ETC.

               (a) Borrower shall pay 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 as same become due and payable.
         Borrower will deliver to Lender, promptly upon Lender's request,
         evidence satisfactory to Lender that the Taxes, Other Charges and
         utility service charges have been so paid or are not then delinquent.
         Borrower shall not allow 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 for liens covering Taxes and
         Other Charges which are not yet due. Except to the extent sums
         sufficient to pay all Taxes and Other Charges have been deposited with
         Lender in accordance with the terms of this Security Instrument,
         Borrower shall furnish to Lender paid receipts for the payment of the
         Taxes and Other Charges prior to the date the same shall become
         delinquent. Notwithstanding anything to the contrary contained herein,
         Borrower shall not be deemed to be in breach of its obligations under
         this Subsection 3.3(a) if Lender fails to pay the Taxes and Other
         Charges in accordance with the terms of the Escrow Agreement and funds
         sufficient to pay the same have been deposited by Borrower.

               (b) After prior written notice to Lender, Borrower, at its own
         expense, may contest by appropriate legal proceeding, promptly
         initiated and conducted in good faith and with due diligence, the
         amount or validity or application in whole or in part of any of

                                       14
<PAGE>

         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
         Loan 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, canceled or lost, (vi) Borrower shall have set
         aside and deposited with Lender adequate reserves for the payment of
         the Taxes, together with all interest and penalties thereon, unless
         Borrower has paid all of the Taxes under protest, and (vii) Borrower
         shall have furnished the security as may be required in the proceeding,
         or as may be requested by Lender to insure the payment of any contested
         Taxes, together with all interest and penalties thereon.

         Section 3.4 CONDEMNATION. Borrower shall promptly give Lender notice of
the actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender is hereby irrevocably appointed as
Borrower's attorney-in-fact, coupled with an interest, with exclusive power to
collect, receive and retain any award or payment for said condemnation or
eminent domain and to make any compromise or settlement in connection with such
proceeding, subject to the provisions of this Security Instrument.
Notwithstanding the foregoing, Borrower may settle and compromise such award
provided that (i) the same is effected in a competent and timely manner, (ii)
the amount of the award does not exceed $250,000, (iii) the award is paid to
Lender and applied in accordance with this Security Instrument and (iv) no Event
of Default then exists. Notwithstanding any taking by any public or quasi-public
authority through eminent domain or otherwise (including but not limited to any
transfer made in lieu of or in anticipation of the exercise of such taking),
Borrower shall continue to pay the Debt at the time and in the manner provided
for its payment in the Note and in this Security Instrument and the Debt shall
not be reduced until any award or payment therefor shall have been actually
received and applied by Lender, after the deduction of expenses of collection,
to the reduction or discharge of the Debt. Lender shall not be limited to the
interest paid on the award by the condemning authority but shall be entitled to
receive out of the award interest at the rate or rates provided herein or in the
Note. 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 may apply any award or payment to the reduction or discharge of
the Debt whether or not then due and payable (such application to be free from
any prepayment consideration provided in the Note, except that if an Event of
Default, or an event which with notice and/or the passage of time, or both,
would constitute an Event of Default, has occurred and is continuing, then such
application shall be subject to the full prepayment consideration computed in
accordance with the Note). If the Property is sold, through foreclosure or
otherwise, prior to the receipt by Lender of the award or payment, Lender shall
have the right, whether or not a deficiency judgment on the Note shall have been
sought, recovered or denied, to receive the award or payment, or a portion
thereof sufficient to pay the Debt.

                                       15
<PAGE>

        Section 3.5 USE AND MAINTENANCE OF PROPERTY. Borrower shall cause the
Property to be maintained and operated in a good and safe condition and repair
and in keeping with the condition and repair of properties of a similar use,
value, age, nature and construction, subject, in the case of a casualty, to the
availability of insurance proceeds. Borrower shall not use, maintain or operate
the Property in any manner which constitutes a public or private nuisance or
which makes void, voidable, or cancelable, or increases the premium of, any
insurance then in force with respect thereto. The Improvements and the Personal
Property shall not be removed, demolished or materially altered (except for
normal replacement of the Personal Property with items of the same utility and
of equal or greater value) without the prior written consent of Lender. Borrower
shall promptly repair, replace or rebuild any part of the Property which may be
destroyed by any casualty, or become damaged, worn or dilapidated or which may
be affected by any proceeding of the character referred to in Section 3.4 hereof
and shall complete and pay for any structure at any time in the process of
construction or repair on the Land. Borrower shall not initiate, join in,
acquiesce in, or consent to any change in any private restrictive covenant,
zoning law or other public or private restriction, limiting or defining the uses
which may be made of the Property or any part thereof. If under applicable
zoning provisions the use of all or any portion of the Property is or shall
become a nonconforming use, Borrower will not cause or permit the nonconforming
use to be discontinued or abandoned without the express written consent of
Lender. Borrower shall not take any steps whatsoever to convert the Property, or
any portion thereof, to a condominium or cooperative form of management.

         Section 3.6 WASTE. Borrower shall not commit or suffer any waste of the
Property or, without first obtaining such additional insurance as may be
necessary to cover a proposed change in use of the Property, make any change in
the use of the Property which will in any way materially increase the risk of
fire or other hazard arising out of the operation of the Property, or take any
action that might invalidate or give cause for cancellation of any Policy, or do
or permit to be done thereon anything that may in any way impair the value of
the Property or the security of this Security Instrument. Borrower will not,
without the prior written consent of Lender, permit any drilling or exploration
for or extraction, removal, or production of any minerals from the surface or
the subsurface of the Land, regardless of the depth thereof or the method of
mining or extraction thereof.

         Section 3.7 COMPLIANCE WITH LAWS; ALTERATIONS.

               (a) Borrower shall promptly comply with all existing and future
         federal, state and local laws, orders, ordinances, governmental rules
         and regulations or court orders affecting or which may be interpreted
         to affect the Property, or the use thereof, including, but not limited
         to, the Americans with Disabilities Act (the "ADA") (collectively
         "APPLICABLE LAWS").

               (b) Notwithstanding any provisions set forth herein or in any
         document regarding Lender's approval of alterations of the Property,
         Borrower shall not alter the Property in any manner which would
         increase Borrower's responsibilities for compliance

                                       16
<PAGE>

         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.

               (c) 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.

               (d) Borrower shall take appropriate measures to prevent and will
         not engage in or knowingly permit any illegal activities at the
         Property.

               Section 3.8 BOOKS AND RECORDS.

               (a) Borrower shall keep accurate books and records of account in
         accordance with sound accounting principles in which full, true and
         correct entries shall be promptly made with respect to Borrower, the
         Property and the operation thereof, and will permit all such books and
         records (including without limitation all contracts, statements,
         invoices, bills and claims for labor, materials and services supplied
         for the construction, repair or operation to Borrower of the
         Improvements) to be inspected or audited and copies made by Lender and
         its representatives during normal business hours and at any other
         reasonable times. Borrower represents that its chief executive office
         is as set forth in the introductory paragraph of this Security
         Instrument and that all books and records pertaining to the Property
         are maintained at the Property or such other location as may be
         expressly disclosed to Lender in writing. Borrower will furnish, or
         cause to be furnished, to Lender on or before forty-five (45) calendar
         days after the end of each calendar quarter the following items, each
         certified by Borrower as being true and correct, in such format and in
         such detail as Lender or its servicer may request:

                   (i) a written statement (rent roll) dated as of the last day
               of each such calendar quarter identifying each of the Leases by
               the term, space occupied, rental required to be paid, security
               deposit paid, any rental concessions, and identifying any
               defaults or payment delinquencies thereunder;

                   (ii) a report of occupancy for the subject quarter, including
               an average daily rate, and any and all franchise inspection
               reports received by Borrower during the subject quarter; and

                   (iii) monthly and year to date operating statements prepared
               for each calendar month during each such reporting period
               detailing the total revenues

                                       17
<PAGE>

               received, total expenses incurred, total costs of capital
               improvements, total debt service and total cash flow.

               (b) Within ninety (90) calendar days following the end of each
         calendar year, Borrower shall furnish a statement of the financial
         affairs and condition of the Borrower and the Property including a
         statement of profit and loss for the Property in such format and in
         such detail as Lender or its servicer may request, and setting forth
         the financial condition and the income and expenses for the Property
         for the immediately preceding calendar year prepared and audited by an
         independent certified public accountant. Borrower shall deliver to
         Lender copies of all income tax returns, requests for extension and
         other similar items contemporaneously with its delivery of same to the
         Internal Revenue Service.

               (c) Borrower will permit representatives appointed by Lender,
         including independent accountants, agents, attorneys, appraisers and
         any other persons, to visit and inspect during its normal business
         hours and at any other reasonable times any of the Property and to make
         photographs thereof, and to write down and record any information such
         representatives obtain, and shall permit Lender or its representatives
         to investigate and verify the accuracy of the information furnished to
         Lender under or in connection with this Security Instrument or any of
         the Other Loan Documents and to discuss all such matters with its
         officers, employees and representatives. Borrower will furnish to
         Lender at Borrower's expense all evidence which Lender may from time to
         time reasonably request as to the accuracy and validity of or
         compliance with all representations and warranties made by Borrower in
         the Loan Documents and satisfaction of all conditions contained
         therein. Any inspection or audit of the Property or the books and
         records of Borrower, or the procuring of documents and financial and
         other information, by or on behalf of Lender, shall be at Borrower's
         expense and shall be for Lender's protection only, and shall not
         constitute any assumption of responsibility or liability by Lender to
         Borrower or anyone else with regard to the condition, construction,
         maintenance or operation of the Property, nor Lender's approval of any
         certification given to Lender nor relieve Borrower of any of Borrower's
         obligations; provided, however, Borrower shall not have any obligation
         to reimburse Lender for more than one (1) such audit or inspection per
         calendar year except in the event of a continuing Event of Default.

               (d) Prior to the transfer of the Loan by Lender pursuant to
         Section 16.1 hereof, Borrower shall deliver to Lender the reports
         required by Section 3.8(a) on a monthly basis. Such reports shall be
         delivered within twenty (20) calendar days after the end of each
         calendar month.

         Section 3.9 PAYMENT FOR LABOR AND MATERIALS. Borrower will promptly pay
when due all bills and costs for labor, materials, and specifically fabricated
materials incurred in connection with the Property and never permit to exist
beyond the due date thereof in respect of the Property or any part thereof any
lien or security interest, even though inferior to the liens and the security
interests hereof, and in any event never permit to be created or exist in

                                       18
<PAGE>

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 (as hereinafter defined).

         Section 3.10 PERFORMANCE OF OTHER AGREEMENTS. Borrower shall observe
and perform each and every term to be observed or performed by Borrower pursuant
to the terms of any agreement or recorded instrument affecting or pertaining to
the Property, or given by Borrower to Lender for the purpose of further securing
an obligation secured hereby and any amendments, modifications or changes
thereto.

         Section 3.11 CERTAIN HOTEL COVENANTS. Borrower further covenants and
agrees with Lender as follows:

               (a) Borrower shall cause the hotel located on the Property to be
         operated pursuant to the Franchise Agreement (as hereinafter defined)
         and the Management Agreement (as hereinafter defined).

               (b) Borrower covenants and agrees that it shall:

                   (i) promptly perform and/or observe all of the covenants and
               agreements required to be performed and observed by it under the
               Franchise Agreement and the Management Agreement and do all
               things necessary to preserve and to keep unimpaired its material
               rights thereunder;

                   (ii) promptly notify Lender of any default under the
               Franchise Agreement or the Management Agreement of which it is
               aware;

                   (iii) promptly deliver to Lender upon request a copy of any
               financial statement, business plan, capital expenditures plan,
               notice, report and estimate received by Borrower under the
               Franchise Agreement or the Management Agreement; and

                   (iv) promptly enforce the performance and observance of all
               of the covenants and agreements required to be performed and/or
               observed by the franchisor under the Franchise Agreement and the
               manager under the Management Agreement.

               (c) Borrower consents and agrees that it shall not, without
         Lender's prior written consent:

                   (i) surrender, terminate or cancel the Franchise Agreement or
               the Management Agreement;

                   (ii) reduce or consent to the reduction of the term of the
               Franchise Agreement or the Management Agreement;

                                       19
<PAGE>

                   (iii) increase or consent to the increase of the amount of
               any charges under the Franchise Agreement or the Management
               Agreement; or

                   (iv) otherwise modify, change, supplement, alter or amend, or
               waive or release any of its rights and remedies under, the
               Franchise Agreement or the Management Agreement in any material
               respect.

               (d) Borrower shall not, without Lender's prior consent, enter
         into transactions with any affiliate, including without limitation, any
         arrangement providing for the managing of the hotel on the Property,
         the rendering or receipt of services or the purchase or sale of
         inventory, except any such transaction in the ordinary course of
         business of Borrower if the monetary or business consideration arising
         therefrom would be substantially as advantageous to Borrower as the
         monetary or business consideration that would obtain in a comparable
         transaction with a person not an affiliate of Borrower. Lender
         acknowledges and agrees that Lender has approved of the Management
         Agreement and Franchise Agreement.

               (e) Borrower shall maintain the Management Agreement for the
         operation of the Property in full force and effect and timely perform
         all of Borrower's obligations thereunder and enforce performance of all
         obligations of the manager thereunder, and not permit the termination
         or amendment of such Management Agreement unless the prior written
         consent of Lender is first obtained. Borrower will enter into and cause
         the manager to enter into an assignment and subordination of such
         Management Agreement in form satisfactory to Lender, assigning and
         subordinating the manager's interest in the Property and all fees and
         other rights of the manager pursuant to such Management Agreement to
         the rights of Lender. Upon an Event of Default, Borrower at Lender's
         request made at any time while such Event of Default continues, shall
         terminate the Management Agreement and replace the manager with a
         manager selected by Lender.

                         ARTICLE 4 - SPECIAL COVENANTS

         Borrower covenants and agrees that:

         Section 4.1 PROPERTY USE. The Property shall be used only as a hotel
and for ancillary purposes (and for the rental of commercial office space to the
extent currently used for such purpose) and for no other use without the prior
written consent of Lender, which consent may be withheld in Lender's sole and
absolute discretion.

         Section 4.2 ERISA.

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

                                       20
<PAGE>

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

                   (i) Equity interests in Borrower are publicly offered
               securities, within the meaning of 29 C.F.R. ss.2510.3-101(b)(2);

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

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

         Section 4.3 SINGLE PURPOSE ENTITY. (1) So long as any obligation under
the Note remains unsatisfied, Borrower covenants and agrees that it has not and
shall not:

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

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

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

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

               (e) own any subsidiary or make any investment in or acquire the
         obligations or securities of any other person or entity without the
         consent of Lender;

               (f) commingle its assets with the assets of any of its
         partner(s), members, shareholders, affiliates, or of any other person
         or entity or transfer any assets to any such

                                       21
<PAGE>

         person or entity other than distributions on account of equity
         interests in the Borrower permitted hereunder and properly accounted
         for;

               (g) incur any debt, secured or unsecured, direct or contingent
         (including guaranteeing any obligation), other than the Debt, except
         (i) unsecured trade and operational debt incurred with trade creditors
         in the ordinary course of its business of owning and operating the
         Property in such amounts as are normal and reasonable under the
         circumstances and (ii) debt incurred in connection with the financing
         of furniture fixtures and equipment at the Property, provided that such
         debt referenced in clauses (i) and (ii) is not evidenced by a note and
         is paid when due and provided in any event the outstanding principal
         balance of all such debt (including any exiting debt owed to MetLife
         Capital Corporation) shall not exceed at any one time four percent (4%)
         of the initial principal amount of the Debt; provided, however, that
         for purposes of this Section 4.3(g), indebtedness shall not include
         judgments against Borrower (other than judgments for contractual
         indebtedness);

               (h) allow any person or entity to pay its debts and liabilities
         (except a Guarantor or Indemnitor) or fail to pay its debts and
         liabilities solely from its own assets;

               (i) fail to maintain its records, books of account and bank
         accounts separate and apart from those of the shareholders, partners,
         members, principals and affiliates of Borrower, the affiliates of a
         shareholder, partner or member of Borrower, and any other person or
         entity or fail to prepare and maintain its own financial statements in
         accordance with generally accepted accounting principles and
         susceptible to audit, or if such financial statements are consolidated
         fail to cause such financial statements to contain footnotes disclosing
         that the Property is actually owned by the Borrower;

               (j) enter into any contract or agreement with any shareholder,
         partner, member, principal or affiliate of Borrower, any guarantor of
         all or a portion of the Debt (a "GUARANTOR") or any shareholder,
         partner, member, principal or affiliate thereof, except upon terms and
         conditions that are intrinsically fair and substantially similar to
         those that would be available on an arms-length basis with third
         parties other than any shareholder, partner, member, principal or
         affiliate of Borrower or Guarantor, or any shareholder, partner,
         member, principal or affiliate thereof;

               (k) seek dissolution or winding up in whole, or in part;

               (l) fail to correct any known misunderstandings regarding the
         separate identity of Borrower;

               (m) hold itself out to be responsible or pledge its assets or
         credit worthiness for the debts of another person or entity or allow
         any person or entity to hold itself out to be responsible or pledge its
         assets or credit worthiness for the debts of the Borrower (except for a
         Guarantor or Indemnitor);

                                       22
<PAGE>

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

               (o) fail to file its own tax returns or to use separate
         contracts, purchase orders, stationary, invoices and checks; provided
         that Borrower may file a consolidated tax return with its affiliates if
         required or permitted under applicable law;

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

               (q) fail to allocate fairly and reasonably among Borrower and any
         third party (including, without limitation, any Guarantor) any overhead
         for common employees, shared office space or other overhead and
         administrative expenses;

               (r) allow any person or entity to pay the salaries of Borrower's
         employees or fail to maintain a sufficient number of employees for its
         contemplated business operations;

               (s) 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;

               (t) file a voluntary petition or otherwise initiate proceedings
         to have the Borrower or any general partner or managing member
         adjudicated bankrupt or insolvent, or consent to the institution of
         bankruptcy or insolvency proceedings against the Borrower or any
         general partner or managing member, or file a petition seeking or
         consenting to reorganization or relief of the Borrower or any general
         partner or managing member as debtor under any applicable federal or
         state law relating to bankruptcy, insolvency, or other relief for
         debtors with respect to the Borrower or any general partner or managing
         member; or seek or consent to the appointment of any trustee, receiver,
         conservator, assignee, sequestrator, custodian, liquidator (or other
         similar official) of the Borrower or any general partner or managing
         member or of all or any substantial part of the properties and assets
         of the Borrower or any general partner or managing member, or make any
         general assignment for the benefit of creditors of the Borrower or any
         general partner or managing member, or admit in writing the inability
         of the Borrower or any general partner or managing member to pay its
         debts generally as they become due or declare or effect a moratorium on
         the Borrower or any general partner or managing member debt or take any
         action in furtherance of any such action;

                                       23
<PAGE>

               (u) except in connection with the Franchise Agreement or
         Management Agreement, share any common logo with or hold itself out as
         or be considered as a department or division of (i) any shareholder,
         partner, principal, member or affiliate of Borrower, (ii) any affiliate
         of a shareholder, partner, principal, member or affiliate of Borrower,
         or (iii) any other person or entity or allow any person or entity to
         identify the Borrower as a department or division of that person or
         entity;

               (v) conceal assets from any creditor, or enter into any
         transaction with the intent to hinder, delay or defraud creditors of
         the Borrower or the creditors of any other person or entity; or

               (w) fail to conduct its business so that the assumptions made
         with respect to the Borrower and SPE Principal in that certain
         "substantive non-consolidation" opinion letter (the "INSOLVENCY
         Opinion") delivered by Riddell Williams P.S. in connection with the
         origination of the Loan shall be true and correct in all material
         respects.

               (2) If Borrower is a limited partnership or a limited liability
         company (other than a Single Member LLC (as defined below), its sole
         general partner or managing member (the "SPE PRINCIPAL") of Borrower,
         as applicable, is and shall be at all times a corporation whose sole
         asset is its interest in Borrower and such SPE Principal of Borrower
         will at all times comply, and will cause Borrower to comply, with each
         of the covenants, terms and provisions contained in Section 4.3(1) as
         if such representation, warranty or covenant was made directly by such
         SPE Principal. The SPE Principal (or Borrower if Borrower is a
         corporation or a Single Member LLC) shall not fail at any time to have
         at least one (1) independent director who is not at the time of initial
         appointment, has not been at any time during the preceding five (5)
         years and shall not be at any time while serving: (a) a stockholder,
         director (other than as an independent director), officer, employee,
         partner or member of the Borrower, the SPE Principal or any affiliate
         of either of them; (b) a customer, supplier or other person who
         purchases any goods or services from or derives any revenues from its
         activities with the Borrower, the SPE Principal or any affiliate of
         either of them; (c) a person or other entity controlling or under
         common control with any such stockholder, member, partner, customer,
         supplier or other person; (d) an attorney or counsel to the Borrower,
         the SPE Principal or any of their affiliates or (e) a member of the
         immediate family of any such stockholder, director, officer, employee,
         member, partner, customer, supplier or other person. Notwithstanding
         the foregoing, the ownership of DE MINIMUS amounts of stock in WHC
         shall not, in and of itself, disqualify an individual from serving as
         an Independent Director. As used herein, the term "affiliate" means any
         person controlling, under common control with, or controlled by the
         person in question, and 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. As
         used herein, the term "Single Member LLC" means a limited liability
         company that (i) is either a single member limited liability company or
         a multiple member limited liability company that does not have an SPE

                                       24
<PAGE>

         Principal, (ii) is organized under the laws of the State of Delaware,
         (iii) provides in its organizational documents that it will at all
         times have either (x) a member which owns no economic interest in such
         Single Member LLC or (y) a "springing member" which will automatically
         become a member of such Single Member LLC immediately prior to the
         dissolution of the last remaining member and (iv) is otherwise
         acceptable to Lender.

                   ARTICLE 5 - REPRESENTATIONS AND WARRANTIES

         Section 5.1 BORROWER'S REPRESENTATIONS. Borrower represents and
warrants to Lender that each of the representations and warranties set forth in
that certain Closing Certificate of even date herewith executed by Borrower in
favor of Lender are true and correct as of the date hereof and are hereby
incorporated and restated in this Security Instrument by this reference.

         Section 5.2 WARRANTY OF TITLE. Borrower represents and warrants that it
has good and marketable title to the Property and has the right to 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 and the
lien of MetLife Capital Corporation in certain personal property financed by it
(the "PERMITTED EXCEPTIONS"). Borrower represents and warrants that none of the
Permitted Exceptions will materially and adversely affect the ability of the
Borrower to pay in full the Loan, the use of the Property for the use currently
being made thereof, the operation of the Property or the value of the Property.
Borrower shall, at its sole cost and expense, forever warrant, defend and
preserve the title and the validity and priority of the lien of this Security
Instrument and shall, at its sole cost and expense, forever warrant and defend
the same to Trustee and Lender against the claims of all persons whomsoever.

         Section 5.3 STATUS OF PROPERTY.

               (a) 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 National Flood Insurance Act of 1968 or the Flood Disaster
         Protection Act of 1973, as amended, or any successor law, or, if
         located within any such area, Borrower has obtained and will maintain
         the insurance prescribed in Section 3.2 hereof.

               (b) Borrower has obtained all necessary certificates, permits,
         certificates of incorporation, licenses and other approvals,
         governmental and otherwise, necessary for the use, occupancy and
         operation of the Property and the conduct of the business as a hotel
         (including, without limitation, any applicable liquor license,
         certificates of completion and certificates of occupancy) and all
         required zoning, building code, land use, environmental and other
         similar permits or approvals, all of which are in full force

                                       25
<PAGE>

         and effect as of the date hereof and not subject to revocation,
         suspension, forfeiture or modification (collectively, the "LICENSES").

               (c) The Property and the present and contemplated use and
         occupancy thereof are to the best knowledge of Borrower in full
         compliance with all Applicable Laws, including, without limitation,
         zoning ordinances, building codes, land use and environmental laws,
         laws relating to the disabled (including, but not limited to, the ADA)
         and other similar laws.

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

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

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

               (g) The Property is free from damage caused by fire or other
         casualty. There is no pending or, to the best knowledge of Borrower,
         threatened condemnation proceedings affecting the Property or any
         portion thereof.

               (h) All costs and expenses of any and all labor, materials,
         supplies and equipment used in the construction of the Improvements
         have been paid in full and no notice of any mechanics' or materialmen's
         liens or of any claims of right to any such liens have been received.

               (i) Borrower has paid in full for, and is the owner of, all
         furnishings, fixtures and equipment (other than tenants' property) used
         in connection with the operation of the Property, free and clear of any
         and all security interests, liens or encumbrances, except the lien and
         security interest created pursuant to the Loan Documents and the lien
         of MetLife Capital Corporation in certain personal property financed by
         it.

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

               (k) All Improvements lie within the boundary of the Land, except
         for such encroachments shown in the title insurance policy insuring the
         lien of this Security Instrument or on the survey which is incorporated
         into said title insurance policy.

         Section 5.4 NO FOREIGN PERSON. Borrower is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986,
as amended, and the related Treasury Department regulations, including temporary
regulations.

                                       26
<PAGE>

         Section 5.5 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 5.6 FRANCHISE AGREEMENT. The WestCoast Hotels Franchise
Agreement dated as of May ___, 2001 (the "FRANCHISE AGREEMENT"), between
Borrower and WestCoast Hotels, Inc., pursuant to which Borrower has the right to
operate the hotel located on the Property under a name and/or hotel system
controlled by such franchisor, is in full force and effect and there is no
default, breach or violation existing thereunder by any party thereto and no
event has occurred (other than payments due but not yet delinquent) that, with
the passage of time or the giving of notice, or both, would constitute a
default, breach or violation by any party thereunder.

         Section 5.7 MANAGEMENT AGREEMENT. The Management Agreement dated as of
May ____, 2001 (the "MANAGEMENT AGREEMENT"), between Borrower and WestCoast
Hospitality Limited Partnership ("WHLP"), pursuant to which such hotel manager
operates the Property as a hotel, is in full force and effect and there is no
default, breach or violation existing thereunder by any party thereto and no
event has occurred (other than payments due but not yet delinquent) that, with
the passage of time or the giving of notice, or both, would constitute a
default, breach or violation by any party thereunder.

         Section 5.8 VALIDITY OF AGREEMENTS. Neither the execution and delivery
of the Loan Documents, the Borrower's performance thereunder, the recordation of
this Security Instrument, nor the exercise of any remedies under this Security
Instrument, will adversely affect Borrower's rights under the Franchise
Agreement, the Management Agreement, or any of the Licenses.

                     ARTICLE 6 - OBLIGATIONS AND RELIANCES

         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 Loan
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 partners, members, 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. Borrower is not
relying on Lender's expertise, business acumen or advice in connection with the
Property.

Section 6.3 NO LENDER OBLIGATIONS.

                                       27
<PAGE>

               (a) Notwithstanding the provisions of Subsections 1.1(e) and
         1.1(l) or Section 1.2, Lender is not undertaking (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.

               (b) 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 Loan Documents, including
         without limitation, any officer's certificate, balance sheet, statement
         of profit and loss or other financial statement, survey, appraisal, or
         insurance policy, Lender shall not be deemed to have warranted,
         consented to, or affirmed the sufficiency, 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 Loan Documents,
Lender is expressly and primarily relying on the truth and accuracy of the
warranties and representations set forth in Article 5 and that certain Closing
Certificate of even date herewith executed by Borrower, 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 such warranties and representations are a material
inducement to Lender in accepting the Note, this Security Instrument and the
Other Loan Documents; and that Lender would not be willing to make the Loan (as
hereinafter defined) and accept this Security Instrument in the absence of the
warranties and representations as set forth in Article 5 and such Closing
Certificate.

                         ARTICLE 7 - FURTHER ASSURANCES

         Section 7.1 RECORDING FEES. 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 Loan Documents, any note or deed of trust 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 supplemental hereto, any
security instrument with respect to the Property or any instrument of further
assurance, and any modification or amendment of the foregoing documents, except
where prohibited by law so to do.

         Section 7.2 FURTHER ACTS. 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, 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 the property and rights hereby granted, bargained, sold,
conveyed, confirmed, pledged, assigned, warranted and transferred or intended
now or hereafter

                                       28
<PAGE>

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 to Lender one or more
financing statements, chattel mortgages or other instruments, to evidence more
effectively the security interest of Lender in the Property. Borrower grants to
Lender an irrevocable power of attorney coupled with an interest for the purpose
of exercising and perfecting any and all rights and remedies available to Lender
at law and in equity, including without limitation such rights and remedies
available to Lender pursuant to this Section 7.2; provided that Lender shall not
exercise such power of attorney unless Borrower fails to comply with the
provisions of this Section 7.2 for ten (10) days after notice from Lender.

         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 imposes a tax, either directly or
         indirectly, on the Debt or Lender's interest in the Property, requires
         revenue or other stamps to be affixed to the Note, this Security
         Instrument, or the Other Loan Documents, or imposes any other tax or
         charge on the same, Borrower will pay the same, with interest and
         penalties thereon, if any; provided, however, the foregoing shall not
         apply to any income or similar taxes which are imposed on Lender. If
         Lender is advised by counsel chosen by it that the payment of tax by
         Borrower would be unlawful or taxable to Lender or unenforceable or
         provide the basis for a defense of usury, then Lender shall have the
         option, by written notice of not less than ninety (90) calendar days,
         to declare the Debt immediately due and payable.

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

         Section 7.4 CONFIRMATION STATEMENT.

               (a) After request by Lender, Borrower, within ten (10) days,
         shall furnish Lender or any proposed assignee with a statement, duly
         acknowledged and certified, confirming to Lender (or its designee) (i)
         the amount of the original principal amount of the Note, (ii) the
         unpaid principal amount of the Note, (iii) the rate of interest of the
         Note, (iv) the terms of payment and maturity date of the Note, (v) the
         date installments of interest and/or principal were last paid, and (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 this Security

                                       29
<PAGE>

         Instrument; provided, however, Lender shall not be entitled hereunder
         to receive more than one (1) such statement in each calendar year.

               (b) Subject to the provisions of the Leases, Borrower shall
         deliver to Lender, promptly upon request (but not more frequently than
         once annually so long as Borrower is not in default hereunder), duly
         executed estoppel certificates from any one or more lessees as required
         by Lender attesting to such facts regarding the Lease as Lender 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 lessee 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 16.1 hereof, at Lender's request, Borrower, any Guarantors and
         any Indemnitors shall provide an estoppel certificate to the Investor
         (defined in Section 16.1) or any prospective Investor in such form,
         substance and detail as Lender, such Investor or prospective Investor
         may require.

         Section 7.5 SPLITTING OF SECURITY INSTRUMENT. This Security Instrument
and the Note shall, at any time until the same shall be fully paid and
satisfied, at the sole election of Lender, be split or divided into two or more
notes and two or more security instruments, each of which shall cover all or a
portion of the Property to be more particularly described therein. To that end,
Borrower, upon written request of Lender, shall execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered by the then owner
of the Property, to Lender and/or its designee or designees substitute notes and
security instruments in such principal amounts, aggregating not more than the
then unpaid principal amount of Debt, and containing terms, provisions and
clauses similar to those contained herein and in the Note, and such other
documents and instruments as may be required by Lender.

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

                      ARTICLE 8 - DUE ON SALE/ENCUMBRANCE

Section 8.1 LENDER RELIANCE. Borrower acknowledges that Lender has
examined and relied on the creditworthiness of Borrower and experience of
Borrower and its partners, members, principals and (if Borrower is a trust)
beneficial owners in owning and operating properties such as the Property in
agreeing to make the Loan, and will continue to rely

                                       30
<PAGE>

on Borrower's ownership of the Property as a means of maintaining the value of
the Property as security for repayment of the Debt and the performance of the
Other Obligations. Borrower acknowledges that Lender has a valid interest in
maintaining the value of the Property so as to ensure that, should Borrower
default in the repayment of the Debt or the performance of the Other
Obligations, Lender can recover the Debt by a sale of the Property.

         Section 8.2 NO SALE/ENCUMBRANCE.

               (a) Borrower agrees that Borrower shall not, without the prior
         written consent of Lender, Transfer the Property or any part thereof or
         permit the Property or any part thereof to be Transferred. 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 Transfer of the Property
         without Lender's consent.

               (b) As used in Section 8.2(a), "Transfer" shall mean any
         voluntary or involuntary sale, conveyance, mortgage, grant, bargain,
         encumbrance, pledge, assignment or transfer of all or any part of the
         Property or any interest therein including, but not limited to: (i) an
         installment sales agreement wherein Borrower agrees to sell the
         Property or any part thereof for a price to be paid in installments;
         (ii) an agreement by Borrower leasing all or a substantial part of the
         Property for other than actual occupancy by a space tenant thereunder;
         (iii) 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; (iv) if Borrower, Guarantor, or any managing
         member or general partner of Borrower or Guarantor is a corporation,
         any Transfer of such corporation's stock (or the stock of any
         corporation directly or indirectly controlling such Borrower,
         Guarantor, managing member or general partner 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 forty-nine percent (49%) or
         more of such corporation's stock shall directly or indirectly be vested
         in or pledged to a party or parties who are not now stockholders
         (provided, however, in no event shall this subpart [iv] apply to any
         Guarantor whose stock or shares are traded on a nationally recognized
         stock exchange); (v) if Borrower, Guarantor, or any managing member or
         general partner of Borrower or Guarantor is a limited liability company
         or partnership, the Transfer by which an aggregate of forty-nine
         percent (49%) or more of the ownership interest in such limited
         liability company or forty-nine percent (49%) or more of the
         partnership interests in such partnership shall directly or indirectly
         be vested in or pledged to parties not having an ownership interest as
         of the date of this Security Instrument; and (vi) if Borrower, any
         Guarantor or any managing member or general partner of Borrower or any
         Guarantor is a partnership, limited liability company or joint venture,
         the change, removal or resignation of a general partner, managing
         member or joint venturer or the Transfer directly or indirectly of all
         or any portion of the partnership or ownership interest of any general
         partner, managing member or joint venturer.

         Section 8.3 EXCLUDED AND PERMITTED TRANSFERS.

                                       31
<PAGE>

               (a) A Transfer within the meaning of this Article 8 shall not
         include Transfers of Shares of WestCoast Hospitality Corporation
         ("WHC") for so long as WHC is a publicly-traded company. In the event
         WHC is no longer a publicly-traded company, the provisions of Sections
         8.2(a) and (b) shall thereafter apply to WHC. Additionally, Lender's
         consent shall not be required in connection with a merger of WHLP into
         WHC or the transfer to WHC of any interests held by WHLP.

               (b) Intentionally Omitted.

               (c) Notwithstanding the provisions of Section 8.2 above, Lender
         will give its consent to three separate sales or transfers of the
         Property or ownership interests in the Borrower, a general partner or
         managing member of the Borrower, or any Guarantor, if (but only if) no
         Event of Default under the Loan Documents has occurred and is
         continuing, and if each of the following conditions precedent have been
         fully satisfied (in each case as determined in Lender's sole and
         absolute discretion or, in connection with the first such transfer of
         the ownership interests in the sole Member of Borrower, Lender's
         reasonable discretion): (i) the grantee's or transferee's integrity,
         reputation, financial condition, character and management ability are
         satisfactory to Lender, and all information relating thereto requested
         by Lender is delivered to Lender at least 30 days prior to the proposed
         transfer, (ii) the grantee's or transferee's (and its sole general
         partner's or managing member's) single purpose and bankruptcy remote
         character are satisfactory to Lender, and all information relating
         thereto requested by Lender is delivered to Lender at least 30 days
         prior to the proposed transfer, (iii) Lender has obtained such
         estoppels from any guarantors of the Note or replacement guarantors and
         such other legal opinions regarding substantive consolidation issues,
         enforceability of the assumption documents, no adverse impact on the
         Securities or any REMIC holding the Note and similar matters as Lender
         may require, (iv) all of Lender's costs and expenses associated with
         the sale or transfer (including reasonable attorneys' fees) are paid by
         Borrower or the grantee or transferee, (v) the payment of a transfer
         fee not to exceed 1% of the then unpaid principal balance of the loan
         evidenced by the Note and secured hereby (the "LOAN"), except that the
         first such transfer of the ownership interests in the sole member of
         Borrower shall be subject to the payment of a transfer fee not to
         exceed 0.5% of the then unpaid principal balance of the Loan, (vi) the
         execution and delivery to Lender of a written assumption agreement
         and/or substitute guaranty (in its sole and absolute discretion) and
         such modifications to the Loan Documents executed by such parties and
         containing such terms and conditions as Lender may require prior to
         such sale or transfer (provided that in the event the Loan is included
         in a REMIC and is a performing Loan, no modification to the terms and
         conditions shall be made or permitted that would cause (A) any adverse
         tax consequences to the REMIC or any holders of any Mortgage-Backed
         Pass-Through Securities, (B) the Security Instrument to fail to be a
         Qualifying Security Instrument under applicable federal law relating to
         REMIC's, or (C) result in a taxation of the income from the Loan to the
         REMIC or cause a loss of REMIC status), and (vii) if applicable, the
         delivery to Lender of an endorsement (at Borrower's

                                       32
<PAGE>

         sole cost and expense) to Lender's policy of title insurance then
         insuring the lien created by this Security Instrument in form and
         substance acceptable to Lender.

               (d) Without limiting the foregoing, if Lender shall consent to a
         transfer of the Property, the written assumption agreement described in
         Subsection 8.3(c)(vi) above shall provide for the release of Borrower
         and, if approved by Lender, each Guarantor and Indemnitor of personal
         liability under the Note and Other Loan Documents, but only as to acts
         or events occurring, or obligations arising, after the closing of such
         transfer.

         Section 8.4. NO IMPLIED FUTURE CONSENT. Lender's consent to one sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property shall not be deemed to be a waiver of Lender's right to require such
consent to any future occurrence of same. Any sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property made in contravention
of this Article 8 shall be null and void and of no force and effect.

         Section 8.5 COSTS OF CONSENT. Borrower agrees to bear and shall pay or
reimburse Lender on demand for all reasonable expenses (including, without
limitation, all recording costs, reasonable attorneys' fees and disbursements
and title search costs) incurred by Lender in connection with the review,
approval and documentation of any such sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer.

         Section 8.6 CONTINUING SEPARATENESS REQUIREMENTS. In no event shall any
of the terms and provisions of this Article 8 amend or modify the terms and
provisions contained in Section 4.3 herein.

         Section 8.7 NON-CONSOLIDATION OPINION. If as a result of any direct or
indirect transfers of interests in Borrower (including any excluded and
permitted transfers) more than forty-nine percent (49%) in the aggregate of
direct or indirect interests in Borrower is owned by any person or entity that
owned less than a forty-nine percent (49%) direct or indirect interest in
Borrower as of the date hereof, Lender shall, as a condition to such transfer,
receive a non-consolidation opinion acceptable to it and the Rating Agencies.

                               ARTICLE 9 - DEFAULT

         Section 9.1 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) calendar day after the same is due or if the entire Debt is not
         paid on or before the maturity date, along with applicable prepayment
         premiums, if any;

               (b) if Borrower, or its general partner or managing member, if
         applicable, violates or does not comply with the provisions of Section
         4.3 in all material respects or if (i) there is a transfer of title to
         the Property or any portion thereof in violation of Article 8, (ii)
         there is a transfer of title to any direct or indirect interest in
         Borrower in violation

                                       33
<PAGE>

         of Article 8, (iii) Borrower voluntarily breaches or permits any other
         breach of Article 8, or (iv) there is any other breach of Article 8 and
         such breach continues for thirty (30) calendar days after Borrower has
         notice of same;

               (c) if any representation or warranty of Borrower or of its
         members, general partners, principals, affiliates, agents or employees,
         or of any Guarantor made herein or in the Environmental Indemnity or in
         any other Loan Document, 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;

               (d) if Borrower or any Guarantor shall make an assignment for the
         benefit of creditors or if Borrower or any Guarantor shall admit in
         writing its inability to pay, or Borrower's or any Guarantor's failure
         to pay its debts as they become due;

               (e) if (i) Borrower or any subsidiary or general partner or
         managing member of Borrower, or any Guarantor 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 Borrower or any subsidiary or general partner or managing
         member of Borrower, or any Guarantor shall make a general assignment
         for the benefit of its creditors; or (ii) there shall be commenced
         against Borrower or any subsidiary or general partner or managing
         member of Borrower, or any Guarantor 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) calendar days; or (iii) there shall be commenced
         against Borrower or any subsidiary or general partner or managing
         member of Borrower or any Guarantor 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) calendar days from the entry thereof;
         or (iv) Borrower or any subsidiary or general partner or managing
         member of Borrower, or any Guarantor 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) Borrower or any subsidiary or general partner or managing
         member of Borrower, or any Guarantor shall generally not, or shall be
         unable to, or shall admit in writing its inability to, pay its debts as
         they become due;

               (f) subject to Borrower's right to contest certain liens as
         provided in this Security Instrument, if the Property becomes subject
         to any mechanic's, materialman's or

                                       34
<PAGE>

         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) calendar days;

               (g) if any federal tax lien is filed against Borrower, any
         general partner or managing member of Borrower, any Guarantor or the
         Property and same is not discharged of record within thirty (30)
         calendar days after same is filed, or if any final judgment or decree
         shall be entered against Borrower which is not fully insured or paid
         within thirty (30) calendar days;

               (h) except as permitted in this Security Instrument, the actual
         or threatened demolition or removal of any of the Improvements without
         the prior consent of Lender;

               (i) damage to the Property in any manner which is not covered by
         insurance, which lack of coverage arises solely as a result of
         Borrower's failure to maintain the insurance required under this
         Security Instrument;

               (j) if without Lender's prior consent, the hotel manager for the
         Property under the Management Agreement (or any successor management
         agreement) resigns or is removed, or there is any material change in
         the Management Agreement (or any successor management agreement);

               (k) this Security Instrument shall cease to constitute a
         first-priority lien on the Property (other than in accordance with its
         terms);

               (l) seizure or forfeiture of any material portion of the
         Property, or Borrower's interest therein, resulting from criminal
         wrongdoing or other unlawful action of Borrower, its affiliates, or any
         tenant in the Property under any federal, state or local law;

               (m) if Borrower consummates a transaction which would cause this
         Security Instrument or Lender's exercise of its rights under this
         Security Instrument, the Note or the Other Loan Documents to constitute
         a nonexempt prohibited transaction under ERISA or result in a violation
         of a state statute regulating governmental plans, subjecting Lender to
         liability for a violation of ERISA or a state statute governing
         employee benefit plans;

               (n) if any default occurs under any guaranty or indemnity
         including the Environmental Indemnity executed in connection herewith
         and such default continues after the expiration of applicable grace
         periods, or such guaranty or indemnity shall cease to be in full force
         and effect, or any guarantor or indemnitor shall deny or disaffirm its
         obligation thereunder;

               (o) if Borrower or any Guarantor, as the case may be, shall
         continue to be in default under any other term, covenant or condition
         of this Security Instrument or any Other Loan Documents for thirty (30)
         calendar days after notice from Lender; provided

                                       35
<PAGE>

         that if such default cannot reasonably be cured within such thirty (30)
         calendar day period and Borrower (or such Guarantor as the case may be)
         shall have commenced to cure such default within such thirty (30)
         calendar day period and thereafter diligently and expeditiously
         proceeds to cure the same, such thirty (30) calendar day period shall
         be extended for so long as it shall require Borrower (or such Guarantor
         as the case may be) 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 sixty (60) calendar days after the notice from Lender
         referred to above;

               (p) if a default has occurred and continues beyond any applicable
         cure period under the Management Agreement (or any successor management
         agreement) if such default permits the hotel manager to terminate or
         cancel the Management Agreement (or any successor management
         agreements);

               (q) if without Lender's prior consent, there is any material
         change in the Franchise Agreement (or any successor franchise
         agreement);

               (r) if a default has occurred and continues beyond any applicable
         cure period under the Franchise Agreement (or any successor franchise
         agreement) if such default permits the franchisor to terminate or
         cancel the Franchise Agreement (or any successor franchise agreement);
         and

               (s) if Borrower ceases to do business as a hotel or motel on the
         Property or terminates such business for any reason whatsoever (other
         than temporary cessation in connection with any renovations to the
         Property).

         Section 9.2 DEFAULT INTEREST. Borrower will pay, from the date of an
Event of Default through the earlier of the date upon which the Event of Default
is cured or the date upon which the Debt is paid in full, interest on the unpaid
principal balance of the Note at a per annum rate equal to the lesser of (a) the
greater of (i) five percent (5%) plus the Prime Rate (as defined in the Note),
and (ii) five percent (5%) plus the Applicable Interest Rate (as defined in the
Note), and (b) the maximum interest rate which Borrower may by law pay or Lender
may charge and collect (the "DEFAULT RATE").

                        ARTICLE 10 - RIGHTS AND REMEDIES

         Section 10.1 REMEDIES. Upon the occurrence of any Event of Default and
prior to Lender's acceptance of any cure thereof, Borrower agrees that Lender
may take such action, by or through Trustee, by Lender itself or otherwise,
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 may determine, in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Lender:

                                       36
<PAGE>

               (a) Right to Perform Borrower's Covenants. If Borrower has failed
         to keep or perform any covenant whatsoever contained in this Security
         Instrument or the Other Loan Documents, Lender may, but shall not be
         obligated to any person to do so, perform or attempt to perform said
         covenant and any payment made or expense incurred in the performance or
         attempted performance of any such covenant, together with any sum
         expended by Lender that is chargeable to Borrower or subject to
         reimbursement by Borrower under the Loan Documents, shall be and become
         a part of the "Debt", and Borrower promises, upon demand, to pay to
         Lender, at the place where the Note is payable, all sums so incurred,
         paid or expended by Lender, with interest from the date when paid,
         incurred or expended by Lender at the Default Rate.

               (b) Right of Entry. Lender may, prior or subsequent to the
         institution of any foreclosure proceedings, enter upon the Property, or
         any part thereof, and take exclusive possession of the Property and of
         all books, records, and accounts relating thereto and to exercise
         without interference from Borrower any and all rights which Borrower
         has with respect to the management, possession, operation, protection,
         or preservation of the Property, including without limitation the right
         to rent the same for the account of Borrower and to deduct from such
         Rents all costs, expenses, and liabilities of every character incurred
         by Lender in collecting such Rents and in managing, operating,
         maintaining, protecting, or preserving the Property and to apply the
         remainder of such Rents on the Debt in such manner as Lender may elect.
         All such costs, expenses, and liabilities incurred by Lender in
         collecting such Rents and in managing, operating, maintaining,
         protecting, or preserving the Property, if not paid out of Rents as
         hereinabove provided, shall constitute a demand obligation owing by
         Borrower and shall bear interest from the date of expenditure until
         paid at the Default Rate, all of which shall constitute a portion of
         the Debt. If necessary to obtain the possession provided for above,
         Lender may invoke any and all legal remedies to dispossess Borrower,
         including specifically one or more actions for forcible entry and
         detainer, trespass to try title, and restitution. In connection with
         any action taken by Lender pursuant to this Subsection 10.1(b), Lender
         shall not be liable for any loss sustained by Borrower resulting from
         any failure to let the Property, or any part thereof, or from any other
         act or omission of Lender in managing the Property unless such loss is
         caused by the willful misconduct of Lender, nor shall Lender be
         obligated to perform or discharge any obligation, duty, or liability
         under any Lease or under or by reason hereof or the exercise of rights
         or remedies hereunder. Borrower shall and does hereby agree to
         indemnify Lender for, and to hold Lender harmless from, any and all
         liability, loss, or damage, which may or might be incurred by Lender
         under any such Lease or under or by reason hereof or the exercise of
         rights or remedies hereunder, and from any and all claims and demands
         whatsoever which may be asserted against Lender by reason of any
         alleged obligations or undertakings on its part to perform or discharge
         any of the terms, covenants, or agreements contained in any such Lease.
         Should Lender incur any such liability, the amount thereof, including
         without limitation costs, expenses, and reasonable attorneys' fees,
         together with interest thereon from the date of expenditure until paid
         at the Default Rate, shall be secured hereby, and Borrower shall
         reimburse Lender therefor

                                       37
<PAGE>

         immediately upon demand. Nothing in this Subsection 10.1(b) shall
         impose any duty, obligation, or responsibility upon Lender for the
         control, care, management, leasing, or repair of the Property, nor for
         the carrying out of any of the terms and conditions of any such Lease;
         nor shall it operate to make Lender responsible or liable for any waste
         committed on the Property by the tenants or by any other parties, or
         for any hazardous substances or environmental conditions on or under
         the Property, or for any dangerous or defective condition of the
         Property or for any negligence in the management, leasing, upkeep,
         repair, or control of the Property resulting in loss or injury or death
         to any tenant, licensee, employee, or stranger. Borrower hereby assents
         to, ratifies, and confirms any and all actions of Lender with respect
         to the Property taken under this subsection.

               (c) Right to Accelerate. Lender may, without notice (except as
         provided in Section 9.1(o) above), demand, presentment, notice of
         nonpayment or nonperformance, protest, notice of protest, notice of
         intent to accelerate, notice of acceleration, or any other notice or
         any other action, all of which are hereby waived by Borrower and all
         other parties obligated in any manner whatsoever on the Debt, declare
         the entire unpaid balance of the Debt immediately due and payable, and
         upon such declaration, the entire unpaid balance of the Debt shall be
         immediately due and payable.

               (d) Foreclosure-Power of Sale. Lender may institute a proceeding
         or proceedings, judicial, or nonjudicial, by advertisement or
         otherwise, for the complete or partial foreclosure of this Security
         Instrument or the complete or partial sale of the Property under power
         of sale or under any applicable provision of law. Lender may, through
         the Trustee, sell the Property, and all estate, right, title, interest,
         claim and demand of Borrower therein, and all rights of redemption
         thereof, at one or more sales, as an entirety or in parcels, with such
         elements of real and/or personal property, and at such time and place
         and upon such terms as it may deem expedient, or as may be required by
         applicable law, and in the event of a sale, by foreclosure 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.

               (e) Rights Pertaining to Sales. Subject to the requirements of
         applicable law and except as otherwise provided herein, the following
         provisions shall apply to any sale or sales of all or any portion of
         the Property under or by virtue of Subsection 10.1(d) above, whether
         made under the power of sale herein granted or by virtue of judicial
         proceedings or of a judgment or decree of foreclosure and sale:

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

                                       38
<PAGE>

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

                   (iii) After each sale, Lender, Trustee or an officer of any
               court empowered to do so shall execute and deliver to the
               purchaser or purchasers at such sale a good and sufficient
               instrument or instruments granting, conveying, assigning and
               transferring all right, title and interest of Borrower in and to
               the property and rights sold and shall receive the proceeds of
               said sale or sales and apply the same as specified in the Note.
               Each of Trustee and Lender is hereby appointed the true and
               lawful attorney-in-fact of Borrower, which appointment is
               irrevocable and shall be deemed to be coupled with an interest,
               in Borrower's name and stead, to make all necessary conveyances,
               assignments, transfers and deliveries of the property and rights
               so sold, Borrower hereby ratifying and confirming all that said
               attorney or such substitute or substitutes shall lawfully do by
               virtue thereof. Nevertheless, Borrower, if requested by Trustee
               or Lender, shall ratify and confirm any such sale or sales by
               executing and delivering to Trustee, Lender or such purchaser or
               purchasers all such instruments as may be advisable, in Trustee's
               or Lender's judgment, for the purposes as may be designated in
               such request.

                   (iv) Any and all statements of fact or other recitals made in
               any of the instruments referred to in Subsection 10.1(e)(iii)
               given by Trustee or Lender shall be taken as conclusive and
               binding against all persons as to evidence of the truth of the
               facts so stated and recited.

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

                   (vi) Upon any such sale or sales, Lender may bid for and
               acquire the Property and, in lieu of paying cash therefor, may
               make settlement for the purchase price by crediting against the
               Debt the amount of the bid made therefor, after deducting
               therefrom the expenses of the sale, the cost of any enforcement
               proceeding hereunder, and any other sums which Trustee or Lender
               is authorized to deduct under the terms hereof, to the extent
               necessary to satisfy such bid.

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

                                       39
<PAGE>

               (f) Lender's Judicial Remedies. Lender, or Trustee upon written
         request of Lender, may proceed by suit or suits, at law or in equity,
         to enforce the payment of the Debt to foreclose the liens and security
         interests of this Security Instrument as against all or any part of the
         Property, and to have all or any part of the Property sold under the
         judgment or decree of a court of competent jurisdiction. This remedy
         shall be cumulative of any other nonjudicial remedies available to
         Lender under this Security Instrument, the Note or the Other Loan
         Documents. Proceeding with a request or receiving a judgment for legal
         relief shall not be or be deemed to be an election of remedies or bar
         any available nonjudicial remedy of Lender.

               (g) Lender's Right to Appointment of Receiver. Lender, as a
         matter of right and (i) without regard to the sufficiency of the
         security for repayment of the Debt and without notice to Borrower, (ii)
         without any showing of insolvency, fraud, or mismanagement on the part
         of Borrower, (iii) without the necessity of filing any judicial or
         other proceeding other than the proceeding for appointment of a
         receiver, and (iv) without regard to the then value of the Property,
         shall be entitled to the appointment of a receiver or receivers for the
         protection, possession, control, management and operation of the
         Property, including (without limitation), the power to collect the
         Rents, enforce this Security Instrument and, in case of a sale and
         deficiency, during the full statutory period of redemption (if any),
         whether there be a redemption or not, as well as during any further
         times when Borrower, except for the intervention of such receiver,
         would be entitled to collection of such Rents. Borrower hereby
         irrevocably consents to the appointment of a receiver or receivers. Any
         receiver appointed pursuant to the provisions of this subsection shall
         have the usual powers and duties of receivers in such matters.

               (h) Commercial Code Remedies. Lender may 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
         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 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.

               (i) Apply Escrow Funds. Lender may apply any Funds (as defined in
         the Escrow Agreement) and any other sums held in escrow or otherwise by
         Lender in accordance with the terms of this Security Instrument or any
         Other Loan Document to the payment of the following items in any order
         in its uncontrolled discretion:

                   (i) Taxes and Other Charges;

                   (ii) Insurance Premiums;

                                       40
<PAGE>

                   (iii) Interest on the unpaid principal balance of the Note;

                   (iv) Amortization of the unpaid principal balance of the
               Note; and

                   (v) All other sums payable pursuant to the Note, this
               Security Instrument and the Other Loan Documents, including
               without limitation advances made by Lender pursuant to the terms
               of this Security Instrument.

               (j) Other Rights. Lender (i) may, upon notice to Borrower,
         surrender the Policies maintained pursuant to this Security Instrument
         or any part thereof, and upon receipt shall apply the unearned premiums
         as a credit on the Debt, 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
         premiums; and (ii) may apply the Tax and Insurance Escrow Fund (as
         defined in the Escrow Agreement) and/or the Replacement Escrow Fund (as
         defined in the Escrow Agreement) and any other funds held by Lender
         toward payment of the Debt; and (iii) shall have and may exercise any
         and all other rights and remedies which Lender may have at law or in
         equity, or by virtue of any of the Loan Documents, or otherwise.

               (k) Discontinuance of Remedies. In case Lender shall have
         proceeded to invoke any right, remedy, or recourse permitted under the
         Loan Documents and shall thereafter elect to discontinue or abandon
         same for any reason, Lender shall have the unqualified right so to do
         and, in such event, Borrower and Lender shall be restored to their
         former positions with respect to the Debt, the Loan Documents, the
         Property or otherwise, and the rights, remedies, recourses and powers
         of Lender shall continue as if same had never been invoked.

               (l) Remedies Cumulative. All rights, remedies, and recourses of
         Lender granted in the Note, this Security Instrument and the Other Loan
         Documents, any other pledge of collateral, or otherwise available at
         law or equity: (i) shall be cumulative and concurrent; (ii) may be
         pursued separately, successively, or concurrently against Borrower, the
         Property, or any one or more of them, at the sole discretion of Lender;
         (iii) may be exercised as often as occasion therefor shall arise, it
         being agreed by Borrower that the exercise or failure to exercise any
         of same shall in no event be construed as a waiver or release thereof
         or of any other right, remedy, or recourse; (iv) shall be nonexclusive;
         (v) shall not be conditioned upon Lender exercising or pursuing any
         remedy in relation to the Property prior to Lender bringing suit to
         recover the Debt; and (vi) in the event Lender elects to bring suit on
         the Debt and obtains a judgment against Borrower prior to exercising
         any remedies in relation to the Property, all liens and security
         interests, including the lien of this Security Instrument, shall remain
         in full force and effect and may be exercised thereafter at Lender's
         option.

               (m) Bankruptcy Acknowledgment. In the event the Property or any
         portion thereof or any interest therein becomes property of any
         bankruptcy estate or subject to

                                       41
<PAGE>

         any state or federal insolvency proceeding, then Lender shall
         immediately become entitled, in addition to all other relief to which
         Lender may be entitled under this Security Instrument, to obtain (i) an
         order from the Bankruptcy Court or other appropriate court granting
         immediate relief from the automatic stay pursuant toss. 362 of the
         Bankruptcy Code so to permit Lender to pursue its rights and remedies
         against Borrower as provided under this Security Instrument and all
         other rights and remedies of Lender at law and in equity under
         applicable state law, and (ii) an order from the Bankruptcy Court
         prohibiting Borrower's use of all "cash collateral" as defined underss.
         363 of the Bankruptcy Code. In connection with such Bankruptcy Court
         orders, Borrower shall not contend or allege in any pleading or
         petition filed in any court proceeding that Lender does not have
         sufficient grounds for relief from the automatic stay. Any bankruptcy
         petition or other action taken by the Borrower to stay, condition, or
         inhibit Lender from exercising its remedies are hereby admitted by
         Borrower to be in bad faith and Borrower further admits that Lender
         would have just cause for relief from the automatic stay in order to
         take such actions authorized under state law.

               (n) Application of Proceeds. The proceeds from any sale, lease,
         or other disposition made pursuant to this Security Instrument, or the
         proceeds from the surrender of any insurance policies pursuant hereto,
         or any Rents collected by Lender from the Property, or the Tax and
         Insurance Escrow Fund or the Replacement Escrow Fund (as defined in the
         Escrow Agreement) or proceeds from insurance which Lender elects to
         apply to the Debt pursuant to Article 3 hereof, shall be applied by
         Trustee, or by Lender, as the case may be, to the Debt in the following
         order and priority: (1) to the payment of all expenses of advertising,
         selling, and conveying the Property or part thereof, and/or prosecuting
         or otherwise collecting Rents, proceeds, premiums or other sums
         including reasonable attorneys' fees and a reasonable fee or commission
         to Trustee, not to exceed five percent of the proceeds thereof or sums
         so received; (2) to that portion, if any, of the Debt with respect to
         which no person or entity has personal or entity liability for payment
         (the "EXCULPATED PORTION"), and with respect to the Exculpated Portion
         as follows: first, to accrued but unpaid interest, second, to matured
         principal, and third, to unmatured principal in inverse order of
         maturity; (3) to the remainder of the Debt as follows: first, to the
         remaining accrued but unpaid interest, second, to the matured portion
         of principal of the Debt, and third, to prepayment of the unmatured
         portion, if any, of principal of the Debt applied to installments of
         principal in inverse order of maturity; (4) the balance, if any or to
         the extent applicable, remaining after the full and final payment of
         the Debt to the holder or beneficiary of any inferior liens covering
         the Property, if any, in order of the priority of such inferior liens
         (Trustee and Lender shall hereby be entitled to rely exclusively on a
         commitment for title insurance issued to determine such priority); and
         (5) the cash balance, if any, to the Borrower. The application of
         proceeds of sale or other proceeds as otherwise provided herein shall
         be deemed to be a payment of the Debt like any other payment. The
         balance of the Debt remaining unpaid, if any, shall remain fully due
         and owing in accordance with the terms of the Note and the other Loan
         Documents.

                                       42
<PAGE>

         Section 10.2 RIGHT OF ENTRY. Lender and its agents shall have the right
to enter and inspect the Property at all reasonable times.

                    ARTICLE 11 - INDEMNIFICATION; SUBROGATION

         Section 11.1 GENERAL INDEMNIFICATION.

               (a) Borrower shall indemnify, defend and hold Lender and Trustee
         harmless against: (i) any and all claims for brokerage, leasing,
         finder's or similar fees which may be made relating to the Property or
         the Debt, and (ii) any and all liability, obligations, losses, damages,
         penalties, claims, actions, suits, costs and expenses (including
         Lender's reasonable attorneys' fees, together with reasonable appellate
         counsel fees, if any) of whatever kind or nature which may be asserted
         against, imposed on or incurred by Lender or Trustee in connection with
         the Debt, this Security Instrument, the Property, or any part thereof,
         or the exercise by Lender or Trustee of any rights or remedies granted
         to it under this Security Instrument; provided, however, that nothing
         herein shall be construed to obligate Borrower to indemnify, defend and
         hold harmless Lender from and against any and all liabilities,
         obligations, losses, damages, penalties, claims, actions, suits, costs
         and expenses enacted against, imposed on or incurred by Lender by
         reason of Lender's willful misconduct or gross negligence.

               (b) If Lender is made a party defendant to any litigation or any
         claim is threatened or brought against Lender concerning the secured
         indebtedness, this Security Instrument, the Property, or any part
         thereof, or any interest therein, or the construction, maintenance,
         operation or occupancy or use thereof, then Lender shall notify
         Borrower of such litigation or claim and Borrower shall indemnify,
         defend and hold Lender harmless from and against all liability by
         reason of said litigation or claims, including reasonable attorneys'
         fees (together with reasonable appellate counsel fees, if any). The
         right to such attorneys' fees (together with reasonable appellate
         counsel fees, if any) and expenses incurred by Lender in any such
         litigation or claim of the type described in this Subsection 11.1(b),
         whether or not any such litigation or claim is prosecuted to judgment,
         shall be deemed to have accrued on the commencement of such claim or
         action and shall be enforceable whether or not such claim or action is
         prosecuted to judgment. If Lender commences an action against Borrower
         to enforce any of the terms hereof or to prosecute any breach by
         Borrower of any of the terms hereof or to recover any sum secured
         hereby, Borrower shall pay to Lender its reasonable attorneys' fees
         (together with reasonable appellate counsel fees, if any) and expenses.
         If Borrower breaches any term of this Security Instrument, Lender may
         engage the services of an attorney or attorneys to protect its rights
         hereunder, and in the event of such engagement following any breach by
         Borrower, Borrower shall pay Lender reasonable attorneys' fees
         (together with reasonable appellate counsel fees, if any) and expenses
         incurred by Lender, whether or not an action is actually commenced
         against Borrower by reason of such breach. All references to
         "ATTORNEYS" in this Subsection 11.1(b) and elsewhere in this Security
         Instrument shall include without limitation any attorney or law firm
         engaged by Lender

                                       43
<PAGE>

         and Lender's in-house counsel, and all references to "FEES AND
         EXPENSES" in this Subsection 11.1(b) and elsewhere in this Security
         Instrument shall include without limitation any fees of such attorney
         or law firm and any allocation charges and allocation costs of Lender's
         in-house counsel.

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

         Section 11.2 ENVIRONMENTAL INDEMNIFICATION. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses (as hereinafter defined)
imposed upon or incurred by or asserted against any Indemnified Parties (other
than those arising solely from a state of facts that first came into existence
after either (i) conveyance of all of Borrower's interest in the Property in
accordance with the provisions of Article 8 hereof or (ii) Lender acquired title
to the Property through foreclosure or a deed in lieu thereof), and directly or
indirectly arising out of or in any way relating to any one or more of the
following: (a) any presence of any Hazardous Substances (as hereinafter defined)
in, on, above, or under the Property; (b) any past, present or future Release
(as hereinafter defined) of Hazardous Substances in, on, above, under or from
the Property; (c) any activity by Borrower, any person or entity affiliated with
Borrower, and any tenant or other user of the Property in connection with any
actual, proposed or threatened use, treatment, storage, holding, existence,
disposition or other Release, generation, production, manufacturing, processing,
refining, control, management, abatement, removal, handling, transfer or
transportation to or from the Property of any Hazardous Substances at any time
located in, under, on or above the Property; (d) any activity by Borrower, any
person or entity affiliated with Borrower, and any tenant or other user of the
Property in connection with any actual or proposed Remediation (as hereinafter
defined) of any Hazardous Substances at any time located in, under, on or above
the Property, whether or not such Remediation is voluntary or pursuant to court
or administrative order, including but not limited to any removal, remedial or
corrective action; (e) any past, present or threatened non-compliance or
violations of any Environmental Law (as hereinafter defined) (or permits issued
pursuant to any Environmental Law) in connection with the Property or operations
thereon, including but not limited to any failure by Borrower, any person or
entity affiliated with Borrower, and any tenant or other user of the Property to
comply with any order of any governmental authority in connection with any
Environmental Laws; (f) the imposition, recording or filing or the future
imposition, recording or filing of any Environmental Lien (as hereinafter
defined) encumbering the Property; (g) any administrative processes or
proceedings or judicial proceedings in any way connected with any matter
addressed in this Section 11.2; and (h) any misrepresentation or inaccuracy in
any representation or warranty or material breach or failure to perform any
covenants or other obligations under the Environmental Indemnity of even date
executed by Borrower and Indemnitor.

                                       44
<PAGE>

         The term "ENVIRONMENTAL LAW" means any present and future federal,
state and local laws, statutes, ordinances, rules, regulations and the like, as
well as common law, relating to protection of human health or the environment,
relating to Hazardous Substances, relating to liability for or costs of
Remediation or prevention of Releases of Hazardous Substances or relating to
liability for or costs of other actual or threatened danger to human health or
the environment. The term "ENVIRONMENTAL LAW" includes, but is not limited to,
the following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances,
rules, regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Substances Transportation Act;
the Resource Conservation and Recovery Act (including but not limited to
Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act;
the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the
Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal
Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide
Act; the Endangered Species Act; the National Environmental Policy Act; and the
River and Harbors Appropriation Act. The term "ENVIRONMENTAL LAW" also includes,
but is not limited to, any present and future federal, state and local laws,
statutes, ordinances, rules, regulations and the like, as well as common law:
conditioning transfer of property upon a negative declaration or other approval
of a governmental authority of the environmental condition of the Property;
requiring notification or disclosure of Releases of Hazardous Substances or
other environmental condition of the Property to any governmental authority or
other person or entity, whether or not in connection with transfer of title to
or interest in property; imposing conditions or requirements in connection with
permits or other authorization for lawful activity; relating to nuisance,
trespass or other causes of action related to the Property; and relating to
wrongful death, personal injury, or property or other damage in connection with
any physical condition or use of the Property.

         The term "ENVIRONMENTAL LIEN" means any lien or other encumbrance
imposed pursuant to Environmental Law, whether due to any act or omission of
Borrower or any other person or entity.

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

         The term "INDEMNIFIED PARTIES" means Lender, any person or entity who
is or will have been involved in originating the Loan evidenced by the Note, any
person or entity who is or will have been involved in servicing the Loan, any
person or entity in whose name the encumbrance created by this Security
Instrument is or will have been recorded, persons and entities who may hold or
acquire or will have held a full or partial interest in the Loan (including but
not limited to

                                       45
<PAGE>

those who may acquire any interest in Securities, as well as custodians,
trustees and other fiduciaries who hold or have held a full or partial interest
in the Loan for the benefit of third parties), as well as the respective
directors, officers, shareholders, partners, employees, agents, servants,
representatives, contractors, subcontractors, affiliates, subsidiaries,
participants, any other person or entity who holds or acquires or will have held
a participation or other full or partial interest in the Loan or the Property,
whether during the term of the Loan or as part of or following foreclosure
pursuant to the Loan) and including but not limited to any successors by merger,
consolidation or acquisition of all or a substantial part of Lender's assets and
business.

         The term "LOSSES" means any claims, suits, liabilities (including but
not limited to strict liabilities), administrative or judicial actions or
proceedings, obligations, debts, damages, losses, costs, expenses, diminutions
in value, fines, penalties, charges, fees, expenses, costs of Remediation
(whether or not performed voluntarily), judgments, award, amounts paid in
settlement, foreseeable and unforeseeable consequential damages, litigation
costs, attorneys' fees, engineer's fees, environmental consultants' fees and
investigation costs (including but not limited to costs for sampling, testing
and analysis of soil, water, air, building materials, and other materials and
substances whether solid, liquid or gas), of whatever kind or nature, and
whether or not incurred in connection with any judicial or administrative
proceedings.

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

         The term "REMEDIATION" means any response, remedial, removal, or
corrective action; any activity to cleanup, detoxify, decontaminate, contain or
otherwise remediate any Hazardous Substance; any actions to prevent, cure or
mitigate any Release of any Hazardous Substance; any action to comply with any
Environmental Laws or with any permits issued pursuant thereto; any inspection,
investigation, study, monitoring, assessment, audit, sampling and testing,
laboratory or other analysis, or evaluation relating to any Hazardous Substances
or to anything referred to in this Article 11.

         Section 11.3 DUTY TO DEFEND AND ATTORNEYS 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. Borrower shall not be liable for the expenses of more than
one separate counsel unless an Indemnified Party shall have reasonably concluded
that there are legal defenses available to it that are different from or
additional to those available to another Indemnified Party. Notwithstanding the
foregoing, any Indemnified Parties may, in their sole and absolute discretion,
engage their own attorneys and other professionals to defend or assist them,
and, at the option of Indemnified Parties, their attorneys shall control the
resolution of claim or proceeding; provided, however, that neither an
Indemnified Party nor its counsel shall have any right to settle or compromise
any claims covered by the indemnification set forth herein without the prior
written consent of Borrower, such consent not to be unreasonably withheld,
conditioned or delayed. Upon demand, Borrower

                                       46
<PAGE>

shall pay or, in the sole and absolute discretion of the Indemnified Parties,
reimburse, the Indemnified Parties for the payment of reasonable fees and
disbursements of attorneys, engineers, environmental consultants, laboratories
and other professionals in connection therewith.

         Section 11.4 SURVIVAL OF INDEMNITIES. Notwithstanding any provision of
this Security Instrument or any other Loan Document to the contrary, the
provisions of Section 11.1 and Section 11.2, and Borrower's obligations
thereunder, shall survive (a) the repayment of the Note, (b) the foreclosure of
this Security Instrument, and (c) the release (or reconveyance, as applicable)
of the lien of this Security Instrument.

                        ARTICLE 12 - SECURITY AGREEMENT

         Section 12.1 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. Borrower by executing and delivering this Security
Instrument has granted and hereby grants to Lender, as security for the
Obligations, a security interest in the Property to the full extent that the
Property may be subject to the Uniform Commercial Code (said portion of the
Property so subject to the Uniform Commercial Code being called in this
paragraph the "COLLATERAL"). Borrower hereby agrees with Lender to execute and
deliver to Lender, in form and substance satisfactory to Lender, such financing
statements, continuation statements, other uniform commercial code forms and
shall pay all expenses and fees in connection with the filing and recording
thereof, and such further assurances as Lender may from time to time, reasonably
consider necessary to create, perfect, and preserve Lender's security interest
herein granted. This Security Instrument shall also constitute a "fixture
filing" for the purposes of the Uniform Commercial Code. All or part of the
Property are or are to become fixtures. Information concerning the security
interest herein granted may be obtained from the parties at the addresses of the
parties set forth in the first paragraph of this Security Instrument. If an
Event of Default shall occur, Lender, in addition to any other rights and
remedies which they may have, shall have and may exercise immediately and
without demand, 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, the right to take possession of the Collateral or
any part thereof, and to take such other measures as Lender may deem necessary
for the care, protection and preservation of the Collateral. Upon request or
demand of Lender, Borrower shall at its expense assemble the Collateral and make
it available to Lender at a convenient place acceptable to Lender. Borrower
shall pay to Lender on demand any and all expenses, including legal expenses and
attorneys' fees, incurred or paid by Lender in protecting the interest in the
Collateral and in enforcing the rights hereunder with respect to the Collateral.
Any notice of sale, disposition or other intended action by Lender with respect
to the Collateral sent to Borrower in accordance with the provisions hereof at
least five (5) days prior to such action, shall constitute commercially
reasonable notice to Borrower. The proceeds of any disposition of the
Collateral, or any part thereof, may be applied by Lender to the payment of the
Obligations in such priority and proportions as Lender in its discretion shall

                                       47
<PAGE>

deem proper. In the event of any change in name, identity or structure of any
Borrower, such Borrower shall notify Lender thereof, and promptly after request
shall execute, file and record such Uniform Commercial Code forms as are
necessary to maintain the priority of Lender's lien upon and security interest
in the Collateral, and shall pay all expenses and fees in connection with the
filing and recording thereof. If Lender shall require the filing or recording of
additional Uniform Commercial Code forms or continuation statements, Borrower
shall, promptly after request, execute, file and record such Uniform Commercial
Code forms or continuation statements as Lender shall deem necessary, and shall
pay all expenses and fees in connection with the filing and recording thereof it
being understood and agreed, however, that no such additional documents shall
increase Borrower's obligations under the Note, this Security Instrument and the
Other Loan Documents. Borrower hereby irrevocably appoints Lender as its
attorney-in-fact, coupled with an interest, to file with the appropriate public
office on its behalf any financing or other statements signed only by Lender, as
Borrower's attorney-in-fact, in connection with the Collateral covered by this
Security Instrument. Notwithstanding the foregoing, Borrower shall appear and
defend in any action or proceeding which affects or purports to affect the
Property and any interest or right therein, whether such proceeding effects
title or any other rights in the Property (and in conjunction therewith,
Borrower shall fully cooperate with Lender in the event Lender is a party to
such action or proceeding).

                              ARTICLE 13 - WAIVERS

         Section 13.1 MARSHALLING AND OTHER MATTERS. Borrower hereby waives, to
the extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, Borrower hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of Borrower, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all persons
to the extent permitted by applicable law.

         Section 13.2 WAIVER OF NOTICE. Borrower shall not be entitled to any
notices of any nature whatsoever from Lender except with respect to matters for
which this Security Instrument specifically and expressly provides for the
giving of notice by Lender to Borrower and except with respect to matters for
which Lender is required by applicable law to give notice, and Borrower hereby
expressly waives the right to receive any notice from Lender with respect to any
matter for which this Security Instrument does not specifically and expressly
provide for the giving of notice by Lender to Borrower.

         Section 13.3 SOLE DISCRETION OF LENDER. Wherever pursuant to this
Security Instrument Lender exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Lender, the
decision of Lender to approve or disapprove or to decide that arrangements or
terms are satisfactory or not satisfactory shall be in the sole discretion of
Lender and shall be final and conclusive, except as may be otherwise expressly
and specifically provided herein.

                                       48
<PAGE>

         Section 13.4 SURVIVAL. The indemnifications made pursuant to Article
11, shall continue indefinitely in full force and effect and shall survive and
shall in no way be impaired by: any satisfaction or other termination of this
Security Instrument, any assignment or other transfer of all or any portion of
this Security Instrument or Lender's interest in the Property (but, in such
case, shall benefit both Indemnified Parties and any assignee or transferee),
any exercise of Lender's rights and remedies pursuant hereto including but not
limited to foreclosure or acceptance of a deed in lieu of foreclosure, any
exercise of any rights and remedies pursuant to the Note or any of the Other
Loan Documents, any transfer of all or any portion of the Property (whether by
Borrower or by Lender following foreclosure or acceptance of a deed in lieu of
foreclosure or at any other time), any amendment to this Security Instrument,
the Note or the Other Loan Documents, and any act or omission that might
otherwise be construed as a release or discharge of Borrower from the
obligations pursuant hereto.

         Section 13.5 WAIVER OF TRIAL BY JURY.

         BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS
SECURITY INSTRUMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH INCLUDING, BUT NOT
LIMITED TO THOSE RELATING TO (A) ALLEGATIONS THAT A PARTNERSHIP EXISTS BETWEEN
LENDER AND BORROWER; (B) USURY OR PENALTIES OR DAMAGES THEREFOR; (C) ALLEGATIONS
OF UNCONSCIONABLE ACTS, DECEPTIVE TRADE PRACTICE, LACK OF GOOD FAITH OR FAIR
DEALING, LACK OF COMMERCIAL REASONABLENESS, OR SPECIAL RELATIONSHIPS (SUCH AS
FIDUCIARY, TRUST OR CONFIDENTIAL RELATIONSHIP); (D) ALLEGATIONS OF DOMINION,
CONTROL, ALTER EGO, INSTRUMENTALITY, FRAUD, REAL ESTATE FRAUD,
MISREPRESENTATION, DURESS, COERCION, UNDUE INFLUENCE, INTERFERENCE OR
NEGLIGENCE; (E) ALLEGATIONS OF TORTIOUS INTERFERENCE WITH PRESENT OR PROSPECTIVE
BUSINESS RELATIONSHIPS OR OF ANTITRUST; OR (F) SLANDER, LIBEL OR DAMAGE TO
REPUTATION. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING
AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.

         Section 13.6 WAIVER OF AUTOMATIC OR SUPPLEMENTAL STAY. In the event of
the filing of any voluntary or involuntary petition under the Bankruptcy Code by
or against Borrower (other than an involuntary petition filed by or joined in by
Lender), the Borrower shall not assert, or request any other party to assert,
that the automatic stay under ss. 362 of the

                                       49
<PAGE>

Bankruptcy Code shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of Lender to enforce any rights it has by virtue
of this Security Instrument, or any other rights that Lender has, whether now or
hereafter acquired, against any guarantor of the Debt. Further, Borrower shall
not seek a supplemental stay or any other relief, whether injunctive or
otherwise, pursuant to ss. 105 of the Bankruptcy Code or any other provision
therein to stay, interdict, condition, reduce or inhibit the ability of Lender
to enforce any rights it has by virtue of this Security Instrument against any
guarantor of the Debt. The waivers contained in this paragraph are a material
inducement to Lender's willingness to enter into this Security Instrument and
Borrower acknowledges and agrees that no grounds exist for equitable relief
which would bar, delay or impede the exercise by Lender of Lender's rights and
remedies against Borrower or any guarantor of the Debt.

                              ARTICLE 14 - NOTICES

       Section 14.1 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, (ii)
one (1) Business Day 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, addressed as follows:

If to Borrower:            West Coast Grand Hotel
                           1415 Fifth Avenue
                           Seattle, Washington 98101
                           Attention:  Executive Offices
                           Facsimile No.:  (206) 971-8101

With a copy to:            WestCoast Hospitality Limited Partnership
                           c/o WestCoast Hospitality Corporation
                           201 W. North River Drive, Suite 100
                           Spokane, Washington 99201
                           Attention: Chief Financial Officer
                           Facsimile No.:  (509) 325-7324

With a copy to:            Riddell Williams P.S.
                           1001 Fourth Avenue Plaza
                           Suite 4500
                           Seattle, Washington 98154-1065
                           Attention:  Bruce Bjerke, Esq.
                           Facsimile No.:  (206) 389 - 1708

                                       50
<PAGE>

If to Lender:              Morgan Guaranty Trust Company of New York
                           c/o J.P. Morgan Mortgage Capital, Inc.
                           400 Perimeter Center Terrace
                           Suite 575
                           Atlanta, Georgia  30346
                           Attention:  L. Edward Register, Jr.
                           Facsimile No.:  (770) 351-8398

With a copy to:            Dechert
                           30 Rockefeller Plaza
                           New York, New York 10112-2200
                           Attention:  Paul A. Keenan, Esq.
                           Facsimile No.: (212) 698-3599

or addressed as such party may from time to time designate by written notice to
the other parties. For purposes of this subsection, the term "BUSINESS DAY"
shall mean a day on which commercial banks are not authorized or required by law
to close in New York, New York.

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

                          ARTICLE 15 - APPLICABLE LAW

         Section 15.1 GOVERNING LAW; JURISDICTION. This Security Instrument
shall be governed by and construed in accordance with applicable federal law and
the laws of the state where the Property is located, without reference or giving
effect to any choice of law doctrine. Borrower hereby irrevocably submits to the
jurisdiction of any court of competent jurisdiction located in the state in
which the Property is located in connection with any proceeding arising out of
or relating to this Security Instrument.

         Section 15.2 USURY LAWS. This Security Instrument and the Note are
subject to the express condition that at no time shall Borrower be obligated or
required to pay interest on the Debt at a rate which could subject the holder of
the Note to either civil or criminal liability as a result of being in excess of
the maximum interest rate which Borrower is permitted by applicable law to
contract or agree to pay. If by the terms of this Security Instrument or the
Note, Borrower is at any time required or obligated to pay interest on the Debt
at a rate in excess of such maximum rate, the rate of interest under the
Security Instrument and the Note shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all prior interest payments in excess of such maximum rate shall be
applied and shall be deemed to have been payments in reduction of the principal
balance of the Note. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the Debt shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Note until payment in full so that the rate or amount

                                       51
<PAGE>

of interest on account of the Debt does not exceed the maximum lawful rate of
interest from time to time in effect and applicable to the Debt for so long as
the Debt is outstanding.

         Section 15.3 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 law. If any
term of this Security Instrument or any application thereof shall be invalid or
unenforceable, the remainder of this Security Instrument and any other
application of the term shall not be affected thereby.

                         ARTICLE 16 - SECONDARY MARKET

         Section 16.1 TRANSFER OF LOAN. Lender may, at any time, sell, transfer
or assign the Note, this Security Instrument and the Other Loan Documents, and
any or all servicing rights with respect thereto, or grant participations
therein 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, investor in such Securities or any
Rating Agency rating such Securities (collectively, the "INVESTOR") and each
prospective Investor, all documents and information which Lender now has or may
hereafter acquire relating to the Debt and to Borrower, any Guarantor, any
Indemnitor and the Property, whether furnished by Borrower, any Guarantor, any
Indemnitor or otherwise, as Lender determines necessary or desirable. The term
"RATING AGENCY" shall mean each statistical rating agency that has assigned a
rating to the Securities.

                               ARTICLE 17 - COSTS

         Section 17.1 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 (excluding the scheduled maturity of the Note) of its
loans, (b) the release or substitution of collateral therefor, or (c) obtaining
certain consents, waivers and approvals with respect to the Property (the
occurrence of any of the above shall be called an "EVENT"). Borrower hereby
acknowledges and agrees to pay, immediately, upon 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.

         Section 17.2 ATTORNEY'S FEES FOR ENFORCEMENT. (a) Borrower shall pay
all legal fees incurred by Lender in connection with (i) the preparation of the
Note, this Security Instrument and the Other Loan Documents and (ii) the items
set forth in Section 17.1 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 Personal

                                       52
<PAGE>

Property and/or collecting any amount payable or in enforcing its rights
hereunder with respect to the Property or Personal Property, whether or not any
legal proceeding is commenced hereunder or thereunder and whether or not any
default or Event of Default shall have occurred and is continuing, together with
interest thereon at the Default Rate from the date of payment or incurring by
Lender until paid by Borrower.

                            ARTICLE 18 - DEFINITIONS

         Section 18.1 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
"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, 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," "LEGAL 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.

         ARTICLE 19 - MISCELLANEOUS PROVISIONS

         Section 19.1 NO ORAL CHANGE. This Security Instrument, the Note, and
the Other Loan Documents and any provisions hereof or thereof, 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 19.2 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 19.3 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 19.4 HEADINGS, ETC. The headings and captions of various
Sections of this Security Instrument are for convenience of reference only and
are not to be construed as defining or limiting, in any way, the scope or intent
of the provisions hereof.

                                       53
<PAGE>

         Section 19.5 DUPLICATE ORIGINALS; COUNTERPARTS. This Security
Instrument may be executed in any number of duplicate originals and each
duplicate original shall be deemed to be an original. This Security Instrument
may be executed in several counterparts, each of which counterparts shall be
deemed an original instrument and all of which together shall constitute a
single Security Instrument. The failure of any party hereto to execute this
Security Instrument, or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.

         Section 19.6 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 19.7 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 Loan
Documents and the performance and discharge of the Other Obligations.

         Section 19.8 ENTIRE AGREEMENT. The Note, this Security Instrument and
the Other Loan Documents constitute the entire understanding and agreement
between Borrower and Lender with respect to the transactions arising in
connection with the Debt and supersede all prior written or oral understandings
and agreements between Borrower and Lender with respect thereto. Borrower hereby
acknowledges that, except as incorporated in writing in the Note, this Security
Instrument and the Other Loan Documents, there are not, and were not, and no
persons are or were authorized by Lender to make, any representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the transaction which is the subject of the Note, this Security
Instrument and the Other Loan Documents.

         Section 19.9 RECONVEYANCE. Upon payment of all sums secured by this
Instrument and satisfaction of all obligations under the Loan Documents, Lender
shall request Trustee to reconvey the Property and shall surrender this
Instrument and all notes evidencing indebtedness secured by this Instrument to
Trustee. Trustee shall reconvey the Property without warranty to the person or
persons legally entitled thereto. Such person or persons shall pay Trustee's
reasonable costs incurred in so reconveying the Property.

         Section 19.10 ACCEPTANCE OF CURE. No provision of the Note, this
Security Instrument and the Other Loan Documents which provide that a remedy,
right or power of Lender exists only during the existence or of continuance of
an Event of Default shall be construed as a imposing any obligation of Lender to
accept any cure, or impair any such remedy,

                                       54
<PAGE>

right or power unless and until Lender, in its sole and absolute discretion,
elects in writing to accept a cure.

                              ARTICLE 20 - TRUSTEE

         Trustee may resign by the giving of notice of such resignation in
writing or verbally to Lender. If Trustee shall die, resign, or become
disqualified from acting in the execution of this trust, or if, for any reason,
Lender shall prefer to appoint a substitute trustee or multiple substitute
trustees, or successive substitute trustees or successive multiple substitute
trustees, to act instead of the aforenamed Trustee, Lender shall have full power
to appoint a substitute trustee (or, if preferred, multiple substitute trustees)
in succession who shall succeed (and if multiple substitute trustees are
appointed, each of such multiple substitute trustees shall succeed) to all the
estates, rights, powers, and duties of the aforenamed Trustee. Such appointment
may be executed by any authorized agent of Lender, and if such Lender be a
corporation and such appointment be executed in its behalf by any officer of
such corporation, such appointment shall be conclusively presumed to be executed
with authority and shall be valid and sufficient without proof of any action by
the board of directors or any superior officer of the corporation. Borrower
hereby ratifies and confirms any and all acts which the aforenamed Trustee, or
his successor or successors in this trust, shall do lawfully by virtue hereof.
If multiple substitute Trustees are appointed, each of such multiple substitute
Trustees shall be empowered and authorized to act alone without the necessity of
the joinder of the other multiple substitute trustees, whenever any action or
undertaking of such substitute trustees is requested or required under or
pursuant to this Security Instrument or applicable law. Any substitute Trustee
appointed pursuant to any of the provisions hereof shall, without any further
act, deed, or conveyance, become vested with all the estates, properties,
rights, powers, and trusts of its or his predecessor in the rights hereunder
with like effect as if originally named as Trustee herein; but nevertheless,
upon the written request of 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, 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
fees or expenses shall be payable to Trustee, except in connection with a
foreclosure of the Property or any part thereof or in connection with the
release of the Property following payment in full of the Debt.

               ARTICLE 21 - SPECIAL STATE OF WASHINGTON PROVISIONS

         Section 21.1 Use of Property. The Property is not used principally for
agricultural or farming purposes.

         Section 21.2 If Lender invokes the power of sale, Lender shall give
written notice to Trustee of the occurrence of a Event of Default and of
Lender's election to cause the Property to be sold. Trustee and Lender shall
give such notices as the applicable laws may require to Borrower and to such
other persons as the applicable laws prescribe, and after the lapse of such time
as may be required by applicable law, Trustee shall sell the Property according
to the

                                       55
<PAGE>

applicable laws. Trustee may sell the Property at the time and place and under
the terms designated in the notice of sale in one or more parcels and in such
order as Trustee may determine. Trustee may postpone sale of all or any parcel
of the Property for a period or periods not exceeding the periods permitted by
applicable law by taking the actions prescribed by applicable law. Lender or
Lender's designee may purchase the Property at any sale.

         Section 21.3 ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND
CREDIT, OR TO FORBEAR FROM ENFORCING PAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.

                                       56
<PAGE>

         IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by
Borrower the day and year first above written.

                                    BORROWER:

                                    WHC809, LLC, a Delaware limited liability
                                    company

                                        By: ____________________________
                                        Name:
                                        Title:

<PAGE>

State of Washington                 )
                                    ) ss
County of __________________        )

I hereby certify that I know or have satisfactory evidence that
___________________, in his capacity as ___________ of WHC809, LLC, a Delaware
limited liability company, is the person who appeared before me and said person
acknowledged that (he/she) signed this instrument and acknowledged it to be
(his/her) free and voluntary act, on behalf of the limited liability company,
for the uses and purposes mentioned in the instrument.

(Seal)
                                                  Dated: ____________________
-----------------------------------------
Notary Public

Serial number:
My appointment expires ________________

<PAGE>

                                    EXHIBIT A

                              (Description of Land)

         All of that certain lot, piece or parcel of land, with the buildings
and improvements thereon, situate, lying and being described as follows:

                                      A - 1

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