WESTCOAST HOSPITALITY CORP
JP MORGAN DEED OF TRUST
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>ex10-2_10809.txt
<DESCRIPTION>JP MORGAN DEED OF TRUST
<TEXT>
                                                                    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

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<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

</TEXT>
</DOCUMENT>
