PARTICIPATING LOAN DOCUMENTS

By Carl J. (Kim) Seneker II Morrison & Foerster LLP San Francisco, California ©Copyright 1994 Morrison & Foerster

Promissory Note Secured by Deed of Trust LOAN NO. ______

______

______

_____, CALIFORNIA

NOTICE TO MAKER: UPON MATURITY OR EARLIER ACCELERATION, A BALLOON PAYMENT OF THE ENTIRE PRINCIPAL BALANCE OF THIS NOTE, PLUS ANY THEN ACCRUED BUT UNPAID INTEREST (INCLUDING, WITHOUT LIMITATION, CONTINGENT INTEREST AS DESCRIBED IN THAT CERTAIN CONTINGENT INTEREST AGREEMENT EXECUTED BY MAKER IN FAVOR OF PAYEE AND DATED CONCURRENTLY HEREWITH) WILL BE DUE AND PAYABLE.

PROMISSORY NOTE

SECURED BY DEED OF TRUST

$______July __, 1994

______, California

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- 1- THIS PROMISSORY NOTE EVIDENCES A SHARED APPRECIATION LOAN AND IS SECURED BY A DEED OF TRUST, ASSIGNNENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING, ENCIMBERING PROPERTY LOCATED IN THE COUNTY OF ______, STATE OF CALIFORNIA.

For value received, the undersigned ("Maker") promises to pay to the order of ______(together with any successor holder of this Note, "Payee"), at its office at ______or at such other location as Payee may from time to time designate, the principal sum of ______DOLLARS ($______) together with interest thereon from the date of disbursement of principal at the rate of ______percent (____%) per annum, subject, however, to adjustment as provided in Paragraph 7 hereof; plus Contingent Interest as defined in the Contingent Interest Agreement ("Contingent Interest Agreement") dated concurrently herewith and executed by Payee and Maker which is incorporated herein by reference. Payments of principal and interest shall be made as provided below.

Principal and interest shall be due and payable as follows:

(a) One installment of interest only, as accrued from and including the date of recordation of the Deed of Trust, shall be due and payable on ______, 1994.

(b) Commencing on ______, 1994, interest only shall be due and payable in arrears in monthly installments of ______DOLLARS ($_____) each, or such lesser amount as shall have accrued if less than the full principal amount of this Note is outstanding, such payments to continue to be due and payable on the first day of each month thereafter through and including ______, _____.

(c) Commencing on ______. ____, an amount shall be due and payable which would be sufficient to fully amortize the then.- outstanding principal balance at the interest rate of ______percent (____%) per annum over a period of twenty-five (25) years in equal monthly installments of principal and interest, such payments to continue to be due and payable in arrears on the first day of each month thereafter through and including ______, ____ (the "Maturity Date"), at which time the entire unpaid principal balance together with all accrued but unpaid interest shall be due and payable.

(d) Payments of Contingent Interest shall be made at the times and in the amounts set forth in the Contingent Interest Agreement.

(e) The full outstanding principal balance of this Note, plus accrued interest and all other sums secured by the First Mortgage (hereinafter defined), plus any prepayment premium provided for herein, shall also be due and payable upon any 2 ______Modern Real Estate Transactions, July 2006

- 2- prepayment of this Note permitted hereunder, upon any "Sale” or "Other Triggering Event", or any "Recovery" which results in the full repayment of the principal sum of this Note, as such terms are defined in the Contingent Interest Agreement, and upon any other event, condition or occurrence which entitles Maker to full repayment of this Note under the terms of the Loan Documents (as defined in the Contingent Interest Agreement).

MAKER ACKNOWLEDGES AND UNDERSTANDS THAT THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE, PLUS ALL ACCRUED BUT UNPAID INTEREST THEREON, PLUS CONTINGENT INTEREST AS PROVIDED IN THE CONTINGENT INTEREST AGREEMENT, SHALL BE DUE AND PAYABLE TO PAYEE ON THE MATURITY DATE. MAKER FURTHER UNDERSTANDS AND ACKNOWLEDGES THAT THIS NOTE DOES NOT PROVIDE FOR FULL AMORTIZATION OF THE PRINCIPAL BALANCE, AND THEREFORE UPON MATURITY A BALLOON PAYMENT OF PRINCIPAL WILL BE REQUIRED.

This Note shall be governed by the following provisions:

1. All payments shall be applied first to interest due on the outstanding principal balance at the interest rate stated in this Note and, subject to any limitation on prepayment of this Note set forth herein, any balance shall be applied to reduction of principal, and interest shall thereafter cease on the principal so paid. If any amounts are owed to Payee under the terms of that certain Indemnity Agreement executed by Maker in favor of Payee and dated of even date hereof, monies received may, at the option of Payee, and following an Event of Default under the First Mortgage (hereinafter defined), be applied to such amounts in the order set forth in paragraph 4.03 of the First Mortgage. Principal and interest shall be payable in lawful money of the United States. The amount of the monthly payments of interest to be made under this Note shall be calculated on the basis of a year of 360 days consisting of twelve (12) months of thirty (30) days each, except that interest for the month of disbursement shall be calculated as provided in item (a) above.

2. Except as expressly provided herein, no privilege is reserved to prepay all or any portion of this Note. Maker acknowledges that Payee, in making the loan evidenced by this Note, is relying on Maker's creditworthiness and its agreement to repay the loan in strict accordance with the terms set forth in this Note. Maker acknowledges that Payee would not make the loan without full and complete assurance by Maker of its agreement to make the payments of principal and interest under this Note provided above and its further agreement not to prepay all or any part of the principal of this Note prior to the Maturity Date, except on the terms expressly set forth herein or in the Option Agreement. Maker has been advised and acknowledges that Payee is relying on the receipt of payments under this Note to, among other things, match and support its obligations under contracts entered into by Payee with third parties. Therefore, any prepayment of this Note, whether occurring as a voluntary prepayment by Maker or occurring upon an acceleration of the principal balance of this Note by Payee on account of any Event of Default, (as hereinafter defined), by Maker, including, but not limited to, any acceleration 3 ______Modern Real Estate Transactions, July 2006

- 3- following any transfer, conveyance or disposition of all or any portion of the Property (as hereinafter defined) or any interest therein, except as expressly permitted under the First Mortgage, could prejudice Payee and result in loss and additional expenses to Payee, the extent of which is extremely difficult and impracticable to ascertain.

Accordingly, the parties have agreed that Maker shall not have the right to prepay all or any portion of the principal balance of this Note during the period commencing on the date hereof and ending on the date which is the first day of the ______full month following the date of this Note (herein, the "Closed Period"). Following the expiration of the Closed Period, Maker shall have the right, on the first day of any month during the term of this Note, and provided that not less than sixty (60) days prior written notice has been given to Payee, to prepay all, but not less than all, of the then outstanding principal balance of this Note, provided that, as a condition to such prepayment and in addition to the unpaid principal balance, accrued interest, Contingent Interest (as calculated in accordance with the Contingent Interest Agreement) and all other sums payable under this Note and any other Loan Instruments (as defined in the First Mortgage), Maker shall pay to Payee a prepayment premium equal to the applicable amount set forth on Schedule 1 attached hereto.

3. This Note is secured by, among other things, the lien of a first Deed of Trust Assignment of Rents, Security Agreement and Fixture Filing (the "First Mortgage") of even date herewith, executed and delivered by Maker as Trustor to ______Title Company as Trustee, naming Payee as Beneficiary and encumbering certain property described therein (the "Property").

4. The occurrence of any of the following shall constitute an "Event of Default" hereunder:

(a) Default in the payment of any installment of principal or interest on this Note when due or in the payment or performance of any other obligation of Maker hereunder pursuant to the terms hereof.

(b) The occurrence of an Event of Default as defined in the First Mortgage or any other instrument (including any amendment, modification or extension thereof) which secures this Note or is entered into in connection with the loan evidenced by this Note, or any other event which, under the terms of this Note or of the First Mortgage or any such other instrument, gives Payee the right to declare this Note entirely due and payable.

5. Upon the occurrence of any such Event of Default, then at the option of Payee, the entire unpaid balance of principal of this Note, together with all accrued interest thereon, all Contingent Interest payable on account thereof as provided in the Contingent Interest Agreement, and all other payments required under this Note, shall at such time or at any time thereafter as Payee may elect, regardless of the Maturity Date of this Note, become immediately due and payable Maker acknowledges that in establishing 4 ______Modern Real Estate Transactions, July 2006

- 4- the annual interest rate of ______percent (____%) plus the Contingent Interest due under the Contingent Interest Agreement, Payee has assumed and taken into account the fact that this Note will not be prepaid except as permitted by this Note, and that there will be no transfer of the Property prohibited by the First Mortgage or any other event which would cause Payee to accelerate the Maturity Date, so that no prepayment of this Note occurring prior to the Maturity Date, regardless of the cause of such prepayment, will be made during the Closed Period and thereafter no prepayment will be made without payment of the appropriate prepayment premium described in Paragraph 2 above. The following provisions relating to Maker's payment of a premium in the event of an acceleration are intended to compensate Payee in the event that this assumption proves to be incorrect. In the event that Payee exercises its option to declare the entire unpaid principal balance due and payable upon the occurrence of an Event of Default, such Event of Default shall be presumed to be and conclusively deemed to be a willful default and a deliberate attempt on the part of the Maker to avoid the Closed Period or the payment of the prepayment premium provided for herein, as applicable, and there shall be due and payable, in addition to the unpaid principal balance, accrued interest, Contingent Interest (as calculated in accordance with the Contingent Interest Agreement) and all other sums payable under this Note and the other Loan Instruments, a prepayment premium equal to (a) if the default giving rise to the Event of Default occurs during the Closed Period, ______percent (___%) of the principal balance of this Note; or (b) if the default giving rise to the Event of Default occurs after the expiration of the Closed Period, then the applicable account set forth on Schedule 1 attached hereto.

Without limiting the scope of the foregoing provisions, the provisions of this paragraph shall constitute, within the meaning of California Civil Code Section 2954.10, both a waiver of any right Maker may have to prepay this Note, in whole or in part, without premium or charge, upon acceleration of the maturity of this Note, and an agreement by Maker to pay the prepayment premium described above, whether such prepayment is voluntary or upon or following any acceleration of this Note (including, without limitation, any acceleration following a transfer, conveyance or disposition of the Property except as expressly permitted under the First Mortgage), and for such purpose Maker has separately initialled this provision in the space provided below, and Maker hereby declares that Payee's agreement to make the loan to Maker at the interest rate and for the term set forth in the Note constitutes adequate consideration, of individual weight, for this waiver and agreement by Maker.

Maker's initials:______

6. In the event that any amount payable hereunder is not paid when due, then in addition to all other rights set forth herein, Payee shall have the right to collect a late charge equal to ______percent (__%) of the delinquent payment, which late charge shall be payable upon demand. Maker and Payee agree that such late charge represents a good faith and fair and reasonable estimate of the probable extraordinary cost to Payee of such delinquency. The right to collect such late charge shall be in addition to all other

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- 5- rights granted to Payee hereunder.

7. During the time that any Event of Default exists, interest at the rate of ______percent (___%) per annum (the "Default Rate") shall accrue and be due and payable on the outstanding principal balance of this Note plus all arrearages of interest past due hereon plus all Contingent Interest then due but unpaid, plus any prepayment premium then payable under Paragraph 2 or 5 above, provided, however, that if there is a maximum legal rate of interest applicable to this Note, the total interest payable on account of this Note shall not exceed simple interest at such maximum rate permitted by law and if applicable law does not permit compounding of interest, then interest at the Default Rate shall accrue and be due and payable on unpaid principal only. Interest accrued under this Paragraph 7 which is in addition to interest which would have accrued under this Note in the absence of an Event of Default shall be immediately due and payable as an addition to any installments of interest otherwise due and payable under the terms of this Note. Interest which is not paid when due under this Note shall be compounded monthly unless applicable law does not permit compounding of interest.

8. If this Note is not paid when due or if an Event of Default occurs, Maker promises to pay all costs of collection and other costs incurred by Payee as a result thereof, including, but not limited to, reasonable attorneys' fees incurred by Payee, whether or not suit is filed hereon, for advice and for any and all other services Payee determines to be necessary or advisable by virtue of the delinquency in payment or other Event of Default.

9. Maker consents to any extension of time for the payment hereof, release of all or any part of the security for the payment hereof or release of any party liable for this obligation. Any such extension or release may be made without notice to Maker and without discharging Maker's liability.

10. This Note shall be governed by and construed in accordance with the laws of the State of California.

11. Reference in this Note to "Payee" shall mean the original Payee hereunder so long as such Payee shall be the holder of this Note and thereafter shall mean any subsequent holder of this Note.

12. Time is of the essence of each obligation of Maker hereunder.

13. No delay or omission on the part of Payee in exercising any rights hereunder or under the First Mortgage or any other Loan Instrument shall operate as a waiver of such right or of any other right hereunder or under said instruments.

14. Maker and any endorsers or guarantors hereof severally waive diligence, presentment, protest and demand and also notice of protest, demand, dishonor, acceleration, intent to accelerate and nonpayment of this Note. 6 ______Modern Real Estate Transactions, July 2006

- 6- 15. Any notices to Maker or Payee given under or pursuant to this Note shall be in writing and shall be addressed and delivered to the respective party or parties in the manner set forth in Section 5.0 of the First Mortgage.

16. [Insert nonrecourse provisions, if applicable.]

IN WITNESS WHEREOF, Maker has executed this Promissory Note as of the year and date set forth above.

MAKER

______,

a ______

By: ______

Name: ______

Title: ______

7 ______Modern Real Estate Transactions, July 2006

- 7- SCHEDULE 1 TO

PROMISSORY NOTE SECURED BY DEED OF TRUST

Prepayment Period Applicable Prepayment Premium

Contingent Interest Agreement

THIS CONTINGENT INTEREST AGREMENT IS SECURED BY, AMONG OTHER THINGS, A SHARED APPRECIATION DEED OP TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT, ENCUMBERING PROPERTY LOCATED IN THE COUNTY OF ______, STATE OF CALIFORNIA.

THIS CONTINGENT INTEREST AGREEMENT (this "Agreement") is made and dated as of July __, 1994, by and between ______a ______("Borrower"), and ______a ______corporation ("Lender").

RECITALS A. Lender has agreed to make a shared appreciation loan to Borrower in the original principal amount of $______(the "Loan").

B. The Loan is evidenced by a Promissory Note Secured by Deed of Trust dated July ___, 1994 in the original principal amount of $______(the "Note"). The Note and this Agreement are secured by a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated July ___, 1994 and recorded in the Official Records of ______County, California (the "Deed of Trust"), made by Borrower as trustor, in favor of Lender, as beneficiary, covering certain real property located in the County of ______, California, more particularly described in Exhibit "A" attached hereto and made a part hereof (the "Property")

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- 8- C. In connection with the Loan, Borrower has also executed in favor of Lender an Indemnity Agreement (the "Environmental Indemnity") and an Assignment of Rents and Leases (the "Assignment") both dated July __, 1994. The Assignment has been recorded in the Official Records of ______County, California.

D. [Substantially concurrently herewith, Borrower and Lender are entering into an Option Agreement (the "Option Agreement") in which Borrower grants to Lender an option to purchase the Property and related property in accordance with the terms thereof.]

E. This Agreement, the Note, the Deed of Trust, the Assignment, the Environmental Indemnity and all other documents entered into by Borrower with respect to the Loan (excluding the Option Agreement) will be referred to herein as the "Loan Documents."

NOW, THEREFORE, in consideration of the foregoing Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower and Lender hereby agree as follows:

AGREEMENT SECTION 1. Definitions.

As used herein, the terms "Agreement", "Borrower", "Lender", "Loan", "Note", "Deed of Trust", "Loan", "Loan Documents" and "Property" shall have the meanings set forth above, and the following terms shall have the meanings set forth below:

"Additional Interest" shall have the meaning set forth in Section 3.a.

"Affiliate" shall mean any person which, directly or indirectly, controls or is controlled by or is under common control with a person and, for the purpose of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities or by contract or otherwise.

"Agreed Value" shall have the meaning set forth in Section 4.b.

"Appreciation Interest" shall have the meaning set forth in Section 4.a.

"Audit" shall have the meaning set forth in Section 3.d.

"Budget" shall have the meaning set forth in Section 3k.

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- 9- "Capital Improvement Reserve Fund" shall have the meaning set forth in Section 3.i. "Contingent Interest" shall mean Additional Interest and Appreciation Interest, collectively and severally.

"Default Rate" shall have the meaning set forth in Section 5.

"Escrowed Funds" shall have the meaning set forth in Section 3.h.

"Event of Default" shall have the meaning set forth in Section 5.

"Expenses" shall mean only the following costs and expenses actually incurred or expended by Borrower for the Property, and without duplication of any item, and no other expense items shall be recognized for purposes of this definition unless specifically agreed to by Lender, in its sole and absolute discretion: (i) Fixed Interest and principal amortization payments actually paid in accordance with the Note; (ii) real estate taxes and municipal assessments, premiums for insurance coverage required by Lender and heating, ventilation and air conditioning costs and other utility charges actually paid by Borrower; (iii) management fees for the Property actually paid by Borrower, not to exceed, on an annual basis, ______percent (___%) of annual Total Revenues; (iv) noncapital repairs and maintenance costs; janitorial costs including supplies, and trash removal costs; pest control, security and fire protection; landscaping; parking area maintenance costs; and general, administration, overhead and marketing costs, in each case actually paid by Borrower in accordance with the annual budgets required by Section 3.k approved by Lender from time to time; (v) deposits actually made into the Reserve Funds in accordance with the provisions of Section 3.i or 3.j; and (vi) cost of the annual Audit required by Lender, as more fully described in Section 3.d hereof. Expenses shall not include: (i) non-cash expenses (including, without limitation, depreciation and amortization); (ii) any expenses associated with the Property which result from services rendered by Borrower or by Affiliates of Borrower or which are otherwise not incurred on an arm's-length basis; (iii) expenditures funded by disbursements from the Reserve Funds; (iv) any sums payable by Borrower as Indemnitor under the Environmental Indemnity on account of any Release of any Hazardous Substances or any Claims relating thereto (as such terms are defined in the Environmental Indemnity); (v) debt service except as expressly included above in Expenses; and (vi) leasing commissions and tenant improvement costs.

"Expense Reserve Fund" shall have the meaning set forth in Section 3.j.

"Final Audit" shall have the meaning set forth in Section 3.d.

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- 10- "Fixed Interest" shall mean the stated interest payable on the Loan, as provided in the Note, which equals percent (_____%) per annum.

"Maturity Date" shall mean ______, 2004.

"Monthly Cash Flow Statement" shall have the meaning set forth in Section 3.c.

"Net Appraised Proceeds" shall mean in the event of the occurrence of any Other Triggering Event, the amount equal to (i) the sum of the Agreed Value of the Property plus the cash balances in the Reserve Funds, minus (ii) the then unpaid principal amount of the Loan.'

"Net Cash Flow" shall mean the Total Revenues of the Property for the quarterly period in respect of which Additional Interest is payable (as hereinafter more specifically described) minus all Expenses of the Property for such quarterly period. The computation of Net Cash Flow shall be made on a modified cash basis, which shall mean the cash actually paid or received during each quarter, without regard to the quarter to which it applies (cash basis), with the exception of any fixed expense items (including but not limited to real estate taxes and insurance premiums) which are normally paid less frequently than quarterly, as approved by Lender. Such fixed expense items shall be deducted as Expenses on a pro rata basis each quarter based on the estimated total annual expense (accrual basis) and shall be reconciled annually pursuant to the annual Audit described in Section 3.d hereof.

"Net Recovery Proceeds" shall mean, in the event of a Recovery, the amount determined by Lender equal to (i) the sum of the cash balances in the Reserve Funds plus either (A) in the event that the amount of any Recovery is adversely affected by the Borrower's breach of its obligations under the Deed of Trust (including, without limitation, Borrower's obligation to maintain insurance with respect to the Property), the Agreed Value which the Property would have had had the amount of such Recovery not been so adversely affected, as determined under Section 4.b; or (B)in all other events, the Recovery Proceeds; minus (ii) the sum of the following: (a) actual costs of repairing, rectifying, mitigating, restoring or replacing the Property or such portion thereof as shall have been damaged, severed, injured, or otherwise adversely affected, but only to the extent such costs are reasonable, are approved by Lender, are paid to persons who are not Affiliates, and are paid out of the Recovery Proceeds; (b) actual out-of-pocket costs incurred by Borrower and Lender in obtaining such Recovery, including, without limitation, court costs and attorneys' fees and costs, but only to the extent such costs are reasonable, are approved by Lender, and are paid out of the Recovery Proceeds; and (c) that portion, if any, of the Recovery Proceeds applied to the unpaid principal balance of the Loan in accordance with the Deed of Trust. 11 ______Modern Real Estate Transactions, July 2006

- 11- "Net Sale Proceeds" shall mean, in the event of an all-cash Sale, the amount equal to (i) the sum of the gross proceeds paid or credited to Borrower on account of any such Sale [(which, in the case of the sale by Borrower of the Property to the "Buyer" under and pursuant to the Option Agreement, shall mean the Purchase Price, as defined in the Option Agreement)], plus the sum of the cash balances in the Reserve Funds, minus (ii) the sum of the following: (A) the then unpaid principal balance of the Loan; plus (B) actual real estate commissions, if any, paid by Borrower to third party brokers in connection with such Sale, in an amount not to exceed reasonable, ordinary, and customary commissions for properties similar to the Property in the City of ______California; plus (C) ordinary, customary and reasonable closing costs paid by Borrower of a type and in an amount normally paid by a seller of commercial property in the City of ______California (including actual title policy costs, the cost of a survey, transfer taxes, recording fees, escrow charges, and reasonable seller's attorneys' fees), which are incurred by Borrower and paid to bona fide third parties who are not Affiliates of Borrower in connection with such Sale; provided,. however, that the maximum aggregate amount which may be deducted from the gross proceeds of the Sale pursuant to items (ii) (B) and (ii) (C) above shall not exceed two percent (2%) of the gross proceeds of the Sale for the purpose of determining Net Sale Proceeds, unless otherwise approved in writing by Lender.

"Other Triggering Event" shall have the meaning set forth in Section 4.a(2).

"Payment Period" shall have the meaning set forth in Section 3.b.

"Qualified Appraiser" shall mean an independent appraiser who is a certified member of the American Institute of Real Estate Appraisers, or other such organization acceptable to Lender (and provided an Event of Default is not continuing, also acceptable to Borrower), with at least ten (10) years of continuous experience in appraising properties comparable to the Property in the market area in which the Property is located.

"Quarterly Cash Flow Statement" shall have the meaning set forth in Section 3.c.

"Recovery" shall mean any recovery of damages or other compensation from a third party for or, on account of the taking, destruction, damage, or loss of all or any portion of the Property, including, without limitation, any condemnation pursuant to the power of eminent domain or a conveyance in lieu thereof and any failure of title, or defect or impairment of title amounting to such failure, affecting all or any portion of or any interest in the Property. The foregoing shall include, without limitation, recoveries under any property damage or title insurance policies (excluding rental loss or business interruption insurance), under any judgments or awards made by any court, arbitrator or other authority, under any warranties, guarantees or indemnities, or under any leases or 12 ______Modern Real Estate Transactions, July 2006

- 12- other agreements, relating to damage to or the taking, destruction or loss of all or any portion of the Property.

"Recovery Proceeds" shall mean the gross proceeds of whatever form or nature actually received by or on behalf of Borrower on account of or otherwise attributable to a Recovery.

"Reserve Funds" shall mean the Capital Improvement Reserve Fund and the Expense Reserve Fund.

"Sale" shall mean a sale, transfer or other disposition of the entirety of the Property which is permitted under the Deed of Trust, and a sale of the Property to the "Buyer" under and pursuant to the Option Agreement.

"Total Revenues" shall mean all gross income, rentals, revenues and consideration, of whatever form or nature, received by or paid to or for the account or benefit of Borrower, any of Borrower's agents or employees, or any Affiliate of Borrower (excluding fees and reimbursements paid to an Affiliate of Borrower which is acting as manager of any of the Property pursuant to a property management contract approved by Lender), from any and all sources, resulting from or attributable to the ownership, operation, use, leasing or occupancy of the Property or from any license, franchise or other agreement, written or oral, by virtue of which any Person occupies all or any part of the Property, but without duplication of any item; provided, however, that in no event shall Total Revenues include (i) the proceeds of any sale, transfer or other disposition of all or any part of the Property or any interest therein, or any insurance proceeds (other than rental loss or business interruption insurance) or condemnation awards paid in connection with any loss, damage, destruction or taking (other than an award for a temporary taking which is paid in compensation for lost rental or income, including a conveyance in lieu thereof, of all or any part of the Property, to the extent that the same are taken into account in calculating Appreciation Interest pursuant hereto; and (ii) any security deposits received from any of the tenants of the Property, unless and until the same are applied to rent or any other of the tenant's obligations in accordance with the terms of such tenant's lease. Without limiting the foregoing, Total Revenues shall specifically include, to the extent actually received by or credited to Borrower, Borrower's agents or employees, or any Affiliate of Borrower, (1) all tenant rents, fees, charges and reimbursements paid under any lease or other agreement relating to the Property; (2) any administrative surcharge applied by Borrower to such tenant rents or reimbursements; (3) any excess of subrentals received by a tenant or subtenant of the Property, and payable to Borrower, over rents paid by such tenant or subtenant under any superior lease; (4) the proceeds of any rental loss or business interruption insurance with

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- 13- respect to the Property; (5) the amount by which the consideration or rental paid to Borrower by any Affiliate of Borrower for any goods, services or space supplied or leased by Borrower to such Affiliate is less than the fair market value thereof; (6) the amount by which the consideration or rental paid by Borrower to any Affiliate of Borrower for any goods, services or space supplied or leased by such Affiliate to Borrower exceeds the fair market value thereof; (7) parking fees or charges and all miscellaneous income; (8) income from the sale of materials and other supplies; (9) income from rentals of furniture, fixtures, equipment and other items; and (10) amounts actually released from the Reserve Funds established by Borrower (other than in the form of disbursements used to pay current Expenses). Notwithstanding anything set forth herein, in no event shall Borrower accept any non-cash consideration in payment for any goods, services or space supplied or leased by Borrower to any party without Lender's prior written consent.

SECTION 2. Promise to Pay Contingent Interest.

a. Promise to Pay. Borrower hereby agrees and promises to pay to Lender (or order), at _____, or at such other place as Lender may from time to time designate, such amounts as are herein described as Contingent Interest, which Contingent Interest constitutes a form of "contingent deferred interest" as defined in Section 1917 (a) of the California Civil Code and shall be in addition to and not in substitution of all other interest payable by Borrower under the Note and any other sums payable to. Lender by Borrower under the Loan Documents.

b. Nature of Contingent Interest. Borrower acknowledges that Borrower and Lender have conferred specifically concerning the contingent and uncertain nature of the Contingent Interest. Borrower and Lender understand and agree that the Contingent Interest and each element thereof are speculative in nature, and both the payment and amount, if any, of Contingent Interest are dependent on a number of contingencies which are not within Lender's control.

c. Security for this Agreement. This Agreement is secured by the Deed of Trust, the Assignment, and all other security agreements now or hereafter securing the Loan. Notwithstanding the payment in full of interest and principal evidenced by the Note, Lender shall have no obligation to reconvey the Deed of Trust unless and until all Contingent Interest and all other sums due hereunder have been paid in full.

SECTION 3. Payment of Additional Interest.

a. Nature of Additional Interest. Borrower shall pay to Lender, in addition to the Fixed Interest and other sums payable by Borrower under the Note and all other sums 14 ______Modern Real Estate Transactions, July 2006

- 14- payable by Borrower to Lender under the Loan Documents and hereunder, as additional interest on the Loan ("Additional Interest"), at the times and in the manner set forth below, an amount equal to ______percent (___%) of Net Cash Flow.

b. Payment of Additional Interest. Subject to adjustment as provided in Section 3.e below, Additional Interest shall be paid quarterly on the fifteenth (15th) day of each February, July, August, and November of each year during the term of the Loan, for and in respect of the calendar quarter ending on the last day of December, March, June, and September, respectively (the "Payment Periods"), provided that: (i) the Net Cash Flow for the period from the date of this Agreement to and including the end of the first full calendar quarter following the date of this Agreement, but not exceeding the sum of $____, shall be deposited into the Reserve Funds as provided in Section 3.j and 3.i; and (ii) at such time as the Loan is repaid in full, all Additional Interest for the preceding Payment Period (or portion thereof, prorated on a daily basis) shall be due and payable. Such Additional Interest payments shall be based upon the Net Cash Flow for the preceding quarter (and in the case of the final payment of Additional Interest, shall include the portion of the then current quarter occurring prior to such payment), as reflected in the Quarterly Cash Flow Statements submitted by Borrower to Lender concurrently with said payments of Additional Interest,. Payments of Additional Interest shall be made in cash or immediately available funds on the date due.

Notwithstanding any of the foregoing provisions or any other provision of this Agreement, Lender shall not be responsible for nor be liable in any respect to Borrower or any other Person for or with respect to any operating loss or deficit of the Property, and if for any quarterly or annual period the Net Cash Flow is a negative number, there shall be no deduction from or offset against the Fixed Interest payments owing under the Note or against any Additional Interest payable in subsequent calendar years for or on account of any such negative amount of Net Cash Flow.

c. Cash Flow Statements On or before each date Additional Interest is due pursuant to Section 3.b above, Borrower shall furnish to Lender a statement of operations of the Property for the immediately preceding Payment Period (the "Quarterly Cash Flow Statement"). On or before the fifteenth (15th) day of each calendar month, Borrower shall furnish to Lender a statement of operations of the Property for the immediately preceding calendar month (the "Monthly Cash Flow Statement"). Each such quarterly and monthly statement shall show, in reasonable detail and in a format approved by Lender, the actual Total Revenues, actual Expenses and Net Cash Flow, and all Quarterly Cash Flow Statements shall also show the Additional Interest for such Payment Period and all data necessary for the calculation of the amounts in the Quarterly Cash Flow Statement. Each quarterly statement shall be certified by Borrower to have been prepared in accordance 15 ______Modern Real Estate Transactions, July 2006

- 15- with the terms of this Agreement and to present correctly in accordance with such terms the items shown therein. Each Quarterly Cash Flow Statement shall be accompanied by a copy of all bank statements for the accounts containing the Reserve Funds that shall have been received by or made available to Borrower since the previous Quarterly Cash Flow Statement was submitted to Lender.

d. Calendar Year Reconciliation Statements. Within ninety (90) days after the end of each calendar year commencing with calendar year 1994, Borrower shall furnish to Lender, in addition to the statements described in Section 3.c above: (i) a statement of operations of the Property for such calendar year showing in reasonable detail and in a format approved by Lender the actual Total Revenues, actual Expenses, Net Cash Flow, and Additional Interest for the entire calendar year (and in the case of the calendar year in which the term of the Loan shall begin or end, inclusive of that portion of such calendar year as shall fall within the term of the Loan), as well as all data necessary for the calculation of any such amounts, which statement shall be certified by Borrower to have been prepared in accordance with the terms of this Agreement and to present correctly in accordance with such terms the items shown therein; (ii) financial statements and schedules, including a balance sheet, statement of cash flow, and statement of operations for the Property for such calendar year, prepared in accordance with generally accepted accounting principles applied on a consistent basis and bearing an opinion, without material qualification as to the calculation of Net Cash Flow, of a nationally recognized firm of independent certified public accountants reasonably satisfactory to Lender, covering the operation of the Property and including also all items necessary to calculate Net Cash Flow and Additional Interest for such calendar year; and (iii) a statement certified by such certified public accounting firm verifying that the Borrower's calculations of Total Revenues, Expenses, Net Cash Flow and Additional Interest payments have been made in accordance with the terms of this Agreement (collectively, the statements described in (ii) and (iii) above are referred to as the "Audit"). No losses for any calendar year shall be carried forward to, or included in, any financial statements or reports for any subsequent calendar year. An Audit shall also be provided within one hundred and twenty (120) days after the outstanding principal amount of the Loan is repaid in accordance with the Note, with such Audit applying to that portion of the then-current calendar year occurring prior to such repayment (the "Final Audit")

e. Adjustment of Payments of Additional Interest. Following receipt by Lender of the annual Audit, payment of Additional Interest shall be adjusted based upon the calculation of the actual Net Cash Flow for such annual period, and Borrower shall pay Lender, upon delivery of each such annual Audit to Lender not later than the times

16 ______Modern Real Estate Transactions, July 2006

- 16- specified above, any additional amount of Additional Interest owing with respect to such year. If Borrower's payments to Lender for the preceding calendar year exceed the amount actually due Lender, then the amount of any such overpayment shall be deducted from the next quarterly payment(s) of Additional Interest due until the credit has been depleted in full and, if not applied in full prior to the Maturity Date, shall be applied toward payment of the outstanding principal balance of the Note on the Maturity Date. Borrower and Lender recognize that reconciliation shall be done only on a calendar year basis, and that any losses from one Calendar Year may not be used to offset gains of future or preceding years.

f. Disputes Concerning Audits. Lender may notify Borrower after receipt of any annual Audit that Lender disputes any computation or item contained in any portion of such Audit. In the event Lender so notifies Borrower, the parties shall meet in good faith within twenty (20) days after Lender's notice to Borrower to resolve such disputed items between themselves. If, despite such good faith efforts, the parties are unable to resolve the dispute at such meeting or within ten (10) days thereafter, the items shall be submitted to arbitration, which, if the item relates to a matter of accounting, shall be performed by an independent certified public accountant or, if the item in dispute does not relate to a matter of accounting, shall be performed by an independent third party not related or affiliated in any way to Lender or Borrower (such accountant or third party herein referred to as the "Arbitrator"), which Arbitrator shall be proposed by Lender and reasonably approved by Borrower within fifteen (15) days after such ten (10) day period (but who in any case shall not be employed by Lender or Borrower). The determination of such Arbitrator shall be final and binding on the parties, and may be enforced in any court of competent jurisdiction. The Arbitrator shall endeavor to render a determination within twenty (20) days after appointment. The fees of such Arbitrator shall be paid by Borrower if the aggregate percentage discrepancy between the amounts of the items in dispute as shown in the annual audit and as finally determined by the Arbitrator exceeds three percent (3%), and otherwise shall be paid ______percent (___%) by Lender and ______percent (____%) by Borrower. Upon resolution of any such dispute, payment of Additional Interest shall be adjusted based upon the calculation of the actual Net Cash Flow for such annual period. Borrower shall pay any additional amount of Additional Interest found to be due to Lender within ten (10) days after the resolution of such dispute by the parties or the Arbitrator's determination, as applicable.

g. Borrower's Books and Records. Borrower shall keep and maintain at all times full and accurate books of account and records adequate to correctly reflect Total Revenues and Expenses. All such books and records shall be kept at Borrower's offices at ______. Such books and records shall be available for at least three (3)

17 ______Modern Real Estate Transactions, July 2006

- 17- years after the end of the relevant calendar year. Until all sums due under the Loan Documents are paid in full, Lender shall have the right to inspect, copy and audit such books of account and records at Lender's expense, during normal business hours, and upon one business day's notice to Borrower, whether such books and records are in the possession of Borrower or any agent of Borrower, for the purpose of verifying the accuracy of the calculation of and payments made on account of Additional Interest. The funds to be deposited and held in the Reserve Funds shall be held in accounts with banks or trust companies in the State of California which are satisfactory to Lender, and, at Lender's option, Lender shall have a first priority security interest therein and Borrower hereby grants said security interest to Lender and shall from time to time execute and deliver on request all documents and agreements required by Lender to evidence and perfect said security interest.

h. Final Payment of Additional Interest. Additional Interest shall be equitably prorated, if necessary, on the basis of a three hundred sixty-five (365) day year for any partial months or partial calendar year in which the term of the Note commences or in which the Note is paid in full. Concurrently with Borrower's payment of Additional Interest on the date the Loan is paid in full, Borrower shall submit the Quarterly Cash Flow Statement applicable to such Payment Period. Assuming such last payment of Additional Interest is made before the delivery to Lender of the annual Audit for the then current calendar year, the amount so paid shall be subsequently adjusted based on the Final Audit and such obligation shall survive the reconveyance or other termination of the Deed of Trust; provided, however, that in addition to Borrower's payment of such Additional Interest on the date of repayment in full of the Loan, it shall concurrently therewith deposit in an escrow account acceptable to Lender in its reasonable discretion and in which Lender shall be and is hereby granted a first priority, perfected security interest, _____percent (___%) of the Total Revenues for the applicable Payment Period (the "Escrowed Funds"), which Escrowed Funds shall be used to pay Lender additional sums owed by Borrower, if any, as a result of the Final Audit. The amount of any underpayment of Additional Interest, as finally determined, shall be paid by Borrower, first from the Escrowed Funds and then, in the event such underpayment exceeds the amount of Escrowed Funds, from Borrower's own funds, within ten (10) days after Lender's approval of such Final Audit. So long as an Event of Default has not occurred and the Deed of Trust has not been foreclosed, in the event of any overpayment of Additional Interest, the Escrowed Funds shall be returned to Borrower and the amount of any such overpayment shall be refunded by Lender within ten (10) days after Lender's approval of the Final Audit.

i. Capital Improvement Reserve Fund. A reserve escrow account acceptable to

18 ______Modern Real Estate Transactions, July 2006

- 18- Lender in its reasonable discretion and in which Lender shall be granted a first priority, perfected security interest (the "Capital Improvement Reserve Fund") shall be established by Borrower concurrently with the funding of the Loan. Borrower shall initially create the Capital Improvement Reserve Fund by making equal calendar quarterly deposits of $______during the remainder of 1994, as reflected in the Budget for 1994 which has been submitted to and approved by Lender. Borrower shall thereafter make quarterly deposits of Net Cash Flow sufficient to maintain the Capital Improvement Reserve Fund in the amount identified in the applicable Budget approved by Lender; however, all deposits (including without limitation, deposits to be made in 1994) shall be made on or before the 20th day of the month following the end of each calendar quarter and shall be made only to the extent that there is Net Cash Flow (computed for these purposes, net of deposits into the Reserve Funds to be made for such quarter) available in that quarter, and only after the quarterly deposits, if any, into the Expense Reserve Fund have been funded in full. Quarterly deposits into the Capital Improvement Reserve Fund shall not be made when the balance on the last day of the applicable quarter, including accrued interest on such Capital Improvement Reserve Fund, exceeds $______or such higher amount specified for such quarter in the Budget line item approved by Lender pursuant to Section 3.k. The Capital Improvement Reserve Fund account shall be in form and content satisfactory to Lender and shall be an interest bearing escrow account at a bank within the State of California satisfactory to Lender. Interest on said funds shall remain in the Capital Improvement Reserve Fund.

Funds may be withdrawn from the Capital Improvement Reserve Fund to cover the cost of emergency capital repairs, major capital replacements and necessary capital improvements to the Property which are to be funded from such reserve fund, as designated in the Budget line item approved by Lender or as may otherwise be approved by Lender in its sole discretion. If any costs paid from the Capital Improvement Reserve Fund are required to be reimbursed by tenants pursuant to the terms of their leases, such reimbursements shall be used to restore the Capital Improvement Reserve Fund to the then applicable balance contemplated in the Budget line item approved by Lender, and any excess not needed for such purpose shall be included in the calculation of the Net Cash Flow next available for payment of Additional Interest. Withdrawals from the Capital Improvement Reserve Fund may be made by Borrower without Lender's consent provided that (a) withdrawals are not made more frequently than once every calendar month, (b) no single withdrawal exceeds ______Dollars ($______), and (c) the aggregate amount of all withdrawals for any calendar year does not exceed ____ Dollars ($ ) (prorated for partial calendar years). withdrawals from the Capital Improvement Reserve Fund shall also be permitted to pay the escrow costs associated with the Capital Improvement Reserve Fund. 19 ______Modern Real Estate Transactions, July 2006

- 19- j. Expense Reserve Fund. In addition to the Capital Improvement Reserve Fund, a separate reserve escrow account acceptable to Lender in its reasonable discretion and in which Lender shall be granted a first priority, perfected security interest (the "Expense Reserve Fund") shall be established by Borrower concurrently with the funding of the Loan. The purposes of the Expense Reserve Fund are: (a) to allow for adequate accumulation of Net Cash Flow to pay Expenses that are not paid on a regular monthly basis (i.e., real estate taxes and insurance premiums); and (b) to provide funds to cover unanticipated Expenses for which there is insufficient Net Cash Flow (as determined prior to paying such Expenses) to pay. The 1994 Budget attached hereto as Exhibit “C" describes the funding and disbursements of the Expense Reserve for 1994. Borrower shall initially deposit the Net Cash Flow for the period from the date of the funding of the Loan to and including the end of the first full calendar quarter following the date of this Agreement, but not exceeding the sum of $_____, into the Expense Reserve Fund (provided that $______of the Net Cash Flow for such period shall be deposited into the Capital Improvement Reserve Fund as provided in Section 3.i), and shall thereafter deposit into the Expense Reserve Fund quarterly on or before the 20th day of the month following the end of each succeeding calendar quarter a sum sufficient to increase the Expense Reserve Fund to the amount specified for the applicable quarter in the 1994 Budget attached hereto as Exhibit "C", or in subsequent years, in the Budget line item approved by Lender pursuant to Section 3.k, but only to the extent that there is Net Cash Flow (computed for these purposes, net of deposits into the Reserve Funds to be made for such quarter) available in that quarter. Quarterly deposits into the Expense Reserve Fund shall not be made when the balance on the last day of the applicable quarter, including accrued interest on such Expense Reserve Fund, exceeds the amount specified for such quarter approved by Lender pursuant to Section 3.k. The Expense Reserve Fund account shall be in form and content satisfactory to Lender and shall be an interest bearing escrow account at a bank within the State of California satisfactory to Lender. Interest on said funds shall remain in the Expense Reserve Fund.

Funds may be withdrawn from the Expense Reserve Fund to pay Expenses (excluding capital improvement costs) for the quarter during which the funds are withdrawn. If any of such expenditures are required to be reimbursed by tenants pursuant to the terms of their leases, such reimbursements shall be used to restore the Expense Reserve Fund to the then applicable balance approved by Lender pursuant to Section 3.k, and any excess not needed for such purpose shall be included in the calculation of the Net Cash Flow next available for payment of Additional Interest. Withdrawals from the Expense Reserve Fund may be made by Borrower without Lender's consent to pay Expenses. Withdrawals from the Expense Reserve Fund shall also be permitted to pay the escrow costs associated with the Expense Reserve Fund. 20 ______Modern Real Estate Transactions, July 2006

- 20- k. Budgets; Lease Reports; Reserve Fund Reports

(i) Borrower shall furnish to Lender, for Lender's review and approval, on or before December 1 of each calendar year during the term of the Loan, a budget ("Budget") for the succeeding calendar year showing, in such detail as Lender may reasonably require, all estimated Total Revenues and Expenses (including contingency items) for the next succeeding calendar year, together with specific line items showing (A) the target balances of each of the Reserve Funds for each quarter during such year, (B) all projected capital improvement costs, and (C) the amount of each type of Expense described in the definition of "Expenses" herein. The Budget shall be in substantially the form as the budget attached hereto as Exhibit "B". In addition, the Budget shall include such additional information as Borrower or Lender deems appropriate, including but not limited to a description of each expense included in one or more particular Expense categories, Borrower's business plans for the operation and marketing of the Property, an assessment of existing market conditions, and a review of the Property's performance in the current calendar year. Lender shall have the right to ask questions regarding the items set forth in the Budget, and Borrower shall make itself reasonably available to respond to Lender's questions. Lender shall approve or disapprove of each line item or expense category in the Budget within fifteen (15) days after delivery of the Budget to Lender and, if any such line item or expense category is disapproved, Borrower shall promptly make changes to the disapproved line item or expense category in the Budget as Lender shall require and shall resubmit such revised line item or expense category to Lender for its approval. If Lender fails to approve any of the line items or expense categories in a proposed Budget prior to the start of the year for which the Budget was prepared, the amounts for such line item or expense category approved by Lender for the immediately preceding year shall control until approval is obtained. Lender hereby acknowledges that it has received and approved the specific line items and expense categories in the Budget for 1994 which has, prior to the date hereof, been submitted to Lender.

(ii) On or before each date Additional Interest is due pursuant to Section 3.b above, Borrower shall furnish to Lender: (a) a summary of all Capital Improvement Reserve Fund and Expense Reserve Fund transactions certified by Borrower's chief financial officer; and (b) a quarterly rent roll for the Property in the form attached hereto as Exhibit "C".

(iii) All statements and reports required under this Agreement shall, subject to the applicable terms and provisions of this Agreement, be in form and substance acceptable to Lender and shall be in addition to any other financial or operating statements required by Lender from Borrower pursuant to the Deed of Trust or any other 21 ______Modern Real Estate Transactions, July 2006

- 21- document or agreement entered into with respect to the Loan.

l. Restrictions on Use of Total Revenues. Borrower shall not use any of the Total Revenues of the Project to pay, or to reimburse Borrower for payment of, costs attributable to any Release of any Hazardous Substance or any Claims relating thereto (as such capitalized terms are defined in the Environmental Indemnity) that Borrower is required to pay as the Indemnitor under the Environmental Indemnity.

m. Management of the Project. Borrower hereby agrees to cause the Property to be operated and managed in a first class, professional, competent and high quality manner at all times prior to the full repayment by Borrower of the Loan and all other sums payable under the Loan Documents.

SECTION 4. Payment of Appreciation Interest.

a. Determination of Appreciation Interest. Borrower shall pay to Lender, in addition to Fixed Interest, Additional Interest, and all other sums payable by Borrower under the Note and the other Loan Documents and hereunder, as additional interest on the Loan ("Appreciation Interest”), at the times and in the manner set forth below, the following:

(1) Upon any all-cash Sale to a bona fide, independent person or entity other than an Affiliate of Borrower [(including, without limitation, a Sale to the "Buyer" under and pursuant to the Option Agreement)], Borrower shall pay to Lender as Appreciation Interest an amount equal to ______percent (____ %) of any Net Sale Proceeds;

(2) Upon maturity of the Note, whether by acceleration, stated maturity, or otherwise, upon any prepayment of the Loan in full as permitted by Lender under the Loan Documents, or in any other event in which the Loan is repaid in full other than under the circumstances described in clauses (1) and (3) of this Section 4.a (each of the foregoing being referred to herein as an "Other Triggering Event"), Borrower shall pay to Lender as Appreciation Interest an amount equal to ______percent (____%) of any Net Appraised Proceeds;

(3) Upon each and every Recovery in which any Net Recovery Proceeds are realized, Borrower shall pay to Lender as Appreciation Interest an amount equal to: (i) in the event of a Recovery which does not result in the full repayment of the principal sum of the Loan, one hundred percent (100%) of the Net Recovery Proceeds; or (ii) in the event of a Recovery which does result in the full repayment of the principal sum of the Loan ______percent (____%) of any Net Recovery

22 ______Modern Real Estate Transactions, July 2006

- 22- Proceeds.

b. Determination of Agreed Value.. As used herein, "Agreed Value" shall mean the market value of the Property or relevant portion thereof as of the date of determination thereof, determined as follows:

(1) Market Value. The market value may be determined by agreement between Lender and Borrower; provided, however, that if Borrower and Lender are unable to agree in a writing signed by both parties no later than ninety (90) days prior to the scheduled maturity date of the Loan, or in the event of any Recovery or Other Triggering Event requiring a determination of Agreed Value, within ten (10) days after such Recovery or Other Triggering Event, then the market value of the Property or relevant portion thereof shall be determined as provided in Subsection (2) below.

(2) Appraisal Procedure. Lender and Borrower will each appoint a Qualified Appraiser within fifteen (15) days after the end of the period for agreement described in paragraph (1). If one party fails to appoint a Qualified Appraiser within such period, then the appraisal of the market value of the Property or relevant portion thereof by the Qualified Appraiser appointed by the other party shall be conclusive and binding upon the parties. Each appraiser will prepare a narrative appraisal of the market value of the Property or relevant portion thereof at least thirty (30) days prior to the maturity date (or, in the event of any Recovery or Other Triggering Event, within forty-five (45) days after his or her appointment). If the two appraisals differ by no more than ten percent (10%), the market value shall be the average of the two appraised values. If the two appraisals differ by more than ten percent (10%), the American Institute of Real Estate Appraisers or such other organization acceptable to Lender (and, if an Event of Default is not continuing, also acceptable to Borrower) shall select a third Qualified Appraiser. Prior to the maturity date, or in the event of any Recovery or Other Triggering Event, within forty-five (45) days after his or her appointment, the third appraiser will review the two appraisals and will either select the market value indicated in one of the two appraisals, in which case the selected appraisal shall determine the market value, or will make his or her own independent appraisal of the market value of the Property, in which case the market value of the Property shall be as determined in the third appraisal. The determination of market value by the two appraisers, or by the third appraiser, as applicable, shall be final and binding on the parties, and may be enforced in any court of competent jurisdiction. Borrower and Lender will pay the respective costs incurred in connection with the appraisals performed by the appraiser appointed by each and will share equally all costs incurred by the third appraiser. The term "market value" shall have the meaning ascribed to it by the American Institute of Real Estate Appraisers. Assumed selling costs may be deducted in calculating Net Appraised Proceeds to the 23 ______Modern Real Estate Transactions, July 2006

- 23- extent, and only to the extent, expressly permitted in the definition of Net Appraised Proceeds.

c. Notice and Time for Payment of Appreciation Interest. Borrower shall provide notices and pay Lender any applicable Appreciation Interest as follows:

(1) Sale or Prepayment. In the case of a permitted Sale, any permitted prepayment in full of all of the Loan, or any Other Triggering Event (except as provided in clause (3) below), Borrower shall give Lender [such notice as is provided in the Option Agreement in the case of a Sale occurring under and pursuant to the Option Agreement, and in all other cases Borrower shall give Lender] written notice of such event not less than ninety (90) days prior to the date thereof. Any Appreciation Interest due Lender on account of such permitted Sale, prepayment, or Other Triggering Event, shall be paid to Lender upon consummation of such Sale, the date of such prepayment in full, or the consummation of such Other Triggering Event, as applicable.

(2) Recovery. In the case of any Recovery, Borrower shall give Lender written notice of the event resulting in such Recovery as required in the Deed of Trust. Borrower shall pay Lender any Appreciation Interest due on account of a Recovery at the time any Recovery Proceeds are paid to Borrower.

(3) Event of Default. Notwithstanding paragraph (1) above, if any Other Triggering Event results from an acceleration of the Loan, no notice need be given by Borrower. In such event, payment of any and all Appreciation Interest on account of such acceleration shall be immediately due and payable upon Lender's election to accelerate the maturity of the Loan, and the calculation of the Agreed Value of the Property in accordance with Section 4.b shall be made as of the date of the Loan acceleration.

(4) Maturity. In the case of the maturity of the Loan (other than as a result of an acceleration under clause (3)), Borrower shall deliver to Lender a written notice of such maturity at least one hundred and twenty (120) days prior to the Maturity Date, whereupon Borrower and Lender shall endeavor to determine the market value of the Property pursuant to Section 4.b. above. The payment of any and all Appreciation Interest shall be due and payable upon the scheduled Maturity Date of the Loan and the calculation of the Agreed Value of the Property in accordance with Section 4.b shall be made as of one hundred twenty (120) days prior to the scheduled Maturity Date of the Loan.

d. Determination of Appreciation Interest Not Deemed to Impair Lender's Rights Under Deed of Trust. Nothing contained in this Section 4 shall be deemed or 24 ______Modern Real Estate Transactions, July 2006

- 24- construed to waive, restrict, impair, or in any manner affect Lender's rights under the Loan Documents to consent or withhold consent to: (i) any prepayment of the Loan, in whole or in part; (ii) sales or other transfers of all or a portion of the Property or any interest therein; (iii) sales or other transfers of any ownership interests in Borrower or any of the entities comprising Borrower; (iv) refinancing of all or any portion of the Loan; (v) any junior financing; (vi) application of insurance, condemnation or other Recovery Proceeds; or (vii) any other matters which require Lender's consent. In no event shall Borrower undertake any such actions without Lender's consent as required under the Loan Documents. The payment of Appreciation Interest at any time required under this Section 4 shall not excuse Borrower's obligation to pay Appreciation Interest at all other times required by this Section 4.

e. Books and Records. As soon as reasonably possible, but in any event not less than five (5) days prior to the date Appreciation Interest is to be paid in accordance with this Section 4, Borrower shall furnish to Lender a detailed breakdown, certified as true, correct and complete by and to the knowledge of Borrower, of all items necessary for the calculation of Net Sale Proceeds or Net Recovery Proceeds, if and as applicable, and the Appreciation Interest payable with respect thereto. Prior to and for a period of five (5) years after each payment of Appreciation Interest, Borrower shall keep and maintain full and accurate books and records adequate to correctly reflect each such item, which books and records shall be kept by Borrower at its office at ______and shall be available for Lender's inspection, copying and review at Lender's expense during normal business hours following one business day's notice for the purpose of verifying the accuracy of the payments made on account of Appreciation Interest.

f. No Deduction for Negative Appreciation Interest. Notwithstanding any provisions to the contrary in this Agreement, Lender shall not be responsible nor liable in any respect to Borrower or any other person or entity for any reduction in the market value of the Property or for any contingency, condition or occurrence that might result in a negative number for Appreciation Interest. If at any time it is calculated, Appreciation Interest shall be a negative amount, no Appreciation Interest shall at that time be payable to Lender, Lender shall in no way be liable for any such negative amount and there shall be no deduction or offset for such negative amount at any time when Appreciation Interest shall be subsequently calculated or against any other sum due on the Loan.

g. No Deduction for Prepayment Premium. If and to the extent any prepayment premium shall be payable upon the repayment of the Loan, as provided in Paragraph 2 or 5 of the Note, the amount of such prepayment premium shall be payable by Borrower, shall not be included as an Expense, and shall not be deducted in determining the Net Sale Proceeds, Net Appraised Proceeds or Net Recovery Proceeds. 25 ______Modern Real Estate Transactions, July 2006

- 25- SECTION 5. Events of Default: Remedies

If one or more of the following events shall occur ("Events of Default" or an "Event of Default"):

a. Borrower shall default in the due and punctual payment of any amounts payable under this Agreement;

b. Borrower shall fail to perform or observe any of the other terms, provisions, covenants, conditions, agreements or obligations contained in this Agreement;

c. An Event of Default shall occur under the Note, the Deed of Trust or any of the other Loan Documents and any cure periods applicable thereto shall have expired; [or]

d. [Borrower shall default in any of its obligations under the Option Agreement; or]

[e] . Any representation, warranty or certification made in writing by or on behalf of Borrower under any of the Loan Documents or any report, certificate or financial statement furnished in connection with any of the Loan Documents, shall be inaccurate or incomplete in any material respect on the date as of which made;

THEN, at the option and upon the declaration of Lender, all sums and other obligations owed to Lender under this Agreement shall, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, whereupon the same shall become immediately due and payable, and Lender may pursue any and all remedies set forth in the Loan Documents and enforce all obligations of Borrower to it under this Agreement and the other Loan Documents, and exercise any and all other remedies granted to it at law, in equity or otherwise, all of which rights and remedies shall be cumulative. Interest at the rate of ______percent (____%) per annum (the "Default Rate") shall accrue on all Contingent Interest payable hereunder from the date due until the date paid; provided, however, that if there is a maximum legal rate of interest applicable to such Contingent Interest, then the interest payable thereon shall not exceed simple interest at such maximum rate permitted by law.

SECTION 6. Relationship of Lender and Borrower as Creditor and Debtor Only.

a. Nature of Relationship. The relationship between Lender and Borrower in connection with the Loan shall be solely that of creditor and debtor. Nothing contained in this Agreement or in any other Loan Documents, including without limitation Lender's right to receive Contingent Interest, shall be deemed or construed to create a partnership,

26 ______Modern Real Estate Transactions, July 2006

- 26- tenancy-in-common, joint tenancy, joint venture or co-ownership between Lender and Borrower. Lender shall not be in any way responsible or liable for the debts, losses, obligations or duties of Borrower with respect to the Property or otherwise by virtue of the Loan. All obligations to pay real property or other taxes, assessments, insurance premiums, and all other fees and charges arising from the ownership, operation, use or occupancy of the Property and to perform obligations under all leases and other agreements and contracts relating to the Property shall be the sole responsibility of Borrower.

b. Indemnification by Borrower. Borrower agrees to indemnify and hold Lender harmless from and against any and all third party claims and liabilities, losses, injuries, costs, damages and expenses (including, without limitation, reasonable attorneys' fees) arising therefrom, which Lender may incur in administering or enforcing the Loan as a result of any act of Lender hereunder or taken pursuant hereto and of and from any and all claims or demands whatsoever which may be instituted 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 lease or any other agreement made by Borrower relating to the Property (except to the extent the same results from Lender's gross negligence or intentional misconduct). As used herein, the term "gross negligence" shall mean an act or omission taken or not taken with reckless disregard of the consequences thereof. Should Lender incur any such liability under any lease, or under or by virtue of this Agreement, the Note, the Deed of Trust, the Assignment, any other Loan Document, or any other agreement made by Borrower relating to the Property [(excluding the Option Agreement)], or in defense of any claims or demands related thereto, the amount thereof, including, without limitation, costs, expenses and reasonable attorneys' fees, shall be secured by the Deed of Trust, the Assignment and all other instruments of security made in connection with the Loan, and Borrower agrees to reimburse Lender therefor immediately upon demand together with interest thereon at the Default Rate from the later of the date the demand therefor is received by Borrower or the date such amounts were incurred by Lender, to the date reimbursed; provided, however, that if there is a maximum legal rate of interest applicable to such interest, then the interest rate shall not exceed simple interest at such maximum rate permitted by law. Upon the failure of Borrower to so reimburse, Lender may declare all sums due hereunder and under the Note, Deed of Trust and the other Loan Documents immediately due and payable.

c. Security. The obligations of Borrower under this Contingent Interest Agreement are secured by the Deed of Trust, the Assignment, and all other security held by Lender for the Loan. The Deed of Trust and the Note are each incorporated herein by

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d. Exculpation. The provisions of Section 8 of the Note and Section 5.17 of the Deed of Trust shall apply to all obligations of Borrower under this Agreement and all such provisions are herein incorporated by reference.

SECTION 7. Miscellaneous.

a. Entire Agreement. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the payment of Contingent Interest and supersedes all prior agreements and understandings relating thereto.

b. Effect of Waiver. No failure to exercise, and no delay in exercising any right, power or remedy hereunder or under any document delivered pursuant hereto shall impair any right, power or remedy which Lender or Borrower, as the case may be, may have, nor shall any such delay be construed to be a waiver of any of such rights, powers or remedies, or an acquiescence in any breach or default under this Agreement or any document delivered pursuant hereto, nor shall any waiver of any breach or default of Borrower hereunder be deemed a waiver of any default or breach subsequently occurring. The rights and remedies herein specified are cumulative and not exclusive of any rights or remedies which Lender or Borrower, as the case may be, would otherwise have.

c. Notices. All notices, requests, consents and demands hereunder shall be given in accordance with the Deed of Trust.

d. Severability of Provisions. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

e. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Borrower, Lender and their respective successors and assigns; provided, however, that, except as specifically provided herein or in the Deed of Trust, Borrower may not, directly or indirectly, sell, assign or otherwise transfer all or any part of the Property or any interest therein, or any of Borrower's rights and obligations under this Agreement, or take or permit any other action prohibited by Section 5.14 of the Deed of Trust, without the prior written consent of Lender, which Lender may give or withhold in its absolute discretion.

f. Counterparts. This Agreement may be executed in any number of counterparts all of which taken together shall constitute one agreement, and any party hereto may execute this Agreement by signing any such counterpart. 28 ______Modern Real Estate Transactions, July 2006

- 28- g. Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

h. Amendment and Waiver. Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

i. Remedies Available. The remedies of Lender, as provided herein or in the Note, the Deed of Trust, the Assignment or any other Loan Document shall be cumulative and concurrent, and may be pursued singularly, successively or together, at the sole discretion of Lender, and may be exercised as often as occasion therefor shall arise. No act of omission or commission of Lender, including specifically any failure to exercise any right, remedy or recourse, shall be deemed to be a waiver or release of the same, and any waiver or release with reference to any one event shall not be construed as continuing or as a bar to, or as a waiver or release of, any subsequent right, remedy or recourse as to a subsequent event.

j. Time of Essence. Time is of the essence of each of Borrower's obligations under this Agreement.

k. Attorneys' Fees. If either party commences any legal action or other proceeding to enforce any of the terms of this Agreement, or because of any breach by the other party or any dispute hereunder, the successful or prevailing party shall be entitled to recover from the nonprevailing party all reasonable attorneys' fees and disbursements incurred in connection therewith, whether or not such controversy, claim or dispute is prosecuted to a final judgment Any such attorneys' fees and disbursements incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from such judgment, and the obligation for such attorneys' fees and disbursements is intended to be severable from the other provisions of this Agreement and not to be merged into any such judgment.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.

“BORROWER”: ______a ______

By: ______

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By: ______

Name: ______

Title: ______

“LENDER”: ______

______

By: ______

EXHIBITS EXHIBIT "A" (Legal Description)

All of that certain real property, together with all easements, rights and appurtenances thereto and all improvements now or hereafter located thereon, situated in the City of ______, County of ______, State of California, and described as follows:

EXHIBIT “C” (1994 Budget)

EXHIBIT “D” (Form of Quarterly Rent Roll)

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